Tag: book keeping and accountancy

Questions Related to book keeping and accountancy

Kiran, a partner in a firm, withdrew money from his capital account during the year ended 31, March 2017. If the amounts withdrawn were: Rs. $12,000$ on June 01, 2015, Rs. $8,000$; on August 31, 2015, Rs. $3,000$; on September 30, 2015, Rs. $7,000$, on November 30, 2015, and Rs. $6,000$ on January 31, 2016. Calculate interest in drawings, if rate of interest is $9$ per cent per annum.

book keeping and accountancy adjustments drawing account of partners interest on drawings interest on partner's drawings and capital

  1. Rs. $1,800$

  2. Rs. $2,400$

  3. Rs. $1,755$

  4. Rs. $1,585$

Show answer
Correct Option: C
Explanation:
 S.No.  Amount withdrawn Date of drawing   No. of months till 31.12.2016 Product 
 1.  12,000  01.06.2015  10  1,20,000
 2.  8,000  31.08.2015  7  56,000
 3. 3,000   30.09.2015  6  18,000
 4.  7,000  30.11.02015  4  28,000
 5.  6,000  31.01.2016  2  12,000
     Total Product    2,34,000
     Interest on Drawings   Total Product x Rate of Interest x Common Factor
         2,34,000x 9% x 1/12 
         1,755
        (Rate of Interest = 9%)
        (Common factor = 1/12)

Unemployment due to mechanization of agriculture is ___________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Seasonal

  2. Structural

  3. Industrial

  4. Personal

Show answer
Correct Option: B

Bonus under Halsey plan is paid ____________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. at 50% of time saved

  2. at 75% of time saved

  3. at 80% of time saved

  4. at 90% of time saved

Show answer
Correct Option: A

Which of the following items will have a debit balance?

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Income received in advance

  2. Bank loan

  3. Prepaid insurance premium

  4. Reserve for doubtful debts

Show answer
Correct Option: C

Which of the following stock exchange is derecognized by SEBI on 19.11.2014 on the allegations of serious irregularities in its functioning?

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Bombay Stock Exchange

  2. Delhi Stock Exchange

  3. Calcutta Stock Exchange

  4. Bangalore Stock Exchange

Show answer
Correct Option: B

 The amount of prepaid expense is ________ from the total of the particular expense.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. added

  2. deducted

  3. neutralized

  4. None of the Above

Show answer
Correct Option: B
Explanation:

There are several items of expense which are paid in advance in the normal course of business operations. At the end of the accounting period, it is found that the benefits of such expense are not yet been fully received; a portion of its benefit would be received in the next accounting year. This portion of expense, is carried forward to the next year and is termed as prepaid expenses. The necessary adjustment in respect of prepaid expenses is:

Prepaid expense A/c Dr.
         To Concerned expense A/c
The effect of the above adjustment entry is that the amount of prepaid part is deducted from the total of the particular expense, and the new account of prepaid expense is shown on the liabilities side of the balance sheet.

Discuss the effect of the following transaction:

Ms. Pooja earns Rs. 2,000 per month. Her salary account is debited by Rs. 30,000 at the end of the year.  

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Rs. 6,000 is the outstanding expense

  2. Rs. 30,000 is asset

  3. Rs. 6,000 is the prepaid expense

  4. Rs. 30,000 is liabilities

Show answer
Correct Option: C
Explanation:

The necessary adjustment in respect of prepaid expenses is made by recording the following entry:

Prepaid expense A/c Dr.
      To Concerned expense A/c
The effect of the above adjustment entry is that the amount of prepaid part is deducted from the total of the particular expense, and the new account of prepaid expense is shown on the assets side of the balance sheet.

Ms. Pooja earns Rs. 2,000 per month. Her salary account is debited by Rs. 30,000 at the end of the year. This implies that Pooja has over payment of Rs. 6,000 in his salary account. Hence, correct expense on account of salary during the current period will be Rs. 24,000 instead of Rs. 30,000. 
Rs. 24,000 is to be shown as expense on account of salary in profit and loss account and recognize a current asset of Rs. 6,000 as an advance salary.
 It will be termed as prepaid expense.

 Expenses which are paid in advance is termed as _____.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Prepaid expense

  2. Outstanding expense

  3. Unpaid expense

  4. None of the above

Show answer
Correct Option: A
Explanation:

There are several items of expense which are paid in advance in normal course of business operations. At the end of the accounting year, it is found that the benefits of such expenses have not been fully received; a portion of its benefit would be received in the next accounting year. This portion of expense, is carried forward to the next year and is termed as prepaid expenses. The necessary adjustment in respect of prepaid expenses is made by recording the following entry:

Prepaid Expense A/c Dr.
       To Concerned Expense A/c
The effect of the above adjustment entry is that amount of prepaid part is deducted from the total of the particular expense, and the prepaid account is shown on the assets side of the balance sheet.

'Subscriptions collected in advance by a publisher' should be classified as _________________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Accrued asset

  2. Accrues liability

  3. Unearned revenue

  4. Prepaid expense

Show answer
Correct Option: C
Explanation:

 Deferred revenue is common with subscription-based products or services that require prepayments. Examples of unearned revenue are rent payments received in advance, prepayment received for newspaper subscriptions, annual prepayment received for the use of software, and prepaid insurance.

Outstanding and prepaid expenses and incomes are taken into account in determining profit or loss under _________________.

book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

  1. Cash system of accounting.

  2. Mercantile system of accounting.

  3. Both (A) and (B).

  4. None of the above.

Show answer
Correct Option: B
Explanation:

Accrual system of Accounting is also known as the mercantile system of accounting wherein the transactions are recognized and recorded as and when they take place. 

Under the accrual accounting method, the revenue is recorded when it is actually earned, and the expenses are reported when they are incurred.
Hence,Outstanding and prepaid expenses and incomes are taken into account in determining profit or loss under mercantile /Accrual system of accounting.