MCQ Cma

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Chapter – 1
Introduction to Financial Accounting
Past year Questions

1. Computers taken on hire by a business for a period of twelve months should be
classified as:
(A) Current assets
(B) Intangible assets
(C) Deferred revenue expenditure
(D) Not an asset June 2021
2. Provisions are ........................

(A) Nominal accounts
(B) Personal accounts
(C) Real accounts
(D) Representative personal accounts June 2021
3. The original cost at which an asset or liability is acquired is known as .............

(A) Carrying cost
(B) Replacement cost
(C) Amortization
(D) Historical cost June 2021
4. Current Assets are those assets:

(A) Which can be converted into cash within 12 months
(B) Which can be converted into cash within a period normally not exceeding 12 months
(C) Which can be converted into cash within an operating cycle which normally does
not exceed 12 months.
(D) Which are held for their conversion into cash within an operating cycle or a period
of 12 months Dec 2020
5. Financial statements are used by:

(A) Investors
(B) Creditors
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(C) Regulators
(D) All of the above Dec 2020
6. A person who owes money to the business is a ..................

(A) Debtor
(B) Creditor
(C) Investor
(D) Promoter Dec 2020
7. Mines as asset is an example of:

(A) Current Asset
(B) Vesting Asset
(C) Fictitious Asset
(D) Intangible Asset Dec 2019
8. The following is not an advantage of Double entry system:

(A) It prevents and minimizes frauds.
(B) Helps in decision making
(C) The trial balance doesn’t disclose certain types of errors
(D) It becomes easy for the Government to calculate the tax Dec 2019

ANSWER KEY
1. D
2. A/B/C
3. D
4 D
5. D
6. A
7. B
8. C

Chapter – 2
Introduction to Corporate Accounting
Past year Questions

1. The arrangement of assets and liabilities in accordance with a particular order is
known as .................. of balance sheet.
(A) Tallying
(B) Marking
(C) Ruling
(D) Marshalling June 2021
2. ................... shall mean any amount written off or retained by way of providing for
depreciation, renewals or diminution in value of assets, or retained by way of
providing for any known liability of which the amount cannot be determined with
substantial accuracy.
(A) Provision
(B) Reserves
(C) Appropriation
(D) Transfer June 2021
3. Which of the following is capital reserve?

(A) Profit prior to incorporation
(B) Profit on sale of fixed assets
(C) Profit on reissue of forfeited shares
(D) All of the above June 2021
4. As per the provisions of the Companies Act, 2013, companies must maintain their
accounts under ............................
(A) Double account system
(B) Single entry system
(C) Double entry system
(D) Duplicate account system June 2021
5. The figures appearing in the Financial Statements may be rounded off to the nearest
crore, only if Turnover is ..............

(A) less than Rs.100 crore

(B) Rs.100 crore or more
(C) more than Rs.100 crore
(D) more than Rs.500 crore Dec 2020
6. Provision is:
(A) an unknown liability but its amount and due date are determinate
(B) an unknown liability and its amount and due date are indeterminate
(C) a known liability and its amount and due date are determinate
(D) a known liability but its amount and due date are indeterminate Dec 2020
7. A balance sheet has two parts to it, i.e.

I. Equity and Liabilities and
II. ........................................
(A) Shareholder’s fund
(B) Trade receivables
(C) Inventories
(D) Assets Dec 2020
8. The words ‘To Balance b/f’ or ‘By Balance b/f’ are recorded in the ‘Particulars
Column’ at the time of posting of:
(A) all compound entries
(B) an opening entry
(C) a closing entry
(D) an adjusting entry Dec 2020
9. Loans from banks repayable on demand will be classified in the Balance Sheet of a
company as:
(A) Short-term borrowings
(B) Long-term borrowings
(C) Other Current Liabilities
(D) Other Long-term Liabilities Dec 2020
10. In the Balance Sheet of a company which item shall be sub-classified as:
(i) Secured, considered good;
(ii) Unsecured, considered good;

(iii) Doubtful.
(A) Long-term and Short-term Trade Receivables
(B) Long-term loans and advances
(C) Short-term loans and advances
11. At the time of preparation of Balance Sheet, Capital Work-in-progress is shown in

the head of:
(A) Share Capital
(B) Non-current Liabilities
(C) Current Assets
(D) Non-current Assets Dec 2019
12. A simplified financial statement that shows how much wealth has been created by a
company is called...............
(A) Income statement
(B) Statement of profit and loss
(C) Value added statement
(D) Economic value added Dec 2019
13. As per Companies Act, 2013, the prescribed form of Balance Sheet of a Company is
given in:
(A) Part II of Schedule III
(B) Part I of Schedule III
(C) Part I of Schedule II
(D) Part I of Schedule V Dec 2019

ANSWER KEY
1 D
2 A
3 D
4 C
5 B
6 D
7 D
8 B
9 A
10 D
11 D
12 C
13 B

Chapter – 3 & 5
Accounting for Share Capital
Past year Questions

1. Unmarked application has to be distributed to underwriters in the ratio of
...................
(A) Gross Liability Ratio
(B) Last Agreed Ratio
(C) Net Liability Ratio
(D) Equal Ratio June 2021
2. Applications bearing the stamp of the respective underwriter are called as .............
(A) Firm applications
(B) Stamped applications
(C) Underwritten application
(D) Marked applications June 2021
3. Underwriting is a contract of:

(A) Indemnity
(B) Bailment
(C) Guarantee
(D) Pledge June 2021
4. There shall be a minimum vesting period of .................. in case of Employee Stock

Option Scheme (ESOS).
(A) 3 months
(B) 1 year
(C) 6 months
(D) 3 years June 2021
5. Where the right to obtain Shares or Stock options expires unexercised, the balance
standing to the credit of Employee Stock Option Outstanding A/c should be
transferred to:
(A) Profit & Loss A/c

(B) General Reserve A/c

(C) Share Based Payment Reserve A/c
(D) Securities Premium A/c June 2021
6. Under the ............... employees are given an option to purchase shares on the spot at
a discount price.
(A) Employees Stock Purchase Scheme
(B) Employee Stock Option Scheme
(C) Stock Appreciation Rights Scheme
(D) Preferential Allotment Scheme June 2021
7. ‘‘Interest accrued & due on debentures’’ is shown ...................... .

(A) Under debentures
(B) As other current liabilities
(C) As provisions
(D) As a reduction of bank balance June 2021
8. As per Section 68 of the Companies Act, 2013, post buyback, debt equity ratio should
not exceed ....................
(A) 1
(B) 1.5
(C) 2
(D) 3 June 2021
9. Where a company buys back own shares or other specified securities, it shall
extinguish and physically destroy the shares or securities so brought back within
............... of the last date of completion of buy-back?
(A) 3 days
(B) 8 days
(C) 7 days
(D) 9 days June 2021
10. Declaration of solvency in relation to buy back of shares has to be filed in .............
(A) Form SH-6
(B) Form SH-9
(C) Form SH-4
(D) Form SH-8 June 2021

11. Paid-up equity shares capital of Novel Ltd. is Rs. 50,00,000 having face value of Rs.10
each fully paid-up. Other details: General Reserve = Rs. 15,00,000 Capital
Redemption Reserve = Rs. 4,00,000 Profit & Loss Account = Rs. 1,00,000 Statutory
Reserve = Rs. 6,40,000 Securities Premium = Rs. 1,00,000 The board of directors
passed resolution in board meeting to buy back maximum number of shares as
allowed by law. What is the maximum no. of shares that can be bought back?
(A) 55,000 shares
(B) 67,000 shares
(C) 1,25,000 shares
(D) 78,000 shares June 2021
12. Negi Ltd. had 90,000 equity shares of Rs. 100 each, fully paid up. The company
decided to buy back 10% shares at par by the issue of sufficient number of
preference shares. Company do not have any reserves. How much preference shares
are required to be issued, if new preference shares are to be issued at Rs. 10 each?
(A) 9,00,000 shares
(B) 90,000 shares
(C) 1,00,000 shares
(D) 1,20,000 shares June 2021
13. Which of the following cannot be used for the purpose of creation of capital
redemption reserve account?
(A) Profit and Loss A/c (credit balance)
(B) General Reserve A/c
(C) Dividend Equalization Reserve A/c
(D) Unclaimed Dividends A/c June 2021
14. According to section 52 of the Companies Act, 2013, the amount in the Securities
Premium A/c cannot be used for the purpose of:
(A) Issue of fully paid bonus shares
(B) Writing off losses of the company
(C) For purchase of own securities
(D) Writing off commission or discount on issue of shares June 2021
15. Which of the following statements is correct?

(A) Preference shares and debentures have priority right for a reward over ordinary
shares

(B) Debentures will not receive interest in a year when the company makes an operating
loss
(C) Preference shares will get dividend only when ordinary shares too receive them
(D) Ordinary shares could be paid dividend even when a company has negative
retained earnings June 2021
16. Capital Redemption Reserve Account may be applied to issue ...................

(A) Right shares
(B) Bonus debentures
(C) Bonus to employees of the company
(D) Bonus shares June 2021
17. Preference shares amounting to Rs. 2,00,000 are redeemed at a premium of 5% by

issue of equity shares amounting to Rs. 1,00,000 at a premium of 10%. What is the
amount to be transferred to capital redemption reserve?
(A) Rs. 1,05,000
(B) Rs. 1,00,000
(C) Rs. 2,00,000
(D) Rs. 1,11,000 June 2021
18. J Ltd. had 3,000, 12% Redeemable Preference Shares of Rs.100 each, fully paid up.
The company issued 25,000 equity shares of Rs. 10 each at par and 1,000 14%
Debentures of Rs. 100 each. The amount to be transferred to Capital Redemption A/c
will be .....................
(A) Nil
(B) Rs. 50,000
(C) Rs. 2,00,000
(D) Rs. 3,00,000 June 2021
19. The notice relating to offer for right issue shall be dispatched through registered post
or speed post or through electronic mode to all the existing shareholders at least .......
before the opening of the issue.
(A) 3 days
(B) 5 days
(C) 7 days
20. If company makes bonus issue at 2:3, then it means:

(A) For every two shares three bonus shares will be allotted
(B) For every three shares two bonus shares will be allotted
(C) For every five shares three bonus shares will be allotted
(D) For every five shares two bonus shares will be allotted June 2021
21. .............. are shares issued by a company free of cost to its existing shareholders.
(A) Right shares
(B) Bonus shares
(C) Stock options
(D) Warrants June 2021
22. ........... refers to that part of the authorized capital which has actually been offered to
the public for subscription.
(A) Called up capital
(B) Subscribed capital
(C) Issued capital
(D) Nominal or authorized capital June 2021
23. Premium on issue of shares must be treated as ........................

(A) Revenue Receipt
(B) Deferred Revenue Receipt
(C) Capital Receipt
(D) Capital Loss June 2021
24. Premium on issue of shares must be credited to a separate account called ..................
(A) Share Premium Account
(B) Securities Premium Account
(C) Discount on Issue of Shares
(D) Securities Profit Account June 2021
25. Which of the following is correct?

(A) The company shall not issue sweat equity shares for more than 15% of the existing
paid up equity share capital in a year or shares of the issue value of rupees five
crore, whichever is higher.
(B) The company shall not issue sweat equity shares for more than 15% of the existing
paid up equity share capital in a year or shares of the issue value of rupees 5 crore,
whichever is lower.

(C) The company shall not issue sweat equity shares for more than 25% of the existing
whichever is higher.
(D) The company shall not issue sweat equity shares for more than 25% of the existing
whichever is lower. Dec 2020
26. The Escrow account under Regulation 9(xi) of SEBI (Buy back of securities)
Regulations, 2018 does not include:
(A) Cash deposited with a scheduled commercial bank
(B) Bank guarantee in favour of the merchant banker
(C) Deposit of acceptable securities with appropriate margin, with the merchant banker
(D) Deposits of acceptable securities with appropriate margin,
with the company Dec 2020
27. If the Articles of Association are silent regarding interest on calls-in-arrears, the
minimum rate of interest which can be charged on calls-in-arrears is:
(A) 12% p.m.
(B) 10% p.a.
(C) 12% p.a.
(D) None of the above Dec 2020
28. The maximum amount of capital a company can issue is called .............
(A) Issued Capital
(B) Paid up Capital
(C) Authorized Capital
(D) Called up Capital Dec 2020
29. Share Options Outstanding Account will be shown in the Balance Sheet of a
company under the heading
(A) Share Capital
(B) Reserves & Surplus
(C) Non-current Liabilities
(D) Current Liabilities Dec 2020
30. Forfeited shares can be re-issued at ..........

(A) Par

(B) Premium
(C) Discount
(D) Any of the above Dec 2020
31. Saket Ltd. purchased a machinery worth Rs.1,20,000 and building worth Rs.2,00,000
from Rashmi Ltd. for an agreed purchase consideration of Rs.3,00,000 to be satisfied
by the issue of 3,000, 10% debentures of Rs.100 each. Calculate the amount to be
transferred to capital reserve A/c:
(A) Rs. 10,000
(B) Rs. 20,000
(C) Rs. 30,000
(D) Rs. 40,000 Dec 2020
32. No issue of bonus shares shall be made by a company out of:

(A) Its free reserves
(B) The securities premium account
(C) Capitalizing reserves created by revaluation of assets
(D) The capital redemption reserve account Dec 2020
33. Preliminary expense is a ............ asset.

(A) Current
(B) Fixed
(C) Tangible
(D) Fictitious Dec 2020
34. Shiva Ltd. forfeited 4,500 equity shares of Rs. 10 each (which are issued on 40% pro-
rata (basis) for non-payment of allotment @ Rs. 6 (including premium of Rs. 2.50)
and first and final call Rs. 3 per share. If the excess money received on application is
used for receiving the amount due as securities premium, what amount should be
credited to ‘Shares Forfeited Account’?
(A) Rs. 15,750
(B) Rs. 28,125
(C) Rs. 39,375
(D) Rs. 13,500 Dec 2019
35. P Ltd. forfeited 5,000 equity shares of Rs. 10 each for non-payment of first and final
call of Rs. 2.50 per share which were issued at a premium of Rs. 3 per share

receivable at allotment. Out of these, 3,200 shares are re-issued at Rs. 8 per share as
fully paid up. The amount transferred to Capital Reserve will be:
(A) Rs. 37,500
(B) Rs. 31,100
(C) Rs. 24,000
(D) Rs. 17,600 Dec 2019
36. C Ltd. invited applications for the issue of 20 Lakh equity shares of Rs. 10 each
payable Rs. 3 on application and Rs. 7 on allotment. Applications were received for
35 Lakh equity shares. Applications for 7 Lakh shares were rejected and prorata
allotment was made to remaining applicants. Excess application money was
adjusted on the sums due on allotment. Ravi could not pay allotment money on his
2500 allotted shares. The amount received on allotment will be:
(A) Rs. 1,39,92,500
(B) Rs. 1,15,92,500
(C) Rs. 1,04,86,880
(D) Rs. 1,15,85,500 Dec 2019
37. Rule 17 of the Companies (Share Capital and Debenture) Rule, 2014, is related to:
(A) Issue of right shares
(B) Buy-back of shares or other securities
(C) Issue of sweat equity shares
(D) Employee stock option plan Dec 2019
38. In case of buy-back of shares, passing of the special resolution is not required if:
(A) the buy-back is 10% or less of the total paid-up equity capital of the company
(B) the buy-back is 25% or less of the total paid-up equity capital of the company
(C) the buy-back is 10% or less of the total paid-up equity capital and free reserves of the
company
(D) the buy-back is 25% or less of the total paid-up equity capital and free reserves of the
company Dec 2019
39. For the companies whose financial statements comply with the accounting standards
as prescribed in Section 133 of the Companies Act, 2013, the premium payable on
redemption of preference shares shall be provided out of:
(A) the profits of the company only
(B) the securities premium only
(C) any of either profits of the company or securities premium

(D) none of the above Dec 2019
40. The Capital Redemption Reserve Account may be used by the company:
(A) In the issue of fully paid-up bonus shares
(B) In conversion of partly paid-up shares into fully paid-up
(C) In writing off the preliminary expenses of the company
(D) In distribution of dividend among shareholders Dec 2019
41. A company offered 2,50,000 equity shares to public for subscription. 70% of public
issue was underwritten by G. Her firm underwritten was for 40,000 shares. Public
subscribed for 1,30,000 shares. What is the net liabilities of G if as per underwriting
agreement no credit is given to underwriter G for her firm underwritten shares?
(A) 4,000 Shares
(B) 85,000 Shares
(C) 96,000 Shares
(D) 56,000 Shares Dec 2019
42. Every buy-back shall be completed within a period of ............. from the date of the
resolution or special resolution, as the case may be, passed by the Board.
(A) One month
(B) Three months
(C) Six months
(D) One year Dec 2019
43. Written down value of a machine as on 31st March 2019 is Rs. 6,65,558. Rate of
depreciation on the basis of written down value method is 15%. What will be the
cost of this machine purchased on 1st April, 2014?
(A) Rs. 15,00,000
(B) Rs. 12,00,000
(C) Rs. 10,00,000
(D) Rs. 8,00,000 Dec 2019
44. Equity holder of a company who does not have the voting control of the company,
by virtue of his or her below fifty percent ownership of the company’s equity capital,
termed as:
(A) Small shareholder
(B) Minority shareholder

(C) (A) or (B) Both

(D) None of these options Dec 2019
45. The term ‘Calls in Arrears’ is shown in the company’s balance sheet:
(A) Under current liabilities
(B) Under current assets, loans and advances
(C) As deducted from called up capital
(D) Non-current liabilities Dec 2019
46. At the time of forfeiture of shares the share capital account will be:
(A) Debited with paid up value of share forfeited
(B) Debited with called up value of shares forfeited
(C) Debited with face value of shares forfeited
(D) Debited with issue price of shares forfeited Dec 2019
47. The loss/discount on re-issue of forfeited shares may be:

(A) Equal or exceed the forfeited amount
(B) Not exceed the forfeited amount
(C) Equal to amount of premium which were received at the time of original issue
(D) Not exceed the called up value of shares Dec 2019
48. When the forfeited shares were originally issued at premium, the maximum
permissible discount on re-issue shall be:
(A) The amount of premium at time of original issue
(B) The amount credited to forfeited shares account
(C) The face value of forfeited shares
(D) The called up value of forfeited shares Dec 2019
49. Z Ltd. issued 5,000 equity shares of Rs. 10 each at 10% premium which is payable on
allotment. The company received application money @Rs. 3 per share and allotment
money received on only 4,500 shares @Rs. 4 per share. The company forfeited 500
shares for non-payment of allotment money. At the time of forfeiture, the Equity
Shares Capital a/c will be:
(A) Debited with Rs. 5,000
(B) Debited with Rs. 3,500
(C) Debited with Rs. 3,000
(D) Credited with Rs. 3,500 Dec 2019

ANSWER KEY
1. A 26. D
2. D 27. D
3. B 28. C
4 B 29. B
5. B 30. D
6. A 31. B
7. B 32. C
8. C 33. D
9. C 34. B
10. B 35. D
11. B 36. D
12. B 37. B
13. D 38. C
14. B 39. A
15. A 40. A
16. D 41. D
17. B 42. D
18. B 43. A
19. A 44. B
20. B 45. C
21. B 46. B
22. C 47. B
23. C 48. B
24. B 49. C
25. A

Chapter – 4
Accounting for Debentures
Past year Questions
1. Discount on issue of debentures is a:

(A) Revenue loss to be charged in the year of issue
(B) Capital loss to be written off from capital reserve
(C) Capital loss to be written off over the tenure of the debentures
(D) Capital loss to be shown as goodwill June 2021
2. Tax deducted at source on interest on debenture is shown as ......................

(A) Expense
(B) Asset
(C) Liability
(D) Income June 2021
3. T Ltd. purchased machinery from N Company for a book value of Rs. 4,00,000. The
consideration was paid by issue of 10% debentures of Rs. 100 each at a premium of
25%. The debenture account was credited with .............................
(A) Rs. 4,00,000
(B) Rs. 5,00,000
(C) Rs. 3,20,000
(D) Rs. 4,80,000 June 2021
4. K Ltd. issued 5,000, 12% debentures of Rs. 100 each at a premium of 10%, which are
redeemable after 10 years at a premium of 20%. The amount of loss on redemption of
debentures to be written off every year is ......................
(A) Rs. 80,000
(B) Rs. 40,000
(C) Rs. 10,000
(D) Rs. 8,000 June 2021
5. Which of the following is not a method of redemption of debentures?

(A) By payment in lumpsum

(B) By payment is Instalments

(C) By purchase in open market
(D) By conversion into short term loans Dec 2020
6. Every company required to create/maintain Debenture Redumption Reserve shall

before the 30th day of April of each year, deposit or invest (as the case may be) at
least ............ % of the amount of its debentures maturing during the year ending on
the 31st day of March next year in the prescribed mode.
(A) 5
(B) 10
(C) 15
(D) 25 Dec 2020
7. Neel Ltd. purchased a building worth Rs. 99,00,000 and issued 12% Debentures of
Rs. 100 each at a premium of 10%. What will be the amount of premium?
(A) Rs. 8,00,000
(B) Rs. 9,90,000
(C) Rs. 9,00,000
(D) Rs. 10,00,000 Dec 2020
8. Five years ago X Ltd. had issued 12% Debentures of 30 lakh (redeemable in six equal
annual Installments). These Debentures will be shown in the Balance Sheet of a
company under the heading:
(A) Non-current Assets
(B) Non-current Liabilities
(C) Current Assets
(D) Current Liabilities Dec 2020
9. The entry - ‘‘Debentures Suspense A/c Dr., To Debentures A/c’’ can be passed/ done:
(A) On the issue of debentures for the consideration other than cash.
(B) On the issue of debentures as collateral security.
(C) For rectification of the error relating to balance of debentures account.
(D) On the issue of debentures at discount but redeemable at premium. Dec 2019
10. C Limited issued 8% Debentures of Rs. 65,00,000 at 5% discount which are

redeemable at a premium of 10%. On recording the transaction ‘‘Loss on Issue of
Debentures Account’’ will be:

(A) Debited by Rs. 3,25,000

(B) Debited by Rs. 6,50,000
(C) Debited by Rs. 9,75,000
(D) Credited by Rs. 3,25,000 Dec 2019
11. M Ltd. issued 8% Debentures of Rs. 60 Lakh on 1st January, 2019 at a discount of
10%. The debentures are redeemable in three equal instalments of Rs. 20 Lakh each
payable on 31st December every year. The amount of discount to be written at the
end of the year on 31st March, 2021, will be:
(A) Rs. 2,00,000
(B) Rs. 1,00,000
(C) Rs. 1,50,000
(D) Rs. 1,75,000 Dec 2019
12. S Ltd. had issued 80,000, 8% Debentures of Rs. 100 each redeemable on 31st
December, 2019 at a premium of 20%. The company offered three options to
debentureholders, out of which one is to convert their holdings into equity shares of
Rs. 10 each at a premium of Rs. 3.50 per share. This offer was accepted by the holders
of 49,275 debentures. For this, number of equity shares issued will be:
(A) 4,38,000
(B) 5,91,300
(C) 3,65,000
(D) 7,98,255 Dec 2019
13. G Ltd. has 8,00,000, 12% Debentures of Rs. 100 each. During the year 2018-2019 the
company purchased its own debentures from the open market for immediate
cancellation are as follows : (i) Aug. 1, 2018 : 15000 Debentures @ Rs. 95.50 (ex-
interest) (ii) Jan. 1, 2019 : 25000 Debentures @ Rs. 101.50 (cum-interest) If debenture
interest is payable on 30th September and 31st March every year, then the amount of
profit or loss on cancellation of debentures will be:
(A) Rs. 30,000 (Profit)
(B) Rs. 70,000 (Profit)
(C) Rs. 67,500 (Profit)
(D) Rs. 1,05,000 (Profit) Dec 2019
14. The profit on cancellation of debentures should be transferred to:

(A) Securities Premium A/c
(B) Statement of profit and Loss

(C) General Reserve A/c

(D) Capital Reserve A/c Dec 2019

ANSWER KEY
1. C
2. C
3. C
4 C
5. D
6. C
7. C
8. D
9. B
10. B
11. A
12. A
13. D
14. D

Chapter – 6
Financial Statements Interpretation
Past year Questions
1. CSR and corporate governance represent a ............... between business and society.
(A) Social climate
(B) Special contract
(C) Special climate
(D) Social contract June 2021
2. Provisions of Corporate Social Responsibility (CSR) are applicable to the company

having net profit of .......................
(A) Rs. 100 crore or more
(B) Rs. 75 crore or more
(C) Rs. 50 crore or more
(D) Rs. 5 crore or more June 2021
3. A corporate balance sheet is also known as:

(A) Statement of changes in assets and liabilities
(B) Statement of sources and application of funds
(C) Statement of financial condition
(D) Statement of object and reason June 2021
4. Every Company having Net Worth of Rs. .......... shall constitute a corporate social
responsibility committee of the Board.
(A) 100 crore or more
(B) 200 crore or more
(C) 500 crore or more
(D) 1000 crore or more Dec 2020
5. The Board of Directors of the Company, who has to form a Corporate Social
Responsibility Committee, shall make sure that the company spends in every
financial year, minimum ............. % of the average net profits made during the 3
immediately preceding financial years as per the CSR policy.
(A) 1

(B) 2
(C) 5
(D) 10 Dec 2020
6. In G Ltd., there is one whole-time director and three part-time directors. The
maximum rate of remuneration payable to all directors will be:
(A) 11%
(B) 8%
(C) 6%
(D) 10% Dec 2019
7. When the effective capital of a company is Rs. 100 crores and above but less than Rs.
250 crores, the maximum remuneration payable as per Part-II of Schedule V of the
Companies Act, 2013, by the company to its managerial personnel when the
company has no profits or inadequate profits, will be:
(A) Rs. 42 Lakh
(B) Rs. 84 Lakh
(C) Rs. 120 Lakh
(D) Rs. 120 Lakh plus 0.01% of the effective capital
in excess of Rs. 150 Lakh Dec 2019
8. Every company having turnover of Rs. ............ during the immediately preceding
financial year shall constitute a Corporate Social Responsibility Committee.
(A) 500 crores and more
(B) 1,000 crores and more
(C) 250 crores and more
(D) 100 crores and more Dec 2019

ANSWER KEY
1 D
2 D
3 C
4 C
5 B
6 A
7 C
8 B

Chapter – 7
Consolidation of Accounts
Past year Questions
1. What is the amount of the unrealized profit to be eliminated, if the parent’s yearend
inventory includes at Rs. 5,40,000 goods invoiced to it by its 60% owned subsidiary
at cost plus 25%?
(A) Rs. 35,000
(B) Rs. 1,08,000
(C) Rs. 64,800
(D) Rs. 81,000 June 2021
2. Pre-acquisition profit in subsidiary company is considered as:

(A) Revenue Profit
(B) Capital Profit
(C) Goodwill
(D) Cost of control June 2021
3. If cost of acquisition of shares in the subsidiary company is more than intrinsic value
of the shares of subsidiary company on the date of acquisition, then resultant figure
will be:
(A) Minority Interest
(B) Capital Reserve
(C) Goodwill
(D) Significant cost June 2021
4. On 30th June, 2018, two-third of the shares of S Ltd. (with total capital of Rs.
48,00,000) was acquired by H Ltd. The balance sheet of S Ltd. showed a debit balance
Rs. 24,00,000 on 1st January, 2018 and a credit balance of Rs. 14,40,000 on 31st
December, 2018. The investment by H Ltd. in shares of S Ltd. is Rs. 36,00,000.
Calculate the ‘‘cost of control’’ in this acquisition:
(A) Rs. 7,20,000
(B) Rs. 6,20,000
(C) Rs. 3,60,000
(D) Rs. 1,80,000 Dec 2020

5. Profit on revaluation of assets to be shown as ............ in the consolidated Balance

Sheet.
(A) General Reserve
(B) Capital Reserve
(C) Goodwill
6. Equity holder of a company who does not have the voting control of the company by
virtue of his or her below fifty percent ownership of the company’s equity capital,
termed as:
(A) Small shareholder
(B) Minority shareholder
(C) (A) or (B) Both
(D) None of these options Dec 2019
7. H Ltd. is a holding company of S Ltd. During the year 2018-19, Bills Receivable
amounted to Rs. 4,00,000, out of total bills receivable of Rs. 5,00,000 received from S
Ltd., were discounted by H Ltd. and S Ltd. had endorsed to its creditors all the bills
received from H Ltd. amounting to Rs. 3,00,000. At the end of the year the amount of
mutual debtors will be:
(A) Rs. 8,00,000
(B) Rs. 3,00,000
(C) Rs. 2,00,000
(D) Rs. 1,00,000 Dec 2019
8. On 1st April, 2019, H Ltd. purchased 16,00,000 equity shares out of 20,00,000 equity
shares of S Ltd. Following information is provided as on 31st March, 2019, by S Ltd.:
Rs. Equity Share Capital 2,00,00,000 General Reserve 45,00,000 Statement of Profit &
Loss 32,00,000 On 1st April, 2019, a machine of S Ltd. revalued by H Ltd. 25% above
its book value of Rs. 12,50,000. The amount of minority interest will be:
(A) Rs. 40 Lakh
(B) Rs. 55 Lakh
(C) Rs. 54.775 Lakh
(D) Rs. 56.025 Lakh Dec 2019
9. Holding of H Ltd. was 75% in S Ltd. Other information obtained from the books of S
Ltd. were as under:
31st March, 2019 (Rs. in Lakh)

Share Capital 150

General Reserve 25
Surplus: Statement of Profit and Loss 35
Capital Reserve 10
If the cost of investment in shares of S Ltd., for H Ltd. was Rs. 162 Lakh, the amount
of cost of control would be:
(A) Rs. 12 Lakh (Goodwill)
(B) Rs. 3 Lakh (Goodwill)
(C) Rs. 3 Lakh (Capital Reserve)
(D) Rs. 4.50 Lakh (Goodwill) Dec 2019
10. The main purpose of the preparation of consolidate statements is:

(A) the compliance of AS-21
(B) to satisfy the legal provision of the Companies Act, 2013
(C) to reflect a true and fair view of the position and the profit or loss of the holding
company ‘group’
(D) All the above Dec 2019

ANSWER KEY
1 B
2 B
3 C
4 A
5 B
6 B
7 D
8 D
9 B
10 D

Chapter – 8
Corporate Financial Reporting
Past year Questions
1. If we add ‘Cost of Capital’ to ‘Economic Value Added’ we get .....................
(A) Profit After Tax
(B) Net Operating Profit After Tax
(C) Gross Value Added
(D) Earnings before Interest and tax June 2021
2. CARO, 2016 applies to a private limited company being a subsidiary or holding

company of a public company, having a paid up capital and reserves and surplus
not more than .................. as on the balance sheet date.
(A) Rs. 5 Crore
(B) Rs. 1 Crore
(C) Rs. 2 Crore
(D) Rs. 10 Crore June 2021
3. CARO, 2016 applies to a private limited company which has a total revenue as
disclosed in Schedule III to the Companies Act, 2013 including revenue from
discoutinuing operations exceeding .......... during the financial year as per the
financial statements.
(A) Rs. 15 Crore
(B) Rs. 100 Crore
(C) Rs. 10 Crore
(D) Rs. 25 Crore June 2021
4. A copy of the financial statements and Board’s report duly adopted at the AGM shall
be filed with the Registrar within ........... of the date of AGM.
(A) 60 days
(B) 30 days
(C) 90 days

5. As per Rule 8 of the Companies (Accounts) Rules, 2014, the Report of the Board shall
contain the particulars of contracts or arrangements with related parties under
Section 188 (1) in the ..................
(A) Form AOC-1A
(B) Form AOC-2
(C) Form AOC-3
(D) Form AOC-4A June 2021
6. Which type of director should be the head of the Stakeholders Grievance

Committee?
(A) Executive director
(B) Non-executive director
(C) Seniormost director
(D) Chairman appointed for shareholder’s meetings June 2021
7. Rishabh Ltd. earns a profit after tax Rs. 3,96,000. Corporate tax is 0.4. Its capital
structure consists of equity shares Rs. 9,60,000; 15% Term Loan Rs. 4,80,000; Cost of
equity is 0.12. Its economic value added is ............
(A) Rs. 2,66,400
(B) Rs. 2,80,800
(C) Rs. 2,08,800
(D) Rs. 2,80,008 June 2021
8. CARO 2016 is applicable to:

(A) Banking Companies and Insurance Companies
(B) One Person Company and Small Companies
(C) Companies registered for Charitable Purposes
(D) Foreign Companies Dec 2020
9. Every non-listed public company must have at least one-woman director, if it has:
(A) paid up share capital of at least Rs. 100 crore
(B) turnover of at least Rs. 100 crore
(C) in aggregate, outstanding loans/ borrowings/debentures/deposits of at least Rs. 50
crore
10. The areas of corporate governance included in Companies Act, 2013 are:

(A) Independent directors and woman director and Corporate Social Responsibility
Committee
(B) Audit Committee, Internal Audit and Serious Fraud Investigation office
(C) Nomination and Remuneration Committee and Stakeholder Relationship Committee
11. Market Value Added is:

(A) = Market Value of equity – Book value of equity
(B) = Present value of all future EVA
(C) = Shareholder Value Added (SVA)
(D) = Both (A) and (B) Dec 2020
12. What is the full form of CARO?

(A) Company Account’s Repository Order
(B) Company Account’s Reports Order
(C) Company Auditor’s Report Order
(D) Company Assets Revaluation Order Dec 2020
13. Shareholder Value Added (SVA) is:

(A) = Economic profits of a business – minimum return required by all providers of
capital
(B) = Economic profits of a business – minimum return required by all Shareholders
only
(C) = Economic profits of a business – minimum return required by Equity Shareholders
only
(D) = Book value of equity – Cost of equity Dec 2020
14. Company Auditor’s Report Order, 2016, was issued by the:

(A) Institute of Chartered Accountants of India
(B) Ministry of Corporate Affairs of Government of India
(C) Comptroller and Auditor General of India
(D) Ministry of Finance of Government of India Dec 2019
15. Company Auditor's Report Order (CARO), 2016 is not applicable to:
(A) Insurance Company
(B) Company registered for charitable purpose
(C) One person company

16. As per Section 149(1) of the Companies Act, 2013, the paid-up share capital
requirement for non-listed company, having at least one woman director is:
(A) Rs. 10 crore or more
(B) Rs. 100 crore or more
(C) Rs. 1,000 crore or more
(D) Rs. 500 crore or more Dec 2019
17. As per the concept of value added statement, "Gross value Added’’ is:
(A) Distributed to employees in the form of salaries and wages, to government in the
form of taxes and duties, to financer in the form of interest.
(B) Distributed to government in the form of taxes and duties, to financer in the form of
interest, to shareholders in the form of dividend.
(C) Distributed to employees in the form of salaries and wages, to government in the
form of taxes and duties, to financer in the form of interest.
(D) Distributed to employees in the form of salaries and wages, to government in the
form of taxes and duties, to financer in the form of interest, to shareholders in the
form of dividend and the remaining balance in the form of
retained earning. Dec 2019
18. The capital structure of KC Ltd. is: Equity Share Capital Rs. 250 lakh Long-term Debt
Rs. 110 lakh Bank Overdraft Rs. 40 lakh The average rate of return on similar types
of companies is 20%, while risk-free return is 10%. Rate of interest charged by bank
is 18%. Weighted Average Cost of Capital (WACC) will be:
(A) 16%
(B) 13.55%
(C) 16.25%
(D) 17.05% Dec 2019
19. The difference between the Company’s total market value and Capital invested is a:
(A) Economic Value Added (EVA)
(B) Shareholder Value Added
(C) Market Value Added
(D) Gross Value Added Dec 2019
20. The Corporate Social Responsibility Committee shall consist of ...........directors, out
of which at least ............ director(s) shall be independent director(s).

(A) two or more; one

(B) four or more; two
(C) three or more; two
(D) three or more; one Dec 2019

ANSWER KEY
1 B
2 B
3 C
4 B
5 B
6 B
7 B
8 D
9 A
10 D
11 D
12 C
13 A
14 B
15 D
16 B
17 D
18 D
19 C
20 D

Chapter – 9
Cash Flow Statements
Past year Questions
1. For the purpose of Cash Flow Statement, ‘Cash Equivalents’ include:
(A) bank fixed deposit for 30 days
(B) money market instruments
(C) treasury bills
(D) All of the above June 2021
2. A Company has a Net Cash Sale of Rs. 6,00,000, Cash Expenses Rs. 2,80,000 and
Depreciation Rs. 50,000. Cash from Operating Activity should be:
(A) Rs. 1,60,000
(B) Rs. 1,20,000
(C) Rs. 2,40,000
(D) Rs. 3,20,000 June 2021
3. Cash Inflow before working capital changes is Rs. 4,80,000, decrease in inventory is
Rs. 60,000, increase in receivables position is Rs. 80,000 and increase in payables
position is Rs. 70,000, then cash flow from operating activity is:
(A) Rs. 5,50,000
(B) Rs. 4,30,000
(C) Rs. 5,70,000
(D) Rs. 5,30,000 June 2021
4. Debentures interest paid is Rs. 80,000, Proposed dividend on equity shares is Rs.
1,50,000, Preference dividend paid is Rs. 1,20,000, Provision for tax is Rs. 90,000, then
cash outflow from financing activity is:
(A) Rs. 3,50,000
(B) Rs. 4,40,000
(C) Rs. 2,00,000
(D) Rs. 2,80,000 June 2021
5. Cash flows arising from the purchase and sale of dealing or trading securities are
classified as:

(A) Operating Activities

(B) Investing Activities
(C) Financing Activities
(D) Extraordinary Activities June 2021
6. On 31st March, 2019, X Ltd. has 8% fixed Deposit (Date of FD 1st March, 2019,
maturing on 31st May, 2019) of Rs. 3,00,000. Interest is received on monthly basis.
While preparing Cash Flow Statement as per AS-3:
(A) Rs. 2,000 (interest) will be added to net profit while calculating net cash inflow after
tax from operating activities
(B) Rs. 3,00,000 will be treated as cash outflow in investing activities
(C) Both (A) and (B)
7. Which of the following is not a cash flow for a company?

(A) Dividends
(B) Proceeds from issuance of share capital
(C) Amortisation of preliminary expenses
(D) Interest payments Dec 2020
8. Cash payments to and on behalf of employees is an example of.................

(A) Cash flow from operating activities
(B) Cash flow from investing activities
(C) Cash flow from financing activities
9. In case of a financial enterprise, Interest received on Debentures held as Investment

is ..................
(A) Operating activity
(B) Investing activity
(C) Financing activity
10. Pooja Ltd. had the investment of Rs. 68 lakh as on 31st March, 2018 and that of Rs.
81lakh as on 31st March, 2019. During the year the company had sold 30% of its
original investment at a profit of Rs. 9,60,000. The cash inflow and outflow from
investment will be:

(A) Rs. 20.40 lakh and Rs. 33.40 lakh

(B) Rs. 33.40 lakh and Rs. 30 lakh
(C) Rs. 30 lakh and Rs. 43 lakh
(D) Rs. 30 lakh and Rs. 33.40 lakh Dec 2019
11. During the year 2018-19, a company redeemed its 10% debenture of Rs. 8,00,000 at
10% premium and after some time a fresh issue was made of new 10% debenture of
Rs. 7,50,000 at a premium of 25%. The net cash flow from debenture would be:
(A) Net cash outflow of Rs. 50,000
(B) Net cash inflow of Rs. 50,000
(C) Net cash inflow of Rs. 57,500
(D) Net cash outflow Rs. 57,500 Dec 2019
12. In the case of financial enterprises, cash flows arise from interest paid should be
classified as cash flow from:
(B) Investing Activities
(C) Financing Activities
(D) Either (B) or (C) Dec 2019
13. Plant Original Costing Rs. 1,35,500 (accumulated depreciation Rs. 72,800) was sold at
a profit of Rs. 15,900 during the year 2018-19. The amount of cash flow from the
transaction would be :
(A) Rs. 1,51,400
(B) Rs. 62,700
(C) Rs. 2,24,200
(D) Rs. 78,600 Dec 2019
14. Mithu Ltd. had the investment as on 31-3-18 and 31-3-19 were Rs. 10,95,000 and Rs.
10,82,000 respectively. During the year interest on investment received Rs. 77,000
which was used in writing down the book value of investments. If there were some
purchases of investment, then the cash flow from investment and from interest
would be:
(A) Cash inflow Rs. 1,300 only
(B) Cash inflow Rs. 9,000 only
(C) Cash inflow Rs. 77,000 and Cash outflow Rs. 64,000
(D) Cash inflow Rs. 9,000 and Cash outflow Rs. 77,000 Dec 2019

15. Following information were provided by a trading company to you:

Net profit after tax for the year 2018-19 18,35,000
During the year 2018-19
· Depreciation written off 1,08,000
· Goodwill written off 50,000
· Provision made for taxation 5,50,000
· Income tax paid 4,80,000
· Interest on Investment credited to Profit and Loss Account 25,000
· Interim dividend paid 2,10,000
Cash flow from Operating Activities would be:
(A) Rs. 22,73,000
(B) Rs. 20,38,000
(C) Rs. 17,23,000
(D) Rs. 20,63,000 Dec 2019

ANSWER KEY
1 D
2 D
3 D
4 C
5 A
6 D
7 C
8 A
9 A
10 D
11 C
12 A
13 B
14 D
15 C

Chapter – 10
ACCOUNTING STANDARDS
Past year Questions
1. AS-11 issued by ICAI deals with ...........
(A) Accounting for Government grants
(B) Accounting for foreign exchange transaction
(C) Cash Flow Statement
(D) Fund Flow Statement June 2021
2. Ravi Ltd. purchased goods at the cost of Rs. 40 lakh in October, 2019. Till March
2020, 75% of the stocks were sold. The Campany wants to disclose closing stock at
Rs. 10 Lakh. The expected sale value is Rs. 11 Lakh and a commission at 10% on sale
is payable to the agent. What is the correct closing stock to be disclosed as at
31.3.2020 as per AS-2?
(A) 10 Lakh
(B) 9.9 Lakh
(C) 11 Lakh
(D) 12 Lakh June 2021
3. Ind AS-2 provides for reversal of the write-down of inventories to:

(A) Cost
(B) Replacement Cost
(C) Net realizable value
(D) Net realizable value limited to the amount of original write-down
June 2021
4. Which of the following is a Small and Medium Sized Company (SMC) as per the
Companies (Accounting standards) Rules, 2006:
(A) X Ltd. has appointed Merchant bankers to prepare a Red-herring prospectus

for the purpose of filing the same with SEBI
(B) Y Pvt. Ltd. engaged only in insurance broking business has a turnover of ? 55
crore (including other income of Rs. 5 crore), GST collected of Rs. 1 crore and
shown as Unsecured Loan and Secured Loan from bank of Rs. 9 crore and
public deposits of Rs. 1 crore.

(C) Z Pvt. Ltd., acquired 51% equity in a listed company. It has a turnover of ? 50
crore and borrowings of Rs. 10 crore.
(D) W Pvt. Ltd. has a turnover of Rs. 55 crore (including other income of Rs. 5
crore) and took Secured Loan from bank of Rs. 10 crore and public deposits of
Rs. 1 crore which were fully paid before the end of the financial year.
Dec 2020
5. Under Ind AS 1, presentation of any items of income or expense as extraordinary

item is:
(A) Separately disclosed

(B) Shown as a part of statement of profit and loss
(C) Prohibited
6. AS 3 and AS 17 are not applicable in their entirety to:
(A) Level II Entities

(B) Level III Entities
(C) SMCs
7. Ind AS 20 requires government grants of the nature of promoters contribution:
(A) to be credited directly to capital reserve and treated as a part of shareholders

funds
(B) to be recognized as income over the periods
(C) Not to be recognized
(D) Either (A) or (B) Dec 2020
8. The Chief Accountant of TT Ltd. gives the following data regarding its six
segments:
Rs. in
crore
Particulars M N O P Q R Total
Segment Assets 9 9 55 9 9 9 100
Segment Results -19 -162 18 10 -19 10 -162
Segment Revenue 161 29 29 28 27 26 300
The Reportable Segments as per AS 17 are :
(A) M, N

(B) M, N, O
(C) M, N, O, P
(D) M, N, O, P, R Dec 2020
9. AS 18 and AS 24 are not applicable in their entirety to:
(A) Level II Entities

(B) Level III Entities
(C) SMCs
(A) Disclosure of accounting policies

(B) Revenue Recognition
(C) Construction contracts
(D) Government grants Dec 2020
11. Ind AS 11 requires contract revenue to be measured at.............
(A) Net realisable value

(B) Fair value of consideration received/ receivable
(C) Consideration received/receivable
12. Ind AS 34 requires the following in the contents of an interim financial report in
addition to what was required under previous standard AS 25:
(A) A condensed balance sheet

(B) A condensed statement of profit and loss
(C) A condensed cash flow statement
(D) A condensed statement of changes in equity Dec 2020
13. GAAP stands for:
(A) Generally accepted accounting principles

(B) Generally accumulated adherence policy
(C) Generally accounting adherence policy
(D) Generally assisted accounting principles Dec 2020

14. .............. are set of accounting standards notified by the Ministry of Corporate
Affairs which are converged with International Financial Reporting Standards.
(A) International Accounting Standards

(B) Indian Accounting Standard
(C) Indian Auditing Standard
(D) International Auditing Standards Dec 2020
15. Ind AS 113 deals with:
(A) Fair value measurement

(B) Joint arrangements
(C) Financial instruments
(D)Insurance contract Dec 2020
16. ............... prescribes the basis for presentation of general purpose financial
statement to ensure comparability both with the entity’s financial statements of
previous periods and with the financial statements of other entities.
(A) Ind AS 1
(B) Ind AS 2
(C) Ind AS 3
(D) Ind AS 4 Dec 2020
17. Which of the following is not a type of segment as per AS-17?
(A) Geographical segment

(B) Business segment
(C) Industrial segment
(D) Reportable segment Dec 2019
18. The Accounting Standards Board was constituted by the Institute of Chartered
Accountants of India in the year:
(A) 1975
(B) 1977
(C) 1976

(D) 1978 Dec 2019
19. Which of following Section of Companies Act, 2013, is required that the auditor
has to report whether in his opinion the financial statements comply with the
Accounting Standards referred in Section 133 of the Companies Act, 2013:
(A) Section 141(3)(e)

(B) Section 145(3)(b)
(C) Section 143(3)(e)
(D) Section 144(3)(e) Dec 2019
20. Which of the following is not included in the conditions satisfied by the small
and medium companies (SMCS) with reference to applicability of Accounting
Standards?
(A) Company is not a holding company or subsidiary of a non-SMC.

(B) Company is not a bank or financial institution or insurance company.
(C) Company's turnover does not exceed Rs. 10 crores in the immediately
preceding accounting year.
(D)Equity and debt securities of the company are not listed or are not in the
process of listing in any stock exchange, whether in India or outside India.
Dec 2019
21. Which of the following International Accounting Standard (IAS) is related to

Earning per share?
(A) IAS-20
(B) IAS-24
(C) IAS-33
(D) IAS-38 Dec 2019
22. Mandatory applicability of Ind AS to all Banks, NBFCS (Non-Banking Finance

Companies), and Insurance Companies is from:
(A) 1st April, 2015

(B) 1st April, 2016
(C) 1st April, 2017

(E) 1st April, 2018 Dec 2019

(D) 1st April, 2018
23. Which of the following Ind AS is related to Consolidated Financial Statements?
(A) Ind AS-108

(B) Ind AS-110
(C) Ind AS-115
(D) Ind AS-7 Dec 2019

ANSWER KEY
1 B 13 A
2 A 14 B
3 B 15 A
4 B 16 A
5 C 17 C
6 D 18 B
7 C 19 C
8 B 20 B
9 B 21 C
10 C 22 C
11 B 23 C
12 D

Chapter – 11
National and International Accounting
Authorities
Past year Questions
1. The IFRS foundation has a .................. governance structure.
(A) Three-tier
(B) Two-tier
(C) Four-tier
(D) Five-tier June 2021
2. Financial Reporting Council (UK) is a:
(A) Company limited by guarantee
(B) Unlimited Company
(C) Subsidiary company of IFRS
(D) Associate company of the Institute of Chartered Accountants of England
June 2021
3. IASB stands for:
(A) Indian Accounting Standard Board

(B) International Auditing Standard Board
(C) International Accounting Standard Board
(D)International Assurance Service Board Dec 2020
4. The structure of IFRS Foundation consists of:
(A) International Accounting Standards Board (IASB), IFRS Foundation Trustees

and IFRS Foundation Monitoring Board
(B) IFRS Foundation Trustees, IFRS Foundation Monitoring Board and IFRS
Advisory Council
(C) IFRS Foundation Monitoring Board, IFRS Advisory Council, International
Accounting Standards Board (IASB)
(D) International Accounting Standards Board (IASB), IFRS Foundation Trustees
and IFRS Advisory Council Dec 2020
5. The Advisory Council is the formal advisory body to the:
(A) International Accounting Standards Board

(B) Trustees of the IFRS Foundation.
Think beyond 70+ in CMA and FM with Raj Awate

1
(C) IFRS Foundation Monitoring Board

(D) Both (A) and (B) Dec 2020
6. Public Interest Committee (PIC) established by IPSASB consists of individuals from

the:
(A) International Monetary Fund

(B) International Organization of Supreme Audit Institutions
(C) Organization for Economic Cooperation and Development and the World Bank
Group
7. The Association of International Certified Professional Accountants launched in

2017, bringing together the expertise and capabilities of the:
(A) AICPA and CIMA

(B) AICPA and FASB
(C) IFRS Foundation and FASB
(D) CIMA and FASB Dec 2020
8. The Institute of Chartered Accountants in Australia and the New Zealand Institute
of Chartered Accountants amalgamated to become one body:
(A) CA ANZ
(B) ICA ANZ
(C) ANZ CA
(D) ANZ ICA Dec 2020
9. External Reporting Board (XRB) belongs to:
(A) New Zealand

(B) Australia
(C) USA
(D) UK Dec 2020
10. Which of the following institute formerly was established as a registered company
under the Companies Act?
(A) The Institute of Chartered Accountants of India ( ICAI)

(B) The Institute of Company Secretaries of India (ICSI)
(C) The Institute of Cost and Works Accountants of India (ICWAI) {now it, The
Institute of Cost Accountants of India}

2
11. The Institute of Chartered Accounts of India is the...... professional body of

Chartered Accountants in the world.
(A) Largest
(B) Second Largest
(C) Third Largest
(D) Fifth Largest Dec 2019
12. ‘‘The Association of International Certified Professional Accountants’’ launched

by the:
(A) American Association of Public Accountants (AAPA)

(B) American Association of Chartered Public Accountants (AICPA)
(C) Chartered Institute of Management Accountants (CIMA)
(D) Both AICPA and CIMA Dec 2019
13. Financial Reporting Council is an organisation of which country?
(A) United States of America (USA)

(B) Canada
(C) UK
(D) Japan Dec 2019

3
ANSWER KEY
1 A
2 A
3 C
4 A
5 D
6 D
7 A
8 A
9 A
10 C
11 B
12 D
13 C

4
Chapter – 13
An Overview of Cost
Past year Questions
1. ............ is regarded as a specialised branch of accounting which involves

classification, accumulation, assignment and control of costs.
(A) Costing
(B) Cost Accounting
(C) Cost Accountancy
(D) Cost Dec 2020
2. Primary packaging material is an example of:
(A) Direct material

(B) Indirect material
(C) Direct expenses
(D)Indirect expenses Dec 2020
3. According to Behavioural Analysis, the overheads may be classified as:
(A) Factory overhead, administration overhead, selling and distribution overhead

(B) Fixed overhead, variable overhead, semi-variable overhead
(C) Indirect material, indirect labour and indirect expenses
(D) Normal overhead & Abnormal overhead Dec 2019
4. Match the following— I with II:

I II
(a) Direct Cost (i) Raw material
(b) Indirect Cost (ii) Showroom expenses
(iii) Drawing Office Expenses
(iv) Carriage inwards
(v) Carriage outwards
(vi) Primary packing

1
(vii) Productive wages

(viii) Oil and grease
Select the correct answer from the options given below:
(A) (a)—(i)(iv)(vi)(vii); (b)— (ii)(iii)(v)(viii)
(B) (a)—(i)(v)(vii); (b)—(ii)(iii)(iv)(v)(viii)
(C) (a)—(i)(iii)(iv)(vi); (b)—(ii)(v)(vii)(viii)
(D) (a)—(i)(iii)(v)(vii); (b)—(ii)(iv)(vi)(viii) Dec 2019
5. Cost of Sales – Selling and Distribution Overhead + Closing Stock of Finished Goods
– Opening Stock of Finished Goods = ..............
(A) Cost of Goods Sold

(B) Works Cost
(C) Cost of Production
(D) Conversion Cost Dec 2019
6. Which of the following are examples of key factors ?

(1) Sales value/quantity
(2) Raw material quantity
(3) Raw material quality
(4) Labour hours availability
(5) Plant capacity
(6) No. of plants used in manufacturing process
(7) Cost of production
(A) 1, 3, 5 and 6
(B) 1, 2, 4 and 5
(C) 2, 3, 5 and 7
(D) 1, 2, 4 and 6 Dec 2019
7. Match the following List-I with List-II:

List-I
(P) Profit earned
(Q) Classification of costs into fixed and variable costs
(R) Both fixed and variable costs are charged to product
(S) Sum of fixed cost and profit
List-II
(1) Contribution
(2) Margin of Safety × P/V Ratio
(3) Marginal Costing

2
(4) Absorption Costing

(A) (P)—(2), (Q)—(4), (R)—(1), (S)—(3)
(B) (P)—(2), (Q)—(3), (R)—(4), (S)—(1)
(C) (P)—(1), (Q)—(4), (R)—(3), (S)—(2)
(D) (P)—(1), (Q)—(3), (R)—(4), (S)—(2) Dec 2019
8. Information provided by S Ltd. are given below:

Fixed Cost Rs. 24 lakh
Profit Rs. 12 lakh
Break-even point Rs. 60 lakh
When sales are Rs. 120 Lakh, then calculate the profit:
(A) Rs. 66 Lakh
(B) Rs. 30 Lakh
(C) Rs. 24 Lakh
(D) Rs. 21 Lakh Dec 2019
9. Which of the following is/are purpose(s) of ‘‘Time Recording’’?
(A) Payroll
(B) Time-keeping
(C) Time-booking
(D) Time-keeping and Time-booking Dec 2019

3
ANSWER KEY
1 B
2 A
3 B
4 A
5 C
6 B
7 B
8 C
9 D

4
Chapter – 14
Cost Accounting Records & Cost Audit
Under the Companies Act, 2013
Past year Questions
1. The base of cost audit report is ...........
(A) Efficiency and propriety
(B) Profitability and liquidity
(C) True & Fair view
(D) Reliability and propriety June 2021
2. Every specified company including all units and branches thereof shall maintain
cost records in ..................... in respect of each financial year.
(A) Form CRA-5
(B) Form CRA-1
(C) Form CRA-4
(D) Form CRA-2 June 2021
3. Cost Auditor is appointed by the ...........
(A) Central Government
(B) Audit Committee
(C) Board of Director
(D) Shareholders June 2021
4. Which of the following is the social purpose of Cost Audit?
(A) Detection and correction of abnormal losses

(B) Detection of errors and frauds
(C) Determination of inventory valuation
(D) Pinpointing areas of inefficiency and mismanagement for the benefit of
shareholders and consumers Dec 2020
5. Which section of the Companies Act, 2013 deals with audit of cost accounting
records?
(A) Section 158

(B) Section 139
(C) Section 168
(D) Section 148 Dec 2020

1
6. Cost Audit Report is required to be prepared in:
(A) Form CRA-1

(B) Form CRA-2
(C) Form CRA-3
(D) Form CRA-4 Dec 2020
7. What is the General information attached in the Annexure to Cost Audit Report?
(A) Distribution of Earnings

(B) Cost Accounting Policy
(C) Details of Industry Specific Operating Expenses
(D) Reconciliation of Indirect Taxes Dec 2020
8. Companies (Cost Records and Audit) Rules, 2014, came into force on:
(A) 1-04-2014
(B) 30-04-2014
(C) 30-06-2014
(D) 30-09-2014 Dec 2019
9. Which of the following Form is used for filing Cost Audit Report with the Central
Government?
(A) CRA-1
(B) CRA-2
(C) CRA-3
(D) CRA-4 Dec 2019

2
ANSWER KEY
1 A
2 B
3 C
4 D
5 D
6 C
7 B
8 C
9 D

3
Chapter – 15
Budget, Budgeting and Budgetory
Control
Past year Questions
1. Fixed Cost = Rs. 2,00,000, Sales = Rs. 8,00,000, P/V Ratio = 30%; the amount of
profit is ............................
(A) Rs. 50,000
(B) Rs. 40,000
(C) Rs. 35,000
(D) Rs. 45,000 June 2021
2. A Budget that gives a summary of all the functional budget and projected Profit &
Loss Account is known as ......................
(A) Capital Budget
(B) Flexible Budget
(C) Master Budget
(D) Discretionary Budget June 2021
3. The difference between fixed cost and variable cost has significance in preparation
of .............................
(A) Flexible Budget
(B) Master Budget
(C) Cash Budget
(D) Capital Expenditure Budget June 2021
4. Which of the following would be found in a Cash budget?

(A) Capital Expenditure
(B) Provision for doubtful debts
(C) Depreciation
(D) Accrued expenditure June 2021
5. The Budget sales for the next 4 quarter are – Rs. 1,92,000, Rs. 2,88,000, Rs. 2,88,000
and Rs. 3,36,000 respectively. It is estimated that sales will be paid for as follows:
75% of the sales will be paid in the quarter in which sales were made. Of the balance

50% will be paid in the quarter after the sales was made. The remaining 50% will be
paid in the quarter after this. The amount of cash received in quarter 3rd will be
.............
(A) 2,76,000
(B) 1,44,000
(C) 3,24,000
(D) 2,40,000 June 2021
6. Sales (in units): Jan. 1,000, Feb. 2,000, Mar. 3,000, Apr. 4,000. 20% of the Sales are
on cash basis and the balance on credit basis. Uniform Selling Price— Rs. 20 per
unit. 50% of credit sales are collected in the month following the sales, 50% of the
remaining in the second month and the balance in the third month. Calculate the
total amount of Cash Sales and Collection from Debtors during the month of April:
(A) Rs. 52,000

(B) Rs. 36,000
(C) Rs. 50,000
7. Sales (in units): Jan. 1,000, Feb. 2,000, Mar. 3,000, Apr. 4,000, May 5,000. 25% of the
Purchases are on cash basis and the balance on credit basis. Uniform Selling Price —
Rs. 20 per unit. This price was fixed after adding 25% to cost. No stock remains at
the end of a month. Purchases are made one month in advance and 50% of Credit
purchases are paid within one month and the balance in two months. Calculate the
total amount of Cash Purchases and Payment to Creditors during the month of
April:
(A) Rs. 62,000

(B) Rs. 46,000
(C) Rs. 50,000
8. A company sells two products, J and K. The sales mix is 4 units of J and 3 units of
K. The contribution margin per unit are Rs. 40 for J and Rs. 20 for K. Fixed costs are
Rs. 3,08,000 per month. Compute the individual break-even point of product J and
product K:
(A) 800 units and 600 units

(B) 600 units and 800 units

(C) 5600 units and 4200 units
(D) 4200 units and 5600 units Dec 2020
9. Which of the following is true?
(A) The main stress of Zero base budgeting is on why a unit needs to spend.
(B) Zero base budgeting facilitates the introduction and implementation of the
system of MBO.
(C) Performance Budgeting requires Establishment of Responsibility Centres.
10. A ............. is a booklet specifying the objectives of an orgnaisation in relation to its

spending strategy.
(A) Budgetary control

(B) Budget manual
(C) Key factor
(D) Budget controller Dec 2020
11. Monsoon is an example of key factor in which of the following indsutries?
(A) Motor car

(B) Aluminium
(C) Electro-optics
(D) Hydropower generation Dec 2020
12. Which of the following steps are required for Budgetary Control?
(A) Organisation for Budgeting; Budget Manual; Responsibility for Budgeting;

and Budget Standard
(B) Organisation for Budgeting; Budget Manual; Responsibility for Budgeting;
and Budget Procedure
(C) Objective for Budgeting; Budget Manual; Responsibility for Budgeting; and
Budget Standard
(D) Organisation for Budgeting; Budget Objective; Responsibility for Budgeting;
and Budget Standard
Dec 2019

13. A factor which will limit the activities of an undertaking and which is taken into
account in preparing budgets, is termed as:
(A) Limiting factor

(B) Governing factor
(C) Key factor
14. ........... is a method of budgeting whereby all activities are re-evaluated each time
a budget is set. Discrete levels of each activity are valued and a combination is
chosen to match funds available.
(A) Master Budget

(B) Zero-Based Budgeting
(C) Performance Budgeting
(D) Flexible Budget Dec 2019

ANSWER KEY
1 B 8 C
2 C 9 D
3 A 10 B
4 A 11 D
5 A 12 B
6 A 13 D
7 A 14 B


Chapter – 16
Ratio Analysis
Past year Questions

1. The following information is pertaining to A Ltd.
Current ratio : 4
Acid Test ratio : 2.8
Current liabilities : 31.00 Lakh
Find out the value of Inventory.
(A) Rs. 62 Lakh
(B) Rs. 43 Lakh
(C) Rs. 37.2 Lakh
(D) Rs. 105.4 Lakh June 2021
2. P Ltd. furnished the following information:

Cost of Goods Sold : Rs. 6 Lakh
Net Profit : Rs. 3 Lakh
Sales Return : Rs. 1 Lakh
If the net profit margin of P Ltd. was 25%, then the gross profit margin was:
(A) 55%
(B) 60%
(C) 40%
(D) 50% June 2021
3. Which of the following is classified as liquidity ratio?
(A) Return on equity
(B) Return on Investment
(C) Acid Test ratio
(D) Debt Equity ratio June 2021
4. A Liquid ratio lower than 1 : 1 shows :

(A) Under trading
(B) Under Investment
(C) Over Trading
(D) Over Investment June 2021

5. If a concern has a very high stock turnover ratio, which of the following statement
is False?
(A) Stock Velocity Ration is Low
(B) Stock has many fast moving items
(C) There is under trading
(D) Funds blocked in working capital are less June 2021
6. ................... examine the policy of the company regarding of dividend and retain
earning.
(A) Earnings Per Share (EPS)
(B) Price Earnings Ratio
(C) Dividend Payout Ratio
(D) Return on Investment June 2021
7. Reliable Ltd. has given the following data:

Budget Production = 800 Units
Standard hours per unit = 25
Actual production = 576 units
Actual Working = 12,000 hours
What is the Efficiency Ratio?
(A) 110%
(B) 120%
(C) 100%
(D) 125% June 2021
8. Earnings Per Share (EPS) is equal to:

(A) Profit before tax/No. of shares in authorized capital
(B) Profit after tax/No. of shares in issued capital
(C) Profit after tax/Net Worth
(D) Profit before tax/Net Worth June 2021
9. Interest coverage ratio = 6, indicates:

(A) Sales are 6 times of interest
(B) Profit after tax is 6 times of interest
(C) EBIT is 6 times of interest
(D) Interest is 6 times after tax June 2021
10. Debtors turnover ratio reflects:

(A) Collection period

(B) Number of times debtors against credit sales
(C) Aging of the debtors
(D) Number of times debtors against total sales June 2021
11. A company has Profit/Volume (P/V) Ratio 40 percent. By what percentage must
variable cost be decreased to offset 25% reduction in selling price, so as to maintain
the same P/V Ratio?
(A) 15%
(B) 25%
(C) 33.33%
(D) 41.67% Dec 2020
12. Which of the following is also known as working capital ratio?
(A) Current ratio

(B) Liquid ratio
(C) Debtor turnover ratio
(D) Cash reserve ratio Dec 2020
13. From the following information, calculate net profit ratio : Gross Profit is 1/4th of
cost and sales is Rs. 2,00,000. Indirect expenses is Rs. 12,000:
(A) 19%
(B) 20%
(C) 14%
(D) 25% Dec 2020
14. If sales in an organisation is Rs. 1,00,000, fixed cost is Rs. 12,000 and profit is Rs.
8,000, Profit/ Volume ratio is ............
(A) 80%
(B) 8%
(C) 20%
(D) 12% Dec 2020

15. Current ratio is 2.5 : 1 and Liquid ratio is 1 : 1. Stock is ? 60,000. Calculate current
liability:
(A) Rs. 40,000

(B) Rs. 60,000
(C) Rs. 1,00,000
(D) Cannot be determined Dec 2020
16. If the Capacity Ratio and Efficiency Ratio of a factory are 95% and 125%
respectively, then Activity Ratio will be:
(A) 131.58%
(B) 76%
(C) 118.75%
(D) 152% Dec 2019
17. N Ltd. has Net working capital of Rs. 119 Lakh, Total Liabilities Rs. 225 Lakh and
Non-current liabilities are Rs. 140 Lakh. The Current Ratio will be:
(A) 2.4 : 1
(B) 1.85 : 1
(C) 2.46 : 1
(D) 1.15 : 1 Dec 2019
18. A company’s purchases are Rs. 385 Lakh, Sales Rs. 510 Lakh and closing stock Rs.
58 Lakh. If the rate of gross profit is 25% on cost, then Stock Turnover Ratio will be:
(A) 5.32 times

(B) 7.34 times
(C) 5.54 times
(D) 5.87 times Dec 2019
19. Mahi Ltd. has closing stock Rs. 648 Lakh and prepaid expenses Rs. 32 Lakh. Total
liquid assets were Rs. 1,830 Lakh. If the liquid ratio is 1.5 : 1, then working capital
will be :
(A) Rs. 836.67 Lakh

(B) Rs. 1,290 Lakh

(C) Rs. 1,258 Lakh

(D) Rs. 1,150 Lakh Dec 2019
20. Which of the following is not included in the activity ratios?
(A) Sales to Capital Employed

(B) Debtors Turnover Ratio
(C) Proprietary Ratio
(D) Working Capital Turnover Ratio Dec 2019
21. The ideal norm preferred by Banks for current ratio is:
(A) 2 : 1
(B) 2.2 : 1
(C) 1.5 : 1
(D) 1.33 : 1 Dec 2019

ANSWER KEY
1. C 12. A
2. D 13. C
3. C 14. C
4. B 15. A
5. C 16. C
6. C 17. A
7. B 18. D
8. B 19. B
9. C 20. C
10. B 21. D
11. B


Chapter – 17
Management Reporting
Past year Questions
1. The focus of Management accounting is on:

(A) Tax Preparation
(B) External Reporting
(C) Internal Reporting
(D) Auditing June 2021
2. Following is not an advantage of effective Management reporting system:
(A) Improves decision making

(B) Improves responsiveness to issue
(C) Improves efficiency of resources
3. Sales Management is more concerned with:
(A) Ageing Schedule of Debtors

(B) Product Cost Variance Analysis
(C) Capital Expenditure and Forward Commitments
4. Which of the following set of report is classified according to their contents?
(A) Descriptive reporting; tabular reports and Graphic reports

(B) Routine reports and Special reports
(C) Production reports; Sales reports; Cost reports and Finance reports
(D) Graphic presentation; Routine reports and Finance reports
Dec 2019
5. Which of the following is not a step taken towards implementing an effective

management reporting programme?
(A) Discovery

(B) Access point

(C) Finance
(D) Feedback Dec 2019

ANSWER KEY
1 C
2 D
3 A
4 C
5 C

Chapter – 18
Decision Making Tools
Past year Questions

1. Cost of Goods ............................
(A) Opening Stock + Purchases – Direct Expenses + Closing Stock
(B) Opening Stock + Purchases + Direct Expenses – Closing Stock
(C) Sales – Opening Stock + Purchases – Direct Expenses – Closing Stock
(D) Opening Stock + Purchases – Direct Expenses – Closing Stock June 2021
2. S Ltd. has fixed cost of Rs. 60,000 P.A. It manufactures a single product which it
sells for Rs. 20 per unit. Its P/V ratio is 40%. S. Ltd. Break-even Point in Units is:
(A) 1800
(B) 3000
(C) 5000
(D) 7500 June 2021
3. Activity based cost system would probably provide the greatest benefits for
organization that use ...........................
(A) Job Order Costing
(B) Process Costing
(C) Standard Costing
(D) Historical Costing June 2021
4. In marginal costing, stock is valued at .......................

(A) Fixed Cost
(B) Semi-variable Cost
(C) Variable Cost
(D)Market Price June 2021
5. An increase in selling price ...................

(A) Increase the break-even point
(B) Decrease the break-even point
(C) Does not affect the break-even point
(D) Optimizes the break-even point June 2021

6. In case of rising prices (Inflation), FIFO method will .........................

(A) Provide lowest value of closing stock and profit
(B) Provide highest value of closing stock and profit
(C) Provide highest value of closing stock but lowest value of profit
(D)Provide highest value of profit but lowest value of closing stock June 2021
7. A management consultancy recovers overheads on chargeable consulting hours.

Budget overheads were Rs. 6,15,000 and actual consulting hours were 32,150.
Overhead were under recovered by Rs. 35,000. If actual overhead were Rs. 6,94,075,
what was the budgeted overhead absorption rate per hour.
(A) Rs. 19.13
(B) Rs. 20.50
(C) Rs. 21.59
(D) Rs. 22.68 June 2021
8. Production 11,000 units @ ?11.50 per unit, Closing Stock of finished Goods 14 3,000
units. Opening Stock 2,000 units @ Rs. 14 per unit, Selling and Distribution Expenses
20% of Cost of Sales, Profit @ 25% on Sales. Calculate Profit per unit:
(A) Rs. 15 per unit

(B) Rs. 10 per unit
(C) Rs. 5 per unit
9. XYZ Ltd. manufactures three products X, Y and Z. The Sales Value Mix Ratio of
these products are 20%, 30% and 50% respectively. The corresponding Variable Cost
to Sales Ratio is 50%, 30% and 20%. The total fixed costs are Rs. 35,500. Calculate
Overall Break Even Point (in Value):
(A) Rs. 50,000

(B) Rs. 60,000
(C) Rs. 71,000
10. Which of the following is not a method of Transfer Pricing?
(A) Market based transfer pricing

(B) Cost based transfer pricing

(C) Negotiated transfer pricing

11. Which of the following is not an objective of Activity Based Costing?
(A) Activity Based Costing is a two-stage product costing method

(B) The cost pools in the two-stage approach now accumulate product related
cost
(C) It is based on the concept that products consume activities and activities
consume resources
12. Selling price of a product is Rs. 32/unit. Variable cost ratio is 50%. Fixed cost is
Rs. 96,000. Units sold are 10,000. Calculate Margin of Safety in percentage:
(A) 40%
(B) 60%
(C) 50%
(D) Cannot be determined Dec 2020
13. From the following, calculate production for the 4th quarter:
Units Sold
Q1 12,000
Q2 15,000
Q3 16,500
Q4 18,000
Opening units 10,000 at the beginning of Q1 and closing units 12,500 at the end of
Q4. Production is 2/3rd of current quarter requirement and 1/3rd of next quarter
requirement:
(A) 12,000 units
(B) 20,500 units
(C) 18,500 units
(D) 18,000 units Dec 2020
14. Margin of Safety may be improved by:
(A) Lowering Fixed Cost

(B) Increasing Volume of Sales

(C) Increasing Selling Price

15. Following information estimated for the year 2020-21 :

 Normal loss in production will be 5% of input.
 Sales (in units) as per Sales Budget 38,350 units.
 Closing stock will be 6600 units which has been estimated 10% more than
previous year’s quantity.
The input for required production will be:
(A) 39,737 units
(B) 41,000 units
(C) 40,898 units
(D) 39,638 units Dec 2019
16. Puvi Ltd. provides the following information for the quarter ending 31st March,
2020:
Expected Sales :
January, 2020 Rs. 25 lakh
February, 2020 Rs. 28 lakh
March, 2020 Rs. 30 lakh
Roughly 40% of the sales are for cash, 80% of credit sales are collected in the month
following the month of sales and the balance of credit sales one month after that. The
amount collected from debtors in the month of March, 2020, will be:
(A) Rs. 10.96 Lakh
(B) Rs. 28.44 Lakh
(C) Rs. 22.96 Lakh
(D)Rs. 16.44 Lakh Dec 2019
17. A low margin of safety usually indicates:
(A) High profit

(B) High fixed overheads
(C) Low fixed overheads
(D) Operation on high level of activity Dec 2019
18. Which of the following is not a method of transfer pricing considered in normal
course?

(A) Full cost transfer pricing

(B) Negotiated transfer pricing
(C) Opportunity cost transfer pricing
(D) Standard cost transfer pricing Dec 2019
19. Following data provided by M Ltd.:

First Six Months (Rs. ) Last Six Months (Rs. )
Profit 10,00,000 14,00,000
Cost of Sales 70,00,000 76,00,000
Fixed cost for the year will be:
(A) Rs. 22 Lakh
(B) Rs. 34.40 Lakh
(C) Rs. 73.33 Lakh
(D) Rs. 44 Lakh Dec 2019
20. In an Activity Based Costing System, the allocation basis that are used for
applying costs to services or procedures are called:
(A) Profit centers

(B) Cost centers
(C) Cost units
(D) Cost drivers Dec 2019
21. Inspection of products is an example of:
(A) Unit level activities

(B) Batch level activities
(C) Product level activities
(D) Facility level activities Dec 2019

ANSWER KEY
1 D
2 B
3 B
4 A
5 D
6 C
7 A
8 B
9 A
10 D
11 D
12 A
13 B
14 D
15 D
16 B
17 B
18 A
19 D
20 C
21 A


Chapter – 20
Valuation of Shares, Business and
Intangible Assets
Past year Questions

1. Find out the goodwill of the company from the following information:
Total Capital Employed = Rs. 8,00,000
Reasonable Rate of return = 15%
Profits for the year = Rs. 12,00,000
Use capitalization method:
(A) Rs. 82,00,000
(B) Rs. 12,00,000
(C) Rs. 72,00,000
(D) Rs. 42,00,000 June 2021
2. Which of the following is not a method of business valuation?

(A) Asset Based
(B) Earning based
(C) Market based
(D) Equity based June 2021
3. Which of the following is not the method of valuation of Goodwill?

(A) Average profit method
(B) Superprofit method
(C) Capitalization method
(D) Straight line method June 2021
4. P purchased business from Q on 30th June, 2019. Profit earned by Q for the
preceding years ending on 31st December every year were: 2016—Rs. 41,000, 2017—
Rs. 40,000 and 2018—Rs. 42,000. It was ascertained that profits of 2017 included a
non-recurring item of Rs. 1,500 and profit of 2018 was reduced by Rs. 2,000 due to
an extraordinary loss on account of theft. The annual premium was Rs. 200 per
annum. P at the time of purchasing the business, was employed with Sufitel
Associates and was getting Rs. 500 p.m. He intends to replace the manager who at

the present is getting Rs. 350 p.m. The goodwill is calculated at 2 years purchase of
the average profits. Calculate the goodwill of the business:
(A) Rs. 84,000

(B) Rs. 78,334
(C) Rs. 75,455
(D) Rs. 85,445 Dec 2020
5. Average profit of a firm is Rs. 48,000. The rate of capitalisation is 12%. Assets and
liabilities of the firm are Rs. 4,00,000 and Rs. 1,70,000 respectively. Find value of
Goodwill:
(A) Rs. 2,30,000

(B) Rs. 4,00,000
(C) Rs. 1,70,000
(D) Rs. 1,90,000 Dec 2020
6. Value of share based on earning basis method is calculated as:
(A) (Possible rate of dividend/Normal rate of dividend) * Paid up value per share
(B) (Normal rate of dividend/possible rate of dividend) * Paid up value per share
(C) (Normal rate of dividend/dividend per share) * Paid up value per share
7. Following information provided by B Ltd.:

 Last Earning Per Share (EPS) of the company = Rs. 75 per share
 Company’s dividend pay-out ratio = 40%
 Required rate of return from equity investment = 18%
By using capitalization earning method, the value of equity will be (if dividend are
expected to grow at a constant rate of 10% per annum):
(A) Rs. 412.50
(B) Rs. 183.33
(C) Rs. 166.67
(D) Rs. 375 Dec 2019
8. Which of the following is not a method used for valuation of shares?
(A) Net assets method

(B) Based on rate of dividend method

(C) Based on rate of earnings method

(D) Net realizable value method Dec 2019
9. Which of the following method of valuation of shares is/are suitable for

ascertaining the market value of shares which are quoted on a recognized stock
exchange?
(A) Based on rate of dividend method

(B) Based on rate of earnings method
(C) Based on price earnings ratio method
10. Average profit, Superprofit and Capital employed of a firm are Rs. 15,60,000; Rs.
4,80,000; and Rs. 90,00,000 respectively. Normal rate of return is 12%. The value of
goodwill on the basis of capitalization of ‘Average Profit’ and of ‘Superprofit’ will
be:
(A) Rs. 130 Lakh and Rs. 40 Lakh

(B) Rs. 1,87,200 and Rs. 57,600
(C) Rs. 130 Lakh and Rs. 11,37,600
(D) Rs. 40 Lakh and Rs. 40 Lakh Dec 2019
11. As per Section 247 of the Companies Act, 2013, the Registered Valuer shall be
appointed by the:
(A) Company’s Board of Directors

(B) Central Government
(C) Registrar of Companies
(D) Company’s AuditCommittee Dec 2019
12. Following are the details of Beta Limited: Rs. in lakh Equity Share Capital
(Shares of Rs. 10) 1500 8% Preference Share Capital 400 12% Debentures 250 Profit
before interest and tax 590 Dividend Payout Ratio = 70% Price-Earning (P/E) Ratio =
25 Corporate tax rate = 30% Earnings Per Share (EPS) will be:
(A) Rs. 3.52

(B) Rs. 2.464
(C) Rs. 2.06
(D) Rs. 2.40 Dec 2019

ANSWER KEY
1 C
2 D
3 D
4 B
5 C
6 A
7 A
8 D
9 C
10 D
11 D
12 D


Chapter – 21
Accounting for Share-Based Payments
Past year Questions

1. Amount received as calls-in-advance is a ................ of the company.
(A) right
(B) asset
(C) debt
(D) revenue
June 2021
2. Amount due on calls made but not paid is known as .....................
(A) Calls-in-Advance
(B) Calls-in-Arrear
(C) Unpaid amounts
(D)Defaulting amounts
June2021
3. ............... may be said to be the compulsory termination of membership by way of

penalty for non-payment of allotment and/or any call money.
(A) Surrender of shares

(B) Forfeiture of shares
(C) Transfer of shares
(D) Transmission of shares June 2021
4. A company has a subscribed capital of 2,00,000 equity shares of Rs. 25 each,Rs. 20

per share called up. The directors forfeited 200 equity held by a shareholder who
failed to pay the first call made @ Rs. 10 per share. Later, the directors reissued these
shares as Rs. 20 per share paid up at Rs. 15 per share. On reissue, amount to be
transferred to capital reserve account is ....................
(A) Rs. 1,000

(B) Rs. 1,400
(C) Rs. 1,500

(D) Rs. 1,100 June2021
5. One Person Company (OPC) shall file a copy of the financial statements duly
adopted by its member, along with all the documents which are required to be
attached to such financial statements, within .................. from the closure of the
financial year.
(A) 30 days
(B) 60 days
(C) 120 days
6. Declared dividend must be paid within .......... of declaration.
(A) 5 days
(B) 10 days
(C) 30 days
7. Under section 247 of The Companies Act, 2013, a Registered Valuer shall be
appointed by the Company’s:
(A) Board of Directors only

(B) Company Secretary only
(C) Director Finance and Accounts only
8. SEBI (Share Based Employee Benefits) Regulations, 2014 apply to the:
(A) Employee stock option schemes and employee stock purchase schemes only
(B) stock appreciation rights schemes only
(C) general employee benefits schemes and retirement benefit schemes only
9. Ind AS 33 deals with ............
(A) Earning per share

(B) Financial Instrument Presentation
(C) Fair Value Measurement

10. With reference to Ind AS 102, what does SBP stand for?
(A) Share based payment

(B) Share based proportion
(C) Sum based payment
(D) Shareholder based pricing Dec 2020
11. Which of the following Ind AS deals with ‘‘Financial Instruments: Presentation’’?
(A) Ind AS-32

(B) Ind AS-33
(C) Ind AS-113
(D) Ind AS-109 Dec 2019

ANSWER KEY
1 C
2 B
3 B
4 A
5 D
6 C
7 D
8 D
9 A
10 A
11 A

Chapter – 22
Methods of Valuation
Past year Questions
1. When the required rate of return is equal to the coupon rate, then the market value
of a bond is ..............................
(A) Above Face Value

(B) Face Value
(C) Below Face Value
(D) Book Value June 2021
2. The (Beta) of a risk free stock is:
(A) 10
(B) –1
(C) 1
(D) 0 June 2021
3. Which of the following investment decision is required to be taken for a stock, if

its intrinsic value is greater than its market value?
(A) Sell
(B) Hold
(C) Buy
(D) Indifferent June 2021
4. Risk-Free Rate of Interest on Govt. Treasury Bonds 5.5%, Average Return on

Market Portfolio 18%. Beta is 1.8. Security is said to be overpriced, if actual return is:
(A) 29%
(B) 28%
(C) 27%

5. Risk-Free Rate of Interest on Govt. Treasury Bonds 5%, Average Return on Market
Portfolio 17.5%. What must be the beta, if the security is correctly priced with actual
return of 25%?
(A) 1.2
(B) 1.3
(C) 1.5
(D) 1.6 Dec 2020
6. The relationship between the risk and return established by the security market
line is called ................
(A) Earning based model

(B) Arbitrage pricing theory
(C) Economic value added
(D) Capital asset pricing model Dec 2020
7. Beta of Market portfolio is always .........
(A) 0
(B) 1
(C) Less than 1
(D) More than 1
Dec 2020
8. Following information is provided by A Ltd.:

Rs. in lakh
2,00,000, 8% Preference Shares of 100 each fully paid-up 200
60,00,000 Equity Shares of Rs. 10 each fully paid-up 600
Reserves and Surplus 270
External Liabilities 480
Average profit after tax, earned every year by the company 169
The normal return earned on the market value of fully paid-up equity shares of the
same type of the company is 15%. Assume that 2% of total assets are worthless. The
intrinsic value per equity share will be:
(A) Rs. 14.50
(B) Rs. 13.98
(C) Rs. 17.32
(D)Rs. 17.83 Dec 2019

9. The risk free rate is 8%, return on a broad market index is 15%. The actual return
provided by the security is 18%. What must be its beta, by using CAPM if the
security is correctly priced in the market?
(A) 1.43
(B) 0.70
(C) 2.00
(D) 1.2
Dec 2019
10. The relationship between risk and return established by the security market line
is called:
(A) Earning Based Model

(B) Capital Assets Pricing Model
(C) Discounted Cash Flow Model
(D)Arbitrage Pricing Theory Dec 2019

ANSWER KEY
1 B
2 D
3 C
4 C
5 D
6 D
7 B
8 B
9 A
10 B

Practice Test Paper -1 Inspire Academy - 8888881719
Chapter – 1
Introduction to Financial Accounting
Practice Test Paper - 1
1. All accounts are classified into

(A) Personal
(B) Real
(C) Nominal accounts
(D) Any of the above
2. Accounts recording transactions with a person or group of persons are known as

A) Personal accounts
(A) (B) Real accounts
(B) Nominal accounts
(C) impersonal accounts
3. Personal accounts are of the following types

(A) Natural, Real, Representative
(B) Artificial, Legal, Nominal
(C) Natural, Artificial, Representative
4. An account recording transactions with an individual human being is termed as a-

(A) Artificial or legal person account
(B) Natural persons personal account
(C) Representative personal accounts
5. Accounts relating to properties or assets are known as

(A) Real Accounts
(B) Personal Accounts
(C) Nominal Accounts
(D) None of above

6. Property, plant and equipment are conventionally presented in the balance sheet at-
(A) Replacement cost less accumulated depreciation
(B) Historical cost less salvage value
(C) Historical cost less depreciation portion thereof
(D) Original cost adjusted tor general price-level changes
7. It is essential to standardize the accounting principles and policies in order to ensure

(A) Transparency
(B) Profitability
(C) Reputation
(D) All of the above
8. A specific accounting policy refers to-

(A) Principles
(B) Methods of applying those principles
(C) Both (A) & (B)
(D) None of the above
9. The determination of the amount of bad debts is an accounting

(A) Policy
(B) Estimate
(C) Parameter
10. Generally, which of the following measurement bases are usually accepted in
accounting parlance
(A) Historical Cost
(B) Current Cost
(C) Realizable Value
11. The concepts of Conservation in balance sheet results in:

(A) Increase in Cash
(B) Decrease in Cash
(C) Decrease in assets
(D) No change in assets.

12. An analytical petty cash book

(A) lists different petty cash expenses under their relevant headings
(B) is used instead of a three column cash book
(C) is not part of the double entry system
(D) is always run on the imprest system
13. A petty cash book is usually maintained by

(A) small traders
(B) big business houses
(C) all business houses—big and small
(D) none of the above
14. Which of the following is not a contingent liability?

(A) Claims against the company not acknowledged as debts
(B) Debts included on debtors which are doubtful in nature
(C) Uncalled liability on partly paid shares
(D) Arrears of cumulative fixed dividends.
15. A petty cash book records

(A) receipts and payments of small amounts
(B) only small payments
(C) only small expenses
(D) small expenses and income
16. The concept of conservatism will have the effect off:

(A) Overstatement of Assets
(B) Understatement of Assets
(C) Overstatement of Liabilities
(D) Understatement of Liabilities.
17. A bill receivable of 10,000, which was received from a debtor in full settlement for a
claim of 11,000 dishonoured will be recorded in -
(A) Bills receivable book
(B) Journal proper (General Journal)
(C) Purchases return Book
(D) Purchase book

18. Outstanding salary 34,000 to be provided in the accounts will be recorded in-
(B) Journal proper (General Journal)
(C) Purchases Return Book
(D) Purchase book
19. A debit note for 20,000 issued to Mr. Z for goods returned by us is to be accounted
for in
(B) General journal
(C) Purchases return book
(D) Purchase book
20. Investment was sold in cash for 1,00,000 at par will be recorded in
(A) Cash book
(B) General journal
(D) Purchase book
21. Investment was sold on credit for 1,00,000 at par will be recorded in -
(A) Cash book
(B) General journal
(D) Purchase book
22. Salary paid in cash 50,000 will be recorded in -

(A) General journal
(B) Cash book
(D) Purchase book

(A) The trial balance is prepared after preparing the profit and loss account.
(B) The trial balance shows only balances of assets and liabilities
(C) The trial balance shows only nominal account balances.

(D) The trial balance has no statutory importance from the point of view of law.
24. ……………… is that expenditure which results in acquisition of an asset or which

results in an increase in the earning capacity of a business.
(A) Capital expenditure
(B) Revenue expenditure
25. Expenses whose benefit expires within the year of expenditure and which are
incurred to maintain the earning capacity of existing assets are termed as
(A) Capital expenditure
(B) Revenue expenditure
26. Journal is the book of in which every transaction is recorded before being posted into
the ledger.
(A) Primary entry
(B) Secondary entry
(A) (C)Third entry
(C) None of above
27. …………………… is a book in which all the business transactions are originally
recorded in chronological order and from which they are posted to the ledger
accounts at any convenient time.
(A) Ledger
(B) Journal
(C) Purchases returns books
(D) Sales book
28. Journal has ………………. Columns.

(A) 4
(B) 5
(C) 3
(D) 6

29. Transactions which are interconnected and have taken place simultaneously are
recorded by means of a-
(A) Adjustment entry
(B) Combined journal entry
(C) Either (A) or (B)
(D) Closing entry
30. ……………………… is the principal book of accounts where similar transactions

relating to a particular person or property or revenue or expense are recorded.
(A) Ledger
(B) Journal
(C) Purchases returns books
(D) Sales book

ANSWER KEY
1. D 16. B
2. A 17. B
3. C 18. B
4 B 19. C
5. A 20. A
6. C 21. B
7. A 22. B
8. C 23. D
9. B 24. A
10. D 25. B
11. A 26. A
12. A 27. B
13. B 28. B
14. B 29. B
15. B 30. A

Practice Test Paper - 2 Inspire Academy - 8888881719
Chapter – 2
Introduction to Corporate Accounting
1. Which of the following appears under the heading Reserves & Surplus in the balance
sheet?
(A) Share Options Outstanding Account
(B) Share Application Money Pending Allotment
(C) Long Term Provisions
(D) Secrete Reserves
2. As per Schedule Ill of the Companies Act, 2013, a Company shall disclose by way of
notes additional information regarding aggregate expenditure and income in
relation to any item of income or expenditure which exceeds
(A) 0.5% of the revenue lrom operations
(B) Rs. 10,000
(C) 1% of the revenue from operations Rs. 1,00,000, whichever is higher
(D) 0.5% of the revenue from operations Rs. 10,000, whichever is less
3. As per Rule 3 of the Companies (Filing of Documents and Forms in Extensible

Business Reporting Language) Rules, 2015, all companies having turnover of
…………... has to file their Balance Sheet, Profit &Loss A/c and other documents
with the Registrar using the Extensible Business Reporting Language (XBRL)
(A) 50 Crore or above
(B) 100 Crore or above
(C) 250 Crore or above
(D) 500 Crore or above
4. As per Section 128 of the Companies Act, 2013, every company shall prepare and
keep at its ………… books of account and other relevant books and papers and
financial statement for every financial year
(A) Corporate Office
(B) Registered Office
(C) Corporate Office or Registered Office
(D) Head Office

5. Which of the following is required to be disclosed in notes to accounts in respect or

Share Capital?
(A) A reconciliation of the number of shares outstanding at the beginning and at the end
of the reporting period
(B) Aggregate number and class of shares bought back
(C) Shares in the company held by each shareholder holding more than 5%
6. As per Rule 3 of the Companies (Filing of Documents and Forms in Extensible

Business Reporting Language) Rules, 2015, all companies having has to file their
Balance Sheet, Profit& Loss A/c and other documents with the Registrar using the
Extensible Business Reporting Language(XBRL).
(A) Issued capital of 5 Crore or above
(B) Authorized capital of more than 10 Crore
(C) Paid-up capital of R 5 Crore or above
(D) Subscribed capital of R 25 Crore or above
7. Final accounts of a company are prepared according to .............. of Companies Act,

2013:
(A) Schedule IV
(B) Schedule V
(C) Schedule III
(D) Schedule VI
8. In the company’s balance sheet, unclaimed dividend should be shown under which
of the following heads ..............
(A) reserves and surplus
(B) current liabilities
(C) unsecured loans
(D) miscellaneous expenditure
9. Which of the following is not the feature of a company?

(A) Separate legal entity
(B) Perpetual Existence
(C) Incorporated association
(D) No separation between management and ownership

10. Financial statement as per Section 2(40) of the Companies Act 2013, inter-alia not
includes:
(A) A Balance Sheet as at the end of the financial year.
(B) A profit and loss account or in the case of a company carrying on any activity not for
profit, an income and Expenditure account for the financial year.
(C) Fund flow statement for the financial year.
(D) A statement of changes in equity, if applicable.
11. Dividend proposed to be paid is calculated as a percentage of

(A) Net Profits
(B) Authorised Capital
(C) Issued Capital
(D) Paid up Capital
12. Dividend declared and paid by a company:

(A) An expense of the company
(B) An income of the company
(C) The distribution of profit earned by the company
(D) The source of fund for the company
13. Consider the following items which appear under Reserves and Surplus of balance
sheet of a company
(1) Statement of Profit and Loss
(2) Capital Redemption Reserve
(3) Securities premium
(4) Capital Reserve
The correct sequence of these items is:
(A) 4, 2, 3, 1
(B) 4, 3, 2, 1
(C) 1,2, 3, 4
(D) 2, 4, 3, 2
14. Part I Schedule III of the Companies Act, 2013 prescribes:

(A) Form of balance sheet
(B) Requirements as to statement of P/L
(C) Horizontal form of balance sheet

(D) None of these
15. Analysis of any financial statement comprises

(A) Balance sheet
(B) P&L Account
(C) Trading account
16. Which of the following are techniques, tools or methods of analysis and
interpretation of financial statements?
(A) Ratio Analysis
(B) Average Analysis
(C) Trend Analysis
17. Interpretation of accounts is the

(A) Art and science of translating the figures
(B) To know financial strengths and weaknesses of a business
(C) To know the causes for the prevailing performance of business
18. Agency cost consists of

(A) Binding
(B) Monitoring
(C) Opportunity and structure cost
19. Which capital is shown in B/S:

(A) Authorised Share Capital
(B) Issued Share Capital
(C) Subscribed Share Capital
20. The maximum amount beyond which a company is not allowed to raise funds by
issue of shares is known as:
(A) Nominal Capital

(B) Issued Capital

(C) Subscribed Capital
(D) None.
21. Dividends are usually paid on:

(A) Authorised Capital
(B) Issued Capital
(C) Called - up Capital
(D) Paid - up Capital
22. The term current asset doesn’t cover

(A) Car
(B) Debtors
(C) Stock
(D) Prepaid expenses
23. P&L statement is also known as

(A) Statement of operations
(B) Statement of income
(C) Statement of earnings
24. Which of the following is true about financial statements?

(A) Financial statement gives a summary of accounts.
(B) Financial statements can be stated as recorded facts.
(a) Only A
(b) Only B
(c) Both A and B
(d) None of above
25. The primary goal of a publicly-owned firm interested in serving its stockholders
should be to-
(A) Maximize expected total corporate profit
(B) Maximize expected EPS
(C) Maximize the stock price per share
(D) Maximize expected net income

26. In the real world, we find that dividends

(A) Usually exhibit greater stability than earnings.
(B) Fluctuate more widely than earnings
(C) Tend to be a lower percentage of earnings for mature firms
(D) Are usually set as a fixed percentage of earnings
27. Which of the following will be shown in the balance sheet under the heading cash
and cash equivalents?
(A) Earmarked balances with banks
(B) Bank deposits with more than twelve months maturity
(C) Cheques, drafts on hand
28. Which of the following type of company is required to file their accounts in
Extensible Business Reporting Language (XBRL) format?
(A) Banking companies
(B) Insurance companies
(C) Non-Banking Financial companies
29. Declared dividend must be paid within ……….. of declaration.

(A) 5 days
(B) 10 days
(C) 30 days
(D) 60 days
30. Retained earnings are-

(A) An indication of a company's liquidity.
(B) The same as cash in the bank.
(C) Not important when determining dividends.
(D) The cumulative earnings of the company after dividends.

ANSWER KEY
1. A 16. D
2. C 17. D
3. B 18. D
4 A 19. D
5. D 20. A
6. A 21. D
7. C 22. A
8. B 23. D
9. D 24. C
10. C 25. C
11. D 26. A
12. C 27. D
13. A 28. D
14. A 29. C
15. D 30. D

Chapter – 3 & 5
Accounting for Share Capital
Practice Test Paper – 3
1. Section 2(88) provides the Definition of .............

(A) Sweat Equity Shares
(B) Subsidiary Company
(C) Shares
(D) Subscribed Capital
2. The notice relating to offer for right issue shall be dispatched through registered post
or speed post of through electronic mode to all the existing shareholders at least
………… before the opening of the issue.
(A) 3 days
(B) 5 days
(C) 7 days
(D) 10 days
3. Value of the right =?

(A) Market value plus average price of the share
(B) Market value less average price of the share
(C) Market value multiplied by adjustment factor
(D) Market value less average price of the share multiplied by adjustment factor
4. Which of the following statement is true if company issues bonus shares?

(A) Bonus share is an income.
(B) Total market value comes down after bonus issue.
(C) Paid-up share capital increases with the issue of bonus shares.
(D) Fund flow is affected adversely due to bonus issue.
5. Bonus issue must be authorized -

(A) By the board of directors
(B) Article of association of the company
(C) Shareholders by ordinary resolution

6. Which of the following can be utilized tor issue of bonus shares?

1. Balance of profits &loss account
2. Capital Reserve
3. Dividend Equalization Fund
4. Development Rebate Reserve
5. Profit Prior to Incorporation
Select the correct answer from the options given below
(A) 1,3 and 5 only
(B) 2 and 4 only
(C) 1 and3 only
(D) 1,2,3 and 5 only
7. Bonus issue can be made on-

(A) Partly paid-up shares
(B) Fully paid-up shares.
(D) Both (A) and (B)
8. Which of the following condition of Section 63 is required to be compiled by the

company before making bonus issue?
(A) Bonus issue is authorized by its articles
(B) Company has not defaulted in payment of interest or principal in respect of fixed
deposits or debt securities issued by it.
(C) Company has not defaulted in payment of statutory dues of the employees like PF
contribution, gratuity and bonus
9. Which of the following statement is false?

(A) The bonus shares shall not be issued in lieu of dividend.
(B) The company which has once announced the decision of its Board recommending a
bonus issue can withdraw the same.
(C) In case of bonus issue there is no cash flow.
(D) Issue of bonus shares does not affect the market value of the company.
10. Which of the following is correct journal entry for issue of bonus shares?

(A) Debit the equity share capital account and credit the securities premium account.
(B) Debit the bonus to shareholders account and credit the general reserve account
(C) Debit the general reserve account and credit the equity share capital account.
(D) Debit the capital reserve account and credit the equity share capital account.
11. Following was the Balance Sheet of BCC Ltd. as on 3Ist December, 2019:
Equity Shares of 10 each 8,00,000
Securities Premium 2,80,000
General Reserve 1,40,000
Profit& Loss Account 2,40,000
Sundry Creditors 1,80,000
Company issued 3 bonus shares for every 4 fully paid-up shares. Securities premium
account will be utilized first and then General Reserve. To issue bonus shares Profit
& Loss A/c will be debited by -
(A) 2,40,000
(B) 1,80,000
(C) 2,00,000
(D) 2,20,000
12. A company has decided to increase its existing share capital by making rights issue
to the existing shareholders in the proportion of 1 new share for every 2 old shares
held. You are required to calculate the value of the right if the market value of share
at the time of announcement of right issue is 576. The company has decided to give
one share of 100 each at a premium of 188 each.
(A) 348
(B) 174
(C) 96
(D) 82
13. A Ltd. has 20,000 Equity Shares of 10 each. Balance of Profit & Loss Account is
1,40,000. It has issued 6% Debentures in the past of 1,20,000
At the annual general meeting it was resolved that:
i. To pay a dividend of 10% in cash Corporate dividend tax rate 17%.
ii. To issue 1 bonus share for every 4 shares held after 1 month of right issue
iii. To give existing shareholder right to purchase one 10 share for every 4 shares prior
to bonus issue
iv. To repay debentures at a premium of 5%.

Balance of Profit & Loss A/e after giving effect to above transactions will be-
(A) 48,100
(B) 54,100
(C) 52,000
(D) 65,100
14. P Ltd. issued 2,000, 10% Preference shares of 100 each at par, which are redeemable
at a premium of 106. For the purpose of redemption, the company issued 1,500
Equity Shares of 100 each at a premium of 20% per share. At the time of redemption
of Preference Shares, the amount to be transferred by the company to the Capital
Redemption Reserve Account =?
(A) 50,000
(B) 40,000
(C) 2,00,000
(D) 2,20,000
15. During the year 2005-2006, T Ltd. issued 20,000, 12% Preference shares of 10 each at
a premium of 5%, which are redeemable after 4 years at par. During the year 2010-
2011, as the company did not have sufficient cash resources to redeem the preference
shares, it issued 10,000, 14% debentures of 10 each at a premium of 10%. At the time
of redemption of 12% preference shares, the amount to be transferred to capital
redemption reserve =?
(A) 90,000
(B) 1,00,000
(C) 2,00,000
(D) 1,10,000
16. The document inviting offers from public to subscribe for the debentures or shares
or deposits of a company is a:
(A) Share Certificate
(B) Articles of Association
(C) Fixed Deposit Receipt
(D) Prospectus.
17. When shares are issued to promoters for their services, the account that will be
debited is:
(A) Preliminary Expenses A/c
(B) Goodwill A/c

(C) Promoters A/c

(D) Share Capital A/c.
18. The maximum amount beyond which a company is not allowed to raise funds, by
issue of shares, is its:
(A) Issued Capital
(B) Reserve Capital
(C) Authorised Capital
(D) Subscribed Capital.
19. Share Premium Account should be shown in the:

(A) Trading A/c
(B) Profit and Loss A/c
(C) Assets side of the Balance Sheet
(D) Liabilities side of the Balance Sheet
20. Preference shares amounting to 2,00,000 are redeemed at a premium of 5%, by issue
of equity shares amounting to 1,00,000 at a premium of 10%. The amount to be
transferred to capital redemption reserve
(A) 1,05,000
(B) 1,00,000
(C) 2,00,000
(D) 1,11,000
21. The balance sheet of A Ltd. has 20,000 9% preference shares of 10 each. The company
redeemed preference shares at a premium of 2 per share. For redemption it realized
investments at a value of 1,60,000 (Book value 2,00,000). At the time of redemption
balance in profit & loss account was 1,60,000. Issued at a premium of 40 per share,
such a number of equity shares of 100 each for the purpose of redemption as to
ensure that after the compliance with the requirements of the Companies Act, 2013,
the credit balance in profit and loss account would be 25,000. No. of equity shares to
be issued are …………. & balance transferred to capital redemption account ………
(A) 1,200 equity shares & 80,000
(B) 800 equity shares & 1,20,000
(C) 1,450 equity shares & 55,000
(D) 1,050 equity shares & 95,000
22. Which of the following should be deducted from the share capital to find out paid –

up capital?
(A) Calls - in - advance
(B) Calls - in arrears
(C) Share forfeiture
(D) Discount on issue of shares.
23. Which of the following does not appear under the head ‘share capital’ of a balance
sheet?
(A) Preference Share Capital
(B) Share Forfeiture A/c
(C) Equity Share Capital
(D) Capital Reserve A/c.
24. Which of the following statements is true regarding calls - in - arrears?

(A) Calls - in - arrears is that part of called up capital which remains unpaid.
(B) It is not shown in the balance sheet until the defaulted shares are forfeited.
(C) The rate of interest on calls - in - arrear is chargeable at 5% p.a. if a company adopts
Table F.
(D) Charging of interest on calls - in arrear need not be permitted by the articles of
association.
25. Which of the following statements is false?

(A) Capital redemption reserve cannot be used for writing off miscellaneous expenses
and losses.
(B) Capital profit realized in cash cannot be used for payment or dividend.
(C) Reserves created by revaluation of fixed assets are not permitted to be capitalized.
(D) Dividend is payable on the calls paid in advance by shareholders.
26. Which of the following statements is incorrect?

(A) In a company liquidation Preference shares are entitled to priority return of capital.
(B) Preference shares have priority right to receive dividend.
(C) Normally Preference shares have no votes at meetings of shareholders.
(D) Preference shares are always cumulative, even if the name does not confirm the
position.

(A) Preference shares and debentures have priority right for a reward over ordinary

shares.
(B) Debentures will not receive interest in a year when the company makes an operating
loss.
(C) Preference shares will get dividend only when ordinary share too receive them.
(D) Ordinary shares could be paid dividend even when a company has negative
retained earnings.
28. For which one or more of the following reasons could a balance is the share
premium be applied?
a) To issue bonus shares
b) For distribution to shareholders as dividend.
c) To write down the value of assets, particularly when they are impaired.
d) To write off expenses of and commission on issuing the same shares
(A) c & d
(B) a & d
(C) b & c
(D) a & b
29. For which one or more of the following reasons does company law attempt to
protect the balance in the Securities Premium account by specifying the reasons for
which alone it may be applied?
(A) It is part of the capital actually contributed by the shareholder
(B) It should be protected from erosion as part of the creditors buffer.
(C) It is not realized in cash.
(D) Itis immoral to allow a company to make profit by trading on its own shares.
30. Ltd. issued 10,000 equity shares of Rs. 10 each at a premium of 20% payable Rs. 4 on
application (including premium), Rs. 5 on allotment and the balance on first and
final call. The company received applications for 15,000 shares and allotment was
made pro-rata. P, to whom 3,000 shares were allotted failed to pay the amount due
on allotment. All his shares were forfeited before the call was made. The forfeited
shares were reissued to Q at par. Assuming that no other bank transactions took
place, the bank balance of the company after effecting the above transactions is?
(A) Rs. 1,14, 000
(B) Rs. 1,32,000
(C) Rs. 1,20,000
(D) Rs. 1,00,000.

ANSWER KEY
1. A 16. D
2. A 17. B
3. B 18. C
4. C 19. D
5. A 20. B
6. C 21. C
7. B 22. B
8. D 23. D
9. B 24. A
10. C 25. D
11. B 26. A
12. C 27. A
13. A 28. B
14. A 29. C
15. C 30. A

Chapter – 4
Accounting for Debentures
1. On issue of debentures as a collateral security, which account is credited?

(A) Debentures Account
(B) Bank Loan Account
(C) Debenture holdings Account
(D) Debenture Suspense Account
2. G Ltd. purchased land and building from H Ltd. at a book value of Rs. 2,00,000. The
consideration was paid by issue of 12% debentures of Rs. 100 each at a discount of
20%. For this transaction, the debentures account would be credited with –
(A) Rs. 2,60,000
(B) Rs. 2,50,000
(C) Rs. 2,40,000
(D) Rs. 1,60,000.
3. K Ltd. Issued Rs. 15,000,12% Debentures of Rs. 50/- each at premium of 10% payable
as Rs. 20/- on application and balance on allotment Debentures are redeemable at per
after 6 years. All the money due on allotment was called up and revised. The amount
of premium will be:
(A) Rs. 3,00,000
(B) Rs. 2,25,000
(C) Rs. 75,000
(D) Rs. 5,25,000
4. Debenture is issued as a collateral security to a loan, interest will be given on-

(A) On debentures only
(B) Both loan & debentures
(C) On loan but not on debentures
(D) None of the following
5. Which of the following statement is true?

(A) A Debenture holder is an owner of the company.

(B) A Debenture is issued at a discount and can be redeemed at a premium.

(C) A Debenture Holder can get his money back only on liquidation.
(D) A Debenture Holder receives interest only in the event of profit.
6. XYZ Co. Ltd. purchased assets worth Rs. 28,80,000. It issued debentures of Rs. 100
each at a discount of 4% in full satisfaction of the purchase consideration. The
number of debentures issued to the vendors of asset are:
(A) Rs. 30,000
(B) Rs. 28,000
(C) Rs. 32,000
(D) Rs. 35,000
7. How money debentures will a company be required to issue for satisfying the
purchase consideration of Rs. 28,80,000, if debentures of Rs. 100 are issued at a
premium of Rs. 20 per debenture?
(A) Rs. 24,000
(B) Rs. 28,000
(C) Rs. 36,000
(D) Rs. 32,000
8. H Ltd. purchased machinery from G company for a book value o? Rs. 4,00,000. The
consideration was paid by issue of 10% debentures of Rs. 100 each at a discount of
20%. The debenture account will be credited by:
(A) Rs. 4,00,000
(B) Rs. 5,00,000
(C) Rs. 3,20,000
(D) Rs. 4,80,000.
9. P Ltd. has issued 15% Debentures of Rs. 20,00,000 at a discount of 10% on April
01,2004 and the company pays interest half-yearly on June 30 and December 31
every year. On March 31,2006, the amount shown as “interest accrued but not due”
in the Balance Sheet will be:
(A) Rs. 75,000
(B) Rs. 2,25,000
(C) Rs. 1,50,000
(D) Rs. 3,00,000.

10. Y Ltd. issued 10,000, 12% debentures of Rs. 100 each at a premium of 10%, which are
redeemable after 10 years at a premium of 20%. The amount of loss on redemption of
debentures to be written off every year will be
(A) Rs. 1,60,000
(B) Rs. 80,000
(C) Rs. 20,000
(D) Rs. 16,000.
11. On May 01,2003, Y Ltd. issued 7%, 40,000 convertible debentures of Rs. 100 each at a
premium of 20%. Interest is payable on September 30 and March 31, every year.
Assuming that the interest runs from the date of issue, the amount of interest
expenditure debited to profit and loss account for the year ended March 31,2004 is:
(A) Rs. 2,80,000
(B) Rs. 2,33,333
(C) Rs. 3,36,000
(D) Rs. 2,56,667.
12. When debentures are issued at par and are redeemable at premium, the credit given
to premium on redemption of debentures account is in nature of:
(A) Personal A/c
(B) Real A/c
(C) Nominal A/c
13. When debentures are issued at a discount, it is prudent to write off the discount:
(A) In the year of the issue of debentures
(B) During the life of the debentures if it is treated as deferred revenue expenditure.
(C) Within 3 years of the issue of debentures
(D) In the year of redemption of debentures
14. Ankit Ltd. issued 5,000 Debentures of Rs. 10 each for subscription. 4,000 Debentures
were subscribed by the public by paying Rs. 3 as application money. Number of
debentures allotted to public by Ankit Ltd. will be:
(A) 5,000 shares
(B) 4,000 shares
(C) 3,000 shares
(D) 1,000 shares

15. Interest received on debenture redemption fund investment is:

(A) Capital reserve a/c
(B) General reserve a/c
(C) Debenture redemption fund A/c
16. Ansh Ltd. issued 10,000 12% Debentures of Rs. 100 each at a discount of 10% payable
in full on application by 31sl March, 2007. Application were received for 12,000
debentures. Debentures were allotted on 9th June, 2007. The amount of excess
money refunded on the same date will be:
(A) Rs. 1,80,000
(B) Rs. 1,00,000
(C) Rs. 1,10,000
(D) Rs. 1,50,000
17. “Non-convertible” debentures is inferred as:

(A) Owner’s capital
(B) Loan capital
(C) Short term debts
(D) None of these
18. Sahil Ltd. has issued 14% Debentures of Rs. 20,00,000 at a discount of 10% on April
01,2005 and the company pays interest half-yearly on June 30, and December 31
every year. On March 31,2007, the amount shown as “interest accrued but not due”
in the balance sheet will be:
(A) Rs. 70,000 shown along with Debentures
(B) Rs. 2,10,000 under current liabilities
(C) Rs. 1,40,000 shown along with Debentures
(D) Rs. 2,80,000 under current liabilities
19. If debentures of Rs. 1,000 are purchased for Rs. 980 by the company, the difference of
Rs. 20 will be assumed to be:
(A) Profit on redemption of debenture
(B) Loss on redemption of debenture
(C) Goodwill

20. Rs. 4,25,000 debentures are issued against the purchase of assets of Rs. 4,50,000 in
this case Rs. 25,000 will be supposed to be:
(A) Goodwill
(B) Capital Reserve
(C) Profit
(D) Loss
21. The interest on Debenture Redemption Fund Investments is credited to:

(A) Debenture A/c
(B) Debenture Redemption Found A/c
(C) Debenture Redemption Found Investment A/c
22. The balance of debenture sinking fund is finally transferred to:

(A) Profit and Loss A/c
(B) DRF Investment A/c
(C) General Reserve
(D) Capital Reserve
23. Debentures which are transferable by mere delivery are:

(A) Registered Debentures
(B) First Debentures
(C) Second Debentures
(D) Bearer Debentures
24. Debenture holders are the:

(A) Owners of the Company
(B) Creditors of the Company
(C) Directors of the Company
(D) Customers of the Company
25. Discount on issue of debentures is:

(A) Current Assets
(B) Fixed Assets
(C) Fictitious Assets
(D) Personal Assets

26. Z Co. Ltd. purchased assets worth Rs. 28,80,000. It issued debentures of Rs. 100 each
at a discount of 4% in full satisfaction of the purchase consideration. The number of
debentures issued to vender is:
(A) 30,000
(B) 28,800
(C) 32,000
27. According to SEBI guidelines by what percentage of amount of debentures the

debenture redemption fund will be raised before redemption?
(A) 40%
(B) 50%
(C) 60%
(D) 100%
28. The Premium on redemption of debentures is

(A) Personal Account
(B) Real Account
(C) Normal Account
(D) None of these
29. Sinking investment always shows

(A) Debit Balance
(B) Credit Balance
(C) Both
(D) None of these
30. The interest on sinking fund investments is credited in:

(A) Profit-Loss Account
(B) Sinking Fund Account
(C) General Reserve Account
(D) Sinking Fund investment

ANSWER KEY
1. A 16. A
2. B 17. B
3. C 18. A
4 C 19. B
5. B 20. B
6. A 21. B
7. A 22. C
8. B 23. D
9. A 24. B
10. C 25. A
11. D 26. A
12. A 27. B
13. B 28. B
14. B 29. A
15. C 30. B

Chapter – 6
Financial Statements Interpretation
1. To pay remuneration to any one managing director; or whole-time director or

manager in excess of 5% of the net profits of the company, which of the following
approvals are required?
(A) Board resolution and prior approval of Central Government
(B) Board Resolution
(C) Special resolution in general meeting.
(D) Ordinary Resolution in general meeting and prior approval of Central Government.
2. ABC Ltd., a listed company having two managing directors, is considering to pay
remuneration to both managing director’s equivalent to 10.5% of net profits of the
company. Company seeks your advise the, necessary approvals required.
(A) Board resolution and prior approval of Central Government
(B) Board Resolution
(C) Special resolution in general meeting.
(D) Ordinary Resolution in general meeting and prior approval of Central Government.
3. Mr. Financer, is a CEO in a public company. Company is considering a proposal to

increase the remuneration payable to Mr. Financer. Which of the following is true in
this regard?
(A) Company can pay upto 5% of net profit to Mr. Financer.
(B) Company can pay upto 1 % of net profit to Mr. Financer.
(C) Company can pay upto 3% of net profit to Mr. Financer.
(D) Limits of Sec. 197 and Schedule V are not applicable over CEO.
4. Which statement is true?

(A) Social responsibility could find expression in the policy documents of the company
wherein a company undertake to discharge certain goals in addition to business
goals.
(B) Business should be expected to take the long term view and perform socially
responsible actions that might primarily reduce profits in the short run but are in the
ultimate interest of the company in the long run
(C) Business should be obliged to internalise most of its external cost

(D) All of the above.
5. Which is the section of Corporate Social Responsibility?

(A) Creditors
(B) Suppliers
(C) Professional institutions
6. Computers taken on hire by a business for a period of twelve months should be

classified as
(A) Current assets
(D) Not an asset
7. In the case of downward revaluation of an asset which is for the first time, the
account to be debited is …………………...
(A) Fixed Asset A/c
(B) Revaluation Reserve A/c
(C) Profit & Loss A/c
(D) General Reserve A/c
8. An orgainsation’s obligation to act to protect and improve society’s welfare as well

as its own interests is referred to as
(A) organisational social responsibility
(B) organisational social responsiveness
(C) corporate obligation
(D) business ethics
9. Which of the following expenses is not included in the acquisition cost of a plant and
equipment?
(A) Cost of site preparation
(B) Delivery and handling charges
(C) Installation costs
(D) Financing costs incurred subsequent to the period after plant and equipment is put
to use.

10. Corporate contributions for charitable and social responsibility purposes is called
(A) corporate philanthropy
(B) corporate charities
(C) corporate donations
(D) corporate discretionary
11. The balance sheet gives information regarding the -

(A) Results of operations for a particular period
(B) Financial position during a particular period
(C) Profit earning capacity for a particular period
(D) Financial position as on a particular date
12. The social demands and expectations of organisations can be assessed by all of the
following except
(A) social planning
(B) social forecasting
(C) social scanning
(D) social audits
13. Provisions of the Corporate Social Responsibility (CSR) are applicable to the
company having turnover of-
(A) 100 Crore or more
(B) 250 Crore or more
(C) 500 Crore or more
(D) 1,000 Crore or more
14. Which of the following is/are the important characteristic of depreciation

P. Depreciation is permanent, continuous and gradual increase in the value of a fixed
asset.
Q. Depreciation is appropriation of profit.
R. Depreciation is always computed in a systematic and rational manner
Select the correct answer from the options give below
(A) O & R only
(B) P & R only
(C) R only
(D) P& O only

15. If the Effective Capital of company is 250 Crores and above it may, without approval
of Central Government pay remuneration to the managerial person not exceeding
(A) 160 lakhs plus 0.05% of the effective capital in excess of 250 Crores
(B) 180 lakhs plus 0.25% of the effective capital in excess of 250 Crores
(C) 240 lakhs plus 0.02% of the effective capital in excess of 250 Crores
(D) 120 lakhs plus 0.01% of the effective capital in excess of 250 Crores
16. Corporate social responsibility that extends beyond legal mandates can help meet
societal expectations in the absence of
(A) Statutory devices
(B) Social tool
(C) Cost tool and Techniques
(D) Science tool
17. If the Effective Capital of company is 100 Crores and above but less than 250 Crores
it may, without approval of Central Government, pay remuneration to the
managerial person not exceeding:
(A) 240 lakhs per annum
(B) 180 lakhs per annum
(C) 120 lakhs per annum
(D) 100 lakhs per annum
18. XYZ Co. Ltd. proposed a dividend of 20%. The net profit of the company is Rs.
1,20,000. The called up equity share capital is Rs. 5,00,000 and the amount of calls in
arrears is Rs. 30,000. What will be the amount of dividend payable?
(A) Rs. 1,00,000
(B) Rs. 94,000
(C) Rs. 24,000
(D) Rs. 1,06,000
19. In ………., approach the assets are stated in balance sheet in the order in which they
can be easily converted into cash and the liabilities in the order in which they have to
be paid off.
(A) Alphabetical order
(B) Permanence order
(C) Liquidity order

20. In ………., approach assets which are to be used for long-term in the business and
are not meant to be sold are presented first and assets which are most liquid such as
cash in hand, are presented at the bottom.
(A) Alphabetical order
(B) Permanence order
(C) Liquidity order
21. If the Effective Capital of company is 5 Crores and above but less than 100 Crores it
may, without approval of Central Government, pay remuneration to the managerial
person not exceeding:
(A) 7 lakhs per month
(B) 5 lakhs per month
(C) 4 lakhs per month
(D) 9 lakhs per month
22. As per Schedule III Current Maturities of Long Term Borrowings should be shown
under
(A) Current Assets in Balance Sheet
(B) Non-current Liability in Balance Sheet
(C) Current Liabilities in Balance Sheet
(D) Other Expenses in Statement of Profit and Loss
23. The arrangement of assets and liabilities in accordance with a particular order is
known as ………. of balance sheet.
(A) Tallying
(B) Marking
(C) Ruling
(D) Marshalling
24. If Net Profit is starting point for the purpose of calculation of managerial
remuneration then which of the following you will deduct:
(A) Income Tax
(B) Capital Profits
(C) Compensation for breach of contract
(D) General expenses

25. Which of the following is correct in relation to sitting fees of directors as per
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014?
(A) The sitting fees for Independent Directors and Women Directors shall not be less
than Rs. 1 Lac.
(B) The sitting fees for Independent Directors and Women Directors shall not be more
than Rs. 1 Lac.
(C) The sitting fees for Independent Directors and Women Directors shall not be less
than the sitting fee payable to other directors.
(D) The sitting fees for Independent Directors and Women Directors shall not be more
than the sitting fee payable to other directors.
26. As per Section 198 of the Companies Act, 2013 while calculating net profit for
managerial remuneration, if gross profit is starting point then which of the following
is allowed to deducted-
(A) Contributions made u/s 181
(B) Actual bad debts written-off
(C) Liability arising from a breach of contract
27. A director or manager in a company may be paid remuneration by way of .............

(A) monthly payment.
(B) a specified percentage of the net profits of the company.
(C) partly by monthly payment and partly at a specified percentage of net profits of the
company.
(D) any of the above
28. As per Section 198 of the Companies Act, 2013 while calculating net profit for
managerial remuneration, if gross profit is starting point then which of the following
is allowed to deducted-
(A) Loss of a capital natures
(B) Voluntarily compensation
(C) Directors seating fee
(D) Super-tax on the income
29. If Net Profit is starting point for the purpose of calculation of managerial
remuneration then which of the following you will add:
(A) Ex-gratia payment to an employee
(B) Capital Profit

(C) Debenture trustee Remuneration

(D) Revenue profit on sale of plant
30. The annual instalment to depreciation fund for replacement of a fixed asset is
(A) Charge against profit
(B) An appropriation of profits
(C) Charge against reserve
(D) Charge against cash

ANSWER KEY
1. C 16. A
2. D 17. C
3. D 18. B
4 D 19. C
5. D 20. B
6. D 21. A
7. C 22. C
8. A 23. D
9. D 24. B
10. A 25. C
11. D 26. D
12. A 27. D
13. C 28. C
14. C 29. A
15. D 30. A

Chapter – 7
Consolidation of Accounts
1. Which of the following treatment is correct for mutual debts with regard to purchase
and sale of goods between holding and subsidiary company
(A) Amount of mutual debt will be added to the Debtors and Creditors on asset side and
liability side respectively while preparing the consolidated balance sheet.
(B) Amount of mutual debt will be ignored as it is not asset or liability at all.
(C) Amount of mutual debt will be deducted from the Debtors and Creditors on asset
side and liability side respectively while preparing the consolidated balance sheet.
(D) Amount of mutual debt will require adjustment on debtors figure on asset side only
if amount receivable by subsidiary company is more than amount payable to
holding company.
2. Which of the following statements are incorrect with regard to preparation of a

consolidated statement of financial position?
a. Gain on fair valuation of a subsidiary’s asset is a pre-acquisition profit.
b. Non-controlling interest does not deserve any portion of fair valuation gain.
c. It an asset is not reported in the subsidiary's ledger it need not be fair valued.
d. Gain on fair valuation of subsidiary's asset inflates the cost of goodwill.
Select the correct answer from options given below.
(A) b, c & d
(B) c & d
(C) a, c & d
(D) a, b & c
3. On a consolidated balance sheet, if the shares of a company have been bought for
more than the balance sheet value then the difference would appear as:
(A) Profit on purchase
(B) Goodwill
(C) Capital reserve
(D) Loss on purchase

4. What is the term used to describe dividends paid by one company in the group to
another in the same group
(A) Inter-group dividends
(B) Intra-group dividends
(C) Group dividends
(D) Interim dividends
5. The minority shareholders of subsidiary company are authorised for:

(A) Capital profit
(B) Revenue profit
(C) Capital and Revenue both profits
(D) All the above.
6. Holding company means:

(A) The holder of at least 51 % shares of another company
(B) The holder of at least 80% shares of another company
(C) Other company controls on its board of directors
(D) All the above
7. The holding company has been defined under,the following section of Company
Act, 2013
(A) Section 3
(B) Section 4
(C) Section 4(4)
(D) Section 2(46)
8. The meaning of Subsidiary company is

(A) Which controls on another company
(B) Other Company controls on its board of directors
(C) Other Company is the holder of 40% shares of this company
(D) None of above
9. Limited is the holder of 55% shares of B Limited, A Limited:

(A) has purchased B Limited
(B) has absorbed B Limited
(C) is holding company

(D) is subsidiary company
10. The share of holding company in the capital and reserve of subsidiary company is
Rs. 3,90,000 and the investment in shares of subsidiary company is Rs. 4,20,000. This
difference is called.
(A) Goodwill Rs. 30,000
(B) Capital Reserve Rs. 30,000
(C) Revenue profit Rs. 30,000
11. If less than 100% of a subsidiary's share capital has been acquired then what is the
rule tor inclusion of the subsidiary's assets on the consolidated balance sheet?
(A) Only, a proportional amount should appear.
(B) All the assets should appear.
(C) None can appear until all the shares have been acquired.
(D) Half the value should appear.
12. H Company is a holding company and S Company is subsidiary company. The

goods casting Rs. 20,000 is included in the stock of S Company which has been
purchased from H Company. H Company sold the goods at a profit of 10% on
Selling price. Unrealized profit will be:
(A) Rs. 2,222
(B) Rs. 2,200
(C) Rs. 2,000
(D) Rs. 1,818
13. Consolidated Financial Statements are prepared on the principle that:

(A) In form the companies are one entity, in substance they are separate.
(B) In form the companies are separate, in substance they are one.
(C) In form and substance, the companies are separate.
(D) In form and substance, the companies are one.
14. The time interval between the dates of balance sheets of holding company and
subsidiary company for the purpose of consolidation of accounts.
(A) can be more than a year
(B) can be 10 to 12 months
(C) can be 7 to 9 months

(D) Cannot be more than 6 months
15. PIONEER LTD. acquired 3200 Equity Shares of ARYAN LTD. on March 31, 2018.
The Share Capital of ARYAN LTD. consists of 4000 Equity Shares of Rs. 100 each.
The cost of investments is Rs. 6,80,000 ARYAN LTD. made a bonus issue on March
31, 2018 of one Equity Share for every four shares held by its shareholders. If the
share in the capital profits in ARYAN LTD. is Rs. 2,65,600 (after adjustment of
Bonus), the amount of Goodwill/Capital Reserve shown in the Consolidated Balance
Sheet on March 31, 2016 is
(A) Rs. 4,14,000 (Goodwill)
(B) Rs. 2,80,000 (Capital Reserve)
(C) Rs. 14,400 (Goodwill)
(D) Data insufficient.
16. Which of the following is true?

(A) Minority shareholders share of pre-acquisition losses should be added to the amount
of Minority Interest.
(B) Holding company's share of pre-acquisition losses must be debited to Profit & Loss
A/c
(C) Dividend received out of pre-acquisition profits of subsidiary should be credited to
Investment A/c.
(D) Dividend received out of post-acquisition profits of subsidiary should be debited to
Investment A/c.
17. How is a negative goodwill reported on the consolidated statement of financial

position?
(A) As a negative asset i.e. shown on the asset side but as a deduction.
(B) A tenth of it is included in consolidated reserves and the remainder reported as a
reserve.
(C) Included fully in the consolidated retained earnings.
(D) As a reserve, which may preferably be titled a capital reserve
18. X LTD. acquired 80% of shares of Y LTD. On March 31,2018 for consideration of Rs.
5,20,000. The share capital of Y LTD. comprises of 4000 Equity Shares of Rs. 100 each.
The Capital Profit and Revenue Profits of Y LTD. were Rs. 3 lakh and Rs. 1 lakh on
the date of acquisition. The amount of minority interest shown in the consolidated
Balance Sheet as on March 31,2018 is
(A) Rs. 2,20,000
(B) Rs. 1,20,000

(C) Rs. 1,60,000

(D) Rs. 1,20,000
19. If stock is sold for a profit from one group member to another, how should this be
dealt with in the final accounts?
(A) Stock should appear at the original cost.
(B) (5) The profits should be included but stock would appear at the value sold for.
(C) (Profit on sale should be eliminated and stock appears at original cost.
(D) Profits on the sale should be eliminated.
20. The claim by outsiders to assets featured on a consolidated balance sheet is known
as:
(A) Subsidiary
(B) Negative goodwill
(C) Minority interest
(D) Wholly owned subsidiary
21. P Ltd. had acquired 80% share in the Q Ltd. for Rs. 25 lacs. The net assets of Q Ltd.
on the day are Rs. 22 lacs. During the year P Ltd. sold the investment for Rs. 30 lacs
and net assets of Q Ltd. on the date of disposal was Rs. 35 lacs. The Profit or Loss on
disposal of this investment to be recognised in consolidated financial statement is:
(A) Profit Rs. 5,00,000
(B) Profit Rs. 2,00,000
(C) Loss Rs. 9,40,000
(D) Loss Rs. 5,40,000
22. On consolidation, if the total of the fair value of the assets acquired is less than the
whole purchase consideration then the differences should be treated as:
(A) Negative goodwill
(B) Goodwill
(C) Profit on acquisition
(D) Loss on acquisition
23. X Ltd. acquired 150000 shares of Y Ltd. on August, 2016. The Equity Capital of Y Ltd.
is Rs. 20 lakhs of Rs. 10 per share. The machinery of Y Ltd. is revalued upwards by
Rs. 4,00,000. The minority group interest shown in the consolidated Balance Sheet as
on March 31,2017 was

(A) Rs. 6,00,000

(B) Rs. 4,00,000
(C) Rs. 1,00,000
24. When dealing with consolidated balance sheets, the expression cost of control could
be used instead of:
(A) Acquisition expenditure
(B) Goodwill
(C) Intangible investments
(D) Negative goodwill
25. In consolidated balance sheet it will not be shown:

(A) Cash
(B) Stock
(C) Minority Interest
(D) Intercompany transaction
26. If a holding company sold the goods costing Rs. 27,000 at Rs. 36,000 to its subsidiary
company and on the date of consolidated balance sheet the goods of Rs. 6,000
remains at subsidiary company from these goods then the unrealised profit will be:
(A) Rs. 500
(B) Rs. 1,500
(C) Rs. 2,000
(D) Rs. 4,500
27. Pre-acquisition reserve is-

(A) Capital profit
(B) Revenue profit
(C) Goodwill
(D) Secret Reserve
28. In case of holding company, Capital profit arising due to revaluation of assets and
liabilities of subsidiary co. is-
(A) Added to capital reserve
(B) Deducted from capital reserve
(C) Added to goodwill

(D) Added to balance of P & L Account
29. Which of the following is not normally considered the right of an ordinary
shareholder
(A) An interest in the profits earned by the company.
(B) An interest in the day-to-day running of the company.
(C) An interest in the net assets of the company.
(D) Voting rights at meetings.
30. Post-acquisition profit is-

(A) Capital Profit
(B) Revenue Profit
(C) Goodwill
(D) Secret Reserve

ANSWER KEY
1. C 16. D
2. A 17. C
3. B 18. C
4 B 19. B
5. C 20. B
6. A 21. D
7. D 22. B
8. B 23. A
9. C 24. C
10. A 25. D
11. A 26. B
12. C 27. A
13. B 28. A
14. D 29. A
15. C 30. B

Chapter – 8
Corporate Financial Reporting
1. When reporting under CARO, 2016, auditor is required to state in case of Nidhi
Companies, whether the Nidhi company has complied with:
(A) Net Owned funds to total debts in the ratio of 1:20.
(B) Net Owned funds to deposits in the ratio of 1:20
(C) Net Owned funds to total debts in the ratio of 1:10
(D) Net Owned funds to deposits in the ratio of 1:10
2. When reporting under CARO, 2016, auditor is required to state in case of Nidhi
Companies, whether the Nidhi company has complied with Net Owned Funds to
Deposits liability in the ratio of 1:20. For this purpose, the deposit liability consists
of:
(A) Fixed Deposits and recurring deposits received from its members.
(B) Fixed Deposits and saving deposits received from its members.
(C) Recurring Deposits and Saving deposits received from its members
(D) Fixed Deposits, recurring deposits and Saving deposits received from its members.
3. Auditor’s report under CARO, 2016 in terms of Para 3(xvi) shall incorporate:
(A) Registration number of company under Companies Act, 2013
(B) Registration number of company allotted by RBI.
(C) Both of the above.
(D) None of the above.
4. Who are the stakeholders of the business that are concerned with CSR?
(A) Governments, employees, communities, partners, competitors
(B) Employees, research agencies, Governments, communities, trade organizations
(C) Suppliers, partners, employee communities, investors, education institutions
5. While reporting under Clause (x) of Para 3 of CARO, 2016, with respect to fraud,
auditor is required to report on:
(A) Fraud noticed and reported u/s 143(12) of Companies Act, 2013
(B) Fraud suspected and reported u/s 143(12) of Companies Act, 2013

(C) Fraud committed on the company by the vendors of the company

(D) Both (a) and (c)
6. While carrying out audit of ABC ltd, auditor observed that a term loan was obtained
by the company from a bank for Rs. 75 lakhs for acquiring R&D equipment, out of
which Rs. 12 lakhs were used to buy a car for use of the concerned director, who was
overlooking the R&D activities. Auditor is required to report the matter:
(A) Under Clause (vii) of paragraph 3 of the CARO, 2016
(B) Under Clause (viii) of paragraph 3 of the CARO, 2016
(C) Under Clause (ix) of paragraph 3 of the CARO, 2016
(D) No reporting required under the requirements of CARO, 2016
7. Corporate governance can be defined as:

(A) The system used by firms to control the actions of their employees.
(B) The election process used to vote in a new Board of Director.
(C) The corporate compliance system used by the firm.
(D) The system used by firms to identity who the critical stakeholders are for the firm.
8. CARO does not apply on a private company if, during a financial year turnover not
exceeding
(A) Rs. 3 Crore
(B) Rs. 5 Crore
(C) Rs. 7 Crore
(D) Rs. 10 Crore
9. The company shall obtain a certificate from either the ……………. regarding
compliance of conditions of corporate governance of the listing agreement and
annex the certificate with the directors repot sent annually to all the shareholders of
the company.
(A) Auditors
(B) Practicing Company Secret
(D) Either (A) or (B)
10. CARO does not apply to

(A) Banking Companies
(B) Not for Profit Companies

(C) both (a) and (b)

11. Which type of director should be the head of the Stakeholders Grievance
Committee?
(A) Executive director
(B) Non-executive director
(C) Senior most director
(D) Chairman appointed for shareholders meetings
12. CARO come into existence in the year —

(A) 2000
(B) 2003
(C) 2004
(D) 2005
13. Section 134 of the Companies Act, 2013 deals with

(A) Directors Report
(B) Auditors Report
(C) Secretary Report
(D) Government Report
14. “Value added statement” is related with

(A) Value created by the activities of the firm
(B) Increase in price of goods and services
(C) Increase in the quality of goods and services
15. Which type of committee is not required to form for compliance with provisions of
Corporate Governance under the Companies Act, 2013 and SEBI Regulations?
(A) Audit Committee
(B) Nomination & Remuneration Committee
(C) Stakeholders Grievance Committee
(D) Corporate Governance Committee
16. To calculate Economic Value Added (EVA) the cost of equity is deducted from –

(A) Gross Profit

(B) Net Profit
(C) EBIT
(D) Net Operating Profit after tax
17. Every listed company and every public company having a paid up share capital of
…………. Calculated at the end of the preceding finance year shall include, in the
report by its Board of directors, a statement indicating the manner in which formal
annual evaluation has been made by the Board of its own performance and that of its
committees and individual directors.
(A) 5 Core or more
(B) 50 Crore or more
(C) 25Crore or more
(D) 10 Crore or more
18. Market Value Added is the difference between –

(A) Market Value of equity and Book value of equity
(B) Gross Profit and Net Profit
(C) Turnover of two consecutive years
19. Which of the following is not one of the underlying principles of the Corporate
Governance?
(A) Openness
(B) Integrity
(C) Accountability
(D) Acceptability
20. When economic value added is used as the performance measure, value is only
created if the after-tax operating income exceeds
(A) cost of investing capital
(B) investment
(C) working capital
(D) sales
21. Which of the performance evaluation methods takes into consideration tax effects?
(A) Economic value added

(B) Return on sales

(C) Residual income
(D) Return on investment
22. Purpose of Guidance Note on Reports and Certificates for Special Purposes is to:
(A) provide guidance on engagements which require a practitioner to issue reports other
than those which are issued in audits or reviews of historical financial information.
(B) provide guidance on engagements which require a practitioner to issue reports in
audits of historical financial information.
(C) provide guidance on engagements which require a practitioner to issue reports in
reviews of historical financial information.
(D) provide guidance on engagements which require a practitioner to issue reports in
audits or reviews of historical financial information.
23. In which of the following companies, auditor is required to report on matters

specified under CARO, 2016:
(A) Foreign company.
(B) Small Company.
(C) One Person company.
24. Directors responsibilities are unlikely to include:

(A) A duty of care
(B) A duty to propose high dividends for shareholders
(C) A fiduciary duty
(D) A duty to keep proper accounting records
25. A private limited company, in order to be covered under CARO, 2016, must satisfy
which of the following conditions:
(A) total borrowings exceeding rupees ten crores from any bank or financial institution
at any point of time during the financial year.
(B) total borrowings exceeding rupees one crore from any bank or financial institution
as on the balance sheet date.
(C) total borrowings exceeding rupees ten crores from any bank or financial institution
as on balance sheet date.
(D) total borrowings exceeding rupees one crore from any bank or financial institution at
any point of time during the financial year

26. CARO, 2016 is applicable over a private limited company, having paid up capital
and reserves and surplus is Rs. 1 crore or more as on the balance sheet date. For this
purpose,
(A) Paid-up share capital would include equity share capital only.
(B) Amount of calls unpaid should be added to the figure of paid-up capital.
(C) Amount originally paid-up on forfeited shares should be added to the figure of paid
- up capital.
(D) Share application money received should be considered as part of the paid-up
capital.
27. Para 3(iii)(c) of CARO, 2016 requires the auditor to state the total amount overdue
for more than 90 days, and whether reasonable steps have been taken by the
company for recovery of the principal and interest. This reporting is required in
which of the following situation:
(A) If the company has granted any loans, secured or unsecured to companies covered
in the register maintained u/s 189 of the Companies Act, 2013.
(B) If the company has granted any loans, secured or unsecured to firms and LLPs
covered in the register maintained u/s 189 of the Companies Act, 2013.
(C) If the company has granted any loans, secured or unsecured to other parties covered
in the register maintained u/s 189 of the Companies Act, 2013
28. Which of the following actions will not help directors to protect themselves from
non-compliance with their obligations and responsibilities
(A) Keeping themselves fully informed about company affairs.
(B) Including a disclaimer clause in their service contracts.
(C) Ensuring that regular management accounts are prepared by the company.
(D) Seeking professional help
29. The corporate governance structure of a company reflects the individual company's:
(A) Cultural and economic system
(B) Legal and business system
(C) Social and regulatory system
30. CSR and corporate governance represent a ……………... between business and
society.
(A) Social climate

(B) Special contract

(C) Special climate
(D) Social contract

ANSWER KEY
1. B 16. D
2. D 17. C
3. D 18. A
4 D 19. A
5. A 20. A
6. C 21. A
7. C 22. A
8. D 23. A
9. B 24. B
10. B 25. D
11. B 26. B
12. B 27. D
13. A 28. B
14. A 29. D
15. D 30. D

Chapter – 9
Cash Flow Statements
1. Which of the following results into decrease in working capital —

(A) Goods sold on credit
(B) Decrease in current liabilities
(C) Decrease in current assets
(D) Increase in current assets.
2. In cash flow statement, interest received by company is classified as-

(A) Operating activities
(B) Cash and cash equivalents
(C) Investing activities
(D) Financing activities.
3. In case of a financial enterprise, interest received on debentures held as investment

is-
(A) Financing activity
(C) Operating activity
4. Which one of the following is false?

(A) If cash outflows exceed cash inflows on an ongoing basis, the business will
eventually run out of cash.
(B) Rapidly expanding companies can sometimes face a cash shortage.
(C) Cash is the lifeblood of a business and without it the business will die.
(D) A profitable company will never run out of cash.
5. In case of financial enterprises, cash flow arising from interest and dividends should
be classified as cash flow from
(B) Financing Activities

(C) Investing Activities

(D) Business Activities
6. As per Accounting Standard - 3, cash equivalents include —

(A) Treasury bills
(B) Commercial papers
(C) Money market funds
7. Cash payments to and on behalf of employees is an example of cash flow from —

8. Investments at the beginning and at the end of the year 2017-18 were 255 Lakh and
210 Lakh respectively. During the year 40 per cent of original investments were sold
at a profit of 763 Lakh. Amount of cash inflow and outflow respectively from
Investments will be:
(A) 102 Lakh and 57 Lakh
(B) 165 Lakh and 57 Lakh
(C) 45 Lakh and Nil
(D) 147 Lakh and 39 Lakh
9. Which statement contains opening as well as closing balances of cash and cash
equivalents and prepared on accrual basis:
(A) Cash flow statement
(B) Fund flow statement
(C) Both (a) and (b) above
(D) Statement of income and expenditure.
10. The purchase of machinery by issuing long-term notes payable should be reported
as a:
(A) Non-cash investing and financing activity
(B) Cash outflow in the operating activity
(C) Cash outflow in the investing activity
(D) Cash outflow in the financing activity.

11. Income from investments is a cash flow from:

(B) Investing activities
(C) Financing activities
12. In cash flow, income tax paid as treated as

(D) Not shown any where
13. By Cash Equivalents we mean:

(A) Bank Balance
(B) Short-term Highly Liquid Securities
(C) Investments
(D) Investments in debenture
14. As per Accounting Standard-3, cash equivalents include-

(A) Treasury bills
(B) Commercial papers
(C) Money market funds
15. Cash payments to and on behalf of employees is an example of cash flow from
16. Net profit before working capital changes of Super Ltd, is 435,000. Changes in
working capital during the year are as follows:
Particulars
Decrease in stock 2,58,000
Decrease in bills payable 8,400
Increase in bills receivable 38,800

Increase in prepaid expenses 2,500

Increase in outstanding expenses 7,800
Cash generated from operation for Super Ltd. will be -
(A) 2,18,900
(B) 7,45,500
(C) 6,51,100
(D) 2,34,500
17. In an organization, provision for taxation as on 31Ist December, 2013 was 16,000 and
on 31st December, 2014 18,000. Provision for taxation of 19,000 was made during the
year 2014. The tax paid during the year is
(A) 17,000
(B) 19,000
(C) 2,000
(D) 16,000
18. Which of the following items is not a part of cash flow from operating activities?
(A) Collection from customers
(B) Payment of outstanding wages
(C) Payment to suppliers of machinery
(D) Advances to foreign suppliers for raw materials
19. While preparing Cash Flow Statement of XY Ltd., a finance company, interest
received on loans should be shown as
(A) Cash Flow from Operating Activities
(B) Cash Flow from Investing Activities
(C) Cash Flow from Financing Activities
(D) Cash and Cash Equivalent
20. Which of the following is not a component of Cash Flow Statement?

(A) Cash payments to suppliers for goods and services
(B) Charging of Depreciation
(C) Cash advances and loans made to third parties
(D) Cash repayments of amounts borrowed
21. In a cash flow statement there is no place for

(A) Issue of equity shares

(B) Issue of bonus shares
(C) Conversion of debt to equity
(D) Both B and C above
22. The purchase of machinery by issuing long-term notes payable should be reported
as a
(A) Non-cash investing and financing activity
(B) Cash outflow in the operating activity
(C) Cash outflow in the investing activity
(D) Cash outflow in the financing activity
23. Which statement contains opening as well as closing balances of cash and cash
equivalents and prepared on accrual basis
(A) Cash flow statement
(B) Fund How statement
(C) Both (A) and (B) above
(D) Statement of income & expenditure
24. Income from investments is a cash flow from

(B) Investing activities
(C) Financing activities
25. A cash flow statement is based upon …………. while fund flow statement recognizes
…………….
(A) Cash basis of accounting; accrual basis of accounting
(B) Accrual basis of accounting; conventional basis of accounting
(C) Mercantile basis of accounting; cash basis of accounting
(D) Cash basis of accounting; basis of accounting
26. According to AS-28, estimates of future cash flow should not include
(A) Cash flow from financing activities
(B) Cash flow from the continuing use of the assets
(C) Cash flow to be received for disposal of asset at the end of its useful life

(D) None of (A), (B), (C).
27. In which schedule of Companies Act, 2013, requirements of Balance Sheet of a

company are mentioned:
(A) Schedule VI Part I
(B) Schedule VI Part II
(C) Schedule III Part I
(D) Schedule III Part II
28. In which schedule of Companies Act, 2013 requirements of Profit and Loss Account
of a company are mentioned:
(A) Schedule VI Part I
(B) Schedule VI Part II
(C) Schedule III Part II
(D) None of these
29. Dividends can be declared out of:

(A) Capital Profit
(B) Capital
(C) Excess of income over expenditure
(D) Excess of expenditure over income
30. Preference share capital of 5,00,000 was redeemed at a premium of 10%, partly out of
proceeds or issue of 20,000 equity shares of 10 each issued at 10% premium and
partly out of profits otherwise available for dividends. Choose the correct effect on
different activities of cash flow statement from the options given below:
(A) In financing activities, cash outflow 5,50,000 and cash inflow 2,20,000.
(B) In financing activities, cash outflow 5,50,000 and in investing activities cash inflow
2,20,000
(C) Net 3,30,000 will be outflow in operating activities
(D) In investing activities cash outflow of 5,50,000 and in financing activities cash inflow
of 2,20,000

ANSWER KEY
1. C 16. C
2. C 17. A
3. C 18. C
4 D 19. A
5. A 20. B
6. D 21. D
7. A 22. A
8. B 23. B
9. A 24. B
10. A 25. A
11. B 26. A
12. A 27. C
13. B 28. C
14. D 29. C
15. A 30. A

Chapter – 10
ACCOUNTING STANDARDS
1. Accounting Standards refers to specific accounting:
(A) Principles
(B) Methods of applying those principles
(C) Both (a) and (b)
(D) None
2. Accounting for Fixed Assets:
(A) AS 6
(B) AS 10
(C) AS 3
(D) AS 2
3. Consistency with reference to application of accounting principles refer to the
(A) All the companies in the same industries should use identical procedures and
methods
(B) Income and assets have not been overstated
(C) Accounting methods and procedures used have to be consistently applied
from year to year
(D) Any accounting method or procedure can be utilized.
4. Accounting Standards ............. the statute:
(A) can over-ride

(B) cannot over-ride
(C) may over-ride
(D) none
5. IASB stands for:
(A) Indian Accounting Standards Board

(B) Indian Accounting Standards Bulletin
(C) International Accounting Standards Bulletin

(D) International Accounting Standards Board
6. AS 22 is related with the following:
(A) Accounting for Taxes on Income

(B) Discontinuing Operations
(C) Interim Financial Reporting
(D) Financial reporting of Interests in Joint Venture
7. AS - 8 on Accounting for Research and Development:
(A) Is replaced by AS - 26
(B) Is applicable only to listed companies
(C) Is mandatory for Research Institutions
(D) Is still in use
8. The purpose of Accounting Standards is to:
(A) Harmonise accounting policies

(B) Eliminate the non-comparability of financial statements
(C) Improve reliability of financial statements
9. AS 2 is on:
(A) Disclosure of Accounting Policies

(B) Valuation of Inventories
(C) Revenue Recognition
(D) Depreciation Accounting
10. The following are the benefits of Accounting Standards except:
(A) Eliminate confusing variations in accounting treatment.

(B) Disclosure of Important Information beyond that required by law.
(C) Facilitate comparison of financial statements by providing valuation norms
and standard accounting policies.
(D) Choice between justified alternative accounting treatments becomes difficult.
11. An accounting policy may be changed
(A) To comply with accounting standard

(B) To ensure more appropriate presentation of the financial statement of the
enterprise
(C) To comply with law

12. The aim of issuing accounting standards is
(A) To hormonise accounting policies

(B) To eliminate the non-comparability of financial statements
(C) To improve the reliability of financial statements
13. As per AS-22, a deferred tax asset should be recognized only if there is a
reasonable certainty that sufficient future taxable income will be available and such a
conclusion is supported by
(A) Consideration of prudence

(B) Consideration of caution
(C) Consideration of consistency
(D) Consideration of conservation.
14. Under AS-28, when goodwill and corporate assets cannot be allocated on a
reasonable and consistent basis to cash-generating unit, to determine impairment
loss.
(A) ‘Bottom up’ test is performed

(B) Both ‘Bottom up’ test and ‘Top down’ test are performed
(C) ‘Top down’ test is performed
(D) None of these tests is performed
15. The fair values of Pension plan assets of Milestones Ltd. at the beginning and the
end of the year 2007-08 were Rs. 2,80,000 and Rs. 3,08,600 respectively. The
employer’s contribution to the plan during the year was Rs. 29,000. If benefit
payments made to the retirees are Rs. 32,000, the actual return on Pension plan assets
for the year will be (as per AS-15):
(A) Rs. 25,600

(B) Rs. 31,600
(C) Rs. 32,600
(D) None of A, B and C
16. As per AS-11 exchange differences arising on repayment of fixed asset- linked
liabilities should be adjusted to
(A) Profit & Loss Account;

(B) Fixed Asset Account;
(C) Revaluation Reserve;

17. _________prescribes the basis for presentation of general purpose financial

statement to ensure comparability both with the entity’s financial statements of
previous periods and with the financial statements of other entities.
(A) Ind AS 1
(B) Ind AS 2
(C) Ind AS 3
(D) Ind AS 4
18. As per AS-11 exchange differences arising on repayment of fixed asset- linked
liabilities should be adjusted to
(A) Profit & Loss Account

(B) Fixed Asset Account
(C) Revaluation Reserve
19. Under AS-26, the normal period of amortisation for an intangible asset other than
goodwill is
(A) the best estimate of its useful life

(B) a period of 10 years
(C) useful life or 10 years whichever is shorter
(D) useful life or 10 years whichever is longer.
20. As per AS-22, justification for method of determining periodic deferred tax is
based on the concept of
(A) Matching of periodic expense to periodic revenue

(B) Objectivity in calculation of periodic expense
(C) Recognition of assets and liabilities
(D) Consistency of tax expenses measurements with actual tax planning strategy.
21.Which one of the following intangibles should not be recognised as per AS-26?
(A) Internally generated goodwill

(B) Licences
(C) Patents
(D) Trademarks.
22. Which one of the following combination of accounting assumptions are

fundarrientals as per AS-1?

(A) Going concern, consistency and accrual

(B) Going concern, conservation and historic cost
(C) Historic cost, consistency and accrual
(D) Conservatism, consistency and accrual.
23. As per AS-27, when two enterprises jointly control a property, each taking a
share of the rents received and bearing a share of the expenses, the joint venture is of
the form:
(A) Jointly controlled operation

(B) Jointly controlled assets
(C) Jointly controlled entities
(D) All of the above three
24. On 1st December, 2017, Guru Construction Company Limited undertook a

contract to construct a building for Rs. 108 lakhs. On 31st March, 2018 the company
found that it had already spent Rs. 83.99 lakhs on the construction. A prudent
estimate of additional cost for completion was 36,01 lakhs. The amount of the
provision for foreseeable loss, which must be made in the Final Accounts for the year
ended 3151 March, 2018 based on AS 7 ‚Accounting for Construction Contracts‛ is
(A) Rs. 13.01 lakhs

(B) Rs. 120.00 lakhs
(C) Rs. 12.00 lakhs
(D) Rs. 36.01 lakhs
25. Ind AS 33 deals with
(A) Earning per share

(B) Financial Instrument Presentation
(C) Fair value measurement
26. With reference to Ind AS 102, what does SBP stands for?
(A) Share based payment

(B) Share based proportion
(C) Sum based payment
(D) Shareholder based pricing
27. Ind AS 113 deals with:
(A) Fair value Measurement

(B) Joint arrangements

(C) Financial Instruments

(D) Insurance Contract
(A) Accounting for Government grants
(B) Accounting for foreign exchange transaction
(D) Fund Flow Statement
29. Ravi Ltd. purchased goods at the cost of Rs. 40 lakh in October, 2019. Till March
2020, 75% of the stocks were sold. The Campany wants to disclose closing stock at
Rs. 10 Lakh. The expected sale value is Rs. 11 Lakh and a commission at 10% on sale
is payable to the agent. What is the correct closing stock to be disclosed as at
31.3.2020 as per AS-2?
(A) 10 Lakh
(B) 9.9 Lakh
(C) 11 Lakh
(D) 12 Lakh
(A) Cost
(B) Replacement Cost

ANSWER KEY
1. D 16. D
2. B 17. A
3. C 18. A
4 B 19. C
5. D 20. A
6. A 21. A
7. A 22. A
8. D 23. B
9. B 24. C
10. D 25. A
11. D 26. A
12. D 27. A
13. A 28. B
14. A 29. A
15. B 30. B

Practice Test Paper -1 Inspire Academy -
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Chapter – 11
National and International Accounting
Authorities
1. The Institute of Cost Accountants of India was setup in –
(A) 1958
(B) 1959
(C) 1960
(D) 1961
2. IFRS refers to –
(A) International Financial Reporting System

(B) Indian Forest Reserve Service
(C) International Financial Reporting Standard
(D) None of-the above
3. Financial Accounting Standard Board is a
(A) Government Organisation

(B) Private Organisation
(C) Semi-Government Organisation
4. Professional Oversight Board (POB) is a:
(A) Accountancy & Actuarial Discipline Board of UK

(B) Australian regulatory body
(C) UK regulatory body
(D) Canadian accounting body
5. A ICPA was founded in –
(A) 1886
(B) 1887
(C) 1890
(D) 1892
Think beyond 70+ in CMA and FM with Raj

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6. Professional Oversight Board (POB) is regulatory body situated in –
(A) USA
(B) India
(C) Japan
(D) UK
7. The European Financial Reporting Advisory Group (EFRAG) is a private

association established in -
(A) 1901
(B) 2001
(C) 1991
(D) 2011
8. Approval of exposure drafts, re-exposure drafts, and IPSASs are made by the
affirmative vote of at least ………… of the International Public Sector Accounting
Standards Board (IPSASB) members.
(A) one-third
(B) two-thirds
(C) one-half
(D) three-fourth
9. Accountancy and Actuarial Discipline Board (AADB) is a disciplinary body in –
(A) UK
(B) USA
(C) France
(D) Japan
10. The Financial Reporting Council (UK) board is supported by three committees,
namely
(A) Presidents Committee; Professional Committee; Implementation Committee

(B) Core Standards Committee; Conduct Committee; Standby Committee
(C) Official Committee; Subsidiary Committee; Professional Committee
(D) Codes & Standards Committee; Executive Committee; Conduct Committee
11. FASB Stands for:
(A) Financial Accounting Standard Board

(B) Financial Accounting System Board

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(C) Financial Accounting Securities Board

12. APB Stands for
(A) Auditing Professional Board

(B) Auditing Practices Board
(C) Auditing Professional Body
13. IFRS Foundation is a ……………………. responsible for developing a single set of

high-quality global accounting standards, known as IFRS Standards
(A) Not-for-profit organization

(B) Statutory organization
(C) Nominee organization
14.The ICAI functions under the Ministry of –
(A) HRD
(B) Corporate Affairs
(C) Finance
(D) Commerce
15. The IFRS Foundation has a ……………. governance structure
(A) Three-tier
(B) Two-tier
(C) Four-tier
(D) Five-tier
16. Financial Reporting Council (UK) is a:
(A) Company limited by guarantee

(B) Unlimited company
(C) Subsidiary company of IFRS
(D) Associate company of the Institute of Chartered Accounts of England
17. AASB Stands for
(A) Australian Accounting Standard Board

(B) America Accounting Standard Board
(C) Australian Accounting System Board

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18. EFRAG Stands for:
(A) European Financial Reporting Accounting Group

(B) European Financial Reporting Advisory Group
(C) European Financial Research Advisory Group
19. In which year ICSI was set - up?
(A) 1980
(B) 1981
(C) 1982
(D) 1978
20. Objective of the Institute of Cost Accountants of India is-
(A) To promote and develop the adoption of scientific methods in cost and
management accountancy.
(B) To compete with the Chartered in Accountants.
(C) To Implement the IFRS in India
(D) To develop high quality public sector financial reporting standards.
21. Member of which organization can be appointed as statutory auditor of a company

under the Companies Act, 2013.
(A) Member of ICSI

(B) Member of ICAI
(C) Member of ICWA
22. FRRP stands for –
(A) Financial Regulation Review Panel

(B) Financial Reporting Review Panel.
(C) Financial Reports Regulatory Provision
23. The Emerging Issues and Task Force was formed by –
(A) Indian Accounting Standards Board

(B) Financial Accounting Standards Board
(C) Institute of Management Accounts
(D) (a) and (b) both

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24. Which of the following is not correct in relation to POB (Professional Oversight
Board).
(A) It is an independent regulator of Corporate Governance and reporting

(B) It can carry out inspections on behalf of the Auditing Practices Board
(C) It makes recommendations to Government and Professional Authorities
(D) (a) and (b) both.
25. Which of the following does not fall under the scope of Ind As 102
(A) Fair value of equity

(B) cash-settled payment transaction
(C) Share-based payment transaction
(D) Credit-Based payment transaction
26. The Council of ICAI constitutes of ……….. members of whom ………… are elected
by the Chartered Accountants and remaining ……… are nominated by the Central
Government generally representing the Comptroller and Auditor General of India,
Securities and Exchange Board of India, Ministry of Corporate Affairs, Ministry of
Finance and other stakeholders.
(A) 20; 12; 4

(B) 40; 32; 8
(C) 30; 20; 6
(D) 50; 38; 9
27. Among the following Disclosures, which of the following are required under Ind
AS 102.
(A) Description of agreements

(B) Average share price of exercised of options
(C) Valuation method to value the awards
28. National and International Accounting Authority
(A) 1980
(B) 1981
(C) 1982
(D) 1978
29. The role of a Company Secretory is:
(A) to play role of secretory in a company

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(B) to play act as an accountant

(C) to ensure compliance of relevant legislation regulation
30. Profession of Company Secretaries is regulated in India by provisions of the-
(A) Companies Act, 2013

(B) Company Secretaries Act, 1988
(C) SEBI Regulations
ANSWER KEY
1. B 16. A
2. C 17. A
3. B 18. B
4 C 19. A
5. B 20. A
6. D 21. B
7. B 22. B
8. B 23. B
9. A 24. B
10. D 25. D
11. A 26. B
12. B 27. D
13. A 28. A
14. C 29. C
15. A 30. A

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Chapter – 12
Adoption, Convergence and Interpretation of
International Financial Reporting Standards
(IFRS) and Accounting Standards in India
Past year Questions

1. Ind AS 19 is on:
(A) Income tax

(B) Leaser
(C) Employee benefits
2. Interim Financial Reporting:
(A) Ind AS-34

(B) Ind AS-33
(C) Ind AS-36
3. Ind AS - 27 is related with the following:
(A) Consolidated and separate financial assets

(B) Impairment of assets
(C) Earnings per share
4. Ind AS - 31 is related with the following:
(A) Impairment of assets

(B) Earnings per share
(C) Interest in Joint Venture
5. Match:
1. Borrowing Cost (a) Ind AS 38
2. Intangible Assets (b) Ind AS 23

1
3. Statement of Cash flow (c) Ind AS 1

4. Presentation of financial Statement (d) Ind AS 7
(A) 1 -(b), 2-(a), 3 -(d),4-(c)
(B) 1-(a), 2-(b), 3 -(c),4 -(d)
(C) 1 -(d), 2-(c), 3 -(b),4-(a)
(D) 1-(c), 2-(b), 3 (a),4-(d)
6. Ind AS-11 deals with:
(A) Accounting for service concession arrangements and agreements for

construction of real estate
(B) Measurement of contract revenue at consideration received/receivable.
7. Ind AS-7:
(A) Prohibits presentation of extraordinary items

(B) Uses the term reporting currency
(C) Do not provide option to classify interest and dividend paid/interest and
dividend received as part of operating cash flows
8. Ind AS 36 is related with the following
(A) Impairment of assets

(B) Investment of property
(C) Earnings per share
9. Ind AS 38 is on:
(A) Investment property

(C) Impairment of assets
10. Match:
1. Business Combination (a) Ind AS 104
2. Share based Payment (b) Ind AS 17
3. Insurance Contracts (c) Ind AS 102
4. Leaser (d) Ind AS 103
(A) 1-(d), 2-(c), 3-(a), 4-(b)
(B) 1-(a), 2-(d), 3-(c), 4-(b)

2
(C) 1-(c), 2-(d), 3-(d), 4-(a)

(D) 1-(b), 2-(d), 3-(c), 4-(a)
11. Ind AS-2
(A) Defines fair value

(B) Provides an explanation in respect of distinction between net realizable value
and fair value
(C) Provides explanation with regard to inventories of service providers
12. Ind AS - 2 is on
(A) Operating segments

(B) Inventories
(C) Income Taxes
13. Ind AS -108 is related with the following
(A) Operating Segments

(B) Leaser
(C) Revenue
(A) Cost
(B) Replacement cost
15. Which Ind AS is applicable on share based payments
(A) Ind AS 103

(B) Ind AS 102
(C) Ind AS 104
(D) Ind AS 105
16. Related party disclosure
(A) Ind AS 21
(B) Ind AS 23
(C) Ind AS 24

3
17. Interest in Joint Ventures
(A) Ind AS 31
(B) Ind AS 21
(C) Ind AS 32
18. IAS-1 allows classification of expenses based on ………… within the equity.
(A) their nature

(B) their function
(C) either their nature or their function
19. IAS-1 requires:
(A) Separate statement of change in equity

(B) Changes in equity to be show as a part of balance sheet.
(C) Separate statement of changes in minority
(D) Changes in equity to be shown as a part or income statement.
20. Total Number of Ind AS which are notified as of date?
(A) 39
(B) 40
(C) 69
(D) 66
21. The convergence of the Indian Accounting Standards with IFRS began in –
(A) Dec -11

(B) April-10
(C) April -11
(D) Aug - 09
22. The global key professional accounting body is –
(A) The International Accounting Standards Board

(B) The Financial Accounting Standards Board
(C) The Institute of Chartered Accountants of India
(D) The International Accounting Standards Committee

4
23. Ind AS-1 requires that classification of expenses be presented on the basis of-
(A) Nature of enterprises

(B) Ability of accountant
(C) Nature of expenses
(D) Reference to last year expenses
24. The original cost at which an asset or liability is acquired is known as –
(A) amortization
(B) replacement cost
(C) historical cost
(D) carrying cost
25. The International Accounting Standards Committee was set up in –
(A) 1976
(B) 2009
(C) 1967
(D) 1982
26. The process of converting foreign - subsidiary financial statements into the home
currency is known as –
(A) reconstruction
(B) transmission
(C) translation
(D) consolidation
27. Ind AS-1 requires disclosure of critical assumptions about the future and other
sources of measurement uncertainty-
(A) That can affect earning capacity of the business

(B) That can affect carrying amounts of assets and liabilities within next financial
year.
(C) That can affect carrying amounts of intangibles in current financial year.
28. The accounting process in which the financial statements of a parent company and
its subsidiaries are added together to yield a unified set of financial statements is
called –
(A) consolidation
(B) amortization

5
(C) amalgamation
(D) translation
29. Accounting in India is governed by the –
(A) Income Tax Department

(B) Reserve Bank of India
(C) Company Law Board
(D) Institute of Chartered Accountants of India.
30. Under Ind AS-1, presentation of any items of income or expense as extraordinary
is -
(A) Separately disclosed

(B) Shown as a part of statement of profit and loss
(C) Prohibited
31. Ind AS-11 requires contract revenue to be measured at -
(A) Net realizable value

(B) Fair value of consideration received/receivable
32. Adoption means application of IFRS issued by IASB as it is in entirety.

Convergence means using IFRS issued by IASB with some carve in and carve outs.
(A) True
(B) False
(C) Partly true
33. Companies covered in Phase I should have net worth
(A) Equal to 500 crores

(B) Equal and more than 500 crores
(C) Less than 500 crores
(D) more than 250 crores but less than 500 crores
34. Ind AS-20 requires government grants of the nature of promoters contribution to
be
(A) Credited directly to capital reserve and treated as a part of shareholders funds
(B) Recognize as income over the periods

6
(C) Do not recognize any such grants

35. Ind AS-34 requires the following in the contents of an interim financial report in
addition to what was required under previous standard AS-25 condensed balance
sheet, a condensed statement of profit and loss, a condensed cash flow statement-
(A) A condensed balance sheet

(B) A condensed statement of profit and loss
(C) A condensed cash flow statement
(D) A condensed statement of changes in equity
36. The net worth shall be calculated in accordance with the ............. of the company
as on ............. or the first audited financial statements for accounting period which
ends after that date;
(A) stand-alone financial statements, 31st March, 2014

(B) consolidated financial statements 31st March, 2014
(C) consolidated financial statements, 1st April 2015
(D) consolidated financial statements, 1st April 2014.
(A) Inventories
(B) Statement of Cash Flows
(C) Accounting Policies, Changes in Accounting Estimates and Errors
(D) Events after the Reporting Period
38. The main objective of the Ind AS-10 is:
(A) When an entity should adjust its financial statements for events alter reporting
period
(B) To prescribe the accounting treatment for income taxes
(C) To prescribe the criteria for selecting and changing accounting policies
(D) To prescribe, for lessee and lessor, the appropriate accounting policies
39. Which Ind AS is applicable on Investment Property
(A) Ind AS 34
(B) Ind AS 38
(C) Ind AS 39
(D) Ind AS 40

7
40. Ind AS will apply to
(A) Both consolidated as well as standalone financials of the company.

(B) Only consolidated financials
(C) Only standalone financials
(D) Optional
41. Ind AS once adopted either voluntarily or mandatorily can not be revoked in
prospective years even in case of net worth goes down from specified limit or any
other criteria given in roadmap.
(A) True
(B) False
42. As part of Ind AS transition process, companies covered in first phase will have to
prepare:
(A) Opening Ind AS Balance sheet as at 1 April 2015.

(B) Equity reconciliation b/w Ind AS and Indian GAAP on 1 April 2015 & 31 March
2016.
(C) Income Reconciliation b/w Ind AS and Indian GAAP for the year ending 31
March 2016.
43. As part of Ind AS transition process, companies covered in first phase will have to
prepare:
(A) Opening Ind AS Balance Sheet as at 1 April 2015.

(B) Equity reconciliation b/w Ind AS and Indian GAAP on 1 April 2015 and 31
March 2016.
(C) Income Reconciliation b/w Ind AS and Indian GAAP for the year ending 31
March 2016
(A) Inventories

8
(A) Impairment of Assets

(A) Inventories
(C) Events after the Reporting Period
(D) Intangible Assets
(A) Inventories
(B) Earnings per share
(C) Intangible Assets
(A) Agriculture
(A) Investment Property

50. Ind AS 115 requires revenue to be measured at–
(A) Net realizable value

(B) Fair value of consideration received/receivable

9

ANSWER KEY
1 C 11 D 21 C 31 B 41 A
2 A 12 B 22 A 32 B 42 D
3 A 13 A 23 C 33 B 43 D
4 C 14 D 24 C 34 C 44 C
5 A 15 B 25 C 35 D 45 A
6 A 16 C 26 C 36 A 46 B
7 A 17 A 27 B 37 B 47 B
8 A 18 C 28 A 38 A 48 A
9 B 19 A 29 D 39 D 49 A
10 A 20 B 30 C 40 A 50 C

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Chapter – 13
An Overview of Cost
1. Cost Accounting is:
(A) Part of Management Accounting

(B) Part of Financial Accounting
(C) Part of Responsibility Accounting
(D) None of these
2. Which one of the following is the Traditional approach for costing?
(A) Contribution approach

(B) Absorption costing approach
(C) Decision making approach
(D) Marginal costing approach
3. The following are features of a relevant cost EXCEPT:
(A) They affect the future cost

(B) They cause an increment in cost
(C) Relevant cost is a sunk cost
(D) They affect the future cash flows
4. Which of the following statement is TRUE about the relevant cost?
(A) It is a sunk cost

(B) It is an opportunity cost
(C) It does not affect the decision making process
(D) All costs are relevant
5. In-Decision making all costs already incurred in past should always be:
(A) Ignored
(B) Considered
(C) Partially ignored
(D) Partially considered
6. Which of the following statement is TRUE about historical cost?

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(A) It is always relevant to decision making

(B) It is always irrelevant to decision making
(C) It is always an opportunity cost
(D) It is always realizable value
7. A business unit is known to be a profit centre –
(A) If its operations or departments are not directly involved in revenue generating
activities, but instead focus on elements of cost control
(B) If its management is evaluated not only on revenues and expenses, but also on
asset investment
(C) If its management is compensated based on the level of profitability
(D) If its management is held accountable for both revenues and expenses and has
the authority to make decision regarding its products, markets and source of
supply
8. A cost centre which is engaged in production activity by conversion of raw material

into finished product is called-
(A) Production cost centre

(B) Impersonal cost centre
(C) Process cost centre
(D) Production unit
9. An average cost is also known as:
(A) Variable cost

(B) Unit cost
(C) Total cost
(D) Fixed cost
10. Period costs are:
(A) Expensed when the product is sold

(B) Included in the cost of goods sold
(C) Related to specific period
(D) Not expensed
11. When production is equal to sales, which of the following is true?
(A) No change occurs to inventories for either use absorption costing or variable
costing methods
(B) The use of absorption costing produces a higher net income than the use of
variable costing

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(C) The use of absorption costing produces a lower net income than the use of
variable costing
(D) The use of absorption costing causes inventory value to increase more than
they would though the use of variable costing
12. Under which of the following, all cost of production is considered as product cost,
regardless of whether they are variable or fixed in nature?
(A) Absorption costing

(B) Direct costing
(C) Marginal costing
(D) Variable costing
13. Management accounting is basically concerned with-
(A) The problem of choice

(B) Causative relationship
(C) Recording of transaction
(D) Both (A) and (B) above
14. Cost accounting is
(A) Nothing more than a detailed analysis of expenditure

(B) An instrument of management control
(C) Useful only in such organization which has profit as the aim
(D) Not needed if prices are beyond the control of the firm.
15. Conversion cost is the summation of
(A) Direct material and direct wages

(B) Direct wages and office overheads
(C) Direct wages, direct charges and works overheads
16. Which of the given cost does not become the part of cost unit?
(A) Advertising expenses

(B) Direct labour cost
(C) Factory overhead
(D) Cost raw material
17. Cost accounting concepts include all of the following except:
(A) Planning
(B) Controlling

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(C) Sharing
(D) Costing
18. Which of the following would be considered a major aim of a job order costing
system?
(A) To determine the costs of producing each job

(B) To compute the cost per unit
(C) To include separate records for each job to track the costs
(D) All of the given options
19. Re-ordering level is equal to:
(A) Maximum consumption x minimum re-order period

(B) Maximum consumption x maximum re-order period
(C) Minimum consumption x minimum re-order period
(D) Normal usage x normal delivery period.
20. The establishment of budgets, standard costs and actual costs of operations,
processes, activities or products and the analysis of variances, profitability or the
social use of funds is known as
(A) Costing
(B) Cost Accounting
(C) Cost Accountancy
(D) Financial Accounting
21. Costs which are constant tor a given level of output and then increase by a fixed
amount at a higher level of output are called
(A) Step costs

(B) Differential costs
(C) Committed costs
(D) Opportunity costs
22. Cost of production report summarizes data of:
(A) Quantities produced by production department only

(B) Cost incurred by production department only
(C) Quality of purchased units only
(D) Quantities produced and Cost incurred by production department
23. Which of the following statement measures the financial position of the entity on
particular time?

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(A) Income Statement

(B) Balance Sheet
(D) Statement of Retained Earnings
24. Which of the following is not an objective of management accounting-
(A) Formulation of plans and policy

(B) Assisting in decision making
(C) Preparation of financial statements
(D) Interpretation of financial documents
25. The techniques and process of ascertaining costs is called .............
(A) costing
(B) allocation
(C) operating
26. Relevant costs are
(A) Future costs

(B) Standard costs
(C) Historical costs
27. The method of costing used in hospital is ............. costing.
(A) operating
(B) fixed
(C) job
28. Which of the following is generally used as cost unit of brickworks
(A) 1,000 bricks

(B) 100 bricks
(C) 10,000 bricks
29. In cotton textile, the cost unit is ............. of cloth.
(A) metre
(B) overhead
(C) process

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30. Which of the following is generally used as cost unit in cement industry-
(A) Per tonne

(B) Per kiloliter
(C) Per kilogram
(D) Per gallon

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ANSWER KEY
1. A 16. A
2. B 17. C
3. C 18. A
4 B 19. B
5. A 20. B
6. B 21. A
7. D 22. D
8. A 23. B
9. B 24. C
10. C 25. A
11. A 26. A
12. A 27. A
13. D 28. A
14. B 29. A
15. C 30. A

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Chapter – 14
Cost Accounting Records & Cost Audit
under the Companies Act, 2013

1. Cost Audit was initially introduced in the year
(A) 1959
(B) 1960
(C) 1965
2. The time limit for making available cost records etc. by the company to the cost auditor is:
(A) 90 days from the end of financial year.

(B) 180 days from the end of financial year.
(C) 135 days from the end of financial year.
(D) 150 days from the end of financial year.
3. Approval of ............. is necessary in appointment of cost auditor:
(A) Central Government

(B) State Government
(C) Board of Directors
(D) None of these
4. Cost auditor is appointed by:
(A) Boards of Directors
(B) State Government
(C) Central Government
(D) None of these
5. The objective of CAS-1 is
(A) Collection, allocation, apportionment and absorption of overheads

(B) Determination of capacity
(C) Preparation of cost statement
(D) Determination of average/equalized transportation cost
6. Which section of the Companies Act, 2013 deals with audit of cost accounting records -

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(A) Section 158

(B) Section 148
(C) Section 168
(D) Section 139
7. Which of the-following is an objective to be achieved through Cost Accounting Standards-
(A) To assist cost accountant’s in preparation of uniform cost statements

(B) To provide better guidelines on standard cost accounting practices
(C) To help Indian industry and the Government towards better cost management
8. Under the existing regulation, a Cost Accountant in practice can take as a partner:
(A) Another Cost Accountant in full time practice

(B) A practicing Chartered Accountant
(C) A practicing Company Secretary
(D) An advocate registered with the Bar Councils
9. ............. is the verification of the correctness of Cost Accounts and adherence to Cost
Accounting principles.
(A) Cost Audit

(B) Tax Audit
(C) Market Audit
(D) None of these
10. The maximum number of cost audits which can be accepted by a firm of Cost Accountants
having three partners are –
(A) For 30 companies

(B) 60 companies, out of which not more than 10 companies shall be companies with paid
up capital of more than Rs. 25 Lacs.
(C) 10 companies
11. The company has to give documents to the cost auditor within
(A) 180 days

(B) 135 days
(C) 120 days
12. The Annexures to the Cost Audit Report and Proforma should be signed by
(A) The Chief Finance Officer and the Managing Director

(B) One Director and Secretary
(C) The Secretary and the Chief Finance Officer

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(D) The Officer-in-Charge of Cost Accounts and the Secretary.

13. The Cost Audit Report need to be submitted to:
(A) Company Law Board;

(B) Board of directors of the company;
(C) Members at the Annual General Meeting of the company.
14. A Cost accountant may be appointed as a ............. under the Insurance Act.
(A) loss assessor and values

(B) Coal
(C) Assuming the loss
(D) None of these
15. CAS-9 deals with
(A) Packing materials cost

(B) Direct materials cost
(C) Indirect materials cost
16. Cost Accounting Record Rules were made first for ............. industry.
(A) Cement
(B) Coal
(C) Steel
(D) None of these
17. The functions of a cost auditor involve-
(A) Examining the inventory records

(B) Capacity utilization
(C) Proper utilization of labour
18. Cost Accounting Standard ………… is related to bringing uniformity and consistency in the
principles and methods of determining the selling and distribution overheads with reasonable
accuracy.
(A) 10
(B) 12
(C) 15
(D) 4
19. Section ……. of the Companies Act, 2013 gives the cost auditor same power as the financial
auditor has under section ………. of the Companies Act, 2013.

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(A) 148, 143

(B) 143, 148
(C) 147, 148
(D) 143, 144
20. According to CAS 2 on Capacity Determination, "Normal Capacity" is
(A) Practical capacity minus the loss of production capacity due to external factors
(B) Difference between installed capacity and the actual capacity utilisation
(C) Maximum production capacity of a plant
(D) Installed capacity minus the inevitable interruptions
21. According to CAS 8 on utilities the cost of maintaining stand-by utilities is ............. cost.
(A) Committed
(B) Utilities
(C) Uncommitted
(D) None of these
22. The structuring of Cost Audit includes
(A) Audit Programmes

(B) Audit working papers
(C) Checking including test checking
23. CAS-4 deals with
(A) Determination of Cost of Production for Captive consumption

(B) Determination of Average (equalized) Cost of Production
(C) Determination of Capacity of a Unit
24. The role of Cost Auditor in respect of non-moving stock is to review
(A) The causes explained by the company for non-movement of the items
(B) How the company deals with the non-moving stock
(C) The policy of the company regarding determination on non-moving items
25. Management Audit is an important tool for:
(A) Performance of an enterprise

(B) Continuous appraisal
(C) All of the above
(D) Evaluations of the methods

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26. Cost Auditor is required to provide reply to any clarification sought for, by the Central
Government from the Cost Auditor in writing of the receipt of the communication addressed
to him calling such clarification within
(A) 45 days of the receipt of the communication.

(B) 30 days of the receipt of the communication.
(C) 180 days of the receipt of the communication.
(D) 120 days of the receipt of the communication
27. Which one is not the objective of Cost Accounting Standards
(A) To bring uniformity and consistency in the principles and methods

(B) To help industry and the Government towards better cost management
(C) To control accounting policies of companies so as to protect investors’ interest
(D) To determine the pollution control costs with reasonable accuracy
28. Application for appointment of Cost Auditor should be sent to Department of Company
Affairs within –
(A) 30 days of commencement of financial year.

(B) 50 days of commencement of financial year.
(C) 45 days of commencement of financial year.
(D) 60 days of commencement of financial year.
29. As per Companies (Cost Records and Audit) Rules, 2014, the Annexure to the Cost Report
is to be duly approved by the
(A) Secretary
(B) Cost Accountant
(C) Board of Directors
30. As per ............. Outward Transportation Cost shall form part of cost of sale. (Fill in the gap
from the below)
(A) CAS-5
(B) CAS-6
(C) CAS-9
(D) CAS-10

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1. C 16. A
2. C 17. D
3. A 18. C
4 A 19. A
5. C 20. A
6. B 21. A
7. D 22. D
8. C 23. A
9. A 24. D
10. B 25. C
11. B 26. B
12. B 27. C
13. B 28. C
14. A 29. C
15. A 30. A
ANSWER KEY

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Chapter – 15
Budget, Budgeting and Budgeting
Control
1. ………………… is an operating and financial plan of a business enterprise
(A) Forecast
(B) Budget
(C) Estimate
(D) Standard
2. …………….. is based on the premise that every rupee of expenditure requires

justification.
(A) Zero Base Budgeting

(B) Programme Budgeting
(C) Performance Budgeting
(D) Appraisal Budgeting
3. ………………… is a budget which, by recognizing different cost behavior patterns,

is designed to change in relation to the volume of output.
(A) Production Budget

(B) Performance Budget
(C) Zero Base Budget
(D) Flexible Budge
4. The budget which usually takes the form of budgeted profit and loss account and
balance sheet is known as
(A) Cash budget

(B) Master budget
(C) Flexible budget
(D) Sales budget
5. While preparing cash budget, which of the following items would not be included-
(A) Interest paid to debenture holders

(B) Salaries and wages

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(C) Bonus shares issued

(D) Income-tax paid
6. Budgeted standard hours of a factory are 15,000. The capacity utilization ratio for
May, 2016 is 85% and efficiency ratio for the month is 120%. The standard hours tor
actual producton in the month will be-
(A) 12,750
(B) 18,000
(C) 15,300
(D) 18,000
7. A plant produces a product in the quantity of 10,000 units at a cost of Rs. 3 per unit.
If 20,000 units are produced, the cost per unit will be Rs. 2.50. Selling price per unit is
Rs. 4. The variable cost per unit will be:
(A) Rs. 2
(B) Rs. 3
(C) Rs. 4
(D) Rs. 1
8. Under which of the following method of budgeting, all activities are re-evaluated
each time a budget is set -
(A) Materials budget

(B) Zero base budgeting
(C) Sales budget
(D) Overheads budget
9. In Rise Ltd, cash sales is 25% and credit sales 75. Sales for November, 2014 is
15,00,000, December, 2014 - 1400,000, January 2015 - 16,00,000, February, 2015 -
10,00,000 and March, 2015 - 9,00,000. 60% of the credit sales are collected in the next
month alter sales, 30% in the second month and 10% in the third month. No bad debts
are anticipated. The cash collected- in the month of March, 2015 from debtors is
(A) 14,60,000
(B) 14,20,000
(A) (C)12,20,000
(C) 9,15,000
10. A factor which limits the activities of an undertaking and which is taken into
account while preparing budget is known as

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(A) Budget manual

(B) Budget controller
(C) Budget key factor
(D) Budget centre
11. The budgeting system designed to change in relation to level of activity actually
attained is known as
(A) Fixed budgeting

(B) Flexible budgeting
(C) Performance budgeting
(D) Functional budgeting
12. From the following, which one is a functional budget
(A) Master budget

(B) Fixed budget
(C) Sales budget
(D) Current budget
13. A budget in which a responsibility centre manager justify each planned activity
and its budgeted total cost is called
(A) Traditional budget

(B) Zero based budget
(C) Master budget
(A) D) Functional budget
14. Which one of the following would not form part of master budget
(A) Cash budget

(B) Statement of profit and loss
(C) Statement of financial position
15. Which one of the following is not advantage of budgetary control?
(A) Maximization of profit through effective planning

(B) Planned approach for expenditure
(C) Create necessary conditions for setting up of standard costs
(D) Based on quantitative data and represent only an impersonal appraisal to
conduct of business activity

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16. A document which sets out the responsibility of the persons engaged in the routine
of and the procedures, forms and records required for Budgetary Control called-
(A) Budget centre

(B) Budget report
(C) Budget controller
(D) Budget manual
17. A budget that gives a summary of all the functional budgets and budgeted
statement of profit and loss is called-
(A) Flexible budget

(B) Master budget
(C) Performance budget
(D) Zero base budget
18. Budget which remains unchanged regardless of the actual level of activity is
known as
(A) Fixed budget

(B) Functional budget
(C) Flexible budget
(D) Cash budget
19. Estimated wages for January is 4,000 and for February 4,400. If the delay in
payment of wages is 1/2 month, the amount of wages to be considered in cash budget
for the month of February will be –
(A) 4000
(B) 4400
(C) 4600
(D) 4200
20. A short term budget broken down into a quarterly or monthly period and
reviewed and modified in the light of changing conditions is:
(A) Current Budget

(B) Flexible Budget
(C) Rolling Budget
(D) Zero Base Budget
21. While preparing a flexible budget indirect wages was considered as semi-variable
expenses, at 50% level of production it was estimated as 1,50,0O0. If it has a tendency
to increase by 10% between 60% to 75% capacity and further will increase by another

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5% when production crosses 75%, the amount of indirect wages at 90% level of
production is
(A) 1,65,000
(B) 1,72,500
(C) 1,73,250
22. The units to be sold for different months are as follows:

Jan Feb Mar April May June
1,200 1,300 1,600 2,000 2,400 3,000
There will be no WIP at the end of any month. Finished units equal to half the sales
for the next month will be in stock at the end of each month. The required production
in units for April will be:
(A) 2,800
(B) 2,200
(C) 2,400
(D) 3,200
23. When demand forecasting is difficult, budget which is prepared:
(A) Sales Budget

(B) Production Budget
(C) Financial Budget
(D) Flexible Budget
24. The budget which usually takes the form of profit and loss account and balance
sheet is known as
(A) Cash budget

(B) Master budget
(C) Flexible budget
(D) Labour budget
25. A fixed budget is one which:
(A) is a plan for capital expenditure in monetary terms

(B) is designed to remain unchanged irrespective of the volume of output or
turnover attained
(C) deals with income and expenditure applicable to a particular function
(D) deals with none of these
26. One of the most significant tools in cost planning is

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(A) Direct material

(B) Budget
(C) Marginal costing
(D) Direct labour
27. When standard output is 10 units per hour and actual output is 14 units per hour,
the efficiency level will be:
(A) 60%
(B) 120%
(C) 140%
28. In ………….. budgeting there was a shift from financial classification to objective
classification in respect of functions, activities etc.
(A) Programme
(B) Performance
(C) Zero base
29. Budget which remain unchanged regardless of the actual level of the activity is
known as:
(A) Fixed Budget

(B) Functional budget
(C) Fiexible budget
(D) Cash budget
30. ……………… is prepared for the estimation of plant capacity to meet the budgeted
production during the budgeted period
(A) Plant utilization budget

(B) Production budget
(C) Manufacturing overhead budget
(D) Labour budget

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ANSWER KEY
1. B 16. D
2. A 17. B
3. D 18. A
4 B 19. D
5. C 20. B
6. C 21. C
7. A 22. B
8. B 23. D
9. D 24. B
10. C 25. B
11. B 26. B
12. C 27. C
13. B 28. B
14. D 29. A
15. B 30. A

Awate 7
Chapter – 16
Ratio Analysis
1. In an organization, current ratio is 2.5, liquid ratio 1.5, prepaid expense nil and
stock Rs. 4,000. The amount of current liabilities is –
(A) 20,000
(B) 40,000
(C) 80,000
(D) 4,000
2. ……………….. are necessary for the study of trends and direction of movements
in the financial position and operating results of a concern.
(A) Trend ratios

(B) Cash flow statements
(C) Common size statements
(D) Comparative statements
3. Current ratio is 2.5 and liquid ratio is 1.5. Working capital is 75,000 Value of the
stock held will be –
(A) 60,000
(B) 1,00,000
(C) 50,000
25. Determine a firm's total assets turnover, if its net profits margin is 8%, total assets
are 8,00,000 and the return on investment is 14%
(A) 2.05
(B) 4.00
(C) 1.75
(D) 2.00
4. Which of the following is a method used in analyzing financial statements
(A) Variance analysis

(B) Trend analysis

(C) Break-even analysis

(D) Budget analysis
5. In an organization, working capital is 1,00,000 and current ratio 3:1. The value of
current assets is
(A) 1,50,000
(B) 1,00,000
(C) 50,000
(D) 15,000
6. Working capital ratio is also known as
(A) Quick ratio

(B) Debt-Equity ratio
(C) Current ratio
(D) Liquid ratio
7. Credit sales of XYZ Ltd. for the year is 12,00,000 and debtors at the end of year
2,40,000. Assuming 360 days in a year, average collection period will be -
(A) 60 Days
(B) 72 Days
(C) 180 Days
(D) 80 Days
8. For the financial year ended 31st March 2015, the figures extracted from the
balance sheet of Excel Ltd. are as under:
Opening stock 29,000
Closing stock 31,000
Purchases 2,42,000
The stock turnover ratio will be -
(A) 12 Times
(B) 15 Times
(C) 9 Times
(D) 8 Times
9. Current Ratio is 2.5:1 and Liquid Ratio is 1.5:1. If inventory is 9,60,000, then the
amount of current assets will be:
(A) 9.6 Lakh

(B) 14.40 Lakh
(C) 24 Lakh

(D) 38.40 Lakh
10. Cost of Goods Sold is 90 Lakh, Purchases are 96 Lakh and Closing Stock is 18
Lakh, then Stock Turnover Ratio will be:
(A) 5 times
(B) 6 times
(C) 6.4 times
(D) 4.29 times
11. If Market price per share, earning per share and Dividend per share are 150, 16.50
and 15 respectively, then Price Earnings Ratio will be
(A) 10 times
(B) 9.09 times
(C) 1.1 times
(D) 0.91 times
12. Capital Gearing Ratio is categorized as:
(A) Profitability Ratio

(B) Activity Ratio
(C) Long-term Solvency Ratio
(D) Market Test Ratio
13. Dividing net credit sales by average debtors would yield ………….
(A) Current ratio

(B) Return on sales ratio
(C) Debtors turnover ratio
(D) Average receivables
14. Find the current lability from the following:

Current ratio-2:5
Liquid ratio- 1:5
Prepaid expenses- Nil
Stock-4,000
(A) 20,000
(B) 40,000
(C) 80,000
(D) 4,000

15. In an organization, profit after interest, tax and dividend on preference shares is
4,00,000. The number of equity shares is 40,000 and the dividend payout ratio is 40%.
The dividend per share is
(A) 4
(B) 25
(C) 10
(D) 6
16. From the following information find the value of closing stock
Stock velocity: 6 months
Gross profit ratio: 25%
Gross profit for the year ended 31st March 2014: 1,00,000
Closing stock for the period- 20,000 more than it was in the beginning of the year.
(A) 1,50,000
(B) 1,40,000
(C) 1,60,000
(D) 70,000
17. The net profit of a company is 2,00,000. Preference dividend 25,000 and taxes
paid 15,000. Number of equity shares is 1,00,000. The earnings per share (EPS) is-
(A) 1.5
(B) 1.6
(C) 2
(D) 1.75
18. The current ratio of AB Ltd. is 2:1, while quick ratio is 1.8:1. If the current
liabilities are 40,000, the value of stock will be
(A) 12,000
(B) 6,500
(C) 8,000
(D) 10,000
19. ABC Ltd. has earned 12% returns on total assets of 8,00,000 and has a net profit
ratio of 8%. Sales of the firm shall be:
(A) 96,000
(B) 6,40,000
(C) 12,00,000

(D) 7,36,000
20. 9% preference shares of 10 each 4,00,000, Equity shares of 10 each 12,00,000. Profit
after tax 4,20,000, Equity dividend paid 20%, Market price of equity shares 25 each.
What will be the earnings per share?
(A) 3.50
(B) 3.20
(C) 5.40
(D) 9.60
21. The average creditors are 74,000, creditors turnover ratio is 4.80 amount of credit
purchase will be:
(A) 15,417
(B) 3,52,500
(C) 3,55,200
22. What will be the amount of stock if the current ratio is 2:1 and quick ratio is 1.5:1
and current liabilities are 90,000?
(A) 55,000
(B) 1,80,000
(C) 1,35,000
(D) 45,000
23. Conducted to ensure borrowings capacity of a concern to meet contingencies in

near future is:
(A) Long term analysis

(B) Vertical analysis
(C) Short term analysis
(D) Internal analysis
24. Return on investment is also known as –
(A) Du-pont chat

(B) Activity ratio
(C) P/V ratio

(D) Market test ratio
25. In financial analysis, time series analysis refers to –
(A) Making a time series of various ratios to assess a firm's profitability

(B) A graphical comparison of a firm's sources of finance
(C) The comparison of financial ratios over a period of time to assess the
direction of change and the financial performance of a firm
(D) A comparison of time values for various ratios of a firm
26. If average collection period is 15 days and average account receivables is 45,000,
the total amount of credit sales will be (assume 360 days in a year)
(A) 10,80,000
(B) 16,20,000
(C) 6,75,000
(D) 1,87,500
27. Return on investment depends on two ratios –
(A) Net profit ratio and capital turnover ratio

(B) Gross profit ratio and net profit ratio
(C) Capital employed ratio and assets turnover ratio
(D) Earnings per share and net profit ratio
28. Current liabilities of a firm are 1,50,000. Its current ratio is 3:1 and liquid ratio is
1:1. The value of stock will be
(A) 3,00,000
(B) 4,50,000
(C) 2,50,000
(D) 1,50,000
29. The following information is pertaining to A Ltd.

Current ratio : 4
Acid Test ratio : 2.8
Current liabilities : 31.00 Lakh
Find out the value of Inventory.
(A) Rs. 62 Lakh
(B) Rs. 43 Lakh
(C) Rs. 37.2 Lakh
(D) Rs. 105.4 Lakh
30. P Ltd. furnished the following information:

Cost of Goods Sold : Rs. 6 Lakh

Net Profit : Rs. 3 Lakh
Sales Return : Rs. 1 Lakh
If the net profit margin of P Ltd. was 25%, then the gross profit margin was:
(A) 55%
(B) 60%
(C) 40%
(D) 50%

ANSWER KEY
1. D 16. C
2. A 17. B
3. C 18. C
4 C 19. C
5. B 20. B
6. A 21. C
7. C 22. D
8. B 23. C
9. D 24. A
10. C 25. C
11. A 26. A
12. C 27. A
13. C 28. A
14. A 29. C
15. A 30. D

Chapter – 17
Management Reporting
1. ……………. are to be presented after making and investigation of the problem

which requires to be investigated.
(A) Memorandum
(B) Special reports
(C) Summary
(D) Special facts
2. ………………… is very important method of presenting information to the

management in a pictorial manner and attracts the eye of the recipient more quickly
and forcibly.
(A) Tabular Reports

(B) Descriptive Reporting
(C) Graphic Presentation
3. ………………………. are presented in the form of comparative statements.
(A) Descriptive Reports

(B) Graphic Presentation
(C) Transactional Analysis
(D) Tabular Reports
4.Which of the following is a kind of information report?
(A) Trend reports

(B) Analytical report
(C) Activity reports
5. Management reporting can be performed as-
(A) Internal reporting

(B) External reporting
(C) Both (A) & (B)

6. The back bone of any organization is
(A) Information
(B) Employee
(C) Management
(D) Capital
7. Which of these is usually written in a form of a memorandum?
(A) Informal reports

(B) Formal reports
(C) Professional reports
(D) Business reports
8. Which of the following is a type of matter may be covered in a special report?
(A) Feasibility study for a project

(B) Cost reduction schemes information
(C) Data on make or buy decision
9. Which of these Is not a parameter of a formal report?
(A) Presentation
(B) Complaint
(C) Information
(D) Request
10. Which oF these reports is written before starting a new project?
(A) Feasibility report

(B) Periodic report
(C) Trouble report
(D) Progress report
11. Which of these must never be a basis for a technical report?
(A) Facts
(B) Tests
(C) Personal prejudices
(D) Experiments
12. Reports present conclusions based on:

(A) Intuition
(B) Belief
(C) Impression
(D) Investigation
13. Which of these is not a parameter of a report?
(A) Ability to acquire additional information

(B) Quality of additional information acquired
(C) Ability to arrive at subjective evaluation
(D) Ability to provide worthwhile recommendations
14. Which of these is not mentioned in a progress report?
(A) Name of project

(B) Right choice of instruments
(C) Nature of work
(D) Amount of work left
15. The chronological development of information in the body of the report is done
according to the:
(A) Logical sequence of events

(B) Order in which events occurred
(C) Choice of the writer
(D) Collection of data
16. Which of these must be avoided in a technical report?
(A) Facts
(B) Logical conclusion
(C) Objective evaluation
(D) Subjective evaluation
17. Which of the following general principle that is required to be followed while
reporting?
I. Report should have a proper title

II. Report should be in good form and should have subheadings and paragraph.
III. Format of report should be changed frequently.
IV. Report should factual.
V. Report need not to save time of the management
Select the correct answer form the options given below.

(A) I and III only

(B) II & IV only
(C) II, III and V only
(D) IV, I and II only
18. Collecting comment and suggestions from users to discover ways to

continuously improve the data and process can be described as-
(A) Implementation
(B) Exception
(C) Feedback
(D) Order
19. Which of these reports provide information without any evaluation?
(A) Informational
(B) Interpretative
(C) Routine
(D) Progress
20. …………… report provides rational findings.
(A) Informative
(B) Interpretative
(C) Routine
(D) Progress
21. The margin of error allowed in a report –
(A) No error is acceptable in a report

(B) Within the permissible limit stated by the management
(C) depends upon the purpose for which a report is prepared.
22. Reports are used for comparative statement
(A) Descriptive Report

(B) Tabular Report
(C) Graphic Report
(D) Surrey Report
23. Matters relating to cost Reduction are covered by –
(A) General Reports

(B) Special Reports

(C) Descriptive Reports

(D) (a) and (b) both.
24. Which of these does a figure not include?
(A) Graphs
(B) Tables
(C) Charts
(D) Drawings
25. The information of MIS comes from the
(A) Internal source

(B) External source
(C) Both internal and external source
26. Which of the following are not covered in managerial reporting?
(A) Buy or make

(B) Sales policy
(C) Capacity utilization
27. Management reporting can be performed as
(A) Internal reporting

(B) External reporting
28. A written report is more formal than an oral report
(A) True
(B) False
29. Graphic techniques help to understand ................
(A) business reports

(B) friendly letters
(C) notices
(D) classified advertisements

30. Which of the following is not the benefit of Management Reporting?
(A) Helpful in control system

(B) Helpful in profitable operations
(C) Follow the Principle of Management by objective
ANSWER KEY
1. B 16. D
2. C 17. D
3. D 18. C
4 D 19. A
5. C 20. B
6. A 21. C
7. A 22. B
8. D 23. B
9. B 24. B
10. A 25. C
11. C 26. D
12. D 27. C
13. C 28. A
14. B 29. A
15. B 30. C

Chapter – 18
Decision Making Tools
1. A company wishes to make a profit of Rs. 1,50,000. It has fixed costs of Rs. 75,000
with a C/S ratio of 0.75 and a selling price of Rs. 10 per unit. How many units would
the company need to sell in order to achieve the required level of profit?
(A) 10,000 units

(B) 15,000 units
(C) 22,500 units
(D) 30,000 units
2. A company which uses marginal costing has a profit of Rs. 37,500 for a period.
Opening inventory was 100 units and closing inventory was 350 units. The fixed
production overhead absorption rate is Rs. 4 per unit. What is the profit under
absorption costing?
(A) Rs. 35,700

(B) Rs. 35,500
(C) Rs. 38,500
(D) Rs. 39,300
3. A company has the following budgeted information for the coming month:
Budgeted sales revenue Rs. 5,00,000, Budgeted contribution Rs. 2,00,000, Budgeted
profit Rs. 50,000. What is the budgeted break-even sales revenue?
(A) Rs. 1,25,000

(B) Rs. 3,50,000
(C) Rs. 3,75,000
(D) Rs. 4,50,000
4. A company manufactures and sells a single product. For this month the budgeted
fixed production overheads are Rs. 48,000, budgeted production is 12,000 units and
budgeted sales are 11,720 units. The company currently uses absorption costing. If
the company used marginal costing principles instead of absorption costing for this
month, what would be the effect on the budgeted profit?
(A) Rs. 1,120 higher

(B) Rs. 1,120 lower

(C) Rs. 3,920 higher
(D) Rs. 3,920 lower
5. A company operates a standard marginal costing system. Last month its actual
fixed overhead expenditure was 10% above budget resulting in a fixed overhead
expenditure variance of Rs. 3,60,000. What was the actual expenditure on fixed
overheads last month?
(A) Rs. 3,24,000

(B) Rs. 3,60,000
(C) Rs. 3,96,000
(D) Rs. 4,00,000
6. Last month, when a company had an opening stock of 16,500 units and a closing
stock of 18,000 units, the profit using absorption costing was Rs. 40,000. The fixed
production overhead rate was Rs. 10 per unit. What would the profit for last month
have been using marginal costing?
(A) Rs. 15,000

(B) Rs. 25,000
(C) Rs. 55,000
(D) Rs. 65,000
7. Which of the following is true at break-even point?
(A) Total Sales revenue = Variable cost

(B) Profit = Fixed cost
(C) Sales revenue = Total cost - variable cost
(D) Contribution = Fixed cost
8. The variable cost of product increases by 10% and the management raise the unit
selling price by equal amount. The fixed costs remain unchanged. The BEP of the
firm ................
(A) increase
(B) decrease
(C) unchanged
9. Sales of two consecutive months of a company are Rs. 3,80,000 and Rs. 4,20,000 the
company’s net profit for these months amounted to Rs. 24,000 and the Rs. 40,000
respectively. The P/V ratio of the company is.

(A) 33.33%
(B) 40%
(C) 25%
10. A company has fixed costs of Rs. 6,00,000 per annum. It manufactures a single
product which it sells for Rs. 200 per unit. Its contribution to sales ratio is 40%. Its
break-even in units is
(A) 7,500 Units

(B) 8,000 Units
(C) 3,000 Units
(D) 1,500 Units
11. Total Sales - Total Variable Cost = ................
(A) Fixed cost

(B) Semi variable cost
(C) Contribution
(D) Break - even point
12. Cost Volume Profit (CVP) analysis is a behavior of how many variables?
(A) 2
(B) 3
(C) 4
(D) 5
13. Which of the following types of costs are allocated to cost centres?
(A) Only direct costs

(B) Only indirect costs
(C) Only semi variable costs
(D) Direct and indirect costs
14. Which one of the following bases would be most appropriate for apportioning a
company’s general advertising costs?
(A) Sales in each division

(B) Purchases in each division
(C) Number of customers in each division

(D) Stock levels in each division
15. A business absorbs overheads on the basis of hours worked on a specific job. If
the overhead absorption rate has been calculated at Rs. 30 per hour, and a job is
estimated to take 20 hours, what price would be charqed to the customer if the
company’s mark-up is 50% of cost.
(A) Rs. 600

(B) Rs. 900
(C) Rs. 1,200
(D) Rs. 300
16. Under marginal costing, the break-even point is found by the following formula:
(A) Fixed costs per unit divided by the total contribution

(B) Total fixed costs divided by the contribution per unit
(C) Total sales divided by the contribution per unit
(D) Total variable costs divided by the contribution per unit
17. A retail company sells computers, each of which is sold for Rs. 250 and bought
from the manufacturer for Rs. 100. The retailer’s fixed costs are Rs. 1,50,000.
Maximum possible sales are 3,000. How many computers must be sold to break-
even?
(A) 1,000
(B) 2,000
(C) 3,000
(D) 750
18. Contribution is known as
(A) Marginal income

(B) Gross profit
(C) Net income
19. ................ costing reduce the possibility of underpricing:
(A) Marginal
(B) Variable
(C) Absorption
(D) Direct
20. A company’s approach to a make or buy decision

(A) Depends on whether the company is operating at or below normal value

(B) Involves an analysis of avoidable costs.
(C) Should use absorption (full costing)
(D) Should use activity based costing
21. Which one of the following is a limitation of a break-even chart?
(A) The split between fixed and variable costs may not be clear-cut.
(B) The break-even profit cannot be indicated on it.
(C) You can only show losses, not profits.
(D) Variable costs are not shown on the chart.
22. Which one of the following would be shown on a break-even chart, but not a
profit/volume chart?
(A) Total costs at maximum sales

(B) Maximum loss at zero sales
(C) Maximum profit at maximum sales
(D) The break-even point
23. The y-axis (vertical axis) on a break-even chart has which one of the following
labels?
(A) Production levels

(B) Variable costs
(C) Costs and revenues
(D) Profit and losses
24. On a break-even chart, if total costs increased and sales decreased, the break-even
point would change in which one of the following ways?
(A) It would not change

(B) It would move to the left along the total sales line
(C) The business would not break even, so there would be no breakeven point
(D) It would move to the right along the total sales line
25. Which of the following statement is not true in respect of Activity based costing?
(A) Activity based costing improves control over overheads costs.

(B) Setting up equipment is a batch level activity.

(C) In Activity based costing each cost pool has its own predetermined overhead
rate.
(D) Activity based costing is less expensive to implement than traditional costing.
26. Performing periodic maintenance on buildings and general use equipment is an

example of:
(A) Facility level activity

(B) Unit level activity
(C) Batch level activity
(D) Product level activity
27. The division of activities into unit level, batch level, product level, and facility
level categories is commonly known as a:
(A) Cost object

(B) Cost application
(C) Cost hierarchy
(D) Cost estimation
28. Costs which are caused by a group of things being made or processed at a single
time are referred to as
(A) Product-level costs

(B) Cost pool
(C) Organizational-level costs
(D) Batch level costs
29. …………………… encourages managers to identity which activities are value

added activities.
(A) Standard Costing

(B) Activity-based Costing
(C) Uniform Costing
(D) Direct Costing
30.S Ltd. has fixed cost of Rs. 60,000 P.A. It manufactures a single product which it
sells for Rs. 20 per unit. Its P/V ratio is 40%. S. Ltd. Break-even Point in Units is:
(A) 1800
(B) 3000
(C) 5000
(D) 7500

ANSWER KEY
1. D 16. B
2. C 17. A
3. C 18. D
4 B 19. C
5. C 20. B
6. B 21. A
7. D 22. A
8. C 23. C
9. B 24. D
10. A 25. D
11. C 26. B
12. B 27. B
13. D 28. D
14. A 29. B
15. B 30. D

Chapter – 19
Valuation Principles & Framework
Practice Test Paper

1. Which of the following is not a valuation approach?
(A) Assets Approach

(B) Income Approach
(C) Expenditure Approach
(D) Market Approach
2. Which of the following is normally used as discounting factor under the

discounted cash flow valuation?
(A) Cost of equity

(B) Cost of debt
(C) Annuity factor
(D) Overall cost of capital
3. Present value means
(A) Value in use

(B) Value of future cash flows
(C) Value calculated using IRR
(D) Present value that buyer is ready to pay
4. Which of the following is required to be taken into consideration while valuing

equity shares of the company?
(A) Size of the block of shares

(B) Restricted transferability aspect
(C) Dividends
5. Which of the following is another name for the required return on a stock?
(A) Discount rate

(B) Dividend payout ratio
(C) Retention ratio
(D) Value

6. Which of the following is not a general principle involved in business valuation?
(A) Value is determined at a specific point in time.

(B) Value is prospective.
(C) Value is influenced by liquidity
(D) Valuation is always depends on fact that who is valuing what.
7. Which of the following is equal to the present value of all cash proceeds received
by a stock investor?
(A) Value
(B) Retention ratio
(C) Dividend payout ratio
(D) Discount rate.
8. Which of the following do financial analysts consider least important when

assessing the long-run economic and financial outlook of a company?
(A) Expected return on equity

(B) Prospects of the relevant industry
(C) Expected changes in EPS
(D) General economic conditions
9. Provisions relating to 'valuation by registered valuers' are contained in
(A) Section 247 of the Companies Act, 2013

(B) Section 242A of the Income Tax Act, 1961
(C) Section 347 of the Companies Act, 2013
(D) Section 240AB of the Income Tax Act, 1961
10. What does the price/earnings (PE) ratio measure?
(A) The multiple that the stock market places on a company’s earnings
(B) The number of times that dividends paid are covered by profits
(C) The return received by way of dividends as a percentage of current share
price
(D) The amount of profits available to ordinary shareholders
11. What does the price-to-earnings ratio (P/E) tell you?
(A) How much each of a company’s products sells for on average

(B) How much investors are willing to pay per unit of a company’s earnings
(C) How much tax per unit investors are willing to pay.

12. What is the most important use of the P/E ratio for investors?
(A) It helps investors decide how much profit a company is likely to make in
future.
(B) It helps investors decide whether a company’s shares are overpriced or
underpriced.
(C) It helps investors decide on the most appropriate risk to reward ratio.
13. What does a high P/E ratio suggest?
(A) A company shares are currently overpriced.

(B) A company shares are currently underpriced.
(C) No relation
14. High P/E ratios tend to indicate that a company will ................
(A) grow quickly

(B) grow at the same speed as the average company
(C) grow slowly
(D) not grow
15. Historically, P/E ratios have tended to be ................
(A) higher when inflation has been high

(B) lower when inflation has been high
(C) uncorrelated with inflation rates but correlated with other macroeconomic
variables
(D) uncorrelated with any macroeconomic variables including inflation rates
16. Market price per share of a firm having equity capital of Rs. 1,00,000 consisting of
shares of Rs. 10 each, profit after tax of Rs. 82,000 and P/E ratio of 8 is
(A) Rs. 65.70

(B) Rs. 10.25
(C) Rs. 65.60
(D) Rs. 1.025
17. As per Section 247of the Companies Act, 2013, where a valuation is required to be
made in respect or any property, stocks, shares, debentures, securities or goodwill or
any other assets or net worth of a company or its liabilities, it shall be valued by a
person having such qualifications and experience and registered as a valuer in such
manner, on such terms and conditions as may be prescribed and appointed by the

(A) Audit committee

(B) Board of Directors of the company.
(C) Board of Directors on recommendation of audit committee.
(D) Audit committee or in its absence by the Board of Directors of that company
18. Which of the following is not a method of business valuation?
(A) Asset based

(B) Earnings based
(C) Market based
(D) Equity based
19. Analysts commonly consider all of the following to be indicators that the market
is overvalued except
(A) High average P/E ratio

(B) High average price-to-book ratio
(C) High average dividend yield
20. Which of the following best describes the replacement value of a business?
(A) Value if sold off piece-meal

(B) Value to replace assets with new
(C) Cost of setting up an equivalent venture
(D) Net present value of current operations
21. The objective of Ind as 32 is to establish principles for presenting financial

instruments:
(A) as equity
(B) for offsetting financial assets and liabilities
(C) as liability
(D) All the above
22. Which of the followings are generally not within scope of Ind As - 32?
(A) Interests in subsidiaries, associates or joint ventures

(B) Employers’ rights and obligations under employee benefit plans
(C) Insurance contracts
23. Which of the followings comes within definition of financial assets
(A) Cash

(B) Equity instrument of another entity

(C) Contractual right to receive cash or another financial assets or to exchange
with entity financial assets or financial liabilities under potentially favorable
conditions
24. Which of the followings comes within definition of financial liabilities
(A) A contractual obligation to deliver cash or another financial asset to another

entity.
(B) A contractual obligation to exchange financial assets/liabilities with another
entity under potentially unfavorable conditions
(C) A contract that will or may be settled in the entity’s own equity instruments
and is a non - derivative for which the entity is or may be obliged to deliver a
variable number of the entity’s own equity instruments
25. Fixed assets which are subsequently measured in accordance with the
revaluation model in Ind AS 16 Property, Plant and Equipment are not within the
scope of Ind AS 113 in terms of both measurement and disclosure.
(A) True
(B) False
(C) (a) and (b)
26. ‘Most advantageous market’ (Ind AS 113 Appendix A) is defined as:
(A) The market that maximises the amount that would be received to sell the asset
or minimises the amount that would be paid to transfer the liability, after
taking into account transaction costs and transport costs’.
(B) ‘The market that maximises the amount that would be received to sell the
asset or minimise the amount that would be paid to transfer the liability,
before taking into account transaction costs and transport costs’.
27. Ind AS 113 Appendix a notes that highest and best use (HBU) is:
(A) The use of a non-financial asset by market participants that would maximise
the value of the asset or the group of assets and liabilities (e.g. a business)
within which the asset would be used.’

(B) ‘The use of a financial asset by market participants that would maximise the
value of the financial asset or the group of financial assets and liabilities
within which the financial asset would be used.’
28. Ind AS 113 Appendix A notes that transport costs are:
(A) ‘the costs that would be incurred to transport an asset from its current
location to its principal (or most advantageous) market.’
(B) ‘the costs that would be incurred to transport an asset from its current
location to its market whether principal or minor.’
29. On 1, April, 2017, H Ltd. acquired 120000 shares out of 150000 equity shares of
Rs. 10 each of S Ltd. at Rs. 16,30,000. On that date balance of General Reserve;
Capital Reserve; and Preliminary Expenses in S Ltd. were Rs. 2,42,000; Rs. 3,20,000;
and Rs. 70,000 respectively. The amount of cost of control will be
(A) Capital Reserve Rs. 19,600

(B) Capital Reserve Rs. 3,62,000
(C) Capital Reserve Rs. 2,89,600
(D) Goodwill Rs. 36,400
30. Trailing P/E is its current market price divided by
(A) most recent four quarters EPS

(B) current book value
(C) last year’s market price
(D) average of last 4 years EPS

ANSWER KEY
1 C 16 C
2 D 17 D
3 B 18 D
4 D 19 C
5 A 20 B
6 D 21 D
7 A 22 D
8 D 23 D
9 A 24 D
10 A 25 B
11 B 26 A
12 B 27 A
13 A 28 A
14 A 29 C
15 B 30 A


Chapter – 20
Valuation of Shares,Business and
Intangible Assets
1. SUHASI LTD. issued 20,000 shares of Rs. 10 each at a discount of 10%. Mr. Harish
to whom 500 shares were allotted failed to pay the final call of Rs. 3 and hence, his
shares were forfeited. The amount to be transferred to the credit of shares forfeiture
account is
(A) Rs. 1,500

(B) Rs. 3,500
(C) Rs. 3,000
(D) Rs. 4,500.
2. GAYATHRI LTD. purchased 1000 shares in SAVITHA LTD. at Rs. 600 per share in
2008. There was a rights issue in 2009 at one shares for every two held at a price of
Rs. 150 per share. If GAYATHRI LTD. subscribed to the rights what would be the
carrying cost of 1500 shares?
(A) Rs. 6,75,000

(B) Rs. 6,50,000
(C) Rs. 6,00,000
(D) Insufficient information
3.ANURAG LTD. purchased a Plant on 1.4.2008 for Rs. 10,00,000. It provides

depreciation @ 20% on W.D.V. during the year ended on 31.3.2010. What would be
the carrying amount of Plant on 31.3.2010, if the company provided impairment loss
on Plant for Rs. 1,00,000?
(A) Rs. 5,40,000

(B) Rs. 6,40,000
(C) Rs. 7,40,000
(D) Insufficient information.
4. Super Profit is Rs. 9,167 and the Normal Rate of Return is 10%. Goodwill as per
capitalisation of Super Profit method is equal to

(A) Rs. 91,670

(B) Rs. 90,600
(C) Rs. 67,910
(D) Rs. 95,000
5. The following data is extracted from the books of HYDER LTD. as on March
31,2010. Paid up value of an Equity Share : Rs. 10 Nominal value of an Equity Share :
Rs. 20 The Yield rate of return of the company: 15.75%. If the normal rate of return is
9%, what would be value of an Equity Share of HYDER LTD.
(A) Rs. 20.00

(B) Rs. 17.50
(C) Rs. 15.75
6. In case of amalgamation in the nature of purchase, Fixed Assets; Current Assets;

Total Debts; Debit balance of Profit and Loss A/c and Purchase Consideration are Rs.
25,60,000; Rs. 12,50,000; Rs. 11,30,000; Rs. 2,20,000; and Rs. 24,00,000 respectively. The
amount of Capital Reserve of Goodwill will be
(A) Goodwill Rs. 60,000

(B) Goodwill Rs. 2,80,000
(C) Capital Reserve Rs. 60,000
(D) Capital Reserve Rs. 1,60,000
7. X Ltd. holds 69% of Y Ltd., Y Ltd. holds 51 % of W Ltd., Z Ltd. holds 49% of W
Ltd. As per AS 18 related parties are:
(A) X Ltd., Y Ltd. & W Ltd.

(B) X Ltd. & Z Ltd.
(C) Y Ltd. & Z Ltd.
(D) X Ltd. & Y Ltd.
8. Capital Employed is Rs. 255 Lakhs; Annual average profits are Rs. 57 Lakhs;
Normal rate of return is 12%. The value of goodwill on the basis of Capitalization of
super profits will be
(A) Rs. 220 Lakhs

(B) Rs. 475 Lakhs
(C) Rs. 6.84 Lakhs
(D) Rs. 26.40 Lakhs

9. A firm values goodwill under ‘Capitalisation of Profits’ method. Average profit of

the firm for past 4 years has been determined at Rs. 1,00,000 (before tax). Capital
employed in the business is Rs. 4,80,000 and its normal rate of return is 12%. Tax rate
is 28% on average. Value of Goodwill based on capitalisation of average profit will
be:
(A) Rs. 1,20,000

(B) Rs. 6,00,000
(C) Rs. 5,00,000
(D) Rs. 4,80,000
10. Goodwill as per purchase of average profit method is equal to ................
(A) Average Profit

(B) Average profit x Amount of purchases
(C) Average Profit x Number of years’ purchases
11. Goodwill is a:
(A) Intangible asset

(B) Fixed asset
(C) Current asset
(D) Fictitious asset
12. The most popular method of valuation of goodwill in case of death of a partner is
(A) Purchase of past Profit Method

(B) Capitalisation Method
(C) Purchase of supper Profit Method
(D) Annuity Method.
13. Normal profit depends on ................. .
(A) Normal Rate of Return

(B) Average capital employed
14. A business is having adjusted net profits of Rs. 1,00,000 and capital employed Rs.
6,00,000. If goodwill is taken at 3 years purchase of super profits and the expected
rate of return is 10% the value of goodwill win be:
(A) Rs. 60,000

(B) Rs. 1,20,000

(C) Rs. 3,00,000
(D) Rs. 5,00,000
15. The methods of valuation of shares are:
(A) 3
(B) 4
(C) 5
(D) 6
16. Valuation of shares is compulsory
(A) On amalgamation
(B) On absorption
(C) On reconstruction
(D) On all the above
17. Intrinsic value of share can be determined by:
(A) Fair value Method

(B) Yield value Method
(C) Net Assets Method
(D) Through SEBI
18. In comparison to face value, the valuation of shares are usually:
(A) More
(B) Less
(C) Equal
(D) Less and more
19. In view of investor, the most appropriate method of valuation of share is:
(A) Net Assets Method

(B) Yield Value Method
(D) None of these
20. Intrinsic value of shares is determined
(A) On the basis of net Assets

(B) On the basis of income

(C) On the basis of market price
(D) By speculators
21. Super profit is ................ .
(A) excess of average profit over normal profit

(B) extra profit earned
(C) average profit earned by similar companies
22. Normal profit is ................
(A) average profit earned

(B) profit earned by similar companies in the same industry
(C) (a) and (b)
23. For calculating net assets the deductible liability is
(A) General Reserve

(B) Loan
(C) Preference Capital
(D) Equity Capital
24. Goodwill is ................
(A) an intangible asset

(B) a fixed asset
(C) realisable
(D) ail of the above
25. On dividend net assets by number of shares, the value of share is called:
(A) Intrinsic value

(B) Book value
(C) Cost price
(D) Market price
26. Goodwill is to be valued when ................ .
(A) amalgamation takes place

(B) one company takes over another company
(C) a partner is admitted
(D) all of the above

27. Goodwill is paid for obtaining ................ .
(A) future benefit

(B) present benefit
(C) past benefit
28. Normal Rate of Return depends on ................
(A) Rate of Interest

(B) Rate of Risk
29. Capital employed at the end of the year is Rs. 4,20,000. Profit earned Rs. 40,000.
Average capital employed is ................
(A) Rs. 4,20,000

(B) Rs. 4,00,000
(C) Rs. 4,40,000
(D) Rs. 4,60,000
30. Any non-trading income included in the profit should be ................
(A) eliminated
(B) added
(C) ignored

ANSWER KEY
1. C 16. D
2. A 17. C
3. A 18. A
4 B 19. B
5. C 20. A
6. A 21. A
7. A 22. B
8. A 23. B
9. A 24. D
10. C 25. A
11. D 26. D
12. A 27. A
13. C 28. C
14. A 29. B
15. D 30. A

Chapter – 21
Accounting for Share-Based Payments
1. For equity - settled share-based payment transactions, the entity shall measure the
goods or services received and the corresponding increase in equity directly at the
................ of the goods or services received unless that it cannot be estimated reliably.
(A) Amortised cost
(B) Fair value
(C) Net Book value
(D) Historical cost
2. ABC, a public limited company, has granted share options to its employees prior
to the date from which IND AS 102 became applicable, (November 7,2016). The
company decided after the issuance of IND AS 102 to reprice the options. The
original exercise price of Rs. 20 was repriced at Rs. 15 per option. IND AS 102 would
require the company to
(A) Apply the Standard to the share options from the original grant date and
ignore the repricing.
(B) Apply the Standard to the share options from the original grant date, taking
into account the repriced award.
(C) Apply the Standard to the repriced award only.
(D) Ignore the Standard for the whole award of share options.
3. For a share-based transaction in which the terms of the arrangement provide an

entity with the choice of whether to settle in cash or by issuing equity instruments,
the entity shall determine whether it has ................ to settle in cash and account for
the share - based payment transaction accordingly
(A) A future obligation

(B) A contingent liability
(C) A present obligation
(D) A deferred liability
4. Cash/assets provided in terms of a Long-term incentives which are not based on

the fair value of group equity instruments are:

(A) outside Ind AS 102 scope - they are typically Ind AS 19 ‘Other longterm
employee benefits’
(B) very much within the scope of Ind AS 102
5. An entity issues shares as consideration for the purchase of inventory. The shares
were issued on January 1,2017. The inventory is eventually sold on December
31,2018. The value of the inventory on January 1, 2017, was Rs. 3 million. This value
was unchanged up to the date of sale. The sale proceeds were? 5 million. The share
issued have a market value of Rs. 3.2 million. Which of the following statements
correctly describes the accounting treatment of this share based payment
transaction?
(A) Equity is increased by Rs. 3 million, inventory is increased by Rs. 3 million;

the inventory value is expensed on sale on December 31, 2018.
(B) Equity is increased by Rs. 3.2 million, inventory is increased by Rs. 3.2
million; the inventory value is expensed on sale on December 31, 2018.
(C) Equity is increased by Rs. 3 million, inventory is increased by Rs. 3 million;
the inventory value is expensed over the two years to December 31,2018.
(D) Equity is increased by Rs. 3.2 million, inventory is increased by Rs. 3.2
million; the inventory value is expensed over the two years to December
31,2018.
6. Which of the following transactions involving the issuance of shares does not
come within the definition of a ‚share-based‛ payment under IND AS 102?
(A) Employee share purchase plans.

(B) Employee share option plans.
(C) Share-based payment relating to an acquisition of a subsidiary
(D) Share appreciation rights.
7. Entity A is an unlisted entity, and its shares are owned by two directors. The
directors have decided to issue 100 share options to an employee in lieu of many
years’ service. However, the fair value of the share options cannot be reliably
measured as the entity operates in a highly specialized market where there are no
comparable companies. The exercise price is Rs. 10 per share, and the options were
granted on January 1, 2014, when the value of the shares was also estimated at Rs. 10
per share. At the end of the financial year, December 31,2014, the value of the shares

was estimated at Rs. 15 per share and the options vested on that date. What value
should be placed on the share options issued to the employee for the year ended
December 31,2014?
(A) Rs. 1,000

(B) Rs. 1,500
(C) Rs. 500
(D) Rs. 250
8. A company may implement share based employees benefit schemes:
(A) Directly
(B) Trust Route
(D) Neither (A) nor (B)
9. …………. means the process by which the company issues Options, SARs, Shares,
or any other benefits under any of the schemes.
(A) Grant
(B) Option
(C) Exercise
(D) Appreciation
10. A listed company can offer various benefits to employees such as ESOS or ESPS
by complying provisions of the-
(1) Companies Act, 2013
(2) SEBI (Share Based Employee Benefits) Regulations, 2014
(3) Companies (Share Capital & Debentures) Rules, 2014
Select the correct answer from the options given below.
(A) (1) only
(B) (1) and (2) only
(C) (2) and (3) only
(D) (1), (2) and (3)
11. Which of the following persons is covered under the provisions relating to share
based payment regulation made by the SEBI?
(A) Permanent employee

(B) Whole time director
(C) Employee of a subsidiary

12. Which of the following person can be treated as 'employee and hence eligible for
employees share based payment benefits?
(A) Relatives of the director who holds more than 10% of the outstanding equity
shares of the company
(B) Temporary employee of the company who has been working in India
(C) Employee of Associate Company
13. As per Rule 12 of the Companies (Share Capital& Debentures) Rules 2014,
'employee' includes
I. A permanent employee of the company who has been working outside India
II. Independent director
III. An employee who is a promoter
IV. Whole time director
V. Director who holds more than 10% of the outstanding equity shares of the
start-up company
(A) (III), (II) & (IV)
(B) (I), (II), (IV) & (V)
(C) (V), (IV)& (I)
(D) (I) and (IV)
14. SEBI (Share Based Employee Benefits) Regulations, 2014 applies to:
(1) Employee Stock Option Schemes

(2) Employee Stock Purchase Schemes
(3) Stock Appreciation Rights Schemes
(4) General Employee Benefits Schemes
(5) Retirement Benefit Schemes
Select the correct answer from the options given below.
(A) (2) and (1)
(B) (3) and (4)
(C) (4) and (5)
(D) All of the above are correct
15. …………… means the option given to the whole-time directors, officers or
employees of a company, which gives such directors, officers or employees the
benefit or right to purchase or subscribe at a future date, the securities offered by the
company at a pre-determined price.
(A) Employee Stock Purchase

(B) General Employee Benefits

(C) Employee Stock Option
(D) Retirement Benefits
16. Which of the following section of the Companies Act, 2013 allows a company to
offer shares to employees under a scheme of employee's stock option?
(A) Section 61
(B) Section 65
(C) Section 62
(D) Section 68
17. As per Section 62(2) of the Companies Act, 2013, a company can offer shares to
employees under a scheme of employee’s stock option by passing-
(A) Board Resolution

(B) Special Resolution
(C) Ordinary Resolution
(D) Extraordinary Resolution
18. Under the ………………. employees given an option to purchase shares on the
spot at a discount price
(A) Employees Stock Purchase Scheme

(B) Employee Stock Option Scheme
(C) Stock Appreciation Rights Scheme
(D) Preferential Allotment Scheme
19. Under ESOS employees are given an option to purchase shares at
(A) On the spot

(B) Later date i.e. after vesting period
(C) Relevant date
(D) Later date i.e. after end of accounting year
20. Under ESPS employees are given an option to purchase shares on the spot at a
(A) Discounted price

(B) Special price
(C) Discount price
(D) Floor price

21. ………………… means the price, if any, payable by the employee for exercising
the option or SAR granted to him
(A) Offer price

(B) Exercise price
(C) Market Price
(D) Fair price
22. Shares to be issued under ESOS
(A) Can be issued as a part of a public issue.

(B) Has no vesting periods
(C) Has to be approved separately by the company in general meeting by passing
special resolution.
23. There shall be a minimum vesting period of …………. in case of ESOS.
(A) 3 months
(B) 6 months
(C) 1 year
(D) 2 years
24. On 1.4.2019, a company offered 300 shares to each of its 1,200 employees at 75 per
share. The employees are given a month to accept the shares. The shares issued
under the plan shall be subject to lock-in to transfer for 3 years from the grant date
i.e. 30.4.2019. Market price of shares on the grant date is 90 per share. Due to post-
vesting restrictions, fair value of shares issued under the plan is estimated at 84 per
share. Up to 30.4.2019, 50% of employees accepted the offer and paid 75 per share.
Face value of share is 10, Expenses to be recognized in year 2019-2020=?
(A) 5,40,000
(B) 32,40,000
(C) 16,20,000
(D) 10,800
25. Which of the following section of the Companies Act, 2013 allows a company to
offer share to employees under a scheme of employee’s stock option?
(A) Section 65
(B) Section 61

(C) Section 62
(D) Section 63
26. X Ltd. has its share capital divided into equity shares of 10 each. On 1.1.2020 it
granted 20,000 employees stock option at 50 per share, when the market price was
120 per share. The options were to be exercised between 15.3.2020 & 31.3.2020. The
employees exercised their options for 16,000 shares only and the remaining options
lapsed. The company closes its books on 31st March every year. Which of the
following is correct?
(A) No entry is passed when Stock Options are granted to employees. Hence, no
entry will be passed on 1.1.2020.
(B) The difference 120- 50 = 70 per share is employee compensation expense and
will be charged to Profit & Loss A/c for the number of options exercised i.e.
16,000 shares by 11,20,000.
(C) Securities Premium A/c will be credited by 17,60,000
27. A company has its share capital divided into shares of 10 each. On 1.1.2016, it
granted 5,000 employees stock option at 50, when the market price was 140. The
options were to be exercised between 1.3.2017 to 31.3.2017. The employees exercised
their options for 4,800 shares only remaining options lapsed. How much amount will
be transferred from Employees Compensation Expenses A/c to Profit & Loss A/c?
(A) 4,32,000
(B) 4,36,000
(C) 4,28,000
(D) 4,44,000
28. On 1.4.2019, GP Ltd. offered 100 shares to each of its 500 employees at 50 per
share. Employees are given a year to accept the offer. Shares issued under the plan
shall be subject to lock-in on transfer for 3 years from the grant date. Market price of
shares on the grant date is 60 per share. Due to post-vesting restrictions on transfer,
the fair value of shares issued under the plan is estimated at 56 per share. On
31.3.2020, 400 employees accepted the offer and paid 50 per share. (a) Expenses to be
recognized=? & (b) Securities Premium A/c will be credited by?
(A) 3,40,000; 20,40,000

(B) 2,40,000; 18,40,000
(C) 2,40,000, 22,40,000
(D) 3,40,000; 18,40,000

29. A company has its share capital divided into shares of 10 each. On 1.4.2018, it
granted 5,000 shares employee's stock options at 40 per share, when the market price
was 130 per share. The options were to be exercised between 16.12.2018 and
15.3.2019. The employees exercised their options for 4,500 shares only; the remaining
options lapsed. Which of the following is correct?
(A) Bank A/c will be debited by 5,85,000 (4,500 shares X 130)

(B) Equity Share Capital A/c will be credited by 5,00,000 (5,000 shares X 10)
(C) Securities Premium A/c will be credited by 7 5,40,000 (4,500 shares X 120)
30. On 1.1.2016, Tulip Ltd. offered 100 shares of 10 each to each of its 500 employees
at 30 per share. The employees were given time up to 31.3.2016 to accept the offer.
The shares issued under ESOP shall be subject to lock-in-period of 2 years from the
grant date. Other details provided are as under:
(i) Market price of shares on the grant date is 50 per share.
(ii) Fair market value of shares is estimated at 40 per share.
(iii) On 31.3.2016,400 employees accepted offer and paid 30 per share.
Employees Compensation Expenses A/c will be debited by –
(A) 4,00,000
(B) 8,00,000
(C) 3,20,000
(D) 2,00,000

ANSWER KEY
1. B 16. C
2. C 17. B
3. C 18. A
4 A 19. B
5. A 20. C
6. C 21. B
7. C 22. C
8. C 23. C
9. A 24. C
10. B 25. C
11. D 26. D
12. D 27. A
13. D 28. B
14. D 29. C
15. C 30. A

Chapter – 22
METHODS OF VALUATION
1.Firm Specific Risk is also called as
(A) Market Risk

(B) Non-Systematic Risk
(C) Macro Risk
(D) Unavoidable Risk
2.An investment is risk free when actual returns are always ................ the expected
returns.
(A) equal to
(B) less than
(C) more than
(D) depends upon circumstances
3. X Ltd. currently pays a dividend of Rs. 1 per share and has a share price of Rs. 20.
If the dividend is expected to grow @ 12% pa forever, what is firm’s required return
on equity using dividend discount model?
(A) 17.6%
(B) 16.17%
(C) 11.67%
(D) 20%
4. Estimated fair value of an asset is based on the ................ value of operating cash
flows.
(A) current
(B) discounted
(C) future
(D) none of these
5. The following approach states that value of a firm is unaffected by its dividend
policy
(A) CAPM approach

(B) Modigliani-Miller approach

(C) Walter's Valuation model
6. Types of risks do not include
(A) Business risks

(B) Market risks
(C) Interest rate risks
(D) Uncertainty
7. Risk is defined as
(A) a variation from the actual;

(B) a variation from the expected;
(C) a possible event;
(D) a possible uncertainty.
8. Unsystematic risk relates to
(A) Market risk

(B) Beta
(C) Inherent risk
(D) Inflation risk
9. Assume that in a stock market the CAPM is working. A company has presently
beta of 0.84 and its going to finance its new project through debt. This would
increase its debt/equity ratio to 1.56 from the existing 1.26 Due to increased
debt/equity ratio, the company’s beta would
(A) increase
(B) decrease
(C) remain unchanged
(D) nothing can be concluded
10. What is the value of the firm usually based on?
(A) The value of debt and equity

(B) The value of equity
(C) The value of debt
(D) The value of assets plus liabilities
11. Portfolio management reduces
(A) Systematic risk;

(B) Unsystematic risk;

(C) Interest rate risk;
(D) Inflation risk.
12. Assume that the following details are given for a company; Sales - Rs. 1,00,000;
Costs - Rs. 75,000; Depreciation - Rs. 20,000; Tax - 35%; Change in Net Working
Capital - Rs. 1,000; Change in Capital Spending - Rs. 10,000. The Free Cash Flow to
Firm (FCFF) for the given data would be:
(A) Rs. 10,000

(B) Rs. 12,250
(C) Rs. 13,500
(D) Rs. 15,000
13. Types of risk does not include
(A) Business Risks

(B) Market Risks
(C) Interest Rate Risks
(D) Uncertainties
14. X Ltd.’s share beta factor is 1.40. The risk free rate of interest on government
securities is 9%. The expected rate of return on the company equity shares is 16%.
The cost of equity capital based on CAPM is
(A) 15.8%
(B) 16%
(C) 18.8%
(D) 9%
15. A firm current assets and current liabilities are Rs. 1,600 respectively. How much
can it borrow on a short- term basis without reducing the current ratio below 1.25?
(A) Rs. 1,000

(B) Rs. 1,200
(C) Rs. 1,400
(D) Rs. 1,600
16. Which of the following best describes free cash flow?
(A) Free cash flow is the amount of cash flow available for distribution to all
investors after all necessary investments in ope’rating capital have been
made.

(B) Free cash flow is the amount of cash flow available for distribution to
shareholders after all necessary investments in operating capital have been
made.
(C) Free cash flow is the net change in the cash account on the balance sheet.
(D) Free cash flow is equal to net income plus depreciation.
(A) Although some methods of estimating the cost of equity capital encounter
severe difficulties, the CAPM is a simple and reliable model that provides
great accuracy and consistency in estimating the cost of equity capital.
(B) The DCF model is preferred over other models to estimate the cost of equity
because of the ease with which a firm’s growth rate is obtained.
(C) The bond-yield-plus-risk-premium approach to estimating the cost of equity
is not always accurate but its advantages are that it is a standardized and
objective model.
(D) Depreciation-generated funds are an additional source of capital and, in fact,
represent the largest single source of funds for some firms.
(A) Actions which increase net income will always increase net cash flow.
(B) One way to increase EVA is to maintain the same operating income with less
capital.
(C) One drawback of EVA as a performance measure is that it mistakenly
assumes that equity capital is free.
(D) Answers (1) and (2) are correct.
19. Given 12 per cent expected rate of return on a suitable market index, with a
standard deviation of 20 percent, and a risk-free rate of 8 percent, the required rate
of return on a share whose beta is 0-8 using CAPM will be
(A) 8-80%
(B) 9-60%
(C) 11-20%
(D) 17-60%
20. A beta of 0.8 for a security would indicate that -
(A) Security is 20% riskier than index/ market.

(B) Security is 80%6 less risky than index/market.
(C) Security is 20% less risky than index/market.
(D) Security is 80% riskier than index/ market

21. Capital Asset Pricing Model (CAPM) provides the link between-
(A) Return and total risk

(B) Risk and covariance
(C) Return and non-diversifiable risk
(D) Return and diversifiable risk
22. Which of the following investment advice will you provide to your client
investor if CAPM Return < Expected return?
(A) Sell
(B) Hold
(C) Buy
(D) Short
23. lt expected return is more than required return as per CAPM, then-
(A) Security is overvalued and hence can be bought

(B) Security is correctly priced and hence should be hold
(C) Security is undervalued and hence can be sold
(D) Security is undervalued and hence can be bought
investor if CAPM Return> Expected return?
(A) Sell
(B) Buy
(C) Hold
25. The Security Market Line (SML) is a line drawn on a chart that serves as a
graphical representation of the Capital Asset Pricing Model, which shows different
levels of ……….. of various marketable securities plotted against the expected
return.
(A) Systematic risk

(B) Unsystematic risk
(C) Total risk
(D) Free risk
26. Market risk is also called:
(A) Systematic risk and unique risk.

(B) Unique risk & non-diversifiable risk.

(C) Systematic risk & diversifiable risk.

(D) Non-diversifiable risk & systematic risk
27. Investors should be agreeing to invest in riskier investments merely
(A) If return is short

(B) If there are no safe alternatives except for holding cash
(C) If expected return is adequate for risk level
(D) If there are true speculators
28. Beta is measure of-
(A) Non-diversifiable risk

(B) Diversifiable risk
(C) Total risk
(D) Covariance
29. A beta of 1.15 for a security would indicate that
(A) Security is trading 15% higher than market index

(B) Security is 15% riskier than index/ market.
(C) Security is 15% less risky than index/market.
(D) Security and market has covariance of 0.15.
investor if CAPM Return = Expected return?
(A) Sell
(B) Buy
(C) Hold
(D) Put

ANSWER KEY
1. B 16. A
2. A 17. D
3. A 18. B
4 B 19. C
5. B 20. C
6. D 21. C
7. A 22. C
8. D 23. C
9. C 24. A
10. B 25. A
11. A 26. D
12. B 27. C
13. D 28. A
14. C 29. B
15. B 30. C

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Past year Questions

2. Provisions are ........................

3. The original cost at which an asset or liability is acquired is known as .............

4. Current Assets are those assets:

5. Financial statements are used by:

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6. A person who owes money to the business is a ..................

7. Mines as asset is an example of:

8. The following is not an advantage of Double entry system:

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Past year Questions

3. Which of the following is capital reserve?

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(A) less than Rs.100 crore

7. A balance sheet has two parts to it, i.e.

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11. At the time of preparation of Balance Sheet, Capital Work-in-progress is shown in

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Past year Questions

3. Underwriting is a contract of:

4. There shall be a minimum vesting period of .................. in case of Employee Stock

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(B) General Reserve A/c

7. ‘‘Interest accrued & due on debentures’’ is shown ...................... .

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15. Which of the following statements is correct?

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16. Capital Redemption Reserve Account may be applied to issue ...................

17. Preference shares amounting to Rs. 2,00,000 are redeemed at a premium of 5% by

20. If company makes bonus issue at 2:3, then it means:

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23. Premium on issue of shares must be treated as ........................

25. Which of the following is correct?

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30. Forfeited shares can be re-issued at ..........

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32. No issue of bonus shares shall be made by a company out of:

33. Preliminary expense is a ............ asset.

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(D) none of the above Dec 2019

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(C) (A) or (B) Both

47. The loss/discount on re-issue of forfeited shares may be:

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1. Discount on issue of debentures is a:

2. Tax deducted at source on interest on debenture is shown as ......................

5. Which of the following is not a method of redemption of debentures?

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(B) By payment is Instalments

6. Every company required to create/maintain Debenture Redumption Reserve shall

10. C Limited issued 8% Debentures of Rs. 65,00,000 at 5% discount which are

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(A) Debited by Rs. 3,25,000

14. The profit on cancellation of debentures should be transferred to:

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(C) General Reserve A/c

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