Accountancy Demystified - Part 1

1. ABC Ltd had a balance of debtors amounting to Rs 10,000 on 1^st April 2007 and of Rs 6000 on 31^st March 2008. The change in value would lead to:

a. Increase in working capital

b. Decrease in working capital

c. No change

2. Trade discounts are shown as

a. Discount account debited

b. Discount account credited

c. Not shown at all!!!

3. If current year’s accounting income is larger than the taxable income then

a. Create deferred tax liability

b. Create deferred tax asset

c. No deferred tax would be created

4. Which of the following is not considered as depreciable assets:

a. Livestock

b. Freehold premises

c. Plant

5. What does AS-1 deal with?

a. Presentation of financial statements

b. Cash flows

c. Inventory

6. The machinery account showed a balance of Rs 1,00,000 on 31st Mar 2008 and Rs 2,00,000 on 31st Mar 2009. A machine costing Rs 10000 was sold for Rs 8000. Accumulated depreciation on the said machine was Rs 3000. What would be the net purchase of machine during the year?

a. Rs 1,10,000

b. Rs 1,11,000

c. Rs 1,08,000

7. A company values its stock on the basis of the FIFO method. On 1st July 2009, it purchased 500 kg at Rs 7.50/kg. On 5th July, it sold 400 kg Rs 7.50/kg. On 6th July, it purchased 700kg at Rs 10/kg. On the 8th July, the company sold 200kg. The total inventory balance remaining is:

a. 7750

b. 6000

c. 1750

8. Profit for the year 2006 was Rs 50,00,000. The company had purchased a machine worth Rs 5,00,000 on which 20% was charged as depreciation (SLM). The IT department allowed 100% depreciation in the 1st Year. How much DTA / DTL would be created?

a. DTL of Rs 5 lakh

b. DTA of Rs 4 lakh

c. DTL of Rs 4 lakh

9. Which of the following is the correct entry for salaries paid to employees?

a. Salaries a/c Dr 5000

To Employees 5000

b. Salaries a/c Dr 5000

To Cash a/c 5000

c. Cash a/c Dr 5000

To Salaries 5000

10. What does the accounting equation look like?

a. Assets = Liabilities + Capital

b. Liabilities = Assets + Capital

c. Capital = Assets + Liabilities

11. A financial lease

a. Transfers substantially all the risks and rewards incident to ownership of an asset

b. Does not transfer the risks and rewards

c. Can be used by lessee as per his / her own will

12. ABC Ltd purchased a machinery worth Rs 1,00,000 in the year 2004. The accumulated depreciation on this machine amounted to Rs 15,000 upto 2009. In 2009, the company sold the machine for Rs 70,000. The profit / loss incurred and Rs 70000 (the sale asset) will be shown as

a. Rs 15000 gain as a subtraction from operating activity and Rs 70000 as an investing activity

b. Rs 30000 loss as subtraction from operating activity and Rs 70000 as an investing activity

c. Rs 15000 loss as an addition to operating activity and Rs 70000 as an investing activity

13. Goodwill is classified as a

a. Current asset

b. Fixed asset

c. Fixed Liability

14. Which of the following indicates accrual concept?

a. Salary of Rs 2000 earned but not received is shown in the P&L account

b. Commission paid which accrued to last year shown in P&L account

c. Income received in advance included in P&L account

15. Which of the following costs are included while calculating cost of inventory?

a. Cost of purchase + Cost of conversion + Other costs incurred in bringing the inventories to their current location and condition

b. Cost of Purchase + Conversion + Storage costs

c. Cost of Purchase + Conversion cost + wages paid to workers