Tag: methods of valuation of closing stock

Questions Related to methods of valuation of closing stock

Goods costing Rs 1000 (Sale Price Rs 1200) given as charity should be credited to __________________.

elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

  1. Sales Account with Rs 1200

  2. Sales Account with Rs 1000

  3. Purchases Account with Rs 1000

  4. Loss by Theft A/c

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Correct Option: C

The cost of inventory as per physical verification as on 24th March was Rs.4,00,000. Goods are sold at a profit of 25%on cost.
On 21st March, goods on the sales value of Rs.1,00,000 were sent on sale on return basis to a customer , the period of approval being two week .He returned 20% of the goods on 31st March.
The cost of inventory as per books on 31st march is ______________.

elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

  1. Rs.4,80,000

  2. Rs.4,16,000

  3. Rs.4,28,000

  4. None of these

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Correct Option: B
Explanation:
In case of sale or return basis the goods that are confirmed as sales and the rest are included in inventory at cost.
Calculation of goods to be included at cost and their value :-

 Goods not approved = 1,00,000 x 20%
                                    = 20,000

Calculation of book value of unapproved goods
Lets assume,
Cost = 100, Gross profit = 25% of cost  
                                        = 25
Therefore, sales = Cost + gross profit
                            = 100 + 25
                             = 125
Hence, we have sales price cost will be = 20000 x 100/125
                                                                   = 16,000

Cost of inventory as on 31st march = 4,00,000 + 16,000
                                                           = 4,16,000

Goods costing Rs 1000 (Sale Price Rs 1200) destroyed by fire should be credited to _________________.

elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

  1. Sales Account with Rs 1200

  2. Sales Account with Rs 1000

  3. Purchases Account with Rs 1000

  4. Loss by Theft A/c

Show answer
Correct Option: C

Cost of Physical Stock Rs.2,30,000
Goods purchases for Rs.10,000 received but omitted to be recorded
Goods costing Rs.20,000 were sold & delivered but omitted to be recorded
Goods costing Rs.5,000 were returned by customers but omitted to be recorded.
Goods costing Rs.3,000 were returned to suppliers but omitted to be recorded.
The cost of stock as per books is ____________.

elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

  1. Rs.2,40,000

  2. Rs.2,38,000

  3. Rs.2,36,000

  4. None of these

Show answer
Correct Option: B
Explanation:
Cost of physical stock                                                                             2,30,000
Less:- purchases recorded but omitted to be recorded                          (10,000)
Add;- Goods sold, not recorded                                                                20,000
Less:- Goods returned by customers                                                         (5,000)
Add:- Goods returned to suppliers                                                             3,000
                                                                                                                  ---------------
Cost of stock as per books                                                                     2,38,000

Goods given as charity credited to ___________.

elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

  1. Charity A/c

  2. Purchase A/c

  3. Drawings A/c

  4. Sales A/c

Show answer
Correct Option: B
Explanation:
Goods given by charity is credited to purchases account. It is an expense to the business and not sales as it is given free of cost for charity purpose. Hence, the entry will be :-
Goods given as charity A/c........ dr
       To Purchases A/c 

Change in inventories of finished goods, work-in-progress and stock-in-trade means _________________________.

elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

  1. Difference between opening inventories and closing inventories

  2. Difference between closing and opening invetories

  3. Difference between opening and closing inventories, if opening inventories are higher

  4. Difference between closing and opening inventories, if closing inventories are higher

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Correct Option: A
Explanation:

Change in inventory means difference between total of opening and closing inventories. Opening inventories and closing include all raw material, work-in-progress and finished goods of inventory. 

The following classes of costs are usually involved in inventory decisions except________.

elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

  1. Cost of Ordering

  2. Carrying cost

  3. Cost of shortages

  4. Machinery cost

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Correct Option: D

Goods worth Rs. 10,000 were withdrawn by the proprietor for his personal use. The account to be credited is ___________.

elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

  1. Sales A/c

  2. Drawing A/c

  3. Purchases A/c

  4. Expenses A/c

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Correct Option: C
Explanation:

When the proprietor withdraws goods for personal use of Rs 10,000 it should be credited/deducted from the stock while calculating cost of goods sold and hence are deducted from purchases.  

Goods given as samples should be credited to ______________.

elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

  1. Advertisement A/c

  2. Sales A/c

  3. Purchases A/c

  4. Closing stock A/c

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Correct Option: C
Explanation:

Goods given out as samples should be credited to purchases account and not to sales account, because goods are moving out of the organisation. But there is no inflow of cash because samples are distributed free of cost. Distribution of samples can be for boosting the sales of the company.

Which store accounting system involves use of market price or stock at cost, whichever is less?

elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

  1. Standard cost system

  2. Average cost system

  3. Costing the closing stock

  4. Market value system

Show answer
Correct Option: C