Test: Accounting Fundamentals Marks = 20

Taha Popatia

1. Zamil Limited applied to the bank for an overdraft limit of Rs. 0.5 million, which was
subsequently accepted by the bank.
Which of the following statements is correct?

(a) Bank will transfer Rs. 0.5 million to the bank account of Zamil Limited
(b) Bank will pay all the cheques issued by Zamil Limited
(c) Bank will pay all the cheques of the amount less than 0.5 million
(d) Bank will pay the cheques issued by Zamil Limited, provided that the account will
not be overdrawn by more than Rs. 0.5 million

2. Which of the following transactions affects the accounting equation as "increase in

one asset, decrease in another asset, and decrease in equity"?

(a) Cash received of Rs. 25,000 against disposal of an asset with a carrying value of
Rs. 20,000
(b) Cash received of Rs. 25,000 against disposal of an asset with a carrying value of
Rs. 30,000
(c) Cash of Rs. 25,000 was received from sales of inventory at 15% margin
(d) Cash of Rs. 25,000 was received from sales of inventory at 10% markup

3. Which of the following best describes the statement of financial position?

(a) Includes all cash inflows and outflows during the year
(b) Includes all assets, liabilities, and equity
(c) Includes all assets and liabilities
(d) Includes all assets, liabilities, income, and expenses

4. Which of the following statements is correct?

(a) Revenue minus cost of sales is net profit

(b) Revenue minus cost of sales, add other income is net profit
(c) Revenue minus operating expenses is gross profit
(d) Revenue minus cost of sales is gross profit

5. Which of the following combinations includes only liabilities?

(a) Machines, Debtors, Cash

(b) Creditors, Bank Overdraft, Bills Payable
(c) Bank, Payables, Sales
(d) Loan Obtained, Loan Issued, Creditors

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PRC-04: Introduction to Accounting
Test: Accounting Fundamentals Marks = 20
Taha Popatia

6. With reference to the accounting equation, state which of the following statements
is true?

(a) Assets should be equal to liabilities

(b) Assets should be equal to equity
(c) Assets should be equal to liabilities and equity
(d) Assets plus liabilities should be equal to equity

7. Total assets of a business are Rs. 250,000, and current assets are 25% of non-current
assets. If the liabilities of the business are Rs. 100,000, and equity was 6 times more
than its current liabilities, the value of net current assets (current assets minus
current liabilities) shall be:

(a) Rs. 25,000

(b) Rs. 37,500
(c) Rs. 50,000
(d) Cannot be calculated from the above data

8. Capital of Bhai Bhai Associates (BBA) was Rs. 250,000. Which of the following is the
correct representation in the statement of financial position?

(a) Assets Rs. 240,000, Liabilities Rs. 10,000

(b) Assets Rs. 50,000, Liabilities Rs. 300,000
(c) Assets Rs. 275,000, Liabilities Rs. 25,000
(d) Assets Rs. 30,000, Liabilities Rs. 280,000

9. Which of the following combinations represents assets only?

(a) Debtors, Purchases, Cash in Hand

(b) Building, Cash at Bank, Investments
(c) Creditors, Insurance, Tax
(d) Bank Overdraft, Equipment, Cash in Hand

10. Which of the following statements best describes the concept of Equity?

(a) Primary right of owners on the assets of the business

(b) Residual right of owners on the assets of the business
(c) Secondary right of owners on the assets of the business
(d) Equity refers to capital employed into the business

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PRC-04: Introduction to Accounting
Test: Accounting Fundamentals Marks = 20
Taha Popatia

11. Debit represents all of the following, except:

(a) Increase in asset

(b) Decrease in liability
(c) Decrease in equity
(d) Increase in equity

12.

(a) Rs. 78,000

(b) Rs. 48,000
(c) Rs. 38,000
(d) Rs. 18,000
13. Which of the following is capital expenditure?

(a) Salaries paid in cash

(b) Equipment purchased on credit
(c) Inventory purchased on credit
(d) Electricity bill received but not yet paid

14. Mukhtar earned profit of Rs. 325,000 during the first quarter of 2022 but withdrew
the following:
• Cash of Rs. 220,000, but he discharged a business liability of Rs. 75,000 as well.
• Goods of Rs. 100,000, of which 40% goods were distributed as free samples (free
sample expense has been included in the calculation of quarterly profit above).
What will be the impact on net assets during the first quarter of 2022?
(a) Net assets increased by Rs. 120,000
(b) Net assets decreased by Rs. 5,000
(c) Net assets increased by Rs. 210,000
(d) Net assets decreased by Rs. 120,000

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PRC-04: Introduction to Accounting
Test: Accounting Fundamentals Marks = 20
Taha Popatia

15. In the case of Mr. Javed receiving a cheque from a customer for Rs. 10,000 and
depositing it into the bank, but the cheque being returned due to insufficient funds,
the dishonoured cheque needs to be recorded in the General Journal.

(a) Sales day book

(b) Sales return day book
(c) Cash book
(d) General journal

16. The total of the Purchases Day Book represents the Net Credit Purchases, which is
the amount of credit purchases after any discounts or returns.

(a) Gross credit purchases

(b) Net credit purchases
(c) Gross total purchases
(d) Net total purchases

17. The current and non-current assets of Rana Enterprises as at 31 January 2022 were
Rs. 400,000 and Rs. 200,000, whereas liabilities were Rs. 250,000. The equity of Rana
Enterprises as at 31 January 2022 will be:

(a) Rs. 600,000

(b) Rs. 350,000
(c) Rs. 150,000
(d) Rs. 50,000
18. Adil sublets part of his premises to Abid. The rental income shall be classified as:

(a) Capital Receipt

(b) Capital Expenditure
(c) Revenue Receipt
(d) Revenue Expenditure

19. Mr. Kashan purchased goods for Rs. 12,000, paid Rs. 10,000 at the time of purchase,
and will pay the remaining Rs. 2,000 later. The correct way to record this transaction
is:

(a) Purchases day book Rs. 12,000

(b) Purchases day book Rs. 10,000, Cash Book Rs. 2,000
(c) Purchases day book Rs. 2,000, Cash book Rs. 10,000
(d) Cash book Rs. 10,000, General journal Rs. 2,000

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PRC-04: Introduction to Accounting
Test: Accounting Fundamentals Marks = 20
Taha Popatia

20. Sultan Traders deals in electric fans. The owner of Sultan Traders took one electric
fan for his home. Which of the following accounts will be debited?

(a) Fans account

(b) Purchases account
(c) Sales account
(d) Drawings account

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PRC-04: Introduction to Accounting