Book Recommended ------ Ultimate Book of Accountancy Class 12th

Sample paper – 4
Best Accountancy book in India ------- ULTIMATE Book of Accountancy 12th

BEST ACCOUNTANCY BOOK

FOR

TERM – 1

AVAILABLE ON AMAZON

As per CBSE Guidelines

Students should attempt 45 Questions; each question carry equal marks i.e. 0.88

Part -1 (Section – A)
Instructions:
From Question number 1 to 18, attempt any 15 Questions

Question 1
A and B are partners sharing profits in the ratio of 2 : 3. C is admitted and
new profit sharing ratio is agreed at 2 : 2 : 1. At the time of revaluation, it was
found that, Furniture was overvalued at 20,000; and there was an
unrecorded asset amounting to Rs. 10,000. Source: Ultimate Book of Accountancy
Revaluation Profit/ loss distributed to the partners:
(A) Revaluation Loss A = 4,000; B = 6,000
(B) Revaluation Loss A = 4,000; B = 4,000; C = 2,000
(C) Revaluation Gain A = 4,000; B = 6,000
(D) Revaluation Gain A = 4,000; B = 4,000; C = 2,000

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Question 2
X Ltd. Forfeited 1000 Shares of Rishi who applied for 1500 shares for non-
payment of allotment of Rs. 3 per shares and First and final call of Rs. 3 per
shares. Excess application money is to be adjusted on allotment. X Ltd.
Decided to reissue the forfeited shares. At what minimum price it can be
reissued (Face value per share is Rs. 10) Source: Ultimate Book of Accountancy
(A) Rs. 10 Per share because shares cannot be issued at discount
(B) Rs. 6 Per share
(C) Rs. 4 Per share
(D) Rs. 14 Per shares

Question 3
Rishi Ltd. Forfeited 1000 Shares of Katyayani who applied for 1800 shares
for non-payment of allotment of Rs. 4 per shares (Including premium of Rs.
1 per shares) and First and final call of Rs. 4 per shares. Rishi Ltd. Issued the
shares of Rs. 10 each at a premium of 20%. Excess application money is to
be adjusted on allotment. Source: Ultimate Book of Accountancy
Securities premium reserve will be at the time of forfeiture of shares ___
(A) Debited with 800
(B) Debited with 1000
(C) Credited with 800
(D) Credited with 1000

Question 4
A company forfeited 3000 shares of Rs. 10 each on which application money
of Rs. 3 per share has been paid. Out of these 2000 Shares were reissued as
fully Paid up and Rs. 4000 has been transferred to Capital reserve.
Rate at which these shares were reissued _______
(A) Rs. 7 per share Source: Ultimate Book of Accountancy

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(B) Rs. 8 Per Share

(C) Rs. 9 Per share
(D) Rs. 10 per share

Question 5
Rishi Ltd. invited application for 20,000 shares @ Rs. 10 each payable as Rs.
4 on application, Rs. 5 on allotment and balance on call. Applications were
received for only 12,000 shares. Director decided to cancel the issue.
Source: Ultimate Book of Accountancy
In how many days Company shall refund the money ______
(A) within 10 days from the closure of issue
(B) within 15 days from the closure of issue
(C) within 30 days from the closure of issue
(D) within 30 days from the date of issue

Question 6
Rubina and Jasmine are partner sharing profits in the ratio of 7 : 3. They
decided to Admit Abhinav as a new partner and new profit sharing ratio
between Rubina, Jasmine and Abhinav 5 : 3 : 2. Source: Ultimate Book of
Accountancy Balance sheet (Extract)
Liabilities Amount Asset Amount
Land and Building 50,000
During the year land and Building found overvalued by 25%. Effect on
partners capital account will be ______ Source: Ultimate Book of Accountancy
(A) Rubina 8,750 (Dr.); Jasmine 3,750 (Dr.)
(B) Rubina 8,750 (Cr.); Jasmine 3,750 (Cr.)
(C) Rubina 7,000 (Cr.); Jasmine 3,000 (Cr.)
(D) Rubina 7,000 (Dr.); Jasmine 3,000 (Dr.)

Question 7
A and B are partners sharing profits in the ratio of 7:3. On 01.10.2021 Mrs. A
advanced Rs.1,00,000 by way of loan to the firm without any agreement as
to interest. and on 01.11.2021 B was in need of funds and hence took a loan

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of Rs.1,00,000 from the firm without any agreement as to interest and Profit
during the year is 20,000. Source: Ultimate Book of Accountancy
Which of the following statement is correct based on above information?
(A) Interest on B’s Loan is 6% p.a.
(B) Interest on Mrs. A loan is 6% p.a.
(C) Interest on B’s Loan is a charge against profit
(D) Net profit transferred to Profit & Loss appropriation Account is Rs.
20,000

Question 8
Rishi and Mohak are partners with a profit-sharing ratio of 2 : 1 and capitals
of Rs. 2,50,000 each. They are allowed 12% p.a. interest on their capitals and
are charged 10% p.a. interest on their drawings. Their drawings during the
year were Rishi Rs. 70,000 and Mohak Rs. 30,000. Mohak share of net profit
as per profit and loss appropriation account amounted to Rs. 50,000. Net
Profit of the firm before any appropriations was: Source: Ultimate Book of
Accountancy

(A) 2,00,000 (B) 95,000

(C) 2,05,000 (D) 1,00,000

Question 9
Rishi and Rajendra started a business on 01.07.2020 with profit sharing
ratio of 7 : 3. Their opening capitals were Rs.1,00,000 and Rs.4,00,000,
respectively. As per the partnership deed, they were entitled to interest on
capitals @ 10% p.a. The firm earned a profit of Rs. 20,000 during the year.
Interest on capital of Rishi will be: Source: Ultimate Book of Accountancy
(A) 10,000 (B) 7,500
(C) 14,000 (D) 4,000

Question 10
Mohak and Siddharth are partners sharing profits in the ratio of 3: 2. Their
capitals were 2,00,000 and 1,00,000 respectively. They admitted Sameer for

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1/4th share in the future profits. Sameer brought 1,50,000 as his capital.
Firm’s Goodwill is: Source: Ultimate Book of Accountancy
(A) Nil (B) 1,50,000
(C) 2,00,000 (D) 1,00,000

Question 11
Gulab & Rose are patners in a firm with profit sharing ratio of 3 : 2. Gulab is
to get commission of 10% of net profit before charging any commission. Rose
is to get a commission of 10% on net profit after charging all commissions.
Net Profit for the year ended 31st March, 2021 was Rs 55,000. What will be
amount of Profit to be distributed to each? Source: Ultimate Book of Accountancy
(A) Gulab = 22,500; Rose = 22,500
(B) Gulab = 33,000; Rose = 22,000
(C) Gulab = 27,000; Rose = 18,000
(D) Gulab = 22,000; Rose = 33,000

Question 12
X and Y are partners. On 1st April 2020 their capitals are Rs.2,50,000; and
1,50,000 respectively. On 1st October 2020 they decided that their capitals
should be Rs.2,00,000 each. The necessary adjustments in the capitals were
made. As per the partnership deed interest on capital is allowed to all the
partners. Y got interest on his capital Rs.14,000. Source: Ultimate Book of
Accountancy

How much interest on capital is to be allowed to X?

(A) 18,000 (B) 20,250
(C) 15,750 (D) 22,500

Question 13
Average profit of firm is Rs. 1,50,000. Total tangible assets in the firm are Rs.
30,00,000 and outside liabilities are Rs. 20,00,000. In same type of business,
normal rate of return is 10% of capital employed. Calculate goodwill by
Capitalization of Super Profit Method. Source: Ultimate Book of Accountancy
(A) 5,00,000 (B) 10,00,000
(C) 15,00,000 (D) 8,00,000

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Question 14
Which of the following statement is not correct? Source: Ultimate Book of
Accountancy

(A) A company is an artificial person created by law.

(B) Every shareholder has a limited liability only up to the amount he has
contributed for the shares allotted to him
(C) A company cannot enter into a contract with its own name.
(D) both B and C is incorrect

Question 15
Rishi Ltd. forfeited _____ shares of Karmendra issued at Rs. 10 per shares for
non-payment of Second and final call of Rs. 2 per shares. Share forfeiture
credited at the time of forfeiture of shares is 16,000. Out of the forfeited
shares 70% of the shares are reissued as fully paid at maximum discount.
Calculate the number of shares forfeited ❶ and Amount transfer to Capital
reserve ❷. Source: Ultimate Book of Accountancy
(A) ❶ 2,000; ❷ Nil
(B) ❶ 2,000; ❷ 13,200
(C) ❶ 4,000; ❷ 13,200
(D) ❶ 4,000; ❷ Nil

Question 16
Which of the following statement is not correct?
(A) Money received in advance from shareholders before it is actually called-
up by the directors is Credited to calls in advance account
(B) Reserve Capital is not shown in company’s Balance Sheet
(C) When shares are forfeited, the share capital account is debited with
Called up capital of shares forfeited Source: Ultimate Book of Accountancy
(D) When shares are forfeited, the share forfeiture account is credited with
Called up capital of shares forfeited.

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Question 17
A, B and C sharing profits in the ratio of 2 : 2 : 1 have fixed capitals of Rs.
3,00,000, Rs. 2,00,000 and Rs. 1,00,000 respectively. After closing the
accounts for the year ending 31st March 2019 it was discovered that interest
on capitals was provided @ 12% instead of 10% p.a. In the adjusting entry:
Source: Ultimate Book of Accountancy

(A) Debit A Rs. 1,200; Credit B Rs. 800 and Credit C Rs. 400
(B) Credit A Rs. 1,200; Debit B Rs. 800 and Debit C Rs. 400
(C) Debit A Rs. 800; Credit B Rs. 1200 and Debit C Rs. 400
(D) Credit A Rs. 800; Debit B Rs. 1200 and Credit C Rs. 400

Question 18
X, Y and Z are partners with a capital of 5,00,000; 2,50,000 and 2,50,000
respectively. At the time of division of profit for the year, there was dispute
between the partners on profit sharing Ratio Source: Ultimate Book of Accountancy
• X wants that Profit will be distributed in the ratio of Capital i.e. 2:1:1.
• Y wants that profit will be distributed in the ratio of 1 : 2 : 1 because Y
devote extra times in the firm so that firm earn extra profit.
• Z wants that profit will be distributed in the ratio of 1:1:2 because due
to special knowledge of Z firm will receive a contract that would result in
double the profit.
Profit for the year after all appropriation is 15,000. There was no agreement
on this point. Calculate the amount payable to X, Y and Z respectively:
(A) X = 7,500; Y = 3,750; Z = 3,750
(B) X = 3,750; Y = 7,500; Z = 3,750
(C) X = 3,750; Y = 3,750; Z = 7,500
(D) X = 5,000; Y = 5,000; Z = 5,000

Part -1
Section – B
Instructions:

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From question number 19 to 36, attempt any 15 Questions.

Question 19
At the time of Admission of a Partner, undistributed profits appearing in
the balance sheet of the old firm is transferred to the capital account of
Source: Ultimate Book of Accountancy

(A) Old partners in old profit-sharing ratio

(B) Old partners in new profit-sharing ratio
(C) Old partners in Sacrificing Ratio
(D) All the partners in new profit-sharing ratio

Question 20
A and B are partners sharing profits and losses as 2 : 1. C is admitted and
profit sharing ratio becomes 3 : 2 : 1. Goodwill of the firm is valued at 60,000.
C brings required goodwill in cash. Goodwill amount will be credited to:
Source: Ultimate Book of Accountancy

(A) B = 10,000 (B) C = 10,000

(C) A = 10,000 (D) A = 5,000 and B = 5,000

Question 21
A and B are Partners sharing Profit in the ratio of apportionment with a
capital of Rs. 3,00,000 and Rs. 2,00,000 Respectively. On 01st October 2020
A further introduce a capital of Rs. 1,00,000 to the Firm. As per the
Partnership Act Interest on Capital will be 10% p.a. and Salary to B is Rs.
3,750 Per month. Profit for the year ended 31.03.2021 was Rs. 25,000.
Source: Ultimate Book of Accountancy

Profit will be distributed among the partners will be:

(A) A = 12,500; B = 12,500 (B) A = 15,900; B = 9,100
(C) A = 8,750; B = 16,250 (D) A = 9,100; B = 15,900

Question 22

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Given below are two statements, One labelled as assertion (A) and the
other labelled as Reason (R):
Assertion: Interest on Capital (Charge) is not Provided in case of loss.
Source: Ultimate Book of Accountancy
Reason: If Interest on Capital is treated as a charge against profit then it
will be provided in all the situations whether the firm is in profit or Loss.

In the context of the above statements, which one of the following is

correct? Source: Ultimate Book of Accountancy
(A) (A) is correct, but (R) is wrong.
(B) Both (A) and (R) are correct.
(C) (A) is wrong, but (R) is correct.
(D) Both (A) and (R) are wrong.

Question 23
In case of Admission of a Partner, the entry for Unrecorded Investments
amount to Rs. 10,000 is: Source: Ultimate Book of Accountancy
(A) Revaluation A/c Dr 10,000
To Investment A/c 10,000

(B) Investment A/c Dr 10,000

To Revaluation A/c 10,000

(C) Partner’s Capital A/c Dr 10,000

To Investment A/c 10,000

(D) Investment A/c Dr 10,000

To Partner’s Capital A/c 10,000

Question 24
A and B are partners with a profit-sharing ratio of 2 : 1 and capitals of Rs.
3,00,000 and Rs. 2,00,000 respectively. They are charged 12% p.a. interest
on their drawings. On 30th April 2020 A withdrew the amount of 10,000 and
during the last Eight months Mr. A withdrew the amount of Rs. ________ in the

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beginning of Every Month. Interest on drawing of Mr. A will be 6,500.

Monthly drawing of Mr. A will be for last eight months: Source: Ultimate Book of
Accountancy

(A) 10,000 (B) 15,000

(C) 80,000 (D) 1,20,000

Question 25
Weighted Average Method of calculating Goodwill is used when
(A) Profits are almost same every year
(B) Profits are not equal (increasing in one year and decreasing in other
year) Source: Ultimate Book of Accountancy
(C) Profits are showing increasing trends/decreasing trends
(D) There are regular losses in the business

Question 26
Given below are two statements, One labelled as assertion (A) and the
other labelled as Reason (R)
Assertion: In Case of Change in profit sharing ratio the old balances of
reserves should be transferred to capital account in old profit-sharing
ratio. Source: Ultimate Book of Accountancy
Reason: It is compulsory to distribute the reserves appearing in the old
balance sheet as they were created, in the old firm.

In the context of the above statements, which one of the following is

correct?
(A) (A) is correct, but (R) is wrong.
(B) Both (A) and (R) are correct.
(C) (A) is wrong, but (R) is correct.
(D) Both (A) and (R) are wrong.

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Question 27
If a share of Rs. 10 issued at a premium of Rs. 2 on which the full amount
has been called is forfeited for non-payment of Rs. 3 per share. the capital
account should be debited with: Source: Ultimate Book of Accountancy
(A) 10 (B) 12
(C) 8 (D) 7

Question 28
Which of the following statement is true? Source: Ultimate Book of Accountancy
(A) When a company issue its share through IPO, it means shares are
issued to Promoters
(B) Own shares purchased by a company with a view to reduce its capital is
called purchase
(C) Capital which is called only at the time of Winding-Up of the Company is
called Reserve Capital
(D) The profit on re-issue of forfeited shares is transferred to general
reserve

Question 29
A, B and C were Partners in a firm sharing profits in 3 : 2 : 1 ratio. They
admitted D for 10% profits. Calculate the Sacrificing Ratio: Source: Ultimate
Book of Accountancy

(A) 1 : 1 : 1 (B) 3 : 2 : 1
(C) 1 : 2 : 3 (D) 1 : 2 : 2

Question 30
X Ltd. Forfeited 800 (80% of the share who has not paid the first call) shares
of Y of Rs. 10 each Rs. 8 called up, for non-payment of first call of Rs. 2 Per
share. Source: Ultimate Book of Accountancy
Closing Balance of Calls in arrear will be_____
(A) 2,000 (B) 400

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(C) Nil (D) 200

Question 31
Given below are two statements, One labelled as assertion (A) and the
other labelled as Reason (R)
Assertion: Forfeited Shares can be re-issued at discount
Source: Ultimate Book of Accountancy
Reason: Forfeited shares can be re-issued at the discount up to the
maximum of the amount already credited to the Share Forfeiture Account.

In the context of the above statements, which one of the following is

correct?
(A) (A) is correct, but (R) is wrong.
(B) Both (A) and (R) are correct.
(C) (A) is wrong, but (R) is correct.
(D) Both (A) and (R) are wrong.

Question 32
A and B are partners sharing profits in the ratio of 2:1. They admit Rishi as a
new partner for 1/5th share in the firm. Rishi was guaranteed a minimum
amount and deficiency if any is to be borne by A and B in the ratio of 7 : 3.
Profit for the year was Rs. 20,000 and deficiency borne by A will be 70,000.
What is a minimum amount guaranteed to Rishi? Source: Ultimate Book of
Accountancy

(A) 30,000 (B) 70,000

(C) 1,00,000 (D) 1,04,000

Question 33
On 1st April 2020, Rishi Ltd. was formed with an authorized capital of Rs.
10,00,000 divided into 10,000 Equity shares of Rs. 100 each. The company
invited applications for 9,000 equity shares and received applications for
8,500 equity shares. All the amount due on allotment and First and Final call
received except a shareholder Katyayani (to whom 1,000 shares were
allotted) did not pay the First and Final call of Rs. 20 per share. Katyayani

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shares were forfeited after the First and Final call and out of his forfeited
shares 700 were reissued at Rs.100 per share fully paid up.
Share capital to be shown in the balance sheet is: Source: Ultimate Book of
Accountancy

(A) 8,20,000 (B) 8,44,000

(C) 7,50,000 (D) 8,30,000

Question 34
Issue of shares at discount is not allowed under which section of the
Companies Act, 2013? Source: Ultimate Book of Accountancy
(A) Section 52 (B) Section 53
(C) Section 54 (D) Section 55

Question 35
A and B are Partner in a firm. They decided to admit C as a new partner for
1/5th share and on the date of admission following entry is passed by the
firm: Source: Ultimate Book of Accountancy
Entry 1
A’s Capital A/c Dr 15,000
B’s Capital A/c Dr 7,500
To Profit & Loss A/c 22,500
(Being profit distributed among the partners)

Entry 2
C’s Current A/c Dr 15,000
To A’s Capital A/c 10,000
To B’s Capital A/c 5,000
(Being adjusted entry for goodwill)

New Profit-sharing Ratio:

(A) 8 : 4 : 3 (B) 2 : 2 : 1
(C) 5 : 3 : 2 (D) 7 : 5 : 3

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Question 36
A company purchased machinery for Rs. 6,00,000, out of which Rs. 1,00,000
was paid immediately and the balance amount was discharged by issue of
equity shares of Rs. 100 each at 25% premium. How many shares will be
issued by the company to the vendor? Source: Ultimate Book of Accountancy
(A) 4,800 Share (B) 4,000 Shares
(C) 8,000 Shares (D) 5,000 Shares

Part -1
Section – C
Instructions:
From question number 37 to 41, attempt any 4 questions.
Question no.’s 37 and 38 are based on the hypothetical situation given
below.
Rishi Limited issued 10,000 equity shares of Rs. 100 shares at a premium of
Rs.20 per share, payable as under: Source: Ultimate Book of Accountancy
• On Application Rs. 20 per share
• On Allotment Rs. 35 per share (including premium Rs.10 per share)
• Balance on First and Final Call (including balance premium)
Over-payments on application were to be applied towards sums due on
allotment and first and final call. Where no allotment was made, money was
to be refunded in full.
The issue was oversubscribed to the extent of 8,000 shares. Applicants for
6,000 shares were allotted only 2,000 shares and applicants for 2,000 shares
were sent letters of regret and application money was returned to them. All
the money due was duly received.

Question 37
Net amount received on allotment ______
Source: Ultimate Book of Accountancy

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(A) 3,00,000
(B) 4,60,000
(C) 2,40,000
(D) 3,50,000

Question 38
The Net amount received on First and Final call? Source: Ultimate Book of
Accountancy

(A) 6,50,000
(B) 6,40,000
(C) 6,60,000
(D) 6,70,000

Question no.’s 39, 40 and 41 are based on the hypothetical situation

given below.
X, Y and Z are partners sharing profits and losses in the ratio of 3 : 2 : 1. After
the final accounts have been prepared, it was discovered that interest on
drawings @ 6% p.a. had not been taken into consideration. The drawings of
the Partners were as follows: Source: Ultimate Book of Accountancy
• X withdrew Rs. 5,000 in the beginning of every month;
• Y withdrew Rs. 15,000 in the beginning of each Quarter;
• Z withdrew Rs. 15,000 at the end of each Quarter;
Give the necessary adjusting journal entry.

Question 39
Interest on drawing of X will be ______ Source: Ultimate Book of Accountancy
(A) 3600 (B) 1800
(C) 1950 (D) 2000

Question 40

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Interest on drawing of Z will be _____ Source: Ultimate Book of Accountancy

(A) 1950 (B) 2250
(C) 1350 (D) 3600

Question 41
Y Capital Account will be debited/ Credited with:
Source: Ultimate Book of Accountancy

(A) Debited with 400 (B) Credited with 400

(C) Debited with 600 (D) Credited with 600

PART – II (SECTION – A)
Instructions:
From Question number 42 to 48 attempt any 5 questions.

Question 42
Given below are two statements, One labelled as assertion (A) and the
other labelled as Reason (R)
Assertion: Redemption of Debentures on due date will increase the
Current Ratio
Source: Ultimate Book of Accountancy
Reason: Redemption of debentures on due date means debentures are
redeemed on time in the current year and both current assets and current
liabilities have decreased by the same amount.

In the context of the above statements, which one of the following is

correct?
(A) (A) is correct, but (R) is wrong.
(B) Both (A) and (R) are correct and (R) is the correct explanation of (A).
(C) (A) is wrong, but (R) is correct.
(D) Both (A) and (R) are wrong.

Question 43
Which of the following is not a limitation of Financial Statements Analysis?

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(A) It is affected by Personal bias Source: Ultimate Book of Accountancy

(B) Ignore price level changes
(C) Lack of qualitative analysis
(D) Inter-firm comparative study possible

Question 44
If Current Ratio is 2:1 and Quick Ratio is 1.5:1. A transaction involving a
decrease in both Current Ratio and Quick Ratio is: Source: Ultimate Book of
Accountancy

(A) Purchase of Non-current Asset for cash

(B) Cash payment of a Current Liability.
(C) Purchase of stock in trade
(D) Redemption of debentures (on due date in the current year)

Question 45
Which one of the following is correct? Source: Ultimate Book of Accountancy
(i) Proposed dividend comes under Non-current Liability
(ii) Short-term Provisions are shown under Current Liability
(iii) Ratio analysis helps in understanding Cash inflows and Cash outflows
(iv) Prepaid rent is a non-current Asset
In the context of above statement, which of the following options is correct?
(A) Only (i) and (ii) are correct
(B) Only (ii) is correct
(C) Only (i) Correct
(D) All are incorrect

Question 46
Analysis Conducted by the Management is known as:

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Source: Ultimate Book of Accountancy

(A) Horizontal Analysis

(B) Internal Analysis
(C) Time series analysis
(D) External Analysis

Question 47
Match the followings: Source: Ultimate Book of Accountancy
Column I Column II
(I) Interest Paid on Public Deposits (a) Reserve & Surplus
(ii) Securities Premium (b) Other Income
(iii) Gain on sale of fixed assets by a financial (c) Finance Cost
company
(iv) Calls in advance (d) Current Liability
Choose the Correct option.
(A) (I) – (c); (II) – (b); (III) – (a); (IV) – (d)
(B) (I) – (d); (II) – (a); (III) – (b); (IV) – (c)
(C) (I) – (c); (II) – (a); (III) – (b); (IV) – (d)
(D) (I) – (d); (II) – (b); (III) – (a); (IV) – (c)

Question 48
Which of the following statement is incorrect? Source: Ultimate Book of Accountancy
(A) goods sold on Credit at a profit of 10% improve the current ratio of 2 : 1
(B) Rent Paid in advance Rs. 5,000 decrease the quick ratio of 1 : 1
(C) There is no effect in Current ratio on Rent Paid in advance Rs. 5,000
(D) Purchase of goods will increase the current ratio of 2:1

PART – II (SECTION – B)
Instructions:
From Question number 49 to 55 attempt any 6 questions.

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Question 49
Revenue from operation Rs. 9,00,000, Gross profit25% on cost, operating
expense Rs. 90,000. Calculate operating ratio: Source: Ultimate Book of Accountancy
(A) 80%
(B) 85%
(C) 90%
(D) 95%

Question 50
Inventory turnover ratio 8 times; Opening Inventory 1,50,000; Closing
Inventory 2,50,000; Sale price is 25% on cost. Calculate gross profit ratio:
Source: Ultimate Book of Accountancy

(A) 10%
(B) 15%
(C) 20%
(D) 25%

Question 51
Which of the following statement is false? Source: Ultimate Book of Accountancy
(A) The purpose of financial statement analysis by trade creditors is to
determine whether the amount due to them is safe
(B) Comparison of value of one period with those of another period for the
same firm is Intra firm comparison
(C) Price level changes ignores is a limitation of financial statement analysis
(D) Horizontal analysis is considered as static

Question 52
Given below are two statements, One labelled as assertion (A) and the
other labelled as Reason (R)

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Assertion: Overvaluation of stock will decrease the Gross Profit

Source: Ultimate Book of Accountancy
Reason: Overvaluation of stock is important to decrease the profit and to
save the tax.

In the context of the above statements, which one of the following is

correct?
(A) (A) is correct, but (R) is wrong.
(B) Both (A) and (R) are correct and (R) is the correct explanation of (A).
(C) Both (A) and (R) are correct but (R) is not correct explanation of (A).
(D) Both (A) and (R) are wrong.

Question 53
Given below are two statements, One labelled as assertion (A) and the
other labelled as Reason (R)
Assertion: Debt to Equity Ratio shows relationship between long-term
external debts and Shareholders Funds.
Source: Ultimate Book of Accountancy
Reason: Long-term Borrowings are shown in the Balance Sheet under
Non-current Liabilities.

In the context of the above statements, which one of the following is

correct?
(A) (A) is correct, but (R) is wrong.
(B) Both (A) and (R) are correct and (R) is the correct explanation of (A).
(C) Both (A) and (R) are correct but (R) is not correct explanation of (A).
(D) Both (A) and (R) are wrong.

Question 54
A transaction that increase in current ratio of 2:1 but no change in working
capital Source: Ultimate Book of Accountancy

(A) Payment to a creditor amounting to Rs. 50,000

(B) Purchase of stock in trade of Rs. 50,000 on credit
(C) Sale of furniture amounting to Rs. 50,000

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(D) Payment of long-term borrowing of Rs. 50,000

Question 55
Which of the following item is not a long term borrowing as per schedule-
III. Source: Ultimate Book of Accountancy
(A) Debenture and Bond (B) Term loan from bank
(C) Public deposit (D) Cash Credit

Answers
1. (A) Revaluation Loss A = 4,000; B = 6,000

2. (c) Rs. 4 Per share

3. (A) Debited with 800

4. (C) Rs. 9 Per share

5. (B) within 15 days from the closure of issue

6. (D) Rubina 7,000 (Dr.); Jasmine 3,000 (Dr.)

7. (D) Net profit transferred to Profit & Loss appropriation Account is Rs. 20,000

8. (C) 2,05,000

9. (D) 4,000

10. (B) 1,50,000

11. (C) Gulab = 27,000; Rose = 18,000

12. (A) 18,000

13. (A) 5,00,000

14. (C) A company cannot enter into a contract with its own name.

15. (A) ❶ 2,000; ❷ Nil

16. (D) When shares are forfeited, the share forfeiture account is credited with Called up capital of
shares forfeited.

17. (A) Debit A Rs. 1,200; Credit B Rs. 800 and Credit C Rs. 400

18. (D) X = 5,000; Y = 5,000; Z = 5,000

19. (A) Old partners in old profit-sharing ratio

20. (C) A = 10,000

21. (C) A = 8,750; B = 16,250

22. (C) (A) is wrong, but (R) is correct

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23. (B) Investment A/c Dr 10,000

To Revaluation A/c 10,000
24. (B) 15,000
25. (C) Profits are showing increasing trends/decreasing trends
26. (A) (A) is correct, but (R) is wrong
27. (A) 10
28. (C) Capital which is called only at the time of Winding-Up of the Company is called Reserve
Capital
29. (B) 3 : 2 : 1
30. (B) 400
31. (B) Both (A) and (R) are correct
32. (D) 1,04,000
33. (B) 8,44,000
34. (B) Section 53
35. (A) 8 : 4 : 3
36. (B) 4,000 Shares
37. (C) 2,40,000
38. (B) 6,40,000
39. (C) 1950
40. (C) 1350
41. (A) Debited with 400

42. (B) Both (A) and (R) are correct and (R) is the correct explanation of (A).

43. (D) Inter-firm comparative study possible

44. (A) Purchase of Non-current Asset for cash

45. (B) Only (ii) is correct

46. (B) Internal Analysis

47. (C) (I) – (c); (II) – (a); (III) – (b); (IV) – (d)

48. (D) Purchase of goods will increase the current ratio of 2:1

49. (C) 90%

50. (C) 20%

51. (D) Horizontal analysis is considered as static

52. (D) Both (A) and (R) are wrong

53. (C) Both (A) and (R) are correct but (R) is not correct explanation of (A).

54. (A) Payment to a creditor amounting to Rs. 50,000

55. (D) Cash Credit

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