Tag: book keeping and accountancy

Questions Related to book keeping and accountancy

The paid-up capital of Mukund Ltd. is Rs $18,00,000$. The company decided to propose a dividend of Rs $2,16,000$ out of current profit. How much of current profit is to be transferred to reserve?

book keeping and accountancy reserve and fund meaning and characteristics of reserves reserves provisions and reserves

  1. At least $2.5$ $\%$

  2. At least $5$ $\%$

  3. At least $10$ $\%$

  4. None of the above

Show answer
Correct Option: A
Explanation:

As per the provision of sub section (2) of section 205 of the companies act, no dividend can be declared or paid by the company to its shareholders out of the profits of the company for the financial year after providing depreciation until a specified percentage of profit of the financial year is transferred to reserves. 


Rules are as under:

  • If proposed dividend exceeds 10% but less than 12.5% of the paid up capital, an amount of 2.5% of the current profit need to be transferred to reserve.
  • If proposed dividend exceeds 12.5% but less than 15% of the paid up capital, an amount of 5% of the current profit need to be transferred to reserve.
  • If proposed dividend exceeds 15% but less than 20% of the paid up capital, an amount of 7.5% of the current profit need to be transferred to reserve.
  • If proposed dividend exceeds 20% of the paid up capital, an amount of 10% of the current profit need to be transferred to reserve.

In present case dividend percentage is 12% (216000/1800000), falls under first rule, hence 2.5% need to be transferred to reserves from current year's profit.

Reverse capital is ______.

book keeping and accountancy reserve and fund meaning and characteristics of reserves reserves provisions and reserves

  1. that part of uncalled capital which has to be called up in the event of winding up of the company

  2. same as capital reserve

  3. created out of revenue profit

  4. created out of capital profits

Show answer
Correct Option: A
Explanation:

Reserve Capital - A company may reserve a portion of its uncalled capital to be called only in the event of winding up of the company. Such ncalled amount is called 'Reserve Capital' of the company. It is available only for the creditors on winding up of the company.

Sundry overhead expenses may be apportioned in the ratio of ___________.

book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

  1. Material consumed

  2. Number of employees

  3. Labour hours

  4. Machine hours

Show answer
Correct Option: C
Explanation:

Sundry overhead expenses may be apportioned in the ratio of labour hours. Sundry expenses are expenses that are small in amount and rare in occurrence. For these rare and insignificant expenses, a company might use a general ledger account entitled Sundry Expenses for these items.

For the proper appreciation of the material control, which of the following step is not necessary ?

book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

  1. Purchasing of materials

  2. Receiving and inspecting of materials

  3. Using of materials

  4. Accounting of materials

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Correct Option: C

Which of the following sets of expenses are the direct expenses of the business?

book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

  1. Salaries, wages and shop rent

  2. Stationery, postage and telephone

  3. Wages, carriage inward, local taxes

  4. Advertisement, legal fees, audit fees

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Correct Option: C

A Joint Venture has a life of fixed period of time.

book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

  1. True

  2. False

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Correct Option: B

_______ are costs that can be influenced or regulated by the manager or head responsible for it.

book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

  1. Uncontrollable costs

  2. Opportunity costs

  3. Controllable costs

  4. Sunk costs

Show answer
Correct Option: C
Explanation:

Controllable Costs are the costs that can be influenced by the manager or head responsible for it. It is a cost that the management at its discretion increase or decrease. These are raw material cost, labour cost and some amount of fixed costs also.

_____ are the costs which have been created by a decision that was made in the past and cannot be changed by any decision that will be made in the future.

book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

  1. Shutdown costs

  2. Fixed costs

  3. Sunk costs

  4. Variable costs

Show answer
Correct Option: C
Explanation:

Sunk costs are the costs which have been created by a decision that was made in the past and cannot be changed by any decisions that will be made in the future. A sunk cost cannot be recovered and are considered irrelevant for future decision making. They are he past expenditures and are also known as retrospective costs.

______ is concerned with the cost of the next best alternative opportunity which was foregone in order to pursue a certain action.

book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

  1. Opportunity cost

  2. Outlay cost

  3. Sunk cost

  4. Shutdown cost

Show answer
Correct Option: A
Explanation:

Opportunity cost is concerned with the cost of the next best alternative opportunity which was forgone in order to pursue a certain action. In other words it is cost of the next best alternative forgone. 

Which of the following would not cause either an under- or over-absorption of overheads ?

book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

  1. Actual direct labour time per unit being greater than budget.

  2. Actual cost of direct labour being greater than budget.

  3. Actual overheads incurred being less than budget.

  4. The number of units produced being grater than budget.

Show answer
Correct Option: B