Acid Test Ratio is calculated as Liquid Assets/Current Liabilities.
Deferred cost is an Asset.
A Work Sheet is a combination of Profit and Loss Account and Balance Sheet items.
Banks, for the preparation of financial statements, are governed under Banking Companies Ordinance, 1962.
Return on investment is computed as Profit x 100/Investment.
Rent of the premises constitutes variable expenses for cost allocation: False.
Sugar used in a sugarcane company is Fixed cost.
An auditor is liable under the following circumstances: Third Party Liabilities.
Agricultural income is taxable under the Income Tax Laws of Pakistan: False.
Principal and markup payment within one year constitutes long term liability for disclosure in the balance sheet of a company: False.
Ordinarily one can have the following partners in a partnership in Pakistan under the Partnership Act 1932: 20.
Working Capital finance can be termed as “Running Finance” in a limited company: True.
Income from Capital gains arising out of trading on a stock exchange in Pakistan is taxable these days: True.
Conversion Cost is calculated as Labour plus overheads.
Current Ratio can be calculated as Current Assets/Current Liabilities.
The need for keeping a record of income and expenditure in a clear and systematic manner has given rise to the subject of Bookkeeping.
If proper books of accounts are not kept in a business, the amount of profit cannot be ascertained.
The stage under which transactions are recorded chronologically in the books of accounts is called Recording.
Bookkeeping is mainly concerned with recording financial data relating to business transactions.
The term expenses and expenditure are different in nature.
When goods are given away as charity or free samples, the purchases account should be Debited.
The sale of a business asset on credit is recorded in General journal.
The discount account is a Nominal account.
The payment side of the cash book is under cost by Rs. 200 when overdraft as per bank statement is the starting point: Rs 400 will be added.
All the direct expenses are charged to Trading account.
Those liabilities which arise only on the happening of some event are called Contingent liabilities.
Marshalling of the balance sheet means the ordering of its assets and liabilities.
Commission received in advance is considered as Unearned income.
The provision for discount on creditors is often not provided in keeping with the principle of Materiality.
The permanent part of the accounting record is Trial Balance.
A working paper which is prepared by the accountant for his own convenience is called Work sheet.
Any expenditure incurred to increase the profit-earning capacity of the concern is a Capital expenditure.
Depreciation on fixed assets is an example of Revenue expenditure.
The capital receipts are shown in the balance sheet on the Liability side.
Error due to wrong allocation of expenditure between capital and revenue is regarded as Error of principle.
Purchase of machinery on account increases an asset and decreases liability.
Accounts in the income statement are known as Nominal accounts.
Financial assets appear in the balance sheet at Current cash value.
Selling marketable securities for cash results in a gain in the income statement and cash received.
Quick ratio is least important as a measure of short-term liquidity.
To offset the decline in profits in 2004, a percentage increase in net income must achieve in 2005.
Accounting is used by business, government, nonprofit organizations, and individuals.
External users of financial accounting information include Labour unions.
A fixed budget is a budget for a single level of activity.
Heavy expenditure on advertisement of a new product is a Revenue expenditure.
Subscriptions received in advance is a Liability.
At the time of admission of a new partner, goodwill raised should be written off in New profit sharing ratio.
Admitting C for 1/4 shares with a Rs. 3,000 contribution for goodwill indicates a total goodwill of Rs. 12,000.
Sales to Mustafa of Rs. 10,000 not recorded affects Sales account and Mustafa account.
Depreciation is a process of Allocation.
Loss on the sale of an asset should be written off against P & L A/C Dr and Fixed Asset Cr.
Income and expenditure account reveals Surplus or deficiency.
The work sheet is used for orderly preparation of adjustments and financial statements at the end of the accounting period.
The post-closing trial balance contains both income statement and balance sheet accounts.
The cost of goods and services used up in obtaining revenue are Expenses.
The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions is known as Responsibility accounting.
If the selling price of a good sold is Rs. 1,000 and its cost is Rs. 800, the gross profit will be Rs. 200.
The dividend declared out of retained earnings is known as Cash dividend.
The process of converting a part of the profit into reserves is known as Appropriation of profits.
In a bank reconciliation, an outstanding check is considered a Deduction from the bank balance.
The market value of shares on which dividend has not been paid is classified as Cumulative preference shares.
In the cash flow statement, cash payments to acquire fixed assets are classified as Investing activities.
According to IFRS, the entity that controls the investee but does not have a majority ownership stake is considered to have Significant influence.
The concept that accounting information should be measured and reported in the national monetary unit of the reporting entity is known as Monetary unit assumption.
The statement which reconciles the profit as per the financial statements with the cash generated from operations is the Cash flow reconciliation statement.
In the cash flow statement, interest and dividends received and paid are classified as Operating activities.
The reduction in the value of an asset due to obsolescence or wear and tear is known as Depreciation.
Current assets are assets that are expected to be converted into cash or used up within one year.
The total of assets and liabilities is always equal in the Balance sheet.
A decrease in an expense or an increase in an asset, which has not yet been recorded, will result in an Overstatement of net income.
An increase in net assets during an accounting period, excluding contributions from owners, is called Revenue.
In cost accounting, the process of allocating indirect costs to products is known as Overhead absorption.
When cash is collected from a debtor and is applied to reduce an accounts receivable, the financial statement equation remains unchanged.
The financial statement that summarizes a firm’s operating, investing, and financing activities over an accounting period is the Cash flow statement.
A company’s payment of dividends decreases both its cash balance and retained earnings.
In the statement of cash flows, the cash flows from operating activities section includes interest paid to lenders and interest received from borrowers.
The accounting equation is Assets = Liabilities + Owner’s Equity.
The sum of all debit entries must equal the sum of all credit entries in a Journal.
The most liquid form of assets is Cash.
If a company sells goods to a customer on credit, it increases both accounts receivable and revenue.
A liability that is expected to be settled within one year or the operating cycle, whichever is longer, is classified as a Current Liability.
A decrease in owner’s equity resulting from the withdrawal of assets by the owner for personal use is called a Drawing.
A measure of a firm’s ability to meet its short-term obligations is the Current Ratio.
The systematic assignment of costs to products or services is known as Cost Allocation.
The net amount of income earned by a corporation that has not been distributed to its stockholders as dividends is called Retained Earnings.
A company’s equity is calculated as Assets minus Liabilities.
A firm’s ability to meet its current obligations is assessed using the Quick Ratio.
Dividends declared but not yet paid are recorded as a Liability.
The entry to record the purchase of inventory on account includes a Credit to Accounts Payable.
A company’s total debits must always equal its total credits in a Double-Entry Accounting System.
The ratio of Net Income to Sales Revenue is known as the Profit Margin Ratio.
The financial statement that shows a company’s revenues and expenses over a specific period of time is the Income Statement.
The process of transferring information from the journal to the ledger is called Posting.
The net difference between an asset’s historical cost and its accumulated depreciation is known as the Carrying Amount.
A revenue account that is used to record reductions in the selling price of goods sold is the Sales Returns and Allowances account.
The allocation of the cost of a tangible asset over its useful life is referred to as Depreciation.
A document that requests payment for goods or services sold is called an Invoice.
The financial statement that summarizes a company’s financial position at a specific point in time is the Balance Sheet.
The difference between the cost of a fixed asset and its accumulated depreciation is known as Book Value.
An internal control procedure that involves separating employee duties so that no one person has control over all phases of a transaction is known as Segregation of Duties.
