If the opening inventory is understated in the year; the cost of goods sold will be _______ and gross profit __________.

• A) Understated, Overstated
• B) Overstated, understated
• C) Understated, understated
• D) Overstated, Overstated

Which of the following is the basic purpose of an accounting system?

• A) Develop financial statements in conformity to GAAP
• B) Meet an organization's need for accounting information as efficiently and effectively as possible
• C) Provide all useful information to decision makers at any cost
• D) Record changes in the financial position of an organization

Opinion of the auditor is termed as unqualified when the auditor concludes the following points about the financial statements Except:

• A) Balance sheet showing sound position
• B) Financial statements are free from misleading information
• C) Financial statements shows consistency in the accounting policies
• D) Financial statements are presented fairly and unbiased

All of the following are the rights of the common shareholders of a Company Except:

• A) Right to attend the general meeting
• B) Right to take part in the decision making
• C) Right to vote
• D) Right to take dividend

Which of the following is TRUE regarding the entry to recognize the depreciation expense?

• A) It is an application of matching principle
• B) Usually includes an offsetting credit to cash
• C) It is done only at the end of each month
• D) It is a closing entry

The appropriate journal entry to record equipment depreciation expense would consist of a debit to Depreciation Expense and a credit to which of the following accounts?

• A) Accumulated Depreciation: Equipment
• B) Retained Earnings
• C) Cash
• D) Equipment Expense

Which of the following best describes the meaning of the term “Purchases”?

• A) Goods bought on credit
• B) Goods paid
• C) Items bought
• D) Goods bought for resale

To find the value of closing stock at the end of a period we:

• A) Do this by stocktaking
• B) Deduct cost of goods sold from sales
• C) Look in the stock account
• D) Deduct opening stock from cost of goods sold

Calculate Written Down Value (WDV) from following information:
Cost of fixed asset = Rs. 300,000; Accumulated depreciation= Rs. 180,000; Salvage value=30,000

• A) Rs. 90,000
• B) Rs. 30,000
• C) Rs. 150,000
• D) Rs. 120,000

Which of the following is NOT the part of annual report?

• A) Five year summary
• B) Auditor’s report
• C) Financial statements
• D) Future investments report

Which of the following would be more important for a short term creditor?

• A) Stability
• B) Solvency
• C) Liquidity
• D) Profitability

Calculate depreciation expense for the year based on Straight Line Method from following information:
Cost of the Asset=Rs.140,000; Life of the Asset = 5 years; Residual value: Rs. 20,000.

• A) Rs. 24,000
• B) Rs. 32,000
• C) Rs. 18,000
• D) Rs. 20,000

Which one of the following is NOT the commonly used technique for analysis of financial statements?

• A) Technical analysis
• B) Ratio analysis
• C) Vertical analysis
• D) Horizontal analysis

Which one of the following inventory methods shows higher expense on income statement during inflation period?

• A) First-in-First - out (FIFO)
• B) All of the given options
• C) Average cost method
• D) Last-in-First-Out (LIFO)

If demand of shares of a company decreases and company needs extra funds then the company should issue shares at:

• A) Premium
• B) Face value
• C) Fair value
• D) Discount

If the opening inventory is overstated in the year; the cost of goods sold will be _______ and gross profit __________.

• A) Overstated, understated
• B) Understated, Overstated
• C) Understated, understated
• D) Overstated, Overstated

In a period of rising prices, all of the following statements regarding LIFO are true EXCEPT:

• A) It can be used to manipulate net income
• B) Most recent inventory costs are allocated to cost of goods sold
• C) Net income is generally higher
• D) Ending inventory is generally undervalued

Which of the following is NOT a qualitative characteristic of financial statements?

• A) Comparability
• B) Relevance
• C) Understandability
• D) Full disclosure

In financial statement analysis, an increasing capital stock account tends to be a sign of which of the following?

• A) High liquidity
• B) Insolvency
• C) Economic health
• D) Weak financial health

If the ABC partnership firm is found engaged in unlawful business, by law the dissolution of the firm must take place:

• A) Cannot be dissolve in any way
• B) After the notice of the court
• C) After the consent of the partners
• D) Without interference of the court