Model questions from GAP

Objective Type Questions

1. Which of the following is not a financial statement:

A. Balance Sheet B. Income Statement C. Trial Balance D. Cash Flow Statement
2. Trial Balance is a:
A. Statement of Ledger Balances B. Financial Statement
C. Method of accounting D. Audit Report
3. The debit and credit balances in Trial Balance do not agree because of:
A. Error of Principle B. Arithmetical error C. Compensating error D. Wrong journal entry
4. The prime objective of Trial Balance is:
A. to establish arithmetical accuracy of accounting work B. to show final account
C. to prepare budget D. to control costs
5. Liabilities and income are shown in ………………. side in Trial Balance.
A. debit B. credit C. first column D. none of above.
6. Balance sheet shows:
A. Financial position B. Loss C. Profit D. Expenses
7. Balance sheet is prepared:
A. for a period B. at a particular date C. to show income D. none of above
8. In balance sheet:
A. total income equals total expenses B. total capital equals total borrowings
C. total fixed assets equals total liabilities D. total assets equals total liabilities
9. Inventories are:
A. current assets B. fixed assets C. current liabilities D. shareholders’ fund
10. Income statement shows:
A. total assets B. total liabilities C. capital D. financial performance
11. Income statement is prepared:
A. for a period B. at a particular date C. to show assets D. none of above
12. Excess of expenses over income is:
A. assets B. loss C. profit D. capital
13. Closing stock is shown in the ……………… side of income statement.
A. debit B. credit C. assets D. liabilities
14. Revenue expenditure maintains:
A. profit B. loss C. earning capacity D. level of staff
15. The benefit of revenue expenditure are received:
A. in same accounting period B. in long term C. in past years D. in same place
16. Capital expenditure:
A. is a loss B. generates assets C. maintains earning capacity D. is a capital
17. Capital expenditure are not used in:
A. determination of profit or loss B. determination of assets
 C. calculation of amount of assets D. increasing earning capacity of an asset
18. Budget is prepared for:
A. current period B. past period C. future period D. none of above
19. Budget is a plan expressed in:
A. language B. quantity C. quality D. financial terms
20. Budget is a management tool for:
A. staffing B. organizing C. balancing D. planning and control
21. Capitalization is a process of:
A. charging depreciation B. calculating capital
C. identifying capital expenditure into fixed assets D. calculating profit
22. Depreciation is:
A. loss of assets B. diminution in the value of assets
C. increase in the value of assets D. part of assets
23. Depreciation arises due to:
A. use of assets B. passage of time C. change in technology D. all three.
24. Depreciation is not charged on:
A. land B. Building C. Furniture D. office equipment
25. Subsidy is:
A. a loan B. donation C. an assistance D. a term of compliance
26. Procurement is related to:
A. acquisition of goods or services B. marketing C. quality of service D. production
27. In Nepal, the procurement by government organizations is guided by:
A. Public Procurement Act B. government C. CIAA D.Public Private Partnership
28. Invitation of tender is the process of:
A. Direct Purchase B. Purchase through negotiation
C. competitive bidding D. Sealed quotation
29. FOB is:
A. Free on Board B. Free on Bank C. Forward or Backward D. Fixed on Board
30. In procurement process, CIF means:
A. all costs, insurance and freight paid by supplier to the port of destination
B. all costs, insurance and freight paid by supplier on the port of destination
C. all costs, insurance and freight paid by buyer to the port of destination
B. all costs, insurance and freight paid by buyer on the port of destination
31. LQD (Liquidated damage) is charged for:
A. Damage to the goods B. Delayed supply C. Damaged Supply D. none of above
32. Irrevocable letter of credit (LC) means:
A. LC opened for supply B. LC that can be cancelled by issuing bank
C. LC with undertaking of issuing bank for payment when all terms are complied with
D. LC that can be amended easily by issuing bank
33. Proforma Invoice is used for:
A. payment B. opening of LC C. insurance cover D. customs clearance
34. Invoice is issued by:
A. the bank B. the buyer C. the supplier D. the director
35. Bid security is submitted by the bidder:
A. along with bid B. after award of contract C. for settlement of contract D. other
36. The performance bond remains valid till:
A. bid opening date B. award of contract C. warranty period D. supply of goods
Long and short type questions:
 What are the objectives of trial balance?
 Differentiate between balance sheet and income statement.
 Differentiate between revenue expenditure and capital expenditure.
 What do you mean by budget?
 What is meant by capitalization?
 What do you mean by depreciation? What is the reason to charge depreciation on assets?
 How do you define subsidy?
 What is meant by procurement?
 What is competitive bidding?
 Explain the terms “FOB” and “CIF” in relation to procurement.
 What do you mean by liquidated damage?
 What is letter of credit?
 Who are the parties to LC?
 Differentiate between Proforma Invoice and Commercial Invoice.
 Differentiate between Bid Security and Performance Security.

Answers to objective type questions:

1. C
2. A 20. D
3. B 21. C
4. A 22. B
5. B 23. D
6. A 24. A
7. B 25. C
8. D 26. A
9. A 27. A
10. D 28. C
11. A 29. A
12. B 30. A
13. B 31. B
14. C 32. C
15. A 33. B
16. B 34. C
17. D 35. A
18. C 36. C
19. D