Question Bank | Fundamentals of Accounting

1. Meaning and Scope of Accounting - Quiz

1. At the end of the financial year, Mr. X earns a profit of Rs.57,000 in his business. This is
a) A transaction
b) An event
c) A transaction as well as an event
d) Neither a transaction nor an event

2. Users of accounting information include
a) Trade payables/ Suppliers
b) Lenders.
c) Customers.
d) all of the above.

2. Accounting Concepts, Principles and Conventions - Quiz

1. If nothing is written in the financial statements about the fundamental accounting assumptions, then it could be presumed that:-
a) They have not been followed
b) They have been followed
c) They have been followed to some extent
d) None of the above

2. The concept of conservatism when applied to the balance sheet results in
a) Understatement of assets.
b) Overstatement of assets.
c) Overstatement of capital.
d) None of the above.

3. Accounting as a Measurment Discipline - Quiz

1. Change in Accounting estimate means:
a) Difference arising between certain parameters estimated earlier and re-estimated during the current period.
b) Difference arising between certain parameters estimated earlier and actual results achieved during current period.
c) Difference arising between certain parameters during the current period and actual results achieved during the previous period.
d) Both (a) and (b)

2. Money is a measurement scale and has universal denomination:
a) True
b) Partly True
c) False
d) Can’t Say

4. Accounting Policies - Quiz

1. Accounting policies refer to specific accounting
a) Principles.
b) Methods of applying those principles.
c) Both (a) and (b).
d) None of the above.

2. Accounting policy for inventories of Xeta Enterprises states that inventories are valued at the lower of cost determined on weighted average basis or not realizable value. Which accounting principle in followed in adopting the above policy?
a) Materiality.
b) Prudence.
c) Substance over form.
d) All of above.

5. Accounting Standards - Quiz

1. Which of the following provide framework and accounting policies so that the financial statements of different enterprise become comparable ?
a) Business standards
b) Accounting standards
c) Market standards
d) None of the above.

2. 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 Institutions
d) Is still in use.

6. Journal Entries - Quiz

1. “Machinery sold for Rs. 30,000 on credit.” In which subsidiary book this transaction will be recorded?
a) Sales Register
b) Cash Book
c) Journal
d) No Entry will be made.

2. Accounts receivable is :
a) Revenue
b) Expense
c) Asset
d) Liability

7. Ledgers - Quiz

1. What will be the Journal Entry when goods purchased are returned?
a) Creditors A/c Dr.
To Purchase Returns A/c
b) Purchase Return A/c Dr.
To Creditors A/c
c) Creditors A/c Dr.
To Sales A/c
d) None of these.

2. What will be the total sales of the year 2008-09 for A Limited, if they provided following information:
Cash sales Rs.80,000
Cash collected from debtors Rs.1,50,000
Bad debts during the year Rs.10,000
Debtors at 1st April, 2008 Rs.15,000
Debtor at 31st March, 2009 Rs.10,000
a) Rs. 2,35,000
b) Rs. 2,30,000
c) Rs. 2,40,000
d) Rs. 2,25,000

8. Trial Balance - Quiz

1. A list which contains balances of accounts to know whether the debit and credit balances are matched.
a) Balance sheet
b) Day Book
c) Journal
d) Trial balance

2. Closing stock in the trial balance implies that.
a) It is already adjusted in the opening stock.
b) It is adjusted in sales a/c
c) It is adjusted in the purchase a/c
d) None of these.

9. Subsidiary Books - Quiz

1. The debit note issued are used to prepare
a) Sales return book
b) Purchase Return Book
c) Sales book
d) Purchases book

2. Purchase goods from E worth Rs. 5,000 on credit basis.
a) Bills Receivable book
b) Purchases book
c) Journal Proper (General journal)
d) Purchases Return

10. Capital and Revenue Expenditures and Receipts - Quiz

1. A bad debt recovered during the year.
a) Capital expenditures
b) Revenue expenditures
c) Capital receipt
d) Revenue receipt

2. Which of the following is a revenue expenditure ?
a) Freight paid on purchase of plant and machinery
b) Legal expenses paid to acquire a property
c) Annual white wash of the factory building
d) Expenses incurred to reduce working capital requirement

11. Cash Book - Quiz

1. The Cash Book records
a) All cash payments
b) All cash payments
c) All cash receipts and payments
d) Cash and credit sale of goods.

2. The total of discounts column on the debit side of the cash book, recording cash discount deducted by customers when paying their accounts, 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.

12. Contingent Assets and Contingent Liabilities - Quiz

1. Bill discounted with a bank is ___________.
a) Contingent liability
b) Current liability
c) Current Asset
d) None of these

2. Contingent asset usually arises from unplanned or unexpected events that give rise to
a) The possibility of an inflow of economic benefits to the business entity.
b) The possibility of an outflow of economic benefits to the business entity.
c) Either (a) or (b)
d) None of the above.

13. Sale of Goods on Approval or Return Basis - Quiz

1. When a large number of articles are sent on a sale or return basis, It is necessary to maintain:
a) Sale Journal
b) Goods Returned journal
c) Sale or Return journal
d) Any of these

2. Under sales on return on approval basis, when transactions are few, the seller, while sending the goods, treats them as
a) An ordinary sale but no entry is passed in the books
b) An ordinary sale and entry for normal sale is passed in the books
c) Approval sale and no entry is passed
d) None of the above

14. Rectification of Errors - Quiz

1. Purchase of office furniture Rs. 1,200 has been debited to General Expense Account. It is:
a) A Clerical error;
b) An error of principle;
c) An error of omission
d) Compensating error;

2. A Machine was Purchased for Rs. 3,000 which was wrongly recorded in Purchase A/c. due to this error :
a) Trial Balance will show difference by Rs. 3,000
b) Trial Balance will not show difference by Rs. 3,000
c) Both (a) and (b)
d) None

15. Bank Recouncilation Statement - Quiz

1. The cash book showed an overdraft of Rs. 1,500 as cash at bank, but the pass book made up to the same date showed that cheques of Rs. 100, Rs. 50 and Rs. 125 respectively had not been presented for payments; and the cheque of Rs. 400 paid into account had not been cleared. The balance as per the pass book will be
a) Rs. 1,100
b) Rs. 2,175
c) Rs. 1,625
d) Rs. 1,375

2. Unfavourable bank balance means :
a) Credit balance in Cash Book
b) Credit balance in Pass Book
c) Debit balance in Cash Book
d) Favourable balance in Cash Book

16. Inventories - Quiz

1. In case goods are manufactured and segregated for specified consumers, the best method for valuation of inventory would be:
a) FIFO
b) LIFO
c) Base Stock
d) Specific Identification

2. Consider the following data pertaining to R Ltd. for the month of June 2011:
Particulars Rs.

Opening stock 30,000
Closing stock 40,000
Purchases 5,60,000
Returns outward 15,000
Returns inward 20,000
Carriage inward 5,000
If the gross profit is 20% of net sales, the gross sales for the month of June 2011 is

a) Rs. 6,95,000
b) Rs. 6,75,000
c) Rs. 5,40,000
d) Rs. 6,68,750

17. Depreciation Accounting - Quiz

1. On 01.01.2001, a new plant was purchased by Mrs. Shweta Periwal for Rs. 1,00,000 and a further sum of R.s 5,000 was spent on installation. On 01.06.2002, another plant was acquired for Rs. 65,000. On 02.01.2003, the first plant was totally destroyed and the amount of Rs. 2,500 only was realized by selling the scraps. It was not insured. On 20.10.2003, a second hand plant was purchased for Rs. 75,000 and a further sum of Rs. 7,500 was spent for repairs and Rs. 2,500 on its erection. It came into use on 15.11.2003. Depreciation has been provided @ 10% on the original cost annually on 31st December. It was the practice to provide depreciation for full year on all acquisitions made at any time during the year and to ignore the depreciation on any time sold during the year. In December 2003, it is decided to change the method of depreciation and to follow the rate of 15% on diminishing balance method with retrospective effect in respect of the existing items of plant and to make necessary adjustments on 31.12.2003.
Profit / Loss on Plant sold = __________.
a) Rs. 71,500 (profit)
b) Rs. 71,500 (loss)
c) Rs. 81,500 (profit)
d) Rs. 81,500 (loss)

2. On 1st January, 2006 A Ltd. purchased a machine for Rs. 50,000 and spent Rs. 4000 on its carriage and Rs. 2000 on its installation. Its useful life is 10 years and scrap value is Rs. 6,000. Depreciation for the year under fixed installment method will be :
a) Rs. 4,600
b) Rs. 5,000
c) Rs. 4,800
d) Rs. 4,500

18. Final Accounts - Quiz

1. Goods worth Rs. 10,000 was destroyed by fire and insurance company admitted the claim of 60%. The accounting entry for above transaction would be:
a) Loss by Fire A/c Dr. Rs. 10,000
To Purchase A/c Rs. 4,000
To Insurance Co. A/c Rs. 6,000
b) Loss by Fire A/c Dr. Rs. 10,000
To Purchase A/c Rs. 6,000
To Insurance Co. A/c Rs. 4,000
c) Loss by Fire A/c Dr. Rs. 6,000
Insurance Co. A/c Dr. Rs. 10,000
d) Loss by Fire A/c Dr. Rs. 4,000
Insurance Co. A/c Dr. Rs. 6,000
To Purchase A/c Rs. 10,000

2. Baba’s Balance sheet as at 31st March, 2008 shows Rs. 6,800 as rent payable. His cash book shows total payment towards Rent Rs. 50,000 during the year ending 31st March 2009 Rent payable as at 31st March, 2009 is Rs. 5,000. Which of the following amount should go to his Profit & Loss A/c as rent.
a) Rs. 61,800
b) Rs. 48,200
c) Rs. 55,000
d) Rs.6,800

19. Consignment - Quiz

1. Goods costing Rs. 2,00,000 sent out to consignee at Cost + 25%. Invoice value of the goods will be:
a) Rs. 2,50,000
b) Rs. 2,40,000
c) Rs. 3,00,000
d) None

2. X of Kolkata sends out 100 boxes to Y of Delhi costing Rs. 100 each. Consignor’s expenses Rs. 1,000. Consignee's expenses selling Rs. 500. 3/5^th of the goods sold by consignee, ½ of the balance goods were lost in consignee’s godown due to fire. The value of abnormal loss will be:
a) Rs. 3,000
b) Rs. 2200
c) Rs. 4,000
d) None

20. Joint Ventures - Quiz

1. Which of the following methods of valuation of closing stock is followed in joint venture accounting?
a) Net realizable value
b) Cost price
c) Least of cost or Net realizable
d) None of these

2. Which of the following statement is true?
a) Only one venture bears the risk
b) Only one venture can sell the goods
c) Only one venture can purchase the goods
d) In joint venture, provisions of partnership act applies

21. Bills of Exchange and Promissory Notes - Quiz

1. A draws a bill for Rs. 15,000 which is accepted by B. They agree to share the proceeds in the ratio of 3:2. A discounts the bill with the bank at 10% p.a., maturity 2 months. What amount will be remitted by A to B after discounting the bill?
a) Rs. 6,000
b) Rs. 7,500
c) Rs. 5,900
d) Rs.7,375

2. A bill not paid by drawee on due date is called ___________.
a) Noting of bill
b) Dishonour of bill
c) Renewal of bill
d) Discounting of bill

22. Introduction to Partnership Accounts - Quiz

1. If there is no partnership deed then interest on capital will be charged at ……….p.a.
a) 6%
b) 8%
c) 9%
d) Nil

2. Interest on drawings is treated as:
a) Revenue
b) Expense
c) Liability
d) None of these.

23. Treatment of Goodwill in Partnership Accounts - Quiz

1. A, B and C are equal partners. D is admitted to the firm for one-fourth share. D brings Rs. 20,000 capital and R.s 5,000 being half of the premium for goodwill. The value of goodwill of the firm is
a) Rs. 10,000
b) Rs. 40,000
c) Rs. 20,000
d) None of the above

2. A and B are partners with capitals of Rs. 10,000 and Rs. 20,000 respectively and sharing profits equally. They admitted C as their third partner with one-fourth profits of the firm on the payment of Rs. 12,000. The amount of hidden goodwill is:
a) Rs. 6,000
b) Rs. 10,000
c) Rs. 8000
d) None of the above

24. Admission of New Partner - Quiz

1. A and B, who share profit and losses in the ratio of 3:2 has the following balances: Capital of A Rs. 50,000; Capital of B Rs. 30,000; Reserve Fund R.s 15,000. They admit C as a partner, who contributes to the firm Rs. 25,000 for 1/6th share in the partnership. If C is to purchase 1/6th share in the partnership from the existing partners A and B in the ratio of 3:2 for Rs. 25,000, find closing capital of C.
a) Rs. 25,000
b) Rs. 19,000
c) Rs. 20,000
d) Rs. 18,000

2. A and B share profits in the ratio of 3:2. A’s capital is Rs. 48,000 B’s capital is Rs. 32,000. C is admitted for 1/5th share in profits. What is the amount of capital which C should bring?
a) Rs. 20,000
b) Rs. 16,000
c) Rs. 1,00,00
d) Rs. 64,000

25. Retirement of a Partner - Quiz

1. A, B and C takes a Joint Life Policy, after five years B retires from the firm. Old profit sharing ratio is 2:2:1. After retirement A and C decides to share profits equally. They had taken a Joint Life Policy of Rs. 2,50,000 with the surrender value Rs. 50,000. What will be the treatment in the partner’s capital account on receiving the JLP amount if joint life premium is fully charged to revenue as and when paid?
a) Rs. 50,000 credited to all the partners in old ratio.
b) Rs. 2,50,000 credited to all the partners in old ratio
c) Rs. 2,00,000 credited to all the partners in old ratio
d) No treatment is required

2. Retiring or outgoing partner:
a) To be liable for firm’s liabilities
b) Not liable for any liabilities of the firm
c) Is liable for obligation incurred before his retirement
d) Is liable for obligations incurred with his consent only

26. Death of a Partner - Quiz

1. X, Y and Z are the partners sharing profits in the ratio of 7:5:4. On 30th June, 2008 Z died and profit for the year ending 31st March, 2009 were Rs. 2,40,000. How much share in profits for the period 1st April 2008 to 30th June 2008 will be credited to Z’s account assuming the profit occurred evenly throughout the year?
a) Rs. 60,000
b) Rs. 15,000
c) Rs. 20,000
d) Nil

2. Match the following items from column A with column B

Column A	Column B
1. Revaluation Account is prepared at the time of	(a) Is not surrendered at the time of retirement of a partner.
2. Joint Life Policy	(b) To settle the claim of the outgoing partner.
3. Premium on Joint Life Policy taken up on the lives of all the partners is paid by	(c) Admission of a partner.
4. The objective of taking a joint life policy by a partnership firm is	(d) Partnership firm.

a) 1-c, 2-a, 3-b, 4-d
b) 1-c, 2-a, 3-d, 4-b
c) 1-c, 2-b, 3-d, 4-a
d) 1-a, 2-c, 3-d, 4-b

27. Issue, Forfeiture and Reissue of shares - Quiz

1. When full amount is due on any call but it is not received, then the shortfall is debited to-
a) Calls in advance
b) Calls in arrear
c) Share capital
d) Suspense account

2. 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

28. Issue of Debentures - Quiz

1. F Ltd. purchased Machinery from G Company for a book value of Rs. 4,00,000. The consideration was paid by issue of 10% debentures of Rs. 100 each at a discount of 20%. The debenture account was credited with ________.
a) Rs. 4,00,000
b) Rs. 5,00,000
c) Rs. 3,20,000
d) Rs. 4,80,000

2. 5,000, 12%debentures of Rs.100 each issued as collateral security. To record this transaction which of the following entry will be passed?
a) Debit cash account and credit debentures account
b) Debit debentures suspenses account and credit debentures account.
c) Debit debentures suspense account and credit cash account.
d) No entry is required to be passed in the books of the company.

29. Redemption of Preference Shares - Quiz

1. O Ltd. has redeemed its 12% preference shares of Rs. 2,00,000 at a premium of 4%. To meet the redemption it has issued Rs. 1,98,084 worth of shares of Rs. 20 each at a premium of 5%. The balance outstanding to the credit of share premium account after adjusting premium on redemption of preference shares =?
a) Rs. Nil
b) Rs. 1,904
c) Rs. 1,432
d) Rs. 8,000

2. A Ltd. had 3,000, 12%. Redeemable preference shares of Rs. 100 each, fully paid up. The company issued 25,000 equity shares of Rs. 10 each at par and 1,000 14%. Debentures of Rs. 100 each. All amounts were received in full. The payment was made in full. The amount to be transferred to capital Redemption Reserve Account Rs.:
a) Nil
b) Rs. 2,00,000
c) Rs. 3,00,000
d) Rs. 50,000

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Fundamentals of Accounting [CA - CPC]

Class/Course - CA - CPC

Subject - Fundamentals of Accounting

Total Number of Question/s - 4416