1. A company purchased machinery for ₹2,00,000 on 1st April 2022. Depreciation is charged at 10% p.a. on the straight-line method. What will be the book value at the end of 3 years?
a) ₹1,40,000
b) ₹1,80,000
c) ₹1,60,000
d) ₹1,20,000
2. Which of the following is NOT an accounting convention?
a) Consistency
b) Conservatism
c) Materiality
d) Objectivity
3. A trial balance shows a difference of ₹1,000, which is placed in a suspense account. Later, it is found that a purchase of ₹1,000 was not posted to the purchase account. What is the rectification entry?
a) Debit Suspense, Credit Purchases
b) Debit Purchases, Credit Suspense
c) Debit Suspense, Credit Cash
d) Debit Cash, Credit Suspense
4. If opening stock is ₹10,000, purchases are ₹40,000, and closing stock is ₹8,000, what is the cost of goods sold?
a) ₹42,000
b) ₹38,000
c) ₹40,000
d) ₹58,000
5. Which concept ensures that expenses are matched with revenues?
a) Consistency
b) Matching
c) Materiality
d) Conservatism
Answer (1)
To find the book value of the machinery at the end of 3 years using the straight-line method of depreciation, follow these steps:
Cost of the machinery : ₹2,00,000
Depreciation per year : 10% of ₹2,00,000
Depreciation per year = 100 10 × 200 , 000 = ₹20,000
Calculate the total depreciation over 3 years:
Total depreciation = ₹20,000 × 3 = ₹60,000
Subtract the total depreciation from the initial cost to find the book value:
Book Value = ₹2,00,000 − ₹60,000 = ₹1,40,000
The correct answer is a) ₹1,40,000 .
The question asks which of the options is NOT an accounting convention. The options provided are:
Consistency
Conservatism
Materiality
Objectivity
Accounting conventions include consistency, conservatism, and materiality. Objectivity is not typically classified as an accounting convention.
The correct answer is d) Objectivity .
When a purchase of ₹1,000 was not posted to the purchase account, and the difference was placed in a suspense account, the rectification entry would involve reversing the suspense entry and correctly recording the purchase:
Debit Purchases , because purchases account should have been increased by ₹1,000.
Credit Suspense , because that account was used to balance the trial.
The correct entry is b) Debit Purchases, Credit Suspense .
To calculate the cost of goods sold (COGS), you use the formula:
COGS = Opening Stock + Purchases − Closing Stock
Opening Stock = ₹10,000
Purchases = ₹40,000
Closing Stock = ₹8,000
COGS = 10 , 000 + 40 , 000 − 8 , 000 = ₹42,000
The correct answer is a) ₹42,000 .
The concept that ensures expenses are matched with revenues is the Matching principle. This principle states that expenses should be recorded in the same accounting period as the revenues that are recognized as a result of those expenses.
The correct answer is b) Matching .
