A-AS Level (CIE) Accounting Paper-3: Specimen Questions with Answers 9 - 10 of 50

Question 9

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Question

MCQ▾

Which of the following statement is not true regarding fixed capital?

Choices

Choice (4)
a.When Fixed capital are fixed, the balances in capital accounts usually remain unchanged during the lifetime of business.
b.When the capitals are fixed each partner has two account, namely capital account, and current account.
c.Fixed capital can never show a negative balance
d.In case of fixed capital all transactions are related to partners are made directly in the capital account.

Answer

d.

Explanation

Under Fixed Capital system the original capital invested by all the partners remain constant unless additional capital is introduced by an agreement. In other words, capital of partners is not allowed to change during the lifetime of business except in extraordinary circumstances. When fixed capital method is adopted, all entries relating to drawing, interest on capitals, interest on drawings, salary to a partner, share of profit or loss etc. , are made in a newly opened account for each partner. This account is called current account or drawings account.

Question 10

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Question

MCQ▾

Means of payment when the company cannot pay in cash.

Choices

Choice (4)
a.Property dividend
b.Scrip dividend
c.Cash dividend
d.Bond dividend

Answer

b.

Explanation

  • Scrip dividend- It is a means of payment when the company cannot pay in cash. This system of dividend means shareholders are paid through commodities, vouchers, tokens, or some other indication of credit instead of cash.
  • Bond dividend- Referred to as fixed-income investment instruments because they promise the holder a fixed payment as returns on investment
  • Property dividend- refers to formal distribution of an asset other than cash to holders of preferred or common shares of stock.
  • Cash dividend- Money paid to stockholders, normally out of the corporation’s current earnings or accumulated profits.

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