Introduction to accounting Test - 3

Profit refers to the excess of revenue over its expenses during an accounting year. It is an income earned by the business from its operating activities.

The correct sequence of the process of accounting is

identification, recording, classification, analysis, interpretation and communication to the interested users.

The term trade payable is the amount payable for purchase of goods and services performed. It is the sum of creditors and bills payable.

A non-profit organisation prepares income and expenditure account instead of profit and loss account as it carries on welfare activities and any set of business.

A transaction can be recorded in the books of account only if it is a financial event expressed in terms of money which brings a change in the financial position of an enterprise. Payment of son’s fees from his personal account does not bring about any change in the financial position of an enterprise.

Intangible assets are those assets which do not have physical existence, and hence computer is a tangible asset as it has a physical existence.

A strike by employees is not a business transaction because this event is not expressed in terms of money. Hence, it does not bring any change in the financial position of an enterprise.

The qualitative characteristics of accounting information are reliability, relevance, comparability, understandability and comparability. Record keeping is one of the function of accounting.

A transaction can be recorded in the books of account only if the transaction is of an economic event which is of financial nature as they bring changes in the resources of a firm.

Intangible assets are those assets which do not have physical existence. For example, goodwill, trademark and software.