Financial Statements Analysis & Reporting

Assignment I

1. What is the underlying convention that supports the immediate recognition of an

estimated loss?
a) Disclosure
b) Consistency
c) Materiality
d) Prudence

2. Liabilities of a business are Rs. 40, 220 and owner’s equity is Rs. 50, 000. The assets of
the business will be
a) Rs. 61,220
b) Rs. 73,780
c) Rs. 85, 000
d) Rs. 90,220
3. Accounting has been defined as “The art of recording, classifying, summarizing,
analyzing andinterpreting the business transactions systematically and
communicatingbusiness results to interested users is accounting” by:
a) AICPA
b) ICAI
c) ICAEW
d) AAA

4. Which of these is/are the objectives of accounting?

a) Communicating information to all interested users
b) Providing relevant data to make appropriate decisions concerning use of limited
resources
c) Facilitating social functions and control
d) All of the above.

5. Ms. Z started business investingRs. 1, 00,000. She purchased goods for Rs. 40,000;
Furniture for Rs. 20,000 andplant & machinery of Rs. 30,000; Rs. 10,000 remains in
hand. According to theaccounting concept Rs. 1, 00,000 will be treated by business as
capital i.e. a liability ofbusiness towards the owner of the business?
a) Accrual concept
b) Business Entity
c) Matching
d) Money Measurement
6. Assets and Expenses Accounts are debited if there is ________and credited if there is -
_______ :
a) Decrease/increase
b) Decrease/decrease
 c) Increase/decrease
d) Increase/increase

7. Liability, Capital and Revenue Accounts are ________ if there isdecrease and _______ if
there is increase:
a) Debited/credited
b) Debited/debited
c) Credited/credited
d) Credited/debited

8. Goods sold to Sfor Rs.4200 was recorded in theSales Book as Rs.2400. The above error
will be reflected in the Trial Balance as:
a) Error of omission
b) Error of commission
c) Error of principle
d) None of the above

9. Rs. 5000 spent on the repairsof building is debited to Building A/c.The above error will
be reflected in the Trial Balance as:
a) Error of omission
b) Error of commission
c) Error of principle
d) None of the above
10. Total of the credit column of trading Account – total of the debitcolumn of trading A/c is
equal to
a) Gross Profit
b) Net Profit
c) Cost of Goods Sold
d) None of the above

11. If the totals of the two columns of the Trial Balance do not tally, the difference will be
transferred to:
a) Secret A/C
b) Suspense A/C
c) Suspicious A/C
d) Doubtful A/C
12. Which of the following is/are the objective(s) of preparing Balance Sheet?
a) To measure the true financial position of abusiness entity at a particular point of
time.
b) To systematically present what a business unit owns and whatit owes.
c) To help different stakeholders in decision making.
d) All of the above.