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Fundamentals of Accounting
QUESTION PAPER
CPT 

FUNDAMENTALS OF ACCOUNTING

SECTION – A : FUNDAMENTALS OF ACCOUNTING (60 MARKS)

Q.1. It is generally assumed that the business will not liquidate in the near foreseeable future because of ___ concept.
(a) Periodicity
(b) Materiality
(c) Matching
(d) Going concern

Q.2. Which of the following is correct?
(a) Capital is equal to assets plus liabilities
(b) Assets is equal to liabilities minus capital
(c) Liabilities is equal to capital plus assets
(d) Capital is equal to assets minus liabilities

Q.3. Double column cash book records
(a) Only cash transactions
(b) All transactions
(c) Cash and bank transactions
(d) Cash purchase and cash sale transactions

Q.4. Errors of commission do not permit
(a) Incorrect totaling of the trial balance
(b) Incorrect totaling of the Balance sheet
(c) Trial balance to agree
(d) None of the above

Q.5. All of the following have debit balance except
(a) Wages account
(b) Trade receivables accounts
(c) Bills payable account
(d) Goodwill

Q.6. The term depletion is used for
(a) Fixed assets
(b) Natural resources
(c) Intangible assets
(d) None of the three

Q.7. A bill of exchange when drawn requires
(a) Noting
(b) Discounting
(c) Acceptance
(d) None of the above

Q.8. According to the provisions of the Reserve Bank of India, a promissory note cannot be made payable to the
(a) Bank
(b) Endorser
(c) Bearer
(d) None of the above

Q.9. Rs.5,000 spent to remove a worn out part and replace it with a new one is
(a) Capital expenditure
(b) Revenue expenditure
(c) Deferred revenue expenditure
(d) None of the above

Q.10. Outstanding salary account is
(a) Real account
(b) Personal account
(c) Nominal account
(d) None of the above

Q.11. Drawings are deducted from ___.
(a) Sales
(b) Purchases
(c) Expenses
(d) Capital

Q.12. The trial balance of Megha shows the opening inventory of Rs. 10,000 which will be ___.
(a) Debited to the trading account
(b) Credited to the trading account
(c) Deducted from closing inventory in the balance sheet
(d) Added to closing inventory in the balance sheet

Q.13. Purchase returns appearing in the trial balance are deducted from ___.
(a) Sales returns
(b) Capital
(c) Sales
(d) Purchases

Q.14. ___ will generally show a debit balance
(a) Bank Loan
(b) Bad debts recovered
(c) Salary payable
(d) Drawings

Q.15. Purchase of a fixed asset on credit basis is recorded in ___.
(a) Cash book
(b) Purchases book
(c) Journal proper
(d) None of the above

Q.16. Accounting means recording of ___.
(a) Transactions
(b) Events
(c) Both (a) and (b)
(d) Neither (a) nor (b)

Q.17. Unless given otherwise, the ratio of sacrifice is the same as ___.
a) New profit sharing ratio
(b) Equal ratio
(c) Old profit sharing ratio
(d) None of the above

Q.18. The ratio in which the continuing partners acquire the outgoing (retired or deceased) partner’s share is called ___.
(a) Sacrificing ratio
(b) Gaining ratio
(c) New profit sharing ratio
(d) Old profit sharing ratio

Q.19. A bill of exchange is called a ____ by one who is liable to pay it on the maturity date.
(a) Bill receivable
(b) Noted bill of exchange
(c) Bill payable
(d) None of the above

Q.20. The amount of calls in arrear is deducted ___ from to arrive at ___.
(a) Issued capital, called up capital
(b) Called up capital, issued capital
(c) Paid up capital, called up capital
(d) Called up capital, paid up capital

Q.21. Sumit places an order to Priyanka for supply of certain goods yet to be manufactured. On receipt of order, Priyanka purchases raw materials, employs workers, produces the goods and delivers them to Sumit. In this case, sale will be presumed to have been made at the time
(a) Receipt of order
(b) Production of goods
(c) Delivery of goods
(d) Purchase of raw material

Q.22. If a machinery is purchased for Rs. 1,00,000, the asset would be recorded in the books at Rs. 1,00,000 even if its market value at that time happens to be Rs. 1,40,000. In case, a year after, the market value of this asset comes down to Rs. 90,000, it will ordinarily continue to be shown at Rs. 1,00,000 and not at Rs. 90,000 due to
(a) Realization concept
(b) Present value concept
(c) Replacement concept
(d) Cost concept

Q.23. Mr. Riyaz deposited a cheque on 28th March, 2012 for a sum of Rs.10,000. The cheque was collected on 4th April, 2012. If the bank balance as per cash book on 31st March, 2012 is Rs.1,00,000, balance as per pass book will be
(a) Rs.1,10,000
(b) Rs.90,000
(c) Rs.1,00,000
(d) None of the above

Q.24. If cost of goods sold is Rs.1,00,000, sales is Rs.1,25,000, closing inventory is Rs.20,000, the gross profit will be
(a) Rs.45,000
(b) Rs. 5,000
(c) Rs. 25,000
(d) None of the three

Q.25. A enters into a joint venture with B. The goods were purchased by A and B amounting Rs.20,000 and Rs.40,000 respectively. C incurred the expenses of Rs.5,000. Goods were sold by A and B amounting Rs.22,000 and Rs.39,000. Goods unsold were taken over by B for Rs.2,000. The profit or loss on joint venture is
(a) Profit of Rs. 2,000
(b) Loss of Rs. 2,000
(c) Profit of Rs. 1,000
(d) Loss of Rs.1,000

Q.26. On 1st January, 2012, Rohan draws upon Rakesh a bill of exchange for three months, of Rs.2,000 for mutual accommodation. On 4th January, 2012 Mohan discounts the bill @ 6% per annum and sends half of the proceeds to Rakesh. The amount of proceeds sent to Rakesh will be
(a) Rs.1,000
(b) Rs.970
(c) Rs.985
(d) Rs.2,000

Q.27. XYZ Ltd. sells goods to its approved customers on sale or return basis at a profit of 20% on sales, treating as actual sales. On 26th March, 2012 goods costing Rs.10,000 were sent to Tannu Ltd. No confirmation has been received from Tannu Ltd. till 31st March, 2012. The amount of inventory with customers to be shown as closing inventory in the balance sheet of ABC Ltd. as on 31st March, 2012 will be
(a) Rs. 12,500
(b) Rs. 8,000
(c) Rs. 10,000
(d) Nil

Q.28. Rajesh and Rakesh are equal partners. Their capitals are Rs.40,000 and Rs.80,000 respectively. The profits for the year before charging interest on capital was Rs.6,000. The
accounts of the year were closed before providing interest @ 5% per annum as per partnership agreement. To rectify this mistake they decided to pass an adjustment entry between the partners. Therefore, Rajesh’s account needs to be debited by
(a) Rs.2,000
(b) Nil
(c) Rs.1,000
(d) None of the above

Q.29. Q, X and Y are partners in the ratio of 3:2:1. Z is admitted in the firm for 1/6th share in profits. X would retain his original share. The new profit sharing ratio between Q, X, Y and Z will be
(a) 12:8:5:5
(b) 8:12:5:5
(c) 5:5:12:8
(d) 5:5:8:12

Q.30. According to which concept, the owner of an enterprise pays the ‘interest on drawings’?
(a) Accrual concept
(b) Conservatism concept
(c) Dual aspect concept
(d) Entity concept

Q.31. A firm earns profit of Rs.1,10,000. The normal rate of return in a similar type of business is 10%. The value of total assets (excluding goodwill) and total outside liabilities are Rs.11,00,000 and Rs.1,00,000 respectively. The value of goodwill by capitalisation method is
(a) Rs.1,00,000
(b) Rs.10,00,000
(c) Nil
(d) None of the above

Q.32. The cost of inventory as per physical verification of BharatI Ltd. on 10th April, 2012 was Rs. 1,20,000. The following transactions took place between 1st April, 2012 to 10th April, 2012:
Cost of goods sold Rs.10,000
Cost of goods purchased Rs.10,000
Purchase returns Rs.1,000
The value of inventory as per books on 31st March, 2012 will be
(a) Rs. 1,19,000
(b) Rs. 1,11,000
(c) Rs. 1,21,000
(d) Rs. 1,20,000

Q.33. The following data has been provided by OTP Ltd.:
Item No. 1 2 3
Units 1 10 2
Cost per unit 10 5 2
Realization value
per unit
11 4 2
The value of inventory on item by item basis will be
(a) Rs. 40
(b) Rs.64
(c) Rs.66
(d) Rs.60

Q.34. Shila’s business disclosed the following profits for the last two years: 2010
           Rs.40,000 (including an abnormal gain of Rs.5,000)
2011 Rs.50,000 (After charging an abnormal loss of Rs.10,000)
The value of goodwill on the basis of one year purchase of the average profit of last two years is
(a) Rs.45,000
(b) Rs.37,500
(c) Rs.47,500
(d) None of the three

Q.35. Shyam sells goods for Rs.1,00,000 to Harish on 1st January, 2012 and on the same day draws a bill on Harish at three months for the amount. Harish accepts it and returns it to Ram, who discounts it on 4th January, 2012 with his bank at 12% per annum. The discounting charges are
(a) Rs.12,000
(b) Rs.4,000
(c) Rs.3,000
(d) Nil

Q.36. Ridhi started her business with capital of Rs.45,000 on 1st January, 2011. Interest on drawingsRs.5,000 and interest on capital Rs.2,000 were appearing in the Profit and Loss A/c for the year ended 31st December, 2011. Ridhi withdrew Rs.14,000 during the year and profit earned during the year amounted to Rs.15,000. Her capital on 31st December, 2011 is
(a) Rs. 67,000
(b) Rs. 47,000
(c) Rs.45,000
(d) Rs. 43,000

Q.37. The accountant of M/s BPL & Bros. paid personal income tax for the proprietor amounting Rs.10,000. This income tax should be
(a) Added to capital
(b) Credited to Profit & Loss Account
(c) Debited to Trading Account
(d) Deducted from capital

Q.38. Mukesh’s Trial balance provides you the following information
Bad debts Rs.10,000
Provision for doubtful debts Rs.15,000
Mukesh wants to make a provision of Rs.20,000 at the end of the year. The amount debited to the Profit & Loss Account is
(a) Rs. 45,000
(b) Rs. 5,000
(c) Rs. 15,000
(d) None of the above

Q.39. Following are the extracts from the Trial Balance of a firm as at 31st March, 2012:
Name of Account Debit
Balance

Rs.
Credit
Balance

Rs.
Salaries 16,000
P.F. deducted
from salaries
1,000
Provide for employer’s share of P.F. equivalent to employee’s share to P.F. The amount at which salaries expense will be shown in the Profit and Loss A/c is
(a) Rs.15,000
(b) Rs.17,000
(c) Rs.16,000
(d) None of the above.

Q.40. Rajsh Garments purchased a machine for Rs.50,000 and spent Rs.6,000 on its erection. On the date of purchase it was estimated that the effective life of the machine will be ten years and after ten years its scrap value will be Rs.6,000. The amount of depreciation for each year on straight line basis is
(a) Rs.5,000
(b) Rs. 5,600
(c) Rs.6,000
(d) None of the above

Q.41. Sweta Ltd. was formed as a Public Limited Company with an authorized capital of Rs.20,00,000 divided into shares of Rs.10 each. Sweta Ltd. issued fully paid up shares of Rs.10 each at a premium of 20%, in consideration for acquiring assets worth Rs.3,64,800 from M/s Rakib Bros. To record this transaction, share capital need to be credited by
(a) Rs.3,80,000
(b) Rs.76,000
(c) Rs.2,00,000
(d) Rs.3,04,000

Q.42. Mr. Sanjiv was the holder of 200 shares of Rs.10 each in RPG Ltd. upon which Rs.5 per share had been called up but he had paid only Rs.2.5 per share thereon. The company forfeited his shares and afterwards sold them to Suresh, credited as Rs.5 per share paid for Rs.900. The amount to be transferred to capital reserve is
(a) Rs.300
(b) Rs.500
(c) Rs.400
(d) None of the above

Q.43. ABL Ltd. forfeited 1,000 equity shares of Rs.10 each, issued at par, for non-payment of first call of Rs.2 and second call of Rs.3 per share. For recording this forfeiture, calls in arrear account will be credited by
(a) Rs. 4,000
(b) Rs. 1,000
(c) Rs. 5,000
(d) Rs. 10,000

Q.44. A fire broke out on 30th March, 2012 in the godown of Rajesh. Inventory of invoice value Rs.1,600 was destroyed. The goods were invoiced at 25% above cost. The insurance company admitted claim of 50% only. The insurance claim accepted was
(a) Rs. 640
(b) Rs. 600
(c) Rs. 800
(d) None of the above

Q.45. Salary has been paid for 11 months from April 2011 to February, 2012 amounting Rs.22,000. The amount of outstanding salary shown in the balance sheet will be
(a) Rs.1833
(b) Rs.2,000
(c) Rs.1,000
(d) None of the above

Q.46. On 1st April, 2011, Madhu invested capital of Rs.2,00,000. He withdrew Rs.50,000 during the year. Interest on drawings is provided @ 10% per annum. The amount of interest on drawings deducted from capital is
(a) Rs. 5,000
(b) Rs. 15,000
(c) Rs. 2,500
(d) Rs.7,500

Q.47. The Bank Account of Mahesh was balanced on 31st March, 2012. It showed an overdraft of Rs.50,000. It was observed that one cheque amounting Rs.20,000 deposited but not collected by bank till 31st March. Bank charges of Rs.500 were also charged by the bank during March but accounted in the book of Mahesh on April 4, 2012. The bank statement of Mahesh shows balance of
(a) Rs.70,500
(b) Rs.69,500
(c) Rs.70,000
(d) Rs.50,000

Q.48. Rs.5,000 was spent by Saroj for addition to machinery in order to increase the production capacity. The amount is
(a) Revenue in nature
(b) Deferred revenue in nature
(c) Capital in nature
(d) Liability in nature

Q.49. Pratap sells goods at 25% on sales. His sales were Rs.10,20,000 during the year. However, he sold damaged goods for Rs.20,000 costing Rs.30,000. This sale is included in Rs.10,20,000. The amount of gross profit is
(a) Rs. 1,90,000
(b) Rs.2,50,000
(c) Rs.2,40,000
(d) Rs.2,00,000

Q.50. The total of the debit and credit side of a trial balance of Mr. Rajiv as on 31st March, 2012 were Rs.20,000 and Rs.10,000 respectively. The difference was transferred to suspense account. On 4th April, 2012, it was found that the total of purchase returns book was carry forward as Rs.1,500 instead of Rs.1,400. The balance of the suspense account after the rectification of this error will be
(a) Rs.10,000
(b) Rs. 9,900
(c) Rs. 11,500
(d) Rs.10,100

Q.51. Capital introduced by Mr. ABL on 1.4.2011 Rs. 3,00,000; further capital introduced during the year was Rs. 50,000 in the mid of the year. Mr. ABL withdrew Rs. 2,000 per month and the profit earned during the year was Rs. 20,000. Capital as on 31.3.2012 will be
(a) Rs. 3,94,000
(b) Rs. 3,46,000
(c) Rs. 2,94,000
(d) None of the three

Q.52. Goods costing Rs.10,000 sent out to consignee at Cost + 25%. Invoice value of the goods will be
(a) Rs.12,500
(b) Rs.12,000
(c) Rs.10,000
(d) None of the above

Q.53. X, Y and Z are the partners sharing profits in the ratio 1:1:2. C died on 30th June 2012 and profits for the accounting year ended on 31st December, 2011 were Rs. 24,000. How much share in profits for the period 1st January, 2012 to 30th June, 2012 will be credited to Z’s Account?
(a) Rs. 12,000
(b) Rs. 6,000
(c) Nil
(d) Rs. 3,000

Q.54. A purchased a car for Rs. 5,00,000, making a down payment of Rs. 1,00,000 and signing a bill payable of Rs. 4,00,000. As a result of this transaction
(a) Assets will increase by Rs. 5,00,000
(b) Liabilities will increase by Rs. 4,00,000
(c) Assets will increase by Rs. 4,00,000
(d) Both (b) and (c)

Q.55. Sulekha purchased a machinery for Rs. 50,000 on 1.4.2011. She paid electricity charges and salary amounting Rs. 1,000 and Rs. 2,000 respectively. Telephone bill amounting Rs. 200 was outstanding on 31.3.2012. The amount of expenses for the year ended 31st March, 2012 will be
(a) Rs. 53,200
(b) Rs. 3,000
(c) Rs. 53,000
(d) Rs. 3,200

Q.56. Goods costing Rs. 10,000 is supplied to Ram at an invoice price of 10% above cost and a trade discount of 5%. The amount of sales is
(a) Rs. 11,000
(b) Rs. 10,450
(c). Rs. 10,500
(d) None of the above

Q.57. Madhu paid Rs. 1,000 towards a debt of Rs. 1,050, which was written off as bad debt in the previous year. Madhu account should be credited with
(a) 1,000
(b) 1,050
(c) Nil
(d) None of the three

Q.58. Mukesh , an employee gets salary Rs. 10,000 per month. He withdrew goods worth Rs. 1,500 for personal use and got salary of Rs. 9,000 in cash in the month of March, 2012. The excess payment of Rs. 500 should be debited to
(a) Salaries account
(b) Goods account
(c) Drawings account
(d) Salaries paid in advance account

Q.59. An old furniture was purchased for Rs. 10,000, it was repaired for Rs. 100. The repairs account should be debited by
(a) Rs.10,000
(b) Rs.10,100
(c) Rs.100
(d) Nil

Q.60. Rs.1,000 paid as rent to Krishna, the landlord, was debited to Krishna’s personal account. This error will
(a) Affect the trial balance
(b) Not affect the trial balance
(c) Affect the suspense account
(d) None of the three

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