Question 1

The chart of accounts is designed to

Accepted Answer

The chart of accounts is designed to to meet the information needs of a company and other financial statement users.

Question 2

Select the correct statement regarding fixed costs.

Accepted Answer

The fixed cost per unit decreases when volume increases is the correct statement regarding fixed costs.

Question 3

Which of the following bonds has the greatest interest rate price risk?

Accepted Answer

A 10 year, 5% coupon bond has the greatest interest rate price risk.

Question 4

Which of the following is not a direct tax?

Accepted Answer

Direct tax is a tax directly paid to the government by the individuals or organizations on whom it is imposed. Sales Tax is paid for the sales of certain goods and services.

Question 5

Generally accepted accounting principles are

Accepted Answer

Generally Accepted Accounting Principles (GAAP) are basic accounting principles and guidelines are concepts that govern the field of accounting Accounting principles and guidelines include : * Business Entity Assumption * Accounting Period * Historical Cost Concept * Full Disclosure Principle * Cost Principle * Matching Principle * Materiality * Monetary Unit Assumption

Question 6

Financial statements are prepared in the following order.

Accepted Answer

The financial statements should be prepared in the following order: Income statement - Statement of retained earnings - Balance sheet 1. Income statement reports revenues and expenses and calculates net income or net loss for the time period. 2. Statement of retained earnings show how retained earnings changed during the period due to net income or net loss and dividends. 3. Balance sheet reports assets, liabilities, and stockholders’ equity as of the last day of the period.

Question 7

Managerial Accounting is also called

Accepted Answer

Both B & C

Question 8

What determines the value of an item?

Accepted Answer

Value is the monetary worth of something, in this case, it is an item. In option A, since it is talking about capital which is measured in monetary terms. The value of an item is determined by its quality and its age. Often antiques with good quality are sold in the market with a high value and are sometimes auctioned.

Question 9

The accounting process involves all of the following except

Accepted Answer

The three steps in the accounting process are 1. Identification, 2. Recording, and 3. Communication. Hence, analyzing and interpreting financial reports is not involved in the accounting process.

Question 10

Explain What are the issues related with Accounts receivable?

Accepted Answer

Issues related to AR 1 Invoice discrepancies / no proper documents 2 Services / goods delivered not satisfactory 3 Customer do more negotiation even your invoice as per agreed terms and conditions 4 Very Important issue if no proper follow up from your side my result you receivable to Bad Debts

Question 11

How to define Inter company Transaction in Account Receivable?

Accepted Answer

Before answering the above question let us first understand the meaning of Intercompany transactions Intercompany transactions are those transactions that takes place between two or more entities of the same group of company So the receivable of one entity would the payable of another entity All intercompany transactions are eliminated befor preparing the final Balance sheet of the group company

Question 12

How important does Accounts receivable for small business and why?

Accepted Answer

Accounts Receivables help small businesses by providing short-term liquidity Also continued sales on credit provide the much needed continuity for small businesses

Question 13

What is an accrued receivable?

Accepted Answer

An accrued receivable is either a trade receivable or a non trade receivable for which a business has earned revenue, but for which it has not yet issued an invoice to the customer You normally create an accrued receivable in either of the following scenarios: * Milestone A milestone has been reached in a contract with a customer, where you are clearly entitled to a specific, pre-defined amount, but the contract does not yet allow you to issue an invoice; or * Services The contract with the customer states that the customer will pay you for hours worked, rather than for a specific work product For example, there may be 10 hours of work that will eventually be billed at a rate of $80 per hour, so you accrue the receivable for $800 The journal entry to create an accrued receivable is a debit to an accounts receivable account, and a credit to the revenue account It may be useful to create a unique general ledger account for accrued receivables, rather than using the main trade receivables account, in order to clearly show these transactions In addition, you should set these journal entries to automatically reverse themselves in the next accounting period; you would then replace the accrual in the next period with the actual invoice (assuming that there is a billing event in the next period) If you are unable to create an invoice in the next period, then you should continue to accrue and reverse the revenue and accrued receivable in every period on a cumulative basis until you can eventually issue an invoice For example, ABC International has completed a milestone in a project to install a dam, though it is not allowed under the contract to issue an invoice more frequently than once a quarter It therefore accrues revenue and a receivable of $50,000 at the end of January The journal entry automatically reverses at the beginning of February ABC then earns another $30,000 on the next project milestone in February, but is still contractually unable to issue an invoice It therefore accrues revenue and a receivable of $80,000 in February The journal entry automatically reverses at the beginning of March ABC then earns another $70,000 on the next project milestone in March It is allowed to issue a quarterly invoice at the end of March, so it issues an invoice for $150,000 By using accruals, ABC has recognized $50,000 of revenue and receivables in January, $30,000 in February, and $70,000 in March, rather than recognizing all $150,000 in March, when it issues an invoice to the customer You should not use accrued receivables if you cannot justify to an auditor that there is a clear obligation by the customer to pay the company for the amount of the accrued receivable Otherwise, there is a presumption that the business has not yet reached the point where the customer has a clear obligation to pay If you use accrued receivables, expect auditors to pay particular attention to their justification For example, you should not accrue receivables in a case where a business is providing services under a fixed fee contract, and it earns revenue only when the entire project is complete and approved by the customer Revenue has not really been earned prior to completion, so there should be no accrual prior to that point

Question 14

How debtors play its role in Accounts receivable?

Accepted Answer

Debtors are the main role of the business he is the entire back bone of the business The goodwill of the concern is in the hands of debtors because he is the person who takes our product or raw material to the customer or manufacture so he is takes the main role in the business in finance and business development

Question 15

What are the goals of Accounts receivable?

Accepted Answer

As sales occurs every customer is not able to pay the bills that's where A/R are occurs the goal of A/R is to maintain summarize & record all the transactions related to unpaid a/c or future collections or A/R

Question 16

How is a journal entry recorded?

Accepted Answer

A journal entry is recorded accourding to the rules of debit and creditfor example goods sold for Rs 50000 for cash ----to record this -- identify the accounts involved-- iegoods A/cand Cash A/cgoods is a real account and cash is also a real accountdebit and credit rule for Real accounts is DEBIT WHAT COMES IN CREDIT WHAT GOES OUT according to this--cash is coming to the organisation and goods is leaving from the organisation--Entry for this is Cash A/c Dr 50000 to Goods A/c or Sales A/c 50000 ( For Cash Sales )

Question 17

Key Difference between Indian accounting standards and international accounting standards is:

Accepted Answer

In international accounting LIFO and extraordinary items are prohibited In international accounting, proposed dividend entry is made in the Year in which it is declared, but in Indian Accounting Standards Proposed Divided entry is passed in the year for which dividend is declared eg Dividend for 09-10 declared in AGM on 14 Sept 2010, Financial (Accounting) Year = 2009-10 In Indian Accounting entry would be passed in 2009-10 Accounts books, but in International Accounting entry would be passed in the year 2010-11 Accounts books

Question 18

What is the difference between finance and accounts? most of the companies having a different section like finance and accounts. why they aren't had only single section neither finance nor accounts?

Accepted Answer

Finance:It is the branch of economics that studies the management of money and other assetsIn simpler terms it can be defined as the commercial activity of providing funds and capitalIt addresses questions like -- what funds are required by the org & How they can be raised & How they have to be allocated etc Accounts: It is the occupation of maintaining and auditing records and preparing financial reports for a business Accounts provides quantitative information about finances It addresses issues like what amount of funds have been allocated to various activities, how the book-keeping is being done etc Both functions are distinct but complimentary to each other Finance and accounts are highly specilized and distinct areas and hence most organizations have seperate sections of finance and accounts

Question 19

What is Trail Balance?

Accepted Answer

After posting the all accounts in the Ledger a statement is prepared to showing debit and credit balancesDebit balances must be tally with the Credit side balance is called trial balance

Question 20

What are trade receivables?

Accepted Answer

Trade receivables are amounts billed by a business to its customers when it delivers goods or services to them in the ordinary course of business These billings are typically documented on formal invoices, which are summarized in an accounts receivable aging report In the general ledger, trade receivables are recorded in a separate accounts receivable account, and are classified as current assets on the balance sheet if you expect to receive payment from customers within one year To record a trade receivable, the accounting software creates a debit to the accounts receivable account and a credit to the sales account when you complete an invoice When the customer eventually pays the invoice, the accounting software records the cash receipt transaction with a debit to the cash account and a credit to the accounts receivable account Trade receivables vary from non trade receivables in that non trade receivables are for amounts owed to the company that fall outside of the normal course of business, such as employee advances or insurance reimbursements Also, most or all of the transactions passing through the main accounts receivable account are generated by the accounting system, as you create customer invoices and credit memos, whereas the transactions recording non trade receivables nearly always involve journal entries

Accounting and Finance Questions