Tag: elements of book keeping and accountancy

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Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

When interest on capital is allowed _________ is credited.

  1. Capital A/c

  2. Profit and loss A/c

  3. Cash A/c

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

Journal entries for Interest on Capital: 

Interest on capital is an appropriation (setting apart) of profit. If a firm has earned profit, it will have a credit balance in the P & L Appropriation A/c.

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

Commission to manager is __________ to Profit and loss Account.

  1. Debited

  2. Credited

  3. Added

  4. Deducted
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Manager's commission is an operating expense just as any other expense like salary, rent etc. Manager's commission paid is shown on the debit side of the profit and loss account as it is an expense for the company.

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

Commission due but not paid to the manager at d end of the years appears under __________ side.

  1. Asset

  2. Liability

  3. Trading A/c Debit side

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

The Outstanding Expense A/c appears on the liability side of the Balance Sheet. While preparing the Trading and Profit and Loss A/c we need to add the amount of outstanding expense to that particular expense.

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

Interest on capital is ______ for a business concern.

  1. Expense

  2. Income

  3. Asset

  4. Liability
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Interest on capital is a charge on the profits of a firm and it is debited to the P&L account to recognise as an expense (and a charge on the profits).

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

From the following details calculate the net profit after charging managerial commission.
Net profit before charging managerial commission Rs.65,000
Managerial commission 11% after charging such commission.

  1. Rs.58,558

  2. Rs.60,300

  3. Rs.59,101

  4. Rs.60,360
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Commission = (65,000 * 11) / (100 + 11) = 715,000 / 111 = 6,441.44. Net profit after commission = 65,000 - 6,441.44 = 58,558.56. Rounding to the nearest whole number gives 58,559. Option A is the closest.

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

From the following details, how much should be charged to profit and loss a/c as bad debts during the current year.
provisions for bad debts A/c at the beginning of the year Rs.20,000
Actual bad debts during year Rs.19,000
Debtors balance at the end of the year Rs.80,000
Previsions for bad debts to be made @5% of total debtors. 

  1. Rs.3,000

  2. Rs.4,000

  3. Rs.2,600

  4. Rs.3,600
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Bad debts to be charged = Actual bad debts + New provision - Old provision. New provision = 5% of 80,000 = 4,000. Total charge = 19,000 + 4,000 - 20,000 = 3,000.

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

The capital of a sole trader would change as a result of ____________________.

  1. A creditor being paid his account by cheque.

  2. Raw materials being purchased on credit.

  3. Fixed asset being purchased on credit.

  4. Wages being paid in cash.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Wages paid in cash is an expense that reduces the net profit, which in turn reduces the owner's capital. The other options involve asset or liability changes that do not affect capital directly.

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

From the following details calculate the managerial commission, if the managerial commission is 11% net profit before charging such commission.fore 
Net profit before charging managerial commission Rs.65,000

  1. Rs. 6,946

  2. Rs.7,230

  3. Rs.7,150

  4. Rs. 6,860
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Commission = 11% of 65,000 = 7,150. Since it is 'before' charging, we use the simple percentage.

Multiple choice elements of book keeping and accountancy adjustments in preparation of financial statements manager's commission on net profit preparation of final accounts preparation of financial statements

The adjustment to be made for interest on drawings is ________________.

  1. Debit profit and loss account and add interest to drawings

  2. Credit profit and loss account and add interest to drawings

  3. Debit profit and loss account and deduct interest from drawings

  4. Credit profit and loss account and deduct interest from drawings
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Interest on drawings is income for the business, so it is credited to the Profit and Loss account. It is then added to the drawings account, which reduces the capital.