When Shares Are Allotted,or a Call Made on Them,allotment and Call

question 66

Multiple Choice

When shares are allotted,or a call made on them,allotment and call accounts are created respectively.What is the nature of these accounts and how are they to be disclosed in the financial statements?

• A) The accounts are similar in nature to an account receivable and are to be disclosed in the statement of financial position as a current asset.
• B) The accounts are similar to a future income benefit and are to be separately disclosed as assets in the statement of financial position.
• C) The accounts are similar to an account receivable and are disclosed in the statement of financial position as a reduction against share capital.
• D) The accounts are in the nature of a deferred income and are disclosed as a provision for future cash inflows in the statement of financial position.

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Definitions:

Operations

The day-to-day activities required for the continued functioning of a business, focusing on producing goods or providing services.

Weighted-Average Method

An inventory costing method that assigns the same cost to each unit, calculated as the total cost of goods available for sale divided by the total units available.

Process Costing

A method of costing used for homogenous products, where costs are accumulated over a period and assigned to units of output on an average basis.

Conversion Costs

The total cost of direct labor and overhead incurred in the process of converting raw materials into finished goods.