Accountancy: CUET Mock Test - 8 - CUET MCQ

The essential elements of partnership firm are at least two persons, there is an agreement between all partners and partnership agreement is for some business. But its not necessary to that the partners have equal share of profits. They may have any profit sharing ratio as agreed or in the deed. 

The correct answer is Simple and integrated, clear, precise, scalable, and reliable.

Key Points

Computerized Accounting System:

• Accounting transactions are handled using a computer system in a computerized accounting system. CAS Transaction Processing that results in records and reports. Analysis of business transactions, recording of transactions, compilation of the trial balance, the balance sheet, and the profit and loss account.
• Accounting software is used by CAS. Application software includes accounting software (like Tally).
• Scalability, Reliability and Accuracy and Speed are these salient feature of Computerized Accounting System.

Important Points

• Simple and integrated, clear, precise, scalable, and reliable: This Option is correct because Accounting transactions are handled using a computer system in a computerized accounting system. CAS Transaction Processing that results in records and reports. Analysis of business transactions, recording of transactions, compilation of the trial balance, the balance sheet, and the profit and loss account.
• Complex, precise, transparent, and quicker to complete: This Option is incorrect because Accounting transactions are handled using a computer system in a computerized accounting system. CAS Transaction Processing that results in records and reports. Analysis of business transactions, recording of transactions, compilation of the trial balance, the balance sheet, and the profit and loss account.
• Being able to go from a manual to a digital accounting system: This Option is incorrect because Accounting transactions are handled using a computer system in a computerized accounting system. CAS Transaction Processing that results in records and reports. Analysis of business transactions, recording of transactions, compilation of the trial balance, the balance sheet, and the profit and loss account.
• None of the above: This option is incorrect because option ‘A’ is correct.

The correct answer is Processing of accounting transaction through computer and produce records and reports

Key Points

Computerised accounting System:

• Computerised Accounting System refers to the processing of accounting transaction using a computer through the use of hardware and software in order to produce accounting records and reports.

Important Points Components of Computerised Accounting System:

• Procedure: A logical sequence of actions to perform a task.
• Data: The raw fact (as input) for any business application.
• People: Users
• Hardware: Computer, associated peripherals, and their network.
• Software: System software and Application software.

The correct answer is A - II, B - IV, C - I, D - III.

Key Points

• The Accounting basis for Cash Flow Statement is Cash Basis.
  • The cash flow statement is prepared based on cash basis accounting, not on accrual basis. This means it reflects cash inflows and outflows, rather than accounting for revenues and expenses when they are incurred.
• Dividend paid on Equity and Preference capital comes under Cash outflow from Financing Activities.
  • Payments of dividends to shareholders are considered financing activities because they are related to the equity financing of the business. Thus, they are recorded as cash outflows in the financing section of the cash flow statement.
• Investment in shares cannot be considered as cash and cash equivalents.
  • Investments in shares are considered as investing activities and not cash equivalents because they cannot be easily and immediately converted to cash without significant risk of changing in value.
• Treasury bills can be classified as cash and cash equivalents.
  • Treasury bills are short-term government securities that are highly liquid and are considered cash equivalents because they have a maturity of less than three months and can be readily converted into a known amount of cash.

Therefore the correct pairing is:
A - II: The Accounting basis for Cash Flow Statement - Cash Basis
B - IV: Dividend paid on Equity and Preference capital - Cash outflow from Financing Activities
C - I: It can not be considered as cash and cash equivalents - Investment in shares
D - III: It can be classified as cash and cash equivalents - Treasury bills

The correct answer is (A) - (II), (B) - (I), (C) - (III), (D) - (IV).

Key Points

• Authorised Capital (A) - (II) Maximum amount of share capital a company could raise during its life time.
  • This is the maximum limit of capital that a company can legally raise through the sale of its shares and is specified in the company's constitution.
  • It represents the potential for expansion and issuance of additional shares in the future.
• Reserve Capital (B) - (I) A portion of uncalled share capital will be called at the time of winding up.
  • Reserve capital is not available for distribution as dividends but is held back to protect the company's creditors in the event of winding up.
  • It provides a financial cushion, ensuring that there are funds available to meet any remaining obligations.
• Issued Capital (C) - (III) Capital issued to public for subscription.
  • This refers to the portion of the authorised capital which is offered to investors by way of public or private placement.
  • It represents the actual amount of capital that is being tapped into and utilized by the company from its authorized limit.
• Subscribed but not fully paid capital (D) - (IV) Amount called up and received but not fully.
  • It indicates the portion of the issued capital that has been subscribed to by investors but has not yet been paid in full.
  • This scenario arises when shares are issued on a partly paid basis and further calls on the unpaid portion are pending.

Therefore, the correct pairing is:

A - II: Authorised Capital - Maximum amount of share capital a company could raise during its life time

B - I: Reserve Capital - A portion of uncalled share capital will be called at the time of winding up

C - III: Issued Capital - Capital issued to public for subscription

D - IV: Subscribed but not fully paid capital - Amount called up and received but not fully

The passage mentions that financial statements provide essential data for decision-makers, helping them interpret and analyze the financial health of the enterprise.

Financial statement analysis is identified as a crucial part of accounting, aiding in decision-making through various techniques like ratios and cash flow analysis

The passage specifically mentions "comparative statements" as one of the methods used in analyzing financial statements.

The passage refers to the process of analyzing and interpreting financial data as "financial statement analysis."

The passage specifies that both external and internal users benefit from analyzing financial statements.

The passage explains that a ratio is calculated based on the relationship between two or more numbers derived from financial statements.

The passage clearly mentions that ratios can be expressed as a fraction, proportion, percentage, or number of times.

The passage highlights that accounting ratios are calculated based on numbers derived from financial statements.

The passage mentions that accounting ratios are derived numbers, meaning they are calculated from other financial data.

Ratios help in simplifying and summarizing financial data, thereby highlighting relationships between key financial figures.

A) Calls in Arrears: This is the amount shareholders fail to pay by the due date. Matches (II) "Amount not paid by shareholders on the due date."
B) Calls in Advance: This is money paid by shareholders before the company officially calls for it. Matches (III) "Amount received before the call is actually made."
C) Forfeiture of Shares: This occurs when shares are cancelled due to non-payment of calls. Matches (IV) "Shares cancelled due to failure to pay calls."
D) Reissue of Shares: Forfeited shares are re-sold to new shareholders. Matches (I) "Shares sold again after being forfeited due to non-payment."

A) Equity Shares: These shares typically carry voting rights and represent ownership. Matches (III) "Shares that give voting rights to holders."
B) Preference Shares: These shares have priority in dividends (fixed rate) and repayment. Matches (IV) "Shares that give fixed dividends to holders."
C) Issued at Par: Shares issued at their nominal (face) value. Matches (I) "Shares issued for the same price as the nominal value."
D) Issued at Premium: Shares issued at a price higher than their nominal value. Matches (II) "Shares issued at a value higher than the nominal price."

A) Authorised Capital: The maximum capital a company is allowed to issue, as stated in its Memorandum. Matches (I) "The maximum capital a company can issue as per its Memorandum of Association.
B) Paid-up Capital: The amount actually collected from shareholders via calls. Matches (II) "The amount collected from shareholders through calls."
C) Uncalled Capital: The portion of subscribed capital not yet demanded by the company. Matches (III) "The portion of subscribed capital not yet called up."
D) Reserve Capital: A portion of uncalled capital reserved for creditors in case of winding up. Matches (IV) "Capital that is available for creditors when the company is wound up."

(A) Correct: A partnership requires at least two persons.
(B) Incorrect: A partnership agreement can be oral, though a written deed is preferred.
(C) Correct: A partnership firm does not have a separate legal entity from its partners.
(D) Correct: A partnership can exist without a written agreement, though the Indian Partnership Act applies in such cases.
(E) Incorrect: Partners are not entitled to remuneration unless agreed upon in the partnership deed.

(A) Correct: Partners are only entitled to interest on capital when the partnership deed allows it.
(B) Correct: No interest is allowed on withdrawn capital unless specified in the deed.
(C) Incorrect: Interest on drawings is charged only if the partnership deed specifies it
(D) Correct: The Partnership Act allows a 6% per annum interest on loans advanced by a partner unless stated otherwise in the deed.
(E) Incorrect: Profits and losses are shared based on the agreement, not solely on capital contributions.

(A) Correct: The fixed capital method keeps capital accounts fixed unless there are changes.
(B) Correct: The fluctuating capital method uses only one account for each partner, where all adjustments are recorded.
(C) Correct: Under the fluctuating capital method, separate current accounts are not used, but all transactions are recorded in the capital account itself.
(D) Incorrect: Interest on capital is recorded in a separate current account in the fixed capital method.
(E) Incorrect: Both methods show different types of adjustments in the capital accounts, not just final balances.

(A) Correct: If no ratio is specified, profits are shared equally among partners.
(B) Incorrect: The partnership deed cannot override the basic provisions of the Partnership Act unless agreed by all parties.
(C) Correct: Any deficiency from a guaranteed share is borne by the other partners, usually in the agreed profit-sharing ratio.
(D) Incorrect: A partnership firm can have a maximum of 50 partners as per the Companies Act.
(E) Correct: The profit-sharing ratio is typically based on mutual agreement between the partners.

(A) Correct: Interest on capital is paid only if there is a profit in the firm.
(B) Incorrect: Salary or remuneration is only paid if stated in the partnership deed.
(C) Correct: Interest on loan is given at 6% per annum if not specified in the partnership deed.
(D) Incorrect: Remuneration is only allowed when explicitly stated in the partnership deed.
(E) Correct: The partnership deed should contain provisions for handling disputes between partners.

It is a definition given by Partnership act 1932 in sec 4
It contains 3 three parameters
1) Agreement
2) sharing of profit and losses
3) carried on by all any of them acting for all means mutual agency
above three things required to form a partnership.

Every partner is bound to attend diligently to his duties in the conduct of the business. Every partner is an agent of the partnership firm. The business in the partnership firm can be carred on by all the partners or any one of them acting for all.

Profit and loss appropriation account is an account where we record all transactions related to the partners like for example their salary, interest on capital, intrest on darawing etc so salary to partner will also appear on debit side of p & l appropriation account.

Interest on drawing is treated as revenue for the firm because interest is paid by the proprietor for withdrawal from the business and it will became revenue for the firm.

According to the partnership act the partners are to share profits equally unless anything else is agreed by the partners or is in the agreement.

The amount of rent would be seen as this partner's capital contribution instead of needing it paid from the venture.

When the partners decide to treat the premium on Joint Life Policy as an expense, then they debit the Premium A/c to the Profit and Loss A/c every year to close it. In this situation, the full amount of policy received from the Insurance Company becomes a gain.