Tag: accounting from incomplete records

Questions Related to accounting from incomplete records

A statement of affairs is a summarised statement of an estimated _____________.

elements of book keeping and accountancy accounting from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs ascertaining profit or loss from incomplete records introduction to single entry system and difference between single entry and double entry system

  1. Financial position

  2. Profit

  3. Income

  4. Loss

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Correct Option: A
Explanation:

To ascertain the Capital, Statements of affairs are prepared.
Capital = Assets - Liabilities
The above equation under which statement of affairs are prepared reflects the financial position of the business.

The capital at the end of the accounting year is ascertained by preparing _______.

elements of book keeping and accountancy accounting from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs ascertaining profit or loss from incomplete records introduction to single entry system and difference between single entry and double entry system

  1. Cash Account

  2. Closing statement of affairs

  3. Total debtors account

  4. Opening statement of affairs

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Correct Option: B
Explanation:

Statement of Affairs is Based under Accounting Equation " Assets = Capital + Liabilities"
thus to ascertain the Closing Capital at the end of the year  Closing Liabilities are deducted from closing assets.

The difference between assets and liabilities is called as ___________.

elements of book keeping and accountancy accounting from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs ascertaining profit or loss from incomplete records introduction to single entry system and difference between single entry and double entry system

  1. Capital

  2. Drawings

  3. Incomes

  4. Expenses

Show answer
Correct Option: A
Explanation:

As assets represents the total funds applied in the business from capital (owners fund) and liabilities(external funds e.g bank loan, creditors etc).
therefore the difference between Assets and Liabilities will represent Capital.

Find the total assets at the end of the year if net profit, drawing during the year and assets at the of beginning of the year were 12,000, 7000 and 20,000 respectively. 

elements of book keeping and accountancy accounting from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs ascertaining profit or loss from incomplete records introduction to single entry system and difference between single entry and double entry system

  1. 25,000

  2. 15,000

  3. 9,000

  4. 8,000

Show answer
Correct Option: A
Explanation:

Calculation of total assets at the end of the year :- 

 Assets in the beginning of the year =Rs 20000
Less : Drawing made during the year (7000)
Add : Net profit for the year                  12000
                                                            = Rs 25000

Balance of interest on calls-on-advance account is transferred to the ___________ at the end of the year.

elements of book keeping and accountancy accounting from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs ascertaining profit or loss from incomplete records introduction to single entry system and difference between single entry and double entry system

  1. Share capital account

  2. Calls in advance account

  3. Securities premium account

  4. Profit & loss account

Show answer
Correct Option: D
Explanation:

Sometimes a shareholder pays a portion or whole on the unpaid amount on the shares held by him in advance. In such a case, money so received in advance is transferred to Calls-in- advance account. It is important to note that calls-in-advance does not form part of share capital. In-spite of this, according to Section 93 dividend may be paid on calls in advance, if authorized by the Articles.

Disclosure in Balance Sheet:

Calls in advance is shown separately, in the Balance Sheet as liability of the company under the heading ‘Current Liabilities’ until the calls are made and the amount actually becomes payable by the shareholder.

Interest on Calls-in-advance:

Since the amount received as calls-in-advance is a liability of the company, it is liable to pay interest on the calls-in-advance from the date of receipt of the amount till the date when the call becomes due for payment. If the Articles of the Company are silent about the rate of interest on calls-in-advance, then rate of interest is 6% p.a. Such an interest is a charge on profits and has to be paid to the concerned shareholder even if there is no profit.

The accounting treatemt for interest on calls in advance is as follows:

1. For interest due

 Interest on calls in advance A/c     Dr.

                To sundry shareholder's  A/c

2. For interest paid

 Sundry shareholder A/c                  Dr.

                To Bank A/c

3. For transfer of balance of interest to profit and loss A/c

  Profit and Loss A/c                            Dr.

                  To Interest on calls in advance A/c

From the following find out the total drawing during the year.
Total assets at the beginning of the year Rs.20,000, total assets at the end of the year 15,000, net profit during the year Rs.7000. 

elements of book keeping and accountancy accounting from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs ascertaining profit or loss from incomplete records introduction to single entry system and difference between single entry and double entry system

  1. Rs. 7000

  2. Rs.12,000

  3. Rs. 8000

  4. Rs.80000

Show answer
Correct Option: B
Explanation:

Calculation of total assets at the end of the year :- 

 Assets in the beginning of the year =Rs 20000
 Add : Net profit for the year                     7000
Less : Assets at the end of the year        (15000)
                                                            = Rs 12000