:: 1 ::

(1)
(2)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(13)
(14)
(15)
(16)
(17)

Special donations are carried to the.of the balance sheet.

Ans. liabilities side
Any profit on the sale of a cricket bat of a club will be taken to.
Ans. income and expenditure account
Cash paid to creditors can be calculated from..
Ans. creditors account
Under the net worth method of single entry the net profit is calculated by comparing
capital in the beginning and capital.
Ans: at the end
Credit sales is computed from.......
Ans. total creditors account
Capital in the beginning is ascertained from .
Ans. opening balance sheet.
Bills receivable endorsed but dishonoured is debited to
Ans. debtors account
Bills receivable received during the year is credited to .
Ans. debtors' account
Bills receivable as endorsed is debited to ..
Ans. creditors' account
Bills payable honoured during the year will be debited to
Ans. bills payable account
Bills payable dishonoured during the year will be credited to
Ans. creditors account.
The amount of interest is credited by the buyer to...
Ans.vendor account
The depreciation in the books of buyer is charged on..
Ans.the cash price
Stock at the shop is debited to
Ans.shop stock account
The goods with customers are transferred from stock in shop account.
Ans. at hire-purchase price
If the rate of gross profit for department X is 25% of the cost and its sales amount to
Rs. 1,00,000, then the amount of gross profit will be equal to
Ans.Rs. 20,000
Repairs to machines in different departments are to be allocated on the basis of....
Ans: actual cost
Under debtors system, the branch account is..
Ans. nominal account.
Petty expenses paid by the branch out of petty cash maintained on imprested
system will be shown on the ..branch account.
Ans.debit side
Under the branch trading and profit and loss account system, the branch account is
of the nature of .
Ans.personal account
Under trading and profit and loss system, the remittances made to the branch
are to the branch account
Ans. Credited
Under trading and profit and loss system, the profits of a branch are.branch
account

:: 2 ::

Ans.debited to branch account

(18) The difference of the two sides of the branch account, under branch trading and
profit and loss account system, shows .. from the branch.
Ans.amount due
(19) Branch adjustment account is in the nature of..
Ans.nominal account
(20) If the branch has collected money from a customer of the head office, then (in the
head office books) branch account is..
Ans.debited
(21) In case of foreign branches, the remittances to and from head office should be
converted at
Ans.actual rate at which the remittances were made.
(22) Cash remitted by branch but not received by the head office is debited by the head
office to
Ans.cash-in-transit account.
(23) Goods sent by the head office to the branch not received by the branch are credited
by H.O. to
Ans.branch account
(24) Goods sent by branch x to branch y, will be debited to
Ans.branch y
(25) Closing stock + cost of goods soldPurchases =
Ans.opening stock
(26) The main object of the average clause is to discourage..
Ans.under insurance
(27) Under the average clause, the loss is suffered by both insurer and insured
a.
Ans.in the ratio of risk covered
(28) Royalty account is in the nature of..
a.
Ans.nminal account
(28) If the right to recoup the shortcomings has expired, they are transferred by the
lessee to
Ans.Profit and loss account
(29) The receipts and payments account records receipts and payments of both apital
and .nature.
Ans.revenue
(30)
Income and Expenditure accunt is a
Ans. nominal account
(31) The income and expenditure account begins with .
Ans. no balance
(16)

(17)

When the lessor receives payment, the credits

(i) Lessee account
(ii) Royalty account
(iii) Short workings account.
Ans.(i) Lessee account
Royalty earned by the lessee is credited to
(i) Sub-lessee account
(ii) Profit and loss account
(iii) Royalty receivable account.
Ans.(iii) Royalty receivable account.

:: 3 ::

(18)

(19)

(20)

(21)

(22)

(23)

(24)

(25)

(26)

The balance of royalty payable account is transferred to

(i) Profit and loss account
(ii) Royalties suspense account
(iii) Production account.
Ans.(iii) Production account.
The balance of royaltys receivable account is transferred to
(i) Profit and loss account
(ii) Royalties suspense account
(iii) Production account.
Ans.(i) Profit and loss account
Under the double account system, the profit and loss account is called
1. Profit and loss account
2. Income and expenditure account
3. Revenue account.
Ans.(iii) Revenue account.
Under the double account system, the profit and loss appropriation account is
called
(i) Net revenue account
(ii) Profit and loss appropriation account
(iii) Profit and loss account.
Ans. (i) Net revenue account
The depreciation on the fixed assets, under the double account system, is shown as

4. Depreciation reserve on the liabilities side of the general balance sheet

5. A deduction from the fixed assets
6. An expenditure on capital account in the first section of the balance sheet.
Ans. (i) Depreciation reserve on the liabilities side of the general balance sheet
Under the double account system, interest on debentures is shown in
(i)Revenue account
(ii) Net revenue account
(iii) Profit and loss account.
Ans.(ii) Net revenue account
Share forfeited account is shown on
7. Liabilities side of the general balance sheet
8. Credit side of the net revenue account
9. Credit side of the receipts and expenditures on capital account
Ans.(iii) Credit side of the receipts and expenditures on capital account
A fixed asset originally acquired for Rs. 20,000 is to be replaced by new one. The
estimated cost of replacement of the original asset is Rs. 30,000. Hence, the
revenue charge equals
(i) Rs. 20,000
(ii) Rs. 10,000
(iii)Rs. 30,000.
Ans. (iii) Rs. 30,000.
A fixed asset originally acquired for Rs. 20,000 is replaced by a new asset costing
Rs. 50,000. But the estimated cost of replacement of the original asset is B Rs.
30,000. Hence, the capital charge equals
10. Rs. 20,000
11. Rs. 50,000

:: 4 ::

(27)

(28)

(29)

12. Rs. 30,000.

Ans.(i) Rs. 20,000
A fixed asset originally acquired for Rs. 20,000 is replaced by a new asset. The
estimated cost of the replacement of the original asset is Rs. 30,000. The sale
proceeds of old material amounted to Rs. 2,000.Hence, the revenue charge equals
(i) Rs. 28,000
(ii) Rs. 18,000
(iii) Rs. 30,000.
Ans.(i) Rs. 28,000
Calls in advance are shown on the
13. Liabilities side of the general balance sheet
14. Expenditure side of receipts and expenditures on capital account
15. Receipts side of receipts and expenditures on capital account.
Ans.(iii) Receipts side of receipts and expenditures on capital account.
Plant and machinery is shown on the
(i) Assets side of the general balance sheet
(ii) Expenditure side of the receipts and expenditures on capital account
(iii) Receipts side of the receipts and expenditures on capital account.
Ans.(ii) Expenditure side of the receipts and expenditures on capital account

:: 5 ::

(30)

(31)

(32)

(33)

(34)

(35)

(36)

(37)

The value of goodwill, according to the simple profit method, is

16. The product of current year's profit and number of years
17. The product of last year's profit and number of years
18. The product of average profits of the given years and number of years.
Ans.(iii)The product of average profits of the given years and number of years.
The goodwill of a business is to be valued at 3 years' purchase of the average
profits of the last three years. The profits of the last three years are Rs. 5,000, Rs.
6,000 and Rs. 7,000 respectively. Hence, the goodwill be valued at
(i) Rs. 18,000
(ii) Rs. 12,000
(iii) Rs. 15,000.
Ans. (i) Rs. 18,000
A business has a capital of Rs. 40,000 at the end. It had earned profits of Rs. 5,000
during the year. Hence, the average capital of the business will be
(i) Rs. 42,500
(ii) Rs. 37,500
(iii) Rs. 35,000.
Ans.(ii) Rs. 37,500
If the average capital of a business is Rs. 60,000 and the normal rate of profit is
15%, then the normal profits will amount to
(i) Rs. 10,000
(ii) Rs. 9,000
(iii) Rs. 15,000.
Ans.(ii) Rs. 9,000
If the super-profits of a business are Rs. 6,000 and the normal rate of profit is 10%,
then the amount of goodwill as per the capitalisation method will be
(i)Rs. 60,000
(ii) Rs. 600
(iii) Neither of the two.
Ans.(i)Rs. 60,000
It is given that net assets available for equity and preference shares amount to Rs.
90,000. The paid up capitals are 10,000 equity shares of Rs. 2 each and 5,000
preference shares of Rs. 10 each. Therefore, value of an equity share will be
(i) Rs. 2 per share
(ii) Rs. 4 per share
(iii) Rs. 5 per share.
Ans.(ii) Rs. 4 per share
It is given that net assets available for equity and preference shares amount to
Rs. 1,87,000. The paid-up capitals are10,000 equity shares of Rs. 4 each and
5,000 preference shares of Rs. 10 each. Therefore, value of a preference share will
be (i) Rs. 10 per share
(ii) Rs. 8 per share
(iii) Rs. 20 per share.
Ans.(iii) Rs. 20 per share.
Under the yield method of valuation of equity share capital, if for an equity share
of Rs. 50, the normal rate of return is 10% and the expected rate of return is 5%,
then the value of an equity share will be
19. Rs. 25
20. Rs. 50

:: 6 ::

(38)

(39)

(40)

(41)

(42)

(43)

(44)

(45)

21. Rs. 100.

Ans.(i) Rs. 25
For calculating the value of an equity share by intrinsic value method, it is
essential to know
(i) Normal rate of return
(ii) Expected rate of return
(iii) Net equity.
Ans.(iii) Net equity.
For calculating the value of an equity share by yield method, it is essential to know

(i)Expected rate of return

(ii) Called-up equity share capital
(iii) Capital employed.
Ans. (i) Expected rate of return
For calculating price-earnings ratio, it is essential to know
(i) Market value per share
(ii) Nominal value per share
(iii) Paid-up value per share.
Ans.(i) Market value per share
For calculating the value of an equity share by earning capacity method, it is
essential to know
(i)Nominal value per share
(ii) Rate of earning
(iii) Dividend per share.
Ans.(ii) Rate of earning
A Ltd. and B Ltd. go into liquidation and a new company X Ltd. is formed. It is a
case of
(i) Absorption
(ii) External reconstruction
(iii) Amalgamation.
Ans.(iii) Amalgamation.
X Ltd. goes into liquidation and a new company Z Ltd. is formed to take over the
business of X Ltd. It is a case of
(i) Absorption
(ii) External reconstruction
(iii) Amalgamation.
Ans.(ii) External reconstruction
X Ltd. goes into liquidation and an existing company Z Ltd. purchases the business
of X Ltd. It is a case of
(i) Absorption
(ii) External reconstruction
(iii) Amalgamation.
Ans.(i) Absorption
Accumulated profits include
(i) Provision for doubtful debts
(ii) Superannuation fund
(iii) Workmen's compensation fund.
Ans.(iii) Workmen's compensation fund.

:: 7 ::

(46)

(47)

(48)

(49)

(50)

(51)

(52)

(53)

Liabilities (not accumulated profits) of a company include

(i) General reserve
(ii) Pension fund
(iii) Dividend equalisation fund.
Ans. (ii) Pension fund
When the expenses of liquidation are to be borne by the vendor company, then the
vendor company debits
(i) Realisation account
(ii) Bank account
(iii) Goodwill account.
Ans. (i) Realisation account
When the expenses of liquidation are to be borne by the purchasing company, then
the purchasing company debits
(i) Vendor company's account
(ii) Bank account
(iii) Goodwill account.
Ans. (iii) Goodwill account.
When the purchasing company makes payment of the purchase consideration, it
debits
(i) Business purchase account
(ii) Assets account
(iii) Vendor company's account.
Ans. (iii) Vendor company's account.
The vendor company transfers preliminary expenses (at the time of absorption) to

(i) Equity shareholders' account

(ii) Realisation account
(iii) Purchasing company's account.
Ans. (i) Equity shareholders' account
For paying liabilities not taken over by the purchasing company, the vendor
company credits
(i) Realisation account
(ii) Bank account
(iii) Liabilities account.
Ans.(ii) Bank account
In case of inter-company holdings, the purchasing company, at the time of payment
of the purchase consideration, surrenders the shares in the vendor company by
crediting
(i) Vendor company's account
(ii) Shares in the vendor company account
(iii) Share capital account.
Ans.(ii) Shares in the vendor company account
The share capital, to the extent already held by the purchasing company, is closed
by the vendor company by crediting it to
(i) Share capital account
(ii) Purchasing company's account
(iii) Realisation account.
Ans.(iii) Realisation account.

:: 8 ::

(54)

(55)

(56)

(57)

(58)

(59)

(60)

(61)

In case of sub-division of share capital the total number of shares

(i) Increases
(ii) Decreases
(iii) Does not change.
Ans.(i) Increases
If the shares of smaller denomination-are converted into the shares of higher
denomination without changing the total amount of share capital, then it is a case
of
(i) Consolidation of share capital
(ii) Sub-division of share capital
(iii) Decrease in unissued share capital.
Ans.(i) Consolidation of share capital
When a company converts its equity shares into the capital stock, then the account
to be credited is
(i)Equity share capital account
(ii) Equity capital stock account
(iii) No entry is required.
Ans.(ii) Equity capital stock account
A Ltd. with a share capital of 10,000 equity shares of Rs. 10 each fully paid
decides to repay Rs. 5 per share thus making each share of Rs. 5 fully paid. It is a
case of
(i) Reducing share capital by returning the excess capital
(ii) Reducing the liability on account of uncalled capital
(iii) Reducing the paid-up capital.
Ans.(i) Reducing share capital by returning the excess capital
For writing off the accumulated Josses under the scheme of capital reduction, we
debit
(i) Share capital account
(ii) Accumulated losses account
(iii) Capital reduction account.
Ans.(iii) Capital reduction account.
If there is any balance in the capital reduction account after writing off all the
accumulated losses, then the same is transferred to
22. Share capital account
23. Capital reserve account
24. General reserve account.
Ans.(ii) Capital reserve account
A company has issued capital of 10,000 equity shares of Rs. 10 each fully paid. It
decides to convert its capital into 20,000 equity shares of Rs. 5 each. It is a case of
(i) Consolidation of share capital
(ii) Sub-division of share capital
(iii) Decrease in unissued share capital.
Ans.(ii) Sub-division of share capital
If the creditors are willing to reduce their claims against the company, (hen the
amount of reduction in their claim will be transferred to
(i) Share capital account
(ii) Creditors account
(iii) Capital reduction account.
Ans.(iii) Capital reduction account.

:: 9 ::

(62)

(63)

(64)

(65)

(66)

(67)

(68)

(69)

Any loss on revaluation of the assets at the time of internal reconstruction, will be
charged from
(i) Revaluation account
(ii) Share capital account
(iii) Capital reduction account.
Ans.(iii) Capital reduction account.
A contingent liability, not provided for, materialised to the extent of Rs. 1,000. The
insurance company paid Rs. 600 in respect of this liability. Hence, the amount to
be charged from the capital reduction account will be
(i) Rs. 600
(ii) Rs. 400
(iii) Rs. 1,000.
Ans.(ii) Rs. 400
A banking company can pay dividend on its shares without writing off
(i) Preliminary expenses
(ii) Brokerage
(iii) The bad debts (provided adequate provision has been made).
Ans.(iii) The bad debts (provided adequate provision has been made).
It is given that the paid-up capital, reserves and share premium account have
balances amounting to Rs. 10,00,000 Rs. 9,00,000 and Rs. 1,50,000 respectively. It
is also given that the profits of the company for the current year are Rs. 1,00,000.
ft should make a transfer of
(i) Rs. 30,000 to statutory reserve
(ii) Rs. 25,000 to statutory reserve
(iii) May be exempted from making such transfer.
Ans.(iii) May be exempted from making such transfer.
Provision for bad debs and doubtful debts is
(i) Not shown anywhere in the published accounts of a banking company
(ii) Shown on the debit side of the profit and loss account
(iii) Shown as a deduction from the interest and discount income on the credit side
of profit and loss account.
Ans.(i) Not shown anywhere in the published accounts of a banking company
Rebate on biffs discounted account is a
(i) Real account
(ii) Personal account
(iii) Nominal account.
Ans.(ii) Personal account
If the balance of rebate on bills discounted is given in the trial balance, it will be
taken to
(i) Debit side of the profit and Joss account
(ii) Credit side of the profit and loss account as a deduction from interest and
discount
(iii) Liabilities side of the balance-sheet.
Ans.(iii) Liabilities side of the balance-sheet.
Money at call and short notice is shown
(i) On the liability side of the balance sheet
(ii) On the asset side of the balance sheet
(iii) It is a contra item.
Ans.(ii) On the asset side of the balance sheet

:: 10 ::

(70)

(71)

(72)

(73)

(74)

(75)

(76)

(77)

Provision for taxation is shown

(i) On the debit side of the profit and loss account
(ii)As a deduction from interest and discount on the credit side of the profit and
loss account
(iii)On the asset side of the balance sheet.
Ans. (ii) As a deduction from interest and discount on the credit side of the profit
and loss account
Loans, cash credits and overdrafts are shown
(i) On the asset side of the balance sheet
(ii) On the liability side of the balance sheet
(iii) These are contra items.
Ans.(i) On the asset side of the balance sheet
Bills discounted and purchased are shown
(i) On the asset side of the balance sheet
(ii) On the liability side of the balance sheet
(iii) Neither of the two sides.
Ans.(i) On the asset side of the balance sheet
Deposits and other accounts are shown
(i) On the asset side of the balance sheet
(ii) On the liability side of the balance sheet
(iii) These are contra items.
Ans.(ii) On the liability side of the balance sheet
A general insurance company carrying on two or more types of business prepares
only
(i) Revenue accounts in respect of different businesses
(ii) Profit and loss account (including appropriation account)
(iii) Separate revenue accounts for each type of business and combined profit and
loss account.
Ans.(iii) Separate revenue accounts for each type of business and combined profit
and loss account.
Reserve for unexpired risks appearing outside the trial balance under adjustments
is
25. Shown on the debit side of the revenue account and liabilities side of the
balance sheet
26. Shown on the credit side of the revenue account and asset side of the balance
sheet
27. Shown as a contra item in the balance sheet.
Ans. (i) Shown on the debit side of the revenue account and liabilities side of the
balance sheet
Reinsurance premium is shown
28. On the debit side of revenue account
29. On the liability side of the balance sheet
30. As deduction from the premiums on the credit side of the revenue account.
Ans.(iii) As deduction from the premiums on the credit side of the revenue
account.
Expenses of management (not applicable to any particular business) are shown in

(i) Revenue account

(ii) Profit and loss account

:: 11 ::

(78)

(79)

(80)

(81)

(82)

(83)

(84)

(iii) Profit and loss appropriation account.

Ans.(ii) Profit and loss account
Transfer fees are credited to
(i) Revenue account
(ii) Profit and loss account
(iii) Profit and loss appropriation account.
Ans.(ii) Profit and loss account
Legal fees in respect of claims are shown in
(i) Revenue account
(ii) Profit and loss account
(iii) Profit and loss appropriation account.
Ans.(i) Revenue account
It is given that claims paid during the year amounted to Rs. 1,00,000. The claims
outstanding in the beginning and at the end were Rs. 15,000 and Rs. 10,000
respectively. Hence, the amount to be debited to revenue account will be
(i) Rs. 1,00,000
(ii) Rs. 1,15,000
(iii) Rs. 95,000.
Ans.(iii) Rs. 95,000.
It is given that additional reserve for unexpired risks was Rs. 50,000 in the
beginning of the year. The net premium for the current year were Rs. 4,00,000 and
the additional reserve for unexpired risks was to be increased by 5% of the net
premiums. Hence, the amount of the additional reserve will be
(i) Rs. 20,000
(ii) Rs. 50,000
(iii) Rs. 70,000.
Ans.(iii) Rs. 70,000.
It is given that the balance being profit of the last year amounted to Rs. 80,000.
During the current year, the business suffered a loss of Rs. 20,000 and dividends
amounting to Rs. 15,000 were paid in respect of the previous year. Hence, the
profit and loss appropriation account will be credited by
(i) Rs. 65,000
(ii) Rs. 45,000
(iii) Rs. 80,000.
Ans.(i) Rs. 65,000
It is given that premiums, reinsurance premiums and commission on reinsurance
ceded amounted to Rs. 10,00,000, Rs. 50,000 and Rs. 30,000 respectively. Hence,
premiums will be shown in the revenue account at
31. Rs.10,00,000
32. Rs. 9,50,000
33. Rs. 9,20,000.
Ans.(ii) Rs. 9,50,000
Postulates of Accounting are:
(i) Exchange
(ii) Period
(iii) Unit of measure
(iv) All of these
Ans.(iv) All of these

:: 12 ::

(85)

(86)

(87)

(88)

(89)

(90)

(91)

(92)
(93)

Meaning of Net Assets is :

(i) Total Assets Total Liabilities
(ii) Fixed Assets + Current Assets
(iii) Total Assets Current Liabilities
(iv) Total Assets Outside Liabilities
Ans.(iv) Total Assets Outside Liabilities
Valuation of closing stock is to be made:
(i) on cost price
(ii) on market price
(iii) cost price or market price, whichever is less
(iv) None of these
Ans.(iii) cost price or market price, whichever is less
According to the cost concept, the assets are always valued at :
34. on cost price
35. on market price
36. on purchase price
37. None of these
Ans.(iii) on purchase price
Under Hire Purchase System depreciation is charged :
(i) On cash price
(ii) Hire purchase price
(iii) Market price
(iv) None of these
Ans.(i) On cash price
Hirer charges depreciation on:
(i) Hire purchase price
(ii) Cash price.
(iii) Lower of the two
(iv) None of these
Ans.(ii) Cash price.
What is transferred to Hirer under hire purchase system :
(i) Ownership of assets
(ii) Possession of asset
(iii) Ownership and possession of asset
(iv) None of these
Ans.(ii) Possession of asset
Hire Purchase Act is :
(i) 1932
(ii) 1956
(iii) 1972
(iv) 1872
Ans.(iii) 1972
The Sale of Goods Act is applicable in: (i) Credit Purchases (ii) Cash Purchases
(iii) Cash Sales (iv) None of these
Ans.(i)Credit Purchases
What is transferred to Hirer under Instalment Payment system :
(i) Ownership of Assets
(ii) Possession of Assets
(iii) Ownership and Possession of assets

:: 13 ::

(iv) None of these.

Ans.(iii) Ownership and Possession of assets
(94) Branch Adjustment Account is prepared:
(i) By Dependent Branch
(ii) By H.O. of Dependent Branch
(iii)By H.O. of Independent Branch
(iv) None of these
Ans.(ii) By H.O. of Dependent Branch
(95) Which account is prepared to find out the amount of closing stock:
(i) Head Office A/c
(ii) Branch A/c
(iii) Memorandum Stock A/c
(iv) None of these
Ans.(iii) Memorandum Stock A/c)
(96) Branch account under debtor system is:
(i) Real account
(ii) Personal account
(iii) Nominal account
(iv) None of these
Ans.(iii) Nominal account
(97) Branch Adjustment account is in the nature of :
(i) Real account
(ii) Nominal account
(iii) Personal account
(iv) None of these
Ans.(ii) Nominal account
(98) In foreign branch fixed assets shall be converted at:
(i) Opening rate
(ii) Average rate
(iii) Rate of the date of purchase
(iv) None of these
Ans.(i) Opening rate
(99) By what rate the balance of H.O. a/c is converted in foreign branch :
(i) Opening rate
(ii) Closing rate
(iii) Average rate
(iv) None of these
Ans.(iv) None of these
(100) The Gross Profit of a business being Rs. 3 lakh and the amount of loss of Profit
Policy being Rs.1,50,000 then the claim for loss Rs. 20,000 will reduce to :
(i) Rs. 12,000
(ii)Rs. 15,000
(iii) Rs. 20,000
(iv) None of these.
Ans.(ii) Rs. 15,000
(101) Loss of Profit Policy indemnity :
(i) Capital Loss
(ii) Revenue Loss
(iii) Budgeted Loss

:: 14 ::

(102)

(103)

(104)

(105)

(106)

(107)

(108)

(109)

(iv) Gross Loss.

Ans.(iii) Budgeted Loss
The value of closing stock Rs. 72,000, the amount of the Policy was Rs. 63,000,
the Actual loss of stock Rs. 54,000, there was an average clause in the Policy.
Calculate the amount of claims:
(i) Rs. 47,250
(ii)Rs. 54,000
(iii)Rs.72,000
(iv) None of these
Ans.(i) Rs. 47,250
The rate of Gross Profit on sales is 20%. Sales up to date of fire amounted to Rs.
1,00,000. Find Amount of Gross Profit:
(i) Rs. 20,000
(ii) Rs. 25,000
(iii)Rs. 50,000
(iv) None of these
Ans.(i) Rs. 20,000
The rate of Gross Profit on cost of sales is 25%. Sales up to date of fire amounted
to Rs. 1,00,000. Find amount of Gross Profit:
(i) Rs. 20,000
(ii) Rs. 25,000
(iii) Rs. 50,000
(iv) None of these
Ans.(i) Rs. 20,000
Excess of assets over liabilities is called :
(i) Creditors
(ii) Profit
(iii) Capital
(iv) Goodwill
Ans.(iii) Capital
Amount of Drawings is added at the time of finding out profit in single entry
system:
(i) In closing capital
(ii) In opening capital
(iii) Not in any capital.
Ans. (i) In closing capital
The amount of additional capital is deducted at the time of finding out profit in
Single Entry System:
(i) from closing capital
(ii) from opening capital
(iii) not from any capital.
Ans.(i) from closing capital
Following records are made in single entry system, give correct answer:
(i) Only in cash book
(ii) In ledger, posting of personal accounts only
(iii) records in cash book and posting of only personal accounts in ledger.
Ans.(iii). records in cash book and posting of only personal accounts in ledger.
Meaning of single entry system of Book-keeping is:
(i) Only one entry for each transaction.

:: 15 ::

(110)

(111)

(112)

(113)

(114)

(115)

(116)

(117)

(ii) Incomplete double entry system

(iii) Both entries only in accounts
Ans.(ii). Incomplete double entry system
Single entry system of book-keeping system:
(i) is best system
(ii) is scientific system
(iii) is incomplete system
(iv) is most popular system.
Ans.(iii) is incomplete system
Liabilities and assets respectively are Rs. 87,000 and Rs. 92,000. Amount of
difference will be:
(i) Creditors
(ii) Debentures
(iii) Profit
(iv) Capital
(v) None out of these.
Ans.(iv) Rs. 5,000 Capital.
To find out the opening and closing capitals, statement of affairs are prepared:
(i) One
(ii) Two
(iii) Four.
Ans.(ii) Two.
The expenses which are not departmental:
(i) are charged to departments in sales ratio.
(ii) are charged to departments in the ratio of assets employed thereto.
(iii) are charged to general profit and loss account.
Ans. (iii) are charged to general profit and loss account.
Cum-dividend quotation of shares means that the quotation includes:
(i) dividend which may be declared in future.
(ii) dividend declared recently but not yet paid.
(iii) nothing else but the price of the share.
Ans. (ii) dividend declared recently but not yet paid.
A quotation is ex-interest when :
(i) the interest to the date of transaction is to be paid in addition to the settled price.
(ii) interest has already been deducted from the price.
(iii) no adjustment is necessary for interest.
Ans.(i) the interest to the date of transaction is to be paid in addition to the settled
price.
Interest is calculated on:
(i) market price of securities
(ii) purchase price of securities
(iii) book value of securities
(iv) face value of securities.
Ans.(iv) face value of securities.
Meaning of ex-interest price of investment is :
(i) market price + interest
(ii) market price interest
(iii) market price
(iv) none out of these

:: 16 ::

(118)

(119)

(120)

(121)

(122)

(123)

(124)

(125)

Ans.(ii) market price interest

The amount of goodwill is paid by the new partner:
(i) For getting share in future profits
(ii) For Paying Entry Fee
(iii) For Paying Capital
(iv) For getting right over assets.
Ans.(i) For getting share in future profits
The value of goodwill is the highest of:
(i) Dog Goodwill
(ii) Rat Goodwill
(iii) Cat Goodwill
(iv) All the above
Ans.(iii) Cat Goodwill
The present value of annuity of Re. 1 for 8 years at 10% is Rs. 2.487. Super profit
is Rs. 22,000. The amount of goodwill will be :
(i) Rs. 5,471
(ii) Rs. 2,200
(iii) Rs. 71,745
(iv) Rs. 54,714
Ans.(iv) Rs. 54,714
Weighted average profit method is suitable :
(i) When there is stability in profits
(ii) When there is unstability in profits
(iii) When there is increase in profits gradually
(iv) When there is decrease in profits gradually
Ans.(iii) When there is increase in profits gradually
The method of valuation of shares is:
(i) Goodwill Valuation Method
(ii) Income Valuation Method
(iii) Profit Valuation Method
(iv) All the above
Ans.(ii) Income Valuation Method
In comparison to face value, the valuation of shares is usually:
(i) More
(ii) Less
(iii) Equal
(iv) Less or More.
Ans.(iv) Less or More
When value of shares is found out on the basis of its dividend or expected
dividend, it is called :
(i) Asset Valuation Method
(ii) Yield or Income Valuation Method
(iii) Fair Value Method
(iv) None of the above.
Ans.(ii) Yield or Income Valuation Method
The most appropriate method of valuation of shares from the point of view of
investor is :
(i) Net Assets method
(ii) Income Valuation Method

:: 17 ::

(126)

(127)

(128)

(129)

(iii) Net Asset and Income Method

(iv) None of the above.
Ans.(ii) Income Valuation Method
In respect of the valuation of shares, the employed capital means:
(i) Cost price of all the assets
(ii) Market value of all the assets
(iii) Book value of all the assets]
(iv) All the above values
Ans.(ii) Market value of all the assets
The value of per shares on division of amount of net assets by number of share will
be :
(i) Intrinsic Value
(ii) Book Value
(iii) Cost Price
(iv) Market Value
Ans.(i) Intrinsic Value
When one company goes in liquidation and a new company is formed to take over
the business of the company which goes in liquidation, this is called :
(i) Amalgamation
(ii) Absorption
(iii) External Reconstruction
(iv) Internal Reconstruction
Ans.(iii) External Reconstruction
In internal reconstruction :
(i) No company goes into liquidation
(ii) Only one company goes into liquidation
(iii) Two or more companies are liquidated
(iv) One or more companies go into liquidation
Ans.(i) No company goes into liquidation.

:: 18 ::

(130) If the net assets taken over by the company are less than the purchase
consideration, the difference shall be treated as :
(i) Secret Reserve
(ii) Goodwill
(iii) Capital Reserve
(iv) General Reserve
Ans.(ii) Goodwill
(131) Interest on debentures is recorded in :
(i) Capital account
(ii) Net Revenue account
(iii) Revenue account
(iv) Not in any account
Ans.(ii) Net Revenue account
(132) Interest on bank loan is recorded in :
(i) Revenue account
(ii) Net revenue account
(iii) Capital Account
(iv) Not in any account
Ans.(ii) Net revenue account
(133) Equity share capital is recorded in :
(i) General balance Sheet
(ii) Net Revenue account
(iii) Capital account
(iv) Not in any account
Ans.(iii) Capital account
(134) When was banking company regulation act implemented?
(i) 1947
(ii) 1949
(iii) 1950
(iv) 1956
Ans.(ii) 1949
(135) How many schedules are there in the amended from of Final Account of Banking
Company:
(i)
8
(ii) 10
(iii) 12
(iv) 16
Ans.(iv) 16
(136) What is the rate of statutory reserve to be maintained under section 17 of Banking
Company Act?
(i) 10% of Net Profit
(ii) 15% of Net Profit
(iii) 20% of Net Profit
(iv) 30% of Net Profit
Ans.(iii) 20% of Net Profit
(137) In which year 14 Banks were Nationalised?
(i) 1969

:: 19 ::

(138)

(139)

(140)

(141)

(142)

(143)

(215)

(ii) 1971
(iii) 1973
(iv) 1977
Ans.(i) 1969
Paid up capital of a bank should not be less then the following percentage of
subscribed capital :
(i) 25%
(ii) 50%
(iii) 75%
(iv) 100%
Ans.(ii) 50%
If nothing is given) What is the percentage maintained by Marine Insurance
companies for Reserve for Unexpired Risk :
(i) 40% of Net Premium
(ii) 50% of Net Premium
(iii) 60% of Net Premium
(iv) 100% of Net Premium.
Ans.(iv) 100% of Net Premium.
When were General Insurance Companies nationalised:
38. 1955
39. 1969
40. 1971
41. 1973
Ans.(iii) 1971
(If nothing is given) What is the percentage maintained for Additional Reserve :
(i) 10% of Net Premium
(ii) 20% of Net Premium
(iii) 0% of Net Premium
(iv) 25% of Net Premium
Ans.(iii) 0% of Net Premium
(If nothing is given) What is the percentage maintained by Insurance Companies
other than Marine Insurance Company for Reserve for unexpired risk:
(i) 40% of Net Premium
(ii) 50% of Net Premium
(iii) 45% of Net Premium
(iv) 100% of Net Premium
Ans.(ii) 50% of Net Premium
Medical expenses regarding claims are added to:
(i) Claims
(ii) Premium
(iii) Management Exp.
(iv) None of above
Ans.(i) Claims
Livestock in the case of mixed farming is
i. a fixed asset.
ii. a current asset
iii. a wasting asset.
iv. a tangible asset.
Ans. ii. a current asset

:: 20 ::

(216) Crops are valued at

i. market price.
ii. cost price.
iii. capitalised value.
iv. economic value.
Ans. i. market price.
(217) Final accounts of a farmer can be prepared under
i. single entry method.
ii. double entry method.
iii. both single and double entry methods.
iv. none of the above.
Ans. iii. both single and double entry methods.
(218) The cash book usually maintained by the fanner is
i. petty cash book.
ii. two-column cash book.
iii. analytical cash book.
iv. three column cash book.
Ans. iii. analytical cash book.
(219) Livestock purchased will figure in
i. the balance sheet.
ii. the trading account.
iii. the profit and loss account.
iv. the current account.
Ans. ii. the trading account.
(220) Grain consumed by livestock will figure
i. in the livestock account.
ii. in the crop account.
iii. both in the livestock and crop account.
iv. none of the above.
Ans. iii. both in the livestock and crop account.
(221) Which one of the following is the criterion, as per AS-7, for determining the
percentage of completion of contract?
i. Proportion of progress payments received to total contract price.
ii. Proportion of work certified to total contract price.
iii. Proportion of costs Incurred to date to the estimated total contract costs.
iv. Proportion of time taken so far to the total estimated time needed to complete
the contract.
Ans. iii. Proportion of costs incurred to date to the estimated total contract costs.
(222) Notional profit on a contract is Rs. 90,000 and 60% of contract is completed. The
customer pays 80% of work certified. The amount of profit to be reserved for
contingencies is
i. Rs. nil.
ii. Rs.36.000.
iii. Rs. 18.000.
iv. Rs. 42.000.
Ans. iv. Rs. 42.000.
(223) The estimated loss on a contract is Rs. 100 lakhs. For the accounting year ended
31st December 1999, the loss computed on the contract which is 70% completed is
Rs. 60 lakh. The loss to be provided as per AS-7 is

:: 21 ::

(224)

(225)

(226)

(227)

(228)

(229)

(230)

i. Rs. 100 lakhs.

ii. Rs. 40 lakh.
iii. Rs. 30 lakhs.
iv. Rs. nil.
Ans. ii. Rs. 40 lakh.
Progress payments and advances received from customers, in respect of contracts
in relation to work performed, are disclosed in financial statements as
i. a liability.
ii. a deduction from the work-in-progress of the contract.
iii. (i) or (ii).
iv. suspense account.
Ans. iii. (i) or (ii).
Consequential loss policy indemnifies
i. Capital losses
ii. Revenue losses
iii. Budgeted losses
iv. Capital and revenue losses
Ans. ii. Revenue losses
Fire Insurance provides cover for
i. Tangible assets
ii. Intangible assets
iii. Fictitious assets
iv. both tangible and Intangible
Ans. i. Tangible assets
With the opening stock at Rs. 13,500, purchases at Rs. 82,500. sales at Rs.
l,20,000and stock salvaged at Rs. 1,260, the rate of gross profit being 50% on cost,
the stock destroyed in fire will be
i. Rs. 14,740
ii. Rs. 24,740
iii. Rs. 36,000
iv. Rs. 40,000
Ans. i. Rs. 14,740
The average clause in a loss of profits policy protects the
i. Insured
ii. Insurer
iii. Workers
iv. Tax authorities
Ans. ii. Insurer
If indemnity period is six months, standard turnover Rs. 20,000, annual turnover
Rs. 50,000, turnover during indemnity period Rs. 8,000. short sales will amount to
i. Rs. 30,000
ii. Rs. 12,000
iii. Rs. 42,000
iv. Rs. 50,000
Ans. ii. Rs. 12,000
A fire insurance policy is taken up to indemnify
i. Capital losses to tangible property
ii. Revenue losses to tangible property
iii. Capital losses to intangible property

:: 22 ::

(231)

(232)

(233)

(234)

(235)

(236)

(237)

iv. Revenue losses to intangible property.

Ans. i. Capital losses to tangible property
Rent and rates are apportioned to different departments on the basis of
i. Floor area occupied
ii. number of workers
iii. sales of each department
iv. value of the assets kept
Ans. i. Floor area occupied
The turnover ratio is used for the allocation of
i. income tax
ii. bad debts
iii. depreciation
iv. staff welfare expenses
Ans. ii. bad debts
Department A produced 1,000 units at a cost of Rs. 2,000 (excluding interdepartmental transfer costs) and B produced 2,000 units at a cost of Rs. 10,000
(excluding inter-departmental transfer costs). Each department transferred to the
other department at cost one-fourth of its production to be used as raw material.
Total cost of department A is
i. Rs.4.500
ii. Rs.4.625
iii. Rs.3.200
iv. Rs.4,800
Ans. iv. Rs.4,800
Provision for unrealised profit with respect to stocks when transfers are effected at
transfer price is to be charged to
i. departmental trading account
ii. departmental profit and loss account
iii. either (i) or (ii)
iv. general profit and loss account
Ans. iv. general profit and loss account
Branch account under debtors system is a
i. real account
ii. nominal account
iii. personal account
iv. representative personal account.
Ans. ii. nominal account
Branch account under stock and debtors system is a
i. real account
ii. nominal account
iii. personal account
iv. representative personal account
Ans. i. real account
When branch 'A' sends goods to branch 'B' in the books of branch 'A' debit is given
too
i. head office account
ii. branch 'B' account

:: 23 ::

(238)

(239)

(240)

(241)

(242)

(243)

(244)

iii. sales return account

iv. sales returns account
Ans. i. head office account
The cash and credit sales of a branch are Rs, 5,000 and Rs. 10,000 respectively.
The amount collected from debtors is Rs. 10.000. Under debtors system the
amount credited to branch will be
i. Rs. 20,000
ii. Rs. 15,000
iii. Rs. 25,000
iv. Rs. 10,000
Ans. ii. Rs. 15,000
Goods are sent to the branch at 20% margin on selling price. When branch stock
discloses a surplus of Us. 2.000 the amount to be credited to branch adjustment
account (above the line) will be
i. Rs. 2,000
ii. Rs. 400
iii. Rs. 333
iv. Rs. 1,600
Ans. ii. Rs. 400
Goods sent by the head office to the branch but not received by the branch before
the close of financial year are credited by head office to
i. branch account
ii. trading account
iii. goods sent to branch account
iv. goods-in-transit account
Ans. i. branch account
When a branch purchases fixed assets and the asset account is to be kept in the
books of head office, the branch makes the following entry.
i. debits head office credits bank
ii. debits branch credits head office
iii. debits head office credits branch asset
iv. debits branch asset credits bank
Ans. i. debits head office credits bank
Depreciation on branch assets under debtors system is
i. not shown separately in branch account
ii. shown in branch account
iii. not accounted
iv. shown in the profit and loss account of head office.
Ans. i. not shown separately in branch account
Stock reserve in relation to closing stock appears
i. on the debit side of branch account
ii. on the credit side of branch account
iii. on the debit side of profit and loss account
iv. on the credit side of the profit and loss account
Ans. i. on the debit side of branch account
The lessee's right to recover the short working is related lo
i. first five years
ii. last three years
iii. terms of the agreement

:: 24 ::

(245)

(246)

(247)

(248)

(249)

(250)

(251)

iv. none of the above.

Ans. iii. terms of the agreement
In the books of lessee, short workings recoverable in future years are
i. a revenue expense
ii. a normal loss
iii. an asset
iv. a liability.
Ans. iii. an asset
In the event of recoupment of short workings, the lessor
i. debits landlord's account
ii. credits sub-lessee's account
iii. debits short workings account
iv. debits profit, and loss account.
Ans. iii. debits short workings account
In the books of lessor short workings irrecoverable are to be
i. credited to profit and loss account
ii. debited to profit and loss account
iii. credited to Trading account
iv. credited to short workings account.
Ans. iv. credited to short workings account.
In case the right to recoup short workings has expired the balance in short
workings account is transferred by lessee to
i. profit and loss account
ii. landlord's account
iii. minimum rent account
iv. short workings suspense account.
Ans. i. profit and loss account
When short workings are lo be recovered by a sublessee the account to be debited
is
i. lessee's account
ii. short workings account
iii. profit and lessee's account
iv. none of the above.
Ans. i. lessee's account
Under instalment system of purchase, interest suspense account in the books of the
buyer is
i. Debited with the difference between instalment price and cash price.
ii. Credited with the difference between instalment price and cash price.
iii. Debited with the interest payable in respect of instalments due.
iv. Debited with the interest payable in respect of instalments not due.
Ans. i. Debited with the difference between instalment price and cash price.
Under the hire-purchase system the buyer becomes the owner of goods :
i. Immediately after the delivery of goods.
ii. Immediately after the down payment.
iii. Immediately after the first instalment is paid.
iv. Immediately after the payment of last instalment.
Ans. iv. Immediately after the payment of last instalment.

:: 25 ::

(252) A Ltd. sells 100 machines Costing Rs. l,000 at Rs. 1,500 each on Hire-purchase
basis instalment due and received during the period Rs. 9,00,000. The Hirepurchase profit for the period is
i. Rs. 9,00,000
ii. Rs. 50,000
iii. Rs. 30,000
iv. Rs. 15,00,000
Ans. iii. Rs. 30,000
(253) Stock out on hire at cost price is ascertained by
i. Deducting the gross profit margin from instalments not due and unpaid.
ii. Taking the cost in the proportion of paid instalments to total instalments.
iii. Taking the cost in the proportion of value of unpaid instalments to HirePurchase price.
iv. None of the above.
Ans. i. Deducting the gross profit margin from instalments not due and unpaid.
(254) A Ltd. sells 100 machines at Hire-purchase price of Rs. 1,500 payable Rs. 300
Cash down and the balance in 12 instalments equally. 400 instalments became due.
Cash received was Rs. 65,000. instalments due and unpaid are
i. Rs. 40,000
ii. Rs. 5,000
iii. Rs. 80,000
iv. Rs. 85,000
Ans. ii. Rs. 5,000
(255) A tape-recorder was sold at a hire-purchase price of Rs. 1,200, payable in 12 equal
instalments. The buyer paid 4 instalments and the tape-recorders was repossessed
after 7th instalment balance due. The repossessed tape-recorders were valued at
Rs. 850 and its original cost was Rs. 900. Profit on repossession is
i. Rs. 50
ii. () Rs. 50
iii. 400.
iv. Rs. 350.
Ans. i. Rs. 50
(256) Under the net worth method the bases for ascertaining the profit is
i. the difference between the capital on two dates
ii. the difference between the gross assets on two dates
iii. the difference between the liabilities on two dates.
iv. the difference between capital assets and liabilities at close
Ans. i. the difference between the capitals on two dates
(257) Under the net worth method any additions to capital during the accounting period
must be
i. added to profit
ii. subtracted from profit
iii. added to capital
iv. deducted from capital.
Ans. ii. subtracted from profit
(258) Cash received from debtors needed for the construction of cash account can be had
from.
i. total debtors account
ii. balance sheet

:: 26 ::

(259)

(260)

(261)

(262)

(263)

(264)

iii. analysis of cash book

iv. pass book.
Ans. i. total debtors account
Given the opening and closing balances of debtors and the figure of credit sales,
the balancing figure of total debtors account will give
i. bill retired during the year
ii. cash received from debtors
iii. closing balance of bills receivable
iv. bills received during the year.
Ans. ii. cash received from debtors
The closing balance of trade debtors can be located from
i. total debtors account
ii. balance sheet
iii. bills receivable account
iv. cash book
Ans. i. total debtors account
An estimate of assets and liabilities as on a dates is called
i. balance sheet
ii. statement of affairs
iii. statement of capital
iv. trial balance.
Ans. ii. statement of affairs
In the case of highly autonomous branches which make use of local currency
substantially the method of translation most suitable is
i.
Temporal method
ii. Current/Non-current method
iii. Closing rate method
iv. Opening rate method.
Ans. iii. Closing rate method
The gain or loss due to difference in exchange is to be adjusted in the
i.
Reserves
ii. Income statement
iii. Retained profits
iv. Branch current account.
Ans. ii. Income statement
The currency into which the trial balance of the branch is translated is known as
i.
Reporting currency
ii. Local currency
iii. Foreign currency
iv. Translated currency.
Ans. i. Reporting currency

(265) Which one of the following combinations of accounting assumptions are

fundamental as per AS1?
i.
Going concern, consistency, and accrual
ii. Going concern, conservatism, and historic cost
iii. Historic cost, consistency and conservatism
iv. Conservatism, consistency and accrual
Ans. i. Going concern, consistency, and accrual

:: 27 ::

(266) Any change in the accounting policy relating to inventories which has a material
effect in the current or later periods should be disclosed. This is in accordance with
the accounting principle of:
i.
Going concern
ii. Conservatism
iii. Consistency
iv. Disclosure
Ans. iii. Consistency
(267) Historical cost of inventories should normally be determined by using
i.
FIFO, or Weighted average cost formula
ii. FIFO, Base Stock, or Adjusted Selling price formula
iii. FIFO, LIFO or Latest Purchase Price formula
iv. LIFO, Base Stock or Adjusted Selling Price formula
Ans. i. FIFO, or Weighted average cost formula
(268) Which one of the following formulae is not based on historic cost?
i.
FIFO
ii. LIFO
iii. Latest Purchase Price
iv. Specific Identifications
Ans. iii. Latest Purchase Price
(269) Which one of the following methods is best suited to retail business?
i.
FIFO
ii
LIFO
iii. Latest Purchase Price
iv. Retail price method
Ans. iv. Retail price method
(270) Selling and distribution costs are not included in cost of inventories because they
i.
are negligible
ii. do not relate to bringing the inventories in their present location and condition
iii. are period costs
iv. are in relation to specific customers
Ans. ii. do not relate to bringing the inventories in their present location and
condition
(271) Cash flows arising from interest paid in the case of a financial enterprise is a cash
flow from
i. operating activities
ii. financing activities
iii. both (i) and (ii)
iv. investing activities
Ans. i. operating activities
(272) Interest and dividends received in the case of a manufacturing enterprise should be
classified as cash flow from
i. operating
ii. financing
iii. Investing
iv. both (ii) and (iii)
Ans. iii. Investing

:: 28 ::

(273) If net profit is taken as the basis to ascertain cash flow from operations, which one
of the following adjustments is correct and proper?
i. add decrease in current assets and current liabilities
ii. add increase in current liabilities and current assets
iii. add increase in current assets and deduct decrease in current liabilities.
iv. add decrease in current assets and add increase in current liabilities.
Ans. iv. add decrease in current assets and add increase in current liabilities.
(274) The conversion of debt to equity:
i. must be shown on a notional basis as a financing cash flow
ii. must be shown on a notional basis as an investment cash flow
iii. must not be shown as it is a non-cash transaction
iv. none of the above
Ans. iii. must not be shown as it is a non-cash transaction
(275) The cash flows associated with extraordinary items should be separately classified
as a cash flow from
i. operating activities
ii. investing activities
iii. financing activities
iv. under (i) or (ii) or (iii) as is appropriate
Ans. iv. under (i) or (ii) or (iii) as is appropriate
(276) Profit or loss for the period includes
i. Ordinary activities
ii. Extraordinary activities
iii. Prior period Items
iv. All the above.
Ans. iv. All the above.
(277) The perception of extraordinary events must be made with reference to
i. Business ordinarily carried on by an enterprise
ii. The frequency with which such events are expected to occur
iii. Both (i) and (ii)
iv. The size of the transaction.
Ans. i. Business ordinarily carried on by an enterprise
(278) Prior period Items must be shown
i. In the current profit and loss account along with the ordinary activities
ii. In the current profit and loss account in a manner that their impact on the
current profit or loss can be perceived
iii. As adjustments to reserves
iv. As a separate Item in the balance sheet.
Ans. ii. In the current profit and loss account in a manner that their impact on
the current profit or loss can be perceived.
(279) A change in the estimated life of the asset, which necessitates adjustment in the
depreciation is an example of
i. Prior period item
ii. Ordinary Item
iii. Extraordinary item
iv. Change in the accounting estimate.
Ans. iv. Change in the accounting estimate.

:: 29 ::

(280) A change in the accounting policy should be made

i. When state so directs
ii. For compliance with an accounting standard
iii. For better presentation of financial statements
iv. All the above.
Ans. iv. All the above.
(281) Depreciable assets are assets which
i. are expected to be used during more than one accounting period
ii. have a limited useful life
iii. are held by the enterprise for use in the production or supply of goods and
services
iv. all the above
Ans. iv. all the above
(282) AS-6 is applicable to which one of the following assets?
i. Goodwill
ii. Livestock
iii. Plantation
iv. Plant and Machinery.
Ans. iv. all the above.
(283) A change in the method of depreciation is made only
i. If the adoption of new method is required by statute
ii. for compliance with an accounting standard
iii. If the change would result in better presentation of the financial statements
iv. all the above.
Ans. iv. all the above.
(284) When a change in the method of depreciation is effected the deficiency or surplus
arising from retrospective re-computatlon of depreciation in accordance with new
method is
i. to be ignored
ii. to be adjusted in the accounts in the year in which the change is effected
iii. to be spread over the remaining period of the life of (he asset.
iv. to be charged or credited to capital reserve.
Ans. ii. to be adjusted in the accounts in the year in which the change is effected
(285) The following factor is to be considered for estimating the useful life of a
depreciable asset
i. Expected physical wear and tear
ii. obsolescence
iii. legal or other limits on the use of assets
iv. all the above.
Ans. iv. all the above.
(286) The stage of completion of a contract is determined on the basis of :
i. proportion of costs incurred to date to the estimated total contract costs
ii. survey of work performed
iii. completion of physical proportion of the contract work
iv. either (i) or (ii) or (iii)
Ans. iv. either (i) or (ii) or (iii)
(287) Revenue is recognised on the basis of:
i. percentage of contract completion
ii. architect's certificates

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(288)

(289)

(290)

(291)

(292)

(293)

(294)

iii. payments received from the customer

iv. either (i) or (iii)
Ans. i. percentage of contract completion
Which one of the following is an example of a direct cost of a contract?
i. selling costs
ii. research and development costs
iii. cost of hiring plant and equipment for the contract
iv. general administration cost
Ans. iii. cost of hiring plant and equipment for the contract
Which one of the following is a cost that may be allocated to contracts as it is
attributable to contract activity?
i. insurance
ii. claims from third parties
iii. research and development
iv. selling costs
Ans. i. insurance
Estimated total loss on the contract:
i. spread over accounting periods equally
ii. must be recognised as an expense immediately
iii. allocated on the basis of architects certificates
iv. allocated on the basis of percentage of completion
Ans. ii. must be recognised as an expense immediately
Which one of the following is excluded in research and development costs?
i. Amortisation of patent and licences
ii. Payment to outside bodies for research and development projects related to the
enterprise
iii. Cost of materials and services consumed.
iv. Costs incurred on research to maintain existing products.
Ans. iv.Costs incurred on research to maintain existing products.
The benchmark treatment of research and development costs is
i. to expense it in the year in which it is incurred
ii. to treat such expenditure as deferred revenue expenditure
iii. (i) or (ii)
iv. to capitalise such expenditure and provide depreciation
Ans. i. to expense it in the year in which it is incurred
Deferred research and development costs are amortised on the basis of
i. sales of the product
ii. use of the product or process
iii. time basis (time during which the product is used or sold)
iv. all the above
Ans. iv. all the above
Research and development costs should be expensed in the year in which it is
incurred if
i. estimated research and development costs exceed the future revenues
ii. the technical feasibility of the product has not been established.
iii. the management has no intention to produce the product

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(295)

(296)

(297)

(298)

(299)

(300)

(301)

iv. adequate revenues do not exist to complete the project and market the product
or process
v. all the above.
Ans. v. all the above.
Which one of the following items is not dealt with by AS-9?
i. Revenue recognition on sale of goods
ii. Revenue recognition on rendering of services
iii. Revenue recognition on the use of resources of the enterprise
iv. Unrealised gains on the holding of current assets.
Ans. iv.Unrealised gains on the holding of current assets.
Which one of the following items is dealt with by AS-9?
i. Realised and unrealised holding gains in relation to fixed assets
ii. Unrealised holding gains in relation to current assets
iii. Revenue recognised on rendering of services
iv. Realised or unrealised gains from foreign currency translation.
Ans. iii. Revenue recognised on rendering of services
Completed service contract method is applicable to which one of the following?
i. Sale of software products
ii. Sale of software development
iii. Installation fees
iv. Royalties.
Ans. iii. Installation fees
In the case of consignment sales revenue is to be recognised on
i. Preparation of pro-forma invoice by the consignor
ii. Receipt of goods by the consignee
iii. Receipt of cash by the consignor
iv. Sale of goods to a third party
Ans. iv. Sale of goods to a third party
Which one of the following is not a component of the cost of fixed asset?
i. Installation costs
ii. Financing costs
iii. Administration and general expenses
iv. Start up and commissioning costs.
Ans. iii. Administration and general expenses
A decrease in net book value arising on revaluation of fixed assets is to be debited
to be
i. revaluation reserve
ii. Profit and loss account
iii. General reserve
iv. Capital reserve.
Ans. ii. Profit and loss account
Items of fixed assets that have been retired from active use and are held for
disposal should be stated at :
i. Net book value
ii. Net realisable value
iii. Lower of the net book value and net realisable value
iv. Higher of the net book value and net realisable value.
Ans. iii. Lower of the net book value and net realisable value

:: 32 ::

(302) Fixed assets purchased on hire-purchase terms are recorded at:

Ans. cash value
(303) When an asset is revalued at higher than original cost, the accumulated
depreciation is
Ans.credited to revaluation reserve
(304) While translating the financial statements of foreign branches, fixed assets are
translated by applying ..
Ans. rate at the date of transaction.
(305) Exchange differences arising on repayment of fixed asset-linked liabilities should
be adjusted to
i. Profit and loss account
ii. Fixed asset account
iii. Revaluation reserve
iv. Capital reserve.
Ans. ii. Fixed asset account
(306) Closing rate is used for translating
Ans. Monetary items.
(307) The carrying amount for current investments is.
Ans.lower of cost and fair value
(308) Investments in properties are to be shown under
Ans. long-term investments.
(309) Amalgamation adjustment account is opened in the books of the transferee
company to incorporate
Ans. the statutory reserves of the transferor company
(310) As per AS-14, purchase consideration is the amount agreed payable to
Ans. shareholders.
(311) Under the 'Purchase Method of Accounting', the transferee company incorporates
in Its books
Ans. the assets, liabilities and statutory reserve of the transferor company
(312) Under the pooling of interests method the difference between the purchase
consideration and share capital of the transferee company should be adjusted
to
Ans. general reserve
(313) As per AS-14 purchase consideration is what is payable to
i. Shareholders
ii. Shareholders and debenture holders
iii. Shareholders and creditors
iv. Debenture holders and creditors
Ans. i. Shareholders
(314) When amalgamation is in the nature of merger, the accounting method to be
followed is:
i. Equity method
ii. Purchase method
iii. Pooling of interests method
iv. Consolidated method
Ans. iii. Pooling of interests method
(315) Amalgamation adjustment account is opened in the books of transferee company to
incorporate
i. The assets of the transferor company

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(316)

(317)

(318)

(319)

(320)

ii. The liabilities of the transferor company

iii. The statutory reserves of the transferor company
iv. The non-statutory reserves of the transferor company
Ans. iii. The statutory reserves of the transferor company
Under the purchase method of accounting, the transferee company incorporates
in its books:
i. The assets and liabilities of the transferor company
ii. The assets, liabilities and statutory reserves of the transferor company
iii. The assets, liabilities and non-statutory reserves of the transferor company
iv. The assets, liabilities and reserves of the transferor company.
Ans. ii. The assets, liabilities and statutory reserves of the transferor company
Under the pooling of interests method the differences between the purchase
consideration and share capital of the transferee company should be adjusted to;
i. General reserve
ii. amalgamation adjustment account
iii. Goodwill or capital reserve
iv. Either (ii) or (iii)
Ans. i. General reserve
Any balance is the capital reduction account after writing off lost capital is
transferred to
i. Capital reserve account
ii. Share surrendered account
iii. Capital reorganisation account
iv. Contingency reserve
Ans. i. Capital reserve account
In a scheme of reorganisation amount of shares surrendered by shareholders is
transferred to
i. Capital reduction account
ii. Share surrendered account
iii. Capital reorganisation account
iv. Capital reserve
Ans. ii. Share surrendered account
Amounts sacrificed by shareholders are credited to
i. Capital reserve account
ii. General reserve account
iii. Capital reduction account

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(321)

(322)

(323)

(324)

(325)

(326)

(327)

(328)

iv. Contingency reserve account

Ans. iii. Capital reduction account
For a company to carry out capital reduction, permission is required from
i. The competent court
ii. Controller of Capital issues
iii. Company Law Board
iv. Central Government.
Ans. i. The competent court
Consent of the creditors is required for
i. Sub-dividing the shares
ii. Consolidation of shares
iii. Increasing share capital
iv. Return of capital.
Ans. iv. Return of capital.
Capital reduction account is used in the case of
i. internal reconstruction
ii. external reconstruction
iii. amalgamation of Companies
iv. absorption of one company by another
Ans. i. internal reconstruction
Banks prepare the accounts for the
i. Calendar year
ii. Financial year
iii. Cooperative year
iv. Diwali year
Ans. ii. Financial year
Banks show the provision for income-tax under the head
i. Contingency accounts
ii. Contingent liabilities
iii. Other liabilities and provisions
iv. Borrowings
Ans. iii. Other liabilities and provisions
The heading other assets does not include
i. Silver
ii. Interest accrued
iii. Inter-office adjustment (Dr.)
iv. Gold
Ans. iv. Gold
Rebate on bills discounted is
i. An item of income
ii. A liability
iii. income received in advance
iv. Income Outstanding
Ans. iii. income received in advance
A non-banking asset is
i.
An item of office equipment
ii. Any asset acquired from the debtors in satisfaction of claim
iii. Money at call and short notice

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(329)

(330)

(331)

(332)

(333)

(334)

(335)

iv. Furniture and fixtures

Ans. ii. Any asset acquired from the debtors in satisfaction of claim
A non-performing asset is
i.
Money at call and short notice
ii. An asset that ceases to generate income
iii. Cash balance in till
iv. Cash balance with RBI
Ans. ii. An asset that ceases to generate income
When income is to be recognised on cash basis, a distinction should be made
between
i.
Performing and non-performing assets
ii. Banking and non-banking assets
iii. Monetary and non-monetary assets
iv. Current and non-current assets
Ans. i. Performing and non-performing assets
A valuation balance sheet is prepared by a
i. trading company
ii. banking company
iii. manufacturing company
iv. life insurance company
Ans. iv. life insurance company
A general insurance business carrying on more than one type of insurance business
prepares
i. a separate revenue account for each type of business.
ii. a separate profit and loss account for each type of business.
iii. a separate revenue account and combined profit and loss account.
iv. a separate revenue account and profit and loss account for each type of
business.
Ans. iii. a separate revenue account and combined profit and loss account.
Survey expenses for marine insurance claims must be
i. added to claims
ii. added to law charges
iii. added to management expenses
iv. shown as a separate item
Ans. i. added to claims
Expenses of management must be
i. charged to Profit and Loss Appropriation A/c .
ii. charged to different revenue accounts
iii. charged to profit and loss account
iv. reduced from investment income
Ans. ii. charged to different revenue accounts
During a year a general insurance company ha. the following details :
Lakh of Rs.
Premiums received
500
Premiums on re-insurance accepted
100
Premiums on re-insurance ceded
200
The amount to be credited as premium to revenue account should be
i. Rs. 500 lakhs
ii. Rs. 600 lakhs

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(336)

(337)

(338)

(339)

(340)

(341)

(342)

iii. Rs. 700 lakhs

iv. Rs. 400 lakhs
Ans. iv. Rs. 400 lakhs
Income tax on interest, dividend and rent should be
i. debited to provision for taxation
ii. debited to profit and loss account
iii. debited to profit and loss appropriation account
iv. deducted from interest, dividends and rents
Ans. iv. deducted from interest, dividends and rents
Cash at call and short notice will appear in the Balance Sheet
i. as a separate item
ii. under the heading 'Cash'
iii. under the heading 'other accounts'
iv. either (i) or (ii)
Ans. ii. under the heading 'Cash'
When an asset is replaced;
i. the current cost of replacement is written off to revenue.
ii. the original cost of the asset is written off to revenue.
iii. the original cost reduced by the amount of depreciation is written off to
revenue.
iv. the lower of (i) or (ii).
Ans. i. the current cost of replacement is written off to revenue.
Original cost of an asset Rs. 5,00,000. Present cost of replacement Rs. 6,50,000.
Amount spent on replacement Rs. 7,60,000. The amount chargeable to revenue
will be:
i. Rs. 6,50,000
ii. Rs. 5,00,000
iii. Rs. 7,60,000
iv. Rs. 2,60,000
Ans. i. Rs. 6,50,000
Interest on debentures is shown in:
i. Revenue account
ii. Capital account
iii. Net revenue account
iv. Capital account
Ans. iii. Net revenue account
When an asset is replaced, any amount realised on sale of old materials will be
credited to
i. Replacement account
ii. Asset account
iii. Revenue account
iv. Net revenue account
Ans. i. Replacement account
Cost of license is shown in the
i. Capital account
ii. Revenue account
iii. General balance sheet
iv. Net revenue account
Ans. i. Capital account

:: 37 ::

(343) Contingencies reserve is created:

i. to declare dividends during years when profits are inadequate.
ii. to meet abnormal expenses which are beyond the control of management.
iii. strengthen generally the financial position of the company.
iv. either (ii) or (iii)
Ans. iv. either (ii) or (iii)
(344) The essential feature of the double account system is:
i. for every debit there is a corresponding credit.
ii. the presentation of capital receipts and capital expenditure in a separate
account.
iii. the presentation of assets at original cost, the depreciation to date being
shown to the credit of depreciation reserve account.
iv. all the above
Ans. iv. all the above
(345) Under double account system, depreciation is credited to
Ans. depreciation reserve account.