PFA-109

State whether each of the following statement is true or false:-

1) Book-keeping involves (i) summarizing the classified transactions (ii) analyzing the summarized
results (iii) interpreting the analyzed results and (iv) communicating the interpreted information to
the interested parties --- (F) [involves (i) identifying transactions (ii) measuring the identified
transactions (iii) recording the measured transactions and (iv) classifying the recorded transactions]

2)Accounting involves only (i) identifying transactions (ii) measuring the identified transactions (iii)
recording the measured transactions and (iv) classifying the recorded transactions----(F) [Accounting
involves, in addition to what has been spelt out, (i) summarizing the classified transactions (ii)
analyzing the summarized results (iii) interpreting the analyzed results and (iv) communicating the
interpreted information to the interested parties ]

3) Accounting is ‘primary stage’.---(F)[It is the ‘secondary stage’ and starts where book-keeping ends]

4) Book-keeping is the ‘secondary stage’ and starts where ‘primary stage’ ends----(F) [It is the
‘primary stage’]

5)Basic objective of book-keeping is to ascertain net results of operations and financial position and
to communicate information to the interested parties-----(F)[objective is to maintain systematic
records of financial transactions]
6) Basic objective of Accounting is to maintain systematic records of financial transactions----(F) [is to
ascertain net results of operations and financial position and to communicate information to the
interested parties]
7)The job of an accountant is often routine and clerical in nature----(F) [is an accountant is analytical
in nature]
8) The job of a book-keeper is analytical in nature----(F) [is often routine and clerical in nature]
9) Book-keeper covers designing of accounting system----(F) [does not cover designing of accounting
system]
10)Accounting does not cover designing of accounting system---(F) [covers designing of accounting
system]
11) The process of recording a in the Journal is called ‘Posting’ (F) (it is Journalising)
12) The individual record of a person or thing or an item of income or an expense is called an
account (T)
13) The Ledger is the not the ultimate destination of all transactions-----------(F) (It is the ultimate
destination of all transactions )
14) The Ledger is called the ‘Book of Prime entry’ (F) (Final entry)
15) A journal entry by means of which the balances of various assets, liabilities and Capital appearing
in the Balance Sheet of previous accounting period are brought forward in the books of current
accounting period, is known as ‘Posting’ (F) (Opening entry)
16) The Ledger is a book of ‘Original entry’ (F) (Final entry)
17) L.F.(i.e., ‘Ledger Folio Column’) in the Journal is filled at the time of Journalising (F) (it is done
at the time of ‘posting’ in to the ledger)
18) Discount column of Cash Book may have either Debit Balance or Credit Balance (F) (it is not
balanced rather each balance is transferred to respective account)
19) The allowance given to customer for prompt payment is called Trade Discount (F) (Cash
discount)
20) Discount received is recorded on the Debit side of the Cash Book (F) (Credit side)
21) Trade Discount received is recorded on the Credit side of Triple Column Cash Book (F) (it is
not recorded in transactional entries)
22) The total of Discount column on Debit side of Cash Book is posted to the Credit side of Discount
Account (F) (it is posted to the Debit side of Discount Account)
23) ‘Rent Out standing’ is a Nominal A/c. (F) (Representative Personal A/c.)
24) A list which contains balances of accounts to know whether the total of ‘Debit Balances’ and
‘Credit Balances’ are tallied is known as Balance Sheet (F) (Trial Balance)
25) Any unexpired expenses account is a Nominal A/c. (F) (Representative Personal A/c.)
26) Purchase of second-hand Building for business purposes by a Hardware merchant is recorded in
Purchase Day Book (F) (Journal)
27) Sales Tax Collected is shown as income on the credit side of Profit & Loss A/c.------(F) (It is
shown as Liability in Balance Sheet)
28) In Trial Balance both Debit and Credit Balances appear and this is why it is an ‘Account’--------(F)
‘Statement’
29) Income Tax paid in a Proprietorship organization is to be shown on the Debit side of Profit &
Loss Account (F) (it is taken as ‘drawings’ so shown on Liability side in Balance
Sheet under the caption head ‘Capital’ and the amount will be deducted from the favourable
‘Capital’ balance)
30) Goods worth Rs.5,000 taken by proprietor for personal use to be credited to Drawings A/c.----(F)
(It will be Credited to Purchase A/c. considering Proprietor is running business as a Trader. However
if Proprietor is running a manufacturing business and Proprietor takes manufactured goods for
personal use then instead of ‘Purchase A/c.’, Trading A/c. will be Credited)
31) Both ‘Cash Sales’ and ‘Credit Sales’ are recorded in ‘Sales Day Book’ (F) (Sales Account)
32) All Direct Expenses are Debited to Profit & Loss A/c. (F) (Trading Account)
33) Capital + Long Term Liabilities —Short Term Liabilities ==Fixed Assets+ Investments+ Current
Assets------(F)(Capital+ Long Term Liabilities +Short Term Liabilities==Fixed Assets + Investments
+Current Assets)
34) ‘Credit Balance’ in Bank Pass Book indicates ‘Overdraft Balance’ (F ) (Favorable Balance)
35) A Profit and Loss Account is a point statement whereas a Balance Sheet is a period statement
(F) -- A Profit and Loss Account is a period statement whereas a Balance Sheet is a point statement
36) Balance sheet is prepared to ascertain the results of business operation during an accounting
period-----(F)(It is prepared to know the financial position of an enterprise at a particular time)
37)Trading and Profit & Loss Account is prepared to know the financial position of an enterprise at a
particular time-----(F) ( It is prepared to ascertain the results of business operation during an
accounting period)
38)Trial Balance is prepared to check whether ‘nature of accounts’ have been correctly dealt or not -
---------(F) ( It is prepared to check the arithmetical accuracy of the posting of transactions to the
Ledger)
39)In Joint Venture, persons carrying on business are called partners (F) [co-venturers]
40) In Partnership, persons carrying on business are called co-venturers (F) [Partners]
41) In Partnership a minor can be admitted as a Partner to the benefits of a firm (T)
42) In Joint Venture, a minor can be a co-venturer ------(F) ( A minor can not be a co-venturer as he is
incompetent to contract
43)In Cosignment, both ownership and risk of Goods remain with the Consignor and Consignee (F)
. [both remain with consignor only]
44)In Consignment while sending goods to Consignee, Consignor forwards a statement showing the
particulars of Goods e.g., quality, quantity, price, markings, packing etc. and this Statement is known
as ‘Account Sales’ (F) [This Statement is known as Proforma Invoice]
45) In Consignment, periodically or when the goods consigned are sold by the Consignee, Consignee
sends a Statement to the Consignor containing the information like (i) Sales made (ii) Expenses
incurred on behalf of the Consignor (iii) Commission earned (iv) An Advance (if any) given (v) the
balance due to Consignor (principal). This Statement is known as ‘Sales Account’ (F)
[The concerned Statement is known as ‘Account Sales’ whereas ‘Sales Account’ provides only the
summary of sales made for Cash and on credit]
46) Del-credere Commission is allowed by the Consignor only when Consignee undertakes the work
of supervising the performance of other agents in a particular area-------(F) (Del-credere Commission
is allowed by the Consignor only when Consignee undertakes the risk of bad debts arising out of
credit sales made by him
47) Del-credere Commission is calculated at an agreed rate either on total sales (if no agreement)
or credit sales (if agreement provides) and loss due to non-recovery of credit sale dues is to be borne
by the Consignor------(F) (Loss due to non-recovery of credit sale dues is not to be borne by the
Consignor) (T)
48) In Partnership, where each date and amount of Drawings are properly indicated, the interest
is calculated for an average period of six months (F) [It is calculated with the help
of Product Method]
49) In Partnership, where each date and amount of Drawings during the period of 12 months are not
properly indicated then interest is calculated on Product Method (F)
[Interest is calculated on the total amount of drawings for an average period of 6 months assuming
each drawing was made evenly in the middle of each month throughout the year and amounts were
drawn evenly during the year]
50) In Partnership where during the period of 12 months fixed amount is withdrawn on the first day
of every month, interest on total amount of Drawings is calculated for an average period of 6
months ------(F) (Interest on total amount of Drawings is calculated for an average period of 6.5
months)
51) In Partnership where during the period of 12 months fixed amount is withdrawn during the
middle of every month, interest on total amount of Drawings is calculated for an average period of
6.5 months-------(F) (Interest on total amount of Drawings is calculated for an average period of 6.0
months)
52) In Partnership where during the period of 12 months fixed amount is withdrawn on the last day
of every month, interest on total amount of Drawings is calculated for an average period of 6.5----(F)
(Interest on total amount of Drawings is calculated for an average period of 5.5 months)
53) In Partnership where during the period of 12 months fixed amount is withdrawn in the beginning
of each quarter, interest on total amount of Drawings is calculated for an average period of 7.0
months--(F)(Interest on total amount of Drawings is calculated for an average period of 5.5 months)
54) In Partnership where during the period of 12 months fixed amount is withdrawn in the middle of
each quarter, interest on total amount of Drawings is calculated for an average period of 6.5 months
--- (F) (Interest on total amount of Drawings is calculated for an average period of 6.0 months)
55) In Partnership if during the period of 12 months fixed amount is withdrawn at the end of each
quarter, interest on total amount of Drawings is calculated for an average period of 5.5 months-------
---(F) (Interest on total amount of Drawings is calculated for an average period of 4.5 months)
56) If Partnership agreement is silent as to Interest on Capital then Interest on Capital is allowed------
---------------------(F) [Interest on Capital is not allowed]
57) In Partnership in absence of any agreement or deed, partners are not entitled to share Profit &
Loss equally ------(F)[In absence of any agreement or deed, partners are entitled to share Profit &
Loss equally]
58) In Partnership even in absence of any agreement or deed, Interest on Drawings is to be charged
(F) [ No Interest on Drawings is to be charged]

59) In Partnership in absence of any agreement or deed, Interest on Advances/Loans by a partner is

not to be allowed-----(F) [Interest on Advances/Loans by a partner is to be allowed @ 6% p.a. even
if there are losses]
60) In Partnership even in absence of any agreement or deed, partners are entitled for Salary and/or
commission (F) [No such Salary and/or commission is allowed].

(61) All ‘direct expenses’ are debited to Profit & Loss A/c.---(F) (‘Indirect expenses’ are debited to
Profit & Loss A/c.)

62) Profit & Loss A/c. contains ‘Real’ and ‘Personal’ ‘Types of Accounts’---(F) (contains ‘Nominal’
‘Types of Account’)

63) Balance Sheet contains ‘Nominal’ ‘Types of Account’-----(F) (contains ‘Real’ and ‘Personal’ ‘Types
of Accounts’)

64) Depreciation has to be provided on all Fixed Assets----(F)(e.g., ‘land’ and ‘old paintings’ do not
depreciate)

65) Under ‘ written down value method’, the amount of yearly depreciation remains the same----(F)
(the amount of yearly depreciation goes on decreasing)

66) ‘Rate of Depreciation’ for any particular asset will be more in case of ‘Straight Line Method’ than
‘Written Down Value Method’----(F) (Since the life of the asset is fixed and as in the case of ‘Written
Down Value Method’ the amount of yearly depreciation goes on decreasing, so to cover the
depreciable value of the asset, ‘Rate of Depreciation’ for any particular asset will be more in case of
‘Written Down Value Method’)

67) Depreciation is calculated only on the invoice price of the asset by disregarding the other costs
incurred towards the assets till it ‘put to use’ (e.g., freight etc. incurred for bringing the asset from
Seller’s point of sale to the point of installation +installation charges, if any, less Cash Discount, if
any, etc.)----(F) [Depreciation is to be calculated on the invoice price of the asset as also other costs
incurred towards the assets till it ‘put to use’ (e.g., freight etc. incurred for bringing the asset from
Seller’s point of sale to the point of installation +installation charges, if any, less Cash Discount, if
any, etc.)]

68) For any particular asset, if ‘rate of depreciation’ is considered to be the same under both ‘written
down value method’ and ‘straight line method’ then amount of ‘depreciation/year’ (other than the
1styear) will be more in case of ‘written down value method’ than ‘straight line method’.----(F)
(Amount of ‘depreciation/year’ (other than the 1styear) will be more in case of ‘straight line method’
than ‘written down value method’)

69) That a company can issue its shares at a ‘premium’ has been dealt ‘under Section 89’ of the
Companies Act, 1956.------(F) (A company can issue its shares at a ‘premium’ has been dealt ‘under
Section 78’ of the Companies Act, 1956)
70) As per provisions of Table-A of Schedule-I of the Companies Act, 1956, the interest rate charged
on calls-in-arrears and interest rate payable on calls-in-advance is same.----(F) (It is 6% p.a. in case of
calls-in-advance and 5%p.a. in case of calls-in-arrears )
71) Discount allowed on reissue of forfeited shares is debited to ‘Calls-in-Arrears A/c.’----(F) (It is
debited to ‘Share Forfeiture Account’).
72)When Shares are forfeited for non-payment of call money and the money already received is
debited to ‘Calls-in-Arrears A/c.’----(F) (It is debited to ‘Share Forfeiture Account’)
73)The difference between Subscribed Capital and Called-up Capital is called Un-subscribed Capital--
----(F)( It is called ‘Uncalled Capital’)
74)Document issued for the issue of Shares is known as ‘Articles of Association’---------(F) (Document
is known as ‘Prospectus’ or ‘Statement in lieu of Prospectus’).
75) Voluntary return of Shares is known as ‘Forfeiture of Shares’----(D)(It is known as ‘Surrender of
Shares’ as here shareholder himself takes the initiative whereas in case of forfeiture, company takes
the initiative)
76) When Shares are issued to Promoters, the account debited is ‘Promoters A/c.’-----(F) the
‘Goodwill A/c.’ is debited
77) Authorised Capital and Nominal Capital are not the same---------(F) (Authorised Capital or
Nominal Capital or Registered Capital are the same).

Select the most appropriate answer:-

(a) Return inward from Zedda is entered in (i) Sales Return Book (ii) Journal (iii) Purchase Return
Book (iv) None of this. Ans— (i)
(b)Which of the following have ‘contra’ entries ?(i) Cash Book only record cash transactions (ii)
Petty Cash Book (iii)Three column Cash Book (iv)All Cash Books. Ans— (iii)
(c) Which of the following accounts is increased by debit entries?(i) Building account (ii)
Commission Received account (iii) Purchase Return account (iv) All of these. Ans— (i)
(d) In order to determine the total amount of sales(i.e., cash+credit) to which of the following
records one should refer? (i) Sales Day Book (ii) Sales Account (iii) Journal (iv)Total Debtors Account.
Ans.— (ii)
(e)Salary paid to Kankan(employee) in Cash, will be debited to (i) Kankan’s Account (ii)Cash
Account (iii) Salaries Account (iv) Trading Account Ans.— (iii)
(f)A second hand machine purchased for Rs.33.000. To make the machine operative repairing cost
incurred for Rs.3,000. Freight and labour charges incurred Rs.2,000 and Rs. 500 respectively to
(ii)Rs.36,000 (iii) Rs.38,000 (iv)Rs.38,500. Ans—(iv)
(g) ‘Debit’ signifies (i) Increase in Asset account (ii) Decrease in Liability account (iii) Decrease in
Capital account (iv) All of the above. Ans—(iv)
(h)Capital of the business is Rs.9,00,000 and total outside Liability is Rs.3,00,000 then total assets
of business would be (i) Rs.3,00,000 (ii) Rs. 6,00,000 (iii) Rs.12,00,000 (iv) Rs.9,00,000. Ans— (iii)
(i) Rule regarding ‘Real Account’ is (i) Debit what comes in, Credit what goes out (ii)Debit all
expenses and losses, Credit all incomes and gains (iii) Debit the receiver, Credit the giver (iv) None of
these. Ans— (i)
(j) Cheques received and deposited with the Bank but not realised before the year end, should be
shown in the Balance Sheet (i) as part of Cash in hand (ii) as part of Bank balance (iii) as Cheques in
hand (iv) should not be accounted at all . Ans—(ii)
(k) Balances of Accounts are transferred to (i) Trial Balance (ii) Trading Account (iii) Profit & Loss
Account (iv) Balance Sheet. Ans.—(i)
(l) The next step after preparation of Ledger is the preparation of---------- (i) Trial Balance (ii)Final
Accounts (iii) Cash Flow Statement (iv) Balance Sheet Ans.—(i)
(m) A business technique by which one person/firm sends goods to another on such basis that goods
will be sold on behalf of and at the risk of the former, is known as : (i) Partnership (ii) Joint Venture
(iii) Consignment (iv) Sales on approval Ans.—(iii)
(n) A periodic statement furnished by the consignee to the consignor stating therein, the quantity
sold, price charged, expenses incurred on behalf of the consignor and commission payable to him in
respect of a particular consignment, and the net amount due from him and remittance made, if any,
etc. is known as: (i) Account Current (ii) Consignment Account (iii) Account Sales (iv) Consignee
Account, Ans.—(iii)
(o)The Consignor sends----------------along with the consigned goods to the consignee (i) Account
Sales (ii) Proforma Invoice (iii) Both [i & ii] (iv) None, Ans.—(ii)
(p) The risk of ‘Stock on consignment’ (i.e., lying in the Godown of consignee as unsold stock) lies
with: (i) Consignee (ii) Consignor (iii) Buyer (iv) Seller . Ans.—(ii)
(q) When a business is jointly undertaken by two or more persons/firms sharing profits and
losses at an agreed ratio (if agreement is silent on this point, then in equal ratio) to execute
a particular job or service contract or so (e.g. Joint Consignment of goods, Joint
Construction of a building, etc.) for a limited purpose and automatically expires on the
completion of the subject job for which it was formed is known as: (i) Partnership (ii) Joint
Venture (iii) Consignment (iv) Sales on approval, Ans.—(ii)
(r) The parties to a Joint Venture are called : (i) Partners (ii) Principal and Agent (iii) Co- venturers’ (iv)
None of the above, Ans.—(iii)
(s) While preparing Annual Financial Accounts the following actions will be taken in which order?
(1) Preparation of Trial Balance, (2) Balancing of Ledger Accounts (3) Preparation of Annual Financial
Account (4) Passing Adjusting entries.
Select the correct answer from the following: (i) 4,2,1,3 (ii) 2,4,3,1 (iii) 2,1,4,3 (iv) 4,2,3,1,
Ans.—(iii).
(t) In the absence of an agreement to the contrary, the partners shall (i) be paid salaries (ii) not be
paid salaries (iii) be paid salaries but only to working partners. (iv) none of this Ans.—(ii)
(u) Partners’ Current Accounts are opened when their Capital Accounts are :(i) Fluctuating (ii) Fixed
(iii) In both the above case (iv) None of these. Ans.—(i)

(v)As per AS-10, Goodwill A/c. can be recorded in the books even if no consideration in money or
money’s worth has been paid for it--------(F) (As per AS-10, Goodwill A/c. can be recorded in the
books only when some consideration in money or money’s worth has been paid for it)

(w)At the time of any change in the constitution of the firm (by way of admission/retirement/death
/change in p.s.ratio) goodwill a/c. will be raised (recorded) in the books…..(F) (If no consideration in
money or money’s worth has been paid for it, goodwill can not be raised in the books of the firm
rather it will be evaluated and sacrificing partner’s share in ‘goodwill value’ will be adjusted through
partners’ capital accounts)

(x) What is not the source of finance of a company--- (a) Equity Share Capital (b)Preference Share
Capital (c) Fixed Assets (d) Debenture Capital. [c]
(y)That portion of the Share Capital which cannot be called up except on the winding up is
known as : (a) Called up Capital (b) Paid up capital (c) Authorised Capital (d) Reserve Capital..[d]
(z)If applications received are for more than shares issued, it is known as---(a) underwriters liability
(b) over subscription (c) fully subscribed (d) under subscription ------[b]
(za) Excess of face value over issue price is known as ---(a) profit (b) discount (c) loss (d) securities
premium reserve [b]
(zb) share application account in the books of a company is a ----(a)personal account (b) real
account (c)nominal account (d)none of the above [a]
(zc) Dividends are usually paid on --(i) authorized capital (ii) issued capital (iii) paid-up capital…[iii]

(zd) As per Companies Act, 1956 ,Securities Premium Account is shown under ‘Equity and
Liabilities’ of the Balance Sheet under the ‘Sub-Head’ ----- (i) share capital (ii) Long-term borrwings
(iii) reserves and surplus. [iii]
(ze) If a company has adopted ‘Table A’ of the Companies Act,1956, it is required to pay interest
on ‘call in advance’ at the rate of (a) 5% (b) 6% (c) 8% (d) 10% [b]
(zf)At the time of forfeiture ,Share Capital Account is debited with------- (a) Face Value (b) Nominal
Value (c) Paid-up Value (d) Called-up Value--------------------[d]
(zg) When full amount is due on any call but it is not received, then shortfall is debited to---(a)
Calls-in-arrear (b) Calls-in-advance (c) Uncalled capital (d)none of the above.------[a]