True / False

All Chapters
Chapte py) -
copt
 False,

34
-

Redemption of Debentures -

-
1. Amounts credited to the debenture redemption reserve may be utilised by the company
for any purpose. False
-
- =>

- -
2. All India Financial Institutions (AIFIs) regulated by Reserve Bank of India and Banking
Companies for both public as well as privately placed debentures need not create any
Debenture Redemption Reserve (DRR). True
-X
3. Under payment in instalments method, the payment of entire debenture is made in one
lot. False
-
-

4. At redemption of debentures, DRR should be transferred to general reserve.Fe

-

-
Redemption of Preference Shares
CRR
1. When shares are redeemed by utilising distributable profit, an amount equal to the
face value of shares redeemed is transferred to Capital Reserve account by debiting the
distributable profit.
Cap Red EAs
2.A company who prepares financial statements in compliance with Accounting
Standards under Section 133 of the Companies Act, 2013, it cannot utilize securities
premium for the purpose of providing for premium on the redemption of Redeemable
Preference shares of the Company.Tue
Free Res
3. The balance in forfeited shares account can be used for transfer to capital redemption
reserve account. False
Bonu shares Gen Res
.

-
F
4. Capital redemption reserve cannot be used for writing off miscellaneous expenses and
losses True
 ↓ EPS = Earn - av
for si ↑
No of .

egsh .

Bonus & Right Issue

decrease
~

1. Earning per share gets increased after bonus issue. False

2. Issued share capital including issue of rights shares and bonus shares may be more than
the Authorised capital. False
=

3. Rights issue of shares results in decrease of market value of per share in comparison to
-
market price before rights issue. True
-

↑p bef Right issue

-
-

Less than
.

A
4. Right shares are normally offered at a price more than the cum-right value of the
-
share, causing dilution in its value post-right issue False

Issue of Debentures Ber

Registered
Creditors
1. Debenture holder are the owners of the company. False
-

2. Perpetual debentures are payable at the time of liquidation of the company.True

3. Registered debentures are transferable by delivery. False
4.When companies issue their own debentures as collateral security for a loan, the holder
of such debenture is entitled to interest only on the amount of loan and not on the
debentures True
Asset
5. Debentures suspense account appears on liability side of balance sheet.False
=

6. If a company incurs loss, then it does not pay interest to the debenture holders.Else
7. At the time of liquidation, debenture holders are paid off after the shareholders.False
-

8. Convertible debentures can be converted into equity shares. True

9. Redeemable debentures are not payable during the life time of the company.False
-

10.Debentures can be issued for a consideration other than for cash, such as for
purchasing land, machinery etc.
~
OrbSub
CA Hardik Manchanda
 O
>
-
20 C10 +10]
Issue of Shares
* issue price
1. Liability of a holder of shares is limited to the face value of shares acquired by them.
2. Authorised capital appears in the balance sheet at face value.True
*
Fixed
3. The rate of dividend on preference shares may --
vary From year to year.False
4. A company may issue shares at a discount to the public in general. Fals-Sweeg
5. Sweat equity shares are those which are issued to employees & directors at a discount.
L
6. As per table F, rate of interest on calls in arrears is 12%. 10
..% F True
=
7. As per Table F, rate of interest on calls in advance is 10%.12%. F
8. Non-participating preference shareholders enjoy voting rights. False
9. Forfeited shares are available to the company for the purpose of resale.True
-

-
10. Loss on reissue should exceed the forfeited amount. False
Not
Dissolution of a Firm
-
Dissolution of a
firm
-
1. Books of accounts are closed in dissolution of partnership. ↑olse
2. On the dissolution of a partnership, firstly, the assets of the firm are realized. Then the
firmrepayment of liabilities to outsiders.True
amount realized, is applied first towards -
-
3) In event of the dissolution of the firm, the business ceases to end. In event of
-
-

-
dissolution of the partnership, the partnership is reconstituted and the business
discontinues. False Debit
- -
4. Expenses of dissolution on realization of assets are credited to the Realization
1
Account. False -
-
5. Revaluation Account is prepared at the time of dissolution of partnership but
-
Realisation Account is prepared at the time of dissolution of partnership firm. True
- - =

CA Hardik Manchanda
 Death of a Partner
1. Business of partnership comes to an end on death of a partner. False
2. Legal heir of a deceased partner automatically becomes partner in the firm.False
- -
-

3. A revaluation account is opened in the books of accounts on death of a partner.True

-
-

4. Any reserve appearing in the balance sheet on the date of death of a partner is
-
transferred to all partners capital account in their profit sharing ratio.TrUS ~
5. Legal heirs of a deceased partner are entitled to his capital account balance only.False
-

-
6) It is not necessary to adjust goodwill on death of a partner. False
1
7) On death of a partner continuing partners can agree to change their capital contribution
-

and profit sharing ratio. True Sum assured

8. On death of a partner, the firm gets surrender value of the joint life policy. False
-
9. Only legal heirs of deceased partner are entitled to amount received from joint life
1
policy. #se All the Ter

Retirement of a Partner
1. Business of a partnership has to be closed if any one of the partners retires.Else
2. At the time of retirement of a partner no special treatment is required for any reserves
-
appearing in the Balance Sheet. False
3. After retirement of a partner, profit sharing ratio of continuing partners remains the
-
same. False
-

4. If any partner wants to retire from the business, he must retire on 1st day of the
accounting year. False is entitled
5. Retiring partner has to forego his share of goodwill in the firm. False
-
6. If a partner retires in between the accounting year then he is not entitled to any profit
-
from the date of beginning of the year till his date of retirement. False
7. If the firm has taken any joint life policy then it is to be surrendered at the time of
-
retirement of a partner.True
=
8) Any joint life policy reserve appearing in the Balance Sheet is credited to all the
-
partners in their old profit sharing ratio.True
9. No revaluation account is necessary on retirement of a partner. False
10) Profit on revaluation is credited to continuing partners, retiring partner is not entitled
-
to any profit on revaluation. all the partner
False
 Admission of a Partner
1. A newly admitted partner does not have same rights as old partners. False
2. When a new partner is admitted, old partners have to forego certain share in profits of
-
the firm, this is called as sacrifice ratio.True
3. Revaluation account is also called as Profit and Loss Adjustment Account.
- Taue
4) Any appreciation in the value of an asset is credited to Revaluation account. Tere
-
5) All the partners may decide not to change the values of assets and liabilities in the
-

books of accounts. True Memorandune

- Rev Als
-
-
6. New partner is entitled to have share in reserves appearing in the balance sheet prior
to his admission. False
7. If revaluation account shows credit balance then it represents profit and therefore it is
-
credited to all partners equally. in their PSR-False
8. New partner brings necessary amount as his capital. True
-
9. New partner is entitled to share in revaluation profit. False
-
old

Treatment of Goodwill
Cam
1. Goodwill is intangible asset therefore it cannot be valued. False
2. Goodwill is valued whenever there is change in the profit sharing ratio among the
-
partners.True
3) Goodwill is the value of reputation of a firm in respect of profits expected in future
- -

over and above the normal rate of profits. True recorded

-
4) At the time of admission or retirement of a partner, goodwill can be raised in the
books of accounts and shown as an asset. False As 26
5. Only simple average method can be used for valuation of goodwill. False
- .

6. Super profit means excess of actual average profit over normal profit.True
-
7. Normal profit means profit earned by similar companies in the same industry.True
-

8. Normal profit depends upon Normal Rate of Return and past

- Xprofits. False
-
9) At the time of admission/retirement of a partner, since goodwill can not be raised in
the books of accounts is recorded through capital accounts of the partners.True
=
-
10. At the time of admission of a partner, goodwill brought in by the new partner is
shared equally by old partners.
False-sacrificatio
 Introduction to Partnership Accounts -
equal
1. In absence of any agreement partners share profits of the business in the ratio of their
capital contribution. False
-2. Profit sharing ratio and capital contribution ratio need not be same.Prue
-3. Every partnership firm must register itself with Registrar of firms. False
-4. A partner can advance loan to the partnership firm in addition to capital contributed by
him.
~ True
-5. A partner can demand interest on capital even if it is not provided in the partnership
deed. False
-

16. If a partner does not take part in day to day business activities of the firm then he is not
entitled to any share of profit. False
-7. Interest should be paid @ 6% p.a. on partners’ loan even if it is not provided in the
partnership deed. Trus
-
-

8. Husband and wife cannot be partners in the same firm. Else

-9. One senior partner is Principal and other partners are his agents. Ele
110. Partners are the agents of the firm and each other. Trus
-

Incomplete Records

1. A Trial Balance cannot be drawn up from books kept under Single Entry.Tune
-

2. Nominal Accounts are kept under Single Entry System. False Personal Cash
- . , Bank
3. Single Entry System can be adopted by small firms.True
1 -

4. Profit under single entry system is always correct and accurate.False

1
1
5. Profits computed under single entry system by different business entities are not
comparable. True
-
=

CA Hardik Manchanda
 Non Profit Organisations Cash basis
>
-

1. The Receipts and payment account for a non-profit organization follows the accrual
concept of accounting. False
Only Revenue
2. Both the revenue and capital nature transactions are recorded in the Income and
-
expenditure account. False
3. Sale of grass by a sports club is to be treated as sale of an asset.False current
-

4) Subscriptions outstanding for the current year are disclosed under the Fixed assets
I
side of the Balance sheet. False
5) Receipts and payments account gives the details about the expenses outstanding for
-
the year. False
Two
6) Adjustments in the form of additional information shall be adjusted in the final
-
accounts of a Non- profit organisation only in one place. False
7. Tournament expenses incurred are more than the Tournament fund, then the excess to
-
be shown as an asset in the closing Balance sheet. False Dr side of93Ak
- .

8. For Non-profit organisation, Excess of income over expenditure in the Income and
-
Expenditure account is termed as profit. False /Surplus
9. Surplus of non-profit organizations is distributed among its members.False Five
10. Tournament fund, building fund, library fund is based on the fund based accounting.
-
-

11) Subscription fees refers to the one-time fees paid by the members to get admission
-
for the benefits of the club. False -Entrance fee -
12. Token payment made to a person, who voluntarily undertakes a service which would
-
normally be paid in case of profitable organization is termed as Honorarium.True
-

-
13. An Insurance company is an example of non-profit organization. False
-

14) Part amount of entrance fees which is to be capitalized shall be disclosed in the
-
-

income and expenditure account. False ↳

Cap fund
15. Both the income and expenditure of the current and the previous year are recorded in
-
the Income and Expenditure account.False
-
16. Amount received as donation by an Non-profit organisation under the will of a
deceased person is termed as legacy. True
-

17) Where a Non-profit organisation has a separate trading activity, the profit/loss from
-
the trading account shall be transferred to Income and Expenditure Account at the time
of consolidation. True
=
 -
-
18. Not for profit concerns concentrate their efforts to maximize the profit earning
avenues. False
19. All the receipts are of revenue nature in case of Non-profit organisation.
- Else
-
20. There is opening balance of Income and expenditure account. False

Final Accounts of Non Manufacturing ~

-
1. The income statement shows either net profit or net loss for a particular period.T
A
*2. Gains from the sale or exchange of assets are not considered as the revenue of the
business. False
-

- As
3. The salary paid in advance is not an expense because it neither reduces assets or nor
- L

increase liabilities. True

4. A loss is an expenditure which does not bring any benefit to the concern.True
- -
-
5. All liabilities which become due for payment within the year are classified as long-term
-plse -urrent
liabilities.
-
6) The term current asset is used to designate cash and other assets or resources which
are reasonably expected to be realized or sold or consumed within one year. True
7. An asset gives rise to expenditure when it is acquired and to an expense when it is
-
consumed. True
-
-
8. If the -balance of an account on the debit side of the trial balance where the benefit has
already expired then it is treated as an expense.True
-

>
9. Sales less cost of goods sold = gross profit.The
- Gloss Loss
10)
- If the debit side of the trading account exceeds its credit side then the balance is
termed as gross profit. Falso- P &L Alr
11. The provision for bad debts is debited to Sundry Debtors Account.False
-
12) The provision for discount on creditors is often not provided in keeping with the
-
principle of conservatism. Trie Bad debt Rec
13. The debts written off as bad, if recovered subsequently are credited to Debtors
-
Account. False Income Or
Cr
- ~
14) The adjustment entry in respect of income received in advance is debit Income
Or
received in advance account and credit income account. False
15. Premium paid on the life policy of a proprietor is debited to profit and loss account.
-
Fe-
Drawings Al
 Dop On
Mach All
To
-
16. Depreciation account appear in the trial balance is taken only to profit and loss
account. True
17.
- Personal purchases included in the purchases day book are added to the sales account
in the Trading account. False - --
-
18. Medicines given to the office staff by a manufacturer of medicines will be debited to
salaries account. True
- -
19) Goods worth Rs. 600 taken by the proprietor for personal use should be credited to
Capital Account. False
-

20. If Closing Stock appears in the Trial Balance, the Closing inventory is then not entered
1
in Trading Account. It is only shown in the Balance Sheet. Trus
=
Dr Draw Dr
Salary . .

A Eur
To
pow
-
Final Accounts of Manufacturing
NRY
1. By-products valued at cost or net realisable value whichever is lower. False
2. The manufacturing account is prepared to ascertain the profit or loss on the goods
-
produced. False cost of Mog gooder
- WIP .

3. If there remain unfinished goods at the beginning and at the end of the accounting
-
-

period, cost of such unfinished goods is shown in the Manufacturing Account. T

&

4. Raw Material Consumed = Opening inventory of Raw Materials + Purchases – Closing

1
inventory of Raw Materials. ~ Trus
- ~ Mbg
- =

5) The Trading Account will show the quantities of finished goods, raw materials and
,

work- in-progress. False False

X
-
6. Overhead is defined as total cost of direct material, direct wages and direct expenses.
7. Manufacturing A/c is prepared by an enterprise engaged in trading activities.
-

Buy/sell-MgX
-

Overhead- &
direct

CA Hardik Manchanda
 Bills of Exchange -
Personal
I-

1. Bills payable account is a nominal account. Falso pas

-
order to
2. Promise to pay is included in a bill of exchange. F
-
-

3. Days of rebate are added to the due date to arrive at the maturity date.False
Grass
-
O
4. Discount at the time of retirement of a bill is a gain for the drawee.Trul
-

5. Foreign bill is drawn in the country and payable outside the country.Fru
-
-
6. Promissory note is different from bill of exchange because the amount is paid by the
-

maker in case of former and by the acceptor in the later.True-

-
-

7. A has drawn a bill on B. B accepts the same and endorses the bill to C. -False
-
8. A bill given to a creditor is called bills payable. Fre
L
accept
Depreciation Emb
T
Dec
1. Increase in market value of a fixed asset is one of the reasons for depreciation being
.

charged. False non-

2. Depreciation is a cash expenditure like other normal expenses..
1 False
3. Cost of property, plant and equipment includes purchase price, refundable taxes &
# -

import duties after deducting any discount or rebate. False ,

Non-Refundable
4) Cost of fixed asset should also include cost of opening a new facility such as
-
inauguration costs. False
5. Depreciation is charged with a constant amount under straight line method and charged
-
with a constant percentage under diminishing balance method. T
6) In case an item of Property, Plant & Equipment is revalued, whole class of assets to
~
which that asset being revalued belongs should be revalued.True
-
-

7. In / case the carrying amount of an asset is decreased due to revaluation, such decrease
should always be recognized in the Profit and Loss account. Ess
8. Akash purchased a machine for Rs. 12,00,000. Estimated useful life is 10 years and scrap
-
value is Rs. 1,00,000. Depreciation for the first year using sum of the years digit method
shall be Rs. 2,00,000. Trus
Else
-
-

9.1Depreciation cannot be provided in case of loss, in a financial year.

-

10. Providing for depreciation also helps in providing for accumulation of funds to facilitate
-
the replacement at the end of its useful life. T
 11 X 10
/
Dep
00 000
, ,

. cash
on 55 n (n +1
I
Exp Do - Owner d

Originalost
-

-
A Dep
>
-
11. If
- the equipment account has a balance of Rs. 12,50,000 and the accumulated
depreciation account has a balance of Rs. 4,00,000, the written down value of same shall be
Rs. 16,50,000. 850
.000 F WDY
-
-v
12. Sum of the years digit method is an example of accelerated method of charging
#
depreciation. Trus
F False
13) Over the life of an asset subject to depreciation, the accelerated method will result in
-
less Depreciation Expense in early years and more depreciation in later years of its life.
14. While depreciating land cost, Straight line method shall give more depreciation than the
-
written down value. False
15. Provision for depreciation account is debited at the time of recording the depreciation
-
on an asset. E DeporProx for Dep
-
16. If adequate maintenance expenditure is incurred with relation to running repairs of an
asset, we need not charge any depreciation. False
-

17. When a property, plant or equipment is sold then provision for depreciation account is
-

debited, asset account is credited and any gain or loss is recorded to profit and loss
account.True
-
,
①pa - > By
18. While calculating the depreciation as per diminishing balance method, the salvage value
of the asset at the end of its life is reduced from its cost. False
-
19. Any change in the estimated useful life of an asset should be accounted for as a change
-
in an accounting estimate in accordance with Accounting Standards.True
↑

-
20. An intangible asset is a non identifiable, non monetary asset. False
-
-

Roxfor Dep entifiabl Mach Al Cr .

As
Toack
#
 .
Cl
CorsptPurd
+ DE -

Inventory Valuation C :

Op + P + De-S
-

1. Inventories are stocks of goods and materials that are maintained for mainly the purpose
of revenue generation.True
2.1A building is considered inventory in a construction business.Trus NRV
False-cost orower
,

3. Inventory is valued as carrying cost less percentage decreases.

-
4. Management has daily information about the quantity and valuation of closing stock
-
under physical Inventory System. False
5. Periodic Inventory System is more suitable for small enterprises.Sure
- .

6. When closing inventory is overstated, net income for the accounting period will be
-
understated. False
7. Closing inventory = Opening inventory + Purchases + Direct expenses - + Cost of goods
-

-
sold. I stoe out
Conversion
-
,

8. Cost of inventories should comprise all cost of purchase. False

- -
-
9) Inventory by-products, should be valued at net realisable value where cost of by
-
-

products can be separately determined. Enot-Ese

-

10.
-Abnormal amounts of wasted materials, labour or other production overheads expenses
are included in the costs of inventories. False
-
11. Perpetual system requires closure of business for counting of inventory. Es
12. Periodic inventory system is a method of ascertaining inventory by taking an actual
-
physical count. True ~
13. The value of closing inventory under simple average price method is realistic as
-
compare to LIFO. Trul
↑

-
--
- Current Asset
14.
- The value of stock is shown on the assets side of the balance-sheet as fixed assets.
- X
*
-
15. Under inflationary conditions, FIFO will not show lowest value of cost of goods sold.False
FIFO
16. Under LIFO, valuation of inventory is based on the assumption that costs are charged
1
against revenue in the order in which they occur. False
17. Valuation of inventory, at cost or net realisable value, whichever less, is based on the
-
principle of Conservatism. Truf
18. Finished goods are normally valued at cost or market price whichever is higher.
- ter
-
SDDDDD Exsive
↳ sold -

how
cogs -
-
-
cost
Rectification of Errors

↳
Osided

Cash book

-
Susank
=

CA Hardik Manchanda
Subsidiary Book

Trial Balance

Temporary
-

CA Hardik Manchanda
Ledger

-
Ele -Aalytical

Journal

↑
will be receiver after sale of good
.

~F
Red &Personal BIs .

Nominal P26.

CA Hardik Manchanda
 Capital & Revenue Expenditure -

1. The nature of business is not an important criteria in separating an expenditure between

capital and revenue. False
2) Expenditure incurred for major repair of the asset so as to increase its productive
-
capacity is Revenue in nature. F
3. Amount spent as lawyer’s fee to defend a suit claiming that the firm’s factory site
1
belonged to the plaintiff’s land is Capital Expenditure. False
4. Amount spent for replacement of worn-out part of machine is Capital Expenditure.
-
Ess
5. Legal fees to acquire property is Capital Expenditure. True
-
-
6. Amount spent for the construction of temporary huts, which were necessary for
-

construction of the cinema house and were demolished when the cinema house was
ready, is Capital Expenditure. Trus
-
- V Ealie
7) Overhaul expenses of second-hand machinery purchased are Revenue Expenditure.
- -
8)*Money spent to reduce working expenses is Revenue Expenditure. False
9) Expense incurred on the repairs and white washing for the first time on purchase of an
-
old building are Revenue Expenses. Ele Int Ast
-
10) Expenses in connection with obtaining a license for running the cinema is Capital
-

Expenditure. Trut
-

CA Hardik Manchanda
 Accounting Principles

F
Bus Entity
T
.

F
-

Ee
Contingent Assets & Liability
be
-
need to
False
Pale
-
-

- - - Provision
-
-
-

False
X

↓ False
-

Liability

CA Hardik Manchanda
 Accounting Policy

F
F
F

Overstate or understal

CA Hardik Manchanda
 Fixed Specific Asset
-

Fleating A
.
eat
Other Important Questions (RTP / PYQ / MTP) -

1) A fixed charge generally covers all the assets of the company including future one. F
-

-2) A claim that an enterprise is pursuing through legal process, where the outcome is
uncertain, is a contingent liability. False
*3) A partnership firm cannot own Asst-
.

any AssetsTrus
-4) Prior period items need not be separately disclosed in the current statement of profit &
-

loss. Fals
= - s
&E
-5) Net income in case of persons practicing vocation is determined by preparing profit &
loss account.
A7) The financial statement must disclose all the relevant and reliable information in
accordance with the full disclosure principle, True- -
8) The debit notes are used to prepare Sales Return Book. Else
-
9) If closing stock appears in the Trial Balance, then the closing inventory is not entered in
*
Trading Account. It is shown only in the Balance sheet.
11) The concept of conservatism when applied to Balance sheet results in understatement
-
of assets. T
-

u
-
=
False
12) The business of partnership must be carried on by all the partners. -

15) Reducing balance method of depreciation is followed to have a uniform charge for
* -

depreciation and repairs and maintenance together True&

-

15)Debenture interest is payable after the payment of preference dividend but before the
payment of equity dividend,Fe
&

O
~ -
16)Warehouse rent paid for storage of finished inventory should be included in the cost of
Finished inventory.False
17) A person holding preference shares of a company cannot hold equity shares of the same
-
T
company Fale
18) Re-issue of forfeited shares is allotment of shares but not a sale. Else
19) Accounting standards for non-corporate entities in India are issued by the central
*
government.Fal ICA)
O
-

20) Reducing balance method of depreciation is followed to have a uniform charge for
-
depreciation and repairs and maintenance together .

Dop Rop & Main

CA Hardik Manchanda WDV

↑&
tr
-uniform
 -
21) In the balance sheet of Angel Limited, preliminary expenses amounting to 15,00,000
rupees and security premium account of ₹105,00,00 are appearing. The accountant can use
the balance in securities premium account to write off preliminary expenses.Let

-
22) A concern proposes to discontinue its business from December 2023, and decides to
dispose of all its plants within a period of three months, the balance sheet as on 31
December
- 2023 should continue to indicate the plants at its historical cost as the assets
will be disposed of after the balance date.

Hist
(Going ern
↳
Asset-RY

CA Hardik Manchanda