Tag: accountancy

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Questions Related to accountancy

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

When depreciation provision method is used, asset is shown at ____________.

  1. cost price

  2. cost less depreciation

  3. replacement value

  4. scrap value
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
When provision for depreciation account is maintained: Every year, depreciation charged is credited to the Provision for Depreciation Account. At the year-end, in the Balance Sheet, the asset will continue to appear at the original cost and the total amount of depreciation provided will be shown in the Provision for Depreciation Account. Thus, the original cost of the asset and the total amount of depreciation charged is known from Balance sheet. For purposes of depreciation in the Balance Sheet, provision for depreciation may be deducted from the original cost of asset and the balance be shown in the outer column. Alternatively, assets may be shown at the original cost on the asset side and Provision for Depreciation may be shown on the liabilities side.
Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

Which of the following statements is true in case of Joint Venture?

  1. Co-venturer's contribution of goods is debited in Joint Bank A/c.

  2. Co-venturer's contribution in cash is debited in Venturer's personal account.

  3. Discount on discounting of B/R is debited to Venturer's personal account.

  4. Sale proceed received is credited to Joint Venture Account.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A joint venture (JV) is a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses, and costs associated with it. 

  • When the sales proceeds or collections Joint bank account. Dr. To joint venture account.  When the collections received by co- ventures  etc, are debited and expenses of joint venture, purchase of goods are credited.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

The company maintains provision for bad debts at $5\%$ and its outstanding debtors at the end of the year was Rs 3,00,000. During the year, opening balance of provision for bad debt was Rs. 5000 and bad debt during the year was Rs. 10,000. The debit to profit and loss account for the year ended in respect of provision for debtors will be: 

  1. Rs. 50,000

  2. Rs. 25,000

  3. Rs. 20,000

  4. Rs. 15,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

New provision = 300000*5/100 = 15000
Old provision = 5000

Bad debts during the year = 10000
Calculation of charge in profit and loss account is : - 
New Provision + Bad debts - previous year Provision
 = 15000 + 10000 - 5000 
 = 20000

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

Opening balance of debtors is Rs. 18,000. $5\%$ provision for bad debt is required to be provided on debtors. If the debtor's balance is increased during the year by Rs. 5,000 and the provision for bad debt has a debit balance of Rs. 350 after transferring bad debts, the charge against the profit and loss account is:

  1. Rs. 1950

  2. Rs. 1500

  3. Rs. 650

  4. Rs. 550
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Option B is correct. 
New provision = 23000*5/100 = 1150 
new provision = 1150
old provsion = (350)
Charge against profit and loss is = New provision - old provision
                                                         1150 - ( -350)
                                                       = 1500

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

The entry for creating a provision for bad debts is ___________.

  1. debit provision for bad debts a/c and credit debtors a/c

  2. debit debtors a/c and credit provision for bad debts a/c

  3. debit provision for bad debts a/c and credit profit and loss a/c

  4. debit profit and loss a/c and credit provision for bad debts a/c
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

simple reason that out of the credit sales made during the particular year, some debts are likely to become bad in the next year due to non- payments. The correct accounting is to make provision for such likely bad debts every year 

The entry for creating a provision is :
  profit and loss A/C Dr.
  To Provision for Doubtful debts.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

A Trial balance contains the following information: Discount allowed Rs.1,500. Provision for discount on debtors Rs.1,100. It is desired to make a provision for discount on debtors of Rs.1,800 at the end of the year.The amount to be debited to the Profit and loss Account is :

  1. Rs. 2,200

  2. Rs. 4,200

  3. Rs. 1,700

  4. Rs.3,200
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The amount to be debited to the P&L account is the new provision (1,800) plus the actual discount allowed (1,500), minus the old provision (1,100). Calculation: 1,800 + 1,500 - 1,100 = 2,200.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

While preparing final account, to make provision for discount on debtors. which of the following adjustment entry will be passed?

Provision for Discount on Debtors A/cTo Debtors A/c Dr.
Profit & Loss A/cTo Provision for Discount on Debtors A/c Dr.
Provision for Discount on Debtors A/cTo Trading A/c Dr.
Debtors A/cTo provision for Discount on Debtors A/c Dr.

  1. A

  2. B

  3. C

  4. D
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

To create or increase a provision for discount on debtors, the Profit & Loss account is debited and the Provision for Discount on Debtors account is credited.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

It is supposed that on $31-12-2015$, the sundry debtors are amounted to Rs. $40,000$. On the basis of past experience, it is estimated that $5\%$ of the sundry debtors are doubtful. Also suppose that during the year $2014$ actual bad debts were Rs. $1,600$. What entry will be passed to create provision for doubtful debts?

  1. Profit & Loss a/c Rs. $2,000$(Dr.) & Provision for doubtful debts A/c Rs. $2,000$(Cr.)

  2. Provision for doubtful debts A/c Rs. $2,000$(Dr.) & Profit & Loss A/c Rs. $2,000$(Cr.)

  3. Provision for doubtful debts A/c Rs. $1,600$ (Dr.) & Profit & Loss A/c Rs. $1,600$(Cr.)

  4. Profit & Loss A/c Rs. $1,600$(Dr.) & Provision for doubtful debts A/c Rs. $1,600$(Cr.)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The provision for doubtful debts is calculated as 5% of 40,000, which is 2,000. The entry to create this provision is to debit the Profit & Loss account and credit the Provision for Doubtful Debts account.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

As per law which enterprise is required to make provisions for depreciation?

  1. Joint stock company

  2. Sole proprietor

  3. Partnership

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Joint stock companies are legally required by the Companies Act to provide for depreciation on their fixed assets before declaring dividends.