Accounting Practice MCQs Competitive Exams Set 19

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(20) Bond holders would be most interested in which of the following?

(a) Quick ratio

(b) Inventory turnover

(c) Times interest earned

(d) None of these

Answer. (c)

1. Identify the item that is likely to serve as source document:

a. Trial balance

b. Income statement

c. Balance sheet

d. Invoice from supplier

Answer. d.

2. Identify which of the normal balances (in parentheses) assigned to the following accounts is incorrect: a. Office supplies (Debit)

b. Cash (Debit)

c. Wages payable (Credit)

d. Fee earned (Debit)

Answer. d.

3. The formula (Cost less salvage value/Total capacity in units x units extracted) refers to which depreciation method:

a. Straight line

b. Units of production

c. Declining balance

d. Depletion

Answer. b.

4. While passing adjusting entries for what type of transections expenses are debited and assets are credited:

a. Accrued revenue

b. Accrued expenses

c. Unearned Revenue

d. Prepaid Revenue

Answer. d.

5. Of the following statements, which one is untrue for the corporate form of organization:

a. It is a separate legal entity

b. It has a limited life

c. Income that is distributed to owners is usually taxed twice

d. Ownership rights can be easily transferred

Answer. b.

6. For each transection, double-entry accounting requires which of the following:

a. Debits to asset accounts must create credits to liability or equity accounts

b. A debit to a liability account must create a credit to an asset accounts

c. Total debits must equal total credits

d. None of these

Answer. a.

7. When costs are rising, which method reports higher net income:

a. LIFO

b. FIFO

c. Average

d. The most recent purchase price

Answer. b.

8. A transection caused Rs. 20,000 decrease in both total assets and total liabilities. This transaction could have been:

a. Purchase of an asset for Rs. 20.000 cash

b. Asset costing Rs. 20,000 destroyed by fire

c. Repayment of Rs. 20,000 bank loan

d. Collection of Rs. 20,000account receivable

Answer. c.

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