Tag: elements of accounts

Questions Related to elements of accounts

____________ A/c is debited when amount of capital is to be brought in by the partner.

adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

  1. Partners' capital

  2. Partners' current

  3. Cash/bank

  4. None of the above

Show answer
Correct Option: C
Explanation:
New partner is admitted either for increasing the partnership capital or strenghthening the management of the firm. When a new partner joins he is required to bring his share of capital and goodwill.
When partner bring his share of capital and goodwill cash/bank A/c is debited.

_____________ A/c is to be credited for amount of capital to be brought in by the partner.

adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

  1. Cash/Bank

  2. Partners' Capital

  3. Partners' Current

  4. None of the above

Show answer
Correct Option: C

What is the journal entry for excess capital withdrawn by the partner?

adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

  1. Cash/Bank A/c Dr.

    To Partners' Capital A/c

  2. Partners' Capital A/c Dr.

    To Cash/Bank A/c

  3. Partners' Capital A/c Dr.

    T\o Partners' Current A/c

  4. Partners' Current A/c Dr.

    To Partners' Capital A/c

Show answer
Correct Option: B
Explanation:
  • When a partner enter into partnership he/she is required to bring his share of capital in the firm. 

  • Capital account of each partner represents his equity in the partnership.

    Capital account of a partner is increased in the following situations:

    • The owner made additional investments during the year.
    • The owner made guaranteed payments to the firm.
    • Partnership earned profits, and a share of profits was allocated to the partner.

    The increase in the capital will record in credit side of the capital account.

    Salary and interest allowances are guaranteed payments, discussed later.

    Capital account of a partner is decreased when the owner makes withdrawals of cash or property

  • Journal entry for excess capital withdrawn by the partner is

  •      Partner's Capital A/c                Dr. 

      To Cash/Bank A/c

$A, B$ and $C$ are partners sharing profits in the ratio of $2 : 2 : 1$. $C$ retired. The new profit-sharing ratio between $A$ and $B$ will be :

adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

  1. $2:1$

  2. $1:1$

  3. $3:1$

  4. $8:1$

Show answer
Correct Option: B
Explanation:

C’s share of profit = 1/5, to be taken by A and B equally.

A gains = 1/5 X 1/2 = 1/10

B gains = 1/5 X 1/2 = 1/10

New share of A = 2/5 + 1/10 = 4/10 + 1/10 = 5/10 = 1/2

New share of B = 2/5 + 1/10 = 4/10 + 1/10 = 5/10 = 1/2

New profit sharing ratio of A and B = 1:1

Which of the following statements is false?

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. At maturity, debenture holders get back their money as per the terms and conditions of redemption.

  2. Debentures cab be forfeited for non payment of call money.

  3. In company's balance sheet, debentures are shown under secured loans.

  4. Interest on debentures is charged against profits.

Show answer
Correct Option: B

Transferring Debenture Redemption Fund A/c balance to General Reserve is the ____ step involved in working of sinking fund method.

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. 8

  2. 9

  3. 10

  4. 11

Show answer
Correct Option: D

After redemption of debentures, the balance of debenture sinking fund is transferred to:

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. Debenture account

  2. General reserve account

  3. Profit & loss account

  4. Capital reserve account

Show answer
Correct Option: B

Accounting entry for recording loss on the realization of sinking fund investment is:

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures
  1. Sinking fund account Sinking fund investment account  Dr.  Cr.
  2. Sinking fund investment account Sinking fund account  Dr.  Cr.
  3. Profit an loss account Sinking fund investment account  Dr.  Cr.
  4. Sinking fund investment account Profit and Loss account  Dr.  Cr.
Show answer
Correct Option: A
Explanation:

If Sinking fund investments are sold—at loss:

Sinking fund a/c Dr. (with amount of loss)

To Sinking fund investment a/c (with book value of investments sold)

(Being sinking fund investments sold at loss)

Which of the following should not be considered as a part of purchase consideration?

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. Payment to equity shareholders

  2. Payment to preference shareholders

  3. Payment to debentureholders

  4. Cash payment to shareholders

Show answer
Correct Option: C
Explanation:

The payments to the debenture holders are not included in the purchase considerations.

The purchase consideration does not include the amount to be paid to the debentureholders by the transferee company.

Where all the debentures are redeemed, the balance left in the debentures sinking fund account is transferable to:

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. Debenture account

  2. Sinking fund investment account

  3. Capital redemption reserve account

  4. General reserve account

Show answer
Correct Option: D