A revenue expenditure wrongly capitalized will lead to: MCQ with Answer and Explanation

Question Report Error

A revenue expenditure wrongly capitalized will lead to:

A. Overstatement of liabilities

B. Overstatement of assets and profit

C. No effect

D. Understatement of assets and profit

Answer: Option B

Solution (By JKExamLibrary)

Capitalizing revenue expense increases assets and reduces expenses, thus overstating profit and assets.

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

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Practice More Accountancy and Book Keeping Questions

Question #1 Report Error

If goods worth Rs 2,000 returned to a supplier are not recorded at all, this error is called:

A. Error of Principle

B. Error of Omission

C. Error of Commission

D. Compensating Error

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Correct Answer: Option B

Explanation:
A complete failure to record a transaction in the books of original entry is an error of complete omission.

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

Question #2 Report Error

The 'Tax Audit' under Section 44AB is required for a professional if gross receipts exceed:

A. ₹25 lakh

B. ₹2 crore

C. ₹1 crore

D. ₹50 lakh

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Correct Answer: Option D

Explanation:
For professionals, tax audit threshold is gross receipts > ₹50 lakh.

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

Question #3 Report Error

'Unclaimed Dividend' is shown in Balance Sheet as:

A. Contingent liability

B. Current liability

C. Current asset

D. Reserve

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Correct Answer: Option B

Explanation:
Unclaimed dividend is a liability until paid or transferred to IEPF.

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

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