Tag: book keeping and accountancy

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Questions Related to book keeping and accountancy

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

The expression "after sight" in a promissory note means that ____________.

  1. The payment can be demanded without it has been shown to the maker.

  2. The payment cannot be demanded on it unless it has been shown to the maker.

  3. The holder may treat the instrument, at his option, either as a bill of exchange or as a promissory note.

  4. The payment cannot be demanded
Reveal answer Fill a bubble to check yourself
A Correct answer
Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

Which of these statements is not true about a Promissory note?

  1. No notice of dishonour of Promissory note is required

  2. Dishonour of Promissory note does not required noting or protest

  3. A Promissory note cannot be made payable to the maker himself

  4. Promissory note cannot be made payable to the bearer
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
  • Notice of dishonor is a notice given by the holder of a bill of exchange or promissory note, to a drawer or indorser showing that acceptance or payment has been refused. Notice of dishonor is also known as certificate of protest or certificate of dishonor.
  • Protest for dishonour: Foreign bill of exchange must be protested for dishonour when such protest is required to be made by the law of the country where they are drawn, but no such protest is needed in the case of a promissory note.
  • A promissory note cannot be made payable the maker himself, while in a bill of exchange to the drawer and payee or drawee and payee may be same person.
  • A promissory note cannot be made payable to the bearer, no matter whether it is payable on demand or after a certain time.
Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

Which of the following instrument cannot be made payable to the bearer?

  1. Promissory note

  2. Bank cheques

  3. Bill of exchange

  4. Accommodation bill
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
  • Promissory Note :-  The sum should be payable to a certain person. There are only two parties to a Promissory Note, one is the maker or the payer and another one is the payee. It is not transferable and thus, the amount is not payable to the bearer.
  • A cheque which is payable to any person who presents it for payment at the bank counter is called 'Bearer cheque'.
  • When a bill of exchange is payable to bearer, it means whoever holds the bill can receive the payment due on it. 
  • “ Bearer ” means the person in possession of a bill or note which is payable to bearer. 
Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

A, B, and C are partners sharing profits in the ratio of $ 5:3:2.$ They decide to share the future profits in the ratio of 2:3:5 with effect from $1st$ April, 2018. What will be accounting treatment of Workmen Compensation Reserve appearing in the Balance Sheet on that date when no information is available for the same?

  1. Distributed among the partners in their in their capital ratio.

  2. Distributed among the partners in their new profit-sharing ratio.

  3. Distributed among the partners in their old profit-sharing ratio.

  4. Carried forward to new Balance Sheet.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

One of the popular form of business now a days is partnership firms. Its defined as the"relation between two or more person who have agreed to share the profits of a business carried on by them."  Here the question is about the treatment of workmen compensation reserve appearing in the balance sheet. 


As there is a change in the constitution of partnership, the workmen compensation reserve that is appearing in the balance sheet should be distributed among the partners in their old profit sharing ratio. As no more information is available regarding the reserve and there is a change in the constitution of the firm by way of change in profit sharing ratio, so the reserve which relates to balance sheet before change in profit ratio should be distributed in the old ratio among the partners.

Whenever the question is silent on the treatment of workmen compensation reserve and no further information is available it is advisable to distribute it in old profit sharing ratio among the partners. So, the whole amount appearing in the balance sheet should be distributed

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

X, Y and Z are partners sharing profits in the ratio of $ 5:3:2.$ They decide to share future profits in the ratio of $2:3:5$ with effect from $1^{st}$ April, $2018$ . They also decide to record the effect of following revaluation without affecting the book values of assets and liabilities, by passing single adjusting entry :

Book Value (Rs.) Revised Value (Rs.)
Land and Building  3,00,000 4,50,000
Plant and Machinery 4,50,000 4,20,000
Trade Creditors 1,50,000 1,35,000
Outstanding Rent  1,35,000 1,80,000

The necessary single adjustment entry will be:

  1. Dr. Z and Cr. X by Rs. 27,000.

  2. Dr. X and Cr. Z by Rs. 27,000.

  3. Dr. Y and Cr. X by Rs. 27,000.

  4. Dr. X and Cr. X by Rs. 27,000.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

To get the adjustment entry done, first need to find out the profit /loss on revaluation. Since books of account are not to be affected due to revaluation, hence an adjustment entry need to be passed:


Revaluation difference can be calculated as: 

Particulars                          Book Value         Revised Value        Gain/Loss

Land & Building                 300000                450000                  150000
Plant & Machinery             450000                420000                  - 30000
Trade Creditors                  150000                 135000                     15000
Outstanding Rent               135000                 180000                   -45000
                                                                                                       ------------------
   Net Gain on Revaluation                                                              90000
                                                                                                       -------------------

Share on revaluation:                   X                       Y                        Z
As per old Ratio                      45000                27000               18000
As per New Ratio                    18000                27000               45000
                                               --------------           --------------           --------------
Sacrifice/Gain                         27000                 NIL                   -27000
                                                -------------           ---------------         ---------------
Hence below adjustment entry will be passed:

Z's A/c                                      Dr. 27000
        To X's A/c                                                  27000

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

A and B enter into a joint venture sharing profits and losses equally. A purchased 5000 kg of rice @ Rs. 25/kg. B purchased 1000 kg of wheat @Rs. 30/kg. A sold 1000 kg of wheat @ Rs. 35/kg and B sold 5000 kg of rice @ Rs. 30/kg. The profit on venture will be :

  1. Rs. 55,000

  2. Rs. 50,000

  3. Rs. 60,000

  4. Rs. 30,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Total cost: (5000 kg * 25) + (1000 kg * 30) = 125,000 + 30,000 = 155,000. Total revenue: (1000 kg * 35) + (5000 kg * 30) = 35,000 + 150,000 = 185,000. Profit = 185,000 - 155,000 = 30,000.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

Where will you record interest on drawings in the final accounts of the firm ? 

  1. Debit side of Profit & Loss Appropriation Account

  2. Credit side of Profit & Loss Appropriation Account

  3. Credit side of Profit & Loss Account

  4. Debit side of Capital/ Current Account only
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest on drawings is an income for the firm, so it is credited to the Profit and Loss Appropriation Account.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

X, Y and Z are partners in a firm.At the time of division of profit for the year there was dispute among the partners.Profits before interest on partner's capital was Rs.10,000 and X wanted interest on capital at 20% as his capital contribution was Rs.1,00,000 as compared to that of Y and Z which was Rs.75,000 and Rs.50,000 respectively. Find the solution ______________________________.

  1. Profits of Rs.10,000 will be distributed equally.

  2. X will get the interest of Rs.20,000 and the loss of Rs.10,000 will be shared equally

  3. All the partners will get interest on their capital and the loss will be shared equally.

  4. None of the above.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to the Indian Partnership Act, in the absence of an agreement, interest on capital is not allowed, and profits are shared equally.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

A and B are partners sharing profits and losses in the ratio of 3 : 2 having the capital of Rs.80,000 and Rs.50,000 respectively. They are entitled to 10% p.a interest on capital before distributing the profits.During the year firm earned Rs.17,800 before allowing any interest on capital.Profits appointed among them excluding interest will be ____________________.

  1. Rs.2,880 and 1,920

  2. Rs.8,800 and 8,800

  3. Rs. 8,000 and 5,000

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Total interest on capital = 10% of (80,000 + 50,000) = 13,000. Available profit is 17,800. Since profit exceeds interest, interest is paid fully. Remaining profit = 17,800 - 13,000 = 4,800. Distributed in 3:2 ratio: A gets 4,800 * 3/5 = 2,880; B gets 4,800 * 2/5 = 1,920.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

A and B are partners with the capital of Rs.20,000 and Rs.10,000 respectively. Interest payable of capital out of profit is 10% p.a. Find the interest on capital for both the partners when the profits earned by the firm is Rs.2,400.

  1. Rs.2,000 and Rs.1,000

  2. Rs.1,600 and Rs. 800

  3. No interest will be paid to the partners

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total interest on capital = 10% of (20,000 + 10,000) = 3,000. Since the profit (2,400) is less than the interest (3,000), interest is restricted to the available profit in the ratio of capitals (2:1). A gets 2,400 * 2/3 = 1,600; B gets 2,400 * 1/3 = 800.