Question – Series 100

  1. Interest received on loan is an income for the business.
  2. Brokerage paid for purchase of land is Capital expenditure because ______.
  3. The sale of asset on credit is recorded in

(a)     Sales Journal

(b)     General Journal

(c)     Cash Book

(d)     Purchases Journal

Answer – Series 100

  1. True

Reason: Interest received on Loan is an income for the business become it is earned by the use of firms’ resources (money). It is shown on the credit side of Profit and Loss Account.

  1. It is a payment for purchase of fixed asset i.e., Land.
  2. (b)

Reason: Sales Journal, Purchases Journal and Cash Book are maintained to record credit sales of goods, credit purchase of goods and Cash transactions respectively. All other transactions are recorded in the General Journal. Assets is not in the nature of goods. Hence, it will be recorded in General Journal.

Question – Series 101

  1. Drawee means a person who draws the Bill of Exchange.
  2. Discount given for early or timely payment is termed as _______.
  3. A Preliminary expense is an example of:

(a) Revenue Expenditure

(b) Deferred Revenue Expenditure

(c) Capital Expenditure

(d) they are Capital in Nature

Answer – Series 101

  1. False

Reason: Bill of Exchange is an “instrument in writing containing an unconditional order signed by the maker directing a certain person to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument”. The Party which makes the order is known as the drawer, the party which accepts the order is known as the drawee and the party to whom the amount has to be paid is known as payee. The drawer and the payee can be the same.

  1. Cash Discount
  2. (b)

Reason: Preliminary expenses are written off over a period of time its benefit is estimated to arise till that time the amount is not written off it is carried in the Balance Sheet under the head Miscellaneous Expenditure.

Question – Series 102

  1. Accounts are usually prepared for a year, this concept is based on Going Concern Concept.
  2. Undercasting of Sales Book is corrected by _________ Sales Account.
  3. Sale of Office Furniture is credited to

(a)     Sales Account

(b)     Furniture Account

(c)     Cash Account

(d)     Purchases Account

Answer – Series 102

  1. False

Reason: Periodicity Concept requires the life of the business be broken into smaller period (a period of 12 months) accounting year. Hence accounts are prepared for a year because of Periodicity Concept.

  1. Crediting
  2. (b)

Reason: Sale of Office Furniture is credited to Furniture Account because it is a sale of an asset and not goods.

Question – Series 103

  1. Retirement of Bill of Exchange means making payment before due date.
  2. Closing Stock existing in the Trial Balance shown in __________.
  3. Payee of Bill of Exchange is a person:

(a)     Who has accepted the bill of exchange.

(b)     A person who has drawn the bill.

(c)     To whom bill of exchange is payable.

(d)     To whom bill is endorsed.

Answer – Series 103

  1. True

Reason: Payment of Bill of Exchange before its due date is termed as Retirement of Bill of Exchange.

  1. Balance Sheet
  2. (c)

Reason: Bill of Exchange is an “instrument in writing containing an unconditional order signed by the maker directing a person to pay the specified sum of money to or to the order of a certain person or to the bearer of the instrument”.  The party which makes the order is known as the drawer, the party which accepts the order is known as the drawee and the party to whom the amount has to be paid is known as payee. The drawer and the payee can be the same person or party.

Question – Series 104

  1. Provision for Discount on Debtors is shown in the Balance Sheet as deduction from Debtors.
  2. Salaries Accounts are shown in _________ column of Trial Balance. .
  3. Bills Receivable of ₹ 5,000 was discounted from the bank. It was dishonoured on the due date. In the Books of Account the dishonour of bill was recorded for ₹ 500. The error will be rectified by:

(a)     Crediting debtor by ₹  4,500

(b)     Crediting Bills Receivable by ₹  4,500

(c)     Debiting Bills Receivable by ₹  4,500

(d)     Debiting Debtor by ₹  4,500

Answer – Series 104

  1. True

Reason: Provision for Discount on Debtors is the estimated amount of discount that may have to be allowed to debtors against payment made by them. Therefore, in the Balance Sheet, it is deducted from Debtors i.e., Debtors are shown at their estimated realisable amount.

  1. debit
  2. (d)

Reason: At the time of Discounting Bills Receivable Account would have been credited. On being dishonoured, Debtor’s Account should have been debited but with the wrong amount i.e., ₹  500. The mistake will be rectified by debiting the Debtor’s Account by further.

Question – Series 105

  1. A Bill Receivable of ₹ 500 was dishonoured and credited as ₹ 50. The error will be rectified by crediting Bills Receivable Account by ₹  450.
  2. Accounts are made for a fixed period usually a year, this concept is based on _______.
  3. Depreciation arises due to

(a)     Wear and tear

(b)     Fall in the market value of an asset.

(c)     Fall in the value of money.

(d)     Increase in the Market Value of an asset.

Answer – Series 105

  1. True

Reason: Bills Receivable Account on bill being dishonoured is credited short by ₹  450. It will be rectified by crediting Bills Receivable Account by ₹  450.

  1. periodicity
  2. (a)

Reason: Assets like plant and machinery are used for producing goods due to which its wear and tear happens. The amount charged on depreciation is the amount of estimated wear and tear.

Question – Series 106

  1. The party which is ordered to pay the amount is known as drawee.
  2. Trial Balance is a _______ of debit and credit balances of accounts in Ledger at a particular date.
  3. Which is the last step of accounting as a process of information?

(a)     Recording economic events in the books of account.

(b)     Preparation of financial Statements

(c)     Communication of information.

(d)     Analysis and interpretation of information.

Answer – Series 106

  1. True

Reason: Drawee is the person on whom the Bill of Exchange is drawn for his acceptance. He is a person to whom credit has been granted by the drawer of the Bill of Exchange.

  1. statement
  2. (c)

Reason: The last step in the process of Accounting as a process of information is to communicate the financial result to various user of Accountancy which include both internal and external user of Accountancy.

Question – Series 107

  1. Error of commission arises when a transaction is left out either wholly or partially..
  2. The documents on the basis of which transactions are recorded in the account books is known as _____.
  3. Which entry is passed in Drawee’s Books when the bill is discounted with bank?

(a)     Bills Payable A/c          …Dr.

To Bank A/c

(b)     Bills Payable A/c           …Dr.

To Drawer’s A/c

(c)     Drawer’s A/c                 …Dr.

To Bills Payable A/c

(d)     No entry is recorded

Answer – Series 107

  1. False

Reason: Error of Commission means error arising due to writing of wrong amount, wrong posting, wrong casting, wrong amount being posted and wrong balancing of account etc. In brief, due to incorrect recording of transactions either wholly or partially.

  1. Source Documents
  2. (d)

Reason: Drawee will not record the entry for discounting the bill because it is an asset of the Drawer or the Payee. Drawee records the entry only at the time of maturity either on payment or renewal.

Question – Series 108

  1. A person who endorses a bill is a payee.
  2. Compensating errors have ________effect.
  3. Which statement is correct:-

(a)     Keeping systematic record of business transaction is not the function of financial accounting.

(b)     Accounting is concerned with monetary transactions.

(c)     Accounting is concerned with past as well as future events.

(d)     Business and businessman are same identity from the accounting point of view.

Answer – Series 108

  1. False

Reason: Bill of Exchange when passed on to another person is known as endorsement. Thus, the person endorsing the bill is endorser and not payee.

  1. Neutrailising
  2. (b)

Reason: Accounting records only those transactions which can be measured in the terms of money. Transactions which cannot be measured in terms of money are not recorded in accounting.

Question – Series 109

  1. Interest received on loan is an income for the business.
  2. Depreciation means _________ in the book value of fixed assets.
  3. The Profit and Loss Account shows the

a) Financial results of the business for a period.

b) Financial position of the business for a period.

c) Financial results of the business on a particular date.

d) Cost of goods sold by the business during its life time.

Answer – Series 109

  1. True

Reason: Interest received on Loan is an income for the business because it is earned by the use of firms’ resources (money). It is shown on the credit side of Profit and Loss Account.

  1. decrease
  2. (a)

Reason: Profit and Loss Account is a statement that shows the profit earned or loss incurred during an accounting period. In other words, it shows the financial results of the business for an accounting period.

Question – Series 110

  1. Accounting aims to communicate financial information to investors only.
  2. Income received in advance is debited to Income Account and credited to ________ while making adjustment entry.
  3. System of preparing Accounts from Incomplete Records can be adopted by

(a)     Small Firms

(b)     Companies

(c)     Registered Co-operative Societies

(d)     Any enterprise

Answer – Series 110

  1. False

Reason: Accounting communicate the financial information to both internal and external users of Accountancy like management, Bank, Creditors etc.

  1. Income Received in Advance
  2. (a)

Reason: System of preparing Accounts from Incomplete Records can be adopted by small firms only. It is mainly suited to small business concerns with limited number of transactions and very few assets and liabilities.

Question – Series 111

  1. Transactions and events that cannot be measured in money terms are not recorded in the books of accounts. It is due to Money Measurement Concept.
  2. Cash Account can have either ________ or _______ balance.
  3. Revenue Expenditure is transferred to:

(a)     Balance Sheet

(b)     Profit and Loss Account

(c)     Partly to Balance Sheet and Partly to Profit and Loss Account.

(d)     Trading Account

Answer – Series 111

  1. True

Reason: Money Measurement Concept holds that only those transactions and events be recorded in the books of accounts which can be measured in money terms.

  1. debit balance or nil
  2. (b)

Reason: Profit earned or loss incurred during an accounting period is determined by comparing revenue incomes and revenue expenditure. They are thus, transferred to Profit and Loss Account.

Question – Series 112

  1. Accounting principles and policies once adopted should be followed year after year unless there is a change in law or accounting standards. It is based on Consistency Concept.
  2. An accountant has not posted few cash transactions in the ledger account. As a result trial balance does not match in this case ________ Concept is not followed.
  3. In Accounting, Goods is defined as:

(a)     Items which purchased for own consumption.

(b)     Items which are purchased for charity.

(c)     Items which are purchased for resale.

(d)     Items without any defect.

Answer – Series 112

  1. True

Reason: Consistency Concept is the fundamental accounting concept which requires the entity to follow the same accounting principles and policies year after year.

  1. Dual Aspect
  2. (c)

Reason: Goods are physical items of trade. It is a term that makes up the sale and purchase of the business. Thus, items which purchased for resale are goods.

Question – Series 113

  1. Ledger is known as Book of Original Entry.
  2. An expenditure is revenue in nature when it benefit expires within the ________ period only.
  3. Aman, a customer had placed an order for purchase of furniture of ₹ 50,000 against which he advanced ₹ 5,000. The businessman wants to record it as a sale. By doing so, which of the following accounting concepts will be violated?

(a)     Money Measurement Concept.

(b)     Accounting Period Concept.

(c)     Going Concern Concept.

(d)     Matching Concept.

Answer – Series 113

  1. False

Reason: All entries primarily are first recorded in the Journal thereafter the recorded transactions are posted into Ledger Accounts. Therefore Journal is termed as Books of Original Entry and not the ledger.

  1. accounting
  2. (b)

Reason: Matching Concept holds that if revenue is recognised its corresponding cost should also be recognised. In the present situation, the business has not incurred any cost to earn the amount, it is only an order that has been received and is yet to be executed. If he recognises it as revenue not matched with corresponding cost, Matching Concept will be violated.

Question – Series 114

  1. Cash column in the Cash Book cannot have credit balance whereas Bank column may have credit balance.
  2. Amount owed to an outsider is a ________.
  3. If the Owner’s Equity is ₹ 80,000 and External Liability is ₹ 40,000. Total assets of the firm will be:

(a)     ₹ 1,00,000

(b)     ₹ 1,20,000

(c)     ₹ 80,000

(d)     ₹ 1,40,000

Answer – Series 114

  1. True

Reason: Cash Column in the Cash Book cannot have debit balance because credit balance means amount spent is more than the Balance. Whereas, Bank Column of the Cash Book may have credit balance (Overdraft balance) meaning bank is overdrawn.

  1. liability
  2. (b)

Reason: Assets = Liabilities + Capital

= ₹ 40,000 + ₹ 80,000

= ₹ 1,20,000.

Question – Series 115

  1. Wages paid to Raman for installation of machinery is debited to Wages Account.
  2. Bill of Exchange is signed by _______.
  3. Opening Stock ₹ 1,00,000; Closing Stock ₹ 60,000; Purchases ₹ 50,000 and Gross Profit is 10% of Sales. The gross profit is:

(a)     ₹ 10,000

(b)     ₹ 12,000

(c)     ₹ 20,000

(d)     ₹ 15,000

Answer – Series 115

  1. False

Reason:  It is a principal that expenses incurred on acquiring and making the asset ready for use is a capital expenditure and is debited to that particular asset account. Therefore, wages paid to Raman for installing the machinery will be debited to Machinery Account.

  1. Drawee
  2. (a)

Reason: Cost of goods sold is ₹ 90,000 (₹ 1,00,000 (Opening Stock) + ₹ 50,000 (Purchases) – ₹ 60,000 (Closing Stock) which is 90% of Sales (Gross Profit being 10% of Sales).

Therefore, Sales is ₹ 90,000 X 100/90 = ₹ 1,00,000.

Gross Profit = Sales – Cost of Goods Sold i.e.,

= ₹ 1,00,000 – ₹ 90,000

= ₹ 10,000.

Question – Series 116

  1. Bank overdraft is shown as a Current Asset.
  2. The amount of depreciation declines every year under ________.
  3. Errors which affect one account are:

(a)     Error of omission

(b)     Error of principle

(c)     Error of posting

(d)     Error of commission

Answer – Series 116

  1. False

Reason:  Bank overdraft means amount overdrawn from the bank and thus, payable to it. It is a current liability of the enterprise as it is payable within a period of twelve months.

  1. Written-Down Value Method
  2. (d)

Reason: Error of Commission means error arising due to writing of wrong amount, wrong posting, wrong casting, wrong amount being posted and wrong balancing of account etc., in brief, it arises due to incorrect recording of transactions either wholly or partially. One side errors are those errors in which one aspect is correctly recorded but the other side is incorrectly recorded. Thus, it can be categorized as Error of Commission.

Question – Series 117

  1. Money which the firm has borrowed and has not yet repaid is a liability of a firm.
  2. Purchases Day Book records only credit purchases of __________.
  3. A debtor who returned goods and is sent a note by the seller. The note is called:

(a)     Debit Note

(b)     Credit Note

(c)     Refund Note

(d)     Return Note

Answer – Series 117

  1. True

Reason: Liabilities are obligations to pay amount of money.

  1. goods
  2. (b)

Reason: Credit Note is made out evidencing that credit has been granted to a debtor e.g., if a customer returns goods previously invoiced, or the customer is allowed further discount, a credit note is issued.

Question – Series 118

  1. Carriage on goods sold is shown in Trading Account.
  2. Income tax paid for the owner is transferred to the debit of _________ A/c .
  3. Commission received in Advance existing in the Trial Balance is shown on the:

(a)     Assets side of the Balance Sheet.

(b)     Liability side of the Balance Sheet.

(c)     Debit side of the Profit and Loss A/c.

(d)     Credit side of the Profit and Loss A/c.

Answer – Series 118

  1. False

Reason: Carriage on Goods sold is an indirect expense and are therefore shown in the Profit and Loss A/c being an expense relating to Sale.

  1. Drawings
  2. (b)

Reason:  Commission received in advance means income yet to be earned. Since it has a credit balance it is shown in the liabilities side of the Balance Sheet. Commission received in advance is in the nature of amount received against which services is yet to be rendered. It will become an income in the year service is rendered.

Question – Series 119

  1. A Journal is also known as Book of Original Entry.
  2. In accounting, the term ‘purchases’ means goods purchased for ______.
  3. Accounting policies once applied should be consistently followed from one period to another period because of:

(a)     Full Disclosure Concept.

(b)     Conservatism Concept.

(c)     Matching Concept.

(d)     Consistency Concept.

Answer – Series 119

  1. True

Reason: A Journal is known as Book of Original Entry in which transactions are first recorded in a chronological order i.e., in the order or sequence they are entered.

  1. resale and material purchased for manufacturing goods.
  2. (d)

Reason:  Consistency Concept prescribes that Accounting policies once applied should be  followed consistently year after year, unless the change is required by law, accounting standard or it will result in better presentation of accounts. This makes the financial statements comparable.

Question – Series 120

  1. Current Liabilities means liabilities that are payable after 12 months from the date of Balance Sheet.
  2. Preparation of a trial balance is not a part of book keeping but an outcome of ______.
  3. Balance Sheet gives information regarding:

(a)     Financial position during a particular period.

(b)     Profit earning capacity for a particular period.

(c)     Financial position as on a particular date.

(d)     Operating efficiency of the firm.

Answer – Series 120

  1. False

Reason: Current Liabilities are those liabilities which are payable  i.e., within 12 months from the date of Balance Sheet. Examples of Current Liabilities are Creditors, Bills Payables, Expenses Payable etc..

  1. book keeping
  2. (c)

Reason:  Balance Sheet is a statement that shows the financial position of the enterprise. Financial position is always true as at a particular point of time because with every transaction and event the financial position changes.

Question – Series 121

  1. Business entity concept is not a fundamental accounting concept.
  2. Errors which affect one account can be _______.
  3. Out of the following which approach is an application of a caution so that expenses and liabilities are not understated and income and assets are not overstated:

(a)     Conservatism Concept

(b)     Disclosure Principle

(c)     Materiality Concept

(d)     Consistency Concept

Answer – Series 121

  1. True

Reason: Fundamental Accounting Concept as per AS-1, Disclosure of Accounting Policies are:

  • Going Concern
  • Consistency
  • Accrual
  1. Error of Omission
  2. (a)

Reason:  According to Conservatism Concept anticipated expenses and losses should be recorded, i.e., neither expenses nor liabilities should be understated. Whereas anticipated incomes should not be recorded i.e., income and assets should not be overstated.

Question – Series 122

  1. Profit and Loss Account shows the financial position of the business.
  2. An asset was purchased for ₹ 10,000 on which depreciation was provided @ 5% on Straight line Method, the W.D.V of the asset at the end of two years will be ________.
  3. An amount of ₹ 5,000 paid to Naresh against an acceptance was debited to Neelam’s Account. The rectification of error will:

(a)     Increase in Net Profit.

(b)     Reduce the Net Profit.

(c)     Have no effect on the Net Profit.

(d)     Increase the Assets

Answer- Series 122

  1. False

Reason: Balance Sheet shows the financial position of the business as it is the statement of assets and liabilities of the enterprise. Profit and Loss Account shows the financial performance i.e., profit earned or loss incurred during the year.

  1. ₹ 9,000
  2. (c)

Reason:  The rectification will not affect the net profit as it is a case of wrong debit to personal accounts

Question – Series 123

  1. Ledger is known as Book of Original Entry.
  2. An expenditure is revenue in nature when it benefit expires within the ____ period only.
  3. Aman, a customer had placed an order for purchase of furniture of ₹ 50,000 against which he advanced ₹ 5,000. The businessman wants to record it as a sale. By doing so, which of the following accounting concepts will be violated?

(a)     Money Measurement Concept.

(b)     Accounting Period Concept.

(c)     Going Concern Concept.

(d)     Matching Concept.

Answer – Series 123

  1. False

Reason: All entries primarily are first recorded in the Journal thereafter the recorded transactions are posted into Ledger Accounts. Therefore Journal is termed as Books of Original Entry and not the ledger.

  1. accounting
  2. (b)

Reason: Matching Concept holds that if revenue is recognised its corresponding cost should also be recognised. In the present situation, the business has not incurred any cost to earn the amount, it is only an order that has been received and is yet to be executed. If he recognises it as revenue not matched with corresponding cost, Matching Concept will be violated.

Question – Series 124

  1. Bank overdraft is shown as a Current Asset.
  2. The amount of depreciation declines every year under _______.
  3. Errors which affect one account are:

(a)     Error of omission

(b)     Error of principle

(c)     Error of posting

(d)     Error of commission

Answer – Series 124

  1. False

Reason:  Bank overdraft means amount overdrawn from the bank and thus, payable to it. It is a current liability of the enterprise as it is payable within a period of twelve months.

  1. Written-Down Value Method
  2. (d)

Reason: Error of Commission means error arising due to writing of wrong amount, wrong posting, wrong casting, wrong amount being posted and wrong balancing of account etc., in brief, it arises due to incorrect recording of transactions either wholly or partially. One side errors are those errors in which one aspect is correctly recorded but the other side is incorrectly recorded. Thus, it can be categorized as Error of Commission.

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