Explore topic-wise InterviewSolutions in Current Affairs.

Followings two approaches are used to determine the owner’s funds :

• Liabilities Based Approach
• Assets Based Approach.

Generally higher stock ratio can be the result of deficit (shortage) of working capital and lower stock – ratio can be the result of unnecessary investment in working capital. Thus, it is desirable to main optimum level of stock.

By debtors turnover ratio it can be ascertained that how many times debtors and bills receivables are emerged due to credit sales and how quickly the collection is converted into cash or cash equivalent.

If the total assets to debt ratio is higher then it is less risky to the lenders to lend their funds.

The right side of the cash book is known as Credit side or Payment side.

Correct option is (c) Both side

Correct option is (b) Real account

There are three types of cash book:

1. Simple cash book,
2. Two columnar cash book s and
3. Three columnar cash book.

Only all types cash receipts and payments transactions are recorded in the simple cash book.

Correct option is (a) In cash book

Correct option is (a) Personal account

Debt-equity ratio indicates the proportion of equity against debt.

Correct option is (C) Brief

The lower creditors’ turnover ratio shows higher payment efficiency and higher investment in creditors and bills payable.

Correct option is (d) Contra transaction

Correct option is (a) Contra transaction

Correct option is (c) Pass book

Correct option is (A) Two

Correct option is (C) Operating ratio

Correct option is (B) Income

On the basis of stock turnover, we can know that during the year, how many times average stock is converted into cost of goods sold and finally into sales of a business unit.

Correct option is (A) 20%

Correct option is (D) 2.5 times

Correct option is (a) Two

Correct option is (D) 1 : 1

Correct option is (C) Solvency

Solvency ratios

• Debt-equity ratio
• Total assets-debt ratio
• Proprietary ratio and
• Interest coverage ratio are useful to determine the payment capacity of long-term liabilities of a business unit.

Correct option is (C) Current Assets + Current liabilities

Liquidity ratios

• Current ratio
• Liquid ratio are useful to know the payment capacity of short term liabilities of a business unit.

There are two approaches used to determine the owner’s funds. Under both the approaches owners’ funds remain identical.

1. Liabilities Based Approach:

As per this approach ;
Owners’ funds = Equity share capital + Preference share capital + Reserves and surplus – Debt balance of P & L A/c (if any).

2. Assets Based Approach:

As per this approach ;
Owners’ funds = Non-current Assets + Current Assets – Non-current liabilities – Current liabilities.

Operating expense = Administrative expense + Sales expense + Depreciation

= ₹ 75,000 + ₹ 52,000 + ₹ 48,000

= ₹ 1,75,000

\(operating\,ratio=\frac{cost\,of\,goods\,sold+operating\,system}{Net\,sales}\times100\)

\(\frac{325000+175000}{600000}\times100=\frac{500000}{600000}\times100=83.33\%\)

1. Gross Profit Ratio =  \(\frac{Gross\,profit}{Net\,sales}\times100=\frac{300000}{1500000}\times100=30\%\)

2. Gross Profit = Sales – Cost of goods sold = ₹ 15,00,000 – ₹ 12,00,000 = ₹ 3,00,000

∴ Gross Profit Ratio =  \(\frac{Gross\,profit}{Net\,sales}\times100=\frac{300000}{1500000}\times100=20\%\)

3. Cost of goods sold = Opening stock + Purchase + Purchase expenses – Closing stock = ₹ 2,50,000 + ₹ 12,00,000 + ₹ 50,000 – ₹ 3,50,000 = ₹ 11,50,000

Net Sales = Sales – Sales return = ₹ 20,00,000 – ₹ 2,00,000 = ₹ 18,00,000 Gross Profit = Sales – Cost of goods sold = ₹ 18,00,000 – ₹ 11,50,000 = ₹ 6,50,000

Correct option is (A) Sales – Cost of goods sold

Correct option is (B) 40%

Correct option is (C) Operating ratio

Correct option is (D) All of the above

Imprest system is a system of petty cash book, in which fixed amount of cash balance is maintained at the beginning of each period.

(a) Debit balance as per cash book: Cash balance as per companies books of a/c’s called debit balance. 

(b) Credit balance as per cash book: The overdrawn balance of cash in companies books a/c called credit balance. 

Features of Bank reconciliation statement are: 

1. It is prepare by customer of the bank but not the banker. 

2. BRS explains the differences between the bank pass book and cash book 

3. It helps to keep track on cheque issue and deposits.

(b) Debit memo

When cash or cheques is deposited in bank, a form is to be filled by a customer and submitted to the banker along with cash or cheque. This is called as Pay – in – slip or deposit slip.

The timing differences in BRS are: 

(a) cheques issued but not yet presented for payment 

(b) cheques deposited into bank but not yet credited 

(c) bank charges and interest on loan and overdraft 

(d) interest and dividends collected by the bank 

(e) dishonour of cheques and bills

(f) amount paid by parties directly into the bank 

(g) payment made directly by the bank to others 

(h) bills collected by the bank on behalf of its customer

The statement which is prepared to find out the reasons for differences in the balances of Cash Book and that of the Pass Book is known as Bank Reconciliation Statement.

बैंक समाधान विवरण

(i) In this system the two aspects of each transaction are recorded in the books of account. This helps in checking the accuracy in accounting.

(ii) No, she purchases and sells goods both on cash and credit basis.

(iii) Yes, she has to spend money for expenses and capital also. Nominal accounts also maintained.

(iv) Yes, she should maintain a bank account for her business.

There are following two methods of reconciling the bank balances: 

1. Bank Reconciliation Statement without preparation of Adjusted Cash Book. 

2. Bank Reconciliation Statement After the preparation of the Adjusted Cash Book.

Correct answer is Pass Book.

सही विकल्प है (अ) बैंक की बही में व्यापारी के खाते का उतारा

Cash transactions are entered into cashbook.

Correct option is (a) an extract