Text Book Back Questions and Answers
I. Multiple Choice Questions
Choose the Correct Answer
Question 1.
Closing stock is an item of ……………..
(a) Fixed asset
(b) Current asset
(c) Fictitious asset
(d) Intangible asset
Answer:
(b) Current asset
Question 2.
Balance sheet is ……………..
(a) An account
(b) A statement
(c) Neither a statement nor an account
(d) None of the above
Answer:
(b) A statement
Question 3.
Net profit of the business increases the ……………..
(a) Drawings
(b) Receivables
(c) Debts
(d) Capital
Answer:
(d) Capital
Question 4.
Carriage inwards will be shown ……………..
(a) In the trading account
(b) In the profit and loss account
(c) On the liabilities side
(d) On the assets side
Answer:
(a) In the trading account
Question 5.
Bank overdraft should be shown ……………..
(a) In the trading account
(b) Profit and loss account
(c) On the liabilities side
(d) On the assets side
Answer:
(c) On the liabilities side
Question 6.
Balance sheet shows the …………….. of the business.
(a) Profitability
(b) Financial position
(c) Sales
(d) Purchases
Answer:
(b) Financial position
Question 7.
Drawings appearing in the trial balance is ……………..
(a) Added to the purchases
(b) Subtracted from the purchases
(c) Added to the capital
(d) Subtracted from the capital
Answer:
(d) Subtracted from the capital
Question 8.
Salaries appearing ill the trial balance is shown on the ……………..
(a) Debit side of trading account
(b) Debit side of profit and loss account
(c) Liabilities side of the balance sheet
(d) Assets side of the balance sheet
Answer:
(b) Debit side of profit and loss account
Question 9.
Current assets does not include ……………..
(a) Cash
(b) Stock
(c) Furniture
(d) Prepaid expenses
Answer:
(c) Furniture
Question 10.
Goodwill is classified as ……………..
(a) A current asset
(b) A liquid asset
(c) A tangible asset
(d) An intangible asset
Answer:
(d) An intangible asset
II. Very Short Answer Questions
Question 1.
Write a note on the trading account.
Answer:
Question 2.
What are wasting assets?
Answer:
These are the assets which get exhausted gradually in the process of excavation. Examples: mines and quarry.
Question 3.
What are fixed assets?
Answer:
Question 4.
What is meant by purchase returns?
Answer:
Goods purchased which are returned to suppliers are termed as purchases return or return outward.
Question 5.
Name any two direct expenses and indirect expenses.
Answer:
Question 6.
Mention any two differences between trial balance and balance sheet.
Answer:
Question 7.
What are the objectives of preparing a trading account?
Answer:
Question 8.
What is the need for preparing a profit and loss account?
Answer:
III. Short Answer Questions
Question 1.
What are final accounts? What are its constituents?
Answer:
The final accounts or financial statements include the following:
The purposes of preparing the financial statements are:
Question 2.
What is meant by closing entries? Why are they passed?
Answer:
Balances of all the nominal accounts are required to be closed on the last day of the accounting year to facilitate the preparation of trading and profit and loss accounts. It is done by passing necessary closing entries in the journal properly. Purchases have debit balance and purchases returns have credit balance. At the end of the accounting year, the balance in the purchases returns account is closed by transferring to the purchase account.
Question 3.
What is meant by gross profit and net profit?
Answer:
Question 4.
“Balance sheet is not an account” – Explain.
Answer:
Question 5.
What are the advantages of preparing a balance sheet?
Answer:
The balance sheet discloses the financial position of a business on a particular date, it gives the balances only for the date on which it is prepared. It shows the financial position of the business according to the going concern concept
Question 6.
What is meant by grouping and marshaling assets and liabilities?
Answer:
a) In the order of liquidity:
b) In the order of permanence:
IV. Exercises
Question 1.
Prepare trading account in the books of Sivashankar from the following figures:
Answer:
Trading account of Sivashankar
Question 2.
Prepare trading account in the books of Mr. Sanj ay for the year ended 31st December 2017:
Answer:
Trading account of Mr. Sanjay for the year ended 31st December 2017
Question 3.
Prepare trading account in the books of Mr. Sanj ay for the year ended 31st December 2017:
Answer:
Trading account of Saravanan for the year ended 31st December, 2017
Question 4.
From the following details for the year ended 31st March 2018, prepare a trading account
Answer:
Trading account for the year ended 31st March 2018
Question 5.
Ascertain gross profit or gross loss from the following:
Answer:
Profit and Loss Account
Question 6.
From the following balances taken from the books of Victor, prepare a trading account for the year ended December 31, 2017:
Answer:
Trading Account of Victor for the year ended 31st December, 2017
Hint: Closing stock will not appear in the trading account because adjusted purchases have been given.
Question 7.
Compute the cost of goods sold from the following information:
Answer:
Cost of goods sold = Opening stock + Net purchases + Direct expenses – Closing stock
= 10,000 + 80,000 + 7,000 – 15,000
= 82,000
Note: Indirect expenses do not form part of the cost of goods sold.
Question 8.
Find out the number of sales from the following information:
Answer:
Cost of goods sold = Opening stock + Net purchases + Direct expenses – Closing stock
= 30,000 + 2,00,000 + 0 – 20,000
= 2,10,000
Therefore, percentage of gross profit on cost of goods sold is
30/70 x 100 = 42.85% (42.857142 ……….)
Gross profit = 42.85% on 2,10,000 i.e., 42.85/100 x 2,10,000 = ₹ 90,000
Sales = Cost of goods sold + Gross Profit
= 2,10,000 + 90,000 (Fractions to be rounded)
= 3,00,000
Question 9.
Prepare profit and loss account in the books of Kirubavathi for the year ended 31st December 2016 from the following information:
Answer:
Profit and loss account of Kirubavathi for the year ended 31st Dec 2016
Question 10.
Ascertain net profit or net loss from the following:
Answer:
Profit and loss account
Question 11.
From the following details, prepare a profit and loss account.
Answer:
Profit and loss account
(Hint: Freight inwards will not appear in profit and loss account as it is a direct expense)
Question 12.
From the following information, prepare profit and loss accounts for the year ending 31st December 2016.
Answer:
Profit and loss account for the year ended 31st December 2016
Question 13.
From the following balances obtained from the books of Mr. Ganesh, prepare trading and profit and loss account:
Answer:
Trading and Profit & loss account of Mr. Ganesh
Question 14.
From the following balances extracted from the books of a trader, ascertain gross profit and net profit for the year ended March 31, 2017:
Answer:
Trading and Profit & Loss account for the year ended 31st March 2017
Question 15.
From the following particulars, prepare a balance sheet in the books of Bragathish as of 31st December 2017:
Answer:
Balance Sheet of Bragathish as of 31st December 2017
Question 16.
Prepare trading and profit and loss account in the books of Ramasundari for the year ended 31st December, 2017 and balance sheet as of that date from the following information:
Answer:
Trading and Profit & Loss a/c of Ramasundari for the year ended 31 Dec 2017 Cr.
Balance Sheet of Ramasundari as of 31st March 2018
Question 17.
From the Trial balance, given by Saif, prepare final accounts for the year ended 31st March 2018 in his books:
Answer:
Trading and Profit & Loss a/c of Saif for the year ended 31 March 2018
Balance Sheet of Saif as of 31st March 2018
Question 18.
Prepare trading and profit and loss account and balance sheet in the books of Deri, a trader, from the following balances as of March 31, 2018.
Answer:
Trading and Profit & Loss a/c of Deri for the year ended 31st March 2018
Balance Sheet of Deri as of 31st March 2018
Textbook Case Study Solved
Question 1.
Mr. Abhinav started a small shop selling dairy products. He wanted to maintain proper books of accounts. But, he had very little knowledge of accounting. He maintained only three books – purchases, sales, and cash book by himself. He bought some dairy products and a refrigerator to store the milk products for which the payment was made by cheque but recorded the same in the purchases book. He also spent for the transportation charges and paid some money to the person who unloaded the stock. He recorded the same in the cash book.
He made both cash and credit sale for the next few weeks. He entered the entire sales in the sales book. In the middle of the month, he was in need of some money for his personal use. So he took some money but did not record in the books.
Now, discuss the following points:
Question 1.
Do you think Mr. Abhinav needs an accountant? Why do you think so?
Answer:
Yes, Mr. Abhinav needs an accountant because he records all cash and credit transactions.
Question 2.
Does he maintain enough books of accounts?
Answer:
Yes, he maintains enough books of accounts.
Question 3.
What other books do you think that he needs to maintain?
Answer:
He needs to maintain a petty cashbook.
Question 4.
What will be the impact on the profit, if he records the purchase of the refrigerator in the purchases book?
Answer:
The purchase book will be overcast because this transaction will be recorded in the proper journal.
Question 5.
Is it important to record the money taken for personal use? Will it affect the final accounts?
Answer:
Yes, then only the actual profit or loss can be found out in the business.
Question 6.
Identify some of the accounting principles relevant to this situation.
Answer:
Some of the accounting principles relevant to this situation are matching principles, business entity concept, money measurement concept, dual output concept, periodicity concept, and going concern concept.
I. Multiple Choice Questions
Choose the correct answer
Question 1.
Carriage outwards will be shown ________.
a) In the trading account
b) In the profit and loss account
c) On the liabilities side
d) On the assets side
Answer:
b) In the profit and loss account
Question 2.
The first part of the income statement is ………………..
(a) Final account
(b) Trading account
(c) Profit and Loss account
(d) Balance Sheet
Answer:
(b) Trading account
Question 3.
___________ account enables the trader to find out gross profit or loss.
a) Trading Account
b) Profit and loss Account
c) Balance sheet
d) Trial balance
Answer:
a) Trading Account
Question 4.
Trading account is a ……………….. account.
(a) Personal
(b) Nominal
(c) Real
(d) Representative personal
Answer:
(b) Nominal
Question 5.
Fixed assets does not include ________.
a) Plant
b) Stock
c) Furniture
d) Computer
Answer:
c) Furniture
Question 6.
……………….. account is the second part of the income statement.
(a) Trading
(b) Profit and Loss
(c) Balance sheet
(d) Final
Answer:
(b) Profit and Loss
Question 7.
All incomes are ________ in the profit and loss account.
a) Debited
b) Credited
c) Assets
d) Liabilities
Answer:
b) Credited
Question 8.
Balances of all the personal and real account are shown in ………………..
(a) Trading account
(b) Profit and loss account
(c) Income statement
(d) Balance sheet
Answer:
(d) Balance sheet
Question 9.
Wages is an example of ________.
a) Capital expenses
b) Indirect expenses
c) Direct expenses
d) Revenue expenses
Answer:
c) Direct expenses
Question 10.
……………….. is a summary of the personal and real accounts.
(a) Balance sheet
(b) Final account
(c) Trading account
(d) Profit and loss account
Answer:
(a) Balance sheet
Question 11.
________ refers to buying and selling of goods with the intention of making a profit.
a) Trading
b) Trial balance
c) Profit and loss account
d) Balance sheet
Answer:
a) Trading
Question 12.
Marshaling can be made in one of the ……………….. ways.
(a) three
(b) two
(c) four
(d) five
Answer:
(b) two
Question 13.
________ is the arrangement of various assets and liabilities in proper order.
a) Marshalling
b) Grouping
c) Recording
d) Packing
Answer:
a) Marshalling
Question 14.
……………….. liabilities are not shown in the balance sheet.
(a) Contingent
(b) Current
(c) Liquid
(d) Fixed
Answer:
(a) Contingent