Financial Accounting MCQ (B.COM SEM 1)

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UNIT 1(TOPIC WISE MCQ)
University Of Lucknow
Financial Accounting

Q1.Who is considered the father of modern accounting?
a) Luca Friar Pacioli
b) J. Betty
c) Henry Fayol
d) Gestonburg
Q2, Give some examples of Personal account.
Ans: Drawings, Capital, Loan etc
Q3. Give some examples of real account.
Ans: Goodwill, Patents, Trade Mark, Copyright, Land and Building, Furniture, Fixtures, Cash, Bills receivable etc.
q4. Which of the following is not a personal account?
a) Capital Account
b) Drawings Account
c) Bills Payable Account
d) Bills receivable Account
e) All of the above
Q5. A list of assets, liabilities and owner’s equity of a business enterprise as of a speciÕc date is:
a) Income Statement
b) Cash Flow Statement
c) Balance-Sheet
d) Proft & Loss Account
Topic:
Definition,Nature and Scope Of
Acoounting
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Q6.The properties own by business enterprises are called:
a) Assets
b) Liabilities
c) Capital
Q7. Which of the following is not a characteristic of accounting information?
a) Relevance
b) Reliability
c) Comparability
d) Matching
Q8. The last step in accounting process is:
a) Identifying the business transactions and events
b) Recording of business transactions
c) Classifying the business transactions
d) Communication of Õnancial statements
SHORT HEAD LINE
9. In every transaction at least two parties are involved.
10. Book-keeping is a systematic record of all Financial transactions.
11. Amount payable by the entity to the outsiders in termed as Liability.

Q12. “Accounting is an art of recording, classifying and summarising in a signiÕcant manner and in terms of money,
transactions and events which are of a Õnancial character and interpreting the result thereof.” This defnition is
given by:
a) American Institute of CertiÕed Public Accountants
b) J. Betty
c) Henry Fayol
d) Gestonburg
Topic:
Concept and Convention
Q13.Accounting principles are divided into:
a) Accounting Concepts
b) Accounting Conventions
c) Fundamental Accounting Assumptions
d) All of the above
Q14.According to which of the following accounting principles, the owners of business are considered as creditors?
a) Money Measurement.
b) Cost.
c) Dual Aspect.
d) Separate Legal Entity.
Q15.Accounting concepts are based on:
a) Certain assumptions
b) Certain facts and Origin
c) Certain accounting records
d) Government guidelines

Q16.Non-Financial quantitative information is not recorded in accounts due to:
a) dual concept
b) accrual concept
c) money measurement concept
d) entity concept
Q17.Which of the following is an example of money measurement concept?
a) Dispute between management and labour union
b) Loss of material Rs. 5,000
c) Sales promotion policy
d) Advertisement for fresh appointment
Q18. Contingent liability is shown in the balance sheet because of:
a) Convention of consistency
b) Convention of materiality
c) Convention of full disclosure
d) Convention of conservatism
Q19. In accounting, all business transactions are recorded as having dual aspect due to:
a) Money measurement concept
b) Dual aspect concept
c) Going concern concept
d) Matching concept
Q20. Accounting equation is an expression of:
b) Business entity concept
d) Matching concept

Q21.Prepaid expenses are shown as an asset due to:
d) Matching concept
Q22. According to which assumption assets are shown in the accounting records at cost less depreciation:
d) Matching concept
Q23. Fixed assets are recorded at cost less depreciation not at a realisable value because of:
d) Matching concept
Q24. Point out the correct accounting equation:
a) Assets = Liabilities – Capital
b) Liabilities = Capital + Assets
c) Capital = Assets + Liabilities
d) Liabilities = Assets – Capital
Q25. According to which of the following concepts, even the proprietor of the business is treated as a creditor of the
business?
b) Cost concept
c) dual aspect concept
d) Business Entity concep

Q26.Final accounts must be prepared on a periodic basis rather than waiting till the business is terminated:
b) Cost concept
d) Accounting Period Concept
Q27.Revenue is considered as being earned on the date at which it is realised:
b) Realisation concept
d) Accounting Period Concept
Q28.The concept of conservatism takes into account:
a) All future proÕts and all future losses
b) All future proÕts but leaves all future losses
c) All future losses but leaves all future proÕts
d) All of the above
Q29. . According the concept of conservatism, the stock is trade is valued at:
a) market price
b) cost price
c) market price or cost price, whichever is lower
d) market price or cost price, whichever is lower

Q30.According to which of the following concepts, for determining the net income from business, all costs which are
applicable to revenue of the period should be charged against that revenue?
a) matching concept
b) cost concept
c) money measurement concept
d) dual aspect concept
Q31. An accounting concept according to which all relatively important and relevant items are disclosed in the
Financial statements is:
a) Materiality
b) Going concern
c) Accrual concept
d) Matching
Q32. Which convention is also known as doctrine of prudence?
a) Convention of consistency
b) Convention of full disclosure
c) Convention of Conservatism
d) Convention of materiality
Important:
33.Principle is objective if the accounting information is not in Influence by the personal bias.
34. Principle is Feasible if it can be applied without unnecessary complexity or cost.
35. Accounting concepts are the Basics upon which the science of accounting is founded.
36. Conventions denote Tradition which guides the accountant in the preparation of Financial statements.
37.usiness entity concept implies that business is different from the owner.
38. Relevance and Reliability are the characteristics which make the accounting information useful for decision
making.
39. The Consistency principle requires that the same accounting methods should be used from year to year.

Topic: Introduction To Financial
Accounting
Q40.The art of recording, classifying and summarizing is called:
(A) Journalizing
(B) Accounting
(C) Bookkeeping
(D) Record Keeping
Q41.Accounting records of a business enterprise is required by:
(A) Management of the business
(B) Outsiders
(C) All of the above
(D) None of these
Q42. Double Entry means:
(A) Entry for the two aspects of books
(B) Entry at two dates
(C) Entry in two aspects of transaction
(D) All of the above
Q43. Bookkeeping provides the:
(A) Primary information
(B) Secondary information
(C) Final information
(D) None of these

Q44.Recording of the business transaction in a systematic way is called
(A) Accounting
(B) Recording
(C) Journalizing
(D) Bookkeeping
Q45. The goods which are purchased for the purpose of resale are called
(A) Purchases
(B) Merchandise
(C) Goods/Inventory
(D) All of the above
Q46. The rights and claims of outsiders/ owner against the asset is called
(A) Owner’s Equity
(B) Liabilities
(C) Equities
(D) None of these
Q47.The complete process of accounting is called
(A) Journalizing
(B) Posting
(C) Summary
(D) Accounting Cycle

Q48. An expenditure the benefit of which is enjoyed for more than one financial year is known as:
A. revenue expenditure
B. long term expenditure
C. extra ordinary expenditure
D. capital expenditure
Topic:
Capital & Revenue Items
Q49.An expenditure that provides benefit for less than one financial period is known as:
A. ordinary expenditure
B. regular expenditure
C. revenue expenditure
D. nominal expenditure
Q50. In accounting and finance, the inflows of economic resources which occur occasionally and which are normally non-
recurring in nature are known as:
A. revenue receipts
B. capital receipts
C. unusual receipts
D. additional receipts
Q51. Which of the following receipts is not a capital receipt?
A. Cash received from sale of a fixed asset
B. Loan received from a bank
C. Cash received as rental income
D. Cash received from sale of shares

Q51. Which of the following is not a correct statement?
A. Capital expenditures become a part of balance sheet
B. Revenue expenditures are shown in the income statement
C. Revenue receipts become a part of balance sheet
D. Revenue receipts are shown in the income statement
Q52. Capital Expenditure is
A. Expenditure on sale
B. Expenditure on employee
C. Expenditure on purchase of fixed asset
D. All of the above
Q53. Expenditure done on purchase of second hand asset, is a
A. Revenue expenditure
B. Capital Expenditure
C. Depends on wish of owner
D. None of the above
Q54. Deferred Revenue expenditure is a type of
A. Capital expenditure
B. Revenue expenditure
C. It’s not an expenditure, it’s an asset

Q55. Depreciation on fixed asset, is an example of
A. Capital expenditure
B. Capital receipt
C. Revenue receipt
D. Revenue expenditure
Q56.Capital expenditure is shown in
A. Balance sheet
B. P&L
C. Both a & B
Q57. Revenue expenditure is shown in
A. Balance sheet
B. P&L
C. Both a & B

Topic:
Accounting Standards and IFRS
Q58. Which accounting standard is applicable for valuation of inventories?
(a) AS -1
(b) AS-2
(c) AS-3
(d)As-4
Q59.Which accounting standard is applicable for intangible assets?
(a) AS- 10
(b) AS-6
(c) AS-26
(d)AS-3
Q60. Which accounting standard is applicable for depreciation accounting?
(a)As-6
(b) AS-9
(c)AS-1
(d)AS-3
Q61. Which accounting standard is applicable for cash flow statement?
(a) AS- 1
(b)AS-10
(c)AS-19
(d)AS-3

Q62. Total number of IFRS is:
a) 15
b) 16
c) 17
d) 18
Q63. International Accounting Standard Board (IASB) was established in the year:
a) 1977
b) 2001
c) 2013
d) 2019
Q64.Accounting Standards Board of India was established in the year:
a) 1970
b) 1972
c) 1973
d) 1977
Accounting Standard board of India was set up by ICAI (Institute of Chartered
Accountants of India).
The International Financial Reporting Standards (IFRS)

Unit II : Partnership Accounts
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Partnership Accounts - problems and detailed study. Admission, Retirement and Death of partners,
Dissolution of Partnership Firadvancedm.
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Q1. Interest on Partners capital is:
a) An expenditure.
b) An appropriation.
c) A gain.
d) None of these.
Q2. In the absence of partnership deed, partners are not entitled to receive:
a) Salaries.
b) Commission.
c) Interest on Capital.
d) All of the above.
Q3. Interest on partner’s capital is paid:
(a) Out of profit;
(b) Out of capital;
(c) None of the above two.
(D)All of these
Q4.Interest on capital is generally calculated on:
(a) Opening capital;
(b) Closing capital;
(c) Average capital
(d)Fluctuating Capital

Topic : Partnership Accounts - advanced problems
Q5.A and B are partners. C is admitted into the Õrm for 1/3rd share of proÕt with a guaranteed profit of Rs. 10,000 p.a. The Firm
net profit during a year is Rs. 24,000. If A is the guarantor, how much profit would be given to A.?
a) Rs. 24,000
b) Rs. 8,000
c) Rs. 6,000
d) Rs. 2,000.
Q6.Manager is entitled to a commission of 10% of net profits after charging such commission. The Firm’s net profit during a year
is Rs. 11,000. The amount of Manager’s commission will be:
a) Rs. 1,000
b) Rs. 1,100
c) Rs. 11,000
d) None of the above
Q7. A and B are partners. C is admitted into the Õrm for 1/3rd share of profit with a guaranteed profit
of Rs. 10,000 p.a. The Firm’s net profit during a year is Rs. 24,000. What amount would be given to C as his share of proft?
a) Rs. 24,000
b) Rs. 8,000
c) Rs. 10,000
d) None of the above

Q8.An ordinary partnership business can have:
(a) Not more than 50 partners.
(b) Not more than 10 partners.
(c) Any number of partners.
(d) Any number than 2 partners.
Q9. 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.
Q10. Partnership is formed by the partners by:
(a) Written agreement
(b) Oral agreement
(c) Written or oral
(d) None of these
Q11. Partnership business in India is government by partnership Act of:
(a) 1913
(b) 1932
(c) 1984
(d) 1928

1. The member of a partnership is collectively known as Firm.
2. Members of a partnership business are individually known as partners.
3. Partnership Firm is governed by the Indian Partnership Act, 1932.
4. Sec. 4 (3/4/5) of the Indian Partnership Act 1932 define a partnership.
5. A partnership is an Association of two or more partners.
6. Liability of a partner is Unlimited.
7. Registration of a partnership Firm is Voluntary.
8. A new partner can be admitted into the Firm only when all partners are Agree.
9. The document which contains the terms and conditions of partnership is called Partnership is
called Partnership Deed.
10. In the absence of a specifis agreement, interest on capital is paid only out of profit.
11. A partner acts as an agent for a Firm.
12. Partners are mutual Agents for each other.
13. In absence of Partnership agreement interest on partner’s loan/Advance will be calculated at
6% p.a. (5% / 6% / 8%)
14. The partner who does not participate actively in partnership business is knows as nominal
(nominal / inactive) partner.
15. Interest on Partner’s loan is to be credited to his loan account.
16. Partner’s loan is paid before payment of partner’s capital.
17. Interest on Partner’s capital is credited to his capital account.
18. Interest on Partner’s drawings is debited to his capital account.
luupdate Important Highlights Topic : Partnership Accounts - advanced problems and
detailed study

19. Minimum number of partners is Two and the maximum is 100 for a Firm.
20. In case of Fixed capital, interest on partner’s capital is credited to Partner’s Current Account.
21. If drawings are made with equal amount in the beginning of the every month for whole year,
interest on drawings is to be calculated for an average period of 6.5 months.
22. If drawing made with equal amount at the end of every month for whole year, interest on
drawings is to be calculated for an average period of 5.5 months.
23. If drawings are made with equal amount in the middle of the every month for whole year,
interest on drawings is to be calculated for an average period of 6 months.
24. In case of Fixed capital, partner’s capital account always shows a credit balance.
25. When partner’s capital account is Fixed then partner’s current account is prepared.

luupdate Important Highlights Partnership Accounts -Admission
1.Share of goodwill brought in cash by the new partner is known as premium for goodwill.
2. Premium for goodwill brought in by the incoming partner is a compensation for the loss shared by
the old partners in terms of share in profts.
3. The value of goodwill varies on the basis of profits of the business.
4. Revaluation account is a nominal account.
5. Reduction in provision for bad debts will be credited to the Revaluation A/c.
6.Old ratio itself is the sacrifice ratio unless there is a change of profit sharing ratio among the old partners.
7. Calculation of Sacrifice ratio is necessary when the new partner brings in his share of goodwill in cash.
8. As per AS 26, only purchased goodwill will be recorded in the books of account.
9. The ratio in which the old partners surrender their share profits in favour of the new partner is called
sacrifice ratio.
10. When the book values of the assets and liabilities are not to be revised, memorandum revaluation account
is prepared.
11. Staff provident fund is a liability.
12. Profits or losses arise on the revaluation of assets and liabilities are shared by the old partner’s in old
ratio.
13. If at the time of admission the revaluation a/c shows a proÕt it should be credited to old partner’s
capital account in old ratio.

14. If at the time of admission the revaluation a/c shows a loss it should be debited to old partner’s capital account
in old ratio.
15. A revaluation account is to be opened when the values of assets and liabilities are required to be altered.
16. Goodwill is an intangible asset.
17. Memorandum Revaluation Account is opened when after revaluation the values of assets and liabilities are kept
unaltered.
18. When goodwill appears in the Balance Sheet at its full value, premium brought in by the new partner is credited
to Capital Account of the new partner.
19. If the new partner brings his share of goodwill in cash it will be shared by old partners in sacrifice ratio.
20. On admission, a new partner gets two rights viz-right to assets and right to share profits.
21. Assessed value of reputation of a business is known as goodwill.
22. Extra earning capacity of a Õrm is known as Goodwill.
23. A new partner may be admitted in a partnership firm with the consent of all the existing partners.
24. The document containing terms and conditions is called the Partnership Deed.
25. The registration of a partnership firm is voluntary.
26. In case of admission of a partner, the incoming partner has to pay his share of premium to the old partner in his
ratio of gain.
27. Goodwill is written off in the Old ratio in case of partnership after the admission of new partner.
28. If a partner takes over a liability of the Firm’s, the partner’s capital account is credited.
29. If a partner takes over an asset of the firms , the partner’s capital account is debited.

Q1. When a new partner is admitted, it requires the consent of
a) All the partners.
b) Majority of the partners.
c) Any one of the partners.
d)Two Of them
Q2. At the time of admission of a new partner
a) Old firm has to be dissolved.
b) Old partnership has to be dissolved.
c) Both the old Firm and partnership have to be dissolved.
d) Neither the Firm nor the partnership has to be dissolved.
Q3. The sacrifice of the old partners is equal to
a) Their new ratio.
b) Their old ratio.
c) New ratio-Old ratio.
d) Old ratio-New ratio.
Q4. Premium brought in cash by the new partner on admission is credited to
a) Premium for goodwill account.
b) Cash account.
c) Capital account of all the partners.
d) Capital account of the old partners.
Partnership Accounts -Admission

Q5.At the time of admission an incoming partner contributes as goodwill:
(a) In cash
(b) Does not pay cash
(c) May or may not pay cash for good will
(d) None of these.
Q6.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) As their old profit ratio
(b) According to new ration
(c) According to sacrifice ratio
(d) None of these
Q7. At the time of admission of a new partner, general reserve is:
(a) Debited to capital of old partners
(b) Credited to capital of old partners.
(c) Allowed to remain is balance sheet
(d) Debited to current account
Q8.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

Q9.In the revaluation account an increase in the value of land and building:
(a) Appears on the debit side
(b) Appears on the credit side
(c) Appears on the credit side of good will account
(d) Does not appear at all
Q10. Liability of partners in a partnership business is:
(a) Limited
(b) Un-limited
(c) Limited & unlimited
(d) None of these
Q11. The objective of partnership is to:
(a) Earn profit
(b) Not to earn profit
(c) Welfare of members
(d) None of these
Q12. Value of good will agreed upon Rs. 30000 on C,S admission and allowing him ¼ share of total
profit Good will is brought in cash, the amount of good-will be as:
(a) Rs. 30000
(b) Rs. 7500
(c) Rs. 150000
(d) Rs. 120000

Partnership Accounts -Retirement and Death of partners
1. In the event of death, the profit or loss on revaluation of asset and liabilities is transferred to all the partner’s capital
account in old ratio.
2. Gaining ratio = New ratio – old ratio.
3. The ratio in which the remaining partners acquire the share of the retiring partner is called gaining ratio.
4. Retiring partners’ share of goodwill is adjusted through the remaining partners’ capital accounts in gaining ratio.
5. On the death of a partner, the amount due to him will be credited to his executor’s loan account if it is not paid
immediately.
6. Decrease in liabilities at the time of retirement of a partner is debited to revaluation account.
7. At the time of retirement of a partner, profit on revaluation will be credited to the capital account of all partners.
8. In case of death of a partner, profit and loss suspense account is shown in new balance sheet on assets side.
9. On retirement of a partner goodwill be credited to the capital account of retiring partner.
luupdate Important Highlights

Q1.The partnership may come to an end due to the:
(a) Death of a partner
(b) Insolvency of partner
(c) By giving notice
(d) All of the above
Q2.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 above
Q3.Revaluation account is operated to find out gain or loss at the time of:
(a) Admission of a partner
(b) Retirement of a partner
(c) Death of a partner
(d) All of above
Q4.Partners equity is effected due to:
(a) Retirement of a partner
(b) Admission of a partner
(c) Death of a partner
(d) All of above

Q5.An account operated to ascertain the loss or gain at the death of a partner is called:
(a) Realization account
(b) Revaluation account
(c) Execution account
(d) Deceased partner A/c
Q6. Amount due to out going partner is shown in the balance sheet as his:
(a) Liability
(b) Asset
(c) Capital
(d) Loan
Q7. 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 above
Q8. A B and C are partners sharing proÕt in the ratio 2:2:1. C retired. The new proFIt sharing ratio between A and B will be
a. 2:1
b. 1:1
c. 3:1
d. None of the above.

Q9. 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. The Bank rate.
Q10. A, B and C share profit equally. A retires. Goodwill is appearing in the balance sheet at Rs. 12,000 but it is revalued at
Rs. 18,000. A will be credited with
a. Rs. 6,000
b. Rs. 4,000
c. Rs. 2,000
Q11. On retirement, the value of goodwill is credited to:
a. All partners.
b. Continuing partners.
c. Retiring partner.
Q12Joint life policy amount received by a firm is distributed in _____.
a. Opening capital ratio.
b. Closing capital ratio.
c. Old profit sharing ratio of partners.
d. New profit sharing ratio of partners.

Partnership Accounts -Dissolution of Partnership Firm
luupdate Important Highlights
1. Unrecorded assets when realised are credited to realisation Account.
2. Partner’s loan account is not transferred to Partner’s Capital Account.
3. Partner’s loan is paid before the payment of Capital Of Partners.
4. Assets having provision are transferred to realisation account at Gross amount.
5. Private property of the partner is used Õrst to pay Private debt.
6. Liabilities not recorded but paid are debited to Realisation account.
7. Loan by the relative of a partner is paid before the payment of partner’s Loan
8. Realisation account is prepared on the dissolution of Firm.
9. If an unrecorded asset is realised, it is credited to Realisation account.
10. No entry is required when a Creditors accepts an asset in payment of his debt.
11. On dissolution, Flactitious assets are transferred to Partner’s Capital accounts.
12. If a partner takes over a liability of the firm, the partner’s capital account is Credited.

Q1. The decision is Garner Vs Murray was given in:
(a) 1904
(b) 1905
(c) 1933
(d) 1804
Q2.Revolution A/c is a:
(a) Real A/c
(b) Personal A/c
(c) Cash A/c
(d) Nominal A/c
Q3. Upon the sale of an established business its good will:
(a) Marketable value
(b) Not marketable value
(c) (b) and (c)
Q4. 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

Q5. For the firm interest on drawing is:
(a) Expense
(b) Income
(c) Liability
(d) None
Q6.Every partner has a right to be consulted in all matters affecting the business of:
(a) Sole – tradership
(b) Partnership
(c) JSC
(d) Both (a) and (b)
Q7. At the time of dissolution non – cash assets are credited with:
(a) Market value
(b) Book value
(c) As the agreed amount among the partners
(d) Cost or market which ever is low
Q8.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 above

Q9. If no provision is made in agreement regarding the duration of the partnership:
(a) Limited partnership
(b) Partnership at – will
(c) None
(d) Particular partnership
Q10.A person who declares by word of mouth as partner of the firm is called:
(a) Active partner
(b) Estople partner
(c) Dormant partner
(d) Nominal partner
Q11. A person who receives a share of profits from one of the regular partner is called:
(a) Secret partner
(b) Quasi
(c) partner in profit only
(d) Sub – partner
Q12. 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) None of these
(d) Arbitration clause

Q13. For any decrease in the value of liability, revolution A/c is to be:
(a) Debited
(b) Credited
(c) Both (Cr.) & (Dr.)
(d) Neither (Dr.) & (Cr.)
Q14. An unrecorded asset realised at the time of realisation is credited to:
(a) Realisation A/c
(b) Revolution A/c
(c) Capital Accounts
(D) Partner Capital Accounts
Q15. At the time of dissolution of the Firm, loan from partner’s relative is:
a) Transferred to realisation account.
b) Transferred to partner’s capital account.
c) Transferred to revaluation account.
d) Not transferred to any account.

Unit III : Hire Purchase and Instalment Accounts, Royalty Accounts, Insolvency Accounts.
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Unit III : Hire Purchase and Instalment Accounts, Royalty Accounts, Insolvency Accounts.
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Q1. The act of buying an asset without having to make full payment in the immediate future is known as:
A. Hire purchase
B. Finance lease
C. Operating lease
D. Sale and leaseback
Q2. The amount of interest is credited by the buyer to……………...
A. Hire purchase Account
B. Hire Vendor Account
C. Interest Account
D. Cash Account
Q3.The depreciation in the books of buyer is charged on……………..
A. Hire Purchase Price
B. Market price
C. Total Instalment amount
D. Cash Price
Q4. What is transferred to Hirer under hire purchase system :
A. Ownership of assets
B. Possession of asset
C. Ownership and possession of asset
D. None of these
Topic : Hire Purchase and Instalment Accounts

Q5. Hire Purchase Act is passed in the year
A. 1932
B. 1956
C. 1972
D. 1872
Q6.Under which system, ownership is transferred on payment of final installment
A. Installment system.
B. Credit system.
C. Hire purchase system.
D. Cash system
Q7. Under hire purchase system the buyer is called _________.
A. Buyer.
B. Hirer.
C. Hire vendor.
D. Debtor
Q8. Under hire purchase system who has the right of sell __________.
A. Buyer.
B. Hirer
C. Hire Vendor.
D. Debtor

Q9.Cash price plus interest is _________.
A. Installment Price.
B. Hire Purchase Price
C. Maximum Retail Price.
D. Retail Price
Q10. Under hire purchase system, interest is calculated on _______.
A. Cash Price.
C. MRP.
D. Outstanding Balance.
Q11. If the hire purchaser fails to make payment of any installment, it is called _______.
A. Default.
B. Repossession.
C. Sale.
D. Purchase
Q12. In the books of hirer, for payment of installment hire vendor account will be ___________.
A. Debited.
B. Credited.
C. Rectified
D. Reversed.

Q13.In the books of Hirer, the interest and depreciation account will be transferred to ______.
A. Trading account
B. P&L account
C. P&L appropriation account
D. Balance sheet.
Q14. Under hire purchase system is interest is calculated on _______.
A. Outstanding Balance .
C. Cash Price.
D. Down Payment.
Q15. Nature of hire purchase agreement is __________.
A. Agreement of sale
B. Option to transfer.
C. Option to buy.
D. Option to sell.
Q16. Under ______ system the buyer does not get ownership of goods immediately
A. Installment
B. Hire Purchase
C. Installment and HP
D. None of these

Q17. ________ is the initial payment made at the time of signing the hire purchase
agreement
A. HP price
B. Installment price
C. Cash price
D. Down payment
Q18. Hire Purchase price =
A. Cash price + Down payment
B. Cash price + Total interest
C. Cash price
D. Sum of total instalments
Q19. Cash Price =
A. Hire purchase price – total interest
B. Down payment in cash
C. Down payment + Interest
Q20. The depreciation on an asset purchased through hire purchase should be:
A. Should be straight line only
B. Based on the cost price of the asset only
C. Based on the total cost including interest
D. No depreciation should be provide until the final payment is made

Q21.Installment system is governed by _______
A. Hire Purchase Act.
B. Sale of Goods Act
C. Installment Act.
D. Properties Registration Act
Q22.Under hire purchase system, the agreement can be _________ anytime.
a) Renewed.
b) Registered.
c) Terminated.
d) Endorsed.
Q23. What is transferred to Hirer under hire purchase system:
a) Ownership of assets
b) Possession of asset
c) Ownership and possession of asset
d) None of these

1. Hire purchaser: A hire purchaser is a person who possesses the goods under hire purchase agreement for use within an option to either
purchase it or return after use.
2. Hire vendor: a hire vendor is a person who sells the goods under hire purchase agreement.
3. Cash price: it is the price of goods which is sold under ‘contract of sale’
4. Hire purchase price: it is the price at which the goods are sold under ‘hire purchase system’ it includes cash price of the goods and interest.
5. Installment money: it is the part of the hire purchase price paid by hire purchaser, in periodic intervals.
6. Deposit: it refers any sum payable by the hirer under the hire purchase agreement by way of initial payment or
credited or to be credited to him under the agreement on account of any deposit.
7. Net cash price: it refers to the differerence between cash price of the goods and deposit (cash price-down
payment=net cash price).
8. Net hire purchase price: it is the net amount after deducting the delivery charges, registration charges, insurance
charges from hire purchase price.
9. Hire charges: it is an amount refers to the difference between hire purchase price and cash price (H P- C P= H C)
it also referred to as interest.
10. Statutory hire charges: it is a hire charges according to the hire purchase act of, 1972.
11. Hire purchase agreement: it is an agreement between hire purchaser and hire vendor according to section 2(c)
of the hire purchase act, 1972 for purchasing of goods according to agreement.
12. Rebate: it is an amount which is claimed by the hire purchaser from the hire vendor in case if he decides to
remit the balance of the purchase price (future installments) in lumpsum without continuing the hire purchasing
agreement.
The rebate is calculated as follows
Rebate = 2/3 X hire charges X (no. of installments due/total no. of installments)
13. Termination of hire purchase agreement: The hirer can terminate the agreement at any time by giving the 14
days notice to the owner. However what ever the amount is already paid by the hirer is considered as a hire
charges.
Luupdate Important Highlights

Topic: Royalty Accounts
1) What is Royalty?
A) A payment is made for use of fixed asset.
B) A fixed payment for use of fixed Assets.
C) A payment paid by owner.
D) None of above
2) Mining Royalties is based on ---------
A) Production
B) Sales
C) Purchases
D) A & B Both
3) Copyright Royalties based on--------
A) Sales
B) Production
C) Purchases
D) A & B Both
4) Lessor is the-------
A) Owner
B) User
C) A & B Both
D) None of these

5) Lessee is the-------
A) Owner
B) User
C) A & B Both
D) None of these
6) What is minimum Rent?
A) Payment for use of land which is fixed.
B) It is payment for use of land on the basis of output.
C) A payment paid by owner.
D) None of above
7) Minimum Rent is also called?
A) Dead Rent
B) Rock Rent
C) Fixed Rent
D) All of the above
8) Short workings = -------- less Royalty payable
A) Minimum Rent
B) Capital
C) Cash paid
D) None of the above

Q9. Royalty is a _____ to lessee
a. Income
b. Expenses
c. Both income and expenses
d. None of the above
10. Excess of Minimum rent over royalties is called
a. Short workings
b. Dead rent
c. Royalties
Q11. All the royalties and short workings irrecoverable should be transferred to
a. Trading account
b. Balance sheet
c. Profit & Loss Account
Q12. Royalty account is in the nature of
a. Real account
b. Nominal account
c. Personal account
d. Revenue account

Q13. When royalty is paid, in the books of lessee, it is debited to
a. Royalty account
b. P&L account
c. Land lord account
d. Lessee account
Q14. The minimum rent can be-------Proportionately, if there is a stoppage due to strike.
a. Increase
b. Decrease
c. A & B both
Q15. In case of recoupment of shortworkings, the lessee:
(a) Debits Shortworkings Account
(b) Credits Profit and loss Account
(c) Credits Shortworkings Account
(d) Credits Landlord’s Account
Q16. The objective of FIxing dead rent is:
(a) Landlord should not get more than a certain amount per year
(b) Lessee should not pay more than the amount of dead rent
(c) Landlord must receive a minimum amount in case of low output or sales.
(d) None of the above

Q17. The lessee's right to recoup shortworkings is related to
(a) Fixed Period
(b) Subsequent two years
(c) Terms and agreement
(d) Subsequent Four years
Q18. In case of Sub‐lease Royalty earned by the lessor is credited to
(a) Sub‐lessee account
(b) Profit and loss account
(c) Royalty receivable account
(d) P&L Apporopriation account.
1. Royalty A/c is in the nature of Nominal A/c
2. Royalty earned by the lessee is credited to Profit and Loss Account A/c
3. At the time of royalty payment, the lessee debits Lessor’s A/c
4. Short workings A/c shows debit balance in the books of Lessee.
5. Shortworkings is the excess of minimum rent over royalties payable for the year.
6. Royalties is calculated either on the basis of production or sales.
7. Royalty suspense A/c shows the shortworkings which exists between tenant and lessor.
8. Irrecoverable shortworkings are transferred to ProFIt and loss account.
9. Shortworkings can be recouped only out of Surplus.
Luupdate Important Highlights

Topic: Insolvency Accounts
Q1.How many Insolvency Act are applicable in India .........?
a) Only One
b) Two
c) Three
d) Four
Q2. Presidency Town Insolvency Act not applicable to .............
a) Mumbai
b) Delhi
c) Chennai
d) Kolkata
Q3. The Adjudicating Authority shall appoint an Interim Resolution Professional
within days of the insolvency commencement date.
a. 07
b. 14
c. 21
d. 28
Q4. Who cannot initiate a fast track corporate insolvency resolution process?
a. Financial creditor
b. Operational creditor
c. Corporate debtor
d. Insolvency professional

Q5. Which of the following Acts have not been amended by the Insolvency and
Bankruptcy Code, 2016?
a. The Transfer of Property Act, 1882
b. The Companies Act, 2013
c. The Limited Liability Partnership Act, 2008
d. The Income Tax Act, 1961
Q6. Repayment plan has to be approved by ……..
a. A majority of creditors.
b. 3/4th in value of the creditors present in person or by proxy.
c. 3/4th in value of the creditors.
d. 3/4th of the creditors present in person or by proxy
Q7. A debtor may make an application for a fresh start for discharge of ……..
a. All debts.
b. Bankruptcy debts.
c. Qualifying debts.
d. Operational debts
Q8. When can a bank initiate a corporate insolvency resolution process in relation to a corporate debtor?
a. On determination of default by National Company Law Tribunal.
b. Occurrence of default.
c. On net-worth of the debtor becoming negative.
d. On the bank classified the account as Non-Performing Asset.

Q9. To whom shall the liquidating company notify about the passing of resolution by
the members for the liquidation:
(A) Registrar of the Company and Regional Director
(B) Insolvency and Bankruptcy Board of India (IBBI) and Regional Director
(C) Registrar of the Company and Insolvency and Bankruptcy Board of India (IBBI)
(D) Registrar of the Company
Q10. Within how many weeks of giving the declaration for initiating voluntary liquidation proceedings, shall the resolution be
passed for appointment of an insolvency professional as a liquidator:
(A) 5 weeks
(B) 4 weeks
(C) 3 weeks
(D) 2 weeks
Q11.Where the corporate person owes any debt to any person, creditors representing ________ in value of its debt shall
approve the resolution for appointment of insolvency professional to act as a liquidator:
A 1/3rd
B 2/3rd
C 3/4th
D 1/4th

Q.12. To which of the following authorities shall intimation be sent of passing of the resolution for
appointment of the liquidator:
(A) The Insolvency and Bankruptcy Board of India (IBBI) only
(B) Registrar of Companies (ROC) only
(C) National Company Law Tribunal (NCLT)
(D) The Insolvency and Bankruptcy Board of India (IBBI) and Registrar of Companies (ROC)
Q13. The liquidator shall not engage a professional who has served as an auditor to the corporate person at any time during
years preceding the liquidation commencement date:
(A) 5 years
(B) 4 years
(C) 3 years
(D) 2 years
Q14.Which Section of the Code deals with voluntary liquidation of corporate person:
A) Section 57
B)Section 58
C) Section 59
D)Section 60

Q15. Who has to notify the Registrar of Companies and IBBI regarding the passing of resolution by the members of liquidating
company for its liquidation:
A Liquidator of the Company
B Company itself
C Creditors of the Company
D Members of the Company
Q16. When did the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 came into
force:
A) 01 January, 2017
B) 01 February, 2017
C) 01 March, 2017
D) 01 April, 2017

UNIT IV
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Unit IV : Insurance Claim for loss of Stock and Loss of Profit, Branch Accounts, Voyage Accounts
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1)Fire insurance privides cover for:
(a) Tangible assets
(b) Intangible assets
(c) Fictitious assets
(d) Business employees
2)The average clause in a loss of profits policy protects by _______.
A. Insured
B. Insurer
C. Workers
Q3. The stock which is rescued from fir is ______.
A. scrap.
B. defectives.
C. salvaged stock.
D. . claim.
Topic: Insurance Claim for loss of Stock and Loss of Profit
Q4. Closing stock on the date of fire is Rs. 50,000 and the stock salvaged is Rs. 23,000. The claim is _____.
A. Rs. 23,000.
B. Rs. 27,000.
C. Rs. 50,000.
D. Rs. 73,000.

Q5.The computation of loss by fire is very simple taken when a --------------
asset is destroyed
a. current
b. long-term
c. fire
d. intangible
Q6. The value of stock on the date of fire can be ascertained more precisely by preparation of a…………… Account
a. Trading A/c
b. memorandum transaction A/c
c. Balance sheet
d. P & L A/c
Q7. ……………..clause is applicable in case of under insurance
a. average
b. Normal
c. short sales
d. indemnity period
Q8. The period for which a policy is taken known ……………….as period
a. indemnity
b. short sales
c. long
d. fixed

Q9. Insured standing charges are the --------------
a. fixed charges
b. horizontal charges
c. fluctuating
d. current charges
Q10. Due to the inclusion of average clause in the fire insurance policy , an insured becomes a……………….in the event of under
insurance.
a. co-insurer
b. provision
c. profit
d. loss
Q11. If Sales of last year is Rs. 450000 and sales of corresponding current year is Rs.200000 then Short sales will be ……………
a. 250000
b. 500000
c. 250000
d. 256000
Q12. If value of Insurance Policy is 63000, Stock on date of Fire is 72000 and Loss of stock is 54000 then Amount of
Claim for stock will be ……………
a. 47250
b. 48250
c. 26000
d. 25000

Q13. Average clause is applicable in case of under insurance.
a. true
b. false
c. only true
d. may be false
Q14. A fire policy covers loss of or damaged to insured property.
a. true
b. false
c. may be true
d. only false
Q15. ……………… ratio indicates the relationship of gross profit to net sales in
terms of percentage.
a. Gross profit
b. Net profit
c. debtors turnover
d. capital employed
Q16. A ---------- policy covers loss of stock, fixed asset, profit, expenses etc.
a. compact
b. comprehensive
c. horizontal
d. operating

Topic: Branch Accounts
1)The system of keeping accounts generally adopted by small size branches are:
a) Debtors system
b) Stock & Debtors system
c) Wholesale branch system
d) Final account system
Q2. Goods are supplied by the head office to dependent branches are at:
a) Cost price
b) Invoice price
c) Market price
d) Cost or invoice price
Q3. Under debtors system which account is prepared by head office to calculate profit or loss of each branch:
a) Capital account
b) Debtors account
c) Branch account
d) Branch adjustment account
Q4. Under debtors system depreciation on fixed asset is________ _______
a) Credited to branch A/c
b) debited to branch A/c
c) Not shown in branch A/c
d) Shown in debtors A/c

Q5. Branch Trading &Profit & Loss A/c is only a_________ account not forming part of the full accounting system.
a) Single
b) Memorandum
c) Capital
d) Double
Q6. The Branch Account prepared under Final Account System is the nature of:
a) Nominal Account
b) Real Account
c) Personal Account
d) General Account
Q7. Branch which does not maintain its own set of books is__________.
a) Dependent branch
b) Independent branch
c) Foreign branch
d) Local branch
Q8. Dependent branch makes:
a) Cash sales only
b) Credit sales only
c) Cash & Credit sales
d) Instalment sales

Q9. All branch expenses such as rent, salary are paid by H.O in case of:
a) Independent branch
b) Local branch
c) Dependent branch
d) Foreign branch
Q10. Under Stock & Debtors system ________ account is prepare by H.O to ascertain the Gross Profit earned by the branch.
a) Branch stock A/c
b) Branch Adjustment A/c
c) Branch expenses A/c
d) Branch P&L A/c
Q11. In branch Account , goods sent by branch P to branch Q will be debited to;
a) Branch X
b) Branch P
c) Branch Q
d) Branch Y
Q12. Under stock &debtors system ________account is prepared by H.O to ascertain the Net Profit.
a) Branch stock A/c
b) Branch Adjustment A/c
c) Branch expenses A/c
d) Branch P&L A/c

Q13, Branch Trading & Profit & Loss A/c is prepared to incorporate all____.
a) Revenue items
b) Capital items
c) Asset items
d) past items
Q14. Under Stock and Debtors system of branch Account branch adjustment account is opened when goods sent to
branch is at:
a) Cost price
b) Invoice price
c) Market price
d) Normal price
Q15.Under debtors system ,the cash sales are
a) Debited to branch account
b) Credited to branch account
c) Debited to debtors account
d) Credited to creditors account
Q16. Under stock & debtors system of branch A/c the account prepared to record all the transactions relating to branch debtors
is recorded in ____.
a) Branch Account
b) Branch adjustment account
c) Branch debtors account
d) Branch expenses account

Q17. The difference between goods sent by H.O and received by branch is known as_______
a) Goods in transit
b) Goods in warehouse
c) Goods in production
d) Goods in go down
Q18. Which account is used for recording transactions relating to H.O supplying resources to the branch?
a) Capital account
b) Branch account
c) Current account
d) Joint venture account
Q19. If a branch has purchased fixed asset on credit basis the liability from such purchase is __________ branch account
a) Debited to
b) Credited to
c) Not shown in
d) Decreased from fixed asset in
Q20. In case of H.O having many branches, transactions among the branches are called.
a) Branch-H.O transaction
b) H.O- Branch Transaction
c) Inter-branch transaction
d) Intra branch transaction

Q21. When a bill is drawn by Branch X on Branch Y, then the books of Branch X is debited by:
a) Bills receivable
b) Head Office
c) Bills Payable
d) Branch Y
Q22. In case of cash in transit the books of branch __________ account is debited to reconcile the difference.
a) Head office
b) Cash in transit
c) Bank
d) Branch
Q23. When an asset is purchased if payment is made by branch the H.O books is debited by ________ account:
a) Branch fixed asset
b) Branch
c) Cash
d ) P&L
Q24. Departmental Accounts are prepared to ascertain
a) Departmental efficiency
b) Workers efficiency
c) Sales income
d) Share value

Q25. which of the following is a method of departmental accounting?
a)Debtors system
b) Stock and debtors system
c) Independent method
d) Single entry system
Q26. Selling expenses are apportioned on the basis of
a) Sales
b) Purchases
c) No of customers
d) No of employees

Topic:Voyage Accounts
Q1. Which Of the Companies Prepared Voyage Account.
a)shopping Mall
b) marine business
C) shipping companies or marine business
d)Partnership Firm
Q2. Give The Formula Of Address Commission
Ans: Address Commission= (Freight+ Primage)* Rate/100
Q3. The charges which are paid to the port authorities to use the port for loading and unloading the cargo from the
ship is called.
Ans: Port Charges
Q4. Primage is also known as ?
Ans: surcharge
Q5. How To calculate Primage:
Ans: Primage= Freight*Rate/100
Q6. The amount charged from the passengers on board is Called.
Ans: passage money.
Q7. Stores consumed is calculated as:
Ans: (Opening stock+ Net Purchases- Closing Stock)

Financial Accounting MCQ (B.COM SEM 1)

Financial Accounting MCQ (B.COM SEM 1)

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