Hello Aspiring Chartered Accountants and Accounting Enthusiasts! 📚✨
Welcome to a comprehensive exploration of the CA Intermediate New Course - Advanced Accounting, focusing specifically on the intricacies of Presentation & Disclosures based Accounting Standards. In this blog post, we're diving deep into the realm of objective-based questions – the perfect tool to sharpen your understanding of this critical subject.
As you journey through the world of accounting standards, we've curated a set of targeted Multiple-Choice Questions (MCQs) to serve as your practice companion. Whether you're gearing up for exams or looking to reinforce your grasp on these standards, this blog is designed with your success in mind.
The CA Intermediate New Course demands a thorough understanding of the Presentation & Disclosures based Accounting Standards, and our objective-based questions are crafted to align with this requirement. From the conceptual foundation to practical applications, we're here to guide you every step of the way.
Join us on this learning adventure as we navigate through the nuances of Advanced Accounting and elevate your preparation with strategic MCQs. Our goal is to empower you with knowledge, boost your confidence, and equip you for success in your CA Intermediate journey.
Question 1: As per AS 3, Long term bank borrowings are considered under _______ activities in the cash flow statement.
- (a) Financing
- (b) Investing
- (c) Operating
- (d) Not considered
Question 2: Under AS 17, segments must be reported separately if the reported revenues (internal and external) are more than _______ of the combined revenues of all the segments.
- (a) 10%
- (b) 15%
- (c) 20%
- (d) 25%
Question 3: As per AS 3, which one of the following is not a financing activity?
- (a) Cash proceeds from issuing equity instruments
- (b) Acquisition of an entity by means of an equity issue
- (c) Cash payments to owners to acquire own entity's shares;
- (d) Cash proceeds from issuing bonds.
Question 4: Which of the following may be treated as Related party as per AS 18?
- (a) A Limited & B Limited only because Mr. X is a common director in both the company
- (b) A Limited & B Limited are totally independent companies; however, the majority of the Board of Directors of both companies are the same
- (c) Mr. S & A limited only because Mr. S purchases the majority of the products of A Limited.
- (d) ABC Bank & N Limited because all borrowings of N Limited are financed by ABC Bank.
Question 5: A Ltd. is a non-financial enterprise and has given loans and advances to B Ltd. (subsidiary of A Ltd.). A Ltd. earned interest of ` 1,00,000 on these loans and advances. Under Accounting Standards, interest earned by A Ltd. will be shown in the Cash Flow Statement as
- (a) Operating Cash Flow
- (b) Investing Cash Flow
- (c) Financing Cash Flow
- (d) Either (a) or (b)
Question 6: Which of the following statements is correct? 1. Options are generally dilutive in nature. 2. Options are generally more dilutive as compared to other potential equity shares.
- (a) Both (1) and (2) are correct.
- (b) Both (1) and (2) are incorrect.
- (c) Only (1) is correct.
- (d) Only (2) is correct.
Question 7: Two major considerations that govern the selection of accounting policy
- (a) Substance over form and Consistency
- (b) Prudence and Materiality
- (c) Prudence and Reliability
- (d) Reliability and Consistency
Question 8: Which of the following is not a Potential Equity Share?
- (a) Employee stock option
- (b) Share warrants
- (c) Cumulative Preference Shares
- (d) Shares issuable under a loan contract upon default of payment of principal or interest
Question 9: In the cash flow statement of a financial enterprise, interest paid and dividends received should be
- (a) classified as operating cash flows
- (b) classified as financing cash flows
- (c) Not shown in cash flow statement
- (d) classified as investing cash flows
Question 10: XYZ Co. Ltd is a financial institution and has given loans and advances to its subsidiary and earned interest of ` 5 lacs on that loan. Interest earned by XYZ Co. Ltd is shown as
- (a) Operating Cash Flow.
- (b) Investing Cash Flow.
- (c) Financing Cash Flow
- (d) cash and cash equivalent
Question 11: XYZ limited is incorporated on 01.10.2022 in India. Its first financial statement is prepared on 31.03.2023 for 6 months. AS 25 is applicable for XYZ Limited if financial statements are published:
- (a) From 01.10.2022 to 31.03.2023
- (b) From 01.10.2022 to 31.12.2024
- (c) From 01.10.2022 to 31.12.2022
- (d) AS 25 is not applicable during the 1st year of operations.
Question 12: In the cash flow statement of a financial enterprise, interest paid and dividends received should be
- (a) classified as operating cash flows
- (b) classified as financing cash flows
- (c) Not shown in cash flow statement
- (d) classified as investing cash flows
Question 13: Interim period as per AS 25 means:
- (a) A Quarter
- (b) Half year
- (c) a Calendar year
- (d) Any period shorter than a full financial year
Question 14: Fundamental accounting assumption is
- (a) Materiality
- (b) Business entity
- (c) Going concern
- (d) Dual aspect
Question 15: It is essential to standardize the accounting
principles and policies in order to ensure
- (a) Transparency
- (b) Consistency
- (c) Comparability
- (d) All of the three.
Question 16: In the cash flow statement of a financial enterprise, interest paid and dividends received should be
- (a) classified as operating cash flows
- (b) classified as financing cash flows
- (c) Not shown in cash flow statement
- (d) classified as investing cash flows
Question 17: Following is not part of Minimum component of an Interim Financial Report:
- (a) Condensed Cashflow statement
- (b) Condensed Director's Report
- (c) Condensed profit & loss statement
- (d) Selected Explanatory Notes
Question 18: Following is not included in Segment Expense.
- (a) Income tax expense
- (b) The expense resulting from the operating activities of a segment that is directly attributable to the segment
- (c) The relevant portion of enterprise expense that can be allocated on a reasonable basis to the segment
- (d) Expense relating to transactions with other segments of the enterprise
Question 19: Which of the following items is not considered as cash or cash equivalent?
- (a) Cash on hand
- (b) Cash at Bank
- (c) Securities deposits for 4 months
- (d) Investments with a maturity of two months from the date of acquisition.
Question 20: AS-1 recognizes___________ Fundamental Accounting Assumptions
- (a) three.
- (b) four.
- (c) five.
- (d) none of the three.
Question 21: Which of the following is NOT a major consideration in the selection and application of accounting policies?
- (a) Prudence
- (b) Comparability
- (c) Materiality
- (d) Substance over form
Question 22: Adoption
of different accounting policies by different companies operating in the same industry affects which of the qualitative characteristics the most?
- (a) Comparability
- (b) Relevance
- (c) Faithful representation
- (d) Reliability
Question 23: Which of the following statements would not be correct in relation to disclosures to be made in the financial statements after making any change in an accounting policy?
- (a) Any change in an accounting policy which has a material effect should be disclosed.
- (b) The amount by which any item in the financial statements is affected by such change should be disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part, the fact should be indicated.
- (c) If a change is made in the accounting policies which has no material effect on the financial statements for the current period but which is reasonably expected to have a material effect in later periods, the fact of such change should be appropriately disclosed in the period in which the change is adopted.
- (d) If a change is made in an accounting policy which has a material effect on the financial statements for the current period and is reasonably expected to have a material effect in later periods, the fact of such change should be appropriately disclosed only in the later periods i.e. year(s) next to the year in which the change is adopted.
Question 24: Crown Ltd. wants to prepare its cash flow statement. It sold equipment of book value of `60,000 at a gain of `8,000. The amount to be reported in its cash flow statement under operating activities is
- (a) Nil
- (b) `8,000
- (c) `68,000
- (d) `60,000
Question 25: While preparing cash flows statement, an entity (other than a financial institution) should disclose the dividends received from its investment in shares as
- (a) operating cash inflow
- (b) investing cash inflow
- (c) financing cash inflow
- (d) cash & cash equivalent
Question 26: XYZ Co. is a financial enterprise. In its cash flow statement, interest paid and dividends received should be
- (a) classified as operating cash flows.
- (b) classified as financing cash flows.
- (c) Not shown in cash flow statement.
- (d) classified as investing cash flows.
Question 27: In the cash flow statement, ‘cash and cash equivalents’ do not include
- (a) Bank balances.
- (b) Short-term investments readily convertible into Cash are subject to an insignificant risk of changes in value.
- (c) Cash balances.
- (d) Loan from bank.
Question 28: While preparing a Cash Flow Statement using the Indirect method as required
under AS 3, which of the following will not be deducted from/added to the Net Profit to arrive at the “Cash flow from Operating activities”?
- (a) Interest income
- (b) Gain on sale of a fixed asset.
- (c) Depreciation.
- (d) Gain on sale of inventory
Question 29: As per AS 17, reportable segments are those whose total revenue from external sales and inter-segment sales is
- (a) 10% or more of the total revenue of all segments
- (b) 10% or more of the total revenue of all external segments
- (c) 12% or more of the total revenue of all segments
- (d) 12% or more of the total revenue of all external segments
Question 30: Which of the following statements is correct?
- (a) Management has a discretion to include a segment as a reportable segment even if it passes the 10% materiality test.
- (b) Management has a discretion to include any segment as a reportable segment if it fails the 12% materiality test.
- (c) It is mandatory for the management to include the segment as a reportable segment if it passes the 10% materiality test.
- (d) It is not mandatory for the management to include the segment as a reportable segment if it passes the 10% materiality test.
Question 31: Which of the following statements is correct?
- (a) The overall test of 75% considers only external revenue to compute the threshold limit.
- (b) The overall test of 75% considers only internal revenue to compute the threshold limit.
- (c) The overall test of 75% considers both internal and external revenue to compute the threshold limit.
- (d) It is management choice whether they want to include both external and internal revenue for computing threshold limit.
Question 32: Which of the following statements is correct?
- (a) The 10% test computed on the basis of revenue, considers both internal and external revenue to compute the threshold limit.
- (b) The 10% test computed on the basis of revenue, considers only external revenue to compute the threshold limit.
- (c) The 10% test computed on the basis of revenue, considers only internal revenue to compute the threshold limit.
- (d) It is management choice whether they want to include both external and internal revenue for computing threshold limit.
Question 33: Which of the following statements is correct?
- (a) In case of 10% test based on profit/loss, we need to consider that any segment whose profit or loss is 10% or more than the net profit or net loss respectively of all segments taken together becomes reportable segment.
- (b) In case of 10% test based on profit/loss, we need to consider that any segment whose profit or loss is 10% or more than the net profit (after netting the losses) of all segments taken together becomes reportable segment.
- (c) In case of 10% test based on profit/loss, we need to consider that any segment whose profit or loss is 10% or more than the net profit or loss (whichever is higher in absolute figures) of all segments taken together becomes reportable segment.
- (d) In case of 10% test based on profit/loss, we need to consider that any segment whose profit or loss is 10% or more than the net profit or loss (whichever is lower in absolute figures) of all segments taken together becomes reportable segment.
Question 34: According to AS-18 Related Party Disclosures, which ONE of the following is not a related party of Skyline Limited?
- (a) A shareholder of Skyline Limited owning 30% of the ordinary share capital
- (b) An entity providing banking facilities to Skyline Limited in the normal course of business
- (c) An associate of Skyline Limited
- (d) Key management personnel of Skyline Limited
Question 35: Are the following statements in relation to related parties true or false, according to AS-18 Related Party Disclosures?
- (a) A party is related to another entity that it is jointly controlled by.
- (b) A party is related to another entity that it controls.
Question 36: Which of the following is not a related party as envisaged by AS-18 Related Party Disclosures?
- (a) A director of the entity
- (b) The parent company of the entity
- (c) A shareholder of the entity that holds 1% stake in the entity
- (d) The spouse of the managing director of the entity
Question 37: According to AS-18 Related Party Disclosures, related party transaction is a transfer of resources or obligations between related parties – provided a price is charged for such transfer.
- (a) True
- (b) False
Question 38: According to AS-18 Related Party Disclosures, parties are considered to be related, if and only if at the end of the reporting period - one party has the ability to control the other party or exercise significant influence over the other party in making financial and/or operating decisions.
- (a) True
- (b) False
Question 39: AB Company Ltd. had 1,00,000 shares of common stock outstanding on January Additional 50,000 shares were issued on July 1, and 25,000 shares were re-acquired on September 1. The weighted average number of shares outstanding during the year on Dec. 31 is
- (a) 1,40,000 shares
- (b) 1,25,000 shares
- (c) 1,16,667 shares
- (d) 1,20,000 shares
Question 40: As per AS 20, potential equity shares should be treated as dilutive when, and only when, their conversion to equity shares would
- (a) Decrease net profit per share from continuing ordinary operations.
- (b) Increase net profit per share from continuing ordinary operations.
- (c) Make no change in net profit per share from continuing ordinary operations.
- (d) Decrease net loss per share from continuing ordinary operations.
Question 41: As per AS 20, equity shares which are issuable upon the satisfaction of certain conditions resulting from contractual arrangements are
- (a) Dilutive potential equity shares
- (b) Contingently issuable shares
- (c) Contractual issued shares
- (d) Potential equity shares
Question 42: In case potential equity shares have been cancelled during the year, they should be:
- (a) Ignored for computation of Diluted EPS.
- (b) Considered from the beginning of the year till the date they are cancelled.
- (c) The company needs to make an accounting policy and can follow the treatment in (a) or (b) as it decides.
- (d) Considered for computation of diluted EPS only if the impact of such potential equity shares would be material.
Question 43: Partly paid up equity shares are:
- (a) Always considered as a part of Basic EPS.
- (b) Always considered as a part of Diluted EPS.
- (c) Depending upon the entitlement of dividend to the shareholder, it will be considered as a part of Basic or Diluted EPS as the case may be.
- (d) Considered as part of Basic/ Diluted EPS depending on the accounting policy of the company.
Question 44: Which of the following is not covered within the scope of AS 26?
- (a) Intangible assets held-for-sale in the ordinary course of business
- (b) Assets arising from employee benefits
- (c) (a) & (b) both
- (d) Research and development activities
Question 45: Intangible asset is recognised if it:
- (a) meets the definition of an intangible asset
- (b) is probable that future economic benefits will flow
- (c) the cost can be measured reliably
- (d) meets all of the above parameters
Question 46: Sun Limited has purchased a computer with various additional software. These are integral part of the computer. Which of the following are true in the context of AS 26:
- (a) Recognise Computer and software as tangible asset
- (b) Recognise tangible and intangible separately
- (c) Recognise computer and software as intangible asset
- (d) Does not recognize the software as an asset.
Question 47: Hexa Ltd developed a technology to enhance the battery life of mobile devices. Hexa has capitalised development expenditure of `5,00,000. Hexa estimates the life of the technology developed to be 3 years but the company has forecasted that 50% of sales will be in year 1, 35% in year 2 and 15% in year 3. What should be the amortisation charge in the second year of the product’s life?
- (a) `2,50,000
- (b) `1,75,000
- (c) `1,66,667
- (d) `1,85,000
Question 48: AS 25 mandates the following in relation to interim financial reports.
- (a) which entities should publish interim financial reports.
- (b) how frequently it should publish interim financial reports.
- (c) how soon it should publish after the end of interim period.
- (d) none of the above.
Question 49: The standard defines Interim financial Report as a financial report for an interim period that contains a set of financial statements.
- (a) Complete
- (b) Condensed
- (c) Financial statement similar to annual
- (d) Either complete or condensed
Question 50: ABC Limited has reported `85,000 as per tax profit in the first quarter and expects a loss of `25,000 each in subsequent quarters. It has a corporate tax rate slab of 20% on the first `20,000 earnings and 40% on all additional earnings. Calculate tax expenses that should report in the first-quarter interim financial report.
- (a) `17,000
- (b) `30,000
- (c) `2,000
- (d) AS 25 does not mandate to report tax expenses
Question 51: An entity prepares quarterly interim financial reports in accordance with AS 25. The entity is engaged in the sale of mobile phones and normally 5% of customers claim on their warranty. The provision in the first quarter was calculated as 5% of sales to date, which was `10 million. However, in the second quarter, a fault was found and warranty claims were expected to be 10% for the whole year. Sales in the second quarter were `15 million. What would be the provision charged in the second quarter’s interim financial statements?
- (a) `1 million
- (b) `2 million
- (c) `1.25 million
- (d) `1.5 million
In the dynamic landscape of CA Intermediate studies, we've strived to enhance your learning experience with our meticulously crafted objective-based questions. Navigating through the chapters of Advanced Accounting and Business Growth, specifically delving into the nuances of Introduction to Presentation & Disclosures based Accounting Standards, our comprehensive set of MCQs aims to provide you with a quick yet thorough revision before your examination.
Remember, success in CA Intermediate requires not just theoretical understanding but also a strategic approach to mastering key concepts. We hope these tailored questions become a valuable asset in your preparation, aiding you in your journey to conquer the CA Intermediate examination.
Best wishes for your exams! 🌟
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