Financial Statements 2 Test 17

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Financial Statements 2 Test 17

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Weekly Quiz Competition

Question 1
1 / -0

Interest on capital will be paid to the partners if provided for in the agreement but only from following _______________.

A
Profits

B
Reserves

C
Accumulated Profits

D
Goodwill

Solution

Interest on Capital: If the partnership deed is silent on interest on partner's capital, then according to the Partnership Act of 1932, no interest on capital should be given to the partners of the firm. However, interest on capital is given only out of the profits, if mutually agreed by all the partners.
Question 2
1 / -0

A club paid subscription fees of Rs. 1,400, out of which Rs. 200 is prepaid. In such case _________________.

A
P & L A/c is debited with Rs.1,400

B
P & L A/c is debited with Rs. 1,200

C
Rs. 200 is shown as current asset

D
Both (B) and (C)

E
Both (A) and (C)

Solution

Subscription fees prepaid is a current asset as its benefit will be received within a period of one year.
Also, we debit expenses only related to the current financial year to the Profit and loss account.
Thus, the journal entry will be:
Profit and Loss A/c .....Dr. 1200
Prepaid Subscription fees A/c ......Dr. 200
To Subscription fees A/c 1400
Thus, option D is correct.
Question 3
1 / -0

Trial Balance contains the following information: Bad debts Rs. 2,000, Provision of Doubtful Debts Rs. 1,500. It is desired to make a Provision of Doubtful Debts Rs. 2,000 at the end of the year. The amount to be debited to the Profit and Loss Account is __________.

A
Rs. 5,500

B
Rs. 6,000

C
Rs.2,500

D
Rs.4,500

Solution

The amount to be debited to Profit & Loss A/c will be = Closing balance of provision - opening balance of provision + total bad debts
= Rs. 2,000 - Rs. 1,500 + Rs. 2,000 = Rs. 2,500
Question 4
1 / -0

Opening balance of debtors is Rs. 18,000. $$5\%$$ provision for bad debt is required to be provided on debtors. If the debtor's balance is increased during the year by Rs. 5,000 and the provision for bad debt has a debit balance of Rs. 350 after transferring bad debts, the charge against the profit and loss account is:

A
Rs. 1950

B
Rs. 1500

C
Rs. 650

D
Rs. 550

Solution

Option B is correct.
New provision = 23000*5/100 = 1150
new provision = 1150
old provsion = (350)
Charge against profit and loss is = New provision - old provision
1150 - ( -350)
= 1500
Question 5
1 / -0

If 'Prepaid Wages' is given in Trial Balance, it is shown in _____________.

A
Debit of Trading A/c

B
Debit of Trading A/c and Assets

C
Debit of P&L A/c

D
Assets

Solution

At the end of the financial year, adjustment entries are also need to be passed for various adjustments. These adjustments are like outstanding expenses, prepaid expenses etc. Once these adjustment entries are passed, a final trial balance is prepared.
Prepaid expenses appearing in trial balance will be shown in asset side of the balance sheet.
Question 6
1 / -0

A Trial Balance contains the following information :
Bad debts Rs.5,000
Discount allowed Rs.4,000
Provision for discount on debtors Rs.2,000
Provision for Doubtful Debts Rs.5,000
Sundry Debtors Rs.50,000
At the end of the year, it is desired to maintain a provision for debts at Rs. 4,000 and provision for discount on debtors at Rs.2,000. Sundry Debtors (after provision) will appear in the Balance Sheet at a figure of :

A
Rs.44,000

B
Rs.38,000

C
Rs.44,700

D
Rs.32,300

Solution

Balance of debtors after provision = Balance before provision - Provision
= 50,000 - ( 4,000 + 2,000 )
= RS-44,000.
Question 7
1 / -0

The Book of Accounts of Z Ltd. shows that the balance of study debtors is Rs. 50,000 and reserve for doubtful debts is Rs. 2,000. Later the management of the company realized that debts to the extent of Rs. 1,000 will become bad and hence decided to create a reserve at 5% on debtors. The amount of reserve for doubtful debts to be shown in profit and loss account is_________.

A
Rs. 2,500

B
Rs. 2,350

C
Rs. 2,450

D
Rs. 1,450
Question 8
1 / -0

If the manager is entitled to a commission of 5% on profits before deducting this commission, he will get a commission of Rs. ________on a profit of Rs. 8,400.

A
400

B
442.11

C
420

D
None of these

Solution

Calculation of Manager's Commission
Amount of Manager's Commission= Net profit x Rate of commission/ 100
= Rs. 8400 x 5/100
= Rs. 420
Therefore, C is the correct option.
Question 9
1 / -0

A trial Balance provides you the information: bad debts Rs. 800, Provision of Doubtful Debts Rs.3,000. It is desired to maintain a Provision of Doubtful Debts Rs.1,000. The accounting treatment of these adjustments is ____________.

A
Rs. 1,800 to be debited to the Profit and Loss Account

B
Rs. 1,200 to be credited to the Profit and Loss Account

C
Rs. 1,200 to be debited to the Profit and Loss Account

D
Rs. 4,800 to be debited to the Profit and Loss Account
Question 10
1 / -0

The company maintains provision for bad debts at $$5\%$$ and its outstanding debtors at the end of the year was Rs 3,00,000. During the year, opening balance of provision for bad debt was Rs. 5000 and bad debt during the year was Rs. 10,000. The debit to profit and loss account for the year ended in respect of provision for debtors will be:

A
Rs. 50,000

B
Rs. 25,000

C
Rs. 20,000

D
Rs. 15,000

Solution

New provision = 300000*5/100 = 15000
Old provision = 5000
Bad debts during the year = 10000
Calculation of charge in profit and loss account is : -
New Provision + Bad debts - previous year Provision
= 15000 + 10000 - 5000
= 20000

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Re-Attempt Weekly Quiz Competition

Bad debts	Rs.5,000
Discount allowed	Rs.4,000
Provision for discount on debtors	Rs.2,000
Provision for Doubtful Debts	Rs.5,000
Sundry Debtors	Rs.50,000

Financial Statements 2 Test 17

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Financial Statements 2 Test 17

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Question 1

Profits

Reserves

Accumulated Profits

Goodwill

Solution

Question 2

P & L A/c is debited with Rs.1,400

P & L A/c is debited with Rs. 1,200

Rs. 200 is shown as current asset

Both (B) and (C)

Both (A) and (C)

Solution

Question 3

Rs. 5,500

Rs. 6,000

Rs.2,500

Rs.4,500

Solution

Question 4

Rs. 1950

Rs. 1500

Rs. 650

Rs. 550

Solution

Question 5

Debit of Trading A/c

Debit of Trading A/c and Assets

Debit of P&L A/c

Assets

Solution

Question 6

Rs.44,000

Rs.38,000

Rs.44,700

Rs.32,300

Solution

Question 7

Rs. 2,500

Rs. 2,350

Rs. 2,450

Rs. 1,450

Question 8

400

442.11

420

None of these

Solution

Question 9

Rs. 1,800 to be debited to the Profit and Loss Account

Rs. 1,200 to be credited to the Profit and Loss Account

Rs. 1,200 to be debited to the Profit and Loss Account

Rs. 4,800 to be debited to the Profit and Loss Account

Question 10

Rs. 50,000

Rs. 25,000

Rs. 20,000

Rs. 15,000

Solution

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