Commerce

Practice Test 37
Aarambh
Accountancy
Full Syllabus

Q1 If the insurance premium paid on 1st April 2021 is Prov for bad
1,800
Rs. 1800 and it is paid up to 30th June 2022 and debts
includes Rs.300 paid for the life of the Additional information:
proprietor, then the amount of insurance (i) Further bad debts amounted to Rs.1500
premium shown in the profit and loss account (ii) The provision for bad debts was to be
for the year ending on 31st March 2022 will be: maintained at 10%
(A) Rs.1500 (B) Rs.1200 What amount will be debited to P&L A/c?
(C) Rs.1800 (D) Rs.2100 (A) Rs.1500 (B) Rs.2500
(C) Rs.2050 (D) Rs.2200
Q2 The goods costing Rs.1500 and cash Rs.2500
were withdrawn for personal use. The amount Q6 Which of the following accounts will be debited
debited to drawings account will be: to rectify "The rent paid to landlord Rs.500 was
(A) Rs.1500 (B) Rs.2500 debited to landlord account. "
(C) Rs.4000 (D) Rs.1000 (A) Cash A/c (B) Rent A/c
(C) Suspense A/c (D) Capital A/c
Q3 The branch of accounting that assists the
management in taking rational policy decisions Q7 Purchased furniture for Rs.12,000 from Rama
and to evaluate the impact of its decisons and Bros for cash. The account to be credited is:
actions is: (A) Purchase
(A) Financial Accounting (B) Furniture
(B) Cost Accounting (C) Rama Bros
(C) Management Accounting (D) Cash
(D) Corporate Accounting
Q8 Balancing of account means:
Q4 Which of the following concepts assume that (A) Total of debit side
the business has a distinct and separate entity (B) Total of credit side
from its owners? (C) Difference in total of debit & credit
(A) Money measurement Concept (D) None of these
(B) Accounting period Concept
(C) Consistency Concept Q9 The cheques of Rs.5000, Rs.18000 and
(D) Business entity Concept Rs.23000 were sent to the bank for collection
during June 2022, out of which the cheque of
Q5 Given: Rs.18000 was collected in July. In the Bank
Particulars Dr Cr Reconciliation Statement made on 30/6/2022:
Debtors 15,000 (A) Rs.18000 will be added to balance as per
Bad debts 1,000 cash book.
(B)

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Rs.18000 will be subtracted from balance as his commission and manager B is entitled to
per cash book. receive a commision @10% on Net profit after
(C) Rs.28000 will be added to balance as per charging his and A's commission. If the net profit
cash book. is Rs.11,00,000 before charging the commissions
(D) Rs.28000 will be subtracted from balance as of A and B. Who will get more commission and
per cash book. by how much?
(A) A will get more commission by Rs.20,000.
Q10 If accrued interest on investment is given in the
(B) A will get more commission by Rs.11,000.
Trial Balance, then it will be:
(C) B will get more commission by Rs.20,000.
(A) Debited to Trading Account
(D) A and B will get same commission.
(B) Credited to Profit & Loss A/c
(C) Shown as an asset in Balance Sheet Q16 The purchase of machinery for cash will be
(D) Shown as a liability in Balance Sheet recorded in:
(A) Journal Proper (B) Cash Book
Q11 Which of the following is an advantage of
(C) Purchase Book (D) None of these
maintaining petty cash book?
Q17 According to which concept the assets are
1. Saving of Time and efforts of chief cashier
recorded in the book of accounts at their
2. Effective control over cash disbursements
purchase price including the cost of
3. Convenient recording
acquisition?
(A) Only 1 (A) Money measurement Concept
(B) Both (1) and (2) (B) Cost Concept
(C) Both (1) and (3) (C) Accounting period Concept
(D) All (D) Consistency Concept

Q12 According to which concept the accounting
policies and practices followed by enterprises
should be uniform and consistent over the
period of time?
(A) Money measurement Concept
(B) Accounting period Concept
(C) Consistency Concept
(D) Business entity Concept
Q13 An account has a debit balance when:
(A) The balancing figure appears on credit side.
(B) The balancing figure appears on debit side.
(C) There is no balancing figure
(D) None of these
Q14 The assets sold on credit are entered in:
(A) Sales Book (B) Cash Book
(C) Purchase Book (D) Journal proper
Q15 The manager A is entitled to receive a
commision @10% on Net profit before charging
Q18 Goods sold to Hari Rs.5000 was credited to
Hari's A/c. To rectify this:
(A) Hari's A/c will be debited by Rs.5000
(B) Hari's A/c will be credited by Rs.10000
(C) Hari's A/c will be debited by Rs.10000
(D) None of these
Q19 Interest accrued Rs.600. The account to be
debited is:
(A) Interest A/c
(B) Cash A/c
(C) Accrued Interest A/c
(D) Loan A/c
Q20 What are the objectives of preparing the Trial
Balance?
(A) To ascertain the arithmetical accuracy of
the ledger accounts.
(B) To help in locating errors.
(C) To help in the preparation of the financial
statements.

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(D) None of these 7. Investment was made on 1/4/2021 and loan

was borrowed on 1/7/2021.
Q21 Distinguish between Straight Line Method and
8. Depreciation Furniture and Machinery @10%
Diminishing Balance Method.
per annum.
Q22 Distinguish between capital expenditure and Prepare:
revenue expenditure. (a) Trading and Profit and Loss A/c for the year
ending on 31/3/2022.
Q23 What is imprest system?
(b) Balance Sheet as on 31/3/2022
Q24 Distinguish between Journa and Ledger.
Q28 Prepare Bank Reconciliation Statement from
Q25 Write any four objectives of accounting. the details given below:
Unfavourable balance
Q26 Show how the following will appear in the Rs.50,000
as per Pass Book
Trading and Profit and Loss A/c and Balance
Cheques issued but
Sheet, for the year ending on 31st March 2022.
not yet presented for Rs. 10,000
10% Bank Loan 50,000
payment
Interest on bank loan 1500
The loan was borrowed on 1st Oct 2021. Cheques deposited
Rs. 8,000
but not yet credited
Q27 The Trial Balance of Ajit Bros. as on 31st March Bank charges Rs. 150
2022 is given below with some additional
Interest debited by
information. Rs. 100
bank
Payment made directly
Rs. 2500
by bank
A customer deposited
directly in bank Rs. 3000
account

Q29 Show how the following will appear in the

Trading and Profit and Loss A/c and Balance
Sheet, for the year ending on 31st March 2022.
10% Bank Loan 50,000
Interest on bank loan 1500
The loan was borrowed on 1st Oct 2021.
Additional Information:
Q30 X Ltd. purchased a machinery costing
1. Closing Stock Rs.80,000 Rs.80,000 on 1.1.2015 and another on 30.6.2015
2. Further bad debts amounted to Rs.5000 for Rs.60,000. On 1.7.2017, one-fourth of the first
3. Provision for bad debts was to be machine was sold for Rs.12,500 and on the
maintained at 10%. same date a new machine was purchased for
4. Provide for discount on debtors @2%. Rs.12,000. On 31.12.2018 two-fourth of the first
5. 1/5th of the insurance expired during the machine was sold for Rs.30,000. The
year. depreciation was charged @10% per annum on
6. 1/4th of Salaries and Wages are paid to the original cost method and the books are closed
factory workers.

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on 31st December every year. for four years ending on 31.12.2018 and show
Prepare Machinery A/c, Provision for your workings clearly.
Depreciation A/c and Machinery Disposal A/c

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Answer Key
Q1 (B) Q17 (B)

Q2 (C) Q18 (C)

Q3 (C) Q19 (C)

Q4 (D) Q20 (D)

Q5 (C) Q21 -

Q6 (B) Q22 -

Q7 (D) Q23 -

Q8 (C) Q24 -

Q9 (B) Q25 -

Q10 (C) Q26 P&L = Rs.2,500, B/S = Rs.51,000

Q11 (D) Q27 Gross Profit = Rs.87,500 Net Profit = Rs.54,640

Balance Sheet = 2,83,040
Q12 (C)
Q28 Unfavourable balance as per Cash Book
Q13 (A)
Rs.52,250
Q14 (D)
Q29 P&L = Rs. 2,500 Balance Sheet = Rs.51,000
Q15 (A)
Q30 Loss on 1st sale = Rs.2,500, Gain on 2nd sale =
Q16 (B) Rs.6000

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Hints & Solutions

Q1 Text Solution: Q7 Text Solution:
Insurance Premium Cash account will be credited.
1800
paid during the year Q8 Text Solution:
(-) Premium paid for life Balancing of account means difference in total
300
insurance of debit & credit.
1500 Q9 Text Solution:
(-) Prepaid 300 Rs.18000 will be subtracted from balance as
Amount to be debited per cash book as it is cheque sent for collection
in P&L for the year 1200 but not yet collected.
2021-22
Q10 Text Solution:
Rs. 1500 is paid for 15 months (1/4/2021 to Accrued interest on investment, if given in Trial
30/6/2022). Balance, will be considered as a current asset
Prepaid premium = (1/4/2022
1500
× 3 = 300
15 and thus it will be shown as an asset in Balance
to 30/6/2022) Sheet.
Q2 Text Solution: Q11 Text Solution:
he amount debited to drawings account will be The advantages of maintaining petty cash
= 1500 + 2500 = 4000 book are:
Q3 Text Solution:
1. Saving of Time and efforts of chief cashier
Management Accounting assists the
2. Effective control over cash disbursements
management in taking rational policy decisions
3. Convenient recording
and to evaluate the impact of its decisons and
actions. Q12 Text Solution:
Q4 Text Solution: According to Consistency concept the
Business entity Concept assumes that the accounting policies and practices followed by
business has a distinct and separate entity from enterprises should be uniform and consistent
its owners over the period of time

Q5 Text Solution: Q13 Text Solution:

An account has a debit balance when its debit
total is more than the credit total and the
balancing figure appears on credit side.

Q14 Text Solution:

The assets sold on credit are entered in Journal
Proper.

Q15 Text Solution:

Given:
Q6 Text Solution: Net Profit = Rs.11,00,000
The rectifying entry will be: Commission of A =
Rent A/c Dr 500 11, 00, 000 × 10% = 1, 10, 000

To Landlord's A/c 500

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Commission of B = recurring by nature.

(11, 00, 000 − 1, 10, 000) ×
10

110
= 90, 000 (d) Capital expenditure benefits more than one
Difference between commission of A and B = accounting year whereas revenue expenditure
1,10,000 - 90,000 = Rs.20,000 normally benefits one accounting year.
(e) Capital expenditure (subject to
Q16 Text Solution:
depreciation) is recorded in balance sheet
The purchase of machinery for cash will be
whereas revenue expenditure (subject to
recorded in Cash Book.
adjustment for outstanding and prepaid
Q17 Text Solution: amount) is transferred to trading and profit and
According to Cost Concep the assets are loss account
recorded in the book of accounts at their
Q23 Text Solution:
purchase price including the cost of acquisition.
The petty cashier works on the Imprest system.
Q18 Text Solution: Under this system, a definite sum is given to the
Hari's A/c will be debited by Rs.10,000 petty cashier at the beginning of a certain
Q19 Text Solution: period. This amount is called imprest amount.
Accrued Interest A/c will be debited. The petty cashier goes on making all small

Q20 Text Solution: payments out of this imprest amount and when

The trial balance is prepared to fulfill the he has spent the substantial portion of the

following objectives : imprest amount he gets reimbursement of the

1. To ascertain the arithmetical accuracy of the amount spent from the head cashier. Thus, he

ledger accounts. again has the full imprest amount in the

2. To help in locating errors. beginning of the next period.

3. To help in the preparation of the financial Q24 Text Solution:

statements. (Profit & Loss account and Balance
Sheet).

Q21 Text Solution:

Q25 Text Solution:

The primary objectives of accounting are:

1. Maintaining records of business;

Q22 Text Solution:
2. Calculating profit or loss;
The difference between capital expenditure
3. Depicting the financial position; and
and revenue expenditure are stated below:
4. Making information available to various
(a) Capital expenditure increases earning
groups and users.
capacity of business whereas revenue
expenditure is incurred to maintain the earning
Q26 Text Solution:
capacity.
(b) Capital expenditure is incurred to acquire
fixed assets for operation of business whereas
revenue expenditure is incurred on day-to-day
conduct of business.
(c) Revenue expenditure is generally recurring
expenditure and capital expenditure is non-

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Q27 Text Solution:

Q30 Text Solution:

Q28 Text Solution:

Q29 Text Solution:

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