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Financial Statements Test - 5

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Financial Statements Test - 5

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Question 1
1 / -0

Any expenditure incurred in order to reduce the operating expenses is ________.

A
Deferred revenue expenditure

B
Promotional expenditure

C
Capital expenditure

D
Revenue expenditure

Solution

operating cost can be reduced by improving or aquiring new machines . purchase or improvement in asset is capital expenditure.
Question 2
1 / -0

Packaging material will be

A
Credited to Profit and loss A/c

B
Debited to Profit and loss A/c

C
Debited to trading A/c

D
Credited to trading A/c

Solution

since it is direct expense it will be shown on debit side of trading account.
Question 3
1 / -0

which branch of accounting helps to ascertain profit and loss for the year and also shows the financial position?

A
Financial accounting

B
Cost accounting

C
Human resource accounting.

D
Management account

Solution

it is the branch which calculates the profit and loss and also shows the financial position through the balance sheet.
Question 4
1 / -0

Goods destroyed by fire should be credited to:

A
Loss of goods by fire account

B
Sales account

C
Purchases account

D
Insurance account

Solution

the journal entry for goods loss by fire is
loss by fire a/c dr
to purchases a/c
Question 5
1 / -0

Which of the following are an example of Revenue Expenditure
(a) Preliminary expenses for floating a company
(b) Renewal expenses/fee of patent.
(c) Depreciation on fixed assets.
(d) Repair of machinery normal or due to negligence of operator
(e) Expenses for obtaining a license.
Options are as follows

A
b,c,d

B
a,b,c,d,e,

C
a,b,c,d,

D
c,d,e

Solution

expenses in the option b c and d are recurring in nature. so they are revenue expenditure.
Question 6
1 / -0

Expenditure incurred on research is an example of _______.

A
Deferred revenue expenditure

B
Partly capital expenditure

C
Revenue expenditure.

D
Capital expenditure.

Solution

as the benefits of research will be distributed over the years so it is deferred revenue expenditure
Question 7
1 / -0

Drawings account is a:

A
Personal Account

B
Nominal Account

C
Company drawing account

D
Real Account

Solution

drawing account is owner's account.so it is personal account.
Question 8
1 / -0

A gross profit is transferred to the __________side of the profit and loss account.

A
Credit

B
Current

C
Asset

D
Debit

Solution

profit and loss account is nominal account so all profit and gains are credited
Question 9
1 / -0

What should be the journal entry when the amount of bad debt is recorded in the books

A

B

C

D

Solution

since bad debts is loss for the business it is debited and debtors that is asset is decreasing so it is credited.
Question 10
1 / -0

Match the following. Options are as follows

A
a(iv),b(iii),c(i),d(ii)

B
a(iv),b(iii),c(ii),d(i)

C
a(iv),b(ii),c(iii),d(i)

D
a(iii),b(iv),c(ii),d(i)

Solution

revenue receipt and expenditure does not affect assets and liabilities. capital receipt and expenditure affects the assets and liabilities.
Question 11
1 / -0

Accounting treatment of Deferred Revenue Expenditure is based on which principle

A
Cost concept

B
Going concern concept

C
Money Measurement

D
Matching Principle

Solution

deferred revenue expenditure is if of revenue in nature then its treatment is done according to matching principle i.e expenses of current year will be matched with the income of current year.
Question 12
1 / -0

Which of the following is Revenue Receipt

A
Amount received which is not is the normal and ordinary course of business like sale of fixed assets.

B
Loan raised.

C
Fresh capital introduced or additional capital introduced

D
Income from non-operating business activities

Solution

revenue receipts are those which do not affect the asset and liabilities. since income from non operating business activities do not affect asset and liabilities it is revenue receipt.
Question 13
1 / -0

Which one of the following should be considered revenue expenditure?

A
Loss of Rs. 10000 incurred in increasing the sitting accommodation of hotel.

B
Rs. 1000 paid for the execution of a new plant.

C
Damage paid on account of breach of a contract to supply certain goods.

D
Repairs to machinery purchased

Solution

this transcation does not affect the assets and liabilities so it is revenue expenditure.
Question 14
1 / -0

Revenue expenditure is intended to benefit _________.

A
Future period

B
Past period

C
Current period

D
None of these

Solution

it is incurred to meet day to day expenses of business.
Question 15
1 / -0

Amount paid for acquiring goodwill is __________.

A
Deferred capital expenditure.

B
Revenue expenditure

C
Deferred revenue expenditure

D
Capital expenditure

Solution

goodwill is considered as an asset so amount spent on aquiring goodwill will be capital expenditure.
Question 16
1 / -0

What should be the journal entry when managers commission due

A

B

C

D

Solution

manager commission is expense so it is debited and since it is outstanding hence outstanding manager commission account is credited.
Question 17
1 / -0

Which one of the following is treated as revenue expenditure?

A
Interest paid on loan during the construction of works.

B
Cost of pulling down an old building

C
Cost incurred for a new exit as required under the local bodies by laws

D
A dealer in purchasing sewing machines and spent some money on the repairs.

Solution

it does not increase the asset so it is revenue expenditure.
Question 18
1 / -0

The balance sheet is a ________ of the assets, liabilities and capital of a concern as on particular date.

A
Picture

B
Balance

C
Statement

D
Document

Solution

as it shows the position of assets and liabilities of the business.
Question 19
1 / -0

Wages paid for erection of machinery are debited to __________.

A
Profit and loss account

B
Wages account

C
Deferred wages account

D
Machinery account

Solution

wages paid for erection is capital expenditure and it will be added to machinery account.
Question 20
1 / -0

Income tax paid by a solo trader is shown

A
On the debit side of the Trading account

B
On the debit side of the Profit and loss account

C
None of these

D
By way of deduction from capital in the balance sheet

Solution

since it is personal expense of the owner it is considered as drawings so it is subtracted from capital in the balance sheet.
Question 21
1 / -0

Which one of the following is capital expenditure?

A
Purchase of raw material

B
Purchase of Land and Building

C
Purchase of machine oil

D
Cost of advertisement for current year

Solution

since it increases the asset so it is capital expenditure.
Question 22
1 / -0

Preliminary expenses are

A
Deferred capital receipt.

B
Revenue receipt.

C
Fictitious asset

D
Deferred revenue receipt

Solution

these are the expenses incurred before starting a business. they are written off over the years of the business.
Question 23
1 / -0

Expenditure incurred by a publisher for acquiring copyrights is a _________.

A
Capital expenditure.

B
Reserve expenditure.

C
Capital receipts

D
Deferred reserve expenditure

Solution

copyrights is considered as an asset so expenditure which increases the asset is capital expenditure.
Question 24
1 / -0

Which of the following is false regarding capital expenditure

A
When expenditure incurred for increasing the earning capacity of the business.

B
When an amount is incurred in non-recurring in nature.

C
Capital expenditure is recorded in balance sheet.

D
Capital expenditure gives benefit over a short period

Solution

capital expenditure is the expenditure which is done on long term assets and liabilities. so it is for long term.

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