Accountancy Demystified - Part 2

1. Which of the following methods is not permitted by the Indian Accounting Standards for inventory valuation?

a) FIFO

b) LIFO

c) Weighted Average Method

2. IDBI Ltd., a banking organization, received interest on its loans to the tune of Rs. 500 thousand for the month June, 2009. The amount would be reflected as –

a) An operating activity

b) An investing activity

c) A financing activity

3. MAT stands for:

a) Minimum Allowable Tax

b) Minimum Alternative Tax

c) Minimum Alternate Tax

4. Inventories are valued at –

a) Cost price or realisable value, whichever is higher.

b) Cost price or realisable value, whichever is lower.

c) Cost price or realisable value, whichever is equal to the last year’s stock value.

5. A company manufactures biscuits for which the production cost/unit is –

Raw material = Rs. 3

Direct Labor = Rs. 1

Direct Expenses = Rs. 2

Normal capacity = 5000 units/annum

Actual production = 4000 units/annum

Fixed production overheads = Rs. 12000/annum

The company has unsold stock of 1500 units at the year end.

Calculate the value of closing stock.

a) Rs. 21000

b) Rs. 9008

c) Rs. 12600

6. As per revenue recognition concept, revenue does not include –

a) Sale of goods

b) Revenue from government grants/subsidies

c) Use of enterprise by others yielding interest, dividend and royalties.

7. Justification for method of determining periodic deferred tax is based on the concept of

a) Matching of periodic expense to periodic revenue

b) Objectivity in the calculation of periodic expense.

c) Recognition of assets and liabilities.

8. A company is building up a factory to start a new production unit. The construction work is going on. How would this be reflected as in the balance sheet?

a) Capital

b) Investment

c) Capital work-in-progress

9. A company had a provision for dividend balance of Rs. 50000 on 1st April, 2006 while it jumped to Rs. 100000 as on 31st March, 2007. The company paid a dividend of Rs. 10000 during the year. Compute the current year’s provision for dividend.

a) Rs. 50000

b) Rs. 60000

c) Rs. 40000

10. Profit for the year 2008 amounted to Rs. 5 lacs. The profit was calculated after providing depreciation of Rs. 50000 but before amortising goodwill of Rs. 10000. The net increase in current assets amounted to Rs. 10000 while net increase in current liabilities amounted to Rs. 25000. Tax paid during the year was 10000. What would be the cash flow from operating activities?

a) Rs. 555000

b) (Rs. 555000)

c) Rs. 455000

11. An FMCG giant recently acquired 5% stake in an edible oil company. The stake was purchased through equity shares, amounting Rs. 2.2 million. This amount would be reflected as –

a) Cash flow from operating activities

b) Cash flow from investing activities

c) Cash flow from financing activities

12. As per revenue recognition concept, payment received in advance is recognized as –

a) A liability

b) An asset

c) A revenue item

13. What is the other name for Income Statement?

a) Profit and Loss Account

b) Income and Expenditure Account

c) Statement of PAT

14. Provision for discount on creditors is shown as –

a) Deduction from creditors in the balance sheet.

b) Addition to creditors in the balance sheet.

c) Shown on the debit side of Income statement.

15. Which of the following is not a method for calculating depreciation?

a) Straight Line Method

b) Sinking Fund

c) Cost of Market Value