100 Important MCQs of Financial Statements of a company Class 12

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Looking for important MCQs with answers of financial statements of a company of accountancy volume 3 class 12 CBSE, ISC, and state Board.

We have compiled very important MCQs of chapter 1 of volume 3 book of accountancy class 12

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)

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Anurag Pathak
Anurag Pathak is an academic teacher. He has been teaching Accountancy and Economics for CBSE students for the last 18 years. In his guidance, thousands of students have secured good marks in their board exams and legacy is still going on. You can subscribe his youtube channel and can download the Android & ios app for free lectures.
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