FINALTERM EXAMINATION
Fall 2008
MGT101- Financial Accounting (Session - 1)
Question No: 1 ( M a r k s: 1 ) http://vuzs.net
Debenture is also named as:
► Share
► Bond
► Equity
► Reserve
Question No: 2 ( M a r k s: 1 ) http://vuzs.net
A company declares a cash dividend to be paid to its stockholders next month. The effect of the transaction is to:
► Decrease assets and liabilities.
► Increase assets and stockholders' equity.
► Decrease assets and stockholders' equity.
► Increase liabilities and decrease stockholders' equity.
Question No: 3 ( M a r k s: 1 ) http://vuzs.net
The beginning balance of retained earnings was Rs. 7,500. The dividends paid to stockholders' were Rs.1, 500. The ending balance of retained earnings is Rs. 5,000. What was the net income or net loss for the accounting period?
► Net loss of Rs.1, 000
► Net income of Rs. 1,000
► Net loss of Rs. 2,000
► Net income of Rs. 2,500
Question No: 4 ( M a r k s: 1 ) http://vuzs.net
The net income calculated in the income statement for the accounting period is reported on:
► Bank Statement
► Statement of retained earnings
► Statement of cash flows
► None of the given options
Question No: 5 ( M a r k s: 1 ) http://vuzs.net
If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. B in distributable profit.
► Rs. 98,000
► Rs. 1, 47,000
► Rs. 2, 45,000
► Rs. 3, 43,000
Question No: 6 ( M a r k s: 1 ) http://vuzs.net
In which situation(s) Partnership is dissolved?
► In case of death of partner
► At the admission of new partner
► If any partner resigned from partnership
► All of the given options
Question No: 7 ( M a r k s: 1 ) http://vuzs.net
A private limited company can commence its business:
► Immediately on receiving a certificate of incorporation
► Without receiving a certificate of incorporation
► Only when it receives certificate of commencement of business
► Only when it receives both, the certificate of incorporation as well as certificate of commencement of business
Question No: 8 ( M a r k s: 1 ) http://vuzs.net
The balance sheet reported a beginning balance of Rs. 20,000 in Accounts Receivable and an ending balance of Rs. 15,000. Credit Sales of Rs. 200,000 were made during the year. Using this information, compute cash collected from customers.
► Rs. 215,000
► Rs. 195,000
► Rs. 200,000
► Rs. 205,000
Question No: 9 ( M a r k s: 1 ) http://vuzs.net
Which of the following is the most important document of the company?
► Memorandum of Association
► Articles of Association
► Prospectus
► Annual Report
Question No: 10 ( M a r k s: 1 ) http://vuzs.net
If dividend is proposed by directors of the company @ 30% for the year, it will be calculated on:
► Capital Reserve
► Authorized share capital
► Paid up share capital
► Share premium
Question No: 11 ( M a r k s: 1 ) http://vuzs.net
Share premium account is used for what?
► Write off Preliminary Expenses of the company.
► Write off the balance amount, in issuing shares on discount.
► Issue fully paid Bonus Shares.
► All of the given options
Question No: 12 ( M a r k s: 1 ) http://vuzs.net
Authorized share capital is also known as:
► Registered capital
► Issued capital
► Paid up capital
► Called up capital
Question No: 13 ( M a r k s: 1 ) http://vuzs.net
In case of fixed capital accounts, other transactions such as Drawings and Profit etc. are recorded in a separate account that is called ___________.
► Fixed Capital Account
► Current Account
► Fluctuating Capital Account
► Floating Capital Account
Question No: 14 ( M a r k s: 1 ) http://vuzs.net
A, B, C are partners. Their profit sharing ratio is equal. Capital balance on July 1st of Partner A --- Rs. 40,000 Partner B --- Rs. 30,000 and Partner C--- Rs. 20,000.Their private property of Partner A is Rs.15,000, Partner B is Rs. 7,000 and Partner C is Rs. 1,500. What is the level of their liabilities under the partnership firm?
► Partner A—Rs. 40,000, Partner B---- Rs. 30,000, Partner C – 20,000
► Partner A—Rs. 40,000, Partner B---- Rs. 30,000, Partner C – 21,500
► Partner A—Rs. 40,000, Partner B---- Rs. 37,000, Partner C – 20,000
► Partner A—Rs. 55,000, Partner B---- Rs. 37,000, Partner C – 21,500
Question No: 15 ( M a r k s: 1 ) http://vuzs.net
Which of the following item will be shown on debit side of capital account of sole proprietor?
► Cash
► Drawings
► Debtors
► Profit
Question No: 16 ( M a r k s: 1 ) http://vuzs.net
Which of the following journal entry will be recorded, if cash is drawn by a Proprietor?
► Proprietor’s drawings a/c (Dr.) and Cash a/c (Cr.)
► Cash a/c (Dr.) and Proprietor’s drawings a/c (Cr.)
► Proprietor’s Capital (Dr.) and Proprietor’s drawings a/c (Cr.)
► Proprietor’s drawings (Dr.) and Proprietor’s Capital a/c (Cr.)
Question No: 17 ( M a r k s: 1 ) http://vuzs.net
An asset is considered to be a current asset if:
► It has been bought recently and was bought new and not used
► It can be realized in cash or sold or consumed in the business within one year
► It is a piece of new machinery that is expected to last for at least ten years
► All of the given options
Question No: 18 ( M a r k s: 1 ) http://vuzs.net
Which of the following appears in both the Income Statement debit column and the Balance Sheet credit?
► Net income
► Net loss
► Dividends
► Retained earnings
Question No: 19 ( M a r k s: 1 ) http://vuzs.net
General office expenses are charged to which of the following head:
► Administrative expenses
► Marketing expenses
► Selling expenses
► Financial expenses
Question No: 20 ( M a r k s: 1 ) http://vuzs.net
Consider the following table:
| | Financial statement item | Classification |
| A. | Inventory | Current asset |
| B. | Tangible assets | Non-current asset |
| C. | Accrued expenses | Current asset |
| D. | Bonds payable | Long-term liabilities |
Identify the row above, showing an INCORRECT financial-statement classification?
► Row A
► Row B
► Row C
► Row D
Question No: 21 ( M a r k s: 1 ) http://vuzs.net
Short-term investments include all of the following EXCEPT:
► A bond receivable intended to be sold within one year
► Frequently traded securities
► A stock investment in the General Electric Company intended to be sold within one year
► A shares investment in the Coca-Cola Company intended to be held for several years
Question No: 22 ( M a r k s: 1 ) http://vuzs.net
The figure of cash received from debtors can be located either from cash book or:
► Debtor’s Control Account
► Balance Sheet
► Profit & Loss Account
► Bills Payable Account
Question No: 23 ( M a r k s: 1 ) http://vuzs.net
It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What amount of new provision for doubtful debts will be credited in profit & loss account
► Rs. 3,600
► Rs. 4,000
► Rs. 1,600
► Rs. 2, 400
Question No: 24 ( M a r k s: 1 ) http://vuzs.net
When one or both aspects of a transaction are recorded in the wrong class or category of account, this is called:
► Error of principle
► Error of omission
► Error of commission
► Error of original entry
Question No: 25 ( M a r k s: 1 ) http://vuzs.net
Which of the following account will be credited when a typewriter is sold that has been used in the office?
► Cash Account
► Sales Account
► Purchase Account
► Office Equipment Account
Question No: 26 ( M a r k s: 1 ) http://vuzs.net
Which of the following rectifying entry will be recorded, if sales to Mr. “A” of Rs.336 have been debited to Mr. “B” account?
► A’s account (Dr.) and B’s account (Cr.)
► B’s account (Dr.) and A’s account (Cr.)
► Sales account (Dr.) and B’s account (cr.)
► B’s account (Dr.) and Sales account (Cr.)
Question No: 27 ( M a r k s: 1 ) http://vuzs.net
Goods purchased from “Mr. A” for Rs. 2,000 passed through the sales book. The rectification of error will result in:
► Increase of gross profit
► Decrease of gross profit
► Remains constant and no effect on net profit
► There is no relation between goods purchased and gross profit
Question No: 28 ( M a r k s: 1 ) http://vuzs.net
Which of the following account(s) will be affected, while rectifying the error of sales to Rahim Rs. 336 posted to his account as Rs. 363?
► Sales account
► Rahim’s account
► Cash account
► Both sales and Rahim’s Account
Question No: 29 ( M a r k s: 1 ) http://vuzs.net
Control account tells about:
► Picture collectively instead of individually
► Details of loyal clients
► Customer attitude of payments
► Complete history of transactions of business clients
Question No: 30 ( M a r k s: 1 ) http://vuzs.net
Which of the following subsidiary book(s) is (are) maintained for debtors control account?
► Sales Day Book
► Sales Return
► Debtors Ledger
► All of the given options
Question No: 31 ( M a r k s: 1 ) http://vuzs.net
Which of the following entry will be recorded when the Bad Debts are recovered?
► Cash account (Dr.) & Bad Debts recovered account (Cr.)
► Accounts Receivable account (Dr.) & Bad Debts recovered account (Cr.)
► Bad debts recovered account (Dr.) and Profit & Loss account (Cr.)
► Provision for doubtful debts account (Dr.) & Cash account (Cr.)
Question No: 32 ( M a r k s: 1 ) http://vuzs.net
If the (New provision + Bad debts) > Amount of old provision then resulting figure will be shown at:
► Debit side of Profit & Loss Account
► Credit side of Profit & Loss Account
► Asset side of Balance Sheet
► Liability side of Balance Sheet
Question No: 33 ( M a r k s: 1 ) http://vuzs.net
Which of the following would be deducted from Sundry Debtors in Balance Sheet?
► Bad debts (Trial balance item)
► Old provision for doubtful debts
► New provision for doubtful debts
► Both Bad debts (given in adjustment) and new provision for doubtful debts
Question No: 34 ( M a r k s: 1 ) http://vuzs.net
Which of the following option is TRUE about the characteristic(s) of Bad Debt?
► It is a definite loss to the business
► It is not shown in Balance Sheet
► No provision is necessary for it
► All of the given options
Question No: 35 ( M a r k s: 1 ) http://vuzs.net
Which one of the following transactions will cause the balance in Mr. Terry's Cash Book to be greater than his Bank Statement balance?
► A cheque is drawn but not yet presented at the bank for payment
► The bank has not yet notified to Mr. Terry about a dishonored cheque
► A credit transfer into Terry's Bank Account
► A cheque payment of Rs.101 is recorded in the Cash Book as Rs.110
Question No: 36 ( M a r k s: 1 ) http://vuzs.net
Consider the following data:
| Particulars | Rs. |
| Assets | ? |
| Owner's equity | 1,50,000 |
| Liabilities | 1,00,000 |
► Rs. 49,000
► Rs. 55,000
► Rs. 50,000
► Rs. 2, 50,000
Question No: 37 ( M a r k s: 1 ) http://vuzs.net
Accounting is the language of:
► Business
► School
► Proprietor
► Management
Question No: 38 ( M a r k s: 1 ) http://vuzs.net
Which of the following account balance is shown on credit side of Trial Balance? (It is assumed that all account balances are shown on normal balance)
► Cash account
► Furniture account
► Vehicle account
► Capital account
Question No: 39 ( M a r k s: 1 ) http://vuzs.net
Under the reducing balance method of depreciation:
► Amount of depreciation increases every year
► Amount of depreciation remains constant for every year
► Amount of depreciation decreases every year
► None of the given options
Question No: 40 ( M a r k s: 1 ) http://vuzs.net
Consider the following inventory record:
| Date | Item | Quantity | Cost/Unit Rs. | Total Rs. |
| Jan. 2 | Beginning inventory | 10 | 10 | 100 |
| Mar. 4 | Purchase | 35 | 11 | 385 |
| May 8 | Purchase | 40 | 12 | 480 |
| Nov. 3 | Purchase | 20 | 13 | 260 |
| De31 | Merchandise available | 105 | | 1,225 |
85 units were sold, Use the FIFO method of inventory costing and determine the cost of goods sold.
► Rs. 1,225
► Rs. 1,015
► Rs. 965
► Rs. 992
Question No: 41 ( M a r k s: 1 ) http://vuzs.net
WhicWhich of the following is an example of direct materials cost?
► Polish and finishing material for chair
► A piece of wood for the production of chair
► Production worker’s wages
► Depreciation expenses
Question No: 42 ( M a r k s: 1 ) http://vuzs.net
Which of the following account will be credited, if the goods are sold on credit to Mr. Mahmood?
► Cash account
► Mr. Mahood account
► Sales account
► Purchases account
Question No: 43 ( M a r k s: 1 ) http://vuzs.net
Which of the following account will be credited, if business sold goods for Rs.10,000 on credit?
► Cash account
► Sales account
► Accounts receivable account
► Purchases account
Question No: 44 ( M a r k s: 1 ) http://vuzs.net
Which of the following is an example of a Current liability?
► Closing inventory
► Opening inventory
► Petty cash
► Bank overdraft
Question No: 45 ( M a r k s: 1 ) http://vuzs.net
Which of the following is CORRECT for trading account?
► It inculdes cost of goods sold and all the direct expenses related to sales
► It inculdes cost of goods sold and all the indirect expenses related to sales
► It inculdes cost of goods sold and all the direct and indirect expenses
► It inculdes cost of goods sold and all the direct and selling, administrative expenses
Question No: 46 ( M a r k s: 1 ) http://vuzs.net
Which of the following are the components of General Ledger?
1) Title of account
2) Amount of transaction
3) Date of transaction
► (1) & (2) only
► (2) & (3) only
► (1) & (3) only
► (1), (2) & (3)
Question No: 47 ( M a r k s: 1 ) http://vuzs.net
The original book of entry, in which all vouchers are first recorded, is called:
► General Journal
► General Ledger
► Trial Balance
► Balance Sheet
Question No: 48 ( M a r k s: 1 ) http://vuzs.net
When a Liability is reduced or decreased, it is recorded on the:
► Right or debit side of the account
► Left or debit side of the account
► Left or credit side of the account
► Right or credit side of the account
Question No: 49 ( M a r k s: 1 ) http://vuzs.net
According to the double entry system of book keeping, the investment of Rs.10, 000 in the business made by the owner will effect:
► Cash & Capital Account
► Cash & Expense Account
► Capital & Revenue Account
► Capital & Expense Account
Question No: 50 ( M a r k s: 1 ) http://vuzs.net
Which of the following is non- profit organization?
► Sole proprietorship
► Partnership
► Limited company
► Trust
Question No: 51 ( M a r k s: 5 )
What is bank overdraft? Mention an example for this. Why companies have to pay mark up on it. Under which head mark up paid on overdraft is shown in financial statement.
Answer:
An overdraft occurs when withdrawals from a bank account exceed the available balance. In this situation a person is said to be "overdrawn”.
Question No: 52 ( M a r k s: 10 )
Income Statement of XYZ Ltd for the year ended on 30th June, 2007:
| Particulars | Rs. | Rs. |
| Sales | | 500,000 |
| Less: Cost of Goods Sold | | 250,000 |
| Gross Profit | | 250,000 |
| Less: Operating expenses | | |
| Administrative expenses | 110,000 | |
| Interest expenses | 20,000 | 130,000 |
| Net profit before Tax | | 120,000 |
| Less: Taxes | | 36,000 |
| Net profit after tax | | 84,000 |
Opening Stock for the year was Rs. 60,000.
Balance Sheet of XYZ Ltd on 30th June, 2007:
| Assets | Rs. |
| Fixed Assets | 400,000 |
| Stock | 60,000 |
| Debtors | 230,000 |
| Bills Receivable | 40,000 |
| Cash at bank | 150,000 |
| Prepaid expenses | 20,000 |
| Total | 900,000 |
| Liabilities | |
| Share capital | 200,000 |
| Reserves and surplus | 250,000 |
| 10% Debentures | 200,000 |
| Creditors | 180,000 |
| Bills payable | 70,000 |
| Total | 900,000 |
Calculate following ratios from the financial statement of XYZ Ltd.
1. Current Ratio
2. Acid Test Ratio
3. Stock turn over Ratio
4. Debt equity Ratio
5. Gross profit Ratio
Solution:
1: Current Ratio:
Total Assets/Total Liabilities
= 900000/900000
= 1
2: Acid Test Ratio
Total Assets-Stock/Total Liabilities
= 900000-60000/900000
= 840000/900000
= 0.933333
3: Stock turn over Ratio
(Average Stock / Cost of goods sold) x 365
Average Stock = opening stock + Closing Stock/2
= 60000+60000/2
= 60000
= (Average Stock / Cost of goods sold) x 365
= (60000/250000) x 365
= 0.24 x 365
= 87.4
4: Debt equity Ratio
Long term Liabilities / Equity
= 200000/200000
= 1
5: Gross profit Ratio
(Gross Profit / Sales) x 100
= 250000/500000 x 100
= 0.5 x 100
= 50
Question No: 53 ( M a r k s: 10 )
Pass the rectifying entries to correct the following errors:
Question No: 54 ( M a r k s: 10 )
The following discrepancies were noted on comparing Cash Book with Pass Book.
(1) The following cheques were deposited into bank on 28th March but were not collected by the bank by 31stMarch, (i) Rs. 500, (ii) Rs. 300, (iii) Rs. 200.
(2) The following cheques were issued but were not presented for the payment by 31st March. (i) Rs. 200, (ii) Rs. 450 (iii) Rs. 525 (iv) Rs. 375.
(3) The bank credited a dividend of Rs. 2,000 on 31st march but intimation was received by the trader on 5th April, 2008.
(4) The bank credited interest of Rs. 50 on 31st March but not debited in Cash Book.
(5) The Bank charged (debited) a commission of Rs. 100 on 31st March.
(6) A cheque of Rs. 500 was received from customer and was entered in the bank column of Cash Book on 25thMarch, but was paid into the bank on 1st April.
Required: Prepare a Bank Reconciliation Statement, if the Bank balance as per Cash Book (Dr.) was Rs. 15,000 on 31stMarch, 2008.
Answer:
Balance as per Cash book. Dr 15000
Less not collected Cheques. (500+300+200) Cr 1000
Dr 14000
Add UN Presented Cheques (200+450+525+375) Dr 1550
Dr 15550
Add dividend Credit by bank Dr 2000
Dr 17550
Add interest credit by bank Dr 50
Dr 17600
Less bank charges Cr 100
Dr 17500
Less Cheque received Cr 500
Balance as per Bank Book Cr 17000
