{"id":58263,"date":"2024-04-16T01:16:27","date_gmt":"2024-04-16T01:16:27","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=58263"},"modified":"2024-04-16T01:16:27","modified_gmt":"2024-04-16T01:16:27","slug":"match-the-items-of-the-following-two-lists-and-indicate-the-correct-answer-list-i-list-ii-a-earning-ability-of-a-firm-1-basis-of-accounting-b-conservatism-2-p-v-ratio-c-cash-profit-3-cash-flow","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/match-the-items-of-the-following-two-lists-and-indicate-the-correct-answer-list-i-list-ii-a-earning-ability-of-a-firm-1-basis-of-accounting-b-conservatism-2-p-v-ratio-c-cash-profit-3-cash-flow\/","title":{"rendered":"Match the items of the following two lists and indicate the correct answer: List-I List-II a. Earning ability of a firm 1. Basis of accounting b. Conservatism 2. P\/V ratio c. Cash profit 3. Cash flow statement d. Cash and accrual 4. Prudence"},"content":{"rendered":"<p>[amp_mcq option1=&#8221;a-2, b-4, c-3, d-1&#8243; option2=&#8221;a-2, b-1, c-4, d-3&#8243; option3=&#8221;a-3, b-4, c-1, d-2&#8243; option4=&#8221;a-3, b-4, c-2, d-1&#8243; correct=&#8221;option3&#8243;]<!--more--><\/p>\n<p>The correct answer is: C. a-3, b-4, c-1, d-2<\/p>\n<ul>\n<li>Earning ability of a firm is a measure of a company&#8217;s profitability. It is calculated by dividing the company&#8217;s net income by its total assets.<\/li>\n<li>Conservatism is a principle of accounting that states that assets should be recorded at their historical cost, and that liabilities should be recorded at their estimated amount.<\/li>\n<li>Cash profit is the amount of cash that a company generates from its operations. It is calculated by subtracting the cost of goods sold, operating expenses, and depreciation from the company&#8217;s revenue.<\/li>\n<li>Cash flow statement is a financial statement that shows how a company&#8217;s cash flows in and out over a period of time. It is divided into three sections: operating activities, investing activities, and financing activities.<\/li>\n<li>Cash and accrual is a basis of accounting that records revenues and expenses when they are earned or incurred, regardless of when cash is received or paid.<\/li>\n<\/ul>\n<p>Here is a brief explanation of each option:<\/p>\n<ul>\n<li>Option A: a-2, b-4, c-3, d-1. This option is incorrect because it matches &#8220;Earning ability of a firm&#8221; with &#8220;P\/V ratio&#8221;. The P\/V ratio is a measure of a company&#8217;s profitability, but it is not the same as earning ability. Earning ability is a more general term that refers to a company&#8217;s ability to generate profits.<\/li>\n<li>Option B: a-2, b-1, c-4, d-3. This option is incorrect because it matches &#8220;Conservatism&#8221; with &#8220;Basis of accounting&#8221;. Conservatism is a principle of accounting, but it is not the same as basis of accounting. Basis of accounting refers to the method that a company uses to record its revenues and expenses.<\/li>\n<li>Option C: a-3, b-4, c-1, d-2. This option is correct because it matches the items in List-I with the items in List-II correctly.<\/li>\n<li>Option D: a-3, b-4, c-2, d-1. This option is incorrect because it matches &#8220;Cash profit&#8221; with &#8220;Conservatism&#8221;. Cash profit is a measure of a company&#8217;s cash flow, but it is not the same as conservatism. Conservatism is a principle of accounting that states that assets should be recorded at their historical cost, and that liabilities should be recorded at their estimated amount.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>[amp_mcq option1=&#8221;a-2, b-4, c-3, d-1&#8243; option2=&#8221;a-2, b-1, c-4, d-3&#8243; option3=&#8221;a-3, b-4, c-1, d-2&#8243; option4=&#8221;a-3, b-4, c-2, d-1&#8243; correct=&#8221;option3&#8243;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85],"tags":[],"class_list":["post-58263","post","type-post","status-publish","format-standard","hentry","category-accounting","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Match the items of the following two lists and indicate the correct answer: List-I List-II a. 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