100 Important MCQs of Financial Statements of a company Class 12
Looking for important MCQs with answers of financial statements of a company of accountancy volume 3 class 12 CBSE, ISC, and state Board.
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Multiple Choice Questions of Financial Statements of a company class 12
Let’s Practical
Under which heading the item ‘Bills discounted but not yet matured’ will
be shown in the Balance Sheet of a company?
a) Current liability
b) Current Assets
c) Contingent Liabilities
d) Unamortized Expenditure
Ans – c)
According to the prescribed order of assets in a Company’s Balance Sheet which
the asset should be shown first of all?
a) Non-current Assets
b) Current Assets
c) Current Investments
d) Loans and Advances
Ans – a)
Financial statements are summarised statements of accounting data that provide information of the business about
a) Current Assets and Quick Assets
b) Debt and Equity
c) Profitability and Financial Position
d) Operating and Non-operating Income
Ans – c)
While preparing the Balance Sheet of a company, 6% debentures is shown under
which head?
a) Share capital
b) Long term borrowings
c) Short term borrowings
d) None of these
Ans – b)
Which of the following will not cover under finance cost?
a) Discount on issue of debentures written off
b) Interest paid on bank overdraft
c) Bank charges
d) Premium payable on redemption of debentures written off
Ans – c)
Reason:- The Bank charges are not shown under Finance Costs but under ‘Other Expenses’, as they are expenses for the services availed from the bank.
The format of the financial statement of a company is prescribed in:
a) Section 129, Schedule III
b) Section 121, Schedule III
c) Section 130, Schedule III
d) Section 129, Schedule I
Ans – a)
Surplus, i.e, Balance in Statement of Profit and Loss is shown as
a) Share capital
b) Reserves and Surplus
c) Other Long term Liabilities
d) Current Liabilities
Ans – b)
In a company’s Balance Sheet, the Debit (Negative) balance of Statement of Profit and Loss is shown under
a) Non-Current Liabilities
b) Current Liabilities
c) Non-Current Assets
d) Reserves and Surplus
Ans – d)
Which of the following items is shown under the head ‘Non-Current Assets’, while preparing the Balance sheet of a company?
a) Underwriting Commission
b) Current Investment
c) Inventory
d) Patents
Ans – d)
‘Interest accrued but not due on loans, is shown in the companies balance sheet under the sub-head_________
a) Reserves and Surplus
b) other Current Liabilities
c) Contingent Liabilities
d) Shareholders Funds
Ans – b)
ABC Ltd has an operating cycle of 20 months. A trade receivable is expected to be realized after 15 months, it will be classified under:
a) Current Asset
b) Non-current Asset
c) Can not be determined
d) None of these
Ans – a)
The Balance Sheet provides information about the financial position of an enterprise:
a) Over a period of time
b) During a period of time
c) for a period of time
d) at a point of time
Ans – d)
Under which of the following headings/subheadings, calls in Advance will be presented in the Balance Sheet of a company as per Schedule III part I of the Companies Act, 2013?
a) Current Liabilities
b) Share Capital
c) Share Application Money Pending Allotment
d) Reserves and Surplus
Ans – a)
Identify the item which is not a part of Shareholders Funds:
a) Share Application Money Pending Allotment
b) Share Capital
c) Reserves and Surplus
d) Money Received against Share Warrants
Ans – a)
Claim against the company not acknowledged as debts are shown under:
a) Current Liabiliites
b) Contingent Liabilities
c) Non-current Liabilities
d) Capital commitments
Ans – b)
A Trade Payable of a concern whose operating cycle is 18 months, is expected to be paid in 24 months will be classified as:
a) Current Liabilities
b) Non-Current Liabilities
c) Any of these
d) None of these
Ans – b)
As per Schedule III, Part – I of the Companies Act, 2013, ‘Calls in arrears’ will be presented under which of the following head/sub-head, in the Balance Sheet of a company?
a) Reserve and Surplus
b) Current Liability
c) Contingent Liabilities
d) Shareholders Funds
Ans – d)
As per the Companies Act, the Balance Sheet of a company is required to be:
a) Horizontal Form
b) Vertical Form
c) Either Horizontal or vertical Form
d) Neither of the above
Ans – b)
2,000, 9% debentures of ₹100 each out of 8,000, 9% debentures are redeemable
within 12 months of the date of the Balance Sheet. They will be shown in the Current Liabilities as:
a) Short-term Borrowings
b) Other Current Liabilities
c) Trade Payables
d) Short term Provisions
Ans – b)
Under which expense head is loss on the issue of debentures shown in Statement of Profit and Loss?
a) Cost of Debt
b) Other expenses
c) Finance cost
d) Operating Cost
Ans – c)
Which of the following is not a subhead under the current assets?
a) Cash and Cash Equivalents
b) Trademarks
c) Short-term Loans and Advances
d) Inventories
Ans – b)
From the given items which is a part of current liabilities:
a) Inventories
b) Trade Payables
c) Cash and Cash Equivalents
d) Trade Receivables
Ans – b)
Which of the following is not a subhead of Current Liabilities?
a) Short Term Provisions
b) Trade Payables
c) Deferred Tax Liabilities
d) Other Current Liabilities
Ans – c)
Securities Premium Reserve is shown under the sub-head __ of the company’s Balance Sheet.
a) share capital
b) Long term Borrowings
c) Long term Provisions
d) None of these
Ans – d)
Which of the following items is not shown under the head Other Current Liabilities, while preparing the company’s Balance Sheet?
a) Calls in advance
b) Unpaid Dividend
c) Proposed Dividend
d) Interest accrued and due on Borrowings
Ans – c)
The financial performance of an accounting entity for an accounting period is given by
a) Cash Flow Statement
b) Statement of Profit and Loss
c) Balance Sheet
d) Director’s Report
Ans – b)
Which of the following is not shown as Non-Current Liabilities?
a) Trade Payables
b) Long term Borrowings
c) Deferred Tax Liabilities
d) Long term Provisions
Ans – a)
As per Schedule III, Part I of the companies Act, 2013 ‘Unpaid Dividend’ will be presented under which of the following head/sub-head, in the Balance Sheet of a company?
a) Reserves and Surplus
b) Current Liabilities
c) contingent Liabilities
d) Shareholder’s Funds
Ans – b)
Debentures redeemable after 10 years from the date of issue are shown as
a) Long term Borrowings
b) Other Long term liabilities
c) Shor Term Borrowings
d) Other short term liabilities
Ans – a)
Dividend earned by a Finance Company is shown in the Statement of Profit
and Loss as:
a) Revenue from Operations
b) Other Income
c) Any of these
d) None of these
Ans – a)
Which of the following will appear as Short-term Provision in a company’s Balance Sheet?
a) Provision for taxation
b) Proposed dividend
c) Employees Provident find
d) All of these
Ans – a)
Dev Ltd Purchased a plant and issued fully paid equity shares for consideration other than cash. These shares will be shown in notes to accounts to share capital as:
a) Issued capital
b) Subscribed but not fully paid
c) Subscribed and fully paid
d) Forfeited shares
Ans – c)
Which of the following is not presented under ‘Current Liabilities; in the Balance Sheet of a Company?
a) Short term Borrowings
b) Deferred Tax Liabilities
c) Short-term Provisions
d) Trade Payables
Ans – b)
Raw Material purchased is shown in the statement of profit and loss as:
a) Purchase of stock in trade
b) Change in inventories
c) Cost of material consumed
d) Other expenses
Ans – c)
Bank Overdraft and cash credit are shown under which head in the company’s Balance Sheet?
a) Cash Equivalents
b) Non-Current Liabilities
c) Current Assets
d) Short term Borrowings
Ans – d)
‘Calls in Advance’ is shown in the company’s Balance Sheet under the head
a) Non-Current Asset
b) Current Liabilities
c) Shareholder’s Funds
d) Non-current Liabilities
Ans – b)
1,000, 9% debentures of ₹100 each are to be redeemed within 12 months of the date of the Balance Sheet. They will be shown in current liabilities as:
a) Short term borrowings
b) Other current liabilities
c) Current Liabilities
d) Short Term provisions
Ans – b)
Unclaimed dividend is shown under Equity and Liabilities of Balance Sheet of a company under the heading:
a) Share Capital
b) Non-Current Liabilities
c) Current Liabilities
d) None of these
Ans – c)
Which of the following is not a component of other incomes for a manufacturing concern?
a) Dividend received
b) Interest on investment
c) Sale of Scrap
d) Rent received
Ans – c)
Name the item out of the following which is shown as short term provision
a) Provision for Tax
b) Interest Accrued but not due
c) Employees Provident Fund
d) Interest Accrued and Due
Ans – a)
If the Operating Cycle can not be identified, it is assumed to be a period of
a) 10 months
b) 11 months
c) 9 months
d) 12 months
Ans – d)
Cash and Cash Equivalents does not include
a) Cheques
b) Balances with banks
c) Bank deposits with less than 12 month’s maturity
d) Inventories
Ans – d)
Equity is ₹ 90,000; Liabilities ₹ 60,000; Profit of the year ₹20,000. Then total assets will be:
a) ₹ 1,70,000
b) ₹ 1,50,000
c) ₹ 1,10,000
d) ₹ 80,000
Ans – a)
The reserve which is created for a specific purpose and which is a charge against revenue is called:
a) Capital Reserve
b) General Reserve
c) Secret Reserve
d) Specific Reserve
Ans – d)
Interest accrued but not due on investment will be shown under which head of current assets?
a) Short term loans and advances
b) Current investments
c) Other current assets
d) Cash and cash equivalents
Ans – c)
Which of the following is not a component of ‘Other Current Liabilities’?
a) Current maturity of long term debts
b) Calls in advance
c) Loan repayable on demand
d) Interest accrued and due on borrowings
Ans – c)
Which one of the following is Commitment?
a) Proposed Dividend
b) Interim Dividend
c) Unpaid/Unclaimed Dividend
d) Dividend Arrears on Cumulative Preference Shares
Ans – d)
Which of the following items is shown under the head ‘Non-Current Assets’ while preparing the Balance Sheet of a company?
a) Commission received in advance
b) Stores and spares
c) Marketable Securities
d) Copyrights and Patents
Ans – d)
In a company’s Balance Sheet, Provision for Employees Benefits to be settled within 12 months is shown under:
a) Non-current Liabilities
b) Current Liabilities
c) Non-Current Assets
d) Current Assets
Ans – b)
Out of the following items, identify which is not shown in the Note to Accounts on other Expenses:
a) Courier Expenses
b) Internet Expenses
c) Rent for factory
d) Wages
Ans – d)
Which of the following items is not shown under the head ‘Non-Current Liabilites’ while preparing the Balance Sheet of a company?
a) 12% Debentures
b) Bank Overdraft
c) Premium on redemption of debentures
d) Provision for Warranty
Ans – b)
Which of the following items is not shown under the head ‘Shareholders Funds’ while preparing the Balance Sheet of a company?
a) Capital Reserve
b) Subscribed Capital
c) Premium on redemption of debentures
d) Securities Premium Reserve
Ans – c)
Money received against share Warrants is shown as
a) Shareholder’s funds
b) Other Long Term Liabilities
c) Long term provisions
d) Other current liabilities
Ans – a)
Which of the following is not a component of other income?
a) Dividend Income
b) Interest Income
c) Proceeds from the sale of scrap
d) Gain on sale of investment
Ans – c)
Reason:- Scarp is the leftover material after the production process for a non-financial business. Therefore it is considered as a revenue of operation, not other income.
Out of the following, identify the item that is not shown in the Note to Accounts on Finance Costs:
a) Interest paid on the term loan
b) Bank deposit
c) Interest paid on Bank Overdraft
d) Discount on issue of Debentures written off
Ans – b)
Which of the following items is not shown under the head ‘Current Liabilities’ while preparing the Balance Sheet of a company?
a) Bank Overdraft
b) Interest accrued and due on debentures
c) Provision for earned leave
d) Trade Payables
Ans – c)
Under which of the following head/subhead is ‘Forfeited Sahres’ presented in the Balance Sheet of a Company?
a) reserves and Surplus
b) Share Capital
c) Other Long term Liabilities
d) Other Current Liabilities
Ans – b)
Which of the following is not the limitation of Financial Statements?
a) Ignore qualitative aspects
b) Personal bias
c) Ignores price level change
d) Provide information about the profitability of the business.
Ans – d)
Share Application Money (Refundable) is shown as
a) Other Long term Liabilities
b) Other Current Liabilities
c) Short term Provisions
d) Shor Term Borrowings
Ans – b)
Calls in Advance and interest payable thereon is shown as
a) Shareholders funds
b) Other non-current liabilities
c) Other current liabilities
d) Trade Payables
Ans – c)
Which of these is not a component of ‘Reserve and Surplus’.
a) Statement of Profit and Loss (Dr. balance)
b) Capital Reserve
c) Reserve Capital
d) Securities Premium Reserve
Ans – c)
Purchase of goods for resale is shown in Statement of Profit and Loss as:
a) Revenue from Operations
b) Cost of Material consumed
c) Purchase of Stock in trade
d) Change in inventories
Ans – c)
Mining Rights are
a) Tangible Fixed Assets
b) Intangible Fixed Assets
c) Intangible Assets Under Development
d) Capital Work in Progress
Ans – b)
Premium on Redemption of Debentures is shown as
a) Long term Borrowings
b) Short Term Borrowings
c) Other long term liabilities
d) Shor term provisions
Ans – c)
Interest and dividend earned by a financial company is shown in Statement of Profit and Loss under the sub-head:
a) Revenue from Operations
b) Other income
c) either a) or b)
d) neither a) nor b)
Ans – a)
While preparing the balance sheet of a company ‘Securities Premium’ is shown under which major head:
a) Non-current liabilities
b) Current liabilities
c) Shareholder’s funds
d) None of these
Ans – c)
Loose Tools appear in the company’s Balance Sheet under the head/sub-head.
a) Inventory
b) Non-current assets
c) Other current assets
d) stores and spare parts
Ans – a)
Which of the following items is shown under the subhead ‘Fixed Tangible Assets while preparing the balance sheet of a company?
a) Goodwill
b) Non-current investment
c) Inventory
d) Livestock
Ans – d)
Unclaimed dividend is shown in equity and liabilities items of the balance sheet under sub-heading:
a) Reserve and Surplus
b) Short term Provisions
c) Current Liabilities
d) None of these
Ans – c)
Surplus, i.e., in Statement of Profit and Loss is shown as
a) Share Capital
b) Reserves and Surplus
c) Other Long Term Liabilities
d) Current Liabilities
Ans – b)
Which of the following is not an objective of Analysis of Financial Statements
a) To judge the financial health of the firm
b) To judge the short term and long term liquidity positions of the firm
c) To judge the reasons for the change in the profitability of the firm
d) To judge the variations in the accounting practices of the business followed by different
enterprises
Ans – d)
Fixed deposits from the public are shown in the balance sheet under the head:
a) Shareholders Funds
b) Non-current Liabilities
c) Non-current Assets
d) None of these
Ans – b)
In the balance sheet of a company, provision for taxation is shown under:
a) Shareholders Funds – Reserve and Surplus
b) Non-current Liabilities – Long term Provisions
c) Current Liabilities – Short term provisions
d) None of the above
Ans- c)
In a company’s Balance Sheet, computer software is shown under the main head.
a) Non-current Liabilities
b) Current Liabilities
c) Non-current Assets
d) Current Assets
Ans – c)
Which of the following is a limitation of financial analysis?
a) It is just a study of reports of the company
b) It judges the ability of the firm to repay its debts
c) It identifies the reasons for the change in a financial position
d) It ascertains the relative importance of different components of the financial positions of the firm
Ans – a)
Calls in advance appear in a company’s balance sheet under:
a) Share capital
b) Reserve and Surplus
c) Long term Provisions
d) Current Liabilities
Ans – d)
Land, Building are:
a) Fixed Tangible Assets
b) Fixed Intangible Assets
c) Current Assets
d) Fictitious Assets
Ans – a)
The Balance Sheet provides information about the financial position of an enterprise:
a) Over a period of time
b) During a period of time
c) For a period of time
d) At a point of time
Ans – d)
The balance sheet of a company is required to be prepared in the format given
in _
a) Schedule III Part II
b) Schedule III Part I
c) Schedule III part III
d) Table A
Ans – b)
As per the companies Act, the Balance Sheet of a company is required to be presented
in _
a) Horizontal Form
b) Vertical Form
c) Either Horizontal or Vertical Form
d) Neither of the above
Ans – b)
Which of the following is not required to be prepared under the Companies
Act?
a) Statement of Profit and Loss
b) Balance Sheet
c) Report of Director’s and Auditor’s
d) Funds Flow Statement
Ans – d)
In a Company’s Balance Sheet _ appear under the head ‘non
current assets’.
a) Goodwill
b) Patents
c) Vehicles
d) All of the above
Ans – d)
Calls in Arrears appear in a company’s Balance Sheet under__________
a) Reserve & Surplus
b) Shareholders Funds
c) Contingent Liabilities
d) Short term Borrowings
Ans – b)
Calls in advance appear in a Company’s Balance Sheet under
a) Share Capital
b) Current Liability
c) Share Application money pending allotment
d) Reserve & Surplus
Ans – b)
Short term Borrowings appear in a Company’s Balance Sheet under the Head __________.
a) Current Assets
b) Current Liabilities
c) Non-Current Liabilities
d) Non-Current Assets
Ans – b)
Public Deposits appear in a Company’s Balance Sheet under:
a) Intangible Assets
b) Current Liabilities
c) Long term Provisions
d) Long term Borrowings
Ans – d)
Goodwill appears in a company’s Balance Sheet under the Sub-head __________.
a) Unamortized Assets
b) Non-current Investment
c) Intangible Assets
d) Tangible Assets
Ans – c)
‘Loose Tools’ appear in the company’s Balance Sheet under the head/sub-head:
a) Inventory
b) Non-current assets
c) Other current assets
d) Stores and Spare Parts
Ans – a)
Share Forfeiture Account appears in a company’s Balance Sheet under the Sub head___________
a) Share capital
b) Reserve and surplus
c) Other long term liabilities
d) Other Current Liabilities
Ans – a)
Expenses allowed on the issue of shares appears in a company’s Balance Sheet under:
a) Share Capital
b) Current Liability
c) Unamortized Expenditure
d) Contingent Liability
Ans – c)
Prepaid expenses appear in a Company’s Balance Sheet under the Sub-Head
_____________.
a) Other Current Assets
b) Short term Loans & Advances
c) Intangible Assets
d) Other Non-Current Assets
Ans – a)
_________ appear in a Company’s Balance Sheet under the Sub-head Short term provision.
a) Interest Accrued but not due on Borrowings
b) Provision for Tax
c) Unpaid Dividend
d) Calls in Advance
Ans – b)
Provision for Tax appears in a company’s Balance Sheet under the Sub-head.
a) Short term Provisions
b) Reserves and Surplus
c) Long term Provisions
d) Other Current Liabilities
Ans – a)
Bills Receivables appear in a company’s Balance Sheet under the Sub-head
a) Current Investments
b) Cash Equivalents
c) Trade Receivables
d) Short term Loans and Advances
Ans – c)
Trade Investments appear in a Company’s Balance Sheet under the Sub-head
a) Current Investments
b) Non-current Investments
c) Intangible Assets
d) Short term Loans and Advances
Ans – b)
Claims against the company are not acknowledged as debts’ is shown under the head____________
a) Current Liabilities
b) Non-Current Liabilities
c) Commitments
d) Contingent Liabilities
Ans – d)
The unclaimed dividend appears in a company’s balance sheet under the subhead
a) Short term Borrowings
b) Trade Payables
c) Other current liabilities
d) Short term provisions
Ans – c)
Interest accrued and due on debentures appear in a company’s Balance Sheet under the Sub-head_____________
a) Short term Borrowings
b) Trade Payables
c) Other current Liabilities
d) Short term Provisions
Ans – c)
Interest accrued but not due on loans appear in a company’s Balance Sheet under the Sub-head____________
a) Short term Borrowings
b) Trade Payables
c) Other current liabilities
d) Short term Provisions
Ans – c)
6% Debentures appear in a Company’s Balance Sheet under the Sub-head______
a) Long term Provisions
b) Long term Borrowings
c) Other current liabilities
d) Other Long term liabilities
Ans – b)
Interest accrued on Investments appear in a Company’s Balance Sheet under the Sub-head____________
a) Non-current Investments
b) Current Investments
c) Other Current Assets
d) Other Non-Current Assets
Ans – c)
‘Accumulated Dividend Arrears’ on preference Shares is shown in the Company’s Balance Sheet as:
a) Current Liability
b) Contingent Liability
c) Commitments
d) short term Provision
Ans – c)
50,000, 9% Debentures redeemable within 12 months of the date of the Balance Sheet will be shown under:
a) Short term Borrowings
b) Short term Provision
c) Other current liability
d) Trade Payables
Ans – c)
Which one of the following is Commitment?
a) Proposed Dividend
b) Interim Dividend
c) Unpaid/Unclaimed Dividend
d) Dividend Arrears on Cumulative Preference Shares
Ans – d)
Which of the following items is shown under the head ‘Current Assets’ while preparing the Balance Sheet of a Company?
a) Trade Investment
b) Underwriting Commission
c) Inventories
d) Livestock
Ans – c)
While preparing the Balance Sheet of a company ‘Underwriting Commission’ is shown under which head?
a) Unamortized Expenditure
b) Current Assets
c) Non-current Assets
d) Current Liability
Ans – a)
Which of the following items is shown under the head ‘Current Liabilities’ while preparing the Balance Sheet of a company?
a) Securities Premium Reserve
b) Debenture
c) Livestock
d) None of the above
Ans – d)
While preparing the Balance Sheet of a Company ‘Securities Premium’ is shown under:
a) Current Liability
b) Share Capital
c) Long term Borrowings
d) None of the above
Ans – d)
Which of the following items is shown under the head ‘Non-Current Assets’ while preparing the Balance Sheet of a company?
a) Underwriting Commission
b) Current Investment
c) Inventory
d) Patents
Ans – d)
Under which heading the item ‘Bills Discounted but not yet matured’ will be shown in the Balance Sheet of a company?
a) Current Liability
b) Current Assets
c) Contingent Liabilities
d) Unamortized Expenditure
Ans – c)
Which one of the following items are shown under the heading ‘current liabilities in the Balance Sheet of a company?
a) Investments
b) Reserve Fund
c) Unclaimed Dividend
d) Livestock
Ans – c)
Which one of the following is not presented under ‘Current Liabilities’ in the Balance sheet of a company?
a) Short term Borrowings
b) Deferred Tax Liabilities
c) Short term Provisions
d) Trade Payables
Ans – b)
While preparing the Balance Sheet of a company which item is shown under the head ‘Long term Borrowings’?
a) 6% Debentures
b) Security Premium Reserve
c) Trade Payables
d) None of the above
Ans – a)
Share Capital of a company consists of 5,00,000 Shares of ₹10 each, ₹8 called up. All the shareholders have duly paid the called-up amount. Share capital will be shown as:
a) Subscribed and Fully paid
b) Subscribed but not Fully Paid
c) Both A and B
d) None of the above
Ans- b)
Change in Inventories means:
a) Opening Inventories less Closing Inventories
b) Closing Inventories less Opening Inventories
c) Difference between opening inventories and closing inventories, if
opening inventories are higher
d) Difference between closing inventories and opening inventories, if
Closing inventories are higher.
Ans – a)
Which of the following is not a sub-head under the Current Assets?
a) Cash and Cash Equivalents
b) Trademarks
c) Short term loans and advances
d) Inventories
Ans – b)
‘Security Deposits; are presented in the Balance Sheet of the company under the sub-head:
a) Other Non-current Assets
b) Long term Loans and advances
c) Fixed Assets
d) Other Current Liabilities
Ans – b)
Which of the following is not a part of Finance Cost (in the statement of profit and loss)?
a) Bank charges
b) Interest paid on debentures
c) Interest paid on public deposits
d) Loss on issue of debentures
Ans – a)
