Podcast
Questions and Answers
Which accounting concept asserts that a business will continue operating for an indefinite period?
Which accounting concept asserts that a business will continue operating for an indefinite period?
- Matching concept
- Duality concept
- Going concern concept (correct)
- Materiality concept
Which concept emphasizes the need for caution in valuing assets and income?
Which concept emphasizes the need for caution in valuing assets and income?
- Duality concept
- Going concern concept
- Verifiable objectivity concept
- Principle of conservatism (correct)
What does the duality concept refer to in accounting?
What does the duality concept refer to in accounting?
- Assuming assets always exceed liabilities
- Evaluating the financial results periodically
- Recording all transactions as either income or expense
- Every transaction has equal and opposite effects in at least two accounts (correct)
Which option best describes the verifiable objectivity concept in accounting?
Which option best describes the verifiable objectivity concept in accounting?
Which accounting concept is primarily concerned with ensuring that all relevant financial information is captured and presented?
Which accounting concept is primarily concerned with ensuring that all relevant financial information is captured and presented?
What was the total cash balance at the start of the business?
What was the total cash balance at the start of the business?
How much was the payment made to Shyam for goods purchased on credit?
How much was the payment made to Shyam for goods purchased on credit?
What amount did Mohit initially pay in cash for the goods sold on credit?
What amount did Mohit initially pay in cash for the goods sold on credit?
How much cash was withdrawn from the bank for personal use?
How much cash was withdrawn from the bank for personal use?
What was the total amount of cheque deposited into the bank from sales?
What was the total amount of cheque deposited into the bank from sales?
According to which accounting concept are all assets recorded in books at their cost price?
According to which accounting concept are all assets recorded in books at their cost price?
Which equation represents the accounting concept where Assets = Liabilities + Capital?
Which equation represents the accounting concept where Assets = Liabilities + Capital?
Which concept is used to create a provision for doubtful debts?
Which concept is used to create a provision for doubtful debts?
According to which concept are salaries and rent recognized based on the period they relate to, rather than when they are paid?
According to which concept are salaries and rent recognized based on the period they relate to, rather than when they are paid?
Which concept requires all transactions to be supported by documentary evidence?
Which concept requires all transactions to be supported by documentary evidence?
Which of the following is NOT a financial statement typically used in accounting?
Which of the following is NOT a financial statement typically used in accounting?
Which accounting concept would you associate with recognizing expenses when they occur, regardless of payment?
Which accounting concept would you associate with recognizing expenses when they occur, regardless of payment?
In accounting, what does the term 'Sundry creditors' refer to?
In accounting, what does the term 'Sundry creditors' refer to?
What is the initial debit balance as of March 31 for Gopalika?
What is the initial debit balance as of March 31 for Gopalika?
How much of the cheques deposited were actually credited by the bank?
How much of the cheques deposited were actually credited by the bank?
What amount was not presented for payment among the drawn cheques?
What amount was not presented for payment among the drawn cheques?
What was the interest charged by the bank due to overdraft?
What was the interest charged by the bank due to overdraft?
How much was the cash book understated by?
How much was the cash book understated by?
What amount was not entered in the cash book but was directly deposited by a customer?
What amount was not entered in the cash book but was directly deposited by a customer?
What was the nature of the payment made for insurance by the bank?
What was the nature of the payment made for insurance by the bank?
Which of the following transactions led to an increase in the overdraft?
Which of the following transactions led to an increase in the overdraft?
Which principle states that 'provide for all anticipated losses and expenses but do not account anticipated incomes and profit'?
Which principle states that 'provide for all anticipated losses and expenses but do not account anticipated incomes and profit'?
Which assumption of accounting states that transactions are recorded when entered into, regardless of whether any amount is exchanged?
Which assumption of accounting states that transactions are recorded when entered into, regardless of whether any amount is exchanged?
Expenses which are due but not yet paid are known as what?
Expenses which are due but not yet paid are known as what?
What will be the balance in X's account if goods worth 50,000 were sold on credit, cash received was 26,000, and goods returned were 4,000?
What will be the balance in X's account if goods worth 50,000 were sold on credit, cash received was 26,000, and goods returned were 4,000?
In a 'T' shaped account of machinery, where will depreciation be shown?
In a 'T' shaped account of machinery, where will depreciation be shown?
Debit vouchers and credit vouchers are types of which category?
Debit vouchers and credit vouchers are types of which category?
Which accounting principle ensures that a company reports all relevant financial information?
Which accounting principle ensures that a company reports all relevant financial information?
What is the primary purpose of the Matching Principle in accounting?
What is the primary purpose of the Matching Principle in accounting?
Study Notes
Accounting Concepts
- Historical Cost Concept: Assets are recorded at their acquisition cost.
- Duality Concept: Asserts that every transaction affects at least two accounts, hence Assets = Liabilities + Capital.
- Principle of Prudence: Ensures that provisions, like for doubtful debts, are made to account for anticipated losses.
- Matching Concept: Expenses are recognized in the same period as the revenues they help generate, regardless of cash payment.
- Verifiable Objectivity Concept: All transactions must have documentary evidence to support them.
- Going Concern Concept: Assumes that a business will continue to operate indefinitely unless specified otherwise.
Petty Cash Book
- A financial journal that records small cash transactions, helping to manage minor expenses efficiently.
- Advantages:
- Simplifies tracking of small cash expenditures.
- Reduces the burden on the main cashbook by separating minor transactions.
- Provides ease of referencing for petty cash expenditures during audits.
Cash Book Transactions
- Starting Balance: Commenced business with cash of 50,000.
- Open Bank Account: 45,000 deposited to open a bank account.
- Purchasing on Credit: Acquired goods on credit worth 10,000 from Shyam.
- Cheque Payment: Paid Shyam by cheque for the credit purchase.
- Sales on Credit: Sold goods to Mohit for 30,000, receiving part cash payment immediately.
- Cheque Collection: Received a customer cheque of 23,090 for sales, deposited into the bank.
- Cash Withdrawals: Withdrawn cash for office use (6,000) and personal use (5,000).
Bank Reconciliation
- Debit Balance: Reflects the cash balance at the start of the month.
- Deposits: Cheques of 19,000 deposited into the bank, only 9,400 credited.
- Outstanding Cheques: Cheques drawn but not yet presented for payment.
- Bank Charges: Interest charged by the bank and unrecorded bank transactions should be adjusted in the cash book.
Accounting Principles Assessment
- Prudence Principle: Advocates for recognizing all potential losses and not accounting for expected income.
- Accrual Assumption: Transactions are recorded when incurred, regardless of payment timing.
- Outstanding Expenses: Refers to expenses that are incurred but not yet paid.
Balances Calculations
- To find the balance for a debtor account:
- Starting with credit sales of 50,000.
- Subtract cash received (26,000) and goods returned (4,000), leading to a balance of 20,000.
- Depreciation Handling: In a T-account for machinery, depreciation is recorded on the debit side as a reduction in asset value.
Types of Vouchers
- Cash Voucher: Used for cash transactions.
- Non-Cash Voucher: Used for transactions that do not involve cash.
- Transfer Voucher: Used for transferring amounts between accounts or entities.
Miscellaneous Points
- Always provide documentary evidence for all financial transactions to ensure compliance and accuracy.
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Description
This quiz covers fundamental accounting concepts such as cash handling, stocks, debtors, creditors, and the importance of the Petty Cash Book. It also explores the advantages of using petty cash in business operations. Understanding these concepts is essential for anyone studying finance or accounting.
