PC 14

Practice Set-1
1. Which qualitative characteristics of accounting information is reflected when accounting information is
clearly presented[D1]?
a. Understandability b. Relevance
c. Comparability d. Reliability
2. Which of the following is not a current assets
a. Inventory b. Sundry Debtor
c. Furniture d. None of the given
3. Assumption of accounting entity or business entity concept is applicable for which of the following business
organizations.
a. Societies b. Joint Stock Companies/ Partnership Firms
c. Corporations d. All the above
4. Switching accounting principles every year would violate the
a. Principle of Conservatism b. Principle of Going concern
c. Consistency principle d. Principle of Money Measurement
5. Voucher is prepared from
a. Documentary evidence b. Journal entry
c. Ledger account d. All of the above
6. Double entry accounting requires that
a. All transactions that create debits to asset accounts must create credits to liability or capital accounts
b. A transaction that requires a debit to a liability account require a credit to an asset account
c. Every transaction must be recorded with equal debits equal total credits.
d. All of the above
7. Calculate the manager’s commission on the profit after charging such commission when the net profit of
the firm is ₹ 50000/- and the rate of commission is 10%
a. ₹ 5000 b. ₹ 5500
c. ₹ 4545 d. ₹ 5555
8. Calculate cost of goods sold and gross profit from the following information.
Sales Rs. 62500
Sales Returns Rs. 500
Opening Stock Rs. 6400
Purchases Rs. 32000
Direct Expenses Rs. 4200
Closing Stock Rs. 7200

a. ₹ 69200 b. ₹ 62000
c. ₹ 35400 d. ₹ 26600
9. Nominal or Registered capital is
a. capital which is actually issued to the public for subscription including the shares allotted to vendors and
the signatories to the company’s memorandum.
b. the amount of share capital which a company is authorised to issue by its Memorandum of Association.
c. capital which has been actually subscribed by the public.
d. capital which has been called up on the shares
10. Pick the right one
a. Capital increases by net profit and fresh capital introduced, decreases by drawings and net loss
b. Capital decreased by net profit and fresh capital introduced, increases by drawings and net loss
c. Capital remains static and is not influenced by net profit and drawing and loss
d. Capital always increases irrespective of profit and loss of the business.
11. The classes of shares in which the company’s capital is to be divided, along with their respective rights and
obligations, are prescribed by the
 a. Board of Director b. General Resolution
c. Memorandum of Association d. Articles of Association of the company.
12. The two basic measures of liquidity are
a. inventory turnover and current ratio b. current ratio and liquid ratio
c. gross profit margin and operating ratio d. current ratio and average collection period
13. Which is called the Acid Ratio
a. Current Ratio b. Turnover Ratio
c. Quick Ratio d. Long-Term Ratio
14. While calculating operating profit, the following are not taken into account.
a. Normal transactions and Expenses of a purely financial nature
b. Abnormal transactions and Expenses of a purely financial nature
c. Normal and abnormal transactions
d. Normal, abnormal transactions and Expenses of a purely financial nature
15. The method is especially suited to natural resources (mines, quarries, sand, pits etc.) is said to be
a. Annuity method b. Depletion method
c. Revaluation method d. Sum of digits method
16. If wages paid for installation of new machinery is debited to wages Account, it is
a. An error of commission b. An error of principle
c. A compensating error d. An error of omission.
17. A bank reconciliation statement is prepared with the balance
a. Passbook b. Cash book
c. Both passbook and cash book d. None of these
18. When an 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.
19. Management concealing important financial information violates the
a. Convention of Materiality b. Convection of Business Entity
c. Convention of Conservatism d. Convention of Full Disclosure
20. When a machinery is purchased for cash, the cash balance is reduced and to that extent, the amount of
machinery as an asset is recorded. This is done to follow which of the following accounting principles:
a. Dual Aspect Principle b. Materiality Principle
c. Conservatism Principle d. Consistency Principle
21. Purchase Manager has been given an estimated annual purchase requirement of 2000 units of material.
Unit price of material is Rs20. Annual cost of carrying inventory is 25% of cost of material. Ordering cost for
an order is Rs50. The Economic Order Quantity (EOQ) will be[D2]
a. 150 b. 300
c. 400 d. 200
22. Where annual consumption -10000kg, Ordering cost ₹ 50, Unit cost of raw material - ₹ 2 and Storage cost-
8% of average inventory, the number of order to be placed in year will be
a. 2 b. 6
c. 5 d. 4
23. A Company budgets for a production of 150000 units. The variable cost per unit is Rs.14 and fixed cost per
unit is Rs.2 per unit. The company fixes the selling price to fetch a profit of 15% on cost, the break-even
point will be when selling price is reduced by 5%, revised break-even point will be
a. 68182 b. 75258
c. 86207 d. 90150
24. In case of a company, selling price per shirt- ₹.800, Variable cost per shirt: ₹.600, Staff salaries-₹.24 lakh
General Office Cost: ₹.8 lakh and Advertising Cost- ₹.8 lakh and the annual sale is 24000 shirt, the break-
even point will be
a. 12000 shirts b. 16000 shirts
c. 20000 shirts d. 240000 shirts
25. Standard Output in 10 hours is 120 units, actual output in 8 hours is 132 units and wages Rate per hour is
₹ 15, the wages payable under Halsey Premium Plan would be
a. ₹ 120 b. ₹ 150
c. ₹ 135 d. ₹ 157.5
26. Task of producing 50 units in 8 hours and the guarantees time wages are ₹ 20/hour. Piece rate is ₹ 4/unit
is payable when task is completed before the standard time. When a worker completes the task in 10 hour,
the wages payable to him under Gantt System would be
a. ₹ 160 b. ₹ 200
c. ₹ 180 d. ₹ 190
27. In a factory, there were 1,000 workers in the beginning of the year while 1200 workers at the end of the
year. During the year 50 workers left and & 60 workers joined for their work. Remaining employees joined
in an Expansion Programme. The flux rate is
a. 10% b. 4.55%
c. 5.45% d. 9.10%
28. Bad debt is an example of
a. production overhead b. administrative overhead
c. selling overhead d. distribution overhead
29. Multiple costing is a technique of using two or more costing methods for ascertainment of cost by
a. the same firm b. the several firms
c. the same industry d. the several industries
30. Abnormal loss and its value are
a. debited to process a/c b. credited to process a/c
c. debited to costing profit and loss a/c d. debited to profit and loss a/c
31. Under absorption arises when
a. Budgeted overheads are more than the actual overheads.
b. Budgeted overheads are less than the actual overheads.
c. Budgeted overheads are equal to the actual overheads.
d. All of the above
32. Piece wage system is suitable in which of the following situations
a. Piece wage system is suitable where close supervision is not possible.
b. This is also suitable in the highly demanding industries.
c. This method is also suitable in the industry where more emphasize is given on the quantity than quality.
d. All of the above
33. Cost of each department is ascertained under
a. Batch costing b. Departmental costing
c. Process costing d. Contract costing
34. Merrick's plan gives three rate pick the incorrect one
a. Up-to 83.33% -Ordinary piece rate, 83.33% to 100% -110% of piece rate and above 100% -120% of piece
rate
b. Up-to 66.66% -Ordinary piece rate, 66.67% to 100% -110% of piece rate and above 100% -120% of piece
rate
c. a. Up-to 83.33% -Ordinary piece rate, 83.33% to 100% -120% of piece rate and above 100% -130% of
piece rate
d. a. Up-to 83.33% -Ordinary piece rate, 83.33% to 100% -120% of piece rate and above 100% -130% of
piece rate
35. Pick the correct one
a. If the over-time has been spent by the worker for the completion of a critical project on the demand of
the customers and associated to a particular job only then it will be treated as direct expense and charged
to the job itself
b. If over-time has been spent by the worker because of abnormal reasons like Machine break-down,
shortage or raw material etc. should be treated as an abnormal expense and it will be charged to costing
profit and loss account
 c. Both A&B
d. None of the given
36. Calculate the labour turnover rate on Separation methods on the basis of the following information relates
to the personnel department of a factory for the Year 2017-18
Number of employees on 1st April 2017: 950
Number of employees on 31st March 2018: 1,050
Number of workers who quit the factory in September 2017: 10
Number of workers discharged in January 2018: 30
Number of workers engaged in December 2017(Including 120 on account of expansion scheme): 140

a. 2% b. 4%
c. 6% d. 8%
37. Pepsi Company produces a single article. Following cost data calculate the Break-even point
Selling price per unit- Rs.40 Marginal cost per unit-Rs.24, Fixed cost per annum- Rs. 16000

a. 1200 units b. 1500 units

c. 1000 units d. 800 units
38. From the data given for two Components, A and B calculate re-ordering level

Normal usage 50 per week each

Maximum usage 75 per week each
Minimum usage 25 per week each
Re-order quantity A : 300; B : 500
Re-Order period A : 4 to 6 Weeks, B: 2 to 4 weeks

a. A-450, B-300 b. A-200, B-150

c. A-500, B-250 d. A-400, B-200
39. The average annual consumption of a material is 18,250 units at a price of Rs. 36.50 per unit. The storage
cost in 20% on average inventory and the cost of placing an order is Rs. 50. How much quantity is to be
purchased at a time?
a. 1000 units b. 750 units
c. 750 units d. 500 unit
40. Fixed Cost = Rs.40, 000 , Profit = Rs. 20,000, B.E.P. = Rs. 80,000 , find out the value of sales
a. ₹ 1,00,000/- b. ₹ 1,20,000/-
c. ₹ 60,000/- d. ₹ 1,40,000/-
41. Depreciation provides fund for[D3]
a. replacement b. repairs
c. expansion of capital d. All of the above
42. Types of reserve are
i. General Reserve ii. Capital Reserve
iii. Accumulated Reserve iv. Specific Reserve
v. Revenue Reserve

a. i, ii, iii and iv b. i, ii, iv and v

c. i, ii, iii and v d. All of the above
43. The journal entry to record purchase of equipment for Rs. 2,00,000 cash and a balance of Rs. 8,00,000 due
in 30 days include
a. Equipment Account Dr. ₹ 200000
To Bank/Cash Account ₹ 200000
b. Equipment Account Dr. ₹ 1000000
To Bank/Cash Account ₹ 200000
 To Creditor Account ₹ 800000
c. Equipment Account Dr. ₹ 800000
To Creditor Account ₹ 800000
d. Equipment Account Dr. ₹ 1000000
To Bank/Cash Account ₹ 1000000
44. Cash withdrawn by the Proprietor should be credited to
a. Drawings account b. Capital account
c. Profit and loss account d. Cash account
45. Which of the following is/are biological assets
i. Human beings ii. Horse
iii. Cows iv. Palm Tress

a. i only b. ii and iii only

c. iii and iv only d. All of the above
46. Profit is a liability for a firm and the loss is an asset under which of the following concepts
a. Business Entity Concept b. Materiality Concept
c. Historical Record Concept d. Accounting Period Concept
47. Which of the following is not a type of liability
a. current liability b. non-current liability
c. contingent liability d. none of the given
48. A Public Limited Company shall have members
a. Minimum 2 Maximum 200 b. Minimum 3 Maximum Unlimited
c. Minimum 5 Maximum Unlimited d. Minimum 7 Maximum Unlimited
49. A company shall be regarded as holding company if it holds
a. MORE THAN ONE-HALF of the total share capital either at its own or together with one or more of its
subsidiary companies
b. MORE THAN ONE-FOURTH of the total share capital either at its own or together with one or more of its
subsidiary companies
c. MORE THAN ONE-THIRD of the total share capital either at its own or together with one or more of its
subsidiary companies
d. MORE THAN TWO THIRD of the total share capital either at its own or together with one or more of its
subsidiary companies
50. Assets the value of which declines over multiple of time period and eventually used to last and then have
no remaining value is
a. Floating assets b. Secret assets
c. Fictitious assets d. Wasting assets
51. Which of the following loss (es) is regarded as loss due to depreciation
i. Normal fluctuation of market prices ii. normal wear and tear
iii. negligence after purchase iv. losses due to damage

a. i, ii and iii b. ii, iii and iv

c. i, iii and iv d. All of the above
52. AS-02 Valuation of Inventory does not apply to[D4]
i. WIP arising under construction contract
ii. WIP arising in the ordinary course of business of service providers
iii. Shares, debentures and other financial instruments held as stock in trade
iv. Producers’ inventories of livestock, agricultural and forest products, and mineral oils, ores and gases

a. i, ii and iii b. ii, iii and iv

c. i, ii and iv d. All of the above
53. Where Specific Identification method is not applicable, the cost of inventories is valued by the
 a. First-in-First out (FIFO) and Weighted Average Cost
b. Last-in-First out (LIFO) and Weighted Average Cost
c. First-in-First out (FIFO) and Last-in-First out (LIFO)
d. Simple Average and Weighted Average Cost
54. In terms of AS-03 Cash Flow Statement, pick the correct one
a. Extra Ordinary items should be separately shown under respective heads of cash from operating,
investing and financing activities.
b. Investing and financing transactions should be included in a cash flow statement whether such
transactions require the use of cash and cash equivalents or not.
c. Both A&B
d. None of the given.
55. In accordance with AS-06 Depreciation Accounting, the depreciation method selected should be applied
consistently from period to period. The change in method of depreciation should be made only if
i. required by statute ii. for compliance with an accounting standard
iii. it is considered that change would result in a more appropriate preparation of financial statement
iv. When there is change in method of depreciation, depreciation should be recalculated in accordance with
the new method from the date of such change and not from the date of assets coming into use. i.e.
retrospectively

a. ii, iii and iv ii. i, ii and iv

c. i, ii and iii iv. All of the above
56. Any expenses incurred on asset between date of ready for use and put to use is either charged to P & L A/c
or treated as deferred revenue expenditure to be amortised in 3-5 years after commencement of
production in terms of
a. AS-10 b. AS-13
c. AS-17 d. AS-21
57. When accounting profit/ loss is higher than taxable profit/loss
a. Deferred Tax Assets is created or Deferred tax liability is reversed.
b. Deferred Tax liability is created or Deferred tax asset is reversed.
c. contingent liability is created or Deferred tax asset is reversed
d. Secret assets is created or Deferred tax liability is reversed.
58. Events occurring after the date of Balance Sheet those represent material changes and commitments
affecting the financial position of the enterprise should be disclosed in
a. Balance Sheet b. Auditor’s Report
c. Director’s Report d. None of the given
59. Which of the following are the components of retirement benefits in terms of AS-15
i. Provident Fund ii. Gratuity
iii. Leave Encashment iv. Superannuation/Pension
v. Other Retirement benefits

a. i, ii, iii and iv b. ii, iii, iv and v

c. i, ii, iv and v d. All of the above
60. An asset that necessarily takes a substantial period of time to get ready for its intended use or sale e.g.
Heavy Plant & Machinery is called
a. Terminal assets b. Qualifying assets
c. Notional assets d. Amortised assets
61. AS-06 Depreciation Accounting, is not applicable to
i. Forest and Plantation ii. Wasting Assets
iii. Goodwill iv. Livestock
iv. Research and development
 a. i, ii, iii and iv b. ii, iii, iv and v
c. i, ii, iv and v d. All of the above
62. Which of the following is not a fixed assets[D5]
a. Bank Balance b. Patent
c. Goodwill d. None of the given
63. The basic concepts related to Profit & Loss Accounts are except
a. Cost concept b. Matching concept
c. Realization Concept d. Going concern concept
64. Revenue is said to have been realised when
a. cash is received
b. right to receive cash on the sale of goods/services has been created
c. Both A & B
d. Either A or B
65. Which of the following events represent business transaction
a. Goods is purchased for cash b. Goods are ordered for delivery next month
c. The owner of the firm dies d. An employee is dismissed from this job
66. 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 2000 for ₹ 10,00,000
b. Building cost details of 2003
c. Building cost details of 1998
d. Similar building cost in August, 2005 ₹ 25,00,000
67. Internal users of a business entity are except
a. Chief Executive Office of the entity b. Plant Managers
c. Line Supervisor d. Owner of the entity
68. Pick the right one
a. Capital increases by net profit and fresh capital introduced, decreases by drawings and net loss
b. Capital decreased by net profit and fresh capital introduced, increases by drawings and net loss
c. Capital remains static and is not influenced by net profit and drawing and loss
d. Capital always increases irrespective of profit and loss of the business.
69. Returned damaged office stationary and received Rs. 50,000. The journal entry will be
a. Stationery Account Dr. ₹ 50000
To Cash Account ₹ 50000
b. Cash Account Dr. ₹ 50000
To Stationery Account ₹ 50000
c. Purchase Account Dr. ₹ 50000
To Cash Account ₹ 50000
b. Cash Account Dr. ₹ 50000
To Purchase Account ₹ 50000
70. Assets sold on credit are entered in
a. sales journal b. Assets Journal
c. Debtor Journal d. Journal Proper
71. One of the most important tools in cost planning is[D6]
a. Direct cost b. Cost Sheet
c. Budget d. Marginal Costing.
72. If, Sales = ₹800,000, Mark-up rate = 25% of cost, the gross profit would be
a. ₹ 200000 b. ₹ 160000
c. ₹ 600000 d. ₹ 640000
73. A company maintains a margin of safety of 25% on its current sales and earns a profit of ₹30 lakhs per
annum. If the company has a profit volume (P/V) ratio of 40%, its current sales amount to
a. ₹ 120 lakhs b. ₹ 240 lakhs
c. ₹ 300 lakhs d. ₹ 150 lakhs
74. Total unit costs are
a. Independent of the cost system, used to generate them
b. Needed for determining product contribution
c. Irrelevant in marginal analysis
d. Relevant for cost-volume-profit analysis
75. Which of the following bases is not appropriate for apportionment of Transport department‘s cost?
a. Crane hours b. Crane value
c. Truck Mileage d. Truck value
76. Selling and distribution overhead does not include
a. Cost of warehousing b. Repacking cost
c. Transportation cost d. Demurrage charges.
77. EOQ is a point where:
a. Ordering cost is equal to carrying cost b. Ordering cost is higher than carrying cost
c. Ordering cost is lesser than the carrying cost d. Total cost is maximum
78. When closing stock is over valuate, what would its effect on profit?
a. It will Increase the profit b. It will decrease the profit
c. No effect on profit d. None of the given
79. Features of a relevant cost are other than
a. it affects the future cost b. It cause an increment in cost
c. It is a sunk cost d. It affects the future cash flows
80. An average cost is also known as:
a. Variable cost b. Unit cost
c. Total cost d. Fixed cost
81. The piece rate system is best described as
a. The increased volume of production results in decreased cost of production
b. The increased volume of production in minimum time
c. Establishment of fair standard rates
d. Higher output is a result of efficient management
82. Which of the following is considered as basic systems of remunerating labour?
a. Time rate system b. Piece rate system
c. Halsey premium plan d. Both time rate and piece rate system
83. If, Gross profit = ₹40,000 GP Margin = 20% of sales what will be the value of cost of goods sold?
a. ₹ 160,000 b. ₹ 120,000
c. ₹ 40,000 d. ₹ 90,000
84. An organisation sold 4000 units and have closing finished goods 3500 units and opening finished goods
units were 1000.The quantity of units produced would be:
a. 7500 units b. 6500 units
c. 4500 units d. 8500 units
85. At the start of the quarter there were 14,630 workers. 750 employees left during the quarter while 600
joined the organization during the same period. Using the flux method, the labour turnover was
a. 5.13% b. 9.23%
c. 9.32% d. 9.28%
86. Accounting of Government Grant is done in accordance with the provision given there in[D7]
a. AS-7 b. AS-12
c. AS-13 d. AS-18
87. Pick the correct one with regards to the provision contained in AS-29
i. Provisioning is required for only those liabilities that exist at the balance sheet date i.e. no provision is
required for costs that need to be incurred to operate in future.
ii. Where details of a proposed new law have yet to be finalized, no provisioning is required unless the
virtual certainty of the enactment of the law is established.
iii. If the reliable estimate of the liability cannot be made, it should be disclosed as a contingent liability.
iv. Where an enterprise is jointly & severally liable for an obligation, Provision should be made for the
portion on which enterprise has direct liability. The balance amount should be disclosed as contingent
liability.
 a. ii, iii and iv b. i, ii and iii
c. i, iii and iv d. All of the above
88. The amount by which the carrying amount of an asset exceeds its recoverable amount is called
a. Contingent loss b. Static loss
c. Impairment loss d. Reliant loss
89. Where an asset is revalued upward, it is accounted as
a. Debit Assets revaluation A/c, Credit-Fixed Asset A/c
b. Debit Fixed Asset A/c, Credit-Assets revaluation A/c
c. Debit Fixed Asset A/c, Credit-Capital A/c
d. Debit Capital A/c, Credit-Fixed Asset A/c
90. Cost of a fixed assets shall not include following except
i. Trade discounts and rebates ii. Sale proceeds of test run production
iii. Import Duties and other non-refundable taxes
iv. Amount of government grants received/ receivable against fixed assets
v. Gain on deferred payment arising out of foreign currency liability

a. i, ii, iv and v b. i, ii, iii and iv

c. ii, iii, iv and v d. All of the above
91. In business purchase should not be recorded without its voucher because it against the principle of[D8]
a. Cost b. Consistency
c. Conservatism d. Objectivity
92. If the opening and closing balance of debtors a/c is ₹ 50,000 and ₹ 40,000 respectively, cash received
from debtors ₹1,10,000 and bad debts are ₹ 4,000 then the amount of credit sales is
a. ₹ 104000 b. ₹ 100000
c. ₹ 102000 d. ₹ 110000
93. Furniture of ₹ 2,00,000 was sent to branch on 1-7-18. What will be the Depreciation on Furniture in the
books of branch at 15% p.a. by Straight Line Method as on 31-3-19?
a. ₹ 30000 b. ₹ 22500
c. ₹ 20500 d. ₹ 25000
94. If the rate of Gross Profit on sale is 20% and cost of goods sold is ₹ 2,00,000, then amount of G.P. will
be equal to
a. ₹ 40,000 b. ₹ 60,000
c. ₹ 75,000 d. ₹ 50,000
95. Work in Progress is valued on the basis of cost incurred because of principle of
a. Conservatism b. Realisation
c. Going Concern d. Matching
96. A worker has a time rate of ₹ 15/hr. He makes 720 units of component (standard time is 5 minutes/ unit)
in a week of 48 hours. His total wages including Rowan bonus for the week is
a. ₹ 792 b. ₹ 820
c. ₹ 840 d. ₹ 864
97. In two consecutive periods, sales and profit were ₹ 1,60,000 and ₹ 8,000 respectively in the first period and
₹ 1,80,000 and ₹ 14,000 respectively during the second period. If there is no change in fixed cost between
the two periods then P-V ratio must be
a. 20% b. 25%
c. 30% d. 40%
98. Good Job Plc makes one product which sells for ₹80 per unit. Fixed costs are ₹28,000 per month and
marginal costs are ₹42 per unit. What sales level in units will provide a profit of ₹10,000?
a. 350 units b. 667 units
c. 1,000 units d. 1,350 units
99. Which of the following product cost is Included in prime cost and conversion cost?
a. Direct labour b. Manufacturing overhead
c. Direct material d. Work in Process
100. The components of total factory cost are
a. Direct Material + Direct Labour b. Direct Labour + Factory Overheads
c. Prime Cost only d. Prime Cost + Factory Overheads