2006 ICFAI University M.B.A Financial Accounting - I (MB131): April 2006 Question paper
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Question Paper
Financial Accounting - I (MB131): April 2006
??Answer all questions.
??Marks are indicated against each question.
1. In the event of conflict between the International Accounting Standards and the local standards, which
among the following will prevail?
(a) The rule of the Company Law will prevail
(b) The rule of the Securities Exchange Board of India prevails
(c) The rule of the International Accounting Standards prevails
(d) The rule of local standards, laws and regulations shall prevail
(e) The rule of the Central Government will prevail.
(1 mark)
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2. Under which of the following conditions is a balance sheet said to be window dressed?
(a) When income is accounted for on accrual basis
(b) When prepaid expenses are considered and accounted for in the preparation of final accounts
(c) When an adequate provision for expenses and potential losses is not made
(d) When a provision for the probable loss is made in advance of its occurrence
(e) When the assets and liabilities in the Balance Sheet are reflected at Historical cost.
(1 mark)
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3. The transactions pertaining to purchase of fixed assets and investments on credit, are recorded in
(a) Simple cash book (b) Double cash book (c) Purchase
book
(d) Journal proper (e) Bills payable book.
(1 mark)
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4. An asset, the value of which depends on the earning capacity of the business concern is
(a) Investments (b) Debtors (c) Fixed
asset
(d) Goodwill (e) Cash at Bank.
(1 mark)
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5. Rights shares are the shares
(a) Issued by a newly formed company
(b) Legally issued to the public at large
(c) Offered to the existing equity shareholders
(d) That have a right of redemption
(e) That have a right to cumulative dividends.
(1 mark)
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6. The maximum amount beyond which a company is not allowed to raise funds by issue of shares is
(a) Issued capital (b) Reserve capital (c) Authorised
capital
(d) Subscribed capital (e) Paid-up capital.
(1 mark)
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7. Which of the following methods of valuation of goodwill uses the present value factor?
(a) Capitalization of average profits methods
(b) Capitalization of super profits method
(c) Annuity method of super profits
(d) Number of years’ purchase of average profits method
(e) Super profits method.
(1 mark)
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8. The process of converting cost of intangible assets to expense is called
(a) Depreciation (b) Amortization (c)
Depletion
(d) Deterioration (e) None of the above.
(1 mark)
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9. Which of the following methods is/are followed for amortization of intangible assets?
(a) Straight-line method (b) Written down method
(c) Sum of the years’ digits method (d) Annuity method
(e) Both (a) and (b) above.
(1 mark)
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10.When depreciation appears in the Trial balance, in which of the following statements will it be shown?
(a) Trading Account (b) Profit and loss account
(c) Profit and loss appropriation account (d) Balance Sheet
(e) Notes to accounts.
(1 mark)
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11.The method of inventory valuation which enables the firm to even out the erratic movements in the
purchase prices to the best extent possible, is
(a) Last in first out method (b) First-in-first out method
(c) High-in-low out method (d) Simple average method
(e) Weighted Average Method.
(1 mark)
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12.Certain fundamental accounting assumptions underlie the preparation and presentation of financial
statements and hence are not specifically stated because their acceptance and use are assumed. Which
among the following is not a fundamental accounting assumption?
(a) Going concern concept (b) Consistency (c) Accrual
(d) Conservatism (e) Both (a) and (b) above.
(1 mark)
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13.The discount allowed on re-issue of forfeited shares is debited to
(a) General reserve account (b) Capital reserve account
(c) Revaluation reserve account (d) Capital redemption reserve account
(e) Forfeited shares account.
(1 mark)
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14.Which of the following cannot be utilized for the redemption of Preference Shares of a company?
(a) Proceeds of fresh issue of shares
(b) Securities premium on fresh issue of shares
(c) General reserve
(d) Profit and loss account
(e) Dividend equalization reserve.
(1 mark)
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15.Which of the following data is essential for calculation of value of an equity share under the intrinsic
value method?
(a) Normal rate of return (b) Expected rate of return
(c) Market value per share (d) Dividend per share
(e) Net equity.
(1 mark)
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16.The cum-interest/cum-dividend quotation implies
(a) The purchaser pays a higher price than the normal price
(b) The right of receiving accrued interest/dividend is retained by the seller
(c) The seller charges a higher price
(d) The right of receiving accrued interest/dividend is passed on to the purchaser
(e) (a), (c) and (d) above.
(1 mark)
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17.The cumulative preference shareholders enjoy preferential treatment over equity shareholders with
regard to
(a) Priority in payment of dividend (b) Return of capital
(c) Voting rights (d) Cumulation of dividends
(e) (a), (b) and (d) above.
(1 mark)
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18.The accounting based on Real capital maintenance concept (which considers the general price rise) is
called the
(a) Current purchasing power Accounting
(b) Current Cost Accounting
(c) Cost accounting
(d) Financial Accounting
(e) Managerial Accounting.
(1 mark)
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19.Share allotment denotes a stage subsequent to
(a) Share Application (b) Share forfeiture (c)
Share redemption
(d) Share First call (e) Share second call.
(1 mark)
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20.The accounting entry involved, for issue of shares to promoters for the services rendered by them is
(a) Debit goodwill account and credit share capital account
(b) Debit cash account and credit share capital account
(c) Debit promoters’ account and credit share capital account
(d) Debit share capital account and credit cash account
(e) Debit goodwill account and credit calls in arrear account.
(1 mark)
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21.Premium on redemption of debentures account is
(a) A real account (b) A nominal account (c) A personal
account
(d) An asset (e) A capital reserve.
(1 mark)
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22.Which of the following statements is true?
(a) Going concern concept assumes that business will be carried on for a definite period
(b) Time period concept facilitates the comparison of the results of one accounting period of a
business with that in the past
(c) The capital losses need not be deducted to ascertain net income
(d) Provision for bad and doubtful debts is created in recognition of conservatism concept
(e) Materiality concept states that all business transactions are to be recorded how so ever
insignificant they may be.
(1 mark)
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23.Which of the following accounts appear(s) in the Balance Sheet of a business?
I. Stock at the end of the financial year.
II. Stock at the beginning of the financial year.
III. Drawings.
IV. Prepaid Rent.
V. Interest received but not yet earned.
(a) Only (I) above (b) Only (III) above
(c) Both (I) and (III) above (d) (I), (III), (IV) and (V) above
(e) All (I), (II), (III), (IV) and (V) above.
(1 mark)
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24.Underwriting commission will not be paid on the amount of shares taken by
(a) Promoters (b) Directors (c)
Employees
(d) Directors’ friends (e) All of the above.
(1 mark)
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25.The portion of the acquisition cost of the asset yet to be allocated is known as
(a) Written down value (b) Accumulated value
(c) Realisable value (d) Salvage value (e) Residual
value.
(1 mark)
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26.Which of the following items is/are covered under Accounting Standard-2 with regard to accounting
for inventory?
I. Financial instruments held as stock-in-trade.
II. Work in progress arising under construction contracts.
III. Work in progress of service providers.
IV. Work in progress of a manufacturing industry.
(a) Only (I) above (b) Only (IV) above
(c) Both (I) and (II) above (d) Both (III) and (IV) above
(e) (II), (III) and (IV) above.
(1 mark)
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27.Which of the following statements is false?
(a) Bonus issue can be made out of share premium account
(b) Bonus issue shall not be made within 12 months of any public issue
(c) Bonus issue shall not be made in lieu of dividend
(d) Reserves created out of revaluation of fixed assets can be used for bonus issue
(e) Bonus shares should not be issued unless partly paid shares are made fully paid.
(1 mark)
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28.The money received on reissue of forfeited shares is inadvertently credited to ‘Capital Suspense’
account. The adjustment entry involved in reversing the capital suspense account is
(a) Debit to Capital Suspense account (b) Credit to Share Capital account
(c) Debit to Share forfeiture account (d) Both (a) and (b) above
(e) (a), (b) and (c) above.
(1 mark)
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29.Which of the following assets is/are to be valued at the lower of cost and net realizable value?
(a) Goodwill (b) Inventories (c) Investments
(d) Sundry debtors (e) Fixed Assets.
(1 mark)
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30.Which of the following statements is true?
(a) Bank charges increase debit balance shown as per bank column of the cash book
(b) Bank charges increase debit balance as per bank pass book
(c) A cash sale of a non-trading asset is recorded in the journal proper
(d) Cash discount allowed by the business will appear on the debit side of the debtor’s account
(e) Bank reconciliation statement is prepared by a bank.
(1 mark)
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31.The balances of which of the following accounts do not disappear, once they are debited/credited to
Trading Account.
(a) Sales (b) Purchases (c) Inward returns
(d) Closing stock (e) Outward returns.
(1 mark)
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32.On issue of shares, the application money should not be less than
(a) 2.5% of the nominal value of shares (b) 2.5% of the issue price of
shares
(c) 5.0% of the nominal value of shares (d) 5.0% of the issue price of
shares
(e) 10.0% of the nominal value of shares.
(1 mark)
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33.Which of the following methods is not a practical way of realizing revenue?
(a) Delivery method (b) Percentage-of-completion method
(c) Production method (d) Installment method
(e) Moving average method.
(1 mark)
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34.According to the SEBI guidelines, before the redemption of debentures having a maturity of more than
18 months, the debenture redemption reserve created, should be at least equivalent to
(a) 10% of the debenture issue (b) 25% of the debenture issue
(c) 30% of the debenture issue (d) 50% of the debenture issue
(e) 75% of the debenture issue.
(1 mark)
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35.The periodical total of a purchase returns book is recorded to the
(a) Debit side of the purchases account
(b) Debit side of the purchases returns account
(c) Credit side of the purchases account
(d) Credit side of the purchases returns account
(e) Credit side of creditors account.
(1 mark)
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36.In Retail Inventory Method, if the markup selling price is decreased but not below the original selling
price, it is known as
(a) Markup cancellation (b) Markdown (c) Markdown cancellation
(d) Net markup (e) Net markdown.
(1 mark)
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37.According to which of the following accounting concepts, are the shareholders treated as creditors for
the amount they pay on shares?
(a) Cost concept (b) Duality concept (c) Going concern concept
(d) Money measurement concept (e) Business entity concept.
(1 mark)
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38.The profit or loss on own debentures is to be accounted for at the time of
(a) Purchase of own debentures (b) Subsequent interest payment
(c) Cancellation of own debentures (d) Original issue of debentures
(e) Liquidation of the company.
(1 mark)
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39.The statement which helps an accountant to assess the arithmetical accuracy of the accounting process
is the
(a) Balance sheet (b) Profit and loss account
(c) Cash book (d) Trial balance (e) Bank reconciliation statement.
(1 mark)
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40.Which of the following is a liability of a firm?
(a) Debit balance of discount column of cash book
(b) Credit balance of bank pass book
(c) Debit balance of bank column of cash book
(d) Debit balance of cash column of cash book
(e) Credit balance of bank column of cash book.
(1 mark)
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41.Following information pertains to Nilgiri Limited for the year 2005-06:
Opening balance of provision for bad and doubtful debts account Rs. 18,000
Bad debts during the year Rs. 15,000
Closing balance of sundry debtors Rs.3,30,000
If the company has the practice of maintaining provision at the rate of 5% on sundry debtors, the
amount to be debited to profit and loss account for the period ended March 31, 2006, was
(a) Rs.6,500 (b) Rs.13,500
(c) Rs.10,720 (d) Rs.20,800 (e) Rs.10,680.
(1 mark)
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42.Nalli Ltd. proposed to issue 10,000 equity shares of Rs.100 each at a premium of 150%. The minimum
amount of application money to be collected per share is
(a) Rs.5.00 (b) Rs.7.50 (c) Rs.15.00 (d) Rs.10.00 (e)
Rs.12.50.
(1 mark)
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43.While preparing the final accounts of the company, the accountant of Nisha Limited located the
following errors:
??The Returns Inward book was undercast by Rs.1,377.
??A purchase of Rs.1,252 was posted to the debit of the supplier’s account as Rs.125.
??Wages of Rs.500 paid for installation of a new machine was debited to wages account.
??Sales returns of Rs.877 were taken into stock but no entry in respect of the transaction was passed
in the books.
The difference in Trial Balance of the company on account of the above errors is
(a) Rs.Nil (b) Rs.877 (c) Rs.1,377 (d) Rs.255 (e)
Rs.4,131.
(2 marks)
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44.Consider the following data pertaining to Nupur Limited for the period 2005-2006:
Particulars Rs.
Opening inventory 15,00,000
Purchases during the year 55,00,000
Sales during the year 54,00,000
A physical inventory taken on March 31, 2006 showed an ending inventory of Rs.25,75,000.
Company’s gross profit on sales was constant at 25% through out the year. The management of the
company suspects pilferage of inventory. The estimated cost of missing inventory on the last day of the
financial year was
(a) Rs.2,00,000 (b) Rs.3,75,000 (c) Rs.1,75,000
(d) Rs.2,75,000 (e) Rs.3,25,000.
(2 marks)
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45.On April 01, 2005 the balance of 12% Debentures of Rs.100 each of Neeti Ltd. was Rs.5,00,000. The
company reserves the right to redeem the debentures in any year by purchase in the open market.
Interest on debentures is payable on September 30, and March 31, every year.
On July 01, 2005, the company purchased 2,000 of its own 12% debentures as investment at Rs.99
cum-interest.
The company cancelled its own 2,000 debentures on March 31, 2006.
The amount of profit/loss on cancellation of own debentures on March 31, 2006 was
(a) Rs.6,000 (profit) (b) Rs.4,000 (loss) (c) Rs.4,000 (profit)
(d) Rs.3,000 (loss) (e) Rs.8,000 (profit).
(2 marks)
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46.Nikhilesh Limited has an account with Century Bank Ltd. Its balance as shown in the Cash book on
December 31, 2005 stood at Rs.2,15,270 (Credit).
The above balances were not agreeing with the balance shown by the bank statement. On scrutiny, the
following discrepancies were noticed:
i. Outstation cheques for Rs.78,000 deposited in the bank on December 22, 2005 were not collected
by the bank as on December 31, 2005.
ii. Bank charges amounting to Rs.1,500, and Bank interest amounting to Rs.5,500 were not recorded in the
cash book.
iii. Cheques amounting to Rs.15,000 issued were not presented for payment as on December 31,
2005.
iv. A deposit of Rs.22,500 in Career Bank was wrongly entered in Century Bank column in the cash
book.
The bank balance as per pass book as on December 31, 2005 was
(a) Rs.2,62,770 (debit) (b) Rs.3,07,770 (credit) (c) Rs.2,78,770 (debit)
(d) Rs.3,07,770 (debit) (e) Rs.2,62,770 (credit).
(2 marks)
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47.On April 01, 2005, Narendra Limited showed a balance of Rs.15,600 to the credit of Provision for bad
and doubtful debts. On March 31, 2006 the Sundry Debtors showed a balance of Rs.2,50,400. Out of
the total debtors, the status of the following debtors is as follows:
Mita Rs.8,000 - identified as bad debt and is to be written off
Gita Rs.7,500 - expected to realize only 80%
Sita Rs.8,000 - expected to realize only 60%
Rita Rs.7,500 - filed insolvency petition and the recovery chances are remote.
All other debts as on the date of finalisation of accounts are estimated to be good. The company
maintains a suitable provision for doubtful debts. The amount debited to the profit and loss account in
respect of provision for bad and doubtful debts for the year ended March 31, 2006 was
(a) Rs.14,300 (b) Rs.8,700 (c) Rs.4,600 (d) Rs.6,400 (e)
Rs.4,900.
(2 marks)
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48.The following is the balance sheet of Nagendra Ltd. as on March 31, 2006:
Liabilities Rs. Assets Rs.
Equity shares of Rs.10 each fully paid up 10,00,000 Sundry assets 19,50,000
12% Redeemable preference shares of Rs.100
each fully paid up 10,00,000
Investments 4,50,000
General Reserve 4,00,000 Cash at bank 4,00,000
Profit & Loss account 2,50,000
Share premium 25,000
Sundry creditors 1,25,000
28,00,000 28,00,000
The Board of Directors of the company decided to redeem the preference shares at a premium of 10%.
In order to facilitate the redemption, the Board has taken the following decisions:
??To sell the investments for Rs.4,20,000.
??To issue sufficient equity shares at a premium of Rs.2 per share to raise the balance need of funds.
??To maintain minimum bank balance of Rs.50,000.
The Board of Directors initiated the above course of action during the month of April, 2006 and
redeemed all the preference shares.
The amount to be transferred to Capital Redemption Reserve is
(a) Rs.70,000 (b) Rs.5,25,000 (c) Rs.1,25,000
(d) Rs.8,00,000 (e) Rs.7,25,000.
(3 marks)
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49.Consider the following information pertaining to Niharika Ltd. for the year 2005-2006:
Particulars 1st April 2005 31st March 2006
Inventory Rs. 52,200 Rs. 65,800
Sundry debtors Rs.1,12,000 Rs. 60,000
Sundry creditors Rs. 50,000 Rs. 48,000
Total credit sales made during the year was Rs.9,75,000. The amount of discount allowed to the sundry
debtors during the period was Rs.8,400. The cost of goods sold of the company was 80% of the sales.
Cash collected from the sundry debtors during the year was
(a) Rs.10,18,600 (b) Rs.10,87,000 (c) Rs.10,27,000
(d) Rs.9,75,000 (e) Rs.9,23,000.
(2 marks)
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50.Neeta Ltd. purchased furniture for Rs.6,00,000 two years ago. The current book value of the furniture is
Rs.3,84,000. If the company charges depreciation on furniture under written down value method, the
rate of depreciation charged was
(a) 35% (b) 30% (c) 25% (d) 20% (e) 15%.
(1 mark)
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51.Nitish Ltd. invited applications for 1,00,000 equity shares of Rs.10 each at a premium of Rs.2 per share. The
entire issue was underwritten by three underwriters in the following percentages:
Ram 30%
Sham 40%
Graham 30%
The details of marked and unmarked applications received are:
Marked applications of Ram 20,000 shares
Sham 32,000 shares
Graham 28,000 shares
Unmarked applications 16,000 shares
The final liability of Sham in terms of number of shares is
(a) Nil (b) 9,600 (c) 3,200 (d) 16,000 (e) 8,000.
(2 marks)
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52.Consider the following data pertaining to Nikki Ltd. for the month of December 2005:
Particulars As on December 01, 2005 (Rs.) As on December 31, 2005 (Rs.)
Stock 5,80,000 1,60,000
Sundry creditors 1,50,000 60,000
The company makes all purchases on credit. During the month of December 2005, the company paid a
sum of Rs.4,50,000 to the suppliers. The goods are sold at 25% above the cost. The sales for the month
of December 2005 were
(a) Rs.7,80,000 (b) Rs.9,75,000 (c) Rs.4,90,000
(d) Rs.3,60,000 (e) Rs.3,30,000.
(2 marks)
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53.Niladri Ltd. purchased a machinery on April 01, 2003 for Rs.2,40,000. It was estimated that the
machinery will have a useful life of 5 years after which it will have no salvage value. If the company
follows sum-of-the-years’-digits method of depreciation, the amount of depreciation charged during the
year 2005-2006 was
(a) Rs.32,000 (b) Rs.48,000 (c) Rs.30,000
(d) Rs.16,000 (e) Rs.64,000.
(1 mark)
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54.Narahari Ltd. issued 3,000 10% Preference shares of Rs.100 each at par, which are redeemable at a
premium of 10%. For the purpose of redemption, the company issued 2,000 Equity Shares of Rs.100
each at a premium of 20% per share. At the time of redemption of Preference Shares, the amount to be
transferred by the company to the Capital Redemption Reserve Account is
(a) Rs.50,000 (b) Rs.40,000 (c) Rs.2,00,000
(d) Rs.1,00,000 (e) Rs.70,000.
(2 marks)
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55.The value of equity share of Naresh Ltd. as per yield method is Rs.254.50 and as per fair value method
is Rs.315.50. The value of the equity share according to intrinsic value method is
(a) Rs.285.00 (b) Rs.265.00 (c) Rs.315.50
(d) Rs.225.50 (e) Rs.376.50.
(1 mark)
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56.Naveen, a sole proprietor, maintains a three columnar cash book to record his business transactions.
Consider the following data pertaining to his business for the month of December, 2005:
Particulars Rs.
Opening cash on hand 25,000
Balance at bank 3,50,000
Cheque received from a customer (after allowing a discount of Rs.2,500) 50,000
Paid the supplier by cheque (discount allowed by the supplier: Rs.10,000) 1,00,000
Salaries paid to staff in cash 20,000
Received a cheque from Daulat Ram, a customer (who owed Rs.16,500 and was
allowed a discount of 10%)
14,850
Paid M/s. Bharani and Co. in full settlement of their dues of Rs.28,500 26,250
Received from Rama & Bros. (as against Rs.38,900) in full and final settlement 36,200
The total amount of discount recorded on the debit side of the three columnar cash book for the month
of December 2005 was
(a) Rs.5,200 (b) Rs.4,150 (c) Rs.6,850
(d) Rs.12,250 (e) Rs.13,900.
(2 marks)
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57.On December 31, 2005, Nirlap Ltd. buys 1,000 of its own 12% Debentures of the par value of Rs.100
each at Rs.97 ex-interest from the open market. The company pays debenture interest half-yearly on
September 30 and March 31.
The amount paid by the company in respect of the above purchase was
(a) Rs.93,000 (b) Rs.97,000 (c) Rs.1,00,000
(d) Rs.1,01,000 (e) Rs.1,04,000.
(1 mark)
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58.The following balances are extracted from the books of accounts of Nayar Ltd. as on March 31, 2006:
Particulars Rs. Particulars Rs.
Share capital account 26,88,000 Manufacturing wages 8,19,400
Preliminary expenses 2,11,000 Sales 71,08,000
Sundry creditors 11,00,600 Returns inward 55,600
15% Term- Loan 4,00,000 Salaries 27,98,400
Closing inventory as on
March 31, 2006
20,52,000
Returns outward 20,600
Cash at bank 4,40,000 Discount allowed 82,000
Sundry debtors 14,30,000 Office administrative expenses 2,17,400
Bills Payable 15,55,000 Prepaid insurance 12,000
Provision for doubtful debts 20,000 Insurance 8,000
Fittings and Fixtures 7,55,400 Bad debts 72,400
Discount received 92,000 Commission received 1,12,800
Opening inventory as on
April 01, 2005
10,93,600
Outstanding salaries 30,000
Purchases 30,79,800
The total of Trial Balance of the company as on March 31, 2006 was
(a) Rs.1,10,33,000 (b) Rs.1,31,27,000 (c) Rs.1,30,97,000
(d) Rs.1,31,23,000 (e) Rs.1,10,75,000.
(2 marks)
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59.Mr. Narain Singh is the proprietor of M/s. Narain Enterprises. The capital contributed by him amounted
to Rs.1,90,000. On April 01, 2005, he withdrew Rs.30,000. The interest on capital and interest on
drawings is 12% per annum and 10% per annum respectively. At the time of finalization of accounts of
M/s. Narain Enterprises for the year 2005-2006, the journal entry to record interest on drawings is
Rs. Rs.
(a) Bank account Dr. 3,000
To interest on drawings account 3,000
(b) Interest on drawings account Dr. 3,600
To Capital account 3,600
(c) Interest on drawings account Dr. 2,000
To Bank account 2,000
(d) Interest on capital account Dr. 2,400
To Interest on drawings account 2,400
(e) Capital account Dr. 3,000
To Interest on drawings account 3,000.
(1 mark)
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60.The following information is extracted from the books of Nasser Limited:
i. The paid-up share capital of the company consists of 1,000, 15% preference shares of Rs.100 each
and 20,000 equity shares of Rs.10 each.
ii. The average annual profits of the company after providing for depreciation and taxation amounted
to Rs.95,000. It is considered necessary to transfer Rs.15,000 to general reserve before declaring
any dividend.
iii. The normal return expected by investors on equity shares in similar business is 10%.
The value of an equity share of Nasser Ltd. is
(a) Rs.32.50 (b) Rs.37.50 (c) Rs.10.00 (d) Rs.25.00 (e)
Rs.27.50.
(2 marks)
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61.Nirmal Ltd. started its operations on April 15, 2005. Consider the following data pertaining to the
company for the year 2005-2006:
Particulars Rs.
Sales (85% collected during the year 2005-2006) 16,00,000
Bad debts written off 4,000
Issue of shares for cash 10,00,000
Purchase of fixed assets for cash 8,00,000
Depreciation 80,000
Amount received by way of short-term loan 2,00,000
Short-term loan repaid 50,000
Payment towards manufacturing and administrative expenses 7,00,000
Amount paid to purchase raw materials 3,00,000
Amount deposited in bank 4,00,000
The balance of cash as on March 31, 2006 was
(a) Rs.3,60,000 (b) Rs.4,55,000 (c) Rs.2,50,000
(d) Rs.5,50,000 (e) Rs.3,10,000.
(2 marks)
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62.In the books of Nalini Ltd., the balance in the furniture and fixtures account as on March 31, 2005 was
Rs.7,50,000. The following additional information is given:
i. Sales of the company during the year 2005-2006 include Rs.25,500 in respect of sale of an old
furniture on March 31, 2006. The book value of the furniture on April 01, 2005 was Rs.38,000
ii. Depreciation @ 5% is to be provided on furniture & fixtures.
The amount at which the furniture and fixtures is shown in the balance sheet of Nalini Ltd. as on
March 31, 2006 was
(a) Rs.6,15,000 (b) Rs.6,76,400 (c) Rs.6,44,500
(d) Rs.6,87,000 (e) Rs.6,74,500.
(3 marks)
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63.Nakshtra Ltd. issued 10,000 equity shares of Rs.10 each at a premium of 20%. The share amount was
payable as:
On application Rs.2
On allotment (including premium) Rs.5
On first call Rs.3
On second and final call Rs.2
Applications were received for 15,000 shares and the shares were allotted to applicants on pro-rata.
Naveen, who was allotted 500 shares, failed to pay the first call. On his subsequent failure to pay the
second and final call, all his shares were forfeited. Out of the forfeited shares, 400 shares were re-issued
@ Rs.8 per share. The amount transferred to capital reserve is
(a) Rs.200 (b) Rs.1,000 (c) Rs.800 (d) Rs.1,300 (e)
Rs.1,200.
(2 marks)
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64.Consider the following particulars pertaining to the sole proprietor business of Mr. Naveen:
Particulars
As on April 01, 2005
Rs.
As on March 31, 2006
Rs.
Capital 10,50,000 ?
Loan from bank 5,25,000 3,75,000
Sundry creditors 75,000 1,05,000
Fixed assets 8,25,000 7,65,000
Inventory 4,50,000 5,25,000
Sundry debtors 2,10,000 2,70,000
Cash and bank 1,65,000 2,55,000
The profit for the year 2005-2006 was
(a) Rs.13,35,000 (b) Rs.1,50,000 (c) Rs.2,85,000
(d) Rs.1,95,000 (e) Rs.1,75,000.
(2 marks)
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65.The balance in machinery account of Leo Ltd. as on April 01, 2005 was Rs.85,000. The following
transactions took place during the year 2005-2006:
Date Particulars Amount (Rs.)
01-07-2005 Machinery purchased 90,000
01-10-2005 Machinery sold (book value as on April
01, 2005 is Rs.40,000)
50,000
01-01-2006 New machinery purchased 80,000
If the company charges depreciation at the rate of 10%, the balance in machinery account as on March
31, 2006 was
(a) Rs.1,84,500 (b) Rs.1,93,500 (c) Rs.2,05,000
(d) Rs.1,99,000 (e) Rs.2,01,750.
(3 marks)
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66.The total of debit side of trial balance of a company is Rs.4,75,000 and that of the credit side is
Rs.5,03,000. Subsequently the following mistakes are discovered:
Particulars
Correct Amount
(Rs.)
Amount which appears in
trial balance (Rs.)
Opening stock 30,600 40,600
Advertisement expenses 20,000 20,000 (credit side)
Interest from investments 36,000 30,000
Sundry creditors 76,000 80,000
The total of the corrected trial balance is
(a) Rs.4,74,900 (b) Rs.4,59,900 (c) Rs.4,85,000
(d) Rs.4,84,900 (e) Rs.4,50,000.
(2 marks)
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67.M/s.Neta Enterprises introduced the imprest system of petty cash book, the amount of imprest being
Rs.2,500. The petty cash transactions during the month of June 2005 are as under:
Particulars Amount (Rs.)
Stamps 265
Conveyance 270
Repairs 516
Stationery 450
Other office expenses 120
The amount of cash received on July 01, 2005 to make up the imprest balance was
(a) Rs.2,500 (b) Rs.879 (c) Rs.855 (d) Rs.1,621 (e)
Rs.1,000.
(1 mark)
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68.The inventory of Nikhil Ltd. as on March 31, 2005 is overvalued by Rs.24,000. The net profit for the
year 2005-2006 was
(a) Overstated by Rs.24,000 (b) Understated by Rs.24,000
(c) Overstated by Rs.48,000 (d) Understated by Rs.48,000 (e) Not affected.
(1 mark)
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69.Consider the following data pertaining to Naidu Ltd. for the month of June 2005:
Purchases Issues Balance
Date Quantity
(Kg.)
Rate
(Rs.)
Quantity
(Kg.)
Quantity
(Kg.)
Rate
(Rs.)
01-06-2005 1,000 22.80
02-06-2005 800 24
10-06-2005 1,200 25
25-06-2005 2,000
If the company uses weighted average method for inventory valuation, the value of inventory as on
June 30, 2005 was
(a) Rs.12,000 (b) Rs.23,333 (c) Rs.24,000
(d) Rs.25,000 (e) Rs.22,800.
(1 mark)
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70.Consider the following data pertaining to Naidu Ltd. for the month of June 2005:
Purchases Issues Balance
Date Quantity
(Kg.)
Rate
(Rs.)
Quantity
(Kg.)
Quantity
(Kg.)
Rate
(Rs.)
01-06-2005 1,000 22.80
02-06-2005 800 24
10-06-2005 1,200 25
25-06-2005 2,000
If the company uses FIFO Method for inventory valuation, the value of inventory as on June 30, 2005
was
(a) Rs.12,500 (b) Rs.25,000 (c) Rs.24,000
(d) Rs.22,800 (e) Rs.20,000.
(1 mark)
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71.Consider the following data pertaining to Naidu Ltd. for the month of June 2005:
Purchases Issues Balance
Date Quantity
(Kg.)
Rate
(Rs.)
Quantity
(Kg.)
Quantity
(Kg.)
Rate
(Rs.)
01-06-2005 1,000 22.80
02-06-2005 800 24
10-06-2005 1,200 25
25-06-2005 2,000
If the company uses LIFO for inventory valuation, the value of inventory as on June 30, 2005 was
(a) Rs.12,500 (b) Rs.25,000 (c) Rs.24,000 (d) Rs.22,800 (e) Rs.20,000
(1 mark)
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72.Nandita Ltd. issued 1,000, 10% debentures at the rate of Rs.100 each during the year 2002-03. Interest
on debentures is payable half yearly on September 30 and March 31 every year. The company has
power to purchase its own 10% debentures in the open market for cancellation. The following
purchases were made during the year 2005-2006:
On July 01, 2005 – 400 of its own 10% debentures at the rate of Rs.96 ex-interest.
On December 01, 2005 – 300 of its own 10% debentures at the rate of Rs.102 cum- interest.
The total amount debited to own debentures investment account was
(a) Rs.70,000 (b) Rs.68,500 (c) Rs.69,000 (d) Rs.70,600 (e) Rs.71,600.
(2 marks)
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73.In the year 2005- 2006, Nikhilesh Ltd. purchased a new machine and made the following payments in
relation to it:
Rs. Rs.
Cost as per supplier’s list 5,20,000
Less: Agreed discount 30,000 4,90,000
Delivery charges 10,000
Erection charges 20,000
Annual maintenance charges 30,000
Additional components to increase capacity of the
machine
40,000
Annual insurance premium 5,000
The cost of the machine is
(a) Rs.5,40,000 (b) Rs.5,45,000 (c) Rs.4,70,000 (d) Rs.5,60,000 (e) Rs.5,70,000.
(1 mark)
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74.As per the Profit and loss account of Naga Ltd. for the year ended March 31, 2006 the amount of salary
expenditure was Rs.4,15,000. If the balance of outstanding salaries as on April 01, 2005 and March 31,
2006 was Rs.64,000 and Rs.74,000 respectively, the cash paid on account of salaries during the year
2005-06 was
(a) Rs.4,05,000 (b) Rs.4,03,000 (c) Rs.4,67,000
(d) Rs.4,27,000 (e) Rs.4,79,000.
(1 mark)
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75.The total purchases of Nagar Ltd. is Rs.50,000. If the gross profit of the company is 20% on sales and
the closing stock is more than the opening stock by Rs.10,000, the cost of goods sold will be
(a) Rs.75,000 (b) Rs.62,500 (c) Rs.40,000 (d) Rs.37,500 (e) Rs.30,000.
(1 mark)
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76.Which of the following transactions would cause a change in owner’s equity?
(a) Repayment of a bank loan (b) Amount received from a debtor
(c) Amount paid to a creditor (d) Purchase of a second-hand machine
(e) Sale of land on credit for a price above cost.
(1 mark)
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77.If the yield rate of return of Nirupama Ltd. is 14%, normal rate of return is 8% and nominal value of its
equity share is Rs.10, then the value of an equity share of Nirupama Ltd. is
(a) Rs.17.50 (b) Rs.13.33 (c) Rs.10.00 (d) Rs.7.50 (e) Rs.5.71.
(1 mark)
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