Chapter MCQ Test 2 — Accounts from Incomplete Records
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
Closing capital Rs 1,40,000; drawings Rs 30,000; fresh capital Rs 20,000; opening capital Rs 1,00,000. The profit is:
Rs 50,000
Rs 40,000
Rs 70,000
Rs 30,000
Explanation: 1,40,000 + 30,000 − 20,000 − 1,00,000 = 50,000.
Question 2 of 10
After computing profit by the net worth method, the question says 'charge depreciation Rs 5,000 and interest on capital Rs 3,000'. The adjusted profit falls by:
Rs 8,000
Rs 2,000
Nil
Rs 5,000 only
Explanation: Both depreciation and interest on capital are expenses, reducing profit by 5,000 + 3,000 = 8,000.
Question 3 of 10
Why does the statement of affairs method give only an approximate profit?
Assets/liabilities are often estimated and it shows no detail of sales or expenses
It uses double entry
It is illegal
It ignores capital
Explanation: With incomplete data and no Trading/P&L detail, it yields only the net change in capital.
Question 4 of 10
Opening debtors 40,000; closing debtors 55,000; cash received from debtors 2,10,000; bad debts 5,000; no returns. Credit sales =
Rs 2,30,000
Rs 2,25,000
Rs 2,20,000
Rs 2,35,000
Explanation: Credit sales = closing 55,000 + cash 2,10,000 + bad debts 5,000 − opening 40,000 = 2,30,000.
Question 5 of 10
Two firms show the same rise in capital, but one introduced heavy fresh capital. Without adjusting fresh capital, its profit would be:
Overstated
Understated
Correct
Zero
Explanation: Fresh capital inflates closing capital; not subtracting it overstates the apparent profit.
Question 6 of 10
A statement of affairs differs from a balance sheet mainly because it is:
Based on estimates from incomplete records, not a full ledger
Always larger
Prepared by the bank
An income statement
Explanation: It is drawn up from incomplete records with estimated figures, so it is less reliable than a true balance sheet.
Question 7 of 10
The conversion method is preferred over the net worth method when the owner needs:
Detailed results — gross profit, net profit and full position
Only the capital
To avoid final accounts
Less work
Explanation: Conversion rebuilds full accounts, revealing how the profit arose, not just its amount.
Question 8 of 10
Opening creditors 30,000; closing creditors 25,000; cash paid to creditors 1,50,000; no returns. Credit purchases =
Rs 1,45,000
Rs 1,55,000
Rs 1,50,000
Rs 1,25,000
Explanation: Credit purchases = closing 25,000 + cash paid 1,50,000 − opening 30,000 = 1,45,000.
Question 9 of 10
Single entry records are NOT acceptable to tax authorities and banks chiefly because they:
Are incomplete and cannot be reliably verified
Are too long
Use double entry
Show too much profit
Explanation: Incomplete, unverifiable records cannot give the assurance lenders and tax officers require.
Question 10 of 10
If only a statement of affairs at the start and end is available (no cash details), the suitable method is the:
Net worth (statement of affairs) method
Conversion method
Double entry only
Imprest method
Explanation: Without transaction detail you can only compare opening and closing capital — the net worth method.