MCQ on Accounting Standards for Corporate Affairs-II

 

MCQ on Accounting Standards for Corporate Affairs

Note: The answer is highlighted in RED COLOUR

1. Shares received from the new company are recorded at –

A. Face value

B. Average price

C. Market value

D. None of the above

C. Market value

2. When two or more companies carrying on similar business decide to combine, a new company is formed, it is known as ..................

A. Amalgamation

B. Absorption

C. Internal reconstruction

D. External reconstruction

A. Amalgamation

3. When one of the existing companies takes over the business of another company or companies, it is known as ...........

A. Amalgamation

B. Absorption

C. Internal reconstruction

D. External reconstruction

B. Absorption

4. While calculating the purchase price, the following values of assets are considered

A. Book value

B. New values fixed

C. Average values

D. Market values

B. New values fixed

5. While calculating the purchase price, the following values of assets are considered

A. Book value

B. New values fixed

C. Average values

D. Market values

C. Average values

6. Which of the following statement is correct?

A. The amount of Goodwill or Capital Reserve is found in the books of purchasing company only

B. The amount of Goodwill or Capital Reserve is found in the books of the vendor company only.

C. Goodwill = Net Assets – Purchase price

D. The face value of shares of the purchasing company will be taken into account while calculating purchase consideration.

A. The amount of Goodwill or Capital Reserve is found in the books of purchasing company only

7. If the two companies have different accounting policies in respect of the same item, then they make necessary changes to adopt .............. accounting policies.

A. LIFO method

B. FIFO method

C. Weighted method

D. Uniform

D. Uniform

8. The Amalgamation Adjustment Account appears in the books, it is shown under the heading of ......... in the balance sheet.

A. Reserve and Surplus

B. Fixed Assets

C. Investments

D. Miscellaneous expenditure

D. Miscellaneous expenditure

9. If the amalgamation is in the ..............., the General Reserve or Profit and Loss A/cbalance will not be shown in the balance sheet.

A. Form of Merger

B. Form of purchase

C. Net assets method

D. Consideration method

B. Form of purchase

10. If the intrinsic values of shares exchanged are not equal, the difference is paid in...........

A. Cash

B. Debenture

C. Pref. share

D. Assets

A. Cash

11. In the case of .............., one existing company takes over the business of another company, and no new company is formed.

A. Amalgamation

B. Absorption

C. Reconstruction

D. None of the Above

B. Absorption

12. In an amalgamation of two companies

A. Both companies lose their existence

B. Both companies continue

C. Any one company continues

D. none

A. Both companies lose their existence

13. When purchasing company pays purchase consideration, it will be debited to

A. Business purchase account

B. Assets account

C. Liquidator of selling company’s account

D. none

C. Liquidator of selling company’s account

14. When the purchasing company bears the liquidation expenses, it will debit the expenses to

A. Vendor Company’s Account

B. Bank Account

C. Goodwill Account

D. none

C. Goodwill Account

15. When the Vendor (seller) company agrees to bear liquidation expenses, it will debit

A. Realisation Account

B. Bank Account

C. Goodwill Account

D. none

A. Realisation Account

16. When the purchasing company does not take over a particular liability and the vendor company pays that liability, it will debit it to

A. Realisation Account

B. Bank Account

C. Liability Account

D. none

A. Realisation Account

17. When the Net Assets are less than the Purchase Consideration, the difference will be

A. Debited to Goodwill A/c.

B. Debited to General Reserve

C. none of these

D. none

A. Debited to Goodwill A/c.

18. While calculating purchase consideration ............... values of assets are to be considered.

A. Book value

B. Revalued price

C. Average price

D. Capital

B. Revalued price

19. Net Assets minus Capital Reserve is _________

A. Goodwill

B. Total assets

C. Purchase consideration

D. None of these

C. Purchase consideration

20. Hitesh Ltd.’s purchase consideration is Rs.12,345 and Net Assets Rs.3,568, then..........

A. Goodwill Rs. 8,777

B. Capital Reserve Rs. 8,777

C. Goodwill Rs. 15,913

D. Capital Reserve Rs. 15,913

A. Goodwill Rs. 8,777

21. The original amount of preference share capital should be transferred to ............account at the time of amalgamation in the books of vendor co.

A. Preference shareholders Account

B. Capital Reserve Account

C. Equity share capital Account

D. Equity share capital Account

A. Preference shareholders Account

22. The share capital, to the extent already held by the purchasing company, is closed by the vendor company by crediting it to:

A. Share capital account

B. Purchasing company's account

C. Realisation account.

D. none

C. Realisation account.

23. In the case of inter-company holdings, the purchasing company, at the time of payment of the purchase consideration, surrenders the shares in the vendor company by crediting:

A. Vendor company's account

B. Shares in the vendor company account

C. Share capital account.

D. none

B. Shares in the vendor company account

24. The vendor company transfers preliminary expenses (at the time of absorption) to:

A. Equity shareholders' account

B. Realisation account

C. Purchasing company's account.

D. none

B. Realisation account

25. A Ltd. and B Ltd. go into liquidation and a new company X Ltd. is formed. It is a case of:

A. Absorption

B. External reconstruction

C. Amalgamation.

D. none

26. The form of the balance sheet is………………..

A. Vertical

B. Horizontal

C. Horizontal and vertical

D. None of the above

C. Horizontal and vertical

27. The term current asset doesn’t cover

A. Car

B. Debtors

C. Stock

D. Prepaid expenses

A. Car

28. The P&L statement is also known as

A. Statement of operations

B. Statement of income

C. Statement of earnings

D. All of the above

B. Statement of income

29. Which of the following is true about financial statements?

I)A financial statement gives a summary of accounts. 

II) Financial statements can be stated as recorded facts.

A. Only I

B. Only II

C. Both I and II

D. None of the above

C. Both I and II

30. The statement of financial position and the balance sheet are synonyms

A. True

B. False

C. none

D. none

A. True

31. Which of the following statements is true?

I) Financial statements are only interim reports. 

II) Financial statements are also known as annual records. 

III) Financial statements are historic.

A. Both I and II

B. Both I and III

C. Both II and III

D. I, II, III

C. Both II and III

32. Certain assumptions are essential to prepare financial statements.

A. True

B. False

C. none

A. True

33. Premium received on the issue of shares cannot be utilized for ---------.

A. for the issue of bonus shares.

B. for the writing off preliminary expenses

C. for providing premium payable on redemption

D. for distribution of dividends.

D. for distribution of dividends.

34. In the case of a public limited company, after getting the-----------the company can start the business

A. Memorandum of Association

B. Table A

C. Certificate of commencement of business

D. Articles of Association

C. Certificate of commencement of business

35. Trade Payables are recorded in………………….

A. Current Liabilities

B. Current Assets

C. Equity

D. Inventories

A. Current Liabilities

36. In company Final Accounts Goodwill is shown under……………

A. Current Liabilities

B. Current Assets

C. Fixed Assets

D. Inventories

C. Fixed Assets

37. Dividend is payable in the amount of…….

A. Profit

B. Reserves

C. Loss

D. Income

A. Profit

38. The dividend paid between two annual general meetings is known as……………………….

A. Final dividend

B. Ex-Dividend

C. Interim Dividend

D. Dividend

C. Interim Dividend

39. Unclaimed dividend recorded on the…………………….. the balance sheet.

A. Liability

B. Assets

C. Credit

D. Debit

A. Liability

40. A liability that can be measured only by using a substantial degree of estimation is called……………………….

A. Contingent liabilities

B. Contingent Assets

C. Fixed Assets

D. Non-Current Liabilities

A. Contingent liabilities

41. Unquoted shares means……………………….

A. Listed Shares

B. Quoted Shares

C. Unquoted Shares

D. Unlisted Shares

D. Unlisted Shares

42. Bills receivable is ……………………..assets.

A. Current

B. Non-current

C. Fixed Assets

D. Investment

A. Current

43. The amount of profit kept aside to maintain a uniform rate of dividend is called………………

A. Ex-Dividend

B. Final Dividend

C. Undistributed Dividend

D. Dividend

C. Undistributed Dividend

44. Director’s remuneration shall not exceed ………………. % of the net profits.

A. 10%

B. 20%

C. 15%

D. 13.333%

A. 10%

 

 

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October 17, 2022

CPD-1 (Paper-2)

Quiz on Accounting Standards in Corporate Accounting

 

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October 17, 2022

CPD-1 (Paper-2)

MCQs on Accounting Standards in Corporate Accounting

 MCQs on Accounting Standards in Corporate Accounting

1. Change in accounting estimate is __________

A. Prior Period Item

B. Change in accounting policy

C. Extra-ordinary item

D. Ordinary item

B. Change in accounting policy

2. Indian accounting standards are the International financial reporting standards converged standards issued by the central government of India under the supervision and control of accounting standards board of ICAI and in consultation with __________.

A. Ministry of corporate affairs

B. NFRA

C. Accounting Standards Board

D. All of the above

B. NFRA

3. Preparation of consolidated Balance Sheet of Holding Co. and its subsidiarycompany as per

A. As 11

B. AS – 22

C. AS 21

D. AS – 23

A. As 11

4. The share of outsiders in the Net Assets in the subsidiary company is known as under :

A. Assets

B. subsidiary company's liability

C. Minority Interest

D. outsiders liability

D. outsiders liability

5. Pre-acquisition profit in subsidiary company is considered as:

A. Revenue profit

B. Capital profit

C. Goodwill

D. Non of the above

B. Capital profit

6. Excess of paid up value of the shares over cost of investment is considered as:

A. Goodwill

B. Capital Reserve

C. Minority Interest

D. Non of above

A. Goodwill

7. Profit earned after acquisition of share is treated as

A. Capital profit

B. Revenue profit

C. General Reserve

D. Revaluation Loss

A. Capital profit

8. Preparation of consolidated statement as per AS 21 is

A. Optional

B. Mandatory for listed Companies

C. Mandatory for Pvt. L

B. Mandatory for listed Companies

9. Holding Co. share in revenue profits of subsidiary company is adjusted in :

A. Cost of control

B. Shown on Assets side of Balance sheet

C. Profit and loss account

D. None of above

C. Profit and loss account

10. Unrealized profit on goods sold and included in stock is deducted from :

A. Capital Profit

B. Revenue Profit

C. Fixed Assets

D. Minority interest

B. Revenue Profit

11. Face value debentures of subsidiary co. held by Holding Company is deducted from

A. Debentures

B. Cost of control

C. Minority interest

D. Debentures in consolidated balance sheet

B. Cost of control

12. Which of the following statement is true:

A. There is no change in the amount of capital reserve before and after issue of bonus share of the issue is made from out of pre-acquisition profit.

B. There is change in the amount of capital reserve before and after issue of bonus share of the issue is made from out of post-acquisition profit.

C. There is change in the amount of capital reserve before and after issue of bonus share of the issue is made from out of pre-acquisition profit.

D. There is no connection between the issue of bonus shares and the calculation of capital reserve.

A. There is no change in the amount of capital reserve before and after issue of bonus share of the issue is made from out of pre-acquisition profit.

13. Minority Interest includes :

A. Share in share capital

B. Share in Capital profit

C. Share in Revenue profit

D. All of the above

D. All of the above

14. The Time interval between the date of acquisition of shares in subsidiary company and date of Balance Sheet of Holding Company is known as :

A. Pre-acquisition period

B. Post-acquisition period

C. Pre-commencement period

D. Pre-incorporation period

B. Post-acquisition period

15. Pre-acquisition dividend received by Holding company is credited to

A. Profit & loss A/c

B. Capital profit

C. Investment A/c

D. Non of the above

C. Investment A/c

16. Post Acquisition dividend received by Holding Company is debited to :

A. Bank A/c

B. profit & loss A/c

C. Dividend A/c

D. Investment A/c

B. profit & loss A/c

17. Which Exchange rate will be considered for conversion of share capital of subsidiarycompany.

A. Opening Rate

B. Closing rate

C. Average Rate

D. Rate of which date share acquired (actual)

D. Rate of which date share acquired (actual)

18. A subsidiary company shall be excluded from consolidation when:

A. Control is intended to be temporary

B. It operates under severe long-term restrictions which significantly impair its ability to transfer funds to the parent

C. Always included for consolidation

D. Both a and b.

D. Both a and b.

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October 17, 2022

CPD-1 (Paper-2)

MCQ- GOVERNMENT ACCOUNTING STANDARDS ADVISORY BOARD (GASAB)

GOVERNMENT ACCOUNTING STANDARDS ADVISORY BOARD (GASAB)

                           

1 .Government Accounting Standards Advisory Board (GASAB) explains the

a) Scope and authority of the Indian Government Accounting Standards (IGASs) for cash system of accounting

b)  Indian Government Financial Reporting Standards (IGFRSs) for accrual system of accounting.

c) Only a) above

d) Both a) & b)

2. Government Accounting Standards Advisory Board (GASAB) was

a) Notified by the President of India in accordance with the provisions of Constitution of India

b) Notified by the Comptroller& Auditor General of India in accordance with the provisions of Constitution of India

c) Notified by the Government of India in accordance with the provisions of Constitution of India

d) None of the above

2. The Government Accounting Standards Advisory Board (GASAB) was constituted by the Comptroller & Auditor General of India on

a) August 12, 2001

b) October 12, 2002

c) August 12, 2002

d) None of the above

2. The Government Accounting Standards Advisory Board (GASAB) was constituted as per the provision of:-

a) Article 150 of the Constitution of India

b) Article 15 of the Constitution of India

c) Article 148 of the Constitution of India

d) None of the above

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November 25, 2018

CPD-1 (Paper-2), CPD-II (Paper-1)

Notes on Government Accounting Standards Advisory Board (GASAB)

Objectives and standard-setting procedure of 

the Government Accounting Standards Advisory Board (GASAB)

Preface to Indian Government Accounting Standards (IGASs) and Indian Government Financial Reporting Standards (IGFRSs)

This Preface sets out the objectives and standard-setting procedure of the Government Accounting Standards Advisory Board (GASAB) and explains the scope and authority of the Indian Government Accounting Standards (IGASs) for cash system of accounting and Indian Government Financial Reporting Standards (IGFRSs) for accrual system of accounting. The Exposure Drafts issued by GASAB and the IGASs and IGFRSs formulated by GASAB and notified by the President of India in accordance with the provisions of Constitution of India should be read in the context of this Preface.

Introduction

Formation of GASAB

1. Article 150 of the Constitution of India stipulates that “The accounts of the Union and of the States shall be kept in such form as the President may, on the advice of the Comptroller and Auditor General of India, prescribe.” Accordingly, with the support of the Government of India, the Government Accounting Standards Advisory Board (GASAB) was constituted by the Comptroller & Auditor General of India on August 12, 2002 for the Union and States.

Composition of GASAB

2. The following is the composition of the GASAB:

i. Deputy Comptroller and Auditor General as Chairperson 

ii. Controller General of Accounts, Ministry of Finance, Government of India 

iii. Financial Commissioner, Railways, Ministry of Railways, Government of India 

iv. Controller General of Defense Accounts, Ministry of Defense, Government of India 

v. Secretary (Posts), Department of Posts 

vi. Member (Finance), Department of Telecommunications 

vii. Additional Secretary (Budget), Ministry of Finance, Government of India 

viii. Deputy Governor, Reserve Bank of India or his/ her nominee. 

ix. Director General, National Council of Applied Economic Research (NCAER), New Delhi 

x. President, The Institute of Chartered Accountants of India (ICAI), or his/her nominee 

xi. President, The Institute of Cost and Works Accountants of India (ICWAI) 

(xii-xv) Principal Secretary (Finance)/ Secretary (Finance) of four States by annual rotation and

(xvi) Director General (Accounts)/ Principal Director, Office of the Comptroller and Auditor General of India, as Member Secretary.

3. All Members, except the Deputy Governor, Reserve Bank of India and the President, Institute of Chartered Accountants of India who could nominate their representatives, are required to attend the meeting personally. In case any Member is unable to attend the meeting, the Chairperson could be informed in advance and the absentee Member could send the views in advance of the scheduled Board meeting.

4. The GASAB Secretariat is located in the Office of the Comptroller & Auditor General of India. The Secretariat normally consists of officers from the Indian Audit & Accounts Service, Indian Civil Accounts Service, Indian Defence Accounts Service, Indian Railway Accounts Service, Indian Posts & Telecommunications Accounts and Finance Service.

Scope, Objectives and Responsibilities of GASAB

5. The objective of the GASAB is to formulate Standards relating to accounting and financial reporting by the Union, the States and Union Territories with Legislature. The Standards so formulated by GASAB are recommended to the Government of India for notification in accordance with the provisions of the Constitution. 

6. The GASAB shall have, inter alia, the following responsibilities:

6.1 To establish and improve Standards of Government accounting and financial reporting in order to enhance accountability mechanisms; 

6.2 To formulate and propose Standards that improves the usefulness of financial reports based on the needs of the users; 

6.3 To keep the Standards current and reflect change in the Governmental environment; 

6.4 To provide guidance on implementation of Standards; 

6.5 To consider significant areas of accounting and financial reporting that can be improved through the standard setting process; and 

6.6 To improve the common understanding of the nature and purpose of information contained in the financial reports.

7. While formulating Standards, the GASAB considers the well-established system of Government accounts in India with underlying accounting concepts and principles. The GASAB also examines relevance of international best practices and gives due consideration while formulating Standards to inclusion of encouraged disclosures or additional information.

8. Consequent upon the recommendation of the Twelfth Finance Commission for introduction of accrual basis of accounting in Government and acceptance by Government of India in principle, GASAB suggested an operational framework and roadmap for transition to accrual basis of accounting in Governments. Subsequently, following the mandate given by the Government to the C&AG to steer implementation of accrual accounting in consultation with different stakeholders and accounting organizations, GASAB is entrusted with the responsibility of formulating accrual based Standards. 

9. The Standards formulated on cash basis of accounting are termed as Indian Government Accounting Standards (IGASs) and the Standards formulated on accrual basis of accounting are termed as Indian Government Financial Reporting Standards (IGFRSs)

Financial Statements of the Government

10. Financial Statements of the Government relate to the Annual Finance Accounts and Annual Appropriation Accounts of the Union Government, State Governments and Union Territories with Legislature. It would also include appropriate statements, schedules and notes to the above Statements. Detailed statements/schedules support the main statements/schedules while additional disclosures are meant to augment the financial statements and are included in the form of notes.

Authority, Scope and Applicability of IGASs and IGFRSs

11. The Standards are notified by the Government as per the powers vested under Article 150 of the Constitution. The IGASs and IGFRSs, as notified by the Government, are applicable to the Union and the States.

12. The provisions of the Standards do not override the provisions of any existing or future Acts or Rules made there under by the Union or State Governments.

13. The Standards would be prospective in their application. The Standards are not applicable retrospectively and the Governments are not required to reframe their Financial Statements of previous periods to comply with the Standards.

14. Standards by their very nature are meant to apply to material items. Any other limitation on their applicability or otherwise is made clear by GASAB in the respective Standards.

15. The Standards have standard portions set in bold italic type which should be read in the context of explanatory paragraphs in the respective Standards set in plain type. Both have equal authority; portion in bold, italic type indicating main principles whereas those in plain type explain those principles.

Standard-setting Procedure for Accounting Standards

16. The following procedures are adopted by the GASAB for formulating Standards:

16.1 The GASAB Secretariat identifies areas for Standard formulation and places them before the GASAB for selection and approval. While doing so, the Secretariat places before the GASAB all important suggestions, references, proposals received from various sections of the Union and State Governments, members of GASAB, members of Civil Society, Professional Bodies and other stakeholders. The priorities, as approved by the GASAB, guide further functioning of the GASAB Secretariat.

16.2 The GASAB Secretariat thereafter prepares the discussion paper on the selected issues for consideration of the GASAB.

16.3 While doing so, the Secretariat studies the existing rules, codes and principles as internal sources, and documents/pronouncements/Standards issued by other national and international Standard setting and regulatory bodies. The Secretariat may also hold consultation with such other persons as are considered necessary for this purpose.

16.4 On consideration of the Discussion paper and the comments received thereon, the GASAB finalizes the Exposure Draft.

16.5 The GASAB may constitute Standing Committee and/or Task based Groups from amongst the Members or their representatives to consider specific areas before finalization.

16.6 The Exposure Draft, as approved for issue by the GASAB, are widely circulated in the public domain and forwarded to all stakeholders. The Exposure Draft is required to be hosted at the website of GASAB.

16.7 Based on the comments received on the Exposure Draft, the Standards are finalized by the GASAB. The Standards, as finalized, are forwarded to the Government for notification in accordance with the provisions of the Constitution of India.

17. The meetings are normally chaired by the Chairperson. In unforeseen circumstances when Chairperson is unable to attend, the senior-most member from the Central Government will chair the meeting. The Comptroller & Auditor General of India will be kept informed of the important developments in the meetings of GASAB.

18. The GASAB may meet as often as is deemed necessary but generally not less than four times in a financial year. The decisions of the GASAB may preferably be by general consensus. In case differences persist, the decision shall be on the basis of voting favoring the recommendation. The dissenting views should also be forwarded to the Government along with the recommendations.

19. GASAB allows an exposure period of 90 days for inviting comments on Exposure Draft.

20. The format of the IGASs and IGFRSs ordinarily includes the following: 

(i) Introduction 

(ii) Objective 

(iii)Scope 

(iv)Definition of the terms used in the Standard 

(v) Accounting and Presentation requirements 

(vi)Disclosure requirements for complying with the Standard, including format of disclosure, etc., if necessary 

(vii) Explanatory paragraphs 

(viii) Transitional Provisions, if any 

(ix)Effective Date.

Compliance with IGASs and IGFRSs

21. All the Standards are mandatory from the effective date(s) mentioned therein after notification of the Standards by Government. Financial Statements cannot be described as complying with IGASs and IGFRSs unless they comply with all the requirements of each applicable IGAS and IGFRS.

22. Where the accounting authorities of the Union and State Governments have deviated from the applicable notified Standards, a disclosure shall be made with reasons for such deviations as well as the effect of the deviations on the Financial Statements.

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November 24, 2018

CPD-1 (Paper-2), CPD-II (Paper-1)