Final Accounts Objectives

(A)  Answer one sentence only.

1. What is Balance Sheet?
Ans.  Balance sheet is a statement which shows financial position of all assets and liabilities of the business on a particular date.

2. State the meaning of debit balance of Trading Account?
Ans.  Debit balance of trading account indicates gross loss of the business for a particular year.

3. When is partner’s current account opened?
Ans.  partner’s capital account is opened if partners adopt fixed capital method.

4. To which account Gross Profit transferred?
Ans.  Gross profit is transferred to the credit side of profit & loss account.

5. What is closing stock?
Ans.  Stock of goods in hand at the end of the accounting year is called as closing stock.

6. What is Final Accounts?
Ans. Final accounts are accounts which are prepared at the end of the financial year by the partnership firm, consisting of trading a/c, profit & loss a/c and balance sheet

7. How is closing stock valued?
Ans.  Closing stock is valued at cost price or market price whichever is less.

8. What do you mean by direct expenses?
Ans.  Expenses which are directly related to production of goods and purchases of goods are called as direct expenses.

9. What do you mean by indirect expenses?
Ans.  Expenses which are not directly related to production of goods and purchases of goods are called as indirect expenses.

10. What do you mean by accrued income?
Ans.  Income which is due for current accounting year but not yet received is known as outstanding income.

11. What is Trial balance?
Ans.  A list of debit and credit balances of all ledger accounts is called as Trial balance.

12. What is bad debts?
Ans.  The amount which is irrecoverable from debtor is called as bad debts.

13. In the absence of partnership deed, what is profit sharing ratio of the partners?
Ans.  In the absence of partnership deed, profit and losses are shared equally by the partners.

14. What do you mean by carriage inward?
Ans. Transport expenses incurred to carry the goods purchased by the firm are called as carriage inward.

15. What do you mean by freight?
Ans. Expenses which are paid to railways or airways for carrying goods are called as freight.

16.  What are tangible assets?
Ans.  Tangible assets are those which are of permanent nature and can be seen by our eyes.

17.  What are intangible assets?
Ans. Intangible assets are those which can not be seen by our eyes but have realisable value.

18.  What are contingent liabilities?
Ans.  A liability which may or may not occur in future, depending on happening of certain events is called as contingent liabilities.

19.  What do you mean by Pre- received incomes?
Ans. Income which is not related to the current accounting year but related to the future period is known as pre-received incomes.

20.  What are fictitious assets?
Ans.  Fictitious assets are those which are intangible in nature and do not have realisable value.

21.  What are outstanding expenses?
Ans.  Expenses which are due but not paid in the current accounting year is known as outstanding expenses


(B)  Write a word or a term or a phrase which can substitute each of the following statements.


1. A statement showing financial position of the business on a particular date. Balance Sheet

2. The amount which is not recoverable from debtors. Bad debts

3. Stock in hand at the end of the accounting year. Closing stock

4. The transport expenses incurred to carry the goods purchased by the firm. Carriage inward

5. Income which is received before its due date. Pre-received income

6. The debit balance of Trading Account. Gross Loss

7. The credit balance of Trading Account. Gross Profit

8. A provision which is created on sundry debtors. Reserve for Doubtful Debts

9. The amount withdrawn by the partners from the business for their personal use. Drawings

10. The accounts which are prepared at the end of each financial year. Final Accounts

11. Expenses which are paid before due. Prepaid expenses

12. The statement showing list of all ledger balances. Trial Balance

13. The credit balance of Profit and Loss Account. Net profit

14. Expenses which are due but not paid at the end of the year. Outstanding expenses

15. Assets which are held in the business for a long period. Fixed assets

16. Goods returned to suppliers Purchase returns

17. An amount paid for the permission to use patents & copyrights Royalty

18. An account to which net loss is transferred in a partnership firm. Partners capital a/c

19. Concession given by firm to customer. Discount allowed

20. Concession given by suppliers to firm Discount received

21. Example of fictitious asset. Preliminary expenses

22. An account prepared by producer to find cost of production. Manufacturing a/c

23. Expenses which are paid off in one year but benefit is availed for number of years Deferred expenses

24. Assets which are not real assets of the business. Fictitious assets




(C)  Fill in the blanks with appropriate alternative given in the brackets.


1. The gross profit is transferred to __________ account.  (a) trading  (b)  profit and loss   (c)  capital  (d)  current
profit and loss


2. Wages paid for installation of machinery should be debited to __________ account.  (a)  machinery  (b)  wages   (c)  trading  (d)  profit and loss
Machinery


3. All indirect expenses are debited to ___________ account.  (a) trading  (b) capital   (c)  profit and loss  (d)  current
profit and loss


4. A statement showing finacial position of the business is called as __________.  (a) Balance sheet  (b)  trial balalnce   (c)  capital  (d)  trading a/c
balance sheet


5. To find out net profit or net loss of the business ___________ account is prepared.  (a) trading  (b)  capital   (c) current  (d)  profit and loss
profit and loss


6. A _____________ is an intangible asset. (a) goodwill  (b)  stock  (c)  building  (d)  cash
Goodwill


7. Trading account is prepared on the basis of ____________ expenses. (a) indirect  (b)  direct  (c)  revenue  (d)  other
Direct


8. The interest on drawings is transferred to __________ side of the profit and loss account. (a) debit  (b)  credit  (c)  asset  (d)  liability
Credit


9. Final accounts are prepared on the basis of __________ and adjustments. (a) trial balance  (b)  capital a/c  (c)  trading A/c  (d)  profit & loss A/c
trial balance


10. ____________ is the list of all ledger balances. (a) balance sheet  (b)  trial balance  (c)  trading A/c  (d)  profit & loss A/c
Trial balance


11. Return outward are deducted from _____________. (a) purchases  (b)  sales  (c)  capital  (d)  debtors
Purchases


12. The withdrawals of partner from the business for their personal use is called as _________. (a) capital  (b)  profit  (c)  drawings  (d)  cash
Drawings


13. Income received in advance is shown on the ___________. (a) debit  (b)  credit  (c)  asset  (d)  liability
Liability


14. Prepaid expenses are shown on the _________ side of the Balance sheet. (a) assets  (b) l iability  (c)  debit  (d)  credit
Assets


15. Profit & Loss Account is _____________ account (a)  Real  (b) nominal  (c) income  (d)  Personal
Nominal

16. _____________ is a financial statement (a)  Income  (b)  Trading a/c   (c)  balance sheet  (d)  Profit & loss a/c
Balance Sheet


17. A provision made for debts irrecoverable from the debtors is called _____________. (a)  bad debts  (b)  reserve for discount on debtors  (c)  reserve for doubtful debts  (d) additional new bad debts
reserve for doubtful debts


18. _____________ is notional loss of the business. (a)  uninsured goods  (b)  goods destroyed by fire  (c)  depreciation  (d) loss from sale of asset
depreciation


19. _____________ a/c prepared by producers to find cost of production. (a)  Manufacturing  (b)  Trading  (c)  Purchase  (d)  Profit & loss
Manufacturing a/c


20. Wages & salaries are debited to _____________ account (a)  Profit & loss  (b)  trading a/c  (c)  expense a/c  (d)  salary a/c
Trading a/c


21. _____________ a/c & _____________ a/c are recorded to balance sheet (a)  profit & loss  (b)  nominal, personal  (c)  real, nominal  (d)  real, personal
Real, Personal


22. _____________ are intangible assets and do not have realisable value. (a)  Good will  (b)  profit & loss (dr bal)  (c)  Trade-mark  (d)  Copy right.
Profit & loss (dr bal)


(D)  State whether the following statements are TRUE/FALSE


1. All direct expenses are debited to Trading account. True

2. The Balance Sheet is a nominal account. False

3. Discount allowed to debtors is called as bad debts. False

4. Profit and loss account is a nominal account True

5. The interest on drawings is an income of the firm. True

6. The interest on capital is an income of the firm. False

7. Trading account is a nominal account. True

8. Prepaid expenses are shown on the asset side of the Balance sheet. True

9. Closing stock is always valued at market price. False

10. Outstanding expenses are shown on the liability side of the Balance sheet. True

11. Partners must share profits and losses equally. False

12. Trial Balance is the base of Final account. True

13. Debit balance of Trading account shows gross profit. False

14. Credit balance of profit and loss account shows net profit of the business. True

15. Return inward is deducted from purchases. False

16. Unproductive wages are debited to trading a/c. False

17. Royalty is debited to profit & loss a/c. False

18. Wages & salaries is treated as indirect expense. False

19. Balance sheet is not an account. True

20. Fictitious assets are intangible assets. True

21. Current assets are also called as floating assets. True

22. Income received, but not earned is an asset. False

23. Outstanding wages is a nominal a/c. False


24. Final accounts are prepared end of the accounting year. True












TEXTUAL PROBLEMS WITH COMPLETE SOLUTION.










ADDITIONAL PROBLEMS WITH COMPLETE SOLUTION .