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Old Thursday, January 07, 2010
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PAPER - 1
PART – I (MCQ)
(COMPULSORY)

Q.1 Select the best option/answer and fill in the appropriate box on the Answer Sheet.

1. Identify the item that is likely to serve as source document:
a. Trial balance
b. Income statement
c. Balance sheet
d. Invoice from supplier

2. Identify which of the normal balances (in parentheses) assigned to the following accounts is incorrect:
a. Office supplies (Debit)
b. Cash (Debit)
c. Wages payable (Credit)
d. Free earned (Debit)

3. The formula (Cost less salvage value/Total capacity in units x units extracted) refers to which depreciation method:
a. Straight line
b. Units of production
c. Declining balance
d. Depletion

4. While passing adjusting entries for what type of transactions expenses are debited and assets are credited:
a. Accrued revenue
b. Accrued expenses
c. Declining balance
d. Depletion

5. Of the following statements, which one is untrue for the corporate form of organization:
a. It is a separate legal entity
b. It has a limited life
c. Income that is distributed to owners is usually taxed twice
d. Ownership rights can be easily transferred

6. For each transaction, double-entry accounting requires which of the following:
a. Debits to asset accounts must create credits to liability or equity accounts
b. A debit to a liability account must create a credit to an asset accounts
c. Total debits must equal total credits
d. None of these

7. When costs are rising, which method reports higher net income:
a. LIFO
b. FIFO
c. Average
d. The most recent purchase price

8. A transaction caused Rs. 20,000 decrease in both total assets and total liabilities. This transaction could have been:
a. Purchase of an asset for Rs. 20.000 cash
b. Asset costing Rs. 20,000 destroyed by fire
c. Repayment of Rs. 20,000 bank loan
d. Collection of Rs. 20,000account receivable

9. What percentage of profit a bank has to transfer to statutory reserve until it inflates to paid-up capital of the bank:
a. 5%
b. 10%
c. 20%
d. 25%

10. Identify the correct answer with regards to depreciation expense:
a. Is an application of the matching principle?
b. Is a closing entry?
c. Usually includes an offsetting credit either to cash or accounts payable.
d. Is not an adjusting entry?

11. Comparison of a company’s financial condition and performance across time is a:
a. Ration analysis
b. Horizontal analysis
c. Vertical analysis
d. None of these

12. Income and expenditure account in a non trading institution records transaction of:
a. Revenue nature only
b. Capital nature only
c. Both (a) & (b)
d. Income of revenue nature and expenditure of revenue and capital nature

13. At the time of admission of a new partner, goodwill raised should be written off in:
a. New profit sharing ratio
b. Old profit sharing ration
c. Sacrificing ratio
d. Gaining ratio

14. A and B are partners in the ratio of 2:1. They admit C for ¼ shares who contribute Rs. 3000 for his share of goodwill. Total value of the goodwill of the firm is:
a. Rs. 3000
b. Rs. 9000
c. Rs. 12000
d. 15000

15. Second hand machinery worth Rs. 10, 000 was purchased, repairing of the machinery cost Rs. 1,000. The machinery was installed by own workers. Wage for this being Rs. 200, the machinery account should be debited for:
a. Rs. 10,000
b. Rs. 11,000
c. Rs. 11,200
d. None of these

16. If net sales Rs. 100,000 cost of goods sold Rs. 55,000, administrative expenses Rs. 5300, selling expenses Rs. 4375, Interest expense Rs. 500, the operating profit is:
a. Rs.35325
b. Rs.45000
c. Rs.39700
d. Rs.34825

17. Which of the ratio best reflects a company’s ability to meet immediate interest payment?
a. Debit ratio
b. Equity ratio
c. Times interest earned
d. None of these

18. Identify which items are subtracted from the list amount and not recorded when computing purchase price:
a. Freight in
b. Trade discount
c. Purchase discount
d. Purchase return

19. Bonus payable only on the maturity of the policy is termed as:
a. Cash bonus
b. Reversionary bonus
c. Interim bonus
d. Bonus is reduction of premium

20. Rebate on bill discounted (unearned discount) is:
a. An expense
b. An income
c. A liability
d. An asset
__________________
Regards,
P.R.
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