Creditors

Q.

The following is the trial balance of Ram Krishan Vyas on 31st March, 2016.
$$\begin{array}{cccc}\text{Name of Accounts}& \text{Amt.(Rs.)}& \text{Name of Accounts}& \text{Amt(Rs.)}\\ \text{Plant and Machinery}& 19,720& \text{Capital}& 80,000\\ \text{Manufacturing Wages}& 34,965& \text{Creditors}& 50,160\\ \text{Salaries}& \text{10, 135}& \text{Bank Loan}& 10,000\\ \text{Furniture}& 9,480& \text{Purchases Return}& 1,140\\ \text{Freight on purchase}& 1,980& \text{Sales}& 2,46,850\\ \text{Freight on Sales}& 2,150& \text{Provision for Bad Debts}& 6,000\\ \text{Building}& 25,000& & \\ \text{Manufacturing Expenses}& 9,455& & \\ \text{Fuel and power}& 1,276& & \\ \text{Electricity (Factory)}& 986& & \\ \text{Insurance and Taxes}& 4,175& & \\ \text{Goodwill}& 30,000& & \\ \text{Rent}& 2,400& & \\ \text{Debtors}& 78,140& & \\ \text{Stable Expenses}& 2,473& & \\ \text{Opening Stock}& 34,170& & \\ \text{Horses and Carts}& 5,165& & \\ \text{Purchases}& 97,165& & \\ \text{Sales Return}& 3,170& & \\ \text{General Expenses}& 8,000& & \\ \text{Bad Debts}& 1,485& & \\ \text{Interest and Bank Charges}& 475& & \\ \text{Advertising}& 4,500& & \\ \text{Bank Balance}& 7,540& & \\ \text{Cash}& 145& & \\ & \underset{–}{}& & \underset{–}{}\\ & 3,94,150& & 3,94,150\\ & \underset{–}{}& & \underset{–}{}\end{array}$$

Prepare trading and profit and loss account and balance sheet after making the following adustments.
(i) Value of closing stock Rs. 29, 638.
(ii) Depreciate plant and machinery @ 10% furniture @ 5% and horses and carts by Rs. 1, 000 also write off goodwill by Rs. 3, 000.
(iii) Provide 5% for doubtful debts on debtors.
(iv) Prepaid expenses: Insurance Rs. 300 and taxes Rs. 190.
(v) $\frac{3}{5}th$ of insurance and taxes, rent and general expenses to be charged to factory and the balance to the office.
(vi) Adverstising is to be written off over 3 years.
(vii) Commission to manager @ 10% on net profit after changing such commission.

Q.

On January 1, 2011, Neha sold goods for Rs. 20, 000 to Muskan and drew upon her a bill of exchange payable after two months. One month before the maturity of the bill Muskan approached Neha to accept the payment against the bill at a rebate at the rate of 12% per annum. Neha agreed to the request of Muskan and Muskan retired the bill under the agreed rate of rebate. Journalise the above transaction in the books of Neha and Muskan.

Q.

Which of the following are not valid with regard to the creditors of any organisation?

1. Creditors are the assets of the company

2. If the business buys goods/services on credit and amount is still to be paid to the persons and/or other entities, these are called creditors

3. Creditors are the liabilities of the company

4. Creditors are increased if the goods are bought on credit

Q.

Mr. Piyush has started a new business. He will be getting a business credit card. He will use this credit card to make purchases for his business. This credit card is a type of:

1. Secured Loan

2. Debtor

3. Unsecured Loan

4. Creditor

Q.

Mr. Ram has a business of selling shoes. He bought goods worth Rs 50, 000 on credit from Mr. Ajay. Also, he borrowed a sum of Rs 1, 00, 000 from his friend Mr.Shyam. What would be the amount of creditors which wil be recorded in his books?

1. Rs 1, 00, 000

2. Rs 50, 000

3. Rs 1, 50, 000

4. Rs 2, 00, 000

Q. A, B and C are partners sharing profits in equal ratio. Capital balances on 1st July, 2014 are A - Rs. 20, 000, B - Rs. 10, 000 and C - Rs. 10, 000. Their private properties are : A - 15, 000, B - Rs. 7, 000 and C - 1, 500. What is the extent of their liability in the firm ?

1. A - Rs. 40, 000; B - Rs. 30, 000; C - Rs. 20, 000
2. A - Rs. 15, 000; B - Rs. 22, 000; C - Rs. 20, 000. Their private properties are: A - Rs. 1, 5000, B - Rs. 7000 and C - Rs. 7, 000 and C - Rs. 1, 500.
3. A - Rs. 35, 000; B - Rs. 17, 000; C - Rs. 11, 500
4. Equal

Q.

Which of the following shall have effect on the creditors of the business?

1. Goods purchased from Mr. Ram Rs 20, 000 for cash

2. Goods purchased from Mr. Ram Rs 20, 000 for which payment is due next month

3. Furniture for use in office, purchased on credit

4. Goods sold for Rs 20, 000 for which the payment shall be received next month

Q.

Mr.Minaal has a grocery shop. He purchased vegetables from a farmer in Haryana for a value of Rs 40, 000 on 21st March 2018. Payment for the same has not been done until 31st March 2018. In the balance sheet of Mr.Minaal, the farmer will be shown as:

1. Asset

2. Debtor

3. Lender

4. Creditor

Q. Accounts Payable is classified as ________.

1. Expenses
2. Fixed Liability
3. Current liabilities
4. Revenue

Q. Creditors are considered as an asset of a business entity

1. False
2. True

Q. Answer the following question in 100 – 120 words :

Q. what is the journal entry of cheque endorsement?