A-AS Level (CIE) Accounting Paper-1: Specimen Questions with Answers 71 - 72 of 93

Question 71

Question

MCQ▾

From the following data what will be the value of current assets

1. Goodwill 12000

2. Stock 6000

3. Investments 2000

4. Cash in hand 6000

Choose the Correct Option:

Choices

Choice (4)

a.

25000

b.

14000

c.

20000

d.

12000

Answer

c.

Explanation

The formula to calculate current assets is as follows:

Question 72

Question

MCQ▾

Factory overhead is classified into:

1-Indirect material cost

2-Indirect labor cost

3-Indirect Expenses

Choose the Correct Option:

Choices

Choice (4)

a.

Only 3

b.

Only 1

c.

1 and 2

d.

All a., b. and c. are correct

Answer

d.

Explanation

The term overhead is a wider concept than the term indirect expenses. Overhead includes the following:

  • Indirect Material Cost
  • Indirect Labor Cost
  • Indirect Expenses.

Overheads are classified under the following three categories:

  • Factory Overhead: It includes
    • Indirect material
    • Indirect labor and
    • Indirect factory expenses.
  • The indirect factory expenses are those which incurred in the factory and are concerned with the running of the factory. The example is: rent, rates and insurance of factory premises, gas, fuel, power and lighting factory, depreciation and repairs of factory building and machinery, works manager salary, research expenses, supervision exp. , stores overhead, drawing expenses etc.
  • Office and Administrative Overhead: Such expenses are not related to factory, but they pertain to the administration of business. The examples are rent, office lighting, depreciation of office building and furniture, postage, stationery, telephone expenses, salaries of office staff, directors՚ fees, auditors՚ fees, general expenses, counting office expenses etc.
  • Selling and Distribution Overhead Expenses incurred for marketing and dispatching of goods are called selling and distribution expenses. Examples of Selling Overhead are: Salaries of salesmen and sales manager, their commission, advertisement expenses, show room expenses, expenses on sales promotion, gifts, samples etc. , travelling expenses, bad debts etc. Examples of Distribution Overhead are: Warehousing charges, packing expenses, loading charges, carriage outwards, depreciation of delivery vans etc.

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