1.Which of the following is an area of interest for the management while using accounting information?(1)(a) Financial Position (b) Long-term and short-term solvency (c) Profitability (d) Allof the above
2. A friend of yours studying in class XI, after going through the topic ‘users of accounting information haveclassified into external and internal users as follows: -(1)INTERNAL USERSEXTERNAL USERSGovernmentManagementInvestorsEmployeesCreditorsResearchersOwnersBankDo you agree with this classification, if not redraw this table?
3. Nazeeris running a construction business and has got a contract in which he has received an orderof constructing a shopping mall. He wants to show it as his asset in his balance sheet.Is he correct in doing so?Give reason(1)
4. Office cash deposited into bank is recorded in cash book on(1)a) Debit Side b) Credit side c) Debit side and on the credit side d) None of the above
5. Choose the correct answer from the options given below: If there is current probability of outflow of uncertain funds for settlement of an obligation, which of the following is said to be recognized?(1)a)Loan b)Liability c)Provision d)Contingent Liability
6.Which of the following is an area of interest for regulatory Agencies?(1)(a) Profitability in relation to turnover and investment (b) Growth potential (c) Estimating National Income (d) Allof the above
7. Mr. Roy has prepared his trial balance and got it tallied. He claims that the financial statements prepared with the help of this trial balance can bewholly reliable. How do you react to Mr.Roy’sstatement?Why? (1)
8. Which of the following are goods?(1)(a)Second hand Machines for sale (b)Furniture purchased for sale.(c) Goods bought for personal use (d)Purchased goods for business use.9.Find out the capital at the beginning. Rs.(1)Capital at the end 182000Drawings 28000Capital Introduced 47000Loss 14000
10. Choosethe odd one and give the reason(1)a. Copyright b. Computer Softwarec. Brand d. Royalty
11. Total purchases made during a particular period can be located from _____________.(1)
12. Which of the following is an external cause of depreciation(1)a. Wear and tear b. Depletion c. Passage of time d. Obsolescence
13.Which of the following will affect the agreement of trial balance(1)a) Rs 5000 received as commission has been treated as commission paid in the books of accounts b) Furniture purchased for cash Rs 18,000 has been treated as credit purchase made from Renju furniture mart c) Rs 18000 received for commission has been debited to cash account and corresponding credit was given to commission as Rs 1800 d) Salary paid to Ramesh Rs 10,000 debited to Ramesh accoun
Answers
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Explanation:
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1. (d) All of the above are areas of interest for management while using accounting information.
2. The classification is not entirely accurate as there may be some overlap between internal and external users. A revised table could be:
Internal Users: Management, Employees, Owners
External Users: Government, Investors, Creditors, Researchers, Bank
3. No, Nazeer cannot show the shopping mall as his asset in the balance sheet until it is completed and transferred to the owner.
4. (b) Credit side
5. (c) Provision
6. (a) Profitability in relation to turnover and investment
7. The trial balance is a tool used to check the arithmetic accuracy of accounting records, but it does not guarantee the reliability of financial statements. Errors of omission, commission, or principle may still exist even if the trial balance is tallied.
8. (d) Purchased goods for business use.
9. Capital at the beginning = Capital at the end - (Drawings + Capital Introduced - Loss) = 182000 - (28000 + 47000 - 14000) = Rs. 88000
10. (b) Computer software, as it is an intangible asset while the other options refer to tangible assets or intellectual property rights.
11. From the purchases account or the purchases journal.
12. (d) Obsolescence, as it is an external factor that can cause the asset to become outdated and less valuable over time.
13. (b) Furniture purchased for cash Rs 18,000 has been treated as credit purchases made from Renju furniture mart.
Here are the explanations for each answer:
1. (d) All of the above are areas of interest for management while using accounting information. Management uses accounting information to assess the financial position of the organization, evaluate its solvency (short-term and long-term), and measure its profitability.
2. The classification is not entirely accurate as there may be some overlap between internal and external users. For example, employees can also be external users if they are not part of the organization. A revised table could be:
Internal Users: Management, Employees, Owners
External Users: Government, Investors, Creditors, Researchers, Bank
3. No, Nazeer cannot show the shopping mall as his asset on the balance sheet until it is completed and transferred to the owner. An asset must meet the definition of being controlled by the organization and generating future economic benefits.
4. (b) Credit side. When cash is deposited into the bank, it is recorded on the credit side of the cash book as it is an increase in the bank balance.
5. (c) Provision. A provision is recognized when there is a current probability of outflow of uncertain funds for the settlement of an obligation. A liability is recognized when there is a present obligation as a result of a past event, and its settlement is expected to result in an outflow of economic resources.
6. (a) Profitability in relation to turnover and investment. Regulatory agencies use accounting information to ensure that businesses comply with the rules and regulations governing their operations. They are interested in profitability in relation to turnover and investment, growth potential, and estimating national income to monitor the economic health of the country.
7. The trial balance is a tool used to check the arithmetic accuracy of accounting records, but it does not guarantee the reliability of financial statements. Errors of omission, commission, or principle may still exist even if the trial balance is tallied. Hence, Mr. Roy's statement is not entirely accurate.
8. (d) Purchased goods for business use. Goods refer to products that are manufactured or purchased for resale. Second-hand machines and furniture purchased for sale are goods, while goods bought for personal use are not considered goods.
9. Capital at the beginning = Capital at the end - (Drawings + Capital Introduced - Loss). From the given information, we can calculate the capital at the beginning as Rs. 88000.
10. (b) Computer software, as it is an intangible asset while the other options refer to tangible assets or intellectual property rights.
11. From the purchases account or the purchases journal. The purchases account shows the total amount of goods purchased during the period, while the purchases journal contains a detailed record of individual purchases.
12. (d) Obsolescence, as it is an external factor that can cause the asset to become outdated and less valuable over time. Wear and tear, depletion, and the passage of time are internal factors that cause depreciation.
13. (b) Furniture purchased for cash Rs 18,000 has been treated as a credit purchase made from Renju furniture mart. This is an error of commission as a cash purchase has been recorded as a credit purchase. It will cause the trial balance to be out of balance, and financial statements will be inaccurate if not corrected.
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