CIE Accounting Paper-1: Specimen Questions with Answers 96 - 98 of 214

Question number: 96

MCQ▾

Question

A company purchased a plant for $50000. The useful life of the plant is 10 years and the residual value is $10000.

What is the annual depreciation charge using the straight line method?

Choices

Choice (4) Response

a.

1000

b.

5000

c.

3000

d.

4000

Answer

d.

Explanation

Under the straight line method depreciation is charged every year evenly under the effective life of an asset.

Question number: 97

MCQ▾

Question

When preparing his final accounts, a trader forgot to include an unpaid invoice for repairs to his machinery

What is the effect of this?

Choices

Choice (4) Response

a.

Fixed assets are undervalued

b.

Net profit is undervalued

c.

Fixed assets are overvalued

d.

Net profit is overvalued

Answer

d.

Explanation

The net profit is overvalued in the final accounts of the trader. Usually the expenses related to the normal activities of the trade business are recorded in the debit side of the profit and loss account.

Question number: 98

Short Answer Question▾

Write in Short

Give brief meaning of the following terms.

Profit and Loss account:

Explanation

All gains and losses are ascertained in order to analyses the excess gain or losses. The profit and loss account is started with crediting the balancing amount of trading account and ended with the net profit of the business. The net profit or net loss is transferred to capital

shows Debit side of the p and L accounts

Shows Debit Side of the P and L Accounts

Shows Debit side of the p and L accounts and creadit side of the P and L accounts.