Question 1

Which of the following is an example of a direct expense?

Accepted Answer

Wages paid for production is a direct expense because it is directly related to the manufacturing or production of goods. Other options like office rent, advertising, and salary of office staff are indirect expenses related to administration and selling.

Question 2

Gross Profit is transferred to which account?

Accepted Answer

Gross Profit is transferred to the credit side of the Profit and Loss Account to ascertain the net profit of the business.

Question 3

Unused stationery at the end of the accounting period is shown in:

Accepted Answer

Unused stationery at the end of the period is an asset and is shown on the asset side of the Balance Sheet.

Question 4

Carriage inwards is debited to:

Accepted Answer

Carriage inwards is related to the purchase of goods and is debited to the Trading Account.

Question 5

If closing stock is given outside the trial balance, it is valued at:

Accepted Answer

Closing stock given outside the trial balance is valued at cost price or net realizable value, whichever is lower, as per the conservatism principle.

Financial Statements - II