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Fundamentals of Accounting
QUESTION PAPER 
CPT
FUNDAMENTALS OF ACCOUNTING 

SECTION – A : FUNDAMENTALS OF ACCOUNTING (60 MARKS)

Q.1. In the books of manufacturing concern, opening inventory consists of
(a) Raw materials
(b) Work-in-progress
(c) Finished goods
(d) All of the above

Q.2. When adjusted purchase is shown on the debit column of the trial balance then
(a) Both opening stock and closing inventory do not appear in the trial balance
(b) Closing inventory is shown in the trial balance and not the opening inventory
(c) Opening inventory is shown in the trial balance and not the closing inventory
(d) Both opening and closing inventory appear in the trial balance

Q.3. Following is the example of external users of financial statements:
(a) Government
(b) Owners
(c) Management
(d) Employees

Q.4. “Business unit is separate and distinct from the person who supply capital to it”, is based on
(a) Money measurement concept
(b) Going concern concept
(c) Business entity concept
(d) Dual aspect concept

Q.5. State the case where the going concern concept is applied?
(a) When an enterprise was set up for a particular purpose, which has been achieved, or to be achieved shortly
(b) When a receiver or liquidator has been appointed in case of a company which is to be liquidated
(c) Fixed assets are acquired for use in the business for earning revenues and are not meant for resale
(d) When an enterprise is declared sick

Q.6. If two or more transactions of the same nature are journalised together having either the debit or the credit account common is known as
(a) Compound journal entry
(b) Separate journal entry
(c) Posting
(d) None of the above

Q.7. If the cheque issued is not presented for the payment upto the date of the preparation of the Bank Reconciliation Statement, then the balance as per Pass Book will be
(a) Higher than the balance shown by the cashbook by the amount of unpresented cheque
(b) Lower than the balance shown by the cashbook by the amount of unpresented cheque
(c) Same as shown by the cashbook
(d) None of the above

Q.8. Whenever errors are noticed in the accounting records, they should be rectified
(a) At the time of preparation of the trial balance
(b) Without waiting the accounting year to end
(c) After the preparation of final accounts
(d) In the next accounting year

Q.9. Parties to a bill of exchange are
(a) Drawer
(b) Drawee
(c) Payee
(d) All of the above

Q.10. All the expenditures and receipts of revenue nature go to
(a) Trading account
(b) Profit and loss account
(c) Balance Sheet
(d) Either to (a) or (b)

Q.11. A ____ is sent to a customer when he returns the goods.
(a) Debit note
(b) Credit note
(c) Proforma invoice
(d) None of the above

Q.12. Noting charges are paid at the time of ____ of a bill.
(a) Retirement
(b) Renewal
(c) Dishonour
(d) None of the above

Q.13. Depreciation of fixed assets is an example of ____ expenditure.
(a) Revenue
(b) Deferred revenue
(c) Capital
(d) None of the above

Q.14. Interest on drawings is ____ for the business.
(a) Loss
(b) Expense
(c) Gain
(d) None of the three

Q.15. An amount of Rs.200 received from A credited to B would affect ____.
(a) Accounts of A and B both
(b) A’s account only
(c) Cash account
(d) B’s account only

Q.16. In ____ method, depreciation is charged by allocating depreciable cost in proposition of the annual output to the probable life-time output.
(a) Working hours method
(b) Replacement method
(c) Revaluation method
(d) Production units method

Q.17. As per section 12 of Negotiable Instruments Act, which of the following is not a foreign bill?
(a) A bill drawn outside India and made payable outside India
(b) A bill drawn outside India and made payable in India
(c) A bill drawn outside India on a person resident in India
(d) A bill drawn in India on a person resident outside India and made payable outside India

Q.18. General reserve at the time of admission of a new partner is transferred to ____.
(a) Profit and Loss adjustment Account
(b) Old partners’ capital accounts
(c) Revaluation account
(d) Memorandum revaluation account

Q.19. A suspense account facilitates the preparation of ____ even when the ____ has not tallied.
(a) Ledgers; Trial balance
(b) Financial statements; Trial Balance
(c) Trial balance; Financial statements
(d) Journal; Trial balance

Q.20. Recording of a transaction in the ledger is called ____ .
(a) Costing
(b) Balancing
(c) Journalizing
(d) Posting

Q.21. Accounting has certain norms to be observed by the accountants in recording of transactions and preparation of financial statements. These norms reduce the vagueness and chances of misunderstanding by harmonizing the varied accounting practices. These norms are
(a) Accounting regulations
(b) Accounting notes
(c) Accounting standards
(d) Accounting framework

Q.22. LPG Ltd. purchased equipment from IPL Ltd. for Rs.50,000 on 1st April, 2009. The freight and cartage of Rs.2,000 is spent to bring the asset to the factory and Rs.3,000 is incurred on installing the equipment to make it possible for the intended use. The market price of machinery on 30th April, 2010 is Rs.60,000 and the accountant of the company wants to disclose the machinery at Rs.60,000 in financial statements. However, the auditor emphasizes that the machinery should be valued at Rs.55,000 (50,000+2,000+3,000) according to:
(a) Money measurement principle
(b) Historical cost concept
(c) Full disclosure principle
(d) Revenue recognition

Q.23. Mr. X started a business on 1st January 2009 with Rs. 5,00,000. During the year he bought goods worth Rs. 1,00,000 on credit and sold 80% of the same goods at profit of 20% on cost. At the end of the year 2009, the amount of opening inventory to be shown in the trial balance of Mr. X will be
(a) Rs. 20,000
(b) Rs. 24,000
(c) Rs. 1,00,000
(d) Nil

Q.24. Trade receivables on 31st March 2010 are Rs.55,200. Further bad debts are Rs.200. Provision for doubtful debts are to be made on Trade receivables @ 5% and also provision of discount is to be made on Trade receivables @ 2%. The amount of provision of doubtful debts will be
(a) Rs.1,045
(b) Rs.2,750
(c) Rs.1,100
(d) Rs.2,760

Q.25. A firm purchases a 5 years’ lease for Rs. 40,000 on 1st January. It decides to write off depreciation on the Annuity method, presuming the rate of interest to be 5% per annum. The annuity for it is 0.230975. The amount of annual depreciation will be
(a) Rs. 8,000
(b) Rs. 2,000
(c) Rs. 9,239
(d) Rs. 6,000

Q.26. The balance of machine on 31st March 2010 is Rs.72,900 (after charging depreciation of the year). The machine was purchased on 1st April 2007 charging depreciation @10% p.a. by diminishing balance method. The cost price of the machine as on 1st April 2007 would be
(a) Rs. 1,00,000
(b) Rs. 90,000
(c) Rs. 81,000
(d) Rs. 72,900

Q.27. On May 01, 2009, T Ltd. issued 7% 40,000 convertible debentures of Rs.100 each at a premium of 20%. Interest is payable on September 30 and March 31, every year. Assuming that the interest runs from the date of issue, the amount of interest expenditure debited to Profit and Loss Account for the year ended March 31, 2010 will be
(a) Rs. 2,80,000
(b) Rs. 2,33,333
(c) Rs. 3,36,000
(d) Rs.2,56,667

Q.28. A company cannot issue redeemable preference shares (not issued for infrastructure projects) for a period exceeding
(a) 6 years
(b) 7 years
(c) 8 years
(d) 20 years

Q.29. T Ltd. had allotted 10,000 shares to the applicants of 14,000 shares on pro-rata basis. The amount payable on application is Rs.2. P applied for 420 shares. The number of shares allotted and the amount carried forward for adjustment against allotment money due from P will be
(a) 60 shares; Rs.120
(b) 340 shares; Rs.160
(c) 320 shares; Rs.200
(d) 300 shares; Rs.240

Q.30. APL Ltd. issued 10,000 shares of Rs.10 each. The called up value per share was Rs.8. The company forfeited 200 shares of Mr. X for non-payment of 1st call money of Rs.2 per share. He paid Rs.6 for application and allotment money. On forfeiture, the share capital account will be ____.
(a) Debited by Rs. 2,000
(b) Debited by Rs. 1,600
(c) Credited by Rs. 1,600
(d) Debited by Rs. 1,200

Q.31. P, Q and R are 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 D’s Account?
(a) Rs. 6,000
(b) Rs. 1,500
(c) Nil
(d) Rs. 2,000

Q.32. A 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.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. A bill of Rs. 12,000 was discounted by A with the banker for Rs. 11,880. At maturity, the bill returned dishonoured, noting charges Rs 20. How much amount will the bank deduct from A’s bank balance at the time of such dishonour?
(a) Rs. 12,000
(b) Rs. 11,880
(c) Rs. 12,020
(d) Rs. 11,900

Q.35. In a joint venture between X and Y, Z purchased goods costing Rs.42,500. Y sold goods costing Rs. 40,000 at Rs. 50,000. Balance goods were taken over by X at same gross profit percentage as in case of sale. The amount of goods taken over by X will be:
a) Rs. 3,125
(b) Rs. 2,500
(c) Rs. 3,000
(d) None of the above

Q.36. Mr. A is a partner in a firm. He withdraws Rs.200 at the end of each month. If rate of interest on drawings is @ 5% p.a., the interest on drawings is
(a) Rs. 65
(b) Rs. 55
(c) Rs. 60
(d) Rs. 50

Q.37. Ramu and Shaymu are partners in a firm sharing profits and losses in the ratio 5:3. The firm earned profits during last four years amounting Rs.18,000, Rs.8,500 (loss), Rs.30,000 and Rs.16,500 respectively. The value of goodwill on the basis of one and a half year’s purchase of average profits of last four years will be
(a) Rs.14,000
(b) Rs.27,375
(c) Rs.21,000
(d) Nil

Q.38. A to whom 100 shares of Rs.10 each was allotted at par, paid Rs.3 on application, Rs.3 on allotment but could not pay the first and final call money of Rs.4. His shares were forfeited by the directors. The amount to be credited to shares forfeited account will be
(a) Rs.500
(b) Rs.400
(c) Rs.600
(d) Rs.1,000

Q.39. Balance as per cash book is Rs. 5,000. Cheques issued but not presented for payment Rs. 2,000 and cheques sent for collection but not collected Rs. 1,500. The Bank had wrongly debited the account of firm by Rs. 20. Balance as per pass book will be
(a) Rs. 5,500
(b) Rs. 5,480
(c) Rs. 5,700
(d) Rs. 8,300

Q.40. Following are the extracts from the trial balance of a firm as on 31st December, 2009:
Particulars Dr.
Rs.
Cr.
Rs.
Investments in 6% Debentures of A Ltd.
(Interest payable on 31st March and 30th September)
30,000
Interest on investments 900
The amount of accrued interest on 31st December will be
(a) Rs. 1,800
(b) Rs. 900
(c) Rs. 450
(d) None of the above.

Q.41. Following are the extracts from the Trial Balance of a firm as on 31st December, 2009.
Particulars Rs
Trade receivables : 30,000
Bad debts 5,000
Additional information:
(i) After preparing the trial balance, it is learnt that a customer, Mohan became insolvent and therefore, the entire amount of Rs.3,000 due from him was irrecoverable.
(ii) 10% provision for bad and doubtful debts is generally created. The amount of provision for bad and doubtful debts to be charged to profit and loss account will be
(a) Rs. 3,000
(b) Rs. 2,700
(c) Rs. 2,500
(d) None of the three

Q.42. X and Y are partners in a firm. During the year 2009, X withdrew Rs.1,000 p.m. and Y withdraw Rs.500 p.m. on the first day of each month for personal use. Interest on drawings is to be charged @ 10% p.a. The interest on drawings will be
(a) Rs. 650
(b) Rs. 975
(c) Rs. 900
(d) Rs. 1,800

Q.43. X and Y are partners in a firm sharing profits and losses in the ratio of 3:2. They have invested capitals of Rs.40,000 and Rs.25,000 respectively. As per the partnership deed, they are entitled to interest on capital @ 5% p.a. before dividing the profits. During the year, the firm earned a profit of Rs.3,900 before allowing interest. The net profit will be apportioned as
(a) Rs.260 to X and Rs.390 to Y
(b) Rs.390 to X and Rs.260 to Y
(c) Rs.2,340 to X and Rs.1,560 to Y
(d) Rs.1,560 to X and Rs.2,340 to Y

Q.44. Advertisement expenditure of Rs.10,000 paid on 30.12.2009, the advertisement in respect of which has appeared in the magazines of January, 2010.
This expenditure will be
(a) Shown as ‘expense’ in the financial statements of the year ended 31st December, 2009
(b) Shown as ‘liability’ in the financial statements of the year ended 31st December, 2009
(c) Shown as prepaid expense in the financial statements of the year ended 31st December, 2009
(d) None of the three

Q.45. Our acceptance to Mr. X for Rs.8,000 renewed for 3 months on the condition that Rs.2,000 is paid in cash immediately and the new bill to be drawn for remaining balance to carry out interest at 18% p.a. The amount of the renewed bill of exchange will be
(a) Rs.6,270
(b) Rs.8,270
(c) Rs.8,000
(d) None of the three

Q.46. On 1st January, 2009, Alpha Ltd. purchased a machine for Rs.50,000 and spent Rs.4,000 on its carriage and Rs.2,000 on its installation. On the date of purchase, it was estimated that the effective life of the machine will be 10 years and after 10 years its scrap value will be Rs.6,000. Depreciation is charged on straight line basis. Depreciation for the year 2009 will be
(a) Rs.4,600
(b) Rs.5,000
(c) Rs.4,800
(d) Rs.4,500

Q.47. Monu and Sonu are partners sharing profits and losses in the ratio of 2:1. Sonu gave a loan of Rs.12,000 to the firm. They did not have any specific agreement about interest on loan mentioned in the partnership deed. Sonu claims interest on loan @ 10% p.a. The interest on loan as per the rules of the Partnership Act, 1932 will be:
(a) Rs.840
(b) Rs.820
(c) Rs.720
(d) Rs.960

Q.48. Mr. X is a partner in a firm along with Mr. Y. Both contributed capitals of Rs.40,000 and Rs.50,000 respectively on the 1st of July, 2009. Interest on capital is to be charged @ 10% p.a. Books of account are to be closed on 31st December, 2009. Interest on capital is
(a) Rs.2,500
(b) Rs.2,000
(c) Rs.4,500
(d) None of the above

Q.49. APL firm has an average profit of Rs.60,000. Rate of return on capital employed is 12.5% p.a. Total capital employed in the firm was Rs.4,00,000. Goodwill on the basis of two years purchase of super profits is
(a) Rs.20,000
(b) Rs.15,000 
(c) Rs.10,000
(d) None of the above.

Q.50. APL transport company purchases a truck for Rs.2,00,000 on 1st January, 2009. It charges 20% depreciation p.a. according to w.d.v. method. The truck was sold on 1st July, 2010 for a sum of Rs.1,60,000.
The profit or loss on sale of truck is
(a) Loss of Rs. 16,000
(b) Profit of Rs. 16,000
(c) Profit of Rs. 12,000
(d) Loss of Rs. 12,000

Q.51. Sonu started business with cash Rs.50,000
Purchased goods from Mohan on credit Rs.20,000
Sold goods to Monu (costing Rs.3,000) for cash Rs.3,600
The accounting equation on the basis of the above transactions will be
(a) Assets Rs.70,600 = Laibilities Rs.3,600+Owner’s equity Rs.67,000
(b) Assets Rs.70,600 = Liabilities Rs.50,600+Owner’s equity Rs.20,000
(c) Assets Rs.70,600= Liabilities Rs.20,000+Owner’s equity Rs.50,600
(d) None of the three

Q.52. Value of physical inventory on 15.4.2010 was Rs.3,00,000. Sales amounting Rs.1,00,000 and purchases worth Rs.50,000 were held between 31.3.2010 and 15.4.2010. Goods are sold at a profit of 20% on sales. Value of inventory as on 31.3.2010 is
(a) Rs.3,50,000
(b) Rs.2,70,000
(c) Rs.3,30,000
(d) Rs.3,00,000

Q.53. X and Y entered into a joint venture agreement to share the profits and losses in the ratio of 2:1. A supplied 100 radio sets worth Rs.1,00,000 to Y incurring expenses of Rs.5,000 for freight and insurance. Y sold 95 radio sets for Rs.1,20,000. 5 radio sets were taken over by Y. The profit/loss on venture will be
(a) Profit of Rs.20,000
(b) Profit of Rs.15,000
(c) Loss of Rs.20,000
(d) Profit of Rs.20,250

Q.54. A cheque of Rs.1,000 received from Mukesh was dishonoured and had been posted to the debit of sales returns account.
The rectifying journal entry will be
Rs. Rs.
(a) Sales Returns A/c Dr. 1,000
    To Mukesh 1,000
(b) Mukesh Dr. 1,000
    To Sales Return A/c 1,000
(c) Mukesh Dr. 1,000
    Sales Returns A/c 1,000
(d) None of the above Dr. 1,000

Q.55.

Record of purchase of T.V.parts.
Date Quantity
Units
Price per unit
Rs.
March 4 900 5
March 10 400 5.50
Record of issues
March 5 600
March 12 400
The value of T.V. sets on 15 March, as per LIFO will be
(a) Rs.1,500
(b) Rs.1,650
(c) Rs.1,575
(d) None of the three

Q.56. A purchased a computer costing Rs.10,000. Repairing expenses Rs.1,000 and miscellaneous expenses Rs.500 were incurred by him on the Computer. He sold the computer at 20% margin on selling price. The sales value will be
(a) Rs.12,500
(b) Rs.11,000
(c) Rs.14,375
(d) Rs.13,800

Q.57. Pavan sold goods to Sodhi for Rs.1,00,000. Pavan will grant 5% discount to Sodhi. Sodhi requested Pavan to draw a bill. The amount of the bill will be
(a) Rs.1,00,000
(b) Rs.95,000
(c) Rs.93,800
(d) Rs.90,000

Q.58. A bill is drawn on 28th March, 2010 for one month after sight. The date of acceptance is 2nd April, 2010. The maturity date of the bill will be
(a) 1st May, 2010
(b) 28th April, 2010
(c) 5th May, 2010
(d) 2nd May, 2010

Q.59. Under mutual accommodation, Mohan drew a bill on Shyam for Rs.50,000 for 3 months. Proceeds are to be shared equally. Mohan got the bill discounted at 12% p.a. and remits required proceeds to Shyam. The amount of such remittance will be
a) Rs.24,250
(b) Rs.25,000
(c) Rs.16,167
(d) Rs.32,333

Q.60. Goods costing Rs. 10,000 were sold at 1/6 profit on selling price. The sale value will be
(a) Rs.12,000
(b) Rs. 12,500
(c) Rs. 10,000
(d) None of the three

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