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The correct answer of this question is (C), as by using the formula of Cost of Goods Sold (Cost Of Sales) , we get the value of $25,000 as shown below: Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory Inventory of the beginning of the year is called Beginning Inventory while Inventory on 31st December is called Ending Inventory which is the goods remain unsold at the end of the accounting year. Given: Here Opening / Beginning Inventory = $10,000  |  Purchases for the year = $20,000 |  Closing / Ending Inventory = $5,000 By putting the values in the above formula, we have: Cost of Goods Sold = $10,000 + $20,000 - $5,000 Cost of Goods Sold = $25,000 So, the cost of sales for the period is $25,000.

This statement is “False” as the Current Ratio is calculated by dividing Current Assets by Current Liabilities .    Current Ratio  =   Current Assets / Current Liabilities Current assets include Cash and Cash Equivalents, Accounts Receivables, Prepaid Expenses and Accrued Revenues Current liabilities include Accounts Payable, Accrued Expenses / Outstanding Expenses and Unearned Revenues. Current ratio is expressed in terms of percentage. Example: A company doing a retail business. From the financial statement of the company, Current Assets are $3000, Current Liabilities are $200. What is the current ratio? Given:                  Current Assets = $3000 | Current Liabilities = $2000 Find: Current Ratio = ? We know the formula as shown below:                               Current Ratio =  Current Assets / Current Liabilities   ...

The correct answer of this multiple choice question is A, as we made disbursements by check / cheque i.e., the Cash is paid out either to purchase goods or services or paid to suppliers / vendors for goods or services purchased on credit / account. The possible entries to record for disbursements by check are shown below (a) If Goods Or Services Purchased By Check / Cheque                       Purchases a/c  XXX                                                   Cash a/c  / Bank a/c  XXX                  (Disbursements Made By Check To Buy Goods Or Services) a) If Payments Made To Vendor                             Accounts Payable a/c  XXX         ...

Solution To True Or False Question With A Simple Example The statement is “False”, as when Collection from Receivable is made, then there is an increase in cash account, which is a Current Asset , due to which total assets increase but at the same time, Accounts Receivable , which is a Current Asset, is decreasing which decreases total assets. So the total assets remain unchanged due to increase in cash account and decrease in account receivable account with an equal amount. Example: The company received cash of $5,000 from its customer. The entry to record is to debit cash account of $5,000 and credit Account Receivables of $5,000. From Accounting Equation, we have: Change In Total Assets  = Increase In Assets (Cash)  -  Decrease In Assets (Account Receivable)    Change In Total Assets  =              $5,000                       -      ...

Cash short and over situation arises in case of petty cash payments and receipts and normal cash transactions. To replenish petty cash account and cash account, cash over and short account is prepared by recording the entry in both cases whether there is cash shortage or cash overage situation. Let’s Explain The Cash Short And Over Situation With The Help Of An Example: Suppose, a shoe company’s cashier received $490 from customer for shoes (sale price = $500) sold but the cashier mistakenly used the accounting software to record the entry in the books of accounts as $500 as it is the actual price stored in the accounting software. Now there is a difference between the actual amount received ($490) and the expected amount recorded in the ledger ($500). So, there is a difference of $10 which is charged to cash over and short account as an expense account. The journal entry to record is shown below: (a). In Case Of Cash Shortage                ...