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PAPER2:FUNDAMENTALSOFACCOUNTING(SYLLABUS2012)_MCQ
Paper2-FundamentalsofAccounting
MultipleChoiceQuestionsonCostAccounting
1. Coststhatchangeinresponsetoalternativecoursesofactionarecalled:
a. Relevantcosts
b. Differentialcosts
c. Targetcosts
d. Sunkcosts
2. ThecostdatapertainingtoProductX ofXLLtd.areasfollows:
Maximumcapacity 30,000units
Normalcapacity 15,000units
Increaseininventory 1,880units
Variablecostperunit `12
Sellingpriceperunit `50
Fixedmanufacturingoverheadcosts `3,60,000
If the profitunder Absorption costingmethod is `1,01,000, the

profitunderMarginalcostingmethodwouldbe
a.`1,46,120
b.`1,23,560
c. `55,880
d.`73,340
[Hint:Fixedcostperunit=`3,60,000/ 15,000units=
`24Profitunderabsorptioncosting=`1,01,000
Adjustmentoffixedmanufacturingoverheadcostsofincreasedinventory=1,880unitsx`24=`
45,120
Profitundermarginalcosting= `1,01,000`45,120=`55,880]
3. The totalcostincurred in theoperationofa

businessundertakingotherthanthecostofmanufacturingandproductionisknownas
a. Directcost
b. Variablecost
c. Commercialcost
d. Conversioncost
4. Considerthefollowingdatafora companyduringthe month ofJune2012

Budgetedhours 4,000
Standardhoursforactualproduction 4,400
Maximumpossiblehoursinthebudgetperiod 4,800
Actualhours 3,800
Theactivity ratioofthecompanyduringthemonthis
a.111%
b.120%
c. 95%
d.117%
[Hint: Activityratio=Standardhoursforactualproduction x 100
Budgetedhours
= 4,440hoursx100 = 111%]
4,000hours
5. Totalunitcostsare
a. Independentofthecostsystem,usedtogeneratethemb.Ne
ededfordeterminingproductcontribution
c.Irrelevantinmarginalanalysisd.Relevantf
orcost-volume-profitanalysis
BoardofStudies,Institute ofCostAccountantsofIndia(StatutoryBodyunderan ActofParliament) Page1

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6. Which of the followingbases is notappropriate for apportionmentof Transportdepartments cost?

a. Cranehours
b. Cranevalue
c. TruckMileage
d. Truckvalue
7. Thecostofobsoleteinventory acquired severalyearsago,to beconsidered ina keep

vs.disposaldecisionisanexampleof:
a. Uncontrollablecost
b.Sunkcost
c.Avoidablecostd.O
pportunitycost
[Hint:Costsofobsoleteinventoryrepresentthesunkcostbecausethecostshavealreadybeenincurred.]
8. Budgetedsalesforthenextyearis5,00,000units.Desiredendingfinishedgoodsinventoryis1,50,000unitsand
equivalentunitsinendingW-I-
Pinventoryis60,000units.Theopeningfinishedgoodsinventoryforthenextyearis80,000units,with50,000equ
ivalentunitsinbeginningW-I-PinventoryHowmanyequivalentunitsshouldbeproduced?
a.5,80,000
b.5,50,000
c.5,00,000
d.5,75,000
[Hint:Usingproductionrelatedbudgets,unitstoproduceequalsbudgetedsales+desiredendingfinishedg
oodsinventory+desiredequivalentunitsinendingW-I-Pinventorybeginningfinishedgoodsinventory
equivalentunitsinbeginningW-I-Pinventory.Therefore,inthiscase,unitstoproduceisequalto5,00,000+
1,50,000+60,00080,000 50,000=5,80,000.
9. Iftheassetturnoverandprofitmarginofacompanyare1.85and0.35respectively,thereturnoninvestmen
tis
a.0.65
b.0.35
c. 1.50
d.5.29
[Hint:Returnoninvestment=AssetturnoverxProfitmargin=1.85x0.35=0.65]
10. Acompanyiscurrentlyoperatingat80%capacitylevel.Theproductionundernormalcapacitylevelis1,50,
000units.Thevariablecostperunitis`14
andthetotalfixedcostsare`8,00,000.Ifthecompanywantstoearnaprofitof
`4,00,000,thenthepriceoftheproductperunitshouldbe
a.`37.50
b.`38.25
c. `24.00
d.`35.00
[Hint:Totalfixedcost -
`8,00,000Expectedprofit
-
`4,00,000Variablecostat80
%level
(80%x 1,50,000unitsx `14) - `16,80,000
Totalprice - `28,80,000
Perunitprice at80%level=(`28,80,000 /1,20,000units)=`24.00.]
11. Considerthefollowingdatapertainingtotheproductionofa companyfora

particularmonth:Openingstockofrawmaterial ` 11,570
Closingstockofrawmaterial ` 10,380
Purchaseofrawmaterialduringthemonth
`1,28,450Tot
almanufacturingcostchargedtoproduct
`3,39,165Fac
toryoverheadsareapplied attherateof45%ofdirectlabourcost.
Theamountoffactory overheadsapplied toproductionis
a.` 65,025

b.` 94,287
c. ` 95,020
d.`1,52,624
[Hint:Rawmaterialused=Op.Stock+PurchasesCl.Stock
=`11,570+`1,28,450`10,380 = `1,29,640
Manufacturingcost =Rawmaterialused+Directlabour+Factoryoverhead
`3,39,165 =`1,29,640+Directlabour+45%ofDirectlabour
1.45Directlabour
=`2,09,525D
irectlabour =`1,44,500
Theamountoffactoryoverhead=45%of`1,44,500=`65,025.]
12. Thebudgetedannualsales
ofafirmis`80lakhsand25%ofthesameiscashsales.Iftheaverageamountofdebtorsofthefirm
is`5lakhs,theaveragecollectionperiodofcreditsalesmonths.
a.1.50
b.1.00
c. 0.50
d.1.75
[Hint:Total annualsales=`80lakhs
Totalcash sales=25%of80lakhs.=20
lakhs.Totalcreditsales =75%of80 lakhs=60lakhs
Averageamountofdebtors=5lakhs=1monthsaveragecreditsales.Therefo
re,averagecollectionperiodis1month.]
13. IftheminimumstocklevelandaveragestocklevelofrawmaterialA are4,000and9,000units

respectively,findoutitsreorderquantity.
a. 8,000units
b. 11,000units
c. 10,000units
d. 9,000units
[Hint:Averagestocklevel =Minimumstocklevel+Reorderquantity9,000units
=4,000units+Reorderquantity
Reorderquantity=9,000units4,000units
Reorderlevel =5,000units/ 0.5 =10,000units]
14. Aworkerhasatimerateof`15/hr.Hemakes720unitsofcomponent(standardtime:5minutes/unit)inaweek
of48hours.HistotalwagesincludingRowanbonusfortheweekis
a.`792
b.`820
c. `840
d.`864
[Hint:Standardtime= 5timesx720units =60hours
60minutes
Timetaken =48 hrs.
Timesaved =12hrs.
TotalearningofaworkerunderRowanplan
= (48 hrs.x`15)+(12 hrs. x48hrs.x`15)
60hrs.
=`720+`144 = `864
15. A companymaintainsamarginofsafetyof25%onitscurrentsalesandearnsaprofit
of`30lakhsperannum.If thecompanyhasa profitvolume(P/V)ratioof40%,itscurrentsalesamountto
a. `200 lakhs
b. `300 lakhs

c. `325 lakhs

d. Noneoftheabove
[Hint:Marginofsafety = Profit/P/VRatio
= 30/0.40= `75lakhs
0.25 of sales = `75 lakhs
Hence,Sales = 75/0.25= `300lakhs]
16. Salefortwoconsecutivemonths,ofacompanyare`3,80,000and`4,20,000.Thecompanysnetprofitsforthes
emonthsamountedto`24,000and`40,000respectively.Thereisnochangeincontribution/salesratioorfixe
dcosts.Thecontribution/salesratioofthecompany is
a.1/3b.
2/5
c.
d. Noneoftheabove
[Hint:Contribution/sales =Increaseinprofit/Increaseinsales
= (40,00024,000)/(4,20,0003,80,000)
=16,000/40,000= 2/5]
17. A Limitedhasfixedcostsof`6,00,000 perannum.It manufacturesasingle productwhichit sellsfor

`200 per unit.Itscontribution to sales ratio is 40%. ALimiteds break-evenin units is
a.7,500
b.8,000
c. 3,000
d.1,500
[Hint:Break-evenunits= Fixedcost/contributionperunit
= `6,00,000/40% of`200
= 7,500]
18. ThecurrentliabilitiesofAkashLtd.is`30,000.Ifitscurrentratiois3:1andQuickratiois1:1,thevalueofstock-in-
tradewillbe
a.`20,000
b.`30,000
c. `60,000
d.Insufficientinformation
[Hint:CurrentRatio = CurrentAssets = 3:1
CurrentLiabilities
CurrentAssets = `30,000 x3 = `90,000
QuickRatio = QuickAssets = 1:1

QuickLiabilities
Liquidassets = `30,000 x1 = `30,000
Hence,valueofstock-in-trade:CALA = `(90,00030,000)
= `60,000]
19. Ifthecapacityusageratioofaproductiondepartmentis90%andactivityratiois99%thentheefficiencyratio
ofthedepartmentis
1. 100%
2. 120%
3. 110%
4. 105%
[Hint:Efficiencyratio(ER) = Std.hr.ofproductionActualhrs.
Activityratio(AR) = Std.hrs.forproductionBudgetedhrs.
Capacityratio (CR) = Actualhrs.Budgetedhrs.
Hence,ER= AR/CR = 99%/90% = 110%]

20. Intwoconsecutiveperiods,salesandprofitwere`1,60,000and`8,000respectivelyinthefirstperiodand`1,80,
000and`14,000respectivelyduringthesecondperiod.Ifthereisnochangeinfixedcostbetweenthetwoperi
odsthenP-Vratiomustbe
1. 20%
2. 25%
3. 30%
4. 40%
[Hint:Changeinprofit =
P/VRatioChangei
nsales
= 14,000
8,0001,80,000
160,000
= 6,000
20,000
= 0.30or30%]
21. HorizonLtd.ManufacturesproductBMforlast5years.Thecompany maintainsamarginofsafety

of37.5%withoverallcontributiontosalesratioof40%.Ifthefixedcostis`5lakh,theprofitofthecompany is
a. `24.00laks
b. `12.50lakh
c. ` 3.00lakh
d. NoneofA,B,C
[Hint:Break evensales= `5 lakhs0.40= `12.50lakhs
Totalsales = 12.50. = `20.00
lakhs(10.375)
Hence theprofitofthecompany:`20lakhx 0.375x0.40= `3.00 lakhs]
22. Thecost-volume-
profitrelationshipofacompanyisdescribedbytheequationy=`8,00,000+0.60x,inwhichxrepresentssalesr
evenueandyisthetotalcostatthesalesvolumerepresentedbyx.Ifthecompanydesirestoearnaprofitof20
%onsales,therequired saleswillbe.
a.`40,00,000
b.`35,50,000
c. `24,00,000
d.`20,00,000
[Hint:Variablecost=60%,therefore,contributiontosalesratio=40% (P/Vratio)
Companystargetprofit20%insales,therefore,revisedcontributionwhichcoversonlyfixedcost=40%-
20%=20%.
Requiredsales=fixedcost/revisedcontribution =`8,00,000/20%=`40,00,000.]
23. ABCLtd.ishaving400workersatthebeginningofthe year and500workers

attheendoftheyear.Duringtheyear20workersweredischargedand15workerslefttheorganization.During
theyearthecompanyhasrecruited65workers.Ofthese,18workerswererecruitedinthevacanciesofthosel
eaving,whiletherestwereengagedforanexpansionscheme.Thelabourturnoverrateunderseparationm
ethodis:
a.22.20%
b.7.78%
c. 4.00%
d.14.40%
[Hint:Average number ofworkers=(400 +500)/2 = 450
Separationmethod
= No.ofseparationsduringtheperiod x
100Averagenumberofworkersduringtheperiod
=20+15x 100450
=7.78%]

24. Oneofthemostimportanttoolsincostplanningis:
a. Directcost
b. CostSheet
c. Budget
d. MarginalCosting.
25. Economiesanddiseconomiesofscaleexplainwhythe:
a. Short-runaveragefixedcostcurvedeclinessolongasoutputincreases.
b. Marginalcostcurvemustintersecttheminimumpointofthefirm'saveragetotalcostcurve.
c. Long-runaveragetotalcostcurveistypicallyU-shaped.
d. Short-runaveragevariablecostcurveisU-shaped.
26. Whichofthefollowingisnotarelevantcost?
a. Replacementcost
b. Sunkcost
c. Marginalcost
d. Standardcost.
27. Whichofthefollowingisanaccounting record?

a. BillofMaterial
b. BinCard
c. StoresLedger.
d. Allofthese.
28. Thefixed-variablecostclassificationhasaspecialsignificanceinpreparationof:
a. FlexibleBudget
b. MasterBudget
c. CashBudget
d. CapitalBudget
29. Inputinaprocessis4000unitsandnormallossis20%.Whenfinishedoutputintheprocessisonly3240units,ther
eisan:
a. Abnormallossof40units
b. Abnormalgainof40units
c. Neitherabnormallossnorgain.
d. Abnormallossof60units.
30. Idlecapacityofaplantisthedifferencebetween:
a. Maximumcapacityandpracticalcapacity
b. Practicalcapacityandnormalcapacity
c. Practicalcapacityandcapacitybasedonsalesexpectancy
d. Maximumcapacityandactualcapacity.
31. WhenP/Vratiois40%and salesvalueis`10,000,thevariablecostwillbe

a.`4000
b.`6000
c. `10000
d.VariableCostcannotbecalculatedfromdatagiven.
32. Theforexcomponentof imported materialcostisconverted

a. Attherateonthedateofsettlement
b. Attherateonthedateoftransaction
c. Attherateondateofdelivery
d. Noneoftheabove.
33. Maximumpossibleproductivecapacityofaplantwhennooperatingtimeislost, isits

a. Practicalcapacity

b. Theoreticalcapacity
c. Normalcapacity
d. Capacitybasedonsalesexpectancy
[Hint:Theoreticalcapacityisthedenominator-
levelconceptthatisbasedonproducingatfullefficiencyallthetime.,
Practicalcapacity is adenominator-levelconcept
thatreducesthetheoreticalcapacitybyunavoidableoperatinginterruptionssuchasscheduledmaintena
ncetime,shutdownsforholidaysandsoon.
Normalcapacitymeasuresthedenominatorlevelintermsofdemandfortheoutputoftheplant.Normal
capacity utilizationis aconcept based on the level of capacity utilizationthat specifies
theaveragecustomerdemandoveratimeperiod,thatincludesseasonal,cyclicalandtrendfactors.]
34. Whenproductionisbelowstandardspecificationorqualityandcannotberectifiedbyincurringadditional
cost,itiscalled
a. Defective
b. Spoilage
c. Waste
d. Scrap
[Hint :(1)Spoiledgoods-
goodsthatdonotmeetproductionstandardsandareeithersoldfortheirsalvagevalueordiscarded;(2)Def
ectiveunits-
goodsthatdonotmeetstandardsandaresoldatareducedpriceorreworkedandsoldattheregularorared
ucedprice;(3)Waste-materialthatislostinthemanufacturingprocessbyshrinkage,evaporation, etc.;
and(4)Scrap-by-productofthemanufacturingprocessthathasaminormarketvalue.]
35. CAS 8requireseachtypeofutility tobe treated as

a. Separatecostobject
b. Notpartofcostasnotincludeinmaterial
c. Notpartofcostastheydo notformpartofproduct
d. Treatedasadministrativeoverheads.
36. Sellinganddistributionoverheaddoesnotinclude:
a. Costofwarehousing
b. Repackingcost
c. Transportationcost
d. Demurragecharges.
37. Whenovertimeisrequiredformeetingurgentorders,overtimepremiumshouldbe
a. ChargedtoCostingProfitandLossA/c
b. Chargedtooverheadcosts
c. Chargedtorespectivejobs
d. Noneoftheabove.
[Hint:When costisincurredforspecifiedjob,thecostshouldbechargedtothatjobonly.]
38. Exchangelossesorgainsafterpurchasetransactioniscompleteistreatedas
a. Productcost.
b. Overheadcost.
c. Purchasecost.
d. Financecost
39. Sellingpriceperunit`15.00;DirectMaterialscostperunit`3.50;DirectLabourcostperunit`4.00VariableOver
headperunit`2.00;Budgetedfixedproductionoverheadcostsare`60,000perannumchargedevenly
acrosseachmonthoftheyear.Budgetedproductioncosts are
30,000unitsperannum.WhatistheNetprofitperunitunderAbsorptioncostingmethod.
a.` 9.50
b.`15.00
c. `11.50

d.`3.50

40. Whichofthefollowingcostislinkedwiththecalculationofcostofinventories?
a. Productcost
b. Periodcost
c. Bothproductandperiodcost
d. Historicalcost
41.
If,Sales=`800,000Markupr
ate=25%ofcost
WhatwouldbethevalueofGrossprofit?
a.`200,000
b.`160,000
c. `480,000
d.`640,000
42. Whichofthefollowingis TRUEwhenpieceratesystem isusedforwagedetermination?

a. Underthismethodofremunerationaworkerispaidonthebasisoftimetakenbyhimtoperformthework
b. Underthismethodofremunerationaworkerispaidonthebasisofproduction
c. Therateisexpressedintermsofcertainsumofmoneyfortotalproduction
d. Therateisnotexpressedintermsofcertainsumofmoneyfortotalproduction
43. Thesalaryoffactory clerk is treatedas:

a. Directlaborcost
b. Indirectlaborcost
c. Conversioncost
d. Primecost
44. AverageconsumptionxEmergencytimeisaformulaforthecalculationof:
a. Leadtime
b. Re-orderlevel
c. Maximumconsumption
d. Dangerlevel
45. EOQisapointwhere:
a. Orderingcostisequaltocarryingcost
b. Orderingcostishigherthancarryingcost
c. Orderingcostislesserthanthecarryingcost
d. Totalcostismaximum
46. Aworkerispaid`0.50perunitand
heproduces18unitsin7hours.Keepinginviewthepieceratesystem,thetotalwagesoftheworkerwouldbe
:
a.18 x0.50 = `9
b.18 x7 =`126
c. 7 x 0.5 =`3.5
d.18 x7x0.50 = `63
47. Whenclosingstockisovervaluate,whatwoulditseffectonprofit?
a. Cannotdeterminedwithgivenstatement
b. ItwillIncreasetheprofit
c. Itwilldecreasetheprofit
d. Noeffectonprofit
48. A firmsells bagsfor`14 each.Thevariablecost for eachunitis`8. Whatisthecontributionmarginperunit?

a. `6
b.`12

c. `14
d.`8
49. Whichofthefollowingis NOTtrue?Asmallcompany'sbreakevenpoint:

a. Occurswhereitsrevenueequalsitsexpenses
b. Shows entrepreneursminimumlevel ofactivity requiredtokeep thecompany in operation
c. Isthepointatwhichacompanyneitherearnsaprofitnorincursaloss
d. Totalcontributionmarginequalstotalvariableexpenses
50. KellerCo.sellsasingleproductfor`28perunit.Ifvariablecostsare65%ofsalesandfixedcoststotal`9,800,the
break-evenpointwillbe:
a. 15,077units
b. 18,200units
c. 539units
d. 1,000units
51. IfBLimited
showsrequiredproductionof120casesofproductforthemonth,directlaborpercaseis3hoursat`12per
hour.Budgeted laborcosts forthemonth should be:
a.`1,360
b.`1,440
c. `4,320
d.`5,346
52. Whichofthefollowingisaprocessbywhichmanagersanalyzeoptionsavailabletosetcoursesofactionbyt
heorganization?
a. Heuristicsmethod
b. Decisionmaking
c. TheDelphitechnique
d. Systematicerror
53. Whichofthefollowingisnottrueaboutdifferentialcosts?
a. Itisabroaderconceptthanvariablecostasittakesintoaccountadditionalfixedcostscausedbymana
gementdecisions
b. Withthepassageoftimeandchangeinsituation,differentialcostswillvary
c. Thedifferenceincostbetweenbuyingthemfromoutsideormaketheminthecompanyisdifferentialco
st,irrelevantfordecisions
d. Theyareextraorincrementalcostscausedbyaparticulardecision
54. WhichoneofthefollowingistheTraditionalapproachfor costing?

a. Contributionapproach
b. Absorptioncostingapproach
c. Decisionmakingapproach
d. Marginalcostingapproach
55. Whatwouldbethemarginofsafetyratiobasedonthefollowinginformation?Salespr
ice =`100perunit
Variablecost =`25perunit
Fixed cost =`50perunit
a. 25%
b. 33.333%
c. 66.666%
d. 75%
56. If:
Costofopening
finishedgoods`2,000Costof goodsto be
produced`6,000Operatingexpenses`1,00

0.

Whichofthefollowingisthecostofgoodsavailableforsale?
a.`8,000
b.`4,000
c. `7,000
d.`9,000
57. AhmedCorporationhassalesof`500,000fortheperiod.Thesellingexpensesareestimatedas12%ofsales.Th
egrossprofitfortheperiodisamountingto `150,000.
Calculatetheamountofsellingexpensesfortheperiod?
a.`60,000
b.`45,000
c. `90,000
d.`210,000
58. Whichofthefollowing wouldbeconsideredtobeaninvestmentcentre?

a. Managershavecontrolovermarketing
b. Managershaveasalesteam
c. Managershaveasalesteamandaregivenacreditcontrolfunction
d. Managerscanpurchasecapitalassetsandaregivenacreditcontrolfunction
59. WhichofthefollowingwouldNOT leadtoanincreasein netcashflow?

a. Largersalesvolume
b. Highersellingprice
c. Reducedmaterialcost
d. Chargingoflowerdepreciation
60. AllofthefollowingarefeaturesofarelevantcostEXCEPT:
a. Theyaffectthefuturecost
b. Theycauseanincrementincost
c. Relevantcostisasunkcost
d. Theyaffectthefuturecashflows
61. Whichofthefollowing statementisTRUEabouttherelevantcost?

a. Itisasunkcost
b. Itisanopportunitycost
c. Itdonotaffectthedecisionmakingprocess
d. Allcostsarerelevant
62. Indecisionmakingallcostsalready incurredinpastshould alwaysbe:

a. Ignored
b. Considered
c. Partiallyignored
d. Partiallyconsidered
63. WhichofthefollowingstatementisTRUEabouthistoricalcost?
a. Itisalwaysrelevanttodecisionmaking
b. Itisalwaysirrelevanttodecisionmaking
c. Itisalwaysanopportunitycost
d. Itisalwaysrealizablevalue
64. Incostaccounting,unavoidablelossischargedtowhichofthefollowing?
a. Factoryoverheadcontrolaccount
b. Workinprocesscontrolaccount
c. Marketingoverheadcontrolaccount
d. Administrationoverheadcontrolaccount
65. MerrickDifferentialPieceRatePlanbasedon pieceratesisfixed.
BoardofStudies,Institute ofCostAccountantsofIndia (StatutoryBodyunderan ActofParliament) Page10

a. Two
b. Three
c. Four
d. Five
66. Whichofthegivenis(are)themethod(s)ofmeasurementofLaborTurnover?
a. Separationmethod
b. Fluxmethod
c. Replacementmethod
d. Allofthegivenoptions
67. Whatwillbetheimpactofnormallossontheoverallperunitcost?
a. Perunitcostwillincrease
b. Perunitcostwilldecrease
c. Perunitcostremainunchanged
d. Normallosshasnorelationtounitcost
68. WhichofthegivenunitscanneverbecomepartoffirstdepartmentofCostofProductionReport?
a. Unitsreceivedfromprecedingdepartment
b. Unitstransferredtosubsequentdepartment
c. Lostunits
d. Unitsstillinprocess
69. Detailsoftheprocessforthelastperiodareasfollows:
Putintoprocess 5,000kg
Materials `2,500
Labor `700
Productionoverheads 200%of labor
Normallossesare10%ofinputintheprocess.Theoutputfortheperiodwas4,200Kgfromtheprocess.Therewa
snoopeningandclosingWork-in-process.Whatweretheunitsofabnormalloss?
a. 500units
b. 300units
c. 200units
d. 100units
70. ABCCompanymakesasingleproductwhichitsellsfor`20perunit.Fixedcostsare`75,000permonthandpro
ducthasaprofit/volumeratioof40%.Inthatperiodactualsaleswere`225,000.
Required:CalculateABCCompanyBreakEvenpointin`
a.`187,500
b.`562,500
c. `1,500,000
d.Noneofthegivenoptions
71. AllofthefollowingarethefeaturesoffixedcostsEXCEPT:
a. Althoughfixedwithinarelevantrangeofactivitylevelbutarerelevanttoadecisionmakingwhenitisavo
idable.
b. Althoughfixedwithinarelevantrangeofactivitylevelbutarerelevanttoadecisionmakingwhenitisincr
emental.
c. Generallyitisirrelevant
d. Itisrelevanttodecisionmakingunderanycircumstances
72. Atypicalfactory overheadcostis:

a. Distribution
b. Internalaudit

c. Compensationofplantmanager
d. Design
73. Anaveragecostisalsoknownas:
a. Variablecost
b. Unitcost
c. Totalcost
d. Fixedcost
74. Period costsare:

a. Expensedwhentheproductissold
b. Includedinthecostofgoodssold
c. Relatedtospecificperiod
d. Notexpensed
75. WhilecalculatingtheEOQ,numberofordersiscalculatedby:
a. Dividingrequiredunitbyorderedquantity
b. Multiplyingtherequiredunitswithorderedquantity
c. Multiplyingtheorderedquantitywithcostperorder
d. Multiplyingtherequiredunitswithcostperorder
76. Whichofthefollowingbestdescribepieceratesystem?
a. Theincreasedvolumeofproductionresultsindecreasedcostofproduction
b. Theincreasedvolumeofproductioninminimumtime
c. Establishmentof fairstandardrates
d. Higheroutputisaresultofefficientmanagement
77. ThetermCostapportionmentisreferredto:
a. Thecoststhatcannotbeidentifiedwithspecificcostcenters.
b. Thetotalcostoffactoryoverheadneedstobedistributedamongspecificcostcentersbutmustbe
dividedamongtheconcerneddepartment/costcenters.
c. Thetotalcostoffactoryoverheadneedstobedistributedamongspecificcostcenters.
d. Noneofthegivenoptions
78. Whichofthefollowinglossisnotincludedaspartofthecostoftransferredorfinishedgoods,butrathertreated
asa period cost?
a. Operatingloss
b. Abnormalloss
c. Normalloss
d. Non-operatingloss
79. HydeParkCompanyproducessprocketsthatareusedinwheels.Eachsprocketsellsfor`50andthecompa
nysellsapproximately400,000sprocketseachyear.Unitcostdatafortheyearfollows:
Directmaterial `15
Directlabor `10
Othercost: Fixed Variable
Manufacturing `5 `7
Distribution `4 `3
Required:Identifytheunitcostofsprocketsunderdirectcosting
a.`44
b.`37
c. `32
d.`35
80. Whenproductionisequaltosales,whichofthefollowingisTRUE?
a. Nochangeoccurstoinventoriesforeitheruseabsorptioncostingorvariablecostingmethods

b. Theuseofabsorptioncostingproducesahighernetincomethantheuseofvariablecosting
c. Theuseofabsorptioncostingproducesalowernetincomethantheuseofvariablecosting
d. Theuseofabsorptioncostingcausesinventoryvaluetoincreasemorethantheywouldthoughtheuseo
fvariablecosting
81. Sellingpriceperunitis`15,totalvariablecostperunitis`9,andtotalfixedcostsare`15,000of
XIT .WhatisthebreakevenpointinunitsforXIT ?
a. 3,000units
b. 1,000units
c. 1,667units
d. 2,500units
82. Whileconstructing aBreakevenchart, thegap

betweensaleslineandvariablecostlineshowswhichofthefollowing?
a. Fixedcost
b. Breakevenpoint
c. Contributionmargin
d. Variablecost
83. AllofthefollowingcomposecostofgoodssoldEXCEPT:
a. Rawmaterial
b. Labor
c. Capital
d. Factoryoverhead
84. AmountofDepreciationonfixedassetswillbefixedinnatureifcalculated underwhichof

thefollowingmethod?
a. Straightlinemethod
b. Reducingbalancemethod
c. Someofyear'sdigitsmethod
d. Doubledecliningmethod
85. WhichofthefollowingisNOT arelevantcosttodecisionmaking?

a. Opportunitycosts
b. Relevantbenefits
c. Avoidablecosts
d. Sunkcosts
86. WhatwouldbetheattitudeofthemanagementintreatingSunk costsindecisionmaking?

a. Aperiodicinvestmentofcashresourcesthathasbeenmadeandshouldberelevantfordecisionmakin
g
b. Itisapastcostwhichisnotdirectlyrelevantindecisionmaking
c. Managementwilltreatitasvariablecosteachtimeindecisionmaking
87. Mr.AslamisrunninghisownpersonalFinancialservicesbusiness.Hehasbeenofferedajobforasalaryof`45,
000permonthwhich hedoesnotavailed.`45,000willbeconsideredas:
a. SunkCost
b. Opportunitycost
c. Avoidablecost
d. Historicalcost
88. Whichof the givencostdoes notbecomethe partof cost unit?

a. Advertisingexpenses
b. Directlaborcost
c. Factoryoverheadcost
d. Costofrawmaterial

89. BudgetedFactoryoverheadattwoactivitylevelsisasfollowsfortheperiod.
Activitylevel Budgetedfactory overhead
Low 10,000 Hours `40,000
High 50,000 Hours `80,000
Required:Identify variableratewiththehelp ofabovementioned data.

a. `4.00perhour
b. `1.60perhour
c. `1.00perhour
d. `2.00perhour
90. WhichofthegivencostisNOT requiredtoprepareCostofProductionReport?

a. Periodcost
b. Materialcost
c. Labourcost
d. Factoryoverheadcost
91. Identify theFOHrateon thebasisofmachinehour?

Budgetedproductionoverheads `2,80,000
Actualmachinehours 70,000 hours
Actualproductionoverheads `2,95,000
a.`4.00
b.`4.08
c. `4.210
d.`4.35
92. WhichofthegivenwillNOTbeincludedforthecalculationofequivalentunitsofmaterialunderweightedaver
agecostingmethod?
a. Openingworkinprocessunits
b. Closingworkinprocessunits
c. Unitcompletedandtransferredout
93. Thebasicassumptionmadeindirectcosting with respecttofixedcostsisthat

a. Fixedcostisacontrollablecost
b. Fixedcostisaproductcost
c. Fixedcostisanirrelevantcost
d. Fixedcostisaperiodcost
94. ThelittleRockCompanyshowsBreakevensalesis`40,500andBudgetedSalesis`50,000.IdentifytheMargin
ofsafetyratio?
a. 19%
b. 81%
c. 1.81%
d. Requiredmoredatatocalculate
95. Amachinecost`60,000fiveyearsago.Itisexpectedthatthemachinewillgeneratefuturerevenueof40,000.
Alternatively,themachinecouldbescrappedfor`35,000.Anequivalentmachineinthesameconditioncost
38,000tobuy now.
Required:Identify therealizablevaluewiththehelp ofgivendata.
a.`60,000
b.`40,000
c. `35,000
d.`38,000

96. Costoffinishedgoodsinventoryiscalculatedby:
a. Deductingtotalcostfromfinishedgoodsinventory
b. Multiplyingunitsoffinishedgoodsinventorywiththecostperunit
c. Dividingunitsoffinishedgoodsinventorywiththecostperunit
d. Multiplyingtotalcostwithfinishedgoodsinventory
97. Assumingnoreturnsoutwardsorcarriageinwards,thecostofgoodssoldwillbeequalto:
a. OpeningstockLesspurchasesplusclosingstock
b. Closingstockpluspurchasesplusopeningstock
c. Saleslessgrossprofit
d. Purchasesplusclosingstockplusopeningstockplus directlabor
98. Allofthefollowingareessentialrequirementsofagoodwage systemEXCEPT:

a. Reducedlaborandoverheadcosts
b. Reducedperunitvariablecosts
c. Increasedproduction
d. Increasedoperatingcosts
99. Profitunderabsorption costingwillbehigherthanundermarginalcostingif:

a. Producedunits>Unitssold
b. Producedunits<Unitssold
c. Producedunits=Unitssold
d. Profitcannotbedeterminedwithgivenstatement
100. GoodJobPlcmakesoneproductwhichsellsfor`80perunit.Fixedcostsare`28,000permonthandmarginalc
ostsare`42perunit.Whatsaleslevelinunitswillprovideaprofitof `10,000?
a. 350units
b. 667units
c. 1,000units
d. 1,350units
101. CostvolumeProfitanalysis(CVP)isabehaviorofhowmanyvariables?
a. 2
b. 3
c. 4
d. 5
102. Ifthesellingpriceandthevariablecostperunitbothdecreaseat10%andfixedcostsdonotchange,whatisth
eeffectonthecontributionmarginperunitandthecontributionmarginratio?
a. Contributionmarginperunitandthecontributionmarginratio bothremainsunchanged
b. Contributionmarginperunitandthecontributionmarginratiobothincreases
c. Contributionmarginperunitdecreasesandthecontributionmarginratioremainsunchanged
d. Contributionmarginperunitincreasesandthecontributionmarginratioremainsunchanged
103. AllofthefollowingaretrueEXCEPT:
a. Profit+Fixedcost+Variablecost=Sales
b. Profit+Fixedcost=SalesVariablecost
c. ContributionmarginFixedcost=Profit
d. Profit+Fixedcost=Sales+Variablecost
104. Ajobneeds3,000actuallaborhourstobecompleted.Itisexpectedtherewillbe25%idletime.Ifthewagerat
eis`12.50perhour, whatisbudgeted laborcostforthejob?
a.`26,000
b.`37,500
c.`50,000
d.`42,000

105. Acompanyhasbudgetedsalesof`48,000,breakevensalesof`35,000andactualsalesof`
40,000duringaparticularperiod.Whatwillbethemarginofsafety?
a.`8,000
b.`13,000
c. `5,000
d.`21,000
106. Whichofthefollowing productcostisIncluded inprimecostand conversion cost?

a. Directlabor
b. Manufacturingoverhead
c. Directmaterial
d. WorkinProcess
107. Machinelubricantusedonprocessingequipmentinamanufacturingplantwouldbeclassifiedasa
a. Periodcost(manufacturingoverhead)
b. Periodcost(Selling,General&Admin)
c. Productcost(manufacturingoverhead)
d. Productcost(Selling,General&Admin)
108. Whichofthefollowingcostswould NOT bea periodcost?

a. Indirectmaterials
b. Administrativesalaries
c. Advertisingcosts
d. Sellingcosts
109. WhichofthefollowingisCORRECTtocalculatecostofgoodsmanufactured?
a. Directlaborcostsplustotalmanufacturingcosts
b. Thebeginningworkinprocessinventoryplustotalmanufacturingcostsandsubtracttheendin
gworkinprocessinventory
c. Beginningrawmaterialsinventoryplusdirectlaborplusfactoryoverhead
d. Conversioncostsandworkinprocessinventoryadjustmentsresultsincostofgoodsmanuf
actured
110. WhilecalculatingtheEOQ,carryingcostistakenasthe:
a. %ageofunitcost
b. %ageoforderingcost
c. %ageofannualrequiredunits
d. Totalunitcost
111. If,Wagerate`100/hrWo
rking hours 8
hoursShiftallowance`5
00Totalpaywillbe:
a.`800
b.`500
c. `1,300
d.`300
112. Whichcostswillchangewithanincreaseinactivity withintherelevantrange?

a. Unitfixedcostandtotalfixedcost
b. Unitvariablecostandtotalvariablecost
c. Unitfixedcostandtotalvariablecost
d. Unitfixedcostandunitfixedcost
113. Thetermcostallocationisdescribedas:

a. Thecoststhatcanbeidentifiedwithspecificcostcenters.
b. Thecoststhatcannotbeidentifiedwithspecificcostcenters.
c. Thetotalcostoffactoryoverheadneedstobedistributedamongspecificcostcenters.
114. OverappliedFOHwillalwaysresultwhenapredeterminedFOHrateisappliedand:
a. Productionisgreaterthandefinedcapacity
b. Actualoverheadcostsarelessthanbudgeted
c. Budgetedcapacityislessthannormalcapacity
d. ActualoverheadincurredislessthanappliedOverhead
115. Thedifferenceovertheperiodoftimebetweenactualandapplied
FOHwillusuallybeminimalwhenthepredetermined overheadrateisbasedon:
a. Normalcapacity
b. Designedcapacity
c. DirectLaborhours
d. Machinehours
116. Thecostthatissubjecttoactualpaymentorwillbepaid forinfutureiscalled:

a. Fixedcost
b. Stepcost
c. Explicitcost
d. Imputedcost
117. UnderperpetualInventorysystemtheInventoryistreatedas:
a. Assets
b. Liability
c. Income
d. Expense
118. Duringtheyear60,000unitsputintoprocess.55,000unitswerecompleted.ClosingWIPwere25,000units,40
%completed.Howmuchtheequivalentunitsofoutputwouldbeproduced?
a. 25,000units
b. 10,000units
c. 65,000units
d. 80,000units
119. Thecomponentsoftotalfactory costare:

a. DirectMaterial+DirectLabor
b. DirectLabor+FOH
c. PrimeCostonly
d. PrimeCost+FOH
120. TheFIFOinventorycostingmethod (whenusinga perpetualinventory

system)assumesthatthecostoftheearliestunitspurchasedisallocatedinwhichofthefollowingways?
a. Firsttobeallocatedtotheendinginventory
b. Lasttobeallocatedtothecostof goodssold
c. Lasttobeallocatedtothe endinginventory
d. Firsttobeallocatedtothecostofgoodssold
121. Whichofthefollowingisconsideredasbasicsystemsof remuneratinglabour?

a. Timeratesystem
b. Pieceratesystem
c. Halseypremiumplan
d. Bothtimerateandpieceratesystem

122. YouarerequiredtocalculatenumberofunitssoldofABCFansCompanyforthefirstquarterof
theyearwiththehelpofgiveninformation.
Inventoryopening
Finishedgoods(100fans) ` 43,000
Directmaterial `2,68,000
Inventoryclosing
Finishedgoods(200fans) Notknown
Directmaterial `1,67,000
Noofunitsmanufactured 567units
a. 300units
b. 767units
c. 467units
d. 667units
123. CostofmaterialconsumedunderLIFOcosting method

is`6,000.ConversionCostis`16,500.1,000unitsoftheproductweremanufactured
outofwhich800@`30unitssold.Therewerenobeginningandendinginventoriesofworkinprocessandfinish
edgoods.
Required:Calculateperunitcostwiththehelpofgiveninformation.
a.`22.50
b. `16.50
c.`6.00
d. `28.13
124. Overtimepremiumwhichispaidtodirectlaborischargedtowhichofthefollowingheadincaseofnormal
circumstances?
a. Workinprocessaccount
b. Entireproduction
c. FactoryoverheadCostaccount
d. Sellingcontrolaccount
125. WhichofthefollowingfunctionsarefulfilledbyGoodsReceivedNote?
i.Providesinformationtoupdatetheinventoryrecordsonreceiptofgoods
ii. Provides informationto checkthequantityon the suppliers invoice
iii.Providesinformationtocheckthepriceonthesuppliersinvoice
a. (i)only
b. (i)and (ii)only
c. (i)and (iii)only
d.(ii)and (iii)only
126. Calculatetotalsalaryreceivedwiththegivendata.Sala
ry `5000
PerPiececommission 10
%perpieceUnitsold 700 pieces
Priceperpiece
`10
a. `5,100
b. `5,000
c.`5,600
d.`5,700
127. Whichofthegivenstatementis CORRECT forIndirectLabor?

a. Itischargedtofactoryoverheadaccount
b. Itischargedtoworkinprocess
c. Itisentireproduction
d. Itischargedtoadministrativeexpenses
128. Aproductionworkerpaid

salaryof`700permonthplusanextra`5foreachunitproducedduringthemonth.Thislaborcostisbestdescrib
edas:

a. Afixedcost
b. Avariablecost
c. Asemivariablecost
d. Astepfixedcost
129. Givendatathat:
Work in ProcessOpeningInventory Rs.20,000
Work in ProcessClosing Inventory Rs.10,000
FinishedgoodsOpeningInventory Rs.30,000
FinishedgoodsClosingInventory Rs.50,000
Costofgoodssold Rs.1,90,000
Whatwillbethevalueofcostofgoodsmanufactured?
a.`200,000
b.`210,000
c. `220,000
d.`240,000
130. ClosingbalanceofworkInProcess(WIP)ispartof:
a. Assetsa/c
b. Expensesa/c
c. Liabilitya/c
d. Owners equity a/c
131. Whichofthegivenis CORRECTforaccountingentryofclosingbalance ofWorkInProcess(WIP)?

a. WIPa/cDrandInventorya/cCr
b. Inventorya/cDrand WIPa/cCr
c. WIPa/c Drandpayrolla/cCr
d. ThereisnoaccountingentryforclosingbalanceofWIP
132. Accountingentry ofclosingbalancecanberecorded for:

a. Incomea/candExpensesa/c
b. Liabilitya/cand Ownersequity a/c
c. Asseta/c andLiabilitya/c
d. Liabilitya/candExpensesa/c
133. Identifyunitstransferredoutwiththehelpofgivendata:
Units
Unitsstillinprocess(100%material,75%conversion)
4,000
Lostunits 2,000
Unitsstartedinprocess 50,000
a. 6,000units
b. 44,000units
c. 52,000units
d. 56,000units
134. Youarerequiredtoidentifyhowmanygoodunitswereoutputsfromtheprocess.
Units
Unitsputinprocess 4,000
Lostunits 500
Unitsinprocess 200
a. 3,300units
b. 4,000units
c. 4,200units
d. 4,500units
135. Themeasureablevalueofanalternativeuseofresourcesisreferredtoas:

a. Anopportunitycost
b. An imputedcost
c. Asunkcost
d. Noneofthese
136. Aquantitativeexpressionofmanagementobjectivesisan:
a. Organizationalchart
b. Managementchart
c. Budget
d. Noneofthese
137. Acostcenteris:
a. Aunitofproductioninrelationto whichcostsareascertained
b. Alocationwhichisresponsibleforcontrollingdirectcosts
c. Anylocationordepartmentwhichincurscost
d. Noneofthese
138. Atbreak-evenpointof400unitssold thevariablecostswere`400and thefixed costs

were`200.Whatwillbethe401unitssoldcontributing toprofitbeforeincometax?
a.`0.50
b.`1.00
c. `1.50
d.Noneofthese
139. Inconsideringa
specialordersituationthatwillenableacompanytomakeuseofcurrentlyidlecapacity,whichofthefoll
owingcostwillbeirrelevant:
a. Depreciation
b. Directlabour
c. Variablefactoryoverhead
d. Noneofthese
140. Afixedcost:
a. Maychangeintotalwhensuchchangeisnotrelatedtochangesinproduction
b. Willnotchangeintotalbecauseitisnotrelatedtochangesinproduction
c. Isconstantperunitforeachunitofchangeinproduction
d. Maychangeintotal,dependingonproductionwiththerelevantrange
141. Allthegivenstatementsregarding job costsheetsareincorrectEXCEPT:

a. Jobcostsheetshowsonlydirectmaterialscostonthatspecificjob
b. Jobcostsheetmustshowthesellingcostsassociatedwithaspecificjob
c. Jobcostsheetmustshowtheadministrativecostsassociatedwithaspecificjob
d. Jobcostsheetshowsdirectmaterialscost,directlabourcostandfactoryoverheadcostsassociatedwit
haspecificjob
142. Whatwouldbetheeffectonthecostofadepartment incaseofnormalLoss

a. Decreased
b. Increased
c. Noeffect
d. Increasetothe%ageofloss
143. Expensessuchasrentanddepreciationofabuilding areshared byseveraldepartmentstheseare:

a. Indirectexpenses
b. Directexpenses
c. Jointexpenses
d. Alloftheabove

144. IfunderappliedFOHis closed tocostofgoodssold,thejournalentry is:

a. DR Costof goods sold..CRFOH control
b. DRFOHcontrol....CRCostof goodssold
c. DR FOHcontrol....CRProfit% lossaccount
d. Noneofthese
145. Re-orderquantity 3600units

Maximum consumption ... 900 units
perweekMinimum consumption....300 units
perweekRe-orderperiod..5 weeks
Basedonthisdata Re-orderlevelis:
a. 4500units
b. 3900units
c. 1200units
d. Noneofthese
146. Thetimelagbetweenindentingandreceivingmaterialis called:

a. Leadtime
b. Idletime
c. Stockouttime
d. Noneofthese
147. AcreditbalanceremaininginFOHControlaccountiscalled:
a. Over-appliedoverhead
b. Under-appliedoverhead
c. Actualoverhead
d. Noneofthese
148. Directmaterialcostplusdirectlabourcostiscalled:
a. Primecost
b. Conversioncost
c. Productcost
d. Allofthese
149. Productivitymeans:
a. Theabilitytoproduce
b. Allunitsproduced
c. Goodunitsproduced
d. Noneofthese
150. Asegmentofthebusinessthatgeneratesboth revenueand costiscalled:

a. ProfitCenter
b. CostCenter
c. Costdriver
d. Allofthese
151. Primecostiscalculatedasunder:
a. ManufacturingCost/CostofGoodsSold
b. DirectMethodplusfactoryoverheads
c. Directlabour+DirectMaterial
d. Noneofthese
152. ProcessCostisverymuchapplicablein:
a. ConstructionIndustry
b. PharmaceuticalIndustry
c. Airlinecompany
d. Noneofthese

153. WhichofthefollowingisnotafunctionofCostAccounting?
a. Costascertainment
b. Planningandcontrol
c. Decision-making
d. Externalreporting
154. Acostis:
a. Asacrifice
b. Releaseofsomething
c. Measureofconsumptionofresources
d. Alloftheabove
155. Costinformationfacilitatesmanyimportantdecisionsexcept:
a. Introductionofaproduct
b. Whethertomakeorbuy
c. Retentionofprofit
d. Explorationofanadditionalmarket
156. ManagementAccountingseekstoservethepurposeofmanagementtorunabusinessmoreefficientlyand
thususesthetechniquesof:
a. FinancialAccounting
b. CostAccounting
c. MathematicsandStatistics
d. Alloftheabove
157. Inprocess costing,each producing departmentisa:

a. Costunit
b. Costcentre
c. Investmentcentre
d. Salescentre
158. Marketinginvolvesthefollowingexcept:
a. Designing
b. Selling
c. Publicity
d. Distribution
159. Administrationspanacrossalltheupstream,mainstreamanddownstreamactivitiesofafirm,suchas:
a. Design,researchanddevelopment
b. Production
c. Marketing
d. Alloftheabove
160. When10,000ending unitsofwork-in-processare30%completedastoconversion,itmeans:

a. 30%oftheunitsarecompleted
b. 70%oftheunitsarecompleted
c. Eachunithasbeencompletedto70%ofitsfinalstage
d. Eachoftheunitsis30%completed
161. Whichofthefollowingisnota method ofcosting ?

a. Marginalcosting
b. Jobcosting
c. Processcosting
d. Operatingcosting

162. Whichofthefollowingisnota techniqueofcosting ?

a. Absorptioncosting
b. Standardcosting
c. Multiplecosting
d. Marginalcosting
163. Costcanbeclassifiedaccording to:

a. Elements
b. Functions
c. Behavior
d. Alloftheabove
164. WhichofthefollowingisTRUEregardingtheuseofblanketrate?
a. Theuseofa singleblanketratemakestheapportionmentofoverheadcostsunnecessary
b. Theuseofasingleblanketratemakestheapportionmentofoverheadcostsnecessary
c. Theuseofasingleblanketrate makestheapportionmentofoverheadcostsuniform
165. Thefunctionalclassificationofcostsincludethefollowingexcept:
a. Primecost
b. Productioncost
c. Administrationcost
d. Marketingcost
166. Whichofthefollowingisnotincludedintheadministrationcost?
a. Salariesofgeneralofficestaff
b. Salariesofforemen
c. Officesuppliesandexpenses
d. Postage,stationary,telephoneetc.
167. Acostunitis:
a. Thecostpermachinehour
b. Costperlabourhour
c. Aunitofproductionorserviceinrelationtowhichcostsareascertained
d. Ameasureofworkoutputinastandardhour
168. Primecostis:
a. Thetotalofdirectcosts
b. Allcostsincurredinmanufacturingaproduct
c. Thematerialcostofaproduct
d. Thecostofoperatingadepartment
169. Costofsalesis:
a. Totalcostsincurredinproduction,administrationandmarketingfunctions
b. Workscostplusadministrationoverheads
c. Aggregateofworks,administrationandmarketingoverheads
d. Primecostsplusmarketingoverheads
170. Variablecostsareconventionally deemedto:

a. Beconstantperunitofoutput
b. Varyperunitofoutputasproductionvolumechanges
c. Beconstantintotalwhenproductionvolumechanges
d. Vary,intotal,fromperiodtoperiodwhenproductionisconstant
171. Fixed costs :

a. Varyintotalasproductionvolumechangeswithinagivenrange
b. Remainconstantintotalbutvaryperunitwhenproductionvolumechanges

c. Remainconstantperunitasproductionvolumechanges
d. Varyintotalwhenproductionvolumedoesnotchange
172. Costswhichdonotfluctuateasthelevelofactivity changeswithinagivenrangeare:

a. Relevantcosts
b. Opportunitycosts
c. Mixedcosts
d. Fixedcosts
173. Whichofthefollowingisnotanexampleofsemi-variablecosts?
a. Telephoneexpenses
b. Maintenanceexpensesofmachines
c. Salaryoftheworksmanager
d. Depreciationexpenses
174. ThefollowinginformationwastakenfromSmartCompanysaccountingrecordsfortheyearended
March31,2013:
`
Increaseinrawmaterialsinventory 15,000
Decreaseinfinishedgoodsinventory 35,000
Rawmaterialspurchased 4,30,000
Directlabourpayroll 2,00,000
Factoryoverhead 3,00,000
Freight 45,000
There was noworkin processinventoryatthe beginningor endof the year.Smarts2,000costof
goodssoldis:
a.`9,50,000
b.`9,65,000
c. `9,75,000
d.`9,95,000
Question175-177 are basedon the following information pertainingto ABCCompanys

manufacturingoperations:
Inventories 3/1/2013 3/31/2013
` `
Directmaterials 36,000 30,000
Work-in-process 18,000 12,000
Finishedgoods 54,000 72,000
AdditionalinformationforthemonthofMarch2013 `
Directmaterialspurchased 84,000
Directlabourpayroll 60,000
Directlabour rate perhour 7.50
Factoryoverhead rateperdirectlabourhour 10.00
175. ForthemonthofMarch2013,primecostwas:
a.`90,000
b.`1,20,000
c. `1,44,000
d.`1,50,000
176. ForthemonthofMarch2013,conversioncostwas:
a.`90,000
b.`1,40,000
c. `1,44,000
d.`1,70,000
177. ForthemonthofMarch2013,costofgoodsmanufactured was:

a.`2,18,000

b.`2,24,000
c. `2,30,000
d.`2,36,000
178. Thecostofrentforamanufacturingplantisa:
Primecost Productcost
a. No Yes
b. No No
c. Yes No
d. Yes Yes
179. Propertytaxesona manufacturingplantareanelementof:

Conversioncost Periodcost
a. Yes No
b. Yes Yes
c. No Yes
d. No No
180. Thefixedportionofthesemi-variablecostofelectricityofamanufacturingplantisa:
Periodcost Productcost
a. Yes No
b. Yes Yes
c. No Yes
d. No No
181. Variousmethodsareusedforpricingmaterialsused.Costpricemethodsare:
a. Specificprice
b. Firstinfirstout
c. Lastinfirstout
d. Alloftheabove
182. Averagepricemethodsofpricingmaterialsissuesarederivedfromcostprices.Theyincludethefollowin
gexcept:
a. Simpleaverage
b. Basestock
c. Weightedaverage
d. Movingaverage
183. Incaseofriseinpricelevels,themostsuitablemethodforvaluingmaterialsissuedis:
a. LIFO
b. FIFO
c. Simpleaverage
d. Weightedaverage
184. TheFIFOassumptionofcostflowwhenappliedinaperiodofrisingprices:
a. Overstatesprofitandclosingstock
b. Overstatesprofitandunderstatesclosingstock
c. Overstatesprofitandshowsclosingstockatcurrentprices
d. Understatesprofitandoverstatesclosingstock
185. Inarepeateddistributionmethod:
a. Eachservicedepartmentinturndoesnotre-allocateitscoststoalldepartments
b. Eachservicedepartmentinturnandre-allocatesitscoststoalldepartments
c. Eachservicedepartment inturnandallocatesitscoststoalldepartments
d. Onlyoneservicedepartmentinturnandre-allocatesitscoststoalldepartments.

[Hint:Repeateddistributionmethod:Thismethodtakeseachservicedepartmentinturnandre-
allocatesitscoststoalldepartmentswhichbenefit.]
186. The cost of goodssoldwas `2,40,000. Beginning andendinginventorybalanceswere`20,000and

`30,000,respectively.Whatwastheinventoryturnoverratio?
a. 8.0times
b. 12.0times
c. 7.0times
d. 9.6times
[Hint:Inventoryturnoverratio=CGS/Averageinventoryinvent
oryturnoverratio=240000/25000=9.6times
averageinventory=openinginventory+closinginventory/2]
187. Where----------------isequal,thatpointiscalledEconomicorderquantity.
a. Orderingcost
b. Carryingcost
c. Orderingandcarryingcost
d. Perunitordercost
188. Lossbyfireisanexampleof:
a. NormalLoss
b. AbnormalLoss
c. IncrementalLoss
d. Cannotbedetermined
189. Themainpurposeof costaccounting is to :

a. Maximizeprofits
b. Helpininventoryvaluation
c. Provideinformationtomanagementfordecisionmaking
d. Aidinthefixation ofsellingprice
190. Wheretheapplied FOHcostisless thanthe actualFOH costitis:

a. Unfavorablevariance
b. Favorablevariance
c. Normalvariance
d. Budgetedvariance
[Hint: When theappliedcost islesserthantheactualcostitisunfavorablevariance.]
191. Whichofthefollowingiscorrect?
a. Unitssold=Openingfinishedgoodsunits+Unitsproduced Closingfinishedgoodsunits
b. UnitsSold=Unitsproduced+Closingfinishedgoodsunits -Openingfinishedgoodsunits
c. Unitssold=Sales+Average unitsoffinishedgoodsinventory
d. Unitssold=Sales-Averageunitsoffinishedgoodsinventory
192. Whichofthe following itemsof expenseareto beadd inFOHcost ?

a. Rentoffactory+Headofficerent+salariestofactorywatchman
b. Rentoffactory+factorylightingbill+Directorssalaries
c. Rentoffactory+factorylightingbill+Factoryemployeessalaries
d. Headofficerent+Factorypropertytax+Factorysmall tools
193. If,Grossprofit=`40,000GPMargin=20%ofsalesWhatwillbethevalueofcostofgoodssold?
a.`160,000
b.`120,000
c. `40,000
d.`90,000
[Hint:Costofgoodssold= Grossprofit (absoluteamount)x80%/20%]

194. Takingstepsforthefreshpurchaseofthosestockswhichhavebeenexhaustedandforwhich
requisitionsaretobehonoredinfuture isaneasyexplanationof:
a. Overstocking
b. Understocking
c. Replenishmentofstock
d. Acquisitionofstock
195. NetIncomebeforeInterestand taxisalsocalled:

a. OperatingIncome/Profit
b. GrossProfit
c. MarginalIncome
d. OtherIncome
196. Whichofthefollowingisindirectcost?
a. Thedepreciationofmachinery
b. Theovertimepremiumincurredatthespecificrequestofacustomer
c. Thehireoftoolsforaspecificjob
197. Inwhichofthefollowing centerFOHcostNOTincurred?

a. ProductionCenter
b. ServiceCenter
c. GeneralCostCenter
d. HeadOffice
198. Whichofthefollowingisconsideredasbasicsystems ofremuneratinglabor?

a. Timeratesystem
b. Pieceratesystem
c. HalseyPremiumplan
d. Bothtimerateandpieceratesystem
199. Netsales=Salesless:
a. Salesreturns
b. Salesdiscounts
c. Salesreturns&allowances
d. Salesreturns&allowancesandsalesdiscounts
200. Anorganistationsold4000unitsandhaveclosingfinishedgoods3500unitsandopeningfinishedgoodsunits
were1000.Thequantityofunitsproduced wouldbe:
a. 7500units
b. 6500units
c. 4500units
d. 8500units
[Hint:Numberofunitsmanufactured/produced=unitssold+closingbalanceoffinishedgoodsunits-
openingbalanceoffinishedgoodsunits
numberof unitsproduced/manufactured=4000+3500-1000=6500]
201. Astoreledgercardissimilartothe .
a. Stockledger
b. Bincard
c. Materialcard
d. Purchaserequisitioncard
202. Whichofthefollowingelementmustbetakenintoaccountwhilecalculatingtotalearningsofaworkerunder
differentincentivewageschemes?
a. Rateperunit
b. Unitsofproduction

c. Extratimetakenbyemployeetocompletetheproduction
d. Numberofworkersemployed
203. Thejournalentry ofpurchaseofstock underperiodicinventory system wouldbe?

a. InventorytoCash
b. CashtoPurchases
c. PurchasestoInventory
204. ClosingworkinprocessInventoryoflastyear:
a. IstreatedasOpeninginventoryforcurrentyear
b. Isnotcarriedforwardtonextyear
c. Becomeexpenseinthenextyear
d. ChargetoProfit&Lossaccount
205. Salesare`4,50,000.Beginningfinishedgoodswere`23,000.Endingfinishedgoodsare`30,000.Thecostofgo
odssoldis`3,00,000.Whatisthecostofgoodsmanufactured?
a. ` 323,000
b. ` 330,000
c. ` 293,000
206. Whiletransportingpetrol,a littlequantitywillbeevaporated;suchkindoflossistermedas:

a. NormalLoss
b. AbnormalLoss
c. Itisincrementalloss
d. Itcannotbeabnormalloss
207. Thecostofelectricity billofthefactory istreatedas:

a. Fixedcost
b. Variablecost
c. Stepcost
d. Semi variablecost
[Hint:SemiVariable Cost:Itisalsoknownasmixedcost.Itisthe
costwhichispartfixedandparvariable.Itisinfactthemixtureof bothbehaviors.
Examplesinclude:Utilitybillsthereisafixedlinerentpluschargesforunitsconsumed.
Salesmanssalarythereisafixedmonthlysalarypluscommissionper unitssold.]
208. Acostcentre is:

a. Aunitofproductorserviceinrelationtowhichcostsareascertained
b. Anamountofexpenditureattributabletoanactivity
c. Aproductionorservicelocation,function,activityoritemofequipmentforwhichcostsareaccum
ulated
d. Acentreforwhichanindividualbudgetisdrawnup
209. Costaccountingdepartmentprepares thathelpsthem inpreparingfinalaccounts.

a. Costsheets
b. Costofgoodssoldstatement
c. CostofproductionReport
d. Materialrequisitionform
210. WhenFOHisunderappliedand chargedtoNetProfit,thetreatmentwould be:

a. Underapplied Addnetprofit
b. UnderappliedLessnetprofit
c. UnderappliedLessoperatingexpense

211. Weightedaveragecostperunitiscalculatedbywhichofthefollowingformula?
a. Costofgoodsissued/numberofunitsissued
b. TotalCost/TotalUnits
c. Costofgoodsmanufactured/closingunits
d. Costofgoodssold/totalunits
212. Buyerproduced20,000unitsandtheirtotalfactorycostwas`450,000,othercostlikepropertytaxonfactory
buildingwas`10,000included inthatcosttillyearended thecostofperunitwouldbe:a.`22.5
b.`23.5
c. `.24.5
d.`26.5
[Hint:Costperunit=Costofgoods manufactured/Numberofunitsmanufactured]
213. Astandard rateispaid totheemployeewhenhecompleted hisjob:

a. Intimelessthanthestandard
b. Instandardtime
c. Intimemorethanstandard
d. Bothinstandardtimeandmorethanthestandardtime
214. Storeinchargeafterreceivingthematerialasperthegoodsreceivednote,placesthematerialatitslocation
andmakesanentry in_ .
a. BinCard
b. StoreLedgerCard
c. StockLedger
215. Ifopeninginventoryofmaterialis`20,000andclosinginventoryis`40,000.theAverageinventoryamountwill
be:
a.`40,000
b.`30,000
c. `20,000
d.`10,000
[Hint: AverageInventory=OpeningInventory+ClosingInventory/2]
216. PVCCompanyhasorderingquantity10,000units.Theyhavestoragecapacity20,000units,theaverageinve
ntorywouldbe:
a. 20,000
b. 5,000
c. 10,000
d. 25,000
[Hint:Averageorderingquantity=OrderingQuantity/2]
217. AllIndirectcostischarged/record inthehead of

a. Primecost
b. FOHcost
c. Directlaborcost
218. Under/OverappliedFOHcostcanbeadjustedinwhichofthefollowing:
a. EntireProduction
b. CostofGoodsSold
c. NetProfit
d. Allofgivenoptions
219. ThedangerLevelcanbecalculated?
a. AverageconsumptionxLeadtimetogeturgentsupplies

b. NormalconsumptionxLeadtimetogeturgentsupplies
c. MaximumconsumptionxLeadtimetogeturgentsupplies
d. MinimumconsumptionxLeadtimetogeturgentsupplies[Hint:D
angerLevel= AverageconsumptionxEmergencytime]
220. NelsonCompanyhasfollowingFOHdetail.
Budgeted(`) Actual(`)
ProductionFixed overheads 36,000 39,000

ProductionVariableoverheads 9,000 12,000
Directlaborhours 18,000 20,000
a. Underappliedby`1,000
b. Over appliedby`1,000
c. Underappliedby`11,000
d. Over appliedby`38,000
221. FactoryOverheadcostincludes :
a. FactoryRent
b. PropertyTax
c. SalariesofFactoryClerk
d. Allofthegiven
222. Whichofthefollowingcannotbeusedasabaseforthedeterminationofoverheadabsorptionrate?
a. Numberofunitsproduced
b. Primecost
c. Conversioncost
d. DiscountAllowed
223. Costofgoodssold`30,000,openingInventory`9,000,Closinginventory`7,800.Whatwastheinventoryturnov
erratio?
a. 3.57times
b. 3.67times
c. 3.85times
d. 5.36times
[Hint:Inventoryturnoverratio=Costofgoodssold/Averageinventory]
224. FOHappliedrateofRs.5.60permachinehour.DuringtheyeartheFOHtoRs.275,000and48,000machinehour
swereused.Whichoneoffollowingstatementiscorrect?
a. Overheadwasunder-appliedbyRs.6,200
b. Overheadwasover-appliedbyRs.6,200
c. Overheadwasunder-appliedbyRs.7,200
d. Overheadwasover-appliedbyRs.7,200
225. CostaccountingconceptsincludeallofthefollowingEXCEPT:
a. Planning
b. Controlling
c. Sharing
d. Costing
226. arefuturecoststhateffectthecurrentmanagementdecision.
a. SunkCost
b. StandardCost
c. RelevantCost
d. IrrelevantCost
[Hint:Relevantcostiswhichchangeswithachangeindecision.Thesearefuturecoststhateffectthecurrent
managementdecision.]

227. Whichofthefollowingcostsispartoftheprimecostformanufacturingcompany?
a. Costoftransportingrawmaterialsfromthesupplierspremises
b. Wagesoffactoryworkersengagedinmachinemaintenance
c. Depreciationoftruckusedfordeliveriestocustomers
d. Costofindirectproductionmaterials
228. Directmaterialopeninginventoryaddnetpurchasesiscalled
a. Materialconsumed
b. Materialavailableforuse
c. Totalmaterialpurchased
d. Materialendinginventory
229. Whichofthefollowingistobecalledproductcost?
a. Materialcost
b. Laborcost
c. FOHcost
230. ABlanketRateis:
a. Asingleratewhichusedthroughouttheorganizationdepartments
b. Adoublerateswhichusedthroughouttheorganizationdepartments
c. Asinglerateswhichusedindifferentdepartmentsoftheorganization
[Hint:Ablanketabsorptionrateisasinglerateofabsorptionusedthroughoutanorganizations
productionfacilityandbaseduponitstotalproductioncostsandactivity.]
231. AllofthefollowingarecharacteristicsofGroupBonusSchemeEXCEPT:
a. Astandard timeissetforthecompletionofajob
b. Ifthetimetakenisgreaterthanthetimeallowed,theworkersinthegroupreceivetimewages
c. Ifthetime takenislessthanthetimeallowed,thegroupreceivesabonusontimesaved
d. Ifthetimetakenisgreaterthanthetimeallowed,theworkersinthegroupreceivetimedeductionsforext
rahours
232. Whichofthefollowingbestdescribesthemanufacturingcosts?
a. Directmaterials,directlaborandfactoryoverhead
b. Directmaterialsanddirectlabor
c. Directmaterials,directlabor,factoryoverhead,andadministrativeoverhead
d. Directlaborandfactoryoverhead
233. HighlaborturnoverisNOTdesirablebecause:
a. Itdenotestheinstability ofthelaborforce
b. Itisanindicationof highlaborcost
c. Itshowsfrequentchangesinthelaborforce
234. Manufacturingentitiesclassifiedtheinventoryinwhichofthreekinds?
a. Materialinventory,WIPinventory,Finishedgoodsinventory
b. Materialinventory,purchasedgoodinventory,WIPinventory
c. Materialinventory,purchasedgoodinventory,Finishedgoodsinventory
d. WIPinventory,Finishedgoodsinventory,purchasedgoodinventory
235. Whichofthefollowingiscorrectformaximumlevel?
a. Reorderlevel(MinimumconsumptionxLeadtime)+EOQ
b. (MaximumconsumptionxLeadtime)(MinimumconsumptionxLeadtime)+EOQ
c. [(Maximumconsumption-Minimumconsumption)Leadtime]+EOQ

236. Inventoryturnoverratiocanbecalculatedasfollow?
a. Costofgoodssold/Averageinventory
b. Grossprofit/Averageinventory
c. Costofgoodssold/sale
d. Costofgoodssold/Grossprofit
237. ThecomponentofFactory overhead areasfollow

a. Directmaterial+Indirectmaterial+Directexpenses
b. Indirectmaterial+Indirectlabor+Othersindirectcost
c. Directmaterial+Indirectexpenses+Indirectlabor
d. Directlabor+Indirectlabor+Indirectexpenses
238. Overtimethatisnecessary inordertofulfillcustomerordersiscalled:

a. Avoidableovertime
b. Unavoidableovertime
c. PremiumOvertime
d. Flextime
239. TheProcessofcostapportionmentiscarried outsothat:

a. Costmaybecontrolled
b. Costunitgatheroverheadsastheypassthroughcostcenters
c. Wholeitemsofcostcanbechargedtocostcenters
d. Commoncostsaresharedamongcostcenters
240. Taylor'sDifferentialPieceRatePlanuses-----------piecerates.
a. Three
b. Two
c. Four
d. Five
241. UnderHalseypremiumplan,iftheemployeecompleteshisjobinlessthanthestandardtimefixedforthejob
,heisgiven:
a. Onlywagesfortheactualhourstaken
b. Wagesfortheactualhourstakenplusbonusequaltoonehalfof thewageofthetimesaved
c. Wagesfortheactualhourstakenplusbonusequaltoonethirdofthewageofthetime saved
d. Onlythebonusequaltoonehalf ofthe time saved
242. IncreaseinmaterialInventorymeans:
a. Theendinginventoryisgreaterthanopeninginventory
b. Theendinginventoryislessthanopeninginventory
c. Bothendingandopeninginventoriesareequal
243. Working hoursoflaborcanbecalculated withthehelpofallexcept:

a. Smartcard
b. Timesheet
c. Clockcard
d. Storecard
244. Amountofnetpurchasecanbecalculatedasfollow
a. Purchaseof
directmaterialaddtradediscountlesspurchasereturnaddcarriageinwardlessothermaterialhand
lingcost
b. Purchaseof
directmateriallesstradediscountladdpurchasereturnaddcarriageinwardlessothermaterialhandli
ngcost
c. Purchaseofdirectmateriallesstradediscountlesspurchasereturnlesscarriageinwardaddotherm
aterialhandlingcost

d. Purchaseofdirectmateriallesstradediscountlesspurchasereturnaddcarriageinwardaddotherm
aterialhandlingcost
245. AllofthefollowingaretermsusedtodenoteFactoryOverheadsEXCEPT:
a. Factoryburden
b. Factoryexpenses
c. Manufacturingoverhead
d. Conversioncosts
246. Reductionof laborturnover, accidents, spoilage,wasteandabsenteeismarethe resultsof

whichofthefollowingwageplan?
a. Piecerateplan
b. Timerateplan
c. Differentialplan
d. Groupbonussystem
247. Costswhichareconstantforarelevantrangeofactivityandrisetonewconstantleveloncethatrangeexcee
ded iscalled:
a. Afixedcost
b. Avariablecost
c. Amixedcost
d. Astepcost
248. Costofgoodssoldcanbecalculatedasfollow
a. CostofgoodsmanufacturedAddOpeningfinished
goodsinventoryLessClosingfinishedgoodsinventory
b. CostofgoodsmanufacturedLessOpeningfinishedgoodsinventoryLessClosingfinishedgoodsi
nventory
c. CostofgoodsmanufacturedLessOpeningfinishedgoodsinventoryAddClosingfinishedgoodsi
nventory
d. Costofgoodsmanufactured
AddOpeningfinishedgoodsinventoryAddClosingfinishedgoodsinventory
249. If,COGS=`70,000GPMargin=30%ofsalesWhatwillbethevalueofSales?
a.`200,000
b.`66,667
c. `100,000
d.`62,500
[Hint:Sales=30000*100%/30%=`100,000]
250. Annualrequirementis7800units;consumptionperweekis150units.Unitprice`5,ordercost`10perorder.Carr
yingcost`1perunitandleadtimeis3week,TheEconomicorderquantitywouldbe.
a. 395units
b. 300units
c. 250units
d. 150units
251. Whatwillbetheimpactofnormallossontheoverallperunitcost?
a. Perunitcostwillincrease
b. Perunitcostwilldecrease
c. Perunitcostremainunchanged
d. Normallosshasnorelationtounitcost
252. Alphacompanypurchased amachineworthRs 200,000 inthelast year. Nowthatmachine can

beuseinanewprojectwhichcompanyhasreceivedthisyear.Nowthecostofthatmachineistobecalled:

a. Projectcost
b. Sunkcost
c. Opportunitycost
d. Relevantcost
253. FOHabsorptionrateiscalculated by thewayof :

a. EstimatedFOHCost/Directlaborhours
b. EstimatedFOHCost/Noofunitsproduced
c. EstimatedFOHCost/PrimeCost
254. Whichofthefollowingis/arenotassociated withordering costs?

a. Interest
b. Insurance
c. Opportunitycosts
255. UnderperpetualInventory system attheendoftheyear:

a. Noclosingentrypassed
b. Closingentrypassed
c. Closingvaluefindthroughclosingentryonly
d. Noneoftheabove.
256. TheHinoCorporationhasabreakevenpointwhensalesare`160,000andvariablecostsatthatlevelofsalesar
e`100,000.
Howmuchwouldcontributionmarginincreaseordecrease,ifvariableexpensesdroppedby`20,000?
a. 37.5%.
b. 60%.
c. 12.5%.
d. 26%
[Hint:Sales=160,000;VC=100,000;CM=60,000
Contributiontosalesratio(C/Sratio)=ContributionMarginin`/Salesin`
60,000/160,000=0.375
0.375*100=37%Ne
wVC=80,000,
Sales=160,000C
M=80,000
Contributiontosalesratio (C/Sratio)=ContributionMarginin`/Salesin`
80,000/160,000=0.5=50%Ri
seinCM=(37.5-50)=12.5]
257. Theshortrunisatimeperiodinwhich:
a. Allresourcesarefixed.
b. Thelevelofoutputisfixed.
c. Thesizeoftheproductionplantisvariable.
d. Someresourcesarefixedandothersarevariable
258. Opportunitycostisthebestexampleof:
a. SunkCost
b. StandardCost
c. RelevantCost
d. IrrelevantCost
259. Thecomponentsoffactoryoverheadareasfollows:
a. Directmaterial+Indirectmaterial+Directexpenses
b. Indirectmaterial+Indirect labor+Othersindirectcost
c. Directmaterial+Indirectexpenses+Indirectlabor
d. Directlabor+Indirectlabor+Indirectexpenses

260. ThetermMaximumlevelrepresents:
a. Themaximumstocklevelindicatesthemaximumquantityofanitemofmaterialwhichcanbeheldinst
ockatanytime.
b. Themaximumstocklevelindicatesthemaximumquantityofanitemofmaterialwhichcannotbeheldi
nstockatanytime.
c. Theaveragestocklevelindicatesthemaximumquantityofanitemofmaterialwhichcanbeheldinsto
ckatanytime.
d. Theavailablestocklevelindicatesthemaximumquantityofanitemofmaterialwhichcanbeheldinsto
ckatanytime.
261. TheFIFOinventorycostingmethod (whenusingaperpetualinventory

system)assumesthatthecostoftheearliestunitspurchasedisallocatedinwhichofthefollowingways?
d. Firsttobeallocatedtothecostofgoodsold
262. Afirm Usesitsowncapital or Usesitsowner'stimeand/orfinancialresourcesbothareexamplesof

a. ImplicitCost
b. ExplicitCost
c. SunkCost
d. RelevantCost
[Hint:Acostthatisrepresentedbylostopportunityintheuseofacompany'sownresources,excludingcash
Theseareintangiblecoststhatarenoteasilyaccountedfor.Forexample,thetimeandeffortthatanownerp
utsintothe maintenanceofthecompanyratherthanworkingonexpansion]
263. IfDirectMaterial=12,000;DirectLabor=8000andotherDirectCost=2000thenwhatwillbethePrimeCost?
a. 12000
b. 14000
c. 20000
d. 22000
264. Wage,Rent&Materialsareexamplesof:
a. ImplicitCost
b. ExplicitCost
c. DirectCost
d. ManufacturingCost
[Hint:Abusinessexpensethatiseasilyidentifiedandaccountedfor.Explicitcostsrepresentclear,obviouscas
houtflowsfromabusinessthatreduceitsbottom-lineprofitability.Thiscontrastswithless-
tangibleexpensessuchasgoodwillamortization,whicharenotasclearcutregardingtheireffectsonabusin
ess'sbottom-linevalue
Goodexamplesofexplicitcostswouldbeitemssuchaswageexpense,rentorleasecosts,andthe
costofmaterials that go intothe productionofgoods.With these expenses,itiseasy to
seethesourceofthecashoutflowandthebusinessactivitiestowhichtheexpenseisattributed]
265. Aninvestorinvestsinstockexchangeheforegoestheopportunitytoinvestfurtherinhishotel.Theprofitwhich
theinvestorwillbegettingfromthehotelis .
a. Opportunitycost
b. PeriodCost
c. ProductCost
d. HistoricalCost
[Hint:1.Thecostofanalternativethatmustbeforgoneinordertopursueacertainaction.Putanotherway,th
ebenefitsyoucouldhavereceivedbytakinganalternativeaction.
2.Thedifferenceinreturnbetweenachoseninvestmentandonethatisnecessarilypassedup.Sayyouinves
tinastockanditreturnsapaltry2%overtheyear.Inplacingyourmoneyinthe

stock,yougaveuptheopportunityofanotherinvestment-say,arisk-
freegovernmentbondyielding6%.Inthissituation,youropportunitycostsare4% (6%-2%)]
266. Itispossibleforanitemofoverhead expendituretobeshared

amongstmanydepartments.Itisalsopossiblethatthissameitemmayrelatetojustonespecificdepartm
ent.
Iftheitemwasnotchargedspecifically toasingledepartmentthiswouldbean example of:
a. Apportionment
b. Allocation
c. Re-apportionment
d. Absorption
267. Generally,thedangerlevelofstockisfixed theminimumlevel

a. Below
b. Above
c. Equal
d. Dangerlevelhasnorelationtominimumlevel
268. Whichofthefollowingis/aretimebasedincentivewageplan?
a. HasleyPremiumPlan
b. HasleyWeirPremiumPlan
c. RowanPremiumPlan
269. Whichofthefollowingis/arereportedinproductioncostreport?
a. Thecostschargedtothedepartment
b. Howthecostswereassignedtotheoutput?
c. Theequivalentunitsofproductionbythedepartment
270. Direct materialscostis `80,000.Directlaborcostis`60,000.Factoryoverheadis `90,000.Beginninggoods

inprocesswere `15,000. The costofgoodsmanufactured is `245,000. Whatis thecostassigned tothe
endinggoodsinprocess?
a.`45,000
b.`15,000
c. `30,000
d.TherewillbenoendingInventory[Hint:Dire
ctMaterial ----80,000 (Given)Directlabor---
----60,000(Given)
FOH--------------
90,000(Given)OpenWIP-------15,000
Total 245000(costofgoodsmanufacturedisalso245000sobalanceiszero)]
271. Salesare`450,000.Beginningfinishedgoodswere`23,000.Endingfinishedgoodsare`30,000.Thecostofgoo
dssoldis`300,000.Whatis thecostofgoodsmanufactured?
a.`323,000
b.`330,000
c. `293,000
272. UnderPeriodicInventorysystem Purchaseofinventory istreatedas:

a. Assets
b. Expense
c. Income
d. Liability

273. Whenpricesarerisingovertime,whichofthefollowinginventorycostingmethodswillresultinthelowestgros
smargin/profits?
a. FIFO
b. LIFO
c. WeightedAverage
274. Themaindifferencebetweentheprofitcenterandinvestmentcenteris:
a. Decisionmaking
b. Revenuegeneration
c. Costincurrence
d. Investment
275. TheInventoryTurnoverratiois5timesandnumbersofdaysinayearis365.Inventoryholdingperiod
indayswould be
a. 100days
b. 73 days
c. 50 days
d. 10 days
276. OverappliedFOHwillalwaysresultwhena predeterminedFOHrateisappliedand:

a. Productionisgreaterthandefinedcapacity
b. Actualoverheadcostsarelessthanbudgetedoverhead
c. Budgetedcapacityislessthannormalcapacity
d. ActualoverheadincurredislessthanappliedOverhead
277. Thefluxmethodoflaborturnoverdenotes:
a. Workersappointedagainstthevacancycausedduetodischargeorquittingoftheorgani
zation
b. Workersappointedinreplacementofexistingemployees
c. Workersemployedundertheexpansionschemesofthecompany
d. Thetotalchangeinthecompositionoflaborforce
[Hint:Thefluxmethodoflaborturnoverdenotesthetotalchangeinthecompositionoflaborforce.
Whilereplacementmethodtakesintoaccountonlyworkersappointedagainstthevacancycauseddueto
dischargeorquittingoftheorganisation.]
278. WhichofthefollowingstatementisTRUEaboutFOHapplied rates?

a. Theyareusedtocontroloverheadcosts
b. Theyarebasedonactualdataforeachperiod
c. Theyarepredeterminedinadvanceforeachperiod
d. Noneofthegiven
279. CostofGoodsManufacturedcanbecalculatedasfollow
a. TotalfactoryCostAddOpeningWorkinprocessinventoryLessClosing
Workinprocessinventory
b. TotalfactoryCostLessOpening
WorkinprocessinventoryAddClosingWorkinprocessinventory
c. TotalfactoryCostLessOpening
WorkinprocessinventoryLessClosingWorkinprocessinventory
d. TotalfactoryCost
AddOpeningWorkinprocessinventoryAddClosingWorkinprocessinventory
280. isthetimeworked overandabovetheemployee'sbasicworking week.

a. Flextime
b. Overtime
c. Shiftallowance
d. Commission

281. Infurnituremanufacturinguseofnail,pins,glue,and
polishwhichusetoincreaseitsesteemvaluethatcostis treated as:
a. Directmaterialcost
b. Indirectmaterialcost
c. FOHcost
d. Primecost
282. Iflaborissatisfiedwithhighwagesitmayultimatelyleadto:
a. Increasedproductionandproductivity
b. Increasedefficiency
c. Reducedlaborandoverheadcosts
283. Whichofthefollowingisamechanicaldevicetorecordtheexacttimeoftheworkers?
a. ClockCard
b. StoreCard
c. TokenSystem
d. AttendanceRegister
284. Whichofthefollowingis/areelement/sofproductionpayroll?
a. Directlaborforcewages
b. Administrativewages
c. Sellingwages
285. IfapredeterminedFOHrateisnotappliedandthevolumeofproductionisreducedfromtheplannedcapaci
ty level,thecostperunitexpected to:
a. Remainunchangedforfixedcostandincreaseforvariablecost
b. Increaseforfixedcostandremainunchangedforvariablecost
c. Increaseforfixedcostanddecreaseforvariablecost
d. Decreaseforbothfixedandvariablecosts
286. WhichofthefollowingisNOTanassumptionofthebasiceconomic-orderquantitymodel?
a. Annualdemandisknown
b. Orderingcostisknown
c. Carryingcostisknown
d. Quantitydiscountsareavailable
287. Inordertoensureefficientfunctioningofthestoresdepartmentandsteadyflowofmaterialstotheproductio
ndepartments,therestocking ofstoresisdutyof:
a. Managers
b. Storekeeper
c. ProductionIncharge
d. Salessupervisor
288. IncostAccounting,abnormallossischarged to:

a. Factoryoverheadcontrolaccount
b. Workinprocessaccount
c. IncomeStatement
d. Entireproduction
289. Ahighinventoryturnovermayindicate:
a. Anefficientuseoftheinvestmentininventory
b. Ahighriskofstock-outs
c. Stockpositionofstoreroom

290. Whichofthefollowingcostisusedinthecalculationofcostperunit?
a. Totalproductioncost
b. Costofgoodsavailableforsales
c. Costofgoodsmanufactured
d. CostofgoodsSold
291. If,COGS=`50,000GPMargin=25%ofsalesWhatwillbethevalueofSales?
a. `200,000
b. `66,667
c. `62,500
292. WhenamanufacturingCompanyhashighlyautomatedmanufacturingplantproducingmanydifferentpr
oducts,themostappropriatebasisforapplyingFOHcosttoworkinprocessis:
a. Directlaborhours
b. Directlaborcosts
c. Machinehours
d. Costofmaterialused
293. AllofthefollowingarecasesoflaborturnoverEXCEPT:
a. Workersappointedagainstthevacancycausedduetodischargeor quittingof theorganization
b. Workersemployedundertheexpansionschemesofthecompany
c. Thetotalchangeinthecompositionoflaborforce
d. Workersretrenched
294. TheTermMinimumLevelRepresents.
a. Thequantitybelowwhichthestockofanyitemshouldnotbeallowedtofall
b. Thequantitybelowwhichthestockofanyitemshouldbeallowedtofall
c. Theestimatedtimeperiodinnumberofdaysorinweeksorinmonths.
d. TheLeadtimeperiodinnumber ofdaysorinweeksorinmonths.
295. Whichofthefollowingwould beconsideredamajoraimofa jobordercosting system?

a. Todeterminethecostsofproducingeachjoborlot
b. Tocomputethecostperunit
c. Toincludeseparaterecordsforeachjobtotrackthecosts
d. Allofthegivenoption.
296. TheEconomicorderquantity canbecalculatedby

a. FormulaMethod
b. TableMethod
c. GraphMethod
d. Allofthegiven
297. Achemicalprocesshasnormalwastageof10%ofinput.Inaperiod,2,500Kgofmaterialwereinputand
therewasabnormallossof75Kg.Whatquantityofgood productionwasachieved?
a. 2,175 kg
b. 2,250kg
c. 2,425kg
d. 2,500kg
298. Whichofthefollowingislikelytobeclassifiedasa directmaterial costofamotorcarwheel?

a. The metalusedtomanufactureit.
b. The metalusedtomanufactureoneofthetoolsusedinthecarwheelfactory.
c. Thecostofoperatingtherawmaterialstoresinthefactory.
d. Thecostofthequalityoperationonthefinishedcarwheels.

[Hint:(b)ispartofthecostofeitherafixedassetoranindirectcostdependingupontheamountinvolved;(c)a
nd(d)arefactoryindirectcosts.]
299. Thefirstin,firstoutmethodofpricingrawmaterialissues,exhibitswhichoneofthefollowingfeatures?
a. Theissuepriceisrecalculatedeachtimenewdeliveriesaremadeintostock.
b. Theissuepriceisalwaysatthelatestprice.
c. Thegoodsarealwaysissuedstrictlyinthephysicalorderinwhichtheyarereceived.
d. Theissuepriceisalwaysattheearliestprice.
[Hint: (a)referstothecontinuousweightedaveragepricemethod.(b)this
methodisknownasthelastin,firstoutmethod.Under(c)itwillrarelybepossibletoissuegoodstocorrespondwi
ththephysicalorderofreceiptunlessthere isastockcontrolsystemdealingwith,
forexampleperishableitems.]
300. Whichofthefollowingisnotamethodofpricingrawmaterialissuesfromstock?
a. Standardcosting.
b. Unitcost.
c. Marginalcost.
d. Continuousweightedaverage.
301. Whichofthefollowing isadirectlabourcost?

a. Supervisorssalariesinthe factory.
b. Costsofthepayrollaccountingsection.
c. Abonuspaidtothestoreman.
d. Thewagesofanoperativepaidonthebasisofoutputachieved.
302. Productionoverheadsareabsorbedintoproductionunitsbytheuseofanoverheadabsorptionrate.Which
oneofthefollowingbestdescribeshowtheabsorptionrateiscalculated?
a. Totalnumberofunitsproduceddividedbythetotalcostcentreoverheads.
b. Totalnumberofunitsproducedmultipliedbytheunit overheadcost.
c. Totalcostcentreoverheadsdividedbythecostcentreactivitylevel.
d. Totalindirectcostsforthebusinessdividedbythetotalnumberofunitsproduced.
[Hint:
(d)wouldproduceanoverheadabsorptionrate,butitwouldbefartoogeneralisedtobeofanypracticalus
etothebusiness]
303. Salescommissionsareclassifiedas
a. Primecosts
b. Periodcosts
c. Productcosts
d. Indirectlabour
304. XYZLtd hasthefollowing data relating toitsassembly plantintheyearended 31December2012:

`000
Directmaterialcosts 500
Directlabourcost 250
Assemblyplantindirectcosts 100
Inaddition,thestoresdepartmenthastotalcostsof`30,000andspends50%ofitstimeservicingtheassemblyp
lant.Therewere50,000labourhoursworkedand25,000machinehoursrunintheassemblyplantin2012.
Theoverhead costperdirectlabourhourwas:
a.`2.0
b.` 4.0
c. `2.3
d.`4.6
[Hint:Theoverheadcostperlabourhouris`1,00,000plus50%ofthestorescosts`15,000,=
`1,15,000dividedby50,000hours.]

305. Ifacompanyusespredeterminedoverheadrecoveryratesandattheendofaperiodfindsthattherehasbee
nanunder-recoveryofoverhead,whichofthefollowingbestexplainshowtheunder-
recoveryhasoccurred?
a. Actualoverheadcosthasexceededtheamountusedasabasisfortheestablishmentofthepredeter
minedrate.
b. Actualoverheadcosthasbeenlessthantheamountusedasabasisfortheestablishmentofthepredet
erminedrate.
c. Actualactivitylevelswerehigherthanplannedduetoanincreaseindemand.
d. Anexpectedprice increaseintheoverheadcostswhichwasbuiltinto
theoverheadrecoveryratedidnottakeplace.
[Hint: (b),(c)and(d)wouldleadtoover-recoveryofoverheads.]
306. Iftherehasbeenanoverrecoveryofoverheads,attheendoftheaccountingperiodtheamountconcerned
shouldbe?
a. Debitedtothecompanyprofitandlossaccount.
b. Creditedtothecompanyprofitandlossaccount.
c. Carriedforwardtothenextaccountingperiodasacostsaving.
d. Usedtoreducenextperiodsoverheadrecoveryrate.
[Hint:Variancesshouldalwaysbedealtwithintheprofitandlossaccountfortheperiodtheyrelateto.]
307. Avariablecostis?
a. Onewhichvariesinproportiontotheleveloffixedcostincurred.
b. Onewhichtendstovarywiththelevelofactivity.
c. Onewhichchangesovertime.
d. Onewhichcannotbeestimatedwithanygreatdegreeofaccuracy.
308. Thetermcontributionrefersto?
a. Theactualamountofprofitmadeperunit.
b. Thebudgetedprofitperunit.
c. Theamountofprofitwhichgoestowardsmeetingtheoverheadsofthebusiness.
d. Thedifferencebetweensalesrevenueandvariablecostsperunit.
[Hint:Contributiononlybecomesprofitwhenfixedcostshavebeencoveredinfull.]
309. Thebreak-evenpointisthatatwhich:
a. Thelevelofactivityatwhichthebusinessoperatesmosteconomically.
b. Thelevelofactivityatwhichthebusinessmakesneitheraprofitnoraloss.
c. Thefixedcostsarelowest.
d. Thevariablecostperunitisminimized.
310. Whenabusinessisfacedwithalimitingfactor(onewhichlimitstheactivityofanentity)andthereisachoiceto
bemadebetweenoptionstofollow,whichofthefollowingstatementsdescribestheoptimalcourseofaction
?
a. Choosetheoptionwhichgivesthehighestunitprofit.
b. Choosetheoptionwhichgivesthehighestunitcontribution.
c. Aimtoachieveabalanceofactivitiescoveringalloftheoptions.
d. Choosetheoptionwhichgiveshighestcontributionperunitoflimitingfactor.
[Hint:(d)wouldgivetheoptimalcourseofactioninfinancialterms.Sometimes,whereresourceconstraintso
perateinnotforprofitorganizations,othernon-financialfactorsmaymeanthatasub-
optimalcourseofactionisfollowed.]
311. XYZLtdhasthefollowingalternativeplannedactivitylevels:
LevelA LevelB LevelC
Totalcosts `1,00,000 `1,50,000 `2,00,000
Numberofunitsproduced 5,000 10,000
15,000(Fixedoverheadremainsconstantovertheactivityra
ngeshown.)
Thefixed overheadcostperunitis:
a.` 20.00

b.`15.00
c. `13.33
d.`10.00
[Hint:Thetotalcostincreasedby`1,00,000inmovingfromLevelAtoLevelC,thereforeiffixedoverheadsarec
onstant,variablecostsare`1,00,000for10,000units,which=`10/unit.AtLevelA,totalcostis`20/unitsofixedov
erheadsabsorbedonaunit basisare `10.]
312. Whichofthefollowingstatementsregardingmarginalcostingisincorrect?
a. Itisausefullong-termplanningtechnique.
b. Itassumesthatfixedcostsremainfixedoverrelevantactivityranges.
c. Itassumesthatothercostsvaryinproportiontoactivity.
d. Itassumesthatcostscanbe classifiedasvariableorfixed.
[Hint:(b),(c)and(d)arecharacteristicsofthemarginalcostingapproachwhichrenderitlessthanusefulasal
ong-termdecision-makingtechnique,hence(a)iscorrect.]
313. Whichphrasebestdescribesthecurrentroleofthemanagerialaccountant?
a. Managerialaccountantspreparethefinancialstatementsforanorganization.
b. Managerialaccountantsfacilitatethedecision-makingprocesswithinanorganization.
c. Managerialaccountantsmakethekeydecisionswithinanorganization.
d. Managerialaccountantsareprimarilyinformationcollectors.
314. LGhasincurredcostof`60,000formaterial.Furtheritincurred` 35,000forlaborand`

70,000forfactoryoverhead.Therewasnobeginningandendingworkinprocess.7,500unitswerecomplete
dandtransferredout.Whatwouldbetheunitcostformaterial?
a.`22
b.`16
c. `14
d.`8
315. Manufacturingcoststypicallyconsistof
a. Directmaterials,directlabor,andmanufacturingoverhead.
b. Productionandshippingcosts.
c. Productionandmarketingcosts.
d. Directmaterials,directlabor,marketingandadministrativecosts.
316. Incomparisontothetraditionalmanufacturingenvironment,overheadcostsinaJITenvironmentallthefollo
wingaretrueexcept:
a. Aremoreeasilytrackedtoproducts.
b. Arefrequentlydirectinnature.
c. Includerent,insuranceandutilities.
d. Mostofthecostsarelikelytobeindirectinnature.
317. Asproductionincreaseswithintherelevantrange
a. Variablecostswillvaryonaper unitbasis.
b. Variablecostswillvaryintotal.
c. Fixedcostswillvaryintotal.
d. Fixedandvariablecoststay the same intotal.
318. Youaregiventhecostandvolumeinformationbelow:Volu
me Cost
1unit `15
10units `150
100units `1500
Whattype of acostis given?
a. Fixedcost
b. Variablecost
c. Stepcost

d. Mixedcost
319. Whichofthefollowing statementsregarding graphsoffixedand variablecostsistrue?
a. Variablecostscanberepresentedbyastraightlinewherecostsarethesameforeachdatapoint.
b. Fixedcostscanberepresentedbyastraightlinestartingattheoriginandcontinuingthrougheachdat
apoint.
c. Fixedcostsarezerowhenproductionisequaltozero.
d. Variablecostsarezerowhenproductionisequaltozero.
320. ABCLtd.hasthreeproductlines- A, B,and C.

A B C Total
TotalSales `10,000 9,000 12,000 31,000
Variablecosts 4,500 7,000 6,000 17,500
ContributionMargin 5,500 2,000 6,000 13,500
Fixed costs 3,500 6,000 3,000 12,500
Netincome 2,000 (4,000) 3,000 1,000
ProductlineBappearsunprofitable,andmanagementisconsideringdiscontinuingtheline.Howwouldthe
discontinuationofProductlineBaffectnetincome?
a. Increaseby$4,000
b. Decreaseby$4,000
c. Increaseby$2,000
d. Decreaseby$2,000
321. CoedNoveltiesmanufactureskey chainsfor collegebookstores.During2012,

thecompanyhadthefollowingcosts:
Directmaterialsused`31,000;Directlabor`18,000;Factory rent`12,000;Equipmentdeprecation
factory`2,000;Equipmentdepreciation
office`750;Marketingexpense`2,500;Administrativeexpenses`40,000
35,000unitsproducedwerein2003.Wh
atistheproductcostperunit?
a.
Approximately`1.24
b. `1.80
c.
Approximately`3.04d
. `1.40
322. TheCapeCodCottonCandyCompanyhadthefollowinginformationavailableregardinglastyear'soperat
ions:
Sales(100,000units)`2,00,000;Variablecosts`1,00,000;Contributionmargin`1,00,000;Fixedcosts`50,000;N
etIncome`50,000
Ifsalesweretoincreaseby200units,whatwouldbetheeffectonnetincome?
a. `400increase
b. `200increase
c. `150increase
d. ` 200loss
323. IfBLimited
showsrequiredproductionof120casesofproductforthemonth,directlaborpercaseis3hoursatRs.12perh
our.Budgeted laborcosts forthemonthshould be:
a. `360
b. `1,440
c. `4,320
d. `5,346
324. Afirm,whichmakesyachts,hasfixedcostsof`260,000permonth.Theproductsellsfor`35,000perboat,andth
evariablecostsofproductionare`15,000perboat.Theboatyardcanmanufacture20 boats eachmonth.
Whatis the firmsmargin of safetyatthe moment?
a. 20%

b. 35%

c. 54%
d. 57%
325. Janetsellsaproductfor`6.25.Thevariablecostsare`3.75.Janet'sbreak-
evenunitsare35,000.Whatistheamountoffixedcosts?
a. `87,500
b. `35,000
c. `131,250
d. `104,750
326. GoodJobPlcmakesoneproduct which sellsfor`80perunit. Fixedcostsare `28,000 per

monthandmarginalcostsare`42aunit.Whatsaleslevelinunitswillprovideaprofitof`10,000?
a. 350units
b. 667units
c. 1,000units
d. 1,350units
327. Ifcomputationalandrecord-
keepingcostsareaboutthesameunderbothFIFOandweightedaverage,whichofthefollowingmethodwill
generallybepreferred?
a. WeightedAverage
b. FIFO
c. Theyofferthesamedegreeofinformation
d. Cannotbedeterminedwithsolittleinformation
328. Abusinessalwaysabsorbsitsoverheadsonlaborhours.Inthe8thperiod,18,000hourswereworked,actualo
verheadswere`279,000andtherewas`36,000over-
absorption.Theoverheadabsorptionrateperhourswas:
a. `15.50
b. `17.50
c. `18.00
d. `13.50
329. BharatLtdestimatedthatduringtheyear75,000machinehourswouldbeusedandithasbeenusinganoverh
eadabsorptionrateof`6.40permachinehourinitsmachiningdepartment.Duringtheyeartheoverheadexp
enditureamountedto`472,560and72,600machinehourswereused.Whichoneofthefollowingstatementsi
scorrect?
a. Overheadwasunder-absorbedby`7,440
b. Overheadwasunder-absorbedby`7,920
c. Overheadwasover-absorbedby`7,440
d. Overheadwasover-absorbedby`7,920
330. Inventoryof`96,000waspurchasedduringtheyear.Thecostofgoodssoldwas`90,000andtheendinginvent
orywas`18,000.Whatwastheinventoryturnoverratiofortheyear?
a. 5.0
b. 5.3
c. 6.0
d. 6.4
331. TheFIFOinventorycostingmethod(whenusingunderperpetualinventorysystem)assumesthatthecostoft
heearliestunitspurchasedisallocatedinwhich ofthefollowingways?
d. Firsttobeallocatedtothecostofgoodsold
332. HighClassInteriorshad beginningmerchandiseinventoryof`75,000.It madepurchases of

`160,000andrecordedsalesof`220,000duringJanuary.Itsestimatedgrossprofitonsaleswas

30%.OnJanuary31,thestorewasdestroyedbyfire.Whatwasthevalueofthemerchandiseinventoryloss?
a. `154,000
b. `160,000
c. `.235,000
d. `81,000
333. Wherethereismassproductionofhomogeneousunitsorwherefewproductsareproduced
inbatches,whichofthefollowingcostdriverwouldberegardedasbestbaseforthedeterminationofFactory
overheadabsorptionrate?
a. Numberofunitsproduced
b. Laborhours
c. Primecost
d. Machinehours
334. Whichofthefollowingisafactorthatshouldbetakenintoaccountforfixingre-orderlevel?
a. Averageconsumption
b. EconomicOrderQuantity
c. Emergencyleadtime
d. Dangerlevel
335. Thecontributionmarginincreaseswhensalesvolumeandpriceremainthesameand:
a. Variablecostperunitdecreases
b. Variablecostperunitincreases
c. Fixedcostsperunitincrease
336. Openingworkinprocessinventorycanbecalculatedunderwhichofthefollowingmethod?
a. FIFOand Averagecosting
b. LIFOand Averagecosting
c. FIFOandLIFOcosting
d. Noneofgivenoptions
337. isapartofcostofproductionreportthatexplainsthecostincurredduringtheprocess.
a. Quantityschedule
b. Costaccountedforasfollow
c. Costchargedtothedepartment
338. Acompanymakesoneproduct,whichhasvariablemanufacturingcostsof`3.25perunitandvariablesellin
gandadministrativecostsof`1.17perunit.Fixedmanufacturingcostsare`42,300permonthandfixedselling
andadministrativecostsare`29,900permonth.Thecompanywantstoearnanaveragemonthlyprofitof`15,
000andtheyexpecttoproduceandsellanaverageof40,000unitsoftheproductpermonth.Whatistheminim
umsellingpricemanagementcanbeexpectedtosettomeettheirprofitabilitygoals?
a. `4.69
b. `4.42
c. `6.60
d. `6.23
339. Acostthatremainsunchanged acrosstherelevantrangeofunitsproducedis whatkind ofcost?

a. Fixedcost
b. Productcost
c. Mixedcost
d. Periodcost

340. Acompany hasthefollowing costdataforthemonth:

Conversioncost:`.78,900;PrimeCost:`115,700;BeginningWorkinProcessInventory:`4,700;EndingWorkinPr
ocessInventory:`2,800;BeginningFinishedGoodsInventory:`27,600;EndingFinishedGoodsInventory:`29,
200;ManufacturingOverheadCosts:`14,500.
WhatistheCostofGoodsSoldforthemonth?
a.`132,100
b.`116,000
c. `130,200
d.`130,500
341. Materialcost=`4.00perunit;Laborcost=Re.0.60perunit;Factoryoverheadcost=`1.00perunit;Administrativ
ecost=`1.20perunit;Sellingcost=15%ofsales;Profit=`1.02perunit.
Whatwillbethesalespriceperunit?
a. 6.0
b. 9.2
c. 7.0
d. Noneofthegivenoption
342. ABC&Companyhas maintainedthefollowing

dataofinventorycontrolUndertheperiodicinventorysystem:
Date Units Total
Jan 01 100 @`10 `1000
Jan 05 100 @`11 `1100
Jan 10 150 @`12 `1600
Duringtheperiod300unitsweresold.
CalculatethecostofendinginventoryunderFIFOmethod.
a. 600
b. 500
c. 400
d. 300
343. Nationalchainsoftyrefittersstockapopulartyreforwhichthefollowinginformationisavailable:Average
usage=140 tyresper day
Minimumusage=90tyresperdayMaximum
usage=175tyresperdayLead time = 10 to
16 days
Re-orderquantity =3000 tyres
Basedontheabovedatacalculatethemaximumlevelofstock possible:
a. 2800
b. 3000
c. 4900
d. 5800
344. The totallabor costincurred by a manufacturingentityincludeswhich oneofthefollowingelements:

a. Directlaborcost
b. Indirectlaborcost
c. Abnormallaborcost
345. If,
Openingstock1,000units;MaterialPurchase7,000units;ClosingStock500units;Materialconsumed`7,500.
Whatwillbetheinventoryturnoverratio?
a. 10Times
b. 12times
c. 14.5times
d. 9.5times

346. IfUnitssold=10,000;Closingfinishedgoods=2,000;Openingfinishedgoods=1,500;Whatwill
bethevalueofunitsmanufactured?
a. 9,500
b. 10,500
c. 13,500
d. 6,500
347. Calculatetheamountofdirectlaborif:
Directmaterial=15,000;Directlabor=70%ofprimecost
a. 6,429
b. 30,000
c. 10,500
d. 35,000
348. Inincreasingproductionvolumesituation,thebehaviorofFixedcost&Variablecostwillbe:
a. Increases,constant
b. Constant,increases
c. Increases,decreases
d. Decreases,increases
349. Whilecalculatingthefinishedgoodsendinginventory,whatwouldbetheformulatocalculateperunitcost?
a. Costofgoodssold/number ofunitssold
b. Costofgoodstobe manufactured/numberofunitsmanufactured
c. Costofgoodsmanufactured/numberofunitsmanufactured
d. Totalmanufacturingcost/numberofunitsmanufactured
350. If the directlaborisRs.42,000andFOHis40%ofconversion cost.WhatwillbetheamountofFOH?

a. 63,000
b. 30,000
c. 28,000
d. 16,800
351. Whichoneofthefollowingcentersisresponsibletoearnsalesrevenue?
a. Costcenter
b. Investmentcenter
c. Revenuecenter
d. Profitcenter
352. Whilepreparing theCostofGoodsSold and IncomeStatement,theoverapplied FOHis;

a. Addback,subtracted
b. Subtracted,addback
c. Add back,addback
d. Subtracted,subtracted
353. Whichofthefollowingratiosexpressedthathowmanytimestheinventoryisturningovertowardsthecostofg
oodssold?
a. Netprofitratio
b. Grossprofitratio
c. Inventoryturnoverratio
d. Inventoryholdingperiod
MCQ#354,355,356and 357arebased onthefollowingdata:
ThefollowingistheIncomeStatementofaCompany
forlastmonth:Particulars `
Sales 4,000,000

Less:variableexpenses 1,800,000
Contributionmargin 2,200,000
Less:fixedexpenses 720,000
Netincome 1480,000
Thecompanyhasnobeginningorendinginventories.Atotalof80,000unitswereproducedandsoldlastmon
th.
354. Whatisthecompany'scontributionmarginratio?
a. 30%
b. 50%
c. 150%
355. Whatisthecompany'sbreak-eveninunits?
a. 48,000units
b. 72,000units
c. 80,000units
356. Howmany unitswould thecompany havetoselltoattaintargetprofitsof`600,000?

a. 48,000units
b. 88,000units
c. 106,668units
357. Whatisthecompany'smarginofsafety in`?

a. `1,600,000
b. `2,400,000
c. `25,60,000
358. Themarginofsafety canbedefined as:

a. Theexcessofbudgetedoractualsalesoverbudgetedoractualvariableexpenses
b. Theexcessofbudgetedoractualsalesoverbudgetedoractualfixedexpenses
c. Theexcessofbudgetedsalesoverthebreak-evenvolumeofsales
d. Theexcessofbudgetednetincomeoveractualnetincome
359. Thecontributionmarginratioiscalculatedby usingwhichoneofthegivenformula?

a. (Sales-FixedExpenses)/Sales
b. (Sales -Variable Expenses)/Sales
c. (Sales -Total Expenses)/Sales
360. Data ofa companyXYZ

isgivenbelowParticulars `
Sales 15,00,000
Variablecost 9,00,000
FixedCost 4,00,000
BreakEven Salesin`
a. `1,00,000
b. `.2,00,000
c. `13,00,000
361. Thebreak-evenpointisthepointwhere:
a. Totalsalesrevenueequalstotalexpenses (variableandfixed)
b. Totalcontributionmarginequalstotalfixedexpenses

c. Totalsalesrevenueequalstovariableexpensesonly
d. Botha&b
362. Thebreak-evenpointinunitsiscalculated using

a. Fixedexpensesandthecontributionmarginratio
b. Variableexpensesandthecontributionmarginratio
c. Fixedexpensesandtheunitcontributionmargin
d. Variableexpensesandtheunitcontributionmargin
363. Marginalcostingisalsoknownas:
a. Indirectcosting
b. Directcosting
c. Variablecosting
d. Both (b)and(c)
364. Thedifferencebetweentotalrevenuesandtotalvariablecostsisknownas:
a. Contributionmargin
b. Grossmargin
c. Operatingincome
d. Fixedcosts
365. PercentageofMarginofSafetycanbecalculatedinwhichoneofthefollowing ways?

a. BasedonbudgetedSales
b. Usingbudgetprofit
c. Usingprofit&Contributionratio
366. WhichofthefollowingrepresentsaCVPequation?
a. Sales=Contributionmargin(Rs.)+Fixedexpenses+Profits
b. Sales=Contributionmarginratio+Fixedexpenses+Profits
c. Sales= Variableexpenses+Fixedexpenses+profits
d. Sales=VariableexpensesFixedexpenses+profits
367. If120unitsproduced,100unitsweresold@`200perunit.Variablecostrelatedtoproduction&sellingis`150per
unitandfixedcostis`5,000.Ifthemanagementwantstodecreasesalespriceby10%,whatwillbethe
effectofdecreasingunitsalespriceonprofitabilityofcompany?
a. Remainsconstant
b. Profitswillincreased
c. Companywillhavetofacelosses
368. Adisadvantageofanhourly wageplanisthatit:

a. Providesnoincentiveforemployeestoachieveandmaintainahighlevelofproduction.
b. Ishardlyeverusedandisdifficulttoapply.
c. Establishesadefiniterateperhourforeachemployee.
d. Encouragesemployeestosacrificequalityinordertomaximizeearnings.
369. Thecostexpended inthe pastthatcannotberetrievedonproductor service

a. RelevantCost
b. SunkCost
c. ProductCost
d. IrrelevantCost
370. Whenamanufacturingprocessrequiresmostlyhumanlaborandtherearewidelyvaryingwageratesamon
g workers,whatis probably themostappropriatebasisofapplying factorycoststoworkinprocess?
a. Machinehours

b. Costofmaterialsused
c. Directlaborhours
d. Directlabordollars
371. Themainpurposeof costaccounting isto:

a. Maximizeprofits.
b. Helpininventoryvaluation
c. Provideinformationtomanagementfordecisionmaking
d. Aidinthefixation ofsellingprice
372. Thecombinationofdirectmaterialanddirectlaboris
a. TotalproductionCost
b. PrimeCost
c. ConversionCost
d. TotalmanufacturingCost
373. methodassumesthatthegoodsreceivedmostrecentlyinthestoresorproducedrecentlyarethefirstonesto
bedeliveredtotherequisitioning department.
a. FIFO
b. Weightedaveragemethod
c. Mostrecentpricemethod
d. LIFO
374. Fixedcostperunitdecreaseswhen:
a. Productionvolumeincreases.
b. Productionvolumedecreases.
c. Variablecostperunitdecreases.
d. Variablecostperunitincreases.
375. Primecost+ Factory overheadcostis:

a. Conversioncost.
b. Productioncost.
c. Totalcost.
d. Noneofgivenoption.
376. FindthevalueofpurchasesifRawmaterialconsumed`90,000;Openingand closing

stockofrawmaterialis`50,000and30,000respectively.
a. `10,000
b. `20,000
c. `70,000
d. `1,60,000
377. IfCostofgoodssold=`40,000;GPMargin=20%ofsalesCalcula
tetheGrossprofitmargin.
a. `32,000
b. `48,000
c. ` 8,000
d. `10,000
378. Annualrequirementis7800units;consumptionperweekis150units.Unitprice`5,ordercost`10perorder.Carr
yingcost`1perunitandleadtimeis3week,TheEconomicorderquantitywouldbe:
a. 395units
b. 300units
c. 250units
d. 150units

379. JuniperLimitedsbudgetedoverheadinthelastperiodwas`170,000.Itsoverheadabsorbedandincurredfor
thesameperiodwere`180,000and`195,000respectively.Whatisitsamountofover-orunder-
absorptionofoverhead?
a. Under-absorptionof`15,000
b. Under-absorptionof`25,000
c. Over-absorptionof`15,000
d. Over-absorptionof`25,000
380. Whichofthefollowingarethecharacteristicsofmanagementaccounting?
(1) Itmustfollowgenerallyacceptedaccountingprinciples.
(2) Itisconcerned withinformationfortheinternaluseofmanagement.
(3) Itemphasisesrelevanceandflexibility ofdata.
a. (1)and(2)
b. (1)and(3)
c. (2)and(3)
d. (1), (2)and (3)
381. Remunerationbased onpieceworkisnotsuitablewhen:

(1) theamountofoutputcannotbeaccuratelymeasured.
(2) thenatureofworkisrepetitive.
(3) thequantityofworkismoreimportantthanquality.
a. (1)only
b. (3)only
c. (1)and(3)
d. (2)and(3)
382. Thedistinctionbetweendirectandindirectlabour helpsto:

a. Measureefficiencyofperformance
b. Determineproductcostmoreaccurately
c. Ensurebettercostanalysisfordecisionsandcontrol
d. Alloftheabove
383. Whichwouldbeanimplicitcostforafirm?Thecost:
a. Ofworkerwagesandsalariesforthefirm.
b. Paidforleasingabuildingforthe firm.
c. Paidforproductionsuppliesforthefirm.
d. Ofwagesforegonebytheownerofthefirm.
384. Thedifferencebetweengatetimeandtimebookedforjobsinrespectofaworkerinduetothefollowingreaso
nsexcept:
a. Change-overtime
b. Illness
c. Waitingformaterials,instructions,etc.
d. Breakdownofmachine
385. Theperiodoftimeforwhichaworkstationisavailableforproductionbutisnotutilizedduetoshortageoftoolin
g,materials,operators,etc.isknownas:
a. Downtime
b. Operationtime
c. Idletime
d. Set-uptime
386. Theobjectiveofworkstudyare:
a. Materialconservation
b. Timesaving
c. Qualityimprovementandcostreduction
d. Alloftheabove

387. Timestudyservesthefollowing purposesexcept:

a. Standardizingjobs,operationetc.
b. Assessinglabourtime
c. Fixationoffactoryoverheadrate
d. Fixationofwageratesandintroductionofincentiveschemes
388. Themethodsofjobevaluationinclude:
a. Grading
b. Ranking
c. Pointsvalue
d. Alloftheabove
389. Meritratinghelpsthefollowingexcept:
a. Determiningrightworkerfortherightjob/work
b. Delinkingrewardswithmerits
c. Simplifyingwagestructure
d. Improvinglabourrelationsandreducinglabourturnover
390. Thefactorstobetakenintoconsiderationinformulatingincentiveschemesinclude:
a. Quantityandquality ofoutput
b. Incidenceofoverhead,andeffectuponworkers
c. Simplicityandlegalprovisions
d. Alloftheabove
391. Contributionmargincontributestomeetwhichoneofthefollowingoptions?
a. Variablecost
b. Fixedcost
c. Operatingcost
d. Netprofit
392. Favourableconditionsfortheoperationofpieceratesinclude:
a. Homogeneousproducts
b. Long,uninterruptedrunofproduction
c. Inspection
d. Highproportionofindirectlabour
393. Iftimeallowedforajobis10hours,timetakenforthejobis8hoursandrateofpayis`2perhour,thebonustothew
orkeris:
a.`1.20
b.`2.00
c. `3.20
d.Noneoftheabove
394. Group bonusschemesaregenerally suitable where:

a. Outputdependsonindividualefforts
b. Outputofindividualworkerscanbemeasuredeasily
c. Itisnecessarytocreatea collectiveinterestinthework
d. Normallossrateishigh
395. Inaprofitsharing scheme the availablesurplusisshared by thefollowing except:

a. Government
b. Shareholders
c. Employees
d. Firm
396. Non-monetaryincentivesmayincludethefollowingexcept:

a. Healthandsafety
b. Housingfacilities
c. Educationandtraining
d. Dearnessallowance
397. Thepurposesservedby preparationofpayrollorwagessheetinclude:

a. Spreadingthevolumeofworktobedone
b. Computationoflabourrateforeachdepartment
c. Comparingactualwageswithbudgetedwagesforcontrol
d. Alloftheabove
398. Theauthorizedheadsofdeductionfromwagespayableincludethefollowingexcept:
a. Carallowance
b. Incometax
c. Providentfund
d. Employeesstateinsurance
399. Wagesanalysisinclude:
a. Grosswagesperproduct
b. Grosswagesperoperationordepartment
c. Grosswagesperlabourclassification
d. Analysisofconstituentofgrosswagesdirect/losttime
400. Inaccountting forlabour cost:

a. A.directlabourcostandindirectlabourcostarechargedtoprimecost
b. Directlabourcostandindirectlabourcostarechargedtooverheads
c.Directlabourcostischargedtoprimecostandindirectlabourcostischargedtooverheads
d.All ofthe above
401. Productivecausesofidletimeincludethefollowingexcept:
a. Powerfailure
b. Fallindemand
c. Machinebreakdown
d. Waitingformaterials,tools,instructions,etc.
402. Thetreatmentofidletimeincostincludethefollowing:
a. Costofnormalandcontrollableidletimeischargedtofactoryoverheads
b. Costofnormalbutuncontrollableidletimeistreatedasprimecost
c. Costofabnormalanduncontrollableidletimeischargedtocostingprofitandlossaccount
d. Alloftheabove
403. Overtimepremiummaybetreated,dependingonthecircumstances,as:
a. Partofdirectwages
b. Partofproductionoverheads
c. Partofcapitalorder
d. Alloftheabove
404. Amanufacturingfirmisverybusyandisworkingovertime.Theamountofovertimepremiumcontainedindir
ectwageswouldnormally beclassedas:
a. Partofprimecost
b. Factoryoverheads
c. Directlabourcost
d. Administrativeoverheads
405. Fringebenefitsarethoseforwhicheffortsoftheworkersarenotnecessaryandmayincludethefollowingexc
ept:
a. Holiday pay

b. Attendancebonus
c. Productionbonus
d. Employerscontribution to P.F.
406. Avoidablecausesoflabourturnoverincludethefollowingexcept:
a. Redundancy
b. Lowwages
c. Badworkingconditions
d. Marriage
407. Theunavoidablecausesoflabourturnoverincludethefollowingexcept:
a. Personalbetterment
b. Dissatisfactionwiththejob
c. Illness
d. Retirement
408. Labourturnovercanbemeasured by thefollowingmethodsexcept:

a. Attritionmethod
b. Separationmethod
c. Replacementmethod
d. Fluxmethod
409. Atthestartofthequartertherewere14,630workers.750employeesleftduringthequarterwhile600joined
theorganizationduring thesameperiod.Using thefluxmethod,thelabourturnoverwas:
a. 5.13%
b. 9.23%
c. 9.32%
d. 9.28%
410. Whichofthefollowingisnotacostimplicationoflabourturnover:
a. Training
b. Recruiting
c. Ageinglabourforce
d. Damageofmachine
411. Preventivecostsoflabourturnoverincludethefollowingexcept:
a. Costofrecruitmentandtraining
b. Medicalservices
c. Welfare
d. Gratuityandpension
412. Replacementcostsoflabourturnoverincludethefollowingexcept:
a. Lossofoutput
b. Costofpersonneladministration
c. Costoftoolandmachinebreakage
d. Costofscrapanddefectivework
413. Costoflabourturnovermaybetreated as:

a. Directwages
b. Primecost
c. Overhead
d. Noneoftheabove
414. (1)Labourcostcontrolleadstominimizationofcostoflabourperunitofoutput.(2)Whenlabourcostisfixednat
ure,anyreductionintotallabourcostmaynotresultinlowercostperunit.Trueorfalse?
a. (1)True; (2)False

b. (1)False;(2)True
c. (1)and(2)False
d. (1)and(2)True
415. Labourcostcontrolembracesthefollowingactivitiesexcept:
a. Recruitmentandpromotion
b. Formulationofwagepolicyandpaymentandaccountingforwages
c. Allocationofcost
d. Preparationoffinancialstatement
416. (1)Paymentofhigherwagesdoesnotnecessarily
meanthatlabourcostperunitishigh.(2)Controloverpaymentofwagesaimsatreducingoreliminatingirreg
ularitiesduringactualdisbursements.TrueorFalse?
a. (1)and(2)True
b. (1)and(2)False
c. (1)False;(2)True
d. (1)True; (2)False
417. Whichofthefollowing techniquesisnotmeantforlabourcostcontrol?

a. Budgetarycontrol
b. Standardcosting
c. ABC analysis
d. Ratioanalysis
418. Ratioswhichmaybeused for comparinglabourcostovertimeincludethefollowingexcept:

a. Grossprofitratio
b. Efficiencyratio
c. Illnessratio
d. Absenteeismratio
419. Costofproductionisequalto
a. Primecosts+othermanufacturingcosts.
b. Productioncosts+ Administrationexpenses.
c. Primecosts+Manufacturingcosts+OpeningW.I.P ClosingW.I.P.
d. Noneoftheabove.
[Hint: Cost of production= Primecost+ Manufacturingcost+OpeningW.I.P-Closing
W.I.P+Administrativeexpenses.]
420. Thecostofgoodssoldisequal to
a. TotalPurchases - TotalSales.
b. Openingstock+TotalPurchase.
c. Openingstock-TotalPurchases+ClosingStock+DirectCosts.
d. Openingstock+TotalPurchasesClosingStock+DirectCosts.
421. WhichofthefollowingisfalseregardingtheLIFOmethod ofinventoryvaluation?

a. The materialissuewillbepricedatthepriceofthematerialthatispurchasedlast.
b. Thepatternof cashflowdoesnot necessarilycoincidewiththeactualflowpatternofmaterials.
c. Itpermitsmanagementtoinfluencenetincomebytimingthepurchases.
d. LIFOdeterminesclosinginventoryatrecentcosts.
[Hint:UnderLIFOthemostrecentlypurchasedareassumedtobethefirstunitssold.Thismethodseldomaccor
dsaphysicalflowofgoodsratherthancostofflowofgoods.Thismethodpermitsmanagementtoinfluence
netincomebytimingthepurchases, LIFOresults inhighercost
ofgoodssoldduringtheinflationaryconditions,andlowestinventoryvaluethisresultsinlowestincomeprovi
ded.UnderLIFOsincethemostrecentlypurchasedareassumedtobefirstunitssold,the

inventorycomprisesofoldestunitsandoldestcost.Henceoption(e)isfalse.Allotherstatementsaretrue.]
422. WhichofthefollowingisNOT areasonforcarryinginventory?

a. Tomaintainindependenceofoperations
b. Totakeadvantageofeconomicpurchase-ordersize
c. To makethesystemlessproductive
d. Tomeetvariationinproductdemand
423. WhichofthefollowingisTRUEregardingDepartmentalRates.
a. A departmentalabsorptionrateisa rateof
absorptionbasedupontheparticulardepartment'soverheadcostandactivitylevel
b. A departmentalabsorptionrateisa rateof absorptionnot
basedupontheparticulardepartment'soverheadcostandactivitylevel
c. Asinglerateofabsorptionusedthroughoutanorganizationsproductionfacilityandbased
uponitstotalproductioncostsandactivity
424. Inventory of`96,000 waspurchased during

theyear.Thecostofgoodssoldwas`90,000andtheendinginventorywas`18,000.Whatwastheinventoryt
urnoverratiofortheyear?
a. 5.0times
b. 5.3times
c. 6.0times
d. 6.4times
425. Ina perpetual inventory system, aninventory flowassumption (i.e.LIFO orFIFO)isused primarily
fordeterminingcostswhichareusedin
a. Forecastsoffuturesale.
b. Recordingthecostofgoodssold.
c. RecordingSalesRevenue.
d. Forecastsoffutureoperatingresults.
[Hint:Thevariousmethods
ofinventoryvaluationsuchasFIFO,LIFOetc.arebasicallydonetoarriveatthecostofgoodssoldandclosingi
nventoryvalueandnotforforecastofsales,orrecordingpurchases,recordingsalesrevenueandnotforfore
castingoperatingresults.]
426. Theinventorymethodwherethecost perunitisrecomputedaftereveryadditionintheinventoryisknownas.

a. Specificidentificationmethod.
b. Movingaveragemethod.
c. Last-in-FirstOutmethod.
d. First-in-First-Outmethod.
[Hint:Themovingaveragemethod
ofinventoryvaluationassumesthatcostsarechargedagainstrevenuebasedonanaverageofthenumber
ofunitsacquiredateachpricelevel.Theresultingaveragepriceisappliedtotheendinginventorytofindthet
otalendinginventoryvalue.Themovingaverageisdeterminedbydividingthetotalcostoftheinventoryava
ilableincludinganybeginninginventorybythetotalnumberofunits.Underthismethodthecostperunitisrec
omputedaftereveryaddition.]
427. Whichofthefollowinginventoryvaluationmethodsshowshigherprofitsduringtheperiodofrisingprices?
a. FIFOmethod.
b. LIFOmethod.
c. Weightedaveragemethod.
d. Simpleaveragemethod.

428. Whichofthefollowingsystemsofinventoryvaluationcomputescostofgoodssoldasaresidualamount?
a. WeightedAverage.
b. Last-in-First-out.
c. PeriodicInventorySystem.
d. SpecificIdentification.
429. Whichofthefollowingiscalculated bya formulathatusesnetsalesasdenominator?

a. Inventoryturnoverratio
b. Grossprofitrate
c. ReturnonInvestment
430. Overhead expenses can beclassifiedaccordingto:

a. Functions
b. Elements
c. Behavior
d. Alloftheabove
431. Whichofthefollowingisnotincludedinfunctionalclassificationofoverheads?
a. Repairsandmaintenance
b. Lubricatingoil
c. Consumablestores
d. Chargeableexpenses
432. Whichofthefollowingisnotanexampleofmarketingoverheads?
a. Salaryoftheforeman
b. Publicityexpenses
c. Salariesofsalesstaff
d. Secondarypackingcharges
433. Someoverheadchargestendtovaryalmostdirectly,sometendtoremainconstantwhilesomeagainvaryin
partwiththevolumeandinpartremainconstant.Thisstatementdescribessequentiallythefollowing:
a. Variable,fixedandsemi-variableoverheads
b. Fixed,semi-variableandvariableoverheads
c. Semi-variable,variableandfixedoverheads
d. Variable,semi-variableandfixedoverheads
434. Supposeafirmsellsitsproductatapricelowerthantheopportunitycostoftheinputsusedtoproduceit.Which
istrue?
a. Thefirmwillearnaccountingandeconomicprofits.
b. Thefirmwillfaceaccountingandeconomiclosses.
c. Thefirmwillfaceanaccountingloss,butearneconomicprofits.
d. Thefirmmayearnaccountingprofits,butwillfaceeconomiclosses.
435. Exampleofsemi-variableitemsincludethefollowingexcept:
a. Telephone
b. Repairsandmaintenance
c. Depreciationofplantandmachinery
d. Insuranceofplantandbuilding
436. DirectLaborisanelementof:
a. Primecost
b. Conversioncost
c. Totalproductioncost

437. Whichofthefollowingisnota productiondepartment?

a. Powerdepartment
b. Machiningdepartment
c. Refiningdepartment
d. Finishingdepartment
438. Whichofthefollowing doesnotmatch?

Itemofcost Basisofcostallocation
a. Power H.P.ofmachine
b. Supervisionofbuilding valueofmaterialsconsumed
c. Insuranceofbuilding areaoccupied
d. Time-keeping numberofemployees
439. (1)Departmentalizationofitemsofcostsisknownasprimarydistribution.
(2)Redistributionofservicedepartments,costsisknownassecondarydistribution.Trueorfalse?
a. (1)and(2)true
b. (1)and(2)false
c. (1)False;(2)True
d. (1)True; (2)False
440. Whichofthefollowing costsisnota factory overheadexpense?

a. Depreciationofequipmentusedintheresearchdepartment
b. Salaryofqualitycontrolinspector
c. Overtimepremiumpaidtodirectlabour
d. Machinemaintenancelabourcost
441. Whichofthefollowingbaseswouldbemostappropriatetoapportionthecostofelectricpowertofactorydep
artments?
a. Numberofoutletpoints
b. Amountmeteredout
c. Cubiccapacityofpremises
d. Kilowattcapacityofmachinesindepartment
442. Amethodofdealingwithoverheadsinvolvesspreadingcommoncostsovercostcentresonthebasisofben
efitreceived.Thisisknownas:
a. Overheadabsorption
b. Overheadapportionment
c. Overheadidentification
d. Overheadanalysis
443. Theprocessofcostapportionmentiscarried outsothat:

a. Costs maybecontrolled
b. Costunitsgatheroverheadsastheypassthroughcostcentres
c. Wholeitemsofcostcanbechargedtocostcentres
d. Commoncostsaresharedamongcostcentres
444. Anoverhead absorptionrateisusedto:

a. Shareoutcommoncostsoverbenefitingcostcentres
b. Findthetotaloverheadsforacostcentre
c. Chargeoverheadstoproducts
d. Controloverheads
445. Whichofthefollowing is not a means wherebyfactoryoverheadscanbe chargedouttoproduction?

a. Directlabourrate

b. Overtimerate
c. Machinehourrate
d. Blanketrate
446. Amanagementconsultancyrecoversoverheadsonchargeableconsultinghours.Budgetedoverheadsw
ere`6,15,000andactualconsultinghourswere32,150.Overheads,wereunder-
recoveredby`35,000.Ifactualoverheads,were`6,94,075,whatwasthebudgetedoverheadabsorptionrat
eperhour?
a.`19.13
b.`20.50
c. `21.59
d.`22.68
447. Idlecapacity ofaplantisdefinedasthedifferencebetween:

a. Practicalcapacityandnormalcapacity
b. Practicalcapacityandcapacitybasedonsaleexpectancy
c. Maximumcapacityandactualcapacity
d. Maximumcapacityandpracticalcapacity
448. Thecapacity whichisbased onthelong-term averageofsalesexpectancy isknownas:

a. Theoreticalcapacity
b. Operatingcapacity
c. Normalcapacity
d. Deratedcapacity
449. Maximumcapacityofaplantreferstoits:
a. Theoreticalcapacity
b. Normalcapacity
c. Practicalcapacity
d. Capacitybasedonsalesexpectancy
450. Whichofthefollowingisnotaproductioncauseofidlecapacity?
a. Set-upandchange-overtime
b. Lackofsupervisionandinstruction
c. Lackof materialsandtools
d. Strike
451. Functionally,administrationexpensesmaycompriseexpensesofthefollowingactivities:
a. Secretarialandboardofdirectors
b. Accounting,financing,taxandlegal
c. Auditandpersonnel
d. Allofthese
452. Whichofthefollowingisnotapossiblemethodofaccountingforadministrationoverheads?
a. Includeaspartofproduction overheads
b. Apportiontoproduction,sellinganddistributionfunctions
c. Treatadministrationasaseparateentityandtreatthecostsassuch
d. Transfertocostingprofitandlossaccount
453. Whichofthefollowingisnotusedasabaseforapportionmentofadministrationoverheads?
a. Directwages
b. Workscost
c. Conversioncost
d. Salesvalue
454. Whichofthefollowingis/arethebasicobject/sofjobanalysis?
a. Determinationofwagerates

b. Ascertaintherelativeworthofeachjob
c. Breakingupjobintoitsbasicelements
455. Analysisofsellinganddistributionoverheadsis doneby:

a. Natureofexpensesandfunctions
b. Areas,productsandsalesmen
c. Typesofcustomersandchannelsofdistribution
d. Alloftheabove
456. Forexercisingcontroloversellinganddistributionoverheads,thefollowingtechniquesmaybeused :
a. Comparisonwithpastresults
b. Budgetarycontrol
c. Standardcosting
d. Alloftheabove
457. Depreciationisa:
a. Measureofconsumptionofassets
b. Processofallocationandnotofvaluation
c. Wearandtearduetouseand/or lapseoftime
d. Alloftheabove
458. Whichofthefollowingdoesnotinfluencetheusefullife ofanasset?

a. Expectedphysicalwearandtear
b. Costoftheasset
c. Obsolescence
d. Legalorotherlimitsontheuseoftheasset
459. Forcomputingdepreciationofanasset,thefactorsthataretakenintoconsiderationincludethefollowingex
cept:
a. Historicalcost
b. Expectedusefullife
c. Insurancepremium
d. Estimatedresidualvalue
460. Depreciationonplantandmachinery is:

a. Notacashcost,soisignoredinthecostaccounts
b. Partofmanufacturingoverheads
c. Partofprimecost
d. Alwayscalculatedusingthestraight-linemethod
461. Whichofthefollowingmethodsofdepreciationresultsinfixedperunitcostofdepreciation?
a. Straightline
b. Reducingbalance
c. Sinkingfund
d. Productionunit
462. Typesofmaintenanceincludethefollowingexcept:
a. Routine
b. Overhaul
c. Emergency
d. Periodic
463. Whichofthefollowingisnotincludedintheobjectivesofmaintenanceofplantand machinery?

a. Reducingidletime
b. Reducingbreakdown

c. Maintainingefficiency
d. Increasinglife
464. Regularmaintenanceexpenses are:

a. Capitalized
b. Partofmanufacturingoverheads
c. Written-offtocostingprofitandlossaccount
d. Partofprimecost
465. Obsolescenceisthemeasureofthelossofvalueof anassetdueto:

a. Technologicalinnovation
b. Changesinmarketconditions
c. Both(a)and (b)above
d. Noneoftheabove
466. Interestonowncapitalisa:
a. Cashcost
b. Notionalcost
c. Sunkcost
d. Partofprimecost
467. Objectivesofresearchanddevelopmentcostsinclude:
a. Maintainingpresentcompetitiveposition
b. Improvingenterprisescompetitiveposition
c. Exploringnowmarket/products
d. Alloftheabove
468. Normalstoreslossesare:
a. Partofprimecost
c. Partofsellinganddistributionoverheads
d. Written-offtocostingandprofitandlossaccount
469. Secondarypacking expenses are:

a. Partofprimecost
c. Partofdistributionoverheads
d. Written-offtocostingprofitandlossaccount
470. Ifyouknow thatwith8 unitsofoutput, averagefixed costis `12.50and average variablecostis`

81.25,thentotalcostatthisoutputlevelis:
a.` 93.75.
b.` 97.78.
c. `750.
d.` 880.
471. Themethodsoftreating costofsmalltoolsincostaccountsinclude:

a. Chargingtoexpense
b. Chargingtostores
c. Capitalizinginasmalltoolsaccount
d. Alloftheabove
472. Undermarginalcosting :
a. Allcostsareclassifiedintotwogroupsvariableandfixed
b. Variablecostsformpartoftheproductcostandinventoryvaluation
c. Fixedcostsaretreatedasperiodcosts
d. Alloftheabove

473. Whichofthefollowingdefinitionsdescribemarginalcost?
a. Thevariablecostofoneunit ofproductorservice
b. Aprinciplewherebyvariablecostsarechargedtocostunitsandthefixedcostsattributabletotherelev
antperiodarewritten-offinfullagainstthecontributionforthatperiod
c. Costsappropriatetoaidingthemakingofspecificmanagementdecisions
d. Thepriceatwhichmaterialidenticaltothatwhichisusedupcouldbereplacedonthedateofusage
474. AccordingtoRowanpremiumplan,whichofthefollowingformulaisusedtocalculatethebonusrate?
a. (Timesaved/timeallowed)x100
b. (Timeallowed/timesaved)x100
c. (Actualtimetaken/timeallowed)x100
d. (Timeallowed/actualtimetaken)x100
475. Whichof the followingis notan assumption underlyingtheaccountantsbreak-even chart ?

a. Fixedcostsremainfixedthroughouttherangecharted
b. Sellingpricesdonotchange
c. Variablecostsfluctuateinverselywithvolume
d. Unitvariablecostsremainconstantthroughouttherangecharted
476. Withregardtobreakevenchartsandbreak-evenanalysis,whichofthefollowingis true?

a. Itisassumedthatvariablecostfluctuatesindirectproportiontooutput
b. Thebreakthebreak-evenpointisattheintersectionofthesaleslineandthevariablecostline
c. Abreak-evenchartshownthemaximumprofitpossible
d. Abreak-evenchartiscapableofdealingwithanychangeofproductmix
477. Thefollowingdatarelatetotwooutputlevelsofadepartment:
Machinehours 17,000 18,500
Overheads(`) 2,46,500 2,51,750
Thevariableoverhead rateperhouris`3.50.Theamountoffixed overheadsis:
a.`5,250
b.`59,500
c. `1,87,000
d.`2,46,500
478. Thefollowingdata relatetotwoactivity levelsofanout-patients departmentinahospital:

No.ofconsultationsperpatient 4,500 5,750
Overheads `2,69,750 `2,89,125
Fixedoverheadsare`2,00,000perperiod.Thevariablecostperconsultationis:
a.`15.50
b.`44.44
c. `59.94
d.`noneoftheabove
479. Break-evenanalysisassumesthatovertherelevantrange:
a. Totalcostsareunchanged
b. Unitvariablecostsareunchanged
c. Variablecostsarenon-linear
d. Unitfixedcostsareunchanged
480. ABCLtd.Hasfixedcostsof`60,000p.a..Itmanufacturesasingleproduct,whichitsellsfor `20per

unit. Its contributionto sales ratio is 40%.ABCLtds break-even pointin units is:
a. 1,800
b. 3,000
c. 5,000

d.7,500
481. SunLtd.Makesasingleproductwhichitsellsfor`10perunit.Fixedcostsare`48,000permonthandtheproducth
asacontributiontosalesratioof40%.Inaperiodwhenactualsaleswere`1,40,000.Sun Ltd.s margin of
safetyin unitswas:
a. 2,000
b. 6,000
c. 8,000
d. 12,000
482. Acompanyproduced 500unitsofaproductand incurred thefollowing costs:

`
Directmaterials 8,000
Directwages 10,000
Overheads(20%fixed) 45,000
Ifthesalesvalueof500unitswas`1,02,000,whatiscontributionmargin?
a. 44%
b. 47%
c. 53%
d. 74%
Usethefollowingdataforquestions483and484:Budget
datafortheHappyLtd.
Sales(1,00,000units) `10,00,000
Costs:
Variable `7,00,000
Fixed `2,10,000 9,10,000
Operatingprofit ` 90,000
483. Iffixedcostsincreasedby`31,500withnoothercostor revenuefactorschanging,thebreak-

evensalesinunitswouldbe:
a. 34,500
b. 80,500
c. 69,000
d. 94,500
484. IfHappyLtd.Issubjecttoaneffectiveincometaxrateof40%,thenumberofunitsHappyLtd.Would
havetosellto earnanafter-taxprofitof`90,000 is:
a.1,00,000units
b.1,20,000units
c. 1,12,000units
d.1,45,000units
485. Sellingaproductatapriceequivalenttoorbelowmarginalcostisrecommendedforashortperiodincertain
specialcircumstances,suchas:
a. Introducinganewproduct
b. Exploringforeignmarket
c. Drivingoutaweakercompetitor
d. Alloftheabove
486. Whichofthefollowingisnotarelevantcostinformationinamakeorbuydecision?
a. Variablecostofmaking
b. Generalfixedcost
c. Purchaseprice
d. Lossofcontributiontomaketheproduct
487. Whichofthefollowingfactorsarenotqualitativefactorsinamakeorbuydecision?
a. Doubtastotheabilityofthesubcontractortomeetdeliverydates
b. Doubtastoabilityofthesubcontractortomaintainquality

c. Thecasewithwhichimprovementscanbemadetotheproduct
d. Theeffectofredundancyonlabourrelations
488. RaymondCorporationestimatesfactoryoverheadof`345,000fornextfiscalyear.Itisestimatedthat60,000u
nitswillbeproducedatamaterialcostof`575,000.Conversionwillrequire34,500directlaborhoursatacostof`
10perhour,with25,875machinehours.
FOHrateonthebases onBudgetedProductionwouldbe?
a. `5.75perunit
b. `6.65perunit
c. `6.0 per unit
d. `1 perunit
489. Ina shutdowndecision,onehastoconsider:

a. Contribution
b. Identifiablefixedcost,ifany
c. Impactofshutdownonotherproducts,ifany
d. Alloftheabove
490. Whena firm doublesitsinputsandfindsthatitsoutputhasmorethandoubled,this is knownas:

a. Economiesofscale.
b. Constantreturnstoscale.
c. Diseconomiesofscale.
d. Aviolationofthelawofdiminishingreturns.
491. Thefirmsmonthlycostofproductionis`1,46,000atanoutputlevelof8,000units.Ifitachievesanoutputlevelof1
2,000unitsitwillincurproductioncostof`1,94,000costofproductionfor15,000unitsis:
a.`1,80,000
b.`2,00,000
c. `50,000
d.`2,30,000
492. Thebasic research costshould be treated as:

a. Productcost
b. Productioncost
c. Productionoverhead
d. Periodcost
493. Afirmrequires16,000nos.ofacertaincomponent,whichisbuysat`60each.Thecostofplacingan
orderandfollowingitupis`120andtheannual storagechargesworks out to 10% ofthe cost oftheitem. To
getmaximumbenefitthe firmshouldplaceorder for . Units atatime.
a. 1,000
b. 900
c. 800
d. 600
494. About50itemsarerequiredeverydayforamachine.Afixedcostof`50perorderisincurredforplacinganord
er.Theinventorycarrying costperitem amountstoRe.0.02 perday.Thelead
periodis32days.Computereorderlevel.
a. 1,200items
b. 1,400items
c. 1,600items
d. 1,800items
495. Thestandardtime requiredper unit of a productis 20minutes. In aday of 8 working hours

aworkergivenanoutputof30units.Ifhegetsatimerateof`20/hr.,histotalearningsunderHalseybonusschem
ewas:

a.`200
b.`192
c. `180
d.`160
496. Amateriallossduringproductionorstorageduetoevaporationorshrinkageiscalled :
a. Scrap
b. Waste
c. Spoilage
d. Materialloss
497. Theprocessofdistributionofoverheadsallottedtoaparticulardepartmentorcostcentreovertheunitsprodu
cediscalled:
a. Allocation
b. Apportionment
c. Absorption
d. Departmentalization
498. Angleofincidencedefines:
a. SystematicriskinCAPM model
b. PostBEPrelationshipbetweentotalcostandtotalrevenue
c. Incidentalfactorsininvestments
d. Marginalcostofproduction
499. A Ltd.Hassalesof`2,200,totalfixedcostof`570,variablecostof`1,540,rawmaterialconsumedof`1,100,
numberofunits sold22,000.What shallbetheBEP 9inunits)if rawmaterialprice isreducedby2%?
a. 18,387
b. 18,560
c. 18,750
d. 19,000
500. Ifanitemofoverheadexpenditureischarged
specificallytoasingledepartmentthiswouldbeanexampleof:
a. Apportionment
b. Allocation
c. Re-apportionment
d. Absorption

Answers
COSTING
1 b 2 c 3 c 4 a 5 c 6 b 7 b
8 a 9 a 10 c 11 a 12 b 13 c 14 d
15 b 16 b 17 a 18 c 19 3 20 3 21 c
22 a 23 b 24 c 25 c 26 b 27 c 28 a
29 b 30 d 31 b 32 b 33 c 34 b 35 a
36 d 37 c 38 d 39 d 40 a 41 b 42 b
43 b 44 d 45 a 46 a 47 b 48 a 49 d
50 d 51 c 52 b 53 c 54 b 55 b 56 a
57 a 58 d 59 d 60 c 61 b 62 a 63 b
64 a 65 b 66 d 67 a 68 a 69 b 70 d
71 d 72 c 73 b 74 c 75 a 76 b 77 c
78 b 79 d 80 a 81 d 82 c 83 c 84 a
85 d 86 b 87 b 88 a 89 c 90 a 91 a
92 d 93 d 94 a 95 c 96 b 97 c 98 d
99 a 100 c 101 c 102 c 103 d 104 b 105 b
106 a 107 c 108 a 109 b 110 a 111 c 112 a
113 a 114 d 115 a 116 c 117 a 118 c 119 d
120 d 121 d 122 c 123 a 124 b 125 d 126 d
127 a 128 c 129 b 130 a 131 d 132 a 133 b
134 a 135 a 136 c 137 c 138 a 139 a 140 b
141 d 142 c 143 a 144 a 145 a 146 a 147 a
148 a 149 a 150 a 151 c 152 a 153 d 154 d
155 c 156 d 157 b 158 a 159 d 160 a 161 a
162 c 163 d 164 a 165 a 166 b 167 c 168 a
169 a 170 a 171 b 172 d 173 c 174 d 175 d
176 b 177 d 178 a 179 c 180 a 181 d 182 b
183 a 184 c 185 b 186 d 187 c 188 a 189 c
190 a 191 a 192 c 193 a 194 c 195 a 196 d
197 d 198 d 199 d 200 b 201 b 202 b 203 d
204 a 205 d 206 a 207 d 208 a 209 b 210 a
211 b 212 a 213 b 214 a 215 b 216 b 217 b
218 d 219 a 220 a 221 d 222 d 223 a 224 b
225 c 226 c 227 a 228 b 229 d 230 a 231 d
232 a 233 d 234 c 235 a 236 a 237 b 238 b
239 d 240 b 241 b 242 a 243 d 244 a 245 a
246 d 247 d 248 a 249 c 250 a 251 a 252 d
253 d 254 d 255 a 256 c 257 d 258 c 259 b
260 a 261 d 262 a 263 d 264 b 265 a 266 a
267 b 268 d 269 d 270 d 271 d 272 b 273 b
274 a 275 b 276 d 277 d 278 c 279 a 280 b
281 b 282 d 283 a 284 d 285 b 286 d 287 b

288 b 289 a 290 c 291 b 292 b 293 d 294 a

295 d 296 d 297 a 298 a 299 d 300 c 301 d
302 c 303 b 304 c 305 a 306 b 307 b 308 d
309 b 310 d 311 d 312 a 313 b 314 d 315 a
316 d 317 b 318 b 319 d 320 d 321 b 322 b
323 c 324 b 325 a 326 c 327 b 328 b 329 a
330 c 331 d 332 d 333 a 334 b 335 a 336 a
337 c 338 c 339 a 340 d 341 b 342 a 343 c
344 d 345 a 346 b 347 d 348 b 349 c 350 c
351 c 352 b 353 c 354 b 355 d 356 a 357 c
358 c 359 b 360 d 361 d 362 c 363 d 364 a
365 d 366 c 367 c 368 a 369 b 370 c 371 c
372 b 373 d 374 a 375 b 376 c 377 d 378 b
379 a 380 c 381 a 382 d 383 d 384 b 385 b
386 d 387 c 388 d 389 b 390 d 391 b 392 b
393 c 394 c 395 a 396 d 397 d 398 a 399 a
400 c 401 b 402 d 403 d 404 b 405 c 406 d
407 b 408 a 409 d 410 c 411 a 412 b 413 c
414 a 415 d 416 a 417 c 418 a 419 d 420 d
421 d 422 c 423 a 424 d 425 b 426 b 427 a
428 c 429 d 430 d 431 d 432 a 433 a 434 d
435 d 436 d 437 a 438 b 439 a 440 a 441 b
442 b 443 d 444 c 445 b 446 b 447 b 448 c
449 a 450 d 451 d 452 a 453 a 454 b 455 d
456 d 457 d 458 b 459 c 460 b 461 d 462 b
463 d 464 b 465 c 466 b 467 d 468 b 469 c
470 c 471 d 472 d 473 a 474 a 475 c 476 a
477 c 478 a 479 b 480 d 481 a 482 b 483 b
484 b 485 d 486 b 487 d 488 a 489 d 490 a
491 d 492 c 493 c 494 c 495 c 496 b 497 c
498 b 499 a 500 b

MCQ FORFINANCIALACCOUNTING
1. WhichEnglishalphabetissimilartotheshapeofanaccount?
(a) I
(b) T
(c) H
(d) None
2. GrossProfitisthedifferencebetween
(a) NetSalesandCostofgoodssold
(b) PATandDividends
(c) NetSalesandCostofproduction
(d) NetSalesandDirectcostsofproductions
[Hints:(a)TradingaccountispreparedtofindouttheGrossProfitduetotheoperationsofabusiness.Itisthediff
erencebetweentheNetSales(i.e.,Saleslesssalesreturn)andtheCostofgoodssold.Costofgoodssold=Op
eningStock+NetPurchases
ClosingStock+Directexpenses.Henceoption(a)istherightoption.Option(c)isincorrectbecausecostofpr
oductiondoesnotconsidertheopeningstockandclosingstockadjustment.Similarlyoption(d)ignores
stockbalanceadjustment.]
3. RecordingofCapitalcontributed by theownerasliability ensurestheadherenceofprincipleof

(a) DoubleEntry
(b) GoingConcern
(c) SeparateEntry
(d) Materiality
[Hints:(c)Recordingofcapitalcontributedbytheownerasliabilityensurestheadherenceofprincipleofthe
SeparateentityorBusinessentityconcept .Theconceptrequiresthebusinesstobe treatedas
distinctfromthe persons whoown it; thenitbecomespossibleto record
transactionsofthebusinesswiththeproprietoralso.Withoutsuchadistinction,theaffairsofthefirmwillbemixe
dupwiththeprivateaffairsoftheproprietorandthetruepictureofthefirmwillnotbeavailable.
UndertheGoingConcernConcept,itisassumedthatthebusinesswillexitforalongtimeandtransactionsare
recordedfromthispointofview.Itisthisthatnecessitatesdistinctionbetweenexpenditurethatwillrenderbe
nefitoveralongperiodandthatwhosebenefitwillbeexhaustedquickly.
UnderDouble-
entryorDualaspectconcept,eachtransactionhastwoaspects,ifabusinesshasacquiredanasset,itmusth
averesultedinone ofthefollowing:
Someotherassethasbeengivenup.
Theobligationtopayforithasarisen.
Therehasbeenaprofit,leadingtoanincreaseintheamountthatthebusinessowestotheproprietor.
Theproprietorhascontributedmoneyfortheacquisitionoftheasset.
Theconcept ofMaterialityrequiresallthematerialitemstoberecordedanddisclosedseparately.]
4. ThebasicconceptsrelatedtoBalanceSheetare
(a) CostConcept
(b) BusinessEntityConcept

(c) AccountingPeriodConcept
(d) Both(a)and (b)above
[Hints:(d)Costconceptrequiresthetransactionstoberecordedinthebooksofaccountsattheamountsact
uallyinvolved.
Supposeafirmpurchasesapieceoflandfor`1,50,000butconsidersitsworth`3,00,000.Thepurchasewillbere
cordedat`1,50,000.Businessentityconceptrequiresthebusinesstobetreatedasdistinctfromthepersonsw
hoownit;thenitbecomespossibletorecordtransactionsofthebusinesswiththeproprietoralso.Withoutsuc
hadistinction,theaffairsofthefirmwillbemixedupwiththeprivateaffairsoftheproprietorandthetruepicture
ofthefirm willnotbeavailable.Accounting periodconceptis applicableto theProfit& LossAccount
whichis preparedfortheyearending and cannot beappliedtoBalanceSheet asitis astatement
prepared as on aparticulardate.Therefore,costandentityconceptsarerelatedtoBalanceSheet.]
5. ThebasicconceptsrelatedtoP&LAccountare
(a) RealizationConcept
(b) MatchingConcept
(c) CostConcept
[Hints:(d)UnderRealizationconcept,accountingisahistoricalrecordoftransactionsandunlessmoneyhas
beenrealized
eithercashhasbeenreceivedoralegalobligationtopayhasbeenassumedbythecustomer-
nosalecanbesaidtohavetakenplaceandnoprofitcanbesaidtohavearisen.Matchingconceptrequirest
hatall the revenues must bematchedwith the
expenses.Therefore,theaboveconceptsarerelatedtotheProfit&Loss Account.]
6. Whichofthefollowingis(are)characteristic(s)ofBadDebt?
(a) Itisa definiteloss tothe business
(b) ItmustbeshowninProfit&lossaccount
(c) Noprovisionisnecessaryforit
(d) Allofthegivenoptions
7. Onlythesignificanteventswhichaffectthebusinessmustberecordedaspertheprincipleof
(a) SeparateEntity
(b) Accrual
(c) Materiality
(d) GoingConcern
[Hints:(c)Theconceptofmaterialityrequiresthatonlythesignificanteventsthataffectthebusinessmustber
ecorded.]
8. P&L Accountispreparedfor a period ofone yearby following

(a) ConsistencyConcept
(b) ConservatismConcept
(c) AccountingPeriodConcept
(d) CostConcept
[Hints:(c)P&LA/CispreparedforaperiodofoneyearbyfollowingtheconceptofAccountingPeriod.]
9. IftheGoing Concernconceptisnolongervalid,whichofthefollowingistrue?
(a) Allprepaidassetswouldbecompletelywritten-offimmediately
(b) TotalcontributedCapitalandRetainedEarningswouldremainunchanged
(c) IntangibleAssetswouldcontinuetobecarriedatnet Amortizedhistoricalcost
(d) LandheldasanInvestment wouldbevaluedatitsrealizablevalue
[Hints:(d)UndertheGoingConcernConcept,itisassumedthatthebusinesswillexitforalongtimeandtransa
ctionsarerecordedfromthispointofview.Itisthisthatnecessitatesdistinctionbetweenexpenditurethatwillr
enderbenefitoveralongperiodandthatwhosebenefitwillbe

exhaustedquickly.Iftheconceptceasestobevalid,thenlandheldasaninvestmentwouldbevaluedatitsr
ealizablevalue.]
10. Underwhichofthefollowingconceptsareshareholderstreatedascreditorsfortheamounttheypaidonthes
haresthey subscribed to?
(a) CostConcept
(b) DualityConcept
(c) BusinessEntityConcept
(d) Sincetheshareholdersownthebusiness,theyarenottreatedascreditors
[Hints:(c)Underbusinessentityconcept,theshareholdersaretreatedascreditors
ofthecompany.Itisalsoknownasseparateentityconcept.]
11. Theunderlyingaccountingprinciple(s)necessitatingamortizationofintangibleasset(s)is/are
(a) CostConcept
(b) RealizationConcept
(c) MatchingConcept
(d) Both (a)and (c)above
[Hints:(c)Thematchingconceptrequiresthatalltherevenuesmustbematchedwiththeexpensesincurred
duringtheaccountingperiod.Theexpensesrelatingtointangibleassetsareamortizedovertheperiodsinwh
ichthebenefitfromintangibleassetsaccrueandthereforetheunderlyingprincipleisthematchingconcept
.]
12. Whichofthefollowingpracticesisnotinconsonancewiththeconventionofconservatism?
(a) CreatingProvisionforBaddebts
(b) CreatingProvisionforDiscountonCreditors
(c) CreatingProvisionforDiscountonDebtors
(d) CreatingProvisionfortax
[Hints:(b)Theprincipleof conservatismseeksprovisions
foralltheprobablelosses.Creatingprovisionfordiscountoncreditorstantamounttorecognitionofprobabl
egainintheformofdiscountandhenceitisnotinconsonancewithconservatism.]
13. Theaccounting measurementthatisnotconsistentwith theGoing Concernconceptis

(a) HistoricalCost
(b) Realization
(c) TheTransactionApproach
(d) LiquidationValue
[Hints:(d)Liquidationvalue isthevalueofthebusinesswhenthebusinessiswound upand
isunderliquidationwhereasthegoingconcernconceptassumesthatthebusinesswillcontinueoveralongti
meandthereforetheaccountingmeasurementLiquidationValue isinconsistentwithgoingconcernco
ncept.]
14. Recordingof FixedAssets atcostensuresadherenceof

(a) ConservatismConcept
(b) GoingConcernConcept
(c) CostConcept
[Hints:(c)Costconceptrequiresthetransactionstoberecordedinthebooksofaccountsattheamountsact
uallyinvolved. Supposeafirmpurchasesapieceof
landfor`1,50,000butconsidersitsworth`3,00,000.Thepurchasewillberecordedat`1,50,000.Therefore,recor
dingoffixedassetsatcostensurestheadherenceofcostconcept.]
15. Omissionofpaiseandshowingtheround figuresinfinancialstatementsisbasedon

(a) ConservatismConcept
(b) ConsistencyConcept

(c) MaterialityConcept
(d) RealizationConcept
[Hints:(c)Omissionofpaiseandshowingtheroundfigureinfinancialstatementsisbasedontheconceptofm
ateriality.]
16. XLtd.,purchased goodsfor`5lakh and sold9/10thofthevalue

ofgoodsfor`6lakh.Netexpensesduringtheyearwere`25,000.Thecompanyreporteditsnetprofitas`75,000.
Whichofthefollowingconceptisviolatedbythecompany?
(a) Realization
(b) Conservation
(c) Matching
(d) Accrual
[Hints:(c)Matchingconceptrequirestheexpensesmustrelatetothegoodsandservicessoldduringthatperi
odtoarriveatthenetprofitsoftheenterprise.Hencematchingconceptrequirestherecognitionofrevenue
andexpensesonacomparablebasis.Intheabovequestionthatamountof`75,000asnetprofitwasarriveda
tbydeducting`5,00,000(beingcostofpurchases)
+`25,000expensesfromthesaleproceedsof`6,00,000.Thisdoesnotfollowmatchingconceptsincethecost
ofgoodssoldistobedeductedandnotthecostofpurchases,sincesomepurchaseshavebeenleftinstock.S
othenetprofitusingmatchingconceptis`6,00,000lesscostof goods `4,50,000(i.e. `
5,00,000x9/10)lessexpensesof`25,000 = `1,25,000.]
17. Accountingdoesnotrecordnon-financialtransactionsbecauseof
(a) EntityConcept
(b) AccrualConcept
(c) CostConcept
(d) MoneyMeasurementConcept
[Hints:(d)Themoneymeasurementconcept:Accountingrecordsonlythosetransactionswhichareexpres
sedinmonetaryvalue,thoughquantitativerecordsarekept.Hence,accountingdoesnotrecordnon
financialtransactions.]
18. Mr.Rohit,ownerofRohitFurnitureLtd.,ownsapersonalresidencethatcost`6,00,000,buthasamarket
valueof`9,00,000. Duringpreparationofthefinancialstatement
forthebusiness,theentirevalueofpropertywasignoredandwasnotshowninthefinancialstatements.Thepri
nciplethatwasfollowedwas
(a) TheconceptoftheBusinessEntity
(b) TheconceptoftheCostPrinciple
(c) TheconceptofGoingConcernPrinciple
(d) TheconceptofDualityPrinciple
[Hints:(a)Businessentityconceptrequiresthebusinesstobetreatedasaseparate entity.]
19. Provisionforbaddebtismadeasperthe
(a) EntityConcept
(b) ConservatismConcept
(c) CostConcept
(d) GoingConcernConcept
[Hints:(b)Provisionforbaddebtsismadeasperthe conceptofconservatism.]
20. FixedAssetsandCurrentAssetsarecategorizedasperconceptof
(a) SeparateEntity
(b) GoingConcern
(c) Consistency
(d) Timeperiod

[Hints:(b)GoingConcernConceptimpliesthattheresourcesoftheconcernwouldcontinuetobeusedforth
epurposesforwhichtheyaremeanttobeused.Forinstance,inamanufacturingconcern,theland,building,
machineryetc.areprimarilyrequiredforcarryingouttheproductionandsellingofcertainproducts.GoingC
oncernConceptimpliesthattheseland,building,machinery,etc.wouldcontinuetobeusedforthispurpos
e.Infact,itisbecausetheseassetsareexpectedtobewiththeconcernforalongperiodoftimeforproduction
andsellingofendproductsthattheseassetsaretermedasFixedAssets.GoingConcernConceptisthebasi
softheconventionalclassificationforinstanceasFixed Asset/CurrentAsset,Longterm/CurrentLiabilities.]
21. WhichofthefollowingisNOTarevenueexpenditure?
(a) Petrolconsumedinmotorvehicles
(b) Costofsaleablegoods
(c) Baddebts
(d) Premiumgivenonlease
22. Whichofthefollowingstatementsistrue?
(a) GoingConcernConceptassumesthatbusinesswillbecarriedonforadefiniteperiod
(b) TheCapitalLossesneednotbedeductedtoascertainnetincome
(c) Provisionforbadanddoubtfuldebtsiscreatedinrecognitionofconservatismconcept
(d) Materialityconceptstatesthatallbusinesstransactionsaretoberecordedhoweverinsignificantthey
maybe
[Hints:(c)Accordingtotheconservatismconcept,anticipateno profit andprovide for all
possiblelosses.Thus,in
recognitionofconservatismconcept,provisionforbadanddoubtfuldebtsiscreatedinanticipationofactu
albaddebts.Thestatementsinotheralternativesareincorrectbecausegoingconcernconceptassumesth
atbusinesswillbecarriedonforaindefiniteperiodandnotfordefiniteperiod(a).Thecapitallossesaretobede
ductedtoascertainnetincome(b).Materialityconceptstatesthatinsignificanteventsneednotberecorde
dandthestatementinalternative (d)isincorrect.Thus,thecorrectansweris(d).]
23. Theexpensesand incomespertaining tofulltrading period aretakentothe

ProfitandLossAccountofabusiness,irrespectiveoftheirpaymentorreceipt.Thisisinrecognitionof
(a) TimeperiodConcept
(b) GoingConcernConcept
(c) AccrualConcept
(d) DualityConcept
[Hints:(c)TheexpensesandincomesforthefulltradingperiodaretakentotheProfit&LossAccountofabusine
ss,irrespectiveoftheirpaymentor
receiptisinrecognitionofaccrualconcept.Theconceptsinotheralternativesareincorrectbecauseaccor
dingtotheTimePeriodconcept
(a)theincomeorlossofabusinessismeasuredperiodicallyforaspecifiedintervaloftimeusuallyoneyearand
itdoesnotspeakabouthowexpensesandincomesareaccountedfortheentireperiodirrespectiveofthec
ashinvolvement.TheGoingconcernconcept(b),whichnecessitatesdistinctionbetweenexpendituretha
twill render benefitover a longperiodandthat whose
benefitwillbeexhaustedwithintheaccountingperiod.TheDualityconcept(d)saysthateverytransactionh
asdualaspectand explains thatCapital +Outsideliability
=Assets.Thisisthebasisforfundamentalequation.Thus,thecorrectansweris (c).]
24. WhichofthefollowingisanexampleofCapitalExpenditure?
(a) InsurancePremium
(b) TaxesandLegalexpenses
(c) Discountallowed
(d) CustomsdutyonImportofMachinery
[Hints:(d)CustomsdutyonimportofmachineryisaCapitalExpenditureandistobecapitalizedalongwiththe
cost
oftheasset.Theotherexpendituresstatedinalternatives(a)InsurancePremium(b)Taxesandlegalexpense
sand(c)Discountallowedareofrevenuenaturewhose

benefitexpireswithinthefinancialyearandarenotthecorrectanswers.Thus,thecorrectansweris(d).]
25. Inthecreditorscontrolaccount,allofthebelowexistexcept:
(a) Creditpurchases
(b) Purchasereturns
(c) Cashpurchases
(d) Cash/chequespaid
26. Ledgercontainsvarious init

(a) Transactions
(b) Entries
(c) Accounts
(d) Noneofthese
27. Whichofthefollowingconceptsassumesthatabusinesswilllastindefinitely?
(a) BusinessEntity
(b) GoingConcern
(c) Periodicity
(d) Consistency
[Hints:(b)AccordingtoGoingConcernConcept(b),abusinessentityisassumedtocarryonitsoperationsfor
ever.Seeminglyinconsequential,thisis
afundamentalconcept,whichhasfarreachingconsequences.Theotherconcepts,BusinessEntityConce
pt(a)treatsbusinessdistinctfrom
theentityofitsowners.Accordingtotheconceptofperiodicity(c)theincomeorlossofthebusinessismeasur
edperiodically,oneyearistheusualaccountingperiod.Theconsistencyconcept(d)requiresthatonceane
ntityhasdecidedononemethodoftreatinganeventinrecordingitinbooksofaccounts,itwilltreatallsubseq
uenteventsofthesamecharacterinthesamefashion.Thus,thealternative (b)isthecorrectanswer.]
28. WhichofthefollowingisanexampleofPersonalAccount?
(a) Machinery
(b) Rent
(c) Cash
(d) Creditor
[Hints:(d)Machinery,casharerealaccounts,Rentisanominalaccount.OnlyCreditorsisapersonalaccoun
t.]
29. Paymentreceivedfrom Debtor

(a) DecreasestheTotalAssets
(b) IncreasestheTotalAssets
(c) ResultsinnochangeintheTotalAssets
(d) IncreasestheTotalLiabilities
[Hints:(c)Paymentsreceivedfromdebtorsresultsindecreaseofdebtorsandincreaseincash.Itdoesnotresu
ltinanychangeinthetotalassetsasdecreaseinoneassetiscompensatedbyincreaseintheotherasset.]
30. The ina ledgerhelpsin locatingthe accountscontained init

(a) Folio
(b) Pages
(c) SerialNumber
(d) Noneofthese
31. CashPurchases
(a) IncreasesAssets
(b) ResultsinnochangeintheTotalAssets

(c) DecreasesAssets
(d) DecreaseLiability
[Hints:(b)Cashpurchases result indecreaseincashandincreaseinstock.Thusthereis
nochangeinthetotalassets.]
32. Inwhichofthefollowingstatementopeningstockisshown?
(a) Profitandlossaccount (RightAnswer)
(b) Balancesheet
(c) Cashflowstatement
(d) Owners equity
33. Theprocessoftransferofentriesfrom daybooktoledgersiscalled

(a) Simpleposting
(b) Journalposting
(c) Transaction
(d) Ledgerposting
34. Goodsreturned fromXis enteredas

(a) DebitX A/c;CreditPurchaseReturnA/c
(b) DebitXA/c;CreditCashA/c
(c) DebitSalesReturn A/c;CreditXA/c
(d) DebitXA/c;CreditSalesA/c
[Hints:(c)SalesReturnsA/cwillbedebitedandXA/cwillbecreditedfollowingtheprincipleofdebittherecei
verandcreditthegiver.]
35. WhenFixedAssetsaresold
(a) TheTotalAssetswillincrease
(b) TheTotalLiabilitieswillincrease
(c) TheTotalAssetswilldecrease
(d) ThereisnochangeintheTotalAssets
[Hints: (d)When fixedassetsaresoldforbookvalue,therewillbenochangeinthe totalassets.]
36. Withdrawalofgoodsfromstockbytheownerofthebusinessforpersonaluseshouldberecordedby
(a) DebitingStock AccountandcreditingCapital Account
(b) DebitingCapitalAccountandcreditingDrawings Account
(c) DebitingDrawings AccountandCreditingStockAccount
(d) DebitingStockAccountandCreditingDrawings Account
[Hints:(c)Withdrawalofgoodsfromstockbytheownerofthebusinessforpersonaluseshouldberecordedb
ydebitingDrawings AccountandcreditingStockAccount]
37. Whichofthefollowingtransactionswouldcauseachangeinownersequity ?
(a) RepaymentofaBankLoan
(b) PaymentofDividendsandUnprofitableOperations
(c) SaleofLandonCredit
(d) PurchaseofAssetsandincurrenceofLiabilities[Hin
ts:(b)AccountingEquationis
Assets=Liabilities+ Ownersequity.
Repaymentofbankloanresultsinreductioninbothassetsandaliabilitywiththesameamount
andhencedoes notaffectownersequity.
Ownersequityisdirectlyincreasedbyintroductionof furthercapitalor incurrence of
profits,similarlyadividendpaymentandanoperatinglossreducestheownersequity.Henceoption(b)resul
tsinchangein theownersequity.

Saleoflandoncreditresultsindecreaseinfixedassets(ontheleftsideoftheequation)andincreasein
currentassets(i.e., debtors), asaresult the ownersequity is not affected. Henceoption(c)results
innochangeinownersequity.
Purchaseofassetsandincurrenceofliabilitiesresultsinincreaseinassetsandincreaseinliabilities,hencedoe
snotresultinchangeinownersequity.
Sooption (b)istherightoption.]
38. Withdrawalsbyproprietorwould
(a) ReducebothAssetsandOwners Equity
(b) Reduce AssetsandincreaseLiabilities
(c) ReduceOwners Equity and increaseLiabilities
(d) HavenoaffectontheBalanceSheet
[Hints:(a)Withdrawalsby proprietor wouldreduceboth assets andownersequity.]
39. Whichofthefollowingistrue?
(a) Thepaymentofa Liability causesanincreaseinOwners Equity
(b) ThecollectionofanAccountReceivablewillcauseTotalAssetstoincrease
(c) The accountingequationmaybe stated as: Assets+Liabilities = Ownersequity
(d) Thepurchaseofanassetsuchasofficeequipment,eitherforcashoroncredit,doesnot
change the OwnersEquity
[Hints:(d)Thepurchaseofanassetsuchasofficeequipment,eitherforcashoroncreditdoesnotresultinanyc
hangeintheownersequityasdecreaseinoneassetiscompensatedbyincreaseintheotherasset.]
40. Whichofthefollowingstatementsis/aretrue?
(i) CashBook recordsallcashreceipts and cashpayments
(ii) CashBook recordsallsaleand purchasetransactionsof goodsbothincashandon credit
(iii) CashBook recordsdiscountonCashPayments
(a) Only(i)above
(b) Only(ii)above
(c) Only(iii)above
(d) Both (i) and(iii) above
[Hints:(d)Acashbookrecordsonlycashtransactionsandathree-
columnarcashbookalsorecordsbankanddiscounttransactions.
Acashbookdoesnotrecordthecredittransactions]
41. TradediscountallowedatthetimeofSaleofgoods.
(a) IsrecordedinSalesBook
(b) IsrecordedinCashBook
(c) IsrecordedinJournal
(d) IsnotrecordedinBooksofAccounts
[Hints:(d)Tradediscountisofferedtocustomersatfixedpercentageoflistpricetopromotesales,itisgenerall
ybasedonthequantityofgoodspurchased.Noentryismadefortradediscountinaccountingrecords.Onlyi
tisrecordedintheinvoiceandsaleandpurchasetransactionsarerecordedatnetinvoiceprice
(listpricelesstradediscount).]
42. ThePeriodicaltotalof theSalesReturnBook isposted tothe

(a) DebitofSalesAccount
(b) DebitofSalesReturn Account
(c) CreditofSalesReturnAccount
(d) DebitofDebtors Account
[Hints:(b)SalesAccountisacreditbalanceandthereforeSalesReturnsAccountisadebitbalanceandtheto
talofSalesReturnsBookwillbepostedtothedebitsideoftheSalesReturnAccount.]

43. IfthePettyCashfundisnotreimbursedjustpriortoyearendandanappropriateadjustingentryisnotmade,th
en
(a) Thepetty cash accountis to be returned tothe companys cashier
(b) ExpensesareoverstatedandCashisunderstated
(c) Cashisoverstatedandexpensesareunderstated
(d) Cashisoverstatedandexpensesareoverstated
[Hints:(c)Underthe imprestsystem,an amountisgivento pettycashierto
meetexpensesduringaperiod.Attheendoftheperiodheisgivencashequaltotheamountspentduringthe
relevantperiod,ifthisadjustingentry
isnotmade,thecashbalanceinthemaincashbookisoverstatedtotheextentoftheexpensesroutedthroug
hthepettycashbookandtheexpensesareunstated.]
44. XYZLtd.Paid wagesof`8,000forerectionofmachinery.Thejournalentry forthetransactionis

(a) Debitwagesandcreditcash
(b) Debitmachineryandcreditcash
(c) Debitwagesandcrediterectioncharges
(d) Debitmachineryandcrediterectioncharges
[Hints:(b)Wagespaidfortheerectionofmachineryis included inthecost ofthemachineryas
itisspecificallyincurredforthemachineryandcannotbecategorizedasanoperatingexpense.Therefore,
Machinery AccountshouldbedebitedandCashAccountshouldbecredited.]
45. Purchaseof goods oncredit

(a) IncreasesLiabilities
(b) IncreasesAssets
(c) Increasesboth AssetsandLiabilities
(d) DecreasesAssets
[Hints:(c)Purchaseofgoodsoncreditincreasestheinventory(Asset)andincreasesthecreditorsforgoods(L
iabilities).]
46. PurchaseofRawMaterialforCash
(a) IncreasestotalAssets
(b) Leavestotal Assetsunchanged
(c) IncreasestotalFixedAssets
(d) IncreasestotalCurrentAssets
[Hints:(b)Purchaseofrawmaterialsforcashleavestotalassetsunchangedastheincreaseininventory
(Asset)iscompensatedbydecreaseincash(Asset).]
47. WhichofthefollowingisnotanAsset?
(a) Stockofstationery
(b) Goodwill
(c) ProfitandLossAccount(CreditBalance)
(d) AccountsReceivable
[Hints:(c)Stockof stationery(a),Goodwill(b)andAccounts Receivable(d)are the assetsand
notthecorrectanswers.Profit&LossAccount(creditbalance)(c)is
theamountbelongstotheownerofthebusinessanditisaliabilitytothebusiness.Henceitisnotanasset,and(c
)isthecorrectanswer.]
48. Theprocessofbalancingofanaccountinvolvesequalizationofbothsidesoftheaccount.Ifthedebitsideofa
naccountexceedsthecreditside,thedifferenceisputonthecreditside.Thesaidbalanceis
(i) ADebitbalance
(ii) ACreditbalance
(iii) AnexpenditureoranAsset
(iv) AnIncomeora Liability

(a) Only(ii)above
(b) Only(iv) above
(c) Both(i) and (iii)above
(d) Both(ii)and (iii)above
[Hints:(c)Theprocessofbalancingofanaccountinvolvesequalizationofbothsidesoftheaccount.Ifthede
bitside ofanaccountexceeds thecreditside,the differenceis put on
thecreditside.Thesaidbalanceisadebitbalanceanditrepresentseitherexpenditureoranassetorboth.Thu
s,thecombinationofitemsunder(i)and(iii) i.e.,alternative(c)is
thecorrectanswer.Theotheralternativesareincorrectbecause,theexcessofdebitovercreditsideisnot
acreditbalanceanditisneitheranincomenoraliability.]
49. Ledgerisalsocalled
(a) Principalbookofaccounts
(b) Cashbooks
(c) Subsidiarybook
(d) Noneofthese
50. Whichofthefollowingtransactionsofabusinessis/arerecorded inJournalProper?

(i) Purchaseof goods oncredit
(ii) SaleofOfficeFurnitureforcash
(iii) DiscountingofBillofExchangewithabank
(iv) EndorsementofaBillofExchangeinsettlementofdebtofthebusiness
(a) Only(i)above
(b) Only(iv) above
(c) Both (ii)and (iv)above
(d) (i),(iii)and (iv)above
[Hints: (b)Endorsementofa
BillReceivableinsettlementofadebtofthebusinessisrecordedintheJournalProper(b)isthecorrectanswer.
ThetransactionsinotheralternativesarenotrecordedinJournalProperandtheyarerecordedinothersubsid
iarybooksspecifiedforthemlikealternative
(i)Purchaseofgoodsoncreditisrecordedinpurchasebook.SaleofofficeFurnitureforcash(ii)andDiscounti
ngofaBillReceivablewithabank(iii)arerecordedinCashbookandnotintheJournalProper.Thus,thecombi
nationofthesetransactionsinalternatives(a),(c)and(d)arenotthecorrectanswers.]
(i) DrawingsAccountisaNominalAccount
(ii) CapitalAccountisaReal Account
(iii) SalesAccountisa NominalAccount
(iv) OutstandingsalariesaccountisaNominalAccount
(v) PatentsAccountisaPersonal Account
(a) Only(i)above
(b) Only(iii)above
(c) Both(ii)and (iii)above
(d) Both (ii),(iv)and(v)above
[Hints:(b)SalesAccountisaNominalAccountisthecorrectstatementandalternative(b)isthecorrectansw
er.Thealternative(a)isincorrectbecausedrawingisnot aNominalAccountand
itisaPersonalAccountoftheownerwhichindicatesthevalueofmoneyorgoodswithdrawnbyhimforperson
alconsumption.Thealternative(c)isincorrectbecausethecombinationsofwrongstatements(ii)CapitalA
ccountisaPersonalAccountandnotaRealAccountwith(iii)correctstatement.Thealternative(d)isincorre
ctbecausethestatement(iv)isincorrectasoutstandingsalariesisarepresentativePersonalAccountandno
taNominalAccountandthestatement(v)isincorrectas PatentsAccountisa RealAccount
andnotPersonalAccount andthe combination of(ii),(iv)and (v)
isnotcorrectanswer.Thusthecorrectansweris(b).]

52. TheentrytorecordthecollectionofcashfromSundryDebtorswouldinvolvea
(i) DebittoSundryDebtors
(ii) DebittoCash Account
(iii) CredittoSundryDebtors
(iv) CredittoCashAccount
(a) Only(i)above
(b) Only(iii)above
(c) Both(ii)and (iii)above
(d) Both (i) and (iv)above
[Hints:(c) Theentrytorecordthecollection ofcashfromsundrydebtorswillbe
CashA/c...Dr.
ToSundryDebtorsA/c
Theentryisstatedinthealternative(c)whichisthecombination of statement (ii)and
(iii).Theotheralternatives(a)and(b)involvesonlyoneaspectofthetransactionandnotthecorrectanswers.
Thealternative(d)thecombinationoftwoincorrecttreatmentsisnotthecorrectanswer.Thus,(c)isthecorre
ctanswer.]
53. ABCLtd.makespaymentstoitsSundryCreditorsthroughcheques
andtheCashDiscountreceivedonthesepaymentsisrecordedintheTriple-
columnarCashBook.Intheeventofdishonourofanysuchcheques,thediscountsoreceived
shouldbewrittenbackthrough
(i) AdebittodiscountcolumnoftheCashBook
(ii) AcredittodiscountcolumnoftheCashBook
(iii) Acreditto bank columnof the Cash Book
(iv) AdebittoDiscountAccount throughJournalProper
(v) AcredittoCreditorsAccountthrough Journal Proper
(a) Only(i)above
(b) Only(ii)above
(c) Both(i) and (iii)above
(d) Both(iv)and(v)above
[Hints:(d)TheamountofcashdiscountreceivedonthepaymentsmadetoSundryCreditorsthroughcheque
sbythebusinesswillberecordedintheCashBook,andifthepreviouslyissuedchequeisdishonoured,thedisc
ountshouldbewrittenbackthrough(iv)AdebittoDiscountAccountthroughJournalProperand(v)Acreditt
oCreditorsAccountthroughJournalProper(d)thecombinationsofthesetwostatementsisthecorrectans
wer.DiscountReceivedandDiscountAllowedAccountsseparatelymaintainedarenotnettedassuchthed
iscountreceivedwhichgottobewrittenbackbecauseofreturnofpreviouslyissuedchequecannotbedebi
tedtodiscountcolumnoftheCashBook(a)istheincorrectanswer.Sinceitisreversalofalreadycrediteddisc
ountaccountagainacredittodiscountcolumnofthecashbookcannotbegivenand(b)istheincorrectans
wer.Thecombinationoftheincorrectstatementsin(i)and(iii)i.e.,(c)isnotthecorrectanswer.Thus,(d)isthec
orrectanswer.]
54. RLtd.makespurchasesoncredit.Ifthepurchasesarenotasperthespecifications,thecompanyreturnsthem
tothesuppliers.Thebook,thatisused torecordsuchreturnsis
(a) ReturnsInwardBook
(b) ReturnsOutwardBook
(c) CashBook
(d) JournalProper

[Hints:(b)Thebook,thatisusedtorecordthegoodspurchasedoncashthataresentbacktothesuppliersona
ccountofnon-
confirmationtothespecifications,istheReturnsOutwardBookalsoknownasPurchasesReturnsBook(b)isth
ecorrectanswer.Returnsinwardbook(a)isnotthecorrectanswerbecause;thesalesreturnsarerecordedin
theReturnsInwardBook.Cashbook(c)is not thecorrectanswerbecause, thetransactionsinvolving
eitherthereceipt orpayment
ofcashisrecordedinthecashbook.JournalProper(d)isnotthecorrectanswerbecausetheJournalProperis
meanttorecordthetransactionswhichdonotfindplaceinanyothersubsidiarybook.Thus,
(b)isthecorrectanswer.]
55. IfOfficeEquipmentispurchasedforcash,whateffectwillthistransactionhaveonthefinancialpositionofthe
company?
(a) Thereisno changein theAssets,Liabilitiesand OwnersEquity
(b) Thereisa decreaseinAssets,increaseinLiabilities andno changeinOwnersEquity
(c) Thereisa decreasein Assets,nochangein Liabilitiesanda decreasein OwnersEquity
(d) ThereisanincreaseinAssets,decreaseinLiabilities andno changein OwnersEquity
[Hints:(a)WhenOfficeEquipmentispurchasedforcash,thereisnochangeintheassets,liabilitiesandowner
sequity.Thus,thealternative(a)isthecorrectanswer.Thecashonhandisusedforpurchase offurniture
anditis onlya changeinthecomposition ofthe assets.The
otheralternatives(b),(c)and(d),whichindicateachangeeitheranincreaseoradecreaseinassets/liabiliti
es/ownersequityarenotthecorrectanswers.Hence(a)isthecorrectanswer.]
56. TheperiodicaltotalofdiscountcolumnonreceiptssideofaTripleColumnCashBookisrecordedtothe
(a) CreditsideofDiscount Account
(b) CreditsideofprovisionforDiscountAccount
(c) DebitsideofDiscountAccount
(d) Creditside ofDebtorsAccount
[Hints:(c)TheperiodicaltotalofdiscountcolumnonreceiptssideofaTripleColumnCashBookisrecordedtot
hedebitsideofDiscountAccount.ReceiptssideofaTripleColumnCashBookindicatesthedebitsideandthe
debitincaseofaNominalAccountisanexpenditureandthediscountenteredonthereceiptsideofTripleCol
umnCashBookindicatesthediscountallowedandpostedtothedebitsideoftheDiscount
Accountintheledger.Thus,(c)isthecorrectanswer.SinceitisnotanincomeitisnotcreditedtoDiscountAcc
ountandalternative (a)isnotthecorrectanswer.Itis not thediscounttobecreditedtoprovision
forDiscountAccountondebtors(b)and
itisnotthecorrectanswer.TheperiodicaltotalisnotcreditedtoDebtorsAccountasonlytheindividualamo
untofdiscountiscreditedtorespectiveDebtorsAccountandnottheperiodicaltotaliscreditedtoDebtors
Accountandalternative(d) isnotthecorrectanswer.Thus,alternative
(c)isthecorrectanswer.]
57. Whichofthefollowingstatementsisfalse?
(a) CreditsidetotalofDiscountcolumnofCashBookisanincome
(b) CreditbalanceofBankPassBookisanoverdraft
(c) DebitbalanceofBankcolumnofCashBookisan Asset
(d) DebitbalanceofCashcolumnofCashBookisanAsset
[Hints:(b)CreditbalanceofBankPassbookisanoverdraft(b)isafalsestatementbecausecreditbalanceas
perPassbookindicatesthefavourablebalanceanditisanasset.CreditbalanceofdiscountcolumnofCash
Bookisanincome(a)istrue.DebitbalanceofbankcolumnofCashBookisanasset(c).Debitbalanceofcash
columnofCashBookisanasset(d)isthetruestatementandthealternativesarenotthecorrectanswers.Thus,
58. PurchaseofFixed Assetsoncreditisoriginally recordedin

(a) PurchasesBook
(b) Ledger
(c) CashBook
(d) JournalProper

[Hints:(d)Purchaseoffixedassetsoncreditisenteredinjournalproperandsubsequentlypostedintotheledg
er.ItisnotrecordedinPurchasesBookasonlypurchaseofgoodswillberecordedinPurchasesBook.InCashB
ook,onlycashtransactionswillberecorded.Asthefixedassetswerepurchasedoncredit,thistransactionwill
notberecordedintheCashBook.]
59. IfyoustartwithcashbookfavorablebalanceinBankReconciliationStatement,whichitemwillbeadded?
(a) Chequedepositedbutnotcreditedbythebank
(b) Chequesomittedtobedepositedintobank
(c) Anyamountdirectlycollectedbybankonbehalfofcustomerbutnotrecordedincashbook
(d) Debitsideofcashbookwasovercast
60. The amountof Owners equityin abusiness is notaffectedby

(a) ThepercentageofTotalAssetsheldincash
(b) Investmentsmadeinthebusinessbytheowner
(c) Theprofitabilityofthebusiness
(d) TheamountofdividendspaidtoStockholders
[Hints:(a)Ownersequityinabusinessistheamountoffundsbelongingtotheowners.Thecompositionofasse
tsdoesnotaffecttheownersequity.Hence,thepercentageoftotalassetsheld incashdoesnot
affecttheowners equity.Ontheotherhand
itindicatestheliquiditypositionofthebusiness.Ownersequityrepresentsinvestmentsmadeinthebusinessb
ytheowners(b),theprofitsofthebusiness(c)andtheownersequity
isaffectedbyachangeinanyoftheseitems.Theamountofdividendspaidtostockholders(d)affectstheow
nersequityinthebusinesswithacorrespondingdecreaseintheequity.Hence,transactioninalternative(d)
adverselyaffectstheownersequity in a business.Thus,correctansweris(a)whichdoes
notaffecttheownersequity.]
61. Whena Fixed Assetisobtained asagift, theaccounttobe credited is

(a) Goodwill A/c
(b) CapitalReserve A/c
(c) DonorsA/c
(d) GeneralReserveA/c
[Hints:(b)Fixedassetsreceivedasagiftimpliestheassetaccountshouldbedebitedandthecorresponding
creditisgiventoCapitalReserveAccount,sinceitisacapitalasset.]
62. Whichofthefollowingis/arefixedasset(s)?
(a) Closinginventory
(b) FixedDepositsinabank
(c) Patents
(d) Prepaidexpenses
[Hints:(c)Fixedassetsareforuseoverrelativelylongperiodandtheyarenotmeantforresales.Patents(c)satis
fythecharacteristicsoffixedassetsandareshownunderthecategoryofFixedassets.Closing
inventory(a)Fixed depositsinbank(b) andPrepaid expenses(d)arecurrent assets.Thus (c
)isthecorrectanswer.
63. BankOverdraftisshownasa
(a) CurrentLiability
(b) ContingentLiability
(c) UnsecuredLoan
(d) Provision
64. WhichofthefollowingisNOTacharacteristicofCashBook?
(a) Ithastwoidenticalsideslefthandside,thedebitsideandrighthandside,thecreditside
(b) ItverifiesthearithmeticaccuracyofpostingofentriesfromtheJournaltotheLedger
(c) Thedifferencebetweenthetotaloftwosidesofcashbookshowscashinhand
(d) Italwaysshowsdebitbalance.Itcannevershowcreditbalance

65. IfMachineryAccountisdebitedwiththeamountofrepairsincurredonthemachine,thisisanexampleof
(a) Compensatingerror
(b) Errorofprinciple
(c) Errorofcommission
(d) Errorofomission
[Hints:(b)Errorofprincipledenoteswrongclassificationofexpenditureorrevenue.Ifacompanypays
forrepairs onamachine,itshouldbedebitedtoRepairsAccount.If
itischargedtomachineryaccount,itisanerrorofprinciple.Compensatingerror(a)istheonewhereoneerror
iscompensatedbyanothererrororseriesoferrorsandthedebittoMachineryAccountonaccountofrepairsi
sneithercompensatedbyanothererrororbyseriesoferrorsandhenceitisincorrect.Errorofcommission(c)isi
ncorrectbecausethisis anerrormadeinrecordingtheamountinvolvedina transactionwhilejournalizing
orposting to ledgeraccounts.Errorofomission(d)maybepartialorcomplete.Undercompletedomission,
therecordingofanentry
iscompletelyomittedanderrorofpartialomissionisresultofomissiononeaspectofatransactionanditisincor
rectanswer.Thus,
(a) BankAccountisaPersonalAccount
(b) Stockofstationery AccountisaNominalAccount
(c) ReturnsInwardAccountisaPersonalAccount
(d) OutstandingrentAccountisaNominalAccount
[Hints:(a)BankAccountisaPersonalAccountisacorrectstatement.Alternative(b)isincorrectbecause,Sto
ckofstationeryAccountisaRealAccount,whichindicatesthevalueofstationeryinstock.ReturnsInwardAc
count(c)isaNominalAccountwhichindicatesthesalesreturnsandtobereflectedintheTradingAccountof
abusiness.OutstandingRentaccount(d)isarepresentativePersonalAccountandnotNominalAccount.Th
us (a)isthecorrectanswer.]
67. Whichofthefollowingisaliability ofafirm?

(a) DebitbalanceofanalyticalPettyCashBook
(b) CreditbalanceofBankPassbook
(c) DebitbalanceofBankcolumnofCashBook
(d) CreditbalanceofBankcolumnofCashBook
[Hints:(d)BankbalancesandcashbalancesrepresentRealAccountsandthedebitbalancesinbankcolum
nandcashcolumnrepresentassetsandthecreditbalancesrepresentliabilitiestoafirm.Butcreditbalancein
cashcolumnisonlyhypotheticalanditneverhappensinpracticallife.Thecreditbalanceinbankcolumnof
cashbookrepresentsoverdraftanditisaliabilityofabusiness.]
68. Whichofthefollowingerrorsisanerrorofprinciple?
(a) Totalsales figure wastakenas`19,373insteadof`19,733
(b) Adiscountof `30allowedtoMr.Awasnotrecordedinthediscountallowedaccount
(c) Legalchargesforacquisitionofbuildingfor`500wasenteredintheLegalExpensesAccount
(d) `1,000receivedfromMr.Xwasposted tothecreditofMr.M
[Hints:(c)Anerrorofprincipleinvolvesanincorrectallocationofexpenditureorreceiptbetweencapitalan
drevenue.]
69. Thebook whichallaccountsofthefirmaremaintainedisknownas

(a) Cashbook
(b) Ledger
(c) Journal
(d) Daybook

70. `500paidascartage onnew PlantandMachinery,this was debitedtoCarriage InwardA/c.This

isanerrorof-
(a) Principle
(b) Omission
(c) Commission
(d) Compensating
71. `4,500paidtoMadanassalaryforthemonthofDecember12,thiswasdebitedtohisA/c,thisisa/an
error.
(a) Principle
(b) Omission
(c) Commission
(d) Compensating
72. WhilecheckingtheaccountsofABCthefollowingdiscrepancieswerenoticed,eventhoughtheTrialBalanc
ewasmadetobalancebyputtingthedifferencetoSuspenseA/c.
(i) Sales daybook for themonth of June12was foundovercastby`7,000.
(ii) Acreditpurchaseof`3,000was omitted to berecorded inthe daysbook.
(iii) `4,300.Receivedfrom Acredited toAA/c `3,400.
(iv) PurchaseofOfficeEquipmentworth `5,000includedintradingpurchases.
FromtheabovedetailswhatwouldhavebeenthedifferenceinTrialBalancewhichwasmadetobalanceby
opening SuspenseA/c.
(a) Debitside shortby`9,100
(b) Creditside shortby`9,100
(c) Debitside more by`7,900
(d) Creditsidemoreby`6,100
73. CashAccountisa
(a) PersonalA/c
(b) NominalA/c
(c) Real A/c
(d) Dummy A/c
74. Rentoutstandingfor themonth of December12 willappear on-

(a) DebitsideofCashBook
(b) CreditsideofCashBook
(c) Eitherside
(d) Nowhere
75. Goodsworth`5,000purchased fromAoncreditwillberecordedon-

(a) DebitsideofCashBook
(b) CreditsideofCashBook
(c) NowhereintheCashBook
(d) Either (a)or(b)
76. Whichcolumnof CashBookisnever balanced.

(a) DiscountColumn
(b) Cash
(c) Bank
(d) PettyCash

77. Thetotalofdebitsideofdiscountcolumnof CashBookis-

(a) Balancedwithcreditsideofdiscountcolumn
(b) PostedtoDiscount Allowed A/c
(c) PostedtoDiscountReceived A/c
(d) PostedtoProfit&Loss A/c
78. Prepaidrentisa
(a) NominalA/c
(b) RepresentativePersonalA/c
(c) TangibleAssetsA/c
(d) None
79. Whichofthefollowingassetsisafictitiousasset
(a) Goodwill A/c
(b) PrepaidRent A/c
(c) OutstandingSalaryA/c
(d) PreliminaryexpensesA/c
80. NominalA/crepresents-
(a) Profit/Gain
(b) Loss/Expenses
(c) None
(d) Both(a)and (b)
81. SBIA/c isa

(a) NominalA/c
(b) ArtificialPersonal A/c
(c) RepresentativePersonalA/c
(d) None
82. LiabilityA/chas.Balance
(a) Debit
(b) Credit
(c) Nobalance
(d) Either (a)or(b)
83. TheSalesReturnsDayBookwouldinclude:
(a) Goodsboughtoncredit
(b) FixedAssetsboughtthatareinappropriateforbusiness
(c) Stockthatcustomershavereturned
(d) Goodsboughtoncreditthatarereturnedtotheoriginalsupplier
84. AnInvestmentinoneasset A/cmaylead to

(a) IncreaseinliabilityA/c
(b) DecreaseinA/casset
(c) Eachaorb
(d) Botha/b.
85. Theprocessofrecordingbusinesstransactionina bookoforiginalentry isknownas-

(a) Journals
(b) Balance
(c) Posting

(d) None
86. ThetypeofA/cwith a named creditbalanceis-

(a) Expenses A/c
(b) Assets A/c
(c) RevenueA/c
(d) SuspenseA/c
87. Overcastingofpurchasesjournalwouldaffect
(a) Salesaccount
(b) Purchaseaccount
(c) Supplier'saccountandpurchaseaccount
(d) Noneofthese
88. Anyincomeorprofitderivedby carryingonthebusinessorduringthecourseofbusinessiscalled-

(a) CapitalReceipt
(b) RevenueReceipt
(c) RevenueGain
(d) CapitalGain
89. Amountreceivedfrom theproprietorsascapitalorloan receiptistreated as-

(a) CapitalReceipt
(b) RevenueReceipt
(c) RevenueIncome
(d) CapitalIncome
90. Whenthebenefitsofrevenueexpenditureisavailableforaperiodoftwoorthreeyears,theexpenditureiskno
wn as-
(a) RevenueExpenditure
(b) DeferredRevenueExpenditure
(c) CapitalExpenditure
(d) Depreciation.
91. Endowmentfundreceiptistradedas-
(a) CasualReceipt
(b) RevenueReceipt
(c) Loss
(d) Expenses
92. Legacyaregenerally-
(a) Capitalized
(b) TreatedLoss
(c) RevenueExpenses
(d) DeferredRevenueexpenses.
93. InterestAccountwillhave-
(a) Debitbalanceonly
(b) Creditbalanceonly
(c) DebitorCreditbalance
(d) Nobalanceatall
94. PurchaseA/cwillhave-

(a) Nobalanceatall
(b) Debitbalance
(c) Creditbalance
(d) DebitorCredit
95. Whichofthefollowing voucherisused torecord transactionsthatdonotaffectbank&cash?

(a) JournalVoucher
(b) ReceiptVoucher
(c) PaymentVoucher
(d) NominalVoucher
96. Opening entriesaregenerally passed through-

(a) GeneralJournal
(b) PurchaseJournal
(c) ProfitandLossA/c
(d) SuspenseA/c
97. Purchasesmadeoncredit notrecorded atallwouldaffect

(a) Purchasesaccount
(b) Supplier'saccount
(c) Purchasesaccountandsupplier'saccount
(d) Noneofthese
98. Whichofthefollowingistheexampleofcontingencies?
(a) Compulsoryacquisitionofpartoflandofthecompany bytheGovernment
(b) Asuitfiledbytheemployee againstthecompany
(c) Adebtorofthecompanyisdeclaredinsolvent,resultinginbaddebtstothecompany
(d) Allof(a),(b)and (c)above.
[Hints:(d)TheStandarddefinescontingencyasaconditionorsituationtheultimateoutcomeofwhichgain
orloss,willbeknownordeterminedonlyontheoccurrence,ornon-
occurrence,ofoneormoreuncertainfutureevents .Allthechoicessatisfythecriteriaofcontingency.]
99. Whichofthefollowingisnotacontingentliability?
(a) Claimsagainstthecompanynotacknowledgedasdebts
(b) Debtsincludedondebtorswhicharedoubtfulinnature
(c) Uncalledliabilityonpartlypaidshares
(d) Arrearsofcumulativefixeddividends
[Hints:(b)Acontingentliabilityisthelosswhichwillbeknownordeterminedonlyontheoccurrenceornon-
occurrenceofoneormorefutureuncertainevents.Debtsofdebtorsisnotanuncertaineventbutonlytherea
lizationofapartofthedebtisdoubtfulforwhichprovision
mustbeprovided,andhenceitisnotacontingentliability.]
100. Inan accountifdebitside> creditside,the balance isknown asthe:

(a) NegativeBalance
(b) Debitbalance
(c) PositiveBalance
(d) Creditbalance
101. Totaldepreciationofanassetcannotexceedits:
(a) Scrapvalue
(b) Residualvalue
(c) Marketvalue
(d) Depreciablevalue

102. AmountpaidtoGaganpostedtothecreditsideofhisaccountwouldaffect
(a) Gagan'saccount
(b) Cashaccount
(c) CashaccountandGagan'saccount
(d) Noneofthese
(a) AsaleofanassetisrecordedintheSalesBook
(b) TotalofReturnOutwardBookisdebitedtoReturnOutwardAccount
(c) ThebalanceofPettyCashBookisaliability
(d) CashBook isasubsidiarybookaswell asaledger
[Hints:(d)ThesaleofanassetisrecordedintheAssetAccountandnotintheSalesbook(whichpertainstosale
ofgoods).Statement(a)isfalse.
TotalofReturnOutwardsbook(beingpurchasereturn)hasacreditbalance.Thetotalistransferredattheend
oftheperiodtothecreditofthePurchaseAccountandnotdebitedtoReturnOutwardsAccount.Statement
(b)isfalse.
ThebalanceofPettyCashbookisnotaliability,itisanassetasitisthebalanceofcashleftwiththepettycashier
.Statement(c)isincorrect.
CashBookisbothasubsidiarybookorbookoforiginalentrywhereallcashtransactionsaredirectlyrecorded
andaledger,itplaystheroleasaCashAccount(aledger).Hencestatement
(d)istrue.
104. Whichofthefollowingistrueregardingclosingentries?
(a) They mustbefollowedbyreversingentries
(b) TheytransferthebalancesinalloftheNominalAccountstotheTradingandProfitandLossAccount
(c) They mustbemadeafterthereversingentriesbutbeforetheadjustingentries
(d) They mustbemadeaftertheadjustingentriesbutbeforethereversingentries
[Hints:(d)Closingentries are requiredto transferthe nominalaccounts tothe Profit&
LossAccountandtheTradingaccount.RealaccountsandpersonalaccountarenotclosedtoProfit&LossA
ccountor
TradingAccount.TheirbalanceiscarriedintheBalanceSheetandappearsasopeningBalanceinthenexta
ccountingperiod.]
105. Closingstock isgenerally valuedat

(a) CostPrice
(b) MarketPrice
(c) CostpriceorMarketpricewhicheverishigher
(d) CostpriceorMarketpricewhicheverislower
[Hints:(d)Para5,ofAS-2statesthatinventoriesshouldbevaluedatthelowerofcostandnetrealizablevalue.]
106. Whichofthefollowing assetsis/aretobevalued atthe lower ofcostandnetrealizablevalue?

(a) Goodwill
(b) Inventories
(c) Investments
(d) Both (b)and(c)above.
[Hints:(b)Inventories(b)aretobevaluedatthelowerofcostandnetrealizablevalue.Alltheotherassetsstate
dinotheralternativesarevaluedasperthecostconcept.Goodwill(a)isafixedintangibleassetandisshown
atthecostofitsacquisition.Investments(c)arevaluedatcostormarketvaluewhicheverisless.Thecombinati
onof(b)and(c)isincorrectbecauseacorrectanswerwithincorrectanswerisanincorrectanswer.Thus,thec
orrectansweris(b).]

107. AfewerrorscommittedinAhhiwalia'sbooksofaccountaregivenbelow.StatewhicherrorswouldaffecttheT
rialBalance.
(a) Salesof`950toRam completely omittedfrombooksofaccount
(b) Purchasesof`720from Shyam entered inthe purchasesjournal as`700
(c) PurchasesJournalis overcastby`1,000
(d) Salesreturnsjournalisundercastby`200
(e) AmountpaidtoAgarwalwrongly postedtothedebittoMittal'saccount
(f) Bank overdraftshownunderdebitcolumnin theTrial Balance
(g) Salesof`500toSadiq entered insalesjournalassales toMushtaq
(h) Wagespaid forinstallationofmachinerydebitedtowagesaccount
(a) a,candg
(b) c,dandf
(c) c,d,eandh
(d) c,d,fandh
108. Whichofthefollowingmethodsisnotapracticalway ofrealizing revenue?

(a) Deliverymethod
(b) Percentage-of-completionmethod
(c) Productionmethod
(d) Movingaveragemethod
[Hints:(d)Thefollowingmethodsarethepracticalwaysofrealizingrevenueapplyingtheconservatismconc
eptandrealizationconceptandthe(a)Deliverymethodincaseofsaleofgoods,(b)Percentage-of-
completionmethodincaseofrenderingofservicesand(c)Productionmethodincaseofagricultureprodu
ce.Thus,thesearethevariouswaysofrecognizingrevenueandthemethodsadoptedtorecognizerevenue
.Movingaveragemethod(d)isthemethodofvaluinginventoryanditisnotthemethodadoptedtorecogniz
erevenue.Thus,(d)isthecorrectanswer.]
109. Theamountpayabletoapersonasconsiderationfortheuseofrightsvested inhimis

(a) Dividend
(b) Royalty
(c) Purchaseconsideration
(d) Installment
[Hints:(b)Theamountpaidtothelandlordforuseofrightsvestedinhimistheroyalty.Dividendistheamountp
aidfortheinvestmentmadeinanenterpriseandisnotthecorrectanswer.Purchaseconsiderationistheprice
paidforreceivinga title ofapropertymoveableandimmoveableand isnot
thecorrectanswer.Installment isthepaymentofamountinstagesand is not
theamountpaidforusingtherightsvestedinthelandlordandisnotthecorrectanswer.]
110. Buildingsaccountisdebitedwithanamounttowardsrepairs.Thisisanexampleof
(a) Errorofcommission
(b) Errorofprinciple
(c) Errorofomission
(d) Compensatingerror
[Hints:(b)Buildings accountdebited with anamounttowards repairsis anerror ofprinciple.
Errorofprincipleisawrongclassificationofexpenditureorreceipt.]
111. Theconceptofconservatism willhavetheeffectof

(a) OverstatementofAssets
(b) UnderstatementofAssets
(c) OverstatementofLiabilities
(d) UnderstatementofLiabilities
[Hints:(b)Theconceptofconservatismwillhavetheeffectofunderstatementofassetssincethefinancialsta
tementsareusuallydrawnuponratheraconservativebasis.Window-
dressingi.e.,showingapositionbetterthanwhatitis,isnotpermitted.]

112. Duringtheyear2011-
2012,thevalueofclosinginventorywasoverstatedby`25,000.Whichofthefollowingistrue?
(a) Thecostofgoodssoldwas overstatedduring2011-2012andincomewillbeunderstatedduring2012-
2013
(b) Theincomewasoverstatedduring2011-12andclosinginventorywillbeoverstatedduring2012-2013
(c) Theretainedearningswasoverstatedduring 2011-2012 andretainedearningswill
beunderstatedduring2012-2013
(d) Thecostofgoodssoldwasunderstatedduring2011-
2012butretainedearningswillnotbeaffectedduring2012-2013
[Hints:(c)ClosingStocksoverstatementincreasestheprofitofthecurrentperiodandresultsintheincreaseo
f retainedearningsrelatingtothecurrentaccountingperiod.Itdecreases the
profitandtherebyretainedearningsofthenextaccountingperiodsincetheclosingstockofthecurrentacc
ountingperiodbecomestheopeningstockofthe nextaccountingperiod,
theoverstatementofwhichhastheeffectofdecreasingtheprofitsandretainedearnings.]
113. Whichofthefollowingerrorsisanerrorofomission?
(a) Saleof `100wasrecordedinthePurchasesJournal
(b) WagespaidtoMohanhavebeendebitedtohisaccount
(c) ThetotalofthesalesjournalhasnotbeenpostedtotheSalesAccount
(d) Repairstobuildingshavebeendebitedtobuildingsaccount
[Hints:(c)Errorofomissionoccurswhenatransactionisentirelyomittedfromrecordintheoriginalbooksparti
allyomittedwhileposting.Therefore,omissionofpostingofthesalesjournaltotheSalesAccountisanerrorofo
mission.]
(a) EnteringwrongamountinthesubsidiarybookaffectstheagreementoftheTrialBalance
(b) Undercastingorovercasttingofasubsidiarybookisanexampleorerrorofcommission
(c) ErrorsofprincipledonotaffecttheagreementofTrialBalance
(d) Both (b)and(c)above
[Hints:(d)Enteringwrongamount inthesubsidiarybookdoesnot
affecttheagreementoftheTrialBalanceasthesameamountispostedinboththeaccountsaffected.Under
castingorovercasttingofasubsidiarybookisanerrorofcommission.Errorsofprincipledonotaffecttheagree
mentoftheTrialBalance.Henceboth (b)and(c )optionsaretrue.]
(a) Errorofcastingaffectspersonalaccounts
(b) Omissionofatransactionfromasubsidiaryrecordaffectsonlyoneaccount
(c) Errorofcarryforwardaffectstwoaccounts
(d) Errorofprincipleinvolvesanincorrectallocationofexpenditureorreceiptbetweencapitalandrevenu
e
[Hints:(d)Errorsofcastingcanappearinanyaccountandnotpersonalaccountsalone.Hencestatements(
a)isfalse.Omission of
atransactionfromsubsidiaryaffectstwoaccountsaresubsidiarybooksarebooksoforiginalentryhencepos
tingintwoaccountsisomitted.Statement(b)isfalse.Errorofcarryforwardaffectsonlyoneaccounti.e.,the
accountinwhoseanerrorhasbeen
made.Statement(c)isfalse.Errorsofprincipleinvolveincorrectallocationofanitembetweencapitalandre
venue.Hencestatement(d)istrue.]
116. Journalproperismeantforrecording
(a) Creditpurchaseoffixedassets
(b) Returnofgoods
(c) Allsuchtransactionsforwhichnospecialjournalhasbeenkeptbythebusiness
(d) Noneofthese

117. ClosingstockintheTrialBalanceimpliesthat
(a) Itisalreadyadjustedintheopeningstock
(b) ItisadjustedinthePurchaseA/c
(c) ItisadjustedintheCostof SaleA/c
(d) ItisadjustedintheProfit&LossA/c
[Hints:(b)ClosingStockappearingintheTrialBalanceimpliesthatithasalreadybeenadjustedinthePurchas
esAccountandhenceappearsasanassetintheBalanceSheet.]
(a) IfaTrialBalancetallies,italwaysmeansthatnoneofthetransactionshasbeencompletelyomitted
(b) ATrialBalancewillnottallyifatransactionisomitted
(c) Acustomertowhomgoodshavebeensoldoncreditcannotavailhimself ofacashdiscount
(d) AcreditbalanceinthePassBookindicatesexcessofdepositsoverwithdrawals
[Hints:(d)AcreditbalanceinthePassBookimpliesafavourablebalanceindicatesexcessofdepositsoverwit
hdrawalsandadebitbalanceinthePassBookimpliesunfavorablebalancei.e.,aoverdraft.Hencestateme
nt(d)isthetruestatement.]
119. Theadjustmenttobemadeforincomereceivedinadvanceis:
(a) Add incomereceivedinadvancetorespectiveincomeandshowitasaliability
(b) Deductincomereceivedinadvancefromrespectiveincomeandshowitasaliability
(c) Addincomereceivedinadvancetorespectiveincomeandshowitasasset
(d) DeductincomereceivedinadvancefromrespectiveincomeandshowitasanassetintheBalanceShe
et
[Hints:(b)Incomereceivedinadvancegivenasanadjustmentrequiresadeductionofthesamefromthein
comeamountanddisclosureofthe sameasaliabilityintheBalanceSheet]
120. Whichofthefollowingstatementsiscorrect?
(a) TheTrialBalanceispreparedafterpreparingtheProfitandLoss Account
(b) TheTrialBalanceshowsonlybalancesofAssetsandLiabilities
(c) TheTrialBalanceshowsonlynominalaccountbalances
(d) TheTrialBalancehasnostatutoryimportancefromthepointofviewoflaw
[Hints:(d)ATrialBalanceisasummaryofallGeneralLedgerBalancesoutstandingasonaparticulardate.Allt
hedebitbalancesfromtheledgerareshownononesideandallthecreditbalancesareshownontheothersi
de.ATrialBalanceispreparedbeforeFinalAccountsareprepared.Fromthepointofviewoflaw,aTrialBalan
cehasnostatutoryimportance.]
121. Whilefinalizingthecurrentyearsaccounts,thecompanyrealizedthatanerrorwasmadeinthecalculationo
fclosingstockofthepreviousyear.Inthepreviousyear,closingstockwasvaluedmoreby`50,000.Asaresult
(a) Previousyears profitis overstated andcurrentyears profitisalso overstated.
(b) Previousyears profitisunderstated andcurrentyears profitis overstated.
(c) Previousyears profitis overstated andcurrentyears profitisunderstated.
(d) Therewillbenoimpactontheprofitofeitherthepreviousyearorthecurrentyear.
[Hints:(c)Closingstockoverstatementandopeningstockunderstatementincreasestheprofitsandviceve
rsaisalsoequallytrue.]
122. Whichofthefollowingisnotcorrect?
(a) Errorswhichaffectoneaccountcanbeerrorsofposting
(b) Errorsofomissionarisewhenany transactionislefttoberecorded
(c) ErrorsofcarryforwardfromoneyeartoanotheryearaffectbothPersonalandRealA/c

(d) Errorsofcommissionarisewhenanytransactionisrecordedinafundamentallyincorrectmanner
[Hints:(d)ErrorofCommissionarisesbecauseofwrongrecording,wrongcasting,wrongcarryforward,wron
gposting,wrongbalancingetc.]
123. Whichofthefollowingerrorsisanerrorofomission?
(a) Purchaseof`2,000hasbeenrecordedintheSalesReturnBook
(b) RepairstomachineryhasbeendebitedtoMachineryAccounts
(c) ThetotalofpurchasejournalhasnotbeenpostedtothePurchaseAccount
(d) LegalchargespaidtoMr.Lawyerhavebeendebitedtohisaccount
[Hints:(c)Errorofcompleteomissionariseswhenaparticulartransactioniscompletelyorpartiallyomittedto
berecordedinthebooksofaccounts.]
124. Ifgoods worth` 1,750returned to a supplieris wrongly entered insalesreturnbookas` 1,570,then

(a) NetProfitwilldecreaseby`3,140
(b) GrossProfitwillincreaseby`3,320
(c) GrossProfitwilldecreaseby`3,500
(d) GrossProfitwilldecreaseby`3,320
125. Forthepast3years,DKLtd.hasfailedtoaccrueunpaidwagesearnedbyworkersduringthelastweekofthey
ear.Theamountsomitted,whichwereconsideredmaterial,wereasfollows:
March 31,2010 -`56,000

March31, 2011-` 51,000
March31, 2012-`64,000
TheentryonMarch31,2012torectifytheseomissionswouldincludea
(a) Credittowageexpensefor`64,000
(b) Debittowageexpensefor`64,000
(c) Debittowageexpensefor`51,000
(d) Debittowageexpensefor`13,000
126. Purchasejournal iskeptto record

(a) Allpurchasesofgoods
(b) Allcreditpurchasesofgoods
(c) Allcreditpurchases
(d) Noneofthese
127. Thebeginningsinventoryofthecurrentyearisoverstatedby`5,000andclosinginventoryisoverstatedby`12
,000.
Theseerrorswillcausethenetincomeforthecurrentyearby
(a) `17,000(overstated)
(b) `12,000(understated)
(c) `7,000(overstated)
(d) `7,000(understated)
[Hints:(c)Overstatementofclosingstockresultsinoverstatementofprofitandoverstatementofopening
stockresultsinunderstatementofprofit.In the instantcase,therewillbe overstatementofprofitby ` 12,000-
`5,000=`7,000.]
128. Theaccountantof LeoLtd. recorded apaymentby cheque toa creditor

forsupplyofmaterialsas`1,340.56.Thebankrecordedthechequeatitscorrectamountof`3,140.56.TheCom
panyhasnotpassedanyrectificationentriesandtheerrorisnotdetectedthroughthebankreconciliation.Th
eimpactofthiserroris
(a) TheTrialBalancewillnotagree
(b) Thebalanceofcreditorsisunderstated

(c) Thepurchasesareunderstated
(d) Thefavorablebankbalanceasper PassBookislessthan theBank
balanceasperCashbook[Hints:(d)Thefavourable bankbalanceasperPass Book will
belessthanthebankbalanceasperCashBook,sincethedebitinthebankaccountismorethanthedebitint
heCashBook(d).AsdebitandcreditareforequalamountthereisnodisagreementoftheTrialBalance;Cred
itors
balanceisoverstatedbutnotunderstated:ThefavourablebankbalanceasperPassBookwillbeless
thantheBankbalanceasperCashBook,sincethedebitintheBankAccount ismorethan
thedebitintheCashbook.Purchasesarenotaffected,asitisapaymenttothecreditor.Thus,thecorrectans
weris(d).]
129. WhichofthefollowingerrorsaffectstheagreementofaTrialBalance?
(a) Mistakeinbalancinganaccount
(b) Omittingtorecordatransactionentirelyinthesubsidiarybooks
(c) Recordingofawrongentryinthesubsidiarybooks
(d) Postinganentryonthecorrectsidebutinthewrongaccount
[Hints:(a)ThemistakeinbalancinganaccountaffectstheagreementofaTrialBalance(a)isthecorrectans
wer.TheothermistakesdonotaffecttheagreementofTrialBalance.Theomissiontorecordatransactionenti
relyinthesubsidiarybooks(b)willnotaffecttheagreementofaTrialBalancebecauseboththeaspectsofatr
ansactionareomittedtoberecorded.Recordingofawrongentryinthesubsidiarybooks(c)willnotcausedis
agreementofaTrialBalancebecause,thewrongentrysorecordedhastheeffectofpostingthetransactioni
nthemannerit is
recorded.Postinganentryonthecorrectsideinthewrongaccount(d)doesnotaffectthetallyingofaTrialBal
ancebecausetheaspectofthetransactionispostedtothecorrectsideofanaccount.Thus
(a)isthecorrectanswer.]
(i) Anerrorincastingthesubsidiarybooksisanerrorofcommission
(ii) Anerrorinwrong casting ofthesalesdaybook willnotaffectthepersonalaccountsofdebtors
(iii) MistakeintransferringthebalanceofanaccounttotheTrialBalancewillnotaffecttheagreementoftheT
rialBalance
(iv) ThemistakeoftreatingaliabilityasanincomeorviceversawillnotaffecttheagreementofaTrialBalanc
e
(a) Only(i)above
(b) Only(ii)above
(c) Both(i) and (ii)above
(d) (i),(ii)and (iv)above
[Hints:(d)Anerrorincastingthesubsidiarybooksisanerrorofcommissions(i),anerrorinwrongcastingofthesal
esdaybookwillnotaffectthepersonalaccountsofdebtors(ii)andthemistakeof treating a
liabilityasanincome or viceversa will not affect theagreement ofa Trial
Balance(iv)arethetruestatementsandthecombinationofthesestatementsalternatives(d)isthecorrecta
nswer.Theotheralternativesareincurrencebecause(a)states
onlythestatementin(i);(b)statesonlythestatement(ii)andthealternative(c)isthecombinationof(i)and(ii)
whichisincomplete.Thus,thecorrectansweris (d).]
131. Whichofthefollowing should notbe treated asrevenueexpenditure?

(a) Interestonloansanddebentures
(b) AnnualfireinsurancepremiumsonPlantandEquipment
(c) Salestaxpaidinconnectionwiththepurchaseofofficeequipment
(d) Smallexpendituresonlong-livedassets,suchas `20forapaperweight.
[Hints:(c)Arevenueexpenditureisanexpenditurewhosebenefitexpireswithinthecurrentaccountingperi
odand is inthe nature of recurringand is thereforewritten offto P&LA/c.Sales
taxpaidinconnectionwiththepurchaseofofficeequipmentisanon-
recurringexpenditurewhosebenefitisgoingtolastformorethanoneaccountingperiodandhencenotare
venueexpenditure.]

132. Capitalexpenditureisanexpenditurewhich
(a) Benefitsthecurrentaccountingperiod
(b) Willbenefitthenextaccountingperiod
(c) Resultsintheacquisitionofapermanentasset
(d) Resultsintheacquisitionofacurrentasset
[Hints:(c)Acapitalexpenditureisanon-
recurringexpenditurewhosebenefitlastsformorethanoneaccountingperiod.Exampleistheacquisitiono
fafixedorpermanentassets.]
133. Whichofthefollowingisnota deferredrevenueexpenditure?

(a) Expensesinconnectionwithissueofequityshares
(b) Preoperativeexpenses
(c) Heavyadvertisingexpensestointroduceanewproduct
(d) Legalexpensesincurredindefendingasuitforbreachofcontracttosupplygoods
[Hints:(d)Deferredrevenueexpenditureisarevenueexpenditurewhosebenefitlastsformorethanoneacc
ountingperiodsandis
thereforewrittenoffduringtheperiodsoverwhichthebenefitlasts(However,AS26requiresthatDeferredrev
enueexpenditureisexpensedwhollyintheyearofincurrence).Legal expenses incurredin
defendingasuitfor breach ofcontractfor supply of
goodsdoesnotsatisfytheprerequisitesofadeferredrevenueexpenditure.]
134. Anydonationreceivedforaspecificpurposeisa
(a) Liability
(b) Assets
(c) Revenuereceipts
(d) Capitalreceipts
135. Whichofthefollowingisanitem ofcapitalexpenditure?

(a) Researchanddevelopmentcostsduringtheyear
(b) InterestonborrowedfundutilizedforacquisitionofOfficeFurniture
(c) InstallationchargespaidinconjunctionwiththepurchaseofOfficeEquipment
(d) Monthlyrentofamachineryusedinthebusiness
[Hints:(c)Acapitalexpenditureisanon-
recurringexpenditurewhosebenefitlastsformorethanoneaccountingperiod.Installationchargespaidin
conjunctionwiththepurchaseofofficeequipmentisanone-
timeexpenditurewhosebenefitlastsformorethanoneaccountingperiod.]
(a) Provisionfordoubtfuldebtsrepresentstheamountthatcannotbecollected
(b) Thedistinctionbetweencapitalandrevenueitemsisimportantbecauseitisoffundamentalimportanc
etothedeterminationofprofits
(c) Goodslostbyfireneednotbeaccountedforsincetheyarenotsales
(d) Freesamplesreceivedarebusinessgains
137. Thebalanceofwhichofthefollowingaccountsdonotdisappear,oncetheyaredebited/creditedtoTradin
gAccount.
(a) Sales
(b) Purchases
(c) Inwardreturns
(d) Closingstock
[Hints:(d)Theclosingstock(d)isthevalueofgoodswhichremainunsoldattheendoftheperiodwhosebalan
ceappearsonceinTradingAccountandonceinBalanceSheetofthebusiness.Allotheraccountssales(a),p
urchases(b)andInward Returns(c)areclosedonce theyareabsorbedbytheTradingAccount.Thus
(d)isthecorrectanswer.]

138. Whichoneof thefollowingshould beconsidered a revenueexpenditure?

(a) `1000paidfortheexecutionofanewplant
(b) Lossof`10,000incurredinincreasingthesittingaccommodationofahotel
(c) Damagepaidonaccountofbreachofacontracttosupplycertaingoods
(d) Repairtomachinerypurchased,secondhand.
139. Whichofthefollowingstatementsare/istrue?EventsafterBalanceSheet are

(a) All thesignificanteventsaftertheBalanceSheetdate
(b) TheeventsafterBalanceSheetdatebutbeforesubmittingittotheRegistrarofCompanies
(c) TheeventsafterBalanceSheetdatebutbeforeitsapprovalbytheboard
(d) AllchangesafterBalanceSheetdatebeforeitsapproval
[Hints:(c)EventsoccurringaftertheBalanceSheetdatearethosesignificantevents,bothfavourableandun
favourable,thatoccur
betweentheBalanceSheetdateandthedateonwhichthefinancialstatementsareapproved
bytheBoard
ofDirectorsinthecaseofacompany,andbythecorrespondingapprovingauthorityinthecaseofanyother
entity.]
140. Whichoneofthefollowingis acapitalexpenditure?

(a) CompensationpaidtoDirectorsonterminationoftheirservices
(b) ExpenditureincurredinconnectionwiththerenewalofaTradeMark.
(c) GratuitiespaidtoDirectorsonterminationoftheirservices.
(d) Royaltypaid ininstallmentsfor thepurchaseof rightstomanufactureandsellpatientmedicines.
141. Whichofthefollowingenhancestheearningcapacityofanasset?
(a) Increaseinworkingcapacityofanasset
(b) Reductioninoperatingcosts
(c) Replacingdamagedparts ofanasset
(d) Both (a)and (c)above
[Hints:(d)Enhancementofearningcapacitycanbebywayofreplacementofwornoutordamagedpartsw
hich
retardedtheearningcapacityandincreaseintheworkingcapacityincreasestheearningcapacityofthea
sset.]
142. Whichofthefollowingitemsshouldnotbecapitalizedrelatingtofixedassets?
(a) Interestpayableonloansordeferredcreditstakenfortheacquisitionorconstructionoffixedassetsbefo
retheyarereadyforuse
(b) Standbyequipmentandservicingequipment
(c) Expenditureincurredontestrunsandexperimentalproduction
(d) Administrationandgeneralexpenses
[Hints:(d)Onlythoseexpenseswhichrelatetoandspecificallyattributabletotheassetarecapitalized.Admi
nistrationandgeneralexpensescannotbespecificallyattributabletotheassetandhencecannotbecapit
alized.]
143. Whichoftheseerrorsaffectonlyoneaccount
(a) Errorsofcasting
(b) Errorsofcarryforward
(c) Errorsofposting
(d) Allthethree
144. Whichoftheseerrorsaffecttwoormoreaccounts
(a) Errorsofcompleteomission
(b) Errorsofprinciple
(c) Errorsofpostingtowrongaccount
(d) Allthethree

145. Whichofthefollowingerrorisanerrorofprinciple
(a) `5,000receivedfromShamcreditedtoRamA/c
(b) `5,000incurredoninstallationofnewplantdebitedtotravellingexpenses A/c
(c) `500 paidforwagesdebitedtosalaryA/c
(d) `500beingpurchase ofrawmaterialdebitedtopurchaseA/c`50
146. Whichofthefollowingisanonesidederror
(a) `500purchaseofoldequipmentnotrecordedinthebooksofA/catall
(b) `500beingexpenseontravellingexpensecreditedtotravellingexpenses
(c) Both
(d) None
147. Anygainonthesaleofnon-currentassetsshouldbe fromthenetprofitandtheloss
mustbe tothenetprofitindeterminingfundfromoperation
(a) Added,Reduced
(b) Added,Added
(c) Deducted,Added
(d) Deducted,Deducted
148. Cashbook records

(a) Onlycashsales
(b) All typesofcashreceiptsandpayments
(c) Onlyrevenuereceipts
(d) Onlycapitalreceipts
149. Ina threecolumncashbook----------doesnotexist

(a) Cashcolumn
(b) Bankcolumn
(c) Pettycashcolumn
(d) Discountcolumn
150. Whichofthesetransactionswillnotberecorded incashbook

(a) Cashreceivedfromdebtors
(b) Cashpaidtocreditors
(c) Salaryremainedoutstanding
(d) Cashdepositedwithbank
151. Theclosing balance ofa pettycash book isa/an

(a) Liability
(b) Gain
(c) Assets
(d) Loss
152. Whichcolumn of a cash book willnothave creditbalance

(a) Bankcolumn
(b) Discountcolumn
(c) Cashcolumn
(d) None
153. Petty cashbalanceisa/an

(a) Assets

(b) Expenditure
(c) Liability
(d) None
154. Whichof theseisaPartofcash in hand

(a) Postagestamps
(b) B/R
(c) ChequeDepositedwithBank
(d) B/Rendorsed
155. WhichofthefollowingisaRealA/c
(a) SalaryA/c
(b) Bank A/c
(c) BuildingA/c
(d) Goodwill A/c
156. WhichofthefollowingisaPersonalA/c
(a) OutstandingSalaryA/c
(b) RentA/c
(c) SBIA/c
(d) BaddebtsA/c
157. WhichofthefollowingisarepresentativePersonalA/c
(b) RentA/c
(c) SBIA/c
(d) BaddebtsA/c
158. WhichofthefollowingisaNominalA/c
(b) RentA/c
(c) SBIA/c
(d) Debtors A/c
159. GoodwillA/cisa/an
(a) NominalA/c
(b) TangibleAsset
(c) IntangibleAsset
(d) Fictitious Asset
160. Posting istheprocessof

(a) Postingthelettersindropbox
(b) Postingsuitablepersontoasuitablejob
(c) Enteringintheledgertheinformationcontainedintheledger
(d) Allthethree
161. Abookwhereinvariousaccountsareopenediscalled
(a) Subsidiarybooks
(b) Journal
(c) Ledger
(d) TrialBalance

162. Whichof theseisnota special purposejournal

(a) Cashjournal
(b) Purchasejournal
(c) Debtorsjournal
(d) Salesjournal
163. Theperiodictotalof sales day book isposted to

(a) SalesA/c
(b) CashsalesA/c
(c) Salesreturn A/c
(d) Creditsales A/c
164. Theperiodic totalofpurchasedaybook isposted to

(a) Purchaseregister
(b) PurchaseA/c
(c) CashpurchaseA/c
(d) CreditpurchaseA/c
165. Capitalexpensesareshownin
(a) BalanceSheet
(b) ProfitandLossA/c
(c) Trading A/c
(d) Noneofthese
166. Revenuereceiptsareshownin
(a) BalanceSheet
(b) ProfitandLossappropriationA/c
(c) ManufacturingA/c
(d) TradingandProfitandLossA/c
167. Revenueisgenerally recognised asbeing earned atthatpointoftime when

(a) saleiseffected
(b) cashisreceived
(c) productioniscompleted
(d) debtsarecollected
168. Whichofthefollowingisarevenueexpenses
(a) Rawmaterialconsumed
(b) Plantpurchased
(c) Longtermloanraisedfrombank
(d) ShareCapital
169. Whichofthefollowingisacapitalexpenditure
(a) Repairofplantandmachinery
(b) Salarypaidtoworkers
(c) Costofstandbyequipment
(d) Annualwhitewashoftheofficebuilding
170. Whichofthesetypesof expenditurewouldnotbe treated asa CapitalExpenditure

(a) AcquisitionofanAsset
(b) ExtensionofanAsset
(c) ImprovementoftheexistingAsset

(d) Maintenanceofthe Asset
171. Expensesofthe following natureare treated asaRevenueexpenses except

(a) Expensesfordaytodayrunningof thebusiness
(b) Puttingthenewassetinworkingcondition
(c) Depreciation
(d) Purchaseofrawmaterial
172. Cash receivedfromdebtors wouldbe deemedas of funds.

(a) Noflow
(b) Sources
(c) Uses
(d) Gain
173. Purchase daybookrecords

(a) Allcashpurchases
(b) Allcreditpurchases
(c) Onlycreditpurchaseof rawmaterialorgoodspurchasedforresale
(d) Allpurchases
174. Journalisalsoknown by
(a) MemorandumA/c
(b) Kacchabooks
(c) Booksoforiginalentry
(d) Properbooks
175. Generallythetermfundisusedtomeanthedifferencebetween
(a) Currentassetsandcurrentliabilities
(b) ProfitandlossA/CandBalancesheet
(c) Currentassetsandnon-currentliabilities
(d) Currentliabilitiesandnon-currentliabilities
176. Theperiodic totalofpurchasedaybook isposted to

(a) CreditorsA/c
(b) Debtors A/c
(c) PurchaseA/c
(d) None
177. WhichofthesedocumentsisnotrequiredforBank Reconciliation

(a) BankcolumnofCashBook
(b) BankPassBook
(c) BankStatement
(d) TrialBalance
178. WhichofthesewillnotaffectBank and Cashbalance

(a) CashreceivedfromXcreditedtoY
(b) ChequesissuedtoAbutdebitedtoB
(c) Chequesdepositedandclearedonthesamedate
(d) Allthethree
179. WhichoftheseitemsaretakenintoconsiderationforpreparationofadjustedCash Book

(a) MistakeinCashBook
(b) MistakeinPassBook

(c) Chequeissuedbutnotpresentedforpayment
(d) Chequesdepositedbutnotcleared
180. CreditbalanceasperCashBook mean-

(a) Surpluscash
(b) Bankoverdraft
(c) Termsdepositswithbank
(d) Noneofthese
181. Debitside ofBank Pass book corresponds to

(a) CreditsideofCashBook
(b) DebitsideofCashBook
(c) DebitsideofTrialBalance
(d) CreditsideofBalanceSheet
182. DifferenceinBank BalanceasperPassBookand CashBook mayariseonaccountof

(a) Chequeissuedbutnotpresented
(b) Chequeissuedbutdishonoured
(c) Chequedepositedandcreditedbybank
(d) Allof(a)and(b)above
[Hints:(d)DifferencesinBankBalanceasperBankPassBookandCashBookariseduetomanyreasons.Fewof
themareChequesissued
(acreditentryinCashBookmade)butnotpresentedforpayment(sonocorrespondingentryinPassBook).
Chequesissued(acreditentryinCashBookmade)butdishonoured(sonocorrespondingentrymadeinPas
sBook).
Incaseofchequesdepositedandcreditedbybank,entriesinbothCashBookandtheBankPassbookarem
ade,hencenodifferencearises.
Henceoption (d)istherightoption.Onlyinsituations (a)and(b)resultindifference.]
(a) When there are chequesdepositedbutnotcollectedby thebanker,overdraftbalance as
perPassBookwillbelessthanthatasper CashBook
(b) WhenthepaymentsideoftheCashBookisundercast,overdraftbalanceasperCashBookwillbemoret
hanoverdraftbalanceasperPassBook
(c) Whenreconciliationis tobe
donewiththeextractsoftheCashBookandPassBookrelatingtothesameperiod,thetransactionswhic
hdonotfigureinoneoftheextractsaretobenoted
(d) Bankinterest debited inthePassBook istobe added toOverdraft
BalanceasperPassBooktoarriveattheOverdraftbalanceasperCashBook
[Hints:(c)Statement(a)isfalse,sincewhenchequesaredepositedatbank,theexistingoverdraftbalanceas
perCashBookdecreaseswhereaswhenthechequeshavenotbeencollectedtheoverdraftbalanceaspe
r PassbookismorethatofCashbook.
Statement(b)isfalse,whenthepaymentssideoftheCashBookisundercastresultsinundercastingofoverdra
ftbalance,hencetheoverdraftbalanceasperCashBookwillbeless,thantheoverdraftbalanceasperPass
Book.
Statement(c)istrue,sincewhenextractsofCashBookandextractsofthePassBookrelatingtosameperiodar
etakenandcompared,theentrieswhichdonotfigureinboththeextractsimplythattheseentriescreatethe
differenceinthebalances,hencearetobenotedforthepreparationofreconciliationstatement.
Statement(d) is false,since
BankinterestdebitedinthePassBookincreasestheoverdraftbalancehencetoarriveatthebalanceasperc
ash,sincetheabovecorrespondingentryisnotmadeinthe CashBook,theinterestamount is tobe
deducted fromthe overdraftbalanceasperBankPassBook.

Henceonlyoption (c)istrue,allotheroptionsarefalse.]
184. TheBankReconciliationStatementisprepared
(a) TorectifythemistakesintheCashBook
(b) ToarriveattheBank Balance
(c) ToarriveattheCashBalance
(d) TobringoutthereasonsforthedifferencebetweentheBalanceasperCashBookandtheBalanceaspe
rBankStatement
[Hints:(d)ThebasicobjectiveofthepreparationoftheBankReconciliationStatementistolocatethereasons
fordifferencesbetweenthebalanceasperCashbookandthebalanceasperBankStatement.Theancillar
ybenefitsduringthisprocessofpreparationcanbesaidtoberectificationofmistakesincashbook,rectificati
onofmistakeinbankstatementetc.Henceoption(d)istherightchoice.]
185. Whichofthefollowingstatementsisfalse?
(a) WhenthebankcolumnofaCashBookshowsacreditbalance, itmeansanamount isduetothebank
(b) WhenPassBookshowsadebitbalance,itmeansoverdraftasperPassBook
(c) WhilepreparingBankReconciliationStatement,chequespaidintobankbutnotyetclearedarededuc
tedfromtheDebitbalanceasperCashBooktoarriveatthebalanceasperPassBook
(d) ABankReconciliationStatementisapartofPassBook
[Hints:(d)AcreditbalanceintheCashBook(bankcolumn)denotesanoverdraftbalance.Itimplies
thatthebusinessis dueto the bankrespectof thatamountithas overdrawn.Henceoption
(a) istrue.
AcreditbalanceinthePassbookreferstofavourablebalanceandadebitbalanceinthepassbookrefersto
Unfavorablebalanceoroverdraft.Henceoption(b)istrue.
WhenpreparingaBRS,wherethereisadebitbalanceorfavourablebalanceintheCashbook(bankcolumn
),chequespaidintobankbutnotyetclearedaredeductedfromthecashbook(bankcolumn)balancetoar
riveatthebalanceinthebankPassbook.Hencestatement(c)istrue.
A BankReconciliationStatementdoesnotformpartofpassbook.It
ispreparedbythebusinesstoreconcilethebalancesasperPassBookorBankStatementandtheCashBook(
bankcolumn).Hencestatement(d)isfalse.]
(a) BankchargesincreasedebitbalanceshownasperBankColumnoftheCashBook.
(b) BankchargesincreasedebitbalanceasperBankpassbook.
(c) Acashsaleofanon-tradingassetisrecordedinthejournalproper.
(d) Cash discountallowed bythe business will appear onthe debitsideof the debtors
account.[Hints:(b)BankchargesincreasedebitbalanceasperBankPassBook(b)isthecorrectanswer.The
debitbalanceasperBankPassBookindicatestheoverdraftbalanceandthebankchargesbeingtheexpe
nditureincreasethedebitbalance.Thealternative(a)isincorrectbecausethe
bankchargesdecreasethedebitbalanceshownasperBankcolumnoftheCashBookanddonotincreaset
hedebitbalance asperCashBook signifiesthefavourablebalance.Acashsaleofanon-
tradingassetisrecordedintheJournalProperisincorrect(c)becauseallintransactionsinvolvingcashreceip
tsandpaymentsarerecordedintheCashbookcashdiscountallowedbythebusinesswillappearonthedeb
itsideofthedebtorsaccount(d)isincorrectbecause,thecashdiscountallowedisareductioninthebalanc
eofadebtorsaccountwhichappearsonthecreditside.Thus (b)isthecorrectanswer.]
187. Bankreconciliationisa statementpreparedtoreconcile

(a) Trialbalance
(b) Cashbook

(c) Bank A/c

(d) Cashasper cashbookwithbankbalance asperbankpassbook
188. Bankreconciliationstatementisapartof
(a) Cashbook
(b) Trialbalance
(c) Auditorsreport
(d) Noneofthese
189. BenefitsofpreparingBankReconciliationStatementincludes
(a) ItbringoutanyerrorscommittedinpreparationofCashbook/BankPassBook
(b) Highlightsunderdelayinclearanceofchequesdepositedbutnotcredited
(c) Helpknowactualbankbalance
(d) Allthethree
190. Debitbalance asperbankpass book mean

(a) Surpluscash
(b) BankOverdraft
(c) Termsdepositswithbank
(d) Noneofthese
191. Whichofthefollowingisnotacauseofdifferenceinbalanceaspercashbookandbalanceasperbankpass
book
(a) Errorsincashbook
(b) Errorsinpassbook
(c) Chequesdepositedandcleared
(d) Chequesissuedbutnotpresentedforpayment
192. Provisioniscreatedfor
(a) UnknownLiabilities
(b) KnownLiabilities
(c) CreationofSecretReserves
(d) AlltheThree
193. Whichofthefollowingisnotamethodofchargingdepreciation
(a) StraightlineMethod
(b) WrittendownvalueMethod
(c) DiscountedpresentvalueMethod
(d) SumofdigitsMethod
194. Asecondhandcarispurchased for`2,00,000and

soldat`1,40,000aftertwoyears.Ifdepreciationischarged @10%onSLM method,find
theprofitorlossonsaleofthecar.
(a)`20,000Loss
(b) `20,000Profit
(c)` 10,000Loss
(d)`10,000Profit
195. Intheabovequestionifthedepreciationischarged
@10%onwrittendownvaluemethod,findtheprofitorlossonsaleof theSecond hand car.
(a) Lossof `20,000
(b) Lossof `22,000

(c) Lossof`11,000

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If the profitunder Absorption costingmethod is `1,01,000, the

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BoardofStudies,Institute ofCostAccountantsofIndia(StatutoryBodyunderan ActofParliament) Page1

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BoardofStudies,Institute ofCostAccountantsofIndia(StatutoryBodyunderan ActofParliament) Page6

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BoardofStudies,Institute ofCostAccountantsofIndia(StatutoryBodyunderan ActofParliament) Page8

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BoardofStudies,Institute ofCostAccountantsofIndia(StatutoryBodyunderan ActofParliament) Page9

BoardofStudies,Institute ofCostAccountantsofIndia(StatutoryBodyunderan ActofParliament) Page10

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BoardofStudies,Institute ofCostAccountantsofIndia(StatutoryBodyunderan ActofParliament) Page11

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BoardofStudies,Institute ofCostAccountantsofIndia(StatutoryBodyunderan ActofParliament) Page13

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BoardofStudies,Institute ofCostAccountantsofIndia (StatutoryBodyunderan ActofParliament) Page10

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BoardofStudies,Institute ofCostAccountantsofIndia (StatutoryBodyunderan ActofParliament) Page12

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BoardofStudies,Institute ofCostAccountantsofIndia (StatutoryBodyunderan ActofParliament) Page13

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BoardofStudies,Institute ofCostAccountantsofIndia (StatutoryBodyunderan ActofParliament) Page15

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