In the name of ALLAH, the most beneficient, the most merciful

Financial Accounting - II (MGT401)

Multiple Choice Questions (MCQs)

Objective Questions

  1. Which of the following schedule of the Company Ordinance 1984 is related to the classification of intangible assets?

    1. 4th schedule
    2. 5th schedule
    3. 6th schedule
    4. 2nd schedule
  2. If the holding company owns100% shares of the subsidiary company then the subsidiary type will be termed as:

    1. Partially Owned Subsidiary
    2. Wholly Owned Subsidiary
    3. Direct Subsidiary
    4. Indirect Subsidiary
  3. Which of the following is the deduction or allowance allowed by a creditor to a debtor?

    1. Trade Discount
    2. Cash Discount
    3. Purchases return
    4. Sales return
  4. Which of the following is INCORRECT for equity of a Public Limited Company?

    1. Equity = Total Assets – Total Liabilities
    2. Equity = Share Capital + General Reserves + Revenue Reserves
    3. Equity = Share Capital + Reserves
    4. Equity = Share Premium + Reserves
  5. Prime cost of goods manufactured is the total of:

    1. Direct materials consumed
    2. Direct materials consumed, direct wages and direct expenses
    3. Direct materials consumed and direct wages
    4. Direct materials consumed, direct wages, direct expenses and production overheads
  6. A Partnership firm has a maximum ______ numbers of partners.

    1. 20
    2. 15
    3. 10
    4. 2
  7. Which institute recommends the adoption of IAS (International Accounting Standards) in Pakistan?

    1. Institute of Chartered Accounts of Pakistan (ICAP)
    2. Institute of Cost & Management Accountants of Pakistan (ICMAP)
    3. Securities and Exchange Commission of Pakistan (SECP)
    4. Stock Exchange
  8. Depreciation is best described as:

    1. A decline in the market value of the assets
    2. A means of expanding the net-cost of non-current assets over their useful life
    3. A source of estimating the amount of money needed to replace the assets
    4. A means of spreading the payment for non-current assets over a period of years
  9. The closing balance of inventory will be if: Opening inventory will Rs.1, 000, purchases will Rs.10, 000 and cost of sales will Rs.10,500.

    1. Rs. 1,000
    2. Rs. 500
    3. Rs. 1,500
    4. Rs. 950
  10. When it is appropriate for a company to use Weighted Average Cost method of inventory?

    1. When prices of materials are more stable
    2. When prices of materials are more volatile
    3. When prices of materials are constantly decreasing
    4. When prices of materials are constantly increasing
  11. Which of the following is/are the Classification of Current Assets with respect to the Companies Ordinance 1984?

    1. Cash Balance
    2. Loans and Advances
    3. Bank Balance
    4. All of the given
  12. At least what percentage of voting right is required for assuming an investor company to have significant influence in the affairs of investee company?

    1. 50%
    2. 10%
    3. 20%
    4. 60%
  13. Which of the following is Not a qualitative characteristic of financial statements according to the IASB’s Framework?

    1. Materiality
    2. Understandability
    3. Comparability
    4. Relevance
  14. The closing stock will be shown under the head of ______ in Balance Sheet.

    1. Non current Assets
    2. Current Assets
    3. Intangible Assets
    4. Tangible Assets
  15. If the holding company owns more than 50% but less than 100% shares of the subsidiary company then the subsidiary type will be termed as:

    1. Partially owned subsidiary
    2. Wholly owned subsidiary
    3. Direct subsidiary
    4. Indirect subsidiary
  16. Which af the following is the ability to govern the financial and operating policies of an enterprise so as to obtain from its activities?

    1. Control
    2. Significant Influence
    3. Direct subsidiary
    4. Indirect subsidiary
  17. An inventory valuation system should include the cost of:

    1. Carriage in
    2. Carriage out
    3. Both Carriage in & Carriage out
    4. None of the given
  18. Which of the following IAS deals with Revaluation of Assets?

    1. IAS 16
    2. IAS 07
    3. IAS 01
    4. IAS 23
  19. If the holding company owns 100% shares of the subsidiary company then the subsidiary type will be termed as:

    1. Partially Owned Subsidiary
    2. Wholly Owned Subsidiary
    3. Direct Subsidiary
    4. Indirect Subsidiary
  20. Which one of the following is the type of stock for trading concerns?

    1. Raw Material
    2. Work in Process
    3. Finished Goods
    4. Stock in Trade
  21. Which of the following may result for an inability to sell a financial asset quickly at close to its fair value?

    1. Price Risk
    2. Liquidity Risk
    3. Interest Rate Risk
    4. Currency Risk
  22. A Private limited company can be formed at least by:

    1. 2 members
    2. 3 members
    3. 1 member
    4. 7 members
  23. Who sign the Memorandum of Association (MOA) of a

    1. Promoters of the company
    2. Managers of the company
    3. Employees of the company
    4. All of the given
  24. Which of the following IAS deals with the Borrowing Costs?

    1. IAS 23
    2. IAS 07
    3. IAS 01
    4. IAS 16
  25. How many person(s) is(are) required to takeover the business after the death of a member in case of Single Member company?

    1. Seven
    2. Three
    3. Two
    4. One
  26. Which of the following costs can be capitalized?

    1. Purchases of assets financed through issue of debentures
    2. Assets that are not currently in use because of excess capacity
    3. Assets not currently undergoing activities necessary to prepare for intended use
    4. Assets intended for sale or use that are produced as discrete projects
  27. Which of the following is an artificial person recognized by law?

    1. Limited company
    2. Partnership
    3. Sole-Proprietorship
    4. Trust
  28. IAS-16 deals with:

    1. Property, Plant and Equipment
    2. Cash Flow Statement
    3. Presentation of Financial Statements
    4. Earning per share
  29. Revaluation of asset is conducted by:

    1. Directors
    2. Shareholders
    3. Managers
    4. Professional Qualified Valuers
  30. Which of the following is original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding?

    1. Research
    2. Development
    3. Audit
    4. Accounting
  31. If the holding company owns marginally less than 100% shares of the subsidiary company then the subsidiary type will be termed as:

    1. Partially Owned Subsidiary
    2. Wholly Owned Subsidiary
    3. Virtually Wholly Owned Subsidiary
    4. Indirect Subsidiary
  32. Section 95A of the Companies ordinance 1984 is applied on which of the following companies?

    1. Listed companies only
    2. Non listed companies only
    3. Private companies only
    4. All companies
  33. Which of the followings information(s) should be disclosed by a company in respect of long term loans made to others?

    1. Interest rate
    2. Period or installments for loan repayment
    3. Any other terms and conditions which have material effects
    4. All of the given
  34. Concept of Related Parties is defined in:

    1. Companies Ordinance 1984
    2. IAS
    3. Both Companies Ordinance 1984 and IAS
    4. Neither in Companies Ordinance 1984 nor in IAS
  35. Which of the following sections of the Companies Ordinance 1984 is related to the Annual General Meeting?

    1. Section 157
    2. section 158
    3. section 159
    4. Section 160
  36. Companies are registered under:

    1. Partnership Act 1932
    2. Companies Ordinance 1984
    3. Partnership Agreement
    4. Income Tax Ordinance 1979
  37. If an intangible resource does not fulfill the criteria of intangible asset then what will be the treatment of expenditures incurred to acquire such intangible resource?

    1. It will be recorded as non-current asset of the company
    2. It will be recorded as an expense for the period
    3. It will be recorded as current asset of the company
    4. It will be recorded as capital of the company
  38. WXY Private Limited was incorporated on 1st Jan, 2010.According to local legislation, in how much time period company WXY is required to prepare its first annual accounts?

    1. Within 20 months
    2. Within 18 months
    3. Within 16 months
    4. Within 14 months
  39. Which of the following is/are the method(s) for calculating the cost of inventory?

    1. FIFO Method
    2. Weighted Average Method
    3. Specific Identification Method
    4. All of the given
  40. Money set aside by limited companies to distribute among shareholders is called.

    1. Directors' salaries
    2. Free Sample Distribution
    3. Dividends
    4. Loan interest
  41. Total factory cost of a manufacturing concern consists of

    1. Direct Material + Direct Labor
    2. Direct Labor + FOH
    3. Direct Material + FOH
    4. Direct Material + Direct Labor + FOH
  42. Preparation and presentation of Financial Statements are governed by:

    1. Companies Ordinance 1984
    2. International Accounting Standards
    3. International Financial Reporting Standards
    4. All of the given
  43. What should be the treatment of research cost incurred by a business according to IAS-38?

    1. It should be recorded as a part of capital of the business
    2. It should be recorded as non-current asset
    3. It should be recorded as current asset
    4. It should be recorded as expense for the period
  44. What will be the accounting treatment of loss in the books of accounts of a company which arises from the revaluation of an asset?

    1. Dr. Asset A/C
      Cr. Revaluation A/C
    2. Dr. Asset A/C
      Cr. Accumulated Depreciation A/C
    3. Dr. Asset A/C
      Cr. Disposal of Asset A/C
    4. Dr. Revaluation A/C
      Cr. Asset A/C
  45. Which one of the following methods for inventory valuation is NOT suitable for homogeneous units?

    1. FIFO Method
    2. LIFO Method
    3. Weighted Average Method
    4. Specific Identification Method
  46. Which of the following is NOT a Qualifying Asset?

    1. Power plant being in the process of manufacturing
    2. Inventories requiring a substantial period for manufacturing
    3. Special order for a special inventory that will be manufactured in 5 months
    4. Asset ready for use
  47. Sitara Textile is using the prudence concept to record the profit in its income statement. According to prudence concept, Sitara Textile will record profit when it is:

    1. Expected
    2. Realized
    3. Material
    4. Received
  48. Which of the following methodology is adopted for the valuation of investments in associated companies?

    1. Equity Method
    2. At cost or Under IAS 39
    3. At amortized cost
    4. At fair value
  49. Which of the following is the type of business owned by one person?

    1. Sole-Proprietorship
    2. Partnership
    3. Public Limited Company
    4. Unlimited Company
  50. When it is suitable to use specific identification cost method?

    1. When items of inventories are normally interchangeable
    2. When items of inventories are not normally interchangeable
    3. When goods are produced for regular projects
    4. None of the given
  51. Which activities by definition do not fulfill the recognition criteria according to IAS-38?

    1. Development activities
    2. Research activities
    3. Both development and research activities
    4. None of the given