COMMON PROFICIENCY TEST More Practice Paper May 2011

ACCOUNTS
Q1. Purpose of an accounting system include all the following except (a) Interpret and record the effects of business transaction. (b) Classify the effects of transactions to facilitate the preparation of reports. (c) Summarize and communicate information to decision makers. (d) Specifies the types of business transactions that enterprises may engage in. Conservatism Concept recommends the following? (a) Provision for doubtful debts and discount on debtors should be made on the basis of actual bad debts and discount. (b) The stock-in-trade should be valued at market price or cost price whichever is less. (c) Small capital items, like crockery should be charged to revenue. (d) All of the above. Current (a) (b) (c) (d) assets are Assets from which long term benefits are to be derived. Long-term and short-term assets. Cash-in-hand and short-term assets which can be converted into cash within one year. Assets which are currently used in the business.

Q2.

Q3.

Q4. Sale of goods to Mohan for cash should be debited to (a) Mohan's Account (b) Cash Account (c) Sales Account (d) None of these Q5. X Ltd. has Rs.4,500 account receivable from Mr. A. On March 15, Mr. B makes a partial payment of Rs.2,100 on behalf of Mr. A to X Ltd. The journal entry made on March 15 by X Ltd. to record this transaction includes: (a) A credit to the Accounts receivable account of Rs.2,100. (b) A credit to the cash received account of Rs.2,100. (c) A debit to the cash account of Rs.l,400. (d) A debit to the Accounts receivable account of Rs.l,400.

Q6. Mr. X has assets of Rs.7,00,000 and liabilities of Rs.80,000. Owner's equity in this case is: (a) Rs. 7, 80,000. (b) Rs. 7, 00,000. (c) Rs. 6, 20,000. (d) Rs. 80,000. Q7. In which book of original entry will you record, a bills receivable of Rs. 3,000, which was received from a debtor in full settlement of his claim of Rs. 3,100, is dishonoured? (a) Purchase Book (b) Cash Book (c) Journal Proper (d) Sales Book When the debit balance as per cash book is the starting point, cheques issued but not presented to bank will be: (a) Added (b) Subtracted (c) Neither of the two (d) Not required to be adjusted

Q8.

Q9. When the overdraft balance of the pass book is the starting point, cheques deposited but not cleared will be: (a) Added (b) Subtracted (c) Neither of the two (d) Not required to be adjusted Q10. When favourable balance as per cash book is the starting point, expenses directly paid by bank will be _____ to get the balance as per the Cash Book: (a) Added (b) Subtracted (c) Neither of the two (d) Not required to be adjusted

Q11. Valuation (a) (b) (c) (d)

of inventory is dealt with in AS-5 AS-2 AS-3 AS-4

Q12. Cost of inventories includes (a) Direct Material + Direct Expenses (b) Direct Labour + Trade Expenses (c) All costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. (d) Direct material only. Q13. When prices are falling which of the following method of inventory valuation will give conservative figure of Gross profit? (a) LIFO (b) FIFO (c) Weighted average (d) Specific identification method Q14. Depreciation fund method is designed to: (a) Only provide for depreciation of an asset (b) Provide for depreciation as also to accumulate the amount for its replacement (c) Only to save tax. (d) To accumulate the amount of its replacement Q15. A Ltd. Company acquired furniture for Rs. 40,000 with an expected useful life of five years and Rs. 2,000 expected residual value. Straight line method of depreciation was used. The equipment was sold at the end of fourth year for Rs. 15,000. The gain or loss on sale will be (a) Rs. 13,000 (loss) (b) Rs. 7,600 (gain) (c) Rs. 5,400 (gain) (d) None of the above Q16. A machinery was purchased for Rs. 50,000. The machinery was depreciated @ 20% p.a. on WDV basis for 3 years. If the machinery is sold at a value of Rs. 25,000, the profit and loss account will be debited/ credited by (a) Rs, 600 (Credit) (b) Rs. 5,000 (Credit) (c) Rs. 1,000 (Debit) (d) Rs.600 (Credit)

Q17.

Cost of a machinery purchased on 1stApril, 2008 is Rs.50,000.Depreciation is to be provided at the rate of 15% p.a. on SLM .The machinery was sold on 31st December, 2008 for Rs.35,000.Which of the statement given below is correct? (a) Loss on sale of machinery is Rs.9,450 (b) Loss on sale of machinery is Rs.9,375 (c) Depreciation to be provided for the year 2008-09 is Rs.5,625. (d) Both (b) & (c) Salary (a) (b) (c) (d) to factory workers will come in: Profit & loss account Trading account Manufacturing account Both (b) and (c)

Q18.

Q19.

The importance of preparing a balance sheet is all of the following except? (a) To ascertain sources and uses of funds (b) To ascertain proprietary ratio (c) To ascertain net distributable profit (d) To ascertain the financial position of an enterprise The gain on sale of old machinery is credited to: (a) Old machinery account (b) Trading account (c) Profit and loss account (d) Both (a) and (c)

Q20.

Answer keyA1. A2. A3. A4. A5. A6. A7. A8. A9. A10. A11. A12. A13. A14. A15. A16. A17. A18. A19. A20. D D C B A C C A B B B C B B C D B C C C