Higher Financial Accounting
(HFA)
MCQs:
1. Investment Account
2. Depreciation & Accounting for lease transactions as per AS-19
Investment Account
1. When the dividend is actually received on the due date,
A. The entire amount is entered in the Capital Column (Cr.) of the Investment A/c
B. The entire amount is entered in the Income Column (Dr.) of the investment A/c
C. The pro-rata amount relating to the period after the date of acquisition entered the Income Column (Cr.) of the Investment A/c
D. The pro-rata amount relating to the period before the date of acquisitions entered is in the Income Column (Cr.) of the Investment A/c
2. When bonus shares are received
A. The Nominal Value [NV] of such bonus shares is entered in the NV Column (Dr.); and no amount is entered in the Capital column (Dr.) of the investment A/c
B. The Nominal Value [NV] of such bonus shares is entered in the NV Column (Dr.); and On in the Capital column (Dr.) of the Investment A/c
C. The Nominal Value [NV] of such bonus shares is entered in the NV Column (Dr.); and in the Capital column (Cr.) of the Investment A/c
D. The Nominal Value [NV] of such bonus shares is entered in the Capital Column (Dr.); and no amount is entered in the NV column (Dr.) of the Investment A/c
3. When the rights shares are subscribed
A. Nominal Value is entered in the NV column (Cr.); and Cost is entered in the Capital column (Cr.) of the Investment A/c
B. Nominal value is entered in the Capital column (Dr.) of the investment A/c
C. Nominal Value is entered in the NV column (Dr.); and Cost is entered in the Capital column (Dr.) of the Investment A/c
D. Cost is entered in the NV column (Dr.) of the Investment A/c
4. When the rights are sold (without subscribing)
A. Sale proceeds are credited to the Investment Account
B. Sale proceeds are debited to the Investment Account
C. No entry is made in the Investment Account; and Sale proceeds are credited to the Profit & Loss Account
D. None of the above
5. The cost of Right shares is
A. Added to the cost of investments
B. Subtracted from the cost of investments
C. No treatment is required
D. None of the above
6. Long term investments are carried at
A. Fair Value
B. Cost Price
C. Cost or Market Value whichever is less are carried at
D. Market Value
7. Short term investments are carried at
A. Market Value
B. Cost Price
C. Cost or Market Value whichever is less
D. None of the above
8. A ltd. Acquired 2,000 equity shares of Omega Ltd., on cum-right basis at 75 per share. Subsequently, omega Ltd. made a right issue of 1: 1 at 60 per share, which was subscribed for by A. Total cost of investments at the year end will be
A. 2,70,000
B. 1,50,000
C. 1,20,000
D. 30,000
9. If market value of investment held as current asset is less than cost
A. difference is debited to profit & loss a/c
B. difference is credited to profit & loss a/c
C. difference is ignored
D. difference is debited to capital reserve a/c
10. If market value of investment held as long term asset is less than cost
A. difference is credited to profit & loss a/c
B. difference is debited to profit & loss a/c
C. difference is ignored
D. difference is debited to capital reserve a/c
11. Dividend on shares accrues
A. on the last day of the financial year
B. on due dates fixed in advance
C. on the first day of the financial year
D. on the date it is declared
12. Dividend is paid
A. to the holder of the shares on the date of book-closure pro rata as per his actual period of holding
B. to the original investor if the shares are sold cum-dividend
C. to the holder of the shares on the date of book-closure irrespective of his actual period of holding
D. to the original investor if the shares are sold ex-dividend
13. XYZ Ltd. pays a dividend on 30-09-2021 for the year ended on 31-03-2021,
A. dividend on shares held as on 30-09-2021 will be treated as Revenue receipt (Income) irrespective of the date of acquisition
B. dividend on shares held as on 30-09-2021 will be treated as Capital receipt irrespective the date of acquisition
C. dividend on shares held as on 31-03-2021 will be treated as Revenue receipt (income); and on shares acquired between 01-04-2021 and 30-09-2021 will be treated as Capital receipt
D. dividend on shares acquired between 01-04-2021 and 30-09-2021 will be treated as Revenue receipt (Income); and on shares acquired between 01-04-2020 and 31-03-2021 will be treated as Capital receipt
14. The current investments are valued on closing date at
A. Market value
B. Cost of purchase
C. Lower of cost and market value
D. Higher of cost and fair value
15. Any reduction to market value of current investment from cost, on valuation date is debited to
A. Revaluation reserve
B. Profit and loss account
C. Capital reserve
D. General reserve
16. Current investments should be valued at the lower of cost and market value determine on
A. Individual investment basis
B. Either individual investment basis or by category of investment
C. On an overall (or global) basis
D. None of the above
17. Interest on securities is paid
A. To the holder of the security on the due date, in respect of his actual period of holding
B. To the holders of the security on the due date, irrespective of his actual period of holding
C. To the original purchaser of the security
D. None of the above
18. Profit on sale of investment
A. is transferred to profit & loss a/c only if the investment is current investment
B. is transferred to profit & loss a/c
C. is transferred to capital reserve a/c if the investment is long term, investment
D. none of the above
19. Following is not a Fixed Income Bearing Security
A. Debentures
B. Equity Shares
C. Government security
D. Preference Shares
20. 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
21. 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
22. Interest is paid
A. to the holder of the security on the due date pro rata as per his actual period of holding
B. to the original investor if the security is sold cum-interest
C. to the holder of the security on the due date irrespective of his actual period of holding
D. to the original investor if the security is sold ex-interest
23. If a security is transferred on 31st March, 2021 being the exact date when interest falls due
A. the entire interest up to 31st March 2021 belongs to the purchaser
B. the interest up to 30th March 2021 belongs to the purchaser
C. the entire interest up to 31st March 2021 belongs to the seller
D. none of the above
24. A security is transferred on 31st May 2021; while the next interest falls due on 30th June 2021
A. The purchaser has the right to claim the Interest up to 31st May 2021 as his income
B. The seller has the right to claim the Interest up to 31st May 2021 as his income
C. The seller has the right to claim the Interest upto 30th June 2021 as his income
D. Interest in June 2021 is divided equally between the seller and the purchaser
25. XYZ buys 200 Debentures of nominal value of Rs.100 each of ICICI Ltd. at Rs. 98 (ex- interest on 1-3-2020 from ABC. Interest @ 12% p.a, is to be paid half-yearly on 30th June and 31st December.
A. Nominal value of investment purchased is Rs. 20,000
B. Nominal value of investment purchased is Rs. 19,600
C. Nominal value of investment purchased is Rs. 20,200
D. Nominal value of investment purchased is Rs. 19,800
26. XYZ buys 200 Debentures of nominal value of 100 each of ICICI Ltd. at 98 (cum-interest on) 1-3-2020 from ABC. Interest @ 12% p.a. is to be paid half-yearly on 30th June and 31st December
A. Nominal value of investment purchased is Rs. 20,000
B. Nominal value of investment purchased is Rs.19,600
C. Nominal value of investment purchased is Rs. 20,200
D. Nominal value of investment purchased is Rs. 19,800
27. XYZ buys 200 Debentures of nominal value of Rs.100 each of ICICI Ltd. at Rs.98 (ex-interest) on 1-3-2020 from ABC. Interest @ 12% p.a. is to be paid half-yearly on 30th June and 31st December
A. XYZ has the right to claim interest of Rs.400
B. ABC has the right to claim interest of Rs. 400
C. XYZ has the right to claim interest of Rs. 2,400
D. XYZ has the right to claim interest of Rs.1,200
28. XYZ buys 200 Debentures of nominal value of Rs.100 each of ICICI Ltd. at Rs. 98 (ex-interest) on 1-3-2020 from ABC. Interest @ 12% p.a. is to be paid half-yearly on 30th June and 31st December Price paid by XYZ towards capital is
A. Rs. 19,600
B. Rs. 20,000
C. Rs. 20,200
D. Rs. 19,800
29. XYZ buys 200 Debentures of nominal value of Rs.100 each of ICICI Ltd. at Rs. 98 (ex-interest) on 1-3-2020 from ABC. Interest @ 12% p.a. is to be paid half-yearly on 30th June and 31st December. Total payment made by XYZ is
A. Rs. 19,600
B. Rs. 20,200
C. Rs. 20,000
D. Rs. 19,800
30. XYZ buys 200 Debentures of nominal value of Rs.100 each of ICICI Ltd. at Rs. 101 (cum-interest) on 1-3-2020 from ABC. Interest @ 12% p.a. is to be paid half-yearly on 30th June and 31st December. Price paid by XYZ towards capital is
A. Rs.19,600
B. Rs. 20,000
C. Rs. 20,200
D. Rs.19,800
31. XYZ buys 200 Debentures of nominal value of Rs. 100 each of ICICI Ltd. at 101 (cum-interest) on 1-3-2020 from ABC. Interest @ 12% p.a. is to be paid half-yearly on 30th June and 31st December. Total payment made by XYZ is
A. Rs. 20,000
B. Rs. 19,600
C. Rs. 20,200
D. Rs. 19,800
32. ABC sells 100 Debentures of nominal value of Rs. 100 each of ICICI Ltd. at Rs. 98 (ex-interest) on 1-3-2020 to XYZ. Interest @ 12% p.a. is to be paid half-yearly on 30th June and 31st December. Nominal Value of investments sold is
A. Rs. 10,000
B. Rs. 10,100
C. Rs. 9,800
D. Rs. 9,900
33. ABC sells 100 Debentures of nominal value of Rs.100 each of ICICI Ltd. at 98 (ex - interest) on 1-3-2020 to XYZ. Interest @ 12% p.a. is to be paid half-yearly on 30th June and 31st December. Amount received towards capital is
A. Rs. 10,000
B. Rs. 10,100
C. Rs. 9,800
D. Rs. 9,900
34. ABC sells 100 Debentures of nominal value of Rs.100 each of ICICI Ltd. at Rs.101 (cum-interest) on 1-3-2020 to XYZ. Interest @ 12% p.a. is to be paid half-yearly on 30th June and 31st December. Amount received towards capital is
A. Rs. 10,000
B. Rs. 10,100
C. Rs. 9,800
D. Rs. 9,900
35. ABC sells 100 Debentures of nominal value of Rs.100 each of ICICI Ltd. at Rs. 98 (ex - interest) on 1-3-2020 to XYZ. Interest @ 12% p.a. is to be paid half-yearly on 30th June and 31st December. Total amount received is
A. Rs. 10,000
B. Rs. 9,900
C. Rs. 10,100
D. Rs. 9,800
36. ABC sells 100 Debentures of nominal value of Rs.100 each of ICICI Ltd. at Rs. 101 (cum-interest) on 1-3-2020 to XYZ. Interest @ 12% p.a. is to be paid half-yearly on 30th June and 31st December. Total amount received is
A. Rs. 10,000
B. Rs. 10,100
C. Rs. 9,800
D. Rs. 9,900
37. XYZ buys Debentures of nominal value of Rs. 100 each of ICICI Ltd. at Rs. 98 (ex-interest) on 1-3-2020 from ABC. Interest of Rs. 400 has accrued from the last due date till the date, of purchase. In the entry for recording this investment in the books of XYZ
A. Rs. 400 will be credited to Interest A/c
B. Rs.400 will be debited to Interest A/c
C. Rs. 400 will be debited to Investment A/c
D. Rs. 400 will be credited to Investment A/c
38. On each sale of investment, the profit or loss is calculated as
A. Sale Price Less Simple Average Cost
B. Sale Price Less Weighted Average Cost
C. Sale Price Less Cost on FIFO basis
D. Sale Price Less Cost on LIFO basis
Depreciation & Accounting for lease transactions as per AS-19
39. When an investment is disposed of, the difference between carrying amount and net sale proceeds is:
A. Transferred to Revenue Reserve
B. Transferred to Capital Reserve
C. Transferred to Profit & Loss Account
D. None of the above
40. Accounting Standard-6 (Depreciation Accounting) is not applicable to
A. Plant and Machinery
B. Goodwill
C. Building
D. Vehicles
41. In finance lease, economic life and useful life:
A. are significantly different
B. Lease Term is for the major part of the economic life
C. Useful life and economic life are almost same
D. Both (b) & (c)
42. Useful life of a leased asset is:
A. The period over which an asset is expected to be economically usable by one or more users.
B. The period over which the leased asset is expected to be used by the lessee.
C. The period over which an asset is expected to be usable.
D. None of the above.
43. AS-19 on Accounting for Lease is applicable to:
A. Lease agreement to use building
B. Lease agreement to use land,
C. Lease agreement to explore natural resources
D. All of the above
44. The difference between residual value of an asset and it's guaranteed residual value is:
A. Fair Value
B. Gross Investment
C. Unguaranteed Residual Value
D. Net Investment
45. Net Investment = Gross Investment - _________.
A. Unguaranteed Residual Value
B. Unearned Finance Income
C. Present Value of Gross Investment
D. Guaranteed Residual Value
46. Property, plant and equipment are conventionally presented in the balance sheet at:
A. Replacement cost less accumulated depreciation
B. Historical cost less salvage value
C. Historical cost less depreciation portion thereof
D. Market value less depreciation
47. The main objective of providing depreciation is to:
A. Calculate true profit
B. Show true financial position in the balance sheet
C. Reduce Tax Burden
D. Both (a) and (b) above
48. Which of the following is not included in the definition of "Fixed Assets" as per AS-10?
A. It is held with the intention of producing goods.
B. It is held with the intention of being used for providing services,
C. It is held with the intention of sale in normal course of business.
D. It is expected to be used for more than one accounting period.
49. AS-6 on 'Depreciation Accounting' applies to
A. Wasting Assets
B. Intangible Assets
C. Tangible Assets
D. All of the above
50. Changes in Depreciation Method are done in which of the following situation:
A. For compliance of Registrar's Order
B. For compliance of Accounting Standards
C. For compliance of statute 34 Investments
D. Both (b) & (c)
51. Investments classified as long term investments should be carried in the financial statements at:
A. Cost
B. Fair Value
C. Face Value
D. Lower of cost or fair value
52. The historical cost of a Plant & Machinery has undergone change due to increase in the long term liability on account of exchange fluctuation. Depreciation should be provided on the revised unamorised depreciable amount.
A. Prospectively over the residual useful life of the asset
B. Restropectively over the total useful life of the asset
C. Both & (a) & (b) are premissible
D. None of the above
53. In Operating Lease arrangement, Depreciation as per AS-6 is recorded in the books of:
A. Lessee
B. Guarantor
C. Lessor
D. None of the above
54. An asset was acquired for Rs. 100 lakh five years ago. The asset has been revalued in the current reporting period at Rs. 80 lakhs. Depreciation provided till date is Rs. 40 lakhs. The balance useful life of the asset is 10 years. Depreciation charged for the current year will be
A. Rs. 16 lakhs
B. Rs. 12 lakhs
C. Rs. 8 lakhs
D. Rs. 24 lakhs
55. As per AS-13, investments readily realizable and held for not more than one year are known as
A. Cash Investments
B. Investment Property
C. Current Investments
D. None of the above
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