The 'Business Entity Concept' means: MCQ with Answer and Explanation

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The 'Business Entity Concept' means:

A. Only companies are separate entities

B. The business is a separate entity from its owners

C. The business is not liable for debts

D. The owner and business are the same

Answer: Option B

Solution (By JKSSB Mock Tests)

For accounting purposes, the business is treated as distinct from the proprietor.

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

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Question #1

Depreciation is provided on:

A. Fixed assets (tangible)

B. Intangible assets only

C. Fictitious assets

D. Current assets

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Correct Answer: Option A

Explanation:
Depreciation is charged on tangible fixed assets like machinery, buildings to reflect wear and tear.

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

Question #2

A company's preliminary expenses written off is shown in:

A. Balance Sheet

B. Not shown

C. Profit & Loss Account

D. Trading Account

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Correct Answer: Option C

Explanation:
Written off portion is charged to P&L Account as an expense.

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

Question #3

A firm's working capital is ₹50,000, current ratio 2.5:1. Its quick ratio is 1.5:1. Inventory value is:

A. ₹40,000

B. ₹30,000

C. ₹20,000

D. ₹25,000

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Correct Answer: Option A

Explanation:
WC = CA - CL = 60,000. CA/CL = 3 => CA = 3CL. So 3CL - CL = 60,000 => 2CL = 60,000 => CL = 30,000, CA = 90,000. QA/CL = 1 => QA = 30,000. Inventory = CA - QA = 90,000 - 30,000 = ₹60,000.

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

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