Competitive Exam

  1. Which of the following accounting equations is not correct?

            (A)       Assets-Liabilities = Equity

            (B)       Assets-Equity = Liability

            (C)       Assets+ Liabilities=Equity

            (D)       Liabilities+ Equity= Assets

  1. Which one of the following statement is correct?

            (A)       Increase in liabilities are credits and decrease are debits.

            (B)       Increase in assets are credits and decrease are debits.

            (C)       Increase in capitals are debits and decrease are credits

(D)       Increase in expenses  are credits and decrease are debits.

  1. A and B are partners in a firm sharing profit and losses in the ratio of 3:2. They admit C into partnership for ¼ share and the new ratio between A and B is 2:1. The sacrificing ratio is

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

  1. Arrange the following liabilities in the order of company Balance Sheet

            (i) Bank Overdraft      (ii) Bank Loan (iii) Share Capital        (iv) Provision for Taxation

            (A) I,ii,iii,iv     (B) iv,iii,ii,I     (C) iii,ii,I,iv     (D) iii,ii,iv,i

  1. Intrinsic value of share is given by

            (A) Total Net Assets   (B) Total  Assets     (C) Share Capital   (D) Market  Capitalization  

                   No. of Shares              No. of Shares          No. of Shares           No. of Shares

  1. Which one of the following concepts is used as fund in the preparation of Funds Flow Statement?

(A) Current Assets

(B) Working Capital

(C) Cash         

(D) All Financial Resources


  1. Window dressing is prohibited due to

(A) Conservation Convention

(B) Convention of Disclosure

(C) Convention of Materiality

(D) Arrear of book accountsww 

  1. Assertion (A): Ratio analysis is one the tools employed to know the financial health of a concern.

Reason (R): Ratio analysis is not the only technique available to take investment decision. 


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

(B) Both (A) and (R) are true, but (R) is incorrect explanation of (A).

(C) (A) is true, but (R) is false

(D) (A) is false, but (R) is true.

  1. Which of the following relate to measures of non-financial performance of a concern?
  2. Customer satisfaction
  3. Business process improvement

iii. Learning organisation

Choose the right combination.

(A) i, iii, ii, iv

(B) ii, iv, iii

(C) iv, i, iii

(D) i, ii, iv


  1. Consider the following parties:
  2. Secured creditors
  3. Unsecured creditors

iii. Partners who have granted loans

  1. Partners who have contributed over and above profit sharing ratio

Arrange them in correct sequence in the event of the dissolution of a firm.

(A) ii, i, iii, iv

(B) i, ii, iii, iv

(C) i, ii, iv, iii

(D) ii, i, iv, iii

  1. Which of the following is ‘true’ regarding the Prudence Principle of Accounting?

(A) Taking care of the future losses

(B) Taking care of the future profits

(C) Taking care of bad debts

(D) Taking care of inventory and depreciation

  1. Which of the following is a non-operating expense?

(A) Salary of Managing Director

(B) Depreciation

(C) Advertisement expenditure

(D) Interest on loan

  1. A and B are partners sharing profits in the ratio of 3 : 2. Their books showed good will at Rs. 3,000. C is admitted with ¼ th share of profits and brings Rs. 10,000 as his capital. But he is not able to bring in cash for his share of goodwill Rs. 3,000. How will you treat this?

(A) Goodwill is raised by Rs. 12,000

(B) C will remain as debtor for Rs. 3,000

(C) C’s A/c. is debited for Rs. 3,000

(D) Goodwill is raised by Rs. 9,000


  1. If there is mutual indebtedness between the transferor company and the transferee in business combination, which of the following is correct?

(A) No adjustment is required in the books of the transferor company.

(B) Adjustment is required in the books of the transferor company.

(C) No adjustment is required in the books of the transferee company.

(D) None of the above


  1. Improvement of profit-volume ratio can be done by

(A) Increasing selling price

(B) Altering sales mixture

(C) Reducing variable cost

(D) All of the above

  1. Insurance expenses paid to bring an equipment from the place of purchase to the place of installation isa type of

(A) Revenue expenditure

(B) Capital expenditure

(C) Deferred revenue expenditure

(D) Operating expense


  1. ABC Ltd was incorporated with an authorised Share Capital of Rs. 1, 00,000 equity shares of Rs. 10 each. The Board of Directors of the company decided to allot 10,000 shares credited as fully paid to the promoters of the company for their services. Which account should be debited in the books of ABC Ltd.?

(A) Promoters’ Account

(B) Services Account

(C) Goodwill Account

(D) Share Capital Account


  1. In a reconstruction scheme, the reduction of capital may take the form of

(A) Reducing the liability of the shareholders in respect of any unpaid amount on the shares held by them.

(B) Paying-off any paid-up share capital which is in excess of its requirement.

(C) Cancelling any paid-up share capital which is lost or unrepresented by available assets.

(D) All of the above.


  1. While determining the normal rate of return for the valuation of shares in Market Value Method, which of the following should be taken into consideration?

(A) The degree of risk involved.

(B) The current rate of interest on gilt-edged securities.

(C) Weighted average cost of capital.

(D) All of the above.


  1. Master budget is a

(A) Functional Budget

(B) Operating Budget

(C) Summary Budget

(D) Financial Budget


  1. Assertion (A):Personal transactions of the owners of the business are not recorded in the books.

Reasoning (R): According to the business entity concept, each business enterprise is considered as an accounting unit separate from owners.


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

(2) Both (A) and (R) are correct but (R) is not the correct explanation of (A).

(3) (A) is correct but (R) is not correct.

(4) (A) is wrong but (R) is correct.

  1. Which one of the following is not an example of ‘financing activities’ with reference to cash flow statement?

(1) Repayment of bank loan

(2) Interest on debentures/Dividend paid

(3) Cash proceeds from public deposits

(4) Sale of fixed assets

  1. Which one of the following statements is true about estimated costs and standard costs?

(1) Standard costs are based on scientific analysis and engineering studies while estimated costs are based on historical basis.

(2) Standard cost emphasis is on “what cost will be” while estimated cost emphasis is on “what cost should be”.

(3) Standard costs are more frequently revised compared to estimated cost.

(4) Estimated costs are more stable than standard costs.

  1. Which one of the following statements is not true?

(1) An expenditure intended to benefit current year is revenue expenditure.

(2) Amount paid for acquiring goodwill is capital expenditure.

(3) Wages paid for installation of a new machine is usually debited to wages account.

(4) Revenue expenditure is not intended to benefit future period.

  1. X Ltd. forfeited 20 shares of Rs. 10 each, Rs. 8 called up, on which John had paid application and allotment money of Rs. 5 per share, of these, 15 shares were reissued to Parker as fully paid up for Rs. 6 per share. What is the balance in the share Forfeiture Account after the relevant amount has been transferred to Capital Reserve Account?

(1) NIL

(2) Rs. 5

(3) Rs. 25

(4) Rs. 100

  1. X and Y sharing profits in the ratio of 7: 3, admit Z for 3/7 share in the new firm in which he takes 2/7 from X and 1/7 from Y. The new ratio of X, Y and Z will be:

(1) 7: 3: 3

(2) 4: 2: 3

(3) 14: 6: 15

(4) 29: 11: 30

  1. Assertion (A):A high operating ratio indicates a favourable position.

Reasoning (R): A high operating ratio leaves a high margin to meet non operating expenses.


(1) (A) and (R) both are correct and (R) correctly explains (A).

(2) Both (A) and (R) are correct but (R) does not explain (A).

(3) Both (A) and (R) are incorrect.

(4) (A) is correct but (R) is incorrect.

  1. The basic difference between a static budget and flexible budget is that:
  2. A flexible budget considers only variable costs but a static budget considers all costs.
  3. Flexible budgets allow management latitude in meeting goals, whereas static budget is based on fixed standards.
  4. A flexible budget is applicable for a single department only but a static budget for entire production facility.
  5. A flexible budget can be prepared for any production level within a relevant range but a static budget is based on one specific level of production.
  6. A retiring partner continues to be liable for obligations incurred after his retirement:
  7. If unpaid amount is transferred to his loan account.
  8. If he does not give public notice.
  9. If he starts a similar business elsewhere.
  10. In all the situations till he survives


  1. In what order, the following assets are shown in the balance sheet of a company?

(i) Trade receivables

(ii) Cash

(iii) Furniture and fittings

(iv) Investment in shares and debentures

  1. (ii), (i), (iv), (iii)
  2. (i), (ii), (iii), (iv)
  3. (iii), (iv), (i), (ii)
  4. (iv), (iii), (ii), (i)
  5. When opening stock is Rs 50,000, closing stock is Rs  60,000 and the cost of goods sold is RS 2,20,000, the stock turnover ratio is:
  6. 2 times
  7. 3 times
  8. 4 times
  9. 5 times

32        If  Stock turnover ratio is 6 times

Average stock = Rs 8,000

Selling price = 25% above cost

What is the amount of gross profit?

  1. Rs. 2000
  2. Rs. 4000
  3. Rs. 10000
  4. Rs. 12000
  5. What is the underlying concept that support the immediate recognition of an estimated loss?
  6. Substance over form
  7. Consistency
  8. Matching
  9. Prudence
  10. Which is not the limitation of budgetary control?
  11. Budgets are based on forecasts which may not be true.
  12. Installation and operation of a system of budgetary control is costly.
  13. Budget is a tool of management and not a substitute of management.
  14. Budgets do not pinpoint the lack of efficiency or the presence of it.
  15. Profit volume ratio of an enterprise is 40%. To offset 10% decrease in selling price, how much sales must be increased?
  16. 10% B. 20%            C. 25%            D. 40%
  17. If debt is Rs. 220, cash balance is Rs. 20 and equity is Rs. 300, then the gearing ratio is
  18. 20% B. 40%            C. 50%            D. 30%
  19. Responsibility Accounting aims to
  20. ensures that a manager is punished if things go wrong.
  21. ensures that costs become the responsibility of a specific manager.
  22. allocates costs to all areas of business.
  23. reduce the costs that a department incure.
  24. Current ratio 2.5,liquid ratio1.5 and working capital Rs. 60000.What is Current Assets?
  25. Rs. 60000             B. Rs. 80000               C. Rs. 100000             D. Rs. 120000.
  26. X,Y and Z are sharing profits in the ratio of 6:5:3.Ais admitted into the partnership for 1/8th share.. The sacrificing ratio of X,Y and Z is
  27. Equal B. 6:5:3           C. 5:4:5           D. 4:5:5
  28. Accounting information of a company is :

            Total Assets Turnover             3 times

            Net Profit Margin                   10%

            Total Assets                            Rs. 100000

            The net profit is

  1. Rs. 10000 B. Rs. 15000               C. Rs. 25000               D. Rs. 30000
  2. “Make sufficient provisions for future losses, but do not anticipate future profits.” This statement is in accordance to the concept of:
  3. Matching B. Objectivity             C. Conservatism          D. Materiality
  4. When a firm is dissolved, profit or loss on realization is shared by the partners
  5. Equal B. In the ratio of their capital balances
  6. In the profit sharing ratio D. In the ratio laid down in Garner Vs. Murray
  7. A flexible budget requires careful study and classification of expenses into
  8. Product expenses and Period Expenses.
  9. Past and Current expenses.
  10. Administrative, selling and factory expenses.
  11. Fixed, semi-variable and variable expenses.
  12. Responsibility Accounting aims at collecting and reporting costing information
  13. Department-wise B. Cost centre-wise     C. Function-wise         D. Product-wise
  14. Return on Investment is computed as
  15. Net Profit Ratio x Capital Turnover Ratio
  16. Operating Net Profit Ratio x Shareholders Fund
  17. Net Profit/ Sales
  18. Cost of Sales/ Capital Employed
  19. Margin of Safety is calculated by using
  20. Profit B. Fixed Cost              C. Break Even Sales               D. Profit

                 P/V Ratio                   contribution                  Sales                                        Sales


  1. Pre-acquisition profit in subsidiary company is considered as
  2. Revenue Profit B. Capital Profit          C. Goodwill    D. Minority Interest
  3. A retiring partner continues to be liable for obligations incurred after his retirement
  4. If unpaid amount transferred to his loan account.
  5. If he does not give public notice.
  6. If he starts a similar business elsewhere.
  7. In all the situations till he survives.
  8. when opening stock is Rs. 50000, closing stock is Rs. 60000and the cost of goods sold is Rs. 220000, the stock turnover ratio is:
  9. 2 times B. 3 times        C. 4 times        D. 5 times
  10. If stock turnover ratio= 6 times

            Average stock= Rs. 8000

            Selling price= 25% above cost

  1. Rs. 2000 B. Rs. 4000     C. Rs. 10000   D Rs. 12000