MCQs and Q&As

A. Two times a year
B. once a year
C. Frequently during the accounting period(Correct)
D. At the end of a accounting period

A. 17,000 (overstated.
B. 12,000 (understated.
C. 7,000 (overstated.(Correct)
D. 7,000 (understated.

C. Overstatement of closing stock results in overstatement of profit and overstatement of
opening stock results in understatement of profit. In the instant case, there will be overstatement of
profit by 12,000 – 5,000 = 7,000.

A. Sales
B. Purchases
C. Inward returns
D. Closing stock(Correct)

The closing stock D. is the value of goods which remain unsold at the end of the period whose balance appears once in Trading Account and once in Balance Sheet of the business.
All other accounts sales A., purchases B. and Inward Returns C. are closed once they are absorbed by the Trading Account. Thus D. is the correct answer.

A. Interest payable on loans or deferred credits taken for the acquisition or construction of fixed assets before they are ready for use
B. Stand by equipment and servicing equipment
C. Expenditure incurred on test runs and experimental production
D. Administration and general expenses(Correct)

Only those expenses which relate to and specifically attributable to the asset are
capitalized. Administration and general expenses cannot be specifically attributable to the asset
and hence cannot be capitalized.