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1. A sent some goods costing Rs.3, 500 to be sold at a profit on 25% on sale, to B on sale or return basis. B returned goods costing Rs.800. At the end of year, the remaining goods were neither returned nor were approved by him. The stock on approval will be shown in balance sheet at:
(c) Rs.2,700 less 25% of 2,700
The cost of goods with B is 3500 – 800 = 2700. Hence option (b) is correct.
2. At what price goods lying with customer’s are valued at year ending under sale of approval basis:
(a) Selling price
(b) Cost price
(c) Current price
(d) Market price.
Goods lying with customer’s are valued at Cost Price at year end. Hence option (b) is correct.
3. When goods are sold on approval basis, the buyer has an option to either Accept the
(a) Goods or return the goods within a fixed period
(b) Goods or return the goods within 6 months
(c) Goods or destroy the goods within fixed period
(d) Goods or return the goods without any time limit.
When goods are sold on approval basis, the buyer has an option to either Accept the Goods or return the goods within a fixed period. Hence option (a) is correct.
4. Under sales on return or approval basis, the ownership of goods is passed only
(a) When the retailer gives his approval
(b) If the goods are not returned within specified period
(c) Both (a) and (b)
(d) None of the above.
Under sales on return or approval basis, the ownership of goods is passed when the retailer gives his approval, or when not returned within specified period. Hence option (c) is correct.
5. On 31st December, 2009 goods sold at a price of Rs.45,000 were lying with a customer, to whom these goods were sold on ‘Sale or Return Basis’ and recorded as actual sales. Since no consent was received from him, the adjustment entry was made presuming goods were sent on approval at a profit of cost + 20%. In the balance sheet the stock with customers A/c will be shown at
(d) None of the above.
When Cost = 100, Sale Price at 20% of Cost is 100+100x(20/100)= 120. So, when sale price is 45000, Cost = (100/120) x 45000= 37500. Option C is correct