Tag: book keeping and accountancy

Questions Related to book keeping and accountancy

Provision for bad and doubtful debts appearing in the books at the time of dissolution of firm is transferred to :

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Capital accounts of the partners

  2. Debtors account

  3. Bad Debts account

  4. Realisation account

Show answer
Correct Option: D
Explanation:

Realisation account is prepared to find out the profit or loss on realisation of assets and payment of liabilities.To calculate the actual profit or loss it is necessary that all the assets should be transferred to realisation account at its gross figure. That's why provision is not shown as a deduction from debtors.It is transferred to credit side of realisation account like other liabilities.

On the dissolution of a firm, loan from the wife of a partner is treated as ____________.

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Loan from the partner

  2. Outside liability

  3. Preferential liability

  4. Liability payable after all other debts have been paid

Show answer
Correct Option: B
Explanation:

Loan from a partners’ wife is to be treated as a normal creditor. 

The basic aim of providing a loan in the name of partner’s wife is to by-pass the legal restrictions on the loan from a partner to the firm.

Which of the following is not a correct statement?

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. The terms capitalisation factor and multiplier are not synonymous terms

  2. Divisible profits do not includes profits on revaluation of assets

  3. Managerial remuneration is to be calculated before providing for taxation

  4. A company may purchase its own debentures

Show answer
Correct Option: A

What journal entry is passed for realising assets to provide cash for payment of liabilities?

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Respective Asset A/c (Book value)   Dr.

    Profit and loss A/c       (profit)             Dr.
                 To Bank A/c (sale proceeds)
                 To Profit and loss A/c (Loss)

  2. Profit and loss A/c (Loss)             Dr.

              To Respective Asset A/c  (Book value)

  3. Bank A/c (Sale proceeds)    A/c

               To Profit and loss (Loss) A/c

  4. Realisation A/c Dr.   
             To Assets A/c 


    Cash/Bank A/c Dr. 
         To Realisation A/c 

Show answer
Correct Option: D
Explanation:

Following entry is made for transfer of assets to realisation account
Realisation A/c Dr.   
         To Assets A/c 
(Being assets are sold)
Cash/Bank A/c Dr. 

     To Realisation A/c 
(Being cash received on realisation of assets)

Which of these is not a method of accounting treatment of premium on joint life policy?

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Treatment as an expense.

  2. Treatments as an asset.

  3. Deferred revenue expense.

  4. None of these.

Show answer
Correct Option: C
Explanation:

A Joint Life Policy (JLP) is an insurance policy which is taken out by the partnership firm on the joint lives of all partners. The amount of policy is payable by the insurance company either on the death or maturity of policy, whichever is earlier. The firm pays annual premium to the insurer against the policy.

There are two method of accounting treatment of joint life policy:
1. Treatment as an expense - When premium is treated as an expense then it is closed every year by transferring to profit and loss account.
2. Treatment as an asset - In this case insurance premium paid is first debited to life policy and credited to bank account. At the end of the year the amount in excess of surrender value is treated as a loss and is transferred to profit and loss account.
Premium paid on joint life policy cannot be treated as deferred revenue expense.

_________ is the main objective of joint life policy.

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. To avert death /retirement of a partner

  2. To meet expense on treatment of ailing partner

  3. To provide fund for payment to the executor of deceased partner

  4. To pay the amount due to the retiring partner

Show answer
Correct Option: C

All external liability accounts including provisions, if any, are closed by transferring them to the credit of _________ account.

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Bank

  2. Realisation

  3. Partner's Capital

  4. Assets (Individually)

Show answer
Correct Option: B
Explanation:

The total amount of debts payable by a business to the outsiders (other than the owners) are called external liabilities. All external liability accounts including provisions, if any, are closed by transferring them to the credit of Realisation account. The journal entry for transfer of liabilities is :

Liabilities A/c Dr.
            To Realisation A/c

Select the most appropriate alternative from those given below:
Drawing account is closed by transferring the balance to the ______ account.

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Drawing

  2. Liabilities

  3. Assets

  4. Capital

Show answer
Correct Option: D
Explanation:

Drawing means the goods or money withdrawn from business concern for personal use. It has two aspects : 1.  It reduces the assets of business. 2. It reduces capital of partner. So it is closed by deducting from capital account.

The journal entry for transfer of assets is ______________________.

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. Realisation A/c Dr.

    To Assets (Individually) A/c

  2. Assets (Individually) A/c Dr.

    To Realisation A/c

  3. Bank A/c Dr.

    To Realisation A/c

  4. Realisation A/c Dr.

    To Revaluation A/c

Show answer
Correct Option: A
Explanation:

All asset accounts excluding cash, bank and the fictitious assets, if any are closed by transfer to the debit of Realisation account at their book values. It may be noted that sundry debtors are transferred at gross value and the provision for doubtful accounts is transferred to the credit side of Realisation account along with liabilities. The same is applied for fixed assets, if provision for depreciation account is maintained. The general entry passed for the transfer of will be: 

Realisation Account  Dr. 
        To Assets (Individually) Account 

Premium paid on the life policy of the proprietor should be debited to Insurance Premium Account.

book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

  1. True

  2. False

Show answer
Correct Option: B
Explanation:
Premium paid on the life policy of the proprietor should not be debited to insurance premium account. Premium paid on life policy of proprietor is not an expense in the normal course of business. It is an expense of personal nature any any expense for personal purpose is debited to drawings A/c.