CIE Accounting Paper-2: Specimen Questions 3 - 7 of 103

Passage

M, N & O are partners sharing profit & loss in the ratio of 7: 5: 4. On April 1st 2014 they decide to change this sharing ratio to 3: 2: 1

Question number: 3 (3 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

Explain the term sacrificing ratio.

Explanation

The ratio in which one or more partner surrenders their share of profit to another partner is called as sacrificing ratio. This is obtained by the formula

Sacrificingratio=OldratioNewratio.

It reduces the share of the existing partner.

Question number: 4 (4 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

What is goodwill?

Explanation

Goodwill is referred as the “value or the reputation” of the firm which the business has earned with its hard work. It is an intangible asset. Goodwill is created by the firm through its brand name, large number of customers, good customer and employee relationships.

Question number: 5 (5 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

State two reasons for bringing about a change in the profit sharing ratio

Explanation

Two reasons for changing the profit sharing ratio are

(i) Admission of a new partner

(ii) Retirement of an old partner

Passage

Mr. Tendulkar’s trial balance showed a suspense A/C of £ 32600 on the debit side. On rechecking the books, the following errors were discovered:

(i) An amount of £ 10000 received from Mr. Ganguly was posted to the debit side of Mr. Ashwin as £ 12000.

(ii) Salary paid to driver £4000 was debited to his personal A/C as £2400

(iii) Drawings of £2000 was credited to sales A/C as £3200

(iv) An amount of £6000 accounting for depreciation on car was posted as £600

(v) Sale of an old bat £20000 was credited to sales A/C as £12000

Question number: 6 (1 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

What are the types of errors that usually occur in accounting?

Explanation

The errors can be classified into 4 types

  • Error of Commission
  • Error of omission
  • Error of complete omission
  • Error of partial omission
  • Error of Principle
  • Compensating Errors

Question number: 7 (2 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

How will Mr. Tendulkar rectify the above said errors in his books?

Explanation

Mr. Tendulkar rectifies the errors in his books by passing the reversal entry also called as the rectifying entry in his books of Accounts.

Rectifying journal entries in the books of Mr. Tendulkar

shows Rectifying journal entries in the books of Mr. Tendulkar

Date

Particulars

L. F

Debit Amt

Credit Amt

(i)

Suspense A/C Dr

2000

Ganguly A/C Dr

10000

To Ashwin A/C

12000

(Being the excess amount received credited to suspense A/C

(ii)

Salary A/C Dr

1600

To driver A/C

1600

(Being salary for driver)

(iii)

Sales A/C Dr

3200

To drawings A/C

2000

To suspense A/C

1200

(Being Wrong credit to Sales A/C rectified)

(iv)

Suspense A/C Dr

5400

To car A/C

5400

(Being Depreciation accounted for)

(v)

Suspense A/C Dr

8000

To Sales A/C

8000

(Being the excess amount credited to sales A/C)

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