Accountancy MCQs
Topic Notes: Accountancy
General Description
Plato
- Biography: Ancient Greek philosopher (427–347 BCE), student of Socrates and teacher of Aristotle, founder of the Academy in Athens.
- Important Ideas:
- Theory of Forms
- Philosopher-King
- Ideal State
11
Which of the following statements is generally considered false regarding the financial performance of a profitable company?
Answer:
Retained profits at the yearend are greater than shareholders’ equity
Retained profits represent only a portion of shareholders' equity, which also includes share capital and other reserves. It is highly unlikely for retained profits to exceed the total shareholders' equity, as equity is the sum of multiple components. Other options are plausible depending on the company's specific expense structure and dividend policies.
12
Why is the balance sheet often referred to as a position statement?
Answer:
Position statement
The balance sheet is called a position statement because it provides a snapshot of a company's financial health at a specific point in time. It details the assets, liabilities, and equity, thereby revealing the entity's overall financial position to stakeholders.
13
Which financial statement provides information regarding the inflows and outflows of cash and cash equivalents during a specific period?
Answer:
Cash flow statement
The Cash Flow Statement is specifically designed to track the movement of cash and cash equivalents. It categorizes these movements into operating, investing, and financing activities, providing stakeholders with insight into the liquidity and solvency of the business entity.
14
What are the two primary methods used to calculate cash flow from operating activities?
Answer:
indirect
The two standard methods for preparing the operating activities section of the cash flow statement are the direct method and the indirect method. The direct method lists major classes of gross cash receipts and payments, while the indirect method adjusts net income for non-cash items.
15
What specific information does a Balance Sheet provide to stakeholders?
Answer:
Financial position as on a particular date
A Balance Sheet is a fundamental financial statement that acts as a snapshot of a company's financial status at a specific point in time. It details the entity's assets, liabilities, and equity, allowing stakeholders to assess the company's solvency and financial structure on that exact date, rather than over a duration of time.
16
Where is Tax Deducted at Source (TDS) typically reported within the Balance Sheet?
Answer:
Under current liabilities on the liabilities side
Tax deducted at source represents an obligation of the entity to remit funds to the government on behalf of another party. Because this creates a short-term financial obligation that must be settled, it is classified as a current liability and presented on the liabilities side of the Balance Sheet until the payment is made.
17
Which of the following items are classified as current assets?
Answer:
All of the above
Current assets are assets that a company expects to convert into cash, sell, or consume within one year or one operating cycle. Sundry Debtors represent money owed by customers, Stock is inventory held for sale, and Prepaid insurance is a payment made in advance for future services. All these meet the criteria for current assets.