MGT101 Quiz ( Lesson 1 - 16 ) Aryan Ahmad Evening Class | Attempts: 275

1.

Qno.1 Why we use financial accounting

A.

Business need
B.

Accounting need
C.

Financial need
D.

Managerial need

Correct Answer
C. Financial need

Explanation
Financial accounting is used to meet the financial needs of a business. It involves recording, summarizing, and reporting financial transactions to provide information for decision-making, financial analysis, and compliance with legal and regulatory requirements. Financial accounting helps in determining the financial position and performance of a business, which is crucial for investors, creditors, and other stakeholders. It also helps in assessing the profitability, liquidity, and solvency of a company. Therefore, the use of financial accounting is driven by the financial needs of a business.

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2.

Qno.2 Which of the following shows a debit balance under normal circumstances?

A.

Asset
B.

Capital
C.

Liability
D.

Sales

Correct Answer
A. Asset

Explanation
Under normal circumstances, an asset account shows a debit balance. This is because assets represent resources owned by a company, such as cash, inventory, or equipment. When these assets increase, they are recorded as debits, and when they decrease, they are recorded as credits. Therefore, a debit balance in an asset account indicates that the value of the assets owned by the company is greater than the liabilities and owner's equity.

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3.

Qno.3 Normally the practice of Book Keeping under Single Entry System is followed by:

A.

Small businesses only
B.

Governments only
C.

Large scale businesses only
D.

Both small businesses and governments

Correct Answer
A. Small businesses only

Explanation
The single entry system of bookkeeping is a simplified method used by small businesses to record financial transactions. It does not provide a complete and accurate picture of the financial position of the business, which is why it is not suitable for large scale businesses or governments that require more comprehensive financial reporting. Therefore, the correct answer is small businesses only.

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4.

Qno.4 An accounting system is used by a business to:

A.

Analyze transactions
B.

Handle routine book-keeping tasks
C.

Classify and summarize financial information
D.

All of the given options

Correct Answer
D. All of the given options

Explanation
An accounting system is used by a business to analyze transactions, handle routine bookkeeping tasks, and classify and summarize financial information. This means that all of the given options are correct. An accounting system helps a business to analyze and understand its financial transactions, keep track of routine bookkeeping tasks such as recording income and expenses, and classify and summarize this financial information to produce useful reports and statements.

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5.

Qno.5 Which of the following is TRUE for Company’s negative working capital?

A.

Current Asset > Current Liability
B.

Current Asset = Current Liability
C.

Current Asset < Current Liability
D.

None of the given options

Correct Answer
C. Current Asset < Current Liability

Explanation
A negative working capital occurs when a company's current liabilities exceed its current assets. This means that the company may have difficulties in meeting its short-term obligations using its current assets.

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6.

Qno.6 Which one of the following is NOT true about Capital Expenditure?

A.

Creates future benefits
B.

Incurred to acquire fixed assets
C.

Incurred to increase the economic life of existing fixed assets
D.

Reduce the profit of the concern

Correct Answer
D. Reduce the profit of the concern

Explanation
Capital Expenditure refers to expenses incurred to acquire fixed assets or increase the economic life of existing fixed assets. It is an investment made by a company to generate future benefits. However, it does not directly reduce the profit of the concern. Instead, it is recorded as an asset on the balance sheet and depreciated over time, which affects the profit through depreciation expense. Therefore, the statement "Reduce the profit of the concern" is not true about Capital Expenditure.

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7.

Qno.7 Consider the following:Beginning inventory 10 units @ Rs. 10 per unitFirst purchase 35 units @ Rs. 11 per unitSecond purchase 40 units @ Rs. 12 per unitThird purchase 20 units @ Rs. 13 per unitSold 10 units @ 1035 units @ 1140 units @ 12Eighty-five units were sold, what is the value of the ending inventory using theFIFO method of inventory costing?

A.

Rs.260
B.

Rs.232
C.

Rs.284
D.

Rs.268

Correct Answer
A. Rs.260

Explanation
The FIFO method (First-In, First-Out) assumes that the first items purchased are the first items sold. In this case, the first inventory of 10 units is sold, followed by 35 units from the first purchase, and then 40 units from the second purchase. The remaining 85 units are from the third purchase. To calculate the value of the ending inventory, we multiply the quantity of the remaining units (85) by the cost of the third purchase (Rs. 13 per unit), which gives us Rs. 1,105. However, since only 85 units were sold, we subtract the cost of the sold units (10 units at Rs. 10 per unit, 35 units at Rs. 11 per unit, and 40 units at Rs. 12 per unit) from the total value, which gives us Rs. 260.

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8.

Qno.9 A decrease in value of a fixed asset due to age, wear and tear is known as:

A.

Acc Depreciation
B.

Accumulated
C.

Appreciation
D.

Written Down Value

Correct Answer
B. Accumulated

Explanation
The decrease in value of a fixed asset due to age, wear and tear is known as depreciation. Accumulated depreciation is a contra-asset account that shows the total depreciation recorded for an asset over its useful life. It represents the cumulative amount of depreciation expense charged against an asset from the time it was acquired until the reporting date. Therefore, accumulated depreciation is the correct answer in this case.

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9.

Qno.13 which of the following entities is not profit oriented entity?

A.

Sole - proprietorship
B.

Partnership
C.

Companies
D.

Trust

Correct Answer
D. Trust

Explanation
A trust is not a profit-oriented entity because its primary purpose is to serve a charitable or philanthropic cause. Trusts are established to hold and manage assets for the benefit of others, such as beneficiaries or charitable organizations. Unlike sole proprietorships, partnerships, and companies, which are established with the intention of generating profits, trusts focus on the distribution of assets for non-profit purposes.

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10.

Qno10 Which of the following is the act of recording each transaction in the Journal?

A.

Journalizing
B.

Posting
C.

Folioing
D.

Transferring

Correct Answer
A. Journalizing

Explanation
Journalizing is the act of recording each transaction in the Journal. The Journal is a book of original entry where all transactions are initially recorded in chronological order. It serves as a complete record of all financial transactions before they are transferred to the ledger accounts. Journalizing involves identifying the accounts involved, recording the date, amount, and description of the transaction, and assigning a unique identification number or reference for future reference and retrieval. It is an essential step in the accounting process to ensure accurate and organized financial records.

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11.

Debit is

A.

Decrease in income
B.

Increase in income
C.

Decrease in asset
D.

Increase in capital

Correct Answer
A. Decrease in income

Explanation
Debit is a term used in accounting to record a decrease in an account balance. In this context, "debit is decrease in income" means that when income is debited, it indicates a decrease in the income amount. This is because debiting an income account reduces its balance. Therefore, the correct answer is "decrease in income".

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12.

Which one do you like?

A.

Option 1
B.

Option 2
C.

Option 3
D.

Option 4

Correct Answer
A. Option 1