B.A. (SOL)



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Fundamentals of Accounting


Q.1. ABC Ltd. follows the written down value method of depreciating machinery year after year
by applying the principle of
(a) Comparability.
(b) Convenience.
(c) Consistency.
(d) All of the above.

Q.2. A change in accounting policy is justified
(a) To comply with accounting standards
(b) To ensure more appropriate presentation of the financial statement of the enterprise.
(c) To comply with the law.
(d) All of the above.

Q.3. Purchases book records:
(a) All cash purchases
(b) All credit purchases of goods & assets
(c) All Credit purchases of goods in trade only.
(d) None of the above

Q.4. A Bank Reconciliation Statement is prepared to know the causes for the difference between:
(a) The balances as per cash column of Cash Book and the Pass Book
(b) The balance as per bank column of Cash Book and the Pass Book
(c) The balance as per bank column of Cash Book and balances as per cash column of Cash
(d) None of the above

Q.5. While finalizing the current year’s profit, the company realized that there was an error in the valuation of closing inventory of the previous year. In the previous year, closing inventory was valued more by Rs.50,000. As a result
(a) Previous year’s profit is overstated and current year’s profit is also overstated
(b) Previous year’s profit is understated and current year’s profit is overstated
(c) Previous year’s profit is understated and current year’s profit is also understated
(d) Previous year’s profit is overstated and current year’s profit is understated

Q.6. In the absence of any provision in the partnership agreement, profits and losses are shared
(a) In the ratio of capitals
(b) Equally
(c) In the ratio of loans given by them to the partnership firm
(d) None of the above

Q.7. Fundamental accounting assumption is
(a) Materiality
(b) Business entity
(c) Going concern
(d) Dual aspect

Q.8. Which of the following errors are not revealed by the Trial Balance?
(a) Compensating errors
(b) Errors of commission
(c) Wrong balancing of an account
(d) Wrong totalling of an account

Q.9. Which of the following are of capital nature?
(a) Purchase of goods
(b) Cost of repairs
(c) Wages paid for installation of machinery
(d) Rent of a factory

Q.10. Which of the following statement is not true?
(a) If del-credere’s commission is allowed, bad debt will not be recorded in the books of
(b) If del-credere’s commission is allowed, bad debt will be debited in consignment account
(c) Del-credere’s commission is allowed by consignor to consignee
(d) Del-credere’s commission is generally given to promote credit sales

Q.11. 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 tenure of the debentures
(d) Capital loss to be shown as goodwill

Q.12. Loss on issue of debentures is treated as ____.
(a) Intangible asset
(b) Current liability
(c) Other non-current/current assets (depending on tenure of its amortization
(d) None of the above

Q.13. Dividends are usually paid as a percentage of ____.
(a) Authorized share capital
(b) Net profit
(c) Paid-up capital
(d) Called-up capital

Q.14. At the time of death of a partner, firm gets ____ from the insurance company against the Joint Life Policy taken jointly for all the partners
(a) Policy Amount
(b) Surrender Value
(c) Policy amount or surrender value which ever is higher
(d) Policy amount or surrender value which ever is lower

Q.15. Profit or loss on revaluation is shared among the partners in ratio.
(a) Old Profit Sharing
(b) New Profit Sharing
(c) Capital
(d) Equal

Q.16. Interest on capital will be paid to the partners if provided for in the agreement but only from ____.
(a) Profits of the year
(b) Reserves
(c) Accumulated Profits
(d) Goodwill

Q.17. The owner of the consignment inventory is ____.
(a) Consignor
(b) Consignee
(c) Trade receivables
(d) None

Q.18. The parties to joint venture is called ____.
(a) Co-venturers
(b) Partners
(c) Principal & Agent
(d) Friends

Q.19. The accommodation bill is drawn ____.
(a) To finance actual purchase or sale of goods
(b) To facilitate trade transmission
(c) When both parties are in need of funds
(d) None of the above

Q.20. The number of production or similar units expected to be obtained from the use of an asset by an enterprise is called as ____.
(a) Unit life
(b) Useful life
(c) Production life
(d) Expected life

Q.21. Mr. Raj purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.
Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, Raj values the machinery at Rs. 1,20,000 in his books. Which of the following concepts was violated by Raj?
(a) Cost concept
(b) Matching concept
(c) Realisation concept
(d) Periodicity concept.

Q.22. M/s XYZ Brothers, which was registered in the year 2000, has been following Straight Line Method (SLM) of depreciation. In the current year it changed its method from Straight Line to Written Down Value (WDV) Method, since such change would result in the additional depreciation of Rs. 200 lakhs as a result of which the firm would qualify to be declared as a sick industrial unit. The auditor raised objection to this change in the method of depreciation. The objection of the auditor is justified because
(a) Change in the method of depreciation should be done only with the consent of the auditor
(b) Depreciation method can be changed only from WDV to SLM and not vice versa
(c) Change in the method of depreciation should be done only if it is required by some statute or change would result in more appropriate presentation of financial statement or for
compliance with the accounting standard
(d) Method of depreciation cannot be changed under any circumstances

Q.23. If cost of goods sold is Rs.80,700, Opening inventory Rs.5,800 and Closing inventory Rs.6,000. Then the amount of purchase will be
(a) Rs.80,500
(b) Rs.74,900
(c) Rs.74,700
(d) Rs.80,900

Q.24. Original cost = Rs. 1,26,000. Salvage value = 6,000. Useful Life = 6 years. Annual depreciation under SLM will be
(a) Rs.21,000
(b) Rs.20,000
(c) Rs.15,000
(d) Rs.14,000

Q.25. A new firm commenced business on 1st January, 2009 and purchased goods costing Rs. 90,000 during the year. A sum of Rs. 6,000 was spent on freight inwards. At the end of the year the cost of goods still unsold was Rs.12,000. Sales during the year Rs.1,20,000. What is the gross profit earned by the firm?
(a) Rs. 36,000
(b) Rs. 30,000
(c) Rs. 42,000
(d) Rs. 38,000

Q.26. B of Kolkata sends out goods costing Rs. 3,00,000 to Y of Mumbai at cost + 25%. Consignor’s expenses Rs. 5,000. 1/10th of the goods were lost in transit. Insurance claim received Rs. 3,000. The net loss on account of abnormal loss is
(a) Rs.27,500
(b) Rs.25,500
(c) Rs.30,500
(d) Rs.27,000

Q.27. R and B enter into a joint venture to sell a consignment of biscuits sharing profits and losses equally. R provided biscuits from his inventory Rs. 10,000. He paid expenses amounting to Rs. 1,000. V incurred further expenses on carriage Rs. 1,000. He received cash for sales Rs. 15,000. He also took over goods to the value of Rs. 2,000. The profit on joint venture will be
(a) Rs.3,000
(b) Rs.5,000
(c) Rs.6,000
(d) Rs.3,500

Q.28. A draws a bill on B for Rs. 20,000 for 3 months on 1.1.10. The bill is discounted with banker at a charge of Rs. 100. At maturity the bill return dishonoured. In the books of A, for dishonour, the bank account will be credited by
(a) Rs. 19,900
(b) Rs. 20,000
(c) Rs. 20,100
(d) Rs. 19,800

Q.29. X sent some goods costing Rs.3,500 at a profit of 25% on sale to Y on sale or return basis. Y returned goods costing Rs.800. At the end of the accounting period i.e. on 31st December, 2009, the remaining goods were neither returned nor were approved by him. The inventory sent on approval will be shown in the balance sheet at
(a) Rs. 2,000
(b) Rs. 2,700
(c) Rs. 2,700 less 25% of 2,700
(d) Rs. 3,500

Q.30. X and Y are partners sharing profits and losses in the ratio of 3:2 having the capital of Rs. 80,000 and Rs. 50,000 respectively. They are entitled to 9% p.a. interest on capital before distributing the profits. During the year firm earned Rs. 7,800 after allowing interest on capital. Profits apportioned among A and B is
(a) Rs. 4,680 and Rs. 3,120
(b) Rs. 4,800 and Rs. 3,000
(c) Rs. 5,000 and Rs. 2,800
(d) None of the above

Q.31. X & Y are partners sharing profits and losses in the ratio 5:3. On admission, Z brings Rs. 70,000 cash and Rs. 48,000 against goodwill. New profit sharing ratio between X, Y and Z are 7:5:4. The sacrificing ratio among X & Y will be
(a) 3:1
(b) 4:7
(c) 5:4
(d) 2:1

Q.32. The cash book showed an overdraft of Rs.1,500, 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

Q.33. A second hand car is purchased for Rs.10,000, the amount of Rs. 1,000 is spent on its repairs, Rs. 500 is incurred to get the car registered in owner’s name and Rs. 1,200 is paid as dealer’s commission. The amount debited to car account will be
(a) Rs. 10,000
(b) Rs. 10,500
(c) Rs. 11,500
(d) Rs. 12,700

Q.34. If a purchase return of Rs.84 has been wrongly posted to the debit of the sales return account, but had been correctly entered in the suppliers account, the total of the trial balance would show
(a) the credit side to be Rs.84 more than debit side
(b) the debit side to be Rs.84 more than credit side
(c) the credit side to be Rs.168 more than debit side
(d) the debit side to be Rs.168 more than credit side

Q.35. The Accountant of the firm M/s ZYZ is unable to tally the following trial balance:
S. No  Account heads Debit
1 Account heads 15,000
2 Purchases 10,000
3 Miscellaneous
4 Salaries 2,500
Total 12500 17,500
The above difference in trial balance is due to
(a) wrong placing of sales account
(b) wrong placing of salaries account
(c) wrong placing of miscellaneous expenses account
(d) wrong placing of all accounts

Q.36. A, B and C are the partners sharing profits in the ratio 7:5:4. D died on 30th June 2009. It was decided to value the goodwill on the basis of three year’s purchase of last five years average profits. If the profits are Rs. 29,600; Rs. 28,700; Rs. 28,900; Rs. 24,000 and Rs. 26,800. C’s share of goodwill will be
(a) Rs. 20,700
(b) Rs. 27,600
(c) Rs. 82,800
(d) Rs. 27,000

Q.37. A company forfeited 2,000 shares of Rs.10 each (which were issued at par) held by Mr. Jack for non-payment of allotment money of Rs.4 per share. The called-up value per share was Rs.9. On forfeiture, the amount debited to share capital will be
(a) Rs.10,000
(b) Rs.8,000
(c) Rs.2,000
(d) Rs.18,000

Q.38. T Ltd. issued 2,000, 10% Preference shares of Rs.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 Rs.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) Rs.50,000
(b) Rs.40,000
(c) Rs.2,00,000
(d) Rs.2,20,000

Q.39. R Ltd. issued 20,000, 8% debentures of Rs.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 will be
(a) Rs.40,000
(b) Rs.10,000
(c) Rs.20,000
(d) Rs.8,000

Q.40. A sent out certain goods to B of Delhi. 1/10 of the goods were lost in transit. Invoice value of goods lost Rs 12,500. Invoice value of goods sent out on consignment will be:
(a) Rs.120,000
(b) Rs.125,000
(c) Rs.140,000
(d) Rs.100,000

Q.41. P Ltd. purchased land and building from N Ltd. for a book value of Rs.2,00,000. The consideration was paid by issue of 12% Debentures of Rs.100 each at a discount of 20%. The debentures account will be credited with
(a) Rs.2,60,000
(b) Rs.2,50,000
(c) Rs.2,40,000
(d) Rs.1,60,000

Q.42. K Ltd. issued shares of Rs.10 each at par. Mr. D purchased 30 shares and paid Rs.2 on application but did not pay the allotment money of Rs.3. If the company forfeits his entire shares, the forfeiture account will be credited by
(a) Rs.90
(b) Rs.81
(c) Rs.60
(d) Rs.54

Q.43. X, Y and Z are partners sharing profits and losses in the ratio 9:4:3. The firm took separate life policy of Rs. 25,000 for A, Rs. 20,000 for B and Rs. 51,000 for Z. What is the share of Z in the policy amount?
(a) Rs. 18,000
(b) Rs. 25,000
(c) Rs. 51,000
(d) Rs. 20,000

Q.44. X and Y are partners sharing profits and losses in the ratio of 3:2 (A’s Capital is Rs.30,000 and Y’s Capital is Rs.15,000). They admitted C and agreed to give 1/5th share of profits to him. How much Z should bring in towards his capital?
(a) Rs. 9,000
(b) Rs. 12,000
(c) Rs. 14,500
(d) Rs. 11,250

Q.45. X and Y are partners with the capital Rs. 50,000 and Rs. 40,000 respectively. They share profits and losses equally. Z is admitted on bringing Rs. 50,000 as capital only and nothing was brought against goodwill. Goodwill valued as Rs. 35,000 which was adjusted through the Capital accounts of the partners. What will be value of goodwill in the books after the admission of Z?
(a) Rs. 55,000
(b) NIL
(c) Rs. 20,000
(d) Rs. 15,000

Q.46. A, B and C are partners in a firm. At the time of division of profit for the year there was dispute between the partners. Profits before interest on partner’s loan was Rs. 6,000 and B determined interest @ 24% p.a. on his loan of Rs. 80,000. There was no agreement on this point. Calculate the amount payable to A, B and C respectively.
(a) Rs. 2,000 to each partner
(b) Loss of Rs. 4,400 for A and C & B will take home Rs. 14,800
(c) Rs. 400 for A, Rs. 5,200 for B and Rs. 400 for C
(d) Rs. 2,400 to each partner

Q.47. A merchant sends out his goods casually to his dealers on approval basis. All such transactions are, however, recorded as actual sales and are passed through the sales book. On 31-12- 2009, it was found that 100 articles at a sale price of 200 each sent on approval basis were recorded as actual sales at that price. The sale price was made at cost plus 25%. The value of inventory on approval will be amounting
(a) Rs.16,000
(b) Rs. 20,000
(c) Rs.15,000
(d) None of the above

Q.48. X draws a bill on Y for Rs 30,000. A wants to endorse it to Z in settlement of Rs 35,000 at 2% discount with the help of Y’s acceptance and balance in cash. How much cash X will pay to Y?
(a) Rs.4,300
(b) Rs.4,000
(c) Rs.4,100
(d) Rs.5,000

Q.49. X and Y enter into a joint venture for purchase and sale of Type-writer. X purchased Typewriter costing Rs. 1,00,000. Repairing expenses Rs. 10,000, printing expenses Rs. 10,000. Y sold it at 20% margin on selling price. The sales value will be:
(a) Rs. 1,25,000
(b) Rs. 1,50,000
(c) Rs. 1,00,000
(d) Rs. 1,40,000

Q.50. R of Faridabad sent out goods costing Rs. 45,000 to Z of Delhi at cost + 331/3%. 1/10th of goods were lost in transit. 2/3rd of the goods received are sold at 20% above invoice price. The amount of sale value will be:
(a) Rs.54,000
(b) Rs.43,200
(c) Rs.60,000
(d) Rs.36,000

Q.51. Rent paid on 1st October, 2008 for the year to 30th September, 2009 was Rs. 1,200 and rent paid on 1st October, 2009 for the year to 30th September, 2010 was Rs. 1,600. Rent paid, as shown in the profit and loss account for the year ended 31st December 2009, would be:
(a) Rs. 1,200
(b) Rs. 1,600
(c) Rs. 1,300
(d) Rs. 1,500

Q.52. K Ltd. purchased a machinery on April 01, 2005 for Rs.3,00,000. It is estimated that the machinery will have a useful life of 5 years after which it will have no salvage value. If the company follows sum-of-the-years’ digits method of depreciation, the amount of depreciation charged during the year 2009-2010 was
(a) Rs.1,00,000
(b) Rs.80,000
(c) Rs.60,000
(d) Rs.20,000

Q.53. If Average inventory = Rs. 12,000. Closing inventory is Rs. 3,000 more than opening inventory then the value of closing inventory will be
(a) Rs. 12,000
(b) Rs. 24,000
(c) Rs. 10,500
(d) Rs. 13,500

Q.54. 54. U Ltd. maintains the inventory records under perpetual system of inventory. Consider the following data pertaining to inventory of U Ltd. held for the month of March 2010:
Date Particulars Qty Cost per
unit (Rs.)
Mar. 1 Opening Inventory 15 400
Mar. 4 Purchases 20 450
Mar. 6 Purchases 10 460
If the company sold 32 units on March 24, 2010, closing inventory under FIFO method is
(a) Rs.5,200
(b) Rs.5,681
(c) Rs.5,800
(d) Rs.5,950.

Q.55. Debit balance as per Cash Book of XYX Enterprises as on 31.3.2012 is Rs. 1,500. Cheques deposited but not cleared amounts to Rs.100 and Cheques issued but not presented of Rs. 150. The bank allowed interest amounting Rs.50 and collected dividend Rs. 50 on behalf of XYZ Enterprises. Balance as per pass book should be
(a) Rs. 1,600
(b) Rs. 1,450
(c) Rs. 1,850
(d) Rs. 1,650

Q.56. If a purchase return of Rs.1,000 has been wrongly posted to the debit of the sales returns account, but has been correctly entered in the suppliers’ account, the total of the
(a) trial balance would show the debit side to be Rs.1,000 more than the credit
(b) trial balance would show the credit side to be Rs.1,000 more than the debit
(c) the debit side of the trial balance will be Rs.2,000 more than the credit side
(d) the credit side of the trial balance will be Rs.2,000 more than the debit side

Q.57. If repair cost is Rs.25,000, whitewash expenses are Rs. 5,000, cost of extension of building is Rs.2,50,000 and cost of improvement in electrical wiring system is Rs. 19,000; the amount to be expensed is
(a) Rs. 2,99,000
(b) Rs. 44,000
(c) Rs. 30,000
(d) Rs. 49,000

Q.58. Magic Tours has Rs. 3,500 account receivable from Rohan. On January 20, the later makes a partial payment of Rs. 2,100 to Magic Tours. The journal entry made on January 20 by Magic Tours to record this transaction includes:
(a) A credit to the cash received account of Rs.2,100
(b) A credit to the Accounts receivable account of Rs.2,100
(c) A debit to the cash account of Rs.1,400
(d) A debit to the Accounts receivable account of Rs.1,400

Q.59. A company forfeited 1,000 shares of Rs. 20 each (which were issued at par) held by Mr. Rohan for non-payment of allotment money of Rs. 8 per share. The called-up value per share was Rs. 18. On forfeiture, the amount debited to share capital will be
(a) Rs. 10,000
(b) Rs. 8,000
(c) Rs. 2,000
(d) Rs. 18,000

Q.60. X, Y and Z are partners sharing profits in the ratio 2:2:1. On retirement of Y, goodwill was valued as Rs. 30,000. Contribution of X and Z to compensate Y will be
(a) Rs. 20,000 and Rs. 10,000 respectively
(b) Rs. 8,000 and Rs. 4,000 respectively
(c) They will not contribute any thing
(d) Information is insufficient for any comment

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