FINAL ACCOUNTS OF MANUFACTURING ENTITIES

SELF EXAMINATION QUESTIONS

Pick up the correct answer from the given choices:
1. The balance of the petty cash is
(a) An expense (b) An income (c) An asset (d) A liability
2. Fixed assets are
(a) Kept in the business for use over a long time for earning income
(b) Meant for resale
(c) Meant for conversion into cash as quickly as possible
(d) All of the above
3. Goodwill is
(a) A current asset (b) An intangible fixed asset
(c) A tangible fixed asset (d) An investment.
4. Inventory is
(a) Included in the category of fixed assets
(b) An investment.
(c) A part of current assets
(d) An intangible fixed asset.
5. The manufacturing account is prepared:
(a) To ascertain the profit or loss on the goods produced
(b) To ascertain the cost of the manufactured goods
(c) To show the sale proceeds from the goods produced during the year
(d) Both (b) and (c).
6. A new firm commenced business on 1st January, 2011 and purchased goods costing
` 90,000 during the year. A sum of ` 6,000 was spent on freight inwards. At the
end of the year the cost of goods still unsold was ` 12,000. Sales during the year
` 1,20,000. What is the gross profit earned by the firm?
(a) ` 36,000 (b) ` 30,000 (c) ` 42,000 (d) ` 38,000
7. From the following figures ascertain the gross profit:
`
Opening Inventory (1.1.2011) 25,000
Goods purchased during 2011 1,30,000
Freight and packing on above 5,000

6.52 COMMON PROFICIENCY TEST

© The Institute of Chartered Accountants of India

 Closing Inventory (31.12.2011) 15,000
Sales 1,90,000
Selling expenses on sales 9,000
(a) `36,000 (b) ` 45,000 (c) ` 50,000 (d) `59,000
8. A prepayment of insurance premium will appear in the Balance Sheet and in the Insurance
Account respectively as:
(a) A liability and a debit balance. (b) An asset and a debit balance.
(c) An asset and a credit balance. (d) None of the above
9. Under-statement of closing work in progress in the period will
(a) Understate cost of goods manufactured in that period.
(b) Overstate current assets.
(c) Overstate gross profit from sales in that period.
(d) Understate net income in that period.
10. If sales revenues are ` 4,00,000; cost of goods sold is ` 3,10,000 and operating expenses are
`60,000, the gross profit is
(a) ` 30,000. (b) ` 90,000. (c) ` 3,40,000. (d) ` 60,000
11. Sales is equal to
(a) Cost of goods sold – Gross profit. (b) Cost of goods sold + Gross profit.
(c) Gross profit – Cost of goods sold. (d) Cost of goods sold + Net profit.
12. A Company wishes to earn a 20% profit margin on selling price. Which of the following is
the profit mark up on cost, which will achieve the required profit margin?
(a) 33% (b) 25% (c) 20% (d) None of the above
13. If sales is ` 2,000 and the rate of gross profit on cost of goods sold is 25%, then the cost of
goods sold will be
(a) ` 2,000. (b) ` 1,500. (c) ` 1,600. (d) None of the above.
14. Sales for the year ended 31st March, 2011 amounted to ` 10,00,000. Sales included goods sold
to Mr. A for ` 50,000 at a profit of 20% on cost. Such goods are still lying in the godown at
the buyer’s risk. Therefore, such goods should be treated as part of
(a) Sales. (b) Closing Inventory.
(c) Goods in transit. (d) Sales return.
15. The capital of a sole trader would change as a result of:
(a) A creditor being paid his account by cheque.
(b) Raw materials being purchased on credit.

FUNDAMENTALS OF ACCOUNTING 6.53

© The Institute of Chartered Accountants of India

 FINAL ACCOUNTS OF MANUFACTURING ENTITIES

(c) Fixed assets being purchased on credit.

(d) Wages being paid in cash.
16. Rent paid on 1st October, 2010 for the year to 30 September, 2011 was ` 1,200 and rent paid
on 1st October, 2011 for the year to 30 September, 2012 was ` 1,600. Rent payable, as shown
in the profit and loss account for the year ended 31 December 2011, would be:
(a) ` 1,200. (b) ` 1,600. (c) ` 1,300. (d) ` 1,500.
17. A decrease in the provision for doubtful debts would result in:
(a) An increase in liabilities. (b) A decrease in working capital.
(c) A decrease in net profit. (d) An increase in net profit.
From the given information, choose the most appropriate answer for Questions 18, 19 & 20:
Sales Opening Purchases Closing Cost of Gross Selling Net
Inventory Inventory goods sold Profit Expenses Profit
` ` ` ` ` ` ` `
15,000 6,000 10,000 ? 9,000 ? 4,000 ?
18. The value of closing Inventory is
(a) ` 9,000 (b) `4,000 (c) `8,000 (d) ` 7,000
19. Gross profit will be
(a) ` 6,000 (b) ` 5,000 (c) `8,000 (d) ` 7,000
20. Net profit will be
(a) ` 6,000 (b) ` 5,000 (c) ` 2,000 (d) ` 7,000
From the given information, choose the most appropriate answer for Questions 21 and 22:
Opening Investment Capital at the Net Profit
Capital By Proprietor Drawings end of the year (Loss)
` ` ` ` `
16,000 Nil 3,000 13,500 ?
21. The net profit will be
(a) ` 600 (b) ` 500 (c) ` 550 (d) ` 700
22. If in the given information, Net Loss is ` 1,000, then the investment made by the proprietor
during the year will be
(a) `1,500 (b) ` 2,000 (c) ` 1,200 (d) ` 1,700
From the given information, choose the most appropriate answer for Questions 23 and 24:
` `
Opening Inventory 20,000 Carriage on sales 3,000
Closing Inventory 18,000 Rent of Office 5,000
Purchases 85,800 Sales 1,40,700

6.54 COMMON PROFICIENCY TEST

© The Institute of Chartered Accountants of India

 Carriage on purchases 2,300
23. Gross profit will be
(a) ` 50,000 (b) ` 47,600 (c) ` 42,600 (d) ` 50,600
24. Net profit will be
(a) ` 42,600 (b) ` 50,600 (c) ` 45,600 (d) ` 47,600
From the given information, choose the most appropriate answer for Questions 25 and 26:
The Zed Company, a whole seller estimates the following sales for the indicated months:
June July August
2011 2011 2011
` ` `
Opening Inventory 4,08,000 4,34,400 4,60,800
Credit Sales 15,00,000 16,00,000 17,00,000
Cash Sales 2,00,000 2,10,000 2,20,000
Total Sales 17,00,000 18,10,000 19,20,000
Selling price is 125% of the purchase price.
25. The cost of goods sold for the month of June, 2011 is:
(a) ` 15,20,000 (b) ` 14,02,500 (c) ` 12,75,000 (d) ` 13,60,000
26. Inventories purchased in July, 2011 is :
(a) ` 16,05,000 (b) ` 14,74,400 (c) ` 14,40,000 (d) ` 13,82,500
Considering the following information answer the Questions 27, 28 and 29 given below:
1st January 31st December
` `
Inventories of raw materials 17,400 18,100
Work-in-progress 11,200 11,400
Inventories of finished goods 41,500 40,700
During the year manufacturing overhead expenses amounted ` 61,100, manufacturing wages
` 40,400 and purchase of raw materials ` 91,900. There were no other direct expenses.
27. The cost of raw materials consumed, issued and used were:
(a) ` 1,09,300 (b) ` 91,200 (c) ` 91,900 (d) ` 92,600.
28. The manufacturing cost of finished goods produced were:
(a) ` 1,31,600 (b) ` 1,93,300 (c) ` 1,91,900 (d) ` 1,92,500.

FUNDAMENTALS OF ACCOUNTING 6.55

© The Institute of Chartered Accountants of India

 FINAL ACCOUNTS OF MANUFACTURING ENTITIES

29. The manufacturing cost of finished goods sold was:

(a) ` 1,91,700 (b) ` 1,92,500 (c) ` 1,94,000 (d) ` 1,93,300.
30. Capital is the difference between
(a) Income and expenses
(b) Sales and Cost of goods sold
(c) Assets and liabilities
(d) None of the above

ANSWERS
1. (c) 2. (a) 3. (b) 4. (c) 5. (b) 6. (a) 7. (b)
8. (c) 9. (d) 10. (b) 11. (b) 12. (b) 13. (c) 14. (a)
15. (d) 16. (c) 17. (d) 18. (d) 19. (a) 20. (c) 21. (b)
22. (a) 23. (d) 24. (a) 25. (d) 26. (b) 27. (b) 28. (d)
29. (d) 30. (c)

6.56 COMMON PROFICIENCY TEST

© The Institute of Chartered Accountants of India