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

Provision for Discount on Debtors is ___________ to Profit and loss account.

  1. Debited

  2. Credited

  3. Not recorded

  4. No entry
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
The double effect of Provision for Discount on Debtors is:
It is shown on the debit side of Profit and Loss Account. 
It is shown as deduction from Debtors in Balance Sheet.
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

Percentage commission to manager can be  calculate on net profit _______.

  1. Before charging commission

  2. After charging commission

  3. Either on net profit before or after charging commission

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

The manager of the business is sometimes given the commission on the net profit of the company. The percentage of the commission is applied on the profit either before charging such commission or after charging such commission.

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 General Manager gets $\dfrac{1}{4}$ of the profit as commission after charging such commission of Works Manager, which is 10% of profits after charging such commission. If profit is Rs. 2,200, the commission of General manager is:

  1. Rs.495

  2. Rs.384

  3. Rs.500

  4. Rs.400
Reveal answer Fill a bubble to check yourself
D Correct answer
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

Debtors Closing Balance Rs 5000, R.D.D 10 % and Provision for discount on Debtors is  5% than what is its value of provision on discount.

  1. Rs. 225

  2. Rs. 200

  3. Rs. 300

  4. Rs. 350
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Provision for bad debts = 10% of 5000 = 500. Net debtors = 5000 - 500 = 4500. Provision for discount = 5% of 4500 = 225.

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

Opening capital Rs. 100000 and additional capital on 1st Oct was Rs. 20000
Interest on capital @ 10% on 31st march closing will be ?

  1. 5,000

  2. 8,000

  3. 11,000

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

Interest on capital = 100000 * 10 / 100

                                = 10000
Additional Capital Introduced on 1st Oct = 20000 * 10 / 100 * 6 / 12
                                                                     = 1000
Total = 10000 + 1000
          = 11000

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 calculated on _____________.

  1. Opening capital

  2. Additional Capital

  3. Closing capital

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

Interest on capital is to be calculated on the capitals at the beginning for the relevant period. If there is any additional capital introduced or capital withdrawn during the year, it will cause change in the capitals and interest is to be calculated proportionately on the changed capitals for the relevant period.

Interest on capital = Amount of capital x Rate of interest per annum x Period of interest

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.