Income tax paid by a sole proprietor is treated as: MCQ with Answer and Explanation

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Income tax paid by a sole proprietor is treated as:

A. Business expense in P&L Account

B. Statutory liability in Balance Sheet

C. Drawings and deducted from Capital

D. Direct expense in Trading Account

Answer: Option C

Solution (By JKSSB Mock Tests)

For a sole proprietor, income tax is a personal expense on the owner's income, hence treated as drawings and reduced from capital.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

'Bonus Shares' are issued by:

A. Capitalizing reserves

B. Private placement

C. Rights issue

D. Fresh issue to public

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Correct Answer: Option A

Explanation:
Bonus shares are issued to existing shareholders without consideration, by capitalizing reserves.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #2

Amortisation is related to:

A. Fictitious assets only

B. Tangible assets

C. Intangible assets

D. Current assets

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Correct Answer: Option C

Explanation:
Amortisation is the systematic write-off of intangible assets like patents, copyrights.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #3

A 'Drawings' account is a:

A. Valuation account

B. Personal account

C. Real account

D. Nominal account

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Correct Answer: Option B

Explanation:
Drawings account represents the proprietor, hence it is a personal account.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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