Podcast
Questions and Answers
For a sole proprietorship, which statement accurately describes the impact of owner investments, revenues, expenses, and withdrawals on equity?
For a sole proprietorship, which statement accurately describes the impact of owner investments, revenues, expenses, and withdrawals on equity?
- Additional investments and revenues increase equity, while expenses and withdrawals decrease it. (correct)
- Additional investments and revenues decrease equity, while expenses and withdrawals increase it.
- Additional investments and revenues increase equity, and expenses will also increase it.
- Additional investments decrease equity, while revenues, expenses and withdrawals increase it.
At the conclusion of an accounting period, a company's liabilities are ₹30,000 and its equity is ₹70,000. Applying the basic accounting equation, what is the total value of the company's assets?
At the conclusion of an accounting period, a company's liabilities are ₹30,000 and its equity is ₹70,000. Applying the basic accounting equation, what is the total value of the company's assets?
- ₹30,000
- ₹40,000
- ₹100,000 (correct)
- ₹70,000
During the current accounting period, if a company's assets increase by ₹35,000 and its equity increases by ₹10,000, what is the change in its liabilities?
During the current accounting period, if a company's assets increase by ₹35,000 and its equity increases by ₹10,000, what is the change in its liabilities?
- Decreased by ₹45,000
- Increased by ₹45,000
- Decreased by ₹25,000
- Increased by ₹25,000 (correct)
As an investor reviewing financial reports with concerns about inconsistencies related to a specific accounting standard within an industry, which regulatory body in India should you approach to address these concerns?
As an investor reviewing financial reports with concerns about inconsistencies related to a specific accounting standard within an industry, which regulatory body in India should you approach to address these concerns?
An India-based Multinational Corporation (MNC) with seven subsidiaries and three associated companies operating within India is mandated to follow Indian Accounting Standards (Ind AS) as per the Ministry of Corporate Affairs (MCA) guidelines. What type of financial statements is this MNC required to prepare?
An India-based Multinational Corporation (MNC) with seven subsidiaries and three associated companies operating within India is mandated to follow Indian Accounting Standards (Ind AS) as per the Ministry of Corporate Affairs (MCA) guidelines. What type of financial statements is this MNC required to prepare?
Which principle dictates that revenues are recognized only when they are earned, regardless of when cash is received?
Which principle dictates that revenues are recognized only when they are earned, regardless of when cash is received?
What is the correct sequence of key activities within the accounting function?
What is the correct sequence of key activities within the accounting function?
Which of the following parties would be considered an external user of accounting information?
Which of the following parties would be considered an external user of accounting information?
Which individual is least likely to be considered an internal user of accounting information within a company?
Which individual is least likely to be considered an internal user of accounting information within a company?
A student purchases a textbook for $150, even though they believe it's only worth $50. At what value should the textbook be recorded, and which accounting principle applies?
A student purchases a textbook for $150, even though they believe it's only worth $50. At what value should the textbook be recorded, and which accounting principle applies?
Which of the following best describes the purpose of accounting?
Which of the following best describes the purpose of accounting?
What does the fundamental accounting equation state?
What does the fundamental accounting equation state?
What is deducted from the gross (original) value of an asset to arrive at its book value?
What is deducted from the gross (original) value of an asset to arrive at its book value?
Flashcards
Assets
Assets
Resources owned by a business.
Liabilities
Liabilities
Obligations of a business to others.
Equity
Equity
The owner's stake in the business.
Expenses and Owner Withdrawals Effect of Equity
Expenses and Owner Withdrawals Effect of Equity
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ICAI
ICAI
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What is accounting?
What is accounting?
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Accounting users
Accounting users
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Accounting measurement
Accounting measurement
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Creditor's interest
Creditor's interest
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Accounting objective
Accounting objective
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Dual aspect concept
Dual aspect concept
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Revenue Recognition
Revenue Recognition
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What is book value?
What is book value?
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Study Notes
- Accounting is the process of recording, classifying, and summarizing transactions of a financial nature, and interpreting the results.
- Users of accounting information can be internal or external to the company.
- Accounting records transactions that can be expressed in monetary terms.
- Creditors are interested in knowing the solvency of the business.
- The primary objective of accounting is to maintain records of all transactions of the business.
- Every financial transaction has two aspects and is recorded in two places.
- Revenues are recognized at the moment of sale.
- Book Value = Gross (Original) value of the asset minus depreciation.
- Debtors owe an enterprise money for goods/services received on credit.
- Contingent liability arises upon the happening of an uncertain future event.
- Capital = total assets – total liabilities.
Multiple Choice Answers Explained
- The proper order for accounting activities is Identifying, Recording, and Communicating,
- Company customers are considered external users of accounting information.
- A partner in a CA firm conducting a company’s external audit isn't considered an internal user of accounting information.
- The cost amount is the accounting principle demonstrated, where the transaction is recorded at the actual cost.
- Increases in expenses and owner withdrawals will decrease equity.
- Total assets must be ₹59,000 if liabilities total ₹19,000 and equity totals ₹40,000 (Assets = Liabilities + Equity).
- Liabilities increased by ₹19,000 if assets increased by ₹24,000 and equity increased by ₹5,000.
- Institute of Chartered Accountants of India could be referred to raise financial reporting issues related to accounting standards.
- An Indian MNC with subsidiaries and associates must prepare both consolidated and standalone financials as per Ind AS guidelines.
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