FIN621 Solved MCQs for Papers File 2

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Q1. Which of the following section of cash flow statement shows the cash effects of those transactions reported in the income statement?

All parts show effects of different transactions of income statement

Q2. If we take goods for own use we should:

Debit - Drawings Account: Credit - Purchases Account

Debit - Drawings Account: Credit - Stock Account Debit - Purchases Account: Credit - Drawings Account Debit - Sales Account: Credit - Stock Account

Q3. The income statement of the UBL shows the interest revenue of Rs. 6,000, and the amount of accrued interest receivable has increased from Rs. 3000 to Rs. 4000 during the year. Calculate the amount of interest received.

RS. 7000

Rs. 5000

Rs. 8000 Rs. 1000

Q4. Which of the following is an example of an accrual?

Q5. Net current assets are equivalent to:

Stock plus debtors plus cash Current liabilities less current assets

Working capital

Fixed assets plus current assets less current liabilities

Working capital= Current assets minus current liabilities.

Q6. Accounting is called the “language of business” because__________:

It communicates the financial information to the Management only In order to run a business one must have knowledge about accounting Different business accounts are involved in financial statements

It helps to organize and communicate financial information to end users

Page 1 In the case of the business entity, accounting would deal with measuring, recording and communicating the results of business activities. That is why; Accounting is often called “Language of Business”.

Q7. In which of the following account, a credit balance would be an evidence for a mistake or an error?

Mr. A Capital Account Cash account Notes payable account page 6 Drawings account

Which of the following represents the main step(s) of accounting cycle? Recording the transactions Classifying the transactions Ordering, summarizing, counting the transactions

Recording, classifying, summarizing transactions

The accounting process or cycle has the following five steps.

1. Identifying the financial transaction 2. Recording Of Financial Transactions 3. Classifying Financial Transactions 4. Summarizing Financial Transactions 5. Communicating the Results of Business

Q8. A company purchased the land in exchange for the capital stock; it would affect which of the following?

It would not affect any section

Q9. Primary purpose of the cash flows statement is to provide the information about: Errors or discrepancies between cash book and income statement

Receipts and payments of cash in the period

Non cash adjustment that effect the income statement Cash paid to the customers and creditors of the business

A primary purpose and objective of cash flow statement is to provide information about the

cash receipts and cash payments of a business entity for the accounting period covered by the

Q10. Cash has been described as:

The lifebuoy of the business The lifeboat of the business The lifeline of the business

The lifeblood of the business

Q11. If a company has paid dividends on its preference shares, under which one of the cash flow statement headings would they appear?

Returns on investments and servicing of finance

Financing Equity dividends paid Capital investment and financial investment