Financial Statements 1 Test 39

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Financial Statements 1 Test 39

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Weekly Quiz Competition

Question 1
1 / -0

If trail a balance does not tally inspite of thorough scrutiny and the difference is substantial, then which one of the following courses would be accountant adopt?

A
Defer preparation of financial statements.

B
Open suspense account.

C
Write off the difference to profit and loss account.

D
Ignore the difference and prepare financial statements.

Solution

Accounting is based on the double entry system where each business transaction will have two affects i.e. one in debit and another in credit. Hence in such situation, the total of both sides must be equal so is the case with trial balance.
If trial balance is not tallied, there are chances of clerical error. These errors need to be identified. If still the differences are not identified and the difference is substantial, then the difference amount need to be transferred to a newly opened a/c "Suspense A/c".
Question 2
1 / -0

Balance sheet is prepared primarily with the following group in view of ____________.

A
owners

B
creditors

C
government

D
management

Solution

Balance Sheet is statement prepared on a particular date to know the financial position of the firm. Every owner would like to know the state of affairs of the business. Balance sheet includes the relevant data of assets and liabilities of the business.
Question 3
1 / -0

'Proposed dividends' is shown in the balance sheet of a company under the head of _________.

A
Provisions

B
Reserves and Surplus

C
Current liabilities

D
Other liabilities

Solution

Provision is defined as the amount set aside to meet the future liability. provisions may be made for short term and long term liability. Short term provisions are those against which the liability is going to arise in next 12 months or so.
Proposed dividend is shown under the heading of provisions in the balance sheet in liability side. Other provisions may be, employee benefits, taxation etc.
Question 4
1 / -0

Cost of goods sold- Rs. 13,300, Gross Profit - Rs. 3,200, Net profit - Rs. 700, what is the amount of sales?

A
Rs. 14,000

B
Rs. 10,100

C
Rs. 16,500

D
Rs. 17,200

Solution

Particulars Amount Particulars Amount
Cost of Goods Sold 13300 Sales 16500
Gross Profit 3200
Total 16500 Total 16500
Question 5
1 / -0

Which of the following are not current liabilities?

A
Bank overdraft.

B
Redeemable debentures.

C
Provision for doubtful debts.

D
Accounts payable.

Solution

Debentures issued by the company represents a long term debt which carries a charge of interest. Redeemable debentures are not current liabilities.
Question 6
1 / -0

A business concern provides the following details.
Cost of goods sold - Rs. 1,50,000
Sales - Rs. 2,00,000
Opening stock - Rs. 60,000
Closing stock - Rs. 40,000
Debtors - Rs. 45,000
Creditors - Rs. 50,000
The concerns, purchases would amount to (in Rs.) ____________.

A
1, 30,000

B
2,20,000

C
2,60,000

D
2,90,000

Solution

This can be represented by below equation:

Opening Stock+Purchases-closing stock=Cost of Goods sold
Putting the available information in the equation:

Rs.60000+Purchases-Rs.40000=Rs.150000
Rs.60000-Rs.40000+Purchases=Rs.150000
Rs.20000+Purchases=Rs.150000
Purchases=Rs.150000-Rs.20000
Purchases =Rs.130000.
Question 7
1 / -0

Assets appearing in the book but having no value are known as ___________.

A
Wasting Assets

B
Intangible Assets

C
Current Assets

D
Fictitious Assets

Solution

The word fictitious mean "fake' or "not true". Fictitious assets are not actually assets but are shown as assets in the balance sheet for time being. In fact, these are expenditure which could not be written off during a particular year. These assets actually does not have any realizable value.
These are amortized over a period of time. For example:
a) Preliminary Expenses
b) Loss on issue of debenture
These are shown in the balance sheet under the heading "Miscellaneous Expenditure" as part of asset.
Question 8
1 / -0

The movement of securities from one stock exchange to another with the object of reaping a profit from the disparity in share prices is called __________.

A
Averaging

B
Arbitraging

C
Back wardation

D
Forward Trading

Solution

Arbitrage is a process of taking out the profits by movement of securities from one stock exchange to another due to price disparity.
Arbitrage is the simultaneous purchase and sale of an asset to profit from an imbalance in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.
Question 9
1 / -0

Given the following data extracted from the book of Abdul traders.
Opening stock - Rs. 30,000
Closing stock - Rs.40,000
Purchases- Rs.1,25,000
Carriage inwards-Rs.2,000
Carriage outwards- Rs.3,000
Return outwards- Rs.5,000
Sales - Rs.1,50,000
The cost of goods sold will be ____________.

A
$$Rs.1,30,000$$

B
$$Rs.1,12,000$$

C
$$Rs.1,20,000$$

D
$$Rs.1,15,000$$

Solution

Cost of goods sold is calculated as :

Opening Stock + Net Purchases + Direct Expenses - Closing Stock = Cost of Goods Sold

By putting the available information:

Rs.30000 + Rs.120000 (Rs.125000 - Rs.5000) + Rs.2000 - Rs.40000

Cost of Goods Sold = Rs. 112000
Question 10
1 / -0

The mutual obligations to be eliminated from the consolidated balance sheet are ___________.
$$1.$$ Cash in transit or goods in transit
$$2.$$ Contingent liabilities
$$3.$$ Loans payable and receivable
$$4.$$ Owing for services rendered

A
$$1, 3$$ and $$4$$

B
$$2$$ and $$4$$

C
$$1$$ and $$3$$

D
All the four
Solution
A consolidated balance sheet is a document which consists of all the assets and liabilities of the parent company as well as its subsidiaries company. It also states the following items to be eliminated while preparing it:
Cash in transit or goods in transit.
Contingent liabilities.
Loans payable and receivable.
Owing for services rendered.

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Particulars	Amount	Particulars	Amount
Cost of Goods Sold	13300	Sales	16500
Gross Profit	3200
Total	16500	Total	16500

Financial Statements 1 Test 39

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Financial Statements 1 Test 39

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Question 1

Defer preparation of financial statements.

Open suspense account.

Write off the difference to profit and loss account.

Ignore the difference and prepare financial statements.

Solution

Question 2

owners

creditors

government

management

Solution

Question 3

Provisions

Reserves and Surplus

Current liabilities

Other liabilities

Solution

Question 4

Rs. 14,000

Rs. 10,100

Rs. 16,500

Rs. 17,200

Solution

Question 5

Bank overdraft.

Redeemable debentures.

Provision for doubtful debts.

Accounts payable.

Solution

Question 6

1, 30,000

2,20,000

2,60,000

2,90,000

Solution

Question 7

Wasting Assets

Intangible Assets

Current Assets

Fictitious Assets

Solution

Question 8

Averaging

Arbitraging

Back wardation

Forward Trading

Solution

Question 9

$$Rs.1,30,000$$

$$Rs.1,12,000$$

$$Rs.1,20,000$$

$$Rs.1,15,000$$

Solution

Question 10

$$1, 3$$ and $$4$$

$$2$$ and $$4$$

$$1$$ and $$3$$

All the four

Solution

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