Tag: adjustment for closing stock only

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Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

A and B entered into a joint Venture to purchase and sell a new item. They agreed to share the profits and losses equally, A purchased goods worth Rs. 90,000 and spent Rs. 25,000 in sending the goods, B spent Rs. 5,000 as selling expenses and sold goods for Rs. 20,0000. What will be the amount  remitted by B to A as final settlement ?

  1. Rs. 1,55,000

  2. Rs. 1,50,000

  3. Rs. 1,15,000

  4. Rs. 80,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Total cost: 90,000 + 25,000 + 5,000 = 120,000. Sales: 200,000. Profit: 80,000. Share: 40,000 each. B collected 200,000, spent 5,000. B owes A: 90,000 (goods) + 25,000 (expenses) + 40,000 (profit) = 155,000.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Under sales on return or approval basis, the ownership of goods is passed only ___________________.

  1. When the purchaser gives his approval

  2. If the goods are not returned within specified period

  3. Both (a) and (b)

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

Ownership passes when the buyer signifies approval or fails to return the goods within the specified time frame.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Which of the following are generally the inventories of a service business _________.

  1. Finished goods inventories

  2. Purchased goods

  3. Raw materials inventories

  4. Work in process inventories
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Service businesses do not typically hold finished goods or raw materials for resale. Instead, they hold work in process inventories, which represent the costs of services currently being performed but not yet billed or completed.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Which method of inventory valuation helps in reducing the burden of income tax in times of rising prices?

  1. Last-in-first-out

  2. First-in-first-out

  3. Average cost

  4. Base stock method
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

LIFO (Last-In-First-Out) assumes that the most recently purchased, higher-cost items are sold first during periods of rising prices. This results in a higher cost of goods sold, which reduces taxable income.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

A higher inventory ratio indicates ____________.

  1. Better inventory management

  2. Quicker turnover

  3. Both A and B

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

A higher inventory turnover ratio indicates that a company is selling its goods quickly and managing its stock levels efficiently. Therefore, both A and B are correct interpretations.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Activities related to coordinating, controlling and planning flow of inventory are classified as ________________.

  1. decisional management

  2. throughput management

  3. inventory management

  4. manufacturing management
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Inventory management is the systematic approach to sourcing, storing, and selling inventory, which includes planning, controlling, and coordinating the flow of goods.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Which of the following is not included in cost of inventory?

  1. Purchase Cost

  2. Transport in Cost

  3. Import Duty

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

Selling cost is an indirect cost which does not have any direct association with the cost of production. 

Selling cost should be included and selling & distribution cost.

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Inventory, is generally valued as lower of ________________.

  1. Market Price and Replacement Cost

  2. Cost and Net Realizable Value

  3. Cost and Sales Value

  4. Sales Value and Profit
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Financial accounting is based on certain conventions , conservatism is one of them. Conservatism convention is based on the the concept "playing safe". Accordingly firms are recording all anticipated losses in books of account.


Valuation of inventory on the basis of cost or net realizable value is also based on the conservatism convention. 

Multiple choice elements of book keeping and accountancy methods of valuation of closing stock adjustment for closing stock only closing stock meaning, kinds and important terms relating to stock

Which one out of the following is not an inventory valuation method?

  1. FIFO

  2. LIFO

  3. Weighted Average

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

FIFO, LIFO, and Weighted Average are standard methods for valuing inventory. EOQ (Economic Order Quantity) is a formula used to determine the optimal order quantity to minimize total inventory costs, not a valuation method.