Accounting & Financial Management

        SECTION A

1. What is the need of accounting?

2.    What is the difference between profit and loss account and Balance sheet?

3.    Discuss the concept of cost.

4.    Explain prudence convention.

5.    Difference between journal and ledger.

6.Explain types of Subsidiary books.

7. Discuss the various formats of a balance sheet.

8.    Elaborate the need of accounting standards.

SECTION B

Case study

A standard company balance sheet has three parts: assets, liabilities, and ownership equity. The main categories of assets are usually listed first, and typically in order of liquidity. Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.
Another way to look at the balance sheet equation is that total assets equals liabilities plus owner's equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's or shareholders' equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing".

Q.1 Discuss the balance sheet.

Q. 2 What does a balance sheet depict?

Q. 3 Discuss liabilities.

SECTION C

1. A "Debit" balance in Cash Book shows
 (A): Cash Sales
 (B): Cash paid to creditors
 (C): Cash expenses made
 (D): Cash paid for buying land

2. A company which uses the direct write-off method recognizes uncollectible accounts expense
 (A): As a percentage of net sales during the period
 (B): As a percentage of net credit sales during the period
 (C): As indicated by aging the accounts receivable at the end of the period
 (D): As specific accounts receivable are determined to be worthless

3. A complete set of financial statements for Hartman Company, at December 31, 1999, would include each of the following, except
 (A): Balance sheet as of December 31, 1999
 (B): Income statement for the year ended December 31, 1999
 (C): Statement of projected cash flows for 2000
 (D): Notes containing additional information that is useful in interpreting the financial statements

4. A financial Statement is
 (A): An event
 (B): Measurable in non-monetary terms
 (C): must effect the financial position of business entity
 (D): expressed in terms of either loss or profit

5. A Trial Balance is prepared to locate
 (A): Errors of principle
 (B): Errors of omission
 (C): Compensating Errors
 (D): none of these

6. A triple column cash book records
 (A): Cash, Bank, Discount
 (B): Cash, Bank, Sales
 (C): Cash, Discount, Sales
 (D): Cash, Bank, Gains

7. All of the following are characteristics of managerial accounting, except
 (A): Reports are used primarily by insiders rather than by persons outside of the business entity
 (B): Its purpose is to assist managers in planning and controlling business operations
 (C): Information must be developed in conformity with generally accepted accounting principles or with income tax regulations
 (D): Information may be tailored to assist in specific managerial decisions

8. Although accounting information is used by a wide variety of external parties, financial reporting is primarily directed toward the information needs of
 (A): Investors and creditors
 (B): Government agencies such as the Internal Revenue Service
 (C): Customers
 (D): Trade associations and labor unions

9. An artificial account that appears in "trial balance" to account for undetected errors is called
 (A): Trading Account
 (B): Rectification Account
 (C): Suspense Account
 (D): Artificial Account

10. An income statement communicates information regarding revenues and expenses
 (A): For a period of time
 (B): At a given point in time
 (C): For some point of time in the future
 (D): At the beginning of the fiscal year

11. An ordinary share dividend is:
 (A): Part of the company profits used to reward the shareholders for their investment
 (B): Interest on money lent to the company by its shareholders
 (C): An expense of running the company
 (D): The directors’ remuneration

12. Bills Receivables is
 (A): An Asset
 (B): A Liability
 (C): An Expense
 (D): Part of Equity

13. Financial Year is also called as
 (A): Accounting Year
 (B): Accounts Year
 (C): Accountability Year
 (D): Accountable Year

14. If the 'Closing Stock' is appearing in trial balance, it is shown in the
 (A): Trading Account
 (B): Profit & Loss Account
 (C): Balance Sheet
 (D): Trading Account and Balance Sheet both

15. In an Accounting Equation, Where do you show the item "Advance to the Suppliers"?
 (A): Assets
 (B): Liabilities
 (C): Equity
 (D): Vendors

16. Information is cost effective when
 (A): The information aids management in controlling costs
 (B): The information is based upon historical costs, rather than upon estimated market values
 (C): The value of the information exceeds the cost of producing it
 (D): The information is generated by a computer-based accounting system

17. Marshalling of "Balance Sheet" means
 (A): The ordering of Assets and Liabilities
 (B): The totaling of Assets and Liabilities
 (C): Assets - Liabilities
 (D): Separate heading of Fixed Assets and Long-term Liabilities

18. Outstanding Expense is an item of
 (A): Assets
 (B): Liabilities
 (C): Debtors
 (D): Investments

19. Sales are recognized as 'Income'
 (A): At the point of Sale
 (B): After the expiry of Credit period allowed to debtors
 (C): At the end of Accounting Period
 (D): after the money is collected from debtors

20. Stock can be classified as
 (A): Fixed Asset
 (B): Intangible Asset
 (C): Current Asset
 (D): Current Liability

21. The basic purpose of an accounting system is to
 (A): Develop financial statements in conformity with generally accepted accounting principles.
 (B): Provide as much useful information to decision makers as possible, regardless of cost
 (C): Record changes in the financial position of an organization by applying the concepts of double-entry accounting
 (D): Meet an organization's need for accounting information as efficiently as possible

22. The external events that involve transfer of value between two entities is known as
 (A): Transactions
 (B): Events
 (C): Divisions
 (D): Happenings

23. The financial statement which shows cash activity (receipts and disbursements) during the accounting period is called a(n)
 (A): Bank statement
 (B): Income statement
 (C): Statement of cash flows
 (D): Bank reconciliation

24. The nature of an asset is best described as
 (A): Something with physical form that is valued at cost in the accounting records
 (B): An economic resource owned by a business and expected to benefit future operations
 (C): An economic resource representing cash or the right to receive cash in the near future
 (D): Something owned by a business that has a ready market value

25. The personal expense of Proprietor are known as
 (A): Proprietary Expenses
 (B): Personal Expense
 (C): Drawings
 (D): Business Expense

26. The profitability and solvency of a business should be measured
 (A): After each transaction
 (B): At the end of Accounting Period
 (C): At the end of each month
 (D): Every Day

27. The Term "Goodwill" comes under the heading of
 (A): Liabilities
 (B): Assets
 (C): Debtors
 (D): Equity

28. When an item appears in the trial balance, it appears in final accounts
 (A): only once
 (B): twice
 (C): three times
 (D): will not appear again in final accounts

29. Which "Book" records all residual transactions?
 (A): Cash Book
 (B): Journal proper
 (C): Purchase Day Book
 (D): Sales Day book

30. Which of the following denotes "Gross Block"?
 (A): Depreciated costs of fixed Assets
 (B): Historical cost of fixed assets
 (C): Liabilities payable
 (D): Gross Profits

31. Which of the following is a part of "Petty Expenses"?
 (A): Postage Stamps purchased
 (B): Purchased Truck
 (C): Paid Carriage for goods purchased
 (D): Tools purchased

32. Which of the following is a part of Fixed Assets?
 (A): Debtors
 (B): Bills Receivables
 (C): Capital
 (D): Building

33. Which of the following is a type of "reserve"?
 (A): Losses reserve
 (B): Payment Reserves
 (C): Non-free reserves
 (D): Specific Reserves

34. Which of the following is NOT a type of Voucher
 (A): Journal Voucher
 (B): Receipt Voucher
 (C): Asset Voucher
 (D): Payment Voucher

35. Which of the following is recorded on "Credit" side of "trial Balance"?
 (A): Trade Expenses
 (B): Sales
 (C): Carriage Inward
 (D): Carriage Outward

36. Which of the following is TRUE?
 (A): Assets=Liablities+Equity
 (B): Assets=Liabilities-Equity
 (C): Assets= Liabilities-Losses
 (D): Assets=Liabilities+Profits

37. Which of the following should not be included as part of cash on the balance sheet
 (A): The amount of petty cash at year-end
 (B): Outstanding cheques at year-end
 (C): Deposits in transit at year-end
 (D): Cheques received from customers

38. Which of the following statements best describes the purpose of financial accounting in a limited liability company?
 (A): To assist in the day-to-day management of the company
 (B): To enable the business to pay the correct amount of tax.
 (C): To ensure that the business pays the correct dividend
 (D): To help the directors discharge their obligations to the shareholders

39. Which of the following statements is correct?
 (A): Accounting profit is the difference between cash receipts and cash paid in a period
 (B): Accounting profit is the total of cash sales in the year less the expenses for the period
 (C): Accounting profit is the difference between revenue income and expenses for the period
 (D): Accounting profit is the difference between revenue income and cash payments for the period

40. A Balance Sheet provides financial information
 (A): For a period of time
 (B): At a given point in time
 (C): For some point of time in the future
 (D): In the mid of the fiscal year