239. Which
of the following entries is correct
in respect of reserve for discounts
on accounts payable?
(a) Debit P&L
A/c and Credit
Reserve for Discount
on Accounts Payable A/c
(b) Debit Accounts Payable A/c and Credit P&L
A/c
(c) Debit Reserve for Discount
on Accounts Payable A/c
and Credit P&L A/c
(d) Debit Reserve for Discount
on Accounts Payable A/c
and credit Accounts
Payable A/c [Hints: (c) The entry will be as follows:
Reserve for Discount on Creditors
A/c ..........................................Dr.
To Profit &
Loss A/c
It will be shown on the credit side as a separate item and will be shown on the
Liabilities
side
by way of deduction from the Sundry
Creditors.]
240. Sundry debtors
as per Trial Balance is
' 43,000 which includes ' 2,200 due from „H‟ in respect
of goods sent to him on approval
basis, the cost
price of which
is ' 1,800. Rectification would involve:
(a)
Adding
' 2,200 to closing stock
(b) Deducting ' 1,800 from closing stock and deducting ' 2,200 each from debtors and sales
(c) Adding
' 1,800 to closing stock and deducting '
2,200 each from debtors
and
sales
(d) Deducting
' 1,800 from debtors
241. Goods in stock worth ' 800 are destroyed by fire and the Insurance Co.
is accepted the claim for ' 600. Adjustment
would involve:
(a) Debit of '
800 to Trading Account
and credit of '
600 and ' 200 to insurance
company and Profit
and Loss Account respectively
(b) Deduct
the ' 800 from closing stock in the Trading
Account
(c) Credit insurance company for ' 600
(d) Debit of '
600 and ' 200 to insurance company and Profit
and Loss Account respectively
and
credit of ' 800 to Trading Account
242. Prepaid expenses
are valued on the Balance Sheet at
(a) Replacement cost
(b)
Current
cost
(c) Cost
to acquire less accumulated amortization
(d)
Cost less expired portion
[Hints: (d) Prepaid expenses are the expenses which
relate to the unexpired portion
of the benefit of the expense. Hence, these are valued on the Balance Sheet at the cost less expired portion.]
243. Which
of the following relationships
is/are false?
(a) Net Profit
= Gross Profit - Administration and Other expenses
(b) Net Profit
= Gross Profit + Administration expenses and Other
expenses
(c) Opening Stock + Purchases - Closing
Stock = Cost
of Sales
(d) Both (b) and (c) above
[Hints:
(d) Net Profit= Gross Profit- Administration
and other expenses.
Hence
option (b) is false.
Opening stock+ Purchases-Closing stock= Cost
of material consumed not cost
of sales.
Option (c
) is false.]
244. Gross Profit is equal
to
(a)
Sales - Cost of goods sold
(b)
Sales - Closing Stock + Purchases
(c) Opening Stock + Purchases - Closing
Stock
(d) None of
the above
245. Which
of the following shall not be deducted from net
profit
while
calculating managerial remuneration?
(a) Loss on
sale of undertaking
(b) Debts considered bad and written off
(c) Liability arising from a
breach of contract
(d) Director's
remuneration
[Hints: (d) Director's remuneration shall
not
be deducted
from
net profit
while calculating managerial remuneration.]
246. Which
of the following equations
is correct?
(a)
Gross Profit+ Sales+ Direct expenses+ Purchases+
Closing stock = Opening
stock
(b)
Gross Profit+ Sales+ Direct expenses+ Purchases- Closing
stock = Opening Stock
(c) Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock =
Sales
(d)
Gross Profit - Opening Stock + Direct expenses + Purchases +Closing stock =
Sales
247. Which
of the following is
not
true with regard to
preparation of Profit
& Loss
Account?
(a) Profit & Loss Account is prepared for a certain period and hence it is an interim statement
(b) Profit & Loss Account
does not disclose the effect of non-financial items
(c) Net Profits
are
ascertained on the basis of current
costs
(d) Net Profits
as disclosed by P&L Account
is not absolute
248. The Profit
and Loss Account shows the
(a) Financial results
of the concern for a
period
(b) Financial position of the concern on a particular date (c) Financial results
of the concern on a particular date
(d)
Cost of goods sold during the period
[Hints: (a) A profit and Loss Account is prepared for the period ending which shows
the financial or operating results of the concern for a
period.]
249. Which
of the following statements
is true?
(a) Provision for doubtful debts
represents the amount that cannot be collected (b)
Cash balance on hand shows whether the business has
earned Profit
or Loss (c) Free samples received are business gains
(d)
The WDV of an asset depreciated on the reducing balance method can never
become zero
250. Cash Profit
is
(a) Net
profit
- Non-trading
Profit - Depreciation
and provision
(b)
Gross Profit - Non-trading Profit
+ Depreciation and provision
(c) Net Profit
+ Depreciation and provision
(d)
Gross Profit - Operational expenses
[Hints: (c) Cash Profit is the Net Profit + Depreciation
and Provision. Depreciation
is a non- cash outflow which is deducted from the profit and therefore, it is added back to the net
profit
to arrive at the net cash profit.]
251. Which
of the following statements
is false?
(a)
Provision for discount
on debtors
can be estimated only after computing the
provision for doubtful debts
(b)
All pre-received
incomes under the cash system of accounting
are
current gains
(c) Cash balance on hand shows whether the business
has earned Profit
or Loss
(d)
Capital expenditure
should be shown
in
the books by
debiting asset
account and crediting supplier or cash account
252. Which
of the following will not appear in Profit
and Loss Account of a business?
(a) Drawings
(b) Bad debts
(c) Accrued expenses
(d) Reserve for discount on Sundry Creditors
[Hints: (a) Profit and Loss Account is an
income statement which depicts all incomes/gains and expenses/losses during an accounting period.
Drawings are neither an
income nor an expense to be recorded in Profit and Loss Account. Thus (a) is the
correct
answer. The items in other alternatives are either expenses or
accrued expenses or probable income
of discount on sundry creditors. The depreciation, bad debts and provision
for doubtful debts and accrued expenses appear
in the Profit and
Loss Account
and provision
for
income i.e., provision
for discount on sundry creditors.
Hence
(a) is the correct
answer.]
253. Which
of the following is
not
a financial statement?
(a) Profit and Loss Account
(b) Balance Sheet
(c) Funds Flow Statement
(d)
Trial Balance
[Hints: (d) Trial Balance
(d) is not a financial statement.
It is a list of all accounts
showing outstanding balances at the end of the
accounting period. It
helps in the preparation of financial statements.
The
Profit and Loss Account
(a);
Balance Sheet (b)
and Funds Flow statement (c) are the financial statements prepared by
a business entity. Funds flow statement though categorized as one of the
financial statements, its
preparation is
not
mandatory.
Thus (d) is the correct
answer.]
254. If unexpired insurance appears in the Trial Balance, it should be
(a)
Credited to the Profit
& Loss Account
(b) Debited to
the Profit
& Loss Account
(c) Shown on the liabilities side of the Balance Sheet
(d)
Shown on the assets
side of the Balance Sheet
[Hints: (d) Unexpired insurance or prepaid insurance must be shown on the assets
side of the Balance Sheet,
because it is an asset. It
cannot
be shown on the liabilities
side of the Balance
Sheet.
It cannot be debited to Profit &
Loss A/c. Also it cannot
be credited to Profit &
Loss A/c. Hence (d)
is true.]
255. Which of the following are/is not a fixed
asset?
(a)
Stock
(b)
Vehicle
(c) Fixed deposit in
bank
(d) Both (a) and (c)
above
256. Which
of the following are/is
a current asset?
(a)
Sundry Debtors
(b)
Stock
(c) Prepaid insurance
(d)
All of (a), (b) and (c) above
257. Tax deducted at source appears
in the Balance Sheet
(a)
On the assets side under current assets
(b)
On the assets side under loans and advances
(c) On the liabilities
side
under current liabilities
(d)
On the liabilities side under provisions
258. Which
of the following statements
is false?
(a)
Balance Sheet
discloses financial position of the business
(b)
A person who
owes to the business is
called Debtor
(c) Decrease
in the value of the asset could decrease the value of a liability
(d)
Assets are to be shown in the Balance Sheet at
the realizable
value
[Hints: (d) AS-10 on Accounting for Fixed Assets states that fixed assets are to be shown
in
the Balance Sheet
at their actual
cost.]
259. Which
of the following statements
is true?
(a)
The balance of the goods account shows
the value of stock in hand
(b) Balancing
of
all accounts must
be done at
the end of each day
(c) Assets which
are to remain in business for continuous use and not meant for
conversion into cash are fixed
assets
(d) Balance Sheet
discloses income position
of the business
260. The Balance Sheet
gives information regarding the
(a) Results of operations
for a particular period
(b) Financial position during a particular period
(c) Profit earning capacity
for
a particular period
(d) Financial position as on a
particular
date
261. Which
of the following accounts
appear(s) in the Balance Sheet of a
business?
i. Stock at
the end of the financial year
ii. Stock at
the beginning of the financial year
iii. Drawings
iv. Prepaid Rent
v. Interest received
but not yet earned
(a)
Only (i) above
(b)
Only (iii)
above
(c) Both (i)and (iii) above
(d) (i),
(iii),
(iv) and (v) above
[Hints: (d)
Stock at the end of the financial year is the closing stock, drawings are the
amounts withdrawn by the owner of the business for personal use; and prepaid rent
is the amount of rent which
is paid in advance of the current financial year and interest received but not yet earned is the amount
of interest received which does not
pertain to the current year are
the items that
appear
in the Balance Sheet
of a business.
Stock at the
beginning
of the financial
year is the opening stock
that
appears in Trading
Account of a business and not in the Balance Sheet.
Thus
(d)
, the combination of all the accounts in alternatives (i), (iii),
(iv) and (v) is the correct answer.]
