A-AS Level (CIE) Accounting Paper-2: Specimen Questions with Answers 41 - 42 of 53

Question 41

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Short Answer▾

Write short notes on:

(a) Closing stock

(b) Outstanding expenses

Explanation

  • Closing stock- The amount of goods unsold at the end of the year is called closing stock. It is valued at cost price or realizable value, whichever is less. For example, certain goods were purchased at $ 10000 but at present is realizable at $ 12000. It will be valued at $ 10000 and not $ 12000. But suppose, if realizable value of the same goods is $ 9000, it will be valued only $ 9000. The basic principle underlying valuation of closing stock is that anticipated losses should be considered, but all unrealized gains should be ignored.
  • Outstanding expenses- 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 payment of which has not yet been made.

Question 42

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Write in Short

Short Answer▾

S & Co. purchased a machine for $ 100000 on 1.1. 2010. another machine costing $ 1,50, 000 was purchased on 1.7. 2011. On 31.12. 2002 the machine purchased on 1.1. 2010 was sold for $ 50,000. The company provides depreciation at 15 % on straight line method. The company closes its accounts on 31st December every year. Prepare machinery account.

Explanation

Prepare Machinery Account
DateParticularsAmountDateParticularsAmount
1.1. 2010To Bank A/c1,00, 00031.12. 2010By Balance c/d1,00, 000
1,00, 0001,00, 000
1.1. 2010To balance b/d1,00, 000By Balance c/d2,50, 000
1.7. 2010To Bank A/c1,50, 0002,50, 000
2,50, 00031.12. 2010By Machinery Disposal A/c1,00, 000
1.1. 2012To balance b/d2,50, 00031.12. 2010By balance c/d1,50, 000
2,50, 0002,50, 000
1.1. 2013To balance b/d1,50, 000

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