Ca Foundation Ca Kajal Derolia: Cakajalderoliaexceleducare

CA FOUNDATION CA KAJAL DEROLIA
cakajalderoliaexceleducare
Paper 1- Principles & Practice of Accounting
State with reasons whether the following statements are True or False:
Questions covering Past Year Papers, MTP & RTP :-
Q.1 Trade Discount is a reduction granted by a supplier from the list price
of goods or services on business considerations for prompt payment.
Q.2 M/s. XYZ & Co. runs a cafe. They renovated. some of the old cabins.
Because of this renovation some space was made free and number of
cabins was increased from 15 to 18. The total expenditure incurred
was 30,000 and was treated as a revenue expenditure.
Q.3 Valuation of inventory, at cost or net realizable value, whichever less, is

based on principle of Conservatism.
Q.4 In case of bill of exchange, the drawer and the payee may not be the
same person but in case of a promissory note, the maker and the
payee may be the same person.
Q.5 A Partnership firm cannot own any Assets.
Q.6 Since company has existence independent of its members, it continues

to be in existence despite the death, insolvency or change of members.
Q.7 Amount spent for the construction of temporary huts, which were
necessary for construction of the Cinema House and were demolished
when the Cinema House was ready, is capital expenditure.
Q.8 If the amount is posted in the wrong account or it is written on the wrong
side of the account, it is called error of principle.
Q.9 In case of consignment sale, ownership of goods will be transferred to

consignee at the time of receiving the goods.
Q.10 In case the due date of a bill falls after the date of closing the account,
the interest from the date of closing to such due date is known as Red-
Ink interest.
Q.11 Limited Liability Partnership (LLP) is governed by Indian Partnership

Act, 1932.
Q.12 The relationship between sales and fixed assets is expressed as working
capital ratio.
Q.13 Overhauling expenses for the engine of motor car to get better fuel
efficiency is revenue expenditure.
Q.14 Depreciation is a non-cash expense and does not result in any cash
outflow.
Q.15 Fees received for Life Membership is a revenue receipt as it is of

recurring nature.
Q.16 If Closing Stock appears in the Trial Balance:

The closing inventory in then not entered in Trading Account. It is shown
only in the balance sheet.
Q.17 Inventory Turnover Ratio is also known as Stock Turnover Ratio.
Q.18 If del-creders commission is paid to consignee, the loss of bad debts is

to be borne by the consignor.
Q.19 Expenses in connection with obtaining a license for running the Cinema
Hall is Revenue Expenditure.
Q.20 Re-issue of forfeited shares is allotment of shares but not a sale.
Q.21 If the effect of errors committed cancel out, the errors will be called
compensating errors and the trial balance will disagree.
Q.22 There are two ways of preparing an account current.
Q.23 When there is no partnership deed prevails, the interest on loan of a

partner to be paid @ 6%.
Q.24 Interest coverage ratio indicates the firm's ability to pay off current
interest and installments.
Q.25 Accrual concept implies accounting on cash basis.
Q.26 The Sales book is kept to record both cash and credit sales.
Q.27 Bank reconciliation statement is prepared to arrive at the bank balance.
Q.28 Finished goods are normally valued at cost or market price whichever is
higher.
Q.29 Reducing balance method of depreciation is followed to have a uniform

charge for depreciation and repairs and maintenance together.
Q.30 Discount at the time of retirement of a bill is a gain for the drawee.
Q.31 A withdrawal of cash from the business by the proprietor should be

charged to profit and loss account as an expense.
Q.32 Partners can share profits or losses in their capital ratio, when there is
no agreement.
Q.33 Receipts and Payments Account highlights total income and

expenditure.
Q.34 Goods worth ` 600 taken by the proprietor for personal use should be
credited to Capital Account.
Q.35 Amount paid to Management company for consultancy to reduce the

working expenses is capital expenditure if the reduced working
expenses will generate long term benefits to the entity.
Q.36 The additional commission to the consignee who agrees to bear the loss
on account of bad debts is called overriding commission.
Q.37 When there is no agreement among the partners, the profit or loss of the
firm will be shared in their capital ratio.
Q.38 When shares are forfeited, the share capital account is debited with
called up capital of shares forfeited and the share forfeiture account is
credited with calls in arrear of shares forfeited.
Q.39 The results and position disclosed by final accounts are not exact.
Q.40 The rationale behind the opening of a suspense account is to tally the
trial balance.
Q.41 Reducing balance method of depreciation is followed to have a uniform

charge for depreciation and repairs and maintenance together.
Q.42 Accounting can be viewed as an information system which has its input
processing methods and output.
Q.43 The value of human resources is generally shown as assets in the

Balance Sheet.
Q.44 The financial statement must disclose all the relevant and reliable
information in accordance with the Full Disclosure Principle.
Q.45 The debit notes issued are used to prepare Sales Return Book.
Q.46 In Account Current, Red Ink Interest is treated as negative interest.
Q.47 A Tallied trial balance means that the books of accounts have been
prepared as per accepted accounting principles.
Q.48 Capital + Long Term Liabilities= Fixed Assets + Current Assets + Cash-
Current Liabilities.
Q.49 Consignment account is of the nature of real account.
Q.50 The Sales book is kept to record both cash and credit sales.
Q.51 In the calculation of average due date, only the due date of first
transaction must be taken as the base date.
Q.52 If a partner retires, then other partners have a gain in their profit
sharing ratio.
Q.53 Net income in case of persons practicing vocation is determined by

preparing profit and loss account.
Additional Questions for practice :-
Q.1 Capital is all assets less fictitious assets.
Q.2 Equity + LTL – CL = FA + CA
Q.3 Prudence is a concept to recognize unrealized profits and not losses.
Q.4 As per AS-1, Fundamental Accounting Assumptions are Going

Concern, Full Disclosure and Accrual Concept.
Q.5 As per Concept of Conservatism, the accountant should provide for

all possible losses, but should not anticipate income.
Q.6 The economic life of an enterprise is artificially split into

periodic intervals in accordance with the going concern
assumptions.
Q.7 Lease premium will be treated as revenue expenditure.
Q.8 Amount received by the issue of debentures is a capital receipt.
Q.9 Capital expenditure is done to restore the efficiency of an asset.
Q.10 Revenue loss is not the same thing as Revenue expenditure.
Q.11 Any expenditure which increases the value of fixed assets is termed
as capital expenditure.
Q.12 Preliminary expenses are classified under deferred revenue

expenditure.
Q.13 Wages paid to workers for erecting machines will be treated

as revenue expenditure.
Q.14 Capital receipts are either shown as an increase in liabilities or as

a reduction in the value of assets.
Q.15 Money spent to reduce working expenses is treated as

capital expenditure.
Q.16 Interest paid on purchase of an asset in all cases, will be treated

as capital expenditure.
Q.17 A building of book value 45,000 got demolished and a new building
having a book value 17,00,000 was constructed. Thus, 45,000 is a
revenue loss and 17,00,000 is a capital receipt.
Q.18 Repairs amount spent on second hand machine, purchased

recently, before using it will be treated as capital expenditure.
Q.19 10 lakhs were spent on the construction of a mess hall for the welfare
of the employees. 6 lakhs were received from the government as a
grant. In this case 4 lakhs will be treated as capital expenditure and 6
lakhs as capital receipt.
Q.20 Amount spent in connection with the issue of capital should be

considered as a capital expenditure, but legal expenses spent in
connection with the issue of capital shall be considered as revenue
expenditure.
Q.21 Expenses in connection with obtaining a license for running the

Cinema Hall is Revenue Expenditure.
Q.22 Present liability of uncertain amount, which can be measured reliably

by using a substantial degree of estimation is termed as contingent
liability.
Q.23 In the financial statement, contingent liability is recognized.
Q.24 If an inflow of economic benefits is probable then a contingent asset

is disclosed in the financial statements.
Q.25 Contingent asset usually arises from unplanned or unexpected events

that give rise to the possibility of an outflow of economic benefits to
the business entity.
Q.26 Wages paid for erection of machinery is debited to Profit and

Loss Account.
Q.27 The balance in the cash book shows net income.
Q.28 The debts written off as bad, if recovered subsequently are credited
to Debtors Account.
Q.29 The sales day book is a part of the ledger.
Q.30 Patent right is in the nature of nominal account.
Q.31 Goods costing 600 taken by the proprietor for personal use should be
credited to Sales Account.
Q.32 If a cheque received is further endorsed, it must be entered on

both sides of the cash book.
Q.33 Rent paid account is Nominal Account whereas, rent received

account is a Real Account.
Q.34 A tallied Trial Balance is a conclusive proof of accuracy of books

of account.
Q.35 Opening, Closing, Rectifying and Adjusting entries are recorded

in Journal proper.
Q.36 Sale of office furniture should be credited to Sales Account.
Q.37 The balance in the Petty Cash Book represents expenses.
Q.38 The purchase day book is a part of the ledger.
Q.39 In a Cash Book, Discount Columns may shown either debit balance
or credit balance.
Q.40 Purchase book records all purchases of goods.
Q.41 The Sales book is kept to record all sales.
Q.42 The debit notes issued are used to prepare sales return book.
Q.43 Bank column of the cash book will show only a debit balance.
Q.44 The interest charged by Banker to customer on overdrawn account

is called Red ink interest.
Q.45 Bank reconciliation statement is prepared to arrive at the

bank balance.
Q.46 Interest charged by the bank will be deducted, when the overdraft
as per the cash book is the starting point for making the bank
reconciliation statement.
Q.47 If the balance as per cash book and pass book are the same, there is
no need to prepare a reconciliation statement.
Q.48 Salary paid to Ram will be debited to Ram’s Personal account.
Q.49 A promissory note can be made payable to the bearer.
Q.50 No cancellation entry is required when a bill is renewed.
Q.51 At the time of Renewal of a bill, Interest account is debited in the

books of a drawee.
Q.52 A bill given to a creditor is called bills payable.
Q.53 A has drawn a bill on B. B accepts the same and endorses the bill to C.
Q.54 Refusal by the acceptor to make payment of the bill on the

maturity date is called Retirement of the bill.
Q.55 Promissory Note requires acceptance.
Q.56 Cancelling old bill and drawing new bill is called renewal of bill.
Q.57 Discount at the time of retirement of a bill is a gain for the drawee.
Q.58 Rectifying errors in subsequent accounting period always affect

the profit or loss of that period.
Q.59 Errors of principle involves an incorrect allocation of expenditure

or receipt between capital and revenue.
Q.60 Wrong casting of subsidiary books does not affect the trail balance.
Q.61 If the amount is posted in the wrong account or it is written on

the wrong side of an account, it is called an error of commission.
Q.62 Under or over-casting of a subsidiary book is an example of error

of commission.
Q.63 Any type of error affects the agreement of trial balance.
Q.64 Purchase of office furniture has been debited to general

expenses account. It is a compensating error.
Q.65 Damaged inventory should be valued at cost or market

price, whichever is lower.
Q.66 Finished goods are normally valued at cost or market price

whichever is higher.
Q.67 The inventory under AS-2 is valued on the basis of cost price or
current replacement cost, whichever is less.
Q.68 Land is also a depreciable asset.
Q.69 Depreciation is a cash expenditure like other normal expenses.
Q.70 Depreciation is an amortized expenditure.
Q.71 Depreciation cannot be provided in case of loss, in a financial year.
Q.72 Depreciable amount refers to the different between historical cost

and the market value of an asset.
Q.73 Depreciation is a non-cash expense and does not result in any

cash outflow.
Q.74 Sales or Return Account in the Sale or return ledger represents

the value of goods still lying with the customers for approval.
Q.75 Profit and loss account shows the financial position of the concern.
Q.76 Profit and loss account is a point statement whereas a balance sheet
is a period statement.
Q.77 The provision for discount on debtors is calculated before

deducting the provision for doubtful debts from debtors.
Q.78 The gain from sale of capital assets need not be added to revenue
to ascertain the net profit of a business.
Q.79 Under the ‘liquidity approach’ assets which are most liquid are
presented at the bottom of the balance sheet.
Q.80 The proprietor of a shop feels that he has made a loss due to
closing stock being zero.
Q.81 Closing stock will never appear in the trial balance.
Q.82 If Closing Stock appears in the Trial Balance :

The closing inventory is then not entered in Trading Account. It is shown
only in the balance sheet.
Q.83 The additional commission to the consignee who agrees to bear

the loss on account of bad debts is called overriding commission.
Q.84 The relationship between consignor and consignee is that of

principal and agent.
Q.85 In consignment, the goods are dispatched on the basis that the
goods will be sold on behalf of, at the expense of and at the risk of
the consignee.
Q.86 Account sales is the statement sent by the consignor to the consignee.
Q.87 Loss of stock is said to be normal loss when such loss is not due
to inherent characteristics of the commodities.
Q.88 A partner who devotes more time to a business than other partners
is entitled to get a salary.
Q.89 Partners can share profits or losses in their capital ratio, when there
is no agreement.
Q.90 The business of partnership firm must be carried on by all the partners.
Q.91 Goodwill brought in by an incoming partner in cash for joining a

partnership firm is taken away by the old partners in their new
profit sharing ratio.
Q.92 Goodwill is fictitious asset.
Q.93 Goodwill is in the nature of personal account.
Q.94 If a partner retires, then other partners have a gain in their

profit sharing ratio.
Q.95 Minor can be admitted to the benefits of LLP.
Q.96 The objective of taking a joint life policy by the partnership firm is
to secure the lives of the existing partners of the firm.
Q.97 LLP has no separate legal entity.
Q.98 LLP Partners act as agents of LLP and other partners.
Q.99 When there is no partnership deed prevails, the interest on loan of

a partner to be paid @ 6%.
Q.100 If payment is made on average due date, it results in loss of interest

to creditors.
Q.101 Average due date is the median average of several due dates
for payments.
Q.102 Scholarship granted to students out of funds provided by

Government will be debited to Income & Expenditure Account.
Q.103 Receipts and Payments Account is a summary of all capital

receipts and payments.
Q.104 If there appears a sports fund, the expenses incurred on

sports activities will be taken to income and expenditure
account.
Q.105 Receipts and Payments Account highlights total income

and expenditure.
Q.106 Only revenue items are disclosed in Income and Expenditure account.
Q.107 Fees received for Life Membership is a revenue receipt as it is

of recurring nature.
Q.108 Reserve Capital and Capital Reserve carry the same meaning.
Q.109 As per Table F, the Minimum rate of interest that can be charged
on calls-in-Arrear and that can be allowed on calls-in-advance are
10% p.m. and 12% p.m. respectively.
Q.110 Re-issue of forfeited shares is allotment of shares but not a sale.
Q.111 Debenture Redemption Premium Account and Discount on issue

of debentures Account are Nominal Accounts.
Q.112 Now Debentures can be issued at Par/Premium but not at discount.
Q.113 Like Shares a Company can issue debentures with voting rights.
Q.114 Maximum number of members in case of private company is 50.
Q.115 While drafting the balance sheet of a company bills receivables

are shown under the head Other Current Assets.
Q.116 When duration of operating cycle cannot be identified, it is assumed of

12 months.
Q.117 Securities premium received by a company is added to share

capital while preparing the balance sheet of a company.
Q.118 It is mandatory for a company to deduct provision for bad and

doubtful debts from trade receivables.
Q.119 A company registered under Companies Act, 2013 in India

may prepare its balance sheet in horizontal form only.
Q.120 Loss of stock is said to be abnormal loss when such loss is

due to inherent characteristics of the commodities.
Q.121 If the consignee is not authorized to get the del-credere

commission, then he is liable for all losses on account of non-
recovery of debts.
Q.122 Consignee has no right in the profit on goods sent on

consignment.
Q.123 If Del-credere commission is paid to consignee, the loss of

bad debts is to be borne by the consignor.
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CA FOUNDATION CA KAJAL DEROLIA

Paper 1- Principles & Practice of Accounting

Questions covering Past Year Papers, MTP & RTP :-

Q.3 Valuation of inventory, at cost or net realizable value, whichever less, is

Q.5 A Partnership firm cannot own any Assets.

Q.6 Since company has existence independent of its members, it continues

Q.9 In case of consignment sale, ownership of goods will be transferred to

Q.11 Limited Liability Partnership (LLP) is governed by Indian Partnership

Q.15 Fees received for Life Membership is a revenue receipt as it is of

Q.16 If Closing Stock appears in the Trial Balance:

Q.17 Inventory Turnover Ratio is also known as Stock Turnover Ratio.

Q.18 If del-creders commission is paid to consignee, the loss of bad debts is

Q.20 Re-issue of forfeited shares is allotment of shares but not a sale.

Q.22 There are two ways of preparing an account current.

Q.23 When there is no partnership deed prevails, the interest on loan of a

Q.25 Accrual concept implies accounting on cash basis.

Q.27 Bank reconciliation statement is prepared to arrive at the bank balance.

Q.29 Reducing balance method of depreciation is followed to have a uniform

Q.31 A withdrawal of cash from the business by the proprietor should be

Q.33 Receipts and Payments Account highlights total income and

Q.35 Amount paid to Management company for consultancy to reduce the

Q.41 Reducing balance method of depreciation is followed to have a uniform

Q.43 The value of human resources is generally shown as assets in the

Q.46 In Account Current, Red Ink Interest is treated as negative interest.

Q.49 Consignment account is of the nature of real account.

Q.53 Net income in case of persons practicing vocation is determined by

Additional Questions for practice :-

Q.1 Capital is all assets less fictitious assets.

Q.2 Equity + LTL – CL = FA + CA

Q.3 Prudence is a concept to recognize unrealized profits and not losses.

Q.4 As per AS-1, Fundamental Accounting Assumptions are Going

Q.5 As per Concept of Conservatism, the accountant should provide for

Q.6 The economic life of an enterprise is artificially split into

Q.7 Lease premium will be treated as revenue expenditure.

Q.8 Amount received by the issue of debentures is a capital receipt.

Q.9 Capital expenditure is done to restore the efficiency of an asset.

Q.10 Revenue loss is not the same thing as Revenue expenditure.

Q.12 Preliminary expenses are classified under deferred revenue

Q.13 Wages paid to workers for erecting machines will be treated

Q.14 Capital receipts are either shown as an increase in liabilities or as

Q.15 Money spent to reduce working expenses is treated as

Q.16 Interest paid on purchase of an asset in all cases, will be treated

Q.18 Repairs amount spent on second hand machine, purchased

Q.20 Amount spent in connection with the issue of capital should be

Q.21 Expenses in connection with obtaining a license for running the

Q.22 Present liability of uncertain amount, which can be measured reliably

Q.23 In the financial statement, contingent liability is recognized.

Q.24 If an inflow of economic benefits is probable then a contingent asset

Q.25 Contingent asset usually arises from unplanned or unexpected events

Q.26 Wages paid for erection of machinery is debited to Profit and

Q.27 The balance in the cash book shows net income.

Q.29 The sales day book is a part of the ledger.

Q.30 Patent right is in the nature of nominal account.

Q.32 If a cheque received is further endorsed, it must be entered on

Q.33 Rent paid account is Nominal Account whereas, rent received

Q.34 A tallied Trial Balance is a conclusive proof of accuracy of books

Q.35 Opening, Closing, Rectifying and Adjusting entries are recorded

Q.36 Sale of office furniture should be credited to Sales Account.

Q.37 The balance in the Petty Cash Book represents expenses.