What is a major limitation of determining profit from incomplete records?
Correct answer: C. It may be affected by inaccurate asset and liability values
- A. It always excludes cash transactions
- B. It cannot use any information about assets
- C. It may be affected by inaccurate asset and liability values
- D. It automatically records every business expense
Explanation
Profit under incomplete records depends on the accuracy of opening and closing assets and liabilities. If an asset is overvalued or a liability is omitted, the calculated capital and profit may be misstated.
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About Incomplete Records
Incomplete records require profit and financial position to be reconstructed when a complete double-entry system is unavailable. Methods include statements of affairs, capital comparisons, control accounts, cash summaries and margin calculations to find missing sales, purchases, expenses, assets, liabilities and drawings, while distinguishing business profit from changes in capital.
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34 free Incomplete Records MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
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More Incomplete Records questions
A trader’s capital increases from Rs. 300,000 to Rs. 360,000 during the year. The trader withdraws Rs. 50,000 and introduces additional capital of Rs. 20,000. What is the result for the year?
When a complete cash book is available but other records are incomplete, which item can be established directly from the cash book?
Opening creditors are Rs. 18,000, cash paid to suppliers is Rs. 60,000, returns outward are Rs. 4,000, and closing creditors are Rs. 24,000. What are the credit purchases?
A trader receives Rs. 260,000 in cash during the year. This includes Rs. 190,000 from debtors, Rs. 25,000 from the sale of equipment, and Rs. 15,000 as a loan. What are the cash sales?
A trader has cost of goods sold of Rs. 280,000 and earns a gross profit equal to 20% of sales. What are the sales?
A business pays Rs. 90,000 for an expense during the year. The expense payable is Rs. 12,000 at the beginning and Rs. 18,000 at the end. What is the expense for the year?