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CBSE Questions for Class 10 Elements Of Book Keeping And Accountancy Capital And Revenue Quiz 2 - MCQExams.com
CBSE
Class 10 Elements Of Book Keeping And Accountancy
Capital And Revenue
Quiz 2
Which of the following is deferred revenue expenditure?
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High legal expenses incurred by the company to defend legal suit of a 10,00,000.
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Sales promotion expenses amounting to Rs.50000.
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Rs. 10000 spent on dismantling of old Plant and Machinery.
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All the three.
Explanation
Deferred revenue expenditure is an expenditure which is revenue in nature and incurred during an accounting period but the benefits from this is to be arrived in coming years.
Therefore high legal expenses to defend a legal suit is a revenue expenses otherwise but its benefits will also arise in future too, hence this has to be treated as deferred revenue expenditure.
___________is/are deferred revenue expenditure.
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Preliminary expenses
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Heavy advertisement expenses
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Brokerage on issue of shares
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All the three
Explanation
Deferred revenue expenditure is an expenditure which is revenue in nature and incurred during an accounting period but the benefits from this is to be arrived in coming years.
Few examples of deferred revenue expenditure:
Preliminary Expenses
Heavy Advertisement expenses
Brokerage on issue of shares
_______is a revenue expenditure.
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Freight paid on purchase of Plant and Machinery
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Legal expenses paid to acquire a property
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Expenses incurred to reduce working capital requirement
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Annual whitewash of the factory building
Explanation
Normal wear and tear of building premises or plant & machinery are treated as routine repair & maintenance.
Annual white wash of factory building is also part of routine normal wear & tear, hence it is a revenue expenditure.
_________is a capital expenditure.
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Cost of a standby equipment
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Goods purchased for resale
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Repair of a second hand equipment
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Annual maintenance of computer systems
Explanation
Expenditure can be segregated as revenue expenditure and capital expenditure.
Revenue expenditure are those which are incurred on day to day smooth operation of the business.
Capital expenditure are those which gives the benefit to the business for a longer duration. Normally value of assets and heavy expenditure on an overhaul of the machine are capital expenditure.
Hence cost of standby equipment is a capital expenditure.
Choose the true statement.
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A lump sum payment paid for purchase of raw materials is treated as capital expenditure.
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Expenditure incurred on getting copyright is treated as capital expenditure.
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Repair and maintenance irrespective of nature and amount is always treated as revenue expenditure.
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Cost of stand by equipment is a revenue expenditure.
Explanation
Capital expenditures include fixed assets or the expenditures which are incurred in current financial year but are to be spread over more than one financial year. All the expenditures which relate to acquisition of permanent assets and are intended to be used in the business for the purpose of earning revenue are called as capital expenditures. Normally, theses assets have a long life and never meant for resale. The term capital expenditure is used to signify the following:
1. Increase in quantity of fixed assets: It means the purchase of new assets will be treated as capital expenditure.
2. Replacement of fixed assets: When any expenditure is made on the replacement of old fixed assets with the new fixed assets then also these expenditures are called capital expenditure.
3. Wages and erection expenses on ercection of plant or machinery, cartage in respect of the erected machines will be treated as capital expenditure.
5. Expenditures incurred for acquiring the patent rights, copyrights, and goodwill are the capital expenditures.
Wrong classification of expenses into revenue and capital expenditure lead to_________.
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under statement of profit or loss
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over statement of profit or loss
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distortion in current ratio
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either (a) and (b)
Explanation
Wrong classification of expenditure in to revenue and capital is an error of principal. In such case, trial balance may agreed but this will show under or over statement of profit.
For example, Rs. 5000 wages paid for installation of machine is a capital expenditure. If this is considered as revenue expenditure. This will result an understatement of profit.
_________is not a capital expenditure.
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Rs.40000 spent on CNG fitting on the old car
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Rs.10000 paid as excise duty on new capital equipment
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Rs.15000 spent on construction of temporary structure for storing building material
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Rs. 10000 paid for removal of old waste and scrap
Explanation
Amount spent on normal business operations are treated as revenue expenditure. Removal of old waste and scrap is a normal routine business activity hence cost incurred on this should be treated as revenue cost not the capital cost.
Expenses the benefit of which does not last more than 12 months are treated as ______.
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deferred revenue expense
0%
revenue expense
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capital expense
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loss
Explanation
If the benefit of expenditure is exhausted within a year, it is treated as an expense (also called as revenue expenditure). Following are few examples of revenue expenditure are:
1. Purchases
2. Wages
3. Freight inward & outward
4. Salary and wages
5. Selling and distribution expenditure
6. Depreciation
7. Interest on borrowings
8. Loss on sale of fixed assets
An amount of Rs.25000 spent on a lawyer's fees to defend a suit for infringement of patent rights is_________.
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Capital Expenditure
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Revenue Expenditure
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Deferred Revenue Expenditure
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None of the above
Explanation
Any expense which is incurred to safeguard the interest of the business are treated as revenue expenditure.
Rs.25000 spent on lawyer's fees to defend the suit for infringement of patent rights is a revenue expenditure.
Which of these is not a temporary account ?
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Insurance A/c
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Building A/c
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Repair and maintenance A/c
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Preliminary A/c
Which of these receipts is capital receipts.
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Old ad debts amounting to Rs.5,000 fully written off recovered now.
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Interest of Fixed Deposits held with Bank amounting to Rs.1,000
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Rs.5,000 being sale of by products and scrap and waste generated
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Insurance claim of Rs.20,000 received on account of damage of Plant and Machine in a major fire.
Cost of inventories consists of_______.
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interest cost
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administrative cost
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selling cost
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all costs to bring the inventory to present location and condition
Explanation
Inventory valuation is done on the basis of cost of inventory or net realizable value whichever is lower.
Cost of inventory includes the direct cost i.e. direct material, direct labor, direct expenses and the cost to bring the inventory to present location and conditions.
Which of these is/are examples of revenue expenditure ?
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Depreciation charges
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Factory insurance premium
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Production royalty paid
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All the three
Explanation
Spending money or incurring a liability for some benefit, service or property received is called expenditure. Payment of rent, salary, purchase of goods, purchase of machinery, purchase of furniture are examples of expenditure. If the benefit of expenditure is exhausted within a year, it is treated as an expense (also called revenue expenditure). A revenue expenditure is a cost that is expensed in the accounting year in which it is incurred. In other words, the cost will be matched with the revenues of the accounting year in which the expenditure took place. Revenue expenditure are costs spent on fixed assets after they have been place in service. Depreciation charges, factory insurance premium, production royalty paid are all examples of revenue expenditure.
Plant and Machinery are generally purchased for _________.
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Rental / Hire purchase
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Long term usage for production purpose
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Re-sale t profit
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As a security to obtain loan from Banks
Salaries is an item of _________.
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revenue
0%
expense
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asset
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liability
Explanation
Expenses are two types i.e. Direct Expense and Indirect Expenses.
Direct Expenses are those which are related to production or trading activity and to be debited in trading account. Examples are Direct Material, Direct Labor, Direct Expenses.
Indirect Expenses are those which are not directly associated with the production activity, these expense need to be debited to profit & loss account. Like Salaries , Rent etc.
The benefit of revenue expenses last for ________.
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just five year
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not more than one trade cycle
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not more than one year
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just three to six months
Explanation
Spending money or incurring a liability for some benefit, service or property received is called expenditure. Payment of rent. salary, purchase of goods, purchase of machinery, purchase of furniture, etc. are examples of expenditure. A revenue expenditure is a cost that is expensed in the accounting year in which it is incurred. In other words, the cost will be matched with the revenues of the accounting year in which the expenditure took place. If the benefit of expenditure is exhausted within a year, it is treated as a revenue expenditure.
Which of the following is a non-recurring expenses
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Godown rent
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Godown Insurance
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Selling and distribution expenses
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Custom and excise duties
Cost of CNG kit fitted on a old car is a ________.
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0%
revenue expenditure
0%
deferred revenue expenditure
0%
capital expenditure
0%
loss
Explanation
Spending money or incurring a liability for some benefit, service or property received is called expenditure. Payment of rent, salary, purchase of goods, purchase of machinery, purchase of furniture, etc. are examples of expenditure. If the benefit of an expenditure lasts for more than a year, it is treated as an asset (also called capital expenditure). The following points are required to decide the nature of capital expenditure:
1. The expenditure, the benefit of which cannot be consumed or utilized in the same accounting period should be treated as capital expenditure.
2. Expenditure incurred to acquire fixed assets of a company
3. Expenditure incurred to acquire fixed assets, erection and installation charges, transportation of assets charges, travelling expenses directly related to purchase fixed assets are covered in capital expenditure. For example, cost of CNG kit fitted on a old car.
4. Capital addition to any fixed assets which increase the life or efficiency of those assets: for example, additional expenses made on a building.
The document listing the latest balance of all real and personal A/c in the ledger on a given date is known as ..........
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Trial balance
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Positional statement
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Income statement
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Charter of A/cs
Explanation
The document listing the latest balance of all real and personal A/c in the ledger on a given date is known as
Positional statement
Which of the following statements is correct?
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Accounting profit is the difference between cash receipts and cash paid in a period.
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Accounting profit is the total of cash sales in the year less the expenses for the period.
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Accounting profit is the difference between revenue income and expenses for the period.
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Accounting profit is the difference between revenue income and cash payments for the period.
Explanation
Profit & Loss account is prepared for a business for a particular period. Profit & Loss account is having two sides i.e. Income and expenses side or debit or credit side. All incomes/revenues are recorded in credit side and expenses are debited.
Excess of Income over expenditure is treated as profit and excess of expenditure over income is a loss.
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Practice Class 10 Elements Of Book Keeping And Accountancy Quiz Questions and Answers
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