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The Government: Budget and the Economy Test - 18

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The Government: Budget and the Economy Test - 18
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  • Question 1
    1 / -0
    Insurance claim received on account of machinery damaged completely by fire ________________.
    Solution
    Capital receipt - Capital receipts are funds received by a business which are not revenue in nature & lead to an overall increase in the total capital of a company. These are funds generated from non-operating activities of a business hence are not shown inside the income statement instead they are shown inside a balance sheet.

    They are non-recurring in nature which means that they don’t occur regularly and can’t be used for distribution of profits. Unlike revenue receipts which can be used to create reserves, capital receipts are not used to create reserve funds. Insurance claim received on account of machinery damaged completely by fire is a capital receipt as this receipt is not in the normal course of business.

  • Question 2
    1 / -0
    FERA was replaced by _______.
    Solution
    The Foreign Exchange Regulation Act was a legislation passed in the year 1973 that imposed strict regulations on certain kinds of payments, the dealings in foreign exchange and securities and the transactions which had an indirect impact on the foreign exchange and import and export of the country. It was replaced by Foreign Exchange Management Act, an act to consolidate and amend laws relating to foreign exchange with a view to facilitate external trade and payments and for promoting the development of foreign exchange market in India.
  • Question 3
    1 / -0
    Which of these is a direct tax?
    Solution
    An income tax is a tax that governments impose on income generated by businesses and individuals within their jurisdiction. By law, taxpayers must file an income tax return annually to determine their tax obligations.  Income taxes  are direct taxes and are a source of An income tax is a tax that governments impose on income generated by businesses and individuals within their jurisdiction. By law, taxpayers must file an income tax return annually to determine their tax obligations.  Income taxes are direct taxes and are a source of revenue for governments.
  • Question 4
    1 / -0
    Income tax was first introduced in India in ______.
    Solution
    The history of income tax in modern India dates back to 1860 when the first income tax act was introduced by James Wilson who became India's first finance member. Hence, income tax was first introduced in India in 1860.
  • Question 5
    1 / -0
    FERA was enacted in _______.
    Solution
    The Foreign Exchange Regulation Act was a legislation passed in the year 1973 that imposed strict regulations on certain kinds of payments, the dealings in foreign exchange and securities and the transactions which had an indirect impact on the foreign exchange and import and export of the country. It came into force on 1st january, 1974. Hence, FERA was enacted in 1973.
  • Question 6
    1 / -0
    Amount received from sale of capital asset or contribution made by properties towards the capital of the business are known as _______________.
  • Question 7
    1 / -0
     MRTP Act was enacted in ______.
    Solution
    The Monopolies and Restrictive Trade Practices Act, 1969, was enacted to:
    1. Ensure that the operation of the economic system does not result in the concentration of economic power in the hands of few.
    2. Provide for the control of monopolies.
    3. Provide monopolistic and restrictive trade practices.
    Hence, MRTP Act was enacted in 1969.
  • Question 8
    1 / -0
    If an income is received in a lump sum payment is received in installments, it is a _________________.
  • Question 9
    1 / -0
    __________ and ___________ have no bearing on the profit or loss for the accounting period.
    Solution
    Capital receipts are a non-recurring incoming cash flow into your business, which leads to the creation of a liability (a debt to be paid in the future) and a decrease in company assets (resources that lead to capital gain).
    Capital expenditure - Money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment is known as capital expenditure.
    Capital receipts and capital expenditure are items of balance sheet and hence, have no bearing on the profit or loss for the acoounting period.
  • Question 10
    1 / -0
    A receipt in substitution of an income is a _______________.
    Solution
    An amount received by the way of substitution or addition of an income is a revenue receipt. For example, a reward received by an employee from his employer in appreciation of his services. This is a revenue receipt because it is received by receiver for his or her performance in services in day to day activities of a business and with this receipt, regular receipts are not getting affected in anyway.
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