CIE Accounting Paper-1: Specimen Questions 57 - 58 of 214

Question number: 57

MCQ▾

Question

John maintains a provision for doubtful debts at 5 % of the trade receivables (debtors) at the end of each financial year.

The Provision for Bad and Doubtful debts account shows a balance of $2000 on 1st January 2008. The Bad debts during the year 2008 amount to $1600. The Sundry debtors on 31st December 2008 are $32, 000.

How much will appear in John’s income statement (profit and loss account) for the year ended 31 December 2008?

Choices

Choice (4) Response
a.

$1600 Debit

b.

$1200 Debit

c.

$1600 Credit

d.

$1200 Credit

Answer

b.

Explanation

The provision for bad and doubtful debts is generally a percentage on the debtors. In above question transaction will be

Dr Profit and Loss A/C for the year ended 31 - 12 - 2008 Cr

Profit and Loss Account for the year ended 31 - 12 - 2008

here table is Profit and Loss Account for the year ended 31 - 12 - 2008

To Bad debts 1600

+ New Provision 1600

________

3200

_ Existing provision 2000

________

$

1200

Question number: 58

MCQ▾

Question

Which statement is correct?

Choices

Choice (4) Response
a.

Accounting can help to identify profit trends.

b.

Accounting can help to monitor liquidity.

c.

Accounting can help to control costs.

d. All a. , b. and c. are correct

Answer

d.

Explanation

The accounting is a process in which financial activities are recorded according to the standard principles of accounting.

Thus accounting helps in controlling costs, identify profit trends and monitor liquidity.

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