1) The matching concept matches

a) assets with liabilities b) income with expenses

c) capital with reserves d) expenses with capital
2) An inexperienced accountant has prepared the current account of one of the partners
as follows:
Rs. Rs.
Interest on capital 33,000 Balance b/d 50,000
Balance c/d 40,000 Drawings 10,000
Share of residual profit 13,000
73,000 73,000
The balance brought down is entered correctly and the amounts of other entries
are correct. However, the accountant is not sure of the difference between debits
and credits.
What should be the correct amount of balance carried down?
a) Rs. 60,000 b) Rs. 70,000
c) Rs. 86,000 d) Rs. 96,000
3) Which of the following errors will create balance in a suspense account?
a) Repairs expense was considered b) Purchase of inventory was
as purchase of asset considered as purchase of non-
current asset

c) An invoice of Rs. 2,500 was totally d) Petty cash expenses of Rs. 500
omitted from the books were only credited to bank
account
4) The purpose of depreciation is to
a) allocate the depreciable cost on a b) write the asset down to its
systematic basis over the asset’s realisable value each period
useful life
c) accumulate a fund for asset d) recognise that assets lose value
replacement over time
5) Zee bought goods on credit from Shan Traders (ST). The goods were not according to
the required specifications and therefore returned to ST. Which document should Zee
send to ST?
a) Credit note b) Debit note
c) Invoice d) Statement of account
6) International Financial Reporting Standards are issued by:
a) Financial Accounting Standards b) International Accounting Standards
Board Board
 c) International Accounting d) Generally Accepted Accounting
Standards Committee Principles Board

7) The cost of a wastebasket having an estimated useful life of 5 years is charged off
as an expense upon purchase. This is an example of the application of the:
a) consistency b) matching principle
c) materiality concept d) historical cost principle
8) Debit always means
a) left side of an account b) right side of an account
c) increase d) increase in assets
9) how will these assets expire?
Prepaid rent Office supplies
(a) With the passage of time Through use and consumption
(b) Through use and consumption With the passage of time
(c) With the passage of time With the passage of time
(d) Through use and consumption Through use and consumption
An unearned revenue in the books of a receiver is likely to be
a) a prepaid expense in the books of b) a prepaid expense in the books of
the payer the payer

c) an accrued expense in the books d) an accrued revenue in the books

of the payer of the payer

10) Which of the following is NOT an asset that falls under the scope of IAS 16 Property,
Plant and Equipment?
a) Tangible assets b) Assets held for the production or
supply of goods or services

c) Assets held for sale in the d) Assets expected to be used for

normal course of business more than one period

11) Which of the following statements is correct regarding trial balance?

a) Every credit balance represents b) Return inward has debit balance
income

c) Opening stock as well as closing d) Trial balance is a book of prime

stock appear in a trial balance entry

12) Which of the following statements is correct?

a) Directors of a company are b) A sole trader business is owned
personally liable for any losses of by shareholders and operated by
the company
 the proprietor

c) Partners are liable for losses in a d) A company is run by directors on

partnership equally regardless of behalf of shareholders
their profit-sharing ratio

13) Interest charged on drawings of partners:

a) increases the profit available for b) decreases the profit available for
appropriation to partners appropriation to partners

c) increases expenses of the d) decreases expenses of partnership

partnership business business
14) A motor vehicle was purchased for Rs. 1,395,000 on 1 July 2018. It has an estimated
useful life of 5 years and a residual value of Rs. 255,000. If the sum of the digits
method of depreciation is used, what will be the carrying amount of motor vehicle as at
30 June 2020?
a) Rs. 711,000 b) Rs. 558,000
c) Rs. 456,000 d) Rs. 303,000
15) During the year 2019, an entity purchased a machine for Rs. 20 million to be used for
6 years. Which of the following would represent residual value of this machine in 2019?
a) Rs. 15 million can be currently b) Rs. 4 million can be currently
obtained from disposal of the obtained from disposal of a 6
machine in present condition year old similar machine

c) Rs. 18 million can be obtained in d) Rs. 18 million can be obtained in

2025 from disposal of the machine 2025 from disposal of the
in present condition machine in present condition

16) A, B and C are partners in a firm sharing profit or loss in the ratio of 3:3:4. B is entitled
to an annual commission of 5% on sales. The sales and net profit earned by the firm
during the year are Rs. 12 million and Rs. 3 million respectively. What is C's share of
profit?
a) Rs. 720,000 b) Rs. 1,140,000
c) Rs. 1,560,000 d) Rs. 960,000
17) An entity received electricity bill for the month of June 2020. The bill will be paid on 10
July 2020. The entity's financial year ends on 30 June. How would the payment be
recorded?
a) Debit electricity expense and credit b) Debit utilities payable and credit
utilities payable electricity expense

c) Debit utilities payable and credit d) Debit electricity expense and credit
 cash cash

18) Allowance for doubtful debts’ account is:

a) liability account b) asset account
c) contra asset account d) expense account
19) Which of the following does not require journal entry in periodic inventory method?
a) Abnormal loss b) Goods returned by a supplier
c) Closing inventory d) Normal loss
20) For reconciling bank balances, unpresented cheques should be:
a) added to balance of bank b) deducted from balance of bank
statement and deducted from statement or added to balance of
balance of cash book cash book
c) deducted from balance of bank d) added to balance of bank
statement and added to balance of statement or deducted from
cash book balance of cash book
21) Which of the following statement(s) is/are correct?
(I) Higher closing prepaid balance than previous year means that payment for the
year exceeds the expense for the year.
(II) Higher closing accrued income balance than previous year means that receipt for
the year exceeds the income for the year.
a) Only (I) is correct b) Only (II) is correct
c) Both are correct d) None is correct
22) Rent amounts totalling Rs. 150,000 were received during the year ended 31
December 2019. In this respect, opening and closing balances are as under:
31 Dec 2019 31 Dec 2018
Rupees
Unearned rent 16,000 10,000
Rent receivable 13,000 17,000
What should be the rent income for the year ended 31 December 2019?
a) Rs. 144,000 b) Rs. 152,000
c) Rs. 148,000 d) Rs. 140,000
23) A transaction not recorded in any other books of original entry is recorded in:
a) Sales day book b) Purchases day book
c) General journal d) Cash book
24) On 1 February 2019, a loan of Rs. 6,000,000 was taken from a bank for acquisition of
an office building. A portion of the building was rented out on 1 August 2019 at a
monthly rent of Rs. 45,000. Interest is payable at 15% per annum on 31 January each
year and rent is received half yearly in advance.
What amounts of interest payable and unearned rent should be shown in the statement of
financial position as on 31 December 2019?
a) Interest payable Rs. 900,000; b) Interest payable Rs. 825,000;
Unearned rent Rs. 270,000 Unearned rent Rs. 45,000

c) Interest payable Rs. 825,000; d) Interest payable Rs. 825.000;

Unearned rent Rs. 45,000 Unearned rent Rs. 250,000

25) An entity acquired laptops in exchange of desktops which have carrying amount of Rs.
450,000 and fair value of Rs. 300,000 at the date of exchange. The list price of the
laptops acquired is Rs. 600,000. The entity is also required to pay cash of Rs. 275,000
in this exchange transaction.
The laptops should be initially recognized at:
a) Rs. 300,000 b) Rs. 575,000
c) Rs. 450,000 d) Rs. 600,000
26) Determine the balance as per bank statement using the following information:
Balance as per cash book: 49,100
Cheques received and deposited into the bank, but not yet credited in the bank
statement 4,600
Unpresented cheques; 6,300
Credit transfers appearing in the bank statement but not entered in the cash book;
3,400
a) Rs. 52,500 b) Rs. 54,200
c) Rs. 58,800 d) Rs. 50,800
27) Which of the following statements is correct?
a) Debit balance as per bank b) Debit balance as per cash book
statement means a bank means a bank overdraft
overdraft
c) Credit balance as per bank d) Credit balance as per cash book
statement means a bank overdraft means an asset
28) If a property, plant and equipment remains idle for whole year, the depreciation
expense for the year will be NIL under:
a) straight line method b) reducing balance method
c) units of production method d) all of the above methods
29) On 1 July 2019 a business acquired a shop on rent which is payable quarterly in
advance. Payments of rent were made as follows:
Date Rupees
 1 July 2019 75,000
30 September 2019 75,000
31 December 2019 75,000
31 March 2020 75,000
30 June 2020 75,000
What will be the rent expense charged to statement of profit or loss for the year ended
31 August 2020?
a) Rs. 375,000 b) Rs. 300,000
c) Rs. 75,000 d) Rs. 225,000
30) On 4 August 2021 goods were sold on credit for Rs 125,000 with credit terms of 3/10
n/20. On 8 August 2021 goods of Rs 25,000 were returned by the buyer. How much
should the seller expect to receive if the buyer pays on 12 August 2021.
a) Rs 100,000 b) Rs 125,000
c) Rs 97,000 d) Rs 121,250
31) On 30 June 2020, the balance in allowance for doubtful receivables showed Rs 16,000.
During the year ended 30 June 2021, receivables of Rs 21,000 were written off. If
allowance for doubtful receivables at 30 June 2021 is Rs 18,000 then what would be
the total effect of bad and doubtful receivables on profit for the years?
a) Decreased by Rs 19,000 b) Increased by Rs 19,000
c) Decreased by Rs 23,000 d) Increased by Rs 23,000
32) A liability is classified as current liability of it is paid:
a) Within one year or normal operating b) Within one year or normal
cycle, whichever is longer operating cycle, whichever is
shorter
c) Out of current assets d) Out of non-current assets
33) Karachi traders (KT) perform stock count on 10 January 2021 for the year ended 31
December 2021. The stock count revealed inventory value of Rs 480,000. During 1
January to 10 January 2021, KT sold inventory for Rs 81,000 at a cost plus mark-up of
35% and purchased inventory of Rs 38,000. The value of inventory as at 31 December
2020 should be:
a) Rs 523,000 b) Rs 502,000
c) Rs 458,000 d) Rs 437,000
34) On 1 may 2019, an entity hired a firm at an annual fee of Rs 150,000 for maintaining
accounting records. On 1 may 2020 the contract was renewed for further one year at
a revised annual fee of Rs 210,000. The fee is paid quarterly in arrears on 31 July, 31
October, 31 January and 30 April each year. What figure should appear for fee in in the
financial statements for the year ended 31 December 2020?
Statement of Financial Position Statement of Profit or loss
a) Prepaid of Rs 35,000 Expense of Rs 190,000
b) Prepaid of Rs 17,500 Expense of Rs 180,000
 c) Accrual of Rs 35,000 Expense of Rs 190,000
d) Accrual of Rs 17,500 Expense of Rs 180,000
35) Which of the following statements about prudence is correct?
a) Assets and income must be b) The lowest possible values should
understated while liabilities and be applied to income and assets
expenses must be overstated. and the highest possible values to
expenses and liabilities.
c) Assets and income are not d) Understating of assets and income
overstated while liabilities and and overstating of liabilities and
expenses are not understated. expense are desirable in
preparing financial
statements.
36) On 30 June 2021, cashbook of Abbas Enterprises reflected a credit balance of Rs
167,000 and bank statement showed a credit balance of Rs 125,000. Which two of the
following situations can reconcile the balance?
a) Unpresented cheques of Rs b) Unpresented cheques of Rs
304,000 and bank charges of Rs 280,000 and bank charges of Rs
12,000 12,000
c) bank charges of Rs 12,000 and d) Unpresented cheques of Rs
uncleared cheques of Rs 304,000 432,000 and uncleared cheques of
Rs 140,000
37) Income arises from increase in assets or decrease in a liability resulting in:
a. Decrease in equity other than contribution from owner
b. Increase in equity other than contribution from owner
c. Increase in equity including contribution from owner
d. Decrease in equity including contribution from owner

38) Which two of the following would be considered as business transection?

a. Business paid the electricity bill of previous year
b. Owner received the electricity bill of the owner residence
c. Owner paid the electricity bill of the owner residence from personal cash
d. Business received electricity bill of office premises which will be paid in next year

39) Which two of the following are not part of a complete set of the financial statement?
a. Notes to financial statement
b. Statement of financial position
c. Director report
d. Auditor report

40) Total assets of a business would be charged as a result of:

a. Non-current assets being purchased on cash
 b. A supplier balance being paid in cheque
c. Wages being paid in cash
d. Non-current assets being purchased on credit

41) A business commenced with capital in cash of RS. 150000. Inventory of RS 100000
was purchased for cash and half of inventory was sold at a mark up of 20% on credit.
Furniture of RS. 40000 was purchased on credit. What will be accounting equation (A-
L=C) after these transactions.
a. Rs.190000-Rs.40000=Rs.150000
b. RS200000-RS40000=RS160000
c. RS150000-RS40000=RS110000
d. RS160000-RS40000=RS120000

42) Which two of the following would be recorded in General journal?

a. Increase in provision of doubtful debts
b. Advance received from customer
c. Write off of a trade receivable balance
d. Receipt of a written off balance

43) Which of the following document would require a double entry?

a. Sales order
b. Sales invoices
c. Delivery note
d. Statement of account

44) Match each of the following transection with appropriate book of prime entry
i. Sales made on credit Sales Return Day Book
ii. Sales made on cash Cash book
iii. Return by credit customer Sales Day Book
iv. Purchase of non-current asset on General journal
credit
45) A transection not recorded in any other books of original entry is recorded in:
a. Sales day book
b. Purchase day book
c. Cash book
d. General journal

46) Zee bought goods on credit from Shan traders. The goods were not according to the
required specification and therefore returned to ST. which document should zee send
to ST
a. Statement of account
b. Credit note
 c. Debit note
d. Invoices

47) Which two of the following statement are correct regarding trial balances?
a. Opening stock as well as closing stock appear in the trail balance
b. Trail balance is not a book of prime entry
c. Every credit balance represent income
d. Return inward has debit balance

48) On 4/8/21 goods were sold on credit for Rs. 125000 with credit term of 3/10, n/20.
On 8/8/21 goods of Rs. 25000 were returned by the buyer. How much should the seller
expect to receive if the buyer pays on 12/08/21
a. RS.100000
b. RS.121250
c. RS.125000
d. RS.97000

49) Which two of the following would be appear in trail balance?

a. Gross profit
b. Discount allowed
c. Trade discount received
d. Acc. Depreciation

50)How would these assets will expire?

Prepaid rent Office supplies

Through use and consumption With the passage of time

Through use and consumption Trough use and consumption

With the passage of time Through use and consumption

With the passage of time With the passage of time

51) Consider the following statement:

i. Higher closing prepaid balances than previous year means that payment for the
year exceeds the expense for the year
ii. Higher closing accrued income balances means that receipt for the year exceeds
the income for the year.

Which of the following is/ are correct?

a- None is correct
 b- Only 1 is correct
c- Only 2 is correct
d- Both are correct

52) On 1-02-19 a loan of RS 6000000 was taken from a bank for acquisition of an office
building. A portion of the building was rented out on i-08-19 at a monthly rent of RS
45000. INTEREST Is payable at 15% per annum on 31-01 each year and rent are
received half yearly in advance.
What amounts of interest payable and unearned rent should be shown in statement of
financial income as on31-12-19?
a- Interest payable 900000, unearned rent 270000
b- Interest payable 450000, unearned rent 45000
c- Interest payable 825000, unearned rent 45000
d- Interest payable 825000, unearned rent 250000

53) An entity received electricity bill for the month of June 20. The bill will be paid on 10
July 20. The entity financial year ends on 30 June. How would the payment be
recorded?
a. Debit utilities payable and credit electricity expense
b. Debit utilities payable and credit cash
c. Debit electricity expense and credit utilities payable
d. Debit electricity expense and credit cash

54) On 1-7-19 a business acquired a shop on rent which is payable quarterly in advance.
Payments are, made as follow:
Date RS
1 JULY 19 75000
30 SEP 19 75000
31 DEC 19 75000
31 MAR 20 75000
30 JUNE 20 75000
Which will be the rent expense charged to P/L for the year ended 31-08-20
a- 75000
b- 375000
c- 300000
d- 225000
55) At 31-12-19 an entity allowance for doubtful receivables amounted to RS.48000 which
was 5% of the receivables at that date. At 31-12-20 receivables totalled Rs 1085000.
It was decided to write off 53000 of debt as irrecoverable and based on past
experience to keep the allowance for doubtful receivables at 5% of receivables.
What should be the charge in P/L for the year ended 31-12-20 for bad and
doubtful receivables.
a- 59250
b- 56600
c- 49400
d- 46750

56) At 31-12-20 receivables totalled RS. 785000 before making the following
adjustment.
i. It was decoded to write off 20000 of bad debts as irrecoverable and create
specific allowance of 80% against balance of RS.75000.
ii. General allowance for receivables is to be maintained at 5% of receivables.

Allowance for doubtful receivables as at 31-12-19 amount to 31000

What should be the allowance for doubtful receivables at December 2020
a- 110000
b- 109500
c- 95500
d- 94500

57) Which is the purpose of maintaining an allowance for doubtful debt receivables.
a. Records irrevocable debts without taking them out of the books of an entity
b. Records the expense of irrevocable debts
c. Have an estimate of future irrecoverable debts
d. Matches the estimate cost future irrecoverable debts against the revenue
earned in giving rise to the potential irrecoverable debts

58) For reconciling bank balances unpresented cheques should be:

a. Deducted from balance of bank statement or added to balance of cash book
b. Added to balance of bank statement or deducted from balance of cash book
c. Deducted from balance of bank statement and added to balance of cash book
d. Added to balance of bank statement and deducted from balance of cash book

59) Which of the following statement is correct?

a. Credit balance as per bank statement means a bank overdraft
b. Debit balance as per bank statement means a bank overdraft
 c. Debit balance as per cash book means bank overdraft
d. credit balance as per cash book means an asset.

60) Determine the balance as per the bank statement using the following information.
RUPEES
Balance as per cash book 49100
Cheques received and deposited into the bank but not yet credited in the 4600
bank statement
Unpresented cheque 6300
Credit transfer appearing in the bank statement but not entered in the cash 3400
book
a- 52500
b- 54200
c- 58800
d- 50800

61) A business has an overhead absorption rate of RS 425 PER MACHINE HOUR based
on budgeted level of activity. Which is 12400 hours. In the period covered by the budget
actual machine hours worked were 2% more than the budgeted hours and actual
overhead expense incurred was RS. 5638900. What was the absorbed OH for the
period?
a. 5638000
b. 5375400
c. 5270000
d. 5500000

62) What entry should be recorded when actual OH expenditure is incurred

DEBIT CREDIT
COST OF SALE PRODUCTION OH
INVENTORY WIP PRODUCTION OH
PRODUCTION OH CASH
PRODUCTION OH COST OF SALE
63) Consider the following diagram:

Which of the following cost would be most likely to be illustrated by the

diagram given below?
 a- Indirect material cost
b- Direct material cost
c- Factory rent
d- Labor cost

64) Which of the following best describes a period cost?

a. A cost that is identifies with a unit produced during the period is included in the
value of inventory. The cost is treated as an expense for the period when the
inventory is actually sold.
b. A cost that can be easily allocated to a particular period without the need for
arbitrary apportionment between periods.
c. A cost that relates to a time period is not included in the inventory valuation. The
entire cost is treated as an expense for the period
d. A cost that is incurred regularly every period e.g., every month or quarter.

65) Which two of the following items would be appearing in analysis of expenses by
nature?
a. Salaries exp
b. Admin exp
c. Distribution exp
d. Rent exp

66) A liability is classified as current liability if it is paid;

a- Out of current assets
b- Within 1 year or normal operating cycle whichever is longer
c- Out of non-current assets
d- Within 1 year or normal operating cycle whichever is shorter

67) The purpose of depreciation is to;

a. Recognize that asset lose value overtime
b. Write the asset down to its realizable value at the end of each period
c. Allocate the depreciable cost on a systematic basis over the asset’s useful life
d. Accumulate a fund for asset replacement

68) Which of the following is not an asset that falls under the scope of IAS 16 PPE?
a. Assets held for the production or supply of goods or service
b. Tangible assets
c. Assets held for sale in the normal course of business
d. Assets expected to be used for more than one period
69) A motor vehicle was purchased for RS. 1395000 on 1 July 18. It has an estimated
useful life of 5 year and residual value of RS. 255000. If the sum of digit method is used
for depreciation what will be the carrying amt of the motor vehicle as at 30 June 2020
a. RS 303000
b. RS 456000
c. RS 711000
d. RS 558000

70) During the year 2019 an entity purchased a machine for RS. 20 million to be used for
6 years. Which of the following would represent residual value of the machine in 2019?
a. Rs 4 million can be currently obtained from disposal of a 6-year-old similar
machine
b. Rs 15 million can be currently obtained from disposal of the machine in present
condition
c. Rs. 18 million can be obtained in 2025 from the disposal of the machine in
present condition.
d. Rs. 7 million can be obtained in 2025 from disposal of a 6-year-old similar
machine.

71) If a PPE remains idle for whole year the depreciation expense for the year will be NIL
under:
a. Straight line method
b. Units of production method
c. Reducing balance method
d. All of the above method

72) Which of the following does not require Journal entry in periodic inventory method?
a. Goods retuned by a supplier
b. Closing stock
c. Abnormal loss
d. Normal loss

73) A company purchased an inventory item at purchase price at RS 1800 and also
incurred freight in cost of RS. 155. The item will be sold at a margin of 15% after
incurring freight out and packing cost of RS 200 and RS 150 respectively. At which
value the item should be carried in the books?
a. RS 1800
b. RS 1955
c. RS 1950
d. RS 2300
 e. RS 2150
f. RS 2100

74) Which two of the following is included in cost of inventory?

a. Recoverable taxes paid on purchases
b. Normal wastages of material
c. Selling cost
d. Fixed manufacturing overheads

75) Bilal has started a trading business. He deals in goods where price is usually rising
over the time. Which of the following statement is correct regarding selection of FIFO
and average method in this case?
a. FIFO will result in lower reported profit
b. Average method will give more accurate profit
c. Avg. method will lead will higher cost of ending stock
d. Profit will be unaffected by the selection of inventory method

76) In preparing its financial statement for the current year an entity closing inventory was
understated by RS. 200000. What will be the effect of this error if it remains
uncorrected?
a. The current year profit will be overstated and next year profit will be understated
b. The current year profit will be understated and next year profit will be overstated
c. The current year profit will be overstated but there will be no effect on next year
profit.
d. The current year profit will be understated but there will be no effect on next year
profit