TC

Accounting Quiz Q71–Q80

Teal Coral Clean theme — click an option to reveal the correct answer and a concise explanation

Questions

Q71. Debt Equity Ratio is 1:2. Which of the following transactions will increase it?

Answer: Issue of Debenture

Solution: Debt‑equity ratio = Debt ÷ Equity. Issuing debentures increases debt while equity remains unchanged, so the ratio rises. Issuing new shares increases equity and lowers the ratio; redemption reduces debt and lowers the ratio.

Q72. If Inventory Turnover ratio is divided into 365, it becomes a measure of:

Answer: Average age of Inventory

Solution: Converting inventory turnover into days (365 ÷ turnover) yields the average age or holding period of inventory in days — how long inventory stays before sale.

Q73. What are the results of equipment sales on credit?

Answer: Assets increase, Income increase

Solution: Selling equipment on credit creates a receivable (asset) and may generate income (gain on sale) if sold above book value. Net effect on total assets depends on receivable vs. written‑down asset, but the immediate recording increases receivables and records sale income.

Q74. Which of the following transactions will increase the total assets of the company?

Answer: Purchase Assets on credit

Solution: Buying an asset on credit increases total assets (new asset) while liabilities also increase. Purchasing with cash merely converts one asset to another (no net change); receiving cash from debtors swaps assets; investing in shares converts cash to investment (no net change).

Q75. Which of the following transactions will reduce total assets and liability?

Answer: Repayment of loan

Solution: Repaying a loan reduces cash (asset) and reduces the loan liability — both sides fall, decreasing total assets and total liabilities by the repayment amount.

Q76. Call in arrears appears in the company Balance Sheet under:

Answer: Share Capital

Solution: Call in arrears (amounts unpaid by shareholders on called‑up shares) is shown as a deduction from called‑up share capital in the equity section of the balance sheet.

Q77. Ratio which reflects managerial efficiency in handling assets is:

Answer: Turnover Ratio

Solution: Turnover ratios (inventory turnover, asset turnover) measure how efficiently management uses assets to generate sales — a direct indicator of asset management efficiency.

Q78. Return on Investment is a:

Answer: Profitability Ratio

Solution: Return on Investment (ROI) measures returns relative to invested capital and is classified as a profitability ratio, assessing how well investments generate profit.

Q79. Return on equity is also called:

Answer: Return on net Worth

Solution: Return on equity (ROE) is commonly referred to as return on net worth — it measures net income relative to shareholders' equity.

Q80. Preliminary expenses are example of:

Answer: Fictitious Assets

Solution: Preliminary expenses (startup/incorporation costs) are treated as fictitious assets — deferred revenue expenditures shown as an asset to be written off over time.

Tip: Options are keyboard-focusable. Press Enter or Space to reveal an answer.

© Quiz • Teal Coral Clean • Interactive answers