In the calculation of return on shareholders investments B.

Net income before preference dividend and interest paid

the referred investment deals with 12:Which of the following Iiabilities are taken into account
A.All reserves for the quick ratio?
B.Preference and equity capital only 1. Bills payable
C.All appropriations 2. Sundry Creditors
D.All of the above 3. Loans
Option: D 4. Debtors
2:Which of the following is an advantage of standard 5. Bank overdraft
costing? A.1, 3 and 5
A.Measuring efficiency Quick ratio is also known as liquid ratio or acid test ratio.
B.Facilitates cost control Current ratio provides a rough idea of the liquidity of a firm
C.Determination of variance so subsequently a second testing device was developed
D.All of the above named as acid test ratio or quick ratio. It establishes
Option: D relationship between liquid assets and current liabilities.
3:The following item is shown in profit and loss Quick ratio = Liquid (quick) assets / Current Liabilities
appropriation account. 13:If the stock turnover ratio is 4 times and the collection
A.Dividends declared period is 30 days the operating cycle would be
B.Discount of issue of shares C.90 days operating cycle = inventory conversion period +
C.Non-operating expenses average collection period
D.Current assets 14:Given that current liabilities are at Rs. 300,000, current
Option: A ratio is 3:1 and quick ratio is 1:1, the value of stock will be:
4:The assets of a business can be classified as A.Rs. 600,000
C.Fixed and current assets 15:If the current ratio stands at 2 : 1 an equal increase in
5:Which of the following is the test of the long term current assets and current liabilities would ------- the
liquidity of a business? current ratio.
A.Interest coverage ratio A.Decrease
6:Identify the item that is not taken into account in 16:Consider the following information
computing the current ratio. 1. Gross sales Rs. 20,00,000
A.Bank overdraft 2. Sales tax 7% on gross sales
7:Dividing the net profit by the paid up amount of equity 3. Income tax 40%
share capital yields __ . 4. Profit before tax 400,000
C.Rate of return on equity share capital What is net profit before tax ratio?
8:Price-earning ratio is equal to market price per equity A.21.5%
share divided by ___ 17:ZBB stands for?
A.Earning per share A.Zero Base Budgeting
9:The sale of inventory on account will cause the quick 18:The stock turnover ratio is ____
ratio to B.Activity ratio
B.Increase 19:AS-19 deals with
10:Given that fixed assets are at Rs. 600,000 current assets C.Leases
Rs. 400,000 share capital Rs. 500,000, fixed liabilities Rs. 20:The return on investment (ROI) may be calculated as
2,50,000, Current liabilities Rs. 2,50,000, the solvency ratio A.Net profit before interest, tax and dividend / Capital
will be employed
A.20% Total assets/total liabilities=solvency ratio which B.Net profit after interest, tax and dividend / Shareholder's
means 1000000/500000=20% fund
11:Return on total assets ratio is equal to _____ divided by C.( Net profit - preference dividend )/ No. of equity shares
total asset D.Return on Investment / Net profit ratio

21:Which of the following transactions will
improve the current Ratio?
1. Bills receivable Dishonoured
2. Cash collected from customers
3. Issue of new shares
4. Payment of preliminary expenses by way of equity
shares
Select the correct answer using the codes given below
C.only 3
22:The stock turnover ratio may be calculated as ___
A.Cost of goods sold / Average stock
23:ROI stands for?
A.Return on Investment
24:The satisfactory ratio between internal and external
equity is ____
A.1:1
25:Match List 1- with List-II and select the correct answer
using the codes given below the lists
List-I List-II
1. Acid test ratio a. Liquidity ratio
2. Gearing ratio b. Profitability ratio
3. Working capital turnover ratio c. Leverage ratio
4. Return on capital employed d. Long term solvency ratio B.2:1
e. Activity ratio
A.1 - a, 2 - c, 3 - e, 4 - b
26:The gross profit ratio is the ratio of gross profit to
D.Net total sales
27:Acid test ratio is equal to quick current assets divided by C.Both preference and equity capitals plus all reserves
____
A.Current liabilities
28:Match List-I with List-II and select the correct answer
using the codes given below the lists
List-I List-II
1. Leverage Ratio a. Liquidity position
2. Acid test b. Efficiency of assets management
3. Turnover Ratio c. Management of working Capital
4. Current Ratio d. Debt and equity relationship
D.1-d, 2 -a, 3 - b,4 - c
29:Which of the following assets would be taken into
account for working capital turnover ratio.
1. Plant 2. Stock
3. Mortgage 4. Sales
5. Reserve 6. Bank
C.2,4, and 6
30:In the debt equity ratio, external equity refers to
C.Debentures and current liability
31:Acid test ratio should normally be ----
B.1:1
32:Match List-I (objectives of analysis) with List -II (ratios to
be computed) and select the correct answer using the
codes given below:
List -I List - II
l. Trading on Equity a. Earning per share
2. Efficiency of inventory control b. Liquidity Ratio
3. Overall Efficiency c. Capital Gearing
4. Immediate solvency d. Stock turnover Ratio
B.1 - c, 2 - d, 3 - a, 4 - b
33:Which of the following is a type of budget according to
function?
B.Operating Budget
34:In the computation of the debtors turnover ratio
accounts receivable includes
A.Debtors and B/R
35:Identify the formula that is used to calculate the capital
turnover ratio
D.Net sales/Capital employed
36:The satisfactory ratio between share-holder's funds and
long terms loan is ____
37:Which accounting standard deals with Interim Financial
Reporting?
A.AS-25
38:In the debt equity ratio, equity refers to
39:Current ratio is a ------ ratio
D.Balance sheet
40:What does the return on total assets take into account?
A.Income before tax and interest on fixed liability.
41:The net income of the company should ideally be -----
times of the fixed internal charges.
D.6 or 7
42:What does the ROI take into account?
A.Net fixed assets
43:If cost of goods sold is Rs. 100,000, other; operating
expenses are Rs. 20,000 and total net sales are Rs. 150,000
the operating ratio will be equal to ____
B.80%
44:The ideal ratio between total long term funds and total
long terms loan is ----
C.2:1
45:The current ratio of a company is 2: 1 which of the
following suggestions would Improve, reduce and net
change it.
I. Payment to trade creditors
II. Sell machinery for cash
Ill. Purchased goods for cash
IV. Issue of equity shares
C.Increases, Increase, No effect, Increase
46:In case of a limited company, the term financial
statements includes
B.Profit and loss account, profit and loss appropriation
account and balance sheet
47:The issue of equity capital in exchange of plant and
machinery will cause the return on equity capital to
B.Decrease
48:The return on equity capital ratio is obtained by dividing
net profit (after tax) less preference dividend by
A.Equity capital
49:The net profit ratio is the ratio of net profit to
C.Net total sales
50:Identify the transaction that has no effect on the
current ratio.
B.Bills receivable collected
51:The profit on the reissue of forfeited share are
transferred to
B.Capital Reserve
52:What does creditors turnover ratio take into account?
B.Total credit purchase
53:The current ratio of a company is 2: 1. Which of the
following suggestions would improve the ratio?
B.To borrow money on an interest-bearing promissory
note
54:The direct advantages of accounting do not include
C.Competitive advantage
55:The basic rule of book-keeping "Debit all expenses and
losses and credit all gains and incomes" is applicable to
C.Nominal account
56:Which of the following statements is not correct?
D.The capitalisation of reserves by the issue of bonus
shares also involves flow of funds
57:Match List I with List II and select correct answer using
the codes given below:
List I List II
a. ABC Analysis I. Capital Structure
b. Fund Flow Analysis II. Inventory Control
c. ROI Ill. Working Capital Management
d. M M Theory IV. Overall Profitability
A.a b c d
II III IV I
58:Match List I with List II and select the correct answer
using the codes given below the lists
List I List II
a. Balance of DebentureRedemption Fund account I.
Realisation account
b. Balance of Sinking Fund account for the replacement of
an asset II. Funds flow statement
c. On dissolution of a firm, the provisions made for
doubtful debts Ill. General reserve
appearing in Balance Sheet
d. Financial consequences of business operations IV. Asset
account
B.a b c d
III IV I II
59:Acid-test ratio should normally be
B.1:1
60:Which one of the following is an example of sources of
funds?
B.Increase in long-term liabilities
61:Match List I (Objectives of analysis) with List II (Ratios to
be computed) and select correct answer using the codes
given below the lists
List I List II
a. Trading on Equity I. Earnings per share
b. Efficiency of Inventory Control II. Liquidity ratio
c. Overall Efficiency III. Capital gearing
d. Immediate Solvency IV. Stock turnover ratio
B.a b c d
III IV I II
62:Which of the following statement is correct?
A.Fixed assets must always be shown at market value
63:Which of the following statement is not correct in
relation to cash discount?
D.Cash discount is always allowed at a rate higher than the
rate of trade discount
64:Bonus shares can be issued by a company
D.Out of free reserves built out of genuine profit
65:Current assets include
A.Stores & Spare parts
B.Stock in trade
C.Sundry Debtors
D.All of the above
Option: D
66:Which one of the following statements is not correct?
B.Bonus shares can be issued in lieu of dividends
67:EPS is calculated as
D.(EAT - Preference Dividend) / Equity shares
68:Match List I (Financial Statements and Accounts) with
List II (special matters associated with statements and
accounts) and select the correct answer using the codes
given below the lists:
List I List II
a. Receipts and Payments Account I. Revenue
b. Income and Expenditure Account II. Cash
c. Dividend Equalisation Reserve llI. Liability
d. Club subscription received in Advance Account IV.
Balance Sheet
V. General Reserve
A.a b c d
II I IV III
69:Which one of the following ratios is most important for
judging the long-term solvency of a firm?
A.Debt-Equity Ratio
70:Match List I (Items) with List II (Heads in Balance Sheet)
and select the correct answer using the codes given below
the lists
List I List II
a. Loss on issue of debentures I. Reserves and Surpluses
b. Unclaimed dividend II. Miscellaneous Expenditure
c. Prepaid rent IlI. Current Liability
d. Profit prior to incorporation IV. Current Assets
C.a b c d
II III IV I
71:Choose the wrong statement
A.Overhaul expenses of secondhand machinery purchased
are revenue expenditure
72:Consider the following statements:
Redeemable preference shares can be redeemed out of
1. Sale proceeds of the new issue of shares
2. Sale proceeds of the new issue of debentures
3. Profits available for dividends
4. Sales proceeds of the assets of the company
Of these statements
A.1 and 3 are correct
73:Accounting is concerned with
A.Monetary transactions
74:Which of the following accounting equation is correct?
A.Capital + Liabilities= Assets
75:Goods withdrawn by the proprietor for his personal use
are
A.Shown as a deduction from the purchases
76:Unpaid calls are shown in the balance sheet of a
company
B.By deducting it from the called-up share capital
77:Match List I with List II and select correct answer using
the codes given below the lists
List I List II
a. Current Ratio I. Sufficiency of EBIT to cover interest
charges
b. Debt-Equity Ratio II. Short-term solvency
c. Net Profit Margin Ratio III. Exposure to financial risk
d. Interest Coverage Ratio IV. Earning left for shareholders
D.a b c d
II III IV I
78:Match List I with List II and select correct answer using
the codes given below:
List I List II
a. G.P. Ratio I. Convention of conservatism
b. Cash budget II. Profitability
c. E.O.Q. III. Inventory management
d. Provision for bad debts IV. Management of liquid assets
D.a b c d
II IV III I
79:Match List I (Ratios) with List II (Method of calculation)
and select correct answer using the codes given the lists
List I List II
a. Debt-EquityRatio I. Equity Capital / Total Debt Capital
b. Proprietary Ratio II. External Equity / Owner's Equity
c. Capital Gearing Ratio III. Total Shareholders Funds / Total
Assets
d. ROI IV. Profit before Interest and Tax / Net Assets
A.a b c d
II III I IV
80:Match List I with List II and select correct answer using
the codes given below:
List I List II
a. Financial leverage I. Efficiency
b. Quick ratio II. Profitability
c. Stock turnover ratio Ill. Risk
d. Margin on sales IV. Liquidity
A.a b c d
III IV I II
81:Stock is
B.Part of current assets
82:Which of the following information related to fixed
assets should be disclosed in the financial statements as
per Accounting Standard - 10 (Accounting Standard on
Fixed Assets)?
A.Gross and net book values of fixed assets at the
beginning and end of an accounting period showing
additions, disposals, acquisitions and other movements
B.Expenditure incurred on account of fixed assets in the
course of construction or acquisition
C.Revalued amount substituted for historical cost of fixed
assets, the method adopted to compute the revalued
amounts, the nature of any indices used, the year of any
appraisal made and whether an external valuer was
involved, in case where fixed assets are stated at revalued
amounts
D.All of the above Option: D
83:Which of the following is not included in the category of
'Intangible Assets' ?
D.Machinery
84:AS -10 (Accounting Standard on Fixed Assets) does not
deal with accounting for the following items to which
special considerations apply
A.Forests, plantations and similar regenerative natural
resources
B.Wasting assets including material rights, expenditure on
the exploration for and extraction of minerals, oil, natural
gas and similar non-regenerative resources
C.Expenditure on real estate development and livestock
D.None of the above Option: D
85:What are the important objectives of accounting?
l. To maintain records of a business
II. Calculation of profit or loss
Ill. Depiction of financial position
IV. To make information available to variousgroups and
users
D.I, II, III and IV
86:Which of the following assets are dealt with by AS - 10
(Accounting Standard on Fixed Assets)?
A.Land, building, plant and machinery, vehicles, furniture
and fittings
B.Goodwill and patents
C.Trademarks and designs
D.All of the above Option: D
87:Cost of inventories includes
C.All costs of purchase, cost of conversion and other costs
incurred in bringing the inventories to their present
location and condition
88:Closing stock is valued at
C.Cost or market price whichever is lower
89:Choose the correct statement:
C.According to AS - 6, depreciation is not to be provided on
land unless it has a limited useful life for the enterprise
90:Match List I with List II and select correct answer using
the codes given below:
List l List II
(Accounting Convention) (Principles Involved)
a. Consistency I. Losses are an ticipated and accounted for
in advance but profits are not accotrnted
for until realised.
b. Comparability II. All the relevant financial information
should be summarised and presented in the accounting
statements.
c. Conservatism III. Accounting procedures in an entity
should be followed uniformly from period to period.
d. Disclosure IV. Accounting statements of different
periods of an entity and those of different entities of a
period should be based on the same accounting principles
and procedures.
B.a b c d
III IV I II
91:The fundamental accounting equation' Assets =
Liabilities + Capital' is the formal expression of
A.Dual aspect concept
92:Stock is valued in the books of accounts at
D.Depends whether LIFO method is used or FIFO method is
used
93:Which of the following statements is true in relation to
liabilities?
A.Claims against the resources.
B.Currently existing obligations which the firm intends to
meet at some time in the future.
C.It must be capable of being expressed in money terms.
D.All of the above Option: D
94:All capital expenditures and receipts are taken to
B.Balance sheet
95:Which one of the following branches of accounting
primarily deals with processing and presenting of
accounting data for internal use?
C.Management accounting
96:Amount spent on an advertisement campaign, the
benefit of which is likely to last for three years is a
C.Deferred revenue expenditure
97:As per AS - 2, inventory is to be valued at
D.The lower of cost, or net realisable value
98:Which of the following can be treated as capital
expenditure?
A.Acquisition of land, building, machinery etc.
B.Amont spent on increasing the Sitting accommodation in
picture hall.
C.Expenditure incurred for acquiring the right to carry on a
business, for example, patent rights, copyright, goodwill.
D.All of the above Option: D
99:Which of the following Accounting standards is
recommendatory and not mandatory?
C.AS -3 - Cash Flow Statement
100:Which of the following is not required to be disclosed
according to AS-6?
D.Depreciated value of the assets
101:What are the limitations of 'money measurement'
concept?
A.Any transaction / event inspite of being very important
cannot be recorded in the books of accounts, if it cannot
be expressed in money value.
B.As per this concept, a transaction is recorded at its
money value on the date of occurrence and the
subsequent changes in the money value are conveniently
ignored.
C.Both (A) and (B) Option: C
102:AS - 9 (Revenue Recognition) is concerned with the
recognition of revenue arising in the course of the ordinary
activities of the enterprise from
A.The sale of goods
B.The rendering of services
C.The use by others of enterprise resources yielding
interest, royalties and dividends
D.All of the above Option: D
103:According to AS - 6, 'Depreciable assets' are assets
which
A.Are expected to be used during more than one
accounting period
B.Have a limited useful life
C.Are held by an enterprise for use in the production or
supply of goods and services, for rental to others, or for
administrative purposes and not for the purpose of sale in
the ordinary course of business
D.All of the above Option: D
104:The method of depreciation is applied consistently to
provide comparability of the results of the operations of
the enterprise from period to period. A change from one
method of providing depreciation to another is made only
A.If the adoption of the new method is required by statute
B.For compliance with an accounting standard
C.If it is considered that the change would result in a more
appropriate preparation or presentation of the finacial
statements of the enterprise
D.All of the above Option: D
105:Which of the following can be treated as revenue
expenditure?
A.Expenses incurred in the normal course of business, for
example, expenses of administration, expenses incurred in
manufacturing and selling products. Examples of such
expenses are salaries, rent, insurance, postage, stationary,
repairs to assets.
B.Expenses incurred to maintain the business, for example,
replacements for maintaining the existing permanent
assets cost of stores consumed in the course of
manufacturing, for example, oil, cotton-waste, machinery,
spares consumed.
C.Depreciation on fixed assets, interest on loans for
business, loss from sale of fixed asset.
D.All of the aboveOption: D
106:Which of the following is not deferred revenue
expenditure?
D.Depreciation on fixed assets.
107:Assessment of depreciation and the amount to be
charged in respect thereof in an accounting period are
usually not based on
A.Market value of the asset
108:Accounting Standard Board was set up by
A.Institute of Chartered Accountants of India
109:Which of the following cannot be treated as revenue
expenditure?
B.Wages paid for the erection of plant and machinery.
110:In reference to the accounting standards, choose the
correct statement:
A.Accounting standards codify the generally accepted
accounting principles
B.They lay down the norms of accounting policies and
practices by way of codes or guidelines
C.The main purpose of accounting standards is to provide
information to the user as to the basis on which the
accounts have been prepared
D.All of the above Option: D
111:In case the depreciable assets are revalued, the
provision for depreciation is based on
A.The revalued amount on the estimate of the remaining
useful life of such assets
112:Contingent liability is shown due to
C.Convention of materiality
113:According to which of the following concepts, fixed
assets are depreciated over their useful life rather than
over a shorter period on the expectation of early
liquidation?
C.Going concern concept
114:Which of the following factors should be considered
while estimating the useful life of a depreciable asset?
A.Expected physical wear and tear
B.Obsolescence
C.Legal or other limits on the use of asset
D.All of the aboveOption: D
115:Match List I with List II and select correct answer using
the codes given below:
List I List II
a. Real Accounts I. Dr. the receiver Cr. the giver
b. Nominal Accounts II. Dr. what comes in Cr. what goes out
c. Personal Accounts Ill. Dr. all expenses and losses Cr. all
gains and incomes
C.a b c
II III I
116:Valuation of inventory is dealt with in
B.AS-2
117:Which of the following accounting equations is not
correct?
D.Liabilities = Assets + Capital
118:How the deferred revenue expenses are treated in the
books of accounts?
A.Such expenses are taken to Profit and Loss Account in
part every year and thus unwritten off portion may be
allowed to stand in the balance sheet on the asset side.
119:Which of the following aspects of revenue recognition
is not dealt by AS-9?
A.Revenue arising from construction contracts
B.Revenue arising from hire-purchase, lease agreements
C.Revenue arising from governments grants and other
similar subsidies
D.All of the aboveOption: D
120:AS - 6 deals with depreciation accounting and applies
to all depreciable assets, except
A.Forests, plantations and similar regenerative natural
resources
B.Wasting assets and expenditure on research and
development
C.Goodwill and livestock
D.All of the above Option: D
1:In accrual basis or mercantile basis of accounting, the
financial effect of the transaction is recorded in the books
A.As and when they occur
2:Match List-I with List-II and select the correct answer
using the codes given below the lists:
List-I List-II
a. Purchases Account I. Real Account
b. Sales Account II. Nominal Account
c. Rent Outstanding Ill. Personal Account
d. Sales tax payable IV. Personal Account
D.a b c d
I II III IV
3:If the premium is paid on the life policy of the proprietor
of the business, it is
A.Treated as the drawings and is shown by way of
deduction from the capital account
4:Accelerated depreciation method is also called
A.Sum of the years digit method
5:Which method of inventory valuation helps in reducing
the burden of income tax in times of rising prices?
A.Last-in-first-out
6:Consider the following Accounting Concepts
1. Business Entity Concept
2. Going Concern Concept
3. Dual Aspect Concept
4. Money Measurement Concept
Which of the above accounting concepts are generally
called fundamental accounting concepts?
A.1,2 and 4
7:The information provided by the financial accounting
system is
A.Significant
B.Sufficient for smooth, orderly and efficient conduct of
business
C.Not sufficient for smooth, orderly and efficient conduct
of business
D.Both (A) and (B).Option: D
8:Match List-I with List-II and select the correct answer
using the codes given below the lists:
List-I List-II
(Term) (Qts application)
a. Depreciation I. Wasting assets
b. Depletion II. Intangible assets
c. Amortisation III. Fixed assets
d. Dilapidation IV . Damage due to a building or other
property during tenancy
B.a b c d
III I II IV
9:Which accounting standard deals with intagible assets?
D.AS-26
10:Under the head 'current assets', the following items are
disclosed
1. Interest accrued on investments
2. Loose tools
3. Work-in-progress
4. Sundry debtors
5. Stock in trade
6. Stores and spare parts
The correct chronological order of their disclosure is
D.1,6,2,5,3,4
11:In cash system of accounting, entries are recorded
B.On the basis of actual receipt of cash and actual payment
of cash
12:What are the advantage of double entry system?
A.Arithmetical accuracy of records
B.Lesser possibility of fraud
C.Helps users of accounting information
D.All of the aboveOption: D
13:If bad debts appear as an adjustment outside the trial
balance, then it is adjusted
A.By debiting bad debts account and crediting sundry
debtors account
14:Bills of exchange are shown under the head
B.Loans and Advances
15:Consider the following statement:
1. Operational loss is a source of fund
2. Decrease in working capital is a source of fund
3. Additions to fixed assets are an application of fund
4. Fresh introduction of capital is an application of funds
Which of the above statements are applicable while
preparing the funds flow statement?
C.2 and 3
16:Which of the following branches of accounting are of
recent origin?
1. Management accounting
2. Social responsibility accounting
3. Human resources accounting
4. Cost accounting
Select the correct answer using the codes given below:
D.2 and 3
17:Match List I with List II and select correct answer using
the codes given below:
List-l List-ll
a. Endowment Fund I. Posted to the credit side of the
income and expenditure account
b. Entrance Fee II. Any income or loss adjusted in the
income and expenditure account
c. Sale of old assets III. Sometimes capitalized and
sometimes treated as revenue income
d. Sale of newspaper IV. Permanent means of support
A.a b c d
IV III II I
18:Accounting rules, practices and conventions should not
change from one year to another as per the
A.Convention of consistency
19:The expired portions of capital/deferred revenue
expenditures and revenue expenditures (adjusted for
outstanding and prepaid expenses) are regarded as
B.Expenses
20:Who has defined accounting as "the art of recording,
classifying and summarising in a significant manner and in
terms of money, transactions and events, which are, in
part at least, of a financial character and interpreting the
results thereof"?
A.American Institute of Certified Public Accountants
21:Following expenses are not shown in Profit & Loss
Account
1. Domestic and household expenses
2. Interest on capital
3. Income tax
4. Life insurance premium
Select the correct answer using the codes given below :
C.1,3 and 4
22:When the proprietor withdraws or takes away some
goods from the business for his personal use or
consumption, he records the withdrawals at
B.Cost price
23:The accounting equation (i.e., Assets = Liabilities +
Capital) is an expression of the
B.Business Entity Concept
24:Which of the following statements is correct?
B.Adjustment entries are required because of accrual basis
used for accounting
25:Single entry in the popular sense may consist of
A.Double entry for certain transactions such as cash
received from debtors
B.Single entry in respect of some transactions such as
purchase of fixed assets etc.
C.No entry in respect of some transactions such as bad
debts etc
D.All of the aboveOption: D
26:Capital Redemption Reserve can be utilised by the
company only for
C.Issue of full paid bonus shares
27:What are the ways of creating secret reserves?
1. By charging excessive depreciation
2. By overvaluing stock in trade and goodwill
3. By suppressing sales
4. By showing a contingent liability as a real liability
5. By grouping free reserves as creditors.
Select the correct answer using the codes given below:
D.1,2 and 4
28:Section ---- of the ----- restricts the maximum number of
members in partnership to 10 in case of banking firms and
20 to carry on any other business in partnership.
D.11, Indian Companies Act, 1956
29:A very important component of management
accounting is
C.Cost accounting
30:Match List I with List II and select correct answer using
the codes given below:
List-l List-ll
a. Depreciation I. Loss of usefulness arising from factors
such as technological changes, improvement in
production methods, change in market demand for the
product etc.
b. Depletion II. Process of writing down the longterm
investments in intangibles such as lease
holds, patents, copyrights, trade marks etc.
c. Amortization Ill. Process of measuring and recording the
exhaustion of natural resources such as ore deposits, oil
wells, timber stands, quarries, etc.
d. Obsolescence IV. Accounting process of converting the
cost of fixed assets to expense
A.a b c d
IV III II I
31:All information which is of material interest to --- should
be disclosed in accounting statements.
1. Proprietors 2. Creditors
3. Investors 4. Debtors
Select the correct answer using the codes given below:
D.1,2 and 3
32:Which of the following statements is correct?
1. Indian Companies Act, 1956 restricts the maximum
number of members in partnership.
2. The Partnership Act implies that a partnership firm
cannot be formed to carry on a charitable work.
3. To become a partner, sharing of profits by the member
is not necessary.
4. To become a partner, sharing of losses by the member is
not necessary.
Select the correct answer using the codes given below:
C.1,2 and 4
33:Under the head 'current liabilities', the following items
are disclosed in the Final Accounts of a company
1. Short term loan
2. Acceptance or Bills Payable
3. Sundry creditors
4. Unclaimed dividend
5. Outstanding expenses and Advance Incomes
6. Interest accrued and due on loans
Select the correct answer using the codes given below:
A.2,3,4 and 5
34:----- reserve refers to the amount which are not free for
distribution by way of dividend, whereas ------- reserve
refers to the amount which are free for distribution by way
of dividend.
D.Capital, Revenue
35:The main objective of providing depreciation is
B.To show the true financial position in the balance sheet
36:Which of the following statements about partnership
firm is not correct?
C.A partner can transfer his interest without the consent of
other partners
37:Under the head 'fixed assets', the following items are
disclosed
1. Land
2. Buildings
3. Railway sidings 3. Facilitating special functions and control
4. Leaseholds 4. To ascertain the financial position of the business
5. Goodwill Which of the above are main objectives of accounting?
The correct chronological order of their disclosure is A.1 and 4
C.5,1,2,4,3 46:An expenditure in the nature of revenue enhancing
38:Which method of inventory valuation is very useful activity is normally regarded as a
when prices are falling? B.Capital expenditure
C.Average cost 47:Which accounting standard deals with accounting for
39:Inventory is valued at cost or market price whichever is amalgamations?
lower. This principle of valuation is based on the D.AS-14
accounting convention of 48:In case of fixed capital accounts, following are recorded
C.Conservatism in the capital accounts of partners
40:Match List-I with List-II and select the correct answer 1. Balance of capital in the beginning of the year
using the codes given below the lists: 2. Fresh capital introduced during the current year
List-I List-II 3. Permanent withdrawal of excess capital and closing
(Particulars) (Section) balance of capital
a. Liability of a partner for acts of the firm I. Sec 31 4. Income tax of partner.
b. Admission of a partner ll. Sec. 25 Select the correct answer using the codes given below:
c. Retirement of a partner Ill. Sec. 34 C.1,2 and 3
d. Insolvency of a partner IV. Sec.32 49:What is the correct sequence of the following heads of
D.a b c d assets in the balance sheet of a company, as per the
II I IV III Companies Act, 19567
41:Which of the following is a correct statement? 1. Investments
D.Chartered accountant as an auditor makes the financial 2. Current Assets
statements reliable to the users. 3. Fixed Assets
42:Which of the following are the qualitative 4. Profit and Loss Account
characteristics of financial statements? 5. Miscellaneous Expenditure
1. Relevance 6. Loans and Advances
2. Reliability Select the correct answer using the codes given below:
3. Comparability D.3,1,2,6,5,4
4. Understandability 50:Which of the following is an intangible asset?
Select the correct answer using the codes given below: D.Goodwill
D.1,2,3 and 4 51:In Accounting equation approach for recording business
43:Which of the following accounting concepts has the transactions all accounts are divided into three categories,
working rule: "anticipate no profits but provide for all namely
possible losses. "? B.Assets, Liabilities and Capital
A.Conservatism concept 52:Which of the following principles is not related to the
44:If 'Incomes received in advance" appears in the trial preparation of profit and loss account?
balance, it D.Dual aspect concept
D.Will be shown on the liabilities side of the balance sheet 1: Identify the item which is not an operating expense
only D.Loss on sale of motor car
45:Following are some of the objectives of accounting 2:Assertion (A). There is no error, when the totals of the
1. To ascertain whether the business operations have been debit side and the credit side of the Trial Balance are equal.
profitable or not Reason (R). Trial Balance is a two-column statement
2. Maintaining systematic records and reporting on the showing names and balances of all the accounts in the
custodianship of resources order in which they appear in the ledger.
D.A is false but R is true.
3:Match List-I with List-II and select the correct answer
using the codes given below the lists:
List-I List-II
a. Net loss from operations I. Source of funds
b. Changes in working capital II. Drain on working capital
c. Depreciation III. Flow of funds
d. Issue of fully paid bonus shares IV. Neither source nor
application of funds.
C.a b c d
II III I IV
4:Match List I (Provision of partnership act) with List II
(Matters with which the provision are released) and select
the correct answer using the codes given below the lists:
List - I List - II
1. lnterest must be allowed @ 6% p.a. (a) Drawings of
partners
2. No interest shall be allowed (b) Net loss of the firm for
an accounting year.
3. No interest shall be charged (c) Capitals contributed by
the partners.
4. Must be shared equally by all the partners (d) Loan given
by a partner to the firm
unless otherwise agreed.
D.1 - d, 2 - c, 3 - a, 4 - b
5:Assertion (A). Under diminishing balance method of
depreciation, the charge for depreciation keeps on
diminishing year after year in all subsequent years.
Reason (R). Under diminishing balance method, the rate
per cent at which depreciation is written off goes on
diminishing from year to year.
C.A is true but R is false
6:Assertion (A) .A new firm can be profitable and yet not
be able to pay its debts as they become due.
Reason (R). New firms often have the problem of having
increased investments in inventory and fixed assets at an
amount which exceeds cash generated from operations.
A.Both A& R are true and R is the correct explanation of A.
7:Revenue is generally recognised as being earned at that
point of time when
A.sale is effected
8:Redeemable preference shares is __
D.Non-Current liability
9:Assertion (A). No item of capital expenditure finds its
place in the Trading and Profit & Loss Account or some
other form of revenue accounts.
Reason (R). Capital expenditure consists of expenditure,
the benefit of which is not fully consumed in one
accounting period but is spread over several periods.
A.Both A and R are true and R is the correct explanation of
A.
10:For the purpose of calculating ROI capital employed
means
D.Fixed assets + current assets - current liabilities
11:Match List I with List II and select the correct answer
using the codes given below the lists:
List I List II
a. Heavy amount of premium on redemption of 1. Capital
expenditure
preference shares
b. Excess of sale proceeds of fixed 2. Deferred revenue
expenditure
assets over their original cost
c. Cost of installation of an old machine 3. Capital gain
d. Freight paid on purchase of raw material 4. Revenue
expenditure
C.a b c d
2314
12:A, B and C were partners sharing profits in the ratio of 3
: 5 : 7. C retires and his share were taken up by A and B in
the ratio of 3: 2. What is new ratio?
B.2:13
13:What does the 'net worth' of a business signify?
D.Total assets - total liabilities
14:Match the following by writing the number of correct
choice
Column A Column B
(i) Debit and Credit Vouchers are also called (a) Non-cash
transactions
(ii) Credit vouchers are prepared for (b) Cash payment of
the business
(iii) Transfer Vouchers are prepared for (c) Cash Vouchers
(iv) Debit Vouchers are prepared for (d) Cash receipts of
the business
A.i ii iii iv
(c) (d) (a) (b)
15:Which of the following is a type of partner?
A.Sleeping or Dormant
B.Nominal
C.Minor
D.All of the above Option: D
16:A, B and C were partners sharing profits and losses in
the ratio of 2 : 2 : 1. A retires, Band C purchase share of A
by paying Rs 30,000 and Rs 40,000. What is new profit
sharing ratio
A.4:3
17:Which of the following statements is correct?
A.A decrease in current liabilities causes an increase in the
working capital.
18:Assertion (A). Management accounting provides
management with information for decision making.
Reason (R). Management accounting is a branch of cost
accounting.
C.A is true but R is false
19:Match List-I with List-II and select the correct answer
using the codes given below the lists:
List-I List-II
a. Balance of Debenture Redemption Fund account I.
Realisation Account
b. Balance of Sinking Fund account for II. Funds flow
statement
the replacement of an asset.
c. On dissolution of a firm, the provisions made for III.
General Reserve
doubtful debts appearing in Balance Sheet.
d. Financial consequences of business operations. IV. Asset
account
B.a b c d
III IV I II
20:Which one of the following is correct about margin of
safety ratio?
D.Contribution / Sales of BEP
21:Match List-I with List-II and select the correct answer
using the codes given below the lists:
List-I List-II
a. Income measurement I. Accrues to owner's equity
b. Expense recognition II. Revenue recognition
c. Basis for realisation in accounting Ill. Matching revenues
and expenses
d. Recognised revenue IV. Accounting period
A.a b c d
III IV II I
22:Identify the item that is not taken into account in
computing the current ratio
A.Land
23:Expenditure incurred on research is an example of
C.Deferred revenue expenditure
24:Match List I (organisation) with List II (Basis of
membership) and select the correct answer using the
codes given below the lists:
List - I List - II
a. Cooperative Society 1. Collective business
b. Joint Hindu 2. Purchase/ Family Transfer of shares
c. Joint Stock 3. By virtue of company Birth
d. Partnership firm 4. Common mutual interest
5. Mutual contract
C.a b c d
4325
25:Amount spent on an advertisement campaign, the
benefit of which is likely to last for three years is a
C.Deferred revenue expenditure
26:Assertion (A).ROI is the index to study management
efficiency.
Reason (R). Earning power in relation to total investment is
measured by ROl.
B.Both A and R are true but R is not a correct explanation
of A.
27:If a particular current asset in the current year is more
than what was in the previous year, then the change in the
current assets results in of working capital.
B.increase
28:A firm earns a profit of Rs. 15,000 per year. In the same
business a 10% return is generally expected. The total
assets of the firm are Rs. 1,70,000. The value of other
liabilities is Rs. 60,000. What is the value of goodwill?
C.Rs. 40,000
29:Which one of the following is capital expenditure?
B.Purchase of a delivery van
30:EBIT /Total Assets Ratio is
B.Profitability Ratio
31:Which one in the following is least suited for measuring
return on investment?
C.Operating income ratio, Total assets turnover
32:The equation for the Debt equity ratio is
A.Long term Debt / Equity Capital
33:Which of the following accounting standards is not
mandatory in India?
A.Fixed assets accounting and revenue recognition
B.Inventory and depreciation accounting
C.Non-monetary assets and fixed assets
D.Monetary assets and depreciation accounting
Option: C
34:Which of the following is a type of efficiency ratio?
C.Working Capital turnover Ratio
35:Match List I (Transaction) with List II (Entry to be made)
and select the correct answer by using the codes given
below the list:
List-I List- II
1. Loss on realisation (a) Debits partner's capital A/C
2. Profit on realisation (b) Credit realisation A/C
3. Assets sold (c) Credit Partner's A/C
4. Creditors paid (d) Debit realisation A/C
A.1-a,2 - c,3 - b,4-d
36:Assertion (A). Companies are required to use Written
Down Value (WDV) method and the rates specified in
Schedule XIV to the Companies Act.
Reason (R). A change from WDV method of providing
depreciation to Straight Line Method (SLM) should be
made if it is considered that the change would result in a
more appropriate preparation or presentation of the
financial statements of the company.
B.Both A and R are true but R is not a correct explanation
of A.
37:Which of the following is a branch of Accounting?
A.Financial Accounting
B.Cost Accounting
C.Management Accounting
D.All of the aboveOption: D
38:Assertion (A). The fixed assets in the balance sheet of a
limited company are required to be shown at cost less
depreciation.
Reason (R). The balance sheet and profit and loss account
are to disclose a true and fair view.
A.Both A and R are true and R is the correct explanation of
A.
39:Which of the following statements are appropriate in
respect of partnership accounts?
1. In the absence of any provision in the partnership
agreement to the contrary, partners can charge interest as
6% per annum on loans given by them to the partnership
firm.
2. An ordinary partnership firm can have not more than 50
partners.
3. A banking partnership firm cannot have more than 10
partnership.
4. In the absence of any provision in the partnership
agreement to the contrary, profits and losses are shared by
the partners in the ratio of their capitals.
Select the correct answer using the codes given below:
C.1 and 3
40:Assertion (A). Performance ratios show where we are
going.
Reason (R). Balance sheet ratios show where we stand.
B.Both A and R are true but R is not a correct explanation
of A.
41:Match List-I with List-II and select the correct answer
using the codes given below the lists:
List-I List-II
a. Profit prior to incorporation I. Provisions
b. Proposed dividend II. Miscellaneous expenditure
c. Interest paid out of capital Ill. Current liabilities
d. Unclaimed dividend IV. Reserves and surplus
B.a b c d
IV I II III
42:Assercion (A). Securities premium amount can be
refunded in cash to equity shareholders for issuing fully
paid bonus shares to members.
Reason (R). Share premium is usually collected when the
market price of the shares is higher than the face value of
the share.
C.A is true but R is false
43:Profit and Loss Account is also called.
B.Income Statement
44:Which one of the following ratio is the indicator of the
long term solvency of the firm?
B.Debt equity ratio
45:Interest coverage Ratio is given by
C.Earning Before Interest and Tax / lnterest on Debt
46:The balance sheet is a __ of the assets, liabilities and
capital of a concern as on particular date.
A.Statement
47:If the change, because of a business transaction results
in the increase of fund then the transactions responsible
for such a change is said to be ____
C.source of fund
48:Match List I (Names of accounts) with List II (Points with
which the accounts are concerned) and select the correct
answer using the codes given below the lists:
List - I List - II
1. Partners current account (a) Dissolution of partnership
2. Goodwill account (b) Revaluation of assets on the
admission of a partner.
3. Partners drawings account (c) Fixed capitals of partners
4. Profit and Loss (d) Goods taken by partners for private
consumption
C.1- a, 2 - c, 3 - d, 4 -b Select the correct answer using the codes given below:
49:Which one of the following will be treated as revenue D.1,2,3,4 and 5
expenditure? 4:Which of the following profits are capital profits?
A.Cost incurred for a new exit as required under the local l. Profit prior to incorporation
bodies by laws 2. Premium received on issue of shares or debentures
50:Match list-I (Ratio) with List-II (Method of calculation) 3. Profit made on redemption of debentures
and select the correct answer using the codes given below 4. Profit set aside for redemption of preference shares.
the lists Select the correct answer using the codes given below:
List I List II D.1,2,3 and 4
l. Financial coverage a. Efficiency 5:According to guidelines issued by SEBI, a new company
2. Quick Ratio b. Profitability set up by entrepreneurs without a track record can issue
3. Stock Turnover Ratio c. Risk capital to public only
4. Margin on sales d. Liquidity A.At par
A.1 - c, 2 - d, 3 - a, 4 - b 6:Which of the following statements is not correct?
51:A balance sheet is D.The gift is not a restricted fund from the point of view of
C.Position statement organisation.
52:To test the liquidity of a concern which of the following 7:Any amount to be written off after the admission of a
ratios are useful? partner is transferred to the capital accounts of all partners
A.Acid test ratio in
53:Budgets can be classified according to B.New profit sharing ratio
A.Time 8:Capital profits can be distributed as dividend only if
B.Functions 1. The Articles of a company permit.
C.Flexibility 2. They are realised in cash
D.All of the above 3. The surplus remains after the revaluation of all assets
Option: D 4. The capital losses have been written off.
1:The major sources where from debentures can be Select the correct answer using the codes given below:
redeemed are D.1,2,3 and 4
1. Profits 9:According to the guidelines issued by SEBI, a company
2.Capital has to create Debenture Redemption Reserve equivalent
3. Provisions made for redemption to --- of the amount of debentures issue before
4. Conversion into shares or new debentures. redemption of debentures commences.
Select the correct answer using the codes given below: B.50%
D.1,2,3 and 4 10:Under the head 'current liabilities', the following items
2:General donations of relatively large amount is recorded are disclosed
on the 1. Sundry creditors
1. Income side of Income and Expenditure Account 2. Acceptances
2. Liabilities side of Balance Sheet 3. Unclaimed dividends
3. Receipts side of Receipts and Payments Account 4. Advance payments
Select the correct answer using the codes given below: 5. Subsidiary companies
B.2 and 3 The correct chronological order of their disclosure is
3:Amalgamation of firms takes place to A.2,1,5,4,3
1. Avoid competition 11:Which of the following provisions held for various
2. Reduce unnecessary advertisement expenditure assets should be transferred to the realisation account
3. Gain monopoly in the market upon dissolution of the firm?
4. Have more capital and skill 1. Provision for Discounts
5. To secure internal and external economies of scale. 2. Provision for Depreciation
3. Joint Life Policy Reserve
4. Contingency Reserve
5. Investment Fluctuation Fund
Select the correct answer using the codes given below
D.1,2,3,4 and 5
12:Consider the following statements:
1. A private company can commence business after getting
the certificate of incorporation from the Registrar of
Companies.
2. The quorum for a meeting of a private company is three
3. Private limited company cannot pay managerial
remuneration in any financial year more than 11 % of the
net profits of the company.
Which of the above statements are correct?
A.Only 1
13:Which of the following statements distinguishing
between a company's balance sheet and a firm's balance
sheet is correct?
A.A company's balance sheet is prepared in the order of
permanence whereas a partnership firm's balance sheet is
usually, prepared in order of liquidity.
B.For a company's balance sheet, there are two standard
forms prescribed under the Companies Act, 1956 whereas,
there is no standard form prescribed under the Indian
Partnership Act. 1932 for a partnership firm's balance
sheet.
C.In case of a company's balance sheet, previous year's
figures are required to be given, whereas, it is not so in the
case of a partnership firm's balance sheet.
D.All of the above Option: D
14:Indicate the item that appears below the line in the
Profit and Loss Account
A.Proposed Dividend
15:Which of the following reserves can be utilised only for
issuing fully paid bonus shares and not for making partly
paid shares fully paid shares?
l. Dividend equalisation reserve
2. Capital reserve arising from profit on sale of fixed assets
received in cash
3. Capital redemption reserve account created at the time
of redemption of redeemable preference shares out of the
profits.
4. Securities premium collected in cash only.
Select the correct answer using the codes given below:
D.3 and 4
16:Which of the following statements is not correct?
D.None of the above
17:GAAP stands for?
A.Generally Accepted Accounting Principles
18:Under the head 'Provisions', in the balance sheet of a
company, the following provisions made for, are to be
disclosed:
1. Proposed dividends
2. Provision for taxation
3. For contingencies
4. For provident fund scheme
5. For insurance, pension and similar staff benefit schemes
The correct chronological order of their disclosure is
C.2,1,3,4,5
19:Which of the following reserves cannot be utilised for
making the partly paid up shares fully paid up?
1. Capital Redemption Reserve Account
2. Securities Premium Account
3. Plant Revaluation Reserve
Select the correct answer using the codes given b elow:
D.1,2 and 3
20:A firm is compulsorily dissolved when
1. All the partners except one become is insolvent.
2. The business becomes illegal
3. All the partners become insolvent.
Select the correct answer using the codes given below:
D.1,2 and 3
21:Capital bonus is given
A.By making partly paid shares as fully paid without getting
cash from the shareholders
B.By the issue of free fully paid shares known as bonus
shares
C.By cash payment to shareholders
D.Both (A) and (B)Option: D
22:x and Yare partners sharing profits and losses in the
proportion of 7 : 5. They agree to admit Z into partnership
who is to get 1/6th share in profits. He acquires this share
as 1/24 from X and 1/8th from Y. Calculate new profit
sharing ratio.
A.13:7:4
23:Which of the following statements is not correct?
A.Realisation A/c is a real account
24:Change in the constitution of the firm may be due to
1.The admission of a new partner
2. The retirement of a partner
3. The death of a partner
Select the correct answer using the codes given below:
D.1,2 and 3
25:Which of the following reserves are free reserves that
can be used for issue of bonus shares?
l. Surplus in profit and loss account
2. General reserve
3. Capital reserve arising due to revaluation of assets.
4. Dividend equalisation reserve
5. Securities premium collected in cash only
6. Securities premium arising on issue of shares on
amalgamation or take over.
Select the correct answer using the codes given below:
A.1,2 4 and 5
26:Assets and liabilities are revalued at the time of
admission of a new partner because
A.The new partner should not be benefitted from any
appreciation in the value of assets.
B.The new partner should not suffer because of any
depreciation in the value of assets.
C.The new partner should not benefit from any diminution
in liabilities or suffer from any appreciation in liabilities.
D.All of the aboveOption: D
27:According to section ---- of the Indian Partnership Act,
1932, dissolution of partnership between all the partners
of a firm is called the 'dissolution of the firm'.
C.39
28:All the fully paid up shares of a company may be
converted into stock if so authorised by the ----- of a
company.
A.Articles of Association
29:As per SEBI's guidelines, an existing company is free to
price its issue, if it has a
B.Three years track record of consistent profitability
30:The listed companies are allowed to pay brokerage on
private placement of capital at the maximum rate of
C.1.5%
31:The dissolution of partnership takes place in the
following cases
1. On the expiry of the period of partnership if constituted
for a fixed period.
2. On completion of a venture if constituted to carry out a
venture.
3. On death of a partner.
4. On adjudication of a partner as an insolvent.
Select the correct answer using the codes given below:
C.1,2,3 and 4
32:Premium received on issue of shares shall be credited
to a separate account called
A.Share premium account
33:Company may pay dividend on advance calls, if it is
authorised by the
B.Articles of Association
34:Which of the following is not a type of a share?
A.Debenture
35:Profit from the date of ------ to the date of __ is called as
profit prior to incorporation.
B.Purchase, incorporation
36:The power to forfeit shares must be provided in the
A.Articles of Association of the company as the Companies
Act does not contain any provision regarding forfeiture of
shares.
37:Income and Expenditure Account is prepared in non-
trading concerns in lieu of
B.Profit and loss account
38:Which of the following statements about goodwill is not
correct?
C.It becomes obsolete
39:Public limited companies cannot issue
B.Defered shares
40:If forfeited shares are reissued at a discount then the
amount of discount should not exceed the
D.Total amount of (A) and (B).
41:According to the decision in Garner vs. Murray, in the
absence of any agreement to the contrary, the deficiency
of the insolvent partner must be borne by other solvent
partners in proportion to
D.Capital which stood before dissolution of the firm.
42:When goodwll is received in cash and retained in the
business upon admission of a new partner the old partners'
capital accounts are credited in the
D.Sacrificing ratio
43:Receipts and payments account of non-trading
concerns is a
B.Real Account
44:Right shares can be issued at any time after the expiry
of
A.Two years from the formation of a company
B.One year from the first allotment of shares in the
company
C.(A) or (B) whichever is earlier.
Option: C
45:Income and Expenditure Account is prepared on the
basis of
B.Mercantile system of accountancy
46:Which one of the following statements is correct?
A.A decrease in current liabilities causes an increase in the
working capital
47:Which of the following statements is not correct?
B.Dissolution of partnership involves complete break-down
of relations among all the partners.
48:As per SEBI's guidelines underwriting is
D.Mandatory
49:According to the Companies Act, 1956 a private
company means a company which by its Articles
1. Restricts the right to transfer its shares, if any
2. Limits the number of its members to 50.
3. Prohibits invitation to the public to subscribe for any
shares in or debentures of, the company.
4. Private companies do not involve participation of public
in general.
Select the correct answer using the codes given below:
D.1,2,3 and 4
50:Advantages of Budgetary control include
A.Maximization of Profit
B.Reduces Cost
C.Corrective Action
D.All of the aboveOption: D
51:Which of the following statements is not correct?
D.A shareholder can incur any debt so as to bind the
company.
52:Which of the following statements is correct?
B.Redemption of preference shares cannot be made out of
the fresh issue of debentures.
1:Accounting ratios can be expressed in the following
forms:
1 Pure number
2. Percentage
3. Times
4. Fraction
Select the correct answer using the codes given below
D.1,2,3 and 4
2:The firm is said to be more geared, if equity capital is
more than the debentures and -------
A.Preference share capital
B.Loan
C.Both (a) +(b)
Option: C Capital Gearing Ratio = (Equity Share Capital ) /
(Preference Share Capital + Debentures + Loans)
3:Which of the following items is considered as a revenue
expenditure?
D.Changing a small component of a machine to maintain
its operating efficiency.
4:The basis adopted for piecemeal distribution of cash
among the partners should be such that amounts finally
left unpaid are in the ratio in which
B.Profits and losses are shared
5:A company can buy-back its own shares out of
1 Free reserves
2 Securities premium account
3. Proceeds of any shares
Select the correct answer using the codes given below:
D.1, 2 and 3
6:The fund as used in funds flow statement means
D.Current assets minus current liabilities
7:Consider the following statements with respect to the
sinking-fund method of depreciation
1. Depreciation is smaller than the assets annual
depreciable cost.
2. Amount of interest constantly declines due to assets
reducing balance.
3. Annual net incidence on profit and loss account remains
constant due to changing fixed depreciation.
4. Periodic depreciation is recorded through the asset
account.
Which of the above statements are correct?
B.1 and 3
8:Consider the following statements:
1. Operational loss is a source of funds.
2.Decrease in working capital is a source of funds.
3. Additions to fixed assets are an application of funds.
4. Fresh introduction of c3pital is an application of funds.
Which of the above statements are applicable while
preparing the funds flow statement?
C.2 and 3
9:Financial statements are aflected by
1 Recorded facts
2. Accounting conventions
3. Personal judgements
Select the correct answer using the codes given below:
D.1,2 and 3
10:Operating profit ratio may be calculated by
1. 100 - Operating ratio
2. (Operating profit / Net Sales) x 100
3. ((Cost of goods sold -Cost of operation)/Sales) x 100
Select the correct answer using the codes given below:
A.1 and 2
11:Proprietary ratio indicates the relationship between
proprietor's funds and __ .
B.Total assets
12:For the purpose of analysing change in financial
position, enterprises prepare
B.Cash flow statement and Funds flow statement
13:Ratios may be classified as
1 Profitability ratios
2. Coverage ratios
3. Turnover ratios
4. Financial ratios
5. Leverage ratios
Select the correct answer using the codes given below:
D.1,2,3,4 and 5
14:Legal cost incurred in case of disputed land and building
is classified as
B.Investing activity
15:Match List-I with List-II and select the correct answer
using the codes given below the lists:
List-I (Transactions) List-II (Impact on current ratio)
a. Goods sold at profit I. Improvement
b. Creditors paid II. Deterioration
c. Debts realised III. No change
d . Materials purchased on credit.
C.a b c d
I I III II
16:Which of the following is a capital expenditure?
B.Interest on borrowings during the period of construction
of works
17:Cost of goods sold equals
A.Opening stock + Purchases + Direct expenses +
Manufacturing expenses - Closing stock
B.Sales - Net Profit
C.Sales - Gross Profit
D.Both (A) and (C)Option: D
18:Match List-I with List-II and select the correct answer
using the codes given below the lists:
List-I List-II
a. Current Ratio I. Sufficiency of EBIT to cover interest
charges
b. Debt-Equity Ratio II. Short-term solvency
c. Net Profit Margin Ratio Ill. Exposure to financial risk
d. Interest Coverage Ratio IV. Earnings left for
shareholders.
D.a b c d
II III IV I
19:Which of the following cash flows is not a cash flow
from operating activity?
D.Payment of dividend.
20:Consider the following statement:
A low inventory turnover may be the result of
1. Obsolescence of some of the stock
2. Slow-moving inventory
3. Frequent stock-outs
4. Fast-moving inventory
Which of the above statement(s) is/are correct?
A.1 and 2
21:Accounting is generally understood as
1. Summarisation of business transactions.
2. Language of the business
3. Source of business information
4. Means of communication.
Select the correct answer using the codes given below:
D.1,2,3 and 4
22:Which of the following statements is correct
A.Whenever there is inflow of cash there will definitely be
inflow of funds though reverse is not true.
23:Cash flows denominated in foreign currency are
reported in a manner consistent with
C.AS-11
24:When prices show a rising trend, which of the following
methods of inventory valuation will result in lower income
and lower valuation of inventory?
B.LIFO
25:In case of disclosure of accounting policies, the
following fundamental accounting assumptions may not be
required to be stated if they are followed in the
preparation of final accounts of a company
1. Materiality and accounting period
2. Going concern and consistency
3. Accrual basis of accounting
4. Conservatism and accounting period
Select the correct answer using the codes given below:
B.1 and 4
26:Which of the following pairs is not correctly matched?
C.Accrual concept: Recognising revenue on receipt of cash
27:Match List-I with List-II and select the correct answer
using the codes given below the lists:
List-I List-II
a. Leverage Ratio I. Short-term solvency
b. Liquidity Ratio II. Earning capacity
c. Turn-over Ratio III . Relationship of Debt and Equity
d. Profitability Ratio IV. Efficiency of Assets Management
D.a b c d
III I IV II
28:Capital employed equals
1. Fixed Assets + Working Capital
2. Long-term debt + Share Capital + Reserves & Surplus -
Fictitious Assets - Non-business Assets
3. Tangible Fixed and Intangible Assets + Current Assets -
Current liabilities
Select the correct answer using the codes given below:
D.1,2 and 3
29:Which of the following is a type of responsibility centre?
A.Cost or Expense Centre
B.Profit Centre
C.Investment Centre
D.All of the above Option: D
30:Amount of premium on issue of shares is decided by the
__ as per the guidelines issued by SEBI
B.Board of Directors
31:There should be a provision in the __ of the company
for capitalisation of reserves.
A.Articles of Association
32:The cash flow associated with extraordinary items
should be classified as arising from
A.Operating activities
B.Investing activities
C.Financing activities
D.All of the above Option: D
33:If depreciation is calculated on the basis of the formula,
(n (n + 1))/2 , then which of the following methods is
adopted?
C.Sum of years digits method
34:The issue of sweat equity shares is authorised by a
special resolution passed by the company in the
A.General meeting
35:SEBI guidelines require that bonus shares should not
dilute the rights of the holders of debentures, convertible
fully or partly. Bonus shares reserved to be issued at the
time of conversion become part of
C.Potential equity shares
36:For piecemeal distribution of cash for return of capital
among the partners on dissolution, the method adopted
should ensure that the amount finally left unpaid i.e., the
loss to be borne by the partners is in
A.Profit-sharing ratio
37:The current ratio of a company is 2 : 1. Which of the
following suggestions would not change it?
C.Purchase of fixed assets
38:Under the head 'provisions' in the balance sheet of a
limited company, the following provisions made for, are to
be disclosed
1. Proposed dividend
2. Provident Fund schemes
3. Pension and other staff-benefit schemes
4. Taxation
The correct chronological order of their disclosure is
C.4,1,2,3
39:Which accounting standard deals with Earning per
share?
D.AS-20
40:A low stock turnover ratio is not desirable because it
reveals the
1. Accumulation of obsolete stock
2. Carrying of too much stock
3. High cost of goods sold
Select the correct answer using the codes given pelow :
C.1 and 3
41:In the case of a particular depreciation method, the
periodic depreciation is smaller than the asset's actual
annual depreciation cost. The annual net incidence on
profit and loss account remains constant due to
incorporation of only fixed depreciation. The periodic
depreciation is not recorded through the asset account.
The depreciation method used in this case is
A.Sinking fund method
42:When it is not registered, a partnership firm is
C.Allowed to carryon business subject to certain disabilities
43:Consider the following ratios:
1. Acid test ratio
2. Capital turnover ratio
3. Bad debts to sales ratio
4. Inventory turnover ratio
Which of these ratios are more appropriate for testing the
liquidity of a concern?
B.1 and 4
44:The current ratio of a company is 2 : 1. Which of the
following suggestions would reduce it?
C.To borrow from money for a short time on an interest Fixed cost Rs.30,000
bearing promissory note Based on these data, the operating leverage shall be
45:The ratios which measure the relative contribution of B.7
financing by owners and financing provided by outsiders 52:The following four assets normally appear in the
are called balance sheet
B.Leverage ratios 1. Advance salary
46:With regard to the rate of return on investment (ROI), 2. Copyright
which of the following statements is not valid? 3. Preliminary expenses
C.It is a superior measure compared to the cash flow 4. Loose tools
generated per share. The correct order in which these are to appear in the
47:Match List-I with List-II and select the correct answer balance sheet if drawn in order of permanency will be
using the codes given below the lists: D.2,4,1,3
List-I List-II 53:Match List-I with List-II and select the correct answer
a. Current assets ÷ Current liabilities I. Performance of using the codes given below the lists:
equity capital List-I List-II
b. Fixed assets ÷ Long-term funds II Short-term solvency a. Reducing capital I. Contribution margin
c. Debt ÷ Equity Ill. Capital Structure b. Sales> Variable cost II. Reorganization
d. Earnings after interest and taxes ÷ Number IV. Overall c. Sales> Break even sales III. Absorption
Performance d. Take-over of firm IV. Margin of safety
of shares issued V. Long-term solvency D.a b c d
A.a b c d II I IV III
II V III IV
48:A company with a paid up capital of 5000 equity shares
of Rs. 10 each has a turnover of four times with a margin of
8% on sales. The ROI of the company will be
B.32%
49:Comparison of financial variables of a business
enterprise over a period of time is called
A.Intra-firm analysis
50:What is the correct sequence of the following items of
current assets in the balance sheet of a company as per the
Companies Act, 1956?
1. Cash balance in hand
2. Interest accrued on investments
3. Stores and spare parts
4. Loose tools
5. Sundry debtors
6. Stock-in-trade
7. Work-in-progress
Select the correct answer using the codes given below:
D.2,3,4,6,7,5,1

51:Consider the particulars given below:

Sales Rs.60,000
Variable cost Rs.25,000