Financial Statements 1 Test 3

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Financial Statements 1 Test 3

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Weekly Quiz Competition

Question 1
1 / -0

True & fair profit/loss of a company is known by _____________.

A
preparing trial balance

B
preparing respective ledger of account

C
preparing trading account

D
preparing trading and profit & loss account

Solution

Accounting is based on certain concepts and conventions. All such concepts and convention should be followed while preparing the financial statement of the firm.
When the trading and profit or loss account is prepared in compliance with all such concepts and conventions, they shall depict a true picture of the profitability of the business entity.
Question 2
1 / -0

Which of the following are current assets?

A
Bank loan for three years.

B
Account receivable.

C
Long-term investments.

D
Debentures sinking fund investments.

Solution

Current assets are those which are convertible into cash in short period of time i.e within a year. Accounts receivable reflects the amount to be received from the debtors for the sales made. Since, such amounts for sales made are receivable in the short period, accounts receivable are classified as current assets.
Question 3
1 / -0

If the operating expenses exceed gross profit, the excess is referred to as ______________.

A
Operating income

B
Operating loss

C
Non-operating expenses

D
Non-operating income

Solution

This can be represented as:

Sales 120000
Less: Cost of Goods Sold 80000
---------------
Gross Profit 40000
Less: Operating Expenses 60000
---------------
Operating Loss (20000)
----------------
Question 4
1 / -0

Income tax paid by a sole proprietor on his business income should be ____________.

A
Debited to Trading Account

B
Debited to Profit and Loss account

C
Deducted from Capital account in the Balance Sheet

D
None of the Above

Solution

In sole proprietorship, all profits are transferred to the owner. Income tax is a personal tax which need to be paid by the individual in case of proprietorship.

This will be considered as personal expense or drawings and should be deducted from the capital a/c.
Question 5
1 / -0

'Bank over draft' should be classified as ____________.

A
Current Asset

B
Current Liability

C
Regular Asset

D
Intangible Asset

Solution

Bank overdraft is a temporary facility provided by the bank to business. Business is permitted to withdraw the amount more than the amount available in bank account. Its a short term liability hence to be consider as current liability.
Question 6
1 / -0

How Should the following assets be shown in the permanence order in the balance sheet of a company?
1. Patent
2. Cash at bank
3. Stock in trade
4. Land and building
5. Cash in hand

A
1, 4, 3, 2, 5

B
4, 1, 3, 2, 5

C
4, 3, 5, 2, 1

D
5, 2, 1, 3, 4

Solution

The permanence order of assets in the balance sheet is:
1. Land and building
2. Patent
3. Stock in trade
4. Cash at bank
5. Cash in hand.
Question 7
1 / -0

Call option is?

A
A contract to buy a certain number of shares at a stated price within a specified period of time.

B
A contract to sell a certain number of shares at a stated price within a specified period of time.

C
The option of the issuing company to demand the shareholders to pay for the partly paid shares.

D
The option available to the convertible debenture holders to demand equity shares in conversion of debentures.

Solution

A call option is an agreement that gives the option buyer the right to buy the underlying asset at a specified price within a specific time period.
Question 8
1 / -0

A company pays dividend out of _____________________.

A
Profits of the company for year for which dividends are to be paid.

B
Undistributed profit of the previous financial years.

C
Money provided by the central and state governments for the payment of dividends in pursuance of their guarantors.

D
All of these.

Solution

Dividends - Dividends are the sum of money to be paid to the members of the company out of the profits made by the company.
Sources od dividend :-
1. Profits of the compnany for the year for which dividends are to be paid.
2. Undistributed profit of the previous financial years.
3. Money provided by the central and state governments for the payment of dividends in pursuance of their guarantors.
Question 9
1 / -0

Working capital cycle involves the following.
i) Acquisition of Raw material
ii) Finished goods
iii) Receivables
iv) Cash
v) Work in progress.
Which of the sequence is correct?

A
(iv), (iii), (i), (v), (ii)

B
(i), (ii), (iii), (iv), (v)

C
(i), (v), (ii), (iii), (iv)

D
(iv), (i), (ii), (iii), (v)
Question 10
1 / -0

A business entity has assets of $$Rs.26,000$$ and liabilities of $$Rs.6,000$$. Owner's equity in this case is __________.

A
$$Rs.32,000$$

B
$$Rs.26,000$$

C
$$Rs.20,000$$

D
$$Rs.6,000$$

Solution

Accounting Equation is formulated as:

Owner's Equity + Liabilities = Total Assets.

By putting the available information in the given problem:

Owner's Equity + Rs.6000 = Rs.26000

Owner's Equity = Rs. 26000 - Rs.6000

Owner's Equity = Rs.20000

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Re-Attempt Weekly Quiz Competition

Financial Statements 1 Test 3

Result

Financial Statements 1 Test 3

Score

-

Rank

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SHARING IS CARING

Question 1

preparing trial balance

preparing respective ledger of account

preparing trading account

preparing trading and profit & loss account

Solution

Question 2

Bank loan for three years.

Account receivable.

Long-term investments.

Debentures sinking fund investments.

Solution

Question 3

Operating income

Operating loss

Non-operating expenses

Non-operating income

Solution

Question 4

Debited to Trading Account

Debited to Profit and Loss account

Deducted from Capital account in the Balance Sheet

None of the Above

Solution

Question 5

Current Asset

Current Liability

Regular Asset

Intangible Asset

Solution

Question 6

1, 4, 3, 2, 5

4, 1, 3, 2, 5

4, 3, 5, 2, 1

5, 2, 1, 3, 4

Solution

Question 7

A contract to buy a certain number of shares at a stated price within a specified period of time.

A contract to sell a certain number of shares at a stated price within a specified period of time.

The option of the issuing company to demand the shareholders to pay for the partly paid shares.

The option available to the convertible debenture holders to demand equity shares in conversion of debentures.

Solution

Question 8

Profits of the company for year for which dividends are to be paid.

Undistributed profit of the previous financial years.

Money provided by the central and state governments for the payment of dividends in pursuance of their guarantors.

All of these.

Solution

Question 9

(iv), (iii), (i), (v), (ii)

(i), (ii), (iii), (iv), (v)

(i), (v), (ii), (iii), (iv)

(iv), (i), (ii), (iii), (v)

Question 10

$$Rs.32,000$$

$$Rs.26,000$$

$$Rs.20,000$$

$$Rs.6,000$$

Solution

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