ABC ltd.

Follows written down value method

of depreciation year after year on the
principle of ?

1.Comparability

2.Convenience

3.Consistency

4.All of the above

2. A change in accounting policy is justified.

1. To comply with accounting standards

2. To ensure more appropriate presentation of
financial statement
3. To comply with the law
4. All of the above

3. Purchase book records:

1. All cash purchases

2. All credit purchases of goods & assets
3. All credit purchases of goods
4. None of the above

4. A bank reconciliation system is prepared to

know the cause of difference between:

1. The balances as per cash column of the cash book

& pass book.
 2. The balances as per bank column of the cash book
& pass book.
3. The balances as per cash column of cash book &
bank column of cash book.
4. None

5. While finalizing the current year profit the

company realized that closing stock of
previous year was overvalued by rs. 50,000.
as a result:

1. PY’s & CY’s profit are overstated.

2. PY’s profit is understated and CY’s profit is
overstated.
3. PY’s & CY’s profit are understated.
4. PY’s profit is overstated and CY’s profit is
understated.

6. Fundamental Accounting assumption is:

1. Materiality
2. Separate Business Entity
3. Going Concern
4. Dual Aspect

7. Which of the following are of capital

nature?

1. Purchase of Goods
2. Cost of Repairs
3. Wages paid for installation of machinery
4. Rent of a factory
8. If cost of goods sold is Rs. 80,700, Opening
Inventory Rs. 5,800 and closing inventory
is Rs. 6,000. The Amount of purchase will be:

1. RS. 80,500
2. RS. 74,900
3. RS. 74,700
4. RS. 80,900

9. Original Cost Rs. 1,26,000. Scrap value Rs.

6,000. Useful life = 6 Years. Compute
depreciation as per SLM Method.

1. RS. 21,000
2. RS. 20,000
3. RS. 15,000
4. RS. 14,000

10. A new firm commenced business on

1st January 2017 and purchased goods
costing RS. 90,000 during the year. A sum
of Rs. 6,000 was spent towards freight
inwards. Closing stock at the end of year
was Rs. 12,000. Sales during the year was Rs.
1,20,000. Find Gross Profit.

1. RS. 36,000
2. RS. 30,000.
3. RS. 42,000.
4. RS. 38,000.
11. The Cash Book showed an Overdraft of Rs. 1,500,
but the pass book made up the same date showed that
Cheques of Rs.100, Rs. 50 and Rs. 125 respectively had
not been presented for payments, and the cheque of Rs.
400 paid into account had not been cleared. The
balance as per the pass book will be:

a.RS. 1,100

b.RS. 2,175

c.RS. 1,625

d.RS. 1,375

12. A second hand car is purchased for Rs. 10000, Rs.

1000 is spent on it’s repairs, Rs. 500 was incurred for
registration and Rs. 1200 was paid as commission. The
amount debited to Car’s account will be:

a.Rs. 10000

b.Rs. 10500

c.Rs. 12700

d.None of the above

13. If a purchase return of Rs. 100 has been wrongly

posted to the debit of the sales return account, but
correctly entered in suppliers account, the total of the
trial balance would show:

a.The credit side to be Rs. 100 more than debit side.

b.The debit side to be Rs. 100 more than credit side.

c.The credit side to be Rs. 200 more than debit side.

d.The debit side to be Rs. 200 more than credit side.

14. Following is the unmatched trial balance. Reason of

non matching of total is:

15. A draws a bill of Rs. 30000 on B. A want to endorse

it to C in settlement of Rs. 35,000 at 2% Discount with
the help of B’s acceptance and balance in cash. How
much cash A will pay to C?

1. Rs. 4300
2. Rs. 4000
3. Rs. 4100
4. Rs. 5000
16. Debit balance as per cash book is Rs. 1500. Cheques
deposited but not cleared amounts to Rs. 100 and
Cheques issued but not presented for payment Rs. 150.
The bank gave interest of Rs. 50 and collected dividend
of Rs. 50 on the account holder’s behalf. Balance as per
Pass-book will be:

1. 1600
2. 1450
 3. 1850
4. 1650
17. Repair Cost Rs. 25000, whitewash expense Rs. 5000,
cost of extension of office building Rs. 250000 and cost
of improving electrical wiring Rs. 19000. The amount of
revenue expense is:

1. 299000
2. 44000
3. 30000
4. 49000
18. A owe Rs. 35000 from B, B made a partial
payment of Rs. 21000. Journal entry of receiving the
amount will include:

1. Cash A/c Credit By Rs. 21000

2. B’s A/c Credit by Rs. 21000
3. Cash A/c Debit by Rs. 14000
4. B’s Account Debit by Rs. 14000
19. Which of the following is not a sub-field of
Accounting?

1. Management Accounting
2. Cost Accounting
3. Financial Accounting
4. Book-keeping
20. Revenue from sale is recorded in the period in
which:

1. Cash is collected
2. Sale is made
 3. Product id manufactured
4. None of the above

Please highlight the correct answer

51. The relationship between current liabilities and current assets is
a. useful in determining income.
b. useful in evaluating a company's liquidity.
c. called the matching principle.
d. useful in determining the amount of a company's long-term debt.
52. Most companies pay current liabilities
a. out of current assets.
b. by issuing interest-bearing notes payable.
c. by issuing stock.
d. by creating long-term liabilities.
53. A current liability is a debt that can reasonably expected to be
paid
a. within one year.
b. between 6 months and 18 months.
c. out of currently recognized revenues.
d. out of cash currently on hand.
54. Liabilities are classified on the balance sheet as current or
a. deferred.
b. unearned.
c. long-term.
d. accrued.
55. From a liquidity standpoint, it is most desirable for a company to
have current
 a. assets equal current liabilities.
b. liabilities exceed current assets.
c. assets exceed current liabilities.
d. liabilities exceed long-term liabilities.
56. The relationship of current assets to current liabilities is used in
evaluating a company's
a. operating cycle.
b. revenue-producing ability.
c. short-term debt paying ability.
d. long-range solvency.
57. Which of the following is usually not an accrued liability?
a. Interest payable
b. Wages payable
c. Taxes payable
d. Notes payable
58. With an interest-bearing note, the amount of assets received
upon issuance of the note is generally
a. equal to the note's face value.
b. greater than the note's face value.
c. less than the note's face value.
d. equal to the note's maturity value.
Use the following information for questions 59 - 61.
Chase County Bank agrees to lend Agler Brick Company $300,000 on January 1.
Agler Brick Company signs a $300,000, 8%, 9-month note.
59. The entry made by Agler Brick Company on January 1 to record
the proceeds and issuance of the note is
a. Interest Expense 18,000
Cash. 282,000
Notes Payable 300,000
b. Cash 300,000
Notes Payable 300,000
c. Cash 300,000
Interest Expense 18,000
Notes Payable 318,000
d. Cash 300,000
Interest Expense 18,000
Notes Payable 300,000
Interest Payable 18,000
60. What is the adjusting entry required if Agler Brick Company
prepares financial statements on June 30?
a. Interest Expense 12,000
Interest Payable 12,000
b. Interest Expense 12,000
Cash 12,000
c. Interest Payable 12,000
Cash 12,000
d. Interest Payable 12,000
Interest Expense 12,000
61. What entry will Agler Brick Company make to pay off the note
and interest at maturity assuming that interest has been accrued to
September 30?
a. Notes Payable 318,000
Cash 318,000
b. Notes Payable 300,000
Interest Payable 18,000
Cash 318,000
c. Interest Expense 18,000
 Notes Payable 300,000
Cash 318,000
d. Interest Payable 12,000
Notes Payable 300,000
Interest Expense 6,000
Cash 318,000
62. As interest is recorded on an interest-bearing note, the Interest
Expense account is
a. increased; the Notes Payable account is increased.
b. increased; the Notes Payable account is decreased.
c. increased; the Interest Payable account is increased.
d. decreased; the Interest Payable account is increased.
Use the following information for questions 63 - 64.
On October 1, Steve's Carpet Service borrows $50,000 from National Bank on a
3-month, $50,000, 8% note.
63. What entry must Steve's Carpet Service make on December 31
before financial statements are prepared?
a. Interest Payable 1,000
Interest Expense 1,000
b. Interest Expense 4,000
Interest Payable 4,000
c. Interest Expense 1,000
Interest Payable 1,000
d. Interest Expense 1,000
Notes Payable 1,000
64. The entry by Steve’s Carpet Service to record payment of the
note and accrued interest on January 1 is
a. Notes Payable 51,000
Cash 51,000
b. Notes Payable 50,000
Interest Payable 1,000
Cash 51,000
c. Notes Payable 50,000
Interest Payable 4,000
Cash 54,000
d. Notes Payable 50,000
Interest Expense 1,000
Cash 51,000
65. Interest expense on an interest-bearing note is
a. always equal to zero.
b. accrued over the life of the note.
c. only recorded at the time the note is issued.
d. only recorded at maturity when the note is paid.
66. The entry to record the payment of an interest-bearing note at
maturity after all interest expense has been recognized is
a. Notes Payable
Interest Payable
Cash
b. Notes Payable
Interest Expense
Cash
c. Notes Payable
Cash
d. Notes Payable
Cash
Interest Payable
67. Sales taxes collected by a retailer are recorded by
a. crediting Sales Taxes Revenue.
b. debiting Sales Taxes Expense.
c. crediting Sales Taxes Payable.
d. debiting Sales Taxes Payable.
68. Unearned Rental Revenue
a. is a contra account to Rental Revenue.
b. is a revenue account.
c. is reported as a current liability.
d. is debited when rent is received in advance.
69. The amount of sales tax collected by a retail store when making
sales is
a. a miscellaneous revenue for the store.
b. a current liability.
c. not recorded because it is a tax paid by the customer.
d. recorded as an operating expense.
70. A retail store credited the Sales account for the sales price and
the amount of sales tax on sales. If the sales tax rate is 5% and the
balance in the Sales account amounted to $168,000, what is the
amount of the sales taxes owed to the taxing agency?
a. $160,000.
b. $168,000.
c. $8,400.
d. $8,000.
71. The current portion of long-term debt should
a. be paid immediately.
b. be reclassified as a current liability.
c. be classified as a long-term liability.
d. not be separated from the long-term portion of debt.
72. Sales taxes collected by a retailer are expenses
a. of the retailer.
b. of the customers.
c. of the government.
d. that are not recognized by the retailer until they are submitted to
the government.
73. A retailer that collects sales taxes is acting as an agent for the
a. wholesaler.
b. customer.
c. taxing authority.
d. chamber of commerce.
74. Sales taxes collected by a retailer are reported as
a. contingent liabilities.
b. revenues.
c. expenses.
d. current liabilities.

75. A cash register tape shows cash sales of $3,000 and sales
taxes of $150. The journal entry to record this information is
a. Cash 3,000
Sales 3,000
b. Cash 3,150
Sales Tax Revenue 150
Sales 3,000
c. Cash 3,000
Sales Tax Expense 150
Sales 3,150
d. Cash 3,150
Sales 3,000
Sales Taxes Payable 150