Capital and Revenue Test 2

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Capital and Revenue Test 2

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Weekly Quiz Competition

Question 1
1 / -0

Proprietor's contribution to the business _____________.

A
Loan

B
Drawings

C
Profit

D
Capital

Solution

As per the separate entity concept of accounting, owner and business are two separate entity in the eyes of law.
Any amount contributed by the owner is considered as capital and to be shown as liability in the balance sheet.
Question 2
1 / -0

Which of the following receipts is of revenue nature ?

A
Amount realized from sale of investments

B
Divided received on investments

C
Amount borrowed from a bank

D
Compensation received from municipal corporation
Solution
If the company has purchased shares for any other company, at the end of the year if profit is made, the firm would receive dividend. This dividend received would be revenue receipts since
- It doesn’t reduce the assets of the company.
- And it also doesn’t create any liability for the company.
Question 3
1 / -0

Which of the following receipts is of capital nature?

A
Amount realized from sale of old furniture.

B
Amount received from debtor whose account was previously written off as bad.

C
Amount of interest accrued on a fixed deposit with bank.

D
Amount realized from debtors against their debts.
Question 4
1 / -0

Type of receipt which do not imply an obligation to return money are called ___________.

A
Revenue receipt

B
Capital receipt

C
Both (A) & (B)

D
None of the above

Solution

Receipts are classified as revenue receipts and capital receipts.

Revenue receipts are those which arises against the normal business operations. These receipts are considered as income of the business and need not to be returned. Examples are revenue receipts from sales, commission, dividend etc.

Capital receipts arises for a specific purposes which need to be returned or need to spent the amount for a specific purposes only. Examples are bank overdraft.
Question 5
1 / -0

Which of the following is a deferred revenue expenditure?

A
Legal expenses incurred on the purchase of land.

B
Expenses on a mega advertisement campaign while launching a new product.

C
Expenses incurred on installation of a new machine.

D
Wages paid for construction of an additional room in the building.

Solution

Revenue expenditure can be classified as:
Revenue expenditure: Expenditure which are spent on day to day basis for smooth running of the business.
Deferred revenue expenditure: Expenses which are of revenue nature but gives the benefit to the business in coming years ahead are called deferred revenue expenditure. Amount spent on mega advertisement campaign for launching a product is though a revenue expenditure but it is going to give the benefit in future too, hence this is considered as deferred revenue expenditure.
Question 6
1 / -0

Which of the following items are capitalized in the cost of the fixed asset?

A
Financing cost relating to deferred credits attributable to acquisition of fixed asset for the period upto completion of fixed asset

B
Financing cost on monies borrowed for acquisition of fixed asset relating to period after such asset is ready to put to use

C
Administration and general charges

D
All of the above
Question 7
1 / -0

If the dividend yield for a firm is 0.3 whose P/E multiple and EPS are 3 and Rs. 6 respectively., the dividend per share of the firm is ______.

A
18.5

B
6

C
5.4

D
0.6

E
0.16

Solution

Market price of the share = P/E X EPS
=3 X 6 = Rs.18 per share
Dividend yield = $$\frac{Divedend \ per \ share}{Market \ price \ per \ share}$$
Question 8
1 / -0

Revenue expenditure is_______ in nature.

A
capital

B
outstanding

C
recurring

D
contingent

Solution

All the expenditure which are incurred in the day to day conduct and administration of a business and the effect of which is completely exhausted within the current accounting year are known as revenue expenditure. These expenditure are recurring by nature as this expenditure is always short lived.
Question 9
1 / -0

The term Capital Expenditure is generally used to signify that expenditure which_______.

A
increase quality of Fixed Asset

B
increase quantity of Fixed Asset

C
results in improvement/replacement of fixed asset

D
all the three

Solution

Expenditure can be segregated as revenue expenditure and capital expenditure.
Revenue expenditure are those which are incurred on day to day smooth operation of the business.

Capital expenditure are those which gives the benefit to the business for a longer duration. Normally value of assets and heavy expenditure on an overhaul of the machine are capital expenditure. In nutshell, capital expenditure are those which:

1) Increase the quantity of Fixed Assets
2) Increase the quality of Fixed Assets
3) Improvement in productivity
Question 10
1 / -0

An amount of Rs. 1,25,000 spent on travelling expenses of the company's directors to a foreign trip for purchase of a plant and machinery is a ________.

A
Capital Expenditure

B
Revenue Expenditure

C
Deferred Revenue Expenditure

D
None of the above

Solution

All the incidental expenses incurred on account of procurement of asset to the installation of assets are considered the cost of that asset and to be capitalized.
Therefore, travelling expenses of Rs.125000/- towards travel for purchase of a plant & machine is a capital expenditure.

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Re-Attempt Weekly Quiz Competition

Capital and Revenue Test 2

Result

Capital and Revenue Test 2

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Rank

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SHARING IS CARING

Question 1

Loan

Drawings

Profit

Capital

Solution

Question 2

Amount realized from sale of investments

Divided received on investments

Amount borrowed from a bank

Compensation received from municipal corporation

Solution

Question 3

Amount realized from sale of old furniture.

Amount received from debtor whose account was previously written off as bad.

Amount of interest accrued on a fixed deposit with bank.

Amount realized from debtors against their debts.

Question 4

Revenue receipt

Capital receipt

Both (A) & (B)

None of the above

Solution

Question 5

Legal expenses incurred on the purchase of land.

Expenses on a mega advertisement campaign while launching a new product.

Expenses incurred on installation of a new machine.

Wages paid for construction of an additional room in the building.

Solution

Question 6

Financing cost relating to deferred credits attributable to acquisition of fixed asset for the period upto completion of fixed asset

Financing cost on monies borrowed for acquisition of fixed asset relating to period after such asset is ready to put to use

Administration and general charges

All of the above

Question 7

18.5

6

5.4

0.6

0.16

Solution

Question 8

capital

outstanding

recurring

contingent

Solution

Question 9

increase quality of Fixed Asset

increase quantity of Fixed Asset

results in improvement/replacement of fixed asset

all the three

Solution

Question 10

Capital Expenditure

Revenue Expenditure

Deferred Revenue Expenditure

None of the above

Solution

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