A-AS Level (CIE) Accounting Paper-2: Specimen Questions with Answers 15 - 16 of 53

Question 15

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Distinguish between preference shares and equity shares

Explanation

Distinguish between Preference Shares and Equity Shares
S. No.Preference SharesEquity Shares
1.Preference shares are paid dividend at fixed rateThe rate of dividend on equity shares is not fixed it may vary from year to year depending upon the availability of profits
2.If dividend is not paid on these shares in any year, the arrears of dividend may accumulateIn case of equity shares dividend cannot accumulate.
3.They have right to receive dividend before any dividend is paid on equity shares.In case of equity shares dividend cannot accumulate
4.They have a right to receive dividend before any dividend is paid on equity shares.Payment of dividend on equity shares is made after the payment of preference dividend.

Question 16

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Give two causes of difference I the cash book balance and pass book balance.

Explanation

Difference between cash book and pass book is caused by the following reasons:

  • Cheques issued to a creditor firm it is immediately recorded on the credit side of the bank column of the cash book. But the bank will debit the firm՚s account only when this cheque is presented to the bank for payment. Generally, there is gap of some days between the issue of cheque and its presentation to the bank. Until the cheques are presented for payment the cash book will show a reduced balance in comparison to the passbook.
  • Omission Errors committed while recording the transaction may show difference in balance of both the books.
    • Cheques issued to the creditor but omitted to be recorded in the cash book.
    • Cheques deposited into bank but omitted to be recorded in the cash book.

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