1. Which one of the following statements is true of bonus shares?

a) Bonus shares are issued to the promoters only

b) Bonus shares are issued only to the existing shareholders
c) Bonus shares are the shares issued to the employees of the company as an incentive
d) Bonus shares are issued at par value
2. The amount of capital that a company can issue at par value is called:
a) Authorized capital
b) Share premium
c) Issued capital
d) Fixed capital
3. The maximum limit of capital allowed to be issued by a company is called:
a) Authorized capital
b) Share premium
c) Issued capital
d) Fixed capital
4. A public limited company has which of the following characteristic(s):
a) Separate Legal Entity
b) Short Life
c) Unlimited Liability
d) Owners and company are the same entities
5. Shareholders are:
a) Customers of the Company
b) Owners of the Company
c) Creditors of the Company
d) None of these
6. Gross profit margin of a company is 55% and its annual sales are reported to be Rs.
10,00,000. What is its amount of Cost of Goods Sold?
a) Rs. 450,000
b) Rs. 500,000
c) Rs. 550,000
d) None of the above
7. The term "capital structure" refers to
a) Combination of debts and common stock equity
b) Current assets and current liabilities
c) Total assets minus liabilities
d) Shareholders' equity
8. Which of the following is a measure of interest payment capacity of a firm?
a) Current Ratio
b) Acid Test Ratio
c) Interest Coverage Ratio
d) Debtors Turnover
9. The primary purpose of the liquidity ratios is to determine
a) How much working capital is tied up in inventory
b) The relative level of long-term debt
c) How well a firm is able to pay off short-term obligations
d) None of the above
10. Atlas Honda had sales of Rs.10 million, Operating Income of Rs.3 million; net income of
Rs.1 million; assets of Rs.1 million; Stockholders' equity of Rs.5 million; and a total debt
of Rs.4 million. What is its return on assets?
a) 37.5%
b) 11.11%
c) 30.0%
d) 25.0%
11. In calculation of quick ratio we do not include amount of:
a) Cash
b) Accounts receivable
c) Inventory
d) None of the above
12. A company purchased land amounting to Rs. 50,000 in 2001. The company has recorded
the asset in books on which of the following values in 2013?
a) Historical cost
b) Market value
c) Realizable value
d) None of the above
13. Which of the following is considered a profitability measure?
a) Days sales in inventory
b) Fixed asset turnover
c) Cash coverage ratio
d) Return on Assets
14. Which of the following is an example of intangible assets? 
a) Equipment 
b) Goodwill
c) Machinery
d) Land
15.  ________is a summary of all assets and liabilities on a particular date.
a) Profit & Loss account 
b) Profit and Loss Appropriation Account
c) Balance Sheet
d) None of the above
16. A preemptive right is:
a) The right of stockholders to buy a pro-rata amount of any new issues of common
stock
b) The right of stockholders to fire and replace the board of directors
c) The right of the corporation to enter into legally binding contracts without the direct
approval of the shareholders
d) The right of stockholders to supercede the actions of top management
17. Bonus shares can be issued at:
a) Discount
b) Premium
c) Par
d) All of the above
18. The persons who take the risk of issuing shares are known as:
 a) Directors
b) Promoters
c) Underwriters
d) None of the above
19. An advantage for the directors of issuing shares through a rights issue would not include:
a) The speed of the issue is quicker
b) A rights issue is cheaper to arrange than a normal issue
c) Dilution of company control is less likely to occur
d) Each share issued will generate more cash than a normal issue
20. The correct double entry for refunding applications when a share issue is oversubscribed
would be:
Debit Credit

a) Ordinary share capital Bank

b) Ordinary share applicants Bank

c) Bank Accrued share capital

d) Refund account Bank

21. Which one of the following statements relating to debentures is incorrect?

a) Debentures provide ownership right in company
b) A company may purchase its own debentures
c) A debenture holder is a creditor of the company
d) A debenture is the written document issued by a company setting out the terms of a
loan
22. Which one of the following is not a right of a shareholder?
a) To receive a dividend declared by the company
b) To attend and vote a meetings
c) To receive the company's accounts
d) To manage company affairs
23. The share of profit a shareholder will receive is called
a) Dividend
b) Surplus
c) Net profit
d) Retained earnings
24. A company is allowed by law to sell 200 000 shares at Rs. 2.00 each. Three-quarters
(3/4) of these shares were bought by the public. What is the issued share capital?
a) Rs. 100 000
b) Rs. 300 000
c) Rs. 400 000
d) Rs. 500 000

25. Debentures indicate the

 a) Short-term Borrowings of a Company
b) Directors’ shares in a company
c) The Investment of Equity-Shareholders
d) Long-term Borrowings of a Company
26. In debenture, interest payable is
a) Transferred to general reserve
b) Transferred to falling fund investment account
c) Charged against the firm’s profits
d) Appropriation of the company’s profits
27. The owner of the debenture is qualified for:
a) Fixed-rate interest
b) Company’s voting rights
c) Firm’s Profits share
d) Fixed dividend
28. On company liquidation, the principal amount of debentures is returned:
a) After Common stockholders
b) Before Equity Capital
c) Last of All
d) None of the above
29. Which of the below-mentioned statement is not true?
a) The issue price and redemption value of debentures cannot differ
b) Interest on debenture is a charge against profits
c) It is common to prefix debentures with the agreed interest rate
d) A debenture is a kind of public borrowing
30. The form of a discount on issue of Debentures is in the nature of
a) Deferred Revenue Expenditure
b) Capital loss
c) Revenue loss
d) None of the above
31. The ideal quick ratio is
a) 2:1
b) 1:1
c) 5:1
d) None of the above
32. The best ratio to evaluate the short term liquidity is:
a) Current Ratio
b) Inventory turnover
c) Accounts receivable turnover
d) None of the above
33. In calculation of quick ratio we do not include amount of:
a) Cash
b) Accounts receivable
c) Inventory
 d) None of the above
34. EBIT is usually the same thing as
a) Funds provided by operations
b) Earnings before taxes
c) Net income
d) Operating profit
35. Which of the following is considered a liquidity measure?
a) Fixed asset turnover
b) Price-earnings ratio
c) Cash Ratio
d) Return on Assets
36. If a firm has Rs.1000 current liabilities, a current ratio equal to 1.2 what is the firm's Net
Working Capital?
a) Rs.100
b) Rs.200
c) Rs.1,000
d) None of the above
37. Which of the following would NOT improve the current ratio?
a) Borrow short term Issue long-term debt to buy inventory
b) To finance additional fixed assets
c) Sell common stock to reduce current liabilities
d) Sell fixed assets to reduce accounts payable
38. A company can improve (lower) its debt-to-total assets ratio by doing which of the
following?
a) Borrow more
b) Shift short-term to long-term debt
c) Shift long-term to short-term debt
d) Sell common stock
39. Hassan enterprises has reported gross profit margin of 32%. If its sales are Rs. 12,50,000,
what is the amount of its cost of goods sold?
a) Rs. 400,000
b) Rs. 800,000
c) Rs. 850,000
d) None of the above
40. A measure of company income from ongoing routine activities is called:
a) Operating income
b) Non operating income
c) Comprehensive income
d) None of the above
41. According to the accounting, which of the following would be considered a cash-flow
item from an "investing" activity?
a) Inflow from issue of shares
b) Cash inflow from sale of current assets
 c) Cash outflow to acquire fixed assets
d) None of the above
42. Which of the following is not a cash outflow for the firm?
a) Dividends
b) Depreciation
c) Interest payments
d) None of the above
43. Which of following asset is considered as non-earning assets?
a) Cash
b) Bank Fixed Deposit
c) Short term investment
d) None of the above
44. Current ratio of a concern is 1, its net working capital will be
a) Positive
b) Negative
c) Nil
d) None of the above
45. The going concern concept refers to a presumption that:
a) Entity will continue to operate in the foreseeable future.
b) The entity will be profitable in the coming year.
c) Entity will not be involved in a merger within a year
d) Top management of the entity will not change in the coming year.
46. Goods taken for personal use of owner are recorded as drawings. This is the application
of which accounting principle?
a) Business entity
b) Matching
c) Realization
d) None of the above
47. Revenue should be recognized when the earning process is virtually complete and the
exchange of value can be objectively measured.
a) Historical cost
b) Business Entity
c) Realization
d) Matching
48. A company has reported net income Rs. 100,000 and total assets of Rs.10,00,000. What
is its return on assets?
a) 5%
b) 10%
c) 15%
d) None of the above
49. Which of the following is considered as liability of a bank?
a) Investment securities
b) Loans
c) Deposits
 d) None of the above
50. Total stockholder’s equity divided by number of shares outstanding represents the:
a) Return on equity
b) Stated value per share
c) Book value per share
d) Price earnings ratio
51. The primary revenue of any bank is its:
a) Interest income
b) Non mark up income
c) Income from other sources
d) None of the above
52. Atlas Honda has an 8 percent return on total assets of Rs.300,000 and a net profit margin
of 5 percent. What are its sales?
a) Rs.3,750,000
b) Rs.480,000
c) Rs.300,000
d) Rs.1,500,000
53. Which of the following is a measure of activity of a firm?
a) Current Ratio
b) Acid Test Ratio
c) Interest Coverage Ratio
d) Debtors Turnover
54. Shares issues without any special rights attached to them are known as:
a) Ordinary shares
b) Preference shares
c) Treasury shares
d) Capital shares
55. On issue of debentures as a collateral security, which account is credited?
a) Debentures Account
b) Bank Loan Account
c) Debenture Holdings Account
d) Debenture Suspense Account
56. Debentures issued as collateral security will be debited to:
a) Bank Account
b) Debentures Suspense Account
c) Debentures Account
d) Bank Loan Account
57. When debentures of Rs.1,00,000 are issued as Collateral Security against a loan of
Rs.1,50,000, the entry for issue of debentures will be :
a) Credit Debentures Rs.1,50,000 and debit bank A/c Rs.1,50,000
b) Debit Debenture Suspense A/c Rs.1,00,000 and Credit Bank A/c Rs.1,00,000
c) Debit Debenture Suspense A/c Rs.1,00,000 and Credit Debentures A/c
Rs.1,00,000.
 d) Debit Cash A/c Rs.1,50,000 and Credit Bank A/c Rs.1,50,000
58. When debentures are to be redeemed at premium an extra entry has to be made at the
time of issue of debentures, which a/c should be credited in this entry?
a) Loss on issue of debentures a/c
b) Debenture redemption premium a/c
c) Bank a/c
d) Debenture holder’s a/c
59. X Ltd. purchased a building for Rs.60,00,000 payable as 50% in Cash and balance by
allotment of 8% debentures of Rs.500 each at par. Number of debentures issued will be :
a) 6,000 debentures
b) 8,000 debentures
c) 12,000 debentures
d) 10,000 debentures
60.  If Vendors are issued debentures of Rs.80,000 in consideration of net assets of
Rs.1,00,000, the balance of Rs.20,000 will be credited to :
a) Statement of Profit & Loss
b) Goodwill Account
c) General Reserve Account
d) Capital Reserve Account
61. A Ltd. issued 1,000, 10% debentures of Rs.100 each at a premium of 5%. What will be
the total amount of interest for one year:
a) Rs.10,500
b) Rs.10,000
c) Rs.5,250
d) Rs.5,000
62. On 1st April 2007, Sunrise Limited issued 5,000, 8% debentures of Rs.100 each at a
discount of 5%. What will be the total amount of interest for the year ending 31st March
2008?
a) Rs.38,000
b) Rs.42,000
c) Rs.40,000
d) Rs.25,000
63. Issued 4,000, 12% debentures of Rs.100 each at discount of 4%, redeemable at a
premium of 10%. In such case:
a) Loss on Issue will be debited by Rs.24,000
b) Loss on Issue will be debited by Rs.56,000
c) Loss on Issue will be debited by Rs.40,000
d) Premium on Redemption will be credited by Rs.24,000
64. Business is said to be in a profit when
a) Expenditure exceeds income
b) Income exceeds expenditure
c) Income exceeds liability
d) Assets exceed expenditure
65. When a Liability is decreased or reduced, it is registered on the
a) Debit or left side of the account
b) Credit or right side of the account
 c) Debit or right side of the account
d) Credit or left side of the account
66. What kind of expenses are paid from Gross Profit?
a) Selling Expenses
b) Financial Expenses
c) General Expenses
d) All of the above
67. Which option gives a review report on the firm’s financial status at a specified date?
a) Income & Expenditure Account
b) Balance Sheet
c) Cash Flow Statement
d) Profit & Loss Account
68. Which of the options is not an intangible asset?
a) Land
b) Patents
c) Goodwill
d) Franchise rights
69. Which of the options is an example of business liability?
a) Creditors
b) Cash
c) Building
d) Land
70. The unfavourable balance of Profit and Loss account should be:
a) Subtracted from liabilities
b) Subtracted from capital
c) Subtracted from current assets
d) Added in liabilities
71. The long term assets that have no physical existence but are rights that have value is
known as:
a) Current assets
b) Fixed assets 
c) Intangible assets
d) Investments 
72. The assets that can be converted into cash within a short period (i.e. 1 year or less) are
known as
a) Current assets.
b) Fixed assets 
c) Intangible assets
d) Investments 
73. Final Account include preparation of _____________.
a) Trading A/c
b) Profit & Loss A/C
c) Balance Sheet
d) All of the Above
74. is the part of income Statement, which is prepared to ascertain the gross
profit/Loss for a given accounting Period.
 (a) Manufacturing A/C
(b) Profit & Loss A/C
(c) Balance Sheet
(d) Trading A/C
75. In trading Account, closing stock is shown at .
a) Cost Price
b) Net Realizable Price
c) A or b whichever Lower
d) A or b whichever higher
76. …………….. is the difference between the selling price and cost price of goods sold.
a) Gross Profit
b) Gross Loss
c) (a) or (b)
d) (a) and (b)
77. Which of the following equation is correct?
a) Gross Profit= Net Sale- Cost of the goods sold
b) Gross Profit=sales+closing Stocks-opening stock -purchase-wages.
c) Cost of goods sold+goods profit= Sales.
d) All of the above.
78. In Trading Account, closing stock is shown at cost price or Net realizable price which
above is lower. This is the due application of .
a) Convention of disclosure
b) Convention of Materiality
c) Convention of Consistency
d) Convention of Conservatism
79. Gross Profit or Gross Loss of revealed by trading Account is transferred to
a) Balance Sheet
b) Profit & Loss A/C
c) Manufacturing A/C
d) Profit & Loss Appropriation Accounts
80. The Net Profit or Loss is Transferred to .
a) Drawing A/C
b) Capital A/C
c) Suspense A/C
d) None Of the Above
81. Which of the following Business entity will not prepare Trading Account?
a) Banking Companies
b) Steel Mills
c) Right Mills
d) Cement Factory
82. The total of the two sides of the Balance Sheet must agree because of the following
Equation?
 a) Assets=Liabilities- Capital
b) Assets=Liabilities+Capital
c) Assets=Fixed Assets+current Assets
d) All of the Above
83. The arrangement of assets and liabilities in accordance with a particular order is known
as of Balance Sheet.
a) Tallying
b) Making
c) Ruling
d) Marshalling
84. ………………..are those whish are acquired for long use in the business and not meant
for resale.
a) Fictitious Assets
b) Intangible Assets
c) Fixed Assets
d) Current or Floating Assets
85. ……………..are valueless assets but shown in the balance sheet on asset side e.g.
preliminary expenses.
a) Fictitious Assets
b) Intangible Assets
c) Fixed Assets
d) Current or Floating Assets
86. are those that are meant to be converted into cash in short term.
a) Fictitious Assets
b) Intangible Assets
c) Fixed Assets
d) Current or Floating Assets
87. In which of the following closing stock does not appear?
a) Trading Account
b) Trial Balance
c) Balance Sheet
d) All of the Above
88. In order to prepare final accounts, all nominal Accounts will be transferred to trading and
Profit & Loss Accounts by passing account journal entries which are called as they
close the nominal Ac.
a) Opening Entries
b) Adjustment Entries
c) Closing Entries
d) None of the above
 89. Opening Stock Rs. 40,000 purchases Rs. 260,000, closing stock Rs, 20,000, cost of
goods=?
a) Rs. 3,20,000
b) Rs. 26,0000
c) Rs. 3,00,000
d) Rs. 2,80,000
90. From the following figures ascertain the gross profit:
Opening Stock 2,50,000
Goods Purchased 13,00,000
Freight 50,000
Closing Stock 1,50,000
Sales 19,00,000
Salary 90,000
a) 3,60,000
b) 4,50,000
c) 5,00,000
d) 5,90,000
91. From the following information calculate net profit
Opening stock 15,00,000
Direct Expenses 3,00,000
Selling & distribution Expenses 2,00,000
Administrative Expenses 1,00,000
Financial Expenses 50,000
Sales 24,00,0000
Gross Profit ration on sales 25%
a) 2,50,000
b) 3,50,000
c) 2,00,000
d) 1,50,000
92. Salary Paid during the year-Rs.35,000.
Salary Outstanding 1.4.2011-RS. 2500
Salary Outstanding On 31.03.2012 – Rs. 7500
Net salary debited to profit n Loss Accounts for the year ended 31.3.2012 should be
__________?
a) Rs. 40,000
b) RS.30,000
c) Rs,25,000
d) Rs.45,000
93. Debt-equity ratio is a sub-part of
a) Short-term solvency ratio
b) Debtors turnover ratio
c) Long-term solvency ratio
d) Debtors turnover ratio
94. The financial data for this year for G. Rabbit Company are as follows: Ending Inventory
480,000 Opening Inventory 390,000 Cost of goods sold 4,250,000 Assume number of
days in a year are 365 Calculate the Inventory Turnover in Days:
a) 60 Days
b) 74 Days
c) 95 Days
d) 87 Days
95. Sales of a company are reported to be Rs.10,00,000 and cost of goods sold is 60% of
sales. What is the amount of Gross Profit?
a) Rs.200,000
b) Rs.400,000
c) Rs.600,000
d) Rs.800,000
96. Net profit of the firm is Rs.50,000 and Net Sales are Rs.250,000. What is the net profit
margin?
a) 15%
b) 20%
c) 25%
d) 30%
97. Total liabilities of the firm are Rs.500,000 and Shareholders’ equity are Rs.700,000.
What is the amount of total assets?
a) Rs.500,000
b) Rs.700,000
c) Rs.1200,000
d) Rs.1900,000
98. Debentures issued against the collateral for debenture holders are called?
a) Secured Debentures
b) Unsecured Debentures
c) Both (a) and (b)
d) None of the above
99. Discount on issue of debentures is regarded as:
a) Profit
b) Loss
c) Revenue
d) None of these
100. Profit and loss account is also known as:
a) Income Statement
b) Statement of changes in equity
c) Statement of Comprehensive Income
d) None of the above