Thursday, July 26, 2012

Accounting Concepts and Practices - Financial Accounting - 14

1. Premium on redemption of debentures account is
[A]A real account
[B]A nominal account
[C]A personal account
[D]An asset

2. The maximum rate of discount that is allowed as per the provisions of the Companies Act in the event of a company issuing shares at a discount is

3. The trade discount on purchases is recorded
[A]When it is received
[B]When the inventory is purchased
[C]When the inventory is sold
[D]Not at all recorded in the books

4. Which of the following is a leverage ratio?
[A]Debt-Equity ratio
[B]Current ratio
[C]Quick ratio
[D]Earning power

5. The document inviting offers from public to subscribe for the debentures or shares of a body corporate is a
[A]Share certificate
[C]Fixed deposit receipt

6. Which of the following is not an asset?
[A]Stock of stationery
[C]Profit and loss account (credit balance)
[D]Accounts Receivable

7. The portion of the acquisition cost of an asset yet to be allocated is known as
[A]Written down value
[B]Accumulated value
[C]Realisable value
[D]Salvage value

8. Which of the following items is/are covered under Accounting Standard-2 with regard to accounting for inventory?
I. Financial instruments held as stock-in-trade
II. Work in progress arising under construction contracts
III. Work in progress of service providers
IV. Work in progress of a manufacturing industry.
[A]Only (I) above
[B]Only (IV) above
[C]Both (I) and (II) above
[D]Both (III) and (IV) above

9. Which of the following statements is/are true?
I. Drawings account is a nominal account
II. Capital account is a real account
III. Prepaid rent is a personal account
IV. Outstanding salaries account is a nominal account
V. Patents account is a personal account.
[A]Only (I) above
[B]Only (III) above
[C]Both (II) and (IV) above
[D](II), (IV) and (V) above

10. Which of the following events is/are not recorded in the books of a business?
[A]Significant monetary events after the balance sheet date
[B]Death of a chief executive of the business
[C]Government investigations into the pricing policies of the business
[D]Both (b) and (c) above

11. Which of the following appears in the profit & loss appropriation account?
[A]Interest on debentures
[C]Provision for taxation
[D]Provision for bad debts

12. Which of the following inventory valuation methods shows higher profits during the period of rising prices?
[A]FIFO method
[B]LIFO method
[C]Weighted average method
[D]Simple average method

13. At the time of preparation of final accounts, bad debts recovered account will be transferred to
[A]Debtor’s account
[B]Profit & loss account
[C]Profit & loss adjustment account
[D]Profit & loss appropriation account

14. Which of the following is not an intangible asset?
[B]Trade mark
[D]Accounts receivable

15. If machinery account is debited with the amount of repairs incurred on the machine, this is an example of
[A]Compensating error
[B]Error of principle
[C]Error of commission
[D]Error of omission

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