Tag: adjustments in preparation of financial statements

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Questions Related to adjustments in preparation of financial statements

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.

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

If the manager is entitled to a commission of 5% on profits before deducting this commission, he will get a commission of Rs. ________on a profit of Rs. 8,400.

  1. 400

  2. 442.11

  3. 420

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

Commission = 5% of 8,400 = 420. Since it is 'before' deducting the commission, 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

If the manager is entitled to a commission of $5\%$ on profits before deducting this commission, he will get a commission of Rs. __________ on a profit of Rs. 8400.

  1. 400

  2. 442.11

  3. 420

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

Commission = 5% on profit

Profit = Rs. 8400
Commission on the profit = 8400 x 5%
                                              = 420

The manager will get commission of Rs. 420

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 manager of a firm is entitled to a commission of  $10$% on the net profit after his commission. If the profit of the firm before charging commission is  $ Rs. 3,30,000$, the amount of manager's commission will be_________. 

  1. $Rs. 33,000$

  2. $Rs. 30,000$

  3. $Rs. 27,000$

  4. $Rs. 36,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Commission = (Profit * Rate) / (100 + Rate) = (3,30,000 * 10) / 110 = 30,000.