Question

Which of the following gives the correct sequence of accounting process? A) Ledger, trial balance, journal, financial statements. B) Financial statements, trial balance, ledger, journal. C) Journal, ledger, trial balance, financial statements. D) Financial statements, journal, ledger, trail balance.

2. If your trial balance has a higher debit balance than credit balance, it signifies A) assets are more than liabilities. B) a profit. C) a loss. D) an error has been made.

3. The accounting principle of offsetting revenue with the expenses incurred in producing that revenue is A) realization principle. B) time period assumption. C) matching principle. D) concept of depreciation.

4. Net income is A) the excess of debits over credits. B) the increase in owners’ equity resulting from the profitable operations of the business. C) the excess of credits of debits. D) the increase of assets of a company during a year.

5. The payback method measures A) how quickly investment dollars may be recovered. B) the cash flow from an investment. C) the economic life of an investment. D) the project profitability of an investment.

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6. Which of the following terms could be used to correctly describe the wages paid to the clerk who enters customer order information into the company’s computer system? Period Cost Product Cost (i) Yes Yes (ii) Yes No (iii) No Yes (iv) No No

A) Choice (i) B) Choice (ii) C) Choice (iii) D) Choice (iv)

7. Within the relevant range, the variable cost per unit A) remains constant as activity changes. B) increases as activity increases. C) decreases as activity increases. D) can increase or decrease as the activity changes, depending on the type of variable cost.

8. Contribution margin is the excess of revenues over A) cost of goods sold. B) manufacturing cost. C) all direct costs. D) all variable costs.

9. Capital Expenditure is recorded as A) An expense. B) An asset. C) A liability. D) Income.

10. A good system of internal control will include all of the following EXCEPT A) divide responsibility for related transactions. B) separate record keeping from custody of assets. C) maintain adequate records. D) hire more staff to supervise the work.

Answer 1

PART – 1) Option C

The process of accounting starts with recording journal entries of the recorded transactions, then the journals are posted into the ledger accounts, the ledger accounts are transferred into trial balance. With the help of trial balance, financial statements are prepared.

PART – 2) Option D

The trial balance is made for checking the arithmetic accuracy of the balances posted on the trial balance. Thus, debit side should be equal to the credit side and if difference exist then it means there is some error.

PART – 3) Option C

Matching principle means that all the expenses and incomes earned by the business firm for producing revenue of the specific period.

PART – 4) Option B

Net income is the excess of the revenues produced from the operations over the expenses. It results in rise in the owner’s equity.

PART – 5) Option A

Payback method is the traditional method which is used by the business firm to know the time in which the initial investment of the project is recovered from the inflows of the project.

PART – 6) Option B

Product cost is related with the production of the product but period cost is that cost which is incurred separate of production work and necessary for routine functioning. Thus, paying wages to clerk is period cost and not product cost.

PART – 7) Option A

The per unit variable cost doesn’t change with change in activity or units produced. The variable cost changes with change in activity but its per unit cost remain intact.

PART – 8) Option D

Contribution = Sale price – Variable cost

PART – 9) Option B

Capital expenditure is called asset for the firm as the benefit of such expense is given to the firm after some years.

PART – 10) Option D

If the company hire more staff for supervising work then it will create problem in supervision as the workers need to follow command of more supervisors which may create doubling of command.