Principles of Accounting | Study Mode

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Question 2
A
Sales department 
B
Production department 
C
Purchase department 
D
Administration department 
Explanation.
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Advertising expenses are expenses incurred in order to enhance the sales of the companys product/services


Correct Option:
A
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Question 3
A
1:1 
B
2:3 
C
1:2 
D
3:2 
Explanation.
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Acid test ratio measures the liquidity position of a company after deduction stock (inventory) from current assets

Formula: current assets less inventory/current liabilities

18000 - 4000/14000 = 1 : 1


Correct Option:
A
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Question 4
A
Price above or below the stipulated price 
B
Any price but not below the transfer price 
C
Cost price 
D
A price that is equal to the mark up 
Explanation.
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Cost plus mark up is a pricing strategy in which the selling price is determined by adding a specific amount mark up to a product unit cost


Correct Option:
A
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Question 5
A
Accountant general 
B
Finance minister 
C
Auditor general 
D
Permanent secretory. 
Explanation.
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Appropriation is the amount that government reserves for a particular purpose. Public expenditure is the spending made by government of a country on collective needs


Correct Option:
C
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Question 6
A
Call in advance 
B
call in arrears 
C
forfeiture 
D
shares 
Explanation.
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is the amount called by the company which is not paid by the shareholders before the due date fixed for payment


Correct Option:
B
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Question 7
A
Goodwill account and credit partners capital account 
B
Cash account and credit goodwill account 
C
Goodwill account and credit cash account 
D
Partners capital account and credit goodwill account 
Explanation.
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When goodwill is raised in the books at full value, the entry is

Dr Goodwill Account

Cr Old partners capital account (old ratio)

When the raised goodwill is written off, entry will be:

Dr All partners capital account

Cr Goodwill accounts

Note: goodwill written off includes new partners in the new profit sharing ratio


Correct Option:
D
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Question 8
A
Debited to the branch current account 
B
Debited to the head office current account 
C
Credited to the head office current account 
D
Credited to the branch current account 
Explanation.
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Branch current account is maintained in the head office books to record all transactions between the head office and the branch. This account is debited with the following:

i. Goods sent to branch

ii. Expenses of the branch paid by the head office

iii. Profit of the branch


Correct Option:
B
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Question 9
A
Cash account 
B
purchase account 
C
goodwill account 
D
sales account 
Explanation.
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Goodwill is the excess of purchase consideration over the total value of the business


Correct Option:
C
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Question 10
A
Income and expenditure account 
B
profit and loss account 
C
receipt and payment account 
D
trading account 
Explanation.
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records profit on branch account


Correct Option:
B
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