CIE Accounting Paper-1: Specimen Questions with Answers 55 - 57 of 214

Question number: 55

MCQ▾

Question

Among the following whose aim is to create profit from the business?

Choices

Choice (4) Response

a.

Trading

b.

Service

c.

Question does not provide sufficient data or is vague

d.

None of the above

Answer

a.

Explanation

The main aim of the trading business is to earn profit and maintain the business with more profitable one. The service business provides services to the customers. In trading business goods are purchased and sold it out without any further process.

Question number: 56

MCQ▾

Question

Where are the personal accounts of suppliers from whom goods received on credit found?

Choices

Choice (4) Response

a.

Purchases journal

b.

Purchases ledger

c.

Sales ledger

d.

Sales journal

Answer

b.

Explanation

Personal accounts of suppliers were written in the purchases ledger from which goods received on credit. The ledger contains all account of suppliers. The Purchase journals are used for all credit purchases of goods made during the year.

Question number: 57

MCQ▾

Question

John maintains a provision for doubtful debts at 5 % of the trade receivables (debtors) at the end of each financial year.

The Provision for Bad and Doubtful debts account shows a balance of $2000 on 1st January 2008. The Bad debts during the year 2008 amount to $1600. The Sundry debtors on 31st December 2008 are $32,000.

How much will appear in John’s income statement (profit and loss account) for the year ended 31 December 2008?

Choices

Choice (4) Response

a.

$1600 Debit

b.

$1200 Debit

c.

$1600 Credit

d.

$1200 Credit

Answer

b.

Explanation

The provision for bad and doubtful debts is generally a percentage on the debtors. In above question transaction will be

Dr Profit and Loss A/C for the year ended 31 - 12 - 2008 Cr

Profit and Loss Account for the year ended 31 - 12 - 2008

here table is Profit and Loss Account for the year ended 31 - 12 - 2008

To Bad debts 1600

+ New Provision 1600

________

3200

_ Existing provision 2000

________

$

1200