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Fundamentals of Accounting


Q.1. Which of the following is not a sub-field of accounting?
(a) Management accounting
(b) Cost accounting
(c) Financial accounting
(d) Book-keeping

Q.2. Revenue from sale of products, is generally, realized in the period in which
(a) Cash is collected
(b) Sale is made
(c) Products are manufactured
(d) None of the above

Q.3. The determination of expenses for an accounting period is based on the principle of
(a) Objectivity
(b) Materiality
(c) Matching
(d) Entity

Q.4. It is essential to standardize the accounting principles and policies in order to ensure
(a) Transparency
(b) Consistency
(c) Comparability
(d) All of the above

Q.5. Change in accounting estimate means
(a) Differences arising between certain parameters estimated earlier and re-estimated during the current period.
(b) Differences arising between certain parameters estimated earlier and actual results achieved during the current period.
(c) Differences arising between certain parameters re-estimated during the current period and actual results achieved during the current period.
(d) Both (a) and (b).

Q.6. Which account is the odd one out?
(a) Office Furniture & Equipment
(b) Freehold Land and Buildings
(c) Inventory of raw materials
(d) Plant and Machinery

Q.7. In Double Entry System of Book-keeping every business transaction affects:
(a) Two accounts
(b) Two sides of the same account
(c) The same account on two different dates
(d) All of the above

Q.8. Which of the following types of information are found in subsidiary ledgers, but not in the general ledger?
(a) Total cost of goods sold for the period
(b) The quantity of a particular product sold during the period
(c) The amount owed to a particular seller
(d) The portion of total current assets that consist of cash

Q.9. Contra entries are passed only when
(a) Double column cash book is prepared
(b) Three-column cash book is prepared
(c) Simple cash book is prepared
(d) None of the above

Q.10. The preparation of a trial balance is for:
(a) Locating errors of complete omission;
(b) Locating errors of principle;
(c) Locating clerical errors.
(d) All of the above

Q.11. Present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation, is termed as ____.
(a) Provision
(b) Liability
(c) Contingent liability
(d) None of the above

Q.12. When preparing a Bank Reconciliation Statement, if you start with a debit balance as per the Cash Book, then cheques issued but not presented within the period are ____.
(a) Added
(b) Deducted
(c) Not required to be adjusted
(d) None of the above

Q.13. Under inflationary conditions, _____ method will show highest value of closing inventory?
(a) FIFO
(b) LIFO
(c) Weighted Average
(d) None of the above

Q.14. In the case of downward revaluation of an asset, which is for the first time revalued, account is debited.
(a) Fixed Asset
(b) Revaluation Reserve
(c) Profit & Loss account
(d) General Reserve

Q.15. The portion of the acquisition cost of the asset, yet to be allocated to Profit and Loss Account is known as ____.
(a) Book value
(b) Accumulated value
(c) Realisable value
(d) Salvage value

Q.16. If a concern proposes to discontinue its business from March 2010 and decides to dispose off all its assets within a period of 4 months, the Balance Sheet as on March 31, 2010 should indicate the assets at their ____.
(a) Historical cost
(b) Net realizable value
(c) Cost less depreciation
(d) Cost price or market value, whichever is lower

Q.17. The balance of the petty cash is ____.
(a) an expense
(b) income
(c) an asset
(d) liability

Q.18. Sales for the year ended 31st March, 2010 amounted to Rs. 10,00,000. Sales included goods sold to Mr. A for Rs. 50,000 at a profit of 20% on cost. Such goods are still lying in the godown at the buyer’s risk. Therefore, such goods should be treated as part of
(a) Sales
(b) Closing inventory
(c) Goods in transit
(d) Sales return

Q.19. As per Section 37 of the Indian Partnership Act, 1932, the executors would be entitled at their choice to the interest calculated from the date of death till the date of payment on the final amount due to the dead partner at percent per annum.
(a) 7
(b) 4
(c) 6
(d) 12

Q.20. If del-credere commission is allowed for bad debt, consignee will debit the bad debt amount to:
(a) Commission Earned A/c
(b) Consignor A/c
(c) Customers A/c (Trade receivables)
(d) General Trading A/c

Q.21. Mr. Raj purchased a machinery costing Rs. 1,00,000 on 1st October, 2011. 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, 2012. While finalising the annual accounts, A 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. Rohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting Rs. 18,00,000 and paid expenses amounting Rs. 2,70,000 during the year, 2009. He paid Rs. 5,000 for an electricity bill of Dec. 2008 and advance salaries amounting Rs. 15,000 was paid for the month of Jan. 2010. He counted net profit as Rs. 3,50,000. The net profit calculated by him is correct according to ____.
(a) Entity concept
(b) Periodicity concept
(c) Matching concept
(d) Conservatism concept

Q.23. P 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.24. R 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.25. P Ltd. acquired assets worth Rs.7,50,000 from H Ltd. by issue of shares of Rs.100 at a premium of 25%. The number of shares to be issued by P Ltd. to settle the purchase consideration will be _____.
(a) 6,000 shares
(b) 7,500 shares
(c) 9,375 shares
(d) 5,625 shares

Q.26. The following information pertains to P Ltd.:
Equity share capital called up Rs. 5,00,000
Calls in arrear Rs. 40,000
Calls in advance Rs. 25,000
Proposed dividend 15%
The amount of dividend payable will be
(a) Rs. 75,000
(b) Rs. 72,750
(c) Rs. 71,250
(d) Rs. 69,000

Q.27. The subscribed share capital of R Ltd. is Rs.80,00,000 of Rs.100 each. There were no calls in arrear till the final call was made. The final call made was paid on 77,500 shares. The calls in arrear amounted to Rs.62,500. The final call on each share will be ____.
(a) Rs. 25
(b) Rs. 7.80
(c) Rs. 20
(d) Rs. 62.50

Q.28. A Company wishes to earn a 20% profit margin on selling price. Which of the following is the profit mark up on cost, which will achieve the required profit margin?
(a) 33%
(b) 25%
(c) 20%
(d) None of the above

Q.29. X, Y and Z are the partners sharing profits and losses in the ratio of 5:3:2, took a joint life policy of Rs. 30,000. On the death of B what amount will be payable to each partner?
(a) X – Rs. 22,000 and Y – Rs. 8,000
(b) X – Rs. 14,000 and Y – Rs. 16,000
(c) X – Rs. 15,000, Y– Rs. 9,000 and Z – Rs. 6,000
(d) X – Rs. 10,000, Y – Rs. 8,000 and Z – Rs. 10,000

Q.30. X, Y and Z were partners in a firm sharing profits and losses in the ratio of 2:2:1 respectively with the capital balance of Rs. 50,000 for X and Y, for Z Rs. 25,000. Y declared to retire from the firm and balance in reserve on the date was Rs. 15,000. If goodwill of the firm was valued as Rs. 30,000 and profit on revaluation was Rs. 7,050 then what amount will be transferred to the loan account of Y?
(a) Rs. 70,820
(b) Rs. 50,820
(c) Rs. 25,820
(d) Rs. 58,820

Q.31. X and Y, who share profits and losses in the ratio of 3:2 has the following balances: Capital of X Rs. 50,000; Capital of Y Rs. 30,000; Reserve Fund Rs. 15,000. They admit Z as a partner, who contributes to the firm Rs. 25,000 for 1/6th share in the partnership. If Z is to purchase 1/6th share in the partnership from the existing partners X and Y in the ratio of 3:2 for Rs. 5,000 as goodwill find closing capital of Z.
(a) Rs. 25,000
(b) Rs. 19,000
(c) Rs. 20,000
(d) Rs. 18,000

Q.32. R and K are partners sharing Profits in the ratio of 2:1. R is admitted to the partnership with effect from 1st April on the term that he will bring Rs. 20,000 as his capital for 1/4th share and pays Rs. 9,000 for goodwill, half of which is to be withdrawn by R and K. How much cash will R & K withdraw from the firm on account of goodwill?
(a) Rs. 3,000 and Rs. 1,500
(b) Rs. 6,000 and Rs. 3,000
(c) Nil
(d) None of the above

Q.33. X and Y are partners sharing profits in the ratio 5:3, they admitted C giving him 3/10th share of profit. If Z acquires 1/5th share from A and 1/10th from B, new profit sharing ratio will be _____.
(a) 5:6:3
(b) 2:4:6
(c) 18:24:38
(d) 17:11:12

Q.34. X, Y and Z are equal partners. K is admitted to the firm for one-fourth share. K brings Rs. 20,000 capital and Rs. 5,000 being half of the premium for goodwill. The total value of goodwill of the firm is ____.
(a) Rs. 10,000
(b) Rs. 40,000.
(c) Rs. 20,000
(d) None of the above

Q.35. X and Y are partners with capitals of Rs. 10,000 and Rs. 20,000 respectively and sharing profits equally. They admitted Z 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. 8,000
(d) None of the above

Q.36. 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 of X : Y will be ____.
(a) 3:1
(b) 4:7
(c) 5:4
(d) 2:1

Q.37. John and Mona 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 John and Mona 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.38. 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 amount of inventory on approval at the end of the year will be _____.
(a) Rs.16,000
(b) Rs. 20,000
(c) Rs. 15,000
(d) None of the above

Q.39. On 16.6.2010 A draws a bill on B for Rs 25,000 for 30 days. 19th July 2010 is a public holiday, maturity date of the bill will be:
(a) 19th July 2010
(b) 18th July 2010
(c) 17th July 2010
(d) 16th July 2010

Q.40. Jain sold goods worth Rs 25,000 to Ronny. Ronny immediately accepted a bill on 1.11.09, payable after 2 months. Jain discounted this bill @ 18% p.a. on 15.11.09. On the due date Ronny failed to discharge the bill. Later on Ronny became insolvent and 50 paise is recovered from Ronny’s estate. How much amount of bad debt will be recorded in the books of Jain ?
(a) Rs. 12,500
(b) Rs. 9,437
(c) Rs. 11,687
(d) Rs. 13,650

Q.41. Shyam’s acceptance to Dinesh for Rs 8,000 renewed for 3 months on the condition that Rs. 4,000 be paid in cash immediately and the remaining amount will carry interest @ 12% p.a. The amount of interest will be ____.
(a) Rs. 120
(b) Rs. 80
(c) Rs. 90
(d) Rs. 160

Q.42. X draws a bill on Y for Rs. 30,000. X 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.43. X drew a bill on Y for Rs. 50,000 for 3 months. Proceeds are to be shared equally. X got the bill discounted at 12% p.a. and remits required proceeds to Y. The amount of such remittance will be ____.
(a) Rs. 24,250
(b) Rs. 25,000
(c) Rs. 16,167
(d) Rs. 32,333

Q.44. X and Y enter into a joint venture to underwrite the shares of L Ltd. @ 5% under writing commission. L Ltd. make an equity issue of 100000 equity shares of Rs 10 each. 80% of the issue are subscribed by the party. The profit sharing ratio between X and Y is 3:2. The balance shares not subscribed by the public, purchased by A and B in profit sharing ratio. How many shares to be purchased by X?
(a) 80,000 shares
(b) 72,000 shares
(c) 12,000 shares
(d) 8,000 shares

Q.45. Ram and Monu entered into a joint venture to purchase and sell new year gifts. They agreed to share the profits and losses equally. Ram purchased goods worth Rs.1,00,000 and spent Rs.10,000 in sending the goods to Monu. He also paid Rs. 5,000 for insurance. Monku spent
Rs. 10,000 as selling expenses and sold goods for Rs.2,00,000. Remaining goods were taken over by him at Rs. 5,000. Find out profit on venture.
(a) Rs. 70,000
(b) Rs. 75,000
(c) Rs. 80,000
(d) Rs. 85,000

Q.46. X and Y entered into a Joint Venture. X purchased goods costing Rs. 2,00,000, B sold 4/5th of the same for Rs. 2,50,000. Balance goods were taken over by Y at cost less 20%. If same set of books is maintained, find out profit on venture.
(a) Rs. 82,000
(b) Rs. 90,000
(c) Rs. 50,000
(d) Nil.

Q.47. If unsold goods costing Rs. 20,000 is taken over by Venturer at Rs. 15,000, the Joint Venture A/c will be credited by:
(a) Rs.20,000
(b) Rs.15,000
(c) Rs.5,000
(d) Nil

Q.48. A of Kolkata sends out goods costing Rs. 1,00,000 to consignee B of Delhi. 3/5th of the goods were sold by consignee for Rs. 70,000. Commission 2% on sales plus 20% of gross sales less all commission exceeds cost price. The amount of Commission will be:
(a) Rs. 2,833
(b) Rs. 2,900
(c) Rs. 3000
(d) Rs. 2,800

Q.49. Kasim of Kolkata sends out 1,000 boxes to Ramu of Delhi costing Rs. 100 each at an Invoice Price of Rs. 120 each. Goods send out on consignment to be credited in general trading account will be:
(a) Rs.1,00,000
(b) Rs.1,20,000
(c) Rs. 20,000
(d) None of the above

Q.50. Goods sent out on consignment Rs. 2,00,000. Consignor’s expenses Rs. 5,000. Consignee’s expenses Rs. 2,000. Cash sales Rs. 1,00,000, credit sales Rs. 1,10,000. Consignment inventory Rs. 40,000. Ordinary commission payable to consignee Rs. 3,000. Del-credere commission Rs. 2,000. The amount irrecoverable from customer Rs. 2,000. What will be the profit on consignment?
(a) Rs. 38,000
(b) Rs. 40,000
(c) Rs. 36,000
(d) Rs. 43,000

Q.51. R of Kolkata sends out 500 boxes to P of Delhi costing Rs. 200 each. Consignor’s expenses Rs 5000. 1/5th of the boxes were still in transit. 3/4th of the goods received by consignee, were sold. The value of goods still in transit will be:
(a) Rs. 20,000
(b) Rs. 21,000 
(c) Rs. 21,200
(d) None of the above

Q.52. If sales revenue are Rs. 4,00,000; cost of goods sold is Rs. 3,10,000 and operating expenses are Rs.60,000 the gross profit is ____.
(a) Rs. 30,000
(b) Rs. 90,000
(c) Rs. 3,40,000
(d) Rs. 60,000

Q.53. If sales are Rs. 2,000 and the rate of gross profit on cost of goods sold is 25%, then the cost of goods sold will be ____.
(a) Rs. 2,000
(b) Rs. 1,500
(c) Rs. 1,600
(d) None of the above

Q.54. Rohit Ltd. purchased a machine on 1.1.2009 for Rs 1,20,000. Installation expenses were Rs. 10,000. On 01.07.2009, expenses for repairs were incurred to the extent of Rs. 2,000. Depreciation is provided under straight line method. Depreciation rate is 10%. Annual Depreciation will be ____.
(a) Rs.13,000
(b) Rs.17,000
(c) Rs. 21,000
(d) Rs.25,000

Q.55. In the books of DK Ltd. the machinery account shows a debit balance of Rs. 60,000 as on April 1, 2009. The machinery was sold on September 30, 2010 for Rs. 30,000. The company charges depreciation @ 20% p.a. on diminishing balance method. Profit / Loss on sale of the mahinery will be ____.
(a) Rs. 13,200 profit
(b) Rs. 13,200 loss
(c) Rs. 6,800 profit
(d) Rs. 6,800 loss

Q.56. The total cost of goods available for sale with a company during the current year is Rs.12,00,000 and the total sales during the period are Rs.13,00,000. If the gross profit margin of the company is on cost, the closing inventory during the current year is
(a) Rs. 4,00,000
(b) Rs. 3,00,000
(c) Rs. 2,25,000
(d) Rs. 2,60,000

Q.57. Consider the following data pertaining to Y Ltd. for the month of March 2010:
Particulars Inventory
As on March 1, 2010 (Rs.) 1,80,000
As on March 31, 2010 (Rs.) 90,000


When preparing a Bank Reconciliation Statement, if you start with the debit balance as per Cash Book, cheques issued but not presented within the period should be ____.
(a) Added
(b) Deducted
(c) Not required to be adjusted
(d) None of the above

Q.59. Rs. 200 paid as wages for erecting a machine should be debited to ____.
a) Repair account
(b) Machine account
(c) Capital account
(d) Furniture account

Q.60. Rs. 2,500 spent on the overhaul of a machine purchased second-hand is ____.
(a) Capital expenditure
(b) Revenue expenditure
(c) Deferred revenue expenditure
(d) None of the above

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