CA Inter MCQ's - Introduction to AS - PDF

CA NITIN GOEL INTRODUCTION TO AS CH 10 MCQ’S 1. Accounting Standards fo...

CA NITIN GOEL INTRODUCTION TO AS CH 10 MCQ’S 1. Accounting Standards for non-corporate entities in India are issued by: a. Central Govt. b. State Govt. c. Institute of Chartered Accountants of India. d. MCA 2. Accounting Standards: a. Harmonise accounting policies and eliminate the non-comparability of financial statements. b. Improve the reliability of financial statements. c. Both (a) and (b). d. manipulate the data for the management. 3. It is essential to standardize the accounting principles and policies in order to ensure a. Transparency. b. Consistency. c. Comparability. d. All the above. 4. Which committee is responsible for approval of accounting standards and their modification for the purpose of applicability to companies? a. NFRA. b. MCA. c. Central Government Advisory Committee. d. IASB 5. Global Standards facilitate a. Cross border flow of money. b. Comparability of financial statements. c. Uniformity and Transparency of financial statements. d. All the three. 6. IFRS stands for: a) International Financial Reporting standards b) International Financial Reporting statements c) Indian Financial Reporting standards d) Indian Financial Reporting statements 7. Accounting Standards cover the aspect of________? a) Recognition of events and transactions in the financial transactions. b) Measurement of events and transactions in the financial transactions. c) Presentation & disclosure of events and transactions in the financial transactions. d) All of the above. Page 10A.1 CA NITIN GOEL INTRODUCTION TO AS 8. Additional guidance given in Ind AS over and above what is given in IFRS are called? a) Carve-outs b) Carve-ins c) Clarifications d) Carve Clarifications Answers: 1. (c) 2. (c) 3. (d) 4. (b) 5. (d) 6. (a) 7. (d) 8. (b) Page 10A.2  CA NITIN GOEL APPLICABILITY OF AS CH 10 MCQ’S 1. Non-corporate entities which are not Level I entities whose turnover (excluding other income) exceeds rupees but does not exceed rupees two-fifty crores in the immediately preceding accounting year are classified as Level II entities. a. five crores. b. two crores. c. fifty crores. d. ten crores. 2. The following Accounting Standard is not applicable to Non-corporate Entitiesfalling in Level II in its entirety. a. AS 10. b. AS 17. c. AS 2. d. AS 13. 3. All non-corporate entities engaged in commercial, industrial and business reporting entities, whose turnover (excluding other income) exceeds rupees 250 crores in the immediately preceding accounting year, are classified as a. Level II entities. b. Level I entities. c. Level III entities. d. Level IV entities. 4. All non-corporate entities engaged in commercial, industrial or business activities having borrowings (including public deposits) in excess of rupees two crores but does not exceed rupees ten crores at any time during the immediately preceding accounting year. a. Level II entities. b. Level IV entities. c. Level III entities. d. Level I entities. 5. “Small and Medium Sized Company” (SMC) means, a company- a. which may be a bank, financial institution or an insurance company. b. whose turnover (excluding other income) does not exceed rupees two-fifty crores in the immediately preceding accounting year; c. whose turnover (excluding other income) does not exceed rupees fifty crores in the immediately preceding accounting year; d. whose turnover (excluding other income) does not exceed rupees five hundred crores in the immediately preceding accounting year. 6. One of the eligibility criteria for classification of non-corporate entities as Level II is that all commercial, industrial and business activities, whose turnover (excluding other income) exceeds? Page 10B.1 CA NITIN GOEL APPLICABILITY OF AS a) ₹ 50 crore but does not exceed ₹ 250 crore in the immediately preceding accounting year b) ₹ 50 lakhs but does not exceed ₹ 250 lakhs in the immediately preceding accounting year c) ₹ 50 crore but does not exceed ₹ 200 crore in the immediately preceding accounting year d) ₹ 10 crores but does not exceed ₹ 50 crore in the immediately preceding accounting year Answers: 1. (c) 2. (b) 3. (b) 4. (c) 5. (b) 6. (a) Page 10B.2  CA NITIN GOEL AS 1 CH 10C DISCLOSURE OF ACCOUNTING POLICIES MCQ’S 1. Which of the following is NOT a major consideration in selection and application of accounting policies? a. Prudence b. Comparability c. Materiality d. Substance over form 2. Adoption of different accounting policies by different companies operating in the same industry affects which of the qualitative characteristics the most? a. Comparability b. Relevance c. Faithful representation d. Reliability 3. Which of the following statement would not be correct in relation to disclosures to be made in the financial statements after making any change in an accounting policy? a. Any change in an accounting policy which has a material effect shouldbe disclosed. b. The amount by which any item in the financial statements is affected by such change should be disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part, the fact should be indicated. c. If a change is made in the accounting policies which has no material effect on the financial statements for the current period but which is reasonably expected to have a material effect in later periods, the fact of such change should be appropriately disclosed in the period in which the change is adopted. d. If a change is made in an accounting policy which has material effect on the financial statements for the current period and is reasonably expected to have a material effect in later periods, the fact of such change should be appropriately disclosed only in the later periods i.e. year(s) next to the year in which the change is adopted. 4. Two major considerations that govern the selection of accounting policy a. Substance over form and Consistency b. Prudence and Materiality c. Prudence and Reliability d. Reliability and Consistency 5. Fundamental accounting assumption is? a. Materiality b. Business entity c. Going concern d. Dual aspect Page 10C.1 CA NITIN GOEL AS 1 CH 10C 6. It is essential to standardize the accounting principles and policies in order to ensure a. Transparency b. Consistency c. Comparability d. All of the three 7. AS 1 recognizes ___________ Fundamental Accounting Assumptions? a. three b. four c. five d. none of the three Answers: 1. (b) 2. (a) 3. (d) 4. (b) 5. (c) 6. (d) 7. (a) Page 10C.2  CA NITIN GOEL AS 2 CH 10D AS VALUATION OF INVENTORIES 02 MCQ’S 1. Which item of inventory is under the scope of AS 2? a. WIP arising under construction contracts. b. Raw materials c. Shares d. Debentures held as stock in trade. 2. Materials and other supplies held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be a. sold at or above cost. b. sold above cost. c. sold less than cost. d. sold at market value (where market value is more than cost). 3. All of the following costs are excluded while computing value of inventoriesexcept? a. Selling and Distribution costs b. Allocated fixed production overheads based on normal capacity. c. Abnormal wastage d. Storage costs 4. Identify the statement(s) which is/are incorrect. a. Storage costs which is a necessary part of the production process is included in inventory valuation. b. Administration overheads are never included in inventory valuation. c. Full amount of variable production overheads incurred are included in inventory valuation. d. Selling and Distribution costs does not form part of stock valuation. 5. Pawan and-Vikas are partners in firm sharing profits and losses in the ratio of 4: 3. Balance Sheet (Extract) Liabilities ₹ Assets ₹ Inventory 2,00,000 If the value of Inventory reflected in the above balance sheet is overvalued by 25%, find out the value of inventory to be shown in the new Balance Sheet. a. ₹ 1,60,000 b. ₹ 2,00,000 c. ₹ 2,40,000 d. ₹ 2,50,000 6. The cost of inventories of items that are not ordinarily inter-changeable and goods or services produced and segregated for specific projects should be assigned by? a. Specific identification of their individual costs b. FIFO Page 10D.1 CA NITIN GOEL AS 2 CH 10D c. Weighted average cost formula d. (b) or (c) 7. In determining the cost of inventories in accordance with AS 2, it is appropriate to exclude certain costs and recognize them as expenses in the period in which they are incurred. An example of such cost is? a. Fixed production overheads. b. Freight inwards. c. Selling and distribution costs. d. Costs of designing products for specific customers. Answers: 1. (b) 2. (a) 3. (b) 4. (b) 5. (a) 6. (a) 7. (c) Page 10D.2  CA NITIN GOEL AS 4 CH 10E CONTINGENCIES AND EVENTS OCCURRING AFTER BALANCE SHEET DATE MCQ’S 1. Cash amounting to ₹ 4 lakhs, stolen by the cashier in the month of March2023, was detected in April, 2023. The financial statements for the year ended 31st March, 2023 were approved by the Board of Directors on 15th May, 2023. As per Accounting Standards, this is for the financial statements year ended on 31st March, 2023. a. An Adjusting event. b. Non-adjusting event. c. Contingency. d. Provision 2. As per Accounting Standards, events occurring after the balance sheet date are a. Only favourable events that occur between the balance sheet date and the date when the financial statements are approved by the Board of directors. b. Only unfavourable events that occur between the balance sheet date and the date when the financial statements are approved by the Boardof directors. c. Those significant events, both favourable and unfavourable, that occur between the balance sheet date and the date on which the financial statements are approved by the Board of directors. d. Those significant events, both favourable and unfavourable, that occur between the balance sheet date and the date on which the financialstatements are not approved by the Board of directors. 3. AS 4 does not apply to a. Obligation under retirement benefit plans. b. Commitments arising from long term lease contracts. c. liabilities of life assurance and general insurance enterprises arising from policies issued. d. Both (a) & (b). 4. A Ltd. sold its building for ₹ 50 lakhs to B Ltd. and has also given the possession to B Ltd. The book value of the building is ₹ 30 lakhs. As on 31st March, 2023, the documentation and legal formalities are pending. For the financial year ended 31st March, 2023 a. The company should record the sale. b. The company should recognise the profit of ₹ 20 lakhs in its profit and loss account. c. Both (a) and (b). d. The company should disclose the profit of ₹ 20 lakhs in notes toaccounts. 5. Which is adjusting event as per AS 4. a. Decline in market value of investments between the balance sheet date and the date on which the financial statements are approved b. Dividend declared after the balance sheet date but before the financial statements are approved for issue. Page 10E.1 CA NITIN GOEL AS 4 CH 10E c. Filing of Bankruptcy by a major customer between the balance sheet date and the date on which the financial statements are approved d. Loss from fire which took place between the balance sheet date and the date on which the financial statements are approved Answers: 1. (a) 2. (c) 3. (d) 4. (c) 5. (c) Page 10E.2  CA NITIN GOEL AS 5 CH 10F NET PROFIT OR LOSS FOR THE PERIOD, PRIOR PERIOD ITEMS & CHANGES IN ACCOUNTING POLICIES MCQ’S 1. A change in the estimated life of the asset, which necessitates adjustment in the depreciation is an example of a. Prior period item. b. Ordinary item. c. Extraordinary item. d. Change in accounting estimate. 2. Which of the following is considered as an extraordinary item as per AS 5? a. Write down or write-off of receivables, inventory and intangible assets. b. Gains and losses from sale or abandonment of equipment used in abusiness. c. Effects of a strike, including those against competitors and majorsuppliers. d. Flood damage from unusually heavy rain or a normally dryenvironment. 3. Which one of the following is an example of extraordinary item? a. The write down of inventories to their net realisable value b. Reversal of write down of inventories c. Government grants become refundable d. Reversal of provisions. 4. Extraordinary items are income or expenses a. That arise from events clearly distinct from the ordinary activities of the enterprise. b. That are not expected to recur frequently or regularly. c. Both (a) and (b). d. None of the three. 5. An audit stock verification during the year ended 31st March, 2021 revealed that opening stock of the year was understated by ₹ 5 lakhs due to wrong counting. While finalizing accounts, your opinion will be a. It is not a prior period item and no separate disclosure is required b. It should be treated as a prior period adjustment and should be separately disclosed in the current year’s financial statement c. The adjustment of ₹ 5 lakhs in both opening stock of current year and profit brought forward from previous year should be made d. Both (b) and (c). 6. There was an omission of ₹ 15,000 purchases from last year books and this error is traced in current year. This will be called as a. Exceptional item b. Prior period item c. Extraordinary item d. Change in accounting estimates Page 10F.1 CA NITIN GOEL AS 5 CH 10F 7. Which of the following may not be considered as an extra-ordinary item? a. Attachment of property of the enterprise b. Losses sustained as a result of an earthquake c. Claims from policyholders arising from an earthquake for an insurance enterprise that insures against such risks d. Loss due to major fire in an important plant of the company 8. There was an omission of ₹ 32,000 sales in last year books and this error is traced in current year. This will be called as a. Exceptional item b. Prior period item c. Extraordinary Item d. Change in accounting estimates 9. Which of the following circumstances may not give rise to the separate disclosure of items of income and expense a. The write-down of inventories to net realizable value b. Legislative changes having retrospective application c. Litigation settlements d. Separation cost paid to CEO of the company Answers: 1. (d) 2. (d) 3. (c) 4. (c) 5. (d) 6. (b) 7. (c) 8. (b) 9. (d) Page 10F.2  CA NITIN GOEL AS 7 CH 10G CONSTRUCTION CONTRACT MCQ’S The below information relates to Questions 1 – 3: XY Ltd. agrees to construct a building on behalf of its client GH Ltd. on 1st April 2022. The expected completion time is 3 years. XY Ltd. incurred a cost of ₹ 30 lakh up to 31st March 2023. It is expected that additional costs of ₹ 90 lakh. Total contract value is ₹ 112 lakh. As at 31st March 2023, XY Ltd. has billed GH Ltd. for ₹ 42 lakh as per the agreement. Assume that the work is completed to the extent of 75% by the end of Year 2. 1. Revenue to be recognized by XY Ltd. for the year ended 31st March 2023 is a. ₹ 28 lakh b. ₹ 42 lakh c. ₹ 30 lakh d. ₹ 32 lakh 2. Total expense to be recognised in Year 1 is a. ₹ 30 lakh b. ₹ 120 lakh c. ₹ 38 lakh d. ₹ 36 lakh 3. Revenue to be recognised for year 2 is a. ₹ 84 lakh b. ₹ 42 lakh c. ₹ 56 lakh d. ₹ 28 lakh 4. LP Contractors undertakes a fixed price contract of ₹ 200 lakh. Transactions related to the contract include: Material purchased: ₹ 80 lakh Unused material: ₹ 30 lakh Labour charges: ₹ 60 lakh Machine used for 3 years for the contract. Original cost of the machine is ₹ 100lakh. Expected useful life is 15 years. Estimated future costs to be incurred to complete the contract: ₹ 80 lakh. Loss on contract to be recognised is: a. ₹ 40 lakh b. ₹ 10 lakh c. ₹ 90 lakh d. ₹ 50 lakh 5. Which of the following does not form a part of contract costs as defined in AS 7? a. Estimated warranty costs under the construction contract. b. Comprehensive insurance policy premium for all open construction contracts. c. General administration costs for which reimbursement is not specified in the contract. d. Research and development costs incurred at the instance of the contractee and billed to his account. Page 10G.1 CA NITIN GOEL AS 7 CH 10G 6. When fixed-price construction contracts require more than one accounting period for completion & contract costs can be reasonably estimated, revenue should be recognized a. At the completion of contract b. When title to the project is transferred to the buyer c. When cash is received from the buyer d. As per percentage of completion. 7. According to AS 7, "Construction Contracts," which of the following criteria must be met for a contract to be considered a construction contract? a. Involvement of physical construction only b. The contract should involve the construction of an asset c. The contract should be completed within a fiscal year d. The contract should be of significant value 8. How are fixed-price contracts recognized under AS 7? a. Using the percentage of completion method b. Using the completed contract method c. Using the installment method d. Using the cost recovery method 9. According to AS 7, which method is preferred for recognizing revenue and costs of long-term contracts? a. Percentage of completion method b. Completed contract method c. Installment method d. Cost recovery method 10. Under AS 7, when should an entity recognize contract revenue and expenses for a construction contract using the percentage of completion method? a. When the contract is completed b. When the contract is initiated c. Over the contract period based on the stage of completion d. When the costs are incurred 11. XYZ Ltd. has a construction contract where the outcome cannot be reliably measured. How should revenue be recognized for this contract according to AS 7? a. Recognize revenue only to the extent of contract costs incurred of which recovery is probable. b. Recognize revenue at the beginning of the contract c. Recognize revenue only upon completion of the contract d. Do not recognize revenue until the outcome is reliably measurable 12. What does AS 7 require regarding the disclosure of information about construction contracts in financial statements? a. Disclose only the total revenue and expenses from the contracts b. Disclose details of contracts and the basis of revenue recognition c. Disclose information only if the contract value exceeds a certain threshold d. Do not disclose information about construction contracts Page 10G.2 CA NITIN GOEL AS 7 CH 10G 13. In a construction contract, when should an expected loss be recognized according to AS 7? a. As soon as the loss becomes probable b. Only upon completion of the contract c. At the beginning of the contract d. When the contract value exceeds a certain threshold 14. According to AS 7, which costs should be included when determining the costs attributable to a contract? a. General and administrative costs b. Costs that are directly related to the specific contract c. Costs incurred before the contract date d. Costs incurred after the completion of the contract Answers: 1. (a) 2. (d) 3. (c) 4. (b) 5. (c) 6. (d) 7. (b) 8. (a) 9. (a) 10. (c) 11. (a) 12. (b) 13. (a) 14. (b) Page 10G.3 CA INTER LEGENDS TELEGRAM CHANNEL Click On Below Image To join our channel  CA NITIN GOEL AS 9 CH 10H REVENUE RECOGNITION MCQ’S 1. Which of the conditions mentioned below must be met to recognize revenuefrom the sale of goods? i. the entity selling does not retain any continuing influence or control over the goods; ii. when the goods are dispatched to the buyer; iii. revenue can be measured reliably; iv. the supplier is paid for the goods; v. it is reasonably certain that the buyer will pay for the goods; vi. the buyer has paid for the goods. a. (i), (ii) and (v) b. (ii), (iii) and (iv) c. (i), (iii) and (v) d. (i), (iv) and (v) 2. Consignment inventory is an arrangement whereby inventory is held by one party but owned by another party. Which of the following indicates that the inventory in question is a consignment inventory? a. Manufacturer cannot require the dealer to return the inventory b. Dealer has the right to return the inventory c. Manufacture is responsible for the pricing of goods and any changes inthe pricing can only be approved by the manufacturer. d. Manufacture is responsible for the holding the goods and any changes in the pricing can only be approved by the dealer 3. Which of the following transactions qualify as revenue for M/s AB Enterprises? a. Sales of ₹ 20 lakhs made under consignment sales. b. Sale of an old machine amounting ₹ 5 lakhs c. Services provided to the customer in the normal course of business. Sales recorded is ₹ 50,000. d. Sales of ₹ 25 lakhs made under consignment sales 4. The Accounting Club has 100 members who are required to pay an annual membership fee of ₹ 5,000 each. During the current year, all members have paid the fee. However, 5 members have paid an amount of ₹ 10,000 each. Of these, 3 members paid the current year’s fee and also the previous year’s dues. Remaining 2 members have paid next years’ fee of ₹ 5,000 in advance. Revenue from membership fee for the current year to be recognised will be: a. ₹ 5,25,000 b. ₹ 5,10,000 c. ₹ 5,00,000 d. ₹ 5,15,000 Page 10H.1 CA NITIN GOEL AS 9 CH 10H 5. FlixNet International offers a subscription fee model to allow the paid subscribers an annual viewing of movies, sports events and other content. It allows users to register for free and have access to limited content for onemonth without any charges. The customer has a right to cancel the subscription within a month’s time but is required to pay for 1 year subscription fee after the free period. XY has subscribed for free viewing on 1st March 2021. After 1 month, he has agreed to pay the annual membership & has paid ₹ 1,200 on 31st March 2021 for subscription that is valid up to 31st of March 2022. Revenue that can be recognized by FlixNet for year ended 31st March 2022 is a. ₹ 100 b. ₹ 1,200 c. Nil d. ₹ 1,100 6. What aspect has special considerations for revenue recognition a. Revenue Arising from Government Grants and Other Similar Subsidies b. Revenue Arising from Construction Contracts c. Revenue Arising from Hire-Purchase, Lease Agreements d. All Of These 7. Goods worth ₹ 4,00,000 were sold on approval basis on 01st Dec, 2022 by ABC Ltd. The period of approval was 3 months after which they were to be considered as sold. Buyer sent approval for 75% goods up to 31st March, 2023 and no approval or disapproval received for the remaining goods till 31st March, 2023. For the year ended 31st March, 2023. a. Revenue should not be recognized at all b. Revenue should be recognized for only 75% of sales c. Revenue should be recognized for the total sales amounting ₹ 4,00,000 as the time period for rejecting the goods had expired d. Revenue should be recognized for only 25% of sales 8. Argentina Enterprises provides subscription-based services. According to AS 9, how should revenue be recognized for subscription services? a. At the beginning of the subscription period b. Over the subscription period c. At the end of the subscription period d. Only when subscribers renew their subscriptions 9. Unique Enterprises receives an order for goods to be shipped internationally on FOB basis. According to AS 9, when should revenue be recognized for international sales? a. At the time of receiving the order b. When the goods are shipped c. When the goods reach the international destination d. When payment is received 10. ABC Ltd. sold goods to a customer on credit. According to AS 9, when should revenue be recognized? a. At the time of delivery b. When payment is received c. When the significant risks & rewards / property in goods is transferred. d. When the customer places the order Page 10H.2 CA NITIN GOEL AS 9 CH 10H Answers: 1. (c) 2. (c) 3. (c) 4. (c) 5. (b) 6. (d) 7. (c) 8. (b) 9. (b) 10. (c) Page 10H.3  CA NITIN GOEL AS 10 CH 10I PROPERTY, PLANT & EQUIPMENT MCQ’S 1. As per AS 10 (Revised) ‘Property, plant and equipment’, which of the following costs is not included in the carrying amount of an item of PPE a. Costs of site preparation b. Costs of relocating c. Installation and assembly costs. d. initial delivery and handling costs 2. As per AS 10 (Revised) ‘Property, Plant and Equipment’, an enterprise holding investment properties should value Investment property a. as per fair value b. under discounted cash flow model. c. under cost model d. under cash flow model 3. A plot of land with carrying amount of ₹ 1,00,000 was revalued to ₹ 1,50,000at the end of Year 2. Subsequently, due to drop in market values, the land was determined to have a fair value of ₹ 1,30,000 at the end of Year 4. Assuming that the entity adopts Revaluation Model, what would be the accounting treatment of Revaluation? a. Initial upward valuation of ₹ 50,000 credited to Revaluation Reserve. Subsequent downward revaluation of ₹ 20,000 debited to P/L. b. Initial upward valuation of ₹ 50,000 credited to P/L. Subsequent downward revaluation of ₹ 20,000 debited to P/L. c. Initial upward valuation of ₹ 50,000 credited to Revaluation Reserve. Subsequent downward revaluation of ₹ 20,000 debited to Revaluation Reserve. d. Initial upward valuation of ₹ 50,000 debited to P/L. Subsequent downward revaluation of ₹ 20,000 credited to P/L. 4. A plot of land with carrying amount of ₹ 1,00,000 was revalued to ₹ 90,000 at the end of Year 2. Subsequently, due to increase in market values, the landwas determined to have a fair value of ₹ 1,05,000 at the end of Year 4. Assuming that the entity adopts Revaluation Model, what would be the accounting treatment of Revaluation? a. Initial downward valuation of ₹ 10,000 debited to Revaluation Reserve. Subsequent upward revaluation of ₹ 15,000 credited to P/L. b. Initial downward valuation of ₹ 10,000 debited to P/L. Subsequent upward revaluation of ₹ 15,000 credited to P/L. c. Initial downward valuation of ₹ 10,000 debited to P/L. Subsequent upward revaluation of ₹ 10,000 credited to P/L and ₹ 5,000 credited to Revaluation Reserve. d. Initial downward valuation of ₹ 10,000 credited to P/L. Subsequent upward revaluation of ₹ 10,000 debited to P/L and ₹ 5,000 debited to Revaluation Reserve. Page 10I.1 CA NITIN GOEL AS 10 CH 10I 5. On sale of an asset which was revalued upwards, what would be the treatment of Revaluation Reserve? a. The Revaluation Reserve is credited to P/L since the profit on sale of such asset is now realized. b. The Revaluation Reserve is credited to Retained Earnings as movement in reserves without impacting the P/L. c. No change in Revaluation Reserve since profit on sale of such asset is already impacting the P/L. d. The Revaluation Reserve is reduced from the asset value to computeprofit or loss. 6. A machinery was purchased having an invoice price ₹ 1,18,000 (including GST ₹ 18,000) on 1 April 2021. The GST amount is available as input tax credit. The rate of depreciation is 10% on SLM basis. The depreciation for 2022 -23 would be a. ₹ 10,000. b. ₹ 11,800. c. ₹ 9,000. d. ₹ 10,500. 7. What does Accounting Standard 10 primarily deal with? a. Revenue Recognition b. Property, Plant, and Equipment c. Leases d. Contingent Liabilities 8. According to AS 10, how should the cost of property, plant, and equipment be measured initially? a. Historical Cost b. Fair Value c. Present Value d. Replacement Cost 9. Under AS 10, which of the following costs should be included in the initial measurement of property, plant, and equipment? a. Selling Costs b. General and Administrative Expenses c. Borrowing Costs d. Future Maintenance Costs 10. In what circumstances does AS 10 allow the revaluation of property, plant, and equipment? a. Only when required by tax regulations. b. When there is a significant change in fair value c. At the discretion of management d. Only during periods of inflation 11. A company purchases a building costing ₹ 25 Lakhs. It is estimated that the estimated life of the building will be 30 years but the company is thinking of selling the building after 20 years when the residual value of the building will be ₹ 25 lakhs. Depreciation will be Page 10I.2 CA NITIN GOEL AS 10 CH 10I a. 1,25,000 b. 0 c. 2,50,000 d. None of the above 12. An entity wishes to accelerate its depreciation policy because of changes in the useful life of the asset. How should the change be dealt with? a. By retrospective restatement b. By retrospective application c. By prospective application d. By disclosure of an error Answers: 1. (b) 2. (c) 3. (c) 4. (c) 5. (b) 6. (a) 7. (b) 8. (a) 9. (c) 10. (b) 11. (b) 12. (c) Page 10I.3  CA NITIN GOEL AS 11 CH 10J THE EFFECT OF CHANGES IN FOREIGN EXCHANGE RATES MCQ’S 1. As per AS 11 assets and liabilities of non-integral foreign operations should be converted at _____________rate. a. Opening b. Average c. Closing d. Transaction 2. The debit or credit balance of “Foreign Currency Monetary Item TranslationDifference Account” a. Is shown as “Miscellaneous Expenditure” in the Balance Sheet b. Is shown under “Reserves and Surplus” as a separate line item c. Is shown as “Other Non-current” in the Balance Sheet d. Is shown as “Current Assets” in the Balance Sheet 3. If asset of an integral foreign operation is carried at cost, cost and depreciation of tangible fixed asset is translated at a. Average exchange rate b. Closing exchange rate c. Exchange rate at the date of purchase of asset d. Opening exchange rate 4. Which of the following can be classified as an integral foreign operation? a. Branch office serving as an extension of the head office in terms of operations b. Independent subsidiary of the parent company c. Branch office independent of the head office in terms of operational decisions d. None of the above 5. Which of the following items should be converted to closing rate for the purposes of financial reporting? a. Items of Property, Plant and Equipment b. Inventory c. Trade Payables, Trade Receivables and Foreign Currency Borrowings d. All of the above 6. What will be the treatment of the balance in the foreign currency translation reserve on disposal of the foreign operation? a. Transfer the balance in foreign currency translation reserve to reserves without impacting P/L b. Record the balance in foreign currency translation reserve as income or expense in P/L c. Foreign currency translation reserve will continue; no change will be made to the balance and it will continue to appear as such even after disposal of the foreign operation Page 10J.1 CA NITIN GOEL AS 11 CH 10J d. Any method from the above can be adopted 7. As per AS 11 assets and liabilities of integral foreign operations should be converted at which rates? a. Opening Rate for all assets and liabilities (monetary and non-monetary) b. Closing Rate for all assets and liabilities (monetary and non-monetary) c. Record transactions at the spot rate, monetary items at closing rate and non- monetary items at the rate on which the transaction was executed. d. Average Rate for all assets and liabilities (monetary and non-monetary) 8. Which of the following statements is false? a. AS 11 should be applied in accounting for transactions in foreign currencies b. AS 11 deals with accounting for foreign currency transaction in the nature of forward exchange contracts c. AS 11 specifies the currency in which an enterprise should present its financial statements d. The principal issues in accounting for foreign currency transactions are to decide which exchange rate to use and how to recognize in the financial statements the financial effect of changes in exchange rates 9. Average rate a. is the exchange rate at the balance sheet date b. is the mean of the exchange rates in force during a period c. is the ratio for exchange of two currencies d. is the rate at which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction 10. Closing rate a. is the exchange rate at the balance sheet date b. is the mean of the exchange rates in force during a period c. is the ratio for exchange of two currencies d. is the rate at which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction 11. Exchange rate a. is the exchange rate at the balance sheet date. b. is the mean of the exchange rates in force during a period. c. is the ratio for exchange of two currencies. d. is the rate at which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. 12. Currency other than the reporting currency of an enterprise a. Non-Reporting currency b. U.S. Dollars c. Foreign Currency d. Indian Rupees 13. Currency used in presenting the financial statements a. Reporting currency b. Non-Foreign Currency c. Official Currency Page 10J.2 CA NITIN GOEL AS 11 CH 10J d. Indian Rupees 14. Money held and assets and liabilities to be received or paid in fixed or determinable amounts of money a. Current items b. Non-monetary items c. Monetary items d. Forward Exchange Contract 15. Which of the following is a foreign currency transaction? i. an enterprise buys or sells goods or services whose price is denominated in a foreign currency. ii. an enterprise borrows or lends funds when the amounts payable or receivable are denominated in a foreign currency. iii. an enterprise becomes a party to an unperformed forward exchange contract. a. only (iii) b. all c. only (i) d. only (ii) 16. Which of the following statements is false? a. At each balance sheet date, foreign currency monetary items should be reported using the closing rate. b. At each balance sheet date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency should be reported using the exchange rate at the date of the transaction. c. At each balance sheet date, non-monetary items, which are carried at fair value denominated in a foreign currency should be reported using the exchange rates that existed when the values were determined. d. At each balance sheet date, foreign currency monetary items should be reported using the average rate during the year. Answers: 1. (c) 2. (b) 3. (c) 4. (a) 5. (c) 6. (b) 7. (c) 8. (c) 9. (b) 10. (a) 11. (c) 12. (c) 13. (a) 14. (c) 15. (b) 16. (d) Page 10J.3  CA NITIN GOEL AS 12 CH 10K ACCOUNTING FOR GOVERNMENT GRANTS MCQ’S 1. To encourage industrial promotion, IDCI offers subsidy worth ₹ 50 lakhs to all new industries set up in the specified industrial areas. This grant is in the nature of promoter’s contribution. How such subsidy should be accounted in the books? a. Credit it to capital reserve b. Credit it as ‘other income’ in the profit and loss account in the year of commencement of commercial operations c. Both (a) and (b) are permitted d. Credit it to general reserve 2. Government grants that are receivable as compensation for expenses or losses incurred in a previous accounting period or for the purpose of giving immediate financial support to the enterprise with no further related costs, should be a. recognised and disclosed in the Statement of Profit and Loss of the period in which they are receivable as an ordinary item. b. recognised and disclosed in the Statement of Profit and Loss of the period in which the losses or expenses were incurred. c. recognised and disclosed in the Statement of Profit and Loss of the period in which they are receivable, as an extraordinary item if appropriate as per AS 5. d. disclosed in the Statement of Profit and Loss of the period in which theyare receivable, as an extraordinary item 3. Which of the following is an acceptable method of accounting presentation for a government grant relating to an asset? a. Credit the grant immediately to Income statement b. Show the grant as part of Capital Reserve c. Reduce the grant from the cost of the asset or show it separately as a deferred income on the Liability side of the Balance Sheet. d. Show the grant as part of general Reserve. 4. X Ltd. has received a grant of ₹ 20 crore for purchase of a qualified machine costing ₹ 80 crore. X Ltd has a policy to recognise the grant as a deduction from the cost of asset. The expected remaining useful life of machine is 10 years. Assume that there is no salvage value & the depreciation method is straight-line. The amount of annual depreciation to be charged as an expense in Profit and Loss Statement will be: a. ₹ 10 crore b. ₹ 6 crore c. ₹ 2 crore d. ₹ 8 crore 5. X Ltd has received a grant of ₹ 20 crore for purchase of a qualified machine costing ₹ 80 crore. X Ltd. has a policy to recognise the grant as deferred income. The expected remaining useful life of the machine is 10 years. Assume that there is no salvage value and the depreciation method is straight-line. The amount of other income to be to be recognised in Profit and Loss Statement will be: Page 10K.1 CA NITIN GOEL AS 12 CH 10K a. ₹ 10 crore b. ₹ 6 crore c. ₹ 2 crore d. ₹ 8 crore 6. Why can the receipt of government assistance by an entity be significant for the preparation of the financial statements? a. To find an appropriate method of accounting for the transfer of resources b. To give an indication of the extent to which the entity has benefited from such assistance c. To identify the conditions giving rise to the period over which the grant will be earned in order to determine costs and expenses d. Both a & b. 7. What is the accounting treatment of government grant refundable which was in the nature of promoters' contribution? a. Debited to Profit & Loss Account b. Added in the Cost of Fixed asset c. Reduced from Deferred Government Grant Account d. Reduced from Capital Reserve 8. A government grant that becomes refundable is treated as a. Ordinary item b. Prior Period Item c. Change in Accounting Policy d. Extra-Ordinary item 9. Entity A purchased a fixed asset of ₹ 160 Cr having useful life of 10 years. Government provided grant of ₹ 60 Cr. After 4 years, entity had to refund the grant of ₹ 20 Cr due to non-fulfilment of a condition. Kindly provide the amount of depreciation to be charged in year 5. Assume - Company follows SLM method of depreciation & grant amount is reduced from the gross block of fixed asset. a. ₹ 16 Cr b. ₹ 12 Cr c. ₹ 13.33 Cr d. ₹ 15 Cr 10. AS 12 "Accounting for Government Grants" is not applicable for following. a. Subsidy from Government b. Cash incentives from Government c. Government participation in the ownership of the company d. Duty Drawback from Government 11. Entity A received government grant of ₹ 500 Cr on 01.10.2022 for investment in capital assets having useful life of 10 years. As on 31.03.2023, no amount could be capitalized in the books as the assets were not ready for use. What amount should be credited to statement of Profit & Loss out of Deferred Government Grant account in FY 2022-23. a. ₹ 500 Cr b. Zero c. ₹ 50Cr d. ₹ 25 Cr Page 10K.2 CA NITIN GOEL AS 12 CH 10K 12. Entity X purchased a fixed asset of ₹ 160 Cr having useful life of 10 years. Government provided grant of ₹ 60 Cr. After 4 years, entity had to refund the grant of ₹ 20 Cr due to non-fulfilment of a condition. Kindly provide the amount of depreciation to be charged in year 5. Assume - Company follows SLM method of depreciation & grant amount is maintained separately under Deferred Grant account. a. ₹ 16 Cr b. ₹ 12 Cr c. ₹ 13.33 Cr d. ₹ 15 Cr 13. At what value government grant is recorded in books in case a non-monetary asset is given free of cost? a. Fair value b. Nominal Value c. Concessional rate d. Should not be recorded Answers: 1. (a) 2. (c) 3. (c) 4. (b) 5. (c) 6. (d) 7. (d) 8. (d) 9. (c) 10. (c) 11. (b) 12. (a) 13. (b) Page 10K.3  CA NITIN GOEL AS 13 MCQ’S ACCOUNTING FOR INVESTMENTS MCQ’S 1. The cost of Right shares is a. added to the cost of investments. b. subtracted from the cost of investments. c. no treatment is required. d. added to cost of investments at market value. 2. Long term investments are carried at a. fair value. b. cost less ‘other than temporary’ decline. c. Cost and market value whichever is less. d. Cost and market value whichever is higher. 3. Current investments are carried at a. Fair value. b. cost. c. Cost and fair value, whichever is less. d. Cost and fair value, whichever is higher. 4. A Ltd. acquired 2,000 equity shares of Omega Ltd. on cum-right basis at ₹ 75 per share. Subsequently, omega Ltd. made a right issue of 1:1 at ₹ 60 per share, which was subscribed for by A. Total cost of investments at the year- end will be ₹ a. 2,70,000. b. 1,50,000. c. 1,20,000. d. 1,70,000. 5. Cost of investment includes a. Purchase costs. b. Brokerage and Stamp duty paid. c. Both (a) and (b). d. none of the above. 6. AS 13 Accounting for Investments does not deal with ……………………… a. Operating or finance leases b. Investments on retirement benefit plans c. Mutual funds d. All of Above 7. ……………………….. is the amount obtainable from the sale of an investment in an open market, net of expenses necessarily to be incurred on or before disposal. CA NITIN GOEL AS 13 MCQ’S a. Investments b. Fair value c. Market value d. Mutual Funds 8. As per AS 13, investments are classified as (1) current investment; (2) long term investment- a. Only 1 b. Only 2 c. Both 1 and 2 d. None of above 9. If the investments are acquired on cum-right basis and the market value of investments immediately after their becoming ex-right is lower than the cost for which they were acquired, then the sale proceeds till the carrying amount becomes equal to the market value is ………………………. to know cost of investment. a. Reduced b. Added c. No treatment d. reduced or added depends on the information 10. …………………………………… is an investment in land or buildings that are not intended to be occupied substantially for use by, or in the operations of, the investing enterprise. a. Shares b. Debentures c. Investment Property d. Govt. Securities 11. On disposal of an investment, the difference between the carrying amount and the disposal proceeds, net of expenses, is recognised in the ……………………………… a. Profit and loss statement b. Realisation Account c. Investment Account d. None of the above 12. Mr. X has purchased 10000 10% debentures on 01.12.2023 for ₹ 101 and also paid brokerage @ 2%. What is the cost of 10% debentures as per AS 13. a. ₹ 10,10,000 b. ₹ 10,00,000 c. ₹ 10,20,000 d. ₹ 10,30,200 13. X Ltd has issued bonus shares in the ratio of 1:2. Mr Vipin has 500 shares which it has taken from market @ 135. How many bonus shares is issued by company and what is cost of bonus share to Mr. Vipin? a. 500, ₹ 135 b. 250, ₹ 135 c. 250, NIL d. 500, NIL CA NITIN GOEL AS 13 MCQ’S 14. On 31.1.2023, Bonus was declared in the ratio of 1: 2. Before and after the record date of bonus shares, the shares were quoted at ₹ 175 per share and ₹ 90 per share respectively. On 1.1.2023, Mr. KM has 1000 shares and sold bonus shares to a Broker, who charged 2% brokerage. Calculate Sale Proceeds of bonus shares. a. ₹ 88,200 b. ₹ 90,000 c. ₹ 44,100 d. ₹ 45,000 15. Mr. X purchased 1000 equity shares of ₹ 10 each in PW Co. Ltd. for ₹ 75,000 inclusive of brokerage and stamp duty. He received Bonus shares in the ratio of 1:2. He sold bonus shares for ₹ 45,000. What is the profit on sale of bonus shares? a. ₹ 20,000 b. ₹ 25,000 c. ₹ 44,100 d. ₹ 45,000 16. Miss Kalpana has purchased 6000 shares of MN Ltd. on 15.01.2023 and then on 23.03.2023 purchased another 7000 shares. On 30.06.2023 company has issued 8000 bonus shares to her. MN Ltd has issued right shares on 31.08.2023 in ratio of 3:7 which she subscribed to the maximum extent. Calculate total number of shares. a. 21,000 b. 30,000 c. 70,000 d. 13,000 17. Dividends for the year ended 31.3.2023 at the rate of 20% were declared by X Ltd. and received by Sundari on 31.10.2023. Dividends for 5000 shares acquired by her on 20.6.2023 are to be adjusted against the cost of purchase. X Ltd. has also issued bonus and right shares. Miss Sundari has received 500 and 700 shares respectively. Initially she has 35000 shares of face value ₹ 10 each purchased at 20 per share. Directors of X Ltd. decided not to pay dividend on bonus and right shares. How much dividend received is to be transferred to P&L Account by Sundari? a. ₹ 70,000 b. ₹ 1,40,000 c. ₹ 80,000 d. ₹ 1,60,000 18. Calculate profit on sale of Bonds. C has purchased 1000 bonds at ₹ 55,000. On 02.02.2023 he sold 200 bonds @ 99 each. a. ₹ 19,800 b. ₹ 11,000 c. ₹ 8,800 d. None of the above 19. Mr. F has sold 400 debentures @ 98/- ex interest and has also paid brokerage @ 1%. Cost of debentures ₹ 39,697. Compute Profit or loss on sale of debentures. a. ₹ 890 Profit b. ₹ 890 Loss c. ₹ 889 Profit d. ₹ 889 Loss CA NITIN GOEL AS 13 MCQ’S 20. As per AS 13, investments are reclassified from current to long term, transfers are made at lower of cost and ……………………… on the date of transfer. a. Carrying amount b. Fair Value c. Face Value d. None of the Above 21. Puvi Nuvi Ltd. has invested in various types of investments? Particular Cost (₹) Market Value (₹) Shares 2,10,000 2,25,000 Bond 90,000 88,000 Gold 78,000 72,000 Calculate value of investment at end of year as on 31.03.2024 assuming current investments. a. ₹ 3,85,000 b. ₹ 3,70,000 c. ₹ 3,78,000 d. ₹ 3,93,000 22. Calculate profit on sale of 500 shares if Mr. Tara has earlier purchased 1000 shares @ 120/- each and paid 1% brokerage and 0.50% Stamp duty on purchase. He also received bonus shares in ratio of 1:2. Sales proceeds of shares are ₹ 48,100. a. ₹ 7,500 b. ₹ 7,600 c. ₹ 7,700 d. ₹ 7,800 23. If rights are not subscribed for but are sold in the market, the sale proceeds are taken to the ……………………… a. Profit and Loss Account b. Realisation Account c. Investment Account d. None of the above 24. Any reduction to fair value is debited to profit and loss account, however, if fair value of investment is increased subsequently, the increase in value of current investment up to the cost of investment is credited to the ……………………….. (and excess portion, if any, is ignored). a. Profit and Loss Account b. Realisation Account c. Investment Account d. None of the above 25. Decide and state on the amount of transfer, based on the following information: Certain long term investments no longer considered for holding purposes, to be reclassified as current investments. The original cost of these was ₹ 15 lakhs but had been written down to ₹ 12 lakhs to recognise other than temporary decline as per AS 13. a. ₹ 18 Lakhs b. ₹ 12 Lakhs c. ₹ 15 Lakhs d. None of Above CA NITIN GOEL AS 13 MCQ’S Answers: 1. (a) 2. (b) 3. (c) 4. (a) 5. (c) 6. (d) 7. (c) 8. (c) 9. (a) 10. (c) 11. (a) 12. (d) Explanation: Cost Value (10000 X ₹ 101) ₹ 10,10,000 Add:- Brokerage (2% of ₹ 10,10,000) ₹ 20,200 Cost of 10% debentures purchased on 1.12.2023 ₹ 10,30,200 13. (c) 14. (c) Explanation: Sale proceeds of equity shares (bonus) sold on 31st March, 2023 = (500 X ₹ 90) – (2% of ₹ 45,000) = ₹ 44,100. 15. (a) Explanation: Profit on sale of bonus shares = Sales proceeds – Average cost Sales proceeds = ₹ 45,000 Average cost = (500/1500) X ₹ 75,000 = ₹ 25,000 Profit = ₹ 45,000 – ₹ 25,000 = ₹ 20,000. 16. (b) Explanation: Right shares = [(6,000 +7,000 +8,000)/7] X 3 = 9,000 shares Total No. of shares = 21,000 + 9,000 = 30,000 17. (a) Explanation: Dividend received = 35,000 at the beginning × 10 × 20% = ₹ 70,000 18. (c) Explanation: Cost of bonds = (55,000/ 1,000) x 200 = 11,000 Sale proceeds = 200 X ₹ 99 = 19,800 Profit element = ₹ 8,800 CA NITIN GOEL AS 13 MCQ’S 19. (d) Explanation: Sales price of debentures (400 x 98) 39,200 Less: Brokerage @ 1% (392) 38,808 Less: Cost of Debentures (39,697) Loss on sale 889 20. (b) 21. (b) Explanation: Particulars Cost (₹) Market Value (₹) Lower of Cost or Market Value (₹) Shares 2,10,000 2,25,000 2,10,000 Bond 90,000 88,000 88,000 Gold 78,000 72,000 72,000 3,70,000 22. (a) Explanation: Cost of equity shares purchased = (1,000 X 120) + (1% of 1,20,000) + (½% of 1,20,000) = ₹ 1,21,800 Profit on sale of bonus shares = Sale proceeds – Average cost Sale proceeds = ₹ 48,100 Average cost = ₹ (1,21,800 /1,500) x 500 = ₹ 40,600 Profit = ₹ 48,100 – ₹ 40,600 = ₹ 7,500. 23. (a) 24. (a) 25. (b)  CA NITIN GOEL AS 15 CH 10L EMPLOYEE BENEFITS MCQ’S 1. Gratuity and Pension would be examples of: a. Short-term employee benefits b. Long-term employee benefits c. Post-employment benefits. d. None of the above. 2. Non-accumulating compensating absence is commonly referred to as: a. Earned Leave b. Sick Leave c. Casual leave d. All of the above 3. The plans that are established by legislation to cover all enterprises and are operated by Governments include: a. Multi-Employer plans b. State plans c. Insured Benefits d. Employee benefit plan 4. Best estimates of the variable to determine the eventual cost of post-employment benefits is referred to as: a. Employer’s contribution b. Actuarial assumptions c. Cost to Company d. Employee’s contribution 5. Actuarial gains / losses should be: a. Recognised through reserves. b. Charged over the expected life of employees. c. Charged immediately to Profit and Loss Statement d. Do not charged to Profit and Loss Statement 6. AS-15 is not applicable to? a. Salary and Wages b. Long-term service award c. Employee Stock Options d. Termination benefits. 7. Cost arising out of increase in the present value of the defined benefit obligation resulting from employee service in the current period is called? a. Interest cost b. Contribution to the plan Page 10l.1 CA NITIN GOEL AS 15 CH 10L c. Current Service Cost d. Past service cost 8. According to AS 15, which of the following is an example of short-term employee benefits? a. Provident fund contributions b. Gratuity c. Long-term disability benefits d. Bonus payable within 12 months 9. What is the primary objective of AS 15 regarding the disclosure of employee benefits? a. To minimize the liability of the employer b. To ensure compliance with tax laws c. To provide information about the cost of employee benefits d. To maximize employee satisfaction 10. XYZ Ltd. has a defined benefit plan. How should the plan assets be valued for the purpose of determining the net defined benefit liability? a. Historical cost b. Fair value c. Present value of expected cash flows d. Nominal value 11. Under AS 15, how should the cost of post-employment benefits be recognized? a. In the period the benefits are paid b. Over the vesting period c. When the employee becomes eligible d. Only when the employee retires Answers: 1. (c) 2. (c) 3. (b) 4. (b) 5. (c) 6. (c) 7. (c) 8. (d) 9. (c) 10. (b) 11. (b) Page 10l.2  CA NITIN GOEL AS 16 CH 10M MCQ’S 1. As per AS 16, all the following are qualifying assets except a. Manufacturing plants and Power generation facilities b. Inventories that require substantial period of time c. Assets those are ready for sale. d. None of the above 2. Which of the following statement is correct: a. Entire exchange gain is reduced from the cost of the Qualifying asset. b. Entire exchange loss is added to the cost of a Qualifying asset. c. No adjustment is done for the exchange loss while computing cost of Qualifying asset. d. None of the above 3. Capitalisation rate considers: a. Borrowing costs on general borrowings only. b. Borrowing costs on general and specific borrowings both. c. Borrowing costs on specific borrowings only d. None of the above 4. If the amount eligible for capitalisation in case of inventory as per AS 16 is ₹ 12,000 and cost of inventory is ₹ 40,000 and its net realizable value is ₹ 45,000; What amount can be capitalised as a part of inventory cost. a. ₹ 12,000. b. ₹ 5,000. c. ₹ 7,000. d. ₹ 10,000. 5. X Ltd is commencing a new construction project, which is to be financed by borrowing. The key dates are as follows: a. 15th May, 2023: Loan interest relating to the project starts to be incurred b. 2nd June, 2023: Technical site planning commences c. 19th June, 2023: Expenditure on the project started to be incurred d. 18th July, 2023: Construction work commences Identify the commencement date for capitalisation under AS 16. a. 15th May, 2023 b. 19th June, 2023 c. 18th July, 2023 d. 2nd June, 2023 Page 10M.1 CA NITIN GOEL AS 16 CH 10M 6. What is the primary objective of Accounting Standard 16 (AS 16) - Borrowing Costs? a. To define the accounting treatment for interest income b. To prescribe the accounting treatment for borrowing costs c. To regulate the issuance of bonds d. To provide guidelines for lease accounting 7. Under AS 16, which of the following borrowing costs should be capitalized? a. All borrowing costs b. Only borrowing costs directly attributable to the acquisition, construction, or production of qualifying assets c. Only borrowing costs incurred for short-term loans d. Borrowing costs incurred for any purpose 8. Under AS 16, what is the treatment of borrowing costs that do not qualify for capitalization? a. They should be expensed in the period they are incurred b. They should be capitalized in the subsequent period c. They should be amortized over an extended period d. They should be disclosed in the financial statements 9. A qualifying being constructed in a factory since 1.4.21 is completed on 28.2.22 Interest on loan taken for the asset for the entire year is 1,20,000. What will be the completion date and capitalisation amount for the asset. a. 28.2.22 ₹ 1,20,000 b. 28.2.22 ₹ 1,10,000 c. 31.3.22 ₹ 1,20,000 d. 31.3.22 ₹ 1,10,000 10. Following will not be considered as borrowing cost. a. amortisation of discounts or premiums relating to borrowings b. finance charges in respect of assets acquired under finance leases or under other similar arrangements c. exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs d. Interest and commitment charges on bank borrowings on non-qualifying assets 11. What is the correct treatment of income from temporary investment from borrowed fund pending expenditure on qualifying asset? a. Income is deducted from borrowing cost. b. Income is credited to P&L account. c. Income is deducted from PPE. d. Income is deducted from borrowing amount. 12. Borrowing cost of a qualifying asset does not include? a. Finance charges in respect of assets acquired under finance lease b. Exchange differences arising from foreign currency borrowing c. Interest charges on bank borrowing d. Loss on sale of investment Page 10M.2 CA NITIN GOEL AS 16 CH 10M Answers: 1. (c) 2. (c) 3. (a) 4. (b) 5. (b) 6. (b) 7. (b) 8. (a) 9. (b) 10. (d) 11. (a) 12. (d) Page 10M.3  CA NITIN GOEL AS 17 CH 10N SEGMENT REPORTING MCQ’S 1. As per AS 17, reportable segments are those whose total revenue from externalsales and inter-segment sales is a. 10% or more of the total revenue of all segments b. 10% or more of the total revenue of all external segments c. 12% or more of the total revenue of all segments d. 12% or more of the total revenue of all external segments 2. Which of the following statements is correct? a. Management has a discretion to include a segment as a reportable segment even if it passes the 10% materiality test. b. Management has a discretion to include any segment as a reportable segment if it fails the 12% materiality test. c. It is mandatory for the management to include the segment as a reportable segment if it passes the 10% materiality test. d. It is not mandatory for the management to include the segment as areportable segment if it passes the 10% materiality test. 3. Which of the following statements is correct? a. The overall test of 75% considers only external revenue to compute the threshold limit. b. The overall test of 75% considers only internal revenue to compute the threshold limit. c. The overall test of 75% considers both internal and external revenue to compute the threshold limit. d. It is management choice whether they want to include both external and internal revenue for computing threshold limit. 4. Which of the following statements is correct? a. The 10% test computed on the basis of revenue, considers both internal and external revenue to compute the threshold limit. b. The 10% test computed on the basis of revenue, considers only external revenue to compute the threshold limit. c. The 10% test computed on the basis of revenue, considers only internalrevenue to compute the threshold limit. d. It is management choice whether they want to include both external and internal revenue for computing threshold limit. 5. Which of the following statements is correct? a. In case of 10% test based on profit/loss, we need to consider that any segment whose profit or loss is 10% or more than the net profit or netloss respectively of all segments taken together becomes reportable segment. b. In case of 10% test based on profit/loss, we need to consider that any segment whose profit or loss is 10% or more than the net profit (after netting the losses) of all segments taken together becomes reportable segment. Page 10H.1 CA NITIN GOEL AS 17 CH 10N c. In case of 10% test based on profit/loss, we need to consider that any segment whose profit or loss is 10% or more than the net profit or loss (whichever is higher in absolute figures) of all segments taken together becomes reportable segment. d. In case of 10% test based on profit/loss, we need to consider that any segment whose profit or loss is 10% or more than the net profit or loss (whichever is lower in absolute figures) of all segments taken together becomes reportable segment. 6. Under AS 17, segments must be reported separately if the reported revenues (internal and external) are more than ___________ of the combined revenues of all the segments. a. 10% b. 15% c. 20% d. 25% 7. Following is not included in Segment Expense. a. Income tax expense. b. The expense resulting from the operating activities of a segment that is directly attributable to the segment. c. The relevant portion of enterprise expense that can be allocated on a reasonable basis to the segment. d. Expense relating to transactions with other segments of the enterprise. 8. Following is not included in Segment Revenue. a. External Revenue. b. Inter Segment revenue. c. The relevant portion of enterprise revenue that can be allocated on a reasonable basis to the segment. d. Extraordinary Item. Answers: 1. (a) 2. (c) 3. (a) 4. (a) 5. (c) 6. (a) 7. (a) 8. (d) Page 10H.2  CA NITIN GOEL AS 18 CH 10O RELATED PARTY DISCLOSURES MCQ’S 1. According to AS-18 Related Party Disclosures, which ONE of the following is not a related party of Skyline Limited? a. A shareholder of Skyline Limited owning 30% of the ordinary share capital b. An entity providing banking facilities to Skyline Limited in the normalcourse of business c. An associate of Skyline Limited d. Key management personnel of Skyline Limited 2. Are the following statements in relation to related parties true or false, according to AS-18 Related Party Disclosures? A. A party is related to another entity that it is jointly controlled by. B. A party is related to another entity that it controls. Statement (A) Statement (B) a. False False b. False True c. True False d. True True 3. Which of the following is not a related party as envisaged by AS-18 Related Party Disclosures? a. A director of the entity b. The parent company of the entity c. A shareholder of the entity that holds 1% stake in the entity d. The spouse of the managing director of the entity 4. According to AS-18 Related Party Disclosures, related party transaction is a transfer of resources or obligations between related parties – provided a price is charged for such transfer. a. True b. False 5. According to AS-18 Related Party Disclosures, parties are considered to be related, if and only if at the end of the reporting period - one party has the ability to control the other party or exercise significant influence over the other party in making financial and/or operating decisions. a. True b. False 6. Related party disclosures are primarily intended to a. Ensure a company's financial statements comply with tax regulations b. Highlight potential conflicts of interest and related-party transactions c. Minimize external scrutiny of a company's operations Page 10O.1 CA NITIN GOEL AS 18 CH 10O d. Facilitate goodwill among different business entities 7. A director of a company purchases goods from that company for personal use. How should this transaction be disclosed in financial statements? a. No disclosure required b. Disclose only if the transaction value exceeds a certain threshold c. Disclose as a related party transaction d. Disclose in the footnotes if the director owns more than 10% of the company's shares 8. What is the primary objective of disclosing related party transactions in financial statements? a. To demonstrate the company's profitability b. To comply with legal requirements c. To enhance transparency and avoid potential conflicts of interest d. To increase the company's market value 9. Which of the following is an example of a related party transaction? a. Sale of goods to an unrelated third-party customer b. Purchase of inventory from an independent supplier c. Loan provided to a subsidiary company d. Salary payment to regular employees 10. Related party disclosures in financial statements typically include information about a. Nature of relationships and transactions b. Names of related parties c. Amounts of transactions and outstanding balances d. All of the above 11. According to accounting standards, who are considered related parties? a. Entities under common control b. Individuals having significant influence over the company c. Both a and b d. None of the above 12. A company rents office space from its major shareholder. How should this transaction be disclosed? a. As a related party transaction b. Only if the rent exceeds a certain percentage of total expenses c. Disclose the nature of the transaction but not the amount d. No disclosure required 13. Which of the following may be treated as Related party as per AS 18? a. A Limited & B Limited only because Mr. X is a common director in both the company. b. A Limited & B Limited are totally independent company, however, majority of the Board of Directors of both the companies are same. c. Mr. S & A Limited only because Mr. S purchases majority of the products of A Limited. d. ABC Bank & N Limited because all borrowings of N Limited is financed by ABC Bank. Page 10O.2 CA NITIN GOEL AS 18 CH 10O Answers: 1. (b) 2. (d) 3. (c) 4. (b) 5. (b) 6. (b) 7. (c) 8. (c) 9. (c) 10. (d) 11. (c) 12. (a) 13. (b) Page 10O.3 CA LEGENDS - LEGENDSWALE Follow us On Instagram ( Click on icon to follow ) Follow us On Telegram ( Click on icon to follow ) Subscribe On Youtube ( Click on icon to Subscribe ) For Buying Classes @ Best Price Visit Our Website  CA NITIN GOEL AS 19 CH 10P LEASES MCQ’S 1. A Ltd. sold machinery having WDV of ₹ 40 lakhs to B Ltd. for ₹ 50 lakhs (Fair value ₹ 50 lakhs) and same machinery was leased back by B Ltd. to A Ltd. The lease back is in nature of operating lease. The treatment will be a. A Ltd. should amortise the profit of ₹ 10 lakhs over lease term. b. A Ltd. should recognise the profit of ₹ 10 lakhs immediately. c. A Ltd. should defer the profit of ₹ 10 lakhs. d. B Ltd. should recognise the profit of ₹ 10 lakhs immediately. 2. In case of an operating lease – identify which statement is correct: a. The lessor continues to show the leased asset in its books of accounts. b. The lessor de-recognises the asset from its Balance Sheet. c. The lessor discontinues to claim depreciation in its books. d. The lessee recognises the asset in its Balance Sheet. 3. In case of finance lease, if the asset is returned back to the lessor at the end ofthe lease term - the lessee always claims depreciation based on which of the following: a. Useful life. b. Lease term. c. Useful life or lease term whichever is less. d. Useful life or lease term whichever is higher. 4. AS 19 lays down 5 deterministic conditions to classify the lease as a finance lease. To classify the lease as an operating lease – which statement is correct? a. Any 1 condition fails. b. Majority of the 5 conditions fail. c. All 5 conditions fail. d. Any 2 conditions fails. 5. The basis of classification of a lease is: a. Control Test. b. Risk and reward Test. c. Both control test and risk and reward test. d. Only reward Test 6. Which of the following is the primary criterion used to classify a lease under AS 19? a. Ownership of the asset b. Length of the lease term c. Transfer of risks and rewards d. Maintenance responsibilities Page 10P.1 CA NITIN GOEL AS 19 CH 10P 7. According to AS 19, a lease that transfers substantially all the risks and rewards incidental to ownership is classified as a. Finance Lease b. Operating Lease c. Sales-Type Lease d. Direct Financing Lease 8. What is the recognition criteria for a finance lease under AS 19 by the lessee at the commencement of the lease term? a. Recognize the lower of fair value of the leased asset or present value of minimum lease payments as an asset and a liability. b. Recognize only the fair value of the leased asset as an asset. c. Recognize the present value of minimum lease payments as an expense. d. Do not recognize anything until the lease term ends. 9. Which of the following statements regarding an operating lease, as per AS 19, is true? a. It is capitalized on the lessee's balance sheet. b. It usually involves transferring ownership of the asset at the end of the lease term. c. It includes finance charges. d. It is expensed over the lease term. 10. In case of a finance lease, which statement regarding the lessee's profit and loss account is correct under AS 19? a. A portion of the total lease payment is recognized as interest expense, and the rest is recorded as depreciation. b. Total lease payment is recognized as interest expense. c. Total lease payment is recognized as depreciation. d. No expense is recorded until the lease term ends. 11. As per AS 19, what is the basis for recognizing lease payments for an operating lease? a. Ratio of benefit obtained and if not available then Straight-line basis. b. Reducing balance method c. Annuity method d. No specific basis is required for recognition. 12. Which financial statement should disclose the information about lease liabilities and assets recognized under AS 19? a. Income Statement b. Statement of Changes in Equity c. Balance Sheet d. Cash Flow Statement 13. Under AS 19, what happens if a lease agreement includes an option for the lessee to purchase the asset at a price significantly below its fair market value? a. It qualifies as a finance lease. b. It is recognized as an operating lease. c. It has no impact on lease classification. d. It is considered a direct financing lease. Page 10P.2 CA NITIN GOEL AS 19 CH 10P 14. In a finance lease, how is the interest component of the lease payment calculated by the lessee under AS 19? a. It remains constant throughout the lease term. b. It decreases over the lease term. c. It increases over the lease term. d. It is equal to the lease payment. 15. As per AS 19, a leased asset should be depreciated over the? a. Shorter of the lease term and the assets useful life b. Longer of the lease term and the assets useful life c. Entire lease term d. Useful life of the asset. 16. In the books of seller-lessee, If a sale and leaseback transaction results in a finance lease, any excess or deficiency of sales proceeds over the carrying amount is? a. immediately recognised as income or loss in the financial statements. b. deferred and amortised over the lease term in proportion to the depreciation of the leased asset. c. If there is loss, then immediately recognized in P&L statement and if there is gain, then amortised over the lease term. d. Either (a) or (b) 17. If Sale and leaseback transaction results in an operating lease and sale price is more than fair value, the excess amount is? a. credited to Profit and Loss statement b. deferred and amortized over expected period of use of the asset c. deferred and amortized over period of five years d. amortized in proportion to lease payments 18. If Sale and leaseback transaction results in a finance lease, any excess or deficiency of sales proceeds over the carrying amount should be? a. credited to Profit and Loss statement. b. deferred and amortized over the lease term in proportion to the depreciation of the leased asset. c. deferred and amortized over period of five years. d. amortized in proportion to lease payments 19. N Limited has entered into lease agreement for machinery from S Limited for 10 years for ₹ 1 lakh per year. Guaranteed scrap value of machinery after 10 years is ₹ 0.5 lakh unguaranteed scrap value is ₹ 0.2 lakh. Present Value of ₹ 1 lakh for 10 years is ₹ 7 lakh, Present value of ₹ 0.5 lakh after 10th year is 0.18 lakh & of ₹ 0.2 lakh is ₹ 0.07 lakh. Calculate Unearned Finance Income for S Limited. a. ₹ 3.45 lakh b. ₹ 3 lakh c. ₹ 3.32 lakh d. ₹ 3.13 lakh Page 10P.3 CA NITIN GOEL AS 19 CH 10P Answers: 1. (b) 2. (a) 3. (c) 4. (c) 5. (b) 6. (c) 7. (a) 8. (a) 9. (d) 10. (a) 11. (a) 12. (c) 13. (a) 14. (b) 15. (a) 16. (b) 17. (b) 18. (b) 19. (a) Page 10P.4  CA NITIN GOEL AS 20 CH 10Q EARNINGS PER SHARE MCQ’S 1. AB Company Ltd. had 1,00,000 shares of common stock outstanding on January 1. Additional 50,000 shares were issued on July 1, and 25,000 shares were re- acquired on September 1. The weighted average number of shares outstanding during the year on Dec. 31 is a. 1,40,000 shares b. 1,25,000 shares c. 1,16,667 shares d. 1,20,000 shares 2. As per AS 20, potential equity shares should be treated as dilutive when, and only when, their conversion to equity shares would a. Decrease net profit per share from continuing ordinary operations. b. Increase net profit per share from continuing ordinary operations. c. Make no change in net profit per share from continuing ordinaryoperations. d. Decrease net loss per share from continuing ordinary operations. 3. As per AS 20, equity shares which are issuable upon the satisfaction of certain conditions resulting from contractual arrangements are a. Dilutive potential equity shares b. Contingently issuable shares c. Contractual issued shares d. Potential equity shares 4. In case potential equity shares have been cancelled during the year, theyshould be: a. Ignored for computation of Diluted EPS. b. Considered from the beginning of the year till the date they are cancelled. c. The company needs to make an accounting policy and can follow the treatment in (a) or (b) as it decides. d. Considered for computation of diluted EPS only if the impact of such potential equity shares would be material. 5. Partlypaid up equity shares are: a. Always considered as a part of Basic EPS. b. Always considered as a part of Diluted EPS. c. Depending upon the entitlement of dividend to the shareholder, it will be considered as a part of Basic or Diluted EPS as the case may be. d. Considered as part of Basic/ Diluted EPS depending on the accounting policy of the company. 6. Which of the following statements is correct? (1) Options are generally dilutive in nature. (2) Options are generally more dilutive as compared to other potential equity shares. Page 10Q.1 CA NITIN GOEL AS 20 CH 10Q a) Both (1) and (2) are correct. b) Both (1) and (2) are incorrect. c) Only (1) is correct. d) Only (2) is correct. 7. Which of the following is not a Potential Equity Share? a) Employee stock option b) Share warrants c) Cumulative Preference Shares d) Shares issuable under a loan contract upon default of payment of principal or Interest 8. Number of shares outstanding as on 01-01-2023 are 2000. Fresh issue of 600 shares for cash on 31-05-2023. Buy back of 300 shares on 01-11-2023. Calculate weighted average outstanding number of shares. a. 2300 shares b. 2500 shares c. 2000 shares d. 2800 shares 9. Opening balance of shares as on 01-01-2023 is 2000 shares. On 31-10-2023, issue of 600 shares of ₹ 10 each, ₹ 5 paid up. Calculate weighted average outstanding number of shares. a. 2100 shares b. 2050 shares c. 2000 shares d. 1500 shares 10. XYZ Limited reported a net profit of ₹ 50,00,000 for the year ended 31st December 2022. The company had 20 Lakh ordinary shares outstanding throughout the year. On 1st July 2022, XYZ issued ₹ 30,00,000 of 5% convertible bonds of ₹100 each convertible into 10 shares. The bonds were outstanding for the entire year, and XYZ pays tax at a rate of 25%. Calculate the diluted earnings per share (EPS) for the year ended 31st December 2022. a. 1.80 b. 2.00 c. 2.50 d. 2.35 Answers: 1. (c) 2. (a) 3. (b) 4. (b) 5. (c) 6. (a) 7. (c) 8. (a) 9. (a) 10. (d) Page 10Q.2  CA NITIN GOEL AS 21: CONSOLIDATED FINANCIAL STATEMENTS AS 21: CONSOLIDATED FINANCIAL STATEMENTS MCQ’S 1. A single set of financial statements that combines the separate sets of financial statements of a parent and its subsidiaries is known as a) equity financial statements b) condensed financial statements c) consolidated financial statements d) interim financial statements 2. ABC Limited acquired 70% of the shares of PQR Limited directly from the owners of those shares. The shares were purchased on the market for ₹400000 in total. PQR Limited must? a) recognize the inflow of cash of ₹400000 and an increase in issued capital of ₹400 000. b) recognize an investment of ₹400000 and an increase in equity of ₹400000. c) de-recognize share capital amounting to ₹400000. d) not make an accounting entry as the transaction is between ABC Limited and the individual shareholders of PQR Limited. 3. When one entity controls the business operations of another entity, the business combination results in the following type of relationship: a) parent-subsidiary b) Partnership c) a merger d) dual-listed 4. For the purposes of consolidated financial reporting, a group is a) an entity that has no subsidiaries. b) a parent entity and all its subsidiaries. c) an entity that has one or more subsidiaries. d) a subsidiary entity of another entity. 5. The process of preparing combined financial statements of a group of entities is known as a) accrual accounting b) condensation c) accumulation d) consolidation 6. The method adopted in combining the separate sets of financial statements of entities in a group to form a set of consolidated financial statements is a) set-off all assets and liabilities and recognize a single net investment. b) line-by-line recognition of the elements of financial statements. c) combine the cash balances of the separate entities into one-line and aggregate the remaining net assets into one item. d) combine all assets and liabilities into one net assets item and combine all profits and losses into one profit or loss item. Page 1.1 CA NITIN GOEL AS 21: CONSOLIDATED FINANCIAL STATEMENTS 7. A group of entities comprised of All Limited, Night Limited and Long Limited have the following cash balances: All Limited ₹2,000, Night Limited ₹5,000, Long Limited ₹10,000. All Limited is the parent entity. The consolidated financial statements show the following amount as the consolidated cash balance? a) ₹2,000 b) ₹7,000 c) ₹15,000 d) ₹17,000 8. The process of consolidation involves? a) balance date adjusting journal entries to the ledger accounts of the subsidiaries. b) balance date adjusting entries to the ledger accounts of the parent entity. c) no adjustments to the individual ledger accounts of entities in the group. d) accruals directly to the balance of the retained earnings account of the parent entity. 9. A full set of consolidated financial statements comprises a consolidated i. Statement of financial position ii. Statement of Profit & Loss iii. Statement of cash flows a) i and ii only b) i, ii and iii only c) ii and iii only d) i and iii only 10. If consolidated financial statements are required to be prepared a) they are additional to the separate financial statements of the entities in the group. b) there is no need to prepare separate financial statements for the entities in the group. c) the need to prepare separate financial statements for the parent entity is redundant. d) it is not necessary to prepare separate financial statements for the subsidiary entities of the group. 11. Control is automatically presumed to exist where the parent either directly or indirectly through subsidiaries owns a) more than 25% but less than 50% of the voting power of an entity. b) more than 10% but less than25% of the voting power of an entity. c) not more than 49% of the voting power of an entity. d) more than 50% of the voting power of an entity. 12. Minority interest should be presented in the consolidated balance sheet a) As a part of liabilities. b) As a part of equity of the parent’s shareholders. c) Separately from liabilities and the equity of the parent’s shareholders. d) As a part of assets. 13. Minority of the subsidiary is entitled to a) Capital profits of the subsidiary company. b) Revenue profits of the subsidiary company. c) Both capital and revenue profits of the subsidiary company. d) Neither capital nor revenue profits of the subsidiary. Page 1.2 CA NITIN GOEL AS 21: CONSOLIDATED FINANCIAL STATEMENTS 14. In consolidation of accounts of holding and subsidiary company, ____________ is eliminated in full. a) Current liabilities of subsidiary company. b) Reserves and surplus of both holding and subsidiary company. c) Mutual indebtedness. d) Nothing. 15. In consolidated balance sheet, the share of the outsiders in the net assets of the subsidiary must be shown as a) Minority interest. b) Capital reserve. c) Current liability. d) Current assets. 16. Provision for Tax made by the subsidiary company will appear in the consolidated balance sheet as an item of a) Current liability. b) Revenue profit. c) Capital profit. d) Current assets. 17. Pre-acquisition profit in subsidiary company is considered as: a) Revenue profit. b) Capital profit. c) Goodwill d) Cost of control 18. Subsidiary company in relation to any other company (that is to say the holding company), means a company in which the holding company -……………. a) Controls the composition of the Board of Directors b) Exercises or controls more than 50% of the total voting power either at its own or together with one or more of its subsidiary companies c) Both (A) or (B) d) Neither (A) nor (B) 19. Which section of the Companies Act, 2013 requires the preparation of consolidated financial statements a) Section 127 b) Section 128 c) Section 130 d) Section 129 20. Holding company holds more than ………….. voting power in subsidiary company. a) 25% b) 40% c) 50% d) 75% Page 1.3 CA NITIN GOEL AS 21: CONSOLIDATED FINANCIAL STATEMENTS 21. Holding company’s share in revenue profits of subsidiary company is adjusted in: a) Cost of control b) Show