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ICFAI MBA Accounting & Finance question paper

Accounting & Finance (SMB108)

Answer all 72 questions.

Marks are indicated against each question.

Total Marks : 100

1. Anticipate no future profits but provide all the future losses is based on
(a) Cost concept
(b) Consistency concept
(c) Conservatism concept
(d) Business entity concept
(e) Accounting period concept. (1 mark)
2. Which of the following events/transactions is not recorded in the books of account of a business?
(a) Loss of stock by fire
(b) Sale of an asset on credit
(c) Purchase of a new asset in exchange of an old asset
(d) Withdrawal of goods by the proprietor for personal consumption
(e) Receipt of interest by proprietor on bank fixed deposit held jointly with spouse. (1 mark)
3. The expenses and incomes pertaining to full trading period are taken to the Profit and Loss account of
a business, irrespective of their actual payment or receipt. This is in recognition of
(a) Duality concept
(b) Accrual concept
(c) Time period concept
(d) Going concern concept
(e) Business entity concept. (1 mark)
4. Which of the following is not a use of fund?
(a) Incurring losses
(b) Acquiring assets
(c) Paying dividends
(d) Incurring expenses
(e) Incurring liabilities. (1 mark)
5. Which of the following financial statements is prepared as of a particular date?
(a) Balance sheet
(b) Cash flow statement
(c) Profit and loss account
(d) Income and expenditure statement
(e) Profit and loss appropriation account. (1 mark)
6. Which of the following is not a current asset?
(a) Inventories
(b) Bills receivable
(c) Prepaid expenses
(d) Accounts receivable
(e) Income received in advance. (1 mark)
7. Which among the following statements can be used to assess the liquidity of a company?
(a) Balance sheet
(b) Profit and loss account
(c) Manufacturing account
(d) Bank reconciliation statement
(e) Profit and loss appropriation account. (1 mark)
8. Revenue Reserve represents
(a) Bad debts realized
(b) Profit on sale of fixed assets.
(c) Gain out of revaluation of assets
(d) Premium on issue of debentures/shares
(e) Accumulated earnings from the profits. (1 mark)
9. Which of the following items is not listed in the schedule for reserve and surplus?
(a) Sinking funds
(b) Capital reserve
(c) Share premium account
(d) Capital redemption reserve
(e) Provision for tax, dividends etc. (1 mark)
10. Who among the following is not an internal user of Financial Statements?
(a) Partners
(b) Officers
(c) Investors
(d) Managers
(e) Board of Directors. (1 mark)
11. Which of the followings is/are false?
I. Cash basis of revenue recognition considers the revenue as realized when sale is completed.
II. Accrual basis for revenue recognition considers the revenue as realized when sale is completed.
III. Financial statements of companies are normally prepared for a period of twelve months. This
period is known as calendar year.
IV. Financial statements are normally prepared for a period of twelve months. This period is known
as accounting year.
(a) Only (I) above
(b) Only (II) above
(c) Both (I) and (III) above
(d) Both (II) and (IV) above
(e) (I), (II) and (III) above. (1 mark)
12. When applied to Balance-Sheet the convention of conservatism results in
(a) Overstatement of capital
(b) Understatement of assets
(c) Understatement of liabilities and provisions
(d) Understatement of assets and liabilities and provisions
(e) Understatement of assets, liabilities and provisions and capital. (1 mark)
13. At the beginning of the current year, the owners equity of a firm is Rs.1,80,000. During the year, the
assets and liabilities of the firm have increased by Rs.1,80,000 and Rs.2,20,000 respectively. Owners
equity at the end of the year will be
(a) Rs.1,40,000
(b) Rs.1,80,000
(c) Rs.2,20,000
(d) Rs.3,60,000
(e) Rs.4,00,000. (2marks)
14. Which of the following is an example of capital expenditure?
(a) Loss of stock by fire
(b) Insolvency of a debtor
(c) Loss due to embezzlement by the Manager
(d) Interest on borrowing during the period of construction works
(e) Compensation paid for breach of a contract for supply of goods. (1 mark)
15. The total of all the current assets of Intelligent Limited is Rs. 3,00,000. The following information is
also available from the trial balance of the company.
Sundry debtors Rs. 30,500
Current liabilities Rs. 16,400
Provision for taxation Rs. 12,000
Cash & bank balance Rs. 30,000
Bills receivable Rs. 25,000
Office typewriter Rs. 39,000
The only other current asset not included in the information above is closing stock. Its value must be
(a) Rs.1,98,000
(b) Rs.2,02,000
(c) Rs.2,04,500
(d) Rs.2,14,500
(e) Rs.2,41,500. (2marks)
16. If there is any short fall in profit and loss appropriation account of a company, then the short fall is to
be shown in the balance sheet as a
(a) Note to the Balance-sheet
(b) Deduction from the owners equity
(c) Deduction from the reserves & surpluses
(d) Profit & loss A/c on the asset side of the Balance-sheet
(e) Profit & loss A/c balance on the liability side of the Balance-sheet. (1 mark)
17. Materiality in accounting is decided
(a) By the size of an item
(b) By size of the business firm
(c) At the sole discretion of the accountant
(d) By the physical volume of the transaction
(e) By the knowledge as to whether an individual item is having a significant influence on financial
statement. (1 mark)
18. Which of the following is not an intangible asset?
(a) Patents
(b) Goodwill
(c) Trade mark
(d) Secret process
(e) Accounts receivable. (1 mark)
19. According to Companies Act, assets are to be classified in the following order
(a) i. Long term investments ii. Current assets
iii. Fixed assets iv. Misc. expenditure
(b) i. Current assets ii. Long term investments
iii. Fixed assets iv. Misc. expenditure
(c) i. Long term investments ii. Fixed assets
iii. Current assets iv. Misc. expenditure
(d) i. Fixed assets ii. Long term investments
iii. Current assets iv. Misc. expenditure
(e) i. Fixed assets ii. Current assets
iii. Long term investments iv. Misc. expenditure.
(1 mark)
20. Which of the following branches of accounting provides information that helps planning, control and
decision making?
(a) Tax Accounting
(b) Cost Accounting
(c) Inflation Accounting
(d) Financial Accounting
(e) Management Accounting. (1 mark)
21. Which of the following is not a prior period item?
(a) Difference arising because of non-accounting of TDS for last year
(b) Depreciation for last year revised in current year due to application of wrong rate
(c) Interest for last year which was not paid due to lack of proper details paid this year
(d) Difference arising in current year due to wrong stock valuation of an item in last year
(e) Arrears pertaining to last year on account of revision of wage structure paid to workers in
current year. (1 mark)
22. The periodical total of discount column on receipts side of a triple column cash book is entered on the
(a) Debit side of discount account
(b) Credit side of discount account
(c) Credit side of debtors account
(d) Credit side of creditors account
(e) Credit side of provision for discount account. (1 mark)
23. According to cash book of Mr. X there was a favorable balance of Rs.1,050 in his bank account. But
the pass book showed an overdraft balance .On a scrutiny of the transactions, the following
discrepancies were revealed.
i. A cheque payment of Rs.1,230 has been entered in the cash book as Rs.1,320.
ii. Xs personal cheque of Rs.2,200 received from his uncle was wrongly debited in cash book of
his business.
iii. Discount received from suppliers of Rs.100 had been wrongly entered in the bank column of cash
book.
The overdraft balance as per bank pass book is
(a) Rs. 960
(b) Rs.1,160
(c) Rs.1,170
(d) Rs.3,260
(e) Rs.3,440. (2marks)
24. Consider the following for Alvin Co. for the year 2009-10:
Cost of goods available for sale Rs.1,00,000
Total sales Rs. 80,000
Opening stock of goods Rs. 20,000
Gross profit margin 25%
Closing stock of goods for the year 2009-10 was
(a) Rs.20,000
(b) Rs.36,000
(c) Rs.40,000
(d) Rs.60,000
(e) Rs.80,000. (2marks)
25. M/s ABC Ltd. has the practice of creating provision for doubtful debts @ 5% on debtors. The balance
of provision for doubtful debts on April 01, 2009 and March 31, 2010 is Rs.30,000 and Rs.40,000,
respectively. If the amount collected from debtors is Rs.56,00,000, credit sales during the year 2009-2010 are
(a) Rs.54,00,000
(b) Rs.55,90,000
(c) Rs.56,00,000
(d) Rs.56,10,000
(e) Rs.58,00,000. (2marks)
26. M/s.Swapna Enterprises introduced the imprest system of petty cash book, the amount of imprest
being Rs.1,000. The petty cash transactions during the month of September 2010 are as under:
Particulars Amount (Rs.)
Stamps 145
Conveyance 186
Repairs 228
Stationery 154
Other office expenses 93
The amount of cash received on October 01, 2010 to make up the imprest balance was
(a) Rs. 194
(b) Rs. 422
(c) Rs. 578
(d) Rs. 806
(e) Rs.1,000. (1 mark)
27. Consider the following data pertaining to purchases made by Zodiac Ltd., a dealer in electronic goods,
for the month of September 2010:
Date Particulars No. of units
Rate per
unit
Rs.
Trade
Discount
September 01 Black & White TVs 50 3,000 10%
Colour TVs 10 6,000 10%
September 09 Tape Recorders 10 1,000 10%
Two-in-one 10 1,500 10%
September 19 Audio Cassettes 100 30 5%
On September 22, 2010, the company purchased from Indian Stationers on credit for office use 10
dozens of carbon papers at the rate of Rs.35 per dozen and 10 dozens of ball pens at the rate of Rs.25
per dozen.
The total amount debited to purchases account for the month of September 2010, was
(a) Rs.2,14,200
(b) Rs.2,14,350
(c) Rs.2,14,950
(d) Rs.2,38,000
(e) Rs.2,38,600. (2marks)
28. Which of the following transactions of a business is not recorded in journal proper?
(a) Opening entries
(b) Transfer entries
(c) Adjusting entries
(d) Rectification entries
(e) Purchase of goods on credit. (1 mark)
29. Which of the following is not disclosed by a Trial Balance ?
(a) Omission to record a transaction.
(b) Debit or credit posted twice in the ledger
(c) Omission to post an amount in an account
(d) Wrong amount debited or credited to an account
(e) Balance of an account wrongly listed in the trial balance. (1 mark)
30. Mr. Mohan sold goods to Mr. Raju for Rs.900. The catalogue price of the goods is Rs.1,000. Mr.
Mohan also offered a further discount of Rs.50 for spot payment of cash. Mr. Raju took delivery of
goods by paying cash.
The journal entry to record the transaction in the books of Mr. Mohan is
(a) Cash a/c Dr. Rs.850
Trade discount a/c Dr. Rs.100
Cash discount a/c Dr. Rs. 50
To Sales a/c Rs.1,000
(b) Cash a/c Dr. Rs.850
Discount a/c Dr. Rs.150
To Sales a/c Rs.1,000
(c) Cash a/c - Dr. Rs.850
Discount a/c Dr. Rs. 50
To Sales a/c Rs. 900
(d) Cash a/c Dr. Rs.850
To Sales a/c Rs. 850
(e) Mr. Rajus a/c Dr. Rs.850
To Sales a/c Rs. 850. (2marks)
31. Consider the following data pertaining to Dolphin Ltd. for the month of September 2010:
Particulars Rs.
Opening stock 30,000
Closing stock 40,000
Purchases 5,60,000
Returns outward 15,000
Returns inward 20,000
Carriage inward 5,000
If the gross profit is 20% of net sales, the gross sales for the month of September 2010 was
(a) Rs.5,40,000
(b) Rs.6,48,000
(c) Rs.6,68,750
(d) Rs.6,95,000
(e) Rs.7,05,000. (2marks)
32. Which of the following journal entry is passed while placing a purchase order of Rs.10,000 with
Mr.Shah?
(a) Purchases account Dr. Rs.10,000
To Shahs account Rs.10,000
(b) Purchases account Dr. Rs.10,000
To Cash account Rs.10,000
(c) Cash account Dr. Rs.10,000
To Shahs account Rs.10,000
(d) Shahs account Dr. Rs.10,000
To Cash account Rs.10,000
(e) No entry is passed. (1 mark)
33. The cost of goods sold does not include
(a) Excise duty
(b) Indirect labor
(c) Power and light
(d) Storage expenses
(e) Administrative expenses. (1 mark)

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