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Questions and Answers
What was the cash balance at the beginning of the period on 1st April, 2021?
What was the cash balance at the beginning of the period on 1st April, 2021?
- 250 (correct)
- 5,400
- 1,180
- 310
How much was collected from sundry debtors during the period?
How much was collected from sundry debtors during the period?
- 45,600 (correct)
- 3,000
- 12,000
- 5,000
Which transaction contributed to the bank overdraft at the beginning of the period?
Which transaction contributed to the bank overdraft at the beginning of the period?
- Bank overdraft (correct)
- Payment to Sundry creditors
- Cash purchases
- Fresh Capital brought in
What could be the source of the cash inflow that is missing from the cash summary?
What could be the source of the cash inflow that is missing from the cash summary?
What was the total amount paid to sundry creditors during the period?
What was the total amount paid to sundry creditors during the period?
What was the total cash balance on 31st March, 2022?
What was the total cash balance on 31st March, 2022?
Which of the following is not included in the cash inflow summary?
Which of the following is not included in the cash inflow summary?
What was the total amount brought in as fresh capital during the period?
What was the total amount brought in as fresh capital during the period?
What is the total amount recorded as 'By Discount'?
What is the total amount recorded as 'By Discount'?
What was the total value of assets on 1-4-2020?
What was the total value of assets on 1-4-2020?
What is the total amount credited to the Creditors Account?
What is the total amount credited to the Creditors Account?
Identify the total amount of returns recorded in the accounts.
Identify the total amount of returns recorded in the accounts.
What is the net total amount for Balance c/d in the recorded sections?
What is the net total amount for Balance c/d in the recorded sections?
Which of the following represents the cash received from bad debts?
Which of the following represents the cash received from bad debts?
What was the monthly domestic expenditure over the two years?
What was the monthly domestic expenditure over the two years?
How much was the declared income for the financial year 2021-2022?
How much was the declared income for the financial year 2021-2022?
What was the amount owed to Moti’s Brother on 1-4-2020?
What was the amount owed to Moti’s Brother on 1-4-2020?
What is the difference in declared income between the two financial years?
What is the difference in declared income between the two financial years?
What happens to closing capital if a profit is incurred during the year?
What happens to closing capital if a profit is incurred during the year?
Which of the following transactions would lead to a decrease in closing capital?
Which of the following transactions would lead to a decrease in closing capital?
What should be added to the closing capital when calculating profit/loss using the capital comparison method?
What should be added to the closing capital when calculating profit/loss using the capital comparison method?
How is profit calculated when using the capital comparison method?
How is profit calculated when using the capital comparison method?
If a business has an opening capital of $10,000 and a closing capital of $12,500 with $3,000 in drawings and $3,750 in capital added, what is the computed profit?
If a business has an opening capital of $10,000 and a closing capital of $12,500 with $3,000 in drawings and $3,750 in capital added, what is the computed profit?
Which of the following is NOT a consideration when computing profit/loss under the capital comparison method?
Which of the following is NOT a consideration when computing profit/loss under the capital comparison method?
What is the effect of making withdrawals on the closing capital?
What is the effect of making withdrawals on the closing capital?
Why is it easier to prepare a balance sheet at two different points of time in the absence of detailed revenue and expense records?
Why is it easier to prepare a balance sheet at two different points of time in the absence of detailed revenue and expense records?
What was the total amount of cash received from the summary cash and bank account?
What was the total amount of cash received from the summary cash and bank account?
How much was the balance brought down for Sundry Debtors Account?
How much was the balance brought down for Sundry Debtors Account?
What is the total amount for bills accepted by customers as indicated in the Sundry Debtors Account?
What is the total amount for bills accepted by customers as indicated in the Sundry Debtors Account?
Which amount is shown as the Bills Receivable that was collected on maturity?
Which amount is shown as the Bills Receivable that was collected on maturity?
How much was discounted from the Bills Receivable account?
How much was discounted from the Bills Receivable account?
What amount remains as the balance carried down in the Sundry Debtors Account?
What amount remains as the balance carried down in the Sundry Debtors Account?
Which entry represents the amount for bills dishonoured in the Bills Receivable Account?
Which entry represents the amount for bills dishonoured in the Bills Receivable Account?
What is the total amount for provision for claims for damages?
What is the total amount for provision for claims for damages?
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Study Notes
Cash and Bank Summary
- Opening cash balance on 1st April 2021 was 250.
- Bank overdraft on 1st April 2021 was 5,400.
- Total collections from sundry debtors amounted to 45,600.
- Cash purchases recorded were 3,000.
- Sale of old furniture generated 750.
- Machinery purchases totaled 12,000.
- Payments to sundry creditors were 26,370.
- Total expenses incurred were 8,450.
- Fresh capital introduced into the business was 5,000.
- Drawings by the proprietor amounted to 3,230.
- Closing cash balance on 31st March 2022 was 310.
- Closing bank balance on 31st March 2022 was 1,180.
- Balancing figure for cash sales was 8,340, indicating potential cash inflow.
Sundry Debtors Account
- Balance brought forward was 70,000.
- Cheques received dishonored were recorded at 5,700.
- Credit sales as a balancing figure totaled 9,59,750.
- Payments made received in cash from the summary accounted for 8,97,150.
- Discount allowed amounted to 2,400 with a balance carried down of 92,000.
Bills Receivable Account
- Opening balance was 15,000, with bills accepted by sundry debtors totaling 40,000.
- Bills collected on maturity amounted to 16,000.
- Discount on bills discounted was recorded at 750.
Capital Comparison Method
- Closing capital shows increased balance indicates profit; decreased balance indicates a loss.
- Fresh investments in the business increase capital, while withdrawals decrease capital.
- Key calculations include:
- Closing capital
- Adding drawings
- Subtracting fresh capital introduced
- Opening capital
- Profit or loss determined by comparing these figures.
Example Calculation
- Raju's opening capital was 10,000 and closing capital was 12,500.
- Drawings during the year totalled 3,000.
- New capital introduced amounted to 3,750.
- Profit or loss can be calculated using the capital comparison method.
Assets and Liabilities Overview
- As of 1st April 2020, assets included cash in hand (25,500), inventory (56,000), sundry debtors (41,500), land/building (1,90,000), and wife's jewelry (75,000).
- Liabilities included debts to Moti’s brother (40,000) and sundry creditors (35,000).
- By 1st April 2022, cash in hand decreased to 16,000 while inventory and sundry debtors increased.
Tax Officer's Evaluation
- Income statements for 2020-2021 and 2021-2022 reported incomes of 1,05,000 and 1,23,000, respectively.
- Domestic expenditure was 4,000 per month during the period.
- Workings necessary to evaluate the correctness of the Income-tax Officer's contention.
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