1. On January 1, 1992 there was a balance of Rs. 4,000 in the plant and machinery account.

An
addition of Rs. 2,000 was made on July 1, 1992. Accounts were closed for the year on December, 31,
1992. If depreciation was charged 10% per annum, the balance in the plant and machinery account
on the closing date would be:
(a) Rs. 5,300
(b) Rs. 5,400
(c) Rs. 5,500
(d) Rs. 5,600
Ans. (c)
2. A machinery having a residual value of Rs. 5,000 was purchased on 1-1-1988 for Rs. 1, 00,000 and
was depreciated @ 9.5% on a straight line method. On 1-1-91, it was estimated that its useful life has
been reduced to eight years. Under the changed circumstances, the annual depreciation charges for
the year 1991 and onwards will be:
(a) Rs. 11,875
(b) Rs. 13,300
(c) Rs. 9,500
(d) Rs. 12,500
Ans. (b)
3. In which one of the following methods of charging depreciation shall the balance never be reduced
to zero?
(a) Fixed installment method
(b) Depreciation fund method
(c) Diminishing balance method
(d) Depletion unit method
Ans. (c)
4. Match List-I with List-II and select the correct answer using the following codes given below the
lists:
List-I
(Types of accounts)

List-II
(Principles)

A. Real Accounts

1. Debit the receiver, credit the give.

B. Nominal Accounts

2. Debit what comes in credit what goes out.

C. Personal Accounts

3. Debit all expenses, credit all gains.

Codes:
ABC
(a) 3 2 1
(b) 1 3 2
(c) 2 3 1
(d) 1 2 3
Ans. (c)
5. Which one of the following branches of accounting primarily deals with processing and Goodwill
presenting of accounting data for internal one?
(a) Financial Accounting
(b) Tax Accounting
(c) Management Accounting
(d) Inflation Accounting
Ans. (c)
6. Holding gains in relation to stocks should not be used for payment of Dividend. Which one of the
following accounting principles is involved in this?
(a) Consistency
(b) Cost
(c) Materiality
(d) Realization
Ans. (d)
7. X started business with a capital of Rs. 20,000 and purchased goods worth Rs. 2,000 on credit.
These transactions may be expressed in the form of Accounting Equation such as:
(a) Rs. 22,000 = Rs. 20,000 Rs. 2,000

(b) Rs. 20,000 = Rs. 22,000 Rs. 2,000

(c) Rs. 22,000 = Rs. 22,000 + 0
(d) Rs. 22,000 = 0 + Rs. 22,000
Ans. (b)
8. Accounting records transaction in terms of:
(a) commodity units
(b) monetary units
(c) production units
(d) none of the above
Ans. (b)
9. Market price or actual cost, whichever is less, is the generally accepted accounting principle for
valuation of:
(a) Stock in trade
(b) Fixed assets
(c) Current assets
(d) All assets
Ans. (a)
10. Capital employed in a business is Rs.1, 50,000. Profits are Rs. 50,000 and the normal rate of
profits is 20%. The amount of goodwill as per capitalization method would be:
(a) Rs. 1, 00,000
(b) Rs. 1, 50,000
(c) Rs. 2, 00,000
(d) Rs. 3, 00,000
Ans. (a)
11. Consider the following data:
Jan. 1, 1989 Opening Stock 500 units Rs. 5 per unit
Jan. 15, 1989 Purchases 400 units @ Rs. 6 per unit

Jan. 30, 1989 issued 300 units

Feb. 15, 1989 Purchases 200 units Rs. 7 per unit
Feb. 28, 1989 Issued 300 units
March 25, 1989 Purchases 200 units @ Rs. 8 per unit
Based on the above data, the value of inventory in hand on 31st March, 1989 as per First in First out
(FIFO) method will be:
(a) Rs. 3,700
(b) Rs. 3,600
(c) Rs. 4,800
(d) None of the above
Ans. (c)
12. Renewal fee for Patents is a:
(a) capital expenditure
(b) revenue expenditure
(c) deferred revenue expenditure
(d) development expenditure
Ans. (a)
13. A manufacturing company spent the following amounts on the import and installation of a
machine:
Rs. 50,000 Price of the machine
Rs. 5,000 Freight
Rs, 1,050 Insurance premium
Rs. 6,000 Replacement of a part damaged in transit, not covered under the insurance policy.
Based on the above data, Capital expenditure would be:
(a) Rs. 50, 000
(b) Rs. 56, 050
(c) Rs. 62, 050

(d) Rs.57, 050

Ans. (b)
14. Given, subscription received in 1990:
For the year 1989 Rs. 500
For the year 1990 Rs. 7,000
For the year 1991 Rs 400
1990-Subscription outstanding Rs. 250.
The amount of subscription to be posted to Income on 31st December 1990 and Expenditure account
of 1990 is:
(a) Rs. 7,000
(b) Rs. 7,250
(c) Rs. 7,900
(d) Rs. 8,150
Ans. (b)
15. What is the correct sequence of the preparation of the following accounts and statements of a
non-profit organization?
1. Income and Expenditure account
2. Receipts and Payment account
3. Balance Sheet
Select the correct answer from the codes given below:
(a) 1, 2, 3
(b) 1, 3, 2
(c) 2, 1, 3
(d) 2, 3, 1
Ans. (c)
16. Profit as per accounts from incomplete records may be construed as equivalent of:
(a) excess of assets over liabilities at the close of the period.

(b) excess of capital at the end over the capital at the beginning
(c) excess of assets over liabilities at the commencement of the period
(d) excess of capital at the beginning over the capital at the beginning
Ans. (b)
17. If the rate of gross profit is 20% on cost of goods sold and the sales are Rs. 1, 50,000 then the
total gross profit would be:
(a) Rs. 25,000
(b) Rs. 30,000
(c) Rs. 37,500
(d) None of the above
Ans. (a)
18. According to records of a firm which does not keep its accounts on double entry system, all sales
were made on credit so as to realize a profit of 33 % sale proceeds. The
3
stock of unsold goods at the beginning and at the end of the trading period were valued at Rs. 21,000
and Rs. 18,000 respectively. Goods worth Rs.1, 39,500 were purchased for resale during the period.
The proprietor withdrew goods worth Rs. 1, 500 during the accounting period for personal use. What
were the total sales during the period?
(a) Rs. 1, 80,000
(b) Rs. 2, 11,500
(c) Rs. 2, 25,000
(d) Rs. 2, 31,500
Ans. (b)
19. In the absence of partnership deed provision of Partnership Act, 1932 became applicable under
which a partner is entitled to interest on money advances to the firm at:
(a) 4% p.a.
(b) 5% p.a.
(c) 6% p.a.
(d) 10% pa.

Ans. (c)
20. Which one of the following as not applicable to a co-operative form of business organization?
(a) Membership is open to all having a common interest
(b) Transferability of shares is permitted among general public
(c) Policy decisions are taken by the members in a general meeting
(d) Major portion of profit is distributed to members by way of dividend
Ans. (d)
21. Which one of the following statements is correct?
(a) A company consists of heterogeneous members
(b) A body corporate includes a co-operative society
(c) The expression corporation or Body corporate are the same
(d) A partner cannot contract with his firm, whereas a member of a company can
Ans. (d)
22. Dividend declared and paid by a company is:
(a) an expense of the company
(b) an income of the company
(c)the distribution of profit earned by the company
(d) the source of fund for the company
Ans. (c)
23. Long term liabilities are:
(a) fixed assets minus current assets
(b) fixed assets minus current liabilities
(c) current Assets plus current liabilities
(d) total liabilities minus current liabilities
Ans. (d)

24. A business entity has assets of Rs. 26,000 and liabilities of Rs. 6,000. Owners equity in this case
is:
(a) Rs. 32,000
(b) Rs. 26,000
(c) Rs. 20,000
(d) Rs. 6,000
Ans. (c)
25. While preparing Annual Financial Statements, credit balance shown by the Bank pass book
should be treated as:
(a) a liability
(b) an income
(c) an excess of payments over receipts
(d) an asset
Ans. (d)
26. If the trial balance does not tally in spite of through scruting and the difference is substantial, then
which one of the following courses should an accountant adopt?
(a) Defer preparation of financial statements
(b) Open suspense account.
(c) Write off the difference to profit and losses A/c
(d) Ignore the difference and prepare financial statements
Ans. (b)
27. A and B are sharing profit and losses in the ratio of 4 I. C is admitted as a new partner for 1/3rd
share of profits for which he pays Rs. 30,000 as goodwill. Lf A and B agree to share future profits
equally, then the amount of goodwill to be credited to A would be:
(a) Rs. 30.000
(b) Rs. 90,000
(c) Rs. 48,000
(d) Rs. 42,000

Ans. (d)
28. The joint life policy account received on the death of a partner is credited to the:
(a) Joint life policy reserve account
(b) Capital accounts of all the partners in their profit sharing ratio
(c) General Reserve account
(d) Profit and Loss Account
Ans. (b)
29. In setting the accounts of a firm after its dissolution, the assets of the firm shall be applied first in
paying:
(a) each partner proportionately what is due to him on account of loans advanced by him
(b) each partner proportionately what is due to him account of capital
(c) each partner proportionately what is due to him on account of past profits
(d) the debts of the firm to the third parties
Ans. (d)
30. A limited company issued equity shares of Rs. 100 each. It has called up Rs. 75 on each share but
received only Rs. 60 per share. The share capital account will be credited with:
(a) Rs. 60 per share
(b) Rs. 75 per share
(c) Rs. 100 per share
(d) None of the above
Ans. (b)
31. Redeemable preference shares can be redeemed:
(a) only if they are fully paid
(b) even if they are partly paid
(c) if they are paid not less than 50% of the nominal value of shares
(d) only if they are issued at a premium
Ans. (a)

32. Where all the debentures are redeemed, the balance left in the Debenture Sinking Fund Account
is transferable to:
(a) Debentures Account
(b) Sinking Fund Investment Account
(c) Capital Redemption Reserve
(d) General Reserve
Ans. (d)
33. The balance in share forfeiture account, after the reissue of all forfeited shares, should be:
(a) added to paid up capital
(b) transferred to goodwill account
(c) transferred to capital reserve account
(d) shown as share forfeiture account
Ans. (c)
34. A company issued Rs. 20,000, 4% bonds repayable on equal installments over 10 years. What is
the amount required in the initial year, to pay interest and to redeem the bonds (ignore tax and DCF)?
(a) Rs. 56,000
(b) Rs. 28,000
(c) Rs. 20,000
(d) Rs. 8,000
Ans. (b)
35. Match List-I with List-II and select the correct answer using the codes given below the lists:
List-I

List-II

A. Deferred shares

1. Repayment obligation

B. Preference shares

2. Resembles Stock dividend

C. Bonus shares

3. No dividend obligation

D. Equity Shares

4. Not being used

Codes:

ABCD
(a) 4 3 1 2
(b) 4 1 3 2
(c) 3 2 1 4
(d) 4 1 2 3
Ans. (d)
36. Which one of the following statements is false?
(a) The process of issue of bonus shares is also known as capitalization of reserves
(b) Fully paid bonus shares are issued only out of capital reserves
(c) Only revenue reserves should be used when bonus is declared in order to make partly paid shares
into fully paid shares.
(d) Bonus shares one shares issued without payment.
Ans. (b)
37. The Balance Sheet of a company showed the following balances at the end of the year under the
head Reserves and surplus: General Reserve Rs. 5,00,000; Share Premium account Rs. 50,000;
Premium on issue of Debentures account Rs. 20,000; Dividends equalization fund Rs. 40,000;
Surplus on revaluation of assets Rs. 30,000 Profit and Loss account (credit) Rs. 60,000. Maximum
amount available for distribution as dividend to the shareholders of the company will be:
(a) Rs. 60,000
(b) Rs.1, 00,000
(c) Rs. 6, 00,000
(d) Rs.6, 70,000
Ans. (c)
38. Capital Gearing ratio denotes the relationship between:
(a) assets and capital
(b) loan and capital
(c) equity shareholders fund and long term borrowed funds
(d) debentures and share capital

Ans. (c)
39. The following balances appear on the liability side of a companys Balance Sheet:
Rs.
Equity Share Capital: 10,000 Shares of Rs. 10 each
10% Redeemable Preference shares

1.00.000
1, 00,000

5,000 shares of Rs 20 each

Capital redemption reserve account

40,000

14% Debentures 1, 00,000 Deb. of Rs. 2 each

RFC loan

2, 00,000
1, 50,000

Profit and Loss A/c

50,000

The Debt Equity ratio of the company is

(a) 35: 20
(b) 35: 26
(c) 35: 25
(d) 35: 21
Ans. (c)
40. Consider the following financial information in respect of two companies namely M Co. and ZCo.
:
Items of Assets and Liabilities

M Co. (Rs)

Z Co. (Rs)

Current Assets

7, 50,000

7, 50,000

Closing inventory

3, 00,000

2, 50,000

Goodwill

5, 00,000

3, 50,000

Current Liabilities

3, 00,000

5, 00,000

Based on the above data, acid test of M Co. in comparison to Z Co. is:
(a) lower
(b) equal

(c) higher
(d) indeterminate
Ans. (c)
41. Match List-I with List-II and select the correct answer using the codes given below the lists:
List-I

List-II

(Names of Accounting Ratios)

(Nature of Accounting Ratios)

A. Capital gearing ratio

1. Revenue Statement Ratio

B. Stock velocity ratio

C. Debtors velocity ratio
D. Dividend Yield ratio

2. Coverage Ratio
3. Market Price ratio
4. Balance Sheet ratio

5. Balance Sheet and Revenue statement combined ratio

Codes:
ABCD
(a) 4 1 5 3
(b) 5 4 2 1
(c) 1 5 4 2
(d) 3 2 5 1
Ans. (a)
42. For the purpose of calculating ROI capital employed means:
(a) Net Fixed Assets
(b) Current Assets-Current Liabilities
(c) Gross Block
(d) Fixed Assets + Current assets Current liabilities
Ans. (d)
43. Given that the net profit for a certain year of company X Ltd. is Rs. 1,23,000, equity-share capital
for the same period is Rs. 10,00,000 and reserve and surplus is Rs. 2,30,000 the rate of return on
owners fund would be:

(a) 12:3%
(b) 10%
(c) 9.98%
(d) none of the above
Ans. (b)
44. Consider the following data:
Costs:

Fixed =

Variable

Rs. 40,000
Rs. 30,000

Rate of income tax

= 30%

Return on capital employed = 10%

Based on the above data the sales volume required to increase the return on capital employed to 18%
would be:
(a) Rs. 5,000
(b) Rs. 7,500
(c) Rs. 8,000
(d) Rs. 8,500
Ans. (c)
45. Consider the following details of companies A B C and D:
A/Rs.

B/Rs. C/Rs. D/Rs.

Fixed Assets 100

125

150

200

Net Current

55

50

40

50

Assets
Sales
Contribution
Fixed Cost

200

250

250

300

150

196

200

180

20

27

30

60

If the cut off point of return on investment is l5% then which of the following companies fulfill this
criterion?

(a) A and C
(b) B and C
(c) A, B and D
(d) B, C and D
Ans. (c)
46. Which one of the following is an example of sources of funds?
(a) Decrease in share capital
(b) Increase in long term liabilities
(c) Decrease in long term liabilities
(d) Increase in Fixed assets
Ans. (b)
41. Current Assets are Rs. 3, 00,000 and current liabilities are Rs. 1, 50,000. Now, if the debtors
realized are Rs. 20,000, then its impact on working capital would be:
(a) an increase of Rs. 20,000
(b) a decrease of Rs. 40,000
(c) an increase of Rs. 40,000
(d) nil
Ans. (d)
48. Match List-I with List-II and select the correct answer using the codes given below the lists:
List-I

List-II

A. Fund flow Analysis

1. Working Capital Management

B. Common Size Profit

2. Inventory Control

and Loss Account

C. ABC analysis

3. Management of receivables

D. Debt Collection Period

4. Financial Statement Analysis

Codes:

ABC D
(a) 4 1 2 3
(b) 1 4 2 3
(c) 2 3 1 4
(d) 3 1 2 4
Ans. (b)
49. The main object of audit is to:
(a) detect the errors and faults
(b) help the company in developing a sound accounting system
(c) verify the correctness of final accounts
(d) prevent commission of errors and faults
Ans. (c)
50. Surprise Checks are part of:
(a) an auditors working papers
(b) an audit programme
(c) an auditors report
(d) an accounting standard
Ans. (b)