Saturday, 11 May 2019

Financial Accounting MCQs page 15

262.        Computers taken on hire by a business for a period of twelve months should be classified as
(a)  Current assets
(b Intangible assets
(c Deferred revenue expenditure
(d Not an asset
[Hints: (d) Computers taken on hire by a business for a period of twelve months is not an asset because it is not owned by the business to be classified as asset. Thus, the correct answer is (d). Since it is not an asset it cannot be classified as any asset and other alternatives are not the correct answers.]

263.        Which of the following is not an intangible asset?
(a)  Trade mark
(b Franchise
(c)  Accounts Receivable
(d)  Secret Profit [Hints: (c) An accounts receivable is not an intangible asset. It is the amount that the business has to receive from its debtors. The other assets mentioned in alternatives a, b, and d- trademark, franchises and secret processes are intangible assets. Hence, the correct answer is (c).]

264.        Which of the following is a current liability?
(a Prepaid expenses
(b)  Trademark
(c Discount on issue of shares
(d)  Outstanding Salaries
[Hints: (d) Outstanding salaries are short term obligations expected to be paid off during the short period of time. So, it is a current liability. Prepaid expenses, trademark and discount on issue of shares are assets. Hence, (d) is correct answer.]




265.         Based on which of the following concepts, is Share Capital Account shown on the liabilities side of a Balance Sheet?
(a Business entity concept
(b)  Money measurement concept
(c Going concern concept
(d)  Matching concept
[Hints: (a) Share capital is the contribution made by the owner(s) and is regarded as a liability to the business in the nature of owner's equity. The underlying feature for this treatment is the distinction between the owner(s) and that of the business owned by them. According to business entry concept whenever an owner brings capital into the business, the business in turn is deemed to owe the capital to the owner. As such the share capital account is treated as a liability to the business and shown under liabilities. The other concepts are not correct because,
(b) Money measurement concept explains that in financial accountancy, a record is made only of information that can be expressed in monetary terms and ignores other events, however significant they may be. It is silent about the treatment of share capital account.
(c)  Going concern concept explains that the resources of the concern would continue to be used for the purposes for which they are meant to be used. The very categorization of assets into fixed and current presupposes the going concern concept. It does not deal about the treatment of share capital account.
(d)  Conservatism concept:  The theme  behind  this  principle is  that recognition  of revenue requires better evidence than recognition of expenses. It deals with revenues
and expenses and not the share capital account.]

266.        Which of the following is not a contingent liability?
(a Debts included in Sundry Debtors which are doubtful in nature
(b Uncalled liability on partly paid shares
(c Claims against the company not acknowledged as debts
(d)  Arrears of fixed cumulative dividend
[Hints: (a) A contingent liability is the loss which will be known or determined only on the occurrence or non- occurrence of one or more future uncertain events. Debts of debtors is not an uncertain event but only the realization of a part of the debt in doubtful for which provision must be provided and hence it is not a contingent liability. Items in other alternatives uncalled liability on partly paid shares (b) may be called up in the event of necessity, claims against the company not acknowledged as debts (c ) they may or may not turn out to be debts in future. Arrears of cumulative fixed dividend (d) are contingent liabilities.]

267.        Which of the following are current assets of a business?
i.    Income received in advance
ii Stock
iii.    Debtors
iv.    Pre-paid expenses
v.    Accrued income
(a Both (i) and (iv) above
(b Both (ii) and (iii) above




(c (i),(ii) and (iii) above
(d (ii),(iii),(iv) and (v) above

268.        Which of the following statements is true?
(a Bad Debts Recovered Account is transferred to Sundry Debtors Account
(b Bill of exchange is drawn by the purchaser
(c)  Trial Balance establishes the arithmetical accuracy of the accounting records
(d)  A well maintained asset need not be depreciated
[Hints: (c) Bad debts recovery amount will be transferred to Profit & Loss Account and not to Sundry Debtors Account. Hence (a) is not correct. Bill of exchange is drawn by the drawer i.e., the seller and not the purchaser. According to Companies Act, all assets must be depreciated. Hence (a),
(b)  and (d) are not true. By tallying Trial Balance always proves the arithmetical accuracy of the accounting records. Hence (c) is correct.]

269.        Closing entries are generally passed
(a)  At the time of opening new books of account
(b)  At the time of closing the accounts
(c During the course of accounting period any time
(d)  After certification of accounts

270.        Closing stock appearing in the Trial Balance is shown in -
(a)  Trading A/c and Balance Sheet
(b Profit and Loss A/c
(c Balance Sheet only
(d)  Trading A/c only

271.        Depreciation Account appearing in the Trial Balance is shown in
(a Profit and Loss A/c
(b)  Trading A/c
(c Deducted from the concerned assets A/c
(d)  Shown on the liability side

272.        Profit on sale of old plant is shown -
(a In Trading A/c
(b In Profit and Loss Appropriation A/c
(c Profit and Loss A/c
(d Being a non operating item ignored

273.        Carriage on goods purchased is shown in
(a Profit and Loss A/c
(b)  Capitalized with work in progress
(c)  Trading A/c
(d)  Shown in Balance Sheet


274.        Which of these is not an operating income
(a Income from sale of trading goods
(b Bad debts recovered




(c Interest on FDs
(d None
275.         ABC holds an average inventory of ' 36,000(CP) with an inventory turnover of 5 times. If the firm makes a gross profit of 25% on sales, find the total sales of the company
(a)  ' 2,40,000 (b)  ' 2,10,000 (c)  ' 2,00,000
(d)  ' 1,80,000

276.        From the following details what will be the partners' commission?
Net profit before charging partners' commission '65,000. Partners' commission @
11% after charging such commission
(a) 6441 (b) 5431 (c 7654
(d)  9876

277.        From the following details what will be the partners' commission?
Net  profit  before  charging  partners'  commission  '65,000.  Partners'  commission
11% before charging such commission
(a) 6441 (b) 5431 (c) 7150 (d)  5876

278.        Arrangement of Balance Sheet in a logical order is known as
(a Dressing Balance Sheet
(b)  Marshalling Balance Sheet
(c Formatting Balance Sheet
(d)  Make up of Balance Sheet

279.        Improper valuation of inventory effects
(a Profitability
(b Financial position
(c Both
(d)  Cash inflows

280.        Find the cost of goods sold if goods are sold for ' 2,000 at 25% profit on cost
(a)  ' 1,600 (b)  ' 1,500 (c)  ' 1,000
(d)  ' 1,800

281.        Find the value of opening stock from the following data.
Purchases ' 1,50,000, Closing stock ' 30,000 , Sales '2,20,000, Gross profit ' 40,000.
(a)  ' 50,000
(b)  ' 55,000




(c)  ' 60,000
(d)  ' 65,000

282.         A Bill of Exchange is drawn on 1st April, 2012 payable after 3 months. The due date of the bill is
(a)  30th June,2012
(b 1st July,2012
(c)  4th July,2012
(d)  4th August,2012
[Hints: (d) Bill drawn on 1st  April, 2012 payable after 3 months. The due date is 1st
April, 2012 + 3 months + 3 days of grace = 4th July, 2012.]

283.        Which of the following statements is/are true?
(a Noting charges are paid by the holder of the bill on the date of default
(b)  A bill can be endorsed only thrice
(c On renewal of bill the old bill is canceled
(d Both (a) and (c) above
[Hints: (d) Noting charges are paid by the holder of the bill to get the bill noted for dishonour on the date of its dishonour. Statement (a) is true.
A bill can be endorsed any number of times, there is no limit to the number of endorsements. Statement (b) is false.
Renewal of bill takes place when the acceptor requests the drawer to cancel the old bill and draw a new bill. Hence statement (c ) is true.
Hence option (d) stating that statement (a) and (c) are the right choice.]

284.        When bill discounted with the bank is dishonoured?
(a)  Acceptor's Account is debited in the books of drawer
(b Bills Receivable Account is credited in the books of drawer
(c Bank Account is debited in the books of drawer
(d Bills Payable Account is debited in the books of drawer
[Hints: (a) When a bill discounted with bank has been dishonoured, the drawer debits the Acceptors Account (restores the acceptor status a debtor for the amount due) and credits the Bank Account or Cash Account (the amount he pays to bank). The acceptor debits the Bills Payable Account, the noting charges and credits the Drawer's Account (Restores the status quo of the creditor to whom he is due to pay). Hence option (a) is correct. All other options are incorrect.]

285.        Which of the following statements is/are false?
(a)  Accommodation bills are drawn for the benefit of drawer only
(b Bills sent for collection is an asset
(c Bills of exchange cannot be drawn on a banker
(d Both (a) and (c) above
[Hints: (d) Accommodation bills are drawn for the benefit of both the parties to the bill. Hence statement (a) is false.
Bills sent for collection in the books of the drawer is an asset replacing the Bills
Receivable (asset).
A cheque is a bill of exchange which is drawn on a banker, payable at sight. Hence option (c ) is false.




Hence option (d) the statements (a) and (c ) are false, is the right choice.]

286.         In the books of the drawer, the accounting treatment involved on receipt of a bill of exchange duly accepted by the drawee is
i.    Debit Bills Receivable Account
ii.    Debit Drawees Account
iii.    Credit Drawees Account
iv.    Credit Sales Account
(a)  Only (i) above
(b Both (ii) and (iv) above
(c Both (i) and (iii) above
(d Both (i) and (iv) above
[Hints: (c) In the books of the drawer, the accounting treatment involved on receipt of a bill of exchange duly accepted by the drawee is debit Bills Receivable Account and credit Drawee's
Account .i.e., the combination of statements in (i) and (iii) alternative (c) is the correct answer. The other alternatives are incorrect because the combination of one correct answer with the statement of incorrect answer. Drawee's Account is debited (ii) as soon as a sale is made or any advances is made and Drawee's Account is not debited when the bill of exchange is accepted and sales is credited (iv) when the sale is made and not at the time of acceptance of bill of exchange. Thus, the alternatives (a), statement (i) (b), combination of (ii) and (iv) (d) combination of (i) and (iv) are incorrect.]

287.         The noting charges levied on dishonour of an endorsed bill by the Notary Public are to be borne by
(a)  The drawer of the bill
(b)  The person responsible for dishonour
(c)  The holder of the bill
(d)  The endorser of the bill
[Hints: (b) The noting charges are the charges paid to Notary Public for presenting a bill for payment and to note the fact of dishonour. The charges are to be borne by the person  responsible for dishonour who  is  none other  than  the drawee.  Thus,  the correct answer is (b).
The drawer of the bill (a) is  incorrect answer because the drawer  may pay  the charges initially but ultimately they are to be borne by the drawee. The holder of the (c) is entitled to receive the payment of the bill and to bear the noting charges on the bill. The endorser (d) may be the drawer of the bill in which case he will recover the
noting charges from the drawee of the bill. Thus (b) is the correct answer.]

288.         The drawer of a trade bill passes relevant entries with regard to the transaction involved in it. But, in case of an accommodation bill, he passes an entry in addition to the usual entries. The additional entry so passed is with respect to
(a Discounting of the bill with the bank
(b Payment of the bill on due date
(c Remitting or receiving the amount
(d)  Sending the bill to bank for collection
[Hints: (c ) In case of accommodation bills, the additional entry that is to be passed




other than the usual entries passed with regard to trade bills in the books of the drawer  is  in  respect  of  (c  )  remitting  or  receiving  the  amount  at  the  time  of discounting the bill and honouring the bill at maturity. The entries passed are the same in case of discounting the bill with the bank (a) and no additional entry is passed except for sending the share of proceeds to the drawee. On payment of the bill on due date (b) no additional entry is passed in the books of the drawer. If the bill is sent to the bank for collection, (d) the purpose behind the accommodation bill is defeated. However, no additional entry is required to be passed at the time of sending the bill to the bank for collection
(d)  . Thus, (c) is the correct answer.]

289.         Under which of the following situations, is journal entry not passed in the books of the drawer?
(a)  When a discounted bill is honoured by the drawee on the due date
(b)  When a bill is sent to the bank for collection
(c)  When a bill is renewed at the request of the drawee
(d)  When a debtor accepts a bill drawn by the drawer
[Hints: (a) When a discounted bill is honoured by the drawee on the due date, (a) no journal entry is passed in the books of the drawer. The entry is passed at the time of discounting of the bill itself and no entry is required if the discounted bill is honoured on due date. Hence, (a) is the correct answer. The other alternatives are incorrect because, when a bill is sent to the bank for collection
(b) a journal entry debiting bills sent to bank for collection and crediting Bills Receivable is passed. When a bill is renewed at the request of the drawee (c) a journal entry is passed canceling the old bill and raising a new bill with interest. When a debtor accepts a bill drawn by the drawer (d) when a debtor is converted to bills receivable and debtors balance is reduced and Bills Receivable account is increased to extent of the amount passing a journal entry to that effect. Thus, (a) is the correct
answer.]

290.        Which of the following is not a feature of a promissory note?
(a It must be in writing
(b It contains an unconditional promise to pay
(c It is payable to the bearer
(d It must be signed by the maker
[Hints: (c) According to the Negotiable Instrument Act, promissory note is not payable to the bearer. It must contain an order to pay. So this is not the characteristic of promissory note. Other options are the characteristics of promissory note.]

291.        How many parties are generally found in a Bill of Exchange
(a) 4 (b) 2 (c)  3
(d)  5




292.         X draws a Bill of Exchange on Y for ' 10,000 on 1-1 -2013 for 3 months. The due date of the bill will be
(a4-4-2013 (b)  3-4-2013 (c)   1-4-2013 (d)  31-3-2013

293.        When a B/R is endorsed by the Drawer what entry is passed by the Drawee
(a B/R A/c Dr. to Drawer A/c Cr.
(b B/P A/c Dr. to Drawer A/c Cr.
(c)  3rd Party's A/c Dr. to B/P A/c Cr.
(d No entry at all

294.        When a B/R is discounted, what entry is passed by the Drawee
(a Bank A/c Dr. to B/R Cr.
(b Drawer A/c Dr. to B/R A/c Cr.
(c B/R A/c Dr. to B/P A/c Cr.
(d No entry

295.        Noting charges are ultimately borne by
(a) Drawee (b) Drawer (c Payee
(d None

296.        Negotiable Instrument Act was enacted in
(a) 1981 (b) 1881 (c) 1871 (d)  2001

297.        Which of these is not an essential feature of a bill of exchange
(a)  Unconditional
(b)  Certainty of amount
(c In writing
(d)  Amount to be paid in foreign currency

298.        A foreign bill of exchange is generally drawn up in
(a) Triplicate (b) Duplicate (c)  Single
(d)  Quadruplicate

299.        Which of these are not required in a promissory note
(a)  Acceptance
(b Unconditional promise to pay
(c Properly stamped
(d Payment to be made legal currency

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