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Accounts and Commerce

Find here best notes with past papers and past experience of Account MCQs which are very helpful and important for PAF Account Branch tests.Moreover, these questions (MCQs) help in preparation of account tests Pak Army and Pak Navy also.

If you have applied in PAF Account Branch then must read the following MCQs. Syllabus of Account Branch in PAF includes commerce, finance and accounting. Total 75 questions are being given in the PAF Account branch tests and total time of 25 Minutes is being given for academic tests.

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MCQs of Accounts Branch (Part-1)

The Doing Business Report” is prepared by which of the following organizations every year?

(A) World Bank
(B) Asian Development Bank (ADB)
(C) International Monetary Fund (IMF)
(D) World Trade Organization (WTO)

Answer: World Bank

Accounting for Intangible Assets are related to–

(A) AS – 10
(B) AS – 12
(C) AS – 24
(D) AS – 26

Answer: AS – 26

Indian Accounting Standard – 28 is related to–

Accounting for taxes on income
Financial Reporting of Interests in Joint Venture
Impairment of Assets
Provisions, Contingent Liabilities and Contingent Assets

Answer: Impairment of Assets

Recording of capital contributed by the owner as liability ensures the adherence of principle of–

(A) Consistency
(B) Going concern
(C) Separate entity
(D) Materiality

Answer: Separate Entity

Bad loans in banking terminology are generally known as–

(A) BPOs
(B) Prime Asset
(C) NPAs
(D) CBS

See Answer:

An association of cement manufacturers is an example of–

(A) Diagonal combination
(B) Vertical combination
(C) Horizontal combination
(D) Lateral combination

Answer: Horizontal combination

The product range is widest in case of–

(A) Chain store
(B) Departmental store
(C) Speciality shop
(D) One price shop

Answer: Departmental store

A public corporation is set up–

By a Special Act of Parliament
By a special order of the Government
Under Indian Companies Act, 1956
By none of the above

Answer: By a Special Act of Parliament

The minimum number of members required for registration of a cooperative society are–

(A) Two
(B) Seven
(C) Ten
(D) Twenty

Answer: Ten

Insurable interest must be present at the time of insurance proposal and payment of claims in–

(A) Fire Insurance
(B) Marine Insurance
(C) Life Insurance
(D) Motor Insurance

Answer: Fire Insurance

A machinery is purchased for Rs. 3,00,000 and Rs. 50,000 is spent on its installation. Rs. 5,000 is spent on What will be the amount of capital expenditure ?

(A) Rs. 3,00,000
(B) Rs. 3,50,000
(C) Rs. 3,55,000
(D) None of these

Answer: Rs. 3,50,000

Which of the following errors are not disclosed by Trial Balance ?

(A) Compensatory Errors
(B) Errors of Principle
(C) Errors of Omission
(D) All the three

Answer: All the three

A large amount spent on special advertisement is–

(A) Capital Expenditure
(B) Revenue Expenditure
(C) Revenue Loss
(D) Deferred Revenue Expenditure

Answer: Deferred Revenue Expenditure

Double Entry System was introduced in–

(A) America
(B) Japan
(C) India
(D) Italy

Answer: Italy

According to going concern concept a business entity is assumed to have–

(A) A long life
(B) A small life
(C) A very short life
(D) A definite life

Answer: A long life

Which of the following companies do not have the obligation to get its Articles of Association registered along with the Memorandum of Association ?

Public Company limited by shares
Unlimited companies
Private companies limited by shares
Companies limited by guarantee

Answer: Public Company limited by shares

What does management audit imply ?

(A) Complete audit
(B) Detailed audit
(C) Efficiency audit
(D) Interim audit

Answer: Efficiency audit

Which one of the following statements is correct ?

Internal audit and Management audit are the same
Internal audit and statutory audit are the same
Internal audit is compulsory in all cases
Statutory audit of company accounts is compulsory

Answer: Statutory audit of company accounts is compulsory

Where does an auditor of a cooperative society submit the audit report ?

To the managing committee of the society only
To the Registrar of Cooperative Societies of the State concerned only
To the State Assembly concerned
To the Registrar of Cooperative Societies of the State concerned and a copy to the society

Answer: To the Registrar of Cooperative Societies of the State concerned only

Which one of the following statements is correct ?

Audit of an educational institution is compulsory if it is run by a charitable trust
A club is treated as a commercial establishment
The accounts of a charitable trust can be audited by any person who belongs to accountancy profession
Audit of a charitable trust is not compulsory under law

Answer: Audit of an educational institution is compulsory if it is run by a charitable trust

MCQs of Accounts Branch (Part-2)

Work Sheet is:

(a) Balance Sheet
(b) Fund Flows Statement
(c) A combination of Profit and Loss Account and Balance Sheet items
(d) None of these

Quick Ratio can be computed as under:

(a) Quick . Assets/Quick Liabilities
(b) Quick . Liabilities Current Assets
(c) Current Assets/ Current Liabilities

Every limited Company in Pakistan is required by law to include the following along with financial reports:

(a) Ratio Analysis
(b) Chairman’s Review
(c) None of these.

Verification includes:

a. Checking Vouchers
b. Examining audit report
c. None of the above

Rent of the premises constitutes variable expenses for cost allocation:

(a) True
(b) False

Sugar used in a sugarcane company is:

(a) Variable cost
(b) Fixed cost
(c) None of these

An auditor is liable under the following circumstances:

(a) Third Party Liabilities
(b) Fraud perpetrated in highly sophisticated circumstances
(c) None of these

Agricultural income is taxable under the Income Tax Laws of Pakistan:

(a) True
(b) False

Principal and markup payment within one year constitutes long term liability for disclosure in the balance sheet of a company.

(a) True
(b) False

Ordinarily one can have the following partners in a partnership in Pakistan under the Partnership Act 1932.

(a) 10
(b) 20
(c) 30
(d) None of these

Working Capital finance can be termed as “Running Finance” in a limited company.

(a) True
(b) False

Income from Capital gains arising out of trading on a stock strange in Pakistan is taxable these days:

(a) True
(b) False

Conversion Cost is calculated as under:

(a) Labour Plus Materials
(b) Labour plus overheads
(c) None of these

Current Ratio can be calculated as under:

(a) Current Liabilities/Current Assets
(b) Current Assets/Current Liabilities
(c) None of these

Acid Test Ratio is calculated as under:

(a) Current Assets/Current Liabilities
(b) Fixed Assets/Current Liabilities
(c) Liquid Assets/Current Liabilities
(d) None of these

Deferred cost is a:

(a) Liability
(b)Asset
(c) None of these

Work Sheet is:

(a) Balance Sheet
(b) Fund Flows Statement
(c) A combination of Profit and Loss Account and Balance Sheet items
(d) None of these

Banks, for the preparation of financial statements, are governed under:

(a) Banking Companies Ordinance, 1962
(b) State Bank of Pakistan Act
(c) None of these

Return on investment is computed:

(a) Investment/Profit x 100
(b) Profit x 100/Investment
(c) None of these

Prime cost is calculated as under:

(a) Manufacturing Cost/Cost of Goods Sold
(b) Direct Method plus factory overheads
(c) Direct labour + Direct Material
(d) None of these

Process Cost is very much applicable in:

(a) Construction Industry
(b) Pharmaceutical Industry
(c) Air line company
(d) None of these

Random sampling in auditing means:

(a) Selection through convenience sampling
(b) Selection through scientific sampling approach
(c) None of these

Increase in income constitutes:

(a) Inflows
(b) Outflows
(c) None of these

M & A stands for:

(a) Mergers & Analysis
(b) Mergers & Acquisitions
(c) Mergers & Allocation
(d) None of these

An endowment insurance policy can be taken in respect of:

(a) Fire insurance
(b) Accident insurance
(c) Life insurance
(d) None of these

Audit and special audit are the same:

(a) In Insurance Company
(b) In Banking Company
(c) None of these

Acid test is the same as:

(a) Quick test
(b) Liquid test
(c) None of these

Maximum number of partners in a partnership firm set up in Pakistan under Partnership Act, 1932 is:

(a) 5
(b) 25
(c) 20
(d) None of these

Preparation of final financial reports is governed in Pakistan under:

(a) No law
(b) Companies Ordinance 1984
(c) None of these

Depreciation is based on:
(a) Economic life of asset
(b) Declared life of asset by supplier
(c) Normal life of asset
(d) None of these

(4) Inventory turnover is calculated as under:

(a) Cost of Goods sold/Closing Inventory
(b) Gross profit/Closing Inventory
(c) Sales/Opening Inventory
(d) None of these

Deferred Revenue is:

(a) Liability
(b) Asset
(c) None of these

Preparation of annual report of a firm is governed under:

(a) Partnership Act 1932
(b) Under partnership Deed
(c) None of these

Deferred Taxation amount be treated as:

(a) Foot note
(b) An item in the Balance Sheet on asset side
(c) None of these

Return of Equity will be calculated as under:

(a) Operating Profit x 100/Equity
(b) Net profit x 100/Paid up Capital only
(c) None of these

Current maturity of long term loan is:

(a) Current Liability
(b) Long Term Liability
(c) None of these

The measureable value of an alternative use of resources is referred to as:

(a) An opportunity cost
(b) An imputed cost
(c) A different cost
(d) A sunk cost
(e) None of these

A quantitative expression of management objectives is an:

(a) Organizational chart
(b)Management chart
(c) Budget
(d) Procedural chart
(e) None of these

A cost center is:

(a) A unit of production in relation to which costs are ascertained
(b) A location which is responsible for controlling direct costs
(c) Part of the factory overhead system by which costs are gathered
(d) Any location or department which incurs cost
(e) None of these

At break-even point of 400 units sold the variable costs were Rs. 400 and the fixed costs were Rs.200. What will be the 401 units sold contributing to profit before income tax?

(a) Rs. 0.00
(b) Rs. 0.50
(c) Rs. 1.00
(d) Rs. 1.50
(e) None of these

In considering a special order situation that will enable a company to make use of currently idle capacity, which of the following cost will be irrelevant:

(a) Materials
(b) Depreciation
(c) Direct labour
(d) Variable factory overhead
(e) None of these

A fixed cost:

(a) May change in total when such change is not related to changes in production
(b) Will not change in total because it is not related to changes in production
(c) Is constant per unit for each unit of change in production
(d) May change in total, depending on production with the relevant range
(e) None of these

Completion of a job is result in:

(a) DR finished goods …….. CR WIP
(b) DR Cost of goods ……… CR finished goods
(c) DR WIP ……………..….….. CR FOH control
(d) DR FOH control …….….. CR FOH applied
(e) None of these

Operating cost in often named as:

(a) Manufacturing cost plus commercial expenses
(b) Prime cost plus factory overheads
(c) Direct material plus direct labour
(d) Selling plus administrative expenses
(e) None of these

MCQs of Accounts Branch (Part-3)

Expenses such as rent and depreciation of a building are shared by several departments these are:
(a) Indirect expenses
(b) Direct expenses
(c) Joint expenses
(d) All of the above
(e) None of these

If under applied FOH is closed to cost of goods sold, the journal entry is:
(a) DR Cost of goods sold …….. CR FOH control
(b) DR FOH control ……..……….. CR Cost of goods sold
(c) DR FOH control ……..……….. CR Profit % loss account
(d) None of these

Based on this data Re-order level is:
(a) 4500 units
(b) 3900 units
(c) 1200 units
(d) 400 units
(e) None of these

The time lag between indenting and receiving material is called:
(a) Lead time
(b) Idle time
(c) Stock out time
(d) None of these

A credit balance remaining in FOH Control account is called:
(a) Over-applied overhead
(b) Under-applied overhead
(c) Actual overhead
(d) None of these

Direct material cost plus direct labour cost is called:
(a) Prime cost
(b) Conversion cost
(c) Product cost
(d) All of these
(e) None of these

Productivity means:
(a) The ability to produce
(b) All units produced
(c) Good units produced
(d) None of these

A segment of the business that generates both revenue and cost is called:
(a) Profit Center
(b) Cost Center
(c) Cost driver
(d) All of these
(e) None of these

Verification includes:
(a) Checking vouchers
(b) Examining audit report
(c) None of these

Audit of a bank is generally conducted through:
(a) Routine checking
(b) Vouching
(c) Balance sheet audit
(d) None of these

Economics resources of a business that are expected to be of benefit in the future are referred to as:
(a) Liabilities
(b) Owner’s equity
(c) Withdrawals
(d) Assets
(e) None of these

Short term Loan can be best described as:
(a) If the period is three years
(b) If the period is less than one year
(c) If the period is over one year
(d) None of these

Books of original entry are called:
(a) Ledger
(b) Work sheets
(c) Journal
(d) None of these

For preparing balance sheets prepaid expenses are shown as part of:
(a) Liability
(b) Equities
(c) Assets
(d) None of these

Unpaid and unrecorded expenses are called:
(a) Prepaid expenses
(b) Accrued expenses
(c) Additional expenses
(d) None of these

Amount, cash, or other assets removed from business by owner is:
(a) Capital
(b) Drawings
(c) Assets
(d) None of these

Under the diminishing balance method, depreciation amount is:
(a) Payment
(b) Receipt
(c) Expenditure
(d) None of these

Users of accounting information include:
(a) The tax authorities
(b) Investors
(c) Creditors
(d) All of these

The business form(s) in which the owner(s) is (are) personally liable is (are) the:
(a) Partnership only
(b) Proprietorship
(c) Corporation only
(d) Partnership and proprietorship
(e) None of these

The investment of personal assets by the owner:
(a) Increases total assets and increases owner’s equity
(b) Increases total assets only
(c) Has no effect on assets but increases owner’s equity
(d) Increase assets and liabilities
(e) None of these

All of the following are forms of organizations except:
(a) Proprietorship
(b) Corporation
(c) Retailer
(d) Partnership
(e) None of these

Economic resources of a business that are expected to be of benefit in the future are referred to as:
(a) Liabilities
(b) Owner’s equity
(c) Withdrawals
(d) Assets
(e) None of these

An owner investment of land into the business would:
(a) Decrease withdrawals
(b) Increase liabilities
(c) Increase owner’s equity
(d) Decrease assets
(e) None of these

A cash purchase of supplies would:
(a) Decrease owner’s equity
(b) Increase liabilities
(c) Have no effect on total assets
(d) None of these

An owner investment of each into the business would:
(a) Increase assets
(b) Decrease liabilities
(c) Increase withdrawals
(d) Decrease owner’s equity
(e) None of these

The payment of rent each month for office space would:
(a) Decrease total assets
(b) Increase liabilities
(c) Increase owner’s equity
(d) None of these

Real accounts are related to:
(a) Assets
(b) Expenses and incomes
(c) Customers and Creditors etc.
(d) None of these

Which one of the following accounts would usually have a debit balance?
(a) Cash
(b) Creditors
(c) Accounts payable
(d) Salaries Expenses
(e) None of these

Quick assets include which of the following?
(a) Cash
(b) Accounts Receivable
(c) Inventories
(d) Only (a) and (b)
(e) None of these

Net income plus operating expenses is equal to:
(a) Net sales
(b) Cost of goods available for sale
(c) Cost of goods sold
(d) Gross profit
(e) None of these

The maximum number of partners in Pakistan can be fixed at the following:
(a) 20
(b) 50
(c) 75
(d) None of these

Balance sheet is always prepared:
(a) For the year ended
(b) As on a specific date
(c) None of these

Fixed Cost:
a. Changes with production
b. Never changes even if production capacity is doubled
c. None of the above

Conversion cost is:
a. Material Cost + Overhead Cost
b. Direct Labour + Material Cost
c. Labour Cost + Overhead Cost

Process Costing is relevant to:
a. Cement industry
b. Job Order cost oriented Projects
c. None of the above

Operating Profit is:
a. Profit after deducting financial costs
b. Profit after deducting taxes
c. Profit after deducting normal operating expenses including depreciation

A good Cost Accounting System is:
a. If it computes estimated cost only
b. If it cannot be reconciled with financial accounts
c. If it enables management to increase productivity and rationalize cost structure

Verification includes:
a. Checking Vouchers
b. Examining audit report
c. None of the above

Stratified audit sample means:
a. Randomly selected items for audit
b. Purposively selected items for audit
c. Items carefully selected from each group

Internal Control is totally synonymous with:
a. Internal check
b. Internal audit
c. None of above

Audit of a bank is generally conducted through:
a. Routine checking
b. Couching
c. Balance sheet audit

An auditor is liable for his annual audit of accounts o:
a. Creditors
b. Bankers
c. Owners

MCQs of Accounts Branch (Part-4)

Income Tax is levied on:

a. Agricultural Income
b. Presumptive Income
c. None of above

If a firm has paid super-tax, its partners may follow any one of the following behaviours:

a. No need to pay income tax, even if the income exceeds the taxable limit.
Pay income tax, even if the income does not exceed the taxable income.
c. Pay income tax as required under the law.

A resident multinational company need not:

a. Pay income tax, if it s caused under Double Taxation agreement.
b. If it is not enjoying tax exemption under the Income Tax Ordinance, 1979 (Second Schedule).
c. None of above

Income Tax rates are the same for:

a. Limited Companies
b. Banking Companies
c. None of above

15. Super Tax on companies is:

a. In vogue in Pakistan
b. Not in vogue in Pakistan
c. None of above

Current Ratio is calculated as:

a. Fixed Assets/Current Liabilities
b. Current Liabilities/Current Assets
c. Current Assets/Current Liabilities

Short-term loan can be described as:

a. If the period is three years
b. If the period is less than one year
c. If the period is over one year

A partnership, in today’s Pakistan, under the current law can have the following number of partners:

a. 50
b. 20
c. 100

Combination can be best described as:

a. Restructuring of Capital of a Company
b. Reduction of Capital of a Company
c. Amalgamation of two different types of businesses

Sources of funds can be increased by:

a. Describing selling prices
b. Increasing expenditure
c. None of above

Double entry book-keeping was fathered by:

(a) F.W.Taylor
(b) Henry Fayol
(c) Lucas Pacioli.

Funds Flow Statement and sources and application statement are:’

(a) Synonymous
(b) Antagonistic
(c) None of these.

Depreciation in spirit is similar to:

(a) Depletion
(b) Amortization
(c) Depression.

Balance Sheet is always prepared:

(a) for the year ended.
(b) As on a specified date.
(c) None of these.

In Insurance, the following Profit and Loss Accounts are prepared:

(a) Separate for Fire, Marine, and Accidents etc.
(b) Consolidated for Fire, Marine, and Accidents etc.(c) None of these.

Partners in Pakistan can today be fixed at the following numbers:

(a) 20
(b) 50
(c) 75.

Flexible budget is a budget with the following features:

(a) Changes with volume of production.
(b) Changes with variable expenses
(c) Changes in Direct material.

Break Even can be calculated as under:

(a) VC_FC- TR TC
(b) FCI- VC TR
(c) None of these

Quick Ratio can be computed as under:

(a) Quick . Assets/Quick Liabilities
(b) Quick . Liabilities Current Assets
(c) Current Assets/ Current Liabilities

In straight line method of depreciation, the written down value of a fixed asset will be at the end of the life of the asset as under:

(a) Rupee one
(b) Rupee zero (c) None of these

Sales budget must be prepared:

(a) Independently
(b) Depending on production capacity
(c) Based on Sales forecasts of market

Consolidation of subsidiary accounts in the balance sheet of a unlisted Holding company is at present in Pakistan:

(a) Compulsory
(b) Voluntary
(c) Required.

Retained earning is synonymous to:

(a) Accumulated profit and loss account
(b) Profit for the year
(c) None of these.

The requirements of an audit report for a Banking Company in Pakistan is under:

(a) Under the Banking Companies Ordinance, 1962.
(b) Under the Companies Ordinance, 1984.
(c) Under (a) and (b) above.

Deferred Taxation is:

(a) Fixed asset
(b) Fixed liabilities
(c) Part of Owners Equity.

Investment Corporation of Pakistan follows:

(a) Open-end mutual funds
(b) Closed-end mutual funds
(c) None of these.

Directors Report is —- in respect of financial report constituent.

(a) Mandatory for a limited Company
(b) Voluntary for a limited Company
(c) None of these.

Every limited Company in Pakistan is required by law to include the following along with financial reports:

(a) Ratio Analysis
(b) Chairman’s Review
(c) None of these.

Cash budget excludes the following:

(a) Non-Cash items
(b) Cash items
(c) Purchase on Credit items.

NGOs are legally required to:

(a) Prepare accounts in a prescribed manner under the law.
(b) Prepare accounts as desired by donors.
(c) None of these

The main source(s) of Generally Accepted Accounting Principles (GAAP) is/are:

(A) Company Law
(B) Accounting standards
(C) Both A and B
(D) None of these

What standards are used to prepare financial statements by most of the countries and companies

(A) International Financial Reporting Standards
(B) International Financial Accounting Standards
(C) International Accounting & Auditing Standards
(D) International Risk Reporting Standards

The correct form of Accounting equation is

(A) Assets + Liabilities = Equity
(B) Assets – Liabilities = Equity
(C) Assets – Receivable = Equity
(D) Assets + Receivable = Equity

A company sold goods worth $5,000 on 5 June and $10,000 on 28 June. The company received the first payment on 25 June and second on 7 July. The company prepared the financial statement on 30 June. What would be the total sale on the financial statement?

(A) $0
(B) $5,000
(C) $10,000
(D) $15,000

Advance payments are recognized as

(A) receivable
(B) payable
(C) bad debt
(D) none of these

What from the following is NOT a current asset?

(A) Patent rights
(B) Inventory
(C) Cash
(D) Trade receivables

What from the following is NOT a non-current asset?

(A) Capital
(B) Property
(C) Patent rights
(D) Inventory

What from the following is/are NOT tangible asset(s)?

I.Patent rights

II. Goodwill

III. Land

(A) I only
(B) II only
(C) I and II only
(D) I, II and III

A machine price was $1,000 and was carried through a truck. The truck’s fares were $500. The engineers charged $500 for the installation. The cost of the machine is?

(A) $1,000
(B) $1,500
(C) $2,000
(D) $2,500

Depreciable amount =

(A) Cost of an asset + Residual value
(B) Cost of an asset – Residual value
(C) Residual value – Cost of an asset
(D) None of these

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