Solution
In the Books of Mr. Pankaj
Manufacturing Account
for the year ended on 31.3.2009
Dr. Cr.
Particulars Amount Particulars Amount
Rs. Rs. Rs.
To Opening W.I.P. 3,90,000 By Closing W-I-P 5,07,000
To Raw Material Consumed: By By - products 20,000
Opening Stock 3,02,000 By Trading A/c- 17,81,000
Purchases 12,10,000 Cost of
finished goods
15,12,000 transferred
Less: Return 18,000
14,94,000
Less: Closing Stock 3,10,000 11,84,000
To Direct Wages 2,10,000
To Direct expenses:
Royalty 1,30,000
To Manufacturing Overhead:
Indirect Material 16,000
Indirect Wages 48,000
Repairs & Maintenance 2,30,000
Depreciation on
Factory Shed 40,000
Depreciation on Plant &
Machinery 60,000 3,94,000
23,08,000 23,08,000
FUNDAMENTALS OF ACCOUNTING 6.51
Copyright -The Institute of Chartered Accountants of India
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. Stock 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, 2009 and purchased goods costing
Rs. 90,000 during the year. A sum of Rs. 6,000 was spent on freight inwards. At the
end of the year the cost of goods still unsold was Rs. 12,000. Sales during the year
Rs. 1,20,000. What is the gross profit earned by the firm?
(a) Rs. 36,000 (b) Rs. 30,000 (c) Rs. 42,000 (d) Rs. 38,000
6.52 COMMON PROFICIENCY TEST
Copyright -The Institute of Chartered Accountants of India
7. From the following figures ascertain the gross profit:
Rs.
Opening stock (1.1.2009) 25,000
Goods purchased during 2009 1,30,000
Freight and packing on above 5,000
Closing Stock (31.12.2009) 15,000
Sales 1,90,000
Selling expenses on sales 9,000
(a) Rs.36,000 (b) Rs. 45,000 (c) Rs. 50,000 (d) Rs.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 Rs. 4,00,000; cost of goods sold is Rs. 3,10,000 and operating expenses
are Rs.60,000, the gross profit is
(a) Rs. 30,000. (b) Rs. 90,000. (c) Rs. 3,40,000. (d) Rs. 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 Rs. 2,000 and the rate of gross profit on cost of goods sold is 25%, then the cost of
goods sold will be
(a) Rs. 2,000. (b) Rs. 1,500. (c) Rs. 1,600. (d) None of the above.
14. Sales for the year ended 31st March, 2009 amounted to Rs. 10,00,000. Sales included
goods sold to Mr. A for Rs. 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 stock. (c) Goods in transit. (d) Sales return.
FUNDAMENTALS OF ACCOUNTING 6.53
Copyright -The Institute of Chartered Accountants of India
FINAL ACCOUNTS OF MANUFACTURING ENTITIES
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.
(c) fixed assets being purchased on credit.
(d) wages being paid in cash.
16. Rent paid on 1st October, 2008 for the year to 30 September, 2009 was Rs. 1,200 and
rent paid on 1st October, 2009 for the year to 30 September, 2010 was Rs. 1,600. Rent
payable, as shown in the profit and loss account for the year ended 31 December 2009,
would be:
(a) Rs. 1,200. (b) Rs. 1,600. (c) Rs. 1,300. (d) Rs. 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
Stock Stock goods sold Profit Expenses Profit
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
15,000 6,000 10,000 ? 9,000 ? 4,000 ?
18. The value of closing stock is
(a) Rs. 9,000 (b) Rs.4,000 (c) Rs.8,000 (d) Rs. 7,000
19. Gross profit will be
(a) Rs. 6,000 (b) Rs. 5,000 (c) Rs.8,000 (d) Rs. 7,000
20. Net profit will be
(a) Rs. 6,000 (b) Rs. 5,000 (c) Rs. 2,000 (d) Rs. 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)
Rs. Rs. Rs. Rs. Rs.
16,000 Nil 3,000 13,500 ?
21. The net profit will be
(a) Rs. 600 (b) Rs. 500 (c) Rs. 550 (d) Rs. 700
22. If in the given information, Net Loss is Rs. 1,000, then the investment made by the proprietor
during the year will be
(a) Rs.1,500 (b) Rs. 2,000 (c) Rs. 1,200 (d) Rs. 1,700
6.54 COMMON PROFICIENCY TEST
Copyright -The Institute of Chartered Accountants of India
From the given information, choose the most appropriate answer for Questions 23 and 24:
Rs. Rs.
Opening Stock 20,000 Carriage on sales 3,000
Closing Stock 18,000 Rent of Office 5,000
Purchases 85,800 Sales 1,40,700
Carriage on purchases 2,300
23. Gross profit will be
(a) Rs. 50,000 (b) Rs. 47,600 (c) Rs. 42,600 (d) Rs. 50,600
24. Net profit will be
(a) Rs. 42,600 (b) Rs. 50,600 (c) Rs. 45,600 (d) Rs. 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
2009 2009 2009
Rs. Rs. Rs.
Opening stock 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, 2009 is:
(a) Rs. 15,20,000 (b) Rs. 14,02,500 (c) Rs. 12,75,000 (d) Rs. 13,60,000
26. Stock purchased in July, 2006 is :
(a) Rs. 16,05,000 (b) Rs. 14,74,400 (c) Rs. 14,40,000 (d) Rs. 13,82,500
Considering the following information answer the Questions 27, 28 and 29 given below:
1st January 31st December
Rs. Rs.
Stock of raw materials 17,400 18,100
Work-in-progress 11,200 11,400
Stock of finished goods 41,500 40,700
During the year manufacturing overhead expenses amounted Rs. 61,100, manufacturing
wages Rs. 40,400 and purchase of raw materials Rs. 91,900. There were no other direct
expenses.
FUNDAMENTALS OF ACCOUNTING 6.55
Copyright -The Institute of Chartered Accountants of India
FINAL ACCOUNTS OF MANUFACTURING ENTITIES
27. The cost of raw materials consumed, issued and used were:
(a) Rs. 1,09,300 (b) Rs. 91,200 (c) Rs. 91,900 (d) Rs. 92,600.
28. The manufacturing cost of finished goods produced were:
(a) Rs. 1,31,600 (b) Rs. 1,93,300 (c) Rs. 1,91,900 (d) Rs. 1,92,500.
29. The manufacturing cost of finished goods sold was:
(a) Rs. 1,91,700 (b) Rs. 1,92,500 (c) Rs. 1,94,000 (d) Rs. 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
Copyright -The Institute of Chartered Accountants of India
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