1. What is final statement of affairs?

After ascertaining profit, a final statement of affairs is prepared at the end of the period by incorporating the adjustment of depreciation, provision for bad debts etc. This is called the final statement of affairs.

2. Give a proforma for final statement of adjustment.

           Liabilities                                     Amount                                          Asset                                          Amount

Opening capital                          xxx                                                   Plant & Machinery               xx

(+) New capital introduced        xx                                                   (-) depreciation                    xx                  xxx            

(+) Profit of the year                    xx                                                    Furniture                               xx

                                                     xxx                                                    (-) depreciation                  xx                  xxx

(-) drawing                                   xx               xxx                                Debtors                                 xx                   

Creditors                                                        xxx                               (-) pro  for bad debts            xx                  xxx

                                                                                                              Stock                                                           xxx

                                                                                                              Cash at bank                                             xxx

                                                                                                              Cash in hand                                             xxx

                                                                          ______                                                                                        _____

                                                                              xxx                                                                                                xxx

3. Differentiate between balance sheet and statement of affairs.

4. What you understand by the term conversion method?

Incomplete records fail to provide all information to final accounts and balance sheet.  In order to prepare final accounts from incomplete records, find out the missing figures by making further computations and adjustment to the available information.

5. Explain the term credit sale.

The amount received from the debtors is not necessarily equal to the actual sales. Some of the money received is used to settle the amount owed by debtors at the start of the year [For goods sold in previous financial year]. Money is owed by the debtors at the end of the year for goods sold during the present financial year.

6. How do you find out total sales if cash sales and  credit sales are given?

  Credit sale   +  Cash  sale    =  Total sales

7. What is credit purchase?

The amount paid to the creditors is not necessarily equal to the actual purchase. Some of the money paid is to settle the amount owed to creditors at the start of the year(for goods brought in the previous financial year).

8. Explain the term total purchases.

Total purchases of goods and services include the value of all goods and services purchased during the accounting period for resale or consumption in the production process, excluding capital goods (the consumption of which is registered as consumption of fixed capital).

Cash purchase  + credit purchase   = Total purchase.

9. What do you mean by margin?

The margin is the gross profit measured as a percentage of selling price.

10. Explain the term mark -up.

The mark-up is the gross profit measured as a percentage of the cost price.

11. What is stock-turn over?

Stock turnover is an accounting term used to describe the measure of how well a company converts stock into revenues. It is the total value of stock sold in a year divided by the average value of goods held in stock. It is also called inventory turnover.

12. By how many methods can we express gross profit?

There are two methods by which we can express gross profit- as margin (on selling price)  and as  as mark-up  (on cost price).