Theoretical Questions Final Account

For a student of accounting, an in-depth understanding of the topics is of prime importance and only with queries that are presented here can a student get a detailed understanding of the whole topic.

Objective type questions:

1. What is the balance of petty cash considered?
2. How is the closing of stock valued at?
3. Which side will the stock appearing in Trial Balance be shown?
4. Where will the stock appearing outside of Trial Balance be shown at?
5. What balance do liabilities have?
6. How is net loss termed in a business?
7. How is net profit taken in case of a firm?
8. Amongst the following:Liability for discounted bills/ Short term loans/ Outstanding wages/ Bank overdraft which is considered a contingent liability?

Apart from certain objective queries, for conceptual clarity, it is important to have detailed knowledge, and here is a set of statements for that.

State True or False:

1. Is unearned income liability of any business?
2. Is unearned income equal to income received in advance?
3. Is the outstanding income account the real account?
4. Can net loss be termed as the firm’s asset since a business venture has to realize this loss from proprietors?
5. Are the goods that are sent to customers for ‘sale or return’ basis also be termed as sales?
6. Can prepaid expenses be considered assets for a business venture?
7. Can accrued income and income due but not received different from each other?
8. Can outstanding expenses account be considered as personal account?
9. Does liabilities side of a balance sheet be said to represent credit balance?
10. Is the credit and debit side of a profit and loss account always said to be equal?

Answers: 1. True 2. True 3.False 4.True 5.False 6.True 7.False 8.True 9.True 10. False
Long Answer Questions:

1. Why is it necessary to keep the issue of bad debts into consideration always? How I this placed in the Final Accounts?
2. How is adjusting entries important? Why adjusting entries are needed in preparation of Final Accounts?
3. How is accidental loss of goods treated in Final Accounts in case: Goods had not been insured/ Goods have been insured and the Insurance company has claims associated with it.

 Very short Questions:

1. When stock is available on both inner and outer side of Trial Balance how is the two versions treated?
2. If unearned income appears in Trial Balance then where is it to be showed in financial statements?
3. From which account and which side is net loss taken for calculation?
4. To get the details of bad debts which journal entry would you consider?
5. How does net profit and net loss affect the business?
6. What is wages owing in Final Accounts is found in Trial Balance how would you treat them?
7. For getting prepaid rent which adjusting entry would be passed?

Short questions:

1. What is that situation when purchases account can be credited?
2. What are the items to be added and subtracted from capital on the liabilities side of the account?
3. Name any 4 fixed and 3 current assets

Write short notes on:

1. Discount given to creditors
2. Expenses that are owing
3. Income that is not earned
4. Insurance that has not expired
5. Increase in assets value
6. Interest placed on drawings

Links of Previous Main Topic:-

• Book keeping
• Meaning of gaap
• Origin of transaction
• The concept of debit and credit
• Subsidiary books or sub division of journal
• Balancing of ledger accounts
• Meaning of trial balance
• Balance sheet in final accounts without adjustments

Links of Previous Main Topic:-

• Meaning of bank reconciliation statements
• Bills of exchange concept of bills of exchange
• Errors affecting or disclosed by trial balance introducing the concept
• Meaning of depreciation