A-AS Level (CIE) Accounting Paper-2: Specimen Questions with Answers 21 - 22 of 53

Question 21

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Short Answer▾

How accounts are treated in fixed capital method.

Explanation

Under fixed capital method capital accounts of the partners will remain fixed year after year from the very beginning except for the introduction of additional capital contributed by the partners. In short entry, like, interest on capital, interest on drawings, share of profits etc. will appear in the capital account Naturally, a separates current account is to be opened where all the adjustments, like interest on capital, interest on drawings, share of profits, partners՚ salaries and commissions, partners՚ drawings etc. will appear in this account along with the opening balance of current account (whether shows a debtor credit balances) . The balance of current account will appear in the Balance Sheet.

Question 22

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Short Answer▾

Difference between single entry and double entry system.

Explanation

The distinctions between double entry system and single-entry system are as follows:

  • In double entry system both the aspects (debit and credit) of all the transactions are recorded in single entry system, there is no record of some transaction՚s, some transactions are recorded in one of their aspects whereas some other transactions are recorded in both of their aspect.
  • Under double entry system, various subsidiary books such as sales book, purchases book etc. are maintained. Under single entry system, no such subsidiary books except cash book which is considered as a part of ledger is maintained.
  • In the case of double entry system, there is a ledger which contains personal, real, and nominal accounts. On the other hand, in single entry system, the ledger contains some personal accounts only.
  • Under double entry system, preparation of trial balance is possible whereas it is not possible to prepare a trial balance in single entry system. Hence accuracy of work is uncertain.

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