Which of the following is a capital profit? MCQ with Answer and Explanation

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Which of the following is a capital profit?

A. Rent received

B. Profit on sale of investment (capital nature)

C. Profit on sale of goods

D. Discount received

Answer: Option B

Solution (By JKSSB Mock Tests)

Profit on sale of a capital asset (like long-term investment) is capital profit. Profit on sale of goods is revenue.

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

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Question #1

The 'ASB' stands for:

A. Auditing Standards Board

B. Accounting Standards Bureau

C. Accounting Standards Board of ICAI

D. Audit and Standards Bureau

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Correct Answer: Option C

Explanation:
ASB is Accounting Standards Board, constituted by ICAI to formulate accounting standards.

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Question #2

If opening capital is Rs 1,00,000, closing capital is Rs 1,50,000, and drawings are Rs 20,000, what is the profit for the year assuming no additional capital?

A. Rs 1,70,000

B. Rs 70,000

C. Rs 50,000

D. Rs 30,000

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Correct Answer: Option B

Explanation:
Profit = Closing Capital + Drawings - Opening Capital. Profit = 1,50,000 + 20,000 - 1,00,000 = Rs 70,000.

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Question #3

Under the double-entry system, a decrease in an asset is recorded by:

A. Crediting the capital account

B. Debiting a liability account

C. Crediting the asset account

D. Debiting the asset account

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Correct Answer: Option C

Explanation:
Assets have normal debit balances. A decrease is recorded by crediting the account.

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

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