Fundamentals of Bookkeeping for Competitive Exams

Fundamentals of Bookkeeping

Q. What is the double-entry accounting principle?

Solution

The double-entry accounting principle states that every transaction affects at least two accounts.

Correct Answer: B — Every transaction affects two or more accounts

Q. What is the effect of recording depreciation on an asset?

Solution

Recording depreciation reduces the book value of the asset on the balance sheet.

Correct Answer: B — Decreases asset value

Q. What is the journal entry to record a sale on credit?

Solution

The correct entry is to debit Accounts Receivable and credit Sales to reflect the sale on credit.

Correct Answer: B — Debit Accounts Receivable, Credit Sales

Q. What is the primary accounting standard used in the United States?

Solution

GAAP (Generally Accepted Accounting Principles) is the primary accounting standard in the U.S.

Correct Answer: B — GAAP

Q. What is the primary purpose of a journal entry?

Solution

A journal entry is used to record financial transactions in the accounting system.

Correct Answer: B — To record financial transactions

Q. Which inventory valuation method uses the most recent costs for the cost of goods sold?

Solution

LIFO (Last In, First Out) assumes that the most recently purchased items are sold first.

Correct Answer: B — LIFO

Q. Which of the following is a component of final accounts?

Solution

The Balance Sheet is one of the key components of final accounts, along with the Income Statement.

Correct Answer: B — Balance Sheet

Q. Which of the following is an example of a current liability?

Solution

Accounts Payable is a current liability as it represents obligations due within one year.

Correct Answer: C — Accounts Payable

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