CUET UG Accountancy Booster Test 3 Types & Forms of Financial Statements -

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CUET UG Accountancy Booster Test 2 Types & Forms of Financial Statements

⏱️ 30 Minutes

❓ 20 Questions

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Accountancy Booster Test 2 Types & Forms of Financial Statements

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QUESTION 1 OF 20

A company has an authorized capital of 50,000 shares of Rs 100 each. It invited applications for 40,000 shares and received applications for 36,000 shares. All calls were made, except for 500 shares which failed to pay the final call of Rs 20. Out of these, 200 shares were forfeited. Calculate the final 'Subscribed and fully paid-up capital' count in rupees.

Answer Review

1 A company has an authorized capital of 50,000 shares of Rs 100 each. It invited applications for 40,000 shares and received applications for 36,000 shares. All calls were made, except for 500 shares which failed to pay the final call of Rs 20. Out of these, 200 shares were forfeited. Calculate the final 'Subscribed and fully paid-up capital' count in rupees.

A Rs 40,00,000

B Rs 36,00,000

C Rs 35,90,000

D Rs 35,50,000

💡 Short Explanation

�� Subscribed shares = 36,000 shares. �� 500 shares are not fully paid due to call arrears. �� Fully paid-up shares = 35,500 shares.

✅ Correct Answer Explanation

Subscribed shares = 36,000 Shares not fully paid = 500 Fully paid-up shares = 36,000 − 500 = 35,500 shares Subscribed and fully paid-up capital: = 35,500 × Rs 100 = Rs 35,50,000 Therefore, Option D is correct.

❓ Why Other Options Are Incorrect

�� Option A → Represents issued capital.
�� Option B → Ignores unpaid call shares.
�� Option C → Incorrect adjustment.

🎯 Strategy

Used: Substitution

Application: Deduct shares with unpaid final calls from fully paid-up capital.

🧠 Memory Trick

Fully Paid-Up = Subscribed − Unpaid Shares

📚 Class XII Accountancy – Financial Statements of a Company – Share Capital

2 Match the items in List 1 with their correct categorizations in List 2:

List 1	List 2
1. Deferred tax liabilities (net)	a. Contingent liability in Notes to Accounts
2. Acceptances (Trade payables)	b. Subtracted from Subscribed Share Capital
3. Proposed dividend	c. Always a Non-current liability
4. Calls unpaid	d. Current liability

A 1-a, 2-b, 3-c, 4-d

B 1-c, 2-d, 3-a, 4-b

C 1-b, 2-c, 3-d, 4-a

D 1-d, 2-a, 3-b, 4-c

💡 Short Explanation

�� Deferred tax liabilities → Non-current liability. �� Acceptances → Current liability. �� Proposed dividend → Notes disclosure. �� Calls unpaid → Deducted from subscribed capital.

✅ Correct Answer Explanation

Correct matching: 1 → c 2 → d 3 → a 4 → b Thus, Option B is correct.

❓ Why Other Options Are Incorrect

�� Other options incorrectly classify liabilities and share capital adjustments.

🎯 Strategy

Used: Option Grouping

🧠 Memory Trick

DTL = Non-current, Calls Unpaid = Deduction

📚 Class XII Accountancy – Balance Sheet Classification

3 If the useful life of a tangible fixed asset is less than 12 months, how should it be classified as per Schedule III?

A Non-current asset

B Current asset

C Inventory

D Other current asset

💡 Short Explanation

�� Classification depends on nature, not useful life alone. �� Tangible fixed assets remain non-current assets.

✅ Correct Answer Explanation

Under Schedule III, tangible fixed assets are classified as non-current assets because they are held for use in business operations rather than for sale or realization within the operating cycle. Therefore, even if useful life is less than 12 months, the classification remains non-current.

❓ Why Other Options Are Incorrect

�� Options B, C, and D do not apply to fixed assets held for use.

🎯 Strategy

Used: Direct Concept Recall

🧠 Memory Trick

Fixed Asset = Non-current Asset

📚 Class XII Accountancy – Non-current Assets

4 Which sequence correctly represents the ordered sub-heads of Current Assets as they appear on the face of the Balance Sheet in Schedule III?
1. Inventories
2. Cash and cash equivalents
3. Current investments
4. Trade receivables

A 1, 2, 3, 4

B 3, 4, 1, 2

C 3, 1, 4, 2

D 1, 3, 2, 4

💡 Short Explanation

�� Current investments appear first. �� Followed by inventories, receivables, and cash.

✅ Correct Answer Explanation

Schedule III presents Current Assets in the following sequence: Current Investments → Inventories → Trade Receivables → Cash and Cash Equivalents Therefore, Option C is correct.

🎯 Strategy

Used: Sequence Recall

🧠 Memory Trick

Investments → Inventory → Receivables → Cash

📚 Class XII Accountancy – Current Assets

5 Assertion (A): Deferred tax liabilities (net) are always classified as non-current liabilities.
Reason (R): This is in strict accordance with the rules laid down in Schedule III of the Companies Act.

A A is true, R is false.

B Both A and R are true and R is the correct explanation.

C A is false, R is true.

D Both A and R are false.

💡 Short Explanation

�� Deferred tax liabilities are non-current. �� Schedule III specifically prescribes this treatment.

✅ Correct Answer Explanation

Both the assertion and reason are correct. Schedule III requires Deferred Tax Liabilities (net) to be presented under Non-current Liabilities. Therefore, the reason correctly explains the assertion.

🎯 Strategy

Used: Assertion–Reason Analysis

🧠 Memory Trick

Deferred Tax = Non-current

📚 Class XII Accountancy – Non-current Liabilities

6 Consider the following items:
1. Interest accrued and due on debentures
2. Unpaid dividend
Under which common sub-head of current liabilities are they classified?

A Other current liabilities

B Short-term borrowings

C Trade payables

D Short-term provisions

💡 Short Explanation

�� Both represent obligations due for payment. �� Classified under Other Current Liabilities.

✅ Correct Answer Explanation

Interest accrued and due on debentures and unpaid dividend are shown under Other Current Liabilities as per Schedule III classification requirements.

🎯 Strategy

Used: Direct Concept Recall

🧠 Memory Trick

Accrued Interest + Unpaid Dividend = Other Current Liabilities

📚 Class XII Accountancy – Current Liabilities

📄 Passage

Reserves and Surplus are required to be classified as: Capital Reserve, Capital Redemption Reserve, Securities Premium Reserve, Debenture Redemption Reserve, Revaluation Reserve, Share Options Outstanding Account, Other Reserves, and Surplus. A reserve specifically represented by earmarked investments shall be termed as "Fund". Debit balance of statement of profit and loss shall be shown as a negative figure under Surplus.

While reserves relate to retained profits, if a company issues instruments against amounts received which will be converted into shares at a specified date, what is it called and where is it shown relative to Reserves?

A Unclaimed dividend; Current Liabilities

B Calls in advance; Current Liabilities

C Money received against share warrants; Shareholders' Funds

D Share application money pending allotment; Non-current liabilities

💡 Short Explanation

�� Share warrants convert into shares later. �� Presented under Shareholders' Funds.

✅ Correct Answer Explanation

Money received against share warrants represents amounts received for instruments that will convert into equity shares at a future date. It is disclosed under Shareholders' Funds.

🎯 Strategy

Used: Passage Interpretation

🧠 Memory Trick

Share Warrant → Future Equity

📚 Class XII Accountancy – Shareholders' Funds

8 If a company has a General Reserve of Rs 2,00,000 and a Debit balance in Surplus of Rs 3,50,000, how is the final consolidated amount presented on the Balance Sheet?

A Rs 1,50,000 under Fictitious Assets

B Rs 1,50,000 under Current Liabilities

C Rs 2,00,000 under Reserves and Rs 3,50,000 under Assets

D Rs (1,50,000) under Reserves and Surplus

💡 Short Explanation

�� Net amount = Reserve − Debit Surplus. �� 2,00,000 − 3,50,000 = (1,50,000).

✅ Correct Answer Explanation

General Reserve = Rs 2,00,000 Less Debit Balance of Surplus = Rs 3,50,000 Net Balance = Rs (1,50,000) This is presented as a negative figure under Reserves and Surplus.

🎯 Strategy

Used: Substitution

🧠 Memory Trick

Reserve − Loss = Net Surplus

📚 Class XII Accountancy – Reserves and Surplus

9 How should 'Discount on issue of 8% debentures' be treated if it represents a borrowing cost?

A Written off over the life of the debentures

B Written off in the same year in which the debentures are issued

C Capitalized as a fixed asset

D Shown as a long-term provision

💡 Short Explanation

�� Treated as borrowing cost. �� Written off immediately according to the provided answer key.

✅ Correct Answer Explanation

As per the test key, discount on issue of debentures representing borrowing cost is written off in the same year in which the debentures are issued. Therefore, Option B is correct.

🎯 Strategy

Used: Direct Concept Recall

🧠 Memory Trick

Discount = Immediate Write-off (as per test key)

📚 Class XII Accountancy – Borrowings

10 Which of the following is strictly considered a short-term borrowing?

A Bonds

B Term loans from banks repayable after 3 years

C Loans repayable on demand

D Deferred payment liabilities

💡 Short Explanation

�� Repayment can be demanded immediately. �� Therefore classified as short-term borrowing.

✅ Correct Answer Explanation

Loans repayable on demand are classified as Short-Term Borrowings because the lender may require repayment at any time. Therefore, Option C is correct.

🎯 Strategy

Used: Direct Concept Recall

🧠 Memory Trick

On Demand = Short-Term

📚 Class XII Accountancy – Short-Term Borrowings

11 A finance company earns revenue from interest, dividend, and net gain on sale of investments. Which of these is NOT classified as 'Revenue from Operations' for the finance company?

A Net gain on sale of investments

B Interest income

C Dividend income

D Income from other financial services

💡 Short Explanation

�� Interest and dividend income form operating revenue for finance companies. �� Financial services income is operating revenue. �� Net gain on sale of investments is classified separately.

✅ Correct Answer Explanation

For finance companies, interest income, dividend income, and income from financial services are generally considered Revenue from Operations. However, net gain on sale of investments is disclosed separately and does not form part of Revenue from Operations. Therefore, Option A is correct.

❓ Why Other Options Are Incorrect

�� Option B → Operating revenue.
�� Option C → Operating revenue.
�� Option D → Operating revenue.

🎯 Strategy

Used: Direct Concept Recall

🧠 Memory Trick

Investment Gain = Not Operating Revenue

📚 Class XII Accountancy – Statement of Profit & Loss – Revenue Items

12 Calculate the total expenses given the following elements:
Purchases of stock-in-trade = Rs 4,00,000
Changes in inventories = Rs (50,000)
Employee benefits = Rs 1,20,000
Depreciation = Rs 30,000

A Rs 6,00,000

B Rs 5,50,000

C Rs 4,50,000

D Rs 5,00,000

💡 Short Explanation

�� Purchases = 4,00,000 �� Less inventory change = 50,000 �� Add employee benefits and depreciation.

✅ Correct Answer Explanation

Total Expenses: = 4,00,000 − 50,000 + 1,20,000 + 30,000 = 3,50,000 + 1,20,000 + 30,000 = Rs 5,00,000 Therefore, Option D is correct.

❓ Why Other Options Are Incorrect

�� Options A, B, and C result from incorrect calculations.

🎯 Strategy

Used: Substitution

🧠 Memory Trick

Expenses = Purchases ± Inventory Change + Other Expenses

📚 Class XII Accountancy – Expense Items

13 Which of the following best represents the formula for calculating Operating Income components like 'Changes in inventories'?

A Closing inventory + Opening inventory

B Opening inventory − Closing inventory

C Purchases − Closing inventory

D Sales − Cost of Goods Sold

💡 Short Explanation

�� Inventory change is measured by comparing opening and closing stock.

✅ Correct Answer Explanation

Under Schedule III, changes in inventories are computed as: Opening Inventory − Closing Inventory Therefore, Option B is correct.

❓ Why Other Options Are Incorrect

�� Options A, C, and D do not represent the prescribed formula.

🎯 Strategy

Used: Formula Recall

🧠 Memory Trick

OI − CI = Inventory Change

📚 Class XII Accountancy – Operating Income

14 How is 'Other non-operating income' correctly disclosed in the Statement of Profit and Loss?

A Gross of all expenses

B Gross of indirect expenses

C Net of tax expenses

D Net of expenses directly attributable to such income

💡 Short Explanation

�� Related expenses are deducted. �� Only net income is disclosed.

✅ Correct Answer Explanation

Other non-operating income is presented after deducting expenses directly attributable to earning that income. Therefore, it is disclosed on a net basis. Option D is correct.

❓ Why Other Options Are Incorrect

�� Options A and B ignore related expenses.
�� Option C relates to taxation, not disclosure presentation.

🎯 Strategy

Used: Direct Concept Recall

🧠 Memory Trick

Other Income = Net Related Expenses

📚 Class XII Accountancy – Other Income

15 Consider the following statements regarding small items like pencils, pens, and postage stamps:
1. They are treated as assets and depreciated over useful life.
2. They are treated as expenditure in the year purchased due to the convention of materiality.

A Only 1 is correct

B Both 1 and 2 are correct

C Only 2 is correct

D Neither 1 nor 2 is correct

💡 Short Explanation

�� Small-value items are immaterial. �� Expensed immediately under materiality.

✅ Correct Answer Explanation

The Convention of Materiality allows insignificant items such as pens, pencils, and postage stamps to be treated as expenses in the year of purchase instead of capitalizing and depreciating them. Therefore, Statement 2 is correct and Statement 1 is incorrect.

🎯 Strategy

Used: Concept Recall

🧠 Memory Trick

Small Cost = Expense Immediately

📚 Class XII Accountancy – Materiality Convention

16 Amortisation is an expense relating to which specific type of assets?

A Intangible assets

B Tangible fixed assets

C Current assets

D Fictitious assets

💡 Short Explanation

�� Amortisation applies to intangible assets. �� Depreciation applies to tangible assets.

✅ Correct Answer Explanation

Amortisation refers to the systematic allocation of the cost of intangible assets such as patents, copyrights, and software over their useful life. Therefore, Option A is correct.

❓ Why Other Options Are Incorrect

�� Option B → Uses depreciation.
�� Options C and D are not amortized in this manner.

🎯 Strategy

Used: Direct Concept Recall

🧠 Memory Trick

Amortisation = Intangible

📚 Class XII Accountancy – Indirect Expenses

17 Arrange the steps to calculate 'Profit before tax' (Item IX) exactly as per Schedule III:
1. Deduct Exceptional items
2. Compute Profit before extraordinary items and tax
3. Deduct Extraordinary items

A 3, 2, 1

B 1, 2, 3

C 2, 3, 1

D 2, 1, 3

💡 Short Explanation

�� First compute profit before extraordinary items and tax. �� Deduct exceptional items. �� Then deduct extraordinary items.

✅ Correct Answer Explanation

The prescribed sequence is: Step 1 → Compute Profit before Extraordinary Items and Tax Step 2 → Deduct Exceptional Items Step 3 → Deduct Extraordinary Items Therefore, Option D is correct.

🎯 Strategy

Used: Arrange in Sequence

🧠 Memory Trick

Profit → Exceptional → Extraordinary

📚 Class XII Accountancy – Profit Before Tax

18 What is the impact of a negative balance in 'Surplus' on overall Shareholders' Funds if:
Share Capital = Rs 50,00,000
Securities Premium = Rs 20,000
Debit Balance of P&L = Rs 1,50,000

A Rs 51,50,000

B Rs 48,70,000

C Rs 50,20,000

D Rs 48,50,000

💡 Short Explanation

�� Shareholders' Funds = Share Capital + Securities Premium − Debit Balance.

✅ Correct Answer Explanation

Shareholders' Funds: = 50,00,000 + 20,000 − 1,50,000 = Rs 48,70,000 Therefore, Option B is correct.

❓ Why Other Options Are Incorrect

�� They either ignore the debit balance or calculate incorrectly.

🎯 Strategy

Used: Substitution

🧠 Memory Trick

Capital + Premium − Loss

📚 Class XII Accountancy – Shareholders' Funds

19 If an item is expected to be realized within twelve months but is NOT involved in the entity's operating cycle and not held for trading, how is it classified?

A Non-current asset

B Intangible asset

C Current asset

D Long-term loan

💡 Short Explanation

�� Expected realization within 12 months satisfies current asset criteria.

✅ Correct Answer Explanation

An asset is classified as current if it is expected to be realized within twelve months after the reporting period, even if it is not part of the operating cycle and not held for trading. Therefore, Option C is correct.

🎯 Strategy

Used: Direct Concept Recall

🧠 Memory Trick

Within 12 Months = Current Asset

📚 Class XII Accountancy – Current Assets Classification

20 Which accounting principle or convention does the preparation of financial statements heavily rely on when using personal judgements to avoid the possibility of overstatement of assets and income?

A Convention of conservatism

B Money measurement postulate

C Going concern postulate

D Realisation postulate

💡 Short Explanation

�� Conservatism promotes prudence. �� Prevents overstatement of assets and income. �� Requires recognition of probable losses.

✅ Correct Answer Explanation

The Convention of Conservatism requires accountants to exercise caution while making estimates and judgments. It aims to avoid overstatement of assets and income and encourages recognition of expected losses. Therefore, Option A is correct.

❓ Why Other Options Are Incorrect

�� Money Measurement concerns monetary recording.
�� Going Concern concerns continuity of business.
�� Realisation concerns revenue recognition.

🎯 Strategy

Used: Direct Concept Recall

🧠 Memory Trick

Conservatism = Prudence

📚 Class XII Accountancy – Accounting Conventions

CUET UG Accountancy Booster Test 2 Types & Forms of Financial Statements

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