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Test: Meaning And Scope Of Accounting - 2 - Commerce MCQ


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15 Questions MCQ Test Accountancy Class 11 - Test: Meaning And Scope Of Accounting - 2

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Test: Meaning And Scope Of Accounting - 2 - Question 1

 Which of the following is correct?

Owner’s Equity is: 

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 1
Explanation:
The correct answer is B: (Current Asset + Fixed Asset) - (Current Liabilities + Long-term Liabilities).
Here is the explanation for why Option B is the correct answer:
- Owner's Equity is a measure of the owner's investment in the business and represents the residual interest in the assets of the business after deducting liabilities. It is also known as net assets or shareholders' equity.
- Current assets are assets that are expected to be converted into cash or consumed within one year, such as cash, accounts receivable, and inventory.
- Fixed assets are long-term assets that are not expected to be converted into cash or consumed within one year, such as property, plant, and equipment.
- Current liabilities are obligations that are expected to be settled within one year, such as accounts payable and short-term loans.
- Long-term liabilities are obligations that are not expected to be settled within one year, such as long-term loans and bonds payable.
To calculate Owner's Equity, we need to subtract liabilities from assets. Therefore, the correct formula is:
(Current Asset + Fixed Asset) - (Current Liabilities + Long-term Liabilities)
The other options provided in the question are incorrect because they either subtract assets from liabilities or subtract liabilities from assets, which would result in an incorrect calculation of Owner's Equity.
Therefore, the correct answer is B: (Current Asset + Fixed Asset) - (Current Liabilities + Long-term Liabilities).
Test: Meaning And Scope Of Accounting - 2 - Question 2

On 31st December, 2005, Ashok Ltd. purchased a machine from Mohan Ltd. for Rs. 1,75,000. This is : (year end : 31st December)

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 2

The purchase of a machine by Ashok Ltd. from Mohan Ltd. for Rs. 1,75,000 on 31st December, 2005, is both a transaction as well as an event.

A transaction is an exchange of goods or services for something of value. In this case, Ashok Ltd. exchanged Rs. 1,75,000 for a machine from Mohan Ltd., which qualifies as a transaction.

An event, on the other hand, is a happening or occurrence that has significance or consequences. The purchase of a machine by Ashok Ltd. from Mohan Ltd. on 31st December, 2005, can be considered an event as it is a significant happening that has financial implications for both companies.

Therefore, the purchase of the machine is both a transaction and an event.

Test: Meaning And Scope Of Accounting - 2 - Question 3

All of the following are functions of Accounting except

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 3

Ledger posting is a 'book-keeping' exercise whereas the others are purely accounting in nature, which are done in accordance with various accounting standards, policies, etc.

Test: Meaning And Scope Of Accounting - 2 - Question 4

Management Accounting:

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 4

Hence, the correct option is c) is a recording technique of management related transaction. Other options, such as b) is accounting for the future is not correct as management accounting is being used today to analyze the cost in a business.

Test: Meaning And Scope Of Accounting - 2 - Question 5

Financial statements users include:

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 5

The correct option is D.

Financial statements are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to understand. A government in whose jurisdiction a company is located will request financial statements in order to determine whether the business paid the appropriate amount of taxes. Shareholders will likely require financial statements to be provided, since they are the owners of the business and want to understand the performance of their investment. Vendors will require financial statements in order to decide whether it is safe to extend credit to a company.

Test: Meaning And Scope Of Accounting - 2 - Question 6

Which of the following is not a subfield of accounting?

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 6
Answer:
Introduction:
In this question, we are asked to identify which of the given options is not a subfield of accounting. Let's evaluate each option to determine the correct answer.
Explanation:
The correct answer is Book-keeping. Here's why:
- Management accounting: This is a subfield of accounting that involves the preparation and presentation of accounting information for internal use by management to aid in decision-making, budgeting, and planning.
- Cost accounting: This is a subfield of accounting that focuses on the identification, measurement, analysis, and allocation of costs associated with producing goods or services.
- Financial accounting: This is a subfield of accounting that involves the preparation and presentation of financial statements for external users, such as investors, creditors, and regulators.
- Book-keeping: While book-keeping is often considered a part of accounting, it is not a distinct subfield. Book-keeping involves the recording and organizing of financial transactions, but it does not encompass the broader aspects of accounting, such as analysis, interpretation, and reporting of financial information.
Conclusion:
In conclusion, Book-keeping is not a subfield of accounting, while Management accounting, Cost accounting, and Financial accounting are all recognized subfields within the field of accounting.
Test: Meaning And Scope Of Accounting - 2 - Question 7

The direct advantage of accounting do not include:

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 7
The direct advantages of accounting do not include:

  • Preparation of financial statements: Accounting plays a crucial role in preparing accurate and reliable financial statements, which provide a snapshot of a company's financial health and performance.

  • Competitive advantage: Accounting can provide valuable insights into a company's financial position, profitability, and efficiency, which can be used to gain a competitive edge over competitors. It helps in identifying strengths and weaknesses, enabling strategic decision-making.

  • Ascertainment of profit or loss: Accounting helps in determining the profit or loss incurred by a business during a specific period. It involves recording and analyzing various financial transactions to calculate the net income or loss generated.

  • Information to interested groups: Accounting generates financial information that is essential for various stakeholders, including investors, creditors, management, and regulatory authorities. It helps in making informed decisions, assessing financial performance, and ensuring transparency.


Therefore, the correct answer is B: Competitive advantage.


Accounting provides various direct advantages, including the preparation of financial statements, ascertainment of profit or loss, and the provision of information to interested groups. However, gaining a competitive advantage is not a direct advantage of accounting. While accounting information can be used strategically to gain a competitive edge, it is not an inherent advantage provided by the accounting process itself.

Test: Meaning And Scope Of Accounting - 2 - Question 8

On March 31, 2011 after sale of goods worth Rs. 2,000, he is left with the closing inventory of  Rs. 10,000. This is

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 8

To determine whether the situation described is an event or a transaction, we need to understand the definitions of these terms.
Event: An event is a happening or occurrence that affects the financial position of a business and can be reliably measured. It may or may not involve an exchange of goods or services.
Transaction: A transaction is an exchange or transfer of goods, services, or money between two or more parties that can be reliably measured.
In the given scenario, the following information is provided:
- On March 31, 2011, goods worth Rs. 2,000 were sold.
- The closing inventory on that date is Rs. 10,000.
Based on this information, we can analyze whether it is an event or a transaction.
Analysis:
- The sale of goods worth Rs. 2,000 is a transaction as it involves the exchange of goods for money.
- The closing inventory of Rs. 10,000 is not a transaction as there is no exchange or transfer of goods, services, or money mentioned. It is merely the remaining value of goods at the end of a period.
Conclusion:
Therefore, the situation described is a combination of an event (sale of goods) and a non-transaction (closing inventory). Hence, option C: "A transaction as well as an event" is the correct answer.
Test: Meaning And Scope Of Accounting - 2 - Question 9

Which of the following is not  an event?

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 9

Among the options provided, the ones that are classified as events in accounting are:

  1. Sale of goods for Rs.5,000
  2. Purchase of goods for Rs.8,000
  3. Rent paid Rs.2,000

These are considered events because they involve financial transactions that affect the financial position of the business. They are changes in the financial status of a business entity that can be measured in monetary terms.

  1. Closing stock of worth Rs.4,000, on the other hand, is not an event but rather a status or condition at a specific point in time. It represents the value of unsold goods at the end of an accounting period and does not by itself constitute a financial transaction or event.
Test: Meaning And Scope Of Accounting - 2 - Question 10

Net Profit or Loss will be derived at _______ stage of accounting

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 10

Summarising stage is concerned with the preparation and presentation of the classified data in a manner useful to the internal as well as external users of financial statements. This process leads to the preparation of the following financial statements. Therefore, Net Profit or Loss is derived at the summarising stage.

Test: Meaning And Scope Of Accounting - 2 - Question 11

Rs. 5,000 paid as rent of office premises in an/a _________

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 11
Explanation:
The correct answer is B: Transaction. Here's why:
1. Rent payment is a financial transaction where money is exchanged for the use of office premises.
2. A transaction refers to an exchange or transfer of goods, services, or money between two or more parties.
3. In this case, the payment of Rs. 5,000 is made to the landlord or property owner as rent for the office premises.
4. The payment of rent fulfills the obligation of the tenant to the landlord as per the terms of the rental agreement.
5. The transaction is completed when the payment is made, and the landlord acknowledges the receipt of the rent.
6. The payment of rent is a regular occurrence and is usually made on a monthly or yearly basis, depending on the terms of the rental agreement.
7. Rent payment is an essential part of running a business, as it provides a physical space for the business operations.
Therefore, the payment of Rs. 5,000 as rent for office premises is considered a transaction.
Test: Meaning And Scope Of Accounting - 2 - Question 12

Financial Statements are a part of:

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 12
Financial Statements are a part of Accounting
Financial statements are essential documents that provide information about the financial performance, position, and cash flows of a company. They are prepared by the accounting department or professionals, and they play a crucial role in assessing a company's financial health and making informed business decisions.
Here are the reasons why financial statements are a part of accounting:
1. Record Keeping:
Financial statements are prepared based on accurate and reliable financial records that are maintained through the process of accounting. Accounting involves recording, classifying, summarizing, and interpreting financial transactions and events.
2. Measurement and Analysis:
Financial statements provide a systematic and structured way to measure and analyze the financial activities of a company. They include the income statement, balance sheet, statement of cash flows, and statement of changes in equity, which help assess the profitability, liquidity, solvency, and efficiency of a business.
3. Compliance:
Financial statements are essential for regulatory compliance. They need to adhere to generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS) to ensure consistency, comparability, and transparency in financial reporting.
4. Communication:
Financial statements serve as a means of communication between a company and its stakeholders, including investors, creditors, employees, and government agencies. They provide valuable information about the financial performance and position of a company, helping stakeholders make informed decisions.
5. Decision Making:
Financial statements are crucial for decision-making purposes. They provide insights into a company's profitability, liquidity, and financial stability, allowing management to make informed decisions regarding investments, expansion, borrowing, and cost control.
In conclusion, financial statements are an integral part of accounting. They are prepared based on accurate financial records, measure and analyze financial activities, ensure compliance with accounting standards, facilitate communication with stakeholders, and support decision-making processes.
Test: Meaning And Scope Of Accounting - 2 - Question 13

Users of accounting information include

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 13
Users of Accounting Information:
There are various users of accounting information who rely on financial statements and reports to make informed decisions. These users include:
1. Trade payables/ Suppliers:
- Suppliers and trade payables need accounting information to assess the financial health and creditworthiness of a company before extending credit terms or entering into business transactions.
- They use accounting information to evaluate a company's ability to meet its financial obligations.
2. Lenders:
- Lenders, such as banks and financial institutions, use accounting information to assess the creditworthiness of a company before providing loans or credit facilities.
- They analyze financial statements and ratios to determine the company's ability to repay debt and interest.
3. Customers:
- Customers may also be interested in a company's financial information to evaluate its stability and profitability.
- They may use financial statements to assess the company's ability to deliver products or services consistently.
4. Investors:
- Investors, including shareholders and potential investors, rely on accounting information to assess the financial performance and prospects of a company.
- They use financial statements to make investment decisions and evaluate the company's profitability and growth potential.
5. Management:
- Internal users, such as managers and executives, rely on accounting information for decision-making and strategic planning.
- They use financial reports to evaluate performance, monitor budgets, and make informed business decisions.
6. Government and regulatory authorities:
- Government agencies and regulatory bodies require accounting information to enforce financial regulations and ensure compliance with accounting standards.
- They use financial statements to assess tax liabilities, monitor financial stability, and protect the interests of stakeholders.
7. Employees:
- Employees may also have an interest in accounting information, especially if they are part of an employee stock ownership plan (ESOP) or have performance-related incentives.
- They use financial statements to assess the financial health of the company and understand its overall performance.
Conclusion:
Accounting information is crucial for various stakeholders, including trade payables, lenders, customers, investors, management, government authorities, and employees. These users rely on financial statements and reports to evaluate the financial health, stability, and performance of a company before making decisions or taking actions.
Test: Meaning And Scope Of Accounting - 2 - Question 14

______ was the root of financial accounting system:

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 14

The wealthy men employed steward to manage their property; the steward in return rendered an account periodically of their stewardship. Thus 'Stewardship Accountingwas the root of financial accounting system.

Test: Meaning And Scope Of Accounting - 2 - Question 15

Purposes of an accounting system include all the following except

Detailed Solution for Test: Meaning And Scope Of Accounting - 2 - Question 15
Purposes of an accounting system include all the following except:
A: Interpret and record the effects of business transactions
- Accounting systems are designed to accurately interpret and record the effects of business transactions. This involves analyzing and documenting the financial impact of these transactions on the organization.
B: Classify the effects of transactions to facilitate the preparation of reports
- Another purpose of an accounting system is to classify the effects of transactions. This involves categorizing transactions into different accounts, such as assets, liabilities, and equity, to facilitate the preparation of financial reports.
C: Summarize and communicate information to decision-makers
- Accounting systems are essential for summarizing and communicating financial information to decision-makers. This includes preparing financial statements, such as the balance sheet, income statement, and cash flow statement, which provide crucial information for making informed decisions.
D: Dictate the specific types of business enterprise transactions that the enterprises may engage in
- The correct answer is D. Accounting systems do not dictate the specific types of business enterprise transactions that the enterprises may engage in. Instead, they focus on accurately recording, classifying, summarizing, and communicating financial information.
In conclusion, the purposes of an accounting system include interpreting and recording business transactions, classifying transaction effects, and summarizing and communicating information to decision-makers. However, accounting systems do not dictate the specific types of business enterprise transactions.
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