PART I
1. RPC Ltd. follows the written down value method of depreciating machinery year after
year due to
(a) Comparability.
(b) Convenience.
(c) Consistency.
(d) All of the above

2. A change in accounting policy is justified
(a) To comply with accounting standard.
(b) To ensure more appropriate presentation of the financial statement of the
enterprise.
(c) To comply with law.
(d) All of the above.

3. Purchases book records:
(a) All cash purchases.
(b) All credit purchases.
(c) Credit purchases of goods in trade.
(d) None of the above.

4. A Bank Reconciliation Statement is prepared to know the causes for the difference
between:
(a) the balances as per cash column of Cash Book and the Pass Book.
(b) the balance as per bank column of Cash Book and the Pass Book.
(c) the balance as per bank column of Cash Book and balances as per cash column
of Cash Book
(d) None of the above.

5. While finalizing the current year’s profit, the company realized that there was an error in
the valuation of closing stock of the previous year. In the previous year, closing stock
was valued more by Rs.50,000. As a result
(a) Previous year’s profit is overstated and current year’s profit is also overstated
(b) Previous year’s profit is understated and current year’s profit is overstated
(c) Previous year’s profit is understated and current year’s profit is also understated
(d) Previous year’s profit is overstated and current year’s profit is understated

6. In the absence of any provision in the partnership agreement, profits and losses are
shared
(a) In the ratio of capitals.
(b) Equally.
(c) In the ratio of loans given by them to the partnership firm.
(d) None of the above.

7. Fundamental accounting assumptions are
(a) Materiality.
(b) Business entity.
(c) Going concern.
(d) Dual aspect

8. Which of the following errors are not revealed by the Trial Balance:
(a) compensating errors;
(b) errors of commission;
(c) wrong balancing of an account;
(d) wrong totalling of an account

9. Which of the following are of capital nature?
(a) Purchase of a goods
(b) Cost of repair
(c) Wages paid for installation of machinery
(d) Rent of a factory

10. Which of the following statement is not true:
(a) If del-creder’s commission is allowed, bad debt will not be recorded in the books
of consignor
(b) If del-creder’s commission is allowed, bad debt will be debited in consignment
account
(c) Del-creder’s commission is allowed by consignor to consignee
(d) Del-creder’s commission is generally relevant for credit sales

PART II
11. Discount on issue of debentures is a __________
(a) Revenue loss to be charged in the year of issue
(b) Capital loss to be written off from capital reserve
(c) Capital loss to be written off over the tenure of the debentures
(d) Capital loss to be shown as goodwill

12. Loss on issue of debentures is treated as ____________.
(a) Intangible asset
(b) Current asset
(c) Current liability
(d) Miscellaneous expenditure

13. Dividends are usually paid as a percentage of ______
(a) Authorized share capital
(b) Net profit
(c) Paid-up capital
(d) Called-up capital

14. At the time of death of a partner, firm gets ________ from the insurance company
against the Joint Life Policy taken jointly for all the partners.
(a) Policy Amount.
(b) Surrender Value.
(c) Policy Value for the dead partner and Surrender Value for the rest.
(d) Surrender Value for all the partners.

15. Profit or loss on revaluation is shared among the partners in _______ ratio.
(a) Old Profit Sharing.
(b) New Profit Sharing.
(c) Capital.
(d) Equal.

16. Interest on capital will be paid to the partners if provided for in the agreement but only
from________
(a) Profits.
(b) Reserves.
(c) Accumulated Profits.
(d) Goodwill.

17. The owner of the consignment stock is________
(a) Consignor
(b) Consignee
(c) Debtors
(d) None

18. The parties to joint venture is called_________
(a) Co-venturers
(b) Partners
(c) Principal & Agent
(d) Friends

19. The purpose of accommodation bill is_______
(a) To finance actual purchase or sale of goods
(b) To facilitate trade transmission
(c) When both parties are in need of funds
(d) None of the above

20. The number of production or similar units expected to be obtained from the use of an
asset by an enterprise is called as _________
(a) Unit life
(b) Useful life
(c) Production life
(d) Expected life

21. Which of the following is not a sub-field of accounting?
(a) Management accounting.
(b) Cost accounting.
(c) Financial accounting.
(d) Book-keeping.

22. Revenue from sale of products, is generally, realized in the period in which
(a) Cash is collected.
(b) Sale is made.
(c) Products are manufactured.
(d) None of the above.

23. The determination of expenses for an accounting period is based on the principle of
(a) Objectivity.
(b) Materiality.
(c) Matching.
(d) Periodicity.

24. It is essential to standardize the accounting principles and policies in order to ensure
(a) Transparency.
(b) Consistency.
(c) Comparability.
(d) All of the above.

25. Change in accounting estimate means
(a) Differences arising between certain parameters estimated earlier and reestimated
during the current period.
(b) Differences arising between certain parameters estimated earlier and actual
results achieved during the current period.
(c) Differences arising between certain parameters re-estimated during the
current period and actual results achieved during the current period.
(d) Both (a) and (b).

26. Which account is the odd one out?
(a) Office Furniture & Equipment.
(b) Freehold Land and Buildings.
(c) Stock of raw materials.
(d) Plant and Machinery.

27. In Double Entry System of Book-keeping every business transaction affects:
(a) Two accounts.
(b) Two sides of the same account.
(c) The same account on two different dates.
(d) All of the above.

28. Which of the following types of information are found in subsidiary ledgers, but not
in the general ledger?
(a) Total cost of goods sold for the period.
(b) The quantity of a particular product sold during the period.
(c) The amount owed to a particular creditor.
(d) The portion of total current assets that consist of cash.

29. Contra entries are passed only when
(a) Double column cash book is prepared
(b) Three-column cash book is prepared
(c) Simple cash book is prepared
(d) None of the above

30. The preparation of a trial balance is for:
(a) Locating errors of commission;
(b) Locating errors of principle;
(c) Locating clerical errors.
(d) All of the above

31. Present liability of uncertain amount, which can be measured reliably by using a
substantial degree of estimation, is termed as ________
(a) Provision
(b) Liability
(c) Contingent liability
(d) None of the above

32. When preparing a Bank Reconciliation Statement, if you start with a debit balance as
per the Cash Book, then cheques issued but not presented within the period are
__________
(a) Added
(b) Deducted
(c) Not required to be adjusted
(d) None of the above.

33. Under inflationary conditions, ________ method will show highest value of closing
stock?
(a) FIFO
(b) LIFO
(c) Weighted Average
(d) None of the above

34. In the case of downward revaluation of an asset, which is for the first time revalued,
_______ account is debited.
(a) Fixed Asset
(b) Revaluation Reserve
(c) Profit & Loss account
(d) General Reserve

35. The portion of the acquisition cost of the asset, yet to be allocated is known as
________
(a) Written down value
(b) Accumulated value
(c) Realisable value
(d) Salvage value

36. If a concern proposes to discontinue its business from March 2005 and decides to
dispose off all its assets within a period of 4 months, the Balance Sheet as on March
31, 2005 should indicate the assets at their _________
(a) Historical cost
(b) Net realizable value
(c) Cost less depreciation
(d) Cost price or market value, whichever is lower

37. The balance of the petty cash is _________
(a) an expense,
(b) income,
(c) an asset.
(d) liability

38. Sales for the year ended 31st March, 2005 amounted to Rs. 10,00,000. Sales included
goods sold to Mr. A for Rs. 50,000 at a profit of 20% on cost. Such goods are still lying
in the godown at the buyer’s risk. Therefore, such goods should be treated as part of
(a) Sales.
(b) Closing stock.
(c) Goods in transit.(d) Sales return.

39. As per Section 37 of the Indian Partnership Act, 1932, the executors would be entitled
at their choice to the interest calculated from the date of death till the date of payment
on the final amount due to the dead partner at ________ percentage per annum.
(a) 7.
(b) 4.
(c) 6.
(d) 12.

40. If del-credere commission is allowed for bad debt, consignee will debit the bad debt
amount to:
(a) Commission Earned A/c
(b) Consignor A/c
(c) Debtors A/c
(d) General Trading A/c

41. Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2005. Transportation
and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000
respectively. Dismantling charges of the old machine in place of which new machine
was purchased amounted Rs. 10,000. Market value of the machine was estimated at
Rs. 1,20,000 on 31st March 2006. While finalising the annual accounts, A values the
machinery at Rs. 1,20,000 in his books.
Which of the following concepts was violated by A?
(a) Cost concept
(b) Matching concept
(c) Realisation concept
(d) Periodicity concept.

42. Mohan purchased goods for Rs.15,00,000 and sold 4/5th of the goods amounting
Rs.18,00,000 and paid expenses amounting Rs.2,70,000 during the year, 2005. He
paid Rs. 5000 for an electricity bill of Dec. 2004 and advance salaries amounting Rs.
15,000 was paid for the month of Jan. 2006. He counted net profit as Rs.3,50,000.
The profit calculated by him is correct according to
(a) Entity concept.
(b) Periodicity concept.
(c) Matching concept.
(d) Conservatism concept.

43. All of the following are functions of Accounting except
(a) Decision making.
(b) Measurement.
(c) Forecasting.
(d) Ledger posting.

44. Manufacturing account is prepared to
(a) ascertain the profit or loss on the goods produced
(b) ascertain the cost of the manufactured goods
(c) show the sale proceeds from the goods produced during the year
(d) both (b) and (c).

45     On March 31, 2006 after sale of goods worth Rs. 2,000, he is left with the closing stock
of Rs. 10,000. This is
(a) An event.
(b) A transaction.
(c) A transaction as well as an event.
(d) Neither a transaction nor an event.

46 Financial statements only consider
(a) Assets expressed in monetary terms.
(b) Liabilities expressed in monetary terms.
(c) Assets expressed in non-monetary terms.
(d) Assets and liabilities expressed in monetary terms

47 Which financial statement represents the accounting equation, assets = Liabilities +
Owner’s equity:
(a) Income Statement
(b) Statement of Cash flows
(c) Balance Sheet
(d) None of the above

48 A purchased a car for Rs.5,00,000, making a down payment of Rs.1,00,000 and signing
a Rs.4,00,000 bill payable due in 60 days. As a result of this transaction
(a) Total assets increased by Rs.5,00,000.
(b) Total liabilities increased by Rs.4,00,000.
(c) Total assets increased by Rs.4,00,000.
(d) Total assets increased by Rs.4,00,000 with corresponding increase in liabilities
by Rs.4,00,000.

49  The debts written off as bad, if recovered subsequently are
(a) credited to Bad Debts Recovered Account
(b) credited to Debtors Account.
(c) debited to Profit and Loss Account
(d) None of the above

50 A withdrawl of cash from business by the proprietor should be credited to:
(a) Drawings Account
(b) Capital Account
(c) Cash Account
(d) None of the above.

51 Contra entries are passed only when
(a) double column cash book is prepared
(b) three-column cash book is prepared
(c) simple cash book is prepared
(d) None of the above

52  Consignment account is
(a) Real account
(b) Personal account
(c) Nominal account
(d) None of the above

PART II
53  Economic life of an enterprise is split into the periodic interval as per ________
(a) Money Measurement.
(b) Matching.
(c) Going concern.
(d) Accrual.

54  Accounting policies refer to specific accounting ________
(a) Principles.
(b) Methods of applying those principles.
(c) Both (a) and (b).
(d) None of the above.

55  Dividends are usually paid as a percentage of ______
(a) Authorized share capital
(b) Net profit
(c) Paid-up capital
(d) Called-up capital

56  Outgoing partner is compensated for parting with firm’s future profits in favour of
remaining partners. The remaining partners contribute to such compensation amount in
______
(a) Gaining Ratio.
(b) Capital Ratio.
(c) Sacrificing Ratio.
(d) Profit Sharing Ratio.

57  The balance of the petty cash is ______
(a) An expense,
(b) Income,
(c) An asset.
(d) Liability

58  Interest on capital will be paid to the partners if provided for in the agreement but only
from________
(a) Profits.
(b) Reserves.
(c) Accumulated Profits.
(d) Goodwill.

59  A proforma invoice is sent by ________
(a) Consignee to Consignor
(b) Consignor to Consignee
(c) Debtors to Consignee
(d) Debtors to Consignor

60  If a venturer draws a bill on his co-venturer and if the drawer discounts the bill with
same sets of books maintained, the discounting charges will be borne by________
(a) The drawer of the bill
(b) The drawee of the bill
(c) The discounting charges will be recorded in memorandum account
(d) The discounting charges will be borne by bank

61  X draws a bill on Y. X endorsed the bill to Z. ________will be the payee of the bill
(a) X
(b) Y
(c) Z
(d) None

62  A Company wishes to earn a 20% profit margin on selling price. ________is the profit
mark up on cost, which will achieve the required profit margin?
(a) 33%.
(b) 25%.
(c) 20%.
(d) None of the above.

63 . In the books of manufacturing concern, opening stock consists of
(a) Raw materials
(b) Work-in-progress
(c) Finished goods
(d) All of the above

64 When adjusted purchase is shown on the debit column of the trial balance then
(a) Both opening stock and closing stock do not appear in the trial balance
(b) Closing stock is shown in the trial balance and not the opening stock
(c) Opening stock is shown in the trial balance and not the closing stock
(d) Both opening and closing stock appear in the trial balance

65  Following is the example of external users:
(a) Government.
(b) Owners.
(c) Management.
(d) Employees.

66  Business unit is separate and distinct from the person who supply capital to it”, is
based on
(a) Money measurement concept.
(b) Going concern concept.
(c) Business entity concept
(d) Dual aspect concept.

67  State the case where the going concern concept is applied?
(a) When an enterprise was set up for a particular purpose, which has been
achieved, or to be achieved shortly.
(b) When a receiver or liquidator has been appointed in case of as a company which
is to be liquidated.
(c) Fixed assets are acquired for use in the business for earning revenues and are
not meant for resale.
(d) When an enterprise is declared sick.

68  If two or more transactions of the same nature are journalised together having either
the debit or the credit account common is known as
(a) Compound journal entry.
(b) Separate journal entry.
(c) Posting.
(d) None of the above.

69 . If the cheque is not presented for the payment upto the date of the preparation of the
Bank Reconciliation Statement, then the balance as per Pass Book will be
(a) Higher than the balance shown by the cashbook by the amount of unpresented
cheque.
(b) Lower than the balance shown by the cashbook by the amount of unpresented
cheque.
(c) Same as shown by the cashbook.
(d) None of the above

70 Whenever errors are noticed in the accounting records, they should be rectified
(a) At the time of preparation of the trial balance.
(b) Without waiting the accounting year to end.
(c) After the preparation of final accounts.
(d) In the next accounting year.

71. Parties to a bill of exchange are
(a) Drawer.
(b) Drawee.
(c) Payee.
(d) All of the above

72. All the expenditures and receipts of revenue nature go to
(a) Trading account.
(b) Profit and loss account.
(c) Balance sheet.
(d) Either to (a) or (b)

73. A__________is sent to a customer when he returns the goods.
(a) Debit note.
(b) Credit note.
(c) Proforma invoice
(d) None of the above.

74. Noting charges are paid at the time of _______of a bill.
(a) Retirement.
(b) Renewal
(c) Dishonour
(d) None of the above.

75. Depreciation of fixed assets is an example of ____________expenditure.
(a) Revenue.
(b) Deferred revenue.
(c) Capital
(d) None of the above.

76. Interest on drawings is________for the business.
(a) Expenditure.
(b) Expense
(c) Gain
(d) None of the three.

77. An amount of Rs.200 received from A credited to B would affect____________
(a) Accounts of A and B.
(b) A’s account
(c) Cash account
(d) B’s account.

78. In___________ method, depreciation is charged by allocating depreciable cost in
proposition of the annual output to the probable life-time output.
(a) Working hours method.
(b) Replacement method.
(c) Revaluation method.
(d) Production units method.

79. General ledger adjustment account(s) is/are opened in__________.
(a) Debtors ledger.
(b) General ledger.
(c) Creditors ledger.
(d) Both (a) and (c)

80. General reserve at the time of admission of a new partner is transferred to
__________.
(a) Profit and loss adjustment account.
(b) Partners’ capital accounts.
(c) Revaluation account
(d) Memorandum revaluation account
.
81. A suspense account facilitates the preparation of __________even when
the_______has not tallied.
(a) Ledgers; Trial balance.
(b) Financial statements; Trial Balance.
(c) Trial balance; Financial statements.
(d) Journal; Trial balance
.
82. Writing of transaction in the ledger is called________________.
(a) Costing.
(b) Balancing.
(c) Journalizing
(d) Posting

83. Drawings account is in the nature of
(a) Personal account
(b) Real account
(c) Nominal account
(d) None of the above

84. Income tax paid by the sole-proprietor from business bank account is debited to
(a) Income tax account
(b) Bank account
(c) Capital account
(d) Not to be shown in the business books

85 Following is the example of internal users:
(a) Government.
(b) Investors.
(c) Creditors.
(d) Employees.

86 Recording of a transaction in a journal is called
(a) Posting.
(b) Entry.
(c) Transfer.
(d) Ruling.

87 Narrations are given at the end of
(a) Final accounts.
(b) Trial balance.
(c) Each ledger account.
(d) Each journal entry.

88The concerned account debited in the journal should be
(a) Debited in the ledger but reference should be of the respective credit account.
(b) Credited in the ledger but reference should be of the respective debit account.
(c) Credited in the ledger and reference should also be of the respective credit
account.
(d) Debited in the ledger and reference should also be of the respective debit
account

89 The basic consideration(s) in distinction between capital and revenue expenditures
is/are
(a) Nature of business.
(b) Effect on revenue generating capacity of business.
(c) Purpose of expenses.
(d) All of the above.

90 Unintentional omission or commission of amounts and accounts in the process of
recording transactions are known as
(a) Frauds.
(b) Misinterpretation.
(c) Errors.
(d) None of the above.

9.1 “Treating a revenue expense as a capital expenditure” is an example of
(a) Compensating errors.
(b) Errors of principle.
(c) Errors of omission.
(d) Errors of commission.

92  Under bank reconciliation statement, while adjusting the cash book
(a) All the errors and omissions in the cashbook are taken into consideration.
(b) All the errors and omissions in the passbook are taken into consideration.
(c) Delays in recording in the passbook due to difference in timing are taken into
consideration.
(d) All of the above.

93 . In ledger there are _______ columns
(a) 4
(b) 6
(c) 8
(d) 10

94  In journal, transactions are recorded on __________.
(a) Chronological order.
(b) Ascending order of amount.
(c) Descending order of amount
(d) None of the above

95  If an effect of an error is cancelled by the effect of some other error, it is commonly
known as ___________
(a) Errors of principle.
(b) Compensating errors.
c) Errors of omission.
(d) Errors of commission.

96  When opening entry is overstated, net income for the accounting period will be
__________.
(a) Overstated.
(b) Not be affected.
(c) Understated.
(d) None of the above.

97  Inventories should be generally valued at lower of cost or ________
(a) Fair market value.
(b) Replacement value.
(c) Present value.
(d) Net realisable value.

98  Memorandum Joint venture account is a ________
(a) Personal account.
(b) Real account.
(c) Nominal account.
(d) None of the above.

99  At the time of admission of a new partner, if the value of goodwill is overstated in the
books, it is written back by ________
(a) Old partners in old profit/loss sharing ratio
(b) All the partners including the new partner in new profit/loss sharing ratio.
(c) Old partners in sacrificing ratio
(d) New partner in gaining ratio.

100  Commission provided by the consignor to the consignee to promote credit sale is
known as _____________
(a) Ordinary commission
(b) Del-credere commission
(c) Over riding commission
(d) Special commission

101_________ is unavoidable and should be spread over the entire consignment while
valuing consignment stock.
(a) Abnormal loss
(b) Normal loss
(c) Extra-ordinary loss
(d) None of the three

102 Generally, when the size of the venture is ________, the co-venturers keep separate
set of books of account for the joint venture.
(a) Small
(b) Medium
(c) Big
(d) All of the above