Here are the answers to the objective type questions on corporate accounting: 1. Payment of dividend. 2. Redemption of Preference shares. 3. Dividend is not payable on the calls paid in advance by a shareholder. 4. Share premium Account appears on the liability side of the balance sheet. 5. Amount called by the company and paid for is forfeited. 6. Capital Reserve. 7. Called up amount. 8. Writing-off Preliminary expense. 9. A company can redeem only fully paid preference share. 10. Issue fully paid bonus shares. 11. At a pre-determined fixed rate. 12. Premium on issue of

1. AS-1-
Disclosure
of
Accountin
g Policies.
Accounting Standards-1: It deals with the disclosure of significant accounting policies followed in the preparation and
presentation of financial statements. The areas in which accounting policies need disclosure include: methods of
depreciation, depletion and amortization; treatment of expenditure during construction; conversion or translation of
foreign currency items; valuation of inventories; treatment of goodwill; valuation of investments; treatment of
retirement benefits; recognition of profit on long-term contacts; calculation of fixed assets; treatment of contingent
liabilities, etc.
The purpose of this standard is to promote a better understanding of financial statements by establishing the
disclosure of significant accounting policies in the financial statements and the manner of doing so. The major
considerations governing the selection and application of accounting policies are prudence, substance over form and
materiality.Compliance with this standard should go a long way in facilitating a more meaningful comparison between
financial statements of different enterprises.
AS 2
:Valuati
on of
Inventor
ies.
The revised standard came into effect in respect of accounting periods commencing on or after April 1,1999.
Scope
The standard should be applied in accounting for inventories other than: (a)
work in progress arising under construction contracts, including directly related service contracts (see Accounting
Standard 7, Accounting for Construction Contacts; (b) work in progress arising in the ordinary course of business of
service providers; (c) shares, debentures and other financial instruments held as stock-in-trade; and (d) producers'
inventories of livestock, agricultural and forest products, and mineral oils, ores and
gases to the extent that they are measured at net realizable value in accordance with the established practices in those
industries.
Definitions: The following terms are used in this standard with the meanings specified.
Inventories are assets: (a) held for sale in the ordinary course of business; (b) in the process of production for such sale; or
(c) in the form of materials or supplies to be consumed in the production process or in the rendering of services. Net
realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and
the estimated costs necessary to make the sale. Measurement of Inventories: Inventories should be valued at the lower of
cost and net realisable value.
Cost of Inventories: The cost of inventories should comprise all costs of purchase, costs of conversion and other costs
incurred in bringing the inventories to their present location and condition.
Cost Formulas: The cost of inventories of items that are not ordinarily interchangeable, and goods or services produced
and segregated for specific projects should be assigned by specific identification of their individual costs.
The cost of inventories, other than those dealt with in the paragraph above, should be assigned by using the first-in, first-
out (FIFO), or weighted average cost formula. The formula used should reflect the fairest possible approximation to the
cost incurred in bringing the items of inventory to their present location and condition.
Disclosure: The financial statements should disclose: (a) the accounting policies adopted in measuring inventories,
including the cost formula used; and (b) the total carrying amount of inventories and its classification appropriate to the
enterprise.
In the initial years, this accounting standard will be recommendatory in character (all other standards are mandatory under
Section 211 of the Companies Act.) During this period, this standard is recommended for use by companies listed don a
recognized stock exchange and other commercial, industrial and business enterprises in the public and private sectors.
Scope: And enterprise should prepare a cash flow statement and should present it for each period for which financial
statements are presented.
Definitions: The following terms are used in this standard with the meanings specified:
Cash: It comprises cash on hand and demand deposits with banks.
Cash equivalents: They are short-term, highly liquid investments that are readily convertible into known amounts of cash
and which are subject to an insignificant risk of changes in value.
Cash flows: They are inflows and outflows of cash and cash equivalents.
Operating activities: These are the principal revenue-producing activities of the enterprise and other activities that are
not investing or financing activities.
Investing activities: These are the acquisition and disposal of long-term assets and other investments not included in cash
equivalent.
Financing activities: These are activities that result in changes in the size and composition of the owners' capital
(including preference share capital in the case of a company) and borrowing of the enterprise.
Presentation of a cash flow statement: The cash flow statement should report cash flows during the period classified by
operating, investing and financial activities. Reporting cash flow from operating activities: An enterprises should report
cash flows
from operating activities using either: (a) The direct method, whereby major classes of gross cash receipts and gross cash
payments are disclosed; or (b) The indirect method, whereby profit or loss is adjusted for the effects of transactions of a
non-cash nature, any deferrals or accruals of past or expense associated with investing or financing cash flows.
Reporting cash flows from investing and financing activities: An enterprise should
report separately major classes of gross cash receipt and gross cash payment arising
from investing and financing activities, except to the extent that cash flows described in the following two paragraphs are
reported on a net basis.
Cash flows arising from the following operating, investing or financing activities, may be reported on a net basis.
(a) Cash receipts and payments on behalf or customers when the cash flows reflect the activities of the customer rather

2. B. COM II
Corporate Accounting
Objective type Questions
 ISSUE OF SHARES
A] Fill in Blanks
1] A preferential share is one which enjoys a preferential right regarding
Payment of dividend.
2] Share premium account can be uitilised to write off Premium payable on
redemption of Preference shares.
3] Dividend is not payable on the calls paid in advance by a shareholder.
4] Share premium Account appears on the liability side of the balance sheet.
5] On forfeiture of shares, amount called by the company and paid for is
forfeited.
6] Any balance left on “forfeited shares Account” after re-issue is transferred
to Capital Reserve.
7] When shares are forfeited, the share capital account is debited by called
up amount.
8] premium on issue of shares can be used for writing-off
Preliminary expense.
9] A company can redeem only fully paid preference share.
10] Capital Redemption Reserve A/C can be utilized for issue fully paid bonus
shares.
11] Interest on debentures is to paid at a pre-determined fixed rate.
12] Premium on issue of debentures is a profit while premium on
redemption of debentures is a Loss.
13] Discount on redemption of debenture is a profit.
14] Discount on issue of debenture appears on the asset side of balance sheet
under the words “miscellaneous expenditure.”
15] Profit on re-issue of forfeited shares is to be transferred to capital
reserve.
16] Calls in advance do not form part of paid-up capital.
17] When shares are forfeited, the share capital account is debited by called-
up amount.
18] The profit on re-issue of forfeited shares is transferred to capital reserve.
19] Premium on issue of shares can be used of Writing off Preliminary.
20] Debenture holders are Creditors of a company.
21] Interest on debenture is to be paid at pre-determined fixed rate.
22] Share premium account is to be credited on issue of shares at premium.
23] Discount on issue o shares is a Capital loss.
24] Preference shares cannot be redeemed unless they are fully paid.
2 5] Premium on issue of debenture is a Profit.
26] Discount on issue of debenture is a Loss.
27] After redemption of debentures, the balance on sinking fund account is to
be transferred to General Reserve.
 Accounting Standards
28] As per AS -13 assets held as stock in trade are not “inventories.”
29] Net realizable value is the balance of selling price over estimated
costs of completion and the estimated costs necessary to make the
sale.

3. 30] AS-13 is related to Accounting for investments.
31] AS-6 is related to Depreciation Accounting.
32] AS-14 is related to Accounting for Amalgamation.
33] Accounting standards are are issued by the ICAI.
34] Non-Monetary assets are assets other than monetary assets.
 Profit /Loss Prior to Incorporation
35] Profit prior to incorporation are not available for dividend and must
be transferred to capital reserve.
36] Post incorporation profit is available for distribution of dividend.
37] Salary to vendor is to be charged against the profit earned before
incorporation.
38] Interest on debentures is to be charged to post incorporation period
39] Post incorporation profit is available for distribution of dividend.
40] The two important ratios in the calculation of profit prior to
incorporation are Time and sales.
42] For ascertaining pre incorporation profit, administration expenses are
apportioned in the Time ratio.
43] Pre incorporation profit is to be debited to Capital Reserve.
44] Loss prior to incorporation is to be debited to Goodwill Account.
45] While determining Time ratio, date of incorporation is most
important.
46] Share Transfer fee is to be apportioned to Post / After period.
47] Miscellaneous Receipts should be apportioned according to Time
ratio.
48] Interest on P.C. should be charged to the period to which it relates.
49] Profit prior to incorporation is an item of Capital nature.
50] Directors fee would be charged to post incorporation period.

 Company Final Accounts
AS-1-Disclosure
of Accounting Policies.
AS 2 :Valuation of Inventories.
AS 3 : Cast Flow Statements.
AS 4 : Contingencies and events occurring after the Balance Sheet.
AS 5 : Net Profit or Loss for the period, prior period items and changes in
AccountingPolicies.
AS 6 : Depreciation Accounting.
AS 9 : Revenue Recognition.
AS 10 : Accounting for Fixed Assets.

4. 51] Provision for taxation is to be shown under the head Current
liabilities In the balance Sheet.
52] The difference between the gross dividend and dividend received is
Debited to Tax Deducted at source account.
53] In the balance sheet, forfeited shares account is to be added to Paid-
up capital.
54] Dividend declared between two A.G.M.s is called the Interim
Dividend.
55] Dividend must be paid in cash.
56] No dividend can be paid on calls in advance.
57] Tax deducted at source will appear under the heading “Current
Assets, Loans Advance.”
58] According to section II, the balance the balance sheet of company
shall be in the prescribed form set out in part I of schedule VI.
59] Securities Premium Account is shown on the liability side of balance
sheet under the heading-Reserves & surplus.
60] Divisible profit do not include; profit prior to incorporation.
61] Dividend are usually paid on: paid-up capital.
62] Dividends can be paid only out of: Current profits.
63] Amount set apart to meet losses due to bad debt reserve is a
Provision.
64] Advance payment of tax is in nature of: prepaid Expenses.