FILL IN THE BLANKS
1. A
company’s
total
liabilities
and
shareholder’s equity amount to Rs.
8,50,000, long term assets to Rs.5,00,000,
accounts receivable to Rs.50,000 and
inventory to Rs.1,00,000. The only other
current asset account shown in the balance
sheet is cash. The value of the cash would
be __________.
2. The decrease in the economic utility of a
tangible fixed asset is best known as
____________.
3. As a convention items appearing on the
balance sheet are listed in the order of their
relative __________.
4. The system of recording transactions
based on dual aspect concept is called
_________ system.
5. According to ___________ concept, quality
of company’s goods will not be allowed to
be recorded in the books of accounts of the
business.
6. The statement containing various ledger
balances on a particular date is known as
__________.
7. The word ‘By’ is used with an account while
making posting on the __________ side of
an account.
8. Accounts receivable are also referred to as
_____________.
9. The expired cost with respect to a fixed
asset
is
referred
to
as
____________expense.
10. Carriage paid for purchase of machinery is
to be recorded by debiting _________
account.
11. According
to
convention
of
____________all possible losses must be
recognized and all possible incomes must
not be taken into consideration until and
unless they are realized.
12. The practice of appending notes regarding
contingent
liabilities
in
accounting
statements is in pursuance to convention of
____________.
13. The assets used for long term use in the
business are termed as _____________.
14. The excess of current assets over current
liabilities is termed as ____________.
15. The account to be debited when goods are
sold to Mr. Kapoor for cash is __________.
16. According to dual aspect concept, the
fundamental accounting equation is as
follows: Owner’s equity + ________ = Total
assets.
17. A system in which accounting entries are
made on the basis of amounts having
become due for payment or receipt,
whether they are actually paid/received or
not, is termed as __________ system of
accounting.
18. ____________ denote the withdrawal of
cash or goods by the owner for his
personal use.
19. Normally expenses will have a __________
balance whereas income/gains will have a
___________balance. (Debit/Credit)
20. Ankit Pizza Ltd. has current assets worth
Rs.52,75,000,
current
liabilities
of
Rs.10,00,000, no long term liabilities and
shareholders equity of Rs.50,00,000. The
total assets of the company would be
___________.
21. On 25th January Meena Co. issues 50,000
shares of Rs. 2 par value for Rs. 7 per
share. To record the entry ________ a/c
would be debited and __________ a/c
would be credited.
22. The ____________ concept does not allow
assets to show at their present value,
because the market prices change very
frequently.
23. __________ is a person who owes money
to the firm.
24. The process of transferring the debit and
credit items from journal to their respective
accounts in the ledger is termed as
___________.
25. The process of finding the net balance of a
ledger account after considering the totals
of both debits and credits appearing in the
account is known as _____________.
26. Asset losses expected due to noncollection of receivables are called
_______________.
27. Owner’s equity could be understood as
comprising of two parts ____________ and
____________.
28. Proprietor’s personal property brought into
the business will increase his __________
in the business.
29. Inventory is valued at lower of the cost or
net realizable value on account of the
accounting principle of conservatism
______________.
30. The accumulated profits of a business
entity are called as ____________.
31. Money spent on heavy advertising, whose
benefit is expected to continue for 3 years
to come is a ___________ expenditure.
32. A person who is entitled to get money from
the firm is termed as _______________.
33. According to ______________ concept it is
assumed that business enterprise will exist
indefinitely for a long period of time in
future.
34. The amount of salary paid by cheque to
suresh would be debited to _________ a/c.
35. The ease with which an asset can be
converted to cash is referred to as
___________.
36. The matching concept involves the
recognition of expenses associated with
______________ earned and revenues
should be recognized in accordance with
the __________ concept.
37. Furniture to a cloth dealer would be
categorized as _____________ asset.
38. If the debts due from customers become
bad, the amount should be credited to
__________ a/c.
39. ___________ is known as a book of prime
entry.
40. Purchase journal is meant for recording
_________ purchases of goods.
41. A balance sheet is statement of what an
organization _______ and what it _______.
42. Corporate accounts need to be prepared
as per ________ of the companies act.
43. The account to be debited for wages paid
for installation of machinery would be
_________ a/c.
44. As per ___________ concept, an entity has
perpetual existence.
45. Bills Receivable is
_________ asset.
46. Copyrights would
_________ asset.
categorized
be
as
categorized
a
as
47. A furniture is a _______ asset for a textile
shop and a __________ asset for a
furniture dealer.
48. A and B share in the ratio of 3:2, C obtains
1/5 share from A. Then the new profit
sharing ratio will be ___________.
49. Trial balance is a ______________ of
balances as on a _____________ date.
50. The rule for personal account is
___________ the receiver and _________
the giver.
51. Final accounts of a company are prepared
according to ____________ of the
companies act.
52. Tangible net worth is equal to net worth
less __________ assets.
53. The shareholders funds comprise
_________ and ___________.
of
54. Under debtors system branch account is a
_________ account.
55. While nominal rate of interest is the rate
applied on the original amount, the true
rate of interest is one determined having
regard to _________ paid from time to
time.
56. An increase in owner’s equity at the end of
the period is the result of __________
made by the business.
57. The principle of accountancy which
recognizes the double aspect of a business
transaction is known as ___________
concept.
58. The account to be credited for withdrawal
of business goods for personal use is
__________.
60. The income and expenditure account is
prepared on the basis of __________
system of accounting.
61. A list or schedule of balances, both debit
and credit, extracted from the accounts in
the ledger and including the cash book
balances is called _________.
62. Properties and possessions of a business
are termed as ___________ of business.
63. For a sole proprietorship, all personal
expenses paid using business cash are
debited to __________ account.
64. Inventories are valued
_________ value.
59. Inventory turnover ratio is calculated by
dividing ________ by average inventory.
Question No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
Answers
2,00,000
Depreciation
Liquidity
Double Entry
Money Measurement
Trial Balance
Credit
Debtors
Depreciation
Machinery
Conservatism
Disclosure
Fixed Assets
Working Capital
Cash a/c
Liabilities
Accrual
Drawings
Debit, credit
Rs. 60,00,000
Cash / Bank a/c, Equity share capital
Cost concept
Debtor
Posting
Balancing of a ledger a/c
Bad debts
Share Capital and Reserves
Capital / equity
Conservatism
Reserves and surplus
Deferred Revenue expenditure
Creditor
Going concern
at
cost
or
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
Salary
Liquidity
Revenue, accrual
Fixed
Debtor
Journal
Credit
Owns, owes
Schedule VI
Machinery a/c
Going concern
Current
Intangible
Fixed, current
2:2:1
Summary, particular
Debit, credit
Schedule VI
Intangible
Capital, reserves
Nominal
Installment
Profits
Dual
Purchase
Cost of goods sold
Accrual
Trial Balance
Assets
Drawings
Net realizable value
SELECT THE CORRECT ALTERNATIVE
1. Which of the following is not affected by
how a firm is financed, by debt or equity :
a. Balance sheet
b. Income statement
c. Operating income
d. Net profit
2. What is the name of depreciation method
where depreciation is charged by allocating
depreciable cost in proportion of the annual
output to the probable life time output.
a. Working hours method
b. Production units method
c. Revaluation method
3. Accrued income should be shown as a :
a. Current liability
b. Current asset
c. Fixed asset
4. Which of the following is a hybrid security.
a. Common equity shares
b. Secured loan
c. Unsecured loan
d. Convertible debentures
9. Sales are equal to :
a. Cost of Goods Sold + Profit
b. Cost of Goods Sold + Gross Profit
c. Gross Profit – Cost of Goods Sold
10. Which of the following costs are generally
allowed to be included in the computation
of the cost of a plant and machinery?
a. Cost of installation
b. Taxes and import duties paid
c. Cost of transporting the machine
d. All of the above
e. None of the above
11. Sales made to Mahesh for cash would be
debited to _________.
a. Cash a/c
b. Mahesh’s a/c
c. Sales a/c
12. Which of the following is an intangible
asset ?
a. Loose tools
b. Patents
c. Plant and machinery
5. The system which gives a continuous
information regarding quantum and value
of inventory is known as :
a. Continuous Stock-taking
b. Periodic inventory
c. Perpetual inventory
13. The test of objectivity and verifiability is
satisfied by valuing inventory at :
a. Historical cost
b. Current replacement price
c. Net realizable value
6. The expenditure incurred for overhauling a
second hand motor car for use in the
business is:
a. Capital expenditure
b. Revenue expenditure
c. Deferred revenue expenditure
14. Machine Hour rate method of charging
depreciation is useful when :
a. Output can be effectively measured
b. Use of assets can be measured in
terms of time
c. Utility of the asset can be directly
related to it’s productive use
7. Receivables for goods sold comes in the
category of ____________.
a. Fixed asset
b. Current asset
c. Current liability
8. The cash discount allowed to a debtor
should be credited to ___________.
a. Discount a/c
b. Customer’s a/c
c. Sales a/c
15. Preference shares have a preference over
equity shares with regard to :
a. Payment of dividend
b. Repayment of capital
c. Both a and b
d. None of the above
16. Registered
debentures
have
the
characteristics of :
a. Priority in repayment
b. Convertibility into preference shares
c. Convertibility into equity shares
d. Transferability upon execution of proper
transfer deed.
17. Repairs and maintenance of building are to
be allocated among the departments on the
basis of :
a. Floor area occupied
b. Fixed asset value
c. Turnover or sales value
18. The rent paid to landlord would be credited
to
a. Landlord’s a/c
b. Rent a/c
c. Cash account
19. Outstanding salaries are shown as :
a. Current asset
b. Current liability
c. An expense
20. In case of annuity method, the amount of
depreciation is:
a. Increasing every year
b. Fixed for all the year
c. Decreasing every year
21. As per the insurance policy method of
depreciation accounting, premium is paid :
a. At the end of the year
b. At the beginning of the year
c. At the beginning of the second year
22. Balance sheet is prepared primarily with
the following group in view :
a. Owners
b. Creditors
c. Government
d. Management
23. Which of the following is an example of
current asset ?
a. Land and building
b. Motor car
c. Patents
d. Prepaid expense
24. Both assets and owner’s equity would be
increased by
a. Capital brought in
b. Purchase of asset on credit
c. Payment of creditors
d. Proprietor’s drawings
25. Which of the following is an example of
current liability ?
a. 12 % debentures
b. Bank overdraft
c. Goodwill
d. Share premium account
26. Which of the accounting concept requires
the practice of crediting closing stock to the
trading account
a. Going concern
b. Cost
c. Realisation
d. Matching
27. Journal proper is used to record :
a. all purchases of goods.
b. all sales of goods
c. all business expenses paid in cash
d. all adjusting and rectification entries
28. Drawings by proprietor would :
a. reduce both assets and owners equity
b. reduce assets and increase liabilities
c. reduce owner’s equity and increase
liabilities
d. Increase owner’s equity and liabilities as
well
29. Profit prior to incorporation is an example
of:
a. Capital reserve
b. Revenue reserve
c. secret reserve
30. Under the stock and debtors system the
branch stock account is :
a. Real account
b. Nominal account
c. Personal account
31. Which of the following arrangements
represents the order of liquidity
a. Cash, Bills receivable, Stock, Debtors
b. Bills receivable, debtors, cash, Stock
c. Cash, Bills receivable, debtors, Stock
d. Cash, debtors, Bills receivable, Stock
32. Purchase of machinery for cash would :
a. Increase total assets
b. reduce current assets
c. Increase fixed assets and reduce
current assets
d. Increase current assets and reduce
fixed assets
33. The credit balance in Income and
Expenditure account indicates :
a. The excess of income over expenditure
b. The excess of expenditure over income
c. The excess of cash receipts over cash
payments
d. The excess of cash payments over cash
receipts
34. The normal accounting view is to ignore
any appreciation in the value of assets as
otherwise it would lead to the contravening
of accounting concept of :
a. Cost
b. Entity
c. Realization
35. The return of goods by a customer will be
debited to __________.
a. Customer’s account
b. Sales return account
c. Goods account
36. Goods given as samples
credited to __________
a. Advertisement account
b. Sales account
c. Purchases account
should
be
37. The net worth of a limited company is equal
to
a. Current assets minus current liabilities
b. Fixed assets minus Long term liabilities
c. Fixed assets minus current liabilities
d. The total shareholders / Proprietor’s
funds
Question No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
Answers
c
b
b
c
c
a
b
b
a
d
a
b
a
b
c
d
b
c
b
b
b
a
d
a
b
d
d
a
a
a
c
c
a
a
b
c
d
STATE WHETHER THE FOLLOWING
STATEMENTS ARE TRUE OR FALSE
1. A revenue denotes the expenditure
incurred by the business in earning income.
17. Higher the debtors turnover ratio lower is
the debt collection period.
2. Circulating capital is represented by fixed
assets.
18. Profits earned increase the owner’s equity.
3. Inventory should be valued at the lower of
historical cost and current replacement
cost.
4. Posting is done in the personal accounts
from the purchases book daily.
5. Depreciation is charged on the book value
of the asset each year in case of
diminishing balance method of charging
depreciation.
6. The asset always appears at original cost
in case depreciation is credited to provision
for depreciation a/c.
7. A capital reserve can be used to pay a
dividend to the shareholders.
8. In absence of any agreement, profit or loss
is to be distributed according to partners
capital ratio.
9. Premium paid on the life policy of a
proprietor is debited to the profit & loss a/c.
10. A liability denotes the value in terms of
money which the business owes.
11. Floating assets are those assets whose
value change constantly.
12. The share premium is a capital reserve and
the Profit & Loss a/c is a revenue reserve.
13. A bonus issue is often used by limited
company to raise money.
14. When the new partner pays his or her
premium for goodwill in cash, it is
distributed among the old partners
according to their old profit-sharing ratio.
15. Ledger is known as a book of prime entry.
16. A share’s book value is the price for which
a person can buy or sell a share.
19. Once the board of directors declares
dividend it is a legal liability.
20. When goods are sold for cash to a debtor,
debtor’s a/c is debited and cash is credited.
21. In absence of any agreement, interest on
capital is charged at 6% in partnership
accounts.
22. A debenture is a type of share.
23. Patents a/c is a nominal account.
24. Bank overdraft is a secured loan.
25. Reserve for doubtful debts is shown under
the head ‘Reserves and surplus’ on the
liabilities side of the Balance sheet.
26. ‘Salary paid in advance’ is a current
liability.
27. All assets in the balance sheet are valued
at their realizable value.
28. Outsiders claim against the business is a
residual claim.
29. The a/c to be credited for payment of rent
to a landlord is landlords a/c.
30. The balance in petty cash book represents
amount spent.
31. Goods taken out by the proprietor from the
business for his personal use are credited
to sales account.
32. The amount of depreciation charged under
SLM method remains the same every year
till there are new purchases or sale of fixed
asset.
33. The term current liabilities is used to denote
those liabilities which re payable after a
year.
34. Rent paid in advance is a current liability.
35. Gaining ratio is calculated at the time of
admission of a new partner.
54. The amount of depreciation is credited to
depreciation fund account in case of
annuity method.
36. Goodwill is a current asset.
55. Acid test ratio denotes liquidity.
37. Journal records
transactions
chronological order.
in
a
56. Credit note is the basis for recording
purchase returns book.
38. Trial balance helps in knowing the
arithmetical accuracy of the accounting
entries.
57. Trial balance is an absolute proof of the
accuracy of the books of accounts.
39. Interest on drawings is an expense for the
business.
58. Cash book is both a ledger account and
subsidiary book.
40. Accumulated profits are transferred to old
partners’ capital account in old profit
sharing ratio.
59. In the case of equity accounts debiting an
account will decrease the balance in the
account.
41. Revaluation method of goodwill is followed
when a new partner pays his or her
required goodwill in cash.
60. The convention of conservatism has
usually the effect of overstating losses and
understating the income.
42. Accrued income is a current asset.
61. Credit purchase of plant is to be recorded
in the journal proper.
43. Sales day book records all sales.
44. When goods are purchased on credit from
a supplier, the supplier’s a/c is credited.
45. Octroi duty paid on raw materials
purchased is a revenue expense.
46. Cost of transportation of machinery to the
site of installation needs to be capitalized.
62. Bills receivable account is a personal
account.
63. A contra entry is one which does not
require posting to the ledger.
64. Only a limited number of transactions affect
the accounting equation.
47. Patent is a current asset.
65. The balance sheet based on cost concept
is of no use to a potential investor.
48. Operating income is not affected by the
capital structure of a company.
66. Royalty paid on production is debited to
profit and loss a/c.
49. The ‘posting’ of an entry is done in the
journal.
67. Under hire-purchase the buyer has the
option to return the goods.
50. The valuation of inventory affects only the
income statement.
68. Any type of error affects the agreement of
trial balance.
51. Prepaid rent account is a nominal account.
69. Bad debts recovered are credited to bad
debts account.
52. Under no circumstances account of a
creditor should be debited.
53. Office equipment purchased on credit will
be recorded in the purchases book.
70. Balance sheet can only indicate the items
which can be expressed in terms of money.
71. Capital expenditure wrongly treated as
revenue would overstate the net profits.
72. Short workings are the difference between
minimum rent and royalty based on actual
workings.
73. The system of accounting for hire purchase
and instalment transactions is one and the
same.
74. Discount columns in the cash book are not
balanced.
75. The term operating profit denotes profits
earned before deducting interest on loans
taken.
76. The closing stock of office stationery is
credited to trading account.
88. Hire vendor although not required to
provide for depreciation must make
provision for losses arising due to goods
likely to be returned in damaged conditions.
89. Goodwill is a fictitious asset.
90. Short workings can be recovered when the
minimum rent is more than actual royalty.
91. Minimum rent is the minimum amount
payable by the lessee to the lessor
irrespective of the output.
92. Under hire purchase system, the asset
account is not debited with the instalment
paid but only with the principal amount
included therein.
77. Entering the wrong amount in the
subsidiary book affects the agreement of
the trial balance.
93. Reserve for doubtful debts (RDD) is
actually a provision and not a reserve.
78. The object of dead rent is that a landlord
should not get more than a certain amount
per year.
94. Security capable of being realized and not
held with the intention of being retained is a
current asset.
79. Hire vendor should provides depreciation in
his books as he continues to be legal
owner of such goods.
95. Carriage outward expense is debited to the
trading account.
80. Depreciation is a non-operating expense.
81. Bank overdraft is a type of secured loan.
96. Depreciation cannot be provided in case of
loss in a financial year.
82. Balance sheet is an account.
97. Under Hire purchase, hire purchaser
records the asset purchased in his books at
total instalment price.
83. Dividends proposed is an appropriation of
profits.
98. Revenues are recognized even if they are
not earned.
84. In the books of the lessor the short
workings (royalty suspense) account
appears on the liabilities side of the
balance sheet.
99. Under some circumstances, the instalment
of long-term liability falling due for payment
in the current year can be treated as a
current liability.
85. The hire – vendor has to refund the
amounts received after repossession of
goods consequent to default by the buyer.
100. The receipts and payments account
records receipts and payments of
revenue nature.
86. Reserves of a company always represent
the amount which the company can readily
spend.
101. The entity concept of accounting is not
applicable to sole trading concern and
partnership accounts.
87. Balance sheet is a test for arithmetical
accuracy of accounts.
102. A credit to equity account decreases the
equity balance.
103. Interest on investments is an operating
income.
119. Debentures is
unsecured loan.
104. A balance sheet is a statement of assets,
liabilities, revenues and expenses as at a
given date.
120. Branch stock account is always prepared
at cost price.
105. Branch account under debtors system is
a real account.
106. Assets are shown in the Balance sheet at
values realizable on liquidation.
107. When an asset balance is to be reduced
the account has to be credited.
108. Higher the administration expenses lower
will be the gross profit.
109. Balance sheet is a statement of sources
and uses of capital.
110. Under debtors system branch account is
debited with losses like bad debts,
discounts allowed and depreciation.
111. The dual aspect concept results in the
accounting equation Capital + Outside
Liabilities = Assets.
112. Purchase of raw material on credit will
increase the working capital.
113. Carriage outward is debited to trading
account at the end of an accounting
period.
114. The accounting policies
enterprise to enterprise.
differ
from
115. When the branch manager is allowed
petty cash on imprest system, the amount
remitted by H.O. to reimburse the actual
expense will be debited to the branch
account.
116. The principle of consistency is particularly
valuable when alternative accounting
method is equally acceptable.
117. Decrease in one asset with no change in
equity will result in decrease of another
asset.
118. Goods distributed as samples
credited to purchase account.
are
categorized
as
an
121. Money measurement concept takes into
account changes in the value of monetary
unit.
122. Increase in equity with no change in the
assets will result in a decrease of outside
liability.
123. Dividend proposed is an appropriation of
profits.
124. Preference share capital is a part of
shareholders funds.
125. In the case of independent branches the
head office account in the books of the
branch is analogous to the capital
account.
Question No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
Answers
False
False
False
True
True
True
False
False
False
True
False
True
False
False
False
False
True
True
True
False
True
False
False
True
False
False
False
False
False
False
False
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
89.
True
False
False
False
False
True
True
False
True
True
False
False
True
True
True
False
True
False
False
False
False
False
True
True
False
False
True
True
True
True
False
True
False
True
False
False
False
False
True
False
True
False
False
True
False
False
False
False
False
True
False
True
True
False
False
True
True
False
90.
91.
92.
93.
94.
95.
96.
97.
98.
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.
111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
125.
False
True
True
True
True
False
False
False
False
True
False
False
False
False
False
False
False
True
False
True
False
True
False
False
True
True
True
False
True
False
False
False
True
True
True
True