Questions for Chapter-Financial statements of a company 

MCQ-Based Questions for CUET Accountancy chapter-Financial statements of a company 

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Practice Questions for CUET Accountancy chapter-Financial statements of a company SET-1

Accounts - MCQ on Financial statements of a company

Class XII

Q.1.Nature of and mode of valuation is given for

a. investments.

b. fixed assets.

c. secured loans.

d. current assets.

Answer:

(a)

Explanation:Nature of and mode of valuation is given for investments, for example cost or market price which ever is lower.

Q.2. While preparing the balance sheet as per schedule VI part I of the companies Act, the main heading that will appear on the assets side at number one is

a. current assets.

b. fixed assets.

c. investments.

d. share capital.

Answer:

(b)

Explanation: The main heading that will appear at number one on the assets side of the balance sheet is fixed assets.

Q.3. The period for which the final accounts are prepared is called

a. financial year.

b. calendar year.

c. one production cycle.

d. year of raising finance.

Answer:

(a)

Explanation: Financial year is related to the accounts. It refers to the period for which final accounts are prepared.

Q.4. Stock in trade is shown under the head

a. fixed assets.

b. miscellaneous expenditure.

c. current assets, loans and advances.

d. investments.

Answer:

(c)

Explanation: Stock in tradeisshown in the assets side of the balance sheet under the head current assets, loans and advances.

Q.5. Two alternative forms of preparing balance sheet is prescribed in

a. Part II of schedule VI.

b. Part I of schedule IV.

c. Part I of schedule VI.

d. Part II of schedule IV.

Answer:

(c)

Explanation: Part I of schedule VI to the companies act. 1956 has prescribed two alternative forms for the preparation of the balance sheet.

Q.6. Development expenditure not adjusted is shown under the head

a. current liabilities and provisions.

b. footnotes.

c. profit and loss account.

d. miscellaneous expenditure.

Answer:

(d)

Explanation: Development expenditure not adjusted isshown in the assets side of the balance sheet under the head miscellaneous expenditure.

Q.7. Plant and machinery is shown under the head

a. investments.

b. fixed assets.

c. secured loans.

d. miscellaneous expenditure.

Answer:

(b)

Explanation: Plant and machinery is shown in the assets side of the balance sheet under the head fixed assets.

Q.8.Uncalled liability on partly paid shares is an example of

a. current liability.

b. fixed liability.

c. provision for liability.

d. contingent liability.

Answer:

(d)

Explanation: Uncalled liability on partly paid shares is an example of contingent liability.The liability, which may or may not arise in future, is called contingent liability.

Q.9. Financial statements normally refers to

a. journal, ledger and trial balance.

books of accounts.

profit and loss account and balance sheet.

ratio analysis and cash flow statement.

Answer:

(c)

Explanation: Financial statements normally refer to the profit and loss account and balance sheet. In broader sense it also includes cash flow statement.

Q.10. Govt. or trust securities held by the company are shown under the head

a. fixed assets.

b. secured loans.

c. current assets

d. investments.

Answer:

(d)

Explanation: Govt. or trust securitiesheld by the company areshown in the assets side of the balance sheet under the head investments.

Q.11. Liabilities, which have not arisen but may arise on the happening of certain events is called

a. current liability.

b. contingent liability.

c. fixed liability.

d. provision for liability.

Answer:

(b)

Explanation: The liability, which may or may not arise in future, is called contingent liability.

Q.12. The end products of accounting process is called

a. trial balance.

b. financial statements.

c. ratio analysis and cash flow statement.

d. balance sheet.

Answer:

(b)

Explanation: The accounting process starts with journal and ends with the preparation of financial statements i.e. profit & loss account and balance sheet.

Q.13. Sundry debtors are shown under the head

a. fixed assets.

b. miscellaneous expenditure.

c. current assets, loans and advances.

d. investments.

Answer:

(c)

Explanation: Sundry debtors areshown in the assets side of the balance sheet under the head current assets, loans and advances.

Q.14. Discount allowed on issue of shares or debentures is shown under the head

a. miscellaneous expenditure.

b. current liabilities and provisions.

c. reserves and surpluses.

d. share capital.

Answer:

(a)

Explanation: Discount allowed on issue of shares or debentures isshown in the assets side of the balance sheet under the head miscellaneous expenditure.

Q.15. The other name for balance sheet is

a. position statement.

b. profit and loss appropriation account.

c. income statement.

d. trading account.

Answer:

(a)

Explanation: Balance sheetis also called position statement.

Q.16.The item “Outstanding expenses” appears in the balance sheet of a company under the category of

a. current assets, loans and advances.

b. discount on issue of shares.

c. Misc. expenditure.

d. current liabilities and provisions.

Answer:

(d)

Explanation: “Outstanding expenses”are shown under the head current liabilities and provisions.

Q.17. Financial statements are expressed in terms of

a. quantity.

b. money.

c. Quality and quantity both.

d. quality.

Answer:

(b)

Explanation: The financial statements are expressed in monetary terms.

Q.18. Goodwill is shown under the head

a. fixed assets.

b. current assets.

c. fictitious assets.

d. share capital.

Answer:

(a)

Explanation: Goodwill is shown in the assets side of the balance sheet under the head fixed assets.

Q.19. Authorised capital is shown under the head

a. share capital.

b. reserves and surpluses.

c. issued capital.

d. owner’s funds.

Answer:

(a)

Explanation:Authorised capital isshown in the liabilities side of the balance sheet under the head share capital.

Q.20. The numbers of major headings on the liabilities side (including contingent liabilities) of the balance sheet are

a. two.

b. four.

c. five.

d. six.

Answer:

(d)

Explanation: There are six major headings on the assets side of the balance sheet.

Practice Questions for CUET Accountancy chapter-Financial statements of a company SET-2

Q.21. Horizontal format and vertical format are related to

a. balance sheet.

b. trading account.

c. profit and loss account.

d. contingent liabilities.

Answer:

a.

Explanation: The companies’ act 1956 has prescribed two alternative forms for preparing balance sheet. The two forms are known as horizontal form and vertical form. There is no prescribed format of Profit and Loss account by Companies act.

Q.22. Capital redemption reserve is shown on the liabilities side of the balance sheet under the heading

a. share capital.

b. unsecured loans.

c. current liabilities and provisions.

d. reserves and surpluses.

Answer:

(d)

Explanation:Capital redemption reserveaccount is shown on the liabilities side of the balance sheet under the heading reserves and surpluses.

Q.23. Claims against the company not acknowledged, as debt is an example of

a. current liability.

b. contingent liability.

c. fixed liability.

d. provision for liability.

Answer:

(b)

Explanation: Claims against the company not acknowledged, as debt is an example ofcontingent liability. The liability, which may or may not arise in future, is called contingent liability.

Q.24. While preparing the balance sheet as per schedule VI part I of the companies act. The main heading that will appear on the assets side at number five is

a. profit and loss account- Dr. balance.

b. loans and advances.

c. investments.

d. miscellaneous expenditure.

Answer:

(a)

Explanation: The main heading that will appear at number five on the assets side of the balance sheet is profit and loss account- Dr. balance.

Q.25. Profit and loss account-loss is shown under the head

a. reserves and surplus.

b. owner’s funds.

c. share capital.

d. profit and loss account.

Answer:

(d)

Explanation: Profit and loss account- loss is shown in the assets side of the balance sheet under the head profit and loss account.

Q.26. The numbers of major headings on the assets side of the balance sheet are

a. five.

b. four.

c. three.

d. two

Answer:

(a)

Explanation: There are five major headings on the assets side of the balance sheet.

Q.27. The item “Provision for taxation” appears in the balance sheet of a company under the category of

a. current assets, loans and advances.

b. reserves and surpluses.

c. Current liabilities and provisions.

d. Misc. expenditure.

Answer:

(c)

Explanation: “Provision for taxation”is shown under the head current liabilities and provisions.

Q.28. The account prepared to show the disposal of divisible profits is called

a. profit and loss account.

b. position statement.

c. profit and loss appropriation account.

d. income statement.

Answer:

(c)

Explanation: Profit and loss appropriation account is prepared to dispose off the divisible profits.

Q.29. The examples of secured loans, is

a. debentures.

b. public deposits.

c. loans and advances from subsidiaries.

d. short term loans and advances.

Answer:

(a)

Explanation: Debentures are usually secured loans.

Q.30. While preparing the balance sheet as per schedule VI part I of the companies act. The main heading that will appear on the liabilities side at number three is

a. Reserves and surpluses.

b. Secured loans.

c. Unsecured loans.

d. Current assets, loans and advances.

Answer:

(b)

Explanation: Secured loans is main heading number three on the liabilities side of the company’s balance sheet.

Q.31. The other name for profit and loss account is

a. position statement.

b. profit and loss appropriation account.

c. income statement.

d. trading account.

Answer:

(c)

Explanation: Profit and loss account is also called income statement.

Q.32.Balances with customs, port trust and excise authorities etc. are shown under the head

a. fixed assets.

b. miscellaneous expenditure.

c. current assets, loans and advances.

d. investments.

Answer:

(c)

Explanation: Balances with customs, port trust and excise authorities etc.areshown in the assets side of the balance sheet under the head current assets, loans and advances.

Q.33. Financial statement relate to

a. past.

b. future.

c. present.

d. present and past.

Answer:

(a)

Explanation: Financial statements relate to the past period and thus are historical documents.

Q.34. Advances and loans to subsidiaries are shown under the head

a. current assets, loans and advances.

b. current liabilities and provisions.

c. secured loans.

d. investments.

Answer:

(a)

Explanation: Advances and loans to subsidiariesareshown in the assets side of the balance sheet under the head current assets, loans and advances.

Q.35. Balance sheet shows the

a. financial statement.

b. financial position.

c. profit earning capacity.

d. operating activities.

Answer:

(b)

Explanation: Balance sheet is a statement of assets and liabilities. Hence it shows the financial position as on a particular date.

Practice Questions for CUET Accountancy chapter-Financial statements of a company SET-3

Q.36. Surplus in profit and loss account is shown on the liabilities side of the balance sheet under the heading

a. share capital.

b. unsecured loans.

c. reserves and surpluses.

d. current liabilities and provisions.

Answer:

(c)

Explanation:Surplus in profit and loss accountis shown on the liabilities side of the balance sheet under the heading reserves and surpluses.

Q.37. Standard form has been prescribed for preparing

a. profit and loss account of company.

b. balance sheet of company.

c. balance sheet of partnership.

d. profit and loss appropriation account.

Answer:

(b)

Explanation: Part I of schedule VI to the companies’ act 1956 has prescribed two alternative forms for preparing balance sheet.

Q.38. Share forfeiture account is shown under the head

a. current liabilities and provisions.

b. owner’s funds.

c. share capital.

d. reserves and surpluses.

Answer:

(c)

Explanation:Share forfeiture accountis shown in the liabilities side of the balance sheet under the head share capital.

Q.39. Fixed assets are shown at

a. cost price.

b. market price.

c. cost or market whichever is lower.

d. replacement price.

Answer:

(a)

Explanation: Fixed assets are purchased for long-term use in the business and are not for re-sale. They are shown at cost price.

Q.40. The item “Fixed deposits” appears in the balance sheet of a company under the category of

a. secured loans.

b. unsecured loans.

c. current liabilities and provisions.

d. Misc. expenditure.

Answer:

(a)

Explanation: “Fixed deposits” are shown under the head secured loans.

Q.41. Preliminary expenses are shown under the head

a. current liabilities and provisions.

b. miscellaneous expenditure.

c. current assets, loans and advances.

d. investments.

Answer:

(b)

Explanation: Preliminary expensesareshown in the assets side of the balance sheet under the head miscellaneous expenditure.

Q.42. While preparing the balance sheet as per schedule VI part I of the companies act. The main heading that will appear on the liabilities side at number five is

a. contingent liabilities.

b. secured loans.

c. current liabilities and provisions.

d. unsecured loans.

Answer:

(c)

Explanation: Current liabilities and provisions is main heading number five on the liabilities side of the company’s balance sheet.

Q.43. Profit and loss appropriation account shows

a. net profit or net loss during the period.

b. flow of funds to different activities.

c. flow of cash to different activities.

d. funds distributed among shareholders and transferred to reserves.

Answer:

(d)

Explanation: Profit and loss appropriation account is prepared after the profit and loss account. It shows how much profit has been distributed as dividends on equity and preference share capital and how much has been transferred to general reserve or other reserves.

Q.44. The item “Sundry creditors” appears in the balance sheet of a company under the category of

a. Secured loans.

b. unsecured loans.

c. current liabilities and provisions.

d. Misc. expenditure.

Answer:

(c)

Explanation: “Sundry creditors” are shown under the head current liabilities and provisions.

Q.45. Discount allowed on issue of shares or debentures to the extent not written off is shown in

a. liabilities side of the balance sheet.

b. assets side of the balance sheet.

c. credit side of P&L.

d. debit side of P&L.

Answer:

(b)

Explanation: Discount allowed on issue of shares or debentures to the extent not written off is shown in assets side of the balance sheet under the head Misc. expenditure.

Q.46. Securities premium account is shown on the liabilities side of the balance sheet under the heading

a. share capital.

b. unsecured loans.

c. current liabilities and provisions.

d. reserves and surpluses.

Answer:

(d)

Explanation:Securities premium account is shown on the liabilities side of the balance sheet under the heading reserves and surpluses.

Q.47. The item “Proposed dividend” appears in the balance sheet of a company under the category of

a. unsecured loans.

b. secured loans.

c. current liabilities and provisions.

d. Misc. expenditure.

Answer:

(c)

Explanation: “Proposed dividend”are shown under the head current liabilities and provisions.

Q.48. Interest accrued on investments held by the company is shown under the head

a. fixed assets.

b. secured loans.

c. current assets, loans and advances.

d. investments.

Answer:

(d)

Explanation: Interest accrued on investmentsareshown in the assets side of the balance sheet under the head current assets, loans and advances.

Q.49. Market price must be disclosed for

a. current assets.

b. fixed assets.

c. quoted investments.

d. unquoted investments.

Answer:

(c)

Explanation: In case of quoted investments market price must be disclosed.

Q.50. Interest accrued and due on secured loans is shown under the head

a. investments.

b. secured loans.

c. current liabilities and provisions.

d. Misc. expenditure.

Answer:

(b)

Explanation:Interest accrued and due on secured loans is shown under the head secured loans.

Q.52. Short term loans and advances means repayment within

a. 12 months.

b. 6 months.

c. 18 months.

d. 36 months.

Answer:

(a)

Explanation: Short-term loans and advances include those, which are due for repayment not later than one year as at the date of balance sheet.

Q.53. Bonus shares are shown under the head

a. Misc. expenditure.

b. reserves and surpluses.

c. secured loans.

d. share capital.

Answer:

(d)

Explanation: Bonus shares issued are shown under the headshare capital.

Q.54. The item “Short term loans and advances” appears in the balance sheet of a company under the category of

a. unsecured loans.

b. secured loans.

c. current liabilities and provisions.

d. Misc. expenditure.

Answer:

(b)

Explanation: “Short term loans and advances” are shown under the head secured loans.

Q.55. Balance sheet of a company contains the figures of

a. current period only.

b. previous period only.

c. both current and previous periods.

d. current period and future expectations.

Answer:

(c)

Explanation: Balance sheet of a company contains the figures of both current and previous periods.

Q.56. Dividend is usually paid on

a. paid up capital.

b. called up capital.

c. subscribed capital.

d. authorized capital.

Answer:

(a)

Explanation:Dividend is usually paid on paid up capital.

Q.57. Amount set aside to meet losses due to bad debts is a/an

a. reserve.

b. liability

c. asset.

d. provision.

Answer:

(d)

Explanation: Amount set aside to meet losses due to bad debts is a provision.

Q.58. The amount is never shown in the amount column of the liabilities side of the balance sheet for

a. calls in arrears.

b. authorised capital.

c. contingent liabilities.

d. profit and loss- loss.

Answer:

(c)

Explanation:The amount is never shown in the amount column of the liabilities side of the balance sheet for contingent liabilities.

Q.59. The use of accounting conventions makes financial statement

a. impressive.

b. incomparable.

c. unrealistic and complex.

d. simple, comparable and realistic.

Answer:

(d)

Explanation: The use of accounting conventions makes financial statementsimple, comparable and realistic.

Q.60. The owners of a company are called

a. shareholders.

b. debenture holders.

c. creditors.

d. promoters.

Answer:

(a)

Explanation: The owners of a company are calledshareholders.

Q.61. Profit and loss account shows

a. gross profits.

b. net profits.

c. distribution of profits.

d. direct expenses.

Answer:

(b)

Explanation: Profit and loss account showsnet profits.

Q.62. The item “Debentures” appears in the balance sheet of a company under the category of

e. secured loans.

f. unsecured loans.

g. current liabilities and provisions.

h. Misc. expenditure.

Answer:

(a)

Explanation: “Debentures” are shown under the head secured loans.

Q.63.Personal judgments also have an important bearing on financial statements. For example

a. valuation of stock at cost or market price.

b. method of valuation of fixed assets.

c. recording of any transactions or not.

d. choice of selecting the method of depreciation.

Answer:

(d)

Explanation: Choice of selecting the method of depreciation (fixed Instalment or written down value) lies on the accountant.

Q.64.Footnote of the balance sheet includes

a. current liabilities.

b. fixed liabilities.

c. contingent liabilities.

d. misc. expenditures.

Answer:

(c)

Explanation: Footnote of the balance sheet includes contingent liabilities.

Q.65.A company’s balance sheet is prepared in the order of

a. liquidity.

b. financial position.

c. permanence.

d. increasing amounts.

Answer:

(c)

Explanation: A company’s balance sheet is prepared in the order of permanence. Fixed assets are shown at the top in the assets side and share capital at the top of liabilities side.

Q.66.Vehicles are shown under the head

a. investments.

b. secured loans.

c. fixed assets.

d. miscellaneous expenditure.

Answer:

(c)

Explanation: Vehicles areshown in the assets side of the balance sheet under the head fixed assets.

Q.67. Calls in arrear are shown under the head

a. current assets.

b. current liabilities.

c. owner’s funds.

d. share capital.

Answer:

(d)

Explanation:Calls in arrear areshown in the liabilities side of the balance sheet under the head share capital.

Q.68. Arrears of dividend on cumulative preference shares is an example of

a. current liability.

b. contingent liability.

c. share capital.

d. secured loans.

Answer:

(b)

Explanation: Arrears of dividend on cumulative preference shares is an example of contingent liability. They are shown in the liabilities side under the head contingent liabilities.

Q.69. The expenses that are incurred in connection with the formation of a company are called

a. prepaid expenses.

b. preliminary expenses.

c. Misc. expenditure.

d. cost of issue.

Answer:

(b)

Explanation: Preliminary expenses include cost of printing various documents, registration and filing fees paid at the time of registration of the company etc.

Q.70. Mould Limited distributed Rs 5,00,000 to the shareholders out of its profit earned. This is an example of

a. interest.

b. bonus.

c. premium.

d. dividend.

Answer:

(d)

Explanation: The part of the profit, which is distributed among shareholders, is called dividend.

Q.71. Issue of shares to promoters is debited to

a. “Issue of Shares Account”.

b. “Incorporation Expenses Account”.

c.“Promoters Account”.

d. “Equity Share Capital Account”.

Answer:

(b)

Explanation: Issue of shares to promoters is debited to the “Incorporation expenses account”. Incorporation expenses are those expenses, which are incurred in the formation of the company.

Q.72. The portion of authorized capital, which can be issued only at the time of liquidation of the company, is called

a. un-issued share capital.

b. capital reserve.

c. reserve capital.

d. liquid capital.

Answer:

(c)

Explanation: The portion of authorized capital, which can be issued only at the time of liquidation of the company, is called reserve capital. It can be used only at the time of winding up of the company.

Q.73. Authorized capital is the

a. one, which can not be issued without the authority of shareholders.

b. one, which can not be issued without the approval of board of directors.

c. one with which the company is registered.

d. one, which is issued to the promoters of the company.

Answer:

(c)

Explanation: Authorized capital is the one with which the company is registered.

Q.74. As per schedule VI of the Companies Act 1956, forfeited shares account will be

a. added to paid up capital.

b. deducted from paid up capital.

c. shown as a capital reserve.

d. shown under reserves and surpluses.

Answer:

(a)

Explanation: Balance in the shares forfeiture account is added to the paid up capital.

Q.75. Subscribed capital is

a. that part of the nominal capital, which is allotted by the company.

b. the maximum amount of share capital, which a company can raise.

c. the amount paid on the shares allotted by the company.

d. the capital which a company can issue in future.

Answer:

(c)

Explanation: Subscribed capital is the amount paid on the shares allotted by the company.

Q.76. Certain expenses relating a particular period may not have been paid in that accounting period are called

a. cash expenses.

b. preliminary expenses.

c. prepaid expenses.

d. outstanding expenses.

Answer:

(d)

Explanation: Certain expenses relating a particular period may not have been paid in that accounting period are called prepaid expenses.

Q.77. Profit and loss account includes

a. direct expenses.

b. indirect expenses.

c. transfer to reserve.

d. sales.

Answer:

(b)

Explanation:Profit and loss account includes indirect expenses.

Q.78. Current asset include

a. goodwill.

b. live stock.

c. preliminary expenses.

d. sundry debtors.

Answer:

(d)

Explanation: Sundry debtors are current assets.