Please refer to Chapter 3 Financial Statements of a Company MCQ Class 12 Accountancy with answers below. These multiple-choice questions have been prepared based on the latest NCERT book for Class 12 Accountancy. Students should refer to MCQ Questions for Class 12 Accountancy with Answers to score more marks in Grade 12 Accountancy exams. Students should read the chapter Financial Statements of a Company and then attempt the following objective questions.

MCQ Questions Class 12 Accountancy Chapter 3 Financial Statements of a Company

Financial Statements of a Company MCQ Class 12 Accountancy provided below covers all important topics given in this chapter. These MCQs will help you to properly prepare for exams.

Question: Stores and Spares are classified in balance sheet under:
(a) Intangible Assets
(b) Current Investment
(c) Inventories
(d) Cash and Cash Equivalent

Question: An example of fixed asset is
(a) Live stock
(b) Value stock
(c) Income stock
(d) None of the options

Question: The assets held by a business which can be converted in the form of cash, without disturbing the normal operations of a business
(a) Intangible assets
(b) Tangible assets
(c) Current assets
(d) Fixed assets

Question: Which of the following items is shown under the head ‘Current Liabilities’ while preparing the Balance Sheet of a company?
(a) Securities Premium Reserve
(b) Debentures
(c) Livestock
(d) None of the above

Question: While preparing the Balance Sheet of a company ‘Securities Premium’ is shown under :
(a) Current Liability
(b) Share Capital
(c) Long-term Borrowings
(d) None of the above

Question: The return which the company pays on borrowed funds is termed as
(a) Bonus
(b) Interest
(c) Dividend
(d) All of the options

Question: The following is(are) the type(s) of capital budgeting decision(s)
(a) Expansion
(b) Diversification
(c) Replacements
(d) All of the options

Question: Which of the following is true about financial statements?
A) Financial statement gives a summary of accounts.
B) Financial statements can be stated as recorded facts.
(a) Only A
(b) Only B
(c) Both A and B
(d) None of the above

Question: Interest on Loans given by a financial company is shown in the statement of profit and loss as :
(a) Revenue from Operations
(b) Other Income
(c) Sundry Expenses
(d) None of these

Question: The following is(are) the external source(s) of cash
(a) Short term borrowings
(b) Long terms loans
(c) Issue of new shares
(d) All of the options

Question: The total cost that arises when the quantity produced is increased by one unit is called
(a) Average cost
(b) Marginal cost
(c) Fixed cost
(d) None of the options

Question: Which of the following is not the limitation of financial statements?
(a) Ignore qualitative aspects.
(b) Personal bias.
(c) Ignores price level change.
(d) Provide information about the profitability of the business

Question: From the given items which is a part of Current Liabilities:
(a) Inventories
(b)Trade Payables
(c) Cash and Cash Equivalents
(d)Trade Receivables

Question: Current assets are also referred to as
(a)Inventory
(b) Investments
(c) Working capital
(d) None of the options

Question: Carriage Inward is normally debited to ____
(a) Manufacturing Account
(b) Profit and Loss account
(c) Capital Account
(d) None of the options

Question: Reliability of financial analysis depends upon the
(a) Reliability of Customer
(b) Reliability of financial data
(c) Reliability of financial data and Reliability of Customer
(d) None of the options

Question: Statement of Profit & Loss is also called………:
(a) Operating Profit
(b) Balance Sheet
(c) Income Statement
(d) Trading Account

Question: Patents and copyrights fall under the category of:
(a) Current Assets
(b) Liquid Assets
(c) Intangible Assets
(d) None of these

Question: Objectives of analysis and interpretation of financial statements are
(a) Prospects
(b) Progress
(c) Position
(d) All of the options

Question: Sub- headings are Non Current Liabilities are
(a) Long Term Provisions
(b) Long Term borrowing
(c) Deferred Tax Liabilities
(d) All of the options

Question: Main headings of assets are
(a) Non Current assets
(b) Current Assets
(c) Current Assets and Non Current assets
(d) None of the options

Question: Under which heading the item ‘Bills Discounted but not yet matured’ will be shown in the Balance Sheet of a company?
(a) Current Liability
(b) Current Assets
(c) Contingent Liabilities
(d) Unamortized Expenditure

Question: Share Capital of a Company consists of 5,00,000 Shares of ₹10 each, ₹8 called up. All the shareholders have duly paid the called up amount. Share capital will be shown as :
(a) Subscribed and Fully Paid
(b) Subscribed but not fully paid
(c) Any of the above
(d) None of the above

Question: Main headings of the liability side of a company balance sheet
(a) All of the options
(b) Shareholders Fund
(c) Current Liabilities
(d) Non Current Liabilities

Question: Financial Statement provide a summary of
(a) Capital
(b) Assets
(c) Liabilities
(d) All of the options

Question: Security Premium is show under which major head
(a) Current Liabilities
(b) Shareholders fund
(c) Current Assets
(d) None of the options

Question: Provision for Provident Fund comes under
(a) Long-term Provision
(b) Trade Payable
(c) Other Current Liabilities
(d) None of the options

Question: ……………… appear in a Company’s Balance Sheet under the Sub-head Short-term Provision
(a) Interest Accrued but not due on Borrowings
(b) Provision for Tax
(c) Unpaid Dividend
(d) Calls in Advance

Question: Trade Investments appear in a Company’s Balance Sheet under the Sub-head ………………….
(a) Current Investments
(b) Non-Current Investments
(c) Intangible Assets
(d) Short-term Loans and Advances

Question: Sinking Fund is shown under which subheading
(a) Non Current Liabilities
(b) Trade Payable
(c) Reserve and Surplus
(d) None of the options

Question: Authorised Capital is shown under which major heading in balance sheet
(a) Current Liability
(b) Shareholders Fund
(c) Current Assets
(d) None of the options

Question: Prepaid Expenses is
(a) Current Assets
(b) Current Liabilities
(c) Long term loan
(d) None of the options

Question: Non Current Assets is
(a) Patents and Trade Marks
(b) Bills Receivables
(c) Prepaid Expenses
(d) Debtors

Question: Fixed Assets subheading is divided into
(a) Capital work in progress
(b) Tangible
(c) Intangible Assets
(d) All of the options

Question: In Balance Sheet Bills Payable is shown under the
(a) Equity and Liability
(b) Current Assets
(c) Current Liabilities
(d) None of the options

Question: Long term Liabilities is
(a) Loans from Banks
(b) Bonds
(c) Debenture
(d) All of the options

Question: Non Current Liabilities classified in balance sheet
(a) Other long term liabilities
(b) Long term borrowings
(c) Deferred tax liabilities
(d) All of the options

Question: Calls in Arrear appears in a company’s balance Sheet under
(a) Contingent Liability
(b) Short Term Borrowings
(c) Shareholders Fund
(d) Reserves and Surplus

Question: Change in inventories means –
(a) Difference between opening inventories and closing inventories
(b) Difference between Closing inventories and opening inventories
(c) Difference between opening inventories and closing inventories if opening inventories are higher
(d) None of the above

Question: Financial Statement also called
(a) Final Accounts
(b) Profit & Loss A/c
(c) Trading A/c
(d) None of the options

Question: Those expenses which paid in advance by the firm
(a) Accrued income
(b) Prepaid expenses
(c) Prepaid expenses and Accrued income
(d) None of the options

Question. Change in Inventories means:
(A) Opening Inventories less ClosingInventories
(B) Closing Inventories less OpeningInventories
(C) Difference between Opening Inventories and Closing Inventories, if Opening Inventories are higher
(D) Difference between Closing Inventories and Opening Inventories, if Closing Inventories are higher.

Question. Assertion A: Profit and Loss Account and Balance sheet are financial statements showing financial position of a business unit. 
Reason (R): Profit and Loss Account and Balance Sheet are prepared at the end of the financial year.
(a) Both A and R are individually true and R is the correct explanation ofA.
(b) Both A and R are individually true but R is not correct explanation ofA.
(c) A is true but R isfalse.
(d) A is false but R is true.

Question.While preparing the Balance Sheet of a company ‘Underwriting Commission’ is shown underwhich head?
(A) UnamortizedExpenditure
(B) CurrentAssets
(C) Non-CurrentAssets
(D) CurrentLiaibility

Question.Assertion A: Profit and Loss Account and Balance sheet are financial statements showing financial position of a business unit. 
 Reason (R): Profit and Loss Account and Balance Sheet are prepared at the end of the financial year.
(a) Both A and R are individually true and R is the correct explanation ofA.
(b) Both A and R are individually true but R is not correct explanation ofA.
(c) A is true but R isfalse.
(d) A is false but R is true.

Question. Share Capital of a Company consists of 5,00,000 Shares of ₹ 10 each, ₹ 8 called up. All theshareholders have duly paid the called up amount. Share capital will be shown as :
(A) Subscribed and Fullypaid
(B) Subscribed but not Fullypaid
(C) Both A andB
(D) None of the above

Question. Agony Ltd. a private limited has taken a loan from IDBI Bank which is due for payment on 1st October 2021. In the Balance Sheet as at 31st March, 2021. Answer thequestions
(1) Loan will beclassifiedas (Current Liability/Non-CurrentLiabilities)
(2) Can company postpone the liability to a later date i.e. extend the period of loan. (Yes orNo)
(3) If the company has a liability due for settlement within 12 months of the date of Balance sheet and it does not have the right to defer, i.e. postpone the settlement , it is classified as (Current Liability/ Non-Current Liability)

Question. ______appear in a Company’s Balance Sheet under the Sub-head Short-termProvision.
(A) Interest Accrued but not due onBorrowings
(B) Provision forTax
(C) UnpaidDividend
(D) Calls in

Question. Which of the following is not a sub-head under the Current Assets?
(A) Cash and CashEquivalents
(B) Trademarks
(C) Short-Term Loans andAdvances
(D) Inventories 

Question: Prepaid expenses are shown under
(a) Cash Equivalents
(b) Inventories
(c) Other current assets
(d) None of the options

Question: Provision for Tax appears in a Company’s Balance Sheet under the Sub-head …………….
(a) Short-term Provisions
(b) Reserves and Surplus
(c) Long-term Provisions
(d) Other Current Liabilities

Question: Bills Receivables appear in a Company Balance Sheet under the Sub-head
(a) Current Investments
(b) Cash Equivalents
(c) Trade Receivables
(d) Short term Loans and Advances

Question: Marketable securities appear in a Company Balance Sheet under the Sub-head
(a) Intangible Assets
(b) Non-Current Investments
(c) Current Investments
(d) Short-term Loans and Advances

Question: Calls in advance is to be shown under the heading of
(a) Current Assets
(b) Current Liabilities
(c) Current Liabilities and Current Assets
(d) None of the options

Question: Goodwill is shown under which subheading
(a) Current Liability
(b) Current Assets
(c) Intangible Assets
(d) None of the options

Question: ___________ is conducted by bankers and government
(a) Internal Analysis
(b) External Analysis
(c) External Analysis and Internal Analysis
(d) None of the options

Question: Bank overdraft is shown in the balance sheet under the
(a) Short Term Borrowings
(b) Non-current liabilities
(c) Non Current assets
(d) None of the options

Question: While preparing the Balance Sheet of a company ‘Underwriting Commission’ is shown under which head?
(a) Unamortized Expenditure
(b) Current Assets
(c) Non-Current Assets
(d) Current Liability

Question: Balance sheet of a company is required to be prepared in the format given in
(a) Schedule III Part II
(b) Schedule III Part I
(c) Schedule III Part III
(d) Table A

Question: As per Companies Act, the Balance Sheet of a company is required to be presented in …………….
(a) Horizontal Form
(b) Vertical Form
(c) Either Horizontal or Vertical Form
(d) Neither of the above

Question: Which of the following is not required to be prepared under the Companies Act
(a) Statement of Profit and Loss
(b) Balance Sheet
(c) Report of Director’s and Auditor’s
(d) Funds Flow Statement

Question: Unclaimed Dividend shown under major heading Current Liability and Subheading
(a) Other Current Liabilities
(b) Trade Payable
(c) Short-term Provision
(d) None of the options

Question: Goodwill appears in a Company’s Balance Sheet under the Sub-head
(a) Unamortized Assets
(b) Non-Current Investment
(c) Intangible Assets
(d) Tangible Assets

Question: Share Forfeiture Account appears in a Company’s Balance Sheet under the Sub-head …………….
(a) Share Capital
(b) Reserve & Surplus
(c) Contingent Liability
(d) Commitments

Question: Expenses allowed on issue of shares appears in a Company’s Balance Sheet under:
(a) Share Capital
(b) Current Liability
(c) Unamortized Expenditure
(d) Contingent Liability

Question: Securities Premium Reserve appears in a Company’s Balance Sheet under :
(a) Share Capital
(b) Long-term Provision
(c) Short-term Provision
(d) Reserve & Surplus

Question: Interest accrued and due on debentures appear in a Company’s Balance Sheet under the Sub-head ……………..
(a) Short-term Borrowings
(b) Trade Payables
(c) Other Current Liabilities
(d) Short-term Provisions

Question: Patents and Trademarks are examples of
(a) intangible Fixed Assets.
(b) Tangible Fixed Assets.
(c) Intangible Assets under Development.
(d) Capital Work-in-Progress

Question: Identify the item which is not a part of Shareholders’ Funds:
(a) Share Application Money Pending Allotment
(b) Share Capital
(c) Reserves and Surplus
(d) Money Received against Share Warrants.

Question: Fixed Deposits appear in a Company’s Balance Sheet under :
(a) Current Assets
(b) Current Liabilities
(c) Long-term Provisions
(d) Long-term Borrowings

Question: Example of Short-term Provision is
(a) Provision for Tax
(b) Debentures
(c) Loan
(d) None of the options

Question: Interest accrued on Investments appear in a Company’s Balance Sheet under the Sub-head ………………….
(a) Non-Current Investments
(b) Current Investments
(c) Other Current Assets
(d) Other Non-Current Assets

Question: The form of balance sheet is
(a) Vertical
(b) Horizontal
(c) Horizontal and vertical
(d) Horizontal or vertical

Question: Debenture is shown under which major heading in balance sheet
(a) Other Current Liabilities
(b) Non Current Liabilities
(c) Current Liability
(d) None of the options

Question: Unclaimed Dividend is shown under which major heading in balance sheet
(a) Current Assets
(b) Equity and Liability
(c) Current Liability
(d) None of the options

Question: Proposed Dividend shown under major heading Current Liability and Subheading
(a) Trade Payable
(b) Short-term Provision
(c) Other Current Liabilities
(d) None of the options

Question: Proposed Dividend is shown under which major heading in balance sheet
(a) Current Assets
(b) Current Liability
(c) Equity and Liability
(d) None of the options

Question: Miscellaneous Expenditure are
(a) Development expenditure not adjusted
(b) Preliminary Expenses
(c) Discount allowed on the issue of shares/deb
(d) All of the options

Question: Securities Premium Reserve is shown on the liabilities side in the Balance sheet under the head :
(a) Reserves and Surplus
(b) Current Liabilities
(c) Share Capital
(d) None of these

Question: Dividend is paid on
(a) authorised capital
(b) issued capital
(c) called up capital
(d) paid up capital

Question: In a Company’s Balance Sheet, Debit (Negative) balance of Statement of Profit and Loss is shown under
(a) Non-current Liabilities.
(b) Current Liabilities.
(c) Non-current Assets.
(d) Reserves and Surplus.

Question: Provision for Tax is our
(a) Liability
(b) Assets
(c) Liability and Assets
(d) None of the options

Question: Bills Payable shown under major heading Current Liability and Subheading
(a) Other Current Liabilities
(b) Short-term Provision
(c) Trade Payable
(d) None of the options

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