In: Accounting
1. Which of the following is true if a firm has only variable expenses?
a) A 10% increase in sales will lead to no change in expenses and no change in profits
b) A 10% increase in sales will lead to no change in expenses and 10% increase in profits
c) A 10% increase in sales will lead to 10% increase in expenses and 10% change in profits
d) A 10% increase in sales will lead to 10 % change in expenses and no change in profits
2. When recording accounting transactions, revenue and expenses will ultimately be recorded in ________ on the balance sheet
a) Revenue
b)Expenses
c) Assets
d) Liabilities
e) Equity
Here you are with the question: Q1 - Option C & Q2 - Option E
Ques 1 | Which of the following is true if a firm has only variable
expenses? a) A 10% increase in sales will lead to no change in expenses and no change in profits b) A 10% increase in sales will lead to no change in expenses and 10% increase in profits c) A 10% increase in sales will lead to 10% increase in expenses and 10% change in profits d) A 10% increase in sales will lead to 10 % change in expenses and no change in profits |
Solution: | The correct answer would be Option c) A 10% increase in sales will lead to 10% increase in expenses and 10% change in profits, if the firm has only variable expenses. Variable Expenses will change as and when sales increases |
Ques 2 | 2. When recording accounting transactions, revenue and expenses
will ultimately be recorded in ________ on the balance sheet a) Revenue b)Expenses c) Assets d) Liabilities e) Equity |
Solution: | The correct answer would be Option e) Equity as all the transactions and revenue and expenses ultimately gets transferred to Shareholder Funds - Reserve & Surplus in Balance Sheet. |