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CA Foundation Exam  >  CA Foundation Tests  >  Principles and Practice of Accounting  >  Test: Final Accounts of Non-Manufacturing Entities-1 - CA Foundation MCQ

Test: Final Accounts of Non-Manufacturing Entities-1 - CA Foundation MCQ


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15 Questions MCQ Test Principles and Practice of Accounting - Test: Final Accounts of Non-Manufacturing Entities-1

Test: Final Accounts of Non-Manufacturing Entities-1 for CA Foundation 2024 is part of Principles and Practice of Accounting preparation. The Test: Final Accounts of Non-Manufacturing Entities-1 questions and answers have been prepared according to the CA Foundation exam syllabus.The Test: Final Accounts of Non-Manufacturing Entities-1 MCQs are made for CA Foundation 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Final Accounts of Non-Manufacturing Entities-1 below.
Solutions of Test: Final Accounts of Non-Manufacturing Entities-1 questions in English are available as part of our Principles and Practice of Accounting for CA Foundation & Test: Final Accounts of Non-Manufacturing Entities-1 solutions in Hindi for Principles and Practice of Accounting course. Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free. Attempt Test: Final Accounts of Non-Manufacturing Entities-1 | 15 questions in 15 minutes | Mock test for CA Foundation preparation | Free important questions MCQ to study Principles and Practice of Accounting for CA Foundation Exam | Download free PDF with solutions
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 1
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What is the primary purpose of preparing final accounts for a sole proprietorship?

Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 1
The final accounts of a sole proprietorship are prepared to assess the profitability and financial position of the business. This includes the preparation of an income statement and a balance sheet that reflect the business's performance and financial status at the end of the accounting period.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 2
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Which of the following statements is true regarding non-manufacturing entities?

Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 2
Non-manufacturing entities are involved in the purchase and sale of goods without changing their form or use. They sell goods in their original form, unlike manufacturing entities that process goods before selling.
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Test: Final Accounts of Non-Manufacturing Entities-1 - Question 3
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What does the Trading Account of a non-manufacturing business entity primarily show?

Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 3
The Trading Account of a non-manufacturing business entity shows the gross profit or gross loss, which is the difference between the sales revenue and the cost of goods sold.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 4
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Which of the following is not a part of the Income Statement for a non-manufacturing concern?
Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 4
The Balance Sheet is not a part of the Income Statement. The Income Statement consists of the Trading account and the Profit and Loss account, which show the performance of the business, whereas the Balance Sheet shows the financial position.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 5
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Outstanding salaries at the end of the accounting period should be:
Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 5
Outstanding salaries are added to the salaries expense in the Profit and Loss Account and shown as a liability in the Balance Sheet. This follows the accrual basis of accounting, where expenses are recognized when incurred, not when paid.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 6
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What is the Matching Principle in accounting?
Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 6
The Matching Principle in accounting states that expenses should be matched with the revenues they helped generate. This ensures that the income statement reflects the true profit or loss for the period.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 7
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Depreciation is accounted for in the financial statements by:
Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 7
Depreciation is an expense and is debited to the Profit and Loss Account. It represents the allocation of the cost of a fixed asset over its useful life.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 8
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Which of the following would be considered a capital receipt?
Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 8
Capital receipts are proceeds from the sale of fixed assets or additional investments by owners. The sale of old machinery would be considered a capital receipt as it is related to a fixed asset.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 9
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Income received in advance is shown on which side of the Balance Sheet?
Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 9
Income received in advance is a liability because it represents revenue that has been received but not yet earned. It is an obligation to provide goods or services in the future.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 10
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The concept that requires recording expenses and related revenues in the same accounting period is known as:
Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 10
The Matching Principle requires that expenses be recorded in the same accounting period as the revenues they help to generate, ensuring that each period's net income or loss reflects the actual economic activity.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 11
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What is the formula to calculate the cost of goods sold (COGS)?
Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 11
The cost of goods sold is calculated by adding the opening stock and purchases together and then subtracting the closing stock. Direct expenses are not subtracted in this formula as they are already included in the cost of purchases.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 12
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If the credit side of the Trading Account is greater than the debit side, what does it indicate?
Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 12
If the credit side (which includes sales and closing inventory) of the Trading Account exceeds the debit side (which includes opening stock, purchases, and direct expenses), it indicates a gross profit.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 13
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What is the treatment of sales returns in the Trading Account?
Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 13
Sales returns are deducted from the total sales on the credit side of the Trading Account to reflect the net sales.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 14
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What does the carriage inwards cost represent in the Trading Account?
Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 14
Carriage inwards refers to the cost incurred to bring the materials to the firm's location and make them available for use, essentially the cost of transporting raw materials to the place where they are needed for production or sale.
Test: Final Accounts of Non-Manufacturing Entities-1 - Question 15
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Which of the following is true regarding the valuation of closing inventory?
Detailed Solution for Test: Final Accounts of Non-Manufacturing Entities-1 - Question 15
Closing inventory is valued at cost or net realisable value, whichever is lower, to ensure that the inventory is not overstated on the financial statements.
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