A-AS Level (CIE) Accounting Paper-1: Specimen Questions with Answers 25 - 27 of 93

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Question 25

Question

MCQ▾

A business purchases a new car.

The table below shows the purchase invoice details:

A Business Purchases a New Car
$
purchase price14 000
delivery charge600
sign writing100
road tax200
tank of fuel50

How much should be debited to the car account?

Choices

Choice (4)

a.

b.

c.

d.

Answer

c.

Explanation

Purchase A/c

Purchase a/C
ParticularsAmountParticularsAmount
To cash a/c14000By Balance c/d14700
To sign writing100
To delivery charges600
14700

Amount should be 14,700

Question 26

Question

MCQ▾

A՚s Trial Balance provides you the following information:

Bad Debts ₹ 3,000

Provision for Bad Debts ₹ 5,000

It is required to maintain a provision of ₹ 1,500 for doubtful debts, the amount to be recorded in P & L A/c will be:

Choices

Choice (4)

a.

4,500 in Dr.

b.

3,500 in Dr.

c.

500 in Dr.

d.

500 in Cr.

Answer

d.

Explanation

Trial Balance Sheet

Trial Balance Sheet
Dr.$Cr.$
By provision for doubtful debts:
Old provision5000
Less: Bad debts3000500
2000
Less: New provision1500

Question 27

Question

MCQ▾

Choose the correct formula to calculate inventory days

Choices

Choice (4)

a.

Closing inventory/Average daily cost of goods sold

b.

Average inventory/Average daily cost of goods sold

c.

Opening inventory/Average daily cost of goods sold

d.

Total inventory/Average daily cost of goods sold

Answer

b.

Explanation

Inventory turnover show many times a company has sold and replaced its inventory in each period. Low inventory turnover implies weak sales and excess inventory whereas, high inventory implies strong or sufficient sales. Inventory calculation helps the businessman to-

  • Better decision making
  • Decisions on pricing
  • Manufacturing decisions
  • Purchase of inventory

Average inventory is calculated by adding the inventory at the beginning and at the end of the period and dividing the sum by 2.

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