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Examination Question

Q1. When a large number of articles are sent frequently on a sale or return basis, it is necessary to maintain
(a) Sale journal
(b) Goods returned journal
(c) Sale or return journal
(d) None of the above.

View Answer

Answer: (c) Sale or return journal

Q2. On 31st December, 2011 goods sold at a sale price of Rs.30,000 were lying with customer, Mohan to whom these goods were sold on ‘approval or return basis’ and recorded as actual sales. Since no consent was received from Mohan, the adjustment entry was made, presuming goods were sent on approval at a profit of cost plus 20%. In the balance sheet, the Inventories with customers account will be shown at Rs.
(a) 30,000.
(b) 24,000.
(c) 20,000.
(d) 25,000.

View Answer

Answer: (d) 25,000.

Q3. A sent some goods costing Rs.3,500 at a profit of 25% on sale to B on sale or return basis. B returned goods costing Rs.800. At the end of the accounting period i.e. on 31st December, 2011, the remaining goods were neither returned nor were approved by him. The Inventories on approval will be shown in the balance sheet at Rs.
(a) 2,000.
(b) 2,700.
(c) 2,700 less 25% of 2,700.
(d) 3,500.

View Answer

Answer: (b) 2,700.

Q4. A merchant sends out his goods casually to his dealers on approval basis. All such transactions are, however, recorded as actual sales and are passed through the sales book. On 31-12-2011, it was found that 100 articles at a sale price of 200 each sent on approval basis were recorded as actual sales at that price. The sale price was made at cost plus 25%. The amount of Inventories on approval will be amounting
(a) Rs.16,000.
(b) Rs.20,000.
(c) Rs.15,000.
(d) None of the above.

View Answer

Answer: (a) Rs.16,000.

Q5. Umesh sends goods on approval basis as follows:
Date
January, 2011
Customer’s NameSale Price of
Goods Sent
Rs.
Goods Accepted
Rs.
Goods Returned
Rs.
8
10
15
22
Anna
Babu
Chandra
Desai
3.500
2,800
3,680
1,260
3,000
2,800
1,000
500
3,680
260
The Inventories of goods sent on approval basis on 31st January will be
(a) Rs.500.
(b) Nil.
(c) Rs.260.
(d) None of the above.

View Answer

Answer: (b) Nil.

Q6. A company sends its cars to dealers on ‘sale or return’ basis. All such transactions are however treated like actual sales and are passed through the sales day book. Just before the end of the financial year, two cars which had cost Rs.55,000 each have been sent on ‘sale or return’ and have been debited to customers at Rs.75,000 each, cost of goods lying with the customers will be
(a) Rs.1,10,000.
(b) Rs.55,000.
(c) Rs.75,000.
(d) None of the above.

View Answer

Answer: (a) Rs.1,10,000.

Q7. A trader has credited certain items of sales on approval aggregating Rs.60,000 to Sales Account. Of these, goods of the value of Rs.16,000 have been returned and taken into Inventories at cost Rs.8,000 though the record of return was omitted in the accounts. In respect of another parcel of Rs.12,000 (cost being Rs.6,000) the period of approval did not expire on the closing date. Cost of goods lying with customers should be
(a) Rs.12,000.
(b) Rs.54,000.
(c) Rs.6,000.
(d) None of the above.

View Answer

Answer: (c) Rs.6,000.

Q8. Under sales on return or approval basis, the ownership of goods is passed only
(a) when the retailer gives his approval
(b) if the goods are not returned within specified period.
(c) Both (a) and (b)
(d) None of the above

View Answer

Answer: (c) Both (a) and (b)

Q9. Under sales on return or approval basis, when transactions are few, the seller, while sending the goods, treats them as
(a) an ordinary sale but no entry is passed in the books
(b) an ordinary sale and entry for normal sale is passed in the books
(c) Approval sale and no entry is passed
(d) None of the above

View Answer

Answer: (b) an ordinary sale and entry for normal sale is passed in the books

Q10. Under sales on return or approval basis, when transactions are few and the seller at the end of the accounting year reverse the sale entry, then what will be the accounting treatment for the goods returned by the customers on a subsequent date?
(a) No entry will be passed for such return of goods
(b) Entry for return of goods is passed by the seller
(c) Only the Inventories account will be adjusted
(d) None of the above

View Answer

Answer: (a) No entry will be passed for such return of goods

Q11. Which of the following is not a main column of sales or return journal?
(a) goods sent on approval column
(b) goods returned column
(c) goods approved column
(d) purchase column

View Answer

Answer: (d) purchase column

Q12. Sale or Return Day Book and Sale or Return Ledger are known as
(a) principal books
(b) subsidiary books
(c) memorandum books
(d) none of the above

View Answer

Answer: (c) memorandum books

Q13. In the Sale or Return Ledger
(a) all the customers are individually debited and the sale or return account is credited with the periodical total of the Sale or Return Day Book.
(b) all the customers are debited in total and the sale or return account is credited with the periodical total of the Sale or Return Day Book.
(c) all the customers are individually debited and the sale or return account is also credited with the individual total of the Sale or Return Day Book.
(d) None of the above.

View Answer

Answer: (a) all the customers are individually debited and the sale or return account is credited with the periodical total of the Sale or Return Day Book.

Q14. When the goods are returned by the customers within the specified time, they are recorded
(a) initially in the Sale or Return Ledger. Thereafter, in the Sale or Return Day Book
(b) initially in the Sale or Return Day Book. Thereafter, in the Sale or Return Ledger
(c) only in the Sale or Return Day Book
(d) only in the Sale or Return Ledger

View Answer

Answer: (b) initially in the Sale or Return Day Book. Thereafter, in the Sale or Return Ledger

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