Tag: elements of book keeping and accountancy

Questions Related to elements of book keeping and accountancy

A, B and C were partners sharing profit and losses in the ratio of 3 :2 :1. A retired and firm received the joint life policy Rs. 12,000. The Joint Life Policy Account appearing in the balance sheet at Rs. 20,000. What will be the treatment for the balance in Joint Life Policy i.e., Rs.8,000.

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  1. Rs. 8,000 credited to partner's current account in profit sharing ratio.

  2. Rs. 8,000 debited to revaluation account

  3. Rs. 8,000 debited to partner's capital account in profit sharing ratio.

  4. Either (b) or (c)

Show answer
Correct Option: D
Explanation:

The profit on the joint life policy i.e., RS-8,000 will either be debited to revaluation account or distributed to partners capital account in profit sharing ratio. 

Either way through revaluation or through transferring in partners capital account its distributed to the partners in their profit sharing ratio. 

D's trial balance contains the following information:
Bad debts Rs. 500
Provision for bad debts Rs. 4,000
It is desired to maintain a provision of Rs. 3,000 at the end of the year Accounting treatment of this adjustment is_________________________.

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Rs. 1,500 to be debited to profit and loss a/c

  2. Rs. 500 to be debited to profit and loss a/c

  3. Rs. 500 to be credited to profit and loss a/c

  4. Rs. 3,500 to be debited to profit and loss a/c

Show answer
Correct Option: C
Explanation:
P & L A/c to be debited/credited = New provision + bad debts - old provision 
                                                       = Rs-3,000 + Rs-500 - Rs-4,000
                                                       = Rs-500 to be credited. 
There is excess old provision hence to make the current provision as Rs-3000, Rs-500 is to be credited. 

F's trial balance contains the following information:
Discount received Rs.1,200
Provision for discount on creditors Rs.1,800
It is desired to maintain a provision for discount on creditors at Rs. 1,600
The amount to be credited to profit and loss a/c is________.

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Rs.1,000

  2. Rs.1,400

  3. Rs.200

  4. Rs.2,200

Show answer
Correct Option: A
Explanation:
P & L A/c to be credited = New provision + Discount received - old provision 
                                                       = Rs-1,600 + Rs-1,200 - Rs-1,800
                                                       = Rs-1,000 to be credited. 

Closing stock appearing in the Trial Balance is shown in_____________.

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. The Balance Sheet only

  2. Both Trading Account and Balance Sheet

  3. Trading Account only

  4. None of these

Show answer
Correct Option: A
Explanation:

Closing stock usually doesn't appear in the trail balance, if it does it will appear only in balance sheet on the assets side and not in trading account. It is the stock left in business at the end of the year.

 It is basically the inventory the company has hands on at the end of the year or is unsold. It includes work-in-progress, raw materials, finished goods etc. 

The balances of all liabilities accounts, income accounts, profits, capital are placed in the ______of trial balance. 

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Credit Column

  2. Debit Column

  3. Ledger Folio

  4. None of the above

Show answer
Correct Option: A

If there is a non agreement of trial balance the possible reasons could be__________________.

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Complete omission of the posting

  2. Due to transposition of the posting

  3. There has been a wrong posting either on debit side or credit side

  4. All of the above

Show answer
Correct Option: D
Explanation:

If there is a non agreement of trial balance the possible reasons could be complete omission of posting, due to transposition of the posting or there has been a wrong posting either on debit or credit side. 

Which item is shown on the debit side of a trial balance?

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Rent outstanding.

  2. Prepaid expenses.

  3. Purchases returns.

  4. Excess of income over expenses.

Show answer
Correct Option: B
Explanation:

Prepaid expenses means the expense which are already paid but the services against which are yet to receive. While passing the closing entry, expenses account will be credited by debiting the prepaid expense.

All expense and _______accounts appearing in the trial balance are transferred to the trading and profit and loss account.

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. Loss

  2. Asset

  3. Liability

  4. Revenue

Show answer
Correct Option: D
Explanation:

All expense and Revenue accounts appearing in the trial balance are transferred to the trading and profit and loss account. All the direct expenses and revenues will be transferred to the trading account whereas all the indirect expenses and revenues will be transferred to profit and loss account. 

One difference between Operating and Financial lease is:

elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

  1. There is often an option to but in operating lease

  2. There is often a call option in financial lease

  3. An operating lease is generally cancellable by lease

  4. A financial lease in generally cancellable by lease

Show answer
Correct Option: C
Explanation:

A cancellable lease is generally an operating lease (rental ) that may be terminated by either the lessee or the lessor without penalty.

If a finance lease is terminated early, the lessee is held liable for the outstanding lease payments plus the leased asset 's residual value .

A lease which is generally not cancellable and covers full economic life of the asset is known as:

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  1. Sale and Leaseback

  2. Operating Lease

  3. Finance Lease

  4. Economic Lease

Show answer
Correct Option: C
Explanation:

Capital lease is a lease agreement in which the lessor agrees to transfer the ownership rights to the lessee after the completion of the lease period. Capital or finance leases are long term and non cancellable in nature.