Why are adjustments in the profit and loss account necessary?
To cover some expenses of the following year
To show the provisions made during the year
To show the total expenses paid and income received during the year
To ascertain the actual expenses incurred and income earned during the year
Correct answer is D
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.
Calls in advance are treated in the balance sheet as______
Current asset
Fixed asset
Current liability
Fixed liability
Correct answer is C
Calls in advance is treated as a current liability until the calls are made and the amount actually becomes payable by the shareholders
1 : 1
3 : 6
2 : 1
2 : 6
Correct answer is C
The existing ratio between Tony and Rose = 2/6 and 1/6
Ade’s ratio = 3/6
Ade’s 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
Gross profit in the branch adjustment account is transferred to the branch____________
Income and expenditure account
Profit and loss account
Receipt and payment account
Trading account
Correct answer is B
Records profit on branch account
Cash account
Purchase account
Goodwill account
Sales account
Correct answer is C
Goodwill is the excess of purchase consideration over the total value of the business