Tag: meaning and preparation of statement of profit

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Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

To ascertain the profit, closing capital is to be adjusted by deducting ________ and adding _________.

  1. Opening capital, Drawings

  2. Opening capital, Cash deposit

  3. Surplus, Opening balance

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

To ascertain the profit, closing capital is to be adjusted by deducting opening capital and adding drawings.


Below is the example:
Opening Capital               Rs.30000
Drawings                           Rs.5000
Closing Capital                 Rs.50000

Solution:
Closing Capital                Rs.50000
Add: Drawing                  Rs.  5000
                                         ----------------
                                         Rs.55000
Less: Opening Capital    Rs.30000
                                         ---------------
Profit during the year      Rs.25000
                                        -----------------

Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

Kumar and Shanu-entered into a joint venture to purchase and sell new year gifts. They agreed to share the profit and losses equally. Kumar purchased goods worth Rs. 1,00,000 and spent' Rs. 10,000 in sending the goods to Shanu. He also paid Rs. 5,000 for insurance. Shanu spent Rs. 10,000 as selling expenses and sold goods for 2,00,000. Remaining goods Were taken over by him at Rs. 5,000. What will be the amount to be remitted by Shanu to Kumar as final settlement?

  1. Rs. 1,55,000

  2. Rs. 1,50,000

  3. Rs. 1,15,000

  4. Rs. 80,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Kumar's total investment: 1,00,000 + 10,000 + 5,000 = 1,15,000. Shanu's sales: 2,00,000 + 5,000 = 2,05,000. Total profit: 2,05,000 - 1,15,000 - 10,000 (Shanu's expenses) = 80,000. Profit share: 40,000 each. Shanu owes Kumar: 1,15,000 (Kumar's cost) + 40,000 (Kumar's profit) - 0 (Kumar's share of sales) = 1,55,000.

Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

Profit under single entry system of Book Keeping means ______________.

  1. The difference between opening and closing cash balances and reduced by fresh capital introduced.

  2. The difference between opening net assets and closing net assets as increased by drawings and reduced by new capital introduced.

  3. Profit shown by Trading and Profit and Loss Account and Balance sheet.

  4. The amount of closing cash balance as reduced by expenses.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When there is no double entry system of accounting is followed, the profits are calculated on the basis of comparing the opening and closing of capital/assets by giving the effect of drawings.

This can be represented as:

Closing Capital                 xxxxx
Add: Drawings                  xxxxx
Less: Fresh capital            xxxxx 
Less: Opening Capital      xxxxx
Balance will be Profit       xxxxx

Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

If opening capital is $Rs.80,000$, closing capital is $Rs.1,80,000$, withdrawals are $Rs.10,000$ and additional capital brought in the business is Rs. $20,000$, then the profit will be________.

  1. $Rs.90,000$

  2. $Rs.1,10,000$

  3. $Rs.70,000$

  4. $Rs.1,50,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

        Closing Capital                         1,80,000

Add: Drawings                                    10,000
Less: Additional Capital                   (20,000)
_________________             __
 Adjusted Capital                              1,70,000 
Less: Opening Capital                      (80,000)
______________             _____
Profit during the year                        90,000

Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

While ascertaining profit in single entry system the amount of additional capital introduced is ___________.

  1. added to the capital in the beginning

  2. deducted from the capital in the beginning

  3. added to the capital at the end

  4. deducted from the capital at the end
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When single entry system is followed, profits can be calculated by comparing the capital at the beginning of the year and capital at the end of the year. This can be formulated as:

Opening capital+Capital introduced during the year+Profit during the year-Drawings=Closing capital.

Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

Rs. 19,500 debited to building repairs on 31 st Dec. 1993 inclined Rs. 9,500 as the cost of building a small room for the watch man. A bill of Rs. 800 for colour wash of the whole building during the year was not received till  Dec. 1993. The amount to be debited to profit and loss account would be _____________.

  1. Rs. 20,300

  2. Rs. 19,500

  3. Rs. 10,800

  4. Rs. 9,500
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The cost of building a room (9,500) is a capital expenditure, not a repair expense. Total repairs = 19,500 - 9,500 = 10,000. Adding the outstanding bill of 800 for colour wash, the total amount to be debited to P&L is 10,000 + 800 = 10,800.

Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

A and B enter into a joint venture to sell a consignment of biscuits sharing profits and losses equally. A provides biscuits from stock Rs. 10,000. He pays expenses amounting to Rs. 1,000. B incurs further expenses on carriage Rs. 1,000. He receives cash for sales Rs. 15,000. He also takes over goods to the value of Rs. 2,000. What will be the amount to be remitted by B to A?

  1. Rs. 13,500

  2. Rs. 15,000

  3. Rs. 11,000

  4. Rs. 10,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A's investment: 10,000 + 1,000 = 11,000. B's expenses: 1,000. Total sales/assets: 15,000 + 2,000 = 17,000. Total profit: 17,000 - 11,000 - 1,000 = 5,000. Profit share: 2,500 each. B owes A: 11,000 (A's cost) + 2,500 (A's profit) - 0 = 13,500.

Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

In statement of profit and loss interest on capital is shown as _________.

  1. Addition

  2. Subtraction

  3. Ignored

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

Allowing interest on capital is an indirect expense for the business, an increase in expenses will lower the profit for the year. Hence, Interest on capital is deducted.

Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

Further capital introduced during the year is ____________ from closing capital in order to find out the correct profit.

  1. Added

  2. Deducted

  3. Divided

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

Additional capital during the year is a result of working capital requirements and closing capital is the composition of profit or loss along with some capital contribution.
Hence, to remove the capital effect additional capital is deducted from closing capital in order to derive the correct profit or loss earned by the company.

Multiple choice elements of book keeping and accountancy accounting from incomplete records ascertaining profit or loss from incomplete records meaning and preparation of statement of profit meaning of incomplete records, reasons for incompleteness and its limitations preparation of final accounts from incomplete records preparation of statement of affairs introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

Profit can be ascertained from the incomplete records under single entry by using  ________.

  1. Statement of affairs

  2. Conversion method

  3. Either A or B

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

The Statement of Affairs Method: takes the difference of opening and closing capitals for calculation of profit or loss under Single Entry System
The Conversion Method of single entry system: tries to convert the records from single entry to double entry system to find the Profit or loss earned by the business.