Capital and Revenue Test 4

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Capital and Revenue Test 4

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Weekly Quiz Competition

Question 1
1 / -0

Which of these receipts is capital receipts.

A
Old ad debts amounting to Rs.5,000 fully written off recovered now.

B
Interest of Fixed Deposits held with Bank amounting to Rs.1,000

C
Rs.5,000 being sale of by products and scrap and waste generated

D
Insurance claim of Rs.20,000 received on account of damage of Plant and Machine in a major fire.
Question 2
1 / -0

Cost of inventories consists of_______.

A
interest cost

B
administrative cost

C
selling cost

D
all costs to bring the inventory to present location and condition

Solution

Inventory valuation is done on the basis of cost of inventory or net realizable value whichever is lower.
Cost of inventory includes the direct cost i.e. direct material, direct labor, direct expenses and the cost to bring the inventory to present location and conditions.
Question 3
1 / -0

Which of these is/are examples of revenue expenditure ?

A
Depreciation charges

B
Factory insurance premium

C
Production royalty paid

D
All the three

Solution

Spending money or incurring a liability for some benefit, service or property received is called expenditure. Payment of rent, salary, purchase of goods, purchase of machinery, purchase of furniture are examples of expenditure. If the benefit of expenditure is exhausted within a year, it is treated as an expense (also called revenue expenditure). A revenue expenditure is a cost that is expensed in the accounting year in which it is incurred. In other words, the cost will be matched with the revenues of the accounting year in which the expenditure took place. Revenue expenditure are costs spent on fixed assets after they have been place in service. Depreciation charges, factory insurance premium, production royalty paid are all examples of revenue expenditure.
Question 4
1 / -0

Plant and Machinery are generally purchased for _________.

A
Rental / Hire purchase

B
Long term usage for production purpose

C
Re-sale t profit

D
As a security to obtain loan from Banks
Question 5
1 / -0

Cost of CNG kit fitted on a old car is a ________.

A
revenue expenditure

B
deferred revenue expenditure

C
capital expenditure

D
loss

Solution

Spending money or incurring a liability for some benefit, service or property received is called expenditure. Payment of rent, salary, purchase of goods, purchase of machinery, purchase of furniture, etc. are examples of expenditure. If the benefit of an expenditure lasts for more than a year, it is treated as an asset (also called capital expenditure). The following points are required to decide the nature of capital expenditure:
1. The expenditure, the benefit of which cannot be consumed or utilized in the same accounting period should be treated as capital expenditure.
2. Expenditure incurred to acquire fixed assets of a company
3. Expenditure incurred to acquire fixed assets, erection and installation charges, transportation of assets charges, travelling expenses directly related to purchase fixed assets are covered in capital expenditure. For example, cost of CNG kit fitted on a old car.
4. Capital addition to any fixed assets which increase the life or efficiency of those assets: for example, additional expenses made on a building.
Question 6
1 / -0

The document listing the latest balance of all real and personal A/c in the ledger on a given date is known as ..........

A
Trial balance

B
Positional statement

C
Income statement

D
Charter of A/cs

Solution

The document listing the latest balance of all real and personal A/c in the ledger on a given date is known as Positional statement
Question 7
1 / -0

Which of the following is a non-recurring expenses

A
Godown rent

B
Godown Insurance

C
Selling and distribution expenses

D
Custom and excise duties
Question 8
1 / -0

Salaries is an item of _________.

A
revenue

B
expense

C
asset

D
liability

Solution

Expenses are two types i.e. Direct Expense and Indirect Expenses.

Direct Expenses are those which are related to production or trading activity and to be debited in trading account. Examples are Direct Material, Direct Labor, Direct Expenses.

Indirect Expenses are those which are not directly associated with the production activity, these expense need to be debited to profit & loss account. Like Salaries , Rent etc.
Question 9
1 / -0

The benefit of revenue expenses last for ________.

A
just five year

B
not more than one trade cycle

C
not more than one year

D
just three to six months

Solution

Spending money or incurring a liability for some benefit, service or property received is called expenditure. Payment of rent. salary, purchase of goods, purchase of machinery, purchase of furniture, etc. are examples of expenditure. A revenue expenditure is a cost that is expensed in the accounting year in which it is incurred. In other words, the cost will be matched with the revenues of the accounting year in which the expenditure took place. If the benefit of expenditure is exhausted within a year, it is treated as a revenue expenditure.
Question 10
1 / -0

Which of the following statements is correct?

A
Accounting profit is the difference between cash receipts and cash paid in a period.

B
Accounting profit is the total of cash sales in the year less the expenses for the period.

C
Accounting profit is the difference between revenue income and expenses for the period.

D
Accounting profit is the difference between revenue income and cash payments for the period.

Solution

Profit & Loss account is prepared for a business for a particular period. Profit & Loss account is having two sides i.e. Income and expenses side or debit or credit side. All incomes/revenues are recorded in credit side and expenses are debited.
Excess of Income over expenditure is treated as profit and excess of expenditure over income is a loss.

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Capital and Revenue Test 4

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Capital and Revenue Test 4

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SHARING IS CARING

Question 1

Old ad debts amounting to Rs.5,000 fully written off recovered now.

Interest of Fixed Deposits held with Bank amounting to Rs.1,000

Rs.5,000 being sale of by products and scrap and waste generated

Insurance claim of Rs.20,000 received on account of damage of Plant and Machine in a major fire.

Question 2

interest cost

administrative cost

selling cost

all costs to bring the inventory to present location and condition

Solution

Question 3

Depreciation charges

Factory insurance premium

Production royalty paid

All the three

Solution

Question 4

Rental / Hire purchase

Long term usage for production purpose

Re-sale t profit

As a security to obtain loan from Banks

Question 5

revenue expenditure

deferred revenue expenditure

capital expenditure

loss

Solution

Question 6

Trial balance

Positional statement

Income statement

Charter of A/cs

Solution

Question 7

Godown rent

Godown Insurance

Selling and distribution expenses

Custom and excise duties

Question 8

revenue

expense

asset

liability

Solution

Question 9

just five year

not more than one trade cycle

not more than one year

just three to six months

Solution

Question 10

Accounting profit is the difference between cash receipts and cash paid in a period.

Accounting profit is the total of cash sales in the year less the expenses for the period.

Accounting profit is the difference between revenue income and expenses for the period.

Accounting profit is the difference between revenue income and cash payments for the period.

Solution

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