Financial Statements 1 Test 27

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Financial Statements 1 Test 27

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Question 1
1 / -0

The items in the balance sheet are marshaled in a way that assets that are to be used permanently are put on top order; this type of arrangement is called _______________.

A
Liquidity order

B
According to time

C
Permanence order

D
Both a and b
Question 2
1 / -0

The correct sequence in preparation of periodical financial statement would be :
$$1.$$ Preparation of balance sheet
$$2.$$ Preparation of cash flow statement
$$3.$$ Preparation of trial balance
$$4.$$ Preparation of Profit and Loss A/c
Select the correct answer from the option given below.

A
$$4, 2, 1, 3$$

B
$$3, 4, 1, 2$$

C
$$2, 4, 3, 1$$

D
$$1, 3, 2, 4$$

Solution

There is an order of preparing financial statements because they build on one another. The first step in the process is the trial balance. The Trial Balance is the balance of all the accounts at the end of the accounting period. After Trial Balance next statement prepared is Profit and Loss A/c. It is the statement that lists all the revenues and expenses for the business for a specific period. After that Balance Sheet is prepared, it lists all the assets and liabilities of the business. Next statement is Cash Flow Statement. It shows inflows and outflows of cash.
Question 3
1 / -0

Which of the following approach can be used for marshalling of balance sheet?

A
Permanence order or according to purpose

B
Liquidity order or according to time

C
Either (A) or (B)

D
None of the above

Solution

There are two orders followed in Marshalling of assets and liabilities.
1. Order of Liquidity- In this, the most liquid assets are placed first and least liquid assets are placed last.
2. Order of Permanence - This is the reverse of order of liquidity.
Question 4
1 / -0

Another name for the balance sheet is __________________.

A
Statement of Operations

B
Statement of Financial Position

C
Both (A) and (B)

D
None of the above
Question 5
1 / -0

The purpose of making trading account ___________________.

A
To know the financial position of business

B
To ascertain the gross profit/loss'

C
To ascertain the net profit/loss'

D
None of the above.
Question 6
1 / -0

Who appoints the auditors of a company?

A
Shareholders

B
Central Government

C
Board of directors

D
Registrar of companies
Question 7
1 / -0

If you are going to put Rs. $$1,00,000$$ in a fixed deposit for a year at $$10\%$$ rate of interest, then you know how much interest your money will earn. What kind of a decision-making condition is this?

A
Certain

B
Uncertain

C
Risk

D
Normal

Solution

Managers take decisions on the basis of three conditions namely certainty, risk and uncertainty. The conditions of risk and uncertainty are applicable to the more complex and unstructured decisions by the managers at the top. Hence, it is a certain decision making to invest Rs. 100000 as a fixed deposit for 10% rate of interest because the interest amount is certain.
Thus, the correct answer is A.
Question 8
1 / -0

Which of the following statement is true?

A
Balance sheet is prepared on the basis of current values.

B
Balance sheet is prepared on historical cost basis is a limitation of balance sheet.

C
Sometimes balance sheet is window - dressed which misleads us. This is advantage of balance sheet.

D
All of the above.

Solution

Historical cost basis means assets and liabilities are recorded at their actual historical cost. Assets are recorded at the price paid for an asset at the time of its acquisition. It does not take into account inflation or changing prices. Historical cost accounting concept does not show the true value of company's assets.
Question 9
1 / -0

Which of the following statement is correct?

A
If there is gross loss in trading account then profit and loss account will also net loss alwasy

B
Balance sheet get tally even if there is error of principle

C
In balance sheet bank balance as per pass will be shown

D
All of the above
Question 10
1 / -0

The arrangement of assets and liabilities in accordance with a particular order is known as _________ of balance sheet.

A
Tallying

B
Marking

C
Ruling

D
Marshalling

Solution

Meaning of Marshal- To arrange in a logical order. The process of arranging the items of balance sheet in a logical order is called Marshalling of balance sheet. It is done to give the better understanding of balance sheet items. There are two orders followed in Marshalling of assets and liabilities.
1. Order of Liquidity
2. Order of Permanence.

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Financial Statements 1 Test 27

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Financial Statements 1 Test 27

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Question 1

Liquidity order

According to time

Permanence order

Both a and b

Question 2

$$4, 2, 1, 3$$

$$3, 4, 1, 2$$

$$2, 4, 3, 1$$

$$1, 3, 2, 4$$

Solution

Question 3

Permanence order or according to purpose

Liquidity order or according to time

Either (A) or (B)

None of the above

Solution

Question 4

Statement of Operations

Statement of Financial Position

Both (A) and (B)

None of the above

Question 5

To know the financial position of business

To ascertain the gross profit/loss'

To ascertain the net profit/loss'

None of the above.

Question 6

Shareholders

Central Government

Board of directors

Registrar of companies

Question 7

Certain

Uncertain

Risk

Normal

Solution

Question 8

Balance sheet is prepared on the basis of current values.

Balance sheet is prepared on historical cost basis is a limitation of balance sheet.

Sometimes balance sheet is window - dressed which misleads us. This is advantage of balance sheet.

All of the above.

Solution

Question 9

If there is gross loss in trading account then profit and loss account will also net loss alwasy

Balance sheet get tally even if there is error of principle

In balance sheet bank balance as per pass will be shown

All of the above

Question 10

Tallying

Marking

Ruling

Marshalling

Solution

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