+2 Level Accounting

1. Which item should be treated as capital expenditure?

a) cost of carriage on the purchase of a fixed asset
b) cost of replacement of part of a fixed asset
c) depreciation of a fixed asset
d) repairs to a fixed asset
2. An item of machinery costs Rs. 60,000. The machinery was later sold for Rs. 8,000 and the loss on
disposal was Rs. 3,000. What was the accumulated depreciation on the machinery on disposal?
a) Rs. 46,000
b) Rs. 49,000
c) Rs. 52,000
d) Rs. 55,000
3. Why do businesses charge depreciation on their fixed assets?
a) to ensure that sufficient cash is available to replace the assets
b) to show the realisable value of the assets in the balance sheet
c) to show when the assets must be replaced
d) to spread the cost of the assets over their estimated useful lives
4. When a businessman introduces capital into his business, the transaction is debited in the cash book
and credited to his capital account. Of which accounting principle is this an example?
a) Entity
b) Going Concern
c) Matching
d) Prudence
5. How can net profit be calculated?
a) Closing Capital + Drawings – Additional Capital – Opening Capital
b) Closing Capital – Drawings + Additional Capital – Opening Capital
c) Opening Capital + Drawings – Additional Capital – Closing Capital
d) Opening Capital – Drawings – Additional Capital – Closing Capital
6. The amount of the dishonoured bill has been wrongly debited to general expenses account, which
type of error has been committed?
(a) Error of principle
(b) Error of commission
(c) Compensating error
(d) Error of omission
7. ‘Advance received from customers is not taken as sale’ is based on:
(a) Money measurement concept
(b) Accrual Concept
(c) Consistency concept
(d) Conservation
8. The term “Income” includes:
(a) Income received
(b) Income receivable
(c) Both (a) and (b)
(d) None of the above
9. When preparing a Bank Reconciliation Statement if you start with balance as per Pass Book, then
cheques paid by bank recorded twice in Pass Book Rs. 1050 will be:
(a) Added
(b) Deducted
(c) Not required to be adjusted
(d) None of the three
10. Mohan paid Rs. 500 towards a debit of Rs. 2,500, which was written off as bad debt in the previous
year. Mohan’s account will be credited with:
(a) Rs. 2,500
(b) Rs. 2,000
(c) Rs. 500
(d) None of the three
11. Goods costing Rs. 1000 supplied to Ramesh at the invoice price of 10% above cost and a Trade
Discount for 5%. The amount of Sales will be:
(a) Rs. 1045
(b) Rs. 1050
(c) Rs. 1100
(d) Rs. 1060
12. Opening Stock 8,500; Purchases 30,700; Direct Expenses 4,800; Indirect Expenses 5,200; Closing
Stock 9,000; Cost of goods sold will be:
(a) Rs. 30,000
(b) Rs. 35,000
(c) Rs. 32,000
(d) Rs. 40,000
13. Total sales during the year amounted to Rs. 70,000; Cash sales Rs. 10,000; Outstanding debtors at the
end of the year Rs. 25,000. Cash received from debtors during the year will be:
(a) Rs. 35,000
(b) Rs. 30,000
(c) Rs. 37,000
(d) Rs. 32,000
14. On 01.12.06, X draws a bill on Y for 30 days after sight. The date of acceptance is 08.12.06. The due
date of the bill will be -
(a) 8.01.07
(b) 10.01.07
(c) 11.01.07
(d) 09.10.07
15. Cost of exceptional repairs of a non-recurring nature by way of overhauling of the entire plant is:
(a) Capital expenditure
(b) Revenue expenditure
(c) Deferred revenue expenditure
(d) Capital lost
16. Goods worth Rs. 500 given as charity should be credited to
(a) Sales account
(b) Purchases account
(c) Charity account
(d) None of the three
17. Bank pass book is also known as _______
(a) Bank book
(b) Bank account
(c) bank column
(d) Bank statement
18. A company purchased a plant for Rs. 5000 useful life of the plant is 10 years and residual value is Rs.
500. Rate of depreciation will be ____
(a) 9%
(b) 10%
(c) 15%
(d) 12½%
19. Syam prepared a trial balance for his factory on 31st March, 2005. The debit total of trial balance was
short by Rs. 500. He transferred the deficiency to suspense A/c. After a close examination be found
 that the purchase day book for Sept. 2005 was under cast by Rs. 500. Necessary Journal entry to
rectify the error will be:
(a) Purchases A/c Dr. 500
To Cash A/c 500
(b) Suspense A/c Dr. 500
To Purchases A/c 500
(c) Purchases A/c Dr. 500
To Suspense 500
(d) None of the above
20. Mr. Ashok buys clothing of Rs. 50,000 paying cash Rs. 20,000. What is the amount of expense as per
the accrual concept?
(a) Rs. 50,000.
(b) Rs. 20,000.
(c) Rs. 30,000.
(d) Nil.
21. What is the order in which the accounting transactions and events are recorded in the books?
(a) Journal, Subsidiary books, Ledger, Balance sheet , Profit and loss account.
(b) Ledger, Journal, Ledger, Balance sheet , Profit and loss account
(c) Journal, Ledger, Profit and loss account, Balance sheet .
(d) Profit and loss account, Ledger, Balance sheet, Journal.
22. Following are the items of the balance sheet of Mr. X: Capital Rs. 7,00,000; Machinery Rs. 5,00,000
and cash Rs. 2,00,000. If Mr. X spends Rs. 5,000 to meet his family expenses, the balance of capital
and cash accounts will be:
(a) Rs.7,00,000 and Rs. 2,00,000.
(b) Rs.6,95,000 and Rs. 1,95,000.
(c) Rs.7,00,000 and RS. 1,95,000.
(d) Rs.6,95,000 and Rs. 2,00,000
23. After preparing the trial balance the accountant finds that the total of the debit side is short by Rs.
1,000. This difference will be:
(a) Credited to suspense account.
(b) Debited to suspense account.
(c) Adjusted to any of the debit balance account.
(d) Adjusted to any of the credit balance account.
24. A, B, C & D are in partnership sharing profits and losses equally. They mutually agree to change the
profit sharing ratio to 3:3 2:2. In this process D loses by:
(a) 1/20
(b) 1/10
(c) 1/5
(d) None of the above
25. A machine purchased on 1st January 2003 at Rs.15,00,000, having useful life of 15 years was
depreciated on straight line basis. On 1st January 2006, the same machine was revalued upward by
Rs.3 lacs. The amount of depreciation for the year 2006 will be:
(a) Rs.1,25,000.
(b) Rs.1,00,000.
(c) Rs.1,20,000.
(d) Rs.1,50,000.
+2 Level Accounting Answers

1. a) cost of carriage on the purchase of a fixed asset

2. b) Rs. 49,000
3. d) to spread the cost of the assets over their estimated useful lives
4. a) entity
5. a) Closing Capital + Drawings – Additional Capital – Opening Capital
6. a) error of principle
7. b) Accual Concept
8. c) Both (a) and (b)
9. a) Added
10. d) None of the three
11. a) Rs. 1045
12. b) Rs. 35,000
13. a) Rs. 35,000
14. b) 10.01.07
15. c) Deferred revenue expenditure
16. b) Purchases account
17. d) Bank statement
18. a) 9%
19. c) Purchases A/c Dr. 500
To Suspense 500
20. a) Rs. 50,000.
21. c) Journal, Ledger, Profit and loss account, Balance sheet
22. b) Rs.6,95,000 and Rs. 1,95,000.
23. b) Debited to suspense account
24. a) 1/20
25. a) Rs.1,25,000.