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NOTE: SOME OF MCQs ARE SOLVED AND SOME ARE NOT, SOLVED AREFROM ASSIGNMENTS SOLUTIONS. THANKS 1.The balance sheet is alternately known as : (a)Assets statement (bStatement of financial position (c)Statement of profit and loss (d)None of the given options 2 Trading & Profit & loss account and balance sheet is prepared from(a) Ledger balance(b) Ledger balances, cash and bank balances(c) Cash book and bank book (d) Trial balance 3. Interest on drawing is an:(a) Expenditure for the business(b) Expense for the business (c) Gain for the business (d) Loss for the business4. The distinction between revenue account and capital account is n e c e s s a r y f o r t h e preparation of: (a) Final accounts (b) Receipt and payment account(c) Cash flow statements (d) Funds flow statements5. Capital expenditure is that expenditure which is:(a) Paid in lump-sum(b) Large in amount (c) Intended to benefit the future period (d) Intended to benefit the current period6. Calculate the gross profit /loss if:Sales Rs. 60,000; Cost of sales Rs. 50,000; Opening stock Rs. 10,000; Purchases Rs.40,000; Wages Rs. 20,000 and Office rent Rs. 10,000.(a) Loss Rs. 10,000(b) Loss Rs. 20, 000 (c) Profit Rs. 10,000 (d) None of the given options7. Balance Sheet shows the:(a) Profit earned by the business(b) Total capital employed

(c) Financial position of the business (d) Trading results of the business8. Net profit is equal to:(a) Sales less cost of sales and operating expenses(b) Gross profit less operating expenses(c) Sales less operating expenses (d) Both (a) & (b) 9. Selling expenses are shown in: (a) Trading account (b) Profit and loss account (c) Profit and loss appropriation account(d) Manufacturing account10. Current liabilities are such obligations which are to be satisfied within: (a) One year (b) Two years(c) Three years(d) All of the given options 1) Depreciation is charged on land in case of: A. Leased hold landB. Land purchased by the owner himself C. Depreciation is never being charged on landD. None of the given options 2) Which of the following does not affect the cash balance of a business? A. Increases in inventoryB. Changes in accounts receivablesC. DepreciationD. Seasonality 3) Ongoing expenditures, such as general and administrative expenses, whichoccur in the process of selling and managing a company are known as: A. Cost of goods soldB. Selling expensesC. Gross margin D. Operating expenses

4) Which of the following is not the same as the others? A. GainB. Gross marginC. IncomeD. Revenue 5) The income statement records: A. SalesB. Cost of goods soldC. ExpensesD. All of the above 6) The difference between assets and liabilities is called: A. Balance sheetB. ProfitC. Gross marginD. Equity 7) Long-term liabilities are: A. Debts or portions of debt due more than 12 months from the date of the balancesheetB. Bills for inventoryC. Amounts due for renovationsD. Amounts due for supplies 8) Which of the following is not a category used for assets on the balance sheet? A. Current 5) Mr. Abid is a partner in a partnership firm. His capital on July 1, 2001 w a s R s . 150,000. He invested further capital of Rs. 50,000 on March 1, 2002. What will bethe mark up on capital if Mark up rate is 5%? The financial year is from July to June.A. Rs.5833 B. Rs. 8,333 C. Rs. 833 D. None of the given options .Calculation: =150,000 x 5% = 7,500 = 50,000 x 5% x 4/12 = 833= 7,500 + 833 = 8,333

6) Which of the following is an example of Non commercial organization?A. Sole proprietorshipB. PartnershipC. Limited Company D. Trusts 7) In case where actual increase or decrease in capital such as Drawing and Profit is notrecorded in capital account, such kind of account is called: A. Fixed capital account B. Fluctuating capital accountC. Current accountD. None of the given option8) There should be a minimum of _________ members to form a public limited company.A. TenB. Nine C. Seven D. Two9) What amount of Provisions for bad debts will appear in Profit & Loss account if:Total debtors Rs. 32,800Bad debts Rs. 3,600Provision for doubtful debts (old) Rs. 6,000Current year provisions (New) Rs. 1,500A. Rs. 11,100 B. Rs. 900 C. Rs. 8,100D. Rs. 5,100 Calculation: = New reserve - Old reserves +Old bad debts= 1,500 6,000 + 3,600 = 900 10) Ascertain the amount of Current Assets from the following data.Stock Rs. 51,060Debtors Rs. 37,178Provision for doubtful debts Rs. 870Cash at bank Rs. 666Advance rent Rs. 120 Rs. 88,154 A. Rs. 88,034B. Rs. 88,238 C. Rs. 89108 Calculation: Stock 51,060Debtors 37,178Less: Provision for doubtful debts (870)Cash at bank 666Advance rent 120 88,154 1. Memorandum of association contains which of the followings:A.

Place of registered office of the companyB. Objective of the companyC. Amount of registered share capital D. All of the given options 2. The maximum amount with which a company gets registration/incorporation is called: A. Authorized share capital B. Issued share capitalC. Subscribed share capitalD. Paid up share capital3. No entry is recorded for:A. Issued share capital B. Authorized share capital C. Subscribed share capitalD. None of the given options 4. All preliminary expenses are incurred by _________ of the company. A. Directors B. Subscribers C. AccountantD. Managers5. Share Premium Account account is used to:A. Write off Preliminary Expenses of the companyB. Write off the balance amount, in issuing shares on discountC. Issue fully paid Bonus Shares D. All of the given options 6. Dividend is approved by the share holders in the __________at the recommendation of the directors. A. Annual general meeting B. Directors meetingC. Statutory meetingD. Special meeting7. In Pakistan, Financial Statements of limited companies are prepared in accordancewith:A. International accounting standards adopted in PakistanB. Companies Ordinance 1984 C. Both A & B

D. None of the given options8. Which of the following are explained in Notes to the accounts?A. Nature of business of the company B. Accounting Policies of the companyC. Details and explanation of items given in the Profit and Loss Account andBalance Sheet D. All of the given options 9. Both Debentures and Term Finance Certificates are usually issued by: A. Public Companies B. Private CompaniesC. Listed CompaniesD. Non listed companies10. Which of the following is not a Component of Financial statement?A. Balance SheetB. Notes to the AccountsC. Comparative figures of Previous Period D. None of the given options 1. A large organization with separate legal status is known as: a) Limited Company b) Sole proprietorship c) Partnership d) None of the given options2. Which one of the following concept may be stated as "for every debit, there is acredit"?a . S e p a r a t e E n t i t y C o n c e p t b.Dual Aspect Concept c.Money Measurement Conceptd.Accounting Period Concept 3. The accounting system, in which accounting entries are made on the basis of amounthaving become due for payment or receipt, is known as: a) Cash system of accounting b) Current accounting period c) Accrual system of accounting d) None of the given options4. Assets which have no physical existence and which cannot be seen, touched or felt arecalled:

a) Current assets b) Tangible assets c) Fictitious assets d) Intangible assets 5. If the Gross profit is Rs. 5,000 and the net profit is 25% of the Gross profit. Theexpenses must be: a) Rs.3,750 b) Rs.1,250 c) Rs.4,150 d) Rs.6,2506. If the profit is 1/4 of the sales then it is: a) 1/4 of the cost price b) 1/3 of the cost price c) 1/5 of the cost price d) 1/2 of the cost price7. Excess of debit over credit is called: a) Opening balance b) Closing balance c) Debit balance d) Credit balance8. Those liabilities which arise only on the happening of some event, are called: a) Current Liabilities b) Outstanding Liabilities c) Deferred Liabilities d) Contingent Liabilities 9. Which one of the following system of recording transaction has a dual aspect conceptof accounting?

a) Double entry system b) Single entry system c) Cash system of accounting d) None of the given options10. The arithmetical accuracy of books of account is verified through: a) Journal b) Trial Balance c) Ledger d) None of the given optionsMr. X, the sole proprietor of Company XY does not list his personal house on the balance sheet of Company XY; Example shows which one of the followingconcept? a) Business Entity b) Matching Concept c) Going Concern Conceptd) Full Disclosure2) Which one of the following is a current liability?(a) Closing inventory(b) Opening inventory(c) Petty cash(d) Bank overdraft 3) The primary purpose of the balance sheet is to a) Report the financial position of the reporting entity at a particularpoint of time b) Measure the net income of a business up to a particular point in timec) Determine cash flow for the periodd) Report the difference between cash inflows and cash outflows for the period4) In Accrual Accounting an expense is recorded when it isa) Paid b) Incurred c) 15 days after receipt of invoiced) Earned5) Which one of the following items will appear on the balance sheet of a companyas current assets? a) Prepaid expenses b) Outstanding expenses c) Furniture and equipmentd) Building6) Which of the following is correct about the drawings?They reduce the Gross profit They reduce the capital & Net Profit They increase in liabilitiesThey are treated as asset7) For purposes of measuring business income, the life of a business is:a) Divided into specific point of time b) Divided into irregular cycles c) Divided into discrete accounting periods d) Considered to be a continuous cycle8) Consider the following totals:Revenues Rs. 100,000Cost and expenses Rs. 45,000Income taxes Rs. 18,000 Net income Rs. 42,000 What was the total of operating income? a. Rs. 42,000 b. Rs. 55,000 c. Rs. 60,000d. Rs. 37,0009) Office salaries, insurance, advertising, sales commissions and rent are the

examples of:a. Financial Expenses b. Operating expenses c. Marketing expensesd. All of the given options10) _______shows how much of a mark-up a company is achieving between the costof what it sells and the selling pricea. Cost of goods sold b. Gross profit c. Gross margin d. Net profit 1. If Accumulated profit brought forward has credit nature, what will be itstreatment? a. It will be added in net profit for the year b. It will be subtracted from the net profit for the year c. It will be deducted from current Assetsd. It will be added in current assets 2. Fixed Assets at WDV + working capital =? a. Total shareholders equity b. Net capital employedc. Long term loand. Current liability 3. Keeping in view the following data, what will be Net Cash Flow from Investing Activities?Particulars Rs. Purchases from short term borrowing 45,000Purchases of marketable securities (65,000)Proceeds from marketable securities 40,000Loans made to borrowers (17,000)Cash paid acquire plant assets (160,000)Proceeds from sales of sales of plant Assets 75,000Collection on loans 12,000a. Rs. (115,000) b. Rs. 100,000c. Rs. 55,000d. None of the given options 4. Keeping in view the following data, what will be Net cash provided byoperating activities?Particulars Rs. Net income 65,000Depreciation expenses 40,000Decrease in accrued interest receivable 1,000Increase in accounts payable 15,000Increase in accrued liabilities 7,000 Non operating loss on sales of marketable securities 4,000Increase in accounts receivable 30,000 Increase in inventory 10,000Decrease in accrued liabilities 8,000Increase in prepayments 3,000 Non operating gain on sales of plant assets 31,000 Net cash provided by operating activities ? a. Rs. 115,000 b. Rs. 100,000c. Rs. 50,000d. None of the given options 5. Advances from customers are shown in which of the following heads inBalance Sheet? a. Current Assets b. Current liabilitiesc. Fixed Assetsd. Long term liabilities 6. While preparing cash flow statements, the repayments of a loan during theyear should be included under the heading of: a. Operating activities b. Financing activitiesc. Investing activitiesd. None of the given options 7. Which of the following statement is also known as a source and usestatements? a. Income Statements b. Statement of Cash Flowsc. Balance Sheetd. Statement of Retained Earnings 1. If Accumulated profit brought forward has credit nature, what will be itstreatment?a. It will be added in net profit for the year b. It will be subtracted from the net profit for the year c. It will be deducted from current Assetsd. It will be added in current assets 2. Fixed Assets at WDV + working capital =? a. Total shareholders equity b. Net capital employed c. Long term loand. Current liability 3. Keeping in view the following data, what will be Net Cash Flow fromInvesting Activities?Particulars Rs.

Purchases from short term borrowing 45,000Purchases of marketable securities (65,000)Proceeds from marketable securities 40,000Loans made to borrowers (17,000)Cash paid acquire plant assets (160,000) Proceeds from sales of sales of plant Assets 75,000Collection on loans 12,000 a. Rs. (115,000) b. Rs. 100,000c. Rs. 55,000d. None of the given options 4. Keeping in view the following data, what will be Net cash provided byoperating activities?Particulars Rs. Net income 65,000Depreciation expenses 40,000Decrease in accrued interest receivable 1,000Increase in accounts payable 15,000Increase in accrued liabilities 7,000 Non operating loss on sales of marketable securities 4,000Increase in accounts receivable 30,000Increase in inventory 10,000Decrease in accrued liabilities 8,000Increase in prepayments 3,000 Non operating gain on sales of plant assets 31,000 Net cash provided by operating activities ? a. Rs. 115,000 b. Rs. 100,000 c. Rs. 50,000 d. None of the given options5. Advances from customers are shown in which of the following heads inBalance Sheet? a. Current Assets b. Current liabilities c. Fixed Assetsd. Long term liabilities 6. While preparing cash flow statements, the repayments of a loan during theyear should be included under the heading of: a. Operating activities b. Financing activities c. Investing activitiesd. None of the given options 7. Which of the following statement is also known as a source and usestatements? a. Income Statements b. Statement of Cash Flows c. Balance Sheetd. Statement of Retained Earnings 8. Calculate depreciation for the year. Building at cost = Rs. 1, 00,000Depreciation rate = 10% a. Rs. 10,000 b. Rs. 1,000c. Rs. 500d. Rs. 0 9. Mr. A, Mr. B and Mr. C are three partners of a partnership firm. The profitsharing ratio is 2:3:5. If company has distributable profit of Rs. 4, 90,000,determine the profit of Mr. A.a. Rs. 98,000 b. Rs. 1, 47,000c. Rs. 2, 45,000d. Rs. 3, 43,000 10. An example of financing activities in the context of cash flow statement is: a. Fixed capital expenditure b. Long-term depositc. Financial charges paid d. Dividend paidAdvance insurance is an example of 1. Current Asset2. Administrative expense3. Insurance expense4. Current Liability Which of the following is not a component of Financial Statement? 1. Balance Sheet 2. Profit and Loss account3. Bank Reconciliation Statement4. Cash Flow statement Cost of goods sold does not contain which of the following heads of Accounts:

1. Purchase of raw material/goods2. Wages paid to employees for manufacturing of goods3. Commission is paid on purchases from third parties4. Any expense incurred on carriage/transportation of purchased items Paid up Capital is: 1. The amount raised by the company by the issue of its shares to general public2. The maximum amount with which a company gets Registration/Incorporation3. Amount collected on issuance of prospectus and debentures4. None of the given OptionsWhich one of the following assets could be described as a current asset?Stock of goods for resaleMachinery to manufacture goods for resaleBuildings to house the machineryLand on which the buildings standOperating Profit is equal to:Sales - Gross Profit Cost of goods sold Operating expensesSales Cost of goods sold Operating expensesSales - Gross Profit None of the given options The accounting equation represents:Resources in the business are equal to resources supplied by the owner and outsidersResources are allocated in the business on cost priceOwners give money for the businessResources in the business are not equal to resources supplied by the owner and outsidersCredit signifies:Increase in asset accountIncrease in liability accountDecrease in capital account None of the given optionsA business owned and run by one person is called:Sole ProprietorshipPartnershipLimited Company None of the given optionsAny expenditure that benefits the business for several accounting years is regarded as:Capital expenditureRevenue expenditureRevenue receipt None of the given optionsWhich of the following option is true?Increase in expense is DebitIncrease in asset is Debit Increase in income is creditAll of the given optionThe accounting equation is based on:Dual aspect conceptGoing concern conceptBusiness entity concept None of the given optionsThe discount allowed by manufacturer or wholesaler at the time of selling goods toretailer as a deduction from the listed-price or catalogue price, is called as:Trade discountCash discountCommission None of the given optionIf the original cost of an asset is Rs. 2,000 then the written down value of asset after twoyears by using the diminishing balance method at the rate of 10% p.a. will be:Rs. 1,600Rs. 1,620Rs. 380 None of the given optionsSales = Cost of goods sold + Gross profit.TrueFalseBalance Sheet discloses the financial position of the business.True FalseBudget is an Organizations plan of future period expressed in money terms.TrueFalseCash Accounting is the accounting system in which events are recorded as and when theyoccur.TrueFalseIn double entry system of book keeping, every business transaction affects the same sideof the same account.TrueFalse Which is the best definition of Balance sheet?o An account proving the Book balances o A record of closing entries o A listing of balances o A statement of Assets Depreciation is:o The amount spent to buy a fixed asset o The salvage value of a fixed asset o

The part of the cost of the fixed asset consumed during its period of use bythe firm o The amount of money spent on replacing asset Which of the following is not a Cash flow in Cash flow statement? o A depreciation charge o Dividend paid o Proceeds on Sales of Fixed Assets o Tax paid Gross Profit is:o Excess of sales over Cost of good sold o Sales less Purchases o Cost of good sold plus Opening Stock o Net profit less expenses of the period Which of the following is an intangible asset?o Patents o Copyrights o Trade marks o All of the given options __________ is used to record transactions that do not affect cash or bank.Payment voucher Receipt voucher Journal voucher All of the given optionsQuestion No: 2 ( Marks: 1 ) - Please choose oneWhich one of the following item will appear on the balance sheet of a company as currentassets?Prepaid expensesOutstanding expenses Furniture and equipmentProvision for depreciationIf bank statement shows a credit balance, it means __________balance for bank book.FavorableUnfavorableOverdraft None of the given optionsFormula for Earning per Share is_______ Market value per share / Earning per share Net profit after tax before appropriation / Number of sharesOperating Profit before financial charges / Financial charges None of the given optionsLiquidity is defined as:The amount of cash to liquidateThe funds available for useThe ability of business to receive its cashThe ability of a business to pay its debts in timeCash flow from operating activities is generated from:The cash receipts and payments that arise from Fixed and Long Term assets of theorganization.Cash generated from daily operations of organizationThe cash receipts and payments that arise from Owners of the business and other longterm liabilities of the organization None of the given options Accumulated Profit & Loss is an example of:Distributable reserves Non distributable reservesBoth Distributive and non distributive reserve None of the given optionsAccording to________________, Fixed assets revaluation reserve is included in thestatement of changes in equity.International Accounting StandardsCompanies OrdinanceInternational Standards of Auditing None of the given optionsShare premium can be utilized:To create non distributive reservesTo issue bonus sharesTo increase the Owners CapitalTo meet unexpected losses

Notes to the accounts explain which of the followings: Nature of business of the companyAccounting Policies of the companyDetails and explanation of items given in the Profit and Loss Account and Balance SheetAll of the given optionsMark up ratio is better for:BankersDebtors CreditorsOwnersDebentures are a companys : AssetsLiabilityExpensesInvestmentsSubscribers / Sponsors are the persons who sign:Articles of AssociationMemorandum of the companyContribute in the initial share capital of the company.All of the given optionsAll expenses incurred up to the stage of incorporation of the company are called:Preliminary ExpensesInstallation expensesAccrued expensesDeferred expensesThe head of board of directors is called:Chief executiveManager Subscriber Shareholder Which of the following would not be categorized as current assets? 1. Stocks2. Debtors3. Plant and Machinery4. Cash in handPak Motors buys a stock worth Rs. 30,000 on credit on the last day of his accounting period and includes these items in Closing Stock. Which of the following figures in theAccounts would be increased by Rs. 30,000?1. Cost of Sales2. Working Capital3. Gross Profit4. Current Assets.An account titled Unearned Fees would be classified as which of the following?1. Asset account2. Liability account3. Revenue account4. Expense accountAsset depreciation is calculated to which of the nearest time periods?1. Day2. Week 3. Month4. None of the Given OptionCapital expenditures are:1. The extra Capital paid in by the proprietor 2. The cost of running the business on day to day basis 3. Money spend on buying Assets or adding value to them4. Money spent on selling Fixed Assets.A Balance Sheet discloses the financial position of a firm:For a given periodOn a particular point of timeOn quarterly basis None of the given optionsCost of sales is equal to:Opening stock Closing stock + Purchases Return outwardsSales PurchasesPurchases Return out + Closing stock None of the given optionsA loss will be considered as capital loss if it:Relates to fixed assetsArises due to abnormal reasonsRepresents the withdrawal of capital None of the given optionsExpenditure will be considered as capital expenditure if:The amount is paid in lump sumIt is intended to benefit the current periodIt is intended to benefit the future periodAll of the given optionsA written evidence in support of a business transaction is called: A business letter Store ledger cardVoucherAll of the given optionsUnder diminishing balance method, depreciation is calculated on:The original costThe scrap valueBook value None of the given optionsThe books of account in which business transactions are originally recorded inchronological order is known as:Ledger JournalTrial BalanceBalance sheetA firm purchased marketable securities for Rs. 10,000. What would its effect be onworking capital?Increased by Rs. 10,000Decreased by Rs. 10,000Increased by Rs. 20,000Remain unchangedIf the profit is 25% of the cost price then it would be:25% of the sale price33% of the sale price
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Financial Management MCQs

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