Fundamentals of Accounting - Bit Questions PDF

 P‐2: Fundamentals of Accounting ‐ Bit Questions FUNDAMENTALS OF ACCOUNTING I. Choose the correct answer from the given four alternatives: 1. Which of the following item is shown in the Receipt and Payment accoun...

 P‐2: Fundamentals of Accounting ‐ Bit Questions FUNDAMENTALS OF ACCOUNTING I. Choose the correct answer from the given four alternatives: 1. Which of the following item is shown in the Receipt and Payment account? (A) Only items of capital nature. (B) Only items of revenue nature which are received during the period of accounts. (C) Only items of revenue nature pertaining to the period of accounts. (D) Both the items of capital and revenue nature which are received during the period of accounts. 2. Any income arising from special fund will be credited to (A) General fund in the Balance Sheet (B) Receipt and Payment account (C) Income and Expenditure account (D) Special fund in the Balance sheet 3. There are 100 members each p aying an annual subscription of ` 500. The Receipt and Payment account shows arrear subscription of ` 4,500, advance subscriptions ` 6,000 and current ` 44,500. How much amount to be credited in the Income and Expenditure account? (A) ` 55,000 (B) ` 49,000 (C) ` 44,500 (D) ` 50,000 4. When opening stock ` 50,000; closing stock ` 40,000; purchases ` 1,90,000 profit margin is 16.67% on sales, the sales are: (A) ` 2,40,000 (B) ` 2,36,000 (C) ` 2,00,000 (D) ` 2,44,000 5. Goods bought for ` 25,000 passed through sales day book will result in (A) No effect on gross profit (B) Decrease in gross profit (C) Decrease in net profit (D) Increase in gross profit 6. Which of the following will result in disagreement of Trial Balance? (A) Sales return treated as purchase. (B) Purchase return treated as sales. (C) Ram a/c wrongly credited instead of Sham a/c (D) Under casting cash book by `1,100 7. In a joint venture X and Y sharing p rofit and l oss equally, X purchased goods costing of ` 40,000 and Y sold the goods for ` 50,000. X is entitled to get 1% commission on purchase and Y is entitled to get 5% commission on sales, the profit will be (A) ` 7,200 (B) ` 7,100 (C) ` 6,800 (D) ` 7,600 8. What is the nature of joint venture with co-venture account? (A) Nominal account (B) Personal account The Institute of Cost Accountants of India 1  P‐2: Fundamentals of Accounting ‐ Bit Questions (C) Real Account (D) Memorandum Account 9. Which of the following term is applicable about consignment? (A) Sale of goods (B) Hypothecation of goods (C) Shipment of goods (D) Mortgage of goods 10. Retirement of bill means (A) sending the bill for collection (B) cancellation of the bill (C) endorsing the bill in favour of third party (D) making payment before the due date. 11. Which one of these documents is not required for bank reconciliation? (A) Bank Column of cash book (B) Bank pass book (C) Previous year’s balance sheet (D) Bank statement 12. In a overdraft balance as per cash book, a cheque of ` 1,250 deposited into bank but not recorded in cash book will be (A) deducted by ` 1,250 (B) added by ` 1,250 (C) added by ` 2,500 (D) deducted by ` 2,500 13. Which of these errors affects only one account? (A) Error of casting (B) Error of posting (C) Error of carry forward (D) All of the above 14. Which of the following error is an error of principle? (A) ` 4,000 received from Sham credited to Shamu a/c (B) ` 5,000 incurred on installation of new plant debited to salary a/c (C) ` 6,000 paid for wages debited to salary a/c (D) ` 7,000 being purchase of raw material debited to purchase a/c 15. In case of depreciable assets are revalued, the provision for depreciation is based on (A) Market value of the assets (B) Historical cost of the asset (C) Written down value of the asset (D) the revalued amount over the estimate of the remaining useful life of such asset. 16. Trade discount is allowed at the time of sale of goods. (A) is recorded in sales book (B) is recorded in cash book (C) is not recorded in books of accounts (D) is recorded in journal 17. A debit note issued to a creditor for goods returned is to be recorded in the (A) Purchase return book (B) Journal Proper (C) Purchase book (D) Bill Receivable book 18. The determination of expenses for an accounting period is based on the concept of The Institute of Cost Accountants of India 2  P‐2: Fundamentals of Accounting ‐ Bit Questions (A) Consistency concept (B) Periodicity concept (C) Timelines concept (D) Industry practice 19. Decrease in the amount of creditors results in (A) Increase in assets (B) Increase in cash (C) Decrease in cash (D) No change in assets 20. Subscription received in advance to be shown in (A) Liability side of the balance sheet (B) Asset side of the balance sheet (C) Income and Expenditure account (D) Journal 21. Which of the following is an accounting equation? (A) Capital = Assets + Liabilities (B) Capital = Assets – Liabilities (C) Assets = Liabilities – Capital (D) Liabilities = Assets + Capital 22. AS – 09 deals with (A) Inventory Valuation (B) Depreciation Accounting (C) Revenue Recognition (D) Cash Flow Statement 23. Y-draws a trade bill of ` 12,000 for 6 months on X. A fter holding the bill for 2.5 months, Y discount the bill with bank @ 10% p.a. The amount of discount on bill is (A) ` 100 (B) ` 350 (C) ` 600 (D) ` 250 24. Bills Receivable books is part of the (A) Journal (B) Ledger (C) Profit & Loss Account (D) Balance Sheet 25. X of Delhi send out certain goods at cost + 25% of cost. Invoice value of goods is ` 1,20,000. 4/5th of the goods were sold by consignee at ` 1,00,000. Commission @ 2% up to invoice value and 10% of any surplus above invoice. The amount of commission will be (A) ` 1,920 (B) ` 2,320 (C) ` 1,820 (D) ` 2,020 26. If X co-venture takes away of goods under memorandum Joint Venture Method then he will debit these goods in his books to (A) Sales Account (B) Purchase Account (C) Personal Account (D) Joint Venture Account 27. At the end of the year Bad Debts Recovered Account is (A) Debited to Debtors Account The Institute of Cost Accountants of India 3  P‐2: Fundamentals of Accounting ‐ Bit Questions (B) Credited to Debtors Account (C) Credited to Profit & Loss Account (D) Debited to Profit & Loss Account 28. As regards the accounting treatment, Legacy should be (A) treated as loss (B) capitalized (C) treated Revenue Expenses (D) treated Deferred Revenue 29. Sales of ` 6,570 is recorded in the sales book as ` 6,750. Such Error is known as (A) Error of Principle (B) Error of Omission (C) Error of Commission (D) Compensating Error 30. Which of the following is correct? (A) Cost of Goods Sold – Opening Stock + Purchases = Closing Stock (B) Purchase + Cost of Goods Sold – Opening Stock = Closing Stock (C) Cost of Goods Sold + Closing Stock – Opening Stock = Purchase (D) Opening Stock + Closing Stock – Purchase = Cost of Goods sold 31. Provision for bad debt is made as per the (A) Entity concept (B) Conservatism concept (C) Cost concept (D) Going concern concept 32. Capital expenditures are shown in the (A) Balance Sheet (B) Profit & Loss a/c (C) Trading a/c (D) Manufacturing a/c 33. Import duty of raw material purchased is a (A) Revenue Expenditure (B) Capital Expenditure (C) Deferred Revenue Expenditure (D) None of the above 34. Life Insurance Corporation Account is a (A) Nominal Account (B) Artificial Personal Account (C) Representative Personal Account (D) Real Account 35. Goods taken from business for personal use by the proprietor should be credited to (A) Drawing a/c (B) Capital a/c (C) Sales a/c (D) Purchase a/c 36. A cash book with discount and bank column is called as (A) Single Column Cash Book (B) Two Column Cash Book (C) Three Column Cash Book (D) Petty Cash Book 37. The periodical total of Returns Inward Day Book is posted to The Institute of Cost Accountants of India 4  P‐2: Fundamentals of Accounting ‐ Bit Questions (A) Debit of Sales Account (B) Debit of Sales Return Account (C) Credit of Sales Return Account (D) Debit of Debtors Account 38. The process of transfer of entries from day book to ledger is called as (A) Balancing (B) Journal Posting (C) Transaction (D) Ledger Posting 39. Which financial statement represents the a ccounting equation as – Assets = Liabilities + Owner’s equity? (A) Income Statement (B) Statement of Cash Flows (C) Balance Sheet (D) Either (A) or (B) 40. The Depreciation Account is closed at the end of the year by transfer to the (A) General Reserve a/c (B) Profit and Loss a/c (C) Provision for Depreciation a/c (D) Fixed Asset a/c 41. The original cost of the machine is ` 19,00,000; machine installation charges are ` 1,00,000; working life of the machine is 5 years and residual value is ` 40,000. If the depreciation is charged on Straight Line basis then 4th year’s depreciation will be: (A) ` 3,72,000 (B) ` 4,00,000 (C) ` 3,92,000 (D) ` 3,52,000 42. Whenever errors are noticed in the accounting records, they should be rectified. (A) at the time of preparation of Trial Balance. (B) without waiting the accounting year to end. (C) after the preparation of final accounts. (D) in the next accounting year. 43. A purchase of ` 49,500 from Shiva wa s recorded in P urchases Book as ` 59,400, the profit would show (A) an increase of ` 9,900 (B) a decrease of ` 9,900 (C) an increase of ` 59,400 (D) neither an increase nor a decrease 44. From the following details ascertain the adjusted bank balance as per Cash Book – overdraft as per Cash Book ` 1,60,000; cheque received entered twice in the Cash Book ` 10,000; credit side of bank column cash short by ` 1,000; bank charges amounting to ` 400 entered twice: (A) ` 1,61,000 (B) ` 1,71,000 (C) ` 1,70,000 (D) ` 1,70,600 45. When credit balance as per pass book is the starting point of a Bank Reconciliation Statement then bank charges are (A) Subtracted (B) Added (C) Either (A) or (B) The Institute of Cost Accountants of India 5  P‐2: Fundamentals of Accounting ‐ Bit Questions (D) None of the above 46. At the time of dishonor of an endorsed bill, which account would be credited by the drawee? (A) Bills Payable Account (B) Drawer’s Account (C) Bank Account (D) Bills Dishonoured Account 47. At the en d of the accounting year bills receivable discounted were ` 32,000 would be shown (A) on Liabilities side of the Balance Sheet (B) on Assets side of the Balance Sheet (C) by way of a note with Balance Sheet (D) Not appeared anywhere 48. X sends out goods to Y, costing ` 3,60,000. Goods are to be sold at cost plus 25% on sales. The consignor asked consignee to pay an advance for an amount equivalent to 60% of sales value. The amount of advance will be (A) ` 2,88,000 (B) ` 2,16,000 (C) ` 2,70,000 (D) ` 3,36,000 49. X sends out certain goods to Y, costing ` 1,50,000 at cost plus 25% on invoice price. ¾ of the goods were sold by R at ` 1,76,000. Commission 5% upto invoice value a nd 10% of any surplus above invoice value. The amount of commission will be (A) ` 10,100 (B) ` 11,975 (C) ` 10,568.75 (D) ` 9,350 50. A purchased goods costing ` 2,60,000 for joint venture with B. B sold a major part of the goods at cost plus 25% on cost, for ` 2,50,000. Balance of goods were taken over by B at cost less 10%. Find out profit/loss on Joint Venture. (A) (Loss) ` 10,000 (B) ` 55,250 (C) ` 44,000 (D) ` 50,000 51. Which of the following account(s) is (are) maintained in the joint venture when separate set of books are maintained? (A) Joint Bank a/c (B) Joint Venture a/c (C) Co-venturer a/c (D) All of the above 52. At the time of preparation of financial accounts, balance of Bad Debts Recovered Account will be transferred to (A) Debtor’s Personal a/c (B) Profit & Loss a/c (C) Bad Debts a/c (D) Profit & Loss Appropriation a/c 53. In case of not for profit making concern, endowment fund receipt is treated as (A) Capital Receipt (B) Revenue Receipt (C) Either (A) or (B) (D) Neither (A) nor (B) The Institute of Cost Accountants of India 6  P‐2: Fundamentals of Accounting ‐ Bit Questions 54. Any donation received for a specific purpose should be credited to (A) Income and Expenditure Account (B) Capital Fund (C) Special Fund (D) Either (A) or (B) 55. Income and Expenditure account shows subscription at ` 2,50,000. Subscriptions accrued in the beginning of the year and at the end of the year were ` 25,000 and ` 37,500 respectively. The amount of subscriptions received appearing in re ceipts and payments account will be (A) ` 2,37,500 (B) ` 2,75,000 (C) ` 1,87,500 (D) ` 2,62,500 56. Which of the following transaction is not recorded in cash book? (A) Bad debts recovered (B) Prepaid expenses (C) Trade discount allowed (D) Freight paid for acquiring an asset 57. Credit purchase of fixed asset is recorded in (A) Journal Proper (B) Purchase book (C) Cash book (D) Petty Cash Book 58. Expenses paid but not accrued means (A) Capital expenses (B) Outstanding expenses (C) Prepaid expenses (D) Cash 59. Till the discounted bill is paid by the acceptor, it remains as (A) a contingent liability (B) a current liability (C) an asset (D) an expense 60. The amount of yearly depreciation under written down value method (A) remains same over the years (B) decreases year by year (C) increases year by year (D) fluctuates 61. Goods purchased from Mr. A but wrongly entered in the account of Mr. B. The rec tification of error will result in (A) increase in gross profit (B) decrease in gross profit (C) no effect on gross profit (D) either A or B 62. When cash received for services rendered in the past (A) Owner’s equity increases (B) Current asset increases (C) Profit increases (D) None of the above The Institute of Cost Accountants of India 7  P‐2: Fundamentals of Accounting ‐ Bit Questions 63. Stock in the hand of the consignee is valued (A) at market price or cost price whichever is less. (B) at selling price. (C) at cost price after inclusion of proportionate non-recurring expenses. (D) at consignment price. 64. Noting charges are paid by (A) the drawee (B) the drawer (C) the payee (D) the acceptor 65. The valuation procedure for stock is cost or net realisable value, whichever is lower. The procedure follows as per (A) Historical Cost Concept (B) Going Concern Concept (C) Money Measurement Concept (D) Conservatism Concept 66. When incomes recognised on cash basis and expenditure recognised on accrual basis, the system termed as (A) Accrual basis of accounting (B) Cash basis of accounting (C) Mercantile basis of accounting (D) Hybrid basis of accounting 67. Which one is not considered as capital expenditure? (A) Depreciation (B) Architect’s fees (C) Demolition cost (D) Legal cost for buying property 68. Legal charges paid to defend a suit on firm’s factory site is (A) Capital expenditure (B) Revenue expenditure (C) Deferred revenue expenditure (D) Prepaid expenditure 69. Profit and loss account is prepared for a period of one year by following the concept of (A) Consistency Concept (B) Cost Concept (C) Going Concern Concept (D) Periodicity Concept 70. The trial balance checks (A) Nature of business (B) Valuation of closing stock (C) Correctness of cash in hand (D) Arithmetical accuracy 71. Errors in carry forward of closing balances from one year to another which affects (A) Nominal accounts (B) Real accounts (C) Personal accounts (D) Both (B) and (C) 72. If a bill drawn on 13th July 2018 for 60 days, payment must be made on (A) 15th September, 2018 (B) 14th September, 2018 The Institute of Cost Accountants of India 8  P‐2: Fundamentals of Accounting ‐ Bit Questions (C) 13th September, 2018 (D) 12th September, 2018 73. The manufacturing account is prepared (A) to ascertain the cost of goods manufactured. (B) to ascertain gross profit. (C) to ascertain profit or loss on the goods manufactured. (D) to ascertain the cost of goods sold 74. Which one of the following is not a financial statement? (A) Trial Balance (B) Profit and Loss account (C) Balance Sheet (D) Fund Flow statement 75. Any revenue expense for which a separate fund is available will be (A) capitalised and shown in the balance sheet. (B) debited to income and expenditure account. (C) debited to the separate fund. (D) None of the above 76. ________________________is not objective of accounting. (A) Gives accurate information (B) Keeps records in systematic manner (C) Analyses recorded data (D) Ascertain financial position of business 77. Which of the following is not a paper transaction? (A) Charge of depreciation (B) Discount received (C) Bad debts written off (D) Cash stolen from office 78. Which of the following is capital expenditure? (A) Repairs of fixed asset (B) Demolition cost (C) Locker rent (D) Annual subscription 79. Advertising expenses for launching a new product of the company is____________. (A) Revenue expenditure (B) Capital expenditure (C) Deferred revenue expenditure (D) Deferred capital expenditure 80. ___________________does fulfill the function of both a journal and a ledger. (A) Purchase book (B) Cash book (C) Sales book (D) Bills Payable book 81. Which of the following is artificial personal account? (A) SBI account (B) Wages paid account (C) Discount received account (D) Drawings account 82. Accounting cycle ends with preparation of______________. (A) the journal/ledger The Institute of Cost Accountants of India 9  P‐2: Fundamentals of Accounting ‐ Bit Questions (B) the trial balance (C) the financial statement (D) the closing entries record 83. Journal proper uses to record _________________. (A) bad debts recovered (B) all cash purchases of assets other than goods (C) writing of bad debts (D) purchase of goods on credit 84. In case of, deposited of c heque into bank but not collected, the balance is less as per ________________. (A) Cash book (B) Pass book (C) Pass book overdraft (D) Both (A) and (B) 85. Accounting does not record non-financial transactions because of (A) Entity concept (B) Accrual concept (C) Cost concept (D) Money measurement concept 86. Narration is given at the end of (A) Final accounts (B) Trial balance (C) Each ledger account (D) Each journal entry 87. Which one of the following is an example of Personal Account? (A) Machinery (B) Rent (C) Cash (D) Creditor 88. ` 5,000 incurred for up gradation of computer by installation of 128 MB Ram is (A) Revenue expenditure (B) Deferred revenue expenditure (C) Capital expenditure (D) None of the above 89. Cost of goods purchased for resale is an example of (A) Revenue expenditure (B) Capital expenditure (C) Deferred revenue expenditure (D) None of the above 90. Insurance claim received on account of machinery damaged completely by fire is (A) Capital receipt (B) Revenue receipt (C) Capital expenditure (D) Revenue expenditure 91. An expenditure is capital in nature when (A) The receiver of the amount is going to treat it for the purchase of fixed assets. (B) It increases the quantity of fixed assets. (C) It is paid as interest on loans for the business. (D) It maintains of fixed asset. The Institute of Cost Accountants of India 10  P‐2: Fundamentals of Accounting ‐ Bit Questions 92. A withdrawal of cash from business by the proprietor should be credited to (A) Drawing Account (B) Capital Account (C) Cash Account (D) Purchase Account 93. Cash book is a form of (A) Ledger (B) Journal (C) Trial Balance (D) All of the above 94. A sale of goods to Laxman for cash should be debited to (A) Laxman A/c (B) Cash A/c (C) Sales A/c (D) Capital A/c 95. The debts written off earlier as bad, subsequently recovered are (A) Debited to profit and loss A/c (B) Credited to bad debt recovery A/c (C) Credited to trade receivable A/c (D) Credited to debtors A/c 96. Which one of the following is an external cause for depreciation (A) Over use (B) Abnormal occurrence (C) Time element (D) Obsolescence 97. Original cost of a machine is ` 1,50,000, residual value ` 10,000, if depreciation is charged @ 105 per annum under WDV method then depreciation for 3rd year will be (A) ` 12,240 (B) ` 11,340 (C) ` 12,150 (D) ` 14,000 98. On which of the following asset, depreciation is charged on ‘Depletion method’ (A) Goodwill (B) Plant and Machinery (C) Land and Building (D) Wasting asset like mine and quarries 99. If a sum of ` 1,500 received from Laxman (debtor) has not been recorded in the books, the (A) Profit would show an increase of ` 1,500 (B) Profit would show a decrease of ` 1,500 (C) Assets would show a decrease of ` 1,500 (D) None of the above 100. It goods worth ` 1,750 returned to suppler is wrongly entered in sales returned book as ` 1,570 then (A) Gross profit will decrease by ` 3,320 (B) Gross profit will decrease by ` 3,500 (C) Gross profit will increase by ` 3,320 (D) Net profit will decrease by ` 3,140 101. Which of the following errors affects the agreement of a trial balance? (A) Mistake in balancing an account (B) Omitting to record a transaction entirely in the subsidiary books The Institute of Cost Accountants of India 11  P‐2: Fundamentals of Accounting ‐ Bit Questions (C) Recording of a wrong entry in the subsidiary book (D) Posting an entry on the correct side but in the wrong account 102. Difference in Bank Balance as per Pass book and Cash book may arise on account of (A) Cheque issued but not presented (B) Cheque issued but dishonoured (C) Cheque deposited not credited by bank (D) All of the above 103. Which of these items are taken into consideration for preparation of adjusted cash book? (A) Mistake in cash book (B) Mistake in pass book (C) Cheque issued but not presented for payment (D) Cheque deposited but not cleared by bank 104. Kasi draws a bi ll on Shyam for ` 5,000 and Kasi endorsed it to Ram. Ram endorese it to Rahul. The payee of the bill will be (A) Kasi (B) Ram (C) Shyam (D) Rahul 105. On receipt of goods from the consignor the consignee debits which of these accounts? (A) Purchase account (B) Goods account (C) Consignor account (D) None of the above 106. The Consignment Accounting is made on the following basis (A) Cash basis (B) Realisation basis (C) Accrual basis (D) None of the above 107. Joint venture account is of the nature of (A) Personal account (B) Nominal account (C) Real account (D) Suspense account 108. If unsold goods costing ` 20,000 is taken over by venturer at ` 15,000, the joint venture account will be credited by (A) ` 20,000 (B) ` 15,000 (C) ` 5,000 (D) Nil 109. 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 110. Which one of the following character is not related to Financial Accounting? (A) Evaluates the financial strength of the whole business. (B) Based on monetary transactions of the enterprise (C) Reports are always subject to statutory audit. (D) Reports are as per requirement of management. The Institute of Cost Accountants of India 12  P‐2: Fundamentals of Accounting ‐ Bit Questions 111. Which one of the following equation is correct? (A) Owner’s Equity = Liability + Asset (B) Owner’s Equity = Asset - Liability (C) Liability = Owner’s Equity + Asset (D) Asset = Owner’s Equity + Liability 112. Identify the Personal Account from the following (A) Salary Payable Account (B) Taxes paid account (C) Investment Account (D) Trademark Account 113. Which of the following is a transaction of contra entry? (A) Sale goods to Y ` 12,500 (B) Godown rent ` 7,000 paid by cheque. (C) Received ` 12,000 in full settlement of ` 12,500 (D) Cash deposited to bank ` 9,000. 114. When Trial Balance will not tally/mismatch? (A) Two errors those are compensating each other. (B) A transaction recorded twice. (C) Taking balance to the wrong side in the Trial balance (D) If an entry is totally missed. 115. An entry of ` 1,560 has been debited to a Debtor’s Personal Account at ` 1,650. It is an error of (A) Omission (B) Commission (C) Principle (D) Compensating 116. Amount set apart to meet loss due to bad debt is a (A) Provision (B) Appropriation (C) Reserve (D) Commission 117. Reduction in value of asset due to its continuous use is treated as (A) Appreciation (B) Depreciation (C) Loss (D) Profit 118. What happens when a bad debt is recovered? (A) Current asset decreases (B) Debtor’s balance decreases (C) Profit increases (D) Owner’s fund decreases 119. Which balance is not considered for closing entries on t he basis of trial balance for transferring to Trading and Profit & Loss Account? (A) Salary and Wages (B) Discount Received (C) Commission Paid (D) Cash in Hand 120. Select correct journal entry to rectify an error “An amount of ` 10,000, withdrawn by owner for personal use debited to Trade Expenses Account”. Debit Credit The Institute of Cost Accountants of India 13  P‐2: Fundamentals of Accounting ‐ Bit Questions (A) Drawing Account Trade Expenses a/c (B) Trade Expenses a/c Drawing Account (C) Drawing Account Cash Account (D) Trade Expenses a/c Cash Account 121. M/s. A.B. Enterprises has bank balance ` 8,800 as per cash book and the followings were found: (a) Three cheques deposited in bank for ` 5,800 but only one cheque for ` 2,000 was cleared. (b) Dividend collected by Bank ` 1,250 was wrongly entered in cash book as ` 1,520. What is balance as per pass book? (A) ` 3,480 (B) ` 4,730 (C) ` 2,730 (D) ` 3,750 122. House Building advance of ` 2.00 lakh paid to employees. It is a (A) Asset (B) Revenue Expenditure (C) Capital Expenditure (D) Deferred Revenue Expenditure 123. Claims against company pending in court case. It is a (A) Current Liability (B) Current Asset (C) Contingent Liability (D) Un-secured Loan 124. Which one of the following is not a negotiable instrument? (A) Currency Note (B) Promissory Note (C) Bill of Exchange (D) Crossed Cheque 125. Which one of the following is not the feature of a joint venture business? (A) Co-venture may or may not contribute initial capital. (B) It has limited duration (C) It is done for specific purpose (D) Profit or loss on joint venture is shared as per their capital ratio. 126. Del Credere Commission in consignment business is generally payable on (A) Total sales (B) only on credit sales. (C) other than credit sales (D) % on recovery of bad debt. 127. There are 250 members in the Srikrishna Clu b where annual subscription is ` 500. During 2016-17, subscription received ` 97,500 and subscription receivable is ` 47,500. What amount of subscription received in advance during 2016-17? (A) ` 20,000 (B) ` 25,000 (C) ` 27,500 (D) `50,000 128. When goods are purchased for the joint venture, the account to be debited is (A) Purchase account (B) Joint Venture account (C) Venture’s capital account (D) either Purchase account or Joint venture account The Institute of Cost Accountants of India 14  P‐2: Fundamentals of Accounting ‐ Bit Questions 129. The abnormal loss on consignment is credited to: (A) Profit and Loss Account (B) Consignee’s Account (C) Consignment Account (D) Insurance Company Account 130. Fixed Assets and Current Assets are categorized as per concept of (A) Separate Entity (B) Going Concern (C) Consistency (D) Time period 131. An expenditure is in capital nature when (A) the receiver of the amount is going to treat it for the purchase of fixed assets. (B) it increase the quantity of fixed assets. (C) it is paid as interests on loans for the business (D) it maintains a fixed assets 132. Cash book is a (A) Subsidiary book (B) Subsidiary book and a Ledger account (C) Ledger account (D) None of the above 133. The periodical total of the Sales Return Book is posted to the (A) Debit side of Sales Account (B) Debit side of Sales Return Account (C) Credit side of Sales Return Account (D) Debit side of Debtors Account 134. Goods sent on consignment account is of the nature of (A) Personal Account (B) Nominal Account (C) Real Account (D) Sales Account 135. Which of the following items are shown in the income and expenditure account? (A) Only items of capital nature. (B) Only items of revenue nature which are received during the period of accounts. (C) Only items of revenue nature pertaining to the period of accounts. (D) Both the items of capital and revenue nature. 136. Income tax of the sole trade paid is shown (A) Debited to P & L Account (B) Debited to Trading Account (C) Debited to his Capital Account (D) None of the above 137. Narration are given at the end of (A) Final Accounts (B) Each Ledger Account in Trial Balance (C) Each Ledger Account (D) Each Journal Entry 138. Life membership fees received by a club is a (A) Revenue Expenditure (B) Capital Expenditure (C) Deferred Revenue Expenditure The Institute of Cost Accountants of India 15  P‐2: Fundamentals of Accounting ‐ Bit Questions (D) Capital Receipt 139. A bad debt recovered during the year will be (A) Capital Expenditure (B) Revenue Expenditure (C) Capital Receipt (D) Revenue Receipt 140. Nominal Account represents (A) Profit & Gain (B) Loss / Expenses (C) Both (A) and (B) (D) None of the above 141. Prepaid rent is a (A) Nominal Account (B) Representative Personal Account (C) Tangible Assets Account (D) None of the above 142. Purchases book is used to record (A) All purchases of goods (B) All credit purchases (C) All credit purchases of goods (D) All credit purchases of assets other than goods 143. The source document or voucher used for recording entries in Sales Book is (A) invoice recieved (B) invoice sent out (C) credit notes sent out (D) debit notes received 144. Ledger contains various _______ in it. (A) transactions (B) entries (C) accounts (D) None of the above 145. Purchase price of Machine ` 8,90,000; Freight and Cartage ` 7,000; Installation charges ` 30,000; Insurance charges ` 20,000; Residual value is ` 40,000; estimated useful life 5 years. The amount of annual depreciation under straight line method will be (A) ` 1,77,400 (B) ` 1,81,400 (C) ` 1,97,400 (D) ` 1,77,900 146. The value of an asset after deducting depreciation from the historical cost is known as (A) Fair value (B) Market value (C) Net realizable value (D) Book value 147. Goods worth ` 272 returned by Lala passed through the books as ` 722. In the rectification entry (A) Lala will be debited by ` 450 (B) Lala will be debited by ` 272 (C) Lala will be credited by ` 722 (D) Lala will be credited by ` 272 The Institute of Cost Accountants of India 16  P‐2: Fundamentals of Accounting ‐ Bit Questions 148. When preparing a bank reconciliation statement, if you start with debit balance as per cash book cheques sent to bank but not collected should be (A) Added (B) Deducted (C) Not required to be adjusted (D) None of the above 149. Payment of Bills of Exchange is received (A) by drawer (B) by holder in due course of due date (C) by endorsee (D) by bank 150. Which of these is/are recurring (indirect) expenses? (A) Transit Insurance and Freight (B) Octroi (C) Loading and Unloading (D) Godown Rent and Insurance 151. Goods of the invoice value of ` 2,40,000 sent out to consignee at 20% profit on cost, the loading amount will be (A) ` 40,000 (B) ` 48,000 (C) ` 50,000 (D) None of the above 152. Memorandum joint venture account is (A) Personal Account (B) Real Account (C) Nominal Account (D) None of the above 153. The balance of the Petty Cash is a / an (A) expense (B) income (C) asset (D) liability 154. Endowment fund receipt is treated as (A) Capital Receipt (B) Revenue Receipt (C) Loss (D) Expenses Answer: 1. D 2. D 3. D 4. A 5. D 6. D 7. B 8. B 9. A 10. D 11. C 12. A 13. D 14. B 15. D 16. C 17. A 18. B 19. C 20. A 21. B 22. C 23. B 24. A 25. B 26. C 27. C 28. B 29. C 30. C 31. B 32 A 33 A 34 B 35 D 36 C 37 B 38 D 39 C 40 B 41. C 42. B 43. B 44. D 45. B 46. B 47. B 48. C 49. C 50. C 51 C 52 D 53 B 54 A 55 B The Institute of Cost Accountants of India 17  P‐2: Fundamentals of Accounting ‐ Bit Questions 56 A 57 C 58 A 59 C 60 A 61. B 62. C 63. D 64. A 65. C 66. D 67. D 68. C 69. C 70. D 71. D 72. D 73. A 74. A 75. C 76. A 77. A 78. D 79. C 80 B 81. A 82 D 83 B 84 B 85 A 86 D 87 D 88 C 89 A 90 A 91 B 92 C 93 A 94 B 95 B 96 D 97 C 98 D 99 D 100 A 101. A 102 D 103 A 104 D 105 D 106 C 107 B 108 B 109 C 110 D 111 B 112 A 113 D 114 C 115 B 116 A 117 B 118 C 119 D 120 B 121 B 122 A 123 C 124 A 125 D 126 A 127 A 128 D 129 C 130 B 131 A 132 B 133 B 134 C 135 C 136 C 137 D 138 D 139 D 140 C 141 B 142 C 143 B 144 C 145 A 146 D 147 A 148 B 149 B 150 D 151 A 152 C 153 C 154 A II. Match the following: 1. Column ‘A’ Column ‘B’ 1. Consignment stock account is A Credit balance of pass book 2. Debit balance of cash book is B No depreciation equal to 3. Error of omission C Debit note 4. Land D Capital expenditure 5. Purchase return book E Real Account 6. Cost of copyrights F Transaction recorded partly 2. Column ‘A’ Column ‘B’ 1. Preliminary Expenses A Revenue Received 2. Interest Received B Bills of Exchange 3. Patent Account C Fictitious Asset 4. Obsolescence D Current Liability 5. Days of Grace E External Cause of Depreciation 6. Outstanding salary for ` 25,000 F Real Account 3. Column ‘A’ Column ‘B’ 1. Dishonour of a bill A Current Asset 2. Statement furnished by consignee B Capital Expenditure to consignor 3. Outstanding Salaries a/c C Notary Public 4. Outstanding Subscription D Intangible Asset 5. Preliminary Expenses E Account Sales 6. Amortization term related to F Current Liabilities 4. Column ‘A’ Column ‘B’ 1. Concept relating to Profit & Loss A Gross Profit a/c The Institute of Cost Accountants of India 18  P‐2: Fundamentals of Accounting ‐ Bit Questions 2. Salary outstanding B Total Sale 3. Sales minus cost of goods sold C Memorandum statement 4. Del Credre Commission D Matching concept 5. Honour before due date E Retirement of bill 6. Bank reconciliation statement F Current liabilities 5. Column ‘A’ Column ‘B’ 1. Pre-receipt of income A Current Liability 2. Return Inward B Capital Expenditure 3. Wages paid of installation of C Real Account machine 4. Goodwill Account D AS – 10 5. Fixed Assets E Current Assets 6. Rent Prepaid F Nominal Account 6. Column ‘A’ Column ‘B’ 1. Income and Expenditure a/c A Nominal a/c 2. Fixed Assets held for B Intangible Asset 3. Discount a/c C Consignment 4. Patent and Copyright D Holder of the bill 5. Del-credere commission E Earning revenue 6. Noting charges paid F Non-profit concern Answer: 1. 1. E 2. A 3. F 4. B 5. C 6. D 2. 1. C 2. A 3. F 4. E 5. B 6. D 3. 1. C 2. E 3. F 4. A 5. D 6. B 4. 1. D 2. F 3. A The Institute of Cost Accountants of India 19  P‐2: Fundamentals of Accounting ‐ Bit Questions 4. B 5. E 6. C 5. 1. A 2. F 3. B 4. C 5. D 6. E 6. 1. F 2. E 3. A 4. B 5. C 6. D III. State whether the following statement is True or False: 1. The policy of anticipate no profi t and provide for all pr obable losses arises due to the convention of conservatism. 2. Single entry system records only one aspect either debit or credit. 3. Rent outstanding is real account and shown in asset side of the balance sheet. 4. Demand bills are payable on a date calculated after adding three days of grace to the period of the bill. 5. Bills receivable a/c is debited by the acceptor on discounting of a bill. 6. Noting charges are related to dishonor of bill. 7. Delcredere Commission is extra commission which is given to the consignee for making him responsibility for extra sales. 8. Joint Venture does not follow actual basis of accounting. 9. Closing Stock, when it appears in the trial balance is taken only in the trading account. 10. Fixed assets are shown in the balance sheet at their market value less depreciation. 11. The capital receipts and payments in receipts and payment account are to be taken to the Balance Sheet. 12. When Credit sales is wrongly posted to the purchase book, it is an error of commission. 13. It is generally assumed that the business will not liquidate in the near forcible future because of entity concept. 14. Freight paid on purchase of machinery is to be treated as revenue expenditure. 15. Bank Reconciliation Statement is a part/component of financial statements. 16. Capital Account is a real account in nature. 17. Under straight line method of depreciation, the cost of the asset written off in equal proportion during its economic life. 18. Total of Purchase Day Book is short by `10,000 will not affect trial balance. 19. A credit balance in the pass book indicates excess of deposits over withdrawals. 20. In case of endorsement of bill, endorser debits endorsee and credits B/P Account. 21. In sole trade, income tax is treated and recorded as drawings. 22. At the end of the accounting year outstanding subscription is shown as liability in Balance Sheet. 23. The Balance Sheet will give the information regarding the financial position for a particular period. 24. Income and Expenditure Account closely resembles the Profit and Loss Account of a trading concern. 25. In case of non-profit organization, excess of income over expenditure is known as surplus. 26. Error of omission will not affect trial balance. The Institute of Cost Accountants of India 20  P‐2: Fundamentals of Accounting ‐ Bit Questions 27. Favourable bank balance means, debit balance in the pass book. 28. Balance Sheet covers the position for a period and not the position of a particular day. 29. Goods bought for 25,000 passed through sales day book will result an incr ease in gross profit. 30. Statement of affairs means statement of assets and liabilities. 31. A bill of exchange is a conditional order in writing given by a debtor to a creditor. 32. Accumulated depreciation account can be located in the debit side of the trial balance. 33. Closing stock appeared in the trial balance is taken to Trading Account. 34. Credit balance of Joint Venture Account is a Profit on Joint Venture. 35. Ownership expressed in terms of money is called Capital Account. 36. Renewal fee for patents is revenue expenditure. 37. Accounting is an art of record keeping. 38. Window dressing of accounts means showing more profits to attract more investment. 39. Cost of extension of building occupied on lease for five years is deferred revenue expenditure. 40. Freight paid on purchase of machinery is to be treated as revenue expenditure. 41. It is generally assumed that the business will not liquidate in near forcible future because of business entity concept. 42. Gratuity and pension paid to employees after retirement is deferred revenue expenditure. 43. Trade discount is allowed for prompt payment. 44. The balance in the petty cash book is an asset. 45. Profit or Loss has no effect on net worth. 46. Trial Balance Document is required for bank reconciliation. 47. A person by whom the bill is endorsed is called endorser. 48. Account sales is a statement furnished by consignor to consignee. 49. Profit and Loss a/c covers a period and not the position on a particular day. 50. The surplus of a non-profit organization is distributed amongst the members. 51. Current assets + Current Liabilities = Working Capital. 52. Discount on Bill of exchange is a loss for the drawer and gain for the drawee. 53. The owner of the consignment stock is consignee. 54. Certificate of protest is issued by a Notary Public. 55. Capital Account is a liability of the business. 56. Overcasting of purchase book would affect purchase account. 57. In case of mineral resources, depreciation is not provided but depletion is charged. 58. The discount column of the cash book is not posted is an example of error of omission. 59. Retirement of bill means sending the bill for collection. 60. Cost of the goods include all expenses incurred till the goods reach the premises of the consignee’s godown. 61. Capital is equal to Asset – Liability. 62. Final Accounts are prepared at the end of the Accounting Year. 63. Del-credere commission is paid to the consignee for increasing the cash sales. 64. Receipts and Payments account shows the financial position of a Non-profit concern. 65. Trial Balance is a part of Final Accounts. 66. Under W.D.V method, the depreciation of an asset decreases every year. 67. Fixed assets are kept in the business for use over a longer period. 68. Ownership expressed in terms of money called Capital Account. 69. Incomplete record of accounting is also known as Single Entry System. 70. Bill of Exchange is accepted by the Drawer. 71. Owner of the goods sent on consignment is Consignor. 72. Bad debts previously written off, if recovered subsequently is credited to Debtor’s Personal Account. Answer: 1. True 2. True 3. False 4. True The Institute of Cost Accountants of India 21  P‐2: Fundamentals of Accounting ‐ Bit Questions 5. False 6. True 7. False 8. True 9. False 10. False 11. True 12. True 13. False 14. False 15. False 16. False 17. True 18. False 19. True 20. False 21. True 22. False 23. False 24. True 25. True 26. True 27. False 28. False 29. True 30. True 31. False 32. False 33. False 34. True 35. True 36. True 37. True 38. True 39. True 40. False 41. False 42. False 43. False 44. True 45. False 46. False 47. True 48. False 49. True 50. False 51. False 52. False 53. True 54. False 55. True 56. True 57. True 58. True 59. False 60. True 61. True The Institute of Cost Accountants of India 22  P‐2: Fundamentals of Accounting ‐ Bit Questions 62. True 63. False 64. False 65. False 66. True 67. True 68. True 69. True 70. False 71. True 72. False FUNDAMENTALS OF COSTING I. Choose the correct answer from the given four alternatives: 1. Carriage outward is a part of (A) Office and Administrative overhead (B) Factory overhead (C) Selling and Distribution overhead (D) Prime Cost 2. Notional cost is also known as (A) Variable cost (B) Imputed cost (C) Opportunity cost (D) Out of Pocket cost 3. Which one of the following is not a cost unit? (A) Kilo watt hour (B) Credit division (C) Patient day (D) Tonne-mile 4. Cost reduction - (A) Long term phenomena (B) It challenges the standards. (C) It is carried out without compromising the quality. (D) All of the above 5. Statement showing break up of costs is known as (A) Cost sheet (B) Tender (C) Production account (D) Statement of profit 6. Prime cost may be correctly termed as The Institute of Cost Accountants of India 23  P‐2: Fundamentals of Accounting ‐ Bit Questions (A) the total of all cost items which can be directly charged to product units. (B) the sums of all direct materials and labour cost excluding all other cost. (C) the total costs incurred in producing a finished unit. (D) the sum of the large cost in product cost. 7. Which one is included in financial accounts but not in cost accounts? (A) Royalty (B) Dividend paid (C) Excise duty (D) Carriage and freight 8. Which of the following term is excluded from the cost accounts? (A) Income tax (B) Interest on debenture (C) Cash discount (D) All of the above 9. Variable costs are fixed (A) depend upon the entity (B) for a period (C) per unit (D) for a particular process of production 10. Costs are classified into fixed costs, variable costs and semi-variable costs, it is known as (A) Behavioural classification (B) Classification according to controllability (C) Functional classification (D) Element wise classification 11. The main purpose of cost accounting is to (A) maximize profit (B) inventory valuation (C) provide information for decision making. (D) fixation of selling price 12. Process cost is very much applicable in (A) Construction industry (B) Pharmaceutical industry (C) Airline company (D) Printing industry 13. All indirect costs are termed as (A) Prime cost (B) Factory cost (C) Conversion cost (D) Overheads 14. CAS-21 is related to (A) Cost Accounting Standard on Overburden Removal Cost. (B) Cost Accounting Standard on Interest and Financing Charges (C) Cost Accounting Standard on Joint Cost (D) Cost Accounting Standard on Quality Control 15. On the basis of “Relationship with accounting period” costs are classified as (A) Historical Costs and Pre-determined Costs. (B) Capital Costs and Commercial Costs. (C) Capital Costs and Revenue Costs. (D) Product Costs and Period Costs The Institute of Cost Accountants of India 24  P‐2: Fundamentals of Accounting ‐ Bit Questions 16. Cost of staff services is an example of (A) Committed Costs (B) Policy and Managed Costs (C) Discretionary Costs (D) Step Costs 17. Which of the following is not a method of costing? (A) Process Costing (B) Batch Costing (C) Direct Costing (D) Operating Costing 18. The written down value of the abandoned plant less its salvage value is (A) Imputed cost (B) Sunk cost (C) Avoidable Cost (D) Opportunity cost 19. The costs are differentiated between fixed and variable costs under (A) Marginal Costing (B) Direct Costing (C) Standard Costing (D) Absorption Costing 20. Which of the following is a suitable cost unit for the BPO Services/Call Centers? (A) Cost per item (B) Cost per hour (C) Cost per account handled (D) Cost per minute 21. Interest on own capital is (A) Cash Cost (B) Notional Cost (C) Part of Prime Cost (D) Semi-Variable Cost 22. Advertisement costs are termed as (A) Direct Expenses (B) Cost of Production (C) Selling Overhead (D) Distribution Overhead 23. Direct Wages ` 2,05,000 and Factory Cost ` 5,60,000. If the ratio of direct wages and factory overhead is 5 : 3 then Direct Material Cost will be (A) ` 2,32,000 (B) ` 3,50,000 (C) ` 3,41,667 (D) ` 2,24,000 24. A technique and process of ascertaining costs is known as (A) Cost (B) Costing (C) Cost Accounting (D) Cost Accountancy 25. The branch of the accounting dealing with the classification, recording, allocation, summarizing and reporting of current and prospective costs, is known as (A) Financial Accounting (B) Management Accounting The Institute of Cost Accountants of India 25  P‐2: Fundamentals of Accounting ‐ Bit Questions (C) Cost Accounting (D) Cost Accountancy 26. Which of the following is not a function of Cost Accountancy? (A) Cost Control (B) Cost Ascertainment (C) Cost Analysis (D) Cost Accounting 27. Which of the following ‘CAS’ is related to “Pollution Cost”? (A) CAS - 11 (B) CAS - 13 (C) CAS - 14 (D) CAS – 17 28. Costs are classified between direct and indirect costs according to method of classification by (A) Nature or Element (B) Functions (C) Degree of traceability to product (D) Change in Activity or Volume 29. Depreciation on building is an example of (A) Committed Costs (B) Policy and Managed Costs (C) Discretionary Costs (D) Step Costs 30. When the volume of output is increased then the per unit fixed cost will be (A) increase in the proportion of output. (B) decrease in the reverse proportion of output (C) changed but not in proportion of output. (D) unchanged 31. Which of the following costing method is suitable for Toy Making Industry? (A) Contract Costing (B) Process Costing (C) Job Costing (D) Batch Costing 32. Which of the following is not a technique of costing? (A) Managerial Costing (B) Process Costing (C) Standard Costing (D) Budgetary Costing 33. Excise duty is an example of (A) Chargeable expense (B) Factory overhead (C) Administrative overhead (D) Non-cost item 34. Over which the following costs, management is likely to have least control? (A) Wages cost (B) Building Insurance cost (C) Machinery Breakdown cost (D) Advertisement cost 35. The works cost plus administration expenses represents The Institute of Cost Accountants of India 26  P‐2: Fundamentals of Accounting ‐ Bit Questions (A) Total cost (B) Cost of Production (C) Cost of sales (D) Factory cost 36. Opportunity cost is the best example of (A) Sunk cost (B) Standard cost (C) Relevant cost (D) Irrelevant cost 37. Which method of costing is used for determination of costs for printing industry? (A) Process costing (B) Operating costing (C) Batch costing (D) Job costing 38. Prime cost plus factory overheads is known as (A) Marginal Costing (B) Conversion Cost (C) Commercial Cost (D) Factory Cost 39. From the following information, find out purchases when raw material consumed is ` 26,500; Closing stock ` 4,500 and opening stock ` 3,000. (A) ` 26,500 (B) ` 25,000 (C) ` 28,000 (D) ` 34,000 40. Bad debts are included as (A) Direct expenses (B) Distribution overhead (C) Cost of production (D) Selling overhead 41. When re-ordering level is 200 units, minimum usage is 20 units, minimum lead time is 5 days, maximum stock is 400 units then re-ordering quantity will be: (A) 400 units (B) 200 units (C) 300 units (D) 100 units 42. In the situation of increasing prices, the valuation of closing stock is more under: (A) Simple average (B) Weighted average (C) FIFO (D) LIFO 43. Payment of Royalties is (A) Direct Expenses (B) Administrative Cost (C) Charged to Profit & Loss A/c (D) Factory Overheads 44. Which one of the following statement is true? (A) Abnormal cost is not controllable (B) Financial Expenses are included in Cost Sheet (C) All overheads changes with the change in volume and in the same proportion. The Institute of Cost Accountants of India 27  P‐2: Fundamentals of Accounting ‐ Bit Questions (D) Primary packing is an item of prime cost. 45. Costing is a technique of (A) Recording of Cost transactions (B) Ascertaining Cost (C) Preparation of final accounts (D) Decision making 46. Which of following is appropriate Cost Unit for timber industry? (A) Per tonne (B) Per article (C) Per Kg. (D) Per foot 47. Which of the following is a Cost Control Technique? (A) Marginal Costing (B) Uniform Costing (C) Standard Costing (D) Absorption Costing 48. Cost of free samples and gifts are included in (A) Prime Cost (B) Factory Overhead (C) Office and Administrative Overheads (D) Selling & Distribution Overheads 49. In behavioural analysis, costs are divided into (A) Production and Non-Production costs (B) Controllable and Non-Controllable costs (C) Direct and indirect costs (D) Fixed and Variable costs 50. Which of the following is a part of both Prime cost and Conversion cost? (A) Direct Material (B) Indirect Labour (C) Direct Labour (D) All of the above 51. Which of the following is not a Relevant Cost? (A) Replacement Cost (B) Sunk Cost (C) Marginal Cost (D) Standard Cost 52. Direct Expenses are also known as (A) Overhead Expenses (B) Process Expenses (C) Chargeable Expenses (D) None of the above 53. Indirect material cost is a part of (A) Prime Cost (B) Factory Overhead (C) Chargeable Expenses (D) None of the above The Institute of Cost Accountants of India 28  P‐2: Fundamentals of Accounting ‐ Bit Questions Answer: 1. C 2. B 3. B 4. D 5. A 6. A 7. B 8. D 9. C 10. A 11. C 12. B 13. D 14. D 15. C 16. B 17. C 18. B 19. A 20. C 21. B 22 C 23 A 24 B 25 C 26 C 27 C 28 C 29 A 30 B 31 B 32 D 33 A 34 C 35 B 36 C 37 D 38 D 39 C 40 D 41 C 42 C 43 A 44 D 45 B 46 D 47 C 48 D 49 D 50 C 51 B 52 C 53 B The Institute of Cost Accountants of India 29