Payment of a liability out of cash will result in: MCQ with Answer and Explanation

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Payment of a liability out of cash will result in:

A. Increase in an asset and increase in a liability

B. Decrease in an asset and decrease in capital

C. Decrease in an asset and decrease in a liability

D. Increase in a liability and decrease in capital

Answer: Option C

Solution (By JKSSB Mock Tests)

Cash (Asset) decreases and the corresponding Liability also decreases, keeping the accounting equation balanced.

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

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Question #1

Which of the following is NOT an advantage of Zero Based Budgeting?

A. Prevents arbitrary budget inflation

B. Fosters efficient resource allocation

C. Eliminates redundant expenses

D. It is less time-consuming than traditional budgeting

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Correct Answer: Option D

Explanation:
ZBB is actually heavily time-consuming because it requires managers to justify every single expenditure from scratch annually.

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Question #2

Which of the following is an example of a deferred revenue expenditure?

A. Heavy advertising campaign for a new product launch

B. Payment of rent

C. Purchase of machinery

D. Payment of salary

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Correct Answer: Option A

Explanation:
A heavy advertising campaign for a new product provides benefits over multiple years, making it a deferred revenue expenditure.

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

Question #3

The Indian Financial Management System (IFMS) integrates:

A. Expenditure, receipts, and debt management

B. Only state government accounts

C. Only pension payments

D. Only receipts

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Correct Answer: Option A

Explanation:
IFMS is a comprehensive system covering all aspects of government financial management including budget, expenditure, receipts, and debt.

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

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