A-AS Level (CIE) Accounting Paper-1: Specimen Questions with Answers 75 - 76 of 93

Question 75

Question

MCQ▾

Gross profit is calculated by using the formula-

Choices

Choice (4)

a.

Revenue- cost of goods sold

b.

Revenue- cost of goods sold + closing stock

c.

Revenue- Loss

d.

Revenue- cost of goods sold- expenses

Answer

a.

Explanation

Gross profit is calculated by using the formula-:

Revenue refers to the money earned through the sale of the product in a particular period. Revenue is the amount before doing any deductions in the income generated by sales. On the other hand, cost of goods refers to the direct cost involved in the production of a product. It includes:

  • Depreciation
  • Labor
  • Overhead
  • Storage
  • Material

Question 76

Question

MCQ▾

Outstanding salary is:

Choices

Choice (4)

a.

Personal account

b.

Nominal Account

c.

Real Account

d.

Assets

Answer

a.

Explanation

  • Outstanding Expenses or Expenses due but not paid:- These are the expenses which have been incurred during the year but have been left unpaid on the date of preparation of final accounts. In other words, the benefit of such expenses has been derived during the year but the payment of which has not yet been made.
  • For example, the firm pays Rent @ $ 1,000 per month. If during the accounting year ending on 31st December only 11 months՚ Rent amounting to $ 11,000 has been paid, rent for one month $ 1,000 will remain outstanding at the end of the year.
  • Treatment in Final Accounts: Outstanding Expenses on the one hand, will be added to the concerned expenses on the debit side of Trading or Profit and Loss Account and on the other hand, will also be shown on the Liabilities side of the Balance Sheet. Outstanding Expenses Account is a Personal Account because it represents those persons to whom the payment is to be made.

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