MCQs on Investment Accounting 2023
Meaning of Investments
The term ‘Investment’ refers to funds invested in various securities consisting of government and semi-government loans, debentures of local authorities such as port trusts, municipal corporations and the like and debentures and shares of companies.
Meaning of Investment Account
The accounts of investments are kept in the same way as the accounts of any other asset. A separate investment account should be opened for each kind of security and on the head of the account particulars regarding the nature of the security, dates when interest or dividend is due, the date of redemption etc. should be stated. When the number of investments carried is large, a separate investment Ledger is employed for recording all investment accounts.
1. Investment account is a:
a)
Personal Account
b) Real
Account
c)
Nominal Account
Ans: b) Real Account
2. Accounting for Investments is
done as per:
a) AS –
12
b) AS –
13
c) AS –
14
d) AS –
15
Ans: b) AS – 13
3. Current investments are
valued at:
a) Cost
b) Fair
value
c) Cost
or fair value whichever is lower
d) None
of these
Ans: c) Cost or fair value whichever is lower
4. Long term or non-current
investments are valued at:
a) Cost
b) Fair
value
c) Cost
or fair value whichever is lower
d) None
of these
Ans: a) Cost
5. When investments are
reclassified from current to long-term, transfers are made at:
a) Cost
b) Fair
value
c) Cost
or fair value whichever is lower
d) None
of these
Ans: c) Cost or fair value whichever is lower
6. Cost of bonus shares is:
a) Fair
market value
b) Nil
c) Cost
of original investment
d) None
of these
Ans: b) Nil
Also Read: Multiple Choice Questions and Answers
- Advanced Financial Accounting MCQs 2023
- Accounts of Banking Companies MCQs
- Accounts of Life Insurance Companies MCQs
- Accounts of General Insurance Companies MCQs
- MCQ on Investment Accounting
- Advanced Financial MCQs (Dibrugarh University 2013 to 2023)
7. Investments hold for more
than one year is known as:
a)
Trade investment
b)
Marketable securities
c) Both
a & b
d) None
of the above
Ans: a) Trade investment
8. Investment hold for less than
or upto one year is called:
a)
Temporary Investments
b)
Current investments
c) Marketable
securities
d) All
of the above
Ans: d) All of the above
9. Which of the following
investments is not true?
a)
Current investments are in the nature of current assets.
b)
Trade investments are in the nature of non-current assets.
c) Cost
of investment includes brokerage at the time of purchase.
d) Cost
of investment includes brokerage paid at the time of sale.
Ans: d) Cost of investment includes brokerage paid at the time of sale.
10. Income-tax on interest,
dividends and rent should be
a)
Debited to provision for taxation.
b)
Credited to provision for taxation.
c)
Deducted from interest, dividends and rents.
d) None
of these
Ans: c) Deducted from interest, dividends and rents.
11. A provision
for diminution in the value of a non-current investment should be made when the
decline is believed to be:
a)
Temporary
b)
Permanent
c) None
of these
Ans: b) Permanent
12. Investments
other than current investments are classified as long term investments even
though they:
a) Are
readily marketable
b) May
not be readily marketable
c) Both
a & b
d) None
of these
Ans: a) Are readily marketable
Fill in the
Blanks:
1. Investments hold for more than
one year to earn continuous income or to control business is called trade
investments.
2. Investment held with a view to
buy or sale is known as temporary investments or current investments or
marketable securities.
3.
Current investments
are valued at cost or fair value whichever is
lower and fixed investments are valued at cost.
4. Investment account is real
account.
5. Assets held as stock-in-trade
are not investments.
6. Sale of right is a capital
receipt in case of right issue.
7. Brokerage is included in
the cost of investment in case of purchase and brokerage are deducted with
the cost of investment in case of sale.
8. FIFO and average cost method is used to calculate cost
of closing balance of investment.
9. Cost of Bonus shares is nil.
10. Accounting for
investments: AS – 13
11. In case of cum-interest,
interest is included in quoted price and in case of
ex-interest, interest is excluded from quoted price.
12. Real price of investment
is Ex-interest/dividend
price.
State whether the following
statements are true or false:
1. A
current investment by its very nature is readily realisable. True
2. Cost
of investment includes brokerage and acquisition fees. True
3.
Bonus shares are issued only to the equity shareholders. True
4. The
carrying amount of non-current investment is cost or fair value whichever is
lower. False
5. The
carrying amount of current investment is
cost. False
6.
Brokerage on disposal of investment is excluded while calculating cost of
investment. True
7.
Current investments and non-current investments are disclosed distinctly in the
financial statements. True
8.
Market value or net realisable value provides an evidence of fair value.
True
9. When
the investment is a fixed asset, any profit or loss made on the sale is capital
profit. True
10.
Right shares are first offered to the existing shareholders of the
company. True
11.
Brokerage on purchase of investment is added while calculating cost of
investment. True
FAQs
1. Why do we need investment accounting?
Ans: Purpose of maintaining an investment ledger is as follows: a) It helps in keeping a record of each investment separately. b) It helps to ascertain the value of securities at the end of the account period. c) It is helpful in ascertaining the amount of accrued income at the end of the accounting period.
2. What are types of investment?
Ans: There are mainly two types of investment as per AS-13: Fixed Investments also known as Trade Investments and Current Investments Also Known as Marketable Securities.
3. What are 4 examples of investment?
Ans: 4 Main examples of Investments are: Equity, Mutual funds, Bonds and Debentures.
4. Which is not considered as investment as per accounting standard 13?
Ans: Investment in Insurance policies, FD in Post office, Investment in PPF etc are not considered as investment as per accounting standard 13.
5. Which method is used to calculate cost of closing balance of investment?
Ans: Fifo and Average cost method is used to calculated cost of closing balance of investment.
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