Financial Accounting – Test Paper 1
Time : 30 Minutes Marks: 100
Each correct answer carries 4 marks while 1 mark will be deducted for each incorrect answer.
- Income earned but not yet received is treated as
(a) Asset
(b) Liability
(c) Loss
(d) Capital - The capital of a firm is R 80,000. The reasonable return in the industry is 7•5%. If the profits earned by the firm during last five years were R 8,000, R 9,000, R 7,000, R 8,500 and R 10,000, then the super profit of the firm is
(a) R 2,000
(b) R 2,500
(c) R 3,000
(d) R 3,500 - Deewali advance given to an employee is
(a) Revenue Expenditure
(b) Capital Expenditure
(c) Deferred Revenue Expenditure
(d) Not an Expenditure - Which accounting concept satisfy the valuation criteria
(a) Going concern, Realisation, Cost
(b) Going concern, Cost, Dual aspect
(c) Cost, Dual aspect, Conservatism
(d) Realisation, Conservatism, Going concern. - Which one of the following items is considered as revenue expenditure?
(a) Expenditure by the way of maintenance for increased productivity
(b) Repair of a car engine for enhancement of operational life
(c) Complete overhaul of a machine, spending around 22% of its value
(d) Changing a small component of a machine to maintain its operational efficiency - A firm has reported a profit of Rs.1,47,000 for the year ended 31-3-2014 after taking into consideration the following items.
(i) The cost of an asset Rs.23,000 has been taken as an expense
(ii) The firm anticipated a profit of Rs.12,000 on the sale of an old furniture
(iii) Salary of Rs.7,000 outstanding for the year has not been taken into account.
(iv) An asset of Rs.85,000 was purchased for Rs.75,000 and was recorded in the books at Rs.85,000.
What is the correct amount of profit to be reported in the books?
(a) Rs.1,47,000
(b) Rs. 1,51,000
(c) Rs.1,63,000
(d) Rs.1,41,000 - The process of recording financial data upto ledger is called
(a) Book keeping
(b) Classifying
(c) Summarising
(d) Analyzing - Secret reserves are created by means of
(a) Transfer to general reserve
(b) Providing excessive depreciation
(c) Overvaluation of inventories
(d) None of the above - Provisions are amounts set aside out of profit and other surpluses for
(a) Meeting a liability, the amount which can be determined with exact figure
(b) Any known liability which the amount cannot be determined with substantial accuracy
(c) Meeting an eventuality arising out of revaluation of asset in ordinary course of business
(d) Meeting a liability arising out of arbitration - In which of the following cases, accounting estimates are needed?
(a) Employs benefit schemes
(b) Impairment of losses
(c) Inventory obsolescence
(d) All of the above - Mention the correct sequence of accounting process.
(a) Communicating – Recording – Identifying
(b) Recording – Communicating – Identifying
(c) Identifying – Recording – Communicating
(d) Identifying – Communicating – Recording - The root cause for financial accounting
(a) Stewardship accounting
(b) Social accounting
(c) Management accounting
(d) Human resource accounting - What will happen if bad debt is not recorded by a firm by mistake?
(a) Net profit would decrease
(b) Net profit would increase
(c) Gross profit would overstate
(d) Gross profit would understate - In income measurement & recognisation of assets & liabilities which of the following concepts goes together ?
(a) Periodicity, Accural, Matching
(b) Cost, Accural, matching
(c) Going concern, cost, Realization
(d) Going concern, Periodicity, Reliability - An entry which is made on both sides of a cash book is called
(a) Cash entry
(b) Contra entry
(c) Payment entry
(d) Compound entry - The written agreement of partnership is most commonly referred as
(a) Agreement
(b) Partnership deed
(c) Partnership account
(d) Partnership act - Which one of the following pairs is not a perfect match?
(a) Suppression of invoice—Window dressing
(b) Overcharging of depreciation— Secret reserve
(c) Omission of cash receipts from debtors—Understatement of sales
(d) Omission of credit sales— Understatement of debtors - A trader has made a sale of Rs.75,500 out of which cash sales amounted to Rs.25,500. He showed trade receivables on 31-3-2014 at Rs.50,000. Which concept is followed by him?
(a) Going concern
(b) Cost
(c) Accrual
(d) Money measurement - The accounting standards are intended to apply only to items which are
(a) Material
(b) Insignificant
(c) Measured in terms of money
(d) None of the above - Preparation of Trial Balance helps mainly in
(a) Summarising business transactions
(b) Verifying that ‘GAAP’ has been observed
(c) Finalising the sources and uses of fund’s statement
(d) Locating errors, if any, in the books of accounts - An asset is never reduced to zero in the
(a) Fixed installment method of depreciation
(b) Annuity method of depreciation
(c) Diminishing balance method of depreciation
(d) None of the above - A real estate company sold a piece of land for Rs.5,00,00,000 (cost Rs.4,20,00,000) then the type of receipt is nature and profit on sale is
(a) Capital & transferred to capital reserve
(b) Revenue & transferred to P & L a/c
(c) Capital & transferred to P & L a/c
(d) Revenue & transferred to general reserve - Interpretation means
(a) Explanation of meaning and significance of the data in Financial Statements.
(b) Concerned with preparation and presentation of classified data
(c) Systematic analysis of recorded data
(d) Methodical classification of data given in Financial Statements. - A trader purchases goods for Rs. 25,00,000, of these 70% of goods were sold during the year. At the end of 31st December 2009, the market value of such goods were Rs. 5,00,000. But the trader recorded in his books for Rs. 7,50,000. Which of the following concept is violated ?
(a) Money measurement
(b) Conservatism
(c) Consistency
(d) None of these - Which of the following is wrong?
(a) All real and personal accounts are transferred to balance sheet
(b) Nominal accounts are transferred to P & L account
(c) Each account is opened separately in ledger
(d) Rent is a personal account, outstanding rent is nominal account