Tag: accounting equations and transactions

Quizzes (0) Questions (112)

Questions Related to accounting equations and transactions

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Following information is available from the books of Mr.Z.

Rs.
Expenses paid during the year $1,35,000$
Expenses outstanding on $1-4-2013$ $12,250$
Expenses prepaid on $1-4-2013$ $15,000$
Expenses outstanding on $31-3-2014$ $17,000$
Expenses prepaid on $31-3-2014$ $16,750$

Net expenses debited to profit & loss account for the year ended $31.3.2014$ should be.

  1. Rs. $1,96,000$

  2. Rs. $1,37,500$

  3. Rs. $1,32,000$

  4. Rs. $1,38,000$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Net expenses = Paid + Outstanding(end) + Prepaid(start) - Outstanding(start) - Prepaid(end). Calculation: 135000 + 17000 + 15000 - 12250 - 16750 = 138000.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

On $31$st March, goods sold at a sale price of Rs. $30,000$ were lying with customer, Mohan to whom these goods were sold on 'sale or return basis' and recorded as actual sales. Since no consent was received from Mohan, the adjustment entry was made presuming goods were sent on approval at a profit of cost plus $20\%$. In the balance sheet, the stock with customers account will be shown at.

  1. Rs. $30,000$

  2. Rs. $24,000$

  3. Rs. $20,000$

  4. Rs. $25,000$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The sale price is 30000 with a 20% profit on cost. If Cost = C, then C + 0.2C = 30000, so 1.2C = 30000, C = 25000. Stock is valued at cost.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

While preparing final account, to record goods are distributed as free samples- which of the following adjustment entry will be passed?

Advertisement A/cTo Capital A/c Dr.
Advertisement A/cTo Purchase A/c Dr.
Advertisement A/cTo Trading A/c Dr.
(B) or (C)

  1. A

  2. B

  3. C

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

Free samples are an advertisement expense. The entry is Advertisement A/c Dr. to Purchases A/c (to reduce cost of goods) or Trading A/c (to reduce stock). Both are valid representations.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Salary paid during the year - Rs. $35,000$
Salary outstanding on $1-4-2014$ - Rs. $2,500$,
Salary outstanding on $31-3-2015$ - Rs. $7,500$
Net salary debited on Profit & Loss A/c for the year ended $31-3-2015$ should be.

  1. Rs. $40,000$

  2. Rs. $30,000$

  3. Rs. $25,000$

  4. Rs. $45,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Net Salary = Paid + Outstanding(end) - Outstanding(start). Calculation: 35000 + 7500 - 2500 = 40000.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

While preparing final account, to record outstanding expenses which of the following adjustment entry will be passes?

Expenses A/cTo Outstanding Expenses A/c Dr.
Outstanding Expenses A/cTo Expenses A/c Dr.
Profit & Loss A/cTo Outstanding Expenses A/c Dr.
Outstanding Expenses A/cTo Profit & Loss A/c Dr.

  1. A

  2. B

  3. C

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

Outstanding expenses are liabilities. The entry is to debit the expense account (to increase the expense) and credit the Outstanding Expenses account (to create the liability).

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

A business entity distributed goods worth Rs. 15,000 as free sample. The adjustment to be made is ____________________.

  1. Subtracted from purchases Alc and credited to Profit and Loss A/c

  2. Added to Purchase Ne and credited to Profit and Loss A/c

  3. Added to Purchase Ne and debited to Profit and Loss A/c

  4. Subtracted from Purchases No and debited to Profit and Loss A/c.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Free samples are an expense (Advertisement). We debit the P&L account and credit Purchases (or Trading) to remove the cost of those goods from inventory/purchases.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Outstanding Rent is an example of _________.

  1. Increase in asset & decrease in owner's liability

  2. Increase in liability & decrease in owner's liability

  3. Decrease in liability & owner's liability

  4. Increase in asset & owner's liability
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Outstanding rent represents an expense incurred but not yet paid, which increases liabilities. This expense reduces the net profit, which in turn reduces the owner's equity (capital).

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

Sales include Rs. $60,000$ sent to Z & Co. on sale or return basis for which no approval has been received as on $31-3-2015$. The cost of the goods was Rs. $50,000$. Which of the following treatment will be correct while preparing final accounts?

  1. Increase sales & debtors by Rs. $60,000$, Decrease closing stock in trading account and balance sheet by Rs. $50,000$

  2. Increase sales & debtors by Rs. $60,000$, Increase closing stock in trading account and balance sheet by Rs. $50,000$

  3. Reducing sales & debtors by Rs. $60,000$, Increase closing stock in trading account and balance sheet by Rs. $50,000$

  4. Reduce sales & debtors by Rs. $60,000$, Reduce closing stock in trading account and balance sheet by Rs. $50,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Since the goods were not approved, the sale must be reversed (reducing Sales and Debtors) and the goods must be added back to closing stock at cost.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

After the preparation of income statement, it was discovered that accrued expenses of 1,000 have been ignored and closing inventory has been overvalued by 1,300. This will have result in:

  1. An understatement of net profit of Rs 2,300

  2. An overstatement of net profit of Rs 300

  3. An understatement of net profit of Rs 300

  4. An overstatement of net profit of Rs 2.300
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If accrued expenses of Rs $1,000$ have been ignored this will increase the net profit by Rs. $1,000$. If closing inventory is overvalued, it will also result in increasing the net profit by Rs. $1 ,300$. Thus, net effect will be profit increased by Rs. $2,300 (1000+1300)$.

Multiple choice book keeping and accountancy accounting equation meaning, objectives and need of adjustments need for adjustments accounting equations and transactions

When the opening and closing stocks are adjusted through purchases, the trial balance does not show any __________. 

  1. Opening stock

  2. Closing stock

  3. Purchases

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

The closing stock represents the cost of unsold goods lying in the stores at the end of the accounting period. The closing stock of the year becomes the opening stock of the next year and is reflected in the trial balance of the next year. Sometimes, the opening and closing stock are adjusted through purchases account. In this regard, the entry recorded is as follows: 

Closing Stock A/c Dr. 
          To Purchases A/c
This entry reduces the amount in the purchases account and is also known as adjusted purchases which is shown on the debit side of the trading and profit and loss account. Another important point is when the opening and closing stocks are adjusted through purchases, the trial balance does not show any opening stock. Instead, the closing stock appears in the trial balance and so also the adjusted purchases.