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Sunday, 2 October 2016

BCA 3rd Semester: Principles of Accounting (Q and A)

Principles of Accounting 

BCA 3rd Semester: Principles of Accounting (Q and A)

(Q and A)

Q(2011): State whether the following statements are TRUE or FALSE. Also state the reasons.

The term Book-Keeping and accounting can be used interchangeably.
Repairs incurred before using a second hand car purchased recently is a capital expenditure.
Journals are prepared annually.
Manual system of accounting is better than accounting software.
Profit and Loss statement shows the gross profit.
Sales Tax collected is a liability.
It is on the basis of going concern that assets are always valued a market price.
All sources of funds have same capital.
The break even is the point of maximum profit.
LIFO method is suitable for items which are non-perishable and bulky items.

Answer:
ⓐ The term Book-Keeping and accounting can be used interchangeably.
FALSE.
The term book-keeping and accounting can't be used interchangeably. Accounting is much broader term or concept that book keeping. Book keeping is merely recording of transactions while accounting includes recording, analyzing, interpreting, reporting and summarizing results to the users.





ⓑ Repairs incurred before using a second hand car purchased recently is a capital expenditure.
TRUE
Capital expenditure is that expenditure which results in acquisition of an asset and later it can be sold and is liquidated into cash. It results in an increase in the earning capacity of a business.

ⓒ Journals are prepared annually.
TRUE
Journal are usually made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.


ⓓ Manual system of accounting is better than accounting software.
FALSE
Accounting software have high speed in processing, are accurate, reliable and hence increases productivity when compared to manual system.


ⓔ Profit and Loss statement shows the gross profit.
FALSE.
Profit and Loss statement shows net profit. It is trading account which shows gross profit.


ⓕ Sales Tax collected is a liability.
TRUE
Sales tax is to be collected from the customers and is to deposited to the government agency. Thus it is a liability.


ⓖ It is on the basis of going concern that assets are always valued a market price.
FALSE
Assets and liabilities appear in the books at cost or book value, these are not intended for sale.


ⓗ All sources of funds have same capital.
FALSE
All sources of funds may have different cost of capital.


ⓘ The break even is the point of maximum profit.
FALSE
Break even is a point of no profit no loss situation.


ⓙ LIFO method is suitable for items which are non-perishable and bulky items.
TRUE
Under LIFO system, the assumption is that the last items purchased are the items sold, meaning the more expensive items were used. The cost of goods sold is therefore relatively higher and the value of goods remaining on the balance sheet is lower since those are older items purchased at a lower price. 
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