UNIT 1

1. In the Income and Expenditure Account, all revenue receipts are entered on the ______.
a) Left-hand side.
b) Right-hand side.
c) Liability side.
d) Asset side.
Answer b) Right-hand side.
2. In the Income and Expenditure Account, all revenues expenses are entered on the ______.
a) Left-hand side.
b) Liability side.
c) Right-hand side.
d) Asset side.
Answer a) Left-hand side.
3. The task of preparing an Income and Expenditure Account and Balance Sheet begins after the
preparation of _____.
a) Profit and Loss Account.
b) Trading Account.
c) Cash Account.
d) Trial balance.
Answer c) Cash Account.
4. In Receipts and Payments Account, cash in hand or at the bank is shown on the _____.
a) Left-hand side.
b) Right-hand side.
c) Credit side.
d) None of the options are correct.
Answer a) Left-hand side.
5. Income and Expenditure Account, generally indicates _____.
a) Cash Balance.
b) Capital Fund.
c) Net Profit / Loss.
d) Surplus / Deficit.
Answer d) Surplus / Deficit.
6. Donation received for a special purpose:
a) Should be credited to a separate account and shown in the Balance Sheet.
b) Should be shown on the Assets side of the Balance Sheet.
c) Should be credited to Income and Expenditure A/c.
d) None of the options are correct.
Answer a) Should be credited to a separate account and shown in the Balance Sheet.
7. Sale of the old newspaper is ______.
a) Revenue Receipt.
b) Asset.
c) Profit.
d) Capital receipt.
Answer a) Revenue Receipt.
8. Which of the following is an example of a Non-Profit organisation?
a) Corporations.
b) Audit Firms.
c) Insurance Companies.
d) Public Hospitals.
Answer d) Public Hospitals.
9. Surplus or profits of Non-Profit Organisations are _______.
a) It is not distributed among members.
b) Maybe or may not be distributed among members.
c) It is debited to the general fund.
d) Distributed among members.
Answer a) It is not distributed among members.
10. An Income and Expenditure Account is based on _______.
a) Accrual Basis of Accounting.
b) Mixed Basis of Accounting.
c) Management Accounting.
d) Cash Basis of Accounting.
Answer a) Accrual Basis of Accounting.

11.
Ans-a

12.
Ans- b

13.
Ans- C
14.
Ans- D

15.
Ans- B

16.
Ans- B

17.
Ans- C

18.
Ans- C

19.
Ans- D
20.
Ans- C

21.
Ans- B

22.
Ans- b

23.
Ans- A

24.
Ans- C

25.
Ans- C
26. M and N enter into a joint venture where M supplies goods worth Rs.6000 and spends Rs.300 on
expenses. N sells the entire lot for Rs.7,800 meeting selling expenses amounting to Rs.300. Profit sharing
ratio equal. N remits to M the amount due. The amount of remittance will be:
(a) Rs.6,900
(b) Rs.7,500
(c) Rs.6,300
(d) Rs.6,600
Ans- C
27. When unsold stock is taken away by a co-venturer, then account is debited:
(a) Joint Stock
(b) Joint Venture
(c) Joint e Bank Account
(d) Co – venturers capital account

Ans- D
28. A bought goods costing 2,00,000. B sold 4/5th of goods for Rs.2,50,000. Balance goods were taken
over by B at cost less 20%. Find out profit on venture:
(a) Rs.82,000
(b) Rs.90,000
(c) Rs.50,000
(d) None
Ans- A
29. Joint venture account is a
(a) Personal account
(b) Real account
(c) Nominal account
(d) None
Ans- C
30. A in joint venture with B, purchased goods costing Rs.2,00,000. B sold most of the goods for
Rs.2,80,000. Unsold material costing Rs.10,000 was taken over by A at Rs.8,000. A is entitled to get 1%
commission on purchases. B is entitled to get 2 % commission on sales, Profit on venture will be :
(a) Rs.80,000
(b) Rs.80,800
(c) Rs.81,200
(d) Rs.80,400
Ans- D
31. The parties to joint venture are called
(a) Co-venturers
(b) Partners
(c) Principal and agent
(d) Friends
Ans- A
32. When co-ventures initially contribute for a joint venture which account should be debited in case
when separate set of books are maintained:
(a) Purchases A/c
(b) Joint ventures A/c
(c) Venture’s Capital A/c
(d) Joint Bank A/c
Ans- D
33. and B enter into a joint venture to underwrite the shares of K Ltd. K Ltd. make an issue of 1,00,000
equity shares of Rs.10 each. 80% of issues are subscribed by the party. The profit sharing ratio between
A and B is 3 : 2. The balance unsubscribed shares are purchased by A and B in profit sharing ratio. How
many shares are purchased by A ?
(a) 80,000 shares
(b) 72,000 shares
(c) 12,000 shares
(d) 8,000 shares
Ans- C
34. If separate set of books is maintained and discount is received at the time of purchase of goods
then such a discount will be treated as :
(a)Income of Joint Venture hence credited to joint venture account
(b)Expense of Joint Venture hence debited to joint venture account
(c) Will not be recorded in books of account
(d) Credited to co- venturers account
Ans- A
35. X and Y enter into a joint venture. X supplied goods to Y worth Rs.70,000. X incurred expenses
amounting to Rs.6,000 on joint venture. The venture resulted in a total profit of Rs.15,000 of which their
ratio of distribution is 2 : 1. The entire sale proceeds were received by Y. Amount received by X from Y in
final settlement will be:
(a) Rs.85,000
(b) Rs.86,000
(c) Rs.80,000
(d) Rs.75,000
Ans- B
36. Memorandum joint venture account is prepared:
(a) When separate set of books is maintained
(b) When each co-venturer keeps record of all the transactions himself .
(c) When each co-venturer keeps records of their own joint venture transaction
(d) None of these
Ans- C
37. X maintains all records in his books. X spends Rs.10000 in Cash on account of joint venture. Which
account would be credited in the Books of X.
(a) Memorandum Venture
(b) Joint Venture
(c) Co – Venturers
(d) Cash
Ans- D
38. A and B enter into a joint venture sharing profits and losses equally. A bought 5000 Kg of rice @
Rs.25/Kg. B bought 1000 Kg of wheat @ Rs.30/Kg. A sold 1000 Kg of wheat @ Rs.35/Kg and B sold 5000
Kg of rice @ Rs.30/ Kg.
The profit on Joint venture will be:
(a) Rs.55,000
(b) Rs.50,000
(c) Rs.60,000
(d) Rs.30,000
Ans- D
39. Karim and Rahim enter a joint venture sharing profits in 2: I. Karim purchases goods of Rs.2,00,000
and Rahim sells goods of Rs.2,50,000. Karim gets 1% commission on purchase and Rahim gets 5%
commission on sales. Find profit on joint venture.
(a) Rs.35,500
(b) Rs.36,000
(c) Rs.34,000
(d) Rs.38,000
Ans- A
1. A company is formed by
A. Government
B. Directors
C. Promoters
D.Owners
Answer: C
2. The word limited should appear after the name of
A. Partnership
B. Registered company
C. Statutory company
D. Chartered company
Answer: B
3. Deferred shares are generally issued to:
A.Promoters
B.Government
C.General Public
D.Managing agents
Answer: A
4. The minimum members in public limited company are:
A. 4
B. 2
C. 8
D. 7
Answer: D
5. Share premium is shown in the balance sheet as an:
A. Deducted from the asset side.
B. Liability
C. Deduction in paid up capital
D. Asset
Answer: B
6. Share premium money can be used for:
A.Issue of fully paid bonus shares
B.Payment of debentures
C.Payment of dividend
D. Writing of good will
Answer: A
7. Debenture can be issued at:
A. At discount
B.At premium
C. At par
D.All of the above
Answer: D
8. How many members have to sign a memorandum of association in case of a private company?
A. Five
B. Seven
C. Two
D. Ten
Answer: C
9.The official signature of a company is called:
A. Prospectus
B. Debentures
C. Shares
D. Common seal
Answer: D
10. The company is managed by the group of persons known as:
A.Board of directors
B.Group of member
C.Team of shareholders
D.None of the above
Answer: A
11. Joint venture is a
a. Personal A/c
b. Nominal A/c
c. Real A/c
d. Memorandum A/c
Ans- B