IGCSE Accounting Paper-1: Specimen Questions with Answers 296 - 298 of 338

Question 296

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Short Answer▾

Have all the errors been discovered in Sudhanshu’s books? (Marks 2)

Why? /Why not?

Explanation

All the errors are not yet discovered in Sudhanshu’s books because the Suspense A/c still shows a credit balance of $495. When all the errors are discovered, there should be no balance in the suspense A/c. The suspense A/c is closed.

Suspense A/c

The suspense A/c is closedThe suspense A/c is closed
$$
Purchases A/c2000Balance b/d2225
Balance c/d495Sales A/c270
24952495

Question 297

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Short Answer▾

Name the final account in which ‘profits on sale of fixed assets’ appear. (Marks 1)

Explanation

P&L A/c

  • When the fixed assets of a business are sold and if any profit is earned out of the excess of sales proceeds over its cost, it is booked under profit on sale of fixed assets a/c.
  • This profit is in nature of indirect income because it is not earned from the main trading activity of the business. All the indirect incomes are credited to P&L A/c.

Question 298

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One Liner▾

Explain any two types of reserves. (Marks 1)

Explanation

  • General Reserve: It is created from profits to only strengthen the financial position of the business and can be used for many purposes. For Ex- It can be used to meet unforeseen losses.
  • Specific Reserve: This reserve is secured for a particular purpose and it cannot be used for any other reason. For Ex- Dividend Equalization Reserve is set up for maintaining a stable rate of dividend despite fluctuations in earnings.

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