Accounting MCQ Questions and Solutions with Explanations

71

A machine was purchased on 1^st January 1992 for Rs. 5,00,000. A further sum of Rs. 5,000 for railway freight, Rs. 500 for local carriage and Rs. 5,000 on installation was spent on it. Depreciation is to be charged at 10% per annum on the written-down value method. On 31^st December 1994 the book-value of the machinery will be:

A) Rs. 3,64,500.00 B) Rs. 3,68,145.00 C) Rs. 3,72,154.00 D) Rs. 3,50,000.00

Discuss

Answer & Solution

Answer: Option C

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72

How are all adjustments made when capital accounts are fixed?

A) Partner's current account B) Partner's capital account C) Partner's fixed account D) Partner's nominal account

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Answer & Solution

Answer: Option A

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73

Match both the lists and select the correct answer:

List-I	List-II
a. Liquidity test	1. $$\frac{{{\text{All business creditors}}}}{{{\text{Average per day credit purchase}}}}$$
b. Functional ratio	2. $$\frac{{{\text{Subscribers fund}}}}{{{\text{Total assets}}}}$$
c. Prosperity	3. $$\frac{{{\text{Gross profit}}}}{{{\text{Net sales}}}} \times 100$$
d. General profitability	4. $$\frac{{{\text{Current assets}}}}{{{\text{Current liabilities}}}}$$

A) a-4, b-1, c-2, d-3 B) a-4, b-3, c-2, d-1 C) a-1, b-2, c-3, d-4 D) a-3, b-4, c-1, d-2

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Answer & Solution

Answer: Option A

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74

A, B and C enter into a partnership investing Rs. 35,000, Rs. 45,000 and Rs. 55,000 respectively. Find their respective shares in annual profit of Rs. 40,500.

A) Rs. 10,500, Rs. 13,500, Rs. 19,500 B) Rs. 10,500, Rs. 10,500, Rs. 21,500 C) Rs. 10,500, Rs. 13,500, Rs. 17,500 D) Rs. 10,500, Rs. 13,500, Rs. 16,500

Discuss

Answer & Solution

Answer: Option D

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75

Which of the following statement is incorrect?

A) Calls-in-arrear do not form part of paid-up capital B) Preference shareholders get dividend at flexible rate C) Share application account is a personal account D) None of the above

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Answer & Solution

Answer: Option B

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76

In case of a company limited by shares the liability of a member is limited to the extent of:

A) Unpaid amount of shares held by him B) Paid amount of shares held by him C) Total amount of shares held by him D) None of the above

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Answer & Solution

Answer: Option A

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77

For calculation of interest on drawing by a partner the following method can be used:

A) Cost Method B) Supply Method C) Product Method D) None of the above

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Answer & Solution

Answer: Option C

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78

Which of the following transactions involve flow of fund:

A) Issue of shares for cash B) Payment of bonus in shares C) Cash paid to creditors D) Purchase of building in exchange of land

Discuss

Answer & Solution

Answer: Option A

Solution:

When we talk about the flow of funds, we refer to the movement of cash or liquid assets between parties. Let’s analyze each option:

Option A: Issue of shares for cash → Correct. In this case, the company receives cash from the investors in exchange for shares. This is a direct flow of funds, as cash is coming into the company.

Option B: Payment of bonus in shares → Incorrect. Here, the company is issuing shares as a bonus rather than paying in cash. Although this transaction involves a change in the company’s equity, it does not involve an actual flow of funds.

Option C: Cash paid to creditors → Incorrect. While cash is leaving the company, this is a payment for an obligation rather than a new source of funds coming in or out, so it is not considered a flow of funds in the sense of generating new capital.

Option D: Purchase of building in exchange of land → Incorrect. This is a non-cash transaction. The company is exchanging land for a building, and there is no flow of cash involved.

Thus, the correct answer is Option A: Issue of shares for cash, as it directly involves a flow of cash into the company.

79

A company may adopt policy to ''window dressing'' by manipulating the data such as
1. inventory valuation
2. omission of liability for goods purchased
3. treating short-term liability as long term debt
4. recording in advance cash receipts applicable to next accounting period
Select the correct answer:

A) 1 B) 1 and 2 C) 1, 2 and 3 D) 1, 2, 3 and 4

Discuss

Answer & Solution

Answer: Option B

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80

When the purchasing company makes payment of the purchase consideration, it debits

A) Business Purchase A/c B) Assets A/c C) Cash A/c D) Vendor Company's A/c

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Answer & Solution

Answer: Option D

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Accounting MCQ Questions and Solutions with Explanations | Commerce