Accounting MCQ Questions and Solutions with Explanations | Commerce

Salaries of selling staff would NOT be considered as a component of 'cost' of stock. When investors purchase shares of stock, the price paid includes two components: the price of the stock and the fee charged by the brokerage firm, called commission.

Current asset is TRUE about the treatment of insurance premium paid in advance. Current assets represent all the assets of a company that are expected to be conveniently sold, consumed, utilized or exhausted through the standard business operations, which can lead to their conversion to a cash value over the next one year period.

Listed companies are public limited companies with shares quoted and traded on a recognized stock exchange.

Due to such type of conditions, these companies are regulated highly by the laws and regulations of the stock exchange, where they have to make disclosures towards the public relating to their financial condition.

Non-listed companies are also public limited companies, but their shares are not quoted and traded on any stock exchange. These companies do not need to offer such an intensity of public disclosures as the listed companies, but they still maintain the essential qualities of the public companies, where at least seven shareholders can be identified .

Public limited companies
Therefore, the public limited companies may either be listed companies or non-listed companies based on their shares being traded in a public forum.

Private limited companies
Private limited companies are different from the public limited companies in which, ownership is relatively more controlled by limited persons and the shares are not allowed to be sold in a public forum.

The memorandum of association of a company is the charter and defines the limitation of the power of the company established under Companies Act. Memorandum of Association is the most important document of a company. It states the objects for which the company is formed. It contains the rights, privileges and powers of the company. Hence it is called a charter of the company. It is treated as the constitution of the company. It determines the relationship between the company and the outsiders.

Merchandise on hand at either the beginning or end of the accounting period is called Inventory. Inventory is the array of finished goods or goods used in production held by a company. Inventory is classified as a current asset on a company's balance sheet, and it serves as a buffer between manufacturing and order fulfillment.

Issued capital refers to the portion of authorized capital that is offered to and taken up by the general public or shareholders. Subscribed capital is the part of issued capital that shareholders have agreed to buy. Authorized capital is the maximum amount of capital a company is allowed to issue. Reserve capital is not typically taken up by the general public; it's set aside for specific purposes. Therefore, the correct answer is Option A: Issued capital.

Current liabilities and current assets items of balance sheet are useful in evaluating a company's liquidity.

General reserve can be distributed among the shareholders. General reserve can be used for distribution of dividend among shareholders when profit is insufficient. Reserves and surpluses are shown in liabilities side of balance sheet.

Shares for which amount is paid by public are called Paid up shares. Paid-Up Share Capital All paid-up capital is listed under the shareholders' equity section of the issuing company's balance sheet. Share capital can fall into four categories; paid-up share capital, called-up share capital, authorized share capital, and issued share capital.

Trust is non-profit organization. A nonprofit organization is a business that has been granted tax-exempt status by the Internal Revenue Service (IRS) because it furthers a social cause and provides a public benefit.