01.

In accounting, only transactions that can be measured in monetary terms are

recorded. Out of the options you provided:

1. Selecting a business premises: This is a decision-making process and cannot

be quantified in monetary terms. So, it cannot be recorded in the books of
accounts.
2. Recruiting a manager: This is also a decision-making process and cannot be
quantified in monetary terms until the manager is hired and a salary is agreed
upon. So, it cannot be recorded in the books of accounts.
3. Deciding to purchase goods on credit: This is a decision and not an actual
transaction, so it cannot be recorded in the books of accounts.
4. Purchasing goods on credit: This is a transaction that can be measured in
monetary terms. The business receives goods and has an obligation to pay in
the future. This can be recorded in the books of accounts.

So, the correct answer is (4) Purchasing goods on credit. This is the transaction
that can be recorded in the books of account.

02. In accounting, both assets and liabilities share several characteristics. Let’s
evaluate each option:

1. Controlled by the business: Both assets and liabilities are controlled by the
business. However, control in the case of liabilities refers to the obligation to
transfer economic benefits as a result of past transactions or events.
2. Inflow of future economic benefits: This is typically associated with assets.
Liabilities generally represent an outflow of economic benefits.
3. Value should be measured in terms of money: This is a common
characteristic of both assets and liabilities. Both need to be quantifiable in
monetary terms to be recorded in the books of accounts.
4. Arose as a result of a past transaction: While this is true for both assets and
liabilities, it doesn’t encompass all assets and liabilities as some may arise due
to legal obligations or constructive obligations.

So, the common characteristic used to identify assets and liabilities in accounting
is (3) Value should be measured in terms of money. This is because every item
that is recorded in the books of accounts must have a monetary value. It allows
for a common measure for recording and reporting.

03. Cost of Sales:

This is calculated as Opening Stock + Purchases + Carriage Inward - Closing Stock.

So, the cost of sales would be Rs 40,000 (Opening Stock) + Rs 160,000 (Purchases)
+ Rs 4,000 (Carriage Inward) - Rs 14,000 (Closing Stock) = Rs 190,000. So, none
of the provided options are correct.
04. Gross Profit:

This is calculated as Sales - Cost of Sales. So, the gross profit would be Rs 320,000
(Sales) - Rs 190,000 (Cost of Sales) = Rs 130,000.

So, none of the provided options are correct.

05. Net Profit:

This is calculated as Gross Profit - Expenses. The expenses include Salaries, Rates
and Electricity, Discounts Allowed, and Bank Loan Interest Paid. So, the net profit
would be Rs 130,000 (Gross Profit) - Rs 12,000 (Salaries) - Rs 18,000 (Rates and
Electricity) - Rs 3,500 (Discounts Allowed) - Rs 2,500 (Bank Loan Interest Paid) = Rs
94,000.

So, none of the provided options are correct.

06.Accrued Bank Loan Interest:

This is calculated as Bank Loan * Bank Loan Interest Rate. So, the accrued bank
loan interest would be Rs 50,000 (Bank Loan) * 10% (Bank Loan Interest Rate) = Rs
5,000.

So, the correct option is 2) Rs 5,000.

07.Accumulated Depreciation and Net Value of Motor Vehicle:

The accumulated depreciation is calculated as Motor Vehicle at Cost *

Depreciation Rate. So, the accumulated depreciation would be Rs 200,000 (Motor
Vehicle at Cost) * 5% (Depreciation Rate) = Rs 10,000.

The net value of the motor vehicle is calculated as Motor Vehicle at Cost -
Accumulated Depreciation. So, the net value of the motor vehicle would be Rs
200,000 (Motor Vehicle at Cost) - Rs 10,000 (Accumulated Depreciation) = Rs
190,000.

So, none of the provided options are correct.

08. Total Liabilities and Total Assets:

The total liabilities include Bank Loan, Trade Payable, Bank Overdraft, and Accrued
Bank Loan Interest. The total assets include Stock (Inventory) as at 01-01-2023,
Trade Receivables, Cash in Hand, and Net Value of Motor Vehicle. So, the total
liabilities would be Rs 50,000 (Bank Loan) + Rs 10,000 (Trade Payable) + Rs 4,000
(Bank Overdraft) + Rs 5,000 (Accrued Bank Loan Interest) = Rs 69,000.

The total assets would be Rs 14,000 (Stock (Inventory) as at 01-01-2023) + Rs

30,000 (Trade Receivables) + Rs 10,000 (Cash in Hand) + Rs 190,000 (Net Value of
Motor Vehicle) = Rs 244,000.

So, none of the provided options are correct.

09.Equity:

This is calculated as Total Assets - Total Liabilities. So, the equity would be Rs
244,000 (Total Assets) - Rs 69,000 (Total Liabilities) = Rs 175,000.

So, none of the provided options are correct.

10.The suitable terms for “P”, “Q”, and “R” respectively would be Liabilities, Credit,
and Debit. This is because in accounting, an increase in liabilities is recorded as a
credit and a decrease is recorded as a debit.

So, the correct option is (1) Liabilities, Credit, and Debit.

11.The type of account that can be substituted for the above type of account “P”
would be Equity account. This is because both liabilities and equity represent the
sources of a company’s assets and they both increase with a credit entry.

So, the correct option is (4) Equity account.

12.The suitable terms for “A” and “B” respectively would be Receipt and Petty
Cash Journal. This is because a receipt is a source document for transactions
related to the receipt of cash, and petty cash transactions are recorded in the
Petty Cash Journal. So, the correct option is (2) Receipt, Petty cash journal.

13.The suitable term for “C” would be Purchase of trade goods on credit. This is
because a Purchase Invoice is a source document for purchases made on credit.
So, the correct option is (2) Purchase of trade goods on credit.

14.Discount received account is an Income account. When a business receives a

discount from a supplier for early payment, the amount is recorded as a reduction
in the expense associated with the purchase, or in a separate account that tracks
discounts. So, the correct option is (1) Income account.