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FA Objectives (Batch B)

1 ) Overdraft means Credit Balance as per _______ book.

Ans : Cash book.

2) When Cash is withdrawn from bank, the bank ______ customers account.

Ans :Debit

3) Factors determining the amount of depreciation

Ans : Original cost of asset, Estimated life & residual value.

4) A bank pass book is a copy of ________ in banks ledger.

Ans : customers account

5) Taking cash as source book with debit balance , cash dishonored will be added or subtracted
from source bk

Ans : Subtracted

6) When balance as per cash bk is te starting point to ascertain te balance as per pass bk, interest
charged by bank is _______

Ans : subtracted.

7) Favourable balance means pass book will have a ______ balance.

Ans : Credit

8. According to accounting retained earning is a profit


9. give an example of internal voucher and external voucher.
Ans: internal voucher - journal
External voucher- cash receipt voucher
Cash payment voucher
Bank receipt voucher
Bank payment voucher
Debit note
Credit note
Invoice

10. what is the difference between work in progress and work in process?
Ans: There are two types of manufacturing : discrete manufacturing[normal
manufacturing] n continuous manufacturing[oil refinery].

Work in progress is in discrete manufacturing n work in process is in continuous


manufacturing.

11. What is imprest?


Ans: the small amount given to cashier for miscellaneous expenses at the beginning of
the month.

12. Details of salary,wages etc nominal accounts are presented in general ledger

13. Which items in bank reconciliation require journal entry?

These items did appear on the bank statement, but they did not appear on the company’s books.A
common example of a bank reconciliation item that will require a journal entry is the bank
service charge. The bank service charge is often shown on the last day of the bank statement.
Since it is on the bank statement, but not yet on the company’s books, you will need to credit
Cash and to debit an expense such as Bank Charges or Miscellaneous Expense.
14. What is retained earnings?
Retained earnings represent the corporation’s cumulative earnings that have not been distributed
to its stockholders.

15 .What is the difference between income, revenue and gain?


Revenue is the amount earned from a company’s main activities such as selling merchandise or
providing services.
16.What are the limitations of trial balance?

 a transaction not being recorded in a journal in the first place (or being recorded incorrectly)
 a journal entry not being posted to the ledger (or being posted twice)
 an entry being made in an incorrect ledger account (on the correct side)
 entries being made on the wrong side of two ledger accounts (that is, reversing what should
be debited and credited)
 offsetting errors (also known as compensating errors)

17. What are the two key methods of accounting?


Ans. Accrual and cash basis

18. Under straight line method depreciation is calculated on


Ans. Original cost

19. The process of transferring entries from journal to ledger is known as


Ans. posting
20. Real accounts always show
Ans. Debit balance

21. Withdrawal of cash from bank by the properitor for office use should be credited to
Ans. Bank a/c

22. Repairs incurred before using a 2nd hand machine purchase recently is what kind of revenue?
Ans. Capital revenue

23. What is the difference between periodic and perpetual inventory?


Ans. In periodic inventory, the value and quantity of inventory is found out only at the end of the
accounting period after having a physical verification of the units in hand.
In perpetual entry, the details of quantity and value of stock of each item is available at all times.

24.The process of recording transactions in subsidiary books is called?


A: Journalising

25.Which books serves the role of both journal as well as ledger?


A: Cash book

26.What is the salvage value of an asset?


A: The amount that an asset can fetch on sale at the end of it’s useful life

27. Carriage outward is debited from which ac?


A: From the Profit and Loss account.

1) The sales book is undercast by Rs. 2000 – what type of error is this?
Error of commission

2) Short debit is rectified by further debit to the respective account


3) Rs.175 paid for repairs on second hand machinery as soon as it was purchased – Capital
expenditure
4) Rs. 600 paid for installation of plant - Capital expenditure
5) During the first week after the release of the cinema, free tickets worth Rs.30 000 were
distributed to increase the publicity of the cinema house – Deferred revenue expenditure
6) Name 2 Annexures to Financial statement.
– Schedule (Quantitative details)
– Notes to Account (Qualitative details)
1) Name 2 Attachments to Financial statement.
– Audit Report
– MDA (Management Discussion & Analysis)
1) what is liquidity order?
the assests which are more readily converted into cash comes first and those which
cannot be so readily coverted come next and so on. Similarly those liabilities which are
payable first come first and those payable later come next and so on.

2) Example for fictitious assets-


1. registration charges paid to the registrar of a joint stock company for getting a
company incorporation
2. discount on issue of shares
(assets that are not represented by tangible possession or property)

3) The provisions for bad debts is charged to profit and loss a/c and is deducted from
debtors in the bal sheet.

4) What is LCM RULE in inventory?


Lower of cost or market value – the value of the inventory at the end of the year is
deliberately made low so that in the next year, it takes care of the inflation of the
inventory.

1.Closing stock is put in which two statements?


Ans.Trading A/c and balance sheet

2.Under inflationary condition which method shows highest value of closing stock?
Ans.FIFO

3.Loss of stock in fire is an example of _________ expenditure


Ans.revenue

4.Sales tax is put in which statement?


Ans.Balance sheet
5._________ shows the financial position of the company.
Ans.Balance sheet

6.Carriage inward and carriage outward put in ___________ side of Trial balance
Ans.Debit

7.Income received in advance appears in which statement(s)?


Ans.P/L & B/S

8.3 methods of calculating capital expenditure


Ans.Average profit
super profit
Average capital

9.wages and salary are debited to


Ans.Trading A/c
P/L
P/L appropriation
B/S

10.opening stock________
Ans.increases gross profit
decreases gross profit
does not affect the gross profit

11. 2 sided errors _________


Ans.are disclosed by Trial balance
are not disclosed by tb
do not affect the agreement of tb
both a&c
both b&c

12.posting the correct amount to the correct side of a wrong ledger a/c will it affect tb or not?
Ans. It won't

13.posting the wrong amount to the correct side of a wrong ledger a/c will it affect the tb?
Ans.It will.

14.what is operating profit


ans. EBDITA
less depreciation and amortisation
15.carriage inward and carriage out are put in which statement
ans.Trading a/c & P/L
P/L & P/L
Trading & Trading
none of the above

1) State whether the following are capital or revenue items


a) Money raised by issue of equity shares – Capital Receipt
1) State whether the following are capital or revenue items
Payment of compensation to a discharged employee – Revenue Expenditure

2) For providing depreciation on lease hold property the appropriate method of depreciation is
a) Replacement method
b) Revaluation method
c) Fixed instalment method
Ans: Fixed instalment method
1) Depreciation is charged on the book value of the asset each year in case of diminishing
balance method – True
2) The asset appears always at original cost in case depreciation is credited to provision for
depreciation account. – True

3) Inventory is valued at lower of the cost or net realisable value on account of the accounting
principle of:
a) Consistency
b) Conservatism-Correct answer
c) Realisation
1) The system which gives a continuous information regarding quantum and value of inventory
is known as:
a) Continuous stock taking
b) Periodic inventory
c) Perpetual inventory- Correct answer
1) What are the causes of depreciation?
a) Wear and tear
b) Exhaustion
c) Obsolescence
d) Efflux of time
e) Accidents
1) Factors affecting the amount of depreciation.
a) Cost of the asset
b) Estimated scrap value
c) Estimated useful life
1) Profit or loss on depreciation fund investment is transferred to:
a) Profit and Loss account
b) Asset Account
c) Depreciation Reserve Account-Correct answer
1) The interest lost on the acquisition of an asset is taken into account in calculating
depreciation in
a) Annuity method

1. The charge for the use of the asset remains uniform each year in case of straight line
method
False
2. The error of complete omission does not affect the agreement of trial balance.
3. Salaries & wages are debited to –
a) Trading account
b) Profit & loss account
c) Profit & loss appropriation account
d) None

(b) – Profit & Loss account

1. What is book value?

Book Value= Original Cost- Depreciation

2. What is Accounting equation?

Assets = Liabilities + Capital

3. What is liquid Asset?


Liquid Asset is cash or other property that can be easily converted to cash.

1. what is the matching principle?

Recognition of expenses in the same period as associated revenues is called


matching concept.
Expenses incurred in an accounting period should be matched with revenues during that
period.
2. What is depreciation?

Depreciation may be described as a permanent, continuing and gradual shrinkage in the


book value of fixed assets.
3. What is payroll?
Payroll is a list of employees and their wages.
Amrita's list- Roll No. 62
Q1. What is the main difference between Partnership and LLP form of business?
LLP’s full form is Limited Liability Partnership.
In a partnership, each partner has unlimited liability for all the debts and obligations of
the firm and actions of his partners and his own.
In an LLP, a partner had limited liability towards the firm’s debts and obligations. He
cannot be asked to contribute more than the agreed upon amount. Also he has unlimited
liability for his actions but limited for the other partners.
Q2. Examples of short term and long term liability.
Short term: Creditors, Bills payable, overdraft.
Long term: Debentures, term loans.
Q3. What kind of Marshalling is followed in India?
Marshalling is the arrangement of the ‘Uses’ according to their liquidity
Lowest to Highest liquidity.
Q4. When a passbook shows a credit balance, should the account owner interpret this an
unfavorable balance?
No. The passbook is the mirror image of the cash book. So a credit balance means a debit
balance in the cash book.
Q5. Would you use the Weighted average method of evaluating inventory if your business
deals with copper and silver?
No. This is because these materials suffer from large fluctuations in price. Thus cost
estimate will go wrong.
Q.6 Does the Bin card have an amount column?
No. This is because it is stores dept. maintains the bin card is not interested in the
amount.
Q.7 If you are returning a good to a seller, what voucher will you send to him?
This is Purchase return. So I will send a Debit note saying that the supplier’s account has
been debited that value.
Q8. What is Inward float?
Inward float comes into picture when you receive a cheque. It is the time between
depositing it and it been cleared.
Q9. What is posting?
The transferring of entries from the prime books to ledger is called posting.
Q10. The wages paid to erect a Machine was debited to Wages A/C. Will this affect the trial
balance?
No. This is Error in principle. The amount should have been debited to Machine A/C.

1. What is imprest system?(system of petty cash book where a certain amount is given to
petty cashier at the beginning of a fixed month)
2. How will you journalise the transaction 'Interest due on a loan'?(
3. An estimate of future bad debts is ____________ (provision for doubtful debt)
4. __________ discount is not recorded in the book of accounts. (Ans. Trade)
5. Errors disclosed by trial balance (partial omission of transaction, posting of the wrong
amount, posting on the wrong side, wrong totalling or balancing)
6. Drawings account is a ______ account (Ans.personal)
7. _________ columns of the cash book are never balanced (discount)
8. The entry made on both the sides of the cash book is _________ (contra entry)
9. The interest on customer's deposit account is entered in the ______ side of the pass
book (credit)
10. ______ stock will not be appearing in the trial balance ( Closing)
1. What Type of Error is : Ignoring Depreciation on Fixed Assets completely
Error of Omission

2. Loan account is ----------------- Account: Nominal or Real or Personal


Ans: Personal

3. What Statement gives the details regarding investment in assets and how they are
financed in an accounting period
Cash Flow Statement

4. What is Credit Note?


Document sent by Seller to Buyer indicating Sales Return

5. ------------------ is the excess of shareholder's contribution over share capital


Share Premium

6. Give an example of a document which is attached to Financial Statement.


Audit Report

7. Assets which are held for produce and not for selling are called -----------------
Fixed Assets

8. Difference of Current Assets and Current Liability is called ...............


Working Capital

9. Closing Stock is an asset or liability?


Asset

10. The Audit report that doesn't agree with the Management's version is called ...........
Adverse Report

What is a Compound Journal Entry?


Compound or Combined Journal Entry is one where more than
one transactions are recorded by passing only one journal entry instead
of passing several journal entries.

What is the difference between Balance and Balancing?


Balance is the difference between the total debits and the total
credits of an account. When posting is done, many accounts may have
entries on their debit side as well as credit side. The net result of such
debits and credits in an account is the balance.
Balancing means the writing of the difference between the amount
columns of the two sides in the lighter (smaller total) side, so that the
grand totals of the two sides become equal.
Discount received column appears in _____ side of the cash
book.(credit/debit) Ans:credit

When a cheque received from a customer is dishonoured, his


account is ________.(credited/debited).Ans:debited

Cash sales are entered in sales day book. true or false ans:false.

The sales day book is used to record all credit sales of goods dealt
with by the trader in his business. Cash sales, cash and credit sales
of assets are not entered in this book.

Outstanding salary account is a ________ account.(personal/real/nominal) ans:personal

what is a stale cheque?

Ans: Each negotiable instrument has a validity. A cheque which has crossed maximum 6 months
from the date of signing the cheque is stale cheque.

What is cartage?

Charge or service for moving goods by truck, wagon, or other vehicle.

The benefits to be derived from the accounting information should


exceed its cost is based on ____________principle.(materiality/cost benefit)

Ans: cost benefit

What is the difference between Drawer,Drawee and Payee?

There are three parties to a bill of exchange as under.


i. Drawer: The person who prepares the bill is called the
drawer i.e., a creditor.
ii. Drawee: The person who has to make the payment or
who accepts to make the payment is called the drawee i.e.,
a debtor.
iii. Payee: The person who receives the payment is payee. He
may be a third party or the drawer himself.

My list of questions
1. How will you journalize when bad debts are recovered?
(Ans. Cash account debited and bad debt recovery account credited)

2. What is contra transaction?


(It is the transaction in which is recorded on both sides of the cash book but in different columns)

3. What do mean by disposal of suspense account.


(Ans. When all the errors are located and rectified by passing the necessary journal entries the
suspense account automatically stands disposed off

4. The debit & credit both may represent either increase or decrease in an account balance.

5. What are the types of provisions?(Provisions for doubtful debts, provision for discount on
debtors)

6. What are the determinants of depreciation?(cost of assets installed, estimated useful life,
estimated salvage value)

7. Errors of principle do not affect the trial balance.

8. A suspense account facilitates the preparation of financial statement even when the trial
balance has not tallied.

Q1. what are wasting assests?


ans 1. Wasting assets are those fixed assets which will surely lose their value because of use. eg.
Mines.

Q2. What is known as the Practical system or English system?


Ans 2. It consists of keeping various registers (or books) to record various types of transactions
and then preparing ledger accounts. in one book only one type of transactions are recorded.

Q3. What does it mean by endorsement in financial accounting language?


ans 3. The act of passing on a cheque. it means writing the order to pay the amount to someone
else,signing it and handing it over to the person named.

Q4. What is "sundry" debtors?


ans 4: Grouping all the debtors together. a collection on debtors of all sizes, misc.

Q5. What is perpetual or periodic inventory system?


ans 5: perpetual inventory is a system that keeps a running and continuous record that tracks
inventories and the cost of goods sold on a day to day basis. periodic system is one in which the
cost of goods sold is computed periodically by relying solely on physical counts without keeping
day to day records of units sold or on hand.

Q6. What is the sum of the digits method?


ans- i'll explain in class..

Q7. Why is Ledger called a principal book?


ans 7:because it contains the accounts showing the results of various transactions. a All
transactions which are first recorded in the Subsidiary Books are posted in the ledger.

Q8.Give 3 reasons why a bank might dishonour a check


ans 8: when there is not sufficient amount in the account. If the check is not dated or more than
six months old. when the cheque isnot signed properly. when the amount in words or figures
differ

1. What r floating assets - they r same as current assets


2.Wat is Cash Basis of accounting - that is a transaction is recorded only when actual cash
transfer has occurred. It is opposite of Accrual basis of accounting
3. Where may the contingent liabilities occur on the balance sheet?
footnotes of balance sheet
4.What is cost concept?
that is actual price paid for an asset is recorded and not it's market value
5.For the rectification of which errors suspense account is utilised?
Errors of Partial Ommission and Errors of Commission
6.Wat is principle book of Account?
Ledger
7.Wat do u mean by a disclaimer report?
It is a type of report given by the auditors and means that either some data is missing or the
auditors can't interpret it properly
8.Journal entry for when a trader collects Sales tax and when he deposits the same with govt
wen collects- Cash A/c to sales tax a/c
wen deposits with govt - Sales tax a/c to Cash a/c
9.Whats the differrence between a Subsidiary ledger and General Ledger
General Ledger contains details of Nominal A/c
SUbsidiary Ledger consists details of personal A/c

1.what is a reserve?
ans .the earnings of a company that remain after payment of dividends.
2. Is bad debt debited /credited?
ans.debited
3.Is provision for bad debt debited/credited?
ans.credited
4.what r wasting assets?
ans.assets which of lose their value because of use.eg.mines
5.which is the book of chronological record?
-----journal
6.The debts owing to others by the business is known as liabilities/ expenses
------liabilities
7.Goodwill is an example of what type of account?
---- intangible real A/c
8.An entry passed in the beginning of each current year is called Original entry/Opening entry?
-----Opening entry
9.When the total of debits and credits are equal, it represents debit balance/credit balance/nil
balance?
-------nil balance
10.When a cheque received from a customer is dishonoured, his account is debited/credited?
ans.debited

1) _________ inventory valuation method gives a more meaningful income statement but less
realistic
balance sheet.
LIFO
2) In ______ system of accounting inventory is considerd as nominal account.
Non Integrated
3) Whenever a cheque deposited is dishonoured, firm need to pass an adjusting entry.
True
4)Cost that cannot be directly related to the products.
Overhead
5)Two type of methods for charging depriciation-
Uniform charge methods
Declining charge depriciation methods