Class 12 Accountancy: CBSE Sample Question Papers- Term I (2021-22)- 2 | Sample Papers for Class 12 Commerce PDF Download

Class-XII
Time: 90 Minutes
Max. Marks: 40

General instructions:
Read the following instructions very carefully and strictly follow them:

1. This question paper comprises two PARTS – I and II. There are 55 questions in the question paper. 
2. There is an internal choice provided in each section.
   I. Part I, contains three Sections -A, B and C. Section A has questions from 1 to 18 and Section B has questions from 19 to 36, you have to attempt any 15 questions each in both the sections.
   II. Part I, Section C has questions from 37 to 41. You have to attempt any four questions.
   III. Part II, contains two Sections – A and B. Section A has questions from 42 to 48, you have to attempt any five questions and Section B has questions from 49 to 55, you have  to attempt any six questions.
3. All questions carry equal marks. There is no negative marking. 
4. Specific instructions related to  each Part and sub-divisions (Section)  is mentioned clearly before the questions. Candidates should read them thoroughly and attempt accordingly.

Correct Answer is Option (a)
When new partner/s is/ are admitted, the old partners in the partnership firm need to sacrifice a part of their share of profit in favour of new partner/s.

Q.2: A share of ₹ 10 originally issued at par on which application and allotment money of ₹ 7 has been received was forfeited. What will be the maximum permissible discount which a company can allow at the time of reissue of this forfeited share?
(a) ₹ 10
(b) ₹ 7
(c) ₹ 3
(d) ₹ 13

Correct Answer is Option (b)

The amount of discount allowed cannot exceed the amount that had been received on forfeited shares at the time of initial issue.

Q.3: If a share of ₹10 issued at a premium of ₹2 on which the full amount has been called and ₹8 (including premium) paid is forfeited, the Share Capital to be debited with:
(a) ₹ 10
(b) ₹ 8
(c) ₹ 2
(d) ₹ 12

Correct Answer is Option (b)
Full amount has been called.

Q.4: Jain Limited purchased building from Sharma Limited for ₹5,40,000 and the payment is to be made by the issue of shares of ₹100 each. What will be the number of shares to be issued when shares  are issued at a par?
(a) 5,400
(b) 6,000
(c) 4,500
(d) None of these

Correct Answer is Option (b)
Number of shares to be issued
=== 5,400 shares

Q.5: The difference between subscribed capital and called up capital is called :
(a) Calls-in-arrear
(b) Calls-in-advance
(c) Uncalled capital
(d) None of these

Correct Answer is Option (c)
That portion of the subscribed capital which has not yet been called up is turned as uncalled capital. The company may collect this amount any time when it needs further funds.

Q.6: The following is the balance of Krishna and Karan, who were sharing profits in equal ratio.

On 1/4/2020, the partners decided to admit Kajol into partnership. The building was to be depreciated by 20%. Find out the value of Building to be shown in the Revaluation Account.
(a) ₹10,000
(b) ₹5,000
(c) ₹50,000
(d) ₹40,000

Correct Answer is Option (a)
Building A/c              Dr.    10,000
To Revaluation A/c            10,000
Calculation : Amount of depreciation on building :
 =  ₹10,000

Q.7: When, at the time of admission, a partner brings goodwill in cash, the amount is credited to which account?
(a) Premium for Goodwill Account
(b) New Partner ’s Capital Account
(c) Cash Account
(d) Bank Account

Correct Answer is Option (a)
Bank A/c Dr.
To Premium for Goodwill A/c
(Amount brought by new partner as premium)

Q.8: The new partner’s share of goodwill is taken by old partners in their:
(a) Gaining ratio
(b) Sacrificing ratio
(c) Old profit sharing ratio
(d) New profit sharing ratio

Correct Answer is Option (b)
The incoming partner who acquires his share in the profits of the firm from the existing partners brings in additional amount to compensate them for loss of their share in super profits. The amount of premium brought in by the new partner is shared by the existing partners in their ratio of sacrifice made by them.

Q.9: Shiv and Hari entered into partnership on 1st April, 2020, contributing ₹ 5,00,000 and Rs 2,00,000 respectively. Hari also introduced ₹ 1,00,000 as additional capital on 1st July, 2020.They agreed to share profits and losses in the ratio of 3 : 2. Interest is to be allowed on capitals @ 8% p.a. Calculate the amount of interest on Hari’s Capital and choose the correct option assuming that the firm closes its books on 31st March every year.
(a) ₹ 40,000
(b) ₹ 24,000
(c) ₹ 8,000
(d) ₹ 22,000

Correct Answer is Option (d)
On ₹ 2,00,000  @8%  for 1 year + On ₹ 1,00,000 @ 8% for 9 months = ₹ 16,000 + ₹ 6,000 = ₹ 22,000

Q.10: A and B are partners in a firm. A is entitled to a salary of ₹ 15,000 p.m. and a commission of 10% of net profit before charging such commission. Net profit for the year ended 31st March 2018 after allowing salary to A was ₹ 4,40,000. Find out the amount of A’s commission.
(a) ₹ 44,000
(b) ₹ 40,000
(c) ₹ 26,000
(d) ₹ 20,000

Correct Answer is Option (a)
A’s Commission:
₹ 4,40,000 × 10/100= ₹ 44,000

Q.11: Interest on capital is provided to partners when:
(a) Capitals are more than ₹ 5,00,000.
(b) A loan is provided by partner.
(c) Drawings are not made by partners.
(d) It is provided in the partnership deed.

Correct Answer is Option (d)
No partner is entitled to claim any interest on the amount of capital contributed by him in the firm as a matter of right. However, interest can be allowed when it is expressly agreed to by the partners. Thus, no interest on capital is payable if the partnership deed is silent on such issue.

Q.12: In the absence of partnership deed, partners are entitled to receive interest on drawings at the rate of:
(a) 10% p.a.
(b) 6% p.a.
(c) 4% p.a.
(d) No interest

Correct Answer is Option (d)
No interest is to be charged on the drawings made by the partners, if it is not mentioned in the deed.

Q.13: Ayush and Akarsh are in partnership. Business is being carried on, in the property owned by Akarsh on a monthly rent of ₹ 5,000. Net profit for the year ended 31st March, 2018 before providing for rent was ₹ 6,00,000. What will be the amount of rent (per annum) to be debited to Profit and Loss Appropriation Account?
(a) ₹ 60,000
(b) ₹ 5,000
(c) ₹ 6,00,000
(d) None of the above

Correct Answer is Option (d)
Rent paid to a partner is a charge against profits. It will be debited to Profit & Loss Account.

Q.14: When Share allotment money is received, which of the following account is credited?
(a) Share Capital Account
(b) Share Allotment Account
(c) Share Application Account
(d) Shareholders Account

Correct Answer is Option (b)
Following entry is passed to allot the shares to shareholders:
Bank A/c  Dr.
To Share Allotment A/c(Being allotment money received)

Q.15: Reserve Share Capital means :
(a) Part of authorised capital to be called at the beginning
(b) Portion of uncalled capital to be called only at liquidation
(c) Over-subscribed capital

(d) Under subscribed capital

Correct Answer is Option (b)
A company may reserve a portion of its uncalled capital to be called only in the event of winding up of the company. Such uncalled amount is called ‘Reserve Capital’ of the company. It is available only for the creditors on winding up of the company.

Q.16: When full amount is due on any call but it is not received, then the short fall is debited to:
(a) Calls-in-advance
(b) Calls-in-arrear
(c) Share Capital
(d) Suspense Account

Correct Answer is Option (b)
It may happen that shareholders do not pay the call amount on due date. When any shareholder fails to pay the amount due on allotment or on any of the calls, such amount is known as ‘Calls in Arrears’/‘Unpaid Calls’.

Q.17: X, Y and Z are partners sharing profits and losses equally. Their capital balances on March, 31, 2012 are ₹80,000, ₹60,000 and ₹40,000 respectively. Their personal assets are worth as follows: X — `₹20,000, Y — ₹15,000 and Z — ₹10,000. The extent of their liability in the firm would be:
(a) X — ₹80,000 : Y — ₹60,000 : and Z — ₹40,000
(b) X — ₹20,000 : Y — ₹15,000 : and Z — ₹10,000
(c) X — ₹1,00,000 : Y — ₹75,000 : and Z — ₹50,000
(d) Equal

Correct Answer is Option (b)
The liability of a partner for acts of the firm is also unlimited. This implies that his private assets can also be used for paying off the firm’s debts.

Q.18: X, Y, and Z are partners in a firm. At the time of division of profit for the year, there was a dispute between the partners. Profit before interest on partner’s capital was ₹6,00,000 and Z demanded minimum profit of ₹5,00,000 as his financial position was not good. However, there was no written agreement on this point. Identify the correct statement to solve the dispute.
(a) Other partners will pay Z the minimum profit and will share the loss equally.
(b) Other partners will pay Z the minimum profit and will share the loss in capital ratio.
(c) X and Y will take ₹50,000 each and Z will take ₹5,00,000.
(d) ₹2,00,000 to each of the partner.

Correct Answer is Option (d)

If the partnership deed is silent about the profit sharing ratio, the profits and losses of the firm are to be shared equally by partners, irrespective of their capital contribution in the firm.

Q.19: At the time of admission of a new partner, general reserve appearing in the old balance sheet is transferred to:
(a) All partner ’s capital account

(b) New partner ’s capital account
(c) Old partner ’s capital account
(d) None of the above

Correct Answer is Option (c)

Q.20: A and B share profits and losses in the ratio of 3 : 1. C is admitted into partnership for 1/4 share. The sacrificing ratio of A and B is:
(a) equal
(b) 3 : 1
(c) 2 : 1
(d) 3 : 2

Correct Answer is Option (b)
As new profit sharing ratio of the old partners is not being changed, their sacrificing ratio will also be same as their old profit sharing ratio.

Q.21: Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R).
Assertion (A) : It is the right of new partner on the firm’s assets and liabilities.
Reason (R) : Old Partners of the firm sacrifice some profit according to the new profit sharing ratio in favour of incoming partner.
In the context of the above statements, which one of the following is correct?
(a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true, but Reason (R) is false.
(d) Assertion (A) is false, but Reason (R) is true.

Correct Answer is Option (b)
It is the right of new partner on the firm’s assets and liabilities on behalf of capital which is brought in by him/her, as he/she brings the required amount of capital and goodwill.

Q.22: E, F and G are partners sharing profits in the ratio of 3 : 3 : 2. As per the partnership agreement, G is to get a minimum amount of ₹ 80,000 as his share of profit every year and any deficiency on this account is to be personally borne by E. The net profit for the year ended 31st March, 2020 amounted to 3,12,000. What will be the amount of deficiency to be borne by E ?
(a) ₹ 1,000
(b) ₹ 4,000

(c) ₹ 8,000
(d) ₹ 2,000

Correct Answer is Option (d)
G's Share = 2/8 × ₹ 3,12,000 = ₹ 78,000
Deficient to be borne by E = ₹ 80,000 – ₹ 78,000= ₹ 2,000

Q.23: The average profit of a business over the last 5 years amounted to ₹ 60,000. The normal commercial yield on capital invested in such a business is deemed to be 10% p.a. The net capital invested in the business is ₹ 5,00,000. Amount of goodwill, at three years' purchase of the average profit of the firm on the basis of super profit method will be:
(a) ₹ 1,00,000
(b) ₹ 1,80,000
(c) ₹ 30,000
(d) ₹ 1,50,000

Correct Answer is Option (c)
Super profit = Average profit – Normal profit
Super profit = ₹ 60,000 – ₹ 5,00,000 × 10/100
 = ₹ 10,000
Goodwill = ₹ 10,000 × 3 = ₹ 30,000

Q.24: A, B and C are partners sharing profits in the ratio of 2:3:1. As per the partnership agreement, C is to get a minimum amount of ₹ 1,00,000 as her share of profits every year and any deficiency on this account is to be personally borne by B. The net profit for the year ended 31st March, 2021 amounted to ₹ 10,00,000. What will be the amount of deficiency to be borne by B?
(a) ₹ 50,000
(b) ₹ 30,000
(c) ₹ 20,000
(d) Nil

Correct Answer is Option (d)
C’s Share = ₹ 10,00,000 × 1/6

= ₹ 1,66,667
As the amount of profit of C is more than the guaranteed amount, no deficiency will be borne by B.

Q.25: Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R).
Assertion (A): The interest on drawings is recorded in the debit side of current account when fixed capital method is followed.
Reason (R): The capital of the partners is fixed, and all the transactions are recorded in the current account.
In the context of the above statements, which one of the following is correct?
(a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true, but Reason (R) is false .
(d) Assertion (A) is false, but Reason (R) is true.

Correct Answer is Option (a)
The interest on drawings is recorded in the current account so as to maintain the capitals of the partners fixed.

Q.26: Asha and Nisha are partners sharing profit in the ratio of 2:1. Asha’s son Ashish was admitted for 1/4 share of which 1/8 was gifted by Asha to her son. The remaining was contributed by Nisha.
Goodwill of the firm in valued at ₹40,000. How much of the goodwill will be credited to the old partners' capital account ?
(a) ₹ 2,500 each
(b) ₹ 5,000 each
(c) ₹` 20,000 each
(d) None of these

Correct Answer is Option (c)
Asha and Nisha share goodwill in equal ratio.

Q.27: If the premium on forfeited shares has already been received, then Securities Premium Reserve Account should be:

(a) Credited
(b) Debited
(c) No treatment
(d) Transferred to Capital Reserve A/c

Correct Answer is Option (c)

Q.28: A company issued 40,000 preference shares of ₹ 100 per share at par payable as under:
On Application :20%
On Allotment : 40%
On First & Final Call : Balance
Applications were received for 50,000 shares. Allotment was made on pro-rata basis. How much amount will be received in cash on allotment?
(a) ₹ 14,00,000
(b) ₹ 16,00,000
(c) ₹ 18,00,000
(d) ₹ 20,00,000

Correct Answer is Option (a)
 ₹ 14,00,000. Allotment due  (40,000 × ₹ 40) = ₹ 16,00,000
Less : Excess application money
(10,000 × ₹ 20) (₹ 2,00,000) = ₹ 14,00,000

Q.29: Rehana, Shakina and Jasmine are partners. They share profit and loss in the ratio 1:2:3. Shakina is guaranteed to get ₹ 50,000 profit. Any deficiency if arises, will be borne by Rehana and Jasmine equally. During the year, they earned a profit of ₹ 6,00,000. How much money has to be given to her by Rehana and Jasmine?
(a) ` 2,000 by Rehana and Jasmine each
(b) ` 2,500 by Rehana and Jasmine each
(c) ` 3,000 by Rehana and Jasmine each
(d) Nil

Correct Answer is Option (d)
Shakina’s share = ` 6,00,000 × 2/6 = ` 2,00,000
As she gets the share more than the guaranteed amount, she will not be reimbursed.

Q.30: Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R).
Assertion (A): The securities premium amount can be used to issue partially paid up bonus shares.
Reason (R): According to Section 52(2) of the Companies Act, 2013, the amount of Securities Premium Reserve can be used only for some specific purposes.
In the context of the above statements, which one of the following is correct?
(a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(d) Assertion (A) is true, but Reason (R) is false.
(d) Assertion (A) is false, but Reason (R) is true.

Correct Answer is Option (d)
According to Section 52(2) of the Companies Act, 2013, the amount of Securities Premium Reserve can be used only for the following purposes :
(i) To issue fully paid-up bonus shares to these share holders.
(ii) To write off preliminary expenses of the company.
(iii) To write off the commission paid or expenses on issue of shares/ debentures.
(iv) To pay premium on the redemption of preference shares or debentures of the company.
(v) Buy-back of equity shares and other securities as per Section 68.

Q.31: X Ltd. takes over the business of Y Ltd. with the following assets and liabilities:
Sundry Assets : ₹ 6,50,000
Other Liabilities : ₹ 50,000
X Ltd. immediately paid ₹ 1,50,000 by promissory note for two months and the balance by issue of 5,000 equity shares of ₹ 100 each for purchase consideration of running business to Y Ltd. Which of the following journal entry is correct for the purchase of running business of Y Ltd.?
(a)
(b)
(c)
(d) None of these

Correct Answer is Option (c)

Q.32: Ram, Rahim and Robert entered into partnership in the profit sharing ratio of 2:3:5. Robert guaranteed Ram ₹ 90,000 of profit every year and if there is less he will be reimbursed the deficient amount by him and Rahim in the ratio of 2:3. The profit for the year ending March 2021 was ₹ 4,00,000. How much money does Rahim has to give to Ram?
(a) ₹ 4,000
(b) ₹ 6,000
(c) ₹ 2,000
(d) Nil

Correct Answer is Option (b)
Ram's Share = ₹ 4,00,000 ×2/10
= ₹ 80,000
Deficiency= ₹ 90,000 – ₹ 80,000  = ₹ 10,000

Q.33: 6,000 shares of ₹ 100 each (applied for 7,500 shares) forfeited due to non-payment of allotment ₹ 40 per share. First & final call was not yet made. Company received only application money at ₹ 50 per share including premium of ₹ 20 per share.

Which of the following amount will be transferred to share forfeiture account by the company?
(a) ₹ 3,75,000
(b) ₹ 3,00,000
(c) ₹ 2,25,000
(d) ₹ 1,80,000

Correct Answer is Option (c)
₹ 7,500 × 30 = ₹ 2,25,000

Q.34: L Company Limited forfeited 2,000 equity shares for non payment of final call of ₹ 4 per share. the issued price of the share was ₹ 10.  these shares. The accountant is puzzled that what is the maximum discount can be permitted on the reissue of such shares. help him to identify the correct option:
(a) @ 10% of issue price
(b) Upto the amount of forfeited money
(c) Could not issue at discount
(d) None of these

Correct Answer is Option (b)

Q.35: On the admission of a new partner, increase in the value of assets is debited to
(a) Profit and Loss Adjustment Account
(b) Assets Account
(c) Old Partner ’s Capital Account
(d) None of these

Correct Answer is Option (b)

Q.36: Once, forfeited shares are reissued, balance of share forfeiture account will be transferred to ____________.
(a) General Reserve
(b) Capital Reserve
(c) Reserve Capital
(d) Securities Premium Reserve

Correct Answer is Option (b)

Question no.’s 37 and 38 are based on the hypothetical situation given below.

Bright Star Limited is engaged in manufacture of high-end medical equipment. Considering the prospects of high growth in this segment the company has decided to expand and for this purpose additional investment of ₹50,00,00,000 is required. Directors have decided that 20% of this requirement would be financed by raising long term debts and balance by issue of equity shares.
As per memorandum of association of the company the face value of equity shares is ₹100 each. Also, considering the market  standing  of  the company these shares would be issued at a premium of 25%. Directors decided to issue sufficient shares to collect the desired amount (including premium).
The prospectus was issued to public, and the issue was oversubscribed by 2,00,000 shares which were issued letters of regret. Answer the below mentioned questions considering that the entire amount was payable on application.

Q.37: What is the total amount collected on application?
(a) ₹42,50,00,000
(b) ₹40,00,00,000
(c) ₹32,00,00,000
(d) None of the above

Correct Answer is Option (a)
Issued capital  = 80% of ₹ 50,00,000
= ₹ 50,00,00,000 × 80/100
= ₹ 40,00,00,000
Number of equity shares issued for subscription = 40,00,00,000 /125
= 32,00,000 shares
Total application money was received on 32,00,000 + 2,00,000 shares
= 34,00,000 × ₹125
= ₹ 42,50,00,000

Q.38: How many equity shares were offered for issue by Bright Star Ltd.?
(a) 40,00,000 shares
(b) 50,00,000 shares
(c) 35,00,000 shares
(d) 32,00,000 shares

Correct Answer is Option (d)
Number of equity shares issued for subscription = 40,00,00,000 /125
= 32,00,000 shares

Question no.’s 39, 40 and 41 are based on the hypothetical situation given below.
On 1st September, 2020, twenty students of Modern College started their Partnership Firm in the name of “Be Safe” for selling sanitisers on digital mode. Since they were good friends of each other, they were not having any explicit agreement in place. All of them have agreed to invest ₹15,000 each as capital. The  books  were closed  on 31st March, 2021, on which date the following information was provided by the firm:

Q.39: Calculate the amount of profits to be transferred to Profit and Loss Appropriation Account.
(a) Profit ₹58,000
(b) Profit ₹44,000
(c) Profit ₹59,200
(d) Profit ₹58,700

Correct Answer is Option (a)
Profit to be transferred to Profit and Loss Appropriation Account
= ₹1,20,000 (sales proceeds) – ₹ 50,000 (cost of goods sold) – ₹7,000 (rent to partner) – ₹5,000 (manager’s commission)
= ₹1,20,000 – ₹62,000
= ₹ 58,000

Q.40: On 31st March, 2021, remuneration to partners will be provided to the partners of “Be Safe” but only out of:
(a) Profits for the accounting year
(b) Reserves
(c) Accumulated profits
(d) Goodwill

Correct Answer is Option (a)

Q.41: On 1st December, 2020 one of the partners of the firm introduced additional capital of ₹30,000 and also advanced a loan of ₹40,000 to the firm. Calculate the amount of interest that partner  will  receive for the current accounting period.
(a) ₹ 4,200
(b) ₹ 1,40
(c) ₹ 1,575
(d) ₹ 800

Correct Answer is Option (d)
Amount of loan = ₹ 40,000
Period for which interest to be paid = 4 months
Interest rate = 6% (in the absence of partnership deed)
Interest = ₹ 40,000×6×4 / 100×12
= ₹ 800
Note: Interest on capital will not be provided as interest on capital is not to be given in case no  information is given in partnership deed.

Q.42: Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R): 
Assertion (A): Horizontal analysis is also known as static analysis.
Reason (R): Static analysis is made to review and analyse the financial statements of one year only.
In the context of the above two statements, which of the following is correct?
(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(c) (A) is true but (R) is false.
(d) (R) is true but (A) is false.

Correct Answer is Option (d)
Horizontal analysis is known as dynamic analysis.

Q.43: Which of the following items is shown under the head Non-Current Assets‘ while preparing company‘s Balance Sheet as per Schedule III of Company Act, 2013?
(a) Motor Vehicles, Stock in trade, Goodwill, Cash at bank, Loose tools
(b) Bills receivable, Goodwill, Motor Vehicles, Loose tools
(c) Goodwill, Motor Vehicles, Loose tools
(d) Goodwill, Motor Vehicles

Correct Answer is Option (d)

Q.44: Cash Balance ₹ 5,000; Trade Payables ₹ 40,000; Inventory ₹ 50,000; Trade Receivables ₹ 65,000 and Prepaid Expenses are ₹ 10,000. Liquid Ratio will be:

(a) 1.75 : 1
(b) 2 : 1
(c) 3.25 : 1
(d) 3 : 1

Correct Answer is Option (a)
Quick ratio = ₹ 70,000 / ₹ 40,000 = 1.75:1

Q.45: Which of the following statements are true about ratio analysis?
(i) Ratio Analysis is useful in financial analysis.
(ii) Ratio Analysis is helpful in communication and coordination.
(iii) Ratio Analysis is not helpful in identifying weak spots of the business.
(iv) Ratio Analysis is helpful in financial planning and forecasting.
(a) (i), (ii), (iv)
(b) (i), (iii), (iv)
(c) (i), (ii), (iii)
(d) (i), (ii), (iii), (iv)

Correct Answer is Option (a)

Q.46: Loose tools is shown under the sub head _________ of the Balance Sheet as per Revised Schedule III of Companies Act, 2013.
(a) Fixed Assets
(b) Other Current Assets
(c) Inventories
(d) Stocks

Correct Answer is Option (c)

Q.47: Which of the following is not a limitation of analysis of financial statements
(a) Window Dressing
(b) Price level changes ignored
(c) Subjectivity

(d) Intra-firm comparison possible

Correct Answer is Option (d)

Q.48:Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R):

Assertion (A): Liquid ratio reveals strength of liquidity of a business unit.
Reason (R): Liquid ratio analyses liquid assets and current liabilities of a business unit in order to assess the extent of liquidity.
In the context of the above two statements, which of the following is correct?
(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true & (R) is not the correct explanation of (A).
(c) (A) is true but (R) is false.
(d) (R) is true but (A) is false.

Correct Answer is Option (a)

Q.49: The fixed assets of a company were ₹ 35,00,000. Its current assets were ₹4,30,000 and current liabilities were ₹3,30,000. The amount of capital employed will be:
(a) ₹35,00,000
(b) ₹4,30,000
(c) ₹3,30,000
(d) ₹36,00,000

Correct Answer is Option (d)
Capital Employed = Total Assets + Current Assets – Current Liabilities
= ₹ 35,00,000 + ₹ 4,30,000 – ₹ 3,30,000
= ₹ 36,00,000

Q.50: The Revenue from Operations of a firm is ₹ 6,00,000. Its inventory turnover ratio is 3 times. If gross profit ratio is 25%. The amount of cost of revenue from operations will be:
(a) ₹ 45,000
(b) ₹ 4,50,000

(c) ₹ 1,50,000
(d) ₹ 6,00,000

Correct Answer is Option (b)
Revenue from Operations = ₹ 6,00,000
Gross Profit = 25/100× ₹ 6,00,000
= ₹ 1,50,000
Cost of Revenue from Operations
= ₹ 6,00,000 – ₹ 1,50,000
= ₹ 4,50,000

Q.51: Which of the following statements is false?
(a) The use of accounting conventions makes financial statements comparable, simple and realistic.
(b) The financial statements show current financial condition of the concern.
(c) Financial statements are prepared on certain basic assumptions (pre-requisites) known as postulates.
(d) Under more than one circumstance, facts and figures presented through financial statements are based on personal opinion, estimates and judgements.

Correct Answer is Option (b)
Financial statements are prepared on the basis of facts in the form of cost data recorded in accounting books. The original cost or historical cost is the basis of recording transactions. As these are not based on market prices, the financial statements do not show current financial condition of the concern.

Q.52: Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R):
Assertion (A): Payment of final dividend already declared improve current ratio.
Reason (R): The ideal current ratio is 2: 1.
In the context of the above two statements, which of the following is correct?
(a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true, but Reason (R) is false.
(d) Assertion (A) is false, but Reason (R) is true.

Correct Answer is Option (b)
Both current assets and current liabilities decreases with the same amount.

Q.53: Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R):
Assertion (A): Profitability ratios measure overall effectiveness of the management.
Reason (R): Profitability ratios are based either on revenue from operations or on investments.
In the context of the above two statements, which of the following is correct?
(a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true, but Reason (R) is false.
(d) Assertion (A) is false, but Reason (R) is true. 

Correct Answer is Option (b)
Profitability ratios are calculated to analyse the earning capacity of the business which is the outcome of utilisation of resources employed in the business. There is a close relationship between the profit and the efficiency with which the resources employed in the business are utilised. 

Q.54: The Quick ratio of a company is 0.8 : 1. Which of the following will increase this ratio?
(i) Purchase of loose tools ₹2,000
(ii) Insurance premium paid in advance ₹500
(iii) Sale of gods on credit ₹3,000
(iv) Honoured a bills payable ₹5,000 on maturity
Choose the correct option:
(a) Only (i) is correct.
(b) Only (ii) is correct.
(c) Only (iii) is correct.
(d) Only (ii) and (iii) are correct.

Correct Answer is Option (c)
Quick assets will increase but current liabilities will not change.

Q.55: Consider the following information of M Ltd.
Working capital : ₹1,80,000
Total debts : ₹3,90,000
Long term debts : 3,00,000
What will be the current ratio?
(a) 1 : 1
(b) 2 : 1
(c) 3 : 1
(d) 1 : 2

Correct Answer is Option (c)
Total Debts = ₹ 3,90,000
Long-term Debts = ₹ 3,00,000
Current Liabilities = Total Debts – Long-term Debts
= ₹ 3,90,000 – ₹ 3,00,000
= ₹ 90,000
Working Capital = Current Assets – Current Liabilities
1,80,000 = Current Assets – ₹ 90,000
Current Assets = ₹ 2,70,000
Current Ratio = Current Assets / Current Liability
₹ 2,70,000 / ₹ 90,000 = 3 :1