PART A ANSWER 7

1. The ease with which an asset can be converted to cash is referred to as:
a. Spread
b. Liquidity
c. Both a & b above
d. None of the above
2. The decrease in the economic utility of a tangible fixed asset ( say due to wear out or
using up) is best known as:
a. Devaluation
b. Utilisation
c. Depreciation
d. None of the above
3. Aniketh pizza limited has current assets worth Rs 5,275,000, current liabilities worth Rs
1,000,000, zero long term liabilities, and shareholders equity totaling Rs 5,000,000. The
total assets of the company would be:
a. Equal to Rs 6,000,000
b. Less than Rs 6,000,000
c. More than Rs 6,000,000
d. Insufficient information
4. A companys total liabilities and shareholders equity amount to Rs 8,50,000, long term
assets to Rs 5,00,000, account receivable to Rs 50,000 and inventory to Rs 100,000. The
only other current asset shown on the balance sheet is cash. The value of the cash would
be:
a. Rs 1,00,000
b. Rs 1,50,000
c. Rs 2,00,000
d. Rs 2,50,000
5. Payment of Rs 85,000 towards proprietors drawings results in:
a. Increase in owners equity by Rs 85,000
b. Decrease in owners equity by Rs 85,000
c. Will not affect the balance sheet
d. None of the above
6. The going concern concept assumes that
a. The business is continuing to be cash rich
b. The business is causing concern to investors
c. The business can continue in operational existence for the foreseeable future.

d. All of the above

e. None of the above
7. Srivatsava wants to see his net profit for the year. Which financial document will provide
the information?
a. Cash book
b. Trial balance
c. Profit and loss account
d. Balance sheet
8. Which of the following will not appear in the books of dilbagh singhs profit and loss
account
a. Purchase of computer
b. Insurance premium paid
c. Repairs to machinery
d. Salesman commission
9. Which of the following will result in a decrease of net profit
a. Payment to suppliers
b. Purchase of building
c. Payment of personal loan
d. Commission paid to middleman for getting the tender order.
10. The gradual and systematic writing off of an intangible long term asset or an account over
an appropriate period is known as
a. Depreciation
b. Depletion
c. Amortization
d. None of the above
11. If a sole trader purchases a van for Rs 55,000 for business use, paying by cheque, when
competing the double entry accounts he will:
a. Credit van account and debit bank account
b. Debit van account and credit bank account
c. Debit van account and credit cash account
d. Debit purchases account and credit bank account
12. An accrual is
a. An expense relating to the current year but not paid in the current year
b. An expense relating to the next year and already paid in the current year
c. An expense relating to the current year and paid in the current year

d. None of the above

13. If sales are Rs 80,000, cost of sales is Rs 55,000, selling expenses are Rs 20,000 and
administration expenses are Rs 16,000, the net result will be
a. A profit of Rs 21,000
b. A profit of Rs 11,000
c. A loss of Rs 21,000
d. A loss of Rs 11,000
14. A creditor account of Rs 8,800 in the double entry system represents:
a. An asset of the business
b. A liability of the business
c. An item of income for the business
d. An expense of the business
e. None of the above.
15. Usually unsecured liabilities are:
a. Shareholders funds
b. Non current liabilities
c. Reserves and surplus
d. None of the above
Part B-Answer 3
1. Ravi commenced business with Cash Rs 50,000. Transaction involves
1.
2.
3.
4.

Cash account Rs 50,000, Creditors account Rs 50,000

Cash account Rs 50,000, Ravi capital account Rs 50,000
Bank account Rs 50,000, Reserves and surplus account Rs 50,000
None of the above

2. Purchased Furniture by issuing cheque for Rs 10,000. Transactions involves

1.
2.
3.
4.

Furniture account Rs 10,000, Cash account Rs 10,000

Furniture account Rs 10,000, Capital account Rs 10,000
Furniture account Rs 10,000, Bank account Rs 10,000
All the abobe

3. Paid salary Rs 5,000, Transaction involves

1.
2.
3.
4.

Salary expense account Rs 5,000, Cash account Rs 5,000

Salary payable account Rs 5,000, Salary expense account Rs 5,000
Salary payable account Rs 5,000, Cash account Rs 5,000
None of the above

4. Received 8,000 on providing service, Transaction involves

1.
2.
3.
4.

Income account Rs 8,000, Cash account Rs 8,000

Income account Rs 8,000, Income receivable account Rs 8,000
Income receivable account Rs 8,000, Cash account Rs 8,000
All the above

5. Rent payable is
1.
2.
3.
4.

Asset account
Expense account
Income account
Liability account