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Introduction to accounting Test - 30

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Introduction to accounting Test - 30
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  • Question 1
    1 / -0
    Accounting is a language of _________.
    Solution
    Accounting is known as the language of the business as it communicates that how the business is operating, whether it is making profit or loss etc.
    Accounting is used to communicate financial and other information to different interested parties like creditors, investors, researchers, governments etc.
  • Question 2
    1 / -0
    Which of the following is the example of external users of accounting information ______________.
    Solution
    Government is an external user of the accounting information as it is not part of the business.
    There are two types of users of the financial statements
    1. Internal Users: The examples of Internal users are owners, management and employee etc.
    2. External Users: The example of External users are the government.
  • Question 3
    1 / -0
    Drawings account is to be created by linking with
    Solution
    The drawings account is to be created by linking with Capital. Drawing means the amount withdrawn by the owner.
    When the owner withdraws some amount from the business it is known as the drawings.
    As per Business Entity Concept, the businessman is considered separate from the business.
    Therefore, capital is the liability for the business and investment for the owner.
  • Question 4
    1 / -0
    In general the financial year from shall be from ______________.
    Solution
    The financial year starts from 1st April of every year and ends on 31 March of the next calendar year. The business prepares its financial statement for each financial year. 
    However, this is not mandatory, there are many business organisations where financial year starts from 1st January and ends on 31 December of the same year.
    Some business organisations also follow the period of 18 months as the financial year.
  • Question 5
    1 / -0
    _________ refers the amount invested by the owner into business.
    Solution
    Capital refers the amount invested by the owner into business. 
    When the owner withdraws some amount from the business it is known as the drawings.
    As per Business Entity Concept, the business man is considered separate from the business.
    Therefore, capital is liability for the business and investment for the owner.
  • Question 6
    1 / -0
    State the fundamental steps in the accounting process __________.
    Solution
    The first step involves identifying the transactions to be recorded and preparing the source documents which are in turn recorded in the basic book of original entry called journal and are then posted to individual accounts in the principal book called ledger. It involves classification of the business transaction, The process of recording transactions in journal is called journalising, Once this journalising process is completed, the journal entry provides a complete and useful description of the event's effect on the organisation. The process of transferring journal entry to individual accounts is called posting. 

  • Question 7
    1 / -0
    Business transaction in which cash is not paid or received immediately is known as ______________.
    Solution
    Transactions are the building blocks of accounts. Any transaction that occur within the business should be present in the accounting records. Credit transaction means any transaction by the terms of which the repayment of money loaned or loan commitment made, payment for goods, services or properties sold or leased is to made at a future date or dates. Credit transactions are paid at a later date than when the exchange of goods or services take place and almost at the time when the invoice for the transaction is issued.
  • Question 8
    1 / -0
    Determining the debit and credit parts of a transaction is called _______________.
    Solution
    Before passing any accounting entry in journal, this has to identify that which account need to be debited and credited. For this, analysis of the business transaction is must which is done on the basis of nature of transaction.
  • Question 9
    1 / -0
    Which of the following show the basic sequence of the accounting process?
    Solution
    Every business transaction is to be recorded in the journal in chronological order. The sequence of any business transaction can be defined as:
    1. Transaction- Firstly, a transaction takes place in a business.
    2. Source document- Each transaction is supported by a source document.
    3. Journal Entry- A transaction is recorded in the journal with the help of a source document. 
    4. Ledger Account- Once the transactions are recorded in the journal then they are posted to the ledger. 
    5. Trial balance- All ledger balances are listed down in a statement named as trial balance
  • Question 10
    1 / -0
    The main purpose of ___________ accounting is to ascertain profit or loss during a specific period and to show financial position of the business.
    Solution
    Profit & loss account and balance sheet are prepared on the basis of information available through financial accounting. Profit and loss account shows the profit or loss during a specific period and balance sheet provides the financial position of the firm on a particular date.
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