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Financial Statements of Not for Profit Organisations MCQ Questions Class 12 Accountancy with Answers
Question. Income and Expenditure account shows transactions of Capital nature for the accounting year. (TRUE/FALSE)
Ans: False

Question. Surplus or Deficit of a non-profit organisation is added to or subtracted from accumulated fund (TRUE/FALSE)
Ans: True

Question. A NPO has a Match Fund of <1,00,000 and Match Expenses of <40,000 Match fund and Match expenses will be shown
in the liabilities side of the Balance Sheet , expenses being deducted from fund.(TRUE/FALSE)
Ans: True

Question. An advance receipt of subscription from members of Not-for–profit organisation is an Asset. (TRUE/ FALSE)
Ans: False

Question. Under NPO, sale of old newspaper is shown as an income (TRUE/FALSE)

Ans: True

Question. Excess of Income over Expenditure in Income and Expenditure account prepared by a NPO is termed as Deficit.(
TRUE/FALSE)
Ans: False

Question. Building Fund, Library Fund et(c) is based on____________Accounting.

Ans: Fund Based

Question. Amount paid by the members to keep their membership alive is termed as__________.
Ans: Subscription

Question. Amount received as donation by NPO under will of a deceased person is termed as______.
Ans: Legacy

Question. Life membership fees received by a NPO is a________.

Ans: Capital Receipt

Question. Token payment made to a person, who voluntarily undertakes a service which would normally command a fee
is_______
Ans: Honororium

Question. Receipts and Payments Account is based on__________Basis of accounting.

Ans: Cash Basis

Question. Which of the following is an example of not-profit-organisation:

(a) Public hospitals
(b) Corporations
(c) Audit firm
(d) Insurance companies.
Ans: A

Question. <100000 received as annual subscription. Out of this <20000 is of pervious year whereas <10000 is receivable at the
end of the current year. Amount of subscription that will be show in income and expenditure account will be
(a) <1, 00,000
(b) <90, 000
(c) <1, 20,000
(d) <80, 000
Ans: B
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Question. Surplus of Not-for –Profit organisations

(a) Distributed among the members
(b) Is not distributed among the members
(c) May be or May not be distributed among the members
(d) Is debited to General fund.
Ans: B

Question. If Life Membership fees of <5000 wrongly treated as revenue receipt then effect of this error on surplus and closing
balance of capital fund will be
(a) Capital fund increased and surplus increased by<5000
(b) Capita fund decreased and surplus increased by<5000
(c) No effect on capital fund but surplus increased by<5000
(d) Capital fund decreased by <5000 but no effect on surplus.
Ans: C

Question. Income and Expenditure Account is based on

(a) Cash Basis of Accounting.
(b) Accrual Basis of Accounting.
(c) Mixed Basis of Accounting.
(d) Management Accounting.
Ans: B

Question. Delhi cricket club gives the following information. Opening Stadium Fund is <10, 00,000. Donation for Stadium fund
received during the year Rs.500000. Income from Stadium Fund Investment Rs.100000. Amount spent during the year on
construction of stadium is Rs.600000. Identify which of the following statement is correct in respect to preparation of Balance
sheet.
(a) Rs.600000 shown on the asset side of the Balance sheet.
(b) Rs.600000 shown on the asset side of the Balance sheet Also Rs.600000 is transferred to the credit of Income and
Expenditure account,
(c) Rs.600000 shown on the asset side of the Balance sheet Also Rs.600000 is transferred from Stadium fund to General fund in
the Balance sheet.
(d) Rs.600000 is shown as an expense in the Income and Expenditure account and Rs.600000 is transferred to the credit pf
Income and Expenditure account from Stadium fund.
Ans: C

Question. Subscriptions received during the year Rs.5,000,amount received in advance for the next year is Rs.300. Amount
outstanding for current year was Rs.400. The amount to be credited to the Income and Expenditure account is
(a) 4,000
(b) 5100
(c) 4200
(d) 4600
Ans: B

Question. Subscription received during the year Rs.50, 000. ;Subscriptions Outstanding at the end of the year` 8,000;
Subscription outstanding at the beginning of the year ` 6,000. Net Income from subscription will be
(a) 48,000
(b) 64,000
(c) 52,000
(d) 36,000
Ans: C

Question. When the Tournament Expenses incurred are more than the Tournament Fund, then the excess amount is excess
amount is
(a) Debited to Income and Expenditure account
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(b) Credited to Tournament Fund

(c) Shown on the Asset side of Balance sheet
(d) Credited to Income and Expenditure Account
Ans: A

Question. Which of the following is prepared to find out the income of a trading concern?
(a) Receipts and Payments a/c
(b) Income and Expenditure a/c
(c) Profit and Loss a/c
(d) Balance Sheet.
Ans: C

Question. If Income is Rs.16,000 and deficit debited to Capital Fund is Rs.4,300 then Expenditure is:
(a) 16,000
(b) 4,300
(c) 20,300
(d) None of these
Ans: C

Question. The Main purpose of Not-for- Profit organisation is :

(a) To earn profit
(b) to serve the society
(c) To improve the economy
(d) None of the above.
Ans: B

Question. If 10% Interest on Investment appearing in the Receipts side is Rs.7000, then the value of investment will be:
(a) Rs.1,00,000
(b) 70,000
(c) 56,000
(d) 49,000
Ans: B

Question. Entrance fees received amounted to Rs.50,000. In this 25% is to be capitalized. Mention the amount to be shown in
income side of Income and Expenditure account:
(a) 12,500
(b)13,200
(c) 50,000
(d) 37,500
Ans: D

Question. Subscription outstanding for the year 2018-19 is Rs.2500. Subscription outstanding for the year 2017-18 was Rs.5000
out of which Rs.3000 were received during the year 2018-19. The outstanding subscription to be shown in the Income and
expenditure for current year 2018-19 is :
(a) Rs. 500
(b) Rs.1000
(c) Rs.2500
(d) Rs.3000
Ans: A

Question. Furniture (Book value) Rs.5,000 were sold for Rs. 4,500. New Furniture worth Rs.10,000 were purchased during the
year. The amount which is to be debited to Income and Expenditure account is :
(a) Profit on sale Rs.500
(b) Loss on sale Rs.500
(c) Sale of furniture Rs.4500
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(d) Purchase of Rs.10000

Ans: B

Question. Stock of medicines on 1.4.18 were Rs.5000. Medicines purchased during the year is Rs.5000. Medicines sold during
the year is Rs.2500. Closing stock of medicines are Rs.3000. Stock of medicines used during the year 2019 is:
(a) Rs.7000
(b) Rs.2500
(c) Rs.5000
(d) Rs.10000
Ans: A

Question. Receipts and payments account makes no difference between:

(a) Capital Receipts and Capital payments
(b) Revenue receipts and revenue payments
(c) Current year and previous year
(d) All the above.
Ans: D

Question. The account which shows classified summary of transactions of a Cash Book’ in a Not-for-Profit Organisation is called:
(a) Income and Expenditure A/c
(b) Receipts and Payments A/c
(c) Profit and Loss A/c
(d) Subscriptions A/c
Ans: B

Question. Name an item that is never shown on the payment side of Receipts and Payment Account, but is shown on the debit
side of the Income and Expenditure Account.
Ans: . Loss on sale of fixed assets/ Depreciation (any one)

Question. Which of the following is not a revenue receipt?

(a) Donations for Tournament
(b) Government Grants
(c) Subscriptions
(d) Entrance Fees
Ans: A

Question. Distinguish between Income and Expenditure Account and Receipts and Payment Account on the basis of Nature of
items.
Ans: Income and Expenditure Account records items of revenue nature while Receipts and Payments Account records items of
both capital and revenue nature.

Question. Distinguish between Income and Expenditure Account and Receipts and Payments Account on the basis of ‘period’?
Ans: Income and Expenditure items relate only to the current period while Receipts and Payments items may relate to preceding
and succeeding periods also.

Question. Distinguish between Income and Expenditure Account and Receipts and Payments Account on the basis of ‘closing
balance’?
Ans: Closing balance of Income and Expenditure Account represents surplus/deficit while the closing balance of Receipts and
Payments Account is cash in hand at the end, bank balance or bank overdraft.
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Question. Which of the following is not a capital receipt?

(a) Endowment Fund
(b) Government Grants
(c) Life Membership Fees
(d) Donations for Building
Ans: B

Question. Which of the following is a capital receipt?

(a) Subscriptions
(b) Sale of used sports material
(c) Endowment fund
(d) Entrance fees
Ans: C

Question. Which of the following statements is not true for Receipts and Payments Account?
(a) It is a summary of the Cash Book.
(b) It records receipts and payments of revenue nature only.
(c) The receipts and payments may relate to current, preceding, or succeeding accounting periods.
(d) Depreciation is not shown in it.
Ans: B

Question. Which of the following is a revenue receipt for a not-for-profit organisation?

(a) Endowment fund
(b) Government Grants
(c) Life Membership fees
(d) Legacies (specific)
Ans: B

Question. Which of the following statements is not true for Income and Expenditure Account?
(a) It records items of revenue nature only.
(b) Items recorded in it relate only to the current period.
(c) Depreciation is not recorded in this account.
(d) It does not have an opening balance.
Ans: C

Question. Which of the following statements is true for Receipts and Payments Account?
(a) It is prepared on accrual basis.
(b) It records receipts and payments of revenue nature only.
(c) Depreciation is debited to this account.
(d) Receipts and payments may relate to current, preceding or succeeding periods.
Ans: D

Question. Which of the following is not a revenue receipt?

(a) Subscriptions
(b) Endowment Fund
(c) Sale of Used sports Material
(d) Entrance Fees
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Ans: B

Question. Income and Expenditure Account records:

(a) Receipts and Payment of Revenue and Capital nature both.
(b) Income and Expenditure of Revenue nature only.
(c) Expenditure of Capital nature only.
(d) Receipts of Revenue nature only.
Ans: B

Question. Which of the following is not a capital receipt?

(a) Donations for tournament
(b) Donations for building fund
(c) Life membership fee
(d) Entrance fees
Ans: D

Question. Jaipur Club has a prize fund of ₹6,00,000. It incurs expenses on prizes amounting to ₹5,20,000. The expenses should
be:
(a) debited to income and expenditure account.
(b) presented on the asset side of the balance sheet.
(c) debited to income and expenditure account and presented on the asset side of the balance sheet.
(d) deducted from the liability side of the balance sheet.
Ans: D

Question. On 1st April 2019, Maitreyi Club had a Prize Fund of `8,00,000. It incurred expenses on prizes amounting to `8,70,000
during the year. The balance of Prize Fund in the Balance Sheet as at 31st March, 2020 will be:
(a) ₹70,000
(b) ₹8,00,000
(c) ₹70,000
(d) Zero
Ans: D

Question. On 1stApril, 2019, Queens Club had a prize Fund had a prize Fund of ₹4,00,000. During the year it incurred expenses
on prizes amounting to ₹4,30,000. The balance of prize Fund in the Balance Sheet as on 31stMarch, 2020 will be
(a) ₹30,000
(b) ₹4,00,000
(c) ₹30,000
(d) Zero
Ans: D

19. Unique Club had a prize Fund of ₹9,10,000 on 1st April, 2019. It incurred expenses on prizes amounting to ₹9,10,000 during
the year. The balance of Prize fund in the balance sheet as on 31st March, 2020 will be:
(a) ₹10,000
(b) ₹10,000
(c) ₹9,00,000
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(d) Zero
Ans: D

Question. Receipts and Payments Account of a club on 31.3.2020 shows a receipt of ₹5,250. There were 416 life members on
31.3.2019 the subscription payable by each member, to be a life time member is ₹125. How many total life members are there
on 31.3.2020? How much amount of total life membership fees has been added to the capital fund on 31.3.2020?
Ans: 458; `57,250

Question. From the given extracts obtained from the Receipts and Payments Account of Cheema Club for the year ended
31st March, 2020 and additional information, Calculate the amount of subscription in arrears as on 31st March, 2020.
Subscriptions Received (₹)
2018-19 10,000
2019-20 1,20,000
2020-21 7,000
Additional Information:
The Club had 130 members paying an annual subscription of ₹1,000 each. Subscription in arrears at the beginning of the year
were ₹16,000. 10 members paid subscription for 2019-20 in 2018-19.
Ans: ₹6,000

Question. Sports Star Charitable club has income of ₹16,000 and ‘deficit’ debited to capital fund of ₹4,300 for the year 2019- 20,
then expenditure for the year 2019-20 is: (CBSE Sample Question Paper 2020-21)
(a) ₹11,700
(b) ₹4,300
(c) ₹20,300
(d) None of these
Ans: C

Question. Not-for-profit organisations are managed by _________ who are fully accountable to their members and the society
for the utilization of the funds raised for meeting the objectives of the organisation. They submit the financial statements to the
statutory authority called __________.
Ans: Trustees, Registrar of Societies

Question. In addition to Receipt and Payment Account, Income and Expenditure Account and Balance Sheet, Not-for-
Profit Organisations are required to maintain a _____________ to keep complete record of all fixed assets and
the consumables.
Ans: Stock Register

Question. Not-for-Profit Organisations do not maintain any capital account. Instead they maintain __________ that goes on
accumulating due to surpluses generated, life membership fee, legacies, et(c) received from year to year.
Ans: capital fund/general fund

Question. Which of the following is never shown on the ‘Payments’ side of Receipts and Payments Account, but is shown as an
Expense while which preparing ‘Income and Expenditure Account’?
(a) Depreciation on fixed assets
(b) Outstanding Expenses
(c) Loss on sale of fixed assets
(d) All of these
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Ans: D

Question. How are specific donations treated while preparing final accounts of a ‘Not-for-Profit Organisation’?
(a) Shown on the debit side of Receipt and Payment Account
(b) Capitalized, i.e. shown on the liabilities side of the Balance Sheet
(c) Both (a) and (b)
(d) Treated as revenue receipts and taken to the credit of Income and Expenditure Account
Ans: C

Question. Which of the following is included in the major sources of income of not-for-profit organisations?
(a) Donations (general)
(b) Legacies (general)
(c) Income from investments
(d) All of these
Ans: D

Question. Which of the following is directly added to the capital fund on the liabilities side of the Balance Sheet?
(a) Life membership fees
(b) Legacies
(c) Entrance Fees
(d) All of these
Ans: A

Question. Which of the following is never shown on the ‘Payment side’ of Receipts and Payments Account but is shown as an
expense while preparing Income and Expenditure Account?
(a) Depreciation on fixed assets
(b) Outstanding expenses
(c) Loss on sale of fixed assets
(d) All of these
Ans: D

Question. The funds raised by not-for-profit organisations through various sources are credited to __________ .
Ans: Capital fund/general fund

Question. Receipts and Payments account gives summarised picture of various receipts and payments recorded in the
__________, irrespective of whether they pertain to the Current/Previous/next year or whether they are of __________ nature.
Ans: Cash book, revenue/capital

Question. Income and Expenditure Account is just like a __________ prepared on __________ basis of accounting in case of the
business organisations.
Ans: Profit and Loss Account , Accrual

Question. How will you treat the following items given in Receipt and Payment Account while preparing Income and Expenditure
Account and Balance Sheet of a not-for-profit organisation?
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Receipts from Charity show ₹7,000

Expenses on Charity show ₹10,000
Ans: Income and Expenditure Account (an extract)
Expenditure (₹) Income (₹)
Expenses on
Charity show 10,000
Less: Receipts
from Charity show (7,000) 3,000

Question. How will you treat the following items given in Receipts and Payment Account while preparing Income and
Expenditure Account and Balance Sheet of a not-for-profit organisation?
Refreshment revenue (Sale of Food Stuff ) ₹10,000
Refreshment expenses (Purchase of Food Stuff ) ₹4,000
Ans: Income and Expenditure Account (an extract)
Expenditure (₹) Income (₹)
Refreshment
revenue 10,000
Less: Refreshment
expenses (4,000) 6,000

Question. Out of the following items, which is not shown in the ‘Receipts and Payments A/c’ of a not for profit organisation?
(a) Subscription received in advance
(b) Subscription due
(c) Last year subscription received
(d) All of the above
Answer: B

Question. Specific Donation received by NPO is shown in the

(a) Credit side of Income and Expenditure Account,
(b) Debit side of Income and Expenditure Account
(c) Liabilities side of Balance Sheet.
(d) As is decided by the management.
Answer: C

Question. Features of a partnership firm are :

(a) Two or more persons are carrying common business under an agreement.
(b) They are sharing profits and losses in the fixed ratio.
(c) Business is carried by all or any of them acting for all as an agent.
(d) All of the above.
Answer: A

Question. Following are essential elements of a partnership firm except:

(a) At least two persons
(b) There is an agreement between all partners
(c) Equal share of profits and losses
(d) Partnership agreement is for some business.
Answer: A

Question. Life Membership Fee received by NPO is accounted as

(a) Revenue Receipt.
(b) Capital Receipt.
(c) an Asset.
(d) Miscellaneous Receipt.
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Answer: B

Question. Salaries paid during the year ended 31st March, 2020 is Rs. 36,000. Salaries paid in advance at the end of previous
year were Rs. 54,000. The amount of Salaries to be debited to income and Expenditure Account for the year ended 31st March,
2020 will be
(a) Rs. 54,000.
(b) Rs. 36,000.
(c) Rs. 90,000.
(d) Rs. 18,000.
Answer: C

Question. If a General Donation of huge amount is received by a school, that donation is treated as :
(a) Revenue Receipt (Income)
(b) Capital Receipt (Liability).
(c) Assets
(d) Earned Income
Answer: B

Question. There are 200 members, each paying an annual subscription of Rs. 1,000; subscription received during the year Rs.
1,95,000; subscriptions received in advance at the beginning of the year Rs. 3,000 and at the end of the year Rs.2,000. Amount
shown in Income & Expenditure Account will be :
(a) Rs. 2,00,000
(b) Rs. 1,96,000
(c) Rs. 1,94,000
(d) Rs. 2,01,000
Answer: A

Question. The opening balance of Prize Fund was Rs.32,800. During the year, donations received towards this fund amounted to
Rs. 15,400; amount spent on prizes was Rs. 12,300 and interest received on prize fund investment was Rs.4,000. The closing
balance of Prize Fund will be :
(a) Rs. 56,500
(b) Rs.64,500
(c) Rs.39,900
(d) Rs. 31,900
Answer: C

Question. The amount received for sale of old sports materials by a Non-profit organisation is shown in which of the following?
(a) Debit side of Income and Expenditure Account
(b) Liability side of Balance Sheet
(c) Credit side of Income and Expenditure Account
(d) Assets side of Balance Sheet
Answer: C

Question. If there is a ‘Match Fund’, then match expenses and incomes are transferred to:
(a) Income and Expenditure A/c
(b) Assets side of Balance Sheet
(c) Liabilities side of Balance Sheet
(d) Both Income and Expenditure A/c and to Balance Sheet
Answer: C

Question. Not-for-profit organisations prepare:

(a) Trading Account
(b) Trading & Profit and Loss Account
(c) Income and Expenditure Account
(d) All of the above
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Answer: C

Question. The Receipts and Payments Account is a summary of:

(a) Debit and Credit balance of Ledger Accounts
(b) Cash Receipts and Payments
(c) Expenses and Incomes
(d) Assets and Liabilities
Answer: B

Question. Identify capital receipt from the following:

(a) Life Membership Fees
(b) Rent Receipt
(c) Entrance fees
(d) Sports expenses.
Answer: A

Question. General Donation received by NPO is shown in the

(a) Credit side of income and Expenditure Account,
(b) Debit side of income and Expenditure Account
(c) Liabilities side of Balance Sheet
(d) Assets side of the Balance Sheet.
Answer: A

Question. Subscriptions received in advance by a club are shown

(a) in the credit side of the Income and Expenditure Account.
(b) in the assets side of the Balance Sheet.
(c) in the liabilities side of the Balance Sheet.
(d) in the payments side of Receipts and Payments Account.
Answer: C

Question. Subscription received during the year 2019-20: Rs. 1,50,000. Outstanding Subscription as on 31st March, 2019: Rs.
1,00,000. The amount shown as subscription receipt will be
(a) Rs. 50,000.
(b) Rs. 1,50,000.
(c) Rs. 1,00,000.
(d) Rs. 1,25,000.
Answer: A

Question. Out of the following, which is Unrestricted Fund?

(a) Annuity Fund
(b) Sports Fund
(c) Capital Fund
(d) Endowment Fund
Answer: C

Question. Subscription received in advance during the current year is

(a) an income.
(b) an asset.
(c) a liability.
(d) None of these.
Answer: C

Question. The opening balance of Prize Fund was Rs.32,800. During the year, donations received towards this fund amounted to
Rs. 15,400; amount spent on prizes was Rs. 12,300 and interest received on prize fund investment was Rs.4,000. The closing
balance of Prize Fund will be :
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(a) Rs. 56,500

(b) Rs.64,500
(c) Rs.39,900
(d) Rs. 31,900
Answer: C

Question. Salary paid in cash during the current year was Rs. 80,000; Outstanding salary at the end was Rs.4,000; Salary paid in
advance last year pertaining to the current year was Rs.3,200; paid in advance during current year for next year was Rs.5,000.
The amount debited to Income and Expenditure Account will be:
(a) Rs.85,800
(b) Rs.77,800
(c) Rs. 82,200
(d) Rs. 74,200
Answer: C

Question. How much amount will be shown in Income and Expenditure Account in the following case?
1-4-2019 31-3-2020
Creditors for Stationery 8,000 6,000
Stock of Stationery 3,000 3,200
During 2019-20 payment made for Stationery was Rs.60,000.
(a) Rs.57,800
(b) Rs.62,200
(c) Rs.61,800
(d) Rs.5 8,200
Answer: A

Question. Income and Expenditure Account is prepared on

(a) Cash Basis.
(b) Accrual Basis.
(c) Both (a) and (b).
(d) Sales Basis,
Answer: B

Question. Main source of Income for a Not-for-Profit Organisation is

(a) Rent.
(b) Salaries.
(c) Donations and Subscriptions.
(d) Sale of Assets.
Answer: C

Question. Credit purchase of stationery is Rs. 64,000, which is 80% of total purchase, compute cash purchase of stationery,
(a) Rs. 16,000
(b) Rs. 24,000
(c) Rs. 8,000
(d) Rs. 40,000.
Answer: A

Question. Choose NPO from the following:

(a) Reliance Industries Limited
(b) Indian Hoc Important Federation
(c) Infosys Ltd.
(d) Private Hospital
Answer: B

Question. Receipts and Payments Account is prepared on

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(a) Cash Basis.

(b) Time Basis.
(c) Accrual Basis.
(d) Sales Basis.
Answer: A

Question. Amount received from sale of grass by a club should be treated as :

(a) Capital Receipt
(b) Revenue Receipt
(c) Asset
(d) Earned Income
Answer: B

Question. Legacy Donation received by NPO to be used for specific purpose is accounted as
(a) Revenue Receipt.
(b) Capital Receipt.
(c) an Asset.
(d) is decided by the Management.
Answer: B

Question. The amount of ‘Entrance Fees’ received by a Non-profit organisation (if it is received regularly) is shown in which of
the following?
(a) Liability side of Balance Sheet
(b) Assets side of Balance Sheet
(c) Debit side of Income and Expenditure Account
(d) Credit side of Income and Expenditure Account
Answer: D

Question. Furniture as on 31st March, 2019 Rs. 4,40,000. Furniture (having Book value as on 1st April, 2018 of Rs. 40,000) sold at
a loss of 20% on 31st December, 2018. Furniture is depreciated @ 10% p.(a) Furniture costing Rs. 3,00,000 was also purchased
on 1st October, 2018. Calculate Loss on sale of furniture.
(a) Rs. 9,400
(b) Rs. 6,400
(c) Rs. 8,000
(d) Rs. 7,400
Answer: D

Question. Receipts and Payments Account is a summary of

(a) Debit and Credit balances of Ledger Account.
(b) Cash receipts and payments.
(c) incomes and Expenses.
(d) Balances of assets and liabilities.
Answer: B

Question. Subscription received by a school for organising annual function is treated as:
(a) Capital Receipt (i.e., Liability)
(b) Revenue Receipt (;.e., Income)
(c) Asset
(d) Earned Income
Answer: A

Question. Choose NPO from the following:

(a) Reliance Industries Limited
(b) Indian Hoc Important Federation
(c) Infosys Ltd.
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(d) Private Hospital

Answer: B

Question. Title of the account which shows Surplus/Deficit of NPO is

(a) Cash Book.
(b) Income and Expenditure Account.
(c) Receipts and Payments Account.
(d) Balance Sheet.
Answer: B

Question. Out of the following items, which one is shown in the ‘Receipts and Payments Account’ of a not for profit
organisation?
(a) Accrued subscription
(b) Outstanding salary
(c) Depreciation
(d) None of these
Answer: D

Question. Income and Expenditure Account reveals:

(a) Surplus or Deficiency
(b) Cash in Hand
(c) Net Profit
(d) Capital Account
Answer: A

Question. Salary paid for the year ended 31st March, 2020 amounted to Rs.75,000. How much amount will be recorded in
Income and Expenditure Account in the following case?
31-3-2019 31-3-2020
Outstanding Salary 6,500 6,000
Prepaid Salary 1,200 1,000
(a) Rs.75,700
(b) Rs.74,300
(c) Rs.75,300
(d) Rs.74,700
Answer: D

Question. Receipts and Payments Account is a

(a) Real Account.
(b) Nominal Account.
(c) Personal Account.
(d) Revenue Account
Answer: A

Question. If there is a 'Match Fund', then Match Expenses and Match Incomes are transferred to
(a) Income and Expenditure A/(c)
(b) Assets side of Balance Sheet.
(c) Match Fund in Liabilities side of Balance Sheet.
(d) Both Income and Expenditure A/c and to Balance Sheet.
Answer: C

Question. Identify revenue receipt from the following:

(a) Donations for Building
(b) Subscription
(c) Life Membership Fees
(d) Legacy donation for Library.
 P a g e | 15

Answer: B

Question. Donation received for a special purpose:

(a) Should be credited to Income and Expenditure Account
(b) Should be credited to separate account and shown in the Balance Sheet
(c) Should be shown on the assets side
(d) Should not be recorded at all.
Answer: B

Question. Calculate the amount of credit purchase from the following information:
Particulars 1st April, 2019(Rs.) 31st March, 2020 (Rs.)

Creditors for Stationery 4,600 11,800

During the year ended 31st March, 2020, payment made to creditors of Rs. 56,800.
(a) Rs. 54,000
(b) Rs. 64,000
(c) Rs. 74,000
(d) Rs. 44,000
Answer: B

Question. Out of the following items, which is not shown in the ‘Receipts and Payments A/c’ of a not for profit organisation?
(a) Subscription received in advance
(b) Subscription due
(c) Last year subscription received
(d) All of the above
Answer: B

Question. Subscription received in advance during the current year is :

(a) an income
(b) an asset
(c) a liability
(d) none of these
Answer: C

Question. Subscription received in cash during the year amounted to Rs.5,00,000; subscription outstanding at the end of
previous year was Rs.20,000 and outstanding at the end of current year was Rs.25,000. Subscription received in advance for next
year was Rs. 8,000 and received in advance during previous year was Rs.7,000. The amount credited to Income & Expenditure
Account will be :
(a) Rs.5,04,000
(b) Rs.5,06,000
(c) Rs.4,96,000
(d) Rs.4,94,000
Answer: A

Question. Compute Rent for the year ended 31st March, 2020 from the following:
1.4.2019 31.3.2020
Outstanding Rent Rs. 19,000 Rs. 14,000
Prepaid Rent Rs. 5,600 Rs. 10,400
Answer: B

Question. Receipts and Payments Account is a :

(a) Personal Account
(b) Real Account
(c) Nominal Account
 P a g e | 16

(d) Real and Nominal Account, both

Answer: B

Question.Income and Expenditure Account records transactions of:

(a) Revenue nature only
(b) Capital nature only
(c) Both revenue and capital nature
(d) Income of only revenue nature and expenditure of revenue and capital nature.
Answer: A

Question. Salaries paid during the year ended 31st March, 2020 is Rs. 36,000. Salaries paid in advance at the end of previous
year were Rs. 54,000. The amount of Salaries to be debited to income and Expenditure Account for the year ended 31st March,
2020 will be
(a) Rs. 54,000.
(b) Rs. 36,000.
(c) Rs. 90,000.
(d) Rs. 18,000.
Answer: C

Accounting For Partnership Firms Goodwill MCQ Questions Class 12 Accountancy with Answers
Question: Goodwill can be classified into which categories
a) Purchased Goodwill
b) Self generated Goodwill
c) Both
d) None of the options
Answer: Purchased Goodwill

Question: Super profit method is for goodwill valuation

a) Super profit x No. of years
b) Average profit x No. of years
c) Weighted Average profit x No. of years
d) None of the options
Answer: Super profit x No. of years

Question: Purchased Goodwill is

a) Assets-Liabilities
b) Assets-Profit
c) Both
d) None of the options
Answer: Assets-Liabilities

Question: If the amount of super profit is negative , what does it indicate?

a) There is no goodwill
b) There is average goodwill
c) Both
d) None of the options
Answer: There is no goodwill

Question: Which goodwill is recorded in books of accounts ?

a) Purchased Goodwill
b) Self -generated Goodwill
c) Both
d) None of the options
Answer: Purchased Goodwill
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Question: When does need valuation of goodwill

a) Both
b) On Retirement or death of a partner
c) Admission of partner
d) None of the options
Answer: Both

Question: Which Factors affecting the value of Goodwill :

a) All of the options
b) Quality of products
c) Location of business
d) Efficient management
Answer: All of the options

Question: Which Methods of valuation of goodwill

a) All of the options
b) Super profit method
c) Capitalization method
d) Average profit method
Answer: All of the options

Question: When sacrificing ratio is used

a) Admission of New partner
b) dissolution of partnership agreement
c) dissolution of partnership firm
d) None of the options
Answer: Admission of New partner

Question: In which ratio the profit or loss on revaluation is shared by the old partners
a) Old Profit sharing ratio
b) New Profit sharing ratio
c) Equally
d) None of the options
Answer: Old Profit sharing ratio

Question: Old profit sharing ratio- new profit sharing ratio is equal to
a) Sacrificing Ratio
b) Gaining Ratio
c) Profit sharing Ratio
d) None of the options
Answer: Sacrificing Ratio

Question: A new Partner can be admitted in the firm, When

a) All partners Agreed
b) Some Partners Agreed
c) Dormant Partner agreed
d) None of the options
Answer: All partners Agreed

Question: When a partner does bring cash for goodwill, an account is raised at
a) New Profit sharing
b) Old Profit sharing Value
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c) Profit Sharing
d) None of the options
Answer: New Profit sharing

Question: When partners decide to show assets and liabilities at old value, Which accounts is opened
a) Memorandum Revaluation A/C
b) Capital A/c
c) Profit & Loss Appropriation A/c
d) None of the options
Answer: Memorandum Revaluation A/C

Question: When Goodwill account is raised , then credit is given to old partners capital Account in
a) New Profit sharing Ratio
b) Old Profit sharing ratio
c) Gaining Ratio
d) None of the options
Answer: New Profit sharing Ratio

Question: The valuation of goodwill is not necessary in sole trading

a) On closing the firm
b) On making a partner
c) On selling the firm
d) None of the options
Answer: On closing the firm

Question: The profit of the last three years are 42000, 39000, 45000 Rs., Value of goodwill at two years purchase of the
average profit will be
a) 84000
b) 42000
c) 126000
d) None of the options
Answer: 84000

Question: find the goodwill of firm using capitalisation method, the total capital employed in the firm 80000 Rs., reasonable
rate of return 15%, Profit for the year 120000 Rs.
a) 720000
b) 820000
c) 120000
d) None of the options
Answer: 720000

Question: What do you mean by super profit

a) Average profit - Normal profit
b) Total Profit/No. of years
c) Average profit + Normal profit
d) None of the options
Answer: Average profit - Normal profit

Question: The excess of average profit over the normal profit is called
a) Super Profit
b) Fixed Profit
c) Abnormal Profit
d) Net profit
Answer: Super Profit
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Question: Weighted Average method of calculating goodwill is used when

a) Both
b) Profit has increasing trend
c) Profit has decreasing trend
d) None of the options
Answer: Both

Question: The monetary value of reputation of the business is called

a) Goodwill
b) Super profit
c) Surplus
d) None of the options
Answer: Goodwill

Question: When the value of goodwill is not given at the time of admission of a new partner, it IS inferred from the capital of
the new firm and profit sharing ratio. This concept is called
a) Hidden Goodwill
b) Purchased Goodwill
c) Average Goodwill
d) None of the options
Answer: Hidden Goodwill

Question: Why new partner needs to bring goodwill?

a) To compensate the sacrificing partners
b) For Revaluation Account
c) For Revaluation Assets
d) All of the options
Answer: To compensate the sacrificing partners

Question: The balance of revaluation A/c is transferred to old partners capital account in their
a) Old Profit sharing ratio
b) New profit sharing ratio
c) Equal ratio
d) None of the options
Answer: Old Profit sharing ratio

Question: Interest on partners capital is calculated on

a) Capital in the beginning
b) Capital in the end
c) Average capital
d) None of the options
Answer: Capital in the beginning

Question: Account is prepared only one time in during the life of firm
a) Realisation Account
b) Revaluation A/c
c) Profit & loss A/c
d) None of the options
Answer: Realisation Account

Question: Revaluation account is prepared on

a) Reconstitution of partnership firm.
 P a g e | 20

b) Dissolution of partnership firm

c) Both
d) None of the options
Answer: Reconstitution of partnership firm.

Question: Goodwill can be classified into which categories

a) Purchased Goodwill
b) Self generated Goodwill
c) Both
d) None of the options
Answer: Purchased Goodwill

Question: When a partner does bring cash for goodwill, an account is raised at
a) New Profit sharing
b) Old Profit sharing Value
c) Profit Sharing
d) None of the options
Answer: New Profit sharing

Accounting For Partnership Firms MCQ Questions Class 12 Accountancy with Answers
Question: For transfer of Profit from Profit and Loss Appropriation account to Reserve account, which account to be credited
(a) Reserve Account
(b) Profit and Loss Appropriation account
(c) Profit and Loss Adjustment Account
(d) Profit and Loss account
Answer: Reserve Account

Question: What is Goodwill

(a) Intangible fixed asset
(b) Fixed Assets
(c) Current Assets
(d) None of the options
Answer: intangible fixed asset

Question: formula for calculation of Goodwill by Capitalisation of Super Profit Method.

(a) Goodwill = Super Profit x 100/Normal rate of return
(b) Goodwill = Capitalised value of Average Profits - Net Assets
(c) Goodwill = Capitalised value of Average Profits - Net Liabilities
(d) None of the options
Answer: Goodwill = Super Profit x 100/Normal rate of return

Question: Formula of Goodwill by Capitalisation of Average Profits Method.

(a) Goodwill = Capitalised value of Average Profits - Net Assets
(b) Goodwill = Super Profit x 100/Normal rate of return
(c) Goodwill = Capitalised value of Average Profits - Net Liabilities
(d) None of the options
Answer: Goodwill = Capitalised value of Average Profits - Net Assets

Question: Where would you record the interest on capital when capitals are fixed?
(a) Partners current account
(b) Partners Capital account
(c) Partners Salary account
(d) None of the options
Answer: Partners current account
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Question: Under capitalization method of goodwill valuation, which of the following formulas is used to calculate the value of
whole business?
(a) Value of whole business=Profit / Reasonable rate of return X 100
(b) Value of whole business= Total assets / Reasonable rate of return X 100
(c) Value of whole business= Equity-Net assets
(d) None of the options
Answer: Value of whole business=Profit / Reasonable rate of return X 100

Question: New investment by any partner in the partnership type of business is _______ to the partners capital account
(a) Credited
(b) Debited
(c) Credit and Debit Both
(d) None of the options
Answer: credited

Question: In the general form of partnership, liabilities of partners are

(a) Unlimited
(b) Limited
(c) Limited to the Business capital
(d) None of the options
Answer: Unlimited

Question: The decision is Garner Vs Murray was given in

(a) 1904
(b) 1905
(c) 1933
(d) 1804
Answer: 1904

Question: Balance of realization Account is transferred to the capital Account of the partners in
(a) Profit sharing ratio
(b) Interest ratio
(c) Capital ratio
(d) Equally
Answer: Profit sharing ratio

Question: At the time of dissolution all the assets of firm are transferred to the realization Account
(a) Book value
(b) Market value
(c) Cost value
(d) None of the options
Answer: Book value

Question: When a partner dies, firm will receive the

(a) Full amount of policy
(b) 1/2 amount of policy
(c) 1/4 amount of policy
(d) 3/4 amount of policy
Answer: Full amount of policy

Question: Section 37 of partnership act provided interest on the amount left by retiring or decreased partner at
(a) 6%
(b) bank rate
(c) 0.1
 P a g e | 22

(d) 0.05
Answer: 6%

Question: When good will is brought in cash by new partner, method is known as
(a) Premium method
(b) Revolution method
(c) Memorandum revolution method.
(d) None of the options
Answer: Premium method

Question: Revolution Account is a

(a) Nominal Account
(b) Personal Account
(c) Real Account
(d) Cash Account
Answer: Nominal Account

Question: For any decrease in the value of liability, revolution Account is to be

(a) Credited
(b) Debited
(c) Both (Cr.) & (Dr.)
(d) None of the options
Answer: Credited

Question: A is drawing Rs. 500 regularly on the 16thof every month, he will have to pay interest in a year on Rs. 6000 for the
total period of @ given rate of interest
(a) 6 months
(b) 5 months
(c) 7 months
(d) 12 months
Answer: 6 months

Question: Old profit sharing ratio minus new profit sharing ration is equal to
(a) Sacrificing ratio
(b) Ratio of gain
(c) Capital ratio
(d) None of the options
Answer: Sacrificing ratio

Question: Upon the sale of an established business its good will

(a) Marketable value
(b) Not marketable value
(c) Both Marketable value and Not marketable value
(d) None of the options
Answer: Marketable value

Question: A credit balance on a partners current Account is.

(a) Part of capital
(b) Fixed capital
(c) A current asset
(d) Long - term liability
Answer: Part of capital

Question: For the firm interest on drawing is

(a) Income
 P a g e | 23

(b) Expense
(c) Liability
(d) None of the options
Answer: Income

Question: Every partner has a right to be consulted in all matters affecting the business of
(a) Partnership
(b) Sole - tradership
(c) JSC
(d) None of the options
Answer: Partnership

Question: The agreement among partners which set out the terms on which they had agreed to form a partnership is called
(a) Partnership deed
(b) Partnership at - will
(c) Arbitration clause
(d) None of the options
Answer: Partnership deed

Question: A person who receives a share of profits from one of the regular partner is called
(a) Sub - partner
(b) Secret partner
(c) Quasi
(d) partner in profit only
Answer: Sub - partner

Question: A person who declares by word of mouth as partner of the firm is called
(a) Estopple partner
(b) Active partner
(c) Dormant partner
(d) Nominal partner
Answer: Estopple partner

Question: If no provision is made in agreement regarding the duration of the partnership

(a) Partnership at - will
(b) Limited partnership
(c) Particular partnership
(d) None of the options
Answer: Partnership at - will

Question: The persons who have entered into a partnership business are individually called
(a) Partners
(b) Vender
(c) Agents
(d) A firm
Answer: Partners

Question: Loss on realization is distributed among partners

(a) According to profit and loss ratio
(b) According to capital ratio
(c) As decided among them
(d) None of the options
Answer: According to profit and loss ratio

Question: If a partner takes over an asset of the firm, his capital account
 P a g e | 24

(a) Will be debited with the amount as agreed

(b) Will be credited with the market value of the asset
(c) Will be debited with book value of the asset
(d) None of the options
Answer: Will be debited with the amount as agreed

Question: At the time of dissolution

(a) Non cash assets are transferred to realization Account
(b) All the assets are transferred to realization
(c) Only current assets are transferred to realization Account
(d) Only liquid and current asset are transferred to realization Account
Answer: Non cash assets are transferred to realization Account

Question. ________ capital accounts always show a credit balance.

Answer: Fixed

Question. Give the average period, in months, for charging interest on drawings of a fixed amount, withdrawn at the end of each
quarter.
Answer: 4.5 months

Question. Give the average period, in months, for charging interest on drawings of a fixed amount withdrawn at the beginning of
each quarter.
Answer: 7.5 months

Question. Give the average period, in months, for charging interest on drawings of a fixed amount withdrawn at the beginning of
each half-year.
Answer: 9 months

Question. Which of the following items is not dealt through Profit and Loss Appropriation Account?
(a) Interest on Partner’s Loan
(b) Partner’s Salary
(c) Interest on Partner’s Capital
(d) Partner’s Commission

Question. E, F and G are partners sharing profits in the ratio of 3:3:2. As per the partnership agreement, G is to get a minimum
amount of ₹80,000 as his share of profits every year and any deficiency on this account is to be personally borne by E. The net
profit for the year ended 31st March, 2020 amounted to ₹3,12 ,000. Calculate the amount of deficiency to be borne by E?
(a) ₹1,000
(b) ₹4,000
(c) ₹8,000
(d) ₹2,000

Question. Pick the odd one out:

(a) Rent to partner
(b) Manager’s Commission
(c) Interest on Partner’s Loan
(d) Interest on Partner’s capital
 P a g e | 25

Question. In case the partners’ capitals are Fixed, in which account will withdrawal of capital be recorded?
Answer: Partners’ capital accounts

Question. Why does the Fixed Capital Account of partners show credit balance even when the firm suffers losses year after year?
Answer: Because the losses are adjusted through Partners’ current accounts.

Question. Give the meaning of ‘Liability of Partnership’ as a feature of partnership.

Answer: The liability of partnership is unlimited – jointly and severally.

Question. Vidit and Seema were partners in a firm sharing profits and losses in the ratio of 3 : 2. Their capitals were ₹1,20,000
and ₹2,40,000, respectively. They were entitled to interest on capital @ 10% p.a. The firm earned a profit of `18,000 during the
year. The interest on Vidit’s capital will be:
(a) ₹12,000
(b) ₹10,000
(c) ₹7,200
(d) ₹6,000

Question. The business of a partnership firm may be carried on by all the partners or any one of them acting for all. One of the
important implications of this statement is that every partner is entitled to participate in the conduct of the
affairs of its business. State the second important implication of this statement.
Answer: Second implication of this statement is that there exists a relation of mutual agency among the partners.

Question. Asha and Deepti were partners in a firm sharing profits and losses in the ratio of 3 : 1. Their fixed capitals
were ₹3,00,000 and ₹2,00,000 respectively. They were entitled to interest on capital @10% p.a. The firm earned a
profit of ₹20,000 during the year. The amount of interest on capital credited to Deepti will be:
(a) ₹12,000
(b) ₹8,000
(c) ₹20,000
(d) ₹5,000

Question. Manu and Kanu were partners in a firm, sharing profits and losses in the ratio of 2 : 3. Their fixed capitals
were ₹10,00,000 and ₹5,00,000, respectively. They were entitled to an interest on capital @10% p.a. The firm earned a profit
of ₹60,000 during the year. The amount of interest on capital credited to Kanu will be:
(a) ₹20,000
(b) ₹40,000
(c) ₹36, 000
(d) ₹24,000

Question. Mohit, Shobhit and Rohit are partners sharing profits and losses in the ratio 2:1:1. Rohit is guaranteed a profit
of ₹14,000.
The firm incurred a profit of ₹20,000 during the year. Calculate the amount of deficiency borne by Mohit and Shobhit.
Answer: Mohit ₹6,000 and Shobhit ₹3,000.

Question. Mohit and Rohit were partners in a firm with capital of ₹80,000 and ₹40,000 respectively. The firm earned a profit
of ₹30,000 during the year Mohit’s share in the profit will be:
(a) ₹2,000
 P a g e | 26

(b) ₹10,000
(c) ₹15,000
((d) ₹18,000

Question. X, Y and Z are partners in a firm sharing profits and losses in the ratio of 6:4:1.X guaranteed a profit of ₹15,000 to Z.
The net profit for the year ending 31 March, 2020 was `99,000. X’s share in the profit of the firm will be:
(a) ₹30,000
(b) ₹15,000
(c) ₹48,000
(d) ₹45,000

Question. Akshat, Bilal and Charu are partners dealing in the sale of sports equipment. Akshat, without the knowledge of Bilal
and Charu, is also running the business of supplying sports equipment to a few sports clubs in which his son is a member. He is
earning good profits from this business but did not inform Bilal and Charu about this. Was Akshat correct in doing so?
Answer: No, Akshat was not correct in doing so. Reason: If a partner carries on any business of the same nature as and
competing with that of the firm, he shall account for and pay to the firm, all profit made by him in that business.

Question. By virtue of Section 464 of the Companies Act, 2013 the Central Government is empowered to prescribe maximum
number of partners in a firm but the number of partners cannot be more than __________
(a) 50
(b) 100
(c) 20
(d) 10

Question. The partnership deed should be properly drafted and prepared as per the provisions of the __________ and
preferably registered with the __________.
Answer: Stamp Act, Registrar of firms.

Question. Can a partner be exempted from sharing the losses in a firm? If yes, under what circumstances?
Answer: Yes, if partnership deed so provides. For example, in case of guarantee of minimum profit to a partner.

Question. Ritesh and Hitesh are childhood friends. Ritesh is a consultant whereas Hitesh is an architect. They contributed equal
amounts and purchased a building for ₹2 crores. After a year, they sold it for ₹3 crores and shared the profits equally. Are they
doing the business in partnership ? Give reason in support of your answer.
Answer: No, they are not doing business in partnership because they are not involved in doing sale and purchase of land/plot on
a regular basis/Mere co-ownership of a property does not amount to partnership.

Question. A partnership firm has 50 members. All the partners have agreed to admit Ram and Mohan as new partners. Can Ram
and Mohan be admitted? Give reason in support of your answer.
Answer: No, Ram and Mohan can’t be admitted as partners.Reason: As per the Companies Miscellaneous Rules, 2014 the
Maximum number of partners in a partnership firm can be 50.

Question. A, B and C decided that interest on capitals will be provided to each partner @ 5% p.a. But after one year C wants that
no interest on capital is to be provided to any partner. State how `C’ can do this?
Answer: Yes, C can do so by altering the provisions of partnership deed, i.e., redrafting the deed, provided all the partners
unanimously agree for it.
 P a g e | 27

Question. Ram and Mohan are partners in a firm without any partnership deed. Their capitals are: Ram ₹8,00,000 and
Mohan ₹6,00,000. Ram is an active partner and looks after the business. Ram wants that profit should be shared in proportion of
capitals. State with reason whether his claim is valid or not.
Answer: His claim is not valid because in the absence of a partnership deed, profits and losses should be shared equally.

Question. A partnership deed provides for the payment of interest on capital but there was a loss instead of profits during the
year 2019-20 .At what rate will the interest on capital be allowed?
(a) 9% p.a.
(b) 6% p.a.
(c) The rate specified in the partnership deed
(d) No interest on capital will be allowed

Question. Kanha, Neeraj and Asha were partners in a firm. They admitted Raghav their Landlord as a partner in the firm.
Raghav brings sufficient amount of capital and goodwill premium for his share in the profits. Raghav had given a loan
of ₹1,00,000 @ 10% p.a. interest to the partnership firm before he became the partner. Now the accountant of the firm is
emphasizing that the interest on loan should be paid @ 6% p.a. Is he right in doing so ? Give reason in support of your answer.

Answer: No, he is not correct. Reason: He will get interest @10% p.a. because of the agreement between Raghav and the firm.

Question. X and Y are equal partners. They had advanced a loan of ₹40,000, contributed equally to the firm on 1st August, 2019.
The partnership deed is silent regarding the payment of interest on loan. What amount of interest on loan is payable to X, if the
firm closes its books of account on 31st March every year?
(a) Nil
(b) ₹2,400
(c) ₹1,600
(d) ₹800

Question. You and your friends Amit and Vinod are partners in a firm sharing profits and losses equally. State, who is correct in
the following case? Give reasons also.
Amit has provided a capital of ₹50,000 whereas Vinod provided ₹10,000 only as capital. Vinod, however, has provided ₹20,000
as loan to the firm. There is no partnership agreement. Vinod claims interest of ₹1,200, whereas you and Amit do not want to
give any interest.

Answer: Vinod is correct. Since there is no partnership agreement, interest on Vinod’s loan @ 6% p.a. = 20,000 × 6/100 = ₹1,200.

Question. Interest on money advanced by a partner to the firm beyond the amount of his capital for the purpose of business is
paid @ 6% p.a. True/False? Give reason.
Answer: False: Interest on partner’s loan is paid at the rate specified in the partnership deed. It is paid @ 6% p.a. if there is no
express agreement between the parters regarding the rate of interest on partner’s loan.

Question. Partner’s capital account will not show a debit balance in spite of losses year after year when _______ because
______.
Answer: Partners’ capitals are fixed; because partner’s capital remains fixed unless there is addition or withdrawal of capital.
Under this method, the ‘share of loss’ is debited to the partner’s current account.

Question. Partner’s capital account always shows a credit balance. True/False? Give reasons.
 P a g e | 28

Answer: False: Under fluctuating capital method, partner’s capital account may sometimes show a debit balance. It is only under
fixed capital method that the partner’s capital account will always show a credit balance.

Question. A and B are partners having fixed capitals of ₹2,00,000 and ₹1,00,000 respectively. At the end of the year 2019-20,
their current accounts showed balances: A ₹1,00,000 (Cr.) B ₹5,000 (Dr.). Where will B’s current account balance be shown in
the books of A and B?
(a) On the liabilities side of the Balance Sheet.
(b) On the assets side of the Balance Sheet.
(c) On the debit side of Profit and Loss Appropriation A/c.
(d) On the credit side of Profit and Loss Appropriation A/c.

Question. A and B are partners sharing profits in the ratio of 3 : 2 with capitals of ₹50,000 and ₹30,000 respectively. Interest on
capital is payable @ 6% p.a. B is to be allowed a salary of ₹1,250 semi-annually. During the year 2019-20, the profits prior to the
calculation of interest on capital but after charging B’s salary amounted to ₹12,500. 10% of the Net Profit is to be transferred to
the General Reserve.
What Journal entry will be passed for transfer of profit to General Reserve?

Answer: Debit Profit and Loss Appropriation A/c by ₹1,500 and credit General Reserve A/c by ₹1,500.

Question. Abha and Bharat were partners. They shared profits and losses equally. On April 1st, 2019 their capital accounts
showed balances of ₹3,00,000 and ₹2,00,000 respectively. Calculate the share of divisible profit of the partners if the
partnership deed provided for interest on capital @10% p.a. and the firm earned a profit of ₹50,000 for the year ended 31st
March, 2020.
(a) Abha ₹30,000; Bharat ₹20,000
(b) Abha ₹25,000; Bharat ₹25,000
(c) Abha ‘Nil’; Bharat ‘Nil’
(d) None of the above

Question. A and B are partners. The net divisible profit as per Profit and Loss Appropriation A/c is ₹2,50,000. The total interest
on partner’s drawing is ₹4,000. A’s salary is ₹4,000 per quarter and B’s salary is ₹40,000 per annum. The net profit/loss earned
during this year was:
(a) ₹3,02,000
(b) ₹1,98,000
(c) ₹3,06,000
(d) ₹2,50,000

Question. A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. During the year the firm incurred a loss
of ₹84,000. The amount of loss transferred to the capital accounts of A, B and C will be:
(a) Loss debited to the capital accounts of A, B and C equally.
(b) Nil
(c) Loss debited to the capital accounts of A, B and C will be ₹42,000, ₹28,000 and ₹14,000 respectively.
(d) None of the above

Question. Reena and Raman are partners with capitals of ₹3,00,000 and ₹1,00,000 respectively. The profit (as per Profit and Loss
Account) for the year ended March 31, 2020 was ₹1,20,000. Interest on capital is to be allowed at 6% p.a.
Raman was entitled to a salary of ₹30,000 p.a. The drawings of partners were ₹30,000 and 20,000. The interest on drawings to
be charged to Reena was Rs. 1,000 and to Raman, ₹500. Their share of profit after necessary
appropriations are:
(a) Reena ₹50,625; Raman ₹16,875
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(b) Reena ₹33,750; Raman ₹33,750

(c) Reena ₹33,000; Raman ₹33,000
(d) Reena ₹48,750; Raman ₹48,750

Question. Aakriti and Bindu entered into partnership for making garments on April 01, 2019 without any partnership agreement.
They introduced Capitals of ₹5,00,000 and ₹3,00,000 respectively. On October 01, 2019, Aakriti advanced ₹20,000 by way of
loan to the firm without any agreement as to interest. Profit and Loss account for the year ended March 31 2020 showed profit
of ₹43,000 before charging interest on Aakriti’s loan. Their share of profit for the year 2019-20 are:
(a) ₹21,200 each
(b) ₹21,500 each
(c) ₹26,875 and ₹16,125 respectively
(d) ₹26,500 and ₹15,900 respectively

Question. X and Y are partners sharing profits and losses in the ratio of 3 : 2 having fixed capitals of ₹1,50,000 and ₹2,00,000
respectively. The partnership deed provides for interest on capital @ 8% p.a. The Net Profit of the firm during
2019-20 was ₹21,000. In what ratio the appropriation of profit will be made?
(a) 3 : 2
(b) 1 : 1
(c) 3 : 4
(d) 4 : 3

Question. Under which of the following situation interest on partners’ capitals shall not be provided?
(a) If the firm has incurred net loss during the year.
(b) If partners’ capitals are equal and their profit sharing ratio is also equal.
(c) Both ((a) and ((b)
(d) If the net profit is less than the total amount payable to partners as interest on capitals.

Question. Anna and Bobby were partners sharing profits and losses in the ratio of 5 : 3. On 1st April, 2019 their capital accounts
showed balances of ₹3,00,000 and ₹2,00,000 respectively. The partnership deed provided for interest on
capital @10% p.a. and the firm earned a profit of ₹45,000 for the year ended 31st March, 2020. The interest on partners’
capitals will be:

((a) ₹30,000 and ₹20,000 respectively

((b) ₹27,000 and ₹18,000 respectively
((c) ₹22,500 and ₹22,500 respectively
((d) None of the above

Question. M and N are partners having capitals of ₹50,000 and ₹1,00,000 respectively. On 1 April 2020, P was admitted with a
capital of ₹2,00,000. At the end of the year 2020, the firm earned a profit of ₹30,000. How should the profits be distributed
among partners, if there is no partnership deed?
(a) Equally
(b) In the ratio of 1:2:4
(c) In the ratio of 1:2:3
(d) None of the above

Question. A and B are partners in a firm having capitals ₹5,00,000 and ₹10,00,000 respectively. The partnership deed provides
for charging interest on drawings @ 5% p.a. A withdrew `40,000 for his personal use during the year 2019-20. B
withdrew ₹2,00,000 from his capital 1.1.2020. The amount of interests that will be charged on partners’ drawings are:
(a) A ₹1,000; B ₹5,000
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(b) A ₹2,000; B ₹10,000

(c) A ₹1,000; B Nil
(d) A `2,000; B Nil

Question. Ram and Shyam are partners sharing profits/losses equally. Ram withdrew ₹1,000 p.m. regularly on the first day of
every month during the year 2019-20 for personal expenses. If interest on drawings is charged @ 5% p.a. What will be the
interest on the drawings of Ram?
(a) ₹50
(b) ₹27
(c) ₹600
(d) ₹325

Question. Verma and Kaul are partners in a firm. The partnership agreement provides that interest on drawings should be
charged @ 6% p.a. Kaul withdrew ₹3,000 per quarter, starting from April 01, 2019. What will be the interest on Kaul’s drawings
during the year 2019-20?
(a) ₹180
(b) ₹90
(c) ₹270
(d) ₹450

Question. Himanshu withdrew ₹2,500 at the end of each month. The Partnership deed provides for charging the interest on
drawings @ 12% p.a. What will be the interest on Himanshu’s drawings for the year ending 31st December, 2017?
(a) ₹300
(b) ₹137.50
(c) ₹1,650
(d) ₹1,800

Question. Dev withdrew `10,000 on 15th day of every month. Interest on drawings was to be charged @ 12% per annum.
Interest on Dev’s drawings will be:
(a) ₹14,400
(b) ₹7,200
(c) ₹1,200
(d) None of these

Question. One of the partners in a partnership firm has withdrawn `9,000 at the end of each quarter, throughout the year.
The interest on drawings at the rate of 6% per annum will be:
(a) ₹540
(b) ₹2,160
(c) ₹810
(d) None of these

Question: If all the partners, but one, are solvent it is

(a) Dissolution of firm
(b) Dissolution of partnership agreement
(c) May or may not cause dissolution
(d) None of the options

Answer: Dissolution of firm

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Question: Retirement or death of a partner.

(a) Is dissolution of partnership agreement
(b) Is dissolution of a firm
(c) May or may not be a dissolution of partnership agreement
(d) None of the options
Answer: Is dissolution of partnership agreement

Question: The loss or gain an account of revaluation at the time of retirement of a partner is shared by
(a) All partners
(b) Remaining partners
(c) Retiring partner
(d) None of the options
Answer: All partners

Question: Amount due to out going partner is shown in the balance sheet as his
(a) Loan
(b) Liability
(c) Asset
(d) Capital
Answer: Loan

Question: If the remaining partner want to continue the business, after the retirement of a partner, a new partnership
agreement
(a) Necessary
(b) Not necessary
(c) Optioned
(d) None of the options
Answer: Necessary

Question: In case of retirement of a partner full good will is credited to the accounts of
(a) All partners
(b) Only retiring partner
(c) Only remaining partner
(d) None of the options
Answer: All partners

Question: The partnership may come to an end due to the

(a) All of the options
(b) Death of a partner
(c) Insolvency of partner
(d) By giving notice
Answer: All of the options

Question: In the revaluation account an increase in the value of land and building
(a) Appears on the credit side
(b) Appears on the debit side
(c) Appears on the credit side of good will account
(d) Does not appear at all
Answer: Appears on the credit side

Question: At the time of a new partner Good will

(a) Belongs only to the old partner who have credited it
(b) Belongs to all partners, new and old
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(c) Belongs only to the new partners who is going to be admitted.

(d) None of the options
Answer: Belongs only to the old partner who have credited it

Question: A new partner may be admitted to a partnership

(a) With the consent of all partners
(b) With the consent of two third of old partners
(c) With the consent of any one of the partners
(d) Without consent of old partners
Answer: With the consent of all partners

Question: At the time of admission of a new partner, general reserve is

(a) Credited to capital of old partners.
(b) Debited to capital of old partners
(c) Allowed to remain is balance sheet
(d) Debited to current account

Answer: Credited to capital of old partners.

Question: Good will of the firm is valued Rs. 30000. C an incoming partner purchase share of total profit Good will be raised in
the books.
(a) Rs. 30000
(b) Rs. 7500
(c) Rs. 120000
(d) Rs. 7000
Answer: Rs. 30000

Question: Value of good will agreed upon Rs. 30000 on C,S admission and allowing him share of total profit Good will is brought
in cash, the amount of good-will be as
(a) Rs. 7500
(b) Rs. 30000
(c) Rs. 120000
(d) Rs. 150000
Answer: Rs. 7500

Question: Good will is valued as two years purchase of the average profits of three previous years are Rs. 15000, the value of
good-will be
(a) Rs. 30000
(b) Rs. 15000
(c) Rs. 50000
(d) Rs. 20000
Answer: Rs. 30000

Question: At the time of admission an incoming partner contributes as goodwill

(a) May or may not pay cash for good will
(b) In cash
(c) Does not pay cash
(d) None of the options
Answer: May or may not pay cash for good will

Question: At the time of admission of a new partner the firm is

(a) Dissolved
(b) Continued
(c) Not effected
(d) RE-organized
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Answer: Dissolved

Question: Interest on capital Account

(a) Debit to profit & loss and credited to partners capital Account.
(b) Debited to profit & loss Account
(c) Credit to profit & loss Account
(d) Only credited to partners capital Account.
Answer: Debit to profit & loss and credited to partners capital Account.

Question: A partners has to pay interest on drawings what is the entry in the personal Account of the partner?
(a) Debit partners current Account
(b) Credit partners capital Account
(c) Credit partners current Account
(d) Debit the partners current Account
Answer: Debit partners current Account

Question: Drawings of the partners are

(a) Debited to capital Account
(b) Debited to profit & loss Account
(c) Credited to profit & loss Account
(d) Credited to capital Account
Answer: Debited to capital Account

Question: Capital of the partners are maintained by

(a) By Fixed & Fluctuating methods
(b) Fixed capital method.
(c) Fluctuating capital
(d) None of the options
Answer: By Fixed & Fluctuating methods

Question: A banking partnership business can have

(a) Not more than 10 partners.
(b) Not more than 20 partners.
(c) Not more than 50 partners.
(d) Any number of partners
Answer: Not more than 10 partners.

Question: Investment in partnership is made by introducing

(a) Cash or non - cash assets
(b) Cash
(c) None - cash assets
(d) None of the options
Answer: Cash or non - cash assets

Question: In the revaluation account a decrease in the value of plant and machinery
(a) Appears on the debit side.
(b) Appears on the credit side.
(c) Appears on the debit side of good will account
(d) Does not appear at all
Answer: Appears on the debit side.

Question: Revaluation account is operated to find out gain or loss at the time of
(a) All of the options
(b) Admission of a partner
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(c) Retirement of a partner

(d) Death of a partner
Answer: All of the options

Question: An ordinary partnership business can have

(a) Not more than 20 partners.
(b) Not more than 30 partners.
(c) Not more than 50 partners.
(d) Any number of partners.
Answer: Not more than 20 partners.

Question: On the retirement of a partner any reserve being should be transferred to the capital account of
(a) All partners in the old profit sharing ratio
(b) Remaining partners in the new profit sharing ratio
(c) Neither the retiring partner, nor the remaining partner
(d) None of the options
Answer: All partners in the old profit sharing ratio

Question: If all the partners, but one are insolvent it is

(a) Dissolution of firm
(b) Dissolution of an agreement
(c) May or may not cause dissolution
(d) None of the options
Answer: Dissolution of firm

Question: At the time of dissolution non - cash assets are credited with
(a) Book value
(b) Market value
(c) Cost or market which ever is low
(d) As the agreed amount among the partners
Answer: Book value

Question: The accounting procedure at the retirement of partner is valued

(a) All of the options
(b) Revaluation of assets and liabilities
(c) Ascertaining his share of good will
(d) Finding the amount due to him
Answer: All of the options

Question: Partners equity is effected due to

(a) All of the options
(b) Retirement of a partner
(c) Admission of a partner
(d) Death of a partner
Answer: All of the options

Question: Oustensible partners are those who

(a) do not contribute any capital but get some share of profit for lending their name to the business
(b) contribute very less capital but get equal profit
(c) do not contribute any capital and without having any interest in the business, lend their name to the business
(d) contribute maximum capital of the business
Answer: C

Question: Sleeping partners are those who

(a) take active part in the conduct of the business but provide no capital. However, salary is paid to them.
 P a g e | 35

(b) do not take any part in the conduct of the business but provide capital and share profits and losses in the agreed ratio
(c) take active part in the conduct of the business but provide no capital. However, share profits and losses in the agreed ratio.
(d) do not take any part in the conduct of the business and contribute no capital. However, share profits and losses in the agreed
ratio.
Answer: B

Question: Interest on capital will be paid to the partners if provided for in the partnership deed but only out of:
(a) Profits
(b) Reserves
(c) Accumulated Profits
(d) Goodwill
Answer: A

Question: Which one of the following items cannot be recorded in the profit and loss appropriation account?
(a) Interest on capital
(b) Interest on drawings
(c) Rent paid to partners
(d) Partner’s salary
Answer: C

Question: Vikas is a partner in a firm. His drawings during the year ended 31st March, 2019 were Rs. 72,000. If interest on
drawings is charged @ 9% p.a. the interest charged will be :
(a) Rs.324
(b) Rs.6,480
(c) Rs.3,240
(d) Rs.648
Answer: C

Question: If a fixed amount is withdrawn by a partner on the first day of every month, interest on the total amount is charged
for months:
(a) 6
(b) 6 ½
(c) 5 ½
(d) 12
Answer: B

Question: X, Y and Z are partners in the ratio of 4 : 3 : 2. Salary to X Rs. 15,000 and to Z Rs.3,000 omitted and profits distributed.
For rectification, now X will be credited :
(a) Rs. 15,000
(b) Rs.1,000
(c) Rs. 12,000
(d) Rs. 7,000
(viii) Guarantee of Profit to a Partner
Answer: D

Question: When a partner is given guarantee by other partners, loss on such guarantee will be borne by :
(a) Partnership firm
(b) All the other partners
(c) Partners who give the guarantee
(d) Partner with highest profit sharing ratio.
Answer: C

Question: If a fixed amount is withdrawn by a partner in each quarter, interest on the total amount is charged for months
(a) 3
(b) 6
 P a g e | 36

(c) 4.5
(d) 7.5
Answer: B

Question: Anuradha is a partner in a firm. She withdrew Rs.6,000 in the beginning of each quarter during the year ended 31st
March, 2019. Interest on her drawings @ 10% p.a. will be :
(a) Rs.900
(b) Rs. 1,200
(c) Rs. 1,500
(d) Rs.600
Answer: C

Question: Which item is recorded on the credit side of partner’s current accounts :
(a) Interest on Partner’s Capitals
(b) Salaries of Partners
(c) Share of profits of Partners
(d) All of the Above
Answer: D

Question: If the Partners’ Capital Accounts are fixed ‘salary payable to partner’ will be recorded:
(a) On the debit side of Partners’ Current Account
(b) On the debit side of Partners’ Capital Account
(c) On the credit side of Partners’ Current Account
(d) None of the above
Answer: C

Question: On 1st June, 2018 a partner introduced in the firm additional capital Rs. 50,000. In the absence of partnership deed,
on 31st March, 2019 he will receive interest:
(a) Rs.3,000
(b) Zero
(c) Rs.2,500
(d) Rs. 1,800
Answer: B

Question: In the absence of Partnership Deed:

(a) Interest will not be charged on partner’s drawings
(b) Interest will be charged @ 5% p.a. on partner’s drawings
(c) Interest will be charged @ 6% p.a. on partner’s drawings
(d) Interest will be charged @ 12% p.a. on partner’s drawings
Answer: A

Question: According to Profit and Loss Account, the net profit for the year is Rs.1,50,000. The total interest on partner’s capital
is Rs. 18,000 and interest on partner’s drawings is Rs.2,000. The net profit as per Profit and Loss Appropriation Account will be :
(a) Rs.1,66,000
(b) Rs.1,70,000
(c) Rs.1,30,000
(d) Rs.1,34,000
Answer: D

Question: In the absence of agreement, partners are not entitled to :

(a) Salary
(b) Commission
(c) Equal share in profit
(d) Both ((a) and ((b)
Answer: D
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Question: For the firm interest on capital is :

(a) Capital Payment
(b) Capital Receipt
(c) Loss
(d) Income
Answer: C

Question: Y is a partner in a firm. He withdrew regularly Rs.3,000 at the end of every month for the six months ending 31st
March, 2019. If interest on drawings is charged @ 10% p.a. the interest charged will be :
(a) Rs.375
(b) Rs.450
(c) Rs.525
(d) Rs.900
Answer: A

Question: Z is a partner in a firm. He withdrew regularly Rs.2,000 every month for the six months ending 31st March, 2019. If
interest on drawings is charged @ 8% p.a. the interest charged will be:
(a) Rs.480
(b) Rs.280
(c) Rs.200
(d) Rs.240
Answer: D

Question: X and Y are partners in the ratio of 3 : 2. Their capitals are Rs.2,00,000 and Rs. 1,00,000 respectively. Interest on
capitals is allowed @ 8% p.a. Firm earned a profit of Rs. 15,000 for the year ended 31st March 2019. As per partnership
agreement, interest on capital is treated a charge on profits. Interest on Capital will be :
(a) X Rs. 16,000; Y Rs.8,000
(b) X Rs.9,000; Y Rs.6,000
(c) X Rs. 10,000; Y Rs.5,000
(d) No Interest will be allowed
Answer: A

Question: X and Y are partners in the ratio of 3 : 2. Their capitals are Rs.2,00,000 and Rs. 1,00,000 respectively. Interest on
capitals is allowed @ 8% p.a. Firm incurred a loss of Rs.60,000 for the year ended 31st March 2019. Interest on Capital will be:
(a) X Rs. 16,000; Y Rs.8,000
(b) X Rs.8,000; Y Rs.4,000
(c) X Rs. 14,400; Y Rs.9,600
(d) No Interest will be allowed
Answer: D

Question: When partners’ capital accounts are fixed, which one of the following items will be written in the partner’s capital
account:
(a) Partner’s Drawings
(b) Additional capital introduced by the partner in the firm
(c) Loan taken by partner from the firm
(d) Loan Advanced by partner to the firm
Answer: B

Question: Interest on partner’s drawings will be credited to

(a) Profit and Loss Account
(b) Profit and Loss Appropriation Account
(c) Partner’s Capital Accounts
(d) None of the Above
Answer: B
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Question: X, Y and Z are partners in the ratio of 6 : 4 : 1. In the firm X has guaranteed Z for his minimum profit of Rs. 15,000.
Firm’s profit was Rs.99,000. In the firm profit X’s share will be:
(a) Rs.30,000
(b) Rs. 15,000
(c) Rs.48,000
(d) Rs.45,000
Answer: C

Question: P, Q and R are partners in 3 : 2 : 1. R is guaranteed that his share of profit will not be less than Rs.70,000. Any
deficiency will be borne by P and Q in the ratio of 2 : 1. Firm’s profit was Rs.2,40,000. Share of P will be :
(a) Rs. 1,00,000
(b) Rs. 1,10,000
(c) Rs. 1,20,000
(d) Rs. 1,02,000
Answer: A

Question: Ajay is a partner in a firm. He withdrew Rs.2,000 per month on the last day of every month during the year ended
31st March, 2019. If interest on drawings is charged @ 9% p.a. the interest charged will be :
(a) Rs.990
(b) Rs. 1,080
(c) Rs. 1,170
(d) Rs.2,160
Answer: A

Question: Sushil is a partner in a firm. He withdrew Rs.4,000 per month in the middle of every month during the year ended
31st March, 2019. If interest on drawings is charged @ 8% p.a. the interest charged will be :
(a) Rs.2,080
(b) Rs. 1,760
(c) Rs.3,840
(d) Rs. 1,920
Answer: D

Question: Features of a partnership firm are :

(a) Two or more persons are carrying common business under an agreement.
(b) They are sharing profits and losses in the fixed ratio.
(c) Business is carried by all or any of them acting for all as an agent.
(d) All of the above.
Answer: D

Question: Following are essential elements of a partnership firm except:

(a) At least two persons
(b) There is an agreement between all partners
(c) Equal share of profits and losses
(d) Partnership agreement is for some business.
Answer: C

Question: Number of partners in a partnership firm may be :

(a) Maximum Two
(b) Maximum Ten
(c) Maximum One Hundred
(d) Maximum Fifty
Answer: D

Question: Liability of partner is :

 P a g e | 39

(a) Limited
(b) Unlimited
(c) Determined by Court
(d) Determined by Partnership Act
Answer: B

Question: P, Q and R sharing profits in the ratio of 2 : 1 : 1 have fixed capitals of Rs.4,00,000, Rs.3,00,000 and Rs.2,00,000
respectively. After closing the accounts for the year ending 31st March, 2019 it was discovered that interest on capitals was
provided @ 6% instead of 8% p.a. In the adjusting entry :
(a) Cr. P Rs. 1,000; Dr. Q Rs.1,500 and Cr. R Rs.500
(b) Dr. P Rs.500; Cr. Q Rs. 1,500 and Dr. R Rs. 1,000
(c) Cr. R. Rs.500; Dr. Q Rs. 1,500 and Cr. R Rs. 1,000
(d) Dr. P Rs. 1,000; Cr. Q Rs. 1,500 and Dr. R Rs.500
Answer: D

Question: A, B and C sharing profits in the ratio of 2 : 2 : 1 have fixed capitals of Rs.3,00,000, Rs.2,00,000 and Rs. 1,00,000
respectively. After closing the accounts for the year ending 31st March, 2019 it was discovered that interest on capitals was
provided @ 12% instead of 10% p.a. In the adjusting entry:
(a) Cr. A Rs. 1,200; Dr. B Rs.800 and Dr. C Rs.400
(b) Dr. A Rs. 1,200; Cr. B Rs.800 and Cr. C Rs.400
(c) Cr. A Rs.800; Cr. B Rs.400 and Dr. C Rs. 1,200
(d) Dr. A Rs.800; Dr. B Rs.400 and Cr. C Rs.1,200
Answer: B

Question: P and Q are partners sharing profits in the ratio of 1 : 2. R was manager who received the salary of Rs. 10,000 p.m. in
addition to commission of 10% on net profits after charging such commission. Total remuneration to R amounted to Rs.
1,80,000. Profit for the year before charging salary and commission was :
(a) Rs.7,20,000
(b) Rs.6,00,000
(c) Rs.7,80,000
(d) Rs.6,60,000
Answer: C

Question: Anu and Tanu are equal partners with fixed capitals of Rs.2,00,000 and Rs. 1,00,000 respectively. After closing the
accounts for the year ending 31st March, 2019 it was discovered that interest on capitals @ 8% p.a. was omitted to be provided.
In the adjusting entry :
(a) Anu will be credited by Rs. 16,000 and Tanu will be credited by Rs.8,000
(b) Anu will be debited by Rs. 16,000 and Tanu will be debited by Rs.8,000
(c) Anu will be credited by Rs.4,000 and Tanu will be debited by Rs.4,000
(d) Anu will be debited by Rs.4,000 and Tanu will be credited by Rs.4,000
Answer: C

Question: Asha and Vipasha are equal partners with fixed capitals of Rs.5,00,000 and Rs.2,00,000 respectively. After closing the
accounts for the year ending 31st March, 2019 it was discovered that interest on capitals was provided @ 6% instead of 5% p.a.
In the adjusting entry:
(a) Asha will be debited by Rs. 1,500 and Vipasha will be credited by Rs. 1,500;
(b) Asha will be credited by Rs. 1,500 and Vipasha will be debited by Rs. 1,500;
(c) Asha will be debited by Rs.5,000 and Vipasha will be debited by Rs.2,000;
(d) Asha will be credited by Rs.5,000 and Vipasha will be credited by Rs.2,000;
Answer: A

Question: Net profit of a firm is Rs.79,800. Manager is entitled to a commission of 5% of profits after charging his commission.
Manager’s Commission will be:
(a) Rs.4,200
(b) Rs.380
 P a g e | 40

(c) Rs.3,990
(d) Rs.3,800
Answer: D

Question: A, B and C are partners. A’s capital is Rs.3,00,000 and B’s capital is Rs.1,00,000. C has not invested any amount as
capital but he alone manages the whole business. C wants Rs.30,000 p.a. as salary. Firm earned a profit of Rs.1,50,000. How
much will be each partner’s share of profit:
(a) A Rs.60,000; B Rs.60,000; C Rs.Nil
(b) A Rs.90,000; B Rs.30,000; C Rs.Nil
(c) A Rs.40,000; B Rs.40,000 and C Rs.40,000
(d) A Rs.50,000; B Rs.50,000 and C Rs.50,000.
Answer: D

Question: A, B and C are partners in the ratio of 5: 3: 2. Before B’s salary of Rs. 17,000 firm’s profit is Rs.97,000. How much in
total B will receive from the firm?
(a) Rs. 17,000
(b) Rs.40,000
(c) Rs.24,000
(d) U 1,000
Answer: D

Question: Which of the following statement is true?

(a) Fixed capital account will always have a credit balance
(b) Current account can have a positive or a negative balance
(c) Fluctuating capital account can have a positive or a negative balance
(d) All of the above
Answer: D

Question: An incoming partner pays his share of good will in cash, and profit sharing ration of old partner is changed, Good - will
be distributed among old partners
a) According to sacrifice ratio
b) As their old profit ratio
c) According to new ration
d) None of the options
Answer: According to sacrifice ratio

Question: When all partners are insolvent creditors will be

a) Paid rate ably
b) Paid fully
c) Taken over by the partners
d) Paid by government
Answer: Paid rate ably

Question: If the partnership agreement is silent as to Interest on capital

a) No interest on capital is allowed
b) 6% interest on capital is allowed
c) 5% interest on capital is allowed
d) 2% interest on capital is allowed
Answer: No interest on capital is allowed

Question: Where there is no partnership agreement exists between partners, what will be the profit sharing ratio between the
partners?
a) Equal
b) Unequal
c) It will depend on a partners capital
 P a g e | 41

d) It will depend on the experience of a partner

Answer: Equal

Question: Identify a situation when fixed capitals of the partners may change?
a) When additional capital is introduced
b) When current accounts are opened
c) When drawings are made by the partners
d) When there is loss in the business
Answer: When additional capital is introduced

Question: Registration of partnership firm is _________-

a) Optional
b) Not Allowed
c) Under Companies Act 2013
d) Compulsory
Answer: Optional

Question: Under fluctuation method of capital, what is the treatment of interest on capital?
a) Credited to capital account
b) Debited to capital account
c) No treatment or adjustment needed
d) Credited to current account
Answer: Credited to capital account

Question: Money withdrawn by a partner on 1st July Rs. 20,000 and interest on drawings is fixed @ 6% (Books are closed on 31st
March.) The amount of interest will be Rupees
a) 900
b) 600
c) 1200
d) No interest will be charged.
Answer: 900

Question: Which of the following is not recorded in the partners current accounts?
a) Drawings
b) Interest on Drawings
c) Partners salaries
d) Administrative expenses
Answer: Drawings

Question: Which Section of the Partnership Act defines Partnership as the relation between persons who have agreed to share
the profits of a business carried on by all or any of them acting for all?
a) Section 4
b) Section 13
c) Section 48
d) Section 61
Answer: Section 4

Question: Partnership business must be

a) Lawful
b) Illegal
c) Voluntary
d) Immoral
Answer: lawful

Question: Profit and Loss appropriation account is differ from Profit and Loss account as it is prepared by
 P a g e | 42

a) Only partnership firm

b) Only sole proprietorship
c) All business firms
d) Only company
Answer: Only partnership firm

Question: Interest on capital is calculated on

a) Opening capital
b) Closing capital
c) Both Closing capital and Profit
d) Net Profit
Answer: Opening capital

Question: Under fluctuating Capital method how many accounts of each partner is maintained
a) 1
b) 4
c) 3
d) 5
Answer: 1

Question: Partners collectively are called

a) Firm
b) Company
c) Business
d) Proprietorship
Answer: Firm

Question: When interest on capital is paid whether there is profit or loss it is known as
a) Charge against profit
b) Appropriation of profit
c) Salary
d) None of the options
Answer: Charge against profit

Question: A partner that doesnt take part in the management of business, but he/she has made investment in business and
liable to creditors of the business is known as
a) Dormant partner
b) Junior partner
c) Nominal partner
d) Active partner
Answer: Dormant partner

Question: In which of the following types of partnership the liability of at least one partner is unlimited whereas the liability of
other partners is limited?
a) Limited partnership
b) Partnership-at-will
c) Particular partnership
d) General partnership
Answer: Limited partnership

Question: A Sleeping Partner is also known as

a) Dormant Partner
b) Active Partners
c) Nominal Partners
d) Minor Partner
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Answer: Dormant Partner

Question: It is better to have the agreement in writing to avoid any ___

a) Dispute
b) Case
c) Loss
d) Audit
Answer: Dispute

Question: Which one of the following is the method of goodwill valuation?

a) Super profit method
b) Average capital method
c) Super capital method
d) Capital intensity method
Answer: Super profit method

Question: Which of the following is not a content of partnership deed?

a) Interest on Bank Loan
b) Interest on Drawings
c) Interest on Partners Loan
d) Interest on Capital
Answer: Interest on Bank Loan

Question: Profit and Loss Appropriation Account is prepared ______

a) After calculating Net Profit
b) Before calculating Net Profit
c) After calculating Gross Profit
d) Before calculating Gross Profit
Answer: After calculating Net Profit

Question: If dates of drawings are not given, interest on drawings is charged for _______ months
a) 6
b) 3
c) 9
d) 12
Answer: 6

Question: Salary paid to partner should be

a) None of these
b) Debited to his current Account
c) Credited to his current Account
d) Credited to profit & loss appropriation Account
Answer: None of these

Question: An account operated to ascertain the loss or gain at the death of a partner is called
a) Revaluation account
b) Realization account
c) Execution account
d) Deceased partner Account
Answer: Revaluation account

Question: Loss on realization is

a) Debited to partners capital Account
b) Credited to partners capital Account
c) Debited to realization Account
 P a g e | 44

d) Credited to realization Account

Answer: Debited to partners capital Account

Question: On Dissolution of a firm, Bank Overdraft is transferred to

a) Realisation Account
b) Cash Account
c) Partners Capital Account
d) Current Account
Answer: Realisation Account

Question: Interest on capital Allowed in Partnership firm

a) Invalid
b) Valid
c) 0.1
d) 0.05
Answer: Invalid

Question: How many minimum persons require for a valid partnership

a) 2
b) 3
c) 4
d) None of the options
Answer: 2

Question: Which Indian Act define Partnership Rules Terms & Conditions
a) Indian Partnership Act,1932
b) Indian Partnership Act,1935
c) Indian Partnership Act,1940
d) Indian Partnership Act,1949
Answer: Indian Partnership Act,1932

Question: Any partner who investments in the business but does not take active part in the business is
a) Sleeping partner
b) Secret partner
c) Active partner
d) Nominal partner
Answer: Sleeping partner

Question: In the absence of an agreement profit and loss are divided by partners in the ratio of
a) Equally
b) Capital
c) Time devoted by each partners.
d) None of the options
Answer: Equally

Question: In the absence of an agreement, Interest on loan advanced by the partner to the firm is allowed at the rate of
a) 6%
b) 5%
c) 12%
d) 9%
Answer: 6%

Question: Current accounts of the partners should be opened when the capitals are
a) Fixed
b) Fluctuating
 P a g e | 45

c) Either fixed or fluctuating

d) None of the options
Answer: Fixed

Question: The members of partnership firm are individually called as

a) Partner
b) Director
c) Investor
d) Manager
Answer: Partner

Question: The written agreement of partnership is called

a) Partnership deed
b) Articles of association
c) Memorandum of association
d) Certificate of incorporation
Answer: Partnership deed

Question: Partnership is formed by the partners by

a) Written or oral
b) Written agreement
c) Oral agreement
d) None of the options
Answer: Written or oral

Question: Liability of partners in a partnership business is

a) Un-limited
b) Limited
c) Limited & unlimited
d) None of the options
Answer: Un-limited

Question: Under fixed capital methods, profit will be credited to

a) Current Account
b) Capital Account
c) Drawings
d) Profit & Loss
Answer: Current Account

Question: The object of partnership is to

a) Earn profit
b) Not to earn profit
c) Welfare of members
d) None of the options
Answer: Earn profit

Question. Which one of the following is NOT an essential feature of a partnership?

(a) There must be an agreement
(b) There must be a business
(c) The business must be carried on for profits
(d) The business must be carried on by all the partners
Answer: D
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Question. X, Y and Z are partners sharing profits and losses equally. Their capital balances on March, 31,2012 are Rs.80,000,
Rs.60,000 and Rs.40,000 respectively. Their personal assets are worth as follows : X — Rs.20,000, Y— Rs. 15,000 and Z— Rs.
10,000. The extent of their liability in the firm would be :
(a) X— Rs. 80,000 : T— Rs.60,000 : and Z— Rs.40,000
(b) X— Rs.20,000 : Y— Rs.15,000 : and Z— Rs.10,000
(c) X— Rs. 1,00,000 : Y— Rs.75,000 : and Z— Rs.50,000
(d) Equal
Answer: B

Question. Sangeeta and Ankita are partners in a firm. Sangeeta’s capital is Rs.70,000 and Ankita’s Capital is Rs.50,000. Firm’s
profit is Rs.60,000. Ankita share in profit will be:
(a) Rs.25,000
(b) Rs.30,000
(c) Rs.35,000
(d) Rs.20,000
Answer: B

Question. Net profit of a firm is Rs.49,500. Manager is entitled to a commission of 10% on profits before charging his
commission. Manager’s Commission will be:
(a) Rs.4,950
(b) Rs.4,500
(c) Rs.5,500
(d) Rs.495
Answer: A

Question. Guarantee given to partner ‘A’ by the other partners ‘B & C’ means :
(a) In case of loss ‘A’ will not contribute towards that loss.
(b) In case of insufficient profits ‘A’ will receive only the minimum guarantee amount.
(c) In case of loss or insufficient profits ‘A’ will withdraw the minimum guarantee amount.
(d) All of the above.
Answer: C

Question. P, Q and R are partners in a firm in 3 : 2 : 1. R is guaranteed that he will get minimum of Rs.20,000 as his share of profit
every year. Firm’s profit was Rs.90,000. Partners will get:
(a) P Rs.40,000; Q Rs.30,000; R Rs.20,000;
(b) P Rs.42,500; Q Rs.27,500; R Rs.20,000;
(c) P Rs.45,000; Q Rs.30,000; R Rs. 15,000;
(d) P Rs.42,000; Q Rs.28,000; R Rs.20,000;
Answer: D

Question. A and B are partners in a pertnership firm without any agreement. A has withdrawn Rs.50,0()0 out of his Capital as
drawings. Interest on drawings may be charged from A by the firm :
(a) @ 5% Per Annum
(b) @ 6% Per Annum
(c) @ 6% Per Month
(d) No interest can be charged
Answer: D

Question. A and B are partners in a partnership firm without any agreement. A devotes more time for the firm as compare to B.
A will get the following commission in addition to profit in the firm’s profit:
(a) 6% of profit
(b) 4% of profit
(c) 5% of profit
(d) None of the above
Answer: D
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Question. In case of partnership the act of any partner is :

(a) Binding on all partners
(b) Binding on that partner only
(c) Binding on all partners except that particular partner
(d) None of the above
Answer: A

Question. Which of the following statement is true?

(a) a minor cannot be admitted as a partner
(b) a minor can be admitted as a partner, only into the benefits of the partnership
(c) a minor can be admitted as a partner but his rights and liabilities are same of adult partner
(d) none of the above
Answer: B

Question. The relation of partner with the firm is that of:

(a) An Owner
(b) An Agent
(c) An Owner and an Agent
(d) Manager
Answer: C

Question. According to Profit and Loss Account, the net profit for the year is Rs.4,20,000. Salary of a partner is Rs.5,000 per
month and the commission of another partner is Rs. 10,000. The interest on drawings of partners is Rs.4,000. The net profit as
per Profit and Loss Appropriation Account will be :
(a) Rs.3,54,000
(b) Rs.3,46,000
(c) Rs.4,09,000
(d) Rs.4,01,000
Answer: A

Question. A and B are partners. According to Profit and Loss Account, the net profit for the year is Rs.2,00,000. The total interest
on partner’s drawings is Rs.1,000. A’s salary is Rs.40,000 per year and B’s salary is Rs.3,000 per month. The net profit as per
Profit and Loss Appropriation Account will be :
(a) Rs.1,23,000
(b) Rs.1,25,000
(c) Rs.1,56,000
(d) Rs.1,58,000
Answer: B

Question. X and Y are partners in the ratio of 3 : 2. Their capitals are Rs.2,00,000 and Rs. 1,00,000 respectively. Interest on
capitals is allowed @ 8% p.a. Firm earned a profit of Rs. 15,000 for the year ended 31st March 2019. Interest on Capital will be :
(a) X Rs. 16,000; Y Rs. 8,000
(b) X Rs.9,000; Y Rs.6,000
(c) X Rs. 10,000; Y Rs.5,000
(d) No Interest will be allowed
Answer: C

Question. A and B contribute Rs. 1,00,000 and Rs.60,000 respectively in a partnership firm by way of capital on which they agree
to allow interest @ 8% p.a. Their profit or loss sharing ratio is 3 :2. The profit at the end of the year was Rs.2,800 before allowing
interest on capital. If there is a clear agreement that interest on capital will be paid even in case of loss, then B’s share will be:
(a) Profit Rs.6,000
(b) Profit Rs.4,000
(c) Loss Rs.6,000
(d) Loss Rs.4,000
 P a g e | 48

(vi) Interest on Drawings

Answer: D

Question. Partners are supposed to pay interest on drawing only when by the
(a) Provided, Agreement
(b) Permitted, Investors
(c) Agreed, Partners
(d) ‘A’ & ‘C’ above
Answer: D

Question. If equal amount is withdrawn by a partner in the beginning of each month during a period of 6 months, interest on the
total amount will be charged for months
(a) 2.5
(b) 3
(c) 3.5
(d) 6
Answer: C

Question. If equal amount is withdrawn by a partner in the end of each month during a period of 6 months, interest on the total
amount will be charged for…………… months
(a) 2.5
(b) 3
(c) 3.5
(d) 6
Answer: A

Question. X, Y and Z are equal partners with fixed capitals of Rs.2,00,000, Rs.3,00,000 and Rs.4,00,000 respectively. After closing
the accounts for the year ending 31st March, 2019 it was discovered that interest on capitals @ 8% p.a. was omitted to be
provided. In the adjusting entry:
(a) Dr. X and Cr. Y by Rs. 8,000
(b) Cr. X and Dr. Z by Rs.8,000
(c) Dr. X and Cr. Z by Rs. 8,000
(d) Cr. X and Dr. Y by Rs.8,000
Answer: C

Question. P, Q and R are equal partners with fixed capitals of Rs.5,00,000, Rs.4,00,000 and Rs.3,00,000 respectively. After closing
the accounts for the year ending 31st March, 2019 it was discovered that interest on capitals was provided @ 7% instead of 9%
p.a. In the adjusting entry:
(a) P will be credited by Rs.2,000 and Q will be debited by Rs.2,000.
(b) P will be debited by Rs.2,000 and Q will be credited by Rs.2,000.
(c) P will be debited by Rs.2,000 and R will be credited by Rs.2,000.
(d) P will be credited by Rs.2,000 and R will be debited by Rs.2,000.
Answer: D

Question. In a partnership firm, a partner withdrew Rs.5,000 per month on the first day of every month during the year for
personal expenses. If interest on drawings is charged @ 6% p.a. the interest charged will be:
(a) Rs.3,600
(b) Rs. 1,950
(c) Rs. 1,800
(d) Rs. 1,650
Answer: B

Question. If fixed amount is withdrawn by a partner on the first day of each quarter, interest on the total amount is charged for
months
(a) 4.5
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(b) 6
(c) 7.5
(d) 3
Answer: C

Question. If a fixed amount is withdrawn by a partner on the last day of each quarter, interest on the total amount is charged for
months
(a) 6
(b) 4.5
(c) 7.5
(d) 3
Answer: B

Question. X, Y and Z are partners in the ratio of 5 : 4 : 3. 2fhas given to Z a guarantee of minimum Rs. 10,000 profit. For the year
ending 31st March, 2019, firm’s profit is Rs.28,800. X’s share in profit will be :
(a) Rs.9,200
(b) Rs.9,600
(c) Rs.7,200
(d) Rs. 12,000
Answer: A

Question. E, F and G share profits in the ratio of 4 : 3 : 2. G is given a guarantee that his share of profits will not be less than
Rs.75,000. Deficiency if any, would be borne by E and F equally Firm’s profit was Rs.2,70,000. F’s share of profit will be :
(a) Rs.90,000
(b) Rs.82,500
(c) Rs.97,500
(d) Rs.75,000
Answer: B

Question. X, Y and Z are partners in 5 : 4 : 1. Z is guaranteed that his share of profit will not be less than Rs. 80,000. Any
deficiency will be borne by X and Y in 3 : 2. Firm’s profit was Rs.5,60,000. How much deficiency will be borne by Y :
(a) 1 2,14,400
(b) Rs. 14,400
(c) Rs. 2,09,600
(d) Rs.9,600
Answer: D

Question. Interest on partner’s capitals will be credited to :

(a) Profit and Loss Account
(b) Profit and Loss Appropriation Account
(c) Interest Account
(d) Partner’s Capital Accounts
Answer: D

Question. For the firm interest on drawings is

(a) Capital Payment
(b) Expenses
(c) Capital Receipt
(d) Income
Answer: D

Question. Partnership Deed is also called _____

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(a) Prospectus
(b) Articles of Association
(c) Principles of Partnership
(d) Articles of Partnership
Answer: D

Question. Which of the following is not incorporated in the Partnership Act?

(a) profit and loss are to be shared equally
(b) no interest is to be charged on capital
(c) all loans are to be charged interest @6% p.a.
(d) all drawings are to be charged interest
Answer: D

Question. When is the Partnership Act enforced?

(a) when there is no partnership deed
(b) where there is a partnership deed but there are differences of opinion between the partners
(c) when capital contribution by the partners varies
(d) when the partner’s salary and interest on capital are not incorporated in the partnership deed
Answer: A

Question. Which accounts are opened when the capitals are fluctuating?
(a) Only Capital Accounts
(b) Only Current Accounts
(c) Capital Accounts as well as Current Accounts
(d) Either Capital Accounts or Current Accounts
Answer: D

Question. Balance of partner’s current accounts are :

(a) Debit balance
(b) Credit balances
(c) Debit or Credit balances
(d) Neither Debit nor credit balances
Answer: C

Question. X, Y and Z are partners in a firm. At the time of division of profit for the year, there was dispute between the partners.
Profit before interest on partner’s capital was Rs.6,000 and Y determined interest @24% p.a. on his loan of Rs. 80,000. There
was no agreement on this point. Calculate the amount payable to X, Y and Z respectively.
(a) Rs.2,000 to each partner.
(b) Loss of Rs.4,400 for X and Z; Twill take Rs.14,800.
(c) Rs.400 for X, Rs.5,200 for Land Rs.400 for Z.
(d) None of the above.
Answer: C

Question. X, Y and Z are partners in a firm. At the time of division of profit for the year there was dispute between the partners.
Profit before interest on partner’s capital was Rs.6,00,000 and Z demanded minimum profit of Rs.5,00,000 as his financial
position was not good. However, there was no written agreement on this point.
(a) Other partners will pay Z the minimum profit and will share the loss equally.
(b) Other partners will pay Z the minimum profit and will share the loss in capital ratio.
(c) X and Y will take Rs.50,000 each and Z will take Rs.5,00,000.
 P a g e | 51

(d) Rs.2,00,000 to each of the partners.

Answer: D

Question. On 1st January 2019, a partner advanced a loan of Rs. 1,00,000 to the firm. In the absence of agreement, interest on
loan on 31st March, 2019 will be :
(a) Nil
(b) Rs. 1,500
(c) Rs.3,000
(d) Rs.6,000
Answer: B

Question. P and Q sharing profits in the ratio of 2: 1 have fixed capitals of Rs.90,000 and Rs.60,000 respectively. After closing the
accounts for the year ending 31st March, 2019 it was discovered that interest on capitals was provided @ 6% instead of 8% p.a.
In the adjusting entry:
(a) P will be credited by Rs. 1,800 and Q will be credited by Rs. 1,200;
(b) P will be debited by Rs.200 and Q will be credited by Rs.200;
(c) P will be credited by Rs.200 and Q will be debited by Rs.200;
(d) P will be debited by Rs. 1,800 and Q will be debited by Rs. 1,200;
Answer: B

Question. A and B sharing profits in the ratio of 7 : 3 have fixed capitals of Rs.2,00,000 and Rs. 1,00,000 respectively. After
closing the accounts for the year ending 31st March, 2019 it was discovered that interest on capitals was provided @ 12%
instead of 10% p.a. In the adjusting entry :
(a) A will be debited by Rs.4,000 and B will be debited by Rs.2,000;
(b) A will be credited by Rs.4,000 and B will be credited by Rs.2,000;
(c) A will be debited by Rs.200 and B will be credited by Rs.200;
(d) A will be credited by Rs.200 and B will be debited by Rs.200;
Answer: D

Question. It the Partner’s Capital Accounts are fixed, interest on capital will be recorded:
(a) On the credit side of Current Account
(b) On the credit side of Capital Account
(c) On the debit side of Current Account
(d) On the debit side of Capital Account
Answer: A

Question. If the Partner’s Capital Accounts are fluctuating, in that case following item/items will be recorded in the credit side of
capital accounts:
(a) Interest on capital
(b) Salary of partners
(c) Commission of partners
(d) All of the above
Answer: D

Question: In the absence of partnership deed remuneration or salary to the partners

(a) Not allowed
(b) Allowed
(c) 25% of profit
(d) None of the options
Answer: Not allowed
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Question: In which partnership deed, all the liabilities of partners are limited
(a) General Partnership
(b) Limited Partnership
(c) Special Partnership
(d) Legal Partnership
Answer: General Partnership

Question: The partnership that is made for fulfilling a particular task, it is called
(a) Special Partnership
(b) Legal Partnership
(c) General Partnership
(d) None of the options
Answer: Special Partnership

Question: The partnership that is made in accordance with the Act, is called
(a) Legal Partnership
(b) Special Partnership
(c) General Partnership
(d) None of the options
Answer: Legal Partnership

Question: The partner whose liability is limited is called

(a) General Partner
(b) Dormant Partner
(c) Special Partner
(d) None of the options
Answer: General Partner

Question: Partners current account are opened when their capital accounts are
(a) Fixed
(b) Fluctuating
(c) General
(d) None of the options
Answer: Fixed

Question: In the absence of an agreement in partnership, the partnership act provides for
(a) Interest on Loan
(b) Interest on Capital
(c) Interest on Drawing
(d) None of the options
Answer: Interest on Loan

Question: Interest payable on the capitals of partners is written

(a) In profit & Loss appropriation A/c
(b) In Profit & Loss Account
(c) In Partners Salary Account
(d) None of the options
Answer: in profit & Loss appropriation A/c

Question: No interest is paid on capital unless all partners are not

(a) Agreed
(b) Not Agreed
(c) Some partners agreed
(d) None of the options
Answer: Agreed
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Question: Interest on drawings charges to keep control on

(a) Unnecessary Drawings
(b) Unnecessary Exp.
(c) Unnecessary capital
(d) None of the options
Answer: Unnecessary Drawings

Question: In case of partnership business, a separate capital account is maintained for

(a) Each Partner
(b) Special Partner
(c) Sleeping Partner
(d) None of the options
Answer: Each Partner

Question: The capital accounts of partners may be maintained by following any of the following two methods:
(a) Fixed Capital Accounts
(b) Fluctuating Capital Accounts
(c) Both
(d) None of the options
Answer: Fixed Capital Accounts

Question: How many accounts prepared for partners under Fixed Capital Accounts method
(a) 2
(b) 3
(c) 4
(d) 5
Answer: 2

Question: Under Fixed Capital Accounts method Balance of Capital account will always show
(a) A credit balance
(b) A debit balance
(c) Dr and Cr. Both
(d) None of the options
Answer: A credit balance

Question: Which accounts prepared for partners under Fixed Fluctuating Capital Accounts method
(a) Capital Account
(b) Current Account
(c) Salary A/c
(d) None of the options
Answer: Capital Account

Question: Interest on partners capital will be allowed only when

(a) Mentioned in the partnership deed.
(b) 1 Partner Agreed
(c) Special Partner agreed
(d) None of the options
Answer: Mentioned in the partnership deed.

Question: Interest on Capital is always calculated on the

(a) Opening Capital
(b) Profit of Partners
(c) Drawings on Partners
(d) None of the options
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Answer: Opening Capital

Question: When date of Drawings is not given, Interest is calculated for a period of
(a) 6 months
(b) 9 months
(c) 12 months
(d) None of the options
Answer: 6 months

Question: When different amount are withdrawn on different date, Which methods to calculate the amount of Interest on
Drawing
(a) Simple Interest Method
(b) Product Method
(c) Both
(d) None of the options
Answer: Simple Interest Method

Question: Direct Method will be used only , when

(a) Amount should be same throughout the period
(b) Date of Drawings should be same throughout the period
(c) Drawings should be made throughout the period regularly without any gap.
(d) All of the options
Answer: Amount should be same throughout the period

Question: Liability of a partner is

(a) Limited to capital
(b) Limited
(c) Unlimited
(d) None of the options
Answer: Limited to capital

Question: Partnership deed is also called

(a) Articles of partnership
(b) Articles of association
(c) Principals of partnership
(d) None of the options
Answer: Articles of partnership

Question: The relationship of partners with the firm is

(a) As Agent
(b) As Manager
(c) As Servant
(d) None of the options
Answer: As Agent

Question: In which year did the partnership act passed

(a) 1932
(b) 1956
(c) 1947
(d) 1952
Answer: 1932

Question: Partnership agreement can be

(a) Oral or Written
(b) Oral
 P a g e | 55

(c) Written
(d) None of the options
Answer: Oral or Written

Question: The Interest on partners capital account is to be credited to

(a) Partners Capital A/c
(b) Profit & loss A/c
(c) Interest A/c
(d) None of the options
Answer: Partners Capital A/c

Question: In the partnership firm, profit and losses are shared

(a) As per agreement
(b) Equally
(c) 25% Each
(d) None of the options
Answer: As per agreement

Question: In the absence of an agreement in partnership, the partnership act provides for
(a) Interest on Loan
(b) Interest on Capital
(c) Interest on Drawing
(d) None of the options
Answer: Interest on Loan

Question: In the absence of partnership deed remuneration or salary to the partners

(a) Not allowed
(b) Allowed
(c) 25% of profit
(d) None of the options
Answer: Not allowed

Question: Which accounts prepared for partners under Fixed Fluctuating Capital Accounts method
(a) Capital Account
(b) Current Account
(c) Salary A/c
(d) None of the options
Answer: Capital Account

Question: What should be the minimum number of persons to form a Partnership :

(a) 2
(b) 7
(c) 10
(d) 20
Answer: A

Question: Every partner is bound to attend diligently to his ______ in the conduct of the business.
(a) Rights
(b) Meetings
(c) Capital
(d) Duties
Answer: D

Question: Forming a Partnership Deed is :

(a) Mandatory
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(b) Mandatory in Writing

(c) Not Mandatory
(d) None of the Above
Answer: C

Question: In the absence of Partnership Deed, the interest is allowed on partner’s capital:
(a) @ 5% p.a.
(b) @ 6% p.a.
(c) @ 12% p.a.
(d) No interest is allowed
Answer: D

Question: In the absence of a partnership deed, the allowable rate of interest on partner’s loan account will be :
(a) 6% Simple Interest
(b) 6% p.a. Simple Interest
(c) 12% Simple Interest
(d) 12% Compounded Annually
Answer: B

Question: A and B are partners in partnership firm without any agreement. A has given a loan of Rs.50,000 to the firm. At the
end of year loss was incurred in the business. Following interest may be paid to A by the firm :
(a) @5% Per Annum
(b) @ 6% Per Annum
(c) @ 6% Per Month
(d) As there is a loss in the business, interest can’t be paid
Answer: B

Question: If any loan or advance is provided by partner then, balance of such Loan Account should be transferred to :
(a) B/S Assets side
(b) B/S Liability Side
(c) Partner’s Capital A/c
(d) Partner’s Current A/c
Answer: B

Question: A, B and C were Partners with capitals of Rs.50,000; Rs.40,000 and Rs.30,000 respectively carrying on business in
partnership. The firm’s reported profit for the year was Rs. 80,000. As per provision of the Indian Partnership Act, 1932, find out
the share of each partner in the above amount after taking into account that no interest has been provided on an advance by A
of Rs.20,000 in addition to his capital contribution.
(a) Rs.26,267 for Partner B and C and Rs.27,466 for Partner A.
(b) Rs.26,667 each partner.
(c) Rs.33,333 for A Rs.26,667 for B and Rs.20,000 for C.
(d) Rs.30,000 each partner.
Answer: A

Question: A partner introduced additional capital of Rs. 30,000 and advanced a loan of Rs.40,000 to the firm at the beginning of
the year. Partner will receive year’s interest :
(a) Rs.4,200
(b) Rs.2,400
(c) Nil
(d) Rs. 1,800
Answer: B

Question: In the absence of partnership deed, partners share profits or losses :

(a) In the ratio of their Capitals
(b) In the ratio decided by the court
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(c) Equally
(d) In the ratio of time devoted
Answer: C

Question: In the absence of express agreement, interest @ 6% p.a. is provided:

(a) On opening balance of partner’s capital accounts
(b) On closing balance of partner’s capital accounts
(c) On loan given by partners to the firm
(d) On opening balance of partner’s current accounts
Answer: C

Question: Which of the following items are recorded in the Profit & Loss Appropriation Account of a partnership firm?
(a) Interest on Capital
(b) Salary to Partner
(c) Transfer to Reserve
(d) All of the above
Answer: D

Question: Is rent paid to a partner appropriation of profits?

(a) It is appropriation of profit
(b) It is not appropriation of profit
(c) If partner’s contribution as capital is maximum
(d) If partner is a working partner.
Answer: B

Question: According to Profit and Loss Account, the net profit for the year is Rs. 1,40,000. The total interest on partner’s capital
is Rs. 8,000 and a partner is to be allowed commission of Rs.5,000. The total interest on partner’s drawings is Rs.1,200. The net
profit as per Profit and Loss Appropriation Account will be :
(a) Rs.1,28,200
(b) Rs.1,44,200
(c) Rs.1,25,800
(d) Rs.1,41,800
Answer: A

Question: Ram and Shy am are partners in the ratio of 3: 2. Before profit distribution, Ram is entitled to 5% commission of the
net profit (after charging such commission). Before charging commission, firm’s profit was Rs.42,000. Shyam’s share in profit will
be:
(a) Rs. 16,000
(b) Rs.24,000
(c) Rs.26,000
(d) Rs. 16,400
Answer: A

Question: A, B and C are partners in a firm without any agreement. They have contributed Rs.50,000, Rs.30,000 and Rs.20,000 by
way of capital in the firm. A was unable to work for six months in a year due to illness. At the end of year, firm earned a profit of
Rs. 15,000. A’s share in the profit will be :
(a) Rs.7,500
(b) Rs.3,750
(c) Rs.5,000
(d) Rs.2,500
Answer: C

Question: In a partnership firm, partner A is entitled a monthly salary of Rs.7,500. At the end of the year, firm earned a profit of
Rs.75,000 after charging A’s salary. If the manager is entitled a commission of 10% on the net profit after charging his
commission, Manager’s commission will be :
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(a) Rs.7,500
(b) Rs. 16,500
(c) Rs.8,250
(d) Rs. 15,000
Answer: D

Question: Seeta and Geeta are partners sharing profits and losses in the ratio 4:1. Meeta was manager who received the salary
of Rs.4,000 p.m. in addition to a commission of 5% on net profits after charging such commission. Profit for the year is Rs.
6,78,000 before charging salary. Find the total remuneration of Meeta.
(a) Rs.78,000
(b) Rs.88,000
(c) Rs.87,000
(d) Rs.76,000
Answer: A

Question: Which accounts are opened when the capitals are fixed?
(a) Only Capital Accounts
(b) Only Current Accounts
(c) Capital Accounts as well as Current Accounts
(d) Either Capital Accounts or Current Accounts
Answer: C

Question: If the Partner’s Capital Accounts are fluctuating, in that case “transfer to reserves” will be recorded in the
(a) Profit and Loss Account
(b) Profit and Loss Appropriation Account
(c) Partner’s Capital Accounts
(d) None of the Above
Answer: B

Question: Interest on Partner’s drawings will be debited to :

(a) Profit and Loss Account
(b) Profit and Loss Appropriation Account
(c) Partner’s Current Account
(d) Interest Account
Answer: C

Question: When partners’ capital accounts are floating, which one of the following items will be written on the credit side of the
partners’ capital accounts? :
(a) Interest on drawings
(b) Loan advanced by partner to the firm
(c) Partner’s share in the firm’s loss
(d) Salary to the active partners
Answer: D

Question: On 1st April 2018, Ts Capital was Rs.2,00,000. On 1st October 2018, he introduces additional capital of Rs. 1,00,000.
Interest on capital @ 6% p.a. on 31 st March, 2019 will be:
(a) Rs.9,000
(b) Rs. 18,000
(c) Rs. 10,500
(d) Rs.15,000
Answer: D

Question: X and Y are partners in the ratio of 3: 2. Their capitals are Rs.2,00,000 and 1 Rs. 1,00,000 respectively. Interest on
capitals is allowed @ 8% p.a. Firm earned a profit of Rs. 60,000 for the year ended 31st March 2019. Interest on Capital will be:
(a) X Rs. 16,000; Y Rs.8,000
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(b) X Rs.8,000; Y Rs.4,000

(c) X Rs. 14,400; Y Rs.9,600
(d) No Interest will be allowed
Answer: A

Question: Where will you record interest on drawings:

(a) Debit Side of Profit & Loss Appropriation Account
(b) Credit Side of Profit & Loss Appropriation Account
(c) Credit Side of Profit & Loss Account
(d) Debit Side of Capital/Current Account only.
Answer: B

Question: How would you close the Partner’s Drawing Account:

(a) By transfer to Capital or Current Account Debit Side.
(b) By transfer to Capital Account Credit Side.
(c) By transfer to Current Account Credit Side.
(d) Either ‘B’ or ‘C
Answer: A

Question: If date of drawings of the partner’s is not given in the question, interest is charged for how much time (a) 1 month
(b) 3 months
(c) 6 months
(d) 12 months
Answer: C

Question: If a fixed amount is withdrawn by a partner on the last day of every month, interest on the total amount is charged for
___ months:
(a) 12
(b) 6 ½
(c) 5 ½
(d) 6
Answer: A

Question: If a fixed amount is withdrawn by a partner in the middle of every month, interest on the total amount is charged for
____ months
(a) 6
(b) 6 ½
(c) 5 ½
(d) 12
Answer: B

Question: Bipasa is a partner in a firm. She withdrew Rs.6,000 at the end of each quarter during the year ended 31st March,
2019. Interest on her drawings @ 10% p.a. will be :
(a) Rs.900
(b) Rs.600
(c) Rs. 1,500
(d) Rs. 1,200
Answer: A

Question: Charulata is a partner in a firm. She withdrew Rs. 10,000 in each quarter during the year ended 31st March, 2019.
Interest on her drawings @ 9% p.a. will be:
(a) Rs. 1,350
(b) Rs.2,250
(c) Rs.900
(d) Rs. 1,800
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Answer: D

Question: If equal amount is withdrawn by a partner in each month during a period of 6 months, interest on the total amount
will be charged for ........... months
(a) 6
(b) 3
(c) 2.5
(d) 3.5
Answer: B

Question: X is a partner in a firm. He withdrew regularly Rs. 1,000 at the beginning of every month for the six months ending
31st March, 2019. If interest on drawings is charged @ 8% p.a. the interest charged will be :
(a) Rs.240
(b) Rs.140
(c) Rs.100
(d) Rs.120
Answer: B

Question: A partner withdraws Rs. 8,000 each on 1st April and 1st Oct. Interest on his drawings @ 6% p.a. on 31st March will be:
(a) Rs.480
(b) Rs.720
(c) Rs.240
(d) Rs.960
Answer: B

Question: A partner draws Rs.2,000 each on 1st April 2018, 1st July 2018, 1st October, 2018 and 1st January 2019. For the year
ended 31st March, 2019 interest on drawings @ 8% per annum will be:
(a) Rs.540
(b) Rs.320
(c) Rs.960
(d) Rs.400
Answer: D

Question: A partner withdraws from firm Rs.7,000 at the end of each month. At the rate of 6% per annum total interest will be:
(a) Rs.5,040
(b) Rs.2,310
(c) Rs.3,570
(d) Rs. 1,370
Answer: B

Question: Sony and Romy are equal partners with fixed capitals of Rs.4,00,000 and Rs.3,00,000 respectively. After closing the
accounts for the year ending 31st March, 2019 it was discovered that interest on capitals was provided @ 8% instead of 10% p.a.
In the adjusting entry:
(a) Sony will be credited by Rs.8,000 and Romy will be credited by Rs.6,000.
(b) Sony will be debited by Rs.8,000 and Romy will be debited by Rs.6,000.
(c) Sony will be debited by Rs. 1,000 and Romy will be credited by Rs. 1,000.
(d) Sony will be credited by Rs. 1,000 and Romy will be debited by Rs. 1,000.
Answer: D

Question: X and Yare partners in the ratio of 3: 2. Their fixed capitals are Rs.2,00,000 and Rs. 1,00,000 respectively. After closing
the accounts for the year ending 31st March, 2019, it was discovered that interest on capital was allowed @ 12% instead of 10%
per annum. By how much amount X will be debited/credited in the adjustment entry: .
(a) Rs.600 (Debit)
(b) Rs.400 (Credit)
(c) Rs.400 (Debit)
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(d) Rs.600 (Credit)

Answer: C

Question: A, Y and Z are equal partners with fixed capitals of Rs.5,00,000, Rs.3,00,000 and Rs. 1,00,000 respectively. After closing
the accounts for the year ending 31st March, 2019 it was discovered that interest on capitals was provided @ 6% instead of 5%
p.a. In the adjusting entry:
(a) Dr. X and Cr. Z by Rs.2,000
(b) Cr. Z and Dr. Z by Rs.2,000
(c) Dr. Z and Cr. Y by Rs.2,000
(d) Cr. Z and Dr. Y by Rs.2,000
Answer: A

Admission Of A Partner MCQ Questions Class 12 Accountancy with Answers

Question: Sacrificing ratio is ascertained at the time of
a) Admission of a new partner
b) Death of partner
c) Retirement of partner
d) None of the options
Answer: Admission of a new partner

Question: share of goodwill brought in by new partner in cash is shared by old partners in
a) Sacrificing ration
b) Old ratio
c) New ratio
d) All of the options
Answer: Sacrificing ration

Question: Excess of the credit side over the debit side of revaluation account
a) Profit
b) Loss
c) Gain
d) Expense
Answer: Profit

Question: Balance sheet prepared after new partnership agreement, assets and liabilities are recorded at
a) Revalued figure
b) Original value
c) At realisable value
d) None of the options
Answer: Revalued figure

Question: Share of goodwill brought in by new partner in cash is called

a) Premium
b) Profit
c) Assets
d) Liabilities
Answer: Premium

Question: Profit or loss on revaluation is borne by

a) Old Partners
b) New partners
c) All partners
d) All of the options
Answer: Old Partners
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Question: When the new partners pays for goodwill in cash, the amount should be debited in the firms book to
a) Cash A/c
b) Goodwill A/c
c) Capital Account
d) All of the options
Answer: Cash A/c

Question: When is brought in cash by the new partner, then the method is known as
a) Premium Method
b) Revaluation Method
c) Memorandum Revaluation Method
d) None of the options
Answer: Premium Method

Question: On the admission of a new partner, if goodwill account is to be raised then this should be debited to
a) Goodwill Account
b) Old Partners capital Account
c) Profit & Loss Appropriation A/c
d) None of the options
Answer: Goodwill Account

Question: When we use super profit Method for goodwill Valuation

a) Firm earns higher Profit
b) Firm earns normal Profit
c) Average profit
d) None of the options
Answer: firm earns higher Profit

Question: Any change in agreement of partnership is called

a) Reconstitution of partnership firm
b) Dissolution of partnership firm
c) Reconstitution of partners
d) None of the options
Answer: Reconstitution of partnership firm

Question: Which circumstances a partnership firm may be reconstituted

a) All of the options
b) Admission of a partner
c) Retirement/Death of a partner
d) Change in Profit Sharing Ratio
Answer: All of the options

Question: At the time of admission of a new partner, Which adjustments are required
a) All of the options
b) Accounting treatment of Goodwill.
c) Accounting treatment of accumulated profit.
d) Calculation of new profit sharing ratio and sacrificing ratio.
Answer: All of the options

Question: At the time of admission of a new partner, Which adjustments are required
a) Calculation of new profit sharing ratio and sacrificing ratio.
b) Accounting treatment of Goodwill.
c) Accounting treatment of accumulated profit.
d) All of the options
Answer: Calculation of new profit sharing ratio and sacrificing ratio.
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Question: Profit Sharing ratio is the ration in which the partners have agreed to share
a) Profit & Losses
b) Profit only
c) Losses only
d) None of the options
Answer: Profit & Losses

Question: In guarantee of profit, given to a partner

a) Minimum Guarantee profit
b) Equal Profit
c) 0.25
d) None of the options
Answer: Minimum Guarantee profit

Question: In the partnership, every partner has the right to

a) Both
b) Consulted about the business
c) Participate in management
d) None of the options
Answer: Both

Question: Which clause should be mentioned in partnership deed

a) All of the options
b) Description of Firms
c) Nature of business
d) Description of partners
Answer: All of the options

Question: in the absence of partnership deed, Interest on Capital and drawing to be

a) Not paid
b) Paid
c) 6% p.a
d) None of the options
Answer: Not paid

Question: a partner may retire from firm

a) Both
b) With an Express agreement among the partners
c) With the consent of all the partners
d) None of the options
Answer: Both

Question: The interest on capital account of partners under the fluctuating capital account method credited to
a) Partners capital account
b) Interest account
c) Profit & Loss A/c
d) None of the options
Answer: Partners capital account

Question: In the absence of agreement to the contrary , partners share profit and losses in the
a) Equal ratio
b) Rate of average capital
c) 0.25
d) None of the options
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Answer: Equal ratio

Question: Partners Salary is debited to

a) Profit & loss Appropriation A/c
b) Profit & loss A/c
c) Revaluation A/c
d) None of the options
Answer: Profit & loss Appropriation A/c

Question: Which items may appear on the credit side of the partners current account
a) Interest on Capital
b) Salary
c) Commission
d) All of the options
Answer: Interest on Capital

Question: If the partners capital account are fixed , Commission payable to partner will show
a) Cr. Side of current A/C
b) Dr. Side of current A/C
c) Both
d) None of the options
Answer: Cr. Side of current A/C

Question: The firm number of partner increase

a) Admission of a new partner
b) Dissolution of a new partner
c) Retirement of new partner
d) Death of new partner
Answer: Admission of a new partner

Question: If partners capitals are fixed, premium for goodwill will be:
a) Credited to the current A/cs of the Sacrificing partners
b) Credited to the Partners Capital A/cs
c) Credited to the P/L Adjustment A/c
d) None of the options
Answer: Credited to the current A/cs of the Sacrificing partners

Question: When the incoming partner pays his share of goodwill privately to the sacrificing partner outside the business Which
account should be debited in the books of account
a) No entry should be recorded
b) Premium for goodwill A/c
c) Partners capital A/c
d) None of the options
Answer: No entry should be recorded

Question: If a new partner is admitted during the year the profits for the year should be divided between ____ period on an
agreed basis
a) Pre-admission and post admission
b) Old profit sharing
c) Equal
d) None of the options
Answer: Pre-admission and post admission

Question: Which of following account is prepared at the time of admission of a new partner?
a) Revaluation Account
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b) Realisation Account
c) Profit & loss A/c
d) None of the options
Answer: Revaluation Account

Question: A and B are partners sharing profits and losses in the ratio of 7 : 5. They agree to admit C, their manager, into
partnership who is to get l/6th share in the profits. He acquires this share as l/24th from A and l/8th from B. The new profit
sharing ratio will be :
(a) 13:7:4
(b) 7 : 13 : 4
(c) 7 : 5 : 6
(d) 5 ; 7 : 6
Answer: A

Question: A and B share profits in the ratio of 3 : 2. They agreed to admit C on the condition that A will sacrifice —th of his share
of profit in favour of C and B will sacrifice yrth of his profits in favour of C. The new profit sharing ratio will be :
(a) 12 : 9 : 4
(b) 3 : 2 : 4
(c) 66:48: 11
(d) 48: 66: 11
Answer: C

Question: A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. A new partner C is admitted. A surrenders
1/15th share of his profit in favour of C and B surrenders 2/15th of his share in favour of C. The new ratio will be :
(a) 8 : 4 : 3
(b) 42 : 26 : 7
(c) 4 : 8 : 3
(d) 26 : 42 : 7
Answer: B

Question: A and B are partners sharing profits and losses as 2 : 1. C is admitted and profit sharing ratio becomes 4:3:2. Goodwill
is valued at Rs.94,500. C brings required goodwill in cash. Goodwill amount will be Credited to :
(a) A 114,000 and B Rs. 7,000
(b) A Rs. 12,000 and B Rs. 9,000
(c) A Rs.21,000
(d) A Rs.94,500
Answer: C

Question: X and Y are partners sharing profits and losses in the ratio of 3 : 2. They admit Z into partnership with |th share in
profits which he acquires equally from X and Y. Z brings in Rs.40,000 as goodwill in cash. Goodwill amount will be credited to :
(a) X Rs.20,000; Y Rs.20,000
(b) X Rs.25,000; Y Rs.15,000
(c) X Rs.24,000; Y Rs. 16,000
(d) X Rs. 4,000; Y Rs. 4,000
Answer: A

Question: 4 and 5 are partners sharing profits in the ratio of 7 : 5. C is admitted into the partnership for 1/6th share which he
acquires 1/24th from A and 1/8fh from B. C does not pay anything for his share of goodwill. On C’s admission firm’s goodwill was
valued at Rs. 1,80,000. Credit will be given to :
(a) A Rs. 22,500; B Rs. 7,500
(b) A Rs. 7,500; B Rs. 22,500
(c) A Rs. 45,000; B Rs. 1,35,000
(d) A Rs.1,35,000; B Rs. 45,000
Answer: B
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Question: X and Y are partners in a firm sharing profits in the ratio of 5 : 3. They admitted Z as a new partner. The new profit
sharing ratio will be 4 : 3 : 2. The firm’s goodwill on Z’s admission was valued at Rs. 1,26,000. But Z could not bring any amount
of goodwill in Cash. Credit will be given to :
(a) X Rs. 17,500; Y Rs.10,500
(b) X Rs. 16,000; Y Rs.12,000
(c) X Rs. 22,750; Y Rs. 5,250
(d) X Rs. 1,02,375; Y Rs.23,625
Answer: C

Question: A and B are partners sharing profits in the ratio of 3 : 2. They admit C into the partnership with 1/4th share in future
profits. The new profit sharing ratio is 5 : 4 : 3. The firm’s goodwill on C’s admission was valued at Rs. 1,44,000. But C could not
bring any amount for goodwill in Cash. Credit will be given to :
(a) A Rs. 80,000; B Rs.64,000
(b) A Rs. 20,000; B Rs. 16,000
(c) A Rs. 1,05,600; B Rs.38,400
(d) A Rs. 26,400; B Rs. 9,600
Answer: D

Question: A and B are sharing profits and losses in the ratio of 3: 2. They admit C as a partner and give him 2/10th share in the
profits. The new profit-sharing ratio will be
(a) 12:8:5.
(b) 3:2:2.
(c) 3:2:5.
(d) 2:1:2.
Answer: A

Question: A and B are sharing profits and losses in the ratio of 5: 3. They admit C as a partner and give him 3/10th share of the
profits. This share he will get 1 /5th from A and 1/10th from B. The new profit-sharing ratio will be
(a) 5:6:3.
(b) 2:4:6.
(c) 17:11:12.
(d) 18:24:38.
Answer: C

Question: Profit or Loss on revaluation of assets and reassessment of liabilities is transferred to Partners' Capital Accounts in
their
(a) Capital Ratio.
(b) Equal Ratio.
(c) Old Profit-sharing Ratio.
(d) Gaining Ratio.
Answer: C

Question: Goodwill of a firm of A and B is valued at Rs.30,000. It is appearing in the books at Rs. 12,000. C is admitted for 1/4
share. What amount he is supposed to bring for goodwill?
(a) Rs.3,000
(b) Rs.4,500
(c) Rs.7,500
(d) Rs. 10,500
Answer: C

Question: P and Q are partners in a firm having capitals of Rs. 15,000 each. R is admitted for 1/3rd share for which he has to
bring Rs. 20,000 for his share of capital. The amount of goodwill will be
(a) Rs. 8,000.
(b) Rs. 10,000.
(c) Rs. 9,000.
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(d) Rs. 11,000.

Answer: B

Question: When the new partner brings cash for goodwill, the amount is credited to
(a) Revaluation Account.
(b) Cash Account.
(c) Premium for Goodwill Account.
(d) Realisation Account.
Answer: C

Question: At the time of admission, if the profit-sharing ratio among the old partners does not change then sacrificing ratio will
be
(a) equal.
(b) according to the contribution of capital.
(c) their old profit-sharing ratio.
(d) according to new partner.
Answer: C

Question: If the new partner brings his share of goodwill in cash, it will be shared by old partners in :
(a) Ratio of sacrifice
(b) Old profit-sharing ratio
(c) New profit-sharing ratio
(d) In Capital ratio
Answer: A

Question: A and B share profits and losses equally. They have Rs.20,000 each as capital. They admit C as equal partner and
goodwill was valued at Rs.30,000. C is to bring in Rs.30,000 as his capital and necessary cash towards his share of goodwill.
Goodwill Account will not remain open in books. If profit on revaluation is Rs. 13,000, find the closing balance of the capital
accounts.
(a) Rs.31,500; Rs.31,500; Rs.30,000
(b) Rs.31,500; Rs.31,500; Rs.20,000
(c) Rs.26,500; Rs.26,500; Rs.30,000
(d) Rs.20,000; Rs.20,000; Rs.30,000
Answer: A

Question: In the absence of an express agreement as to who will contribute to new partners’ share of profit, it is implied that the
old partners will contribute :
(a) Equally
(b) In the ratio of their capitals
(c) In their old profit-sharing ratio
(d) In the gaining ratio
Answer: C

Question: A and B are partners sharing profit in the ratio of 3 : 2. They admit C as a partner by giving him 1/3 share in future
profits. The new ratio will be :
(a) 12: 8:5
(b) 8: 12 : 5
(c) 5:5:12
(d) None of the Above
Answer: D

Question: X and Y are partners sharing profit in the ratio of 3 : 2. Z was admitted with 1/4 share in profits which he acquires
equally from X and Y. The new ratio will be:
(a) 9:6: 5
(b) 19: 11: 10
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(c) 3 : 3 : 2
(d) 3 : 2 : 4
Answer: B

Question: A and B share profits in the ratio of 2 : 1. C is admitted with 1/4 share in profits. C acquires 3/4 of his share from A and
1/4 of his share from B. The new ratio will be:
(a) 2 : 1 : 1
(b) 23 : 13 : 12
(c) 3:1:1
(d) 13 : 23 : 12
Answer: B

Question: A and B are partners in a firm sharing profits in the ratio of 2 : 1. C is admitted as a partner. A and B surrender 1/2 of
their respective share in favour of C. C is to bring his share of premium for goodwill in cash. The goodwill of the firm is estimated
at Rs. 60,000. Credit will be given to :
(a) A Rs. 15,000; B Rs. 15,000
(b) A Rs.40,000; B Rs. 20,000
(c) A Rs.30,000; B Rs. 30,000
(d) A Rs.20,000; B Rs. 10,000
Answer: D

Question: P and S are partners sharing profits in the ratio of 3 : 2. R is admitted with 1/5th share and he brings in Rs.84,000 as
his share of goodwill which is Credited to the Capital Accounts of P and S respectively with Rs.63,000 and Rs.21,000. New profit
sharing ratio will be :
(a) 3 : 1 : 5
(b) 9 : 7 : 4
(c) 3 : 2 : 5
(d) 7 : 9 : 4
Answer: B

Question: Partners A, B and C share the profits of a business in the ratio of 3 : 2 : 1 respectively. They admit D who brings in
Rs.60,000 for his share of goodwill. A, B, C and D decide to share the profits respectively in the ratio of 5 : 3 : 2 : 2. Credit will be
given to :
(a) A Rs. 6,000; B Rs.6,000
(b) A Rs.30,000; B Rs. 18,000; C Rs. 12,000
(c) A Rs.30,000; B Rs.20,000; C Rs. 10,000
(d) A Rs.30,000; B Rs.30,000
Answer: D

Question: A new partner may be admitted into a partnership ;

(a) With the consent of any one partner
(b) With the consent of majority of partners
(c) With the consent of all old partners
(d) With the consent of 2/3rd of old partners
Answer: C

Question: On the admission of a new partner :

(a) Old firm is dissolved .
(b) Old partnership is dissolved
(c) Both old partnership and firm are dissolved
(d) Neither partnership nor firm is dissolved
Answer: C

Question: B and N are partners in a firm sharing profits in the ratio of 3 : 2. They admit S as a partner for l/4th share in the
profits. S acquires his share from B and N in the ratio of 2 : 1. The new profit-sharing ratio will be :
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(a) 2:1:4
(b) 19: 26: 15
(c) 3:2:4
(d) 26: 19: 15
Answer: D

Question: Unrecorded assets or liabilities are transferred to

(a) Partners’ Capital Accounts.
(b) Revaluation Account.
(c) Profit and Loss Account.
(d) Partners' Current Accounts.
Answer: B

Question: X and Y are partners sharing profits in the ratio of 3: 2, and capitals as Rs. 100,000 and Rs. 50,000 respectively. Z is
admitted for 1/5th share in profits. The amount Z will contribute as capital will be
(a) Rs. 50,000.
(b) Rs. 35,000.
(c) Rs. 37,500.
(d) Rs. 60,000.
Answer: C

Question: X and Y are partners sharing profits and losses in the ratio of 3:2. Z was admitted for the 1/5th share and for this he
brings Rs. 150,000, as capital. If capitals are to be proportionate to profit-sharing ratio, the respective capitals of the partners
will be
(a) Rs. 3,00,000: Rs. 3,00,000: Rs.1,50,000.
(b) Rs. 3,60,000: Rs. 2,40,000: Rs. 1,50,000.
(c) Rs. 1,50,000: Rs.' 1,50,000: Rs. 1,50,000.
(d) Rs. 1,50,000: Rs. 2,00,000: Rs. 4,00,000.
Answer: B

Question: Revaluation Account or Profit and Loss Adjustment A/c is a

(a) Real Account
(b) Personal Account
(c) Nominal Account
(d) Asset Account
Answer: C

Question: In case of admission of a partner, the entry for unrecorded investments will be:
(a) Debit Partners Capital A/cs and Credit Investments A/c
(b) Debit Revaluation A/c and Credit Investment A/c
(c) Debit Investment A/c and Credit Revaluation A/c
(d) None of the above
Answer: C

Question: When the balance sheet is prepared after the new partnership agreement, the assets and liabilities are recorded at:
(a) Historical cost
(b) Current cost
(c) Realisable value
(d) Revalued figures
Answer: D

Q. 12. A and B are partners sharing profit or loss in the ratio of 3 : 2. C is admitted into partnership as a new partner. A sacrifice
1/3 of his share of B sacrifice 1/4 of his share in favour of C. What will be the C’s share in the firm?
(a) 1/5
(b) 2/10
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(c) 3/10
(d) None of the above
Answer: C

Question: A and B are partners in a firm sharing profits and losses in the ratio of 2 : 3. C is admitted for 1/5 share in the profits of
the firm. If C gets it wholly from A, the new profit sharing ratio after C’s admission will be :
(a) 1 : 3 : 3
(b) 3 : 1 : 1
(c) 2 : 2 : 1
(d) 1 : 3 : 1
Answer: D

Question: A and B are partners sharing profits in the ratio of 4 : 3. They admitted C as a new partner who gets l/5th share of
profit, entirely from A. The new profit sharing ratio will be :
(a) 20: 8:7
(b) 13 : 15 : 15
(c) 13 : 15 : 7
(d) 15 : 13 : 5
Answer: C

Question: A and B are partners sharing profits and losses in the ratio of 5 : 4. C is 1 admitted for 1/5th share. A and B decide to
share equally in future. Sacrificing ratio will be:
(a) 5 :4
(c) 2 : 7
(c) 7 : 2
(d) 1 : 1
Answer: C

Question: A and B are partners. They admit C for 1/3rd share. In future the ratio between A and B would be 2 : 1. Sacrificing ratio
will be :
(a) 2:1
(b) 1 : 1
(c) 5 : 1
(d) 1 : 5
Answer: D

Question: When a new partner is admitted, the balance of General Reserve appearing in the Balance Sheet at the time of
admission is credited to
(a) Profit and Loss Appropriation Account.
(b) Capital Accounts of all the partners.
(c) Capital Accounts of Old Partners.
(d) Revaluation Account.
Answer: C

Question: If X pays Rs. 1,50,000 as his share of goodwill to Y (Privately), an existing partner* the treatment will be
(a) Goodwill Account will be debited by Rs. 1,50,000.
(b) Goodwill Account will be debited byRs.6,00,000.
(c) Goodwill Account will be credited by Rs. 1,50,000.
(d) No entry will be passed.
Answer: D

Question: If the incoming partner brings the amount of goodwill in Cash and also a balance exists in goodwill account, then this
goodwill account is written off among the old partners in
(a) The new profit-sharing ratio
(b) The old profit-sharing ratio
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(c) The sacrificing ratio

(d) The gaining ratio
Answer: B

Question: If, at the time of admission, the revaluation A/c shows a profit, it should be credited to :
(a) Old partners capital accounts in the old profit-sharing ratio.
(b) All partners capital accounts in the new profit-sharing ratio.
(c) Old partners capital accounts in the new profit-sharing ratio.
(d) Old partners capital accounts in the sacrificing ratio.
Answer: A

Question: A and B are partners sharing profits in the ratio of 11 : 4. C was admitted. A surrendered 1/11th of his share and B1/4
of his share in favour of C. The 11 : 4 sacrificing ratio will be :
(a) 11:4
(b) 1 : 1
(c) 4:11
(d) 7 : 4
Answer: B

Question: P and 0 are partners sharing profits in the ratio of 9 : 7. R is admitted as a partner with 9/20 th share in the profits,
which he takes 1/5th from P and 1/4th from Q. Sacrificing ratio will be :
(a) 5 : 4
(b) 9 : 7
(c) 7 : 9
(d) 4 : 5
Answer: D

Question: A, B and C are partners sharing in the ratio of 5 : 4 : 3. They admit D for 1/7 th share. It is agreed that B would retain
his original share. Sacrificing ratio will be :
(a) A, B and C - 5:4:3
(b) A and C -4 : 3
(c) A and C - 5:4
(d) A and C - -5:3
Answer: D

Question: When a new partner does not bring his share of goodwill in cash, the amount is debited to :
(a) Cash A/c
(b) Premium A/c
(c) Current A/c of the new partner
(d) Capital A/cs of the old partners
Answer: C

Question: If, at the time of admission, some profit and loss account balance appears in the books, it will be transferred to :
(a) Profit & Loss Adjustment Account
(b) All partners’ Capital Accounts
(c) Old partners’ Capital Accounts
(d) Revaluation Account
Answer: C

Question: A and B are partners sharing profit or loss in the ratio of 4 : 1. A surrenders 1/4 of his share and B surrenders 1/2 of his
share in favour of C, a new partner. What will be the C’s share?
(a) 3/4
(b) 1/5
(c) 1/10
(d) 3/10
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Answer: D

Question: A and B are partners in a business sharing profits and losses in the ratio of 7 : 3 respectively. They admit C as a new
partner. A sacrificed l/7th share of his profit and B sacrificed l/3rd of his share in favour of C. The new profit-sharing ratio of A, B
and C will be:
(a) 3:1:1
(b) 2 : 1 : 1
(c) 2:2:1
(d) None of the above
Answer: A

Question: A and B are partners of a partnership firm sharing profits in the ratio of 3 : 2 respectively. C was admitted for l/5th
share of profit. Machinery would be appreciated by 10% (book value Rs. 80,000) and building would be depreciated by 20%
(Rs.2,00,000). Unrecorded debtors of Rs. 1,250 would be brought into books now and a creditor Amounting to Rs.2,750 died and
need not pay anything on this account. What will be profit/loss on revaluation?
(a) Loss Rs.28,000
(b) Loss Rs. 40,000
(c) Profits Rs.28,000
(d) Profits Rs.40,000
Answer: A

Reconstitution Of Firm MCQ Questions Class 12 Accountancy with Answers

Question: The partners whose share decrease as a result of change in profit sharing ratio are known as
a) Sacrificing Partners
b) Gaining Partners
c) Sleeping Partners
d) None of the options
Answer: Sacrificing Partners

Question: The partners whose share Increase as a result of change in profit sharing ratio are known as
a) Gaining Partners
b) Sacrificing Partners
c) Sleeping Partners
d) None of the options
Answer: Gaining Partners

Question: Gaining ratio is the ratio with which the profit share of the partners
a) Increase
b) Decrease
c) Both
d) None of the options
Answer: Increase

Question: Sacrificing Partners is the ratio with which the profit share of the partners
a) Decrease
b) Increase
c) Both
d) None of the options
Answer: Decrease

Question: Profit of the firm that have not been distributed among the partners, called
a) Accumulated Profits
b) Average Profit
c) Super Profit
d) None of the options
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Answer: Accumulated Profits

Question: What adjustment are required when existing partners decide to change their profit sharing ratio?
a) All of the options
b) Adjustment for Reserve
c) Accumulated Profits & Losses
d) Adjustment for Goodwill
Answer: All of the options

Question: A firm is reconstituted , whenever there is a

a) All of the options
b) Retirement of Existing Partner
c) Death of a partner
d) Admission of a new partner
Answer: All of the options

Question: How can the gaining partner compensate the sacrificing partner in case of change in profit sharing ratio
a) By paying Goodwill
b) By paying Profit
c) By Paying losses
d) None of the options
Answer: By paying Goodwill

Question: Employees Provident fund is

a) Not Distributed among the partners
b) Distributed among the partners
c) Distributed in profit sharing ratio
d) None of the options
Answer: Not Distributed among the partners

Question: New Profit sharing ratio is the ratio in which all the partners, including the new partner, share future
a) Profits & Losses of the firm
b) Losses of the firm
c) Profits of the firm
d) None of the options
Answer: Profits & Losses of the firm

Question: Profit & loss adjustment account, which

a) Both
b) Increase value of the assets
c) Decrease Value of Liabilities
d) None of the options
Answer: Both

Question: General reserve at the time of admission of a partner is transferred to

a) Old partners capital Account
b) Revaluation Account
c) Both
d) None of the options
Answer: Old partners capital Account

Question: When the incoming Partner brings in his share of premium for goodwill in cash, it is adjusted by crediting to
a) Premium ( Goodwill) A/C
b) His Capital A/c
c) Sacrificing Partners capital A/c
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d) None of the options

Answer: Premium ( Goodwill) A/C

Question: Z is admitted to a firm for 1/4 share in the profits for which he brings in Rs. 10000towards premium for goodwill, it will
be taken by the old partners in
a) The Sacrificing ratio
b) The old Profit sharing ratio
c) The new profit sharing ratio
d) None of the options
Answer: the Sacrificing ratio

Question: Revaluation A/c ( alternatively Profit & Loss Adjustment Account ) is a

a) Nominal Account
b) Real Account
c) Personal Account
d) None of the options
Answer: Nominal Account

Question: The balance in the investment fluctuation fund, after meeting the loss on revaluation of investments, at the time of
admission of a partner will be transferred to
a) Old partners capital Account
b) The revaluation Account
c) Personal Account
d) None of the options
Answer: Old partners capital Account

Question: If the incoming partner is to bring in premium for goodwill in cash and also a balance exists in the goodwill account,
then this goodwill account is written of among the old partners in
a) The old profit sharing ratio
b) The new profit sharing ratio
c) The sacrificing ratio
d) None of the options
Answer: The old profit sharing ratio

Question: X and Y are partners sharing profits in the ratio of 2:1, they admit Z into the partnership for 1/4th share in profits for
which brings in Rs. 20000 as his share of capital. Hence the adjusted capital of X and Y will be
a) 40000 and 20000 Rs. Respectively
b) 32000 and 16000 respectively
c) 60000 and 30000 Rs. Respectively
d) None of the options
Answer: 40000 and 20000 Rs. Respectively

Question: When A and B , sharing profits and losses in the ratio of 3:2, Admit C as a partner giving him 1/5th share of profits, this
will be given by A and B
a) In the ratio of their profits
b) Equally
c) In the ratio of their capitals
d) None of the options
Answer: In the ratio of their profits

Question: If the adjustment in the values of assets at the time of the admission of a partner shows profits, the same should be
credited to the capital accounts of
a) The old partners in their old profit sharing ratio
b) The old partners in their new profit sharing ratio
c) All partners in their old profit sharing ratio
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d) None of the options

Answer: The old partners in their old profit sharing ratio

Question: The new partner get the right of

a) Both
b) Share Future profit
c) Share in the assets
d) None of the options
Answer: Both

Question: The ratio in which the continuing partners acquire the outgoing partners share is called
a) Gaining Ratio
b) New Profit sharing ratio
c) Old Profit sharing ratio
d) None of the options
Answer: Gaining Ratio

Question: New Profit sharing ratio is

a) Old Share+Acquire Share
b) New Share +Old Share
c) Old Share-Acquire share
d) None of the options
Answer: Old Share+Acquire Share

Question: Gaining ratio is

a) New Ratio-Old ratio
b) New Ratio+Old ratio
c) New Ratio-Profit Sharing ratio
d) None of the options
Answer: New Ratio-Old ratio

Question: At the time of retirement of a partner, if goodwill appears in the balance sheet, it must be written off, the capital
accounts of all partners are debited in
a) The old profit sharing ratio
b) The new profit sharing ratio
c) The capital ratio
d) None of the options
Answer: The old profit sharing ratio

Question: In the event of death of a partner, the amount of general reserve is transferred to partners capital accounts in
a) The old profit sharing ratio
b) The new profit sharing ratio
c) the capital ratio
d) None of the options
Answer: The old profit sharing ratio

Question: On the death of a partner, credit balance of profit and loss account appearing in the balance sheer should be credited
to the capital accounts of
a) All partners including the deceased partner in their profit sharing ratio
b) The remaining partners in the new profit sharing ratio
c) Equally
d) None of the options
Answer: All partners including the deceased partner in their profit sharing ratio
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Question: According to the partnership Act ( SEC-37), the interest payable to the deceased partner on the amount left by him
will be
a) 6% P.A
b) 10% P.A
c) 12% P.A
d) None of the options
Answer: 6% P.A

Question: The share of goodwill of the retiring partner is debited to remaining partners in their
a) Gaining Ratio
b) New Profit sharing ratio
c) Old Profit sharing ratio
d) None of the options
Answer: Gaining Ratio

Question: Decrease in the value of Liabilities on reconstitution of the partnership firm results into
a) Gain to the Existing Partner
b) Loss to the Existing Partner
c) Neither Gain of loss to Existing partner
d) None of the options
Answer: Gain to the Existing Partner

Question: At the time of admission of a new partner, General reserve appearing in the old balance sheet is transferred to
a) Old partners capital Account
b) New partners capital account
c) All Partners capital A/c
d) None of the options
Answer: Old partners capital Account

Question: On the admission of a new partner, increase in the value of assets is debited to
a) Assets Account
b) Revaluation A/c
c) Profit & Loss Account
d) None of the options
Answer: Assets Account

Question: Change in profit sharing ratio of existing partners result in

a) Reconstitution of firm
b) Revaluation firm
c) Amalgamation firm
d) None of the options
Answer: Reconstitution of firm

Question: Change in the partnership agreement results in

a) Reconstitution of firm
b) Dissolution of firm
c) Amalgamation firm
d) None of the options
Answer: Reconstitution of firm

Question: Change in partnership agreement

a) Changes in the relationship among the partner
b) Results in end of partnership business
c) Dissolved the partnership firm
d) None of the options
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Answer: Changes in the relationship among the partner

Question: On reconstitution of the partnership firm, increase in the value of the assets will result into
a) Gain to the Existing Partner
b) Loss to the Existing Partner
c) Neither Gain of loss to Existing partner
d) None of the options
Answer: Gain to the Existing Partner

Question: X and Y shares profits in the ratio of 2:3, how they decided to share profits equally in the future, Which partner will
sacrifice and in which ratio
a) Y Sacrifice 1/10
b) X Sacrifice 1/10
c) Both
d) None of the options
Answer: Y Sacrifice 1/10

Question: A, B and C are partners in the firm, if D is admitted as a new partner

a) Old partnership is reconstitute
b) Old firm is dissolved
c) Both
d) None of the options
Answer: Old partnership is reconstitute

Question: Generally the interest on capital is considered as

a) An Appropriation profit
b) An asset
c) An Expense
d) None of the options
Answer: An Appropriation profit

Question: Revaluation account or Profit & loss adjustment account is

a) Nominal Account
b) Real Account
c) Personal Account
d) None of the options
Answer: Nominal Account

Retirement or Death of a Partner MCQ Questions Class 12 Accountancy with Answers

Question: A, B and C are partners sharing profit or loss in the ratio of 2 : 3 : 4. A retires and after A’s retirement B and C agreed
to share profit or loss in the ratio of 3 : 4 in future. Their gaining ratio will be :
(a) 2 : 3
(b) 4 : 3
(c) 3 :4
(d) 1 : 1
Answer: C

Question: A, B and C were partners in a firm sharing profits and losses in the ratio of 2:2:1. The capital balance are Rs.50,000 for
A, Rs.70,000 for B, Rs.35,000 for C. B decided to retire from the firm and balance in reserve on the date was Rs.25,000. If
goodwill of the firm was valued at Rs.30,000 and profit on revaluation was Rs.7,500 then, what amount will be payable to B?
(a) Rs.70,820
(b) Rs.76,000
(c) Rs.75,000
(d) Rs.95,000
Answer: D
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Question: P, Q and R are sharing profits and losses equally. R retires and the goodwill is appearing in the books at Rs.30,000.
Goodwill of the firm is valued at Rs. 1,50,000. Calculate the net amount to be credited to R's Capital A/c.
(a) Rs.60,000
(b) Rs.50,000
(c) Rs.40,000
(d) Rs. 10,000
Answer: C

Question: A, B and C are partners sharing profits in the ratio of 5 : 2 : 1. If the new ratio on the retirement of A is 3 : 2, what will
be the gaining ratio?
(a) 11: 14
(b) 3 : 2
(c) 2 : 3
(d) 14:11
Answer: D

Question: P, Q and R are partners sharing profits in the ratio of 5 : 4 : 3. Q retires and P and R decide to share future profits
equally. Gaining Ratio will be :
(a) 5 : 3
(b) 1 : 1
(c) 1 : 3
(d) 3 : 1
Answer: C

Question: A, B and C are partners sharing profits in the ratio of 1/2 : 1/4 : 1/4. New ratio on the retirement of B will be :
(a) 2 : 4
(b) 1 : 2
(c) 2 : 1
(d) 1/4 : 1/2
Answer: C

Question: What treatment is made of accumulated profits and losses on the retirement of a partner?
(a) Credited to all partner’s capital accounts in old ratio.
(b) Debited to all partner’s capital accounts in old ratio.
(c) Credited to remaining partner’s capital accounts in new ratio.
(d) Credited to remaining partner’s capital accounts in gaining ratio.
Answer: A

Question: At the time of retirement of a partner, profit on revaluation will be credited to:
(a) Capital Account of retiring partner
(b) Capital Accounts of all partners in the old profit-sharing ratio.
(c) Capital Accounts of the remaining partners in their old profit-sharing ratio
(d) Capital Accounts of the remaining partners in their new profit-sharing ratio
Answer: B

Question: What journal entry will be recorded for writing off the goodwill already existing in Balance Sheet at the time of
retirement of a partner?
(a) Retiring Partner’s Capital A/c Dr.
To Goodwill A/c
(b) All Partner’s Capital A/cs (including retiring) Dr. (in old ratio)
To Goodwill A/c
(c) Remaining Partner’s Capital A/cs Dr. (in gaining ratio)
To Goodwill A/c
(d) Remaining Partner’s Capital A/cs Dr. (in new ratio)
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To Goodwill A/c
Answer: B

Question: Partner's Capital Account is debited

(a) to record the General Reserve.
(b) to record the gain on revaluation.
(c) to record the Profit and Loss A/c (Dr.).
(d) to record the shortage of capital brought in.
Answer: A

Question: The amount due to deceased partner is paid to

(a) His Father.
(b) His Wife.
(c) His Legal Heir,
(d) Remaining Partners.
Answer: B

Question: Gaining ratio is

(a) Old Profit-sharing Ratio - New Profit-sharing Ratio.
(b) Old Profit-sharing Ratio - New Profit-sharing Ratio.
(c) New Profit-sharing Ratio - Old Profit-sharing Ratio,
(d) New Profit-sharing Ratio - Old Profit-sharing Ratio.
Answer: B

Question: On retirement of a partner, unrecorded assets are

(a) debited to Revaluation Account.
(b) credited to Revaluation Account.
(c) credited to Partner's Capital Account.
(d) debited to Profit and Loss Appropriation Account.
Answer: B

Question: At the time of retirement of a partner, profit (gain) on revaluation will be credited to the Capital Accounts of
(a) retiring partner.
(b) all partners in their old profit-sharing ratio.
(c) the remaining partners in their old profit-sharing ratio.
(d) the remaining partners in their new profit-sharing ratio.
Answer: B

Question: increase in liability at the time of retirement of a partner is

(a) credited to Revaluation Account.
(b) debited to Revaluation Account.
(c) debited to Profit and Loss Account.
(d) debited to Profit and Loss Appropriation Account
Answer: B

Question: A, B and C are partners in a firm sharing profit/loss in the ratio of 2 : 2 : 1. On March 31, 2019, C died. Accounts are
closed on Dec., 31 every year. The sales for the year 2018 was Rs.6,00,000 and the profits were Rs.60,000. The sales for the
period from Jan. 1,2019 to March 31, 2019 were Rs.2,00,000. The share of deceased partner in the current year’s profits on the
basis of sales is :
(a) Rs.20,000
(b) Rs.8,000
(c) Rs.3,000
(d) Rs.4,000
Answer: D
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Question: A, B and C were partners sharing profits and losses in the ratio of 2 : 2 : 1. Books are closed on 31st March every year.
C dies on 5th November, 2018. Under the partnership deed, the executors of the deceased partner are entitled to his share of
profit to the date of death, calculated on the basis of last year’s profit. Profit for the year ended 31 st March, 2018 was
Rs.2,40,000. C s share of profit will be :
(a) Rs.28,000
(b) Rs.32,000
(c) Rs.28,800
(d) Rs.48,000
Answer: C

Question: P, Q and R were partners sharing profits in the ratio of their Capital contribution which were Rs.6,00,000; Rs.4,00,000
and Rs.5,00,000 respectively. Their books are closed on 31st March every year. P dies on 24th August, 2018. Under the
partnership deed, deceased partner is entitled to his share of profit/loss to the date of death based on the average profits of
preceding three years. Profits were 2015 Rs.50,000; 2016 Rs. 1,20,000 (Loss); 2017 Rs.30,000 and 2018 Rs.60,000. P's share of
profit/loss will be :
(a) Rs.3,200
(b) Rs.6,400
(c) Rs. 12,000
(d) Rs. 4,800
Answer: D

Question: Retiring partner is compensated for parting with the firm’s future profits in favour of remaining partners. The
remaining partners contribute to such compensation amount in :
(a) Gaining Ratio
(b) Capital Ratio
(c) Sacrificing Ratio
(d) Profit Sharing Ratio
Answer: A

Question: ‘Gaining Ratio’ means :

(a) Old Ratio - New Ratio
(b) New Ratio - Old Ratio
(c) Old Ratio - Sacrificing Ratio
(d) New Ratio - Sacrificing Ratio
Answer: B

Question: On 1st April, 2019 A, B and C were partners sharing profits and losses in the ratio of 5 : 3 : 2 respectively. On this date
B retires. The new profit sharing ratio of A and C will be 3 : 2. Gaining ratio will be :
(a) 1 :2
(b) 2 : 1
(c) 1 : 1
(d) 5 : 2
Answer: A

Question: B, P and L sharing profits in the ratio 4:3:2. B retires, P and L decided to share profits in future in the ratio of 5 : 3.
Gaining ratio will be :
(a)11:21
(b)21: 11
(c) 11 : 13
(d) 13 : 11
Answer: B

Question: P, Q and R were partners sharing profits in the ratio 2 : 2 : 1. Q retires and the new profit sharing ratio of P and R will
be 3 : 1. Gaining ratio will be :
(a) 1 : 7
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(b) 2 : 1
(c) 1 : 2
(d) 7 : 1
Answer: D

Question: Which of the following statement is correct?

(a) Goodwill at the time of retirement of a partner is credited to remaining Partners’ Capital Accounts in sacrificing ratio.
(b) Goodwill at the time of retirement of a partner is credited to remaining Partners’ Capital Accounts in gaining ratio.
(c) Goodwill at the time of retirement of a partner is debited to remaining Partners' Capital Accounts in sacrificing ratio.
(d) Goodwill at the time of retirement of a partner to the extent of retiring Partner's Share is debited to remaining Partners’
Capital Accounts in gaining ratio.
Answer: D

Question: Revaluation Account is prepared to give effect to

(a) change in value of assets alone.
(b) change in value of liabilities alone.
(c) undistributed profits and losses.
(d) change in the values of assets and liabilities.
Answer: D

Question: On the retirement of Hari from the firm of Hari, Ram and Sharma, the Balance Sheet showed a debit balance of Rs.
12,000 in the Profit and Loss Account. For calculating the amount payable to Hari, this balance will be transferred
(a) to the credit of the Capital Accounts of Hari, Ram and Sharma equally.
(b) to the debit of the Capital Accounts of Hari, Ram and Sharma equally.
(c) to the debit of the Capital Accounts of Ram and Sharma equally.
(d) to the credit of the Capital Accounts of Ram and Sharma equally.
Answer: B

Question: A, B and C are partners sharing profits in the ratio of 3:2:1, C retired. New profit-sharing ratio will be
(a) 1:3.
(b) 3:2.
(c) 1:1.
(d) None of these.
Answer: B

Question: A, S and C are partners sharing profits in the ratio of 3: 2:1, C retired, and new profit-sharing ratio is 3:2. Gaining ratio
will be
(a) 3:2.
(b) 1:2.
(c) 2:1.
(d) None of these.
Answer: A

Question: A, B and C are equal partners in a firm. B retires and the remaining partners decide to share the profits of the new firm
in the ratio of 5 : 4. Gaining ratio will be :
(a) 1 :1
(b) 1 : 2
(c) 2 : 1
(d) 5 : 4
Answer: C

Question: A, B and C are partners sharing profit or loss in the ratio of 3 : 2 : 1. B retires and after B's retirement A and C agreed
to share profit or loss in the ratio of 3 : 2 in future. Their gaining ratio will be :
(a) 3 : 1
(b) 1 : 3
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(c) 3:7
(d) None of the above
Answer: C

Question: A, B and C are partners sharing profit or loss in the ratio of 4 : 3 : 2. C retires and after C’s retirement A and B agreed
to share profit or loss in the ratio of 4 : 3 in future. Their gaining ratio will be :
(a) 3 : 2
(b) 4 : 3
(c) 3 : 4
(d) 1 : 1
Answer: B

Question: A, B and C were partners sharing profits in the ratio of 4:5:3. C died and remaining partners decided to share profits in
the ratio of 7:8, the gaining ratio will be .
(a) 8:7.
(b) 4:5.
(c) 1:1.
(d) 2:1.
Answer: A

Question: A, B and C were partners, sharing profit and losses in the ratio of 3:2:1. B died, the firm decided to value the goodwill
on the basis of 3 years' purchase of average of 5 years profits. The profits of the firm for the last five years before charging
interest on capital were Rs. 11,000, Rs. 9,000, Rs. 11,000, Rs. 7,000 and Rs. 8,000. The capital of the firm stood at Rs. 50,000 and
interest rate is 8%. Value of goodwill will be
(a) Rs. 10,000.
(b) Rs. 15,600.
(c) Rs. 21,000.
(d) Rs. 11,000.
Answer: B

Question: A, B and C are partners sharing profits in the ratio of 1/4 : 3/10 : 9/20. The New ratio on the retirement of C will be :
(a) 6 : 5
(b) 5 : 6
(c) 4 : 3
(d) 4 : 10
Answer: B

Question: X, y and Z have been sharing profits in the ratio of 4 : 2 : 1 Z retires. X and Y take Z’s share equally. New profit sharing
ratio will be :
(a) 5 : 2
(b) 5 : 3
(c) 9 : 5
(d) 4 : 2
Answer: C

Question: P, Q and R have been sharing profits and losses in the ratio of 5 : 3 : 2. Q retires. His share is taken by P and R in the
ratio of 2 : 1. New profit sharing ratio will be:
(a) 6 : 4
(b) 7 : 3
(c) 7 : 2
(d) 6 : 3
Answer: B
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Question: X, Y and Z were partners sharing profits in the ratio of 2:2:1. Y died on 30th June, 2020 and profit for the accounting
year ended 31st March, 2020 was Rs. 36,000. If profit share of deceased partner is to be calculated on the basis of previous
year's profit, amount of profit credited to Y’s Capital Account will be
(a) Rs. 3,000.
(b) Rs. 2,400.
(c) Rs. 3,600.
(d) Rs. 2,800.
Answer: C

Question: Choose the odd one:

(a) Revaluation Account
(b) Realisation of assets.
(c) Adjustment of goodwill.
(d) Gaining ratio.
Answer: B

Question: The Partnership Deed does not have a clause on rate of interest to be paid on amount due to heirs of deceased
partner. At what rate interest on the outstanding amount shall be payable?
(a) At the rate at which the banks grant loan.
(b) At the rate of interest provided ¡n the Partnership Act, 1932.
(c) At the rate of interest demanded by the heirs of the deceased partner.
(d) 8% p.a.
Answer: B

Question: On the death of a partner, his share in the profits of the firm till the date of his death is transferred to the
(a) Debit of Profit and Loss Account
(b) Credit of Profit and Loss Account.
(c) Debit of Profit and Loss Suspense Account.
(d) Credit of Profit and Loss Suspense Account
Answer: C

Question: A, Band Care partners sharing profit and losses in the ratio of 2:2:1.B died, at that time goodwill of the firm valued at
Rs. 30,000. What contribution has to be made by A and C in order to pay B's Executor?
(a) Rs. 20,000 and Rs. 10,000.
(b) Rs. 15,000 and Rs. 15,000.
(c) Rs. 8,000 and Rs. 4,000.
(d) Rs. 6,000 and Rs. 6,000.
Answer: C

Question: A, B and Care partners in a firm, sharing profits in the ration of 2:2:1.Their Capital Accounts stood as Rs. 50,000, Rs.
50,000 and Rs. 25,000 respectively. B died, and balance in the reserve on that date was Rs. 15,000. If goodwill of the firm is Rs.
30,000 and profit on revaluation is Rs. 7,050, what amount will be transferred to B's Executor's Account?
(a) Rs. 50,820.
(b) Rs. 70,820.
(c) Rs. 8,820.
(d) Rs. 60,820.
Answer: B

Question: A, B and C are equal partners. C retires. He surrenders 3/5th of his share in favour of A and 2/5th in favour of B. New
ratio will be :
(a) 3 : 2
(b) 8 : 7
(c) 7:8
(d) 2 : 3
Answer: B
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Question: P, Q and R are partners sharing profits in the ratio of 4 : 3 : 2.Q retires and his share was taken up by P and R in the
ratio 3 : 2. New profit sharing ratio will be :
(a) 16 : 29
(b) 29 : 16
(c) 3 : 2
(d) 2 : 3
Answer: B

Question: L, P and G are three partners sharing profits in the ratio 15 : 9 : 8. G retires. L and P decided to share profits in equal
ratio. Gaining ratio will be :
(a) 15: 9
(b) 9:15
(c) 7 : 1
(d) 1 : 7
Answer: D

Question: On retirement of a partner, goodwill will be credited to the Capital Account of:
(a) Retiring Partner
(b) Remaining Partners
(c) All Partners
(d) None of the Above
Answer: A

Question: On the death of a partner, the amount due to him will be credited to :
(a) All partner’s Capital Accounts
(b) Remaining partner’s Capital Accounts
(c) His Executor’s Account
(d) Governments’ Revenue Account
Answer: C

Question: How goodwill is recorded on the retirement of a partner?

(a) Remaining Partner’s Capital A/cs Dr. (In Gaining Ratio)
To Retiring Partner’s Capital A/c (with his share of goodwill)
(b) Remaining Partner’s Capital A/cs Dr. (In New Ratio)
To Retiring Partner’s Capital A/c (with his share of goodwill)
(c) Goodwill A/c Dr.
To All Partner’s Capital A/cs (In Old Ratio)
(d) Goodwill A/c Dr.
To Retiring Partner’s Capital A/c (with his share)
Answer: A

Question: Retiring partner is compensated by the continuing partners in their

(a) Gaining Ratio.
(b) Capital Ratio.
(c) Sacrificing Ratio.
(d) Profit-sharing Ratio.
Answer: A

Dissolution Of Firm MCQ Questions Class 12 Accountancy with Answers

Question: When Retiring partners balance is treated as loan , in the absence of any information, he will get:
a) Interest only 6% per annum
b) Interest 7.5%
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c) Interest 12%
d) None of the options
Answer: Interest only 6% per annum

Question: Deceased partners share of profit is to be transferred to his account by:

a) P/L Suspense A/c
b) P/L Adjustment A/c
c) P/L Appropriation A/c
d) Revaluation Account
Answer: P/L Suspense A/c

Question: Deceased partners share of profit is shown in:

a) Credit side of his capital account
b) Debit side of his capital account
c) Both
d) None of the options
Answer: Credit side of his capital account

Question: Calculation of sharing of profit up to date of death will be calculated on the basis of
a) Both Time basis and Turnover basis
b) Yearly basis
c) Monthly basis
d) None of the options
Answer: Both Time basis and Turnover basis

Question: When amount due to retiring partner is paid with interest, it will be paid through which account?
a) His Loan Account
b) His capital account
c) His Drawing account
d) None of the options
Answer: His Loan Account

Question: Partners Capital Account will be debited in case o

a) Loss on Revaluation
b) Profit on Revaluation
c) General Reserve
d) None of the options
Answer: Loss on Revaluation

Question: When a Partner dies, amount due to him will be paid to:
a) His Executor
b) Gainer partner
c) Remaining Partners
d) None of the options
Answer: His Executor

Question: Retiring partners share of goodwill is calculated as follows:

a) Value of firms goodwill x His Share of profit
b) Value of firms goodwill x Gainer partners share
c) Value of firms goodwill x All partners share
d) None of the options
Answer: Value of firms goodwill x His Share of profit
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Question: Deceased partner share of profit can be calculated on the basis of

a) Time basis and Sale Basis
b) Sales basis
c) Time basis
d) None of the options
Answer: Time basis and Sale Basis

Question: The outgoing partners share in the profits may be adjusted through
a) Profit and Loss suspense account
b) Profit and Loss account
c) Profit and Loss Appropriation account
d) Revaluation Account
Answer: Profit and Loss suspense account

Question: The continuing partners may agree on a specified new profit sharing ratio so in that case the specified ratio will be
the:
a) New ratio
b) Old ratio
c) Sacrificing ratio
d) None of the options
Answer: New ratio

Question: Bad debts recovered will

a) Increase the Revaluation Profit
b) Decrease the Revaluation Profit
c) Both
d) None of the options
Answer: Increase the Revaluation Profit

Question: Reason for preparing Profit and Loss suspense Account is to

a) Adjust the profit of deceased partner
b) Adjust the Revaluation profit
c) Adjust the capital of deceased partner
d) Adjust the Revaluation loss
Answer: Adjust the profit of deceased partner

Question: What is the meaning of change in the profit sharing ratio:

a) Purchase of shares of profit by one partner form another partner
b) In which all partner including the new partner share future profit and loss
c) In which all partner including the retired partner share future profit and loss
d) None of the options
Answer: Purchase of shares of profit by one partner form another partner

Question: The circumstances when change in profit sharing ratio is needed:

a) Both
b) When existing partners decide
c) At the time of admission/retirement/death
d) None of the options
Answer: Both

Question: In case of change in profit sharing ratio among the existing partners who will compensate the existing partners:
a) Gaining partner shall compensate
b) Only one partner
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c) Sacrificing partner shall compensate

d) None of the options
Answer: Gaining partner shall compensate

Question: ______ is a kind of reserve created for payment of compensation in case of accident.
a) Workmen compensation Reserve
b) Profit and loss compensation Reserve
c) Investment compensation Reserve
d) Investment compensation Reserve
Answer: Workmen compensation Reserve

Question: The decision in garner Vs Murray is exactly to section of the Indian partnership Act 1932
a) Section 48
b) Section 41
c) Section 37
d) None of the options
Answer: Section 48

Question: On dissolution of the firm , Cash balance is transferred to

a) Bank Account
b) Realisation Account
c) Partners capital A/c
d) None of the options
Answer: Bank Account

Question: On dissolution of the firm , all assets are transferred to realisation account at
a) Book Value
b) Market Value
c) Cost value
d) None of the options
Answer: Book Value

Question: What time would be taken into consideration if equal monthly amount is drawn as drawing at the beginning of each
month
a) 6.5 Month
b) 5.5 Month
c) 6 month
d) None of the options
Answer: 6.5 Month

Question: What balance does a partners current account has

a) Both
b) Dr. Balance
c) Cr. Balance
d) None of the options
Answer: Both

Question: A draws 1000 Rs. Per month on the last day of every month. If the rate of interest is 5% P.A then the total interest
on drawing will be
a) Rs. 275
b) Rs. 375
c) Rs. 300
d) Rs. 225
Answer: Rs. 275
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Question: Why is Profit and Loss Adjustment Account prepared

a) To record those transaction and errors which were left while preparing the final accounts
b) To record those transaction which were left while preparing the revaluation A/c
c) To record those transaction which were left while preparing the Capital A/c
d) None of the options
Answer: To record those transaction and errors which were left while preparing the final accounts

Question: Give circumstances under which the fixed capitals of partners may change
a) Both
b) When fresh capital is introduced by the partner
c) When a part of capital is withdrawn by the partner
d) None of the options
Answer: Both

Question: In the absence of any information regarding the acquisition of share in profit of the retiring/deceased partner by the
remaining partners, it is assumed that they acquire his/her share
a) Old profit sharing ratio
b) New profit sharing ratio
c) Gaining Ratio
d) None of the options
Answer: Old profit sharing ratio

Question: On retirement/death of a partner, the retiring/deceased partners capital account will be credited with
a) His/her share of goodwill
b) Goodwill of the firm
c) Shares of goodwill of remaining partners
d) None of the options
Answer: His/her share of goodwill

Question: Gobind, Hari and Pratap are partners. On retirement of Gobind, the goodwill already appears in the Balance Sheet at
T 24,000. The goodwill will be written off
a) By debiting all partners capital accounts in their old profit sharing ratio
b) By debiting remaining partners capital accounts in their new profit sharing ratio
c) By debiting retiring partners capital accounts from his share of goodwill
d) None of the options
Answer: By debiting all partners capital accounts in their old profit sharing ratio

Question: Chaman, Raman and Suman are partners sharing profits in the ratio of 5:3:2. Raman retires, the new profit sharing
ratio between Chaman and Suman will be 1:1. The goodwill of the firm is valued at Rs. 1,00,000 Ramans share of goodwill will be
adjusted
a) By debiting only Sumans Capital Account with Rs. 30,000.
b) By debiting Chamans Capital account and Sumans Capital Account with Rs 15,000 each.
c) By debiting Chamans Capital account and Sumans Capital Account with Rs. 21,429 and 8,571 respectively.
d) None of the options
Answer: By debiting only Sumans Capital Account with Rs. 30,000.

Question: On retirement/death of a partner, the remaining partner(s) who have gained due to change in profit sharing ratio
should compensate the
a) Remaining partners (who have sacrificed) as well as retiring partners.
b) Retiring partners only.
c) Remaining partners only (who have sacrificed).
d) None of the options
Answer: Remaining partners (who have sacrificed) as well as retiring partners.
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Question: _______ is prepared at the time of dissolution :

a) Revaluation Account
b) Profit & Loss Account
c) Profit and Loss Appropriation Account
d) Realisation Account
Answer: D

Question: While transferring assets to realisation account is omitted to be transferred:

a) Patents
b) Goodwill
c) Cash
d) Investments
Answer: C

Question: If total assets are Rs.2,00,000; total liabilities are Rs.40,000; amount realised on sale of assets is
Rs. 1,75,000 and realisation expenses are Rs.3,000, the profit or loss on realisation will be :
a) Profit Rs. 12,000
b) Loss Rs.68,000
c) Loss Rs.28,000
d) Loss Rs.25,000
Answer: C

Question: In which condition a partnership firm is deemed to be dissolved?

a) On a partner’s admission
b) On retirement of a partner
c) On expiry of the period of partnership
d) On loss in partnership
Answer: C

Question: A partnership firm is compulsorily dissolved) :

a) When the business of the firm is declared illegal
b) When a partner of the firm dies
c) When a partner of the firm becomes insolvent
d) When a partner transfers his share to some other person without the consent of other partners
Answer: A

Question: At the time of firm’s dissolution, Balance of General Reserve shown in the Balance Sheet is
credited to :
a) Realisation Account
b) Creditor’s Account
c) Partner’s Capital Account
d) Profit & Loss Account
Answer: C

Question: On dissolution, goodwill account is transferred to) :

a) In the Capital Accounts of Partners
b) On the credit of Cash Account
c) On the Debit of Realisation Account
d) On the Credit of Realisation Account
Answer: C
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Question: On dissolution, the balance of a partner’s capital account appearing on the assets side of a
balance sheet is transferred to :
a) On the Debit of Realisation Account
b) On the Credit of Realisation Account
c) On the Debit of Partner’s Capital Account
d) On the Credit of Cash Account
Answer: C

Question: On dissolution, partner’s loan is transferred to :

a) Partner’s Capital Account
b) Realisation Account
c) Partner’s Loan Account
d) Revaluation Account
Answer: C

Question: Sundry Creditors amounted to Rs.8,000. These were paid at a discount of 5%.
Realisation account will be debited by
a) Rs.8,000
b) Rs.7,600
c) Rs.400
d) Rs. 8,400
Answer: B

Question: On dissolution of a firm, a partner took over Rs. 17,000 investments for Rs. 14,000. Which one of
the following account will be debited/credited with how much amount?
a) Partner’s Capital Account Debit with Rs. 14,000
b) Partner’s Capital Account Credit with Rs. 17,000
c) Realisation Account Credit with Rs. 17,000
d) Realisation Account Credit with Rs.3,000
Answer: A

Question: On dissolution of firm, which item is debited to the realisation account?:

a) Realisation expenses paid by partner
b) Balance of reserve fund
c) Amount of unrecorded asset
d) Creditor’s balance shown in the Balance Sheet
Answer: A

Question: At the time of dissolution of a firm, Creditors are Rs. 70,000; Partners’ capital is Rs. 1,20,000;
Cash Balance is Rs. 10,000. Other assets realised Rs. 1,50,000. Profit/Loss in the realisation account will be :
a) Rs.60,000 (Loss)
b) Rs.80,000 (Profit)
c) Rs.40,000 (Loss)
d) Rs.30,000 (Loss)
Answer: D

Question: On firm's Dissolution, Patents realised at Rs. 40,000. State which account will be credited.
a) Cash A/c
b) Realisation A/c
c) Profit and Loss A/c
d) Patents A/c
Answer: B
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Question: At the time of dissolution^ partner gives his personal asset to firm's creditor in settlement, the
account credited will be
a) Realisation A/c.
b) Partner's Capital A/c.
c) Cash A/c.
d) Creditor's A/c.
Answer: B

Question: On dissolution of a firm, an unrecorded furniture of Rs. 5,000 was taken by a partner for Rs.
4,300 against payment. Which Account will be credited and by how much amount?
a) Cash Account by Rs. 4,300.
b) Realisation Account by Rs.700.
c) Partner's Capital Account by Rs. 5,000.
d) Realisation Account by Rs. 4,300.
Answer: D

Question: A firm is dissolved, Param, a partner is to carry out dissolution for which he will get Rs. 5,000,
including expenses. Realisation Expenses were Rs. 2,500. Realisation Account will be debited by
a) Rs. 5,000.
b) Rs. 2,500.
c) Rs. 7,500.
d) None of these.
Answer: A

Question: A firm is dissolved, Raman, a partner is to carry out dissolution for which he will get Rs. 50,000,
including expenses. Realisation Expenses were Rs. 25,000, which were paid by the firm. Realisation Account
will be debited by
a) Rs. 50,000.
b) Rs. 25,000.
c) Rs. 75,000.
d) None of these.
Answer: A

Question: How much amount will be paid to Creditors for Rs.25,000 if Rs.5,000 of the creditors are not to
be paid and the remaining creditors agreed to accept 5% less amount?
a) Rs. 18,750
b) Rs. 19,000
c) Rs. 19,750
d) Rs.20,000
Answer: B

Question: P, a partner, is to bear all expenses of realisation for which he is to be paid Rs.2,000. P had to pay
realisation expenses of Rs.2,500. How much amount will be debited to Realisation Account?
a) Rs.500
b) Rs.2,500
c) Rs.4,500
d) Rs.2,000
Answer: D

Question: Which of the following is not transferred to Realisation Account:

a) Balance of Cash Account
b) Balance of Reserves
c) Balance of Profit & Loss Account
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d) All of the Above

Answer: D

Question: On taking responsibility of payment of a liability of Rs.50,000 by a partner, the account credited
will be :
a) Realisation Account
b) Cash Account
c) Capital Account of the Partner
d) Liability Account
Answer: C

Question: Cash balance shown in the Balance Sheet is shown on dissolution of firm in :
a) Realisation Account
b) Cash Account
c) Capital Account
d) None of the Account
Answer: B

Question: At time of dissolution of partnership firm, the balance of profit and loss account shown in the
assets side of Balance sheet of the firm is transferred to:
a) Realisation Account
b) Cash Account
c) Capital Accounts of partners
d) Loan Accounts of partners
Answer: C

Question: At the time of dissolution of partnership firm, the amount of ‘Bills Payable’ shown in the liability
side of Balance Sheet is transferred to :
a) Capital Accounts of Partners
b) Realisation Account
c) Cash Account
d) Loan Account of Partners
Answer: B

Question: On dissolution, the final balance of capital accounts are transferred to :

a) Realisation Account
b) Cash Account
c) Profit & Loss Account
d) Loan Accounts of Partners
Answer: B

Question: On dissolution of the firm, amount received from sale of unrecorded asset is credited to :
a) Partner’s Capital Accounts
b) Profit and Loss Account
c) Realisation Account
d) Cash Account
Answer: C

Question: Realisation A/c is a :

a) Nominal A/c
b) Real A/c
c) Personal A/c
d) Real A/c as well as Personal A/c
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Answer: A

Question: In the event of dissolution of firm, the partner’s personal assets are first used for payment of the :
a) Firm’s liabilities
b) The personal liabilites
c) None of the two
d) Any of the two
Answer: B

Question: On dissolution, when a partner takes over an asset _____ Is debited

a) Realisation Account
b) Partner’s Capital Account
c) Cash Account
d) Asset Account
Answer: B

Question: In case of dissolution, assets are transferred to Realisation Account:

a) At Book Value
b) At Market Value
c) Cost or Market Value, whichever is lower
d) None of the Above
Answer: A

Question: On dissolution of a firm, bank overdraft is transferred to

a) Realisation account
b) Partners capital account
c) Bank account
d) None of the options
Answer: Realisation account

Question: On dissolution of a firm, partners loan account is transferred to

a) None of the options
b) Partners current account
c) Realisation account
d) Partners capital account
Answer: None of the options

Question: After transferring liabilities like creditors and bills payables in the realisation account, in the
absence of any information regarding then payment, such liabilities are treated as
a) Fully paid
b) Partly paid
c) Never Paid
d) None of the options
Answer: Fully paid

Question: Unrecorded assets when taken over by a partner are shown in

a) Credit of realisation account
b) Debit of realisation account
c) Debit of bank account
d) All of the options
Answer: Credit of realisation account

Question: Unrecorded liabilities when paid are shown in

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a) Debit of realisation account

b) Credit of realisation account
c) Debit of bank account
d) Credit of bank account
Answer: Debit of realisation account

Question: The accumulated profits reserves are transferred to

a) Partners capital account
b) Realisation account
c) Bank account
d) None of the options
Answer: Partners capital account

Question: On dissolution of the firm, partners capital accounts are closed through
a) Bank account
b) Drawings account
c) Realisation account
d) Partners capital account
Answer: Bank account

Question: On dissolution, how will you deal with partners loan if it appears on the assets side of the balance
sheet
a) Transferred to the concerned partners capital account
b) Transferred to the Revaluation account
c) Transferred to the Bank account
d) None of the options
Answer: Transferred to the concerned partners capital account

Question: On dissolution of a firm, In order to record the sale of assets and discharge of liabilities, a
nominal account is opened named
a) Realisation account
b) Profit & loss A/c
c) Profit & loss adjustment A/c
d) None of the options
Answer: Realisation account

Question: Which are the important objectives of preparing realisation account

a) All of the options
b) To close all the books of account
c) To record transactions relating to the sale of assets and discharge of liabilities
d) To determine profit or loss due to the realisation of assets and liabilities
Answer: All of the options

Question: On dissolution of the firm , any surplus remaining after discharging all liabilities and payment to
partners for their capital balances is
a) Distributed to partners in their profit sharing ratio
b) Distributed to partners in Equally
c) Distributed to partners in their Capital ratio
d) None of the options
Answer: Distributed to partners in their profit sharing ratio

Question: W, X, Y and Z are equal partners, W, X and Z died together in plane crash, this accidents results
in
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a) Dissolution of partnership as well as firm

b) Dissolution of partnership
c) Dissolution of firm
d) None of the options
Answer: Dissolution of partnership as well as firm

Question: Profit and loss appropriation A/c is prepared to

a) Find out divisible profit
b) Create reverse fund
c) Find out net profit
d) None of the options
Answer: Find out divisible profit

Question: Which of the following is an appropriation of profit

a) Interest on capital
b) Interest on Loan
c) Salary
d) Rent
Answer: Interest on capital

Question: When drawings are made at the end of every month of certain amount, then interest will be
calculated on total drawings for
a) 5.5
b) 6 month
c) 6.5
d) None of the options
Answer: 5.5

Question: For the firm interest on drawing is

a) Gain
b) Expense
c) Loss
d) None of the options
Answer: Gain

Question: In the absence of partnership deed, Partners are not entitled to receive
a) All of the options
b) Salaries
c) Commission
d) Interest on capital
Answer: All of the options

Question: If a fixed amount is withdrawn on the first day of every Quarter the interest on total drawing will
be calculated for
a) 7.5 Month
b) 5.5
c) 6 month
d) 6.5
Answer: 7.5 Month

Question: Anukalp and Karan are partners with the capital of Rs. 25000 and 15000 respectively, Interest
payable on capital is 10% P.A, find the Interest on capital for both the partners when the profits earned by
the firm is Rs 2400
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a) 1500 and 900

b) 2500 and 1500
c) 1200 and 1500
d) None of the options
Answer: 1500 and 900

Question: Features of a partnership firm are

a) All of the options
b) 2 or more person
c) Sharing profit and losses in agreed ratio
d) None of the options
Answer: All of the options

Question: In realisation account, sale of assets is recorded at their

a) Realised value.
b) Cost Value
c) Book Value
d) None of the options
Answer: Realised value.

Question: When assets are realised at more than their book value.
a) Profit arises
b) Loss Arise
c) Both
d) None of the options
Answer: Profit arises

Question: A firm is compulsorily dissolved when partners become insolvent.

a) Both
b) All Partners
c) Except One Partner
d) None of the options
Answer: Both

Question: Fluctuating Capital A/c is credited with

a) All of the options
b) Interest on Capital
c) Profit of the year
d) Remuneration A/c
Answer: All of the options

Question: Interest on Partners capital A/c is

a) An appropriation A/c
b) Expense
c) Gain
d) None of the options
Answer: An appropriation A/c

Question: Calculate the interest on drawing @ 12% for Gambhir if he withdrew 2000 Rs. Once at the
beginning of each month
a) 1560
b) 1500
c) 1200
d) 1000
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Answer: 1560

Question: Interest on drawings of the partner is a

a) Profit to business
b) Loss to Business
c) Profit to partner
d) None of the options
Answer: Profit to business

Question: Calculate on interest on drawing @ 12% p.a for Abhishek if he withdraw Rs. 2000 once in month
a) 1440
b) 1220
c) 1320
d) 1300
Answer: 1440

Question: Current A/c is

a) Personal A/c
b) Real A/c
c) Capital A/c
d) Nominal A/c
Answer: Personal A/c

Question: The current A/c of partners will always have

a) Either of the Two
b) Dr. Balance
c) Cr. Balance
d) None of the options
Answer: Either of the Two

Question: An unrecorded asset was valued at Rs. 1,00,000. On firm’s dissolution, it was sold for 52%.
Realisation account will be credited with :
a) Rs.52,000
b) Rs.48,000
c) Rs. 1,00,000
d) None of the Above
Answer: A

Question: On firm’s dissolution, a partner undertook firm’s creditors at Rs. 17,000. In this case the account
will be credited :
a) Creditors A/c
b) Cash A/c
c) Realisation A/c
d) Partner’s Capital A/c
Answer: D

Question: On dissolution, losses are first of all met:

a) Out of Capital
b) Out of Profits
c) Out of private assets of partners
d) Out of loan from Bank
Answer: B
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Question: Unrecorded liability, when paid on dissolution of a firm is debited to :

a) Partner’s Capital A/cs
b) Realisation A/c
c) Liabilities A/c
d) Asset A/c
Answer: B

Question: On dissolution of a partnership firm, profit or loss on realisation is distributed among the
partners
a) In capital ratio
b) In Profit sharing ratio
c) Equally
d) None of the above
Answer: B

Question: Change in the existing agreement between the partners is called :

a) Dissolution of Firm
b) Dissolution of Partnership
c) Dissolution of Business
d) All of the Above
Answer: B

Question: On dissolution, the balance of ‘Profit & Loss Account’ appearing on the assets side of a Balance
Sheet is transferred to :
a) On the debit of Realisation Account
b) On the credit of Realisation Account
c) On the debit of Partner’s Capital Accounts
d) On the credit of Partner’s Capital Accounts
Answer: C

Question: In the event of dissolution of a partnership firm, the provision for doubtful debts is transferred to
:
a) Realisation Account
b) Partners Capital Accounts
c) Sundry Debtors Account
d) None of the above
Answer: A

Question: On dissolution, if a partner undertakes to make payment of a liability of the firm is debited)
a) Profit & Loss Account
b) Realisation Account
c) Partner’s Capital Account
d) Cash Account
Answer: B

Question: At the time of dissolution of partnership firm, fictitious assets are transferred to :
a) Capital Accounts of Partners
b) Realisation Account
c) Cash Account
d) Partners’ Loan Account
Answer: A

Question: On dissolution, when a partner takes over an unrecorded asset, ______ is credited :
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a) Capital Account of the Partner

b) Cash Account
c) Asset Account
d) Realisation Account
Answer: D

Question: There was an Unrecorded asset of Rs.2,000 which was taken over by a partner at Rs. 1,500.
Partner’s Capital Account will be debited by ............
a) Rs.2,000
b) Rs. 1,500
c) Rs.500
d) Rs.3,500
Answer: B

Question: On dissolution of a firm, debtors were Rs. 17,000. Of these Rs.500 became bad and the rest
realised 60%. Which account will be debited and by how much amount?
a) Realisation Account by Rs. 16,500
b) Profit & Loss Account by Rs.500
c) Cash Account by Rs.9,900
d) Debtors Account by Rs.7,100
Answer: C

Question: In the Balance Sheet Total Debtors appear at Rs.50,000 and Provision for Doubtful Debts appear
at Rs. 1,500. How much amount will be realised from Debtors, if bad debts amount to X 10,000 and
remaining debtors are realised at a discount of 5%
a) Rs.38,000
b) Rs.36,500
c) Rs.36,575
d) Rs.39,500
Answer: A

Question: How much amount will be paid to A, if his opening capital is Rs.2,00,000 and his share of
realisation profit amounts to Rs. 10,000 and he has taken over assets valuing Rs.25,000 from the firm?
a) Rs.2,35,000
b) Rs. 1,65,000
c) Rs.2,15,000
d) Rs. 1,85,000
Answer: D

Question: If total assets of a firm are Rs. 12,00,000 and total liabilities are Rs.2,40,000, what will be the
capitals of P, Q and R if they share profits in the ratio of their capitals and profit sharing ratio is 1 : 2 : 3 :
a) P Rs.4,80,000; Q Rs.3,20,000; R Rs. 1,60,000
b) P Rs. 1,60,000; Q Rs.3,20,000; R Rs.4,80,000
c) P Rs.2,00,000; Q Rs.4,00,000; R Rs.6,00,000
d) P Rs.6,00,000; Q Rs.4,00,000; R Rs.2,00,000
Answer: B

Question: On dissolution of a firm, a partner’s capital account has a credit balance of Rs.42,000. His share
of profit in realisation account is Rs. 9,000. He has paid firm’s realisation expenses Rs.3,000. He will finally
get a payment of:
a) Rs.39,000
b) Rs.42,000
c) Rs.54,000
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d) Rs.48,000
Answer: C

Question: On dissolution of a firm, debtors Rs. 17,000 were shown in the Balance Sheet. Out of this Rs.2,000
became bad. One debtor became insolvent. 70% were recovered from him out of Rs.5,000. Full amount was
recovered from the balance debtors. On account of this item, loss in realisation account will be :
a) Rs.5,100
b) Rs. 1,500
c) Rs.3,500
d) Rs.2,000
Answer: C

Question: X, Yand Z are partners in a firm in the ratio of 4 : 3 : 2. On firm’s dissolution, firm’s total assets
are Rs.70,000, creditors are Rs. 15,000. Realisation expenses are Rs.2,100. Assets realised 15% more than
the book-value. Creditors were paid 2% more. For profit/loss on realisation, Fs capital account will be
debited/credited with :
a) Credit Rs.8,100
b) Credit Rs.2,700
c) Debit Rs.2,700
d) Debit Rs.2,400
Answer: B

Question: Anu, Bina and Charan are partners. The firm had given a loan of Rs.20,000 to Bina. On the event
of dissolution, the loan will be settled by :
a) Transferring it to debit side of Realization Account.
b) Transferring it to credit side of Realization Account.
c) Transferring it to debit side of Bina’s Capital Account.
d) Bina paying Anu and Charan privately.
Answer: C

Question: At the time of dissolution of firm, at what stage the balances of Partners' Capital Accounts are
paid?
a) After Payment of Outsiders' Liabilities
b) Before payment of loan by partner
c) After payment of Outsiders' Liabilities and Partner's Loan
d) Before payment of Outside Liabilities.
Answer: C

Question: On dissolution, if a partner pays firm's liability which ofthe following account is debited?
a) Profit and Loss Account
b) Realisation Account.
c) Partner's Capital Account
d) Cash Account
Answer: B

Question: Which of the following is transferred to Realisation Account?

a) Balance of Cash Account
b) Balance of Reserves
c) Balance of Profit and Loss Account
d) Patents Account
Answer: D
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Question: In the Balance Sheet, Debtors exist at Rs. 50,000 and Provision for Doubtful Debts at Rs. 1,500.
How much amount will be realised from Debtors, if bad debts are Rs. 10,000 and remaining debtors are
realised at a discount of 5%?
a) Rs. 38,000
b) Rs. 36,500
c) Rs. 36,575
d) Rs. 39,500
Answer: A

Question: P, a partner, is to bear realisation expenses for which he is to be paid Rs. 2,000. P had to pay
realisation expenses of Rs. 2,500. How much amount will be debited to Realisation Account?
a) Rs. 500
b) Rs. 2,500
c) Rs. 4,500
d) Rs. 2,000
Answer: D

Question: Investments of Rs. 2,00,000 were not shown in the books. One of the creditors took these
investments in settlement of his debt of Rs. 2,20,000. How much amount will be payable to that creditor?
a) Rs. 20,000
b) Rs. 2,20,000
c) Rs. 4,20,000
d) Nil
Answer: D

Question: A firm is dissolved, Pawan, a partner is to carry out dissolution. Rs. 50,000 is fixed as his
remuneration. Realisation Expenses were Rs. 25,000, which were paid by Pawan. Pawan's Capital Account
will be credited by
a) Rs. 50,000.
b) Rs. 75,000.
c) Rs. 25,000.
d) Rs. 1,00,000.
Answer: B

Question: Profit or loss of realisation account is transferred to :

a) Profit & Loss Account
b) Capital Accounts of Partners
c) Balance Sheet
d) None of the Above
Answer: B

Question: Which of the following is transferred to Realisation Account :

a) Balance of Cash Account
b) Balance of Profit & Loss Account
c) Amount realised on sale of assets
d) Reserves
Answer: C

Accounting For Share Capital MCQ Questions Class 12 Accountancy with Answers
Question: Minimum number of members in a Private Company
a) 2
b) 5
c) 7
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d) 1
Answer: 2

Question: Minimum number of members in a Public Company

a) 7
b) 2
c) 5
d) 3
Answer: 7

Question: Maximum number of members in a Private Company

a) 50
b) 60
c) 70
d) 100
Answer: 50

Question: Maximum number of members in a Public Company

a) Any Number of members
b) 50
c) 60
d) None of the options
Answer: Any Number of members

Question: Minimum Capital of a Private Company

a) 1 Lakh
b) 2 Lakh
c) 3 Lakhs
d) None of the options
Answer: 1 Lakh

Question: Interest on calls in advance

a) 6% P.A
b) 5% P.A
c) 9% P.A
d) No Interest
Answer: 6% P.A

Question: Interest on calls in arrear

a) 5% P.A
b) 6% P.A
c) 9% P.A
d) No Interest
Answer: 5% P.A

Question: Minimum subscription in case of public company

a) 90% of the entire issue
b) 75% of the entire issue
c) 50% of the entire issue
d) None of the options
Answer: 90% of the entire issue

Question: Minimum application money in case of public limited company

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a) 5% of the nominal face value

b) 10% of the nominal face value
c) 15% of the nominal face value
d) None of the options
Answer: 5% of the nominal face value

Question: Minimum Capital of a Public Company

a) 5 Lakh
b) 1 Lakh
c) 2 Lakh
d) None of the options
Answer: 5 Lakh

Question: Maximum Rate of discount

a) 10% of the nominal value of share
b) 5% of the nominal face value
c) 15% of the nominal face value
d) None of the options
Answer: 10% of the nominal value of share

Question: Issue of share at a discount

a) Section 79
b) Section 78
c) Section 76
d) None of the options
Answer: Section 79

Question: Issue of share at a premium

a) Section 78
b) Section 79
c) Section 76
d) None of the options
Answer: Section 78

Question: Which of the following statement is false:

a) A shareholder is the agent of the company
b) A company is a legal entity quite distinct from its members.
c) A company can buy its own share
d) Same person can agent and creditor of the company
Answer: A shareholder is the agent of the company

Question: Which of the following are the characteristics of a company

a) Liability of the members is limited upto the face value of shares held by them
b) It is a voluntary association of persons.
c) A company is a separate body can sue and be sued in its own name
d) All of the above
Answer: Liability of the members is limited upto the face value of shares held by them

Question: Formed by special act of the legislature or parliament Called

a) Statutory Company
b) Guarantee company
c) Chartered companies
d) None of the options
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Answer: Statutory Company

Question: Liability of the member is limited upto the amount he guaranteed to contribute in the event of winding up.
a) Guarantee company
b) Statutory Company
c) Chartered companies
d) None of the options
Answer: Guarantee company

Question: Incorporated under special charter by the king or sovereign

a) Chartered companies
b) Statutory Company
c) Guarantee company
d) None of the options
Answer: Chartered companies

Question: Minimum number of directors in Pvt. Ltd company

a) 2
b) 3
c) 4
d) No limit
Answer: 2

Question: Minimum number of directors in Ltd company

a) 3
b) 2
c) 4
d) No limit
Answer: 3

Question: Which of the following capital is not shown in companys balance sheet:
a) Reserve Capital
b) Authorised capital
c) Issued and Subscribed capital
d) Called and paid up capital
Answer: Reserve Capital

Question: Permission from central government to issue share capital is required if Nominal capital exceeds
a) 1 Crore
b) 2 Crore
c) 1 Lakh
d) 2 Lakh
Answer: 1 Crore

Question: A company is said to be Deemed Public company if its Annual Turnover exceeds
a) 25 Crores.
b) 20 Crore
c) 30 Crore
d) None of the options
Answer: 25 Crores.

Question: Share application and allotment account is a:

a) Personal account
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b) Real account
c) Nominal account
d) None of the options
Answer: Personal account

Question: Securities premium account is shown on the liabilities side of the balance sheet under the head:
a) Reserves and surplus
b) Share capital
c) Current liabilities
d) None of the options
Answer: Reserves and surplus

Question: Discount of issue of share shows debit balance and hence shown on the assets side of the balance sheet under the
head
a) Miscellaneous expenditure.
b) Reserves and surplus
c) Share capital
d) Current liabilities
Answer: Miscellaneous expenditure.

Question: As per section 78 of the companies act, amount collected as premium on securities cannot be utilised for:
a) Purchase of fixed assets
b) Writing off preliminary expenses
c) Buy back of its own shares
d) Premium payable on redemption of preference shares
Answer: Purchase of fixed assets

Question: The portion of the authorised capital which can be called-up only on the liquidation of the company is called
a) Reserve capital
b) Authorised capita
c) Issued capital
d) Called up capital
Answer: Reserve capital

Question: Penalty for delay in refunding application money

a) 0.15
b) 0.06
c) 0.05
d) 0.2
Answer: 0.15

Question: Which of the following statement is false?

a) A company can raise funds beyond its Authorised capital.
b) Declared dividend should be classified in the balance sheet as a current liability.
c) Dividends are usually paid as a percentage of paid-up-capital.
d) As per the companies act, only preference shares which are redeemable within 20 years can be issued.
Answer: A company can raise funds beyond its Authorised capital.

Question: Which of the following statements are correct?

a) Paid-up-capital = called-up-capital - calls in arrear
b) Subscribed capital is that part of capital which is offered to the public for subscription.
c) Issued capital is that part of authorised capital which is applied by the public and allotted by company.
d) None of the options
Answer: Paid-up-capital = called-up-capital - calls in arrear
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Question: Which of the following is not a statistical book of a company?

a) Register of debenture holders
b) Share application and allotment book
c) Register of share warrants
d) Register of shares and debentures transferred
Answer: Register of debenture holders

Question: Which of the following is not a statutory book of a company?

a) Agenda book
b) Annual returns
c) Minutes book
d) Register of fixed deposits
Answer: Agenda book

Question: Securities premium once received cannot be cancelled.

a) True
b) False
c) Both
d) None of the options
Answer: True

Question: Technique used for marketing a public offer of equity shares of a company is called book building process.
a) True
b) False
c) Both
d) None of the options
Answer: True

Question: As per SEBI guidelines, A new company without any track record can issue share at a premium.
a) False
b) True
c) Both
d) None of the options
Answer: False

Question: Share capital suspense account is opened when:

a) When application money is received but balance sheet is prepared before allotment of shares.
b) Balance sheet is not tallied
c) When dividend is declared but not paid
d) When shares are forfeited
Answer: When application money is received but balance sheet is prepared before allotment of shares.

Question: A new company set up by existing companies with five year track record can issue share at premium provided:
a) All of the options
b) Participation of existing companies are not less that 50%
c) Prospectus contains justification for issue price
d) The issue price is made applicable to all new investors uniformly.
Answer: All of the options

Question: Issue of share at a discount must be authorised by a resolution passed by the company in general meeting and duly
sanctioned by the
a) Central government.
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b) State government.
c) Local government
d) None of the options
Answer: Central government

Question: A company can issue share at a discount if

a) All of the options
b) One year have been elapsed since the date at which the company was allowed to commence business
c) Shares issued at a discount must belong to a class of shares already issued
d) Issue must take place within two must after the date of sanction by the court or within extended time
Answer: All of the options

Question: Maximum number of members in a private company is :

a) 7
b) 200
c) 20
d) No Limit
Answer: B

Question: Capital of a Company is divided in units which is called :

a) Debenture
b) Share
c) Stock
d) Bond
Answer: B

Question: Shareholders receive from the company :

a) Interest
b) Commission
c) Profit
d) Dividend
Answer: D

Question: Voluntary return of shares for concellation by the shareholders is called

a) Cancellation of shares
b) Forfeiture
c) Surrender of shares
d) None of these
Answer: C

Question: If the Premium on the forfeited shares has already been received, then Securities Premium A/c
should be :
a) Credited
b) Debited
c) No treatment
d) None of these
Answer: C

Question: Balance of share forfeiture account is shown in the balance sheet under the head
a) Share Capital Account
b) Reserve and Surplus
c) Current Liabilities and Provisions
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d) Unsecured Loans
Answer: A

Question: 700 shares of Rs. 10 each were reissued as Rs. 9 paid up for Rs.7 per share. Entiy for reissue will
be :
a) Bank A/c Dr. 4,900
Share Discount A/c Dr. 1,400
To Share Capital A/c 6,300
b) Bank A/c Dr. 4,900
To Share Capital A/c 4,900
c) Bank A/c Dr. 4,900
Share Forfeiture A/c Dr. 1,400
To Share Capital A/c 6,300
d) Bank A/c Dr. 4,900
Share Forfeiture A/c Dr. 2,100
To Share Capital A/c 7,000
Answer: C

Question: A Ltd. forfeited 2,000 shares of Rs.10 each fully called up for non-payment of final call of Rs.2
per share. 1,200 of these shares were reissued at Rs.7 per share, fully paid up. What is the amount to be
transferred to Capital Reserve Account?
a) Rs. 7,600
b) Rs. 1,200
c) Rs. 12,400
d) Rs. 6,000
Answer: D

Question: Using information given in above question, what is the net balance in Share Forfeiture Account:
a) Rs.9,600
b) Rs.6,400
c) Rs. 16,000
d) Rs.2,800
Answer: B

Question: Maximum limit of Premium on shares is:

a) 5%
b) 10%
c) No Limit
d) 100%
Answer: C

Question: When a company issues shares at a premium, the amount of premium should be received by the
company :
a) Along with application money
b) Along with allotment money
c) Along with calls
d) Along with any of the above
Answer: D

Question: Amount of securities premium can be utilised for:

a) Writing off the preliminary expenses of the company
b) Issuing bonus shares to the shareholders of the company
c) Buy-back of its own shares
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d) All of the above

Answer: D

Question: Which shareholders are returned their capital after some specified time :
a) Redeemable Preference Shares
b) Irredeemable Preference Shares
c) Cumulative Preference Shares
d) Participating Preference Shares
Answer: A

Question: The following statements apply to equity/preference shareholders. Which one of them applies
only to preference sharehoders?
a) Shareholders risk the loss of investment
b) Shareholders bear the risk of no dividends in the event of losses
c) Shareholders usually have the right to vote
d) Dividends are usually given at a set amount in every financial year.
Answer: D

Question: Unless otherwise stated, a preference share is always deemed to be :

a) Cumulative, participating and non-convertible
b) Non-cumulative, non-participating and non-convertible
c) Cumulative, non-participating and non-convertible
d) Non-cumulative, participating and non-convertible
Answer: C

Question: A company has _______

a) Separate Legal Entity
b) Perpetual Existence
c) Limited Liability
d) All of the Above
Answer: D

Question: Shareholders are :

a) Customers of the Company
b) Owners of the Company
c) Creditors of the Company
d) None of these
Answer: B

Question: Who are the real owners of a company?

a) Government
b) Board of Directors
c) Equity shareholders
d) Debentureholders
Answer: C

Question: Authorised capital of a Company is divided into 5,00,000 shares of Rs. 10 each. It issued 3,00,000
shares. Public applied for 3,60,000 shares. Amount of issued capital will be :
a) Rs.30,00,000
b) Rs.36,00,000
c) Rs.50,00,000
d) Rs.6,00,000
Answer: A
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Question: A Company invited applications for 1,00,000 shares and it received applications for 1,50,000
shares. Applications for 30,000 shares were rejected and the remaining were allotted shares on prorata
basis. How many shares an applicant for 3,000 shares will be allotted :
a) 2,500 Shares
b) 3,600 Shares
c) 4,500 Shares
d) 2,000 Shares
Answer: A

Question: E Ltd. had allotted 10,000 shares to the applicants of 14,000 shares on pro-rata basis. The amount
payable on application was Rs.2. F applied for 420 shares. The number of shares allotted and the amount
carried forward for adjustment against allotment money due from F will be :
a) 60 shares; Rs.120
b) 340 shares; Rs.160
c) 320 shares, Rs.200
d) 300 shares; U40
Answer: D

Question: Using information given in Q. 117, what is the net balance left in Share Forfeiture Account:
a) Rs. 1,400
b) Rs. 1,500
c) Rs.900
d) Rs. 1,000
Answer: D

Question: P Ltd. forfeited 150 shares of Rs.10 each, issued at a premium of Rs.2, for non-payment of the
final call of Rs.3. Out of these, 100 shares were re-issued at Rs. 11 per share. How much amount would be
transferred to capital reserve?
a) Rs.700
b) Rs.500
c) Rs. 1,200
d) Rs.300
Answer: A

Question: XY Limited issued 2,50,000 equity shares of Rs. 10 each at a premium of Rs.1 each payable as
Rs.2.5 on application, Rs.4 on allotment and balance on the first and final call. Applications were received
for 5,00,000 equity shares but the company allotted to them only 2,50,000 shares. Excess money was applied
towards amount due on allotment. Last call on 500 shares was not received and shares were forfeited after
due notice. This is a case of:
a) Over subscription
b) Pro-rata allotment
c) Forfeiture of Shares
d) All of the above
Answer: D

Question: 800 shares of Rs.10 each issued at 20% premium were forfeited for non-payment of allotment
money of Rs.5 (including premium) and first & final of Rs.3 per share. Share Forfeiture Account will be
credited with :
a) Rs. 1,600
b) Rs.2,400
c) Rs.3,200
d) Rs.4,800
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Answer: C

Question: 800 shares of Rs.10 each issued at 30% premium (to be paid on allotment) were forfeited for non-
payment of Rs.2 per share on first call and Rs.2 per share on final call. Share Forfeiture Account will be
credited with :
a) Rs.2,400
b) Rs.4,800
c) Rs.3,200
d) Rs.7,200
Answer: B

Question: A Company forfeited 300 shares of Rs.10 each, Rs.8 per share called up, on which X had paid
application and allotment money of Rs.6 per share. Share Forfeiture Account will be credited with :
a) Rs. 600
b) Rs. 1,800
c) Rs. 1,200
d) Rs.2,400
Answer: B

Question: For what purpose securities premium reserve account cannot be utilized?
a) Amortization of preliminary expenses
b) Distribution of dividend
c) Issue of fully paid bonus shares
d) Buy Back of own shares
Answer: B

Question: Premium on the issue of shares should be shown :

a) On the Assets side of balance sheet
b) On the Equity & Liabilities side of balance sheet
c) In profit & loss Statement
d) None of the Above
Answer: B

Question: A Company issued 50,000 shares of Rs.20 each at 5% premium. Rs.10 were payable on
application and balance on allotment. What will be the allotment amount?
a) Rs.5,00,000
b) Rs.4,75,000
c) Rs.5,50,000
d) Rs.5,25,000
Answer: C

Question: Equity shares cannot be issued for the purpose of:

a) Cash Receipts
b) Purchase of assets
c) Redemption of debentures
d) Distribution of dividend
Answer: D

Question: A Company may issue

a) Equity Shares
b) Preference Shares
c) Equity and Preference both shares
d) None of the Above
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Answer: C

Question: A company cannot issue :

a) Redeemable Equity Shares
b) Redeemable Preference Shares
c) Redeemable Debentures
d) Fully Convertible Debentures
Answer: A

Question: Authorised Capital of a Company is mentioned in :

a) Memorandum of Association
b) Articles of Association
c) Prospectus
d) Statement in lieu of Prospectus
Answer: A

Question: In case of private placement of shares, the lock in period is :

a) 1 Year
b) 2 Years
c) 3 Years
d) None of the above
Answer: C

Question: A Company is
a) All of the options
b) Has separate legal identity
c) Has Perpetual existence
d) Has Common seal
Answer: All of the options

Question: Restricts the right to transfer of shares for

a) Private company
b) Limited company
c) Both
d) None of the options
Answer: Private company

Question: Prohibits any invitation to public to subscribe for shares and Debentures for
a) Private company
b) Limited company
c) Both
d) None of the options
Answer: Private company

Question: Prohibits any invitation or acceptance of deposits from persons other than its members , directors or their relatives
for
a) Private company
b) Limited company
c) Both
d) None of the options
Answer: Private company
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Question: As per section 617 is a company in which more than 50% of paid up capital is held by Central or State Government
or both, Called
a) Government Company
b) Private company
c) Limited company
d) Foreign Company
Answer: Government Company

Question: Section 591of Act states this type of company is incorporated outside India but has established business in India,
Called
a) Foreign Company
b) Government Company
c) Private company
d) Limited company
Answer: Foreign Company

Question: Authorised Capital is also known as

a) Nominal or registered Capital
b) Share capital.
c) Called up Capital
d) None of the options
Answer: Nominal or registered Capital

Question: Which is the maximum amount of capital a company can issue

a) Authorised Capital
b) Share capital.
c) Called up Capital
d) None of the options
Answer: Authorised Capital

Question: Which is part of authorized capital

a) Issued Capital
b) Paid up capital
c) Called up Capital
d) None of the options
Answer: Issued Capital

Question: Capital raised by issue of shares is called

a) Share capital.
b) Authorised Capital
c) Called up Capital
d) None of the options
Answer: Share capital.

Question: It cannot exceed authorized capital .

a) Issued Capital
b) Paid up capital
c) Share capital.
d) None of the options
Answer: Issued Capital

Question: Subscribed Capital is part of

a) Issued Capital
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b) Share capital.
c) Paid up capital
d) Called up Capital
Answer: Issued Capital

Question: It is that part of uncalled capital which the company reserve to be called only upon winding up of company
a) Reserve Capital
b) Share capital.
c) Called up Capital
d) Called up Capital
Answer: Reserve Capital

Question: Capital Reserve is

a) Not available for distribution
b) Available for distribution
c) Both
d) None of the options
Answer: Not available for distribution

Question: How many classes of shares

a) 2
b) 3
c) 4
d) 5
Answer: 2

Question: Classes of shares is

a) Both
b) Preference shares
c) Equity shares
d) None of the options
Answer: Both

Question: Preference shares : are shares which get preferential right in respect of
a) Both
b) Right of dividend
c) Repayment of capital on winding up
d) None of the options
Answer: Both

Question: Shares can be issued

a) Both
b) for cash
c) for consideration other than cash
d) None of the options
Answer: Both

Question: Terms of issue of share

a) All of the options
b) Issue of shares at Par
c) Issue of shares at Premium
d) Issue of shares at Discount
Answer: All of the options
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Question: First instalment paid along with application is called

a) Application money
b) Allotment Money
c) Both
d) None of the options
Answer: Application money

Question: When Second instalment paid

a) On allotment
b) On Application
c) Both
d) None of the options
Answer: On allotment

Question: Issues Of Shares At Premium means Issue Of Share At

a) More than face value
b) Face Value
c) Discount Value
d) Premium value
Answer: More than face value

Question: Issue Of Shares For Cash At Par Means shares are issued
a) Face Value
b) Premium value
c) Discount Value
d) None of the options
Answer: Face Value

Question: Issue Of Shares At Discount, Rate of discount should not be more than
a) 0.1
b) 0.05
c) 0.12
d) None of the options
Answer: 0.1

Question: Issue Of Shares At Discount, Sanction from company Law board must be obtained and shares must be issued within
a) 2 Months of permission
b) 3 Months of permission
c) 4 Months of permission
d) None of the options
Answer: 2 Months of permission

Question: Premium received on issue of shares is shown on

a) Equity and liabilities part of the balance sheet
b) Asset part of the balance sheet
c) Dr side in profit & loss A/c
d) Cr side in profit & loss A/c
Answer: Equity and liabilities part of the balance sheet

Question: Premium on issue of shares can be used for

a) Issue of fully paid bonus shares
b) distribution of profit
c) Transferred to general reserve
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d) None of the options

Answer: Issue of fully paid bonus shares

Question: Balance in forfeited share account is shown in the balance sheet under the head of
a) Share capital.
b) Reserves and surplus
c) Current liabilities
d) None of the options
Answer: Share capital.

Question: If a share of Rs. 10 issued at a premium of Rs. 2 on which the full amount has been called and Rs. 2 (including
premium) paid is forfeited, the share capital account should be debited with
a) Rs. 10
b) Rs. 6
c) Rs. 5
d) None of the options
Answer: Rs. 10

Question: When share are forfeited, share capital account is debited with
a) Called up value of shares
b) Nominal Value of shares
c) Paid up value of share
d) None of the options
Answer: Called up value of shares

Question: If the loss on reissue on shares is less than the amount forfeited, the surplus is transferred to
a) Capital Reserve
b) Revenue Reserve
c) Current liabilities
d) None of the options
Answer: Capital Reserve

Question: If on share of nominal value of Rs. 10, Rs. 10 have been called up and also received, it will be shown as
a) Subscribed and fully paid up
b) Subscribed but not fully paid up
c) Issued share capital
d) None of the options
Answer: Subscribed and fully paid up

Question: If on share of nominal value of Rs. 10, Rs. 8 have been called up and also received, it will be shown as
a) Subscribed but not fully paid up
b) Subscribed and fully paid up
c) Issued share capital
d) None of the options
Answer: Subscribed but not fully paid up

Question: A company can re-issue its seized shares

a) All of the options
b) At par
c) At premium
d) At discount
Answer: All of the options
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Question: The meeting of the board of directors should be at least

a) Every Quarter
b) Every Year
c) Every month
d) None of the options
Answer: Every Quarter

Question: Premium on issues of shares determined by

a) Issuer Company
b) Company Law board
c) SEBI
d) None of the options
Answer: Issuer Company

Question: A Company can issue share on discount

a) After 1 Year of Company Starting
b) After 1 Year of Company Starting
c) After permission of Central Govt.
d) None of the options
Answer: After 1 Year of Company Starting

Question: When does need valuation of shares

a) Time of Merger
b) Admission of new Partner
c) Dissolution of Company
d) None of the options
Answer: Time of Merger

Question: Which company has special rights under Companies Act 3 (i) section (iii)
a) Private Company
b) Limited company
c) Illegal company
d) None of the options
Answer: Private Company

Question: A company is formed according to the provisions of Indian Companies Act,

a) 1956
b) 1932
c) 1952
d) None of the options
Answer: 1956

Question: Capital included in the Total of Balance Sheet of a Company is called :

a) Issued Capital
b) Subscribed Capital
c) Called up Capital
d) Authorised Capital
Answer: B

Question: _____ is transferred to Capital Reserve.

a) Profit from sale of fixed assets
b) Premium on issue of shares
c) Profit on forfeiture of shares
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d) All of the Above

Answer: D

Question: Reserve Capital is also known by :

a) Capital Reserve
b) Called up Capital
c) Subscribed Capital
d) None of the above
Answer: D

Question: Persons who start a company are called _____

a) Shareholders
b) Directors
c) Promoters
d) Auditors
Answer: C

Question: Minimum subscription amount of 90% is related to which share capital:

a) Authorised Capital
b) Issued Capital
c) Paid up Capital
d) Reserve Capital
Answer: B

Question: Share Application Account is in the nature of:

a) Real Account
b) Personal Account
c) Nominal Account
d) None of the above
Answer: B

Question: A Company purchased a building for Rs.3,60,000 and issued as payment equity shares at 20%
premium. Journal Entry will be :
a) Building A/c Dr. 4,00,000
To Share Capital A/c 3,20,000
To Securities Premium Reserve A/c 80,000
b) Share Capital A/c Dr. 4,00,000
To Building A/c 3,60,000
To Securities Premium Reserve A/c 40,000
c) Building A/c Dr. 3,60,000
To Share Capital A/c 3,00,000
To Securities Premium Reserve A/c 60,000
d) Building A/c Dr. 3,60,000
To Share Capital A/c 60,000
To Securities Premium Reserve A/c 3,00,000
Answer: C

Question: A Company purchased a Building for Rs. 12,00,000 out of which Rs.2,00,000 were paid in cash.
Balance amount was paid by issue of equity shares of Rs. 10 each at 25% premium. How many shares will
be issued by the Company :
a) 1,00,000 Shares
b) 80,000 Shares
c) 1,20,000 Shares
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d) 96,000 Shares
Answer: B

Question: If shares of Rs.4,00,000 are issued for purchase of assets of Rs.5,00,000, Rs. 1,00,000 will be
treated as _______ :
a) Discount
b) Premium
c) Profit
d) Loss
Answer: B

Question: 400 shares of Rs.10, on which Rs.8 has been called and Rs.5 has been paid, are forfeited. Out of
these, 300 shares are re-issued for Rs.9 as fully paid. What is the amount to be transferred to Capital
Reserve Account?
a) Rs. 1,200
b) Rs. 1,600
c) Rs.2,000
d) Rs. 1,700
Answer: A

Question: R Ltd. forfeited 600 shares of Rs. 100 each Rs.70 called up on which Mahesh has paid application
and allotment money of Rs.50 per share. Of these, 400 shares were re-issued to Naresh as fully paid-up for
Rs.110 per share. What is the amount to be transferred to Capital Reserve?
a) Rs.30,000
b) Rs.36,000
c) Rs.24,000
d) Rs.20,000
Answer: D

Question: Madhu Ltd. forfeited 800 shares of Rs.10 each issued at 10% premium to Shyam (Rs.9 called up)
on which he did not pay Rs.3 of allotment (including premium) and first call of Rs.2. Out of these, 600
shares were re-issued to Ram as fully paid up for Rs.9 per share. What is to amount to be transferred to
capital Reserve?
a) Rs.2,400
b) Rs. 1,800
c) Rs.3,000
d) Rs.3,600
Answer: A

Question: A company has issued 10,000 Equity Shares of Rs. 10 each and it has called the total nominal
(face) value. It has received the total amount, except the final call of Rs. 3 on 500 Equity Shares.These 500
Equity Shares will be shown as
a) Subscribed and fully paid-up.
b) Subscribed but not fully paid-up.
c) Issued share capital.
d) None of these.
Answer: B

Question: On an equity share of Rs. 20, the company called-up Rs. 16 but Rs. 14 has been received by the
company, Equity Share Capital Account will be credited by
a) Rs. 20.
b) Rs. 16.
c) Rs. 14.
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d) Rs.2.
Answer: B

Question: X Ltd. forfeited 2,000 shares of Rs. 10 each (which were issued at par) held by Naresh for non-
payment of allotment money of Rs.4 per share.The called-up value per share was Rs. 9.On forfeiture, the
amount debited to Share Capital Account will be
a) Rs. 10,000.
b) Rs. 8,000.
c) Rs. 2,000.
d) Rs. 18,000.
Answer: D

Question: Deepak Ltd. offered for subscription 5,50,000 equity shares of Rs. 10 each.The public applied for
5,00,000 shares.
The call ( Rs. 8 per share) was received except from Gopal, who holds 4,000 shares has not paid after
application money of Rs. 2 per share and from Shyam who holds 1,000 shares has paid only Rs. 6 per share.
Gopal's shares were forfeited. The amount of subscribed capital to be disclosed in the Balance Sheet is
a) Rs.39,96,000.
b) Rs.39,74,000.
c) Rs.49,46,000.
d) Rs.49,74,000.
Answer: B

Question: If a shareholder does not pay his dues on allotment, for the amount due, there will be a
a) Credit balance in the Shares Allotment Account.
b) Debit balance In the Shares Forfeiture Account.
c) Credit balance in the Shares Forfeiture Account.
d) Debit balance in the Shares Allotment Account,
Answer: D

Question: Sun & Moon Ltd. invited applications for 25,000 equity shares of Rs. 10 each and received 30,000
applications along with the application money of Rs. 4 per share. Which of the following alternatives can be
followed?
(i) Refund the excess application money and full allotment to rest of the applicants,
(li) Not to allot any share to some applicants, full allotment to some of the applicants and pro rata allotment to the rest of the
applicants,
(iii) Not to allot any share to some applicants and make pro rata allotment to other applicants.
(iv) Make pro rata allotment to all the applicants and adjust the excess money received towards call money.
a) only (I) above.
b) both (i) and (iii) above,
c) All of the above.
d) only (li) above.
Answer: C

Question: A Building was purchased for Rs. 9,00,000 and payment was made in Rs. 100 shares at 20%
premium. Securities Premium Reserve A/c will be
a) Debited by Rs. 1,50,000
b) Credited by Rs. 1,50,000
c) Debited by Rs. 1,80,000
d) Credited by Rs. 1,80,000
Answer: B
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Question: A company purchased machinery for Rs. 1,80,000 and in consideration issued shares at 20%
premium. What will be the face value of shares issued :
a) Rs. 1,50,000
b) Rs. 1,44,000
c) Rs. 1,80,000
d) Rs.2,16,000
Answer: A

Question: Forfeiture of shares results in the reduction of:

a) Subscribed Capital
b) Authorised Capital
c) Reserve Capital
d) Fixed Assets
Answer: A

Question: Reserve Capital is :

a) Subscribed Capital
b) Capital Reserve
c) Uncalled Capital
d) Part of the uncalled capital which may be called only at the time of liquidation of the Company
Answer: D

Question: In the Balance Sheet of a company, under the heading share capital, at the last is shown :
a) Authorised Share Capital
b) Subscribed Share Capital
c) Issued Share Capital
d) Reserve Share Capital
Answer: B

Question: Which of the following is not shown under the heading ‘Share Capital’ in a Balance Sheet:
a) Subscribed Capital
b) Issued Capital
c) Reserve Capital
d) Authorised Capital
Answer: C

Question: A Company is created by :

a) Special act of the Parliament
b) Companies Act
c) Investors
d) Members
Answer: B

Question: An artificial person created by Law is called :

a) Sole Tradership
b) Partnership Firm
c) Company
d) All of the Above
Answer: C

Question: The liability of members in a Company is :

a) Limited
b) Unlimited
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c) Stable
d) Fluctuating
Answer: A

Question: Following amounts were payable on issue of shares by a Company : Rs.3 on application, Rs.3 on
allotment, Rs.2 on first call and Rs.2 on final call. X holding 500 shares paid only application and allotment
money whereas Y holding 400 shares did not pay final call. Amount of calls in arrear will be :
a) Rs.3,800
b) Rs.2,800
c) Rs. 1,800
d) Rs.6,200
Answer: B

Question: Metacaf Ltd. issued 50,000 shares of Rs.100 each payable Rs.20 on application (on 1st May 2012);
Rs.30 on allotment (on 1st January 2013); Rs.20 on first call (on 1st July 2013) and the balance on final call
(on 1st February 2014). Shankar, a shareholder holding 5,000 shares did not pay the first call on the due
date. The second call was made and Shankar paid the first call amount along with the second call. All sums
due were received.
Total amount received on 1st February was :
a) Rs. 15,00,000
b) Rs. 16,00,000
c) Rs. 10,00,000
d) Rs. 11,00,000
Answer: B

Question: A shareholder holding 600 shares paid the amount of call @ Rs.5 per share on 1st November 2018
whereas the call was due on 1st March 2019. Interest on calls in advance as per Table F will be :
a) Rs.45
b) Rs.60
c) Rs.50
d) Rs.120
Answer: D

Question: Discount allowed on re-issue of forfeited shares is debited to :

a) Share Capital A/c
b) Share forfeiture A/c
c) Statement of Profit & Loss
d) General Reserve A/c
Answer: B

Question: The balance of the forfeited shares account after re-issue of forfeited shares is transferred to :
a) Statement of Profit & Loss
b) Share Capital A/c
c) Capital Reserve A/c
d) General Reserve A/c
Answer: C

Question: X Ltd. forfeited 500 shares of t) 0 each fully called up for non-payment of final call of Rs.3 per
share 300 of these shares were reissued at Rs.9 per share, fully paid up. What is the amount to be
transferred to Capital Reserve Account?
a) Rs.3,500
b) U,\00
c) Rs.3,200
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d) Rs. 1,800
Answer: D

Question: Premium on issue of shares can be used for

a) issue of partly paid bonus shares.
b) writing off losses incurred during the year.
c) writing off discount/loss on Issue of debentures,
d) writing off past losses.
Answer: C

Question: When shares are forfeited. Share Capital Account is debited with
a) nominal (face) value of shares.
b) called-up share capital.
c) paid-up value of shares.
d) market value of shares.
Answer: B

Question: A company is
a) Artificial person
b) Living person
c) Non living Person
d) None of the options
Answer: Artificial person

Question: The director of a company must be

a) Shareholder
b) Agent
c) Employee
d) None of the options
Answer: Shareholder

Question: Capital reserves are created from

a) Capital Profit
b) Average Profit
c) Share Profit
d) None of the options
Answer: Capital Profit

Question: Equity share holders are :

a) Owners
b) Creditors
c) Customers of Company
d) None of the options
Answer: Owners

Question: Nominal share capital is

a) The amount actually paid by the shareholders
b) That Part of the authorised capital which is issued by the company
c) The maximum amount of share capital which a company is authorised to issue
d) None of the options
Answer: The amount actually paid by the shareholders
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Question: Money received in advance from shareholders before it is actually called-up by the directors is
a) Credit to calls account
b) Debit to calls account
c) Capital A/C
d) None of the options
Answer: Credit to calls account

Question: The balance of share forfeited account after the reissue of forfeited shares is transferred to
a) Capital reserve
b) General reserve
c) Revenue Reserve
d) None of the options
Answer: Capital reserve

Question: Balance of share forfeiture account is shown in the balance sheet under the item
a) Share capital account
b) Reserves and surpluses
c) Unsecured Loans
d) None of the options
Answer: Share capital account

Question: Those companies whose shares are listed on a recognised stock exchange for public trading
a) Listed Company
b) Government Company
c) Private Company
d) Limited company
Answer: Listed Company

Question: When a company repurchase its own share from the market to reduce the number of share it is called
a) Buy-back of shares
b) Issue of shares
c) Forfeited share
d) None of the options
Answer: Buy-back of shares

Question: Sources for Buy-back of Share is

a) All of the options
b) Free reserves.
c) Securities premium account
d) Proceeds of any shares
Answer: All of the options

Question: Company has

a) Separate legal entity
b) Perpetual Existence
c) Limited Liability
d) None of the options
Answer: Separate legal entity

Question: Share capital of a company can be divided into

a) All of the options
b) Authorised Capital
c) Issued Capital
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d) Subscribed Capital
Answer: All of the options

Question: The capital of a company is divided into a number of equal parts, Each part is called
a) Share
b) Debenture
c) General Reserve
d) None of the options
Answer: Share

Question: They have a right to receive dividend

a) Preference Share
b) Share
c) Debenture
d) None of the options
Answer: Preference Share

Question: Right shares are first offered to the

a) Existing share holders
b) Customers
c) Companies
d) None of the options
Answer: Existing share holders

Question: Right share are not offered to the existing equity shareholders if
a) Both
b) The company in general meeting has so decided by a special resolution
c) Decided by an ordinary resolution and same has been approved by the central government
d) None of the options
Answer: Both

Question: Which of the following statement in false

a) Bonus shares can be issued out revaluation profit.
b) Bonus issue is made out of free reserves or securities premium collected in cash only
c) No bonus issue shall be made within 12 months of any public or right issue.
d) Company can issue bonus shares in any ratio
Answer: Bonus shares can be issued out revaluation profit.

Question: Which of the following Reserves which are not available for issue of fully paid bonus shares
a) Capital reserve arising due to revaluation
b) Dividend equalisation reserve
c) Profit and loss account
d) Capital redemption reserve
Answer: Capital reserve arising due to revaluation

Question: Which of the following reserves which can be utilised to make partly paid shares into fully paid up
a) Capital reserve from sale of fixed assets in cash
b) Securities premium
c) Capital redemption reserve
d) Surplus arising from a change in the method of charging depreciation
Answer: Capital reserve from sale of fixed assets in cash
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Question: Raj Limited forfeited 1,000 shares of 10 each for the non-payment of the final call of Rs.2 per share. These shares
were reissued @ Rs.8 per share fully paid up. Find out the amount of capital reserve.
a) 6000
b) 10000
c) 15000
d) 8000
Answer: 6000

Question: Share Capital Account should be debited (at the time of forfeiture) with:
a) Called up amount
b) Paid up amount
c) Premium Amount
d) All of the options
Answer: Called up amount

Question: Securities premium reserve cannot be used

a) Working capital
b) Buy back of shares
c) Writing off preliminary expenses
d) None of the options
Answer: Working capital

Question: Which Shares are issued by a company to its employees or directors for their hard work and dedication towards the
company.
a) Sweat Equity Shares
b) Bonus Shares
c) Preference Shares
d) None of the options
Answer: Sweat Equity Shares

Question: What is the limit of Securities Premium on the issue of shares?

a) Unlimited
b) 0.1
c) 0.15
d) 0.2
Answer: Unlimited

Question: Which capital is to be stated in the Memorandum of Association of a company?

a) Authorised Capital
b) Called up capital
c) Subscribed capital
d) Subscribed capital
Answer: Authorised Capital

Question: Share capital is shown in the balance sheet under the heading of_______
a) Shareholders Funds
b) Current Assets
c) Current liabilities
d) None of the options
Answer: Shareholders Funds

Question: have voting rights in all circumstances

a) Equity Share
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b) Preference Share
c) Bonus Share
d) None of the options
Answer: Equity Share

Question: What type of shares can be issued at discount?

a) Sweat Equity Shares
b) Equity Shares
c) Preference Shares
d) None of the options
Answer: Sweat Equity Shares

Question: Shubham Limited invited applications for subscription of 10,000 Equity shares @ Rs.10 each. Applications were
received for 20,000 shares. This situation is called
a) Oversubscription of shares
b) Under subscription of shares
c) Full Allotment of shares
d) Pro Rata Allotment of share
Answer: Oversubscription of shares

Question: In case of private placement of shares and company does not invite the general public for
subscription of shares in that case, company instead of issuing prospectus :
a) Prepares the statement in lieu of prospectus
b) Prepares the Report
c) Prepares the Budget
d) Prepares the Asset side of Balance Sheet
Answer: A

Question: In case of private placement of shares, to raise the amount of capital a company :
a) invites the public through prospectus
b) does not invite the public
c) invites the public through advertisement
d) invites the public through memorandum of association
Answer: B

Question: Shares issued by a company to its employees or directors in consideration of ‘Intellectual

Property Rights’ are called :
a) Right Equity Shares
b) Private Equity Shares
c) Sweat Equity Shares
d) Bonus Equity Shares
(iv) Issue and Allotment of Shares
Answer: C

Question: Liability of a shareholder is limited to _____ of the shares allotted to him:

a) Paid up Value
b) Called up value
c) Face value
d) Reserve Price
Answer: C
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Question: Preference shares, in case the holders of these have a right to convert their preference shares into
equity shares at their option according to the terms of issue, such shares are called :
a) Cumulative Preference Share
b) Non-cumulative Preference Share
c) Convertible Preference Share
d) Non-convertible Preference Share
Answer: C

Question: A preference share which does not carry the right of sharing in surplus profits is called
a) Non-Cumulative Preference Share
b) Non-participating Preference Share
c) Irredeemable Preference Share
d) Non-convertible Preference Share
Answer: B

Question: Which shareholders have a right to receive the arrears of dividend from future profits :
a) Redeemable Preference Shares
b) Participating Preference Shares
c) Cumulative Preference Shares
d) Non-Cumulative Preference Shares
Answer: C

Question: If a share of Rs. 100 on which Rs.60 has been paid, is forfeited, it can be re-issued at the
minimum price of:
a) Rs. 60
b) Rs.100
c) Rs. 40
d) Rs.140
Answer: C

Question: A Company forfeited 1,000 shares of Rs. 10 each fully called, on which Rs.6,000 has been paid.
Out of these 800 shares were reissued upon payment of Rs.6,600. What is the amount to be transferred to
Capital Reserve?
a) Rs.4,800
b) Rs.6,000
c) Rs.4,600
d) Rs.3,400
Answer: D

Question: A company forfeited 700 shares of Rs.10 each, on which only Rs.5 per share was paid. Of these,
200 shares were reissued at Rs.9 per share. Amount from Share Forfeiture Account to Capital Reserve
Account will be transferred :
a) Rs.800
b) Rs.200
c) Rs.3,500
d) Rs.2,500
Answer: A

Question: On an equity share of Rs.10 the company has called up Rs.8 but Rs.6 have been received by the
company is forfeited, the capital account should be debited by:
a) Rs.10
b) Rs. 8
c) Rs. 6
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d) Rs. 2
Answer: B

Question: If a share of Rs. 10 issued at a premium of Rs.3 on which the full amount has been called and
Rs.8 (including premium) paid is forfeited the capital account should be debited with :
a) Rs. 5
b) Rs. 8
c) Rs.10
d) Rs.13
Answer: C

Question: If a share of Rs.10 issued at a premium of Rs.1 on which Rs. 9 (including premium) have been
called and Rs.7 including premium is paid is forfeited, the capital account should be debited by :
a) Rs.10
b) Rs. 7
c) Rs. 8
d) Rs. 9
Answer: C

Question: As per SEBI Guidelines, Application money should not be less than of the issue price of each
share.
a) 10%
b) 15%
c) 25%
d) 50%
Answer: C

Question: 4,000 Equity Shares of Rs. 10 each were issued at 8% premium to the promoters of a company
for their services. Which account will be debited?
a) Share Capital Account
b) Goodwill Account/Incorporation Cost Account
c) Securities Premium Reserve Account
d) Cash Account
Answer: B

Question: If vendors are issued fully paid shares of Rs. 1,25,000 in consideration of net assets of Rs.
1,50,000, the balance of Rs.25,000 will be credited to :
a) Statement of Profit & Loss
b) Goodwill Account
c) Security Premium Reserve Account
d) Capital Reserve Account
Answer: C

Question: On a share of Rs. 10 issued at a premium of Rs. 2, whole amount is called-up and Rs. 7 is
received, Share Capital Account will be credited by
a) Rs. 10
b) Rs.12.
c) Rs.7.
d) Rs.2.
Answer: A

Question: On a share of Rs. 20 issued at a premium of Rs. 4 on which Rs. 16 (including premium) is called-
up and Rs. 10 (including premium) paid is forfeited, the Share Capital Account will be debited by
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a) Rs.20.
b) Rs.12.
c) Rs.10.
d) *16.
Answer: B

Question: At the time of reissue of all forfeited shares

a) General Reserve is debited with the credit balance left in the Forfeited Shares Account.
b) General Reserve is credited with the credit balance left in the Forfeited Shares Account.
c) Capital Reserve is debited with the credit balance left in the Forfeited Shares Account.
d) Capital Reserve is credited with the credit balance left in the Forfeited Shares Account.
Answer: D

Question: Green Ltd. had allotted 10,000 shares to the applicants of 14,000 shares on pro rata basis. The
amount payable on application is Rs. 2 per share. Mohan applied for 420 shares. The number of shares
allotted and the amount carried forward for adjustment against allotment money due from Mohan are
a) 60shares, Rs. 120.
b) 320 shares, Rs. 200.
c) 340shares, Rs. 100.
d) 300shares, Rs.240.
Answer: D

Question: Star Ltd. issued 10,000 equity shares of Rs. 100 each at a premium of 20%. Mamta, who has been
allotted 2,000 shares did not pay first and final call of Rs. 5 per share. On forfeiture of Mamta's shares,
amount debited to Securities Premium Reserve Account will be
a) Rs. 5,000.
b) Rs. 10,000.
c) Rs. 15,000.
d) NIL.
Answer: D

Question: To whom dividend is given at a fixed rate in a company?

a) To equity shareholders
b) To preference shareholders
c) To debentureholders
d) To promoters
Answer: B

Question: Preference shareholders have

a) Preferential right as to dividend only
b) Preferential right in the management
c) Preferential right as to repayment of capital at the time of liquidation of the company
d) Preferential right as to dividend and repayment of capital at the time of liquidation of the company
Answer: D

Question: The shares on which there is no any pre-fixed rate of dividend is decided, but the rate of dividend
is fluctuating every year according to the availability of profits, such share are called :
a) Equity Share
b) Non-cumulative preference share
c) Non-convertible preference share
d) Non-guaranteed preference share
Answer: A
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Question: Anthony Ltd. Issued 40,000 equity shares of Rs. 20 each payable as Rs. 5 on application; Rs. 7 on
allotment and Rs. 8 on final call. Company received the due amount but one shareholder holding 250 shares
did not pay the allotment money and another shareholder holding 150 shares failed to pay the amount due
on final call. Total amount of Calls-in-Arrears is
a) Rs. 1,750.
b) Rs. 3,200.
c) Rs. 6,000.
d) Rs. 4,950.
Answer: D

Question: Gopal Ltd. purchased machine of Rs. 1,15,000 from Indian Traders, payment of Rs. 10,000 was
made by issuing cheque and the remaining amount by issue of equity shares of the face value of Rs. 10 each
fully paid at an issue price of Rs. 10.50 each. Amount of securities premium will be
a) Rs. 6,000.
b) Rs. 7,000.
c) Rs. 5,000.
d) Rs. 4,000.
Answer: C

Question: Mohar Ltd. forfeited 160 shares of Rs. 10 each on which the holder had paid only the application
money of Rs. 2 per share. Out of these, 40 shares were reissued to Gaurav as fully paid for Rs. 9 per
share.The gain on reissue Is
a) Rs. 320.
b) Rs. 160.
c) Rs. 40.
d) None of these.
Answer: C

Question: Interest on calls in arrears is charged according to Table F at:

a) 6% p.a.
b) 10% p.a.
c) 5% p.a.
d) 12% p.a.
Answer: B

Question: Amount of Calls in Arrears is shown in the Balance Sheet

a) as deduction from issued capital
b) as deduction from subscribed capital
c) as addition to subscribed capital
d) on the assets side
Answer: B

Question: As per Table F, the Company is required to pay ______ interest on the amount of calls in advance
a) 12% p.a.
b) 5% p.a.
c) 10% p.a.
d) 6% p.a.
Answer: A

Question: A Company may issue the shares :

a) By Private Placement of Shares
b) By Public Subscription of Shares
c) For Consideration other than cash
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d) By All of the Above

Answer: D

Question: Public subscription of shares include :

a) To Issue Prospectus
b) To Receive Applications
c) To Make Allotment
d) All of the Above
Answer: D

Question: Which of the following will define, when appropriation of a certain number of shares is made to
an applicant in response to his application?
a) Share allotment
b) Share forfeiture
c) Share trading
d) Share Purchase
Answer: A

Question: If a share of Rs. 10 issued at a premium of Rs. 2 on which the full amount has been called and Rs.
8 (including premium) paid is forfeited, the Share Capital Account will be debited with
a) Rs. 12.
b) Rs.10.
c) Rs. 8.
d) Rs. 6.
Answer: B

Question: If discount on reissue of shares is less than the amount forfeited, the surplus is transferred to
a) Capital Reserve.
b) General Reserve.
c) Securities Premium Reserve.
d) Statement of Profit and Loss.
Answer: A

Accounting For Share Capital MCQ Questions Class 12 Accountancy with Answers
Question: A company is
a) Artificial person
b) Living person
c) Non living Person
d) None of the options
Answer: Artificial person

Question: The director of a company must be

a) Shareholder
b) Agent
c) Employee
d) None of the options
Answer: Shareholder

Question: Capital reserves are created from

a) Capital Profit
b) Average Profit
c) Share Profit
d) None of the options
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Answer: Capital Profit

Question: Equity share holders are :

a) Owners
b) Creditors
c) Customers of Company
d) None of the options
Answer: Owners

Question: Nominal share capital is

a) The amount actually paid by the shareholders
b) That Part of the authorised capital which is issued by the company
c) The maximum amount of share capital which a company is authorised to issue
d) None of the options
Answer: The amount actually paid by the shareholders

Question: Money received in advance from shareholders before it is actually called-up by the directors is
a) Credit to calls account
b) Debit to calls account
c) Capital A/C
d) None of the options
Answer: Credit to calls account

Question: The balance of share forfeited account after the reissue of forfeited shares is transferred to
a) Capital reserve
b) General reserve
c) Revenue Reserve
d) None of the options
Answer: Capital reserve

Question: Balance of share forfeiture account is shown in the balance sheet under the item
a) Share capital account
b) Reserves and surpluses
c) Unsecured Loans
d) None of the options
Answer: Share capital account

Question: Those companies whose shares are listed on a recognised stock exchange for public trading
a) Listed Company
b) Government Company
c) Private Company
d) Limited company
Answer: Listed Company

Question: When a company repurchase its own share from the market to reduce the number of share it is called
a) Buy-back of shares
b) Issue of shares
c) Forfeited share
d) None of the options
Answer: Buy-back of shares

Question: Sources for Buy-back of Share is

a) All of the options
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b) Free reserves.
c) Securities premium account
d) Proceeds of any shares
Answer: All of the options

Question: Company has

a) Separate legal entity
b) Perpetual Existence
c) Limited Liability
d) None of the options
Answer: Separate legal entity

Question: Share capital of a company can be divided into

a) All of the options
b) Authorised Capital
c) Issued Capital
d) Subscribed Capital
Answer: All of the options

Question: The capital of a company is divided into a number of equal parts, Each part is called
a) Share
b) Debenture
c) General Reserve
d) None of the options
Answer: Share

Question: They have a right to receive dividend

a) Preference Share
b) Share
c) Debenture
d) None of the options
Answer: Preference Share

Question: Right shares are first offered to the

a) Existing share holders
b) Customers
c) Companies
d) None of the options
Answer: Existing share holders

Question: Right share are not offered to the existing equity shareholders if
a) Both
b) The company in general meeting has so decided by a special resolution
c) Decided by an ordinary resolution and same has been approved by the central government
d) None of the options
Answer: Both

Question: Which of the following statement in false

a) Bonus shares can be issued out revaluation profit.
b) Bonus issue is made out of free reserves or securities premium collected in cash only
c) No bonus issue shall be made within 12 months of any public or right issue.
d) Company can issue bonus shares in any ratio
Answer: Bonus shares can be issued out revaluation profit.
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Question: Which of the following Reserves which are not available for issue of fully paid bonus shares
a) Capital reserve arising due to revaluation
b) Dividend equalisation reserve
c) Profit and loss account
d) Capital redemption reserve
Answer: Capital reserve arising due to revaluation

Question: Which of the following reserves which can be utilised to make partly paid shares into fully paid up
a) Capital reserve from sale of fixed assets in cash
b) Securities premium
c) Capital redemption reserve
d) Surplus arising from a change in the method of charging depreciation
Answer: Capital reserve from sale of fixed assets in cash

Question: Raj Limited forfeited 1,000 shares of 10 each for the non-payment of the final call of Rs.2 per share. These shares
were reissued @ Rs.8 per share fully paid up. Find out the amount of capital reserve.
a) 6000
b) 10000
c) 15000
d) 8000
Answer: 6000

Question: Share Capital Account should be debited (at the time of forfeiture) with:
a) Called up amount
b) Paid up amount
c) Premium Amount
d) All of the options
Answer: Called up amount

Question: Securities premium reserve cannot be used

a) Working capital
b) Buy back of shares
c) Writing off preliminary expenses
d) None of the options
Answer: Working capital

Question: Which Shares are issued by a company to its employees or directors for their hard work and dedication towards the
company.
a) Sweat Equity Shares
b) Bonus Shares
c) Preference Shares
d) None of the options
Answer: Sweat Equity Shares

Question: What is the limit of Securities Premium on the issue of shares?

a) Unlimited
b) 0.1
c) 0.15
d) 0.2
Answer: Unlimited

Question: Which capital is to be stated in the Memorandum of Association of a company?

a) Authorised Capital
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b) Called up capital
c) Subscribed capital
d) Subscribed capital
Answer: Authorised Capital

Question: Share capital is shown in the balance sheet under the heading of_______
a) Shareholders Funds
b) Current Assets
c) Current liabilities
d) None of the options
Answer: Shareholders Funds

Question: have voting rights in all circumstances

a) Equity Share
b) Preference Share
c) Bonus Share
d) None of the options
Answer: Equity Share

Question: What type of shares can be issued at discount?

a) Sweat Equity Shares
b) Equity Shares
c) Preference Shares
d) None of the options
Answer: Sweat Equity Shares

Question: Shubham Limited invited applications for subscription of 10,000 Equity shares @ Rs.10 each. Applications were
received for 20,000 shares. This situation is called
a) Oversubscription of shares
b) Under subscription of shares
c) Full Allotment of shares
d) Pro Rata Allotment of share
Answer: Oversubscription of shares

Question: In case of private placement of shares and company does not invite the general public for
subscription of shares in that case, company instead of issuing prospectus :
a) Prepares the statement in lieu of prospectus
b) Prepares the Report
c) Prepares the Budget
d) Prepares the Asset side of Balance Sheet
Answer: A

Question: In case of private placement of shares, to raise the amount of capital a company :
a) invites the public through prospectus
b) does not invite the public
c) invites the public through advertisement
d) invites the public through memorandum of association
Answer: B

Question: Shares issued by a company to its employees or directors in consideration of ‘Intellectual

Property Rights’ are called :
a) Right Equity Shares
b) Private Equity Shares
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c) Sweat Equity Shares

d) Bonus Equity Shares
Answer: C

Question: Liability of a shareholder is limited to _____ of the shares allotted to him:

a) Paid up Value
b) Called up value
c) Face value
d) Reserve Price
Answer: C

Question: Preference shares, in case the holders of these have a right to convert their preference shares into
equity shares at their option according to the terms of issue, such shares are called :
a) Cumulative Preference Share
b) Non-cumulative Preference Share
c) Convertible Preference Share
d) Non-convertible Preference Share
Answer: C

Question: A preference share which does not carry the right of sharing in surplus profits is called
a) Non-Cumulative Preference Share
b) Non-participating Preference Share
c) Irredeemable Preference Share
d) Non-convertible Preference Share
Answer: B

Question: Which shareholders have a right to receive the arrears of dividend from future profits :
a) Redeemable Preference Shares
b) Participating Preference Shares
c) Cumulative Preference Shares
d) Non-Cumulative Preference Shares
Answer: C

Question: If a share of Rs. 100 on which Rs.60 has been paid, is forfeited, it can be re-issued at the
minimum price of:
a) Rs. 60
b) Rs.100
c) Rs. 40
d) Rs.140
Answer: C

Question: A Company forfeited 1,000 shares of Rs. 10 each fully called, on which Rs.6,000 has been paid.
Out of these 800 shares were reissued upon payment of Rs.6,600. What is the amount to be transferred to
Capital Reserve?
a) Rs.4,800
b) Rs.6,000
c) Rs.4,600
d) Rs.3,400
Answer: D

Question: A company forfeited 700 shares of Rs.10 each, on which only Rs.5 per share was paid. Of these,
200 shares were reissued at Rs.9 per share. Amount from Share Forfeiture Account to Capital Reserve
Account will be transferred :
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a) Rs.800
b) Rs.200
c) Rs.3,500
d) Rs.2,500
Answer: A

Question: On an equity share of Rs.10 the company has called up Rs.8 but Rs.6 have been received by the
company is forfeited, the capital account should be debited by:
a) Rs.10
b) Rs. 8
c) Rs. 6
d) Rs. 2
Answer: B

Question: If a share of Rs. 10 issued at a premium of Rs.3 on which the full amount has been called and
Rs.8 (including premium) paid is forfeited the capital account should be debited with :
a) Rs. 5
b) r 8
c) Rs.10
d) Rs.13
Answer: C

Question: If a share of Rs.10 issued at a premium of Rs.1 on which Rs. 9 (including premium) have been
called and Rs.7 including premium is paid is forfeited, the capital account should be debited by :
a) Rs.10
b) Rs. 7
c) Rs. 8
d) Rs. 9
Answer: C

Question: As per SEBI Guidelines, Application money should not be less than of the issue price of each
share.
a) 10%
b) 15%
c) 25%
d) 50%
Answer: C

Question: 4,000 Equity Shares of Rs. 10 each were issued at 8% premium to the promoters of a company
for their services. Which account will be debited?
a) Share Capital Account
b) Goodwill Account/Incorporation Cost Account
c) Securities Premium Reserve Account
d) Cash Account
Answer: B

Question: If vendors are issued fully paid shares of Rs. 1,25,000 in consideration of net assets of Rs.
1,50,000, the balance of Rs.25,000 will be credited to :
a) Statement of Profit & Loss
b) Goodwill Account
c) Security Premium Reserve Account
d) Capital Reserve Account
Answer: C
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Question: On a share of Rs. 10 issued at a premium of Rs. 2, whole amount is called-up and Rs. 7 is
received, Share Capital Account will be credited by
a) Rs. 10
b) Rs.12.
c) Rs.7.
d) Rs.2.
Answer: A

Question: On a share of Rs. 20 issued at a premium of Rs. 4 on which Rs. 16 (including premium) is called-
up and Rs. 10 (including premium) paid is forfeited, the Share Capital Account will be debited by
a) Rs.20.
b) Rs.12.
c) Rs.10.
d) *16.
Answer: B

Question: At the time of reissue of all forfeited shares

a) General Reserve is debited with the credit balance left in the Forfeited Shares Account.
b) General Reserve is credited with the credit balance left in the Forfeited Shares Account.
c) Capital Reserve is debited with the credit balance left in the Forfeited Shares Account.
d) Capital Reserve is credited with the credit balance left in the Forfeited Shares Account.
Answer: D

Question: Green Ltd. had allotted 10,000 shares to the applicants of 14,000 shares on pro rata basis. The
amount payable on application is Rs. 2 per share. Mohan applied for 420 shares. The number of shares
allotted and the amount carried forward for adjustment against allotment money due from Mohan are
a) 60shares, Rs. 120.
b) 320 shares, Rs. 200.
c) 340shares, Rs. 100.
d) 300shares, Rs.240.
Answer: D

Question: Star Ltd. issued 10,000 equity shares of Rs. 100 each at a premium of 20%. Mamta, who has been
allotted 2,000 shares did not pay first and final call of Rs. 5 per share. On forfeiture of Mamta's shares,
amount debited to Securities Premium Reserve Account will be
a) Rs. 5,000.
b) Rs. 10,000.
c) Rs. 15,000.
d) NIL.
Answer: D

Question: To whom dividend is given at a fixed rate in a company?

a) To equity shareholders
b) To preference shareholders
c) To debentureholders
d) To promoters
Answer: B

Question: Preference shareholders have

a) Preferential right as to dividend only
b) Preferential right in the management
c) Preferential right as to repayment of capital at the time of liquidation of the company
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d) Preferential right as to dividend and repayment of capital at the time of liquidation of the company
Answer: D

Question: The shares on which there is no any pre-fixed rate of dividend is decided, but the rate of dividend
is fluctuating every year according to the availability of profits, such share are called :
a) Equity Share
b) Non-cumulative preference share
c) Non-convertible preference share
d) Non-guaranteed preference share
Answer: A

Question: Anthony Ltd. Issued 40,000 equity shares of Rs. 20 each payable as Rs. 5 on application; Rs. 7 on
allotment and Rs. 8 on final call. Company received the due amount but one shareholder holding 250 shares
did not pay the allotment money and another shareholder holding 150 shares failed to pay the amount due
on final call. Total amount of Calls-in-Arrears is
a) Rs. 1,750.
b) Rs. 3,200.
c) Rs. 6,000.
d) Rs. 4,950.
Answer: D

Question: Gopal Ltd. purchased machine of Rs. 1,15,000 from Indian Traders, payment of Rs. 10,000 was
made by issuing cheque and the remaining amount by issue of equity shares of the face value of Rs. 10 each
fully paid at an issue price of Rs. 10.50 each. Amount of securities premium will be
a) Rs. 6,000.
b) Rs. 7,000.
c) Rs. 5,000.
d) Rs. 4,000.
Answer: C

Question: Mohar Ltd. forfeited 160 shares of Rs. 10 each on which the holder had paid only the application
money of Rs. 2 per share. Out of these, 40 shares were reissued to Gaurav as fully paid for Rs. 9 per
share.The gain on reissue Is
a) Rs. 320.
b) Rs. 160.
c) Rs. 40.
d) None of these.
Answer: C

Question: Interest on calls in arrears is charged according to Table F at:

a) 6% p.a.
b) 10% p.a.
c) 5% p.a.
d) 12% p.a.
Answer: B

Question: Amount of Calls in Arrears is shown in the Balance Sheet

a) as deduction from issued capital
b) as deduction from subscribed capital
c) as addition to subscribed capital
d) on the assets side
Answer: B
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Question: As per Table F, the Company is required to pay _____ interest on the amount of calls in advance
a) 12% p.a.
b) 5% p.a.
c) 10% p.a.
d) 6% p.a.
Answer: A

Question: A Company may issue the shares :

a) By Private Placement of Shares
b) By Public Subscription of Shares
c) For Consideration other than cash
d) By All of the Above
Answer: D

Question: Public subscription of shares include :

a) To Issue Prospectus
b) To Receive Applications
c) To Make Allotment
d) All of the Above
Answer: D

Question: Which of the following will define, when appropriation of a certain number of shares is made to
an applicant in response to his application?
a) Share allotment
b) Share forfeiture
c) Share trading
d) Share Purchase
Answer: A

Question: If a share of Rs. 10 issued at a premium of Rs. 2 on which the full amount has been called and Rs.
8 (including premium) paid is forfeited, the Share Capital Account will be debited with
a) Rs. 12.
b) Rs.10.
c) Rs. 8.
d) Rs. 6.
Answer: B

Question: If discount on reissue of shares is less than the amount forfeited, the surplus is transferred to
a) Capital Reserve.
b) General Reserve.
c) Securities Premium Reserve.
d) Statement of Profit and Loss.
Answer: A

Question: Authorized share capital is also known as:

a) Nominal Capital
b) Called up capital
c) Issued capital
d) Reserve Capital
Answer: Nominal Capital

Question: When the entire face value of a share is called by the company and is also paid by the shareholder, It is known as
a) Subscribed and fully paid up capital
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b) Subscribed but not fully paid up capital

c) None of the options
Answer: Subscribed and fully paid up capital

Question: When a company makes an offer or invites the public in general to subscribe its shares, it is known as
a) Initial Public Offer
b) Issue of shares at par
c) Issue of shares at Premium
d) None of the options
Answer: Initial Public Offer

Question: Equity Shares are

a) Not Convertible.
b) Convertible
c) Both
d) None of the options
Answer: Not Convertible.

Question: As per the Companies Act, 2013, companies cannot issue

a) Irredeemable Preference Shares
b) Equity Shares
c) Bonus Shares
d) None of the options
Answer: Irredeemable Preference Shares

Question: Share Forfeiture account is a

a) Nominal Account
b) Fictitious Asset
c) Personal Account
d) Real Account
Answer: Nominal Account

Question: Which is not true about Preference Shares?

a) No Dividend
b) Can be Redeemed
c) Can be converted
d) Right to Dividend
Answer: No Dividend

Question: In case of a public company, it must have at least _____ Directors.

a) 3
b) 5
c) 7
d) 9
Answer: 3

Question: Which of the following is a free reserve

a) Capital reserve collected in cash
b) Investment allowance reserve
c) Development rebate reserve
d) Plant revaluation reserve
Answer: Capital reserve collected in cash
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Question: Which of the following statement is false

a) Bonus issue is made in lieu of dividend
b) Bonus issue is not made unless the partly paid shares are made fully paid up
c) Bonus issue must be implemented within six months from the date of approval
d) Bonus is simply capitalisation of free reserves
Answer: Bonus issue is made in lieu of dividend

Question: Which account is debited When shares are issued to the promoters:
a) Incorporation Expenses A/c
b) Premium A/c
c) Discount A/c
d) Capital A/c
Answer: Incorporation Expenses A/c

Question: Which Shares have the right to receive arrears of dividend before dividend is paid to the equity shareholders.
a) Cumulative Preference Shares
b) Redeemable Preference Shares
c) Equity Shares
d) All of the options
Answer: Cumulative Preference Shares

Question: If a shareholder does not pay calls money on time a notice of ___________ days should be given to the shareholder
to pay the amount.
a) 14 days
b) 15 days
c) 10 days
d) None of the options
Answer: 14 days

Question: Which type of shares can be issued at discount?

a) Sweat Equity Shares
b) Preference Shares
c) Equity Shares
d) All of the options
Answer: Sweat Equity Shares

Question: Which of the following way is not used by the company to issue the shares?
a) Without stock exchange
b) By public subscription
c) By private placement
d) All of the options
Answer: Without stock exchange

Question: Return of partly paid shares by the shareholders to the company is known as
a) Surrender of shares
b) Forfeiture
c) Both
d) None of the options
Answer: Surrender of shares

Question: Those share who carry preferential right in respect of dividend at a fixed rate are called
a) Preference share
b) Equity share
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c) Both
d) None of the options
Answer: Preference share

Question: Which of the following is not a type of Preference Shares

a) Irredeemable Preference Shares
b) Redeemable Preference shares
c) Participating Preference shares
d) Convertible Preference Shares
Answer: Irredeemable Preference Shares

Question: When an applicant gets less shares than the applied share, this situation is called
a) Pro-rata
b) Premium
c) Discount
d) None of the options
Answer: Pro-rata

Question: The amount of premium is decided by the board of Directors as per the guidelines issued by
a) SEBI
b) BSE
c) NIFTY
d) All of the options
Answer: SEBI

Question: Any profit on reissue of Forfeited shares represents capital profit & hence it should be transferred to
a) Capital reserve
b) Asset side of balance sheet
c) Share capital
d) None of the options
Answer: Capital reserve

Question: Share Application A/c and Share Allotment A/c is:

a) Personal Account
b) Nominal Account
c) Real Account
d) None of the options
Answer: Personal Account

Question: Dividend is paid to the

a) Shareholders
b) Debenture holders
c) Both
d) None of the options
Answer: Shareholders

Question: Sweat equity Shares can be issued only after

a) One year of commencement of business
b) Two years of commencement of business
c) Three years of commencement of business
d) None of the options
Answer: One year of commencement of business
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Question: Which share issued for Employees hard work

a) Sweat equity Shares
b) Preference share
c) Equity share
d) None of the options
Answer: Sweat equity Shares

Question: Which Share to relatively small selected group of persons

a) Private placement of shares
b) Sweat equity Shares
c) Preference share
d) Equity share
Answer: Private placement of shares

Question: When the number of received is less than the number of shares offered to public it is under subscription, Called
a) Under subscription
b) Oversubscription
c) Preferential Allotment
d) None of the options
Answer: Under subscription

Question: When the number of received is more than the number of shares offered to public, In such cases
a) All of the options
b) Either reject the excess applications
c) Make prorata allotment
d) Partially refund amount on other prorata allotment is made
Answer: All of the options

Question: A certain number of shares are reserved for purchase and issue to key permanent employees at a price much lower
than the market price called
a) Employees stock option plan
b) Preferential Allotment
c) Private placement of shares
d) None of the options
Answer: Employees stock option plan

Question: Cancellation or termination of membership of a share holder by taking away the shares and rights of membership by
a) Forfeiture of shares
b) Issue of shares
c) Re-Issue of shares
d) None of the options
Answer: Forfeiture of shares

Question: B Ltd. forfeited 300 shares of Rs. 100 each, Rs.70 called up, for non-payment of first call of Rs.20
per share. Out of these, 200 shares were reissued for Rs. 60 per share as Rs.70 paid up. What is the amount
to be transferred to Capital Reserve Account?
a) Rs. 13,000
b) Rs. 8,000
c) Rs. 2,000
d) Rs. 7,000
Answer: B
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Question: 2,000 shares of Rs.10, on which XI has been called and X5 has been paid, are forfeited. Out of
these, 1,500 shares are re-issued for X9 as fully paid. What is the amount to be transferred to Capital
Reserve Account?
a) Rs.6,000
b) Rs.7,500
c) Rs. 10,000
d) Rs. 8,500
Answer: A

Question: A-Ltd. forfeited 400 shares of Rs.20 each Rs. 15 called up on which application and allotment
money of Rs.11 per share has been received. Of these, 100 shares were re-issued as fully paid-up for X24 per
share. What is the amount to be transferred to Capital Reserve?
a) Rs. 1,500
b) Rs.4,400
c) Rs.1,100
d) Rs.3,500
Answer: C

Question: Z Ltd. forfeited 300 shares of Rs. 10 each issued at 20% premium (Rs.9 called up) on which Rs.4
of allotment (including premium) and first call of X2 has not been received. Out of these, 100 shares were
re-issued as fully paid up for Rs.9 per share. What is to amount to be transferred to capital Reserve?
a) Rs.400
b) Rs.300
c) Rs.500
d) Rs.600
Answer: A

Question: MIG Ltd. forfeited 40 shares of Rs. 10 each issued at a premium of 40% to Raj who had applied
for 48 shares. After having paid Rs. 6 (including Rs. 2 premium), he did not pay allotment money of Rs. 2
(including Rs. 1 premium) and on his subsequent failure to pay the first call of Rs. 3 (including Rs. 1
premium) his shares were forfeited. The amount to be credited to Forfeited Shares Account is
(a) Rs. 288.
(b) Rs. 200.
(c) Rs. 192.
(d) Rs. 160.
Answer: B

Question: Nominal Share Capital is ................

a) that part of authorised capital which is issued by the company
b) the amount of capital which is actually applied by the prospective shareholders
c) the amount of capital which is actually paid by the shareholders
d) the maximum amount of share capital which a company is authorised to issue
Answer: D

Question: The portion of the capital which can be called-up only on the winding up of the Company is
called ................
a) Authorised Capital
b) Called up Capital
c) Uncalled Capital
d) Reserve Capital
Answer: D

Question: Reserve Capital is a part of:

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a) Paid-up Capital
b) Forfeited Share Capital
c) Assets
d) Capital to be called up only on liquidation of company
Answer: D

Question: Which of the following statements is true?

a) Authorised Capital = Issued Capital
b) Authorised Capital > Issued Capital
c) Paid up Capital > Issued Capital
d) None of the above
Answer: B

Question: A company issued 4,000 equity shares of Rs. 10 each at par payable as under : On application
Rs.3; on allotment Rs.2; on first call Rs.4 and on final call Rs.1 per share.
Applications were received for 13,000 shares. Applications for 3,000 shares were rejected and pro-rata
allotment was made to the applicants for 10,000 shares. How much amount will be received in cash on first
call? Excess application money is adjusted towards amount due on allotment and calls.
a) Rs.6,000
b) Nil
c) Rs. 16,000
d) Rs. 10,000
Answer: A

Question: A company issued 4,000 equity shares of Rs.10 each at par payable as under : On application
Rs.3; on allotment Rs.2; on first call Rs.4 and on final call Rs.1 per share.
Applications were received for 10,000 shares. Allotment was made pro-rata. How much amount will be
received in cash on allotment?
a) Rs.8,000
b) Rs. 12,000
c) Nil
d) None
Answer: C

Question: A company issued 5,000 equity shares of Rs. 100 each at par payable as to :
Rs.40 on application; Rs.50 on allotment and Rs.10 on call.
Applications were received for 8,000 shares. Allotment was made on pro-rata. How much amount will be
received in cash on allotment?
a) Rs.2,50,000
b) Rs. 1,20,000
c) Rs. 1,30,000
d) Rs.50,000
Answer: C

Question: Issue of shares at a price lower than its face value is called :
a) Issue at a Loss
b) Issue at a Profit
c) Issue at a Discount
d) Issue at a Premium
Answer: C

Question: According to Companies Act, Minimum Subscription has been fixed at ................ of the issued
amount.
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a) 25%
b) 50%
c) 90%
d) 100%
Answer: C

Question: One of the conditions, in addition to others, for allotment of shares is :

a) Resolution in General Meeting
b) Receiving Minimum Subscription
c) Full Subscription by Public
d) Full Payment on Application
Answer: B

Question: Issue of shares at a price higher than its face value is called :
a) Issue at a Profit
b) Issue at a Premium
c) Issue at a Discount
d) Issue at a Loss
Answer: B

Question: On issue of shares Premium is :

a) Profit
b) Income
c) Revenue Receipt
d) Capital Profit
Answer: D

Question: Which of the following is not a capital profit?

a) Profit prior to incorporation of the company
b) Profit from the sale of fixed assets
c) Premium on issue of shares
d) Compensation received on the termination of a contract
Answer: D

Question: If 500 shares of Rs.10 issued at a premium of Rs.1 on which Rs.9 (including premium) have been
called and Rs.7 including premium have been paid are forfeited, the forfeiture account should be credited
by :
a) Rs.3,000
b) Rs.3,500
c) Rs.4,000
d) Rs.4,500
Answer: A

Question: A Company forfeited the following shares :

200 shares of Rs.10 each; called up Rs.9 per share, paid-up tl per share. Journal Entry for forfeiture will be)
:
a) Share Capital A/c Dr. 2,000
To Share Forfeiture A/c 200
To Calls in Arrears A/c 1,800
b) Share Capital A/c Dr. 2,000
To Share Forfeiture A/c 1,800
To Calls in Arrears A/c 200
c) Share Capital A/c Dr. 1,800
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To Share Forfeiture A/c 1,400

To Calls in Arrears A/c 400
d) Share Capital A/c Dr. 1,800
To Share Forfeiture A/c 400
To Calls in Arrears A/c 1,400
Answer: C

Question: A Ltd. forfeited 500 shares of Rs.10 each, Rs.7 called up, issued at a premium of Rs.2 per share to
be paid at the time of allotment for non-payment of first call of Rs.2 per share. Entry on forfeiture will be :
a) Share Capital A/c Dr. 3,500
Securities Premium Reserve A/c Dr. 1,000
To Share First Call A/c 1,000
To Share Forfeiture A/c 3,500
b) Share Capital A/c Dr. 4,500
Securities Premium Reserve A/c Dr. 1,000
To Share First Call A/c 1,000
To Share Forfeiture A/c 4,500
c) Share Capital A/c Dr. 4,500
To Share First Call A/c 1,000
To Share Forfeiture A/c 3,500
d) Share Capital A/c Dr. 3,500
To Share First Call A/c 1,000
To Share Forfeiture A/c 2,500
Answer: D

Question: Amount of Calls in Advance is

a) Added to Share Capital
b) Deducted from Share Capital
c) Shown on the Assets side
d) Shown on the Equity & Liabilities side
Answer: D

Question: From which account, expenses on issue of shares will be written off first of all:
a) Statement of Profit and Loss
b) Miscellaneous Expenditure Account
c) Share Issue Expenses Account
d) Securities Premium Reserve Account
Answer: D

Question: Pro-rata allotment of shares is made when there is :

a) Under subscription
b) Oversubscription
c) Equal subscription
d) As and when desired by directors
Answer: B

Question: If applicants for 80,000 shares were allotted 60,000 shares on prorata basis, the shareholder who
was allotted 1,200 shares must have applied for :
a) 900 Shares
b) 3,600 Shares
c) 1,600 Shares
d) 4,800 Shares
Answer: C
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Question: A Company offered 50,000 shares of Rs. 10 each at par payable as to Rs.3 on applications, Rs.5
on allotment and the balance on final call. Applications were received for 60,000 shares and the allotment
was made pro-rata. The excess application money was to be adjusted on allotment and call. How much
amount will be transferred from Share Application A/c to Share Allotment A/c?
a) Rs. 1,80,000
b) Rs.30,000
c) Rs. 1,50,000
d) Rs.50,000
Answer: B

Question: Which one of the following items is not a part of subscribed capital?
a) Equity Shares
b) Preference Shares
c) Forfeited Shares
d) Bonus Shares
Answer: C

Question: At the time of forfeiture of shares the share capital account is debited with
a) Face value
b) Called up value
c) Paid up value
d) Issued value
Answer: B

Question: 600 shares of Rs.10 each were forfeited for non-payment of Rs.2 per share on first call and Rs.5
per share on final call. Share Forfeiture Account will be credited with:
a) Rs. 1,200
b) Rs. 1,800
c) Rs.3,000
d) Rs.4,200
Answer: B

Question: On 300 equity shares of Rs.10 the company has called up Rs. 8 but Rs. 6 have been received by
the company are forfeited, the forfeiture account should be credited by :
a) Rs.2,400
b) Rs. 1,200
c) Rs. 1,800
d) Rs. 600
Answer: C

Question: If 400 shares of Rs. 10 issued at a premium of Rs.3 on which the full amount has been called and
(including premium) have been received are forfeited, the forfeiture account should be credited with :
a) Rs.3,200
b) Rs.2,000
c) Rs. 1,200
d) Rs.2,800
Answer: B

Question: The amount of discount on reissue of forfeited shares cannot exceed :

a) 5% of the face value
b) 10% of the face value
c) The amount received on forfeited shares
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d) The amount not received on forfeited shares

Answer: C

Question: T Ltd. forfeited 400 shares of Rs. 10 each, Rs.7 called up, for non-payment of first call of Rs.2 per
share. Out of these, 300 shares were reissued for Rs.6 per share as Rs.7 paid up. What is the amount to be
transferred to Capital Reserve Account?
a) Rs. 1,700
b) Rs. 1,200
c) Rs.2,100
d) Rs. 300
Answer: B

Question: 300 equity shares of Rs.10 each were issued at Rs.5 per share premium. Only Rs.4 per share on
application has been paid on these shares. These shares were forfeited. Later on out of these, 200 shares
were reissued at Rs.12 per share as fully paid. What will be amount of Capital Reserve?
a) Rs. 500
b) Rs. 1,200
c) Rs. 200
d) Rs. 800
Answer: D

Question: True/False:
According to the below given information the final call per share is Rs.22. The subscribed capital of a
company is Rs. 80,00,000 and the nominal value of the share is Rs.100 each. There were no calls in arrear
till the final call was made . The final call made was paid on 77,500 shares only . The balance in the calls in
arrear amounted to Rs.55,000.
Answer : True

Question: True/ False :

Securities premium received on issue of shares cannot be used for the purpose of buy back of shares.
Answer : False

Question: True/False-Share application amount is in the nature of Real account

Answer : False

Question: Arrange the following in proper sequence as types of “Share Capital”

a) Paid up capital
b) Issued capital
c) Subscribed capital
d) Called up capital
Answer : Issued, Subscribed, Called –up, Paid-up.

Question: Maximum limit of premium on shares is :

a) 32%
b) 20%
c) No limit
d) 100%
Answer : C

Question: Amount of money not received out of called up capital is :

a) Added to share capital
b) Subtracted from share capital
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c) Shown as current liabilities

d) Shown as current asset
Answer : B

Question: Following amounts were payable on issue of shares by a company : Rs.3 on application , Rs.3 on
allotment , Rs.2 on first call and Rs.2 on final call . X holding 500 shares paid only application and
allotment money whereas Y holding 400 shares did not pay final call . Amount of calls in arrear will be:
a) 3,800
b) 2,800
c) 1,800
d) 6,200
Answer : B

Question: Rajan Limited issued 50,000 shares at a price lower than the nominal value of the share. The
shares issued are called:
a) Sweat equity shares
b) Redeemable Preference shares
c) Equity shares
d) Bonus shares
Answer : A

Question: E Ltd. had allotted 10,000 shares to the applicants of 14,000 shares on pro-rata basis, application
money on another 6000 shares was refunded .The amount payable on the application was Rs.2. Sitaraman
applied for 420 shares . The number of shares allotted to him will be:
a) 60 shares
b) 340 shares
c) 320 shares
d) 300 shares
Answer : D

Question: A company issued 4,000 equity shares of rupees 10 each at par payable as under:
On application rupees 3 , on allotment rupees 2; on first call rupees 4 and on final call rupees 1 per share.
Applicants were received for 16,000 share . Application for 6,000 shares were rejected and pro-rata
allotment was made to the applicants for 10,000 shares . How much amount will be received in cash on first
call,when excess application money is adjusted towards amount due on allotments and calls :
a) Rupees 6.000
b) nil
c) Rupees 16,000
d) Rupees 10,000
Answer : A

Question: A company issued 4000 equity shares of rupees 50 each at par payable as under:
On application rupees 20%, on allotment 40% ; on first call 10% ; on final call -balance Applications were
received for 10,000 shares . Allotment was made pro-rata . How much amount will be received in cash on
allotment?
(a) Rupees 6.000
(b) nil
(c) Rupees 16,000
(d) Rupees 20,000
Answer : D

Question: Which one of the following is not a part of subscribed capital:

a) Equity shares issued to vendor
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b) Preference shares of convertible type

c) Forfeited shares
d) Bonus shares
Answer : C

Question: When nominal (face) value of a share is called up by the company but as some shareholders did
not pay the money, the shares are forfeited . The share capital is shown in the balance sheet (notes) of a
company under the following heading:
a) Subscribed and fully paid up
b) Subscribed but not fully paid up
c) Subscribed and called up
d) Subscribed but not called up
Answer : A

Question: Zee Ltd issued 15,000 equity shares of Rs.20 each at a premium of Rs.5 payable Rs.5 on
application,Rs.10 on allotment (including premium) and the balance on first and final call. The company
received applications for 22,500 shares and allotment was made pro rata. Bittoo to whom 1,200 shares were
allotted, failed to pay the amount due on allotment. All his shares were forfeited after the call was made.
The forfeited shares were reissued to Dheeraj at par. Assuming that no other bank transactions took place,
the bank balance of the company after the above transactions is :
a) Rs.6,85,000
b) Rs.3,60,500
c) Rs.3,78,000
d) Rs.6,34,000
Answer : C

Question: Zen Ltd purchased the sundry assets of M/s Surat Industries for Rs.28,60,000 payable in fully
paid shares of Rs.100 each. State the number of shares issued to vendor when issued at premium of 10%.
a) 28,000
b) 31,778
c) 28,600
d) 26,000
Answer : D

Question: The subscribed share capital of Mukand Ltd is Rs.1,00,00,000 of Rs.100 each. There were no
calls in arrear till the final call was made. The final call made was paid on 97,500 shares. The calls in arrear
amounted to Rs.87,500.The final call on share :
a) Rs.20
b) Rs.35
c) Rs.25
d) Rs.45
Answer : B

Question: These shares which in addition to the fixed preference dividend, carry a right to participate in the
surplus profits, if any, after dividend at a stipulated rate has been paid to the equity share holders are
called:
a) Participating preference shares
b) Convertible preference shares
c) Redeemable preference shares
d) Cumulative preference shares
Answer : A
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Question: T Ltd had allotted 20,000 shares to the applicants of 24,000 shares on pro rata basis. The amount
payable on application is Rs.2. Manoranjan applied for 450 shares. The number of shares allotted and the
amount carried forward for adjustment against allotment money due from him is:
a) 150 shares,Rs.375
b) 375 shares,Rs.150
c) 400 shares,Rs.100
d) 300 shares,Rs.300
Answer : B

Question: A company forfeited 3,000 shares of Rs.10 each(which were issued at par) held by Kishore for
nonpayment of allotment money ofRs.5 per share.The called up value per share was Rs.8.On forfeiture, the
amount debited to share capital:
a) Rs.30,000
b) Rs.24,000
c) Rs.15,000
d) Rs.6,000
Answer : B

Question: Z limited issued shares of Rs.100 each at a premium of 10%. Mr. Q purchased 500 shares and
paid Rs.20 on application but did not pay the allotment money of Rs.30. If the company forfeited his 30%
shares, the forfeiture account will be credited by :
a) Rs. 4500
b)Rs. 3500
c) Rs. 1650
d) Rs. 3000
Answer : D

Question: Daisy Limited forfeited 200 shares Rs.10 each who had applied for 500 shares, issued at a
premium of 10% for nonpayment of final call of Rs.3 per share. Out of these 100 shares were issued as fully
paid up for Rs.15. The profit on reissue is :
a) Rs. 700
b) Rs. 6400
c) Rs. 300
d) Rs. 400
Answer : A

Question: Mithas Limited was formed with share capital of Rs. 50,00,000 divided into 50,000 shares of
Rs.100 each. 9,000 shares were issued to the vendor as fully paid for purchase consideration of a furniture
acquired. 30,000 shares were allotted in payment of cash on which Rs.70 per share was called and paid .
State the amount of subscribed capital :
a) Rs. 50,00,000
b) Rs. 30,50,000
c) Rs. 30,00,000
d) Rs. 20,00,000
Answer : C

Question: Faltu Limited invited application for 2,00,000 shares of Rs.10 each. These shares were issued at
premium of Rs.11 each which was allowed at the time of allotment. All money was called and duly received
except on 10,000 shares on which only application money of Rs.3 per share was received.
The company forfeited all the shares. 7000 of forfeited share where re-issued at Rs.13per share. State the
amount of securities premium to be shown under the head -Reserve and surplus.
a) Rs.20,00,000
b) Rs.11,11,000
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c) Rs.8,11,000
d) Rs.21,11,000
Answer : D

Question: Mahima limited has an authorised capital of Rs. 1,00,00,000 divided into 1,00,000 equity shares
of Rs .100 each . If offered 90,000 equity shares Rs.10 each at a premium of Rs.8 .The public applied for
81,000 equity shares. Till 31st March 2018, Rs.17 (including premium) was called . An applicant holding
5000 shares did not pay first call of Rs.2per share.
As per the above given information:
_____ is the amount of Share capital to be shown in the balance sheet of the company.
Answer : Rs.7,19,000

Question: Out of total face value, liability of a shareholder is limited to __________ value of the share
allotted to him.
Answer : Called up

Question: Match the following :

a) Cumulative Pref. Share i) Repaid after some time
b) Participating Pref. Share ii) converts into equity shares
c) Redeemable Pref. shares iii) Dividend accumulates if not paid
d) Convertible Pref. shares iv) Gets share in surplus profit
The correct match is:
a) a-ii ,b-i, c-iii, d-iv
b) a-iii, b-iv, c-i, d-ii
c) a-iii, b-iv, c-ii ,d-i
d) a-ii, b-iv, c-iii, d-i
Answer : B
Issue Of Debentures MCQ Questions Class 12 Accountancy with Answers
Question: Which of the following statements is true?
a) A debenture issued at a discount can be redeemed at a premium
b) A debenture holder is an owner of the company
c) A debenture holder can get his money back only on the liquidation of the company
d) A debenture holder receives interest only in the event of profits
Answer: A debenture issued at a discount can be redeemed at a premium

Question: Which of the following statements is false?

a) Debentures cannot be secured
b) A company can issue convertible debentures
c) A company can issue redeemable debentures
d) Debentures have no right to participate in profits over and above their fixed interest
Answer: Debentures cannot be secured

Question: Perpetual debentures are also known as

a) Irredeemable debentures
b) Secured Debentures
c) Unsecured Debentures
d) None of the options
Answer: Irredeemable debentures

Question: Debenture premium cannot be used to

a) Pay dividends
b) Write off the discount on issue of shares or debentures
c) Write off the premium on redemption of shares or debentures
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d) Write off capital loss

Answer: Pay dividends

Question: Loss on issue of debentures is treated as

a) Miscellaneous expenditure
b) Intangible asset
c) Current asset
d) Current liability
Answer: Miscellaneous expenditure

Question: Secured Debentures is known as

a) Mortgage debentures
b) Naked debentures
c) Unsecured Debentures
d) None of the options
Answer: Mortgage debentures

Question: Unsecured Debentures is known as

a) Simple or Naked debentures
b) Mortgage debentures
c) Secured Debentures
d) None of the options
Answer: Simple or Naked debentures

Question: Which of the following is not true about debenture stock:

a) Debenture stock are identified by their distinct number
b) It must be fully paid.
c) Debenture Stock can be transferred in fraction.
d) None of the options
Answer: Debenture stock are identified by their distinct number

Question: Which is an agreement between the company and the trustees to look after the interest of debenture holders.
a) Debenture trust deed
b) Partnership deed
c) Both
d) None of the options
Answer: Debenture trust deed

Question: A company can not issue

a) Debentures with voting rights
b) Share
c) Debentures
d) None of the options
Answer: Debentures with voting rights

Question: Which of the following is not a characteristic of Bearer Debentures?

a) Their transfer requires a deed of transfer
b) They are treated as negotiable instruments
c) They are transferable by mere delivery
d) The interest on it is paid to the holder irrespective of identity
Answer: Their transfer requires a deed of transfer

Question: Which of the following is/are true with respect to debentures?

a) Both
b) They can be issued for cash
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c) They can be issued for consideration other than cash

d) None of the options
Answer: Both

Question: When debentures are issued as collateral security, the final entry for recording the transaction in the books is
a) Debit debenture suspense a/c. and credit debentures a/c.
b) Credit debentures a/c. and debit cash a/c.
c) Debit debenture suspense a/c. and credit cash a/c.
d) None of the options
Answer: Debit debenture suspense a/c. and credit debentures a/c.

Question: Which of the following is false with respect to debentures?

a) They can be issued in lieu of dividends
b) They can be issued for cash
c) They can be issued for consideration other than cash
d) They can be issued as collateral security
Answer: They can be issued in lieu of dividends

Question: Which of the following is true with regard to 10% Debentures issued at a discount of 20%
a) The face value and the carrying amount of debentures are equal.
b) The carrying amount of debentures gets reduced each year at a rate of 20%
c) Issue price and the carrying amount of debentures are equal
d) At the time of redemption, the debenture holder will be paid the issue price
Answer: The face value and the carrying amount of debentures are equal.

Question: Which of the following statements is false?

a) The issue price and redemption value of debentures cannot differ.
b) Debenture is a form of public borrowing
c) It is customary to prefix debentures with the agreed rate of interest
d) Debenture interest is a charge against profits
Answer: The issue price and redemption value of debentures cannot differ.

Question: As per the Companies Act, Interest accrued and due on debentures should be shown Under
a) Debentures.
b) Capital
c) Shares
d) None of the options
Answer: Debentures.

Question: Which of the following is false?

a) Interest on debentures is an appropriation of profits.
b) Equity is owners stake and the debenture is a debt
c) Rate of interest on debentures is fixed
d) Debenture holders get preferential treatment over the equity holders at the time of liquidation
Answer: Interest on debentures is an appropriation of profits.

Question: Discount on issue of debentures is a

a) Capital loss to be written off over the tenure of the debentures
b) Revenue loss to be charged in the year of issue
c) Capital loss to be written off from capital reserve
d) Capital loss to be shown as goodwill
Answer: Capital loss to be written off over the tenure of the debentures

Question: Debentures are shown in the balance sheet of a company under the head of
a) Non current Liabilities
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b) Current Liabilities
c) Share Capital
d) None of the options
Answer: Non current Liabilities

Question: When debentures are issues at discount , the discount should be written off
a) During the life of the debentures
b) In the year of the issue of debentures
c) Within 5 years of the issue of the debentures
d) None of the options
Answer: During the life of the debentures

Question: Debenture holder are

a) The creditors of the company
b) The owners of the company
c) The vendors of the company
d) None of the options
Answer: The creditors of the company

Question: Debenture interest is paid

a) At a pre determined rate
b) At variable rate
c) 25% of Profit
d) None of the options
Answer: At a pre determined rate

Question: At the time of issue of debentures , debenture Account is

a) Credited by the face value of debentures
b) Credited by the Amount received
c) Credited by the issue price of debentures
d) None of the options
Answer: Credited by the face value of debentures

Question: Discount or loss on issue of debentures to be written of within after 12 months from the date of balance sheet or after
the period of operating cycle is shown as
a) Other Non current Assets
b) Other Current assets
c) Other Current Liabilities
d) None of the options
Answer: Other Non current Assets

Question: Discount or loss on issue of debentures to be written of within 12 months from the date of balance sheet or within the
period of operating cycle is shown as
a) Other Current assets
b) Other Non current Assets
c) Other Current Liabilities
d) None of the options
Answer: Other Current assets

Question: Debenture is a
a) Long term Loan
b) Short term loan
c) Dividend
d) None of the options
Answer: Long term Loan
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Question: Which does not have possess the voting right

a) Debenture Holder
b) Share Holder
c) Both
d) None of the options
Answer: Debenture Holder

Question: A written promise for a debt by a company under its seal which contains the terms and conditions regarding the
amount of loan
a) Debenture
b) Share
c) Capital
d) None of the options
Answer: Debenture

Question: Debenture holders are entitled the right to receive

a) Interest
b) Dividend
c) Both
d) None of the options
Answer: Interest

Question: Debentures of a Company can be issued :

a) For Cash
b) For Consideration other than Cash
c) As a Collateral Security
d) Any of the above
Answer: D

Question: On issue of debentures as a collateral security, which account is credited?

a) Debentures Account
b) Bank Loan Account
c) Debenture Holdings Account
d) Debenture Suspense Account
Answer: A

Question: Debentures issued as collateral security will be debited to :

a) Bank Account
b) Debentures Suspense Account
c) Debentures Account
d) Bank Loan Account
Answer: B

Question: On liquidation of company, principal amount of debentures is returned :

a) First of All
b) Last of All
c) Before Equity Capital
d) After Equity Capital
Answer: C

Question: Which of the following statements is false?

a) Debenture is a form of public borrowing.
b) It is customary to prefix debentures with the agreed rate of interest.
c) Debenture interest is a charge against profits.
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d) The issue price and redemption value of debentures cannot differ.

Answer: D

Question: Which of the following is not a characteristic of Bearer Debentures?

a) They are treated as negotiable instruments.
b) Their transfer requires a deed of transfer.
c) They are transferable by mere delivery.
d) The interest on it is paid to the holder irrespective of identity.
Answer: B

Question: When debentures are to be redeemed at premium an extra entry has to be made at the time of issue of debentures,
which a/c should be credited in this entry?
a) Loss on issue of debentures a/c
b) Debenture redemption premium a/c
c) Bank a/c
d) Debenture holder’s a/c
Answer: B

Question: Premium on Redemption of Debentures Account is :

a) Personal Account
b) Real Account
c) Nominal Account
d) All of the Above
Answer: A

Question: X Ltd. acquired assets of Rs.20 lakhs and took over creditors of Rs.20 thousand from LLtd. XLtd. issued 8% debentures
of Rs.200 each at a discount of 10% as purchase consideration. Number of debentures issued will be :
a) 11,000
b) 9,000
c) 10,000
d) 10,100
Answer: A

Question: Globe Ltd. issues 20,000, 9% debentures of Rs. 100 each at a discount of 5% redeemable at the end of 5 years at a
premium of 6%. For what amount ‘Loss on Issue of Debentures Account’ will be debited?
a) Rs. 1,00,000
b) Rs. 1,20,000
c) Rs.2,80,000
d) Rs.2,20,000
Answer: D

Question: Issued 5,000, 12% debentures of Rs. 100 each at a discount of 2%, redeemable at a premium of 5%. In such case :
a) Loss on Issue will be Credited by Rs. 10,000.
b) Loss on Issue will be debited by Rs.35,000.
c) Premium on Redemption will be debited by Rs.25,000.
d) Premium on Redemption will be credited by Rs.35,000.
Answer: B

Question: Issued 4,000, 12% debentures of Rs. 100 each at a premium of 4%, redeemable at a premium of 10%. In such case :
a) Loss on Issue will be debited by Rs.24,000
b) Loss on Issue will be debited by Rs.56,000
c) Loss on Issue will be debited by Rs.40,000
d) Premium on Redemption will be credited by Rs.24,000
Answer: C
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Question: When debentures are issued at a discount, the discount is written off
a) after debentures have been redeemed.
b) in the year when debentures are issued,
c) during the life of the debentures.
d) None of these.
Answer: B

Question: Interest on Debentures is paid on

a) Amount received on Issue.
b) Nominal (Face) Value.
c) On Premium.
d) None of these.
Answer: B

Question: Debentures issued as Collateral Security

a) are recorded in the books.
b) are not recorded in the books.
c) may or may not be recorded in the books.
d) None of these.
Answer: C

Question: Which of the following statements is false?

a) At maturity, debenture holders get back their money.
b) Debentures can be forfeited for non-payment of call money.
c) In company’s balance sheet, debentures are shown under the head Long term Borrowings.
d) Interest on debentures is a charge against profits.
Answer: B

Question: Which of the following statements is false :

a) A Company can issue redeemable debentures.
b) A Company can issue debentures with voting rights.
c) A Company can issue convertible debentures.
d) A Company can buy its own debentures and shares.
Answer: B

Question: The Principal amount of debentures will be repaid by the company either at the end of a specified period or by
instalments during the life time of the company. Such types of debentures are called :
a) Redeemable Debentures
b) Irredeemable Debentures
c) Convertible Debentures
d) Bearer Debentures
Answer: A

Question: If Vendors are issued debentures of Rs.4,40,000 in consideration of assets of Rs. 5,00,000 and liabilities of Rs.
1,00,000, the balance of Rs.40,000 will be debited to:
a) General Reserve Account
b) Capital Reserve Account
c) Goodwill Account
d) Statement of Profit & Loss
Answer: C

Question: A Ltd. issued 1,000, 10% debentures of Rs. 100 each at a premium of 5%. What will be the total amount of interest for
one year :
a) Rs. 10,500
b) Rs. 10,000
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c) Rs. 5,250
d) Rs. 5,000
Answer: B

Question: The amount of debenture is returned to the holders at the end of

a) Predetermined maturity period
b) Company
c) Current Year
d) None of the options
Answer: Predetermined maturity period

Question: A debenture of company possesses the characteristics

a) All of the options
b) Written promise
c) Face value
d) Rate of interest
Answer: All of the options

Question: Debenture is redeemable (payable) at a fixed and specified period of time which is called
a) Maturity period.
b) Long Term Loan Period
c) Short Term Loan Period
d) None of the options
Answer: Maturity period.

Question: At the time of liquidation, first priority is given to the at the time of repayment.
a) Debenture Holder
b) Share Holder
c) Both
d) None of the options
Answer: Debenture Holder

Question: Person holding debenture is known as

a) Debenture Holder
b) Share Holder
c) Both
d) None of the options
Answer: Debenture Holder

Question: The interest paid on debentures is a

a) Charge against profit
b) Net Profit
c) Reserve & Surplus
d) None of the options
Answer: Charge against profit

Question: Which are can be converted into equity shares of the issuing company after a predetermined period of time
a) Convertible debentures
b) Non convertible debentures
c) Secured Debenture
d) Unsecured Debentures
Answer: Convertible debentures

Question: Convertible debentures can be

a) Both
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b) Partly Convertible Debentures

c) Fully convertible Debentures
d) None of the options
Answer: Both

Question: X Co Ltd purchased assets worth RS 28,80,000. It issued debentures of Rs. 100 each at a discount of 4% in full
satisfaction of the purchase consideration. The number of debentures issued to vendor is
a) Rs. 30,000
b) Rs.32,000
c) Rs.35,000
d) None of the options
Answer: Rs. 30,000

Question: Discount on issue of debentures is shown under the following head in the Balance Sheet
a) Miscellaneous expenditure
b) Profit and loss account
c) Debentures account
d) All of the options
Answer: Miscellaneous expenditure

Question: When debentures are issued at par and are redeemable at a premium, the loss on such an issue debited to
a) Loss on issue of debentures account
b) Profit and loss account
c) Profit and loss account
d) None of the options
Answer: Loss on issue of debentures account

Question: Excess value of net assets over purchase consideration at the time of purchase of business is credited to
a) Capital reserve
b) General reserve
c) Vendors account
d) None of the options
Answer: Capital reserve

Question: When all the debentures are redeemed, balance in the debentures redemption fund account is transferred to
a) General reserve
b) Capital reserve
c) Capital reserve
d) None of the options
Answer: General reserve

Question: Own debentures are those debentures of the company which

a) The company purchase from the market and keeps them as investments
b) The company allots to its own promoters
c) The company allots to its own promoters
d) All of the options
Answer: The company purchase from the market and keeps them as investments

Question: Profit on cancellation of own debentures is transferred to

a) Capital reserve
b) Profit and loss appropriation account
c) Debenture redemption reserve
d) None of the options
Answer: Capital reserve
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Question: When debentures are redeemed out of profits, an equal amount is transferred to
a) Debenture redemption reserve
b) General reserve
c) Capital reserve
d) All of the options
Answer: Debenture redemption reserve

Question: Profit on sale of debenture redemption fund investments in the first instance is credited to
a) Debenture redemption fund account
b) Profit and loss appropriation account
c) General reserve account
d) None of the options
Answer: Debenture redemption fund account

Question: Debentures which can be transferred by way of delivery and the company does not keep any record of the debenture
holders
a) Bearer Debenture
b) Simple or Naked debentures
c) Mortgage debentures
d) Secured Debentures
Answer: Bearer Debenture

Question: When debentures are issued at a discount and are redeemable at a premium, which of the following accounts is
debited at the time of issue
a) Loss on issue of debentures account
b) Debentures account
c) Premium on redemption of debentures account
d) None of the options
Answer: Loss on issue of debentures account

Question: The balance of sinking fund investment account after the realisation of investments is transferred to
a) Sinking fund account
b) Profit and loss account
c) Debentures account
d) None of the options
Answer: Sinking fund account

Question: Issue of Debenture at more than face value, Called

a) Issue of debenture at premium
b) Issue of debenture at par
c) Both
d) None of the options
Answer: Issue of debenture at premium

Question: Debentures can be issued

a) Both
b) Issue of debenture at premium
c) Issue of debenture at par
d) None of the options
Answer: Both

Question: Loss on issue of debenture is written off each year in proportion to amount of debenture which reduces with every
instalment paid, Called
a) Proportion Method
b) Equal instalment method
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c) Both
d) None of the options
Answer: Proportion Method

Question: When debentures are redeemed after fixed period here loss is spread equally over life of debenture therefore called
a) Equal instalment method
b) Proportion Method
c) Both
d) None of the options
Answer: Equal instalment method

Question: The loss on issue of debentures is fictitious asset and shown in Balance Sheet
a) Assets side
b) Liabilities Side
c) Both
d) None of the options
Answer: Assets side

Question: Insert on Debentures is calculated

a) At a fixed rate on its face value
b) At a fixed rate on its Par value
c) At a average rate on its Par value
d) None of the options
Answer: At a fixed rate on its face value

Question: Insert on Debentures is

a) Change in Profit
b) Charge on profit
c) Both
d) None of the options
Answer: Change in Profit

Question: Debenture Application Account is a

a) Personal Account
b) Real Account
c) Nominal Account
d) None of the options
Answer: Personal Account

Question: Debenture Allotment Account is a.

a) Personal Account
b) Nominal Account
c) Real Account
d) None of the options
Answer: Personal Account

Question: Premium on Redemption of Debentures Account is

a) Personal Account
b) Real Account
c) Capital A/c
d) None of the options
Answer: Personal Account

Question: On 1st April 2007, Sunrise Limited issued 5,000, 8% debentures of Rs. 100 each at a discount of 5%. What will be the
total amount of interest for the year ending 31st March 2008?
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a) Rs.38,000
b) Rs.42,000
c) Rs.40,000
d) Rs.25,000
Answer: C

Question: Luxor Pens Ltd. issued 10,000,7% Debentures of Rs. 100 each at a discount of Rs. 4 redeemable at a premium of Rs. 6.
It will write off Loss on Issue of Debentures
a) from Securities Premium Reserve.
b) from Statement of Profit and Loss.
c) from General Reserve.
d) None of these.
Answer: B

Question: Which of the following statement is Correct?

a) A debentureholder is an owner of the company.
b) A debentureholder can get his money back only on the liquidation of the company.
c) A debenture issued at a discount can be redeemed at a premium.
d) A debentureholder receives interest only in the event of profits.
Answer: C

Question: In the Balance Sheet of a company, interest accrued and due on debentures is shown under the main head
(a) Share Capital.
(b) Reserves and Surplus.
(c) Current Liabilities.
(d) Non-current Liabilities.
Answer: C

Question: Debenture holders are :

a) Owners of the Company
b) Debtors of the Company
c) Creditors of the Company
d) Promoters of the Company
Answer: C

Question: Debentures represent the :

a) Long-term Borrowings of a Company
b) The Investment of Equity-Shareholders
c) Directors’ shares in a company
d) Short-term Borrowings of a Company
Answer: A

Question: Zero Coupon Bonds are issued :

a) At Zero Interest Rate
b) With Specified Rate of Interest
c) Without Specified Rate of Interest
d) None of These
Answer: C

Question: X Ltd. purchased a building for Rs.60,00,000 payable as 20% in Cash and balance by allotment of 8% debentures of
Rs.500 each at a premium of 20%. Number of debentures issued will be :
a) 9,600
b) 8,000
c) 12,000
d) 10,000
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Answer: B

Question: Sunrise Ltd purchased a building for Rs.5,00,000 payable as 15% in cash and balance by allotment of 9% debentures of
Rs. 100 each at a premium of 25%. Number of debentures issued will be :
a) 4,250
b) 4,000
c) 5,000
d) 3,400
Answer: D

Question: If Vendors are issued debentures of Rs.80,000 in consideration of net assets of Rs. 1,00,000, the balance of Rs.20,000
will be credited to :
a) Statement of Profit & Loss
b) Goodwill Account
c) General Reserve Account
d) Capital Reserve Account
Answer: D

Question: The debentures whose principal amount is not repayable by the company during its life time, but the payment is
made only at the time of Liquidation of the company, such debentures are called :
a) Bearer Debentures
b) Redeemable Debentures
c) Irredeemable Debentures
d) Non-Convertible Debentures
Answer: C

Question: Debenture Application Account is in the natutre of

a) Real Account
b) Personal Account
c) Nominal Account
d) None of the above
Answer: B

Question: Discount on issue of Debentures is in the nature of

a) Revenue loss
b) Capital loss
c) Deferred Revenue Expenditure
d) None of the above
Answer: B

Question: Debentures are part of

a) Shareholders'Funds.
b) Borrowed Funds.
c) Borrowings from Bank.
d) None of these.
Answer: B

Question: Debentures are shown in the Balance Sheet of a company under the head of
a) Non-current Liabilities.
b) Current Liabilities.
c) Share Capital.
d) None of these.
Answer: A

Question: Debentureholders are

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a) owners of the company.

b) lenders of the company.
c) vendors of the company.
d) customers of the company.
Answer: B

Question: When debentures of Rs. 1,00,000 are issued as Collateral Security against a loan of Rs. 1,50,000, the entry for issue of
debentures will be :
a) Credit Debentures Rs. 1,50,000 and debit bank A/c Rs. 1,50,000
b) Debit Debenture Suspense A/c Rs. 1,00,000 and Credit Bank A/c Rs. 1,00,000
c) Debit Debenture Suspense A/c Rs. 1,00,000 and Credit Debentures A/c Rs. 1,00,000.
d) Debit Cash A/c Rs. 1,50,000 and Credit Bank A/c Rs. 1,50,000
Answer: C

Question: Interest on debentures issued as a collateral security is paid on :

a) Nominal value of debentures
b) No interest is paid
c) Face value of debentures
d) Paid up value of debentures
Answer: B

Question: Loss on Issue of Debentures is written off:

a) In the year of the issue of debentures
b) During the life of the debentures
c) Within 3 years of the issue of debentures
d) In the year of redemption of debentures
Answer: A

Question: Which of the following is Correct with respect to debentures?

a) They can be issued on credit.
b) They can be issued for consideration other than cash.
c) They cannot be issued as collateral security.
d) They can be issued partly on credit and partly in cash.
Answer: B

Question: Discount on issue of debentures account is a

a) Fictitious Asset
b) Current Asset
c) Fixed Asset
d) Current liability
Answer: Fictitious Asset

Question: Securities Premium received on debentures is a

a) Capital Profit
b) Current Asset
c) Capital Loss
d) None of the options
Answer: Capital Profit

Question: Shareholders get dividend, Debenture holders will get

a) Interest
b) Shares
c) Bonus
d) Profit
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Answer: Interest

Question: Debenture is acknowledgment of debt and a contract for the repayment of principal amount with
a) Interest
b) Premium
c) Dividend
d) None of the options
Answer: Interest

Question: debentures can be issued under the ________ of company

a) Common seal
b) Rules & Principles
c) Companies Act
d) None of the options
Answer: Common seal

Question: A debenture is
a) An external equity
b) Owners equity
c) An internal equity
d) Payment of Profit
Answer: An external equity

Question: At the time of liquidation the payment to debenture holders is made on the priority bases before the
a) Payment of Share Capital
b) Payment of Dividend
c) Payment of Profit
d) Payment of Profit
Answer: Payment of Share Capital

Question: A Company can issue its debentures a

a) All of the options
b) At Par
c) At Premium
d) At Discount
Answer: All of the options

Question: Non-Convertible Debentures

a) Cannot be converted into shares
b) Cannot be redeemed
c) Cannot not be issued
d) None of the options
Answer: Cannot be converted into shares

Question: Debenture holders do not have right for

a) All of the options
b) Dividend
c) Profit
d) Voting Right
Answer: All of the options

Question: When a company issue its debentures at discount, the amount of discount is considered as a:
a) Capital loss
b) Normal Loss
c) Capital gain
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d) Reserve & Surplus

Answer: Capital loss

Question: Debenture forms part of

a) Loan
b) Capital
c) Fund
d) None of the options
Answer: Loan

Question: Is payable even if there are no profits

a) Interest.
b) Dividend
c) Commission
d) Secured
Answer: Interest.

Question: Debentures payable to a holder of certificate is called

a) Bearer.
b) Unregistered
c) Secured
d) None of the options
Answer: Bearer.

Question: Debentures payable to person whose name appears both on Debenture Certificate and companys register is called
a) Registered.
b) Unregistered
c) Bearer
d) None of the options
Answer: Registered.

Question: Debentures which have the charge on the property of the company is
a) Secured.
b) Unsecured
c) Registered
d) None of the options
Answer: Secured.

Question: Debenture which are repayable only on the happening of an event of winding up is called
a) Both
b) Irredeemable
c) Perpetual
d) None of the options
Answer: Both

Question: Types of debentures on the basis of security

a) Both
b) Secured debentures
c) Unsecured debentures
d) None of the options
Answer: Both

Question: Types of debentures on the basis of redemption

a) Both
b) Redeemable
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c) Non-Redeemable
d) None of the options
Answer: Both

Question: Types of debentures on the basis of records

a) Both
b) Registered debentures
c) Bearer debentures
d) None of the options
Answer: Both

Question: This is not different types of debentures

a) Equity Debentures
b) Redeemable Debentures
c) Perpetual Debentures
d) Coupon Rate Debentures
Answer: Equity Debentures

Question: Premium on issue of debentures is considered as

a) Capital profit
b) Average Profit
c) Reserve Capital
d) Light Discount bond
Answer: Capital profit

Question: When an instrument is issued without interest rate and issue price is thereby discounted, the issue of such instrument
is called ----
a) Deep Discount Bond
b) Fixed coupon Bond
c) Light Discount bond
d) None of the options
Answer: Deep Discount Bond

Question: Interest on debentures will be paid to debenture holders

a) Whether there is profit or loss
b) When there is profit
c) When there is capital reserve
d) None of the options
Answer: Whether there is profit or loss

Question : Shubham Limited invited applications for 5,000, 11% Debentures @ 100 each. The issue was oversubscribed by 5
times. What is this situation called?
a) Over Subscription
b) Full Subscription
c) Under Subscription
d) Pro-rata Allotment
Answer: Over Subscription

Question: While passing the entry for refund of money if the applications are rejected. Which account should be credited
a) Bank A/c
b) Debenture Application A/c
c) Debenture Allotment A/c
d) None of the options
Answer: Bank A/c
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Question: A debenture of Rs. 100 is issued at Rs. 105.It is an example of

a) Debenture issued at premium
b) Debenture issued at par
c) Debenture issued at discount
d) None of the options
Answer: Debenture issued at premium

Question: When a company purchases some assets and issues debentures as a payment for the purchase, to the vendors it is
known as issue of
a) Debentures issued for consideration other than cash
b) Debentures issued for cash
c) Debentures issued as collateral security
d) None of the options
Answer: Debentures issued for consideration other than cash

Question: Name the security which is issued in addition to the principal security
a) Collateral security
b) Principal security
c) Security Premium
Answer: Collateral security

Question: When does a company issue debentures as collateral security

a) When lender demands additional security
b) When lender gives additional security
c) When lender does not gives additional security
d) When lender does not demands additional security
Answer: When lender demands additional security

Question: Apple Computers Ltd. issued 10,000,7% Debentures of Rs. 100 each at a discount of Rs. 6 on 1st October, 2019.
Interest for the year ended 31 st March, 2020 will be
a) Rs. 65,800.
b) Rs. 32,900.
c) Rs. 70,000.
d) Rs. 35,000.
Answer: D

Question: William Pens Ltd. issued 10,000, 7% Debentures of Rs. 100 each at a discount of Rs. 4. It has a balance in Securities
Premium Reserve of Rs. 25,000. It will write off Discount on Issue of Debentures
a) Rs. 40,000 from Securities Premium Reserve.
b) Rs. 40,000 from Statement of Profit and Loss.
c) Rs. 25,000 from Securities Premium Reserve and Rs. 15,000 from Statement of Profit and Loss (Finance Cost).
d) Rs. 15,000 from Securities Premium Reserve and Rs. 25,000 from Statement of Profit and Loss (Finance Cost).
Answer: C

Question: Premium received on issue of debentures may be utilised for

a) For writing off discount allowed on issue of shares
b) For writing off premium allowed on redemption of debentures
c) For writing off preliminary expenses
d) For All of the Above
Answer: D

Question: ‘A’ Limited purchased the assets from ‘B’ Limited for Rs.5,40,000. ‘A’ Limited issued 10% debentures of Rs. 100 each at
10% discount against the payment. The number of debentures received by ‘B’ Limited will be :
a) 54,000
b) 5,400
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c) 60,000
d) None of the above
Answer: D

Question: ‘A’ Limited purchased the assets from ‘B’ Limited for Rs.5,40,000. ‘A’ Limited issued 10% debentures of Rs. 100 each at
20% premium against the payment. The number of debentures received by ‘B’ Limited will be :
a) 4,500
b) 5,400
c) 45,000
d) 6,000
Answer: A

Question: Discount on Issue of Debentures is restricted to

a) 10%.
b) 20%.
c) 25%.
d) None of these.
Answer: D

Question: Electronics Ltd. issued 10,000, 6% Debentures of Rs. 100 each at a premium of Rs. 10. It will credit 6% Debentures
Account by
a) Rs. 11,00,000.
b) Rs. 10,00,000.
c) Rs. 9,00,000.
d) Rs. 8,00,000.
Answer: B

Question: HP Ltd. issued 5,000,8% Debentures of Rs. 100 each at Rs. 95. It will credit 8% Debentures Account by
a) Rs. 5,00,000.
b) Rs. 4,75,000.
c) Either a) or b) as it decides.
d) Rs. 5,25,000.
Answer: A

Question: Interest payable on debentures is :

a) an appropriation of profits of the company
b) a charge against profits of the company
c) transferred to sinking fund investment account
d) transferred to general reserve
Answer: B

Question: A debenture holder is entitled to :

a) Fixed dividend
b) Share in profits
c) Voting rights in the company
d) Interest at the fixed rate
Answer: D

Question: Discount or Loss on Issue of Debentures is written off from

a) Securities Premium Reserve.
b) Securities Premium Reserve (if it exists) and thereafter from Statement of Profit and Loss.
c) Statement of Profit and Loss.
d) General Reserve.
Answer: B
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Question: Debenture interest is paid

a) at a predetermined rate.
b) at variable rate.
c) at a rate based on net profit of the company.
d) at a rate as determined by the company from time to time.
Answer: A

Question: At the time of issue of debentures, Debentures Account is

a) credited by the amount received.
b) credited by the issue price of the debentures.
c) credited by the nominal (face) value of the debentures.
d) None of the above.
Answer: C

Question: X Ltd. purchased building of Y Ltd. for Rs. 4,00,000. The consideration was paid by issue of 10% Debentures of Rs. 100
each at a discount of Rs. 20.10% Debentures Account is credited with
a) Rs. 5,20,000.
b) Rs. 5,00,000.
c) Rs. 4,80,000.
d) Rs. 3,20,000.
Answer: B
Redemption Of Debentures MCQ Questions Class 12 Accountancy with Answers
Question: Types of debentures on the basis of priority
a) Both
b) First debentures
c) Second debenture
d) None of the options
Answer: Both

Question: Which debentures are issued with a specific rate of interest

a) Coupon rate debentures
b) First debentures
c) Second debenture
d) None of the options
Answer: Coupon rate debentures

Question: Debentures can be issued at par at premium or discount but redemption only
a) Both
b) Redeemable at par
c) Redeemable at premium
d) None of the options
Answer: Both

Question: Debentures account is always credited with the

a) Nominal value
b) Premium Value
c) Discount value
d) None of the options
Answer: Nominal value

Question: Redemption of debentures means

a) Repayment of the due amount of debentures to the debenture holders
b) Repayment of the due amount of debentures to the Share holders
c) Repayment of the due amount of debentures to the Employees
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d) None of the options

Answer: Repayment of the due amount of debentures to the debenture holders

Question: When repayment is made at the date of maturity called

a) Maturity Date
b) Maturity Profit
c) Maturity Capital
d) None of the options
Answer: Maturity Date

Question: Profit on sale of debenture redemption fund investments in the first instance is credited to :
a) Debenture redemption fund account
b) Profit and loss appropriation account,
c) General reserve account
d) None of the options
Answer: Debenture redemption fund account

Question: When debentures are redeemed out of profits, an equal amount is transferred to
a) Debenture redemption reserve
b) General reserve
c) Capital reserve.
d) None of the options
Answer: Debenture redemption reserve

Question: Profit on cancellation of own debentures is transferred to :

a) Capital reserve.
b) General reserve
c) Debenture redemption reserve
d) None of the options
Answer: Capital reserve.

Question: Own debentures are those debentures of the company which:

a) The company purchases from the market and keeps them as investments.
b) The company allots to its own promoters,
c) The company allots to its Director,
d) None of the options
Answer: The company purchases from the market and keeps them as investments.

Question: Which of the following statements are false if debentures redeemed out of capital:
a) DRR is not created if debentures are redeemed out of capital
b) Nominal value of debentures redeemed is not transferred to DRR or General Reserve.
c) Debentures account is debited and bank account is credited
Answer: DRR is not created if debentures are redeemed out of capital

Question: Debentures can be redeemed out of

a) All of the options
b) Profits
c) Capital
d) Provisions made for redemption
Answer: All of the options

Question: Which of the following is not true about Debenture redemption reserve(DRR)
a) DRR is required in case of Fully convertible debenture.
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b) DDR created @ 50% of the amount of debentures issued before commencement of redemption
c) Withdrawal from DRR can be made only after 10% of debenture liability has been redeemed.
d) None of the options
Answer: DRR is required in case of Fully convertible debenture.

Question: Premium on redemption of debentures account is

a) A nominal account - expenditure
b) A real account
c) A personal account
d) A nominal account - income
Answer: A nominal account - expenditure

Question: Vinod Limited has to redeem its debentures worth Rs.80,000 by paying a lump sum amount to the debenture
holders. How much DRR company should create?
a) Rs. 20000
b) Rs. 30000
c) Rs. 25000
d) None of the options
Answer: Rs. 20000

Question: Why does a company purchase its own debentures from the open market?
a) For Cancellation OR Investment
b) For Raising Finance
c) For Investment only
d) None of the options
Answer: For Cancellation OR Investment

Question: In Which account the balance of DRR is transferred after the redemption of debentures?
a) General Reserve
b) Debenture Redemption Reserve
c) Capital Reserve
d) Securities Premium Reserves
Answer: General Reserve

Question: Debentures which are not repayable during the lifetime of the company are called ..
a) Perpetual or Irredeemable Debentures
b) Convertible Debentures
c) Redeemable Debentures
d) Non-convertible Debentures
Answer: Perpetual or Irredeemable Debentures

Question: Creation of DRR is compulsory in case of

a) Non-Convertible Debentures
b) Convertible Debentures
c) Banking Companies
d) None of the options
Answer: Non-Convertible Debentures

Question: What journal entry will take place when a company purchases its own debentures from the open mark
a) Own Debentures A/c Dr. To Bank A/c
b) Bank A/c Dr. To Debentures A/c
c) Own Debentures A/c Dr. To Debenture A/c
d) Bank A/c Dr. To Debenture Application A/c
Answer: Own Debentures A/c Dr. To Bank A/c
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Question: A Debenture of a company represents

a) Debt
b) Capital
c) Shareholders Fund
d) Assets
Answer: Debt

Question: Which of the following is not a Personal Account?

a) Assets Account
b) Debenture Account
c) Debenture Application A/c
d) Debenture Allotment A/c
Answer: Assets Account

Question: Advantage of Redemption by purchase in open market

a) Both
b) Decrease the amount of interest payable to outsiders
c) When market price of own debentures is low than the redeemable value.
d) None of the options
Answer: Both

Question: Sometimes company can purchase the debentures at more than the redeemable value due to the following reasons
:
a) All of the options
b) To maintain the solvency ratio.
c) To utilize the surplus money or funds which are lying idle with the company
d) When rate of interest on debentures is more than the current market rate of interest on debentures in the industry
Answer: All of the options

Question: Sources of Redemption of debentures

a) All of the options
b) Proceeds from fresh issue of share capital or debenture holders.
c) From accumulated profits
d) Proceeds from sale of fixed assets.
Answer: All of the options

Question: when a company not used its reserve or accumulated profit for redemption of its debentures. It is called
a) Redemption out of capital
b) Redemption by conversion
c) Redemption out of profit
d) None of the options
Answer: Redemption out of capital

Question: Which is a reserve representing retentions out of profit made for the purpose of redemption of debentures
a) Debenture Redemption Reserve
b) Capital reserve
c) General reserve
d) None of the options
Answer: Debenture Redemption Reserve

Question: Exception to the creation of DRR

a) All of the options
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b) All infrastructure companies

c) Debentures issued by Banking Companies
d) Companies issuing privately placed debentures
Answer: All of the options

Question: Premium payable on redemption of debentures is in nature of

a) Personal Account
b) Real Account
c) Current Account
d) None of the options
Answer: Personal Account

Question: In case debentures of Rs. 10000 are issued at par but redeemable at a premium of 10% the premium payable is
debited to
a) Loss on issue of debentures A/c
b) Debentures Suspense Account
c) Both
d) None of the options
Answer: Loss on issue of debentures A/c

Financial Statement Of Companies MCQ Questions Class 12 Accountancy with Answers

Question: ___________ is conducted by bankers and government
a) External Analysis
b) Internal Analysis
c) External Analysis and Internal Analysis
d) None of the options
Answer: External Analysis

Question: Bank overdraft is shown in the balance sheet under the

a) Short Term Borrowings
b) Non-current liabilities
c) Non Current assets
d) None of the options
Answer: Short Term Borrowings

Question: An example of fixed asset is

a) Live stock
b) Value stock
c) Income stock
d) None of the options
Answer: Live stock

Question: The assets held by a business which can be converted in the form of cash, without disturbing the normal operations
of a business
a) Current assets
b) Tangible assets
c) Intangible assets
d) Fixed assets
Answer: Current assets

Question: The return which the company pays on borrowed funds is termed as
a) All of the options
b) Interest
c) Dividend
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d) Bonus
Answer: All of the options

Question: The following is(are) the type(s) of capital budgeting decision(s)

a) All of the options
b) Diversification
c) Replacements
d) Expansion
Answer: All of the options

Question: The following is(are) the external source(s) of cash

a) All of the options
b) Long terms loans
c) Issue of new shares
d) Short term borrowings
Answer: All of the options

Question: The total cost that arises when the quantity produced is increased by one unit is called
a) Marginal cost
b) Average cost
c) Fixed cost
d) None of the options
Answer: Marginal cost

Question: Current assets are also referred to as

a) Working capital
b) Investments
c) Inventory
d) None of the options
Answer: Working capital

Question: Carriage Inward is normally debited to ____

a) Manufacturing Account
b) Profit and Loss account
c) Capital Account
d) None of the options
Answer: Manufacturing Account

Question: Reliability of financial analysis depends upon the

a) Reliability of financial data
b) Reliability of Customer
c) Reliability of financial data and Reliability of Customer
d) None of the options
Answer: Reliability of financial data

Question: Objectives of analysis and interpretation of financial statements are

a) All of the options
b) Progress
c) Position
d) Prospects
Answer: All of the options

Question: Sub- headings are Non Current Liabilities are

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a) All of the options

b) Long Term borrowing
c) Deferred Tax Liabilities
d) Long Term Provisions
Answer: All of the options

Question: Main headings of assets are

a) Current Assets and Non Current assets
b) Current Assets
c) Non Current assets
d) None of the options
Answer: Current Assets and Non Current assets

Question: Main headings of the liability side of a company balance sheet

a) All of the options
b) Shareholders Fund
c) Current Liabilities
d) Non Current Liabilities
Answer: All of the options

Question: Financial Statement provide a summary of

a) All of the options
b) Assets
c) Liabilities
d) Capital
Answer: All of the options

Question: Calls in advance is to be shown under the heading of

a) Current Liabilities
b) Current Assets
c) Current Liabilities and Current Assets
d) None of the options
Answer: Current Liabilities

Question: Goodwill is shown under which subheading

a) Intangible Assets
b) Current Assets
c) Current Liability
d) None of the options
Answer: Intangible Assets

Question: Prepaid Expenses is

a) Current Assets
b) Current Liabilities
c) Long term loan
d) None of the options
Answer: Current Assets

Question: Non Current Assets is

a) Patents and Trade Marks
b) Bills Receivables
c) Prepaid Expenses
d) Debtors
Answer: Patents and Trade Marks
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Question: Security Premium is show under which major head

a) Shareholders fund
b) Current Liabilities
c) Current Assets
d) None of the options
Answer: Shareholders fund

Question: Provision for Provident Fund comes under

a) Long-term Provision
b) Trade Payable
c) Other Current Liabilities
d) None of the options
Answer: Long-term Provision

Question: Sinking Fund is shown under which subheading

a) Reserve and Surplus
b) Trade Payable
c) Non Current Liabilities
d) None of the options
Answer: Reserve and Surplus

Question: Authorised Capital is shown under which major heading in balance sheet
a) Shareholders Fund
b) Current Liability
c) Current Assets
d) None of the options
Answer: Shareholders Fund

Question: Debenture is shown under which major heading in balance sheet

a) Non Current Liabilities
b) Other Current Liabilities
c) Current Liability
d) None of the options
Answer: Non Current Liabilities

Question: Example of Short-term Provision is

a) Provision for Tax
b) Debentures
c) Loan
d) None of the options
Answer: Provision for Tax

Question: Provision for Tax is our

a) Liability
b) Assets
c) Liability and Assets
d) None of the options
Answer: Liability

Question: Bills Payable shown under major heading Current Liability and Subheading
a) Trade Payable
b) Short-term Provision
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c) Other Current Liabilities

d) None of the options
Answer: Trade Payable

Question: Unclaimed Dividend shown under major heading Current Liability and Subheading
a) Other Current Liabilities
b) Trade Payable
c) Short-term Provision
d) None of the options
Answer: Other Current Liabilities

Question: Unclaimed Dividend is shown under which major heading in balance sheet
a) Current Liability
b) Equity and Liability
c) Current Assets
d) None of the options
Answer: Current Liability

Question: Proposed Dividend shown under major heading Current Liability and Subheading
a) Short-term Provision
b) Trade Payable
c) Other Current Liabilities
d) None of the options
Answer: Short-term Provision

Question: Proposed Dividend is shown under which major heading in balance sheet
a) Current Liability
b) Current Assets
c) Equity and Liability
d) None of the options
Answer: Current Liability

Question: Miscellaneous Expenditure are

a) All of the options
b) Preliminary Expenses
c) Discount allowed on the issue of shares/deb
d) Development expenditure not adjusted
Answer: All of the options

Question: Fixed Assets subheading is divided into

a) All of the options
b) Tangible
c) Intangible Assets
d) Capital work in progress
Answer: All of the options

Question: In Balance Sheet Bills Payable is shown under the

a) Current Liabilities
b) Current Assets
c) Equity and Liability
d) None of the options
Answer: Current Liabilities
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Question: Long term Liabilities is

a) All of the options
b) Bonds
c) Debenture
d) Loans from Banks
Answer: All of the options

Question: Non Current Liabilities classified in balance sheet

a) All of the options
b) Long term borrowings
c) Deferred tax liabilities
d) Other long term liabilities
Answer: All of the options

Question: Financial Statement also called

a) Final Accounts
b) Profit & Loss A/c
c) Trading A/c
d) None of the options
Answer: Final Accounts

Question: Those expenses which paid in advance by the firm

a) Prepaid expenses
b) Accrued income
c) Prepaid expenses and Accrued income
d) None of the options
Answer: Prepaid expenses

Question: Prepaid expenses are shown under

a) Other current assets
b) Inventories
c) Cash Equivalents
d) None of the options
Answer: Other current assets

Question: Provision for Tax appears in a Company’s Balance Sheet under the Sub-head ................
a) Short-term Provisions
b) Reserves and Surplus
c) Long-term Provisions
d) Other Current Liabilities
Answer: A

Question: Bills Receivables appear in a Company Balance Sheet under the Sub-head
a) Current Investments
b) Cash Equivalents
c) Trade Receivables
d) Short term Loans and Advances
Answer: C

Question: Marketable securities appear in a Company Balance Sheet under the Sub-head
a) Current Investments
b) Non-Current Investments
c) Intangible Assets
d) Short-term Loans and Advances
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Answer: A

Question: While preparing the Balance Sheet of a company ‘Underwriting Commission’ is shown under
which head?
a) Unamortized Expenditure
b) Current Assets
c) Non-Current Assets
d) Current Liability
Answer: A

Question: Which of the following items is shown under the head ‘Current Liabilities’ while preparing the
Balance Sheet of a company?
a) Securities Premium Reserve
b) Debentures
c) Livestock
d) None of the above
Answer: D

Question: While preparing the Balance Sheet of a company ‘Securities Premium’ is shown under :
a) Current Liability
b) Share Capital
c) Long-term Borrowings
d) None of the above
Answer: D

Question: Balance sheet of a company is required to be prepared in the format given in

a) Schedule III Part II
b) Schedule III Part I
c) Schedule III Part III
d) Table A
Answer: B

Question: As per Companies Act, the Balance Sheet of a company is required to be presented in ................
a) Horizontal Form
b) Vertical Form
c) Either Horizontal or Vertical Form
d) Neither of the above
Answer: B

Question: Which of the following is not required to be prepared under the Companies Act
a) Statement of Profit and Loss
b) Balance Sheet
c) Report of Director’s and Auditor’s
d) Funds Flow Statement
Answer: D

Question: In a Company's Balance Sheet, Debit (Negative) balance of Statement of Profit and Loss is shown
under
a) Non-current Liabilities.
b) Current Liabilities.
c) Non-current Assets.
d) Reserves and Surplus.
Answer: D
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Question: Patents and Trademarks are examples of

a) intangible Fixed Assets.
b) Tangible Fixed Assets.
c) Intangible Assets under Development.
d) Capital Work-in-Progress.
Answer: A

Question: Identify the item which is not a part of Shareholders' Funds:

a) Share Application Money Pending Allotment
b) Share Capital
c) Reserves and Surplus
d) Money Received against Share Warrants.
Answer: A

Question: Fixed Deposits appear in a Company’s Balance Sheet under :

a) Current Assets
b) Current Liabilities
c) Long-term Provisions
d) Long-term Borrowings
Answer: D

Question: Goodwill appears in a Company’s Balance Sheet under the Sub-head

a) Unamortized Assets
b) Non-Current Investment
c) Intangible Assets
d) Tangible Assets
Answer: C

Question: Share Forfeiture Account appears in a Company’s Balance Sheet under the Sub-head ................
a) Share Capital
b) Reserve & Surplus
c) Contingent Liability
d) Commitments
Answer: A

Question: Expenses allowed on issue of shares appears in a Company’s Balance Sheet under:
a) Share Capital
b) Current Liability
c) Unamortized Expenditure
d) Contingent Liability
Answer: C

Question: In Balance Sheet Computer software is shown under the

a) Fixed intangible Assets
b) Fixed Tangible Assets
c) Fictitious Assets
d) Current Assets
Answer: A

Question: Those liabilities which may or may not arise as they are dependent on happening in future.
a) Contingent Liability
b) Current Liability
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c) Provisions
d) Reserve & surplus
Answer: A

Question: A company prepares its Balance Sheet as per the format in

a) Schedule VI of the Indian Companies Act, 2013
b) Schedule II of the Indian Companies Act, 2013
c) Schedule IV of the Indian Companies Act, 2013
d) None of the options
Answer: A

Question: With the permission of Registrar accounting period can be extended up to

a) 18 Months
b) 13 Months
c) 14 Months
d) 15 Months
Answer: A

Question: Preliminary expenses include

a) All of the options
b) Legal cost
c) Professional fees
d) Stamp duty
Answer: All of the options

Question: Preliminary expenses are shown in the balance sheet.

a) Assets side
b) Liabilities side
c) Assets side and Liabilities side
d) None of the options
Answer: A

Question: Which are written off every year from the profits earned by the business.
a) Preliminary Expenses
b) Liabilities
c) Preliminary Expenses and Liabilities
d) None of the options
Answer: A

Question: Securities Premium Reserve is shown under:

a) Reserve and Surplus
b) Short term provisions
c) Current Liabilities
d) Current Assets
Answer: A

Question: Which Indian Companies Act is in force these days

a) Companies Act 2013
b) Indian Companies Act 1956
c) Indian Companies Act 2015
d) Indian Companies Act 2014
Answer: A
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Question: Which of the following is a fictitious Asset?

a) Preliminary Expense
b) Goodwill
c) Land & building
d) None of the options
Answer: A

Question: The basic equation on which a profit & loss statement is based is
a) Revenues - Expenses = Profit
b) Revenues + Expenses = Profit
c) Revenues - Expenses = Profit and Revenues + Expenses = Profit
d) None of the options
Answer: A

Question: The profit & loss statement is also known as the

a) All of the options
b) Income Statement
c) Statement of Earning
d) Statement of Operation
Answer: All of the options

Question: The profit & loss statement summarizes the

a) Revenues and expenses
b) Assets and Liabilities
c) Revenues and expenses and Assets and Liabilities
d) None of the options
Answer: A

Question: Which is not a limitation of Financial Statements

a) Used by various agencies for policy decisions
b) Give information on historic fact
c) Transactions expressed in monetary terms are considered
d) They are the Interim Report and not the final one
Answer: A

Question: ______is a Current Liability.

a) Sundry Creditors
b) Drawings
c) Prepaid Insurance
d) Sundry Creditors
Answer: A

Question: Which are the determinants of dividend policy

a) All of the options
b) Working Capital Requirement
c) Liquidity Position
d) Legal Requirement
Answer: All of the options

Question: Record all the credit balances of real and personal accounts in the
a) Liability side of the balance sheet
b) Assets side of the balance sheet
c) Liability side of the balance sheet and Assets side of the balance sheet
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d) None of the options

Answer: A

Question: Record all the debit balances of real and personal accounts in the
a) Assets side of the balance sheet
b) Liability side of the balance sheet
c) Assets side of the balance sheet and Liability side of the balance sheet
d) None of the options
Answer: A

Question: The process of preparing income statement is

a) Trial Balance, Profit & Loss account and Balance Sheet
b) Balance Sheet ,Profit & Loss account, Trial Balance,
c) Balance Sheet, Trial Balance, Profit & Loss account
d) None of the options
Answer: A

Question: Financial statements reflect a combination of

a) All of the options
b) Recorded facts
c) Accounting conventions
d) Personal judgements
Answer: All of the options

Question: Persons who are willing to invest in any organization always wish to know about the profitability and solvency of the
business concern
a) All of the options
b) Investors and Potential Investors
c) Employees and Workers
d) Owner
Answer: All of the options

Question: The employee and workers are interested in financial statement for knowing about the
a) All of the options
b) Timely payment of wages and salaries
c) Bonus
d) Appropriate increment
Answer: All of the options

Question: Management interested in financial statements for drafting

a) All of the options
b) Various policies
c) Facilitating planning
d) Decision making process
Answer: All of the options

Question: There are various external parties who are interested in financial statements
a) Creditors and Investors and Potential Investors
b) Creditors
c) Investors and Potential Investors
d) None of the options
Answer: A
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Question: When the Profit and Loss account shows a debit balance, i.e., loss which could not be adjusted against general
reserves, the same is shown as a last item on
a) Asset side
b) Liability Side
c) Asset side and Liability Side
d) None of the options
Answer: A

Question: Assets which are converted into cash within an operating cycle is known as
a) Current Assets
b) Fixed Assets
c) Intangible Assets
d) None of the options
Answer: A

Question: Fixed Assets are

a) All of the options
b) Land and Building
c) Plant and Machinery
d) Motor Car
Answer: All of the options

Question: Those assets that are used for more than one year are called
a) Fixed Assets
b) Current Assets
c) Current Liabilities
d) All of the options
Answer: A

Question: Current Liabilities are

a) All of the options
b) Bank overdraft
c) Bills payable
d) Creditors
Answer: All of the options

Question: Current Liabilities are those liabilities which are liable to pay with in an operating cycle generally one year
a) Current Liabilities
b) Current Assets
c) Reserves and Surplus
d) None of the options
Answer: A

Question: What are the items shown under heading Miscellaneous Expenditure
a) All of the options
b) Preliminary expenses
c) Discount on Issue of share and debenture
d) Deferred expenses
Answer: All of the options

Question: What are the items shown under heading Reserve and Surplus
a) All of the options
b) Capital Reserve
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c) Capital Redemption Reserve

d) Securities Premium
Answer: All of the options

Question: Profit and loss account is also called_____statement

a) Income
b) Capital
c) Loss
d) None of the options
Answer: A

Question: The statement which shows the assets and liabilities of a company is known as
a) Balance sheet
b) Profit & Loss Account
c) Trial Balance
d) None of the options
Answer: A

Question: Financial statements are the ______of information to interested parties.

a) Basic Source
b) External Source
c) Basic Source and External Source
d) None of the options
Answer: A

Question: Financial statements are primarily directed towards the needs of

a) Owners
b) Customers
c) Banks
d) None of the options
Answer: A

Question: Financial statements are the end products of

a) Accounting process
b) Company process
c) Selling Process
d) None of the options
Answer: A

Question: Which includes in Trade Receivables

a) Debtors
b) Creditors
c) Bills Payable
d) None of the options
Answer: A

Question: Inventories include the following are

a) All of the options
b) Raw Material
c) Work in progress
d) Goods acquired for trading
Answer: All of the options
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Question: Which is the first thing which is being shown in the liabilities side of balance sheet
a) Share Capital
b) Current Assets
c) Current Liabilities
d) None of the options
Answer: A

Question: 6% Debentures appear in a Company’s Balance Sheet under the Sub-head

a) Long-term Provisions
b) Long-term Borrowings
c) Other Current Liabilities
d) Other Long-term Liabilities
Answer: B

Question: Interest accrued on Investments appear in a Company’s Balance Sheet under the Sub-head
................
a) Non-Current Investments
b) Current Investments
c) Other Current Assets
d) Other Non-Current Assets
Answer: C

Question: ‘Accumulated Dividend Arrears’ on preference shares is shown in the Company’s Balance Sheet
as :
a) Current Liability
b) Contingent Liability
c) Commitments
d) Short-term Provision
Answer: C

Question: Which of the following is not a Short-term Borrowing?

(a) Deposits
(b) Loans repayable on demand
(c) Bank Overdraft
(d) Trade Receivables
Answer: D

Question: Which of the following is not a Non-Current Asset?

(a) Fixed Assets
(c) Long-term Loans and Advances
(b) Share Capital
(d) Non-current Investments
Answer: B

Question: If the Operating Cycle cannot be identified, it is assumed to be a period of

(a) 10 months,
(b) 11 months,
(c) 9 months.
(d) 12 months.
Answer: D
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Question: A company has issued 1,00,000 Equity Shares of f 10 each. It has called the total nominal value of
the share. lt has received the calls made except the final call off 3 on 1,000 shares. Subscribed capital will be
shown as follows:
(a) Subscribed and not fully paid-up:
1,00,000 Equity Shares of f 10 each 10,00,000
Less: Calls-in-Arrears 3,000
9.97.000
(b) Subscribed and fully paid-up: Rs.
1,00,000 Equity Shares of f 10 each 10,00,000
Less: Calls-in-Arrears 3,000
9.97.000
(c) Subscribed and fully paid-up: Rs.
99.000 Equity Shares off 10 each 9,90,000
(d) Subscribed but not fully paid-up:
1.000 Equity Shares off 10 each 10,000
Less: Calls-in-Arrears 3,000 7,000
9.97.000
(d) Can be shown either as (b) or as (c).
Answer: C

Question: Debentures redeemable after 10 years from the date of issue are shown as
(a) Long-term Borrowings.
(b) Other Long-term Liabilities,
(c) Short-term Borrowings.
(d) Other Short-term Liabilities.
Answer: A

Question: Name the item out of the following which is shown as Short-term Provision:
(a) Provision for Tax
(b) Interest Accrued but not Due
(c) Employees' Provident Fund
(d) Interest Accrued and Due
Answer: A

Question: According to prescribed order of assets in a Company’s Balance Sheet ................ assets should be
shown first of all.
a) Non-Current Assets
b) Current Assets
c) Current Investments
d) Loans and Advances
Answer: A

Question: In a Company’s Balance Sheet ................ appear under the head ‘non-current assets.
a) Goodwill
b) Patents
c) Vehicles
d) All of the above
Answer: D

Question: Calls in Arrears appear in a Company’s Balance Sheet under

a) Reserve & Surplus
b) Shareholder’s Funds
c) Contingent Liabilities
d) Short-term Borrowings
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Answer: B

Question: While preparing the Balance Sheet of a Company which item is shown under the head ‘Long
term Borrowings’?
a) 6% Debentures
b) Security Premium Reserve
c) Trade Payables
d) None of the above
Answer: A

Question: Share Capital of a Company consists of 5,00,000 Shares of Rs.10 each, Rs.8 called up. All the
shareholders have duly paid the called-up amount. Share capital will be shown as :
a) Subscribed and Fully Paid
b) Subscribed but not fully paid
c) Any of the above
d) None of the above
Answer: B

Question: A Company has issued 2,00,000 Equity Shares of Rs.10 each and it has called the entire nominal
value of the share. It has received the entire amount except final call of Rs.3 per share on 5,000 shares.
Subscribed Capital will be shown as follows:
a) Subscribed and fully paid 2,00,000 Equity Shares
of Rs.10 each 20,00,000
Less: Call in Arrears 15,000 19,85,000
b) Subscribed but not fully paid 2,00,000 Equity
Shares of Rs.10 each 20,00,000
Less: Call in Arrears 15,000 19,85,000
c) Subscribed and fully paid 1,95,000 Equity Shares
of Rs.10 each 19,50,000
Subscribed but not fully paid 5,000 Equity Shares of
Rs. 10 each 50,000
Less: Call in Arrears 15,000 35,00
19,85,000
d) Can be shown as b) or as c)
Answer: C

Question: Calls in advance appear in a Company’s Balance Sheet under

a) Share Capital
b) Current Liability
c) Long-term Borrowings
d) Reserve & Surplus
Answer: B

Financial Statement Of Companies MCQ Questions Class 12 Accountancy with Answers

Question: Tangible assets are assets which can be physically seen and touched, Like
a) All of the options
b) Land & Building
c) Plant and Equipment
d) Furniture & Fixture
Answer: All of the options

Question: Intangible Assets: Intangible Assets are those which are not tangible like
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a) All of the options

b) Goodwill
c) Brand / Trademarks
d) Computer Software & Mining rights
Answer: All of the options

Question: Statement of Profit & Loss - Negative Balance is shown as a minus item under
a) Reserve and Surplus
b) Shareholders Fund
c) Short-term Loan
d) None of the options
Answer: Reserve and Surplus

Question: Fixed assets are classified in

a) All of the options
b) Tangible
c) Intangible
d) Capital Work in progress
Answer: All of the options

Question: Advance payment towards a certain expense is shown under

a) Other current assets
b) Other Current Liabilities
c) Other current assets and Other Current Liabilities
d) None of the options
Answer: Other current assets

Question: Balance Sheet of A Company is prepared according to the Revised Schedule III, Part-I of
a) Section 211
b) Section 213
c) Section 217
d) Section 209
Answer: Section 211

Question: Preliminary Expense is

a) Fictitious Asset
b) Current Assets
c) Current Liabilities
d) None of the options
Answer: Fictitious Asset

Question: Current Maturity of Long term debt will appear in the company s Balance sheet under
a) Other current liabilities
b) Other Current Assets
c) Other current liabilities and Other Current Assets
d) None of the options
Answer: Other current liabilities

Question: Which item is not part of Reserve and Surplus

a) Accumulated Depreciation
b) Capital Reserves
c) General Reserve
d) All of the options
Answer: Accumulated Depreciation
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Question: Trade payables on account of purchase of Fixed Assets and interest accrued there on, will come under the head
a) Other Long Term Liabilities
b) Long Term provisions
c) Other Current Assets
d) None of the options
Answer: Other Long Term Liabilities

Question: Salaries outstanding Rs 50,000 will be record in the balance sheet under
a) Other Current Liabilities
b) Other Current Assets
c) Non-current Liabilities
d) All of the options
Answer: Other Current Liabilities

Question: Trade Receivable is consist of

a) Bills receivable and Debtors
b) Bills receivable
c) Debtors
d) None of the options
Answer: Bills receivable and Debtors

Question: Why government is interested in analysis financial statement

a) Compile National Income and taxes and policy making
b) know whether the business is able to pay debt
c) know the earning capacity
d) know the liquidity of business
Answer: Compile National Income and taxes and policy making

Question: Loss on sale is a

a) Non Operating Expenses
b) Miscellaneous Expenses
c) Sales Expenses
d) All of the options
Answer: Non Operating Expenses

Question: Which items is not the example of operating expenses

a) Loss on sale of fixed assets
b) Cash discount allowed to customers
c) Selling and Distribution expenses
d) All of the options
Answer: Loss on sale of fixed assets

Question: ___________ is conducted by the management

a) Internal Analysis
b) External Analysis
c) Internal Analysis and External Analysis
d) None of the options
Answer: Internal Analysis

Question: Document that compares a particular financial statement with prior period statements or with the same financial
report generated by another company.
a) Comparative statement
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b) Common Size statements

c) Ratio Analysis
d) None of the options
Answer: Comparative statement

Question: Income Statement represents

a) Statement of Profit and Loss
b) Cash Flow Statement
c) Fund Flow statement
d) All of the options
Answer: Statement of Profit and Loss

Question: Which statement shows the sources related to the inflow and Outflow of cash
a) Cash Flow Statement
b) Fund Flow Statement
c) Ratio Analysis
d) None of the options
Answer: Cash Flow Statement

Question: Name the expenses which refer to the indirect expenses relating to the principal revenue generating activities of the
enterprise:
a) Non Operating Expenses
b) Miscellaneous Expenses
c) Sales Expenses
d) All of the options
Answer: Non Operating Expenses

Question: Sub headings are Non Current Liabilities are

a) All of the options
b) Long Term borrowing
c) Deferred Tax Liabilities
d) Long Term Provisions
Answer: All of the options

Question: Financial management process deals with

a) Financing decisions
b) Investments
c) Financing decisions and Investments
d) None of the options
Answer: Financing decisions

Question: For a business concern capital is a

a) Liability
b) Asset
c) Gain
d) None of the options
Answer: Liability

Question: Gross profit is equal to

a) Sale - cost of sale
b) Sale - Expenses
c) Sale - cost of sale and Sale - Expenses
d) None of the options
Answer: Sale - cost of sale
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Question: The accounting equation is

a) Assets= capital + Liabilities
b) Assets= capital - Liabilities
c) Assets= capital + Liabilities and Assets= capital- Liabilities
d) None of the options
Answer: Assets= capital + Liabilities

Question: Any physical thing that has money value

a) Assets
b) Intangible assets
c) Goodwill
d) None of the options
Answer: Assets

Question: Error which affect income statement belongs to

a) Nominal account
b) Real account
c) Personal account
d) None of the options
Answer: Nominal account

Question: Preliminary expense incurred for formation of joint stock company represent
a) Deferred revenue expenditure
b) Revenue loss
c) Capital loss
d) None of the options
Answer: Deferred revenue expenditure

Question: Operating expense represent are

a) Selling and administrative expense
b) Selling expense and general expense
c) Selling and administrative expense and Selling expense and general expense
d) None of the options
Answer: Selling and administrative expense

Question: Bills receivable and debtors are

a) Current assets
b) Fixed assets
c) Long term assets
d) None of the options
Answer: Current assets

Question: Cash and Cash Equivalents does not include

a) Cheques.
b) Balances with banks.
c) Bank deposits with more than 12 months maturity.
d) Inventories.
Answer: D

Question: In a company's Balance Sheet Provision for Employees Benefits to be settled within 12 months is
shown under
a) Non-current Liabilities.
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b) Current Liabilities.
c) Non-current Assets.
d) Current Assets.
Answer: B

Question: Out of the following items, identify which of the following item is not shown in the Note to
Accounts on Other Expenses:
a) Courier Expenses
b) Internet Expenses
c) Rent for factory
d) Wages
Answer: D

Question: Money Received Against Share Warrants is shown as

a) Shareholders'Funds.
b) Other Non-current Liabilities,
c) Long-term Provisions.
d) Trade Payables.
Answer: A

Question: Share Application Money (refundable) is shown as

a) Other Long-term Liabilities.
b) Intangible Fixed Assets.
c) Short-term Provisions.
d) Capital Work-in-Progress.
Answer: B

Question: Cails-in-Advance and interest thereon is shown as

a) Shareholders'Funds.
b) Other Long-term Liabilities,
c) Other Current Liabilities.
d) Other Current Liabilities.
Answer: C

Question: Interest accrued and due on debentures appear in a Company’s Balance Sheet under the Sub-
head ______
a) Short-term Borrowings
b) Trade Payables
c) Other Current Liabilities
d) Short-term Provisions
Answer: C

Question: Interest accrued but not due on loans appear in a Company’s Balance Sheet under the Sub-head
__________
a) Short-term Borrowings
b) Trade Payables
c) Other Current Liabilities
d) Short-term Provisions
Answer: C

Question: 50,000, 9% Debentures redeemable within 12 months of the date of Balance Sheet will be shown
under :
a) Short-term Borrowings
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b) Short-term Provision
c) Other Current Liability
d) Trade Payables
Answer: C

Question: Short-term Borrowings appear in a Company’s Balance Sheet under the head
a) Current Assets
b) Current Liabilities
c) Non-Current Liabilities
d) Non-Current Assets
Answer: B

Question: Securities Premium Reserve appears in a Company’s Balance Sheet under :

a) Share Capital
b) Long-term Provision
c) Short-term Provision
d) Reserve & Surplus
Answer: D

Question: Prepaid Expenses appear in a Company’s Balance Sheet under the Sub-head
a) Other Current Assets
b) Short-term Loans & Advances
c) Intangible Assets
d) Other Non-Current Assets
Answer: A

Question: _______ appear in a Company’s Balance Sheet under the Sub-head Short-term Provision
a) Interest Accrued but not due on Borrowings
b) Provision for Tax
c) Unpaid Dividend
d) Calls in Advance
Answer: B

Question: Which of the following items is shown under the head ‘Non-Current Assets’ while preparing the
Balance Sheet of a company?
a) Underwriting Commission
b) Current Investment
c) Inventory
d) Patents
Answer: D

Question: Under which heading the item ‘Bills Discounted but not yet matured’ will be shown in the
Balance Sheet of a company?
a) Current Liability
b) Current Assets
c) Contingent Liabilities
d) Unamortized Expenditure
Answer: C

Question: Which one of the following items is shown under the heading ‘current liabilities’ in the Balance
Sheet of a company?
a) Investments
b) Reserve Fund
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c) Unclaimed Dividend
d) Livestock
Answer: C

Question: Discount received is a

a) Revenue
b) Liabilities
c) Expenses
d) None of the options
Answer: Revenue

Question: Balance sheet does not contain

a) Income and expense
b) Assets
c) Liabilities
d) None of the options
Answer: Income and expense

Question: Bas debts are shown in

a) Profit and loss account
b) Balance sheet
c) Profit and loss account and Balance sheet
d) None of the options
Answer: Profit and loss account

Question: Nominal accounts are related to

a) Expense + Income
b) Liability
c) Assets
d) None of the options
Answer: Expense + Income

Question: Outstanding wages appear in trial balance will be recorded in the

a) Balance sheet
b) Trading account
c) Balance sheet and Trading account
d) None of the options
Answer: Balance sheet

Question: Discount allowed appear in the trial balance will be recorded in the
a) Profit and loss account
b) Balance sheet
c) Trading account
d) None of the options
Answer: Profit and loss account

Question: Which group contains only fixed assets

a) Land, machinery, vehicles
b) Land, debtors, vehicle
c) Cash, land, debtors
d) None of the options
Answer: Land, machinery, vehicles
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Question: Current liabilities do not include

a) Prepaid insurance
b) Sundry creditors
c) Bank overdraft
d) None of the options
Answer: Prepaid insurance

Question: If business assets are more than its liabilities, this position is known as
a) Solvency
b) Insolvency
c) Loan position
d) None of the options
Answer: Solvency

Question: The excess of over liability is

a) Capital
b) Profit
c) Loss
d) None of the options
Answer: Capital

Question: Personal accounts are related to

a) Equity and Drawings
b) Assets and liabilities
c) Income and expenses
d) None of the options
Answer: Equity and Drawings

Question: Closing stock is recorded in the

a) Balance sheet
b) Profit and loss account
c) Trial balance
d) None of the options
Answer: Balance sheet

Question: Receipt on sales of fixed assets is

a) Capital receipt
b) Current receipt
c) Debtor receipt
d) None of the options
Answer: Capital receipt

Question: Net loss is always more than

a) Gross profit
b) Capital
c) Sale
d) None of the options
Answer: Gross profit

Question: Pre received income is shown in

a) Liability
b) Assets
c) Revenue
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d) None of the options

Answer: Liability

Question: Prepaid expenses should appear in

a) Assets
b) Liability
c) Revenues
d) None of the options
Answer: Assets

Question: A loss is revenue loss because it is release to

a) Normal reason
b) Decrease in Tax liability
c) Current assets
d) None of the options
Answer: Normal reason

Question: A loss is a capital loss because its due to

a) Fixed assists
b) Abnormal loss
c) Withdrawal of capital
d) None of the options
Answer: Fixed assists

Question: Trial balance is a

a) List of ledger balance
b) Income statement
c) Balance sheet
d) All of the options
Answer: List of ledger balance

Question: Net income is equal to

a) Revenue - Expense
b) Sale - Purchase
c) Assets - Liabilities
d) None of the options
Answer: Revenue - Expense

Question: Any difference in trial balance transferred to

a) Suspense A/c
b) Capital A/c
c) Current A/c
d) None of the options
Answer: Suspense A/c

Question: Raw materials destroyed by fire shows in

a) Revenue loss
b) Abnormal loss
c) Capital loss
d) None of the options
Answer: Revenue loss

Question: Expenses increasing the earning capacity of business are

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a) Capital expenses
b) Financial expenses
c) Direct expenses
d) None of the options
Answer: Capital expenses

Question: Interest paid on loan is a

a) Financial expenses
b) Management expenses
c) Selling expenses
d) All of the options
Answer: Financial expenses

Question: The balance sheet, also called the

a) Statement of financial position
b) Profit & Loss Account
c) Cash Flow
d) None of the options
Answer: Statement of financial position

Question: An accounting period cannot be extended to longer than in special permission

a) 18 Months
b) 20 Months
c) 22 Months
d) 24 Months
Answer: 18 Months

Question: Financial management mainly focuses on

a) All elements of acquiring and using means of financial resources for financial activities
b) Efficient management of every business
c) Brand dimension
d) Arrangement of funds
Answer: All elements of acquiring and using means of financial resources for financial activities

Question: Finance Function comprises of

a) Procurement & effective use of funds
b) Safe custody of funds only
c) Expenditure of funds only
d) None of the options
Answer: Procurement & effective use of funds

Question: Financial management process deals with

a) Financing decisions
b) Investments
c) Financing decisions and Investments
d) None of the options
Answer: Financing decisions

Question: Which of the following statements are true?

a) Financial statements are also known as annual records and Financial statements are historic
b) Financial statements are also known as annual records
c) Financial statements are historic
d) None of the options
Answer: Financial statements are also known as annual records and Financial statements are historic
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Question: The statement of financial position and the balance sheet are
a) Synonyms
b) Antonyms
c) Synonyms and Antonyms
d) None of the options
Answer: Synonyms

Question: The term current asset doesn't cover

a) Car
b) Debtors
c) Stock
d) Prepaid expenses
Answer: Car

Question: The form of balance sheet is

a) Horizontal and vertical
b) Vertical
c) Horizontal
d) None of the options
Answer: Horizontal and vertical

Question: The term Financial Statement covers

a) Profit & Loss Statement and Balance sheet
b) Profit & Loss Statement
c) Balance sheet and Profit & Loss Statement appropriation account
d) None of the options
Answer: Profit & Loss Statement and Balance sheet

Question: Interpretation of accounts is the

a) All of the options
b) Art and science of translating the figures
c) To know financial strengths and weaknesses of a business
d) To know the causes for the prevailing performance of business
Answer: All of the options

Question: Gross Margin - Selling and Administrative Expense

a) Net Operating Profit
b) Gross Margin
c) Net Profit before Taxes
d) None of the options
Answer: Net Operating Profit

Question: Net Profit before Taxes - Income Taxes

a) Net Profit (or Net Loss)
b) Gross Profit (or Net Loss)
c) Net Profit (or Net Loss) and Gross Profit (or Net Loss)
d) None of the options
Answer: Net Profit (or Net Loss)

Question: Net Sales - Cost of Goods Sold =

a) Gross Margin
b) Gross Loss
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c) Net Loss
d) None of the options
Answer: Gross Margin

Question: The P & L statement contains categories of

a) All of the options
b) Sales and expenses
c) Costs of goods sold
d) Net sales
Answer: All of the options

Question: Over a specified period of time, A Profit and Loss statement measures
a) Companys sales and expenses
b) Companys Assets and Liabilities
c) Company s sales and expenses and Company s Assets and Liabilities
d) None of the options
Answer: Companys sales and expenses

Question: From the given items which is not shown under Current Liabilities:
a) Trade Payables
b) Short-term Provisions
c) Short-term Borrowings
d) Inventories
Answer: D

Question: From the given items which is a part of Current Liabilities:

a) Inventories
b) Trade Payables
c) Cash and Cash Equivalents
d) Trade Receivables
Answer: B

Question: Which of the following is not shown as Non-Current Liabilities?

a) Trade Payables
b) Long-term Borrowings
c) Deferred Tax Liabilities
d) Long-term Provisions
Answer: A

Question: Surplus, i.e Balance in Statement of Profit and Loss is shown as

a) Share Capital.
b) Reserves and Surplus.
c) Other Long-term Liabilities.
d) Current Liabilities.
Answer: B

Question: ‘Claims against the Company not acknowledged as debts’ is shown under the head _______
a) Current Liabilities
b) Non-Current Liabilities
c) Commitments
d) Contingent Liabilities
Answer: D
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Question: Unclaimed dividend appears in a Company’s balance Sheet under the Sub-head
a) Short-term Borrowings
b) Trade Payables
c) Other Current Liabilities
d) Short-term Provisions
Answer: C

Question: Which one of the following is Commitment?

a) Proposed Dividend
b) Interim Dividend
c) Unpaid/Unclaimed Dividend
d) Dividend Arrears on Cumulative Preference Shares
Answer: D

Question: Which of the following items is shown under the head ‘Current Assets’ while preparing the
Balance Sheet of a company?
a) Trade Investment
b) Underwriting Commission
c) Inventories
d) Livestock
Answer: C

Question: Change in Inventories means :

a) Difference between Opening Inventories and Closing Inventories
b) Difference between Closing Inventories and Opening Inventories
c) Difference between Opening Inventories and Closing Inventories, if Opening Inventories are higher
d) Difference between Closing Inventories and Opening Inventories, if Closing Inventories are higher.
Answer: A

Question: Mining Rights are

a) Tangible Fixed Assets.
b) Other Current Liabilities.
c) Intangible Assets Under Development.
d) Short-term Borrowings.
Answer: B

Question: Premium on Redemption of Debentures is shown as

a) Long-term Borrowings.
b) Short-term Borrowings.
c) Other Long-term Liabilities.
d) Short-term Provisions.
Answer: C

Question: Bills Payable is shown as

a) Long-term Borrowings.
b) Short-term Borrowings.
c) Other Current Liabilities.
d) Trade Payables.
Answer: D

Question: Which of the following is not a Long-term Borrowing?

a) Bonds
b) Debentures
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c) Public Deposits
d) Trade Payables
Answer: D

Question: Out of the following, identify the item that is not shown in the Note to Accounts on Finance Costs:
a) Interest paid on term loan
b) Bank Deposit
c) Interest paid on Bank Overdraft
d) Discount on Issue of Debentures Written off.
Answer: B

Question: Who of the following is not the Internal User of Financial Statements?
a) Creditors
b) Shareholders
c) Management
d) Employees
Answer: A

Question: Which of the following is not the limitation of financial statements?

a) Ignore qualitative aspects.
b) Personal bias.
c) Ignores price level change.
d) Provide information about the profitability of the business.
Answer: D
Analysis of Financial Statement and Tools MCQ Questions Class 12 Accountancy with Answers
Question: Financial Statement Analysis Objectives/Need is
a) All of the options
b) Measure the profitability of the business
c) Measure the financial strength of the business
d) Make comparative study within the firm and with other forms
Answer: All of the options

Question: Significance or Importance of Financial Analysis is

a) All of the options
b) To know the profitability Condition
c) To know the liquidity Condition
d) To know the solvency Condition
Answer: All of the options

Question: To whom Importance of Financial Analysis is

a) All of the options
b) For Management
c) For Investors
d) For Creditors
Answer: All of the options

Question: Which is Types of financial Analysis

a) Horizontal Analysis and Vertical Analysis
b) Horizontal Analysis
c) Vertical Analysis
d) None of the options
Answer: Horizontal Analysis and Vertical Analysis
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Question: Horizontal Analysis is also known as

a) Dynamic Analyses
b) Vertical Analysis
c) Dynamic Analyses and Vertical Analysis
d) None of the options
Answer: Dynamic Analyses

Question: In which analysis Financial Statement for a single year analysed

a) Vertical Analysis
b) Dynamic Analyses
c) Vertical Analysis and Dynamic Analyses
d) None of the options
Answer: Vertical Analysis

Question: Tool of Financial Analysis is

a) Comparative Statement and Common Size Statement
b) Comparative Statement
c) Common Size Statement
d) None of the options
Answer: Comparative Statement and Common Size Statement

Question: Comparative Statement is a form of

a) Horizontal Analysis
b) Vertical Analysis
c) Horizontal Analysis and Vertical Analysis
d) None of the options
Answer: Horizontal Analysis

Question: Study of relationship between various items is known as

a) Accounting Ratios
b) Vertical Analysis
c) Horizontal Analysis
d) None of the options
Answer: Accounting Ratios

Question: Operating Expenses is include

a) All of the options
b) Office and Administrative expenses
c) Selling and Distribution expenses
d) Provision for doubtful debts
Answer: All of the options

Question: Non operating Expenses are

a) All of the options
b) Interest on long term debts
c) Loss on sale of fixed assets
d) Intangible assets written off such as goodwill, patents etc
Answer: All of the options

Question: Importance of Comparative Statement is

a) All of the options
b) Make the data simple and more understandable
c) Indicate the trend with respect to the previous year
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d) compare the firm performance with the performance of other firm in the same business
Answer: All of the options

Question: Net Reserve and Surplus means total of all reserves less
a) Miscellaneous Expenditure
b) Office Expense
c) Direct expenses
d) All of the options
Answer: Miscellaneous Expenditure

Question: Which of the following items appear in the Statement of Profit and Loss
a) Sales
b) Creditors
c) Goodwill
d) Trade payables
Answer: Sales

Question: When analysis is made on the basis of Published statements, reports and information it is known as
a) External analysis
b) Horizontal analysis
c) Vertical Analysis
d) None of the options
Answer: External analysis

Question: Who is interested in the analysis of financial statement?

a) All of the options
b) Creditors
c) Government
d) Investors
Answer: All of the options

Question: The Real object of Analysis of Financial Statement is

a) To measure the financial strength of the business
b) To assess the total expenses of the firm
c) To know about historical cost concept
d) To assess the total liabilities of the firm
Answer: To measure the financial strength of the business

Question: Limitations of financial analysis except

a) All of the options
b) Dont reflect changes in price level
c) Affected by the personal ability and bias of the Analyst
d) Single years Analysis of financial statement have limited use
Answer: All of the options

Question: Shareholders are interested in the analysis of financial statement because

a) They want to judge the present and future earning capacity of the business
b) For the assessment of tax
c) For Research
d) All of the options
Answer: They want to judge the present and future earning capacity of the business

Question: Horizontal Analysis is

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a) Time Series Analysis

b) Cross Section Analysis
c) Profitability Analysis
d) All of the options
Answer: Time Series Analysis

Question: The point where total of sales is exactly equal to the total of cost.
a) Break-even Point
b) Profit Point
c) Loss Point
d) All of the options
Answer: Break-even Point

Question: Non-operating Incomes refers to

a) Which are not from the main revenue producing activities
b) Which are earned in the form of sales
c) the indirect expenses relating to the principal revenue generating activities of the enterprise
d) The expenses and losses which are not related to the operating activities
Answer: Which are not from the main revenue producing activities

Question: Which is not a limitation of financial statement?

a) Assess the financial position and profitability
b) Qualitative aspect is ignored
c) Ignores price level changes
d) All of the options
Answer: Assess the financial position and profitability

Question: Rent received, Profit on sale of fixed assets, Compensation for acquisition of land are example of
a) Non-operating Incomes
b) Operating Incomes
c) Operating expenses
d) None of the options
Answer: Non-operating Incomes

Question: Statement of Profit and Loss is prepared to assess the

a) Net Profit and Net Loss
b) Net Profit
c) Net Loss
d) None of the options
Answer: Net Profit and Net Loss

Question: If the different financial data is analysed and compared over a period of time it is called
a) Intra firm analysis
b) Inter firm analysis
c) Trade analysis
d) None of the options
Answer: Intra firm analysis

Question: Comparison of two or more departments or divisions of the same business unit with the objective of meaningful
analysis
a) Intra-firm comparison
b) Inter firm analysis
c) Intra-firm comparison and Inter firm analysis
d) None of the options
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Answer: Intra-firm comparison

Question: Internal analysis is done

a) By Management
b) By Shareholders
c) By debenture holder
d) None of the options
Answer: By Management

Question: Financial year always begins on

a) 1st April-31st March
b) 1st January-31st December
c) 1st August -31st July
d) None of the options
Answer: 1st April-31st March

Question: Comparative Financial Statement is an example of

a) Horizontal analysis
b) Vertical Analysis
c) External analysis
d) None of the options
Answer: Horizontal analysis

Question: Shareholders fund is divided into

a) All of the options
b) Share Capital
c) Reserves and Surplus
d) Money received against share warrant
Answer: All of the options

Question: A technique uses in comparative analysis of financial statement is

a) Common size analysis
b) Graphical analysis
c) Preference analysis
d) Returning analysis
Answer: Common size analysis

Question: Formula such as net income available for common stockholders divided by total assets is used to calculate
a) Return on total assets
b) Return on total equity
c) Return on debt
d) Return on sales
Answer: Return on total assets

Question: A techniques uses to identify financial statements trends are included

a) Common size analysis and Percent change analysis
b) Common size analysis
c) Percent change analysis
d) None of the options
Answer: Common size analysis and Percent change analysis

Question: Price per ratio is divided by cash flow per share ratio which is used for calculating
a) Price to cash flow ratio
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b) Dividend to stock ratio

c) Sales to growth ratio
d) Cash flow to price ratio
Answer: Price to cash flow ratio

Question: A formula such as net income available to common stockholders divided by common equity is used to calculate
a) Return on common equity
b) Return on interest
c) Return on earning power
d) None of the options
Answer: Return on common equity

Question: Companies that help to set benchmarks are classified as

a) Benchmark companies
b) Analytical companies
c) Return companies
d) None of the options
Answer: Benchmark companies

Question: Total assets divided common equity is a formula uses for calculating
a) Equity multiplier
b) Graphical multiplier
c) Turnover multiplier
d) None of the options
Answer: Equity multiplier

Question: Profit margin multiply assets turnover multiply equity multiplier is used to calculate
a) Return on equity
b) Return on turnover
c) Return on stock
d) None of the options
Answer: Return on equity

Question: Company low earning power and high interest cost cause financial changes which have
a) High return on assets
b) Low return on assets
c) Low return on equity
d) None of the options
Answer: High return on assets

Question: Financial analysis becomes significant because it:

a) Ignores price level changes
b) Measures the efficiency of business
c) Lacks qualitative analysis
d) Is effected by personal bias
Answer: B

Question: When bad position of the business is tried to be depicted as good, it is known as ................
a) Personal Bias
b) Price Level Changes
c) Window Dressing
d) All of the Above
Answer: C
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Question: For whom the analysis of financial statements is not significant?

a) Investor
b) Government
c) Ambassador of India
d) Company’s Employee
Answer: C

Question: While preparing Common-size Balance Sheet, each item of Balance Sheet is expressed as % of
a) Non-current Assets.
b) Current Assets,
c) Non-current Liabilities.
d) Total Assets.
Answer: D

Question: Which analysis is considered as dynamic?

a) Horizontal Analysis
b) Vertical Analysis
c) Internal Analysis
d) External Analysis
Answer: A

Question: Which analysis is considered as static?

a) Horizontal Analysis
b) Vertical Analysis
c) Internal Analysis
d) External Analysis
Answer: B

Question: Comparative Statement of Profit & Loss provides information about:

a) Rate of increase or decrease in revenue from operations
b) Rate of increase or decrease in cost of revenue from operations
c) Rate of increase or decrease in net profit
d) All of the above
Answer: D

Question: Which analysis depicts the relationship between two figures :

a) Ratio Analysis
b) Trend Analysis
c) Cumulative figures and averages
d) Dividend Analysis
Answer: A

Question: In which analysis total cost are equal to total revenue from Operations :
a) Trend Analysis
b) Ratio Analysis
c) Break-Even Point Analysis
d) Fund Flow Statement Analysis
Answer: C

Question: If net revenue from operations of a firm are Rs. 1,20,000; cost of revenue from operations is
Rs.66,000 and operating expenses are Rs.21,600, what will be the percentage of operating income on net
revenue from operations?
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a) 55%
b) 45%
c) 73%
d) 27%
Answer: D

Question: If net revenue from operations of a firm are Rs. 15,00,000; Gross Profit is Rs.9,00,000 and
operating expenses are Rs.75,000, what will be percentage of operating income on net revenue from
operations?
a) 45%
b) 55%
c) 35%
d) 65%
Answer: B

Question: Main objective of Trend Analysis is

a) To make comparative study of the financial statements for a number of years
b) To indicate the direction of movement
c) To help in forecasts of various items
d) All of the Above
Answer: D

Question: While preparing Common-size Balance Sheet, each item of Balance Sheet is expressed as % of
a) Current Assets
b) Non-current Assets
c) Non-current Liabilities
d) Total Assets
Answer: D

Question: Under which tool of financial analysis, 100% is taken as base and all other related amounts are
expressed as a percentage of base?
a) Comparative Statement
b) Common-size Statement
c) Ratio Analysis
d) Cash Flow Statement
Answer: B

Question: The most commonly used tools for financial analysis are :
a) Comparative Statements
b) Common Size Statements
c) Accounting Ratios
d) All of the above
Answer: D

Question: This item is not used as a tool for Analysis of Financial Statements :
a) Cash Flow Statement
b) Fund Flow Statement
c) Ratio Analysis
d) No. of Employees Statement
Answer: D

Question: Which one of the following items is not a tool used for financial analysis?
a) Comparative Statements
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b) Ratio Analysis
c) Common Size Statements
d) Statement of Dividend Distribution
Answer: D

Question: Amount left after deducting gross profit from Revenue from Operations is generally :
a) Cost of Revenue from Operations
b) Material consumed
c) Opening Inventory + Purchases - Closing Inventory
d) All of the above
Answer: D

Question: What is gross profit + materials consumed?

a) Purchases
b) Revenue from Operations
c) Opening Inventory
d) Closing Inventory
Answer: B

Question: Main objective of Common Size statement is :

a) To present the changes in various items
b) To provide for a common base for comparison
c) To establish relationship between various items
d) All of the Above
Answer: D

Question: Financial analysis become useless because it:

a) Measures the profitability
b) Measures the Solvency
c) Lacks Qualitative Analysis
d) Makes a comparative study
Answer: C

Question: Parties interested in financial analysis are :

a) Investors
b) Government
c) Financial Institutions
d) All of the Above
Answer: D

Question: Main limitation of financial analysis is :

a) To know earning capacity
b) To know financial strength
c) Do not reflect changes in price level
d) Comparative study with other firms
Answer: C

Question: Payment of Income Tax is considered as

a) Direct Expenses
b) Indirect Expenses
c) Operating Expenses
d) None of the Above
Answer: B
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Question: Interest on Loans is

a) Direct Expenses
b) Indirect Expenses
c) Operating Expenses
d) None of the Above
Answer: B

Question: Ratios which relate firms stock to its book value per share, cash flow and earnings are classified as
a) Market value ratios
b) Marginal ratios
c) Return ratios
d) None of the options
Answer: Market value ratios

Question: An equation in which total assets are multiplied to profit margin is classified as
a) Du DuPont equation
b) Turnover equation
c) Preference equation
d) None of the options
Answer: du DuPont equation

Question: High price to earning ratio shows companys

a) High growth prospect
b) Low dividends paid
c) High marginal rate
d) None of the options
Answer: High growth prospect

Question: Analysis simply means ____________data

a) Simplification
b) Explaining
c) Simplification and Explaining
d) None of the options
Answer: Simplification

Question: Interpretation means _________data

a) Explaining
b) Simplification
c) Explaining and Simplification
d) None of the options
Answer: Explaining

Question: Common size analysis is also known as ______ Analysis

a) Vertical
b) Vertical
c) Vertical
d) None of the options
Answer: Vertical

Question: The analysis of actual movement of money inflow and outflow in an organization is called_________analysis.
a) Cash flow
b) Simplification
c) Explaining
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d) None of the options

Answer: Cash flow

Question: The financial statements of a business enterprise include

a) All of the options
b) Balance sheet
c) Profit & Loss Account
d) None of the options
Answer: All of the options

Question: The most commonly used tools for financial analysis are
a) All of the options
b) Horizontal analysis
c) Vertical analysis
d) Ratio analysis
Answer: All of the options

Question: An Annual Report is issued by a company to its:

a) Management
b) Directors
c) Auditors
d) Management
Answer: Management

Question: Balance Sheet provides information about financial position of the enterprise
a) At a point in time
b) At a point in time
c) For a period of time
d) None of the above
Answer: At a point in time

Question: Comparative statement are also known as

a) Horizontal analysis
b) Dynamic analysis
c) Vertical analysis
d) External analysis
Answer: Horizontal analysis

Question: Ratio analysis establishes relationship between

a) Two financial statements
b) Two Share Holder
c) Two Debentures Holder
d) None of the above
Answer: Two financial statements

Question: Common size statements and financial ratios are the two tools employed in
a) Vertical analysis
b) Horizontal analysis
c) Vertical analysis and Horizontal analysis
d) None of the options
Answer: Vertical analysis

Question: Ratio analysis is a total for analysing the

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a) Financial statements of any enterprise and Income statements of any enterprise

b) Financial statements of any enterprise
c) Income statements of any enterprise
d) None of the options
Answer: Financial statements of any enterprise and Income statements of any enterprise

Question: Financial analysis helps an analyst to

a) Arrive at a decision and Making a decision
b) Arrive at a decision
c) Making a decision
d) None of the options
Answer: Arrive at a decision and Making a decision

Question: each item is expressed as a percentage of some common base in

a) Common size statement
b) Fund Flow Statement
c) Cash Flow Statement
d) Cash Flow Statement
Answer: Common size statement

Question: Bring out the importance of Financial Analysis

a) All of the options
b) Helps in evaluating the profit earning capacity and financial feasibility of a business
c) Helps in evaluating the profit earning capacity and financial feasibility of a business
d) Helps in evaluating the relative financial status of a firm comparison to other competitive firms
Answer: All of the options

Question: Those financial statements that enable intra-firm and comparisons of financial statements over a period of time are
called
a) Comparative Financial Statements
b) Fund Flow Statement
c) Cash Flow Statement
d) Trend Analysis
Answer: Comparative Financial Statements

Question: These statements depict the relationship between various items of financial statements and some common items
a) Common Size Statements
b) Comparative Financial Statements
c) Trend Analysis
d) None of the options
Answer: Common Size Statements

Question: It is a technique of studying the operational results and financial position over a series of years.
a) Trend Analysis
b) Common Size Statements
c) Comparative Financial Statements
d) Trend Analysis
Answer: Trend Analysis

Question: Trend analysis can be observe the financial position percentage changes over time in the selected data using with
a) Previous years data
b) Next years data
c) Previous years data and Next years data
d) None of the options
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Answer: Previous years data

Question: Importance of Trend Analysis

a) All of the options
b) Assists in Forecasting
c) Percentage Terms
d) Presents a Broader Picture
Answer: All of the options

Question: Importance of Comparative Statements

a) All of the options
b) Make Presentation Simpler
c) Help in Drawing Conclusion
d) Help in Detection of Problems
Answer: All of the options

Question: The reasons that advocate in favour of Financial Analysis

a) All of the options
b) Helps in assessing the long-term solvency of the business
c) helps in evaluating the profit earning capacity and financial feasibility of a business
d) Assists management in decision making process, drafting various plans and also in establishing an effective controlling system
Answer: All of the options

Question: Common size statements can be classified into which broad categories
a) Common size statements can be classified into two broad categories and Common Size Balance Sheet
b) Common size statements can be classified into two broad categories
c) Common Size Balance Sheet
d) None of the options
Answer: Common size statements can be classified into two broad categories and Common Size Balance
Sheet

Question: Columns prepared in a Common Size Statement

a) All of the options
b) Particulars Column
c) Amount Columns
d) Percentage or Ratio Columns
Answer: All of the options

Question: The comparison of financial data of same time period of different organizations engaged in similar business.
a) Cross-sectional analysis
b) Spatial data analysis
c) Time series analysis
d) None of the options
Answer: Cross-sectional analysis

Question: The symptom of large inventory accumulation in anticipation of price rise in future will be indicated by
a) Inventory turnover ratio
b) Working Capital turnover ratio
c) Asset turnover ratio
d) All of the options
Answer: Inventory turnover ratio

Question: For a healthy business the current ratio lies between

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a) 1.5 to 3
b) 0 to 1.5
c) 3 to 4.5
d) 4.5 to 6
Answer: 1.5 to 3

Question: Revenue from Operations less cost of Revenue from Operations is called :
a) Net Profit
b) Operating Profit
c) Gross Profit
d) Total Profit
Answer: C

Question: Which objective is not fulfilled by comparative Statement of Profit & Loss :
a) To compare the items of Statement of Profit & Loss of two years
b) To know the absolute changes in items of Statement of Profit & Loss
c) To show the change in financial position
d) To know the percentage changes in items of Statement of Profit & Loss
Answer: C

Question: What will be the trend percentage, if the Inventory of a firm is Rs.2,00,000; Rs.2,40,000;
Rs.3,00,000 and Rs.4,00,000 respectively?
a) 1, 1.2, 1.5,2
b) 10, 12, 15,20
c) 100, 120, 150, 200
d) None of the Above
Answer: C

Question: In a common size Balance Sheet, total liabilities are assumed to be equal to
a) 1
b) 10
c) 100
d) 1,000
Answer: C

Question: In a common size Statement of Profit & Loss, the amount of net revenue from operations is
assumed to be equal to
a) 1
b) 10
c) 100
d) 1,000
Answer: C

Question: Comparison of actual values of one firm with those of another firm belonging to the same
industry is
a) inter-firm Comparison.
b) intra-firm Comparison.
c) Pattern Comparison.
d) Standard Comparison.
Answer: A

Question: While preparing Common-size income Statement, each item of income Statement is expressed as
% of
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a) Revenue from Operations.

b) Other income.
c) Total Income.
d) Profit before Tax.
Answer: A

Question: Feature of financial analysis is to present the data contained in financial statements in
a) Easy form
b) Convenient and rational groups
c) Comparable form
d) All of the Above
Answer: D

Question: Which analysis is considered as dynamic :

a) Horizontal Analysis
b) Vertical Analysis
c) Internal Analysis
d) External Analysis
Answer: A

Question: Which analysis is considered as static :

a) Horizontal Analysis
b) Vertical Analysis
c) Internal Analysis
d) External Analysis
Answer: B

Question: Creditors or Suppliers are interested to know the

a) Profitability of the firm in relation to turnover.
b) Profitability of the firm in relation to investments.
c) Short-term solvency/liquidity of the concern.
d) Effective utilisation of its (firm's) resources.
Answer: C

Question: Comparison of values of one period with those of another period for the same firm is
a) Intra-firm comparison.
b) Inter-firm comparison.
c) Pattern comparison.
d) Trend comparison.
Answer: A

Question: Which of the following is not a limitation of Financial Statement Analysis?

a) Ignores the Qualitative Elements
b) Not free from personal bias
c) Intra-firm Comparison
d) Ignores the price level changes
Answer: C

Question: A company’s Revenue from Operations are Rs.20,00,000; Cost of Revenue from Operations is Rs.
14,00,000 and indirect expenses are Rs.2,00,000. What is the amount of Gross Profit?
a) Rs. 18,00,000
b) Rs.4,00,000
c) Rs. 8,00,000
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d) Rs.6,00,000
Answer: D

Question: Revenue from Operations Rs.4,00,000; Cost of Revenue from Operations 60% of Revenue from
Operations; Operating expenses Rs. 30,000 and rate of income tax is 40%. What will be amount of profit
after tax?
a) Rs.64,000
b) Rs.78,000
c) Rs.52,000
d) Rs.96,000
Answer: B

Question: Revenue from Operations Rs. 8,00,000; Gross Profit Ratio 32%; Indirect Exp. 10% of Gross
Profit and income tax 40%. What will be the amount of profit after tax?
a) Rs. 1,38,240
b) Rs. 1,02,400
c) Rs.92,160
d) Rs.1,53,600
Answer: A

Question: Common Size Statements are prepared

a) In the form of Ratios
b) In the form of Percentages
c) In both of the Above
d) None of the Above
Answer: B

Question: Which of the following is untrue :

a) Common size Balance Sheet
b) Common size Statement of Profit & Loss
c) Common size cash Flow Statement
d) None of the Above
Answer: C

Question: Main objective of Common Size Statment of Profit & Loss is :

a) To present changes in assets and liabilities
b) To judge the financial soundness
c) To establish relationship between revenue from operations and other items of statement of Profit & Loss
d) All of the Above
Answer: C

Question: Which one of the following items is not a method/tool of analysis of financial statements?
a) Trend Analysis
b) Statement of Affairs
c) Cash Flow Statement
d) Comparative Statements
Answer: B

Question: Which one of the following items is not a method/tool of analysis of financial statements?
a) Accounting Ratio
b) Break Even Point
c) Statement of Receipts and Payments
d) Fund Flow Statement
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Answer: C

Question: Which one of the following items is not a method/tool of analysis of financial statements?
a) Fund Flow Statement
b) Common Size Statement
c) Statement of Trade Receivables
d) Cash Flow Statement
Answer: C

Question: Main objective of analysis of financial statements is

a) To know the financial strength
b) To make a comparative study with other firms
c) To know the efficiency of management
d) All of the Above
Answer: D

Question: Analysis of Financial Statements is significant:

a) For Creditors
b) For Managers
c) For Employees
d) For all of the above
Answer: D

Question: Which objective is not fulfilled by comparative financial statement:

a) Indicate the extent of change in assets and liabilities
b) Indicate the extent of change in items of Statement of Pofit & Loss
c) Show effect of operative activities on assets and liabilities
d) Show the direction of change in assets and liabilities
Answer: B

Question: The formula used to calculate current ratio is

a) Current assets / Current liabilities
b) Current liabilities / Current assets
c) Inventory / Current liabilities
d) None of the options
Answer: Current assets / Current liabilities

Question: Interpretation of accounts is the

a) All of the options
b) Art and science of translating the figures
c) To know financial strengths and weaknesses of a business
d) To know the causes for the prevailing performance of business
Answer: All of the options

Question: Which of the following are techniques, tools or methods of analysis and interpretation of financial statements?
a) All of the options
b) Ratio Analysis
c) Average Analysis
d) Trend Analysis
Answer: All of the options

Question: Which of the following statements are true

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a) All of the options

b) External analysis depends entirely on issued financial statements
c) Interpretation and analysis both are different
d) Financial analysis covers interpretation
Answer: All of the options

Question: Common-size balance sheet shows

a) Relative value of the various items
b) Different value of the various items
c) Relative value of the various items and Different value of the various items
d) None of the options
Answer: Relative value of the various items

Question: Each product is represented as a percentage of the net sales figure

a) In the common size income statement
b) In the Trend analysis
c) In the common size income statement and In the Trend analysis
d) None of the options
Answer: In the common size income statement

Question: Common size income statements represent the various elements as a

a) Percentage of the net sales figure
b) Percentage of the gross profit
c) Percentage of the net sales figure and Percentage of the gross profit
d) None of the options
Answer: Percentage of the net sales figure

Question: Analysis of any financial Statement comprises

a) All of the options
b) Balance sheet
c) P&L Account
d) Trading account
Answer: All of the options

Question: Comparison of financial statements highlights the trend of the ___ of the business.
a) All of the options
b) Financial position
c) Performance
d) Profitability
Answer: All of the options

Question: When ratios of previous years are compared with current years, they are called
a) Trend ratios
b) Current ratios
c) Trend ratios and Current ratios
d) None of the options
Answer: Trend ratios

Question: When financial statements of several years are analysed, it is termed as

a) Vertical analysis
b) Horizontal analysis
c) Current ratios
d) None of the options
Answer: Vertical analysis
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Question: Comparative Financial Statement is a tool of

a) Financial analysis
b) Profit analysis
c) Loss Analysis
d) None of the options
Answer: Financial analysis

Question: Common-Size Statement is also known as

a) Hundred Percent Statement
b) External analysis statement
c) Hundred Percent Statement and External analysis statement
d) None of the options
Answer: Hundred Percent Statement

Question: Common-Size Statement is the statement in which amounts of individual items of balance sheet convert into
a) Percentage
b) Profit
c) Loss
d) None of the options
Answer: Percentage

Question: Heterogeneous cash flows can be made comparable by

a) Discounting technique and Compounding technique
b) Discounting technique
c) Compounding technique
d) None of the options
Answer: Discounting technique and Compounding technique

Question: When the concept of ratio is defined in respected to the items shown in the financial statements, it is termed as
a) Accounting ratio
b) Financial ratio
c) Costing ratio
d) None of the options
Answer: Accounting ratio

Question: The relationship between two financial variables can be expressed in:
a) Either of These
b) Pure ratio
c) Percentage
d) Rate or time
Answer: Either of These

Question: Liquidity ratios are expressed in

a) Pure ratio form
b) Percentage
c) Pure ratio form and Percentage
d) None of the options
Answer: Pure ratio form

Question: Ratio analysis is useful in

a) Financial analysis
b) Profit Analysis
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c) Loss Analysis
d) None of the options
Answer: Financial analysis

Question: Ratio Analysis is helpful for

a) All of the options
b) Financial planning
c) Forecasting
d) Financial analysis
Answer: All of the options

Question: Profit for the objective of calculating a ratio may be taken as

a) All of the options
b) Profit before tax but after interest
c) Profit before interest and tax
d) Profit after interest and tax
Answer: All of the options

Question: Which of the following are limitations of ratio analysis?

a) All of the options
b) Ratio analysis may result in false results if variations in price levels are not considered
c) Ratio analysis ignores qualitative factors
d) Ratio Analysis is historical analysis
Answer: All of the options

Question: High price to earning ratio shows companys

a) High growth prospect
b) Low growth prospect
c) Low dividends paid
d) All of the options
Answer: High growth prospect

Question: What financial statement lists assets from current to long term?
a) Balance Sheet
b) Cash Flow statement
c) Balance Sheet and Cash Flow statement
d) All of the options
Answer: Balance Sheet

Question: What balance sheet formal is vertical?

a) Report
b) Standard
c) Account
d) None of the options
Answer: Report

Question: Net income equals

a) Total Revenue - Total Expenses
b) Total Revenue + Total Expenses
c) Total Revenue - Total Expenses and Total Revenue + Total Expenses
d) None of the options
Answer: Total Revenue - Total Expenses
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Question: Total assets divided common equity is a formula uses for calculating
a) Equity multiplier
b) Graphical multiplier
c) Turnover multiplier
d) None of the options
Answer: Equity multiplier

Question: What financial ratio helps management evaluate profits available for dividends?
a) Retention Rate
b) Cash Ratio
c) Debt Ratio
d) All of the options
Answer: Retention Rate

Question: Bring out the importance of Financial Analysis

a) All of the options
b) Helps in evaluating the profit earning capacity and financial feasibility of a business
c) Helps in evaluating the profit earning capacity and financial feasibility of a business
d) Helps in evaluating the relative financial status of a firm comparison to other competitive firms
Answer: All of the options

Question: Net Reserve and Surplus means total of all reserves less
a) Miscellaneous Expenditure
b) Office Expense
c) Direct expenses
d) All of the options
Answer: Miscellaneous Expenditure

Question: Which analysis is based only on one year’s data :

a) Cash Flow Statement
b) Dividend Analysis
c) Vertical Analysis
d) Horizontal Analysis
Answer: C

Question: Main limitation of analysis of financial statements is

a) Affected by window dressing
b) Difficulty in forecasting
c) Do not reflect changes in price level
d) All of the Above
Answer: D

Question: Which of the following is not a limitation of analysis of financial statements?

a) Affected by personal bias
b) To know the financial strength
c) Lack of Qualitative Analysis
d) Based on accounting concepts
Answer: B

Question: For whom analysis of financial statements is not significant?

a) Political Adviser of Prime Minister
b) Investors
c) Management
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d) Financial Institutions
Answer: A

Question: Which technique of financial analysis shows a comparative study of items or components of
financial statements for two or more years?
a) Common-size Statement
b) Ratio Analysis
c) Comparative Statement
d) Trend Analysis
Answer: C

Question: Which one of the following is tool of financial analysis?

a) Comparative Statements
b) Common-size Statements
c) Cash Flow Statement
d) All of these
Answer: D

Question: In the Balance Sheet of a Common Size Statement:

a) Figure of share capital is assumed to be 100
b) Figure of current liabilities is assumed to be 100
c) Figure of fixed assets is assumed to be 100
d) Figure of total assets is assumed to be 100
Answer: D

Question: Total assets of a firm are Rs.20,00,000 and its fixed assets are Rs.8,00,000. What will be the
percentage of fixed assets on total assets?
a) 60%
b) 40%
c) 29%
d) 71%
Answer: B

Question: If total assets of a firm are Rs. 8,20,000 and its fixed assets are Rs.5,90,400, what will be the
percentage of current assets on total assets?
a) 42%
b) 58%
c) 28%
d) 72%
Answer: C

Question: Fixed Assets of a company increased from Rs.3,00,000 to Rs.4,00,000. What the percentage of
change?
a) 25%
b) 33.3%
c) 20%
d) 40%
Answer: B

Question: A Company’s current liabilities decreased from Rs.4,00,000 to Rs.3,00,000. What is the
percentage of change?
a) 25%
b) 33.3%
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c) 20%
d) 40%
Answer: A

Question: A company’s working capital is Rs. 10 lakh (Negative balance) in the year 2018. It became Rs.15
lakh (Positive balance) in the year 2019. What is the percentage of change?
a) 150%
b) 100%
c) 250%
d) 50%
Answer: C

Question: Comparative Statements show the changes in

a) Percentages.
b) Absolute amounts,
c) Both (a) and (b).
d) Ratios.
Answer: C

Question: From financial statement analysis, the creditors are interested to know
a) Liquidity.
b) Profit.
c) Efficiencies.
d) Share capital.
Answer: A

Question: Which of the following is the objective of comparative Statements?

a) To make the data simpler and understandable
b) To indicate the trend
c) To help in forecasting
d) All of the Above
Answer: D

Question: Which of the following is device of comparative statements?

a) Comparison expressed in terms of absolute data
b) Comparison expressed in terms of percentages
c) Comparison expressed in terms of ratios
d) All of the Above
Answer: D

Question: Comparative Balance Sheet:

a) Provides a summarized view of the operations of the firm
b) Presents the financial position of the firm
c) Presents the change in various items of balance sheet
d) None of the above
Answer: C

Question: Revenue from Operations Rs.4,00,000; Cost of Revenue from Operations 60% of Revenue from
Operations, indirect expenses 15% of Gross Profit; Income Tax 40%. Calculate net profit after tax
a) Rs.64,000
b) Rs. 54,400
c) Rs.81,600
d) Rs.96,000
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Answer: C

Question: In comparative statements change in different items is presented in the form of ______
a) Money Values
b) Percentages
c) Both Money Values and Percentages
d) None of the above
Answer: C

Question: Which of the following is not a form of presenting financial analysis :

a) Absolute figure Comparison
b) Ratio Method
c) Cumulative figures and averages
d) Annual Report
Answer: D

Question: Main objective of Common Size Balance Sheet is :

a) To establish relationship between revenue from operations and other items of statement of profit & loss
b) To present changes in assets and liabilities
c) To present changes in various items of income and expenses
d) All of the Above
Answer: B

Question: In the Statement of Profit & Loss of a Common Size Statement:

a) Figure of net revenue from operations is assumed to be equal to 100
b) Figure of gross profit is assumed to be equal to 100
c) Figure of net profit is assumed to be equal to 100
d) Figure of assets is assumed to be equal to 100
Answer: A

Question: ‘No profit no loss’ point is called :

a) Fund Flow Point
b) Cash Flow Point
c) Trend Analysis
d) Break Even Point
Answer: D

Question: Net profit is obtained by deducting ................ from Gross Profit.

a) Operating Expenses
b) Non-Operating Exp.
c) Operating and Non-Operating Exp.
d) None of the Above
Answer: C
Accounting Ratios MCQ Questions Class 12 Accountancy with Answers
Question: Accounting ratios are an important tool of
a) Financial statement analysis
b) Trial Balance
c) Financial statement analysis and Trial Balance
d) None of the options
Answer: Financial statement analysis

Question: When the concept of ratio is defined in respected to the items shown in the financial statements, it is termed as
a) Accounting ratio
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b) Financial ratio
c) Costing ratio
d) None of the options
Answer: Accounting ratio

Question: Which ratio is considered as safe margin of solvency?

a) Current ratio
b) Liquid ratio
c) Current ratio
d) None of the options
Answer: Current ratio

Question: Current ratio is stated as a crude ratio because

a) It measures only the quantity of current assets
b) It measures only the quality of current assets
c) It measures only the quantity of current assets and It measures only the quality of current assets
d) None of the options
Answer: It measures only the quantity of current assets

Question: Liquid ratio is also known as

a) Quick ratio and Acid test ratio
b) Quick ratio
c) Acid test ratio
d) None of the options
Answer: Quick ratio and Acid test ratio

Question: Debt-equity ratio is a sub-part of

a) Long-term solvency ratio
b) Debtors turnover ratio
c) Short-term solvency ratio
d) None of the options
Answer: Long-term solvency ratio

Question: Liquid assets is determined by

a) Current assets-stock-Prepaid expenses
b) Current assets +stock+ prepaid expenses
c) Current assets +Prepaid expenses
d) None of the options
Answer: Current assets-stock-Prepaid expenses

Question: Higher the ratio, the more favourable it is, doesn t stands true for
a) Operating ratio
b) Liquidity ratio
c) Net profit ratio
d) Stock turnover ratio
Answer: Operating ratio

Question: The most precise test of liquidity is

a) Absolute Liquid ratio
b) Quick ratio
c) Current ratio
d) None of the options
Answer: Absolute Liquid ratio
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Question: Collection of debtors

a) Decreases current ratio
b) Increases current ratio
c) Has no effect on current ratio
d) None of the options
Answer: Decreases current ratio

Question: In ABC analysis A class consist of items having

a) Accurate records
b) Good records
c) Minimal records
d) No records
Answer: Accurate records

Question: In the Balance sheet of a firm, the debt equity ratio is 2:1.The amount of long term sources is Rs.12 lac. What is the
amount of tangible net worth of the firm?
a) Rs.8 lakh
b) Rs.6 lakh
c) Rs.4 lakh
d) None of the options
Answer: Rs.8 lakh

Question: Accounting Ratios are mathematical expression of the relationship between

a) Two Accounting Figures
b) Two Shareholders
c) Two Debtors
d) None of the options
Answer: Two Accounting Figures

Question: Ratio Analysis is a tool to measure the

a) Financial Status
b) Profit status
c) Loss Status
d) None of the options
Answer: Financial Status

Question: When ratios are calculated on the basis of accounting information, they are called
a) Accounting ratios
b) Working Capital Ratio
c) Profit ratio
d) None of the options
Answer: Accounting ratios

Question: Objectives of Ratio Analysis

a) All of the options
b) To know the areas of an enterprise which need more attention
c) To know about the potential areas which can be improved on
d) Helpful in comparative analysis of the performance
Answer: All of the options

Question: Ratio Analysis helpful in

a) Comparative analysis of the performance and Budgeting and forecasting
b) Comparative analysis of the performance
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c) Budgeting and forecasting

d) None of the options
Answer: Comparative analysis of the performance and Budgeting and forecasting

Question: Ratio Analysis provide analysis of the

a) Liquidity
b) Solvency
c) Profitability
d) None of the options
Answer: Liquidity

Question: Ratio Analysis provide information useful for

a) Preparing the plans for future
b) Share holders
c) Debentures holder
d) None of the options
Answer: Preparing the plans for future

Question: Advantages of Ratio Analysis

a) All of the options
b) It is useful in analysis of key financial figures
c) It is useful in analysis of financial statements
d) Better understand financial numbers
Answer: All of the options

Question: Current ratio is stated as a crude ratio because

a) It measures only the quantity of current assets
b) It measures only the quality of current assets
c) It measures only the quantity of current assets and It measures only the quality of current assets
d) None of the options
Answer: It measures only the quantity of current assets

Question: Limitations of Ratio Analysis

a) All of the options
b) Accounting ratios ignore qualitative factors
c) Absence of universally accepted terminology
d) Ratios are affected by window-dressing
Answer: All of the options

Question: Ratio Analysis Price level changes

a) Ignored
b) Noticed
c) Ignored and Noticed
d) None of the options
Answer: Ignored

Question: Ratio Analysis ignored

a) Qualitative factors
b) Quantity Factors
c) Qualitative factors and Quantity Factors
d) None of the options
Answer: Qualitative factors
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Question: Ratio Analysis affected by

a) All of the options
b) Window-dressing
c) Personal bias
d) Ability of the analyst
Answer: All of the options

Question: An accounting ratio is a

a) Mathematical expression
b) Logical expression
c) Mathematical expression and Logical expression
d) None of the options
Answer: Mathematical expression

Question: Accounting ratios classified as under

a) All of the options
b) Liquidity Ratios
c) Current ratio
d) Solvency Ratios
Answer: All of the options

Question: Current ratio is also known as

a) Working capital ratio
b) Profit Sharing Ratio
c) Working capital ratio and Profit Sharing Ratio
d) None of the options
Answer: Working capital ratio

Question: Which Ratio establishes relationship between current assets and current liabilities
a) Current ratio
b) Liquidity Ratios
c) Solvency Ratios
d) None of the options
Answer: Current ratio

Question: Current Ratio is

a) Current Assets/Current Liabilities
b) Current Assets-Current Liabilities
c) Current Assets x Current Liabilities
d) None of the options
Answer: Current Assets/Current Liabilities

Question: Which Items Included in Current Assets for get the current ratio
a) All of the options
b) Current investments
c) Current Stock
d) Trade receivables (bills receivable and sundry debtors less provision for doubtful debts)
Answer: All of the options

Question: Which Items Included in Current Assets for get the current ratio
a) All of the options
b) Short-term borrowings
c) Cash balance
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d) Short-term provisions
Answer: All of the options

Question: Liquid ratio is also known as

a) Quick Ratio and Test Ratio
b) Quick Ratio
c) Test Ratio
d) None of the options
Answer: Quick Ratio and Test Ratio

Question: Liquid Ratio is

a) Liquid Assets or Quick Assets/Current Liabilities
b) Liquid Assets or Quick Assets+Current Liabilities
c) Liquid Assets or Quick Assets-Current Liabilities
d) None of the options
Answer: Liquid Assets or Quick Assets/Current Liabilities

Question: Items Included in Liquid/Quick Assets

a) All of the options
b) Items Included in Liquid/Quick Assets
c) Trade receivables
d) Cash and cash equivalents
Answer: All of the options

Question: Items excluded in liquid assets are

a) Inventories and prepaid expenses
b) Inventories
c) Prepaid expenses
d) None of the options
Answer: inventories and prepaid expenses

Question: Which ratios judge the long-term financial position of an enterprise

a) Solvency Ratios
b) Quick Ratio
c) Test Ratio
d) None of the options
Answer: Solvency Ratios

Question: Establishes the relationship between long-term debt (external equities) and the equity (internal equities)
a) Debt to Equity ratio
b) Quick Ratio
c) Test Ratio
d) None of the options
Answer: Debt to Equity ratio

Question: Debt to Equity ratio establishes the relationship between

a) long-term debt (external equities) and the equity (internal equities)
b) long-term debt (external equities) and the current Assets(internal equities)
c) long-term debt (external equities) and the equity (internal equities) and long-term debt (external equities) and the current
Assets(internal equities)
d) None of the options
Answer: long-term debt (external equities) and the equity (internal equities)
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Question: Debt to Equity Ratio is

a) Debt (Long-term external equities)+Equity (Shareholders funds)
b) Debt (Long-term external equities)-Equity (Shareholders funds)
c) Debt (Long-term external equities)+Equity (Shareholders funds) and Debt (Long-term external equities)-Equity (Shareholders
funds)
d) None of the options
Answer: Debt (Long-term external equities)+Equity (Shareholders funds)

Question: Cash Balance Rs.5,000; Trade Payables Rs.40,000; Inventory Rs.50,000; Trade Receivables
Rs.65,000 and Prepaid Expenses are Rs. 10,000. Liquid Ratio will be
a) 1.75 : 1
b) 2 : 1
c) 3.25 : 1
d) 3 : 1
Answer: A

Question: Current Assets Rs.4,00,000; Current Liabilities Rs.2,00,000 and Inventory is Rs.50,000. Liquid
Ratio will be :
a) 2 : 1
b) 2.25 : 1
c) 4 : 7
d) 1.75 : 1
Answer: D

Question: Which of the following transactions will improve the Current Ratio :
a) Cash Collected from Trade Receivables
b) Purchase of goods for cash
c) Payment to Trade Payables
d) Credit purchase of Goods
Answer: C

Question: Current Assets Rs.85,000; Inventory Rs.22,000; Prepaid Expenses Rs.3,000. Then liquid assets
will be :
a) Rs.63,000
b) 60,000
c) X 82,000
d) X 1,10,000
Answer: B

Question: A Company’s Quick Ratio is 1.5 : 1; Current Liabilities are Rs.2,00,000 and Inventory is X
1,80,000. Current Ratio will be :
a) 0.9:1
b) 1.9:1
c) 1.4:1
d) 2.4:1
Answer: D

Question: A Company’s Quick Ratio is 1.8 : 1; Liquid Assets are Rs.5,40,000 and Inventory is Rs. 1,50,000.
Its Current Ratio will be :
a) 2 : 1
b) 2.3 : 1
c) 1.8:1
d) 1.3:1
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Answer: B

Question: What will be the amount of Gross Profit, if revenue from operations are Rs.6,00,000 and Gross
Profit Ratio 20% of revenue from operations?
a) Rs. 1,50,000
b) Rs. 1,00,000
c) Rs. 1,20,000
d) Rs. 5,00,000
Answer: C

Question: Revenue from operations is Rs. 1,80,000; Rate of Gross Profit is 25% on cost. What will be the
Gross Profit?
a) Rs.45,000
b) Rs.36,000
c) Rs.40,000
d) Rs.60,000
Answer: B

Question: Operating ratio is :

a) Cost of revenue from operations + Selling Expenses/Net revenue from operations
b) Cost of production + Operating Expenses/Net revenue from operations
c) Cost of revenue from operations + Operating Expenses/Net Revenue from Operations
d) Cost of Production/Net revenue from operations.
Answer: C

Question: Two basic measures of liquidity are :

a) Inventory turnover and Current ratio
b) Current ratio and Quick ratio
c) Gross Profit ratio and Operating ratio
d) Current ratio and Average Collection period
Answer: B

Question: Current Ratio is :

a) Solvency Ratio
b) Liquidity Ratio
c) Activity Ratio
d) Profitability Ratio
Answer: B

Question: Current Ratio is :

a) Liquid Assets/Current Assets
b) Fixed Assets/Current Assets
c) Current Assets/Current Liabilities
d) Liquid Assets/Current Liabilities
Answer: C

Question: Debt Equity Ratio is :

a) Liquidity Ratio
b) Solvency Ratio
c) Activity Ratio
d) Operating Ratio
Answer: B
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Question: Debt Equity Ratio is :

a) Long Term Debts/Shareholder’s Funds
b) Short Term Debts/Equity Capital
c) Total Assets/Long term Debts
d) Shareholder’s Funds/Total Assets
Answer: A

Question: Proprietary Ratio is :

a) Long term Debts/Shareholder’s Funds
b) Total Assets/Shareholder’s Funds
c) Shareholder’s Funds/Total Assets
d) Shareholder’s Funds/Fixed Assets
Answer: C

Question: lf Current Ratio ofa firm is 2.5 :1 and its Current Liabilities are ,00,000. Its Working Capital will
be
a) 3,00,000.
b) 3,75,000.
c) 11,00,000.
d) 7,00,000.
Answer: A

Question: Non-current Assets of a firm are 26,00,000, Current Assets are 9,00,000 and Shareholders’ Funds
are 21,50, 000.TotaI debts of the firm will be
a) 43,50,000.
b) 13,50,000.
c) 21,50,000.
d) 38,50,000.
Answer: B

Question: Sincere Ltd. has a Proprietary Ratio of 25%. To maintain this ratio at 30%, management may ~
a) increase Equity.
b) Reduce Debt.
c) Either Increase Equity or Reduce Debt.
d) lncrease Current Assets.
Answer: C

Question: From the following, which ratio is not a part of Profitability Ratio:
a) Proprietary Ratio
b) Gross Profit Ratio
c) Operating Ratio
d) Net Profit Ratio
Answer: A

Question: From the following information, calculate Proprietary Ratio: Share Capital 5,00,000, Non-
current Assets 22,00,000, Reserves and Surplus 3,00,000, Current Assets 10,00,000.
a) 100%
b) 70%
c) 40%
d) 25%
Answer: D

Question: The two basic measures of operational efficiency of a company are

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a) Inventory Turnover Ratio and Working Capital Turnover Ratio

b) Liquid Ratio and Operating Ratio.
c) Liquid Ratio and Current Ratio.
d) Gross Profit Margin and Net Profit Margin.
Answer: A

Question: A Company’s Current Ratio is 3 : 1 and Liquid Ratio is 1.2 : 1. If its Current Liabilities are
Rs.2,00,000, what will be the value of Inventory?
a) Rs.2,40,000
b) Rs.3,60,000
c) Rs.4,00,000
d) Rs.40,000
Answer: B

Question: A Company’s Current Ratio is 2.5 : 1 and Liquid Ratio is 1.6 : 1. If its Current Assets are
Rs.7,50,000, what will be the value of Inventory?
a) Rs.4,50,000
b) Rs.4,80,000
c) Rs.2,70,000
d) Rs. 1,80,000
Answer: C

Question: Current Ratio of a Company is 2.5 : 1. If its working capital is Rs. 60,000, its current liabilities
will be :
a) Rs.40,000
b) Rs.60,000
c) Rs. 1,00,000
d) Rs.24,000
Answer: A

Question: Quick Assets do not include

a) Cash in hand
b) Prepaid Expenses
c) Marketable Securities
d) Trade Receivables
Answer: B

Question: Current Assets do not include :

a) Prepaid Expenses
b) Inventory
c) Goodwill
d) Bills Receivable
Answer: C

Question: Quick Ratio is also known as :

a) Liquid Ratio
b) Current Ratio
c) Working Capital Ratio
d) None of the Above
Answer: A

Question: Items Included in Long-term Debts

a) Long-term borrowings and Long-term provisions
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b) Long-term borrowings
c) Long-term provisions
d) None of the options
Answer: Long-term borrowings and Long-term provisions

Question: Equity or Shareholders Funds is equal to

a) Equity Share Capital + Preference Share Capital+ Reserves and Surplus
b) Equity Share Capital + Preference Share Capital
c) Equity Share Capital + Reserves and Surplus
d) None of the options
Answer: Equity Share Capital + Preference Share Capital+ Reserves and Surplus

Question: Working Capital is equal to

a) Current Assets Current Liabilities
b) Current Assets + Current Liabilities
c) Current Assets/Current Liabilities
d) None of the options
Answer: Current Assets Current Liabilities

Question: Which ratio establishes the relationship between proprietors funds and total assets.
a) Proprietary ratio
b) Solvency Ratios
c) Quick Ratio
d) Test Ratio
Answer: Proprietary ratio

Question: Proprietary ratio Proprietary ratio

a) Proprietors funds and total assets
b) Proprietors funds and total Liabilities
c) Proprietors funds and total assets and Proprietors funds and total Liabilities
d) None of the options
Answer: Proprietors funds and total assets

Question: Proprietary Ratio is equal to

a) Proprietors Funds or Shareholders Funds/Total Assets
b) Proprietors Funds or Shareholders Funds + Total Assets
c) Proprietors Funds or Shareholders Funds - Total Assets
d) None of the options
Answer: Proprietors Funds or Shareholders Funds/Total Assets

Question: Proprietors Funds or Shareholders Funds is equal to

a) Liabilities Approach Share Capital + Reserves and Surplus
b) Liabilities Approach Share Capital - Reserves and Surplus
c) Liabilities Approach Share Capital / Reserves and Surplus
d) None of the options
Answer: Liabilities Approach Share Capital + Reserves and Surplus

Question: Non-current Assets is equal to

a) Tangible assets + Intangible assets + Non-current trade
b) Tangible assets - Intangible assets - Non-current trade
c) Tangible assets + Intangible assets + Non-current trade and Tangible assets - Intangible assets - Non-current trade
d) None of the options
Answer: Tangible assets + Intangible assets + Non-current trade
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Question: The quick ratio of a company is 2 : 1. State giving reasons, (for any four) which of the following would improve,
reduce or not change the ratio
a) Purchase of machinery for cash
b) Purchase of goods on credit (iii) Sale of furniture at cost
c) Sale of goods at a profit
d) None of the options
Answer: Purchase of machinery for cash

Question: The debt equity ratio of a company is 1:1 state giving reasons, (any four) which of the following would improve,
reduce or not change the ratio
a) Purchase, of machinery for cash
b) Sale of goods at a profit
c) Redemption of debentures at a premium
d) None of the options
Answer: Purchase, of machinery for cash

Question: Analyses of data provided in the financial statements a is termed as

a) Financial analysis
b) Profit analysis
c) Loss Analysis
d) None of the options
Answer: Financial analysis

Question: Long term creditors are concerned about the ability of a firm to discharge its obligations to pay
a) Interest and repay the principal amount of term
b) Interest
c) Repay the principal amount
d) None of the options
Answer: Interest and repay the principal amount of term

Question: Ratios help in comparisons of a firm s results over a number of

a) Accounting periods as well as with other business enterprises
b) Share as well as with other business enterprises
c) Debentures as well as with other business enterprises
d) None of the options
Answer: Accounting periods as well as with other business enterprises

Question: The following groups of ratios primarily measure risk

a) Liquidity, activity and debt
b) liquidity, activity and profitability
c) liquidity, activity and common stock
d) activity, debt and profitability
Answer: Liquidity, activity and debt

Question: The ___________ ratios are primarily measures of return.

a) Activity
b) Liquidity
c) Profitability
d) Debt
Answer: Activity

Question: The _____ of a business firm is measured by its ability to satisfy

a) Liquidity
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b) Activity
c) Liquidity
d) Debt
Answer: Liquidity

Question: _______ratios are a measure of the speed with which various accounts are converted into sales or cash.
a) Activity
b) Liquidity
c) Activity
d) Debt
Answer: Activity

Question: The two basic measure of liquidity are

a) Current ratio and liquid ratio
b) Inventory turnover and current ratio
c) Gross profit margin and operating ratio
d) Current ratio and average collection period
Answer: Current ratio and liquid ratio

Question: The______is a measure of liquidity which excludes_______, generally the least liquid asset.
a) Liquid ratio, inventory
b) Current ratio, accounts debtors
c) Current ratio, inventory
d) None of the options
Answer: Liquid ratio, inventory

Question: The_______is useful in evaluating credit and collection policies.

a) Average collection period
b) Average payment period
c) Current asset turnover
d) None of the options
Answer: Average collection period

Question: The_____measures the activity of a firms inventory

a) Inventory turnover
b) Average collection period
c) Current ratio
d) None of the options
Answer: Inventory turnover

Question: The_____ratio may indicate the firm is experiencing stock outs and lost sales.
a) Quick
b) Inventory turnover
c) Average collection period
d) None of the options
Answer: Quick

Question: ABC Co extends credit terms of 45 days to its customer, its credit collection would be considered poor if its average
collection period was
a) 47 days
b) 57 days
c) 36 days
d) 30 days
Answer: 47 days
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Question: ______are especially interested in the average payment period, since it provides them with a sense of the bill-
paying patterns of the firm.
a) Lenders and suppliers
b) Customers
c) Stockholders
d) Borrowers and buyers
Answer: Lenders and suppliers

Question: The ____ ratios provide the information critical to the long-run operation of the firm
a) Solvency
b) Profitability
c) Activity
d) Liquidity
Answer: Solvency

Question: Accounting ratios are classified in which categories

a) Traditional Classification and Functional Classification
b) Traditional Classification
c) Functional Classification
d) None of the options
Answer: Traditional Classification and Functional Classification

Question: Which ratios are those accounting ratios which are based on the Financial Statement like Trading and Profit and Loss
Account and Balance Sheet
a) Traditional ratios
b) Functional ratios
c) Traditional ratios and Functional ratios
d) None of the options
Answer: Traditional ratios

Question: Traditional ratios are those accounting ratios which are based on the
a) Financial Statement
b) Trial Balance
c) Financial Statement and Trial Balance
d) None of the options
Answer: Financial Statement

Question: Traditional Classification is further divided into the categories

a) All of the options
b) Income Statement Ratios
c) Balance Sheet Ratios
d) Composite Ratios
Answer: All of the options

Question: Income Statement Ratios

a) Gross Profit Ratio
b) Trial Balance Ratio
c) Gross Profit Ratio and Trial Balance Ratio
d) None of the options
Answer: Gross Profit Ratio

Question: Balance Sheet Ratios are

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a) All of the options

b) Current Ratio,
c) Debt Equity Ratio
d) None of the options
Answer: All of the options

Question: Composite Ratio is

a) Debtors Turnover Ratio
b) Solvency
c) Profitability
d) Activity
Answer: Debtors Turnover Ratio

Question: The functional ratios are further divided into the which categories
a) All of the options
b) Liquidity Ratio
c) Solvency Ratio
d) Activity Ratio
Answer: All of the options

Question: Liquidity ratios are calculated to determine

a) Short term solvency
b) Long term solvency
c) Short term solvency and Long term solvency
d) None of the options
Answer: Short term solvency

Question: Solvency ratios are calculated to determine

a) Long term solvency
b) Short term solvency
c) Long term solvency and Short term solvency
d) None of the options
Answer: Long term solvency

Question: Activity Ratios is relate to

a) Sales or cost of goods sold
b) Profit
c) Loss
d) None of the options
Answer: Sales or cost of goods sold

Question: Debtor turnover ratio is also knows as

a) Accounts receivable turnover ratio
b) Liquidity Ratio
c) Solvency Ratio
d) Activity Ratio
Answer: Accounts receivable turnover ratio

Question: Debtor turnover ratio indicates the velocity of

a) Debt collection of a firm
b) Debt Payment of firm
c) Debt collection of a firm and Debt Payment of firm
d) None of the options
Answer: Debt collection of a firm
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Question: Debtors turnover ratio is equal to

a) Net credit sales/Average trade debtors
b) Net credit sales + Average trade debtors
c) Net credit sales - Average trade debtors
d) None of the options
Answer: Net credit sales/Average trade debtors

Question: Inventory ratio is equal to

a) Cost of good sold/Average inventory of cost
b) Cost of good sold x Average inventory of cost
c) Cost of good sold + Average inventory of cost
d) None of the options
Answer: Cost of good sold/Average inventory of cost

Question: A company’s Current assets are Rs. 3,00,000 and its current liabilities are Rs.2,00,000.
Subsequently, it paid Rs.50,000 to its trade payables. Current ratio will be ................
a) 2 : 1
b) 1.67:1
c) 1.25:1
d) 1.5:1
Answer: B

Question: Current Assets of a Company were Rs. 1,00,000 and its current ratio was 2:1. After this the
company paid Rs.25,000 to a Trade Payable. The Current Ratio after the payment will be :
a) 5 : 1
b) 2 : 1
c) 3 : 1
d) 4 : 1
Answer: C

Question: Current liabilities of a company were Rs.2,00,000 and its current ratio was 2.5 : 1. After this the
company paid Rs. 1,00,000 to a trade payable. The current ratio after the payment will be :
a) 2 : 1
b) 4 : 1
c) 5 : 1
d) None of the above
Answer: A

Question: Fixed Assets Rs.5,00,000; Current Assets Rs.3,00,000; Equity Share Capital Rs.4,00,000; Reserve
Rs.2,00,000; Long-term Debts Rs.40,000. Proprietary Ratio will be :
a) 75%
b) 80%
c) 125%
d) 133%
Answer: A

Question: The _______ ratios provide the information critical to the long run operation of the firm.
a) Liquidity
b) Activity
c) Solvency
d) Profitability
Answer: C
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Question: If Debt equity ratio exceeds _______ , it indicates risky financial position.
a) 1 : 1
b) 2 : 1
c) 1 : 2
d) 3 : 1
Answer: B

Question: Opening Inventory 11,00,000; Closing Inventory Rs. 1,50,000; Purchases Rs.6,00,000; Carriage
Rs.25,000; Wages Rs.2,00,000. Inventory Turnover Ratio will be :
a) 6.6 Times
b) 7.4 Times
c) 7 Times
d) 6.2 Times
Answer: D

Question: Revenue from Operations Rs.8,00,000; Gross Profit Ratio 25%; Opening Inventory Rs. 1,00,000;
Closing Inventory Rs.60,000. Inventory Turnover Ratio will be :
a) 10 Times
b) 7.5 Times
c) 8 Times
d) 12.5 Times
Answer: B

Question: On the basis of following data, the cost of revenue from operations by a company will be :
Opening Inventory Rs.70,000; Closing Inventory Rs.80,000; Inventory Turnover Ratio 6 Times.
a) Rs.1,50,000
b) Rs.90,000
c) Rs.4,50,000
d) Rs.4,80,000
Answer: C

Question: Total revenue from operations Rs.27,00,000; Credit revenue from operations Rs. 18,00,000;
Opening Debtors Rs.3,20,000; Closing Debtors Rs.4,00,000; Provision for Doubtful Debts Rs. 60,000. Trade
Receivables Turnover Ratio will be :
a) 7.5 times
b) 9 times
c) 6 times
d) 5 times
Answer: D

Question: Credit revenue from operations Rs.24,00,000; Trade Receivables Turnover Ratio 6 times;
Opening Debtors Rs.3,20,000. Closing Debtors will be :
a) Rs.4,00,000
b) Rs.4,80,000
c) Rs. 80,000
d) Rs. 7,20,000
Answer: B

Question: A firm makes credit revenue from operations of Rs.2,40,000 during the year. If the trade
receivables turnover ratio is 8 times, calculate closing debtors, if the closing debtors are more by Rs.6,000
than the opening debtors :
a) Rs.33,000
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b) Rs.36,000
c) Rs.24,000
d) Rs.27,000
Answer: A

Question: Opening Inventory Rs. 1,00,000; Closing Inventory Rs. 1,20,000; Purchases Rs.20,00,000; Wages
Rs.2,40,000; Carriage Inwards Rs. 1,50,000; Selling Exp. Rs.60,000; Revenue from Operations Rs.30,00,000.
Gross Profit ratio will be :
a) 29%
b) 26%
c) 19%
d) 21%
Answer: D

Question: Cash Revenue from Operations Rs.4,00,000; Credit Revenue from Operations Rs.21,00,000;
Revenue from Operations Return Rs. 1,00,000; Cost of revenue from operations Rs. 19,20,000. G.P. ratio
will be
a) 4%
b) 23.2%
c) 80%
d) 20%
Answer: D

Question: A firm’s credit revenue from operations is Rs.3,60,000, cash revenue from operations is
Rs.70,000. Cost of revenue from operations is Rs.3,61,200. Its gross profit ratio will be :
a) 11%
b) 15%
c) 18%
d) 16%
Answer: D

Question: Satisfactory ratio between Long-term Debts and Shareholder’s Funds is :

a) 1 : 1
b) 3 : 1
c) 1 : 2
d) 2 : 1
Answer: D

Question: On the basis of following data, the Debt-Equity Ratio of a Company will be: Equity Share Capital
Rs.5,00,000; General Reserve Rs.3,20,000; Preliminary Expenses Rs.20,000; Debentures Rs.3,20,000;
Current Liabilities Rs.80,000.
a) 1 : 2
b) .52 : 1
c) .4 : 1
d) .37 : 1
Answer: C

Question: On the basis of following information received from a firm, its Debt-Equity Ratio will be :
Equity Share Capital Rs.5,80,000; Reserve Fund Rs.4,30,000; Preliminary Expenses Rs.40,000; Long term
Debts Rs. 1,28,900; Debentures Rs.2,30,000.
a) .42 : 1
b) .53 : 1
c) .63 : 1
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d) .37 : 1
Answer: D

Question: Liquid Assets do not include :

a) Bills Receivable
b) Debtors
c) Inventory
d) Bank Balance
Answer: C

Question: Ideal Current Ratio is :

a) 1 : 1
b) 1 : 2
c) 1 : 3
d) 2 : 1
Answer: D

Question: Working Capital is the :

a) Cash and Bank Balance
b) Capital borrowed from the Banks
c) Difference between Current Assets and Current Liabilities
d) Difference between Current Assets and Fixed Assets
Answer: C

Question: Young India Ltd. has a Operating Profit Ratio of 20%. To maintain this ratio at 25%,
management may
a) Increase selling price of Stock- in-trade.
b) Reduce Cost of Revenue from Operations.
c) Increase selling price of Stock-in-Trade and to reduce Cost of Revenue from Operations.
d) All of the above.
Answer: D

Question: A transaction involving a decrease in Debt-Equity Ratio and increase in Current Ratio is
a) issue of Debentures against the purchase of fixed assets.
b) Issue of Debentures for cash.
c) Redemption of Preference shares for cash.
d) Issue of Equity shares for cash.
Answer: D

Question: Current Ratio is 2 : 1. On the sale of fixed asset (Book value 20,000) for 18,000, state whether the
Current Ratio will
a) Improve.
b) Decline.
c) Not change.
d) Can't say.
Answer: A

Question: if Revenue from Operations is l,60,000 and Gross Profit is 40,000, Gross Profit Ratio will be
a) 30%.
b) 25%.
c) 40%.
d) 50%.
Answer: B
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Question: Name the difference between Capital Employed and Non-current Liabilities:
a) Shareholders’ Funds
b) Capital Employed
c) Total Debts
d) Total Assets
Answer: A

Accounting Ratios MCQ Questions Class 12 Accountancy with Answers

Question: Proprietary or equity ratio is equal to
a) Shareholders funds/ total assets
b) Shareholders funds+ total assets
c) Shareholders funds- total assets
d) None of the options
Answer: Shareholders funds/ total assets

Question: Fixed assets to proprietors fund ratio establish a relationship between

a) Fixed assets and shareholders funds
b) Working Capita and shareholders funds
c) Return on Working Capital
d) None of the options
Answer: Fixed assets and shareholders funds

Question: Fixed Assets to Proprietors Fund Ratio is equal to

a) Fixed Assets/Proprietors fund
b) Fixed Assets+Proprietors fund
c) Fixed Assets-Proprietors fund
d) None of the options
Answer: Fixed Assets/Proprietors fund

Question: Interest Coverage Ratio is equal to

a) Net Profit before Interest and tax/Interest on long term loan
b) Net Profit before Interest and tax+Interest on long term loan
c) Net Profit before Interest and tax-Interest on long term loan
d) None of the options
Answer: Net Profit before Interest and tax/Interest on long term loan

Question: Interest Coverage Ratio is deal only in

a) Return on loan as interest
b) Return on Working Capital
c) Return on loan as interest and Return on Working Capital
d) None of the options
Answer: Return on loan as interest

Question: Management are interested in

a) Activity Ratios and Profitability Ratios
b) Activity Ratios
c) Profitability Ratios
d) None of the options
Answer: Activity Ratios and Profitability Ratios

Question: Equity Investors are interested in

a) All of the options
b) knowing Earnings per Share
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c) Return on Investment
d) Return on Equity
Answer: All of the options

Question: Long term creditors are those creditors who provide funds for
a) More than one year
b) Only one year
c) More than one year and Only one year
d) None of the options
Answer: More than one year

Question: Long term creditors are interested in

a) All of the options
b) Debt-Equity Ratio
c) Proprietary Ratio
d) Proprietary Ratio
Answer: All of the options

Question: Short-term creditors are interested in

a) Current Ratio and Quick Ratios
b) Current Ratio
c) Quick Ratios
d) None of the options
Answer: Current Ratio and Quick Ratios

Question: Inventory ratio is a relationship between

a) Cost of good sold and cost of average inventory
b) Cost of good Purchased and cost of average inventory
c) Cost of good sold and cost of average inventory and Cost of good Purchased and cost of average inventory
d) None of the options
Answer: Cost of good sold and cost of average inventory

Question: Opening Stock + Purchase + Direct Expense - Closing stock is equal to

a) Cost of goods sold
b) Cost of goods purchased
c) Cost of goods sold and Cost of goods purchased
d) None of the options
Answer: Cost of goods sold

Question: Average Inventory is equal to

a) Opening stock + Closing stock/2
b) Opening stock - Closing stock/2
c) Opening stock + Closing stock/2 and Opening stock - Closing stock/2
d) None of the options
Answer: Opening stock + Closing stock/2

Question: Working capital turnover ratio indicates the velocity of the utilization of
a) Net working capital
b) Accounts receivable turnover ratio
c) Net working capital and Accounts receivable turnover ratio
d) None of the options
Answer: Net working capital

Question: Working capital turnover ratio is equal to

a) Cost of Sales/Working Capital
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b) Cost of Sales + Working Capital

c) Cost of Sales - Working Capital
d) None of the options
Answer: Cost of Sales/Working Capital

Question: Inventory turnover ratio be more important when analysing

a) Grocery store
b) Insurance company
c) Grocery store and Insurance company
d) None of the options
Answer: Grocery store

Question: For measuring the long term solvency of any business we calculate
a) Debt Equity Ratio
b) Working Capital Ratio
c) Debt Equity Ratio and Working Capital Ratio
d) None of the options
Answer: Debt Equity Ratio

Question: Debt Equity Ratio is also known as

a) External internal equity ratio
b) Working Capital Ratio
c) External internal equity ratio and Working Capital Ratio
d) None of the options
Answer: External internal equity ratio

Question: Debt equity ratio indicates the relationship between

a) External equities and the internal equities
b) Cost of goods sold and Working capital
c) External equities and the internal equities and Cost of goods sold and Working capital
d) None of the options
Answer: External equities and the internal equities

Question: Equity ratio relates to

a) Shareholders funds to total assets
b) Shareholders funds to total Liabilities
c) Shareholders funds to total assets and Shareholders funds to total Liabilities
d) None of the options
Answer: Shareholders funds to total assets

Question: Sales ratio may otherwise be called

a) Turnover
b) Working Capital
c) Turnover and Working Capital
d) None of the options
Answer: Turnover

Question: Debtors Rs. 5000, B/R Rs. 1000, Credit Sales for the year Rs. 24000, Cash Sales Rs. 6000, Hence average Collection
Period in months
a) 3 Months
b) 4 Months
c) 7.5 Months
d) None of the options
Answer: 3 Months
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Question: No. of Equity Shares 5000, Dividend per equity share Rs. 4, Earning per Equity Share Rs. 10, Hence Pay-out ratio is
a) 0.4
b) 0.2
c) 0.3
d) None of the options
Answer: 0.4

Question: Current Ratio is 3:4, Current Liabilities Rs. 24000, the amount of current assets will be
a) Rs 18000
b) Rs 15000
c) Rs 16000
d) Rs 20000
Answer: Rs 18000

Question: Opening Stock Rs. 80000, Closing Stock Rs. 100000, Cost of Goods Sold Rs. 3,60000, Hence stock turnover is
a) 4 Times
b) 5 Times
c) 2 Times
d) None of the options
Answer: 4 Times

Question: Average payment period 2 months hence creditors turnover will be

a) 6 Times
b) 5 Times
c) 2 Times
d) None of the options
Answer: 6 Times

Question: If the operating ratio is 75%, the Net Profit ratio will be
a) 0.25
b) 0.15
c) 0.2
d) 0.3
Answer: 0.25

Question: The most rigorous test of liquidity is

a) Absolute Liquid ratio
b) Quick Ratio
c) Current Ratio
d) None of the options
Answer: Absolute Liquid ratio

Question: Acid test ratio is equal to quick assets divided by

a) Current Liabilities
b) Long-Term Liabilities
c) Creditors Only
d) None of the options
Answer: Current Liabilities

Question: Return on Investment is ratio between

a) Net Profit and capital employed
b) Investment and profit
c) Net Profit and capital employed and Investment and profit
d) None of the options
Answer: Net Profit and capital employed
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Question: Capital Employed is equal to

a) Fixed Capital+Working Capital
b) Total Assets-Total Liabilities
c) Total Assets
d) Total Liabilities
Answer: Fixed Capital+Working Capital

Question: Ratios which are usually calculated in times are

a) Activity Ratio
b) Profitability Ratio
c) Financial Position Ratio
d) None of the options
Answer: Activity Ratio

Question: Which ratios are commonly expressed in percentage

a) Profitability Ratio
b) Activity Ratio
c) Financial Position Ratio
d) None of the options
Answer: Profitability Ratio

Question: Activity ratios help management in

a) Evaluating the performance
b) Managing the resource
c) Planning the finance
d) None of the options
Answer: Evaluating the performance

Question: A low current ratio may signify

a) Shortage of working capital
b) Working capital adequacy
c) Optimum working capital
d) None of the options
Answer: Shortage of working capital

Question: Collection from book debts

a) Have no effect on current ratio
b) Decrease the current ratio
c) Increase the current ratio
d) None of the options
Answer: Have no effect on current ratio

Question: A low proprietary ratio indicates

a) Over trading
b) Under trading
c) Over trading and Under trading
d) None of the options
Answer: Over trading

Question: A low Stock turnover indicates

a) Over investment in stock
b) Monopoly situation
c) Solvency Position
d) None of the options
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Answer: Over investment in stock

Question: Current ratio is sometimes referred as to

a) Working Capital Ratio
b) Solvency Ratio
c) Financial Ratio
d) None of the options
Answer: Working Capital Ratio

Question: Price Earning ratio is useful to

a) Investors in shares
b) Short term Creditors
c) Debentures holders
d) None of the options
Answer: Investors in shares

Question: Liquid Assets include :

a) Debtors
b) Bills Receivable
c) Bank Balance
d) All of the Above
Answers: D

Question: Liquid Ratio is equal to liquid assets divided by :

a) Non-Current Liabilities
b) Current Liabilities
c) Total Liabilities
d) Contingent Liabilities
Answers: B

Question: Patents and Copyrights fall under the category of:

a) Current Assets
b) Liquid Assets
c) Intangible Assets
d) None of Above
Answers: C

Question: On the basis of following data, the liquid ratio of a company will be : Current Ratio 5 : 3; Current Liabilities Rs.75,000
and Inventory Rs.25,000
a) 1 : 1
b) 2 : 1.8
c) 3 : 2
d) 4 : 3
Answers: D

Question: Current ratio of a firm is 9 : 4. Its current liabilities are Rs. 1,20,000. Inventory is Rs.30,000. Its liquid ratio will be :
a) 1 : 1
b) 1.5 : 1
c) 2 : 1
d) 1.6:1
Answers: C

Question: A firm’s current ratio is 3.5 : 2. Its current liabilities are Rs.80,000. Its working capital will be :
a) Rs. 1,20,000
b) Rs. 1,60,000
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c) Rs.60,000
d) Rs.2,80,000
Answers: C

Question: Average Inventory Rs.60,000; Inventory Turnover Ratio 8; Gross Profit 20% on revenue from operations; what will be
Gross Profit?
a) Rs.1,20,000
b) Rs.96,000
c) Rs.80,000
d) Rs.15,000
Answers: A

Question: Opening Inventory Rs.75,000; Closing Inventory Rs.1,05,000; Inventory Turnover Ratio 6; Gross Profit 20% on cost;
what will be Gross Profit?
a) Rs.1,35,000
b) Rs.1,08,000
c) Rs.90,000
d) Rs.18,000
Answers: B

Question: Opening Inventory Rs.40,000; Purchase Rs.4,00,000; Purchase Return Rs.12,000, what will be Inventory turnover ratio
if Closing Inventory is less than Opening Inventory by Rs.8,000?
a) 9 Times
b) 10.78 Times
c) 11 Times
d) 8.82 Times
Answers: C

Question: Working Capital is 7,20,000; Trade Payables 40,000; Other Current Liabilities 2,00,000; Calculate Current Ratio.
a) 3 : 1
b) 4 : 1
c) 5 :1
d) 7:1
Answers: B

Question: Current Assets are 4,00,000; Inventories 2,00,000; Working Capital 2,40,000, calculate Current Ratio.
a) 2.5:1
b) 1:1
c) 2:1
d) 1:2
Answers: A

Question: Which ratio is not a part of Solvency Ratio?

a) Current Ratio
b) Debt to Equity Ratio
c) Total Assets to Debt Ratio
d) Proprietary Ratio
Answers: A

Question: A transaction involving an increase in Current Ratio but no change in Working Capital:
a) Purchase of goods on credit
b) Cash payment of Non-current Liability
c) Payment to a Trade Creditor
d) Sale of Fixed Assets for Cash
Answers: C
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Question: In debt equity ratio, debt refers to :

a) Short Term Debts
b) Long Term Debts
c) Total Debts
d) Debentures and Current Liabilities
Answers: B

Question: Proprietary Ratio indicates the relationship between Proprietor’s Funds and
a) Long-Term Debts
b) Short Term & Long Term Debts
c) Total Assets
d) Debentures
Answers: C

Question: The formula for calculating the Debt Equity Ratio is :

a) Short Term Debts/Shareholder’s Funds
b) Shareholder’s Funds/Fixed Assets
c) Short Term + Long Term Debts/Shareholder’s Funds
d) None of the Above
Answers: D

Question: A Company’s Current Assets are Rs.6,00,000 and working capital is Rs.2,00,000. Its Current Ratio will be :
a) 3 : 1
b) 1.5 : 1
c) 2 : 1
d) 4 : 1
Answers: B

Question: A Company’s Current Ratio is 2.4 : 1 and Working Capital is Rs.5,60,000. If its Liquid Ratio is 1.5, what will be the value
of Inventory?
a) Rs.6,00,000
b) Rs.2,00,000
c) Rs.3,60,000
d) Rs.6,40,000
Answers: C

Question: A Company’s Current Ratio is 2.5 : 1 and its Working Capital is Rs.60,000. If its Inventory is Rs. 52,000, what will be the
liquid Ratio?
a) 2.3 : 1
b) 2.8 : 1
c) 1.3 : 1
d) 1.2 : 1
Answers: D

Question: A Company’s liquid assets are Rs. 10,00,000 and its current liabilities are Rs.8,00,000. Subsequently, it purchased
goods for Rs. 1,00,000 on credit. Quick ratio will be ________
a) 1.11:1
b) 1.22:1
c) 1.38 : 1
d) 1.25 : 1
Answers: A

Question: A Company’s liquid assets are Rs.5,00,000 and its current liabilities are Rs.3,00,000. Thereafter, it paid 1,00,000 to its
trade payables. Quick ratio will be:
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a) 1.33 : 1
b) 2.5 : 1
c) 1.67:1
d) 2 : 1
Answers: D

Question: The ________ is a measure of liquidity which excludes _______ generally the least liquid asset.
a) Current ratio, Accounts receivable
b) Liquid ratio, Accounts receivable
c) Current ratio, inventory
d) Liquid ratio, inventory
Answers: D

Question: Current assets include only those assets which are expected to be realised within
a) 3 months
b) 6 months
c) 1 year
d) 2 years
Answers: C

Question: The __________ of a business firm is measured by its ability to satisfy its short term obligations as they become due.
a) Activity
b) Liquidity
c) Debt
d) Profitability
Answers: B

Question: Ideal Quick Ratio is :

a) 1 :1
b) 1 : 2
c) 1 : 3
d) 2 : 1
Answers: A

Question: Liquid Assets :

a) Current Assets - Prepaid Exp.
b) Current Assets - Inventory + Prepaid Exp.
c) Current Assets - Inventory - Prepaid Exp.
d) Current Assets + Inventory - Prepaid Exp.
Answers: C

Question: Buying goods for cash

a) Have no effect on current ratio
b) Decrease the current ratio
c) Increase the current ratio
d) None of the options
Answer: Have no effect on current ratio

Question: Ratio of Net Sales to Net Working Capital is

a) Working Capital Turnover Ratio
b) Profitability Ratio
c) Liquidity Ratio
d) None of the options
Answer: Working Capital Turnover Ratio
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Question: Ratio of Net Profit before interest and tax to sales is

a) Operating Profit Ratio
b) Capital Gearing
c) Solvency Ratio
d) None of the options
Answer: Operating Profit Ratio

Question: Debt Equity Ratio is

a) Solvency Ratio
b) Liquidity Ratio
c) Profitability Ratio
d) None of the options
Answer: Solvency Ratio

Question: Stock turnover ratio is calculated by dividing cost of goods sold by

a) Average Stock
b) Closing Stock
c) Opening Stock
d) None of the options
Answer: Average Stock

Question: Quick ratio does not include

a) Stock
b) Bank Balance
c) Cash
d) Debtors
Answer: Stock

Question: Liquid assets means current assets less

a) Stock and prepaid expenses
b) Stock
c) prepaid expenses
d) None of the options
Answer: Stock and prepaid expenses

Question: Sales ratio may otherwise be called

a) Turnover
b) Working Capital
c) Turnover and Working Capital
d) None of the options
Answer: Turnover

Question: An equal increase in both current assets and liabilities would________Current ratio
a) Increase
b) Decrease
c) No effect
d) None of the options
Answer: Increase

Question: The excess of Current ratio is also treated as a sign of managerial

a) Inefficiency
b) Efficiency
c) Inefficiency and Efficiency
d) None of the options
Answer: Inefficiency
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Question: Issue of Debentures would________Debt Equity Ratio

a) Increase
b) Decrease
c) No effect
d) None of the options
Answer: Increase

Question: Conversion of debentures into preference shares shall_________The debt ratio

a) Decrease
b) Increase
c) No effect
d) None of the options
Answer: Decrease

Question: The main purpose of activities ratios is________

a) To know how effectively the resources have been used
b) To know the solvency
c) To meet short term liabilities
d) None of the options
Answer: To know how effectively the resources have been used

Question: Followings are the solvency ratio except

a) Quick Ratio
b) Total Assets to Debt Ratio
c) Debt equity ratio
d) Proprietary Ratio
Answer: Quick Ratio

Question: Which of the following is a liquidity ratio?

a) Quick ratio
b) Inventory turnover
c) Working Capital Turnover Ratio
d) None of the options
Answer: Quick ratio

Question: Which Ratio shows the relationship between current assets with current liabilities
a) Current ratio
b) Debt ratio
c) Quick ratio
d) Gross profit ratio
Answer: Current ratio

Question: Low Current Ratio indicates

a) Business cannot meet short term liability
b) Business can meet long term liability
c) Business cannot meet long term liability
d) Business can meet short term liability
Answer: Business cannot meet short term liability

Question: Cost of Revenue from operations + Operating Expenses/ Revenue from operations x100
a) Operating Ratio
b) Proprietary Ratio
c) Gross Profit Ratio
d) Working Capital Turnover Ratio
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Answer: Operating Ratio

Question: Inventory Turnover Ratio is calculated under__________

a) Activity Ratio
b) Solvency Ratio
c) Profitability Ratio
d) None of the options
Answer: Activity Ratio

Question: Ratio which convey an enterprise s ability to meet long term obligations
a) Solvency ratio
b) Activity ratio
c) Liquidity ratio
d) Profitability ratio
Answer: Solvency ratio

Question: Which Ratio establishes the relationship between net profit and revenue from operations.
a) Net profit ratio
b) Gross Profit Ratio
c) Working Capital Turnover Ratio
d) None of the options
Answer: Net profit ratio

Question: Liquidity ratio is the relationship between ____ assets and ____liabilities
a) Quick and current
b) Quick and non-current
c) Quick and current and Quick and non-current
d) None of the options
Answer: Quick and current

Question: Ratios which are used to measure the profitability are called_________
a) Profitability ratio
b) Solvency ratio
c) Activity ratio
d) Liquidity ratio
Answer: Profitability ratio

Question: Following are Profitability ratios except

a) Working capital turnover ratio
b) Gross profit ratio
c) Net profit ratio
d) Operating profit ratio
Answer: Working capital turnover ratio

Question: Which ratio do you calculate by using the creditors?

a) Trade payable Turnover Ratio
b) Inventory Turnover Ratio
c) Trade Receivable Turnover Ratio
d) None of the options
Answer: Trade payable Turnover Ratio

Question: Under what heading Interest Coverage Ratio is calculated?

a) Solvency Ratio
b) Liquidity Ratio
c) Activity Ratio
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d) Profitability Ratio
Answer: Solvency Ratio

Question: If Trade Payable turnover ratio shows a high turnover ratio it means
a) Availability of less credit or fast payment
b) Profitability of the firm
c) Net Profit
d) Shows after how much times funds are collected
Answer: Availability of less credit or fast payment

Question: Debt Equity Ratio is expressed in ______

a) Fraction
b) Percentage
c) Time
d) None of the options
Answer: Fraction

Question: Objective of Interest coverage ratio

a) Ascertain the interest paying capacity of a company
b) Highlight the general financial position of enterprise
c) Measure of financial leverage
d) Measures the safety margin available to creditors
Answer: Ascertain the interest paying capacity of a company

Question: A high Debt to Equity Ratio means

a) Firm is depend upon borrowings/debts
b) Firm has no debts at all
c) Firm is depend upon Equity only
d) Firm is free from debts
Answer: Firm is depend upon borrowings/debts

Question: Liquid Ratio is also known as :

a) Acid Test Ratio
b) Gross Profit Ratio
c) Current Ratio
d) Debt Equity Ratio
Answer: Acid Test Ratio

Question: Quick Assets do not include:

a) Inventories
b) B/R
c) Cash
d) Bank
Answer: Inventories

Question: Low Working Capital Turnover Ratio indicates:

a) Under-utilization of working capital
b) Over-utilization of working capital
c) No use of working capital
d) There is no working capital
Answer: Under-utilization of working capital

Question: From the following, identify the item which will help in increasing the Debt to Equity Ratio?
a) Issue of debentures for cash
b) Issue of Equity Shares
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c) Purchase of Intangible Assets

d) Redemption of debentures in cash
Answer: Issue of debentures for cash

Question: Revenue from operations is not used in the calculation of __________

a) Trade Payable Turnover Ratio
b) Operating Ratio
c) Net Profit Ratio
d) Gross Profit Ratio
Answer: Trade Payable Turnover Ratio

Question: Average Inventory is used to calculate the_______

a) Inventory Turnover Ratio
b) Interest Coverage Ratio
c) Debt Equity Ratio
d) Current Ratio
Answer: Inventory Turnover Ratio

Question: Current Liabilities are not required to calculate the________

a) Interest Coverage Ratio
b) Current Ratio
c) Quick Ratio
d) Both Current Ratio and Quick Ratio
Answer: Interest Coverage Ratio

Question: Gross Profit Ratio and Net Profit Ratio is calculated under________
a) Profitability Ratios
b) Activity Ratio
c) Solvency Ratio
d) Liquidity Ratio
Answer: Profitability Ratios

Question: Operating cost - Operating Expenses = ?

a) Cost of Revenue from Operations
b) Gross Profit
c) Net Profit
d) Operating Profit
Answer: Cost of Revenue from Operations

Question: Return on Investment (ROI) is calculated under_________

a) Profitability Ratios
b) Solvency Ratios
c) Activity Ratios
d) Liquidity Ratios
Answer: Profitability Ratios

Question: On the basis of following data, a Company’s closing debtors will be:
Credit revenue from operations Rs.9,00,000; Average Collection period 2 months; Opening debtors are Rs. 15,000 less as
compared to closing debtoRs.
a) Rs.1,42,500
b) Rs.1,57,500
c) Rs.1,80,000
d) Rs.75,000
Answer: B
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Question: Total credit revenue from operations of a firm is Rs.5,40,000. Average collection period is 3 months. Opening debtors
are Rs. 1,10,000. Its closing debtors will be :
a) Rs.1,35,000
b) Rs.1,60,000
c) Rs.2,20,000
d) Rs.1,80,000
Answer: B

Question: The formula for calculating Trade Payables Turnover Ratio is :

a) Net Credit Purchases/Average Creditors
b) Net Credit Purchases/Average Creditors + Average Bills Payable
c) Cash Purchases/Total Creditors
d) None of the Above
Answer: B

Question: Name the aggregate of Shareholders’ Funds and Total Debts:

a) Total Debts
b) Capital Employed
c) Total Assets
d) Non-current Assets
Answer: C

Question: From the following, which ratio is not a part of Activity Ratio:
a) inventory Turnover Ratio
b) Trade Receivables Turnover Ratio
c) Working Capital Turnover Ratio
d) Debt to Equity Ratio
Answer: D

Question: if Credit Revenue from Operations is T 7,00,000, Cash Revenue from Operations is 1,00,000. Cost of Revenue from
Operations is 6,40,000, then Gross Profit Ratio will be
a) 15%.
b) 18%.
c) 25%.
d) 20%.
Answer: D

Question: Which of the following transactions will improve the quick ratio?
a) Sale of goods for cash
b) Sale of goods on credit
c) Issue of new shares for cash
d) All of the Above
Answer: D

Question: A company’s Current Ratio is 2 : 1. After cash payment to some of its creditors, Current Ratio will:
a) Decrease
b) Increase
c) As before
d) None of these
Answer: B

Question: A Company’s Current Assets are Rs. 8,00,000 and its current liabilities are Rs.4,00,000. Subsequently, it purchased
goods for Rs. 1,00,000 on credit. Current ratio will be _______
a) 2 : 1
b) 2.25 : 1
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c) 1.8:1
d) 1.6:1
Answer: C

Question: Opening Inventory of a firm is Rs.80,000. Cost of revenue from operations is Rs.6,00,000. Inventory Turnover Ratio is 5
times. Its closing Inventory will be:
a) Rs.1,60,000
b) Rs.1,20,000
c) Rs.80,000
d) Rs.2,00,000
Answer: A

Question: Cost of revenue from operations Rs.6,00,000; Inventory Turnover Ratio 5; Find out the value of opening inventory, if
opening inventory is Rs.8,000 less than the closing inventory.
a) Rs.1,12,000
b) Rs. 1,16,000
c) Rs.1,28,000
d) Rs. 1,24,000
Answer: B

Question: Revenue from Operations Rs.2,00,000; Inventory Turnover Ratio 5; Gross Profit 25%. Find out the value of Closing
Inventory, if Closing Inventory is Rs.8,000 more than the Opening Inventory.
a) Rs. 3 8,000
b) Rs.22,000
c) Rs.34,000
d) Rs.26,000
Answer: C

Question: Credit Purchases Rs. 12,00,000; Opening Creditors Rs.2,00,000; Closing Creditors Rs.1,00,000. Trade Payables
Turnover Ratio will be :
a) 6 times
b) 4 times
c) 8 times
d) 12 times
Answer: C

Question: Total Purchases Rs.4,50,000; Cash Purchases Rs.1,50,000; Creditors Rs.50,000; Bills Payable Rs.10,000. Trade Payables
Turnover Ratio will be :
a) 7.5 times
b) 6 times
c) 9 times
d) 5 times
Answer: D

Question: Credit Purchases Rs.6,00,000; Trade Payables Turnover Ratio 5; Calculate closing creditors, if closing creditors are
Rs.10,000 less than opening creditors.
a) Rs.1,15,000
b) Rs.1,25,000
c) Rs.1,30,000
d) Rs.1,10,000
Answer: A

Question: On the basis of following data, a Company’s Total Assets-Debt Ratio will be: Working Capital Rs.2,70,000; Current
Liabilities Rs.30,000; Fixed Assets Rs.4,00,000; Debentures Rs.2,00,000; Long Term Bank Loan Rs. 80,000.
a) 37%
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b) 40%
c) 45%
d) 70%
Answer: B

Question: On the basis of following information received from a firm, its Total Assets-Debt Ratio will be :
Working Capital Rs.3,20,000; Current Liabilities Rs. 1,40,000; Fixed Assets Rs.2,60,000; Debentures Rs.2,10,000; Long Term Bank
Debt Rs.78,000.
a) 40%
b) 60%
c) 30%
d) 70%
Answer: A

Question: Inventory Turnover Ratio is :

a) Average Inventory/Revenue from Operations
b) Average Inventory/Cost of Revenue from Operations
c) Cost of Revenue from Operations/Average Inventory
d) G.P./Average Inventory
Answer: C

Question: Revenue from Operations 9,00,000, Gross Profit 25% on Cost, Operating Expenses 90,000, OperatingRatio will be
a) 100%.
b) 50%.
c) 90%.
d) 10%
Answer: C

Question: Calculate Operating Profit Ratio if Revenue from Operations is 5,00,000, Operating Profit is 75,000.
a) 25%
b) 12%
c) 13.33%
d) 15%
Answer: D

Question: Credit revenue from operations Rs.3,00,000. Trade Receivables Turnover Ratio 5; Calculate Closing Debtors, if closing
debtors are two times in comparison to Opening DebtoRs.
a) Rs.40,000
b) Rs. 60,000
c) Rs. 80,000
d) Rs. 1,20,000
Answer: C

Question: Credit revenue from operations Rs.5,60,000; Debtors Rs.70,000; B/R Rs. 10,000. Average Collection Period will be :
a) 52 Days
b) 53 Days
c) 45 Days
d) 46 Days
Answer: B

Question: Credit revenue from operations Rs.6,00,000; Cash revenue from operations Rs.1,50,000; Debtors Rs.1,00,000; B/R
Rs.50,000. Average Collection Period will be :
a) 2 Months
b) 2.4 Months
c) 3 Months
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d) 1.6 Months
Answer: C

Question: If a Company’s Current Liabilities are Rs.80,000; Working Capital is Rs.2,40,000 and Inventory is Rs.40,000, its quick
ratio will be:
a) 3.5 : 1
b) 4 : 1
c) 4.5 : 1
d) 3 : 1
Answer: A

Question: A Company’s Liquid Assets are Rs.2,00,000, Inventory is Rs. 1,00,000, Prepaid Expenses are Rs.20,000 and Working
Capital is Rs.2,40,000. Its Current Ratio will be:
a) 1.33:1
b) 4 : 1
c) 2.5 : 1
d) 3 : 1
Answer: B

Question: Long term solvency is indicated by :

a) Current Ratio
b) Quick Ratio
c) Net Profit Ratio
d) Debt/Equity Ratio
Answer: D
Accounting Ratios MCQ Questions Class 12 Accountancy with Answers
Question: Gross profit is equal to
a) Gross Profit/Net Sales x100
b) Gross Profit+Net Sales x100
c) Gross Profit-Net Sales x100
d) None of the options
Answer: Gross Profit/Net Sales x100

Question: Gross profit would be the difference between

a) Net sales and cost of goods sold
b) Gross sales and cost of goods sold
c) Net sales and cost of goods sold and Gross sales and cost of goods sold
d) None of the options
Answer: Net sales and cost of goods sold

Question: Gross Profit ratio expresses the relationship between

a) Gross profit and sales
b) Net Profit and sales
c) has no effect on current ratio
d) None of the options
Answer: Gross profit and sales

Question: For calculating Security of Return on Debt we calculate

a) Interest Coverage Ratio
b) Debt-Equity Ratio
c) Proprietary Ratio
d) Fixed Assets and Proprietary Fund Ratio
Answer: Interest Coverage Ratio
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Question: For calculating the security of debt we calculate

a) All of the options
b) Debt-Equity Ratio
c) Proprietary Ratio
d) Fixed Assets and Proprietary Fund Ratio
Answer: All of the options

Question: Solvency of a concern can be measured in

a) Security of Debt and Security of return
b) Security of Debt
c) Security of return
d) None of the options
Answer: Security of Debt and Security of return

Question: Ratios which throw light on the debt servicing ability of the businesses in the long run are known as
a) Solvency ratios
b) Proprietary Ratio
c) Quick Ratios
d) None of the options
Answer: Solvency ratios

Question: The solvency position of any firm is determined and measured with the help of
a) Solvency ratios
b) Activity Ratios
c) Profitability Ratios
d) None of the options
Answer: Solvency ratios

Question: A very high current ratio is

a) Not a good sign
b) A good sign
c) Not a good sign and A good sign
d) None of the options
Answer: Not a good sign

Question: Quick assets are those assets which can get converted into
a) Cash easily
b) Liability easily
c) Cash easily and Liability easily
d) None of the options
Answer: Cash easily

Question: Which ways to measure the liquidity of a firm

a) Current ratio of the firm and Quick ratio of the firm
b) Current ratio of the firm
c) Quick ratio of the firm
d) None of the options
Answer: Current ratio of the firm and Quick ratio of the firm

Question: Management Members are interested in calculating

a) Activity Ratios and Profitability Ratios
b) Activity Ratios
c) Profitability Ratios
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d) None of the options

Answer: Activity Ratios and Profitability Ratios

Question: Long term creditors are interested in calculating

a) All of the options
b) Debt-Equity Ratio
c) Proprietary Ratio
d) Total Assets to Debt Ratio
Answer: All of the options

Question: Financial ratio analysis are conducted by which groups of analysts

a) All of the options
b) Managers
c) Equity investors
d) Long term creditors
Answer: All of the options

Question: Operating expenses normally include

a) Administrative and office expenses and Selling and distribution expenses
b) Administrative and office expenses
c) Selling and distribution expenses
d) None of the options
Answer: Administrative and office expenses and Selling and distribution expenses

Question: The two basic components for the calculation of operating ratio are
a) Operating cost (cost of goods sold plus operating expenses) and net sales
b) Operating cost (cost of goods sold plus operating expenses) and Gross sales
c) Operating cost (cost of goods sold plus operating expenses) and Net Loss
d) None of the options
Answer: Operating cost (cost of goods sold plus operating expenses) and net sales

Question: Operating ratio is the ratio of

a) Cost of goods sold plus operating expenses to net sales
b) Cost of goods sold minus operating expenses to net sales
c) Cost of goods sold plus operating expenses to net sales and Cost of goods sold minus operating expenses to net sales
d) None of the options
Answer: Cost of goods sold plus operating expenses to net sales

Question: Operating Profit Ratio is equal to

a) Operating Profit Ratio/Net sales X 100
b) Gross Profit/Net sales/100
c) Net Profit/Net sales/100
d) None of the options
Answer: Operating Profit Ratio/Net sales X 100

Question: Net profit ratio is equal to

a) Net Profit/Net sales/100
b) Net Profit+Net sales/100
c) Gross Profit/Net sales/100
d) None of the options
Answer: Net Profit/Net sales/100

Question: Net sales is equal to

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a) Sales-Sales Return
b) Sales+Sales Return
c) Sales/Sales Return
d) None of the options
Answer: Sales-Sales Return

Question: Suppliers and creditors of a firm are interested in

a) Liquidity position
b) Profitability position
c) Market share position
d) Debt position
Answer: Liquidity position

Question: Which ratio explains that how much por tion of earning is distributed in the form of dividend?
a) Pay-out Ratio
b) Equity-Debt Ratio
c) Earning Yield Ratio
d) Dividend-Debt Ratio
Answer: Pay-out Ratio

Question: The basic components for the calculation of gross profit ratio are
a) Gross profit and net sales
b) Assets and liabilities
c) Gross profit and net sales and Assets and liabilities
d) None of the options
Answer: Gross profit and net sales

Question: Those assets which can get converted into cash easily in case of emergency
a) Quick assets
b) Intangible Assets
c) Quick assets and Intangible Assets
d) None of the options
Answer: Quick assets

Question: Which ratio indicates the long-term or future solvency position of the business
a) Equity ratio
b) Net Profit Ratio
c) Gross Profit Ratio
d) None of the options
Answer: Equity ratio

Question: Long term solvency of any business we calculate which ratios

a) All of the options
b) Debt Equity
c) Proprietary Ratio
d) Proprietary Ratio
Answer: All of the options

Question: Inventory turnover ratio is more important in case of

a) Grocery store
b) Insurance company
c) Grocery store and Insurance company
d) None of the options
Answer: Grocery store
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Question: If current assets are quite capable to pay the current liability the liquidity of the concerned firm will be considered
a) Good
b) Bad
c) Average
d) None of the options
Answer: Good

Question: The current ratio explains the relationship between

a) Current assets and current liabilities
b) Sundry Debtors and sundry creditors
c) Current assets and current liabilities and Sundry Debtors and sundry creditors
d) None of the options
Answer: Current assets and current liabilities

Question: Which one is considered the more refined form of measuring the liquidity of the firm
a) Quick ratio of the firm
b) Current ratio of the firm
c) Quick ratio of the firm and Current ratio of the firm
d) None of the options
Answer: Quick ratio of the firm

Question: Current Assets Rs.5,00,000; Current Liabilities Rs. 1,00,000; Revenue from Operations
Rs.28,00,000. Working Capital turnover Ratio will be:
a) 7 times
b) 5.6 times
c) 8 times
d) 10 times
Answer: A

Question: On the basis of following data, the Working Capital Turnover Ratio of a company will be :
Liquid Assets Rs.3,70,000; Inventory Rs.80,000; Current Liabilities Rs. 1,50,000; Cost of revenue from
operations Rs.7,50,000.
a) 2.5 Times
b) 3 Times
c) 5 Times
d) 3.8 Times
Answer: A

Question: A firm’s current assets are Rs.3,60,000; current ratio is 3 : 1. Cost of revenue from operations is
Rs. 12,00,000. Its working capital turnover ratio will be :
a) 3 Times
b) 5 Times
c) 8 Times
d) 4 Times
Answer: B

Question: Assuming that the current ratio is 2 : 1, purchase of goods on credit would:
a) Increase Current ratio
b) Decrease Current ratio
c) have no effect on Current ratio
d) decrease gross profit ratio
Answer: B
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Question: Assuming that the current ratio is 2 : 1, Cash paid against Bills Payable would:
a) increase current ratio
b) Decrease Current ratio
c) have no effect on Current ratio
d) decrease gross profit ratio
Answer: A

Question: Assuming liquid ratio of 1.2 : 1, cash collected from debtors would :
a) increase liquid ratio
b) decrease liquid ratio
c) have no effect on liquid ratio
d) increase gross profit ratio
Answer: C

Question: If the inventory turnover ratio is divided into 365, it becomes a measure of ______
a) Sales efficiency
b) Average Age of Inventory
c) Sales Turnover
d) Average Collection Period
Answer: B

Question: If average inventory is Rs.50,000 and closing inventory is Rs.2,000 less than the opening
inventory, opening and closing inventory will be :
a) Rs.52,000 and Rs.50,000
b) Rs.50,000 and Rs.48,000
c) Rs.48,000 and Rs.46,000
d) Rs.51,000 and Rs.49,000
Answer: D

Question: Opening Inventory Rs.50,000; Closing Inventory Rs.40,000 and cost of revenue from operations
Rs.7,20,000. What will be Inventory Turnover Ratio?
a) 18 Times
b) 16 Times
c) 14.4 Times
d) 8 Times
Answer: B

Question: If opening inventory is Rs. 1,20,000, Cost of Revenue from Operations is 10,00,000 and Inventory
Turnover Ratio is 5 Times, then Closing Inventory will be
a) 3,20,000.
b) 2,80,000.
c) 1,60,000.
d) 4,00,000.
Answer: B

Question: A transaction involving a decrease in both Current Ratio and Quick Ratio is
a) Sale of Non—current Asset for cash.
b) Sale of Stock-in-Trade at loss.
c) Cash payment of a Current Liability.
d) Purchase of Stock-in-Trade on credit;
Answer: D
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Question: A transaction involving decrease in Current Ratio and an increase in Quick Ratio: .
a) Purchase of Stock-in-Trade for cash
b) Sale of Non-current Assets for Cash
c) Sale of Stock-in-Trade at loss
d) Cash payment of Non-current Liability
Answer: C

Question: A transaction involving increase in both Current Ratio and Quick Ratio:
a) Purchase of Stock-in-Trade on Credit
b) Sale of Stock at Loss
c) Cash payment of Non-current Liability
d) Sale of Non-current Asset for Cash
Answer: D

Question: Cash Balance Rs.15,000; Trade Receivables Rs.35,000; Inventory Rs.40,000; Trade Payables
Rs.24,000 and Bank Overdraft is Rs.6,000. Current Ratio will be :
a) 3.75 : 1
b) 3 : 1
c) 1 : 3
d) 1 : 3.75
Answer: B

Question: Trade Receivables Rs.40,000; Trade Payables Rs.60,000; Prepaid Expenses Rs. 10,000; Inventory
Rs. 1,00,000 and Goodwill is Rs. 15,000. Current Ratio will be :
a) 1 : 2
b) 2 : 1
c) 2.33 : 1
d) 2.5 : 1
Answer: D

Question: A Company’s Current Ratio is 2.8 : 1; Current Liabilities are Rs.2,00,000; Inventory is Rs.
1,50,000 and Prepaid Expenses are Rs. 10,000. Its Liquid Ratio will be :
a) 3.6 : 1
b) 2.1 : 1
c) 2 : 1
d) 2.05 : 1
Answer: C

Question: A Company’s Current Ratio is 3 : 1; Current Liabilities are Rs.2,50,000; Inventory is Rs.60,000
and Prepaid Expenses are Rs. 5,000. Its Liquid Assets will be :
a) Rs.6,90,000
b) Rs.6,95,000
c) Rs.6,85,000
d) Rs.8,15,000
Answer: C

Question: Equity Share Capital Rs.20,00,000; Reserve 5,00,000; Debentures Rs. 10,00,000; Current
Liabilities Rs. 8,00,000. Debt-equity ratio will be :
a) .4:1
b) .32 : 1
c) .72 : 1
d) .5 : 1
Answer: A
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Question: Debt equity ratio of a company is 1 : 2. Which of the following transactions will increase it:
a) Issue of new shares for cash
b) Redemption of Debentures
c) Issue of Debentures for cash
d) Goods purchased on credit
Answer: C

Question: On the basis of following data, the proprietary ratio of a Company will be : Equity Share Capital
Rs.6,00,000; Debentures Rs.2,40,000; Statement of Profit & Loss Debit Balance Rs.40,000.
a) 74%
b) 65%
c) 82%
d) 70%
Answer: D

Question: On the basis of following information received from a firm, its Proprietary Ratio will be :
Fixed Assets Rs.3,30,000; Current Assets Rs. 1,90,000; Preliminary Expenses Rs.30,000; Equity Share
Capital Rs.2,44,000; Preference Share Capital Rs. 1,70,000; Reserve Fund Rs.58,000.
a) 70%
b) 80%
c) 85%
d) 90%
Answer: C

Question: The formula for calculating the Trade Receivables Turnover Ratio is :
a) Total Revenue from Operations/Average
b) Debtors Credit Revenue from Operations/Average Debtors
c) Net Credit Revenue from Operations/Average Debtors + Average Bills Receivable
d) None of the Above
Answer: C

Question: Total revenue from operations Rs.9,00,000; Cash revenue from operations Rs.3,00,000; Debtors
Rs.1,00,000; B/R Rs.20,000. Trade Receivables Turnover Ratio will be :
a) 5 Times
b) 6 Times
c) 7.5 Times
d) 9 Times
Answer: A

Question: Credit Purchases Rs.9,60,000; Cash Purchases Rs.6,40,000; Creditors Rs.2,40,000; Bills Payable
Rs.80,000. Average Payment Period will be :
a) 3 months
b) 4 months
c) 2.4 months
d) 6 months
Answer: B

Question: On the basis of following data, a Company’s Gross Profit Ratio will be :
Net Profit Rs.40,000; Office Expenses Rs.20,000; Selling Expenses Rs.36,000; Total revenue from operations
Rs.6,00,000.
a) 16%
b) 20%
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c) 6.67%
d) 12.5%
Answer: A

Question: What will be the amount of Gross Profit, if revenue from operations are Rs.6,00,000 and Gross
Profit Ratio is 20% of cost?
a) Rs. 1,50,000
b) Rs. 1,00,000
c) Rs. 1,20,000
d) Rs.5,00,000
Answer: B

Cash Flow Statement MCQ Questions Class 12 Accountancy with Answers

Question: Sale of Copyrights is concerned with_______
a) Investing Activities
b) Operating Activities
c) Both Operating Activities and Financing Activities
d) Financing Activities
Answer: Investing Activities

Question: Dividend Received is concerned with_________

a) Investing Activities
b) Operating Activities
c) Financing Activities
d) Both Operating Activities and Financing Activities
Answer: Investing Activities

Question: Refund of income tax is the part of

a) Operating activities in Cash Flow Statement
b) Financing Activities in Cash Flow Statement
c) Investing Activities in Cash Flow Statement
d) All of the options
Answer: Operating activities in Cash Flow Statement

Question: Rent received is classified under

a) Investing Activities
b) Operating Activities
c) Cash and Cash Equivalents
d) Financing Activities
Answer: Investing Activities

Question: In indirect method, Which is used to calculate the amount of net cash flow from operating activities
a) Net income figure from the income statement
b) Net loss figure from Profit & Loss
c) Net Profit figure from Profit & Loss
d) All of the options
Answer: Net income figure from the income statement

Question: Which activities are the same for Computation of Direct and indirect method
a) Cash Flow from Financing Activities and Cash flow from Investment activities
b) Cash Flow from Operating Activities and Cash flow from Investment activities
c) Cash Flow from Operating Activities and Cash flow from Financial activities
d) All of the options
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Answer: Cash Flow from Financing Activities and Cash flow from Investment activities

Question: The main difference in direct and indirect method is to calculate the
a) Cash flow from operating activities
b) Cash Flow from Financing Activities
c) Cash Flow from Investing Activities
d) All of the options
Answer: Cash flow from operating activities

Question: Which is the Method for the preparation of cash flow statement
a) Both Direct and Indirect
b) Direct Method
c) Indirect Method
d) Average Method
Answer: Both Direct and Indirect

Question: How many methods for the preparation of cash flow statement
a) 2
b) 3
c) 4
d) 5
Answer: 2

Question: A cash flow statement is also prepared to determine the

a) Liquidity position of the organisation
b) Debt position of the organisation
c) Net Profit position of the organisation
d) Net Profit position of the organisation
Answer: Liquidity position of the organisation

Question: The most important objective of cash flow statement is that helps to ascertain the and outflows of cash and from
a) All of the options
b) Gross inflows
c) Outflows of cash
d) Cash equivalents
Answer: All of the options

Question: What are the objectives of preparing cash flow statement

a) All of the options
b) To determine the liquidity position of the organisation
c) To know about the requirement of cash in future
d) To ascertain the gross inflows and outflows of cash
Answer: All of the options

Question: When Company repurchases shares, pays dividends or pays off debt, it records a
a) Cash outflow
b) Cash inflow
c) Not related to cash
d) All of the options
Answer: Cash outflow

Question: When the company issues new shares, it records a

a) Cash inflow
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b) Cash outflow
c) Not related to cash
d) All of the options
Answer: Cash inflow

Question: Cash flows from financing activities are those that take place between
a) Firm and its investors
b) Sundry Creditors and Sundry Debtors
c) Net profit & loss
d) All of the options
Answer: Firm and its investors

Question: Cash flows from investing activities are those

a) All of the options
b) Property
c) Plant
d) Intangible assets.
Answer: All of the options

Question: Under Cash Flow from Operating Activities incorporates are

a) All of the options
b) Cash received from customers
c) Paid to suppliers
d) Paid for operating costs
Answer: All of the options

Question: The cash flow statement begins with the

a) Cash Flow from Operating Activities
b) Cash Flow from Financing Activities
c) Cash Flow from Investing Activities
d) None of these
Answer: Cash Flow from Operating Activities

Question: The primary objective of cash flow statement is to provide useful information about
a) Cash Flow
b) Net Profit
c) Net Loss
d) All of the options
Answer: Cash Flow

Question: A cash flow statement shows

a) Both Inflow and Outflow
b) Inflow cash
c) Outflow cash
d) Not related to cash
Answer: Both Inflow and Outflow

Question: For calculating cash flow from operating activities, provision for doubtful debts is __________the profit made during
the year
a) Added to
b) Deducted from
c) Divided to
d) All of the options
Answer: Added to
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Question: An increase in accrued income during the particular year is ____________for calculating the cash flow from
operating activities (added to/deducted from).
a) Added to
b) Deducted from
c) Divided to
d) All of the options
Answer: Added to

Question: Expenses paid in advance at the end of the year are______________the profit made during the year
a) Deducted from
b) Added to
c) Divided to
d) All of the options
Answer: Deducted from

Question: If the net profits made during the year are Rs. 50,000 and the bills receivables have decreased by Rs. 10,000 during
the year then the cash flow from operating activities will be equal to Rs.
a) Rs. 60,000
b) Rs. 40,000
c) Rs. 70,000
d) Rs. 50000
Answer: Rs. 60,000

Question: If the net profits earned during the year is Rs. 50,000 and the amount of debtors in the beginning and the end of the
year is Rs. 10,000 and Rs.20,000 respectively, then the cash from operating activities will be equal to Rs.
a) Rs. 40,000
b) Rs. 60,000
c) Rs. 70,000
d) Rs. 50000
Answer: Rs. 40,000

Question: Total Sales Rs, 500000, Credit Sales Rs. 225000, Total Purchase Rs. 248000, Credit Purchase Rs. 108000, Cash
Operating Exp Rs. 40000, Cash From Operation will be
a) Rs. 95000
b) Rs. 90000
c) Rs. 60000
d) RS. 70000
Answer: Rs. 95000

Question: Net Profit for the year Rs. 15000 , Interest Received in advance on 1st Jan 2004 Rs. 2000 and 31st December 2004
Rs. 3000, Cash from operation will be
a) Rs. 16000
b) Rs. 22000
c) Rs, 13000
d) Rs. 15000
Answer: Rs. 16000

Question: Opening Stock Rs. 7000, Closing stock Rs. 10000, Cash Purchase Rs. 82000. Sales Rs. 125000 including credit sales Rs.
18000, Cash generated from operations Equal
a) Rs. 22000
b) Rs. 42000
c) Rs. 28000
d) Rs. 30000
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Answer: Rs. 22000

Question: Total sales Rs. 200000, Debtors at the beginning Rs. 15000, Debtors at the ending Rs. 28000, Cash Sale will be
a) Rs. 187000
b) Rs 213000
c) Rs. 215000
d) Rs. 210000
Answer: Rs. 187000

Question: Which of the following is an example of non cash Exp

a) Depreciation
b) Wages and salaries
c) Telephone Exp
d) All of the options
Answer: Depreciation

Question: If the net operating profit of a business is Rs. 90000 and the debtors have decreased during the year by Rs. 30000,
cash from operation equal to
a) Rs. 120000
b) Rs. 90000
c) Rs. 60000
d) Rs. 50000
Answer: Rs. 120000

Question: Cash from operation will increase due to

a) Decrease in stock
b) Increase in stock
c) Increase in Bills receivable
d) Decrease in Bills receivable
Answer: Decrease in stock

Question: Cash flow statement is prepared from

a) All of the options
b) Balance sheet
c) Profit and Loss
d) Additional Information
Answer: All of the options

Question: Cash from operation will decrease due to

a) Increase in Current assets
b) Decrease in Current assets
c) Increase in Current Liabilities
d) Decrease in Current Liabilities
Answer: Increase in Current assets

Question: Increase in the amount of bills receivable results in

a) Decrease in cash
b) Increase in cash
c) No change in cash
d) All of the options
Answer: Decrease in cash

Question: Which of the following is not a cash outflow

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a) Increase in outstanding Exp.

b) Increase in Prepaid Exp.
c) Increase in Stock
d) Increase in Bills receivable
Answer: Increase in outstanding Exp.

Question: Which of the following is not a cash inflow

a) Purchase of fixed assets
b) Sale of goods
c) Issue of debentures
d) Sales of fixed assets
Answer: Purchase of fixed assets

Question: Acquisition of assets or Acquisition of an enterprise by means of issue of shares and debentures is _________
transaction
a) Non Cash
b) Cash
c) Both
d) None of these
Answer: Non Cash

Question: According to AS-3 (Revised) redemption of preference share is _______ activity

a) Financing
b) Investing
c) Operating
d) All of the options
Answer: Financing

Question: Marketable securities is treated as ___________ in cash flow statement

a) Cash equivalent
b) Non Cash equivalent
c) Both
d) All of the options
Answer: Cash equivalent

Question: An example of cash flow from investing activity is :

a) Issue of debenture
b) Repayment of long-term loan
c) Purchase of raw materials for cash
d) Sale of investment by non-financial enterprise.
Answer: D

Question: An example of Cash Flows from Investing Activity is :

a) Cash Revenue from Operations
b) Commission Received
c) Payment of cash for purchase of fixed assets
d) Dividend paid
Answer: C

Question: An Example of cash flow from financing activity is :

a) Payment of dividend
b) Receipt of dividend on investment
c) Cash received from customer
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d) Purchase of fixed asset

Answer: A

Question: A company receives a dividend of X2 Lakhs on its investment in other company’s shares. In case
of a Finance Company, it will be classified under which kind of activity?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) No Cash Flow
Answer: A

Question: How will you classify loans given by Tata Finance Company?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) No Cash Flow
Answer: A

Question: How will you classify deposits by customers in Axis Bank?

a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) No Cash Flow
Answer: A

Question: Which of the following item is considered as Cash Equivalents?

a) Marketable Securities
b) Debtors
c) Investment
d) Bills of Exchange
Answer: A

Question: Which of the following is considered as Cash Equivalents?

a) Bank deposits for 2 months
b) Commercial Papers
c) Treasury Bills
d) All of the above
Answer: D

Question: Cash deposit with the bank with a maturity date after two months belongs to which of the
following in the cash flow statement:
a) Investing activities
b) Financing activities
c) Cash and Cash equivalents
d) Operating activities
Answer: C

Question: Which of the following is shown under Financing Activity?

a) interest paid
b) Commission Received
c) Cash received against sale of goods
d) Cash paid for purchase of goods.
Answer: A
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Question: Which of the following is not included in Cash and Cash Equivalents?
a) Balances with Banks
b) Bank deposits with 100 days of maturity
c) Cheques and Drafts on hand
d) Cash on hand
Answer: B

Question: Which of the following is not part of Cash and Cash Equivalents?
a) Inventories
b) Current investments
c) Short-term Deposits
d) Marketable Securities
Answer: A

Question: ‘Koval Ltd! is a financing company. Under which activity will the amount of interest paid on a
loan settled in the current year be shown?
a) investing Activities
b) Financing Activities
c) Both Investing and Financing Activities
d) Operating Activities
Answer: D

Question: GSC Ltd. purchased machinery of Rs. 10,00,000 issuing a cheque of Rs. 2,50,000 and 10%
Debentures of Rs. 7,50,000. ln the Cash Flow Statement, the transaction will be shown as
a) Outflow under Investing Activity Rs. 10,00,000, inflow under Financing Activity as Receipt for Debentures Rs. 7,50,000.
b) Outflow under investing Activity Rs. 2,50,000.
c) Inflow of Rs. 7,50,000 as Financing Activity.
d) None of the above.
Answer: B

Question: Angel Ltd., a stock broker, purchased 5,000 shares of Tata Housing Ltd. it is
a) Operating Activity.
b) Investing Activity.
c) Financing Activity.
d) General Activity.
Answer: B

Question: According to AS-3 (Revised) purchase of fixed assets is

a) Investing
b) Operating
c) Financing
d) All of the options
Answer: Investing

Question: AS-3 (revised ) deals with statement of changes in financial position on ________
a) Cash Basis
b) Non Cash Basis
c) On Accrual Basis
d) All of the options
Answer: Cash Basis

Question: Increase in stock results in _____________ of cash

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a) Outflow cash
b) Inflow cash
c) No change in cash
d) All of the options
Answer: Outflow cash

Question: Increase in creditors results in _____________ of cash

a) Inflow cash
b) Outflow cash
c) No change in cash
d) All of the options
Answer: Inflow cash

Question: Refund of income tax is a __________

a) Inflow cash
b) Outflow cash
c) No change in cash
d) All of the options
Answer: Inflow cash

Question: Cash flow statement is based upon _________ basis of accounting

a) On Cash basis
b) On Accrual Basis
c) Non Cash Basis
d) All of the options
Answer: On Cash basis

Question: Which is the classification of cash flow statement

a) All of the options
b) Cash Flow from Operating Activities
c) Cash Flow from Financing Activities
d) Cash Flow from Investing Activities
Answer: All of the options

Question: Redemption of Preference shares comes under

a) Cash Flow from Financing Activities
b) Cash Flow from Operating Activities
c) Cash Flow from Investing Activities
d) All of the options
Answer: Cash Flow from Financing Activities

Question: Cash flow statement is useful for

a) Short Term financial analysis
b) Long Term financial analysis
c) 10 Years
d) 5 Years
Answer: Short Term financial analysis

Question: The word fund means the difference of _______ and _______
a) Current Assets and Current Liabilities
b) Sundry Creditors and Sundry Debtors
c) Profit and Loss
d) All of the options
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Answer: Current Assets and Current Liabilities

Question: Cash Receipts from sale of goods by a trading company come under which activity while preparing cash flow
statement?
a) Operating Activity
b) Investing Activity
c) Operating and Financing Activities
d) Financing Activity
Answer: Operating Activity

Question: Which of the following is not a source of finance

a) Fixed Assets
b) Debentures
c) Bank Overdraft
d) Bank Loan
Answer: Fixed Assets

Question: Purchase of office equipment will affect

a) Investing Activities
b) Operating Activities
c) Financing Activities
d) Both Operating and Financing Activities
Answer: Investing Activities

Question: Purchase of shares of other company will be considered as

a) Investing activities
b) Operating Activities
c) Financing Activities
d) All of the options
Answer: Investing activities

Question: Decrease in value of Patents

a) Add (operating activities)
b) Less (operating activities)
c) Add (Investing activities)
d) Add (Financing activities)
Answer: Add (operating activities)

Question: Purchase of plant and machinery will be

a) Deducted in investing activities
b) Deducted in Financing Activities
c) Added in Investing Activities
d) Added in Financing Activities
Answer: Deducted in investing activities

Question: Loss on sale of furniture will be

a) Add (operating activities)
b) Less (Investing activities)
c) Less (operating activities)
d) Add (Investing activities)
Answer: Add (operating activities)

Question: Cash deposit with the bank with a maturity date after two months belongs to which of the following
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a) Cash and Cash Equivalents

b) Investing Activities
c) Financing Activities
d) Both Investing and Financing
Answer: Cash and Cash Equivalents

Question: Payment of dividend will come under financing activities when it is paid by_____
a) All of these
b) Manufacturing Company
c) Trading Company
d) finance Company
Answer: All of these

Question: Which items will be added in operating activities

a) All of the options
b) Decrease in stock
c) Increase in creditors
d) Increase in outstanding expenses
Answer: All of the options

Question: What will be effect of Decrease in Trade receivables on cash Inflow

a) Add in operating activities
b) Less in financing activities
c) Add in financing activities
d) Less in operating activities
Answer: Add in operating activities

Question: Which is shown as addition in financing activities

a) Increase in Bank Overdraft
b) Decrease in Bank Overdraft
c) Both Increase and Decrease in Bank Overdraft
d) Redemption of Debentures
Answer: Increase in Bank Overdraft

Question: Interest on long term borrowings is an Expense relating to financial activities and shown as ______ of cash.
a) Outflow
b) Inflow
c) Income
d) All of the options
Answer: Outflow

Question: Which is not considered with operating activities:

a) Issue of Equity shares
b) General Reserve
c) Income tax
d) Loss on sale of assets
Answer: Issue of Equity shares

Question: Interest received will be considered as financing activity when________

a) Interest received on calls in arrear
b) Redemption of debentures takes place
c) Bank overdraft is settled
d) Interest received on investments
Answer: Interest received on calls in arrear
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Question: Dividend paid by a finance company comes under_______

a) Operating Activities
b) Investing Activities
c) Manufacturing Activity
d) Financing Activity
Answer: Operating Activities

Question: Dividend Received is considered as operating activity when______

a) Received by a finance company
b) Received by a Trading Company.
c) Received by a manufacturing company
d) Received by any company
Answer: Received by a finance company

Question: Mention the net amount of sourceof cash when a fixed asset (having book value of Rs. 15,000) is sold at a loss of Rs.
5,000.
a) Rs. 10000
b) Rs. 15000
c) Rs. 20000
d) Rs. 30000
Answer: Rs. 10000

Question: Which of the following is concerned with financing activities

a) Interest paid on long term loans
b) Rent Received
c) Sale of investment
d) Income tax paid
Answer: Interest paid on long term loans

Question: While calculating cash flow statement form investment activities following items should be added except?
a) Cash paid for purchase of Non-current Investment
b) Cash received from sale of investments
c) Interest received
d) Cash received from sale of fixed assets
Answer: Cash paid for purchase of Non-current Investment

Question: Increase in the balance of Securities premium reserve will be________________

a) Add in Financing Activities
b) Less in Financing Activities
c) Add in Investing Activities
d) Less in Investing Activities
Answer: Add in Financing Activities

Question: Increase in the Computer Software (asset) will be

a) Deducted in Investing activities
b) Added in Operating Activities
c) Deducted in Operating Activities
d) Added in Investing activities
Answer: Deducted in Investing activities

Question: Cash and Cash Equivalents

a) Operating Activities
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b) Financing Activities
c) Investing Activities
d) Not concerned with any activity
Answer: Operating Activities

Question: Conversions of debentures into equity shares will be_______

a) No Effect
b) Operating Activity
c) Investing Activity
d) Cash and Cash Equivalents
Answer: No Effect

Question: Increase in Bank Overdraft balance _____________

a) Add in Financing Activities
b) Add in Operating Activities
c) Less in Operating Activities
d) Less in Financing Activities
Answer: Add in Financing Activities

Question: For purpose of preparing cash flow statement, which of the following is not considered as a cash equivalent
a) Investment in Bonds
b) Commercial paper
c) Marketable securities
d) Treasury Bills
Answer: Investment in Bonds

Question: Cash Credit is concerned with __________

a) Financing Activities
b) Investing Activities
c) Operating Activities
d) Cash and Cash Equivalents
Answer: Financing Activities

Question: Which of the following item is not added or deducted while preparing cash flow statement
a) Bonus shares issued
b) Dividend Paid
c) Purchase of goodwill
d) Dividend Received
Answer: Bonus shares issued

Question: Which of the following transactions would not create a cash flow
a) Amortization of a patent.
b) Payment of dividend.
c) Sale of office equipment at book value.
d) Goods purchased in cash
Answer: Amortization of a patent.

Question: Interest paid on bank overdraft will come in __________

a) Financing activities
b) Investment activities
c) Both finance and investing activities
d) Less in operating activities
Answer: Financing activities
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Question: Adjustment for Proposed Dividend is:

a) Add previous year's proposed dividend under net profit before tax and extra-ordinary items and deduct it under Financing
Activity.
b) Add current year's proposed dividend under net profit before tax and extraordinary items and deduct previous year's
proposed dividend under Financing Activity.
c) Add current year's proposed dividend under Net Profit before Tax and Extraordinary items and deduct current year's
proposed dividend under Financing Activity.
d) None of the above.
Answer: A

Question: Buy-back of shares is an extra-ordinary item for

a) Operating Activities.
b) investing Activities.
c) Financing Activities.
d) Cash and Cash Equivalents.
Answer: C

Question: Voluntary retirement compensation paid to employees is an example of extraordinary item for
a) Operating Activities.
b) Investing Activities.
c) Financing Activities.
d) Cash and Cash Equivalents.
Answer: A

Question: Cash flow statement is prepared for financial planning of ..................

a) Long range
b) Medium range
c) Short range
d) Very Long range
Answer: C

Question: Which of the following is source of cash?

a) Cash deposited into Bank
b) Cash withdrawn from Bank
c) Sale of Goods costing Rs. 10,000 for Rs.8,000
d) Sale of marketable securities for cash
Answer: C

Question: Which of the following is not source of cash?

a) Issue of shares
b) Purchase of Machinery
c) Sale of Asset
d) Dividend received
Answer: B

Question: An example of cash flow from operating activity is :

a) Purchase of own debenture
b) Sale of fixed assets
c) Interest paid on term-deposits by a bank
d) Issue of equity share capital
Answer: C

Question: An example of Cash Flow from Operating Activity is :

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a) Cash receipts from sale of goods and services

b) Sale of long-term investments
c) Interest Received
d) Issue of Debentures
Answer: A

Question: Which of the following is an example of cash flow from Operating Activities?
a) Issue of Shares
b) Purchase of Machinery
c) Purchase of Investment
d) Purchase of Inventory for Cash
Answer: D

Question: Dividend paid by a manufacturing company is classified under which kind of activity while
preparing cash flow statement?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) No Cash Flow
Answer: C

Question: Interest paid by an investment company will come under which kind of activity while preparing
cash flow statement?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) No Cash Flow
Answer: A

Question: Which of the following item is not considered as Cash Equivalents?

a) Short term Deposits in Bank
b) Commercial Papers
c) Treasury Bills
d) Investment
Answer: D

Question: Kaveri Ltd. a financing company, obtained loan and advances of ? 5,00,000 during the year @
12% p.a. It will be included in which of the following activities while preparing the Cash Flow Statement?
a) Investing Activities
b) Financing Activities
c) Both Investing and Financing Activities
d) Operating Activities
Answer: D

Question: Which of the following transactions will not result into flow of cash?
a) issue of equity shares of Rs. 1,00,000.
b) Purchase of machinery of Rs. 1,75,000.
c) Redemption of 9% Debentures of Rs. 3,50,000.
d) Cash deposited into bank Rs. 15,000.
Answer: D
Cash Flow Statement MCQ Questions Class 12 Accountancy with Answers
Question: Cash flow arises when the net effect of a transaction _____ the amount of cash or cash equivalents
a) Either increase or decrease
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b) Only Increase
c) Only decrease
d) All of the options
Answer: Either increase or decrease

Question: Purchase of marketable securities will result in _________

a) No effect on cash and cash equivalents
b) Increase in Investing activities.
c) Increase in cash and cash equivalents
d) Decrease in cash and cash equivalents
Answer: No effect on cash and cash equivalents

Question: Cash Flow from Operating activities + Cash flow from investing activities + Cash flow from financing activities =?
a) Net Increase/Decrease in cash & cash equivalents
b) Net Increase/Decrease in Non-current Assets
c) Net Increase/Decrease in Long term Loans
d) Net Increase/Decrease in Capital
Answer: Net Increase/Decrease in cash & cash equivalents

Question: Is payment for purchase of fixed assets will be classified as operating activity for both finance and non finance
company
a) No its investing activities
b) No Its financing activities
c) Not to be recorded
d) All of the options
Answer: No its investing activities

Question: Purchase and Sales of Shares by a company comes under

a) Investing activities
b) Operating Activities
c) Not recorded
d) Financing Activities
Answer: Investing activities

Question: Decrease in the value of Trade Receivable will be

a) Added in operating activities
b) Added in Investing Activities
c) Deducted in operating activities
d) All of the options
Answer: Added in operating activities

Question: Operating activities is mainly concerned with____________

a) Current assets and current liabilities
b) Long term liabilities and stockholders equity
c) Long term assets
d) All of the options
Answer: Current assets and current liabilities

Question: In the statement of cash flows (indirect method) a decrease in inventory should be reported as__________
a) Addition
b) Deduction
c) Investing activity
d) Not reported
Answer: Addition
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Question: Which activity is the main revenue generating activities of the enterprises
a) Cash flow from operating activities
b) Cash flow from management activities
c) Cash flow from investment activities
d) Non Cash transactions
Answer: Cash flow from operating activities

Question: Which of the following transaction is untrue regarding the limitations of cash flow statement?
a) It is not used for judging the profitability of enterprises
b) To ascertain the net changes in cash and cash equivalents
c) To help in short term financial planning.
d) To ascertain the liquidity of enterprises
Answer: It is not used for judging the profitability of enterprises

Question: Cash and Cash Equivalents do not include_____

a) Stock Inventory
b) Cheques in hand
c) Cash at bank
d) Cash in hand
Answer: Stock Inventory

Question: Short term highly liquid investments which are readily convertible into known amount of cash and which are subject
to an insignificant risk of change in the value are called _______
a) Cash Equivalents
b) Cash at Bank
c) Non-current Assets
d) Intangible Assets
Answer: Cash Equivalents

Question: Which of the following is not concerned with Financing Activity

a) Sale of Non-current investment
b) Loan taken from bank
c) Issue of Equity Shares
d) Increase in Securities Premium
Answer: Sale of Non-current investment

Question: The various activities operating, investing and financing classified as per ___related to cash flow statement
a) AS 3 (revised)
b) AS 4 (revised)
c) AS 5 (revised)
d) AS 6 (revised)
Answer: AS 3 (revised)

Question: Which of the following is not a cash inflow?

a) Goods purchased in cash
b) Sale of asset at loss
c) Goods sold in cash
d) Interest received on investment
Answer: Goods purchased in cash

Question: Payment of dividend is classified as_____________

a) Financial activities
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b) Operational activities
c) Both Operational activities and Investment activities
d) Investment activities
Answer: Financial activities

Question: ______ are highly liquid assets that can be converted into cash shortly.
a) Cash Equivalents
b) Inventories
c) Non-current Investments
d) Non-current Assets
Answer: Cash Equivalents

Question: Repayment of long term loans _________

a) Financing Activities
b) Operating Activities
c) Investing Activities
d) Both Investing Activities and Operating Activities
Answer: Financing Activities

Question: Buy Back of equity shares is concerned with_________

a) Financing Activities
b) Investing Activities
c) Operating Activities
d) Both Investing Activities and Operating Activities
Answer: Financing Activities

Question: Purchase of shares or debentures are concerned with________

a) Investing Activities
b) Both Operating Activities and Financing Activities
c) Operating Activities
d) Financing Activities
Answer: Investing Activities

Question: Cash flow arises when the net effect of a transaction _____ the amount of cash or cash equivalents
a) Either increase or decrease
b) Only Increase
c) Only decrease
d) All of the options
Answer: Either increase or decrease

Question: An increase in Bonds Payable (a long term liability).

a) Financing
b) Investing
c) Operating
d) Supplemental
Answer: Financing

Question: Which of the following statements represent example of cash flow from investing activities?
a) Cash advances and loans made to third parties
b) Cash advances and loans made by financial enterprises
c) Both
d) None of the options
Answer: Cash advances and loans made to third parties
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Question: Refund of income tax is a __________

a) Inflow cash
b) Outflow cash
c) No change in cash
d) All of the options
Answer: Inflow cash

Question: Cash flow statement means inflow and outflow of cash of a particular period which are divided into:
a) All of the options
b) Cash flow from operating activities
c) Cash flow from investing activities
d) Cash flow from financing activities
Answer: All of the options

Question: Which is the cash equivalents

a) All of the options
b) Convertible into cash within three months.
c) Highly liquid and capable of paying debts.
d) Easily convertible into cash and risk-free.
Answer: All of the options

Question: Which is the Importance of cash flow statement

a) All of the options
b) Evaluation of cash position
c) Getting an idea of future cash position
d) Picture of liquidity position
Answer: All of the options

Question: Limitations of Cash Flow Statementv are

a) All of the options
b) Cash flow statement does not consider non-cash item
c) Cash flow statement cannot replace fund flow statement or income statement
d) It cannot be used for the purpose of comparison over a period of time
Answer: All of the options

Question: Sales of copyrights is concern with

a) Investing activities
b) Operating activities
c) Financing activities
d) All of the options
Answer: Investing activities

Question: Provision for doubtful debts will appear under

a) Short term provisions
b) Long term provisions
c) Reserve & Surplus
d) Other current assets
Answer: Short term provisions

Question: Cash and cash equivalent dont include

a) Inventories
b) Cash
c) Cash at bank
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d) Cheques in hand
Answer: Inventories

Question: Loose tools are shown under

a) Inventories
b) Cash
c) Current Assets
d) Liabilities
Answer: Inventories

Question: Which are the Operating Activities

a) All of the options
b) Payment of employee
c) Purchase of inventory
d) Proceeds from sale of goods
Answer: All of the options

Question: Which are the Investing Activities

a) All of the options
b) Purchase of property
c) Sale of property
d) Proceeds from issue of Shares
Answer: All of the options

Question: Which are the Financing Activities

a) All of the options
b) Redemption of Share
c) Redemption of debentures
d) Payment of dividends
Answer: All of the options

Question: Cash Outflows from financing activities are

a) All of the options
b) Cash repayments of amounts borrowed.
c) Interest paid on debentures and long-term loans and advances
d) Dividends paid on equity and preference capital
Answer: All of the options

Question: Cash Inflows from financing activities are

a) Cash proceeds from issuing shares and Cash proceeds from issuing debentures, loans, bonds
b) Cash proceeds from issuing shares
c) Cash proceeds from issuing debentures, loans, bonds
d) None of the options
Answer: Cash proceeds from issuing shares and Cash proceeds from issuing debentures, loans, bonds

Question: Cash Inflows from Investing Activities are

a) All of the options
b) Cash receipt from disposal of fixed assets
c) Interest received in cash from loans and advances
d) Dividend received from investments in other enterprises
Answer: All of the options

Question: Cash Outflows from investing activities are

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a) All of the options

b) Cash payments to acquire fixed assets
c) Cash payments to acquire shares, warrants
d) Cash payments to acquire shares, warrants
Answer: All of the options

Question: Cash Outflows from operating activities are

a) All of the options
b) Cash payments to suppliers for goods and services
c) Cash payments to and on behalf of the employees
d) Cash payments to an insurance enterprise for premiums and claims
Answer: All of the options

Question: Which of the following is not application of cash?

a) Increase in Debtors
b) Increase in Inventory
c) Increase in Bills Payable
d) Increase in Prepaid Expenses
Answer: C

Question: Cash from operating activities consists of:

a) Operating Profit
b) Decrease/Increase in Current Assets
c) Decrease/Increase in Current Assets
d) All of the Above
Answer: D

Question: While calculating operating profit which will be added to net profit:
a) Preliminary Expenses Written off
b) Depreciation
c) Loss on Sale of Asset
d) All of the Above
Answer: D

Question: State whether cash deposited in bank will be classified under which kind of activity?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) No Cash Flow
Answer: D

Question: Mention the net amount of‘Source’ or ‘Use’ of cash when a fixed asset having book value of Rs.
15,000 is sold at a loss of Rs. 5,000.
a) Use Rs.5,000
b) Source Rs. 10,000
c) Use 115,000
d) Source 115,000
Answer: B

Question: Dividend paid by a Trading company is classified under which kind of activity while preparing
cash flow statement?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
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c) Cash Flow from Financing Activities

d) No Cash Flow
Answer: C

Question: An example of Cash Flows from Financing Activity is :

a) Credit Revenue from Operations
b) Cash receipts from issue of shares
c) Sale of Investments
d) Interest Received
Answer: B

Question: If a machine whose original cost is Rs.40,000 having accumulated depreciation Rs. 12,000, were
sold for Rs.34,000 then while preparing Cash Flow Statement its effect on cash flow will be :
a) Cash flow from financing activities Rs.34,000
b) Cash flow from financing activities Rs. 6,000
c) Cash flow from investing activities Rs. 34,000
d) Cash flow from investing activities Rs. 6,000
Answer: C

Question: If 6% Pref. share capital Rs.2,00,000 were redeemed at a premium of 5%, while preparing Cash
Flow Statement its effect on cash flow will be :
a) Cash used from financing activities Rs.2,12,000
b) Cash received from financing activities Rs.2,12,000
c) Cash used (Payment) from financial activities Rs.2,10,000
d) Cash used (Payment) from financial activities Rs.2,00,000
Answer: C

Question: Refer to Q. 10, calculate the amount of purchase of Machinery.

a) Rs. 1,50,000
b) Rs. 3,00,000
c) Rs. 11,50,000
d) Rs. 50,000
Answer: A

Question: Exe Ltd. has balance in Provision for Tax Account of Rs. 50,000 and Rs. 75,000'as on 31st March,
2018 and 2019 respectively. it made a provision for tax during the year of € 65,000. The amount of tax paid
during the year was,
a) Rs. 50,000.
b) Rs. 60,000.
c) Rs. 40,000.
d) Rs. 75,000
Answer: C

Question: While preparing Cash Flow Statement, ‘interest paid on debentures’ will be considered as a
a) Operating Activity.
b) Financing Activity.
c) investing Activity.
d) Both Operating and Financing Activity.
Answer: B

Question: Dividend paid by a financial company is shown as cash outflow under

a) Operating Activities.
b) investing Activities.
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c) Financing Activities.
d) Cash and Cash Equivalent.
Answer: C

Question: Dividend paid by a non-financial company is shown as

a) Operating Activity.
b) Investing Activity.
c) Financing Activity.
d) Cash and Cash Equivalent.
Answer: C

Question: Equity dividend paid should be classifieds cash outflow from

a) Financing activities
b) Operating activities
c) Investing activities
d) All of the options
Answer: Financing activities

Question: Cash flows are

a) Inflow and outflow of cash and Inflow and outflow of cash equivalent
b) Inflow and outflow of cash
c) Inflow and outflow of cash equivalent
d) None of the options
Answer: Inflow and outflow of cash and Inflow and outflow of cash equivalent

Question: Principal revenue generating activities of an enterprise are called as

a) Operating activities
b) Financing activities
c) Investing activities
d) All of the options
Answer: Operating activities

Question: The principal revenue-producing activities of an entity are called

a) Operating activities
b) Financing activities
c) Investing activities
d) All of the options
Answer: Operating activities

Question: Cash payments to and on behalf of employees is an example of cash flows from
a) Operating activities
b) Financing activities
c) Investing activities
d) All of the options
Answer: Operating activities

Question: Activities that result in changes in the size and composition of the equity capital and borrowings of an entity are
called
a) Financing activities
b) Operating activities
c) Investing activities
d) All of the options
Answer: Financing activities
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Question: Which of the following categories is not used to classify cash flows in the cash flow statement
a) Managing Activities
b) Operating activities section
c) Investing activities section
d) Financing activities section
Answer: Managing Activities

Question: The amortization of the cost of an intangible asset

a) Operating Activity
b) Investing Activity
c) Financing Activity
d) Supplemental Activity
Answer: Operating Activity

Question: The exchange or conversion of long-term bonds into common stock.

a) Supplemental Activity
b) Operating Activity
c) Investing Activity
d) Financing Activity
Answer: Supplemental Activity

Question: A decrease in the current liability Income Taxes Payable.

a) Operating Activity
b) Investing Activity
c) Financing Activity
d) Supplemental Activity
Answer: Operating Activity

Question: A decrease in the current asset account Prepaid Insurance.

a) Operating Activity
b) Investing Activity
c) Financing Activity
d) Supplemental Activity
Answer: Operating Activity

Question: An increase in Bonds Payable (a long term liability).

a) Financing Activity
b) Investing Activity
c) Operating Activity
d) Supplemental Activity
Answer: Financing Activity

Question: A decrease in the balance of Accounts Receivable.

a) Operating Activity
b) Investing Activity
c) Financing Activity
d) Supplemental Activity
Answer: Operating Activity

Question: The purchase of a new delivery truck to be used in the business.

a) Investing Activity
b) Operating Activity
c) Financing Activity
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d) Supplemental Activity
Answer: Investing Activity

Question: Purchase of Treasury Stock (companys own stock).

a) Financing Activity
b) Investing Activity
c) Operating Activity
d) Supplemental Activity
Answer: Financing Activity

Question: Retirement of long term Bonds Payable.

a) Financing Activity
b) Investing Activity
c) Operating Activity
d) Supplemental Activity
Answer: Financing Activity

Question: An increase in the balance in Accounts Payable

a) Operating Activity
b) Investing Activity
c) Financing Activity
d) Supplemental Activity
Answer: Operating Activity

Question: Gain on the Sale of Automobile formerly used in the business.

a) Operating Activity
b) Investing Activity
c) Financing Activity
d) Supplemental Activity
Answer: Operating Activity

Question: Declaration and payment of dividends on companys stock.

a) Financing Activity
b) Investing Activity
c) Operating Activity
d) Supplemental Activity
Answer: Financing Activity

Question: Proceeds from the sale of equipment used in the business.

a) Investing Activity
b) Operating Activity
c) Financing Activity
d) Supplemental Activity
Answer: Investing Activity

Question: Depreciation Expense is

a) Operating Activity
b) Investing Activity
c) Financing Activity
d) Supplemental Activity
Answer: Operating Activity

Question: The statement of cash flows is designed with the purpose of helping users to assess each of the following, except
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a) The profitability of the entity

b) The major sources of cash receipts during the period
c) The reasons why net cash flows from operating activities differ from net income
d) The ability of a entity to remain liquid
Answer: The profitability of the entity

Question: The indirect method of preparing a statement of cash flows is also known as
a) Reconciliation method
b) Income statement method
c) Balance sheet method
d) Reverse method
Answer: Reconciliation method

Question: Which of the following items affects net income but does not affect cash?
a) All of these
b) Depreciation of fixed assets
c) Amortization of intangible assets & bond discounts
d) Depletion of natural resources
Answer: All of these

Question: Under indirect method of preparing statement of cash flows, depreciation expense affects
a) Operating activities section
b) Investing activities section
c) Financing activities section
d) Notes to the financial statements
Answer: Operating activities section

Question: Significant non cash investing and financing activities are reported in the
a) Foot notes or separate notes to the financial statements
b) Operating activities section of statement of cash flows
c) Investing activities section of statement of cash flows
d) Financing activities section of statement of cash flows
Answer: Foot notes or separate notes to the financial statements

Question: Which of the following is not a non-cash investing and financing activity
a) Repayment of short-term loan
b) Purchase of land by issuing common stock
c) Conversion of bonds into common stock
d) Conversion of preferred stock into common stock
Answer: Repayment of short-term loan

Question: Which of the following is not a financing activity

a) Sale of investment
b) Purchase of treasury stock
c) Issuance of common stock
d) Issuance of bonds payable
Answer: Sale of investment

Question: Which of the following is not an operating cash flow

a) Purchase of equipment for cash
b) Collection of cash from receivables
c) Payment of income tax
d) Payment of cash for operating expenses
Answer: Purchase of equipment for cash
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Question: A statement of cash flows has

a) 3 sections
b) 4 sections
c) 5 sections
d) 6 sections
Answer: 3 sections

Question: A financial statement that shows the inflows and outflows of cash during a particular period of time is known as
a) Statement of cash flows
b) Income statement
c) Statement of retained earnings
d) Balance sheet
Answer: Statement of cash flows

Question: A company who issues bonds or stocks in result raised funds which finally
a) Increases cash
b) Decreased cash
c) Increased liabilities
d) Increased equity
Answer: Increases cash

Question: In a statement of cash flows, a company investing in short-term financial investments and in fixed assets results in
a) Decreased cash
b) Increased cash
c) Increased liabilities
d) Increased equity
Answer: Decreased cash

Question: Which of the following is not a cash outflow

a) Increase in creditors
b) Increase in Prepaid expenses
c) Increase in debtors
d) Increase in stock
Answer: Increase in creditors

Question: Which of the following is not a cash inflow

a) Decrease in creditors
b) Decrease in debtors
c) Issue of shares
d) Sale of fixed assets
Answer: Decrease in creditors

Question: When a fixed asset is bought as hire purchase, interest element is classified under ______ and loan element is
classified under________.
a) Financing activities, investing activities
b) Operating activities, financing activities
c) Investing activities, operating activities
d) All of the options
Answer: Financing activities, investing activities

Question: In case of other enterprises cash flow arising from interest paid should be classified as cash flow from ________ while
dividends and interest received should be stated as cash flow from ____
a) Financing activities, investing activities
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b) Operating activities, financing activities

c) Investing activities, operating activities
d) All of the options
Answer: Financing activities, investing activities

Question: In the case of financial enterprises, the cash flow resulting from interest and dividend received and interest paid
should be classified as cash flow from
a) Operating activities
b) Financing activities
c) Investing activities
d) All of the options
Answer: Operating activities

Question: Listed Enterprises need to prepare Cash Flow Statement only

a) Indirect method
b) Direct method
c) Average method
d) All of the options
Answer: Indirect method

Question: As per AS-3, Cash Flow Statement is mandatory for

a) Companies listed on a stock exchange and Companies with a turnover of more than Rs 50 crores
b) Companies listed on a stock exchange
c) Companies with a turnover of more than Rs 50 crores
d) None of the options
Answer: Companies listed on a stock exchange and Companies with a turnover of more than Rs 50 crores

Question: For the calculation of cash flow from operating activities, payments and receipts shown in Profit & Loss account are
converted into payments and receipts actually in cash by eliminating
a) Non-cash revenue from the revenue earned and Non-cash expenses from expenses incurred
b) Non-cash revenue from the revenue earned
c) Non-cash expenses from expenses incurred
d) None of the options
Answer: Non-cash revenue from the revenue earned and Non-cash expenses from expenses incurred

Question: Which of the following are cash flow from operating activities
a) Cash Receipts from customers and Cash Paid to Supplier and Employees
b) Cash Receipts from customers
c) Cash Paid to Supplier and Employees
d) None of the options
Answer: Cash Receipts from customers and Cash Paid to Supplier and Employees

Question: _________ reconciles the opening cash balance with the closing cash balance of a given period on the basis of net
decrease or increase in cash during that period.
a) Cash Flow Statement
b) Funds Flow Statement
c) Both
d) None of the options
Answer: Cash Flow Statement

Question: Cash flow statement is based upon _________ while Funds Flow Statement recognizes _______.
a) Cash basis of accounting, accrual basis of accounting
b) Accrual basis of accounting, cash basis of accounting
c) Both are based on cash basis of accounting
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d) All of the options

Answer: Cash basis of accounting, accrual basis of accounting

Question: The objectives of Cash Flow Statement are

a) All of the options
b) Analysis of cash position
c) Short-term cash planning
d) Comparison of operating Performance
Answer: All of the options

Question: Cash Flow Statement is also known as

a) Statement of Changes in Financial Position on Cash basis
b) Only inflow of cash
c) Only outlow of cash
d) None of the options
Answer: Statement of Changes in Financial Position on Cash basis

Question: As per Accounting Standard-3, Cash Flow is classified into

a) Operating activities, financing activities and investing activities
b) Operating activities and investing activities
c) Investing activities and financing activities
d) Operating activities and financing activities
Answer: Operating activities, financing activities and investing activities

Question: Redemption of preference Shares is concerned directly with

a) Financing Activities
b) Investing Activities
c) Operating Activities
d) All of the options
Answer: Financing Activities

Question: Sale of machinery is concerned with_________

a) Investing Activities
b) Financing Activities
c) Operating Activities
d) All of the options
Answer: Investing Activities

Question: Proposed Dividend is classified under

a) Short term provisions
b) Reserves and Surplus
c) Non-current Liabilities
d) Long term provisions
Answer: Short term provisions

Question: Financing activities brings changes in

a) Size and composition of owners equities and Borrowing of the enterprise
b) Size and composition of owners equities
c) Borrowing of the enterprise
d) None of the options
Answer: Size and composition of owners equities and Borrowing of the enterprise
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Question: ABC Ltd had investment of Rs 68,000 as on 31.3.2013 and investment of Rs 56,000 as on 31.3.2014. During the year
ABC Ltd sold 40% of its investments being held in the beginning of period at a profit of Rs 16,800. Determine cash flow from
investing activities.
a) Rs. 28,800
b) Rs. 59,200
c) Rs. 72,800
d) All of the options
Answer: Rs. 28,800

Question: Which of the following statements represent example of cash flow from investing activities?
a) Cash advances and loans made to third parties
b) Cash advances and loans made by financial enterprises
c) Both
d) None of the options
Answer: Cash advances and loans made to third parties

Question: Acquisition and disposal of long term assets is included in

a) Cash flow from investing activities
b) Cash flow from financing activities
c) Cash flow from operating activities
d) All of the options
Answer: Cash flow from investing activities

Question: Which of the following are cash flow from financing activities
a) Interest paid and Dividend paid
b) Interest paid
c) Dividend paid
d) None of the options
Answer: Interest paid and Dividend paid

Question: Which of the following are cash flow from investing activities
a) All of the options
b) Interest received
c) Dividend received
d) Sale of fixed assets
Answer: All of the options

Question: In indirect method, net cash flow from operating activities is calculated on the basis of
a) Net profit before tax
b) Net Profit after tax
c) Gross Profit after tax
d) Gross Loss after tax
Answer: Net profit before tax

Question: Given salary expenses Rs 40,000, Outstanding in the beginning of the year: Rs 5,000 and outstanding at the end of the
year Rs 10,000. Cash outflow on salary will be
a) Rs. 35000
b) Rs. 45,000
c) Rs. 55,000
d) Rs. 15,000
Answer: Rs. 35000

Question: The amount of operating expenses which are actually been paid in cash are shown under
a) Cash outflow on expenses
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b) Cash flow from sales

c) Cash outflow on purchases
d) All of the options
Answer: Cash outflow on expenses

Question: While preparing Cash Flow Statement, non-cash items and non-operating items are not required to be adjusted
under________
a) Direct method
b) Indirect method
c) Average method
d) All of the options
Answer: Direct method

Question: IDFC Bank Ltd. issued 1,00,000, 9% Debentures of Rs. 100 each for subscription. issue was
subscribed. The amount of receipt will be shown as
a) Operating Activity.
b) investing Activity.
c) Financing Activity.
d) General Activity.
Answer: C

Question: Discount/Loss on lssue of Debentures debited to Statement of Profit and Loss (Finance Cost) is
a) added under Operating Activities and Debentures are shown under Financing Activities at net amount received.
b) added under Operating Activities and Debentures are shown under investing Activities at net amount received.
c) deducted under Operating Activities and shown as inflow under Financing Activities.
d) added under Investing Activities and shown as Operating Activities at net amount received.
Answer: A

Question: Which of the following transactions will result into flow of cash?
a) Cash withdrawn from bank Rs. 20,000.
b) issued 20,000, 9% Debentures to the vendor of machinery.
c) Received Rs. 19,000 from debtors.
d) Deposited cheques of Rs. 10,000 into bank.
Answer: C

Question: A Ltd., engaged in the business of retailing of two wheelers, invested Rs. 50,00,000 in the shares of
a manufacturing company. Dividend received on this investment will be :
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) Cash Equivalent
Answer: B

Question: How will you treat payment of dividend in a Cash flow statement?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) Cash Equivalent
Answer: C

Question: How will you treat Bank Overdraft in a Cash Flow Statement?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
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c) Cash Flow from Financing Activities

d) Cash Equivalent
Answer: C

Question: Cash from Operating activities will decrease due to :

a) Increase in Current Assets
b) Decrease in Current Liabilities
c) Neither of the two
d) Both A and B above
Answer: D

Question: Which of the following is incorrect about the statement of cash flows?
a) It provides information about the cash receipt and cash payments of an enterprise.
b) It reconciles ending cash balance with the balance as per bank statement.
c) It provides information about the operating, investing and financing activities.
d) It explains the deviation of cash from Earnings.
Answer: B

Question: The statement of cash flows clarifies cash flows according to

a) Operating and non-operating flows
b) Investing and non-operating flows
c) Inflows and outflows
d) Operating, investing and financing activities
Answer: D

Question: Which of the following is not added as Non-Cash Expense?

a) Goodwill amortised
b) Depreciation
c) interest on debentures paid
d) All of these
Answer: C

Question: ABC Ltd. has Machinery written down value of which on 1st April, 2018 was Rs. 8,60,000 and on
31st March, 2019 was Rs. 9,50,000. Depreciation for the year was Rs. 40,000. in the beginning of the year, a
part of machinery was sold for Rs. 25,000, which had a written down value of Rs. 20,000. Calculate Cash
Flow from Investing Activities.
a) Rs. 1,25,000
b) Rs. (1,25,000)
c) Rs. 2,50,000
d) Rs. (2,50,000)
Answer: B

Question: Refer to above question, calculate Gain (profit) on sale of Machinery.

a) Rs. 6,000
b) Rs. 5,000
c) Rs. 10,000
d) Rs. 12,000
Answer: B

Question: Where will you show purchase of Goodwill in a Cash Flow Statement?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
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d) Cash Equivalent
Answer: B

Question: How will you treat payment of ‘Interest on Debentures’ while preparing a Cash Flow Statement?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) Cash Equivalent
Answer: C
Cash Flow Statement MCQ Questions Class 12 Accountancy with Answers
Question: A financial statement that shows the inflows and outflows of cash during a particular period of time is known as
a) Statement of cash flows
b) Income statement
c) Statement of retained earnings
d) Balance sheet
Answer: Statement of cash flows

Question: A company who issues bonds or stocks in result raised funds which finally
a) Increases cash
b) Decreased cash
c) Increased liabilities
d) Increased equity
Answer: Increases cash

Question: In a statement of cash flows, a company investing in short-term financial investments and in fixed assets results in
a) Decreased cash
b) Increased cash
c) Increased liabilities
d) Increased equity
Answer: Decreased cash

Question: Which of the following is not a cash outflow

a) Increase in creditors
b) Increase in Prepaid expenses
c) Increase in debtors
d) Increase in stock
Answer: Increase in creditors

Question: Which of the following is not a cash inflow

a) Decrease in creditors
b) Decrease in debtors
c) Issue of shares
d) Sale of fixed assets
Answer: Decrease in creditors

Question: When a fixed asset is bought as hire purchase, interest element is classified under ______ and loan element is
classified under________.
a) Financing activities, investing activities
b) Operating activities, financing activities
c) Investing activities, operating activities
d) All of the options
Answer: Financing activities, investing activities
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Question: In case of other enterprises cash flow arising from interest paid should be classified as cash flow from ________
while dividends and interest received should be stated as cash flow from ____
a) Financing activities, investing activities
b) Operating activities, financing activities
c) Investing activities, operating activities
d) All of the options
Answer: Financing activities, investing activities

Question: In the case of financial enterprises, the cash flow resulting from interest and dividend received and interest paid
should be classified as cash flow from
a) Operating activities
b) Financing activities
c) Investing activities
d) All of the options
Answer: Operating activities

Question: Listed Enterprises need to prepare Cash Flow Statement only

a) Indirect method
b) Direct method
c) Average method
d) All of the options
Answer: Indirect method

Question: As per AS-3, Cash Flow Statement is mandatory for

a) Companies listed on a stock exchange and Companies with a turnover of more than Rs 50 crores
b) Companies listed on a stock exchange
c) Companies with a turnover of more than Rs 50 crores
d) None of the options
Answer: Companies listed on a stock exchange and Companies with a turnover of more than Rs 50 crores

Question: For the calculation of cash flow from operating activities, payments and receipts shown in Profit & Loss account are
converted into payments and receipts actually in cash by eliminating
a) Non-cash revenue from the revenue earned and Non-cash expenses from expenses incurred
b) Non-cash revenue from the revenue earned
c) Non-cash expenses from expenses incurred
d) None of the options
Answer: Non-cash revenue from the revenue earned and Non-cash expenses from expenses incurred

Question: Which of the following are cash flow from operating activities
a) Cash Receipts from customers and Cash Paid to Supplier and Employees
b) Cash Receipts from customers
c) Cash Paid to Supplier and Employees
d) None of the options
Answer: Cash Receipts from customers and Cash Paid to Supplier and Employees

Question: _________ reconciles the opening cash balance with the closing cash balance of a given period on the basis of net
decrease or increase in cash during that period.
a) Cash Flow Statement
b) Funds Flow Statement
c) Both
d) None of the options
Answer: Cash Flow Statement
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Question: Cash flow statement is based upon _________ while Funds Flow Statement recognizes _______.
a) Cash basis of accounting, accrual basis of accounting
b) Accrual basis of accounting, cash basis of accounting
c) Both are based on cash basis of accounting
d) All of the options
Answer: Cash basis of accounting, accrual basis of accounting

Question: The objectives of Cash Flow Statement are

a) All of the options
b) Analysis of cash position
c) Short-term cash planning
d) Comparison of operating Performance
Answer: All of the options

Question: Cash Flow Statement is also known as

a) Statement of Changes in Financial Position on Cash basis
b) Only inflow of cash
c) Only outlow of cash
d) None of the options
Answer: Statement of Changes in Financial Position on Cash basis

Question: As per Accounting Standard-3, Cash Flow is classified into

a) Operating activities, financing activities and investing activities
b) Operating activities and investing activities
c) Investing activities and financing activities
d) Operating activities and financing activities
Answer: Operating activities, financing activities and investing activities

Question: Redemption of preference Shares is concerned directly with

a) Financing Activities
b) Investing Activities
c) Operating Activities
d) All of the options
Answer: Financing Activities

Question: Sale of machinery is concerned with_________

a) Investing Activities
b) Financing Activities
c) Operating Activities
d) All of the options
Answer: Investing Activities

Question: Proposed Dividend is classified under

a) Short term provisions
b) Reserves and Surplus
c) Non-current Liabilities
d) Long term provisions
Answer: Short term provisions

Question: Financing activities brings changes in

a) Size and composition of owners equities and Borrowing of the enterprise
b) Size and composition of owners equities
c) Borrowing of the enterprise
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d) None of the options

Answer: Size and composition of owners equities and Borrowing of the enterprise

Question: ABC Ltd had investment of Rs 68,000 as on 31.3.2013 and investment of Rs 56,000 as on 31.3.2014. During the year
ABC Ltd sold 40% of its investments being held in the beginning of period at a profit of Rs 16,800. Determine cash flow from
investing activities.
a) Rs. 28,800
b) Rs. 59,200
c) Rs. 72,800
d) All of the options
Answer: Rs. 28,800

Question: Which of the following statements represent example of cash flow from investing activities?
a) Cash advances and loans made to third parties
b) Cash advances and loans made by financial enterprises
c) Both
d) None of the options
Answer: Cash advances and loans made to third parties

Question: Acquisition and disposal of long term assets is included in

a) Cash flow from investing activities
b) Cash flow from financing activities
c) Cash flow from operating activities
d) All of the options
Answer: Cash flow from investing activities

Question: Which of the following are cash flow from financing activities
a) Interest paid and Dividend paid
b) Interest paid
c) Dividend paid
d) None of the options
Answer: Interest paid and Dividend paid

Question: Which of the following are cash flow from investing activities
a) All of the options
b) Interest received
c) Dividend received
d) Sale of fixed assets
Answer: All of the options

Question: In indirect method, net cash flow from operating activities is calculated on the basis of
a) Net profit before tax
b) Net Profit after tax
c) Gross Profit after tax
d) Gross Loss after tax
Answer: Net profit before tax

Question: Given salary expenses Rs 40,000, Outstanding in the beginning of the year: Rs 5,000 and outstanding at the end of
the year Rs 10,000. Cash outflow on salary will be
a) Rs. 35000
b) Rs. 45,000
c) Rs. 55,000
d) Rs. 15,000
Answer: Rs. 35000
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Question: The amount of operating expenses which are actually been paid in cash are shown under
a) Cash outflow on expenses
b) Cash flow from sales
c) Cash outflow on purchases
d) All of the options
Answer: Cash outflow on expenses

Question: While preparing Cash Flow Statement, non-cash items and non-operating items are not required to be adjusted
under________
a) Direct method
b) Indirect method
c) Average method
d) All of the options
Answer: Direct method

Question: Interest received by a finance company is classified under which kind of activity while preparing
a Cash flow statement?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) No Cash Flow
Answer: A

Question: A Mutual Fund Company receives a dividend of Rs.20 Lakhs on its investments in another
company’s shares. Where will it appear in a Cash Flow Statement?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) No Cash Flow
Answer: A

Question: Dividend paid by a finance company is classified under which kind of activity while preparing
cash flow statement?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) No Cash Flow
Answer: C

Question: Dividend received by other than financial enterprise is shown in Cash Flow Statement under
a) Operating Activities.
b) Investing Activities.
c) Financing Activities.
d) General Activities.
Answer: B

Question: Dividend received by financial enterprise is shown in Cash Flow Statement under
a) Operating Activities.
b) Investing Activities.
c) Financing Activities.
d) General Activities.
Answer: A
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Question: Payment of income Tax is shown as

a) Operating Activities.
b) investing Activities.
c) Financing Activities.
d) General Activities.
Answer: A

Question: While calculating operating profit which will be added to net profit
a) Profit on Sale of Asset
b) Increase in General Reserves
c) Interest received
d) Refund of Tax
Answer: B

Question: While calculating cash flow from operating activities which will be deducted:
a) Decrease in Prepaid Expenses
b) Increase in Trade Payables
c) Increase in Trade Receivables
d) Decrease in Trade Receivables
Answer: C

Question: While calculating cash flow from operating activities which will be added :
a) Increase in Inventory
b) Increase in Creditors
c) Decrease in Bills Payable
d) Increase in Trade Receivables
Answer: B

Question: Amongst the following payment of bonus to the employees by an insurance company is which
type of activity?
a) Operating Activity
b) investing Activities
c) Financing Activity
d) Both operating and Financing Activity
Answer: A

Question: Which of the following transactions will result into ‘Flow of Cash’?
a) Deposited Rs. 10,000 into bank.
b) Withdrew cash from bank Rs. 14,500.
c) Sale of Machinery of the book value of Rs. 74,000 at a loss of Rs. 9,000.
d) Converted Rs. 2,00,000, 9% Debentures into equity shares.
Answer: C

Question: If the amount of goodwill is Rs.40,000 at the beginning of a year and Rs.48,000 at the end of that
year then while preparing cash flow statement its effect on cash flow will be :
a) Cash used (Payment) in Investing Activities Rs. 8,000
b) Cash received from operating activities Rs. 8,000
c) Cash used (Payment) from Operating Activities Rs. 8,000
d) Cash used (Payment) from Financial Activities Rs.8,000
Answer: A
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Question: How will you deal increase in the balance of ‘Securities Premium Reserve’ while preparing a
Cash Flow Statement?
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) Cash Equivalent
Answer: C

Question: Fine Garments Ltd. is engaged in the export of readymade garments. The company purchased a
machinery of Rs. 10,00,000 for the use in packaging of such garments. Cash flow due to the purchase of
machinery will be cash flow from :
a) Cash Flow from Operating Activities
b) Cash Flow from Investing Activities
c) Cash Flow from Financing Activities
d) Cash Equivalent
Answer: B

Plus Two Computerised Accounting Chapter Wise Questions and Answers Chapter 1 Overview of Computerised Accounting
System
November 25, 2020 by Prasanna
Kerala Plus Two Computerised Accounting Chapter Wise Questions and Answers Chapter 1 Overview of Computerised
Accounting System
Plus Two Accountancy Overview of Computerised Accounting System One Mark Questions and Answers
Question 1.
Accounting Packages are developed on the basis of
(a) Accounting concepts
(b) Accounting conventions
(c) Both Accounting concepts and Conventions
(d) None of the above
Answer:
(c) Both Accounting concepts and Conventions
Question 2.
What type of Software is an Accounting Package?
(a) System Software
(b) Application Software
(c) Utility Software
(d) Basic
Answer:
(b) Application Software
Question 3.
The components of computerised accounting system are
(a) Data, Report, Ledger, software, Hardware
(b) Software, Hardware, People, Procedure, Data
(c) Data, Coding, Procedure, Objective, Output
(d) People, Procedure, Hard ware, software
Answer:
(b) Software, Hardware, People, Procedure, Data
Question 4.
Grouping of Accounts means the classification of data from:
(a) Assets, Capital, and Liabilities
(b) Assets, Capital, Liabilities, Revenues & Expenses
(c) Assets, Owners equity, Revenue & Expenses
(d) Capital, Liabilities, Revenues, & Expenses
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Answer:
(b) Assets, Capital, Liabilities, Revenues & Expenses
Question 5.
Codification of Accounts required for the purpose of:
(a) Hierarchical relationship between groups and components
(b) Data processing faster and preparing of final accounts
(c) Keeping data and information secured
(d) None of the above
Answer:
(a) Hierarchical relationship between groups and components
Question 6.
Method of codification should be
(a) Such that it leads to grouping of accounts
(b) An identification mark
(c) Easy to understand and leads to grouping of accounts
(d) None of the above
Answer:
(c) Easy to understand and leads to grouping of accounts
Question 7.
Final account subsystem in Accounting Information System (AIS) deals with
(a) Preparation of budgets
(b) Preparation of Pay Roll
(c) Preparation of Final Accounts
(d) None of the above
Answer:
(c) Preparation of Final Accounts
Question 8.
Pick the odd one out
(a) Password security
(b) Data Audit
(c) Data Bank
(d) Data vault
Answer:
(c) Data Bank
Question 9.
Which among the following is an example of mnemonic codes.
(a) AS03, AS04, AS05
(b) 1925, 1926, 1927, 1928
(c) ACC, ECO, ENG, MAL
(d) 001-100, 101-200, 201-300, 301-400
Answer:
(c) ACC, ECO, ENG, MAL
Question 10.
Which among the following deals with generation of reports that are vital for management decision making?
(a) Costing sub system
(b) Pay Roll Accounting Sub system
(c) Budget Sub System
(d) Management Information System
Answer:
(d) Management Information System
Question 11.
The need of codification is
(a) Easy to process data
(b) Keeping proper records
(c) The generation of block codes
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(d) The encryption of data

Answer:
(d) The encryption of data
Question 12.
Choose the correct pair
(a) Cash and Bank sub system – Deals with receipts and payments of cash
(b) Inventory subsystem – deals with recording of sales
(c) Payroll Accounting sub system – deals with the preparation of final accounts
(d) Accounts receivable sub system – deals with expenses.
Answer:
(a) Cash and Bank sub system – Deals with receipts and payments of cash
Computerised Accounting System MCQ Questions Class 11 Accountancy with Answers
Question : Who is the marketer of Tally?
a) Tally Package Pvt. Ltd.
b) Tally Gold Pvt. Ltd.
c) Tally Solutions Pvt. Ltd.
d) None of the above
Answer : C

Question : Who is the developer of Tally?

a) Wally Feurzeig
b) John G. Kemeny
c) Nandan M. Nilekani
d) Shyam Sundar Goenka
Answer : D

Question : What is the short-cut to paste text from Tally?

a) Ctrl + Shift + V
b) Alt + V
c) Ctrl + Alt + V
d) Alt + Shift + V
Answer : C

Question : How can you file an income tax return in India?

a) www.gst.gov.in
b) www.mca.gov.in
c) www.incometaxindiaefiling.gov.in
d) None of the above
Answer : C

Question : What is the Short-cut key for quitting tally?

a) Alt + Ctrl + Q
b) Alt + Q
c) Ctrl + Q
d) Alt + F2 + Q
Answer : B

Question : All payments are entered under Accounting Voucher in Tally through
a) F5
b) F6
c) F7
d) F8
Answer : A
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Question : What does tally run on?

a) Windows
b) Tally Solutions
c) ERP Module
d) Tally Gold Edition
Answer : A

Question : What is Short-cut key for selecting company?

a) Alt + F1
b) F1
c) Ctrl + F1
d) Alt + Ctrl + F1
Answer : B

Question : Choose the right option to change the Company Information

a) Company info> Back up
b) Company info> Alter
c) Company info> split Company d)ata
d) None of these
Answer : B

Question : Select the right usefulness of Tally vault Password

a) It will lock the period of Company Sales
b) It will lock the period of Company
c) It will lock all voucher entries for that Company
d) It will not show the Company Name in the Company Select List
Answer : D

Question : What are the two ledgers that is by default provided by tally?
a) Cash a/c & Bank a/c
b) Bank a/c & P/L a/c
c) Cash a/c & P/L a/c
d) None of the above
Answer : C

Question : What are the languages required for tally?

a) C
b) C++
c) C & C++
d) None of the above
Answer : C

Question : Multiple godown are activated from

a) F11
b) F11>F1
c) F11>F2
d) F11>F3
Answer : C

Question : To print a voucher from Tally pressing

a) Ctrl+P
b) Shift +P
c) Alt +P
d) Ctrl+Alt +P
Answer : C
 P a g e | 316

Question : What is Primary Key?

a) A primary key is a maximal set of attributes in a table that uniquely identifies tuples in that table.
b) A primary key is a minimal set of attributes in a table that uniquely identifies tuples in that table.
c) A primary key is a unique identifier.
d) Both b) & c)
Answer : D

Question : What is the short-cut key for back-up?

a) Shift + Tab
b) Alt + Tab
c) Shift + Ctrl + Tab
d) None of the above
Answer : A

Question : What are the details required for filing income tax returns?
a) PAN, Aadhar Card, Current address and Bank Details
b) Income proofs and information about all the deductions claimed under Section 80
c) Tax payment information such as TDS and advance tax payments
d) All of the above
Answer : D

Question : We deduct ----- after computing tax liability, to determine the actual tax payment.
a) Advance tax
b) TDS
c) TCS
d) Both i & ii
Answer : D

Question : Create a new company in Tally from Company Info. menu is possible by selecting:
a) New Company
b) Start Company
c) Create
d) Create Company
Answer : D

Question : Which shortcut key to zoom in Tally?

a) Alt+P
b) Alt+Z
c) Alt+Ctrl+Z
d) None of these
Answer : B

Question : What is the benefit of income tax return file?

a) Claim Tax Refund
b) Income & Address Proof
c) Avoid Penalty and Prosecution
d) All of the above
Answer : D

Question : How to activate calculator in tally anywhere?

a) Alt + C
b) Ctrl + N
c) Ctrl + Alt + N
d) Ctrl + R
 P a g e | 317

Answer : B

Question : What is the due date of submission of return for an individual?

a) 31st July
b) 31st August
c) 30th September
d) 31st October
Answer : A

Question : Which Shortcut key is used to create a new company in Tally?

a) Ctrl+F3
b) Alt+F3
c) Ctrl+F4
d) Alt+F4
Answer : B

Question : The option used in Tally to close opened Company is:

a) Alter Company
b) Close Company
c) Shut Company
d) Exit Company
Answer : C

Question : Which key is used to post credit purchase in Tally?

a) F8
b) F9
c) F10
d) F2
Answer : B

Question : The return of income is to be furnished in

a) ITNS281
b) Form 26AS
c) Form26Q
d) ITR 1 – to 7 (as the case may be)
Answer : D

Question : Salary Account comes under which head

a) Indirect Incomes
b) Indirect Expenses
c) Direct Incomes
d) Direct Expenses
Answer : B

Question : What is the due date of submission of return for a company?

a) 31st July
b) 31st August
c) 30th September
d) 31st October
Answer : C

Question : To creating voucher, step after GOT is

a) Accounts info.
b) Accounting vouchers
 P a g e | 318

c) Inventory vouchers
d) Inventory info.
Answer : A

Question : Which one from the following options is the acknowledgement of filing the return of income?
a) ITR4
b) ITR – V
c) Form26AS
d) Form 26QB
Answer : B

Question : Number of digit in a PAN card is:

a) 7
b) 9
c) 10
d) 8
Answer : C

Question : What is the short-cut to copy text from Tally?

a) Ctrl + Alt + C
b) Alt + C
c) Ctrl + Shift + C
d) Alt + Shift + C
Answer : A

Question : Which sub menu is used to create new ledger, groups and voucher types in tally
a) Account Info
b) Accounting Vouchers
c) Inventory Vouchers
d) Inventory Info
Answer : A

Question : What is the Short-cut key for Payments in Tally?

a) F3
b) F4
c) F5
d) F6
Answer : C

Question : If the recipient of income doesn’t furnish his PAN to deductor then TDS is to be deducted at which rate?
a) 10%
b) 15%
c) 5%
d) 20%
Answer : D

Question : Related fields in a database are grouped to form a

a) Data file.
b) Data record.
c) Bank.
d) Menu.
Answer : B

Question : In Tally functions of F3 button

a) To close the company
 P a g e | 319

b) To select the different company

c) To change the current date
d) To select the company
Answer : B

Question : A report generator is used to

a) Delete files
b) Print files on paper.
c) Data entry.
d) Update files
Answer : B

Question : Which menu appears after starting tally for the first time?
a) Gateway of Tally
b) Company Info
c) Display
d) None of these
Answer : B

Question : Which shortcut key is used in Company Features screen to use Inventory features in Tally?
a) F1
b) F2
c) F4
d) F3
Answer : B

Question : Which shortcut key is used in company for statutory and taxation in Tally?
a) F11 And Then F3
b) F12 And Then F3
c) Alt+F11
d) Alt+Ctrl+F11
Answer : A

Question : Where do we record transactions of Salary, Rent paid?

a) Contra
b) Journal
c) Receipt
d) Payment
Answer : D

Question : Which option is used in Tally to make changes in created company?

a) Shut Company
b) Select Company
c) Alter
d) None of these
Answer : C

Question : For Bad Debt Recovery which group required to be selected

a) Indirect income
b) Direct income
c) Direct expenses
d) Indirect expenses
Answer : A
 P a g e | 320

Question : Is it possible to load companies with the same name at the same time?
a) Yes
b) No
c) Always possible
d) Sometimes possible
Answer : B

Question : What is the short-cut key for Receipts (transaction for direct cash) in Tally?
a) F4
b) F5
c) F6
d) F7
Answer : C

Question. Adjustment Entries/Non-Cash Entries are recorded in

(a) Payment Voucher
(c) Contra Voucher
(b) Journal Voucher
(d) Purchase Voucher
Answer
B
Question Which of the following is characteristic of Accounting Information System?
(a) It is helpful in handling financial transactions of an organisation
(b) It is helpful in budgeting
(c) It generates reports
(d) All of the Above
Answer
D
Question. __ is the name of Software:
(a) Ex
(b) Tally
(c) Busy
(d) All of the Above
Answer
D
Question. For creating a company we use
(a) Alt + F1
(c) Alt + F2
(b) Alt + F3
(d) ESC key
Answer
B
Question. Level of Secrecy is very low in case of:
(a) Ready to Use Software
(b) Customised Software
(c) Tailor made Software
(d) All of the Above
Answer
A
Question. Which of the following is helpful in decision making?
(a) Accounting Information System
(b) General Ledger
(c) Management Information System
(d) Payroll
Answer
 P a g e | 321

C
Question. There are ……….. pre-defined groups in tally :
(a) 15
(b) 13
(c) 28
(d) 2
Answer
C
Question. Which one of the following is not an advantage of Computerised Accounting System:
(a) High Reliability
(b) High Speed
(c) High Cost
(d) High Security of Data
Answer
C
Question. Which one of the following is limitation of Computerised Accounting System:
(a) Adverse Affect on Health
(b) Staff Opposition
(c) High Cost of Training
(d) All of the Above
Answer
D
Question. This is a non-accounting voucher.
(a) Receipt Voucher
(c) Memo Voucher
(b) Payment Voucher
(d) Journal Voucher
Answer
C
Question. Which one of the following is not a limitation of Computerised Accounting System:
(a) Flexible Reporting
(b) Security Problem
(c) High Cost of Training
(d) System Failure
Answer
A
Question. Examples of Transaction Processing System are:
(a) Automatic Teller Machines
(b) Order Processing
(c) Payroll Applications
(d) All of the Above
Answer
D
Question. For receipt voucher, we use ………. Key. A
(a) F6
(c) F4
(b) F5
(d) F7
Question. Cost of installation is very high in case of ……..
(a) Customised Software
(b) Tailor made Software
(c) Ready to Use Software
(d) All of the Above
Answer
B
 P a g e | 322

Question. This software is not developed according to the needs of some specific user :
(A) Tailor made Software
(B) Customised Software
(C) Ready to Use Software
(D) All of the Above
Answer
C
Question. To change period in Tally we use ………. Key.
(a) FI
(c) F5
(b) F3
(d) F2
Answer
D
Question It is easy to learn:
(a) Tailor made Software
(b) Customised Software
(c) Ready to Use Software
(d) All of the Above
Answer
C
Question. Which of the following is the purpose of Accounting Information System?
(a) Inventory Control
(b) Advertising
(c) Marketing Research
(d) Recruitment of Employees
Answer
A
Question. For print option in Tally we use ………. Short cut key.
(a) Ctrl + P
(c) Alt + P
(b) Shift + P
(d) Arrow Key
Answer
C

Plus Two Computerised Accounting Chapter Wise Questions and Answers Chapter 6 Data Base Management
System for Accounting
November 25, 2020 by Prasanna
Kerala Plus Two Computerised Accounting Chapter Wise Questions and Answers Chapter 6 Data Base
Management System for Accounting
Plus Two Accountancy Data Base Management System for Accounting One Mark Questions and Answers
Question 1.
DBMS stands for __________
Answer:
DataBase Management system.
Question 2.
Name of database object to hold data
(a) Tables
(b) Forms
(c) Queries
(d) Reports
Answer:
(a) Tables
Question 3.
LibreOffice Base is a
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a) Word Processing Software

b) Presentation Software
c) Spread sheet Software
d) Data Base Management Software
Answer:
d) Data Base Management Software
Question 4.
The common fields used in a relationship between tables are called
(a) Joint field
(b) Main field
(c) Key field
(d) Table field
Answer:
(c) Key field
Question 5.
The result of Query can be displayed by clicking on ___________
Answer:
Run Button
Question 6.
SQL stands for _______
Answer:
Structural Query Language
Question 7.
______ denotes the number of rows in the table
(a) Tuple
(b) Cardinality
(c) DBMS
(d) Domain
Answer:
(b) Cardinality
Question 8.
A single row in the table is called
(a) Attribute
(b) Tuple
(c) Column
(d) Cardinality
Answer:
(b) Tuple
Question 9.
Database in LibreOffice Base is called ________
(a) Data group
(b) Mass Data
(c) Rows and columns
(d) Data Source
Answer:
(d) Data Source
Question 10.
A data base consists of a number of that ______ contains the individual pieces of data
Answer:
fields
Question 11.
A _________ of the database is a group of fields
(a) Table
(b) Forms
(c) Query
(d) None of these
Answer:
(a) Table
 P a g e | 324

Question 12.
The data type suitable to the name of a person
Answer:
Text: [VARCHAR]
Question 13.
The default extension of LibreOffice Base file is
(a) .bmp
(b) .xls
(c) .lob
(d) .odb
Answer:
(d) .odb
Question 14.
Which among the format searches for all values ending with R?
(a) LIKE ‘*R*’
(b) LIKE ‘*R’
(c) LIKE ‘R*’
(d) LIKE ‘END\‘R’
Answer:
(b) LIKE ‘*R’
Question 15.
ODBC stands for _______
Answer:
Open Database Connectivity
Question 16.
The data type suitable to the age of an employee is;
Answer:
Number (Numeric)
Question 17.
__________are used to store the data in the database
(a) Reports
(b) Forms
(c) Tables
(d) Queries
Answer:
(c) Tables
Question 18.
________ is a tool to connect tables in a database
(a) Forms
(b) Queries
(c) Relationships
(d) Fields
Answer:
(c) Relationships
Question 19.
Choose the right path to start up LibreOffice Base
(a) Applications → Office → LibreOffice Base
(b) Applications → Create → LibreOffice Base
(c) Applications → Login → Office → LibreOffice Base
(d) Applications → Create → Office → LibreOffice Base
Answer:
(a) Applications → Office → LibreOffice Base
Question 20.
LibreOffice Base runs on _____ and _____ operating system
Answer:
Windows and Linux
Question 21.
Which among the following is not an advantage of LibreOffice Base
 P a g e | 325

(a) The information is portable

(b) Ensure Data security
(c) Initial training is required for all users
(d) Many people can access the same database at the same time
Answer:
(c) Initial training is required for all users
Question 22.
Which among the following is not a component of Database system?
(a) Data
(b) Hardware
(c) Software
(d) None of these
Answer:
(d) None of these
Question 23.
RDBMs stands for ____________
Answer:
Relational Data Base Management System
Question 24.
The data type suitable to basic pay of employee:
Answer:
Number (Numeric)
Question 25.
What field type is used to store picture in a table?
Answer:
OLE object.
Question 26.
‘Join Line’ in the context of LibreOffice Base Tables means:
Answer:
Graphical representation of relationship between tables.
Question 27.
Reports are created from
(a) Tables
(b) Forms
(c) Relationships
(d) Tabs
Answer:
(a) Tables
Question 28.
Database is referred to as _______________
(a) Front-end program
(b) Back – end program
(c) User-end program
(d) None of these
Answer:
(b) Back – end program
Question 29.
Which among the following is not a DBMS?
(a) Base
(b) Access
(C) Oracle
(d) None of these
Answer:
(d) None of these
Question 30.
Choose the right pairs.
(a) Desktop data base – Single user applications
(b) Desktop data base – Multi user applications
 P a g e | 326

(c) Server data base – Multi user applications

(d) Server data base – Single user applications.
Answer:
(a) & (c)
Question 31.
_______ are the fundamental building blocks fo the database.
(a) Tables
(b) Forms
(c) Queries
(d) Reports
Answer:
(a) Tables
Question 32.
Each column of the table is called …..(a)…… and characteristics of which is called …….(b)…….
Answer:
(a) field
(b) attributes
Question 33.
The format for getting the employees whose names begins with ‘K’ is ______
Answer:
LIKE ‘K*’
Question 34.
To expect a well formatted printable data from LibreOffice Base database, we may use
Answer:
Report
Question 35.
__________ are used for connecting tables in database to get the advantage of data redundancy
(a) Relationships
(b) Primary key
(c) Forms
(d) Tables
Answer:
(a) Relationships
Question 36.
In a database context is a window or screen that contain numerous fields, or spaces to enter data
(a) Tables
(b) Forms
(c) Query
(d) Reports
Answer:
(b) Forms
Question 37.
________ section contains the tittle of the report
(a) Field name
(b) Report header
(c) Form Header
(d) Report name
Answer:
(b) Report header
Question 38.
A ________ is a reference to a field in another relation or table
(a) Primary key
(b) Candidate key
(c) Foreign key
(d) Super key
Answer:
(c) Foreign key
 P a g e | 327

Question 39.
The name which indicate the number of columns in the table
(a) Domain
(b) Tuple
(c) Degree
(d) Attribute
Answer:
(c) Degree
Question 40.
The end result of normalisation is known as ___________
Answer:
Refinement
Question 41.
Data type ‘Text’ can store up to characters
(a) 65,535
(b) 255
(c) 35,423
(d) 555
Answer:
(b) 255
Question 42.
Relationship between primary key of one table to primary key of another table is called
(a) One to one
(b) One to many
(c) Many to many
(d) Many to one
Answer:
(a) One to one
Question 43.
A query criteria LIKE ‘RAJU*’ returns all names that: LIKE ‘RAJU*’
(a) Contains RAJU
(b) Starts with RAJU
(c) Ends with RAJU
(d) None of these
Answer:
(b) Starts with RAJU
Question 44.
The characteristics of an entity is ________________
Answer:
Attributes
Question 45.
The data type _______ can store upto 65, 535 characters
(a) Text
(b) Number
(c) Memo
(d) Date
Answer:
(c) Memo
Question 46.
Anything which has a real life existence is called ___________
Answer:
Entities
Question 47.
What criteria is used to get return a text starts with ‘A’
Answer:
LIKe ‘A*’
Question 48.
A text data field is used to hold ______ values
 P a g e | 328

(a) Alphanumeric
(b) Numbers only
(c) Alphabets only
(d) Any data
Answer:
(a) Alphanumeric
Question 49.
DBMS is an aggregate of data, hardware, software and ______
Answer:
Users
Question 50.
A _______ is a two dimensional array containing rows and columns
Answer:
Table
Question 1.
Which function will be used to calculate the interest portion of on installment of loan :
(a) PPMT
(b) IPMT
(c) FAPM
(d) None of these
Answer :
(b)
Question 2.
Which formula to be used to get the sum total of cell A1, A2 and A3 :
(a) SUM = (A1 + A2 + A3)
(b) SUM = (A1, A2, A3)
(c) = SUM (A1 : A3)
(d) None of these
Answer :
(c)
Question 3.
Which of the following coordinates excel work book :
(a) Workbook
(b) Worksheet
(c) Chart
(d) Worksheet and chart
Answer :
(d)
Question 4.
For fixed the Raw and Column title in a worksheet, where by they don’t scroll, when spreadsheet is scrolled. What will
be used in the following :
(a) Freeze pens command
(b) Unfreeze pens command
(c) Hold title command
(d) Marge command
Answer :
(a)
Question 5.
In windows at which place do we type values and formulae :
(a) In title toolbar
(b) Through smart screen menu command
(c) In formula bar
(d) In standard bar
Answer :
(c)
Question 6.
Data or formula can be copied by :
(a) Through cut, copy, paste command on the edit menu
 P a g e | 329

(b) Through smart screen menu command

(c) Through buttons of standard toolbar
(d) All of the above
Answer :
(d)
Question 7.
Which of the following formula is incorrect :
(a) =(10 + 50)
(b) = (B7 x B1)
(c) = (B7 + 14)
(d) 14 + 15
Answer :
(d)
Question 8.
Which function will be used for calculation of fixed depreciation?
(a) SLN
(b) RRF
(c) DVD
(d) LTF
Answer :
Question 9.
What is the syntax, for calculation by diminishing balance method :
(a) = DB (Cost, salvage, life, 1)
(b) = FB (cost, 25, 1)
(c) = PFB (Cost, salvage, life)
(d) None of these
Answer :
(a)
Question 10.
Which of the following functions is used to calculate principal amount from instalment :
(a) RPT
(b) PMT
(c) PPMT
(d) IPMFT
Answer :
(c)