The mechanism by which a business can reduce its tax liability by claiming credit for taxes paid on purchases is called: MCQ with Answer and Explanation

Question
The mechanism by which a business can reduce its tax liability by claiming credit for taxes paid on purchases is called:
A. Tax Refund
B. Tax Deduction at Source (TDS)
C. Input Tax Credit (ITC)
D. Reverse Charge Mechanism (RCM)
Answer: Option C
Solution (By JKSSB Mock Tests)
ITC avoids the cascading effect of taxes by allowing a set-off of tax paid on inputs against tax payable on output.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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Question #1
The 'Other Matter' paragraph refers to:
A. Matters other than those presented or disclosed in the financial statements that are relevant to understanding the audit, auditor's responsibilities, or report
B. Adverse opinion
C. Matters already disclosed in financial statements
D. Qualification
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Correct Answer: Option A

Explanation:
Other Matter deals with matters not in the financial statements.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #2
The 'Dividend' is paid on:
A. Issued capital
B. Called-up capital
C. Authorised capital
D. Paid-up capital
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Correct Answer: Option D

Explanation:
Dividend is paid on the paid-up share capital, i.e., the amount actually received from shareholders.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #3
A company uses 'Economic Order Quantity' (EOQ) of 500 units. Annual demand is 5,000 units. Number of orders per year will be:
A. 100
B. 500
C. 10
D. 5
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Correct Answer: Option C

Explanation:
Number of orders = Annual demand / EOQ = 5,000 / 500 = 10.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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