Accounting Mcqs - Set 13

1)   Depreciation is calculated on the____________?

a. Cost price of asset
b. Market price
c. Cost+ Transport+ Installation expenses
d. Cost or market values whichever is less
Answer  Explanation 

ANSWER: Cost+ Transport+ Installation expenses

Explanation:
No explanation is available for this question!


2)   Which of the following is an external cause of depreciation?

a. Routine repair and maintenance
b. Misuse
c. Obsolescence
d. Wear and tear
Answer  Explanation 

ANSWER: Obsolescence

Explanation:
No explanation is available for this question!


3)   Which of the following is not depreciated?

a. Building
b. Land
c. Plant and Machinery
d. Office equipment
Answer  Explanation 

ANSWER: Land

Explanation:
No explanation is available for this question!


4)   ____________is also known as Appraisal system of depreciation?

a. Inventory system
b. Survey system
c. Annuity system
d. Insurance
Answer  Explanation 

ANSWER: Inventory system

Explanation:
No explanation is available for this question!


5)   Bad debts recovered account will be transferred to______________?

a. Debtor‘s Account
b. Profit and Loss Account
c. Provision for Doubtful Debt Account
d. Either (b )or C. above
Answer  Explanation 

ANSWER: Either (b )or C. above

Explanation:
When Bad debts are recovered the entry is
Cash A/c …………………………………………………… Dr.
To Bad debts recovered A/c
This A/c can either be transferred to P& L A/c or Provisions for Doubtful Debts A/c.


6)   The entry for creating a Provision for bad debts is_____________?

a. Debit Provision for Bad Debts A/c and credit Debtors A/c
b. Debit Debtors A/c and credit Provision for Bad Debts A/c
c. Debit Provision for Bad Debts A/c and credit Profit & Loss A/c
d. Debit Profit and Loss A/c and credit Provision for Bad Debts A/c.
Answer  Explanation 

ANSWER: Debit Profit and Loss A/c and credit Provision for Bad Debts A/c.

Explanation:
Provision for bad debt is a charge against profit and therefore, the entry for creating
provision for bad debts is done by debiting P&L A/c and crediting provision for bad debts
account.


7)   When a person purchasing goods on credit he becomes a_________in the books of the seller?

a. Debtor
b. Creditor
c. Defaulter
d. Offender
Answer  Explanation 

ANSWER: Debtor

Explanation:
No explanation is available for this question!


8)   Cost of goods sold excludes___________?

a. Opening Stock
b. Carriage inward
c. Wages & Salary
d. Postage & Stamps
Answer  Explanation 

ANSWER: Postage & Stamps

Explanation:
No explanation is available for this question!


9)   Tax deducted at source A/c appears in___________?

a. Assets side
b. Liability side
c. Profit & Loss A/c
d. Debited to Capital A/c
Answer  Explanation 

ANSWER: Assets side

Explanation:
No explanation is available for this question!


10)   Investment in own share A/c appears in____________?

a. Asset side
b. Liability side
c. Netted from Capital
d. Profit & Loss A/c
Answer  Explanation 

ANSWER: Asset side

Explanation:
No explanation is available for this question!


11)   Payments received in advance from a customer for a contract can be__________?

a. Shown as a deduction from contract work-in-progress on asset side
b. Shown as a liability
c. Credited to P&L A/c
d. Either A. or B. above
Answer  Explanation 

ANSWER: Either A. or B. above

Explanation:
No explanation is available for this question!


12)   If a company has contingent liabilities, they appear in the__________?

a. Balance Sheet
b. Directors‘ report
c. Notes on account to Balance Sheet
d. Chairman‘s report
Answer  Explanation 

ANSWER: Notes on account to Balance Sheet

Explanation:
Contingent liabilities are disclosed in the notes to Balance Sheet


13)   Recent developments have made much of a company‘s inventory obsolete. This obsolete inventory should be?

a. Written down to zero or its scrap value
b. Shown in the Balance Sheet at its replacement cost
c. Shown in the Balance Sheet at cost, but classified as a non-current asset
d. Carried in the accounting records at cost until it is sold
Answer  Explanation 

ANSWER: Written down to zero or its scrap value

Explanation:
No explanation is available for this question!


14)   Which of the following is not classified as inventory in the financial statements?

a. Finished goods
b. Work-in-process
c. Stores and spares
d. Advance payments made to suppliers for raw materials
Answer  Explanation 

ANSWER: Advance payments made to suppliers for raw materials

Explanation:
No explanation is available for this question!


15)   If actual bad debts are more than the provision for bad debts, then there will be a_____________?

a. Credit balance of Provision for Bad Debts Account
b. Debit balance of Provision for Bad Debts Account
c. Debit balance of Bad Debts Account
d. Debit balance of Discount on Debtors Account
Answer  Explanation 

ANSWER: Debit balance of Provision for Bad Debts Account

Explanation:
Provision for Bad Debts Account is created for writing off bad debts. Since the provision for bad debts is a credit balance account, If the actual bad debts exceed the provision created then there will be debit balance of provision for bad debts account.


16)   The creation of provision for doubtful debts given as an adjustment requires____________?

a. Debit Profit and Loss Account and deduct the provision from debtors
b. Credit Profit & Loss Account and deduct the provision from debtors
c. Credit Profit and Loss Account and add the provision to debtors
d. Debit Profit & Loss Account and add the provision to debtors
Answer  Explanation 

ANSWER: Debit Profit and Loss Account and deduct the provision from debtors

Explanation:
The adjustment for provision for bad debts account given in the adjustments is to debit P&L A/c and deduct from Sundry Debtors, the amount of provision for bad debts. Provision for bad debts is created against Sundry Debtors and therefore deducted from Sundry Debtors and Debited to P&L A/c as it is a charge against P&L A/c.


17)   Under the direct write-off method of recognizing a bad debt expense. Which of the following statements is/are true?

a. The bad debt expense is not matched with the related sales
b. Revenue is overstated in the year of sales
c. It violates the matching principle of accounting
d. All of the above
Answer  Explanation 

ANSWER: All of the above

Explanation:
Under the direct write off method of recognizing a bad debt expense, the alternative D. is the correct answer which the combination of the following statements A. The bad debt expense is not matched with the related sales because the expense is written off in the year of occurrence and it is not matching with the related sales. B. Revenue is overstated in the year of Sales as a result not making any provision for possible loss on account of non- recoverable account. C. It violates the matching principle of accounting as the expense of bad debt is not matched for the same period of income. Thus, D. is the correct answer.


18)   At the time of preparation of financial accounts, bad debt recovered account will be transferred to?

a. Debtors A/c
b. Profit & Loss A/c
c. Profit & Loss Adjustment A/c
d. Profit & Loss Appropriation A/c
Answer  Explanation 

ANSWER: Profit & Loss A/c

Explanation:
Bad debt recovered is a windfall gain and it is transferred to Profit & Loss Account at the time of preparation of Final Accounts. If provisions account is there in the books it will be transferred to Provision A/c and the balance if any in the provision account will be transferred to Profit & Loss Account. It is recovery of bad debt written off and hence it is not transferred to Debtors Account. It is not transferred to Profit & Loss Adjustment Account. It is not an appropriation to be transferred to Profit & Loss Appropriation Account. Thus, the answer is B


19)   The balance of Revaluation Reserve pertaining to an asset that has been disposed off or retired can be transferred to?

a. General Reserve A/c
b. Profit & Loss A/c
c. Asset A/c
d. Capital Reserve A/c
Answer  Explanation 

ANSWER: Capital Reserve A/c

Explanation:
According to AS-10 on disposal of a previously revalued item of fixed asset, the difference between net disposal proceeds and the net book value should be charged or credited to the Profit & Loss Statement except that to the extent that such a loss is related to an increase which was previously recorded as a credit to revaluation reserve and which has not been subsequently reversed or utilized, it may be charged directly to that account. This balance (no longer needeD. being of capital nature should be transferred to Capital Reserve Account.


20)   Period cost include which of the following ?

a. selling Expense
b. Direct labor
c. factory overhead
d. selling Expenses & administrative expenses
Answer  Explanation 

ANSWER: selling Expenses & administrative expenses

Explanation:
No explanation is available for this question!