# Principles of Accounting | Study Mode

Question 11
A
#20,500
B
#23,000
C
#28,000
D
#27,000
##### Explanation

Average stock is the calculating the addition of stock at the beginning and at the end of the financial period and dividing the value by two.

It is the average value of products kept for sale during an accounting period.

Therefore:

Average stock = opening stock + closing stock/2

= 32000 + 9000/2

= 41000/2

=? 20500

Question 12
A
#61,000
B
#62,000
C
#58,000
D
#57,000
##### Explanation

Cost of goods sold is the direct costs attributable to the production of the goods sold in a company.

Cost of goods available for sale (32000 + 39000) = 71000

Less closing stock = 9000

Cost of goods sold = 7100 - 9000

= 62000

Question 13
A
1 : 1
B
3 : 6
C
2 : 1
D
2 : 6
##### Explanation

The existing ratio between Tony and Rose = 2/6 and 1/6

Ades ratio = 3/6

Ades share to be taken by Tony and Rose in the ratio 2 : 1

Tony gets: 3/6 x 2/6

= 6/18

Rose gets: 3/6 x 1/3

= 3/18

New ratio between Tony and Rose = 6 : 3

= 2 : 1

Question 14
A
Current asset
B
Fixed asset
C
Current liability
D
Fixed liability
##### Explanation

calls in advance is treated as a current liability until the calls are made and the amount actually becomes payable by the shareholders

Question 15
A
To cover some expenses of the following year
B
To show the provisions made during the year
C
To show the total expenses paid and income received during the year
D
To ascertain the actual expenses incurred and income earned during the year
##### Explanation

Fundamental principle of preparing P&L account is that expenses and income relating to only the trading period are taken to the trading profit and loss account.

Question 16
A
Dependent branch
B
foreign branch
C
independent branch
D
single branch
##### Explanation

Explanation not provided, please join discuss, your contributions are welcomed

Question 17
A
Debit entry
B
Contra entry
C
Credit entry
D
Reversal entry
##### Explanation

A contra entry is an entry which is recorded to reverse or offset an entry on the other side of an account

When cash is remitted from the branch

Dr Bank account

Cr Branch account

Or

Dr Remittance from bank

Cr Remittance from branch

Question 18
A
#40,000
B
#41,500
C
#41,700
D
48,500
##### Explanation

Trading, profit and loss account for the month ended 31/1/95

For the month ended 31/1/95

? ?

Sales 8200

Cost of sales:

Purchases 15000

Closing stock(10000) (5000)

Gross profit8200

Gross profit b/d 8200

Sales commission 500

Rent 1000 (1500)

Net profit1700

WORKINGS:

Rent paid for 12 months 12000

Rent paid for one month

12000 x 1/12(1000)

Prepaid rent11000

Balance sheet as at 31/1/95

Noncurrent asset:

Furnishing 10000

Ceiling fan1500 11500

Current asset:

Cash (see cash account) 9200

Inventory 10000

Prepaid rent (see above) 11000 30200

41700

Capital 40000

Net profit (see p&l) 1,700

41700

Question 19
A
Partners salaries
B
Interest on capital
C
Interest on loans
D
Partners drawings
##### Explanation

is charged in the profit and loss account as finance expenses

Question 20
A
#22,800
B
#9,200
C
#800
D
#21,200
##### Explanation

Explanation not provided, please join discuss, your contributions are welcomed

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