55. Revenue is generally considered as realized:
(A) At the time of agreement to sell
(B) At the time of inflow of cash
(C) At the time of sale
(D) At the time of production of goods
Answer: (C) At the time of sale
- Explanation: According to the Revenue Recognition Principle, revenue is generally recognized when it is earned, which typically occurs at the time of sale (or when the goods/services are provided) and the transfer of ownership has taken place, regardless of when the cash is actually received.
56. Provision for doubtful debts at the time of dissolution of firm is transferred to:
(A) Debtors account
(B) Realization account
(C) Cash account
(D) Capital account
Answer: (B) Realization account
- Explanation: Upon the dissolution of a partnership firm, all assets (excluding Cash/Bank) and external liabilities are transferred to the Realization Account to ascertain the final profit or loss from the winding up of the business. Provision for doubtful debts, being a provision against an asset (Debtors), is also transferred to the credit side of the Realization Account.
57. Relating to the ‘closing stock’ for an accounting period, which of following is true?
(A) the figure is shown only in the trading account
(B) the figure is shown only in the balance sheet
(C) the figure is shown in the trading account and the balance sheet
(D) the figure is shown as part of purchases in the trading account
Answer: (C) the figure is shown in the trading account and the balance sheet
- Explanation: Closing Stock is shown on the Credit side of the Trading Account to determine the Cost of Goods Sold and Gross Profit. It is also shown on the Asset side of the Balance Sheet as a Current Asset to reflect the unsold goods remaining at the end of the accounting period.
58. Which of the following is not an objective of accounting?
(A) To maintain records of business
(B) To ascertain profit or loss of the business
(C) To depict capital, liabilities and assets of the business enterprise
(D) To provide information about the personal assets and personal liabilities of the owner(s) of the business enterprise
Answer: (D) To provide information about the personal assets and personal liabilities of the owner(s) of the business enterprise
- Explanation: According to the Separate Entity Concept, the business is treated as a separate and distinct entity from its owner. Accounting focuses only on the transactions and financial status of the business, not the owner’s personal affairs.
59. Consignee account is in the nature of
(A) Personal account
(B) Real account
(C) Nominal account
(D) All of these
Answer: (A) Personal account
- Explanation: The Consignee is the person or entity to whom goods are sent for sale. Since the consignee is a person (or a firm/company which is an artificial person), the Consignee Account is classified as a Personal Account.
60. Which of the following is not a revenue expenditure?
(A) Amount spent on import duty on raw material (B) Amount spent to reduce working expenses
(C) Amount spent to remove a worn-out part of a delivery van and replace it with a new one
(D) Repairs to a machine necessitated by negligence of an employee
Answer: (B) Amount spent to reduce working expenses
- Explanation: An expenditure incurred whose benefit extends beyond the current accounting period or which is incurred to increase the earning capacity (like spending money to reduce future working expenses) is generally treated as Capital Expenditure. All other options (A, C, D) are routine operating costs or maintenance costs that are consumed within the current period and are therefore Revenue Expenditure.