Tag: elements of accounts

Quizzes (156) Questions (701)

Questions Related to elements of accounts

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

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

  1. Partners' capital

  2. Partners' current

  3. Cash/bank

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
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.
Multiple choice adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

What is the journal entry for excess capital withdrawn by the partner?

  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
Reveal answer Fill a bubble to check yourself
B Correct answer
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  • Journal entry for excess capital withdrawn by the partner is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

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

$A, B$ 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 :

  1. $2:1$

  2. $1:1$

  3. $3:1$

  4. <span>$8:1$</span>
Reveal answer Fill a bubble to check yourself
B Correct answer
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

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

Which of the following statements is false?

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

Debentures are debt instruments and cannot be forfeited for non-payment of call money in the same way shares can be, as they represent a loan rather than equity ownership.

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

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

  1. Debenture account

  2. General reserve account

  3. Profit &amp; loss account

  4. Capital reserve account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Once debentures are redeemed, the sinking fund is no longer needed, so the balance is transferred to the General Reserve account.

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

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

  1. Sinking fund account&nbsp;Sinking fund investment account&nbsp; Dr.&nbsp; Cr.
  2. Sinking fund investment account&nbsp;Sinking fund account&nbsp; Dr.&nbsp; Cr.
  3. Profit an loss account&nbsp;Sinking fund investment account&nbsp; Dr.&nbsp; Cr.
  4. Sinking fund investment account&nbsp;Profit and Loss account&nbsp; Dr.&nbsp; Cr.
Reveal answer Fill a bubble to check yourself
A Correct answer
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)

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

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

  1. Payment to equity shareholders

  2. Payment to preference shareholders

  3. Payment to debentureholders

  4. Cash payment to shareholders
Reveal answer Fill a bubble to check yourself
C Correct answer
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.

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

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

  1. Debenture account

  2. Sinking fund investment account

  3. Capital redemption reserve account

  4. General reserve account
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Similar to the previous question, the balance in the debenture sinking fund after redemption is transferred to the General Reserve account.