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ACCOUNTING CONCEPTS, EQUATIONS, STANDARDS 1.

Match List-I (Concepts of Accounting) with List-II (Suitability of the Accounting Concepts) and select the Correct answer using the Code given below the lists: List-I (Concepts of Accounting) A. Money measurement concept organizations B. Business entity concept C. Cost concept D. Dual aspect concept are of financial nature in accounting Codes: ABCD (a) 4 2 3 1 (b) 3 1 4 2 (c) 4 1 3 2 (d) 3 2 4 1 Ans. (c) CLASSIFICATION OF EXPENSES, RECEIPTS, PROFITS (CAPITAL /REVENUE) 2. The cost of a machine is Rs.70, 000. It has 10-year life at the end of which it is expected to realize Rs.5, 000. The depreciation for first for years on a straight line basis is (a) Rs. 28,000 List-II (Suitability of the Accounting Concepts) 1. Applicable to all forms of business

2. Basic accounting 3. Original purchase price of assets 4. Applicable to those transactions/ events which

(b) Rs. 26,000 (c) Rs. 22,000 (d) Rs. 20,000 Ans. (b) 3. What is the kind of expenditure incurred on heavy advertising whose benefit is to continue for years to come? (a) Revenue Expenditure (b) Capital Expenditure (c) Deferred Revenue Expenditure (d) Prepaid Expenditure Ans. (c) 4. Cost of goods purchased for resale is an example of: (a) capital expenditure (b) revenue expenditure (c) deferred revenue expenditure (d) None of the above Ans. (b) 5. Consider the following statements: Capital expenditure is incurred for the purpose of 1. obtaining a long-term benefit for the business 2. increasing earning capacity of the business 3. purchasing of marketable securities 4. acquiring of an asset in the business Which of these statements are correct?

(a) 1 and 4 (b) 1, 2 and 4 (c) 2 and 3 (d) 3 and 4 Ans. (b) 6. Which one among the following shall result in capital loss to a firm ? (a) Pilferage of certain items (b) Loss of goods in transit (c) Loss due to delay in delivery by port authorities (d) Confiscation of goods by custom authorities on account of false declaration Ans. (a) ACCOUNTS OF NON-PROFIT ORGANISATION, PARTNERSHIP 7. Z is admitted in a firm for a 1/4 share in the profits for which he brings Rs 30,000 for goodwill. It will be taken away by the old partners X and Y in: (a) old profit-sharing ratio (b) new profit-sharing ratio (c) sacrificing ratio (d) capital ratio Ans. (c) 8. A partners capital at the end of a, year was Rs 3,00,000. His share of profit for the. year was Rs. 60,000 and he had drawn Rs. 20,000 from the firm during the year. Then his capital at the beginning of the year was: (a) Rs. 3,00,000 (b) Rs. 3,20,000

(c) Rs. 3,80,000 (d) Rs. 2,60,000 Ans.(d) 9. The balance left in the capital accounts on dissolution of a firm is transferred to: (a) Realization Account (b) Profit and Loss Account (c) Bank Account (d) None of the above Ans. (c) 10. As per Garner v. Murray rule, the loss resulting from a partners insolvency is borne by other partners in: (a) equal ratio (b) their capital ratio (c) their profit-sharing ratio (d) 3 : 1 ratio Ans.(b) 11. Consider the following statements: Issue of bonus shares can be made out of the 1. General Reserve Account 2. Realized Capital Profits Account 3. Revaluation Reserve Account 4. Profit and Loss Account (Cr.) Which. of these statements are correct? (a) 1 and 4

(b) 2, 3 and 5 (c) 1, and 4 (d) 2, 3 and 4 Ans. (c) 12. A, B and C are equal partners, After distributing the loss on realization of assets and paying all liabilities their capital accounts show the following balances: A Rs. 10,000 (Cr.) BRs. 4,000 (Cr.) CRs. 14,000 (Dr.) What is the amount of cash with the firm? (a) Rs. 18,000 (b) Rs. 4,000 (c) Rs. 14,000 (d) Rs. 10,000 Ans. (c) 13. In case of retirement of a partner, the partners loan account would be shown: (a) in his capital account (b) in his wifes loin account (c) in his loan account (d) in the total amount due to him Ans. (c) FINANCIAL STATEMENTS (FINAL ACCOUNTS) 14. Which of the following is/are included in income and expenditure account?

1. Accrued expenses 2. Credit purchases 3. Prepaid expenses 4. Opening cash balance Select the correct answer using the code given below: Code: (a) l only (b) l and 2 (c) 2 and 3 (d) 3 and 4 Ans. (b) 15. Which one of the following is the correct sequence regarding preparation of final accounts? (a) LedgerTrial BalanceJournalProfit and Loss AccountBalance Sheet (b) JournalLedgerTrial BalanceProfit and Loss AccountBalance Sheet (c) Trial BalanceLedgerJournalBalance SheetProfit and Loss Account (d) JournalTrial BalanceLedgerProfit and Loss AccountBalance Sheet Ans. (b) 16. Consider the following: 1. Preparation of Balance Sheet 2. Preparation of Funds Flow Statement 3. Preparation of Trial Balance 4. Preparation of Profit and Loss Account

The correct chronological sequence of the above in the preparation of periodical financial statement is: (a) 4, 2, 3, 1 (b) 3, 4, 1, 2 (c) 2, 4, 3, 1 (d) 1, 3, 2, 4 Ans.(b) 17. In a draft Balance. Sheet, the stock at valuation Rs. 1,00,000 was shown on assets side. While finalizing the Balance Sheet, an item which was valued at Rs. 37,400 had realizable of Rs. 26,000 only. In the Profit and Loss Account, the stock would be shown at: (a) Rs. 62,600 (b) Rs. 88,600 (c) Rs. 1,00,000 (d) Rs 1,26,000 Ans. (b) 18. Consider the following statements The purposes of charging depreciation to the Profit and Loss Account are: 1. to provide for replacement of an asset 2. to ascertain true profit 3. to present real financial position 4. to arrive at the scrap value of the asset Which of these statements are correct? (a) 1 and 4 (b) 1 and 2

(c) 1, 2 and 3 (d) 2, 3 and 4 Ans. (b) ACCOUNTING.OF SHARES AND DEBENTURES 19. Forty thousand 10% Redeemable Preference Shares of Rs. 10 each are redeemed at a premium of Rs. 10 each by the issue of 20,000 equity shares of Rs. 10 each at a premium of Rs. each. The amount transferred to Capital Redemption Reserve Account would be: (a) Rs. 1,80,000 (b) Rs. 2,00,000 (c) Rs. 2,20,000 (d) Rs. 2,40,000 Ans. (b) 20. Profit from re-issue of forfeited shares should be transferred to: (a) Profit and Loss Account (b) General Reserve (c) Share Premium Account (d) Capital Account Ans. (d) 21. A company must refund the amount of subscription received from the public including the development if the amount received is less than the mandatory minimum subscription. The mandatory minimum subscription is (a) 75% (b) 80% (c) 90%

(d) 95% Ans. (c) 22. Equity shares represent owners capital. Therefore, an equity shareholder: (a) has preferential claim over income and wealth of the company (b) has residual claim over income and wealth of the company (c) has no right over income and wealth of the company (d) is personally liable for all the liabilities of the company even beyond his paid-up capital Ans. (b) 23. 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 Ans.(b) RATIO ANALYSIS 24. Which one of the following transactions can change the current ratio? (a) Purchase of goods for cash (b) Payment to outstanding trade creditors (c) Acceptance on a Bill of Exchange written by a trade creditor (d) Dishonor of a Bill of Exchange Ans. (b)

25. An investor while trading in a stock in the share market lays greatest emphasis upon: (a) earning before interest and tax (b) rate of return on equity (c) earning price ratio (d) dividend price ratio Ans. (c) 26. A company takes a loan of Rs. 70 lakhs on which it has to pay interest @ 15% p.a. Companys return on investment is 25% before tax and the tax payable on net earnings is 60%. What gain accrues to the shareholders because of this loan? (a) Rs. 2, 40,000 (b) Rs. 2, 43,000 (c) Rs. 2, 77,000 (d) Rs. 2, 80,000 Ans. (d) 27. Following particulars are given for a firm: Quick Ratio1 .5 Current AssetsRs. 1, 50,000 Current LiabilitiesRs. 60,000 The value of stock is: (a) Rs. 60,000 (b) Rs. 70.000 (c) Rs. 80,000 (d) Rs. 90,000 Ans. (a) 28. The Balance Sheet of M/s ABC as on 3 1 December is:

Liabilities Equity Share Capital Equipment Stock Profit and Loss A/c 10% Debentures Sundry Creditors Provision for Taxation 73,000 The Liquidity Ratio is: (a) 2 : 5 (b) 9: 20 (c) 1: 2 (d) 1: 1 Ans. (c)

Rs. 22,000 46,000 14,000 8,000

Assets Machinery and

Rs.

Sundry Debtors 19,000 23,000 Cash at bank

10,000 2,000

1000

Prepaid Expenses 73, 000

1000

29. The current assets to the current liabilities ratio is said to be satisfactory if it is (a) 1: 2 (b) 2: 1 (c) 1: 1 (d) 1.5: 1 Ans. (b)

30. For a firm, the particulars are: Rs. Stock Debtors Bills Receivable Overdraft Advances (Recoverable cash or kind) Net Profit 40,0000 4,000 Net Sales Gross Profit 7,50,000 60,000 60,000 45,000 12,000 Rs. Cash in Hand Creditors Bills Payable Bank 40,000 70,000 45,000 4,000

The Current Ratio for the firm is nearly: (a) 27: 20 (b) 17:13 (c) 9:7 (d) 11 :9 Ans. (c) 31. Which one of the following is a leveraged buy-out? (a) When a company is taken over by financing through borrowed funds (b) When a company is taken over by the employees funds (c) When a lender takes over a company to whom it is indebted (d) When a company is bought out directly by buying its shares in the market Ans. (a)

32. For a firm: Opening StockRs. 32,000 Closing StockRs. 34,000 SalesRs. 4,40,000 Gross Profit Ratio25% on sales The stock turnover ratio of the firm is (a) 8.0 (b) 8.5 (c) 9.0 (d) 10.0 Ans. (d) 33. Following particulars are given for a firm: Closing StockRs. 45,000 Other Current AssetsRs. 1,05,000 Current Liabilities Rs. 70,000 SalesRs. 3,20,000 The Working Capital Turnover Ratio is: (a)5 :1 (b)4 :1 (c)3 :1 (d)2 :1 Ans. (b) FUNDS FLOW STATEMENT

34. Match List-I with List-II and select the correct answer using the Code given below the lists: ListI A. VED Analysis B. Ratio Analysis C. Fund-flow Analysis D. Income and Expenditure Codes: ABCD (a) 1 4 2 3 (b) 2 3 1 4 (c) 1 3 2 4 (d) 2 4 1 3 Ans. (b) 35. If net profit are Rs. 30,000 and expenses not resulting in the application of fund are Rs. 10,000, then the funds from operation will be: (a) Rs. 30,000 (b) Rs. 40,000 (c) Rs. 10,000 (d) Rs. 20,000 Ans. (b) AUDITING 36. Select the pairs which are correctly matched List-II 1. Sources and uses of fund 2. Inventory control 3. Analysis and interpretation of financial statements 4. Non-profit organization analysis

1. Statutory Audit 2. Management Audit 3. Operational Audit 4. Internal Audit

: Review of various operations of a company : Verification of top level policy and its implications : Examining the production planning and control operations : According to the company objectives

Select the correct answer using the Code given below: Code: (a) 1 and 2 (b) 1 and 3 (c) 2 and 3 (d) 1 and 4 Ans. (c) 37. Four important acts performed by an Auditor in connection with an audit work are: 1. verification of assets and checking valuation of the same 2. checking of Annual Accounts and balance Sheet 3. preparation of an audit programme 4. test checking of financial transactions The correct sequence in which these acts are performed by the Auditor is (a) 2, 1, 3, 4 (b) 2, 3, 4, 1 (c)3, 1,4,2 (d) 3, 4, 1, 2 Ans. (d)

38. Consider the following statements The auditor is generally expected to carry out the following in a particular seriatim: 1. Verification of assets and liabilities 2. Vouching of transactions 3. Checking of valuation of assets and liabilities The correct chronological sequence of these acts is: (a) 1, 3, 2 (b) 3, 2, 1 (c) 2, 1, 3 (d) 3, 1, 2 Ans. (c) 39. Auditing is compulsory in case of: (a) Joint-stock Company (b) Charitable Trust (c) Cooperative Society (d) All of the above Ans. (d) 40. Consider the following statements: An Internal Audit is not a part of: 1. Continuous Statutory Audit 2. Internal Check System 3. Internal Control System Which of these statements are correct?

(a) l, 2 and 3 (b) 1 and 2 (c) 2 and 3 (d) 1 and 3 Ans. (b) 41. Consider the following statements: An Internal Control System may include: 1. interim audit 2. internal audit 3. financial controls Which of these statements are correct? (a) 1, 2 and 3 (b) 1 and 2 (c) 2 and 3 (d) 1 and 2 Ans. (c) 42. According to the Companies Act, account books of a company are to be preserved for the preceding: (a) six years (b) eight years (c) five years (d) nine years Ans. (b) 43. Consider the following functions:

1. Checking of valuation and physical verification of assets 2. Routine checking and vouching 3. Scrutiny of internal check system The correct sequence of these functions to be performed by an Auditor during the course of auditing is (a) 2, 1, 3 (b) 3, 1, 2 (c) 3, 2, 1 (d) 1, 2 , 3 Ans. (c) 44. Which of the following may be included in Audit Working Paper? 1. Audit notebook 2. Audit programmers 3. Schedules of sundry debtors and sundry creditors 4. Audit manuals Select the correct answer using the Code given below: Code: (a) 1 and 4 (b) 1 and 2 (c) 2, 3 and 4 (d) 1, 2 and 3 Ans. (d) 45. Internal Auditor is appointed by the: (a) Board of Directors of the Company

(b) shareholders of the Company (c) Institute of Chartered Accountants of India (d) Company Secretary Ans. (a) 46. Financial audit in Joint-stock Company in India is: (a) necessary (b) voluntary (c) statutory (d) voluntary for companies which operate in certain activities only Ans. (c) CAPITAL MARKET (STOCK EXCHANGE) 47. Consider the following statements: 1. Transfer and transmission of shares is the same thing 2. Stag is a speculative person who applies for shares in a new issue expected to be oversubscribed to make profit by selling such shares at a premium3. Stock is a bundle of fully paid shares put together for convenience Which of the above statements is/are correct? (a) 1 and 2 (b) 2 and 3 (c) 3 only (d) 2 only Ans. (b) 48. Underwriters are persons who: (a) purchase the shares and debentures of a company

(b) work as agents of the company for the sale of shares and debentures (c) undertake to buy those shares and debentures not subscribe for by the public (d) publicize the share-issue on behalf of the company Ans. (c) 49. The movement of securities from one stock exchange to another with the object of reaping a profit from the disparity in share prices is called: (a) averaging (b) arbitraging (c) backwardation (d) forward trading Ans. (b) 50. Which one of the following statements pertaining to mutual funds is true? (a) Mutual funds can be operated only by government organizations (b) The maximum investment in mutual funds by an individual should not exceed a particular ceiling fixed by government from time to time (c) Return on investment and safety of principal is not guaranteed in mutual funds (d) Unit Trust of India is the regulatory authority for mutual funds in India. Ans. (b)