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Question 1:

How is an error of omission described?

A transaction is recorded in the wrong account but the correct amount. The transaction is recorded in the correct account but in the wrong subsidiary book. A transaction is not recorded at all in the books of accounts. A transaction is recorded with the incorrect amount.

Question 2:

The assumption that transactions are recorded at their original purchase price, not their current market value, refers to which concept?

Materiality. Historical Cost. Prudence. Consistency.

Question 3:

The net profit as per the Profit and Loss Account is INR 120,000. Directors propose a dividend of 10%. The company's share capital is INR 1,000,000. How is this recorded in the final accounts?

Profit and Loss Appropriation Account debited with INR 100,000. Dividend INR 100,000 shown as an appropriation in the Profit and Loss Appropriation Account. Dividend INR 120,000 shown as an expense in the Profit and Loss Account. Dividend INR 100,000 shown as a liability in the Balance Sheet.

Question 4:

What is the purpose of creating a provision for bad and doubtful debts in the final accounts?

To account for potential future losses on receivables To increase the value of receivables To increase the net profit To decrease the gross profit

Question 5:

What does the balance sheet show?

The financial position of the business at a certain date The sales and purchases of the business The cash flow of the business The profitability of the business over a period

Question 6:

In final accounts, where is the interest on capital recorded?

As a liability in the balance sheet As an appropriation of profit in the profit and loss account As an asset in the balance sheet As an expense in the profit and loss account

Question 7:

What is the effect of a cheque issued but not yet presented for payment on the bank balance?

Increases the cash book balance No effect on the bank statement balance Decreases the bank statement balance Increases the bank statement balance

Question 8:

How is the net profit determined in final accounts?

By subtracting total expenses from gross profit By adding gross profit to total expenses By adding total expenses to gross profit By subtracting gross profit from total expenses

Question 9:

How are prepaid expenses treated in final accounts?

As a current liability in the balance sheet As income in the profit and loss account As a current asset in the balance sheet As an expense in the profit and loss account

Question 10:

In the balance sheet, how are long-term liabilities shown?

Under non-current liabilities Under current liabilities Under non-current assets Under current assets

Quiz: Fundamentals of Accounting