ABBSOFT COMPUTERS

FINANCIAL ACCOUNTING
PART (A)- 1 MARK
1. The success of business depends on the factor.
a. Land
b. Labor and capital
c. Management
d. All of the above
Ans. (d)

2. _______ States that “anticipate no profits but provide for all possible losses”.
a. The Realization concept
b. Concept of prudence
c. Both a & b
d. The Accrual concept
Ans. (b)

3. Luca Fra Pacioli, _______ mathematician.

a. An Italian
b. An Indian
c. An American
d. None of the above
Ans. (c)

4. Voucher can be of
a. Two types
b. Three types
c. Four types
d. Six types
Ans. (b)

5. There are _______ elements of profit and loss Account.

a. Two
b. Three
c. Four
d. Five
Ans.(a)

6. The term Credit is derived from

a. French word
b. Greek word
c. Latin word
d. None of the above
Ans. (c)

7. _________ is the residual interest of owners in assets over liabilities.

a. Expenses
b. Income
c. Equity
d. None of the above
Ans.(d)

1
 ABBSOFT COMPUTERS

8. _________ records goods returned to the supplier (s).

a. Salas day book
b. Purchase day book
c. Returns Inward book
d. Return outward book
Ans.(d)

9. _________ records credit sale of traded goods.

a. Purchase day book
b. Sales day book
c. Cash book
d. None of the above
Ans.(b)

10. _________ of the cash book is not balanced

a. Discount column
b. Bank
c. Cash
d. All of the above
Ans.(a)

11. There are _______ types of primary books.

a. Two
b. Four
c. Six
d. Eight
Ans.(a)

12. The suffix “c/d” denotes

a. Carried down
b. Count down
c. Credit or debit
d. None of the above
Ans.(a)

13. Which of the following is a book of secondary entries/

a. Posting
b. Ledger
c. Account
d. None of the above
Ans.(b)

14. The account maintained by the bank for it customer is a

a. Pay-in-slip
b. Pass book
c. Mirror – version
d. None of the above

2
 ABBSOFT COMPUTERS
Ans.(b)

15. The bank reconciliation statement is

a. Not a part of books of accounts
b. A part of books of accounts
c. A part and parcel of books of accounts
d. Both b & c
Ans.(a)

16. ________ gives the details of transactions between bank and the customer.
a. Reconciliation statement
b. Bank statement
c. Pass book
d. Cash book
Ans.(a)

17. _________ is not a part of books of account.

a. Trial balance
b. P & L A/c
c. Trading A/c
d. Balance sheet
Ans.(a)

18. Trading account shows

a. Gross profit
b. Net profit
c. Notional profit
d. Both a & b
Ans.(a)

19. Omission of recording a transaction in the primary book is called

a. Error of principle
b. Error of omission
c. Both a & b
d. Error of commission
Ans.(b)

20. ________ shows the position of Assets and Liabilities of a business entity as on a particular
date.
a. P & L A/c
b. P & L appropriation A/c
c. Balance sheet
d. Suspense Account
Ans.(c)

21. In India Corporate entities registered as per

a. Companies Act 1948
b. Companies Act 1956
c. Banking Regulation Act 1947
d. None of the above

3
 ABBSOFT COMPUTERS
Ans.(b)

22. Reserve is the part of

a. Profit
b. Dividend
c. Bonus
d. All of the above
Ans.(a)

23. Minute books are maintained as per

a. Sec 143
b. Sec 157
c. Sec 193
d. Sec 307
Ans.(c)

24. The abridged statements shall be audited and approved by the

a. Board of Directors
b. Accountant
c. Finance Manager
d. All of the above
Ans.(a)

25. Historical cost of inventories may be determined by using

a. FIFO
b. LIFO
c. Both a & b
d. Variable Costing Method
Ans.(c)

26. Variable costing is also called

a. Direct costing
b. Absorption costing
c. Both a & b
d. None of the above
Ans.(b)

27. ________ have a residual interest in corporate profits.

a. Debenture Capital
b. Preference Share Capital
c. Equity Share Capital
d. Both a & b
Ans.(c)

28. Statutory books are required to be maintained by a Companies Act.

a. 1932
b. 1948
c. 1949
d. None of the above

4
 ABBSOFT COMPUTERS
Ans.(d)

29. Intangible assets

a. Have physical existence
b. Have no physical existence
c. Which can be seen
d. None of the above
Ans.(b)

30. The term ‘depreciable assets’ refers to:

a. Tangible assets
b. Tangible fixed assets
c. Intangible assets
d. None of the above
Ans.(b)

31. Prevision for taxation is shown under the head _______ in the Balance Sheet.
a. P & L
b. Reserves
c. Provision
d. All of the above
Ans.(a)

32. All dividends must be paid within _______ days of its declaration.
a. 37
b. 42
c. 48
d. 52
Ans.(a)

33. MODVAT was introduced by incorporating Rules 57A to 57J in the Central Excise Rules.
_____
a. 1932
b. 1944
c. 1952
d. None of the above
Ans.(d)

34. MODVAT was introduced in the year

a. 1980
b. 1989
c. 1992
d. None of the above
Ans.(d)

35. Which of the following is distribution of profits to shareholders?

a. Amortization
b. Effective Capital
c. Dividend
d. Provisions

5
 ABBSOFT COMPUTERS
Ans.(c)

36. Capital required to maintain routine operations is called

a. Fixed Capital
b. Working Capital
c. Fixed assets
d. All of the above
Ans.(b)

37. Short term obligations which have to be a met within the next twelve months is called
a. Current Assets
b. Working capital
c. Secured loans
d. Current liabilities
Ans.(d)

38. _______ denotes the loss in value on an asset due to wear and tear.
a. Provision of taxation
b. Dividend
c. Depreciation
d. None of the above
Ans.(c)

39. Managerial remuneration is payable to managerial personnel within the overall ceiling
prescribed in section of the Companies Act, _____.
a. 1956
b. 1959
c. 1947
d. 1955
ans.(a)

40. The Income Tax Act ________

a. 1958
b. 1968
c. 1972
d. 1961
Ans.(d)

41. Expand MAT

a. Modified Annual Tax
b. Minimum Alternative Tax
c. Maximum Annual Tax
d. Maximum Alternative Tax
Ans.(a)

42. An Annual Report comprises

a. Director’s Report
b. Auditor’s Report
c. Annual Account
d. All of the above

6
 ABBSOFT COMPUTERS
Ans.(d)

43. Loans obtained against hypothecation of an asset is called

a. Unsecured Loan
b. Capital
c. Secured Loan
d. All of the above
Ans.(c)

44. ICAI has issued Accounting Standard- 6 (AS-6) on:

a. Material charges
b. Dividend
c. Depreciation Accounting
d. All of the above
Ans.(c)

45. It is a part of total equity of a company. The holders of these shares enjoy certain privilege is
called
a. Equity Share capital
b. Preference Share capital
c. Capital Structure
d. Leverage
Ans.(a)

46. ‘It’ is an artificial account which appear in the Trial Balance to account for undetected errors.
Here ‘It’ stands for:
a. Fixed A/c
b. Reserve A/c
c. Suspense A/c
d. None of the above
Ans.(c)

47. Which of the following is arrived at by deducting the direct cost of goods sold from sales
proceeds?
a. Net profit
b. Gross profit
c. Balance Sheet profit
d. All of the above
Ans.(b)

48. Which of the following is a document supporting cheques deposited into the bank?
a. Bank statement
b. Pass book
c. Cash book
d. Pay-in-slip
Ans.(d)

49. Folio means the page of

7
 ABBSOFT COMPUTERS
a. A Journal
b. A Ledger
c. Both a & b
d. None of the above
Ans.(b)

50. Furniture Account is

a. Real A/c
b. Nominal A/c
c. Personal A/c
d. Representative Personal A/c
Ans.(a)

PART (B)- 2 MARKS

1. A credit sale of Rs.500 to Gopal has been wrongly passed through the purchase book. The
rectification entry will be
a. Gopal’s A/c Dr. 1,000
To purchase A/c 500
To sales A/c 500
b. Purchase A/c Dr. 500
To sales A/c 500
c. Gopal’s A/c Dr. 1,000
To purchase A/c 1,000
d. None of the above
Ans.(b)

.
2. ‘It’ is a control account maintained in the general ledger which records transactions of
individual customers accounts in a summarized manner. Here ‘It’ stands for
a. General Reserve A/c
b. Sundry Creditors A/c
c. Sundry Debtors A/c
d. Both b & c
Ans.(c)

3. Subsidiary Ledger is classified into

a. Main Ledger and Secondary Books
b. General Ledger: Debtors Ledger, Creditors Ledger
c. Both a & b
d. None of the above
Ans.(b)

4. Pass the Journal Entry for: sold goods on credit Rs.1,10,000

a. Sales A/c Dr. 1,10,000
To Debtors A/c 1,10,000

8
 ABBSOFT COMPUTERS

b. Debtors A/c Dr. 1,10,000

To Sales A/c 1,10,000

c. Goods A/c Dr. 1,10,000

To Sales A/c 1,10,000

d. None of the above

Ans.(b)

5. Purchased goods worth Rs.1,00,000 paying Rs.15,000 cash and balance payable after three
months. The elements included are:
a. Cash and Creditor
b. Purchase and Creditor
c. Purchase, cash and Creditor
d. Goods and cash
Ans.(c)

6. A ____________ Increase in liability, while _____________increase in liability.

a. Debit, Debit
b. Credit, Credit
c. Debit, Credit
d. Credit, Debit
Ans. (b)

7. Return inward = _____________, return outward = __________________.

a. Sales return, purchase return
b. Purchase return, sales return
c. Purchase return, purchase book
d. None of above.
Ans. (a)

8. The term petty is derived from _________ word “________” which means small.
a. French, petti
b. German, petty
c. Ital, petit
d. French, petit
Ans. (d)

9. 1. The compensating errors are most difficult to find out.

2. trail balance help in locating errors.
a. 1-true, 2-false
b. 1-true, 2- true
c. 1-false, 2-false
d. 1-false, 2- false.
Ans. (b)

10. ___________ is the person who draws the bills of exchange & __________ is the person to
whom the payment is to be made.
a. drawer, drawee

9
 ABBSOFT COMPUTERS
b. drawee, payee
c. payee, drawee
d. drawer, payee.
Ans. (d)

11. 1. Expenses and Losses = Debit

2. Decrease in assets and increase in Liabilities (also equity) = Credit

a. 1-True; 2-True
b. 1-False; 2-False
c. 1-True; 2-False
d. 1-False; 2-True
Ans .(a)

12. 1. The schedules to the Balance Sheet and Profit & Loss A/c contain as much details as
Possible.
2. Finance charges include lease rentals, bank commission, and bank charges. Etc.
a. 1-True; 2-False
b. 1-False; 2-False
c. 1-True; 2-True
d. 1-False; 2-True
Ans.(c)

13. 1. Double entry accounting is not followed while recording transactions.

2. The books of accounts are maintained on accrual basis.
a. 1-True; 2-True
b. 1-False; 2-False
c. 1-True; 2-False
d. 1-False; 2-True
Ans. (d)

14. Salary of Rs.200 paid to the Cashier, gopal has been debited to his personal A/c. The
rectification entry will be:
a. Salary A/c Dr. 200
To Gopal’s A/c 200

b. Gopal’s A/c Dr. 200

To Salary A/c 200

c. Cash A/c Dr. 200

To Salary A/c 200

d. None of the above

Ans. (a)

15. Journal is used as the book of _________ entry which cannot be recorded in __________.
a. secondary, jounal

10
 ABBSOFT COMPUTERS
b. primary, cash book
c. entries, sales book
d. primary, cash book
Ans. (d)

16. (I) Stock refers to the unsold goods lying in the business on a certain date.
(II) Opening & closing stock accounts have to be regarded as assets account
Which of the above statement are not correct.
a. Only I
b. Only II
c. Neither I & II
d. Both I & II

17. In ________ transaction personal account may or may not be involved while in _________
Transaction personal account is definitely involved.
a. General, journal
b. Cash, sales
c. Credit, purchase
d. Cash, credit
Ans.(d)

18.The _______ of an enterprise consists of all promissory motes given by customer while
__________ consist of all promissory notes accepted by the business in restpect of amounts owing to
its suppliers.
a. B/E, B/R
b. B/R,B/P
c. A/R,B/E
d. B/P,B/R
Ans. (b)

19. Match the following

A.
1.It is the process of transferring debits & credits from the journal & other books of original entry to
their accounts in the ledger
2. it is process of ascertaining that a particular account has received more benefits than it has
received on particular date.
B.
1.Balancing
2. Posting

a. 1-2,2-1
b. 1-1,2-2
c. neither of above
d. only 1-2.

Ans.(b)

20___________ method of depreciation is the most simple method of depreciation. To compute

depreciation by ________method initial cost & estimated life need to considered.

11
 ABBSOFT COMPUTERS
a. Straight line , reducing balancing
b. Straight line, written down value
c. Reducing balancing, Straight line
d. Straight line, Straight line
Ans. (d)

PART (C)- 4 MARKS

ABC Ltd., maintains a Current Account with the S.B.I. Bank 31st March 2004, the bank
column of its cash allowed a debit balance of Rs.1, 54,300. However, the Bank statement showed a
different balance as on that date.
Reasons:
Cheques deposited but not yet the bank Rs.75, 450
Cheques issued but not yet presented Rs.80,760 Bank charges not yet recorded in the cash book
Rs.1,135
Cheque received by the bank directly Rs.1,35,200 Insurance premium paid by the bank as per
standing instructions not yet intimated Rs.15,400

By preparing reconciliation statement answer Q.No. 61-65.

1. What is the total amount to be deducted from Bank balances as per the Cash book?
a. Rs.1, 35,200
b. Rs.2, 15,960
c. Rs.91,985
d. None of the above
Ans.(c)

2. What is the total amount to be added to Bank Balance as per the Cash book?
a. Rs.1, 80,760
b. Rs.1, 90,850
c. Rs.2, 15,960
d. None of the above
Ans.(c)

3. What is the balance as per the Bank Statement?

a. Rs.1, 54,300
b. Rs.1, 35,200
c. Rs.3, 70,000
d. None of the above
Ans.(d)

4. What is the total balance after adding the amount to be added to the Bank balance as per the
Cashbook but before deduction?
a. Rs.2, 15,960
b. Rs.3, 70,260
c. Rs.4, 15,150
d. None of the above

12
 ABBSOFT COMPUTERS
Ans.

Q.no: 70-75

TRIAL BALANCE
as on 31st December 2002

Particulars Dr. Rs. Cr. Rs.

R. Rajan’s Capital 2,90,000
R. Rajan’s Drawings 7,600
Purchase and Sales 89,000 1,50,000
Sales and Purchase Return 89,00 4,500
Stock (1-1-2002) 12,000
Wages 8,000
Building 2,20,000
Freight and Carriage 20,000
Trade Expenses 2,000
Advertisement 2,400
Interest 3,500
Taxes and Insurance 1,300
Debtors and Creditors 65,000 12,000
Bills Receivable and Bills Payable 15,000 7,000
Cash at Bank 12,000
Cash in hand 1,900
Salaries 8,000

4,67,000 4,67,000

Adjustments:
1. Stock on 31st December, 2002 was valued at Rs.15,000.
2. Insurance was prepaid to the extent of Rs.400
3. Outstanding liabilities were: Salaries Rs.2,000, Taxes Rs.1,300.
4. Depreciate Building at 2% p.a.

5. The gross profit is

a. 35,000
b. 36,700
c. 37,700
d. 38,700
Ans. (c)

Q 6. The net profit is

a. 20,000
b. 20,200
c. 21,000
d. 21,200

13
 ABBSOFT COMPUTERS
Ans.(b)

Q 7. The balance for tax and insurance posted in P&L account is

a. 2,000
b. 2,200
c. 2,500
d. 3,000
Ans.(b)

Q 8. The total amount in balance sheet of assets side is

a. 3,50,900
b. 3,34,900
c. 3,54,900
d. 3,24,900
Ans.(d)

Q 9. The capital amount to be posted in liability side is

a. 3,02,600
b. 3,06,200
c. 3,03,000
d. 3,10,200
Ans.(a)

10. Match the following:

A
1. Non-cash resources & obligations change in time periods other than those in which money is
received or paid.
2. It is based on the concept that to find out the profitability, the expenses incurred to generate
the revenue are to be matched against that revenue.
3. Assets are always recorded at acquisition cost and that cost becomes the basis for all future
accounting for the asset.
4. This concept tells that to recognize revenue it has to be ‘realized’.
B.
1. Realization concept
2. Accrual concept
3. Matching concept
4. Cost concept

a. 1-2, 2-4, 3-3, 4-1

b. 1-2, 2-3, 3-4, 4-1.
c. 1-3, 2-4, 3-3, 4-2
d. 1-1, 2-3, 3-2, 4-4
Ans. (b)

11. Match the following:

A. 1. Manipal academy of higher education.
2. Building account

14
 ABBSOFT COMPUTERS
3. Goodwill account
4. Salary account

B 1. Nominal account
2. Tangible assets account
3. Intangible assets account
4. Personal account
a. 1-2, 2-4, 3-3, 4-1
b. 1-1, 2-3, 3-4, 4-2.
c. 1-4, 2-2, 3-3, 4-1
d. 1-2, 2-4, 3-1, 4-4.
Ans. (c)

12. Match the following:

A
1. These assets are mere debit balances, i.e. expenses or loses carried forwarding one year to
another.
2. These assets are either in the form of cash or quickly converted into cash.
3. These fixed assets are exhausted or lost through the use.
4. These are non-physical assets.
B
1. wasting assets
2. intangible assets
3. liquid assets
4. fictitious assets.

a. 1-1,2-3,3-4,4-1
b. 1-3,3-4,3-2,4-1
c. 1-4,2-3,3-1,4-2.
d. 1-4,2-3,3-2,4-1
Ans. (c)

13.Which of the following statement is correct:

1. accounting machines are used only for journalizing & posting.
2. www provides internet technology to navigate the vast resources available in the market.
3. AS-9 of ICAI deals with fixed assets.
4. AS-10 of ICAI deals with depreciation accounting
a.1,2,3
b. 2,3
c. only 2
d. 3,4

Ans.(c)

14. On 1st March , 2008, Ram drew a 3 months’ bill on Rahim for Rs. 500, which was
duly accepted. Ram discounted the bill with his banker at 8% per annum. The bill was
duly honored on the due date. Which of the following entries will be made in the
books of Rahim:
1. Ram account Dr. 500
To B/P account 500

15
 ABBSOFT COMPUTERS
2. B/R account Dr. 500
To Rahim Account 500
3. B/P account Dr. 500
To Cash A/c 500
4. cash account Dr. 490
To B/R account 490

a. 1,3
b. 2,3
c. 1,4
d. 2,4
Ans. (a)

15.what will be the total of assets side according to the accounting equation on the basis of
the following transactions.
1. Ramesh started Business with Rs. 2,00,000.
2. purchased goods on credit from Ashok Rs. 40.000
3. sold goods for cash Rs. 26000, costing Rs. 22000.

a. Rs.226000
b. Rs.240000
c. Rs.224000
d. Rs.204000
Ans.(c)

ANSWERS

1. d 2. b 3. c 4. b 5. a 6. c 7.
d

8. d 9. b 10. a 11. a 12. a 13.b

14. b

15. a 16. a 17. a 18. a 19. b 20. c 21. b

22. a 23. c 24. a 25. c 26. b 27. c 28. d

29. b 30. b 31. a 32. a 33. d 34. d 35. c

36. b 37. d 38. c 39. 40. d 41. a 42. d

16
 ABBSOFT COMPUTERS

43.c 44. c 45. c 46. 47. a 48. d 49. c

50. b 51. d 52. b 53. a 54. b 55. a 56. c

57. b 58. b 59. c 60. a 61. c 62. c 63. d

64. 65. 66. 67. 68. 69.

70. c

71. b 72. b 73. d 74. a

17