A-AS Level (CIE) Accounting Paper-1: Specimen Questions with Answers 68 - 69 of 93

Question 68

Question

MCQ▾

In the Trial Balance are shown Debtors , provision for Bad Debts . In the adjustments Bad Debts are written off and provision for doubtful debts on debtors, on provision for discount and debtors and creditors is to be provided. The P& LA/e will be debited by:

Choices

Choice (4)

a.

2600

b.

900

c.

1520

d.

240

Answer

a.

Explanation

Trading and Profit & Loss A/c

Trading and Profit & Loss a/C
ParticularsAmountParticularsAmount
To, bad debts1500
Add: New Provision40002600
5,5001520
Less: Old Provision2900
To Provision for discount on debtors

Question 69

Question

MCQ▾

Goodwill should be recorded in the books

Choices

Choice (4)

a.

When some consideration in money or money՚s worth has been paid for it

b.

When management is interested to show goodwill in the books of accounts

c.

When company is going to issue shares or debentures for public subscription

d.

When firms in the same industry show goodwill in their books of accounts

Answer

a.

Explanation

  • Goodwill means the good name, or the reputation earned by a firm through the hard work and honesty of its owners. If a firm renders good service to the customers who feel satisfied will come repeatedly and the firm will be able to earn more profits.
  • If new partner brings his share of goodwill in cash, and if the Goodwill Account already appears in the books of the firm, first the existing Goodwill Account will have to be written off. For this purpose, old Partners՚ Capital, Accounts are debited in their old profit-sharing ratio and Goodwill Account is credited. Thus, the following entry is passed to write off the existing goodwill:

Old Partner՚s Capital A/cs

To Goodwill A/C

(Goodwill written off in old ratio)

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