A-AS Level (CIE) Accounting Paper-1: Specimen Questions with Answers 90 - 92 of 93

Question 90

Question

MCQ▾

From the information given below calculate Proprietary ratio

Equity share capital ; Preference share capital , debentures ; General reserve , Opening stock ; Closing stock ; other current assets ; Fixed assets , and current liabilities .

Choices

Choice (4)

a.

b.

c.

d.

Answer

c.

Explanation

Question 91

Question

MCQ▾

What does ‘too low debtors’ turnover ratio indicate:

Choices

Choice (4)

a.

Restrictive credit policy

b.

Inefficient credit policy

c.

Good collection policy

d.

Prompt payments

Answer

b.

Explanation

  • A too low debtors՚ turnover ratio will indicate the liberal and inefficient credit and collection policy of the management. It shows that more money is being locked-up in debtors which will result in higher bad – debts, increase in cost of collection and the loss of interest on the money due from debtors.
  • Normally, a high debtors turnover ratio indicates the prompt payments by debtors but ta too high ratio may be the result of restrictive credit and collection policy of the management which may curtail the sales and hence may adversely affect the profits.

Question 92

Question

MCQ▾

While trying to close his books for the year ended 31st march 2019, Monica found that the sales book was overcast by $ 100. How will Monica rectify the error?

Choices

Choice (4)

a.

Monica՚s a/c will be credited

b.

Sales A/c will be credited

c.

Customer՚s account will be debited

d.

Sales will be debited as “To overcasting of sales book $ 100”

Answer

d.

Explanation

These errors affect only one account. Such errors occur in the following cases:

  • When a subsidiary book is undercast (totaled less) or Overcast (totaled in excess)
  • When the posting to an account is altogether omitted.
  • When the posting is done on the wrong side of an account.

When the posting of a wrong amount is done. Rectification of such errors depends on the stage at which the errors are located:

  • When one sided error is located and rectified Balance and before opening of Suspense A/c before the preparation of Trial balance
  • When one sided error is located and rectified after the preparation of Trial Balance and after opening of Suspense A/c.

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