CIE Accounting Paper-1: Specimen Questions 165 - 167 of 214

Question number: 165

Short Answer Question▾

Write in Short

Shusma has a shop which sells fashion ornament. She bought 50 ornaments for $13.00 each and paid total carriage inwards of $50.00. She sold 30 ornaments for $20.00 each. The price at which she can sell the ornaments has now fallen to $13.50 each. At what amount will Shusma value the remaining ornaments in her balance sheet?

Explanation

The value of ornaments in balance sheet is $270

Number of ornaments brought is 50

The remaining ornaments as stock is =Purchasedornamentssoldornaments

=5030

=20

The value of ornaments in the balance sheet is 20×13.50

=$270

Question number: 166

MCQ▾

Question

What is shown as a liability in a Balance Sheet?

Choices

Choice (4) Response
a.

Advertising expenses

b.

Proposed dividend

c.

Preliminary expenses

d.

Discount on issue of shares

Answer

b.

Explanation

Current liabilities are those liabilities which are repayable within a year. It may take normal operating cycle of the business day by using of existing assets. Thus current liabilities includes

  • Trade creditors
  • Bills payable
  • Proposed dividend
  • Accrued expenses
  • Bank overdraft
  • Short term loans

Question number: 167

Short Answer Question▾

Write in Short

Mention the bases of accounting in common usage to finalize accounts.

Explanation

There are three bases of accounting in common usage. Any one of the following method can be used to finalize the accounts:

  • Cash basis
  • Accrual or Mercantile basis
  • Mixed or Hybrid basis.

Cash plays an important role in the Cash basis system. Accrual or Mercantile basis is followed by all the merchants, trade and industry. Mixed basis is combines of both ‘cash basis’ and ‘accrual basis’. This method is not used widely due to the inconsistency.

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