Accounting Practice MCQs Competitive Exams Set 22

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(viii) Expense is recorded in the accounting records when:

(a) Cash is paid

(b) The purchase order is placed with the supplier

(c) Purchases are made

(d) None of these

Answer. (c)

(ix) The cash basis of accounting:

(a) Is widely used by manufacturing firms.

(b) Is often used by merchandising firms.

(c) Usually results in a larger amount of tax than under accrual basis accounting .

(d) Can not be used in filing income tax returns.

Answer. (c)

(x) The straight-line method of depreciation:

(a) Generally gives best results because it is easy to apply

(b) Should be used in a period of inflation, because it accumulates the fund for the replacement of asset at a uniform rate.

(c) Is the best method used for wasting assets.

(d) Ignores fluctuations in the rate of asset usage.

Answer. (b)

(xi) Which of the following accounts are not closed at the end of an accounting period?

(a) Revenue accounts

(b) Expense accounts

(c) Drawing accounts

(d) Asset accounts

Answer. (d)

(xii) Under periodic inventory system cost of goods sold is determined and recognized in the books of accounts:

(a) At the time of purchase of goods

(b) At the time of sale of goods

(c) At the end of the year

(d) None of these

Answer. (c)

(xiii) Which of the following is not a use of working capital?

(a) Repayment of long term debt

(b) Cash dividend declared but not paid

(c) Payment of an account payable

(d) Acquisition of treasury stock.

Answer. (b)

(xiv) A transection caused a ₹ 10,000 decrease in both assets and total liabilities. This transaction could have been:

(a) Purchase of furniture for ₹ 10,000

(b) An asset costing ₹ 10,000 was destroyed by fire

(c) Repayment of bank loan ₹ 10,000

(d) Collection of a ₹ 10,000 account receivable

Answer. (c)

(xv) Which ratio indicates a firm՚s ability to pay current liabilities in the shortest possible time?

(a) Current Ratio

(b) Equity Ratio

(c) Debt Ratio

(d) Quick Ratio

Answer. (a)

(xvi) If we add the average number of days to turn the inventory over and the average age of receivables (in number of days) , we arrive at:

(a) The company՚s fiscal period

(b) The sales volume of the business

(c) The company՚s operating cycle

(d) Nothing meaningful

Answer. (c)