Soumendra Roy

B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)

FINANCIAL & MANAGEMENT ACCOUNTING
BASIC ACCOUNTING CONCEPTS, CAPITAL AND REVENUE EXPENDITURE AND FINAL
ACCOUNTS
1. Proper and systematic keeping or maintenance of the books of accounts is known as ________.
a. Accounting
b. Costing Accounting
c. Book Keeping
d. Accountancy
2. _______________ is an art of identifying, classifying, recording, summarizing and interpreting business
transactions of financial nature.
a. Accounting
b. Costing Accounting
c. Book Keeping
d. Accountancy
3. The expenditure for which payment has been made or a liability incurred by which is carried forward on the
presumption that it will be of benefit over a subsequent period or periods, is known as ___________.
a. Deferred Revenue Expenditure
b. Revenue Expenditure
c. Capital Expenditure
d. All of the above
4. Information in financial reports is based on ___________ transactions.
a. Accounting
b. Economic
c. Financial
d. Business
5. Internal users are the __________ of the business entity.
a. Management/Employees
b. Investors
c. Creditors
d. Income Tax Department
6. A _________ would most likely use an entities financial report to determine whether or not the business entity
is eligible for a loan.
a. Debtor
b. Shareholder
c. Creditor
d. All of the above
7. Which of the following is not a business transaction?
a. Bought furniture of 10,000 for business
b. Paid for salaries of employees 5,000
c. Paid sons fees from her personal bank account 20,000
d. Paid sons fees from the business 2,000
8. Deepti wants to buy a building for her business today. Which of the following is the relevant data for his
decision?
a. Similar business acquired the required building in 2009 for 10,00,000
b. Building cost details of 2012
c. Building cost details of 2007
d. Similar building cost in August, 2014 25,00,000
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)

9. Which is the last step of accounting as a process of information?
a. Recording of data in the books of accounts
b. Preparation of summaries in the form of financial statements
c. Communication of information
d. Analysis and interpretation of information
10. Which qualitative characteristics of accounting information are reflected when accounting information is clearly
presented?
a. Understandability
b. Relevance
c. Comparability
d. Reliability
11. Use of common unit of measurement and common format of reporting promotes:
a. Understandability
b. Relevance
c. Comparability
d. Reliability
12. If a firm believes that some of its debtors may default, it should act on this by making sure that all possible
losses are recorded in the books. This is an example of the ______________ concept.
a. Business Entity
b. Conservatism
c. Matching
d. Going concern
13. The fact that a business is separate and distinguishable from its owner is best exemplified by the ________
concept.
a. Business Entity
b. Conservatism
c. Matching
d. Going concern
14. A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be
increased. Normal accounting procedure is to ignore this because of the _________.
a. Business Entity
b. Dual Aspect
c. Conservatism
d. Going concern
15. The management of a firm is remarkably incompetent, but the firms accountants cannot take this into account
while preparing book of accounts because of ____________ concept.
a. Money Measurement
b. Dual Aspect
c. Conservatism
d. Going concern
16. Everything a firm owns, it also owns out to somebody. This co incidence is explained by the _________
concept.
a. Money Measurement
b. Dual Aspect
c. Conservatism
d. Going concern
17. The _________ concept states that if straight line method of depreciation is used in one year, then it should also
be used in the next year.
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
a. Business Entity
b. Consistency
c. Matching
d. Going concern
18. If a firm receives an order for goods, it would not be included in the sales figure owing to the __________.
a. Money Measurement
b. Dual Aspect
c. Conservatism
d. Revenue Recognition
19. During the life time of an entity accounting produce financial statements in accordance with which basic
accounting concept:
a. Conservatism
b. Matching
c. Accounting Period
d. None of the above
20. When information about two different enterprises have been prepared and presented in a similar manner the
information exhibits the characteristics of:
a. Verificiability
b. Relevance
c. Reliability
d. None of the above
21. A concept that a business enterprise will not be sold or liquidated in the near future is known as:
a. Going concern
b. Economic entity
c. Monetary unit
d. None of the above
22. The primary quantities that make accounting information useful for decision making are:
a. Relevance and freedom from bias
b. Reliability and comparability
c. Comparability and consistency
d. None of the above
23. Voucher is prepared for:
a. Cash received and paid
b. Cash/Credit Sales
c. Cash/Credit purchase
d. All of the above
24. Voucher is prepared from:
a. Documentary evidence
b. Journal entry
c. Ledger account
d. All of the above
25. Debit voucher is prepared for _____________.
a. Cash payment
b. Cash receipt
c. Credit transactions
d. All of the above
26. Credit voucher is prepared for _____________.
a. Cash payment
b. Cash receipt
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
c. Credit transaction
d. All of the above
27. Point out the correct equation
a. Assets = Liabilities Capital
b. Assets = Liabilities + Capital
c. Liabilities = Assets + Capital
d. Capital = Assets + Liabilities
28. Payment of salary to Suman, the manager will _______________.
a. Decrease assets and capital
b. Increase assets and decrease capital
c. Decrease assets and increase capital
d. Decrease assets and liability
29. Mohan spent 2,000 as repair on purchases of machine from scrap dealer. The transaction will ________.
a. Increase and decrease assets
b. Decrease assets and capital
c. Increase and decrease capital
d. Increase and decrease liability
30. Purchasing pocket transistor for proprietors son will _____________.
a. Increase assets and decrease capital
b. Increase assets and decrease liability
c. Decrease assets and decrease capital
d. Decrease assets and decrease liability
31. The journal is a book of:
a. Only cash transactions
b. Original entry
c. Credit sales and purchases
d. Secondary entry
32. The rule of debit and credit as regards _____________ should be debit the debtor and credit the creditor.
a. Personal Account
b. Impersonal Account
c. Real Account
d. Nominal Account
33. Interest on drawing __________
a. Increase assets and decrease capital
b. Increase expense and decrease liability
c. Increases and decreases capital
d. Increase liability and decreases capital
34. Goods drawn by the proprietor from the business for personal use _________.
a. Increases capital and decreases assets
b. Increases assets and decreases expense
c. Decreases capital and decreases assets
d. Increases and decreases assets
35. Recovery of bad debts previously written off
a. Increases assets and revenue
b. Decreases assets and expenses
c. Increases assets and capital
d. Increases expenses and assets
36. Wages owing is ___________.
a. Personal Account
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
b. Impersonal Account
c. Real Account
d. Nominal Account
37. Recording of transaction in the journal is called:
a. Posting
b. Journalizing
c. Tallying
d. Casting
38. The ledger folio column of journal is used to:
a. Record the date o which amount posted to a ledger account
b. Record the number of ledger account to which information is posted
c. Record the number of amounts posted to the ledger account
d. Record the page number of the ledger account
39. 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
40. The journal entry to record the purchase of equipments for 2,00,000 cash and a balance of 8,00,000 due in
30 days include:
a. Debit equipment for 2,00,000 and Credit cash 2,00,000.
b. Debit equipment for 10,00,000 and Credit cash 2,00,000 and Creditors 8,00,000.
c. Debit equipment 2,00,000 and Credit debtors 8,00,000.
d. Debit equipment 10,00,000 and Credit Cash 10,00,000.
41. When a entry is made in journal:
a. Assets are listed first.
b. Accounts to be debited listed first.
c. Accounts to be credited listed first.
d. Accounts may be listed in any order.
42. If a transaction is properly analyzed and recorded:
a. Only two accounts will be used to record the transaction.
b. One account will be used to record transaction.
c. One account balance will increase and another will decrease.
d. Total amount debited will equals total amount credited.
43. The journal entry to record payment of monthly bill will include:
a. Debit monthly bill and Credit capital.
b. Debit capital and Credit cash.
c. Debit monthly bill and Credit cash.
d. Debit monthly bill and Credit creditors.
44. Journal entry to record salaries will include:
a. Debit salaries Credit cash
b. Debit capital Credit cash
c. Debit cash Credit salary
d. Debit salary Credit creditors
45. When a firm maintains a cash book, it need not maintain:
a. Journal proper
b. Purchases (journal) book
c. Sales (journal) book
d. Bank and cash account in the ledger
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
46. Double column cash book records:
a. All transactions
b. Cash and bank transactions
c. Only cash transactions
d. Only credit transactions
47. Cash book does not record transaction of:
a. Cash nature
b. Credit nature
c. Cash and credit nature
d. None of these
48. Total of these transactions is posted in purchase account:
a. Purchase of furniture
b. Cash and credit purchase
c. Purchase return
d. Purchase of stationery
49. The periodic total of sales return journal is posted to:
a. Sales account
b. Goods account
c. Purchase return account
d. Sales return account
50. Goods purchased on cash are recorded in the:
a. Purchases (journal) book
b. Profit and loss account
c. Purchases return account
d. Furniture account
51. Purchase book records _________.
a. All purchases
b. All cash purchases
c. All credit purchases
d. All credit purchases of goods
52. Sales book records ____________.
a. Sale of assets on credit
b. Sale of goods on credit
c. Cash sales
d. All credit sales
53. Purchase return book records ___________.
a. Return of goods purchased on credit
b. Return of assets purchased on credit
c. Return of all things
d. Return of capital
54. Sales return book records ___________.
a. Return of assets sold on credit
b. Return of goods sold on credit
c. Return of all things
d. Return of capital
55. Journal proper records ___________.
a. All transactions
b. All cash transactions
c. All credit transactions
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
d. All transactions not recorded in any of the subsidiary books
56. The purchases journal contains:
a. All purchases
b. All purchases of merchandise
c. Credit purchase of merchandise
d. Cash purchase of merchandise
57. The source document for recording entries in the purchase returns journal is generally:
a. A credit note
b. An invoice
c. A bill
d. A debit note
58. Credit balance of bank column in cash book shows:
a. Overdraft
b. Cash deposited in our bank
c. Cash withdrawn from bank
d. None of these
59. Balancing of account means:
a. Total of debit side
b. Total of credit side
c. Difference in total of debit & credit
d. None of these
60. Assets account show _______________ balance.
a. Debit
b. Credit
c. Either debit or credit
d. Plus
61. Trial balance is prepared according to ___________ method.
a. Balance
b. Total
c. Total and balance
d. All of the above
62. The balance of ______________ account will be shown at the debit column of trial balance.
a. Cash
b. Creditors account
c. Bank overdraft account
d. Capital account
63. Trial balance fails to detect __________.
a. Errors of omission in original books
b. Errors of principle
c. Compensating errors
d. All the above
64. Trial balance is ___________.
a. A statement
b. An account
c. A summary
d. An information
65. The preparation of a Trial Balance helps to:
a. Locating errors of complete omission
b. Locating errors of principle
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
c. Locating errors of commission
d. None of the above
66. The form listing the balances and the title of the accounts in the ledger on a given date is the:
a. Income statement
b. Balance sheet
c. Retained earnings statement
d. Trial Balance
67. Which of the following is not a subfield of accounting?
a. Management accounting
b. Cost accounting
c. Financial accounting
d. Book - keeping
68. Purposes of an accounting system include all the following concept except:
a. Interpret and record the effects of business transactions.
b. Classify the effects of transactions to facilitate the preparation of reports.
c. Summarize and communicate information to decision makers.
d. Dictate the specific types of business enterprise transactions that the enterprises may engage in.
69. Financial position of the business is ascertained on the basis of
a. Records prepared under book keeping process
b. Trial balance
c. Accounting reports
d. None of the above
70. Financial statements do not consider
a. Assets expressed in monetary terms.
b. Liabilities expressed in monetary terms.
c. Only assets expressed in non monetary terms.
d. Assets and liabilities expressed in non monetary terms.
71. On January 1, Suman paid rent of 5,000. This can be classified as
a. An event
b. A transaction
c. A transaction as well as an event
d. Neither a transaction nor an event
72. On March 31, 2012 after sale of goods worth 2,000, he is left with the closing stock of 10,000. This is
a. An event
b. A transaction
c. A transaction as well as an event
d. Neither a transaction nor an event
73. All the following items are classified as fundamental accounting assumption except:
a. Consistency
b. Business entity
c. Going concern
d. Accrual
74. Two primary qualitative characteristics of financial statements are:
a. Understandability and materiality
b. Relevance and reliability
c. Relevance and understandability
d. Materiality and reliability
75. A purchased a car for 5,00,000, making a down payment of 1,00,000 and signing a 4,00,000 bill payable
due in 60 days. As a result of this transactions
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
a. Total assets increased by 5,00,000
b. Total liabilities increased by 4,00,000
c. Total assets increased by 4,00,000
d. Total assets increased by 4,00,000 with corresponding increase in liabilities by 4,00,000
76. Mohan purchased goods for 15,00,000 and sold 4/5
th
of the goods amounting 18,00,000 and met expenses
amounting to 2,50,000 during the year, 2012. He counted net profit as 3,50,000. Which of the accounting
concept was followed by him?
a. Business Entity concept
b. Periodicity concept
c. Materiality concept
d. Conservatism concept
77. A businessman purchased goods for 25,00,000 and sold 80% of such goods during the accounting year ended
31
st
March, 2012. The market value of the remaining goods was 4,00,000. He valued the closing stock at cost.
He violated the concept of
a. Money measurement concept
b. Conservatism concept
c. Cost concept
d. Periodicity cost
78. Assets are held in the business for the purpose of
a. Resale
b. Conversion of cash
c. Earning revenue
d. None of the above
79. Revenue from the sale of products, is generally, realized in the period in which
a. Cash is collected
b. Sale is made
c. Products are manufactured
d. None of the above
80. The concept of conservatism when applied to the balance sheet results in
a. Understatement of assets
b. Overstatement of assets
c. Overstatement of capital
d. None of the above
81. Decrease in the amount of creditors
a. Increase in cash
b. Decrease in cash
c. Decrease in assets
d. No change in assets
82. Consider the following data pertaining to Beta Ltd.:
Particulars
Cost of machinery purchased on 1
st
April, 2012 10,00,000
Installation charges 1,00,000
Market value as on 31
st
March, 2013 12,00,00
While finalizing the annual accounts, if the company values the machinery at 12,00,000. Which of the
following concepts is violated by the Beta Ltd.?
a. Cost concept
b. Matching concept
c. Accrual
d. Periodicity concept
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
A proprietor, Mr. Anil has reported a profit of 1,25,000 at the end of the financial year after taking into
consideration the following amount:
i. The cost an asset of 25,000 has been taken as an expense.
ii. Mr. Anil is anticipating a profit of 10,000 on the future sale of a car shown as an asset in his books.
iii. Salary of 7,000 payable in the financial year has not been taken into account.
iv. Mr. Anil purchased an asset for 75,000 but its fair value on the date of purchase was 85,000. Mr. Anil
recorded the value of the asset in his books by 85,000.
On the basis of the facts answer the following questions from the given choices:
83. What is the correct amount of profit to be reported in the books?
a. 1,25,000
b. 1,35,000
c. 1,50,000
d. 1,33,000
84. Which measurement base should be followed in the statement (iv)?
a. Historical cost
b. Current cost
c. Replacement cost
d. Present value
85. Which concept should be followed in the statement (ii)?
a. Conservatism
b. Materiality
c. Historical cost
d. Accrual
86. Which concept should be followed in the statement (iii)?
a. Materiality
b. Historical cost
c. Current cost
d. Accrual
87. A change in Accounting Policy is justified
a. To comply with accounting standard.
b. To ensure more appropriate presentation of the financial statement of the enterprise.
c. To comply with law.
d. All of the above.
88. Accounting policies for inventories of Beta Enterprises states that inventories are valued at the lower of cost
determined on weighted average basis or not realizable value. Which accounting principle is followed in
adopting the above policy?
a. Materiality
b. Prudence
c. Substance over form
d. All of the above
89. The area wherein different accounting policies can be adopted are
a. Providing depreciation
b. Valuation of inventories
c. Valuation of investments
d. All of the above
90. Selection of an inappropriate accounting policy decision may
a. Overstate the performance and financial position of a business entity.
b. Understate / overstate the performance and financial position of a business entity.
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
c. Overstate the performance of a business entity.
d. Understate the financial position of a business entity.
Sohan purchased a machinery amounting 10,00,000 on 1
st
April, 2002. On 31
st
March, 2012, similar machinery
could be purchased for 20,00,000 but the realizable value of the machinery (purchased on 1.4.2002) was estimated
at 15,00,000. The present discounted value of the future net cash inflows that the machinery was expected to
generate in the normal course of business, was calculated as 12,00,000. From the above information, answer the
following:
91. The current cost of the machinery is
a. 10,00,000
b. 20,00,000
c. 15,00,000
d. 12,00,000
92. The present value of the machinery is
a. 10,00,000
b. 20,00,000
c. 15,00,000
d. 12,00,000
93. The historical cost of the machinery is
a. 10,00,000
b. 20,00,000
c. 15,00,000
d. 12,00,000
94. The realizable cost of the machinery is
a. 10,00,000
b. 20,00,000
c. 15,00,000
d. 12,00,000
95. The rent paid to landlord is credited to
a. Landlords account
b. Rent account
c. Cash account
d. None of the above
96. In case of a debt becoming bad, the amount should be credited to
a. Debtors account
b. Bad debts account
c. Cash account
d. Sales account
97. Sunset Tours has 3,500 account receivable from Mohan. On January 20, the Rotary makes a partial payment
of 2,100 to Sunset Tours. The journal entry made on January 20 by Sunset Tours to record this transaction
includes:
a. A credit to the cash received account of 2,100.
b. A credit to the account receivables account of 2,100.
c. A debit to the cash account of 1,400.
d. A debit to the Accounts receivable account of 1,400.
98. The debts written off as bad, if recovered subsequently are
a. Credited to Bad Debts Recovered Account.
b. Credited to Debtors Account.
c. Debited to Profit and Loss Account.
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
d. None of the above.
99. The process of transferring the debit and credit items from a Journal to their respective accounts in the ledger is
termed as
a. Posting
b. Purchase
c. Balancing of an account
d. Arithmetically accuracy test
100. The technique of finding the net balance of an account after considering the totals of both debit and credit
appearing in the account is known as
a. Posting
b. Purchase
c. Balancing of an account
d. Arithmetically accuracy test
101. At the end of the accounting year all the nominal accounts of the ledger book are
a. Balanced but not transferred to profit and loss account.
b. Not balanced and also the balance is not transferred to the profit and loss account.
c. Balanced and the balance is transferred to the balance sheet.
d. Not balanced and their balance is transferred to the profit and loss account.
102. Assertion (A) Accounting is a continuous process in any business undertaking.
Reason (R) This is an Accounting period concept.
a. Assertion (A) is true
b. Reason (B) is true
c. (A) and (R) is true
d. Neither (A) nor (B) is true
103. Match the following
Part A (Accounting Concept)
1. Objectivity Concept
2. Realization Concept
3. Matching Concept
4. Cost Concept
Part B (Fact)
A. All accounting transactions should be evidenced and supported by business documents i.e., vouchers and
invoice.
B. The concept revolves around the determination of the point of time when revenues are earned.
C. It is necessary during the accounting period with the revenues recognized during the same period.
D. Fixed assets are recorded in the account books at the price at which they are acquired.
Codes:
1 2 3 4
a A B C D
b B A C D
c D C B A
d C B A D
104. Depreciation is a charge against:
a. Profit
b. Assets
c. Company
d. Books of A/c
105. General Reserve created from:
a. Capital profit
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
b. Revenue Profit
c. Only Profit
d. By Sale of Assets
106. Profit from sale of assets is example for:
a. Revenue Profit
b. Capital Profit
c. Loss
d. None of these
107. Dividend can be declared from:
a. Revenue Profit
b. Capital Profit
c. Secret Reserve
d. All of these
108. Which one of the item is not capital in nature?
a. Money raised by the issue of equity shares
b. Expenditure incurred on issue of equity shares
c. Cost of formation of a new company
d. Carriage paid on goods purchased
109. 10,000 spent on replacement of worn out part of the machine will be charged as:
a. Capital Expenditure
b. Revenue Expenditure
c. Deferred Revenue Expenditure
d. All of the above
110. Discount allowed on issue of shares is an example of:
a. Capital Expenditure
b. Revenue Expenditure
c. Deferred Revenue Expenditure
d. All of the above
111. Depreciation of Fixed Assets is an example of:
a. Capital Expenditure
b. Revenue Expenditure
c. Deferred Revenue Expenditure
d. All of the above
112. Which of the following items should be taken as of a capital nature?
a. 2,000 spent on dismantling, removing and reinstalling Plant and Machinery to more convenient site.
b. 800 paid for removal of stock to a new site.
c. 2,000 paid for erection of a new machine.
d. A sum of 5,000 was expended on dismantling, removing and reinstalling Plant, Machinery and Furniture.
113. Which of the following item should be taken as of a revenue nature?
a. A sum of 2,000 was spent on painting the new godown.
b. Damage paid on account of the breach of a contract to supply a certain goods.
c. Legal expenses incurred in defending a suit for breach of contract to supply goods.
d. All of the above.
114. Which of the following should not be treated as revenue expenditure?
a. Interest on loans and debentures.
b. Annual fire insurance premiums on Plant and Equipment.
c. Sales tax paid in connection with the purchase of office equipment.
d. Repairs and maintenance on fixed assets like machines.
115. Which expense is a Capital Nature?
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
a. Depreciation
b. Wages
c. Salary
d. Stationary
116. Which of the following is not deferred revenue expenditure?
a. Expenses in connection with issue of equity shares.
b. Preliminary expenses.
c. Heavy advertising expenses to introduce a new product.
d. Legal expenses incurred in defending a suit for breach of contract to supply goods.
117. Any income or profit derived by carrying on the business or during the course of business is called
a. Capital Receipt
b. Revenue Receipt.
c. Revenue Gain
d. Capital Gain
118. Amount received from the proprietors as capital or loan receipt is treated as
a. Capital Receipt.
b. Revenue Receipt
c. Revenue Income
d. Capital Income
119. When the benefits of revenue expenditure is available for a period of two or three years, the expenditure is
known as
a. Revenue Expenditure
b. Deferred Revenue Expenditure
c. Capital Expenditure
d. Depreciation.
120. Endowment fund receipt is traded as
a. Casual Receipt.
b. Revenue Receipt
c. Loss
d. Expenses.
121. Legacy are generally
a. Capitalized
b. Treated Loss
c. Revenue Expenses
d. Deferred Revenue expenses.
122. Which of the following is an item of capital expenditure?
a. Research and development costs during the year
b. Interest on borrowed fund utilized for acquisition of Office Furniture
c. Installation charges paid in conjunction with the purchase of Office Equipment
d. Monthly rent of a machinery used in the business
123. Benefit of revenue expenses extends to
a. 10 years
b. 5 years
c. One accounting year
d. As long as the business continues
124. Which of the following is a revenue expenses
a. Raw material consumed
b. Plant purchased
c. Long term loan raised from bank
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
d. Share Capital
125. Which of the following is a capital expenditure
a. Repair of plant and machinery
b. Salary paid to workers
c. Cost of stand by equipment
d. Annual whitewash of the office building
126. Which of these types of expenditure would not be treated as a Capital Expenditure
a. Acquisition of an Asset
b. Extension of an Asset
c. Improvement of the existing Asset
d. Maintenance of the Asset
127. Expenses of the following nature are treated as a Revenue expenses except
a. Expenses for day to day running of the business
b. Putting the new asset in working condition
c. Depreciation
d. Purchase of raw material
128. Huge expenditure incurred at the time of launching of a new product in market is a/an
a. Revenue Expenditure
b. Capital Expenditure
c. Loss
d. Deferred Revenue Expenditure
129. Which of these items will not be capitalized along with the Asset
a. Installation charges
b. Annual repair and maintenance
c. Statutory levies
d. Freight and insurance
130. Capital expenditure is an expenditure which
a. Benefits the current accounting period.
b. Will benefit the next accounting period.
c. Results in the acquisition of a permanent asset.
d. Results in the acquisition of a current asset.
131. Gross Profit is the difference between
a. Net Sales and Cost of goods sold
b. PAT and Dividends
c. Net Sales and Cost of production
d. Net Sales and Direct costs of productions
132. Property, Plant and Equipment are conventionally presented in the Balance Sheet at
a. Replacement cost Accumulated Depreciation
b. Historical cost Salvage Value
c. Historical cost Depreciation portion thereof
d. Original cost adjusted for general price-level changes
133. Outstanding salaries is shown as
a. An Asset in the Balance Sheet
b. A Liability
c. By adjusting it in the P & L A/c
d. Both (b) and (c) above
134. Insurance prepaid is shown as
a. Current Asset
b. Current Liability
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
c. Fixed Asset
d. Income
135. Depreciation appearing in the Trial Balance should be
a. Debited to P&L A/c
b. Shown as liability in Balance Sheet
c. Reduced from related asset in Balance Sheet
d. Both (a) and (c) above
136. A club paid subscription fees of 1,400. Out of which 200 is prepaid. In such case
a. P&L A/C is debited with 1,400
b. P&L A/C is debited with 1,200
c. 200 is shown as current asset
d. Both (b) and (c) above
137. Bad debts recovered is
a. Credited to P&L A/c
b. Debited to P&L A/c
c. Reduced from debtors in Balance Sheet
d. Added to debtors in Balance Sheet
138. The adjustment to be made for prepaid expenses is
a. Add prepaid expenses to respective expenses and show it as an asset
b. Deduct prepaid expenses from respective expenses and show it as an asset
c. Add prepaid expenses to respective expenses and show it as a liability
d. Deduct prepaid expenses from respective expenses and show it as a liability
139. On scrutiny of a firms books of accounts, it was observed that the following errors have occurred in the
previous years but have not yet been rectified.
i. Depreciation for 2011-2012- 7,000 understated
ii. Accrued expenses as at March 31, 2013 - 10,000 understated
The impact of this on the reported net income for the year ending March 31, 2013 is
a. 7,000 Overstated
b. 10,000 Overstated
c. 17,000 Understated
d. 17,000 Overstated
140. Sundry debtors as per Trial Balance is 43,000 which includes 2,200 due from H in respect of goods sent
to him on approval basis, the cost price of which is Rs 1,800. Rectification would involve:
a. Adding 2,200 to closing stock
b. Deducting 1,800 from closing stock and deducting 2,200 each from debtors and sales
c. Adding 1,800 to closing stock and deducting 2,200 each from debtors and sales
d. Deducting 1,800 from debtors
141. Goods in stock worth 800 are destroyed by fire and the Insurance Co. is accepted the claim for 600.
Adjustment would involve:
a. Debit of 800 to Trading Account and credit of 600 and 200 to insurance company and Profit and
Loss Account respectively
b. Deduct the 800 from closing stock in the Trading Account
c. Credit insurance company for 600
d. Debit of 600 and 200 to insurance company and Profit and Loss Account respectively and credit
of 800 to Trading Account
142. Prepaid expenses are valued on the Balance Sheet at
a. Replacement cost
b. Current cost
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
c. Cost to acquire less accumulated amortization
d. Cost less expired portion
143. Which of the following relationships is/are false?
a. Net Profit = Gross Profit Administration and Other expenses
b. Net Profit = Gross Profit + Administration expenses and Other expenses
c. Opening Stock + Purchases Closing Stock = Cost of Sales
d. Both (b) and (c) above
144. Gross Profit is equal to
a. Sales Cost of goods sold
b. Sales Closing Stock + Purchases
c. Opening Stock + Purchases Closing Stock
d. None of the above
145. Which of the following shall not be deducted from net profit while calculating managerial remuneration?
a. Loss on sale of undertaking
b. Debts considered bad and written off
c. Liability arising from a breach of contract
d. Directors remuneration
146. Which of the following equations is correct?
a. Gross Profit+ Sales+ Direct expenses+ Purchases+ Closing stock = Opening stock
b. Gross Profit+ Sales+ Direct expenses+ Purchases- Closing stock = Opening Stock
c. Gross Profit + Opening Stock + Direct expenses + Purchases- Closing stock = Sales
d. Gross Profit Opening Stock + Direct expenses + Purchases +Closing stock = Sales
147. Which of the following is not true with regard to preparation of Profit & Loss Account?
a. Profit & Loss Account is prepared for a certain period and hence it is an interim statement
b. Profit & Loss Account does not disclose the effect of non-financial items
c. Net Profits are ascertained on the basis of current costs
d. Net Profits as disclosed by P&L Account is not absolute
148. The Profit and Loss Account shows the
a. Financial results of the concern for a period
b. Financial position of the concern on a particular date
c. Financial results of the concern on a particular date
d. Cost of goods sold during the period
149. Which of the following statements is true?
a. Provision for doubtful debts represents the amount that cannot be collected
b. Cash balance on hand shows whether the business has earned Profit or Loss
c. Free samples received are business gains
d. The WDV of an asset depreciated on the reducing balance method can never become zero
150. Cash Profit is
a. Net profit Non-trading Profit Depreciation and provision
b. Gross Profit Non-trading Profit + Depreciation and provision
c. Net Profit + Depreciation and provision
d. Gross Profit Operational expenses
151. Which of the following statements is false?
a. Provision for discount on debtors can be estimated only after computing the provision for doubtful debts
b. All pre-received incomes under the cash system of accounting are current gains
c. Cash balance on hand shows whether the business has earned Profit or Loss
d. Capital expenditure should be shown in the books by debiting asset account and crediting supplier or cash
account
152. Which of the following will not appear in Profit and Loss Account of a business?
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
a. Drawings
b. Bad debts
c. Accrued expenses
d. Reserve for discount on Sundry Creditors
153. Which of the following is not a financial statement?
a. Profit and Loss Account
b. Balance Sheet
c. Funds Flow Statement
d. Trial Balance
154. If unexpired insurance appears in the Trial Balance, it should be
a. Credited to the Profit & Loss Account
b. Debited to the Profit & Loss Account
c. Shown on the liabilities side of the Balance Sheet
d. Shown on the assets side of the Balance Sheet
155. Which of the following are/is not a fixed asset?
a. Stock
b. Vehicle
c. Fixed deposit in bank
d. Both (a) and (c) above
156. Which of the following are/is a current asset?
a. Sundry Debtors
b. Stock
c. Prepaid insurance
d. All of (a), (b) and (c) above
157. Tax deducted at source appears in the Balance Sheet
a. On the assets side under current assets
b. On the assets side under loans and advances
c. On the liabilities side under current liabilities
d. On the liabilities side under provisions
158. Which of the following statements is false?
a. Balance Sheet discloses financial position of the business
b. A person who owes to the business is called Debtor
c. Decrease in the value of the asset could decrease the value of a liability
d. Assets are to be shown in the Balance Sheet at the realizable value
159. Which of the following statements is true?
a. The balance of the goods account shows the value of stock in hand
b. Balancing of all accounts must be done at the end of each day
c. Assets which are to remain in business for continuous use and not meant for conversion into cash are
fixed assets
d. Balance Sheet discloses income position of the business
160. The Balance Sheet gives information regarding the
a. Results of operations for a particular period
b. Financial position during a particular period
c. Profit earning capacity for a particular period
d. Financial position as on a particular date
161. Which of the following accounts appear(s) in the Balance Sheet of a business?
i. Stock at the end of the financial year
ii. Stock at the beginning of the financial year
iii. Drawings
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
iv. Prepaid Rent
v. Interest received but not yet earned
a. Only (i) above
b. Only (iii) above
c. Both (i)and (iii) above
d. (i), (iii), (iv) and (v) above
162. Which of the following is not an intangible asset?
a. Trade mark
b. Franchise
c. Accounts Receivable
d. Secret Profit
163. Which of the following is a current liability?
a. Prepaid expenses
b. Trademark
c. Discount on issue of shares
d. Outstanding Salaries
164. Which of the following is not a contingent liability?
a. Debts included in Sundry Debtors which are doubtful in nature
b. Uncalled liability on partly paid shares
c. Claims against the company not acknowledged as debts
d. Arrears of fixed cumulative dividend
165. Which of the following are current assets of a business?
i. Income received in advance
ii. Stock
iii. Debtors
iv. Pre-paid expenses
v. Accrued income
a. Both (i) and (iv) above
b. Both (ii) and (iii) above
c. (i),(ii) and (iii) above
d. (ii),(iii),(iv) and (v) above
166. Closing stock appearing in the Trial Balance is shown in
a. Trading A/c and Balance Sheet
b. Profit and Loss A/c
c. Balance Sheet only
d. Trading A/c only
167. Depreciation Account appearing in the Trial Balance is shown in
a. Profit and Loss A/c
b. Trading A/c
c. Deducted from the concerned assets A/c
d. Shown on the liability side
168. Profit on sale of old plant is shown
a. In Trading A/c
b. In Profit and Loss Appropriation A/c
c. Profit and Loss A/c
d. Being a non operating item ignored
169. Carriage on goods purchased is shown in
a. Profit and Loss A/c
b. Capitalized with work in progress
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
c. Trading A/c
d. Shown in Balance Sheet
170. Which of these is not an operating income
a. Income from sale of trading goods
b. Bad debts recovered
c. Interest on FDs
d. None
171. ABC holds an average inventory of 36,000 (CP) with an inventory turnover of 5 times. If the firm makes a
gross profit of 25% on sales, find the total sales of the company
a. 2,40,000
b. 2,10,000
c. 2,00,000
d. 1,80,000
172. From the following details what will be the partners commission?
Net profit before charging partners commission Rs 65,000. Partners commission @ 11% after charging such
commission
a. 6441
b. 5431
c. 7654
d. 9876
173. From the following details what will be the partners commission?
Net profit before charging partners commission 65,000. Partners commission 11% before charging such
commission
a. 6441
b. 5431
c. 7150
d. 5876
174. Arrangement of Balance Sheet in a logical order is known as
a. Dressing Balance Sheet
b. Marshalling Balance Sheet
c. Formatting Balance Sheet
d. Make up of Balance Sheet
175. Improper valuation of inventory effects
a. Profitability
b. Financial position
c. Both
d. Cash inflows
176. Find the cost of goods sold if goods are sold for 2,000 at 25% profit on cost
a. 1,600
b. 1,500
c. 1,000
d. 1,800
177. Find the value of opening stock from the following data.
Purchases 1,50,000, Closing stock 30,000 , Sales 2,20,000, Gross profit 40,000.
a. 50,000
b. 55,000
c. 60,000
d. 65,000
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
178. Choose the true statement
a. Accrued income represent income unearned but realized in cash
b. Accrued income represents income earned but not realized in cash
c. Accrued income A/c is shown on the liability side
d. No tax is payable on accrued income
179. Which of these is not a feature of a Balance Sheet
a. It is statement of financial position as on a particular date
b. Liabilities are shown on the left hand side
c. It is a Memorandum A/c
d. Assets and liabilities are presented either in liquidity or permanency order
180. Which of the following is true when a debtor pays his dues?
a. The asset side of the Balance Sheet will decrease
b. The asset side of the Balance Sheet will increase
c. The liability side of the Balance Sheet will increase
d. There is no change in total assets or total liabilities
181. Consider the following data pertaining to a company for the year 2011-2012 :
Opening balance of sundry debtors 40,000; Credit sales 4,30,000; Cash sales 20,000; Cash collected from
debtors 4,00,000; Closing balance of sundry debtors 50,000
The bad debts of the company during the year are
a. 40,000
b. 35,000
c. 30,000
d. 20,000
182. The opening stock of a company is 60,000 and the closing stock is 70,000. If the purchases during the year
are 2,00,000 the cost of goods sold will be
a. 2,10,000
b. 2,00,000
c. 1,90,000
d. 1,80,000
183. During the year 2012-13, the profit of a business before charging Sales Managers commission was 1,89,000.
If the Sales Managers commission is 5% on profit after charging his commission, then the total amount of
commission payable to manager is
a. 10,000
b. 9,450
c. 9,000
d. 8,500
184. Which of the following accounting treatments is/are true in respect of accrued commission appearing on the
debit side of a Trial Balance?
a. It is shown on the debit side of the Profit and Loss Account
b. It is shown on the credit side of the Profit and Loss Account
c. It is shown on the liabilities side of the Balance Sheet
d. It is shown on the assets side of the Balance Sheet
185. Profit and loss on Depreciation Investment Fund A/c is transferred to
a. Profit and Loss A/c
b. General Reserve A/c
c. Trading A/c
d. Capital Reserve A/c
186. From the following details ascertain net profit of Q Club for the period ended on 31.03.2013 under cash basis
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
Items 31.03.2012 () 31.03.2013 ()
Net Profit as per Accrual Basis 10,800
Accrued Subscription 550 450
Subscription received in advance 250 100
Salary outstanding 300 50
Prepaid Rent 600 150
a. 11,000
b. 10,800
c. 10,950
d. 11,050
187. Fixed Assets are valued according to cost,
If you have to settle their worth,
Is it more? Is it less? We leave you to guess, if you can, can you value the Earth?
a. Anonymous
b. Anthony
c. G. Betty
d. T.G. Tokhey
188. The term current assets does not include:
a. Debtors
b. Bills Receivable
c. Stock
d. Goodwill
189. The term fixed assets does not include:
a. Plant
b. Furniture
c. Prepaid expenses
d. Land and Building
190. If the total assets of a company amount to 1,50,000 and owners equity is 70,000, the amount of liabilities
will be:
a. 70,000
b. 80,000
c. 90,000
d. 1,00,000
191. Balance is a statement of __________.
a. Assets
b. Liabilities
c. Capital
d. All of these
192. Amount receivable by a company against credit sales are usually called _________.
a. Sundry Debtors
b. Bills Receivable
c. Sundry Creditors
d. Bills Payable
193. Owners equity could be understood as comprising ____________ and ____________.
a. Contributed Capital and Liabilities
b. Retained Earnings and Assets
c. Assets and Liabilities
d. Contributed Capital and Retained Earnings
194. In case of Joint stock Company, Financial Statements refer to:
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
a. Balance Sheet
b. Trial Balance and P&L A/c
c. Profit and Loss A/c
d. Balance Sheet, P&L A/c and P&L Appropriation A/c
195. Cost of sales in the case of trading company is equal to:
a. Sales Gross Profit
b. Opening Stock + Purchases + Incidental Expenses closing Stock
c. Sales Closing Stock
d. Only (a) and (b)
196. Which of the following statement are true?
a. The statement disclosing status of investment is known as Balance Sheet
b. The statement showing the result is known as Profit and Loss Account
c. The Balance Sheet comprises of a list of assets, liabilities and capital at a given date
d. All of the above
197. Which of the following importance is provided by Balance Sheet?
a. It gives a concise summary of the concerns resources and liabilities and owners equity
b. It is a measure of the firms liquidity
c. It is a measure of firms solvency
d. All of the above
198. Which of the following is not an example of Intangible Assets?
a. Patents and Trade Marks
b. Copyright
c. Goodwill
d. Land
199. Costs of intangible fixed assets are __________ over their useful lives.
a. Depreciated
b. Amortized
c. Charged
d. Allocated
200. A new firm commenced business of 1
st
January, 2011 and purchased goods costing 90,000 during the year. A
sum of 6,000 was spent on freight inwards. At the end of the year the cost of the goods still unsold was
12,000. Sales during the year was 1,20,000. What is the gross profit earned by the firm?
a. 36,000
b. 30,000
c. 42,000
d. 38,000
201. From the following figures ascertain the gross profit:

Opening Stock (1.1.2012) 25,000
Goods purchased during 2012 1,30,000
Freight and packing on above 5,000
Closing Stock (31.12.2012) 15,000
Sales 1,90,000
Selling expenses on sales 9,000
a. 36,000
b. 45,000
c. 50,000
d. 59,000
202. A prepayment of insurance premium will appear in Balance Sheet and in the Insurance Account respectively as:
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
a. A liability and a debit balance
b. An asset and a debit balance
c. An asset and a credit balance
d. None of the above
203. Understatement of closing work in progress in the period will
a. Understate cost of goods manufactured in that period
b. Overstate current assets
c. Overstate gross profit from sales in that period
d. Understate net income in that period
204. If sales revenue are 4,00,000, cost of goods sold is 3,10,000 and operating expenses are 60,000, the gross
profit is
a. 30,000
b. 90,000
c. 3,40,000
d. 60,000
205. A company wishes to earn a 20% profit margin on selling price. Which of the following is the profit mark up on
cost, which will achieve the required profit margin?
a. 33%
b. 25%
c. 20%
d. None of the above
206. Sales for the year ended 31
st
March, 2012 amounted to 10,00,000. Sales included goods sold to Mr. Anil for
50,000 at a profit of 20% on cost. Such good are still lying in the godown at the buyers risk. Therefore, such
goods should be treated as part of
a. Sales
b. Closing stock
c. Goods in transit
d. Sales return
207. The capital of a sole trader would change as a result of:
a. A creditor being paid his account by cheque
b. Raw materials being purchased on credit
c. Fixed assets being purchased on credit
d. Wages being paid in cash
208. Rent paid on 1
st
October, 2010 for the year to 30 September, 2011 was 1,200 and rent paid on 1
st
October,
2011 for the year to 30 September, 2012 was 1,600. Rent payable, as shown in the profit and loss account for
the year ended 31
st
December, 2011, would be:
a. 1,200
b. 1,600
c. 1,300
d. 1,500
209. A decrease in the provision for doubtful debts would result in:
a. An increase in liabilities
b. A decrease in working capital
c. A decrease in net profit
d. An increase in net profit
From the given information, choose the most appropriate answer for the following questions:
Sales () Opening
Stock ()
Purchases
()
Closing
Stock ()
Cost of
Goods Sold
()
Gross
Profit ()
Selling
Expenses
()
Net Profit
()
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
15,000 6,000 10,000 ? 9,000 ? 4,000 ?
210. The value of Closing Stock is:
a. 9,000
b. 4,000
c. 8,000
d. 7,000
211. Gross profit will be:
a. 6,000
b. 5,000
c. 8,000
d. 7,000
212. Net profit will be:
a. 6,000
b. 5,000
c. 2,000
d. 7,000
From the given information, choose the most appropriate answer for the following questions:
Opening Capital
()
Investment by
Proprietor ()
Drawings () Capital at the end
of the year ()
Net Profit / (Loss)
()
16,000 Nil 3,000 13,500 ?
213. The net profit will be:
a. 600
b. 500
c. 550
d. 700
214. If in the given information, net loss is 1,000, then the investment made by the proprietor during the year will
be:
a. 1,500
b. 2,000
c. 1,200
d. 1,700
From the given information, choose the most appropriate answer for the following questions:

Opening Stock 20,000 Carriage on sales 3,000
Closing Stock 18,000 Rent of office 5,000
Purchases 85,800 Sales 1,40,700
Carriage on purchases 2,300
215. Gross profit will be:
a. 50,000
b. 47,600
c. 42,600
d. 50,600
216. Net profit will be:
a. 42,600
b. 50,600
c. 45,600
d. 47,600
From the given information, choose the most appropriate answer for the following questions:
Zenith Co., a whole seller estimates the following sales for the indicated months:
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
June 2012
()
July 2012
()
August 2012
()
Opening Stock 4,08,000 4,34,400 4,60,800
Credit Sales 15,00,000 16,00,000 17,00,000
Cash Sales 2,00,000 2,10,000 2,20,000
Total Sales 17,00,000 18,10,000 19,20,000
Selling price is 125% of the purchase price.
217. The cost of goods sold for the month of June, 2012 is:
a. 15,20,000
b. 14,02,500
c. 12,75,000
d. 13,60,000
218. Stock purchased in July, 2012 is:
a. 16,05,000
b. 14,74,000
c. 14,40,000
d. 13,82,500
219. The cost of raw materials consumed, issued and used were:
a. 1,09,300
b. 91,200
c. 91,900
d. 92,600
220. The manufacturing cost of finished goods produced were:
a. 1,31,600
b. 1,93,300
c. 1,91,900
d. 1,92,500
221. The manufacturing cost of finished goods sold was:
a. 1,91,700
b. 1,92,500
c. 1,94,000
d. 1,93,300
222. Which of the following is not a Fixed Asset?
a. Building
b. Bank balance
c. Plant
d. Goodwill
223. Which of the following statement is incorrect?
a. The Current Liabilities is used to denote those liabilities which are payable after a year
b. The term Current Assets and Liquid assets have synonymous meanings
c. All Current Assets are Fictitious Assets
d. All of the above
224. Income Tax paid by a sole proprietor on his business income should be:
a. Deducted to the Trading Account
b. Deducted to the Profit and Loss Account
c. Deducted from the Capital A/c in the Balance Sheet
d. All of the above
225. Which of the following statement is correct?
a. Creating reserve for discount on creditors is not strictly according to the principle of conservation.
Soumendra Roy
B.Com (H), A.C.M.A., L.I.I.I., PhD (Management) (Pursuing)
b. Stock at the end, if appears in the Trial Balance, is taken only to the Balance Sheet.
c. Salary paid in advance is not an expense because it neither reduces assets nor increases liabilities.
d. All of the above.

Q. No. Sol Q. No. Sol Q. No. Sol Q. No. Sol Q. No. Sol
1 2 3 4 5
6 7 8 9 10
11 12 13 14 15
16 17 18 19 20
21 22 23 24 25
26 27 28 29 30
31 32 33 34 35
36 37 38 39 40
41 42 43 44 45
46 47 48 49 50
51 52 53 54 55
56 57 58 59 60
61 62 63 64 65
66 67 68 69 70
71 72 73 74 75
76 77 78 79 80
81 82 83 84 85
86 87 88 89 90
91 92 93 94 95
96 97 98 99 100
101 102 103 104 105
106 107 108 109 110
111 112 113 114 115
116 117 118 119 120
121 122 123 124 125
126 127 128 129 130
131 132 133 134 135
136 137 138 139 140
141 142 143 144 145
146 147 148 149 150
151 152 153 154 155
156 157 158 159 160
161 162 163 164 165
166 167 168 169 170
171 172 173 174 175
176 177 178 179 180
181 182 183 184 185
186 187 188 189 190
191 192 193 194 195
196 197 198 199 200
201 202 203 204 205
206 207 208 209 210
211 212 213 214 215
216 217 218 219 220
221 222 223 224 225