CPT Accounting Questions and Answers - Part 2

Welcome in the second part of CPT Accounting Questions and Answers. In second part, we are covering the questions which have not been covered in first part.

11. Discount on issue of debentures is a __________

(a) Revenue loss to be charged in the year of issue (b) Capital loss to be written off from capital reserve (c) Capital loss to be written off over the tenure of the debentures (d) Capital loss to be shown as goodwill

Correct Answer : (c)

Reason Behind This : It is capital loss and it is written off between the period of issue of debentures and repayment of debentures because we can not show it in one year cost against our total profits.

12. Loss on issue of debentures is treated as ____________

(a) Intangible asset (b) Current liability (c) Other non-current/current assets (depending on tenure of its amortization (d) None of the above

Correct Answer : (c)

Reason Behind This : If amortization is more than one year, it will be non-current asset.

13. Dividends are usually paid as a percentage of ______

(a) Authorized share capital (b) Net profit (c) Paid-up capital (d) Called-up capital

Correct Answer : (c)

Reason Behind This : Dividends are usually paid as a percentage of paid up capital because dividend is the distribution of net profit to large numbers of partners. These partners are called shareholders. If any shareholder have more paid up capital, he has more right to get more dividend.

14. At the time of death of a partner, firm gets ________ from the insurance company against

the Joint Life Policy taken jointly for all the partners

(a) Policy Amount (b) Surrender Value (c) Policy amount or surrender value which ever is higher (d) Policy amount or surrender value which ever is lower

Correct Answer : (b)

Reason Behind This : When a partner will die, insurance policy will discontinue. So, firm only gets surrender value as per the rules and regulations of insurance companies in India.

15. Profit or loss on revaluation is shared among the partners in _______ ratio.

(a) Old Profit Sharing (b) New Profit Sharing (c) Capital (d) Equal

Correct Answer : (a)

Reason Behind This : Profit or loss on revaluation is shared among the partners in old profit sharing ratio because any profit or loss is the result of business activity of old partners. See performa at here.

16. Interest on capital will be paid to the partners if provided for in the agreement but only

from________

(a) Profits of the year (b) Reserves (c) Accumulated Profits (d) Goodwill

Correct Answer : (a)

Reason Behind This : It is because partners are not creditors. They have right to get profit but if there is the provision, they can get interest on their capital but it will be given if there is profit in the year. Otherwise, partners have no right. But this rule is not apply if partner gives loan to firm.

17. The owner of the consignment inventory is________

(a) Consignor (b) Consignee (c) Trade receivables (d) None

Correct Answer : (a)

Reason Behind This :Only consignor is the owner as per the agency act.

18. The parties to joint venture is called_________

(a) Co-venturers (b) Partners (c) Principal & Agent (d) Friends

Correct Answer : (a)

Reason Behind This : Parties to joint ventures is called co-venture. If there is the firm, then parties will be partners. If there is the consignment contract, parties will be principal and agent. If there is relationship of friendship, parties will be friends.

19. The accommodation bill is drawn_______

(a) To finance actual purchase or sale of goods (b) To facilitate trade transmission (c) When both parties are in need of funds (d) None of the above

Correct Answer : (d)

Reason Behind This : This bill is written and accepted only for help the friend who need fund. There is no consideration for writing and accepting this bill. There is not the consideration for credit sale or credit purchase.

20. The number of production or similar units expected to be obtained from the use of an asset

by an enterprise is called as _________

(a) Unit life (b) Useful life (c) Production life (d) Expected life

Correct Answer : (b)

Reason Behind This : Useful life is important term which is used for calculating depreciation. In accounting book, you can find same definition.