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Questions and Answers of
Business Accounting
The partners are to change their profit ratios as shown:They decide to bring in a goodwill amount of £72,000 on the change. The last balance sheet before any element of goodwill has been introduced
Black and Smart are in partnership, sharing profits and losses equally. They decide to admit King. By agreement, goodwill valued at £40,000 is to be introduced into the business books. King is
Blunt, Dodds and Fuller are in partnership. They shared profits in the ratio 1:3:2. It is decided to admit Baxter. It is agreed that goodwill is worth £60,000, but that this is not to be brought
At 31 December 20X7, the balance sheet of A, B, and C who are equal partners, was as follows:A retired at that date. In order to determine the amount due to him the following revaluations were made:
A new partner has joined the business during the year and has paid in £10,000 for ‘goodwill’. This £10,000 has been credited by the bookkeeper to the account of the new partner. The senior
Poole and Burns, who share profits and losses equally, decide to dissolve their partnership as at 30 June 20X1. Their balance sheet on that date was as follows:The debtors realised £8,200, the
On 1 April 20X6 a business purchased a machine costing £112,000. The machine can be used for a total of 20,000 hours over an estimated life of 48 months. At the end of that time the machine is
Penrose and Wilcox are in partnership, sharing profits and losses in the ratio 3 : 2. The following information was taken from their books for the year ended 31 December 20X9, before the completion
X, Y and Z have been in partnership for several years, sharing profits and losses in the ratio 3 : 2 : 1. Their last balance sheet which was prepared on 31 October 20X9 is as follows:Despite making
The following trial balance has been extracted from the books of Gain and Main as at 31 March 20X8; Gain and Main are in partnership sharing profits and losses in the ratio 3 to 2:In appropriating
A, B & C are partners sharing profits and losses in the ratio 2 : 2 : 1. The balance sheet of the partnership as at 30 September 20X7 was as follows:Authors’ note: Inventory is another word for
Lock, Stock and Barrel have been in partnership as builders and contractors for many years. Owing to adverse trading conditions it has been decided to dissolve the partnership. Profits are shared
Amis, Lodge and Pym were in partnership sharing profits and losses in the ratio 5 : 3 : 2. The following trial balance has been extracted from their books of account as at 31 March 20X8:Additional
Grant and Herd are in partnership sharing profits and losses in the ratio 3 to 2. The following information relates to the year to 31 December 20X8:Additional information:1. The partnership agreement
Flyer Ltd started in business on 1 April 20X4. Its issued share capital was 200,000 ordinary shares of £1 each and 100,000 5 percent preference shares of £1 each. The following information is
Trainsign Ltd has an authorised capital of £500,000, consisting of 350,000 ordinary shares of £1 each and 150,000 7 per cent preference shares of £1 each. Of these, 260,000 ordinary shares and
A balance sheet is to be drawn up from the following information as at 30 September 20X2: Issued share capital: ordinary shares £1 each Authorised share capital: ordinary shares of £1 each 6 per
The following balances remained in the ledger of OK Ltd after preparation of the profit and loss account for the year ended 31 March 20X6The directors propose:(i) A transfer to general reserve of
Select Ltd is registered with an authorised capital of 300,000 ordinary shares of £1. The following trial balance was extracted from the books of the company on 31 March 20X1, after the preparation
Developing Ltd has an authorised capital of 50,000, 10% preference shares of £1 each and 200,000 ordinary shares of 50p each. After preparation of the profit and loss account for 20X4, the following
The trial balance extracted from the books of Tailor Times Ltd at 31 December 20X3 was as follows:You are given the following additional information:(i) The authorised and issued share capital is
(a) From the above information, prepare the balance sheet of Budgie Limited indicating clearly the shareholders’ funds and working capital.(b) Comment on the capital position disclosed by the
The following is the trial balance of Tully Ltd as on 31 December 20X5:Given the following information, you are to draw up a trading and profit and loss account for the year ending 31 December 20X5,
You are to draw up a trading and profit and loss account for the year ending 31 December 20X2, and a balance sheet as at that date from the following trial balance and details of Partido Ltd:Notes at
Here is the trial balance of Falta Ltd as at 30 April 20X5:Given the following information as at 30 April 20X5, draw up a profit and loss account and balance sheet for the year to that date:(i) Stock
Study the following financial statements of two companies and then answer the questions which follow. Both companies are stores selling carpets and other floorcoverings. The values shown are in
Burden PLC has an authorised capital of 500,000 ordinary shares of £0.50 each.(a) At the end of its financial year, 31 May 20X9, the following balances appeared in the company’s books:The
The accountant of Fiddles PLC has begun preparing financial statements but the work is not yet complete. At this stage the items included in the trial balance are as follows:Notes (i ) to (vii) below
(a) The business of V A Fraga is taken over by T Malloy in its entirety. The assets are deemed to be worth the balance sheet values as shown. The price paid by Malloy is £260,000. Show the opening
The chairman of a public limited company has written his annual report to the shareholders, extracts of which are quoted below.Extract 1‘In May 20X6, in order to provide a basis for more efficient
Explain what you understand by the accounting term ‘debentures’ and indicate the circumstances under which a debenture issue would or would not be an appropriate form of financing.
The directors of the company by which you are employed as an accountant have received the forecast profit and loss account for 20X9 which disclosed a net profit for the year of £36,000. This is
I Dodgem’s balance sheet as at 31 December 20X8 was as follows:An opportunity had arisen for Dodgem to acquire the business of A Swing who is retiring.Dodgem agreed to take over Swing’s premises,
Spectrum Ltd is a private company with an authorised capital of £700,000 divided into shares of £1 each. 500,000 shares have been issued and are fully paid. The company has been formed to acquire
Dinho and Manueli are in partnership sharing profits and losses equally after interest of 10% on each partner’s capital account in excess of £100,000. At 31 December 20X8, the partnership trial
You are to study the following financial statements for two furniture stores and then answer the questions which follow.Required:(a) Calculate the following ratios for each business:(i) Gross profit
Durham Limited had an authorised capital of £200,000 divided into 100,000 ordinary shares of £1 each and 200,000 8% preference shares of 50p each. The following balances remained in the accounts of
The summarised accounts of Hope (Eternal Springs) Ltd for the years 20X8 and 20X9 are given below.Stock at 1 January 20X8 was £50,000.Required:(a) Calculate the following ratios for 20X8 and
The following figures are for AB Engineering Supplies Ltd at 31 December 20X9:(a) Calculate:(i) Gross profit as a percentage of the sales;(ii) Rate of stock turnover;(iii) Net profit as a percentage
L Mann started business with £5,000 in the bank on 1 April. The business transactions during the month were as follows:(i) Took £300 out of the bank for petty cash(ii) Bought a second-hand van and
Of the following, which are correct?(A) (i) and (iii) only(B) (i) and (ii) only(C) (ii) and (iv) only(D) (iii) and (iv) only (i) Goods sold on credit to R Williams (ii) S Johnson returns goods to
Which of the following are incorrect?(A) (i) and (iii) only(B) (iii) only(C) (ii) and (iv) only(D) (iv) only Goods sold for cash (ii) Goods bought on credit from T Carter (iii) Goods returned by us
Given the following, what is the amount of Capital? Assets: Premises £20,000; Stock £8,500; Cash £100. Liabilities: Creditors £3,000; Loan from A Adams £4,000(A) £21,100(B) £21,600(C)
Of the following, which are incorrect?(A) (ii) and (iv) only(B) (i) and (ii) only(C) (i) and (iii) only(D) (ii) and (iii) only (i) Sold van for cash (ii) Bought stationery by cheque (iii) Took cash
What is the balance on the following account on 31 May 20X5?(A) A credit balance of £395(B) A debit balance of £380(C) A debit balance of £395(D) There is a nil balance on the account 20X5 May 1
Which of the following is correct?(A) Profit does not alter capital(B) Profit reduces capital(C) Capital can only come from profit(D) Profit increases capital
What would have been the balance on the account of C De Freitas in MC17 on 19 May 20X5?(A) A debit balance of £265(B) A credit balance of £95(C) A credit balance of £445(D) A credit balance of
Which of the following best describes a trial balance?(A) Shows the financial position of a business(B) It is a special account(C) Shows all the entries in the books(D) It is a list of balances on
Is it true that the trial balance totals should agree?(A) No, there are sometimes good reasons why they differ(B) Yes, except where the trial balance is extracted at the year end(C) Yes, always(D)
Gross profit is(A) Excess of sales over cost of goods sold(B) Sales less Purchases(C) Cost of goods sold + Opening stock(D) Net profit less expenses of the period.
Net profit is calculated in the(A) Trading account(B) Profit and loss account(C) Trial balance(D) Balance sheet.
To find the value of closing stock at the end of a period we(A) do this by stocktaking(B) look in the stock account(C) deduct opening stock from cost of goods sold(D) deduct cost of goods sold from
The credit entry for net profit is on the credit side of(A) The trading account(B) The profit and loss account(C) The drawings account(D) The capital account.
Which of these best describes a balance sheet?(A) An account proving the books balance(B) A record of closing entries(C) A listing of balances(D) A statement of assets.
The descending order in which current assets should be shown in the balance sheet is(A) Stock, Debtors, Bank, Cash(B) Cash, Bank, Debtors, Stock(C) Debtors, Stock, Bank, Cash(D) Stock, Debtors, Cash,
Which of these best describes fixed assets?(A) Are bought to be used in the business(B) Are items which will not wear out quickly(C) Are expensive items bought for the business(D) Are of long life
Carriage inwards is charged to the trading account because(A) It is an expense connected with buying goods(B) It should not go in the balance sheet(C) It is not part of motor expenses(D) Carriage
Given figures showing: Sales £8,200; Opening stock £1,300; Closing stock £900; Purchases £6,400; Carriage inwards £200, the cost of goods sold figure is(A) £6,800(B) £6,200(C) £7,000(D)
The costs of putting goods into a saleable condition should be charged to(A) Trading account(B) Profit and loss account(C) Balance sheet(D) None of these.
Suppliers’ personal accounts are found in the(A) Nominal ledger(B) General ledger(C) Purchases ledger(D) Sales ledger.
The Sales Day Book is best described as(A) Part of the double entry system(B) Containing customers’ accounts(C) Containing real accounts(D) A list of credit sales.
Which of the following are personal accounts?(i) Buildings(ii) Wages(iii) Debtors(iv) Creditors(A) (i) and (iv) only(B) (ii) and (iii) only(C) (iii) and (iv) only(D) (ii) and (iv) only.
When Lee makes out a cheque for £50 and sends it to Young, then Lee is known as(A) The payee(B) The banker(C) The drawer(D) The creditor.
If you want to make sure that your money will be safe if cheques sent are lost in the post, you should(A) Not use the postal service in future(B) Always pay by cash(C) Always take the money in
When banking money in to your current account you should always use(A) A cheque book(B) A paying-in slip(C) A cash book(D) A general ledger.
A debit balance of £100 in a cash account shows that(A) There was £100 cash in hand(B) Cash has been overspent by £100(C) £100 was the total of cash paid out(D) The total of cash received was
£50 cash taken from the cash till and banked is entered(A) Debit cash column £50: Credit bank column £50(B) Debit bank column £50: Credit cash column £50(C) Debit cash column £50: Credit cash
A credit balance of £200 on the cash columns of the cash book would mean(A) We have spent £200 more than we have received(B) We have £200 cash in hand(C) The bookkeeper has made a mistake(D)
‘Posting’ the transactions in bookkeeping means(A) Making the first entry of a double entry transaction(B) Entering items in a cash book(C) Making the second entry of a double entry
A cash discount is best described as a reduction in the sum to be paid(A) If payment is made within a previously agreed period(B) If payment is made by cash, not cheque(C) If payment is made either
Discounts received are(A) Deducted when we receive cash(B) Given by us when we sell goods on credit(C) Deducted by us when we pay our accounts(D) None of these.
The total of the ‘Discounts Allowed’ column in the Cash Book is posted to(A) The debit of the Discounts Allowed account(B) The debit of the Discounts Received account(C) The credit of the
Sales invoices are first entered in(A) The Cash Book(B) The Purchases Journal(C) The Sales Account(D) The Sales Journal.
The total of the Sales Journal is entered on(A) The credit side of the Sales Account in the General Ledger(B) The credit side of the General Account in the Sales Ledger(C) The debit side of the Sales
Given a purchases invoice showing 5 items of £80 each, less trade discount of 25 percent and cash discount of 5 per cent, if paid within the credit period, your cheque would be made out for(A)
An alternative name for a Sales Journal is(A) Sales Invoice(B) Sales Day Book(C) Daily Sales(D) Sales Ledger.
Entered in the Purchases Journal are(A) Payments to suppliers(B) Trade discounts(C) Purchases invoices(D) Discounts received.
The total of the Purchases Journal is transferred to the(A) Credit side of the Purchases Account(B) Debit side of the Purchases Day Book(C) Credit side of the Purchases Book(D) Debit side of the
Credit notes issued by us will be entered in our(A) Sales Account(B) Returns Inwards Account(C) Returns Inwards Journal(D) Returns Outwards Journal.
The total of the Returns Outwards Journal is transferred to(A) The credit side of the Returns Outwards Account(B) The debit side of the Returns Outwards Account(C) The credit side of the Returns
We originally sold 25 items at £12 each, less 331/3 per cent trade discount. Our customer now returns 4 of them to us. What is the amount of credit note to be issued?(A) £48(B) £36(C) £30(D) £32.
Depreciation is(A) The amount spent to buy a fixed asset(B) The salvage value of a fixed asset(C) The part of the cost of the fixed asset consumed during its period of use by the firm(D) The amount
A firm bought a machine for £3,200. It is to be depreciated at a rate of 25 per cent using the Reducing Balance Method. What would be the remaining book value after 2 years?(A) £1,600(B) £2,400(C)
A firm bought a machine for £16,000. It is expected to be used for 5 years then sold for £1,000. What is the annual amount of depreciation if the straight line method is used?(A) £3,200(B)
In the trial balance the balance on the Provision for Depreciation Account is(A) Shown as a credit item(B) Not shown, as it is part of depreciation(C) Shown as a debit item(D) Sometimes shown as a
If an accumulated provision for depreciation account is in use then the entries for the year’s depreciation would be(A) Credit Provision for Depreciation Account, debit Profit and Loss Account(B)
Which of the following are not true? A Bank Reconciliation Statement is(i) Part of the double entry system(ii) Not part of the double entry system(iii) Sent by the firm to the bank(iv) Posted to the
Given a desired cash float of £200, if £146 is spent in the period, how much will be reimbursed at the end of the period?(A) £200(B) £54(C) £254(D) £146.
When a petty cash book is kept there will be(A) More entries made in the general ledger(B) Fewer entries made in the general ledger(C) The same number of entries in the general ledger(D) No entries
Which of the following do not affect trial balance agreement?(i) Sales £105 to A Henry entered in P Henry’s account(ii) Cheque payment of £134 for Motor expenses entered only in Cash Book(iii)
Which of the following are not errors of principle?(i) Motor expenses entered in Motor Vehicles account(ii) Purchases of machinery entered in Purchases account(iii) Sale of £250 to C Phillips
Errors are corrected via the Journal because(A) It saves the bookkeeper’s time(B) It saves entering them in the ledger(C) It is much easier to do(D) It provides a good record explaining the double
Which of these errors would be disclosed by the trial balance?(A) Cheque £95 from C Smith entered in Smith’s account as £59(B) Selling expenses had been debited to Sales Account(C) Credit sales
The following letter has been received from a client. ‘I gave my bank manager those audited accounts you prepared for last year. But he says he needs more information before he will agree to
Galloway Ltd has an authorised capital of 250,000 ordinary shares of £1 each.(a) At the end of its financial year, 30 April 20X8, the following balances remained in the company’s books after
The trading stock of Joan Street, retailer, has been reduced during the year ended 31 March 20X8 by £6,000 from its commencing figure of £21,000.A number of financial ratios and related statistics
If a trial balance totals do not agree, the difference must be entered in(A) The Profit and Loss Account(B) A Suspense Account(C) A Nominal Account(D) The Capital Account.
Harold Smart, who is a small manufacturer trading as Space Age Projects, is very pleased with his recently completed financial results which show that a planned 20% increase in turnover has been
You are given summarised information about two firms in the same line of business, A and B, as follows.Required:(a) Produce a table of eight ratios calculated for both businesses.(b) Write a report
Business A and Business B are both engaged in retailing, but seem to take a different approach to this trade according to the information available. This information consists of a table of ratios,
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