Tag: preparation of final accounts

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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

Making Provision for Discount on Debtors is an example of __________.

  1. Increase in Asset & Owner's Liability

  2. Decrease in Asset & Owner's Liability

  3. Increase in Liability & Owner's Liability

  4. Decrease in Liability & Increase in Owner's Liability

  5. Increase in Liability & Decrease in Owner's Liability
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A provision for discount on debtors reduces the asset (debtors) and reduces owner's equity (as it is an expense).

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

Sundry Debtors on $31^{st}$ March $2006$ are Rs. $55,200$ Further Bad debts are Rs. $200$:
Provision for doubtful debts are to be made on debtors $@ 5\%$ and also provision of discount on debtors $@ 2\%$ the amount of provision of discount on debtors will be __________.

  1. Rs. $1,045$

  2. Rs. $2,750$

  3. Rs. $1,100$

  4. Rs. $2,760$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Net debtors = 55,200 - 200 (bad debts) = 55,000. Provision for doubtful debts = 5% of 55,000 = 2,750. Debtors after provision = 55,000 - 2,750 = 52,250. Provision for discount = 2% of 52,250 = 1,045.

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 net profit after his commission. If the net profit of the firm before charging commission is Rs. $4,40,000$. The amount of manager's commission will be.

  1. Rs. $44,000$

  2. Rs. $40,000$

  3. Rs. $37,000$

  4. Rs. $33,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Commission = (Profit * Rate) / (100 + Rate) = (4,40,000 * 10) / 110 = 40,000.

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 percentage of the commission is applied on the profit either:
1. Before charging such commission 
2. After charging such commission.

  1. 1 is true

  2. 2 is true

  3. Both are true

  4. Both are false
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. In the absence of any such information, it is assumed that the commission is allowed as a percentage of the net profit before 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 manager of the business is sometimes given the commission on _______.

  1. Salary

  2. Purchase

  3. Gross profit

  4. Net profit
Reveal answer Fill a bubble to check yourself
D 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.  In the absence of any such information, it is assumed that commission is allowed as a percentage of the net profit before 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

From the following details,_______will 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.24,000
Actual bad debts during the year Rs.20,000
Closing balance of Debtors. Rs.80,000
Provision for bad debts to be made @5% of total debtors.

  1. Nil

  2. Rs. 4,250

  3. Rs.2,690

  4. Rs.3,200
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The total provision required is 5% of 80,000 = 4,000. Since the existing provision is 24,000 and actual bad debts were 20,000, the remaining provision is 4,000. No additional charge is needed.

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 calculated the managerial commission.
Net profit before charging managerial commission Rs.65,000
Managerial commission 11% after charging such commission.

  1. Rs.6,441

  2. Rs.6,500

  3. Rs.6,290

  4. Rs.6,360
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Commission = (65,000 * 11) / 111 = 6,441.44, which rounds to 6,441.

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 if the managerial commission is 11% of net profit before charging such commission.
Net profit before charging managerial commission Rs.65,000

  1. Rs.58,558

  2. Rs.60,300

  3. Rs.57,850

  4. Rs.60,360
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Commission = 11% of 65,000 = 7,150. Net profit after commission = 65,000 - 7,150 = 57,850.