Mid Term Mock

Name: __________________ Date: _____________ Total Marks: 80

1. Expenditures which provide benefits in future period are called:

(a) Revenue expenditure
(b) Outstanding expenditure
(c) Current expenditure
(d) Capital expenditure

2. Which one is a capital transaction?

(a) Purchase of goods
(b) Payment of wages
(c) Sale of goods
(d) Purchase of machinery

3. The capital of a business would change as a result of:

(a) A supplier being paid by cheque
(b) Non-current assets being purchased on cash
(c) Non-current assets being purchased on credit
(d) Wages being paid in cash

4. Cash invested in the business by the owner is called

(a) Current asset
(b) Non-current asset
(c) Liabilities
(d) Capital

5. Cash or goods taken away by the proprietor is called

(a) Drawings
(b) Sales
(c) Charity
(d) Expense

6. Which of the following is not true:

(a) Revenue – Expenses = profit
(b) Revenue – Profit = Expenses
(c) Sales + Gross Profit = Revenue
(d) Revenue = Profit + Expenses

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7. Expenses paid by a business decrease:

(a) Cash
(b) Capital
(c) Cash and capital
(d) Capital and Accounts payable

8. What double entry would be made to record the purchase of an item of machinery on
credit?
(a) Debit machinery, credit cash
(b) Debit machinery, credit accounts payables
(c) Debit purchases, credit trade payables
(d) Debit trade payables, credit machinery

9. What transaction is presented by the entries: debit bank, credit Receivables?

(a) Sale of goods for cash
(b) Purchase of goods for cash
(c) Receipt of cheque from receivables
(d) Payment of cheque to payables

10. A debit entry usually represents increase in:

(a) Assets and Income
(b) Liabilities and Income
(c) Assets and Expenses
(d) Liabilities and Expenses

11. In which book of prime entry does cash purchases worth Rs. 500,000 would be recorded?
(a) Petty cash book
(b) Cash book
(c) Purchase day book
(d) Accounts payable book

12. In which book of prime entry does cash sales worth Rs. 250,000 would be recorded?
(a) Petty cash book
(b) Cash book
(c) Sales day book
(d) Accounts receivable book

13. The statement including balances of ledgers and prepared normally at end of each month is
termed as:
(a) General ledger
(b) Statement of financial position
(c) Trial balance
(d) Bank reconciliation statement

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14. Which of the following head of account balance shall be shown on credit side of trial
balance?
(a) Carriage Inwards
(b) Return Inwards
(c) Return outwards
(d) Carriage outwards

15. Discount allowed of Rs. 1,500 was recorded on the credit side and discount received of Rs.
1,800 was recorded on debit side of trial balance.
The difference in trial balance was?
(a) No difference
(b) Rs. 300
(c) Rs. 600
(d). Rs. 3,300

16. Which of the following accounts are closed at the end of the financial year to statement of
comprehensive income?
• Assets
• Expenses
• Liabilities
• Income
• Capital

17. Which of the following is the effect on net profit if a business decreases provision for
doubtful debts?
(a) It will increase net profit
(b) It will decrease net profit
(c) It will increase gross and net profit
(d) No effect
18. Which of the following statement best describes the concept of Equity?
(a) Primary right of owners on the assets of the business
(b) Residual right of owners on the assets of the business
(c) Secondary right of owners on the assets of the business
(d) Equity refers to capital employed into business

19. Total assets of the business are Rs. 250,000 and current assets are 25% of non-current
assets. If the liabilities of the business are Rs. 100,000 and equity was 6 times more than its
current liabilities, the value of net current assets (current assets minus current liabilities)
shall be:
(a) Rs. 25,000
(b) Rs. 37,500
(c) Rs. 50,000
(d) Cannot be calculated from above data

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20. What is the nature of allowance for doubtful debt account?

(a) An asset
(b) A liability
(c) An equity
(d) Contra asset account

21. Which of the following is not included in definition of Liability in accordance with conceptual
framework?
(a) Present obligation of the entity
(b) Future obligation of the entity
(c) As a result of past event
(d) The settlement of which is expected to result in an outflow of resources

22. Which of the following items will be debited to payable account in journal entry?
(a) Payment to credit supplier
(b) Cash purchases
(c) Refunds from a credit supplier
(d) Balance due

23. Columns in three column cash book on payment side shall be:
(a) Cash, Bank and Discount Allowed
(b) Cash, Bank and Discount Received
(c) Cash, Discount Allowed and Discount Received
(d) Bank, Discount Allowed and Discount Received

24. Which of the following shall be recorded in petty cash book?

(a) Cash received from customer
(b) Cash paid to supplier
(c) Cash purchase
(d) Travelling expense

25. Shakeel's books showed accounts receivable balance of Rs. 360,000 as at 30 June 2022 and
5% allowance was created. An amount of Rs. 6,300 was charged to statement of
comprehensive income for the year ended 30 June 2022. Subsequently, it was discovered
that bad debts recovered was included in cash received from receivables amounting to Rs.
5,500 and further discount allowed of Rs. 3,500 was written on debit side of receivable
ledger.
Which of the following statement is correct as a result of the above error?
(a) Charge for the year was overstated by Rs. 75
(b) Charge for the year was understated by Rs. 75
(c) Charge for the year was overstated by Rs. 100
(d) Charge for the year was understated by Rs. 100

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26. Armaghan's receivables ledger balance as at 30 June 2022 was Rs. 480,000 before making
the following adjustments:
• Armaghan had identified that Kashif Enterprise’s debt of Rs. 8,500 should be written off.
• Armaghan intends to make 60% allowance against receivables of Rs. 15,000 from Rajput
Co.
• Armaghan’s estimate is to create a general allowance of 4% of receivables balance,
whereas the opening balance of allowance was Rs. 16,800.
Which of the following statement is true?
(a) Specific allowance Rs. 15,000 and general allowance Rs. 18,260 was created
(b) Specific allowance Rs. 9,000 and general allowance Rs. 18,260 was created
(c) An amount of Rs. 10,460 was charged to statement of comprehensive income
(d) Net receivables of Rs. 438,240 was shown in statement of financial position
27. Which of the following treatment is correct?
(a) Bad debts written off are charged to profit and loss and deducted from accounts
receivables as allowance for doubtful debts
(b) Increase in allowance for doubtful debts is charged to profit and loss and closing balance
of allowance for doubtful debts is deducted from accounts receivables
(c) Bad debts written off are subtracted from increase in allowance and net amount is
charged as expense
(d) Bad debts written off and decrease in allowance are added and total amount is charged
as expense

28. Which of the following is NOT a terminology used in maintaining petty cash book system?
(a) Imprest System
(b) Reimbursement of expenses
(c) Cash float
(d) Cash budgets

29. Any transaction, which cannot be recorded in any other book of prime entry, is recorded in?
(a) Cash book
(b) Petty cash book
(c) General journal
(d) Day books

30. Mr. Khan is our customer and supplier as well. The amount due to Mr. Khan was Rs. 25,800
and the amount due from Mr. Khan was Rs. 29,600.
Which of the following entry is correct on account of the above contra settlement?
(a) Dr. Receivables Rs. 3,800 and Cr. Payables Rs. 3,800
(b) Dr. Payables Rs. 3,800 and Cr. Receivables Rs. 3,800
(c) Dr. Payables Rs. 29,600 and Cr. Receivables Rs. 29,600
(d) Dr. Payables Rs. 25,800 and Cr. Receivables Rs. 25,800

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31. The opening and closing allowances of doubtful debts of a company were Rs. 15,200 and Rs.
16,800. The accountant treated opening allowance as closing allowance and vice versa.
Which of the following statements is true as a result of the above error?
(a) Charge for the year was overstated by Rs. 1,600
(b) Charge for the year was understated by Rs. 1,600
(c) Charge for the year was overstated by Rs. 3,200
(d) Charge for the year was understated by Rs. 3,200

32. Consider the following accounting treatment, and identify which of the following TWO
statements are correct?
(a) Rent received in advance was recorded as current liability
(b) Salaries unpaid at year end was recorded as current liability
(c) Accrued interest expense was recorded as current asset
(d) Prepaid expense was recorded as non-current asset

33. A prepaid expense adjustment is recognized as:

(a) Increase in expense and increase in current asset
(b) Increase in expense and decrease in current liability
(c) Decrease in expense and increase in current asset
(d) Decrease in expense and decrease current liability

34. Which TWO of following entries can be passed, if bad debts recovered during the year?
• Dr. Bad debts expense and Cr. Accounts receivables
• Dr. Accounts receivables and Cr. Bad debts expense
• Dr. Cash and Cr. Bad debts expense
• Dr. Cash and Cr. Bad debts recovered

35. Which of the following statements is correct?

(a) Net Sales = Gross sales – sales return – discount allowed
(b) Gross Sales = Net sales – sales return – discount allowed
(c) Net Sales = Gross sales – sales return + discount received
(d) Gross Sales = Net Sales

36. Adil sublets part of his premises to Abid, the rental income shall be classified as?
(a) Capital Receipt
(b) Capital Expenditure
(c) Revenue Receipt
(d) Revenue Expenditure

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37. Sultan traders deals in electric fans. The owner of Sultan traders took one electric fan for his
home, which of the following account will be debited?
(a) Fans account
(b) Purchases account
(c) Sales account
(d) Drawings account
38. Accounts receivables, net of allowance were Rs. 66,500 as at 1 July 2021 and Rs. 76,000 as
at 30 June 2022. The company’s estimate is to create a general allowance at 5% of
receivable balance. During the year ended 30 June 2022, cash sales of Rs. 50,000 were
made; cash of Rs. 125,500 and cheque of Rs. 130,000 were received, of which Rs. 5,500 was
related to bad debts recovered. Irrecoverable debts to be written off were Rs. 9,000;
discount allowed and received Rs. 3,000 and 2,000 respectively, whereas contra settlement
with payables was Rs. 6,000.
What was the sales amount which shall be recognized as revenue in the statement of
comprehensive income for the year ended 30 June 2022?
(a) Rs. 279,000
(b) Rs. 278,000
(c) Rs. 277,500
(d) Rs. 328,000

39. Which of the following net amount is charged to the profit and loss account during the
year?
(a) Bad debts written off + bad debts to be written off + Decrease in allowance – bad debts
recovered
(b) Bad debts written off + bad debts to be written off + increase in allowance – bad debts
recovered
(c) Bad debts written off + bad debts to be written off + Decrease in allowance + bad debts
recovered
(d) Bad debts written off + bad debts to be written off – Increase in allowance – bad debts
recovered

40. Receivables balances at start and end of year were Rs. 175,000 and Rs. 193,000. Discount
allowed Rs. 6,000; Discount received Rs. 3,000; Bad debts written off Rs. 2,000; Bad debts to
be written off Rs. 4,000. Increase in allowance Rs. 6,700; Cheque received from suppliers Rs.
53,000 and from customers Rs. 356,000; Cash sales Rs. 45,000; Sales returns Rs. 6,000 (of
which one-third related to cash sales).
What will be net credit sales for the year?
(a) Rs. 382,000
(b) Rs. 427,000
(c) Rs. 425,000
(d) Rs. 431,000

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41. Debit represents all of the following, except:

(a) Increase in asset
(b). Decrease in liability
(c) Decrease in equity
(d) Increase in equity

42. While finalizing the accounts, Mujahid overlooked to record accrued expense of Rs. 37,800
and accrued income of Rs. 16,300.
What was the impact on profit as a result of the above omission?
(a) Profit for the year was understated by Rs. 21,500
(b) Profit for the year was overstated by Rs. 21,500
(c) Profit for the year was understated by Rs. 54,100
(d) Profit for the year was overstated by Rs. 54,100

43. If accrued expense was wrongly recorded as accrued income at the end of the year, then
what will be the impact on the profit of this error?
(a) Profit was understated by amount of error
(b) Profit was understated by double the amount of error
(c) Profit was overstated by amount of error
(d) Profit was overstated by double amount

44. Nasir had consumables as at 1 January 2022 of Rs. 16,000 and bill of consumables were
unpaid as at 1 January 2022 of Rs. 22,500.
During the year ended 31 December 2022, Nasir had paid Rs. 185,000 against purchase of
consumables. At 31 December 2022, a bill of consumables of Rs. 16,800 was unpaid and
unused consumables were Rs. 22,780.
The amount of expense charged for the year ended 31 December 2022 was?
(a) Rs. 183,920
(b) Rs. 172,520
(c) Rs. 186,080
(d) Rs. 197,480

45. Mr. Sultan is supervisor in the production department of a business. He needed an

inventory item but that was not lying in the storehouse. Which primary document should be
prepared to initiate the purchase process and which department is responsible to issue this
document?
(a) Purchase order issued by purchase department
(b) Purchase requisition issued by store department
(c) Purchase requisition issued by purchase department
(d) Purchase order issued by store department

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46. Mr. Kashan purchased goods from Mr. Zubair for Rs. 12,000. He paid Rs. 10,000 at the time
of purchases and the balance amount will be paid in two months' time. Mr. Kashan should
record the transaction of purchases in:
(a) Purchases day book Rs. 12,000
(b) Purchases day book Rs. 10,000, Cash Book Rs. 2,000
(c) Purchases day book Rs. 2,000, Cash book Rs. 10,000
(d) Cash book Rs. 10,000, General journal Rs. 2,000

47. Double entry for “cash received from supplier against goods returned after clearance of
account” shall be:
(a) Dr. Purchase Returns and Cr. Creditors
(b) Dr. Creditors and Cr. Purchase Returns
(c) Dr. Creditors and Cr. Cash
(d) Dr. Cash and Cr. Purchase Returns

48. Armaghan Enterprises sold goods to Najma Traders for Rs. 100,000 subject to term 5/10,
n/30 on 1 January, 2022. Armaghan Enterprises expected that Najma Traders shall avail the
discount. Payment was received by Armaghan Enterprises after the discount period. What
journal entry will be passed in the books of Armaghan Enterprises?
(a) Cash account Debit Rs. 100,000, Najma Traders Credit Rs. 100,000
(b) Cash account Debit Rs. 100,000, Najma Traders Credit Rs. 95,000, Sales account Credit
Rs. 5,000
(c) Cash account Debit Rs. 95,000, Discount allowed Debit Rs. 5,000, Najma Traders Credit
Rs. 100,000
(d) Cash account Debit Rs. 100,000, Najma Traders Credit Rs. 95,000, Discount received Rs.
5,000

49. Total of purchases day book represents:

(a) Gross credit purchases
(b) Net credit purchases
(c) Gross total purchases
(d) Net total purchases

50. Which of the following document will storekeeper receive on receipt of goods from
supplier:
(a) Goods dispatched note
(b) Goods received note
(c) Delivery note
(d) Invoice

51. Allowance for doubtful debts is:

(a) Asset account
(b) Liability account
(c) Contra for asset account
(d) Contra for liability account

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52. Which of the following is NOT a reason for recording the bad debts in books?
(a) Customer was declared insolvent
(b) Customer had died and he had left insufficient assets to its debts
(c) Customer is in severe financial difficulties
(d) Customer showed dishonesty and left without intimating

53.

(a) Rs. 17,649

(b) Rs. 17,499
(c) Rs. 15,974
(d) Rs. 13,734

54.

(a) Rs. 337,482

(b) Rs. 270,220
(c) Rs. 356,479
(d) Rs. 318,485
55. Which one of the following not an external user of financial statements?
(a) Lender
(b) Investor
(c) Customer
(d) Management

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56. In which book of prime entry does payment of entertainment expense worth Rs.150 is
usually recorded?
(a) Petty cash book
(b) Cash payment journal
(c) Bank book
(d) None of the above

57. In which book of prime entry does cash purchases worth Rs. 500,000 would be recorded?
(a) Petty cash book
(b) Cash book
(c) Purchase day book
(d) Accounts payable book

58. Which one of the following not an internal user of financial statements?
(a) Employees
(b) Management
(c) Supplier
(d) Executive Director

59. The main source(s) of Generally Accepted Accounting Principles (GAAP) is/are:
(a) Company Law
(b) International Finance Reporting Standards (IFRSs)
(c) Tax law
(d) Sales Tax Act

60. Which of the following document is prepared by the business’s store keeper on receiving
goods in store?
(a) Goods dispatched note
(b) Goods received note
(c) Remittance advice
(d) Debit note

61. Any expense which is related to the current accounting period, but not paid till year-end,
rather payable in the subsequent year, is termed as:
(a) Prepaid expense
(b) Accrued expense
(c) Unearned expense
(d) Expense paid in advance

62. In which book of prime entry does debit notes received worth Rs.100,000 would be
recorded?
(a) Accounts payable book
(b) Purchase journal
(c) Return inwards journal
(d) Returns outward journal

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63. In which book of prime entry does sales on account of Rs. 700,000 would be recorded?
(a) Sales journal
(b) Accounts receivable journal
(c) Cash book
(d) Return inwards journal

64. R Co. had paid two annual insurance premiums; first for property on 1 April 2022 Rs.
120,000 and second for plant on 1 August 2022 Rs. 180,000. How much amount shall be
charged to the statement of comprehensive income and statement of financial position as
at 30 September 2022?
Statement of comprehensive income | Statement of Financial position
(a) Rs. 65,000 | Rs. 225,000 accrued expense
(b) Rs. 65,000 | Rs. 225,000 prepaid expense
(c) Rs. 90,000 | Rs. 210,000 accrued expense
(d) Rs. 90,000 | Rs. 210,000 prepaid expense

65. Gross amount of purchases must be equal to:

(a) Total of all invoices issued to customers
(b) Total of all credit notes issued to customers
(c) Total of all debit notes sent by customers
(d) Total of all invoices received from suppliers

66. A debit note is issued to a:

(a) Customer for return of goods
(b) Supplier for return of goods
(c) Customer to accept the goods
(d) Supplier to accept the goods

67. In which book of prime entry does purchases on account of Rs. 500,000 would be recorded?
(a) Cash book
(b) Accounts payable book
(c) Purchase day book
(d) None of the above

68. In which book of prime entry does credit note received worth Rs.150,000 would be
recorded?
(a) Accounts receivable book
(b) Sales day book
(c) Return inwards journal
(d) Returns outward journal

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69. Nasir Limited pays internet usage bills for the months of January 2022 to June 2022 in
subsequent months in equal amounts on a monthly basis. The amount paid till 30 June 2022
is Rs. 181,000.
How much amount shall be charged to statement of comprehensive income and statement
of financial position as at 30 June 2022?

Statement of comprehensive income Statement of financial position

(a) Rs. 181,000 as expense Rs. 36,200 accrued expense
(b) Rs. 181,000 as expense Rs. 36,200 prepaid expense
(c) Rs. 217,200 as expense Rs. 36,200 accrued expense
(d) Rs. 217,200 as expense Rs. 36,200 prepaid expense

70. A company has introduced a new policy of paying commission to its salesperson at 1% of
sales, in the month following the sales. The total sales from January 2022 to November 2022
was recorded at 3,780,000 and sales for the month of December 2022 was Rs. 360,000.
Which of the following statement is correct?
(a) Commission expense for the year ended 31 December 2022 was Rs. 37,800
(b) Commission payable as at 31 December 2022 was Rs. 3,600
(c) Commission payable as at 31 December 2022 should be recorded as non-current liability
(d) Commission of Rs. 37,800 was recorded as income for the year

71. Staff salary remaining unpaid as at the year-end should be accounted for as:
(a) Prepaid salary (debit) and Staff salary expense (credit)
(b) Staff salary expense (debit) and Cash (credit)
(c) Accrued Salary (debit) and Staff salary expense (credit)
(d) Staff salary expense (debit) and accrued salary (credit)

72. A business has a year ended 30 September and receives an invoice for rent of Rs. 600,000
for the six months to 31 December. What accrual or prepayment is required for the invoice
in the year-end accounts?
(a) Prepaid rent = Rs.300,000
(b) Accrued rent = Rs.300,000
(c) Prepaid rent = Rs.600,000
(d) Accrued rent = Rs.600,000

73. Nisar deposited Rs. 150,000 in deposit account at 12% p.a. on 1 July 2022. Interest on
deposit shall be received on 30 June each year. Nisar closes its books on 31 December each
year.
Which of the following statement is correct in relation to the above statement on 31
December 2022?
(a) Interest income Rs. 18,000 and accrued interest income Rs. 9,000
(b) Interest income Rs. 18,000 and accrued interest income Rs. 4,500
(c) Interest income Rs. 9,000 and accrued interest income Rs. 9,000
(d) Interest income Rs. 9,000 and accrued interest income Rs. 4,500

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74. The petty cash balance as at 3 January 2022 was Rs 2350 and following transactions were
incurred on 4 January 2022
1. Purchase of tea for office Rs 250
2. Paid for repairs of water dispenser Rs 400
3. Paid for travelling bill to peon Rs 100
The cashier sent all vouchers relating to week ended 4 January 2022 for reimbursement
amounting to Rs 3400 The reimbursement was made immediately
What shall be amount of petty cash float
(a) Rs 1600
(b) Rs 3400
(c) Rs 5000
(d) Rs 5750

75. Which of the following best describes the imprest system of operating petty cash?
A. Expenses incurred on weekly basis shall not exceed the set limit
B. The exact amount of expenditure is reimbursed at intervals to maintain fixed float
C. Authorization of all vouchers must not be necessary
D. Regular equal amounts of cash are transferred into petty cash at intervals

76. Expenses relevant to the accounting period which remain unpaid by period end should be:
(a) Included with expenses paid and shown as an asset at the period end
(b) Ignored until they are paid for in the next period
(c) Deducted from amount already paid and shown as a liability at the period end
(d) Included with the expenses and shown as a liability at the period end

77. Which of the following is not true?

(a) An accrual is an amount owing at the end of a period; a prepayment is an amount paid in
advance
(b) An accrual is a liability; a prepayment is an asset
(c) An accrual is a liability; a prepayment is always a non-current asset
(d) An accrual is a current liability; a prepayment is a current asset

78. After writing off bad debts, Rashid has outstanding receivables of Rs. 238,750. He identifies
two specific amounts for which he wishes to make full allowance:
• Rs. 450 owing by Syed
• Rs. 1,200 owing by Raja
Rashid also wishes to maintain a general allowance of 5% of outstanding receivables.
What amount is shown on Rashid’s statement of financial position in respect of receivables?
Rs. ___________

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79. Which of the following is the effect on net profit if a business decreases provision for
doubtful debts?
(a) It will increase net profit
(b) It will decrease net profit
(c) It will increase gross and net profit
(d) No effect

80. What is the nature of allowance for doubtful debt account?

(a) An asset
(b) A liability
(c) An equity
(d) Contra asset account

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