Model Question paper

1. What is the first step of accounting process?

(a) Identifying the financial transaction.
(b) Recording the financial transaction.
(c) Classifying the financial transaction
(d) Analyzing the financial transaction

2. What is the last step of accounting as a process of information?

(a) Preparation of financial statements
(b) Communication of information
(c) Analysis and interpretation of information
(d) None of the above.

3. The essential attributes (elements) of accounting are

i. Accounting is both an art and science of recording ,classifying and summarizing
financial
statements
ii. Accounting records events and transactions of financial nature only
iii. Accounting records transactions by recording them in terms of money
iv. Accounting records education and experience of management also.
The correct option is -
(a) All of the above
(b) (i) and (ii) only
(c) (iii) & (iv) only
(d) (i), (ii) &(iii)

4. The basic function of accounting is to

(a) Record all business transactions
(b) Interpret financial data
(c) Assist the management in performing their functions effectively
(d) None of the above.

5. Accounting records business transactions of financial character in the book of original entry
which is called
(a) Ledger
(b) Bank Pass Book
(c) Journal
(d) Book-keeping

6. The main book of account to which all the transactions are ultimately posted is known as
(a) Cash book
(b) Bank statement
(c) Ledger
(d) Journal

7. The process of summarizing the financial transactions leads to the preparation of certain
statements. They are
i. Trial balance
ii. Trading A/c
iii. Profit & Loss A/c
iv. Balance sheet
The correct option is –
(a) (i) &(iv)
 (b) (ii) &(iii)
(c) All the above
(d) (i) (ii) & (iii)

8. Classification of the entries or transactions is achieved by recording them in

(a) Cash Book
(b) Ledger
(c) journal proper
(d) cash and bank Book

9. Which of the following events will not be recorded by the accounting?

i. resignation by marketing manager
ii. Loss of a trade mark and patent case in the court of law
iii. Strike and lock out by the factory workers
iv. Quarrel between production and marketing manager
The correct option is –
(a) (i) & (iv)
(b) (iii) &(iv)
(c) All the above
(d) (i), (ii) & (iii)

10. Accounting is necessary in today’ environment because

i. it gives true & fair view
ii. it filters out irrelevant information and only relevant information in summarized form
is given
iii. Accounting Information is easily understandable and comparable
iv. For all the above reasons

The correct option is –

(a) (i) &(ii)
(b) (i) &(iii)
(c) (ii) &(iii)
(d) (iv)
11. (Match the following)
Only monetary transactions p) business entity assumption
recorded in the books of accounts
x) Transactions are assumed to before q) monetary measurement assumption
specified period normally one year
y)business is separate and distinct from r) Periodicity assumption owner
z) Business is looked upon as a s) going concern assumption entity
Correct combination is-
(a) Wp; xr; ys; zq
(b) Ws; xr; yq; zp
(c) Wq; xr; yp; za
(d) Ws; xq; yp; zr

12. In ‘Going concerns concept’:

i. life of business is assumed to be indefinite.
ii. value of assets are recorded at market price
iii. assets are depreciated on the basis of expected life
The correct option is –
(a) i),ii) are true
(b) i), iii) are true
(c) ii), iii) are true
(d) i), iii) are false
13. Which is the accounting concept that requires the practice of crediting closing stock
to the trading account.
(a) Going concern
(b) Cost
(c) Matching
(d) Realisation
14. Assets in the balance sheet are shown at cost less depreciation rather than their
replacement cost because of the accounting convention.
(a) Going concern
(b) Matching
(c) Realisation
(d) Money Measurement
15. According to money measurement concept, which one of the following will be recorded in
books of account
(a) Excellent morale of workers
(b) Quality control in business
(c) Managing ability of the manager
(d) Cost of Machinery
16. Contingent liability appears as a footnote in the balance sheet. This is in accordance with the
accounting principle
(a) Consistency
(b) Disclosure
(c) Conservatism
(d) Materiality
17. The policy of ‘anticipate no profit and provide for all the possible losses’ arises due to
convention of
(a) Consistency
(b) Disclosure
(c) Conservatism
(d) Matching

18. Revenue is generally recognized being earned at the point of time when:
(a) Sale is effected
(b) Cash is received
(c) Production is completed
(d) Goods are delivered

19. Name of convention that states ‘closing stock is valued at cost price or market price or lower
of the two’ is
(a) Convention of consistency
(b) Convention of full disclosure
(c) Convention of conservatism
(d) None of the above

20. Name of convention that states the same accounting methods should be adopted every year
in preparing financial statements.
(a) Convention of consistency
(b) Convention of full disclosure
(c) Convention of materiality
(d) Convention of conservations

21. Under Double Entry system, how many aspects of a transaction are recorded?
(a) One
(b) Two
 (c) One or two depending upon the nature of transaction
(d) May be three

22. The two aspects of a transaction under the double entry System are
(a) Receiving and giving
(b) Incoming and outgoing
(c) Debit and credit
(d) All the above

23. In the Double entry system, debits

(a) are always favourable since they denote incoming
(b) can be both favourable or unfavourable depending upon the nature of accounts
where they are recorded
(c) are always unfavourable since they denote expenses and losses
(d) can’t say

24. In the double Entry System, since all liabilities are credited, therefore
(a) all credit entries are bad for the business
(b) Credit entries are not always bad because gains and profits are also credited
(c) credit entries can be both good and bad depending upon the nature of account
(d) can’t say

25. Debit means

(a) An increase in asset
(b) An Increase in liability
(c) An increase in capital
(d) a decrease asset
26. Credit means
(a) An increase in asset
(b) An Increase in liability
(c) An decrease in capital
(d) a decrease liability

27. Crediting an asset account means

(a) Increase in the value of asset
(b) Decrease in the value of the asset
(c) The value of the asset will not change
(d) The value of liabilities will decrease

28. A sale of goods to Ram for cash will lead to

(a) Debiting Ram ‘s a/c and crediting cash a/c
(b) Debiting cash a/c and crediting Ram ‘s a/c
(c) Debiting cash a/c and crediting Goods a/c
(d) Debiting Ram’s a/c and crediting goods a/c

29. A withdrawal of cash from business by the proprietor should be credited to

(a) Drawing a/c
(b) capital a/c
(c) cash a/c
(d) Bank a/c
30. An advertisement expense is incurred by Ram without making the payment to the
advertiser. Whose a/c should be credited by Ram?
(a) His own a/c
(b) Advertisement a/c
 (c) Advertiser’s a/c
(d) None of these

31. The assets of a business are always equal to,-

(a) The total of its liabilities and capital (owner’s equity)
(b) The total of its liabilities but the capital (owner’s equity) is separately
accounted for
(c) The sum of cash and bank balance in its balance sheet.
(d) The total of its liabilities and capital (owner’s equity) but the profits of the
business are not taken into account.

32. For recording changes in assets and expenses (losses) in the accounts
(a) Increase in assets is debited and increase in expenses / losses is credited.
(b) Increase in assets is debited and increase in expenses / losses is also debited.
(c) Increase in assets is credited and increase in expenses / losses is debited.
(d) Increase in assets is credited and increase in expenses / losses is also credited.
33. For recording changes in liabilities and capital / revenues (gains) in the accounts
(a) Decrease in liabilities is debited and decrease in capital / revenue (gains) is credited.
(b) Decrease in liabilities is credited and decrease in capital / revenue (gains) is also
credited.
(c) Decrease in liabilities is debited and decrease in capital / revenue (gains) is also
debited.
(d) Decrease in liabilities is credited and decrease in capital / revenue (gains) is debited.

34. Find the correct statement

(a) Credit a decrease in assets
(b) Credit the increase the expenses
(c) Debit the increase in revenue
(d) Credit the decrease in capital

35. State the correct classification of the commonly used accounts, namely (1) Building
(2) Credit purchases (3) Electricity charges due but not yet paid (4) Godown rent paid
in advance.
(a) 1 & 2 are assets and 3 & 4 liabilities.
(b) 1&4 are assets and 2 & 3 liabilities.
(c) 1 & 3 are liabilities and 2 & 4 assets.
(d) None of the above.

36. The journal entry to record the sale of services on credit should include :
(a) Debit to debtors and credit to capital.
(b) Debit to cash and credit to debtors.
(c) Debit to fees income and Credit to debtors.
(d) Debit to debtors and credit to fees income.

37. The journal entry to record purchase of equipment for Rs. 2,00,000 cash and a balance of Rs.
8,00,000 due in 30 days include:
(a) Debit equipment for Rs. 2,00,000 and credit cash 2,00,000.
(b) Debit equipment for Rs. 10,00,000 and credit cash Rs. 2,00,000 and creditors
Rs. 8,00,000.
(c) Debit equipment Rs. 2,00,000 and credit debtors Rs. 8,00,000.
(d) Debit equipment Rs. 10,00,000 and credit cash Rs. 10,00,000.

38. Cash withdrawn by the proprietor should be credited to,-

 (a) Drawings account
(b) Capital account
(c) Profit and loss account
(d) Cash account

39. Posting is the process of,-

(a) Recording of transactions in the journal .
(b) Transferring entries from the ledger to the journal.
(c) Transferring entries from books of original entry to the ledger.
(d) Transferring the balance in the ledger account to the trial balance.

40. Credit balance of bank account in cash book shows

(a) Over draft
(b) Cash deposited in our bank
(c) Cash withdrawn from bank
(d) None of these
41. Goods purchased on cash are recorded in the
(a) Purchases (journal) book
(b) Purchases return (journal) book
(c) Ledger
(d) Cash book
42. A contra entry -
(a) Is a single entry.
(b) Is an entry entered to cancel the effect of an earlier entry.
(c) Is not a book keeping entry.
(d) does not affect both cash and bank ledgers..

43. Which of the following statement is not correct in relation to cash discount
(a) Cash discount is an allowance made by the person who receives cash to the payer for
prompt payment.
(b) Cash discount is an allowance in addition to the trade discount.
(c) Cash discount is recorded in account books.
(d) Cash discount is always allowed at a rate higher than the rate of Trade Discount.

44. When the claim on account of loss of stock is partly accepted by the Insurance Co., the
journal entry will be, -
(a) Debit Insurance Claim account; Debit. Profit and loss A/c & Credit Trading
account
(b) Debit Insurance claim account & Credit Trading account
(c) Debit Insurance claim account & Credit Profits & loss account
(d) Debit Insurance claim account & Debit. Trading account and Credit Profits
and loss account.

45. If one of the cars purchased by a car dealer for resale is used for business purposes instead
of resale, then it should be recorded by passing the entry –
(a) Debit drawing account and credit purchase account.
(b) Debit office expenses account and Credit Motor car account.
(c) Debit. Motor car account and credit purchase account.
(d) Debit motor car account and credit stock account.

46. Favorable balance as per the cash book means-

(a) Credit balance in the bank column of the cash book.
(b) Debit balance in the bank column of the cash book.
(c) Debit balance in the passbook.
(d) None of the above.
47. If the cash book balance is taken as starting point the items which make the cash book
balance smaller than the passbook must be –
(a) Added for the purpose of reconciliation.
(b) Subtracted for the purpose of reconciliation.
(c) Both (a) and (b) could be correct.
(d) None of the above.

48. If the overdraft as per the passbook is taken as the starting point, the cheques issued but not
presented are to –
(a) Added in the bank reconciliation statement.
(b) Subtracted in the bank reconciliation statement.
(c) Ignored.
(d) None of the above.

49. Which of the following is not an advantage of bank reconciliation statement

(a) Early detection of errors
(b) Completion of cash book
(c) Reducing the chances of embezzlement
(d) Correct calculation of profit.

50. A debit balance in the depositor’s cash book will be shown as

(a) Debit balance on the bank statement.
(b) A credit balance on the bank statement
(c) An overdrawn balance on the bank statement
(d) None of the above.

51. Favorable bank balance means--

(a) Credit balance in the cash book.
(b) Credit balance in passbook.
(c) Debit balance in cash book.
(d) Both (b) and (c)

52. Balance as per cash book is Rs. 50,000. Cheques issued, but not presented for
payment Rs. 20,000 and cheques sent for collection, but not collected Rs. 10,500.
The bank had wrongly debited the account of firm by Rs. 20. Balance as per pass
book will be
(a) Rs. 59,500
(b) Rs. 59480
(c) Rs. 59700
(d) Rs. 58300

53. The following particulars relate to the business of Mohan on 31.3.2007. Balance as
shown by the cash book Rs. 1,00,000. Cheques issued, but not presented for payment
Rs. 40,000. Cheques deposited, but not yet collected Rs. 30,000. Balance as shown
by the bank pass book will be -
(a) Rs. 90,000
(b) Rs. 1,00,000
(c) Rs. 1,10,000
(d) None of the above.
54. You are given two statement (1) A bill of exchange is drawn by the creditor (2) A bill of
exchange must be accepted by the payee. Which of the following options is correct :-
(a) Statement 1 is false but statement 2 is true.
(b) Both the statement are true
(c) Both the statement are false
(d) Statement 1 is true but the statement 2 is false.

55. You are given two statement (1) A promissory note is drawn by creditor in favor of his
debtor (2) There are two parties to a bill of exchange. Which of the following options is correct :-
(a) Statement 1 is false but statement 2 is true.
(b) Both the statement are true
(c) Both the statement are false
(d) Statement 1 is true but the statement 2 is false.

56. Which of the following statements is correct :

(a) Capital expenditure is incurred to maintain the earning capacity of the business.
(b) Revenue expenditure is generally non recurring by nature.
(c) Capital expenditure normally benefits for one accounting year.
(d) None of the above.

57. A business has incurred expenditure on (1) Repairs and white washing at the time of
purchase of an old building in order to make it usable (2) Registration fees paid at the time of
purchase of a new building.
(a) Whereas 1 is capital expenditure, 2 is revenue expenditure.
(b) Both 1 & 2 are item of capital expenditure
(c) Both 1 & 2 are expenditures of revenue nature
(d) Item 1 is deferred revenue expenditure and item 2 is revenue expenditure.

58. An advertisement company has incurred heavy expenditure on advertising on launching a

product. The expenditure can be classified as deferred revenue expenditure because
(a) It is likely to give benefit for more than one accounting period.
(b) The people are not likely to remember the advertisement for slightly longer period.
(c) It is incurred on day to day conduct of business
(d) All of the above.

59. Please state which of the following is correct .

(a) Capital expenditure is recorded in the profit and loss account and then transferred to
the balance sheet.
(b) Capital expenditure without depreciation is recorded in the balance sheet.
(c) Revenue expenditure without adjustment for outstanding and pre paid amount is transferred
to
trading and profit and loss account.
(d) None of the above.

60. What would be the treatment, when a fixed asset is sold for Rs. 1,20,000, whose cost was Rs.
1,00,000 & WDV Rs. 60,000
(a) Revenue profit of Rs. 60,000.
(b) Capital profit of Rs. 60,000.
(c) Capital profit of Rs. 20,000 and Revenue profit of Rs. 40,000.
(d) Capital profit of Rs. 40,000 and revenue profit of Rs. 20,000.

61. Compensation received from Government for compulsory removal of a business premises to
another place is an example of -
(a) Capital expenditure
(b) Capital receipt
 (c) Revenue expenditure
(d) Revenue receipt
62. Which of these is correct, when a machinery is purchased for Rs. 1,00,000 and installation
charges of Rs. 10,000 is incurred therefore.
(a) Capital expenditure of Rs. 1,10,000.
(b) Capital expenditure of Rs. 1,00,000 and Revenue expenditure of Rs. 10,000.
(c) Deferred revenue expenditure of Rs. 1,10,000.
(d) Deferred revenue expenditure of s. 1,00,000 and revenue expenditure of Rs. 10,000.

63. Which one of the following is not a capital expenditure.

(a) Cost of issuing shares and debenture.
(b) Wages paid for construction of building
(c) Repairs on a second hand machinery newly purchased.
(d) Purchased of new spark plug for a two year old car.
64. A receipt and payment account
(a) is prepared at the end of accounting year on the basis of cash receipts and
cash payments recorded in the cash book.
(b) is simply a summary of cash and bank transactions under various heads.
(c) give summarized picture of various receipts and payments irrespective of
whether they pertain to the current period or not.
(d) All of the above.

65. The opening balance in the receipt and payment account represents
(a) Cash in hand / cash at bank shown on its receipt side
(b) Cash in hand / cash at bank shown on its credit side
(c) The liabilities of the business
(d) None of the above.
66. Receipt side of the receipt and payment account give a list of
(a) Only revenue receipts for past current and future periods.
(b) Revenue receipts for past current and future periods as well as capital receipts.
(c) Revenue receipts for only the current period.
(d) Revenue receipts for only the current period as well as capital receipts

67. While preparing the receipt and payment account, in case there is bank over draft at the
beginning of the year
(a) The same is entered on the debit side of this account
(b) It is ignored
(c) The same is entered on the credit side of this account.
(d) None of the above

68. Income and expenditure account

(a) Is just like profit and loss account prepared on accrual basis
(b) Includes capital as well as revenue items
(c) a & b both are correct
(d) All revenue items pertaining to past, current and future period are shown in this
account.
69. In preparation of income and expenditure account
(a) Opening and closing balance of cash in bank are excluded in addition to
exclusion of capital receipts and capital payments
(b) Opening and closing balance of cash in bank are included but capital receipts
and capital payments are excluded.
(c) Opening and closing balance of cash in bank are included in addition to
inclusion of capital receipts and capital payments
(d) Opening and closing balance of cash in bank are excluded but capital receipts
and capital payments are included.
70. A business receives subscription of 100000 for the current year and 50000 for the
earlier years. The opening cash balance is Rs. 20000. Payment of Rs. 30000 has been
made for purchase of Govt. securities. Rs. 10000 donation for building has also been
made for the current year. The excess of income over expenditure at the year end
shall be
(a) Rs. 90000
(b) Rs. 100000
(c) Rs. 40000
(d) Rs. 60000

71. Which is correct

i. Trial balance is made to check arithmetical accuracy of postings In books of accounts.
ii. Trial balance reflects the financial health of the business entity as on a particular date.
iii. Trial balance is prepared for internal use only.
iv. Trial balance can be made by two methods- Totals method and balance method.
The correct option is –
(a) only i, iii, iv are correct
(b) i & ii are correct
(c) ii, iii, iv are correct
(d) All are correct

72. Which of the following mistakes will not be detected in spite of agreement of Trial Balance
(a) Omitting to record a transaction entirely in the books.
(b) Making mistake in balancing an account.
(c) Making an entry on wrong side.
(d) Omitting to write balance of account in Trial Balance.
73. Which of the following are correct
(i) Mistake in transferring balance to trial balance will result into disagreement of
trial balance.
ii) Posting an entry on correct side but in wrong account will not affect agreement
of trial balance.
iii) An error of principle- expense of capital nature treated as revenue expenditure
will effect agreement of trial balance.
iv) Posting on both the debit and the credit side with wrong amount will not effect
trial balance.
The correct option is -
(a) i), ii), iv) are correct
(b) i), ii), iii) are correct
(c) ii), iii), iv) are correct
(d) i), iii), iv) are correct

74. Sales to B Rs 500 posted to his account as Rs. 50 would effect

(a) Sales A/c
(b) Cash A/c
(c) B’s A/c
(d) None of these

75. Sales to Mr. A recorded in purchase journal would effect

(a) Sales account
(b) Sales account, Purchase account and A’s account.
(c) Purchase A/C and A’s A/C
(d) None of these
76. Purchase made on credit not recorded at all would effect
(a) Purchase Book
(b) Supplier’s account
(c) Purchase A/C and Supplier’s A/C
(d) None of these

77. Amount received from S posted to the account of M would effect

(a) S’s A/c
(b) M’s A/c
(c) S’s A/c and M’s A/c
(d) None of these

78. A few errors committed in A’s books of accounts are given below Which of the errors would
effect Trial Balance
a. Sales of 950 to Ram completely omitted in books of account.
b. Purchases of Rs.720 from Shyam entered in purchases journal as Rs.700.
c. Purchases journal is overcast by 1000.
d. Sales return journal is under cost by Rs.200.
e. Amount paid to Aggarwal wrongly posted to the debit to Mittal’s account.
f. Bank overdraft shown under debit column in Trial Balance.
g. Wages paid for installation of machinery debited to wages A/C.
h. Sales of Rs. 500 made to Sadiq entered in sales to Sadam.
The correct option is –
(a) a, c and g
(b) c, d and f
(c) c, d. e and h
(d) c, d, f and h

79. Which item is shown on the debit side of a trial balance

(a) Rent outstanding
(b) Prepaid expenses
(c) Purchase return
(d) Excess of income over expences by firm.

80. If a trial balance does not tally in spite of thorough scrutiny and difference is substantial then
which of the courses the accountant would adopt
(a) Defer the preparation of financial statement.
(b) Open Suspense A/C.
(c) Write off the difference to Profit and Loss A/C
(d) Ignore the difference and prepare financial statements.

81. A bill of Rs. 2000 for old office furniture sold to Sethi was entered in the sales book. The
book value of furniture sold was Rs. 2500. Rectification entry would be
(a) Sales A/c Dr. 2000 To furniture A/C 2000
(b) Furniture A/c Dr. 2500 To loss on sale of furniture A/C 500 To sales A/C 2000
(c) Sales A/C Dr. 2000 Loss on sale of furniture A/C Dr. 500 To furniture A/c 2500
(d) Sethi’s A/c Dr. 2000 To furniture A/C 2000

82. An amount of Rs. 2000 withdrawn by the proprietor for his personal use has been debited to
trade expenses account. Rectification entry would be
(a) Trade expenses A/C Dr. 2000To Drawings A/C 2000
(b) No mistake
 (c) Drawings A/C Dr. 2000 To trade expenses A/C 2000
(d) Trade expenses A/C Dr. 2000 To Capital A/C 2000

83. Rs. 1500 received from Malhotra have been credited to Mehrotra. Rectification entry would
be
(a) Malhotra’s A/C Dr. 1500 To Mehrotra’s A/C 1500
(b) Mehrotra’s A/C Dr. 1500 To Malhotra’s A/C 1500
(c) Does not effect Trial Balance hence no need to pass any entry.
(d) No mistake

84. An amount of Rs.800 received on account of interest was credited to commission account.
Rectification would be
(a) Cash A/C Dr. 800 To Interest A/c 800
(b) Comission A/C Dr. 800 To interest A/c 800
(c) Does not effect Trial Balance hence no need to pass any entry
(d) No mistake

85. A bill receivable for Rs. 15000 accepted by Soni Bros. was recorded in bills payable book.
Rectification entry would be
(a) Bills receivable A/C Dr. 15000 To bills payable A/C 15000
(b) Bills receivable A/C Dr. 15000 To Soni Bros. 15000
(c) Bills receivable A/C Dr. 15000 Bills payable A/C Dr. 15000
To Soni Bros. 30,000
(d) Bills Payable A/C Dr. 15000 To Soni Bros. 15000

86. Current liabilities are such liabilities which are to be satisfied

(a) within one year
(b) within two years
(c) within three years
(d) None of the above.

87. Loss on sale of old motor is debited to

(a) Profit & Loss a/c
(b) Motor car a/c
(c) Depreciation a/c
(d) None of the above.

88. Computers should be classified as

(a) Fixed assets
(b) Current assets
(c) Liquid assets
(d) All of the above.

89. Sales are equal to

(a) Cost of goods solds plus Gross profit
(b) Cost of Goods sold minus gross profit
(c) Gross profit minus cost of goods sold
(d) None of the above.

90. Income tax paid by a sole trader is shown

(a) On the debit side of the trading a/c
(b) on the debit side of the Profit & Loss a/c
 (c) By way of deduction from the capital in the balance sheet
(d) None of the above.

91. Training fee received appearing in the trial balance is shown

(a) on the debit side of the Profit & Loss a/c
(b) On the credit side of the Profit & Loss a/c
(c) On the assets side of the balance sheet
(d) On liability side of the balance sheet.

92. Goodwill is a
(a) Fictitious asset
(b) Tangible Asset
(c) Intangible asset
(d) Not a asset at all.

93. Return Inwards in the trial balance are deducted from

(a) purchases
(b) sales
(c) freight
(d) None of the above.

94. Disputed liabilities in respect of manufacturing defects in the goods sold is shown
(a) On the debit side of the trading account
(b) On the debit side of the P&L a/c
(c) On the liabilities side of the balance sheet
(d) As a note below the balance sheet

95. Salary has been prepaid. It will be

(a) Debited to the trading a/c
(b) Debited to the profit and loss a/c
(c) Shown as liability in the balance sheet
(d) Shown as an on the asset side of the balance sheet

96. Part of wages has remained unpaid. It will be

(a) it will be debited to the Trading A/c and also shown as an asset in the balance
sheet.
(b) It will be debited to the profit and loss account and then shown as liability in the
balance sheet
(c) It will be debited to the Trading account and then shown as liability in the balance
sheet
(d) It will be debited to the profit and loss account and then shown as asset in the
balance sheet

97. Part of factory insurance premium paid relates to the next accounting year.
(a) It will be debited to the profit and loss account and then also shown as liability in
the balance sheet
(b) will not be debited to the profit and loss account and instead would be shown as
liability in the balance sheet
(c) will not be debited to the profit and loss account and instead would be shown as
an asset in the balance sheet
(d) None of the above.

98. Interest income has accrued to the business but has not been received from the bank. It
 (a) will not be shown as income in the profit and loss account but would be shown in the
asset side of the balance sheet.
(b) will be shown as income in the profit and loss account and also as current asset in
the asset side of the balance sheet.
(c) will be shown as income in the profit and loss account only
(d) will be shown as income in the profit and loss account and also as current liability in
the liability side of the balance sheet.

99. Depreciation is provided on

(a) Current assets
(b) Fixed assets
(c) Intangible assets
(d) None of the above.

100. The manager is entitled to a commission of 5% on profits before deducting the

commission. The profit is Rs.2,100, therefore his commission will be
(a) Rs.100
(b) Rs.105
(c) Rs.110
(d) Rs. 115

Suggested answers to the above questions.

1a 21 b 41 d 61 b 81 c
2b 22 d 42 b 62 a 82 c
3d 23 b 43 d 63 d 83 b
4a 24 c 44 a 64 d 84 b
5c 25 a 45 c 65 a 85 c
6c 26 b 46 b 66 b 86 a
7c 27 b 47 a 67 c 87 a
8b 28 c 48 a 68 a 88 a
9c 29 c 49 d 69 a 89 a
10 d 30 c 50 b 70 b 90 c
11 c 31 a 51 c 71 a 91 b
12 b 32 b 52 b 72 a 92 c
13 c 33 c 53 c 73 a 93 b
14 a 34 a 54 d 74 b 94 d
15 d 35 b 55 c 75 b 95 d
16 b 36 d 56 d 76 c 96 c
17 c 37 b 57 b 77 c 97 c
18 a 38 d 58 a 78 b 98 b
19 c 39 c 59 d 79 b 99 b
20 a 40 a 60 c 80 b 100 a
 Model Question paper

1. In which financial statements is bad debt shown, if it appears in the adjustment

(a) Trading & profit and loss account.
(b) Profit and loss account & balance sheet
(c) Only balance sheet
(d) Only profit and loss account

2. Sundry debtors of Mr. R. amounts to Rs. 25000 and additional bad debts, not recorded Rs.
3000. R provides for doubtful debts @ 2% and for discount @ 1%. The amount of net debtors to
be shown in the balance sheet will be -
(a) Rs. 21560
(b) Rs. 22000
(c) Rs. 21780
(d) Rs. 21340

3. Unrealised profit will be debited to

(a) Profit and loss account
(b) Provision account
(c) Profit and loss adjustment account
(d) Profit and loss appropriation account

4. How will discount allowed be treated, if it appears in the Trial balance and provision for
discount on debtors account appears?
(a) Shown on the debit side of the profit and loss account.
(b) Shown on the debit side of the provision for discount on debtors account.
(c) Shown on the debit side of the trading account.
(d) Either (a) or (b)

5. Goodwill is
(a) A current asset
(b) An tangible asset
(c) An intangible asset
(d) Fictitious asset

6. Closing stock will not be shown in the trading account, if

(a) It appears in the trial balance
(b) It does not appear in the trial balance
(c) It appears in the balance sheet
(d) It appears in the profit and loss account

7. When there is abnormal loss, which of the following regarding the value of goods lost is
correct –
(a) Total value is shown on the asset side
 (b) Value recovered from the Insurance Co. is shown on the asset side.
(c) Amount due from the Insurance Co. is shown on the asset side.
(d) No entry.

8. Balance sheet is also known as

(a) Position statement
(b) Analysis statement
(c) Cash flow statement
(d) Fund flow statement

9. Establishment Expenses account is shown

(a) In the debit side of trading
(b) In the debit side of profit and loss
(c) In the liability side of balance sheet
(d) In the assets side of balance sheet

10. Fixed assets are

(a) Kept in the business for use over a long time for earning income.
(b) Meant for resale
(c) Meant for conversion into cash as quickly as possible
(d) All of the above

11. Drawing are deducted from

(a) Sales
(b) Purchases
(c) Expenses
(d) Capital

12. Prepaid insurance given in the trial balance is recorded in

(a) Trading account
(b) Profit and loss account
(c) Balance sheet
(d) None of the three

13. ________ Reserve is not shown in balance sheet

(a) General Reserve
(b) Capital reserve
(c) Secret reserve
(d) None of the three

14. Goods costing Rs. 7500 were sold at 25% profit on selling price. The sales will be of
(a) Rs. 10000
(b) Rs. 9000
(c) Rs. 8000
(d) None of the three
15. The Capital in a business on January 1 and January 31 is Rs. 17000 and Rs. 17200
respectively. Investment by owner and withdrawal by owner during January amounted to Rs.
1000 and 700 respectively. What is the net income for January -
(a) Rs. 100 loss
(b) Rs. 300
(c) Rs. 200
(d) Rs. 500

16. Partner’s Current Accounts are opened when their capital accounts are
(a) Fixed
(b) Fixed and fluctuating both
(c) Fluctuating
(d) None of these

17. In the absence of an agreement to the contrary, partners share profits and losses in the
(a) Ratio of their capital in the beginning of the year
(b) Ratio of their capital at the end of the year
(c) Ratio of average capital
(d) The equal ratio

18. The interest on partner’s drawing is debited to

(a) Partner’s capital account
(b) Profit and loss account
(c) Drawing account
(d) None of these

19. X Y Z are partners sharing profits in ratio of 5:3:2 in the Firm XYZ & CO. There is change in the
profit sharing ratio. If Z acquires 1/5 share from X, new ratio would be
(a) 5:3:2
(b) 4:3:3
(c) 3:3:4
(d) 4:3:4

20. X Y Z are partners sharing profits in ratio of 5:3:2 in the Firm XYZ & CO. There is change in the
profit sharing ratio. If Z acquires 1/5 share equally from X and Y, new ratio would be
(a) 5:3:4
(b) 4:2:4
(c) 4:2:3
(d) 3:3:4

21. X Y Z are partners sharing profits in ratio of 5:3:2 in the Firm XYZ & CO. There is change in the
profit sharing ratio. If X, Y and Z decide to share profit equally, sacrificing/gaining ratio would be
(a) (-)5/30 1/30 4/30
(b) 4:2:4
(c) 3:3:4
 (d) none of the above

22. The General Reserve at the time of admission of a partner is transferred to

(a) Revaluation A/C
(b) Old partners’s Capital A/C
(c) Niether of the two
(d) Profit & Loss A/c

23. When the incoming partner brings in his share of premium for goodwill in cash, it is adjusted
by crediting to
(a) his capital A/C
(b) premium (goodwill) A/C
(c) sacrificing partners’ Capital A/C
(d) none of above

24. Z is admitted to firm for 1/4th share in profits for which he brings in Rs. 10000 towards
premium for goodwill. It will be taken by the old partners in
(a) the old profit sharing ratio
(b) the new profit sharing ratio
(c) the sacrificing ratio
(d) none of the above

25. Revaluation A/C (or alternatively P&L adjustment A/C) is a

(a) Real A/C
(b) Nominal A/C
(c) Personal A/C
(d) none of the above

26. The balance in the investment Fluctuation Fund, after meeting the loss on revaluation of
investments, at the time of admission of a partner will be transferred to
(a) the Old Partners’ Capital A/C
(b) the Revaluation A/C
(c) the General Reserve
(d) none of the above
27. If the incoming partner is to bring in premium for goodwill in cash and also a balance exists
in the goodwill A/C, then this goodwill account is written off amount the old partners in
(a) new profit sharing ratio
(b) the old profit sharing ratio
(c) the sacrificing ratio
(d) none of the above

28. X and Y are partners sharing profit in the ratio of 2:1. They admit Z into the partnership for
1/4th share in profits for which he brings in Rs. 20000 as his share of capital. Hence the adjusted
Capital of X and Y will be
(a) Rs. 40000 and Rs. 20000 respectively
(b) Rs. 32000 and Rs. 16000 respectively
 (c) Rs. 60000 and Rs. 30000 respectively
(d) none of the above

29. In the event of death of a partner, the amount of General Reserve is transferred to Partners’
Capital account in
(a) the new profit sharing ratio
(b) the old profit sharing ratio
(c) the Capital ratio
(d) none of the above

30. A, B and C are partners sharing the profit in the ratio of 2:2:1. C retired. The new profit
sharing ratio between A and B will be
(a) 2:1
(b) 1:1
(c) 3:1
(d) none of the above

31. Out of the features namely 1. Involuntary association 2. Limited liability 3. Perpetual
succession 4. Common seal, which are the special features of a company.
(a) Only 2 & 3
(b) Only 2,3,& 4
(c) Only 1,2 & 3
(d) All of the above.

32. Which of the following is not a part of the financial statements of an enterprise-
(a) Trial Balance.
(b) Trading Account.
(c) Profit and Loss account.
(d) Balance Sheet.

33. While preparing the financial statements of a company

(a) Assets are not shown at historic cost.
(b) Conservatism is followed.
(c) Industry practices are irrelevant.
(d) Consistency is not required to be observed.

34. Going concern postulate assumes that

(a) The enterprise is treated as a going concern and exists for a limited period of time
(b) The concern is going to close down shortly
(c) The enterprise is treated as a going concern and exists for a longer period of time
(d) None of the above

35. Reserve capital of a company is

(a) A portion of its called up capital which is put in the reserves
(b) A portion of the paid up capital which is put in the reserves
 (c) A portion of its subscribed capital which is put in the reserves
(d) A portion of its uncalled capital to be called only in the winding up of the company

36. A preference share is one which fulfills the following conditions

(a) It carries a preferential right to dividend
(b) With respect to capital, it carries preferential right to the repayment ahead to equity
(c) Both a & b
(d) None of the above.

37. Premium on issue of shares

(a) Is a capital receipt and discount on issue of shares is a capital loss
(b) Is a revenue receipt and discount on issue of shares is a capital loss
(c) Is a capital receipt and discount on issue of shares is a revenue loss
(d) Is a revenue receipt and discount on issue of shares is a revenue loss

38. Journal entry recorded for the amount of calls received in advance is
(a) Bank account debit ; To Calls-in-advance account
(b) Calls-in-advance account debit ; To share application account
(c) Share application account debit ; To Calls-in-advance account
(d) Bank account debit ; To Share application account

39. Discount allowed on reissue on forfeited shares should be debited to the share forfeited
account. The balance if any left in the share forfeited account
(a) Should be treated as capital profit and transferred to share capital account
(b) Should be treated as revenue and transferred to profit and loss account
(c) Should be treated as revenue but may be treated as capital at the option of the
company
(d) Should be treated as capital profit and transferred to capital reserve account.

40. Capital profit arises

(a) In respect of all forfeited shares
(b) Only in respect of the forfeited shares reissued
(c) Only when all the forfeited shares are reissued at a premium
(d) Only in respect of the forfeited shares which are not reissued

41. Preliminary expenses incurred in connection with the formation of a company are
(a) Are revenue in nature and therefore debited to profit and loss account
(b) Are revenue in nature but may be capitalized at the option of a company
(c) Are amortized over a period of three to five years.
(d) Are not amortized at all

42. Expenses on issue of shares and debentures

(a) Include expenses on prospectus and advertisement but not merchant banker fees
(b) Includes merchant banker fees but not expenses on prospectus and advertisement
(c) Include expenses on prospectus and advertisement as well as merchant banker fees
(d) None of the above.
43. Which Accounting Standards deals with prior period items -
(a) AS-5
(b) AS-6
(c) AS-7
(d) AS-8

44. Contingent liabilities are –

(a) not shown in financial statements.
(b) are shown on asset side of the balance sheet.
(c) are shown on liability side of the balance sheet.
(d) are shown as foot notes to the balance sheet.

45. Contingent asset is -

(a) same as ordinary asset
(b) same as contingent liability
(c) a possible asset whose existence is uncertain.
(d) An asset which is likely to have an uncertain amount of erosion in its value.

46. Which of the following statement is not true -

(a) If del-credere commission is allowed, bad debt will not be recorded in the
books of consignor.
(b) If del-credere commission is allowed, bad debt will be debited in consignment
account.
(c) Del-credere commission is allowed by consignor to consignee.
(d) Del-credere commission is generally relevant for credit sales.

47. In consignment, the consignor transfers _______ to the consignee

(a) Possession of goods
(b) Ownership in goods
(c) Both a & b
(d) None of the above

48. If the goods purchased are in transit, then the journal entry to record will be -
(a) Debit goods-in-Transit account and credit supplier’s account
(b) Debit goods-in-Transit account and credit purchases account
(c) Debit purchases account and credit goods-in-transit account
(d) Debit supplier’s account and credit goods-in-Transit account

49. In hire purchase agreement

(a) The property in goods passes to the hire purchaser when the first installment is paid
(b) The property in goods never passes to the hire purchaser
(c) The property in goods passes to the hire purchaser when the last installment is paid
(d) The seller is not entitled to taken away the goods if default is made in the payment
of installments
50. In hire purchase agreement
(a) The hire purchaser has no right of disposal of goods at any point
(b) The hire purchaser has no right of disposal of goods till be becomes the owner
(c) The hire purchaser can dispose the goods after terminating the contract
(d) The hire purchaser can dispose the goods after payment of termination charges

51. In joint venture partnerships

(a) Going concern assumption is followed in accounting
(b) The partnership does not end on completion of the venture
(c) There is a specific law to regulate the affairs of joint ventures
(d) No distinction is made between capital and revenue expenditures

52. Which of the following statement is true

(a) In case of separate sets of books method of joint venture, co-venturer’s
contribution of goods is debited in joint bank account.
(b) Co-venture’s contribution in cash is debited in co-venturer’s personal account
(c) Discount on discounting of B/R is debited to co-venturer’s personal account
(d) Contract money received is credited to joint venture account

53. If any stock is taken over by a co-venturer, it will be treated as an -

(a) Income of the joint venture, hence credited to joint venture account
(b) Expenses of joint venture, hence debited to joint venture account
(c) To be ignored from joint venture transaction
(d) It will be treated in the personal book of the venturer and not in the books of joint
venture.

54. Which of these is not an accounting method of joint venture

(a) Separate set of books
(b) Split set of books
(c) Same set of books
(d) None of the above

55. Which of the following account discloses venturers balance in joint venture
(a) Joint bank account
(b) Joint venture account
(c) Co-venturer account
(d) Memorandum account

56. Which of the following Rules for recording transactions with branches in head office is not
correct
(a) Goods consigned to branch will be recorded in head office books at the cost.
 (b) The branch will convert the invoice at the rate prevailing on the date of receipt of
goods
(c) Expenses charged to the branch will be converted by the branch at the average
rate.
(d) Goods consigned to branch will be recorded in head office books at the
invoice price
57. If the accounts of branch fixed assets are maintained in head office, the entry in respect of
depreciation will be
(a) Depreciation account debit ; To head office account
(b) Branch account debit ; To profit and loss account
(c) Branch account debit ; To branch fixed assets
(d) Branch fixed assets debit ; To Branch account

58. In stock and debtors system of branch accounting,

(a) Head office opens a branch account in its books and does not keep separate
accounts relating to various type of transactions at the branch
(b) Goods are invoiced to the branch at the cost price which the branch may vary
at its option
(c) Goods are invoiced to the branch at the selling price which the branch may
vary at its option.
(d) Goods are invoiced to the branch at the selling price which the branch is not
authorized to vary.

59. In departmental accounts, if one department supplies goods to another department at the
selling price,
(a) A reserve will have to be created in respect of stock of such goods at the date of
closing
(b) A reserve is not required to be created in respect of stock of such goods
(c) A reserve may be created at the option of both the departments
(d) None of the above.

60. ‘Assets should be valued at the price paid to acquire them’ is based on
(a) Accrual concept
(b) Cost concept.
(c) Money measurement concept.
(d) Realisation concept

61. The main object of providing depreciation on fixed assets is

(a) Save tax
(b) To know the correct financial position of the business
(c) To increase the expenses of business
(d) To reduce the profit of the business
Read the following statements & Answer Question 62 to 63
1. Depreciation is charged annually on the real cost of asset
2. Amount of depreciation is reducing as the balance is reducing each year
3. Method is allowed under I.T. Act
4. Amount depreciation is same in each financial year
5. Depreciation is charged annually on the basis of account balance in the beginning of
the year

62. For straight line method of depreciation

(a) 1,4 are true
(b) 1,3, are true
(c) 3,4 are true
(d) 3,5 are true
63. For Written down value method of depreciation
(a) 1,2 are correct
(b) 2,3,5 are correct
(c) 1,4 are correct
(d) 1,5 are correct

64. Which of the following assets do not require depreciation

(a) Leased assets
(b) Live stock
(c) Loose tool
(d) land

65. Depreciable assets are assets which

(a) are expected to be used during more than one accounting period.
(b) have a limited useful life
(c) are held by the enterprise for use in the production or supply of goods/services
(d) All the above

66. The factors causing depreciation include-

(a) wear and tear
(b) obsolescence
(c) Both (a) and (b)
(d) Neither (a) nor (b)

67. An asset is purchased for Rs 50000 on which depreciation is to be provided annually

according to the straight line method. The useful life of the asset is 8 years and residual value is
10000. The rate of depreciation is
(a) 20%
(b) 18%
(c) 10%
(d) 8%

68. Depreciation account is closed by

 (a) A transfer to owner’s personal A/C
(b) A transfer to balance sheet
(c) A transfer to Profit & Loss A/C
(d) A transfer to asset A/C

69. Journal entries to be passed for providing depreciation on assets will be

(a) Depreciation A/C Dr : To Profit & Loss A/C
(b) Depreciation A/C Dr. : To Assets A/C
Profit and loss A/C Dr. : To Depreciation A/C
(c) Profit and loss A/C Dr. : To Asset A/C
(d) Asset A/C Dr. : To depreciation A/C
Depreciation A/C Dr. : To Profit and loss A/C

70. Machine purchased on 1-4-2007 Rs.10,00,000; WDV on 31-3-09 Rs. 8,10,000; Sold for
Rs.9,00,000 on 31-3-09; Necessary journal entries for the above at the time of sale would be
(a) Bank A/c Dr. 900000
To machinery A/C 900000
(b) Machinery A/C Dr. 900000
To Bank A/C 900000
(c) Machinery disposal A/c Dr. 810000
To machinery 810000
Bank A/C Dr. 900000
To Machinery Disposal A/C 900000
Machine Disposal A/C Dr. 90000
To Profit and loss A/C 90000
(d) Bank A/C Dr. 810000
P&L A/C Dr. 90000
To Machinery A/C 1000000

71. Under which one of the following methods of depreciation the value of assets is never
reduced to zero:
(a) Straight line Method
(b) Diminishing Balance Method
(c) Sum of years digit Method
(d) Annuity Method

72. On Jan 1, 2008 there was a balance of Rs. 4000 in plant and machinery A/C. An addition of
Rs. 2000 was made on July 1, 2008 . Accounts were closed on Dec 31, 2008. If depreciation is
charged @ 10% per annum, the balance in plant and machinery A/C would be
(a) 5300
(b) 5400
(c) 5500
(d) 5600

73. Secret Revenue can be created in accounts by-

(a) Under-reporting depreciation.
 (b) Over-reporting depreciation.
(c) Both (a) and (b)
(d) Neither (a) nor (b)

74. Cost of M/c 15000; Provision for Depreciation 30000; Sold 14000; The journal entries are:-
(a) P&L A/C Dr. 1000
Bank A/C Dr. 14000
To Machinery A/C 15000
(b) Machinery disposal A/C Dr. 15000
To machinery A/C 15000
Provision for depreciation A/C Dr. 3000
To Machinery disposal A/C 3000
Bank A/C Dr. 14000
To machinery disposal A/C 14000
Machinery Disposal A/C Dr. 2000
To P&L A/C 2000
(c) Bank A/C Dr. 14000
To Machine A/C 14000
P&L A/C Dr. 14000
To machinery A/C 14000
P&L A/C Dr. 3000
To provision for depreciation 3000
(d) Bank A/C Dr. 15000
To P&L A/C 2000
To Machinery A/C 12000

75. You are given four statements viz.

(i) Depreciation is calculated not only on invoice price of asset but also on the freight
and installation charges less cash discount, if any
(ii)At the same rate of depreciation, amount of depreciation under the straight line
method would be equal in the year of acquisition but higher in subsequent
years as compared to W.D.V. method of depreciation
(iii) Depreciation is essentially on equitable allocation of the cost of fixed asset
over different periods during which asset is used by the firm.
(iv) No method of depreciation accurately calculates the charge to be made in respect of
the asset
Which of the statements are correct-
(a) i), ii) are correct
(b) iii), iv) are correct
(c) i), ii), iv) are correct
(d) All are correct

76. Which of the following accounting standards are applicable to all enterprises
(whether corporate or non corporate bodies of any size) in their entirety?
(a) AS-1,AS2,AS7
(b) AS9,AS 11, AS22
 (c) AS19
(d) AS1,AS2, AS7, AS9, AS11,AS22

77. Accounting standards apply to all organizations engaged in

(a) Commercial and business activities ,
(b) Industrial Activities
(c) charitable and religious activities
(d) To all the activities specified in (A), (B) and (C) above

78. General purpose Financial Statements include

(a) Profit & Loss A/c &Balance sheet
(b) Cash Flow statement
(c) Statements and Explanatory Notes forming part of above statements
(d) All the above

79. While assessing Income under the Income-tax Act, if there is a conflict between Accounting
Standards and provisions of Income Tax Act then
(a) The Accounting Standard will prevail
(b) Income Tax Act will Prevail
(c) Conflict would be referred to the court of law
(d) It would be left to the discretion to the Assessing Officer.

80. The fundamental accounting assumptions are

(a) Going concern, Consistency and Accrual
(b) Mercantile system, cash accounting ,accounting year
(c) Prudence, Substance over form, Materiality
(d) None of the above

81. Accounting policies are specific accounting principles and the methods of applying those
principles in the preparation and presentation of financial statements. The examples of
accounting areas where these policies get reflected are
(a) Methods of depreciation and amortization, Conversion of foreign exchange
currency items treatment of expenditure during construction, treatment of
goodwill, treatment of retirement benefits
(b) valuation of inventories, valuation of investments, valuation of fixed assets,
recognition of profit on long term contracts
(c) None of the above
(d) Both (a) & (b)

82. The major consideration that govern the selection and application of accounting policies are
(a) Prudence, Substance over Form, materiality
(b) Going, concern, Consistency and accrual
(c) Both the above
(d) None of the above
83. All of the following are examples of accounting policies except-
(a) method of charging depreciation.
(b) Expenditure during construction.
(c) Valuation of investment.
(d) Sinking fund created for replacement of assets.

84. The Principle of ‘Prudence’

(a) Attaches uncertainty to future
(b) recognizes profits only when the same are realized though not necessarily in
cash
(c) Makes provision for all expenses and losses though the amount can not be
determined with certainty and accuracy
(d) All the above

85. The controversy in preparation of accounts of Satyam was centered around

(a) Accounting standard on disclosure of accounting Policies
(b) Accounting Standard of Revenue Recognition
(c) Accounting standard for accounting for effect of changes in foreign exchange rates
(d) Accounting standard of Accounting for taxes on income

86. Inventory as per Accounting Standard AS-2 ‘Valuation of Inventory’ means

(A) Assets held in the form of raw material, work in progress, or finished goods, for sale
in the ordinary course
(B) Materials , maintence supplies to be used in the production process
(C) Consumables and Loose tools awaiting use in the production process
(D) Machinery spares warranting irregular use
Correct option is
(a) (A) only
(b) (A)& (B)
(c) (A), (B) & (C)
(d) All of the above

87. As`per AS-2 , inventories should be valued at

(a) Cost only
(b) Net Realizable value only
(c) Lower of cost or net realizable value
(d) Higher of cost or net realizable value

88. In which method of accounting for construction contracts, the current income
relatable to activities of the year , is recognized and shown in the financial
statements?
(a) Project Completion Method
(b) The Percentage completeion Method
(c) In both the methods
(d) None of the above
89. The revenue as per AS-9 on ‘Revenue recognition means revenue from
(A) Sale of Goods
(B) Rendering of Services
(C) Revenue resulting from interest, dividend royalties
(D) Gains from changes in foreign exchange rates
The correct option is
(a) All the above
(b) (A) & (B)
(c) (C) &(D)
(d) (A),(B) &(C)

90. AS-9 on ‘Revenue Recognition’ is mainly concerned with the

(a) Timing Of Recognition of Revenue In the statement of Profit & Loss A/c
(b) The amount of revenue recognition in the P&LA/c
(c) The Type of revenue recognition in the P&L A/c
(d) None of the above

91. As per AS-11 on ‘Accounting for Effect of changes in foreign exchange rates’ , an
enterprise is expected to disclose
A) the amount of exchange difference included in the net profit or loss for the
period
B) the amount of exchange difference adjusted in the carrying amount of fixed
assets during the accounting period
C) The amount of exchange differences in respect of forward exchange contracts
to be recognized in the profit or loss for one or more subsequent accounting
periods
D) None of the above
The correct option is:
(a) (A) & (B)
(b) (A) & (C)
(c) (A)(B) & (C)
(d) (D)

92. The Accounting Standard On Leases is applicable to all types of leases including
lease agreement to use of lands, lease agreement to use natural resources like oil, gas,
timber metals and leasing agreements for motion films, video recordings, plays etc.
(a) The above statement is correct
(b) The above statement is wholly incorrect
(c) The above statement is partially correct in relation to lease agreements of
motion picture, plays etc.
(d) The above statement is partially correct in relation to leasing agreement to use
of lands and natural resources occurring therein

93. The difference in accounting income and taxable income arise because of
 i) Timing differences
ii) Permanent differences
iii) Unabsorbed depreciation
iv) Carry forward of losses
Correct option is:
(a) All the above
(b) None of the above
(c) (i) & (ii)
(d) (iii) & (iv)

94. The AS22 on ‘Accounting for Taxes on income’ mandates for accounting of taxes in
the computation of profit and loss account. The taxes to be considered for the purpose
are
i) current taxes
ii) Deferred taxes
iii) Sales tax
iv) Excise duty
The correct option is
(a) All of the above
(b) (i)(ii) &(iii)
(c) (i) &(ii)
(d) (iii) &(iv)

95. The Tax effect of a timing difference can be

i) Deferred tax asset
ii) Deferred tax liability
iii) prepaid expense
iv) Unexpired expense
Correct option is:
(a) All the above
(b) None of the above
(c) (i) & (ii)
(d) (iii) & (iv)

96. Which of the following is not a condition required to be satisfied for amalgamation in the
nature of merger
(a) All the assets and liabilities of the transferor company become the assets and
liabilities of the transferee
(b) Share holder holding not less than 90% of the face value of the equity share of the
transferor company become equity share holder of the transferee company
(c) Consideration for amalgamation is discharged by the transferee company wholly by
the issue of equity shares in the transferee company except for cash in respect of any
fractional shares.
(d) The assets and liabilities of the transferor company are recorded on the basis of their
fair values at
the date of amalgamation

97. In the ‘Purchase’ method of accounting for amalgamation

(a) The reserves of the transferor company including statutory reserves are included in
the financial statement of the transferee company
(b) The reserves of the transferor company other than the statutory reserves are included
in the financial statement of the transferee company
(c) The reserves of the transferor company other than the statutory reserves are not
included in the financial statement of the transferee company
(d) The reserves of the transferor company including statutory reserves are not included
in the financial statement of the transferee company

98. The goodwill arising in amalgamation, as per accounting standard 14, should be
amortised to income on a systematic basis over its useful life. The amortization
period,
(a) Should not exceed 5 years unless a somewhat longer period can be justified
(b) Should not exceed 5 years at all
(c) Should exceed 5 years
(d) None of the above

99. When an amalgamation is effected after the balance sheet date, but before the issuance of
the financial statement of either party to the amalgamation,

(a) Disclosure of contingencies should not be made but amalgamation should be

incorporated in the financial statement
(b) Disclosure of contingencies should be made but amalgamation should not be
incorporated in the financial statement
(c) Disclosure of contingencies should be made and amalgamation should be
incorporated in the financial statement
(d) Disclosure of contingencies should not be made and amalgamation should
also not be incorporated in the financial statement

100. In a scheme of amalgamation, when the market value of the assets given up can not
be reliably assessed, such assets
(a) Are valued at their respective cost price
(b) Are valued at their respective net book value
(c) Are not valued at all
(d) Are not taken over by the transferee company
Suggested Answers to the above questions
1b 21 a 41 c 61 b 81 d
2d 22 b 42 c 62 a 82 a
3a 23 c 43 a 63 b 83 d
4a 24 c 44 d 64 d 84 d
5c 25 b 45 c 65 d 85 a
6a 26 a 46 b 66 c 86 c
7c 27 b 47 a 67 c 87 c
8a 28 a 48 a 68 c 88 b
9b 29 b 49 c 69 b 89 d
10 a 30 b 50 b 70 c 90 a
11 d 31 b 51 d 71 b 91 c
12 c 32 a 52 d 72 c 92 b
13 c 33 b 53 b 73 b 93 a
14 a 34 c 54 b 74 b 94 c
15 a 35 d 55 c 75 d 95 c
16 a 36 c 56 d 76 d 96 d
17 d 37 a 57 c 77 d 97 c
18 a 38 a 58 d 78 d 98 a
19 c 39 d 59 a 79 b 99 b