179. Which
of these items are taken into consideration for preparation of
adjusted Cash Book
(a)
Mistake in Cash
Book
(b)
Mistake in Pass Book
(c) Cheque issued but
not presented for payment
(d)
Cheques deposited but not cleared
180. Credit balance as per Cash Book mean-
(a)
Surplus cash
(b) Bank overdraft
(c)
Terms deposits
with bank
(d) None of
these
181. Debit side of Bank Pass book corresponds to -
(a)
Credit
side
of Cash Book
(b) Debit side of Cash
Book
(c) Debit side of Trial Balance
(d)
Credit
side
of Balance Sheet
182. Difference in Bank Balance as per Pass Book and Cash Book may
arise on account
of
(a)
Cheque issued but not presented
(b)
Cheque issued but dishonoured
(c) Cheque deposited and credited by bank
(d)
All of (a) and (b) above
[Hints: (d) Differences in Bank Balance as per Bank Pass Book and Cash Book arise
due
to many reasons. Few of them are Cheques issued (a credit entry in Cash Book made) but
not presented for payment
(so no corresponding entry
in Pass Book). Cheques issued (a credit entry
in
Cash
Book made)
but dishonoured (so no
corresponding entry
made in Pass Book).
In case of cheques deposited and credited by bank, entries in both Cash Book and the
Bank Pass
book
are made, hence no difference arises.
Hence option (d)
is the right option. Only in situations (a) and (b)
result
in difference.]
183. Which
of the following statements
is/are true?
(a)
When there are cheques
deposited but not collected by the
banker, overdraft balance as per Pass Book will be less
than that as
per Cash Book
(b)
When the payment side of the Cash Book is undercast,
overdraft balance as
per
Cash Book will be more than overdraft
balance as per Pass
Book
(c) When reconciliation is
to be done with the extracts of the Cash Book and Pass Book
relating to the same period,
the transactions which do not figure in one of the extracts are to be noted
(d) Bank interest debited in the Pass
Book
is to be added to Overdraft Balance as per
Pass Book to arrive at
the
Overdraft balance as
per Cash Book
[Hints: (c) Statement (a) is false, since when
cheques are deposited at bank, the
existing overdraft balance as per Cash Book decreases whereas when the cheques
have not been collected the overdraft balance as per Pass book is more that of Cash
book.
Statement (b) is false, when the payments side of the Cash Book is undercast results in undercasting of overdraft balance, hence
the overdraft balance
as per
Cash Book will be less, than the overdraft
balance as per Pass
Book.
Statement
(c)
is true, since
when extracts of Cash Book and extracts
of the Pass Book relating to same period are taken and compared, the entries which do not
figure in both the extracts imply that these entries create the difference in the
balances, hence
are
to be noted for the preparation of reconciliation statement.
Statement (d) is false, since
Bank
interest debited in the Pass Book increases
the overdraft balance
hence
to arrive at the balance
as per
cash, since
the above corresponding entry is not made
in the Cash Book, the interest amount is to be
deducted from the overdraft
balance as
per Bank Pass Book.
Hence only
option (c) is true,
all other options are false.]
184. The Bank Reconciliation Statement
is prepared
(a)
To rectify
the mistakes in the Cash Book
(b)
To arrive at
the Bank Balance
(c)
To arrive at
the Cash Balance
(d)
To bring out
the reasons for
the difference between the
Balance as per Cash
Book and the Balance as per Bank Statement
[Hints: (d) The basic
objective of the preparation
of
the
Bank
Reconciliation
Statement is to locate the reasons for differences between the balance as per Cash book and the balance as per Bank Statement. The ancillary benefits during this
process of preparation
can be
said
to
be
rectification of mistakes
in
cash book,
rectification of mistake in bank statement
etc.
Hence option (d)
is the right choice.]
185. Which
of the following statements
is false?
(a)
When the bank column of a Cash Book shows a credit balance, it means an
amount
is due to the bank
(b)
When Pass
Book
shows a debit balance,
it means overdraft
as per Pass Book
(c) While preparing Bank Reconciliation Statement, cheques paid into bank but not
yet
cleared are deducted from the Debit balance as per Cash Book to arrive at the
balance as per Pass Book
(d)
A Bank Reconciliation Statement is a part of Pass
Book
[Hints: (d)
A credit balance in the Cash Book(bank
column) denotes an overdraft
balance. It
implies that the business is due
to the bank respect
of that amount it has
overdrawn.
Hence option
(a) is true.
A credit balance in the Pass book refers to favourable balance and a debit balance in the pass book refers to Unfavorable
balance or overdraft.
Hence option (b) is true.
When preparing a BRS, where there is a debit balance or favourable balance in the Cash
book (bank column), cheques paid into bank but not yet cleared are deducted from the cash book (bank column) balance to arrive at the balance in the bank Pass
book.
Hence statement (c ) is
true.
A Bank Reconciliation Statement does not form part of pass book. It is prepared by
the business to reconcile the balances as per Pass Book or Bank Statement and the
Cash Book (bank column).
Hence statement (d)
is false.]
186. Which
of the following statements
is true?
(a) Bank charges increase debit balance shown as per Bank Column of the Cash
Book.
(b) Bank charges increase
debit balance as per Bank pass book.
(c) A cash sale of a
non-trading
asset is recorded in the journal
proper.
(d) Cash discount allowed by the business
will
appear on the debit side of the debtor's
account. [Hints: (b) Bank charges increase debit balance as per Bank Pass Book (b) is
the correct answer. The
debit balance
as per Bank Pass Book indicates the
overdraft balance
and
the bank charges being the
expenditure
increase
the debit balance. The alternative (a) is incorrect because the bank
charges
decrease
the debit balance
shown as per Bank
column of the Cash Book and do not increase the debit balance as
per Cash Book signifies the favourable balance. A cash sale of a non-trading asset is
recorded in the Journal Proper
is incorrect (c) because
all in transactions involving
cash receipts and payments are
recorded in the Cash book cash discount allowed by
the business
will appear on the debit side of the debtor's account (d) is incorrect because, the cash discount allowed is a reduction in the balance of a debtor's account
which appears
on the credit side. Thus
(b) is the correct answer.]
187. Bank reconciliation is
a statement
prepared to reconcile—
(a)
Trial balance
(b)
Cash book
(c) Bank A/c
(d)
Cash as per cash book with
bank balance as
per bank pass book
188. Bank reconciliation statement is a part of —
(a)
Cash book
(b)
Trial balance
(c) Auditors
report
(d) None of
these
189. Benefits of
preparing
Bank Reconciliation
Statement
includes —
(a) It bring
out any errors committed in preparation of Cash book / Bank Pass
Book
(b) Highlights
under delay
in
clearance of cheques
deposited but not credited
(c) Help
know actual bank balance
(d)
All the three
190. Debit balance as per bank pass book mean —
(a)
Surplus cash
(b) Bank Overdraft
(c) Terms deposits
with bank
(d) None of
these
191. Which
of the following is
not
a cause of difference in balance as per cash book and balance as per bank pass
book—
(a) Errors in cash book
(b) Errors in pass
book
(c) Cheques deposited and cleared
(d)
Cheques
issued but
not presented for payment
192. Provision is created for —
(a) Unknown Liabilities
(b) Known Liabilities
(c) Creation of Secret Reserves
(d)
All the Three
193. Which
of the following is
not
a method of charging
depreciation
(a)
Straight line Method
(b)
Written down value Method
(c) Discounted present
value Method
(d)
Sum of digits
Method
194. A second hand car is
purchased for ' 2,00,000 and sold at
' 1,40,000 after two years.
If depreciation is charged @
10% on SLM method, find the profit
or loss
on sale of the car.
(a)
' 20,000 Loss (b)
' 20,000 Profit
(c)
' 10,000 Loss
(d)
' 10,000 Profit
195. In the above question if the depreciation is charged @10% on written down value
method, find the profit or loss on sale of the Second hand car.
(a) Loss of
' 20,000 (b) Loss of
' 22,000 (c) Loss of
' 11,000
(d) Profit of ? 11,000
196. The term “ Reserve”
has been defined in of the Companies
Act, 1956
(a) Part III Schedule
VI
(b) Part III Schedule V
(c) Part II Schedule VI
(d) Part I Schedule
I
197. Which
of the following is
true with
respect to
providing depreciation
under diminishing balance method?
(a)
The amount
of depreciation keeps increasing
every
year while the rate of depreciation
keeps decreasing
(b)
The amount of depreciation
and the rate of depreciation decrease every
year
(c)
The amount of depreciation decreases
while the rate of depreciation
remains the
same
(d)
The amount
of depreciation and the rate of depreciation increases every
year
[Hints: (c) Under the written down value method of depreciation, the rate of percentage
of depreciation is fixed,
but
it applies to the value of the asset at which the asset
stands in the books in the beginning of the year. Therefore, the amount of
depreciation decreases as the fixed rate of depreciation is charged on written down values of the asset.]
198. Which
of the following statements
best describes the purpose
of
depreciation?
(a) Regular reduction of asset value to correspond to changes in market value as the
asset ages
(b)
A process of correlating
the market value
of an asset with its
gradual
decline in physical efficiency
(c) Allocation of cost
in a
manner that will ensure that Plant and Equipment items
are
not carried on
the Balance Sheet in excess
of
net realizable value
(d) Allocation of the cost of an asset
to the periods in which services are received
from
the asset [Hints: (d) AS-6 defines depreciation
as a measure of the wearing out, consumption or other loss of value of a depreciable asset arising from use, effluxion
of time
or obsolescence through technology and market changes. Depreciation is allocated so as to change a fair proportion
of the depreciable amount in each
accounting period during the expected useful life of the
asset. Depreciation includes
amortization of assets whose useful life is predetermined.
The ultimate outcome of accounting for depreciation is cash available to replace the
asset; however this
cannot be the purpose
of
depreciation.]
199. The main objective of providing
depreciation is to
(a)
Calculate the true profit
(b)
Show the
true financial position
in the Balance Sheet
(c) Provide funds
for
replacement
of fixed assets
(d) Both (a) and (b) above
[Hints: (d) The main objective of providing depreciation is to find out the true Net
Profit or Loss for an accounting period and to present a true and fair view of the
state of affairs of the
business. Providing funds for replacement is only an ancillary
objective and not the main objective.]
200. Depreciation is a process of
(a)
Valuation
(b)
Valuation and allocation
(c) Allocation
(d)
Appropriation
[Hints: (c) AS-6 on depreciation
accounting defines „depreciation' as the measure of wearing out, consumption or
other loss of a value of a depreciable asset
arising from use, effluxion of time or
obsolescence through technology and market changes. Depreciation is allocated so as to charge a fair proportion of the depreciable
amount in each accounting period during the expected useful life of the asset. Depreciation includes
amortization
of assets whose useful life is predetermined.]
201. The portion of
the acquisition cost
of the asset
yet to be allocated is
known as
(a)
Written down value
(b)
Accumulated value (c) Salvage value
(d) Residual Value
[Hints: (a) The portion of the acquisition cost of the asset yet to be allocated is known
as written down value
(a). Accumulated value
(b)
is the value of a thing accumulated over
a period of time and not
the correct answer. Salvage
value (c) is the value of an asset that remains as scrap value after its usage over a period of time and is not the
correct answer. Residual value (d) is the value remaining residue and is not the
correct
answer.
Alternative (a) is
the
correct answer.]
202. Which
of the following statements is true with regard to written down value method of
depreciation?
i. The rate at which
the asset is written off reduces year after year
ii. The amount of depreciation
provided reduces
from year to year
iii. The rate of depreciation as well as the amount of depreciation reduce year after year
iv. The value of the asset
gets reduced to zero over a period of time
(a)
Only (i) above
(b)
Only (ii) above
(c) Both (i)
and (ii) above
(d) (i),(ii)
and (iii) above
[Hints: (b) Under written down value
method of depreciation, the
amount on which
depreciation is provided reduces from
year to year. Thus the statement under alternative (b) is
the
correct answer.
The statements
in other alternatives are
incorrect
because, the rate of depreciation does not change
year after year it remains
fixed (a). The rate of depreciation and the amount of depreciation
reduce from year
to year is incorrect because only the amount of depreciation
reduces and
not
the rate. Thus, the
alternative with the combination of statements (i) and (iii) is
incorrect.
Under diminishing
balance method of depreciation, the amount of the asset never becomes to zero over a period of
time. Thus, the alternatives (a),(c ), (d)
and
(e) are incorrect.]
203. The accounting process
of gradually
converting
the unexpired cost
of fixed assets into expenses
over a series of accounting periods
is
(a) Depreciation
(b) Physical deterioration of the asset
(c) Decrease
in market
value of the asset
(d)
Valuation of an asset at a point
of time
[Hints: (a) The accounting process of gradually converting the unexpired cost of fixed
assets into expenses over a series of accounting periods is called depreciation (a).
Physical deterioration of the asset (b) is the wear and tear of the asset on account of its usage and it is not any accounting process involved in it and it is not the correct answer. Decrease in market value of the asset (c) is not the accounting process and is
not
the correct answer. The allotment of cost of an asset over its estimated useful life is not the valuation of an asset (d) at a point of time is not the correct answer. Thus, (a)
is the correct answer.]
204. Which
of the following factors are primarily considered to
determine the economic life of an asset?
(a) Passage of time, asset usage, and obsolescence
(b)
Tax regulations and SEBI guidelines
(c) Tax regulations and asset
usage
(d)
SEBI guidelines and Asset usage [Hints: (a) The economic life of an asset should
be
estimated on the basis of passage
of time, asset
usage and obsolescence of the asset.
It will not consider the factors like tax regulations, SEBI guidelines, management and external
factors. Hence (a) is
true.]
205. In which of the following
methods, the cost of the asset is spread over in equal
proportion
during its useful economic
life?
(a)
Straight-line method
(b)
Written down value method
(c) Units-of-production method
(d)
Sum-of-the
years'-digits method
[Hints: (a)
Under straight line method of depreciation, the depreciable asset whether tangible or intangible is depreciated over
its useful life with an equal amount
of depreciation in each period. This is the widely used approach of recognizing an equal amount of depreciation expense
in each period of a depreciable
asset's useful life. Thus,
alternative
(a) is the correct answer.
Alternative
(b)
Written
down value method is incorrect because where
the asset is depreciated on diminishing balance
of the asset where in the depreciation
expense is
not
equal in each period. Alternative (c)
double
declining method is incorrect
because, under
this method depreciation
expenses is not equal like under written down value method and it is more in the initial stages of the acquisition of the asset and less in the later periods. The method of
recording depreciation under sum
of the years' digits method (d) is not
equal in each period it is also more in the early periods of acquisition of the asset and less in the later periods.]
206. Which
of the following statements
is correct?
(a) Depreciation cannot be provided in case
of
loss in a financial year
(b) Depreciation is a charge against
profit
(c) Depreciation is provided in the books
only when there is profit
(d) Depreciation is an appropriation of profit
[Hints: (b) Depreciation is provided as a
charge against profits. It is not an appropriation
of profit. It is provided irrespective of whether the business is making a loss
or a profit. Hence statement (b) is
a true statement.]
207. Depreciation is calculated on the
(a)
Cost price of asset
(b)
Market
price
(c) Cost+
Transport+
Installation expenses
(d)
Cost or market values whichever is
less
208. Which
of the following is
an external
cause of depreciation
(a) Routine repair
and maintenance
(b)
Misuse
(c) Obsolescence
(d)
Wear and tear
209. Depreciation is a process of —
(a)
Valuation of fixed assets
(b)
Allocation of cost
over the useful life of assets
(c) Generating
funds replacements of the assets
(d)
Avoidance of tax
210. Which
of the following is
not
depreciated
(a) Building
(b)
Land
(c) Plant and Machinery
(d)
Office equipment
211. Schedule XIV of the Companies Act specifies------as
minimum rate of depreciation
(WDV)
on ship fishing vessels
(a)
27%
(b)
33%
(c)
10%
(d) 15%
212. ------------- is also
known as Appraisal
system of depreciation
(a) Inventory system
(b)
Survey
system
(c) Annuity system
(d) Insurance
213. Bad debts
recovered account will be transferred to
(a) Debtor's
Account
(b) Profit and Loss Account
(c) Provision for Doubtful Debt Account
(d) Either
(b )or (c)
above
[Hints: (d) When Bad debts are recovered the entry
is
Cash A/c ..........................................................Dr.
To Bad debts recovered A/c This
A/c can either be transferred to P&
L A/c or Provisions
for
Doubtful Debts A/c.]
214. The entry for creating
a Provision for bad debts is
(a) Debit Provision for Bad Debts
A/c and credit Debtors A/c
(b) Debit Debtors
A/c
and credit Provision for Bad Debts
A/c
(c) Debit Provision for Bad Debts
A/c and credit Profit
& Loss A/c
(d) Debit Profit and Loss
A/c and credit Provision for Bad Debts A/c.
[Hints: (d)
Provision for bad debt is a charge against profit and therefore, the entry
for
creating provision for bad debts is done
by
debiting P&L A/c and crediting provision for bad debts account.]
215. When a
person purchasing goods
on credit he becomes
a .in the books
of
the seller-
(a) Debtor
(b)
Creditor
(c) Defaulter
(d)
Offender
