Accounting and Finance MCQs Test 1

 Your answer is incorrect. The Correct answer is (option 2).
Explanation:
As H is buyer of goods so when he returns goods to J; then he Will send J a debit note to indicate
that J’s account has been debited.

 Your answer is incorrect. The Correct answer is (option 3).

 Your answer is incorrect. The Correct answer is (option 1).
Explanation:
Option “A” is correct as it has two sides of debit and credit and also acts as an account.

 Your answer is incorrect. The Correct answer is (option 1).
Explanation:
Cash book is the book to record transactions relating to cash in hand, cash at bank and cash
discounts.

 Your answer is incorrect. The Correct answer is (option 4).
Explanation:

 Your answer is incorrect. The Correct answer is (option 2).
Explaination

 Your answer is incorrect. The Correct answer is (option 3).
Explaination

 Your answer is incorrect. The Correct answer is (option 1).

 Your answer is incorrect. The Correct answer is (option 2).
Explaination
Question shows position (balance) of an account at a particular date. “A” and “C” options are examples of accounting transactions and do not represent balances, whereas “D” option represents a liability on part of the business. Moreover debit balance indicates an asset (receivable) so “B” option is correct.

 Your answer is incorrect. The Correct answer is (option 1).
Explaination
“A” option is correct as it involves the following effects:

 Your answer is incorrect. The Correct answer is (option 2).
Explaination
The error of wrong inclusion of petrol expense in the truck account has the following effects.

<img class=”alignnone size-full wp-image-54″ src=”https://www.playaccounting.com/wp-content/uploads/2016/01/sad.png” alt=”sad” width=”32″ height=”32″ /> Your answer is incorrect. The Correct answer is (option 4).
Explaination
Effects of this error are

 Your answer is incorrect. The Correct answer is (option 3).
Explaination

As annual cost of machine Q is lowest so it should be chosen with one of the rental machines
which have costs lower than machine P; so “3” option is correct.

 Your answer is incorrect. The Correct answer is (option 1).
Explaination

 Your answer is incorrect. The Correct answer is (option 2).
Explaination

 Your answer is incorrect. The Correct answer is (option 3).
Explaination
“C” option is correct as like all other Income statement items bad debts are closed to Income statement.

 Your answer is incorrect. The Correct answer is (option 2).
Explaination

 Your answer is incorrect. The Correct answer is (option 2).
Explanation
Realization and Matching concepts state that income is recorded in the books when it is earned whether received or not. As a rental receipt of $10 000 covers, a period of 12 months from 1 April 2018 to 31 March 2019 whereas the business year ends on 31 December 2018. So up to that date rent of only 9 months has expired i.e. from 1 April 2018 to 31 December 2018, so $7 500 ($10000 x 75%) will be reported as rental income for the year. As income has a credit nature so it will be shown in the income statement as a credit entry.

 Your answer is incorrect. The Correct answer is (option 3).
Explaination

 Your answer is incorrect. The Correct answer is (option 3).
Explaination
“C” is the right option. As provision for bad debts is created out of profits i.e. when it increases; profit reduces and vice-e-versa for the contrary. So it is not recorded in the total trade receivables account or sales ledger control account.

 Your answer is incorrect. The Correct answer is (option 2).
Explaination
There are many other items in the trial balance in addition to control account items so it cannot help to make the trial balance balanced on its own (“3” option), As errors would have already incurred so control accounts cannot prevent errors (“4” option). Errors in the personal accounts and in the books of prime entry can be detected by comparing their respective balances so “2” option is correct.

 Your answer is incorrect. The Correct answer is (option 2).
Explaination
Inventory at 31 December 2017 will be the opening inventory of 2018. So its overstatement will increase cost of sales of 2018 to which it is added which will ultimately understate profits by $6 000.

 Your answer is incorrect. The Correct answer is (option 4).
Explaination
Department 1 should not be closed as it is generating positive profits Of $20 000 whereas although department 2 is not producing any profit but if it is closed then head office expenses of S30 000 allotted to the department 2 will be charged to department 1 which will reduce existing profits of S20000 ($20 000 + Nil) to a loss of $10 OOO ($20 000 – $30 000).

 Your answer is incorrect. The Correct answer is (option 4).
Explaination
Provision for bad debts is a contra asset so it is deducted from trade receivables. Moreover its
amount be S1 250 (S25 000 5%); so “4” option is correct.

 Your answer is incorrect. The Correct answer is (option 2).
Explaination

 Your answer is incorrect. The Correct answer is (option 2).
Explaination
Expense owing means expense, which has been incurred, but payment for it is yet to be made; so it is a liability. Moreover as its amount is payable within one year so is shown as a current liability.

 Your answer is incorrect. The Correct answer is (option 1).

 Your answer is incorrect. The Correct answer is (option 1).

 Your answer is incorrect. The Correct answer is (option 2).
Explaination

 Your answer is incorrect. The Correct answer is (option 3).
Explaination
Amounts to be credited to the partner’s current accounts will be

 Your answer is incorrect. The Correct answer is (option 2).
Explaination
“2” option is correct as cash or bank account also shows details of receipts and payments Of cash.

 Your answer is incorrect. The Correct answer is (option 1).
Explaination
As through “Financed by” section of a sale trader; we know

As we have amounts of three items given in the above formula, so we can interpolate the figures to find out amount of drawings i.e.

 Your answer is incorrect. The Correct answer is (option 1).

 Your answer is incorrect. The Correct answer is (option 2).
Explaination
“2” option is correct as is also the answer (last item) of the manufacturing account; whereas the remaining items are simply used to calculate cost of production.

 Your answer is incorrect. The Correct answer is (option 3).
Explaination

 Your answer is incorrect. The Correct answer is (option 2).
Explaination
Obviously inventory should be recorded at that cost, which has actually been incurred to bring them in a saleable condition i.e., cost of production.

 Your answer is incorrect. The Correct answer is (option 2).
Explaination

 Your answer is incorrect. The Correct answer is (option 4).
Explaination

 Your answer is incorrect. The Correct answer is (option 1).
Explaination
For a proper comparison, both businesses should have same facilities. As Business X is not paying manager’s salary, if salary would had been paid profit figure would be $82 000 ($100 000 — $18 000). Likewise Business Y is not paying rent of premises, if rent would had been paid, profit figure would be $60 000 ($100 000 – $40 000); so “1” option is correct.

 Your answer is incorrect. The Correct answer is (option 3).