For revision
Answers to select questions from quizzes conducted
1. If a business provides services worth Rs. 10,000 to a customer and bills
him for Rs. 11,800 inclusive of GST, what will be the amount shown as
sales in the accounting books?
Ans : Rs. 10,000 because GST collected has to be paid to the Government
2. Calculate the gross profit from the following figures :
Cost of raw materials consumed in production : Rs. 100
Cost of labour for producing the finished goods : Rs. 10
Advertisement expenses incurred by the business : Rs. 5
Salaries for Head Office staff : Rs. 2
Sales : Rs. 120
Ans : For calculating gross profit, only those expenses pertaining to manufacturing process is
considered.
Sales less cost of raw materials consumed – cost of labour
Don’t consider advertisement and salaries for head office
3. Calculate the net profit from the following figures :
Cost of raw materials consumed in production : Rs. 100
Cost of labour for producing the finished goods : Rs. 10
Advertisement expenses incurred by the business : Rs. 15
Salaries for Head Office staff : Rs. 2
Depreciation : Rs. 10
Sales : Rs. 140
Ans : Sales less cost of raw materials – cost lf lahour – advertisement – salaries - depreciation
For net profit calculation, all expenses are included
4. Calculate the value of raw materials consumed in production from the
following :
Opening stock of raw materials : Rs. 10,000
Closing stock of raw materials : Rs. 8,000
Purchase of raw materials : Rs. 25,000
Ans : Op stock + purchase less closing stock gives cost of raw materials consumed
It is preferable to prepare the ledger for raw materials a/c
5. If gross profit is Rs. 1,000 and the business incurs the following
expenses, calculate the net profit.
Rent : Rs. 100
Electricity expenses : Rs. 100
Salaries for head office staff : Rs. 50
Publicity expenses : Rs. 200
Ans : Gross Profit less rent, electricity expenses, salaries and publicity expenses
6. If total value of assets is Rs. 20 lakhs, capital is Rs. 5 lakhs and
retained earnings are Rs. 2 lakhs, what is the value of borrowings?
Ans : Capital + Retained Earnings + Borrowings = Assets
7. Calculate the profit or loss from the following :
Sales income : Rs. 10,00,000
Cost of raw materials consumed : 70% of sales income
Travelling expenses : 5% of sales income
Salaries : 15% of sales income
Other outstanding expenses : Rs. 25,000
Sales – cost of raw materials = Gross Profit
Gross Profit – travelling expenses – salaries – other outstanding
expenses = net profit
Assumption : I am assuming that other outstanding expenses is not
included in the list of expenses and so I am treating it as an expense
and deducting from the income.
Alternative assumption : I am assuming that outstanding expenses is a
balance sheet item (liability) and this amount is already provided for in
the expenses.
PLEASE STATE ASSUMPTION CLEARLY – IT IS NOT POSSIBLE TO STATE
ASSUMPTION IN MOODLE. SO USE 1ST ASSUMPTION IN MOODLE AND
PROCEED.
8. State true or false : Depreciation is a non-cash expense – TRUE
9. State if the journal entry shown below is true or false based on figures
given below :
Goods purchased on cash basis
Value of goods purchased : Rs. 100
GST on goods : Rs. 12
Discount given by supplier : Rs. 5
Debit Purchase a/c Rs. 112
Credit Cash a/c Rs Rs. 107
Credit Discount a/c Rs 5
True- total cost to company is value of goods + GST less discount
10, State if the journal entry given below is true or false based on figures
given below :
Goods sold on cash basis
Value of goods sold : Rs. 100
Discount given to customer : Rs. 5
Debit buyer a/c Rs. 95
Debit discount a/c Rs. 5
Credit Sales a/c Rs. 100
False – buyer pays Rs. 95 in cash (100 – 5)
Journal entry
Cash Dr. Rs 95
Discount Dr. Rs. 5
Sales Cr. Rs, 100
OR
Cash Dr. Rs. 95
Sales Cr. Rs. 95
11. State true or false
A business sells goods worth Rs. 10 lakhs on 3rd February, 2024. The sale
is made on credit basis. Payment to be received on 3rd March, 2024.
The sale will be accounted in the books of account of the business under
the accrual system of accounting on 3rd March, 2024.
False – it will be accounted on 3rd February, 2024. Under cash system, it
will be accounted on 3rd March
12. State True or False :
The cost of goods sold in the following case is Rs. 20,000/-
Cost of Raw Materials Consumed : Rs. 10,000
Wages paid for producing the goods : Rs. 10,000
Salaries paid to head office staff : Rs. 5,000
True – Salaries is not included in cost of goods sold
13. State true or false
You book a ticket on 10th May to travel by train on 15th May. The travel
expense will be accounted on 15th May under accrual system of
accounting.
True
14. State true or false
Buying of a computer by a business is a revenue expense
False – buying an asset is a capital expenditure
15. State true or false
Other income is always more than sales income in any manufacturing
business
False
