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Fundamentals
of Accounting
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Objective
Questions
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State
with reasons whether the following statements
are True or False:- |
(18
marks)
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(1)
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Depreciation
is an Amortised expenditure |
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(2)
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Prudence
is a concept to recognize unrealized Profits
and not Losses. |
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| (3) |
Pre-operative
expenses are revenue expenses |
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| (4) |
Reducing
Balance Method of Depreciation is followed to
have a uniform charge for Depreciation and Repairs
and Maintenance together. |
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| (5) |
Errors
of principle will affect Trial Balance. |
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| (6) |
Heavy expenditure incurred on advertisement
at the time of introducing a new product is
a Deferred Revenue Expenditure. |
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| (7)
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When
we buy furniture on cash we debit Cash Account. |
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| (8) |
Rectification
of mistakes is necessary to tally the Trial
Balance. |
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| (9) |
The rule of Garner vs Murray is applied in settling
the customer dues. |
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| Ans: |
(1)
T, (2) F, (3) F, (4) T, (5) F, (6) T, (7)
F, (8) F, (9) F.
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State
with reasons whether the following statements
are True or False:- |
(18
marks)
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(1)
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Capital
+ Long Term Liabilities = Fixed Assets + Current
Assets + Cash - Current Liabilities |
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(2)
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Net
Profit is reflected in higher cash balance and
Net Loss is reflected in Lower Net Worth. |
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| (3) |
If
the amount is posted in the wrong account or
it is written on the wrong side of an account,
it is called error commission. |
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| (4) |
The
allowance made for prompt payment is called
trade discount. |
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| (5) |
Finished
goods are normally valued at cost or market
price whichever is higher. |
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| (6) |
The balance in the petty Cash Book represents
expense. |
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| (7) |
Providing
depreciation ensures sufficient cash for asset
replacement. |
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| (8) |
Fixed
costs remain relatively unaffected in a defined
period of time. |
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| (9) |
Bank Reconcilliation statement is prepared to
arrive at the Bank Balance. |
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| Ans: |
(1)F,
(2) F, (3) T, (4) F, (5) F, (6) F, (7) T,
(8) T, (9) F.
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State
with reasons whether the following statements
are True or False:- |
(18
marks)
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(1)
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An
expenditure intended to benefit the current
period is a revenue expenditure. |
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(2)
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A
withdrawal of cash from the business by the
proprietor should be charged to profit and Loss
Account as an expense. |
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| (3) |
The
Trial Balance ensures the arithmetical accuracy
of the books. |
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| (4) |
Profit
and Loss Account shows the financial position
of the concern. |
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| (5) |
Expenses
incurred to keep the machine in working condition
is a capital expenditure. |
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| (6) |
Accrual concept implies accounting on cash basis. |
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| (7) |
Wrong
casting of subsidiary books does not affect
the Trial Balance. |
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| (8) |
The
relationship between the consignor and the consignee
is that of a Principal and Agent. |
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| (9) |
Joint life Policy is taken by the partners in
order to provide working capital for the firm. |
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| Ans: |
(1)
T, (2) F, (3), T, (4) F, (5) F, (6) F, (7)
F, (8) T, (9) F.
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State
with reasons whether the following statements
are True or False:- |
(15
marks)
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(1)
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The
Sales Day Book is a part of the Ledger. |
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(2)
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Depreciation
cannot be provided in case of loss, in a financial
year. |
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| (3) |
Amounts
written off from the cost of Fixed Assets is
Capital Expenditure. |
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| (4) |
Wages
paid to workers to produce a tool to be captivity
consumed is capital expenditure. |
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| (5) |
Deferred
Revenue Expenditure is current year's revenue
expenditure to be paid in later years. |
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| (6) |
Rectification of errors will not necessarily
balance a Trial Balance. |
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| (7) |
Self-Balancing
Ledgers do not follow the system of double entry. |
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| (8) |
Profit
and Loss Account shows the financial position
of the concern. |
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| (9) |
Providing depreciation in the accounts reduces
the amount of profit available for dividend.
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| (10) |
Fixed
Assets are stated in the Balance Sheet at their
market value. |
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| Ans: |
(1)F,
(2)F, (3)F, (4)T, (5)F, (6)F, (7)F, (8)F,
(9)T, (10)F
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State
with reasons whether the following statements
are True or False:- |
(15
marks)
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(1)
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Scholarships
granted to students out of funds provided by
Government will be debited to Income and Expenditure
Account. |
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(2)
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In
Consignment, the goods are dispatched on the
basis that the goods will be sold on behalf
of, at the expense of and at the risk of the
consignee. |
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| (3) |
A
Profit and Loss Account is a point statement
whereas a Balance Sheet is a period statement. |
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| (4) |
Contingent
Liability is an ascertained liability but its
amount and due date are indeterminate.
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| (5) |
M/s.
Ram & Co. did not provide any depreciation on
Plant & Machinery as its market value is much
higher that the cost of purchase. |
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| (6) |
The proprietor of a shop feels that he has made
a loss due to closing stock being zero. |
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| (7) |
Expenditure which results in acquisition of
a permanent asset is a capital expenditure. |
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| (8) |
A
tallied Trial Balance will not reveal compensating
errors and errors on account of wrong balancing. |
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| (9) |
Bank Reconciliation Statement is prepared to
arrive at the Bank Balance. |
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| (10) |
Finished
goods are normally valued at cost or market
price whichever is higher. |
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| Ans: |
(1)F,
(2)F, (3)F, (4)F, (5)F, (6)F, (7)T, (8)Partly
T and Partly F, (9)F, (10)F
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State
with reasons whether the following statements
are True or False:- |
(15
marks)
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(1)
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Trail
Balance is prepared after preparing the Profile
and Loss Account |
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(2)
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Sale
of Office Furniture should be credited to Sales
Account |
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| (3) |
Wages
paid for erection of machinery are debited to
Profit and Loss Account. |
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| (4) |
Amount
paid for acquiring Goodwill is deferred revenue
expenditure. |
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| (5) |
Receipts
and Payments Account is a summary of all capital
receipts and payments. |
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| (6) |
The relationship between the consignor and the
consignee is that of Principal and Agent. |
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| (7) |
If payment is made on the average due date,
it results in loss of interest to creditor. |
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| (8) |
Any
type of error affects the agreement of Trial
Balance. |
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| (9) |
The provision for discount on Debtors is calculated
before deducting the provision for doubtful
debts from Debtors. |
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| (10) |
Patent
rights is in the nature of Nominal Account. |
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| Ans: |
(1)F,
(2)F, (3)F, (4)F, (5)F, (6)T, (7)F, (8)F,
(9)F, (10)F
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State
with reasons whether the following statements
are True or False:- |
(15
marks)
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(1)
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A
bill given to a creditor is called bills payable. |
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(2)
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The
trial balance checks the honesty of the book-keeper. |
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| (3) |
Overhaul
expenses of a secondhand machinery purchased
are revenue expenditure. |
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| (4) |
The
balance in the Cash Book shows net income. |
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| (5) |
Goodwill
is not a fictitious asset. |
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| (6) |
The receipts and payments account records receipts
and payments of revenue nature only. |
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| (7) |
Account sales is the statements sent by the
consignor to the consignee. |
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| (8) |
A
promissory note can be made payable to bearer. |
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| (9) |
Purchase of office furniture has been debited
to general expenses account. It is a compensating
error. |
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| (10) |
Del
credere commission is normally calculated on
total sales. |
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| Ans: |
(1)T,
(2)F, (3)F, (4)F, (5)T, (6)F, (7)F, (8)F,
(9)F, (10)T
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State
with reasons whether the following statements
are True or False:- |
(15
marks)
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(1)
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In
accounting, all business transactions are recorded
as having dual aspect. |
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(2)
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Error
of carry-forward of totals of Purchase Journal
affects two accounts. |
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| (3) |
Interest
cahrged by the bank will be deducted, when the
overdraft as per the Cash Book is made the starting
point for making the Bank Reconciliation Statement. |
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| (4) |
Discount
at the time of retirement of a Bill is a gain
for the drawee. |
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| (5) |
Sales
Ledger Adjustment Account under sectional balancing
system is also known as Debtors Ledger Control
Account. |
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| (6) |
Loss of Stock is said to be abnormal loss when
such loss is due to inherent characteristics
of the commodities. |
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| (7) |
Major repair charges including replacement of
certain wornout parts incurred before using
a second-hand Car purchased recently is a capital
expenditure. |
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| (8) |
There
exists difference between the Written Down Value
method and Diminishing Balance method of depreciation. |
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| (9) |
Purchases Book records all purchases of goods. |
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| (10) |
The
debts written off as bad, if recovered subsequently
are credited to debtors account. |
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| Ans: |
(1)T,
(2)F, (3)F, (4)T, (5)T, (6)F, (7)T, (8)F,
(9)F, (10)F
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State
with reasons whether the following statements
are True or False:- |
(20
marks)
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(1)
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The
gain from sale of capital assets need not be
added to revenue to ascertain the net profit
of a business. |
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(2)
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Discount
account should be balanced in the cash book |
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| (3) |
The
expressions-depreciation is to be charged at
10% and 10% p.a. on furniture and fittings carry
the same meaning. |
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| (4) |
Error
of principle involves an incorrect allocation
of expenditure or receipt between capital and
revenue. |
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| (5) |
Interset
charged by the bank will be deducted when the
overdraft as per pass book is the starting point
for preparing the bank reconcilliation statement
to arrive at the balance as per cash book at
the end. |
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| (6) |
No cancellation entry is required when a bill
is renewed. |
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| (7) |
Under the self balancing system the general
ledger adjustment account is always opened in
the general ledger. |
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| (8) |
If
the consignee is not authorised to get the del
credere commission, then he is liable for all
losses on account of non-recovery of debts. |
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| (9) |
A joint venture business has a definite life. |
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| (10) |
If
there appears a sports fund, the expenses incurred
on sports activities will be taken to income
and expenditure account. |
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| Ans: |
(1)T,
(2)F, (3)F, (4)T, (5)T, (6)F, (7)F, (8)F,
(9)T, (10)F
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State
with reasons whether the following statements
are True or False:- |
(20
marks)
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(1)
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An
expenditure intended to benefit the current
period is a revenue expenditure. |
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(2)
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The
Trial Balance ensures the arithmetical accuracy
of the books. |
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| (3) |
The
relationship between the consignor and the consignee
is that of Principal and Agent. |
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| (4) |
Depreciation
cannot be provided incase of loss, in a financial
year. |
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| (5) |
Profit
and Loss Account shows the financial position
of the concern. |
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| (6) |
Bank Reconcilliation ststement is prepared to
arrive at the bank balance. |
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| (7) |
Sale of office furniture should be credited
to Sales Account |
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| (8) |
IReceipts
and payments account is a summary of all capital
receipts and payments. |
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| (9) |
The proprietor of a shop feels that he has made
a loss due to closing stock being zero.. |
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| (10) |
Expenditure
which results in acquisition of a permanenet
assets of enduring benefit to the business is
a capital expenditure. |
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| Ans: |
(1)T,
(2)T, (3)T, (4)F, (5)F, (6)F, (7)F, (8)F,
(9)F, (10)T
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State
with reasons whether the following statements
are True or False:- |
(20
marks)
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(1)
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The
provision for discount on debtors is calculated
after deducting the provision for doubtful debts
from debtors. |
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(2)
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Freight
and Cartage expenses paid on purchases of goods
is added to the amount of purchase. |
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| (3) |
Goodwill
is a current asset. |
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| (4) |
Loss
of stock is said to be normal loss when such
loss is not due to inherent characteristics
of the commodities. |
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| (5) |
A
tallied Trial Balance will not reveal compensating
errors and errors on account of wrong balancing. |
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| (6) |
Wages paid to workers to produce a tool to be
captively consumed is capital expenditure. |
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| (7) |
Accrual concept implies accounting on cash basis. |
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| (8) |
The
relationship between the consignor and the consignee
is that of a Principal and Agent. |
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| (9) |
Error of Principle involves an incorrect allocation
of expenditure or receipt between capital and
revenue. |
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| (10) |
No
cancellation entry is required when a bill is
renewed. |
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| Ans: |
(1)T,
(2)T, (3)F, (4)F, (5)Partly True & Partly
False, (6)T, (7)F, (8)T, (9)F, (10)F.
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State
with reasons whether the following statements
are True or False:- |
(20
marks)
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(1)
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Average
due date is the median average of several due
dates for payment |
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(2)
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Goodwill
is in the nature of Personal Account. |
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| (3) |
The
balance in the petty cash book represents amount
spent. |
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| (4) |
Nominal
accounts are balanced in the end of the accounting
year. |
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| (5) |
If
the amount is posted in the wrong account or
it is written on the wrong side of an account,
it is called error of omision. |
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| (6) |
If payment is made on the average due date it
results in loss of interst to the creditor. |
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| (7) |
Expenses incurred on white-washing of factory
building done after every six months is Revenue
Expenditure. |
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| (8) |
In
the calculation of average due date, only the
due date of the first transaction must be taken,
on the base date. |
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| (9) |
Higher depreciation will not affect cash profit
of the business. |
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| (10) |
Amount
spent for replacementnof worn out part of a
machine is Capital Expenditure. |
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| Ans: |
(1)F,
(2)F, (3)F, (4)F, (5)F, (6)F, (7)T, (8)F,
(9)T, (10)F.
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State
with reasons whether the following statements
are True or False:- |
(20
marks)
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(1)
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Temporary
shed put up at project site to house materials
is a capital expenditure. |
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(2)
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Tallying
of the trial balance only proves arithmetical
accuracy. |
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| (3) |
Companies
can keep their accounts under cash basis. |
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| (4) |
A
partnership firm stands dissolved if the business
which is carried on becomes illegal. |
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| (5) |
Heavy
advertising to introduce a new product is capital
expenditure. |
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| (6) |
Receipts and payments account highlights total
income and expenditure. |
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| (7) |
Current cost gives an alternative measurement
base. |
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| (8) |
Joint-venture
is a very short duration of business maily confined
to single deal entered into by two or more persons
jointly. |
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| (9) |
In Account Current, Red Ink Interest is treated
as negative interest. |
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| (10) |
Legal
fees paid to acquire a property is capital expenditure. |
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| Ans: |
(1)T,
(2)T, (3)F, (4)T, (5)F, (6)F, (7)T, (8)T,
(9)T, (10)T.
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State
with reasons whether the following statements
are True or False:- |
(20
marks)
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(1)
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Expenditure
on renovation of a theatre which has increased
the seating capacity by 10% is deferred revenue
expenditure. |
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(2)
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A
has drawn a bill on B. B Accepts the same and
endorses the bill to C. |
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| (3) |
Outstanding
expenditure is a nominal account. |
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| (4) |
A
joint venture is a partnership under the Partnership
Act. |
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| (5) |
A
partner who devotes more time to a business
than other partners is entitled to get a salary. |
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| (6) |
A tallied trial balance means that the books
of accounts have been prepared as per accepted
accounting principles. |
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| (7) |
Provision of Bad debts is debited to Sundry
Debtors Account. |
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| (8) |
Discount
account in cash-book should be balanced. |
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| (9) |
Travelling expenses of Rs. 80,000 paid to a
technician for the installation of a new machine
is debited to Profit and Loss Account. |
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| (10) |
Goodwill
brought in by incoming partner in cash for joining
in a partnership firm is taken away by the old
partners in their new profit sharing ratio. |
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