TC

Accounting Quiz Q41–Q50

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Questions

Q41. Wages paid for machine installation debited in wages account, it is:

Answer: An error of Principal

Solution: Wages for installation are a capital expenditure and should be capitalized to the asset (machinery). Debiting Wages account instead is a classification error — an error of principle (wrong accounting treatment).

Q42. If amount of any known liability can’t be determined with substantial accuracy then:

Answer: A contingent liability should be created

Solution: When a liability is known to exist but its amount cannot be estimated reliably, it is treated as a contingent liability (disclosed in notes). If the amount can be estimated reliably and the obligation is probable, a provision is recognized instead.

Q43. Which of the following statement is not true about provision?

Answer: It is an appropriation of Profit

Solution: A provision is a charge against profit (an expense) created to meet a probable liability or diminution in asset value. It is not an appropriation of profit (appropriations occur after profit is determined).

Q44. Which one is not a cause of depreciation?

Answer: Price Inflation

Solution: Depreciation arises from physical wear and tear, passage of time, and obsolescence. Price inflation affects monetary values but is not a cause of physical depreciation of assets.

Q45. Depreciation is calculated from the date of:

Answer: Assets Put to use

Solution: Depreciation is charged from the date the asset is available for use (i.e., put to use). If installation or commissioning is required, depreciation begins when the asset is ready and used in operations.

Q46. If the amount of any known liability can be determined with accuracy:

Answer: A liability should be provided

Solution: When a liability is known and its amount can be measured reliably, it should be recognized as a definite liability in the books (i.e., provided for). Provisions are for probable liabilities where the amount can be estimated; contingent liabilities are disclosed when uncertainty remains.

Q47. Which of the following is the example of Capital Reserve?

Answer: Premium on issue of Share

Solution: Share premium (amount received over face value on issue of shares) is a capital reserve. General reserve and debenture redemption reserve are revenue reserves; workman’s compensation fund is a specific reserve (revenue nature).

Q48. Loss on sale of Assets is shown in:

Answer: None of the above

Solution: Loss on sale of assets is shown in the Profit & Loss Account (as an expense). It is not shown in the trading account or profit & loss appropriation account; therefore "None of the above" is correct among the given options.

Q50. Reserve is created by debiting:

Answer: Profit & Loss Appropriation Account

Solution: Reserves are created by appropriating profit — the Profit & Loss Appropriation Account is debited (reduction of retained profit) and the Reserve account is credited.

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