Financial Statements 1 Test 2

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Financial Statements 1 Test 2

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Weekly Quiz Competition

Question 1
1 / -0

__________ are costs which have been applied against revenue of particular accounting period.

A
Expenses

B
Income

C
Loss

D
None of these

Solution

Costs incurred by a business in the process of earning revenue are known as expenses. Generally, expenses are measured by the cost of assets consumed or services used during an accounting period. The usual items of expenses are depreciation, rent, wages, salaries, interest, cost of heater, light and water, telephone etc.
Question 2
1 / -0

Wages paid to workers must be debited to _________ account.

A
Wages

B
Machinery

C
Factory expenses

D
Office expenses

Solution

Wages is a direct expenses and should be debited to wages account as an expense in trading account as a direct cost. Wages is nominal account.
Question 3
1 / -0

Goods destroyed by fire should be credited to______.

A
Purchases account

B
Sales account

C
Loss of goods by fire account

D
Insurance account

Solution

Loss of goods by fire, it is just possible that some goods may catch fire and result in loss to the business. This is definitely loss, so "Loss of goods by fire" account will be debited. Such goods have been destroyed, not sold, so their valuation will be made at cost price. So, purchases account will be credited. The journal entry for this transaction will be made as under:

Loss of goods by fire A/c Dr.
To Purchases A/c
Question 4
1 / -0

The balance sheet is a __________ of the assets, liabilities and capital of concern as on particular date.

A
Statement

B
Document

C
Picture

D
Balance

Solution

The balance sheet indicates the financial position of a firm on a particular date. It is prepared as a statement showing all the assets and liabilities of the firm.
Question 5
1 / -0

The take over of a company in which most of the purchase price is paid with borrowed money is referred to as __________.

A
Hostile takeover

B
Illegal takeover

C
Leveraged buy-out

D
Management buy-out

Solution

A leveraged buy out (LBO) is financial transaction in which a company purchased another company by using the borrowed money.
A leveraged buyout is the acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition.
Question 6
1 / -0

Balance Sheet is a statement of ________.

A
Assets

B
Liabilities

C
Capital

D
All of the above

Solution

Balance sheet is statement prepared for every financial year to know the state of affairs of the company on a particular date. Balance sheet has two major components i.e. assets and liabilities.
Assets side of the balance sheet is having current assets, fixed assets. On the side, i.e. liability side will have capital and long term & short term liabilities.
Question 7
1 / -0

Legacies are generally __________.

A
capitalized and taken to balance sheet

B
treated as income

C
treated as expenditure

D
treated as other incomes

Solution

An amount received by a non profit organization as per will is called as legacy. It should be considered as receipts and to be recorded in the receipts and payment account. Legacy should be recorded as capital receipt because it it received for a specific purpose. This has to be added to capital fund and to be taken in the balance sheet.
Question 8
1 / -0

Which financial statement represents the accounting equation:
ASSETS = LIABILITIES + OWNER'S EQUITY?

A
Income Statement

B
Cash Flow Statement

C
Balance Sheet

D
Fund Flow Statement

Solution

Balance sheet is a statement of affairs of the business on a particular date. Balance sheet shows assets , liabilities and capital of the business.
Accounting equation may be defines as:

Owner's Equity+ Liabilities=Total Assets
Owner's Equity+ Liabilities=Current Assets+Fixed Assets
Question 9
1 / -0

Balance sheet is a(n) ____.

A
Statement

B
Account

C
Ledger

D
Book

Solution

Balance sheet is an statement prepared on a particular date for showing the financial position of the firm as on the date. This includes assets and liabilities.
Question 10
1 / -0

Investment of X company , profit in shares of other company PQR Pvt. Ltd are recorded in ________

A
Asset side of balance sheet

B
Liability side of balance sheet

C
Profit & loss a/c

D
Not recorded in balance sheet

Solution

Investment helps in generating future cash flow for the business therefore they are assets of the company.
Hence, the Investment of X company will be recorded in the assets side of the balance sheet of the POR Pvt. Ltd.

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Financial Statements 1 Test 2

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Financial Statements 1 Test 2

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SHARING IS CARING

Question 1

Expenses

Income

Loss

None of these

Solution

Question 2

Wages

Machinery

Factory expenses

Office expenses

Solution

Question 3

Purchases account

Sales account

Loss of goods by fire account

Insurance account

Solution

Question 4

Statement

Document

Picture

Balance

Solution

Question 5

Hostile takeover

Illegal takeover

Leveraged buy-out

Management buy-out

Solution

Question 6

Assets

Liabilities

Capital

All of the above

Solution

Question 7

capitalized and taken to balance sheet

treated as income

treated as expenditure

treated as other incomes

Solution

Question 8

Income Statement

Cash Flow Statement

Balance Sheet

Fund Flow Statement

Solution

Question 9

Statement

Account

Ledger

Book

Solution

Question 10

Asset side of balance sheet

Liability side of balance sheet

Profit & loss a/c

Not recorded in balance sheet

Solution

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