Question

On January 1, 2009, Madison Company had Rs60,000 of Retained Earnings. During 2009 Madison earned net income of Rs100,000 and declared and paid dividends of Rs15,000. In addition, the company received cash of Rs25,000 as an additional investment by its owners. Therefore, the ending balance in Retained Earnings at December 31, 2009 would be

Select one:

a. Rs145,000

b. Rs 90,000

c. Rs130,000

d. Rs170,000

Which of the following items would not fall under the definition of an asset?

Select one:

a. Machinery

b. Owner’s equity

c. Cash

d. Land

Which accounting concept or principle states that the transactions of a business must be recorded separately from those of its owners or other businesses?

Select one:

a. Materiality concept of accounting

b. Matching principle of accounting

c. Time period concept of accounting

d. Business or economic entity concept of accounting- Separate entity

The journal entry to record the receipt of rent received in advance requires a:

Select one:

a. Credit to Cash.

b. Debit to Cash

c. Credit to Rent Revenue.

d. Debit to Unearned Rent.

Which of the following accounts is NOT closed at the end of the accounting year?

Select one:

a. Interest receivable

b. Sales revenue

c. Depreciation expense

d. Cost of goods sold

Infosys Company issued 200,000 shares of its common stock for cash. The journal entry to record the stock issue would include

Select one:

a. A debit to Common Stock

b. A debit to Retained Earnings

c. A credit to Cash

d. A credit to Common Stock

Infosys Company issued 200,000 shares of its common stock for cash. The journal entry to record the stock issue would include

Select one:

a. A debit to Common Stock

b. A debit to Retained Earnings

c. A credit to Cash

d. A credit to Common Stock

A business has the following items in it:
- Owners equity $600,000
- Total liabilities $1,400,000

What is the value of the assets in this business?

Select one:

a. $600,000

b. $800,000

c. $1,400,000

d. $2,000,000

Revenue accounts are increased by credits

Select one:

a. Never

b. Only when they have a credit balance

c. Only when they have a debit balance

d. Always

The Profit and Loss account is also called

Select one:

a. Balance Sheet

b. Income Statement

c. Trial Balance

d. Cash Flow Statement

The elements of the accounting equation are

I.  Assets

II.  Liabilities

III. Trial Balance

IV. Capital

Select one:

a. I, II and IV

b. I, II and III

c. I, III and IV

d. II, III and IV

Answer 1

1. Retained Earnings= Beginning Retained Earnings + Net Income - Dividends

= 60000+100000-15000= $145000

Option "a" is the Answer.

Retained earnings not include additional investment by owner. It is Treated as Capital.

2. Assets are resources owned by company that have future economic value. Owner's Equity is not an asset. it is a liability nature. company owes that money to owners.

option "b" is the answer.

3. Separate entity concept says that the transactions of a business must be recorded separately from those of its owners or other businesses.

option "d" is the answer

4. Rent received in advance journal entry is as follows: debit to cash a/c, and credit to rent received in advance a/c

option "b" is the answer

5. Interest receivable is an asset account. so it will not close in the end of the year. it is carry forwrd the balance to next year. Others are expenses, it will close respective accounting year.

option "a" is the answer

6. Issue of common stock journal entry is Debit the Cash a/c and Credit common stock a/c.

option "d" is the answer

7. Accounting Equation is as follows

Assets= Owner's Equity+Liabilities

2000000= 600000+1400000

Asset= $2,000,000

option "d" is the answer

8. Always Revenue accounts are increased by credits, Because revenue account is credit nature. Debit all the expenses and credit all the revenue is the thumb rule.

option "d" is the answer

9. The profit and loss account also called income statement.

option "b" is the answer

10. Accounting equation; Assets= Capital+Liabilities.

option "a" is the answer