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All questions of Electricity companies for B Com Exam
How does the Double Account System handle the replacement of an asset in terms of its cost?- a)The cost of the new asset is fully expensed in the year of replacement.
- b)The cost of the old asset is written off, and the cost of the new asset is capitalized.
- c)The cost of the old asset remains unchanged, and the cost of the new asset is charged to revenue.
- d)The cost of the old asset is adjusted for inflation, and the cost of the new asset is charged to capital.
Correct answer is option 'C'. Can you explain this answer?
a)
The cost of the new asset is fully expensed in the year of replacement.
b)
The cost of the old asset is written off, and the cost of the new asset is capitalized.
c)
The cost of the old asset remains unchanged, and the cost of the new asset is charged to revenue.
d)
The cost of the old asset is adjusted for inflation, and the cost of the new asset is charged to capital.
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Universal Academy answered |
Under the Double Account System, the cost of the old asset remains unchanged, and the cost of the new asset is charged to the revenue account. This approach helps allocate costs accurately between capital and revenue.
What is the primary objective of creating a Contingency Reserve in an electricity company?- a)To meet expenses related to normal maintenance.
- b)To provide compensation for employees.
- c)To cover losses arising from accidents or circumstances beyond control.
- d)To finance new capital projects.
Correct answer is option 'C'. Can you explain this answer?
a)
To meet expenses related to normal maintenance.
b)
To provide compensation for employees.
c)
To cover losses arising from accidents or circumstances beyond control.
d)
To finance new capital projects.
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Universal Academy answered |
The Contingency Reserve is established to cover expenses or loss of profits arising from accidents, strikes, or other unforeseen circumstances beyond the control of the management.
Under the Double Account System, how is the replacement of an old asset handled when a new asset is acquired?- a)The old asset is written off, and the new asset is capitalized.
- b)Depreciation is charged to the asset account.
- c)The old asset remains in the books at its book value.
- d)Both old and new assets are expensed.
Correct answer is option 'C'. Can you explain this answer?
a)
The old asset is written off, and the new asset is capitalized.
b)
Depreciation is charged to the asset account.
c)
The old asset remains in the books at its book value.
d)
Both old and new assets are expensed.
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Universal Academy answered |
Under the Double Account System, the old asset continues to be recorded in the books at its book value, and the cost of replacement is allocated between capital and revenue.
Which of the following is a feature of the Double Account System?- a)Current assets and liabilities are recorded in Receipts and Expenditure on Capital Account.
- b)Revenue Account and Net Revenue Account are prepared instead of Profit and Loss Account.
- c)Depreciation is deducted from the asset's book value.
- d)Fixed assets are always recorded at their market value.
Correct answer is option 'B'. Can you explain this answer?
a)
Current assets and liabilities are recorded in Receipts and Expenditure on Capital Account.
b)
Revenue Account and Net Revenue Account are prepared instead of Profit and Loss Account.
c)
Depreciation is deducted from the asset's book value.
d)
Fixed assets are always recorded at their market value.
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Universal Academy answered |
In the Double Account System, Revenue Account and Net Revenue Account are prepared instead of the traditional Profit and Loss Account. This helps in distinguishing operating results from extraneous items.
What is the basis for determining the reasonable return for an electricity undertaking?- a)Fixed rate set by the Central Government.
- b)Income derived from investments only.
- c)Proportion of income saved on account of development rebate.
- d)Bank Rate stipulated by the Reserve Bank of India plus a percentage of the Capital Base.
Correct answer is option 'D'. Can you explain this answer?
a)
Fixed rate set by the Central Government.
b)
Income derived from investments only.
c)
Proportion of income saved on account of development rebate.
d)
Bank Rate stipulated by the Reserve Bank of India plus a percentage of the Capital Base.
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Universal Academy answered |
The reasonable return for an electricity undertaking is based on the Bank Rate stipulated by the Reserve Bank of India plus a percentage of the Capital Base, along with other specified factors.
What is the main purpose of the Double Account System for public utility undertakings?- a)To show the financial position at a particular date.
- b)To disclose the sources of capital and their applications in fixed assets.
- c)To calculate profits and losses accurately.
- d)To manage current assets and liabilities.
Correct answer is option 'B'. Can you explain this answer?
a)
To show the financial position at a particular date.
b)
To disclose the sources of capital and their applications in fixed assets.
c)
To calculate profits and losses accurately.
d)
To manage current assets and liabilities.
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Universal Academy answered |
The Double Account System is designed to present the sources of capital and how they are used in acquiring fixed assets. It focuses on showing how capital is raised and applied in different fixed assets for public utility undertakings.
Which method is used to calculate depreciation under the Compound Interest Method?- a)An allowance equal to a percentage of the original cost divided by the asset's life.
- b)An annual contribution that accumulates at compound interest until 90% of the original cost is reached.
- c)An allowance based on the current market value of the asset.
- d)An allowance that decreases linearly over the asset's life.
Correct answer is option 'B'. Can you explain this answer?
a)
An allowance equal to a percentage of the original cost divided by the asset's life.
b)
An annual contribution that accumulates at compound interest until 90% of the original cost is reached.
c)
An allowance based on the current market value of the asset.
d)
An allowance that decreases linearly over the asset's life.
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Universal Academy answered |
The Compound Interest Method of depreciation involves setting aside an annual contribution that accumulates at compound interest until an amount equal to 90% of the original cost is reached.
What is the significance of the Double Account System for public utility undertakings?- a)It focuses on calculating profits accurately.
- b)It helps determine the fair market value of fixed assets.
- c)It discloses the sources of capital and their applications in fixed assets.
- d)It provides a detailed breakdown of revenue and expenses.
Correct answer is option 'C'. Can you explain this answer?
a)
It focuses on calculating profits accurately.
b)
It helps determine the fair market value of fixed assets.
c)
It discloses the sources of capital and their applications in fixed assets.
d)
It provides a detailed breakdown of revenue and expenses.
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Universal Academy answered |
The Double Account System is significant because it discloses the sources of capital and how they are utilized in acquiring various fixed assets. It provides transparency in financial reporting for public utility undertakings.
What is the primary purpose of the General Reserve in an electricity company?- a)To cover losses arising from accidents.
- b)To provide funds for replacing fixed assets.
- c)To maintain a contingency fund for unforeseen expenses.
- d)To accumulate profits for distribution to shareholders.
Correct answer is option 'B'. Can you explain this answer?
a)
To cover losses arising from accidents.
b)
To provide funds for replacing fixed assets.
c)
To maintain a contingency fund for unforeseen expenses.
d)
To accumulate profits for distribution to shareholders.
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Universal Academy answered |
The General Reserve is created to provide funds for replacing fixed assets, ensuring that the company can maintain and improve its infrastructure over time.
What is the purpose of the Development Reserve in an electricity company?- a)To finance new capital projects.
- b)To cover unexpected maintenance expenses.
- c)To accumulate profits for distribution to shareholders.
- d)To provide compensation to employees.
Correct answer is option 'A'. Can you explain this answer?
a)
To finance new capital projects.
b)
To cover unexpected maintenance expenses.
c)
To accumulate profits for distribution to shareholders.
d)
To provide compensation to employees.
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Universal Academy answered |
The Development Reserve is established to finance new capital projects, ensuring that the company can expand and improve its operations.
Chapter doubts & questions for Electricity companies - Advanced Corporate Accounting 2025 is part of B Com exam preparation. The chapters have been prepared according to the B Com exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for B Com 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.
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Advanced Corporate Accounting
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