Professional Documents
Culture Documents
1. Which of the following statements is true with respect to the accounting concepts?
(a) The concept of conservatism places a constraint on what should be recorded and reported
(b) Accounting period concept states that expenses are to be recognized in the period of their related revenue
(c) Going concern concept assumes that business will be carried on for a definite period
(d) Provision for bad and doubtful debts is created in recognition of realization concept
(e) Matching concept states that resources are consumed to earn the revenue and the cost of resources
consumed should be set off to obtain income.
2. Which of the following errors is not disclosed by the trial balance?
(a) A cash sale of Rs.1,400 is omitted to be recorded in the sales account
(b) An amount of Rs.2,500 received from ‘A’ is posted on the debit side of B’s account
(c) A credit purchase of goods worth Rs.4,500 is recorded in the purchase book as Rs.5,400
(d) An amount of Rs.3,200 paid to RX Ltd., is posted twice to the debit of RX Ltd.’s account
(e) A receipt of Rs.5,700 from a debtor is posted correctly in the cash account but on the correct side of
debtors account as Rs.570.
3. Which of the following statements is false with respect to the classification of expenses as revenue and capital?
(a) Capital expenditure results from outflow of cash relating to bringing an asset of an enduring nature into
existence
(b) Revenue expenditure relates to those expenses which are incurred in earning the revenues and the benefit
of which gets exhausted within the same accounting period
(c) If any asset is bought by an enterprise for resale, it becomes a capital expenditure for the enterprise
(d) Capital expenditure relates to such expenses, which generate benefits and assists the entity in earning
revenue over a period of time
(e) Revenue expenditure of the period is matched with revenue receipts and is charged to profits during the
period.
4. Which of the following statements is false with reference to inventories?
(a) The finished goods which have been produced internally for inventory should be priced at production
cost
(b) The periodic system computes cost of goods sold as residual amount
(c) The perpetual system is more accurate but more costly
(d) The cost of acquisition of inventory does not include direct expenses
(e) Historical cost of inventory refers to the cost of acquisition of inventory.
5. Which of the following statements is true in respect of the entries recorded in the books of the drawee of a bill?
(a) When a bill is accepted, the account to be credited is drawer’s a/c
(b) When a bill is discharged, the account to be credited is bills payable a/c
(c) When a bill presented for payment by bank is dishonored, the account to be credited is bills payable a/c
(d) When noting charges of a dishonored bill is paid by the endorsee, the account to be credited is drawer’s
a/c
(e) When a bill is retired before its maturity, the account to be credited is the bills payable a/c.
6. Consider the following data from the books of a trader for the year ended December 31, 2008:
Particulars Rs.
Balance of capital account as on January 01, 2008 4,00,000
Additional capital introduced during the year 1,00,000
Balance of capital account as on December 31, 2008 8,00,000
Drawings in the beginning of the year 2,00,000
Interest on opening capital 5% p.a.
Interest on drawings 6% p.a.
Profit earned during the year ended December 31, 2008 was
(a) Rs.4,92,000
(b) Rs.3,00,000
(c) Rs.5,00,000
(d) Rs.5,12,000
(e) Rs.5,32,000.
7. Which of the following statements is false?
(a) The forfeited shares should not be re-issued at a premium
(b) At the time of forfeiture of shares, securities premium account should not be debited with the amount of
premium already received
(c) Shares can be issued at a discount only after one year from the commencement of business
(d) Securities premium cannot be utilized to redeem preference shares
(e) The loss on re-issue of shares cannot be more than the gain on forfeiture of those shares.
8. While finalizing the current year accounts, Karthika Ltd., realized that closing stock of the previous year is over
stated by Rs.15,000 and closing stock of the current year is overstated by Rs.36,000. Because of these errors, the
net income for the current year is
(a) Understated by Rs.51,000
(b) Overstated by Rs.51,000
(c) Understated by Rs.36,000
(d) Overstated by Rs.21,000
(e) Understated by Rs.21,000.
9. The following information pertains to Soma Ltd., for the year 2007-08:
Particulars April 1, 2007 (Rs.) March 31, 2008 (Rs.)
Inventory 72,000 67,000
Sundry debtors 47,000 70,000
Sundry creditors 40,000 38,000
Total credit sales made during the year were Rs.6,75,000. The cost of goods sold of the company was 80% of the
sales.
If there were no cash sales and cash purchases during the year, cash paid to sundry creditors during the year was
(a) Rs. 7,22,000
(b) Rs. 6,98,000
(c) Rs. 6,75,000
(d) Rs. 6,77,000
(e) Rs. 5,37,000.
10. On September 01, 2008, Bharath accepted a bill drawn by Suraj for 6 months for Rs.4,725 being amount due. On
September 04, 2008, Suraj got the bill discounted with his bank at 12% per annum (rounded off to the nearest
rupee). On October 16, 2008, Bharath was declared as insolvent. A dividend of 20 paise in the rupee was
received from his official receiver on December 16, 2008. The amount received from the official receiver on
December 16, 2008 was
(a) Rs.3,780
(b) Rs. 840
(c) Rs. 945
(d) Rs.4,200
(e) Rs.3,600.
11. Happy Club furnishes you the following information for the year 2007-08:
Particulars Rs.
Subscriptions received during the year 2007-08 4,000
Subscriptions received in advance for the year 2008-09 800
Subscriptions outstanding for 2007-08 400
Subscriptions outstanding for 2006-07 300
The amount of subscriptions to be shown in the income and expenditure account of 2007-08 is
(a) Rs.4,800
(b) Rs.4,400
(c) Rs.3,300
(d) Rs.3,200
(e) Rs.3,900.
12. Firex Coal Ltd., took a coalfield on lease from Bhuma Ltd., for a period of 25 years from April 01, 2004.
Royalty should be paid at the rate of Rs.5 per ton of coal extracted. A minimum rent of Rs.3,00,000 per annum
should be paid. Lessee has authority to recoup the short workings during the first three years of the lease. The
coal extracted for the past four years was as follows:
Year Coal in tonnes
2004-05 10,000
2005-06 70,000
2006-07 80,000
2007-08 1,20,000
The amount payable to Bhuma Ltd., during the year 2006-07 was
(a) Rs.3,00,000
(b) Rs. 50,000
(c) Rs.1,00,000
(d) Rs.2,50,000
(e) Rs.2,00,000.
13. Ranky Ltd., has furnished the following data from its Balance Sheet:
Liabilities Rs.
15,000, 10% Preference shares of Rs.10 each fully paid-up 1,50,000
1,20,000, Equity shares of Rs.10 each, Rs.7 paid-up 8,40,000
General reserve 2,00,000
Securities premium 50,000
Capital reserve 1,00,000
Profit and Loss account 3,50,000
The directors decided to issue one bonus share for every three shares held, after making the final call of Rs.3 per
share. It was decided to use capital reserve, securities premium, general reserve to the fullest extent possible and
the deficit to be adjusted from Profit and Loss account. The capital reserve includes a cash gain of Rs.60,000
against the sale of machinery. The securities premium includes Rs.10,000 being the amount of premium on the
shares issued to promoters. The amount to be adjusted from Profit and Loss account, for the issue of bonus
shares is
(a) Rs.1,00,000
(b) Rs. 90,000
(c) Rs.1,20,000
(d) Rs.1,50,000
(e) Rs. 50,000.
14. The reserve created by the insurance companies to provide for the high amount of claims due to losses occurred
in the calamity such as earthquake, floods, war, etc. is known as
(a) General Reserve
(b) Revaluation Reserve
(c) Capital Redemption Reserve
(d) Catastrophe Reserve
(e) Reserve for unexpired risk.
15. The balance in the creditors account of Shirdibaba Ltd., as at the beginning of the month of December 2008
was Rs.3,40,000. During the month a sum of Rs.2,00,000 was paid to the creditors. The creditors were allowed a
sum of Rs.5,600 as cash discount. A bill for Rs.6,000 accepted by the company earlier in favour of a creditor
could not be honoured on the due date and hence was dishonoured on December 20, 2008. The balance in the
creditors’ account at the end of the month of December 2008 was Rs.3,90,400. The amount of credit purchases
made during the month of December 2008 was
(a) Rs.2,56,400
(b) Rs.2,50,400
(c) Rs.2,46,600
(d) Rs.2,50,000
(e) Rs.2,49,600.
16. The incomes or expenses which arise in the current year as a result of errors or omissions in the preparation of
financial statements of one or more previous years are known as
(a) Prior period items
(b) Extraordinary items
(c) Contingent items
(d) Preliminary items
(e) Equity items.
17. Liquidator’s Final Statement of Account is in the nature of
(a) Real account
(b) Representative personal account
(c) Personal account
(d) Nominal account
(e) A statement, but not an account.
18. Bills receivable a/c of Pavan Ltd., showed a balance of Rs.75,000, on December 01, 2008. New bills accepted by
debtors during the month of December 2008 amounted to Rs.9,000 and bills dishonoured by drawees amounted
to Rs.12,000 and bills honoured by drawees amounted to Rs.37,500. Bills receivable account balance as on
December 31, 2008 was
(a) Rs. 91,500
(b) Rs. 34,500
(c) Rs. 72,000
(d) Rs.1,15,500
(e) Rs.1,09,500.
19. Shakthi Ltd., gave a Bauxite mine on lease to Rakhi Ltd., at a royalty of Rs.4 per ton of Bauxite raised and a
minimum rent of Rs.12,000 per annum. Since there was a provision for sublease, Rakhi Ltd., subleased a part of
the mine to Vishu Ltd., at a royalty of Rs.5 per ton and a minimum rent of Rs.6,000 per annum. At the end of the
first year, Bauxite raised by Vishu Ltd., was 1,050 tonnes and Rakhi Ltd., was 2,850 tonnes (exclusive of 1,050
tones). The amount of royalty receivable by Shakthi Ltd., is
(a) Rs. 6,000
(b) Rs.12,000
(c) Rs.15,600
(d) Rs.11,400
(e) Rs.18,000.
20. The reversionary bonus is
(a) The amount that the policy holder can get immediately in cash if he stops paying further premium
(b) Bonus payable in cash at the end of every year
(c) Bonus payable on maturity of policy pending the ascertainment of profit
(d) Bonus payable in cash but utilized by policy holder to adjust premium due from him
(e) Bonus payable only on the maturity of the policy.
21. The following information is extracted from the Balance Sheet of Acess Bank Ltd., for the year 2007-08:
Particulars Rs.
Advances 1,80,20,000
Deposits 41,25,000
Investments 60,15,000
Cash and balances with RBI 7,60,000
Fixed assets 15,30,000
Other assets 5,15,000
Balances with banks and money at call & short notice 4,10,000
The total amount on assets side of the balance sheet of Acess Bank Ltd., was
(a) Rs.2,40,35,000
(b) Rs.3,13,75,000
(c) Rs.2,53,60,000
(d) Rs.2,72,50,000
(e) Rs.2,21,45,000.
22. The following data was extracted from the books of Deepu Ltd., as on March 31, 2008:
• Total sundry debtors as per Trial Balance Rs.60,900.
• Bad debts identified after the preparation of Trial Balance Rs.900.
• Provision for bad debts to be created @ 5% on sundry debtors.
• Provision for discount on sundry debtors to be created @ 2%.
The net amount of sundry debtors shown in the balance sheet of Deepu Ltd., as on March 31, 2008 was
(a) Rs.55,860
(b) Rs.60,000
(c) Rs.57,000
(d) Rs.60,900
(e) Rs.58,800.
23. The life insurance fund of Abhaya Insurance Company on December 31, 2008 showed a balance of
Rs.71,58,750. It was later found that the following adjustments were not taken into account:
Particulars Amount (Rs.)
Dividend from investment 3,90,000
Income tax on above 18,750
Bonus in reduction of premium 7,00,875
Claims covered under re-insurance 3,47,250
Claims intimated but not accepted and paid by the company 5,81,250
Balance of fund after incorporating the above transactions was
(a) Rs.74,04,375
(b) Rs.65,62,875
(c) Rs.65,54,625
(d) Rs.65,95,125
(e) Rs.65,45,625.
24. If the difference in trial balance is transferred to Suspense a/c, what will be the Suspense a/c balance due to the
following errors?
i. Debited Purchases a/c by Rs.6,500 for furniture purchased.
ii Debited Jain’s a/c and Salary a/c by Rs.3,000 each for salary paid to him.
iii. Debited Agarwal’s a/c by Rs.7,350 for goods purchased from him on credit.
iv. Credited Samanth’s a/c by Rs.100 for cash discount allowed by him.
(a) Rs.16,750
(b) Rs.10,250
(c) Rs.17,500
(d) Rs.24,200
(e) Rs.24,100.
25. Bank pass book of Mr.Vishnu showed a favourable balance of Rs.20,000, as on March 31, 2008. The pass book
balance did not agree with the balance as per cash book. On scrutiny, the following errors and omissions were
noticed:
• A cheque for Rs.4,000 issued has not been presented for payment till date.
• Rent of Rs.10,000 directly deposited into the bank account by the tenant is not accounted in the cash
book.
• A cheque for Rs.15,000 deposited in the bank is not yet realized.
• The interest on debentures directly collected by the bank, amounting to Rs.10,000 is not accounted in the
cash book.
The bank balance as per cash book is
(a) Debit balance of Rs.40,000
(b) Credit balance of Rs.11,000
(c) Credit balance of Rs.20,000
(d) Debit balance of Rs.11,000
(e) Debit balance of Rs.19,000.
26. Always Bank Ltd., has furnished the following data for the year ended March 31, 2008:
Due date inclusive of 3
Bill No. Rs.
days of grace
1. 1,20,000 01.05.2008
2. 2,00,000 28.02.2008
3. 8,00,000 29.07.2008
4. 60,000 01.06.2008
The above bills were discounted at 5% p.a. The unexpired discount as on March 31, 2008 was
(a) Rs.13,710
(b) Rs.13,170
(c) Rs.14,710
(d) Rs.14,701
(e) Rs.14,170.
27. The book value of stock as on March 14, 2008 was Rs.1,30,000. Goods worth Rs.6,000 were destroyed in fire on
March 15, 2008, against which claim for Rs.4,000 was admitted by the Insurance Company. Which of the
following is the appropriate accounting treatment for the above transaction?
(a) Debit Rs.4,000 to Profit & Loss a/c and show Rs.4,000 as claim receivable on the asset side of Balance
Sheet
(b) Debit Rs.6,000 to Profit & Loss a/c and show Rs.4,000 as claim receivable on the asset side of Balance
Sheet
(c) Deduct Rs.6,000 from the value of closing stock; debit Rs.2,000 to Profit & Loss a/c and show Rs.4,000
as claim receivable on the asset side of Balance Sheet
(d) Deduct Rs.6,000 from the value of closing stock; debit Rs.6,000 to Profit & Loss a/c and show Rs.4,000
as claim receivable on the asset side of Balance Sheet
(e) Credit Rs.2,000 to Profit & Loss a/c and show Rs.4,000 as claim receivable on the asset side of Balance
Sheet.
28. Physical stock of a company was found to be Rs.35,000. It was taken on April 07, 2008, a week after the end of
the accounting year March 31, 2008.
Additional information:
i. Goods costing Rs.5,000 were sold during the week.
ii. Goods costing Rs.4,000 were purchased during the week.
iii. Goods earlier purchased but returned during the period amounted to Rs.1,000.
iv. Goods earlier purchased but not received Rs.6,000.
The book value of stock held as on March 31, 2008 was
(a) Rs.27,000
(b) Rs.19,000
(c) Rs.43,000
(d) Rs.51,000
(e) Rs.35,000.
29. Which of the following statements is true?
(a) Income tax provision relating to current year is a charge against Profit & Loss appropriation account
(b) Income tax provision relating to previous year should be debited to Profit & Loss account
(c) Interim dividend should be debited to Profit & Loss account
(d) Managing director’s salary should be debited to Profit & Loss account
(e) Provision for doubtful debts relating to current year is a charge against Profit & Loss appropriation
account.
30. Alphons Ltd., issued 1,000 equity shares of Rs.10 par value at Rs.30 per share and all shares are subscribed and
total amount duly received. The journal entry to record this transaction would include a
(a) Debit to Cash for Rs.10,000
(b) Credit to Share capital for Rs.30,000
(c) Debit to Share premium Rs.20,000
(d) Credit to Share capital for Rs.10,000
(e) Credit to Cash for Rs.20,000.
END OF SECTION A
1. Grace Ltd., has furnished the following trial balance prepared by their newly appointed accounts
assistant as on March 31, 2008:
Particulars Dr. (Rs.) Cr. (Rs.)
Share Capital (2,00,000 equity shares of Rs.10 each) 20,00,000
Purchases 20,00,000
Stock as on April 01, 2007 3,50,000
Creditors 2,50,000
Bad debts 1,500
Fixed assets at cost: Land 8,50,000
Furniture 2,50,000
Buildings 12,50,000
Motor vehicles 1,55,000
Accumulated depreciation: Buildings 30,000
Motor vehicles 25,000
Furniture 50,000
Postage and telegram 5,000
Motor vehicle expenses 22,500
Interest received 7,500
Auditors’ fees 2,500
13% Debentures 9,00,000
Cash and Bank balances 87,850
Calls-in-arrears 6,000
Sales 27,50,000
Debtors 7,25,000
Provision for doubtful debts 2,500
Bad debts recovered 100
Salaries 1,75,000
Printing and stationery 7,500
Investments (at cost) 2,50,000
Directors’ fess 7,250
Profit & Loss a/c (Cr. Balance) 1,30,000
6. ‘Financial statements portray the effects of financial transactions by grouping these into broad
classes according to their elements’. In this context, explain the elements of financial statements. ( 10 marks)
7. Briefly explain the different methods of redemption of debentures. ( 10 marks)
END OF SECTION C
Working Notes :
(1) For Calculating Branch Closing Stock (when it is not given), normal loss is credited to Branch Stock
Account at invoice price. Normal Loss Account is closed by debiting to Branch Adjustment Account.
(2) Loading on net goods sent: Goods sent to branch Rs. 8,40,000 less goods returned to head office Rs.30,000.
Therefore, net goods sent = Rs.8,10,000. Loading is 1/5 of Rs.8,10,000 = Rs. 1,62,000.
(3) Loading on goods transferred to Bhubaneswar Branch: 1/5 of Rs.24,000 = Rs.4,800.
(4) Loading on goods Pilfered: 1/5 of Rs.6,000 = Rs.1,200. Cost of goods pilfered Rs.4,800
(Rs.6,000 – Rs.1,200) will be debited to Branch profit and loss Account.
(5) Loading on goods lost by fire: 1/5 of Rs.8,000 = Rs.1,600. Cost of goods lost by fire Rs.6,400
(Rs.8,000 – Rs.1,600) will be debited to General Profit and Loss Account.
(6) Loading on opening stock: 1/5 of Rs.80,000 = Rs.16,000.
(7) Loading on closing stock: 1/5 of Rs.2,82,300 = Rs.56,460.
(8) Petty Expenses = Opening petty cash Rs.300 plus cash sent by head office for petty expenses = Rs.64,000
less closing petty cash Rs.500 = Rs.63,800.
4. In the books of Techno Ltd.
Dr. 9% Debentures
Account Cr.
Date Particulars Rs Date Particulars Rs
31.12.08 To Own Debentures Investment 3,96,000 1.10.08 By Balance b/d 19,00,000
a/c
31.12.08 To Debentures Redemption
Fund a/c (Profit on 4,000
cancellation)
31.12.08 To Bank a/c 15,00,000
19,00,000 19,00,000