Tag: elements of accounts

Questions Related to elements of accounts

Which of the following amounts shall be credited to Investor Education and Protection Fund, if they remain unpaid/unclaimed for seven years from the date they become due?

elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

  1. Matured debentures of a company

  2. Tax arrears

  3. Proceeds of sale property

  4. Provision for doubtful debts

Show answer
Correct Option: A
Explanation:

Investor Education and Protection Fund (IEPF) is for promotion of investors’ awareness and protection of the interests of investors.

Investor Education and Protection Fund (IEPF) has been set-up under Section 205C of the Companies Act, 1956 by way of the Companies (Amendment) Act, 1999.  As per the Act, the following amounts which have remained unclaimed and unpaid for a period of seven years from the date they became due for payment shall be credited to the IEPF:-
 (a) Unpaid dividend accounts of the companies;
 (b) The application moneys received and due for refund; 
(c) Matured deposits;
 (d) The interest accrued in the amounts referred to in clauses (a) to (d);
 (e) matured debentures;
 (f) Grants and donations by the Central Govt., State Govt., companies or any other institutions ;
 (g) The interest or other income received out of the investments made from the fund.

Find the total at assets at the beginning of the year if the net profit, drawing during the year and Assets at the end of the year were 12,000, 7000 and 25,000 respectively.

elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

  1. 15,000

  2. 10,000

  3. 20,000

  4. 8,000

Show answer
Correct Option: C

A reserve is a ______________ against Profits.

elements of accounts company final accounts reserves provisions provisions and reserves

  1. Charge

  2. Deducted

  3. Added

  4. Appropriation

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Correct Option: D
Explanation:

Distribution of Profits against a reserve head to meet future needs are called appropriations. Eg. General Reserve, Revenue Reserve. 

 Reserve is created after the calculation of_______.

elements of accounts company final accounts reserves provisions provisions and reserves

  1. Net loss

  2. Net profit

  3. Gross profit

  4. Capital

Show answer
Correct Option: B
Explanation:

Reserves & surplus fund is created out of profits that are to be shared between the partners or share holders. Therefore fund created out of profit is a liability to the company and can be created only after the calculation of profit. Reserves & Surplus fund is created to meet future contingencies. If the contingency does not arise as expected this fund can be distributed among partners or distributed as dividends among shareholders. It can be used for issuing bonus shares. The decision how to make use of the funds will be done by the partners or in the case of a company in the AGM. 

Creation of reserve reduces taxable profits of the business.

elements of accounts company final accounts reserves provisions provisions and reserves

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

Since reserves are neither expenses nor losses, so these are not charged to profit & loss Account rather these are debited to Profit & Loss Appropriation Account which is prepared after Profit and Loss Account.

Creation of reserve does not reduce the net profit but only reduces the divisible profits.

Which of the following items is not taken into account while computing quick ratio?

elements of accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

  1. Cash

  2. Bank Balance

  3. Bank overdraft

  4. Sundry creditors

Show answer
Correct Option: C
Explanation:

The quick ratio is a financial ratio used to gauge a company's liquidity. The quick ratio is also known as the acid test ratio. The quick ratio compares the total amount of cash and cash equivalents + marketable securities + accounts receivable to the amount of current liabilities.

Which of the following liabilities are taken into account for acid test ratio?
(i) Trade creditors
(ii) Bank overdraft
(iii) Cash credit
(iv) Outstanding expenses

elements of accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

  1. i & ii

  2. i & iv

  3. i, ii, iii & iv

  4. ii, iii & iv

Show answer
Correct Option: C
Explanation:

Acid test ratio = quick assets / current liabilities. All current liabilities are considered while calculating acid test ratio.

The excess of current assets over current liabilities is called as ___________.

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  1. Net tangible worth

  2. Net worth

  3. Gross working capital

  4. Net working capital

Show answer
Correct Option: D
Explanation:

The formula for calculation of "Net working capital" is as follows:

Net working capital = Total current assets - Total current liabilities
Net working capital is the aggregate amount of all current assets minus current liabilities. It is used to measure the short-term liquidity of a business, and can also be used to obtain a general impression of the ability of a company management to utilize assets in an efficient manner.

What is the meaning of current ratio of less than one?

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  1. Current liabilities < Current assets

  2. Fixed assets > Current assets

  3. Current assets < Current liabilities

  4. Share capital > Current assets

Show answer
Correct Option: C
Explanation:

Current ratio is the measure of liquidity of a company at the certain date. A high current ratio can be signs of problems in managing working capital. When current ratio is low and Current liabilities exceeds current assets, the company may have problems in meeting its short term obligations.

Suppliers and Creditors of a firm are interested in ______.

elements of accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

  1. Profitability Position

  2. Liquidity Position

  3. Market Share Position

  4. Debt Position

Show answer
Correct Option: B
Explanation:

Liquidity position signify the short term solvency position of the company. Suppliers and creditors are short term liabilities, they are interested to know the liquidity position.