A-AS Level (CIE) Accounting Paper-3: Specimen Questions with Answers 40 - 41 of 50

Question 40

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Question

MCQ▾

When a firm dissolve, goodwill account is transferred to

Choices

Choice (4)
a.Credit side of cash a/c
b.Partner’s capital a/c
c.Debit side of realisation account
d.Credit side of realisation account

Answer

c.

Explanation

  • When a firm dissolves no special treatment is given to goodwill account. Like other assets goodwill is also transferred to debit side of realisation account.
  • Realisation account is prepared on the admission, retirement, or death of a partner. This account is prepared to find out the profit and loss on the sale of assets and repayment of liabilities.

Question 41

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Question

MCQ▾

________ will indicate the liberal and inefficient credit collection policy of the management.

Choices

Choice (4)
a.A high stock turnover ratio
b.A low debtors’ turnover ratio
c.None of the above
d.All of the above

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 deb to$
  • A high debtors turnover ratio indicates the prompt payment by debtors, but 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.

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