Financial Accounting MGT101 Midterm Solved Papers Mega File

Financial Accounting MGT101 Midterm Solved Papers Mega File

MGT101 Midterm Solved MCQs

Question No: 1 ( Marks: 1 ) – Please choose one
An accounting system is used by a business to:
► Analyze transactions
► Handle routine book-keeping tasks
► Classify and summarize financial information
► All of the given options

Question No: 2 ( Marks: 1 ) – Please choose one
The assets which have a limited useful life are termed as:
► Limited assets
► Depreciateable assets
► Unlimited assets
► None of the given options

Question No: 3 ( Marks: 1 ) – Please choose one
Accountancy covers which of the following area(s):
► Book-keeping
► Accounting
► Auditing
► All of the given options

Question No: 4 ( Marks: 1 ) – Please choose one
If a business pays rent in advance for 12 months, it will be treated as:
► Prepaid expenses of business
► Long term liability of business
► Fixed assets of business
► Current liability of business

Question No: 5 ( Marks: 1 ) – Please choose one
If you start with cash book balance (Dr.), which of the following item will be deducted in
Bank Reconciliation Statement?
► Any cheque drawn to creditor but not paid by bank
► Interest credited by the bank in pass book
► Cheque deposited but not credited by the bank
► Dividend collected by bank on behalf of the customer

Question No: 6 ( Marks: 1 ) – Please choose one
Which one of the following is NOT true about Capital Expenditure?
► Creates future benefits
► Incurred to acquire fixed assets
► Incurred to increase the economic life of existing fixed assets
► Reduce the profit of the concern

Question No: 7 ( Marks: 1 ) – Please choose one
Cost of asset = Rs. 1,00,000
Life of asset = 5 years
Depreciation for each year = Rs. 15,000
Sale price after 5 years = Rs.50,000
Book value of Asset after 5 years = ?
Asset year 1 = 100,000 – 15000 = 85000
Year 2 = 85000 – 15000 = 70000
Year 3 = 70000 – 15000 = 55000
Year 4 = 55000 – 15000 = 40000
Book value after year 5 = 40000 – 15000 = 25000
► Rs.25, 000
► Rs. 75,000
► Rs. 15,000
► Rs. 1, 00,000

Question No: 8 ( Marks: 1 ) – Please choose one
A decrease in value of a fixed asset due to age, wear and tear is known as:
► Depreciation
► Accumulated Depreciation
► Appreciation
► Written Down Value

Question No: 9 ( Marks: 1 ) – Please choose one
In balance sheet fixed assets are shown at:
► Cost price
► Market value
► Fair value
► Written down value (WDV)

Question No: 10 ( Marks: 1 ) – Please choose one
In cost of goods sold statement, the ‘cost of material consumed’ is equal to:
► Opening raw material inventory + Purchases – Ending raw material inventory
► Opening raw material inventory – Purchases + Ending raw material inventory
► Ending raw material inventory + Opening raw material inventory – Purchases
► Ending raw material inventory + Opening raw material inventory + Purchases

Question No: 11 ( Marks: 1 ) – Please choose one
Direct materials costs = 80,000
Direct labor costs =50,000
Manufacturing overhead costs =60,000
Prime cost = dm + dl =130000
►Rs.130, 000
► Rs.110, 000
► Rs.140, 000
► Rs.190, 000

Question No: 12 ( Marks: 1 ) – Please choose one
What would be the value of ‘cost of goods manufactured’ if the total factory cost of the
month is Rs. 6,000, opening work in process is Rs. 2,000 and the closing work in
process is Rs. 2,500?
► Rs. 5,500
► Rs. 8,000
► Rs. 4,500
► Rs. 8,500

Question No: 13 ( Marks: 1 ) – Please choose one
Following are the inventories of Manufacturing Concern EXCEPT:
► Raw material
► Work in process
► Finished goods
► Merchandise inventory

Question No: 14 ( Marks: 1 ) – Please choose one
If cost of sales is Rs. 95,000, sales are Rs. 200,000 and operating expenses are Rs.
100,000. What will be the net result?
► Rs. 5,000 Loss
► Rs. 5, 000 Profit
► Rs.1, 95,000 Profit
► Rs.1, 95,000 Loss

Question No: 15 ( Marks: 1 ) – Please choose one
Which of the following account balance will be shown on debit side of Trial Balance? (It
is assumed that all account balances are shown on normal balance)
► Cash account
► Furniture account
► Vehicle account
► All of the given options

Question No: 16 ( Marks: 1 ) – Please choose one
Which of the following account will be credited in the books of ABC Co. Ltd., if furniture
is purchased on cash?
► Furniture account
► Cash account
► Business account
► Bank account

Question No: 17 ( Marks: 1 ) – Please choose one
Which of the following account will be credited, If Mr. “A” started business with cash
Rs. 2, 00,000?
► Capital account
► Cash account
► Mr. A’s account
► Business account

Question No: 18 ( Marks: 1 ) – Please choose one
Which of the following journal entry will be recorded, if the goods are sold on credit to
Mr. ‘B’?
► Mr. “B” / Accounts Receivable account (Dr) and Sales account (Cr)
► Cash account (Dr) and sales account (Cr)
► Sales account (Dr) and Mr. B / Accounts Receivable account (Cr)
► Goods Sold account (Dr) and Mr. B / Accounts Receivable account (Cr)

Question No: 19 ( Marks: 1 ) – Please choose one
Which of the following is NOT an item of a Balance Sheet?
► Accounts Receivable
► Accounts Payable
► Sales Revenue
► Marketable Securities

Question No: 20 ( Marks: 1 ) – Please choose one
Accounts Receivable & Inventory are the examples of:
► Liquid assets
► Current assets
► Fixed assets
► Capital assets

Question No: 21 ( Marks: 1 ) – Please choose one
Which of the following shows summary of a company’s financial position at a specific
date?
► Profit & Loss Account
► Cash Flow Statement
► Balance Sheet
► Income & Expenditure Account

Question No: 22 ( Marks: 1 ) – Please choose one
Which of the following summarizes the cash movements during a specified period?
► Trading account
► Profit & Loss account
► Receipts & Payments account
► Balance Sheet

Question No: 23 ( Marks: 1 ) – Please choose one
Which of the following financial statement summarizes the profitability of an organization
for a particular period?
► Balance Sheet
► Trading and Profit & Loss account
► Cash Flow Statement
► Statement of Retained Earnings

Question No: 24 ( Marks: 1 ) – Please choose one
In an account, if credit side < debit side then the balance is known as:
► Negative Balance
► Debit Balance
► Positive Balance
► Credit Balance

Question No: 25 ( Marks: 1 ) – Please choose one
Which of the following is CORRECT about the flow of recording a transaction?
► Occurrence of event – voucher—Journal—Ledger—Trial Balance—profit and loss account—Balance Sheet
► Occurrence of event—Journal – voucher —Ledger—Trial Balance—profit and loss account—Balance Sheet
► Occurrence of event—Ledger – voucher—Journal—Trial Balance—profit and loss account—Balance Sheet

Question No: 26 ( Marks: 1 ) – Please choose one
Which of the following is used to record financial transactions in chronological (day-today)
order?
► Voucher
► General Journal
► General Ledger
► Trial balance

Question No: 27 ( Marks: 1 ) – Please choose one
When a Liability is reduced or decreased, it is recorded on the:
► Right or debit side of the account
► Left or debit side of the account
► Left or credit side of the account
► Right or credit side of the account

Question No: 28 ( Marks: 1 ) – Please choose one
What is the nature of an expense account?
► Debit
► Credit
► Revenue
► None of the given options

Question No: 29 ( Marks: 1 ) – Please choose one
Consider the following:
Beginning inventory:  10 units @ Rs. 10 per unit
First purchase:  35 units @ Rs. 11 per unit
Second purchase:  40 units @ Rs. 12 per unit
Third purchase:  20 units @ Rs. 13 per unit
Eighty units were sold, what is the value of the ending inventory using the FIFO method of inventory costing?
► Rs.260
► Rs.232
► Rs.284
► Rs.320

Question No: 30 ( Marks: 1 ) – Please choose one
If, Cost of machine = Rs.400, 000
Useful life = 5 years
Rate of depreciation= 40%
The book value of machine after one years using diminishing balance method is ?
► Rs.86, 400
► Rs. 1, 44,000
► Rs. 2, 40,000
► Rs. 51,840

Question No: 31 ( Marks: 1 ) – Please choose one
The total of all costs incurred to convert raw material into finished goods is known as:
► Prime cost
► Conversion cost
► Sunk cost
► Opportunity cost

Question No: 32 ( Marks: 1 ) – Please choose one
Which of the following is an example of direct materials cost?
► Polish and finishing material for chair
► A piece of wood for the production of chair
► Production worker’s wages
► Depreciation expenses

Question No: 33 ( Marks: 1 ) – Please choose one
Which of the following journal entry will be recorded, if the payment of furniture
purchased is made through cheque?
► Furniture account (Dr) and Bank account (Cr)
► Furniture account (Dr) and Profit & Loss account (Cr)
► Furniture account (Dr) and Cash account (Cr)
► Cash account (Dr) and Furniture account (Cr)

Question No: 34 ( Marks: 1 ) – Please choose one
Which one of the following statement is CORRECT about Long term liabilities?
► These are due within one year
► These are consist of all debts, payable after 12 months
► In working capital, these are deducted from current assets
► All of the given options

Question No: 35 ( Marks: 1 ) – Please choose one
What type of expenses are paid out of Gross Profit?
► Selling Expenses
► General Expenses
► Financial Expenses
► All of the given options

Question No: 36 ( Marks: 1 ) – Please choose one
Which one of the following is NOT prepared by Non profit organizations?
► Profit & Loss account
► Income & Expenditure account
► Receipts & Payments account
► Balance Sheet

Question No: 37 ( Marks: 1 ) – Please choose one
Which of the following financial statement summarizes the profitability of an organization
for a particular period?
► Trading and Profit & Loss account
► Cash Flow Statement
► Statement of Retained Earnings
► Balance Sheet

Question No: 38 ( Marks: 1 ) – Please choose one
Which of the following period is known as a fiscal Year of the Government of Pakistan?
► 1st January to 31st December
► 1st June to 31st May
► 1st July to 30th June
► 1st October to 30th September

Question No: 39 ( Marks: 1 ) – Please choose one
What would be the affect on the components of the accounting equation, if goods are
purchased on cash?
► Increase in cash and decrease in equity
► Increase in cash and increase in goods
► Increase in goods and decrease in cash
► Increase in equipment and increase in equity

Question No: 40 ( Marks: 1 ) – Please choose one
Obligations to pay cash or un-earned incomes by the business are the:
► Assets
► Liabilities
► Equities
► Expenses

Question No: 41 ( Marks: 1 ) – Please choose one
The basic accounting principle/concept according to which Business is independent
from its owner(s) is known as:
► Separate Entity Concept
► Matching Concept
► Going Concern Concept
► Materiality Concept

Question No: 42 ( Marks: 1 ) – Please choose one
Double entry accounting system includes:
► Accrual accounting only
► Cash accounting only
► Both cash and accrual accounting
► None of the given options

Question No: 43 ( Marks: 1 ) – Please choose one
An accounting system is used by a business to:
► Analyze transactions
► Handle routine book-keeping tasks
► Structure information
► All of the given options

Question No: 44 ( Marks: 1 ) – Please choose one
Which of the following essentials are shown in Cash Book?
(1) Date of transaction
(2) Narration of transaction
(3) Cheque number
► (1) & (2) only
► (2) & (3) only
► (1) & (3) only
► (1), (2) & (3)

Question No: 45 ( Marks: 1 ) – Please choose one
Income of the business includes:
► Cash sales only
► Credit sales only
► Credit purchases only
► Both cash sales and credit sales

Question No: 46 ( Marks: 1 ) – Please choose one

Which of the following account will be credited, when the goods are purchased on cash?
► Stock account
► Cash account
► Supplier account
► Work in process account

Question No: 47 ( Marks: 1 ) – Please choose one
If the cost of sales is Rs. 60,000, sales are Rs. 95,000 and operating expenses are
Rs.20,000 during the year. What would be the Net Profit?
► Rs.15,000
► Rs. 35,000
► Rs. 55,000
► Rs. 60,000

Question No: 48 ( Marks: 1 ) – Please choose one
A summarized record of transactions related to individuals or things is called a/an ___.
► Account
► Voucher
► Journal
► Trial balance

Question No: 49 ( Marks: 1 ) – Please choose one
When a assets is increased, it is recorded on the:
► Right or debit side of the account
► Left or debit side of the account
► Left or credit side of the account
► Right or credit side of the account

Question No: 50 ( Marks: 1 ) – Please choose one
Cost incurred for the maintenance of shop is considered as _________.
► Deferred expense
► Capital expense
► Revenue expense
► Preliminary expense

MGT101 Solved Subjective Midterm Papers

How you can distinguish between Sole proprietorship, Partnership and Joint Stock company?

Sole Proprietorship:-

A sole proprietorship also known as a sole trader, or simply proprietorship is a type of business entity which is owned and run by one individual and where there is no legal distinction between the owner and the business. All profits and all losses accrue to the owner (subject to taxation). All assets of the business are owned by the proprietor and all debts of the business are their debts and they must pay them from their personal resources. This means that the owner has unlimited liability. It is a “sole” proprietorship in the sense that the owner has no partners (partnership). A sole proprietor may do business with a trade name other than his or her legal name. This also allows the proprietor to open a business account with banking institutions

Partnership:-

A partnership is a type of business entity in which partners (owners) share with each other the profits or losses of the business. Partnerships are often favored over corporations for taxation purposes, as the partnership structure does not generally incur a tax on profits before it is distributed to the partners (i.e. there is no dividend tax levied). However, depending on the partnership structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as shareholders of a corporation.

Joint Stock Company:-

A joint stock company (JSC) is a type of business entity: it is a type of corporation or partnership involving two or more legal persons. Certificates of ownership (or stocks) are issued by the company in return for each financial contribution, and the shareholders are free to transfer their ownership interest at any time by selling their stockholding to others. In most countries, a joint stock company offers the protection of limited liability; a
shareholder is not liable for any of the company’s debt beyond the face value of their shareholding. There are two kinds of joint stock company : private and public companies. The shares of the former are usually only held by the directors and Company Secretary. The shares of the latter are bought and sold on the open market.

Differentiate between capital and revenue expenditure.

CAPITAL: –

The value invested in the business by the owner in whatever form is called capital. The owner may introduce a capital of Rs. 250,000 which may be in the form of Rs. 200,000 cash and a machinery of Rs. 50,000. The capital of Rs. 250,000 is shown in Balance sheet as credit balance whereas cash and machinery being assets are shown in balance
sheet as debit balance.

CAPITAL EXPENDITURE:-

These are expenses whose benefits last for a longer period or the benefits are yet to be enjoyed by the business. For example when a vehicle is purchased by the business, it will benefit the business for the current period and for the years to come. Capital expenditure always results in increase in assets. Therefore amount expended on vehicle
is our capital expenditure and vehicle is shown in the balance sheet as an asset.

REVENUE EXPENDITURE:-

These are expenses whose benefits do not last for longer period and are restricted to current period only and no more benefits are to be enjoyed by the business in the coming periods. For example Salaries, utility bills, fuel bills paid, against which the organization enjoyed benefits for only current period.

Write a note on legal documents required for the formation of company.

In Pakistan when someone wants to form a company. He will contact with SECP, its abbreviation for Securities and Exchange Commission of Pakistan. it came in 1984 in law of Pakistan which is called companies ordinance. It controls all affairs of limited companies. For making of private limited company 2 members can submit their names in memorandum and articles of association along with other requirements of company ordinance 1984. while for public limited company seven members will sent their names. By this way they can apply and make registration of the company.

What is the difference between public and private company?

The main difference between public and private company is that in public limited companies there is no restriction on number of persons to be its members. There is one restriction. That there should be a minimum of three members to form a public limited company. Public limited company can offer its shares to general public. While in private company two to fifty persons can form a company. Minimum two members are elected to form a board of directors. This board is given the responsibility to run day to day business of the company. Private limited company cannot offer its share to general public.

The following discrepancies were noted on comparing Cash Book with Pass Book.

1. Balance as per Cash Book (Cr) is Rs. 19,000.
2. Cheque for Rs. 5,000 paid into the bank for collection on 20th March, 2008 has not yet been collected.
3. Cheques for Rs. 15,000 Issued on 24th March, 2008, out of which Cheques for Rs. 10,000 presented during March, 2008
4. An amount of Rs. 1,000 for interest on overdraft was debited in the Pass Book but was intimated to Mr. David on 4th April, 2008.
5. Mr. David paid into his bank account an amount of Rs. 3,000 but it was wrongly credited to Mr. Denial’s Account.
6. On 20th March, 2008 the bank received dividend of Rs. 10,000 from a company where Mr. David’s has invested his money, the same had been recorded in Cash Book on 31st March, 2008.
7. Cheque of Rs. 2,500 was shown in Pass Book as dishonored.
Required: Prepare a Bank Reconciliation Statement as on 31st March, 2008
Balance as per Cash Book Cr 19000
Unpresented cheques Dr 5000
Uncredited cheque Dr 10000
Interest by bank Dr. 1000