Question 1

Which one of the following is a capital expenditure?

Accepted Answer

A) Compensation paid to Directors on termination of their services 
B) Expenditure incurred in connection with the renewal of a Trade Mark. 
C) Gratuities paid to Directors on termination of their services. 
D) Royalty paid in installments for the purchase of rights to manufacture and sell patient medicines. 
A) Compensation paid to Directors on termination of their services 
B) Expenditure incurred in connection with the renewal of a Trade Mark. 
C) Gratuities paid to Directors on termination of their services. 
D) Royalty paid in installments for the purchase of rights to manufacture and sell patient medicines. A

Question 2

Which of the following errors affects the agreement of a Trial Balance?

Accepted Answer

A) Mistake in balancing an account 
B) Omitting to record a transaction entirely in the subsidiary books 
C) Recording of a wrong entry in the subsidiary books 
D) Posting an entry on the correct side but in the wrong account 
A) Mistake in balancing an account 
B) Omitting to record a transaction entirely in the subsidiary books 
C) Recording of a wrong entry in the subsidiary books 
D) Posting an entry on the correct side but in the wrong account A

Question 3

Journal proper is meant for recording

Accepted Answer

A) Credit purchase of fixed assets . 
B) Return of goods 
C) All such transactions for which no special journal has been kept by the business 
D) None of these 
A) Credit purchase of fixed assets . 
B) Return of goods 
C) All such transactions for which no special journal has been kept by the business 
D) None of these C

Question 4

Capital expenditure is an expenditure which

Accepted Answer

A) Benefits the current accounting period 
B) Will benefit the next accounting period 
C) Results in the acquisition of a permanent asset 
D) Results in the acquisition of a current asset 
A) Benefits the current accounting period 
B) Will benefit the next accounting period 
C) Results in the acquisition of a permanent asset 
D) Results in the acquisition of a current asset

Question 5

Which of the following statements are / is true? ?Events after Balance Sheet? are

Accepted Answer

A) All the significant events after the Balance Sheet date 
B) The events after Balance Sheet date but before submitting it to the Registrar of Companies 
C) The events after Balance Sheet date but before its approval by the board 
D) All changes after Balance Sheet date before its approval 
A) All the significant events after the Balance Sheet date 
B) The events after Balance Sheet date but before submitting it to the Registrar of Companies 
C) The events after Balance Sheet date but before its approval by the board 
D) All changes after Balance Sheet date before its approval

Question 6

Which of the following statements is correct?

Accepted Answer

A) The Trial Balance is prepared after preparing the Profit and Loss Account 
B) The Trial Balance shows only balances of Assets and Liabilities 
C) The Trial Balance shows only nominal account balances 
D) The Trial Balance has no statutory importance from the point of view of law 
A) The Trial Balance is prepared after preparing the Profit and Loss Account 
B) The Trial Balance shows only balances of Assets and Liabilities 
C) The Trial Balance shows only nominal account balances 
D) The Trial Balance has no statutory importance from the point of view of law

Question 7

The balance of which of the following accounts do not disappear, once they are debited/credited to Trading Account.

Accepted Answer

A) Sales 
B) Purchases 
C) Inward returns 
D) Closing stock 
A) Sales 
B) Purchases 
C) Inward returns 
D) Closing stock

Question 8

Which of the following should not be treated as revenue expenditure?

Accepted Answer

A) Interest on loans and debentures 
B) Annual fire insurance premiums on Plant and Equipment 
C) Sales tax paid in connection with the purchase of office equipment 
D) Small expenditures on long- lived assets, such as ` 20 for a paper weight. 
A) Interest on loans and debentures 
B) Annual fire insurance premiums on Plant and Equipment 
C) Sales tax paid in connection with the purchase of office equipment 
D) Small expenditures on long- lived assets, such as ` 20 for a paper weight.

Question 9

The beginnings inventory of the current year is overstated by ` 5,000 and closing inventory is overstated by ` 12,000. These errors will cause the net income for the current year by

Accepted Answer

A) 17,000 (overstated) 
B) 12,000 (understated) 
C) 7,000 (overstated) 
D) 7,000 (understated) 
A) 17,000 (overstated) 
B) 12,000 (understated) 
C) 7,000 (overstated) 
D) 7,000 (understated)

Question 10

If goods worth ` 1,750 returned to a supplier is wrongly entered in sales return book as ` 1,570 , then

Accepted Answer

A) Net Profit will decrease by ` 3,140 . 
B) Gross Profit will increase by ` 3,320 
C) Gross Profit will decrease by ` 3,500 . 
D) Gross Profit will decrease by ` 3,320 
A) Net Profit will decrease by ` 3,140 . 
B) Gross Profit will increase by ` 3,320 
C) Gross Profit will decrease by ` 3,500 . 
D) Gross Profit will decrease by ` 3,320

Question 11

Which of the following is true?

Accepted Answer

A) Error of casting affects personal accounts 
B) Omission of a transaction from a subsidiary record affects only one account 
C) Error of carry forward affects two accounts 
D) Error of principle involves an incorrect allocation of expenditure or receipt between capital and revenue 
A) Error of casting affects personal accounts 
B) Omission of a transaction from a subsidiary record affects only one account 
C) Error of carry forward affects two accounts 
D) Error of principle involves an incorrect allocation of expenditure or receipt between capital and revenue

Question 12

For the past 3 years, DK Ltd. has failed to accrue unpaid wages earned by workers during the last week of the year. The amounts omitted, which were considered material, were as follows: March 31,2010 - ` 56,000 March 31, 2011 - ` 51,000 March 31, 2012 - ` 64,000 The entry on March 31, 2012 to rectify these omissions would include a

Accepted Answer

A) Credit to wage expense for ` 64,000 
B) Debit to wage expense for ` 64,000 
C) Debit to wage expense for ` 51,000 
D) Debit to wage expense for ` 13,000 
A) Credit to wage expense for ` 64,000 
B) Debit to wage expense for ` 64,000 
C) Debit to wage expense for ` 51,000 
D) Debit to wage expense for ` 13,000

Question 13

Which of the following is not correct?

Accepted Answer

A) Errors which affect one account can be errors of posting 
B) Errors of omission arise when any transaction is left to be recorded 
C) Errors of carry forward from one year to another year affect both Personal and Real A/c 
D) Errors of commission arise when any transaction is recorded in a fundamentally incorrect manner 
A) Errors which affect one account can be errors of posting 
B) Errors of omission arise when any transaction is left to be recorded 
C) Errors of carry forward from one year to another year affect both Personal and Real A/c 
D) Errors of commission arise when any transaction is recorded in a fundamentally incorrect manner

Question 14

Any donation received for a specific purpose is a

Accepted Answer

A) Liability . 
B) Assets . 
C) Revenue receipts . 
D) Capital receipts 
A) Liability . 
B) Assets . 
C) Revenue receipts . 
D) Capital receipts

Question 15

Which of the following statements is true?

Accepted Answer

A) Provision for doubtful debts represents the amount that cannot be collected 
B) The distinction between capital and revenue items is important because it is of fundamental importance to the determination of profits 
C) Goods lost by fire need not be accounted for since they are not sales 
D) Free samples received are business gains 
A) Provision for doubtful debts represents the amount that cannot be collected 
B) The distinction between capital and revenue items is important because it is of fundamental importance to the determination of profits 
C) Goods lost by fire need not be accounted for since they are not sales 
D) Free samples received are business gains

Question 16

Which of the following errors is an error of omission?

Accepted Answer

A) Purchase of ` 2,000 has been recorded in the Sales Return Book 
B) Repairs to machinery has been debited to Machinery Accounts 
C) The total of purchase journal has not been posted to the Purchase Account 
D) Legal charges paid to Mr. Lawyer have been debited to his account 
A) Purchase of ` 2,000 has been recorded in the Sales Return Book 
B) Repairs to machinery has been debited to Machinery Accounts 
C) The total of purchase journal has not been posted to the Purchase Account 
D) Legal charges paid to Mr. Lawyer have been debited to his account

Question 17

Which of the following statements is/are true?
(i) An error in casting the subsidiary books is an error of commission
(ii) An error in wrong casting of the sales day book will not affect the personal accounts of debtors
(iii) Mistake in transferring the balance of an account to the Trial Balance will not affect the agreement of the Trial Balance
(iv) The mistake of treating a liability as an income or vice versa will not affect the agreement of a Trial Balance

Accepted Answer

A) Only (i) above 
B) Only (ii) above 
C) Both (i) and (ii) above 
D) (i),(ii) and (iv) above 
A) Only (i) above 
B) Only (ii) above 
C) Both (i) and (ii) above 
D) (i),(ii) and (iv) above

Question 18

During the year 2011-2012, the value of closing inventory was overstated by ` 25,000. Which of the following is true?

Accepted Answer

A) The cost of goods sold was overstated during 2011-2012 and income will be understated during 2012-2013 
B) The income was overstated during 2011-12 and closing inventory will be overstated during 2012- 2013 
C) The retained earnings was overstated during 2011-2012 and retained earnings will be understated during 2012-2013 
D) The cost of goods sold was understated during 2011-2012 but retained earnings will not be affected during 2012-2013 
A) The cost of goods sold was overstated during 2011-2012 and income will be understated during 2012-2013 
B) The income was overstated during 2011-12 and closing inventory will be overstated during 2012- 2013 
C) The retained earnings was overstated during 2011-2012 and retained earnings will be understated during 2012-2013 
D) The cost of goods sold was understated during 2011-2012 but retained earnings will not be affected during 2012-2013

Question 19

Which of the following enhances the earning capacity of an asset?

Accepted Answer

A) Increase in working capacity of an asset 
B) Reduction in operating costs 
C) Replacing damaged parts of an asset 
D) Both (a) and (c) above 
A) Increase in working capacity of an asset 
B) Reduction in operating costs 
C) Replacing damaged parts of an asset 
D) Both (a) and (c) above

Question 20

Which of the following is an item of capital expenditure?

Accepted Answer

A) Research and development costs during the year 
B) Interest on borrowed fund utilized for acquisition of Office Furniture 
C) Installation charges paid in conjunction with the purchase of Office Equipment 
D) Monthly rent of a machinery used in the business 
A) Research and development costs during the year 
B) Interest on borrowed fund utilized for acquisition of Office Furniture 
C) Installation charges paid in conjunction with the purchase of Office Equipment 
D) Monthly rent of a machinery used in the business

Exam 31: Errors, Adjustments, and Expenditures in Accounting

Which one of the following is a capital expenditure?

Which of the following errors affects the agreement of a Trial Balance?

Journal proper is meant for recording

Capital expenditure is an expenditure which

Which of the following statements are / is true? ?Events after Balance Sheet? are

Which of the following statements is correct?

The balance of which of the following accounts do not disappear, once they are debited/credited to Trading Account.

Which of the following should not be treated as revenue expenditure?

The beginnings inventory of the current year is overstated by ` 5,000 and closing inventory is overstated by ` 12,000. These errors will cause the net income for the current year by

If goods worth ` 1,750 returned to a supplier is wrongly entered in sales return book as ` 1,570 , then

Which of the following is true?

Which of the following is not correct?

Any donation received for a specific purpose is a

Which of the following statements is true?

Which of the following errors is an error of omission?

During the year 2011-2012, the value of closing inventory was overstated by ` 25,000. Which of the following is true?

Which of the following enhances the earning capacity of an asset?

Which of the following is an item of capital expenditure?

Exploring Features and Advantages of Computerized Accounting Systems

Exploring Computerized Accounting Systems and Software

Non-Profit Organizations and Financial Statements

Not-For-Profit Organizations and Financial Accounts

Goodwill and Intangible Assets

Valuation and Calculation of Goodwill

Understanding the Concepts of Lessor, Lessee, and Minimum Rent

Royalty Accounting and Partnership Firms

Accounting

Accounting and Corporate Finance

Accounting and Finance

Depreciation, Share Capital, and Forfeiture of Shares

Financial Statements and Accounting Principles

Insurance Provision and Accounting Standards

Formation and Capital Structure of Public Companies

Share Forfeiture, Debentures, and Sinking Fund

Financial Accounting and Banking

Insurance and General Insurance Companies: Understanding Terms and Concepts

Single Entry System and Company Ownership

Share Capital and Shareholders in a Company

Debentures, Bonds, and Shares

Accounting Concepts and Principles

Accounting Concepts and Practices

Financial Statements and Accounting for Nonprofit Organizations

Hire Purchase, Sale of Goods, and Bookkeeping

Accounting and Bookkeeping

Allocation of Selling Expenses Among Departments Based on Sales

Accounting Concepts and Systems

Accounting and Financial Transactions

Ac Types, Balances, and Entries

Capitalization, Errors, Cash Book, and Types of Accounts

Revenue Recognition and Expenditure Classification

Depreciation and Asset Provision

Accounting Adjustments and Financial Statement Treatment

Balance Sheet and Profit Loss Account

Accounting and Financial Management

Bills of Exchange, Consignment, and Partnership

Accounting Standards and Joint Ventures

Accounting and Financial Management : Part A

Accounting and Financial Management : Part B

Accounting: Interest, Bill, Partnership Agreement,insurance, Contingent Liability, and Business Resources

Fundamentals of Accounting: Objectives, Concepts, and Principles

Depreciation and Reserves: Understanding the Accounting Concepts

Underwriting and Creditor Questions in Company Affairs

Amalgamation, Llp, and Single Entry System

Single Entry System and Profit Calculation

Accounting for Receipts, Payments, Income, and Expenditure in Consignment and Joint Venture Businesses

Accounting for Co-Venturers, Consignments, and Branches

Accounting Arrangements and Operations for Branches

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