Financial Accountancy Solved Model paper

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Q. 1. State whether following statements are True/False.
(i) Expenses + Loss+ Assets=Income+ Gains+ Liabilities.
(ii) Bank Overdraft is a Real Account.
(iii) Short workings is the amount by which the minimum rent falls short of the actual royalty.
(iv) Hire purchase stock represents the installments from buyers not yet due.
(v) Life Membership fee is an item of liability in case of a club.
(vi) The inventory under AS 2 is valued on the basis of cost price or current replacement cost which
ever is lower.
(vii) Goodwill is a fictitious asset.
(viii) Debit balance in the Profit and Loss A/c is treated as surplus.
(ix) A and B divide profit in the ratio of 5:3. Z is admitted for 1/5 share in the business. The new profit
sharing ratio is 5:3:2.
(x) Gaining Ratio is applicable at the time of retirement of a partner.
(xi) The contract of insurance is a contract of guarantee.
(xii) Issue of Sweat Equity shares is a non-cash transaction.
(xiii) Stock Turnover ratio is Average Stock/Net Sales.
(xiv) High Capital Gearing ratio means high return to equity shareholders even in case of low profit.
(xv) AS 4 deals with prior period adjustments.
(xvi) The amortization of the amount of software commences from the date when it is available for
use.
(xvii) Changing of rings and pistons of an engine to increase efficiency is in the nature of revenue
expenditure.
(xviii) Preference shares may be redeemed from the General Reserve.
(xix) In case of a Branch situated in New York, Balance in ‘Head Office A/c’ in the Branch Books is to be
taken at Dollars.
(xx) Buy back is permitted only in respect of fully paid-up shares.

Answer 1.
(i) The Statement is True.
(ii) False – Bank O/D is a personal account.
(iii) False – Short workings is the amount by which the minimum rent exceeds the actual royalty.
(iv) The Statement is True.
(v) The Statement is True.
ICWAI Financial Accountancy Solved Model paper




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