l. Multiple Choice Questions. ONLY ONE answer is correct. (1, x 20 = 20 ) 1.- limits the economic data in an accounting system to data related directly to the activities of the business. a. The cost concept c. The business entity concept b. The objective concept d. The partnership concept 2. A credit may signify a(n) a. increase in liability account c. increase in expense account b. increase in asset account d.decrease in equity account , revenues are reported in the income statement in the period in which they are 3. Under the ...............- earned. a. cash basis of accounting b. accrual basis of accounting c. adjusting process d. posting process 4. The following accounts are permanent accounts except a. wage expenses b. accounts receivable c. accumulated depreciation d.supplies 5. When there are a large number of individual accounts with a common characteristic, it is common to place them in a. creditors ledger b. subsidiary ledger c. accounts payable ledger d. accounts receivable ledger 6. The income statement in which th a. multi-step form b. single-step form c. account form 7·The objectives of control over inventory are …………… c. using proper inventory cost method e total of all expenses is deducted from the total of all revenues is termed d. report fornm a. safeguarding the inventory from damage or theft b. reporting inventory in the financial statements d. both a and b.
1. The answer is option “c” – business entity concept. This concept requires transaction relating to a business to be recorded separately from those of its owners.
2. The answer is option “a” – increase in liability account. For instance when a company buys materials on credit it will credit its accounts payable – a current liability account.
3. The answer is option “b” – accrual basis of accounting. It does not matter if cash is received or not but revenue will be recorded in the income statement.
4. The answer is option “a” – wage expenses. Wage expenses are a temporary account as they are closed in a year and are not carried forward to the next year.
5. The answer is option “b” – subsidiary ledger. A controlling account helps in representing the subsidiary ledger in the general ledger.
6. The answer is option “b” – single step income statement. It does not include several sections and sub-sections.
7. The answer is option “d” – both a and b. Control over inventory is required to not only safeguard the inventory but also to report them in the financial statements.
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