1

Model Test paper Accounts officer posts

1. Consider the following documents:
1. Audit Notebook
2. Audit Programme
3. Audit Report
4. Audit Files
The correct sequence in which an auditor prepares these documents is
(a) 1, 2, 3, 4 (b) 2, 1, 3, 4 (c) 2, 1, 4, 3 (d) 1, 2, 4, 3
Ans. (c)

2. Which of the following pairs are correctly matched?

1. Test check-Random Checking
2. Internal Cheek-A system of automatic checking
3. Internal Control-Includes internal check and internal audit
4. Investigation-General examination of all accounting records
Select the correct answer using the codes given below:
Codes:
(a) 1, 2, 3 and 4 (b) 1, 2 and 4 (c) 3 and 4 (d) 1, 2 and 3
Ans. (d)

3. The scope of external audit in the case of a partnership firm is decided by the:
(a) Companies Act
(b) Partnership Act
(c) Letter of Appointment of the auditor
(d) Income Tax Act
Ans. (c)

4. A C.A. who has purchased on credit goods worth Rs. 2000 from a company ‘Z’ Ltd. is:
(a) not qualified from being appointed an auditor of Z Ltd.
(b) disqualified from being appointed an auditor of any company of the group
(c) disqualified from being appointed an auditor of Z Ltd.
(d) disqualified from being appointed an auditor of any company having dealings with Z Ltd.
Ans. (c)

5. The auditors of a company are NOT supposed to issue an unqualified report when:
(a) goodwill worth Rs.1, 00,000 built up by the company is not shown in the Balance sheet
(b) good will is shown in the Balance sheet of the company although it has been totally lost
(c) Balance sheet and Profit and Loss Account show a true and correct view of the company’s
affairs and are drawn in conformity with the law
(d) proper Books of accounts as required by law have been kept by the company but the auditor
has been refused access to same of these books
Ans. (d)
 2

6. Consider the following situation:

1. The business of the company is being conducted fraudulently.
2. The persons connected with the formation of the company have been guilty of fraud.
3. The company so desires it by way of a special resolution.
The central Government NEED NOT NECESSARILY appoint Inspectors to investigate the
affairs of the company in respect of situations Listed at:
(a) 1, 2 and 3
(b) 1 and 2
(c) 1 and 3
(d) 2 and 3
Ans. (b)

7. Consider the following institutions:

1. SEBI (Securities Exchange Board of India) 1988
2. Board for Industrial and Financial Reconstruction (BIFR)
3. EXIM Bank
4. National Stock Exchange
The correct chronological sequence of the establishment of these institutions is:
(a) 4,1,2,3 (b) 3 1, 2, 4 (c) 3,2,1,4 (d) 4, 2, l, 3
Ans. (c)

8. Consider the following steps in the process of allotment of shares:

1. Issue of Prospectus
2. Appointment of Manager to the issue
3. Receipt of application money
4. Listing in a stock exchange
5. Minimum subscription
The correct chronological sequence of these steps is:
(a) 1, 2,5,4,3 (b) 2, 1,3,5,4 (c) 2, 1,5,3,4 (d) 1, 2,4,5,3
Ans. (b)

9. Which one of the following statements is correct?

(a) Cooperative organizations are based on the principle of “One share One Vote”
(b) A public limited company does not invite capital from the public.
(c) Most of the public enterprises in India are organized on the pattern of private limited
companies
(d) Registration of partnership is compulsory
Ans. (c)

10. Match List-I with List-II and select the correct answer using the codes given below the lists:
List-I List-II
A. Sole Trader 1. Larger no. of risks takers
B. Partnership 2. Betterment of the weaker sections
C. Cooperatives 3. Contractual relationship
D. Public Limited Company 4. Unlimited liability
 3

Codes:
AB C D
(a) 1 2 3 4 (b) 4 3 2 1 (c) 4 2 3 1 (d) 1 3 2 4
Ans. (b)

11. The liability of shareholders of a Public Limited Co. is limited to the:

(a) paid up value of shares
(b) extent of their private assets
(c) nominal value of shares
(d) amounts called up
Ans. (c)

12. The ‘Instrument of Transfer’ is used at the time of:

(a) issue of new shares to public by the Co.
(b) issue of debentures to the public by the Co.
(c) sale of shares by a member
(d) Conversion of shares into stock
Ans. (c)

13. Vertical combination helps to:

(a) achieve economy by combining allied activities
(b) survive daring the times of depression
(c) fight a common enemy
(d) add new product lines
Ans. (a)

14. A part dealing with restrictive trade practice of the MRTP Act was amended in 1991. This
Amendment is applicable:
(a) only to private sector companies
(b) only to public sector companies
(c) to both public and private limited companies
(d) both public and private sector companies
Ans. (d)

15. Modernization leads to:

(a) higher productivity and higher production
(b) lower investment and cheaper quality
(c) cost reduction through reduced expenditure
(d) higher cost of production
Ans. (a)

16. Technological updating would invariably require:

(a) change in management
(b) privatization of public enterprises
(c) retrenchment of workers
 4

(d) induction of fresh capital

Ans. (d)

17. Letter of credit is now becoming an increasingly popular method of financing:

(a) fixed capital needs
(b) working capital needs
(c) redemption of debentures
(d) distribution of dividend
Ans. (b)

18. Deferred Payments arrangement aim at financing:

(a) working capital needs
(b) redemption of debts
(c) purchase of GDRs
(d) import of plant and machinery
Ans (d)

19. In general, expert incentives are permitted within the regulatory framework of:
(a) OECD (b) UNCTAD (c) IMF (d) WTO
Ans. (d)

20. Import procedure begins with:

(a) indent
(b) marine insurance
(c) mate’s certificate
(d) shipping order
Ans. (a)

21. Which one of the following statements is correct?

(a) EXIM Bank promotes Indian exports through a wide variety and range of lending
programmes
(b) EXIM Bank does not extend non-funded facility to Indian exporter
(c) Overseas investment finance facility is not a part of the functions of EXIM Bank
(d) EXIM Hank was established to provide assistance in raising capital in international markets.
Ans. (a)

22. In which of the following types of insurance should insurable interest be present only at the
time when policy is taken?
(a) Fire insurance
(b) Life Insurance
(c) Marine insurance
(d) Life & Marine insurance
Ans. (b)

23. Match List-I with List-Il and select the correct answer using the codes given below the lists:
List-I List-II
 5

A. Causa Proxima 1. Financial Stake

B. Re-insurance 2. Main Reason behind the event
C. Indemnity 3. Compensation for the loss
4. Risking with other insurer
Codes:
ABC
(a) 2 4 3 (b) 1 2 3 (c) 2 3 1 (d) 2 4 1
Ans. (a)

24. ‘Insurer’ is a person who has:

(a) insured his life on goods
(b) helped a person to get an insurance policy
(c) undertaken to make good the loss of the subject matter of insurance
(d) filed a suit in a court of law to recover an insurance claim
Ans. (c)

25. In Insurance contract UBERIMA FIDEI’ aspect is

used as synonym of:
(a) insurable interest
(b) free consent of parties
(c) utmost good faith
(d) legality of consideration
Ans. (c)

26. Both ‘Security’ and ‘Investment’ elements are available:

(a) only in Life Insurance
(b) in both Life and Fire Insurance
(c) in both Marine and Fire Insurance
(d) in Life, Marine and Fire Insurance
Ans. (a)

27. Match List-I (Management experts) with List-II (sequence of functions advocated by them)
and select the correct answer using the codes given below the lists:
List-I List-II
A. Newman and Summer 1. Organizing, Planning, Leading and controlling
B. Hendry Fayol 2. Planning, Organizing, Commanding and Controlling
C. Luther Gullick 3. Planning, Organizing, Staffing, Directing and Controlling
D. Koontz and O’ Donnel 4. “POSDCORB”

Codes:
ABCD
(a) 1 2 4 3 (b) 2 1 3 4 (c) 1 2 3 4 (d) 2 1 4 3
Ans. (c)

28. Which one of the following statements regarding “Skill-Mix” of management is correct?
(a) Top Management requires more human relations skill than others.
 6

(b) Middle Level Management requires more technical skills than others
(c) Supervisory Level men require less technical skill than other
(d) Top management requires more conceptual skill than others
Ans. (d)

29. From the point of view of functional organization, which one of the following cannot be
claimed to be an advantage?
(a) It ensures a greater division of labour
(b) It leads to a higher degree of efficiency
(c) It helps in the assignment of specific responsibilities
(d) It facilitates small scale production
Ans. (d)

30. Match List-I (A Managerial Activity) with List-II (Managerial Function) and select the
correct answer using the codes given below the lists:

List-I List-II
A. Forecasting 1. Controlling
B. Communication 2. Planning
C. Selection of managers 3. Leading
D. Establishing performance standards 4. Staffing
Codes:
ABCD
(a) 2 3 4 1 (b) 1 2 4 3 (c) 2 4 3 1 (d) 2 3 4 2
Ans. (a)

31. Organization Theory deals with:

(a) forms of business organization
(b) structure of an organization
(c) industrial relations
(d) incentives and wage policy
Ans. (b)

32. The potential disadvantage of MBO is:

(a) its inability to control progress of work and achievement of results
(b) its over emphasis on production and productivity
(c) the additional commitment to the organization
(d) the absence of short term and long term planning
Ans. (b)

33. Consider the following statements:

1. Decentralization and Delegation are closely inter- related.
2. Delegation and decentralization are h desirable.
3. Decentralization is not suitable for large organization.
4. Delegation is not possible in the case of small organizations
Of these statements:
 7

(a) 1 and 2 are correct

(b) 2 and 3 are correct
(c) 1 and 4 are correct
(d) 1, 3 and 4 are correct
Ans. (c)

34. Which one of the following statements is correct?

(a) Responsibility of the delegate cannot be greater than the authority delegated
(b) Delegation frees the delegator of the responsibility
(c) Delegation is merely the division of work
(d) Delegation does not bestow an obligation on the part of the delegatee
Ans. (a)

35. The basis of Theory ‘Z’ is the reliance on:

(a) external control of human behavior
(b) self control and self-direction
(c) the belief that productivity is linked to trust, openness, subtlety and intimacy in the work
environment
(d) governmental regulatory framework
Ans. (c)

36. Delegation of authority is linked to:

(a) managerial planning
(b) management coordination
(c) management control
(d) scientific management
Ans. (c)

37. Match List-I with List-II and select the correct answer using the codes given below the list:
List-I List-II
A. F. W. Taylor 1. MBO
B. Henry Fayol 2. Scientific Management
C. Elton Mayo 3. Fourteen principles of Management
D. Peter Drucker 4. Theory ‘X’
Codes:
ABCD
(a) 2 3 – 1 (b) 1 2 4 - (c) 2 – 4 1 (d) 3 2 – 1
Ans. (a)

38. When an office manager selects different colors of paper and ink for printing forms
according to the purpose for which they are intended, he is following the principle of:
(a) systems integration
(b) standardization
(c) identification
(d) multiple use
Ans. (c)
 8

39. Office Management is generally speaking, the

responsibility area of:
(a) Corporate controller
(b) Works manager
(c) Chairman, Board of Directors
(d) Chief Executive
Ans. (d)

40. File Movement Register keeps track of:

(a) indexing of records
(b) classification of records
(c) inventory of records
(d) None of the above
Ans. (c)

41. The use of office machine cannot:

(a) enhance production
(b) save labour
(c) promote accuracy
(d) relieve monotony
Ans. (d)

42. What is the correct sequence of the following functionaries I authorities in the life of a
company?
1. Board of Directors
2. Promoters
3. Underwriters
4. Registrar of Companies
5. Liquidators
Select the correct answer using the codes given below:
Codes:
(a) l, 2, 3, 4, 5 (b) 2, 1, 3, 4, 5 (c) 5, 4, 1, 3, 2 (d) 2, 4, 1, 3, 5
Ans. (d)

43. Which one of the following statements is correct?

(a) A prospectus is a notice, circular, advertisement or other intimation inviting offers from the
public for the purchase of goods of a company
(b) The amount of minimum subscription is mentioned in the Memorandum of Association
(c) All the directors must sign the prospectus
(d) Investors are not duly protected against any misstatement in a Prospectus
Ans. (c)

44. Match List-I with List-II and select the correct answer using the codes given below the lists:
List-I List-II
A. Director 1. In charge of statutory and administrative duties
B. Company Secretary 2. Reports to the management
 9

C. Managing Director 3. Reports to the shareholders

D. Statutory auditor 4. Reports to the Board of Directors
5. Trustee of company’s assets
Codes:
ABCD
(a) 2 4 5 1 (b) 5 1 2 3 (c) 5 1 4 3 (d) 3 2 5 4
Ans. (c)

45. Which one of the following statements correctly explains the “Doctrine of Indoor
Management”?
(a) Every person dealing with the company is presumed to have read and understood the contents
of the Company’s Memorandum and Articles of Association
(b) It is aimed at protecting outsiders while dealing with the company
(c) If a person enters into a contract with the Company. which is contrary to the provisions of the
Memorandum and AOA, he will not have any right under such a contract
(d) It is a rule that seeks to protect the company while dealing with the outsiders
Ans. (b)

46. Match List-I (Types of securities) with List-II (Special features) and select the correct answer
using the codes given below the lists:
List-I List-II
A. Blue Chip 1. Issued by a. private limited company
B. Deep Discount Bonds 2. Highly Profitable investments in stock exchange
C. Commercial Paper 3.Issued by financially sound companies
D. Debentures 4. Small investments yielding a big sum after a long-term
5. Issued by cos. having large reserves
6. Issued in lieu of loans
Codes:
ABCD
(a) 2 1 3 6 (b) 1 4 6 5 (c) 2 3 1 5 (d) 2 4 3 6
Ans. (a)

47. A public limited company cannot issue:

(a) debentures
(b) deferred shares
(c) participating preference shares
(d) redeemable preference shares
Ans. (b)

48. “Which one of the following statements is correct?

(a) Merchant bankers shall furnish a Due Diligence certificate while forwarding a draft
prospectus / letter of offer to registrar of companies
(b) Employee stock option scheme is a compulsory scheme on the part of the company to
encourage employees to have a greater sense of participation in the activities of the company
(c) When a private limited or a closely held or an unlisted public company desires to get listed in
a stock exchange by disinvestment, if may do so
 10

(d) A company issuing shares to the public has no sight to select a Merchant Banker to manage
the issue
Ans. (a)

49. Which of the following are the methods of marketing new issues of securities?
1. Listing of securities
2. Jobbers and brokers
3. Private placement of securities
4. Privileged subscriptions
Select the correct answer using the codes given below:
Codes:
(a) 1 and 2 (b) 2 and 3 (c) 3 and 4 (d) 1, 2, 3 and 4
Ans. (c)

50. Match List-I with List-II and select the correct answer using the codes given below the lists:

List-I List-II
A. Agenda 1.Minimum number of members required to be present
B. Quorum 2. Entitlement to vote
C. Adjournment 3. Matters to be taken up for decision
D. Proxy 4. A meeting in progress postponed to some other date
5. Minimum no. of directors
6. Entitlement to participate
Codes:
ABCD
(a) 1 6 4 2 (b) 3 5 1 2 (c) 3 1 4 2 (d) 2 1 4 6
Ans. (c)

Questions at RRUVNL, ACCOUNTANT POST\

 11

11. Match List -I with List -II and select the correct answer using the Code given below the lists:

List I                                                                                            List II

A. Leasehold property                                                 1. Depreciation fund method

B. Mines, quarries, etc.                                               2. Annuity method

C. The interest lost on the acquisition of an asset       3. Fixed installment method

D. To provide for replacement of assets at the end     4. Deplection method

of its useful life

Code:

ABCD

(a) 2 1 4 3 (b) 3 4 1 2 (c) 3 4 2 1 (d) 4 3 1 2

Ans. (c)

12. Consider the following methods of inventory valuation:

1. Simple average 2. First in first out 3. Last in first out 4. Weighted average

Which of these methods do not match current cost with current revenues?

(a) 1 and 3 (c) 1, 2 and 4 (b) 1, 2 and 3 (d) 2, 3 and 4

Ans. (c)

13. The main purpose of depreciation accounting is to:

(a) charge the cost of asset

(b) allocate the cost of the asset over its estimated useful

(c) provide for replacement of the asset on the expiry of its useful life

(d) value the assets on the closing data of the year

Ans. (b)

14. Accounting is the process of matching:

 12

(a) benefits and costs

(b) revenues and costs

(c) cash inflows and outflows

(d) potential and real performance

Ans. (b)

15. Match List- I with List- II and select the correct answer using the Code given below the lists:

List-I                                                                                List-II

A. Showing joint life policy at                     1. Concept of surrender value consistency

B. Team spirit and dedication of                  2. Concept of cost

employees are not recorded in the

books of accounts

C. Methods f depreciation and inventory     3. Concept of conservatism.

valuation should not be changed frequently

D. Fixed assets are recorded at cost less     4. Concept of money measurement

depreciation

Code:

ABCD

(a) 3 4 1 2 (b) 3 4 2 1 (c) 4 3 1 2 (d) 4 3 2 1

Ans. (a)

16. Consider the following activities connected with the accounting information system:

1. Preparation of the table of accounting

2. Communication of accounting information

3. Preparation of accounting information report

 13

4. Collection of accounting data

The correct sequence of these activities is:

(a) 4, 1, 3, 2 (b) 1, 4, 3, 2 (c) 4, 3, l, 2 (d) 1, 2, 4, 3

Ans. (a)

17. Materiality in accounting is decided:

(a) by the size of an item

(b) by the knowledge as to whether an individual item is having a significant influence on

financial statement

(c) solely by the discretion of the accountant

(d) by the physical volume of the transaction

Ans. (b)

18. Consider the following fundamental assumptions:

1. Prudence 2. Going concern 3. Accrual 4. Consistency

As per Accounting Standard-I, which of these assumptions are taken into consideration while
preparing financial statements?

(a) 1 and 4 (b) 2 and 3 (c) 1, 2, 3 and 4 (d) 2, 3 and 4

Ans. (d)

19. A cooperative store having a turnover of Rs. 10 lakhs and profit of Rs. 50,000 purchased
locks costing Rs. 300 for use in the shop. The accountant charged in the P & L A/c of current
year, but tt5e auditor raised on objection saying that it should be capitalized. On which one of the
following conventions could the accountant be defended?

(a) Disclosure (b) Materiality (c) Conservatism (d) Consistency

Ans. (b)

20. If depreciation is calculated on the basis of the formula n (n + 1)/ 2 then which one of the
following methods is adopted?

(a) Diminishing value method

 14

(b) Annuity method

(c) Sum of years digits method

(d) Sinking fund method

Ans. (c)

21. Which one of the following statements is correct?

(a) Preliminary expenses are revenue expenses

(b) Cost of issuing shares and debentures and raising loans, such as legal expenses and
underwriting commission are capital expenditure

(c) Interest on loan is a capital expenditure

(d) Cost of machinery purchased is revenue expenditure

Ans. (b)

22. Which one of the following is a capital expenditure?

(a) Compensation paid for breach of a contract of supply of goods

(b) Interest on borrowings during the period of construction of works

(c) Loss of stock by fire

(d) Loss due to embezzlement by the manager

Ans. (b)

23. A company issued 14% debentures of Rs. 10, 00,000 at a discount of 10%. The discount
allowed will be treated in the account books as:

(a) Capital expenditure

(b) Revenue expenditure

(c) Deferred revenue expenditure

(d) Capital loss

24. A and B are partners in a firm sharing profits in the ratio of 3:2. They admit C as a new
partner for 1/3 share in the profits of the firm. The new profit sharing ratio of A, B and C is:
 15

(a) 3:2:1 (b) 3:2:2 (c) 3:2:3 (d) 6:4:5

Ans. (d)

25. A, B and C are partners sharing profits in the ratio of

6:3:1. They decided to dissolve the firm when their capitals were Rs. 8,000, Rs. 3,000 and Rs.
(—) 1,000 respectively. Other liabilities and assets were—Bank overdraft Rs. 3,500; A’s
advance to the firm Rs. 500; Sundry creditors Rs. 2,500; plant and machinery Rs. 7,500; stock in
trade Rs. 2,500, sundry debtors Rs.

6,000 and cash Rs. 500. Plant and machinery realized at 20% less, stock in trade at 25% less and
sundry debtors at 30% less than their respective book value. Expenses of dissolution amounted to
Rs. 250. C became insolvent and his private estate yielded Rs. 100 only. What is the loss on
realization?

(a) Rs. 4,125 (b) Rs. 4,150 (c) Rs. 4,175 (d) Rs. 4,225

Ans. (c)

26. A, B and C are the partners in a business firm sharing their profits in the ratio of 4:3: 2. A
new partner D enters the firm. The new profit sharing ratio of A, B, C and D is 5:4: 2: 1. D
contributes goodwill of Rs. 36,000. This goodwill is to be allocated among A, B and C. Which
one of the following will be the correct allocation?

A                           B                              C

Rs.                          Rs                             Rs

(a)                16,000                    12,000                      8,000

(b)                12,000                      8.000                    16,000

(c)                12,000                       NIL                      24,000

(d)                24,000                       NIL                      12,000

Ans. (c)

27. The ending balance of owner’s equity is Rs. 21,100. During the year, the owner contributed
Rs. 6,000 and withdrew Rs. 4,000. If the firm had Rs. 8,000 net income for the year, what was
the owner’s equity at the beginning?

(a) Rs. 23,000 (b) Rs. 21,000 (c) Rs. 19,000 (d) Rs. 11,000

Ans. (d)
 16

28. The ending balance of the accounts receivable account was Rs. 12,000. Services billed to
customers for the period were Rs. 21,500 and collection on account from customers was Rs.
23,600. The beginning balance of account receivable was:

(a) Rs. 33,500 (b) Rs. 14,100 (c) Rs. 9,800 (d) Rs. 33,300

Ans. (b)

29. A, B and C are equal partners in a firm with capitals Rs. Rs. 16,800, Rs. 12,600 and Rs.
6,000 respectively. With bills payable Rs. 3,300; creditors Rs. 6,000; cash Rs. 600; debtors Rs.
10,800; stocks Rs. 11,400; furniture Rs. 2,400 and building Rs. 19,500 E is admitted to the firm
and brings Rs. 9,000 as goodwill and Rs. 15,000 as capital. Half the goodwill is withdrawn by
old partners, and stock and furniture is depreciated by 10%. A provision of 5% on debtors is
created and value of building is taken at Rs. 27,000. The profit on revaluation will be:

(a) Rs. 5,500 (b) Rs. 5,580 (c) Rs. 5,400 (d) Rs. 5,680

Ans. (b)

30. A and B sharing profits in the ratio of 3 : 2 and having capitals of Rs. 30,000 and Rs. 15,000
respectively decided to dissolve the firm. After paying off all liabilities, cash realized from
various assets is Rs. 15,000. This amount will be distributed between A and B as:

(a) Rs. 9,000 and Rs. 6,000 respectively

(b) Rs. 10,000 and Rs. 5,000 respectively

(c) Rs. 7,500 and Rs. 7,500 respectively

(d) Rs. 12,000 and Rs. 3,000 respectively

Ans. (d)

31. A had started business with 20,000 in the beginning of the year. During the year he borrowed
Rs. 10,000 from B. He further introduced Rs. 20,000 in the business. He also gave Rs. 5,000 as
loan to his son. Goods given away as charity by him was Rs. 2,000. Profit earned by him was Rs.
25,000. He also withdrew Rs. 3,000 from the business. His capital at the end of the year would:

(a) Rs. 50, 000 (b) Rs. 40, 000 (c) Rs. 62, 000 (d) Rs. 48, 000

Ans. (c)

32. Under the net worth method, the basis of ascertaining profit is the:

(a) difference between the liabilities on two dates

 17

(b) difference between the gross assets on two dates

(c) difference between the capital assets on two dates

(d) increase in net worth before adjusting for drawings and additions to capital

Ans. (d)

33. Following are the extracts from the Trial Balance of a firm:

Particulars                               Dr. (Rs)                                     Cr. (Rs)

Sundry debtors                         50,000                                            -

Provision for doubtful debts         -                                             5,000

Bad debts                                    3,000                                            -

Additional Information:

(i) Additional Rs. 3,000.

(ii) Keep the provision for bad debts @ 10% on debtors

The net amount of bad debts the will appear in the

Profit and Loss Account will be:

(a) Rs. 8,000 (b) Rs. 7,500 (c) Rs. 5,700 (d) Rs. 4,500

Ans. (c)

34. Consider the following statements:

Notes forming part of accounts of companies invariably display significant Accounting Policies.

1. as per the requirement of SEBI guidelines for disclosure and investor protection

2. because it is a mandatory requirement under the Companies Act, 1956

3. as required by AS—I—disclosure of accounting policies, which is mandatory

4. as it is required under the listing agreement with the stock exchanges

Which of the above statements are correct?

 18

(a) 1, 2 and 3 (b) 2 and 3 (c) 2, 3 and 4 (d) 1 and 4

Ans. (a)

35. In the Balance Sheet, under the subheading current liabilities and provisions disclosure of the
name(s) of small-scale industries/undertakings is required if the company owes a sum:

(a) exceeding Rs. 1 lakh as outstanding for more than 6 months

(b) not exceeding Rs. 1 lakh as outstanding for more than 6 months

(c) exceeding Rs. 1 lakh as outstanding for more than 30 days

(d) exceeding Rs. 50,000 as outstanding for more than 2 months

Ans. (c)

36. A non-performing asset with a financial institution denotes an asset on which:

(a) regular dividend is not being received

(b) interest is on default for two quarters or more

(c) repayment of capital appears difficult

(d) there is no earning of profit

Ans. (b)

37. Some companies give cash flow statements in then annual reports as prescribed by:

(a) Part IV of Schedule Vito the Companies Act, 1956

(b) the listing agreement with the stock exchanges

(c) the SEBI regulations

(d) the Accounting Standard-3 on cash flow statements

Ans. (d)

38. Consider the following statements:

Redeemable preference shares of a company can be redeemed out of:

1. profits of the company which would otherwise be available for dividend

 19

2. company’s share premium account

3. fresh issue of shares made for the purpose of redemption

Which of the above statements are correct?

(a) 1 and 2 (b) 1 and 3 (c) 2 and 3 (d) 1, 2 and 3

Ans. (b)

39. A company forfeited 100 shares of Rs. 10 each owing to the default in the payment of share
call, money of Rs. 5 each. These shares were issued at Rs. 9 each, payable at Rs. 2 on
application, Rs. 2 on allotment and the balance of Rs. 5 on call. The shares were then reissued to
another shareholder at a price of Rs. 6 share.

The amount to be debited to forfeited share account on account of discount on reissue of shares
would be:

(a) Rs. 100 (b) Rs. 300 (c) Rs. 400 (d) Rs. 500

Ans. (b)

40. The issue of bonus shares must be in accordance with the guidelines issued by the:

(a) Company Law Board

(b) Controller of capital issues

(c) Securitizes and Exchange Board of India

(d) Registrar of Companies

Ans. (c)

41. Financial indicators of four companies are as follows:

Company     Current    Debt-equity ratio  Rate of return       Fixed asset turnover

ratio                                     on investment

A.                   2.0:1             2.5:1                     10 %                              5

B.                   2.5:1             3.0:1                     25 %                              4

C.                   1.5:1             4.0:1                     20 %                              3

 20

D.                   1.0:1             3.5:1                     15 %                              2

In general, which of the above companies would fall in the highest risk class?

(a) A and B (b) B and C (c) C and D (d) A and D

Ans. (c)

42. Consider the following ratios:

1. Acid test ratio

2. Capital turnover ratio

3. Bad debts to sales ratio

4. Inventory turnover ratio

Which of these ratios are more appropriate for testing the liquidity of a concern?

(a) 1 and 3 (b) 1 and 4 (c) 2 and 4 (d) 2 and 3

Ans. (a)

43. Consider the given data:

1. Proprietary ratio = 0.75

2. Current ratio =2:1

3. Proprietary fund = Rs. 60,000

4. Fixed assets = Rs. 50,000

The working capital will be computed by:

(a) Rs. 10,000 (b) Rs. 15,000 (c) Rs. 20,000 (d) Rs. 25,000

Ans. (b)

44. Consider the following Balance Sheet of ABC Company Limited as on March 31, 1999:

Liabilities                Rs. Assets                                           Rs.

Equity share              20,00.000      Fixed assets                60,00000

 21

capital

Preference                 10,00,000      Less 20,00,000           40,00,000

share capital                                    depreciation

General                     5.00,000         Debtors                      10,00,000

reserve

10 %                        11,00,000         Stock                           6,00,000

Creditors                   7,00,000          Cash                            1,00,000

Outstanding               3,00,000    Formation expenses              5,000

expenses

Profit & Loss             1,05,000

A/c

57,05,000                                            57, 05,000

The current ratio of ABC Company Limited is:

(a) 2.00 (b) 1.90 (c) 1.85 (d) 1.70

Ans. (d)

45. Consider the following statements:

A low inventory turnover may be the result of:

1. obsolescence of some of the stock

2. slow-moving inventory

3. frequent stock-outs

4. fast-moving inventory

Which of the above statement(s) is/are correct?

(a) l and 2 (b) 4 alone (c) 2 alone (d) 2 and 3

 22

Ans. (a)

46. Match List-I with List-II and select the correct answer using the Code given below the Lists:

List- I                                                                                    List- II

A. Current assets ÷ Current liabilities               1. Performance of equity capital

B. Fixed assets ÷ Long-term funds                    2. Short-term solvency

C. Debt ÷ Equity                                                3. Capital structure

D. Earnings after interest                                   4. Overall performance

and taxes ÷ Number of shares issued

5. Long-term solvency

Code:

ABCD

(a) 2 5 3 4 (b) 1 2 3 4 (c) 2 5 4 3 (d) 1 2 4 3

Ans. (a)

47. If the management of a Limited Company want to evaluate the general efficiency which one
of the following additional information is required?

(a) Sales and earnings after income tax and interest

(b) Break-up of owned funds into share capital, reserves and surpluses, etc.

(c) Earnings before income tax and interest

(d) Operating expenses and sales

Ans. (a)

48. Owned funds would be:

(a) Rs. 25 lakhs (b) Rs 8.50 lakhs (c) Rs. 25.20 lakhs (d) Rs. 27 lakhs

Ans. (a)

49. The margin of safety i.e. the cushion of protection for creditors is:
 23

(a) 4.06: 1 (b) Rs. 4.60 lakhs (c) 0.20: 1 (d) Rs. 22 lakhs

Ans. (a)

50. Consider the particulars given below:

Sales = Rs.60,000

Variable cost = Rs.25,000

Fixed cost = Rs. 30,000

Based on these data, the operating leverage shall be:

(a) 5 (b) 7 (c) 8 (d) 9

Ans. (a)
 24

Accounting model questions at the interview – only accounting part

28. A director having direct or indirect, interest or concern in a transaction of the company, has
to disclose his interest in a meeting to the:

(a) Board of Directors

(b) Shareholders

(c) Company Secretary

(d) Registrar of Companies

Ans. (a)

29. Match List-I with List-II and select the correct answer using the Code given below the lists:

List-I                                                                                    List-II

A. Company Secretary                       1. In charge of statutory and administrative duties

B. Director                                         2. Reports to the shareholders

C. Managing Director                        3. Reports to the Management

D. Internal Auditor                            4. Trustee of Company’s assets

5. Reports to the Board of Directors

Codes:

ABCD

(a) 1 5 2 3 (b) 3 5 2 1 (c) 1 4 5 3 (d) 3 4 5 1

Ans. (c)

30. Which one of the following reports should have “responsibility statement” under the
Companies Act, 1956?

(a) Auditor’s report

(b) Board of Director’s report

(c) Company Secretary’s report

 25

(d) Audio Committee’s report

Ans. (b)

31. Consider the following statements:

1. Board of Directors appoints the first auditor of the company

2. A shareholder of a company can become member of the Board

3. Board of Directors can act as auditors

4. Directors of one company can be appointed as Director to any number of companies

Which of the above statements are correct?

(a) 1,2 and 3 (b) 1 and 3 (c) 1 and 2 (d) 2, 3 and 4

Ans. (c)

32. The capital of a public limited company can be reduced with the confirmation of the:

(a) Registrar of Companies

(b) Company Law Board

(c) Securities and Exchange Board of India

(d) High Court

Ans. (b)

33. Match List-I (Concept relating to company meetings) with List-II (Meaning) and select
the correct answer using the Code given below the lists:

List-I                                                                List-II

A. Proxy                                  1. Minimum number of members required to be present

B. Quorum                              2. Getting the right to vote only

C. Statutory Meeting              3. Conducted once in a year

D. Annual General Meeting   4. Once in the life time of a company

5. Meeting of a particular group of shareholders

 26

Codes:

ABCD

(a) 5 3 2 1 (b) 2 1 4 3 (c) 5 1 2 3 (d) 2 3 4 1

Ans. (

34. Minimum paid-up capital required to incorporate a public-limited company is:

(a) Rs. 20,000 (b) Rs. 1 ,00.00 (c) Rs. 5,00,000 (d) Rs. 10,00,000

Ans. (d)

35. Consider the following statements:

1. The minimum number of directors in a public company is three.

2. The first directors are appointed by the first general meeting.

3. An official director appointed by the government in a public company is required to possess

qualification shares within 2 months of his appointment.

4. The Company Secretary is appointed by Board of Directors.

Which of the above statements are correct?

(a) 1 and 2 (b) l and 4 (c) 2 and 3 (d) 2 and 4

Ans. (b)

36. After the commencement of the Companies Act, 1956 no person, save as otherwise provided
in Section 276, shall hold office as director at the same time in more than:

(a) 5 Companies (b) 10 Companies (c) 15 Companies (d) 20 Companies

Ans. (d)

37. Match List-I (Company having paid-up capital more than) with List-II (Must have/be a)
and select the correct answer using the Code given below the lists.

List-I                                                         List-II

A. One lakh rupees                       1. Whole-time Director

B. Ten lakh rupees                       2. Secretarial compliance report

 27

C. Fifty lakh rupees                     3. Qualified Company Secretary

D. Five crore rupees                    4. Public Limited Company

5. Private Limited Company

Codes:

ABCD

(a) 5 4 3 1 (b) 3 4 1 5 (c) 5 2 3 1 (d) 3 2 1 5

Ans. (a)

38. Match List—I with List—II and select the correct answer using the Code given below the
lists:

List-I                                                           List-II

A. SEBI                             1. Apex institution of development banks

B. OTCEI                          2. Credit rating

C. IDBI                             3. Trading in securities of small company and government

D. CRISIL                        4. Regulation and development of capital market

Codes:

ABCD

(a) 4 3 1 2 (b) 3 4 1 2 (c) 4 3 2 1 (d) 3 4 2 1

Ans. (a)

39. Merchant Banker does NOT offer services in regard to:

(a) project appraisal

(b) capital issue

(c) project preparation

(d) subscription of Equity shares

Ans. (a)
 28

40. Match List—I with List—II and select the correct answer using the Code given below the
lists:

List—I                                          List—II

A. Reducing capital                        1. Contribution margin

B. Sales> Variable cost                  2. Reorganization

C. Sales> Break even sales            3. Absorption

D. Take-over of firm                     4. Margin of safety

Codes:

ABCD

(a) 2 1 3 4 (b) 1 2 3 4 (c) 1 2 4 3 (d) 2 1 4 3

Ans. (d)

41. Mechanistic structures are designed to:

(a) promote flexibility and quick responses to fast changing situations

(b) induce people to behave in predictable and accountable manner

(c) make people happy by assigning specific tasks to. them

(d) perform assigned tasks within the scheduled time

Ans. (d)

42. The Net asset Value (NAV) of a unit of mutual fund scheme is computed as:

Market value of the fund’s investments ± Receivables + Accrued income —

(a) Liabilities — Accrued expenses

No. of units outstanding

(b) Market value of the fund’s investment

No. of units outstanding

(c) Assets of the fund — Liabilities of the fund

 29

No. of units outstanding

(d) Face value of the unit + Dividend per unit

Ans. (a)

43. Which one of the following reports deals with “Corporate government”?

(a) Sabhanayagam Report

(b) Kurmaramangalam Birla Report

(c) Narasimham Report

(d) L. C. Gupta Report

Ans. (b)

The following Seven (7) items consist of two statements one labelled the ‘Assertion A’ and the
other labelled the Reason R’. You are to examine these two statements carefully and decide the
Assertion (A) and the Reason (R)are individually true and if so, whether the Reason is a correct
explanation of the Assertion. Select your answers to these items using the Code given below and
mark your answer sheet accordingly:

Code:

(a) Both A and R are true and R is the correct explanation of A

(b) Both A and R are true but R is NOT the correct explanation of A

(c) A is true but R is false

(d) A is false but R is true

44. Assertion (A): The best way of reporting of social responsibility is to prepare a Value Added
Statement (VAS) to show the income earned by the providers of capital, the employees and the
government.

Reason (R): A business is accountable to the society since it makes use of community-owned
assets such as roads, railways, communication and other infrastructural facilities and concessions
provided by the state from the taxpayer’s money.

Ans. (a)

45. Assertion (A): The interest on borrowed funds can be capitalized upto the completion of
fixed assets.
 30

Reason (R):The completion of fixed assets has been possible only because of these funds.

Ans. (b)

46. Assertion (A): A claim lodged with Railways in March 1998 for loss of goods of Rs.
2,00,000 had been passed for payment in March 2001 for Rs. 1,50,000. No entry was passed in
1998.

Reason (R): The collectability of the claim was not certain in 1998.

Ans. (a)

47. Assertion (A): Life-membership fees is to be capitalized.

Reason (R) : Often these are non-recurring receipts and the members take advantage of the
services provided during the tenure of membership.

Ans.(b)

48. Assertion (A): The company is said to be trading on equity.

Reason (R): The capital structure of the company is highly geared.

Ans. (b)

49. Assertion (A): R.O.I. measures the final outcome of all recorded business activities. It is the
ratio that measures the performance of the firm that generates returns.

Reason (R): However, interpretation regarding the amount of capital invested and size of returns
generated by a firm differ from one interpreter to another and one organization to another. In
other words, practices are not uniform and as such the acceptability of the concept is being
questioned.

Ans. (b)

50. Assertion (A): An auditor of a company gives a critical review of accounts.

Reason (R): He gives collaborative evidence that accounts are properly drawn up.

Ans. (c)
 31

Model accounts only

1. According to the concept of conservation, the stock in trade is valued at—

(A) Cost price
(B) Market price
(C) Cost or market price which ever is higher
(D) Cost or market price which ever is lower
Ans. (D)

2. The concept of conservation will have the effect of—

(A) Over statement of assets
(B) Understatement of assets
(C) Understatement of liabilities
(D) Understatement of provision for bad and doubtful debts
Ans. (B)

3. Non-financial information is not recorded in accounts due to—

(A) Accrual concept
(B) Entity concept
(C) Dual aspect concept
(D) Money measurement concept
Ans. (D)

7. If the rate of gross profit for department X is 25% of cost, the amount of gross profit on sales
of Rs. 100000 will be-—
(A) Rs. 16667 (B) Rs. 20000 (C) Rs. 25000 (D) Rs. 33333
Ans. (B)

8. Provision for bad debts of a foreign branch is converted at—

(A) Opening rate of exchange
(B) Closing rate of exchange
(C) Average rate of exchange
(D) Rate applicable to debtors
Ans. (B)

9. If goods are transferred from ‘X’ department to ‘Y’ department at cost +25%, the amount of
stock reserve on closing stock of Rs. 20000 in ‘Y’ department will be—
(A) Rs. 4000 (B) Rs. 5000 (C) Rs. 6000 (D) Rs. 3333
Ans. (A)

10. If out of the bills of Rs. 10000 discounted by the insolvent bills of Rs. 4000 are likely be
dishonoured, unsecured creditors will include in respect of them an amount of—
(A) Rs. 10000 (B) Rs.6000 (C) Rs. 4000 (D) None of the above
Ans. (C)
 32

17. A plant worth Rs. 800000 has been insured for Rs. 600000. The loss on account of fire is Rs.
500000. The insurance company under average clause will bear the loss to extent of—
(A) Rs. 500000 (C) Rs. 800000 (B) Rs.600000 (D) Rs. 375000
Ans. (A)

18. It is not an item of Income with reference to a voyage a/c—

(A) Passage money
(B) Freight
(C) Primage
(D) Address commission
Ans. (D)

21. Inventory is valued at lower of the cost or net realisable value on account of the accounting
principle of—
(A) Realisation (B) Consistency (C) Conservatism (D) None of the above
Ans. (A)

22. In the period of rising prices, LIFO method may result in—
(A) Lowering the profit
(B) Raising the profit
(C) Raising the tax liability
(D) None of the above
Ans. (B)

23. Given,
Total assets turnover 4
Net Profits 10%
Total Assets Rs. 50000
Net profit will be—
(A) Rs. 15000 (B) Rs. 10000 (C) Rs. 25000 (D) Rs.20000
Ans. (D)

24. A company auditor addresses his audit report to-

(A) Board of directors
(B) Members
(C) Managing director
(D) Company secretary
Ans. (B)

25. Bonus shares means shares issued to—

(A) Workers
(B) Existing equity shareholders
(C) Preferential shareholders in lieu of dividend
(D) Debenture holders in lieu of interest
Ans. (B)
 33

26. Which of the following does not call for physical verification?
(A) Stock (B) Plant (C) Loose tools (D) Goodwill
Ans. (D)

27. Cash from operations is equal to—

(A) Net profit + increase in current assets
(B) Net profit + decrease in current liabilities
(C) Profit from operation ± Adjustment of increase and decrease in current assets and liabilities
(D) Fund from operation ± Adjustment of increase and decrease in current assets and current
liabilities
Ans. (C)

29. Which of the following is not a current liability?

(A) Bank overdraft
(B) Redeemable debentures
(C) Account payable
(D) Provision for bad debts
Ans. (B)

30. Amount of under writing commission payable on the issue of debentures is limited to—
(A) 2% (B) 2.5% (C) 3% (D) 5%
Ans. (B)

31. Which of the following acid test ratio can be said to be satisfactory?
(A) 2: 1 (C) 1: 1 (B) 1: 2 (D) None of these
Ans. (C)

32. The two factor theory of motivation was propounded by—

(A) Peter Drucker (B) Herzberg (C) McGregor (D) Maslow
Ans. (B)

33. Which of the following leadership styles is most commonly found now a day?
(A) Autocratic (B) Democratic (C) Free rein (D) Participative
Ans. (B)

34. Deciding in advance what is to be done in future is called—

(A) Management (B) Coordination (C) Planning (D) Decision-making
Ans. (C)

35. The organisation structure where there is direct vertical relationship is called—
(A) Line organisation
(B) Chain organisation
(C) Command organisation
(D) All the above
Ans. (D)
 34

36. When managers devote their attention only to those events where results are highly deviated
from normal; ft is called—
(A) Management by objective
(B) Management by exception
(C) Management by crisis
(D) Management by choice
Ans. (B)

37. Under delegation of authority—

(A) Authority is given to subordinates
(B) Authority flows from top to bottom
(C) Delegator of authority is not received of accountability
(D) All the above happens
Ans. (D)

38. The process of determining by observation and study and reporting pertinent information
relating to the nature of specific job is called—
(A) Job specification (B) Job evaluation (C) Job analysis (D) Job description
Ans. (C)

44. A company has equity capital of Rs. 200000. Preference capital of Rs. 100000, 12%
debentures of Rs. 100000, long term loan of Rs. 200000 and short term loan of Rs. 100000. The
capital gearing ratio will be—
(A) 1:1 (B) 0.5: 1 (C) 0.4: 1 (D) None of the above
Ans. (C)

45. In case of a company, total assets less outside liabilities is called—

(A) Net working capital
(B) Gross working capital
(C) Deferred liabilities
(D) Net worth
Ans. (D)

46. If opening sales is Rs. 10000 purchases Rs. 30000 direct expenses Rs. 4000 and closing stock
Rs. 5000 the costs of goods is sold would be—
(A) Rs. 39000 (B) Rs. 40000 (C) Rs.41000 (D) Rs. 44000
Ans. (A)

47. Premium on issue of shares is shown in balance sheet as—

(A) An asset (B) A liability (C) An expense (D) A revenue
Ans. (B)

48. Which of the following is known as ‘backbone of auditing’?

(A) Verification of assets (B) Internal check (C) Vouching (D) Internal audit
Ans. (C)
 35

49. A limited company? 100 shares of Rs. 10/- cash fully called up on which Rs. 4/- per share
was paid up. The company reissued 50 shares at the rates of Rs. 8/- each. The amount transferred
to capital reserve will be—
(A) Rs. 500 (B) Rs.200 (C) Rs. 250 (D) Rs. 100
Ans. (D)

50. Sale of long term investments indicates—

(A) A change in current assets
(B) Application of funds
(C) Increase in working capital
(D) Source of funds
Ans. (D)

51. Net working capital refers to—

(A) Current assets
(B) Current assets minus current liabilities
(C) Equity share capital minus fixed assets
(D) Retired earnings.
Ans. (B)

52. If sales Rs. 6000 gross profit is 1/3 on cost, purchases are R. 4900 and the closing stock is
Rs. 900, the opening stock will be—
(A) Rs.400 (B) Rs.500 (C) Rs. 1100 (D) Rs. 2000
Ans. (B)

53. The primary objective of audit is—

(A) Detection and prevention of frauds
(B) Detection and prevention of errors
(C) Detection of frauds and errors
(D) To ensure the final accounts and statements exhibit true and fair position of business
Ans. (D)

54. ‘An auditor is a watch dog and not a blood hound’. This was observed in case of— (A)
London oil storage company
(B) Kingston cotton Mills Limited
(C) London General Bank
(D) Delightful Cigarette Company Ltd.
Ans. (B)

55. If two or more sugar mills combine together, it is known—

(A) Horizontal combination
(B) Vertical combination
(C) Lateral combination
(D) None of the above
Ans. (A)
 36

56. Surrender value is related to—

(A) Marine insurance (B) General insurance (C) Life insurance (D) Fire insurance
Ans. (C)

57. Over capitalisation refer to—

(A) Excess of capital
(B) Excess rate of dividend payment, on shares
(C) Over estimation of rate of capitalisation
(D) Raising more capital than is warranted by its earning power
Ans. (D)

58. Motivation refers to—

(A) Coordinate the people
(B) Guide the working people
(C) Terrorise the people
(D) Inducing people to work willing by
Ans. (D)

59. Which of the following is not a barrier in communication—

(A) Fear and distrust (B) Affection (C) Perception (D) Noise
Ans. (B)

60. “Management is an art of getting things done through and with formally organised group.”
This definition has been by—
(A) Peter Drucker (B) Henry Fayol (C) Harod Koontz (D) F. W. Taylor
Ans. (C)

61. Foreign exchange for import of goods is sanctioned by—

(A) Exim Bank
(B) Reserve Bank of India
(C) State Bank
(D) Ministry of commerce
Ans. (B)

62. The cost of a machine having a span of life of 5 years is Rs. 10000. It has a scrap value of Rs.
1000. The amount of depreciation in the first year under the sum of year’s digit method will be—
(A) Rs. 1600 (B) Rs. 1800 (C) Rs. 2000 (D) Rs. 3000
Ans. (D)

63. Given:
Gross profit Rs. 60000
Gross profit ratio: 20%
Debtor’s velocity 2 months
The amount of debtors will be—
(A) Rs. 30000 (B) Rs. 50000 (C) Rs. 120000 (D) Rs.200000
Ans. (B)
 37

64. Premium on issue of shares can be used for—

(A) Issue of Bonus shares
(B) Payment of Dividends
(C) Payment of operating expenses
(D) Redemption of debentures
Ans. (A)

65. If current ratio is 25, quick ratio (1) 5 and net working capital Rs. 15000. This value of
inventory will be—
(A) Rs. 10000 (B) Rs. 15000 (C) Rs. 37500 (D) Rs. 52500
Ans. (A)

66. Unclaimed dividend is shown on the liability side of the balance sheet under the heading—
(A) Revenue and surplus (B) Provisions (C) Current liabilities (D) Miscellaneous items
Ans. (C)

67. Accounting standards in India are prescribed by—

(A) Company Law Board
(B) Institute of charted accountants of India
(C) Institute of coat and works accountants of India
(D) Indian standard Board
Ans. (B)

68. Which of the following is not correct—

(A) Purchase + Opening stock—Cost of goods sold = Closing stock
(B) Opening stock + Purchases — Closing stock = Cost of goods sold
(C) Closing stock + Cost of goods sold — Purchases = Opening stock
(D) Cost of goods sold — Closing stock + Purchases = Opening stock
Ans. (D)

69. A company bought assets worth Rs. 360000 and in lieu issued debentures of Rs. 100 each at
a discount of 10%. The number of debentures issued will be—
(A) 3000 (B) 3600 (C) 3960 (D) 400
Ans. (D)

70. A person got insured his goods worth Rs. 10000 for Rs. 80QO against fire. Loss by fire to
him was Rs. 9000. He can claim—
(A) Rs. 8000 (B) Rs. 9000 (C) Rs. 10000 (D) Rs. 7200
Ans. (D)

71. The data obtained from a newspaper are—

(A) Primary data (B) Secondary data (C) Both (A) and (B)
(D) None of these
Ans. (B)
 38

72. Current Ratio of a firm is 3: 1 and working capital is Rs. 60000. What will be the amount of
current Assets—
(A) Rs. 30000 (B) Rs90000 (C) Rs. 120000 (D) Rs. 180000
Ans. (B)

73. The income from that house property is taxable under the head “Income from House
property”.
(A) The assessee has ownership on that house
(B) The assessee uses that house for his business
(C) The assessee himself lives in that house
(D) The assessee has let out that house on rent for residence
Ans. (A)

74. Following is the deduction in respect of repair under the head of income from house property
—
(A) 25% of Annual Value
(B) 30% of Net Annual Value
(C) 1/5 of Annual Value
(D) 1/5 of Net Annual Value
Ans. (B)

75. Single entry system can not be maintained by—

(A) Sole proprietorship
(B) Partnership concerns
(C) Joint stock company
(D) All of these
Ans. (D)

76. Cash account will not be affected by—

(A) Cash paid to creditors
(B) Discount received
(C) Cash sales
(D) Cash received from debtors
Ans. (B)

77. Maximum standard Deduction for employees getting gross salary not more than Rs.
100000 is allowed—
(A) Rs. 20000 (B) Rs. 25000 (C) Rs. 30000 (D) Rs. 33000
Ans. (C)

78. Tax audit is compulsory in case of a person carrying on business whose gross receipt)
turnover/sales and exceeds—
(A) Rs. 50 Lakhs (B) Rs. 40 Lakhs (C) Rs. l0 Lakhs (D) Rs. 25 Lakhs
Ans. (B)
 39

79. Mr. Rastogi of Meerut was declared insolvent. One of his liabilities related to one months
rent due to his landlord. This liability will be treated as—
(A) Preferential Creditor
(B) Partly Secured Creditor
(C) Fully Secured Creditor
(D) Unsecured Creditor
Ans. (A)

80. When two or more companies liquidate to form a new company. It is called—
(A) Amalgamation (B) Absorption (C) Reconstruction (D) Purchase of Business
Ans. (A)

86. The salary received by a member of parliament is—

(A) Exempt from Tax
(B) Taxable under the head of salary
(C) Taxable under the head of other sources
(D) Taxable under the lead of business
Ans. (C)

87. For the purpose of income tax it is necessary for agriculture income that—
(A) Land should be used for agricultural activities
(B) Land should be used for godown
(C) Land should be used for irrigation
(D) None of above
Ans. (A)

88. Depreciation is allowed on—

(A) Tangible Assets (B) Current Assets (C) Fixed Assets (D) Intangible Assets
Ans. (C)

89. When shares are forfeited, the share capital account is debited by—
(A) Nominal value of forfeited shares
(B) Paid up amount of forfeited shares
(C) Called up amount on forfeited shares
(D) Forfeited amount of shares
Ans. (C)

90. The term ‘POIM’ for the four functions of management. Planning, organisation, integration
and measuring was given by.—
(A) F.W. Taylor
(B) Harold Smiddy
(C) Tanon Brown
(D) Peter F. Drucker
Ans. (B)
 40

Model for UPSC Accounts only

5. Which one of the following branches of accounting primarily deals with processing and
Goodwill presenting of accounting data for internal one?

(a) Financial Accounting

(b) Tax Accounting

(c) Management Accounting

(d) Inflation Accounting

Ans. (c)

6. “Holding gains in relation to stocks should not be used for payment of Dividend.” Which one
of the following accounting principles is involved in this?

(a) Consistency (b) Cost (c) Materiality (d) Realization

Ans. (d)

8. Accounting records transaction in terms of:

(a) commodity units (b) monetary units (c) production units (d) none of the above

Ans. (b)

9. Market price or actual cost, whichever is less, is the generally accepted accounting principle
for valuation of:

(a) Stock in trade (b) Fixed assets (c) Current assets (d) All assets

Ans. (a)

15. What is the correct sequence of the preparation of the following accounts and statements of a
non-profit organization?

1. Income and Expenditure account

2. Receipts and Payment account

3. Balance Sheet

Select the correct answer from the codes given below:

 41

(a) 1, 2, 3 (b) 1, 3, 2 (c) 2, 1, 3 (d) 2, 3, 1

Ans. (c)

16. Profit as per accounts from incomplete records may be construed as equivalent of:

(a) excess of assets over liabilities at the close of the period.

(b) excess of capital at the end over the capital at the beginning

(c) excess of assets over liabilities at the commencement of the period

(d) excess of capital at the beginning over the capital at the beginning

Ans. (b)

23. Long term liabilities are:

(a) fixed assets minus current assets

(b) fixed assets minus current liabilities

(c) current Assets plus current liabilities

(d) total liabilities minus current liabilities

Ans. (d)

Where all the debentures are redeemed, the balance left in the Debenture Sinking Fund Account
is transferable to:

(a) Debentures Account

(b) Sinking Fund Investment Account

(c) Capital Redemption Reserve

(d) General Reserve

Ans. (d)

33. The balance in share forfeiture account, after the reissue of all forfeited shares, should be:

(a) added to paid up capital

(b) transferred to goodwill account

 42

(c) transferred to capital reserve account

(d) shown as share forfeiture account

Ans. (c)

35. Match List-I with List-II and select the correct answer using the codes given below the lists:

List-I                           List-II

A. Deferred shares       1. Repayment obligation

B. Preference shares    2. Resembles Stock dividend

C. Bonus shares          3. No dividend obligation

D. Equity Shares         4. Not being used

Codes:

ABCD

(a) 4 3 1 2 (b) 4 1 3 2 (c) 3 2 1 4 (d) 4 1 2 3

Ans. (d)

36. Which one of the following statements is false?

(a) The process of issue of bonus shares is also known as capitalization of reserves

(b) Fully paid bonus shares are issued only out of capital reserves

(c) Only revenue reserves should be used when bonus is declared in order to make partly paid
shares into fully paid shares.

(d) Bonus shares one shares issued without payment.

Ans. (b)

38. Capital Gearing ratio denotes the relationship between:

(a) assets and capital

(b) loan and capital

(c) equity shareholder’s fund and long term borrowed funds

 43

(d) debentures and share capital

Ans. (c)

41. Match List-I with List-II and select the correct answer using the codes given below the lists:

List-I                                               List-II

(Names of Accounting Ratios)     (Nature of Accounting Ratios)

A. Capital gearing ratio                 1. Revenue Statement Ratio

B. Stock velocity ratio                              2. Coverage Ratio

C. Debtors velocity ratio               3. Market Price ratio

D. Dividend Yield ratio                4. Balance Sheet ratio

5. Balance Sheet and Revenue statement combined ratio

Codes:

ABCD

(a) 4 1 5 3 (b) 5 4 2 1 (c) 1 5 4 2 (d) 3 2 5 1

Ans. (a)

42. For the purpose of calculating ROI capital employed means:

(a) Net Fixed Assets

(b) Current Assets-Current Liabilities

(c) Gross Block

(d) Fixed Assets + Current assets – Current liabilities

Ans. (d)

46. Which one of the following is an example of sources of funds?

(a) Decrease in share capital

(b) Increase in long term liabilities

 44

(c) Decrease in long term liabilities

(d) Increase in Fixed assets

Ans. (b)

48. Match List-I with List-II and select the correct answer using the codes given below the lists:

List-I                                                  List-II

A. Fund flow Analysis                        1. Working Capital Management

B. Common Size Profit                       2. Inventory Control

and Loss Account

C. ABC analysis                                  3. Management of receivables

D. Debt Collection Period                   4. Financial Statement Analysis

Codes: ABC D

(a) 4 1 2 3 (b) 1 4 2 3 (c) 2 3 1 4 (d) 3 1 2 4

Ans. (b)

49. The main object of audit is to:

(a) detect the errors and faults

(b) help the company in developing a sound accounting system

(c) verify the correctness of final accounts

(d) prevent commission of errors and faults

Ans. (c)

50. ‘Surprise Checks’ are part of:

(a) an auditor’s working papers (b) an audit programme

(c) an auditor’s report (d) an accounting standard

Ans. (b)
 45

31. Internal audit helps in—

(A) Internal check
(B) Audit in depth
(C) Statutory audit
(D) Internal control
Ans. (D)

32. Day-today cash transactions of a club are recorded in—

(A) Receipts and Payments A/c
(B) Income and Expenditure A/c
(C) Cash Book
(D) Journal
Ans. (B)

33. An entry of Rs, 320 has been debited to Rajesh’s account, as Rs. 230. It is an error of—
(A) Commission (B) Omission (C) Principle (D) None of these
Ans. (A)

47. The most rigorous test of liquidity is—

(A) Current ratio
(B) Acid test ratio
(C) Stock turnover ratio
(D) Debtors turnover ratio
Ans. (B)

52. Secret reserves may be created by—

(A) Under-valuation of liabilities only
(B) Under-valuation of assets only
(C) Over-valuation of assets only
(D) Over-valuation of liabilities and under-valuation of assets
Ans. (D)

53. The current ratio of a firm is 2: 1. If it pays Rs. 5000 to it creditors, it will—
(A) Increase the current ratio
(B) Decrease the current ratio
(C) Increase working capital
(D) Neither increase nor decrease
Ans. (D)

54. E-commerce means—

(A) Economics Commerce
(B) Electronic Commerce
(C) Engineering Commerce
(D) Electrified Commerce
Ans. (B)