Rules of Double Entry Book–Keeping
- How does depreciation effect basic accounting equation
(a) Leads to decreases in assets and shareholders’ equity
(b) Leads to decrease in asset only
(c) Leads to increase in liability and decrease in assets
(d) Leads to decrease in share holders’ equity - In which of the following case there is No Change in Total Liability
(a) Payment of Creditors
(b) New Bills Payable accepted
(c) Payment of Outstanding Liability
(d) None of these - Withdrawals by proprietor would
(a) Reduce both Assets and Owner’s Equity
(b) Reduce Assets and increase Liabilities
(c) Reduce Owner’s Equity and increase Liabilities
(d) Have no effect on the Balance Sheet - Which of the following is true?
(a) The payment of a Liability causes an increase in Owner’s Equity
(b) The collection of an Account Receivable will cause Total Assets to increase
(c) The accounting equation may be stated as: Assets + Liabilities = Owners‘ equity
(d) The purchase of an asset such as office equipment, either for cash or on credit, does not change the Owners‘ Equity - Purchase of goods on credit
(a) Increases Liabilities
(b) Increases Assets
(c) Increases both Assets and Liabilities
(d) Decreases Assets - Purchase of Raw Material for Cash
(a) Increases total Assets
(b) Leaves total Assets unchanged
(c) Increases total Fixed Assets
(d) Increases total Current Assets - If Office Equipment is purchased for cash, what effects will this transaction have on the financial position of the company?
(a) There is no change in the Assets, Liabilities and Owners‘ Equity
(b) There is a decrease in Assets, increase in Liabilities and no change in Owners‘ Equity
(c) There is a decrease in Assets, no change in Liabilities and a decrease in Owners‘ Equity
(d) There is an increase in Assets, decrease in Liabilities and no change in Owners‘ Equity - The amount of Owners‘ equity in a business is not affected by
(a) The percentage of Total Assets held in cash
(b) Investments made in the business by the owner
(c) The profitability of the business
(d) The amount of dividends paid to Stock holders - An Investment in one asset A/c may lead to –
(a) Increase in liability A/c
(b) Decrease in A/c asset
(c) Each (a) or (b)
(d) None of these - An increase in one liability may lead to
(a) Increase in another asset
(b) Decrease in liability
(c) Both (a) and (b)
(d) Either (a) or (b) - Decrease in the amount of Creditors results in
(a) Increase in Cash
(b) Decrease in Assets
(c) Decrease in Cash
(d) No Change in assets - If individual assets is increased, there will be a corresponding
(a) Increase of another assets or increase of capital
(b) Decrease of another assets or increase of liability
(c) Decrease of specific liability or decrease of capital
(d) Increase of drawings and liability - An increase in one liability may lead to
(a) Increase in another asset
(b) Decrease in liability
(c) Both (a) and (b)
(d) Either (a) or (b) - Which Financial statement represents the accounting equations
(a) Income Statement
(b) Statement of Cash Flows
(c) Balance Sheet
(d) None of the above - In Accounting Equation effects are taken on:
(i) Assets (ii) Liability (iii) Capital (iv) Revenue (v) Expenses
(a) (i) only
(b) (i) & (ii) & (iii)
(c) (i) & (ii) & (iii) & (iv) & (v)
(d) (iv) & (v) - Which of the following is true when a debtor pays his dues?
(a) The asset side of the Balance Sheet will decrease
(b) The asset side of the Balance Sheet will increase
(c) The liability side of the Balance Sheet will increase
(d) There is no change in total assets or total liabilities - When Fixed Assets are sold
(a) The Total Assets will increase
(b) Total Liability will increase
(c) Total Assets will decrease
(d) There is no Change in Total Assets - Which financial statement represent the accounting equation ,
ASSETS = LIABILITY + OWNERS EQUITY
(a) Income statement
(b) Cash flow statement
(c) Balance Sheet
(d) Funds flow statement - Ram starts business with Rs. 90,000 and then buys goods from Shaym on credit for Rs. 23,000. The accounting equation based on Assets = Capital + Liability will be
(a) 1,13,000 = 90,000 + 23,000
(b) 1,13,000 = 1,13,000 + 0
(c) 90,000 = 67,000 + 23,000
(d) 67,000 = 90,000 – 23,000 - Change in the capital A/c of proprietor may occur due to
(a) Profit earned
(b) Loss incurred
(c) Capital Introduced
(d) All of the above - The process of recording financial data up to trial balance is_______
(a) Book keeping
(b) Classifying
(c) Summarising
(d) Analising - Which of the following is not the main objective of accounting?
(a) Systematic recording of transactions
(b) Ascertaining profit or loss
(c) Ascertainment of financial position
(d) Solving tax disputes with tax authorities - The accounting cycle represents a series of steps that a business uses
(a) To record and classify the transactions
(b) To summarize the transactions
(c) To communicate financial events
(d) For all of these - Which of the following is a financial asset?
(a) Inventories
(b) Equipment
(c) Loan to an associate
(d) Accounts receivable - Rebate on bills discounted is
(a) An item of income
(b) A liability
(c) Income received in advance
(d) None of the above - Life insurance premiums received by an insurance company
should be classified as
(a) accrued asset
(b) accrued liability
(c) prepaid expense
(d) unearned revenue - Which of the following comes first in accounting cycle ?
(a) Recording in subsidiary books
(b) Preparing trading account
(c) Posting in ledger accounts
(d) Entering in trial balance - Which of the following is not based upon expectations?
(a) Useful life
(b) Residual Value
(c) Historical Value
(d) Salvage Value - A secret reserve can be created through
(a) Undervaluation of assets and liabilities
(b) Undervaluation of current assets and undervaluation of current liabilities
(c) Undervaluation of assets and liabilities
(d) Overvaluation of assets and under valuation of liabilities - Liability for bill discounted is a————
(a) Current liability
(b) Contingent liability
(c) Fixed liability
(d) None of the three