Accounting - Practice Test

[#741] Intrinsic value of a share is given by

(A) $$frac{{{ ext{Total net assets}}}}{{{ ext{Number of shares}}}}$$

(B) $$frac{{{ ext{Total assets}}}}{{{ ext{Number of shares}}}}$$

(C) $$frac{{{ ext{Share capital}}}}{{{ ext{Number of shares}}}}$$

(D) $$frac{{{ ext{Market capitalisation}}}}{{{ ext{Number of shares}}}}$$

Correct Answer

(A) $$frac{{{ ext{Total net assets}}}}{{{ ext{Number of shares}}}}$$

[#742] Assertion (A) Personal transactions of the owners of the business are not recorded in the books. Reason (R) According to the business entity concept, each business enterprise is considered as an accounting unit separate from owners.

(A) Both (A) and (R) are correct and (R) is the correct explanation of (A)

(B) Both (A) and (R) are correct, but (R) is not the correct explanation of (A)

(C) (A) is correct, but (R) is not correct

(D) (A) is wrong, but (R) is correct

Correct Answer

(D) (A) is wrong, but (R) is correct

[#743] Given below are two statements, one labelled as Assertion (A) and the other as Reason (R): Assertion (A): Capital expenditure is incurred for the purpose of acquiring fixed assets. Reason (R): Capital expenditure item is shown in the asset side of the Balance sheet. Select the correct answer:

(A) Both (A) and (R) are true and (R) is the correct explanation of (A)

(B) Both (A) and (R) are correct but (R) is NOT the correct explanation of (A)

(C) (A) is true but (R) is false

(D) (A) is false but (R) is true

Correct Answer

(A) Both (A) and (R) are true and (R) is the correct explanation of (A)

Explanation

Solution: Assertion (A): Capital expenditure is incurred for the purpose of acquiring fixed assets. This statement is TRUE . Capital expenditure is money spent to buy things that will last a long time and help the business make money in the future. Think of things like buildings, machinery, or land. These are called fixed assets . Reason (R): Capital expenditure item is shown in the asset side of the Balance sheet. This statement is also TRUE . The Balance Sheet is a snapshot of what a company owns (assets) and owes (liabilities) at a specific point in time. Because fixed assets are things the company *owns*, they are listed on the asset side of the Balance Sheet. Now, the important question is: Does Reason (R) *explain* why Assertion (A) is true? Yes, It is correct explanation of Assertion. So, the correct answer is: Option A: Both (A) and (R) are true and (R) is the correct explanation of (A)

[#744] On increase in sales price

(A) Does not affect Break-Even Point

(B) Lower Break-Even Point

(C) Raises Break-Even Point

(D) Lowers net profit

Correct Answer

(B) Lower Break-Even Point

[#745] If vendors are issued debentures of Rs. 1,00,000 in consideration of net assets of Rs. 1,20,000, the balance of Rs. 20,000 will be credited to:

(A) Goodwill Account

(B) Capital Reserve Account

(C) Profit and Loss Account

(D) General Reserve Account

Correct Answer

(B) Capital Reserve Account

Accounting - Study Mode

[#741] Intrinsic value of a share is given by

Correct Answer

[#742] Assertion (A) Personal transactions of the owners of the business are not recorded in the books. Reason (R) According to the business entity concept, each business enterprise is considered as an accounting unit separate from owners.

Correct Answer

Correct Answer

Explanation

[#744] On increase in sales price

Correct Answer

[#745] If vendors are issued debentures of Rs. 1,00,000 in consideration of net assets of Rs. 1,20,000, the balance of Rs. 20,000 will be credited to:

Correct Answer