2 D
3 D
4 D
5 A
6 C
7 C
8 B
9 C
10 A
11 C
12 D
13 C
14 C
15 A
16 C
17 C
18 A
19 D
20 B
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1. Which of the following would NOT be the characteristics of current assets?
A. Likely to change before the next accounting period is over
B. Not bought for resale
C. Use as part of the firm's trading operations
D. Liquidity
2. ABC Company has Rs. 150,000 cash, Rs. 80,000 as accounts receivables, Rs. 20,000
as allowance for doubtful accounts, Rs. 10,000 as work in progress inventory, Rs. 55,000
as prepaid expenses, Rs. 50,000 land purchased in the current year. Calculate the value of
current assets.
A. Rs. 275,000
B. Rs. 315,000
C. Rs. 365,000
D. Rs. 220,000
3. Which of the following would be considered a cash-flow item from a "financing"
activity?
A. A cash outflow to the government for taxes
B. A cash outflow to repurchase the firm's own common stock
C. A cash outflow to lenders as interest
D. A cash outflow to purchase bonds issued by another company
4. Which of the following is NOT an example of cash equivalents?
A. Certificates of Deposit
B. Money market accounts
C. Money market mutual funds
D. Euro Bond
5. Which of the following would NOT be considered a cash flow from “operating” activities?
A. Payments for the sale of loans
B. Interest received on loans
C. Tax payments
D. Payment of debt principle
6. Depreciation is added back to profit when arriving at the cash flow from operating
activities because:
A. Depreciation is only an estimated amount
B. Depreciation does not affect profit
C. Depreciation does not result in a flow of cash
D. Depreciation only affects the balance sheet, not the profit and loss account
7. If net profit before taxation and interest was Rs. 95,000, depreciation for the year was
Rs. 17,000, stock has decreased during the year by Rs. 7,000, debtors have increased by
Rs. 11,000 and creditors have decreased by Rs. 4,000, what is the overall cash flow from
operating activities?
A. Rs. 104,000
B. Rs. 112,000
C. Rs. 98,000
D. Rs. 134,000
8. In the long run, a business must generate positive net cash flow from which of the
following activities, if it is to survive?
A. Investing activities
B. Financing activities
C. Operating activities
D. Non cash activities
9. The income statement of the UBL shows the interest revenue of Rs. 6,000, and the
amount of accrued interest receivable has increased from Rs. 3000 to Rs. 4000 during the
year. Calculate the amount of interest received.
A. Rs. 7000
B. Rs. 8000
C. Rs. 5000
D. Rs. 1000
10. The statement of cash flow does NOT assist investors, creditors and others in
assessing such factors as:
A. The company’s ability to generate positive cash flows in future periods
B. The company’s ability to meet its obligations and to pay dividends
C. The company’s ability to forecast future losses
D. The company’s needs for external financing
11. Which of the following should NOT be called “Sales”?
A. Goods sold for cash
B. Office fixtures sold
C. Goods sold on credit
D. Sale of item previously included in ‘Purchases’
12. An incorrect inventory balance would NOT cause an error in the calculation of
___________.
A. Cost of goods sold
B. Net income
C. Gross profit
D. Dividends
13. Which of the following is NOT true about the specific identification method?
A. It requires a very detailed physical count
B. This method allows management to easily manipulate ending inventory cost
C. This method is very hard to use on interchangeable goods
D. This results in an overstated inventory account during the period of inflation
14. Under the periodic inventory system, which of the following is a correct closing
entry?
A. Debit - Income Summary; Credit - Sales
B. Credit - Income Summary; Debit - Purchase Returns & Allowances
C. Debit - Income Summary; Credit Merchandise Inventory
D. Debit Purchases; Credit - Income Summary
15. In a periodic inventory system, when merchandise is purchased its cost is debited to
________ account.
A. Inventory
B. Inventory expense
C. Purchases
D. Cost of goods sold
16. Which of the following is NOT a financial asset?
A. Marketable securities
B. Receivables
C. Inventory
D. Short-term investments
17. Notes to financial statements are beneficial in meeting the disclosure requirements of financial reporting. The note should NOT be used to:
A. Describe significant accounting policies
B. Describe depreciation methods employed by the company
C. Describe principles and methods peculiar to the industry
D. Correct an improper presentation in the financial statements
18. A company purchased the land in exchange for the capital stock; it would affect which of the following?
A. Cash flow from operating activities
B. Cash flow from investing activities
C. Cash flow from financing activities
D. It would not affect any section
19. Which of the following would NOT represent the cash outflows for the business?
A. Purchase of building for cash
B. The sale of land for cash
C. Retirement of long term debt
D. The payment of cash for dividends
20. The balance sheet reported a beginning balance of Rs. 20,000 in Accounts Receivable
and an ending balance of Rs. 15,000. The income statement reported Sales Revenue of
Rs. 200,000. Using this information, compute cash collected from customers.
A. Rs. 215,000
B. Rs. 205,000
C. Rs. 195,000
D. Rs. 200,000
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