Question 1

In a Cash Book Debit balance of `112 brought forward as credit balance of ` 121, while preparing a Bank Reconciliation Statement taking the balance as per Cash Book as the starting point:

Accepted Answer

The error made was reversing the nature of the balance while bringing it forward, which means the actual difference to reconcile the balance as per Cash Book would be the sum of both incorrect credit balance and the correct debit balance, i.e., 112 + 121 = 233.

Question 2

______________ represents a potential obligation that could be created depending on the outcome of an event.

Accepted Answer

Contingent liabilities are potential obligations that may become actual liabilities depending on the outcome of a future event.

Question 3

Opening Debtors, Collection from Debtors and Discount Allowed were `3,15,000. `18,30,000 and `35,000 respectively. If the closing debtors were 20% of credit sales of the period then closing debtors and credit sales would be

Accepted Answer

Explanation: To find the closing debtors and credit sales, we use the information given. Opening Debtors + Credit Sales - Collections - Discount Allowed = Closing Debtors. Let's denote Credit Sales as "X". So, 3,15,000 + X - 18,30,000 - 35,000 = 20% of X. Simplifying, we get X = 19,37,500. Therefore, Closing Debtors = 20% of 19,37,500 = 3,87,500.

Question 4

Following information is given ` Opening Stock 2,13,000 Purchase 16,55,000 Sales 21,32,000 Carriage Inwards 32,500 Carriage Outwards 38,600 Return Inwards 38,000 If the rate of gross profit is 25% on cost then value of closing stock will be

Accepted Answer

To find the closing stock, first calculate the cost of goods sold (COGS). Gross profit is 25% on cost, so sales = 1.25 * COGS. Rearrange to find COGS = Sales / 1.25 = 21,32,000 / 1.25 = 17,05,600. Calculate total cost: Opening Stock + Purchases + Carriage Inwards - Return Inwards = 2,13,000 + 16,55,000 + 32,500 - 38,000 = 18,62,500. Closing Stock = Total Cost - COGS = 18,62,500 - 17,05,600 = 1,56,900. However, this doesn't match any options, so recheck calculations or assumptions.

Question 5

Provision for Doubtful Debt on 1st April, 2018 was `21,500. During the year 2018 - 19 the Bad-debt and Recovery of Bad-debt were ` 10,500 and ` 2,100 respectively. The Sundry Debtors on 31st March, 2019 were `2,25,000. Provision is to be made @ 5% on Debtors. If on 31st March, 2019, there was additional Bad-debt of ` 2,500 then Provision for doubtful-debt will be

Accepted Answer

The provision for doubtful debts is calculated on the closing balance of debtors after adjusting for bad debts and recoveries. The calculation is as follows: Adjusted Debtors = Sundry Debtors - Additional Bad-debt + Recovery of Bad-debt = 225,000 - 2,500 + 2,100 = 224,600. New Provision = 5% of Adjusted Debtors = 5% of 224,600 = 11,230. Change in Provision = New Provision - Old Provision = 11,230 - 21,500 = -3,270. Since the provision has decreased, the difference is credited to the Profit & Loss Account, but since the question asks for the amount to be debited (implying the expense associated with the provision for the current year), we calculate the expense as the amount added to reach the new provision level from adjustments made during the year: Bad-debt expense (including additional bad debt) = 10,500 + 2,500 = 13,000. Recovery of Bad-debt reduces this expense, so the net expense = 13,000 - 2,100 = 10,900. The net effect on the P&L for provisions and bad debts combined is an increase in expenses, but since the direct question is about the provision adjustment, the correct answer reflects the calculation error in interpreting the provision adjustment as a direct debit to the P&L. The correct approach is to recognize the net change in provision required based on the adjusted debtor balance, which results in a calculation of the new provision requirement and comparison to the existing provision.

Question 6

A and B enter into a joint venture sharing profit and losses in the ratio of 3:2. A purchased goods costing `2,00,000. B sold 95% goods for ` 2,50,000. A is entitled to get 1% commission on purchase and B is entitled to get 5% commission on sales. A drew a bill on B for an amount equivalent to 80% of original cost of goods. A got it discounted at `1,50,000. What is A's share of profit?

Accepted Answer

A's commission on purchase = 1% of 2,00,000 = `2,000.B's commission on sales = 5% of 2,50,000 = `12,500.Total profit = Sales - Cost of goods sold - A's commission - B's commission= 2,50,000 - (95% of 2,00,000) - 2,000 - 12,500= 2,50,000 - 1,90,000 - 2,000 - 12,500= `45,500.A's share = 3/5 of 45,500 = `27,300.But A also incurred a loss due to discounting the bill = 1,60,000 (80% of 2,00,000) - 1,50,000 = `10,000.Therefore, A's net share of profit = 27,300 - 10,000 = `17,300.Since none of the options match the calculated value, the correct answer is:D

Question 7

On 31st March, 2018 (`) On 31st March, 2019 (`) Subscription Outstanding 55,000 72,000 Subscription Received in Advance 31,000 37,000 The amount of subscription received during the year 2018-19 would be

Accepted Answer

The amount of subscription received during the year 2018-19 can be calculated using the formula: Subscription Received during the year = Subscription Received in Advance at the end + Subscription Outstanding at the end + Subscription for the current year - Subscription Received in Advance at the beginning - Subscription Outstanding at the beginning. Plugging in the given values: = 37,000 + 72,000 + Subscription for the current year - 31,000 - 55,000. To find the Subscription for the current year, we need to rearrange the formula to solve for it, but since the question directly asks for the total subscription received (which includes adjustments for advances and outstanding amounts), we don't have a direct way to calculate it without knowing the actual subscription amount for the year. However, the correct approach involves adjusting the outstanding and advance subscriptions as part of the total calculation. The provided options suggest a misunderstanding in the calculation process, as the correct calculation method requires additional information not provided in the question.

Question 8

_______________ is prepared at the end of the accounting period to show the financial position o f business

Accepted Answer

The Balance Sheet is prepared at the end of the accounting period to show the financial position of a business, detailing its assets, liabilities, and owners' equity.

Question 9

Payment of monthly rent to land cord is

Accepted Answer

Payment of monthly rent to a landlord is considered an economic event because it involves a financial transaction related to the acquisition or use of a resource (in this case, property).

Question 10

_____________is the original form of accounting

Accepted Answer

The answer of _____________is the original form of accounting
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Question 11

_____________is an example of fixed asset

Accepted Answer

Land and building are fixed assets because they are not easily converted into cash and are used in the business for a long period of time.

Question 12

The term _________denotes the cost of services and things used for earning revenue

Accepted Answer

Expense is the correct term as it refers to the cost of services and things that are used in the process of earning revenue.

Question 13

A person who owes money to the business is a __________

Accepted Answer

A debtor is someone who owes money to the business, typically because they have purchased goods or services on credit.

Question 14

A _________ is a person to whom business owes money

Accepted Answer

A creditor is a person or entity to whom money is owed by the business, typically because they have provided goods, services, or loans to the business.

Question 15

___________denote goods brought for sale.

Accepted Answer

"Purchases" denote goods brought for sale, as it refers to the acquisition of goods that a business intends to sell.

Question 16

________________ is an example of wasting asset

Accepted Answer

Mines are considered wasting assets because their value decreases over time as the resources are extracted, unlike land which typically appreciates or maintains value, and closing stock which is inventory and not categorized as a wasting asset.

Question 17

Asset acquired for long period of time in the business is known as ___________

Accepted Answer

Fixed assets are assets that are purchased for long-term use and are not likely to be converted quickly into cash, such as buildings, machinery, and land.

Question 18

Things which are purchased by the business for resale are called________

Accepted Answer

Purchases refer to the goods acquired by a business for the purpose of resale, making them an integral part of the inventory that the business intends to sell to its customers.

Question 19

____________ expenditure is increased to maintain the business or to keep the assets in good working condition

Accepted Answer

Revenue expenditure is incurred to maintain the business or to keep the assets in good working condition, covering costs such as repairs and maintenance.

Question 20

______________ is the major source of revenue of any business

Accepted Answer

Sales are the primary source of revenue for most businesses, as they represent the income received from selling goods or services to customers.

Quiz 42: Accounting: Interest, Bill, Partnership Agreement,insurance, Contingent Liability, and Business Resources