FINALTERM  EXAMINATION
Spring 2010
MGT101- Financial Accounting (Session - 4)
Shared by Raza Tahir
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Time: 90 min
M - 69
Question No: 1    ( M - 1 )    .
 Which of the following is used to record financial transactions in chronological (day-to-day) order?
       ► Voucher
       ► General Journal
       ► General Ledger
       ► Trial balance
   
Question No: 2    ( M - 1 )    .
          Consider the following:
 
 
Beginning inventory
 
10 units @ Rs. 10 per unit
First purchase
35 units @ Rs. 11 per unit
Second purchase
40 units @ Rs. 12 per unit
Third purchase
20 units @ Rs. 13 per unit
Eighty-five units were sold, what is the value of the ending inventory using the FIFO method of inventory costing?
       ► Rs.260 
       ► Rs.232
       ► Rs.284
       ► Rs.268
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Question No: 3    ( M - 1 )    .
 Consider the following data and identify the amount which will be shown in profit & loss account.                               
Particulars
Rs.
Bad debts
1,600
Provision for doubtful debts (old)
2,000
Current year’s provision (new)
800
 
 
       ► Rs. 400
 
       ► Rs. 800
       ► Rs. 2,000
       ► Rs. 2,400
   
Question No: 4    ( M - 1 )    .
 Transaction that has been completely forgotten to enter is called:
       ► Error of principle
       ► Error of omission
       ► Error of commission
       Error of original entry
   
Question No: 5    ( M - 1 )    .
 Which of the following item must be recorded in the adjusted Cash Book in order to bring it in line with the entries in the Bank Statement?
       ► Bank charges
       ► An error on the Bank Statement
       ► An uncredited deposit
       ► An unpresented cheque
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Question No: 6    ( M - 1 )    .
 Consider the following data and identify the amount which will be shown in profit & loss account.                               
Particulars
Rs.
Bad debts
1,600
Provision for doubtful debts (old)
2,000
Current year’s provision (new)
1,000
 
       ► Rs. 600
       ► Rs. 1,600
       ► Rs. 2,000
       ► Rs. 2,600
   
Question No: 7    ( M - 1 )    .
 Which one of the following is TRUE about provisions?
       ► It is necessary to prepare for showing true picture of balance sheet
       ► It is a reduction from assets
       ► It is prepared for specific purposes
       ► All of the given options
   
Question No: 8    ( M - 1 )    .
 Which of the following account will be credited when interest on capital is charged against the distribution of profit?
       ► Interest account
       ► Partner’s capital account
       ► Profit and Loss account
       ► Profit and loss appropriation account
   
Question No: 9    ( M - 1 )    .
 The primary purpose of preparing a cash flow statement for an entity is to provide information about:           
►Its financial position at the end of an accounting period
►Its cash receipts and cash payments during an accounting period
►Its financial position at the start of an accounting period
►None of the given options
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Question No: 10    ( M - 1 )    .
 Which of the following is a type of business formed under the Companies Ordinance 1984?
       ► Sole-Proprietorship
       ► Partnership
       ► Joint Stock Company
       ► All of the given options
   
Question No: 11    ( M - 1 )    .
 When the current Ratio is 2: 5 and the amount of Current Liabilities is Rs. 25,000. What will be the amount of Current Assets?
       ► Rs.  62,500
       ► Rs. 12,500
       ► Rs. 10,000
       ► Cannot be calculated with the help of given data
   
Question No: 12    ( M - 1 )    .
 If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. B in distributable profit.
       ► Rs. 98,000
       ► Rs. 1, 47,000
       ► Rs. 2, 45,000
       ► Rs. 3, 43,000
    
Question No: 13    ( M - 1 )    .
 If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. C in distributable profit.
       ► Rs. 98,000
       ► Rs. 1, 47,000
       ► Rs. 2, 45,000
       ► Rs. 3, 43,000
   
Question No: 14    ( M - 1 )    .
 Which of the following will be credited, if cash is drawn by Proprietor?
       ► Proprietor’s drawing
       ► Proprietor’s cash
       ► Proprietor’s capital
       ► Proprietor’s income
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Question No: 15    ( M - 1 )    .
 An asset cost Rs. 50,000, has an estimated residual value of Rs.1, 500, and an estimated useful life of 8 years. What is the depreciation rate under reducing balance method?
 
 
       ► 11.5%
 
       ► 20.0%
       ► 25.0%
       ► 35.5%
   
Question No: 16    ( M - 1 )    .
 Mr. B provided the following information at the end of the month:
 
 
Particulars
 
Rs.
Cash
100
Accounts Receivable
500
Accounts Payable                         
200
Bank Loans                                   
1,000
 
 
Based on the information provided, what are the total assets of Mr. B?
 
       ► Rs.200
       ► Rs. 600
       ► Rs. 800
       ► Rs. 1,700
   
Question No: 17    ( M - 1 )    .
 When we close bad debt account, which of the following account is debited?
       ► Profit and loss account
       ► Bad debt account
       ► Debtor account
       ► Creditor account
   
Question No: 18    ( M - 1 )    .
 ABC Company received discount on its credit purchases, which of the following will be credited while entering in journal?
       ► Cash
       ► Discount received
       ► Creditors
       ► Bank
   
Question No: 19    ( M - 1 )    .
 Credit sales appear on the ____________ side of the Debtors control account.
       ► Left side or credit
       ► Left side or debit
       ► Right side or debit
       ► Right side or credit
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Question No: 20    ( M - 1 )    .
 Bad debts belong to which one of the following class:
       ► Asset
       ► Revenue
       ► Expense
       ► Owner’s Equity
   
Question No: 21    ( M - 1 )    .
 Which of the following is used to convert accounting information from the cash basis of accounting to the accrual basis of accounting?
       ► Ledger
       ► Journal entries
       ► Adjusted entries
       ► Trial balance
   
Question No: 22    ( M - 1 )    .
 Adjusting entries are recorded in which of the following?
       ► Voucher
       ► General journal
       ► Ledger
       ► Trial balance
   
Question No: 23    ( M - 1 )    .
 Dillon Company sold marketable securities Costing Rs.60,000 for Rs.72,000 cash. In the company’s income statement and statement of cash flows, respectively, this will appear as:
       ► A Rs.72,000 gain and a Rs.6,000 cash receipt
       ► A Rs.12,000 gain and a Rs.72,000 cash receipt
       ► A Rs.12,000 gain and a Rs.60,000 cash receipt
       ► A Rs.72,000 sale and a Rs.72,000 cash receipt
   
Question No: 24    ( M - 1 )    .
 For which of the following share premium can be utilized?
       ► To write off preliminary expenses
       ► To meet the expenses of issue of shares
       ► To issue bonus shares
       ► All of the given options
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Question No: 25    ( M - 1 )    .
 According to the statement of cash flows following are the examples of investing activities except:
       ► Sales of machinery
       ► Capital invested by the owners
       ► Purchase of building for the business use
       ► Cash received from the disposal of equipment
   
Question No: 26    ( M - 1 )    .
 In statement of cash flows, a payment of cash dividends is related to:
       ► Investing activity
       ► Financing activity 
       ► Operating activity
       ► Cash flows from operations
   
Question No: 27    ( M - 1 )    .
 Which of the following is concerned with to maintain the books of accounts in a systematic way?
       ► Accounting
       ► Recording
       ► Book-keeping
       ► Summarizing
   
Question No: 28    ( M - 1 )    .
 Which of the following is the recording phase of an accounting system?
       ► Financial Accounting
       ► Cost Accounting
       ► Management Accounting
       ► Book-keeping
   
Question No: 29    ( M - 1 )    .
 The accounting equation is based on:
       ► Dual aspect concept
       ► Money measurement concept
       ► Going concern concept
       ► Separate entity concept
   
Question No: 30    ( M - 1 )    .
 Which of the following shows a debit balance under normal circumstances?
       ► Asset
       ► Expenses
       ► Both assets and expenses
       ► Revenue
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Question No: 31    ( M - 1 )    .
 Which of the following is used to record the receipts of cash or cheque?
       ► Journal Voucher
       ► Receipt Voucher
       ► Payment Voucher
       ► Cash voucher
   
Question No: 32    ( M - 1 )    .
 Closing stock of the previous year becomes:
       ► Opening stock of the next year
       ► Opening stock of previous year
       ► Closing stock of the next year
       ► None of the given options
   
Question No: 33    ( M - 1 )    .
 If:
Ø      Cost of machine= Rs. 200,000
Ø      Rate of depreciation = 10% p.a.
Ø      Sale price= Rs. 50,000
What will be book value of machine after two years using diminishing balance method?
       ► Rs. 150,000
       ► Rs. 162,000
       ► Rs. 160,000
       ► Rs. 180,000
   
Question No: 34    ( M - 1 )    .
 Which of the following is TRUE about capital receipt?
       ► It decreases value of property or increases value of liability
       ► It is shown in the income and expenditure account
       ► It is recurring in nature
       ► It is not shown in the statement of financial positions
   
Question No: 35    ( M - 1 )    .
 Bank reconciliation statement is a part of:
       ► Pass book
       ► Ledger account
       ► Cash book
       ► Journal
   
Question No: 36    ( M - 1 )    .
 When Bank Statement shows a debit balance it means:
       ► Favourable balance as per cash book
       ► Debit balance as per cash book
       ► Favourable balance as per bank statement
       ► Overdraft as per bank statement
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Question No: 37    ( M - 1 )    .
 Following information are extracted from books of Mr. XYZ
 
 
Particulars
 
Rs.
Bad Debts (Given in trial balance)
500
Old provisions (Given in trial balance)
700
Sundry Debtors (Given in trial balance)
44,800
If the Provision for doubtful debts has been increased by 5%, what amount of provision for doubtful debts will be shown in Profit & Loss Account?
       ► Rs. 2,240
       ► Rs. 2,425
       ► Rs. 1,925
       ► Rs. 3,025
    
Question No: 38    ( M - 1 )    .
 Which of the following is TRUE?
       ► Unearned revenue is an asset shown in balance sheet
       ► Unearned revenue is a liability shown in balance sheet
       ► Unearned revenue is a liability shown in profit and loss account
       ► Unearned revenue is revenue shown in profit and loss account
   
Question No: 39    ( M - 1 )    .
 Prepaid insurance will become an expense when the balance of prepaid amount is _________.
       ► Expired
       ► Collected
       ► Paid
       ► Earned
   
Question No: 40    ( M - 1 )    .
 Which of the following would be included in the cost of goods sold?
       ► Cost of materials used
       ► Sales
       ► Operating expenses
       ► Operating income
   
Question No: 41    ( M - 1 )    .
 Which of the following Legal Documents of a company contain(s) the rules and regulations framed for the internal management of the company?
       ► Memorandum of Association
       ► Articles of Association
       ► Both Memorandum of Association and Articles of Association
       ► Prospectus
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Question No: 42    ( M - 1 )    .
 ABC Co. Ltd. has a paid up capital of Rs. 800,000 divided into 8,000 shares of Rs.100 each. Two bonus shares are issued for every four shares held in the company. Select the write answer for bonus shares from the options given below.
       ► 4,000 bonus shares
       ► 8,000 bonus shares
       ► 16,000 bonus shares
       ► 32,000 bonus shares
   
Question No: 43    ( M - 1 )    .
 XYZ Company has paid up capital of 20,000 shares of Rs. 100 each. The company offers to existing shareholders the right to buy 3 shares of Rs. 100 each at Rs. 125 for every 5 shares held. What would be the number of right shares?
       ► 120 right shares
       ► 12,000 right shares
       ► 15,000 right shares
       ► 25,000 right shares
   
Question No: 44    ( M - 1 )    .
 The amount of share premium can be utilized EXCEPT:
       ► To write off preliminary expenses
       ► To meet the expenses of issue of shares
       ► To distribute among the shareholders
       ► To issue bonus shares
   
Question No: 45    ( M - 1 )    .
 In converting from the cash to accrual basis of accounting, if a current asset account has decreased, the decrease:
       ► Should be added to net income
       Should be subtracted from net income
       ► Should be multiplied with net income
       ► Has no effect on net income
   
Question No: 46    ( M - 1 )    .
 If, Retain earning at the beginning Rs. 897, Net income Rs. 140, and Retain earning at the end Rs. 1,009. Then, which of the following figure represents the amount of dividend paid?
       ► Rs. 28
       ► Rs. 252
       ► Rs. 739
       ► Rs. 2,046
   
Question No: 47    ( M - 1 )    .
 Current ratio may be increased by:
       ► Overstating current Assets
       ► Overstating current Liabilities
       ► Understating current Assets
       ► Understating current assets and overstating current liabilities
   
Question No: 48    ( M - 1 )    .
 Which of the following is/are least important as a measure of short-term liquidity?
       ► Quick ratio
       ► Debt ratio
       ► Current ratio
       ► All of the given options
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Question No: 49    ( M - 3 )
 Differentiate between debtor’s turnover ratio and creditor’s turnover ratio.
AWNSER
Debtor’s turnover ratio is regarding payment received from debtors. Basically this ratio is a helping tool for the management to make out and identify the debtors who do not pay in time.

Creditors’ turnover ratio is the calculation done to identify that that in how many days the company is required to pay its creditors and the number of installments.
   
Question No: 50    ( M - 3 )
 Pass the journal entries if:
Ø      Shares are issued against cash of Rs. 20,000.
Ø      Shares are issued against transfer of asset amounting to Rs. 30,000.
A)    cash dr. 20000 and share capital Cr. 20000
B)    asset a/c dr. 30000 and share capital cr 30000             
Question No: 51    ( M - 5 )
 What types of changes are made when a new partner joins partnership? Mention those situations in which partnership comes to an end.
AWNSER.
 Following changes are made/ incorporated:
• Old agreement is modified/ changed or a new one is drafted out.
• The agreement would include clauses regarding the profit and loss shares between the partners.
• The business assets and liabilities are re-evaluated which includes the intangible assets like goodwill.
In case partnerships come to an end, then the changes are elicited as:
• All liabilities are paid out from the company assets.
• The amount left after clearing the liabilities is distributed among the partners according to the profit and loss shares as highlighted in the agreement.
• In case the company assets are not enough to pay the liabilities then both the partners pay according to the agreement made to clear the liabilities.
Question No: 52    ( M - 5 )
Ø       When closing stock is given in trial balance only, then what will be its effect in Profit & Loss account and Balance Sheet and why?
Ø      When depreciation is given in trial balance only, then what will be its effect in Profit & Loss account and Balance Sheet and why?
AWNSER
A)    Closing stock given in trial balance will be shown as asset in balance sheet only, no effect in P & L a/c
   
B)     depreciation when given in trial balance will be shown as an expense in P & L a/c, only no effect in balance sheet.
 
Question No: 53    ( M - 5 )
 What do you know about the Cash flow from investing activities? Explain with the help of examples.
AWNSER
These are actually cash receipts and payments which arise from fixed and long term assets. In such cases the cash flows highlights the investment trend. In case it is negative, it means that the company is investing in long term assets and it wants to expand and if it is positive, it means that the company is selling its long term
investments.
Examples:
• Cash receipts from sale of property, plant and equipment.
• The cash payments to acquire property, plant and equipment.

Lets suppose there was a long term investment of Rs.50,000 and 20,00 was expended to acquire these.
Wherefore;
Add: Disposal Long Term Investments 50,000
Less: Acquisition of Fixed Assets and Long Term Investments (20,000)
Net Cash Flow from Investing Activities 30,000