Finance Test 1

Which of the following can be categorized as discretionary expense

Purchase,

Salary,

Repair & Maintenance,

R&D Expense

Both Assets and owner’s equity would be increased by

Capital bought in,
purchase of an asset on credit,

payment of creditors,

proprietors drawings

The balance of cash account indicates

Net income for the period,

net loss for the period,

net cash on hand,

net worth of the business

While preparing cash flow statements, the repayments of a loan during the
year should be included under the heading of
Operating cash flow

Financing cash flow,

investing cash flow

none of the above

Which of the following can be categorized as Revenue

dividend received

Sale of goods,
Sale of old furniture
All of the above

Credit sales for the year is Rs 100000 and closing debtors are Rs 10000.
Calculate the collection period of the firm.
10 days,

36.5 days,
27.39 days,

None of the above

Account Receivable Turnover = Net Credit Sales /Accounts Receivable = 100000/10000 = 10

Average Collection Period = Days in period / Account Receivable Turnover = 365/10 = 36.5

When liability is increased, it is recorded on the

Credit side,
debit side,

left hand side,

any of the above

There was a fire in M Ltd Godown. It resulted into loss of Rs 5 Racr goods.
However the insurance company accepted the claim of rs 4.5 cr. This will
result In ___________ in equity by Rs ______.
Increase 4.5 Cr

Decrease 0.5Cr
Increase 0.5 Cr

Decrease 5 Cr

Which of the following is liquidity ratio

Debt to equity ratio,

Return on Investment,

RTotal asset turnover ratio,

current ratio

In which of the following statement, final balances of all the accounts are
prepared in the form of a list
Ledger,
accounting equation,

trial balance
journal

Which of the following self generated intangible asset can be recorded in

books of account
Goodwill,

technical knowhow,

software,
all the above

Every accounting transaction must atleast affect ______accounts?

One,two, three, four

Ans – two

In which of the following form of business, income is taxed separately from its
owners
Sale proprietorship

Partnership

corporation,
all of the abpve

ABC ltd purchased machinery on 1st October 2017 at cost of Rs 5 Lac. There is
no salvage value and estimated useful life of machinery is 5 years How much
depreciation should be charged for year 2017-18?
1 Lac

Zero

50000
None of the above

Calculation of depreciation of machinery For the year ending 2017-18

Depreciation = [ ( cost of price / estimated useful life ) * Total used day ] = ( 500000/5 ) * 6/12 = 100000 * 6/12 = 50000

Which of the following s an operating item?

Interest paid,

salary paid,
dividend received,
share capital issued

In which of the following firm structure compliance cost is maximum

Sole proprietorship,

ltd liability partnership,

pvt ltd company,

public ltd company

If total liabilities decreased by Rs 20000 and stakeholders equity increased by

Rs 5000 during a period of time, then total assets must change by what
amount and direction during the same time period?
Rs 15000 increase,
Rs 15000 decrease,

Rs 25000 increase,

Rs 25000 decrease

A credit sale of goods to mohan should be credited to

Sales account
mohan account

goods account

purchase account

Ram’s account in the accounts payable ledger has a Rs 2000 beginning

balance. After a transaction for Rs 500 is posted from the purchases journal,
the balance in Ram’s account is ____
1500 credit,

1500 debit,

2500 credit,
2500 debit

If manufacturing expenses are Rs 20000, interest expenses Rs 4000, cash sales

is Rs 30000. Increase in inventory and debtors is Rs 5000 and Rs 7000
respectively. While increase in accounts payable is 9000. Calculate the cash
flow from operation?
Rs 9000,
Rs 3000,
Rs 7000,

Rs 12000

Net Cash Flow = (increase in cash reserves + incoming cash) - (outgoing cash + cash yet to be realized)
=(9000 + 30000) – (20000 +4000 + 5000 + 7000) = 3000

Which of the following is basic accounting equation

Capital – Liabilities=Assets,

Assets + liabilities = capital,

Assets + capital = liabilities,

liabilities + capital = assets

A credit sale to mohan should be debited to

Sales account, mohan account, goods account, purchase account

Ans – Mohan account

The share capital of company is Rs 10 cr divided in 10 Lac number of shares.

Calculate the face value of share
RS 100,
Rs 1000,

Rs 10,

Rs 1

Face Value = Share capital / Number of Shares = 100000000/1000000 = 100

On 1st April 2017 P Ltd sells 100000 shares of dabur india ltd to Q Ltd at Rs
400 per share (Market price on that day) with an agreement to repurchase the
same at Rs 412 per share on 31st Dec 2017. How the transaction should be
presented in financial statements of P ltd
Sale of investment,

sale of shares,

borrowings
investment
Operating expenses of Moon Ltd are Rs 18000, Interest expenses Rs 5000, Tax
paid Rs 4000. If sales is Rs 35000 then calculate the Net profit Margin.
0.2285,
0.7714,

0.51,

0.0657

Net Profit Margin = Net Income/Total Sales = (35000 – 18000 – 5000 – 4000 )/35000 = 8000/35000 = 0.22857

Which of the following statement shows the Net profit/Loss earned by a

business entity?
Income statement
balance sheet,

trial balance,

cash flow statement

Decline in the value of intangible assets in a given year is known as

Depreciation,

amortization,
depletion,

any of the above

Higher Debt-Equity ratio indicates

High operating Risk,

Low operating Risk,

High Financial Risk,

Low Financial Risk

Advance from customers is a example of ________

Asset,

liability,
income,

expense
If net profit is Rs 10000, Preference dividend is Rs 2000 and Number of shares
are 600, calculate EPS?
16.66,

20,

13.33
None of the above

EPS = (Net income – Preferred Dividends)/No of Shares = (10000-2000)/600 = 13.33

Others
Higher debt-equity ratio indicates
High operating risk

Low operating risk

High financial risk

Low financial risk

Which of the following is the basic accounting equation

Capital – liabilities = Assets

Assets + liabilities = Capital

Assets + capital = liabilities

Liabilities + capital = Assets

Which of the following is an financing item

Dividend received
Share capital issued

Interest paid

Salary paid

In which of the following books, separate account is maintained for each item?
Trial balance

Accounting Equation

Journal
Ledger

A business has paid the rent for the period Jan-March 2016 in June2016, in
which year financial statements this rent expenses will be recorded
All of the above

2017

2016
2015

Loss on the sale of Fixed assets will be shown in which part of the cash flow
statement, if indirect method is followed?
Financing cash flow

None of the above

Investing cash flow

Operating cash flow

Proceeds on the sale of fixed assets will be shown in which part of the cash
flow statement, if indirect method is followed?
Financing cash flow

None of the above

Investing cash flow

Operating cash flow

A credit sale of goods to Mohan should be debited to

Sales account,
Mohan account

Goods account

purchase account

Which of the following is a Current Asset?

Computers

Cars

Debtors
furniture
Purchase of machinery against issue of shares will be shown in which part of
the cash flow statement
Financing cash flow

None of the above

Operating cash flow

Investing cash flow

XYZ Ltd paid salaries of Rs 200000 in the month of March2016. Journalize the
transaction
Employees A/c Debited to Salary

Employees A/c Debited to Cash

Salary A/c debited to Cash

Cash A/c debited to Salary

Who approves the financial statements of a company?

Management

Board of Directors
Auditors

Shareholders

Which of the following measure will be used for calculation of Inventory

Turnover Ratio
Net Sales

Cost of Sales

Credit Sales

Cost of Goods Sold

Which of the following statement shows the Net Profit/Loss earned by a

business entity?
Trial Balance

Balance Sheet

Income Statement
Cash Flow Statement
Accounting standards are issued by which of the following entity, in India
ICAI
SEBI

RBI

IFRS

Wages paid to workers must be debited to ____ account

Wages
Office Expenses

Factiry Expenses

Machinary

Which of the following statements shows the financial position of a business

entity as on date
Balance Sheet
Income Statement

Cash Flow Statement

Trail Balance

In which of the following firm structure liability of owners is unlimited

Sole Proprietorship
Public Ltd Company

Pvt Limited Company

Ltd Liability Partnership

Total Fixed cost includes cost of

Plant and machinery and depreciation cost of plant
Routine maintenance of plant

Plant and machinery

Plant and machinery and routine maintenance of plant

In order to reflect the efficiency in debtor’s management, Debtor turnover
ratio should be _____
Decreased

Increased
Kept constant

Increased

A new firm commenced business on 1st January,2016 and purchased goods

costing Rs 90,000 during the year. A sum of Rs 6000 was spent on freight. At
the end of the year the cost of goods still unsold was Rs 12,000. Sales during
the year Rs 12,0000. What is the gross profit earned by the firm.
Rs 36000
Rs 30000

Rs 42000

Rs 38000

Opening stock as on 1.1.2006 Rs. 90000.00

Freight charges paid Rs. 6000.00

Total Purchase Cost Rs. 96000.00

Less Closing Stock Rs. 12000.00

Net Purchase value Rs. 84000.00

Sales Value Rs.120000.00

Gross profit Rs. 36000.00

Percentage of Gross Profit 42.857 %

Capital contributed by owners is recorded as liability as per which of the

following concept
Dual Aspect

Monetary Unit

Economic Entity
Going Concern

Which of the following is an example of business liability

Land
Cash

Creditors
Building

In which of the following books transactions are first time recorded

Accounting equation

Journal
Ledger

Trail balance

Security Premium Reserve is an example of _______

Revenue Reserve

Capital Reserve
Reserve Capital

Revaluation Reserve

Total profits earned in an industry at all points along the value chain
Net loss

Profit pool
Gross profit

Net profit