SEM - 3 ADVANCED CORPORATE ACCOUNTING 1 MCQ ACCOUNTING STANDARDS (AS)/LEASE ACCOUNTING

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1 SEM - 3 ADVANCED CORPORATE ACCOUNTING 1 MCQ ACCOUNTING STANDARDS (AS)/LEASE ACCOUNTING 1. The title of Indian Accounting standard No- 6 (A) Accounting for depreciation (B) Depreciable assets (C) Calculation of depreciation (D) None of above 2. The date from which AS are made mandatory for all types of enterprises- (A) (B) (C) (D) AS -6 Depreciation Accounting does not apply to the following; (A) Building (B) Furniture (C) Plant (D) Goodwill 4. A change in the method of Depreciation as per AS -6 is treated as the change in the (A) Change in valuation (B) Change in Profit and Loss account (C) Change in accounting policy (D) None of above 5. AS -10 is issued for treatment of (A) Fixed Assets (B) Liabilities (C) Current Assets (D) Share Capital 6. Depreciation is charged on the following assets; (A) Current assets (B) Liquid assets (C) Intangible assets (D) Fixed assets 7. AS -6 is not applicable to followings:- (A) Goodwill (B) Patents (C) Know how (D) All of above 8. Assets acquired in exchange of other assets is recorded in books at (A) Fair market price (B) Cost (C) Selling price (D) None of above 9. AS are issued in India by :- (A) ICS (B) ICWA (C) ICAI (D) Government of India 10. The following terms are related to depreciation accounting:- (A) Historical cost (B) Residual value (C) Useful life (D) All of above 11. The useful life of depreciable asset is than its physical life. (A) Longer (B) Shorter (C) Equal (D) Average 12. In lease contract gives the to lessee to use the assets belonging to the leaser. (A) Term (B) Usage (C) Right (D) All of above 13. The lease title of the asset to the lessee by the end of the lease period. (A) Transfers (B) Buys (C) Owns (D) None of above. 14. The amount regularly paid for the use of leased assets is known as :- (A) Residual value (B) Capital amount (C) Lease Rental (D) Useful life.

2 15. A long term lease contract which extends over the whole useful life of an asset and which cannot be cancelled is known as- (A) Financial lease (B) Sale lease (C) Corporate lease (D) Leverage lease 16. Under this type of lease, a firm sells the assets to other party and the same is again taken on lease from that party (A) Financial lease (B) Sale lease (C) Capital lease (D) Leverage lease 17. When the asset to be leased is very costly one and the lessor cannot provide complete finance, this type of lease is preferable (A) Direct lease (B) Service lease (C) Leveraged Lease (D) International lease 18. When an agreement is between two citizens of different countries it is called (A) International lease (B) Financial lease (C) Medical lease (D) Sales-aid lease 19. deals with the accounting of lease transactions. (A) AS 6 (B) AS 10 (C) AS 17 (D) AS In case of the buyer shows the assets in his balance sheet and also shows the outstanding amount as liability. (A) Lease accounting (B) Hire Purchase system (C) Depreciation accounting (D) None 21. is the value a firm gets at the end of the assets useful life when the asset is sold. (A) Lease value (B) Cost value (C) Financial value (D) Salvage value 22. The greatest benefit of lease accounting is (A) Tax benefit (B) Cost benefit (C) Value added benefit (D) None 23. The is the legal owner of the asset and shows the lease transactions in his books as such. (A) Lessee (B) Proprietor (C) Share holders (D) Lessor 24. The first leasing company of India (FLCI) was established by of city bank. (A) Farouque Irani (B) Farouque Engineer (C) Farouque Shaikh (C) All of above 25. In the books of Leasee the journal entry for financial charges are (A) Credited (B) No entry (C) Debited (D) None ACCOUNTING FOR UNDER WRITING COMMISSION 1. The Maximum rate of underwriting commission in case of Shares and Debentures as per Companies Act should be respectively; (A) 5% & 2.5% of face value (B) 5% & 2.5% of Issue price (C) 2.5% & 5% of face value (D) 2.5% & 5% of Issue price 2. When only one underwriter has underwritten the issue only partly, then the deduction is made from his original liability- (A) For unmarked applications

3 (B) For marked applications (C) For his Firm underwriting (D) None of above 3. If any underwriter has a negative liability, then that amount is divided between the remaining partners; (A) Proportion of original liability (B) In profit sharing ratio (C) Equally (D) None of above 4. If debenture price of Rs 90 (Face value Rs 100) maximum amount of underwriting commission allowable is (A) Rs 2.50 (B) Rs 1.80 (C) Rs 2.25 (90x2.5%) (D) Rs On Equity shares of Rs 100 each, issued at Rs 125 per share, the maximum amount of underwriting commission payable to underwriter should be- (A) Rs 6 (B) Rs 4.75 (C) Rs 3.90 (D) Rs 6.25 (125x5%) 6. Under which section of Companies Act, there are certain restrictions regarding the payment of Underwriting commission? (A) 76 (B) 78 (C) 80 (D) Entry passed when the amount of underwriting commission is being fixed- (A) Bank Dr. To Underwriters a/c (B) Underwriters a/c Dr. To Underwriting commission a/c (C) Underwriting commission a/c Dr. To Bank (D) Underwriting commission a/c Dr. To Underwriters a/c 8. By closing underwriting commission a/c in which account the balance will be carry forwarded by the company? (A) Share Capital (B) Profit and Loss a/c (C) Underwriters a/c (D) Bank a/c 9. On equity shares of Rs 100 each issued at Rs 140 per share, the maximum of underwriting commission payable to underwriters will be (A) Rs 6.25 (B) Rs 5.25 (C) Rs 6 (D) Rs Net Liability in firm underwriting means (A) Firm liability (B) Normal liability (C) Normal Net liability + Firm Liability (D) Net liability less Firm liablity 11. The company should have powers to provide underwriting commission by its- (A) Articles of Association (B) Memorandum of Association (C) Under companies Act 1956 (D) Under Underwriting contract 12. can underwrite a public issue of shares or debentures.

4 (A) An Individual (B) Finance company (C) More than one individual (D) All of above 13. How will share underwriters considered from the view point of company? (A) Third parties (B) Promoters (C) Regulators (D) None of above SY B.Com Sem 3 MCQs Advance corporate Accounts 1. From the following. Who cannot file the application for winding up the company? (a) Company (b) stack holders (c) Creditors (d) Debtors days notice is to be given when a company has passed resolution for voluntary winding up. 3. A liquidator is an independent person from the business to complete the process of liquidation. 4. A liquidator should prepare final statement on completion of liquidation. 5. Employee s gratuity is considered as unsecured creditor. False (Preferential creditor) 6. Employee s provident fund is considered as preferential creditor.- True 7. Workers dues are payable in priority to government dues. True 8. A liquidator cannot keep the sum received on behalf of the company more than Rs. 500 for more than 10 days. 9. Debentures are less secured than fully secured creditors. 10. Which mode of the winding up the companies, will be called compulsory winding up? (a) Winding up by the tribunal (b) Voluntary winding up (b) Winding up subject to the supervision of the tribunal (d) None of the above. 11. Which of the following is not the preferential creditor? (a) Provident fund of staff (b) Leave remuneration (c) Municipal tax (d) all of the above. 12. If the company is solvent, the interest on debenture is paid until the date of payment. 13. The liquidator s statement is similar as Cash Account. - True 14. The liquidator has cash on hand Rs to pay to creditors. The liquidator is entitled to remuneration at 2% on the amount distributed to the creditors. What can be the amount of remuneration? (a) Rs (b) Rs (c) Rs (d) None of the above. 15. If the company is insolvent, the interest on debenture is paid till the date of winding up. - True 16. Outstanding salary upto maximum Rs. 20,000 is to be treated as preferential creditors. 17. The shareholders who ceased to be shareholders within one year from the date of winding up are kwon as List B Contributories except due to death. 18. The distribution of capital deficiency should be done in which ratio? (a) In number of Shares (b) In Nominal value (c) Both a & b (d) none of the above.

5 19. According to supreme court directions, debenture holders are paid prior to preferential creditors. 20. Liquidator s statement is a ledger account and part of double account system. False 21. Receipt side of the liquidator s statement include the followings, (a) Bank Balance (b) Surplus from secured creditors (d) All of the above. 22. Salary of four clerks is monthly Rs. 30,000 each, which is outstanding for last two months. How much amount would be considered as preferential creditors at the time of liquidation? (a) Rs. 2,40,000 (b) Rs. 2,00,000 (c) Rs. 80,000 (d) None of the above 23. Following items are not a part of liquidator s statement? (a) Goodwill (b) Profit & Loss account (c) a & b (d) None of the above. 24. Accrued leave remuneration is considered as preferential creditor.- True 25. Fully secured creditors are paid first among all the creditors. Profit prior to incorporation 1. The profit of post incorporation period is called; (a) Revenue profit (b) capital profit (c) Both a & b (d) none of the above 2. Salesmen s commission is divided in profit prior to incorporation according to (a) Turnover Ratio (b) Time Ratio (c) Post incorporation period (d) Pre incorporation period 3. Director s remuneration is calculated on the basis of, (a) Turnover Ratio (b) Time Ratio (c) Post incorporation period (d) Pre incorporation period 4. If there is a loss prior to incorporation, it will be debited to (a) General Reserve A/c (b) Profit and Loss A/c (c) Capital Reserve Account (d) None of the Above 5. Audit fees in general is to be treated as post incorporation expenses. 6. A private company can start business on the receipt of the Certificate of Incorporation. 7. Capital loss should be debited to Goodwill Account. 8. Which of the following expenses is not distributed based on time. (a) Rent (b) Salary (c) Stationery expenses (d) None of the above. 9. Interest on purchase price is divided in time ratio. 10. Gross profit is to be distributed in turnover ratio. 11. Net profit is get divided into; (a) Capital Profit (b) Revenue Profit (c) Both a & b (d) None of the above 12. Preliminary expenses is written on post incorporation period. 13. Sales man s salary is to be divided into turnover ratio.

6 CAPITAL REDUCTION 1) If under the scheme of capital reduction, creditors agree to waive a part of their dues, then waived amount will be transferred to- (A) share capital account (B) creditors account (C) capital reduction account (D) Profit & Loss account 2) For capital reduction, sanction of following body is necessary (A) Share holder (B) Court (C) Creditors (D) Tribunal 3) When capital reduction is made by unlimited company (A) The approval of court is not necessary (B) The approval of shareholders is not necessary (C) The approval of creditors is not necessary (D) The approval of debtors is not necessary 4) If liabilities recorded in books are cancelled, then it is transferred to- (A) Debenture Account (B) creditors Account (C) capital reduction account (D) Share capital Account 5) If preference dividend is cancelled, then (A) capital reduction account debited (B) preference share capital account is debited (C) No entry is made (D) Profit and loss Account is debited

7 6) After completion of the scheme of capital reduction the credit balance of profit and loss account or balance of General reserve account is transferred to (A) Capital reserve A/C (B) Share capital A/C (C) Capital redemption reserve A/C (D) Not transferred to any account 7) If any balance is left out of surrender of share account, then (A) Share capital A/C is credited (B) capital reduction A/C is credited (C) Shareholder s A/C is credited (D) capital reduction A/C is debited 8) If profit is made on sale of any asset then it is credited to- (A) Profit and Loss A/C (B) Capital reserve A/C (C) Capital reduction A/C (D) General reserve A/C 9) When arrears of preference dividend is declared, then it is considered as a loss and is debited to (A) Capital reduction A/C (B) Profit and Loss A/C (C) Capital reserve A/C (D) None of the above 10) If under the scheme of capital reduction, the damaged machinery worth Rs. 1,50,000 is sold out as a scrap for Rs.25,000, then (A) Rs.25,000 should be credited to capital reduction account (B) Rs. 1,50,000 should be debited to capital reduction account (C) Rs. 1,75,000 should be credited to capital reduction account (D) Rs. 1,25,000 should be debited to capital reduction account 11) If under the scheme of capital reduction, out of the preference dividend in arrears of Rs. 75,000 ( Which was not declared and not paid), Rs. 50,000 is waived by preference Shareholders, then (A) Rs.50,000 would be credited to capital reduction account (B) Rs.25,000 would be credited to capital reduction account (C) Rs.25,000 would be debited to capital reduction account

8 (D) No entry will be made 12) Under the scheme of capital reduction, balance left in capital reduction A/c, after writing of Accumulated losses, is transferred to- (A) Capital Redemption reserve A/C (B) General reserve A/C (C) Capital reserve A/C (D) Share capital A/C 13) Credit balance of capital reduction account is transferred to (A) Capital Reserve A/C. (B) General reserve A/C (C) Goodwill A/C (D) Profit and Loss A/C 14) After implementing the scheme of internal capital reduction, the company is (A) Continued (B) Dissolved (C) Purchased by other company (D) Merged to another company 15) The most important reason for capital reduction is (A) The low price of goodwill shown in balance sheet (B) Excessive amount of depreciation on fixed assets (C) Over capitalization (D) Under capitalization 16) At the time of capital reduction, outstanding director fees was Rs. 20,000, 60% director fees were already paid. Outstanding director fee is waved by directors and directors fee paid to directors are repaid to the company by them. Then will be credited to Capital Reduction A/C. (A) Rs. 20,000 (B) Rs. 30,000

9 (C) Rs. 40,000 (D) Rs. 50,000 17) For the capital reduction scheme, in which Sections of Company Act, the provisions are made? (A) 100 to 104 (B) 200 to 204 (C) 300 to 304 (D) 400 to ) Reconstruction expenses paid for implementing the capital reduction scheme (A) Credited to capital reduction A/C (B) Credited to Dissolution expenses A/C (C) Debited to bank A/C (D) Credited to bank A/C 19) Who will sacrifice in the capital reduction scheme? (A) Equity Share holders (B) Preference Share Holders (C) Creditors (D) All of the above as per requirement 20) While applying scheme of reduction of capital, if there is decrease on asset side in the Balance Sheet (A) Credited to capital reduction Fund A/C (B) Credited to Profit & Loss A/c (C) Debited to capital reduction Fund A/C (D) Debited to Profit & Loss A/c 21) Total amount in capital reduction Fund is Rs. 27,50,000. Total application of capital reduction Fund is Rs.27,25,000. So closing balance of capital reduction Fund (A) Debited to Goodwill A/c Rs. 25,000

10 (B) Credited to Goodwill A/c Rs. 25,000 (C) Debited to Capital Reserve A/c Rs. 25,000 (D) Credited to Capital Reserve A/c Rs. 25,000 22) K.K. Co s. market value of freehold property is Rs. 7,50,000, which is 25% more its book value, so under capital reduction scheme (A) Rs.1,87,500 debited to capital reduction Fund A/C (B) Rs.1,50,000 credited to capital reduction Fund A/C (C) Rs.1,50,000 debited to capital reduction Fund A/C (D) Rs.1,87,500 credited to capital reduction Fund A/C 23) Company can reduce its share capital by- (A) Cancelling its share which are not subscribed. (B) Reducing subscribed capital (C) (A) & (B) both (D) None of the above 24) If under the scheme of capital reduction, out of the preference dividend in arrears of Rs. 90,000 (Which was not declared and not paid),rs. 60,000 is waived by preference shareholders then (A)Rs. 60,000 would be credited to capital reduction A/C (B) Rs. 30,000 would be credited to capital reduction A/C (C) Rs. 30,000 would be debited to capital reduction A/C (D) No entry will be made 25) While applying scheme of reduction of capital, if there is an increase on asset side in the Balance Sheet (A) Profit & Loss A/c is Debited (B) Profit & Loss A/c is credited (C) Capital reduction A/C is debited (D) Capital reduction A/C is credited

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