1. Answer the following questions :

(A) Choose the most appropriate one from the given following alternatives:

1) Name the book in which, entries are recorded on the basis of credit notes issued. 
      a)         Sales Book. 
      b)         Purchase Book. 
      c)          Sales Return Book.
      d)         Purchase Return Book.
2) Which of the following is a resource owned by the business with the purpose of using it for generating future profits? 
      a)      Loan from Bank. 
      b)      Owner's Capital. 
      c)       Trade Mark.
      d)      All of the above.
3) Chandu & Co.'s Account is a 
      a)      Real Account. 
      b)      Nominal Account. 
      c)       Representative Personal Account. 
      d)      Artificial Personal Accounts.
4) Contingent Liability would appear 
      a)         on the liabilities side of the Balance Sheet. 
      b)         on the assets side of the Balance Sheet. 
      c)          as a note in the Balance Sheet.
      d)         None of the above.

5) Which of the following term is most suitable for writing off Patent? 
      a)      Depletion. 
      b)      Amortization. 
      c)       Depreciation. 
      d)      All of the above.

6) Discount given in the Sales - Invoice itself is 
      a)         Cash discount. 
      b)         Trade discount. 
      c)          Rebate. 
      d)         Allowance.

7)If Ram's acceptance which was endorsed by us in favour of Saleem is dishonoured, then the amount will be debited in our books to 
      a)      Saleem. 
      b)      Ram. 
      c)       Bills Receivable Account. 
      d)      None of the above.
8) In case of a Club, the excess of expenditure over income is called as 
      a)      Surplus. 
      b)      Deficit. 
      c)       Capital Fund. 
     d)      Investment in Fixed Assets.
9) A Charitable Institution has 250 members with a annual subscription of ` 5,000 each. The subscription received during 2018-19 were ` 11,25,000, which include ` 65,000 and ` 25,000 for the years of 2017-18 and 2019-20 respectively. Amount of outstanding subscription for the 2018-19 will be 
      a)      Rs. 90,000. 
      b)      Rs. 1,25,000. 
      c)       Rs. 2,15,000. 
      d)      Rs. 1,90,000.
10) The following are details of closing stock items in Aarvi Limited:
Historical Cost (Rs. in Lakh)
Net Realisable Value (Rs. in Lakh)

The value of Closing Stock will be 
       a)      Rs. 120 Lakh. 
       b)      Rs. 125 Lakh. 
       c)       Rs. 117 Lakh. 
      d)      Rs. 128 Lakh. 

11) Which of the following commission is allowed by the consignor to the consignee to encourage the consignee for putting-up hard work in introducing new product in the market? 
      a)      Del-credere Commission. 
      b)      Over-riding Commission.
      c)       Hard work Commission. 
      d)      Ordinary Commission. 

12) Which of the following is not a Qualitative Characteristics of Financial Statement? 
      a)         Cost Principle. 
      b)         Understandability. 
      c)          Relevance. 
      d)         Reliability. 
13) Exception to consistency principle is 
      a)         Cost Principle. 
      b)         Going Concern Principle. 
      c)          Matching Principle. 
      d)         Prudence Principle. 
14) Interest charged by vendor in Hire Purchase System, is calculated on the basis of 
      a)         Outstanding hire purchase price. 
      b)         Outstanding cash price. 
      c)          Instalment amount. 
      d)         Cost price of the asset. 
15) The balance in consignment account shows 
      a)         Amount receivable from consignee. 
      b)         Amount payable to consignee. 
      c)          Profit/ loss on consignment. 
      d)         Closing stock with consignee. 
16) Provision for bad debts is 
      a)         Real Account. 
      b)         Nominal account. 
      c)          Personal account. 
      d)         None of the above. 
17) Purchase of a laptop for office use wrongly debited to Purchase Account. It is an error of 
      a)      Omission. 
      b)      Commission. 
      c)       Principle. 
      d)      Misposting. 
18) As on 31st March, 2017 debtors; and additional bad debts are Rs. 8,00,000 and Rs. 10,000 respectively. If the provision for bad debts is made at 5% on debtors then amount of such provision will be 
      a)         Rs. 40,000. 
      b)         Rs. 50,000. 
      c)          Rs. 39,500. 
     d)         Rs. 40,500. 
19) Canteen expenses are apportioned among departments in the proportion of 
      a)         Departmental floor space. 
      b)         Departmental direct wages. 
      c)          Departmental sales. 
      d)         Departmental No. of employees. 
20) The business is treated as distinct and separate from its owners on the basis of the 
      a)         Going concern concept. 
      b)         Conservatism concept. 
      c)          Matching concept. 
      d)         Business entity concept. 
21) If any stock is taken by a co-venturer, it will be treated as 
      a)         an income of the joint venture. 
      b)         an expense of the joint venture. 
      c)          to be ignored from joint venture. 
    d)         it will be treated in the personal books of the co-venturer. 
22) Interest received in advance account is a 
      a)         Nominal Account. 
      b)         Real Account. 
      c)          Artificial Personal Account. 
      d)         Representative Personal Account. 
23) Shiva draws a bill on Sanat on 25th October, 2018 for 90 days, the maturity date of the bill will be 
      a)         27th January, 2019. 
      b)         26th January, 2019. 
      c)          25th January, 2019. 
      d)         28th January, 2019. 
24) Peeru and Simu are entered in the business of buy and sale of food grain for a period of one year and sharing the profit in the ratio of 3 : 2, this agreement is a 
      a)          Partnership. 
      b)          Consignment. 
      c)         Joint-venture. 
      d)          Lease. 
25) At the end of the year 2017-18, Prepaid Insurance Premium Rs. 7,500 appeared in the Trial Balance, it will be shown 
      a)         only in Profit & Loss Account. 
      b)         only in Balance Sheet. 
      c)          both in Profit & Loss Account and in Balance Sheet. 
    d)         not in Both in Profit & Loss Account and in Balance Sheet. 
26) Debtors Ledger Adjustment Account is opened in the 
      a)         Debtors Ledger. 
      b)         Creditors Ledger. 
      c)          General Ledger. 
     d)         Both Creditors Ledger and General Ledger. 
27) Advertisement expenses are apportioned among departments in the proportion of 
      a)         sales of each department. 
      b)         purchases of each department. 
      c)          no. of units sold by each department. 
      d)         cost of sales of each department. 
28) Generally sacrifice ratio is concerned with the situation of 
      a)         Admission of a new partner. 
      b)         Retirement of a partner. 
      c)          Dissolution of firm. 
      d)         Conversion of firm into company. 
29) Due to retrospective effect on revision of salary of employees, the arrears of salary relating to past years, payable in current year is 
       a)         Prior - period item. 
       b)         Extra - ordinary item. 
       c)          Ordinary item requiring separate disclosure 
       d)         Contingent item. 
30) KCS purchased a machine from JPS on hire purchase system, whose cash price was Rs.8,64,000. Rs.2,16,000 being paid on delivery and balance in three annual instalments of Rs.2,88,000 each. The amount of interest included in first installment would be 
       a)         Rs. 72,000. 
       b)         Rs. 57,600. 
       c)          Rs. 1,08,000. 
      d)         Rs. 36,000. 
31) Memorandum Joint Venture Account is prepared when 
      a)      the separate set of books is maintained for Joint Venture. 
      b)      the each Co-venturer keeps records of all transactions. 
    c)       the each Co-venturer keeps records of their own transactions only. 
      d)      All of the above cases. 
32) If an employee of the business files a legal suit on business, it is considered in the books as a 
      a)         Legal Expense. 
      b)         Liability. 
      c)          Contingent Asset. 
      d)         Contingent Liability. 
33) Which of the following is not a method of charging depreciation? 
      a)         Sinking Fund Method. 
      b)         Sum of years Digit Method. 
      c)          Working hours Method. 
      d)         Asset's Life-cycle Method. 
34) If average inventory is Rs. 1,25,000 and closing inventory is Rs. 10,000 less than opening inventory then the value of closing inventory will be 
      a)         Rs. 1,35,000. 
      b)         Rs. 1,15,000. 
      c)          Rs. 1,30,000. 
      d)         Rs. 1,20,000. 
35) Both cash and credit transactions are recorded, on the basis of 
      a)         Accounting Period Concept. 
      b)         Going Concern Concept. 
      c)          Business Entity Concept. 
      d)         Accrual Concept. 
36) The Accommodation bill is drawn 
      a)         to finance actual purchase or sale of goods. 
      b)         to facilitate trade transmission. 
      c)          when both parties are in need of funds. 
      d)         None of the above. 
37) Balance of X's account in creditors ledger is transferred to X's account in debtors ledger, in this case 
      a)         X's account in debtors ledger will be debited. 
      b)         X's account in creditors ledger will be debited. 
      c)          Suspense account will be debited. 
      d)         None of the above. 
38)Ground rent or surface rent means 
      a)         Minimum rent. 
      b)         Maximum royalty payable. 
      c)          Minimum royalty payable. 
      d)         Fixed rent payable in addition to minimum rent. 
39)Accounting standard in India are issued by 
      a)         Government of India. 
      b)         Reserve Bank of India. 
      c)          The Institute of Chartered Accountants of India. 
      d)         The Institute of Accounting Standard of India. 
40) Income and Expenditure Account is a 
      a)         Nominal Account.  
      b)         Real Account. 
      c)          Personal Account. 
      d)         Artificial Personal Account. 
41) Creditors ledger adjustment account is opened in 
      a)         General Ledger. 
      b)         Debtors Ledger. 
      c)          Creditors Ledger. 
      d)         Either (B) or (C). 
42) At the end of the accounting year the capital expenditures are shown in the 
      a)         assets side of the Balance Sheet. 
      b)         liabilities side of the Balance Sheet. 
      c)          debit side of the Profit and Loss A/c. 
      d)         credit side of the Profit and Loss A/c. 
43) Receipts and Payments account is a 
      a)         Nominal Account. 
      b)         Real Account. 
      c)          Personal Account. 
      d)         Artificial Personal Account. 
44) Outward Invoice issued is a source document of 
      a)         Purchase Book. 
      b)         Sales Book. 
      c)          Return Inward Book. 
      d)         Return Outward Book. 
45) Which of the following book is both a journal and a ledger? 
      a)         Cash Book. 
      b)         Sales Day Book. 
      c)          Bills Receivable Book. 
      d)         Journal Proper. 
46) Contingent liability would appear 
      a)         on the liability side of the Balance Sheet. 
      b)         on the assets side of the Balance Sheet. 
      c)          do not shown in the books of accounts. 
      d)         as a note in Balance Sheet. 
48)Income statement of a Charitable Institution is known as 
      a)         Statement of profit and loss. 
      b)         Receipts and Payments Account. 
      c)          Income and Expenditure Account. 
      d)         Profit and Loss Account. 
49) Which of the following account is mainly prepared at the time of dissolution of the firm 
      a)         Revaluation A/c. 
      b)         Goodwill A/c. 
      c)          Realization A/c. 
      d)         Memorandum Revaluation A/c. 
50) Which of the following is of capital nature? 
      a)         Commission on purchases. 
      b)         Cost of repairs. 
      c)          Rent of factory. 
     d)         Wages paid for installation of machinery. 
51) A resource owned by the business with purpose of using it for generating future profit, is known as 
      a)         Capital. 
      b)         Asset. 
      c)          Liability. 
      d)         Surplus. 
1)    Net Worth is excess of total assets over total liabilities. 
2)    The Trade discount is never entered in the books of accounts. 
3)    In case of Loss of Profit Policy, Gross Profit is the sum of Net Profit plus Insured Standing Charges.  
4)    The Bank A/c is a Personal Account. 
5)    Interest to be allowed @ 0.75 per cent per month on Partners Capital of Rs. 60 Lakh; Manager's Commission @ 5 per cent of Net Profit before charging such commission. If the Net Profit before charging interest on capital and manager's commission amounted to Rs. 14.85 Lakh, then manager's commission will be Rs. 47,250. 
6)    A machinery was purchased on Hire Purchase System. Its cash price was Rs. 5,20,000 which was payable in annual instalments of Rs. 1,80,000 each including interest @ 15 per cent per annum. The amount of interest included in 2nd instalment would be Rs. 62,700. 
7)    Assets are classified as non-current asset and current assets as per Going-Concern Principle. 
8)   Recoverable/Fair Value Amount is the higher of asset's net selling price and its value in use.
9)     The Normal Loss is included in the valuation of inventories. 
10)    The relation between Consignee and Consignor is that of Agent and principal. 
11)    Profit or Loss on revaluation is shared among the partners in Old profit sharing Ratio. 
12)    At the time of goods sent to consignee, the proforma invoice is prepared by Consignor. 
13)    Short-working is the amount by which minimum rent exceeds the actual royalty.
14)   While posting an opening entry in the ledger, in case of an Account having debit balance, in ‘Particulars’ column the words to Balance b/f are written on debit side. 
15)    Depreciation Accounting is the process of allocation and not valuation. 
16)    The Sales Rs. 180 Lakh, Purchases Rs. 129 Lakh and Opening Stock Rs. 33 Lakh. If the rate of Gross Profit is 50% on cost, then the value of closing stock will be Rs. 42 lakh. 
17)    According to AS-2 inventories should be valued at lower of cost and Net realizable value. 
18)    The relationship between Co- venturers is that of Co-owners. 
19)    Realisation account is opened at the time of Dissolution of the firm. 
20)    The Trade discount is not recorded in the books of accounts. 
21)    Memorandum revaluation account is prepared when the Book value of assets and liabilities are not altered. 
22)    A bill of exchange drown on 12th April, 2017 for four months, the date of maturity will be 14th August, 2017. 
23)    The parties of joint venture is called Co-ventures. 
24)    Finished goods are normally valued at cost or Net Realisable Value whichever is lower. 
25)   Outstanding subscription is shown in the Assets side of Balance Sheet.

(C) State whether the following statements are True or False.

1)     All these items of revenue nature which received during the period of accounts, are only shown in the Income and Expenditure Account. False 
2)    When the capitalization of profits method is used then the value of goodwill on the basis of future maintainable profits is more than that of on the basis of super profits. False 
3)     In case of transfer from Creditors Ledger to Debtors Ledger, the Debtors Ledger Adjustment Account should be debited. False 
4)      Receipts and Payments Account is prepared by adopting cash principle of accounting. True 
5)      In the Stock and Debtors Method of accounting, balance of Branch Stock Account shows either Gross Profit or Gross Loss. True 
6)    Normal loss of goods sent on consignment is shown in Consignment Account. False 
7)    Deferred revenue expenditure is current year's revenue expenditure to be paid in the later years. False 
8)       Sales Book records both cash and credit sales. False 
9)      Unrecoupable short-workings should be charged to Profit and Loss Account. True 
10)     In case of trading concern, cost of goods sold and cost of sales are same. False 
11)      In Proprietorship business, Income-tax payable is shown as a liability in Balance Sheet. False 
12)    Bad debts recovered is credited to debtor's personal account. False 
13)    Receipt & Payment Account only records the revenue nature of receipts and expenses. False 
14)    Reducing balance method for depreciation is followed to have a uniform charge for depreciation and repairs and maintenance together. True 
15)    Reserve for Discount on Creditors has a credit balance. False 
16)    A promissory note can be made payable to the bearer. False 
17)    Memorandum joint venture account is prepared to find out amount due from co-venture. False 
18)     In absence of partnership deed the profit or loss should be distributed among partners in their capital ratio. False 
19)   As per AS-9 revenue from interest should be recognized on the time proportion basis. True 
20)     As per AS-7 expenses recognized in the period in which the work to which expenses relate is performed. True 
21)   New-partner pays premium for goodwill, which will be shared by old partners in their new profit sharing ratio. False 
22)   One of the objectives achieved by providing depreciation is saving cash resources for future replacement of assets. True 
23)    Royalty account is a real account in nature. False 
24)   Expenses incurred by branch out of petty cash balance are debited to branch account by the head office. False 
25)   Bank reconciliation statement is prepared to arrive at the bank balance. False

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