Hi,

Please the detailed notes on Finance & Accounting, request you to understand and prepare well so that you could crack
the various rounds of interviews
*

Three Golden rules of accounting*

AR/AP*

NAV - & its formula*

Balance Sheet (How it is prepared?) *

LIFO *

FIFO *

Bank Reconciliation Statement (How & why it is prepared?) *

Interest *

Dividend *

Shares and Debentures *

Mutual funds *

Derivatives / Types of derivatives. *

Types of derivatives *

Capital Market *

Hedging*

Additional Topics
Classification of Accounting, Key Accounting Concepts, Fundamental Accounting Assumptions, Accounting Policies
Types of Accounts, Double Entry system
Journal Entries, Posting to Ledger, Preparation of Trial Balance
Subsidiary Books
Rectification of Errors
Adjusting Entries
Bank Reconciliation
Inventory Valuation
Fixed Assets, Depreciation, Sale of assets

Preparation of Financial statements (P&L, Balance Sheet & Cash flow)

Ratio Analysis

*Also Find the model test paper, balance sheet (Performa) &
other detailed topics.*

*Update your knowledge really well and get back to us, so that we could
schedule your interviews with the company officials. *

*Remember the interviews happen from Monday to Friday (any day) so please
reach our office before 12 noon so that we could finish with the entire
interview formalities and aptitude test the very same day!!*

TOPICS FOR PREPARATION

3 Golden rules of accounting

Define the use of a Balance Sheet and its preparation in detail.

Accounts Payable & Accounts Receivable

Derivative

Hedging

LIFO & FIFO

BANK RECONCILATION STATEMENT

Define Capital Market with relevant concept

What are Mutual funds

Difference between Shares and Debentures

What do we mean by the term Interest and how is it different from Dividend?

Depreciation

Balance Sheet

3 Golden rules of accounting

REAL ACCOUNTS:

DEBIT WHAT COMES IN & CREDIT WHAT GOES OUT

NOMINAL ACCOUNTS:
GAINS

DEBIT ALL EXPENSES AND LOSSES & CREDIT ALL INCOMES AND

PERSONAL ACCOUNTS: DEBIT THE RECEIVER & CREDIT THE GIVER

Define the use of a Balance Sheet and its preparation in detail.

A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time.
These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount
invested by the shareholders.
The balance sheet must follow the following formula:
Assets = Liabilities + Shareholders' Equity
It's called a balance sheet because the two sides balance out. This makes sense: a company has to pay for all the things it
has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholders' equity).
Each of the three segments of the balance sheet will have many accounts within it that document the value of each.
Accounts such as cash, inventory and property are on the asset side of the balance sheet, while on the liability side there are
accounts such as accounts payable or long-term debt. The exact accounts on a balance sheet will differ by company and by
industry, as there is no one set template that accurately accommodates for the differences between different types of
businesses.

Difference between Accounts Payable & Accounts Receivable with suitable examples?
Accounts Payable ("payables")
An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable
entry is found on a balance sheet under the heading current liabilities.
Accounts payable are often referred to as "payables".
Another common usage of AP refers to a business department or division that is responsible for making payments owed by
the company to suppliers and other creditors.

Accounts payable are debts that must be paid off within a given period of time in order to avoid default. For example, at the
corporate level, AP refers to short-term debt payments to suppliers and banks.
Payables are not limited to corporations. At the household level, people are also subject to bill payment for goods or
services provided to them by creditors. For example, the phone company, the gas company and the cable company are types
of creditors. Each one of these creditors provides a service first and then bills the customer after the fact. The payable
is essentially a short-term IOU from a customer to the creditor.
Each demands payment for goods or services rendered and must be paid accordingly. If people or companies don't pay their
bills, they are considered to be in default.

Accounts Receivable
Money owed by customers (individuals or corporations) to another entity in exchange for goods or services that have been
delivered or used, but not yet paid for.
IF company has receivables it means that it has made sale but
Receivables usually come in the form of operating lines of credit and are usually due within a relatively short time period,
ranging from a few days to a year.
On a public company's balance sheet, accounts receivable is often recorded as an asset because this represents a legal
obligation for the customer to remit cash for its short-term debts
If a company has receivables, this means it has made a sale but has yet to collect the money from the purchaser. Most
companies operate by allowing some portion of their sales to be on credit. These types of sales are usually made to
frequent or special customers who are invoiced periodically, and allow them to avoid the hassle of physically making
payments as each transaction occurs. In other words, this is when a customer gives a company an IOU for goods or
services already received or rendered.
Accounts receivable are not limited to businesses - individuals have them as well. People get receivables from their
employers in the form of a monthly or bi-weekly paycheck. They are legally owed this money for services (work) already
provided.
When a company owes debts to its suppliers or other parties, these are known as accounts payable.
Explain Derivatives?

A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a
contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common
underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are
characterized by high leverage. HYPERLINK
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ult/empty.gif/652b304c375574494676634141524355" \t "_top"
Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Derivatives are contracts
and can be used as an underlying asset. There are even derivatives based on weather data, such as the amount of rain or the
number of sunny days in a particular region.
Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative purposes. For example, a
European investor purchasing shares of an American company off of an American exchange (using U.S. dollars to do so)
would be exposed to exchange-rate risk while holding that stock. To hedge this risk, the investor could purchase currency
futures to lock in a specified exchange rate for the future stock sale and currency conversion back into Euros.
What is Hedging?

Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an
offsetting position in a related security, such as a futures contract. HYPERLINK
"http://ads.forbes.com/RealMedia/ads/click_lx.ads/investopedia.com/trading/350444059/x85/OasDefault_v5/default/empty.
gif/652b304c375574494676634141524355" \t "_top"
An example of a hedge would be if you owned a stock, then sold a futures contract stating that you will sell your stock at a
set price, therefore avoiding market fluctuations.
Investors use this strategy when they are unsure of what the market will do. A perfect hedge reduces your risk to nothing
(except for the cost of the hedge).
HYPERLINK "http://www.investopedia.com/terms/h/hedge.asp" What is the difference between hedging and
speculation?
Hedging involves taking an offsetting position in a HYPERLINK "http://www.investopedia.com/terms/d/derivative.asp"
derivative in order to balance any gains and losses to the underlying asset. Hedging attempts to eliminate the volatility
associated with the price of an asset by taking offsetting positions contrary to what the investor currently has. The main
purpose of HYPERLINK "http://www.investopedia.com/terms/s/speculation.asp" speculation, on the other hand, is to
profit from betting on the direction in which an asset will be moving.
Hedgers reduce their risk by taking an opposite position in the market to what they are trying to hedge. The ideal situation in
hedging would be to cause one effect to cancel out another. For example, assume that a company specializes in producing
jewelry and it has a major contract due in six months, for which gold is one of the company's main inputs. The company is
worried about the volatility of the gold market and believes that gold prices may increase substantially in the near future. In
order to protect itself from this uncertainty, the company could buy a six-month HYPERLINK
"http://www.investopedia.com/terms/f/futurescontract.asp" futures contract in gold. This way, if gold experiences a 10%
price increase, the futures contract will lock in a price that will offset this gain. As you can see, although hedgers are
protected from any losses, they are also restricted from any gains. Depending on a company's policies and the type of
business it runs, it may choose to hedge against certain business operations to reduce fluctuations in its profit and
protect itself from any HYPERLINK "http://www.investopedia.com/terms/d/downside.asp" downside risk.
Speculators make bets or guesses on where they believe the market is headed. For example, if a speculator believes that a
stock is overpriced, he or she may HYPERLINK "http://www.investopedia.com/terms/s/shortselling.asp" short sell the
stock and wait for the price of the stock to decline, at which point he or she will buy back the stock and receive a profit.
Speculators are vulnerable to both the downside and HYPERLINK "http://www.investopedia.com/terms/u/upside.asp"
upside of the market; therefore, speculation can be extremely risky.
Overall, hedgers are seen as HYPERLINK "http://www.investopedia.com/terms/r/riskadverse.asp" risk averse and
speculators are typically seen as HYPERLINK "http://www.investopedia.com/terms/r/risklover.asp" risk lovers. Hedgers
try to reduce the risks associated with uncertainty, while speculators bet against the movements of the market to try to profit
from fluctuations in the price of securities.

What is LIFO & FIFO method?

Last In, First Out - LIFO
An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are
used sold or disposed of first.
LIFO assumes that an entity sells, uses or disposes of its newest inventory first. If an asset is sold for less than it is acquired
for, then the difference is considered a capital loss. If an asset is sold for more than it is acquired for, the difference is
considered a capital gain. Using the LIFO method to evaluate and manage inventory can be tax advantageous, but it may
also increase tax liability.
First in, First out - FIFO
An asset-management and valuation method in which the assets produced or acquired first are sold, used or disposed
of first. FIFO may be used by a individual or a corporation.

For taxation purposes, FIFO assumes that the assets that are remaining in inventory are matched to the assets that are most
recently purchased or produced. Because of this assumption, there is a number of tax minimization strategies associated
with using the FIFO asset-management and valuation method.
BANK RECONCILATION STATEMENT
Bank reconciliation is the process of comparing and matching figures from the accounting records against those shown on
a HYPERLINK "http://en.wikipedia.org/wiki/Bank_statement" \o "Bank statement" bank statement. The result is that any
transactions in the accounting records not found on the bank statement are said to be outstanding. Taking the balance on the
bank statement adding the total of outstanding receipts less the total of the outstanding payments this new value should
(match) reconcile to the balance of the accounting records.
Bank reconciliation allows companies or individuals to compare their account records to the bank's records of their account
balance in order to uncover any possible discrepancies. Discrepancies could include: cheques recorded as a lesser amount
than what was presented to the bank; money received but not lodged; or payments taken from the bank account without the
business's knowledge. A bank reconciliation done regularly can reduce the number of errors in an accounts system and make
it easier to find missing purchases and sales invoices.
No we are ready to explore bank reconciliation sample. Below you can find cash book and bank statement of company ABC
for January.

Cash Book
INCLUDEPICTURE "http://www.bookkeeping-financial-accounting-resources.com/images/cash-book.jpg" \*

MERGEFORMATINET
On the cash book you see opening cash balance at the beginning of January. On the left side you have cash inflows, i.e. cash
received by the company in January, on the left side you can see cash payments made by ABC in January. Final cash book
closing balance is $2348.

Bank Statement
INCLUDEPICTURE "http://www.bookkeeping-financial-accounting-resources.com/images/bank-statement.jpg" \*

MERGEFORMATINET

On the bank statement you can see details of each transaction. In the Outflow column you can see payments from ABC bank
account cleared by the bank, each such payment if supported by cheque has a reference number. In the column Inflow you
can see payments received into the bank account of ABC based on the cheques received. Some payments could be received
directly to the bank account.

Adjust Cash Book By Informational Differences

So our first task to solve this bank reconciliation sample is to compare bank statement and cash book and identify items on
the bank statement which are not in the cash book. In the picture below you can see those items, i.e. circled in red: payment
made to British way directly from bank account and payment received from BC Way directly to the bank account. These
items are included into the adjusted cash book, which is presented below.

INCLUDEPICTURE "http://www.bookkeeping-financial-accounting-resources.com/images/cash-book-adjustments.jpg" \*

MERGEFORMATINET
So how we adjust cash book? We take non-adjusted cash book balance at the end of month, add payments received directly
to the bank account (from BC Way amounting to $1000) and deduct payments made directly from bank account (to British
way amounting to $100) and get adjusted cash book balance amounting to $3338.

Identify Timing Differences

Next what we do is to find items on the cash book which are not on the bank statement. These will be timing differences, i.e.
items paid or received by not yet cleared by the bank and they will be included into the bank reconciliation sample. Picture
below shows such items on the cash book circled in red.
INCLUDEPICTURE "http://www.bookkeeping-financial-accounting-resources.com/images/timing-differences.jpg" \*

MERGEFORMATINET
On January 31 $1566 was received from Koala, but not yet cleared by the bank and included into the bank statement. On
January 28 and 31 accordingly ABC company paid to Logypol and Dizzy amounting accordingly to $234 and $540, which
were also not included into the bank statement. These items will be included into the bank reconciliation.

Bank Reconciliation Sample

Below based on the above data you can see bank reconciliation sample, which reconciles balance in the adjusted cash book
with the bank statement and explains differences.
To make such reconciliation we start from adjusted cash book balance of $3338. Add to this amount cheques not yet
presented to the bank, i.e. payments to Logypol and Dizzy amounting accordingly to $234 and $540. Intermediate amount is
$4112.
Afterwards we deduct from the intermediate amount payments accepted by the bank after the end of January, i.e. payment
from Koala amounting to $1566. By making these calculations we get the final amount of $2546 which is the same as per
bank statement at the end of January.

INCLUDEPICTURE "http://www.bookkeeping-financial-accounting-resources.com/images/bank-reconciliationsample.jpg" \* MERGEFORMATINET

So finally in this bank reconciliation sample we have adjusted cash book and reconciles adjusted cash book balance with the
bank statement explaining differences which are due to different timing of payments recorded on the cash book and bank
statement.

Define Capital Market with relevant concept

The market for long-term funds where securities such as common stock, preferred stock, and bonds are traded. Both the
primary market for new issues and the secondary market for existing securities are part of the capital market. Any
HYPERLINK "http://financial-dictionary.thefreedictionary.com/Market" market in which HYPERLINK "http://financialdictionary.thefreedictionary.com/Securities" securities are HYPERLINK "http://financialdictionary.thefreedictionary.com/Trading" traded. Capital markets include the HYPERLINK "http://financialdictionary.thefreedictionary.com/Stock" stock and HYPERLINK "http://financialdictionary.thefreedictionary.com/Bond+Market" bond markets. Companies and governments use capital markets to raise
HYPERLINK "http://financial-dictionary.thefreedictionary.com/Funding" funds for their operations; for example, a
company may HYPERLINK "http://financial-dictionary.thefreedictionary.com/Issue" issue an HYPERLINK
"http://financial-dictionary.thefreedictionary.com/IPO" IPO while a government may issue a HYPERLINK
"http://financial-dictionary.thefreedictionary.com/Bond" bond in order to conduct new or expand ongoing HYPERLINK
"http://financial-dictionary.thefreedictionary.com/Activities" activities. HYPERLINK "http://financialdictionary.thefreedictionary.com/Investors" Investors purchase securities in the capital markets in order to extract a
HYPERLINK "http://financial-dictionary.thefreedictionary.com/Return" return and earn HYPERLINK "http://financialdictionary.thefreedictionary.com/Profit" profit on the securities. Capital markets include HYPERLINK "http://financialdictionary.thefreedictionary.com/Primary+Market" primary markets, such as IPOs that are placed with investors through
HYPERLINK "http://financial-dictionary.thefreedictionary.com/Underwriter" underwriters, and HYPERLINK
"http://financial-dictionary.thefreedictionary.com/Secondary+Market" secondary markets, in which all subsequent trading
takes place. Government agencies in different countries regulate local capital markets, though some, especially exchanges,
play some role in regulating themselves.

What are Mutual funds

A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that
brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares,
which represent a portion of the holdings of the fund.

You can make money from a mutual fund in three ways:

1) Income is earned from HYPERLINK "http://www.investopedia.com/terms/d/dividend.asp" dividends on stocks and
HYPERLINK "http://www.investopedia.com/terms/i/interest.asp" interest on bonds. A fund pays out nearly all of
the income it receives over the year to fund owners in the form of a distribution.

2) If the fund sells securities that have increased in price, the fund has a HYPERLINK
"http://www.investopedia.com/terms/c/capitalgain.asp" capital gain. Most funds also pass on these gains to investors in a
distribution.

3) If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then
sell your mutual fund shares for a profit.
Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more
shares.

Advantages of Mutual Funds

Professional Management - The primary advantage of funds is the professional management of your money. Investors
purchase funds because they do not have the time or the expertise to manage their own portfolios. A mutual fund is a
relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments.
HYPERLINK "http://www.investopedia.com/terms/d/diversification.asp" Diversification - By owning shares in a mutual
fund instead of owning individual stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a
large number of assets so that a loss in any particular investment is minimized by gains in others. In other words, the more
stocks and bonds you own, the less any one of them can hurt you (think about Enron). Large mutual funds typically own
hundreds of different stocks in many different industries. It wouldn't be possible for an investor to build this kind of a
portfolio with a small amount of money.
HYPERLINK "http://www.investopedia.com/terms/e/economiesofscale.asp" Economies of Scale - Because a mutual fund
buys and sells large amounts of securities at a time, its transaction costs are lower than what an individual would pay for
securities transactions.
HYPERLINK "http://www.investopedia.com/terms/l/liquidity.asp" Liquidity - Just like an individual stock, a mutual fund
allows you to request that your shares be converted into cash at any time.
Simplicity - Buying a mutual fund is easy! Pretty well any bank has its own line of mutual funds, and the minimum
investment is small. Most companies also have automatic purchase plans whereby as little as $100 can be invested on a
monthly basis.

Difference between Shares and Debentures

When you buy shares, you become one of the owners of the company. Your fortunes rise and fall with that of the company.
If the stocks of the company soar in value, your investment pays off high dividends, but if the shares decrease in value, the
investments are low paying. The higher the risk you take, the higher the rewards you get.
A debenture is an unsecured loan you offer to a company. The company does not give any collateral for the debenture, but
pays a higher rate of interest to its creditors. In case of bankruptcy or financial difficulties, the debenture holders are paid
later than bondholders. Debentures are different from stocks and bonds, although all three are types of investment. Below
are descriptions of the different types of investment options for small investors and entrepreneurs.
Debentures are more secure than shares, in the sense that you are guaranteed payments with high interest rates. The
company pays you interest on the money you lend it until the maturity period, after which, whatever you invested in the
company is paid back to you. The interest is the profit you make from debentures. While shares are for those who like to
take risks for the sake of high returns, debentures are for people who want a safe and secure income
Redemption of Shares: The process whereby a company can redeem shares through repayment of the nominal value to the
shareholder.
Redemption of Debentures: Debenture is a debt instrument to raise funds. It has a maturity period associated with it. At the
end of the maturity, the company (borrower) should return the interest and principal amount. Debenture Redemption
Reserve is an amount kept as reserve for paying the debenture holder at the end of the maturity period.

What is Depreciation?
A HYPERLINK "http://www.businessdictionary.com/definition/noncash-expense.html" noncash expense that reduces the
HYPERLINK "http://www.investorwords.com/5209/value.html" value of an HYPERLINK
"http://www.investorwords.com/273/asset.html" assetas a HYPERLINK "http://www.investorwords.com/7202/result.html"
result of HYPERLINK "http://www.investorwords.com/5296/wear_and_tear.html" wear and tear, age, or HYPERLINK
"http://www.investorwords.com/3376/obsolescence.html" obsolescence. Most assets lose their value over time (in other
HYPERLINK "http://www.businessdictionary.com/definition/word.html" words, they depreciate), and must be replaced
once the end of their HYPERLINK "http://www.investorwords.com/5193/useful_life.html" useful life is reached. There are
several HYPERLINK "http://www.businessdictionary.com/definition/accounting-method.html" accounting methods that
are used in HYPERLINK "http://www.investorwords.com/3495/order.html" order to HYPERLINK
"http://www.investorwords.com/5348/write_off.html" write off an asset's depreciation HYPERLINK
"http://www.investorwords.com/1148/cost.html" cost over the HYPERLINK
"http://www.investorwords.com/3669/period.html" period of its useful life. Because it is a HYPERLINK
"http://www.investorwords.com/3307/non_cash_expense.html" non-cash expense, depreciation lowers the HYPERLINK
"http://www.investorwords.com/992/company.html" company's reported HYPERLINK
"http://www.investorwords.com/1618/earnings.html" earnings while increasing HYPERLINK
"http://www.investorwords.com/2084/free_cash_flow.html" free cash flow.

Basing on the nature of the asset the depreciation will be calculated. There are different methods of depreciations. They are:
1) Straight line method,
2) Diminishing value method,

3) Sinking fund method,

4) Annuity method,
5) Depletion method. etc.

There are two types of depreciation the straight line method and the written down value method. The rates of depreciation
under the two methods vary as the useful life of the asset remains the same irrespective of the method of depreciation used.
Under straight line method, a fixed percentage is applied on the original cost of the asset, thereby ensuring that the
depreciation per annum over the useful life is constant. Under written down value method, a fixed percentage is applied on
the written down value (original cost less depreciation charged till the end of the previous year) of the asset. This results in
higher depreciation in the earlier years and lesser depreciation in the later years.
Normally the depreciation rate under written down value is higher than the rate under straight line method. This ensures
creation of depreciation provision over the useful life of the asset.

All the Best........

Accounting Questionnaire
1. 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

2. A businessman purchased goods for $2,500,000 and sold 80% of such goods during the
accounting year ended 31st March, 2005.The market value of the remaining goods was
$400,000.He valued the closing stick at cost. He violated the concept of:
a. Money measurement
b. Conservatism
c. Cost
d.Periodicity
3. Assets are held in the business for the purpose of:
a.
b.
c.
d.

Resale
Conversion into cash
Earning revenue
None of the above

4. If an individual asset is increased there will be corresponding

a.
b.
c.
d.

Increase of another asset or increase of capital

Decrease of another asset or increase of liability
Decrease of specific liability or decrease of capital
Increase of drawings and liability

5. Consider the following data pertaining to Alpha Ltd.

Particulars

Cost of machinery purchased on

1st April,2005

1,000,000

Installation charges
Market value as on 31st
March,2006

100,000
1,200,000

While finalizing the annual accounts, if the company values the machinery at $1,100,000.Which of the
following concepts is followed by the Alpha Ltd?
a.
b.
c.
d.

Cost
Matching
Realization
Periodicity

6. Which financial statement represents the accounting equation, Assets=Liabilities Owners

equity:
a. Income statement
b. Statement of Cash flows
c. Balance Sheet

d. None of the above

7. The debts written off as bad, if recovered subsequently are:
a.
b.
c.
d.

Credited to Bad Debts Recovered Account

Credited to Debtors Account
Debited to Profit and Loss Account
None of the Above

8. Journal and Ledger records transaction in:

a.
b.
c.
d.

A chronological order and analytical order respectively

An analytical order and chronological order respectively
A chronological order only
An analytical order only

9. At the end of the accounting year all the nominal accounts of the ledger book are:
a.
b.
c.
d.

Balance but not transferred to profit and loss account

Not balanced and also the balance is not transferred to the profit and loss account
Balanced and the balance is transferred to the balance sheet
Not balanced and their balance is transferred to the profit and loss account

10. The debit note issued are used to prepare:

a.
b.
c.
d.

Sales return book

Purchase return book
Sales book
Purchase book

11. A second hand motor car was purchased on credit from B Brothers for $10,000
a.
b.
c.
d.

Journal Proper(General Journal)

Sales Book
Cash Book
Purchase Book

12. Purchased goods from E worth $5,000 on the credit basis

a.
b.
c.
d.

Bills Receivable Book

Purchases book
Journal Proper(General Journal)
Purchases Return

13. A debit note for $2,000 issued to Mr. for goods returned by us is to be accounted for:

a.
b.
c.
d.

Bills Receivable Book

Purchases Book
Journal Proper(General Journal)
Purchases Return

14. The Sales Returns Book records

a. The return of goods purchased
b. Return of anything purchased
c. Return of goods sold
15. The weekly or monthly total of the purchase book is:
a. Posted to the debit of the purchases Account
b. Posted to the debit of the Sales Account
c. Posted to the credit of the Purchases Account
16. Contra entries are passed only when
a.
b.
c.
d.

Double column cash book is prepared

Three-column cash book is prepared
Simple cash book is prepared
Both a and b

17. The balance in the petty cash book is:

a.
b.
c.
d.

An expenses
A profit
An asset
A liability

18. Amount received from IDBI as a medium term loan for augmenting working capital:
a.
b.
c.
d.

Capital expenditure
Revenue expenditure
Capital receipt
Revenue receipt

19. A second hand car is purchased for $10,000 the amount of $1,000 is spent on its repairs, $500 is
incurred to get the car registered in owners name and $200 is paid as dealers commission. The
amount debited to car account will be
a. $10,000
b. $10,500
c. $11,500

d. $11,700

20. If the amount is posted in the wrong account or it is written on the wrong side of the account, it
is called
a.
b.
c.
d.

Error of omission
Error of commission
Error of principle
Compensating error

21. If a purchase return of $1,000 has been wrongly posted to the debit of the sales returns account,
but has been correctly entered in the suppliers account, the total of the
a.
b.
c.
d.

Trial balance would show the debit side to be $1,000 more than the credit
Trial balance would show the credit side to be $1,000 more than the debit
The debit side of the trial balance will be $2,000 more than the credit side
The credit side of the trial balance will be $2,000 more than the debit side

22. $200 received from Smith whose account, was written off as a bad debt should be credited to:
a.
b.
c.
d.

Bad Debts Recovered account

Smiths account
Cash account
Bad debts account

23. If a purchase return of $24 has been wrongly posted to the debit of the sales return account, but
had been correctly entered in the suppliers account, the total of the trial balance would show:
a.
b.
c.
d.

The credit side to be $24 more than debit side

The debit side to be $24 more than credit side
The credit side to be $ 48 more than debit side
The debit side to be $48 more than credit side

24. Goods purchased $100,000.Sales $90,000.Margin 12% on cost. Closing Stock=?

a.
b.
c.
d.

(10,000)
10,000
19,643
8,000

25. Errors of commission do not permit

a. Correct totaling of the balance sheet

b. Correct totaling of the trial balance

c. The trial balance to agree
d. None of the above

26. The total cost of goods available for sale with a company during the current year is $1,200,000
and the total sales during the period are $1,300,000.If the gross profit margin of the company is
33 1/3% on cost, the closing inventory during the current year is
a.
b.
c.
d.

$400,000
$300,000
$225,000
$260,000

27. Ascertain the amount of purchase if Cost of goods sold is $80, 700, Opening stock $800,
closing stock $6,000
a.
b.
c.
d.

$80,500
$74,900
$74,700
$85,900

28. Under inflationary conditions, which of the methods will not show lowest value of the closing
stock?
a.
b.
c.
d.

FIFO
LIFO
None of the options are correct
All of the options are correct

29. On April 07, 2005, i.e., a week after the end of the accounting year 2004-2005, a company
undertook physical stock verification. The value of stock as per physical stock verification was
found to be $35,000.The following details pertaining to the period April 01,2005 to April 07,
2005 are given:
(i)
(ii)
(iii)
(iv)

Goods costing $5,000 were sold during the week

Goods received from consignor amounting to $4,000 included in the value of stock
Goods earlier purchased but returned during the period amounted to $1,000
Goods earlier purchased and accounted but not received $6,000
a.
b.
c.
d.

$27,000
$19,000
$43,000
$51,000

30. Consider the following data pertaining to N Ltd. For the month of March 2005:
Purchases
Issues
Balance
Quantity

Rate

Quantity

Quantity

Rate

(kg.)

($)

(kg.)

()kg.

($)

500

22.8

Date

01-03-2005
02-03-2005

400

24

10-03-2005

600

25

25-03-2005

1,000

If the company uses weighted average method for inventory valuation, the value of inventory as on March 31,
2005 is
a. $11967
b. $12000
c. $12500
d. $11400
31. Which of the following is False?
1. The value of ending inventory under simple average price method is realistic.
2. Usually profit or loss will not arise out of pricing the issues on the basis of simple average
price method.
3. The value of stock is shown on the assets side of the balance sheet as fixed assets.
4. Opening stock plus purchases minus cost of goods sold is the value of closing stock.

32. If a concern proposes to discontinue its business from March 2005 and decides to dispose off all its assets
within a period of 4 months, the balance sheet as on March 31, 2005 should indicate the assets at their
1. Historical cost.
2. Net realizable value.
3. Cost less depreciation.
4. Cost price or market value, whichever is lower.
33. Amit Ltd. purchased a machine on 01.01.2003 for $120,000. Installation expenses were $10,000. On
01.07.2003, expenses for repairs were incurred to the extent of $2000. Depreciation is provided under straight
line method. Depreciation rate = 15%. Annual depreciation =
1. $13000
2. $19500
3. $21000
4. $25000
34. Fixed assets are:
1. Kept in the business for use over a long time for earning income.
2. Meant for resale.
3. Meant for conversion into cash as quickly as possible.
4. All of the above.
35. From the following figures ascertain the gross profit:
Particulars
$
Opening stock (01.01.2006)
25000
Goods purchased during 2006
130,000
Freight and packing on above
5000
Closing stock (31.12.2006)
20000
Sales
190,000
Selling expenses on sales
9000
a.
b.
c.
d.

$36000
$45000
$50000
$59000

Based on the following para answer Q 36-39

Mohan purchased a machinery amounting $1,100,000 on 1st April, 2000. On 31st March, 2006. The similar
machinery could be purchased for $2,800,000 but the realizable value of the machinery (purchased on
1.4.2000) was estimated at $1,500,000. The present discounted value of the future net cash inflows that the
machinery was expectd to generate in the normal course of business, was calculated as $1,250,000.
36. the current cost of the machinery is:
a. $2,800,000
b. $2,000,000
c. $1,500,000
d. $1,200,000
37. The present value of the machinery is:
a. $1,250,000
b. $2,000,000

c. $1,500,000
d. $1,200,000
38. The historical cost of machinery is:
a. $1,000,000
b. $2,000,000
c. $1,100,000
d. $1,200,000

39. The realizable value of machinery is:

a. $1,000,000
b. 2,000,000
c. $1,500,000
d. $1,200,000
Based on the following para answer Q 40-45
The following are the details supplied by Agril Ltd. in respect of its raw materials for the month of December,
2005:
Date
Receipts(Units)
Price per unit
Issues(Units)
($)
01.12.2005
2,000(opening)
5.00
07.12.2005
1,000
6.00
10.12.2005
2,500
15.12.2005
2,000
6.50
31.12.2005
2,200
On 31.12.2005, a shortage of 100 units was found.
40. Find the value of closing stock using LIFO principle
a. $1,900
b. $2,400
c. $2,000
d. $1,000
41. Using the data given in problem, the value of the issues in the month of December 2005 using LIFO
principle

a.
b.
c.
d.

$35,000
$28,000
$20,000
$65,000

42. Using the data given in problem, the value of closing stock using FIFO principle
a. $1,600
b. $1,500
c. $1,300
d. $2,000
43. Using the data given in the problem, the value of the issues in the month of December 2005 using FIFO
method.
a. $27,700
b. $35,500
c. $19,500
d. $21,300
44. Using the data given in problem, the value of closing stock using simple average principle
a. $950
b. $875
c. $1,000
d. $1,300
e. $750

45. Using the data given in the problem, the value of issues in the month of December 2005 using simple
average method
a. $15,385
b. $21,675
c. $19,750
d. $28,125
Based on the following para answer Q46 48
In the year 2004-2005, C Ltd purchased a new machine and made the following payments in relation to it:
Particulars
$
$
Cost as per suppliers list
520,000
Less: agreed discount
50,000
470,000
Delivery charges
10,000
Erection charges
20,000
Annual maintenance charges
30,000
Additional components to increase capacity of the
4,000
Machine
Annual insurance premium
5,000
46. The cost of the machine is
a. $540,000
b. $545,000

c. $504,000
d. $550,000
47. If depreciation is provided @ 10% p.a. SLM, depreciation for 3rd year is
a. $54,000
b. $54,500
c. $47,000
d. $50,400
48. If depreciation is provided @ 10% p.a. under declining balance method, depreciation for 3rd year is
a. $43,740
b. $44,145
c. $40,824
d. $44,550
49. Original cost = $126,000. Salvage value = $6,000. Useful life = 3 years. Annual depreciation under SLM
=
a. $21,000
b. $20,000
c. $15,000
d. $40,000
50. Below some errors are mentioned. State which of these will not be revealed by the Trial Balance:
a. Compensating errors
b. Errors of principle
c.Wrong balancing of an account
d. Both a and b.

LIABLITIES
Current Liabilities:
Commercial Paper
Accounts Payable
Accured Liablities
Accured Income Taxes
Long-Term Debt Due
Obligations Under Capital Leases
Total Current Liabilites
Long Term Debt
Long Term Obligations Under Capital Leases
Deffered Income Taxes and Other
Minority Interest
Shareholder's Equity:

Amount
****
****
****
****
****
****
****
****
****
****
****

Amount

****

****

ASSET
Current Assets:
Cash and Cash Equipments
Receivables
Inventories
Prepaid Expenses and Other
Fixed Assets
Property and Equipments, at cost
Land
Buildings and Improvements
Furnitures And Fixtures
Transportation Equipments
Total Property and Equipment
Less : Accumulated Depreciation

Amount

Amount

****
****
****
****

****

****
****
****
****
****

****
****

Preffered Stock
Common Stock
Capital in Excess of Par Value
Accumulated Other Comprehensive Income
Retained Earnings
Total Shareholder's Equity

Total Liabilities

****
****
****
****
****
****

Property and Equipments: Net

****

****

Property Under Capital Lease

Less: Accumulated Amortization

****
****

****
****

****

Property Under Capital Lease : Net

Goodwill
Other Assets and Deffered Charges

****
****
****

****

Total Assets

****