Most Important MCQs

Accounting &
Financial Management

Module ‘A’
Q. Depreciation is defined as the
1. Reduction in the value operating cost
2. The decreased value of assets (due to wear and tear of
assets)
3. Decreased in value of assets gradually and continuously

A. Only 1 is correct
B. Only 2 and 3 are correct
C. All 1, 2, and 3 are correct
D. None of the above

ANS : C
Depreciation
Depreciation is part of fixed assets that the owner can't recover,
due to a reduction in their value due to its continuous operation,
reduction in value due to wear and tear of fixed assets, and
gradual decrease in value of capital goods.

The organization makes provisioning which makes conduct its

business in an effective manner.
Q. As there are many causes of depreciation like wear and tear of
assets, obsolescence, accident, fall in market price, and efflux of time,
what is the meaning of efflux of time?

A. An invention or permanent change of demand

B. Mere passage of time fall in the value of assets even in not in use
C. Due to technology change fall in demand
D. Change in value of land due to government rules

ANS : B
Efflux of Time
Efflux of time is a cause of depreciation in which the value of
assets is decreased due to a natural passing of time rather than
from a specific action or event even not in the use of fixed assets
of the company.

For example, if we take a car and it is not in use for more than 1
year, its value automatically decreases.
Q. Which of the given reasons is the need for depreciation?

1. To make provision for replacement

2. To know the correct profit
3. To show the correct financial position of a company
4. To estimate residual scrap value

A. Only 1 is correct
B. Only 2 and 3 are correct
C. All 1, 2, and 3 are correct
D. None of the above

ANS : C
Need of Depreciation
• An organization needs the process of depreciation
because it shows the correct financial position without
reflecting wrong data on profit and loss.
• To make provision for assets so that in fixed tenure
the organization can replace it while its capital goods
or fixed assets.

• It also makes it easy in the actual entry of debit and

credit in the Balance sheet account.
Q. Consider the given statements about the straight-line
depreciation method and find out the wrong one;

1. It is also called the fixed percentage of the original cost or fixed

instalment method
2. It is mentioned in the Income tax act of 1961
3. In this method, minimum tenure of depreciation should be 1 year

A. Only 1 is incorrect
B. Only 2 is incorrect
C. All 1, 2, and 3 are incorrect
D. None of the above

ANS : B
Straight-line Depreciation
• Straight-line depreciation is also called fixed instalment
or percentage method.

• In this method, a fixed amount will be deducted yearly

but in the case of shorter periods minimum time of 6
months is also considered.

• It requires only three inputs to calculate: asset cost,

useful life, and estimated scrap value. The straight-line
method is not mentioned in IT Act, 1961, and hence
statement 2 is incorrect.
Q. Look at the given statements about the written-down
value method:
1. Written down value (WDV) method is also called the
reducing balance method.
2. It is mentioned in IT Act-1961 and Company Act-2013.
3. In this method, the residual value never becomes zero.

Which of the given statements is /are correct?

A. Only 1 is correct
B. Only 2 is correct
C. All 1, 2, and 3 are correct
D. None of the above

ANS : C
Written Down Depreciation
• Written down depreciation method is mentioned in the
Companies Act 2013. The method has a fixed value % of
depreciation, which is calculated on the diminished book
value and the value declines year by year. The scrap value
of a scrap never becomes zero, which is one of the
disadvantages of this method.
• The IT Act, of 1961 mentions a block of assets to calculate
depreciation. The Companies Act states that there are
three methods of calculating depreciation, straight-line
method, written-down value method, & unit of production
method.
Q. On 1st January 2020, ABC ltd Purchased machinery for
Rs. 1,00,000 and spent Rs. 4000 on its carriage and
Rs.8000 on its installation. Its useful life is 10 years and its
scrap value is Rs.12000. What is the depreciation value
every year in the straight line method?

A. Rs 7000
B. Rs 10,000
C. Rs 12,000
D. Rs 15,000

ANS : B
Written Down Depreciation
The original cost of machinery-10000
Additional charge= Installation charge + Carriage charge
= 8000+4000
= 12000
Hence Cost of the machine = 1,12,000
Scrap Value=12000
Depreciable amount=100000
Now every year depreciation = 100000/10
=Rs. 10,000/ per year
Q. Assets purchased by a company of Rs. 20,000 for
every rate of depreciation in 20%, what is the
depreciation amount in 3 years by Written Down
Value method?

A. 2250
B. 2260
C. 2550
D. 2560

ANS : D
Written Down Depreciation
As we know in the Written down value method, the annual
depreciation is previous year assets value x percentage of
depreciation
1st year depreciation = 20000 X 20/100
= 4000
2nd year assets value = 20000-4000 = 16000
2nd year depreciation = 16000 X 20/100
= 3200
3rd year assets value = 16000-3200
= 12800
Hence 3rd year depreciation = 12800 X 20/100
= 2560
Q. How many methods of calculating depreciation
are recognised under the Indian Accounting
Standards?

A. 2
B. 3
C. 4
D. 5

ANS : B
Solution
There are three methods of calculating depreciation
that are recognised under the Accounting Standards of
India (IND AS 10 & 16). They are:
1.Straight Line Method

2.Written Down Value Method

3.Units of Production Method
Q. Calculate depreciation for the second year using
the Written Down Value Method:
Original Cost = 20,000
Rate of Depreciation = 10%

A. 2000
B. 1800
C. 1700
D. 1500

ANS : B
Solution
• Under the WDV method, the depreciation is calculated by
multiplying the rate of depreciation with the previous year’s
value of an asset.
• Hence, the depreciation for the first year is Rs. 2000.
• The value of this asset at the end of first year is Rs. 18,000

• The depreciation for the second year is, thus, Rs. 1800.
Q. Under which of the following methods of
depreciation, is the depreciation based on the actual
usage of an asset & not on the passage of time?

A. Straight Line Method

B. Written Down Value Method
C. Units of Production method
D. Sum of years’ digit method

ANS : C
Solution
➢The method which uses usage rather than time to
calculate depreciation is called the Units of
Production Method.

➢The usage is measured using the output of

production.
Q. Which of the following are the most commonly used
instruments of credit?

A. Bill of Exchange
B. Promissory Notes
C. Both A & B
D. None of the above

ANS : C
Solution
• In a business, credit transactions play a very important
role. For manufacturing goods, a manufacturer purchases
raw materials, the majority of which will be on credit.
And the credit is generally provided by obtaining a written
document called Instrument of Credit.
• The most commonly used instruments of credit are Bill of
Exchange & Promissory Notes. Both instruments come
under the preview of the Negotiable Instruments Act 1881
so there is no counterparty risk involved.
•
Q. Which of the following statements is/are incorrect
with regard to the Bill of Exchange?

A. It is a written documents
B. It is sign by maker
C. It contain an unconditional order
D. It is defined under section 6 of the Negotiable
Instrument Act 1881

ANS : D
Solution
• Bill of Exchange is a negotiable instrument defined under
section 5 of the Negotiable Instrument Act 1881.
• As per section 5 of NI Act, it is defined as; A “bill of
exchange” is an instrument in writing containing an
unconditional order, signed by the maker, directing a
certain person to pay on demand or at fixed or
determinable future time a certain sum of money only to,
or to the order of, a certain person or to the bearer of the
instrument.
•
Q. An expenditure that occurs only current period
is known as.?

A. Revenue Expenditure
B. Capital Expenditure
C. Deferred Capital Expenditure
D. Current Expenditure

ANS : A
Solution
A company spends revenue expenditure to maintain the
regular functioning of the system like salary, repair of
machines, tours, travel, etc. There are two types of
expenditure of an organization one is revenue and the
other is Capital.
Q. Consider the given statement about Revenue expenditure
1. Expenditures associated with revenue generation include all day-to-
day expenses needed to operate a business, such as sales salaries,
rent, office supplies, and utilities.
2. Administrative overhead, research, and development and accounting
frameworks are treated as types of revenue expenditure.

Which of the given statement is correct?

A. Only 1 is correct
B. Only 1 is correct
C. Both are correct
D. None of the above
ANS : C
Solution
Expenditure involves all day-to-day expenses needed to operate
a business, such as sales salaries, rent, office supplies, and
utilities is called revenue expenditure. There are many examples
of revenue expenditures such as administrative overhead
research and development, accounting frameworks, etc.
Q. Which of the following considers Revenue expenditure?

1. Furniture of the book value of 20000 Rs

2. Temporary was constructed costing 30000 Rs These are necessary for the
construction of the new building and were demolished when the buildings
were ready.
3. Replacement of the old machine with a new machine.

Which of the given statement is correct?

A. Only 1 is correct
B. Only 3 is correct
C. All are correct
D. None of the above
ANS : D
Solution
Expenditure involves all day-to-day expenses needed to operate
a business, such as sales salaries, rent, office supplies, and
utilities is called revenue expenditure. There are many examples
of revenue expenditures such as administrative overhead
research and development, accounting frameworks, etc.
Q. Which accounting principle states that Capital
contributed by the owner is liability for business ?

A. Cost Concepts
B. Money Measure Concepts
C. Realisation Concepts
D. Business Entity Concepts

ANS : D
Business Entity Concept
• This concept separates the entity of proprietor from the
business transaction.
• Capital contributed by the owner is liability for business
because business is different from owner.
• Any money withdrawn by proprietor is drawings.
• All entries are kept from the point of view of business and not
from owner.
• An enterprise is economic unit separate from owner.
Q. Due to which concept, accounting does not record
non-financial transactions?

A. Going concern concept

B. Money measurement concept

C. Accrual concept

D. Cost concept

ANS : B
Money Measurement Concept
• Every transaction is measured in terms of
money. Viz production /sales/wages etc., all
converted to money.

• Health of a proprietor or manager is not taken

into the books although it may have a great
impact on the overall business.
Q. Amount withdrawn by proprietor in business should
be credited to____.

A. Proprietors account
B. Drawings account
C. Capital account
D. Asset account

ANS: B
Business Entity Concept
• Capital contributed by the owner is liability for business
because business is different from owner.

• Any money withdrawn by proprietor is drawings.

• An enterprise is economic unit separate from owner.

Q. Which accounting principle states that Every transaction
has double effect, one is debit and another one is credit?

A. Dual Aspect Concept

B. Business Entity Concept

C. Periodicity Assumption

D. Going Concern Concept

ANS : A
Double Entry System
• Every transaction has two aspects.

• A scientific system in which the business

transactions are recorded in book of account
in two accounts, one account is debited and
the other is credited.
Q. As per revenue recognition principle, sales
revenues should be recognized at the time when?

A. Order is taken for merchandise

B. Ownership of goods gets transferred from the

seller to the buyer

C. Cash is received

D. All of the above

ANS : B
Realization Concept
• This concept tells us when revenue is treated as
realised or earned.

• It is treated as realized on the date when property

in goods passes to buyer and he becomes legally
liable to pay.

• No future income is considered.

Q. An expenditure which helps in generating revenue for more
than one year is called ?

An expenditure which generates the revenue in the same year

is called ?

A. Revenue, capital
B. Capital, revenue
C. Capital, capital
D. Revenue, revenue

ANS : B
Capital Expenditures include the amounts spent to acquire
assets such as land, buildings, equipment, furnishings, fixtures,
vehicles.

The total amount spent on capital expenditures during an

accounting year is reported under investment activities on the
statement of cash flows.
Revenue expenditure refers to those expenditures which are
incurred during normal business operation by the company,
benefit of which will be received in the same period.

For example, rent expenses, utility expenses, salary expenses,

insurance expenses, commission expenses, manufacturing
expenses.
Q. An expense which is incurred while accounting
period, it will keep showing its benefits over the period
of two to three years?

A. Capital Expenditure
B. Revenue Expenditure
C. Deferred Revenue Expenditure
D. All, the above

ANS : C
Deferred Revenue Expenditure is an expense which is incurred
while accounting period and the result and benefits of this
expenditure are obtained over the multiple years in the future.

For example, revenue used for advertisement is deferred

revenue expenditure because it will keep showing its benefits
over the period of two to three years.
Q. Freight expenses for moving new machinery to factory
comes under which kind of expenses?

A. Revenue expenses
B. Deferred revenue expenditure
C. Capital expenditure
D. None of the above

ANS : C
Types of Errors in Accounting
Errors in accounting are broadly classified into two
categories which are as follows:

❖Error of principle

❖Clerical errors
Q. Calculate depreciation by using Straight-Line Depreciation
Method;

• A company bought a machine for Rs 1,00,000 on 1

January 2021
• Estimated life of 4 years, no scrap value
• 1 January 2022, an additional motor of Rs 9000 was
fitted into the machine
• Expected that the useful life of the machine would not
be affected
Depreciation for 2016

100000 = Rs 25000
4

Annual depreciation from 2017 onwards

= 100000 9000
+
4 3

= Rs28000
 Q. Calculate depreciation by using Straight-Line Depreciation
Method
• ABC Transport acquired a truck on 1st October 2023 at
a cost of Rs 4,00,000.

• The firm writes off depreciation @ 10% of the original

cost every year.

• The books are closed on 31st March every year.

• Show the truck account and depreciation account for

three years.
JAIIB OCTOBER
2100 MCQs
AFM Module A | Class 02 By - Mahesh Sir
Units of Production Depreciation Method
This method is a usage-based method. The depreciation
amount is not based on passage of time but actual use of
the asset.

In this method, the useful life is measured in term of

production output or number of unit which an asset is
capable of producing during its lifetime.

Depreciation Expense = (Number of units produced /

Life in number of units) x (Cost – Salvage value)
Company ABC Ltd, purchases a pen production machine
that can manufacture 1,000,000 pens after which it will
have to be scrapped. The purchase cost of the machine is
Rs 100,000 and the scrap value is estimated at Rs 10,000.
During the first year of production, the machine
produced 200,000 pens.
Depreciation Expense = (Number of units produced / Life in
number of units) x (Cost – Salvage value)

Units of Production Method = (200,000/1,000,000) * ( 100,000 -10000)

= 0.2 * 90,000
= Rs 18000
Sum-of-the-Years-Digits Depreciation Method

The sum-of-the-years-digits method is one of the accelerated depreciation

methods. A higher expense is incurred in the early years and a lower
expense in the latter years of the asset’s useful life.

Depreciation Expense = (Remaining life / Sum of the years digits)

x (Cost – Salvage value)
Consider a piece of equipment that costs 25,000 and
has an estimated useful life of 8 years and a 0-salvage
value.
To calculate the sum-of-the-years-digits depreciation
1. The depreciation base is constant throughout the
years and is calculated as follows:
Depreciation Base = Cost – Salvage value

Depreciation Base = 25,000 – 0 = 25,000

2. The remaining life is simply the remaining life of

the asset. For example, at the beginning of the year,
the asset has a remaining life of 8 years. The
following year, the asset has a remaining life of 7
years, etc.
3. RL / SYD is “remaining life divided by sum of the years.”
In this example, the asset has a useful life of 8 years.

Therefore, the sum of the years would be 1 + 2 + 3 + 4 + 5 +

6 + 7 + 8 = 36 years.

Therefore, the RM / SYD = 8 / 36 = 0.2222.

4. The RL / SYD number is multiplied by the depreciating

base to determine the expense for that year.
5. The same is done for the following years. In the
beginning of year 2, RL / SYD would be 7 / 36 = 0.1944.
0.1944 x 25,000 = 4,861 expense for year 2.
Q. The accounts and balance sheet prepared under Section 29 of
the Banking Regulation Act along with the auditor's report have to
be published in newspapers within a period of __________ months
from the end of the period to which the account and balance sheet
relate.

A. 30 Days
B. 2 Months
C. 3 Months
D. 6 Months

ANS : D
• The accounts and balance sheet prepared under Section 29 of the
Banking Regulation Act along with the auditor’s report have to be
published, as provided in Section 31 thereof with Rule 15 of the
Banking Regulation (Companies) Rules, 1949.

• Accordingly, the publication has to be made in a newspaper, which

is in circulation at the place where the banking company has its
principal office, within a period of six months from the end of the
accounting period.
Q. Which of the following statements is incorrect with regards to the banking
company, submission of Balance sheet & profit and loss A/C reports?

A. Banking company has to submit 2 copies of its balance sheet and profit and loss
account to the RBI within 2 months from the end of the accounting period
B. Banking company has to submit 3 copies of its balance sheet and profit and loss
account to the RBI within 3 months from the end of the accounting period.
C. Banking company has to submit 5 copies of its balance sheet and profit and loss
account to the RBI within 5 months from the end of the accounting period.
D. Banking company has to submit 6 copies of its balance sheet and profit and loss
account to the RBI within 6 months from the end of the accounting period.

ANS : B
• The balance sheet and profit and loss account have to be
prepared in the forms set out in the 3rd Schedule of the
Banking Regulation Act 1949.

• The banking company has to submit 3 copies of its balance

sheet and profit and loss account to the RBI within 3 months
from the end of the accounting period. This may be extended
by the Reserve Bank of India by a further period not
exceeding three months.
Q. The balance sheet and profit and loss account of a
banking company has to be audited as stipulated under
which section of the Banking Regulation Act 1949?

A. Section 29
B. Section 30
C. Section 31
D. Section 35

ANS : B
Q. RBI is empowered under ____________ Section of
the BR Act 1949, to order a special audit of the
accounts of any banking company.

A. Section 29 (B)
B. Section 30(B)
C. Section 29(1B)
D. Section 30(1B)

ANS : D
Q. Section 35 of the Banking Regulation Act 1949,
deals with which of the following;

A. Balance sheet
B. Profit and loss account
C. Bank audit
D. Bank Inspection

ANS : D
Q. The powers, functions and duties of the auditors
of banking companies is defined under which of the
following Sections of the Companies Act?

A. Section 222
B. Section 225
C. Section 227
D. Section 229

ANS : C
The powers, functions and duties of the auditors and the
liabilities to auditors of banking companies are defined under
Sections 227 of the Companies Act are applicable to give certain
additional information in his audit report such as any matter,
which the auditor considers necessary to bring to the notice of
the shareholders of the company.
Q. Which Chapter of the RBI Act 1934, deals with penalty
for violation of the Act?

A. Chapter II
B. Chapter III
C. Chapter IV
D. Chapter V

ANS : D
• A banking company has to abide by the
requirements of the RBI Act and the BR Act and the
subordinate legislation and failure to do so invites
penalties.

• Chapter V of the RBI Act 1934, deals with the

penalty for violation of the Act. Banking companies
have to make applications and furnish return
statements, etc under different provisions of the
Act.
Q. Which of the following statements is incorrect with respect to
the Bank Reconciliation Statement?

A. Preparing a Bank Reconciliation Statement requires making

necessary corrections in the cash book and adjusting the cash
book balance.
B. A credit entry in a passbook is equivalent to a debit entry in a
cash book.
C. An overdraft in the passbook is a debit balance.
D. A credit balance as per the cash book is a favourable balance.

ANS : D
The bank reconciliation statement (BRS), commonly
referred to as the bank passbook, is a record book of the
transactions of a bank account that aids account holders
in maintaining a record of their funds and updating
previous transactions. The cash book's balance must
match the bank passbook's balance on the statement. All
deposits are listed in the credit column of the BRS, while
all withdrawals are listed in the debit column. It will
display a debit balance (overdraft) if the withdrawal is
more than the deposits.
Q. The overdraft balance in the bank passbook is Rs. 15,000.
A cheque is issued of Rs. 5,000 by the firm but it has not
been presented for payment so far. Which of the following is
the balance as per cash book of the firm?

A. Rs. 10,000 Favourable Balance

B. Rs. 20,000 Overdraft Balance
C. Rs. 10,000 Overdraft Balance
D. Rs. 20,000 Favourable Balance

ANS : B
• The overdraft balance (or the debit balance) as per the

bank passbook is Rs. 15,000. The firm had issued a

cheque, but not presented it for payment. It means that

the firm would have an additional entry of Rs. 5000.

• The firm’s cash book would have an overdraft balance of

Rs. 20,000.
Q. A cheque that is returned by a bank and is marked NSF,
means ________.

A. overwriting of cheque
B. it is a damaged cheque
C. inability to verify identity
D. lack of funds

ANS : D
• There are several reasons why a bank might return a
cheque.

• NSF stands for non-sufficient funds, and it is a term used

to indicate that a cheque is returned due to insufficient
funds in the account on which it is drawn.
Case I
ABC International is closing its books for the month ended March 31. ABC's controller must prepare a bank
reconciliation based on the following issues:

The bank statement contains an ending bank balance of Rs 320,000.

➢ The bank statement contains a Rs 200 check printing charge for new cheque that the company ordered.

➢ The bank statement contains a Rs 150 service charge for operating the bank account.

➢ The bank statement rejects a deposit of Rs 500 due to not sufficient funds and charges the company a Rs
10 fee associated with the rejection.

➢ The bank statement contains interest income of Rs 20.

➢ Deposited Rs 80,000 of checks that have not yet cleared the bank.

➢ Issued Rs 25,000 of checks at month-end that were not deposited in time to appear on the bank
statement.
 Item # Adjustment to Books

Bank balance Rs 320,000 1

- Check printing charge -200 2 Debit expense, credit cash

- Service charge -150 3 Debit expense, credit cash

- NSF fee -10 4 Debit expense, credit cash

- NSF deposit rejected - 500 4 Debit receivable, credit cash

+ Interest income + 20 5 Debit cash, credit interest income

- Uncleared checks - 80,000 6 None

+ Deposits in transit + 25,000 7 None

Book balance Rs 264,170

The balance of cash at bank as shown in the Cash Book of XYZ Ltd on 31st December 2021 was ₹8,200.
On comparing it with the pass book, the following differences were noted:

1.Cheque sent for collection amounting to ₹6,400 have not been cleared by the bank so far.

2.Cheque issued but not presented for payment ₹4,000.

3.Bank charges ₹200 not entered in the Cash Book.

4.Credit of ₹500 in the pass book in respect of interest was not recorded in the Cash Book.

5.A vendor deposited ₹2,000 directly in our bank account which was only recorded in the pass book.

6.As per standing instructions of XYZ Ltd, the bank has made the following payments:

• Insurance premium : ₹1,200

• Club Fees : ₹1,000

Prepare a Bank Reconciliation Statement as on 31st December 2021.

JAIIB OCTOBER | 2100 MCQs | AFM Module A | Class 3

By - Mahesh Sir
The balance of cash at bank as shown in the Cash Book of XYZ Ltd on 31st December 2021 was ₹8,200.
On comparing it with the pass book, the following differences were noted:

1.Cheque sent for collection amounting to ₹6,400 have not been cleared by the bank so far.

2.Cheque issued but not presented for payment ₹4,000.

3.Bank charges ₹200 not entered in the Cash Book.

4.Credit of ₹500 in the pass book in respect of interest was not recorded in the Cash Book.

5.A vendor deposited ₹2,000 directly in our bank account which was only recorded in the pass book.

6.As per standing instructions of XYZ Ltd, the bank has made the following payments:

• Insurance premium : ₹1,200

• Club Fees : ₹1,000

Prepare a Bank Reconciliation Statement as on 31st December 2021.

Q. Accounting Standard _________ deals with the
accounting and disclosure for benefits provided to
employees in the financial statements of employers.

A. Accounting Standard 15
B. Accounting Standard 17
C. Accounting Standard 20
D. Accounting Standard 26

ANS : A
AS-15
• Accounting of retirement benefit to employees in
financial statements
• PF/pension/gratuity leave encashment post
retirement welfare scheme
• Method by which retirement benefits valued.
Q. Disclosures of accounting policies as per AS 1 means;

A. All significant accounting policies adopted in the preparation of

financial statement should be disclosed.
B. The disclosure of the significant accounting policies as such
should form a part of the financial statements.
C. Any changes in the accounting policies that has a material effect
in the current period or that which is reasonably expected to
have a material effect in later period should be disclosed.
D. All the above

ANS : D
Q. Which of the following is true with regards to Accounting
Standard 2;

A. The standard deals with the determination of the values at

which inventories are carried in the financial statements.
B. Weighted average cost or first in first out (FIFO) methods is
permitted in cases where goods are ordinarily interchangeable.
C. This standard is not applied to work in progress of service
providers & shares, debentures stock held in trade.
D. All the above

ANS : D
Q. The Accounting Standard 3 requires the preparation of
cash flows statement & its presentations to be classified
among which of the following heads;

A. Financing Activities
B. Investing Activities
C. Operating Activities
D. All the above

ANS : D
AS-3
• Preparation of cash flow statement and its
presentation along with financial statements

• Cash flow to be classified by

operating/investing/financing activities.
Q. The accounting treatment for property, Plant &
Equipment's (PPE) comes under________.

A. Accounting Standard 5
B. Accounting Standard 10
C. Accounting Standard 15
D. Accounting Standard 20

ANS : B
Q. Accounting Standard 25 deals with the accounting for
interim financial reporting of an enterprise. Which of the
followings is/are main components of an interim financial
report?

A. Condensed balance sheet

B. Condensed statement of P&L
C. Condensed cash flow statement
D. All the above

ANS : D
Q. At the time of recognition, an item of PPE that qualifies
for recognition as an asset should be measured at its cost
which include followings;

A. Purchase cost including import duties & non-refundable

taxes
B. Directly attributable & necessary cost
C. Costs of dismantling & restoration
D. All the above

ANS : D
Accounting Standards
Accounting Standards
Q. “Earnings Per Share” comes under
which Accounting Standard?
A. AS 15
B. AS 20
C. AS 23
D. AS 25

ANS : B
AS-20
• Principles & determination of earnings per share

• Comparison between enterprises.

• Net profit (loss)/ weighted average number of

shares.
Q. Which of the following Accounting Standards is
related to Cash Flow Statement?

A. AS 1
B. AS 2
C. AS 3
D. AS 5

ANS : C
➢AS 2 is related to Valuation of Inventories
➢AS 3 is related to Cash Flow Statement
➢AS 4 is related to Contingencies and Events Occurring
after the Balance Sheet Date

➢AS 5 is related to Net Profit or Loss for the Period, Prior

Period Items and Changes in Accounting Policies
Q. Which of the following IAS is related to

Income Taxes?

A. IND AS 12
B. IND AS 16
C. IND AS 19
D. IND AS 23

ANS : A
➢IND AS 12 is related to Income taxes
➢IND AS 16 is related to Property, Plant and
Equipment
➢IND AS 19 is related to Employee Benefit.
➢IND AS 23 is related to Borrowing cost
Q. Accounting Standard 3 and Ind AS
________ provide detailed guidelines for
preparing cash flow statements.

A. Ind AS 2
B. Ind AS 5
C. Ind AS 7
D. Ind AS 10

ANS : C
Accounting Standard 3 and Ind AS 7 provide detailed

guidelines for preparing cash flow statements. As per

these standards, entities need to provide detailed

guidelines for preparing cash flow statements along

with the presentation and disclosure of cash flow

information.
Q. Which of the following statement is/are correct regarding
Real Accounts?
A. All assets of a firm, which are tangible or intangible, fall
under the category of ‘Real Accounts’.
B. These are the accounts of all the assets and liabilities of
the organization.
C. We do not close these accounts at the end of the
accounting year and appear in the Balance Sheet.
D. All the above
ANS : D
Real Accounts
• All assets of a firm, which are tangible or intangible, fall under
the category of ‘Real Accounts’.

• These are the accounts of all the assets and liabilities of the
organization.

• We do not close these accounts at the end of the accounting

year and appear in the Balance Sheet. Thus, we carry forward
the balances of these accounts to the next accounting year.
Q. Consider the following statements with regards to tangible &
intangible real accounts and find out the wrong one;

A. Tangible real accounts are related to things that can be touched and
felt physically.
B. Tangible real accounts examples are goodwill, patents, trademarks,
etc.
C. Intangible real accounts are related to things that can’t be touched
and felt physically.
D. None the above

ANS : B
Real Accounts
• Tangible real accounts are related to things that can be touched
and felt physically. Few examples of tangible real accounts are
building, machinery, stock, land, etc.

• Intangible real accounts are related to things that can’t be

touched and felt physically. Few examples of such real accounts
are goodwill, patents, trademarks, etc.
Q. Which of the following is/are correct examples of
Personal accounts
A. Accounts of customers,
B. Accounts of goods suppliers,
C. Capital, drawings
D. All the above

ANS : D
Personal Accounts
Personal Accounts which are related to individuals,
firms, companies, etc.

Few examples are debtors, creditors, banks,

outstanding account, prepaid accounts, accounts of
customers, accounts of goods suppliers, capital,
drawings, etc.
Q. Which of the following statement is/are correct with respect
to Nominal Accounts?
A. These are temporary accounts and thus we need to transfer
their balances to Trading and Profit and Loss A/c at the end
of the accounting year.
B. Nominal Accounts are the accounts relating to the
expenses, losses, incomes, and gains.
C. Purchase A/C, Salary A/C, Sales A/C, Commission received
A/C, Bad Debt A/C, etc.
D. All the above

ANS : D
Nominal Accounts
Nominal Accounts are the accounts relating to the
expenses, losses, incomes, and gains.

The dictionary meaning of the word ‘nominal’ is

“existing in name only“ and the meaning remains
absolutely true in accounting sense too, furthermore
nominal accounts do not really exist in physical form,
but behind every nominal account money is involved.
Q. All assets of a firm, which are tangible or intangible,
fall under the category of ______.

A. Real Accounts
B. Nominal Accounts
C. Personal Accounts
D. Option A & c

ANS : A
Real Accounts
• All assets of a firm, which are tangible or intangible, fall under the category
of ‘Real Accounts’.

• Tangible real accounts are related to things that can be touched and felt
physically. Few examples of tangible real accounts are building, machinery,
stock, land, etc.

• Intangible real accounts are related to things that can’t be touched and felt
physically. Few examples of such real accounts are goodwill, patents,
trademarks, etc.
Q. From which of the following is a ledger account prepared?

A. Transactions

B. Journal

C. Events

D. None of the above

ANS : B
JOURNAL
A journal entry records a business transaction and is
the first step of the accounting cycle. Journal entries
should be made for every business transaction and
are posted to the general ledger.

A properly documented journal entry consists of the

following: Correct date. Amount(s) that will be
debited.
Q. The Journal entries are posted in the ledger with which sequence?

A. In order of their category

B. In order of their dates
C. In order of their importance
D. As per discretion of the firm

ANS : B
Q. The process of transferring of items from a journal to
their respective ledger accounts is called as,

A. Entry

B. Arithmetic

C. Balancing

D. Posting

ANS : D
Q. The left hand side of the ledger account is referred to as.

A. Footing

B. Credit side

C. Debit side

D. Balance

ANS : C
Q. Which of the following statements is incorrect in the
context of a trial balance?

A. It is a record of the final ledger balance of all accounts

and has a debit & credit column.
B. It helps in the preparation of the Balance Sheet and
Profit and Loss Account.
C. The primary goal of this statement is to verify the
accuracy of commercial transactions in a company's
ledgers.
D. All the above statements are correct.

ANS : D
A trial balance is a report that lists all ledger
account balances, whether they are debit or
credit, as of a specific date.

Thus, a summary of all ledger accounts can

be called the trial balance.
Q. Among these, which item is used as the base for
preparing trial balance?

A. Cash account

B. Balance sheet

C. Journal

D. Ledger account

ANS : D
Q. If there is a difference in the two columns of a trial
balance, a separate account is created to put in the
balance amount. What is the name of this account?

A. Difference A/C
B. Suspense A/C
C. Error A/C
D. Omission A/C

ANS : B
A new account called the Suspense Account is
formed and the discrepancy in amount is placed in
this account if there is a difference of some amount
between the totals of the columns of the Trial
Balance.
Q. The errors occur when one wrong entry neutralises the
impact of another incorrect entry, is called?

A. Omission
B. Commission
C. Principle
D. Compensating error

ANS : D
Compensating errors:
Compensating errors occur when one wrong entry
neutralises the impact of another incorrect entry.

These entries cancel the other error that is recorded.

Q. When the accountant records a transaction that does
not comply with the rules of accounting, is called?

A. Omission
B. Commission
C. Principle
D. Compensating error

ANS : C
Types of Errors in Accounting
Errors in accounting are broadly classified into two
categories which are as follows:

❖Error of principle

❖Clerical errors
Error of Principle:

Error of principle is said to occur when the accountant records a transaction that
does not comply with the rules of accounting.

As per accounting rules, for every debit, there should be a corresponding credit.

When a transaction violates this rule, an error results from it and such an error is
known as the error of principle.
Q. The error result from the negligence of the person
who is in charge of recording the transactions____?

A.Omission
B. Commission
C. Principle
D.Compensating error

ANS : B
Errors of Commission:
These types of error result from the negligence of the person who is in
charge of recording the transactions.

These types of errors have an impact on the trial balance and the
examples of such errors can be the recording of incorrect amounts and
incorrect totalling in the ledger or subsidiary books or posting at the
wrong side of ledger accounts.
Q. The errors occur when one wrong entry
neutralises the impact of another incorrect
entry, is called?

A.Omission
B. Commission
C. Principle
D.Compensating error

ANS : D
Compensating errors:
Compensating errors occur when one wrong entry neutralises the
impact of another incorrect entry.

These entries cancel the other error that is recorded.

Q. Which of the following is an accounting equation?

A. Assets = Liabilities
B. Assets = Equity - Liability
C. Assets = Liabilities + Owners Equity
D. Liability = Asset + Capital

ANS : C
JAIIB OCTOBER | 2100 MCQs | AFM Module A | Class 4

By - Mahesh Sir
Q. Which of the following statements is incorrect in the
context of a trial balance?

A. It is a record of the final ledger balance of all accounts

and has a debit & credit column.
B. It helps in the preparation of the Balance Sheet and
Profit and Loss Account.
C. The primary goal of this statement is to verify the
accuracy of commercial transactions in a company's
ledgers.
D. All the above statements are correct.

ANS : D
A trial balance is a report that lists all ledger
account balances, whether they are debit or
credit, as of a specific date.

Thus, a summary of all ledger accounts can

be called the trial balance.
Q. Among these, which item is used as the base for
preparing trial balance?

A. Cash account

B. Balance sheet

C. Journal

D. Ledger account

ANS : D
Q. The owner of a business has wrongly debited
the stationary account for an amount of Rs. 5000,
which was withdrawn for personal use. Which
account will be debited in the rectification journal
entry?

A. Travelling Expenses A/c

B. Drawings A/c
C. Bank A/c
D. Cash A/c

ANS : D
Q. Which of the following terms is used when a
mistake is committed while totalling a subsidiary
book?

A. Errors of costing
B. Error of principle
C. Compensating Error
D. None of the above

ANS : A
➢ Errors of costing are errors or mistakes that
are committed while incorrectly totalling a
subsidiary book.
➢ Error of commission occurs when an
accountant or bookkeeper correctly enters a
debit or credit in an account but enters it in
the incorrect subsidiary records.

➢ Errors of principles are applicable when

wrong accounting principles are applied.
Q. If credit sales made to Rahul were in the amount of
Rs. 5,000 but they were recorded as Rs. 500. By what
amount will Rahul’s account be debited in the
rectification entry?

A. Rs 5000
B. Rs 5500
C. Rs 4500
D. Rs 500

ANS : C
Q. Suppose, old furniture sold to A for Rs 10,500 was
passed through the Sales Book. What account will be
credited in the rectification entry?

A. A’s A/c
B. Cash A/c
C. Sales A/c
D. Old Furniture A/c

ANS : D
Two-sided Errors
Purchase of vehicle for Rs. 500000 has been entered in the purchase
book. Account of the supplier has been credited by Rs. 500000 which
is correct. Debit given to purchase account is wrong as it should have
been given to the Vehicle Account.
Two-sided Errors
Goods purchased from ABC, wrongly recorded in sales register of Rs 25000
Q. Rs 15,000 was paid as wages to a worker called
'Bahadur Singh'. However, the same was debited to
his personal account. Which account will be credited?

A. Salary A/c
B. Bahadur Singh’s A/c
C. Bank A/c
D. Wages A/c

ANS : B
Q. Which of the following is an example of error of
commission?
1. Credit sales to Govind was posted to his account
as Rs. 1,000 instead of 10,000.
2. Goods of Rs. 500 were purchased from Rohan, but
instead it was posted in Mohan’s account.

A. Only 1
B. Only 2
C. Both 1 & 2
D. None

ANS : C
Q. If there is a difference in the two columns of a trial
balance, a separate account is created to put in the
balance amount. What is the name of this account?

A. Difference A/C
B. Suspense A/C
C. Error A/C
D. Omission A/C

ANS : B
A new account called the Suspense Account is
formed and the discrepancy in amount is placed in
this account if there is a difference of some amount
between the totals of the columns of the Trial
Balance.
One-sided Errors
Rent paid Rs 1000 posted as Rs 10000
The owner of a business has wrongly debited the stationary account for an amount
of Rs. 5000, which was withdrawn for personal use. Which account will be debited
in the rectification journal entry?
Q. Which of the following transactions will be
included in a cash book?
I: Cash sales of Rs. 10,000
II: Purchases of Rs. 50,000
III: Credit sales of Rs. 30,000

A. I & II
B. II & III
C. I & III
D. I, II, & III

ANS : A
➢ A cash book is a record of transactions which involve
cash receipts and payments. A cash book records only
cash transactions, and all receipts are recorded on the
debit side, while the payments are on the credit side.
➢ The cash book records one aspect of the transaction
only, which is cash.
➢ Cash sales of Rs. 10,000 and purchases worth Rs. 50,000
will be recorded in the cash book, however, credit sales
will not be recorded.

➢ If the sales are done on credit, they are recorded in the

sales journal or the sales daybook.
Q. A debtor, Suresh, owed Rs. 5000 but became
insolvent, and he pays 50 paise for a rupee in full
settlement. Which of the following accounts will be
debited?

A. Cash A/C
B. Bad Debt A/C
C. Suresh A/C
D. Both Cash & Bad Debt A/C

ANS : D
Q. The rule of “Debit what comes in and Credit
what goes out” applies to which of the following
accounts?

A. Real A/c
B. Personal A/c
C. Nominal A/c
D. Artificial Personal A/c

ANS : A
JAIIB OCTOBER | 2100 MCQs | AFM Module A | Class 4
Module A 05 : Class - 5/5

By - Mahesh Sir
Q. Which of the following functions of the back office can be
grouped into ‘e-banking’?

I: Mobile Banking
II: Calculation of EMIs
III: Transaction processing
IV: Card based payments

A. I & II
B. II & III
C. III & IV
D. I & IV

ANS : D
e-Banking
The functions that can be grouped into ‘e-banking’
category are:
➢Mobile Banking
➢Card based payments
➢Handling transactions conducted through internet
Q. Which of the following items are recorded in the Suspense A/c?

A. Amounts whose precise nature is yet to be determined

B. Losses due to frauds or adjustment that is awaiting
C. All of the above
D. None of the above

ANS : C
Suspense Account
A suspense account comes under the ‘other assets’ in the
balance sheet, and is used to temporarily record
transactions:
➢Amounts whose precise nature is yet to be determined
➢Losses due to frauds or adjustment that is awaiting
➢Debit balances arising from payment of interest warrants
pending reconciliation of amounts deposited by a
company
Q. Which of the following audits includes an examination of
financial statements for its use in court as evidence?

A. Stock & Receivables Audit

B. Forensic Audit
C. Revenue Audit
D. Tax Audit

ANS : B
Forensic Audit
A forensic audit is a review and assessment of
financial data from a company for use as evidence
in a court of law.

To prosecute a party for fraud, embezzlement, or

other financial accusations, a forensic audit may be
performed.
Q. Which of the following audit reports has to be issued by
Statutory Auditors?

I: Statutory Audit Report

II: Long Form Audit Report
III: Tax Report

A. Only I
B. I & II
C. I & III
D. I, II & III

ANS : D
Statutory Audit
Statutory Audit is made up of the word statute, which is
another word for regulation. Thus, it is clear that the
statutory audit is a required audit as specified by the
Banking Regulation Act of 1949.
The reports that a Statutory Auditors that have to be issued
are:
1. Statutory Audit Report
2. Long Form Audit Report
3. Tax Report
Q. Which of the following statements is correct in the context of the
Balance Sheet Equation?

A. The sum total of balance of reserves & surplus and capital is the net
worth of a business.
B. Conversion of loan into equity results in change of only assets.
C. Repayment of loan results in a change in liabilities, however, the
total liabilities are the same.
D. All the statements are correct.

ANS : A
Balance Sheet Equation
➢The net worth of a business is a sum total balance of reserves
& surplus and capital. Net worth is the liability of a business
entity towards its owners.

➢The second statement is incorrect as conversion of loan into

equity results in only change in liabilities, with total liabilities
remaining the same.

➢The third statement is also incorrect as repayment of loan

affects both assets and liabilities.
Q. Which of the following methods of valuation of inventories is
permitted by the IND AS 2?

I: LIFO
II: FIFO
III: Weighted Average Cost Method

A. I & II
B. II & III
C. I & III
D. I, II & III

ANS : B
Q. Which of the following items does not appear on the credit side
of the P&L Appropriation A/c?

A. Net profit of the year

B. Transfer to general reserve
C. Amount withdrawn from general reserve
D. Balance of surplus bought from previous year

ANS : B
Credit & Debit side of the P&L A/c
The credit side of the P&L Appropriation account contains the following:
➢ Balance of surplus bought from previous year
➢ Net profit of the year
➢ Amount withdrawn from general reserve
➢ Income tax provision that is no longer required or excess provision that is
written back
Debit side contains the following:
➢ Debenture Redemption Reserve
➢ Transfer to reserve
➢ Transfer to dividend
➢ Dividend Distribution Tax
➢ Income tax provided for previous year
➢ Surplus to balance sheet
Q. As there are many causes of depreciation like wear and tear of
assets, obsolescence, accident, fall in market price, and efflux of time,
what is the meaning of efflux of time?

A. An invention or permanent change of demand

B. Mere passage of time fall in the value of assets even in not in use
C. Due to technology change fall in demand
D. Change in value of land due to government rules

ANS : B
Efflux of Time
Efflux of time is a cause of depreciation in which the value of
assets is decreased due to a natural passing of time rather than
from a specific action or event even not in the use of fixed assets
of the company.

For example, if we take a car and it is not in use for more than 1
year, its value automatically decreases.
Q. On 1st January 2020, ABC ltd Purchased machinery for
Rs. 1,00,000 and spent Rs. 4000 on its carriage and
Rs.8000 on its installation. Its useful life is 10 years and its
scrap value is Rs.12000. What is the depreciation value
every year in the straight line method?

A. Rs 7000
B. Rs 10,000
C. Rs 12,000
D. Rs 15,000

ANS : B
Written Down Depreciation
The original cost of machinery-10000
Additional charge= Installation charge + Carriage charge
= 8000+4000
= 12000
Hence Cost of the machine = 1,12,000
Scrap Value=12000
Depreciable amount=100000
Now every year depreciation = 100000/10
=Rs. 10,000/ per year
Q. Assets purchased by a company of Rs. 20,000 for
every rate of depreciation in 20%, what is the
depreciation amount in 3 years by Written Down
Value method?

A. 2250
B. 2260
C. 2550
D. 2560

ANS : D
Written Down Depreciation
As we know in the Written down value method, the annual
depreciation is previous year assets value x percentage of
depreciation
1st year depreciation = 20000 X 20/100
= 4000
2nd year assets value = 20000-4000 = 16000
2nd year depreciation = 16000 X 20/100
= 3200
3rd year assets value = 16000-3200
= 12800
Hence 3rd year depreciation = 12800 X 20/100
= 2560
Q. Which of the following are the most commonly used
instruments of credit?

A. Bill of Exchange
B. Promissory Notes
C. Both A & B
D. None of the above

ANS : C
Solution
• In a business, credit transactions play a very important
role. For manufacturing goods, a manufacturer purchases
raw materials, the majority of which will be on credit.
And the credit is generally provided by obtaining a written
document called Instrument of Credit.
• The most commonly used instruments of credit are Bill of
Exchange & Promissory Notes. Both instruments come
under the preview of the Negotiable Instruments Act 1881
so there is no counterparty risk involved.
Q. Which of the following statements is/are incorrect
with regard to the Bill of Exchange?

A. It is a written documents
B. It is sign by maker
C. It contain an unconditional order
D. It is defined under section 6 of the Negotiable
Instrument Act 1881

ANS : D
Solution
• Bill of Exchange is a negotiable instrument defined under
section 5 of the Negotiable Instrument Act 1881.
• As per section 5 of NI Act, it is defined as; A “bill of
exchange” is an instrument in writing containing an
unconditional order, signed by the maker, directing a
certain person to pay on demand or at fixed or
determinable future time a certain sum of money only to,
or to the order of, a certain person or to the bearer of the
instrument.
•
Q. Which of the following considers Revenue expenditure?

1. Furniture of the book value of 20000 Rs

2. Temporary was constructed costing 30000 Rs These are necessary for the
construction of the new building and were demolished when the buildings
were ready.
3. Replacement of the old machine with a new machine.

Which of the given statement is correct?

A. Only 1 is correct
B. Only 3 is correct
C. All are correct
D. None of the above
ANS : D
Solution
Expenditure involves all day-to-day expenses needed to operate
a business, such as sales salaries, rent, office supplies, and
utilities is called revenue expenditure. There are many examples
of revenue expenditures such as administrative overhead
research and development, accounting frameworks, etc.
Q. An expense which is incurred while accounting
period, it will keep showing its benefits over the period
of two to three years?

A. Capital Expenditure
B. Revenue Expenditure
C. Deferred Revenue Expenditure
D. All, the above

ANS : C
Deferred Revenue Expenditure is an expense which is incurred
while accounting period and the result and benefits of this
expenditure are obtained over the multiple years in the future.

For example, revenue used for advertisement is deferred

revenue expenditure because it will keep showing its benefits
over the period of two to three years.
Q. Freight expenses for moving new machinery to factory
comes under which kind of expenses?

A. Revenue expenses
B. Deferred revenue expenditure
C. Capital expenditure
D. None of the above

ANS : C
Q. Which of the following statements is incorrect in the
context of a trial balance?

A. It is a record of the final ledger balance of all accounts

and has a debit & credit column.
B. It helps in the preparation of the Balance Sheet and
Profit and Loss Account.
C. The primary goal of this statement is to verify the
accuracy of commercial transactions in a company's
ledgers.
D. All the above statements are correct.

ANS : D
A trial balance is a report that lists all ledger
account balances, whether they are debit or
credit, as of a specific date.

Thus, a summary of all ledger accounts can

be called the trial balance.
Q. The owner of a business has wrongly debited
the stationary account for an amount of Rs. 5000,
which was withdrawn for personal use. Which
account will be debited in the rectification journal
entry?

A. Travelling Expenses A/c

B. Drawings A/c
C. Bank A/c
D. Cash A/c

ANS : B
Q. Which of the following is an example of error of
commission?
1. Credit sales to Govind was posted to his account
as Rs. 1,000 instead of 10,000.
2. Goods of Rs. 500 were purchased from Rohan, but
instead it was posted in Mohan’s account.

A. Only 1
B. Only 2
C. Both 1 & 2
D. None

ANS : C
Q. If there is a difference in the two columns of a trial
balance, a separate account is created to put in the
balance amount. What is the name of this account?

A. Difference A/C
B. Suspense A/C
C. Error A/C
D. Omission A/C

ANS : B
A new account called the Suspense Account is
formed and the discrepancy in amount is placed in
this account if there is a difference of some amount
between the totals of the columns of the Trial
Balance.
Q. Which of the following transactions will be
included in a cash book?
I: Cash sales of Rs. 10,000
II: Purchases of Rs. 50,000
III: Credit sales of Rs. 30,000

A. I & II
B. II & III
C. I & III
D. I, II, & III

ANS : A
➢ A cash book is a record of transactions which involve
cash receipts and payments. A cash book records only
cash transactions, and all receipts are recorded on the
debit side, while the payments are on the credit side.
➢ The cash book records one aspect of the transaction
only, which is cash.
➢ Cash sales of Rs. 10,000 and purchases worth Rs. 50,000
will be recorded in the cash book, however, credit sales
will not be recorded.

➢ If the sales are done on credit, they are recorded in the

sales journal or the sales daybook.
Q. “Earnings Per Share” comes under
which Accounting Standard?
A. AS 15
B. AS 20
C. AS 23
D. AS 25

ANS : B
AS-20
• Principles & determination of earnings per share

• Comparison between enterprises.

• Net profit (loss)/ weighted average number of

shares.
Q. Which of the following Ind AS is related to

Income Taxes?

A. IND AS 12
B. IND AS 16
C. IND AS 19
D. IND AS 23

ANS : A
➢IND AS 12 is related to Income taxes
➢IND AS 16 is related to Property, Plant and
Equipment
➢IND AS 19 is related to Employee Benefit.
➢IND AS 23 is related to Borrowing cost
Q. Which of the following statement is/are correct regarding
Real Accounts?
A. All assets of a firm, which are tangible or intangible, fall
under the category of ‘Real Accounts’.
B. These are the accounts of all the assets and liabilities of
the organization.
C. We do not close these accounts at the end of the
accounting year and appear in the Balance Sheet.
D. All the above
ANS : D
Q. The overdraft balance in the bank passbook is Rs. 15,000.
A cheque is issued of Rs. 5,000 by the firm but it has not
been presented for payment so far. Which of the following is
the balance as per cash book of the firm?

A. Rs. 10,000 Favourable Balance

B. Rs. 20,000 Overdraft Balance
C. Rs. 10,000 Overdraft Balance
D. Rs. 20,000 Favourable Balance