01. Which of the following is not a fundamental accounting assumption? (a) Going concern (b) Consistency (c) Prudence (d) Accrual

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1 (Compiled By :- ARU Academy, Chennai. Based on Memory) Marks 100 Time : 2 Hours Session 1st Part A Fundamentals of Accounting 01. Which of the following is not a fundamental accounting assumption? (a) Going concern (b) Consistency (c) Prudence (d) Accrual 02. A change in accounting policy is justified: (a) To comply with accounting standard (b) To ensure more appropriate presentation of the financial statements of the enterprise (c) To comply with law (d) All of the above 03. Cost of inventory 1,00,000; Market Value 80,000. If the inventory is valued at 1,00,000, which of the following accounting concepts is violated? (a) Money measurement (b) Cost (c) Prudence (d) Periodicity 04. Amount paid to a supplier is: (a) An event (b) A Transaction (c) Both (a) and (b) (d) Neither (a) nor (b) 05. Economic life of an enterprise is split into some periodic intervals as per concept: (a) Money Measurement (b) Matching (c) Periodicity (d) Accrual 06. According to concept, the same method of accounting is to be followed year after year: (a) Going Concern (b) Entry (c) Cost (d) Consistency 07. Benefits of AS (Accounting Standards) are: (a) To harmonise accounting policies (b) To eliminate the non-comparability of financial statements (c) To improve the reliability of financial statements (d) All of the above 08. Purpose of an accounting system include all the following except: (a) Interpret and record the effects of business transaction (b) Classify the effects of transactions to facilitate the preparation of reports (c) Summarize and communicate information to decision markers (d) Dictate the specific types of business enterprise transactions that the enterprises may engage in 09. Prepaid Insurance account is a : (a) Nominal account (b) Real account (c) Representative Personal Account (d) Artificial Personal account 10. A trader purchased goods for 4,000 at a trade discount of 5%. As he paid the amount immediately, a cash discount of 100 was also allowed. In this case, Purchases A/c is debited by: (a) 4,000 (b) 3,800 (c) 3,700 (d) 3, Some of the goods purchased for trading are used for the construction of business premises. The account to be credited is : (a) Business premises A/c (b) Purchases A/c (c) Sales A/c (d) None of the above 12. Cash Book is a type of but treated as a of accounts: (a) Subsidiary book, principal book (b) Principal book, subsidiary book (c) Subsidiary book, subsidiary book (d) Principal book, principal book 1 P a g e A R U A c a d e m y w w w. a r u a c a d e m y. c o m

2 13. A sales return of 2,000 has been wrongly posted to the credit of Purchase Returns accounts, but has been correctly posted to the customer s account. The effect on the trial balance will be: (a) Debit total increases by 4,000 (b) Credit total increases by 4,000 (c) Credit total increases by 2,000 (d) Debit total increases by 2, While finalizing the current year s profit, the company realized that there was an error in the valuation of closing inventory of the previous year. In the previous year, closing inventory was valued more by 50,000. As a result: (a) Previous year s profit is overstated and current year s profit is also overstated (b) Previous year s profit is understated and current year s profit is overstated (c) Previous year s profit is understated and current year s profit is also understated (d) Previous year s profit is overstated and current year s profit is also understated 15. An amount of 500 received from a customer has been debited to his account. This error is classified as : (a) Error of principle (b) Error of omission (c) Error of commission (d) Compensating error 16. Starting with the Debit balance as per Cash Book, cheques deposited but not cleared will be: (a) Added in B.R.S. (b) Deducted in B.R.S. (c) Ignored in B.R.S. (d) None of the above 17. A trader has an opening inventory of 70,000 on , which consists of a slow moving item costing 10,000 and was written off by 2,000. This item was sold for 9,000 during the year. Barring the transaction, the gross profit on sales for the year remained at 20%. The sales and purchases during the year amounted to 5,09,000 & 3,78,000 respectively. Find the value of closing inventory on : (a) 44,000 (b) 38,000 (c) 40,000 (d) 42, During a year the sales and purchases of a firm amounted to 4,00,000 and 4,00,000 respectively. Opening inventory was Nil. Closing inventory at selling price was 1,00,000. Find out the cost of closing inventory using Adjusted Selling Price Mehtod: (a) 80,000 (b) 1,00,000 (c) 1,50,000 (d) 1,40, E Ltd. a dealer in second-hand cars has the following five vehicles of different models and makes in their inventory at the end of the financial year Car Cost ( ) NRV ( ) Fiat 90,000 95,000 Ambassador 1,15,000 1,55,000 Maruti Esteem 2,75,000 2,65,000 Maruti 800 1,20,000 1,25,000 The value of inventory included in the balance sheet of the company as on March 31, 2010 was : (a) 7,62,500 (b) 7,70,000 (c) 5,90,000 (d) 8,70, Which of the following expense is not included in the acquisition cost of a plant and equipment? (a) Cost of site preparation (b) Delivery and handling charges (c) Installation costs (d) Fire Insurance premium 21. A machinery was purchased for 6,00,000 on and paid 30,000 on its installation. It is estimated that the useful life of the machinery is 10 years and its scrap value is 20,000. The amount of depreciation to be charged for the year ending will be : (a) 61,000 (b) 62,000 (c) 60,000 (d) 2 P a g e A R U A c a d e m y w w w. a r u a c a d e m y. c o m

3 63, The book value of a machinery on was 70,000. Depreciation is charged at 10% p.a. under W.D.V. Method on 31st March every year. The machine was sold for 60,000 on , Calculate the Profit / Loss on sale of machinery: (a) Profit 3,000 (b) Loss 3,000 (c) Profit 900 (d) Loss The objectives of providing depreciation on an asset are: (a) To ascertain the true Profit/Loss of the firm (b) To provide funds for the replacement of fixed asset (c) To show the true financial position in the Balance Sheet (d) All of the above 24. The machine is purchase for 3,00,000. Its estimated working life is 28,000 hours, the Scrap value is 20,000. Anticipated pattern of working hours are as follows: Year Hours 1 3 3, , ,800 Depreciation for 8th Years is : (a) 28,000 (b) 19,286 (c) 30,000 (d) 26, Increase in the value of Assets 1,00,000. Decrease in the value of Liabilities 50,000. Then owner s equity will: (a) Increase by 1,50,000 (b) Increase by 50,000 (c) Decrease by 1,50,000 (d) Decrease by 50, Net profit before charging manager s commission is 49,500 and the manager is to be allowed a commission of 10% on the profit after charging such commission. Commission amount will be : (a) 5,000 (b) 4,950 (c) 4,500 (d) None of these 27. Goods costing 8,000 were destroyed by fire. Insurance company accepted a claim of 5,000. The amount to be credited to Purchases / Trading A/c will be : (a) 5,000 (b) 8,000 (c) 3,000 (d) 13, Capital introduced at the beginning by Ram 13,000 Further capital introduced during the year 3,000. Drawings 4,000 and closing capital is 20,000. The amount of net profit will be: (a) 8,000 (b) 7,000 (c) 4,000 (d) 11, Rent paid on 1st October, 2016 for the year to 30th September, 2017 was 1,50,000 and rent paid on 1st October, 2017 for the year to 30th September, 2018 was 1,80,000. Rent paid, as shown in the Profit and Loss account for the year ended 31st December 2017, would be: (a) 1,57,500 (b) 1,50,000 (c) 1,80,000 (d) 1,65, For mutual accommodation of Mita and Rita, Rita accepted a bill drawn on her by Mita for 7,500. The said bill is discounted by Mita at 7,400 and remitted 1/3rd of the proceeds to Rita. To honour the bill, the amount to be paid by Mita to Rita on the due date will be: (a) 7,500 (b) 4,500 (c) 5,000 (d) None of the above 31. Ram draws a bill on Rahim for 15,000. The bill was discounted with Bank at 14,900. On the due date the bill was dishooured and the noting charges amounted to 50. What is the amount to be debited by Bank to Ram s account? (a) 14,000 (b) 14,900 (c) 15,000 (d) 15, G draws a bill on R.G. endorses the bill to S. On the due date the bill is dishonoured. On dishonor, which account is credited in the books of G? (a) Bills Receivable A/c (b) S A/c (c) R A/c (d) Bills Payable a/c 3 P a g e A R U A c a d e m y w w w. a r u a c a d e m y. c o m

4 boxes of goods are consigned at a cost of 250 each. Consignor s expenses amounted to 3,000. 1/6th of the boxes are still in transit. 3/5th of the boxes received by consignee are sold at 300 each. The value of goods in transit will be (a) 25,500 (b) 25,000 (c) 30,000 (d) 40, MN of Mumbai sent out goods costing 4,00,000 to QR of Delhi on consignment basis. Consignee is paid an ordinary commission of 2% and a delcredere commission of 3% on sales. The entire goods were sold by consignee for 5,00,000. However, the consignee could recover 4,92,000 from the trade receivables. In the books of consignee, the commission to be transferred to profit & Loss A/c will be : (a) 25,000 (b) 17,000 (c) 20,000 (d) 33, Mr. Mehta sent 1,000 shirts costing 400 each to Mr. Kehta on consignment basis. Mehta paid 20,000 as expenses. Kehta sold 900 shirts at 500 each. His selling expenses amounted to 15,000. Find the value of closing inventory. (a) 42,000 (b) 43,500 (c) 40,000 (d) 45, P & Q entered into a joint venture. P purchased 5,000 units of goods at 30 each. Q sold 4,800 units at 50 each. The remaining goods were taken over by Q at a value of 5,000. P is allowed a commission of 2% on purchased and Q is allowed a commission of 1% on sales. Find the share of Q in the profit of joint venture. (a) 46,300 (b) 44,800 (c) 50,000 (d) 45, Mukes and Vimal entered into a joint Venture. Mukesh purchased goods for 36,000 and paid 39,00 as expenses. Vimal purchased goods for 17,000 and paid 3,000 as expenses. Entire goods were sold for 65,000. They share profits and losses in the ratio of 2:1 the final remittance to Mukesh will be : (a) 43,300 (b) 40,000 (c) 50,000 (d) 65, Under sales on return or approval basis, the ownership of goods is passed only (a) When the retailer gives his approval (b) If the goods are not returned within specified period. (c) Both (a) & (b) (d) None of the aboe 39. Goods were sent to a customer on sale or Return basis at cost +30%. The invoice price is 6,500. At the end of the year market value of the goods is 5% less than the cost. Closing inventory is valued at (a) 5,000 (b) 4,750 (c) 4,800 (d) 6, Guarantees given in respect of third parties will be considered as : (a) Contingent liability (b) Current liability (c) Contingent asset (d) Provision 41. In the absence of any provision in the partnership agreement, profit and losses are shared (a) In the ratio of capital (b) Equally (c) In the ratio of loans given by them to the firm (d) None of the above 42. Wages paid for Installation of Machinery was wrongly Debited to wages A/c Error is : (a) Commission Error (b) Principal Error (c) Compensatory Error (d) Partial omission 43 R,S and T are partners sharing profits and losses in the proportion of 3:2:1. S retired and the new profit sharing ratio between R and T is 3:1 and the Reserve of Rs. 15,000 is divided among the partners in the ratio of. : (a) 2,500 : 5,000 : 7,500 4 P a g e A R U A c a d e m y w w w. a r u a c a d e m y. c o m

5 (b) 5,000 : 2,500 : 7,500 (c) 7,500, : 5,000 : 2,500 (d) 2,500 : 7,500 : 5, Calculate the value of goodwill of a firm under capitalization Method. Capital Employed in the firm 6,00,000 Reasonable Rate of Return 14% Average profit : 1,12,000 (a) 2,10,000 (b) 2,00,000 (c) 2,80,000 (d) 2,40, At the time of retirement of a partner, firm gets from the insurance company against the joint life Policy taken jointly for all the partners. (a) Policy Amount. (b) Surrender Value (c) Policy Value for the retiring partner and surrender Value for the rest. (d) Surrender value for all the partners. 46. Goodwill brought in by incoming partner in cash for joining in a partnership firm is taken away by the old partners in their ratio (a) Capital (b) New profit Sharing (c) Sacrificing (d) Old profit Sharing 47. Jain and Deepak are partners in a firm with no partnership agreement. The profit for the year was 14,200. Deepak claimed p.a. on the loan of 70,000 given to the firm. Calculate the share of Jain and Deepak in the profit of the firm. : (a) 5000 & 9,200 (b) 7,100 & 7,100 (c) 2,100 & 12,100 (d) None 48. Credit purchase of Machinery should be recorded in : (a) Purchase Book (b) Cash Book (c) Petty Cash Book (d) Journal proper 49. On admission of a partner unrecorded investments worth 5,000 and unrecorded liability toward suppliers for 1,500 will be recorded in : (a) Revaluation A/c (b) Capital A/c (c) Realisation A/c (d) None of the three 50. A Company issued 30,000 shares of 10 each, payable as 3 on application, 3on allotment and 4 on call. Applications were received for 50,000 shares. Allotment was made on pro-rata basis. Excess application money was refunded. Mr. X, a holder of 100 shares failed to pay the call money. His shares were forfeited. The above transactions are related to : (a) Over subscription (b) Pro rata allotment (c) Forfeiture (d) All of the Above 51. Bajaj Ltd. Issued 4,000 shares of 10 each at a premium of 20%, payable as 5 on application (including premium), 3 on allotment and 4 on call. Mr. Q, a holder of 100 shares failed to pay the allotment and call money. His shares were forfeited. The amount to be credited to Forfeited Shares A/c will be : (a) 500 (b) 400 (c) 1000 (d) A Company forfeited 100 shares of 10 each, on which 5 per share was already paid up. Out of them 70 shares are reissued at 7 per share as fully paid up. The amount to be transferred to the Capital Reserve A/c will be : (a) 350 (b) 490 (c) 140 (d) P a g e A R U A c a d e m y w w w. a r u a c a d e m y. c o m

6 53. Discount on issue of debentures is a : (a) Revenue loss to be charged in the year of issue (b) Capital loss to be written off from capital reserve (c) Capital loss to be written off over the tenure of the debentures (d) Capital loss to be shown as goodwill 54. Preference shares amounting to 3,00,000 are redeemed at a premium of 5% by issue of equity shares amounting to 2,00,000 at a premium of 3%. The amount to be transferred to Capital Redemption Reserve: (a) 1,00,000 (b) 1,20,000 (c) 2,10,000 (d) None 55. LT Ltd. Purchased land and building from Ab Ltd. For a book value of 22,00,000. The consideration was paid by issue of 12% Debentures of 100 each at a premium of 10% The Debentures A/C is credited by : : (a) 22,00,000 (b) 20,00,000 (c) 24,20,000 (d) 25,20, Which of the followings statements is false : (a) Equity is owner s stake and the debenture is a debt (b) Rate of interest on debentures is fixed (c) Debenture holders get preferential treatment over the equity holders at the time of liquidation (d) Interest on debentures is an appropriation of profits. 57. The purpose of accommodation bill is : (a) To finance actual purchase or sale of goods (b) To facilitate trade transmission (c) When both parties are in need of funds (d) None of the above 58. On X draws a bill on Y for 30 days. Y accepted the bill on The maturity date of the bill will be : (a) (b) (c) (d) None of the above 59. The part of share capital which can be called up only on the liquidation of a company is called (a) Authorized capital (b) Called up capital (c) Capital reserve (d) Reserve capital 60. A company issued 15,000 shares of 10 each. Called up value per share is 8 A holder of 250 shares paid 2 per share only. On forfeiture of his shares, share Capital A/c is debited by : (a) 2,500 (b) 2,000 (c) 500 (d) None of these Part B Mercantile Laws 61 The offer can be lapsed in case of : (a) Revocation (b) by rejection of offeree (c) Counter offer (d) All of the Above 62 An offer open for acceptance over a period of time is : (a) Void offer (b) Counter offer (c) Implied offer (d) Standing Offer 6 P a g e A R U A c a d e m y w w w. a r u a c a d e m y. c o m

7 63 A specific proposal is : (a) A proposal made to public at large (b) A proposal made to a particular person (c) A proposal made to anyone (d) A proposal open for over a period of time 64 A lunatic person is : (a) A minor (b) An insolvent person (c) An alien enemy (d) An unsound mind person 65 Threat to commit suicide is : (a) Undue influence (b) Fraud (c) Coercion (d) Misrepresentation 66 Where both the parties to an agreement under a mistake as to a matter of fact, which is essential to the agreement, the agreement is : (a) Valid (b) Void (c) Voidable (d) Illegal 67 If a consent of a party is not free, then the contract is : (a) Valid (b) Void (c) Voidable (d) Illegal 68 Mere silence as to facts likely to affect the desire of the party does not amount to : (a) Coercion (b) Fraud (c) Mistake (d) Misrepresentation 69 A contract formed out of love and affection is valid, if it is : (a) Expressed in writing only (b) Written and registered under law (c) Oral promise (d) Contractual promise 70 Right in Rem means : (a) Right to make contract with one party (b) Right to sue a particular person (c) Right available to a person against whole world (d) None of the above 71 Executory contract is : (a) Where all the parties to a contract have performed their obligations (b) Where something remains to be done by the parties (c) No one is performed (d) None of the above 72 The contract is discharged under mutual agreement through : (a) Death (b) Insolvency (c) Novation (d) Impossibility of performance 73 A owes 25,000 to B pays 22,000 in full and final settlement of account. This is : (a) Novation (b) Alteration (c) Remission (d) Cancellation 74 X agree Y to work from On , he writes a letter to ;Y that no need to join in work. It is types of breach. : (a) Actual (b) Anticipatory (c) Substitution (d) Rescission 75 Supervening impossibility is an : (a) Impossibility occurs after entering into contract (b) Impossibility occurs before entering into contract (c) Impossibility occurs at the time of entering into contract (d) None of the above 76 Which of the following statements is false regarding rescission : (a) Rescission can be made through mutual agreement. (b) When one party makes a default in performance, the other party can rescind the contract. (c) In case of voidable contract, the aggrieved party can cancel the contract (d) None of the above 77 Contingent contract is always : (a) Valid (b) Void (c) Voidable (d) Illegal 7 P a g e A R U A c a d e m y w w w. a r u a c a d e m y. c o m

8 78 A delivered goods to B s warehouse by mistake. B used the goods. A asks B for the price of the goods. This is : (a) Void Contract (b) Quasi Contract (c) Contingent contract (d) None of these 79 Under the sale of goods Act, 1930 property means : (a) Transfer of possession (b) Ownership (c) Delivery of goods (d) All of these 80 Breach of Warranty gives rise to : (a) Claim damages (b) Rejection of goods (c) Repudiation of contract (d) None of these 81 P wants to sell his car, so he appoints Q an auctioneer as his agent to sell car. R made highest bid at the time of fall of hammer. Q says to R for signing of cheque otherwise ownership shall not be transferred to him. R sings the cheque which subsequently dishonored. In this case the ownership (a) Is transferred with fall of hammer (b) Is not transferred as cheque is dishonored (c) Is transferred if R sings another cheque (d) None of the above 82 Risk follows from seller to buyer when : (a) Possession of goods is given (b) Buyer paid the price (c) Ownership passes to the Buyer (d) All of the above 83 If there is a contract for sale of specific goods under deliverable state, the ownership will passes : (a) When goods are delivered t the buyer (b) When payment is done (c) When contract is made (d) None of these 84 Bill of lading is issued by: (a) Shipping Company (b) Transporter (c) Railway Administration (d) Mercantile agent 85 Which of the following is not a mode of delivery : (a) Constructive (b) Structured (c) Actual (d) Symbolic 86 An unpaid seller has rights against : (a) On goods (b) On buyer (c) on both goods and buyer (d) None of these 87 When goods are delivered to the buyer on approval or on sale or return basis, the property in the goods transferred to the buyer when : (a) The buyer retains the goods beyond stipulated time (b) The buyer signifies his approval (c) The buyer does any other act adopting the transaction (d) All of these 88 P for sale of a property appoints Q as a mediator with a commission of 20,000. Q found the customer R who paid 50,000 as an advance to Q. Later P refuses to sell the property. Can R claim advance back from Q : (a) Yes R can claim his amount from Q (b) No R cannot claim any amount from Q (c) Whole the contract is void (d) None of these 89 P sold 100 refrigerators to Q They are kept in the warehouse. The seller (P) told to the warehouse keeper to keep the goods on behalf of Q. This is : (a) Structural (b) Constructive (c) Symbolic (d) Actual 90 Auction sale is completed on (a) When bid is made (b) Fall of hammer (c) When auction is started (d) None of the above 8 P a g e A R U A c a d e m y w w w. a r u a c a d e m y. c o m

9 91 Where there is no provision for the duration of partnership, then it is known as : (a) Particular partnership (b) Partnership at will (c) Fixed term partnership (d) None of the above 92 Every partner is liable in the firm : (a) Jointly (b) Severally (c) Either Jointly or Severally (d) Both Jointly & Severally 93 A minor Joined for benefits of partnership has a right to : (a) Share the profits (b) Inspect the boos of firm (c) Sue for his share of profits (d) All of the above 94 The partnership will be compulsorily dissolved in case of : (a) All partners become insolvent (b) Death of a partner (c) Retirement of a partner (d) Admission of a partner 95 In the absence of any agreement, partners will share the profits in : (a) Capital ratio (b) As per their convenience (c) Equal Ratio (d) All of the above 96 A, B, C are active partners in the firm. A retires without giving public notice of his retirement. B and C carries on the business of the firm, and incurs liability. In this case : (a) A is also liable (b) Only B & C are liable (c) Firm will be deemed to be dissolved (d) Only A is liable 97 In unregistered firm, a partner can sue for : (a) Goodwill (b) Share in Profits (c) Dissolution of the firm (d) None of the above 98 Which of the following statements is false : (a) A partner who takes fixed salary in lieu of share in profits may be a partner. (b) A partner who expresses (or) by his action intimates others that he is a partner may be partner. (c) It is essential to have agreement to share profits and losses. (d) A partner who does not participate in management has no liabilities. 99 The partner of a firm agrees to share profits with an outsider but no other rights of firm. Such outsider is called : (a) Nominal partner (b) Dormant partner (c) Subpartner (d) Partner in profits only 100 Sanju and Manju are tailors. Manju takes all the profits and gives wages to Sanju. The relationship between Sanju and Manju is : (a) Partner (b) Joint Owners (c) Master & Servant (d) Agent & Principal. 9 P a g e A R U A c a d e m y w w w. a r u a c a d e m y. c o m

10 Part A 1 C 21 A 41 B 61 D 81 A 2 D 22 D 42 B 62 D 82 C 3 C 23 D 43 C 63 B 83 C 4 B 24 A 44 B 64 D 84 A 5 C 25 A 45 B 65 C 85 B 6 D 26 C 46 C 66 B 86 C 7 D 27 B 47 A 67 C 87 D 8 D 28 A 48 D 68 B 88 A 9 C 29 A 49 A 69 B 89 B 10 B 30 C 50 D 70 C 90 B 11 B 31 D 51 D 71 B 91 B 12 A 32 B 52 C 72 C 92 D 13 B 33 A 53 C 73 C 93 A 14 D 34 B 54 A 74 B 94 A 15 C 35 A 55 A 75 A 95 C 16 B 36 B 56 D 76 D 96 A 17 C 37 A 57 C 77 A 97 C 18 A 38 C 58 D 78 B 98 D 19 C 39 B 59 D 79 B 99 C 20 D 40 A 60 B 80 A 100 C ************ Unique features of the institute Complete Coverage of Syllabus within the Specified Time Limit. Extensive Material covering past question papers. State of the art Class Rooms that provide perfect learning atmosphere. Accessible Faculty: All Faculties respond to mails/calls received from students. High Pass Percentage - Consistently maintaining close to 80% pass Career Counselling - to ensure that the student is not only coached but also highly motivated on various aspects Corporate Style of Management. Kostini, an innovative practice series that helps you to practice better ARU Academy ( India s No. 1 COACHING INSTITUTE FOR CA CPT, IPCC, ICWA, CS) 7/3, Madley Road T.Nagar, Chennai-17 (Near Jain College ) Contact No. : / / info@aruacademy.com 10 P a g e A R U A c a d e m y w w w. a r u a c a d e m y. c o m