Objective Questions SYNOPSIS

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1 Objective Questions 1 Objective Questions SYNOPSIS I. MULTIPLE CHOICE QUESTIONS Chapter 1 : Amalgamation of Companies 274 Chapter 2 : Capital Reduction and Internal Reconstruction 280 Chapter 3 : Investment Accounting 283 Chapter 4 : Final Accounts of Companies 287 Chapter 5 : Introduction to IFRS 293 II. FILL IN THE BLANKS WITH SUITABLE WORDS Chapter 1 : Amalgamation of Companies 297 Chapter 2 : Capital Reduction and Internal Reconstruction 298 Chapter 3 : Investment Accounting 299 Chapter 4 : Final Accounts of Companies 300 Chapter 5 : Introduction to IFRS 301 III. MATCH THE COLUMNS Chapter 1 : Amalgamation of Companies 302 Chapter 2 : Capital Reduction and Internal Reconstruction 303 Chapter 3 : Investment Accounting 304 Chapter 4 : Final Accounts of Companies 305 Chapter 5 : Introduction to IFRS 307 IV. STATE WHETHER THE STATEMENTS ARE TRUE OR FALSE Chapter 1 : Amalgamation of Companies 307 Chapter 2 : Capital Reduction and Internal Reconstruction 309 Chapter 3 : Investment Accounting 310 Chapter 4 : Final Accounts of Companies 311 Chapter 5 : Introduction to IFRS 312 V. THEORY QUESTIONS - SHORT NOTES Chapter 1 : Amalgamation of Companies 313 Chapter 2 : Capital Reduction and Internal Reconstruction 313 Chapter 3 : Investment Accounting 313 Chapter 4 : Final Accounts of Companies 313 VI. SHORT QUESTIONS Chapter 1 : Amalgamation of Companies 314 Chapter 2 : Capital Reduction and Internal Reconstruction 314 Chapter 3 : Investment Accounting 315 Chapter 4 : Final Accounts of Companies 315 Chapter 5 : Introduction to IFRS 316

2 2 Financial Accounting (T.Y. B.Com.) (Sem. V) I. MULTIPLE CHOICE QUESTIONS Chapter 1 : Amalgamation of Companies 1. Amalgamation of companies is governed by. a) AS 13 b) AS 14 c) AS 9 d) AS The scheme of amalgamation can involve companies a) none b) two c) one d) three 3. The amalgamation requires approval of. a) High Court b) Registrar of Companies c) Central Government d) Directors 4. Approval by a shareholders is necessary for treatment as in nature of merger. a) 51% b) 75% c) 90% d) 80% 5. Approval by % of shareholders is required for implementation of the scheme of amalgamation. a) 51% b) 75% c) 80% d) 90% 6. In case of purchase method, transferee company should record assets at. a) book value b) cost c) market value d) agreed value 7. In case of pooling of interest method, transferee company should record assets at. a) cost b) market value c) agreed value d) book value 8. Amalgamation Adjustment Account is required in respect of. a) general reserve b) statutory reserve c) security premium d) capital reserve 9. The excess of net asset value over consideration is. a) capital reserve b) security premium c) profit or loss d) goodwill 10. AS 14 covers amalgamation of. a) companies b) firms c) firms and company d) Directors and Partners 11. On amalgamation, the transferer company transfer its assets to Realisation Account at. a) agreed value b) book value c) market value d) original cost 12. X Ltd. And Y Ltd form into a new company XY Ltd. X Ltd. Y Ltd. ` ` Net Assets 5,50,000 6,00,000 Purchase consideration 10,00,000 8,00,000 The purchase consideration is to be settled by issue (` 100) of fully paid shares of XY Ltd at par. The number of shares issued to XY Ltd. will be. a) 1,00,000 shares b) 2,00,000 shares c) 45,000 shares d) 55,000 shares

3 Objective Questions On 31st March, 2009; X Ltd. Acquired Y Ltd. The Balance Sheet of Y Ltd. was as follows : Liabilities ` Assets ` Equity Capital 3,00,000 Fixed Assets 13,00,000 Reserves 9,50,000 Current Assets 5,70,000 Current Liabilities 7,20,000 Preliminary Expenses 1,00,000 19,70,000 19,70,000 If all the assets & Liabilities are taken at Book values the purchase consideration payable by X Ltd is. a) ` 11,50,000 b) ` 19,70,000 c) ` 20,70,000 d) `10,28, Pooja Ltd. purchased Rita Ltd. and agreed to pay the following to Rita Ltd. for the acquisition : i) 2 equity shares of Pooja Ltd. for ` 20 each, fully paid for every equity share of Rita Ltd. and cash ` 4 per share held. Total equity shares of Rita Ltd. are 5000 shares. ii) Discharge of Rita Ltd. s 20,000 10% Debentures by issued of 15,000 12% debentures of Pooja Ltd. and cash at ` 5 per debentures held. The purchase consideration payable by Pooja Ltd. to Rita Ltd. is. a) ` 20,20,000 b) ` 20,35,000 c) ` 20,38,000 d) ` 20, 32, Universal Ltd. Balance Sheet as on 31st March, 2009 Liabilities ` Assets ` 10,000 Equity Shares of Fixed Assets 2,00,000 ` 10 each 1,00,000 Current Assets 1,70,000 Profit & Loss Account 2,20,000 Creditors 50,000 3,70,000 3,70,000 On 1st April, 2009; Omega Ltd. took over the business of Universal Ltd. for a consideration of ` 3,75,000. Profit or loss on realization was : a) ` 55, 000 (Profit) b) ` 55,000 (Loss) c) ` 80,000 (Profit) d) ` 50,000 (Profit) 16. Purchase consideration as per AS 14 is the amount payable to. a) shareholders and debentureholders b) shareholders and creditors c) shareholders d) none of the above 17. For accounting mergers, the method followed is. a) Pooling of Interest Method b) Equity Method c) Purchase Method d) none of the above 18. Under Pooling of Interest Method, the difference between purchase consideration and share capital of transferee company should be adjusted to. a) General Reserve Account b) Goodwill Account c) Amalgamation Adjustment Account d) none of the above 19. Pooling of Interest is a method of. a) providing depreciation b) valuation of inventory c) accounting for amalgamation d) none of the above

4 4 Financial Accounting (T.Y. B.Com.) (Sem. V) 20. Under Purchase Method, any excess of purchase consideration over net assets acquired should be recognised as. a) goodwill b) capital reserve c) Profit & Loss Account d) none of the above 21. Profit on Realisation Account is transferred by transferor company to. a) Equity Shareholders Account b) Preference Shareholders Account c) Profit & Loss Account d) none of the above 22. The asset, which is not taken under Net Asset Method of calculation of purchase consideration, is. a) discount on issue of shares b) loose tools c) furniture d) bills receivable 23. Companies may combine by. a) Amalgamation b) Absorption c) External reconstruction d) Any of the above 24. If Vijay Ltd. and Vishakha Ltd. are taken over by Swati Ltd. a new company it is called. a) Absorption b) External reconstruction c) Amalgamation d) Internal reconstruction 25. If Deepa Ltd. is taken over by Ranbhir Ltd. it is called as a) Amalgamation b) External reconstruction c) Absorption d) Merger 26. If Santosh Ltd. and Kumari Ltd. are taken over by Santosh Kumar Ltd a new company. a) Santosh Ltd. and Kumari Ltd. are Vendor Companies b) Santosh Ltd. and Santoshkumar Ltd. are Vendor Companies c) Kumari Ltd. is a purchasing Company d) Kumar Ltd. is a purchasing company 27. If Santoshkumari Ltd. is taken over by Santoshkumar Ltd. a new company it is called. a) Internal reconstruction b) External reconstruction c) Absorption d) Merger 28. On amalgamation business is taken over by. a) New company b) Existing company c) weak company d) Holding company 29. As per AS 14 amalgamation is of two types : a) Merger b) Purchase of business c) Merger of purchase of business d) None of the above 30. On merger, vendor companies are. a) Liquidated b) Formed c) Dissolved d) None of the above 31.The common feature in merger, purchase of business is. a) Liquidation of at least two companies b) Liquidation of at least one company c) Purchase of one company by another company d) Combination of at least two companies

5 Objective Questions As per Companies Act 1956,. a) Amalgamation includes absorption b) Absorption includes amalgamation c) Amalgamation excludes absorption d) Internal reconstruction includes external reconstruction. 33. Accounting for amalgamation is governed by. a) AS 1 b) AS 14 c) AS 13 d) AS Accounting for absorption is governed by. a) AS 1 b) AS 13 c) AS 14 d) AS Accounting for amalgamation by merger is as per. a) AS 1 b) AS 13 c) AS 14 d) AS Accounting for amalgamation by purchase is as per. a) AS 1 b) AS 13 c) AS 14 d) AS As per AS 14 transferor company means the company. a) which is amalagamated into another company b) which is newly registered c) which is none of the above d) Into which a company is amalgamated. 38. Transferee company as per AS 14 is. a) Vendor company b) Purchasing company c) Liquidated company d) None of the above 39. On amalgamation preliminary expenses in Balance Sheet of Vendor Company are debited to. a) Realisation A/c b) Equity shareholders A/c c) Cash A/c d) Preference shareholder A/c 40. On amalgamation Profit and Loss A/c debit balance in Balance Sheet of Vendor Company is transferred to. a) Realisation A/c b) Cash A/c c) Equity shareholders A/c d) Preference shareholders A/c 41. On amalgamation Debentures Account appearing in the Balance Sheet of Vendor Company is closed by. a) Crediting to Realisation Account, whether debentures are taken over or not b) Crediting to Realisation Account when debentures are taken over c) Crediting to Realisation Account when Debentures are not taken over d) None of the above 42. On amalgamation Provident Fund Account in the Balance Sheet of Vendor Company is transferred to. a) Realisation Account b) Purchasing co's Account c) Equity Shareholders Account d) Preference Shareholders Account 43. Sinking Fund appearing in the Balance Sheet of Vendor Company is transferred to. a) Realisation Account c) Preference Shareholders Account b) Equity Shareholders Account d) Purchasing Companies Account 44. On amalgamation if preference shares are settled at a premium, the premium is. a) Debited to Realisation Account b) Credited to Realisaiton Account

6 6 Financial Accounting (T.Y. B.Com.) (Sem. V) c) Credited to securities premium Account d) Debited to Profit and Loss Account 45. Accounting for amalgamation in the books of a Vendor Company is. a) The same in all types of amalgamation b) The different in all types of amalgamation c) Dependent on the type of company d) Dependent on purchase consideration 46. On amalgamation, accounting for amalgamation in the books of purchasing company is. a) The same in all types of amalgamations b) The different in all types of amalgamation depending on the type of amalgamation. c) Dependent on the type of companies d) Dependent on the purchase consideration 47. In amalgamation as a merger all the assets and liabilities of vendor company become the assets and liabilities of. a) Transferee company b) Vendor Company c) Holding company d) Subsidiary company 48. Shareholders holding not less than 90% of the face value of equity share capital in the Vendor Company become the equity shareholders in the purchasing company if amalgamation is. a) In the nature of merger b) In the nature of purchase of business c) In the nature of absorption d) In the nature of internal reconstruction 49. On amalgamation as a merger all assets and liabilities of the transferor company are incorporated in the books of transferee company at. a) Market value b) Book value c) Market value or Book value which ever is less d) Agreed value 50. On amalgamation as a purchase of business assets and liabilities are transferred to the books of transferee company at. a) Market Value b) Book Value c) Agreed Value d) Cost 51. Under amalgamation as a purchase of business the reserves carried in the books of transferee company are. a) Statutory reserves only b) General reserve c) Profit and Loss Account d) All of the above 52. Amalgamation Adjustment Account is opened in the books of transferee company to incorporate. a) Liabilities of Transferor company b) Assets of Transferor company c) Statutory reserves of transferor company d) None of the above 53. Under amalgamation as a purchase of business the transferee company incorporates in its books only. a) Assets and liabilities of transferor company b) Assets, liabilities and statutory reserves of transferor company. c) Assets, liabilities and reserves of transferor company d) None of the above

7 Objective Questions Goodwill arising on amalgamation is to be. a) Amortized on a systematic basis b) Adjusted against general reserves c) Retained in the books of transferee company d) None of the above 55. As per AS 14, payment of expenses on amalgamation. a) Becomes part of purchase consideration b) Does not become part of purchase consideration c) Appears in the books of transferor company only d) None of the above 56. The asset which is not considered under Net Asset method of calculation of purchase consideration is. a) Underwriting commission b) Plant and machinery c) Bills receivable d) Stock 57. 'Pooling of Interest' is a method of. a) Accounting for amalgamation b) Calculation of purchase consideration c) Stock valuation d) None of the above 58. Under 'Purchase Method', excess of purchase consideration over the net assets taken over is accounted as. a) Goodwill b) Capital Reserve c) Profit and Loss Account d) None of the above 59. In case provision for doubtful debts is against the debtors, the debtors are transferred to Realisation Account at. a) Gross amount b) Net amount c) Market value d) None of the above 60. Purchase consideration under payment method in amalgamation is. a) Payment to shareholders b) Payment to debentureholders c) Payment to preference shareholders d) Payment of expenses 61. Under amalgamation profit on Relisation is transferred to. a) Equity shareholders A/c b) Preference shareholders A/c c) Debentureholders A/c d) Creditors A/c 62. Under amalgamation Loss on Realisation is debited to. a) Equity shareholders A/c b) Preference shareholders A/c c) Profit and Loss Appropriation A/c d) None of the above 63. As per AS 14 amalgamation under Net payment method payment to creditors by Transferee company. a) Forms part of purchase consideration b) Does not form part of purchase consideration c) Debited to Realisation A/c d) None of the above

8 8 Financial Accounting (T.Y. B.Com.) (Sem. V) Chapter 2 : Capital Reduction and Internal Reconstruction 1. Capital reduction is implemented per Section of Companies Act. a) 77 b) 75 c) 80 d) The scheme of capital reduction is to be approved by. a) High Court b) SEBI c) Central Government d) Shareholders 3. The scheme of internal reconstruction involves company. a) one b) two c) three d) many 4. Fictitious assets are to be transferred to. a) internal reconstruction b) security premium c) share capital d) capital reserve 5. Balance in Capital Reduction should be transferred to. a) security premium b) capital reserve c) share capital d) Profit & Loss Account 6. The cancellation of contingent liability is for company a) profit b) loss c) no profit no loss d) nil 7. The payment for contingent liability should be debited to. a) capital reduction b) capital reserve 8. And Reduced words are to be shown as in Balance Sheet as per requirement. a) company law b) AS c) income tax d) stock exchange 9. XYZ Ltd. had on 31st December, 2008; 80,000 equity shares at ` 10 each. It was decided to reduce shares to ` 8 each. The reduction is. a) ` 1,60,000 b) ` 80,000 c) ` 2,00,000 d) ` 1,50, Creditors of the company are ` 50,00,000 one creditor for ` 20,00,000 decided to forego 40% of his claim. He is allotted 30,000 equity shares of ` 40 each in full satisfaction. The amount transferred to capital reduction is. a) ` 8,00,000 b) ` 10,00,000 c) ` 4,00,000 d) ` 5,00, The preference shareholders agree to forego arrears of preference dividend of ` 72,000. The amount transferred to Capital Reduction Account is. a) Nil b) ` 72,000 c) ` 36,000 d) ` 70, Creditors are ` 3,00,000. They are given the option to either accept 50% of their claim in cash in full settlement or to convert their claim in to equity shares of ` 10 each. Creditors of ` 2,00,000 opt for shares in satisfaction of the claim. Capital reduction Account is credited by `. a) ` 1,00,000 b) ` 1,50,000 c) ` 50,000 d) ` 2,00, Investment costing of ` 24,000 given to Bank for bank overdraft of ` 16,800. The capital reduction is debited by `. a) ` 4,000 b) ` 8,000 c) ` 7,200 d) ` 4, Y Ltd. has 8,000 equity shares of ` 100 each fully paid. Each share is sub-divided into 10 equity shares of ` 10 each. The number of shares after sub-division will be. a) 8,000 b) 80,000 c) 75,000 d) 60,000

9 Objective Questions Provision for taxation is ` 1,00,000. The tax liability of the company is settled at ` 80,000 & it is paid immediately. Amount credited to capital reduction is. a) ` 80,000 b) ` 1,00,000 c) ` 20,000 d) ` 60, % debentures of ` 100 each ` 1,00,000 to be converted into such number of 8% debentures of ` 50 each as to generate the same amount of interest as before. The amount of 8% debentures will be. a) ` 1,00,000 b) ` 25,000 c) ` 75,000 d) ` 1,20, In internal reconstruction, method of calculation of purchase consideration is by. a) Net Asset Method b) Net Payment Method c) no purchase consideration required d) none of the above 18. On internal reconstruction, assets are written off except. a) land & building b) goodwill c) preliminary expenses d) Profit & Loss Account 19. Payment of reconstruction expenses is debited to. a) Profit & Loss Account b) Capital Reduction Account c) Cash Account d) Goodwill Account 20. The Court Confirmation Order may direct the management to add to its name. a) limited b) unlimited c) and reduced d) none of the above 21. Credit balance on Capital Reduction Account is utilised for. a) issue of bonus shares b) writing off fictitious assets c) paying shareholders d) none of the above 22. The scheme of internal reconstruction requires sanction from. a) shareholders b) A/A c) Court d) all the above 23. Internal Reconstruction is governed by section. a) 494 b) 801 c) 804 d) Surrender of fully paid shares amounts to. a) Alteration of share capital b) Reduction of share capital c) Arrangement d) Variation of shareholder's rights 25. Debentureholders accepting less than the face value of their debentures amounts to. a) Compromise b) Reduction of share capital c) Alteration of share capital d) Variation of shareholder's rights 26. Creditors accepting part payment of their claims amounts to. a) Reduction of Share Capital c) Compromise b) Variation of Shareholders Rights d) Alteration of share capital 27. Share Capital A/c Dr. (` 100) To Share Capital A/c (` 10) The above entry in the scheme of reconstruction records : a) Consolidation of share capital b) Sub-division of share capital c) Conversion of shares into stock d) Conversion of stock into shares

10 10 Financial Accounting (T.Y. B.Com.) (Sem. V) 28. In Internal Reconstruction. a) Only one company is liquidated b) One or more companies are liquidated. c) Two or more companies are liquidated. d) No company is liquidated. 29. Reduction in Share capital of a company means reduction in. a) Paid up capital b) Called up capital c) Authorized capital d) Uncalled capital 30. Share Capital A/c Dr. (` 10) To Share Capital A/c (` 100) The above entry is the entry of. a) Sub-division of share capital b) Consolidation of share capital c) Internal reconstruction d) Amalgamation 31. A Ltd. company may alter its share capital to. a) Increase reserve capital b) Sub-divide share capital c) Consolidate share capital d) b and c 32. The existing 1,000 shares of ` 100 each altered to 10,000 shares of ` 10 each is. a) Consolidation b) Sub-division c) Conversion d) Surrender 33. Balance on Capital Reduction is utilized to. a) Write off preliminary expenses c) Pay dissentient shareholders b) Issue bonus shares d) None of the above 34. Internal Reconstruction requires. a) Ordinary resolution passed at General meeting b) Special resolution passed at General meeting c) Special resolution passed at Board meeting d) Ordinary resolution passed at Board meeting 35. Capital Reduction requires. a) Court order b) Order of the Registrar c) Order of the SEBI d) Order of stock exchange 36. Amicable settlement of differences by mutual consent by parties is. a) Arrangement b) Compromise c) Confirmation d) Merger 37. Re-arrangement of rights or liabilities without any dispute is. a) Amalgamation b) Arrangement c) Compromise d) Merger 38. Creditors foregoing their claims in whole or in part is. a) Compromise b) Arrangement c) Consolidation d) Sub-division Chapter 3 : Investment Accounting 1. Investments intended to be held for less than 12 months is called investment. a) annual b) current c) long-term d) trade 2. Fixed return bearing investment are. a) equity shares b) debentures c) jewellery d) machinery

11 Objective Questions The requirements regarding investment are specified in as. a) 3 b) 11 c) 13 d) Rights shares are offered in ratio of. a) number shares held c) face value of shares b) cost of shares d) paid up value of share 5. The cost of investment sold is to be calculated as per Method. a) FIFO b) LIFO c) Weighted Average d) Simple Average 6. The interest up to the date of transaction is paid in addition to the price in case of quotation. a) cum-interest b) ex-interest c) fixed price d) all types of 7. The interest on bonds is to be calculated on. a) cost b) face value c) number of bands d) market value 8. The carrying amount of current investment is to be shown at. a) face value b) cost c) market value d) lower of cost or market value 9. Each side of Investments Account have columns of amount. a) 2 b) 3 c) 4 d) The carrying amount of long-term investment is to be shown at. a) cost b) face value c) market value d) paid up value 11. On 1st July, 2008; Jayshree Ltd. purchased 100 of its own 12% debentures for a price of ` 9,900 which is cum interest price. Interest is paid on 30th September and 31st March every year. The acquisition cost of 100 debentures is. a) ` 9,600 b) ` 9,700 c) ` 10,300 d) ` 10, Rajashree Ltd. holds 14% debentures of the face value of ` 5,000 in RJ. Ltd. Interest is payable on 30th June and 31st December every year. The debentures were purchased on 1st July, Accounts are closed on 31st March every year. The accrued interest on 31st March, 2008 was. a) ` 175 b) ` 525 c) ` 325 d) ` Y Ltd. purchased 10,000 ` 120 each and paid 2% The cost of acquisition is. a) ` 1,20,000 b) ` 2,400 c) ` 1,22,400 d) ` 1,25, Z Ltd. purchased 10,000 shares of ` 10 each at ` 25 per share of A Ltd. during the year During the year , A Ltd. offered rights issues at one share for every two shares held at a price of ` 20 per share. Right shares were subscribed. The carrying cost of investment is. a) ` 2,50,000 b) ` 1,00,000 c) ` 2,50,000 d) ` 3,50, Long-term investments are carried out at. a) cost b) fair value c) market value d) cost or market value whichever is less 16. Short-term investments are carried at. a) market value b) cost c) cost or market value whichever is less d) none of the above

12 12 Financial Accounting (T.Y. B.Com.) (Sem. V) 17. Cost of right shares is. a) added to cost of investment b) deducted from cost of investment c) ignored d) none of the above 18. Sale of right shares is. a) credited to Investment Account b) debited to Investment Account c) not entered in Investment Account d) none of the above 19. Cost of investment includes. a) purchase price b) stamp duty c) brokerage d) all the above 20. Investment in immovable properties shown under. a) fixed asset b) current asset c) current investment d) long-term investment 21. Interest on securities is paid on due date to the. a) holder on the due date in respect of actual holding period b) original buyer c) holder on the due date irrespective of the period of holding d) none of the above 22. When bonus shares are received,. a) nominal value is entered in nominal value column of Investment Account b) cost is entered in cost column of Investment Account c) ignored d) none of the above 23. Interest on securities is always calculated on. a) cost price b) market price c) face value d) all of the above 24. Securities can be purchased at. a) cum-interest price b) ex-interest price c) cost + brokerage + interest d) any of the above 25. Equity shares is a. a) Fixed income bearing security b) Fluctuating income bearing security c) Safe security d) None of the above 26. Interest is always calculated on the. a) M.V. of the security c) Face Value of the security b) Cost of the security d) Realisable value of the security 27. Interest is paid to the. a) holder of the security on the due date irrespective of the actual period of holding b) original holder c) buyer of the security on the due date d) none of the above 28. On sale of investment Profit / Loss is calculated by the equation. a) sale average cost b) sale weighted average cost c) sale cost as per FIFO basis d) sale cost as per LIFO basis

13 Objective Questions Profit on sale of investment is transferred to. a) Profit and Loss A/c b) Investment A/c c) Capital Reserve A/c d) None of the above 30. Dividend on shares accrues on the. a) due date b) date of declaration c) date fixed in advance d) last day of the year 31. Current Investments are valued on the closing date at. a) Cost b) Market value c) Cost or Market value whichever is lower d) Cost or Market value whichever is higher 32. Issue of bonus shares is entered in. a) N.V. column on Debit side of investment A/c b) Capital column on Debit side of Investment A/c c) N.V. column on credit side of Investment A/c d) None of the above 33. Rights shares subscribed are entered in. a) N.V. column (Dr.) cost is entered in capital column Debit of the Investment A/c b) N.V. column (Cr.) cost in cost column Credit of Investment A/c c) Cost is entered in capital column on Debit side of Investment A/c d) none of the above 34. Sale of rights shares is entered in investment A/c on. a) Debit side of Investment A/c in cost column. b) Debit side of Investment A/c in N.V. column. c) Entered in Investment A/c d) Sale proceeds credited to Profit and Loss A/c 35. Cost of Rights shares is. a) added to cost of investments b) deducted from cost of investments c) added to N.V. of investments d) none of the above 36. Accounting for investment is dealt with by. a) AS 9 b) AS 13 c) AS 11 d) AS Cost of acquisition of debentures in the case of cum interest price is. a) cum interest price interest for expired period b) cum interest price + interest for expired period c) cum interest price only d) none of the above 38. Loss on sale of investment is. a) W.A. cost of investment Net sales b) W.A. cost of investment + Net sales c) Simple average cost of investment Net sales d) None of the above 39. Loss on sale of investment is. a) debited to Investment A/c b) debited to Profit and Loss A/c

14 14 Financial Accounting (T.Y. B.Com.) (Sem. V) c) credited to Profit and Loss A/c d) none of the above 40. X purchased 2,000 equity shares of Y Ltd. at cost of ` 125 per share on 1st March Theses shares are held as current investment. On 31st March 2010 M.V. of shares was ` 115 per share. The carrying amount of investment is. a) ` 2,50,000 b) ` 2,30,000 c) ` 4,80,000 d) ` 2,00, Refer to Question No 40. If the M.V. of shares on 31st March 2011 is ` 135 per share the carrying amount is. a) ` 2,50,000 b) ` 2,00,000 c) ` 2,70,000 d) ` 4,50, On sale of equity shares the equity shares A/c is credited by. a) cost price b) Net selling price c) M.V. d) Nominal value 43. Bonus shares received increases. a) Nominal value of shares held b) Cost of shares held c) M.V. of shares held d) None of the above Chapter 4 : Final Accounts of Companies 1. The requirements for final account of companies are specified in Schedule. a) I b) VI c) XIII d) XIV 2. The Schedule VI is divided into Parts. a) 4 b) 2 c) 3 d) 1 3. The unpaid interest on loan is. a) loan b) current liabilities c) reserve d) contingent liabilities 4. Any amount payable within 12 months from date of Balance sheet is called. a) capital b) loan c) contingent liabilities d) current liabilities 5. Fixed deposit with bank is a part of. a) investment b) bank balance c) fixed assets d) loans & advances 6. Calls in arrears is to be. a) shown as debtors b) reduced from share capital c) shown as investments d) ignored 7. The liabilities of companies are divided needs. a) 4 b) 5 c) 6 d) 3 8. The assets of companies are dividend in heads. a) 5 b) 3 c) 4 d) 6 9. The debit balance in Profit & Loss Account is to be. a) reduced from share capital b) reduced from reserve

15 Objective Questions 15 c) disclosed as miscellaneous expenditure d) shown as a note to account 10. Part 3 of Schedule VI provides interpretations of. a) reserve b) capital c) loans d) assets 11. Dividend paid on share capital is to be. a) shown as finance expenses b) shown as appropriations of profit c) shown in Manufacturing Account d) shown as reduction in capital 12. The Part I of Schedule VI requires Profit & Loss Account to be prepared in. a) horizontal forms b) vertical forms c) convenient forms d) columnar form 13. The extract of Balance Sheet and business profile is specified in Part of VI. a) 1 b) 2 c) 3 d) The uncalled amount in investment in shares is shown as. a) investment b) contingent liabilities c) current liabilities d) current assets 15. The compulsory transfer to reserve 10% of profit, if dividend declared is % a) 10% b) 15% c) 20% d) 25% 16. The interest accrued on investment appears in the Balance Sheet under the head : a) current assets b) fixed assets c) loans & advances d) investments 17. In Balance Sheet, securities premium should be shown under. a) share capital b) reserves & surplus c) current liabilities d) fixed assets 18. Which of the followingitems do not come under, reserves & surplus. a) capital redemption reserve b) general reserve c) provident fund d) sinking fund 19. Opening balance of Profit & Loss A/c was ` 7,500, dividend paid ` 1,500 ending balance of Profit & Loss A/c was ` Net income / net loss was. a) loss ` 1,000 b) net loss ` 2,000 c) net income ` 1,000 d) net income ` 6, Retained earnings is the amount of. a) profit after tax less dividend b) profit before tax less dividend c) profit before depreciation d) profit after depreciation 21. Which of the following is not an example of fixed assets? a) plant & machinery b) buildings c) royalty d) patents 22. Unclaimed dividend is shown under. a) current liability b) secured loans c) provisions d) reserves 23. Balance Sheet as on 31st March, Share Capital ` 20,00,000 Profit & Loss Account ( ) ` 67,000 Profit for the year ` 1,90,610 The company wants to transfer ` 50,000 to debenture redemption reserve and declare 10% dividend. The balance in the Profit & Loss Appropriation Account is. a) ` 7,610 b) ` 1,88,549 c) ` 8,610 d) ` 1,81,849

16 16 Financial Accounting (T.Y. B.Com.) (Sem. V) 24. Which of the following items appears on the assets side of Balance Sheet? a) capital reserve b) security premium c) sinking fund investment d) specific reserve 25. Ravi Ltd. proposed a dividend of 15% The called up equity capital of the company is ` 3,00,000 calls in arrears amounted to ` 20,000 and calls in advance amounted to ` 50,000. Dividend payable is. a) ` 42,000 b) ` 49,500 c) ` 39,000 d) ` 34,500 No dividend is payable on calls in advance. 26. The example of accounting policy is. a) consistency b) going concern c) accrual d) depreciation 27. The example of accounting policy is. a) realisation b) dual aspect c) maturity d) valuation of inventory 28. As per AS 1, disclosure should be made of. a) all accounting principles b) all accounting policies c) all accounting concepts d) all significant accounting policies 29. Which of the following is shown under Reserves & Surplus? a) calls in advance b) calls in arrears c) securities premium d) bonus 30. Which is deducted from share capital to get paid up capital? a) calls in arrears b) calls in advance c) bonus d) reserves 31. Payment of dividend is based on. a) paid up capital b) authorised capital c) issued capital d) reserve capital 32. Unclaimed dividend is shown under. a) current liabilities b) current assets c) reserves and surplus d) none of the above 33. Final dividend can be declared by. a) shareholders only b) directors only c) stock exchange d) none of the above 34. Recommendation and declaration is necessary for. a) final dividend b) interim dividend c) interest on debentures d) none of the above 35. Following is not a fixed asset : a) goodwill b) machinery c) vehicles d) loose tools 36. Following is an appropriation of profit : a) interest on loan b) provision for dividend c) audit fees d) none of the above 37. Following is not a secured loans : a) debentures b) bank loans c) public deposits d) none of the above 38. Following is not shown under provisions : a) provision for taxation b) provision for dividend c) provision for depreciation d) none of the above

17 Objective Questions Forfeited shares is. a) added to paid up share capital b) deducted from paid up capital c) shown under reserves & surplus d) none of the above 40. The company has 5% Government Securities having face value of ` 1,00,000 and cost ` 95,000. The interest on Government Securities will be. a) ` 5,000 b) ` 4,750 c) ` 9,750 d) none of the above 41. Arrears of preference dividend is a. a) contingent liability b) current liability c) fixed liability d) none of the above 42. Balance sheet of a company must be prepared in. a) horizontal form only b) vertical form only c) either in Vertical or Horizontal form d) either in Vertical or Horizontal form as per schedule VI 43. Profit and Loss Account of a company must be as per. a) part II of schedule VI of Companies Act b) Part I of schedule VI of Companies Act c) vertical form only d) horizontal form only 44. Repairs to building must be shown as a. a) separate item on debit side of profit and loss A/c b) separate item on credit side of profit and loss A/c c) addition to other expenses on debit side of profit and loss A/c d) none of the above 45. Remuneration to M.D. should be shown as a separate item on debit side of. a) Trading A/c b) Profit and Loss A/c c) Profit and Loss appropriation A/c d) None of the above 46. Payment to auditor should be shown on debit side of. a) Profit and Loss A/c b) Trading A/c c) Profit and Loss Appropriation d) None of the above 47. Unpaid call is. a) added to issued capital and paid up capital b) shown as a current liabilities c) deducted from issued, subscribed and paid up capital d) added to authorised capital 48. Interest accrued but not due on Loans is shown under. a) current liabilities b) secured loans c) unsecured loans d) none of the above 49. Interest accrued and due on loans is shown under. a) current liabilities b) secured loans c) unsecured loans d) none of the above 50. Unclaimed dividend is shown under. a) share capital b) current liabilities c) provisions d) unsecured loans 51. Live stock is shown under. a) current Assets b) fixed Assets c) investments d) current liabilities

18 18 Financial Accounting (T.Y. B.Com.) (Sem. V) 52. Interest accrued on investment is shown under. a) current assets b) current liabilities c) investments d) loans and advances 53. Public deposits accepted by companies are shown under. a) loans and advances b) investments c) secured loans d) unsecured loans 54. Bills Receivable is shown under. a) loans and advances b) current assets c) current liabilities d) contingent liabilities 55. Bills payable is shown under. a) current assets b) loans and advances c) current liabilities d) secured loans 56. Prepaid insurance is shown under. a) current assets b) loans and advances c) current liabilities d) secured loans 57. Interest out of capital during construction period is shown under. a) Miscellaneous expenditure b) Capital W.I.P. c) Profit and Loss A/c d) Share capital 58. Development expenditure is shown under. a) Miscellaneous expenditure b) Capital W.I.P. c) Debit side of Profit and Loss A/c d) Loans and advances. 59. Uncalled amount on partly paid shares is shown under. a) a note to Balance Sheet b) investment c) share capital d) provision 60. Arrears of preference dividend is shown as a. a) current liability b) none to Balance sheet c) deduction from preference share capital d) addition to preference share capital 61. Unexecuted contracts on capital A/c is shown under. a) a note to Balance sheet as contingent liabilities b) capital work in progress c) share capital d) current liabilities 62. Net Block of fixed assets is shown under. a) Horizontal Balance sheet b) Vertical Balance sheet c) Schedule of capital d) None of the above 63. Net Block is. a) Current Assets Current Liabilities b) Gross Block Accumulated depreciation c) Net Block + Depreciation accumulated d) None of the above 64. Unpaid dividend A/c is transferred to. a) Special Bank Account within 7 days from the expiry of 30 days from the date of declaration. b) Special Bank Account within 30 days from the expiry of 7 days from the date of declaration

19 Objective Questions 19 c) Investor education and protection fund within 7 days from the expiry of 30 days from the date of declaration. d) None of the above 65. Short term loan is the loan due for not more than. a) 2 years b) 1 year c) 5 years d) 3 years 66. In a fixed asset schedule Gross Block Closing is equal to. a) Opening Gross Block purchases b) Opening WDV + purchases c) Opening WDV + sales purchases d) Closing WDV + depreciation 67. In a schedule of fixed assets closing depreciation is equal to. a) opening depreciation + Depreciation provided during the year depreciation on asset sold b) opening depreciation + closing WDV c) closing WDV + opening WDV d) cost depreciation 68. When demand for tax is raised by the Income tax department. a) no entry is passed b) it is shown as a contingent liability c) it is debited to profit and loss A/c d) it is debited to tax paid A/c 69. When demand for tax is raised and it is disputed by the company through an appeal it is. a) shown as a current liability b) shown as a contingent liability c) not entered in the books d) debited to profit and loss A/c 70. When the demand for tax is raised by the Income tax department and it is accepted by the company it is. a) debited to Profit and loss A/c and credited to provision for tax A/c b) not entered in the books c) shown as a contingent liability d) debited to tax paid account 71. When the assessed tax is less than the provision made, it is. a) debited to tax paid A/c and credited to Profit and Loss A/c b) not entered in the books c) debited to provision for tax A/c and credited Profit and Loss A/c d) none of the above 72. Dividend is calculated on. a) paid up capital b) called up capital c) calls in arrears d) none of the above 73. Accounting policies are prescribed by. a) Companies Act b) AS 1 c) Income tax Act d) Sales tax Act 74. The following is not shown under share capital of a company. a) calls in arrears b) preference share capital c) forfeited shares A/c d) preference dividend 75. The following item is not shown as a Reserve. a) Securities premium b) Capital Reserve c) General Reserve d) None of the above

20 20 Financial Accounting (T.Y. B.Com.) (Sem. V) 76. Interim dividend of a company can be declared by. a) Shareholders b) Board of directors c) M.D d) SEBI 77. Following is not a contingent liability. a) Interim dividend b) Bills discounted c) Liability under guarantee d) Arrears of preference dividend 78. Following item cannot be shown under provision. a) provision for bad debts b) provision for taxation c) provision for dividend d) unclaimed dividend 79. Following is not a secured loans. a) Public Deposits b) Debentures c) Loans from Banks d) None of the above 80. Following is not shown under Current Asset, Loans and Advances. a) Closing Stock b) Bills Receivable c) Bank balance d) Preliminary expenses 81. The following is not a fixed asset. a) Live stock b) Patents c) Loose Tools d) Machinery 82. The following is an appropriation of profit a) Audit fees b) Provision for tax c) Proposed dividend d) Director's fees 83. The following is a charge against income. a) audit fees b) provision for dividend c) provision for dividend distribution tax d) interim dividend 84. Advance tax is shown under. a) Current liabilities b) Provisions c) Loans and Advances d) Current Assets 85. The asset which is shown under fixed asset is. a) Loose Tools b) Vehicles c) Stock d) Investment 86. The asset which is intangible is. a) Railway siding b) Patents and copyrights c) Building d) Vehicles 87. Long term investments are shown in the company Balance sheet under. a) Fixed assets b) Investments c) Current Assets d) Miscellaneous Expenditure Chapter 5 : Introduction to IFRS 1. IFRS are issued by a) IASB b) ICAI c) FASB d) IASC 2. The ICAI has decided to adopt IFRS wef. a) b) c) d) US GAAP are issued by a) ICAI b) IASB c) FASB d) IASC

21 Objective Questions The countries which have adopted IFRS are a) Africa b) West Asia c) Asia pacific d) All of the above 5. IFRS are the a) Sets of financial Reporting standards b) Rules of accounting c) Sets of auditing standards d) none of the above 6. The objective of IFRS is to a) ensure preparation of financial statements b) ensure that the financial statements contain high quality information. c) ensure uniformity in financial statements at national level d) none of the above 7. IFRS will facilitate a) better access and reduction in cost of capital raised from global market. b) easy borrowing from Indian Capital market. c) improvement in comparability of financial information. d) a + c 8. IFRS are applicable to All the entries having networth in excess of a) ` 500 crores b) ` 1000 crores c) ` 100 crores d) ` 10,000 crores 9. IASC was formed on a) b) c) d) Till date the IFRS are a) 18 b) 9 c) 25 d) The IAS issued so far are a) 46 b) 45 c) 41 d) As on today the IAS in force are a) 25 b) 21 c) 12 d) The number of IAS withdrawn amounted to a) 11 b) 15 c) 12 d) Interpretations on application of IFAS are issued by a) SIC b) IFRIC c) IASB d) ICAI 15. Till date the number of IFRI interpretation issued is a) 12 b) 18 c) 16 d) Time frame for convergence to IFRS commences on a) b) c) d) The first reporting period as per IFRS is a) b) c) d) The first reporting date as IFRS is a) b) c) d) The core group issued press release as on a) c) b) d)

22 22 Financial Accounting (T.Y. B.Com.) (Sem. V) 20. The core group has decided to converge to IFRS IN a) 2 phases b) 3 phases c) 4 phases d) 5 phases 21. The first phase begins on a) May 2010 b) April 2011 c) July 2011 d) Oct, The second phase begins on a) May 2011 b) March, 2011 c) April 2013 d) July, SME are those organizations whose turnover does not exceed. a) 101 crores b) ` 100 crores c) ` 200 crores d) 250 crores 24. Snakall enterprises are those enterprises whose investment in plant & machinery does not exceed. a) ` 2 crores b) ` 2.5 crores c) ` 3 crores d) ` 5 crores 25. Medium enterprises are those enterprises whose investment in plant & Machinery is a) More than ` 5 crores but less than ` 10 crores b) More than ` 5.5 crores but less than ` 15 crores c) More than ` 7.5 crores but less than ` 20 crores d) More than ` 10 crores but less than ` 25 crores 26. Financial statements as per IFRS are presented at a) historical cost b) market value c) Fair value d) replacement value 27. As per Indian GAAP financial statements are presented at a) market value b) historical cost c) Fair value d) replacement value 28. Fair value represents a) transaction value b) average value c) market value d) none of the above 29. Financial statements as per IFRS include a) Balance sheet b) Profit & Loss A/c c) Application A/c d) All of the above 30. Financial statements as per IFRS include a) Cash flow statement b) Summary of significant accounting policies c) Balance sheet & Profit & Loss A/c d) All of the above 31. Presentation of financial statements should be in compliance with a) IAS b) IFRS c) IFRS, IAS and IFRIC interpretations d) none of the above 32. Current Assets are expected to realize within a) 12 months b) 20 months c) 24 months d) 36 months 33. Non current assets include a) tangible assets b) intangible assets c) financial assets d) all of the above

23 Objective Questions Intangible assets include a) software b) website c) patent d) all of the above 35. Property includes a) Freeholder land b) Building c) plant & equipment d) a & b 36. Biological assets include a) Building b) machinery c) Living animals d) none of the above 37. Current liabilities are those liabilities which are to be settled within a period of a) 18 months b) 12 months c) 21 months d) 24 months 38. Equity comprises a) Equity instruments b) Share premium c) Retained earnings d) all of the above 39. Incomes are a) increases in the economic benefits b) decreases in the economic benefits c) increases in net profit d) none of the above 40. Expenses are a) increases in the economic benefits b) decreases in the economic benefits c) decreases in cost d) none of the above 41. Fair value may be a) market price b) Transaction price c) P. V. of future cash flow d) all of the above 42. The approaches to fair valuation include : a) 'In use' valuation premise b) In exchange valuation premises c) a & b d) none of the above 43. The methods of valuation include : a) Market approach b) cost approach c) Income approach d) all of the above. 44. While applying the P. V. techniques the factors to be considered include : a) Risk b) Uncertainity c) Risk & uncertainty d) none of the above 45. The process of conversion to IFRS include a) initial phase b) planning c) execution d) all of the above 46. Total number of IAS are a) 41 b) 40 c) 32 d) Total number of IFRS are a) 42 b) 9 c) 32 d) IFRS 1 was issued in a) June 2003 b) January 2003 c) June 2011 d) January In General terms, convergence means a) achievement of compliance with IFRS b) achievement of harmony in relation to IFRS c) achievement of identity with IFRS d) naming local accounting standards as IFRS

24 24 Financial Accounting (T.Y. B.Com.) (Sem. V) 50. Convergence of Indian Accounting Standards with IFRS implies that a) Indian Accounting Standards will be known as IFRS b) IFRS will adopt Indian Accounting Standards c) Indian Accounting Standards I will be known as IFRS 1. d) Indian Accounting Standards will achieve harmony in relation to IFRS II. FILL IN THE BLANKS WITH SUITABLE WORDS. Chapter 1 : Amalgamation of Companies 1. Amalgamation is covered under. 2. Amalgamations are of types. 3. Amalgamation needs to be approved by % of shareholders. 4. AS 14 covers only amalgamation of. 5. The payment made to debenture holders should included in consideration. 6. The approval by of shareholders is necessary for amalgamation in the nature of. 7. The two methods of accounting for amalgamation are relevant for company. 8. method provides that assets and liabilities should be recorded at book value by a new company. 9. Purchase method requires accounting for assets and liabilities at by transferee company. 10. Amalgamation Adjustment Account is applicable per method of accounting. 11. Amalgamation includes reconstruction. 12. Amalgamation of is not covered under AS Arrangement between or more companies is necessary for amalgamation. 14. Merger or absorption are schemes of. 15. Reserves of transferor company is required to be adjusted under method of accounting. 16. Unrecorded assets cannot be accounted per method. 17. Amalgamation which does not fulfill conditions of merger is called. 18. Capital Reduction is a variety of amalgamation. 19. The accounting for transferor company is in manner irrespective of type of amalgamation. 20. Goodwill or capital reserve can arise under method of accounting. 21. In merger, all assets and liabilities are taken over at. 22. In amalgamation, the purchasing company is called as company. 23. In amalgamation, the vendor company is called as company. 24. Method is followed for accounting merger. 25. Payment to does not form part of purchase consideration. 26. Payment of liquidation expenses does not form part of. 27. As per AS 14, goodwill arising on amalgamation should be written off within years. 28. Dissolution expenses paid by purchasing company are debited to Account in purchase. 29. Dissolution expenses paid by purchasing company are debited to in merger. 30. In merger, shareholders holding % of the face value of equity shares become equity shareholders of the transferee company. 31. Preliminary expenses are transferred to Shareholders Account. 32. In merger, vendor companies are. 33. The company amalgamated into another company is company.

25 Objective Questions Purchasing company is called as company. 35. On amalgamation preliminary expenses are debited to. 36. Premium on settlement of preference shares is debited to A/c. 37. Amalgamation Adjustment A/c appears in the Balance sheet under. 38. Profit on Realisation is transferred to A/c. Chapter 2 : Capital Reduction and Internal Reconstruction 1. The reduction of capital is permitted under of Companies Act. 2. The Capital reduction means reduction in value of shares. 3. The Sub division of shares does not result in of capital. 4. The Shareholders can surrender shares for or. 5. The internal reconstruction results in proper valuation of and of companies. 6. The scheme of internal reconstruction requires approval of. 7. resolution is to be passed by shareholders for approval of scheme of reconstruction. 8. The fictitious debit balances are to be transferred to Account. 9. The difference in revaluation of assets is to be transferred to Account. 10. A scheme of or mean the scheme having same effect. 11. The full balance of capital is to be debited, if value is reduced 12. Shareholders not approving scheme is called shareholders. 13. The Balance Sheet prepared after implementation of the scheme is to be suffixed by words. 14. The expenses for forming and implementing scheme should be debited to. 15. The scheme of internal reconstruction can be utilized to provide for the company. 16. Capital Reduction Account is by payment of reconstruction expenses. 17. The objective of reconstruction is to write off. 18. Court Confirmation Order has to be registered with the of companies. 19. In, no new company is formed. 20. Appreciation in the value of land & building is recorded on side of Capital Reduction Account. 21. Any credit balance on Capital Reduction Account after writing off losses is transferred to Account. 22. In re-organisation, shares surrendered are transferred to A/c. 23. Payment for contingent liability is debited to A/c. 24. Fictitous assets are written off to A/c. 25. The objective of capital reduction scheme is to w/off. 26. In capital Reduction all the adjustments are made in A/c. 27. Reconstruction expenses are debited to A/c. 28. Appreciation in land and building is credited to A/c. 29. Internal Reconstruction is governed by section of Companies Act. 30. Capital Reduction requires. 31. Amicable settlement of differences by mutual consent by parties is. 32. Creditors foregoing their claims in whole or in part is. Chapter 3 : Investment Accounting 1. The investment intended to be held for less than months is called investment as per AS 13.