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Financial Statements 2 Test 18

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Financial Statements 2 Test 18
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  • Question 1
    1 / -0
    Which of the following items will have a debit balance?
  • Question 2
    1 / -0
    What is the correct sequence of the following action required for the preparation of Final Accounts?
    (1) Preparation of Trial Balance 
    (2) Balancing of Accounts
    (3) Preparation of Annual Financial Statements 
    (4) Marking Adjusting Entries
    Select the correct answer from the codes given below:-
    Solution
    The correct sequence for preparation of final accounts are:-
    1) Balancing of all the ledger accounts so that the balance can be transferred to the trial balance.
    2) Transfer of ledger balances to the trial balance. 
    3) Passing any adjustment entries. They are usually the entries passed at the end of the year. 
    4) After adjusting entries passed final accounts are prepared. 
  • Question 3
    1 / -0
    The company maintains provision for bad debts at 5% and its outstanding debtors at the end of the year were Rs. 3,00,000. During the year, opening balance of provision for bad debt was Rs. 5,000 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 __________.
    Solution

  • Question 4
    1 / -0
    Which one of the following statements is not correct?
    Solution
    The provision for doubtful debts is the estimated amount of bad debt that will arise from accounts receivable that have been issued but not yet collected. It is identical to the allowance for doubtful accounts.  The provision is used under accrual basis accounting, so that an expense is recognized for probable bad debts as soon as invoices are issued to customers, rather than waiting several months to find out exactly which invoices turned out to be uncollectible. Thus, the net impact of the provision for doubtful debts is to accelerate the recognition of bad debts into earlier reporting periods. Hence, provision for doubtful debt is considered as an expense it can be owed to the owner.
    Therefore, A is the correct option.
  • Question 5
    1 / -0
    The manager of a firm is entitled to a commission of  $$10$$% on the net profit after his commission. If the profit of the firm before charging commission is  $$ Rs. 3,30,000$$, the amount of manager's commission will be_________. 
    Solution

  • Question 6
    1 / -0
    If Incomes received in advance appears in the trial balance, it__________.
    Solution
    ‘Income received in advance’, as the name suggests, are the earned revenue which is to be earned in the future in an accounting period but is already received in the current accounting period. As it is received before it gets accrued, it is a liability to an entity. Hence, it will be shown on the liabilities side of balance sheet.
    Therefore, D is the correct option.
  • Question 7
    1 / -0
    Y's trial balance contains the following information:
    Bad debtsRs. 5,000
    Provision for bad debtsRs. 6,000
    Sundry debtorsRs. 50,000
    It is desired to create a provision for bad debts at 10 per cent on Sunday debtors at the end of the year. Sundry Debtors will appear in the balance sheet at a figure of ____________.
    Solution
    The closing balance of the provision for bad debts is required to be held at 10% of the Sundry debtors, ie, Rs. 5000 (Rs. 50,000 x 10%). Therefore, the net amount of Sundry Debtors that will appear in Balance Sheet is Rs. 45,000 (Rs. 50,000 - 5,000).
  • Question 8
    1 / -0
    Payment received from debtor _______________.
  • Question 9
    1 / -0
    The Books of Accounts of Z Ltd. shows that the balance of sundry debtors is. 50,000 and reserve for doubtful debts is 2,000. Later the management of the company released that debts to the extent of 1,000 will become bad. It was 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 ________.
  • Question 10
    1 / -0
    A's trial balance contains the following information:
    Bad debtsRs. 5,000
    Discount allowedRs. 3,000
    Provision for discount on debtorsRs. 3,300
    Provision for bad debtsRs. 5,500
    Sundry debtorsRs. 60,000
    At the end of the year, it is desired to maintain a provision for bad debts of Rs.5,000 and provision for discount on debtor at Rs. 3,000.
    Sundry debtors will appear in the balance sheet at a figure of __________.
    Solution
    Sundry Debtors at the end of the year = Rs. 60,000
    (-) Provision for discount                        = Rs. 3,000
    (-) Provision for Bad debts                     = Rs. 5,000
    Net Debtors at the end of the year       = Rs. 52000
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