Accounting

Question Paper

Financial Accounting (MB131) : April 2004

Section A : Basic Concepts (100 Marks)

• This section consists of questions with serial number 1 -

73.

• Answer all questions.

• Each question carries one mark.

1. Which of the following appears under the head 'Miscellaneous expenditures' on the assets side of

Balance Sheet of a company?

(a) Bills discounted from bank

(b) Prepaid insurance

(c) Directors' remuneration

(d) Discount allowed on issue of shares

(e) Income tax paid in advance.

(1 mark)

2. Dividends are usually paid on

(a) Authorized capital

(b) Issued capital

(c) Called-up capital

(d) Paid-up capital

(e) Reserve capital

(1 mark)

3. Which of the following can be utilized for redemption of preference shares?

(a) The proceeds from fresh issue of equity shares

(b) The proceeds from issue of debentures

(c) The proceeds from issue of fixed deposit

(d) The sale proceeds of investments

(e) Both

(a) and

(b) above.

(1 mark)

4. Which of the following costs is not categorized as Research and Development Costs?

(a) Cost of materials consumed in the process of research and development

(b) Amortization of patents and licenses related to research and development

(c) Depreciation of premises that is used for carrying the work of research

(d) Salaries and wages paid to personnel engaged at the research and development activities

(e) Promotional expenses on market research for existing products.

(1 mark)

5. The maximum amount beyond which a company is not allowed to raise funds by issue of shares is

(a) Issued capital

(b) Reserve capital

(c) Nominal capital

(d) Subscribed capital

(e) Paid-up capital.

(1 mark)

6. According to which of the following accounting concepts, are consolidated financial statements

prepared when a parent-subsidiary relationship exists?

(a) Going concern

(b) Business entity

(c) Materiality

(d) Cost

(e) Periodicity.

(1 mark)

7. Rights shares are the shares

(a) Issued by a newly formed company

(b) Legally issued to the public at large

(c) Offered to the existing equity shareholders

(d) That have a right of redemption

(e) That have a right to cumulative dividends.

(1 mark)

8. Which of the following data is essential for calculation of value of an equity share under the intrinsic

value method?