MGT101 Final Term Quiz 3

Accumulated depreciation of furniture is a/an _________. Select the correct option

Correct option: Contra asset account

Explanation: Accumulated depreciation of furniture is recorded as a contra asset account. It offsets the asset account (furniture) by showing the total depreciation expense accumulated over time, reducing the net book value of the asset on the balance sheet.

In a trading concern, salaries of marketing staff is included in _________. Select the

Correct option: Cost of goods sold Preliminary expense Cost of sales Operating expense

Correct option: Operating expense

Explanation: Salaries of marketing staff are considered operating expenses because they are incurred as part of the day-to-day operations of the business to promote and sell products. These costs are not directly related to the production or procurement of goods sold.

Which of the following is an example of direct materials cost? Select the correct option.

A piece of wood for the production of chair

Depreciation expenses

Polish and finishing material for chair

Production worker’s wages

Correct option: A piece of wood for the production of a chair

Explanation: Direct materials are those materials that are directly traceable to the production of a specific product. A piece of wood used in chair production is a direct material cost, as it becomes a physical part of the finished product. Which of the following should be debited on return of raw material to supplier in manufacturing concern? Select the correct option.

Voucher payable account

Debtors account

Material account

Purchase account

Correct option: Purchase account

Explanation: When raw materials are returned to the supplier in a manufacturing concern, the purchase account is debited to reverse the original purchase entry. This reduces the overall purchases recorded, reflecting the return of goods.

When correct accounting effect (Dr/Cr) is given in the wrong accounting head as well as the wrong main head, it is known as: Select the correct option.

Error of original entry

Error of omission

Error of commission

Error of principle

Correct option: Error of principle

Explanation: An error of principle occurs when the correct debit or credit effect is recorded, but it is applied to the wrong accounting head or main head, violating accounting principles. For example, recording a capital expense as a revenue expense.

Mr. X receives a discount of Rs. 50 from a supplier. The discount is debited to discount allowed account. What will be its effect on net profit? Select the correct option.

Understated by Rs.100Overstated by Rs.100No effect

Understated by Rs.50

Correct option: Understated by Rs. 100

Explanation: The discount received is incorrectly debited to the " Discount Allowed" account, which is an expense account. This results in an understatement of income by Rs. 50 (since the discount should increase income) and an additional Rs. 50 overstatement of expense. Together, this misclassification understates the net profit by Rs. 100. Discount allowed to a debtor is credited under main head: Select the correct option.

Income

Expenses

Assets

Liabilities

Correct option: Expenses

Explanation: Discount allowed to a debtor is considered an expense because it represents a reduction in the amount receivable from the debtor, and it directly affects the business's financial position by decreasing revenue. Therefore, it is credited under the expenses main head.

Current year’s depreciation of furniture is a/an _________. Select the correct option.

Correct option: Expense account

Explanation: The current year's depreciation of furniture is considered an expense because it reflects the allocation of the asset's cost over its useful life. Depreciation is recorded as an expense in the income statement and reduces the overall profit of the company.

Carriage inward is Debited under main head: Select the correct option.

Liabilities

Assets

Income

Expenses

Correct option: Expenses