What is the primary purpose of Past Adjustments in accounting?
B
Correct Answer: To correct incorrect transactions previously recorded in the books of accounts.
Past Adjustments are done for correcting the incorrect transactions recorded in the books of accounts.
Question 2
If an appropriation of profit was completely forgotten (not passed), what is the rectification step?
B
Correct Answer: Pass the correct entry.
Where an entry was not passed (forgotten), the rectification involves simply passing the correct entry.
Question 3
When an incorrect entry for appropriation of profits has been passed, what are the two main steps for rectification?
B
Correct Answer: Reverse the incorrect entry, then pass the correct entry.
Where an incorrect entry was passed, the correction involves first reversing the incorrect entry and then passing the correct entry.
Question 4
Which of the following is an example of an error related to appropriation of profits that requires past adjustment?
B
Correct Answer: Interest on capital paid @ 5% instead of 7%.
An example of an error related to appropriation of profits is when Interest on Capital was paid at a wrong rate, like 5% instead of 7%.
Question 5
If "no salary was payable but was wrongly paid to partner B," this is an example of which type of error in appropriation?
D
Correct Answer: Appropriation not to be made but paid.
This scenario falls under the type of error where an appropriation was not supposed to be made but was wrongly paid.
Question 6
Commission was payable to partner A, but not paid due to oversight is an example of what kind of past adjustment error?
C
Correct Answer: Appropriation to be made but not paid.
This describes a situation where an appropriation (commission) was due but was omitted.
Question 7
What is the first step for Past Adjustments, where a single adjustment entry is passed?
B
Correct Answer: Prepare an Adjustment table.
Where adjjustment to be done through a single entry, the first step is to prepare an Adjustment table.
Question 8
In the Adjustment Table , if the "Firm (P&L Appr A/c)" column does not have equal debit and credit totals, what action is required?
B
Correct Answer: Write the difference on the shorter side of the firm column to match totals.
If the firm column in the adjustment table does not match, the difference is written on the shorter side to balance it.
Question 9
How is the difference in the "Firm (P&L Appr A/c)" column from the Adjustment Table distributed among partners ?
C
Correct Answer: In their correct profit sharing ratio, on the reverse side in the partner capital columns.
The difference in the firm column is distributed to the partners' capital accounts on the reverse side, according to their correct profit sharing ratio.
Question 10
When using Method of passing multiple journal entries for Past Adjustments , what new account is typically opened?
B
Correct Answer: Profit and Loss Adjustment A/c.
When multiple adjustment entries are passed , a new account called 'Profit and Loss Adjustment A/c' is opened.
Question 11
In Method of past adjustments where multiple entries are passed, then while passing journal entries, which account replaces 'P&L Approprition A/c'?
C
Correct Answer: Profit and Loss Adjustment A/c.
In the method where multiple journal entries are passed for rectification in appropriations, we write 'P&L Adjustment A/c' in place of 'P&L Appr A/c'.
Question 12
If Interest on Capital was omitted (not paid), what would be the rectification entry, when method of passing multiple entries for rectification is followed?
B
Correct Answer: Profit and Loss Adjustment A/c Dr. To Partner Capital A/c.
For omitted items like Interest on Capital, the rectification entry would be debit Profit and Loss Adjustment A/c and credit Partner Capital A/c.
Question 13
Where mltiple entries for rectification is followed then after passing all individual rectification entries , what is the next step regarding the Profit and Loss Adjustment A/c?
B
Correct Answer: Prepare the Profit and Loss Adjustment A/c and find its balance.
After passing all entries, the next step is to prepare the Profit and Loss Adjustment A/c to find its balance.
Question 14
If the Profit and Loss Adjustment A/c has a higher debit side, what is the final journal entry for the difference?
B
Correct Answer: Partner Capital A/c Dr. To Profit and Loss Adjustment A/c.
If the Profit and Loss Adjustment A/c has a higher debit side, it is credited in the journal, and Partner Capital A/c is debited.
Question 15
What is the primary reason past adjustments are called "adjustments"?
B
Correct Answer: Because they are corrections to mistakes made in the past.
Past adjustments are named so because they involve correcting a mistake that was done in the past.
Question 16
A, B, and C were partners sharing profits in the ratio of 1:1:1. The profits were, however, wrongly distributed in the ratio of 3:2:1. This is an example of what type of error?
C
Correct Answer: Profit distribution made in incorrect ratio.
This scenario directly illustrates an error where profit distribution was made in an incorrect ratio.
Question 17
In the adjustment table , partner A debit total was higher than his credit total. In the rectification entry :
A
Correct Answer: Partner A Capital A/c will be debited
If the total of debit side is higher than total of credit side then that partner capital A/c is debited in the rectification entry
Question 18
With respect to the adjustment table, after all rectifications are entered, which of the following is true
C
Correct Answer: Debit total should be equal to credit total
In the adjustment table , after all the rectifications are entered, the debit side should be equal to the credit total.
Question 19
In case fixed capital methods are followed, the journal entry for past adjustments is entered in
B
Correct Answer: Partner Current A/c
When fixed capital method is followed, the past adjustment journal entry Is made in partner current as it is related to errors in profit appropriation
Question 20
If the partnership firm forgot to pay interest on drawings to the partners, then in the adjutsment table, entry is made on which side of partner capital A/c column
A
Correct Answer: debit side
If the partnership firm forgot to pay interest on drawings to the partners, then in the adjutsment table, entry is made on debit side of partner capital A/c column. This is because the partner capital will decrease due to payment of interest on drawings
