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Fundamentals of Accounting

Q.1. Transactions between owner and business are recorded as per
(a) Periodicity concept
(b) Going concern concept
(c) Prudence concept
(d) Business Entity concept

Q.2. Which of the following items is an asset?
(a) Salary paid to manager
(b) Accounts payable
(c) Sales
(d) Trade receivables

Q.3. The information provided in the annual financial statements of an enterprise pertain to:
(a) Business Industry
(b) Economy
(c) Individual business entity
(d) None of the three

Q.4. Which of the following is not a transaction?
(a) Goods are purchased on cash basis for Rs.1,000.
(b) Salaries paid for the month of May, 2010.
(c) Land is purchased for Rs.10 lacs.
(d) An employee dismissed from the job.

Q.5. All the following statements are objectives of accounting except
(a) Providing information about the assets, liabilities and capital of business entity.
(b) Maintaining records of business.
(c) Providing information about the performance of business entity.
(d) Providing details about the personal assets and liabilities of the owner.

Q.6. Payment of personal expenses of the owners of the business need to be recorded as:
(a) Drawings.
(b) Liabilities.
(c) Expenses.
(d) None of the three.

Q.7. The purchases Journal records
(a) All purchases.
(b) All purchases of goods dealt in by the firm.
(c) Credit purchases of goods dealt in by firm.
(d) Cash purchase of goods dealt in by firm.

Q.8. Which of the following lists the balance and the title of accounts given in the ledger, on a given date?
(a) P & L Account.
(b) Balance sheet.
(c) Earnings Statement
(d) Trial balance.

Q.9. Under straight line method, depreciation is calculated on
(a) Written down value.
(b) Scrap value.
(c) Original cost.
(d) None of the three.

Q.10. If the date of maturity of a bill is a holiday, then the bill will mature on:
(a) Next working day.
(b) Preceding working day.
(c) Holiday itself.
(d) Other agreed day.

Q.11. A promissory note is drawn by ___ in favour of ___.
(a) Drawer, Drawee.
(b) Maker, Payee.
(c) Payer, Payee.
(d) Drawer, Payee.

Q.12. ____ principle requires that the same accounting method should be used from one accounting period to the next.
(a) Conservatism.
(b) Consistency.
(c) Business entity.
(d) Money measurement.

Q.13. The left side of an account is known as ___ and the right side as ___.
(a) Debit, credit.
(b) Credit, debit.
(c) Liability, asset.
(d) None of the three.

Q.14. In double entry book keeping system, every transaction affects at least ___ account(s).
(a) One.
(b) Two.
(c) Three.
(d) Four.
All expenses and ___ accounts appearing in the trial balance are transferred either to the trading account or profit and loss account.
(a) Loss.
(b) Income
(c) Asset.
(d) Liability

Q.16. Scrap value of an asset means the amount that it can fetch on sale at the ___ of its useful life.
(a) Beginning.
(b) End
(c) Middle.
(d) None of the three.

Q.17. The petty cashier generally work on ___ system.
(a) Accrual.
(b) Balancing.
(c) Imprest.
(d) None of the three.
Proforma invoice is a statement of information in the form of invoice prepared by the ____ to appraise the about certain essential particulars of the goods.
(a) Consignee, Consignor.
(b) Buyer/Seller.
(c ) Consignor, Consignee.
(d) None of the three

Q.19. Carriage charges paid for a new plant purchased if debited to carriage account would affect
(a) Plant account.
(b) Carriage account.
(c) Plant and carriage accounts.
(d) None of the three.

Q.20. The amount due to the retiring partner on account of goodwill is debited to the continuing partners in their ___.
(a) Profit sharing ratio.
(b) Sacrificing ratio.
(c) Capital ratio.
(d) Gaining ratio.

Q.21. Mr. X, the owner of M/s IPL Ltd. withdrew some goods from the business for his personal use. The accountant of the firm recorded this transaction on the basis of selling price of goods. He justifies his contention on the basis that business and the proprietor are two different entities as per business entity concept and therefore drawings should be charged at the same price on which the goods are sold to the outside customers. However, Mr. X emphasizes that he should be charged with only the cost price of the goods withdrawn by him.
At which price, the drawings should be recorded?
(a) Fair value.
(b) Selling price.
(c) Cost price.
(d) None of the three.

Q.22. The substance of the transactions gets preference over legal position. The transactions and events recorded in the books of account and presented in the financial statements, should be governed by the substance of such transactions and not merely by their legal form as per the concept of
(a) Faithful representation.
(b) Substance over form.
(c) Neutrality.
(d) Fair disclosure.
X and Y are partners sharing profits in the ratio of 3:2. They admit Z as a new partner for 3/10th share, which he acquires 2/10 from A and 1/10 from B. The new profit sharing ratio of X, Y and Z is
(a) 3:4:3.
(b) 4:3:3.
(c) 3:3:4.
(d) None of the three.

Q.24. The profits for the last four years are given as follows:
Year Rs.
2006 40,000
2007 50,000
2008 60,000
2009 50,000
The value of goodwill on the basis of three years' purchase of average profits based on the last four years will be
(a) Rs.1,00,000.
(b) Rs.1,50,000.
(c) Rs.2,00,000
(d) None of the three.

Q.25. A Ltd. acquired assets worth Rs. 75,000 from B Ltd. by issue of shares of Rs.10 each at a premium of Rs. 5. The number of shares to be issued by A Ltd. to settle the purchase consideration will be
(a) 6,000 shares
(b) 7,500 shares
(c) 9,375 shares
(d) 5,000 shares

Q.26. X and Y are partners in a firm sharing profits in the ratio of 3:2. They admit Z as the new partner for 1/6th share in the profits. The firm's goodwill was valued at Rs.1,50,000. For adjustment of goodwill, Z's account will be debited by
(a) Rs. 20,000.
(b) Rs. 15,000.
(c) Rs. 25,000.
(d) None of the three.

Q.27. Following figures have been taken from the trial balance of a trader;
Purchases 30,000
Purchase Returns 5,000
Sales 40,000
Sales Returns 5,000
The amount of profit will be
(a) Rs. 10,000.
(b) Rs. 5,000.
(c) Rs. 7,500.
(d) None of the three.

Q.28. The balance of furniture and fixtures as on 1st April, 2009 was Rs. 10,000. Furniture of Rs.5,000 was purchased on 1st October, 2009. Depreciation is charged @ 10% p.a. on W.D.V. method. The depreciation for the year ended 31st March, 2010 will be ___.
(a) Rs.1,500
(b) Rs.1,250
(c) Rs.1,750
(d) None of the above

Q.29. Mr. Aakash consigned to Mr. Rajesh 100 cases of tea costing Rs. 100 per case. He paid Rs. 1,000 as freight and cartage. Mr. Rajesh could take delivery of only 90 cases since 10 cases were loss in transit. The amount of abnormal loss will be ___.
(a) Rs.1,000
(b) Rs.1,100
(c) Rs.1,050
(d) None of the three

Q.30. Mr. Verma holding 1,000 equity shares of Rs.10 each, issued at par, could pay Rs.3.50 on application, but could not pay the allotment money of Rs. 2.5 per share and his shares were forfeited. In the books of the company, shares forfeited account will be credited by
(a) Rs. 2,500
(b) Rs. 1,500
(c) Rs. 3,500
(d) Rs. 2,000

Q.31. OPL Ltd. purchased assets of AZX Ltd. for purchase consideration of Rs.60 lacs. It was decided that the purchase consideration will be discharged by issue of 10% debentures of Rs.1,000 each at a premium of 20%. The number of debentures issued will be ___.
(a) 6,000
(b) 10,000
(c) 5,000
(d) None of the above

Q.32. Ashish Company Ltd. issued 1,00,000, 7% debentures of Rs.100 each at a discount of 4% redeemable after 5 years at a premium of 6%. Loss on issue of debentures is ___.
(a) Rs. 10,00,000
(b) Rs. 6,00,000
(c) Rs. 16,00,000
(d) Rs. 4,00,000

Q.33. A, B and C are partners sharing profits and losses in the ratio of 5: 3 :2. A retires and goodwill is valued at Rs. 50,000. New profit sharing ratio of B and C will be equal. For the adjustment of goodwill, B and C capital accounts will be debited by:
(a) Rs. 15,000 and Rs. 10,000 respectively
(b) Rs. 10,000 and Rs. 15,000 respectively
(c) Rs. 20,000 and Rs. 5,000 respectively
(d) Rs. 5,000 and Rs. 20,000 respectively

Q.34. The date of maturity of bill is 10th October, 2009. The Government of India suddenly declared 10th October, 2009 as the holiday under the Negotiable Instruments Act, then the bill will mature on ___.
(a) 9th October, 2009
(b) 10th October, 2009.
(c) 12th October, 2009.
(d) 11th October, 2009.

Q.35. Ltd. Company purchase machinery on 1st April, 2007 for Rs. 1,00,000. The depreciation on this machinery is charged @ 10% per annum on straight line method. On 30th September, 2009 machinery is sold for Rs.89,000. The profit or loss on sale of such machinery is:
(a) Profit of Rs. 12,000.
(b) Loss of Rs. 12,000.
(c) Profit of Rs. 14,000.
(d) Loss of Rs. 6,000.

Q.36. The following are the details regarding purchases of a certain item during the month of January.
Purchases Purchases Purchases Purchases
200 units 900 units 300 units 400 units
@ Rs. 7 @ Rs. 8 @ Rs. 9 @ Rs. 10
Rs. 1,400 Rs. 7,200 Rs. 2,700 Rs. 4,000
Rs. 15,300
A physical inventory of the items taken on January 31 shows that there are 700 units in hand. The valuation of inventory as per FIFO method is:
(a) Rs. 5,400.
(b) Rs. 6,700.
(c) Rs. 8,600
(d) Rs. 5,000.
A promissory note for Rs. 5,000 in favour of Rohan settled by sending him Tania's acceptance for Rs. 5,000. The required Journal entry will be
Rs. Rs.
(a) Rohan Dr. 5,000
   To Tania 5,000
(b) Tania Dr. 5,000
   To Rohan 5,000
(c) Bill receivable Dr. 5,000
   To Bills payable 5,000
(d) Bill payable Dr. 5,000
   To Bills receivable 5,000
Q.38. Shyamu prepared a trial balance for his factory on 31st March, 2010. The debit total of the trial balance was short by Rs. 500. He transferred the deficiency to a suspense account. In April, 2010 after a close examination, he found that the purchases day book for September, 2009 was undercast by Rs.500. The necessary Journal entry to rectify the error will be ___ assuming Final Accounts are not prepared.
Rs. Rs.
(a) Purchases A/c Dr. 500
To Cash A/c 500
(b) Suspense A/c Dr. 500
To Purchases A/c 500
(c) Purchases A/c Dr. 500
To Suspense A/c 500
(d) None of the above Dr. 500
Q.39. The following particulars relate to the business of Rohan on March 31, 2010.
Balance as shown by the cash book Rs. 10,000
Cheques issued but not presented for payment Rs. 4,000
Cheque deposited but not yet collected Rs. 3,000
Balance as shown by the Bank pass book will be
(a) Rs.9,000.
(b) Rs.10,000.
(c) Rs.11,000
(d) None of the above.

Q.40. Which of the following errors will affect the trial balance?
(a) Repairs to building wrongly debited to Building A/c
(b) Total of Purchase Journal cast short by Rs.1,000.
(c) Freight paid on new machinery debited to Freight A/c
(d) None of the three.

Q.41. X's acceptance to Y for Rs. 10,000 renewed for 2 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. On 1.1.2010, a machine costing Rs. 10,000 and a piece of furniture costing Rs.20,000 was purchased. Depreciation is provided @ 5% p.a. on furniture and 10% per annum on machine. The depreciation for the year ended 31st March, 2010 should be:
(a) Rs. 1,000 
(b) Rs. 300
(c) Rs. 500
(d) None of the three

Q.43. On 1st February, 2010, a loan of Rs.10,000 was given @ 12% per annum. Interest was received for 3 months from February to April in April, 2010. In the financial statements of the year ended 31st March, 2010 amount of accrued interest should be:
(a) Rs. 100
(b) Rs. 200
(c) Rs. 300
(d) Rs. 1,200

Q.44. Goods costing Rs. 4,80,000 were sent on consignment basis. Goods are invoiced at 125% of the cost price. The invoice price and the loading will be:
(a) Rs. 6,00,000 and Rs. 1,00,000.
(b) Rs. 5,00,000 and Rs. 1,00,000.
(c) Rs. 6,00,000 and Rs. 1,20,000.
(d) Rs. 5,00,000 and Rs. 1,20,000.

Q.45. Mr. X sent 250 units costing Rs. 10,000 each to Mr. Y. Mr. Y sold 150 units @ Rs. 14,200 per unit on credit and 75 units @ Rs. 14,000 for cash. Mr. B is entitled to a commission Rs.500 per unit. The amount of commission will be:

Q.46. Raja and Rani enter into a joint venture. Both of them deposited Rs.65,000 and Rs.32,500 respectively into a joint venture. Goods were purchased for Rs.75,000 and expenses amounting Rs.10,950 were incurred. Goods sold for Rs.90,000 and goods unsold were taken over by Ram at an agreed value of Rs.2,700. The profit on joint venture is:
(a) Rs. 17,700
(b) Rs. 4,500
(c) Rs. 4,050
(d) Rs. 6,750

Q.47. On 1st January Shikha owes Rs.10,000 and accepts a 3 months bill for the amount. On the date of maturity Shikha, not being able to honour the bill. She paid Rs.4,000 cash and requested to draw another bill for three months for the balance amount with interest @ 15% per annum. The amount of interest should be
(a) Rs. 200
(b) Rs. 225
(c) Rs. 500
(d) Rs. 900

Q.48. A draws a bill of Rs.10,000 on B on 23rd December, 2009 for one month. The bill is accepted on 25th December, 2009 by B. The maturity date of the bill will be:
(a) 26th January, 2010.
(b) 28th January, 2010.
(c) 27th January, 2010.
(d) 25th January, 2010.

Q.49. On 1st January, 2010, Veneet sold goods worth Rs.20,000 to Rena and drew a bill on Rena for 3 months. Rena accepted the bill and returned it to Veneet who discounted the bill with bank on 4th February, 2010 @ 15% per annum. The discounting charges will be:
(a) Rs. 3,000
(b) Rs. 750
(c) Rs. 500
(d) None of the three.

Q.50. A and B are partners sharing profit and losses in the ratio of 2:1. On 1st January, 2009, C is admitted with 1/4th share in profits with guaranteed amount of Rs. 25,000. The profits for the year ended 31st December, 2009 amounting to Rs. 76,000. The share of B in the profits should be:
(a) Rs.19,000
(b) Rs.38,000
(c) Rs.17,000
(d) None of the above.

Q.51. Dinesh and Raj are partners in a firm with capitals of Rs. 5,00,000 each. They admit Deepu as a partner with ¼th share in the profits of the firm. Deepu bring Rs. 8,00,000 as his share of capital. The profit and loss account showed a credit balance of Rs. 4,00,000 as on the date of his admission. The value of hidden goodwill will be
(a) Rs. 14,00,000.
(b) Rs. 18,00,000.
(c) Rs. 10,00,000.
(d) None of the above.

Q.52. Rent due for the month of March will appear ___ in the cash book
(a) On the receipt side
(b) On the payment side
(c) As a contra entry
(d) No where

Q.53. A Ltd. issued 20,000, 8% debentures of Rs. 10 each at par. The debentures are redeemable at a premium of 20% after 5 years. The amount of loss on redemption of debentures should be:
(a) Rs. 50,000
(b) Rs. 40,000
(c) Rs. 30,000
(d) None of the above.

Q.54. Goel Ltd. issued 10,000, 10% debentures of Rs.100 each at a discount of 10%. The entire amount is payable on application. Application were received for 12,000 debentures. The allotment of debentures was made on 10th October, 2009. The amount which should be credited to the debentures account on 10th October, 2009 will be:
(a) Rs. 12,00,000.
(b) Rs. 10,80,000.
(c) Rs. 9,00,000
(d) Rs. 10,00,000

Q.55. RND Ltd. had 9,000, 10% redeemable preference shares of Rs. 10 each, fully paid up. The company decided to redeem these preference shares at par by the issue of sufficient number of equity shares of Rs.10 each fully paid up at a discount of 10%. The number of equity shares issued should be:
(a) 9,000
(b) 11,000
(c) 10,000
(d) None of the above.

Q.56. A firm dealing in cloth has 15,000 meters of cloth on April 1, 2009 valued at Rs.1,50,000. The firm purchased 20,000 meters @ Rs.12 per meter during the year ending 31st March, 2010 and sold 30,000 meters @ Rs.25 per meter during the same period. As per LIFO, the closing inventory will be valued at:
(a) Rs. 60,000
(b) Rs. 1,25,000
(c) Rs. 50,000
(d) None of the above.

Q.57. On January 1, 2010 Victory Ltd., purchased a second hand machinery for Rs. 50,000 and spend Rs. 2,000 as shipping and forwarding charges, Rs. 1,000 as import duty, Rs.1,000 as carriage inwards, Rs.500 is repair charges, Rs. 200 as installation charges, Rs.400 as brokerage of the middle man and Rs. 100 for an iron pad. Total cost of machinery is
(a) Rs. 55,100
(b) Rs. 55,000
(c) Rs. 54,600
(d) Rs. 55,200.

Q.58. On 1-4-2009, Ram invested Rs.1,00,000 in a business. Interest on capital is to be allowed @ 12% per annum. Amount of interest to be charged to P & L Account for the year 2009-2010 is:
(a) Rs. 9,000.
(b) Rs. 10,000
(c) Rs. 12,000
(d) None of the above.

Q.59. Goods costing Rs. 1,20,000 were sent on consignment basis. These goods are invoiced to give a gross margin of 20% on invoice price. The amount of loading is:
(a) Rs. 24,000.
(b) Rs. 30,000.
(c) Rs. 20,000.
(d) None of the above.

Q.60. Rohan's trial balance contains the following information:
Discount received Rs.1,000
Provision for discount on trade payables Rs.1,600
It is desired to maintain a provision for discount on trade payables at Rs.1,100. The amount to be credited to P & L Account is :
(a) Rs.1,500
(b) Rs.3,500.
(c) Rs.1,000.
(d) Rs.500.

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