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Final Accounts Test 2

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Final Accounts Test 2
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Weekly Quiz Competition
  • Question 1
    1 / -0
    The loss on the sale of old furniture is debited to ________.
    Solution
    On sale of any old assets, if any profit or loss arises, this has to be debited to profit & loss account. Though it is not a business activity but due to usage of assets, the value gets depreciated. Depreciation is charged to profit & loss account. Same way, any loss arising on account of sale of old furniture should be debited to profit & loss account. 
  • Question 2
    1 / -0
    If net profits are Rs. 30,000 and expenses not resulting in the application of fund are Rs. 10,000, then the funds from operation will be ___________.
    Solution
    Funds from operation means the cash inflows generated from the business. That means, all non fund expenses need to added back to the net profit to find out the funds from operations. 
    Hence,
    Net Profit + Non fund expenses = Funds from operations
    Rs.30000 + Rs.10000 = Rs.40000/-
  • Question 3
    1 / -0
     Discount is given to debtors to encourage _________.
    Solution
    A business enterprise allows discount on debtors to encourage prompt payments. Discount likely to be allowed to customers in an accounting year can be estimated and provided for by creating a provision for discount on debtors. Provision for discount is made on good debtors which are arrived at by deducting further bad debts and the provision for doubtful debts. The journal entry is recorded to create provision for discount on debtors:
    Profit and Loss A/c Dr.
            To Provision on Discount on Debtors A/c
    As stated above, the provision for discount on debtors will be created only on good debtors.
  • Question 4
    1 / -0
     Provision for discount on debtors is ____________.
    Solution
    A business enterprise allows discount to its debtors to encourage prompt payments. Discount likely to be allowed to customers in an accounting year can be estimated and provided for by creating a provision for discount on debtors. Provision for discount is made on good debtors which are arrived at by deducting further bad debts and the provision for doubtful debts. The following journal entry is recorded to create provision for discount on debtors:
    Profit and Loss A/c Dr.
            To Provision for Discount on Debtors A/c 
  • Question 5
    1 / -0
    Discount given to debtors is known as _____.
    Solution
    A business enterprise allows discount to its debtors to encourage prompt payments. Discount likely to be allowed to customers in an accounting year can be estimated and provided for creating a provision for discount on debtors. Provision for discount is made on good debtors which are arrived at by deducting further bad debts and the provision for doubtful debts. 

    The following journal entry is recorded to create provision for discount on debtors: 
                 Profit and Loss A/c Dr.       
                To Provision for Discount on Debtors A/c
  • Question 6
    1 / -0
    Which of the following methods or inventory valuation results in lower valuation of inventory and low income when Inflation is on the rise?
    Solution
    During times of rising prices, companies may find it beneficial to use LIFO cost accounting over FIFO. Under LIFO, whenever prices are rising, firms can save on taxes as well as better match their revenues to their latest costs.
  • Question 7
    1 / -0
     Provision for discount on debtors is created for_____.
    Solution
    A business enterprise allows discount to its debtors encourage prompt payments. Discount likely to be allowed to customers in an accounting year can be estimated and provided for by creating a provision for discount on debtors. Provision for discount is made on good debtors which are arrived at by deducting further bad debts and the provision for doubtful debts. The following journal entry is recorded to create provision for discount on debtors:
    Profit and Loss A/c  Dr.
             To Provision for Discount on Debtors A/c
    The provision for discount on debtors will be created only on good debtors.
  • Question 8
    1 / -0
    Net profit is calculated in the __________.
    Solution
    Financial statement of the business are prepared normally at the end of the financial year. There are three main statements that are prepared:
    1) Trading account shows the gross profit/loss after debiting all the direct expenses and sales.
    2) Profit & Loss account  shows the net profit/loss after considering the indirect expenses and incomes.
    3) Balance Sheet which shows the assets and liabilities of the firm as on the date. 
  • Question 9
    1 / -0
    Consider the following statements.
    I. Incase of the marine insurance, the insurable interest must exist at the time the loss occurs.
    II. Incase of fire insurance, insurable interest must exist both at the time of the contract and at the time of loss.
    Which of the statements given is/are correct?
    Solution
    1. In a marine insurance contract the presence of insurable interest is necessary only at the time of the loss. It is immaterial whether he has or does not have any insurable interest at the time when the marine insurance policy was taken.
    2. A person cannot insure the property of a third party, because he does not have an insurable interest in it. In case of fire insurance, insurable interest must exist both at the time of contract and at the time of loss.
    3. It is not necessary that he should have insurable interest at the time of maturity also.
  • Question 10
    1 / -0
    The degree to which the returns of the two securities change together, is reflected by _________.
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