The Government: Budget and the Economy Test

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The Government: Budget and the Economy Test - 21

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Weekly Quiz Competition

Question 1
1 / -0

Amount received for surrender of certain rights under an agreement is a______, when a capital asset is being given up in the form of these rights.

A
Deferred revenue receipts

B
Capital receipts

C
Revenue receipts

D
None of the above

Solution

An amount received in consideration of the surrender of certain rights under an agreement is a capital receipt, because such rights are capital assets which have been given up. For e.g., a lump sum amount received as commuted pension is a capital receipt being in the nature of compensation for surrendering the right to pension.
Question 2
1 / -0

Which of the following is/ are not revenue receipt?

A
Contributions into the business by the proprietor.

B
Loans taken from banks.

C
Amount received on issue of share capital.

D
All of the above.
Solution
Revenue Receipts - Receipts that are obtained in the course of normal business activities are known as revenue receipts. Cash from sale of goods, rent received, commission received etc., are regarded as revenue receipts. They are shown in the Profit & Loss Account.
Capital receipts refer to incoming cash flows (receipts) originating from one of the following three sources:
- Cash from the sale of fixed assets (either tangible or intangible)
  Can also include a payment associated with an insurance claim from a damaged fixed asset
- Cash from the sale of shares in the business
  Can include common stock and preferred stock
- Cash from the issuance of a debt instrument
Therefore, all the receipts given in question are of capital nature.
Question 3
1 / -0

Which of the following is/ are not capital receipt?

A
Receipts from sales.

B
Fees received for services.

C
Interest on investment.

D
All of the above.
Solution
Revenue receipts are receipts that occur routinely. They are realized from day to day business activities of a company and are needed by any business to survive and strive. Revenue receipts are normally received through the sale of stock-in-trade and the provision of services to customers in the ordinary course of business. The effect of revenue receipts is normally shown only in theincome statement of the company.
Examples of revenue receipt are :
Revenue received from sale of goods to customers.
Revenue received from provision of services to clients
Income received as interest on a saving account.
Dividend income received from shares of various companies.
Rental income received by a company.
Bad debts recovered by a company
Cash discount received from vendors.
Commission income received by a company.
Therefore, all the incomes given in the question are revenue receipts.
Question 4
1 / -0

_________ and ________ have no bearing on the profit or loss for the accounting period.

A
Capital receipts, Capital expenditure

B
Capital expenditure, Revenue receipts

C
Capital receipts, Regular receipts

D
None of the above

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 accounting period.
Question 5
1 / -0

Amount realized by the sale of fixed assets or by issue of shares or debentures is a _________ while amount realized by sale of goods or rendering services is always _________.

A
Revenue receipts, Capital receipt

B
Capital receipt, Revenue receipts

C
Capital receipt, Capital receipt

D
Revenue receipts, Revenue receipts

Solution

An amount received on account of sale of trading goods or receipts in respect of circulating capital or of flowing capital is revenue receipt, for example sale of a motor car by a dealer. On the other hand a receipt on account of sale of fixed assets is a capital receipt, for example, amount received on sale of a motor car by a person who is not a car dealer.
Question 6
1 / -0

Company's paid up capital is rupees 50,000. It will be put in ____________.

A
Capital account

B
Capital receipts

C
Revenue receipts

D
Deferred revenue account

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).
Paid up capital is a sum of money invested by shareholders in exchange of shares which is not recurring in nature and hence, it is a capital receipt.
Question 7
1 / -0

Government Borrowing refers to ______________.

A
borrowing from the market by way of $$91$$ days Treasury Bills

B
raising funds from public through National Savings Schemes, Post Office Saving Deposits, Provident Fund Collections, etc

C
both (a) and (b)

D
neither (a) and (b)
Question 8
1 / -0

Which of the following is not included in Balance of Unrequited Transfers?

A
Grants and Reparation

B
Interests, Profits, Dividends and Royalties received and paid from and to Foreigners

C
Gifts

D
Donations
Question 9
1 / -0

Amount received as compensation under an agreement for the loss of future profits is a _______________.

A
Deferred revenue receipts

B
Capital receipts

C
Revenue receipts

D
None of the above

Solution

An amount received as a compensation for loss of future profit under an agreement is a revenue receipt But an amount received in consideration of the surrender of certain rights under an agreement is a capital receipt, because such rights are capital assets which have been given up. For e.g., pension received by a former employee is a revenue receipt as it is in the nature of compensation of past services. But a lump sum amount received as commuted pension is a capital receipt being in the nature of compensation for surrendering the right to pension.
Question 10
1 / -0

Fiscal Policy is concerned with:

A
Public Revenue, Public Expenditure and Public Debt

B
Controlling the BOP situation

C
Controlling the Banks

D
None of the above

Solution

Fiscal Policy is concerned with public revenue and public expenditure and debt. Fiscal policy helps to ensure economic stability and economic growth. During inflation, revenue is decreased. Whereas, during deflation, revenue is increased.

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Re-Attempt Weekly Quiz Competition

The Government: Budget and the Economy Test - 21

Result

The Government: Budget and the Economy Test - 21

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Rank

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SHARING IS CARING

Question 1

Deferred revenue receipts

Capital receipts

Revenue receipts

None of the above

Solution

Question 2

Contributions into the business by the proprietor.

Loans taken from banks.

Amount received on issue of share capital.

All of the above.

Solution

Question 3

Receipts from sales.

Fees received for services.

Interest on investment.

All of the above.

Solution

Question 4

Capital receipts, Capital expenditure

Capital expenditure, Revenue receipts

Capital receipts, Regular receipts

None of the above

Solution

Question 5

Revenue receipts, Capital receipt

Capital receipt, Revenue receipts

Capital receipt, Capital receipt

Revenue receipts, Revenue receipts

Solution

Question 6

Capital account

Capital receipts

Revenue receipts

Deferred revenue account

Solution

Question 7

borrowing from the market by way of $$91$$ days Treasury Bills

raising funds from public through National Savings Schemes, Post Office Saving Deposits, Provident Fund Collections, etc

both (a) and (b)

neither (a) and (b)

Question 8

Grants and Reparation

Interests, Profits, Dividends and Royalties received and paid from and to Foreigners

Gifts

Donations

Question 9

Deferred revenue receipts

Capital receipts

Revenue receipts

None of the above

Solution

Question 10

Public Revenue, Public Expenditure and Public Debt

Controlling the BOP situation

Controlling the Banks

None of the above

Solution

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