Deck 29: Accounting and Financial Transactions

Question 1

When Fixed Assets are sold

A)The Total Assets will increase
B)The Total Liabilities will increase
C)The Total Assets will decrease
D)There is no change in the Total Assets

Answer 1

There is no change in the Total Assets

Question 2

Withdrawal of goods from stock by the owner of the business for personal use should be recorded by

A)Debiting Stock Account and crediting Capital Account
B)Debiting Capital Account and crediting Drawings Account
C)Debiting Drawings Account and Crediting Stock Account
D)Debiting Stock Account and Crediting Drawings Account

Answer 2

Debiting Drawings Account and Crediting Stock Account

Question 3

Withdrawals by proprietor would

A)Reduce both Assets and Owner's Equity
B)Reduce Assets and increase Liabilities
C)Reduce Owner's Equity and increase Liabilities
D)Have no affect on the Balance Sheet

Answer 3

Reduce both Assets and Owner's Equity

Question 4

Which of the following is true?

A)The payment of a Liability causes an increase in Owner's Equity
B)The collection of an Account Receivable will cause Total Assets to increase
C)The accounting equation may be stated as: Assets+Liabilities = Owners' equity
D)The purchase of an asset such as office equipment, either for cash or on credit, does not change the Owners' Equity

Question 5

Which of the following statements is/are true?
(i) Cash Book records all cash receipts and cash payments
(ii) Cash Book records all sale and purchase transactions of goods both in cash and on credit
(iii) Cash Book records discount on Cash Payments

A)Only (i) above
B)Only (ii) above
C)Only (iii) above
D)Both (i) and (iii) above

Question 6

Trade discount allowed at the time of Sale of goods.

A)Is recorded in Sales Book
B)Is recorded in Cash Book
C)Is recorded in Journal
D)Is not recorded in Books of Accounts

Question 7

The Periodical total of the Sales Return Book is posted to the

A)Debit of Sales Account
B)Debit of Sales Return Account
C)Credit of Sales Return Account
D)Debit of Debtors Account

Question 8

If the Petty Cash fund is not reimbursed just prior to year end and an appropriate adjusting entry is not made, then

A)The petty cash account is to be returned to the company's cashier
B)Expenses are overstated and Cash is understated
C)Cash is overstated and expenses are understated
D)Cash is overstated and expenses are overstated

Question 9

XYZ Ltd. Paid wages of ` 8,000 for erection of machinery. The journal entry for the transaction is

A)Debit wages and credit cash
B)Debit machinery and credit cash
C)Debit wages and credit erection charges
D)Debit machinery and credit erection charges

Question 10

Purchase of goods on credit

A)Increases Liabilities
B)Increases Assets
C)Increases both Assets and Liabilities
D)Decreases Assets

Question 11

Which of the following is not an Asset?

A)Stock of stationery
B)Goodwill
C)Profit and Loss Account (Credit Balance)
D)Accounts Receivable

Question 12

The process of balancing of an account involves equalization of both sides of the account. If the debit side of an account exceeds the credit side, the difference is put on the credit side. The said balance is
(i) A Debit balance
(ii) A Credit balance
(iii) An expenditure or an Asset
(iv) An Income or a Liability

A)Only (ii) above
B)Only (iv) above
C)Both (i) and (iii) above
D)Both (ii) and (iii) above

Question 13

Ledger is also called

A)Principal book of accounts .
B)Cash books .
C)Subsidiary book .
D)None of these

Question 14

Which of the following transactions of a business is/ are recorded in Journal Proper?
(i) Purchase of goods on credit
(ii) Sale of Office Furniture for cash
(iii) Discounting of Bill of Exchange with a bank
(iv) Endorsement of a Bill of Exchange in settlement of debt of the business

A)Only (i) above
B)Only (iv) above
C)Both (ii) and (iv) above
D)(i),(iii) and (iv) above

Question 15

Which of the following statements is/are true?
(i) Drawings Account is a Nominal Account
(ii) Capital Account is a Real Account
(iii) Sales Account is a Nominal Account
(iv) Outstanding salaries account is a Nominal Account
(v) Patents Account is a Personal Account

A)Only (i) above
B)Only (iii) above
C)Both (ii) and (iii) above
D)Both (ii) ,(iv) and (v)above

Question 16

The entry to record the collection of cash from Sundry Debtors would involve a
(i) Debit to Sundry Debtors
(ii) Debit to Cash Account
(iii) Credit to Sundry Debtors
(iv) Credit to Cash Account

A)Only (i) above
B)Only (iii) above
C)Both (ii) and (iii) above
D)Both (i) and (iv) above

Question 17

ABC Ltd. makes payments to its Sundry Creditors through cheques and the Cash Discount received on these payments is recorded in the Triple-columnar Cash Book. In the event of dishonour of any such cheques, the discount so received should be written back through
(i) A debit to discount column of the Cash Book
(ii) A credit to discount column of the Cash Book
(iii) A credit to bank column of the Cash Book
(iv) A debit to Discount Account through Journal Proper
(v) A credit to Creditor's Account through Journal Proper

A)Only (i) above
B)Only (ii) above
C)Both (i) and (iii) above
D)Both (iv) and (v) above

Question 18

R Ltd. makes purchases on credit. If the purchases are not as per the specifications, the company returns them to the suppliers. The book, that is used to record such returns is

A)Returns Inward Book
B)Returns Outward Book
C)Cash Book
D)Journal Proper

Question 19

If Office Equipment is purchased for cash, what effect will this transaction have on the financial position of the company?

A)There is no change in the Assets, Liabilities and Owners' Equity
B)There is a decrease in Assets, increase in Liabilities and no change in Owners' Equity
C)There is a decrease in Assets, no change in Liabilities and a decrease in Owners' Equity
D)There is an increase in Assets, decrease in Liabilities and no change in Owners' Equity

Question 20

The periodical total of discount column on receipts side of a Triple Column Cash Book is recorded to the

A)Credit side of Discount Account
B)Credit side of provision for Discount Account
C)Debit side of Discount Account
D)Credit side of Debtor's Account

Question 21

Which of the following statements is false?

A)Credit side total of Discount column of Cash Book is an income
B)Credit balance of Bank Pass Book is an overdraft
C)Debit balance of Bank column of Cash Book is an Asset
D)Debit balance of Cash column of Cash Book is an Asset

Question 22

Purchase of Fixed Assets on credit is originally recorded in

A)Purchases Book
B)Ledger
C)Cash Book
D)Journal Proper

Question 23

If you start with cash book favorable balance in Bank Reconciliation Statement, which item will be added?

A)Cheque deposited but not credited by the bank
B)Cheques omitted to be deposited into bank
C)Any amount directly collected by bank on behalf of customer but not recorded in cash book
D)Debit side of cash book was overcast

Question 24

When a Fixed Asset is obtained as a gift, the account to be credited is

A)Goodwill A/c
B)Capital Reserve A/c
C)Donor's A/c
D)General Reserve A/c

Question 25

Which of the following is/are fixed asset(s)?

A)Closing inventory
B)Fixed Deposits in a bank
C)Patents
D)Prepaid expenses

Question 26

Bank Overdraft is shown as a

A)Current Liability .
B)Contingent Liability .
C)Unsecured Loan .
D)Provision

Question 27

Which of the following is NOT a characteristic of Cash Book?

A)It has two identical sides-left hand side, the debit side and right hand side, the credit side
B)It verifies the arithmetic accuracy of posting of entries from the Journal to the Ledger
C)The difference between the total of two sides of cash book shows cash in hand
D)It always shows debit balance. It can never show credit balance

Question 28

If Machinery Account is debited with the amount of repairs incurred on the machine, this is an example of

A)Compensating error
B)Error of principle
C)Error of commission
D)Error of omission

Question 29

Which of the following is true?

A)Bank Account is a Personal Account
B)Stock of stationery Account is a Nominal Account
C)Returns Inward Account is a Personal Account
D)Outstanding rent Account is a Nominal Account

Question 30

Which of the following is a liability of a firm?

A)Debit balance of analytical Petty Cash Book
B)Credit balance of Bank Pass book
C)Debit balance of Bank column of Cash Book
D)Credit balance of Bank column of Cash Book

Question 31

Which of the following errors is an error of principle?

A)Total sales figure was taken as ` 19,373 instead of ` 19,733
B)A discount of ` 30 allowed to Mr. A was not recorded in the discount allowed account
C)Legal charges for acquisition of building for ` 500 was entered in the Legal Expenses Account
D)1,000 received from Mr. X was posted to the credit of Mr. M

Question 32

The book which all accounts of the firm are maintained is known as

A)Cash book .
B)Ledger .
C)Journal .
D)Daybook

Question 33

` 500 paid as cartage on new Plant and Machinery, this was debited to Carriage Inward A/c. This is an error of-

A)Principle .
B)Omission .
C)Commission .
D)Compensating

Question 34

` 4,500 paid to Madan as salary for the month of December'12, this was debited to his A/c, this is a/an ……………………… error.

A)Principle .
B)Omission .
C)Commission .
D)Compensating

Question 35

While checking the accounts of ABC the following discrepancies were noticed, even though the TrialBalance was made to balance by putting the difference to Suspense A/c.
(i) Sales day book for the month of June'12 was found overcast by ` 7,000.
(ii) A credit purchase of ` 3,000 was omitted to be recorded in the days book.
(iii) ` 4,300. Received from A credited to A A/c ` 3,400.
(iv) Purchase of Office Equipment worth ` 5,000 included in trading purchases.
From the above details what would have been the difference in Trial Balance which was made to balance by opening Suspense A/c.

A)Debit side short by ` 9,100 .
B)Credit side short by ` 9,100 .
C)Debit side more by ` 7,900 .
D)Credit side more by ` 6,100

Question 36

Rent outstanding for the month of December'12 will appear on-

A)Debit side of Cash Book .
B)Credit side of Cash Book .
C)Either side .
D)Nowhere

Question 37

Goods worth ` 5,000 purchased from A on credit will be recorded on-

A)Debit side of Cash Book .
B)Credit side of Cash Book .
C)Nowhere in the Cash Book .
D)Either (a) or (b)

Question 38

Which column of Cash Book is never balanced.

A)Discount Column .
B)Cash .
C)Bank .
D)Petty Cash

Question 39

The total of debit side of discount column of Cash Book is-

A)Balanced with credit side of discount column .
B)Posted to Discount Allowed A/c.
C)Posted to Discount Received A/c .
D)Posted to Profit & Loss A/c

Question 40

Prepaid rent is a -

A)Nominal A/c .
B)Representative Personal A/c .
C)Tangible Assets A/c .
D)None

Question 41

Which of the following assets is a fictitious asset

A)Goodwill A/c .
B)Prepaid Rent A/c .
C)Outstanding Salary A/c .
D)Preliminary expenses A/c

Question 42

Nominal A/c represents-

A)Profit/Gain .
B)Loss/Expenses .
C)None .
D)Both (a) and (b)

Question 43

SBI A/c is a -

A)Nominal A/c .
B)Artificial Personal A/c .
C)Representative Personal A/c .
D)None

Question 44

Liability A/c has……………. Balance

A)Debit .
B)Credit .
C)No balance .
D)Either (a) or (b)

Question 45

The Sales Returns Day Book would include:

A)Goods bought on credit .
B)Fixed Assets bought that are inappropriate for business .
C)Stock that customers have returned .
D)Goods bought on credit that are returned to the original supplier

Question 46

An Investment in one asset A/c may lead to -

A)Increase in liability A/c .
B)Decrease in A/c asset .
C)Each a or b .
D)Both a/b.