Accounting , CPT – Chapter 6 CA PRATHAP SS

A. Previous Financial Year

B. Following Financial Year

C. Current Financial Year

D. None

Answer:

Solution

Prepaid expense is expense paid in advance but which has not yet been incurred. Expense must be recorded in the accounting period in which it is incurred. Therefore, prepaid expense must be not be shown as expense in the accounting period in which it is paid but instead it must be presented as such in the subsequent accounting periods in which the services in respect of the prepaid expense have been performed.

Therefore, the Answer is Option B: The Following Financial Year

A. Purchase A/c or Trading A/c

B. Supplier A/c

C. Goods In Transit A/c

D. Cash A/c

Answer:

Solution

The normal journal entry of Goods in Transit is

Goods In Transit A/c Dr To Purchases A/c

Answer is Option A – Purchases A/c or Trading A/c

A. Rs.55,000/-

B. Rs.3,00,000/-

C. Rs.9,167/-

D. Rs.5,50,000/-

Answer:

Solution

Average Capital = Opening Capital + Closing Capital

2

Formula Used

Opening Capital + Profit for the year = Closing Capital

Closing Capital = Rs.5,00,000+Rs.1,00,000

= Rs.6,00,000/-

Average Capital = Rs.5,00,000+ Rs.6,00,000

2

Average Capital = Rs.5,50,000

Computation of Closing Capital

Computation of Average Capital

A. Rs.44,000/-

B. Rs.40,000/-

C. Rs.37,000/-

D. Rs.33,000/-

Answer:

Solution

Net Profit before charging such commission

Rs.4,40,000

Amount of Manager’s commission

Rs.4,40,000 X 10/110 =Rs.40,000/-

Answer is Option B – Rs.40,000/-

A. Rs.4,65,000/-

B. Rs.5,25,000/-

C. Rs.5,65,000/-

D. Rs.5,10,000/-

Answer:

Solution Balance Sheet

Capital 2,00,000

Net Profit 1,50,000

Provision For Taxes 75,000 Sundry Assets 4,65,000

Advance Tax Paid 60,000

5,25,000 5,25,000

Liabilities 1,00,000

A. Rs.92,000/-

B. Rs.42,000/-

C. Rs.1,72,000/-

D. Rs.52,000/-

Answer:

Solution

Balance Sheet

Loan 50,000

Trade Creditors 80,000

Capital 50,000 Stock 90,000

Fixed Assets 72,000

2,22,000 2,22,000

Profit For The Year (balancing figure)

Profit will be the balancing figure on the Liabilities Side

Cash In Hand 60,000 42,000

A. Rs. 1,455/-

B. Rs.1,305/-

C. Rs.555/-

D. Rs.705/-

Answer :

Solution

Profit & Loss A/c

To Bad Debts 120

To Carriage Outwards 175

To Net Profit (balancing figure)

1,455

By Gross Profit b/d

1,750

1,750 1,750

Carriage Inward is a direct expense which is already taken into account to arrive at the Gross Profit.

Proprietors Personal Expenses will not be included as only amounts relating to the business is entered.

A. Rs.40,000/-

B. Rs.45,000/-

C. Rs.55,000/-

D. Rs.60,000/-

Answer :

Solution

To Opening Stock 60,000

To Purchases 90,000

To Gross Profit (33 1/3% on cost =1/4 on Sales =1/4*Rs.1,20,000)

30,000 By Closing Stock Less: Damaged Goods

60,000

By Sales 1,20,000

1,80,000 1,80,000

15,000 45,000

A. Rs.2,25,000/-

B. Rs.1,85,000/-

C. Rs.2,05,000/-

D. Rs.1,75,000/-

Answer:

Solution Move from

cash outflow to

amount debited to

P/L following accrual

accounting Salaries Paid for the year Rs.2,00,000

Last Year Outstanding Rs.10,000 - Rs.1,90,000

Prepaid Salaries For Next Year Rs.20,000 - Rs.1,70,000

Current Year Outstanding Salary Rs.15,000 + Rs.1,85,000

A. Rs.2,00,000/-

B. Rs. 1,00,000/-

C. Rs. 3,00,000/-

D. Rs. 4,00,000/-

Answer:

Solution As per the question, Current Asssets = Rs.3,00,000 Fixed Assets = Rs.6,00,000 Capital = Rs.12,00,000 Balance Sheet

Capital 12,00,000

Current Assets 3,00,000

Fixed Assets 6,00,000

13,00,000 13,00,000

Current Liabilities (balancing figure)

Investments 4,00,000

1,00,000

A. Rs.2,400/-

B. Rs. 2,305/-

C. Rs. 2,300/-

D. Rs. 2,000/-

Answer:

Solution

Sundry Debtors 48,000 -

=

Bad Debts 2,000 46,000

- Provision For Doubtful Debts =5/100* 46,000 2,300

A. Rs. 5,70,000/-

B. Rs. 4,90,000/-

C. Rs. 5,30,000/-

D. None of the above

Answer:

Solution

To Opening Stock (balancing figure)

4,90,000

To Purchases 4,50,000

To Gross Profit (12% on Sales)

90,000

By Closing Stock

3,60,000

By Sales 7,50,000

11,10,000 11,10,000

To Direct Expenses 80,000

A. Provision for Bad Debts is shown as a liability in the Balance Sheet or may be deducted from the debtors in the balance sheet.

B. Bad Debts could be more than Provision for Bad Debts.

C. Bad Debts could be less than Provision for Bad Debts.

D. Actual bad debts are not adjusted against the provision for bad debts A/c

Answer: D

A. Prepaid Expenses A/c will be debited and the respective expenses A/c will be credited

B. Respective Expenses A/c will be debited and Prepaid Expenses A/c will be credited.

C. Prepaid Expenses A/c will be debited and Profit & Loss A/c will be credited.

D. Profit & Loss A/c will be debited and Prepaid Expenses A/c is credited.

Answer: A

A. Rs. 7,000/-

B. Rs.1,07,000/-

C. Rs.93,000/-

D. Rs. 1,00,000/-

Answer:

Solution

Formula Used Net Realisable value of account receivable =

Account receivable – Provision for bad and doubtful debts

NRV = A/c receivable – Provision for doubtful debts = 1,00,000 – 7,000 = 93,000

Net realizable value of the accounts receivable is Rs.93,000

A. Rs.61,800/-

B. Rs.48,200/-

C. Rs.55,000/-

D. Rs. 6,800/-

Answer:

Solution

Formula Used Rent of the year = Total rent + Current year

outstanding – Previous year outstanding

= 50,000 + 5,000 – 6,800 = 48,200

A. Current Assets : Fixed Liabilities

B. Current Assets : Current Liabilities

C. Fixed Assets : Fixed Liabilities

D. Fixed Liabilities : Current Liabilities

Answer : B

A. Goodwill is a fictitious Asset

B. Closing Stock is a wasting asset.

C. Preliminary Expense is a current asset.

D. Patent is an intangible asset.

Answer : D

A. Rs.20,000/-

B. Rs.16,000/-

C. Nil

D. None of these

Answer:

Solution

Profit = Sales - Cost of Goods Sold Formula Used

Sales = 4,000 * 25 = 1,00,000

COGS = 1,05,000 * (4/5) = 84,000

Profit = Rs.16,000

Profit = 1,00,000 - 84,000 = 16,000

Cost of Production = 1,00,000 + Direct expenses = 5,000 1,05,000

A. Prepaid Insurance A/c Dr Rs.1,800 To Insurance A/c Rs.1,800

B. Insurance A/c Dr Rs. 1,800 To Prepaid Insurance A/c Rs. 1,800

C. Prepaid Insurance A/c Dr Rs.600 To Insurance A/c Rs.600

D. Insurance A/c Dr Rs. 600 To Prepaid Insurance A/c Rs. 600

Answer:

Solution

Annual Insurance premium = 2,400 Monthly insurance premium = 2,400 / 12 = 200

Since the premium for the whole year was paid on 1st January , hence three months premium ( 200 * 3 = 600 ) has been used

up. So, on 31st March, Prepaid Insurance will be for 9 months ie.,

200x9 = Rs,1,800/-

The Journal Entry on 31st March will be Prepaid Insurance A/c Dr Rs.1,800 To Insurance A/c Rs.1,800 On 1st April 2013, the above entry will be reversed.

Answer is Insurance A/c Dr 1,800 To Prepaid Insurance A/c 1,800