CIE Accounting Paper-1: Specimen Questions 62 - 64 of 214

Question number: 62

MCQ▾

Question

What information is shown by a business’s Profit and Loss Account?

Choices

Choice (4) Response
a.

if the business income exceeds expenditure

b.

if the business has made a net profit

c.

if the business assets equal the liabilities

d.

if the business has made a gross profit

Answer

b.

Explanation

Net profit is ascertained after calculating the gross profit of the business. To earn net profit trader has to incur many expenses apart from the trading and manufacturing goods. Thus net profit shows the business of Profit and Loss Account.

Passage

On April 2015 the balance of Twinkle Ltd were:

Sales ledger control account $55400

Provision for doubtful debts account $5540

Question number: 63 (1 of 2 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

Calculate the percentage rate used for the provision for doubtful debts.

Explanation

10 %

Thepercentagerateusedfortheprovisionfordoubtfuldebts=ProvisionfordoubtfuldebtsSalesledgercontrolaccount×100

=554055400×100

=110×100

=10%

Hence, the percentage of rate used for the provision for doubtful debts is 10%

Question number: 64 (2 of 2 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

On 31 March 2015 the balance on the provision for doubtful debts had decreased

to $3540. Suggest one reason for the decrease.

Explanation

The main reasons are:

  • Decrease in the value of

o Trade receivable

o Credit sales

  • Decrease in rate of provision in bad debts.
  • Anticipating the bad debts.
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