Q: A decrease in the provision for doubtful debts would result in ______________.

Provision for Doubtful Debts means the expense reported on the income statement or profit and loss A/c. If Provision for Doubtful Debts is the current period expense associated with the losses from normal credit sales, it will appear as an operating expense usually as part of Selling, General and Administrative Expenses (SG&A). If a provision for doubtful debts would decrease then debit balance of profit and loss A/c would decrease and ultimately net profit would increase.

Question 1

The credit balance in the Profit & Loss Account is ___________.

Accepted Answer

A profit and loss account records all the incomes and expenses that have taken place in the year. All the expenses are recorded on the debit side whereas all the incomes are recorded on the credit side. When the credit side is more than the debit side it denotes profit. Hence, Credit balance of Profit and loss account is profit.

Question 2

The debit balance in the Profit & Loss Account is ___________.

Accepted Answer

The debit balance of a profit and loss account denoted loss. Debit balance of the profit and loss account shows that the expenses were more than the incomes.

Question 3

Which of the following are not current liabilities?

Accepted Answer

Debentures issued by the company represents a long term debt which carries a charge of interest. Redeemable debentures are not current liabilities.

Question 4

'Proposed dividends' is shown in the balance sheet of a company under the head of _________.

Accepted Answer

Provision is defined as the amount set aside to meet the future liability.  provisions may be made for short term and long term liability. Short term provisions are those against which the liability is going to arise in next 12 months or so. Proposed dividend is shown under the heading of provisions in the balance sheet in liability side. Other provisions may be, employee benefits, taxation etc.

Question 5

The term current assets does not include _____________.

Accepted Answer

Current Assets are those which generated during the course of business operations and changes with each of the transaction. Examples are sundry debtors, stock in trade, Bills receivables, cash on hand, cash at bank etc. Furniture is an item of fixed assets and to be shown in the assets side under the heading of fixed assets.

Question 6

If sales are $Rs. 6,00,000$; Gross profit is $1/3$ on cost; Purchases are $Rs. 4,90,000$ and the Closing stock is $Rs. 90,000$, then the opening stock will be_________.

Accepted Answer

Solution can be represented as:Sales= Cost of Goods Sold +Gross ProfitAssuming COGS is Rs.100Gross Profit will be 1/3 of Rs.100 i.e.33.33Therefore Sales =Rs.100+Rs.33.33 i.e. Rs.133.33If we calculate the Gross Profit on Sales that becomes = GP/Sales*100                                                                                           =33.33/133.33*100i.e. Gross  Profit will be 25% on salesSales= Rs.600000Gross Profit= 25% of Rs.600000 i.e. Rs.150000Cost of Goods Sold= Sales-Gross Profit                                = Rs.600000-Rs.150000                                = Rs.450000Now, to find out the opening stock, below equation help us:Cost of Goods Sold= Op Stock+Purchases-Closing Stock450000=Op Stock+490000-Rs.90000450000=Op Stock+ Rs.400000Op Stock = Rs.450000-Rs.400000Opening Stock =Rs.50000.

Question 7

Which of the following accounts have only credit balance?

Accepted Answer

An accounts assigned normal balance is on the side where increases go because the increases in any account are usually greater than the decreases. Therefore, asset, expense, and owner's drawing accounts normally have debit balances. Liabilities, revenue, and owner's capital accounts normally have credit balances.

Question 8

A decrease in the provision for doubtful debts would result in ______________.

Accepted Answer

Provision for Doubtful Debts means the expense&#10;reported on the income statement or profit and loss&#10;A/c. If Provision for&#10;Doubtful Debts is the&#10;current period expense associated with the losses from normal credit sales, it&#10;will appear as an operating expense usually as part of Selling, General and&#10;Administrative Expenses (SG&A). If&#10;a provision for doubtful debts would decrease then debit balance of profit and&#10;loss A/c would decrease and ultimately net profit would increase.

Question 9

Under permanence order of balance sheet _________ a/c is shown at the last.

Accepted Answer

Assets and Liabilities are to be shown in the balance sheet either in permanency order or liquidity order. This is called marshaling of balance sheet. Order of permanency is that where the assets and liabilities are shown as per their permanency in the business. For example, in assets side, fixed assets are show first staring from Goodwill, Land & Building, Plant & Machinery , Furniture and Fixtures and then current assets.  In current assets also, cash in hand is the most liquid asset hence to be shown in the last.

Question 10

Contingent Liability is _____________________.

Accepted Answer

Contingent liability is a unascertained liability but its amount and due date and indeterminate. The occurrence or non occurrence along with the amount of liability that might arise is not certain.