School of Distance Education

UNIVERSITY OF CALICUT
School of Distance Education

BCM2B02 FINANCIAL ACCOUNTING

II Semester (2019 Admn.)
B.Com. Core Course
Question Bank

1. Opening capital is ascertained by preparing:

(a) Cash book (b) Creditors A/c
(c ) Debtors A/c (d) Opening statement of affairs.
2. A Single entry system it:
(a) Complete and scientific system (b) Incomplete and unscientific
(c ) Incomplete and scientific (d) Complete and unscientific
3. Single Entry system has effect:
(a) One effect (b) Tow effect
(c ) Three effect (d) None of the above
4. In Single entry system, it is not possible to prepare:
(a) Receipts and payments A/c (b) Trial balance
(c) Balance sheet (d) Account sales
5. A Single entry system is usually adopted by:
(a) Company (b) Partnership
(c) Government (d) None of above
6. Single Entry system is must suited where:
(a) Cash transactions are many (b) Credit transactions are many.
(c) Cash & credit transactions are more (d) None of the above

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7. Capital can be obtained by preparing:

(a) Cash book (b) Statement of affairs
(c ) Debtors A/c (d) Creditors A/c
8. Credit sale can be obtained by preparing:
(a) Cash book (b) Statement of affairs
(c ) Debtors A/c (d) Creditors A/c
9. Credit Purchase can be calculated by preparing:
(a) Cash book (b) Statement of affairs
(c ) Debtors A/c (d) Creditors A/c
10 Cash in hand can be obtained by preparing:
(a) Cash book
(b) Statement of affairs
(c) Debtors A/c
(d) Creditors A/c
11. In single entry system profit is calculated as follows:
(a) Opening Capital + Drawing + Fresh Capital- Ending capital
(b) Capital at the end – Drawing – Fresh capital - Opening capital
(c) Capital at the end + Drawing – Fresh capital -Opening capital
(d) None of the above
12. In single entry system only accounts are opened:
(a) Personal A/c (b) Real A/c
(c ) Nominal A/c (d) Real & Nominal A/c
13. Single entry system cannot be a maintained by:
(a) Joint stock company (b) Partnership A/c
(c ) Sole-tradership A/c (d) All of these
14. Single entry system of book – keeping is generally followed by:
(a) Small business (b) Non – trading
(c ) Large business (d) None
15. A Statement of assets and liabilities prepared under the single entry system is called:
(a) Balance sheet (b) Financial statement
(c ) Cash statement (d) Statement of affairs

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16. Net worth of an organization means the excess of its total assets over total:
(a) Expenses (b) Incomes
(c ) Liabilities (d) Both (a) and (b)
17. Which one of is most likely to have the lowest rate of stock turn:
(a) Jeweler (b) Green grocer
(c ) Super market (d) News agent
18. If a store’s mark up is 25% the margin must be:
(a) 5% (b) 15% (c) 10% (d) 20%
19. If the rate of G.P on sale is 20% and cost of goods, sold is Rs. 100,000, then amount of G.P will
be equal to:
(a) Rs. 20,000 (b) Rs.25,000 (c) Rs.35,000 (d) Rs.15,000
20. Bad -debts written off always affect the:
(a) Debtors A/c (b) Creditor A/c
(b) Cash A/c (d) None of these
21. Company has ……………
(A) Separate Legal Entity (b) Perpetual Existence
(C) Limited Liability (d) All of the Above
22. Shareholders are :
(A) Customers of the Company (b) Owners of the Company
(C) Creditors of the Company (d) None of these
23. Who are the real owners of a company?
(A) Government (b) Board of Directors
(C) Equity shareholders (d) Debentureholders
24. A Company is created by :
(A) Special act of the Parliament (b) Companies Act
(C) Investors (d) Members
25. Equity shares cannot be issued for the purpose of:
(A) Cash Receipts (b) Purchase of assets
(C) Redemption of debentures (d) Distribution of dividend

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26. The shares on which there is no any pre-fixed rate of dividend is decided, but the rate of
dividend is fluctuating every year according to the availability of profits, such share are
called :
(A) Equity Share (b) Non-cumulative preference share
(C) Non-convertible preference share (d) Non-guaranteed preference share
27. Preference shares, in case the holders of these have a right to convert their preference shares
into equity shares at their option according to the terms of issue, such shares are called :
(A) Cumulative Preference Share (b) Non-cumulative Preference Share
(C) Convertible Preference Share (d) Non-convertible Preference Share
28. Which shareholders have a right to receive the arrears of dividend from future profits :
(A) Redeemable Preference Shares (b) Participating Preference Shares
(C) Cumulative Preference Shares (d) Non-Cumulative Preference Shares
29. Which shareholders are returned their capital after some specified time :
(A) Redeemable Preference Shares (b) Irredeemable Preference Shares
(C) Cumulative Preference Shares (d) Participating Preference Shares
30. The following statements apply to equity/preference shareholders. Which one of them applies
only to preference shareholders?
(A) Shareholders risk the loss of investment
(B) Shareholders bear the risk of no dividends in the event of losses
(C) Shareholders usually have the right to vote
(D) Dividends are usually given at a set amount in every’ financial year.
31. Unless otherwise stated, a preference share is always deemed to be :
(A) Cumulative, participating and non-convertible
(B) Non-cumulative, non-participating and non-convertible
(C) Cumulative, non-participating and non-convertible
(D) Non-cumulative, participating and non-convertible
32. The portion of the capital which can be called-up only on the winding up of the Company is
called
(A) Authorised Capital (b) Called up Capital
(C) Uncalled Capital (d) Reserve Capital

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33. Capital included in the Total of Balance Sheet of a Company is called :

(A) Issued Capital (b) Subscribed Capital
(C) Called up Capital (d) Authorised Capital
34. Reserve Capital is also known by :
(A) Capital Reserve (b) Called up Capital
(C) Subscribed Capital (d) None of the above
35. In the Balance Sheet of a company, under the heading share capital, at the last is shown :
(A) Authorised Share Capital (b) Subscribed Share Capital
(C) Issued Share Capital (d) Reserve Share Capital
36. Reserve Capital is a part of:
(A) Paid-up Capital
(B) Forfeited Share Capital
(C) Assets
(D) Capital to be called up only on liquidation of company
37. Which of the following statements is true? (C.S. Foundation, Dec. 2012)
(a) Authorised Capital = Issued Capital (b) Authorised Capital > Issued Capital
(c) Paid up Capital > Issued Capital (d) None of the above
38. In case of private placement of shares, to raise the amount of capital a company :
(A) invites the public through prospectus
(B) does not invite the public
(C) invites the public through advertisement
(D) invites the public through memorandum of association
39. Shares issued by a company to its employees or directors in consideration of ‘Intellectual
Property Rights’ are called :
(A) Right Equity Shares (b) Private Equity Shares
(C) Sweat Equity Shares (d) Bonus Equity Shares
40. Public subscription of shares include :
(A) To Issue Prospectus (b) To Receive Applications
(C) To Make Allotment (d) All of the Above

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41. Issue of shares at a price lower than its face value is called :
(A) Issue at a Loss (b) Issue at a Profit
(C) Issue at a Discount (d) Issue at a Premium
42. Persons who start a company are called ……………….
(A) Shareholders (b) Directors
(C) Promoters (d) Auditors
43. Share Application Account is in the nature of:
(A) Real Account (b) Personal Account
(C) Nominal Account (d) None of the above
44. If vendors are issued fully paid shares of ₹1,25,000 in consideration of net assets of
?1,50,000, the balance of ₹25,000 will be credited to :
(A) Statement of Profit & Loss (b) Goodwill Account
(C) Security Premium Reserve Account (d) Capital Reserve Account
45. Premium on the issue of shares should be shown :
(A) On the Assets side of balance sheet
(B) On the Equity & Liabilities side of balance sheet
(C) In profit & loss Statement
(D) None of the Above
46. From which account, expenses on issue of shares will be written off first of all:
(A) Statement of Profit and Loss
(B) Miscellaneous Expenditure Account
(C) Share Issue Expenses Account
(D) Securities Premium Reserve Account
47. Pro-rata allotment of shares is made when there is :
(A) Under subscription (b) Oversubscription
(C) Equal subscription (d) As and when desired by directors
48. If applicants for 80,000 shares were allotted 60,000 shares on prorata basis, the shareholder
who was allotted 1,200 shares must have applied for :
(A) 900 Shares (b) 3,600 Shares
(C) 1,600 Shares (d) 4,800 Shares

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49. If 500 shares of ₹10 issued at a premium of ₹1 on which ₹9 (including premium) have been
called and ₹7 including premium have been paid are forfeited, the forfeiture account should
be credited by :
(A) ₹3,000 (b) ₹3,500 (c) ₹4,000 (d) ₹4,500
50. Discount allowed on re-issue of forfeited shares is debited to :
(A) Share Capital A/c (b) Share forfeiture A/c
(C) Statement of Profit & Loss (d) General Reserve A/c
51. The balance of the forfeited shares account after re-issue of forfeited shares is transferred to :
(A) Statement of Profit & Loss (b) Share Capital A/c
(C) Capital Reserve A/c (d) General Reserve A/c
52. Madhu Ltd. forfeited 800 shares of `10 each issued at 10% premium to Shyam (` 9 called
up) on which he did not pay ` 3 of allotment (including premium) and first call of `2. Out of
these, 600 shares were re-issued to Ram as fully paid up for `9 per share. What is to amount
to be transferred to capital Reserve?
(A) `2,400 (b) ` 1,800 (c) `3,000 (d) `3,600
53. Debenture holders are :
(A) Owners of the Company (b) Debtors of the Company
(C) Creditors of the Company (d) Promoters of the Company
54. Debentures represent the :
(A) Long-term Borrowings of a Company
(B) The Investment of Equity-Shareholders
(C) Directors’ shares in a company
(D) Short-term Borrowings of a Company
55. Zero Coupon Bonds are issued :
(A) At Zero Interest Rate (b) With Specified Rate of Interest
(C) Without Specified Rate of Interest (d) None of These
56. Interest payable on debentures is :
(A) an appropriation of profits of the company
(B) a charge against profits of the company
(C) transferred to sinking fund investment account
(D) transferred to general reserve

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57. A debenture holder is entitled to :

(A) Fixed dividend (b) Share in profits
(C) Voting rights in the company (d) Interest at the fixed rate
58. On liquidation of company, principal amount of debentures is returned :
(A) First of All (b) Last of All
(C) Before Equity Capital (d) After Equity Capital
59. Which of the following statements is false?
(A) Debenture is a form of public borrowing.
(B) It is customary to prefix debentures with the agreed rate of interest.
(C) Debenture interest is a charge against profits.
(D) The issue price and redemption value of debentures cannot differ.
60. Which of the following is not a characteristic of Bearer Debentures?
(A) They are treated as negotiable instruments.
(B) Their transfer requires a deed of transfer.
(C) They are transferable by mere delivery.
(D) The interest on it is paid to the holder irrespective of identity.
61. Which of the following statements is false?
(A) At maturity, debenture holders get back their money.
(B) Debentures can be forfeited for non-payment of call money.
(C) In company’s balance sheet, debentures are shown under the head Long term
Borrowings.
(D) Interest on debentures is a charge against profits
62. Which of the following statements is false :
(A) A Company can issue redeemable debentures.
(B) A Company can issue debentures with voting rights.
(C) A Company can issue convertible debentures.
(D) A Company can buy its own debentures and shares.

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63. The Principal amount of debentures will be repaid by the company either at the end of a
specified period or by instalments during the life time of the company. Such types of
debentures are called :
(A) Redeemable Debentures (b) Irredeemable Debentures
(C) Convertible Debentures (d) Bearer Debentures
64. The debentures whose principal amount is not repayable by the company during its life time,
but the payment is made only at the time of Liquidation of the company, such debentures are
called :
(A) Bearer Debentures (b) Redeemable Debentures
(C) Irredeemable Debentures (d) Non-Convertible Debentures
65. Debenture Application Account is in the nature of
(A) Real Account (b) Personal Account
(C) Nominal Account (d) None of the above
66. Discount on issue of Debentures is in the nature of
(a) Revenue loss (b) Capital loss
(c) Deferred Revenue Expenditure (d) None of the above
67. Premium received on issue of debentures may be utilised for
(A) For writing off discount allowed on issue of shares
(B) For writing off premium allowed on redemption of debentures
(C) For writing off preliminary expenses
(D) For All of the Above
68. In the case of net worth method of single entry system, the net profit is ascertained by
a. Preparing trading and profit and loss account
b. Comparing opening capital and closing capital
c. Preparing memorandum trading account
d. None of these
69. Capital at the beginning of the year is ascertained by preparing
a. Memorandum trading account (b) Total creditors account
b. Total debtors account (d) Opening statement of affairs

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70. The closing balance in the creditors account can be ascertained from the
a. Cash account (b) Total creditors account
b. Closing statement of affairs (d) None of these
71. If the rate of G/P is 25% of sales and the cost of goods sold is ` 150000, the amount of G/P
will be
(a) `30000 (b) `25000 (c) `40000 (d) `50000
72. Share application account is classified as
(a) Real account (b) Personal account
(c ) Impersonal account (d) Nominal account
73. A newly established company cannot issue shares at
a. Par (b) Premium (c) Discount (d) None of these
74. The minimum share application is
(a) 1% of the face value (b) 5% of the face value
(c ) 10% of the face value (d) 25% of the face value
75. The difference between subscribed capital and called up capital is known as
(a) Paid up capital (b) Uncalled capital
(b) Calls in advance (d) Calls in arrears
76. The number of days required from the time of issue of the prospectus to the complete
allotment should not exceed.
a. 30 days (b) 60 days (c) 90 days (d) 120 days
77. The excess price received on the par value of the shares should be credited to
(a) Calls in advance (b) Reserve capital account
(c ) Security premium reserve account (d) None of these
78. Which of the following should be deducted from the share capital to determine the paid up
share capital.
(a) Calls in advance (b) Calls in arrears
(c ) Security premium reserve (d) Discount on issue of shares.
79. The security premium will be shown under the heading
(a) Share capital (b) Current liability
(c ) Current assets (d) None of these

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80. As per the table A of the Companies Act, the interest on calls in advance is
a. 5% (b) 10% (c) 6% (d) None of these.
81. The rate of interest a company can charge on calls in arrears according to Table A of the
Companies Act is
a. 10% (b) 6% (c) 5% (d) None of these.
82. The rate of discount on shares cannot exceed
(a) 5% (b) 10% (c ) 6% (d) None of these
83. Premium on issue of shares can be used for
(a) Issue of bonus shares (b) Distribution of profit
(c ) Transferring to general reserve. (d) None of these
84. When shares are forfeited the share capital account is debited by
(a) Paid up amount (b) Called up amount,
(c ) Calls in arrear (d) Nominal value of such share.
85. The profit on reissue of forfeited shares is transferred to
(a) General reserve (b) Capital reserve
(c )Capital redemption reserve (d) None of these
86. Which of the following signifies the difference between par value and an issue price below
par value.
(a) Security premium (b) Discount on issue of shares
(c ) Calls in arrear
87. When an existing company offers it shares for sale to the existing shareholders, it is known
as
(a) Private placement (b) Bonus issue.
(c ) Right issue (d) Offer for sale
88. Dividends are usually paid on
(a) Authorized capital (b) Issued capital
(c ) Called up capital (d) Paid up capital
89. Which of the following should be deducted from the share capital to find out paid up capital
(a) Calls in advance (b) Calls in arrear
(c ) Shares forfeited account (d) Discount on issue of shares.

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90. Interest on debenture is

(a) Adjustment of profit (b) Appropriation of profit
(c ) Charge on profit (d) None of these
91. In the balance sheet of a company, debentures are shown under which heading
(a) Secured loan. (b) Unsecured loan
(c ) Provisions (c ) Reserves and surplus
92. In the balance sheet of a company, the discount on issue of debentures is shown under which
heading
(a) Fixed asset (b) Current asset
(c ) Investment (d) Miscellaneous expenditure
93. which of the following is not an advantage of having a conceptual framework of accounting?
a. Development of accounting standards is subject to less political pressure
b. A consistent balance sheet or income statement approach is used to setting standards
c. Consider the needs of all users
d. Avoids a mixed up approach to setting standards
94. A conceptual framework for accounting is
a. A set of financial statements
b. A set of rules governing financial reporting
c. A set of components of financial statements
d. A set of principles underpinning financial reporting
95. Which of the following relate to financial position in a set of financial statements?
a. Assets , liabilities, income and expenses
b. Assets, liabilities and equity
c. Income and expenses
d. Income, expenses and liabilities
96. GAAP stands for
a. Generally accepted accounting principles
b. Globally accepted accounting practice
c. Generally allowable accounting principles
d. Generally allowable accounting practices

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97. The global key professional accounting body is ----------

a. The international accounting standards board
b. The institute of chartered accountants of india
c. The financial accounting standard board
d. The international accounting standards committee
98. 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
99. The international accounting standard Committee was set up in --------
(a) 1982 (b) 1976 (c ) 1967 (d) 2009
100. The process of converting foreign subsidiary financial statements into the home
currency is known as -------
(a) Transmission (b) Translation
(c ) Consolidation (d) Reconstruction
101. Accounting in india is governed by the -----
(a) Income tax department (b) Company law board
(c ) Institute of chartered accountants of india (d) Reserve bank of india
102. Interim dividend paid is always shown
(a) In P/L Appropriation A/c (b) On the asset side of the B/S
(c ) On the liability side of the B/S (d) None of these.
103. Unclaimed dividend is shown in the B/S under the head
(a) Current liability (b) Unsecured loan
(c ) Reserve and surplus (d) Provisions
104. Advance payment of tax is in the nature of
(a) Capital expenditure (b) Prepaid expenses
(c ) Outstanding expenses (d) Revenue expenditure
105. Debentures are shown in the B/S under head.
(a) Current assets, loans and advances (b) Investment
(c ) Non current liabilities (d) Unsecured loan

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106. Preliminary expenses is an example of

(a) Fixed asset (b) Current asset
(c ) Investment (d) Fictitious asset
107. Divisible profit do not include
(a) Insurance fund (b) Reserve fund,
(c ) profit and loss account balance (d) revaluation reserve
108. loose tools are shown in the B/S under the head.
(a) Fixed asset (b) Investment
(c )Current asset (d) Miscellaneous expenditure
109. Discount on shares and debentures are shown in
(a) Profit and loss appropriation account (b) Asset side of the balance sheet
(c ) Liability side of the balance sheet (d) None of these
110. Calls in arrear is
(a) Shown as current asset (b) Deducted from share capital
(c )Shown as current liability (d) Shown under miscellaneous expenditure
111. The amount set aside to meet the loss of bad debt is
(a) Provision (b) Liability
(c ) Reserve (d) Contingent liability
112. In the case of joint stock company, goodwill is shown on the asset side under the
head.
(a) Non current asset (b) Investment
(c) Current asset (d) Miscellanious expenditure
113. Advance payment of tax should be shown on the
a. Debit side of P/L A/c
b. Debit side of the profit and appropriation account
c. Asset side of the balance sheet
d. Liability side of the balance sheet
114. Which of the following item will be taken in the surplus statement
(a) Provision for taxation (b) Transfer to sinking fund
(c ) Contribution to PF (d) Preliminary expenses written off

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115. Scrip dividend means

(a) Unclaimed dividend (b) Arrears of dividend
(c ) Dividend paid other than cash (d) Cash dividend
116. Which of the following would not appear in a limited company’s surplus/Deficit
statement
(a) Transfer to revaluation reserve (b) Provision for taxation
(c )Interim dividends (d) Transfer to general reserve

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ANSWER KEY

1 D 21 D 41 C 61 B 81 C 101 C

2 B 22 B 42 C 62 B 82 B 102 A

3 A 23 C 43 B 63 A 83 A 103 A

4 B 24 B 44 C 64 C 84 B 104 B

5 C 25 D 45 B 65 B 85 B 105 C

6 A 26 A 46 D 66 B 86 B 106 D

7 B 27 C 47 B 67 D 87 C 107 D

8 C 28 C 48 C 68 B 88 D 108 C

9 D 29 A 49 A 69 A 89 B 109 B

10 A 30 D 50 B 70 B 90 C 110 B

11 C 31 C 51 C 71 D 91 A 111 A

12 A 32 D 52 A 72 A 92 D 112 A

13 A 33 B 53 C 73 C 93 C 113 C

14 A 34 D 54 A 74 B 94 D 114 D

15 D 35 B 55 C 75 B 95 B 115 C

16 C 36 D 56 B 76 D 96 A 116 B

17 A 37 B 57 D 77 C 97 A

18 D 38 B 58 C 78 B 98 C

19 B 39 C 59 D 79 D 99 C

20 A 40 D 60 B 80 C 100 B

Prepared by :
Rajan P,
Assistant Professor of Commerce,
School of Distance Education,
University of Calicut.

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