FINANCIAL & MANAGEMENT ACCOUNTING BASIC ACCOUNTING CONCEPTS, CAPITAL AND REVENUE EXPENDITURE AND FINAL ACCOUNTS 1. Proper and systematic keeping or maintenance of the books of accounts is known as ________. a. Accounting b. Costing Accounting c. Book Keeping d. Accountancy 2. _______________ is an art of identifying, classifying, recording, summarizing and interpreting business transactions of financial nature. a. Accounting b. Costing Accounting c. Book Keeping d. Accountancy 3. The expenditure for which payment has been made or a liability incurred by which is carried forward on the presumption that it will be of benefit over a subsequent period or periods, is known as ___________. a. Deferred Revenue Expenditure b. Revenue Expenditure c. Capital Expenditure d. All of the above 4. Information in financial reports is based on ___________ transactions. a. Accounting b. Economic c. Financial d. Business 5. Internal users are the __________ of the business entity. a. Management/Employees b. Investors c. Creditors d. Income Tax Department 6. A _________ would most likely use an entities financial report to determine whether or not the business entity is eligible for a loan. a. Debtor b. Shareholder c. Creditor d. All of the above 7. Which of the following is not a business transaction? a. Bought furniture of 10,000 for business b. Paid for salaries of employees 5,000 c. Paid sons fees from her personal bank account 20,000 d. Paid sons fees from the business 2,000 8. Deepti wants to buy a building for her business today. Which of the following is the relevant data for his decision? a. Similar business acquired the required building in 2009 for 10,00,000 b. Building cost details of 2012 c. Building cost details of 2007 d. Similar building cost in August, 2014 25,00,000 Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
9. Which is the last step of accounting as a process of information? a. Recording of data in the books of accounts b. Preparation of summaries in the form of financial statements c. Communication of information d. Analysis and interpretation of information 10. Which qualitative characteristics of accounting information are reflected when accounting information is clearly presented? a. Understandability b. Relevance c. Comparability d. Reliability 11. Use of common unit of measurement and common format of reporting promotes: a. Understandability b. Relevance c. Comparability d. Reliability 12. If a firm believes that some of its debtors may default, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ______________ concept. a. Business Entity b. Conservatism c. Matching d. Going concern 13. The fact that a business is separate and distinguishable from its owner is best exemplified by the ________ concept. a. Business Entity b. Conservatism c. Matching d. Going concern 14. A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the _________. a. Business Entity b. Dual Aspect c. Conservatism d. Going concern 15. The management of a firm is remarkably incompetent, but the firms accountants cannot take this into account while preparing book of accounts because of ____________ concept. a. Money Measurement b. Dual Aspect c. Conservatism d. Going concern 16. Everything a firm owns, it also owns out to somebody. This co incidence is explained by the _________ concept. a. Money Measurement b. Dual Aspect c. Conservatism d. Going concern 17. The _________ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year. Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) a. Business Entity b. Consistency c. Matching d. Going concern 18. If a firm receives an order for goods, it would not be included in the sales figure owing to the __________. a. Money Measurement b. Dual Aspect c. Conservatism d. Revenue Recognition 19. During the life time of an entity accounting produce financial statements in accordance with which basic accounting concept: a. Conservatism b. Matching c. Accounting Period d. None of the above 20. When information about two different enterprises have been prepared and presented in a similar manner the information exhibits the characteristics of: a. Verificiability b. Relevance c. Reliability d. None of the above 21. A concept that a business enterprise will not be sold or liquidated in the near future is known as: a. Going concern b. Economic entity c. Monetary unit d. None of the above 22. The primary quantities that make accounting information useful for decision making are: a. Relevance and freedom from bias b. Reliability and comparability c. Comparability and consistency d. None of the above 23. Voucher is prepared for: a. Cash received and paid b. Cash/Credit Sales c. Cash/Credit purchase d. All of the above 24. Voucher is prepared from: a. Documentary evidence b. Journal entry c. Ledger account d. All of the above 25. Debit voucher is prepared for _____________. a. Cash payment b. Cash receipt c. Credit transactions d. All of the above 26. Credit voucher is prepared for _____________. a. Cash payment b. Cash receipt Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) c. Credit transaction d. All of the above 27. Point out the correct equation a. Assets = Liabilities Capital b. Assets = Liabilities + Capital c. Liabilities = Assets + Capital d. Capital = Assets + Liabilities 28. Payment of salary to Suman, the manager will _______________. a. Decrease assets and capital b. Increase assets and decrease capital c. Decrease assets and increase capital d. Decrease assets and liability 29. Mohan spent 2,000 as repair on purchases of machine from scrap dealer. The transaction will ________. a. Increase and decrease assets b. Decrease assets and capital c. Increase and decrease capital d. Increase and decrease liability 30. Purchasing pocket transistor for proprietors son will _____________. a. Increase assets and decrease capital b. Increase assets and decrease liability c. Decrease assets and decrease capital d. Decrease assets and decrease liability 31. The journal is a book of: a. Only cash transactions b. Original entry c. Credit sales and purchases d. Secondary entry 32. The rule of debit and credit as regards _____________ should be debit the debtor and credit the creditor. a. Personal Account b. Impersonal Account c. Real Account d. Nominal Account 33. Interest on drawing __________ a. Increase assets and decrease capital b. Increase expense and decrease liability c. Increases and decreases capital d. Increase liability and decreases capital 34. Goods drawn by the proprietor from the business for personal use _________. a. Increases capital and decreases assets b. Increases assets and decreases expense c. Decreases capital and decreases assets d. Increases and decreases assets 35. Recovery of bad debts previously written off a. Increases assets and revenue b. Decreases assets and expenses c. Increases assets and capital d. Increases expenses and assets 36. Wages owing is ___________. a. Personal Account Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) b. Impersonal Account c. Real Account d. Nominal Account 37. Recording of transaction in the journal is called: a. Posting b. Journalizing c. Tallying d. Casting 38. The ledger folio column of journal is used to: a. Record the date o which amount posted to a ledger account b. Record the number of ledger account to which information is posted c. Record the number of amounts posted to the ledger account d. Record the page number of the ledger account 39. The journal entry to record the sale of services on credit should include: a. Debit to debtors and credit to capital b. Debit to Cash and Credit to debtors c. Debit to fees income and Credit to debtors d. Debit to Debtors and Credit to fees income 40. The journal entry to record the purchase of equipments for 2,00,000 cash and a balance of 8,00,000 due in 30 days include: a. Debit equipment for 2,00,000 and Credit cash 2,00,000. b. Debit equipment for 10,00,000 and Credit cash 2,00,000 and Creditors 8,00,000. c. Debit equipment 2,00,000 and Credit debtors 8,00,000. d. Debit equipment 10,00,000 and Credit Cash 10,00,000. 41. When a entry is made in journal: a. Assets are listed first. b. Accounts to be debited listed first. c. Accounts to be credited listed first. d. Accounts may be listed in any order. 42. If a transaction is properly analyzed and recorded: a. Only two accounts will be used to record the transaction. b. One account will be used to record transaction. c. One account balance will increase and another will decrease. d. Total amount debited will equals total amount credited. 43. The journal entry to record payment of monthly bill will include: a. Debit monthly bill and Credit capital. b. Debit capital and Credit cash. c. Debit monthly bill and Credit cash. d. Debit monthly bill and Credit creditors. 44. Journal entry to record salaries will include: a. Debit salaries Credit cash b. Debit capital Credit cash c. Debit cash Credit salary d. Debit salary Credit creditors 45. When a firm maintains a cash book, it need not maintain: a. Journal proper b. Purchases (journal) book c. Sales (journal) book d. Bank and cash account in the ledger Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) 46. Double column cash book records: a. All transactions b. Cash and bank transactions c. Only cash transactions d. Only credit transactions 47. Cash book does not record transaction of: a. Cash nature b. Credit nature c. Cash and credit nature d. None of these 48. Total of these transactions is posted in purchase account: a. Purchase of furniture b. Cash and credit purchase c. Purchase return d. Purchase of stationery 49. The periodic total of sales return journal is posted to: a. Sales account b. Goods account c. Purchase return account d. Sales return account 50. Goods purchased on cash are recorded in the: a. Purchases (journal) book b. Profit and loss account c. Purchases return account d. Furniture account 51. Purchase book records _________. a. All purchases b. All cash purchases c. All credit purchases d. All credit purchases of goods 52. Sales book records ____________. a. Sale of assets on credit b. Sale of goods on credit c. Cash sales d. All credit sales 53. Purchase return book records ___________. a. Return of goods purchased on credit b. Return of assets purchased on credit c. Return of all things d. Return of capital 54. Sales return book records ___________. a. Return of assets sold on credit b. Return of goods sold on credit c. Return of all things d. Return of capital 55. Journal proper records ___________. a. All transactions b. All cash transactions c. All credit transactions Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) d. All transactions not recorded in any of the subsidiary books 56. The purchases journal contains: a. All purchases b. All purchases of merchandise c. Credit purchase of merchandise d. Cash purchase of merchandise 57. The source document for recording entries in the purchase returns journal is generally: a. A credit note b. An invoice c. A bill d. A debit note 58. Credit balance of bank column in cash book shows: a. Overdraft b. Cash deposited in our bank c. Cash withdrawn from bank d. None of these 59. Balancing of account means: a. Total of debit side b. Total of credit side c. Difference in total of debit & credit d. None of these 60. Assets account show _______________ balance. a. Debit b. Credit c. Either debit or credit d. Plus 61. Trial balance is prepared according to ___________ method. a. Balance b. Total c. Total and balance d. All of the above 62. The balance of ______________ account will be shown at the debit column of trial balance. a. Cash b. Creditors account c. Bank overdraft account d. Capital account 63. Trial balance fails to detect __________. a. Errors of omission in original books b. Errors of principle c. Compensating errors d. All the above 64. Trial balance is ___________. a. A statement b. An account c. A summary d. An information 65. The preparation of a Trial Balance helps to: a. Locating errors of complete omission b. Locating errors of principle Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) c. Locating errors of commission d. None of the above 66. The form listing the balances and the title of the accounts in the ledger on a given date is the: a. Income statement b. Balance sheet c. Retained earnings statement d. Trial Balance 67. Which of the following is not a subfield of accounting? a. Management accounting b. Cost accounting c. Financial accounting d. Book - keeping 68. Purposes of an accounting system include all the following concept except: a. Interpret and record the effects of business transactions. b. Classify the effects of transactions to facilitate the preparation of reports. c. Summarize and communicate information to decision makers. d. Dictate the specific types of business enterprise transactions that the enterprises may engage in. 69. Financial position of the business is ascertained on the basis of a. Records prepared under book keeping process b. Trial balance c. Accounting reports d. None of the above 70. Financial statements do not consider a. Assets expressed in monetary terms. b. Liabilities expressed in monetary terms. c. Only assets expressed in non monetary terms. d. Assets and liabilities expressed in non monetary terms. 71. On January 1, Suman paid rent of 5,000. This can be classified as a. An event b. A transaction c. A transaction as well as an event d. Neither a transaction nor an event 72. On March 31, 2012 after sale of goods worth 2,000, he is left with the closing stock of 10,000. This is a. An event b. A transaction c. A transaction as well as an event d. Neither a transaction nor an event 73. All the following items are classified as fundamental accounting assumption except: a. Consistency b. Business entity c. Going concern d. Accrual 74. Two primary qualitative characteristics of financial statements are: a. Understandability and materiality b. Relevance and reliability c. Relevance and understandability d. Materiality and reliability 75. A purchased a car for 5,00,000, making a down payment of 1,00,000 and signing a 4,00,000 bill payable due in 60 days. As a result of this transactions Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) a. Total assets increased by 5,00,000 b. Total liabilities increased by 4,00,000 c. Total assets increased by 4,00,000 d. Total assets increased by 4,00,000 with corresponding increase in liabilities by 4,00,000 76. Mohan purchased goods for 15,00,000 and sold 4/5 th of the goods amounting 18,00,000 and met expenses amounting to 2,50,000 during the year, 2012. He counted net profit as 3,50,000. Which of the accounting concept was followed by him? a. Business Entity concept b. Periodicity concept c. Materiality concept d. Conservatism concept 77. A businessman purchased goods for 25,00,000 and sold 80% of such goods during the accounting year ended 31 st March, 2012. The market value of the remaining goods was 4,00,000. He valued the closing stock at cost. He violated the concept of a. Money measurement concept b. Conservatism concept c. Cost concept d. Periodicity cost 78. Assets are held in the business for the purpose of a. Resale b. Conversion of cash c. Earning revenue d. None of the above 79. Revenue from the sale of products, is generally, realized in the period in which a. Cash is collected b. Sale is made c. Products are manufactured d. None of the above 80. The concept of conservatism when applied to the balance sheet results in a. Understatement of assets b. Overstatement of assets c. Overstatement of capital d. None of the above 81. Decrease in the amount of creditors a. Increase in cash b. Decrease in cash c. Decrease in assets d. No change in assets 82. Consider the following data pertaining to Beta Ltd.: Particulars Cost of machinery purchased on 1 st April, 2012 10,00,000 Installation charges 1,00,000 Market value as on 31 st March, 2013 12,00,00 While finalizing the annual accounts, if the company values the machinery at 12,00,000. Which of the following concepts is violated by the Beta Ltd.? a. Cost concept b. Matching concept c. Accrual d. Periodicity concept Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) A proprietor, Mr. Anil has reported a profit of 1,25,000 at the end of the financial year after taking into consideration the following amount: i. The cost an asset of 25,000 has been taken as an expense. ii. Mr. Anil is anticipating a profit of 10,000 on the future sale of a car shown as an asset in his books. iii. Salary of 7,000 payable in the financial year has not been taken into account. iv. Mr. Anil purchased an asset for 75,000 but its fair value on the date of purchase was 85,000. Mr. Anil recorded the value of the asset in his books by 85,000. On the basis of the facts answer the following questions from the given choices: 83. What is the correct amount of profit to be reported in the books? a. 1,25,000 b. 1,35,000 c. 1,50,000 d. 1,33,000 84. Which measurement base should be followed in the statement (iv)? a. Historical cost b. Current cost c. Replacement cost d. Present value 85. Which concept should be followed in the statement (ii)? a. Conservatism b. Materiality c. Historical cost d. Accrual 86. Which concept should be followed in the statement (iii)? a. Materiality b. Historical cost c. Current cost d. Accrual 87. A change in Accounting Policy is justified a. To comply with accounting standard. b. To ensure more appropriate presentation of the financial statement of the enterprise. c. To comply with law. d. All of the above. 88. Accounting policies for inventories of Beta Enterprises states that inventories are valued at the lower of cost determined on weighted average basis or not realizable value. Which accounting principle is followed in adopting the above policy? a. Materiality b. Prudence c. Substance over form d. All of the above 89. The area wherein different accounting policies can be adopted are a. Providing depreciation b. Valuation of inventories c. Valuation of investments d. All of the above 90. Selection of an inappropriate accounting policy decision may a. Overstate the performance and financial position of a business entity. b. Understate / overstate the performance and financial position of a business entity. Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) c. Overstate the performance of a business entity. d. Understate the financial position of a business entity. Sohan purchased a machinery amounting 10,00,000 on 1 st April, 2002. On 31 st March, 2012, similar machinery could be purchased for 20,00,000 but the realizable value of the machinery (purchased on 1.4.2002) was estimated at 15,00,000. The present discounted value of the future net cash inflows that the machinery was expected to generate in the normal course of business, was calculated as 12,00,000. From the above information, answer the following: 91. The current cost of the machinery is a. 10,00,000 b. 20,00,000 c. 15,00,000 d. 12,00,000 92. The present value of the machinery is a. 10,00,000 b. 20,00,000 c. 15,00,000 d. 12,00,000 93. The historical cost of the machinery is a. 10,00,000 b. 20,00,000 c. 15,00,000 d. 12,00,000 94. The realizable cost of the machinery is a. 10,00,000 b. 20,00,000 c. 15,00,000 d. 12,00,000 95. The rent paid to landlord is credited to a. Landlords account b. Rent account c. Cash account d. None of the above 96. In case of a debt becoming bad, the amount should be credited to a. Debtors account b. Bad debts account c. Cash account d. Sales account 97. Sunset Tours has 3,500 account receivable from Mohan. On January 20, the Rotary makes a partial payment of 2,100 to Sunset Tours. The journal entry made on January 20 by Sunset Tours to record this transaction includes: a. A credit to the cash received account of 2,100. b. A credit to the account receivables account of 2,100. c. A debit to the cash account of 1,400. d. A debit to the Accounts receivable account of 1,400. 98. The debts written off as bad, if recovered subsequently are a. Credited to Bad Debts Recovered Account. b. Credited to Debtors Account. c. Debited to Profit and Loss Account. Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) d. None of the above. 99. The process of transferring the debit and credit items from a Journal to their respective accounts in the ledger is termed as a. Posting b. Purchase c. Balancing of an account d. Arithmetically accuracy test 100. The technique of finding the net balance of an account after considering the totals of both debit and credit appearing in the account is known as a. Posting b. Purchase c. Balancing of an account d. Arithmetically accuracy test 101. At the end of the accounting year all the nominal accounts of the ledger book are a. Balanced but not transferred to profit and loss account. b. Not balanced and also the balance is not transferred to the profit and loss account. c. Balanced and the balance is transferred to the balance sheet. d. Not balanced and their balance is transferred to the profit and loss account. 102. Assertion (A) Accounting is a continuous process in any business undertaking. Reason (R) This is an Accounting period concept. a. Assertion (A) is true b. Reason (B) is true c. (A) and (R) is true d. Neither (A) nor (B) is true 103. Match the following Part A (Accounting Concept) 1. Objectivity Concept 2. Realization Concept 3. Matching Concept 4. Cost Concept Part B (Fact) A. All accounting transactions should be evidenced and supported by business documents i.e., vouchers and invoice. B. The concept revolves around the determination of the point of time when revenues are earned. C. It is necessary during the accounting period with the revenues recognized during the same period. D. Fixed assets are recorded in the account books at the price at which they are acquired. Codes: 1 2 3 4 a A B C D b B A C D c D C B A d C B A D 104. Depreciation is a charge against: a. Profit b. Assets c. Company d. Books of A/c 105. General Reserve created from: a. Capital profit Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) b. Revenue Profit c. Only Profit d. By Sale of Assets 106. Profit from sale of assets is example for: a. Revenue Profit b. Capital Profit c. Loss d. None of these 107. Dividend can be declared from: a. Revenue Profit b. Capital Profit c. Secret Reserve d. All of these 108. Which one of the item is not capital in nature? a. Money raised by the issue of equity shares b. Expenditure incurred on issue of equity shares c. Cost of formation of a new company d. Carriage paid on goods purchased 109. 10,000 spent on replacement of worn out part of the machine will be charged as: a. Capital Expenditure b. Revenue Expenditure c. Deferred Revenue Expenditure d. All of the above 110. Discount allowed on issue of shares is an example of: a. Capital Expenditure b. Revenue Expenditure c. Deferred Revenue Expenditure d. All of the above 111. Depreciation of Fixed Assets is an example of: a. Capital Expenditure b. Revenue Expenditure c. Deferred Revenue Expenditure d. All of the above 112. Which of the following items should be taken as of a capital nature? a. 2,000 spent on dismantling, removing and reinstalling Plant and Machinery to more convenient site. b. 800 paid for removal of stock to a new site. c. 2,000 paid for erection of a new machine. d. A sum of 5,000 was expended on dismantling, removing and reinstalling Plant, Machinery and Furniture. 113. Which of the following item should be taken as of a revenue nature? a. A sum of 2,000 was spent on painting the new godown. b. Damage paid on account of the breach of a contract to supply a certain goods. c. Legal expenses incurred in defending a suit for breach of contract to supply goods. d. All of the above. 114. Which of the following should not be treated as revenue expenditure? a. Interest on loans and debentures. b. Annual fire insurance premiums on Plant and Equipment. c. Sales tax paid in connection with the purchase of office equipment. d. Repairs and maintenance on fixed assets like machines. 115. Which expense is a Capital Nature? Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) a. Depreciation b. Wages c. Salary d. Stationary 116. Which of the following is not deferred revenue expenditure? a. Expenses in connection with issue of equity shares. b. Preliminary expenses. c. Heavy advertising expenses to introduce a new product. d. Legal expenses incurred in defending a suit for breach of contract to supply goods. 117. Any income or profit derived by carrying on the business or during the course of business is called a. Capital Receipt b. Revenue Receipt. c. Revenue Gain d. Capital Gain 118. Amount received from the proprietors as capital or loan receipt is treated as a. Capital Receipt. b. Revenue Receipt c. Revenue Income d. Capital Income 119. When the benefits of revenue expenditure is available for a period of two or three years, the expenditure is known as a. Revenue Expenditure b. Deferred Revenue Expenditure c. Capital Expenditure d. Depreciation. 120. Endowment fund receipt is traded as a. Casual Receipt. b. Revenue Receipt c. Loss d. Expenses. 121. Legacy are generally a. Capitalized b. Treated Loss c. Revenue Expenses d. Deferred Revenue expenses. 122. Which of the following is an item of capital expenditure? a. Research and development costs during the year b. Interest on borrowed fund utilized for acquisition of Office Furniture c. Installation charges paid in conjunction with the purchase of Office Equipment d. Monthly rent of a machinery used in the business 123. Benefit of revenue expenses extends to a. 10 years b. 5 years c. One accounting year d. As long as the business continues 124. Which of the following is a revenue expenses a. Raw material consumed b. Plant purchased c. Long term loan raised from bank Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) d. Share Capital 125. Which of the following is a capital expenditure a. Repair of plant and machinery b. Salary paid to workers c. Cost of stand by equipment d. Annual whitewash of the office building 126. Which of these types of expenditure would not be treated as a Capital Expenditure a. Acquisition of an Asset b. Extension of an Asset c. Improvement of the existing Asset d. Maintenance of the Asset 127. Expenses of the following nature are treated as a Revenue expenses except a. Expenses for day to day running of the business b. Putting the new asset in working condition c. Depreciation d. Purchase of raw material 128. Huge expenditure incurred at the time of launching of a new product in market is a/an a. Revenue Expenditure b. Capital Expenditure c. Loss d. Deferred Revenue Expenditure 129. Which of these items will not be capitalized along with the Asset a. Installation charges b. Annual repair and maintenance c. Statutory levies d. Freight and insurance 130. Capital expenditure is an expenditure which a. Benefits the current accounting period. b. Will benefit the next accounting period. c. Results in the acquisition of a permanent asset. d. Results in the acquisition of a current asset. 131. Gross Profit is the difference between a. Net Sales and Cost of goods sold b. PAT and Dividends c. Net Sales and Cost of production d. Net Sales and Direct costs of productions 132. Property, Plant and Equipment are conventionally presented in the Balance Sheet at a. Replacement cost Accumulated Depreciation b. Historical cost Salvage Value c. Historical cost Depreciation portion thereof d. Original cost adjusted for general price-level changes 133. Outstanding salaries is shown as a. An Asset in the Balance Sheet b. A Liability c. By adjusting it in the P & L A/c d. Both (b) and (c) above 134. Insurance prepaid is shown as a. Current Asset b. Current Liability Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) c. Fixed Asset d. Income 135. Depreciation appearing in the Trial Balance should be a. Debited to P&L A/c b. Shown as liability in Balance Sheet c. Reduced from related asset in Balance Sheet d. Both (a) and (c) above 136. A club paid subscription fees of 1,400. Out of which 200 is prepaid. In such case a. P&L A/C is debited with 1,400 b. P&L A/C is debited with 1,200 c. 200 is shown as current asset d. Both (b) and (c) above 137. Bad debts recovered is a. Credited to P&L A/c b. Debited to P&L A/c c. Reduced from debtors in Balance Sheet d. Added to debtors in Balance Sheet 138. The adjustment to be made for prepaid expenses is a. Add prepaid expenses to respective expenses and show it as an asset b. Deduct prepaid expenses from respective expenses and show it as an asset c. Add prepaid expenses to respective expenses and show it as a liability d. Deduct prepaid expenses from respective expenses and show it as a liability 139. On scrutiny of a firms books of accounts, it was observed that the following errors have occurred in the previous years but have not yet been rectified. i. Depreciation for 2011-2012- 7,000 understated ii. Accrued expenses as at March 31, 2013 - 10,000 understated The impact of this on the reported net income for the year ending March 31, 2013 is a. 7,000 Overstated b. 10,000 Overstated c. 17,000 Understated d. 17,000 Overstated 140. Sundry debtors as per Trial Balance is 43,000 which includes 2,200 due from H in respect of goods sent to him on approval basis, the cost price of which is Rs 1,800. Rectification would involve: a. Adding 2,200 to closing stock b. Deducting 1,800 from closing stock and deducting 2,200 each from debtors and sales c. Adding 1,800 to closing stock and deducting 2,200 each from debtors and sales d. Deducting 1,800 from debtors 141. Goods in stock worth 800 are destroyed by fire and the Insurance Co. is accepted the claim for 600. Adjustment would involve: a. Debit of 800 to Trading Account and credit of 600 and 200 to insurance company and Profit and Loss Account respectively b. Deduct the 800 from closing stock in the Trading Account c. Credit insurance company for 600 d. Debit of 600 and 200 to insurance company and Profit and Loss Account respectively and credit of 800 to Trading Account 142. Prepaid expenses are valued on the Balance Sheet at a. Replacement cost b. Current cost Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) c. Cost to acquire less accumulated amortization d. Cost less expired portion 143. Which of the following relationships is/are false? a. Net Profit = Gross Profit Administration and Other expenses b. Net Profit = Gross Profit + Administration expenses and Other expenses c. Opening Stock + Purchases Closing Stock = Cost of Sales d. Both (b) and (c) above 144. Gross Profit is equal to a. Sales Cost of goods sold b. Sales Closing Stock + Purchases c. Opening Stock + Purchases Closing Stock d. None of the above 145. Which of the following shall not be deducted from net profit while calculating managerial remuneration? a. Loss on sale of undertaking b. Debts considered bad and written off c. Liability arising from a breach of contract d. Directors remuneration 146. Which of the following equations is correct? a. Gross Profit+ Sales+ Direct expenses+ Purchases+ Closing stock = Opening stock b. Gross Profit+ Sales+ Direct expenses+ Purchases- Closing stock = Opening Stock c. Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock = Sales d. Gross Profit Opening Stock + Direct expenses + Purchases +Closing stock = Sales 147. Which of the following is not true with regard to preparation of Profit & Loss Account? a. Profit & Loss Account is prepared for a certain period and hence it is an interim statement b. Profit & Loss Account does not disclose the effect of non-financial items c. Net Profits are ascertained on the basis of current costs d. Net Profits as disclosed by P&L Account is not absolute 148. The Profit and Loss Account shows the a. Financial results of the concern for a period b. Financial position of the concern on a particular date c. Financial results of the concern on a particular date d. Cost of goods sold during the period 149. Which of the following statements is true? a. Provision for doubtful debts represents the amount that cannot be collected b. Cash balance on hand shows whether the business has earned Profit or Loss c. Free samples received are business gains d. The WDV of an asset depreciated on the reducing balance method can never become zero 150. Cash Profit is a. Net profit Non-trading Profit Depreciation and provision b. Gross Profit Non-trading Profit + Depreciation and provision c. Net Profit + Depreciation and provision d. Gross Profit Operational expenses 151. Which of the following statements is false? a. Provision for discount on debtors can be estimated only after computing the provision for doubtful debts b. All pre-received incomes under the cash system of accounting are current gains c. Cash balance on hand shows whether the business has earned Profit or Loss d. Capital expenditure should be shown in the books by debiting asset account and crediting supplier or cash account 152. Which of the following will not appear in Profit and Loss Account of a business? Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) a. Drawings b. Bad debts c. Accrued expenses d. Reserve for discount on Sundry Creditors 153. Which of the following is not a financial statement? a. Profit and Loss Account b. Balance Sheet c. Funds Flow Statement d. Trial Balance 154. If unexpired insurance appears in the Trial Balance, it should be a. Credited to the Profit & Loss Account b. Debited to the Profit & Loss Account c. Shown on the liabilities side of the Balance Sheet d. Shown on the assets side of the Balance Sheet 155. Which of the following are/is not a fixed asset? a. Stock b. Vehicle c. Fixed deposit in bank d. Both (a) and (c) above 156. Which of the following are/is a current asset? a. Sundry Debtors b. Stock c. Prepaid insurance d. All of (a), (b) and (c) above 157. Tax deducted at source appears in the Balance Sheet a. On the assets side under current assets b. On the assets side under loans and advances c. On the liabilities side under current liabilities d. On the liabilities side under provisions 158. Which of the following statements is false? a. Balance Sheet discloses financial position of the business b. A person who owes to the business is called Debtor c. Decrease in the value of the asset could decrease the value of a liability d. Assets are to be shown in the Balance Sheet at the realizable value 159. Which of the following statements is true? a. The balance of the goods account shows the value of stock in hand b. Balancing of all accounts must be done at the end of each day c. Assets which are to remain in business for continuous use and not meant for conversion into cash are fixed assets d. Balance Sheet discloses income position of the business 160. The Balance Sheet gives information regarding the a. Results of operations for a particular period b. Financial position during a particular period c. Profit earning capacity for a particular period d. Financial position as on a particular date 161. Which of the following accounts appear(s) in the Balance Sheet of a business? i. Stock at the end of the financial year ii. Stock at the beginning of the financial year iii. Drawings Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) iv. Prepaid Rent v. Interest received but not yet earned a. Only (i) above b. Only (iii) above c. Both (i)and (iii) above d. (i), (iii), (iv) and (v) above 162. Which of the following is not an intangible asset? a. Trade mark b. Franchise c. Accounts Receivable d. Secret Profit 163. Which of the following is a current liability? a. Prepaid expenses b. Trademark c. Discount on issue of shares d. Outstanding Salaries 164. Which of the following is not a contingent liability? a. Debts included in Sundry Debtors which are doubtful in nature b. Uncalled liability on partly paid shares c. Claims against the company not acknowledged as debts d. Arrears of fixed cumulative dividend 165. Which of the following are current assets of a business? i. Income received in advance ii. Stock iii. Debtors iv. Pre-paid expenses v. Accrued income a. Both (i) and (iv) above b. Both (ii) and (iii) above c. (i),(ii) and (iii) above d. (ii),(iii),(iv) and (v) above 166. Closing stock appearing in the Trial Balance is shown in a. Trading A/c and Balance Sheet b. Profit and Loss A/c c. Balance Sheet only d. Trading A/c only 167. Depreciation Account appearing in the Trial Balance is shown in a. Profit and Loss A/c b. Trading A/c c. Deducted from the concerned assets A/c d. Shown on the liability side 168. Profit on sale of old plant is shown a. In Trading A/c b. In Profit and Loss Appropriation A/c c. Profit and Loss A/c d. Being a non operating item ignored 169. Carriage on goods purchased is shown in a. Profit and Loss A/c b. Capitalized with work in progress Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) c. Trading A/c d. Shown in Balance Sheet 170. Which of these is not an operating income a. Income from sale of trading goods b. Bad debts recovered c. Interest on FDs d. None 171. ABC holds an average inventory of 36,000 (CP) with an inventory turnover of 5 times. If the firm makes a gross profit of 25% on sales, find the total sales of the company a. 2,40,000 b. 2,10,000 c. 2,00,000 d. 1,80,000 172. From the following details what will be the partners commission? Net profit before charging partners commission Rs 65,000. Partners commission @ 11% after charging such commission a. 6441 b. 5431 c. 7654 d. 9876 173. From the following details what will be the partners commission? Net profit before charging partners commission 65,000. Partners commission 11% before charging such commission a. 6441 b. 5431 c. 7150 d. 5876 174. Arrangement of Balance Sheet in a logical order is known as a. Dressing Balance Sheet b. Marshalling Balance Sheet c. Formatting Balance Sheet d. Make up of Balance Sheet 175. Improper valuation of inventory effects a. Profitability b. Financial position c. Both d. Cash inflows 176. Find the cost of goods sold if goods are sold for 2,000 at 25% profit on cost a. 1,600 b. 1,500 c. 1,000 d. 1,800 177. Find the value of opening stock from the following data. Purchases 1,50,000, Closing stock 30,000 , Sales 2,20,000, Gross profit 40,000. a. 50,000 b. 55,000 c. 60,000 d. 65,000 Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) 178. Choose the true statement a. Accrued income represent income unearned but realized in cash b. Accrued income represents income earned but not realized in cash c. Accrued income A/c is shown on the liability side d. No tax is payable on accrued income 179. Which of these is not a feature of a Balance Sheet a. It is statement of financial position as on a particular date b. Liabilities are shown on the left hand side c. It is a Memorandum A/c d. Assets and liabilities are presented either in liquidity or permanency order 180. Which of the following is true when a debtor pays his dues? a. The asset side of the Balance Sheet will decrease b. The asset side of the Balance Sheet will increase c. The liability side of the Balance Sheet will increase d. There is no change in total assets or total liabilities 181. Consider the following data pertaining to a company for the year 2011-2012 : Opening balance of sundry debtors 40,000; Credit sales 4,30,000; Cash sales 20,000; Cash collected from debtors 4,00,000; Closing balance of sundry debtors 50,000 The bad debts of the company during the year are a. 40,000 b. 35,000 c. 30,000 d. 20,000 182. The opening stock of a company is 60,000 and the closing stock is 70,000. If the purchases during the year are 2,00,000 the cost of goods sold will be a. 2,10,000 b. 2,00,000 c. 1,90,000 d. 1,80,000 183. During the year 2012-13, the profit of a business before charging Sales Managers commission was 1,89,000. If the Sales Managers commission is 5% on profit after charging his commission, then the total amount of commission payable to manager is a. 10,000 b. 9,450 c. 9,000 d. 8,500 184. Which of the following accounting treatments is/are true in respect of accrued commission appearing on the debit side of a Trial Balance? a. It is shown on the debit side of the Profit and Loss Account b. It is shown on the credit side of the Profit and Loss Account c. It is shown on the liabilities side of the Balance Sheet d. It is shown on the assets side of the Balance Sheet 185. Profit and loss on Depreciation Investment Fund A/c is transferred to a. Profit and Loss A/c b. General Reserve A/c c. Trading A/c d. Capital Reserve A/c 186. From the following details ascertain net profit of Q Club for the period ended on 31.03.2013 under cash basis Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) Items 31.03.2012 () 31.03.2013 () Net Profit as per Accrual Basis 10,800 Accrued Subscription 550 450 Subscription received in advance 250 100 Salary outstanding 300 50 Prepaid Rent 600 150 a. 11,000 b. 10,800 c. 10,950 d. 11,050 187. Fixed Assets are valued according to cost, If you have to settle their worth, Is it more? Is it less? We leave you to guess, if you can, can you value the Earth? a. Anonymous b. Anthony c. G. Betty d. T.G. Tokhey 188. The term current assets does not include: a. Debtors b. Bills Receivable c. Stock d. Goodwill 189. The term fixed assets does not include: a. Plant b. Furniture c. Prepaid expenses d. Land and Building 190. If the total assets of a company amount to 1,50,000 and owners equity is 70,000, the amount of liabilities will be: a. 70,000 b. 80,000 c. 90,000 d. 1,00,000 191. Balance is a statement of __________. a. Assets b. Liabilities c. Capital d. All of these 192. Amount receivable by a company against credit sales are usually called _________. a. Sundry Debtors b. Bills Receivable c. Sundry Creditors d. Bills Payable 193. Owners equity could be understood as comprising ____________ and ____________. a. Contributed Capital and Liabilities b. Retained Earnings and Assets c. Assets and Liabilities d. Contributed Capital and Retained Earnings 194. In case of Joint stock Company, Financial Statements refer to: Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) a. Balance Sheet b. Trial Balance and P&L A/c c. Profit and Loss A/c d. Balance Sheet, P&L A/c and P&L Appropriation A/c 195. Cost of sales in the case of trading company is equal to: a. Sales Gross Profit b. Opening Stock + Purchases + Incidental Expenses closing Stock c. Sales Closing Stock d. Only (a) and (b) 196. Which of the following statement are true? a. The statement disclosing status of investment is known as Balance Sheet b. The statement showing the result is known as Profit and Loss Account c. The Balance Sheet comprises of a list of assets, liabilities and capital at a given date d. All of the above 197. Which of the following importance is provided by Balance Sheet? a. It gives a concise summary of the concerns resources and liabilities and owners equity b. It is a measure of the firms liquidity c. It is a measure of firms solvency d. All of the above 198. Which of the following is not an example of Intangible Assets? a. Patents and Trade Marks b. Copyright c. Goodwill d. Land 199. Costs of intangible fixed assets are __________ over their useful lives. a. Depreciated b. Amortized c. Charged d. Allocated 200. A new firm commenced business of 1 st January, 2011 and purchased goods costing 90,000 during the year. A sum of 6,000 was spent on freight inwards. At the end of the year the cost of the goods still unsold was 12,000. Sales during the year was 1,20,000. What is the gross profit earned by the firm? a. 36,000 b. 30,000 c. 42,000 d. 38,000 201. From the following figures ascertain the gross profit:
Opening Stock (1.1.2012) 25,000 Goods purchased during 2012 1,30,000 Freight and packing on above 5,000 Closing Stock (31.12.2012) 15,000 Sales 1,90,000 Selling expenses on sales 9,000 a. 36,000 b. 45,000 c. 50,000 d. 59,000 202. A prepayment of insurance premium will appear in Balance Sheet and in the Insurance Account respectively as: Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) a. A liability and a debit balance b. An asset and a debit balance c. An asset and a credit balance d. None of the above 203. Understatement of closing work in progress in the period will a. Understate cost of goods manufactured in that period b. Overstate current assets c. Overstate gross profit from sales in that period d. Understate net income in that period 204. If sales revenue are 4,00,000, cost of goods sold is 3,10,000 and operating expenses are 60,000, the gross profit is a. 30,000 b. 90,000 c. 3,40,000 d. 60,000 205. A company wishes to earn a 20% profit margin on selling price. Which of the following is the profit mark up on cost, which will achieve the required profit margin? a. 33% b. 25% c. 20% d. None of the above 206. Sales for the year ended 31 st March, 2012 amounted to 10,00,000. Sales included goods sold to Mr. Anil for 50,000 at a profit of 20% on cost. Such good are still lying in the godown at the buyers risk. Therefore, such goods should be treated as part of a. Sales b. Closing stock c. Goods in transit d. Sales return 207. The capital of a sole trader would change as a result of: a. A creditor being paid his account by cheque b. Raw materials being purchased on credit c. Fixed assets being purchased on credit d. Wages being paid in cash 208. Rent paid on 1 st October, 2010 for the year to 30 September, 2011 was 1,200 and rent paid on 1 st October, 2011 for the year to 30 September, 2012 was 1,600. Rent payable, as shown in the profit and loss account for the year ended 31 st December, 2011, would be: a. 1,200 b. 1,600 c. 1,300 d. 1,500 209. A decrease in the provision for doubtful debts would result in: a. An increase in liabilities b. A decrease in working capital c. A decrease in net profit d. An increase in net profit From the given information, choose the most appropriate answer for the following questions: Sales () Opening Stock () Purchases () Closing Stock () Cost of Goods Sold () Gross Profit () Selling Expenses () Net Profit () Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) 15,000 6,000 10,000 ? 9,000 ? 4,000 ? 210. The value of Closing Stock is: a. 9,000 b. 4,000 c. 8,000 d. 7,000 211. Gross profit will be: a. 6,000 b. 5,000 c. 8,000 d. 7,000 212. Net profit will be: a. 6,000 b. 5,000 c. 2,000 d. 7,000 From the given information, choose the most appropriate answer for the following questions: Opening Capital () Investment by Proprietor () Drawings () Capital at the end of the year () Net Profit / (Loss) () 16,000 Nil 3,000 13,500 ? 213. The net profit will be: a. 600 b. 500 c. 550 d. 700 214. If in the given information, net loss is 1,000, then the investment made by the proprietor during the year will be: a. 1,500 b. 2,000 c. 1,200 d. 1,700 From the given information, choose the most appropriate answer for the following questions:
Opening Stock 20,000 Carriage on sales 3,000 Closing Stock 18,000 Rent of office 5,000 Purchases 85,800 Sales 1,40,700 Carriage on purchases 2,300 215. Gross profit will be: a. 50,000 b. 47,600 c. 42,600 d. 50,600 216. Net profit will be: a. 42,600 b. 50,600 c. 45,600 d. 47,600 From the given information, choose the most appropriate answer for the following questions: Zenith Co., a whole seller estimates the following sales for the indicated months: Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) June 2012 () July 2012 () August 2012 () Opening Stock 4,08,000 4,34,400 4,60,800 Credit Sales 15,00,000 16,00,000 17,00,000 Cash Sales 2,00,000 2,10,000 2,20,000 Total Sales 17,00,000 18,10,000 19,20,000 Selling price is 125% of the purchase price. 217. The cost of goods sold for the month of June, 2012 is: a. 15,20,000 b. 14,02,500 c. 12,75,000 d. 13,60,000 218. Stock purchased in July, 2012 is: a. 16,05,000 b. 14,74,000 c. 14,40,000 d. 13,82,500 219. The cost of raw materials consumed, issued and used were: a. 1,09,300 b. 91,200 c. 91,900 d. 92,600 220. The manufacturing cost of finished goods produced were: a. 1,31,600 b. 1,93,300 c. 1,91,900 d. 1,92,500 221. The manufacturing cost of finished goods sold was: a. 1,91,700 b. 1,92,500 c. 1,94,000 d. 1,93,300 222. Which of the following is not a Fixed Asset? a. Building b. Bank balance c. Plant d. Goodwill 223. Which of the following statement is incorrect? a. The Current Liabilities is used to denote those liabilities which are payable after a year b. The term Current Assets and Liquid assets have synonymous meanings c. All Current Assets are Fictitious Assets d. All of the above 224. Income Tax paid by a sole proprietor on his business income should be: a. Deducted to the Trading Account b. Deducted to the Profit and Loss Account c. Deducted from the Capital A/c in the Balance Sheet d. All of the above 225. Which of the following statement is correct? a. Creating reserve for discount on creditors is not strictly according to the principle of conservation. Soumendra Roy B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing) b. Stock at the end, if appears in the Trial Balance, is taken only to the Balance Sheet. c. Salary paid in advance is not an expense because it neither reduces assets nor increases liabilities. d. All of the above.