Accounting concepts quiz

• A Realisation Account is a nominal account
• Expenses on dissolution of a firm are called Realisation Expenses
• If X, Y, and Z share profits in the ratio of ½:½:¼, and Z dies, the new ratio of X and Y will be 3:2
• Creditors are not considered while computing the current ratio
• Decrease in the value of fixed assets due to wear and tear is termed as Depreciation
• Excess of average profits over the normal profits is called Super profits
• Recording an unrecorded liability when reconstituting a partnership firm results in loss to the existing partners
• The monetary value of the business's reputation is called Goodwill
• Cost of Goods Sold equals Sales less Gross Profit.
• On dissolution of a firm, the Realisation Account is debited with all assets to be realised
• Recording an unrecorded asset on the reconstitution of a partnership firm results in gain to the Existing Partners
• For the firm, interest on a partner's drawings is income
• Realisation expenses are recorded on the debit side of the Realisation Account
• At the time of dissolution of a firm, the book value of assets is recorded on the debit side of the Realisation Account
• A cash flow statement is related to AS-3
• Cash and cash equivalents include treasury bills, commercial bills, and cash at bank
• On dissolution of the firm, partner's capital accounts are closed through the Bank / Cash Account
• A Revaluation Account or Profit & Loss Adjustment Account is a nominal account
• The sacrifice ratio is calculated at the time of admission of a partner
• If profit during the year is ₹20,000 with a ₹9,000 increase in stock and a ₹5,000 decrease in debtors, the cash from operating activities is ₹16,000
• Profit and loss on revaluation at the time of retirement must be shared by all partners
• Cash brought in for goodwill by a new partner is shared by the existing partners in the sacrificing ratio
• The balance of the cash account is not transferred to the Realisation Account
• If M, Land A are partners sharing profits in the ratio of 9: 4:3 with a joint life policy of ₹96,000 and A dies, A's share in the JLP amount is ₹18,000
• Premium on the issue of shares is called Capital Gain
• A share application account is a personal account
• Under the provisions of the Companies Act, a company can issue both equity and preference shares

Share Forfeiture and Debentures

• The balance of share forfeiture account, after re-issue, is transferred to Capital Reserve
• A debenture holder receives interest
• Debenture holders are called creditors of the company
• If Table F of the Companies Act, 2013 is adopted, the company will pay interest on calls paid in advance up to 12% per annum
• A company can issue its shares at a premium under Section 52 of the Companies Act, 2013
• The shares can not be issued at discount
• Debentures may be issued at par, premium, or discount
• Debentures can be redeemed out of profit, capital or provision
• Financial statements are recorded facts
• Payment of creditors will improve the current ratio
• A debenture is part of long-term borrowings
• Comparative statements are also known as horizontal analysis
• Issuing debentures at a discount is a capital loss
• The Debtors Turnover Ratio is Net Credit Sales / Average Trade Receivables
• A fluctuating capital account is credited with interest on capital, profit of the year, and remuneration of partners

Ratios, Profit and Loss

• Debt equity ratio is a solvency ratio
• Stock Turnover Ratio = Cost of Goods Sold / Average Stock
• Issue of Shares is not an example of cash outflow
• If x, y, z are partners in the ratio of 3: 4: 3, and y retires, with x and z sharing profits in equal ratio; the new ratio of x and z will be 1:1
• The artificial person, common seal, and limited liability are features of a company
• There are 2 types of shares
• Shares cannot be issued at a discount according to Section 53
• In the absence of a partnership deed, a partner is not entitled to receive interest on capital, salary, or commission
• A manager's commission will not be recorded in the Profit & Loss Appropriation A/c – Debt equity ratio is a solvency ratio

Stock Turnover and Cost of Goods

• Stock Turnover Ratio is Cost of Goods Sold /Average Stock
• Cost of Goods Sold is Sales Gross Profit
• The balance of the Sinking Fund Account after redemption of debentures is transferred to the General Reserve Account.
• Own debentures are those the company purchases from the markets and holds as investments
• Premium on the redemption of debentures is a personal account
• Debentures can be redeemed out of profit, capital, or provision
• Premium on Redemption of Debentures A/c is a liability
• The premium on the redemption of debentures is generally provided at the time of issue of debentures
• A sinking fund investment is an asset
• If a company issues 1,000, 12% debentures of ₹100 each at 10% premium, the 12% stands for the rate of interest
• Interest on a partner's drawings is debited to the partner's capital account
• Interest on a partner's capital is calculated on opening capital

Profit and Loss and Partner Salaries

• A manager's commission will not be recorded in Profit and loss Appropriation A/c?
• The Current Account of the partners shows either a debit or credit balance
• All of these, partnership agreement can be oral, written, oral or written
• If the total assets of a firm are ₹4,05,000 and the total outside liabilities are ₹55,000, then the partner's capital will be ₹3,50,000
• The maximum number of partners in a firm is 50
• Goodwill at twice the average of last three years profit if the profits of the last three years were ₹4,000, ₹5,000 and ₹6,000 equal to 10,000
• In sole sole trading the valuation of goodwill is necessary on selling the firm
• The nature of goodwill has high level. It is a Dog
• Firms that has earned exceptionally high profits from a contract which will not be renewed which will not be included in Calculation of the goodwill

Goodwill Calculation and Company Shares

• Goodwill will be calculated at one and half years' purchase of average profit of last 5 years with profits during 3 years as ₹20,000 ₹18,000 and ₹9,000, and suffered losses of ₹2,000 and ₹5,000 in last 2 years. The amount of goodwill will be ₹12,000
• Nature of goodwill is likely to be low in nature
• The journal entry when a company issues fully-paid shares to promoters for their services is Goodwill A/c Dr. To Share Capital A / c
• When a company issues shares at a premium, the amount of premium may be received along with any of these
• An issue of shares which is not a public issue but offered to a selected group of persons is a private placement of shares
• A Share Application Account is a personal account
• There isn't an at discount.
• Securities Premium cannot be applied for Paying dividend to members
• The balance of discount on debentures is shown in the Assets side
• Premium on issue of debentures' are Reserve and Surplus
• Premium on issue of debentures is a Capital Gain for company
• Debenture carries interest at a Fixed Rate
• The ideal current ratio is 2:1
• The maximum limit for members amount to 200 peoples
• Fixed loan payment, if Interest given
• Interest on Partners' Capital is always

Changes and Gaining Ratio

• Change in profit - sharing ratio of existing partners results in the Reconstitution of Firm New Ratio Old Ratio Gaining Ratio :
• The excess of average profit over the normal profit is called Adhilaabhh (Super Profit)
• The ideal liquidity (quick) ratio will be ideal to keep it at 1:1
• In which ratio the amount of cash brought in for goodwill by the new partner is shared by the existing partners it requires
• Excess of the credit side debit side side amount equal or more likely to be in the side
• C receives 120000 Rs and his amount with existing C is admitted with 1/5 share
• The accumulated profits and reserve arePartnerss in the
• If the partners get paid more and sharae in
• Raj and Shantanu share with ratios of 3:2:1 Raj retires.
• Gaining is calculated but with the current time

Rest and Old Partners

• Revaluation, share of partners is is
• Should be given share for all old partners ,
• Paid the remaining partners with some for from the side to to send
• Personal is not allowed as there should be payment sent
• , , , , , .. amount to
• All personal account in
• are what to
• More to credit partners accounts
• What assets should always equal and debit should be given
• A is what needs t, debit account is what should be credited

Ratios and Goodwill

• Debt Equity Ratio is calculated as
• Cash needs to be cash to function
• Financial must use some as cash for use. ,
• 90% is needed
• New firm #1= Discount: #2= Financial

Partners, Loss and bonds in closing statement

• To re enter
• To write some more loss and
• General profit is only

This quiz focuses on introductory accounting concepts: types of shares, partnership deeds, profit and loss allocation, debt-equity ratio, stock turnover, and debentures. Test your knowledge of key accounting principles.