A-AS Level (CIE) Accounting Paper-1: Specimen Questions with Answers 16 - 17 of 93

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Question 16

Question

MCQ▾

Goods worth $ 10,000 were burnt by fire and a claim of 70 % has been accepted by the insurance company. The amount to be transferred to p&l a/c will be:

Choices

Choice (4)

a.

$ 17,670

b.

$ 18,620

c.

$ 17,689

d.

$ 18,600

Answer

c.

Explanation

Adjustment entry:

Loss by accident (fire) A/c Dr. 10,000

To Purchases A/c 10,000

(Goods burnt by fire)

Insurance Company A/c Dr. 7000

Profit & Loss A/c 3000

To Loss by Accident A/c 10,000

(70 % of the claim accepted by the insurance company)

Question 17

Question

MCQ▾

Single Entry System of bookkeeping is:

Choices

Choice (4)

a.

Unscientific

b.

Unsystematic

c.

Inaccurate

d.

All a., b. and c. are correct

Answer

d.

Explanation

  • Preparation of Trial Balance not possible: The method does not record both the aspects of a transaction.
  • Incomplete and Unscientific System: The system is incomplete and unscientific because both the aspects, debit and credit of a transaction are not recorded. Also, no set rules are followed under this method.
  • True Profit or Loss cannot be ascertained: Because nominal accounts are not maintained, a Trading and Profit and Loss Account cannot be prepared and hence, the profit earned or loss suffered during a particular period cannot be ascertained with reasonable accuracy.
  • Difficulty in preparing Balance Sheet: Since real accounts are not maintained, Balance Sheet cannot be prepared to depict the true financial position of the business. Only a statement of affairs is prepared wherein the value of assets and liabilities is written on estimated basis.
  • No Control on Assets: Since real accounts are not maintained, it is not possible to keep full control on the assets and as such, the chances of misappropriation of assets cannot be avoided.

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