Unit 2: Corporate Financial Statements - Practice Quiz

1 Which of the following is a primary purpose of corporate financial statements?

2 Which document shows the financial position of a company at a particular point in time?

3 The Statement of Profit and Loss primarily reports a company's:

4 Which qualitative characteristic makes financial information free from bias?

5 Financial statements are mainly prepared for which group of users?

6 Which of the following is a key feature of financial statements?

7 The comparability characteristic of financial statements allows users to:

8 In the vertical format of the Balance Sheet, items are presented:

9 Under Schedule III of the Companies Act, the Balance Sheet is presented in which format?

10 In the vertical Balance Sheet format, which broad heading includes Shareholders' Funds?

11 Which of the following is shown under 'Non-Current Assets' in the vertical Balance Sheet?

12 In the vertical format, inventories and trade receivables are usually classified as:

13 In the vertical Statement of Profit and Loss, which item is normally shown first?

14 Which of the following is classified as a Current Liability in the vertical Balance Sheet?

15 In the vertical Balance Sheet, the total of Equity and Liabilities must equal:

16 Depreciation is best described as the allocation of:

17 The term used for spreading the cost of an intangible asset over its useful life is:

18 Under the straight-line method, annual depreciation is calculated as:

19 The estimated value of an asset at the end of its useful life is called its:

20 Which of the following assets is normally NOT depreciated?

21 A company prepares its financial statements following the accrual concept. Revenue of was earned in March but cash was received in April. In which period should this revenue be recognized?

22 Which qualitative characteristic of financial statements is primarily compromised when a company frequently changes its accounting policies without disclosure?

23 Corporate financial statements are considered useful to lenders mainly because they help assess:

24 A stakeholder wants to know whether a company generated enough cash from its core operations to fund its activities. Which financial statement is most relevant?

25 The principle that requires anticipating no profit but providing for all possible losses is known as:

26 In the vertical format of the Balance Sheet as per Schedule III, under which main head is 'Trade Payables' shown?

27 A company's Statement of Profit and Loss shows Revenue from Operations , Other Income , and Total Expenses . What is the Profit before Tax?

28 Under Schedule III vertical format, where is 'Securities Premium' presented in the Balance Sheet?

29 Which of the following is classified as a Non-current Asset in the vertical Balance Sheet format?

30 In the vertical Statement of Profit and Loss, 'Finance Costs' primarily represent:

31 A company reports Long-term Borrowings of and Deferred Tax Liabilities of . Under Schedule III, both are grouped under which head?

32 Which item is disclosed under 'Other Current Assets' rather than as a separate main line item in the vertical Balance Sheet?

33 A machine costing has a residual value of and a useful life of 5 years. Using the straight-line method, the annual depreciation is:

34 The main difference between depreciation and amortization is that:

35 An asset costs and is depreciated at 20% per annum under the Written Down Value method. The depreciation charged in the second year is:

36 Which statement best describes the accounting purpose of charging depreciation?

37 A company changes its depreciation method from WDV to SLM. Such a change is treated as a change in:

38 Under the straight-line method, the book value of an asset at the end of its useful life equals:

39 A patent purchased for has a legal life of 10 years but an expected useful life of 6 years. Over how many years should it typically be amortized?

40 Which of the following factors is NOT relevant in determining the amount of depreciation on an asset?

41 As per Schedule III of the Companies Act, 2013, a company presents its Balance Sheet in the vertical format. Under which head and sub-head would 'Calls-in-Advance' appear?

42 A machine costing has an estimated life of 10 years and residual value of . After 3 years of Straight Line depreciation, the estimated total useful life is revised to 8 years (from purchase) with the same residual value. What is the depreciation charge for the 4th year?

43 Under the Written Down Value (WDV) method, an asset costing is depreciated at p.a. What is the accumulated depreciation at the end of 3 years?

44 As per AS-26 / Ind AS 38, which of the following statements about amortization of an intangible asset with an indefinite useful life is correct?

45 In the vertical Statement of Profit and Loss under Schedule III, 'Finance Costs' are shown as a separate line item. Which of the following would NOT be classified under Finance Costs?

46 A company follows the Units of Production method. A machine costing (residual value ) has an estimated productive capacity of 5,00,000 units. If it produces 80,000 units in Year 1 and 1,20,000 units in Year 2, what is the carrying amount at the end of Year 2?

47 The concept of 'true and fair view' in corporate financial statements primarily requires that the statements:

48 Which statement best captures the conceptual distinction between depreciation and impairment?

49 Under Schedule III, 'Proposed Dividend' for the current year (declared after the balance sheet date but before approval of accounts) is treated as:

50 An asset costing is depreciated under WDV at . At the end of Year 2, it is sold for . What is the profit or loss on sale?

51 In the vertical Balance Sheet, an asset expected to be realized within 12 months is classified as current. A company holds trade receivables realizable in 15 months but within its normal operating cycle of 18 months. How should it be classified?

52 Under the Sum of Years' Digits (SYD) method, an asset costs with residual value and a 4-year life. What is the depreciation for Year 2?

53 Which of the following best explains why corporate financial statements emphasize the 'going concern' assumption in their preparation?

54 A company changes its depreciation method from SLM to WDV. As per accounting standards, this change is treated as:

55 In the vertical Statement of Profit and Loss, 'Changes in inventories of finished goods, work-in-progress and stock-in-trade' is shown. An increase in closing inventory over opening inventory results in:

56 A machine's cost is , installation , and it is expected to incur dismantling cost at the end of its life (present value ). Under Ind AS 16, what is the depreciable cost base (assuming zero residual value)?

57 A key limitation of corporate financial statements prepared under historical cost is that they:

58 The Component approach to depreciation under Ind AS 16 requires that:

59 Under Schedule III, 'Securities Premium Reserve' and 'Capital Redemption Reserve' are both presented under Reserves and Surplus. Which of the following usage restrictions is correct?

60 An asset was depreciated under SLM at per year. At the end of Year 4, an impairment loss of is recognized reducing carrying amount to . If remaining useful life is 5 years with zero residual value, the revised annual depreciation is: