Accounting - An Introduction — Practice Quiz

Amount of money or goods taken by the proprietor for personal use

Step 1: The term 'Drawings' is an important accounting term related to the owner's personal use of business resources. Step 2: Why Option C is correct - Drawings refers to the amount of money OR value of goods which the proprietor (owner) takes from the business for his/her personal or household use. For example, if an owner takes ₹5,000 from the business cash for personal expenses, this is called drawings. Step 3: Why Option A is wrong - Money borrowed from a bank is a Loan or Liability. Step 4: Why Option B is wrong - Money invested by the owner INTO the business is called Capital, not drawi

Income = Revenue - Expense

Step 1: Understand the meaning of Income. Income is the difference between what a business earns (Revenue) and what it spends (Expense). Step 2: Example to understand - If goods costing ₹25,000 are sold for ₹35,000, then Revenue = ₹35,000, Expense = ₹25,000, and Income = ₹35,000 - ₹25,000 = ₹10,000. Step 3: Why Option B is correct - The formula Income = Revenue - Expense is the standard accounting definition given in the chapter. Step 4: Why Option A is wrong - Assets - Liabilities gives us Capital (owner's equity), not income. Step 5: Why Options C and D are wrong - Capital + Drawings and Pur

Accounting records are based on historical cost and do not reflect price changes

Step 1: Advantages and limitations of accounting are important. Limitations are the weaknesses or shortcomings of the accounting system. Step 2: Why Option C is correct - Fixed assets are recorded at their ORIGINAL COST (historical cost). Over time, prices rise due to inflation, but accounting does not adjust for this. So the Balance Sheet may not show the true current value of assets, which is a major limitation. Step 3: Why Options A, B, and D are wrong - These are all ADVANTAGES of accounting, not limitations. Helping in decisions, providing court evidence, and facilitating loans are benefi

Social Accounting

Step 1: Identify the description given in the question — disclosing social benefits and costs of a business enterprise. Step 2: Why Option D is correct - Social Accounting (also called social reporting or social responsibility accounting) specifically focuses on reporting social benefits like medical facilities, housing, education for employees AND social costs like environmental pollution, exploitation of employees, etc. Step 3: Why Option A is wrong - Cost Accounting deals with product costing and price fixing, not social benefits or costs. Step 4: Why Option B is wrong - Tax Accounting hand