RISE PREMIER SCHOOL OF ACCOUNTANCY

Batch: PRC November attempt

Total marks: 40
Subject: Introduction to Accounting
Time allowed: 50 Minutes
Teacher: Mr. Naveed Ansari
Series Test-3
Date: 6th November, 2024
Syllabus: Ch # 04 & Ch # 06
Name: _________________________________ Rise ID: ______________
Choose the correct answers.
01. Ahmad has paid Rs. 11,040 for rent for the six-month period to 31 August 2002. What accrual or
prepayment is required when preparing accounts for the year ended 30 June 2002?
(a) A prepayment of Rs. 1,840
(b) An accrual of Rs. 1,840
(c) A prepayment of Rs. 3,680
(d) An accrual of Rs. 3,680

02. Profit before correction is Rs. 50,000. It has been identified that an accrued expense of Rs. 10,000 has been
understated while an accrued income of Rs. 30,000 has been overstated. What will be the impact of
correction of this error on Profit?
(a) Profit will be decreased by Rs. 20,000 (b) Profit will be decreased by Rs. 40,000
(c) Profit will be increased by Rs. 20,000 (d) Profit will be increased by Rs. 40,000

03. Following statements are given?

(I) Recording of amount earned but not yet received is under accrual basis of accounting
(II) Cash basis of accounting says that record the cash when it is incurred or when it is earned.
(a) Only (I) is true (b) Only (II) is true
(c) Both are true (d) Both are not true

04. A tenant pays us rent of Rs. 1,000 a month. At the year-end he had paid 3 months in advance. During the
year, Rs. 16,000 was received. What was in our last year's statement of financial position in respect of this
tenant?
(a) Rs. 1,000 Debit (b) Rs. 1,000 Credit
(c) Rs. 7,000 Debit (d) Rs. 7,000 Credit

05. On 1 February 2019, a loan of Rs. 6,000,000 was taken from a bank for acquisition of an office building. A
portion of the building was rented out on 1 August 2019 at a monthly rent of Rs. 45,000. Interest is payable
at 15% per annum on 31 January each year and rent is received half yearly in advance.
What amounts of interest payable and unearned rent should be shown in the statement of financial
position as on 31 December 2019?
(a) Interest payable Rs. 900,000; Unearned rent Rs. 270,000
(b) Interest payable Rs. 450,000; Unearned rent Rs. 45,000
(c) Interest payable Rs. 825,000; Unearned rent Rs. 45,000
(d) Interest payable Rs. 825.000; Unearned rent Rs. 250,000

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06. An accrued income is:
(a) An income relating to next year but not received in current year
(b) An income relating to the current year and received within current year
(c) An income relating to the current year but not received in current year
(d) An income relating to next year and already received in current year

07. Ahmad enterprises has year-end on 31 August. On 31 December 2015, the organization took out a loan of
Rs. 200,000 with annual interest of 15%. The interest is payable in equal instalments on the first day of
April, July, October and January in arrears. How much should be charged to P&L for the year ended 31
August 2016, and how much shown on the statement of financial position?
Profit or loss Statement of financial position
(a) Rs. 12,000 Rs. 7,500 accrual
(b) Rs. 20,000 Rs. 5,000 accrual
(c) Rs. 9,000 Rs. 7,500 prepayment
(d) Rs. 30,000 Rs. 5,000 prepayment

08. The rent expense for Ali Enterprises for the period 1 September 2018 to 31 May 2019 is Rs. 45,000, which is
20% more than the previous period of same months. Rent expense is paid on 1 June.
What is the charge of rent expense in the statement of profit or loss for the year ended 31 December 2018?
(a) Rs. 40,333 (b) Rs.53,333
(c) Rs. 48,333 (d) Rs. 41,250

09. Why it is necessary to account for Accrued Income?

(a) So that current liabilities are not overstated
(b) So that profit is not understated
(c) So that current assets are not overstated
(d) So that profit is not overstated

10. The rent account for a business was as follows:

Rent expense A/c
Rs. Rs.
01.01.05 Bal. b/d 1,000
01.02.05 Bank 3,000
01.05.05 Bank 3,000
01.08.05 Bank 3,600 31.12.05 P/L 13,000
01.11.05 Bank 3,600 31.12.05 Bal. c/d 1,200
14,200 14,200
01.01.05 Bal. b/d 1,200
Which of the following best describes the rent expense?
(a) Cash paid Rs. 13,000 & Charge for year Rs. 13,200
(b) Cash paid Rs. 13,000 & Charge for year Rs. 13,000
(c) Cash paid Rs. 13,200 & Charge for year Rs. 13,000
(d) Cash paid Rs. 13,200 & Charge for year Rs. 13,200

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11. Ali purchased new printing machine costing Rs. 80,000 on 01.01.20. The installation costs were Rs. 5,000 and
the employees received training on how to use the machine, at a cost of Rs. 2,000. Before using the machine
to print customer's orders, a test was undertaken and the paper and ink cost Rs.1,000. The machine was
ready to use on 1st April 2020. Depreciation is charged under reducing balance method @ rate of 10%.
What should be the cost of the machine in the company's statement of financial position?
(a) Rs. 79,550 (b) Rs. 77,400
(c) Rs. 81,400 (d) Rs. 86,000

12. Which of the following should be accounted for as capital expenditure?

(a) The purchase of a car by a car dealer for re-sale
(b) The purchase of a delivery van by a business
(c) The cost of repairing a delivery van by a business
(d) The cost of vehicle insurance by a business

13. A business accounted for the purchase of a new delivery truck as a motor expense in the accounting records.
What is the effect of this error upon the profit for the year and also upon the carrying value of assets
included in the statement of financial position before the error is corrected?
(a) Profit for the year is understated and assets on the statement of financial position are overstated
(b) Profit for the year is overstated and assets on the statement of financial position are overstated
(c) Profit for the year is understated and assets on the statement of financial position are understated
(d) Profit for the year is overstated and assets on the statement of financial position are understated

14. If the depreciation on a fixed asset is calculated by references to the reducing balance method
(a) Then, in relation to 'that particular fixed asset, there will be an equal depreciation charge in the
profit and loss account of each year during the life of the asset,
(b) The depreciation charge in the profit and loss account in respect of that asset will decrease each
over the life of the asset
(c) The depreciation charge in the profit and loss account relating to that asset will be greater in the
later years of the life of the asset than in the earlier years.
(d) All other things being equal, net profit will be greater in the earlier years of the life of asset than in
the later years.

15. A vehicle bought on 1 January 2001 at a cost of Rs. 16,000. Its useful life is estimated at 4 years and its
residual value as being Rs. 4,000. At 01.01.03, a review of the vehicle's probable useful life suggested that it
should be retained until 01 January 2006 and its residual value should be Rs. 2,500.
What is the amount of straight-line depreciation charged in the profit and loss account in the year to 31
December 2003.
(a) Rs. 3,500 (b) Rs. 1,875
(c) Rs. 2,500 (d) Rs. 3,000

16. Mr. Musa purchased a furniture costing Rs. 200,000 on 01.01.11. Rate of Depreciation decided by company
is 20% using WDV method. The residual value estimated on 01.01.11 is Rs. 10,000.
The company decided on 01.01.13 that depreciation method should be Straight line with a residual value of
Rs.6,000 at the end of its remaining useful life of 4 years.
(a) Rs. 48,500 (b) Rs. 30,500
(c) Rs. 50,000 (d) Rs. 32,000

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17. Mr. A has purchased a machine costing Rs. 100,000 on 01.01.04. Residual value is Rs. 2,000. Total life in units
is estimated to be 10,000. Units produced in 2004 are 2,000. Units produced in 2005 are 3,000. Units
produced in 2006 are 5,000. What is the carrying value at the end of 2006.
(a) Carrying value will be equal to the depreciable amount
(b) Carrying value will be equal to the [Cost – Acc. Depreciation till 01.01.06)
(c) Carrying value will be equal to the Residual value
(d) Carrying value will be the same as if calculated under the straight-line method

18. Ahmad purchased a delivery van costing Rs. 900,000 on 01.01.21. It has an expected residual value after 45
years of Rs. 72,000. If the sum of the digits method of depreciation is used, what will be the Accumulated
Depreciation of the asset at the end of Year 31.12.24?
(a) Rs. 33,600 (b) Rs. 139,200
(c) Rs. 760,800 (d) Rs. 136,000

19. Which of the following statements is/are correct?

(I) All property, plant & equipment are tangible assets but all tangible assets are not property, plant &
equipment.
(II) All property, plant & equipment are non-current assets but all non-current assets are not property,
plant & equipment
(a) Only Statement (I) is true (b) Only Statement (II) is true
(c) Both are true (d) Both are not true

20. The following graph represents the:

(I) Depreciation expense under Straight-line method

(II) Acc. Depreciation under output method
(a) Only Statement (I) is true (b) Only Statement (II) is true
(c) Both are true (d) Both are not true

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