Financial Accounting MCQ Quiz in தமிழ் - Objective Question with Answer for Financial Accounting - இலவச PDF ஐப் பதிவிறக்கவும்
Last updated on Apr 3, 2025
Latest Financial Accounting MCQ Objective Questions
Top Financial Accounting MCQ Objective Questions
Financial Accounting Question 1:
Which of the following is not a method of calculating the value of goodwill in a partnership firm?
Answer (Detailed Solution Below)
Financial Accounting Question 1 Detailed Solution
The correct answer is - None of the above
Key Points
- Capitalization of Average Profits
- This method calculates goodwill by capitalizing the average profits of the firm.
- The formula used is: Goodwill = (Average Profits × 100 / Normal Rate of Return) - Capital Employed.
- This approach is based on the assumption that the firm’s value is derived from its ability to generate profits.
- Super Profits Method
- This method calculates goodwill based on the excess of expected profits over normal profits.
- The formula used is: Goodwill = Super Profits × Number of Years Purchase.
- Super Profits are calculated as: Super Profits = Average Profits - Normal Profits, where Normal Profits = Capital Employed × Normal Rate of Return / 100.
- Capitalization of Super Profits
- This method calculates goodwill by capitalizing the super profits of the firm.
- The formula used is: Goodwill = Super Profits × 100 / Normal Rate of Return.
- This approach is used when the firm is earning profits above the normal expected return.
Additional Information
- More than one of the above
- This option would be correct if more than one of the methods listed were not methods of calculating goodwill. However, all the methods listed are valid methods.
- None of the above
- This option is correct because all the methods listed (Capitalization of Average Profits, Super Profits Method, Capitalization of Super Profits) are indeed recognized methods for calculating the value of goodwill in a partnership firm.
Financial Accounting Question 2:
The accounting principle which states that the same accounting treatment should be given to similar items is known as:
Answer (Detailed Solution Below)
Financial Accounting Question 2 Detailed Solution
The correct answer is - Consistency Principle
Key Points
- Consistency Principle
- The Consistency Principle is an accounting principle that requires businesses to use the same accounting methods and procedures from period to period.
- This principle ensures comparability of financial statements over different periods, making it easier for users to understand and analyze financial performance.
- Consistency helps in maintaining the reliability of financial reporting and reduces the possibility of errors or manipulation in accounting.
- If there is a change in accounting methods, the reason and impact of such a change must be clearly disclosed in the financial statements.
Additional Information
- Full Disclosure Principle
- This principle requires that all material and relevant information should be disclosed in the financial statements.
- The aim is to ensure that users of financial statements are not misled and have a complete understanding of the financial position and performance of the entity.
- Materiality Principle
- The Materiality Principle states that all significant items, which could influence the decision-making process of users, should be reported in financial statements.
- Insignificant items can be disregarded, and their omission will not mislead users of the financial statements.
Financial Accounting Question 3:
Which of the following pairs of items would appear on the same side of the trial balance?
Answer (Detailed Solution Below)
Financial Accounting Question 3 Detailed Solution
Financial Accounting Question 4:
Answer (Detailed Solution Below)
Financial Accounting Question 4 Detailed Solution
Financial Accounting Question 5:
Comprehension:
Cedar Co is a trading entity that commenced operations on 1 January 20X4. The accountant is in the process of finalizing the financial statements for the year ended 31 December 20X4.
Information provided:
The following information relates to inventory movements for Product X during the year ended 31 December 20X4:
-
1 January 20X4: Opening inventory - 200 units at a cost of $12.00 per unit.
-
15 March 20X4: Purchases - 500 units at a cost of $13.50 per unit.
-
10 May 20X4: Sales - 400 units at a selling price of $20.00 per unit.
-
20 July 20X4: Purchases - 300 units at a cost of $14.00 per unit.
-
5 September 20X4: Sales - 350 units at a selling price of $22.00 per unit.
-
12 November 20X4: Purchases - 400 units at a cost of $13.00 per unit.
During the year, Cedar Co identified that 50 units of Product X, purchased on 20 July 20X4, were damaged in transit. These units could be sold for $10.00 each if an additional $2.00 per unit was spent on minor repairs. The remaining undamaged units are expected to sell at their usual selling price.
Cedar Co typically uses the First-In, First-Out (FIFO) method for valuing its inventory. However, the accountant is also considering the weighted average cost method for comparative purposes.
Task 4
On 1 January 20X4, Cedar Co acquired a new delivery van for $35,000. The van has an estimated useful life of 5 years and a residual value of $5,000. Cedar Co uses the straight-line method for depreciation. On 31 December 20X4, it was discovered that a minor repair to the van costing $200 had been incorrectly debited to the motor vehicles cost account instead of the repairs expense account.
(b) State the journal entry required to correct the error regarding the minor repair.
Answer (Detailed Solution Below)
Financial Accounting Question 5 Detailed Solution
The correct option is option 1
Additional Information:
-
Debit Repairs Expense: The repair was a revenue expenditure (expense) and should increase the repairs expense. Since it was incorrectly debited to the asset account, this entry recognizes the expense.
-
Credit Motor Vehicles Cost: The repair cost was incorrectly added to the asset's cost. This entry removes the incorrect capitalization from the Motor Vehicles Cost account.
Financial Accounting Question 6:
Comprehension:
Cedar Co is a trading entity that commenced operations on 1 January 20X4. The accountant is in the process of finalizing the financial statements for the year ended 31 December 20X4.
Information provided:
The following information relates to inventory movements for Product X during the year ended 31 December 20X4:
-
1 January 20X4: Opening inventory - 200 units at a cost of $12.00 per unit.
-
15 March 20X4: Purchases - 500 units at a cost of $13.50 per unit.
-
10 May 20X4: Sales - 400 units at a selling price of $20.00 per unit.
-
20 July 20X4: Purchases - 300 units at a cost of $14.00 per unit.
-
5 September 20X4: Sales - 350 units at a selling price of $22.00 per unit.
-
12 November 20X4: Purchases - 400 units at a cost of $13.00 per unit.
During the year, Cedar Co identified that 50 units of Product X, purchased on 20 July 20X4, were damaged in transit. These units could be sold for $10.00 each if an additional $2.00 per unit was spent on minor repairs. The remaining undamaged units are expected to sell at their usual selling price.
Cedar Co typically uses the First-In, First-Out (FIFO) method for valuing its inventory. However, the accountant is also considering the weighted average cost method for comparative purposes.
Task 4
On 1 January 20X4, Cedar Co acquired a new delivery van for $35,000. The van has an estimated useful life of 5 years and a residual value of $5,000. Cedar Co uses the straight-line method for depreciation. On 31 December 20X4, it was discovered that a minor repair to the van costing $200 had been incorrectly debited to the motor vehicles cost account instead of the repairs expense account.
(a) What amount should be recognized as depreciation for the year ended 31 December 20X4?
Answer (Detailed Solution Below) 6000
Financial Accounting Question 6 Detailed Solution
(a) Depreciation for the year ended 31 December 20X4:
-
Depreciable amount = Cost - Residual Value = $35,000 - $5,000 = $30,000
-
Annual depreciation = Depreciable amount / Useful life = $30,000 / 5 years =
$6,000
Financial Accounting Question 7:
Comprehension:
Cedar Co is a trading entity that commenced operations on 1 January 20X4. The accountant is in the process of finalizing the financial statements for the year ended 31 December 20X4.
Information provided:
The following information relates to inventory movements for Product X during the year ended 31 December 20X4:
-
1 January 20X4: Opening inventory - 200 units at a cost of $12.00 per unit.
-
15 March 20X4: Purchases - 500 units at a cost of $13.50 per unit.
-
10 May 20X4: Sales - 400 units at a selling price of $20.00 per unit.
-
20 July 20X4: Purchases - 300 units at a cost of $14.00 per unit.
-
5 September 20X4: Sales - 350 units at a selling price of $22.00 per unit.
-
12 November 20X4: Purchases - 400 units at a cost of $13.00 per unit.
During the year, Cedar Co identified that 50 units of Product X, purchased on 20 July 20X4, were damaged in transit. These units could be sold for $10.00 each if an additional $2.00 per unit was spent on minor repairs. The remaining undamaged units are expected to sell at their usual selling price.
Cedar Co typically uses the First-In, First-Out (FIFO) method for valuing its inventory. However, the accountant is also considering the weighted average cost method for comparative purposes.
Task 3
Which of the following statements is TRUE regarding the accounting for the 50 damaged units of Product X and the general impact of inventory valuation methods during a period of rising prices?
Answer (Detailed Solution Below)
Financial Accounting Question 7 Detailed Solution
The correct option is option 2
Additional Information:
Accounting for Damaged Units (IAS 2):
* IAS 2 Inventories requires that inventory be valued at the lower of cost and net realisable value (NRV).
* Cost of 50 damaged units (from 20 July purchase): 50 units * $14.00 = $700.
* Net Realisable Value (NRV) of damaged units: (Selling price $10.00 - Repair cost $2.00) * 50 units = $8.00 * 50 = $400.
* The lower of cost ($700) and NRV ($400) is $400. Therefore, the units should be recognised at $8.00 per unit (i.e. $400/50 units). The write-down of $300 ($700-$400) is recognized as an expense in the Statement of Profit or Loss.
2. Impact of Inventory Valuation Methods (Rising Prices):
* FIFO (First-In, First-Out): In a period of rising prices, FIFO assumes that the oldest (cheaper) inventory is sold first. This means that the cost of sales will be lower, and consequently, the reported profit will be higher. The closing inventory will consist of the most recently purchased (more expensive) items, leading to a higher closing inventory value and thus higher total assets.
* Weighted Average Cost (AVCO): In a period of rising prices, AVCO uses an average cost that is higher than the older costs assumed by FIFO. This results in a higher cost of sales and lower reported profit, and a lower closing inventory value and lower total assets, compared to FIFO.
Combining the two parts:
The 50 damaged units are valued at their NRV of $8.00 per unit.
In a period of rising prices, FIFO results in higher reported profit and higher total assets.
Incorrect Options Explanation:
1 & 3: These options incorrectly state that the damaged units should be recognized at cost. IAS 2 requires the lower of cost and NRV.
1 & 4: These options incorrectly state that FIFO results in lower profit and lower assets in rising prices. FIFO leads to higher profit and assets in rising price environments because older, cheaper inventory is assumed sold first.
Financial Accounting Question 8:
Comprehension:
Cedar Co is a trading entity that commenced operations on 1 January 20X4. The accountant is in the process of finalizing the financial statements for the year ended 31 December 20X4.
Information provided:
The following information relates to inventory movements for Product X during the year ended 31 December 20X4:
-
1 January 20X4: Opening inventory - 200 units at a cost of $12.00 per unit.
-
15 March 20X4: Purchases - 500 units at a cost of $13.50 per unit.
-
10 May 20X4: Sales - 400 units at a selling price of $20.00 per unit.
-
20 July 20X4: Purchases - 300 units at a cost of $14.00 per unit.
-
5 September 20X4: Sales - 350 units at a selling price of $22.00 per unit.
-
12 November 20X4: Purchases - 400 units at a cost of $13.00 per unit.
During the year, Cedar Co identified that 50 units of Product X, purchased on 20 July 20X4, were damaged in transit. These units could be sold for $10.00 each if an additional $2.00 per unit was spent on minor repairs. The remaining undamaged units are expected to sell at their usual selling price.
Cedar Co typically uses the First-In, First-Out (FIFO) method for valuing its inventory. However, the accountant is also considering the weighted average cost method for comparative purposes.
Task 2 d)
What is the correct Gross profit for Cedar Co's Statement of Profit or Loss for the year ended 31 December 20X4, when applying the periodic weighted average cost method reflecting all necessary inventory adjustments?
Answer (Detailed Solution Below) 5500
Financial Accounting Question 8 Detailed Solution
Gross Profit (Periodic Weighted Average Cost Method):
-
Sales Revenue: $15,700
-
Cost of Sales: ($10,200)
-
Gross Profit (Periodic AVCO) = $15,700 - $10,200 = $5,500
Financial Accounting Question 9:
Comprehension:
Cedar Co is a trading entity that commenced operations on 1 January 20X4. The accountant is in the process of finalizing the financial statements for the year ended 31 December 20X4.
Information provided:
The following information relates to inventory movements for Product X during the year ended 31 December 20X4:
-
1 January 20X4: Opening inventory - 200 units at a cost of $12.00 per unit.
-
15 March 20X4: Purchases - 500 units at a cost of $13.50 per unit.
-
10 May 20X4: Sales - 400 units at a selling price of $20.00 per unit.
-
20 July 20X4: Purchases - 300 units at a cost of $14.00 per unit.
-
5 September 20X4: Sales - 350 units at a selling price of $22.00 per unit.
-
12 November 20X4: Purchases - 400 units at a cost of $13.00 per unit.
During the year, Cedar Co identified that 50 units of Product X, purchased on 20 July 20X4, were damaged in transit. These units could be sold for $10.00 each if an additional $2.00 per unit was spent on minor repairs. The remaining undamaged units are expected to sell at their usual selling price.
Cedar Co typically uses the First-In, First-Out (FIFO) method for valuing its inventory. However, the accountant is also considering the weighted average cost method for comparative purposes.
Task 2 c)
What is the correct Cost of Sales for Cedar Co's Statement of Profit or Loss for the year ended 31 December 20X4, when applying the periodic weighted average cost method reflecting all necessary inventory adjustments?
Answer (Detailed Solution Below) 10200
Financial Accounting Question 9 Detailed Solution
Cost of Sales:
-
Opening Inventory: $2,400
-
Purchases: $16,150
-
Goods Available for Sale: $18,550
-
Less: Closing Inventory (calculated in Task 1b): ($8,350)
-
Cost of Sales (Periodic AVCO) = $18,550 - $8,350 = $10,200
Financial Accounting Question 10:
Comprehension:
Cedar Co is a trading entity that commenced operations on 1 January 20X4. The accountant is in the process of finalizing the financial statements for the year ended 31 December 20X4.
Information provided:
The following information relates to inventory movements for Product X during the year ended 31 December 20X4:
-
1 January 20X4: Opening inventory - 200 units at a cost of $12.00 per unit.
-
15 March 20X4: Purchases - 500 units at a cost of $13.50 per unit.
-
10 May 20X4: Sales - 400 units at a selling price of $20.00 per unit.
-
20 July 20X4: Purchases - 300 units at a cost of $14.00 per unit.
-
5 September 20X4: Sales - 350 units at a selling price of $22.00 per unit.
-
12 November 20X4: Purchases - 400 units at a cost of $13.00 per unit.
During the year, Cedar Co identified that 50 units of Product X, purchased on 20 July 20X4, were damaged in transit. These units could be sold for $10.00 each if an additional $2.00 per unit was spent on minor repairs. The remaining undamaged units are expected to sell at their usual selling price.
Cedar Co typically uses the First-In, First-Out (FIFO) method for valuing its inventory. However, the accountant is also considering the weighted average cost method for comparative purposes.
Task 2 b)
What is the correct Gross Profit for Cedar Co's Statement of Profit or Loss for the year ended 31 December 20X4, when applying the FIFO method reflecting all necessary inventory adjustments
Answer (Detailed Solution Below) 5550
Financial Accounting Question 10 Detailed Solution
Gross Profit (FIFO Method):
-
Sales Revenue: $15,700
-
Cost of Sales: ($10,150)
-
Gross Profit (FIFO) = $15,700 - $10,150 = $5,550