What is the main purpose of the Double Account System for public utility undertakings?

To show the financial position at a particular date.

To disclose the sources of capital and their applications in fixed assets.

To calculate profits and losses accurately.

To manage current assets and liabilities.

Which of the following is a feature of the Double Account System?

Current assets and liabilities are recorded in Receipts and Expenditure on Capital Account.

Revenue Account and Net Revenue Account are prepared instead of Profit and Loss Account.

Depreciation is deducted from the asset's book value.

Fixed assets are always recorded at their market value.

What is the primary objective of creating a Contingency Reserve in an electricity company?

To meet expenses related to normal maintenance.

To provide compensation for employees.

To cover losses arising from accidents or circumstances beyond control.

To finance new capital projects.

What is the basis for determining the reasonable return for an electricity undertaking?

Fixed rate set by the Central Government.

Income derived from investments only.

Proportion of income saved on account of development rebate.

Bank Rate stipulated by the Reserve Bank of India plus a percentage of the Capital Base.

What is the primary purpose of the General Reserve in an electricity company?

To cover losses arising from accidents.

To provide funds for replacing fixed assets.

To maintain a contingency fund for unforeseen expenses.

To accumulate profits for distribution to shareholders.

Under the Double Account System, how is the replacement of an old asset handled when a new asset is acquired?

The old asset is written off, and the new asset is capitalized.

Depreciation is charged to the asset account.

The old asset remains in the books at its book value.

Both old and new assets are expensed.

Which method is used to calculate depreciation under the Compound Interest Method?

An allowance equal to a percentage of the original cost divided by the asset's life.

An annual contribution that accumulates at compound interest until 90% of the original cost is reached.

An allowance based on the current market value of the asset.

An allowance that decreases linearly over the asset's life.

How does the Double Account System handle the replacement of an asset in terms of its cost?

The cost of the new asset is fully expensed in the year of replacement.

The cost of the old asset is written off, and the cost of the new asset is capitalized.

The cost of the old asset remains unchanged, and the cost of the new asset is charged to revenue.

The cost of the old asset is adjusted for inflation, and the cost of the new asset is charged to capital.

What is the purpose of the Development Reserve in an electricity company?

To finance new capital projects.

To cover unexpected maintenance expenses.

To accumulate profits for distribution to shareholders.

To provide compensation to employees.

What is the significance of the Double Account System for public utility undertakings?

It focuses on calculating profits accurately.

It helps determine the fair market value of fixed assets.

It discloses the sources of capital and their applications in fixed assets.

It provides a detailed breakdown of revenue and expenses.

Electricity companies Free MCQ Practice Test with Solutions

	Advanced Corporate Accounting 89 videos\|52 docs\|22 tests

	Advanced Corporate Accounting 89 videos\|52 docs\|22 tests

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