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The correct choice of this multiple choice question (mcq) is option (B), as Posting is the process of transferring accounting journal entries to concerned ledger’s accounts separately in a classified manner. It is done only in Ledger (King of All Books And Books of Final Entry) while recording of Business Transactions in Journal is called Journalizing . After journalizing the business transactions in which accounts are recorded involved in transactions, the next step is the posting. It is the important Step of the Accounting Cycle . In ledger, T-Account form or Self-Balancing form are used. For each account, t-account is prepared to find the balance of an account at the end of the accounting period. For example, if Mr. A, who is a sole proprietor, sold goods worth $1000 to Mr. B on 5 th March, 2025, then it is a business transaction. The seller issued sales invoice to the buyer as evidence in support of this business transaction. After that, this transaction (in which two accoun...

The correct choice of this multiple choice question is (B), as Income Statement or Statement of Comprehensive Income shows the matching of revenues with relevant expenses related to the current accounting period in order to calculate net profit or net loss for the period and also to check the financial performance of the business during the accounting period. Financial performance shows how much effectively, the company utilizes its resources, minimize and control unnecessary expenses to generate revenues over the period. If the company is performing well financially, then it can stabilize, grow and expand the business and can survive in the market. The option A is incorrect, as changes in equity over a period of time is shown by Statement of Owners’ Equity or Statement of Retained Earnings. It also shows the profits retained by the company in the business after paying Dividends to shareholders. Company’s business needs retained earnings to grow and expand the business. After the...

The correct statements are (A), (B) and (D), as Journal is used to record Business Transactions in chronological order i.e., date-wise. For example, On 1 st January, 2024, Mr. A started the business with cash of $100,000. On 2 nd January, 2024, he purchased merchandise worth $5,000. On 3 rd January, 2024, He sold merchandise worth $10,000. These are the business transactions and these are entered in journal date-wise i.e., every business transaction is Journalized in journal in the order of date. No entry can’t be come first which is occurred lately i.e., first date entry will come first, then second one and so on. In this example, we record first entry in journal which occurred on 1 st January, 2024, that is debit the cash account and credit the capital account. The second entry will come next according to date which is here debit purchases account and credit cash account. Then, third entry to on 3 rd January, 2024, is to debit cash account with $10,000 and credit sales accou...

The correct choice is (D), as in Accounting Equation , the left side must be equal to credit side otherwise there are surely some errors, mistakes or frauds. Due to Dual Aspect Accounting Concept , every debit must be equal and opposite to credit. For every debit, there must be a credit in equal amount but in opposite side. Under such accounting system, an accounting journal entry must have atleast one debit account and one credit account with equal amount on opposite side. This basis is the foundation of Double Entry System . This system of Bookkeeping maintains a balance on both sides of accounting equation and such balance in accounts are shown in Balance Sheet which shows assets on left side or assets side while liabilities and shareholders’ equity on right side or liabilities & shareholders’ equity side. The option (A) is wrong, as if one account is credited then other must be debited, otherwise, it goes against the fundamental principles of dual aspect accounting conce...

The correct option is (a), as Assets are resources owned, managed and controlled by the company from which the company expect to get probable future economic benefits. For example, Cash is a Current Asset which is owned and controlled by the company to get future benefits i.e., cash is used to purchase merchandise for resale purpose in order to earn revenue by selling merchandise to customers on selling price. In case of Prepaid Rent , rent paid in advance to acquire property on rent in order to operate the business and ultimately, earns revenue from profitable activities conducting on rental property. Assets create value for the company’s business such as Goodwill , which is an Intangible Asset , create the value of the business in the minds of customers in the form business good name and reputation, customer satisfaction, brand identity and awareness, etc. Assets increase efficiency of operations as when most advanced tools are used to operate the business activities, it ...

The options 2, 3 and 5 are the correct choices as the Balance Sheet shows the financial position of Permanent Accounts , which Assets , Liabilities and Equity , at a specific time on a particular date. For example, at a time, assets such as cash in hand was at $50,000 on 9 A.M  on 31 st December, 2024. Suppose, at 5 P.M, the position of cash in hand was $30,000 on 31 st December,  2024. So, the monetary value of assets, liabilities and equity changes with the passage of time but the equality among assets, liabilities and equity remains throughout the accounting period. Such equality among assets, liabilities and equity represents Account Equation . So, a balance sheet also a representation of accounting position. Other options are incorrect as the balance sheet is not prepared for a period but for a specific time on a particular date of accounting period. Other Financial Statements such as Income Statement, Statement of Retained Earnings and Statement of Cash Flows ...

The correct choice of this multiple choice question is (C), as ratio analysis is used to express the relationship between items or accounts of Financial Statements. For example, Current Ratio is used to show the relationship between Current Assets and Current Liabilities . If the company has more current assets than its current liabilities then its business can easily meet daily expenses and pay short-term obligations to run the daily operations of the business and may earn revenue for the period. If the current ratio is more than 1, then the business can easily meet current liabilities. If it is less than 1, then the business is unable to meet its current liabilities with current assets. This is critical for the continuity and survival of the business as it may fail to carry on the business i.e., unable to pay its short-term debts necessary to run the business and as a result the business operations are stopped and business suffered the losses. If the current ratio is equal to 1, t...