Tag: calculation of profit or loss under single entry system of accounting and statement of affairs

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Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

The authorised capital of M Ltd. consists of both cumulative preference shares and equity shares. Each $5$% cumulative preference share has a par value $Rs. 100$. Each equity share has a par value $Rs. 10$. During the year $2005-06$, the cumulative preference share capital was $Rs. 2,00,000$
If dividend declarations totalled $Rs. 25,000$ in the year $2005-06$, the dividends allocated to the equity shareholders in  the year $2005-06$ will be ___________.

  1. $Rs. 21,000$

  2. $Rs. 15,000$

  3. $Rs. 10,000$

  4. $Rs. 16,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Dividend is a sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves).
 As the name syas, preference shareholders have prefernce over equity shareholders in payment of dividend.
Calaculation of dividend payablr on 5% cumulative prefence share capital is
Annual dividend =  Par value of share * Rate of dividend
Annual dividend = Rs. 200000 * 5%
Annual dividend = Rs. 10000
Dividend for equity shareholder = total dividend - preference dividend
Dividend for equity shareholder = Rs.25000 - Rs. 10000
Dividend for equity shareholder = Rs. 15000
Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Identify the external user of financial information or financial statements.

  1. Management of the business

  2. CFO of the business

  3. Employees of the business

  4. Investors of the business
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Financial accounting information is used for decision making by external users. External users, are not involved in the operations of the company but hold some financial interest.  External users are people outside the business entity (organization) who use accounting information. Examples of external users are suppliers, banks, customers, investors, potential investors, and tax authorities.
Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Use the following information for questions given ahead:
B Ltd. was registered with a share capital of $Rs. 2,00,00,000$ divided into equity shares of $Rs. 10$ each. It issued $Rs. 1,80,00,000$ equity shares to the general public at par payable as to $Rs. 3$ on application, $Rs. 3$ on allotment and balance in $2$ equal calls. The public had subscribed for $17,00,000$ shares. Till $31st$ March, $2006$, only first call had been made. All the shareholders had paid up except Mr. C, a holder of $50,000$ shares, who did not pay the call money.
B Ltd.'s Issued Capital will be ____________.

  1. $Rs. 2,00,00,000$

  2. $Rs. 1,80,00,000$

  3. $Rs. 1,70,00,000$

  4. $Rs. 1,36,00,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Issued capital can be taken as the part of the authorized capital, which is actually offered to the public for subscription. The number of issued stock is a sub-group of the total authorized or registered shares. Issued capital is the quantity of stock which the BOD (Board of Directors) or stockholders have decided to assign. Generally, a company does not issue the entire authorized shares at a time so that the issued capital is always less than the authorized capital. 

Issued capital does not get affect by subscribed or paid up capital and hence, in the given question B Ltd.'s Issued capital is Rs. 1,80,00,000.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Find the net profit made by the business if the total assets at the beginning of the year and at the end of the year were Rs.20,000 and 15,000 and drawing during the year were Rs.12,000.

  1. Rs. 5000

  2. Rs. 7000

  3. Rs. 9000

  4. Rs. 11,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Users of accounting information include ____________.

  1. Tax authorities

  2. Investors

  3. Creditors

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

The objective of accounting is to provide information to users for decision-making. 

The users of accounting information include: the owners and investors, management, suppliers, lenders, employees, customers, the government, and the general public.

The users may be classified into internal and external users.

Internal users refer to managers who use accounting information in making decisions related to the company's operations.

External users, on the other hand, are not involved in the operations of the company but hold some financial interest. The external users may be classified further into users with direct financial interest – owners, investors, creditors; and users with indirect financial interest – government, employees, customers and the others.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Which of the following are external stakeholders of a firm?

  1. Government.

  2. Bank.

  3. Investor.

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

A stakeholder is either an individual, group or organization who is impacted by the outcome of a project. They have an interest in the success of the project, and can be within or outside the organization that is sponsoring the project.

Stakeholder of a business may be internal stakeholders i.e., within the business organisation or external stakeholders i.e., outside the organization.
Examples of internal stakeholders are management, employees etc and examples of external stakeholders are bankers, government, investor, supplier etc.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

_________ helps in preparation of final accounts.

  1. Journal

  2. Ledger

  3. Trial Balance

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

A trial balance is a bookkeeping or accounting report that lists the balances in each of an organization's general ledger accounts at the year end (Accounts with zero balances will likely be omitted). 

The debit balance amounts are listed in a column with the heading "Debit balances" and the credit balance amounts are listed in another column with the heading "Credit balances." The total of each of these two columns should be identical. 
With the help of trial balance final accounts i.e., Trading A/c, Profit & loss A/c and Balance Sheet is prepared.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Use the following information for questions given ahead:
D Ltd. issued $2,00,000$ shares of $Rs. 100$ each at a premium of $Rs. 20$ per share payable as follows:
On application $Rs. 20$; On allotment $Rs. 50$ (including premium); On first call $Rs. 30$; On second and final call $Rs. 20$.
Applications were received for $3,00,000$ shares and pro-rata allotment was made to applications of $2,40,000$ shares. Money excess received on application was employed on account of sum due on allotment as part of share capital. A, to whom $4,000$ shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were forfeited and B, the holder of $6,000$ shares, failed to pay the two calls and his shares were forfeited after the second call. Of the forfeited shares, $8,000$ shares were reissued to C at a discount of $10$%, the whole of A's forfeited shares being reissued.
Amount refunded to shareholders will be ______________

  1. $Rs. 20,00,000$

  2. $Rs. 16,00,000$

  3. $Rs. 12,00,000$

  4. $Rs. 8,00,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
An oversubscribed security offering often occurs when the interest for an initial public offering (IPO) of securities exceeds the total number of shares issued by the underlying company. 
Pro rata is the term used to describe a proportionate allocation. It is a method of assigning an amount to a fraction according to its share of the whole. While a pro rata calculation can be used to determine the appropriate portions of any given whole, it is most commonly used in business finance.
Therefore, in the given case:
| No. of share applied for                 (1) | No. of share Allotted          (2) | Amount received on application        (3) | Amount required on allotment         (4) | Amount adjusted on allotment         (5) | Refund     (3) – (4) | | --- | --- | --- | --- | --- | --- | |        300000 |           240000 |       6000000 |       4800000 |           Nil |      1200000 |

 

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

_______ consists of a list of all the ledger balances on a particular date.

  1. Trial Balance

  2. Balance Sheet

  3. Cash Flow Statement

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

Trial Balance consists of a list of all the ledger balances on a particular date.

A trial balance is a bookkeeping or accounting report that lists the balances in each of an organization's general ledger accounts at the year end (Accounts with zero balances will likely be omitted). The debit balance amounts are listed in a column with the heading "Debit balances" and the credit balance amounts are listed in another column with the heading "Credit balances." The total of each of these two columns should be identical.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

After the preparation of ledgers, the next step is the preparation of _____________.

  1. Trading accounts

  2. Trial balance

  3. Profit and loss amount

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

In the accounting cycle, transactions are recorded in journals, then posted to ledgers. The next step is to summarize the ledger balances in a trial balance to ensure the books are balanced before preparing final accounts.