A-AS Level (CIE) Accounting Paper-1: Specimen Questions with Answers 32 - 33 of 93

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Question 32

Question

MCQ▾

When closing capital is more than opening capital, it shows:

Choices

Choice (4)

a.

No profit-no loss

b.

Profit

c.

Profit, if there is no introduction of fresh capital

d.

Loss

Answer

c.

Explanation

In accounting, Capital refers to the amount brought in by the owner in the form of cash or kind. Opening capital shows the amount in the beginning of the period and closing capital shows the amount of capital at the end of the accounting period.

  • If closing capital of company is higher than the opening capital denotes that the business has earned some profit.
  • If opening capital is more as compared to the closing capital or closing capital is less than the opening capital, it denotes that the company has suffered loss.

Question 33

Question

MCQ▾

An asset is purchased for $ 60,000 and spent $ 2,000 on its installation. The useful life of plant is 10 years and the estimated scrap value is $ 6,000. Depreciation under the original cost method would be:

Choices

Choice (4)

a.

$ 5,800

b.

$ 6,200

c.

$ 5,400

d.

$ 5,600

Answer

d.

Explanation

As the rate of depreciation is not given in the question, the amount of capital depreciation will be arrived as under,

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