Final Accounts Test 3

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Final Accounts Test 3

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Weekly Quiz Competition

Question 1
1 / -0

While making an adjustment entry in respect of interest on capital, credit is made to _______________.

A
Capital account

B
Interest on capital account

C
Profit & loss account

D
Interest account

Solution

Interest on Capital has the following two effects on final accounts: It is an expense of the business, therefore; it will be recorded on the debit side of Profit and Loss Account. On the other hand, it is an income of the owner, therefore; it will be added in the Capital Account in Balance Sheet.
Question 2
1 / -0

The interest can be computed on the additional capital __________.

A
from the date on which it was brought into the business

B
from the beginning of year

C
from middle of the year

D
None of the above

Solution

Sometimes, the proprietor may like to know the profit made by the business after providing for interest on capital. In such a situation, interest is calculated at a given rate of interest on capital as at the beginning of the accounting year. If however, any additional capital is brought during the year, the interest may also be computed on such amount from the date on which it was brought into the business. Such interest is treated as expense for the business and the following journal entry is recorded in the books of account:
Interest on capital A/c Dr.
To Capital A/c
In the final accounts, it is shown as an expense on the debit side of the profit and loss account and added to the capital in the balance sheet.
Question 3
1 / -0

Net profit of a business is Rs. 220 before charging commission. If the manager is entitled to 15% of the profit before charging such commission, the commission will be _____.

A
Rs. 44

B
Rs. 33

C
Rs. 20

D
Rs. 30

Solution

The manager of the business is sometimes given the commission on the net profit of the company. The percentage of the business is applied on the profit either before charging such commission or after charging such commission.

In the absence of any such information, it is assumed that commission is allowed as a percentage of the net profit before charging such commission.

Net profit of the business is Rs. 220 before charging commission, If the manager is entitled to 15% of the profit before charging such commission, the commission will be:
= Rs. 220 X 15/100
= Rs. 33
Question 4
1 / -0

Interest on capital will be ________.

A
debited to profit & loss account

B
credited to profit & loss account

C
debited to trading account

D
credited to trading account

Solution

Sometimes, the proprietor may like to know the profit made by the business after providing for interest on capital. In such a situation, interest is calculated at a given rate of interest on capital as at the beginning of the accounting period. If however, any additional capital is brought during the year, the interest may also be computed on such amount from the date on which it was brought into the business. Such interest is treated as expense for the business and the following journal entry is recorded in the books of accounts:
Interest on Capital A/c Dr.
To Capital A/c
In the final accounts, it is shown as an expense on the debit side of the profit and loss account and added to capital in the balance sheet.
Question 5
1 / -0

Indicate which of the following is correct ?

A
Sales - Gross profit - Operating Expenses = Net profit

B
Sales + Gross profit -Operating Expenses = Net profit

C
Gross profit + Operating profit - Cost of goods sold = Net profit

D
Sale - Cost of goods sold - Operating expenses = Net profit

E
None of these

Solution

Following Equation is a correct one:

Sales
Less: Cost of Goods Sold
Less: Operating Expenses
------------------------
Net Profit
-------------------------
Question 6
1 / -0

Interest on capital is added to______.

A
profit

B
cash

C
capital

D
interest

Solution

Sometimes, the proprietor may like to know the profit made by the business after providing for interest on capital. In such a situation, interest is calculated at a given rate of interest on capital as at the beginning of the accounting year. If however, any additional capital is brought during the year, the interest may also be computed on such amount from the date on which it was brought into the business. Such interest is treated as an expense for the business and the following entry is recorded in the books of accounts:
Interest on Capital A/c Dr.
To Capital A/c
In the final accounts, it is shown as an expense on the debit side of profit and loss account and added to capital in the balance sheet.
Question 7
1 / -0

Interest on capital is ________ on business.

A
expense

B
loss

C
profit

D
income

Solution

Sometimes, the proprietor may like to know the profit made by the business after providing for interest on capital. In such a situation, interest is calculated at a given rate of interest on capital as at the beginning of the accounting year.
If however, any additional capital is brought during the year, the interest may also be computed on such amount from the date on which it is brought into business.
Such interest is treated as expense for the business and the following entry is recorded in the books of account:
Interest on Capital A/c Dr.
To Capital A/c
Question 8
1 / -0

Manager's Commission is __________ to company.

A
Loss

B
Profit

C
Expense

D
Income

Solution

The manager of the business is sometimes given the commission on the net profit of the company. The percentage of the commission is applied on the profit either before charging such commission or after charging such commission. In the absence of any such information, it is assumed that commission is allowed as a percentage of the net profit before charging such commission. Manager's commission is an expense to the company.
Suppose the net profit of a business is Rs. 110 before charging commission.

If the manager is entitled to 10% of the profit before charging such commission, the commission will be calculated as:
= Rs. 110 X 10/100
= Rs. 11
Question 9
1 / -0

Interest is calculated at a given rate of interest on capital as at the _____ of the accounting year.

A
beginning of the year

B
ending of the year

C
additional capital

D
Both A & C

Solution

Sometimes, the proprietor may like to know the profit made by the business after providing for interest on capital. In such a situation, interest is calculated at a given rate of interest on capital as at the beginning of the accounting year. If however, any additional capital is brought during the year, the interest may also be computed on such amount from the date on which it is brought into the business. Such interest is treated as expense for the business on debit side of profit and loss account.
Question 10
1 / -0

The manager of the business is sometimes given the commission on _______.

A
Salary

B
Purchase

C
Gross profit

D
Net profit

Solution

The manager of the business is sometimes given the commission on the net profit of the company. The percentage of the commission is applied on the profit either before charging such commission or after charging such commission. In the absence of any such information, it is assumed that commission is allowed as a percentage of the net profit before charging such commission.

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Re-Attempt Weekly Quiz Competition

Final Accounts Test 3

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Final Accounts Test 3

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SHARING IS CARING

Question 1

Capital account

Interest on capital account

Profit & loss account

Interest account

Solution

Question 2

from the date on which it was brought into the business

from the beginning of year

from middle of the year

None of the above

Solution

Question 3

Rs. 44

Rs. 33

Rs. 20

Rs. 30

Solution

Question 4

debited to profit & loss account

credited to profit & loss account

debited to trading account

credited to trading account

Solution

Question 5

Sales - Gross profit - Operating Expenses = Net profit

Sales + Gross profit -Operating Expenses = Net profit

Gross profit + Operating profit - Cost of goods sold = Net profit

Sale - Cost of goods sold - Operating expenses = Net profit

None of these

Solution

Question 6

profit

cash

capital

interest

Solution

Question 7

expense

loss

profit

income

Solution

Question 8

Loss

Profit

Expense

Income

Solution

Question 9

beginning of the year

ending of the year

additional capital

Both A & C

Solution

Question 10

Salary

Purchase

Gross profit

Net profit

Solution

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