MGT401 Midterm MCQs 2025

Q1. An Economic transaction______________.

1. Never affects the books of accounts
2. only occurred in daily life
3. Is valued in monetary terms
4. only occurred in a business

Correct answer: Is valued in monetary terms

Q2. Issuance of share for cash for expansion of business operations is considered as:

1. All of the given options
2. Financing activity
3. Operating activity
4. Financing activity

Correct answer: Financing activity

Q3. Which of the following body is responsible for recommending financial reporting standards as required by the Securities and Exchange Commission of Pakistan?

1. ICAP
2. PACRA
3. DFI
4. SBP

Correct answer: ICAP

Q4. Which of the following could appear as separate items in the statement of changes in equity required by IAS I Presentation of Financial Statements as part of a company’s financial statements?

1. Loss on sale of investments
2. Prior year adjustments
3. Proceeds of an issue of ordinary shares
4. Gain on revaluation of land

Correct answer: Proceeds of an issue of ordinary shares

Q5. Going concern is the assumption that the entity will continue in business for:

1. Short term period
2. Foreseeable future
3. Defined future
4. Two years

Correct answer: Foreseeable future

Q6. Which of the following is (are) reason(s) of inconsistency?

1. When an IFRS requires a change in presentation
2. Another presentation or classification is more appropriate
3. All of the given options
4. Significant change in the operations of the entity

Correct answer: All of the given options

Q7. Loans that have to be repaid within one month are treated as:

1. Contingent Liabilities
2. Short Term Liabilities
3. Medium Term Loans
4. Long Term Liabilities

Correct answer: Short Term Liabilities

Q8. Cash flow statement is designed to assist users in assessing all of the following except:

1. Capability of the company to remain solvent
2. Company’s profitability
3. Provide reason why net cash flow from operating activities fluctuate from net income
4. Major source of cash receipts & payments during the period

Correct answer: Company’s profitability

Q9. The objectives of the financial statements are consisted all of the following; EXCEPT:

1. Provide information regarding business performance
2. These provide the information regarding organization’s policies
3. Provide information regarding the cash flows
4. Help the investor to make decision regarding holding of shares

Correct answer: These provide the information regarding organization’s policies

Q10. The information is said to have relevance if it has:

1. Timeliness
2. Confirmatory value
3. Materiality
4. Completeness

Correct answer: Materiality

Q1. IASB conceptual framework is a building block for:

1. Conceptual understanding of company’s policies
2. All of the given options
3. Accounting Standards and policies
4. Establishing SECP rules

Correct answer: All of the given options

Q2. Which of the following is considered as outflow of cash?

1. Loan taken from bank
2. Payment of dividend
3. Issuance of debentures
4. Issuance of shares

Correct answer: Payment of dividend

Q3. The company has sold the machinery for worth Rs. 12 million which also includes Rs. 2 million gain from the sale of machinery. This transaction would affect the:

1. Financing activity
2. Investing activity
3. Financing activity and investing activity
4. Operating activity and financing activity

Correct answer: Investing activity

Q4. With reference to the IAS 07, an investment having maturity _____________ qualifies as a cash equivalent.

1. Up to 6 months
2. Up to 12 months
3. Up to 3 months
4. Up to 9 months

Correct answer: Up to 3 months

Q5. Faithful representation allies to which of the following?

1. Income
2. All of the above
3. Expenses
4. Assets

Correct answer: All of the above

Q6. Which of the following is considered as Non-cash item on income statment ?

1. Outstanding liabilities
2. Outstanding assets
3. Accrued income
4. Depletion

Correct answer: Depletion

Q7. A role of the financial statements such as the cash flow statement is to assist the investors because:

1. It is a general-purpose financial statement
2. It chronologically records cash receipts and payments
3. It includes capital receipts and payments
4. It includes cash receipts and payments of revenue nature

Correct answer: It includes cash receipts and payments of revenue nature

Q8. Which of the following statement is FALSE about IFRS?

1. The decision whether to adopt a particular standard or not rests with SBP
2. IFRSs cannot be applied in any country without approval of the national regulators in that country
3. IFRSs are adopted by SECP by notification in official gazette
4. Upon notification the standards have the authority of law

Correct answer: The decision whether to adopt a particular standard or not rests with SBP