MGT101- Financial Accounting 2
This is a interesting and important quiz for accounting. Take this quiz and have a good time!
Questions and Answers
- 1.
A transaction that has been recorded in wrong account of the same class instead of being recorded in the right account
- A.
Error of Omission
- B.
Error of Commission
- C.
Error of Principle
- D.
Error of Original entry
Correct Answer
B. Error of CommissionExplanation
Error of commission refers to a mistake made when a transaction is recorded in the wrong account of the same class, instead of being recorded in the correct account. This means that the transaction has been entered, but in the wrong place, leading to inaccurate financial statements. Unlike error of omission, where a transaction is completely left out, error of commission involves recording the transaction, but in the wrong account. This type of error can result in misrepresentation of financial information and requires correction to ensure accurate reporting.Rate this question:
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- 2.
Which of the following is a debit entry on the Bank Statement that might not appear in the Cash Book?
- A.
A standing order
- B.
An uncredited cheque
- C.
A credit transfer
- D.
An unpresented cheque
Correct Answer
A. A standing orderExplanation
A standing order is a regular payment made from a bank account to another party. It is initiated by the account holder and authorized to be paid at specific intervals. Since it is a debit entry on the bank statement, it represents a decrease in the account balance. However, it might not appear in the cash book because it is a recurring payment that is automatically deducted from the account, and therefore may not be recorded separately in the cash book each time it occurs.Rate this question:
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- 3.
Which of the following account balance is shown on debit side of Trial Balance?(It is assumed that all account balances are shown on normal balance).
- A.
Capital account
- B.
Sundry creditors account
- C.
Accounts payable account
- D.
Sundry debtors account
Correct Answer
D. Sundry debtors accountExplanation
The correct answer is Sundry debtors account. In a trial balance, debit balances are shown on the debit side. Sundry debtors account represents the amount owed to the business by its customers, which is an asset account. Since it has a debit balance, it would be shown on the debit side of the trial balance. Capital account represents the owner's investment, which is a credit balance. Sundry creditors account and accounts payable account represent the amount owed by the business to its suppliers, which are liability accounts and have credit balances.Rate this question:
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- 4.
If cost of sales is Rs. 95,000, income from sales Rs. 200,000 and operatingexpenses Rs. 300,000. What will be net result?
- A.
Rs.195,000 Losses
- B.
Rs.195,000 Profits
- C.
Rs.105,000 Profits
- D.
Rs.105,000 Losses
Correct Answer
A. Rs.195,000 LossesExplanation
The net result can be determined by subtracting the cost of sales and operating expenses from the income from sales. In this case, the income from sales is Rs. 200,000, the cost of sales is Rs. 95,000, and the operating expenses are Rs. 300,000. Therefore, the net result would be Rs. 200,000 - Rs. 95,000 - Rs. 300,000 = Rs. -195,000. Since the result is negative, it indicates a loss of Rs. 195,000.Rate this question:
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- 5.
In which of the following statement opening stock is shown?
- A.
Profit and loss account
- B.
Balance sheet
- C.
Cash flow statement
- D.
Owner’s equity
Correct Answer
A. Profit and loss accountExplanation
In the profit and loss account, the opening stock is shown as it is a part of the calculation of the cost of goods sold. The opening stock represents the value of inventory that a company has at the beginning of the accounting period. It is an important figure in determining the gross profit of the business. The profit and loss account is a financial statement that summarizes the revenue, expenses, and profits or losses of a company over a specific period of time.Rate this question:
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- 6.
Working capital Rs. 20,000, Current liabilities Rs. 30,000 and fixed assets Rs.100,000; calculate current assets?
- A.
Rs. 10,000
- B.
Rs. 50,000
- C.
Rs. 110,000
- D.
Rs. 120,000
Correct Answer
B. Rs. 50,000 -
- 7.
Which of the following content(s) is (are) included in the Cost of goods sold?
- A.
Opening stock
- B.
Purchases
- C.
Freight in
- D.
All of the given options
Correct Answer
D. All of the given optionsExplanation
The cost of goods sold includes all of the given options, which are opening stock, purchases, and freight in. Opening stock refers to the value of inventory at the beginning of a period, purchases represent the cost of acquiring additional inventory during the period, and freight in refers to the transportation costs incurred to bring the inventory to the business. All of these costs are directly related to the production or acquisition of goods that are sold by the business and are therefore included in the cost of goods sold.Rate this question:
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- 8.
Which of the following Organization converts raw material into finished goods?
- A.
Trading concern
- B.
Manufacturing concern
- C.
Merchandising concern
- D.
Service concern
Correct Answer
B. Manufacturing concernExplanation
A manufacturing concern is an organization that converts raw materials into finished goods. This involves various processes such as production, assembly, and packaging. Unlike trading concerns that buy and sell goods without any transformation, manufacturing concerns add value to the raw materials by transforming them into finished products. Merchandising concerns focus on buying and selling goods without any alteration, while service concerns provide services rather than physical goods. Therefore, the correct answer to the question is manufacturing concern.Rate this question:
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- 9.
Which of the following is an example of direct materials cost?
- A.
Production worker’s wages
- B.
Depreciation expenses
- C.
A piece of wood for the production of chair
- D.
Polish and finishing material for chair
Correct Answer
C. A piece of wood for the production of chairExplanation
A piece of wood for the production of a chair is an example of direct materials cost because it is a material that is directly used in the production process. Direct materials costs are the costs of materials that can be easily and directly traced to a specific product. In this case, the piece of wood is a tangible material that is necessary for the production of the chair, making it a direct materials cost.Rate this question:
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- 10.
In cost of goods sold statement, the ‘cost of material consumed’ is equal to:
- A.
Opening raw material inventory + Purchases – Ending raw material inventory
- B.
Opening raw material inventory - Purchases + Ending raw material inventory
- C.
Ending raw material inventory - Opening raw material inventory – Purchases
- D.
Ending raw material inventory + Opening raw material inventory + Purchases
Correct Answer
A. Opening raw material inventory + Purchases – Ending raw material inventoryExplanation
The cost of material consumed in the cost of goods sold statement is calculated by adding the opening raw material inventory to the purchases and then subtracting the ending raw material inventory. This is because the opening raw material inventory represents the value of materials available at the beginning of the period, the purchases represent the additional materials acquired during the period, and the ending raw material inventory represents the value of materials remaining at the end of the period. By subtracting the ending inventory from the total materials available, we can determine the cost of the materials that were consumed or used in production during the period.Rate this question:
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- 11.
What would be the value of Total Factory Cost, if cost of raw materials, directlabor costs, and manufacturing overhead costs are Rs.80,000, Rs.50,000, andRs.60,000 respectively?
- A.
Rs.130, 000
- B.
Rs.110, 000
- C.
Rs.140, 000
- D.
Rs.190, 000
Correct Answer
D. Rs.190, 000Explanation
The Total Factory Cost is the sum of the cost of raw materials, direct labor costs, and manufacturing overhead costs. In this case, the cost of raw materials is Rs.80,000, direct labor costs are Rs.50,000, and manufacturing overhead costs are Rs.60,000. Adding these three costs together, we get Rs.190,000 as the Total Factory Cost.Rate this question:
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- 12.
Which of the following assets are shown at written down value in Balance Sheet?
- A.
Current assets
- B.
Liquid assets
- C.
Floating assets
- D.
Fixed assets
Correct Answer
D. Fixed assetsExplanation
Fixed assets are shown at written down value in the balance sheet. This means that their value is reduced over time to reflect their depreciation. Fixed assets include tangible assets such as land, buildings, machinery, and equipment. The balance sheet provides a snapshot of a company's financial position, and by showing fixed assets at written down value, it accurately represents the true value of these assets after accounting for their depreciation.Rate this question:
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- 13.
An asset cost Rs. 50,000, has an estimated residual value of Rs.1, 500, and anestimated useful life of 5 years. What is the depreciation rate?
- A.
20.0%
- B.
25.0%
- C.
35.5%
- D.
50.4 %
Correct Answer
D. 50.4 %Explanation
The depreciation rate can be calculated by subtracting the estimated residual value from the original cost of the asset, and then dividing it by the estimated useful life of the asset. In this case, the depreciation rate would be (50,000 - 1,500) / 5 = 48,500 / 5 = 9,700. Therefore, the depreciation rate is 9,700 / 50,000 = 0.194, which is equivalent to 19.4%. Therefore, the correct answer is 19.4%, not 50.4%.Rate this question:
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- 14.
Calculate depreciation of machine after first year by using diminishing balancemethod with the help of given data?If, Cost of machine = Rs.400, 000Useful life = 5 yearsResidual value = Rs.25, 000Sale price = Rs.40, 000Rate of depreciation = 40%
- A.
Rs. 160,000
- B.
Rs. 11,840
- C.
Rs. 34,560
- D.
Rs. 34,860
Correct Answer
A. Rs. 160,000Explanation
The correct answer is Rs. 160,000. The diminishing balance method of depreciation calculates depreciation based on a fixed rate applied to the reducing balance of the asset. In this case, the rate of depreciation is 40%. In the first year, the depreciation would be 40% of the cost of the machine, which is Rs. 400,000. Therefore, the depreciation after the first year would be Rs. 160,000.Rate this question:
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- 15.
Which one of the following is INCORRECT about closing Stock?
- A.
It is added into current assets
- B.
It is deducted from material available for use
- C.
It becomes opening stock of next year
- D.
It increases the owner’s equity of business
Correct Answer
D. It increases the owner’s equity of businessExplanation
Closing stock does not increase the owner's equity of a business. Owner's equity represents the owner's investment in the business and the profits accumulated over time. Closing stock is the value of unsold goods at the end of an accounting period and is recorded as an asset on the balance sheet, specifically under current assets. It is not directly related to the owner's equity, which is affected by factors such as capital contributions, retained earnings, and business profits.Rate this question:
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- 16.
In the cost of goods sold statement, Cost of direct material consumed + Directlabor = ___________
- A.
Conversion cost
- B.
Prime cost
- C.
Total factory cost
- D.
Cost of goods manufactured
Correct Answer
B. Prime costExplanation
The cost of direct material consumed and direct labor are both components of prime cost. Prime cost includes all the direct costs involved in the production of goods, such as the cost of raw materials and the cost of labor directly involved in the manufacturing process. Therefore, the correct answer is prime cost.Rate this question:
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- 17.
The total of all costs incurred to convert raw material into finished goods isknown as:
- A.
Prime cost
- B.
Conversion cost
- C.
Sunk cost
- D.
Opportunity cost
Correct Answer
B. Conversion costExplanation
The correct answer is Conversion cost. Conversion cost refers to the total expenses incurred in converting raw materials into finished goods. It includes direct labor costs and manufacturing overhead costs such as utilities, depreciation, and maintenance. This cost does not include the cost of raw materials. By calculating the conversion cost, a company can determine the total expenses involved in the production process and make informed decisions about pricing and profitability.Rate this question:
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- 18.
In cost of goods sold statement the ‘total factory cost’ is equal to:
- A.
Cost of material consumed + Labor cost
- B.
Cost of material consumed + Conversion cost
- C.
Cost of material consumed + Total factory cost
- D.
Cost of material consumed + Factory overhead
Correct Answer
B. Cost of material consumed + Conversion costExplanation
The correct answer is "Cost of material consumed + Conversion cost." In the cost of goods sold statement, the total factory cost includes both the cost of material consumed and the conversion cost. The cost of material consumed refers to the cost of raw materials used in the production process, while the conversion cost includes the cost of labor and other expenses directly related to the manufacturing process, such as utilities and maintenance. Therefore, the total factory cost is the sum of these two components.Rate this question:
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- 19.
Which of the following is (are) inventory valuation method(s)?
- A.
FIFO
- B.
LIFO
- C.
Weighted average
- D.
All of the given options
Correct Answer
D. All of the given optionsExplanation
The correct answer is "All of the given options" because FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and Weighted Average are all commonly used methods for valuing inventory. FIFO assumes that the first items purchased are the first ones sold, LIFO assumes that the last items purchased are the first ones sold, and Weighted Average calculates the average cost of all items in inventory. These methods help businesses determine the value of their inventory and the cost of goods sold.Rate this question:
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- 20.
The cost of an incomplete fixed asset is transferred to _________ as on BalanceSheet date.
- A.
Capital account
- B.
Capital work in progress account
- C.
Relevant asset account
- D.
Owner's equity account
Correct Answer
B. Capital work in progress accountExplanation
When a fixed asset is incomplete, its cost is transferred to the Capital Work in Progress account on the Balance Sheet date. This account is used to track the costs incurred during the construction or development phase of a fixed asset. Once the asset is completed, the cost is then transferred from the Capital Work in Progress account to the relevant asset account. This ensures that the incomplete fixed asset is properly accounted for and its costs are accurately reflected in the financial statements.Rate this question:
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- 21.
Under the straight line method of depreciation:
- A.
Amount of depreciation increases every year
- B.
Amount of depreciation remains constant for every year
- C.
Amount of depreciation decreases every year
- D.
None of the given options
Correct Answer
B. Amount of depreciation remains constant for every yearExplanation
Under the straight-line method of depreciation, the amount of depreciation remains constant for every year. This means that the same amount is deducted from the asset's value each year over its useful life. This method assumes that the asset depreciates evenly over time and does not take into account any fluctuations in its value. Therefore, the depreciation expense is the same for each year, resulting in a constant amount of depreciation.Rate this question:
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- 22.
Which of the following asset is NOT depreciated?
- A.
Factory Buildings
- B.
Office Equipment
- C.
Land
- D.
Plant & Machinery
Correct Answer
C. LandExplanation
Land is not depreciated because it is considered a non-depreciable asset. Unlike buildings, equipment, and machinery, land is not subject to wear and tear or obsolescence over time. Land is typically considered to have an indefinite useful life and its value is expected to appreciate rather than depreciate. Therefore, it is not necessary to allocate any depreciation expense to land.Rate this question:
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Current Version
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Mar 21, 2023Quiz Edited by
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Jun 04, 2009Quiz Created by
Zubair
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