IAS Civil Services Practice Test Commerce

IAS Civil Services Practice Test Commerce
FREE UPSC IAS Solved Paper for Practice
Commerce Practice Paper For Civil Service Examination (UPSC) Based on Previous Questions
Civil Services (Pre) Examination
Commerce
1. Match List-I with List-II and select the correct answer using the Code given below the Lists:
List-I List-II
A. Income measurement 1. Accrues to owner’s equity
B. Expense recognition 2. Revenue recognition
C. Basis for realization in accounting 3. Matching revenues and expenses
D. Recognized revenue 4. Accounting period
Code:
A B C D
(a) 3 4 2 1
(b) 3 4 1 2
(c) 2 3 4 1
(d) 2 3 1 2
Ans. (a)

2. If the total charge of depreciation and maintenance is considered, the method which would provide a uniform charge is:
(a) Annuity method
(b) Straight line method
(c) Diminishing balance method
(d) Insurance policy method
Ans. (c)

3. Obsolescence means decline in the value due to:
(a) fall in the market price
(b) physical wear and tear
(c) innovations and inventions
(d) efflux of time
Ans. (c)

4. Which one of the following accounting standard is NOT mandatory in India?
(a) Fixed assets accounting and revenue recognition
(b) Inventory and depreciation accounting
(c) Non-monetary assets and fixed assets
(d) Monetary assets and depreciation accounting
Ans. (b)

5. Concept of conservatism refers to taking into account:
(a) all profit
(b) only cash profit
(c) only profit realized
(d) profit realized and all possible losses
Ans. (d)

6. In the Last-In-First Out (LIFO) method, the closing stock is valued at:
(a) a price which is paid for the last consignment
(b) a price which is paid for the earlier consignments
(c) an average price of all the consignments
(d) none of the above
Ans. (b)

7. Charging a period for the proportionate cost of an intangible asset is termed as:
(a) depreciation
(b) diminution
(c) amortisation
(d) expiration
Ans. (c)

8. It is given that the cost of the stock is Rs. 100. However, its current market price is Rs. 95 (buying) and Rs. 90 (selling). If the market price is interpreted in the sense of replacement cost, the stock should be valued at:
(a) Rs. 95
(b) Rs. 100
(c) Rs. 90
(d) Rs. 93
Ans. (a)
ACCOUNTING $ONCEPTS,
EQUATIONS STANDARDS

9. A second hand machinery was purchased for Rs. 1, 00,000 five years ago and was overhauled by carrying out some current repairs at a cost of Rs. 10,000. It has also an accumulated depreciation of Rs. 50,000. It has been disposed of in the beginning of the sixth year for Rs. 60,000. Profit/loss on such disposal shall be:
(a) Profit of Rs. 10,000
(b) Loss of Rs. 50,000
(c) Loss of Rs. 40,000
(d) No profit, no loss
Ans. (d)
CLASSIFICATIONQ EXPENSES,
RECEIPTS, PROFITS (CAPITAL/REVENUE)

10. The term loan of Rs. 5, 00,000 was received from IFCI. It was used as under:
1. Rs. 2, 00,000 was advanced to suppliers for capital-work-in-progress and
2. Rs. 3,00,0000 was used for financing the working capital
The interest payable would be treated:
(a) on both (1) and (2) as capital expenditure
(b) on (1) as capital expenditure and on (2) as revenue expenditure
(c) on (1) as deferred expenditure and on (2) as revenue expenditure
(d) on (1) as deferred revenue expenditure and on (2) as capital expenditure.
Ans. (b)

11. Which of the following expenditures are to be treated as revenue expenditure?
1. Interest paid on money borrowed during construction period
2. Cost of Patent Rights
3. Loss of uninsured stock due to fire
4. Retirement gratuity paid to an employee.
Select the correct answer using the Code given below:
Code:
(a) 1, 2 and 3
(b) 2, 3 and 4
(c) 3 and 4
(d) 1 and 2
Ans. (c)

12. Expenditure incurred on research is an example of:
(a) capital expenditure
(b) revenue expenditure
(c) deferred-revenue expenditure
(d) partly capital expenditure and partly revenue expenditure
Ans. (a)

13. Payment of compensation to a worker, who has been discharged from service, is a:
(a) capital expenditure
(b) revenue expenditure
(c) deferred-revenue expenditure
(d) non-business expenditure
Ans. (b)

14. ‘A’ and ‘B’ are two partners of a firm having capital of Rs. 15,000 and Rs. 5,000 respectively, sharing profit and loss in the ratio of 2: 1.
On dissolution of the firm the assets realized is
1st installment ... Rs. 3,000
2nd installment ... Rs. 5,000
Under Proportionate Capital Method, the loss to ‘B’ will be:
(a) Rs. 1000
(b) Rs. 2100
(c) Rs. 3000
(d) Rs. 4000
Ans. (d)

15. ‘A’ and ‘B’ are partners in a business sharing profits in the ratio of 5:3. They admit ‘C’ as a partner with 1/4 share in the profits which be acquires 3/4 from ‘A’ and 1/4 from ‘1’. He pays Rs. 4,000 as his share of goodwill. ‘A’ and ‘13’ will be credited by:
(a) Rs. 2,500 and Rs. 1,500 respectively
(b) Rs. 2,000 each
(c) Rs. 1,000 and Rs. 3,000 respectively
(d) Rs. 3,000 and Rs. 1,000 respectively
Ans. (d)

16. In the event of dissolution of a firm, the partner’s personal assets are first applied for payment of:
(a) the personal liabilities
(b) the firm’s liabilities
(c) both the personal and firm’s liabilities
(d) the preferential and tax liabilities
Ans. (d)

17. ‘A’ and ‘B’, who are partners, share profits in the ratio of 7:3. ‘C’ is admitted as a new partner. ‘A’ surrenders 1/7 of his share and ‘B’ surrenders 1/3 of his share in favour of’ C. The new profit sharing ratio will be:
(a) 6:2: 2
(b) 4:1: l
(c) 3:2:2
(d) none of the above
Ans. (a)

18. If a company adopts able ‘A’, the company is required to pay interest on calls in advance at the rate of:
(a) 8%
(b) 7%
(c) 6%
(d) 5%
Ans. (c)

FINANCIAL STATEMENTS
(FINAL ACCOUNTS)

19. Rs. 19,500 debited to building repairs on 31st Dec., 1993 included Rs. 9,500 as the cost of building a small room for the watchman. A bill of Rs. 800 for colour wash of the whole building during the year was not received till 1993 Dec. The amount to be debited to profit & loss account would be:
(a) Rs. 20,300
(b) Rs. 19,500
(c) Rs. 10,800
(d) Rs. 9,500
Ans. (c)

20. Which one of the following is NOT a current liability?
(a) Acceptances
(b) Loan installment payable in the current year
(c) Temporary bank overdraft
(d) Arrears of preference dividend
Ans. (a)

21. Amount set apart to meet probable losses on account of bad debts is a:
(a) liability
(b) reserve
(c) provision
(d) contingent liability
Ans. (c)

22. According to Companies Act, a “reserve capital” is created:
(a) for a specific purpose at any time during its working life
(b) for issue to the existing shareholders as rights issue of shares
(c) as the uncalled portion of share capital of a limited company to be called only in the event of winding up
(d) for conversion of FCDS into equity’ shares
Ans. (c)

23. Which one of the following is known as Registered Capital of the Company?
(b) Authorized capital
(a) Paid up capital
(c) Uncalled capital
(d) Reserve capital
Ans. (b)


24. In a trial balance, debtors appear at Rs. 45,000. Provision doubtful debts at 5% is to be made after
considering the following adjustments:
1. An amount of Rs. 1,000 is included in debtor who is bankrupt and his estate is expected to realize 50 (fifty) paisa in the rupee.
2. Debtors include an amount of Rs. 2,000 for goods supplied to proprietor.
3. Bills receivable include a dishonored bill for Rs.1, 000.
4. Goods sold in ‘Sale or Return’ basis not approved by the customer for Rs. 5,000 recorded as sale.
5. Debtor includes an amount of Rs. 500 from a customer whose financial position is doubtful.
The total provision to be made for doubtful debts is:
(a) Rs. 1,900
(b) Rs. 2,250
(c) Rs. 2,425
(d) none of the above
Ans. (a)

25. Match List-I with List-II and select the correct answer using the Code given below the Lists:
List-I List-II
(Items of balance sheet of company) (Headings of balance sheet)
A. Profit prior to incorporation 1. Provisions
B. Proposed dividend 2. Miscellaneous expenditure
C. Interest paid out of Capital 3. Current liabilities
D. Unclaimed dividend 4. Reserves and Surplus
Code:
A B C D
(a) 4 1 3 2
(b) 4 1 2 3
(c) 1 4 2 3
(d) 1 4 3 2
Ans. (b)

26. Closing stock appearing in trial balance will be taken to:
(a) trading account only
(b) balance sheet only
(c) trading account and balance sheet
(d) profit & loss account only
Ans. (b)

27. Provision for discount on debtors shall be made on:
(a) book debts before incurring bad debt and before providing for bad debt
(b) book debts after incurring bad debt and after providing for bad debt
(c) book debts before incurring bad debts but after providing for bad debt
(d) book debts after incurring bad debt but. before providing for bad debt
Ans. (b)

28. When sale is Rs. 4, 80,000, gross loss is 25% on cost, purchase is Rs. 3, 50,000 and closing stock is Rs. 60,000, the stock in the beginning would be:
(a) Rs. 70,000
(b) Rs. 94,000
(c) Rs. 1, 34,000
(d) Rs. 3, 50,000
Ans. (d)

ACCOUNTING OF SHARES & DEBENTURES

29. Which of the following statements are true?
1. Dividend can be paid out of capital profits if only Article of Association of the company permits.
2. Goodwill taken over may be written off out of profit prior to incorporation.
3. Dividend can be paid out of current profits in spite of unprovided depreciation for past years.
4. Capital redemption reserve can be used for issuing fully paid bonus shares to the shareholders according to Company’s Act.
Select the correct answer using the Code given below:
Code:
(a) 1 and 2
(b) 1, 2 and 3
(c) 2 and 4
(d) 3 and 4
Ans. (c)

30. Consider the following statements:
Redeemable preference shares can be redeemed out of:
1. sale proceeds of the new issue of shares
2. sale proceeds of the new issue of debentures
3. profits available for dividends
4. sales proceeds of the assets of the company.
Of these statements:
(a) 1 and 3 are correct
(b) 1 alone is correct
(c) 2, 3 and 4 are correct
(d) 1, 2, 3 and 4 are correct
Ans. (a)

31. Match List-I with List-II and select the correct answer using the Code given below the Lists:
List-I List-II
A. Balance of Debenture Redemption 1. Realization account
Fund account
B. Balance of Sinking Fund account 2. General Reserve
for the replacement of an asset
C. On dissolution of a firm, the provisions 3. General Reserve
made for doubtful debts appearing in
Balance Sheet
D. Financial consequences of business 4. Asset account
operations
Code:
A B C D
(a) 1 2 3 4
(b) 3 4 1 2
(c) 1 2 4 3
(d) 3 2 2 1
Ans. (b)

32. A company issues 10,000 shares of Rs. 10 each at a discount of 10% payables follows:
On application Rs. 2.50
On allotment Rs. 3.00
On first & final calls Rs. 3.50
A holder of 100 shares did not pay the final call and his shares were forfeited. Share Capital A/c will be debited by:
(a) Rs. 650
(b) 850
(c) Rs. 1000
(d) Rs. 900
Ans. (c)

33. A public limited company can offer rights only to the:
(a) directors of the company
(b) existing equity shareholders
(c) debenture holders
(d) short-term creditors of the company
Ans. (b)

34. To enable a company to pay dividends, a special authority is:
(a) not needed either in the Memorandum or in the Articles
(b) heeded either in the Memorandum or in the Articles
(c) needed only in the Memorandum
(d) needed only in the Articles
Ans. (a)

35. Whenever debentures are cancelled, any point on cancellation is transferred to:
(a) profit and loss account
(b) sinking fund account
(c) capital redemption reserve account
(d) capital reserve account
Ans. (d)

36. According to the latest guidelines a company cannot issue:
(a) both equity and preference shares simultaneously
(b) non-convertible debentures
(c) irredeemable preference shares
(d) partially convertible debentures
Ans. (c)

37. Share premium received by issuing shares can be used for:
(a) payment of dividend
(b) issue of bonus shares
(c) remuneration to management
(d) any business purpose
Ans. (b)

RATIO ANALYSIS
38. Match List-I with List-II and select the correct answer using the Code given below the Lists:
List-I List-II
A. EAIT ÷ No. of equity shares outstanding 1. Liquidity
B. Debt + equity 2. Solvency
C. FA Long-term funds 3. Capital structure
D.CA- CL 4. Overall performance
Code:
A B C D
(a) 4 3 2 1
(b) 4 3 1 2
(c) 2 3 1 4
(d) 2 3 4
Ans. (a)

39. Given:
Fixed Assets ... Rs. 10, 00,000
Current Assets ... Rs. 6, 00,000
Total net profit ... Rs. 2, 60,000
Current Liabilities ... Rs. 3, 00,000
Which one of the following will be the correct ROI?
(a) 26%
(b) 25%
(c) 20%
(d) 16.5%
Ans. (c)

40. Given that:
Closing stock Rs. 30,000
Opening stock Sales Rs. 20,000
Administrative and selling expenses Rs. 20,000
Purchases the operating ratio is: Rs. 70,000
(a) 50%
(b) 65%
(c) 75%
(d) 80%
Ans. (d)

41. If the Stock turnover ratio is 4 times and the collection period is 30 days, the operating cycle would be:
(a) 30 days
(b) 60 days
(c) 90 days
(d) 120 days
Ans. (d)

42. Consider the following Income Statement:
Dr. Rs. Rs. Cr. Rs.
To salaries 8,000 By Gross Income 1, 00,000
Add:
Outstanding 2.000 10,000 By profit on sale of investment 5,000
To stationary 2,000
To rent 3,000
To provision for 10,000
Depreciation
To bad debts 2,000
To loss on sale of 3,000
Machinery
To provision for taxation 10,000
To net income 65,000
1,05,000 1,05,000
Which one of the following will be the correct ‘Fund from operation’?
(a) Rs. 73,000:
(b) Rs. 75,000
(c) Rs. 83,000
(d) Rs. 92,000
Ans. (c)

AUDITING

43. Match List-I with List-II and select the correct answer using the Code given below the Lists:
List-I List-II
A. Compensating errors 1. Not recording a business transaction
B. Errors of omission 2. Charging a Revenue item to capital
C. Errors of principle 3. Writing a debit item on the credit side and a credit
item on the debit side of equal amount
D. Errors of commission 4. Posting a correct amount to a wrong Account
Codes:
A B C D
(a) 3 1 4 2
(b) 2 1 4 3
(c) 3 1 2 4
(d) 2 1 3 4
Ans. (c)

44. Match List-I with List-II and select the correct answer using the Code given below the Lists:
List-I List-II
(Appointment of auditor) ( Appointing authority)
A. First auditor of a non-Govt. limited company 1. Shareholders of the company
B. Reappointment of a retiring auditor of a non-Govt 2. Board of Directors of the
limited company company
C. Auditor of a Government company 3. Central Government
on the advice of the Comptroller
and Auditor-General of India
D. Auditor of a non-Govt. limited 4. Central Government
company, when shareholders
fail to appoint or reappoint an auditor
Codes:
A B C D
(a) 1 2 4 3
(b) 2 1 3 4
(c) 1 2 3 4
(d) 2 1 4 3
Ans. (b)

45. Account books for how many preceding years should be preserved in good condition?
(a) 5
(b) 8
(c) 10
(d) 13
Ans. (b)

46. Under the law, the inspector who does the inspection of the company’s accounts has to submit his report to the:
(a) Company’s Board of Directors
(b) Secretary to the company
(c) Central Government
(d) Shareholders of the company
Ans. (c)

47. Consider the following statements:
Management audit may:
1. cover performance audit
2. protect the interests of the shareholders
3. cover proprietary audit
4. refer to audit of work done by the management accountant
Of these statements:
(a) 1 and 2 are correct
(b) 3 and 4 are correct
(c) 1 and 3 are correct
(d) 2 and 4 are correct
Ans. (c)

48. The remuneration of an auditor of partnership firm is fixed by:
(a) the Partnership Act
(b) the Companies Act
(c) the Government
(d) none of the above
Ans. (d)

49. Audit report along with annual accounts is given by:
(a) Statutory Auditor
(b) Internal Auditor
(c) Government Auditor
(d) Secretarial Auditor
Ans. (a)

50. If the shareholders fail to appoint or reappoint auditors of a limited company in an Annual General Meeting, the vacancy will be filled by the:
(a) Securities of Exchange Board of India
(b) Comptroller and Auditor-General of India
(c) Central Government
(d) Registrar of Companies
Ans. (c)