If a debtor becomes insolvent and only 60 paise in a rupee is recovered from his debt of Rs 5,000, the Bad Debts account is debited by: MCQ with Answer and Explanation

Question

If a debtor becomes insolvent and only 60 paise in a rupee is recovered from his debt of Rs 5,000, the Bad Debts account is debited by:

A. Rs 3,000

B. Rs 5,000

C. Rs 8,000

D. Rs 2,000

Answer: Option D

Solution (By JKSSB Mock Tests)

Amount recovered = 60% of 5,000 = Rs 3,000. The irrecoverable amount (Bad Debt) is 40% of 5,000 = Rs 2,000.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

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The 'Subsequent Events' in audit refer to:

A. All future events

B. Events before the balance sheet date

C. Events after auditor's report

D. Events occurring between the balance sheet date and date of auditor's report

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Correct Answer: Option D

Explanation:
Auditors consider events after the reporting period up to the date of the report.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #2

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A firm has an average profit of ₹50,000, normal rate of return 10%, capital employed ₹4,00,000. Goodwill by capitalization of super profit method (if capitalized at 10%) will be:

A. ₹10,000

B. ₹2,00,000

C. ₹1,00,000

D. ₹50,000

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Correct Answer: Option C

Explanation:
Normal profit = 10% of 4,00,000 = 40,000. Super profit = 50,000 - 40,000 = 10,000. Goodwill by capitalization of super profit = 10,000 / 10% = ₹1,00,000.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping