Saturday, October 20, 2018

FINANCIAL ACCOUNTING MULTIPLE CHOICE QUESTIONS FOR UPCOMING EXAM


COVERING 8 MULTIPLE CHOICE QUESTIONS
(CORRECT ANSWERS ARE GIVEN IN RED LETTERS)
MULTIPLE CHOICE QUESTIONS ASKED IN 2011 EXAM
1. (a) choose the correct answer: (1x3=3)
(i)      Accounting standard board was set up in India in the year (1965/1971/1977)
(ii)    The total amount to be paid by the buyer under hire purchase system is called (cash price/ hire-purchase price/ market price)
(iii)   Cash sent by the branch not received by the head office by the end of the year is debited to (cash-in-transit/ goods-in-transit/ arrears cash account)
(b) Fill in the blanks: (1x3=3)
(i)      The cost of goods sold on hire purchase is transferred to Trading account.
(ii)    Royalty paid on sales is debited to Profit and Loss account.
(iii)   After making payment to third parties, the Loan due to partner is paid.
MULTIPLE CHOICE QUESTIONS ASKED IN 2012 EXAM
1. (a) Fill up the blanks:
(i) Heavy advertising to launch a new product is a __. (Capital Expenditure / Revenue Expenditure / Deferred Revenue Expenditure)
(ii) Valuation of inventories is account for as per Accounting Standard 3.
(iii) If inventory at branch is shown at invoice price instead of cost price, then the account which is used for adjustment is Branch Adjustment Account.
(iv) Royalty Account is __. (Nominal Account / Real Account / Personal Account)
(v) An unrecorded liability when paid on dissolution is debited to __. (Realisation Account / Partner’s Capital Account / Revaluation Account)
(b) Write true or false
(i) Branch Stock Account is always prepared at cost price.                              False
(ii) Under Stock and Debtor System, Branch Stock Account is a Nominal Account.                              False    
(iii) Under Stock and Debtor System, no entry is required for normal loss of stock.            False
MULTIPLE CHOICE QUESTIONS ASKED IN 2013 EXAM
1. (a) Write True or False:                             1x3=3
(i) Loss of stock by fire is shown on the credit side of Profit and Loss account.                      False
(ii) Hire-purchase transactions are governed by the Hire Purchase Act, 1972.                       True
(iii) When firms are amalgamated, Realisation accounts are prepared to close the books of such firms.   True
(b) Fill in the blanks:                        1x3
(i) Royalty paid on sales debited to Profit and Loss Account.
(ii) A branch is simply a separate unit of a business enterprise.
(iii) When a partner is not able to meet his liabilities, he is said to be insolvent.
(c) Choose the correct answer:                  1+1=2
(i) Accounting standard deals with depreciation is (5/6/7).
(ii) Under the stock and debtors system, Branch Stock Account is a (Personal Account/ Real Account/ Nominal Account).
MULTIPLE CHOICE QUESTIONS ASKED IN 2014 EXAM
1. (a) Fill in the blanks :                  1x4=4
a)      Accounting Standards Board was set up in India in the year 1977
b)      The cost of goods sold on hire purchase is transferred to Trading Account.
c)       Royalty paid on sales is debited to Profit and loss Account.
d)      In departmental accounts, each department is considered as a  Separate profit centre.
(b) Write ‘True’ or ‘False’:            1x4=4
a)      Accounting principles are formulated by the government.                    False
b)      The total amounted to be paid by the buyer under hire-purchase system is called hire-purchase price.  True                       
c)       In branch accounting, each branch has separate entity.                          False
d)      Short working is the excess of minimum rent over royalty payable for the year.                         True
MULTIPLE CHOICE QUESTIONS ASKED IN 2015 EXAM (NEW COURSE)
1. (a) Fill in the blanks:                                                                                                                                   1x4=4
a)      Balance Sheet is also known as Position  Statement.
b)      In hire-purchase system, the buyer charges depreciation on Cash price.
c)       Royalty Account is closed by transferring to Production or Profit and Loss Account.
d)      Branches are generally classified into Three types.
    (b) Write ‘True’ or ‘False’:                                                                                                                        1x4=4
a)      Profit & Loss Account shows the financial position of a concern.         False, Operating efficiency
b)      Profit on repossession of goods sold on hire-purchase system is a capital profit.        False, Revenue Profit
c)       Shortworkings is the excess of minimum rent over actual royalty.                     True
d)      In Departmental Accounts, each department is considered as a separate profit centre.          True
MULTIPLE CHOICE QUESTIONS ASKED IN 2015 EXAM (OLD COURSE)
1. (a) Write ‘Correct’ or ‘Incorrect’ :                                                                                                         1x4=4
a)      Unearned Income Account is a liability.                          True
b)      Cost of goods sold on hire-purchase is transferred to hire-purchase Trading Account.             True
c)       Minimum Rent is also known as ‘Rock Rent’ in Royalty Account.                         True
d)      When a partner is not able to meet his liabilities, he is said to be solvent.      True
    (b) Fill in the blanks:                                                                                                                                    1x4=4
a)      Valuation of inventories is accounted for as per the Accounting Standard 2.
b)      Hire-purchase transactions are controlled by the Hire-Purchase Act of 1972.
c)       Royalty paid on sales is debited to Profit and Loss Account.
d)      If inventory at branch is shown at invoice price instead of cost price, then the account which is used for adjustment is Stock reserve Account.
MULTIPLE CHOICE QUESTIONS ASKED IN 2016 EXAM (NEW COURSE)
1. (a) Fill in the blanks:                                                                                                   1x4=4
a)      Accounting Standard 6 deals with Depreciation Accounting.
b)      The total amount to be paid by the buyer under hire-purchase system is called Hire purchase price.
c)       Under Stock and Debtors system, Branch Stock Account is a real account.
d)      Royalty paid on sales is debited to Profit and Loss Account.
    (b) Write ‘True’ or ‘False’:                                                                                        1x4=4
a)      Loss of stock by fire is shown on the credit side of Profit and Loss Account.                  False
b)      Cost of goods sold on hire-purchase is transferred to Hire-Purchase Trading Account.             False,
c)       In Departmental Accounts, each department is considered as a separate profit centre.          True
d)      Royalty Account is a Real Account.                   False, Nominal Account
MULTIPLE CHOICE QUESTIONS ASKED IN 2016 EXAM (OLD COURSE)
1. (a) Write whether the following statements are ‘True’ or ‘False’:                                                         1x4=4
a)      Accounting principles are formulated by the Government.                   False, FASB
b)      Hire-purchase transactions are governed by the Hire-Purchase Act, 1972.     True
c)       Cash sent by the branch not receive by the head office by the end of the year is debited to arrear cash account.                         False, Cash in transit
d)      Royalty paid on sales is credited to Profit and Loss Account.                                 True
    (b) Fill in the blanks:                                                                                                                    1x4=4
a)      Valuation of inventories is accounted for as per Accounting Standard 2.
b)      Profit on repossession of goods sold on Hire-Purchase System is considered as a revenue profit.
c)       In Branch Accounting, each branch has separate existence.
d)      On dissolution of a partnership firm, cash in hand is transferred to Cash Account.
MULTIPLE CHOICE QUESTIONS ASKED IN 2017 EXAM (NEW COURSE)
1.       (a) Write ‘True’ or ‘False’                                                                                                      1x4=4
a)      Sales – Gross Profit = Cost of goods sold                       True
b)      There is no difference between Hire Purchase System and Instalment Purchase system.      False
c)       Under debtors system, Branch Account discloses profit or loss of the branch.                             True
d)      Royalty account is closed by transferring it to the Landlord’s account.                              False
(b) Fill in the blanks:                                                                                                        1x4=4
a)   Accounting Standard Board was set up in India in the year 1977.
b)   In hire purchase system, the buyer charges depreciation on the cashPrice.
c)    Selling expenses should be divided among the different departments on the basis of turnover.
d)   Short working is the excess of minimum rent over actual royalty.
MULTIPLE CHOICE QUESTIONS ASKED IN 2017 EXAM (OLD COURSE)
1.       (a) Fill in the blanks:                                                                                        1x4=4
a)      Revenue is generally recognized at the point of sale.
b)      In hire purchase system, the buyer charges depreciation on cash price.
c)       Royalty paid on sales is debited to Profit and Loss Account.
d)      After making payment to third parties, the loan due to a partner is paid.
(b) Write True and False:                                              1x4=4
a)      Accounting Standard Board was set up in India in the year 1977.
b)      The buyer has no option to return the goods in case of hire purchase.                            True
c)       Branch Stock A/c is always prepared at cost price.                     False
d)      When a partner is not able to meet his liabilities, he is said to be insolvent.                   True
CHAPTERWISE MULTIPLE CHOICE QUESTIONS
1. Final Accounts of Sole Traders and partnership
Tick the correct answer to each of the following statement given below:
1.       Unearned income is classified as Current liability.
2.       The balance of petty cash is an asset.
3.       Goodwill is an Intangible asset.
4.       Fixed assets are kept in the business for use over a long period for earning income.
5.       Closing stock is valued at cost of market price whichever is Lower.
6.       Medicine given to the office staff by a manufacturer of medicines will be debited to Salaries account.
7.       The claim admitted in respect of stock destroyed by fire will be credited to Trading Account and will go to the assets side of the Balance Sheet.
8.       Manufacturing account is prepared to ascertain the cost of goods manufactured.
9.       The profit and loss account shows operating efficiency/ net profit earned during a particular period.
10.   Balance sheet shows the financial position of the concern.
11.   Deferred expenses to the extent not written off is shown as an asset in the balance sheet.
State whether the following statement is True or False:
1.       Trading and profit and loss account is prepared for a particular period.  T
2.       Balance sheet is prepared on a particular date.  T
3.       Sales – cost of goods sold = Gross Profit.  T
4.       The provision for doubtful debts is debited to Profit and Loss Account.  T
5.       The provision for discount on creditors is generally not provided in the books of account keeping in view the principle of conservatism. F
6.       If closing stock is appeared in trial balance, it is credited to Trading account.  F
7.       The bad debts previously written off, if recovered subsequently are credited to debtor account.  F
8.       Income tax paid on behalf of the proprietor is debited to profit and loss account.  F
9.       Income tax and life insurance premium is treated as drawings.  T
10.   Prepaid rent appearing in the trial balance is taken only to profit and loss account.  F
11.   The expression depreciation at 5% and 5% p.a. convey the same meaning.  F
12.   Heavy advertising to launch a new product is Deferred revenue expenditure.  T
13.   Unearned income is an asset.  F
2. Royalty Accounts
Ø  Royalty is a nominal account.
Ø  Royalty is calculated either on the basis of production or on sales.
Ø  Royalty paid on sales is debited to P/L Account and Royalty paid on production is debited to production account.
Ø  Shortworkings is the excess of minimum rent over royalty.
Ø  Surplus is the excess of royalty over minimum rent.
Ø  Shortworkings recoverable in future are shown in the balance sheet on the assets side.
Ø  Shortworkings not recouped is debited to P/L Account.
Ø  When shortworkings is recovered debit is given to either royalties account or landlord account.
Ø  When there is no provision for recoupment of shortworkings, then shortworkings of each of the years is to be treated as irrecoverable shortworkings and hence transferred to profit and loss account.
Ø  Recoupment of shortworkings can be restricted or unrestricted.
Ø  Lump sum payment for purchase of patent, mine or book is known as Nazrana, Lease premium or Goodwill.
Ø  Lump sum payment for purchase of patent, mine or book is not royalty, it is an asset which is shown in the balance sheet.
Ø  Ground rent or surface rent in the rent payable by the lessee in addition to minimum rent.
3. Branch Accounting
Q. State whether the following Statements are ‘True’ or ‘False’:
1.       Under the stock and debtors system Branch Stock Account is a Nominal Account.  F
2.       Under stock and debtors system branch profit is ascertained by opening Branch Adjustment Account.  T
3.       Under debtors system Branch Account discloses profit or loss of the branch.  T
4.       Under debtors system, Branch Account is credited with opening balances of branch assets.  F
5.       Under debtors system, no entry is required in Branch Account for branch expenses paid by the branch out of petty cash.  T
6.       Under stock and debtors system no entry is required for normal loss of stock.  F
7.       Branch stock account is always prepared at cost price.  F
8.       In the case of foreign branches current assets and current liabilities are converted at the rate prevailing on the date of trial balance.  T
9.       In the case of branch keeping full system of accounting, (when branch fixed assets account is maintained in head office account) depreciation for the year is debited to profit and loss account and credited to head office account in branch books.  T
10.   The balances shown by head office account in branch books and branch account in head office books are always equal although the natures of balances differ.  F
11.   Under Debtors System, bad debts and discount allowed figure in the Branch Account.  F
12.   Under Debtors System, Debtors at close are shown on the Debit Side of the Branch Account after adjusting for Bad Debts, discount allowed etc.  F
13.   Under Debtors System, Depreciation is not shown in the Branch Account.  T
14.   Reserve for Bad Debts and Reserve for Discount on Debtors will be recorded separately in the Branch account under the Debtors system.  F
15.   Actual petty expenses incurred by the Branch Account under the Debtors system will not be recorded in the Branch Account.  T
16.   Sales Returns will not appear directly in the Branch Account under the Debtors System.  T
17.   Branch Account under Debtors System is a Real Account.  F
18.   Under Debtors System Branch Account is debited with losses like bad debts, discounts allowed and depreciation.  F
19.   When the Branch Manager is allowed petty cash on Imprest System, the amount remitted by Head Office to reimburse the actual expenses will be debited to the Branch Account.  T
20.   Branch Account is a nominal account in nature and is prepared in the Branch Books.  F
21.   Under debtors system, losses due to pilferage, wastage and other losses of stock due to normal and abnormal reasons are completely ignored.  T
22.   Branch account is a nominal account under debtors system.  T
23.   Branch account is a personal account under final account system.  T
 Q. Fill in the Blanks:
1.       The main establishment located at the main place of activity is called the Head Office and the subsidiary establishments located at various places are called Branch.
2.       Goods supplied to Dependent Branches by the Head Office may be either at Cost or at Invoice price.
3.       The One Account System or Debtors System is generally adopted when the branch is fairly small in size.
4.       Stock and debtors system or Analytical method is generally adopted when the branch is Large.
5.       Branch Account is Nominal in nature and is prepared in the Head Office Books
6.       Under Debtors System, credit sales, bad debts, return inward, discounts allowed and depreciation are not takes in the Branch Account.
7.       Under Debtors System fixed assets is shown on the credit side only after deducting the amount of depreciation, if any.
8.       Under the Debtors System, the Head Office will record all the transactions relating to the branch in the Branch Account through Debtors and Creditors relationship between the Branch and the Head Office.
9.       Under the Debtors System, the Reserve for Doubtful Debts /Reserve for Discount on Debtors should be deducted from closing Debtors and only the good closing debtors will be recorded in the Branch Account.
10.   Actual petty expenses incurred by the branch will will not be recorded in the Branch Account under the Debtors System.
4. Departmental Accounts
Fill in the blanks:
(a) When inter-departmental transfer is based on market price and there are unsold goods out of the transferred goods at the end of the accounting period, provision must be made for the Unrealised Profit on unsold goods included in the stock lying with the transferee department.
(b) Department accounts are prepared to know separately the Profit of each department.
(c) Selling Expenses should be divided among the different departments on the basis of Sales.
(d) Building expenses should be divided among the different departments according to the Space occupied by each department.
5. Hire Purchase and Installment Purchase System:
1. Each instalment including down payment is treated as hire charges by the: (b) Seller
2. Interest is charged on the amount: (b) Outstanding
3. In hire purchase, ownership of goods is transferred only when full and final payment is made. True
4. In instalment purchase system, ownership of goods is transferred immediately.                          True
5. Under Instalment System, the seller treats the transaction as a: (b) Credit Sale
6. The amount of Depreciation in Hire Purchase is charged on: (a) Cash Price Paid
7. In case of Hire Purchase system, the seller  _____ the goods in case of non – payment.  (b) Can repossessed
8. In case of Instalment Purchase system, the seller  _____ the goods in case of non – payment. (a) Cannot repossessed
9. Which of the following is not the feature of hire purchase?
(a) Total price are paid in instalments
(b) Only possession of goods is transferred immediately
(c) In case of default, seller has the right to repossess the goods.
(d) Ownership of goods transferred immediately.
10. When the goods are repossessed, Vendor will close the account of the hire purchaser by transferring the balance to: (c) Goods repossessed Account
11. In case of Hire Purchase, purchaser of the goods can dispose of the goods in any manner he likes.    False
12. In case of Instalment Purchase system, if there is default in the payment of any instalment, the seller has no right to repossess the goods.                     True
13. Each instalment is treated as hire charge till the last instalment is paid in case of Hire purchase basis.  True
14. HP Debtors is that part of instalment which is due but not paid by the buyer.                               True
15. HP Stock is the value of goods with the hire purchaser for which instalments will become due in subsequent accounting periods.                               True
16. Total interest is apportioned to the different instalments on the basis of amount due at different instalments. True
17. Hire purchase is governed by the sale of goods Act, 1932.                      True
18. Hire purchase is an agreement of hiring but instalment purchase is an agreement to sale.                      True
19. There is a difference between instalment purchase and credit sale.                  True
20. Each instalment includes payment towards cash price and interest.                  True      
21. Depreciation on fixed assets purchased on hire purchase system is charged in the books of purchaser. True
22. Total interest is apportioned to the different installments on the basis of amount due at different installments. True

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