ADVANCED ACCOUNTING – III SEMESTER

UNIT:1 – PARTNERSHIP ACCOUNTS-I

MULTIPLE CHOICE

1. How many members are required to form a partnership business? []

(a) Minimum three members (b) Minimum two members
(c) Minimum ten members (d) Minimum one member

2. In case of fixed capital method, which of the following account is prepared? [ ]

(a) Capital account (b) current account
(c) Both (a) & (b) (d) none of the above

3. Which is maintained for adjusting entries such as interest on drawings,

interest on capital, salaries etc. [ ]
(a) Profit & loss appropriation a/c (b) trading a/c
(c) Trial balance (d) ledger a/c

4. What is the formula to calculate average profit? [ ]

(a) Average profit=sales-purchases
(b) average profit= total profit/profit in Each year
(c) Average profit=sales-cost
(d) average profit=total profit/no. of years

5. Adjustments in the partnership a/c are required to be made under which situation? []
(a) Admission of a partner (b) Death of a partner
(c) Retirement of a partner (d) All the above

6. What is the main reason behind retirement of an existing partner from

a partnership firm [ ]
(a) Old age (b) high profit in existing business
(c) High losses on other business (d) none of the above

7.What is the formula used to calculate sacrificing ratio? []

(a) Sacrificing ratio = difference between old ratio of partners
(b) Sacrificing ratio = profit sharing ratio-loss sharing ratio
(c) Sacrificing ratio = old ratio-new ratio
(d) None of the above

8. At the time of admission of a new partner, general reserve is transferred to? []

(a) P&L Adjustment a/c (b) Partner’s capital a/c
(c) Neither of the two (d) Partner’s current a/c

9. P&Q are sharing profits in the ratio of 3:2.They admit new partner R with 1/5 share in profit
of the firm. What is the new profit ratio of partners? [ ]
(a) 2:2:3 (b) 12:8:5
(c) 2:1:4 (d) 5:6:2

10. Which of the following is not pre-planned? []

(a) Admission (b) Retirement
(c) Death (d) Dissolution

FILL IN THE BLANKS

1, is the relation between persons who have agreed to share

profits of a business carried on by all or any of them acting for all.

2, contains the terms and conditions of partnership agreed by all

the partners.

3, The two methods available for maintaining capital accounts of partner are
And

4, refers to the amount which is contributed by no. of partners at

the time of partnership agreement.

SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,

JAGTIAL.
5, is the present value of firms anticipated excess earning.

6,The excess of actual profit over normal profit is called as profit

7,In case of accounts, the capital introduced by partner changes yearly.

8, of a firm takes place when there is any change in the existing

agreement of a partnership firm.

9, ratio refers to the ratio in which all partners share future profit

losses of the firm.

10, Revaluation a/c is a/c.

KEY: MULTIPLE CHOICES:

1,(b) 2,(c) 3,(a) 4,(d) 5,(d) 6,(a) 7,(c) 8,(b) 9,(b) 10,(c).

KEY: FILL IN THE BLANKS:

1,Partnership 2,partnership deed 3,Fixed capital method,Fluctuaing capital method 4,capital
5,goodwill 6,super 7,Fluctuating capital 8,Reconstitution
9,new profit sharing 10,Normal.

UNIT-2: PARTNERSHIP ACCOUNTS-II

MULTIPLE CHOICE
1, According to Indian partnership Act 1932, a partnership can be dissolved when?
[]
(a) Partners are declared insolvent by an agreement
(b) Compulsory dissolution
(c) Without the intervention of court
(d) All the above

2, In dissolution of partnership all assets of the firm are transferred at

to a newly opened realization a/c. []
(a) New values (b) Book value
(c) New value (d) Book value capital

3, For closing realization a/c the profit or loss is distributed among partners in ratio.
[]

(a) Capital ratio (b) Capital ratio profit sharing ratio

(c) Profit sharing ratio (d) none of the above

4, Garner Vs. Murray is a case related to of a patner. []

(a) Death (b) Dissolution
(c) Insolvency (d) Retirement

5, If capitals are fixed in insolvency of a partner, then the loss on insolvent partner will be
borne by solvent partner in []
(a) Profit sharing ratio (b) Capital ratio
(c) Sales ratio (d) None of the above

6,
is added as adjustment to capital accounts and transferred to all partners of
capital are fluctuating in case of partner’s insolvency. []
(a) General reserve (b) Fixed assets
(c) Liabilities (d) None of the above

7, The purchase consideration for the business is generally paid by the purchasing company in
form of it’s own_______and _______ []
(a) Shares (b) Debentures
(c) Both a & b (d) Profit and loss

8, In case of sale to a company, the company will discharge the amount due from it in the
form of cash, shares and_________ []
(a) Capital (b) Profit
(c) Debentures (d) none of the above

SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,

JAGTIAL.
9, The Profit or loss on realization obtained by the sale to a company will be transferred to the
capital accounts in the _______ ratio []
(a) Profit sharing (b) capital
(c) Both a and b (d) None of the above

10, _________ is transferred to realization a/c, as the purchasing company purchases all
assets. []
(a) Capital a/c (b) cash a/c (c) Both a and b
(d) None of the above

FILL IN THE BLANKS

1, If the partner takes over an asset in dissolution of a firm, his________a/c should be

debited and the ________a/c should be credited.

2, worthless assets are transferred to________a/c.

3, Compulsory dissolution of the firm will occur by the adjudication of all partners or of all
partners but one as_______.

4, When a partnership is at will, the firm may be_______by any partners giving a notice in
writing to all the other partners.

5, According to Garner Vs.Murry, the loss on account of insolvency of a partner should be

borne by the insolvent partner by their_________ratio.

6, When a partner is insolvent, if anything is received from the estate that should
be_________to capital a/c.

7, The shares or debentures received from the company should be valued according to
their__________.

8, The procedure for closing accounting books of partnership from is same as in case
of______.

9, If ‘A’ contributed Rs.50,000 as capital and ‘B’ as Rs.30,000 what will be their
ratio=__________.

10, Shares are divided into________ratio between partner.

KEY: MULTIPLE CHOICE:

1,(d) 2,(b) 3,(c) 4,(c) 5,(b) 6,(a) 7,(c) 8,(c) 9,(a) 10,(b).

KEY: FILL IN THE BLANKS:

1,capital,Realisaion 2,Realisation 3,Insolvent 4,Dissolved 5,capital 6,credited 7,present

worth 8,Dissolution of firm 9, 5:3 10,profit sharing.

UNIT-3: MULTIPLE CHOICE

1, Which of the following agency/organisation monitors the issue of shares? [ ]
(a) SEBI (b) ROC (c) CLB (d) Ministry of finance

2, The Voluntary return of shares for cancellation by the shareholder is called________.

[]
(a) Forfieture of shares (b) Surrender of shares
(c) Transmission of shares (d) Transfer of shares

3, Guaranteeing to subscribe to an agreed no. of shares for consideration is called________.

[]
(a) Guarantee (b) Undertaking
(c) Underwriting (d) Pledge

4, Shares premium is shown under the heading_________. []

(a) Sharing capital (b) Reserve & Surplus
(c) Secured loan (d) unsecured loan

SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,

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5, None-convertible debentures refer to_________. []
(a) Owners capital (b) Loan capital
(c) Short term debts (d) All the above

6, The unpaid amount on share which can be called up on winding up of company

is_________. []
(a) Reserve capital (b) Called up capital
(c) Paid up capital (d) Capital reserve

7, Securities which create burden on finance of a company when there are no profits
are_______. []
(a) Equity shares (b) Preference shares
(c) Debentures (d) All the above

8, When shares are forfeited, capital a/c is debited by_________. []

(a) Forfeited amount (b) Called up amount
(c) Normal value (d) paid up amount

9, If preference shares are redeemed at premium may be provided out of the_________.

] (a) Sharing premium account (b) share capital account
(c) Provision capital account (d) capital redemption reserve account

10, bonus shares are issued by the companies because of________. []

(a) Surplus cash (b) Large amount of general reserve
(c) Heavy competition (d) High gross profit ratio

FILL IN THE BLANKS

1, premium on issue of shares is determined by____________.
2, When an existing company offers its shares for sale to he existing
shareholders, it is known as_________.
3, The maximum premium at which shares can be issued is__________.
4, The excess price received over the par value of shares should be credited
to_________.
5, The excess amount received over the called amount of shares is credited
to___________.
6, The discount allowed on reissue of forfeited shares is debited to________.
7, ___________allotment of shares means all the applicants in proportion to the
shares applied.
8, Discount on issue of debenture is____________for company.
9, The underwriting commission in the case of issue of debentures cannot
exceed__________.
10, loss on issue of debentures is treated as_________.

KEY: MULTIPLE CHOICE:

1,(a) 2,(b) 3,(c) 4,(b) 5,(b) 6,(a) 7,(c) 8,(b) 9,(a) 10,(b).

KEY: FILL IN THE BLANKS:

1,Issuing company 2,Right issue 3,Unlimited 4,securities premium account 5,calls-in-advance
account 6,shares forfeited account 7,prorate 8,capital loss 9, 2.5% 10,miscellaneous
expenditure.

UNIT-4 MULTIPLE CHOICE

1, __________is artificial person created by law. []

(a) Individual (b) Company
(c) Contractor (d) None of the above

2, Companies Act 2013 is an Amendment to the companies Act__________. [ ]

(a) 1947 (b) 1990 (c) 1956 (d) 1979

SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,

JAGTIAL.
3, ________refers to the total amount of money which is obtained from subscribers on the
shares of company. []
(a) Shares capital (b) Asset
(c) Liabilities (d) Profit

4, Final a/c consists of trading a/c, profit & loss a/c and__________. []
(a) Realization a/c (b) balance sheet
(c) Revaluation a/c (d) cash flow statement

5, Sundry creditor is a_________type of liability. []

(a) Current (b) Fixed
(c) Long term (d) Short term

6, Debtors are shown under________side of balance sheet. []

(a) Right (Asset) (b) left (liabilities)
(c) Both a and b (d) None of the above

7, Capital profit must be transferred to__________. []

(a) Capital reserve a/c (b) Realisation a/c
(c) Profit&loss a/c (d) Revaluation a/c

8, Under profit prior incorporation, gross profit is allocated based on_________ratio.

(a) Time (b) Sales
(c) Weight (d) Purchase

9, When expenses remain constant overall the financial year the they can be divided
in__________. []
(a) Time ratio (b) Sales ratio
(c) Purchase ratio (d) none of the above

10, after the incorporation of a company all profits or losses are transferred to_________a/c.
(a) Trading (b) Revaluation
(c) Profit&loss appropriation (d) Realisation

FILL IN THE BLANKS

1,”A company means a company formed and registered under act”.
This definition is given by__________.
2, A company is a_________entity.
3, Companies are classified into________categories.
4, The amount of authorized capital issued for public subscription is known
as__________.
5, Balance sheet is prepared to know ___________position of the business.
6, RBDD stands for__________.
7, The Profit earned or losses incurred before the incorporation of company is
known as__________.
8, Post incorporation profit is also referred as____________.
9, Bad debts and advertisements are allowed based on___________ ratio.
10, Depreciation is allowed based on __________ ratio.

KEY: MULTIPLE CHOICE:

1,(b) 2,(c) 3,(a) 4,(b) 5,(a) 6,(a) 7,(a) 8,(b) 9,(a) 10,(c).

KEY: FILL IN THE BLANKS:

1, Companies Act 1956 2, Separate legal entity 3, five 4, Issued capital 5, Financial 6,
Reserve for bad and doubtful debts 7, Profit or loss prior to incorporation 8, Revenue Profits 9,
Sales 10, Time.

SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,

JAGTIAL.
 UNIT-5: MULTIPLE CHOICE

1, In a corporate world, the term________is oftenly used whose meaning is found to be

ambigious as it is complicated to define. [ ]
(a)Shares (b) Debentures
(c)Goodwill (d) Equity shares

2, which of the following are the components of goodwill? [ ]

(a) Profitability (b) Normal rate of return
(c) Capital employed (d) All the above

3, The process of evaluation for the maintenance of profits in future by the firm is known
as__________. [ ]
(a) Future maintenance profit (b) present maintenance profit
(c) Past maintenance profit (d) Future maintenance loss

4, which of the following is not a method of valuation of goodwill? []

(a) Average profit method (b) Fair value method
(c) Super profit method (d) Annuity method

5, ________is an aggregated of fixed assets and net working capital. []

(a) Bank rate (b) Risk
(c) Profitability (d) capital employed

6, To calculate the value of goodwill, the super profits are multiplied with the________.
[]
(a) No. of years (b) No. of days
(c) No. of months (d) No. of hours

7, Under Annuity method, Goodwill=__________. []

(a) no. of days of purchase X super profits
(b) no. of months of purchase X Super profit
(c) Super profits X present value factor
(d) super profits X no. of years Of sale

8, Which are the following are the methods of valuing shares? []

(a) Net assets method (b) Yield Basis method
(c) Fair value method (d) All the above

9, Net assets backing method is also known as________. []

(a) Market value method (b) Intrinsic value method
(c) Dual method (d) earning basis method

10, The following formula is used under yield basis method to value the shares [ ]
(a) Value of share=expected rate/Normal rate X paid up value of each share
(b) Value of share=available rate/Normal rate X paid up value of share
(c) Value of share=expected rate/Abnormal rate X paid up value of share
(d) None of the above
FILL IN THE BLANKS:
1, _________is defined as the ability of a business to earn profit in future.
2, every investor mainly focuses on the attainment of a fair return on their
investments which is often referred to as_________.
3, ___________method is mostly used in case of death or retirement of a
partner.
4, Capital employed=____________.
5, people who purchase shares of a company are called as_________.
6, fair value method is also known as_________.
7, Under net asset backing method, the total net value of the assets is divided
by number of____________.
8, Average profits=____________.
9, The PVF is calculated by using the____________formula.
10, under weighted average profit method,profis are arranged___________and
them multiplied by their respective number.

KEY: MULTIPLE CHOICE:

1,(c) 2,(d) 3,(a) 4,(b) 5,(d) 6,(a) 7,(c) 8,(d) 9,(b) 10,(a).

KEY: FILL IN THE BLANKS:

SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,
JAGTIAL.
1, Goodwill 2, Rate of earning 3, Average profit 4, assets-liabilities
5, shareholders 6, dual method 7, equity shares 8, total profits/no. of years 9, PVF=1/(1+i)n
10, chronologically.

Multiple Choice Questions

UNIT:1 – PARTNERSHIP ACCOUNTS-I

1. Which of the following reserves which are not available for issue of fully paid bonus
shares?
(a) Profit and loss account (b) Dividend equalization reserve
(c) Capital reserve arising due to revaluation
(d) Capital redemption reserve

2. Which of the following reserve whiuch can be utilized to make partly paid shares
Into fully paid up?
(a) Securities premium
(b) Capital redemption reserve
(C) Capital reserve arising due to revaluation
(d) Capital reserve from sale of fixed assets in cash
3. Which of the following statements is false?
(a) Bonus issue is not made unless partly paid shares are fully paid up
(b) Bonus issue is made in liew of dividends
(c) Bonus issue must be implemented within six months from the date of
approval
(d) Bonus issue is capitalization of free reserves
4. Which of the following statement is false?
(a) Capital reserve collected in cash (b) Plant revaluation reserve
(c) Investment allowance reserve (d) Development rebate reserve
5. Which of the statement is false?
(a) Bonus is made out of free reserves
(b) Bonus shares can be issued out of revaluation profits
(c) No bonus issue shall be made within 12 months of any public or right issue
(d) Company can issue bonus shares in any ratio
Answers: 1. (c); 2. (d); 3. (b); 4. (a); 5. (b).

Partnership accounts-2
1. Realisation account is a
a) Personal account b) real account c) nominal account d) none of this

2. On dissolution all assets are transferred to realization account at them

a) book value b) market value c) realised value d) market or cost price which is ever is less

3. Provision for bad debts appearing in the books at the time of dissolution of firm in
transferred to
a) Debtors account b) bad debts account c) realisation account d) partners’ capital account

4. on dissolution, goodwill account is transferred to

a) revaluation account b) realisation account c) partners’ capital account d) profit & loss
account

5. on dissolution of a firm, bank overdraft is transferred to

a) cash account b) bank account c) realisation account d) partners’ capital account

SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,

JAGTIAL.
6. on dissolution of a firm, partners loan account is transferred to
a) cash account b) realisation account c) partners’ capital account d) none of the above

7. unrecorded assets when taken over by a partner are shown on

a) debit of realisation account b) debit of bank account c) credit of realisation account
d) credit of bank account

8. unrecorded liabilities when paid are shown in

a) debit side of realisation account b) debit side of bank account
c) credit side of realisation account d) credit side of liabilities account

9. the accumulated profit and reserves are transferred to

a) realisation account b) partners’ capital account c) bank account d) none of the above

10. On dissolution of firm, partners’ capital accounts are closed through

a) realisation account b) drawings account c) bank account d) loan account

11. On dissolution of a firm, profits or loss on realization will be shared by partners

a) equally b) profit sharing ratio c) capital ratio d) none of the above

12.According to decision in Garner Vs Murry loss arising due to insolvency of partner is the be
borne by solvent partners in
a) profit sharing ratio b) capital ratio c) equally d) none of the above

FILL IN THE BLANKS:

1. In case of dissolution of partners business in……………….
2. In case of dissolution of firm business is……………….
3. In case of dissolution, a new account called……….
4. If creditors are RS. 20,000, total of capital accounts RS. 80,000 cash RS. 15,000. The
bank value of other sundry assets is…………….
5. If the liabilities of firm are S creditors RS. 45,000loans from A RS. 20,000, A capital RS.
15,000 B capital RS. 10,000 book values of assets are………….
6. Assets are transferred to……………. side of realisation A/c
7. Liabilities to third partners are transferred to…………side of realisation A/c
8. Provisions for D debts is transferred to……………. side of realization A/c
9. For sale of unrecorded assets……………. Account is debited and……………Account is credited
10. For payment of unrecorded liabilities………………. account is debited and………………account is
credited
11. For liabilities agreed to be discharged by a partner on behalf of firm……………. account is
debited………account is credited
12. For assists taken over by a partner……………. Account is debited and…………. Account is
credited
13. According Garner Vs Murray case decision, solvent partner must bear loan due to in
solvency is proportion of………….
14. If capital account is fixed, the solvent partners will bear the loan due to in solvency in
proportion of………….
15. If capital accounts are fluctuating……………should be transferred to capital accounts to
determine capital ratio for bearing loss due to insolvency of partners

ANSWERS- MUILTIPLE CHOICE QUESTIONS

1) c
2) a
3) c
4) b

SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,

JAGTIAL.
5) c
6) a
7) c
8) a
9) b
10) c
11) b
12) b

FILL IN THE BLANKS:

1) Not dissolved
2) Dissolved
3) Realisation account
4) RS. 85,000
5) credit side
6) debit side
7) credit side
8) credit side
9) cash or bank account, realisation account
10) realisation account, bank account
11) realisation account, partners’ capital
12) partners’ capital account realisation account
13) capital accounts
14) fixed capitals
15) undistributed profits,reserves, losses

COMPANY ACCOUNTS
MULTIPLE CHOCIE QUESTONS:
1. A company is formed
a) by special act. Of parliament b) under companies act.
c) general agreement among potential investors d) none of the above

2. shareholders are
a) creditors b) customers c) owners d) partners

3. the liability of equity shareholders is

a) unlimited b) limited up to c) guarantee given by them d) none of the above

4. Authorised capital is
a) the part of capital which is issued by the company
b) the amount of capital which is applied by prospective shareholders
c)maximum amount of capital which it is authorized to issue
d) amount paid by shareholders

5. Public limited companies should have a minimum paid up capital of

a) RS.5 lakhs b) RS.10 lakhs c) RS.20 lakhs d) RS.50 lakhs

6. private limited companies should have a minimum paid up capital of

a) RS.5 lakhs b) RS.1 lakhs c) RS.10 lakhs d) RS.40 lakhs

7. in case of private companies:

a) share can be transferred without restrictions
b) there is restriction on transfer of shares
c) can transfer 200 shares without consent of other shareholders
d) can transfer 500 shares with the consent of other shareholders

8. securities premium account can be used for

SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,

JAGTIAL.
a) paying tax liability b) paying dividend on shares
c) allowing discount in reissue of forfeited shares
d) to write off preliminary expenses

9. after the issue of forfeited shares, balance of forfeited shares account Is transferred to
a) capital reserves A/c b) share capital c) general reserves d) profit & loss A/c

10. preference shares have priority over equity shares for

a) payment of dividend and repayment of capital b) voting in annual general meeting
c) subscribe for new issue of shares and debentures d) interest on money invested in company

11. shareholders get:

a) interest b) dividend c) bonus d) commission

12.debenture holders have right to receive…. even if there is no profit

a) interest b) commission c) dividend d) bonus

13. debenture holders are the…. of the company

a) owners b) customers c) creditors d) partners

14. dividends are usually paid as a percentage of

a) authorized capital b) net profit c) paid up capital d) called up capital

15.debentures can be issued only

a) at par b) at discount c) premium d) any of the above

FILL IN THE BLANKS:

1. Govt. company means…………………….
2. Foreign company means…………………
3. In case of a private company the maximum number of members is………….
4. Is case of private company there is restriction on………………
5. A private company is prohibited from………….
6. In case of public company there is………………. on the number on members
7. ‘Listed company’ means a company……….
8. ‘One-person company’ means……………….
9. According to sec 53 of the companies act. 2013 a company cannot issue shares
at…………….
10. In case of cumulative preference shares the shareholders have the right to………………
11. According to sec 44 no of companies can issue……. shares or preference shares
redeemable after 20 years from the date of issue
12. According to table ‘F’ interest at the rate of………………is to be charged on calls in
arrears
13. According to table ‘F’ interest at a rate not exceeding…………….is to be paid on calls in
advance
14. A company cannot allot shares unless __________ stated in the prospectus is
received.
15. When shares are issued to promoters for services rendered by them ______ is
debited and share capital is credited.
16. Premium received on debentures issued at premium and redeemable at par in
credited to ___________
17. The rate of underwriting commission on shares must not exceed__________
18. The rate of underwriting commission in case of debentures must not exceed
____________% of the issue price of debentures.
19. Applications received from a particular Underwriter with stamp of underwriter are
called__________
20. Applications received directly from company without stamp of underwriters are called.

ANSWERS-MULTIPLE CHOICE QUESTIONS:

1) b

SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,

JAGTIAL.
 2) c
3) b
4) c
5) a
6) b
7) b
8) d
9) a
10) a
11) b
12) a
13) c
14) c
15) d

FILL IN THE BLANKS:

1) any company in which not less than 51% of the shares are held by central or state govt.
or partly by both
2) any company incorporated outside India and has a place of business in India
3) 200
4) Transfer of shares
5) Inviting public to subscribe for securities of the company
6) No limit
7) Which has its securities listed in any recognized stock exchange
8) Which has only one person as a member
9) Discount
10) Receive arrears
11) Non-redeemable preference shares
12) 10% p.a
13) 12%
14) Minimum subscription
15) Goodwill account
16) Securities premium account
17) 5%
18) 2.5%
19) Marked applications
20) Unmarked applications
BONUS SHARES
Fill in the Blanks
1. Securities premium account and capital redemption reserve account can be
utilized for issuing ------------------and not for making partly paid shares as fully
paid shares.
2. Issue of bonus shares is permitted only if all partly paid shares made------------.
3. Bonus issue can be made out of securities premium collected in ------------only.
4. Capital reserve created out of -----------of assets is not available for issue of bonus
shares.
5. ---------------------reserves can be used for issue of bonus shares.

Answers: (1) fully paid bonus shares; (2) fully paid shares; (3) cash; (4) revaluation; (5)
Free.

COMPANY FINAL ACCOUNTS & PROFIT PIOR TO INCORPORATION

MULTIPLE CHOICE QUESTIONS:
1. under companies act. 202 financial statement of companies can be prepared in
a) horizontal form b) vertical form c) any form at discretion of company

2. under companies act. 2013, the following income statement is prepared

a) trading and profit & loss account b) profit & loss and profit & loss appropriation A/c
c)statement of profit % loss d) revenue account

3. profit prior to incorporation arises when

a) a company is dissolved and new company is formed
b) a new company is formed is place of partnership firm
c) when there is an amalgamation of companies
d) running business is taken over by promoters of company at date prior to date of
incorporation
SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,
JAGTIAL.
4. profit before incorporation is of
a) capital nature b) revenue nature
c) both capital and revenue nature d) general reserves

5. profit prior to incorporation is

a) credited to capital reserve b) debited to goodwill
c) profit & loss statement d) general reserve

FILL IN THE BLANKS:

1) Under companies act 2012 financial statement should give……………. view of of the
company
2) Financial statement should be presented according to……………. of companies act.
3) All assets are classified as………….
4) Share application money pending allotment is shown as a separate item under……………
5) Share application money received by the company which is to be refunded is shown under
major head………… and sub-head………….
6) Credit balance of profit & loss statement is shown under major head……….and sub-
head………….
7) Debit balance of profit & loss statement is shown under major head……………and sub-
head……………. As a…………………
8) Bank overdraft is shown in balance sheet under major head…………. and sub-
heads………………………
9) Cheques, drafts on hand and cash balance are shown under major head……………….and sub
head………………
10) Prepaid expenses, ineptest accrued on investment are shown under major head……………
and sub head…………
11) Provision for doubtful debts is shown under major head…………….and sub-head trade
receivable as deduction
12) Provision for taxation, proposed dividends, dividend distribution tax are shown under
major head………………and sub-head……………
13) Goodwill, trademarks, computers and patents are shown under major head…………. Sub-
head………………
14) Calls-arrears are shown under major head…………. and sub head…………….as deduction
15) Forfeited shares account is shown under major head……………and under………capital by way
of addition
16) Calls in advance is shown under major head…………….and sub-head
17) gross profit is apportioned between pre-incorporation and post incorporation period the
basis of……………
18) selling & distribution expenses, carriage outwards, travelling expenses are apportioned
based on……………….
19) salaries, office expenses, printing and stationary etc…, are apportioned in the ratio of……….
20) expenses which are exclusively related to pre-incorporation period, such as interest in
vendors loan, salary paid to partners hold be charged to……………. period
21) expenses exclusively related to post-acquisition period should be charged to…………….

ANSWRS-MULTIPLE QUESTIONS:
1) b
2)c
3) d
4) a
5) a

FILL IN THE BALANCE:

1) true and fair view
2) schedule III
3) non-current and current
4) equity and liabilities
5) current liabilities and other current liabilities
6) shareholders’ funds and reserved and surplus
SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,
JAGTIAL.
7) shareholders fund and reserved and surplus as negative figure
8) current liabilities and other current liabilities
9) current assets and cash and cash equivalents
10) current assets and other current assets
11) current assets and trade receivables by way of deduction
12) current liabilities and short-term provisions
13) non-current assets, fixed assets intangible assets
14) shareholders fund and under subscribed capital as deduction
15) shareholders fund and under subscribed capital by way addition
16) current liabilities and other current liabilities
17) turn over or time
18) turn over
19) time ratio
20) pre-incorporation period
21) post-incorporation period

VALUATION OF GOODWILL AND SHARES

MULTIPLECHOICE;
1. Goodwill is
a) intangible asset b) tangible asset c) fictitious asset d) none of the above

2. Goodwill is shown in company’s is balance sheet under the head

a) investment b) miscellaneous expenditure c) current assets d) non-current assets-fixed
assets
3. The value of goodwill according to simple profit method is
a) the product of current year profit and number of years
b) the product of last year profit and number of years
c) the product of average profits of the given years and number of years
d) none of the above

4. Super profit is the difference between:

a) capital employed and average capital employed b) average profit and normal profit
c) current year profit and last year profit d) none of the above

5. In case of valuation of goodwill, the term ‘capital employed’ means the funds provided by.
a) shareholders only b) debenture holders only c) shareholders, debenture holders
d) shareholders, debenture holders and creditors

6. the average capital employed can be ascertained

a) by deducting half of the current year profit from opening capital
b) by deducting half of the current year profit from closing capital
c) by adding ½ of current year’s profit to closing capital
d) none of the above

7. under the net assets method, the value of share depends on the amount available to
a) preference shareholders b) equity shareholders
c) creditors d) debenture holders

8. capital at the end RS.1,00,000. It had earned a profit of RS. 20,000 during the year the
average capital employed in the business will be
a) RS. 75,000 b) RS. 90,000
c) RS.1,20,000 d) RS.1,50,000

9. for calculating value of share by intrinsic value method, it is essential to know

a) normal rate of return b) expected rate of return
c) net-assets d) none of the above

SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,

JAGTIAL.
FILL IN THE BLANKS
1) the excess of average profits over normal profits is known as…………….
2) Average capital employed may be calculated by adding half of the current year profit
to…………….
3) Normal profit may be calculated with the help of normal rate of return and………….
4) To ascertain……………value of shares it is essential to find out the value of net assets of the
company
5) Intrinsic value of shares is calculated by dividing net assets of the company by……………
6) Fair value of shares is the simple average of……………value and………….value of a share
7) Premises RS.9,00,000 machinery RS.12,00,000 cash & bank balances RS.1,00,000
liabilities outsider’s RS.1,00,000 capital employed is………….
8) Capital employed RS.1,00,000 normal profit expected in similar concerns 10% average
profit of the business RS. 40,000 the value of goodwill on the basis of 3 years purchase of
super profit is RS……………………
9) Average capital employed RS.20,00,000 average profit earned RS.3,13,000 remuneration
to be provided RS. 48,000 normal profit 10%. Sundry assets RS.23,50,400 current
liabilities RS. 95,110. Value of goodwill on the basis of 3 years purchase of super profit is
RS. ……………….
10) Intrinsic value on share RS.140 yield value of share RS.130 fair value of share is RS.
…………………….

ANSWERS- MULTIPLE QUESTIONS:

1) a
2) d
3) c
4) b
5) a
6) b
7) b
8) b
9) c
10) a

FILL IN THE BLANKS:

1) super profits
2) opening capital
3) capital employed
4) intrinsic value
5) number of shares
6) intrinsic value and yield
7) RS.21,00,000
8) RS. 90,000
9) RS.1,96,800
10) RS.135

SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,

JAGTIAL.
SRINIVAS GUNDA – H.O.D. Dept of Commerce & Management, NSV DC,
JAGTIAL.