MULTIPLE CHOICE QUESTIONS OF ACCOUNTING AND FINANCIAL ANALYSIS Q1.

Real accounts are related to: a) b) c) d) Assets Expenses and loses Debtors and creditors Income and gain

Q2. Prepaid expenditure is shown as a) b) c) d) An asset A liability An expense None of these

Q3. The primary objective of Current ratio is: a) b) c) d) To measure the use of debt To measure the liquidity To measure the effectiveness of capital To measure the profitability of the company

Q4. Net working capital is -------- of total current assets and total current liabilities: a) b) c) d) Aggregate Difference Total Maximum

Q5.long term creditor of the company is interested in: a) b) c) d) Profitability of the company Long term solvency on the company Cash position of the company All of the above

Q6. In Fund Flow Statement, fund means: a) b) c) d) Working Capital Current Assets Cash only None of the above

Q7. Current Assets are Rs.3,00,000; Current Liabilities are Rs.1,50,000;the debtors realized Rs.20,000. Its impact on working capital would be: a) b) c) d) Increase working capital by 20,000 Decrease working capital Rs.20,000 No change in working capital Cannot be determined

Q8.Debenture is: a) b) c) d) Long term liability Short term liability Asset None of the above

Q9.Intrest on Drawings is---a) b) c) d) Expenditure for the business. Expenses for the business. Gain for the business. Loss for the Business.

Q10. The Diminishing value Method means a method by which-------a) b) c) d) The rate of depreciation falls year by year The amount on which depreciation is calculated falls year by year The rate as well as the amount to which it is applied falls year by year None of the above

Q11. In the balance sheet of the company the item Goodwill is shown under the headings------. a) b) c) d) Current assets Loans and advances Liability Fixed asset.

Q12. In a cash flow statement which of the following would appear as a cash outflow. a) b) c) d) The payment for investments purchased Amount received on issue of new shares Debentures held as investment being converted into shares None of the above.

Q13. The assets of a business on 31st march, 2010 are worth Rs. 50,000 and its capital is Rs.35, 000. Its liability on that date shall be a) b) c) d) 85,000 15,000 35,000 10,000

Q13.outstanding salaries are shown in a) b) c) d) Trading account(debit side) Profit and loss account(credit side) Balance sheet (asset side) Balance sheet (liability side)

Q14. Which of the following transactions will result in fund flow? a) Cash collected from debtors b) Purchase of machinery by issue of debentures c) Old furniture, the book value of which is 5000 discarded and written off in the profit and loss account. d) None of the above transactions will result in funds flow.

Q15. According to the Business Entity Concept a) Transactions between the business and its owners are not recorded. b) Transactions between the business and its owners are recorded considering them to be a one single entity. c) Transactions between the business and its owners are recorded from the business point of view. d) None of the above

Q16. According to the cost concept a) b) c) d) Assets are recorded at the value paid for acquiring it. Assets are recorded by estimating the market value at the time of purchase. Assets are recorded at lower of cost and market value. None of the above

Q17. According to going concern concept, a business is viewed as having a) b) c) d) a limited life a very long life an indefinite life none of these

Q18. Which of the following equation is correct? a) b) c) d) Assets + capital =Liabilities Liabilities+ capital= Assets Assets+ Liabilities=capital Assets-Liabilities=Capital

Q19. The trial balance shows a) b) c) d) Both debit and credit balances Credit balances Debit balances None of these

Q20. Which of the following accounts will be credited on giving cash donation? a) b) c) d) Cash account Donation account Purchase account Stock account

Q21. Depreciation arises because of a) b) c) d) Wear and tear Inflation Fall in the value of the assets None of these

Q22.straight line method of depreciation is that method under which a) b) c) d) Depreciation is charged at a fixed percentage on the book value of the asset Depreciation is charged at a fixed percentage on the original cost of the asset. Depreciation is charged on original cost of asset but the depreciation rate changes. All of the above

Q24. A machinery which cost Rs.2, 00,000 is depreciated at 25% per year using the written down value method. At the end of three years, it will have a net book value of. a) b) c) d) Rs.1,50,000 Rs. 84,375 Rs.1, 12,500. Rs.1,00,000

Q25. Which of the following is non-current liability? a) b) c) d) Mortgage loan Bank overdraft Outstanding wages Bills payable

Q26.which of the following will not change working capital: a) b) c) d) Purchase of goods for cash Purchase of machine for cash Purchase of machine against cheque Sale of old machine against cheque

Q27. Which of the following is an application of fund? a) b) c) d) Payment of dividend Writing-off goodwill Sale of goods for cash Refund of income tax

Q28.while calculating funds from operations, which of the following item is deducted from the net profit: a) b) c) d) Loss on sale of fixed assets Non operating incomes Depreciation on fixed assets None of these

Q29. A transaction does not result into flow of funds: a) b) c) d) When a current asset is converted into another current asset When a fixed asset is bought out of current asset When a long term liability is paid out of current asset None of these.

Q30.which of the following is not a cash inflow: a. b. c. d. purchased of fixed assets sale of goods issue of debentures sale of fixed assets

Q31.According toAS-3 (revised) purchase of fixed assets is treated as: a) b) c) d) operating activity investing activity financing activity none of these

Q32.Total sale Rs.2, 00,000; debtors at the beginning Rs.15, 000; Debtors at the end ding Rs.28, 000; cash sales will be: a) Rs.1,87,000 b) Rs.2,13,000 c) Rs.2,15,000 d) Rs.2,10,000 Q33. Cash from operation will decrease due to: a) b) c) d) Increase in current asset Decrease in current asset Increase in current liabilities none of these

Q34. Cash flow statement is prepared from: a) b) c) d) balance sheet profit and loss a/c additional information all of these

Q35. If the net operating profit of a business is Rs.90, 000 and the debtors have decreased during the year by Rs.30, 000.cash from operation equals to a) b) c) d) Rs.90,000 Rs. 1,20,000 Rs.60,000 Rs.30,000

Q36. Ideal current ratio is: a) b) c) d) 1:1 2:1 1:2 2:2

Q37. Quick ratio does not include: a) b) c) d) Cash Bank balance Debtors Stock

Q38. Debt-equity ratio is: a) b) c) d) Liquidity ratio Solvency ratio Profitability ratio None of these

Q39. Current ratio is some time referred to as: a) b) c) d) Working capital ratio Solvency ratio Financial ratio None of these

Q40. Ratios, which are usually calculated in times, are: a) b) c) d) Activity ratios Profitability ratios Financial position ratios Solvency ratio

Q41. Higher, the ratio, the more favorable it is. This does not apply to: a) b) c) d) Operating ratio Stock turnover Net profit ratio None of these

Q42. The most rigorous test of liquidity is: a) b) c) d) Quick ratio Current ratio Absolute liquid ratio None of these

Q43. A transactions involving a very small amount, does not need to be recorded under a separate

head because of: a) b) c) d) Dual concept Materiality Revenue recognition concept Cost concept

Q44. Land and building is a a) Current assets b) fixed assets c) Current Liabilities d) fixed liabilities Q45.______________is an intangible asset. a) b) c) d) Goodwill Debtors Furniture Cash

Q46. Salary is an example of a) Personal account b) real account c) Nominal account Q47. Real Account s is used to represent: a) b) c) d) Assets and liabilities Only Assets Only Liabilities Income and Assets

Q48. Cost of sales is equal to

a) b) c) d) Opening stockpurchase Opening stockpurchase+ closing stock Opening stock +purchase Opening stock +purchases + direct expensesclosing stock

Q49. Closing stock in adjustment is recorded in the a) b) c) d) Balance sheet and trading A/c Balance sheet Profit and loss A/c trading A/c

Q50. Commission received appearing in trial balance is shown a) b) c) d) On the debit side of Profit and loss A/C On the credit side of Profit and loss A/C On the asset side of Balance sheet On the liabilities side of balance sheet

Discuss the principles of Accounting with suitable examples