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Fundamentals of Accounting
QUESTION PAPER
CPT 
FUNDAMENTALS OF ACCOUNTING

SECTION – A : FUNDAMENTALS OF ACCOUNTING (60 MARKS)

Q.1. All of the following are functions of Accounting except
(a) Decision making
(b) Measurement
(c) Forecasting
(d) Ledger posting

Q.2. Manufacturing account is prepared to
(a) Ascertain the profit or loss on the goods produced
(b) Ascertain the cost of the manufactured goods
(c) Show the sale proceeds from the goods produced during the year
(d) Both (b) and (c).

Q.3. On March 31, 2010 after sale of goods worth Rs. 2,000, he is left with the closing inventory of Rs. 10,000. This is
(a) An event
(b) A transaction
(c) A transaction as well as an event
(d) Neither a transaction nor an event

Q.4. Financial statements only consider
(a) Assets expressed in monetary terms
(b) Liabilities expressed in monetary terms
(c) Assets expressed in non-monetary terms
(d) Assets and liabilities expressed in monetary terms

Q.5. Which financial statement represents the accounting equation, Assets = Liabilities + Owner’s equity?
(a) Income Statement
(b) Statement of Cash flows
(c) Balance Sheet
(d) None of the above

Q.6. A purchased a car for Rs.5,00,000, making a down payment of Rs. 1,00,000 and signing a Rs. 4,00,000 bill payable due in 60 days. As a result of this transaction
(a) Total assets increased by Rs. 5,00,000.
(b) Total liabilities increased by Rs. 4,00,000.
(c) Total assets increased by Rs. 4,00,000.
(d) Total assets increased by Rs. 4,00,000 with corresponding increase in liabilities by Rs. 4,00,000.

Q.7. The debts written off as bad, if recovered subsequently are
(a) Credited to Bad Debts Recovered Account
(b) Credited to Trade receivables Account
(c) Debited to Profit and Loss Account
(d) None of the above

Q.8. A withdrawal of cash from business by the proprietor should be credited to:
(a) Drawings Account
(b) Capital Account
(c) Cash Account
(d) None of the above

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. Consignment account is
(a) Real account
(b) Personal account
(c) Nominal account
(d) None of the above

Q.11. Economic life of an enterprise is split into the periodic interval as per ____ concept.
(a) Money Measurement
(b) Matching
(c) Periodicity
(d) Accrual

Q.12. Accounting policies refer to specific accounting ____.
(a) Principles
(b) Methods of applying those principles
(c) Both (a) and (b)
(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. Outgoing partner is compensated for parting with firm’s future profits in favour of remaining partners. The remaining partners contribute to such compensation amount in ____.
(a) Gaining Ratio
(b) Capital Ratio
(c) Sacrificing Ratio
(d) Profit Sharing Ratio

Q.15. The balance of the petty cash is ____.
(a) An expense
(b) Income
(c) An asset
(d) Liability

Q.16. Interest on capital will be paid to the partners if provided for in the agreement but only from ____.
(a) Profits
(b) Reserves
(c) Goodwill
(d) None of the above

Q.17. A proforma invoice is sent by ____.
(a) Consignee to Consignor
(b) Consignor to Consignee
(c) Customers to Consignee
(d) Customers to Consignor

Q.18. If a venturer draws a bill on his co-venturer and if the drawer discounts the bill with same sets of books maintained, the discounting charges will be borne by ____.
(a) The drawer of the bill
(b) The drawee of the bill
(c) The discounting charges will be recorded in memorandum account
(d) The discounting charges will be borne by bank

Q.19. A draws a bill on B. X endorsed the bill to C _____. will be the payee of the bill.
(a) A
(b) B
(c) C
(d) None

Q.20. AB Company wishes to earn a 20% profit margin on selling price____. 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.21. A businessman purchased goods for Rs. 25,00,000 and sold 80% of such goods during the accounting year ended 31st March, 2010. The market value of the remaining goods was Rs. 4,00,000. He valued the closing inventory at cost. He violated the concept of
(a) Money measurement
(b) Conservatism
(c) Cost
(d) Periodicity

Q.22. M/s XYZ Brothers, which was registered in the year 2008, 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 deprecation should be done only if it is required by some statute
and change would result in appropriate presentation of financial statement
(d) Method of depreciation cannot be changed under any circumstances

Q.23. AC Ltd., a dealer in second-hand cars has the following five vehicles of different models and makes in their inventory at the end of the financial year 2009-2010:
Car Cost Rs. Net realisable
value (Rs.)
Fiet  90000 95000
ECO 1,15,000 1,55,000
Maruti 2,75,000 2,65,000
i20 1,00,000 1,25,000
Zen 2,10,000 2,00,000
The value of inventory included in the Balance Sheet of the company as on March 31, 2010 was
(a) Rs. 7,62,500
(b) Rs. 7,70,000
(c) Rs. 7,90,000
(d) Rs. 8,70,000

Q.24. Original cost = Rs. 1,26,000; Salvage value = Nil; Useful life = 6 years. Depreciation for the first year under sum of years digits method will be
(a) Rs. 6,000
(b) Rs. 12,000
(c) Rs. 18,000
(d) Rs. 36,000

Q.25. If sales revenues 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.26. Consider the following for Alpha Co. for the year 2009-10:
Cost of goods available for sale Rs.1,00,000
Total sales Rs. 80,000
Opening inventory of goods Rs. 20,000
Gross profit margin 25%
Closing inventory of goods for the year 2009-10 was
(a) Rs. 80,000
(b) Rs. 60,000
(c) Rs. 40,000
(d) Rs. 36,000

Q.27. X and entered into a joint venture and purchased a piece of land for Rs 20,000 and sold it for Rs 60,000 in 2010. Originally A had contributed Rs 12,000 and B Rs 8,000. The profit on venture will be
(a) Rs. 40,000
(b) Rs. 20,000
(c) Rs. 60,000
(d) Nil

Q.28. On 1.1.2010 A draws a bill on B for Rs. 50,000. At maturity, the bill returned dishonoured as B became insolvent and 40 paise per rupee is recovered from his estate. The amount recovered is:
(a) Rs. 20,000
(b) Nil
(c) Rs. 30,000
(d) 40 paise

Q.29. Average inventory = Rs 12,000. Closing inventory is Rs. 3,000 more than opening inventory. The value of closing inventory will be
(a) Rs. 12,000
(b) Rs. 24,000
(c) Rs. 10,500
(d) Rs. 13,500.

Q.30. Find the goodwill of the firm using capitalization method from the following information: 
Total Capital Employed in the firm Rs. 8,00,000
Reasonable Rate of Return 15%
Profits for the year Rs. 12,00,000
(a) Rs. 82,00,000
(b) Rs. 12,00,000
(c) Rs. 72,00,000
(d) Rs. 42,00,000

Q.31. X & Y are partners sharing profits and losses in the ratio 5:3. After admission of Z, new profit sharing ratio between X, Y and Z are 7:5:4. The sacrificing ratio among X : Y will
(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 overdraft 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 machinery is purchased for Rs. 10,000, the amount of Rs. 1,500 is spent on its transportation and Rs. 1,200 is paid for installation. The amount debited to machinery account will be
(a) Rs. 10,000
(b) Rs. 10,500
(c) Rs. 11,500
(d) Rs. 12,700

Q.34. Consider the following data pertaining to a company for the month of March 2010:
Particulars Rs.
Opening inventory 22,000
Closing inventory 25,000
Purchases less returns 1,10,000
Gross profit margin (on sales) 20%
The sales of the company during the month are
(a) Rs. 1,41,250
(b) Rs. 1,35,600
(c) Rs. 1,33,750
(d) Rs. 1,28,400.

Q.35. The accountant of the firm M/s XYZ is unable to tally the following trial balance.
Account
heads
Debit
(Rs.)
Credit
(Rs.)
Sales 15,000
Purchases 10,000
Miscellaneous
Expenses
2,500
Salaries 2,500
Total 12,500 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. The profits of last five years are Rs. 85,000; Rs. 90,000; Rs. 70,000; Rs. 1,00,000 and Rs. 80,000. Find the value of goodwill, if it is calculated on average profits of last five years on the basis of 3 years of purchase.
(a) Rs. 85,000
(b) Rs. 2,55,000
(c) Rs. 2,75,000
(d) Rs. 2,85,000

Q.37. AP Ltd. recorded the following information as on March 31, 2010:
Inventory as on April 01, 2009 80,000
Purchases 1,60,000
Sales 2,00,000
It is noticed that goods worth Rs. 30,000 were destroyed due to fire. Against this, the insurance company accepted a claim of Rs. 20,000
The company sells goods at cost plus  The value of closing inventory, after taking into account the above transactions is,
(a) Rs. 10,000
(c) Rs. 1,00,000
(b) Rs. 30,000
(d) Rs. 60,000

Q.38
Rs.  Rs.
Opening inventory 20,000 Carriage on sales 3,000
Closing inventory 18,000 Rent of Office 5,000
Purchases 85,800 Sales 1,40,700
Carriage on purchases 2,300
Gross profit will be
(a) Rs. 50,000
(c) Rs. 42,600
(b) Rs. 47,600
(d) Rs. 50,600

Q.39. OMZ Ltd., a listed company, acquired assets worth Rs. 7,50,000 from APL Ltd. and issued shares of Rs. 100 each at premium of 25%. The number of shares to be issued by OMZ Ltd. to settle the purchase consideration will be
(a) 6,000
(b) 7,500
(c) 9,375
(d) 5,625

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. 1,20,000
(b) Rs. 1,25,000
(c) Rs. 1,40,000
(d) Rs. 1,00,000

Q.41. FTP Ltd. purchased Machinery from GDP 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

Q.42. PLF Ltd. issued 5,000, 12% debentures of Rs.100 each at a premium of 10%, which are redeemable after 10 years at a premium of 20%. The amount of loss on redemption of debentures to be written off every year is
(a) Rs. 80,000
(b) Rs. 40,000
(c) Rs. 10,000
(d) Rs. 8,000

Q.43. A and B share profits and losses in the ratio of 2 : 1. They take C as a partner and the new profit sharing ratio becomes 3 : 2 : 1. C brings Rs. 4,500 as premium for goodwill. The full value of goodwill will be
(a) Rs. 4,500
(b) Rs. 18,000
(c) Rs. 27,000
(d) Rs. 24,000

Q.44. The profits of last three years are Rs. 42,000; Rs. 39,000 and Rs. 45,000. Find out the goodwill of two years purchase.
(a) Rs. 42,000
(b) Rs. 84,000
(c) Rs. 1,26,000
(d) Rs. 36,000

Q.45. DJ Ltd. has issued 14% Debentures of Rs.20,00,000 at a discount of 10% on April 01, 2008 and the company pays interest half-yearly on June 30, and December 31 every year. On March 31, 2010, the amount shown as “interest accrued but not due” in the Balance Sheet will be
(a) Rs. 70,000 shown under current liabilities
(b) Rs. 2,10,000 under current liabilities
(c) Rs. 1,40,000 shown along with Debentures
(d) Rs. 2,80,000 under current liabilities

Q.46. P and Q enter into a joint venture sharing profit and losses in the ratio 2:1. P purchased goods costing Rs. 2,00,000. Q sold the goods for Rs. 2,50,000. P is entitled to get 1% commission on purchase and Q is entitled to get 5% commission on sales. The profit on venture will be:
(a) Rs. 35,500
(b) Rs. 36,000
(c) Rs. 34,000
(d) Rs.38,000

Q.47. Rakesh purchased a machine on 01.01.2010 for Rs 1,20,000. Installation expenses were Rs. 10,000. Residual value after 5 years Rs. 5,000. On 01.07.2010, expenses for repairs were incurred to the extent of Rs 2,000. Depreciation is provided under straight line method. Annual Depreciation is
(a) Rs. 13,000
(b) Rs. 17,000
(c) Rs. 21,000
(d) Rs. 25,000

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

Q.49. X and Y entered into joint venture for equal profits. X purchased 1,000 kg of rice costing Rs. 200 each. Carriage Rs. 2,000, insurance Rs. 3,000. 4/5th of the boxes were sold by Y at Rs. 250 per boxes. Remaining inventory were taken over by Y at cost. The amount of inventory taken over will be:
(a) Rs. 40,000
(b) Rs. 41,000
(c) Rs. 50,000
(d) Rs. 50,200

Q.50. X company sends its cars to dealers on ‘sale or return’ basis. All such transactions are however treated like actual sales and are passed through the sales day book. Just before the end of the financial year, two cars which had cost Rs.55,000 each have been sent on ‘sale or return’ and have been debited to customers at Rs.75,000 each, cost of goods lying with the customers will be
(a) Rs. 1,10,000
(b) Rs. 55,000
(c) Rs. 75,000
(d) None of the above

Q.51. Electricity charges paid on 1 October, 2008 for the year to 30 September, 2009 was Rs. 2,400 and electricity charges paid on 1 October, 2009 for the year to 30 September, 2010 was Rs. 3,200. Electricity charges paid, as shown in the profit and loss account for the year ended 31 December 2009, would be:
(a) Rs. 2,400
(b) Rs. 3,200
(c) Rs. 2,600
(d) Rs. 3,000

Q.52. Goods costing Rs 2,00,000 sent out to consignee at Cost + 20%. Invoice value of the goods will be
(a) Rs. 2,50,000
(b) Rs. 2,40,000
(c) Rs. 3,00,000
(d) None of the above.

Q.53. K, N and P are the partners sharing profits in the ratio 7:5:4. D died on 30th June 2010 and profits for the accounting year 2009-2010 were Rs. 24,000. How much share in profits for the period 1st April 2010 to 30th June 2010 will be credited to P’s Account.
(a) Rs. 6,000
(b) Rs. 1,500
(c) Nil
(d) Rs. 2,000

Q.54. H of Kolkata sends out certain goods at cost + 25%. Invoice value of goods sends out Rs. 2,00,000. 4/5th of the goods were sold by consignee at Rs.1,76,000. Commission is 2% upto invoice value and 10% of any surplus above invoice value. The amount of commission will be:
(a) Rs. 4,800
(b) Rs. 5,200
(c) Rs. 3,200
(d) Rs. 1,600

Q.55. Debit balance as per Cash Book of RJD Enterprises as on 31.3.2010 is Rs. 1,500. Cheques deposited but not cleared amounts to Rs. 100 and Cheques issued but not presented is Rs. 150. The bank allowed interest amounting Rs. 50 and collected dividend Rs. 50 on behalf of RJD 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. P and Q are partners sharing profits in the ratio 5:3. They admitted R for 1/5th share of profits, for which he paid Rs. 1,20,000 against capital and Rs. 60,000 against goodwill. Find the capital balances for each partner taking R’s capital as base capital.
(a) Rs. 3,00,000; Rs. 1,20,000 and Rs. 1,20,000
(b) Rs. 3,00,000; Rs. 1,20,000 and Rs. 1,80,000
(c) Rs. 3,00,000; Rs. 1,80,000 and Rs. 1,20,000
(d) Rs. 3,00,000; Rs. 1,80,000 and Rs. 1,80,000

Q.58. L’s acceptances of Rs. 20,000 given to A is renewed upon cash payment of Rs. 5,000 and the fresh bill of Rs. 15,100. Journal entry for renewal in the books of A will be
(a) B/R A/c Dr. 15,100
Cash A/c Dr. 5,000
To L A/c
To Interest A/c
20,000
100
(b) B/R A/c Dr. 20,100
To Cash A/c 5,100
To L A/c 15,000
To Interest A/c 100
(c) B/R A/c Dr. 20,100
To L A/c 20,100
(d) B/R A/c Dr. 15,000
Cash A/c Dr. 5,000
To L A/c 20,000

Q.59.

A company forfeited 2,000 shares of Rs. 10 each (which were issued at par) held by Mr. John 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.60. S, N and P are partners sharing profits in the ratio 2:2:1. On retirement of N, goodwill was valued as Rs. 30,000. The contribution of S and P to compensate N will be ____.
(a) Rs. 20,000 and Rs. 10,000
(b) Rs. 8,000 and Rs. 4,000
(c) They will not contribute any thing.
(d) Information is insufficient for any comment.

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