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business
corporate accounting

Questions and Answers of Corporate Accounting

Where investments are reclassified from current to long-term, transfers are made atA. CostB. The lower of cost and fair valueC. None of these
Mr. X furnishes the following details relating to his holding in 6% Government Bonds :Opening Balance face value ₹ 60,000 -- Cost ₹ 59,000.1.3.2016 ---- 100 units purchased ex-interest at ₹
Explain the different purposes of maintaining investment ledger.
A provision for diminution in the value of a long-term investment should be made when the decline is believed to beA. TemporaryB. PermanentC. None of these
On 1.1.2016 Debentures in X Ltd. were held as investment by Y Ltd. to the tune of ₹ 15,000 at the cost of ₹ 16,000. Interest is payable half yearly on 30th June and 31st December. On 1.5.2016 ₹
(a) What is cum-interest or dividend ?(b) How is it adjusted in the books of account ?
A long-term investment is an investment other thanA. Investment propertiesB. A current investmentC. None of these
Mr. A held on 1st January, 2016 ₹ 1,00,000 of 31/2% Government loan at ₹ 95,000. Three months interest had accrued. On 31st May he purchased a further ₹ 40,000 of the loan @ ₹ 96 (Net)
(a) In what ways is ex-interest or dividend different from cum-interest or dividend?(b) How is ex-interest or dividend treated in the books of account?
Investments other than current investments are classified as long-term investments, even though theyA. May be readily marketableB. May not be readily marketableC. None of these
Nicco-Uco Finance Co. Ltd. had on 1st January 2016, 6% Government of West Bengal Bonds of the face value of ₹ 80,000 valued at ₹ 79,600 on which interest accrued for three months on that date. On
How is dividend from pre-acquisition profit treated in the Investment Account?
Any reduction in the carrying amount and any reversals of such reductions should beA. Charged to the profit and loss accountB. Credited to the profit and loss accountC. None of these
Nicco-Uco Finance Co. Ltd. had on 1st January 2016, 6% Government of West Bengal Bonds of the face value of ₹ 80,000 valued at ₹ 79,600 on which interest accrued for three months on that date. On
How is bonus shares treated in the Investment Account?
On 1st April, 2016, XY & Co. Ltd. held 9% Debentures in B Ltd. of the face value of ₹ 10,000 at a cost of ₹ 8,000. Market value on that date was ₹ 9,000. Interest is payable on 31st
Bonanza Limited held on 1st April, 2016 ₹ 2,00,000 of 9% Government Loan (2018) at ₹ 1,90,000 (face value of Loan ₹ 100 each). Three month’s interest had accrued on the above date. On 31st
Mr. Shape dealt on the stock exchange and had purchased and sold leading scripts but did not maintain his accounts in a proper manner. He furnished the following data:Everlite Ltd. issued bonus
On 1.1.2016, X Ltd. had 10,000 equity shares of ₹ 10 each in Alpha Ltd. purchased for ₹ 1,25,000. The company unlike investment companies does not make any apportionments of dividends (received
The date of transaction isA. The date on which it is recorded in the books of accountB. The date when the transaction is contracted or recognisedC. The date of receiving (or paying) cash
Exchange differences arising on the settlement of monetary items should be recognisedA. In the Balance Sheet as capital reserveB. In the Profit and Loss Account as income or expensesC. Neither of the
Net investment in a non-integral foreign operation isA. The amount invested by the reporting enterprise at costB. The reporting enterprises’ share in the net assets of that operationC. Neither of
If the US$ falls in value against the Indian ₹ (INR), and you have net $ liabilityA. An exchange loss will resultB. An exchange gain will resultC. Neither gain or loss will result
AS ---- 12 deals withA. Government participation in the ownership of the enterpriseB. Special problems arising in accounting for government grant in hyper inflationary economiesC. Disclosure of
Government grant includesA. Free technical assistanceB. Indirect help, such as improving local roadC. Duty drawbacks
Government grants may be related to1. Specific Fixed Assets2. Revenues3. ExpensesWhich of the following alternative is correct ?A. 1 and 3B. 1, 2 and 3C. 1 only
On the notification that an enterprise will receive a government grantA. Enterprise will do nothing until the cash is receivedB. Enterprise will record it on an accrual basisC. Enterprise will open
Where the government grants are of the nature of promoters’ contribution and no repayment is ordinarily expected thereof, the grant is treated asA. Capital reserve which can be distributed as
When the government grant is in the form of land at no cost, then it shouldA. Not be recorded at allB. Be recorded at a fair valueC. Be recorded at a nominal value
When a government grant is awarded for the purpose of giving immediate financial support to an enterpriseA. It should be transferred to capital reserveB. It should be credited to Profit and Loss
The amount refundable in respect of a grant related to revenue should be appliedA. First against capital profitB. First against current profitC. First against unamortised deferred credit
The amount refundable in respect of a grant related to a specific fixed asset should be recordedA. By reducing general reserveB. By increasing the book value of the assetC. By reducing the book value
Government grant in the nature of promoters’ contribution that become refundableA. Should be reduced from the general reserveB. Nshould be reduced from the capital reserveC. Should be charged to
AS----13: Accounting for Investments deals withA. Operating leases onlyB. Financial lease onlyC. Neither operating lease nor finance lease
A long-term investment is an investment other thanA. Investment propertiesB. A current investmentC. None of the above
Pre-acquisition interest on investment isA. Credited to profit and loss accountB. Credited to capital reserveC. Deducted from the total cost of acquisition
A provision for diminition in the value of a long-term investment should be made when the decline isbelieved to beA. TemporaryB. PermanentC. Neither of the above
When rights shares offered are subscribed for, the cost of rights shares areA. Accounted for separatelyB. Added to the carrying amount of the original holdingC. Deducted from the carrying amount of
An enterprise holding investment properties should account for them asA. Current investmentsB. Separate assetC. Long-term investments
Investment properties (e.g., buildings) are carried in the financial statementsA. At costB. At fair market valueC. At cost less accumulated depreciation and accumulated impairment loss
Any reduction in carrying amount and any reversals of such reductions should be adjusted inA. The revaluation reserveB. The general reserveC. The profit and loss account
Profits on disposal of investment isA. Credited to revaluation reserveB. Credited to profit and loss accountC. Credited to investment fluctuation fund
When investments are re-classified from current to long-term, the transfers are made atA. CostB. The lower of cost and fair value on the date of transferC. Fair value on the date of transfer
Which of the following statement is true?A. Borrowing costs may include interest on bank borrowings and other short-term and long-term borrowings.B. Borrowing costs may include interest and
A qualifying asset is an asset that necessarily takes :A. A short period of time to get ready for its intended use or saleB. A substantial period of time to get ready for its intended use or saleC. A
Borrowing costs are capitalised as part of the cost of a qualifying asset when it is probable that :A. They will result in future economic benefits to the enterprise and the cost may not be measured
Temporary investment income generated from loans taken in order to finance qualifying asset should be:A. Added to the borrowing costsB. Deducted from the borrowing costsC. Shown as income in the
Borrowing costs areA. Always capitalisedB. Never capitalisedC. Sometimes capitalised
Borrowing costs should be recognised as an expense and charged to the profit and loss account of the period in which they are incurred :A. If the borrowing costs relate to qualifying assetB. If the
Mohan Meakin Ltd. is manufacturing high quality wine which will take 6 years to mature. The inventory of wine:A. Is not a qualifying assetB. Is a qualifying assetC. Is a fixed asset
Capitalisation of borrowing costs should commence when1. Expenditure for acquisition, construction or production of a qualifying asset is being incurred;2. Borrowing costs are being incurred;3.
Capitalisation of borrowing costs should be suspended during extended periods:A. If the active development is interrupted temporarilyB. If the active development is interrupted permanentlyC. Neither
Capitalisation of borrowing costs should cease :A. When substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are completeB. When all the activities
Minimum lease payments are:(i) Payments over the lease term, the lessee is to make(ii) Contingent rent(iii) Any residual value guaranteed by the lessee.Which of the following is correct ?A. (i), (ii)
Gross investment in the lease is the aggregate of theA. Minimum lease payments under finance lease from the stand point of the lessorB. Minimum lease payments under finance lease from the stand point
Leased assets appear in the Balance Sheet of the lessee in the case ofA. All leasesB. Operating leasesC. Finance leases
Lease liabilities areA. Long-term liabilityB. Current liabilityC. Split between A and B
At the beginning of the leaseA. Major portion of the payment is principal, with a small element of interestB. Major portion of the payment is interest, with a small element of principalC. The
Contingent rent must beA. Added to the lease liabilityB. Charged as expenseC. Treated as deferred revenue expenditure
Lessors shall record assets, given under a finance leaseA. As a leased assetB. As held-for-sale assetsC. As a receivable
Initial direct costs of the lessee, such as in negotiating and securing leasing arguments areA. Charged immediately by the lesseeB. Added to the amount recorded as an assetC. Added with contingent
A finance lease gives rise to a depreciation expense for the depreciable assets. The depreciation policy for leased asset shouldA. Match the period of the leaseB. Be consistent with that for
An asset given under operating lease should be presented in the Balance Sheet of theA. Lessee as a fixed assetB. Lessor as a fixed assetC. Lessor as a current asset
In preparing the financial statements of R Ltd for the year ended 31.3.2017, you come across the following information. State with reasons, how would you deal with them in the financial statements:An
On April 1, 2016 Singh had 20,000 equity shares in X Ltd. The face value of the shares were ₹ 10 each but their book value was ~ 16 per share.On June 1, 2016, Singh purchased 5,000 more equity
Raghav Rathore carried out the following transactions in connection with his investments during the year ended 31 March, 2016:You are required to record the above transactions in the Ledger of
A cash flow statement provides information that enables users to evaluateA. The profitability of the companyB. The solvency of the companyC. The liquidity, flexibility and ability of the company to
Disclosure of fundamental accounting assumptions are:A. Necessary if they are followed at the time of preparation of financial statementsB. Necessary if they are not followed at the time of
Revenue from sales, expenses paid for purchases, employee salary and overheads compriseA. Operating activitiesB. Financing activitiesC. Investing activities
What does the going concern mean?A. A business is profitableB. A business will continue to operate for the foreseeable futureC. The assets of a business exceed its liabilities
Payment to acquire plant and machinery and patents areA. Operating activitiesB. Investing activitiesC. Financing activities
A very large company has prepared financial statements without including very small items of furniture in its fixed assets. What accounting concept has the company applied?A. PrudenceB. ConsistencyC.
Cash equivalents are heldA. For investment purposesB. For the purpose of meeting short-term cash commitmentsC. For other purposes
Two companies buy identical computer equipment. The large company writes it off immediately, but the smaller company treats it as a fixed asset. Which accounting concept are the companies applying?A.
Standard Costs Method or the Retail Method is used as a Activities that result in changes in the size and composition of the owners’ capital and borrowing of the enterprise areA. Investing
Which is an example of the prudence concept?A. Only items with a monetary value are included in accountingB. Accrued expenses are charged to profit and loss accountC. Profit is not over-stated
An investment normally qualifies as a cash equivalent only when it has a short maturity of, say,A. Six months or lessB. Four months or lessC. Three months or less
Which of the following statements explain prudence concept most closely ?A. All legislation and accounting standards have been complied withB. Understatement of assets or gains and overstatements of
Examples of cash flows arising from investing activities are:1. Cash received for sale of plant and machinery.2. Cash proceeds from issuing of shares.3. Cash received from disposal of shares of other
Which of the following statements is / are correct?(1) In order to achieve comparability it may sometimes be necessary to override the prudence concept.(2) Substance over form is an accounting
Examples of cash flows arising from financing activities are :1. Cash repayments of amount borrowed on long-term basis.2. Cash advances and loans made to third parties by a non- financial
A company purchases a machinery on hire purchase over four years but does not own the machinery until the final payment has been made. At the end of year 1, the company shows the machinery in its
Which method of cash flow reporting starts with net profit for calculating cash flow from operating activities?A. Direct methodB. Indirect methodC. NeitherD. Both
Which of the following is correct ?A. Inventories are assets held for use in the construction of the building, e.g., air conditionersB. Inventories are assets held for sale in the ordinary course of
Interest and dividend received from short-term investments included in cash and cash equivalents should be considered asA. Cash flow from investing activitiesB. Cash flow from financing activitiesC.
Net realisable value isA. The estimated selling price plus cost of completion minus selling expensesB. The estimated selling price less cost of competitionC. The estimated selling price in the
Dividend paid will be treated as cash flow fromA. Operating activities in case of a financial enterpriseB. Financing activities in case of a financial enterprise onlyC. Financing activities in case
The purchase price, transport and handling cost, tax and import duties are all examples ofA. Cost of purchaseB. Cost of conversionC. Cost of purchase, cost of conversion and other costs
Interest on overdue payment and interest on overdraft should be treated as cash flow fromA. Financing activitiesB. Operating activitiesC. Investing activities
The cost of inventories should compriseA. Cost of purchase, cost of conversion and other cost like interestB. Cost of purchase, cost of conversion and other cost like post manufacturing storage
Generally cash flows arising from taxes on income should be classified as cash flows fromA. Operating activitiesB. Investing activitiesC. Financing activities
Standard Costs Method or the Retail Method is used as a tool of measurement of cost. Retail Method isA. Sale price plus mark upB. Sale price less gross marginC. None of the above
Which of the following statement is true?A. The cash flows arising from acquisitions and from disposals of subsidiaries or other business units should be presented after netting off and classified as
Reasons for inventories being sold for less than their cost could be:(i) Damage to the inventories and obsolescence(ii) General fall in the market price of the goods(iii) Fall in the production cost
The acquisition of an enterprise by issue of shares willA. Be shown in the cash flow statement under investing activitiesB. Not be shown in the cash flow statementC. Be shown in the cash flow
Amar restores and sells second hand motorcycles. At 31st December, 2006, he had one motorcycle in inventory. Details of this were: Model: Bajaj Boxer Details :This item cost ₹ 10,000 and in
Amar also holds an inventory of parts, which he values on the periodic weighted average basis. During the year 2006 his purchases of parts was:At 31st September, 2006 he had 300 units in inventory.
Cash flows arising from transactions in a foreign currency should be recordedA. In an enterprise’s reporting currency at the rate on the date of closing the books of accountB. In an enterprise’s
Unrealised gains and losses arising from changes in foreign exchange ratesA. Are treated as cash flows from operating activitiesB. Are not treated as cash flowC. Are treated as cash flows from
Following the physical stock taking, the value of total stock is ₹ 1,22,357. The auditors find the following additional information :(i) 370 units of stock which cost ₹ 0.40 per unit have been

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