B.

COM(HONS),5TH SEMESTER

INTERNAL SUGGESTION

ADVANCED FINANCIAL ACCOUNTING

1. Branch not keeping the full system of accounting is also known as

(a) Foreign branch

(b) Dependent branch

(c) Independent branch

(d) None of the above

Answer (b) Dependent branch

2. Branch keeping the full system of accounting is also known as

(a) Independent branch

(b) Dependent branch

(c) Foreign branch

(d) None of the above

Answer (a) Independent branch

3. Stock and debtor system is popularly known as

(a) Foreign branch methods

(b) Analytical methods

(c) Synthetic methods

(d) Analytical methods

Answer (d) Analytical methods

4. Branch debtor system is otherwise known as

(a) Synthetic methods

(b) Stock and debtor methods

(c) Foreign branch methods

(d) Analytical methods

Answer (a) Synthetic methods

5. Branch account is prepared to ascertain

(a) Profit and loss of the branch

(b) Financial statement of the business

(c) Assets and liability of the head office

(d) None of the above

Answer (a) Profit and loss of the branch

6. The system in which profit and loss made by the branch is determined by
preparing branch trading and profit & loss account at cost price is

(a) Synthetic methods

(b) Stock and debtor methods

(c) Final account methods

(d) Analytical methods

Answer (c) Final account methods

7. The account prepaired for the ascertaining the amount of gross profit
earned by the branch under stock and debtor system is

(a) Branch adjustment account

(b) Branch stock account

(c) Goods sent to branch account

(d) Branch debtor account

Answer (a) Branch adjustment account

8. The account prepared to adjust the loading included in the value of

opening and closing stock at branch is termed as

(a) Branchadjustmentaccount

(b) Stock reserve and surplus account

(c) Goods sent to branch account

(d) Branch debtor account

Answer (b) Stock reserve and surplus account

9. The account prepared in the same way as that when goods are invoice at
cost, except that all entries are made at invoice price is termed as

(a) Branch adjustment account

(b) Branch stock account

(c) Goods sent to branch account

(d) Branch debtor account

Answer (b) Branch stock account

10. Which methods is adopted generally in those branches which are small in
size

(a) Debtors method

(b) Stock and debtor methods

(c) Foreign branch methods

(d) Analytical methods

Answer (a) Debtors method

11. In which methods goods are sent by the head office to the branch at
invoice price

(a) Invoice price method

(b) Debtors method

(c) Stock and debtor methods

(d) Foreign branch methods

Answer (a) Invoice price method

12. Which account is prepaired when branch sells goods on credit

(a) Branch adjustment account

(b) Branch debtors account

(c) Goods sent to branch account

(d) Branch debtor account

Answer (b) Branch debtors account

13. Which books is prepared to maintaining the small expenses like carriage
postage, entertainment etc.

(a) Management books

(b) Petty cash book

(c) Accounting books

(d) None of the above

Answer (b) Petty cash book

14. The goods sent by the head office may be either at ……..or cost plus profit

(a) Cost price

(b) Selling price

(c) Market price

(d) Invoice price

Answer (a) Cost price

15. Which account is prepared for recording all cash transaction relating to
the branch?

(a) Goods sent to branch account

(b) Branch debtor account

(c) Branch cash account

(d) None of the above

Answer (c) Branch cash account

(16) When the lessor receives payment, the credits—

(i) Lessee account
(ii) Royalty account
(iii) Short workings account.
Ans.(i) Lessee account
(17) Royalty earned by the lessee is credited to—
(i) Sub-lessee account
(ii) Profit and loss account
(iii) Royalty receivable account.
Ans.(iii) Royalty receivable account.
(18) The balance of royalty payable account is transferred to—
(i) Profit and loss account
(ii) Royalties suspense account
(iii) Production account.
Ans.(iii) Production account.
(19) The balance of royalty‟s receivable account is transferred to —
(i) Profit and loss account
(ii) Royalties suspense account
(iii) Production account. Ans.(i) Profit and loss account
(20) Under the double account system, the profit and loss account is called—
1. Profit and loss account
2. Income and expenditure account
3. Revenue account. Ans.(iii) Revenue account.
(21) Under the double account system, the profit and loss appropriation account is called
— (i) Net revenue account
(ii) Profit and loss appropriation account
(iii) Profit and loss account. Ans. (i) Net revenue account
(22) The depreciation on the fixed assets, under the double account system, is shown as
— 1. Depreciation reserve on the liabilities side of the general balance sheet
2. A deduction from the fixed assets
3. An expenditure on capital account in the first section of the balance sheet.
Ans. Depreciation reserve on the liabilities side of the general balance sheet
(23) Under the double account system, interest on debentures is shown in—
(i)Revenue account
(ii) Net revenue account
(iii) Profit and loss account. Ans.(ii) Net revenue account
(24) Share forfeited account is shown on—
1. Liabilities side of the general balance sheet
2. Credit side of the net revenue account
 3. Credit side of the receipts and expenditures on capital account
Ans.(iii) Credit side of the receipts and expenditures on capital account
(25) A fixed asset originally acquired for Rs. 20,000 is to be replaced by new one. The
estimated cost of replacement of the original asset is Rs. 30,000. Hence, the revenue
charge equals — (i) Rs. 20,000 (ii) Rs. 10,000 (iii)Rs. 30,000. Ans. (iii) Rs. 30,000.

(26) A fixed asset originally acquired for Rs. 20,000 is replaced by a new asset costing
Rs. 50,000. But the estimated cost of replacement of the original asset is B Rs. 30,000.
Hence, the capital charge equals—
1. Rs. 20,000
2. Rs. 50,000
3. Rs. 30,000. Ans.(i) Rs. 20,000
(27) A fixed asset originally acquired for Rs. 20,000 is replaced by a new asset. The
estimated cost of the replacement of the original asset is Rs. 30,000. The sale proceeds of
old material amounted to Rs. 2,000.Hence, the revenue charge equals
(i) Rs. 28,000
(ii) Rs. 18,000
(iii) Rs. 30,000. Ans.(i) Rs. 28,000

(28) Calls in advance are shown on the—

1. Liabilities side of the general balance sheet
2.. Expenditure side of receipts and expenditures on capital account
3. Receipts side of receipts and expenditures on capital account. Ans. Receipts side of
receipts and expenditures on capital account.

(29) Plant and machinery is shown on the—

(i) Assets side of the general balance sheet
(ii) Expenditure side of the receipts and expenditures on capital account
(iii) Receipts side of the receipts and expenditures on capital account. Ans.(ii)
Expenditure side of the receipts and expenditures on capital account

(30) The value of goodwill, according to the simple profit method, is— 16. The product
of current year's profit and number of years 17. The product of last year's profit and
number of years 18. The product of average profits of the given years and number of
years. Ans.(iii)The product of average profits of the given years and number of years.

(31) The goodwill of a business is to be valued at 3 years' purchase of the average profits
of the last three years. The profits of the last three years are Rs. 5,000, Rs. 6,000 and Rs.
7,000 respectively. Hence, the goodwill be valued at— (i) Rs. 18,000 (ii) Rs. 12,000 (iii)
Rs. 15,000. Ans. (i) Rs. 18,000

(32) A business has a capital of Rs. 40,000 at the end. It had earned profits of Rs. 5,000
during the year. Hence, the average capital of the business will be — (i) Rs. 42,500 (ii)
Rs. 37,500 (iii) Rs. 35,000. Ans.(ii) Rs. 37,500
(33) If the average capital of a business is Rs. 60,000 and the normal rate of profit is
15%, then the normal profits will amount to— (i) Rs. 10,000 (ii) Rs. 9,000 (iii) Rs.
15,000. Ans.(ii) Rs. 9,000

(34) If the super-profits of a business are Rs. 6,000 and the normal rate of profit is 10%,
then the amount of goodwill as per the capitalisation method will be— (i)Rs. 60,000 (ii)
Rs. 600 (iii) Neither of the two. Ans.(i)Rs. 60,000

(35) It is given that net assets available for equity and preference shares amount to Rs.
90,000. The paid up capitals are 10,000 equity shares of Rs. 2 each and 5,000 preference
shares of Rs. 10 each. Therefore, value of an equity share will be— (i) Rs. 2 per share (ii)
Rs. 4 per share (iii) Rs. 5 per share. Ans.(ii) Rs. 4 per share

(36) It is given that net assets available for equity and preference shares amount to Rs.
1,87,000. The paid-up capitals are—10,000 equity shares of Rs. 4 each and 5,000
preference shares of Rs. 10 each. Therefore, value of a preference share will be— (i) Rs.
10 per share (ii) Rs. 8 per share (iii) Rs. 20 per share. Ans.(iii) Rs. 20 per share.

(37) Under the yield method of valuation of equity share capital, if for an equity share of
Rs. 50, the normal rate of return is 10% and the expected rate of return is 5%, then the
value of an equity share will be— 19. Rs. 25 20. Rs. 50 21. Rs. 100. Ans.(i) Rs. 25

(38) For calculating the value of an equity share by intrinsic value method, it is essential
to(i) Normal rate of return (ii) Expected rate of return (iii) Net equity. Ans.(iii) Net
equity.

(39) For calculating the value of an equity share by yield method, it is essential to know
— (i)Expected rate of return (ii) Called-up equity share capital (iii) Capital employed.
Ans. (i) Expected rate of return

(40) For calculating price-earnings ratio, it is essential to know— (i) Market value per
share (ii) Nominal value per share (iii) Paid-up value per share. Ans.(i) Market value per
share

(41) For calculating the value of an equity share by earning capacity method, it is
essential to know — (i)Nominal value per share (ii) Rate of earning (iii) Dividend per
share. Ans.(ii) Rate of earning

(42) A Ltd. and B Ltd. go into liquidation and a new company X Ltd. is formed. It is a
case of— (i) Absorption (ii) External reconstruction (iii) Amalgamation. Ans.(iii)
Amalgamation.

(43) X Ltd. goes into liquidation and a new company Z Ltd. is formed to take over the
business of X Ltd. It is a case of— (i) Absorption (ii) External reconstruction (iii)
Amalgamation. Ans.(ii) External reconstruction
(44) X Ltd. goes into liquidation and an existing company Z Ltd. purchases the business
of X Ltd. It is a case of— (i) Absorption (ii) External reconstruction (iii) Amalgamation.
Ans.(i) Absorption

(45) Accumulated profits include— (i) Provision for doubtful debts (ii) Superannuation
fund (iii) Workmen's compensation fund. Ans.(iii) Workmen's compensation fund.