SKANS School of Accountancy, Multan

Name Batch: 7
PRC-4 MOCK 02 Full Book Total Time: 60 Min
1. The IASB’s Conceptual Framework for Financial Reporting defines an asset as:
(a) A resource controlled by an entity which is capable of generating independent cash flows.
(b) A present economic resource controlled by the entity as a result of past events.
(c) A resource owned/controlled by an entity as a result of past events, from which future economic benefits are expected.
(d) A resource capable of generating income for the entity.
2. One of the local fast-food outlets hired a first-year accounting student to oversee the cash-collection procedures. When the firm
pays the student his weekly wage, the transaction will
(a) Increase an asset, increase a liability (b) Decrease an asset, decrease a liability
(c) Increase an asset, increase owner's equity (d) Decrease an asset, decrease owner's equity
3. A business has purchased machinery on credit. Which of the accounts mentioned below are affected by the transactions?
(a) Trade payables (b) Purchases (c) Machinery (d) Capital
4. Khalid is a dealer in electronic goods (refrigerator, washing machine, air conditioners, televisions, etc.). He purchased two air
conditioners and installed in his showroom. In the books of Khalid, the cost two air conditioners will be debited to
(a) Drawing account (b) Capital Account (c) Fixed assets (non-current assets) (d) Purchases account
5. In practice, many entities use different types of vouchers to initially record the transactions in an accounting system.
(a) True (b) False
6. Which of the following transactions must be recorded in general journal of an Electronics Trader?
(a) Cash sales of office furniture (b) Cash sales of electronics items
(c) Credit sales of office furniture (d) Credit sales of electronics items
7. A Credit Note is issued to a:
(a) Customer for return of goods (b) Supplier for return of goods
(c) Customer to accept the goods (d) Supplier to accept the goods
8. Which of the following document is prepared when an item is needed in the business but it is not available in stock?
(a) Purchase requisition (b) Quotation and approval (c) Purchase order (d) Goods received note
9. Which of the following statement describes the nature of weekly imprest system for petty cash?
(a) Maximum amount of weekly petty cash expense is defined
(b) For maintaining a fixed float; an amount equal to weekly expenses incurred is reimbursed
(c) Proper authorization is required for all expense
(d) Business transfers an equal amount to petty cash balance at regular interval
10. From ledgers a trial balance is prepared to check arithmetical accuracy of double entry book-keeping and it is also starting point to
prepare financial statements.
(a) True (b) False
11. How different formats of ledgers are balanced?
(a) T account: periodically & Running balance account: periodically
(b) T account: after each transaction & Running balance account: after each transaction
(c) T account: periodically & Running balance account: after each transaction
(d) T account: after each transaction & Running balance account: periodically
12. Which of these would normally be a credit balance in the trial balance? (i) Loan (ii) Owner’s capital (iii) Drawings (iv) Purchases
(a) (i) and (ii) (b) (i) and (iii) (c) (ii) and (iii) (d) (ii) and (iv)
13. The list of chart of accounts (with unique codes) is usually arranged in:
(a) Chronological order (b) Random order (c) Order of appearance of accounts (d) Sorted order (higher amounts first)
14. Which statement is true?
(a) The debit balance accounts are closed at end of accounting period while credit balance accounts are carried forward to next year
(b) The credit balance accounts are closed at end of accounting period while debit balance accounts are carried forward to next year
(c) Income, expenses and drawings a/c are closed at end of year while assets, liabilities and capital a/c are carried forward to next year
(d) Income, expenses and capital a/c are closed at end of year while assets, liabilities and drawings a/c are carried forward to next year
15. Jasia has taken a loan of Rs. 250,000 from HBL as on 1st March 2018 for the construction of her office building. The construction
is completed as on June 30, 2018. She rented a portion of her office for Rs. 4,500 per month on July 1. Interest is accrued and paid
annually @ 15% per annum on December each year. What amount of interest expenses and rent income should be shown in the
statement of Profit or Loss of Jasia’s business prepared on December 31, 2018?
(a) Interest expense Rs. 54,000, Rental income Rs. 37,500 (b) Interest expenses. 37,500, Rental income Rs. 54,000
(c) Interest expense Rs. 31,250, Rental income Rs. 27,000 (d) Interest expenses. 37,500, Rental income Rs. 4,500
16. What is the treatment of Pre - received income in the Statement of Financial Position of the business?
(a) Treated as a non – current asset (b) Treated as a current asset (c) Treated as a non – current liability (d) Treated as current liability
17. An accrual is:
(a) An expense relating to next year but not paid in current year (b) An expense relating to current year and paid within current year
(c) An expense relating to current year but not paid in current year (d)An expense relating to next year and already paid in current year
18. An entity’s draft accounts for the year to 31st October 2015 report a loss of Rs. 1,486. When the assistant accountant prepared the
accounts, she did not include an accrual of Rs. 1,625 and a prepayment of Rs. 834. What is profit or loss for the year to 31st October
2015 following the inclusion of the accrual and prepayment?
(a) A loss of Rs. 695 (b) A loss of Rs. 2,277 (c) A loss of Rs. 3,945 (d) A profit of Rs. 1,807
19. A business has received an amount of Rs. 1,000 from a receivable that had been previously written off as irrecoverable. What is
the correct accounting entry to record the transaction?
(a) Dr Cash 1,000 Cr Bad and doubtful debts expense a/c Rs. 1,000 (b) Dr Cash 1,000 Cr Receivables Rs. 1,000
(c) Dr Comprehensive income statement 1,000 Cr Receivables 1,000 (d) Dr Comprehensive income statement 1,000 Cr Cash 1,000
20. After writing off bad debts, Rashid has outstanding receivables of Rs. 238,750. He identifies two specific amounts for which he
wishes to make full allowance:  Rs. 450 owing by Syed  Rs. 1,200 owing by Raja
Rashid also wishes to maintain a general allowance of 5% of outstanding receivables. What amount is shown on Rashid’s statement of
financial position in respect of receivables? Rs. ___________
21. Is there a difference in bad and double debts?
(a) No, they are inter-changeable
(b) Yes, bad debt refers to an account receivable that has been clearly identified as not being collectible. Whereas a doubtful debt is an
account receivable that might become a bad debt at some point in the future
(c) Yes, doubtful debt refers to an account receivable that has been clearly identified as not being collectible. Whereas a bad debt is an
account receivable that might become a bad debt at some point in the future
(d) They are synonymous
22. During the year ended 31 December 2019 Faisal Traders (FT) turnover totalled Rs. 3,000,000, its accounts receivable amounting
to 4% of turnover for the year. FT wishes to maintain its doubtful debt allowance at 3% of accounts receivable, and discovers that the
allowance, as a result is 25% higher than it was a year before. During the year specific irrecoverable debts of Rs. 3,200 were written
off and irrecoverable debts (written off three years previously) of Rs. 150 were recovered. What is the net charge for bad and doubtful
debts for the year ended 31 December 2019?
(a) Rs. 720 (b) Rs. 900 (c) Rs. 3,770 (d) Rs. 3,950
23. Which TWO of the following items should be capitalised within the initial carrying amount of an item of plant?
(a) Cost of transporting the plant to the factory (b) Cost of installing a new power supply required to operate the plant
(c) A deduction to reflect the estimated residual value (d) Cost of a three-year maintenance agreement
24. Which of the following is not a component of cost of an asset?
(a) Purchase price (b) Import duties (c) Refundable sales tax (d) Installation and assembly costs
25. Small Limited purchased a machine for Rs. 8 million. It has an estimated residual value of Rs. 1.5 million and useful life of seven
years. Calculate depreciation percentage (to be applied to cost) under straight line method.
(a) 7% (b) 12.7% (c) 11.6% (d) 7.11%
26. Normal Limited purchased premises for Rs. 16 million with no salvage value and useful life of 45 years. What is the depreciation
charge for the fourth year under the sum-of-the-year digit method?
(a) Rs. 4,692,754 (b) Rs. 6,492,754 (c) Rs. 7,544,926 (d) Rs. 5,744,926
27. Which of the following is allowed as a cost of inventory?
(a) Abnormal waste (b) Storage costs (c) Selling costs (d) Variable manufacturing overheads
28. Which of the following costs must be expensed?
(a) Costs of purchase that are paid to the suppliers of raw materials (b) Import duties on raw materials that are paid to the authorities
(c) Variable production overheads that are allocated to each unit based on actual usage (d) Distribution cost
29. If closing inventory is accounted for as Rs.240,000 instead of Rs.180,000 then;
(a) Gross profit as well as net profit will be exaggerated (b) Gross profit and net profit would both be understated
(c) Gross profit will be exaggerated, and net profit understated (d) Gross profit will be exaggerated but net profit correctly reported
30. Phill Morris Limited (PML) is in the business of procuring a specific type of machine and sells them to international markets.
During the year, PML bought four machines costing Rs.12million, Rs.14 million, Rs.13 million and Rs.10 million respectively.
During the year it sold only one machine for Rs.14 million and follows the FIFO method of valuation. Which of the following
statements is TRUE?
(a) Cost of Inventory is 37 million and cost of sales is 10 million (b) Cost of Inventory is 39 million and the cost of sales is 14 million
(c) Cost of Inventory is 37million and cost of sales is 12 million (d) Cost of Inventory is 37 million and cost of sales is 13 million
31. Which of the following is NOT a disclosure requirement of IAS 2?
(a) The accounting policies adopted in measuring inventories (b) The cost formula used
(c) Amount of write-down of inventories recognised as expense in period (d) Location of each place where entity keeps its inventory
32. Which TWO of the following are indirect costs for a business that produces tablecloths?
(a) 300 meters of white cotton fabric purchased (b) 5 litres of lubricant for sewing machines purchased
(c) Wages of two sewing machine operators working 40 hours each week (d) Electricity bill of production area
33. Which one of the following would be classified as direct labour?
(a) Human resource manager in a company servicing cars (b) Bricklayer in a construction company
(c) General manager in a departmental store (d) Maintenance manager in a company producing cameras
34. Which of the following account is most unlikely to be part of factory ledger?
(a) Inventory (WIP) (b) Production overheads (c) Plant & Machinery (installed in factory premises) (d) Direct Labour (wages control)
 35. During the month of May 2021, a manufacturing business payroll totalled Rs. 23.7 million. Rs. 3.7 million of this amount was for
indirect wages and the remainder was for direct worker wages. What is the double entry for the above labour costs?
(a) Dr. Wages Control Rs. 23.7m & Cr. WIP Rs. 20m & Cr. Production OH Rs. 3.7m
(b) Dr. Wages Control Rs. 23.7m & Dr. WIP Rs. 3.7m & Cr. Production OH Rs. 20m
(c) Dr. WIP Rs. 20m & Dr. Production OH Rs. 3.7m & Cr. Wages Control Rs. 23.7m
(d) Dr. WIP Rs. 3.7m & Dr. Production OH Rs. 20m & Cr. Wages Control Rs. 23.7m
36. Which of the following is not a characteristic of service organization?
(a) A large percentage of assets comprise inventory
(b) A large percentage of assets comprise receivable
(c) The funds of service companies are usually tied up towards accounts receivable
(d) There is no line item for the cost of goods sold in the income statement of service companies.
37. A business is in process of reconciling cash book with banks statement. Which of the following item require entry in cash book?
(a) Bank service charges (b) Deposits credited by the bank after the date of the bank statement
(c) Cheque of another account erroneously credited by bank (d) Cheques presented by suppliers after the date of bank statement
38. If it was found that receipt side of cash book has been under-casted, then in preparing bank reconciliation statement, it should be:
(a) Deducted from balance as per cash book (b) Added in balance as per bank statement
(c) Added in balance as per cash book (d) Deducted from balance as per bank statement
39. Following information is available regarding cash at bank of a business:
 Cash at bank as per bank column of the cash book Rs.4,910
 Unpresented cheques Rs.630
 Cheques received & paid into the bank, but not yet entered on the bank statement Rs.460
 Credit transfers from customers entered on the bank statement but not entered in the cash book Rs.340
What is Cash at bank as per bank statement?
(a) Rs. 5,420 Debit (b) Rs. 5,420 Credit (c) Rs. 5,250 Debit (d) Rs. 5,250 Credit
40. Bank Reconciliation Statement is prepared by
(a) Bank of business entity (b) Accountant of business entity itself (c) Major customer of business (d) Auditors of business
41. Following information has been extracted from the records of Falcon Traders (FT) for the year ended 31 December 2013:
Non-current assets Rupees Non-current liabilities Rupees
Freehold land 100,000 10% long term loan from bank 190,000
Building 610,000
Plant and machinery 330,000 Current liabilities
Office equipment 115,000 Trade creditors 75,000
Current assets Creditors for office expenses 35,000
Stock 183,000
Debtors 177,000
Bank 45,000
Total Total
Following information is available for the year 2014:
1. Cash sales made during the year amounted to Rs. 375,000. Credit sales were 75% of the total sales and the amount
collected from debtors was Rs. 1,035,000. Provision for doubtful debts has to be made equal to 5% of the debtors’
balance at the end of 2014. The provision for doubtful debts at the end of 2013 was nil.
2. Payments made to trade creditors amounted to Rs. 641,450. Credit purchases were Rs. 664,950 whereas cash purchases
were 35% of the total purchases.
3. FT paid Rs. 38,000 against salaries, Rs. 30,000 against office expenses and Rs. 45,000 against selling expenses.
4. Cash discount allowed to customers during the year amounted to Rs. 21,000 whereas discount received from suppliers
was Rs. 13,000.
5. On 1 July 2014 FT sold one of the old machinery at a loss of Rs. 15,000. On 31 December 2013 this old machinery had
a book value of Rs. 54,800. On 1 October 2014 a new machine Z was purchased in its place at a cost of Rs. 164,800.
6. On 1 January 2014, office equipment was sold at its book value for Rs. 20,000.
7. Depreciation is to be provided on building at 10%, plant and machinery at 15% and office equipment at 20% per annum
on their book value.
8. Interest on long term loan at 10% per annum together with part payment of the principal sum of Rs. 25,000 was
made on 31 December 2014.
9. On 31 December 2014 closing stock was Rs. 90,000 and creditors for office expenses were Rs. 28,000.
Required: Prepare a statement of comprehensive income for the year ended 31 December 2014. (09)
Prepare a statement of financial position as at 31 December 2014. (11)