TYBMS SEM 5 : Financial Accounting (Most Imp Objective Questions with Solution)

  Paper/Subject Code: 46012/Finance: Financial Accounting

TYBMS SEM 5 :

Financial Accounting

(Most Imp Objective Questions with Solution)

(1) All Questions are compulsory with Internal Choice.

(2) Each Questions carries equal marks.

(3) Use of Simple C Calculator is allowed.

April 2025

Q.1 A) Choose Correct Alternative and rewrite the sentence: (Any 8)                        8

1. Which financial statements are mandatory under the Companies Act, 2013 ?

a) Balance Sheet and Cash Flow Statement

b) Profit & Loss Account and Notes to Accounts

c) Balance Sheet and Profit & Loss Account

d) Cash Flow Statement and Trial Balance

2. What is the purpose of underwriting shares?

a) To sell shares directly to the public

b) To audit the share issue process

c) To ensure all shares are subscribed, even if not taken by the public

d) To set the share price

3. What is the maximum commission allowed for underwriting shares, as per the Companies Act?

a) 2%

b) 5%

c) 10%

d) 7%

4. AS 1 is related to:

a) Depreciation Accounting

b) Valuation of Inventory

c) Disclosure of Accounting Policies

d) Recognition of Revenue

5. How are foreign currency transactions recorded in the books of accounts?

a) At the average exchange rate for the month

b) At the rate on the day of the transaction

c) At the closing exchange rate

d) At any convenient rate

6. When buying shares, brokerage is:

a) Deducted from the investment cost

b) Added to the investment cost

c) Ignored in investment accounting

d) Included only for government bonds

7. In firm underwriting, underwriters:

a) Are required to buy a fixed number of shares

b) Have no liability for unsubscribed shares

c) Are not paid any commission

d) Act as brokers only

8. The purpose of ethical behaviour in accounting is to:

a) Maximize profits for companies

b) Ensure fairness and transparency in financial reporting

c) Minimize taxes for clients

d) Hide financial losses

9. Which of the following is classified as a fixed-income-bearing security?

a) Shares

b) Debentures

c) Real estate

d) Mutual funds

10. The IFAC Code of Ethics is designed for.

a) Promoting financial innovation

b) Encouraging transparency and ethical behaviour among professional accountants

c) Restricting access to financial markets

d) Increasing profits for accounting firms

Q.1 B) State whether the following statements are True or False: (Any 7)            (07)

1. The Companies Act, 2013 mandates the preparation of both the Balance Sheet and Profit & Loss Account.

Ans: True

2. Underwriting commission is paid to ensure underwriters promote the company's stock.

Ans: True

3. Brokerage fees are added to the cost of investment in shares.

Ans: True

4. AS 1 requires companies to disclose only minor accounting policies.

Ans: False

5. Foreign currency transactions are recorded at the exchange rate on the transact

Ans: True

6. Debentures provide fixed income to investors.

Ans: True

7. Unethical behaviour in accounting does not affect the credibility of financials

Ans: False

8. An underwriter's liability is reduced by the number of shares taken by the public

Ans: True

9. Investment in shares provides fixed income, similar to debentures.

Ans: False

10. The IFAC Code of Ethics applies to professional accountants globally.

Ans: True

November 2024

Q.1 A) Choose Correct Alternative and rewrite the sentence: (Any 8)            (08)

1. __________ must be included in the Current Liabilities" section of the Balance Sheet.

a) Trade receivables

b) Deferred tax assets

c) Short-term borrowings

d) Property, plant, and equipment

2. Under Schedule III of the Companies Act, 2013, assets are classified as _________.

a) Non-Current Assets and Current Assets

b) Fixed Assets and Variable Assets

c) Contingent Assets and Non-Contingent Assets

d) Liquid and Illiquid Assets

3. When an issue is fully subscribed, the liability of the underwriter is ________.

a) Reduced proportionately

b) Eliminated entirely

c) Transferred to sub-underwriters

d) None of the above

4. The portion of an issue which is not marked by any specific underwriter is called ________.

a) Marked application

b) Unmarked application

c) Firm underwriting

d) Subscribed capital

5. According to AS 11, exchange rate differences arising on the settlement of monetary items should be ________.

a) Deferred

b) Recognized in the Profit and Loss Account

c) Adjusted in the reserves

d) Ignored

6. If a company purchases goods worth rate changes to 272 when payment is $1,000 when the exchange rate is 1 USD =Rs. 70, and the made, how should the exchange difference be treated?

a) As an income of ₹2,000

b) As an expense of ₹2,000

c) Ignored in the accounts

d) Added to the cost of goods purchased

7. AS-13 requires that current investments should be valued at __________.

a) Cost

b) Market value

c) Cost or fair value, whichever is lower

d) Cost or market value, whichever is higher

8. When an investment is sold at a price higher than its cost, the difference is recorded as _________.

a) Capital Gain

b) Revenue Gain

c) Depreciation

d) Premium on investment

9. _________ is the primary objective of the IFAC Code of Ethics for Professional Accountants.

a) To ensure that accountants follow tax laws accurately

b) To provide a framework for ethical conduct. in accounting practices

c) To regulate accounting firms

d) To increase profits for organizations

10. Ethical violations in the preparation of financial reports can lead to ___________.

a) Greater profitability for the company

b) Increased trust and confidence from investors

c) Loss of credibility, legal penalties, and damage to professional reputation

d) More investment opportunities

Q.1 B) Match the terms in Column A with the correct Answers in Column B.: (Any 8) (08)

Column A	Column B
1. Balance Sheet	a) Applications that cannot be identified with a particular underwriter
2. Exchange Rate	b) Decrease in the value of assets due to wear and tear
3. Market Value	c) Applications where the name of the underwriter is noted
4. Integrity	d) Exchange rate at the balance sheet date
5. Marked Applications	e) A statement that shows the financial position of a company
6. Materiality	f) Value of an investment as determined by the stock market
7. Investment Income	g) Ethical principle requiring accountants to act with fairness
8. Depreciation	h) The significance of an item's impact on financial statements
9. Closing Rate	i) Income derived from dividends and interest on investments
10. Unmarked Applications	j) The rate at which one currency is exchanged for another

Ans:

Column A	Column B
1. Balance Sheet	e) A statement that shows the financial position of a company
2. Exchange Rate	j) The rate at which one currency is exchanged for another
3. Market Value	f) Value of an investment as determined by the stock market
4. Integrity	g) Ethical principle requiring accountants to act with fairness
5. Marked Applications	c) Applications where the name of the underwriter is noted
6. Materiality	h) The significance of an item's impact on financial statements
7. Investment Income	i) Income derived from dividends and interest on investments
8. Depreciation	b) Decrease in the value of assets due to wear and tear
9. Closing Rate	d) Exchange rate at the balance sheet date
10. Unmarked Applications	a) Applications that cannot be identified with a particular underwriter

November 2023

Q.1 A) State whether the following statements are True or False: (Any 8)    (08)

1) Dividend can be paid to lenders of funds.

Ans: False

2) R.D.D. is usually estimated as percentage of debtors.

Ans: True

3) Trade Receivables are always shown under current Liabilities.

Ans: False

4) Shareholders funds are always non-current.

Ans: True

5) Capital profit realized in cash can be used for paying dividend.

Ans: True

6) The underwriting commission can be more than 10%.

Ans: False

7) Unmarked applications are known as direct applications.

Ans: True

8) Inventory is a non-monetary item.

Ans: True

9) Foreign currency is a currency other than home currency.

Ans: True

10) Dividend is always calculated on Market Value of the security.

Ans: False

Q.1 B) Match the following: (Any 7).                (07)

Column A	Column B
1. 10% Debentures	a. Ethics
2. Goodwill	b. Laws
3. Marked Applications	c. Accounting of Foreign Currency
4. Underwriting Commission	d. Reporting Currency
5. Ex-Interest	e. Added to cost
6. Brokerage on Purchase	f. Excluding interest
7. Home Currency	g. Maximum 5% in case of shares
8. AS-11	h. Bears stamp of underwriters
9. Rules that must be followed by all	i. Intangible Assets
10. Rules expected to be followed by all	j. Long Term Borrowings

Ans:

Column A	Column B
1. 10% Debentures	j. Long Term Borrowings
2. Goodwill	i. Intangible Assets
3. Marked Applications	h. Bears stamp of underwriters
4. Underwriting Commission	g. Maximum 5% in case of shares
5. Ex-Interest	f. Excluding interest
6. Brokerage on Purchase	e. Added to cost
7. Home Currency	d. Reporting Currency
8. AS-11	c. Accounting of Foreign Currency
9. Rules that must be followed by all	b. Laws
10. Rules expected to be followed by all	a. Ethics

November 2022

Q.1 (A) Multiple Choice Questions. (Any 8)                (08)

1. Unclaimed dividend is shown under ________.

a) Secured Loan

b) Short term Provision

c) Long Term Provision

d) Current Liability

2. When the entire issue is underwritten it is called ________.

a) Partial Underwriting

b) No Underwriting

c) Full Underwriting

d) Half Underwriting

3. An exchange rate on the date of balance sheet is known as ________.

a) Monetary Rate

b) Non-Monetary Rate

c) Closing Rate

d) Average Rate

4. Interest on securities is always calculated on ________.

a) Face Value

b) Market Value

c) Cost

d) Cum Interest

5. A Company has to spend _______ in CSR.

a) 10% of Net Profit

b) 20% of Net Profit

c) 2% of Net Profit

d) 1% of Net Profit

6. Short term loan is the loan due for not more than _________.

a) 1 Year

b) 2 Year

c) 4 Year

d) 5 Year

7. Total share for which guarantee is given by each underwriter individually is known as ________.

a) Net Liability

b) Gross Liability

c) Marked Application

d) Unmarked Application

8. Foreign currency is a currency ________.

a) Used in recording foreign transaction

b) Other than the reporting currency

c) In presenting foreign financial statements

d) Is the proportion between two currencies

9) Loss on sale of investment is ________.

a) Debited to Profit and Loss A/c

b) Credited to Profit and Loss A/c

c) Debited to Investment. A/c

d) Debited to Interest A/c

10. ASB is constituted in ________.

a) 1977

b) 1987

c) 1997

d) 1967 

Q.1 (B) State whether the following statements are True or False: (Any 7).    (07)

1. The income for pre-acquisition period should be credited to Investment Account.

Ans: True

2. AS-13 deals with accounting for Foreign Currency Transactions. 

Ans: False

3. The applications forms received by the company without any stamp of any of the underwriters are known as Marked Application.

Ans: False

4. Accounting policies adopted by a company should be disclosed as per AS-1.

Ans: True

5. CSR is governed by section 135 of Companies Act 2013.

Ans: True

6. Ethical behavior should be practiced with Shareholders only.

Ans: False

7. Issue of bonus share is entered in N.V. column of Investment A/c.

Ans: True

8. Balance in Foreign Exchange Fluctuation A/c is transferred to capital A/c.

Ans: False

9. When the issue is underwritten by two or more underwriters it is called as "sole underwriting".

Ans: False

10. Interest is disclosed under cash and cash equivalent.

Ans: False

November 2019

Q1A. Multiple Choice Questions (any 8):                (08)

1) Following is an example of an accounting policy

(a) Realisation

(b) Materiality

(c) Dual Aspect

(d) Valuation of investment

2) The following factor should be considered while selecting and applying accounting policies

(a) Consistency

(b) Prudence

(c) Dual aspect

(d) Cost

3) Accounting to AS 1, disclosure should be made of

(a) Fundamental accounting assumptions

(b) All accounting principles

(c) All significant accounting policies

(d) All accounting policies

4) The underwriter is entitled to claim remuneration on

(a) The issue price of shares underwritten

(b) The face value of share actually purchased

(c) The face value of shares not purchased by him

(d) None of the above

5) If the whole of the issue of shares or debentures is underwritten it is known as

(a) Partial underwriting

(b) Sole underwriting

(c) Complete or full underwriting

(d) None of the above

6) If a part of the issue of shares or debentures is underwritten, it is termed as

(a) Partial underwriting

(b) Complete underwriting

(c) Firm underwriting

(d) None of the above

7) Following is not a fixed income bearing securities

(a) Debentures

(b) Equity shares

(c) Preference shares

(d) Government securities

8) Interest is always calculated on the

(a) Market value of the security

(b) Nominal value of the security

(c) Book value of the security

(d) Weighted average cost of the security

9) Interest on bonds accrues

(a) On the last day of the financial year

(b) On due dates fixed in advance

(c) On the date fixed by board resolution

(d) As declared by the company in the beginning of every financial year

10) If market value of investment held as current asset is less than cost

(a) Difference is credited to P&L a/c

(b) Difference is debited to P&L a/c

(c) Difference is ignored

(d) Difference is debited to capital reserve a/c

Q1. B. Match the following (any7):            (07)

Column A (Items)	Column B (Headings)
1) Bank Balance	a) current Liabilities (other current Liabilities)
2) Investment	b) Shareholders fund (Reserve and Surplus)
3) Accrued Salary	c) None Current Assets (Non-Current Investment)
4) Authorised Capital	d) current Liabilities (other current Liabilities)
5) Acceptance	e) Share Capital
6)  Unclaimed Dividend	f) Shareholders Fund (R & S)
7) Proposed dividend	g) Current Assets (Cash & Cash Equivalents)
8) Security Premium Reserve	h) Shareholders Fund (R & S)
9) Geneal Reserve	i) current Liabilities (Trade Payable)
10) Capital Reserve	j) Notes to accounts

Ans:

Column A (Items)	Column B (Headings)
1) Bank Balance	g) Current Assets (Cash & Cash Equivalents)
2) Investment	c) None Current Assets (Non-Current Investment)
3) Accrued Salary	d) current Liabilities (other current Liabilities)
4) Authorised Capital	f) Shareholders Fund (R & S)
5) Acceptance	i) current Liabilities (Trade Payable) Share Capital
6)  Unclaimed Dividend	a) current Liabilities (other current Liabilities)
7) Proposed dividend	d) current Liabilities (other current Liabilities)
8) Security Premium Reserve	h) Shareholders Fund (R & S)
9) General Reserve	f) Notes to accounts
10) Capital Reserve	b) Shareholders fund (Reserve and Surplus)

November 2018

Q1A. Multiple Choice Questions (any 8) :                     (08)

1) Which of the following should be deducted from the share capital to find out paid-up capital?

a) Call in advance

b) Call in arrears

c) Security Premium

d) Bonus

2) Dividend are usually paid on

a) Authorized capital

b) Issued Capital

c) Paid up Capital

d) Reserve Capital

3) Which of the following is not classified as inventory in the financial statements?

a) Finished Goods

b) Work in Progress

c) Stores & Spares

d) Advance payment made to suppliers for raw materials

4) If the whole of the issue of shares or debentures is underwritten it is known as ________

a) Partial underwriting

b) Sole underwriting

c) Complete of Full underwriting

d) None of the above

5) If a part of the issue of shares or debentures is underwritten, it is termed as ________

a) Partial underwriting

b) Complete underwriting

c) Firm underwriting

d) None of the above

6) The mean of the exchange rates in force during a period is known as ________.

a) Average rate

b) Closing rate

c) Reporting rate

d) Fair rate

7) The exchange rate at the balance sheet date is known as ________.

a) Average rate

b) Closing rate

c) Non-Monetary rate

d) Monetary rate

8) Following is not a fixed income bearing security _________.

a) Debentures

b) Equity Shares

c) Preference Shares.

d) Government Security

9) Interest is always calculated on the ________.

a) Market Value of the security

b) Nominal value of the security

c) Book Value of the security

d) Weighted average cost of the security

10) Interest on bonds accrues _________.

a) On the last day of the financial year

b) On due dates fixed in advance

c) On the date fixed by board resolution

d) As declared by the company in the beginning of every financial year.

Q1 B. State whether following statements are true or false (any7)        (07)

1) Dividend can be paid out of capital, but interest cannot be paid out of capital.

Ans: False

2) Further bad debts are usually estimated as percentage of debtors.

Ans: True

3) Trade Receivable are always shown under current assets.

Ans: True

4) Shareholders funds are always non-current

Ans: True

5) Capital profit realized in cash can be used for paying dividend.

Ans: True

6) The underwriting commission is payable in cash

Ans: True

7) Unmarked applications are known as direct applications.

Ans: True

8) Inventories is a non-monetary item.

Ans: True

9) Foreign currency is a currency other than the Indian rupee.

Ans: True

10) Interest is always calculated on Market Value of the security.

Ans: False