Accounting Equation Effects Test 16

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Accounting Equation Effects Test 16

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Weekly Quiz Competition

Question 1
1 / -0

Select the most appropriate alternative from those given below:
Capital is excess of assets over _________.

A
Goodwill

B
Liabilities

C
Investments

D
Drawings

Solution

Accounting Equation can be presented as:

Capital+Liabilities=Assets

Therefore

Capital = Assets- Liabilities

It is true that capital is excess over liabilities.
Question 2
1 / -0

An old car having a book value of Rs. 50,000 on 1st April 2013 and having market value of Rs. 10,000 as on 31st March 2014 is reported in the financial statement at Rs. 10,000. The company is following ____ method of valuation.

A
Historical cost

B
Present value

C
Realizable cost

D
Current cost

Solution

Realizable value is the net amount of money that you will to get from selling one of your assets. In other words, realizable value is equal to the sale price of an asset less any applicable fees. Notice this has nothing to do with the fair market value of the asset being sold. In this question the company is following realizable cost method of valuation as old car is reported in the financial statements at market value.
Question 3
1 / -0

_______ is subject matter of Accounting.

A
Death of key executive of the business/company

B
Strike of workers

C
Payment of Rs.10,000 to bank in discharge of outstanding loan

D
Marriage of the daughter of the Managing Director of the Company

Solution

The concept of money measurement states that only those transactions and happenings in an organisation which can be expressed in terms of money such as sale of goods or payment of expenses or receipt of income, etc. are to be recorded in the book of accounts.
All such transactions or happenings which can not be expressed in monetary terms, for example, the death of a manager, do not find a place in the accounting records of a firm.
Another important aspect of the concept of money measurement is that the records of the transactions are to be kept not in the physical units but in the monetary unit.
Question 4
1 / -0

_________ is an Accounting Convention.

A
Consistency

B
Accrual

C
Realization

D
Going Concern

Solution

There are four main conventions in practice in accounting: conservatism; consistency; full disclosure; and materiality.
Question 5
1 / -0

________ is not an accounting convention.

A
Business entity

B
Disclosure

C
Conservatism

D
Materiality

Solution

Business entity is not an accounting convention. Its an accounting concept. An accounting concept is a principle that ensures true and fair view of statements, where as, accounting conventions are practices that are generally accepted and followed by accountants.
There are four main conventions in practice in accounting: conservatism; consistency; full disclosure; and materiality.
Question 6
1 / -0

The difference between assets and liabilities is?

A
Bank overdraft

B
Retained profit

C
Capital or owner's equity

D
Creditors

Solution

The accounting equation displays that all assets are either financed by borrowing money or paying with the money of the company's shareholders. Thus, the accounting equation is: Assets = Liabilities + Owner's equity. The balance sheet is a complex display of this equation, showing that the total assets of a company are equal to the total of liabilities and owner's equity. The difference between assets and liabilities is capital or owner's equity i.e. Owner's equity = Assets - Liabilities.
Question 7
1 / -0

Revenue is generally considered as realized ________.

A
At the time of agreement to sell

B
At the time of receipt of cash

C
At the time of sale

D
At the time of production of goods

Solution

The revenue recognition principle is a cornerstone of accrual accounting together with the matching principle. They both determine the accounting period in which revenues and expenses are recognized.
According to the principle, revenues are recognized when they are realized or realizable, and are earned (usually when goods are transferred or services rendered), no matter when cash is received.
Hence, the revenue is generally recognized at the time of sale.
Question 8
1 / -0

The 'Revenue Recognition' principle refers to ________.

A
The process of matching of expenses and revenue

B
The process of identifying those transactions that result in an inflow of cash from customers

C
The earning process which gives rise to revenue realization

D
The process of determination of the income of enterprise.

Solution

Revenue Recognition principle is based on accounting period concept. It assumes that all transactions relating to income and expenses must be recorded in the books of account based on the accounting period followed by the business. Hence if any amount which is not paid but the service is already taken must be recorded as an adjustment.
Question 9
1 / -0

Accounting policies followed by the companies are __________.

A
Different from year to year

B
Frequently changed as per the situation

C
The same as notes to accounts

D
Consistently followed from year to year

Solution

The accounting information provided by the financial statements would be useful in drawing conclusions regarding the working of an enterprise only when it allows comparisons over a period of time as well as with the working of other enterprises.
Thus, both inter-firm and inter-period comparisons are required to be made. This can be possible only when accounting policies and practices followed by enterprises are uniform and are consistent over the period of time.
Question 10
1 / -0

Excess of Assets over liabilities is ___________.

A
Owner's capital

B
Net profit

C
Gross profit

D
Net worth

Solution

The accounting equation is the foundation of double entry accounting. The accounting equation displays that all assets are either financed by borrowing money or paying with the money of the company's shareholders. Thus, the accounting equation is: Assets = Liabilities + Owner's equity (Net worth). Which also means excess of asserts over liabilities is nothing but owner's equity i.e. Assets - Liabilities = Owner's equity (Net worth).

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Re-Attempt Weekly Quiz Competition

Accounting Equation Effects Test 16

Result

Accounting Equation Effects Test 16

Score

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Rank

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SHARING IS CARING

Question 1

Goodwill

Liabilities

Investments

Drawings

Solution

Question 2

Historical cost

Present value

Realizable cost

Current cost

Solution

Question 3

Death of key executive of the business/company

Strike of workers

Payment of Rs.10,000 to bank in discharge of outstanding loan

Marriage of the daughter of the Managing Director of the Company

Solution

Question 4

Consistency

Accrual

Realization

Going Concern

Solution

Question 5

Business entity

Disclosure

Conservatism

Materiality

Solution

Question 6

Bank overdraft

Retained profit

Capital or owner's equity

Creditors

Solution

Question 7

At the time of agreement to sell

At the time of receipt of cash

At the time of sale

At the time of production of goods

Solution

Question 8

The process of matching of expenses and revenue

The process of identifying those transactions that result in an inflow of cash from customers

The earning process which gives rise to revenue realization

The process of determination of the income of enterprise.

Solution

Question 9

Different from year to year

Frequently changed as per the situation

The same as notes to accounts

Consistently followed from year to year

Solution

Question 10

Owner's capital

Net profit

Gross profit

Net worth

Solution

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