Final Accounts Test 6

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Final Accounts Test 6

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Question 1
1 / -0

Providing Interest on Capital _______ net profit.

A
Reduces

B
Increases

C
No effect

D
None

Solution

Interest on capital is a charge on the profits of a firm and it decreases the net available profit for appropriation.
Question 2
1 / -0

Opening capital Rs. 100000 and additional capital on 1st Oct was Rs. 20000
Interest on capital @ 10% on 31st march closing will be ?

A
5,000

B
8,000

C
11,000

D
None of these.

Solution

Interest on capital = 100000 * 10 / 100
= 10000
Additional Capital Introduced on 1st Oct = 20000 * 10 / 100 * 6 / 12
= 1000
Total = 10000 + 1000
= 11000
Question 3
1 / -0

When the firm thinks of availing discount on bulk purchases, then ____________________________.

A
The number of orders will increases if the minimum quantity of purchase is less than the EOQ.

B
The carrying costs will increases if the EOQ is less than the minimum quantity of purchase.

C
The discount will not affect the carrying costs.

D
Incremental benefits come due to discount and carrying costs.

E
The incremental costs are equal to incremental befits and so discount can be ignored to calculated EOQ.

Solution

When the minimum quantity for purchases is more than the economic order quantity, then there will be an increase in the average value of the inventory which will result in higher incidence of carrying cost.
Question 4
1 / -0

Choose the correct chronological order of ascertainment of the following profits from the profit and loss account.

A
Operating Profit, Net Profit, Gross Profit

B
Operating Profit, Gross Profit, Net Profit

C
Gross Profit, Operating Profit, Net Profit

D
Gross Profit, Net Profit, Operating Profit
Solution
At the end of the financial year, books of the business are closed and financial statements are prepared to know the profitability of the organization.

Following is the sequence of knowing the profitability:
Gross Profit by preparing the trading account
Operating Profit by deducting the operating expenses from gross profit.
Net Profit after deducing the non operating expenses from operating profit and adding the non operating income.
Question 5
1 / -0

Commission to manager is __________ to Profit and loss Account.

A
Debited

B
Credited

C
Added

D
Deducted

Solution

Manager's commission is an operating expense just as any other expense like salary, rent etc. Manager's commission paid is shown on the debit side of the profit and loss account as it is an expense for the company.
Question 6
1 / -0

ABC analysis of inventory __________________________.

A
Is useful for companies having different items in an inventory with different quantities and values.

B
Segregates items with smaller value in the category A

C
Segregates items which are larger in number with small rupee investment into category C.

D
Both (A) and (C) above

E
Both (A) and (B) above

Solution

ABC is an inventory management technique in which inventory is segregated into three groups - A, B and C on the basis of value of annual usage. The A items are those in which it has the largest rupee investment, the B group consists of items accounting for the next largest investment and the C group consists of a large number of items accounting for a small rupee investment,
Question 7
1 / -0

When interest on capital is allowed _________ is credited.

A
Capital A/c

B
Profit and loss A/c

C
Cash A/c

D
None

Solution

Journal entries for Interest on Capital:
Interest on capital is an appropriation (setting apart) of profit. If a firm has earned profit, it will have a credit balance in the P & L Appropriation A/c.
Question 8
1 / -0

Commission due but not paid to the manager at d end of the years appears under __________ side.

A
Asset

B
Liability

C
Trading A/c Debit side

D
None

Solution

The Outstanding Expense A/c appears on the liability side of the Balance Sheet. While preparing the Trading and Profit and Loss A/c we need to add the amount of outstanding expense to that particular expense.
Question 9
1 / -0

In computing the return on capital employed the profit figure to be taken into account is __________________.

A
Net profit after taxes + Interest

B
Net profit after taxes and interest

C
Net profit after taxes, interest and preference divided

D
None of the above

Solution

Net profit after taxes = Gross profit - Operating expenses - interest - taxes

As capital employed include debt.capital therefore interest is added to net profit after taxes
Interest is first deducted to calculate amount of taxes and then added back.
Question 10
1 / -0

At the end of the year, balance of salary account is transferred to ________.

A
trading account

B
balance sheet

C
profit & loss account

D
statement of affairs

Solution

At the end of the financial year, all the nominal accounts are transferred to the trading and profit & loss account by passing the closing entries.
A salary account is an indirect expense that is transferred to the profit & loss account.

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Final Accounts Test 6

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Final Accounts Test 6

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Question 1

Reduces

Increases

No effect

None

Solution

Question 2

5,000

8,000

11,000

None of these.

Solution

Question 3

The number of orders will increases if the minimum quantity of purchase is less than the EOQ.

The carrying costs will increases if the EOQ is less than the minimum quantity of purchase.

The discount will not affect the carrying costs.

Incremental benefits come due to discount and carrying costs.

The incremental costs are equal to incremental befits and so discount can be ignored to calculated EOQ.

Solution

Question 4

Operating Profit, Net Profit, Gross Profit

Operating Profit, Gross Profit, Net Profit

Gross Profit, Operating Profit, Net Profit

Gross Profit, Net Profit, Operating Profit

Solution

Question 5

Debited

Credited

Added

Deducted

Solution

Question 6

Is useful for companies having different items in an inventory with different quantities and values.

Segregates items with smaller value in the category A

Segregates items which are larger in number with small rupee investment into category C.

Both (A) and (C) above

Both (A) and (B) above

Solution

Question 7

Capital A/c

Profit and loss A/c

Cash A/c

None

Solution

Question 8

Asset

Liability

Trading A/c Debit side

None

Solution

Question 9

Net profit after taxes + Interest

Net profit after taxes and interest

Net profit after taxes, interest and preference divided

None of the above

Solution

Question 10

trading account

balance sheet

profit & loss account

statement of affairs

Solution

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