MCQ 4 – Professional Accounting 
Level- Medium
Results
#1. Which of the following is a business transaction ?
If goods are purchased on Cash or on Credit for the purpose of business, there becomes a transaction that must be recorded.
#2. Select the terms that closely belongs to the review of financial statements?
YTD – Year Till Date, MTD – Month Till Date, Y-1 – Previous Year. These terms are used to define the periodicity to which financial accounting data is reviewed in the financial statements.
#3. For business entity, which currency is referred to from its primary economic environment
Functional currency is one in which business entity records its business transactions for the purpose of its Financial Statements. This is the currency normally prevalent in the primary economic environment of business entity and business entity use this currency for legal reportings.
#4. For a business entity, functional currency is the local currency. How far is it true?
Normally, the local currency is an entity’s functional currency. However, for any business entity, the functional currency is the currency in which most of the business transactions are performed and the one that is used for legal reporting. Hence, there are situations that may allow a functional currency to be different from the local currency for a business entity.
#5. While accounting of purchases, VAT/GST tax paid on goods purchase is booked under ?
For the purpose of business, if goods are purchased where GST/VAT is paid, Taxes recoverable a/c is debited when Input Tax Credit is eligible for business entity. This Input tax is later used to reduce the liability arising from Tax Payable against sales of goods/services.
#6. In the context of bank statements and bank reconciliation through digital mode, MT-940 refers to ?
MT-940 is an electronic bank statement issued by bank in standard swift message for a statement of account balances. MT refers to Message Type. Many ERP or accounting software use this electronic statement to do automatic bank reconciliation.
#7. For registered companies, the important difference between Internal Audit and Statutory Audit is that :
For registered companies under Companies Act, be it public limited or private limited, Statutory audit is mandatory while Internal Audit becomes mandatory only after annual turnover goes above Rs 200 crores. Internal Auditor can be internal from the company but a company may appoint an external auditor to conduct internal audit.
#8. In the context of accounting, Period Closing refers to
Period closing activity is performed by Accountants as a good practice to have a better control and discipline in the accounting process. Normally, accounting calendar is divided into monthly periods.
#9. In the context of accounting, how many ledgers does a company must prepare?
#10. In the context of accounting, an accounting calendar means
Companies generally follow the calendar months for recording the business transactions. Companies keep 12 months minimum in accounting calendar but some companies prefer to have some periods dedicated for closing after each quarter or half-yearly.