Branch Accounting MCQ Quiz | Schedule III Companies Act 2013 Ratios | Departmental Accounting & Single Entry System
Branch Accounting MCQ Quiz with Answers | Schedule III Companies Act 2013 Ratios, Departmental Accounting & Single Entry System
Test your knowledge of branch accounting (stock & debtors system, debtors method, dependent and independent branch), departmental accounting, Schedule III Companies Act 2013 ratios, liquidity and leverage ratios, and single entry system (net worth / statement of affairs method) with 20 carefully selected MCQs and detailed explanations.
About this accounting MCQ quiz
This practice set brings together 20 high-quality multiple choice questions on branch accounting, Schedule III Companies Act 2013 ratio disclosures, departmental accounting, liquidity and leverage ratios, and the single entry system using the net worth or statement of affairs method, exactly in the style asked in university and professional exams.
You can attempt each question, instantly see whether your answer is correct, and read a clear explanation so that concepts like debtors method for small branches, stock and debtors system, dependent branches, departmental overheads, and activity ratios such as inventory turnover ratio become crystal clear.
- Core focus: branch accounts (dependent / independent branches, goods sent at cost or invoice price, branch debtors account, branch adjustment account).
- Financial reporting: Schedule III Companies Act 2013 – financial statement format and ratio disclosures.
- Ratios: liquidity ratio, acid test ratio (quick ratio), activity ratio, leverage ratio, profitability overview.
- Departmental accounting: independent and columnar accounting, allocation of common expenses.
- Single entry system: net worth or statement of affairs method, opening and closing capital comparison.
20 MCQs – attempt the quiz
As per the amended Schedule III, companies must disclose ratios like current ratio, debt service coverage ratio, return on equity, trade payables turnover ratio, trade receivables turnover ratio, inventory turnover ratio, net capital turnover ratio, net profit ratio, return on capital employed and return on investment, but assets turnover ratio is not specifically listed for mandatory disclosure.
Under the stock and debtors system, Branch Adjustment Account is prepared to find out gross profit by adjusting loading on opening stock, goods sent to branch, sales and closing stock when goods are invoiced at selling price.
For small branches, the head office usually adopts the debtors system, maintaining one composite branch account that behaves like a debtor account to ascertain profit or loss of the branch.
Branch Debtors Account records credit sales, cash received from debtors, discounts allowed and bad debts, helping the head office track and control amounts due from branch customers.
In branch accounting, goods are often invoiced to branches at invoice price, which may be cost or cost plus a loading (profit) to facilitate control and calculation of branch gross profit.
Schedule III of the Companies Act 2013 prescribes the format and minimum disclosure requirements for the balance sheet, statement of profit and loss and other financial statements for companies.
Liquidity ratios such as current ratio and acid test (quick) ratio measure the short-term solvency of a firm, that is, its ability to meet current liabilities as and when they fall due.
The acid-test ratio is popularly called the quick ratio because it compares quick assets (current assets minus inventory and prepaid expenses) with current liabilities.
Inventory turnover ratio is an activity or turnover ratio that indicates how efficiently inventory is managed by showing how many times stock is sold and replaced during a period.
Debt-equity, interest coverage and debt-to-assets ratios evaluate financial leverage and long-term solvency, whereas return on equity is a profitability ratio that measures return to shareholders.
Departmental accounting helps compare results of various departments, improves planning and control, and enables performance evaluation by showing each department’s profit or loss separately.
When each department maintains its own complete set of books, it is called independent departmental accounting, unlike columnar accounting in which one common set of books has separate columns for departments.
Common expenses that cannot be fairly apportioned to departments are charged to the general profit and loss account, rather than to any one departmental account.
Dependent branches do not keep complete books of account; the head office maintains the branch records to determine the branch’s trading results.
In case of dependent branches, the head office generally pays all major expenses and only petty cash may be handled at the branch level.
Dependent branches frequently receive goods at invoice price, which may be cost or cost plus a profit margin, to support control over branch stock and gross profit.
In the debtors system, Branch Account is a nominal account and all revenue and expenses relating to the branch, including depreciation on branch fixed assets, are debited or credited to this account to determine branch profit or loss.
Under single entry, the net worth method is called the statement of affairs method because opening and closing statements of affairs, similar to balance sheets, are prepared to calculate profit by comparing capital.
When closing capital (after adjusting drawings and additional capital) exceeds opening capital, the excess represents profit for the period under the net worth or statement of affairs method.
A statement of affairs in single entry appears similar to a balance sheet, listing assets and liabilities, but is often based on estimates rather than on full double entry records.
FAQs on branch accounting, Schedule III & ratios
Branch accounting records transactions of different branches separately to determine branch-wise profit or loss and improve control, which is why exam questions often test concepts like debtors method, stock and debtors system, dependent branch and goods sent at invoice price.
For small size branches that do not maintain full books, the debtors system (also called branch debtors system) is generally preferred, where the head office keeps a single branch account to compute branch profit or loss.
Schedule III of Companies Act 2013 lays down the format and minimum disclosure requirements for financial statements, including presentation of balance sheet, statement of profit and loss and disclosure of key ratios like current ratio, net capital turnover ratio and trade payables turnover ratio.
Liquidity ratios such as current ratio and quick ratio measure a firm’s short-term ability to pay current liabilities, while leverage ratios like debt-equity ratio, interest coverage ratio and debt to assets ratio focus on long-term solvency and financial risk.
Under the net worth (statement of affairs) method, opening capital is compared with closing capital after adjusting drawings and additional capital, and a positive difference represents profit while a negative difference indicates loss for the period.
The questions, explanations and HTML CSS quiz layout provided here are created in generic educational language, contain no copied textbook wording or copyrighted diagrams and are intended to be reused, customised and monetised in your own blog or learning platform.
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