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Module II - MCQ

This document contains a multiple choice quiz on accounting concepts related to the preparation of financial statements. There are 15 multiple choice questions testing understanding of concepts like depreciation, book value, accounting for fixed assets, treatment of expenses and profits, and terminology used in financial statements. The questions cover topics like methods of calculating depreciation, treatment of accumulated depreciation, identifying balance sheet and income statement items, and distinguishing between different types of reserves and profits.

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aditi anand
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67 views

Module II - MCQ

This document contains a multiple choice quiz on accounting concepts related to the preparation of financial statements. There are 15 multiple choice questions testing understanding of concepts like depreciation, book value, accounting for fixed assets, treatment of expenses and profits, and terminology used in financial statements. The questions cover topics like methods of calculating depreciation, treatment of accumulated depreciation, identifying balance sheet and income statement items, and distinguishing between different types of reserves and profits.

Uploaded by

aditi anand
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Multiple Choice Questions

Module II Preparation of Financial Statements

Preparation of Companies Financial Statements: as per Revised Schedule III Income Statement
Balance Sheet Accounting for Depreciation

Q.No. Question Option A Option B Option C Option D Correct


1 Depreciation is a process of: valuation Cost pricing justification B
allocation
2 Cos of the fixed asset – Salvage Market Value Book Value Depreciable Depreciated C
value = ? cost cost
3 Book value of a fixed asset is equal Cost – Cost – Cost + Cost + A
to: Accumulated Salvage Value Salvage accumulated
Depreciation value Depreciation
4 Consider the following information:
 Cost of the building: $75,000 $15,000 $20,400 $9,600 $7,500 C
 Accumulated depreciation of
building: $27,000
 Accelerated depreciation rate:
20%

Based on the above information, the


depreciation expense for the current
period is:

5 For an asset owned for more than one 35% x cost of 35% x (cost of 35% x 35% x (cost of
year, the depreciation charge for the the asset. the asset - accumulated the asset + B
year, calculated using the reducing- accumulated depreciation. accumulated
balance basis at the rate of 35%, would depreciation). depreciation).
be arrived at as follows:
6 Eva has purchased a machine for The straight- The reducing- The choice Both the
£300,000. She will depreciate it either at line basis will balance basis of straight-line
20% on the straight-line basis or at 30% lead to the will lead to depreciation basis at 20% A
on the reducing-balance basis. highest the highest method does per annum
Which method will lead to the highest combined combined not affect and the
combined profits in the first two years profits. profits. the reducing-
that the machine is owned? combined balance basis
profit at 30% per
figures. annum will
lead to the
same
combined
profit figure
for the first
two years.
7 Which of the following is true about Only A Only B Both A and B None of the
financial statements? above C

A) Financial statement gives a summary


of accounts.
B) Financial statements can be stated as
recorded facts.
8 The following item is shown in profit Dividends Discount of Non- Current A
and loss appropriation account. declared issue of operating assets
shares expenses
9 The issue of equity capital in exchange
of plant and machinery will cause the Fluctuate Decrease Increase Remain B
return on equity capital to unchanged
10 Which of the following statements are
true? Both A and B Both A and C Both B and C A, B, C C

A) Financial statements are only interim


report.
B) Financial statements are also known
as annual records.
C) Financial statements are historic.
11 Bonus shares can be issued by a Out of the Out of share Without any Out of free
company Reserves premium not provision for reserves built
created by collected in it in the out of D
revaluation cash Articles of genuine
of fixed Association profit
assets of the
company
12 Amount spent on an advertisement Capital Revenue Deferred None of the
campaign, the benefit of which is likely expenditure expenditure revenue above C
to last for three years is a expenditure
13 ABC Ltd was incorporated with an Promoters’ Services Goodwill Share Capital
authorised Share Capital of Rs. 1, 00,000 Account Account Account Account C
equity shares of Rs. 10 each. The Board
of Directors of the company decided to
allot 10,000 shares credited as fully paid
to the promoters of the company for
their services. Which account should be
debited in the books of ABC Ltd.?
14  In accounting, profit prior to Revenue Secret Capital General C
incorporation is treated as Reserve Reserve Reserve Reserve
15 The funds available with a company Net Profit Net Capital Profit Retained
after paying all claims including tax and Operating Earnings D
dividend is called Profit

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