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Question 1 General Knowledge
Which of the following errors will be disclosed in the trial balance?
- A. Recording transactions in the wrong account
- B. Duplication of a transaction in the accounting records
- C. Posting only the debit portion of a particular journal entry
- D. Recording the wrong amount for a transaction to both the account debited and the account credited
Correct answer: C. Posting only the debit portion of a particular journal entry
Correct answer (Option C):\nA trial balance will only disclose errors that disrupt the equality of total debits and total credits. Posting only the debit portion of a journal entry creates an asymmetrical entry, leaving the credit side short, which directly causes the trial balance totals to disagree. Option C is correct.\n\nWhy others are wrong:\nOption A is an error of commission and keeps debits equal to credits. Option B is an error of duplication where both sides are entered twice, maintaining balance. Option D is an error of original entry affecting both sides equally, so it won't show up as a mismatch.\n\nStudy tip:\nErrors that affect only one account or one side of a transaction break the ledger balance and are caught by the trial balance.
Question 2 General Knowledge
Which of the following account usually shows a credit balance?
- A. Capital account
- B. Bank overdraft
- C. Both (A) and (B)
- D. Purchase account
Correct answer: C. Both (A) and (B)
Correct answer (Option C):\nBoth Capital accounts and Bank Overdraft accounts normally carry credit balances. Capital represents the owner's equity (a liability of the business to the owner), which increases on the credit side. A bank overdraft is a current liability indicating a negative bank balance, which also carries a credit balance. Option C is correct.\n\nWhy others are wrong:\nOption A and Option B are both credit balance accounts, making Option C the comprehensive correct choice. Option D (Purchase account) represents an expense and always exhibits a normal debit balance.\n\nStudy tip:\nRemember the modern classification rule: Liabilities, Capital, and Revenue accounts increase with a credit and carry a normal credit balance.
Question 3 General Knowledge
Identify the correct statement:
- A. Carriage inwards and carriage outwards are both credit balances
- B. Returns inwards and returns outwards are both debit balances
- C. Both carriage inwards and carriage outwards appear in the trading account
- D. None of these
Correct answer: D. None of these
Correct answer (Option D):\nNone of the given options are correct. Carriage inwards and carriage outwards are both expenses and carry debit balances. Returns inwards (sales returns) have a debit balance, while returns outwards (purchase returns) have a credit balance. Carriage inwards appears in the Trading Account, but carriage outwards appears in the Profit and Loss Account. Thus, all specific choices are false. Option D is correct.\n\nWhy others are wrong:\nOption A is wrong because carriage expenses are debits. Option B is wrong because returns outwards is a credit balance. Option C is wrong because carriage outwards goes to the Profit and Loss account as an indirect selling expense.\n\nStudy tip:\nCarriage Inwards relates to acquiring goods (Direct Expense), while Carriage Outwards relates to selling goods (Indirect Expense).
Question 4 General Knowledge
A debit balance on a partner's current account must indicate that
- A. Drawings are higher than the profit share for that year
- B. They are insolvent
- C. They have a credit balance on their capital account
- D. They have withdrawn more than they have earned in the partnership
Correct answer: D. They have withdrawn more than they have earned in the partnership
Correct answer (Option D):\nA debit balance on a partner's current account indicates that the partner's cumulative withdrawals (drawings) and shares of losses exceed their total earnings (share of profits, interest on capital, salary) within the partnership. This means they owe money back to the firm. Option D is correct.\n\nWhy others are wrong:\nOption A refers only to a single year, whereas a current account balance is cumulative. Option B is incorrect as a debit balance does not automatically mean legal insolvency. Option C is a separate account and does not influence the immediate definition of a current account debit balance.\n\nStudy tip:\nUnder the fixed capital method, routine adjustments like profits, salary, and drawings are maintained in the current account to keep capital intact.
Question 5 General Knowledge
Locate the item that would not be found in the Profit and Loss Appropriation account of partners:
- A. interest on loan by partner to partnership
- B. interest on drawings
- C. salaries
- D. interest on capital
Correct answer: A. interest on loan by partner to partnership
Correct answer (Option A):\nInterest on a loan provided by a partner to the partnership is treated as a charge against profits, not an appropriation of profits. Therefore, it is debited to the standard Profit and Loss Account, not the Profit and Loss Appropriation account. Option A is correct.\n\nWhy others are wrong:\nOption B, C, and D are standard elements of profit distribution among partners. Interest on drawings is credited, while partner salaries and interest on capital are debited to the Profit and Loss Appropriation account.\n\nStudy tip:\nCharges against profit must be paid regardless of whether the firm earns profits, whereas appropriations are made only out of available net profits.
PSC PYQ