BASIC ASPECTS OF BALANCE SHEET

1. Which of the following is shown on the liability side of a balance sheet:

a: sources of funds
b: uses of funds
c: accumulated losses in the case of a company
d: pre operative expenses
e: pre paid expenses

2. Which of the following provides an appropriate explanation to the term ‘cash

loss’?:
a: the loss which a firm has incurred due to cash misplaced in transit
b: the cash which has been lost by the firm during its day to day operation
c: the loss which the firm has incurred after providing for depreciation
d: the loss which the firm has incurred before providing for the depreciation
e: the loss which could be made up by the firm after inducting additional cash by
the owners of the business.

3. A firm has to purchase some additional land for expansion of its activity. The
money spent in purchase of the land, would be called:
a: sources of funds
b: use of working capital
c: use of funds
d: surplus of uses
e: deficit in uses

4. The amount of security deposits for the purpose of electricity or telephone is

shown in the balance sheet as:
a: fixed assets
b: intangible assets
c: current asset
d: non current asset
e: none of the above

5. Which of the following will not be considered as intangible assets ?:

a: preliminary expenses
b: pre operative expenses
c: debit balance of profit and loss account
d: prepaid expenses
e: none of the above

6. In the balance sheet of a firm, the amount of loss incurred by the firm can be
shown as:
a: a deduction from the amount of capital
b: a deduction from the amount of general reserve
c: an intangible assets to be adjusted out of the capital or reserves

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d: all the above
e: none of the above

7. Prepaid insurance is shown in the balance sheet of a firm as:

a: fixed assets
b: intangible assets
c: non current asset
d: current asset
e: current liability

8. Pre operative expenses are recorded in the balance sheet of a business

organization as:
a: fixed assets
b: intangible assets
c: non current asset
d: current asset
e: current liability

9. Which one of the following is not included in the assets of a firm:

a: pre operative expenses
b: preliminary expenses
c: Good will
d: prepaid expenses
e: outstanding expenses

10. If a company revaluates its assets, its net worth:

a: will improve
b: will remain same
c: will be positively effected
d: non of the above

11. The term ‘net block’ in the context of a balance sheet prepared by M/s ABC
Limited stand for:
a: fixed assets at their original cost
b: current assets at their purchase price less old stock
c: book debts less provision for book debts
d: fixed assets less depreciation
e: current assets less current liabilities

12. A firm has current ratio of 1.5:1, fixed assets of Rs.10 lac, non current assets
of Rs.2 lac, intangible assets of Rs.1 lac. If its current liabilities are Rs.6 lac.
What is the amount of total assets ?:
a: Rs.20 lac

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b: Rs.22 lac
c: Rs.25 lac
d: Rs.30 lac
e: Rs.27 lac

13. If a company issues bonus shares, the debt equity ratio will:
a: Remain unaffected
b: Will be affected
c: Will improve
d: None of the above

14. If a company issues rights shares, the debt equity ratio will:
a: Remain unchanged
b: Improve
c: will change
d: (b) & (c) above

15. Funds raised through long term liabilities should be invested:

a: In current assets
b: In fixed assets
c: Partly in current assets and fixed assets
d: None of the above

16. For the purpose of ratio analysis an investment in the shares of sister
concern would be classified as:
a: A fixed assets
b: Intangible asset
c: Current asset
d: Non current asset

17. Debentures are classified as:

a: Long term debt
b: Short term loan
c: Owned funds
d: Owned funds if raised from shareholders

18. For a real property developer, al plot of land is:

a: A fixed assets
b: A current asset
c: Both the above
d: None of the above

19. For a dealer in truck vehicles, a truck is:

a: A current assets

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b: A fixedasset
c: Both the above
d: None of the above

20. For a transport operator, a bus is:

a: Current asset
b: Fixed asset
c: Both the above
d: None of the above

21. Long term sources of the organization are:

a: Capital and reserves
b: Term loans for institutions
c: Long term unsecured loans
d: All the above

22. In a balance sheet, owners fund or net worth mean:

a: All the money invested by owners from their own sources
b: Paid up capital and reserves
c: Money contributed by promoters in any form
d: None of the above

23. The contingent liabilities are shown:

a: In the balance sheet total
b: In the balance sheet along with other liabilities
c: As foot notes
d: None of the above

24. Which of the following can be taken as contingent liabilities:

a: Expenses not provided, liability on account of letter of credit, letter of
guarantee, provisions not made etc.
b: Current liabilities, which are to be repaid immediately
c: Net worth of the party
d: None of the above

25. The investment in security deposits made against telephone or electricity is:
a: A current asset
b: A fixed asset
c: A non current asset
d: None of the above

26. In a balance sheet, profit is shown under:

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a: Liabilities
b: Current assets
c: Fixed assets
d: None

27. If a company revaluates its assets, the net working capital, current ratio and
quick ratio of the company:
a: will improve
b: will remain unaffected
c: will undergo some change
d: None of the above

28. Working capital limits are supposed to be repaid out of:

a: Capital
b: Sales
c: Current assets
d: (b) & (c) above

29. Term loans are paid out of:

a: Sales
b: Capital
c: Working capital limits
d: Profits

30. Intangible assets are:

a: Goodwill, patents, copy rights, trade marks, licenses, preliminary expenses etc
b: Land and building
c: Cash in bank
d: None of the above

31. Window dressing of current ratio is possible by:

a: Undervaluing the inventory
b: Depositing cash in hand in bank
c: Converting cash into inventory

32. An asset is:

a: Sources of funds
b: Use of funds
c: Inflow of funds
d: None of the above

33. If a company issues bonus shares, the net worth of the company:
a: Will undergo change

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b: Will not undergo change
c: Both (a) and (b)
d: None of the above

34. A funds flow statement is:

a: A source of fund’ statement
b: A statement of use of funds
c: A statement of sources and uses of funds for a definite period between two
definite dates
d: None of the above

35. Increase in liabilities and decline in assets will indicate:

a: Increase in sources of funds
b: Decrease in sources of funds
c: Will not affect funds position
d: None of the above

36. An increase in assets and decline in liabilities will indicate:

a: Increase in use of funds
b: Decrease in use of funds
c: Will not affect funds position
d: None of the above

37. Cash generated in business or cash profit or cash accrual, means:

a: Profit and depreciation
b: Profit less depreciation
c: Net profit
d: None of the above