Tag: adjustments in preparation of financial statements

Questions Related to adjustments in preparation of financial statements

Interest on capital is ______ for a business concern.

  1. Expense

  2. Income

  3. Asset

  4. Liability


Correct Option: A
Explanation:

Interest on capital is a charge on the profits of a firm and it is debited to the P&L account to recognise as an expense (and a charge on the profits).

From the following details calculate the net profit after charging managerial commission.
Net profit before charging managerial commission Rs.65,000
Managerial commission 11% after charging such commission.

  1. Rs.58,558

  2. Rs.60,300

  3. Rs.59,101

  4. Rs.60,360


Correct Option: A

From the following details, how much should be charged to profit and loss a/c as bad debts during the current year.
provisions for bad debts A/c at the beginning of the year Rs.20,000
Actual bad debts during year Rs.19,000
Debtors balance at the end of the year Rs.80,000
Previsions for bad debts to be made @5% of total debtors. 

  1. Rs.3,000

  2. Rs.4,000

  3. Rs.2,600

  4. Rs.3,600


Correct Option: A

The capital of a sole trader would change as a result of ____________________.

  1. A creditor being paid his account by cheque.

  2. Raw materials being purchased on credit.

  3. Fixed asset being purchased on credit.

  4. Wages being paid in cash.


Correct Option: D

From the following details calculate the managerial commission, if the managerial commission is 11% net profit before charging such commission.fore 
Net profit before charging managerial commission Rs.65,000

  1. Rs. 6,946

  2. Rs.7,230

  3. Rs.7,150

  4. Rs. 6,860


Correct Option: C

The adjustment to be made for interest on drawings is ________________.

  1. Debit profit and loss account and add interest to drawings

  2. Credit profit and loss account and add interest to drawings

  3. Debit profit and loss account and deduct interest from drawings

  4. Credit profit and loss account and deduct interest from drawings


Correct Option: B

In the Trial Balance, are shown Debtors Rs. 2,400, Bad Debts Rs. 221, Bad Debts Reserve Rs. 324. For creating a Reserve for Doubtful Debts @10% on debtors, the P & L A/c will be debited by __________.

  1. 137

  2. 240

  3. 343

  4. 9


Correct Option: A

If the manager is entitled to a commission of 5% on profits before deducting this commission, he will get a commission of Rs. ________on a profit of Rs. 8,400.

  1. 400

  2. 442.11

  3. 420

  4. None of these


Correct Option: C

If the manager is entitled to a commission of $5\%$ on profits before deducting this commission, he will get a commission of Rs. __________ on a profit of Rs. 8400.

  1. 400

  2. 442.11

  3. 420

  4. None of these


Correct Option: C
Explanation:

Commission = 5% on profit

Profit = Rs. 8400
Commission on the profit = 8400 x 5%
                                              = 420

The manager will get commission of Rs. 420

The manager of a firm is entitled to a commission of  $10$% on the net profit after his commission. If the profit of the firm before charging commission is  $ Rs. 3,30,000$, the amount of manager's commission will be_________. 

  1. $Rs. 33,000$

  2. $Rs. 30,000$

  3. $Rs. 27,000$

  4. $Rs. 36,000$


Correct Option: B