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 INDEX

CH.NO. CHAPTER NAME PAGE NO.

1 Introduction to Financial Accounting 1.1 – 1.34
2 Introduction to Corporate Accounting 2.1 – 2.8
3 Accounting for Share Capital 3.1 – 3.29
4 Accounting for Debentures 4.1 – 4.12
5 Related Aspects of Company Accounts 5.1 – 5.8
6 Financial Statements Interpretation 6.1 – 6.6
7 Consolidate of Accounts as per Companies Act, 2013 7.1 – 7.13
8 Corporate Financial Reporting 8.1 – 8.8
9 Cash Flow Statement 9.1 – 9.14
10 Accounting Standards (AS) 10.1 – 10.17
11 National and International Accounting Authorities 11.1 – 11.3
Adoption, Convergence and Interpretation of International
12 12.1 – 12.5
Financial Reporting Standards
Cost Accounting Records and Cost Audit Under Companies
13 13.1 – 13.6
Act, 2013
14 Budget, Budgeting and Budgetary Control 14.1 – 14.7
15 Ratio Analysis 15.1 – 15.13
16 Management Reporting (Management Information System) 16.1 – 16.2
17 Decision Making Tools 17.1 – 17.10
18 Valuation, Principles and Framework 18.1 – 18.5
19 Valuation of Shares, Business and Intangible Assets 19.1 – 19.10
20 Indian Accounting Standards (Ind AS) 102 20.1 – 20.2
21 Method of Valuation 21.1 – 21.3
INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY

1 INTRODUCTION TO FINANCIAL ACCOUNTING

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. The convention that states that the accounting practice should be followed consistently
over the years.
(a) Consistency (b) Conservation
(b) Materiality (d) Disclosure

2. Claims against the company not acknowledged as debts are:

(a) Contingent liability (b) Current liability
(c) Secured loan (d) Unsecured loan

3. A concern maintains a petty cash book under the imprest system. The imprest amount
is ` 250. At the beginning of a week the petty cash book has a debit balance of ` 27.
Amount needed to restore the imprest is
(a) ` 250 (b) ` 227 (c) ` 27 (d) ` 223

4. A petty cash account has an imprest of ` 250. Currently the account has debit balance
of ` 30 cash needed to restore the imprest is
(a) 30 (b) 220 (c) 250 (d) 280

5. Conservatism concept does not require

(a) Making provision for doubtful debts
(b) Valuing stock at lower of cost or net realizable value
(c) Creating provision for discount on creditors
(d) Making provision for an unfavourable legal suit.

6. As per duality concept or accounting equivalence concept, which of the following is

correct?
(a) All increase in liabilities and increase in assets represent sources of funds.
(b) All the decrease in liabilities and decrease in assets represent sources of funds.
(c) All increase in liabilities and decrease in assets represent sources of funds.
(d) All increases in liabilities and increase in assets represent uses of funds.

7. The petty cash is kept on the imprest system and the balance at the start of the month
is ` 300 if petty cash expenses during the month of ` 270 are incurred, the amount
received from the cashier at the start of the next month should be
(a) ` 30 (b) ` 270 (c) ` 300 (d) ` 570

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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
8. Recording of Fixed Assets at cost ensures adherence of
(a) Conservation Concept (b) Going Concern Concept
(c) Cost Concept (d) Both (a) and (b) above

9. Human resources will not appear in the balance sheet according to …… concept.
(a) Accrual (b) Going concern
(c) Money measurement concept (d) None

10. The main purpose of petty cash is

(a) to pay employees’ wages (b) to pay suppliers for their goods
(c) to provide change for the till (d) to pay small day to day business expenses

11. „B Limited purchased goods of ` 10,00,000, and sold 90% of goods and remaining
goods market value is ` 90,000, and closing stock is 105, but he recorded ` 90,000 and
not ` 1,00,000. Which concept does he follows:
(a) Materiality concept (b) Cost concept
(c) Entity concept (d) Conservatism concept

12. Under the imprest system the petty cash is

(a) Increased every week
(b) reduced every week
(c) Always restored to the original amount
(d) Used up completely before being restored

13. Assets are held in the business for the purpose of:
(a) Re-sale (b) Conversion into cash
(c) Earning reverse (d) None of the above

14. It is essential to standardize the accounting principles and policies in order to insure:
(a) Transparency (b) Consistency
(c) Comparability (d) All of the above

15. In the financial statement, contingent liability is:

(a) Recognized (b) Not Recognized
(c) Adjusted (d) None of the above

16. Rohan purchased goods for ` 25,00,000 and sold 4/5th of the goods amounting `
18,00,000 and met expenses amounting ` 2,50,000 during the year, 2013. He counted
net profit as ` 3,50,000 which accounting concept was followed by him?
(a) Entity (b) Periodicity (c) Matching (d) Conservation

17. The determination of expenses for an accounting period is based on the principle of:
(a) Objectivity (b) Materiality (c) Matching (d) Periodicity

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18. The concept of Conservation in balance sheet results in:
(a) Increase in cash (b) Decrease in cash
(c) Decrease in assets (d) No change in assets

19. An analytical petty cash book

(a) lists different petty cash expenses under their relevant headings.
(b) is used instead of a three column cash book.
(c) is not part of the double entry system.
(d) is always run on the imprest system.

20. A petty cash book is usually maintained by

(a) small traders (b) big business houses
(c) all business houses – big and small (d) all of the above

21. Which of the following is not a contingent liability?

(a) Claims against the company not acknowledged as debts
(b) Debts included on debtors which are doubtful in nature
(c) Uncalled liability on partly paid shares
(d) Arrears of cumulative fixed dividends

22. A petty cash book records

(a) receipts and payments of small amounts
(b) only small payments
(c) only small expenses
(d) small expenses and income

23. The concept of conservatism will have the effect off:

(a) Overstatement of Assets (b) Understatement of Assets
(c) Overstatement of Liabilities (d) Understatement of Liabilities

24. The balance of petty cash book represents

(a) petty expenses (b) profit
(c) petty cash in hand (d) none of these

25. Accounting is a / an ……
(a) Science (b) Art
(c) Subject matter of sociology (d) Subject matter philosophy

26. Accounting does not record non-financial transactions because of …..

(a) entity concept (b) accrual concept
(b) measurement concept (d) going concept

27. The determination of expenses for an accounting period is based on the concept of
(a) Objectivity (b) Materiality
(c) Matching (d) Periodicity

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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
28. Decrease in the amount of creditors results in
(a) increase in cash (b) decrease in cash
(c) increase in assets (d) no change in assets

29. Accounting does not recorded non-financial transactions because of

(a) Entity Concept (b) Accrual Concept
(c) Cost Concept (d) Money Measurement Concept

30. Which of the following transactions will be entered in the journal proper?
(a) purchase of furniture for resale
(b) sale of old office equipment for cash
(c) recovery of a debit previously written off as bad
(d) return of machinery previously purchased for use in the business

31. Which one of the following character is not related to Financial Accounting?
(a) Evaluates the financial strength of the whole business.
(b) Based on monetary transactions of the enterprise.
(c) Reports are always subject to statutory audit.
(d) Reports are as per requirement of management.

32. Which one of the following equation is correct?

(a) Owner’s Equity = Liability + Asset
(b) Owner’s Equity = Asset Liability
(c) Liability = Owner’s Equity + Asset
(d) Asset = Owner’s Equity Liability

33. Returns Inward Book is used to record

(a) Returns of goods previously sold
(b) Returns of goods previously purchased
(c) Returns of fixed assets previously purchased
(d) Returns of fixed assets previously sold

34. Accounting does not record non-financial transactions because of

(a) Entity concept (b) Accrual concept
(c) Cost concept (d) Money measurement concept

35. Returns Inward Book is used to record

(a) Returns of goods previously sold
(b) Returns of goods previously purchased
(c) Returns of fixed assets previously purchased
(d) Returns of fixed assets previously sold

36. Sales Day Book is used to record

(a) all sales (b) all credit sales
(c) all credit sales of goods (d) all credit of assets

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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
37. Purchase Day Book is used to record
(a) all purchases (b) all credit purchases
(c) all credit purchases of goods (d) all credit purchases of assets

38. Gopal Bros, have purchased a filling cabinet for office use, from Office Supplies Ltd.
paying immediately by cash. This transaction will be entered in the
(a) journal proper (b) purchase day book
(c) cash book (d) none of the above

39. Accounting cycle ends with preparation of …….

(a) the journal / ledger (b) the trial balance
(c) the financial statement (d) the closing entries record

40. The credit purchases of fixed assets are recorded in

(a) Purchase Book (b) Cash Book
(c) Journal Proper (d) Sales Return Book

41. The total of discount column on the debit side of the Cash Book, is posted to the
(a) Credit of the discount allowed account
(b) Debit of the discount received account
(c) Credit of the discount received account
(d) Debit of the discount allowed account

42. The Trial Balance checks:

(a) Arithmetical Mistake (b) Honesty of the book keeper
(c) Valuation of Closing Stock (d) Nature of the business

43. Cash sales at exhibition hall are:

(a) Recorded in Journal Proper (b) Recorded in Cash Book
(c) Recorded in Sales Book (d) Not recorded

44.A Capital Reserve is built out of

(a) Recurring profits (b) Non-recurring profits
(c) Revenue (d) Reserve Fund

45. Wages paid for installation of assets should be debited to

(a) Wages A/c (b) Assets A/c
(c) Trading A/c (d) P & L A/c

46. Revenue Reserves are built out of

(a) Recurring profit (b) Non recurring profit
(c) Capital Reserve (d) None of the above

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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
47.A transaction affects three accounts, one account is debited by ` 7,500, another account
is credited by ` 9,000. Third account will be
(a) Credited by ` 7,500 (b) Debited by ` 9,000
(c) Credited by ` 1,500 (d) Debited by ` 1,500

48. Ravi who was a creditor for ` 47,000, his account was settled for 145,850. At the time of
settlement, Ravi‟s account would be debited by
(a) ` 45,850 (b) ` 47,000
(b) ` 1,150 (d) ` None of the above

49. Which of the following is a transaction of contra entry?

(a) Purchased goods from X ` 10,000
(b) Cash deposited into Bank 115,000
(c) Paid to Y 4,800 in full settlement of ` 5,000
(d) Shop rent of ` 6,000, paid by cheque

50. Which of the following is not a business transaction?

(a) Rent paid to Landlord ` 5,000
(b) Goods purchased from Z ` 20,000
(c) Placed an order to Chandra & Co. for purchasing the goods for ` 35,000
(d) Received interest from Bank ` 2,000

51. Cash column of cash book can never have

(a) Credit balance (b) Debit balance
(c) Zero balance (d) None of the above

52. Interest paid on loan taken for purchase of asset should be debited to
(a) Interest A/c (b) Asset A/c
(c) Profit and Loss A/c (d) Trading A/c

53. Identify Personal Account from the following:

(a) Furniture A/c (b) Bank of India A/c
(b) Rent A/c (d) Investment A/c

54. Compound journal entry contains

(a) More than one debit entry only
(b) More than one credit entry only
(c) More than one debit entry or more than one credit entry or both
(d) No Narration

55. Which one of the equation is correct

(a) Total Assets Liabilities = Capital Profit
(b) Total Assets Liabilities = Capital + Profit
(c) Total Assets + Profit = Capital + Liabilities
(d) Total Assets + Liabilities = Capital Profit

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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
56. Journal is a
(a) Memorandum record (b) Secondary record
(c) Primary record (d) None of the above

57. Which is the correct, if cash sales of ` 2,000 is omitted to be recorded in cash sales
account?
(a) Debit amount in trial balance has been increased by ` 2,000
(b) Debit amount in trial balance has been increased by ` 4,000
(c) Credit amount in trial balance has been increased by ` 2,000
(d) Credit amount in trial balance has been increased by ` 4,000

58. How is the “distribution of goods as free sample” recorded in the Journal?

Debit Credit
ding Account es Account
vertisement Account fit and Loss Account
chase Account vertisement Account
vertisement Account chase Account

59. Which is the correct equation as per the double entry concept?
(a) Liabilities = capital + assets (b) Assets + liabilities = capital
(c) Capital = assets liabilities (d) Assets = capital liabilities

60. Which of the following is not a personal account?

(a) Capital account (b) Pre-paid rent account
(c) Salary account (d) Interest outstanding account

61. From the following, which is not considered as subsidiary book?

(a) Bills Receivable Book (b) Bills Payable Book
(c) Journal Proper (d) Cash Book

62. Journal is a
(a) Memorandum Record (b) Primary Record
(c) Secondary Record (d) All of the above

63. Ledger is also called

(a) Principal book of accounts (b) Cash books
(c) Subsidiary book (d) None of these

64. The process of balancing of an account involves equalization of both sides of the
account. If the debit side of an account exceeds the credit side, the difference is put on
the credit side. The said balance is:
(I) A Debit balance (II) A Credit balance
(III) An expenditure or an Asset (IV) An Income or a Liability

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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
(a) Only (II) above (b) Only (IV) above
(c) Both (I) and (III) above (d) Both (II) and (III) above

65. Credit sale is recorded in:

(a) Sales Book (b) Sales Account
(c) Creditor (d) None

66. If wages are paid for construction of business premises ……A/c is credited and …….
A/c is debited.
(a) Wages, Cash (b) Premises, Cash
(c) Cash, Wages (d) Cash, Premises

67. Which of the following is not a Real Account?

(a) Cash A/c (b) Investment A/c
(c) Outstanding A/c (d) Purchases A/c

68. What is the principle of nominal A/c?

(a) Debit what comes in, credit what goes out.
(b) Debit all expenses & losses & credit all incomes & gains.
(c) Debit the receiver, credit the giver.
(d) Debit all assets, credit all liabilities.

69. Debit notes issued are used to prepare …..

(a) Sales Returns Book (b) Purchase Return Book
(c) Journal Proper (d) Purchases Book

70. The ……. in a ledger helps in locating the accounts contained in it:
(a) Folio (b) Pages
(c) Serial Number (d) None of these

71. Purchase of goods on credit:

(a) Increases Liabilities (b) Increases Assets
(c) Increases both Assets and Liabilities (d) Decreases Assets

72. An Investment is one asset A/c may lead to:

(a) Increase in Liability A/c (b) Decrease in A/c asset
(c) Either (a) or (b) (d) Both (a) and (b)

73. In an account if Debit side > Credit side, the balance is known as the:
(a) Negative Balance (b) Debit Balance
(c) Positive Balance (d) Credit Balance

74. Which of these transactions will not be recorded in cash book:

(a) Cash received from debtors (b) Cash paid to creditors
(c) Salary remained outstanding (d) Cash deposited with bank

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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
75. Revenue is generally recognized as being earned at that point of time when:
(a) Sale is effected (b) Cash is received
(c) Production is completed (d) Debts are collected

76.A customer returning the goods purchased on credit, may inform the seller by sending:
(a) Debit Note (b) Credit Note
(c) Court Notice (d) Return Invoice

77. Sales of office furniture should be credited to:

(a) Sales Account (b) Furniture Account
(c) Purchase Account (d) Cash Account

78. Sale or Return Day Book and Sale or ledger Return Ledger are known as:
(a) Principal books (b) Subsidiary books
(c) Memorandum book (d) None of the above

79. ` 1,000 paid as wages for erecting machine should be debited to:
(a) Repair account (b) Machine account
(c) Capital account (d) Furniture account

80. The process of balancing of an account involves equalization of both sides of the
account. If the debit side of an account exceeds the credit side the difference is put on
the credit side. The said balance is:
(I) A debit balance
(II) A credit balance
(III) An expenditure or an asset
(IV) An income or a liability
(a) Only (II) above (b) Only (IV) above
(c) Both (I) and (II) above (d) both (II) and (III) above

81. Which of the following is an example of Personal Account?

(a) Machinery (b) Rent (c) Cash (d) Creditor

82. Which of the following is not a financial statement?

(a) Profit and loss account (b) Balance sheet
(c) Funds flow statement (d) Trial Balance

83. Which English alphabet is similar to the shape of an account?

(a) I (b) T
(c) H (d) None of the above

84. Which column of Cash Book never balanced?

(a) Discount column (b) Cash
(c) Bank (d) Petty cash

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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
85. The amount payable to a person as consideration for the use of right vested in him is:
(a) Dividend (b) Royalty
(c) Purchase consideration (d) Installment

86. The closing balance of a petty cash book is a / an ……

(a) Liability (b) Gain
(c) Assets (d) Loss

87. Goods bought for ` 25,000 passed through sales day book will result in …….
(a) Decrease in Gross Profit (b) No effect on Gross Profit
(c) Increase in Gross Profit (d) Decrease in Net Profit

88. Narration are given at the end of

(a) Final Account (b) Each Ledger Account in Trial Balance
(c) Each Ledger Account (d) Each Journal Entry

89. Nominal Account represents

(a) Profit & Gain (b) Loss / Expenses
(c) Both (a) and (b) (d) None of the above

90. Prepaid rent is a

(a) Nominal Account (b) Representative Personal Account
(c) Tangible Assets Account (d) None of the above

91. Purchases book is used to record

(a) All purchases of goods (b) All credit purchase
(c) All credit purchases of goods (d) All credit purchases of assets other than goods

92. The source document or voucher used for recording entries in Sales Book is
(a) invoice received (b) invoice sent out
(c) credit notes sent out (d) debit notes received

93. Trade discount allowed at the time of sale of goods is

(a) recorded in Sales Book (b) recorded in Cash Book
(c) recorded in Journal (d) not recorded in Books of Accounts

94.A sale of goods to Ram for cash should be debited to

(a) Ram (b) Cash A/c
(c) Sales A/c (d) Capital A/c

95. Ledger contains various ….. in it.

(a) transactions (b) entries
(c) accounts (d) none of the above

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96. The balance of the Petty Cash is a / an
(a) expenses (b) income (c) asset (d) liability

97. Closing stock appearing in the Trial Balance is shown in

(a) Trading A/c and Balance Sheet (b) Profit and Loss A/c
(c) Balance Sheet only (d) Trading A/c only

98. Identify the „Personal Account‟ from the following:

(a) Salary Payable Account (b) Taxes Paid Account
(c) Investment Account (d) Trademark Account

99. Which of the following is a transaction of contra entry?

(a) Sale goods to Y ` 12,500.
(b) Godown rent ` 7,000 paid by cheque.
(c) Received ` 12,000 in full settlement of ` 12,500.
(d) Cash deposited to bank ` 9,000.

100. When Trial Balance will not tally/mismatch?

(a) Two errors those are compensating each other.
(b) A transaction recorded twice.
(c) Taking balance to the wrong side in the Trial Balance.
(d) If an entry is totally missed.

101. Which balance is not considered for closing entries on the basis of trial balance for
transferring to Trading and Profit & Loss Account?
(a) Salary and Wages (b) Discount Received
(c) Commission Paid (d) Cash in Hand

102.Cash book is a
(a) Subsidiary book (b) Subsidiary book and a Ledger account
(c) Ledger account (d) None of the above

103.The periodical total of the Sale Return Book is posted to the

(a) Debit side of Sales Account (b) Debit side of Sales Return Account
(c) Credit side of Sales Return Account (d) Debit side of Debtors Return

104.Narration is given at the end of

(a) Final accounts (b) Trial balance
(c) Each ledger account (d) Each journal entry

105.Which one of the following is an example of Personal Account?

(a) Machinery (b) Rent (c) Cash (d) Creditor

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106.A withdrawl of cash from business by the proprietor should be credited to
(a) Drawing Account (b) Capital Account
(c) Cash Account (d) Purchase Account

107.Which financial statement represent the accounting equationAsset

= Liability = Owner‟s equity:
(a) Income statement (b) Cash flow statement
(c) Balance Sheet (d) None of the above

108.A debit note issued to a creditor for goods returned is to be recorded in the
(a) Bills receivable book (b) Purchase book
(c) Purchase return book (d) Journal proper

109. Cash book is a form of

(a) Ledger (b) Journal (c) Trial Balance (d) All of the above

110. A sale of goods to Laxman for cash should be debited to

(a) Laxman A/c (b) Cash A/c (c) Sales A/c (d) Capital A/c

111. The debts written off earlier as bad, subsequently recovered are
(a) Debited to profit and loss A/c (b) Credited to bad debt recovery A/c
(c) Credited to trade receivable A/c (d) Credited to debtors A/c

112.Which of the following transaction is not recorded in cash book?

(a) Bad debts recovered (b) Prepaid expenses
(c) Trade discount allowed (d) Freight paid for acquiring an asset

113.Credit purchase of fixed asset is recorded in

(a) Journal proper (b) Purchase book
(c) Cash book (d) Petty cash book

114.When cash received for services rendered in the past

(a) Owner’s equity increases (b) Current asset increases
(c) Profit increases (d) None of the above

115.The trial balance checks

(a) Nature of business (b) Valuation of closing stock
(c) Correctness of cash in hand (d) Arithmetical accuracy

116.…… does fulfill the function of both a journal and a ledger.

(a) Purchase book (b) Cash book
(c) Sales book (d) Bills payable book

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117.Which of the following is artificial personal account?
(a) SBI account (b) Wages paid account
(c) Discount received account (d) Drawings account

118. Journal proper uses to record …..

(a) bad debts recovered
(b) all cash purchases of assets other than goods
(c) writing of bad debts
(d) purchase of goods on credit

119. Double Entry Principle means:

(a) Having debit for every credit and similarly, credit for each debit.
(b) Writing all the entries twice in the book.
(c) Maintaining the double account for all business transactions.
(d) Writing two times the same entry.

120. Which of the following is not a function of accounting

(a) Keeping systematic record (b) Protecting properties of business
(c) Maximizing the results (d) Meeting legal requirements

121.The system of recording transactions based on dual concept is called

(a) Double account system (b) Double entry system
(c) Single entry system (d) Cash system

122.Which is not function of accounting?

(a) Decision making (b) Measurement
(c) Forecasting (d) Ledger posting

123. The total of the Purchase Day Book for the month will be entered on the
(a) Debit side of the purchases account
(b) Credit of the purchases account
(c) Debit side of the individual accounts of creditors
(d) Credit side of the individual accounts of creditors

124. The sale of a business asset on credit is recorded in

(a) sales journal (b) cash receipt journal
(c) general journal (d) none of these

125.On 31st December 2006 assets of the business are ` 3,00,000 and its capital is = `
1,00,000. Its liabilities on that date will be
(a) 4,00,000 (b) 2,00,000
(c) 1,00,000 (d) None of the above

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126.When goods are returned to suppliers, the suppliers will also receive
(a) Credit note (b) debit note
(c) Either credit note or debit note (d) credit note and debit note both

127. Book-keeping is mainly concerned with

(a) Recording of financial data
(b) Designing the systems in recording, classifying and summarizing the recorded data.
(c) Interpreting the data for internal and external users
(d) None of the above

128. The books of accounts of a firm of office equipment suppliers include the usual
subsidiary books and three ledgers; purchases, sales and general. If a typewriter is
purchased on credit for the purpose of resale, the subsidiary book and ledger(s) to be
used for recording this transaction should be
(a) Journal and General ledger
(b) Journal, general ledger and purchases ledger
(c) Purchases day book and general ledger
(d) Purchases day book general ledger and purchases ledger

129. Accounting cycle starts with ……. ends with ………

(a) Recording of transactions, preparation of final accounts
(b) Recording of transactions, posting them in ledger
(c) Recording & posting of transaction, preparation of final accounts
(d) None of the above

130. According to Dual aspect concept, which of the following is incorrect:

(a) Increase in one asset & decrease in other asset
(b) Decrease in one liability & increase in other liability
(c) Decrease in both liability & asset
(d) None of the above

131. What does „AICPA‟ stands for:

(a) American Institute of Certified Public Accountants
(b) Anglo Institute of Certified Public Accountants
(c) African Institute of Certified Public Accountants
(d) American Institute of Certified Private Accountants

132. “The system of book keeping by double entry is, perhaps the most beautiful one in the
wide domain of literature or science. Were it less common, it would be the
administrator of the learned world” is spoken by:
(a) Luca Pacioli (b) Edwin T. Freedly
(c) Warren Buffet (d) Richard Notebaert

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133.Who originated the double entry system of accounting:
(a) Alfred Marshall (b) Edwin T. Freedly
(c) Luco Pacoli (d) Warren Buffet

134.A credit note received from a supplier would be recorded in

(a) cash book (b) returns inward book
(c) journal (d) returns outward book

135.Closing entries are recorded in

(a) journal proper (b) ledger
(c) cash book (d) none of these

136.Which organization uses cash system of Accounting?

(a) Company (b) NPO’s
(c) Partnership Firms (d) None of the above

137. What is the full form of GAAP:

(a) Generally Accepted Accounting Parts
(b) Generally Accepted Accounting Provisions
(c) Generally Accepted Accounting Principles
(d) Generally Accepted Accounting Principles

138. Who defined this statement:

“An account has been defined as a formal record of a particular type of transaction
expressed in money”
(a) Luco Pacoli (b) Warren Buffet
(c) Philip Kotler (d) Kohler

139. Which of the following is NOT a characteristic of Accounting?

(a) Accounting is an art
(b) It records transactions only in monetary terms
(c) It is concerned with interpretation of results
(d) None of the above

140. Which of the following is NOT a branch of Accounting?

(a) Financial Accounting (b) Cost Accounting
(c) Corporate Accounting (d) Management Accounting

141. “Book-keeping starts where accounting ends”:

(a) True (b) Partly True (c) False (d) Partly False

142. Following one is not a book of original entry

(a) Purchase book (b) cash book
(c) Ledger (d) bills payable book

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143.Which of the following is not a form of personal account?
(a) Natural Personal Account (b) Artificial Personal Account
(c) Representative Personal Account (d) Nominal Personal Account

144. Closing entries are recorded in

(a) Purchases book (b) sales book (c) cash book (d) journal proper

145. Which of the following is not the purpose of accounting?

(a) Providing information about the assets, liabilities and capital c business entity.
(b) Maintaining record of business
(c) Providing information about the performance of business.
(d) Providing details about the personal assets and liabilities of the owners of business entity.

146. Mohan a cloth merchant buys cloth for ` 50,000 paying cash ` 20,000. What is the
amount of expenses as per accrual concept?
(a) 50,000 (b) 20,000 (c) 30,000 (d) Nil

147. The principal book of account is

(a) cash book (b) ledger (c) journal (d) none of these

148. Match list I with List II and select the correct answer using the codes given below the
list.
List I (Types of Account) List II (Principles)
X Real Account 1 Debit the receiver, credit the giver
Y Nominal Account 2 Debit what comes in, credit what goes out
Z Personal Account 3 Debit all expenses, credit all gains
The correct option is:
(a) Z – 2 (b) X – 3 (c) Y – 3 (d) X – 2

149. Rustam and Co. Purchases a typerwriter for office used from Equipment Suppliers
Ltd., payment immediately by cash. This transaction will be entered in the
(a) Cash book (b) Journal proper
(c) Purchases day book (d) none of these

150.Revaluation account is a:
(a) Nominal account (b) Real account
(c) Personal account (d) None of the above

151.In which of the book cash purchase is recorded?

(a) Cash book (b) Purchase book
(c) Both (a) and (b) (d) None of these

152.In case of three column cash book, contra entry is related with:
(a) Cash ; Discount (b) Cash ; Bank
(c) Bank ; Discount (d) None of these

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153. Double Entry principle means:
(a) Writing all entries in the book.
(b) Having debit for every credit and similarly, credit for every debit.
(c) Maintaining the double account for each business transaction.
(d) Writing two times the same entry.

154. If salaries paid appearing in the trial balance for the year ending 2017 is ` 7,500 and
it is given in the adjustments that the salary unpaid for the year ending 2017 is `
2,500. The total amount to be debited to the Profit and Loss Account under the head
salaries will be:
(a) ` 10,000 (b) ` 5,000 (c) ` 2,500 (d) ` 7,500

155. The three columns on each side of a three columns cash book represent:
(a) Real and personal accounts (b) Real and nominal account
(c) Personal and nominal account (d) Real, personal and nominal accounts

156.Mathur & Co. purchases a motor car on credit from Auto Distributors for thepurpose
of resident. This transaction will be entered in the:
(a) Cash book (b) Journal proper
(c) Purchase day book (d) None of these

157.Credit balance of a personal account indicates:

(a) Cash balance (b) Amount payable
(c) Amount receivable (d) None of these

158.Cash account will show:

(a) Debit or credit balance (b) A credit balance
(c) A debit balance (d) None of these

159.Leger Book is popularly known as:

(a) Secondary book of accounts (b) Principal book of account
(c) Subsidiary book of accounts (d) None of the above

160.Cash book is a:
(a) Subsidiary Book (b) Subsidiary Journal and Ledger
(c) Ledger Account (d) None of these

161.The balance in the petty cash book is:

(a) An expenses (b) A profit
(c) An asset (d) A liability

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162.Balance of cash book is posted to the ledger:
(a) In the cash account (b) In bank account
(c) No where (d) Either (a) or (b)

163. A cheque received and deposited in the same day is recorded in the:
(a) Cash column of the cash book (b) Bank column of the cash book
(b) Credited in the cash book (d) Debited in the cash book

164. In a three column Cash Book:

(a) Only cash column and discount columns are balanced.
(b) Only bank column and discount columns are balanced.
(c) Only cash column and bank columns are balanced.
(d) Cash column, bank column and discount columns are balanced.

165. Purchases book is used to record:

(a) All purchases of goods (b) All credit purchases
(c) All credit purchase of goods (d) All credit purchases of assets other than goods

166.Sales returns book is used to record:

(a) Returns of fixed assets sold on credit. (b) Returns of goods sold for cash
(c) Returns of goods sold on credit (d) Sales of goods

167.Purchase for office furniture on account is recorded in:

(a) General journal (b) Cash book
(c) Purchase book (d) Sales book

168. Acceptances received and recorded in Bills Receivable Book are transferred to ledger:
(a) On the debit side of relevant personal accounts.
(b) On the credit side of relevant personal account.
(c) Nowhere
(d) Either (a) or (b)

169. A Return Inwards Book is kept to record:

(a) Returns of goods sold (b) Returns of anything purchased
(c) Returns of goods purchased (d) Returns of anything sold

170.A second hand motor car was purchased on credit from Mohan will be recorded in
the:
(a) Journal proper (General Journal) (b) Sales Book
(c) Cash Book (d) Purchase Book

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171.Which of these is a method of preparation of Trial Balance?
(a) Total method (b) Balance method
(c) Both (a) and (b) (d) None

172. If Trial Balance tallies it surely means that there are no errors in books of account.
This statement is:
(a) True (b) False (c) Partly True (d) None

173. Which of the following is both a principal as well as a subsidiary book?

(a) Sales Book (b) Purchase Book
(c) Cash Book (d) Bills Receivable Book

174.If goods worth ` 20,000 are stolen, then it shall be recorded in:
(a) Purchase Book (b) Journal Proper
(c) Purchases Return Book (d) All of the above

175.The total of purchase book will be posted in ledger in:

(a) Debit side of purchase A/c (b) Credit side of purchase A/c
(c) Credit side of cash A/c (d) None of the above

176.The total of sales book will be posted in ledger in:

(a) Debit side of sales A/c (b) Credit side of sales A/c
(c) Debit side of cash A/c (d) None of the above

177.The total of sales return will be recorded in the ledger by:

(a) Debiting sales return A/c (b) Crediting sales return A/c
(c) Crediting cash A/c (d) Debiting cash A/c

178. Which of the following transactions will be recorded in the sales book of Mohit
Furnitures & Co.?
(a) Sold Table for cash ` 10,000.
(b) Sold Chair to Mehra & Co. for ` 12,000.
(c) Sold an old Typewriter for ` 2,000 to Verma & Co.
(d) Both (a) & (c)

179. Which of the following transactions will be recorded in the purchase book of Sharma
Cloth House?
(a) Purchased Cloth worth ` 2,000 for cash.
(b) Purchased stationery worth 200 on credit.
(c) Purchased cloth worth ` 5,000 from Verma Garments.
(d) None of the above.

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180.Which of the following is NOT included in Trial Balance?
(a) Closing stock (b) Opening Stock
(c) Suspense A/c (d) All of the above

181.If the trial balance is NOT reconciled, then it is reconciled by opening:

(a) Suspense A/c (b) Reconciliation A/c
(c) Miscellaneous A/c (d) All of the above

182.The overdraft balance in the Savings A/c of the bank will be at the
(a) Debit side of Bank column (b) Credit side of Bank column
(c) Neither (a) nor (b) (d) Both (a) and (b)

183. Which of the following transactions are recorded in purchase book?

(a) All purchases made during the year.
(b) Only credit purchases during the year.
(c) Only credit purchases of goods traded by the firm.
(d) None of the above.

184. If goods worth ` 5000 are taken by the proprietor for personal use, the entry will be:
(a) Debit Drawings A/c , Credit Purchases A/c
(b) Debit Purchases A/c , Credit drawings A/c
(c) Debit Proprietor A/c , Credit Purchases A/c
(d) Credit Proprietor A/c , Debit stock A/c

185. The balance in the bank pass book is:

(a) Debit (b) Credit
(c) Both Debit & Credit (d) None of the above

186.Maintaining petty cash book is:

(a) Mandatory (b) Necessary
(c) Dependent on nature of business (d) All of the above

187. Purchase book records:

(a) All purchases made by the firm.
(b) All purchases of fixed asset used by the firm.
(c) Credit purchases of goods dealt in by the firm.
(d) Cash purchases of goods dealt in by the form.

188. Sales Book is prepared:

(a) on the basis of Cash Book (b) on the basis of copies of invoices
(c) Both (a) and (b) (d) on the basis of sales orders

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189.In which book does the cash sales will be recorded:
(a) Cash Book (b) Purchase Book
(c) General Journal (d) Sales Book

190.The following is entered in the Journal Proper:

(a) purchase of an asset for cash (b) purchase of goods for cash
(c) purchase of an asset on credit (d) purchase of goods on credit

191.The Returns Outward Day Book is entered up from the following documents:
(a) Invoices received (b) credit notes received
(c) Invoices sent out (d) debit notes sent out

192. If capital is ` 10,000, creditors ` 5,000 B/P ` 2,000, Machinery ` 2,000, Prepaid
expenses ` 1,000. Land and Building ` 5,000. Find the value of Debtors is:
(a) ` 7,000 (b) ` 12,000 (c) ` 9,000 (d) ` 8,000

193. B/P ` 20,000, creditors ` 10,000, Debtors ` 5,000, Investment ` 2,00,000 Plant and
Machinery is ` 150,000, closing stock is ` 20,000. Find the capital:
(a) 3,55,000 (b) 2,00,000 (c) 3,44,000 (d) 3,45,000

194. The purchase Day Book is entered up from the following documents:
(a) Invoice received (b) credit notes sent out
(c) Invoices sent out (d) debit notes received

195.The Sales Day Book is entered up from the following documents:

(a) Invoices received (b) credit notes sent out
(c) Invoices sent out (d) debit notes received

196.A suspense account facilitates the preparation of ….. when the …… has not been
tallied.
(a) Trial Balance, Financial Statement (b) Financial Statement, Trial Balance
(c) Ledger, Trial Balance (d) Journal, Trial Balance

197.After preparing the trial balance the accountant finds that the total of the debit side is
short by ` 51,000. This difference will be:
(a) Debited to suspense account (b) Adjusted to any of the debit balance account
(c) Credited to suspense account (d) Adjusted to any of the credit balance account

198.Day books are used because:

(a) The double entry system would not work without them.
(b) To meet the requirements of the law.
(c) It is a convenient way of grouping together similar transactions which reduces the
number of entries in the ledger.
(d) None of the above.
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199. The bank column of a cash book may show:
(a) Only a debit balance
(b) only a credit balance
(c) either a debit balance or a credit balance

200. In a three column Cash Book:

(a) Only cash and bank columns are balanced.
(b) Only cash and discount columns are balanced.
(c) Only bank and discount columns are balanced.
(d) Cash, bank and discount columns are balanced.

201. When both the aspects of a transaction are recorded in the cash book itself, it is
called:
(a) a transfer entry (b) an opening entry
(c) a contra entry (d) a compound entry

202.Cash book is a:
(a) Ledger account (b) Subsidiary book
(c) Journal as well as ledger (d) none of these

203.Cash Book is:

(a) a journal and not a ledger (b) a ledger and not a journal
(c) both a journal and a ledger (d) neither a journal nor a ledger

204.Cash book records:

(a) all receipts only (b) all payments only
(c) all cash and credit transactions (d) all receipts and payments of cash

205.When a firm maintains a simple cash book (with cash column only), it need not
maintain:
(a) purchases journal (b) sales journal
(c) general journal (d) cash account in the ledger

206. When a firm maintains a three column cash book, it need riot maintain:
(a) cash account in the ledger
(b) bank account in the ledger
(c) discount accounts in the ledger
(d) cash account, bank account and discount accounts in the ledger.

207. A simple cash book (with cash column only) may show:
(a) only a debit balance
(b) only a credit balance
(c) either a debit balance or a credit balance
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208.` 3,000 drawn by the proprietor for personal used should be debited to
(a) travelling expenses account (b) personal expenses account
(c) drawings account (d) none of these

209.A Journal is:

(a) a book of accounts (b) a financial statement
(c) a book of original entry (d) a ledger

210.A ledger is:

(a) a book of accounts (b) a financial statement
(c) a book of original entry (d) a journal

211.Transactions are first recorded:

(a) in an account (b) in a journal
(c) in a ledger (d) none of the above

212.The process by which the entries in the journal are transferred to the accounts in the
ledger is called
(a) Journalizing (b) ledgerizing
(c) Posting (d) any of the above

213. If more than two accounts are affected by a business transaction, the sum of the debits
must be:
(a) Greater than the sum of the credit
(b) less than the sum of the credit
(c) Equal to the sum of the credits

214. A book of accounts is called a (an):

(a) Journal (b) account (c) ledger (d) financial statement

215. The following account has a credit balance:

(a) Discount allowed (b) carriage outward
(c) Carriage inward (d) discount received

216.The following account has a credit balance:

(a) Returns inward (b) rent paid
(c) Returns outward (d) cash

217.The following account would be found in the purchase ledger:

(a) Purchases (b) P. Sharma, a supplier
(c) Returns outward (d) K. Roy, a customer
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218.The following account normally has a debit balance:
(a) commission received account (b) a loan account
(c) A creditor’s account (d) furniture account

219.The following account normally has a credit balance:

(a) Sales returns account (b) stock account
(c) Rent paid account (d) proprietor’s capital account

220.Following account has a credit balance:

(a) Equipment account (b) Purchase Return account
(c) Purchases account (d) depreciation account

221.The following account has a debit balance:

(a) Sales account (b) interest received account
(c) Proprietor’s drawings account (d) discount received account

222. A credit balance on Bipin‟s account (a supplier of goods) in your ledger means that:
(a) Bipin owes you the money
(b) you owe Bipin the money
(c) You have just paid Bipin that amount of money
(d) You have returned that amount of goods to Bipin

223. The following is a book of original entry and is also part of the ledger:
(a) The purchase day book (b) the cash book
(c) The sales day book (d) the journal

224. Classified summary of all transactions is called:

(a) Cash book (b) journal (c) ledger (d) trial balance

225. What is put in the posting reference column of an account?

(a) an account number (b) ledger page number
(c) date (d) none of the above

226.What is put in the posting reference column of a journal?

(a) journal page number (b) ledger page number
(c) date (d) none of the above
227.Which of the following has a credit balance in the ledger?
(a) carriage inward (b) carriage outward
(c) returns inward (d) returns outward

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228.The following account would be found in the debtors ledger:
(a) Sales (b) returns inward
(c) R. Dutta, a customer (d) P. Arora, a supplier

229. Which one of the following happenings could not account for a credit balance on a
trade debtor‟s account?
(a) an account has been paid twice by the debtor.
(b) cash discount has not been deducted from an invoice.
(c) the debtor’s cheque had been made out for the wrong amount.
(d) Returns outward have not been taken into account.
(e) There has been a misposting in the debtors ledger.

230. A credit balance on a sole trader‟s capital account is:

(a) equal to the cash and bank balances of the business.
(b) The amount the sole trader owes the business.
(c) The difference between the assets and external liabilities of the business.
(d) Equal to the value of the fixed assets of the business.

231. Sales account, salaries account and capital account normally have:
(a) credit, debit and debit balances respectively.
(b) credit, credit and debit balances respectively.
(c) debit, debit and credit balances respectively.
(d) credit, debit and credit balances respectively.

232. Furniture account, rent received account and debtors account normally have:
(a) debit, debit and debit balances respectively.
(b) debit, credit and debit balances respectively.
(c) credit, debit and credit balances respectively.
(d) debit, debit and credit balances respectively.

233. The basic accounting equation is:

(a) A = L + OE (b) OE = A + L
(c) A = L − OE (d) L = OE + A

234. Assets minus owner‟s equity equals:

(a) capital (b) expenses (c) liabilities (d) income

235. The equity of owner of a business enterprise is referred to as:

(a) assets (b) reserves (c) liabilities (d) none of the above

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236.A business enterprise pays ` 500 to its creditor. The effect of the transaction on
accounting equation is:
(a) Increase in an asset, increase in capital (b) Increase in an asset, increase in liability
(c) Decrease in an asset, decrease in capital (d) none of the above

237.During an accounting period total assets decrease by ` 5,000 and capital increases by
` 20,000. The amount and direction of the period‟s change in external liabilities is:
(a) ` 15,000 increase (b) ` 25,000 increase
(c) ` 15,000 decrease (d) ` 25,000 decrease

238. Which of the following would cause a change in the capital of a sole trader?
(a) Purchase of a typewriter on credit for office use.
(b) Depreciation of a motor vehicle.
(c) Payment to a creditor for goods supplied in the last month.
(d) Collection of cash from a debtor.

239. Which of the following transactions would affect the cash position of a sole trader?
(a) Payment from petty cash for purchase of stationary.
(b) Withdrawal of goods for personal purposes by the proprietor.
(c) Depreciation of office furniture.
(d) Bad debt written off.

240. Purchase of machine for cash:

(a) Increase total assets (b) leaves total assets unchanged
(c) Decreases total assets (d) increases liabilities

241. Withdrawals by proprietor:

(a) Reduce both assets and owner’s equity
(b) Reduce owner’s equity and increase liabilities.
(c) Reduce assets and increase liabilities.
(d) Affect none of assets, liabilities and owner’s equity.

242. On sale of old equipment, owner‟s equity:

(a) decreases (b) increases
(c) remains unchanged (d) may or may not change

243.The assets of a business are worth ` 1,56,000 and its capital is ` 96,000. Its liabilities
are:
(a) ` 2,52,000 (b) ` 60,000 (c) ` 96,000 (d) ` 1,56,000

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244. The liabilities of a business are ` 40,000 and the proprietor‟s claim is ` 70,000. The
total assets amount to
(a) ` 70,000 (b) ` 30,000 (c) ` 1,10,000 (d) ` 40,000

245. Which of the following is true?

(a) Assets + Reserves = Equity
(b) Assets + Equity = Liabilities
(c) Assets Liabilities = Owner’s funds
(d) Liabilities to outsiders + Reserves =Equity

246. Which of the following events does not represents a business transaction?
(a) Goods are purchased on credit.
(b) Machinery is purchased for cash.
(c) An employee is dismissed from his job.
(d) The owner of the business withdraws goods from the business for his personal use.

247. Which of the following events represents a business transaction?

(a) The owner of the firm dies.
(b) Stationery is purchased for cash.
(c) Good are ordered for delivery next month.
(d) A prospective employee is interviewed.

248. In double entry system of book-keeping every business transaction affects:

(a) Two sides of the same account (b) Two accounts
(c) One account (d) the same account on two different dates

249. Double entry means:

(a) Entry made in two sides of book.
(b) Entry made for two aspects of the transaction.
(c) Entry made in two places journal and ledger.
(d) None of these

250. Which of the following is a personal account?

(a) Wages account (b) Cash account
(c) Debtors account (d) furniture account

251.Purchase of an asset is:

(a) an expenses (b) an asset
(c) a loss (d) none of these

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252.Which of the following one is real account?
(a) Salary account (b) Advertisement account
(c) Cash account (d) Creditors account

253.Commission earned but not received is a:

(a) Real account (b) Nominal account
(c) Personal account (d) Both real and personal account

254.Which of the following is a nominal account?

(a) Machinery account (b) Office equipment account
(c) Drawings account (d) carriage inwards account

255.Patent right account is of the nature of:

(a) Real account (b) nominal account
(c) Personal account (d) none of these

256.Increase in liability and revenue are recorded on the:

(a) Debit side (b) Both sides
(c) Credit side (d) Neither side

257.Decrease in an asset account is recorded on the:

(a) Debit side (b) Both sides
(c) Credit side (d) Neither side

258.Increase in an expense account is recorded on the:

(a) Debit side (b) Both sides
(c) Credit side (d) Neither side

259.Increase in capital is recorded on the:

(a) Debit side (b) Both sides
(c) Credit side (d) Neither side

260.Purchase of goods for cash from Arun should be recorded by:

Debit Credit
(a) Purchases account Arun account
(b) Cash account Arun account
(c) Purchases account Cash account
(d) Arun account Cash account

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261. Payment of a firm‟s rent from the business bank account should be recorded by:
Debit Credit
(a) Bank account Rent account
(b) Rent account Capital account
(c) Rent account Drawings account
(d) Rent account Bank account

262. Cash brought in by the proprietor as capital should be recorded by:

Debit Credit
(a) Cash account Bank account
(b) Capital account Cash account
(c) Cash account Capital account
(d) Capital account Bank account

263. Withdrawal of goods from stock by the owner of the business for personal use should
be recorded by:
Debit Credit
(a) Drawings account Cash account
(b) Drawings account Purchases account
(c) Capital account Drawings account
(d) Purchases account Capital account

264. Goods returned by Nisit, a customer should be recorded by:

Debit Credit
(a) Sales returns account Nisit account
(b) Purchases account Nisit account
(c) Nisit account Sales account
(d) Nisit account Goods account

265. Sales of goods on credit to Deepak should be recorded by:

Debit Credit
(a) Deepak account Sales account
(b) Cash account Sales account
(c) Cash account Deepak account
(d) Sales account Deepak account

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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
266. Which of the following double entry would not record a purchase of goods for resale?
Debit Credit
(a) Purchases account Cash account
(b) Purchases account Supplier’s personal account
(c) Purchases account Stock account
(d) Purchases account Bank account

267. Which of the following is not a satisfactory balance sheet equation?

(a) Assets liabilities = owner’s equity
(b) Assets = liabilities + owner’s equity
(c) Assets = liabilities owner’s equity
(d) Assets owner’s equity = liabilities

268. Trial Balance is:

(a) a real account (b) a nominal account (c) not an account

269. Trial Balance contains balances:

(a) of all ledger accounts
(b) of only personal and real accounts
(c) of real and nominal accounts

270. The preparation of a trial balance helps in locating:

(a) errors of omission (b) errors of principle
(c) clerical errors (d) None of the above

271.The following is not a book of original entry:

(a) The journal (b) The cash book
(c) The ledger (d) the purchase day book

272. The following would be entered in the Journal Proper:

(a) Purchases and returns of goods
(b) Correction of errors made in the ledger
(c) Sales and returns of goods
(d) Cash transactions

273. Errors of commission arises when:

(a) Any transaction is left either wholly or partially
(b) Any transaction is incorrectly recorded either wholly or partially
(c) Any transaction is recorded in a fundamentally incorrect manner

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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
274.If the credit side of a Trial Balance exceeds the debit side, The suspense account will
show:
(a) Credit balance (b) debit balance
(c) Credit or debit balance (d) none of these

275.A trial balance is:

(a) a rough draft of the final account (b) a list of balance in the ledger
(c) a statement of assets and liabilities (d) a statement of incomes and expenses

276. The main purpose of preparing a trial balance is:

(a) To check the accuracy of the book of original entry
(b) To check the arithmetical accuracy of the double entry
(c) To help balance the bank account
(d) Reconcile the bank account with the bank statement

277. The verification that the debits and credits in the ledger are equal is called a:
(a) Bank reconciliation statement (b) Trial Balance
(c) Balance sheet (d) Journal

278. The following error would normally be revealed by a trial balance:

(a) A sale to B.Sen has been recorded to the debit of S.Sen account
(b) A transaction has been completely omitted from the books
(c) A purchase of furniture for resale has been debited to furniture account
(d) A payment for purchase of stationery has not been posted from the cash book

279. A trial balance which is out of balance indicates that:

(a) A journal entry has been completely omitted from the posting process
(b) A debit has been posted to the wrong account
(c) The number of debit postings in the ledger differs from the number of credit postings
(d) There is not an equality of debit and credit amounts in the ledger

280. The following errors would not prevent the trial balance from agreeing:
(a) A sale of ` 358 entered in the sales day book as ` 538.
(b) Under casting the purchase day book by `100.
(c) Bank charges of ` 30 entered in the cash book but omitted from the bank charges
account.
(d) A cheque of ` 150 from N. Roy posted to the debit of his account.

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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
281. The trial balance provides:
(a) Complete proof of the accuracy of accounting records.
(b) Substantial proof of the accuracy of accounting records.
(c) Proof of the equality of debits and credits.
(d) No proof of accuracy.

282. The following errors would prevent the trial balance from agreeing:
(a) Goods sold on credit for ` 780 incorrectly invoiced as ` 870.
(b) Stock on hand at the end of the year undervalued by ` 250.
(c) A sale of surplus equipment for ` 1,600 entered in the sales account.
(d) A sales day book item for ` 293 entered in the customer’s account as ` 239.

283. The following error a trial balance would be able to disclose:

(a) Goods costing ` 50 taken from stock by the proprietor but no entry was made in the
books.
(b) Uncollected wages totaling ` 540 repaid to the cashier but no record was made in the
accounts.
(c) Petty cash reimbursement of ` 100 was debited to the cash account.
(d) Repairs to machinery ` 300 wrongly debited to machinery account.

284. A suspense account can be used as temporary measure to balance the:

(a) Manufacturing account (b) Appropriation account
(c) Trading and profit and loss account (d) Trial balance

285. If a posting is made to the correct class of account and on the correct side, but in a wrong
account, it is an error of:
(a) commission (b) principle (c) omission (d) compensating

286. A suspense account is opened when the:

(a) bank account does not balance.
(b) trial balance does not balance.
(c) profit and loss account does not balance.
(d) trading account does not balance.

287. The following account has a normal debit balance:

(a) Trade creditors (b) Anit Sen, capital
(c) Cash (d) more of these

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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
288.The tabulation of balances of all ledger accounts as a summary statement is known as:
(a) Reconciliation statement (b) Financial statement
(c) Trial balance (d) Balance sheet

289.The total of the Purchase Day Book will be posted to:

(a) Purchases account (b) Individual accounts of suppliers
(c) Cash account (d) none of the above

290. The total of the Sales Day Book will be credited to:
(a) Sales account (b) Cash account
(b) Individual accounts of customers (d) none of the above

291. The total of the Purchase Returns Day Book will be posted to:
(a) Purchases account (b) Purchase returns account
(c) Individual accounts of suppliers (d) Cash account

292.The total of the Sales Returns Day Book will be posted to:
(a) Sales account (b) Sales returns account
(c) Individual accounts of customers (d) Cash account

ANSWER KEYS
1 2 3 4 5 6 7 8 9 10
(a) (a) (d) (b) (c) (c) (b) (c) (c) (d)
11 12 13 14 15 16 17 18 19 20
(d) (c) (c) (d) (b) (c) (c) (a) (a) (b)
21 22 23 24 25 26 27 28 29 30
(b) (b) (b) (c) (b) (c) (c) (b) (d) (d)
31 32 33 34 35 36 37 38 39 40
(d) (b) (a) (a) (b) (c) (c) (c) (d) (c)
41 42 43 44 45 46 47 48 49 50
(d) (a) (d) (b) (b) (a) (d) (b) (b) (c)
51 52 53 54 55 56 57 58 59 60
(a) (b) (b) (c) (b) (c) (a) (d) (c) (c)
61 62 63 64 65 66 67 68 69 70
(d) (b) (a) (c) (a) (d) (c) (b) (b) (a)
71 72 73 74 75 76 77 78 79 80
(c) (c) (b) (c) (a) (a) (b) (c) (b) (c)

81 82 83 84 85 86 87 88 89 90
(d) (d) (b) (a) (b) (c) (c) (d) (c) (b)
91 92 93 94 95 96 97 98 99 100
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INTRODUCTION TO FINANCIAL ACCOUNTING UNIQUE ACADEMY
(c) (b) (d) (b) (c) (c) (c) (a) (d) (c)
101 102 103 104 105 106 107 108 109 110
(d) (b) (b) (d) (d) (c) (c) (c) (a) (b)
111 112 113 114 115 116 117 118 119 120
(b) (c) (a) (d) (d) (b) (a) (b) (a) (c)
121 122 123 124 125 126 127 128 129 130
(b) (d) (a) (c) (b) (b) (a) (d) (a) (d)
131 132 133 134 135 136 137 138 139 140
(a) (b) (c) (d) (a) (b) (d) (d) (d) (c)
141 142 143 144 145 146 147 148 149 150
(c) (c) (d) (d) (d) (d) (b) (c) (a) (a)
151 152 153 154 155 156 157 158 159 160
(a) (b) (b) (a) (d) (b) (b) (c) (b) (b)
161 162 163 164 165 166 167 168 169 170
(c) (c) (b) (c) (c) (c) (a) (b) (a) (a)
171 172 173 174 175 176 177 178 179 180
(c) (b) (c) (b) (a) (b) (a) (b) (c) (a)
181 182 183 184 185 186 187 188 189 190
(a) (b) (c) (a) (c) (c) (c) (b) (a) (d)
191 192 193 194 195 196 197 198 199 200
(c) (c) (d) (b) (c) (b) (a) (c) (c) (a)
201 202 203 204 205 206 207 208 209 210
(c) (c) (c) (d) (d) (d) (a) (c) (c) (a)
211 212 213 214 215 216 217 218 219 220
(b) (c) (c) (c) (d) (c) (b) (d) (d) (b)
221 222 223 224 225 226 227 228 229 230
(c) (b) (a) (c) (d) (b) (d) (c) (d) (c)
231 232 233 234 235 236 237 238 239 240
(d) (b) (a) (c) (d) (d) (d) (b) (a) (b)
241 242 243 244 245 246 247 248 249 250
(a) (d) (b) (c) (c) (c) (b) (b) (b) (c)
251 252 253 254 255 256 257 258 259 260
(b) (c) (d) (d) (a) (c) (c) (a) (c) (c)
261 262 263 264 265 266 267 268 269 270
(d) (c) (b) (a) (a) (c) (c) (c) (a) (c)
271 272 273 274 275 276 277 278 279 280
(c) (d) (b) (b) (b) (b) (b) (d) (d) (a)
281 282 283 284 285 286 287 288 289 290
(c) (d) (c) (d) (a) (b) (c) (c) (a) (a)
291 292
(b) (b)

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INTRODUCTION TO CORPORATE ACCOUNTING UNIQUE ACADEMY

2 INTRODUCTION TO CORPORATE ACCOUNTING

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. The part of share capital which can be called up only on the winding up of a company
is called:
(a) Authorized capital (b) Called up capital
(c) Capital Reserve (d) Reserve Capital

2. The amount of capital that is mentioned in capital clause is known as:

(a) Authorized capital (b) Registered capital
(c) Nominal Capital (d) All of these

3. “Proposed dividends” is shown in the Balance Sheet of a Company under the head:
(a) Provisions (b) Reserves and Surplus
(c) Current Liabilities (d) Other Liabilities

4. ……… and ……….. of Schedule III of Companies Act, 2013, deals with presentation of
Profit & Loss Account and Balance Sheet:
(a) Part I and Part II (b) Part I and Section 210
(c) Part II and Section 211 Current Liabilities (d) Part II and Part I

5. Equity ` 90,000
Liability ` 60,000
Profit of the year ` 20,000. Find Total Assets
(a) ` 170,000 (b) ` 150,000 (c) ` 110,000 (d) ` 80,000

6. A ……. is an artificial person created by law with a perpetual succession and common
seal.
(a) company (b) partnership firm
(c) sole proprietorship (d) hindu undivided family

7. Equity shareholders have a right to:

(a) Vote (b) 20% dividend
(c) Have preference on redemption (d) All of the above

8. Equity shareholders are of a company:

(a) Bankers (b) Creditors (c) Debtors (d) Owners

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INTRODUCTION TO CORPORATE ACCOUNTING UNIQUE ACADEMY
9. According to Company Act, 2013, Balance sheet of a company is prepared as per:
(a) Part II of Schedule III (b) Part I of Schedule III
(c) Part II of Schedule IV (d) Part I of Schedule IV

10. The Reserve which is created for a particular purpose and which is a charge against
revenue is called:
(a) Capital Reserve (b) General Reserve
(c) Secret Reserve (d) Specific Reserve

11. Premium received on issue of shares are shown under the head ........... in Balance Sheet:
(a) Reserve and surplus (b) Current liabilities and provisions
(c) Share capital (d) contingent liabilities

12. Which assets is not current asset:

(a) Debtor (b) Prepaid expenses
(c) Goodwill (d) Stock

13. As per the Companies Act only preference shares, which are redeemable within…….
can be issued:
(a) 24 years (b) 30 years (c) 25 years (d) 20 years

14. Balance amount in the share forfeiture would be shown in the balance sheet under the
head of……
(a) Share capital (b) Reserve and surplus
(c) Current liabilities (d) secured loans

15. As per the Companies Act, a company cannot proceed to allot shares unless ............ is
received.
(a) minimum subscription (b) allotment money
(c) application money (d) call money

16. Capital Reserve is created out of:

(a) Capital profit (b) Revenue profit
(c) Capital receipt (d) Revenue receipt

17.Aims Limited provides you the following information:

Particulars `
Equity share capital called up 4,00,000
Calls in advance 25,000
Calls in arrears 40,000
The amount of paid up capital to be shown in the Balance Sheet of Aims Limited will
be?
(a) 3,35,000 (b) 3,85,000 (c) 3,60,000 (d) 4,25,000

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INTRODUCTION TO CORPORATE ACCOUNTING UNIQUE ACADEMY
18. Final accounts of a company are prepared according to …… of companies Act, 2013:
(a) Schedule IV (b) Schedule V (c) Schedule Iii (d) Schedule VI

19. A public company can have a minimum of .............. members:

(a) any number (b) seven (c) twenty (d) fifty

20. In the company’s balance sheet, unclaimed dividend should be shown under which of
the following heads …….
(a) Reserves and surplus (b) Current liabilities
(c) Unsecured loans (d) miscellaneous expenditure

21. Which of the following is not the feature of a company?

(a) Separate legal entity
(b) Perpetual Existence
(c) Incorporated association
(d) No separation between management and ownership

22. Unless otherwise stated a preference share is always deemed to be:

(a) Cumulative, Participating and Convertible.
(b) Cumulative, Non-participating and Non-Convertible.
(c) Non-Cumulative, Participating and Non-Convertible.
(d) Non-Cumulative, Non-Participating and Convertible.

23. Profit prior to incorporation is an example of:

(a) Revenue reserve (b) Secret reserve
(c) Capital reserve (d) General reserve

24.Z Ltd. whose financial statements comply with accounting standards, as prescribed
under section 133 of Companies Act, 2013, cannot apply the securities premium
amount for the purpose of:
(a) To provide for the purchase of its own shares.
(b) To provide for the issue of fully paid up bonus shares.
(c) To write off commission and discounts on issue of shares and debentures.
(d) To write off continuous losses of the company.

25. Financial statement as per Section 2(40) of the Companies Act 2013, inter-alia not
includes:
(a) A Balance Sheet as the end of the financial year.
(b) A profit and loss account or in the case of a company carrying on any activity not for
profit, an income and Expenditure account for the financial year.
(c) Fund flow statement for the financial year.
(d) A statement of changes in equity, if applicable.

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INTRODUCTION TO CORPORATE ACCOUNTING UNIQUE ACADEMY
26. The maximum number of partner is mentioned in:
(a) Companies Act (b) Partnership Act
(c) Limited Liability Partnership Act (d) None of the above

27. (1) Balance Sheet

(2) Cash Flow
(3) Trial Balance
(4) P&L A/c
Financial statements which are presented to outsiders are:
(a) Only 3:1 , 2 and 3 (b) Only 3:1, 2 and 4
(c) Only 2:1 and 4 (d) All 4:1, 2, 3 and 4

28. Dividend proposed to be paid is calculated as a percentage of:

(a) Net Profits (b) Authorized Capital
(c) Issued Capital (d) Paid up Capital

29. Balance sheet shows the balance of assets and liabilities for:
(a) A day (b) A month
(c) A year (d) None of the above

30. Statement of Profit and Loss shows the profit for:

(a) Whole year (b) A day
(c) A month (d) None of the above

31. Dividend declared and paid by a company:

(a) An expense of the company.
(b) An income of the company.
(c) The distribution of profit earned by the company.
(d) The source of fund for the company.

32. Consider the following items which appear under Reserves and Surplus of balance
sheet of a company:
(1) Statement of Profit and Loss
(2) Capital Redemption Reserve
(3) Securities premium
(4) Capital Reserve
The correct sequence of these items is:
(a) 4, 2, 3, 1 (b) 4, 3, 2, 1
(c) 1, 2, 3, 4 (d) 2, 4, 3, 2

33.What is whole dividend distribution tax rate for financial year 2017-18:
(a) 16.995% (b) 15.995% (c) 14.995% (d) None of these

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INTRODUCTION TO CORPORATE ACCOUNTING UNIQUE ACADEMY
34. Part I Schedule III of the Companies Act, 2013 prescribes:
(a) Form of balance sheet (b) Requirements as to statement of P/L
(c) Horizontal form of balance sheet (d) None of these

35. The profit before commission is ` 21,000. The commission paid to manager is 5% on
net profit. The commission will be:
(a) 1,050 (b) 1,000 (c) 2,100 (d) 1,100

36. Live-stock is shown in the balance sheet of a company as:

(a) Investment (b) In form of tangible assets
(c) Current assets (d) None of the above

37. Closing stock appearing in trial balance will be taken to:

(a) Trading account only (b) Balance sheet only
(c) Trading account and balance sheet (d) Statement of profit and loss only

38. Goodwill is shown under:

(a) None current assets : Fixed Assets – Intangible
(b) Current Assets
(c) None current Liabilities
(d) None current Assets : Fixed Assets – Tangible

39. What is the correct sequence of the following actions required for the preparation of
final accounts:
(1) Preparation of Trial Balance.
(2) Balancing of Accounts.
(3) Preparation of annual financial statements.
(4) Making adjusting entries.
Select the correct answer using the codes given below:
(a) 4, 2, 1, 3 (b) 2, 4, 3, 1
(c) 2, 1, 4, 3 (d) 4, 2, 3, 1

40. Which of the following is shown in surplus in statement of profit and loss:
(a) Provision for Income Tax (b) Provision for Depreciation
(c) Provision for Doubtful Debts (d) Contribution to General Reserve

41. Which of the following does not belong to the category of fixed assets:
(a) Loose tools (b) Machinery
(c) Furniture (d) Land and Building
42. Which of the following statements are false?
(a) When all the figures in a balance sheet are stated as percentage of the total, it is termed as
horizontal analysis.
(b) When financial statements of several years are analyzed, it is termed as vertical analysis.
(c) Vertical Analysis is also termed as dynamic analysis.
(d) None of these.
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INTRODUCTION TO CORPORATE ACCOUNTING UNIQUE ACADEMY
43. Which statements are true?
(A) When ratios of previous years are compared with current years, they are called
trend ratios.
(B) Trend percentages and trend ratios are used in static analysis.
(C) Reliability of financial analysis depends upon the reliability of financial data.
(a) Both A and B (b) Both A and C
(c) Both B and C (d) A, B, C

44. Comparison of financial statements highlights the trend of the ........... of the business.
(a) Financial position (b) Performance
(c) Profitability (d) All of the above

45. Analysis of any financial statement comprises:

(a) Balance sheet (b) P & L Account
(c) Trading account (d) All of the above

46. Which of the following statements are true?

(A) Common size balance sheet shows relative value of the various items.
(B) In the common-size income statement, each product is represented as a percentage
of the net sales figure.
(C) Common size income statements represent the various elements as a percentage of
the gross profit.
(a) Both A and B (b) Both A and C
(c) Both B and C (d) A, B, C

47. Which of the following statements are true?

(A) External analysis depends entirely on issued financial statements.
(B)Interpretation and analysis both are different.
(C) Financial analysis covers interpretation.
(a) Both A and B (b) Both A and C
(c) Both B and C (d) A, B, C

48. Which of the following are techniques, tools or methods of analysis and interpretation
of financial statements?
(a) Ratio Analysis (b) Average Analysis
(c) Trend Analysis (d) All of the above

49. Interpretation of accounts is the:

(a) Art and science of translating the figures.
(b) To know financial strengths and weaknesses of a business.
(c) To know the causes for the prevailing performance of business.
(d) All of the above.

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INTRODUCTION TO CORPORATE ACCOUNTING UNIQUE ACADEMY
50. The form of balance sheet is:
(a) Vertical (b) Horizontal
(c) Horizontal and Vertical (d) Horizontal or vertical

51. The term current asset doesn’t cover

(a) Car (b) Debtors
(c) Stock (d) Prepaid expenses

52.P & L statement is also known as:

(a) Statement of operations (b) Statement of income
(c) Statement of earnings (d) All of the above

53. Which of the following is true about financial statements?

(A)Financial statement gives a summary of accounts.
(B)Financial statements can be stated as recorded facts.
(a) Only A (b) Only B
(c) Both A and B (d) None of the above

54. Which of the following statements are true?

(A) Financial statements are only interim report.
(B) Financial statements are also known as annual records.
(C) Financial statements are historic.

(a) Both A and B (b) Both A and C

(c) Both B and C (d) A, B, C

55. Agency cost consists of:

(a) Binding (b) Monitoring
(c) Opportunity and structure cost (d) All of the above

56. Which capital is shown in B/S:

(a) Authorized Share Capital (b) Issued Share Capital
(c) Subscribed Share Capital (d) All of the above

57. The maximum amount beyond which a company is not allowed to raise funds by issue
of shares is known as:
(a) Nominal Capital (b) Issued Capital
(c) Subscribed Capital (d) None

58. Dividends are usually paid on:

(a) Authorized Capital (b) Issued Capital
(c) Called-up Capital (d) Paid-up Capital

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INTRODUCTION TO CORPORATE ACCOUNTING UNIQUE ACADEMY

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(d) (d) (a) (d) (a) (a) (a) (d) (b) (d)
11 12 13 14 15 16 17 18 19 20
(a) (b) (d) (a) (a) (a) (c) (c) (b) (b)
21 22 23 24 25 26 27 28 29 30
(d) (b) (c) (d) (c) (a) (b) (d) (a) (a)
31 32 33 34 35 36 37 38 39 40
(c) (a) (a) (a) (b) (b) (b) (a) (c) (d)
41 42 43 44 45 46 47 48 49 50
(a) (b) (d) (d) (d) (a) (d) (d) (d) (d)
51 52 53 54 55 56 57 58
(a) (b) (c) (c) (d) (d) (a) (d)

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY

3 ACCOUNTING FOR SHARE CAPITAL

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. Redemption of preference shares can not be done out of:

(a) Amount of sale of an asset (b) General Reserve
(c) Balance of Profit & Loss A/c (d) Development Fund

2. Amount of share application should not be less than........... % of face value:

(a) 5% (b) 10% (c) 75% (d) None

3. Amount of share forfeited after re-issue of shares should be transferred to:

(a) Add to Share Capital (b) Capital Reserve A/c
(c) The Head Revenue & Surplus (d) Share Forfeited A/c

4. If shares are issued at premium then, the amount of premium can be utilized.
(a) For issue of bonus shares (b) For payment of dividend
(c) For redemption of debenture (d) None

5. Value of share is ` 100 and only ` 80 called up only and a shareholder did not paid the
final call of ` 30 and his share is forfeited. On forfeiture Share Capital A/c will be
debited by:
(a) 100 (b) 80 (c) 50 (d) 70

6. Any balance remaining in Share Forfeited account after reissue of all forfeited shares
will be transferred to:
(a) Share Capital A/c (b) Goodwill A/c
(c) Capital Reserve A/c (d) General Reserve A/c

7. Time period between 2 calls should be:

(a) Minimum 15 days (b) Minimum 21 Days
(c) Minimum 1 months (d) Minimum 3 months

8. “Securities Premium A/c” is shown in B/S on:

(a) Asset side (Loan & Advances) (b) Liabilities side (Reserve & Surplus)
(c) Liabilities side (Loan & Advances) (d) Asset side (Miscellaneous Assets)

9. Profit on reissue of forfeited shares is transferred to:

(a) Profit and Loss A/c (b) Capital Reserve A/c
(c) Share Capital A/c (d) General Reserve A/c

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
10. Bonus shares can not be issued out of:
(a) Capital Redemption Reserve A/c (b) General Reserve
(c) Balance of Profit & Loss A/c (d) Dividend Equalization

11. Maximum amount that can be collected as premium as a percentage of face value:
(a) 10% (b) 20% (c) 30% (d) Unlimited

12. Maximum amount that should be called by a company with application for its shares is
the following percent of face value of shares:
(a) 2% (b) 5% (c) 10% (d) 15%

13. A company cannot issue:

(a) Redeemable Equity Shares (b) Redeemable Preference Shares
(c) Redeemable Debentures (d) Full Convertible Debentures

14. Which of the following is not a capital profit?

(a) Profit prior to incorporation of the company
(b) Profit from the sale of fixed assets
(c) Premium on issue of shares
(d) Compensation received on the termination of a contract

15. Unless otherwise stated, a preference share is always deemed to be:

(a) cumulative, participating and non-convertible
(b) non-cumulative, non-participating and non-convertible
(c) cumulative, non-participating and non-convertible
(d) non-cumulative, participating and non-convertible

16. Premium on issue of shares can be used for:

(a) issue of bonus shares (b) payment of dividend
(c) payment of operating expenses (d) redemption of debentures

17. The rate of interest paid on calls in advance as per Table F is:
(a) 5% p.a. (b) 6% p.a. (c) 10% p.a. (d) 12% p.a.

18. The document inviting offers from public to subscribe for the debentures or shares or
deposits of a company is a:
(a) Share Certificate (b) Articles of Association
(c) Fixed Deposit Receipt (d) Prospectus

19. When shares are issued to promoters for their services, the account that will be debited
is:
(a) Preliminary Expenses A/c (b) Goodwill A/c
(c) Promoters A/c (d) Share Capital A/c

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
20. The maximum amount beyond which a company is not allowed to raise funds, by issue
of shares, is its:
(a) Issued Capital (b) Reserve Capital
(c) Authorized Capital (d) Subscribed Capital

21. Share Premium Account should be shown in the:

(a) Trading A/c (b) Profit and Loss A/c
(c) Assets side of the Balance Sheet (d) Liabilities side of the Balance Sheet

22. Which of the following should be deducted from the share capital to find out paid-up
capital?
(a) Calls-in-advance (b) Calls-in arrears
(c) Share forfeiture (d) Discount on issue of shares

23. Which of the following does not appear under the head „share capital‟ of a balance
sheet?
(a) Preference Share Capital (b) Share Forfeiture A/c
(c) Equity Share Capital (d) Capital Reserve A/c

24. Which of the following statements is true regarding calls-in-arrears?

(a) Calls-in-arrears is that part of called-up capital which remains unpaid.
(b) It is not shown in the balance sheet until the defaulted shares are forfeited.
(c) The rate of interest on calls-in-arrear is chargeable at 5% p.a. if a company adopts Table
F.
(d) Charging of interest on calls-in arrear need not be permitted by the articles of association.

25. Which one of the following is known as Registered Capital of the Company?
(a) Paid-up Capital (b) Authorized Capital
(c) Uncalled Capital (d) Reserve Capital

26. The directors of B Ltd. made the final call of ` 30 per share January 15, 2004
indicating the last date of payment of call money to be January 31, 2004. Mr. C holding
7,500 shares paid the call money on March 15, 2004. If the company adopts Table F of
the Companies Act the amount of interest on calls – in – arrear to be paid by Mr. C is?
(a) ` 1937.50 (b) ` 1,406.00 (c) ` 2812.50 (d) ` 1,687.50

27. O Ltd. issued 10,000 equity shares of ` 10 each at a premium of 20% payable ` 4 on
application (including premium) ` 5 on allotment and the balance on first and final
call. The company received applications for 15,000 shares and allotment was made pro-
rata P. to whom 3,000 shares were allotted failed to pay the amount due to allotment.
All his shares were forfeited before the call was made. The forfeited shares were
reissued to Q at par. Assuming that no other bank transactions took place, the bank
balance of the company after effecting the above transactions is?
(a) ` 1,14,000 (b) ` 1,32,000 (c) ` 1,20,000 (d) ` 1,00,000

Mob No - 8007916622/33 3.3

ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
28.A company forfeited 2,000 shares of ` 10 each (which were issued at par) held by Mr.
John for non-payment of allotment money of ` 4 per share. The called-up value per
share was ` 9. On forfeiture, the amount debited to share capital A/c is?
(a) ` 10,000 (b) ` 8,000 (c) ` 2,000 (d) ` 18,000

29.G. Ltd acquired assets worth 7,50,000 from H. Ltd by issue of shares of ` 100 at a
premium of 25%. The number of shares to be issued by G. Ltd. to settle the purchase
consideration is?
(a) 6,000 Shares (b) 7,500 shares (c) 9,375 shares (d) 5,625 shares

30. B. Ltd., a listed company, proposed to issue 1,00,000 equity shares of ` 10 each at par
by way of private placement. The maximum amount of brokerage that can be paid by
the company is?
(a) 5,000 (b) 10,000 (c) 50,000 (d) 25,000

31. UK Ltd. issued 20,000 shares of ` 10 each at a premium of 20% on May 01, 2004,
payable as follows:
On application ` 4.50 (inclusive of premium)
On allotment ` 2.50
On first final call ` 5.00
Mr. M, to whom 1,000 shares were allotted, has paid ` 5,000 on June 01, 2004. At the
time of remitting the allotment money, she indicated that the excess money should be
adjusted towards the call money. The directors of the company made the first and final
call on October 31, 2004. The company has a policy of paying interest on calls-in-
advance. The amount of interest paid to Mrs. M on calls-in-advance is?
(a) 62.00 (b) 52.08 (c) 250.00 (d) 150.00

32. Z. Ltd. issued 10,000 shares of ` 10 each. The called up value per share was ` 8. The
company forfeited 200 shares of Mr. A for non-payment of 1st call money of ` 2 per
share. He paid ` 6 for application and allotment money. On forfeiture, the share
capital account will be:
(a) Debited by ` 2,000 (b) Debited by ` 1,600
(c) Credited by ` 1,600 (d) Debited by ` 1,200

33.B Ltd. invited application for 5,000 shares of ` 10 each at a premium of ` 2 per share
payable as follows:
On application ` 5 (including of premium)
On allotment `4
On final call `3
Allotment was made on pro rate basis to the applicants of 6,000 shares. Mr. C to whom
60 shares were allotted, failed to pay allotment money and call money. Mr. D the
holder of 100 shares, failed to pay call money. All these shares were forfeited after
proper notice.
(i) On forfeiture, the amount credited to share allotment account is?
(a) ` 480 (b) ` 640 (c) ` 180 (d) ` 400

Mob No - 8007916622/33 3.4

ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
(ii) On forfeiture, the amount credited to share forfeiture account is?
(a) ` 300 (b) ` 880 (c) ` 320 (d) ` 940

34. When shares are forfeited, the Share Capital Account is debited with ….. and the
Share Forfeiture Account is credited with ……
(a) Paid-up capital of shares forfeited ; Called up capital of shares forfeited.
(b) Called up capital of shares forfeited ; Calls in arrear of shares forfeited.
(c) Called up capital of shares forfeited ; Amount received on shares forfeited.
(d) Calls in arrears of shares forfeited ; Amount received on shares forfeited.

35. The following statements apply to equity / preference shareholders. Which one of them
applies only to preference shareholders?
(a) Shareholders risk the loss of investment.
(b) Shareholders bear the risk of no dividends in the event of losses.
(c) Shareholders usually have the right to vote.
(d) Dividends are usually given at a set amount in every financial year.

36. Interest on amount of calls in advance can not be more than:

(a) 5% per annum (b) 6% per annum
(c) 10% per annum (d) 12% per annum

37. The amount of capital that is mentioned in „Capital clause‟ is known as:
(a) Authorized Capital (b) Registered Capital
(c) Nominal Capital (d) All of these

38. That portion of called up capital which is not received is known as:
(a) Uncalled capital (b) Unpaid calls
(c) Reserved capital (d) None of these

39. The minimum subscription as prescribed by SEBI against the entire issue is:
(a) 95% (b) 90% (c) 5% (d) None of these

40. The amount called over and above the nominal value of share should be credited to:
(a) Share premium A/c (b) Share capital A/c
(c) Share Allotment A/c (d) None of these

41. The excess of the nominal value over the issue price presents:
(a) Premium on shares (b) Discount on share
(c) Forfeiture of shares (d) None of these

42. Pro-Rata allotment is done in case of:

(a) Full subscription (b) Oversubscription
(c) Under subscription (d) Shares issued at premium

Mob No - 8007916622/33 3.5

ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
43. Share application account is of the nature of a:
(a) Real A/c (b) Personal A/c
(c) Nominal A/c (d) None of the above

44. Balance of share premium account can not be used for:

(a) Issuing of fully paid bonus shares (b) Writing off preliminary expenses
(c) Writing off discount of issue of shares(d) Writing off goodwill

45. The company charges interest on calls in arrear at rate of:

(a) 6% (b) 10% (c) 5% (d) 14%

46. If the Premium of the forfeited share has already been received, then share Premium
A/c should be:
(a) Credited (b) Debited
(c) Cannot be cancelled (d) None of these

47. What percentage of shares issued to the public must be subscribed so that the shares
can be allotted?
(a) 75% (b) 50% (c) 90% (d) None of these

48. The minimum share application is:

(a) ` 2 per share (b) 5% of nominal value of shares
(c) 10% of nominal value of shares (d) 15% of nominal value of shares

49. Which account will be credited if the gain on forfeiture is more than the loss on
reissue?
(a) Capital Reserve (b) Profit & Loss
(c) General Reserve (d) Share Forfeiture

50. The subscribed capital of a company is ` 80,00,000 and the nominal value of the share
is ` 100 each. There were no calls in arrear till the final call was made. The final call
made was paid on 77,500 shares only. The balance in the calls in arrear amounted to `
62,500. Calculate the final call on share.
(a) 7 (b) 20 (c) 22 (d) 25

51. On the forfeiture of shares, the share capital will be debited by:
(a) Paid up value (b) Called up value
(c) Uncalled capital (d) Nominal value

52. If the shares are issued at a premium and the amount of premium has been received,
then what will be the treatment of the premium amount at the time of forfeiture?
(a) Debit Security Premium A/c (b) Debit Capital Reserve A/c
(c) Credit Security Premium A/c (d) No treatment

Mob No - 8007916622/33 3.6

ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
53. As per Section 52, the balance standing in the securities premium account cannot be
utilized for:
(a) Payment of dividend (b) Writing of discount on issue of shares
(c) Issue of fully paid Bonus Shares (d) None of these

54. Voluntary return of shares for cancellation by the shareholders is called:

(a) Cancellation of shares (b) Forfeiture
(c) Surrender of shares (d) None of these

55. Balance in the share forfeiture account appears in the balance sheet under the head of:
(a) Share Capital (b) Reserve & Surplus
(c) Current Liabilities (d) None of these

56. The statement issued to the public for issue of shares is called as:
(a) Statement in lieu of prospectus (b) Prospectus
(c) Articles of association (d) None of the above

57. Right shares are issued to:

(a) The existing shareholders (b) Promoters
(c) Employees (d) Vendor

58. Share allotment account is:

(a) Personal A/c (b) Nominal A/c
(c) Real A/c (d) All of the above

59. If the shares are issued to the promoters, then which account will be debited?
(a) Promoters A/c (b) Share Capital A/c
(c) Goodwill A/c (d) P & L A/c

60.A company forfeited 5,000 shares of ` 10 each held by A for non-payment of allotment
money of ` 4 per share. The called up value per share is ` 8. Calculate the amount to
be debited to the share capital A/c at the time of forfeiture of such shares.
(a) 28,000 (b) 40,000 (c) 18,000 (d) None of these

61. A vendor has been allotted shares of ` 5,00,000 then the balance of ` 50,000 will be
considered as:
(a) Goodwill (b) Capital Reserve (c) Loss (d) Profit

62. ABC Ltd. acquired the assets worth ` 10,00,000 from XYZ Ltd. by issuing shares of `
10 each at a premium of ` 10 each. Calculate the number of shares to be issued to settle
the liability:
(a) ` 50,000 (b) ` 1,00,000 (c) ` 5,000 (d) ` 10,000

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
63. ABC Ltd. allotted 20,000 shares to the applicants of 28,000 shares on pro-rata basis. If
the application money is ` 5 per share, calculate the number of shares allotted to Ram
and also the amount to be adjusted from further calls if he has applied for 840 shares.
(a) 800 shares, ` 1,200 (b) 600 shares, ` 800
(c) 600 shares, ` 1,800 (d) 600 shares, ` 1,200

64. If a share of ` 100 on which ` 80 has been paid is forfeited, then calculate the minimum
price at which it can be re-issued.
(a) ` 80 (b) ` 100 (c) ` 20 (d) ` 50

65. A company has issued 50,000 shares of ` 10 each at 20% premium payable as follows:
Application ` 3, Allotment ` 5 (including premium) and first & final call of ` 4 each. A
holder of 2,500 shares failed to pay the first & final call and his shares were forfeited
thereafter. Calculate the amount to be credited to the share forfeiture A/c.
(a) ` 11,000 (b) ` 15,000 (c) ` 22,000 (d) None of these

66. Which of the following statement is true?

(a) Authorized Capital = Issued Capital
(b) Authorized Capital > Issued Capital
(c) Paid up Capital > Issued Capital
(d) None of the above

67. Which of the following will define, when appropriation of a certain number of shares is
made to an applicant in response to his application?
(a) Share allotment (b) Share forfeiture
(c) Share trading (d) Share purchase

68. P. Ltd. forfeited 150 shares of ` 10 each, issued at a premium of ` 2, for non-payment
of the final call of ` 3.out of these, 100 shares were reissued @ ` 11 per share. How
much amount would be transferred to capital reserve?
(a) ` 700 (b) ` 500 (c) ` 1,200 (d) ` 300

69. If the number of shares offered to public for subscription is less than the number of
applications received, it is termed as:
(a) Minimum subscription (b) Over subscription
(c) Under subscription (d) Maximum subscription

70. XY Limited issued 2,50,000 equity shares of ` 10 each at a premium of ` 1 each

payable as ` 2.5 on application, ` 4 on allotment and balance on the first and final call.
Applications were received for 5,00,000 equity shares but the company allotted to them
only 2,50,000 shares. Excess money was refunded after adjustment for further calls.
Last call on 500 shares were not received ajid shares were forfeited after due notice.
This is a case of:
(a) Oversubscription (b) Pro-rata allotment
(c) Forfeiture of shares (d) All of the above

Mob No - 8007916622/33 3.8

ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
71. Z limited forfeited 200 fully called up shares of ` 10 each on which 1,300 had been
received. Later on these shares were reissued as fully paid @ ` 9 per share. The
amount to be transferred from share forfeited account to capital reserve account will
be:
(a) ` 1,800 (b) ` 2,000 (c) ` 1,100 (d) Nil

72. Omega Limited, a listed company acquires assets worth ` 7,50,000 from Alpha Limited
and issue shares of ` 10 each at premium of 25%. The number of shares to be issued by
Omega Ltd., to settle the purchase consideration will be:
(a) ` 60,000 (b) ` 75,000 (c) 1,00,000 (d) 1,25,000

73. E Ltd. had allotted 10,000 shares to the applicants of 14,000 shares on pro-rata basis.
The amount payable on application was ` 2. F applied for 420 shares. The number of
shares allotted and the amount carried forward for adjustment against allotment
money due from F will be:
(a) 60 shares ; ` 120
(b) 340 shares ; ` 160
(c) 320 shares ; ` 200
(d) 300 shares ; ` 240

74. A company forfeited 1,000 shares of ` 10 each (which were issued at par) held by
Saurabh for non-payment of allotment money of ` 4 per share. The called-up value per
share was ` 8. On forfeiture, the amount debited to share capital account will be:
(a) ` 10,000 (b) ` 8,000 (c) ` 2,000 (d) ` 18,000

75. The maximum amount beyond which a company is not allowed to raise funds by issue
of its shares, is called:
(a) Subscribed capital (b) Called-up capital
(c) Paid-up capital (d) Authorized capital

76. Pious Limited purchases a machine worth ` 1,15,000 from Indigo Traders. Payment
was made as ` 10,000by cheque and the remaining by issue of equity shares of the face
value of ` 10 each fuly paid-up at an issue price of ` 10.50 each. Amount of share
premium would be:
(a) ` 6,000 (b) ` 5,000 (c) ` 7,000 (d) ` 4,000

77. A company invited share application of 5,000 shares, it received application of 6,000
shares and were allotted shares on prorate basis, 200 shares were forfeited. To which of
the following does this case belong:
(a) Prorata (b) Oversubscription
(c) Forfeiture (d) All of the above

78.X failed to pay final call on 24,000 shares ` 20 per share on 15.12.2013 and paid the
same on 15.03.2014. What is the interest of calls in arrears.
(a) 12,000 (b) 6,000 (c) 6150 (d) 6,250

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
79. Company cannot issue shares more than:
(a) Authorized Capital (b) Subscribed Capital
(c) Issued Capital (d) Paid up Capital

80. Premium received on re-issue of forfeited share should be:

(a) Debit to share forfeited A/c (b) Credit to share forfeited A/c
(c) Credit to securities premium A/c (d) None

82. Ltd. forfeited 700 shares of ` 10 each (9 called up) on which he paid up 7 per share.
Out of these 200 shares were re-issued at ` 9. Calculate the amount credited to Share
Capital A/c at time of re-issued?
(a) ` 6,300 (b) ` 4,300 (c) ` 1,800 (d) ` 2,000

83. Y Ltd. forfeited 300 shares of ` 10 each for non-payment of allotment money of ` 4,
first call and second call of ` 2 each. All the shares were re-issued @ ` 10 paid up.
Calculate the amount transferred to capital reserve.
(a) ` 800 (b) ` 900 (c) ` 1,800 (d) ` 2,000

83. Gas Ltd. issued 1,00,000 equity shares of ` 10 payable as follows:

` 3 on application, ` 3 on allotment, ` 2 on first call and ` 2 on second and final call.
The Company received application for 1,50,000 shares. The allotment was made as
under Applicant for 50,000 shares were allotted in full. Applicant for 80,000 shares
were allotted 50,000 shares on pro-rata basis and applicants for 20,000 shares were
rejected. The amount of excess application money available for adjustment against
allotment is:
(a) ` 50,000 (b) ` 90,000 (c) ` 60,000 (d) ` 40,000

84. Dabur Ltd. forfeited 400 shares of ` 10 each fully called up on which the holder has
paid only application money at ` 4 per share. Out of these 250 shares were re-issued at
` 12 per share fully paid up. Capital reserve will be credited by:
(a) ` 3,000 (b) ` 1,600 (c) ` 4,800 (d) ` 1,000

85. A new company wants to issue share at premium. The maximum rate of premium will
be:
(a) No limit (b) 10% (c) 30% (d) 15%

86. Forfeited shares account (not yet re-issued) shown under the heading ……..
(a) Current liabilities (b) Reserves and surplus
(c) Share capital (d) Long-term borrowings

87.Pious Limited purchases a machine worth ` 1,15,000 form Indigo Traders. Payment
was made as ` 10,000 by cheque and the remaining by issue of equity shares of the face
value of ` 10 each fully paid-up at an issue of ` 10.50 each. Amount of share premium
would be:
(a) ` 5,000 (b) ` 6,000 (c) ` 7,000 (d) ` 4,000

Mob No - 8007916622/33 3.10

ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
88. As per Section 52 of the Companies Act, 2013, the securities premium reserve can be
utilized for the purpose of:
(a) Redemption of preference shares.
(b) Transfer of amount to capital redemption reserve.
(c) Payment of dividend on preference shares.
(d) Payment of premium on redemption of preference shares.

89. Which of the following statement is not correct?

(a) Equity shares are convertible.
(b) Equity shares have voting rights.
(c) Equity shares are also known as ordinary shares.
(d) Equity shareholders get dividend.

90. XYZ limited issued 20,000 shares of ` 10 each. It received applications for 24,000
shares. Shares were allotted to all shareholders proportionately. The application money
was ` 6 and allotment and call money was ` 4 per share. Ram who was allotted 300
shares could not pay the allotment money. The money due to Ram would be:
(a) ` 1,800 (b) ` 1,200 (c) ` 1,440 (d) ` 840

91. Star Ltd. issued 80,000 equity shares of ` 10 each. The money was payable as ` 3 on
application, ` 4 on allotment, ` 2 on first call and ` 1on final call. The applications
were received for 1,20,000 shares. Applicants of 20,000 shares were allotted in full.
Applicants of 80,000 shares were allotted 60,000 shares on prorate basis and
applications for 20,000 shares were rejected. Amount to be refunded by the company
is:
(a) Nil (b) ` 1,80,000 (c) ` 60,000 (d) ` 1,20,000

92. Large Ltd. issued 25,000 equity shares of ` 100 each at premium of ` 15 each payable
as ` 25 on application, ` 40 on allotment and balance in the first call. The applications
were received for 75,000 equity shares. The above is the case of:
(a) Forfeiture of shares (b) Pro-rata allotment
(c) Over-subscription (d) Under-subscription

93. Which of the following statement is not true:

(a) When the shares are forfeited securities premium is debited along with share capital
where premium has not been received.
(b) Where all the forfeited shares are not re-issued the share forfeited account will show a
credit balance equal to gain on forfeiture of shares not yet re-issued.
(c) Loss on re-issue of shares cannot be more than the gain on forfeiture of those shares.
(d) Where forfeited shares are re-issued at premium, the amount of such premium is credited
to capital reserve account.

94. The amount paid in advance by a shareholder is called:

(a) Called up capital (b) Prepaid capital
(c) Calls in advance (d) Unpaid capital

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
95. Nominal capital is also known as …….
(a) Authorized capital (b) Issued capital
(c) Preference capital (d) None of the above

96.A company forfeited 100 equity shares of ` 100 each issue at premium of 50% on which
first call of ` 30 per share was not received, final call of ` 20 is yet to be made. These
shares were subsequently reissued @ 70 per share @ ` 80 paid up. The amount
credited to capital reserve:
(a) ` 4,000 (b) ` 2,000 (c) ` 3,000 (d) None

97.A company issued 5000 shares. Application were received for 6000 shares and
company made pro-rata allotment. D a shareholder was allotted 600 shares. Find the
applied no. of shares by him:
(a) 820 (b) 720 (c) 900 (d) 800

98. A company issued ` 9,00,000 shares. Offer came for ` 8,50,000 shares. Face value is `
10 per share. Application ` 2, allotment is ` 4 balance in 2 equal calls. Amount
transferred to share capital:
(a) 90,00,000 (b) 85,00,000 (c) 80,00,000 (d) 1,00,00,000

99. If a company issued ` 10,000, the application is received for ` 12,000 shares, company
made pro-rata allotment for applicants of ` 6,000 and allotted them ` 5,000 shares.
Rest applicants were allotted in full amount adjusted against allotment is it application
is for ` 2?
(a) ` 2,000 (b) ` 1,000 (c) ` 3,000 (d) ` 1,500

100. D/P limited issued 10,000 equity shares of ` 10 each at a premium of 20%. The share
amount was payable as ` 2 on application ` 5, o allotment (including premium) ` 3 on
first call and ` 2 on second and final call. Application were received for 14,000 shares
and share were allotted to applicants on pro-rata basis. “E” who was allotted 3,000
shares failed to pay the first call. On his subsequent failure to pay the second and final
call, all his shares were forfeited. Out of the forfeited shares 200 shares were reissued
at the rate of ` 9 share. The amount transferred to capital reserve is:
(a) ` 200 (b) ` 1,100 (c) ` 800 (d) `1,300

101. A Company issues shares of ` 10 each at a premium of ` 2. The amount was payable
as on application of ` 3, on allotment ` 4 (including premium), on 1st call ` 3 and on
second and final. All ` 2 Mr. E who holds 100 shares failed to pay first call money.
The Company has forfeited 100 shares after the first call on forfeiture, the amount
debited to share capital account will be:
(a) ` 700 (b) ` 1,200 (c) ` 1,000 (d) ` 800

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
102. A Company invited application for 20,000 shares and it received 60,000 applications.
The shares were allotted as per details given below. Category A – shares applied
40,000 shares allotted 10,000. Category B – shares applied 15,000 shares allotted
10,000. Category C – shares applied 5,000 shares allotted nil. Ram lies in category B
and has been allotted 300 shares. The number of shares applied by him would be:
(a) 100 (b) 450 (c) 300 (d) 200

103. Which of the following statement in false about calls in advance?

(a) According to Table F, maximum interest on calls in advance is paid @ 12% p.a.
(b) Payment of interest on calls in advance is at the discretion of the company.
(c) Interest on calls in advance is paid from the date of receipt of calls upto the data of
relevant call.
(d) Calls in advance are not entitled for any dividend.

104. Which of the following statement is true?

(a) Reserve capital can’t be called when required.
(b) In case of under subscription pro-rata allotment can be made.
(c) A Co. can’t issue shares at a discount.
(d) Authorized capital can never be less than subscribed capital.

105. A Ltd. Company forfeited 1000 equity shares of ` 10 each, issued at a premium of
10% for non-payment of first call of ` 2 and second call of ` 3 share. For recording
this forfeiture, calls-in-error A/c will be credited by:
(a) ` 10,000 (b) ` 4,000 (c) ` 5,000 (d) ` 7,000

106. As per Companies Act, 2013 the interest on calls-in-advance in paid for the period
from the:
(a) Date of receipt of allotment money to the date of appropriation.
(b) Date of receipt of calls-in-advance to the date of appropriation of the call.
(c) Date of receipt of application money to the date of appropriation.
(d) Date of appropriation to the date of dividend payment.

107. The maximum amount beyond which a company is not allowed to raise funds by issue
of its shares (on face value) is called:
(a) Authorized Capital (b) Called-up-Capital
(c) Paid-up Capital (d) Subscribe Capital

108.Biscuits Limited invited applications for 5000 shares of ` 10 each at a premium of ` 2

share. The amount was payable as ` 5 (including premium) on applicants, ` 4 on

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
allotment and ` 3 on final call allotment was made on prorate bases to the application
of 6000 shares. Mr. C to whom 60 shares were allotted, failed to pay allotment money
and call money. Mr. D the holder of 100 share, failed to pay the call money. All these
shares were forfeited after proper notice of forfeiture, the amount credited to share
forfeiture account will be:
(a) ` 300 (b) ` 880 (c) ` 940 (d) ` 940

109.When there is an increase in the minimum capital with which the company is
registered is to be altered.
(a) Memorandum of association (b) Article of association
(c) Paid up Capital (d) Subscribed capital

110. Star Ltd. issued 80,000 equity shares of ` 10 each. The money was payable as ` 3 on
application, ` 4 on allotment, ` 2 on first call and ` 1 on final call. The applications
were received for 1,20,000 shares, Applicants of 20,000 Shares were allotted in full.
Applicants of 80,000 were allotted 60,000 shares on pro-rata basis and applications
for 20,000 shares were rejected. Amount to be refunded by the company is:
(a) ` 1,80,000 (b) ` 60,000 (c) Nil (d) ` 1,20,000

111. A shareholder does not pay his dues on allotment. For the amount due, there will be a …..
(a) Debit balance in the share allotment account.
(b) Credit balance in the share allotment account.
(c) Credit balance in the share forfeiture account.
(d) Debit balance in the share forfeiture account.

112. Oil Ltd. issued 1,00,000 equity shares of ` 100 each. The money was payable as
follows:
On application ` 20, on allotment ` 30, on first call ` 20 and on second and final call `
30. Applications were received for 2,00,000 shares and pro-rata allotment was made
to applicants of 1,50,000 shares. Excess money received on application was utilized
towards allotment money. The amount adjusted towards allotment is:
(a) ` 10,00,000 (b) ` 20,00,000 (c) ` 18,00,000 (d) ` 15,00,000

113.Which of the following statement is true?

(a) A company cannot reissue shares at discount.
(b) Reserved capital cannot be called when required.
(c) Authorized capital can never be less than issued capital.
(d) In case of under subscription pro-rata allotment can be made.

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
114.The discount allowed on re-issue of forfeited shares is debited to ……….
(a) General reserve account (b) Share forfeiture account
(c) Capital reserve account (d) Revaluation reserve account

115.XY Limited issued 2,50,000 equity shares of ` 10 each at a premium of ` 1 each

payable as ` 2.5 on Application ` 4 on allotment and balance on the first and final
call. Application will received for 5,00,000 equity shares but the company allotted to
them only 2,50,000 shares. Excess money was refunded after adjustment for further
calls. Last call on 5000 shares were not received and share were forfeited after due
notice. This is a case of:
(a) Oversubscription (b) Pro-rata allotment
(c) Forfeiture of shares (d) All of the above

116. Z Limited forfeited 200 fully called up shares of ` 10 each on which ` 1,300 had been
received later on these shares were reissued as fully paid up @ ` 9 per share. The
amount to be transferred from share forfeited account to capital reserve account will
be:
(a) ` 1,800 (b) ` 2000 (c) ` 1,100 (d) Nil

117. Omega Limited, a listed company acquires assets worth ` 7,50,000 from Alpha
Limited and issue shares of ` 10 each at premium of 25%. The number of shares to be
issued by Omega Ltd. to settle the purchase consideration will be:
(a) 60,000 (b) 75,000 (c) 1,00,000 (d) 1,25,000

118. E Ltd. had allotted 10,000 shares to the applicants of 14,000 shares on pro-rata basis.
The amount payable on application was ` 2. F applied for 420 shares. The number of
shares allotted and the amount carried forward for adjustment against allotment
money due from F will be:
(a) 60 shares ` 120 (b) 340 shares ` 160
(c) 320 shares ` 200 (d) 300 shares ` 240

119. According to Sec-55 of Companies Act, 2013, a company cannot redeem its preference
shares out of:
(a) Revenue Profits.
(b) Net proceeds of fresh issue of shares.
(c) Partly out of revenue profits and partly out of net proceeds of fresh issue of shares.
(d) Out of redemption.

120. Redeemable preference shares of 2,00,000 are redeemed at par for which purpose,
fresh equity shares are issued for ` 80,000 at 10% premium. The amount to be
transferred to Capital Redemption Reserve will be:
(a) 80,000 (b) 1,20,000 (c) 2,00,000 (d) 1,12,000

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
121.Which of the following accounts can be transferred to Capital Redemption Reserved
A/c?
(a) General Reserve A/c (b) Forfeited Share A/c
(c) Profit prior to incorporation (d) Share Premium A/c

122.Which of the following accounts can be transferred to Capital Redemption Reserved

A/c?
(a) General Reserve A/c (b) Forfeited Share A/c
(c) Profit prior to incorporation (d) Share Premium A/c

123.If preference shares are redeemed at premium, such premium may be provided out
of:
(a) Share Forfeited A/c (b) Security Premium A/c
(c) Proceeds of fresh issue of shares (d) CRR A/c

124.S Ltd. issued 2000, 10% preference shares of 00 each at par, which are redeemable at
a premium of 10%. For the purpose of redemption, the company issued 1,500 equity
shares of ` 100 each at a premium of 10%. At the time of redemption of preference
shares, the amount to be transferred by the company to CRR will be:
(a) ` 50,000 (b) ` 45,000 (c) ` 55,000 (d) ` 60,000

125. T Ltd. issued 30,000, 12% preference shares of ` 10 each at a premium of 5%

which are redeemable at par. The company, since it did not have sufficient cash
resources to redeem the preference shares, issued 20,000, 14% debentures of ` 10
each at a premium of 10%. The amount to be transferred to CRR will be:
(a) ` 85,000 (b) ` 1,00,000 (c) ` 3,00,000 (d) ` 1,10,000

126. Preference shares amounting to ` 2,50,000 are redeemed at a premium of 5% by issue

of shares amounting to ` 1,50,000 at a premium of 10%. The amount to be
transferred to CRR will be:
(a) ` 1,05,000 (b) ` 1,00,000 (c) ` 2,00,000 (d) ` 1,11,000

127. The balance appearing in the books of company at the end of the year were:
CRR A/c ` 50,000
Security Premium ` 5,000
Revaluation Reserve ` 2,000
P/L A/c (Dr.) `10,000
Maximum amount available for distribution as bonus shares will be:
(a) ` 50,000 (b) ` 55,000 (c) ` 45,000 (d) ` 1,57,000

128. Which of the following method cannot be used to redeem the preference shares?
(a) Capitalization of undistributed profits.
(b) Proceeds of fresh issue of shares.
(c) Both (a) and (b).
(d) The proceeds from issue of debentures.

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
129. Which of the following statement is false?
(a) A company has to redeem its preference shares within 20 years.
(b) Preference Shareholders are creditors of the company.
(c) The part of authorized capital which can be called up only in the event of liquidation of
a company is called reserve capital.
(d) Capital Redemption Reserve can be utilized only for issuing fully paid bonus shares.

130. On redemption of preference shares, money cannot be arranged (for payment to

shareholders) from:
(a) issue of new shares (b) sale of investment
(c) sale of fixed asset (d) bank loan or overdraft

131.Share premium cannot be used to ……

(a) issue bonus shares (b) redeem preference shares
(c) write off preliminary expense (d) write off discount on issue of shares

132.Preference shares can be redeemed:

(a) Even if they are partly paid (b) After getting permission from the court only
(c) Only if they are fully paid (d) All of the above

133.The preference share which carry the right of participating in the surplus left after
paying the equity dividend are called:
(a) Convertible Preference Shares (b) Cumulative Preference Shares
(c) Participating Preference Shares (d) All of the above

134. Redeemable preference shares must be redeemed within:

(a) 5 years (b) 20 years (c) 15 years (d) 10 years

135. Irredeemable preference shares:

(a) Cannot be issued at all.
(b) Can be issued after taking permission from the ROC.
(c) Can be issued after taking approval of the Central Government.
(d) Can be issued after obtaining the permission of the court.

136. ` 10,00,000 preference shares are to be redeemed by issue of 8,000 equity shares @ `
100 each for ` 120 each. Then, the Capital Redemption Reserve is to be credit by:
(a) ` 4,00,000 (b) ` 10,00,000 (c) ` 8,00,000 (d) ` 2,00,000

137.Preference shares can be redeemed from:

(a) Out of profits
(b) Proceeds of fresh issue of equity shares
(c) Proceeds of fresh issue of preference shares
(d) All of the above

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
138.If the preference shares are redeemed at a premium, then the premium payable on
redemption is provided out of:
(a) Securities Premium Account (b) Profit of the Company
(c) Both (a) and (b) (d) Neither (a) nor (b)

139.When the shares are redeemed out of profit then an amount equal to the nominal
value of such shares is transferred to:
(a) General Reserve (b) Capital Redemption Reserve
(c) Capital Reserve (d) Securities Premium

140. The maximum fine which can be charged on the company or its members for
noncompliance of section 55 is:
(a) ` 1,00,000 (b) ` 10,000 (c) ` 5,000 (d) ` 25,000

141. Which of the following statement is false?

(a) Capital Redemption Reserve can be applied for issuing bonus shares of the company.
(b) Partly paid up shares can be redeemed.
(c) Both (a) and (b).
(d) Neither (a) not (b).

142. A company cannot issue redeemable preference shares for a period exceeding:
(a) 6 years (b) 7 years (c) 8 years (d) 20 years

143. Solid Ltd. issued 2,000, 10% preference shares of ` 100 each at par, which are
redeemable at a premium of 10%. For the purpose of redemption, the company issued
1,500 equity shares of ` 100 each at a premium of 20% per share. At the time of
redemption of preference shares, the amount to be transferred by the company to the
Capital Redemption Reserve Account will be:
(a) ` 50,000 (b) ` 40,000 (c) ` 2,00,000 (d) ` 2,20,000

144. Which of the following accounts cannot be transferred to capital redemption reserve
account?
(a) Dividend equalization account (b) General reserve
(c) Profit and loss appropriation account (d) Securities premium reserves

145. Which of the following cannot be utilized for redemption of preference share?
(a) General Reserve
(b) Capital Reserve
(c) Credit balance of profit and loss account
(d) Dividend equalization account.

146. Solid Ltd. issued 2000, 10% preference shares of ` 100 each at par, which are
redeemable at a premium of 10% for the purpose of redemption the company issued
1500 equity shares of ` 100 each at a premium of 20% per share. At the time of

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
redemption of preference shares, the amount to be transferred by the company to the
capital redemption reserve account will be:
(a) ` 50,000 (b) ` 2,20,000 (c) ` 2,00,000 (d) ` 40,000

147. Capital Redemption Reserve A/c is prepared when:

(a) Redemption is done out of issue of fresh shares.
(b) Redemption is done out of profit of the company.
(c) Redemption is done through company’s capital fund.
(d) All of the above.

148. During the year 2008-2009. Tin Ltd. issued 20,000, 12% preference shares of ` 10
each at a premium of 5%, which are redeemable after 4 years at par. During the year
2012-2013, as the company did not have sufficient cash resources to redeem the
preference shares, it issued 10,000, 14% preference shares of ` 10 each at a premium
of 10%. At the time of redemption of 12% preference shares, the amount to be
transferred to capital redemption reserve would be:
(a) ` 2,00,000 (b) ` 1,10,000 (c) ` 90,000 (d) ` 1,00,000

149. A company cannot issue redeemable preference shares for a period exceeding:
(a) 6 years (b) 7 years (c) 8 years (d) 20 years

150. S Ltd. issued 8,000, 10% preference shares of ` 100 each at par which is redeemable
at premium of 10% company issued 1500 equity shares of ` 100 each @ 20%
premium per share. The amount transferred by company to CRR A/c will be:
(a) 1,50,000 (b) 2,00,000 (c) 2,50,000 (d) None of above

151. Premium on redemption of redeemable preference shares can be paid out of:
(a) Capital Redemption Reserve Account
(b) Existing Shares Premium Account
(c) Proceed of fresh issue of shares
(d) All of the above

152. Underwriting commission payable on the shares taken up by the promoters is:
(a) 2.5% (b) 2% (c) 5% (d) Nil

153. Preference shareholders are:

(a) Creditors of company (b) Owners of company
(c) Customers of company (d) Employees of the company

154.The buyback of shares should the completed within period from the date of passing
the special resolution:
(a) 12 months (b) 24 months (c) 1 months (d) 15 months

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
155. Bonus shares are issued by the companies because?
(a) Surplus cash is available.
(b) There are heavy accumulated general reserve.
(c) There is heavy competition from similar companies.
(d) They have high gross profit ratio.

156. The share capital of a company consists of:

(a) Equity and preferences shares (b) Equity shares
(c) Preference shares (d) Deferred shares

157.Shareholders are:
(a) Customers of the company (b) Owners
(c) Creditors (d) None of these

158.Authorized capital clause is written in:

(a) Memorandum of association (b) Articles of association
(c) Prospectus (d) None of the above

159.That portion of the uncalled capital which can be called up only winding up of the
company called:
(a) Authorized capital (b) Issued capital
(c) Subscribed capital (d) Reserve capital

160. On an equity shares of ` 10 the minimum amount of share application under the law
should be:
(a) ` 5.00 (b) ` 7.00 (c) ` 8.00 (d) ` 9.00

161. Shares can be issued:

(a) At discount (b) At premium
(c) At par (d) All of the above

162. A company can issue its shares at premium under the provisions of following Section
of companies Act:
(a) 50 (b) 51 (c) 52 (d) 53
163. Securities premium can not be applied:
(a) For paying dividend to members.
(b) For issuing bonus shares to members.
(c) For writing off preliminary expenses of company.
(d) For writing off discount on issue of debentures.
164. Premium received on issue of shares account is shown at:
(a) Equity and Liabilities part of balance sheet.
(b) Assets part of balance sheet.
(c) In statement of profit and loss.
(d) None of the above.

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
165. A company has issued 50,000 equity shares of ` 10 each at a premium of 15% payable
at ` 3 on application, ` 6.50 on allotment (including Premium) and ` 2 on call.
Applications were received for 75,000 shares and pro-rata allotment was made. All
the calls were made by the company and the amount was dully received except.
Allotment and call money from a shareholder who applied for 1,200 shares. Calculate
the calls in arrears.
(a) ` 5,600 (b) ` 4,400 (c) ` 8,400 (d) ` 4,000

166. XYZ Ltd., has a huge amount of reserve in store and proposes to issue bonus shares to
the shareholders. Company had not paid interest since post 3 years. Is the company
eligible to issue bonus?
(a) Yes (b) No
(c) 6m + SR (d) Application of SEBI

167. Maximum Interest on call in arrears may be charged according to table Fat:
(a) 12% p.a. (b) 10% p.a. (c) 20% p.a. (d) 24% p.a.

168. Calls paid in advance account is shown separately at the:

(a) In statement of profit and loss (b) Other current Liabilities
(c) Assets part of balance sheet (d) None of the above

169. In case of shares have been issued at a premium and the amount of premium has been
received then the time of forfeiture of such shares:
(a) Securities Premium Reserve account should be debited.
(b) Securities Premium Reserve account should be credited.
(c) Securities Premium Reserve account should be neither debited nor credited.
(d) None of the above.

170. Discount allowed on re-issue forfeited shares is debited to:

(a) Share Discount A/c (b) Share forfeiture A/c
(c) Profit and Loss A/c (d) General Reserve

171.After re-issuing the forfeited shares, the balance of forfeited account transferred to:
(a) Capital reserve account (b) General reserve account
(c) Capital redemption reserve account (d) Reserve capital account

172. The balance of forfeited share is:

(a) A revenue reserve
(b) A capital reserve
(c) A capital reserve

173. Preference shareholders are:

(a) Creditors of the company (b) Owners of the company
(c) Customers of the company (d) Employee of the company

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
174.In practice, share capital of a company means:
(a) Authorized capital (b) Issued capital
(c) Subscribed capital (d) Paid up capital

175.Right shares are the shares that are offered to the:

(a) Directors of the company (b) Debenture holders
(c) Existing shareholders (d) Creditors of the company

176. Unpaid calls are shown in the balance sheet of a company:

(a) By adding it to the share capital.
(b) By deducting it from the called up share capital.
(c) Under the head ‘current assets’.
(d) Under the head ‘current liabilities’.

177. Pro-rata allotment of shares means allotment of shares:

(a) Equally amongst the applicants.
(b) At the discretion of the directors.
(c) To all the applicants in the proportion to the share applied for.

178. When shares are forfeited, called up amount on shares is debited to:
(a) Forfeiture account (b) Capital reserve account
(c) General reserve account (d) Capital account

179.Allotment of shares can be taken up only after:

(a) It is approved by the shareholders. (b) clearance is obtained from SEBI
(c) Minimum subscription is received (d) directors have taken up quantization share

180.Share application account is a:

(a) Personal Account (b) Real Account
(c) Nominal Account (d) None of these

181.Share can be forfeited:

(a) For non-payment of call money (b) For failure to attend A.G.M.
(c) Both ‘A’ and ‘B’ (d) None of the above

182. In absence of specific information of the company, security premium reserve is called
along with:
(a) Application (b) Allotment (c) first call (d) None

183. Forfeited shares re-issued cannot be issued at a discount more than:

(a) Amount forfeited (b) 20% of face value
(c) Not less than the amount forfeited (d) No restriction

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
184.Partly paid up shares can not be made fully paid up by bonus from:
(a) General reserve (b) Dividend equalization
(c) Profit on revaluation of assets (d) None of the above

185.Preference shares of a company can not be redeemed:

(a) At Par (b) at Premium
(c) At Discount (d) None of the above

186.Which method is legally allowed for redemption of preference shares:

(a) Sales of assets of the company (b) Loan from the Bank
(c) Issue of fresh equity shares (d) None of the above

187.Transfer in capital redemption reserve account is allowed from:

(a) Workmen’s compensation fund (b) Securities premium account
(c) Share forfeited account (d) Capital reserve

188. Redeemable preference shares can be redeemed:

(a) Only if they are fully paid
(b) Even if they are partly paid
(c) If they are paid not less than 50% of the nominal value of shares.
(d) Only if they are issued at premium

189. Those preference shares which do not enjoy the right to share additional profits come
under the category of:
(a) Irredeemable preference shares (b) Participating preference shares
(c) Non-cumulative preference shares (d) Non-participating preference shares

190.Equity shares cannot be issued for the purpose of:

(a) Cash receipts (b) Purchase of assets
(c) Redemption of debentures (d) Distribution of dividend

191.Which of the following is not shown under the heading „Share Capital‟ in a Balance
Sheet:
(a) Subscribed Capital (b) Issued Capital
(c) Reserve Capital (d) Authorized Capital

192.A company issued 4,000 equity shares of ` 10 each at par payable as under:
On application X 3; on allotment X 2; on first call X 4 and on final call X 1 per share.
Applications were received for 13,000 shares. Applications for 3,000 shares were
rejected and pro-rata allotment was made to the applicants for 10,000 shares. How
much amount will be received in cash on first call? Excess application money is
adjusted towards amount due on allotment and calls:
(a) X 6,000 (b) Nil (c) X 16,000 (d) X 10,000

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
193.Y Ltd. forfeited 400 shares of ` 10 each, ` 7 called up, for non-payment of first call of
` 2 per share. Out of these, 300 shares were reissued for ` 6 per share as ` 7 paid up.
What is the amount to be transferred to Capital Reserve Account?
(a) ` 1,700 (b) ` 1,200 (c) ` 2,100 (d) ` 300

194.400 shares of ` 10, on which ` 8 has been called and ` 5 has been paid, are forfeited.
Out of these, 300 shares are re-issued for ` 9 as fully paid. What is the amount to be
transferred to Capital Reserve Account?
(a) ` 1,200 (b) ` 1,600 (c) ` 2,000 (d) ` 1,700

195. R. Ltd. forfeited 600 shares of ` 100 each, ` 70 called up on which Mahesh has paid
application and allotment money of ` 50 per share. Of these, 400 shares were re-
issued to Naresh as fully paid-up for ` 110 per share. What is the amount to be
transferred to Capital Reserve?
(a) ` 30,000 (b) ` 36,000 (c) ` 124,000 (d) ` 20,000

196. Madhu Ltd. forfeited 800 shares of ` 10 each issued at 10% premium to Shyam (` 9
called up) on which he did not pay ` 3 of allotment (including premium) and first call
of ` 2. Out of these, 600 shares were re-issued to Ram as fully paid up of ` 9 per
share. what is to amount to be transferred to Capital Reserve?
(a) ` 2,400 (b) ` 1,800 (c) ` 3,000 (d) ` 3,600

197. B Ltd. forfeited 300 shares of ` 100 each, ` 70 called up, for nonpayment of first call
of ` 20 per share. Out of these, 200 shares were reissued for ` 60 per share as ` 70
paid up. What is the amount to be transferred to Capital Reserve Account?
(a) ` 13,000 (b) ` 8,000 (c) ` 2,000 (d) ` 7,000

198.2,000 shares of ` 10, on which ` 7 has been called and ` 5 has been paid. What is the
amount to be transferred to Capital Reserve Account?
(a) ` 6,000 (b) 2,500 (c) 3,500 (d) 8,500

199. Metacaf Ltd. issued 50,000 shares of ` 100 each payable ` 20 on application (on 1st
May 2012) ; ` 30 on allotment (on 1st January 2013); ` 20 on first call (on 1st July
2013) and the balance on final call (on 1st February 2014) Shankar, a shareholder
holding 5,000 shares did not pay the first call on the due date. The second call was
made and Shankar paid the first call amount along with the second call. All sums due
were received.
Total amount received on 1st February was:
(a) ` 15,00,000 (b) ` 16,00,000 (c) ` 10,00,000 (d) ` 11,00,000

200. Company engaged in the setting up of infrastructural projects may issue preference
shares for a period not exceeding ……
(a) 30 years (b) 20 years (c) 10 years (d) 5 years

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
201.A company may issue Bonus …… out of …….
(a) Bonds, Free reserves
(b) Securities, Securities Premium A/c
(c) Shares, Capital Redemption Reserve A/c
(d) Shares, All of the above

202. A public Company need not offer further shares to existing shareholders, if ……
(a) Ordinary resolution is passed to that effect by the company in General Meeting.
(b) Special resolution is passed to that effect by the company in General Meeting.
(c) Resolution is passed by Board of Directors and approved by Company Law Board.
(d) Special resolution is passed by the company in General Meeting and approved by
Registrar of Companies.

203. Preference shares are entitled to vote on every resolution placed before the company
at any meeting if the dividend due on such shares are in arrears for a period of ……..
or more.
(a) 2 years (b) 3 years (c) 4 years (d) 1 years

204. Sweat equity shares shall not exceed …….. of the paid up equity Capital of the
company at any time.
(a) 5% (b) 15% (c) 25% (d) 26%

205. Application money to be received by company shall not be less than ……

(a) 2.5% Premium (b) 5% Issue Price
(c) 7% Premium (d) 10% Issue Price

206.Section 2(88) provides the Definition of ……

(a) Sweat Equity Shares (b) Subsidiary Company
(c) Shares (d) Subscribed Capital

207.The company may issue Sweat Equity Shares of Max ……% of paid up equity or `
…… whichever is higher.
(a) 25% , 10 Crore (b) 15% , 5 Crore
(c) 10% , 2 Crore (d) 25% , 25 Crore

208.Discount allowed on re-issue of forfeited share is:

(a) Debited to Discount A/c (b) Debited to Share Forfeited A/c
(c) Debited to Profit and Loss A/c (d) Debited to Share Premium A/c

209.Share can be forfeited ……

(a) For non-payment of call money (b) For failure to attend AGM
(c) For failure to send proxy form (d) For any of the above failures

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ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
210. On an equity share of ` 20, the company has called up ` 18 but actually received ` 16
only, the share capital would be credited by:
(a) ` 20 (b) ` 18 (c) ` 16 (d) ` 10

211. On an equity share of ` 20, the company has called up ` 18 but actually received ` 16
only, the difference of ` 2 will be debited to:
(a) Calls in arrears (b) Calls in advance
(c) Calls in suspense (d) Calls in doubt

212.On an equity share of ` 20, the company has called up ` 18 but a shareholder paid
only ` 14 and his shares were forfeited on forfeiture of his shares the Share Forfeited
A/c would be:
(a) Credited by ` 20 (b) Debited by ` 18
(c) Credited by ` 14 (d) Debited by ` 10

213. On a share of ` 100 issued at a premium of ` 10 the whole amount has been called up
but in the case of a shareholder only ` 80 has been received. On forfeiture of the
shares, share premium A/c would be credited by:
(a) ` 80 (b) ` 20 (c) ` 30 (d) ` 70

214. If shares issued at premium are forfeited for non-payment of call money including
premium amount then at the time of forfeiture of such shares:
(a) Share Premium A/c will be debited in respect of unpaid premium amount.
(b) Share Premium A/c will be credited in respect of unpaid premium amount.
(c) Outstanding Calls A/c will be debited in respect of unpaid premium amount.
(d) Outstanding Calls A/c will be debited in respect of unpaid premium amount.

215. On re-issue of forfeited shares issued at discount:

(a) Discount A/c can be re-debited (equal to initial discount at the time of allotment).
(b) Discount A/c to be credited (equal to initial discount at the time of allotment).
(c) Share Forfeited A/c to be debited (equal to initial discount at the time of allotment).
(d) Share Forfeited A/c to be debited (equal to total discount).

216. Equity shareholders are the:

(a) Owner of the company (b) Creditor of the company
(c) Debtor of the company (d) Management of the company

217.A infrastructure project can issue redeemable preference shares for a period
exceeding years:
(a) A company cannot issue redeemable preference shares for a period exceeding 20 years
as per the provisions of the companies act.
(b) Can Issue but the period should not be more than 30 years.
(c) A company cannot issue redeemable preference shares for a period exceeding 30 years
as per the provisions of the companies act.
(d) Can issue but the period should not be more than 40 years.

Mob No - 8007916622/33 3.26

ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
218.Premium of issue of preference share is shown under:
(a) Reserves and surplus (b) Miscellaneous expenses
(c) Capital A/c (d) Secured loans advances

219. Bonus shares can be issued if the:

(a) Articles of Association permit it.
(b) Proposal is approved by the shareholders in the general meeting.
(c) Issue is made out of free reserves.
(d) All the three.

220. Premium on redemption of redeemable preference shares can be paid out of:
(a) Existing Share Premium A/c.
(b) Proceed of fresh issue of shares including premium.
(c) Profit and Loss A/c.
(d) All the above.

221. Transfer to Capital redemption reserve can be from ………

(a) Profit and Loss A/c (b) Profit prior to Incorporation A/c
(c) Share Forfeited A/c (d) Capital reserve

222.On 15th June, 1988 a company had 10,000, 12% Redeemable Preference Shares of `
10 each which were issued on 1st April, 1980 with a redemption period of 20 years.
These shares will be redeemed:
(a) Before 15th June, 1998 (b) Before 15th June, 1993
(c) Before 1st April, 1990 (d) Before 1st April, 2008

223.The preference shares should be redeemed with in a period of:

(a) Not exceeding 10 years (b) Not exceeding 15 years
(c) Not exceeding 20 years (d) Not exceeding 5 years

224.Redeemable preference shares cannot be redeemed out of:

(a) Profit prior to incorporation (b) Contingency fund
(c) General reserve (d) Dividend Equalization Fund A/c

225.A company cannot issue:

(a) Shares at discount (b) Irredeemable preference shares
(c) Debentures redeemable at premium (d) Right shares

226.Right shares are issued to the:

(a) Promoters (b) Existing shareholders only
(c) Board of directors (d) Management

Mob No - 8007916622/33 3.27

ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
227. Which of the following is odd one:
(a) Writing of preliminary expenses.
(b) Payment of dividend.
(c) Writing off discount on issue of shares.
(d) Writing off commission paid on issue of shares/debentures.

228. The pre-emptive subscription rights to buy additional securities to the existing
shareholders is called:
(a) Initial public issue (b) Right issue
(c) Buy back of shares (d) None of the above

229. If amount of minimum subscription has not received within 30 days from prospectus
date or any other period prescribed by SEBI, then amount received shall be returned
within …. Days from the closure of issue:
(a) 30 days (b) 15 days (c) 60 days (d) 120 days

230. ABC Ltd. offered to the public for subscription but the minimum subscription has not
been received within 30 days from prospectus date, in how many days company can
returned the amount received?
(a) 30 days (b) 15 days (c) 60 days (d) 120 days

231. Sweat equity shares allotted to employees shall be locked if for ……..
(a) 6 Months (b) 1 Year (c) 2 Years (d) 3 Years

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(a) (a) (b) (a) (b) (c) (c) (b) (b) (d)
11 12 13 14 15 16 17 18 19 20
(d) (b) (a) (d) (c) (a) (d) (d) (b) (c)
21 22 23 24 25 26 27 28 29 30
(d) (b) (d) (a) (b) (c) (b) (d) (a) (a)
31 32 33 34 35 36 37 38 39 40
(c) (b) i(c) ii (b) (c) (d) (d) (d) (b) (b) (a)
41 42 43 44 45 46 47 48 49 50
(b) (b) (b) (d) (b) (c) (c) (b) (a) (d)
51 52 53 54 55 56 57 58 59 60
(b) (d) (a) (c) (a) (b) (a) (a) (c) (b)
61 62 63 64 65 66 67 68 69 70
(a) (a) (d) (c) (b) (b) (a) (a) (c) (d)
71 72 73 74 75 76 77 78 79 80
(c) (a) (d) (b) (d) (b) (d) (a) (a) (c)

Mob No - 8007916622/33 3.28

ACCOUNTING FOR SHARE CAPITAL UNIQUE ACADEMY
81 82 83 84 85 86 87 88 89 90
(d) (d) (b) (d) (a) (c) (a) (d) (a) (d)
91 92 93 94 95 96 97 98 99 100
(c) (c) (d) (c) (a) (a) (b) (b) (a) (c)
101 102 103 104 105 106 107 108 109 110
(d) (b) (b) (d) (c) (b) (a) (c) (a) (b)
111 112 113 114 115 116 117 118 119 120
(a) (a) (c) (b) (d) (c) (a) (d) (d) (b)
121 122 123 124 125 126 127 128 129 130
(a) (d) (b) (a) (c) (b) (b) (d) (c) (d)
131 132 133 134 135 136 137 138 139 140
(b) (c) (c) (b) (a) (d) (d) (c) (b) (b)
141 142 143 144 145 146 147 148 149 150
(b) (d) (a) (d) (b) (a) (b) (d) (d) (a)
151 152 153 154 155 156 157 158 159 160
(b) (d) (b) (a) (b) (a) (b) (a) (d) (d)
161 162 163 164 165 166 167 168 169 170
(d) (c) (a) (a) (a) (b) (b) (b) (c) (b)
171 172 173 174 175 176 177 178 179 180
(a) (c) (b) (c) (c) (b) (c) (d) (c) (a)
181 182 183 184 185 186 187 188 189 190
(a) (b) (c) (c) (c) (c) (a) (a) (d) (d)
191 192 193 194 195 196 197 198 199 200
(c) (a) (b) (a) (d) (a) (b) (a) (b) (a)
201 202 203 204 205 206 207 208 209 210
(d) (b) (a) (c) (b) (a) (b) (b) (a) (b)
211 212 213 214 215 216 217 218 219 220
(a) (c) (d) (a) (a) (a) (b) (a) (d) (a)
221 222 223 224 225 226 227 228 229 230
(a) (b) (c) (a) (b) (b) (b) (b) (b) (b)
231
(b)

Mob No - 8007916622/33 3.29

ACCOUNTING FOR DEBENTURES UNIQUE ACADEMY

4 ACCOUNTING FOR DEBENTURES

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. Unless written off, the loss issue of debentures is shown:

(a) On the assets side of Balance Sheet.
(b) On the debit side of Profit and Loss Account.
(c) By way of deduction from the amount of debentures.
(d) On the liabilities side of Balance Sheet.

2. If debentures are issued as consideration for purchase of any fixed asset, the entry is:
(a) Debit Asset A/c ; Credit Vendor A/c
(b) Debit Asset A/c ; Credit Bank A/c
(c) Debit Asset A/c ; Credit Debentures A/c
(d) Debit Debenture A/c ; Credit Asset A/c

3. When debentures are issued as collateral security, the final entry for recording the
transaction in the book is:
(a) Credit Debentures A/c and Debit Cash A/c
(b) Debit Debenture Suspense A/c and Credit Cash A/c
(c) Debit Debentures Suspense A/c and Credit Debenture A/c
(d) Debit Cash A/c and Credit the Loan A/c for which security is given.

4. Interest payable on debentures is:

(a) An appropriation of profits of the company.
(b) A charge against profit of the company.
(c) Transferred to sinking fund investment account.
(d) Transferred to general reserve.

5. A company issue 14%, debentures of ` 10,00,000 at a discount of 10%. The discount

allowed will be treated in the account book as:
(a) Capital Expenditure (b) Revenue Expenditure
(c) Deferred Revenue Expenditure (d) Capital Loss

6. Which of the following statements is false?

(a) At maturity, debenture holders get back their money.
(b) Debentures can be forfeited for non-payment of call money.
(c) In company’s balance sheet, debentures are shown under the head Secured Loans.
(d) Interest on debentures is charged against profits.

Mob No - 8007916622/33 4.1

ACCOUNTING FOR DEBENTURES UNIQUE ACADEMY
7. Discount on issue of debentures is a:
(a) Revenue loss to be charged in the year of issue.
(b) Capital loss to be written off from capital reserve.
(c) Capital loss to be written off over the period of the debentures.
(d) Capital loss to be shown as goodwill.

8. When debentures are issued at par and are redeemable at premium, the credit given to
Premium of Redemption of Debenture Account is in the nature of:
(a) Personal Account (b) Real Account
(c) Nominal Account - Expenses (d) Nominal Account – Income

9. Loss on issue of debentures is treated as:

(a) Intangible Asset (b) Non-current Asset
(b) Non-current Liability (d) Miscellaneous Expenditure

10. Which of the following is false?

(a) A company can issue redeemable debentures.
(b) A company can issue debentures with voting rights.
(c) A company can issue convertible debentures.
(d) A company can buy its own debentures and shares.

11. The following journal entry appears in the books of Pravin Ltd.
Bank A/c Dr. ` 4,75,000
Loss on Issue of Debenture A/c Dr. ` 25,000
To 12% Debenture A/c 5,00,000
Debentures have been issued at a discount of:
(a) 15% (b) 5% (c) 10% (d) 20%

12.X Co. Ltd. purchased assets worth ` 28,80,000. It issued debentures of ` 100 each at a
discount of 4% in full satisfaction of the purchase consideration. The number of
debentures issued to the vendors of asset are:
(a) ` 30,000 (b) ` 28,000 (c) ` 32,000 (d) ` 35,000

13.How many debentures will a company be required to issue for satisfying the purchase
consideration of ` 28,80,000, if debentures of ` 100 are issued at a premium of ` 20
debenture?
(a) ` 24,000 (b) ` 28,000 (c) ` 36,000 (d) ` 32,000

14.F Ltd. purchased machinery from G company for a book value of ` 4,00,000. The
consideration was paid by issue of 10% debentures of ` 100 each at a discount of 20%.
The debenture account will be credited by:
(a) ` 4,00,000 (b) ` 5,00,000 (c) ` 3,20,000 (d) ` 4,80,000

15.T Ltd. has issued 15% Debentures of ` 20,00,000 at a discount of 10% on April 01,
2004 and the company pays interest half-yearly on June 30 and December 31 every

Mob No - 8007916622/33 4.2

ACCOUNTING FOR DEBENTURES UNIQUE ACADEMY
year. On March 31, 2006, the amount shown as “interest accrued but not due” in the
balance sheet will be:
(a) ` 75,000 (b) ` 2,25,000 (c) ` 1,50,000 (d) ` 3,00,000

16. When debentures of 1,00,000 are issued as Collateral Security against a loan of
1,50,000, the entry for issue of debentures will be:
(a) Credit Debentures ` 1,50,000 and debit cash A/c ` 1,50,000.
(b) Debit Debenture Suspense A/c ` 1,00,000 and Credit Cash A/c ` 1,00,000.
(c) Debit Debenture Suspense A/c ` 1,00,000 and Credit Debentures A/c ` 1,00,000.
(d) Debit Cash A/c 1,50,000 and Credit Bank A/c 1,50,900.

17. P Ltd. issued 10,000, 12% debentures of ` 100 each at a premium of 10%, which are
redeemable after 10 years at a premium of 20%. The amount of loss on redemption of
debentures to be written off every year will be:
(a) ` 1,60,000 (b) ` 80,000 (c) ` 20,000 (d) ` 16,000

18. On May 01, 2003, Y Ltd. issued 7%, 40,000 convertible debentures of ` 100 each at a
premium of 20%. Interest is payable on September 30 and March 31, every year.
Assuming that the interest runs from the date of issue, the amount of interest
expenditure debited to profit and loss account for the year ended March 31, 2004 is:
(a) ` 2,80,000 (b) ` 2,33,333 (c) ` 3,36,000 (d) ` 2,56,667

19. Shyam Limited issued 20,000, 8% debentures of ` 10 each at par which are redeemable
after 5 years at a premium of 20%. The amount of loss on redemption of debentures to
be written off every year is:
(a) ` 40,000 (b) ` 10,000 (c) ` 20,000 (d) ` 8,000

20. Which of the following statements is false?

(a) Debenture is a form of public borrowing.
(b) It is customary to prefix debentures with the agreed rate of interest.
(c) Debenture interest is a charge against profits.
(d) The issue price and redemption value of debentures cannot differ.

21. Which of the following is not a characteristic of Bearer Debentures?

(a) They are treated as negotiable instruments.
(b) Their transfer requires a deed of transfer.
(c) They are transferable by mere delivery.
(d) The interest on it is paid to the holder irrespective of identity.

22. The debentures which are secured by a charge upon some or all assets of the company
are known as:
(a) First mortgage debenture (b) Second mortgage debenture
(c) Bearer debenture (d) Secured debenture

Mob No - 8007916622/33 4.3

ACCOUNTING FOR DEBENTURES UNIQUE ACADEMY
23. When debentures are to be redeemed at premium an extra entry has to be made at the
time of issue of debentures, which A/c should be credited in this entry?
(a) Loss on issue of debentures A/c (b) Debenture redemption premium A/c
(c) Bank A/c (d) Debenture holder’s A/c

24. When debentures are issued at par and are redeemable at premium, the credit given to
premium on redemption of debentures account is in nature of:
(a) Personal A/c (b) Real A/c
(c) Nominal A/c (d) None of these

25. When debentures are issued at a discount, it is prudent to write off the discount:
(a) In the year of the issue of debentures
(b) During the life of the debentures if it is treated as deferred revenue expenditure.
(c) Within 3 years of the issue of debentures.
(d) In the year of redemption of debentures.

26. Ansh Ltd. issued 5,000 Debentures of ` 10 each of subscription. 4,000 Debentures were
subscribed by the public by paying ` 3 as application money. Number of debentures
allotted to public by Ansh Ltd. will be:
(a) 5,000 shares (b) 4,000 shares
(c) 3,000 shares (d) 1,000 shares

27. Interest received on debenture redemption fund investment is:

(a) Capital reserve A/c (b) General reserve A/c
(c) Debenture redemption fund A/c (d) None of the above

28. Paresh Ltd. issued 10,000 12% Debentures of ` 100 each at a discount of 10% payable
in full on application by 31st March, 2007. Application were received for 12,000
debentures. Debentures were allotted on 9th June, 2007. The amount of excess money
refunded on the same date will be:
(a) ` 1,80,000 (b) ` 1,00,000 (c) ` 1,10,000 (d) ` 1,50,000

29. “Non-convertible” debenture is inferred as:

(a) Owner’s capital (b) Loan capital
(c) Short term debts (d) None of these

30. Tahil Ltd. has issued 14% Debentures of ` 20,00,000 at a discount of 10% on April 01,
2005 and the company pays interest half-yearly on June 30, and December 31 every
year. On march 31, 2007, the amount shown as “interest accrued but not due” in the
balance sheet will be:
(a) ` 70,000 shown along with Debentures.
(b) ` 2,10,000 under current liabilities.
(c) ` 1,40,000 shown along with Debentures.
(d) ` 2,80,000 under current liabilities.

Mob No - 8007916622/33 4.4

ACCOUNTING FOR DEBENTURES UNIQUE ACADEMY
31. XYZ Ltd. purchased a machinery for ` 10,00,000 from Mohan Ltd. and the
consideration wash paid by the issue of 18% debentures of ` 100 each at a discount of
20%. Calculate the number of debentures to be issued:
(a) 12,500 (b) 10,000
(c) 9,333 (d) none the of above

32. Yadav Ltd. purchased a building from Gandhi Ltd. for ` 50,00,000 and the
consideration was paid by the issue of debentures of ` 100 each at a premium of ` 25
each. Calculate the number of debentures to be issued to Gandhi Ltd.
(a) 50,000 (b) 40,000
(c) 66,667 (d) None of the above

33. Debenture holders are called the …… of a company.

(a) Banker (b) Owner (c) Creditor (d) Debtor

34. ABC Ltd. purchased a machinery from Micro Ltd. for ` 50,00,000 and the
consideration was paid by issuing debentures of ` 100 each at a discount of 20%.
Calculate the amount to be credited to the debenture account:
(a) ` 50,00,000 (b) ` 43,00,000 (c) ` 75,00,000 (d) ` 62,50,000

35. Ram Ltd. purchased a car from Harish Ltd. for ` 10,00,000 and the consideration was
paid by issuing debentures of ` 10 each at a premium of ` 2.5 each. Calculate the
amount to be credited to Debentures Account:
(a) ` 8,00,000 (b) ` 13,33,000
(c) ` 12,50,000 (d) None of these

36. Morseny Ltd. issued 2,000, 15% debentures of ` 100 each at a premium of 10% which
are redeemable after 10 years at a premium of 20%. The discount of loss on
redemption of debentures to be written off every year is:
(a) ` 20,000 (b) ` 10,000
(c) ` 40,000 (d) None of these

37. ABC Ltd. issued 1,000, 9% debentures of ` 100 each at a discount of 10%, which will
be redeemed after 5 years at a premium of 10%. Calculate the discount on loss of issue
of debentures to be written off each year.
(a) ` 40,000 (c) ` 20,000 (c) ` 10,000 (d) ` 5,000

38. When the debentures are issued as a collateral security then what entry will be passed?
(a) No entry
(b) Debit Debenture Suspense A/c and Credit Debentures A/c
(c) Both (a) & (b)
(d) Neither (a) nor (b)

Mob No - 8007916622/33 4.5

ACCOUNTING FOR DEBENTURES UNIQUE ACADEMY
39. Which of the following statement is NOT true?
(a) On maturity the debenture holders get back their money.
(b) Debentures can be forfeited for non-payment of call money.
(c) In the balance sheet, debentures are shown under secured loan.
(d) Interest on debentures is payable even in case of loss.

40. Interest on debentures issued as a collateral security is paid on:

(a) Nominal value of debentures (b) No interest is paid
(c) Face value of debentures (d) Paid up value of debentures

41.A debenture holder is entitled to:

(a) Fixed dividend (b) Share in profits
(c) Voting rights in the company (d) Interest at the fixed rates

42. If the debentures allotted for consideration other than cash are more than the agreed
purchase price, the difference shall be debited to:
(a) Goodwill Account (b) P & L A/c
(c) Securities Premium A/c (d) Debentures A/c

43. If the debentures allotted for consideration other than cash are less than the agreed
purchase price, the difference is credited to:
(a) Goodwill A/c (b) Capital Reserve A/c
(c) P & L A/c (d) None of these

44. Shares may be issued:

(a) For cash (b) For consideration other than cash
(c) For both (a) and (b) (d) None of the above

45. Which of the following will be the journal entry for recording the issue of shares at par
against purchase of Machinery?
(a) Debit Machinery A/c , Credit Share Capital A/c
(b) Debit Share Capital A/c , Credit Machinery A/c
(c) Debit Bank A/c , Credit Share Capital A/c
(d) Debit Machinery A/c , Credit Cash A/c

46. Debentures of a company can be issued:

(a) For cash (b) For consideration other than cash
(c) As a collateral security (d) Any of the above

47. On issue of debentures as a collateral security, which account is credited?

(a) Debentures Account (b) Bank Loan Account
(c) Debenture holding Account (d) Debenture Suspense Account

Mob No - 8007916622/33 4.6

ACCOUNTING FOR DEBENTURES UNIQUE ACADEMY
48. G Ltd. purchased land and building from H Ltd. at a book value of ` 2,00,000. The
consideration was paid issue of 12% debentures of ` 100 each at a discount of 20%.
For this transaction, the debentures account would be credited with:
(a) ` 2,60,000 (b) ` 2,50,000 (c) ` 2,40,000 (d) ` 1,60,000

49. Limited company issued a prospectus inviting application for 2,000 shares of ` 10 each
at premium of ` 2 per share payable as follows:
On application `2
On allotment ` 5 (including premium)
On 1 call ` 3 on 2 final call ` 2
st nd

Application were received for 3,000 shares and allotment was made on pro-rata basis
to applicant of 2,400 shares. Money received in excess on application was adjusted
towards allotment.
Ramesh whom 40 shares were allotted, failed to pay allotment money & first call his
shares were forfeited. Find the number of shares Ramesh has applied for?
(a) 52 (b) 50 (c) 42 (d) 48

50. T Ltd. has issued 14% Debentures of 20,00,000 at a discount of 10% in April 2013 and
the company pays interest half-yearly on June 30 and December 31 every year. On
March 31, 2014, the amount shown as „interest accrued but not due‟ in the balance
sheet will be:
(a) ` 70,000 (b) ` 2,80,000 (c) ` 1,40,000 (d) ` 2,10,000

51. T Ltd. has issued 14% Debentures of 20,00,000 at a discount of 10% in April 2013 and
the company pays interest half-yearly on June 30 and December 31 every year. On
March 31, 2014, the amount shown as „interest accrued but not due‟ in the balance
sheet will be:
(a) ` 1,40,000 (b) ` 2,10,000 (c) ` 2,80,000 (d) ` 70,000

52. The holder of debentures issued as collateral security to a loan is entitled to interest on:
(a) The amount of loan only (b) on the face value of debentures
(c) Neither loan nor debenture (d) Both the loan amount and debentures.

53. K Ltd. issued ` 15,000, 12% Debentures of ` 50/- each at premium of 10% payable as `
20/- on application and balance on allotment Debentures are redeemable at per after 6
years. All the money due on, allotment was called up and revised. The amount of
premium will be:
(a) ` 3,00,000 (b) ` 2,25,000 (c) ` 75,000 (d) ` 5,25,000

54. Debentures is issued as a collateral security to a loan, interest will be given on:
(a) On debentures only (b) Both loan & debentures
(c) On loan but not on debentures (d) None of the following

Mob No - 8007916622/33 4.7

ACCOUNTING FOR DEBENTURES UNIQUE ACADEMY
55. Which of the following statement is true?
(a) A Debenture holder is an owner of the company.
(b) A Debenture is issued at a discount and can be redeemed at a premium.
(c) A Debenture Holder can get his money back only on liquidation.
(d) A Debenture Holder receives interest only in the event of profit.

56. Match list I with list II and select the correct answer using the codes given below the
list:
List I List II
A Discount on Debenture 1 Current liability
B Forfeited Capital 2 Non-current Assets
C Income tax payable 3 Current Assets
D Debtors acceptance 4 Non-current Liability

A B C D

(a) 2 4 1 3
(b) 4 2 3 1
(c) 2 4 3 1
(d) 4 2 1 3

57. If shares are reissued then they are issued at:

(a) Par (b) Premium (c) Discount (d)All of the above

58. On redemption of Debentures, the amount lying in Debenture Redemption Reserve,

which is no longer necessary to be retained, should be transferred to:
(a) Revaluation Reserve (b) Securities Premium Reserve
(b) Capital Reserve (d) General Reserve

59. Debenture Redemption Premium A/c is:

(a) Assets (b) Liability (c) Expenses (d) Revenue

60. If debentures of ` 1,000 are purchased for ` 980 by the company, the difference of ` 20
will be assumed to be:
(a) Profit on redemption of debenture (b) Loss on redemption of debenture
(c) Goodwill (d) None of the above

61. ` 4,25,000 debentures are issued against the purchase of assets of 4,50,000 in this case `
25,000 will be supposed to be:
(a) Goodwill (b) Capital Reserve
(c) Profit (d) Loss

62. The interest on Debenture Redemption Fund Investments is credited to:

(a) Debenture A/c
(b) Debenture Redemption Found A/c

Mob No - 8007916622/33 4.8

ACCOUNTING FOR DEBENTURES UNIQUE ACADEMY
(c) Debenture Redemption Found Investment A/c
(d) None of the above

63. The balance of debenture sinking fund is finally transferred to:

(a) Profit and Loss A/c (b) DRF Investment A/c
(c) General Reserve (d) Capital Reserve

64. Debentures which are transferable by mere delivery are:

(a) Registered Debentures (b) First Debentures
(c) Second Debentures (d) Bearer Debentures

65. Debenture holders are the:

(a) Owners of the Company (b) Creditors of the Company
(c) Directors of the Company (d) Customers of the Company

66. Discount on issue of debentures is:

(a) Current Assets (b) Fixed Assets
(c) Fictitious Assets (d) Personal Assets

67.X Co. Ltd. purchased assets worth ` 28,80,000. It issued debentures of ` 100 each at a
discount of 4% in full satisfaction of the purchase consideration. The number of
debentures issued to vendor is:
(a) 30,000 (b) 28,800
(c) 32,000 (d) None of the above

68. Premium on Redemption of debenture account is:

(a) Asset (b) Liability (c) Expenses (d) Revenue

69.Debentures of ` 4,25,000 are issued against the purchase of assets of 4,25,000 in this
case ` 25,000 will be supposed to be:
(a) Goodwill (b) Capital Reserve (c) Profit (d) Loss

70.If Debentures of ` 1000 purchased for ` 980 by the Company, the difference of ` 20
will be assumed to be:
(a) Profit on redemption of debenture (b) Loss of redemption of debenture
(c) Goodwill (d) None of the above

71. Debenture is the part of:

(a) Share capital (b) Loan (c) Owner Capital (d) All the above

72. The interest on Debentures is:

(a) 6% (b) 12% (c) 20% (d) Fired Rate

73. The consideration of Debentures is:

(a) Profit (b) Dividend (c) Capital Receipts (d) Interest

Mob No - 8007916622/33 4.9

ACCOUNTING FOR DEBENTURES UNIQUE ACADEMY
74. A Co. issued 1,00,000, 12% Debentures of ` 100 each. The interest on Debentures is:
(a) ` 12,000 (b) 1,20,000 (c) ` 12,00,000 (d) None of these

75. According to SEBI guidelines by what percentage of amount of debentures the

debentures redemption fund will be raised before redemption?
(a) 40% (b) 50% (c) 60% (d) 100%

76. The Premium on redemption of debentures is:

(a) Personal Account (b) Real Account
(c) Normal Account (d) None of these

77. Sinking investment always shows:

(a) Debit Balance (b) Credit Balance
(c) Both (d) None of these

78. The interest on sinking fund investments is credited in:

(a) Profit & Loss Account (b) Sinking Fund Account
(c) General Reserve Account (d) Sinking Fund investment

79. Debentures represent:

(a) Long term debt of company (b) Investment of equity shareholders
(c) Shares of directors in company (d) None of these

80. Debenture holders are:

(a) Owners of company (b) Customers of company
(c) Creditors of company (d) None of these

81. Discount on issue of debenture is:

(a) Fixed asset (b) Current asset
(c) Real asset (d) Unreal asset

82. Loss on issue of debenture A/c is:

(a) A liability (b) an asset
(c) An expenses (d) A gain

83. The discount on debentures which is not written off is shown in final account of
company:
(a) On liabilities side of balance sheet
(b) On assets side of balance sheet
(c) On debit side of profit and loss A/c
(d) On credit side of profit and loss A/c

84. The journal entry for debentures issued at par and are also redeemable at par:
(a) Dr. Bank, Cr. Debentures A/c (b) Dr. Debentures A/c, Cr. Bank A/c
(c) Dr. Capital A/c, Bank A/c (d) None of these

Mob No - 8007916622/33 4.10

ACCOUNTING FOR DEBENTURES UNIQUE ACADEMY
85. If debentures of ` 3,00,000 are issued at par but redeemable at 5% premium due will
be debited to:
(a) Securities premium account (b) Debenture Redemption Premium A/c
(c) Loss on Issue of debentures A/c (d) None of these

86. If vendor‟s debentures of ` 8,00,000 is issued to vendor in purchase consideration of

net assets of ` 8,00,000, then ` 2,00,000 will be credited to:
(a) Profit and Loss A/c (b) Goodwill Account
(c) General Reserve Account (d) Capital Reserve Account

87. Issue of debentures as collateral security will be debited to:

(a) Bank account (b) Debenture suspense account
(c) Debentures Account (d) None of these

88. Debenture which transfer by mere delivery are:

(a) Registered Debentures (b) First Debentures
(c) Second Debentures (d) Bearer Debentures

89. X Co. Ltd. purchased assets worth ` 28,80,000. It issued debentures of ` 100 each at a
discount of 4% in full satisfaction of the purchase consideration. The minimum
number of debenture issued to vendor is:
(a) 30,000 (b) 32,000 (c) 28,800 (d) None of these

90. In the Companies Act, 2013 description of Debentures is given in the:

(a) Section 2(10) (b) Section 2(30)
(c) Section 3(1) (d) Section 4A

91. When debentures are redeemed by sinking fund method, after redemption of
debentures, the balance of debenture redemption fund A/c should be transferred to:
(a) Debenture Redemption Fund Investment A/c
(b) General Reserve
(c) Debentures A/c
(d) None of these

92. Following is not a characteristic of debentures:

(a) It is like a certificate.
(b) It is an acknowledgement of loan taken by company.
(c) It can be transferred.
(d) Debenture holder possess voting right in the meetings.

93. Discount on issue of debentures is a:

(a) Revenue profit (b) Revenue loss
(c) Capital profit (d) Capital loss

Mob No - 8007916622/33 4.11

ACCOUNTING FOR DEBENTURES UNIQUE ACADEMY
ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(a) (c) (c) (b) (d) (b) (c) (a) (b) (b)
11 12 13 14 15 16 17 18 19 20
(b) (a) (a) (b) (a) (c) (c) (d) (d) (d)
21 22 23 24 25 26 27 28 29 30
(b) (d) (b) (a) (b) (b) (c) (a) (b) (a)
31 32 33 34 35 36 37 38 39 40
(a) (b) (c) (d) (a) (c) (c) (c) (b) (b)
41 42 43 44 45 46 47 48 49 50
(d) (a) (b) (c) (a) (d) (a) (b) (d) (a)
51 52 53 54 55 56 57 58 59 60
(d) (a) (c) (c) (b) (b) (d) (d) (b) (b)
61 62 63 64 65 66 67 68 69 70
(b) (b) (c) (d) (b) (a) (a) (b) (b) (a)
71 72 73 74 75 76 77 78 79 80
(b) (d) (d) (a) (b) (a) (a) (b) (a) (c)
81 82 83 84 85 86 87 88 89 90
(d) (c) (b) (a) (b) (d) (b) (d) (a) (b)
91 92 93
(b) (d) (d)

Mob No - 8007916622/33 4.12

RELATED ASPECTS OF COMPANY ACCOUNTS UNIQUE ACADEMY

5 RELATED ASPECTS OF COMPANY ACCOUNTS

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. The total managerial remuneration payable by a company, to its directors including

managing director and whole-time director, and its manager in respect of any financial
year shall not exceed 11% of the net profits of that company for that financial year
computed in the manner laid down in Sec.198 except that the remuneration of the
directors shall not be deducted from the gross profits. This restriction is not applicable
in case of:
(a) Private companies which has committed default in filling of their financial statements u/s
or annual return u/s 92 with the Registrar.
(b) Government public companies which has committed a default in filling of their financial
statements u/s 137 or annual return u/s 92 with Registrar.
(c) Public companies which has committed a default in filing of their financial statements u/s
137 or annual return u/s 92 with the Registrar.
(d) All of the above.

2. The underwriting commission on shares must not exceed…….

(a) 2.0 % of the issued price of shares.
(b) 2.5 % of the issued price of shares.
(c) 5.0 % of the issued price of shares.
(d) 5.5 % of the issued price of shares.

3. The underwriting commission on Debenture must not exceed……

(a) 2.0 % of the issued price of shares.
(b) 2.5 % of the issued price of shares.
(c) 5.0 % of the issued price of shares.
(d) 5.5% of the issued price of shares.

4. Can a private Limited Company issue debenture as per Companies Act, 2013?
(a) Yes (b) No (c) Partly Yes (d) Partly No

5. M/s XYZ Ltd. is a public limited company desires to issue debenture with voting rights.
Can company do so?
(a) Yes (b) No (c) Partly Yes (d) Partly No

6. What is the cooling period after the buyback of securities for the same type of
securities?
(a) 1 year from the date of buy back (b) 6 months from the date of buyback
(c) 9 months from the date of buy back (d) 2 years from the date of buyback

Mob No - 8007916622/33 5.1

RELATED ASPECTS OF COMPANY ACCOUNTS UNIQUE ACADEMY
7. Sources of funds for buyback of shares are ……
(a) Free reserve or securities.
(b) The securities premium account.
(c) The proceeds of any shares or other specified securities.
(d) Both (a) and (b).

8. Which of the following companies shall not buy back its own securities unless the
consequent reduction of share capital is effected under the Section 67 of the Companies
Act, 2013?
(a) Limited by shares (Private and Public).
(b) Limited by guarantee.
(c) Unlimited co.
(d) Both (a) and (b)

9. Every buyback shall be completed within ………. Years from the date of passing of
special resolution / Board resolution.
(a) 2 years (b) 1 year (c) 5 years (d) 3 years

10.M/s ABC Limited desires to buy back its shares. Company passed the special resolution
at 1st January, 2016. As per Section 68(4) of the companies Act, 2013, up to which date
company need to be completed the process of buy back?
(a) 5th January (b) 30th December, 2016
(c) 30th September, 2016 (d) None of the above

11. A company want to redeem 12000 shares whose face value is 10 each at a redemption
value of ` 15 each. The company wants to redeem shares out of profits. Amount
required to be transferred to CRR is:
(a) 1,20,000 (b) 1,50,000 (c) 60,000 (d) 9,00,000

12. Underwriting commission is paid out of ……….

(a) Proceed of issue (b) Profit of company
(c) Out of Reserve (d) Either (a) or (b)

13. Copy of underwriter agreement should be delivered to ………..

(a) Registrar of Companies (b) NCLT
(c) RD (d) MCA

14. For issuing employees stock option .......... is required to be passed by company.
(a) Ordinary Resolution (b) Special Resolution
(c) Unanimous Resolution (d) Board Resolution

15. Letter of Buyback offer shall be as per format prescribed in …….

(a) PAS-4 (b) SH-8
(c) MHT-4 (d) PAS-8

Mob No - 8007916622/33 5.2

RELATED ASPECTS OF COMPANY ACCOUNTS UNIQUE ACADEMY
16. Which of the following statements is not true?
(a) Interest on debenture is not shown in Profit and Loss A/c
(b) Interest on debenture holders is to be paid whether there is profit or loss to the company.
(c) There is restriction on utilization of premium on issue of shares.
(d) Company can buy back its debentures.

17. In the event of liquidation of the company the debenture holders have prior right for:
(a) Interest (b) Principal amount
(c) None (d) Both (a) and (b)

18. Discount is issue of debenture is a:

(a) Capital loss (b) Revenue loss
(c) Financial loss (d) Speculative loss

19. Discount on issue of debenture is shown in balance sheet as:

(a) Miscellaneous expenses (b) Goodwill
(c) Claims receivable (d) Reserve capital

20. Premium on redemption of debenture A/c is a:

(a) Personal A/c (b) Real A/c
(c) Nominal A/c (d) Suspense A/c

21. Premium on redemption of debenture is generally provided at the time of ……..

(a) Issue of debenture (b) Redemption of debentures
(c) Every year (d) After 10 years

22. Debentures cannot be redeemed at:

(a) Premium (b) Discount
(c) Par (d) More than 10% premium

23. Debentures can be redeemed out of:

(a) Profits (b) provisions
(c) Capital (d) All the above

24.A company issued 1000 12% debentures of 100 at par redeemable at 10% premium,
12% stands for:
(a) Rate of dividend (b) Rate of tax
(c) Rate of interest (d) Rate of TDS

25. Debenture holders are ……..

(a) Owners of the company (b) Lenders of the company
(c) Debtors of the company (d) Trustee of the company

Mob No - 8007916622/33 5.3

RELATED ASPECTS OF COMPANY ACCOUNTS UNIQUE ACADEMY
26. Which of the following is incorrect with respect of debentures?
(a) They can be issued for cash.
(b) They can be issued for consideration other than cash.
(c) They can be issued as collateral security.
(d) They can be issued in lieu or dividends.

27. Which of the following is incorrect?

(a) A company can issue irredeemable debentures.
(b) A company can issue debentures with voting rights.
(c) A company can buy its own shares.
(d) A company can buy its own debentures.

28. Debentures which are not secured by any charge upon any assets of the company are
called:
(a) Secured debenture (b) Naked debenture
(c) Bearer debenture (d) Floating debenture

29. A company issued 14% debentures of ` 1,000 each at ` 950 to be redeemable at `

1,050. The difference of ` 100 will be:
(a) Debited to loss on issue of Debenture A/c.
(b) Credited to loss issue of Debenture A/c.
(c) Preliminary Expenses A/c.
(d) Capital loss A/c.

30. The maximum discount at which debenture can be issued is:

(a) 10% (b) 20%
(c) No such limit exist (d) 50%

31. Loss on issue of debenture A/c is a:

(a) Personal A/c (b) Nominal A/c
(c) Real A/c (d) Dummy A/c

32. XYZ Ltd. issued 1,00,000 debentures of ` 100 each at a discount of 10% to be
redeemed at the end of 10th year from the date of issue at par. The loss on issue of
debenture will be written off as:
(a) ` 10,000 every month.
(b) ` 1,00,000 every year.
(c) ` 10,00,000 at the end of 10th year.
(d) ` 10,00,000 at the end of 1st year of issue.

33. ABC issued 1,00,000 12.5% debentures of ` 100 each. The total amount of interest
payable on the debentures will be:
(a) ` 12,50,000 (b) ` 12.5
(c) ` 1,00,00,000 (d) ` 1,25,000

Mob No - 8007916622/33 5.4

RELATED ASPECTS OF COMPANY ACCOUNTS UNIQUE ACADEMY
34. Which of these statement is not true about debenture holder:
(a) Debenture holders are like the lenders of the company.
(b) Debenture holders have priority of payment of interest and amount.
(c) In case of loss the debenture holders are not entitled to interest on the debentures.
(d) Interest on debenture is an allowable expenses.

35. Which of the following is odd one:

(a) Voting right
(b) Interest
(c) Priority in payment of interest and principal
(d) Allowable expenses

36. Debentures are those which can be transferred by mere delivery.

(a) Naked (b) Registered (c) Bearer (d) Floating

37. Issue of debentures as collateral securities means issue of such debentures as:
(a) Subsidiary security (b) Principal security
(c) In lieu of principal security (d) None

38. Which of these is not a method of redemption of debentures?

(a) Purchase in open market (b) Auction of debentures
(c) Drawing of lots (d) Payment in lump sum

39. Debentures which are convertible into shares at the option of the shareholders
according to the terms of the issue are known as:
(a) Optional debenture (b) Convertible debenture
(c) Convertible shares (d) Flexible debenture

40. As per SEBI Guidelines Debenture Redemption reserve is required to be created in

case the company issue debentures with a maturity of:
(a) More than 18 months (b) 2 years
(c) 10 years (d) 5 years

41. Company should created DRR equivalent to ….% of the amount of debenture issue
before redemption of debenture can commence:
(a) 75 (b) 40 (c) 50 (d) 25

42. Withdrawal from DRR is permissible only after …% of the debenture liability has
been redeemed:
(a) 30 (b) 40 (c) 10 (d) 25

43. Debenture holders are:

(a) Owners of the company (b) Debtors of the Company
(c) Creditors of the company (d) Promoters of the Company

Mob No - 8007916622/33 5.5

RELATED ASPECTS OF COMPANY ACCOUNTS UNIQUE ACADEMY
44. Zero Coupon Bonds are issued:
(a) At Zero interest Rate (b) With Specified Rate of Interest
(c) Without Specified Rate of Interest (d) None of these

45. Interest payable on debentures is:

(a) An appropriation of profits of the company.
(b) A charge against profits of the company.
(c) Transferred to sinking fund investment account.
(d) Transferred to general reserve.

46. A debenture holder is entitled to:

(a) Fixed dividend (b) Share in profits
(c) Voting rights in the company (d) Interest at the fixed rate

47. Which of the following statements is false?

(a) Debenture is a form of public borrowing.
(b) It is customary to prefix debentures with the agreed rate of interest.
(c) Debenture interest is a charge against profits.
(d) The issue price and redemption value of debentures cannot differ.

48. Which of the following is not a characteristic of Bearer Debentures?

(a) They are treated as negotiable instruments.
(b) Their transfer requires a deed of transfer.
(c) They are transferable by mere delivery.
(d) The interest on it is paid to the holder irrespective of identity.

49. Which of the following statements is false?

(a) At maturity, debenture holders get back their money.
(b) Debentures can be forfeited for non-payment of call money.
(c) In company’s balance sheet, debentures are shown under the head Long term
Borrowings.
(d) Interest on debentures is a charge against profits.

50. Which of the following statements is false:

(a) A Company can issue redeemable debentures.
(b) A Company can issue debentures with voting rights.
(c) A Company can issue convertible debentures.
(d) A Company can buy its own debentures and shares.

51. Discount on the issue of Debentures should be shown on the:

(a) As Expenses in the Statement of P & L.
(b) Equity and Liabilities side of B/S.
(c) Assets side of B/S.
(d) As Income in the Statement of P & L.

Mob No - 8007916622/33 5.6

RELATED ASPECTS OF COMPANY ACCOUNTS UNIQUE ACADEMY
52. Debentures of a Company can be issued:
(a) For Cash (b) For Consideration other than Cash
(c) As a Collateral Security (d) Any of the above

53. On issue of debentures as a collateral security, which account is credited?

(a) Debentures Account
(b) Bank Loan Account
(c) Debentures Holdings Account
(d) Debentures Suspense Account

54. Interest on debentures issued as a collateral security is paid on:

(a) Nominal value of debentures (b) No interest is paid
(c) Face value of debentures (d) Paid up value of debenture

55. Loss on issue of debentures is written off:

(a) On the year of the issue of debentures.
(b) During the life of the debentures.
(c) Within 3 years of the issue of debentures.
(d) In the year of redemption of debentures.

56. When debentures are to be redeemed at premium an extra entry has to be made at the
time of issue of debentures, which A/c should be credited in this entry?
(a) Loss on issue of debentures A/c
(b) Debenture redemption premium A/c
(c) Bank A/c
(d) Debenture holder’s A/c

57. Premium on Redemption of Debentures Account is:

(a) Personal Account (b) Real Account
(c) Nominal Account (d) All of the above

58. On 1st April 2017; Sunrise Limited issued 5,000, 8% debentures of ` 100 each at a
discount of 5%. What will be the total amount of interest for the year ending 31st
March 2018?
(a) ` 38,000 (b) ` 42,000 (c) ` 40,000 (d) ` 25,000

59. As per SEIB Guidelines an amount equal to ……. of the debenture issue must be
transferred to Debenture Redemption Reserve before redemption begins.
(a) 50% (b) 80% (c) 25% (d) 100%

60. According to the guidelines issued by Securities and Exchange Board of India (SEBI)
what percentage of the amount of debentures must be transferred to ‘Debentures’
Redemption Reserve’ before the commencement of redemption of debentures, in case
of convertible debentures?
(a) 25% (b) 50% (c) 100% (d) Zero

Mob No - 8007916622/33 5.7

RELATED ASPECTS OF COMPANY ACCOUNTS UNIQUE ACADEMY
61. X Ltd., wants to redeem 5,000, 5% Debentures of ` 100 each at 5% premium. How
much amount it must transfer to Debenture Redemption Reserve, if it has already a
balance of ` 1,00,000 in Debentures Redemption Reserve Account?
(a) ` 4,00,000 (b) ` 25,000 (c) ` 2,00,000 (d) ` 2,50,000

62. Where is ‘Debenture Redemption Reserve’ transferred after the redemption of all
debentures?
(a) Capital Reserve Account (b) General Reserve Account
(c) Statement of Profit and Loss (d) Sinking Fund Account

63. Debentures can be redeemed:

(a) By issue of new shares (b) By existing resources
(b) By Accumulated profits (d) By all of the above

64. Debentures can be redeemed:

(a) By annual drawings (b) By purchase in the open market
(c) By Conversion (d) By all of the above

ANSWER KEYS
1 2 3 4 5 6 7 8 9 10
(a) (c) (c) (a) (b) (b) (d) (b) (b) (b)
11 12 13 14 15 16 17 18 19 20
(a) (d) (a) (a) (b) (a) (d) (a) (a) (c)
21 22 23 24 25 26 27 28 29 30
(a) (b) (d) (c) (b) (d) (b) (b) (a) (c)
31 32 33 34 35 36 37 38 39 40
(b) (b) (a) (c) (a) (c) (a) (b) (b) (a)
41 42 43 44 45 46 47 48 49 50
(c) (c) (c) (c) (b) (d) (d) (b) (b) (b)
51 52 53 54 55 56 57 58 59 60
(c) (d) (a) (b) (b) (b) (a) (c) (c) (d)
61 62 63 64
(b) (b) (d) (d)

Mob No - 8007916622/33 5.8

FINANCIAL STATEMENT INTERPRETATION UNIQUE ACADEMY

6 FINANCIAL STATEMENT INTERPRETATION

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. An external user of financial statement of a company is:

(a) Director (b) Partner (c) Supplier (d) Officer

2. XYZ Co. Ltd. proposed a dividend of 20%. The net profit of the company is ` 1,20,000.
The called up equity share capital is ` 5,00,000 and the amount of call in arrears is `
30,000. What will be the amount of dividend payable?
(a) ` 1,00,000 (b) ` 94,000 (c) ` 24,000 (d) ` 1,06,000

3. As per Schedule III Current Maturities of Long Term Borrowings should be shown
under:
(a) Current Assets in Balance Sheet.
(b) Non-current Liability in Balance Sheet.
(c) Current Liabilities in Balance Sheet.
(d) Other Expenses in Statement of Profit and Loss.

4. Section 188 of Companies Act, 2013 provides that except with the consent of the Board
of Directors given by a resolution at a meeting of the Board and subject to such
conditions as may be prescribed, no company shall enter into any contract or
arrangement with a related partly with respect to sale, purchase or supply of goods or
materials. However, company cannot enter into such contracts or arrangements except
with the prior approval of the company by a resolution if sale, purchase or supply of
goods, amounting to:
(a) 10% or more of the turnover of the company or ` 100 Cr., whichever is lower.
(b) 10% of net worth of the company or ` 100 Cr., whichever is lower.
(c) 10% of the net worth of the company or 10% or more of turnover of the company or `
100 Cr., whichever is lower.
(d) 10% of the turnover of the company or ` 50 Cr., whichever is lower.

5. Section 188 of Companies Act, 2013 provides that except with the consent of the Board
of Directors given by a resolution at a meeting of the Board and subject to such
conditions as may be prescribed, no company shall enter into any contract or
arrangement with a related party with respect to selling or otherwise disposing of or
buying property of any kind. However, company cannot enter into such contracts or
arrangements, except with the prior approval of the company by a resolution if selling
or otherwise disposing of, or buying, property of any kind, amounting to:
(a) 10% or more of the turnover of the company of ` 100 Cr., whichever is lower.
(b) 10% of net worth of the company or ` 100 Cr., whichever is lower.

Mob No - 8007916622/33 6.1

FINANCIAL STATEMENT INTERPRETATION UNIQUE ACADEMY
(c) 10% of the net worth of the company or 10% or more of turnover of the company or `
100 Cr., whichever is lower.
(d) 10% of the turnover of the company or ` 50 Cr., whichever is lower.

6. Section 188 of Companies Act, 2013 provides that except with the consent of the Board
of Directors given by a resolution at a meeting of the Board and subject to such
conditions as may be prescribed, no company shall enter into any contract or
arrangement with a related party with respect to leasing of property of any kind.
However, company cannot enter into such contracts or arrangements, except with the
prior approval of the company by a resolution if leasing of property of any kind,
amounting to:
(a) 10% or more of the turnover of the company or ` 100 Cr., whichever is lower.
(b) 10% of net worth of the company or ` 100 Cr., whichever is lower.
(c) 10% of the net worth of the company or 10% or more of turnover of the company or `
100 Cr., whichever is lower.
(d) 10% of the turnover of the company or ` 50 Cr. whichever is lower.

7. Section 188 of Companies Act, 2013 provides that except with the consent of the Board
of Directors given by a resolution at a meeting of the Board and subject to such
conditions as may be prescribed, no company shall enter into any contract or
arrangement with a related party with respect to availing or rendering of any services.
However, company cannot enter into such contracts or arrangements, except with the
prior approval of the company by a resolution if availing or rendering of any services,
amounting to:
(a) 10% or more of the turnover of the company or `100 Cr., whichever is lower.
(b) 10% of net worth of the company or ` 100 Cr., whichever is lower.
(c) 10% of the net worth of the company or 10% or more of the turnover of the company or `
100 Cr., whichever is lower.
(d) 10% of the turnover of the company or ` 50 Cr., whichever is lower.

8. Section 188 of Companies Act, 2013 provides that except with the consent of the Board
of Directors given by a resolution at a meeting of the Board and subject to such
conditions as may be prescribed, no company shall enter into any contract or
arrangement with a related party with respect to such related party’s appointment to
any office or place of profit in the company, its subsidiary company or associate
company. However, company shall not enter into a transaction or transactions, where
the transaction or transactions to be entered into is for appointment to any office or
place of profit in the company, its subsidiary company or associate company at a
monthly remuneration .
(a) Exceeding ` 1 Lacs (b) Exceeding ` 2 Lacs
(c) Exceeding ` 2.50 Lacs (d) Exceeding ` 5 Lacs

Mob No - 8007916622/33 6.2

FINANCIAL STATEMENT INTERPRETATION UNIQUE ACADEMY
9. Where any contract or arrangement is entered into by a director or any other
employee, without obtaining the consent of the Board or approval by a resolution in the
general meeting u/s 188(1) and if it is not ratified by the Board or, as the case may be,
by the shareholders at a meeting within from the date on which such contract
or arrangement was entered into, such contract or arrangement shall be
(a) 3 months ; voidable at the option of the Board.
(b) 6 months ; voidable at the option of the Board.
(c) 3 months ; voidable at the option of the Board or, as the case may be, of the shareholders.
(d) 6 months ; voidable at the option of the Board or, as the case may be, of the shareholders.

10.Reliable Casting Ltd., is a subsidiary or Unique Machinery Ltd. The board of directors
of the respective companies have made the following appointments on a consolidated
monthly salary of ` 2,52,000 with effect from 1st June 2018.
(a) Mr. X, a director of Unique Machinery Ltd. as factory manager of Reliable Casting Ltd.
(b) Mr. Y, a director of Reliable Casting Ltd. as Purchase manager of Unique Machinery Ltd.
(c) Mr. Z, relative of a director of Unique Machinery Ltd. as Sales Manager of Unique
Machinery Ltd.
(d) Mr. A not related to any director of both the companies, as Chief Accountant of Unique
Machinery Ltd. but his relative has been appointed as additional director of Unique
Machinery Ltd. with effect from 1st May 2018.

11.To make payment in excess of 11% of net profit as managerial remuneration, which of
the following authorizations are is required?
(a) Ordinary Resolution and prior approval of Central Government.
(b) Special Resolution and prior approval of Central Government.
(c) Board Resolution and prior approval of Central Government.
(d) None of the above.

12.To pay remuneration to any one managing director; or whole-time director or

manager in excess of 5% of the net profits of the company, which of the following
approvals are required?
(a) Board resolution and prior approval of Central Government.
(b) Board Resolution.
(c) Special Resolution in general meeting.
(d) Ordinary Resolution in general meeting and prior approval of Central Government.

13.ABC Ltd., a listed company having two managing directors, is considering to pay
remuneration to both managing directors equivalent to 10.5% of net profits of the
company. Company seeks your advice the necessary approvals required.
(a) Board resolution and prior approval of Central Government.
(b) Board Resolution.
(c) Special Resolution in general meeting.
(d) Ordinary Resolution in general meeting and prior approval of Central Government.

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FINANCIAL STATEMENT INTERPRETATION UNIQUE ACADEMY
14. Mr. Financer is a CEO in a public company. Company is considering a proposal to
increase the remuneration payable to Mr. Financer. Which of the following is true in
this regard?
(a) Company can pay upto 5% of net profit to Mr. Financer.
(b) Company can pay upto 1% of net profit to Mr. Financer.
(c) Company can pay upto 3% of net profit to Mr. Financer.
(d) Limits of Sec. 197 and Schedule V are not applicable over CEO.

15. As per Sec. 197(3) of Companies Act, 2013, if in any financial year, a company has no
profits or its profits are inadequate, the company shall not pay to its directors,
including any managing or whole time director or manager, by way of remuneration:
(a) Any sum exclusive of any fees payable to director’s u/s 197(5) except in accordance with
the provisions of Schedule IV.
(b) Any sum exclusive of any fees payable to director’s u/s 197(5) except in accordance with
the provisions of Schedule V.
(c) Any sum inclusive of any fees payable to director’s u/s 197(5) except in accordance with
the provisions of Schedule IV.
(d) Any sum inclusive of any fees payable to director’s u/s 197(5) except in accordance with
the provisions of Schedule V.

16. Which of the following is correct in relation to sitting fees of directors as per
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014?
(a) The sitting fees for Independent Directors and Women Directors shall not be less than ` 1 Lac.
(b) The sitting fees for Independent Directors and Women Directors shall not be more than ` 1 Lac.
(c) The sitting fees for Independent Directors and Women Directors shall not be less than the sitting
fees payable to other directors.
(d) The sitting fees for Independent Directors and Women Directors shall not be more than the
sitting fee payable to other directors.

17. A director or manager in a company may be paid remuneration by way of .

(a) Monthly payment.
(b) A specified percentage of the net profits of the company.
(c) Partly by monthly payment and partly at a specified percentage of net profits of the
company.
(d) Any of the above.

18. As per Sec. 197 of Companies Act, 2013, if any director draws or receives, directly or
indirectly, by way of remuneration any sum in excess of the limit prescribed by this
section or without approval required under this section, he .
(a) Shall refund such sums to the company, within two years or such lesser period as may be
allowed by the company, and until such sum is refunded, hold it in trust for the company.
(b) Shall refund such sums to the company and until such sum is refunded, hold it in trust for
the company.
(c) Shall obtain approval from Central Government to retain such excess amount.
(d) None of the above.

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FINANCIAL STATEMENT INTERPRETATION UNIQUE ACADEMY
19. As per Sec. 197(10) of Companies Act, 2013, the company shall not waive the recovery
of any sum refundable to its u/s 197(9) unless .
(a) Approved by the company by special resolution within two years from the date the sum
becomes refundable.
(b) Approved by the company by special resolution within six months from the date the sum
becomes refundable.
(c) Permitted by NCLT.
(d) Permitted by the Central Government.

20. As per Section 197(16) of Companies Act, 2013, the of the company shall, in
his report under , make a statement as to whether the remuneration paid by
the company to its directors is in accordance with the provisions of this section,
whether remuneration paid to any director is in excess of the limit laid down under this
section and give such other details as may be prescribed.
(a) Auditor ; Sec. 143.
(b) Internal auditor ; Sec. 138.
(c) Board of Directors ; Sec. 134.
(d) None of the above.

21. In making the computation of profit for the purpose of Sec. 197 of Companies Act, 2013,
credit shall be given for which of the following sums:
(a) Profits, by way of premium on shares or debentures of the company, which are issued or sold by
the company if the company is an investment company.
(b) Profits of a capital nature including profits from the sale of the undertaking or of any part
thereof.
(c) Profits from the sale of any immovable property or fixed assets of a capital nature, unless the
business of the company consists, whether wholly or partly, of buying and selling any such
property of assets.
(d) Any amount representing unrealized gains, notional gains or revaluation of assets.

22. In making the computation of profit for the purpose of Sec. 197 of Companies Act, 2013,
credit shall not be given for which of the following sums:
(a) Profits, by way of premium on shares or debentures of the company, which are issued or sold by
the company if the company is an investment company.
(b) Profits of a capital nature including profits from the sale of the undertaking or of any part
thereof.
(c) Profits from the sale of any immovable property or fixed assets of a capital nature, unless the
business of the company consists, whether wholly or partly, of buying and selling any such
property or assets.
(d) Any amount representing unrealized gains, notional gains or revaluation of assets.

23. As per Sec. 200 of Companies Act, 2013 may, while according its approval u/s 196, to
any appointment or to any remuneration u/s 197 in respect of cases where the company has
inadequate or no profits, fix the remuneration within the limits specified in this Act, at such
amount or percentage of profits of the company, as it may deem fit.
(a) Central Government (b) Company
(c) Company or Central Government (d) Central Government and company

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FINANCIAL STATEMENT INTERPRETATION UNIQUE ACADEMY
24. Which statement is true?
(a) Social responsibility could find expression in the policy documents of the company wherein a
company undertake to discharge certain goals in addition to business goals.
(b) Business should be expected to take the long term view and perform socially responsible actions
that might primarily reduce profits in the short run but are in the ultimate interest of the
company in the long run.
(c) Business should be obliged to internalize most of its external cost.
(d) All of the above.

25. Which of the section of Corporate Social Responsibility?

(a) Creditors (b) Suppliers
(c) Professional Institutions (d) All of the above

26. An organizations obligation to act to protect and improve society’s welfare as well as its own
interests is referred to as:
(a) Organizational social responsibility (b) Organizational social responsiveness
(c) Corporate obligation (d) Business ethics

27. The social demands and expectations of organizations can be assessed by all of the following
except:
(a) Social planning (b) Social forecasting
(c) Social scanning (d) Social audits

28. Corporate contributions for charitable and social responsibility purposes is called:
(a) Corporate philanthropy (b) Corporate charities
(c) Corporate donations (d) Corporate discretionaries

29. Corporate social responsibility that extends beyond legal mandates can help meet societal
expectations in the absence of:
(a) Statutory devices (b) Social tool
(c) Cost tool and Techniques (d) Science tool

30. Which statement is true?

(a) Social responsibility could find expression in the policy documents of the company wherein a
company undertake to discharge certain goals in addition to business goals.
(b) Business should be expected to take the long term view and perform socially responsible actions
that might primarily reduce profits in the short run but are in the ultimate interest of the
company in the long run.
(c) Business should be obliged to internalize most of its external cost.
(d) All of the above.
ANSWER KEYS
1 2 3 4 5 6 7 8 9 10
(c) (b) (c) (a) (b) (c) (d) (c) (c) (b)
11 12 13 14 15 16 17 18 19 20
(d) (c) (d) (d) (b) (c) (d) (a) (a) (a)
21 22 23 24 25 26 27 28 29 30
(a) (d) (b) (d) (d) (a) (a) (a) (a) (d)

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CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY

7 CONSOLIDATION OF ACCOUNTS AS PER COMPANIES

ACT, 2013

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. It is compulsory for a holding company to purchase the equity shares of a subsidiary

company:
(a) At least 50% (b) At least 52%
(c) At least 75% (d) None of these

2. In consolidated balance sheet it will not be shown:

(a) Cash (b) Stock
(c) Minority Interest (d) Intercompany transaction

3. If a holding company sold the goods costing ` 27,000 at ` 36,000 to its subsidiary
company and on the date of consolidated balance sheet the goods of ` 6,000 remains at
subsidiary company from these goods then the unrealized profit will be:
(a) ` 500 (b) ` 1,500 (c) ` 2,000 (d) ` 4,500

4. The minority share holders of subsidiary company are authorized for:

(a) Capital profit (b) Revenue profit
(c) Capital and Revenue both profits (d) All the above

5. Holding company means:

(a) The holder of at least 51% shares of another company.
(b) The holder of at least 80% shares of another company.
(c) Other company controls on its board of directors.
(d) All the above.

6. The holding company has been defined under the following section of Company Act,
2013.
(a) Section 3 (b) Section 4
(c) Section 2(4) (d) Section 2(46)

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CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY
7. The meaning of Subsidiary company is:
(a) Which controls on another company.
(b) Other Company controls on its board of directors.
(c) Other Company is the holder of 40% shares of this company.
(d) None of above.

8. Limited is the holder of 55% shares of B Limited, A Limited:

(a) has purchased B Limited (b) has absorbed B Limited
(c) is holding company (d) is subsidiary company

9. The share of holding company in the capital and reserve of subsidiary company is `
3,90,000 and the investment in shares of subsidiary company is ` 4,20,000. This
difference is called:
(a) Goodwill ` 30,000 (b) Capital Reserve ` 30,000
(c) Revenue profit ` 30,000 (d) None of the above

10. H Company is a holding company and S Company is subsidiary company. The goods
casting ` 20,000 is included in the stock of S Company which has been purchased from
H Company. H Company. Sold the goods at a profit of 10% on Selling price.
Unrealized profit will be:
(a) 2,222 (b) 2,200 (c) 2,000 (d) 1,818

11. Consolidated Financial Statements are prepared on the principle that:

(a) In form the companies are only entity, in substance they are separate.
(b) In form the companies the companies are separate, in substance they are one.
(c) In form and substance, the companies are one.
(d) In form and substance the companies are one.

12. The time interval between the dates of balance sheets of holding company and
subsidiary company for the purpose of consolidation of accounts:
(a) can be more than a year (b) can be 10 to 12 months
(c) can be 7 to 9 months (d) Cannot be more than 6 months

13.Pioneer Ltd acquired 3200 Equity shares of Aryan Ltd. on March 31, 2018. The Share
Capital of Aryan Ltd. consists of 4000 Equity shares of ` 100 each. The cost of
investments is ` 6,80,000. Aryan Ltd. made a bonus issue on March 31, 2018 of one
Equity Share for every four shares held by its shareholders. If the share in the capital
profits in Aryan Ltd. is ` 2,65,600 (after adjustment of Bonus), the amount of Goodwill
/ Capital Reserve shown in the Consolidated Balance Sheet on March 31, 2016 is:

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CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY
(a) 4,14,000 (Goodwill) (b) 2,80,000 (Capital Reserve)
(c) 14,400 (Goodwill) (d) Data insufficient

14. Gaint Ltd. acquired 80% shares of Zoom Ltd. on January 1, 2009. Trade creditors of
Zoom Ltd. include ` 45,000 for gods supplied by Gaint Ltd. on which the latter made
of profit of ` 9,000. One-fifth of the goods are still in the stock on March 31, 2016.
The value of stock to be considered for the purpose of consolidation is:
(a) ` 7,200 (b) ` 4,500
(c) ` 1,800 (d) None of (A), (B), (C)

15. Wealth Ltd. acquired 55% shares of Gold Ltd. on February 01, 2008. Wealth Ltd. sells
goods at cost plus 20%. During the year 2008-09, it supplied goods with ` 90,000 to
Gold Ltd. out of which 60% are still in stock of Gold Ltd. as on March 31, 2009. The
unrealized profit on stock to be adjusted while preparing Consolidated Balance Sheet
as on March 31, 2009 is:
(a) ` 4,950 (b) ` 5,940 (c) ` 9,900 (d) ` 10,800

16. Sunny Ltd. acquired 70% shares of Harry Ltd. on October 01, 2009 at a price of `
5,00,000. The Balance of Profit and Loss account of Harry Ltd. is as under:

As on Balance
April01, 2009 80,000 Debit balance
March 31, 2010 1,60,000 Credit balance

The share of Capital Profit of Sunny Ltd. at the time of consolidation is:
(a) ` 28,000 (b) ` 48,000
(c) ` 84,000 (d) None of (A), (B), (C)

17. Zoom Ltd. acquired 80% shares of Dark Ltd. on March 31, 2018 for consideration of `
5,20,000. The share capital of Dark Ltd. comprises of 4,000 equity shares of ` 100 each.
The capital profit and revenue profits of Dark Ltd. were ` 3 lakh on the date of
acquisition. The amount of minority interest shown in the consolidated Balance Sheet
as on March 31, 2018 is:
(a) ` 2,20,000 (b) ` 1,20,000 (c) ` 1,60,000 (d) ` 1,20,000

18. On July 01, 2018 Grenison Ltd. acquired 7000 equity shares of Narmada Ltd. for
consideration of ` 8,00,000. The share capital of narmada Ltd. consists of 10,000 equity
shares of ` 100 each.

Mob No - 8007916622/33 7.3

CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY
The balance of Genereal Reserve and Profit and Loss Account of Narmada Ltd. are as
under:

As on July 01, 2018 As on March 31, 2019

General Reserve ` 1,70,000 ` 2,00,000
Profit and Loss A/c ` 1,50,000 ` 1,75,000

What will be the amount of Minority interest to be shown in Consolidated Balance

Sheet as on March 31, 2019.
(a) 3,07,500 (b) 3,60,000
(c) 4,12,500 (d) Insufficient information

19. A Ltd. had acquired 80% share in the B Ltd. for ` 25 lacs. The net assets of B Ltd. on
the day are ` 22 lacs.
During the year A Ltd. sold the investment for ` 30 lacs and net assets of B Ltd. on the
date of disposal was ` 35 lacs. The Profit or Loss on disposal of this investment to be
recognized in consolidated financial statement is:
(a) Profit ` 5,00,000 (b) Profit ` 2,00,000
(c) Loss ` 9,40,000 (d) Loss ` 5,40,000
20. Economic Activity of Investment Associate Ltd. is controlled by Holding Ltd. and
Subsidiary Ltd. State the Relevant Accounting Standard (out of AS 13, AS 21, AS 23,
AS 27) applicable if Holding Ltd. holds:
(a) 19% Shares in Investment Associate Ltd.
(b) 20% Shares in Investment Associate Ltd.
(c) 50% Shares in Investment Associate Ltd.
(d) 51% Shares in Investment Associate Ltd.

21. Room Ltd. holds 25% share in Door Ltd. at a cost of ` 7.50 lakhs as on 31.3.2005 out of
Door’s share capital and Reserve of ` 30 lakhs each. For the year ended 31.3.2012,
Door Ltd. made a profit of ` 2,40,000 and 30% of it was distributed as dividend. In the
Consolidated Financial Statement, the carrying amount of investment as at 31.03.2012
will be:
(a) ` 15.00 (b) ` 16.50 (c) ` 15.42 (d) ` 14.82

22. Sky Ltd. purchased special machinery from Earth Ltd. for 50 Lakhs in consideration
of 50,000 equity shares of ` 100 each of the company. Where this transaction will be
reflected in the Cash Flow Statement as per AS-3?
(a) Operating Activities (b) Financing Activities
(c) Investing Activities (d) None of the above

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CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY
23. Bansal Ltd. had acquired 75% share of Navina Ltd. for ` 27 lakh. The Net Assets of
Navina Ltd. on the day are ` 24 lakh. During the year Bansal Ltd. sold the investment
for ` 32 lakh and Net Assets of Navina Ltd. on the date of disposal was ` 40 lakh. The
Profit / Loss on disposal of this investment to be recognized in consolidated financial
statement is:
(a) Profit ` 8.00 lakh (b) Profit ` 2.00 lakh
(c) Loss ` 7.00 lakh (d) Insufficient Information

24. Peeru Ltd. acquired 80% Equity shares of Pimo Ltd. on 1 st April, 2016. On 31st March,
2018, goods worth ` 65,000 purchased from Perru Ltd., were included in stock of Pimo
Ltd. Peeru Ltd. made a profit of 25% on cost. At the time of preparation of
consolidated Balance Sheet the amount of unrealized profit on stock will be:
(a) ` 1,62,500 (b) ` 21,667 (c) ` 13,000 (d) NIL

25. Patel Ltd. purchases 75% shares out of 60,000 Equity Shares of ` 10 each in Chandu
Ltd. at ` 7,95,000. On that date balance of Capital Reserve; Securities Premium;
General Reserve and Discount on issue of Debentures were ` 69,000 ; ` 1,20,000 ; `
2,15,000 ; and ` 40,000 respectively. The amount of minority interest will be:
(a) ` 5,51,000 (b) ` 2,41,000 (c) ` 1,98,750 (d) ` 1,95,000

26. X Ltd. acquired 150000 shares of Y Ltd. on August, 2016. The Equity Capital of Y Ltd.
is ` 20 lakh of ` 10 per share. The machinery of Y Ltd. is revalued upwards by `
4,00,000. The minority group interest shown in the consolidated Balance Sheet as on
March 31, 2017 was:
(a) 6,00,000 (b) 4,00,000 (c) 1,00,000 (d) none of above

27. It is compulsory for a holding company to purchase the equity shares of a subsidiary
company:
(a) More than 50% (b) at least 52%
(c) At least 75% (d) None of these

28. In consolidated balance sheet it will not be shown:

(a) Cash (b) Stock
(c) Minority Interest (d) Inter company transaction

29.If a holding company sold the goods costing ` 27,000 at ` 36,000 to its subsidiary
company and on the date of consolidated balance sheet the goods of ` 6,000 remains at
subsidiary company from these goods then the unrealized profit will be:
(a) ` 500 (b) ` 1,500 (c) ` 2,000 (d) ` 4,500

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CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY
30. The minority share holders of subsidiary company are authorized for:
(a) Capital Profit (b) Revenue Profit
(c) Capital and Revenue both profits (d) All the above

31. Holding company means:

(a) The holder of at least 51% shares of another company.
(b) The holder of at least 80% shares of another company.
(c) Other company controls on its board of directors.
(d) All the above.

32. The holding company has been defined under the following Section of Company Act,
2013:
(a) Section 3 (b) Section 4 (c) Section 4(4) (d) Section 2(46)

33. The meaning of subsidiary company is:

(a) Which controls on another company.
(b) Other company controls on its board of directors.
(c) Other company is the holder of 405 shares of this company.
(d) None of above.

34. A Limited is the holder of 555 shares of B. Limited, A Limited:

(a) has purchased B Limited (b) has absorbed B Limited
(c) is holding company (d) is subsidiary company

35. The share of Holding company in the capital and reserve of subsidiary company is `
3,90,000 and the investment in shares of subsidiary company is 4,20,000. This
difference is called:
(a) Goodwill ` 30,000 (b) Capital Reserve ` 30,000
(c) Revenue profit ` 30,000 (d) None of the above

36. H Company is a holding company and S Company is subsidiary company. The goods
casting ` 20,000 is included in the stock of S Company which has been purchased from
H Company. H Company sold the goods at a profit of 10% on selling price. Unrealized
profit will be:
(a) ` 2222 (b) ` 2200 (c) ` 2000 (d) ` 1818

37. Percentage of shares of subsidiary company which is purchased by holding company is:
(a) 50% (b) Less than 50%
(c) More than 50% (d) None of the above

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CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY
38. Definition of a subsidiary company has been given in Indian Companies Act, 2013:
(a) Sec. 2 (b) Sec 2(87)
(c) Sec. 8 (d) None of the above

39. Pre-acquisition reserve is:

(a) Capital profit (b) Revenue profit
(c) Goodwill (d) Secret Reserve

40. In case of holding company, Capital profit arising due to revaluation of assets and
liabilities of subsidiary co. is:
(a) Added to capital reserve (b) Deducted from capital reserve
(c) Added to goodwill (d) Added to balance of P & L Account

41. Post acquisition profit is:

(a) Capital Profit (b) Revenue Profit
(c) Goodwill (d) Secret Reserve

42.A holding company is best defined as one which:

(a) Holds most of the net assets of another company.
(b) Holds both shares and debentures in another company.
(c) Holds most of the shares in another company.
(d) Holds the reserves of another company on behalf of that company.

43. A non-controlling interest is best defined as:

(a) The debt stake in a subsidiary, as opposed to the equity stake.
(b) The total of the debt and equity stakes in the subsidiary.
(c) The equity stake in the subsidiary not held by the holding company.
(d) The equity stake in the subsidiary held by the holding company, less reserve.

44. The group share of the pre-acquisition reserves of a subsidiary form part of:
(a) The group’s revenue reserves (b) The goodwill calculation
(c) The group’s capital reserves (d) The groups share capital

45. If AB Ltd. buys more than 50% of the shares in CD Ltd. then which of the following
statements accurately summarizes the relationship between these two firms?
(a) AB Ltd. is the parent undertaking.
(b) There is no significant financial relationship between the two.
(c) AB Ltd is a subsidiary undertaking of CD Ltd.
(d) CD Ltd is the parent undertaking.

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CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY
46. When someone buys ordinary shares in another company then they are entitled to all
bar one of the following:
(a) A right to an interest in the profits earned by the company.
(b) Voting rights at the shareholder’s meeting.
(c) A right to an interest in the net assets of the company.
(d) A right to dividends out of the company profits.

47. On a consolidated balance sheet, if the shares of a company have been bought for more
than the balance sheet value then the difference would appear as:
(a) Loss on purchase (b) Profit on purchase
(c) Capital reserve (d) Goodwill

48. If less than 100% of a subsidiary’s share capital has been acquired then what is the
rule for inclusion of the subsidiary’s assets on the consolidated balance sheet?
(a) None can appear until all the shares have been acquired.
(b) All the assets should appear.
(c) Half the value should appear.
(d) Only a proportional amount should appear.

49. What is the term used to describe dividends paid by one company in the group to
another in the same group?
(a) Intragroup dividends (b) Interim dividends
(c) Group dividends (d) Intergroup dividends

50. If stock is sold for a profit from one group member to another, how should this be dealt
with in the final accounts?
(a) Profits on the sale should be eliminated.
(b) Profit on sale should be eliminated and stock appears at original cost.
(c) Stock should appear at the original cost.
(d) The profit should be included but stock would appear at the value sold for.

51. The claim by outsiders to assets featured on a consolidated balance sheet is known as:
(a) Negative goodwill (b) Minority interest
(c) Wholly owned subsidiary (d) Subsidiary

52. Under acquisition accounting, the fair value of an asset will be the:
(a) Decided by purchaser (b) Cost paid for asset
(c) Replacement cost (d) Historical cost of the aster

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CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY
53. On consolidation, if the total of the fair value of the assets acquired is less than the
whole purchase consideration then the difference should be treated as:
(a) Profit on acquisition (b) Goodwill
(c) Negative goodwill (d) Loss on acquisition

54. If parent undertaking owns 60% of subsidiary Lev Ltd and Lev Ltd itself owns 40% of
another subsidiary Hinds Ltd. The parent company owns how much of Hinds Ltd?
(a) 24% (b) 12% (c) 40% (d) 60%

55. When dealing with consolidated balance sheets, the expression cost of control could be
used instead of:
(a) Negative goodwill (b) Intangible investment
(c) Goodwill (d) Acquisition expenditure

56. Why do wholly owned subsidiaries not have to prepare consolidated financial
statements?
(a) Historical legal precedent.
(b) It is considered that it would involve too much work.
(c) No shareholder would need to see them.
(d) Small firms are exempt.

57. What term is used to describe an entity which is jointly controlled by the reporting
entity and one or more others under a contractual agreement?
(a) Associated undertaking (b) Merger
(c) Joint venture (d) Minority interest

58. In acquisition accounting, the ‘fair value’ of quoted investment should be based upon:
(a) Historical cost (b) Net realizable value
(c) Market price (d) Replacement cost

59. A firm which has significant influence over another firm but does not actually control
the firm or have a dominant influence over the firm’s actions would refer to the firm it
has influence over as:
(a) Joint venture (b) Subsidiary
(b) No specific term exists (d) Associated undertaking

60. If a parent undertaking owns 75% of a subsidiary Clews Ltd, and Clews Ltd. itself
owns 20% of another subsidiary, Chase Ltd, then the parent company owns how much
of Chase Ltd?
(a) 50% (b) 25% (c) 17% (d) 15%

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CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY
61. Entities which the reporting entity holds an interest on a long-term basis and which are
jointly controlled by the reporting entity and one or more other ventures under a
contractual arrangement would be known as which of the following?
(a) Acquisition (b) Joint Venture
(c) Merger (d) Holding company

62. If a parent undertaking owns 60% of a subsidiary Batnak Ltd. and Batnak Ltd itself
owns 33% of another subsidiary, Brassington Ltd, then the parent company owns how
much of Brassington Ltd?
(a) 60% (b) 33% (c) 40% (d) 20%

63. Which of the following is not normally considered the right of an ordinary
shareholder?
(a) An interest in the day-to-day running of the company.
(b) Voting rights at meetings.
(c) An interest in the net assets of the company.
(d) An interest in the profits earned by the company.

64. If a parent undertaking owns 80% of a subsidiary Merrett Ltd, and Merrett Ltd. itself
owns 40% of another subsidiary, Yates Ltd, then the parent company owns how much
of Yates Ltd?
(a) 40% (b) 32% (c) 25% (d) 75%

65. Preparation of consolidated Balance Sheet of Holding Co. and its subsidiary company
as per:
(a) AS – 11 (b) AS – 22 (c) AS – 21 (d) AS – 23

66. The share of outsiders in the Net Assets in subsidiary company is known as under:
(a) Outsiders liability (b) Assets
(c) Subsidiary company’s liability (d) Minority Interest

67. Pre-acquisition profit in subsidiary company is considered as:

(a) Revenue profit (b) Capital profit
(c) Goodwill (d) None of the above

68. Excess of cost of investment over paid up value of the shares is considered as:
(a) Goodwill (b) Capital Reserve
(c) Minority Interest (d) None of the above

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CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY
69. Excess of paid up value of the shares over cost of investment is considered as:
(a) Goodwill (b) Capital Reserve
(c) Minority Interest (d) None of above

70. Profit earned before acquisition of share is treated as:

(a) Capital profit (b) Revenue profit
(c) General Reserve (d) Revaluation Loss

71. Profit earned after acquisition of share is treated as:

(a) Capital profit (b) Revenue profit
(c) General Reserve (d) Revaluation Loss

72. Preparation of consolidated statement as per AS 21 is:

(a) Optional (b) Mandatory for listed Companies
(c) Mandatory for Pvt. Ltd. (d) Companies Ltd. partnership firm

73. Holding Co. share in revenue profits of subsidiary company is adjusted in:
(a) Cost of control (b) Shown on Assets side of Balance Sheet
(c) Profit and Loss Account (d) None of above

74. Unrealized profit on goods sold and included in stock is deducted from:
(a) Capital Profit (b) Revenue Profit
(c) Fixed Assets (d) Minority interest

75. Which of the following statement is true:

(a) There is no change in the amount of capital reserve before and after issue of bonus share
of the issue is made from out of pre-acquisition profit.
(b) There is change in the amount of capital reserve before and after issue of bonus share of
the issue is made from out of post-acquisition profit.
(c) There is change in the amount of capital reserve before and after issue of bonus share of
the issue is made from out of pre-acquisition profit.
(d) There is no connection between the issue of bonus shares and the calculation of capital
reserve.

76. Consolidated financial statements are prepared on the principle:

(a) In form the companies are one entity; in substance they are separate.
(b) In form the companies are separate; in substance they are one.
(c) In form and substance the companies are one entity.
(d) In form and substance the companies are separate.

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CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY
77. Minority Interest includes:
(a) Share in share capital (b) Share in Capital profit
(c) Share in Revenue profit (d) All of the above

78. The Time interval between the date of acquisition of shares in subsidiary company and
date of Balance Sheet of Holding Company is known as:
(a) Pre-acquisition period (b) Post-acquisition period
(c) Pre-commencement period (d) Pre-incorporation period

79. Pre-acquisition dividend received by Holding company is credited to:

(a) Profit & Loss A/c (b) Capital profit
(c) Investment A/c (d) None of the above

80. Post-Acquisition dividend received by Holding Company is debited to:

(a) Bank A/c (b) Profit & Loss A/c
(c) Dividend A/c (d) Investment A/c

81. Which Exchange rate will be considered for conversion of share capital of subsidiary
company?
(a) Opening Rate (b) Closing Rate
(c) Average Rate (d) Rate of which date share acquired (actual)

82.A subsidiary company shall be excluded from consolidation when:

(a) Control is intended to be temporary.
(b) It operates under serve long-term restrictions which significantly impair its ability to
transfer funds to the parent.
(c) Always included for consolidation.
(d) Both (a) and (b).

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CONSOLIDATION OF ACCOUNTS AS PER COMPANIES ACT, 1013 UNIQUE ACADEMY

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(a) (d) (b) (c) (a) (d) (b) (c) (a) (c)
11 12 13 14 15 16 17 18 19 20
(b) (d) (c) (a) (a) (a) (c) (c) (d) (a)
21 22 23 24 25 26 27 28 29 30
(c) (d) (c) (c) (b) (a) (a) (d) (b) (c)
31 32 33 34 35 36 37 38 39 40
(a) (d) (b) (c) (a) (c) (c) (b) (a) (a)
41 42 43 44 45 46 47 48 49 50
(b) (b) (c) (b) (a) (d) (d) (b) (a) (b)
51 52 53 54 55 56 57 58 59 60
(b) (b) (b) (a) (c) (c) (c) (c) (d) (d)
61 62 63 64 65 66 67 68 69 70
(a) (d) (a) (b) (c) (d) (b) (a) (b) (a)
71 72 73 74 75 76 77 78 79 80
(b) (b) (c) (b) (a) (c) (d) (b) (c) (b)
81 82
(d) (d)

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COROPRATE FINANCIAL REPORTING UNIQUE ACADEMY

8 CORPORATE FINANCIAL REPORTING

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. Which section of Companies Act, 2013 deals with auditors report:

(a) 143 (b) 147 (c) 148 (d) 154

2. CARO does not apply on a private company if, during a financial year turnover not
exceeding:
(a) ` 3 Crore (b) ` 5 Crore (c) ` 7 Crore (d) ` 10 Crore

3. CARO does not apply to:

(a) Banking Companies (b) Not for Profit Companies
(c) Both (a) and (b) (d) None of the above

4. CARO come into existence in the year:

(a) 2000 (b) 2003 (c) 2004 (d) 2005

5. Section 134 of the Companies Act, 2013 deals with:

(a) Directors Report (b) Auditors Report
(c) Secretary Report (d) Government Report

6. “Value added statement” is related with:

(a) Value created by the activities of the firm.
(b) Increase in price of goods and service.
(c) Increase in the quality of goods and services.
(d) None of the above.

7. To calculate Economic Value Added (EVA) the cost of equity is deducted from:
(a) Gross Profit (b) Net Profit
(c) EBIT (d) Net Operating Profit after tax

8. Market Value Added is the difference between:

(a) Market Value of equity and Book value of equity.
(b) Gross Profit and Net Profit.
(c) Turnover of two consecutive years.
(d) None of the above

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COROPRATE FINANCIAL REPORTING UNIQUE ACADEMY
9. Shareholder Value Added represents:
(a) Operating Profit (b) Accounting Profit
(c) Economic Profit (d) Gross Profit

10. When economic value added is used as the performance measure, value is only created
in the after-tax operating income exceeds:
(a) Cost of investing capital (b) Investment
(b) Working capital (d) Sales

11. Which of the performance evaluation methods takes into consideration tax effects?
(a) Economic value added (b) Return on sales
(c) Residual income (d) Return on investment

12. Which of the following best describes “Market Value Added”?

(a) The value added to the product the firm produces above and beyond the costs of the
inputs.
(b) The difference between the book value of equity and debt versus the market value of the
firm.
(c) The difference between the market value of the firm and the amount of contributed
capital.
(d) None of the above accurately describes Market Value Added.

13. As per SA 700 “Forming an Opinion and Reporting on Financial Statements”, the
description of the auditor’s responsibilities for the audit of the financial statements
shall be included:
(a) Within the body of the auditor’s report.
(b) Within an appendix to the auditor’s report, in which case the auditor’s report, shall
include a reference to the location of the appendix.
(c) By a specific reference within the auditor’s report to the location of such a description on
a website of an appropriate authority, where law, regulation or the national auditing
standards expressly permit the auditor to do so.
(d) Any of the above.

14. A matter giving rise to a modified opinion in accordance with SA 705 (Revised), or a
material uncertainty related to events or conditions that may cast significant doubt on
the entity’s ability to continue as a going concern in accordance with SA 570 (Revised),
are by their nature key audit matters. In relation to this statement, select the
appropriate answer:

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COROPRATE FINANCIAL REPORTING UNIQUE ACADEMY
(a) Such matters shall not be described in the Key Audit Matters section of the auditor’s
report and the requirements as stated in SA 701 do not apply.
(b) Such matters shall only be described in the key Audit Matters section of the auditor’s
report and the requirements as stated in SA 701 shall apply.
(c) Such matters shall be described in the Key Audit Matters section of the auditor’s report
and the requirements as stated in SA 701 shall apply in addition to the requirements of
SA 570 of SA 705, as the case may be.
(d) Such matters shall be described in Emphasis of matter Para.

15. The auditor shall express a qualified opinion when:

(a) The auditor having obtained sufficient appropriate audit evidence, concludes that
misstatements, individually or in the aggregate, are material and pervasive, to the
financial statements.
(b) The auditor is unable to obtain sufficient appropriate audit evidence on which to base the
opinion, but the auditor concludes that the possible effects on the financial statements of
undetected misstatements, if any, could be material and pervasive.
(c) Either (a) or (b).

16. When reporting in accordance with a compliance framework and the auditor expresses
and adverse opinion, the auditor shall state that, in the auditor’s opinion because of the
significance of the matter(s) described in the Basis for Adverse Opinion section:
(a) The accompanying financial statements do not present fairly of […] in accordance with
[the applicable financial reporting framework].
(b) The accompanying financial statements do not give a true and fair view of […] in
accordance with [the applicable financial reporting framework].
(c) The accompanying financial statements have not been prepared, in all material respects,
in accordance with [the applicable financial reporting framework].
(d) Either (a) or (b).

17. If there is a material misstatement of the financial statements that relates to specific
amounts in the financial statements (including quantitative disclosures in the notes to
the financial statements), the auditor shall include in the a description and
quantification of the financial effects of the misstatement, unless impracticable.
(a) Opinion Section
(b) Basis for Opinion Section
(c) Key Audit matters Section
(d) Other Matter Para

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COROPRATE FINANCIAL REPORTING UNIQUE ACADEMY
18. Purpose of Guidance Note on Reports and Certificates for Special Purposes is to:
(a) Provide guidance on engagements which require a practitioner to issue reports other than
those which are issued in audits or reviews of historical financial information.
(b) Provide guidance on engagements which require a practitioner to issue reports in audits
of historical financial information.
(c) Provide guidance on engagements which require a practitioner to issue reports in reviews
of historical financial information.
(d) Provide guidance on engagements which require a practitioner to issue reports in auditsor
reviews of historical financial information.

19. Which of the following engagements is covered within the scope of Guidance Note on
Reports and Certificates for special purposes:
(a) Engagements covered by Standards on Related Services (SRS) such as agreed-upon
procedures and compilation engagements.
(b) The preparation of tax returns where no assurance opinion/conclusion is expressed.
(c) Consulting (or advisory) engagements, such as management and tax consulting.
(d) Engagements for issuing Certificate for net worth required for a tender document.

20. As per Guidance Note on Reports and Certificates for Special Purposes in conducting
an assurance engagement, the objectives of the practitioner is to obtain either
reasonable assurance or limited assurance, as appropriate about whether the subject
matter information is free from material misstatement. The term limited assurance
engagement implies:
(a) An assurance engagement in which the practitioner reduces engagement risk to an
acceptably low level in the circumstances of the engagement, as the basis for the
practitioner’s opinion.
(b) An assurance engagement in which the practitioner reduces engagement risk to a level
that is acceptable in the circumstances of the engagement but where that risk is greater
than for a reasonable assurance engagement.
(c) An assurance engagement in which the practitioner reduces engagement risk to nil level.
(d) An assurance engagement in which the practitioner is not able to reduce engagement risk.

21. Scope of certificate issued by a practitioner is:

(a) Narrow and restricted to subject matter only.
(b) Wide and generally covers an opinion on complete set of financial statements.
(c) Marrow and restricted to financial elements only.
(d) Wide and covers an opinion on general as well as special purpose financial statements.

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COROPRATE FINANCIAL REPORTING UNIQUE ACADEMY
22. In which of the following companies, auditor is required to report on matters specified
under CARO, 2016.
(a) Foreign company (b) Small Company
(c) One Person company (d) None of the above

23. A private limited company, in order to be covered under CARO, 2016, must satisfy
which of the following conditions:
(a) Total borrowings exceeding rupees ten crores from any bank or financial institution at
any point of time during the financial year.
(b) Total borrowings exceeding rupees one crore from any bank or financial institution as on
the balance sheet date.
(c) Total borrowings exceeding rupees ten crores from any bank or financial institution as on
balance sheet date.
(d) Total borrowings exceeding rupees one crore from any bank or financial institution at any
point of time during the financial year.

24. Astha Pvt. Ltd. which is a subsidiary company of Kiran Pvt. Ltd., has fully paid capital
of ` 40 lakh. During the year, the company had borrowed ` 55 lakh each from a bank
and a financial institution independently. It has the turnover of ` 175 lakhs.
(a) CARO is not applicable as Astha Pvt. Ltd., is a small company.
(b) CARO is not applicable as total borrowings exceeds ` 1 Cr.
(c) CARO is not applicable as Astha Pvt. Ltd., is a subsidiary company of another Pvt. Ltd.
(d) CARO is applicable as turnover exceeds ` 1 Cr.

25. CARO, 2016 is applicable over a private limited company, having paid up capital and
reserves and surplus is ` 1 crore or more as on the balance sheet date for this purpose:
(a) Paid-up share capital would include equity share capital only.
(b) Amount of calls unpaid should be added to the figure of paid-up capital.
(c) Amount originally paid-up on forfeited shares should be added to the figure of paid-up
capital.
(d) Share application money received should be considered as part of the paid-up capital.

26. Para 3(iii) of CARO, 2016 requires the auditor to state the total amount overdue for
more than 90 days, and whether reasonable steps have been taken by the company for
recovery of the principal and interest. This reporting is required in which of the
following situation:
(a) If the company has granted any loans, secured on unsecured to companies covered in the
register maintained u/s 189 of the Companies Act, 2013.

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COROPRATE FINANCIAL REPORTING UNIQUE ACADEMY
(b) If the company has granted any loans, secured or unsecured to firms and LLPs covered in
the register maintained u/s 189 of the Companies Act, 2013.
(c) If the company has granted any loans, secured or unsecured to other parties covered in
the register maintained u/s 189 of the Companies Act, 2013.
(d) All of the above.

27. ABC Ltd., a listed company pays to its managerial personnel the remuneration in
excess of the limits prescribed under the Companies Act, 2013 without obtaining the
necessary approvals. While reporting under CARO, 2016, auditor is required to state:
(a) Name of persons to whom the remuneration in excess of limits are paid and the amount
involved.
(b) The amount involved and steps taken by the company for securing refund of the same.
(c) Name persons to whom the remuneration in excess of limits are paid and the steps taken
by the company for securing refund of the same.
(d) The maximum remuneration payable and amount paid in excess of maximum
remuneration.

28. When reporting under CARO, 2016, auditor is required to state in case of Nidhi
Companies, whether Nidhi company has complied with:
(a) Net Owned funds to total debts in the ratio of 1:20.
(b) Net Owned funds to deposits in the ratio of 1:20.
(c) Net Owned funds to total debts in the ratio of 1:10.
(d) Net Owned funds to deposits in the ratio of 1:10.

29. When reporting under CARO, 2016, auditor is required to state in case of Nidhi
Companies, whether the Nidhi company has complied with Net Owned Funds to
Deposits liability in the ratio of 1:20. For this purpose, the deposit liability consists of:
(a) Fixed Deposits and recurring deposits received from its members.
(b) Fixed Deposits and saving deposits received from its members.
(c) Recurring Deposits and Saving deposits received from its members.
(d) Fixed Deposits, Recurring deposits and Saving deposits received from its members.

30. Auditor’s report under CARO, 2016 in terms of Para 3(xvi) shall incorporate:
(a) Registration number of company under Companies Act, 2013.
(b) Registration number of company allotted by RBI.
(c) Both of the above.
(d) None of the above.

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COROPRATE FINANCIAL REPORTING UNIQUE ACADEMY
31. If a company is not regular in deposit of statutory dues to the appropriate authorities,
auditor need to report on arrears of outstanding dues as at the last day of the financial
year concerned for a period of:
(a) More than 90 days from the date they became payable.
(b) More than 6 months from the date they became payable.
(c) More than 90 days from the reporting they became payable.
(d) More than 6 months from the reporting date.

32. While reporting under Clause (x) of Para 3 of CARO, 2016, with respect to fraud,
auditor is required to report on:
(a) Fraud noticed and reported u/s 143(12) of Companies Act, 2013.
(b) Fraud suspected and reported u/s 143(12) of Companies Act, 2013.
(c) Fraud committed on the company by the vendors of the company.
(d) Both (a) and (c).

33. While carrying out audit of ABC Ltd, auditor observed that a term loan was obtained
by the company from a bank for ` 75 lakhs for acquiring R & D equipment, out of
which ` 12 lakhs were used to buy a car for use of the concerned director, who was
overlooking the R & D activities. Auditor is required to report the matter:
(a) Under Clause (vii) of paragraph 3 of the CARO, 2016.
(b) Under Clause (viii) of paragraph 3 of the CARO, 2016.
(c) Under Clause (ix) of paragraph 3 of the CARO, 2016.
(d) No reporting required under the requirements of CARO, 2016.

34. Reporting under CARO, 2016 will be required in case of which companies:
(a) X Pvt. Ltd. which is subsidiary of ABC Ltd. a listed company.
(b) X Pvt. Ltd. which is a one-person company, having paid up capital of ` 105 Lacs.
(c) X Pvt. Ltd. which is a Small Company, having outstanding borrowings from banks in
excess of ` 1 Cr.
(d) All of the above.

35. In which of the following companies, auditor is required to report on matters specified
under CARO, 2016:
(a) Private limited company, which is a holding company of a public company having a paid-
up capital and reserves and surplus not more than rupees one crore as on the balance sheet
date.
(b) Private limited company, which is a subsidiary company of a public company, which
does not have total borrowings exceeding rupees one crore from any bank or financial
institution at any point of time during the financial year.

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COROPRATE FINANCIAL REPORTING UNIQUE ACADEMY
(c) Both (a) and (b).
(d) None of the above.

36. While carrying out the audit of X (P) Ltd., auditor observed that total managerial
remuneration paid by the company to its directors including managing director, whole
time director and its manager exceeds 11% of net profit. While reporting under
CARO, 2016, auditor is:
(a) Not required to report such excess payment.
(b) Report under clause (x) of Para 3, the nature of contravention and the amount involved.
(c) Report under clause (xi) of Para 3, the amount involved and steps taken by the company
for securing refund of the same.
(d) Report under clause (xiv) of Para 3, the nature of contravention u/s 197 of Companies
Act, 2013.

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(a) (b) (b) (b) (a) (a) (d) (a) (c) (a)
11 12 13 14 15 16 17 18 19 20
(a) (c) (d) (a) (d) (c) (b) (a) (d) (b)
21 22 23 24 25 26 27 28 29 30
(a) (a) (d) (b) (c) (d) (b) (b) (d) (d)
31 32 33 34 35 36
(b) (a) (c) (a) (c) (a)

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CASH FLOW STATEMENT UNIQUE ACADEMY

9 CASH FLOW STATEMENT

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. Cash flow statement is required for the financial planning of:

(a) Short range (b) Long range
(c) Medium range (d) Very long range

2. In cash flow statement, dividend paid in case of financing company is classified as:
(a) Operating activities (b) Investing activities
(c) Financing activities (d) Cash and cash equivalents

3. Which of the following results into decrease in working capital:

(a) Goods sold on credit (b) Decrease in current liabilities
(c) Decrease in current assets (d) Increase in current assets

4. In cash flow statement, interest received by company is classified as:

(a) Operating activities (b) Cash and cash equivalents
(c) Investing activities (d) Financing activities

5. In case of a financial enterprise, interest received on debentures held as investment is:

(a) Financing activity (b) Investing activity
(c) Operating activity (d) None of the above

6. As per Accounting Standard – 3, cash equivalents include:

(a) Treasury bills (b) Commercial papers
(c) Money market funds (d) All of the above

7. Cash payments to and on behalf of employees is an example of cash flow from:

(a) Operating activity (b) Investing activity
(c) Financing activity (d) None of the above

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CASH FLOW STATEMENT UNIQUE ACADEMY
8. Match the following:
List 1 List 2
P Cash flow statements 1 Inflow of funds
Q Inflow of cash 2 Short term financial planning
R Investment (maturity period 3 months) 3 Financial activity
S Payment of dividend 4 Cash equivalent

P Q R S
(a) 4 1 2 3
(b) 2 4 1 3
(c) 4 3 1 2
(d) 3 4 1 2

9. Statement-1:
In funds flow analysis, current assets and current liabilities are shown separately in a
statement of changes in working capital.
Statement-2:
In cash flow analysis, increases and decreases of all current accounts are adjusted in the
calculation of cash flow from operating activities.
Select the correct answer from the following:
(a) Both statements are correct.
(b) Both statements are incorrect.
(c) Statement-1 is correct, but Statement-2 is incorrect.
(d) Statement-1 is incorrect, but Statement-2 is correct.

10. Match the following

List 1 List 2
P Cost Accounting 1 Change in working capital
Q Funds flow statement 2 Deals with the cost of production selling and distribution.
R Cash flow statement 3 Is an important technique of financial analysis.
S Ratio analysis 4 Cash and cash equivalents

P Q R S
(a) 4 3 2 1
(b) 2 1 4 3
(c) 4 3 1 2
(d) 3 4 2 1

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CASH FLOW STATEMENT UNIQUE ACADEMY
11. Assertion (A):
Cash flow statement enhances the comparability of report.
Reason (R):
Cash flow statement eliminates the effect of using different treatments for same transactions.
Select the correct answer from the following:
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.

12. Statement-1:
According to AS-3, provision for taxation should always be treated as a non-operating
charge on profits.
Statement-2:
Dividend on shares is an appropriation of profits and not a trading charge.
Select the correct answer from the following:
(a) Both statements are correct.
(b) Both statements are incorrect.
(c) Statement-1 is correct, but Statement-2 is incorrect.
(d) Statement-1 is incorrect, but Statement-2 is correct.

13. are necessary for the study of trends and direction of movements in the
financial position and operating results of a concern.
(a) Trade ratios (b) Cash flow statements
(c) Common size statements (d) Comparative statements.

14. Current ratio is 2.5 and liquid ratio is 1.5. Working capital is ` 75,000. Value of the
stock held will be:
(a) ` 60,000 (b) ` 1,00,000
(c) ` 50,000 (d) None of the above

15. Which statement contains opening as well as closing balances of cash and cash
equivalents and prepared on accrual basis:
(a) Cash flow statement (b) Fund flow statement
(c) Both (a) and (b) above (d) Statement of income and expenditure

16. The purchase of machinery by issuing long-term notes payable should be reported as a:
(a) Non-cash investing and financing activity.
(b) Cash outflow in the operating activity.

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CASH FLOW STATEMENT UNIQUE ACADEMY
(c) Cash outflow in the investing activity.
(d) Cash outflow in the financing activity.

17. Income from investments is a cash flow from:

(a) Operating activities (b) Investing activities
(c) Financing activities (d) None of the above.

18. A company has annual sales of ` 150 lakhs entirely on credit. It keeps an average
inventory sufficient to meet sales demand for half of a month and gives its customer
one month credit. Its average current liabilities are ` 10 lakhs. The company must
maintain cash and bank balance to have current ratio of 2. The amount of cash balance
will be:
(a) ` 1,25,000 (b) ` 3,00,000 (c) ` 13,75,000 (d) ` 7,50,000

19. Which of the following is not a limitation of financial statements:

(a) Financial statements are essentially interim reports and therefore, cannot be final because
the final gain or loss can be computed only at the termination of the business.
(b) The values ascribed to the assets presented in the statements depend upon the standards
of the person dealing with them.
(c) Financial statements fall to bring out the significance of non-financial factors.
(d) Financial statements serve as a useful guide for the stakeholders of the company.

20. In the management information system (MIS), top level management uses:
(a) Operating information (b) Tactical information
(c) Transactional information (d) Strategic information

21. A cash flow statement is based upon while fund flow statement recognizes .
(a) Cash basis of accounting ; Accrual basis of accounting
(b) Accrual basis of accounting ; Cash basis of accounting.
(c) Merecantile basis of accounting ; Cash basis of accounting.
(d) Cash basis of accounting ; Cash basis of accounting.

22. In cash flow, income tax paid is treated as:

(a) Operating activity (b) Investing activity
(c) Financing activity (d) Not shown any where

23. By ‘Cash Equivalents’ we mean:

(a) Bank Balance (b) Short-term highly Liquid Securities
(b) Investments (d) Investments in debentures

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CASH FLOW STATEMENT UNIQUE ACADEMY
24. Net Profit + Non-Cash expenses =
(a) Gross Profit (b) Profit after tax
(c) Funds from operation (d) Distributable profit

25.Match the following:

List 1 List 2
A Cash flow statements 1 Inflow of fund
B Inflow of cash 2 Short-term financing planning
C Investment (maturity period 3 months) 3 Financial activity
D Payment of dividend 4 Cash equivalent

Codes:
A B C D
(a) 2 4 1 3
(b) 2 1 4 3
(c) 4 1 2 3
(d) 3 4 1 2

26.Arrange the following categories of cash inflows and cash outflows in a correct order:
(1) Cash from investing activities
(2) Cash from financing activities
(3) Cash from operating activities
Codes:
(a) 2, 1 and 3 (b) 1, 3 and 2
(c) 3, 2 and 1 (d) 3, 1 and 2

27.In case of financial enterprises cash flows arising from are classified as cash
flows from operating activities.
(a) Interest paid (b) Interest Received
(c) Dividend Received (d) All of the above

28.Both cash flow statement and fund flow statement are:

(a) Prepared on cash basis (b) Prepared on the basis of working capital
(b) Useful for long-term analysis (d) None of the above

29.While analyzing the opening and closing balance sheet of a company the following are
observed:
Total increase in current assets ` 20,000
Total increase in current liabilities ` 80,000

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CASH FLOW STATEMENT UNIQUE ACADEMY
Total decrease in current assets ` 1,30,000
Total decrease in current liabilities ` 30,000
The net change in working capital is:
(a) No change in working capital
(b) Net increase in working capital ` 1,60,000
(c) Net decrease in working capital ` 60,000
(d) None of the above.

30. Which of the following involves a movement of cash?

(a) A bonus issue (b) A right issue
(c) Depreciation of fixed assets (d) Provision for taxes

31. The following items would be classified as operating activities in the statement of cash
flows:
(a) Acquisition of equipment, payment of dividend.
(b) Proceeds from borrowing, payment of interest.
(c) Payment of salaries, cash received from sale of goods.
(d) Payment on loan, payments for taxes.

32. When the installment paid in respect of a fixed asset acquire on deferred payment basis
includes both interest and loan, the interest element is classified under activities
and the loan element is classified under ........... activities.
(a) Financing, Investing (b) Investing, Operating
(c) Operating, Financing (d) Investing, Operating

33. In cash flow statement, proceeds from sales of an asset will be considered as:
(a) Investing activity (b) Financing activity
(c) Operating activity (d) None of the above

34. Which one of the following is false?

(a) If cash outflows exceed cash inflows on an ongoing basis, the business will eventually
run out of cash.
(b) Rapidly expanding companies can sometimes face a cash shortage.
(c) Cash is the lifeblood of a business and without it the business will die.
(d) A profitable company will never run out of cash.

35. In a cash flow statement there is no place for:

(a) Issue of equity shares (b) Issue of bonus shares
(c) Conversion of debt to equity (d) Both B and C above

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CASH FLOW STATEMENT UNIQUE ACADEMY
36. SKY Ltd. purchased a special machinery from Earth Ltd. for ` 50 Lakhs in
consideration of 50,000 equity shares of ` 100 each of the company. Where this
transaction will be reflected in the Cash Flow Statement as per AS-3?
(a) Operating Activities (b) Financing Activities
(c) Investing Activities (d) None of the above

37. As per AS-3 (Revised) Interest and Dividends received in the case of a manufacturing
enterprise should be classified as cash flow from:
(a) Operating activities (b) Financing activities
(c) Investing activities (d) Both (b) and (c)

38. Which of the following items is not a part of cash flow from operating activities?
(a) Collection from customers
(b) Payment of outstanding wages
(c) Payment to suppliers of machinery
(d) Advance to foreign suppliers for raw materials

39. While preparing Cash Flow Statement of XY Ltd. a finance company, interest received
on loans should be shown as:
(a) Cash Flow from Operating Activities.
(b) Cash Flow from Investing Activities.
(c) Cash Flow from Financing Activities.
(d) Cash and Cash Equivalent.

40. Which of the following is not a component of Cash Flow Statement?

(a) Cash payment to suppliers for goods and services.
(b) Charging of Depreciation.
(c) Cash advances and loan made to third parties.
(d) Cash repayments of amounts borrowed.

41. In a cash flow statement there is no place for:

(a) Issue of equity shares (b) Issue of bonus shares
(c) Conversion of debt to equity (d) Both B and C above

42.H Ltd. is a listed company. Its capital consists of equity shares of ` 1 each. On
31.03.2008 H Ltd. acquires 80% of the equity shares of S Ltd. The fair value of the
assets of S Ltd on that date are:

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CASH FLOW STATEMENT UNIQUE ACADEMY
` (000)
Tangible fixed assets 60
Stocks 20
Cash 10
Total 90

The purchase consideration consists of 50,000 equity shares of H Ltd. valued at par and
` 50,000 cash.
The Cash Flow Statement for the year to 31.03.08 will show the above transaction as:
` (000)
(a) Under financing activity 50
(b) Under investment activity 100
(c) Under investment activity 40
(d) Under cash & cash equivalent-increased by 40

43. According to AS-28 estimates of future cash flow should not include:
(a) Cash flow from financing activities.
(b) Cash flow from the continuing use of the assets.
(c) Cash flow to be received for disposal of asset at the end of its useful life.
(d) None of (a), (b), (c)

44. In which schedule of Companies Act, 2013, requirements of Balance Sheet of a

company are mentioned:
(a) Schedule VI Part I (b) Schedule VI Part II
(c) Schedule III Part I (d) Schedule III Part II

45. In which schedule of Companies Act, 2013 requirements of Profit and Loss Account of
a company are mentioned:
(a) Schedule VI Part I (b) Schedule VI Part II
(c) Schedule III Part II (d) None of these

46. Dividends can be declared out of:

(a) Capital Profit (b) Capital
(c) Excess of income over expenditure (d) Excess of expenditure

47. After declaration, all dividends must be paid within:

(a) 15 days (b) 20 days
(c) 30 days (d) 42 days

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CASH FLOW STATEMENT UNIQUE ACADEMY
48. Interim dividend is declared by:
(a) Annual general meeting (b) Extraordinary meeting
(c) Board of Director (d) Central Government

49. In case of only one Managing director in the company, his remuneration can not be
more than:
(a) 1% of annual net profit (b)2% of annual net profit
(c) 3% of annual net profit (d) 5% of annual net profit

50. Cash flows arising from interest paid in the case of a financial enterprises is a cash flow
from:
(a) Operating activities (b) Financing activities
(c) Both (a) and (b) (d) Investing activities

51. Interest and dividends received in the case of a manufacturing enterprises should be
classified as cash flow from:
(a) Operating (b) Financing
(c) Investing (d) Both (b) and (c)

52. If net profit is taken as the basis to ascertain cash flow from operations, which one of
the following adjustments is correct and proper?
(a) Add decrease in current assets and current liabilities.
(b) Add increase in current liabilities and current assets.
(c) Add increase in current assets and deduct decrease in current liabilities.
(d) Add decrease in current assets and add increase in current liabilities.

53. The conversion of debt to equity:

(a) Must be shown on a notional basis as a financing cash flow.
(b) Must be shown on a notional basis as an investment cash flow.
(c) Must not be shown as it is a non-cash transaction.
(d) None of the above.

54. The cash flows associated with extraordinary items should be separately classified as a
cash flow from:
(a) Operating activities (b) Investing activities
(c) Financing activities (d) Under (a) or (c) as is appropriate

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CASH FLOW STATEMENT UNIQUE ACADEMY
55. Cash payment to suppliers of inputs and services used should be separately classified as
cash flow from:
(a) Operating activities (b) Investing activities
(c) Financing activities (d) both (a) and (c)

56. Cash receipts from sale of fixed assets should be classified as a cash flow from:
(a) Operating activities (b) Investing activities
(c) Financing activities (d) none of the above

57. Cash proceeds from issuing debentures should be classified as a cash flow from:
(a) Operating activities (b) Investing activities
(c) Financing activities (d) none of the above

58. ‘Cash receipts from sale of goods and services’ should be classified as a cash flow from:
(a) Operating activities (b) investing activities
(c) Financing activities (d) none of the above

59. Which of the following items would be subtracted from net income when using the
indirect method of calculating cash flows provided by operating activities?
(a) Depreciation expenses (b) Repayment of bonds payable
(c) A gain on the sale of land (d) A loss on the sale of equipment

60. Which of the following would be considered as cash-flow item from a ‘Financing’
activity?
(a) A cash outflow to the government for taxes.
(b) A cash outflow to repurchase the firm’s own common stock.
(c) A cash outflow to lenders as interest.
(d) A cash outflow to purchase bonds issued by another company.

61. The method for presenting Net cash provided by operating activities that starts with
net income and adjusts it for items that affected reported net income but that did not
affect cash is called the?
(a) Direct method (b) Working capital method
(c) Indirect method (d) Cost-benefit method

62. Cash paid for preferred stock dividends should be shown on the statement of cash
flows under?
(a) Investing activities (b) Financing activities
(c) Noncash investing and financing activities (d) Operating activities

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CASH FLOW STATEMENT UNIQUE ACADEMY
63. Which of the following would not be considered a cash flow from ‘Operating’
activities?
(a) Payments for the inventory (b) Interest received on loans
(c) Tax payments (d) Payment of debt principle

64. In the long run, a business must generate positive net cash flow from which of the
following activities, if it is to survive?
(a) Investing activities (b) Financing activities
(c) Operating activities (d) Non cash activities

65. Depreciation is added back to profit when arriving at the cash flow from operating
activities because?
(a) Depreciation is only an estimated amount.
(b) Depreciation does not affect profit.
(c) Depreciation only affects the balance sheet, not the profit and loss account.
(d) None of the above.

66. A company purchased the land in exchange for the capital stock; it would affect which
of the following?
(a) Cash flow from operating activities (b) Cash flow from investing activities
(c) Cash flow from financing activities (d) it would not affect any section

67. Which of the following would not represent the cash outflows for the business?
(a) Purchase of building for cash (b) The sale of land for cash
(c) Retirement of long term debt (d) The payment of cash dividends

68. The statement of cash flows does not include cash inflows and outflows for which of the
following activities?
(a) Financing activities (b) Investing activities
(c) Operating activities (d) Revenue activities

69. The primary purpose of the statement of cash flows is to?

(a) Provide information about the investing and financing activities during a period.
(b) Prove that revenue exceed expenses if there is a net income.
(c) Provide information about the cash receipts and cash payments during a period.
(d) Facilitate banking relationship.

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CASH FLOW STATEMENT UNIQUE ACADEMY
70. If a company purchased treasury stock with cash, this would reported on the statement
of cash flows as?
(a) An operating cash outflow (b) An investing cash outflow
(c) A financing cash outflow (d) A financing cash inflow

71. When equipment is sold for cash, the amount received is reflected as cash?
(a) Inflow in the operating section (b) Inflow in the financing section
(c) Inflow in the investing section (d) Outflow in the investing section

72. Which of the following is not an example of cash equivalents?

(a) Certificates of Deposit (b) Money market accounts
(c) Money market mutual funds (d) Euro Bond

73. Which of the following cash flows results from an operating activity?
(a) Paying dividends to stockholders (b) Repaying note payable
(c) Receiving interest on investment (d) Purchasing equipment

74. Which of the following cash flows results from a financing activity?
(a) Receiving dividends on investment in another company.
(b) Repaying long-term debt.
(c) Purchasing an investment in another company.
(d) Receiving payment from a customer.

75. Which of the following cash flows results from a financing activity?
(a) Borrowing money from the bank.
(b) Receiving a stock dividend worth ` 3 per share.
(c) Paying income taxes at end of year.
(d) All of the above result from financing activities.

76. The two approaches to reporting cash flows provided by operating activities are?
(a) Direct and indirect methods.
(b) The basic and standard methods.
(c) The gross margin and contribution margin methods.
(d) The liquidity and profitability methods.

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CASH FLOW STATEMENT UNIQUE ACADEMY
77. In preparing cash flows provided by operating activities using the indirect method,
which of the following items is added to net income?
(a) Non-cash expenses such as depreciation.
(b) Gains on investing and financing transactions.
(c) Increases in current asset balances.
(d) Decreases in current liability balances.

78. Which of the following would be considered an investing activity and a source of cash?
(a) Purchase of equipment.
(b) Sale of BBB’s stock held as an investment.
(c) Issuance of corporate stock.
(d) Receipt of interest on savings account.

79. Which of the following would be consistent with a more aggressive approach to
financing working capital?
(a) Financing short-term needs with short-term funds.
(b) Financing permanent inventory buildup with long-term debt.
(c) Financing seasonal needs with short-term funds.
(d) Financing some long-term needs with short-term funds.

80. Which of the following illustrates the use of a hedging (or matching) approach to
financing?
(a) Short-term assets financed with long term liabilities.
(b) Permanent working capital financed with long-term liabilities.
(c) Short-term assets financed with equity.
(d) All assets financed with a 50 percent equity, 50 percent long-term debt mixture.

81. Permanent working capital:

(a) Varies with seasonal needs.
(b) Includes fixed assets.
(c) Is the amount of current assets required to meet a firm’s long-term minimum needs.
(d) Includes accounts payable.

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CASH FLOW STATEMENT UNIQUE ACADEMY

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(a) (a) (c) (c) (c) (d) (a) (a) (a) (b)
11 12 13 14 15 16 17 18 19 20
(a) (a) (d) (c) (b) (a) (b) (a) (d) (d)
21 22 23 24 25 26 27 28 29 30
(a) (a) (b) (c) (b) (d) (d) (d) (d) (b)
31 32 33 34 35 36 37 38 39 40
(c) (a) (a) (d) (d) (d) (c) (c) (a) (b)
41 42 43 44 45 46 47 48 49 50
(d) (c) (a) (c) (c) (c) (c) (c) (d) (a)
51 52 53 54 55 56 57 58 59 60
(c) (d) (c) (d) (a) (b) (c) (a) (c) (b)
61 62 63 64 65 66 67 68 69 70
(c) (b) (b) (c) (a) (d) (b) (d) (a) (c)
71 72 73 74 75 76 77 78 79 80
(c) (d) (c) (b) (a) (a) (a) (b) (d) (b)
81
(c)

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ACCOUNTING STANDARDS UNIQUE ACADEMY

10 ACCOUNTING STANDARDS (AS)

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. The Accounting Standards are mandatory for:

(a) Companies (b) Partnership Concerns
(c) Charitable Organizations (d) Sole Proprietorship

2. Accounting Standards refers to specific accounting:

(a) Principles (b) Methods of applying those principles
(c) Both (a) and (b) (d) None

3. Accounting for Fixed Assets:

(a) AS 6 (b) AS 10
(c) AS 3 (d) AS 2

4. Accounting Standards the statute:

(a) can over-ride (b) cannot over-ride
(c) may over-ride (d) none

5. IASB stands for:

(a) Indian Accounting Standards Board.
(b) Indian Accounting Standards Bulletin.
(c) International Accounting Standards Bulletin.
(d) International Accounting Standards Board.

6. AS-8 on Accounting for Research and Development:

(a) is replaced by AS – 26.
(b) is applicable only to listed companies.
(c) is mandatory for Research Institution.
(d) is still in use.

7. The purpose of Accounting Standards is to:

(a) Harmonize accounting policies.
(b) Eliminate the non comparability of financial statements.
(c) Improve reliability of financial statements.
(d) All of the above.
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ACCOUNTING STANDARDS UNIQUE ACADEMY
8. AS-2 is on:
(a) Disclosure of Accounting Policies. (b) Valuation of Inventories.
(c) Revenue Recognition. (d) Depreciation Accounting.

9. Which of the following provide framework and accounting policies so that the financial
statements of different enterprises become comparable?
(a) Business standards (b) Accounting Standards
(c) Market standards (d) None of the above

10. Consistency with reference to application of accounting principles refer to the:

(a) All the companies in the same industries should use identical procedures and methods.
(b) Income and assets have not been overstated.
(c) Accounting methods and procedures used have to be consistently applied from year to
year.
(d) Any accounting method of procedure can be utilized.

11. Match the following:

(A) AS 26 (i) Impairment of Assets
(B) AS 10 (ii) Discontinuing operations
(C) AS 28 (iii) Intangible assets
(D) AS 24 (iv) Accounting for Fixed Assets

The correct alternative is:

A B C D
(a) (iii) (iv) (ii) (i)
(b) (ii) (iv) (i) (iii)
(c) (ii) (iv) (iii) (i)
(d) (iii) (iv) (i) (ii)

12. Certain norms, which are followed by accountants while preparing financial
statements in order to reduce the vagueness and chances of misunderstanding by
harmonizing the varied accounting practices are:
(a) Accounting Regulations (b) Accounting concept
(c) Accounting Standards (d) Accounting Principal

13. All the following are benefits of Accounting Standards except .

(a) AS cannot override the statute.
(b) AS reduces to a reasonable extent confusing variations in the accounting treatments used
to prepare financial statement.

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ACCOUNTING STANDARDS UNIQUE ACADEMY
(c) AS may call for disclosure beyond that required by law.
(d) AS facilitates comparison of financial statements of companies.

14. Match the following:

1 Intangible assets (a) AS 28
2 Joint venture (b) AS 25
3 Impairment (c) AS 27
4 Interim (d) AS 26

1 2 3 4
(a) (d) (b) (c) (a)
(b) (d) (c) (a) (b)
(c) (c) (d) (a) (b)
(d) (d) (c) (b) (a)

15. AS 22 is related with the following:

(a) Accounting for Taxes on Income.
(b) Discontinuing Operations.
(c) Interim Financial Reporting.
(d) Financial reporting of Interest in Joint Venture.

16. Which accounting standard is applicable on provisions contingent liabilities and

contingent assets?
(a) AS 30 (b) AS 29 (c) AS 28 (d) AS 12

17. The following are the benefits of Accounting Standards except:

(a) Eliminate confusing variations in accounting treatment.
(b) Disclosure of Important Information beyond that required by law.
(c) Facilitate comparison of financial statements by providing valuation norms and standard
accounting policies.
(d) Choice between justified alternative accounting treatments becomes difficult.

18. An accounting policy may be changed:

(a) To comply with accounting standard.
(b) To ensure more appropriate presentation of the financial statement of the enterprises.
(c) To comply with law.
(d) All of the above.

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ACCOUNTING STANDARDS UNIQUE ACADEMY
19. The aim of issuing accounting standards is:
(a) To harmonize accounting policies.
(b) To eliminate the non-comparability of financial statements.
(c) To improve the reliability of financial statements.
(d) All of the above.

20. The fair values of Pension plan assets of Milestones Ltd., at the beginning and the end
of the year 2007-08 were ` 2,80,000 and ` 3,08,600 respectively. The employer’s
contribution to the plan during the year was ` 29,000. If benefit payments made to the
retirees are ` 32,000, the actual return on Pension plan assets for the year will be (as
per AS-15).
(a) ` 25,600 (b) ` 31,600
(c) ` 32,600 (d) None of A, B and C

21. As per AS-11 exchange differences arising on repayment of fixed asset linked liabilities
should be adjusted to:
(a) Profit & Loss Account (b) Fixed Asset Account
(c) Revaluation Reserve (d) None of the above

22. On 1st December, 2017 Gruh Construction Company Limited undertook a contract to
construct a building for ` 108 lakhs. On 31st March, 2018 the company found that it
had already spent ` 83.99 lakhs on the construction. A prudent estimate of additional
cost for completion was 36.01 lakhs. The amount of the provision for foreseeable loss,
which must be made in the Final Accounts for the year ended 31st March, 2018 based
on AS 7 “Accounting for Construction Contracts” is:
(a) ` 13.01 lakhs (b) ` 120.00 lakhs
(c) ` 12.00 lakhs (d) ` 36.01 lakhs

23. PRARTHANA Limited is in engineering industry. The company received an actuarial

valuation for the first time for its pension scheme which revealed a surplus of ` 6 lakhs.
It contributes ` 5 lakhs annually for its pension schemes. The average remaining life of
the employee is estimated to be 6 years. As per AS 15 (Revised).
(a) Surplus of 6 ` lakhs in the pension scheme on its actuarial valuation is required to be
credited to the Profit and Loss Statement for the current year.
(b) Surplus of ` 6 lakhs can be spread over the next 2 years by reducing the annual
contribution to ` 2 lakhs instead of ` 5 lakhs.
(c) Surplus of ` 6 lakhs is to be spread over the average remaining life of the employees of 6
years by crediting to the Profit and Loss Statement of each year.
(d) None of these.

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ACCOUNTING STANDARDS UNIQUE ACADEMY
24. The fair value of Plan assets of ARIMA Ltd. at beginning and end of the year 2011-
2012 were ` 4,00,000 and ` 5,70,000 respectively. The employer’s contribution to the
plan during the year was ` 1,40,000. If benefit payments to retirees were ` 1,00,000,
what would be the actual returns on plan assets (as per AS-15)?
(a) ` 1,50,000 lakhs (b) ` 1,30,000 lakhs
(c) ` 1,20,000 lakhs (d) Insufficient information

25. NANDITHA LTD. has imported $ 50,000 worth of goods from CHICAGO TRADERS
of USA on 30.02.2012 when exchange rate was ` 54.60 per US $. The payment for
imports was made on 30.06.2012 when exchange rate was ` 55.50 per US $. If the rate
of exchange on 31.03.2012 is ` 55.00 per US $, the exchange difference to be charged /
debited to Profit & Loss Account for the year 2012-13 as per AS-11 will be:
(a) ` 25,000 (b) ` 45,000
(c) ` 20,000 (d) None of (a), (b) and C

26. Chandra Ltd. purchased machinery on 01.04.2013 for ` 35 Lakhs. Written down value
of the machinery as on 31st March, 2017 is ` 18.27 Lakhs. The recoverable amount of
the machinery is ` 12.45 Lakhs. The impairment loss as per AS-28 will be:
(a) ` 16.73 Lakhs (b) ` 22.55 Lakhs
(c) ` 5.82 Lakhs (d) ` 4.28 Lakhs

27. As per AS-22, a deferred tax asset should be recognized only if there is a reasonable
certainty that sufficient future taxable income will be available and such a conclusion is
supported by:
(a) Consideration of Caution (b) Consideration of prudence
(c) Consideration of consistency (d) Consideration of conservation

28. Under AS-28, when goodwill and corporate assets cannot be allocated on a reasonable
and consistent basis to cash-generating unit, to determine impairment loss.
(a) ‘Bottom up’ test is performed.
(b) Both ‘Bottom up’ test and ‘Top down’ test are performed.
(c) ‘Top down’ test is performed.
(d) None of these tests is performed.

29. The objective of AS-1 is:

(a) To prohibit any change in the accounting policies.
(b) To ensure disclosure of accounting policies.
(c) To ensure that the effect of any change in accounting policy is adequately disclosed.
(d) Both B and C above.

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ACCOUNTING STANDARDS UNIQUE ACADEMY
30. Contingent Assets as per AS-29 are:
(a) Recognized in Balance Sheet if happening is almost certain.
(b) Not Recognized in Balance Sheet.
(c) Disclosed in Notes to Accounts.
(d) None of (a), (b), (c).

31. Under the “Pooling of interest method” the difference between the purchase
consideration and Share Capital of the transferee Company should be adjusted to (as
per AS-14).
(a) Goodwill or Capital Reserve
(b) General Reserve
(c) Amalgamation Adjustment Account
(d) Either (a) or (c)

32. As per AS-11 exchange differences arising on repayment of fixed asset-linked liabilities
should be adjusted to:
(a) Profit & Loss Account (b) Fixed Asset Account
(c) Revaluation Reserve (d) None of the above

33. Under AS-26 the normal period of amortization for an intangible asset other than
goodwill is:
(a) The best estimate of its useful life.
(b) A period of 10 years.
(c) Useful life or 10 years whichever is shorter.
(d) Useful life or 10 years whichever is longer.

34. APEX LTD. has an asset with W.D.V. of ` 50 Lakh as on 31.03.2009 and its
recoverable amount on 31.03.2009 is determined at ` 38 lakh. If the tax rate is 30%
and carrying amount of the assets for tax purpose is ` 42 lakh, what would be Deferred
Tax Asset as per AS-22?
(a) ` 3.60 lakh (b) ` 2.40 lakh
(c) ` 1.20 lakh (d) Incomplete Information

35.FINCORP LTD. holds 25% shares in SUNCORP LTD. at a cost of ` 5 lakh as on

31.03.2008. out of SUNCORP LTD. shares capital and reserve of ` 20 lakh each. For
the year ended 31.03.2009. SUNCORP LTD., made a profit to ` 80,000 and 50%
distributed as dividend. What will be the amount of investment (carrying amount) in
the Consolidated Financial Statement of FINCORP LTD. as on 31.03.2009. (as per AS-
23)?

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ACCOUNTING STANDARDS UNIQUE ACADEMY
(a) 10.10 lakh (b) 10.20 lakh
(c) 10.30 lakh (d) Incomplete Information

36. In accordance with AS-20, if an enterprise has more than one class of equity shares, net
profit or loss for the period is to be apportioned are the different classes of shares in
accordance with:
(a) The paid-up capital of the different classes.
(b) Their dividend rights.
(c) The number of shares in each class of shares.
(d) The issue price of each class of shares.

37. Shiva Ltd. has obtained an institutional loan of ` 60 Crores for machinery on
01.06.2016. The machinery installed on 1st February, 2017 with cost of ` 52 Crores and
balance loan has been utilized for working capital. Interest on above loan is @ 11% per
annum. As per AS-16 the amount of interest to be capitalized for the year ended 31 st
March, 2017 will be:
(a) 4.7667 Crores (b) 3.8133 Crores
(c) 5.50 Crores (d) 4.40 Crores

38. As per AS-22 justification for method of determining periodic deferred tax is based on
the concept of:
(a) Matching of periodic expenses to periodic revenue.
(b) Objectivity in calculation of periodic expenses.
(c) Recognition of assets and liabilities.
(d) Consistency of tax expenses measurements with actual tax planning strategy.

39. Which one of the following intangibles should not be recognized as per AS-26?
(a) Internally generated goodwill (b) Licenses
(c) Patents (d) Trade marks

40. Which of the following combination of accounting assumptions are fundamentals as

per AS-1?
(a) Going concern, consistency and accrual.
(b) Going concern, conservation and historic cost.
(c) Historic cost, consistency and accrual.
(d) Conservatism consistency and accrual.

41. On 1.04.2010, RICHI LTD has 5,00,000 shares outstanding. On 1.6.2010, it issued on
new shares for each Five shares outstanding at ` 15. If Fair value of one Equity Share

Mob No - 8007916622/33 10.7

ACCOUNTING STANDARDS UNIQUE ACADEMY
immediately before the right issue is ` 21, what would be the theoretical ex-rights fair
value per share of RICH LTD.? As Per AS-20.
(a) ` 20.00 (b) ` 18.00
(c) ` 16.00 (d) Incomplete Information

42. The fair value of Pension Plan Assets of ROLTA LTD. at the beginning and end of the
year 2009-10 were ` 3 lakh and ` 4.50 lakh respectively. Benefit payment made to
retires were ` 75,000, what would be the employer’s contribution to the Plan during
the year, if the actual return on Pension Plan assets are 97,500? As per AS-15.
(a) 97,500 (b) 1,27,500
(c) 1,50,000 (d) Insufficient Information

43. STC LTD. had imported raw materials with US$ 1000 on 24.02.2009 when exchange
rate was ` 46.60 per US$. The payment for imports was made on 15.06.2009 when
exchange rate was ` 47.50 per US$. If the rate of exchange on 31.03.2009 is ` 47.00 per
US$, the Loss / gain for the financial year 2009-10 will be (as per AS-11).
(a) ` 500 Loss (b) ` 500 Gain
(c) ` 400 Gain (d) None of (a), (b), (c)

44. As per AS-27, when two enterprises jointly control a property, each taking a share of
the rents received and bearing a share of the expenses, the joint venture is of the form:
(a) Jointly controlled operation (b) Jointly controlled assets
(c) Jointly controlled entities (d) All of the above three

45. As per AS-22, a deferred asset should be recognized only when there is a certainty of
future taxable income to realize is known as:
(a) Consideration of Prudence (b) Consideration of Conservatism
(c) Consideration of Consistency (d) Consideration of Caution

46. As per AS-14, the type of Amalgamation are:

(a) Nature of Merger and nature of Absorption.
(b) Nature of Purchase and nature of Reconstruction.
(c) Nature of Purchase and nature of Merger.
(d) None of the above.

47. With which the AS-6 is concerned?

(a) Disclosure of Accounting Policies. (b) Cash flow statement (Revised).
(b) Accounting of Buy back of shares. (d) Depreciation Accounting

Mob No - 8007916622/33 10.8

ACCOUNTING STANDARDS UNIQUE ACADEMY
48. GANGOTRI LTD. has provided depreciation as per Accounting records ` 4 lakhs and
as per Tax records ` 7 lakh. Unamortised preliminary expenses, as per tax record is `
5600. There is adequate evidence of future profit efficiency. If the tax rate applicable to
the company is 40%, what would be deferred Tax liability as per AS-22.
(a) ` 1,20,000 (b) ` 1,17,760
(c) ` 1,12,240 (d) None of (a), (b) and (c)

49. The fair market values of Pension Plan assets of ASILEENA LTD. at the beginning of
year 2009-10 was ` 7,00,000. The employer contribution to the plan and Benefit
payments made to retire during the year were ` 1,00,000 and ` 40,000 respectively. if
the actual return on pension Plan assets is ` 50,000, what would be the Fair market
value of pension plant at end of year 2009-10 (As per-AS-15)?
(a) ` 8,00,000 (b) ` 8,10,000
(b) ` 8,30,000 (d) Insufficient information

50. According to AS-29, Restructuring Cost does not include:

(a) Cost of Sale or termination of line of business.
(b) Cost of retraining or relocating continuing staff.
(c) Market Cost.
(d) Both B and C above.

51. As per AS-26 when an intangible asset is required by issue of shares and other
securities, the cost of intangible asset should be recorded at:
(a) Fair value of the intangible asset acquired.
(b) Fair value of the shares and other securities issued.
(c) A or B which is more evident.
(d) None of (a), (b), (c).

52. Under the purchase method of accounting the transferee company incorporates into its
books. (As per AS-14):
(a) The Assets and liabilities of the transferor company.
(b) The Assets, liabilities and statutory reserves of the transferor company.
(c) The Assets, liabilities and non-statutory reserves of the transferor company.
(d) The Assets, liabilities and reserves of the transferor company.

53. PRARTHANA LTD., a firm of contractors provides the following details for the year
ended 31st March, 2011:
Total Contract Price ` 1,000 lakhs
Work Certified ` 500 lakhs

Mob No - 8007916622/33 10.9

ACCOUNTING STANDARDS UNIQUE ACADEMY
Work not certified ` 105 lakhs
Estimated further Cost to Completion ` 495 lakhs
Progress Payment Received ` 400 lakhs
To be Received ` 140 lakhs.
Amount due to customers as per AS-7 will be:
(a) ` 100 lakhs (b) ` 550 lakhs
(c) ` 35 lakhs (d) None of these

54. According to AS-11 (Revised) the difference between the forward rate and the
exchange rate at the date of transaction should be:
(a) Ignored (b) Recognized as income or expense
(c) Adjusted to Shareholder’s interest (d) None of (a), (b), (c)

55. As per AS-3 (Revised) Interest and Dividends received in the case of a manufacturing
enterprise should be classified as cash flow from:
(a) Operating activities (b) Financing activities
(c) Investing activities (d) Both (b) and (c)

56.M.S. GOYAL & A. JINDAL LTD. provides the following information:

Accounting Profit ` 6,00,000
Book Profit as per MAT ` 3,50,000
Profit as per Income Tax Act ` 60,000
Tax Rate 20%
MAT Rate 7.50%.
Deferred Tax Asset / Liability as per AS-22 will be:
(a) 1,20,000 (DTL) (b) 1,08,000 (DTL)
(c) 1,20,000 (DTA) (d) 1,08,000 (DTA)

57. Accountants of NAVEEN ND Ltd. show a net profit of ` 7,20,000 for the third quarter
of 2011 after incorporating the following:
(1) Bad debts of ` 40,000 incurred during the quarter. 50% of the bad debts have been
deferred to the next quarter.
(2) Extra ordinary loss of ` 35,000 incurred during the quarter has been fully recognized in
this quarter.
(3) Additional depreciation of ` 45,000 resulting from the change in the method of charge of
depreciation.
The correct Quarterly Income as per AS-25 is:
(a) ` 7,00,000 (b) ` 6,85,000
(c) ` 6,65,000 (d) None of these

Mob No - 8007916622/33 10.10

ACCOUNTING STANDARDS UNIQUE ACADEMY
58. RAJASTHALI Ltd. ordered 16,000 kg. of certain material at ` 160 per unit. The
purchase price includes excise duty ` 10 per kg. in respect of which full CENVAT
credit admissible. Freight incurred amounted to ` 1,40,160. Normal transit loss is 2%.
The company actually received 15,500 kg. and consumed 13,600 kg. of material. The
cost of inventory as per AS 2 will be:
(a) ` 3,20,644 (b) ` 3,01,644
(c) ` 3,07,800 (d) None of these

59. BANSAL & JINDAL CONSTRUCTION CO.LTD. under took a contract on 1st
January, 2011 to construct a building for ` 80 lakhs. The company found on 31st
March, 2011 that it had already spent ` 58,50,000 on the construction. Prudent
estimate of additional cost for completion was ` 31,50,000. Contract Value to be
recognized as turnover in the final accounts for the year ended 31st March, 2011 as per
AS 7 (revised) will be:
(a) ` 80 lakhs (b) ` 10 lakhs
(c) ` 52 lakhs (d) None of the above

60. Moon Ltd. entered into agreement with Sun Ltd. for sale of goods of ` 8 lakhs as a
profit of 20% on cost. The sale transaction took place on 1 st February, 2011. On the
same day Sun Ltd. entered into another agreement with Moon Ltd. to resell the same
goods at ` 10.80 lakhs on 1st August, 2011. The pre-determined reselling price covers
the holding cost of Sun Ltd. Treatment as per AS 9 in the books of Moon Ltd:
(a) Sales A/c will be credited with ` 9,60,000.
(b) Advance from Sun Ltd. A/c will be credited with ` 9,60,000.
(c) Financing Charges Account will be debited with ` 1,20,000.
(d) None of the above.

61. PRARTHANA LTD. is in engineering industry. The company received an actuarial

valuation for the first time for its pension scheme which revealed a surplus of ` 6 lakhs.
It contributes ` 5 lakhs annually for its pension schemes. The average remaining life of
the employee is estimated to be 6 years. As per AS 15 (Revised).
(a) Surplus of ` 6 lakhs in the pension scheme on its actuarial valuation is required to be
credited to the Profit and Loss Statement for the current year.
(b) Surplus of ` 6 lakhs can be spread over the next 2 years by reducing the annual
contribution to ` 2 lakhs instead of ` 5 lakhs.
(c) Surplus of ` 6 lakhs is to be spread over the average remaining life of the employees of 6
years by crediting to the Profit and Loss Statement of each year.
(d) None of these.

Mob No - 8007916622/33 10.11

ACCOUNTING STANDARDS UNIQUE ACADEMY
62. M/s XYZ Ltd. has three segments namely X, Y, Z. The total assets of the Company are:
Segment X ` 1.00 crore
Segment Y ` 3.00 crores
Segment Z ` 6.00 crores.
Deferred tax assets included in the assets of each Segments are:
X ` 0.50 crore
Y ` 0.40 crore
Z ` 0.30 crore.
As per AS 17:
(a) X, Y and Z are reportable segments.
(b) Only X and Y are reportable segments.
(c) Only X and Z are reportable segments.
(d) Only Z and Y are reportable segments.

63. NIKITA Limited wishes to obtain a machine costing ` 30 lakhs by way of lease. The
effective life of the machine is 15 years, but the company requires it only for the first 5
years. It enters into an agreement with Ashok Ltd., for a lease rental for ` 3 lakhs p.a.
payable in arrears and the implicit rate of interest is 15%. Treatment as per AS 19 in
the books of Lessee.
(a) Lease payments should be recognized as an expenses in the Statement of Profit and Loss
on a straight line basis over the lease term.
(b) Finance Charges included in Lease payments should be recognized as an expenses in the
Statement of Profit and Loss.
(c) Depreciation of ` 2,00,000 p.a. should be recognized as an expenses in the Statement of
Profit and Loss.
(d) None of these.

64. RAKESH BEHARI LTD. has provided the following information:

`
Depreciation as per accounting records 2,00,000
Depreciation as per income tax records 5,00,000
Unamortized preliminary expenses as per income tax records 30,000
Tax Rate 50%

There is adequate evidence of future profit sufficiency. As per AS 22 Deferred Tax

Asset / Liability to be recognized will be:
(a) 1,50,000 (DTA) (b) 15,000 (DTL)
(c) 1,35,000 (Net DTL) (d) None of these

Mob No - 8007916622/33 10.12

ACCOUNTING STANDARDS UNIQUE ACADEMY
65. Mr. Rajiv Gupta, CEO of Indraprastha Co-operative Bank reports quarterly any
estimates an annual income of ` 100 crores. Assume tax rates on first ` 50 crores at
30% and on the balance income at 40%. The estimated quarterly income are ` 7.5
crores, ` 25 crores, ` 37.5 crores and ` 30 crores. The tax expense to be recognized in
last quarter as per AS 25 is:
(a) ` 9 crores (b) ` 10.5 crores
(c) ` 12 crores (d) None of these

66.S.S. CORPORATE SECURITIES LTD. is showing an intangible asset at ` 72 lakhs as

on 01.04.2011 and that item was acquired for ` 96 lakhs on 01.04.2008 and that item
was available for use from that date. It has been following the policy of amortization of
the intangible asset over a period of 12 years on straight line basis. As per AS 26.
(a) ` 4.8 lakhs should be adjusted against the current year’s profits.
(b) ` 4.8 lakhs should be adjusted against the opening balance of revenue reserves.
(c) 9.6 lakhs should be adjusted against the opening balance of revenue reserves.
(d) None of these.

67. An asset of PELF FINSTOCK LTD. does not meet the requirements of environment
laws which have been recently enacted. The asset has to be destroyed as per the law.
The asset is carried in the Balance Sheet at the year end at ` 6,00,000. The estimated
cost of destroying the asset is ` 70,000. Impairment Loss to be recognized as an expense
immediately in the Statement of Profit and Loss as per AS 28 is:
(a) 6,00,000 (b) 6,70,000
(c) Nil (d) None of these

68. X Ltd. holds 51% of Y Ltd., Y Ltd. holds 51% of W Ltd., Z Ltd. holds 49% of W. Ltd.
As per AS 18, Related Parties are:
(a) X Ltd., Y Ltd. & W Ltd. (b) X Ltd. & Z Ltd.
(c) Y Ltd. & Z Ltd. (d) X Ltd. & Y Ltd. only

69. As per records of NAVEEN ND Ltd. Accounting Profit ` 12,00,000, Book Profit as per
MAT ` 7,00,000, Profit as per Income Tax Act ` 1,20,000, Tax Rate 20%, MAT Rate
7.50%. As per AS 22, Deferred Tax Asset / Liability will be:
(a) ` 2,40,000 (b) ` 2,16,000
(c) ` 48,000 (d) ` 2,68,500

70. As per records of PELF FIN STOCK LTD. Net Profit for the current year ` 199.20
lakhs No. of Equity Shares outstanding 100 lakhs, No. of 12% Convertible Debentures

Mob No - 8007916622/33 10.13

ACCOUNTING STANDARDS UNIQUE ACADEMY
of ` 100 each 2 lakhs, Each Debenture is convertible into 10 equity shares, Tax Rate
30%, As per AS 20, Diluted Earnings Per Share is:
(a) ` 1.66 (b) ` 1.86
(c) ` 1.80 (d) None of these

71. Accountants of M.K. SHARDA LTD. show a Net Profit of ` 14,40,000 for the third
quarter of 2011 after incorporating the following:
(1) Bad debts of ` 80,000 incurred during the quarter. 50% of the bad debts have been
deferred to the next quarter.
(2) Extra ordinary loss of ` 70,000 incurred during the quarter has been fully recognized in
this quarter.
(3) Additional depreciation of ` 90,000 resulting from the change in the method of charge of
depreciation.
As per AS 25, the Correct Quarterly Income is:
(a) 14,00,000 (b) 13,70,000
(c) 13,33,000 (d) None of these

72. SHRIJAN LTD. wishes to obtain a machine costing ` 60 lakhs by way of lease. The
effective life of the machine is 15 years, but the company requires it only for the first 5
years. It enters into an agreement with Ashok Ltd., for a lease rental for ` 6 lakhs p.a.
payable in arrears and the implicit rate of interest is 15%. As per AS 19, what should
be recognized as an expenses in the Statement of Profit and Loss in the books of Lessee:
(a) Total Lease Payments.
(b) Only Finance Charges included in Lease payments.
(c) Depreciation of ` 4,00,000 p.a.
(d) None of these.

73. SOFTEX LTD. is having a plant (asset), carrying amount of which is ` 40 lakh on
March 31, 2012. It balance useful life is 3 years and residual value at the end of 3 years
is ` 3 lakh. Estimated future cash flow from using the plant will be ` 10 lakh per
annum for 3 years. If the discount rate is 10% “The Value in Use” for the plant as per
AS 28 will be:
(a) 27.124 lakh (b) 22.001 lakh
(c) 21.870 lakh (d) Insufficient Information

74.HILL LTD. has provided depreciation in accounts for ` 80 lakhs, but as per tax
records it is ` 120 lakhs. Unamortized preliminary expenses as per tax records are `
40,000. There is adequate evidence of future Profit sufficiently. Tax rate is 30%. How
much deferred tax assets / liability should be recognized as per AS-22?

Mob No - 8007916622/33 10.14

ACCOUNTING STANDARDS UNIQUE ACADEMY
(a) 12.00 lakhs (b) 11.88 lakhs
(c) 5.94 lakhs (d) Nil.

75. AKASH LTD. set up a new factory in the backward area and purchased Plant for `
500 lakhs for the purpose. Purchases were entitled for CENVAT credit of ` 10 lakhs
and Government also agreed to extend 25% subsidy for backward area development.
Determine the depreciable value of the asset.
(a) ` 500 lakhs (b) ` 392 lakhs
(c) ` 400 lakhs (d) ` 390 lakhs

76. As per AS-10 Fixed Assets that have been retired from active use and held for disposal
should be stated in Balance Sheet at:
(a) Net Book Value.
(b) Net Realizable Value.
(c) Lower of the Net Book Value and Net realizable value.
(d) Higher of the Net Book Value and Net realizable value.

77. Under AS-26, brand generating costs:

(a) Can be capitalized if they can be measured reliably.
(b) Can be capitalized if market value exceeds the costs.
(c) Cannot be capitalized.
(d) Can be capitalized if present value of future benefits exceeds the costs.

78. As per AS-22, A deferred tax Asset should be recognized only when there is certainty of
future taxable income to realize. This is based on the consideration of:
(a) Prudence (b) Conservation
(c) Caution (d) Consistency

79. SIMTH LTD. had 1000000 equity shares outstanding on April 01, 2012. The average
fair value per share during the year 2012-13 was ` 50. The company has given share
option to its employees of 2,00,000 shares at option price of ` 40. If net profit
attributable to equity shareholders for the year ended March 31, 2013 is ` 21 lakh,
what would be DILUTED EPS as per AS-20?
(a) 2.10 (b) 2.06
(c) 2.02 (d) None of (a), (b), (c)

80. VASUDA CONSTRUCTION LTD. undertook a contract on January 1, 2013 to

construct a building for ` 70 lakh. The company found on March 31, 2013 that it had
already spent ` 52 lakh on the construction. Prudent estimate of additional cost for

Mob No - 8007916622/33 10.15

ACCOUNTING STANDARDS UNIQUE ACADEMY
completion was ` 28 lakh. Contract value to be recognized as Turnover in the final
accounts for the year ended March 31, 2013 as per AS-7 (revised) will be:
(a) ` 52.5 lakh (b) ` 50.4 lakh
(c) ` 45.5 lakh (d) None of these

81. The fair of Pension Plan Assets of ZOOM LTD. at the beginning and end of the year
2012-13 were ` 5,60,000 and ` 6,20,000 respectively. The actual return on Pension Plan
Assets for the year was ` 63,000. If benefit payments made to the retirees are ` 64,000,
the employer’s contribution to the plan during the year as per AS-15 would be:
(a) ` 52,000 (b) ` 61,000
(c) ` 65,000 (d) None of (a), (b), (c)

82. M/S DEEPASHREE purchased 1000 shares in SPECTRUM LTD. at ` 600 per share in
2010. There was a rights issue in 2013 at one share for every two held at price of ` 150
per share. If M/s. Deepashree subscribed to the rights, what would be carrying cost of
1,500 shares as per AS-13.
(a) ` 6,00,000 (b) ` 6,75,000
(c) ` 7,00,000 (d) Date insufficient

83. SWIFT LTD. has an asset, which is carried in the Balance Sheet on 31.03.2013 at ` 600
lakh. As at date value in USE is ` 400 lakh. If the net selling price is ` 450 lakh,
Impairment loss of the Asset as per AS-28 will be:
(a) ` 200 lakh (b) ` 150 lakh
(c) ` 50 lakh (d) None of (a), (b), (c)

84. PARTHAN LTD. reports quarterly and estimates an annual income of ` 200 crores.
Assume Tax rates on first ` 100 crores at 30% and on the balance income at 40%. The
estimated quarterly income are ` 15 crores, ` 50 crores, ` 75 crores and ` 60 crores
respectively. The Tax expenses to be recognized in the last quarter as per AS-25 is:
(a) ` 24 crores (b) ` 21 crores
(c) ` 19 crores (d) Insufficient Information

85.BHARAT LTD. bought a forward contract for three months of US $ 150000 on 1 st

March, 2013 at 1 US $ = ` 54.10 when exchange rate was 1 US $ = ` 54.12. On 31st
March, 2013 when the books were closed forward exchange rate for two months was
US $ 1 = ` 54.16. on 30th April, 2013 the contract was sold at ` 54.20 per US Dollar. As
per AS-30 the profits from sale of contract to be recognized in the Profit & Loss A/c
will be:
(a) ` 6,000 (b) ` 8,000
(c) ` 12,000 (d) None of these

Mob No - 8007916622/33 10.16

ACCOUNTING STANDARDS UNIQUE ACADEMY

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(a) (c) (b) (b) (d) (a) (d) (b) (b) (c)
11 12 13 14 15 16 17 18 19 20
(d) (c) (a) (b) (a) (b) (d) (d) (d) (b)
21 22 23 24 25 26 27 28 29 30
(d) (c) (a) (b) (a) (c) (b) (b) (d) (b)
31 32 33 34 35 36 37 38 39 40
(b) (a) (c) (c) (a) (b) (b) (a) (a) (a)
41 42 43 44 45 46 47 48 49 50
(a) (b) (a) (b) (a) (c) (d) (b) (b) (d)
51 52 53 54 55 56 57 58 59 60
(c) (b) (c) (b) (c) (b) (a) (c) (c) (b)
61 62 63 64 65 66 67 68 69 70
(a) (d) (a) (c) (b) (b) (a) (a) (b) (c)
71 72 73 74 75 76 77 78 79 80
(a) (a) (a) (b) (a) (c) (c) (a) (c) (c)
81 82 83 84 85
(b) (b) (b) (b) (a)

Mob No - 8007916622/33 10.17

NATIONAL AND INTERNATIONAL ACCOUNTING AUTHORITIES UNIQUE ACADEMY

11 NATIONAL AND INTERNATIONAL ACCOUNTING

AUTHORITIES

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. FRRP stands for:

(a) Financial Regulation Review Panel.
(b) Financial Reporting Review Panel.
(c) Financing Reports Regulatory Provision.
(d) None of the above.

2. The Emerging Issues and Task Force was formed by:

(a) Indian Accounting Standards Board (b) Financial Accounting Standards Board
(c) Institute of Management Account (d) (a) and (b) both

3. Which of the following is not correct in relation to POB (Professional Oversight

Board):
(a) It is an independent regulator of Corporate Governance and reporting.
(b) It can carry out inspections on behalf of the Auditing Practice Board.
(c) It makes recommendations to Government and Professional Authorities.
(d)(a) and (b) both.

4. Which of the following does not fall under the scope of Ind AS 102:
(a) Fair value of equity (b) Cash-settled payment transaction
(c) Share-based payment transaction (d) Credit-Based payment transaction

5. Among the following Disclosures, which of the following are required under Ind AS
102:
(a) Description of agreement.
(b) Average share price of exercised of options.
(c) Valuation method to value the award.
(d) All of the above.

6. National and International Accounting Authority:

(a) 1980 (b) 1981
(c) 1982 (d) 1978

Mob No - 8007916622/33 11.1

NATIONAL AND INTERNATIONAL ACCOUNTING AUTHORITIES UNIQUE ACADEMY
7. The role of a Company Secretory is:
(a) To play role of secretory in a company.
(b) To play act as an accountant.
(c) To ensure compliance of relevant legislation regulation.
(d) None of the above.

8. The ICAI was established in:

(a) 1946 (b) 1948 (c) 1949 (d) 1952

9. The ICAI functions under the Ministry of:

(a) HRD (b) Corporate Affairs
(c) Finance (d) Commerce

10. The total number of member in the council of ICAI are:

(a) 37 (b) 38 (c) 39 (d) 40

11. The Institute of Cost Accountants of India was setup in:

(a) 1958 (b) 1959 (c) 1960 (d) 1961

12. IFRS refers to:

(a) International Financial Reporting System.
(b) Indian Forest Reserve Services.
(c) International Financial Reporting Standard.
(d) None of the above.

13. Financial Accounting Standard Board is a:

(a) Government Organization (b) Private Organization
(c) Semi-Government Organization (d) All of the above

14. A ICPA was founded in:

(a) 1886 (b) 1887 (c) 1890 (d) 1892

15. Professional Oversight Board (POB) is regulatory body situated in:

(a) USA (b) India (c) Japan (d) UK

16. Accountancy and Actuarial Discipline Board (AADB) is a disciplinary body in:
(a) UK (b) USA (c) France (d) Japan

Mob No - 8007916622/33 11.2

NATIONAL AND INTERNATIONAL ACCOUNTING AUTHORITIES UNIQUE ACADEMY
17. FASB Stands for:
(a) Financial Accounting Standard Board. (b) Financial Accounting System Board.
(c) Financial Accounting Securities Board. (d) None of the above.

18. APB Stands for:

(a) Auditing Professional Board (b) Auditing Practices Board
(c) Auditing Professional Body (d) None of the above

19. AASB Stands for:

(a) Australian Accounting Standard Board (b) America Accounting Standard Board.
(c) Australian Accounting System Board (d) None of the above

20. EFRAG Stands for:

(a) European Financial Reporting Accounting Group.
(b) European Financial Reporting Advisory Group.
(c) European Financial Reporting Advisory Group.
(d) None of the above.

21. In which year ICSI was set-up?

(a) 1980 (b) 1981 (c) 1982 (d) 1978

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(b) (b) (b) (d) (d) (a) (c) (c) (c) (d)
11 12 13 14 15 16 17 18 19 20
(b) (c) (b) (b) (d) (a) (a) (b) (a) (b)
21
(a)

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ADOPTION, CONVERGENCE & INTERPRETATION OF IFRS & AS UNIQUE ACADEMY

ADAPTION, CONVERGENCE AND INTERPRETATION

12 OF INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRS) AND ACCOUNTING STANDARDS

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. Adoption means application of IFRS issued by IASB as it is entirety. Convergence

means using IFRS issued by IASB with some carve in and carve outs.
(a) True (b) False
(c) Partly True (d) None of the above

2. Companies covered in Phase I should have net worth:

(a) Equal to 500 crores (b) Equal and more than 500 crores
(c) Less than 500 crores (d) More than 250 crores but less than 500 crores

3. Ind AS will apply to:

(a) Both consolidated as well as standalone financials of the company.
(b) Only consolidated financials.
(c) Only standalone financials.
(d) Optional.

4. Ind AS once adopted either voluntarily or mandatorily can not be revoked in

prospective years even in case of net worth goes down from specified limit or any other
criteria given in roadmap.
(a) True (b) False
(c) Both (a) and (b) (d) None of the above

5. As part of Ind AS transition process, companies covered in first phase will have to
prepare:
(a) Opening Ind AS Balance sheet as at 1 April 2015.
(b) Equity reconciliation b/w Ind AS and Indian GAAP on 1st April 2015 & 31st March 2016.
(c) Income Reconciliation b/w Ind AS and Indian GAAP for the year ending 31st March
2016.
(d) All of the above.

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ADOPTION, CONVERGENCE & INTERPRETATION OF IFRS & AS UNIQUE ACADEMY
6. As part of Ind AS transition process, companies covered in first phase will have to
prepare:
(a) Opening Ind AS Balance Sheet as at 1st April 2015.
(b) Equity reconciliation b/w Ind AS and Indian GAAP on 1st April 2015 and 31 March
2016.
(c) Income Reconciliation b/w Ind AS and Indian GAAP for the year ending 31st March
2016.
(d) All of the above.

7. The net worth shall be calculated in accordance with the of the company as on
or the first audited financial statements for accounting period which ends after
that date:
(a) Stand-alone financial statements, 31st March, 2014.
(b) Consolidated financial statements 31st March, 2014.
(c) Consolidated financial statements, 1st April 2015.
(d) Consolidated financial statements, 1st April 2014.

8. Total Number of Ind AS which are notified as of date?

(a) 39 (b) 40 (c) 69 (d) 66

9. The convergence of the Indian Accounting Standards with IFRS began in:
(a) Dec – 11 (b) April – 10 (c) April – 11 (d) Aug – 09

10. The global key professional accounting body is:

(a) The International Accounting Standards Board.
(b) The Financial Accounting Standards Board.
(c) The Institute of Chartered Accountants of India.
(d) The International Accounting Standards Committee.

11. The original cost at which an asset or liability is acquired is known as:
(a) Amortization (b) replacement cost
(c) Historical cost (d) carrying cost

12. The International Accounting Standards Committee was set up in:

(a) 1976 (b) 2009 (c) 1967 (d) 1982

13. The process of converting foreign – subsidiary financial statements into the home
currency is known as:
(a) Reconstruction (b) Transmission (c) Translation (d) Consolidation

Mob No - 8007916622/33 12.2

ADOPTION, CONVERGENCE & INTERPRETATION OF IFRS & AS UNIQUE ACADEMY
14. The accounting process in which the financial statements of a parent company and its
subsidiaries are added together to yield a unified set of financial statements is called:
(a) Consolidation (b) amortization (c) amalgamation (d) translation

15. Accounting in India is governed by the:

(a) Income Tax Department.
(b) Reserve Bank of India.
(c) Company Law Board.
(d) Institute of Chartered Accountants of India.

16. Which Ind AS is applicable on Investment Property:

(a) Ind AS 34 (b) Ind AS 38 (c) Ind AS 39 (d) Ind AS 40

17. Ind AS 36 is related with the following:

(a) Impairment of assets (b) Investment of property
(c) Earnings per share (d) None of the above

18. Ind AS 38 is on:

(a) Investment property (b) Intangible assets
(c) Impairment of assets (d) None of the above

19. Match the following:

1 Business Combination (a) Ind AS 104
2 Share based Payment (b) Ind AS 17
3 Insurance Contracts (c) Ind AS 102
4 Leaser (d) Ind AS 103

1 2 3 4
(a) (b) (a) (d) (c)
(b) (a) (b) (c) (d)
(c) (d) (c) (b) (a)
(d) (c) (b) (a) (d)

20. Ind AS-2 is on:

(a) Operating segment (b) Inventories
(c) Income Taxes (d) None of the above

21. Ind AS-108 is related with the following:

(a) Operating Segments (b) Inventories
(c) Income Taxes (d) None of the above
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ADOPTION, CONVERGENCE & INTERPRETATION OF IFRS & AS UNIQUE ACADEMY
22. Which Ind AS is applicable on share based payments:
(a) Ind AS 103 (b) Ind AS 102
(c) Ind As 104 (d) Ind AS 105

23. Related party disclosure:

(a) Ind AS 21 (b) Ind AS 23
(c) Ind As 24 (d) None of the above

24. Interest in Joint Ventures

(a) Ind As 31 (b) Ind As 31
(c) Ind AS 32 (d) None of the above

25. Ind AS 19 is on:

(a) Income tax (b) Leaser
(c) Employee benefits (d) None of the above

26. Interim Financial Reporting:

(a) Ind AS – 34 (b) Ind AS – 33
(c) Ind AS – 36 (d) None of the above

27. Ind AS – 27 is related with the following:

(a) Consolidated and separate financial assets. (b) Impairment of assets.
(c) Earnings per share. (d) None of the above.

28. Ind AS – 31 is related with the following:

(a) Impairment of assets (b) Earnings per share
(c) Interest in Joint Venture (d) None of the above

29.Match the following:

1 Borrowing Cost (a) Ind AS 38
2 Intangible Assets (b) Ind AS 23
3 Statement of Cash flow (c) Ind AS 1
4 Presentation of financial Statement (d) Ind AS 7
1 2 3 4
(a) (d) (c) (a) (b)
(b) (a) (d) (c) (b)
(c) (c) (d) (d) (a)
(d) (b) (d) (c) (a)

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ADOPTION, CONVERGENCE & INTERPRETATION OF IFRS & AS UNIQUE ACADEMY

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(b) (b) (a) (a) (d) (d) (a) (b) (c) (a)
11 12 13 14 15 16 17 18 19 20
(c) (c) (c) (a) (d) (d) (a) (b) (a) (b)
21 22 23 24 25 26 27 28 29
(a) (b) (c) (a) (c) (a) (a) (c) (a)

Mob No - 8007916622/33 12.5

COST ACCOUNTING RECORDS & COST AUDIT UNDER COM.ACT 2013 UNIQUE ACADEMY

13 COST ACCOUNTING RECORDS AND COST AUDIT

UNDER COMPANIES ACT, 2013

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. The centre point of cost audit is:

(a) Factory (b) Company
(c) Management (d) None of the above

2. Appointment of cost auditor is done by:

(a) Board of Directors (b) Shareholder
(c) Central Government (d) None of the above

3. Cost auditor gives his report to:

(a) Central Government (b) Shareholder
(c) Board of Directors (d) None of the above

4. Cost audit protects the interest of:

(a) Consumers (b) Shareholders
(c) Directors (d) None of the above

5. Cost Audit protects:

(a) Interest of Consumers (b) Interest of Shareholders
(c) Interest of Employees (d) None of these

6. Approval of is necessary in appointment of cost auditor:

(a) Central Government (b) State Government
(c) Board of Directors (d) None of these

7. Cost auditor is appointed by:

(a) Boards of Directors (b) State Government
(c) Central Government (d) None of these

8. The authority of approving the appointment of Cost Auditor is

(a) Department of Company Affairs. Cost Audit Branch of the Central Government.
(b) Corporate Governance.
(c) Both (a) and (b).
(d) None of these.

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COST ACCOUNTING RECORDS & COST AUDIT UNDER COM.ACT 2013 UNIQUE ACADEMY
9. The Cost Auditor has to submit his report to the Board of Directors within days
from the close of the financial year of the company.
(a) 180 (b) 120
(c) 225 (d) None of these

10. The authority competent to approve the appointment of Cost Auditor is:
(a) General Body (b) Board of Directors
(c) The CEO of the Company (d) Central Government

11. The maximum number of audit which can be accepted by a firm of accountants having
three partners is:
(a) For 30 products
(b) 60 companies, out of which not more than 30 companies shall be companies with paid up
capital of more than ` 25 lakhs.
(c) 60 products
(d) 30 companies

12. Under the existing regulation, a Cost Accountant in practice can take as a partner:
(a) Another Cost Accountant in full time practice.
(b) A practicing Chartered Accountant.
(c) A practicing Company Secretary.
(d) An advocate registered with the Bar Councils.

13. is the verification of the correctness of Cost Accounts and adherence to Cost
Accounting principles.
(a) Cost Audit (b) Tax Audit
(c) Market Audit (d) None of these

14. Two of the basic principles governing an audit are and

(a) Confidentiality Objectivity (b) Net Sales, Cost Audit
(c) Tax Audit (d) None of the above

15.A cost auditor at a time can function as an auditor of how many companies of which all
the companies paid up capital is more than ` 30 lakhs?
(a) 25 companies (b) 20 companies
(c) 10 companies (d) None of the above

16.A cost Audit Firm has three partners. State how many companies cost audit can be
conducted where the paid up capital of all the companies is less than ` 25 lakhs?
(a) 30 companies (b) 60 companies
(c) 15 companies (d) None of the above

17.A Cost Accountant in practice has accepted as the concurrent auditor of a company for
a particular year. Can the Cost Accountant accepts appointment as Cost Auditor of the
same company for that year?

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COST ACCOUNTING RECORDS & COST AUDIT UNDER COM.ACT 2013 UNIQUE ACADEMY
(a) A concurrent auditor is a person holding an office of profit of the company and therefore
he cannot be appointed as the Cost Auditor of the same year.
(b) Both (a) and (c).
(c) One Director and Secretary.
(d) None of these.

18. The company has to give documents to the cost auditor within:
(a) 180 days (b) 135 days
(c) 120 days (d) None of these

19. The Annexures to the Cost Audit Report and Proforma should be signed by:
(a) The Chief Finance Officer and the Managing Director.
(b) One Director and Secretary.
(c) The Secretary and the Chief Finance Officer.
(d) The Officer-in-Charge of Cost Accountant and the Secretary.

20. The Cost Audit Report need to be submitted to:

(a) Company Law Board.
(b) Board of directors of the company.
(c) Members at the Annual General Meeting of the company.
(d) None of the above.

21. A Cost accountant may be appointed as a under the Insurance Act.

(a) Loss assessor and values (b) Coal
(c) Assuming the loss (d) None of these

22. CAS-9 deals with:

(a) Packing materials cost (b) Direct materials cost
(c) Indirect materials cost (d) All of the above

23. Cost Accounting Record Rules were made first for industry.
(a) Cement (b) Coal
(c) Steel (d) None of these

24. Outward transportation cost, as per CAS-5 shall form part of cost of .
(a) Sales (b) Profit
(c) Loss (d) None of these

25. Rectified sprit is covered by:

(a) Cost Accounting Records (Chemical Industries) Rules.
(b) Cost Accounting Records (Formulations) Rules.
(c) Cost Accounting Records (Industrial Alcohol) Rules.
(d) Cost Accounting Records (Bulk Drugs) Rules.

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COST ACCOUNTING RECORDS & COST AUDIT UNDER COM.ACT 2013 UNIQUE ACADEMY
26. Copy of Cost Audit Report need not be submitted to:
(a) Company Law Board.
(b) Board of Directors of the Company.
(c) Members at Annual General Meeting of the Company.
(d) Income Tax Officer.

27. According to CAS 2 on Capacity Determination, “Normal Capacity” is:

(a) Practical capacity minus the loss of production capacity due to external factors.
(b) Difference between installed capacity and the actual capacity utilization.
(c) Maximum production capacity of a plant.
(d) Installed capacity minus the inevitable interruptions.

28. According to CAS 8 on utilities the cost of maintaining stand-by utilities is

cost.
(a) Committed (b) Utilities
(c) Uncommitted (d) None of these

29. The structuring of Cost Audit includes:

(a) Audit Programmes (b) Audit working papers
(c) Checking including test checking (d) All of the above

30. CAS-4 deals with:

(a) Determination of Cost of Production for Captive consumption.
(b) Determination of Average (equalized) Cost of Production.
(c) Determination of Capacity of a Unit.
(d) None of the above.

31. The role of Cost Auditor in respect of non-moving stock is to review:

(a) The causes explained by the company for non-movement of the items.
(b) How the company deals with the non-moving stock.
(c) The policy of the company regarding determination of non-moving items.
(d) All of the above.

32. Management Audit is an important tool for:

(a) Performance of an enterprises (b) Continuous appraisal
(c) All of the above (d) Evaluations of the methods

33. Cost Auditor is required to provide replay to any clarification sought for by the
Central Government from the Cost Auditor in writing of the receipt of the
communication addressed to him calling such clarification within:
(a) 45 days of the receipt of the communication.
(b) 30 days of the receipt of the communication.
(c) 180 days of the receipt of the communication.
(d) 120 days of the receipt of the communication.

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COST ACCOUNTING RECORDS & COST AUDIT UNDER COM.ACT 2013 UNIQUE ACADEMY
34. CAS-9 deals with:
(a) Packing material cost (b) Pollution control cost
(c) Cost of utilities (d) Direct material cost

35. The Annexure to the (Cost Records and Audit) Rules, 2014 deals with:
(a) Product group details.
(b) Abridged cost statement for each product group separately.
(c) Value addition and distribution of earnings for the company as a whole.
(d) Operating ratio analysis for each product group separately.

36. As per Companies (Cost Records and Audit) Rules, 2014 the Annexure to the Cost
Report is to be duly approved by the:
(a) Secretary (b) Cost Accountant
(c) Board of Directors (d) None of the above

37. As per Outward Transportation Cost shall from part of cost of sale.
(a) CAS-5 (b) CAS-6
(c) CAS-9 (d) CAS-10

38. Companies (Cost Records and Audit) Rules, 2014 provides that Cost Report is to be
submitted to the Board of Director within:
(a) 180 days from the close of the company’s financial year.
(b) 120 days from the close of the company’s financial year.
(c) 90 days from the close of the company’s financial year.
(d) 60 days from the close of the company’s financial year.

39. CAS-13 deals with:

(a) Cost of Service Cost Centre (b) Employee Cost
(c) Pollution Control Cost (d) Repair and Maintenance Cost

40. The annexure to Cost Audit Report under Companies (Cost Records and Audit) Rules
2014 deals with:
(a) Installed Capacity and Actual Production.
(b) Capital employed.
(c) Related Party transactions for the Company as a whole.
(d) Reconciliation of Indirect taxes for the Company as a whole.

41. Cost Audit was initially introduced in the year:

(a) 1959 (b) 1960
(c) 1965 (d) None of the above

42. CAS – 5 deals with:

(a) Equalized Cost of Transportation (b) Captive Consumption
(c) Cost of Utilities (d) Cost of Service Cost Centre

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COST ACCOUNTING RECORDS & COST AUDIT UNDER COM.ACT 2013 UNIQUE ACADEMY
43. From CRA – 3 related to:
(a) Cost Audit Report (b) Appointment of cost auditor
(c) Removal of cost auditor (d) None of the above

44. From CRA – 1 related to:

(a) Maintain cost record (b) Appointment of cost auditor
(c) Cost audit report (d) None of the above

45. Appointment of financial auditor is made by:

(a) The Annual General Meeting of the Company
(b) Both (a) and (b)
(c) None of the above
(d) Board of directors subject to the prior approval of the Central Government.

46. Under Companies Act, the Cost audit report shall be submitted to the of the
company.
(a) Board of directors (b) Shareholders
(c) CEO (d) Partners

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(a) (a) (c) (a) (a) (a) (a) (a) (a) (d)
11 12 13 14 15 16 17 18 19 20
(b) (a) (a) (a) (c) (b) (a) (b) (b) (b)
21 22 23 24 25 26 27 28 29 30
(a) (a) (a) (a) (c) (c) (a) (a) (d) (a)
31 32 33 34 35 36 37 38 39 40
(d) (c) (b) (a) (c) (c) (a) (a) (a) (c)
41 42 43 44 45 46
(c) (a) (a) (a) (a) (a)

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BUDGET, BUDGETING AND BUDGETARY CONTROL UNIQUE ACADEMY

14 BUDGET, BUDGETING AND BUDGETARY CONTROL

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. The budget control organization is usually headed by a top executive who is known as:
(a) Budget controller (b) Cash controller
(c) Production controller (d) None of the above

2. In order to prepare a flexible budget items of anticipated expenditure are classified

into:
(a) Fixed, variable and semi-variable (b) Variable and Fixed
(c) Semi-variable (d) None of the above

3. budget is a summary of all the functional budgets and the budgeted profit or
loss.
(a) Master (b) Cash
(c) Production (d) None of the above

4. budget is most suited for fixed expenses.

(a) Fixed (b) Variable
(c) Semi-variable (d) None of the above

5. budget shows the anticipated sources and utilization of cash.

(a) Cash (b) Cheque
(c) Both (a) and (b) (d) None of the above

6. The two main methods of preparing cash budget are method and method.
(a) Receipt and Payments (b) Net Adjusted Income
(c) Profit and Loss Account (d) Both (a) and (b)

7. Zero-base budgeting was first used by

(a) Jimmy Carter (b) Koontz and Donald
(c) F.W. Taylor (d) None of the above

8. Master budget incorporates all budgets.

(a) Functional (b) Production
(c) Selling (d) Distribution

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BUDGET, BUDGETING AND BUDGETARY CONTROL UNIQUE ACADEMY
9. A factor which influences all other budgets, is called
(a) Key (b) Master
(c) Cash Budget (d) None of the above

10. Budgetary control is a system of controlling

(a) Costs (b) Finance
(c) Account (d) Management

11.A budget that gives a summary of all the functional budgets and projected profit and
loss account is known as:
(a) Capital budget (b) Sales budget
(c) Master budget (d) Flexible budget

12. Which of the following is usually a long term budget?

(a) Sales budget (b) Cash budget
(c) Capital expenditure budget (d) Fixed budget

13. The fixed variable cost classification has a special significance in the preparation of:
(a) Flexible budget (b) Master budget
(c) Cash budget (d) Capital expenditure budget

14. The success of a flexible budget depends upon careful study and classification of
expenses into:
(a) Historical and predetermined (b) Manufacturing, administrative and selling
(c) Fixed, variable and semi-variable (d) None of the above

15. The budget that is set first and all the other budgets are subordinate to it is:
(a) Cash budget (b) Master budget
(c) Capital expenditure budget (d) Budget for the key factor

16. Cash budget is prepared because it:

(a) is legally compulsory (b) indicates profitability
(c) encourages over spending (d) helps in cash management

17. If period of credit allowed to the customer is 2 months then the credit sales of which
month will be considered for cash budget:
(a) First month (b) Second month
(c) Third month (d) Fourth month

18. While preparing cash budget, Cash discount allowed to customers is added to:
(a) Payments (b) Receipts (c) Sales (d) Purchases

19. While preparing cash budget, opening balance of cash is added to:
(a) Receipts (b) Payments (c) Profit (d) Loss

Mob No - 8007916622/33 14.2

BUDGET, BUDGETING AND BUDGETARY CONTROL UNIQUE ACADEMY
20. Cash budget is based on:
(a) Past performance (b) Future performance
(c) Average of past performance (d) None of the above

21. Budgeting may be said to be the act of budgets.

(a) Building (b) Making
(c) Manual (d) None of the above
22. Budgeting system key managerial functions.
(a) Integrates (b) Both (a) and (c)
(c) Non-integrates (d) None of the above
23. Zero-base budgeting overcomes the weaknesses of
(a) Conventional Budgeting (b) Inconventional Budgeting
(c) Both (a) and (b) (d) None of the above

24. Calender Ratio = .

Number of actual working days in a period
(a) 100
Number of working days in the budget period

Number of working days in the budget period

(b) 100
Number of actualworking days in a period

Both (a) and (b)

(c)
None of the above.
(d)
25. Capacity Ratio = .
Actual hours worked Budgeted hours
(a) 100 (b) 100
Budgeted hours Actualhoursworked
(c) Both (a) and (b) (d) None of the above

26. Efficiency Ratio = .

Standard hours for actual production

(a) 100
Actual hours worked

Standard hours for actual production 100

(b) Actual hours worked100

Both (a) and (b)

(c)
None of the above
(d)
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BUDGET, BUDGETING AND BUDGETARY CONTROL UNIQUE ACADEMY
27. Activity Ratio = .
Standard hours for actual production
(a) 100
Budgeted standard hours

Budgeted hours
(b) 100
Actualhoursworked

Both (a) and (b)

(c)
None of the above
(d)
28. A master budget is the incorporating its component functional budgets:
Summary (b) Winter budget
(a)
(c) Both (a) and (b) (d) None of the above

29. The sales Budget is the most important budget and forms the basis on which all the
built up.
(a) Other budgets (b) Both (a) and (c)
(c) Spring budgets (d) None of the above

30.A system by which budgets are used as a mean of planning and controlling all aspects
of a business is called
(a) Budgetary control (b) Both (a) and (c)
(c) Budgetary System (d) None of the above

31. is a budget designed to finish budgeted costs for any level of activity actually
allowed.
(a) Flexible budget (b) Both (a) and (c)
(c) Fixed budget (d) None of the above

32. is a summary of all functional budgets in a capsule form.

(a) Master Budget (b) Both (a) and (b)
(c) Flexible Budget (d) None of the above

33. Budgetary control helps management to plan and

(a) Control (b) Loss
(c) Both (a) and (b) (d) None of the above

34. Budgeted is an expression of a business plan in financial terms shows the

anticipated sources and utilization of cash.
(a) Cash Budget (b) Both (a) and (c)
(c) Pass Budget (d) None of the above

35. determines the priorities of functional budgets.

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BUDGET, BUDGETING AND BUDGETARY CONTROL UNIQUE ACADEMY
(a) Principal Budget Factor (b) Both (a) and (c)
(c) Production Budget Factor (d) None of the above

36.A document which set out the responsibilities of the persons engaged in the routine of
and the forms and records required for budgetary control is called
(a) Budget Manual (b) Both (a) and (c)
(c) Principle Budget (d) None of the above

37. Cash budget is a budget.

(a) Short term budget (d) Long term budget
(c) Both (a) and (b) (d) None of the above

38. is a budget which states the additional workers to be engaged in the factory.
(a) Labour Procurement Budget (b) Recognizing Different Budget
(c) Both (a) and (b) (d) None of the above

39.A budget which consolidates the organizations overall plan is called

(a) Master Budget (b) Both (a) and (c)
(c) Profit Budget (d) None of the above

40. It is essential to determine the proper budget period and to have well defined .
(a) Responsibility Centre (b) Both (a) and (c)
(c) Unresponsibility Centre (d) None of the above

41. Sales budget is a:

(a) Functional budget (b) Master budget
(c) Expenditure budget (d) None of the above

42. In the case of plant, the limiting factor may be:

(a) Insufficient capacity (b) Shortage of experienced salesman
(c) General shortage of power (d) None of the above

43. The difference between fixed and variable cost has a special significance in the
preparation of:
(a) Flexible budget (b) Master budget
(c) Cash budget (d) None of the above

44. The budget that is prepared firs of all is:

(a) Cash budget (b)Master budget
(c) Budget for the key factor (d) None of the above

45. In case of materials, the key factor may be:

(a) Insufficient advertising (b) restrictions imposed by quota
(c) Low market demand (d) None of the above

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BUDGET, BUDGETING AND BUDGETARY CONTROL UNIQUE ACADEMY
46. The budget which commonly takes the form of budgeted profit and loss account and
balance sheet is:
(a) Cash budget (b) Master budget
(c) Flexible budget (d) None of the above

47. The primary difference between a fixed budget and a variable (flexible) budget is that a
fixed budget:
(a) includes only fixed costs, while a variable budget includes only variable costs.
(b) is concerned with only future acquisitions of fixed costs, while a variable budget is
concerned with expenses which vary with sales.
(c) cannot be changed after the period begins, while a variable budget can be changed after
the period begins.
(d) is a plan for a single level of sales (or other measure of activity), while a variable budget
consists of several plans, one for each of several levels of sales (or other measure of
activity).

48. A forecast set of final accounts is also known as .

(a) Capital budget (b) Cash budget
(c) Master budget (d) Sales budget

49. Budgetary control involves all but one of the following:

(a) Modifying future plan
(b) Analyzing difference
(c) Using static budget
(d) Determine differences between actual and planned results.

50. Responsibility centers include:

(a) Cost centers (b) Profit centers
(c) Investment centers (d) All of the above

51. Which of the following represents the normal sequence in which the below budgets are
prepared:
(a) Sales, Balance Sheet, Income Statement.
(b) Balance Sheet, Sales, Income Statement.
(c) Sales, Income Statement, Balance Sheet.
(d) Income Statement, Sales, Balance Sheet.

52. Budgetary control helps the management in .

(a) Planning only (b) Control only
(c) Planning and control (d) Directing

53.A budget that gives a summary of all the functional budgets and projected Profit and
Loss Account is known as:
(a) Capital budget (b) Flexible budget
(c) Master budget (d) Discretionary budget

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BUDGET, BUDGETING AND BUDGETARY CONTROL UNIQUE ACADEMY
54.A major element in budgetary control is
(a) The preparation of long-term plans.
(b) The comparison of actual results with planned objectives.
(c) The valuation of inventories.
(d) Approval of the budget by the stock holders.

55. A static budget is useful in controlling costs when cost behavior is

(a) Mixed (b)Fixed (c) Variables (d) Linear

56. Which of the following statement most clearly describes the master budget?
(a) The master budget is similar to a legal action and must be followed to fulfill company
policy.
(b) The master budget is a strategic plan proposed by management and communicated
through proforma financial statements.
(c) He master budget is a set of budgeted financial statements that are sometimes called
proforma statements.
(d) The master budget is not in itself a strategic plan but aids managers in implementing their
strategic plans.

57. The budget designed to furnish budgeted cost any level of activity actual attained is
called:
(a) Zero base budget (b) Fixed budget
(c) Flexible budget (d) Budget manual

58. Budget reports should be prepared:

(a) Daily (b) Monthly
(c) Weekly (d) As frequently as needed

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(a) (a) (a) (a) (a) (d) (a) (a) (a) (a)
11 12 13 14 15 16 17 18 19 20
(c) (c) (a) (c) (d) (d) (c) (a) (a) (b)
21 22 23 24 25 26 27 28 29 30
(a) (a) (a) (a) (a) (a) (a) (a) (a) (a)
31 32 33 34 35 36 37 38 39 40
(a) (a) (a) (a) (a) (a) (a) (a) (a) (a)
41 42 43 44 45 46 47 48 49 50
(a) (a) (a) (c) (b) (b) (d) (c) (c) (d)
51 52 53 54 55 56 57 58
(c) (c) (c) (b) (b) (d) (c) (d)

Mob No - 8007916622/33 14.7

RATIO ANALYSIS UNIQUE ACADEMY

15 RATIO ANALYSIS

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. The Preparation of Cash flow Statement has become now a days.

(a) Optional (b) Mandatory
(c) Prohibited (d) None of the above

2. Analytical Methods and devices used in analyzing financial statements are:

(a) Comparative Statement (b) Common Size Statement
(c) Trend Ratio (d) All of the above

3. Cash flow Statement is based on:

(a) Working Capital (b) Narrow concept
(c) Both (a) and (b) (d) None of the above

4. Cash flow Statement is prepared on:

(a) Cash basis (b) Accrual basis
(c) Both (a) and (b) (d) None of the above

5. Cash flow Statement is more useful in analysis.

(a) Long term (b) Short term
(c) Very Long term (d) None of the above

6. Fund Flow Statement is based on the concept of

(a) Narrow (b) Working Capital
(c) Cash from operation (d) None of the above

7. Fund Flow Statement is prepared on:

(a) Cash basis (b) Accrual basis
(c) Both (a) and (b) (d) None of the above

8. Fund Flow Statement is more useful in

(a) Short term (b) Long term
(c) Medium term (d) None of the above

Mob No - 8007916622/33 15.1

RATIO ANALYSIS UNIQUE ACADEMY
9. MIS is a necessity of :
(a) All the organizations (b) Few organizations
(c) Small organizations (d) Large organizations

10. MIS is a :
(a) Computer based Information System
(b) Physical Information
(c) Management based Information System
(d) None of the above

11. MIS helps in:

(a) Strategic Planning (b) Management Control
(c) Operational control (d) All of the above

12. Financial Statements are prepared on the basis of:

(a) Recorded facts (b) Accounting conventions
(c) Personal Judgments (d) All of the above

13. Financial Statements are very much relevant to:

(a) Management (b) Public
(c) Shareholders (d) All of the above

14. Objective of the analysis financial statements analysis can be:

(a) Long term and Short term (b) Medium term
(c) Short term (d) Long term

15. Modus operandi of analysis financial statement analysis may be:

(a) Horizontal (b) Vertical
(c) Both (a) and (b) (d) None of the above

16. Fund Flow Statement also refers to as a Statement of:

(a) Source and application of fund (b) Inflow and Outflow
(c) Fund from operation (d) None of the above

17. Flow of fund include both:

(a) Inflow and Outflow (b) Cash from operation
(c) Fund from operation (d) None of the above

Mob No - 8007916622/33 15.2

RATIO ANALYSIS UNIQUE ACADEMY
18. The MIS is a system which provides information support for in the
organizations.
(a) Decision making (b) Database
(c) Computer (d) None of the above

19. Current ratio are equal to

Current Assets Current Liabilities
(a) (b)
Current Liabilities Current Assets
Fixed Assets
(c) (d) None of the above
Fixed Liabilities

20. Returns on Investment are equal to

Net Operating Profit Net Profit
(a) 100 (b) 100
Capital Employed Shareholder fund
Net Profit after tax
(c) 100 (d) None of the above
Equity Shareholder

21. Capital Employed are equal to

(a) Net Current Assets Working Capital
(b) Net Fixed Assets + Working Capital
(c) Net Fixed Assets Working Capital
(d) None of the above

22. Return on Assets are equal to

(a) Net Profit before tax Net Profit after tax
100 (b) 100
Total Assets Total Assets
Net Profit
(c) 100 (d) None of the above
Total Assets

23. Capital turnover ratio are equal to

Capital Employed Net Sales
(a) (b)
Net Sales Capital Employed
Net Sales
(c) (d) None of the above
Total Assets

24.Total Assets Turnover Ratio are equal to

Mob No - 8007916622/33 15.3
RATIO ANALYSIS UNIQUE ACADEMY
Total Assets Net Sales
(a) (b)
Net Sales Total Assets
Current Assets
(c) (d) None of the above
Total Assets

25. Stock turnover ratio are equal to:

Cost of good sold Average Inventory
(a) (b)
Average Inventory Cost of good sold
Average Inventory
(c) (d) None of the above
Sales

26. Creditors Turnover Ratio is:

Credit Purchases Average Creditors
(a) (b)
Average Creditors Cost of good sold
Current Assets
(c) (d) None of the above
Current Liabilities

27. Current Ratio is:

Current Assets Current Liabilities
(a) (b)
Current Liabilities Current Assets
Cost of good sold
(c) (d) None of the above
Average Inventory

28. Liquid Ratio is:

Liquid Assets Liquid Liabilities
(a) (b)
Current Liabilities Liquid Assets
Fixed Assets
(c) (d) None of the above
Long term Funds

29. Debt Equity Ratio is:

Debts Equity
(a) (b)
Equity (Shareholder Funds) Debts
Current Assets
(c) (d) None of the above
Liquid Liabilities

30.Proprietary Ratio is:

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RATIO ANALYSIS UNIQUE ACADEMY
Shareholders Fund Current Liabilities
(a) (b)
Total Assets Liquid Assets
Total Assets
(c) (d) None of the above
Shareholders Fund

31. Fixed Assets Ratio is:

Fixed Assets Long-term Funds
(a) (b)
Long-term Funds Fixed Assets
Current Assets
(c) (d) None of the above
Liquid Liabilities

32. Debt Services Ratio is:

Net Proift Interest and Tax Liquid Assets
(a) (b)
Interest Charges Current Liabilities
Fixed Assets
(c) (d) None of the above
Liquid Assets

33. Capital Gearing Ratio is:

Fixed Interest Bearing Funds Equity Shareholders Funds
(a) (b)
Equity Sharesholders Funds Fixed Interest Bearing Funds
Long term Funds
(c) (d) None of the above
Fixed Assets

34. Earning Per Share (EPS) is:

Net Profit No. of equity shares
(a) (b)
No. of equity shares Net Profit
Long-term Funds
(c) (d) None of the above
Fixed Assets

35. Price Earning Ratio is:

Market Value per equity share Earning per shares
(a) (b)
Earning per share Market Value per equity share
Long term Funds
(c) (d) None of the above
Fixed Assets

Mob No - 8007916622/33 15.5

RATIO ANALYSIS UNIQUE ACADEMY
36. Payout ratio is:
Dividend per equity share Earnings per share
(a) (b)
Earnings per share Dividend per equity share
Long term Funds
(c) (d) None of the above
Fixed Assets

37. The meaning of inventory means:

(a) Stock of raw material and stores.
(b) Stock of work-in-progress and semi-finished goods.
(c) Stock of finished goods.
(d) All of the above.

38. The term cash profit indicates:

(a) Net Profit + Interest + Depreciation
(b) Net Profit + Depreciation
(c) Net Profit + Interest + Tax
(d) Net profit after depreciation, Interest and tax

39. Consider the following information relating to Shiva Ltd.

Net worth ` 250 lakhs
Total assets ` 600 lakhs
Long term debt ` 200 lakhs
Current liabilities ` 150 lakhs
The debt equity ratio of the company is:
(a) 0.555 (b) 0.44 (c) 0.800 (d) 2.800

40. Which of the following firms would have the least liquidity:
(a) Current ratio = 4.2 and quick ratio = 2.6
(b) Current ratio = 3.2 and quick ratio = 2.1
(c) Current ratio = 1.2 and quick ratio = 1.6
(d) Current ratio = 2.4 and quick ratio = 1.6

41. The ratios measure the ability of the firm to meet its maturing short-term
obligations.
(a) Profitability (b) Liquidity (c) Solvency (d) Debt

42. The quick ratio is also called as ratio or ratio.

(a) Financial (b) Super quick
(c) Operating (d) Liquid, Acid test

Mob No - 8007916622/33 15.6

RATIO ANALYSIS UNIQUE ACADEMY
43. The ratio indicates the proportion of long-term funds deployed in fixed assets.
(a) Current (b) Profitability
(c) Proprietary (d) Fixed assets to Long-term funds

44. The actual debtors collection period should be compared with of the
company in analyzing the efficiency of credit control department.
(a) Return on Investment (b) Credit terms
(c) Debtors Payment (d) Price earning

45. The margin may be compared with that of competition in the industry to assess
the operational performance.
(a) Gross profit (b) Return on equity
(c) Dividend payout (d) Book value

46. The measure of net profit earned per share is termed as

(a) Net profit (b) Return on equity
(c) Operating (d) None of the above

47.A high dividend payout signifies distribution policy of the company.

(a) Liberal (b) Investment
(c) Profit (d) Disinvestment

48. AS-3 (Revised) is mandatory for:

(a) Listed companies.
(b) Companies having a turnover of more than ` 50 crores.
(c) Both (a) and (b).
(d) Unlisted company.

49. Securities premium collected amounts to cash flow from:

(a) Operating activities (b) Exchange rate
(c) Financing activities (d) Investing activities

50. Dividend received should be classified as cash inflow from activities.

(a) Fund flow statement (b) Financing
(c) Investing (d) Indirect

51. Under method, the difference between cash receipts and cash payments are
taken to arrive at the net cash flow from operating activities.
(a) Direct (b) Indirect (c) Increase (d) Investing

Mob No - 8007916622/33 15.7

RATIO ANALYSIS UNIQUE ACADEMY
52. The increase in current asset will cash from operations.
(a) Indirect (b) Reduce (c) Increase (d) Investing

53. Losses made in trading activities will cause to:

(a) Decrease current assets (b) Increase current assets
(c) Use up the funds (d) Increase working capital

54. The relationship between sources and application of funds and its impact on is
explained in statement of sources and application of funds.
(a) Working capital (b) Fund
(c) Increase (d) Decrease

55. The increase in provision for doubtful debts will result in of working
capital.
(a) Capital employed (b) Inflow
(c) Decrease (d) Outflow

56. The excess of current assets over current liabilities is called

(a) Working capital (b) Assets
(c) Inflow (d) Cash from operation

57.A flow of funds takes place only if account is involved.

(a) Working capital (b) Current
(c) Inflow (d) Cash from operation

58. The funds flow statement is prepared in between balance sheet dates.
(a) Two (b) Three
(c) Four (d) Both (b) and (c)

59. Which best describes the gross margin ratio?

(a) Leverage ratio (b) Liquidity ratio
(c) Coverage ratio (d) Profitability ratio

60.A firm’s equity multiplier is an indication of its position.

(a) Liquidity (b) Debt
(c) Asset utilization (d) Inventory

Mob No - 8007916622/33 15.8

RATIO ANALYSIS UNIQUE ACADEMY
61. Proprietary Funds = ……………
(a) Equity Share Capital + Reserves Fictitious Assets + Current Assets
(b) Equity Share Capital + Preference Share Capital + Fixed Assets Fictitious Assets
(c) Equity Share Capital + Preference Share Capital + Reserves Fictitious Assets
(d) All of the above are correct

62. A Ltd. Financial Statement shows the following date:

Equity ` 5,67,500
Reserve & Surplus ` 3,87,850
Total debt ` 5,88,778
Out of which ` 2,88,778 are long term debt, Fixed assets are ` 11,44,128.Current
Ratio = ?
(a) 2.48 (b) 1.92 (c) 3.68 (d) 1.33

63. A Cash flow statement is like an income statement.

(a) I agree (b) I disagree
(c) I cannot say (d) The statement is ambiguous

64. Collection from debtors will the working capital.

(a) Increases (b) Decreases
(c) Will not affect (d) Cannot say anything without monetary figures

65. Increase in amount of debtors results in _

(a) Decrease in cash (b) Increase in cash
(c) No change in cash (d) Decrease in working capital

66. A company can improve (lower) its debt – to – total assets ratio by doing which of the
following?
(a) Borrow more
(b) Shift short – term to long – term debt
(c) Shift long – term to short – term debt
(d) Sell common stock

67. Which of the following is considered a profitability measure?

(a) Days sales in inventory (b) Fixed asset turnover
(c) Price – earnings ratio (d) Return on assets

Mob No - 8007916622/33 15.9

RATIO ANALYSIS UNIQUE ACADEMY
68. What type of ratios measure the liquidity of specific assets and the efficiency of
managing assets?
(a) Profitability Ratios (b) Liquidity Ratios
(c) Leverage Ratios (d) Activity Ratios

69. Which of the following transactions is NOT reflected in a fund flow statement?
(a) Sale of treasury stock
(b) Declaration of stock dividend
(c) Purchase of foreign subsidiary with cash
(d) Insurance of convertible bonds

70. Cash equivalents are short term highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of changes in
value.
(a) I agree (b) I disagree
(c) I cannot say (d) This statement is ambiguous

71. Which of the following transactions would not create a cash flow?
(a) A company purchased some of its own shares from a shareholder.
(b) Amortization of patent.
(c) Payment of a cash dividend.
(d) Sale of equipment at book value.

72. The quick ratio formula uses which of the following?

(a) Total assets (b) Cash
(c) Total current assets (d) Inventory

73. The dividend payout ratio describes:

(a) The proportion of earnings paid as dividends.
(b) The relationship of dividends per share to market price per share.
(c) The percentage of dividends per share to market price per share.
(d) Dividends as per percentage of the price / earnings ratio.

74. Proprietary Ratio assess:

(a) Long Term Solvency (b) Short Term Solvency
(c) Profitability (d) Activity

75.KJ Ltd. PAT is ` 1,06,000. Its equity share capital is ` 3,50,000 of ` 10 each. The
market price is ` 45. P/E Ratio = ?
(a) 12.87 (b) 15.84 (c) 14.85 (d) 150

Mob No - 8007916622/33 15.10

RATIO ANALYSIS UNIQUE ACADEMY
76. Non-cash transactions:
(a) Form part of fund flow statement.
(b) Do not form part of fund flow statement.
(c) May or may not form part of fund flow statement.
(d) I cannot say whether they are part of fund flow statement.

77. Net Profit + Non cash expenditure = …….

(a) Funds from operation (b) Profit after tax
(c) Application of funds (d) EBIT

78. is prepared to know the financial position of a company on a particular date.

(a) Balance Sheet (b) Fund flow statement
(c) Profit & Loss account (d) None of the above

79. If pre-acquisition dividend is received it is credited to:

(a) Profit and loss adjustment account. (b) Capital work-in-progress account
(c) Investment account (d) Capital account

80. As per AS-3, Cash includes:

(a) Cash in hand and demand deposit with banks.
(b) Term deposit with bank.
(c) Short term highly liquid investment readily convertible into cash which are subject to
insignificant risk of changes in value.
(d) (a), (b) & (d).

81. Which of the following can be categorized as cash equivalents as per AS-3?
(a) Treasury bill (b) Commercial paper
(c) Money market funds (d) All of the above

82. Taxes on income should be classified as:

(a) Operating Activities
(b) Investing Activities
(c) Financing Activities
(d) Operating Activities, unless they can be specifically identified with financial and
investing activities.

83. The Preparation of Cash flow statement is governed by AS-3 (Revised). This statement
is
(a) Correct (b) Not correct
(c) Partially correct (d) None of the above
Mob No - 8007916622/33 15.11
RATIO ANALYSIS UNIQUE ACADEMY
84. Cash from operations is equal to:
(a) Net profit plus non-cash items plus non-operating expenses.
(b) Net profit plus increase in debtors.
(c) Net profit plus increase in stock.
(d) None of the above.

85. Which of the following is a cash flow from a “financing” activity?

(a) Cash outflow to the government for taxes.
(b) Cash outflow to shareholders as dividends.
(c) Cash outflow to purchase bonds issued by another company.
(d) All of the above.

86. represents the resources that have been sacrificed to attain a particular
objective.
(a) Expenses (b) Cost (c) Assets (d) Liability

87. Which group of ratios measure a firm’s ability to meet short-term obligations?
(a) Liquidity ratios (b) Debt ratios
(c) Coverage ratios (d) Profitability ratios

88. Which of the following would be considered as application of funds?

(a) A decrease in accounts receivable. (b) A decrease in cash
(c) An decrease in account payable (d) An increase in cash

89. Sale of old plant & machinery the working capital.

(a) Increases
(b) Decreases
(c) Will not affect
(d) Cannot say anything without monetary figures

90. Which of the following can be shown on the “Application side” in fund flow statement?
(a) Funds lost in operation (b) Non-trading payments
(c) Net increase in working capital (d) All of the above

91. For an investment to qualify as a cash equivalent, it must be readily convertible to a

known amount of:
(a) Gold (b) Cash
(c) Investment (d) Real estate

Mob No - 8007916622/33 15.12

RATIO ANALYSIS UNIQUE ACADEMY
92. In AS-3 (Cash Flow Statements) where would you find a bank current account debit
balance?
(a) In cash and cash equivalents (b) In investing activities
(c) In Financing activities (d) In operating activities

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(b) (d) (b) (a) (b) (b) (b) (b) (a) (a)
11 12 13 14 15 16 17 18 19 20
(d) (d) (d) (a) (c) (a) (a) (a) (a) (a)
21 22 23 24 25 26 27 28 29 30
(b) (a) (b) (b) (a) (a) (a) (a) (a) (a)
31 32 33 34 35 36 37 38 39 40
(a) (a) (a) (a) (a) (a) (d) (b) (c) (c)
41 42 43 44 45 46 47 48 49 50
(b) (d) (d) (b) (a) (d) (a) (c) (c) (c)
51 52 53 54 55 56 57 58 59 60
(a) (b) (c) (c) (c) (a) (b) (a) (d) (c)
61 62 63 64 65 66 67 68 69 70
(c) (d) (b) (c) (c) (d) (d) (d) (b) (a)
71 72 73 74 75 76 77 78 79 80
(b) (b) (a) (a) (c) (b) (a) (a) (c) (d)
81 82 83 84 85 86 87 88 89 90
(d) (d) (a) (a) (b) (b) (a) (c) (a) (d)
91 92
(b) (a)

Mob No - 8007916622/33 15.13

MANAGEMENT REPORTING UNIQUE ACADEMY

16 MANAGEMENT REPORTING

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. Which of the following is not the benefit of Management Reporting?

(a) Helpful in control system.
(b) Helpful in profitable operations.
(c) Follow the Principle of Management by objective.
(d) All of the above

2. What are the essential components to Management Reporting. Select appropriate code:
(A) Discovery (B) Analysis
(C) Performance (D) Implementation (E) Validation
(a) A, B, C, D, E (b) A, B, C
(c) D, C, E (d) A, B, D

3. On the basis of users the managerial reports are categorized as:

(a) Operating reports and financial reports.
(b) Trend reports and analytical reports.
(c) Individual activity reports and joint activity reports.
(d) Internal reports and external reports.

4. On the basis of techniques of preparation, the managerial reports can be classified into:
(a) Operating reports and financial reports.
(b) Trend reports and analytical reports.
(c) Individual activity reports and joint activity reports.
(d) Internal reports and external reports.

5. Which of the following are not covered in managerial reporting?

(a) Buy or make (b) Sales policy
(c) Capacity utilization (d) None of the above

6. Management reporting can be performed as:

(a) Internal reporting (b) External reporting
(c) Both (a) and (b) (d) None of the above

7. A written report is more formal than an oral report.

(a) True (b) False
(c) Both (a) and (b) (d) None of the above

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MANAGEMENT REPORTING UNIQUE ACADEMY
8. Graphic techniques help to understand
(a) Business reports (b) Friendly letters
(c) Notices (d) Classified advertisements
9. Which of these does a figure not include?
(a) Graphs (b) Tables
(c) Charts (d) Drawings

10. The information of MIS comes from the:

(a) Internal source (b) External source
(c) Both internal and external source (d) None of the above

11. FICKLE LTD. has five business segments with operating profits and losses as shown
below:
Segment Operating Profit / Loss (` in lakh)
P 3
Q (3)
R 20
X (9)
Y (20)
Reportable Segments as per AS-17 are:
(a) P, Q, R, X, Y (b) P, Q, R, Y
(a) P, Q, R only (d) R, X, Y only

12. The margin of error allowed in a report:

(a) No error is acceptable in a report.
(b) Within the permissible limit stated by the management.
(c) Depends upon the purpose for which a report is prepared.
(d) None of the above.

13. Reports are used to comparative statements:

(a) Descriptive Report (b) Tabular Report
(c) Graphic Report (d) Surrey Report

14. Matters relating to cost Reduction are covered by:

(a) General Reports (b) Special Reports
(b) Descriptive Reports (d) (a) and (b)

ANSWER KEYS
1 2 3 4 5 6 7 8 9 10
(c) (d) (d) (b) (d) (c) (a) (a) (b) (c)
11 12 13 14
(d) (c) (b) (b)

Mob No - 8007916622/33 16.2

DECISION MAKING TOOLS UNIQUE ACADEMY

17 DECISION MAKING TOOLS

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. The following data is available for the period.

Opening inventory 10,000 units.
Closing inventory 8,000 units.
Absorption costing profit ` 2,80,000
The profit for the period using marginal costing would be:
(a) 2,78,000 (b) 2,80,000
(c) 2,82,000 (d) Impossible to calculate without more information.

2. The overhead absorption rate for product T is ` 4 per machine hour. Each unit of T
required 3 machine hours.
Inventories of product T last period were:
Unit
Opening inventory 2,400
Closing inventory 2,700
Compared with the marginal costing profit for the period, the absorption costing profit
for product T will be:
(a) ` 1,200 higher (b) ` 3,600 higher
(c) ` 1,200 lower (d) ` 3,600 lower

3. In a period where opening inventories were 15,000 units and closing inventories were
20,000 units, a firm had a profit of ` 130,000 using absorption costing. If the fixed
overhead absorption rate was ` 8 per unit, the profit using marginal costing would be:
(a) 90,000 (b) 1,30,000
(c) 1,70,000 (d) Impossible to calculate without more information

THE FOLLOWING INFORMATION RELATES TO QUESTIONS 4 AND 5.

Cost and selling price details for product Z are as follows:
` Per unit
Direct material 6.00
Direct labour 7.50
Variable overhead absorption rate 2.50
Fixed overhead absorption rate 5.00
21.00
Profit 9.00
Selling price 30.00

Mob No - 8007916622/33 17.1

DECISION MAKING TOOLS UNIQUE ACADEMY
Budget production for the month was 5,000 units although the company managed to
produce 5,800 units, selling 5,200 of them and incurring fixed overhead costs of ` 27,400.

4. The marginal costing profit for the month is:

(a) ` 45,400 (b) ` 46,800 (c) ` 53,800 (d) ` 72,800

5. The absorption costing profit for the month is:

(a) ` 45,200 (b) ` 45,400 (c) ` 46,800 (d) ` 48,400

6. In a period, a company had opening inventory of 31,000 units and closing inventory of
34,000 units. Profit based on marginal costing were ` 8,50,500 and on absorption
costing were ` 9,55,500. If the budgeted total fixed costs for the company was
18,37,500. What was the budgeted level of activity in units?
(a) 32,500 (b) 52,500 (c) 65,000 (d) 1,05,000

7. A company had opening inventory of 48,500 units and closing inventory of 45,500 units.
Profit based on Marginal costing were ` 3,15,250 and absorption costing were `
2,88,250. What is the fixed overhead Absorption rate per units?
(a) ` 5.94 (b) ` 6.34 (c) ` 6.50 (d) ` 9.00

8. Which of the following are acceptable bases for absorbing production overheads?
1. Direct labour
2. Machine hours
3. As a percentage of the prime cost
4. Per unit
(a) Method (1) and (2) only (b) Method (3) and (4) only
(b) Method (1), (2), (3) and (4) (d) Variable and fixed costs

9. Absorption costing is concerned with which of the following?

(a) Direct materials (b) Direct labour
(c) Fixed costs (d) Variable and fixed costs

10.A company made 17,500 units at a total cost of ` 16 each. Three quarters of the costs
were variable and one quarter fixed, 15,000 units were sold at ` 25 each. There were no
opening inventories. By how much will the profit calculated using absorption costing
principles differ from the profit if marginal costing principles had been used?
(a) The absorption costing profit would be ` 10,000 less.
(b) The absorption costing profit would be ` 10,000 greater.
(c) The absorption costing profit would be ` 30,000 greater.
(d) The absorption costing profit would be ` 40,000 greater.
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DECISION MAKING TOOLS UNIQUE ACADEMY
11.A company has established a marginal costing profit of ` 72,300. Opening inventory
was 300 units and closing inventory is 750 units. The fixed production overhead
absorption rate has been calculated as ` 5 unit. What was the profit under absorption
costing?
(a) ` 67,050 (b) ` 70,050 (c) ` 74,550 (d) ` 77,550

12.A company produces and sells a single product whose variable cost is ` 6 per unit.
Fixed costs have been absorbed over the normal level of activity of 2,00,000 units and
have been calculated as ` 2 per unit. The current selling price is ` 10 per unit. How
much profit is made under marginal costing if the company sells 2,50,000 units?
(a) ` 5,00,000 (b) ` 6,00,000 (c) ` 9,00,000 (d) ` 10,00,000

13.A company wishes to make a profit of ` 1,50,000. It has fixed costs of ` 75,000 with a
C/S ratio of 0.75 and a selling price of ` 10 per unit. How many units would the
company need to sell in order to achieve the required level of profit?
(a) 10,000 units (b) 15,000 units (c) 22,500 units (d) 30,000 units

14.A company which uses marginal costing has a profit of ` 37,500 for a period. Opening
inventory was 100 units and closing inventory was 350 units. The fixed production
overhead absorption rate is ` 4 per unit. What is the profit under absorption costing?
(a) ` 35,700 (b) ` 35,500 (c) ` 38,500 (d) ` 39,300

15.A company has the following budgeted information for the coming month:
Budgeted Sales Revenue ` 5,00,000
Budgeted contribution ` 2,00,000
Budgeted profit ` 50,000
What is the budgeted break-even sales revenue?
(a) ` 1,25,000 (b) ` 3,50,000 (c) ` 3,75,000 (d) ` 4,50,000

16.A company manufactures and sells a single product. For this month the budgeted fixed
production overheads are ` 48,000, budgeted production is 12,000 units and budgeted
sales are 11,720 units. The company currently uses absorption costing. If the company
used marginal costing principles instead of absorption costing for this month, what
would be the effect on the budgeted profit?
(a) ` 1,120 higher (b) ` 1,120 lower
(c) ` 3,920 higher (d) ` 3,920 lower

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DECISION MAKING TOOLS UNIQUE ACADEMY
17. A company operates a standard marginal costing system. Last month its actual fixed
overhead expenditure was 10% above budget resulting in a fixed overhead expenditure
variance of ` 3,60,000. What was the actual expenditure on fixed overheads last
month?
(a) ` 3,24,000 (b) ` 3,60,000 (c) ` 3,96,000 (d) ` 4,00,000

18. Last month, when a company had an opening stock of 16,500 units and a closing stock
of 18,000 units, the profit using absorption costing was ` 40,000. The fixed production
overhead rate was ` 10 per unit. What would the profit for last month have been using
marginal costing?
(a) ` 15,000 (b) ` 25,000 (c) ` 55,000 (d) ` 65,000

19. Which of the following types of costs are allocated to cost centres?
(a) Only direct costs (b) Only indirect costs
(c) Only semi variable costs (d) Direct and indirect costs

20. Which one of the following bases would be most appropriate for apportioning a
company’s general advertising costs?
(a) Sales in each division.
(b) Purchases in each division.
(c) Number of customers in each division.
(d) Stock levels in each division.

21. A business absorbs overheads on the basis of hours worked on a specific job. If the
overhead absorption rate has been calculated at ` 30 per hour, and a job is estimated
to take 20 hours, what price would be charged to the customer if the company’s mark-
up is 50% of cost.
(a) ` 600 (b) ` 900 (c) ` 1,200 (d) ` 300

22. Under marginal costing, the break-even point is found by the following formula:
(a) Fixed costs per unit dividend by the total contribution.
(b) Total fixed costs divided by the contribution per unit.
(c) Total sales divided by the contribution per unit.
(d) Total variable costs divided by the contribution per unit.

23. A retail company sells computers, each of which is sold for ` 250 and bought from the
manufacturer for ` 100. The retailer’s fixed costs are ` 1,50,000. Maximum possible
sales are 3,000. How many computers must be sold to break-even?
(a) 1000 (b) 2,000 (c) 3,000 (d) 750

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DECISION MAKING TOOLS UNIQUE ACADEMY
24. Using the information in question 23, how much profit or loss would be made if 2,700
computers were sold?
(a) ` 4,50,000 profit (b) ` 2,55,000 profit
(c) ` 1,62,000 profit (d) ` 1,50,000 loss

25. Using the information in question 23, how many computers would have to be sold for
the company to earn a profit of ` 1,80,000?
(a) 1,200 (b) 1,000 (c) 2,200 (d) 720

26. On a break-even chart, which of the following indicates the point where a business
breaks even?
(a) Where the variable costs line crosses the fixed costs line.
(b) Where the fixed line crosses the sales line.
(c) Where the total costs line crosses the fixed costs line.
(d) Where the sales line crosses the total costs line.

27. Contribution is known as:

(a) Marginal income (b) Gross profit
(c) Net income (d) None of the above

28. costing reduce the possibility of under pricing:

(a) Marginal (b) Variable (c) Absorption (d) Direct

29. A company’s approach to make or buy decision:

(a) Depends on whether the company is operating at or below normal value.
(b) Involves an analysis of avoidable costs.
(c) Should use absorption (full costing).
(d) Should use activity based costing.

30. Which one of the following is a limitation of a break-even chart?

(a) The split between fixed and variable costs may not be clear-cut.
(b) The break-even profit cannot be indicated on it.
(c) You can only show losses, not profits.
(d) Variable costs are not shown on the chart.

31. Which one of the following would be shown on a break-even chart, but not a
profit/volume chart?
(a) Total costs at maximum sales (b) Maximum loss at zero sales
(c) Maximum profit at maximum sales (d) The break-eve point

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DECISION MAKING TOOLS UNIQUE ACADEMY
32. The Y-axis (vertical axis) on a break-even chart has which one of the following labels?
(a) Production levels (b) Variable costs
(c) Costs and revenues (d) Profit and losses

33. On a break-even chart, if total costs increased and sales decreased, the break-even
point would change in which one of the following ways?
(a) It would not change.
(b) It would move to the left along the total sales line.
(c) The business would not break even, so there would be no break-even point.
(d) It would move to the right along the total sales line.

34. On a break even chart, if fixed costs increased at a particular level of activity, what
would happen to the fixed costs line on the chart?
(a) The fixed costs line at all levels of activity would be changed.
(b) The fixed cost line would be unchanged, but a different colour would be used when
drawing the line from the point where the fixed costs increase.
(c) It would be shown as a step up on the line at the point when increases.
(d) Fixed costs are always the same, so the line would be unchanged.

35. A company has a very small margin of safety on a specific product. Which one of the
following events would be likely to result in a loss on that product?
(a) The business achieving no more than the maximum activity level as shown on the
existing breakeven chart.
(b) An increase in the selling price but no changes to costs.
(c) A significant increase in the variable costs of the product but no changes to the selling
price or fixed costs.
(d) None of the above.

36. Consider the following types of cost:

(1) Sunk costs
(2) Committed costs
(3) Opportunity costs
(4) Outlay costs
Which of the above will always be irrelevant when considering a particular course of
action?
(a) 1 only (b) 3 and 4 (c) 3 only (d) 1 and 2

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DECISION MAKING TOOLS UNIQUE ACADEMY
37. A Company’s fixed cost amounts to ` 120 lakhs p.a. and its overall P/V ratio is 0.4. The
annual sales of the company should be ` lakhs to have a Margin of Safety of
25%.
(a) 400 (b) 500
(c) 600 (d) None of the above

38. The variable cost of a product increases by 10% and the management raises the unit
selling price by 10%. The fixed cost remain unchanged. Then BEP of the firm
(a) Increases (b) Decreases
(c) Remain the same (d) None of the above

1
39.A company with a contribution / sales ratio of 33 % and fixed cost of ` 3 lakhs per
3
month should have a monthly sales of ` lakhs to maintain a margin of safety
of 10%.
(a) 8 (b) 10
(c) 12 (d) None of the above

40.A company maintains a margin of safety of 25% on its current sales and earns a profit
of ` 30 lakhs per annum. If the company has a profit volume (P/V) ratio of 40%, its
current sales amount to:
(a) ` 200 lakhs (b) ` 300 lakhs
(c) ` 325 lakhs (d) None of the above

41.A company has margin of safety of ` 40 lakhs and earns and annual profit of `10
lakhs. If the fixed costs amount to ` 20 lakhs, annual sales will be ………
(a) ` 160 lakhs (b) ` 140 lakhs
(c) ` 120 lakhs (d) ` 200 lakhs

42. In two consecutive periods, sales and profit were 1,60,000 and 8,000 respectively in the
first period and ` 1,80,000 and ` 14,000 respectively during the second period. If there
is no change in fixed cost between the two periods then P/V ratio must be ……..
(a) 20% (b) 25% (c) 30% (d) 40%

43. Which of the following is true at breakeven point?

(a) Total Sales revenue = Variable cost.
(b) Profit = Fixed cost.
(c) Sales revenue = Total cost – variable cost.
(d) Contribution = Fixed cost.

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DECISION MAKING TOOLS UNIQUE ACADEMY
44. The variable cost of product increases by 10% and the management raise the unit
selling price by equal amount. The fixed costs remain unchanged. The BEP of the firm:
(a) increase (b) decreases
(c) unchanged (d) None of the above

45. Sales of two consecutive months of a company are ` 3,80,000 and ` 4,20,000 the
company’s net profit for these months amounted to ` 24,000 and the ` 40,000
respectively. The P/V ratio of the company is:
(a) 33.33% (b) 40%
(c) 25% (d) None of the above

46. A company has fixed costs of ` 6,00,000 per annum. It manufactures a single product
which it sells for ` 200 per unit. Its contribution to sales ratio is 40%. Its breakeven in
units is:
(a) 7,500 Units (b) 8,000 Units
(c) 3,000 Units (d) 1,500 Units

47. Total Sales – Total Variable Cost = ……….

(a) Fixed Cost (b) Semi variable cost
(c) Contribution (d) Breakeven point

48. Cost Volume Profit (CVP) analysis is a behavior of how many variables?
(a) 2 (b) 3 (c) 4 (d) 5

49. Selling price per unit ` 10 ; Variable cost ` 8 per unit ; Fixed cost ` 20,000 ; Breakeven
production in units?
(a) 10,000 (b) 16,300 (c) 2,000 (d) 2,500

50. Actual sales ` 4,00,000 ; Breakeven sales ` 2,50,000 ; Margin of safety in percentage is:
(a) 66.67 (b) 33.33% (c) 37.5% (d) 76.33%

51. A retail company sells computer parts, each of which is sold for ` 250 and bought from
the manufacturer for ` 100. The retailer’s fixed costs are ` 1,50,000. Maximum
Possible sales are 3,000. How many computers must be sold to breakeven?
(a) 2,000 (b) 1,000 (c) 750 (d) 3,000

52. Break-even point occurs at 40% of total capacity, margin of safety will be ……
(a) 40% (b) 60% (c) 80% (d) 85%

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DECISION MAKING TOOLS UNIQUE ACADEMY
53.Calculate value of closing stock from the following:
`
Opening stock of finished goods (500 units) 2000
Cost of production (10,000 units) 50,000
Closing stock (1,000 units) ?
(a) ` 4,000 (b) ` 4,500 (c) ` 5,000 (d) ` 6,000

54.
`
Profit as per cost accountant 548
Overvaluation closing stock in financial books 4,500
Profit / Loss as per financial account ?
(a) Profit ` 14,048 (b) Loss ` 12,952
(c) Profit ` 5,048 (d) Loss ` 3,952

55.A lorry capable of carrying 5 tonnes of goods normallycarries 80% of the load on the
outward journey and 40% of the load on inward journey. The journey is 300 km. For
one side. It takes two days to complete the return trip. In a year of 300 days compute
the tonnes km.
(a) 2,70,000 tonnes km (b) 3,00,000 tonnes km
(c) 3,30,000 tonnes km (d) 3,40,000 tonnes km

56. Which of the following represents a CVP equation?

(a) Sales = Contribution margin (`) + Fixed expenses + Profits.
(b) Sales = Contribution margin ratio + Fixed expenses + Profits.
(c) Sales = Variable expenses + Fixed expenses + Profits.
(d) Sales = Variable expenses Fixed expenses + Profits.

57. Sales ` 25,000 ; Variable cost ` 15,000 ; Fixed cost ` 4,000 ; P/V ratio is …..
(a) 40% (b) 80% (c) 15% (d) 30%

58. P/V ratio is 25% and margin of safety is ` 3,00,000; the amount of profit is .
(a) ` 1,00,000 (b) ` 80,000 (c) ` 75,000 (d) ` 60,000

59. If the P/V ratio of a product is 25% and selling price is ` 25 per unit, the marginal cost
of the product would be ……
(a) ` 18.75 (b) ` 16 (c) ` 15 (d) ` 20

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DECISION MAKING TOOLS UNIQUE ACADEMY

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(d) (b) (a) (a) (d) (b) (d) (c) (d) (b)
11 12 13 14 15 16 17 18 19 20
(c) (b) (d) (c) (c) (b) (c) (b) (d) (a)
21 22 23 24 25 26 27 28 29 30
(b) (b) (a) (b) (c) (d) (d) (c) (b) (a)
31 32 33 34 35 36 37 38 39 40
(a) (c) (d) (c) (c) (d) (a) (c) (b) (b)
41 42 43 44 45 46 47 48 49 50
(c) (c) (d) (c) (b) (a) (c) (b) (a) (c)
51 52 53 54 55 56 57 58 59
(b) (b) (c) (d) (a) (c) (a) (c) (a)

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VALUATION, PRINCIPLES AND FRAMEWORK UNIQUE ACADEMY

18 VALUATION, PRINCIPLES AND FRAMEWORK

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. A company has a profit attributable to ordinary shareholders of £1,00,000. The

number or ordinary shares of £1 in issue during the year was 3,00,000. The market
value of the company’s share at the year end was £ 6.50. The price / earnings ratio for
this company is:
(a) 0.05 times (b) 0.33 (c) 6.5 times (d) 19.5 times

2. What does the price / earnings (PE) ratio measure?

(a) The multiple that the stock market places on a company’s earnings.
(b) The number of times that dividend paid are covered by profits.
(c) The return received by way of dividends as per percentage of current share price.
(d) The amount of profits available to ordinary shareholders.

3. What does the price-to-earnings ratio (P/E) tell you?

(a) How much each of a company’s product sells for on average.
(b) How much investors are willing to pay per unit of a company’s earnings.
(c) How much tax per unit investors are willing to pay.
(d) None of the above.

4. What is the most important use of the P/E ratio for investors?
(a) It helps investors decide how much profit a company is likely to make in future.
(b) It helps investors decide whether a company’s shares are overpriced or underpriced.
(c) It helps investors decide on the most appropriate risk to reward ratio.
(d) None of the above.

5. What does a high P/E ratio suggest?

(a) A company shares are currently overpriced.
(b) A company shares are currently underpriced.
(c) No relation.
(d) None of the above.

6. High P/E ratios tend to indicate that a company will

(a) Grow quickly.
(b) Grow at the same speed as the average company.
(c) Grow slowly.
(d) Not grow.
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VALUATION, PRINCIPLES AND FRAMEWORK UNIQUE ACADEMY
7. Historically, P/E ratios have tended to be
(a) Higher when inflation has been high.
(b) Lower when inflation has been high.
(c) Uncorrelated with inflation rates but correlated with other macroeconomic variables.
(d) Uncorrelated with any macroeconomic variables including inflation rates.

8. Market price per share of a firm having equity capital of ` 1,00,000 consisting of shares
of ` 10 each, profit after tax of ` 82,000 and P/E ratio of 8 is:
(a) ` 65.70 (b) ` 10.25 (c) ` 65.60 (d) ` 1.025

9. The objective of Ind as 32 is to establish principles for presenting financial

instruments:
(a) As equity (b) for offsetting financial assets and liabilities
(c) As liability (d) All the above

10. Which of the following are generally not within scope of Ind AS-32?
(a) Interests in subsidiaries, associates or joint ventures.
(b) Employer’s rights and obligations under employee benefit plans.
(c) Insurance contracts.
(d) All of the above.

11. There are various ways in which a contract to buy or sell a non-financial item can be
settled net in cash or another financial instrument of by exchanging financial
instruments. These include:
(a) When the terms of the contract permit either party to settle it net in cash or another
financial instrument or by exchanging financial instruments.
(b) When the ability to settle net in cash or another financial instrument, or by exchanging
financial instruments, is not explicit in the terms of the contract, but the entity has a
practice of setting similar contracts net in cash or another financial instrument, or by
exchanging financial instruments with the counter party, by entering into off setting
contracts.
(c) When the ability to settle net in cash or another financial instruments, or by exchanging
financial instruments, is not explicit in the terms of the contract, but the entity has a
practice of setting similar contracts net in cash or another financial instrument, or by
exchanging financial instruments with the counter party by selling the contract before its
exercise or lapse.
(d) When the non-financial item that is the subject of the contract is readily convertible to
cash.

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VALUATION, PRINCIPLES AND FRAMEWORK UNIQUE ACADEMY
12. Which of the following comes within definition of financial assets:
(a) Cash
(b) Equity instrument of another entity.
(c) Contractual right to receive cash or another financial assets or to exchange with entity
financial assets or financial liabilities under potentially favorable conditions.
(d) All of the above.

13. Which of the followings comes within definition of financial liabilities?

(a) A contractual obligation to deliver cash or another financial asset to another entity.
(b) A contractual obligation to exchange financial assets/liabilities with another entity under
potentially unfavorable conditions.
(c) A contract that will or may be settled in the entity’s own equity instruments and is a non-
derivative for which the entity is or may be obliged to deliver a variable number of the
entity’s own equity instruments.
(d) All of the above.

14. Fixed assets which are subsequently measured in accordance with the revaluation
model in Ind AS-16 Property, Plant and Equipment are not within the scope of Ind AS-
113 in terms of both measurement and disclosure.
(a) True (b) False
(c) (a)and (b) (d) None of above

15. Ind AS 113 Appendix A notes that an orderly is:

(a) ‘A transaction that assumes exposure to the prefect completion market for a date just
before the measurement date to allow for marketing activities that are usual but not
customary for transactions involving such assets or liabilities; it may or may not a forced
transaction (e.g. a forced liquidation or distress sale).’
(b) ‘A transaction that assumes exposure to the market for a period before the measurement
date to allow for marketing activities that are usual and customary for transactions
involving such assets or liabilities; it is not a forced transaction (e.g. a forced liquidation
or distress sale).’
(c) Both (a) and (b).
(d) None of the above.

16. ‘Most advantageous market’ (Ind AS-113 Appendix A) is defined as:

(a) The market that maximizes the amount that would be received to sell the asset or
minimizes the amount that would be received to sell the asset or minimizes the amount
that would be paid to transfer the liability, after taking into account transaction costs and
transport costs.

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VALUATION, PRINCIPLES AND FRAMEWORK UNIQUE ACADEMY
(b) The market that maximizes the amount that would be received to sell the asset or
minimize the amount that would be paid to transfer the liability, before taking into
account transaction costs and transport costs.
(c) Both (a) and (b).
(d) None of the above.

17. Ind AS-113 Appendix a notes that highest and best use (HBU) is:
(a) The use of a non-financial asset by market participants that would maximize the value of
the asset or the group of assets and liabilities (e.g. a business) within which the asset
would be used.
(b) The use of a financial asset by market participants that would maximize the value of the
financial asset of the group of financial assets and liabilities within which the financial
asset would be used.
(c) Both (a) and (b).
(d) None of the above.

18. Ind AS-113 Appendix A notes that transport costs are:

(a) The cost that would be incurred to transport an asset from its current location to its
principal (or most advantageous) market.
(b) The cost that would be incurred to transport an asset from its current location to its
market whether principal or minor.
(c) Both (a) and (b).
(d) None of the above.

19. On 1st April, 2017, H Ltd. acquired 120000 shares out of 150000 equity shares of ` 10
each of S Ltd. at ` 16,30,000. On that date balance of General Reserve; Capital
Reserve; and Preliminary Expenses in S Ltd. were ` 2,42,000; and ` 70,000
respectively. The amount of cost of control will be:
(a) Capital Reserve ` 19,600 (b) Capital Reserve ` 3,62,000
(c) Capital Reserve ` 2,89,600 (d) Goodwill ` 36,400

20. Trailing P/E is its current market price divided by:

(a) Most recent four quarters EPS. (b) Current book value.
(c) Last years market price. (d) Average of last 4 years EPS.

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VALUATION, PRINCIPLES AND FRAMEWORK UNIQUE ACADEMY
21. VINTEX LTD. has 5,00,000 equity shares outstanding on April 01, 2008. The average
fair value per share during the year 2008-09 was ` 40. The company has given share
option to its employee of 1,00,000 shares at option price of ` 30. If net profit
attributable to equity shareholders for the year ended March 31, 2009 is ` 12 lakh,
Diluted EPS would be:
(a) 2.29 (b) 2.40
(c) 2.50 (d) None of (a), (b), (c)

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(d) (a) (b) (b) (a) (a) (b) (c) (d) (d)
11 12 13 14 15 16 17 18 19 20
(d) (d) (d) (b) (b) (a) (a) (a) (c) (a)
21
(a)

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VALUATION OF SHARES, BUSINESS & INTANGIBLE ASSETS UNIQUE ACADEMY

19 VALUATION OF SHARES, BUSINESS AND INTANGIBLE

ASSETS
MULTIPLE CHOICE QUESTIONS
In each of the following one of the alternatives is correct, indicate the correct one:

1. Given: The growth rate in the dividends is expected to be 8%. The Beta of the stock is
1.60 and the return on the market index is 13%. The required rate of return would be:
(a) 14% (b) 16% (c) 18% (d) 20%

2. Identify which of the following is not a financial liability?

(a) X Ltd. has 1 Lakh ` 10 ordinary shares issued.
(b) X Ltd. has 1 Lakh 8% ` 10 redeemable preference shares issued.
(c) X Ltd. has ` 2,00,000 of 6% bond issued.
(d) Both (a) and (b).

3. If a company has a P/E ratio of 12 and a Market to Book Value Ratio 2.10, then its
Return on Equity will be:
(a) 14.10% (b) 17.50%
(c) 25.20% (d) None of the above

4. VARTUAL LTD. acquired 1000 shares in ANKIT LTD. at a Cum-right price of ` 250
per share. Ankit Ltd. offered right shares of one for every two held at ` 125 per share.
After the right issue the share price fell from ` 250 to ` 200 per share. If the rights
were sold by virtual Ltd. at ` 70 per share, what would be the carrying cost of
investment in Ankit Ltd. After the sale of rights?
(a) ` 2,50,000 (b) ` 2,15,000
(c) ` 2,85,000 (d) None of (a), (b) and (c)

5. Mr. BIKRAM purchased 1000 shares in Ranjan Laboratories at ` 300 per share in
2005. There was Right issue in 2008 at one share for every two held at a price of ` 100
per share. If Mr. Bikram subscribed to the rights, what would be carrying cost of 1500
shares.
(a) ` 2,50,000 (b) ` 3,50,000
(b) ` 3,00,000 (d) Insufficient information

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VALUATION OF SHARES, BUSINESS & INTANGIBLE ASSETS UNIQUE ACADEMY
6. ANKITA LTD. has a Plant (Asset) which is carried in the Balance Sheet on 31.03.2009
at ` 500 lakh. As that date the value in use is ` 400 lakh. What would be the
impairment loss of the Plant, if the net selling price as on 31.03.2009 is 300 ` lakh?
(a) ` 100 lakh (b) ` 125 lakh
(c) ` 150 lakh (d) Incomplete information

7. The share capital of Sanjana Ltd. is ` 10,00,000 consisting of fully paid 10,000 shares,
15% preference shares of ` 100 each and 9,000 equity shares of ` 100 each. The after-
tax profit of the company for the year. 2008-09 is ` 1,23,000. The normal rate of return
is 8%. The value of equity share of the company is:
(a) ` 171 (b) ` 125 (c) ` 154 (d) ` 150

8. SUHASI LTD. issued 20,000 shares of ` 10 each at a discount of 10%. Mr. Harish to
whom 500 shares were allotted failed to pay the final call of ` 3 and hence, his shares
were forfeited. The amount to be transferred to the credit of shares forfeiture account
is:
(a) ` 1,500 (b) ` 3,500 (c) ` 3,000 (d) ` 4,500

9. GAYATHRI LTD. purchased 1000 shares in SAVITHA LTD. at ` 600 per share in
2008. There was a rights issue in 2009 at one shares for every two held at a price of `
150 per share. If Gayathri Ltd. subscribed to the rights what would be the carrying
cost of 1500 shares?
(a) ` 6,75,000 (b) ` 6,50,000
(b) ` 6,00,000 (d) Insufficient information

10.ANURAG LTD. purchased a Plant on 1.4.2008 for ` 10,00,000. It provides depreciation

@ 20% on W.D.V. during the year ended on 31.3.2010. What would be the carrying
amount of Plant on 31.3.2010, if the company provided impairment loss on Plant for `
1,00,000?
(a) ` 5,40,000 (b) ` 6,40,000
(c) ` 7,40,000 (d) Insufficient information

11.Super Profit is ` 9,167 and the Normal Rate of Return is 10%. Goodwill as per
capitalization of Super Profit method is equal to:
(a) 91,670 (b) 90,600 (c) 67,910 (d) 95,000

12. The following data is extracted from the books of HYDER LTD. as on March 31, 2010.
Paid up value of an Equity Share : ` 10
Normal value of an Equity Share : ` 20
The Yield rate of return of the company : 15.75%
Mob No - 8007916622/33 19.2
VALUATION OF SHARES, BUSINESS & INTANGIBLE ASSETS UNIQUE ACADEMY
If the normal rate of return is 9%, what would be value of an Equity Share of HYDER
LTD.
(a) 20.00 (b) 17.50
(c) 15.75 (d) None of the above

13. In case of amalgamation in the nature of purchase, Fixed Asset; Current Assets; Total
Debts; Debt balance of Profit and Loss A/c and Purchase Consideration are `
25,60,000; ` 12,50,000 ; ` 11,30,000; ` 2,20,000 and ` 24,00,000 respectively. The
amount of Capital Reserve of Goodwill will be:
(a) Goodwill ` 60,000 (b) Goodwill ` 2,80,000
(c) Capital Reserve ` 60,000 (d) Capital Reserve ` 1,60,000

14. Chandra Ltd. acquired a machine for ` 65 Lakhs on 1st July, 2014. It has a life of 5
years with a salvage value of ` 7 Lakhs. As on 31st March, 2017, if present value of
future cash flows is ` 28 Lakhs and net selling price is ` 25 Lakhs, impairment loss will
be:
(a) ` 3 Lakhs (b) ` 30 Lakhs
(c) ` 18.15 Lakhs (d) ` 5.10 Lakhs

15. Roshan Ltd. agreed to absorb Richa Ltd. For this purpose Richa Ltd’s 5000, 9%
Preference shares are valuled at ` 124.50 each and ` 65,000 Equity shares are valued at
` 32 each. If Roshan Ltd. discharged purchase consideration by issuing its Equity
shares of ` 10 each which is having intrinsic value of ` 46 each. No. of Equity share
issued by Roshan Ltd. to Richa Ltd. will be:
(a) 45.214 (b) 2,70,250 (c) 58,750 (d) 70,000

16. X Ltd. holds 69% of Y Ltd., Y Ltd. holds 51% of W Ltd., Z Ltd. holds 49% of W Ltd.
As per AS 18 related parties are:
(a) X Ltd., Y Ltd, & W Ltd. (b) X Ltd. & Z Ltd.
(c) Y Ltd. & Z Ltd. (d) X Ltd. & Y Ltd.

17.Kovid Ltd. agreed to absorbs Shiva Ltd. Shiva Ltd. has been issued 12,000 Equity
Shares of ` 10 which having intrinsic value of ` 32 each. If intrinsic value of Kovid
Ltd.’s equity share is ` 64 each, then how many equity shares should be issued by
Kovid Ltd. to Shiva Ltd. to meet out the purchase consideration?
(a) 2,40,000 (b) 1,20,000 (c) 18,750 (d) 60,000

Mob No - 8007916622/33 19.3

VALUATION OF SHARES, BUSINESS & INTANGIBLE ASSETS UNIQUE ACADEMY
18. Capital Employed is ` 225 Lakhs; Annual average profits are ` 57 Lakhs; Normal rate
of return is 12%. The value of goodwill on the basis of Capitalization of super profits
will be:
(a) ` 220 Lakhs (b) ` 475 Lakhs
(c) ` 6.84 Lakhs (d) ` 26.40 Lakhs

19. A firm values goodwill under ‘Capitalization of Profits’ method. Average profit of the
firm for past 4 years has been determined at ` 1,00,000 (before tax). Capital employed
in the business is ` 4,80,000 and its normal rate of return is 12%. Tax rate is 28% on
average. Value of Goodwill based on capitalization of average profit will be:
(a) ` 1,20,000 (b) ` 6,00,000 (c) ` 5,00,000 (d) ` 4,80,000

20. Biomed International Ltd. is developing a new production process. During the financial
year ending 31st March, 2017, the total expenditure incurred was ` 50 lakhs. This
process met the criteria for recognition as an intangible asset on 1 st December, 2016.
Expenditure incurred till this date was ` 22 lakhs. Further expenditure incurred on the
process for the financial year ending 31st March, 2018 was ` 80 lakhs. As at 31st March,
2018, the recoverable amount of knowhow embodied in the process is estimated to be `
72 lakhs. This includes estimates of future cash outflows as well as inflows. The amount
of impairment loss for the year ended 31st March, 2018 is:
(a) ` 80 lakhs (b) ` 36 lakhs (c) ` 28 lakhs (d) ` 72 lakhs

21. Goodwill is a:
(a) Intangible asset (b) Fixed asset
(c) Current asset (d) Fictitious asset

22. The most popular method of valuation of goodwill in case of death of a partner is:
(a) Purchase of past Profit Method
(b) Capitalization Method
(c) Purchase of supper Profit Method
(d) Annuity Method

23. A business is having adjusted net profits of ` 1,00,000 and capital employed ` 6,00,000.
If goodwill is taken at 3 years purchase of super profits and the expected rate of return
is 10% the value of goodwill win be:
(a) ` 60,000 (b) ` 1,20,000 (c) ` 3,00,000 (d) ` 5,00,000

24. The method of valuation of shares are:

(a) 3 (b) 4 (c) 5 (d) 6

Mob No - 8007916622/33 19.4

VALUATION OF SHARES, BUSINESS & INTANGIBLE ASSETS UNIQUE ACADEMY
25. Intrinsic value of share can be determined by:
(a) Fair value Method (b) Yield value Method
(c) Net Assets Method (d) Through SEBI

26. In comparison to face value, the valuation of shares are usually:

(a) More (b) Less (c) Equal (d) Less and more

27. Valuation of shares is compulsory:

(a) On amalgamation (b) on absorption
(c) On reconstruction (d) on all the above

28. In view of investor, the most appropriate method of valuation of share is:
(a) Net Assets Method (b) Yield Value Method
(c) Both (a) and (b) (d) None of these

29. Intrinsic value of shares is determined:

(a) On the basis of net Assets (b) On the basis of income
(c) On the basis of market price (d) By speculators

30. For calculating net assets the deductible liability is:

(a) General Reserve (b) Loan
(c) Preference Capital (d) Equity Capital

31. On dividend net assets by number of shares, the value of share is called:
(a) Intrinsic value (b) Book value
(c) Cost price (d) Market price

32. Goodwill is
(a) an intangible asset (b) a fixed asset
(c) realizable (d) all of the above

33. Goodwill is to be valued when

(a) Amalgamation takes place.
(b) One company takes over another company.
(c) A partner is admitted.
(d) All of the above.

34. Goodwill is paid for obtaining

(a) Future benefit (b) present benefit
(c) Past benefit (d) none of the above
Mob No - 8007916622/33 19.5
VALUATION OF SHARES, BUSINESS & INTANGIBLE ASSETS UNIQUE ACADEMY
35. Super profit is
(a) Excess of average profit over normal profit.
(b) Extra profit earned.
(c) Average profit earned by similar companies.
(d) None of the above.

36. Normal profit is

(a) Average profit earned.
(b) Profit earned by similar companies in the same industry.
(c) (a) and (b).
(d) None of the above.

37. Normal profit depends on

(a) Normal Rate of Return (b) Average capital employed
(c) Both (a) and (b) (d) None of the above

38. Goodwill as per purchase of average profit method is equal to

(a) Average Profit
(b) Average Profit  Amount of purchases
(c) Average Profit  Number of years’ purchases
(d) All of the above

39. Goodwill as per purchase or super profit method is equal to

(a) Super Profit
(b) Super Profit  Amount of purchases
(c) Super Profit  Number of year’s purchases
(d) None of the above

40. Normal Rate of Return depends on

(a) Rate of Interest (b) Rate of Risk
(c) Both (a) and (b) (d) None of the above

41. While calculating capital employed ,

(a) Tangible trading assets should be considered.
(b) Intangible assets should be considered.
(c) Fictitious assets should be considered.
(d) None of the above.

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VALUATION OF SHARES, BUSINESS & INTANGIBLE ASSETS UNIQUE ACADEMY
42. Any non-trading income included in the profit should be
(a) eliminated (b) added
(c) ignored (d) none of the above

43. Under capitalization of super profit method, Goodwill is equal to

(a) Capitalized value of super profit at NRR
(b) Capitalized value of maintained profit
(c) (a) and (b)
(d) None of the above

44. Capital employed at the end of the year is ` 4,20,000. Profit earned ` 40,000. Average
capital employed is:
(a) ` 4,20,000 (b) ` 4,00,000 (c) ` 4,40,000 (d) ` 4,60,000

45. Rate of interest is 11% and the rate of risk is 9%. The normal rate of return is
(a) 11% (b) 9% (c) 20% (d) 2%

46. Capital employed at the beginning of the year is ` 5,20,000 and the profit earned
during the year is ` 60,000. Average capital employed during the year is
(a) ` 5,50,000 (b) ` 5,20,000 (c) ` 5,80,000 (d) ` 4,60,000

47. Average profit is ` 19,167 and normal profit is ` 10,000. The Super Profit is
(a) ` 9,167 (b) ` 29,167 (c) ` 19,167 (d) ` 10,000

48. Capital employed is ` 50,000. Trading Profit amounted to ` 12,200, ` 15,000 and `
2,000 loss for 2008, 2009 and 2010 respectively. Rate of interest is 8% and the rate of
risk is 2%. Remuneration from alternative employment of the proprietor is ` 3,600 p.a.
Amount of Goodwill at 3 years’ purchase of Super Profit is
(a) ` 8,000 (b) ` 8,800 (c) ` 8,850 (d) ` 9,500

49. Shares are to be valued on

(a) Mergers (b) Sale of shares
(c) Gift tax (d) All of the above

50. Quoted shares are those shares which are

(a) listed on the stock exchange (b) quoted daily
(c) quoted by the seller (d) quoted by the buyer

Mob No - 8007916622/33 19.7

VALUATION OF SHARES, BUSINESS & INTANGIBLE ASSETS UNIQUE ACADEMY
51. Under net asset method, value of a share depends on
(a) Net assets available to equity shareholders
(b) Net assets available to debentures holders
(c) Net assets available to preference shareholders
(d) None of the above

52. Net asset value is also called as

(a) assets backing value (b) intrinsic value
(c) liquidation value (d) (a), (b) and (c)

53. While deciding net asset value, fictitious assets

(a) should be considered (b) should not be considered
(c) added to total assets (d) none of the above

54. Net asset value method is based on the assumption that the company is
(a) a going concern (b) going to be liquidated
(c) (a) and (b) (d) none of the above

55. Yield value depends on

(a) future maintainable profit (b) paid-up equity capital
(c) normal rate of return (d) none of the above

56.F.M.P. for yield valuation is

(a) Future profit
(b) Profit that would be available to equity shareholders
(c) Past profit
(d) None of the above

57. Yield value is based on the assumption that:

(a) The company is going concern (b) The company will be liquidated
(c) The company is sick (d) none of the above

58. Fair value of a share is equal to:

(a) Intrinsic value only (b) Yield value only
(c) Average of intrinsic and yield value (d) none of the above

59. Value of a partly paid equal share is equal to

(a) Value of full paid share calls unpaid per share
(b) Calls in arrears per share
(c) Paid-up value per share
(d) None of the above
Mob No - 8007916622/33 19.8
VALUATION OF SHARES, BUSINESS & INTANGIBLE ASSETS UNIQUE ACADEMY
60. Following details are extracted from the records of a company:
`
2000 9% Preference Shares of ` 100 each. 2,00,000
50,000 Equity shares of ` 10 each, ` 8 per share paid up. 4,00,000
Expected Profit. 2,18,000
Tax Rate. 40%
Transfer to general reserve. 20%
Normal rate of earning. 15%
Yield value per share is
(a) ` 15 (b) ` 11.55 (c) ` 16 (d) ` 17.50

61. Gross assets are 1,01,000, fictitious assets ` 350 are included in the gross assets.
External liabilities are ` 7,500. 6% preference share capital is ` 45,000. Equity capital
is 4,500 equity shares of ` 10 each fully paid. Average expected profit is ` 8,500.
Transfer to reserves is 10% preference dividend is payable. NRR is 9%. The Net Asset
Value Per share is:
(a) ` 11 (b) ` 10.70 (c) ` 15 (d) ` 20

62. The company earns a net profit of ` 24,000 with a capital of ` 1,20,000. The NRR is
10%. Under capitalization of super profit, goodwill will be _
(a) ` 1,20,000 (b) ` 70,000 (c) ` 12,000 (d) ` 24,000

63. Average capital employed ` 14,00,000.

Net Profit 2011 2,50,000
2012 1,00,000 (loss)
2013 4,50,000
NRR 10%
Goodwill at 3 years’ purchase of super profit will be
(a) 1,80,000 (b) 1,50,000 (c) 1,20,000 (d) 90,000

Mob No - 8007916622/33 19.9

VALUATION OF SHARES, BUSINESS & INTANGIBLE ASSETS UNIQUE ACADEMY
64.
Equity shares of ` 10 each 22,00,000
15% Preference shares of ` 100 each 18,00,000
40,00,000

Average Net Profit 10,50,000

NRR 20%

Net tangible assets are revalued by ` 2,00,000 more than the amounts at which they are
stated in the books. Super Profit of the company will be:
(a) ` 2,00,000 (b) ` 2,10,000
(c) ` 2,50,000 (d) ` 2,70,000

ANSWER KEYS

1 2 3 4 5 6 7 8 9 10
(b) (a) (b) (d) (b) (a) (d) (c) (a) (a)
11 12 13 14 15 16 17 18 19 20
(a) (b) (c) (d) (c) (a) (d) (a) (a) (b)
21 22 23 24 25 26 27 28 29 30
(d) (a) (b) (a) (c) (a) (d) (b) (a) (b)
31 32 33 34 35 36 37 38 39 40
(a) (d) (d) (a) (a) (b) (c) (c) (c) (c)
41 42 43 44 45 46 47 48 49 50
(a) (a) (a) (b) (c) (a) (a) (c) (d) (a)
51 52 53 54 55 56 57 58 59 60
(a) (d) (b) (b) (d) (b) (a) (c) (a) (b)
61 62 63 64
(b) (a) (a) (b)

Mob No - 8007916622/33 19.10

INDIAN ACCOUNTING STANDARDS (IND AS) 102 UNIQUE ACADEMY

20 INDIAN ACCOUNTING STANDARDS (IND AS) 102

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. Cash/assets provided in terms of a Long-term incentives which are not based on the
fair value of group equity instruments are:
(a) Outside Ind AS-102 scope – they are typically Ind AS 19 ‘Other long-term employee
benefits’.
(b) Very much within the scope of Ind AS-102.
(c) Both (a) and (b)
(d) None of the above.

2. Which of the following transactions involving the issuance of shares does not come
within the definition of a “share-based” payment under IND AS 102?
(a) Employee share purchase plans.
(b) Employee share option plans.
(c) Share-based payment relating to an acquisition of a subsidiary.
(d) Share appreciation rights.

3. An entity issues shares as consideration for the purchase of inventory. The share were
issued on January 1, 2017. The inventory is eventually sold on December 31, 2018. The
value of the inventory on January 1, 2017, was ` 3million. This value was unchanged
up to the date of sale. The sale proceeds were ` 5 million. The share issued have a
market value of 3.2 million. Which of the following statements correctly describes the
accounting treatment of this share based payment transaction?
(a) Equity is increased by ` 3million, inventory is increased by ` 3 million; the inventory
value is expensed on sale on December 31, 2018.
(b) Equity is increased by ` 3.2 million, inventory is increased by ` 3.2 million; the
inventory value is expensed on sale on December 31, 2018.
(c) Equity is increased by ` 3 million, inventory is increased by ` 3 million; the inventory
value is expensed over the two years to December 31, 2018.
(d) Equity is increased by ` 3.2 million, inventory is increased by ` 3.2 million; the
inventory value is expensed over the two years to December 31, 2018.

4. Entity A is an unlisted entity, and its shares are owned by two directors. The directors
have decided to issue 100 share options to an employee in lieu of many years’ service.
However, the fair value of the share options cannot be reliably measured as the entity
Mob No - 8007916622/33 20.1
INDIAN ACCOUNTING STANDARDS (IND AS) 102 UNIQUE ACADEMY
operates in a highly specialized market where there are no comparable companies. The
exercise price is ` 10 per share, and the option were granted on January 1, 2014, when
the value of the shares was also estimated at ` 10 per share. At the end of the financial
year, December 31, 2014, the value of the shares was estimated at ` 15 per share and
the options vested on that date. What value should be placed on the share options
issued to the employee for the year ended December 31, 2014?
(a) ` 1,000 (b) ` 1,500 (c) ` 500 (d) ` 250

5. Volcano, a public limited company, has granted share options to its employees prior to
the date from which IND AS 102 became applicable (November 7, 2016). The company
decided after the issuance of IND AS 102 to reprice the options. The original exercise
price of ` 20 was repriced at ` 15 per option. IND AS 102 would require the company
to:
(a) Applying the Standard to the share options from the original grant date and ignore the
repricing.
(b) Apply the Standard to the share options from the original grant date, taking into account
the repriced award.
(c) Apply the Standard to the repriced award only.
(d) Ignore the Standard for the whole award of share options.

6. For equity settled share based payment transactions, the entity shall measure the goods
or services received and the corresponding increase in equity directly at the
of the goods or services received unless that it cannot be estimated reliably.
(a) Amortised cost (b) Fair value
(c) Net Book value (d) Historical cost

7. For a share based transaction in which the terms of the arrangement provide an entity
with the choice of whether to settle in cash or by issuing equity instruments, the entity
shall determine whether it has to settle in cash and account for the share based
payment transaction accordingly.
(a) A future obligation (b) A contingent liability
(c) A present liability (d) A deferred liability

ANSWER KEYS

1 2 3 4 5 6 7
(a) (c) (a) (c) (c) (b) (c)

Mob No - 8007916622/33 20.2

METHOD OF VALUATION UNIQUE ACADEMY

21 METHOD OF VALUATION

MULTIPLE CHOICE QUESTIONS

In each of the following one of the alternatives is correct, indicate the correct one:

1. Risk is defined as:

(a) A variation from the actual (b) A variation from the expected
(c) A possible event (d) A possible uncertainty

2. Types of risks do not include:

(a) Business risks (b) Market risks
(c) Interest rate risks (d) Default risks (e) Uncertainty

3. Unsystematic risk relates to:

(a) Market risk (b) Beta
(c) Inherent risk (d) Interest rate risk (e) Inflation risk

4. What is the value of the firm usually based on?

(a) The value of debt and equity (b) The value of equity
(c) The value of debt (d) The value of assets plus liabilities

5. Portfolio management reduces:

(a) Systematic risk (b) Unsystematic risk
(c) Interest rate risk (d) Inflation risk

6. Types of risk does not include:

(a) Business Risks (b) Market Risks
(c) Interest Rate Risks (d) Uncertainities

7. Assume that the following details are given for a company:

`
Sales 1,00,000
Costs 75,000
Depreciation 20,000
Tax 35%
Change in Net Working Capital 1,000
Change in Capital Spending 10,000

Mob No - 8007916622/33 21.1

METHOD OF VALUATION UNIQUE ACADEMY
The Free Cash Flow to Firm (FCFF) for the given data would be:
(a) ` 10,000 (b) ` 12,250 (c) ` 13,500 (d) ` 15,000

8. Assume that in a stock market the CAPM is working. A company has presently beta of
0.84 and its going to finance its new project through debt. This would increase its debt /
equity ratio to 1.56 from the existing 1.26. Due to increased debt/equity ratio, the
company’s beta would:
(a) Increase (b) decrease
(c) Remain unchanged (d) nothing can be concluded

9. X Ltd.’s share beta factor is 1.40. The risk free rate of interest on government
securities is 9%. The expected rate of return on the company equity shares is 16%. The
cost of equity capital based on CAPM is:
(a) 15.8% (b) 16% (c) 18.8% (d) 9%

10.A firm current assets and current liabilities are ` 1,600 respectively. How much can it
borrow on a short-term basis without reducing the current ratio below 1.25?
(a) ` 1,000 (b) ` 1,200 (c) ` 1,400 (d) ` 1,600

11. Which of the following best describes free cash flow?

(a) Free cash flow is the amount of cash flow available for distribution to all investors after
all necessary investments in operating capital have been made.
(b) Free cash flow is the amount of cash flow available for distribution to shareholders after
all necessary investments in operating capital have been made.
(c) Free cash flow is the net change in the cash account on the balance sheet.
(d) Free cash flow is equal to net income plus depreciation.

12. Which of the following statements is correct?

(a) Actions which increase net income will always increase net cash flow.
(b) One way to increase EVA is to maintain the same operating income with less capital.
(c) One drawback of EVA as a performance measure is that it mistakenly assumes that
equity capital is free.
(d) Answer (1) and (2) are correct.

13. Which of the following statements is correct?

(a) Although some methods of estimating the cost of equity capital encounter severe
difficulties, the CAPM is a simple and reliable model that provides great accuracy and
consistency in estimating the cost of equity capital.

Mob No - 8007916622/33 21.2

METHOD OF VALUATION UNIQUE ACADEMY
(b) The DCF model is preferred over other models to estimate the cost of equity because of
the ease with which a firm’s growth rate is obtained.
(c) The bond yield-plus-risk-premium approach to estimating the cost of equity is not always
accurate but its advantages are that it is a standardized and objective model.
(d) Depreciation-generated funds are an additional source of capital and, in fact, represent the
largest single source of funds for some firms.

14. Given 12 per cent expected rate of return on a suitable market index, with a standard
deviation of 20 percent, and a risk-free rate of 8 percent, the required rate of return on
a share whose beta is 0  8 using CAPM will be:
(a) 8  80% (b) 9  60% (c) 11 20% (d) 17 60%

15. Firm Specific Risk is also called as:

(a) Market Risk (b) Non-Systematic Risk
(c) Macro Risk (d) Unavoidable Risk

16. An investment is risk free when actual returns are always the expected
returns.
(a) equal to (b) less than
(c) more than (d) depends upon circumstances

17. X Ltd. currently pays a dividend of ` 1 per share and has a share price of ` 20. If the
dividend is expected to grow @ 12% pa forever, what is firm’s required return on
equity using dividend discount model?
(a) 17.6% (b) 16.17% (c) 11.67% (d) 20%

18. Estimated fair value of an asset is based on the value of operating cash flows.
(a) current (b) discounted
(c) future (d) none of these

19. The following approach states that value of a firm is unaffected by its dividend policy:
(a) CAPM approach (b) Modigliani-Miller approach
(c) Walter’s Valuation model (d) None of the above

ANSWER KEYS
1 2 3 4 5 6 7 8 9 10
(a) (e) (e) (b) (a) (d) (b) (c) (c) (b)
11 12 13 14 15 16 17 18 19
(a) (b) (d) (c) (b) (a) (a) (b) (b)

Mob No - 8007916622/33 21.3