Introduction to Financial Accounting

        SECTION A

1. What is the need of accounting?

2.    What is the difference between profit and loss account and Balance sheet?

3.    Discuss the concept of cost.

4.    Explain prudence convention.

5.    Difference between journal and ledger.

6.Explain types of Subsidiary books.

7. Discuss the various formats of a balance sheet.

8.    Elaborate the need of accounting standards.

SECTION B

Case study

A standard company balance sheet has three parts: assets, liabilities, and ownership equity. The main categories of assets are usually listed first, and typically in order of liquidity. Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.
Another way to look at the balance sheet equation is that total assets equals liabilities plus owner's equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's or shareholders' equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing".

1. What is the use of position statement in the business?

2. What are the techniques of financial statement analysis?

3. Briefly explain the classification of assets.

Q.4 Discuss the balance sheet.

Q. 5 What does a balance sheet depict?

Q. 6 Discuss liabilities.

SECTION C
Question 1
The external events that involve transfer of value between two entities is known as
  Transactions 
  Events 
  Divisions 
  Happenings 
 
Question 2
Which of the following is TRUE?
  Assets=Liablities+Equity 
  Assets=Liabilities-Equity 
  Assets= Liabilities-Losses 
  Assets=Liabilities+Profits 
 
Question 3
The personal expense of Proprietor are known as
  Proprietary Expenses 
  Personal Expense 
  Drawings 
  Business Expense 
 
Question 4
"Which ""Book"" records all residual transactions?"
  Cash Book 
  Journal proper 
  Purchase Day Book 
  Sales Day book 
 
Question 5
"A ""Debit"" balance in Cash Book shows"
  Cash Sales 
  Cash paid to creditors 
  Cash expenses made 
  Cash paid for buying land 
 
Question 6
"Which of the following is a type of ""reserve""?"
  Losses reserve 
  Payment Reserves 
  Non-free reserves 
  Specific Reserves 
 
Question 7
"Which of the following is a part of ""Petty Expenses""?"
  Postage Stamps purchased 
  Purchased Truck 
  Paid Carriage for goods purchased 
  Tools purchased 
 
Question 8
"Which of the following is recorded on ""Credit"" side of ""trial Balance""?"
  Trade Expenses 
  Sales 
  Carriage Inward 
  Carriage Outward 
 
Question 9
DRR refers to
  Debenture Rate Reserve 
  Debtors Rate Reserve 
  Dividend Rates Reserve 
  Debentive Redemption Reserve 
 
Question 10
A Trial Balance is prepared to locate
  Errors of principle 
  Errors of omission 
  Compensating Errors 
  none of these 
 
Question 11
Stock can be classified as
  Fixed Asset 
  Intangible Asset 
  Current Asset 
  Current Liability 
 
Question 12
Bills Receivables is
  An Asset 
  A Liability 
  An Expense 
  Part of Equity 
 
Question 13
The basic purpose of an acounting system is to
  Develop financial statements in conformity with generally accepted accounting principles.
  "Provide as much useful information to decision makers as possible, regardless of cost"
  Record changes in the financial position of an organization by applying the concepts of double-entry accounting
  Meet an organization's need for accounting information as efficiently as possible
 
Question 14
Information is cost effective when
  The information aids management in controlling costs 
  "The information is based upon historical costs, rather than upon estimated market values"
  The value of the information exceeds the cost of producing it 
  The information is generated by a computer-based accounting system 
 
Question 15
"A complete set of financial statements for Hartman Company, at December 31, 1999, would include each of the following, except"
  "Balance sheet as of December 31, 1999"
  "Income statement for the year ended December 31, 1999"
  Statement of projected cash flows for 2000 
  Notes containing additional information that is useful in interpreting the financial statements
 
Question 16
"An artificial account that appears in ""trial balance"" to account for undetected errors is called"
  Trading Account 
  Rectification Account 
  Suspense Account 
  Artificial Account 
 
Question 17
An income statement communicates information regarding revenues and expenses
  For a period of time 
  At a given point in time 
  For some point of time in the future 
  At the beginning of the fiscal year 
 
Question 18
Which of the following is a part of Fixed Assets?
  Debtors 
  Bills Receivables 
  Capital 
  Building 
 
Question 19
"Although accounting information is used by a wide variety of external parties, financial reporting is primarily directed toward the information needs of"
  Investors and creditors 
  Government agencies such as the Internal Revenue Service 
  Customers 
  Trade associations and labor unions 
 
Question 20
The financial statement which shows cash activity (receipts and disbursements) during the accounting period is called a(n)
  Bank statement 
  Income statement 
  Statement of cash flows 
  Bank reconciliation 
 
Question 21
A company which uses the direct write-off method recognizes uncollectible accounts expense
  As a percentage of net sales during the period 
  As a percentage of net credit sales during the period 
  As indicated by aging the accounts receivable at the end of the period 
  As specific accounts receivable are determined to be worthless 
 
Question 22
A triple column cash book records
  "Cash, Bank, Discount"
  "Cash, Bank, Sales"
  "Cash, Discount, Sales"
  "Cash, Bank, Gains"
 
Question 23
"Which of the following denotes ""Gross Block""?"
  Depreciated costs of fixed Assets 
  Historical cost of fixed assets 
  Liabilities payable 
  Gross Profits 
 
Question 24
"All of the following are characteristics of managerial accounting, except"
  Reports are used primarily by insiders rather than by persons outside of the business entity
  Its purpose is to assist managers in planning and controlling business operations
  Information must be developed in conformity with generally accepted accounting principles or with income tax regulations
  Information may be tailored to assist in specific managerial decisions 
 
Question 25
Which of the following statements is correct?
  Accounting profit is the difference between cash receipts and cash paid in a period
  Accounting profit is the total of cash sales in the year less the expenses for the period
  Accounting profit is the difference between revenue income and expenses for the period
  Accounting profit is the difference between revenue income and cash payments for the period
 
Question 26
Which of the following is NOT a type of Voucher
  Journal Voucher 
  Receipt Voucher 
  Asset Voucher 
  Payment Voucher 
 
Question 27
An ordinary share dividend is:
  Part of the company profits used to reward the shareholders for their investment
  Interest on money lent to the company by its shareholders 
  An expense of running the company 
  The directors remuneration
 
Question 28
"When an item appears in the trial balance, it appears in final accounts"
  only once 
  twice 
  three times 
  will not appear again in final accounts 
 
Question 29
Outstanding Expense is an item of
  Assets 
  Liabilities 
  Debtors 
  Investments 
 
Question 30
"Marshalling of ""Balance Sheet"" means"
  The ordering of Assets and Liabilities 
  The totaling of Assets and Liabilities 
  Assets - Liabilities 
  Separate heading of Fixed Assets and Long-term Liabilities 
 
Question 31
The profitability and solvency of a business should be measured
  After each transaction 
  At the end of Accounting Period 
  At the end of each month 
  Every Day 
 
Question 32
Sales are recognized as'Income'
  At the point of Sale 
  After the expiry of Credit period allowed to debtors 
  At the end of Accounting Period 
  after the money is collected from debtors 
 
Question 33
"The Term ""Goodwill"" comes under the heading of"
  Liabilities 
  Assets 
  Debtors 
  Equity 
 
Question 34
Financial Year is also called as
  Accounting Year 
  Accounts Year 
  Accountability Year 
  Accountable Year 
 
Question 35
The nature of an asset is best described as
  Something with physical form that is valued at cost in the accounting records
  An economic resource owned by a business and expected to benefit future operations
  An economic resource representing cash or the right to receive cash in the near future
  Something owned by a business that has a ready market value 
 
Question 36
Which of the following statements best describes the purpose of financial accounting in a limited liability company?
  To assist in the day-to-day management of the company 
  To enable the business to pay the correct amount of tax. 
  To ensure that the business pays the correct dividend 
  To help the directors discharge their obligations to the shareholders 
 
Question 37
Which of the following should not be included as part of cash on the balance sheet
  The amount of petty cash at year-end 
  Outstanding cheques at year-end 
  Deposits in transit at year-end 
  Cheques received from customers 
 
Question 38
"If the 'Closing Stock' is appearing in trial balance, it is shown in the"
  Trading Account 
  Profit & Loss Account 
  Balance Sheet 
  Trading Account and Balance Sheet both 
 
Question 39
"In an Accounting Equation, Where do you show the item ""Advance to the Suppliers""?"
  Assets 
  Liabilities 
  Equity 
  Vendors 
 
Question 40
A financial Statement is
  An event 
  Measurable in non-monetary terms 
  must effect the financial position of business entity 
  expressed in terms of either loss or profit