GLS University

Faculty of Commerce
Semester II
Financial Accounting - 2

Multiple Choice Questions

Unit 1

Investment Accounts

Multiple Choice Questions:-

1. While selling securities brokerage is generally calculated on following prices:

(a) Face Value
(b) Sales Price
(c) Market Price
(d) None of above

2. Investment accounts are kept:

(a) Only by brokers
(b) Only by companies
(c) By any person who is an investor
(d) By stock exchange

3. Interest on security is calculated on :

(a) Its Face Value
(b) Its Market Price
(c) Its Purchase Price
(d) None of the above

4. Capital value in case of Cum-Interest Purchase means:

(a) The total amount paid to broker as purchase price
(b) Purchase price + Brokerage – Interest included
(c) Market Price
(d) None of the above

5. Capital value in case of Ex-Interest Purchase means:

(a) The total amount paid to broker as purchase price
(b) Purchase price + Brokerage – Interest included
(c) Purchase price + Brokerage
 (d) None of the above

6. In case of Purchase and sales of securities ex- interest:

(a) Interest is payable in addition to market price
(b) Market price includes interest also
(c) The seller gets interest on the next interest dates
(d) None of the above

7. The closing stock of Investment is valued:

(a) Always at purchase price
(b) At cost or market price whichever is less
(c) Always at market price
(d) None of the above

8. In the purchase of securities ex- interest, Interest is calculated:

(a) From the date of purchase till next date of interest
(b) From the last date of interest till date of purchase
(c) No separate interest is calculated
(d) None of the above

9. The value of securities printed on it is called:

(a) Face Value
(b) Market value
(c) Cash Price
(d) None of above

10. The purchase price which includes accrued interest from the last date of interest till today
is the transaction of :
a) Cum Interest Purchase
b) Ex- Interest Purchase
c) Purchase
d) None of above

Do as directed:-

1. Interest on security is calculated on its Face Value.

2. While selling securities brokerage is generally calculated on Sales Price.
3. Capital value in case of Cum-Interest Sales means: Selling Price- Brokerage-Interest
Included.
4. The interest on fixed dates are received by Government securities:
 5. The closing stock of Investment is valued at Cost Price or Market Price whichever is less.
6. While purchasing securities brokerage is generally calculated on Purchase Price.
7. In case of ex-interest transaction, the amount of interest is calculated from the last date of
interest payment till the date of transaction date.
8. The price which we paid at the time of purchase including brokerage amount is called
Cost or capital value.
9. The purchase price which includes accrued interest from the last date of interest till today
is the transaction of Cum Interest Purchase.
10. The price of the securities rulling in the market is known as Market Value.

Calculate following:-

1. An investor purchased on 1-6-11 9% Government of India loan of Rs- 1,00,000 at 102%

Cum interest. Brokerage was paid at 1% on purchase price. Int Dates are 30th June and
31st December. Then capital value is:
Ans. 99,270

2. Mr. Dinesh had on 1-1-11 10% debentures o Rs. 1,00,000. Out of these he sold
debentures of Rs. 20,000 at 96% Cum interest on 15-4-11. Then he purchased Debentures
of Rs. 40,000 on 15-6-11 at 102% ex interest. Interest is payable on 30th June and 31st
December. He received on 30-6-11 interest as follows:
Ans. 6,000

3. On 1-7-11 Mr. Varun purchased 10% debentures of Rs. 1,50,000 for Rs. 1,60,000. He
paid brokerage at 1% on Purchase price. Interest dates are 30th June and 31st December.
Ans. 1,61,600

4. On 1-7-10 Het purchased 15% Debentures of Rs. 2,47,500 for Rs. 2,64,000. He paid
brokerage at 1 % on Purchase price. Interest dates are 30th June and 31stDecember.The
capital value will be:
Ans. 2,66,640

5. On 31-5-10, 15% government securities of Face Value Rs. 4,00,000 was purchased at Rs.
110 and Rs. 10,000 paid as brokerage. Interest is paid on 30th June and 31st December.
Then the Capital Value wil be:
Ans. 4,25,000
Unit -2

Insurance Claims

Multiple Choice Questions:-

1. Fire insurance privides cover for:

(a) Tangible assets
(b) Intangible assets
(c) Fictitious assets
(d) Business employees

2. The difference between standard turnover and actual turnover during the indemnity
period is :
(a) Short Sales
(b) Actual Sales
(c) Total Sales
(d) None of the above

3. A fire insurance policy is taken out to indemnity:

(a) Capital losses and revenue losses of tangible assets
(b) Revenue losses of tangible assets
(c) Capital losses of intangible assets
(d) None of the above

4. Sock of goods destroyed by fire is 9,00,000, Stock of goods salvaged 1,00,000, value of
insurance policy 8,00,000, There is an average clause in the policy then the amount of
claim is :
(a) 9,00,000
(b) 8,00,000
(c) 7,20,000
(d) 7,00,000

5. For the year 2008,2009,2010 if the rate of gross profit were 15% , 20%, and 18%
respectively , then the rate of Average gross profit for the year 2011 will be:
(a) 15%
(b) 18%
 (c) 17.67%
(d) 20%

6. Cost of machinery 60,000, Insurance Policy includes Average Clause 50,000, Goods
saved 6,000, Amount of Claim will be:
(a) 45,000
(b) 60,000
(c) 50,000
(d) None of above

7. Value of goods destroyed is 48,000, Goods saved 12,000, Amount of insurance policy
was 40,000 which include average clause then amount of claim is:
(a) 32,000
(b) 40,000
(c) 48,000
(d) 12,000

8. If the indemnity period is six months, standard turnover is 20,000, Annual turnover is
50,000, turnover during indemnity period is 8,000, then short sales amount will be:
(a) 30,000
(b) 12,000
(c) 42,000
(d) None of above

9. Opening stock 13,500, Purchase 82,500, Sales 1,20,000 and stock salvaged 1,260, the
rate of gross profit 50% on cost then the stock destroyed by fire will be:
(a) 14,740
(b) 27,740
(c) 36,000
(d) None of above

10. Sock of goods destroyed by fire is 13,60,000, Stock of goods salvaged 3,40,000, value of
insurance policy 11,90,000, There is an average clause in the policy then the amount of
claim is :
(a) 9,52,000
(b) 4,08,000
(c) 13,60,000
(d) 8,33,000

Do as directed:-
 1. The average clause in a loss of profit policy protects the Insurer.
2. A fire insurance policy is taken up to indemnify Capital losses to tangible assets.
3. The difference between standard turnover and actual turnover during the indemnity
period is Short Sales.
4. Consequential loss policy indemnifies Revenue losses.
5. The average clause in a policy discourage Under Insurance.
6. Fire insurance privides cover for Tangible assets.
7. For the preparation of claim for loss of stock the difference between the value of stock on
the date of fire and Stock Saved is considered.
8. When insurance is taken against loss of profit first we need to find out Short Sales.
9. When only goods or stock is insured it is compulsory to find out cost of stock on the date
of fire.
10. In order that the businessman does not under insure the property, the Average Clause is
generally included in the fire policy.

Calculate the following:-

1. When the opening stock is Rs. 13,500, purchase Rs. 82,500, sales Rs. 1,20,000 and stock
salvaged is Rs. 1,260 the rate of gross profit being 50% on cost , the stock destroyed in
fire will be:
Ans. 14,740

2. If indemnity period is six months, standard turnover rs. 20,000 annual turnover rs 50,000
turnover during indemnity period rs. 8,000 than short sales will amount to:
Ans. 12,000

3. If indemnity period is six months for which sales were rs 20,000 while during the last
year for the same period sales were rs. 1,00,000, Last year the rate of gross profit was
15% on sales and percentage of profit on basis of sum insured was 18% then the amount
of claim is :
Ans. 12,000

4. Opening stock Rs. 27,000, Purchase Rs. 1,65,000. Sales Rs.2,40,000, Goods saved Rs.
2,250 and Gross Profit is Rs. 50 % on cost, then the cost of goods burnt by fire is:
Ans. 29,750

5. Stock of goods destroyed by fire- 8,00,000 Stock of goods salvaged 2,00,000 value of
insurance policy 7,00,000 There is an average clause in the policy. Then the amount of
claim is :
Ans. 5,60,000
 6. Date of fire is 25th Feb 2008, Stock as on 1-1-2008 is 70,000, purchase and sales from 1-
1-08 to till the date of fire is 1,20,000 and 2,00,000 respectively, Rate of G/P on sales is
25% then the value of goods destroyed by fire is:
Ans. 40,000

Unit – 3

Accounts of Royalty / Accounting in Computerized Environment

Multiple choice questions:-

1. The difference between Minimum rent and actual royalty is ;

(a) Short working (b) Royalty (c) Profit (d) None of above

2. Right to recoup short working means;

(a) Write of short workings
(b) Recover short workings in coming years
(c) Fix short working amount
(d) All of above

3. Minimum rent term refers to the amount;

(a) Expense (b) Income (c) fix payment to Landlord (d) Royalty

4. When Royalty amount is more than Minimum rent, amount paid to landlord is;
(a) Royalty amount (b) Minimum amount (c) Difference of both (d) None

5. For making use of Tally we must first go to –

(a) Ledger creation (b) Company creation (c) Accounting voucher (d) Inventory

6. For cash payment entry in Tally, following key should be pressed;

(a) F7 (b) F6 (c) F8 (d) F5

7. Minimum Rent in the first year Rs 1,00,000 and will be increased by Rs 10,000 p.a. for
three years and then after by 10% per year. What is the amount at the end of 6th year?
(a) Rs 1,00,000 (b) Rs 1,50,000 (c) Rs 1,57,300 (d) Rs 1,60,000

8. Royalty is Rs 64,000, Minimum rent Rs 80,000. Strike is for 3 months with no work
done, Minimum rent to be reduced in proportion of time, find the amount paid to
Landlord.
(a) Rs 60,000 (b) Rs 64,000 (c) Rs 80,000 (d) None of these
 9. Calculate units manufactured during the year; Units Sold – 500, Opening stock – 100;
Closing stock – 200
(a) 500 (b) 700 (c) 550 (d) 600

10. In the books of Lessor short working is called;

(a) Royalty payable
(b) Royalty suspense account
(c) Royalty payable suspense account
(d) Royalty receivable suspense account

Do as directed :-

1. Short workings recouped means Royalty is more than minimum rent.

2. The amount paid to the Landlord is Royalty or minimum rent whichever is more.
3. When Royalty is less than Minimum rent, amount paid to landlord is Minimum rent.
4. Royalty is a Profit and Loss type of account.
5. Short working recouped is the excess of minimum rent over royalty (True / False)
6. Royalty suspense account is Nominal account. (True / False)
7. 7.5 is a version of Tally accounting software (True / False)
8. For making a journal entry in Tally , F7 key should be pressed.
9. Arithmetic and logic is part of CPU in a computer.
10. The movable mark on a display screen of computer is Cursor.

Calculate the following :-

1. Royalty per ton is Re 1 and the output for first two years is 10,000 and 15,000 tons
respectively. Show Royalty account in books of Lessor.
Ans. Dr Landlord a/c 10,000 Cr P&l a/c 10,000
Dr Landlord a/c 15,000 Cr P&l a/c 15,000

2. Minimum rent – Rs 1,00,000

Actual Royalty 2014 – Rs 80,000; 2015 – Rs 1,04,000; 2016 – Rs 1,12,000. If Short
working is recouped during following two years in which it arises, what will be that
amount in the year 2016?
Ans. Rs 12,000

3. Opening stock – 100 machines; Closing stock – 50 machines; Sales- 400 machines; find
out the machines manufactured?
Ans. 350 machines

4. Explain the various options in the menu of Gateway of Tally?

 Ans. Accounts Info, Transactions vouchers, Accounting Vouchers, Reports, Balance
Sheets, P&L, Ration Analysis etc.
5. Which are the two most popular languages used in computer.
Ans. COBOL- language used for business and FORTRAN – Algebraic language used for
mathematics and science.

Unit 4

Hire Purchase and Instalment Accounting

Multiple Choice Questions:-

1. The amount payable less its cash price is equal to _________

(a) Depreciation
(b) Interest
(c) Market Price
(d) Purchase Price

2. Under Hire Purchase system the amount of interest is charged to ________ account
(a) Asset
(b) Purchaser
(c) Profit and loss
(d) Seller

3. At the end of the year the interest paid and depreciation charged are transferred to the
______ account.
(a) Asset
(b) Profit and Loss
(c) Purchased
(d) Seller

4. In which of the following method of sales, if the purchaser can’t pay the amount of
instalment, the vendor can get the assets as return back?
(a) Cash method
(b) Sales or Return based sale
(c) Instalment system
(d) Hire purchase system

5. Which of the following is not included in the hire purchase agreement?

(a) Interest Rate
 (b) Instalment amount
(c) Method of depreciation
(d) Number of instalment

6. Under the hire purchase system, goods are delivered to the hirer when…..
(a) First instalment is paid
(b) Agreement is signed
(c) Last instalment is paid
(d) None of above

7. Under the hire purchase system, ownership of goods is transferred to the hirer when…
(a) First instalment is paid
(b) Agreement is signed
(c) Last instalment is paid
(d) None of above

8. In case of hire purchase interest is included in----

(a) Down payment
(b) Hire purchase price
(c) Cash price
(d) None of above

9. Which of the following statement is correct?

(a) In hire purchase system depreciation is calculated on cash price of the asset
purchased.
(b) In hire purchased system depreciation is calculated on contract price.
(c) In hire purchased system depreciation is calculated on market price.
(d) None of above

10. According to hire purchase agreement rs. 25,000 is the down payment and rs. 90,000 is
the total amount of three equal amount instalments inclusive of interest rs. 15,000, then
how much would be the cash price of the asset…..
(a) 90,000
(b) 1,00,000
(c) 1,15,000
(d) 1,30,000

Do as directed:-
 1. Cash Price of asset + Interest = Contract Price
2. Under Hire Purchase system the amount of interest is charged to Profit and loss amount
3. In case of hire purchase the depreciation is calculated on Cash Price.
4. Interest is calculated on Balance of cash price outstanding at the beginning of instalment
under hire purchase agreement
5. By deducting cash price from the contract price of assets, the difference of the amount is
called Interest.
6. In case of Hire purchase system, interest is not included in Down Payment.
7. The main difference between sale under hire purchase agreement and sale under
instalment system is regarding Ownership of the goods.
8. The total amount payable less its cash price is equal to Interest.
9. In Hire purchase system depreciation is calculated on cash price of the assets
purchased.
10. In hire purchase system , the interest is calculated on each instalment on the outstanding
cash price of the instalment. (True/False)

Calculate the following:-

1. Deepali has purchased one machine on hire purchase agreement. The cash price of
machine is Rs. 90,000. The amount is to be paid on agreement Rs. 30,000 and balance
amount is paid by three equal annual instalments of Rs. 30,000 each. Find out the interest
of third year.
Ans. 5,000

2. Paid Rs.2,800 at the time of contract. Four annual instalment were paid respectively
Rs.3120, Rs.2480, Rs.1880 and Rs.1320. Rate of Interest 10%. Then Cash price will be:
Ans. 10,000

3. Mr. Arham purchased one machine from Kavya on 1-4-96 on hire purchase agreement
paying cash Rs.20,000 and agreed to pay further three instalments of Rs.23,400,
Rs.21600 and Rs.19,800 respectively on 31 march every year. Rate of interest is 10%
then what would be cash price….
Ans. 74,000

4. Paid Rs.7,000 at the time of contract. Four annual instalments were paid respectively
Rs.7,800, Rs.6,200, Rs.4,700, Rs.3,300. Rate of interest is 10% then cash price will be..
Ans. 25,000

5. Paid Rs. 3,500 at the time of contract. Four annual instalmets were paid respectively Rs.
3.900, 3,100, 2350, 1650. Rate of interest is 10%, then cash price____
Ans. 12,500