Lecturer Commerce Solved Past Paper MCQs of 2011

1- The amount of money in the account of account holder is called.

A). Profit

B). Interest

C). Deposit

D). Loan

2-  Cheque is always crossed by:

A). Drawer

B). Drawee

C). Holder

D). None of these

3- What is the purpose of bank slip?

A). To credit an overseas bank account.

B). To pay a creditor who does not have a bank account.

C). To pay money into a bank account.

D). To with draw money from current account.

4- Dishonored cheque means:

A). Cheque cashed by bank.

B). Cheque presented to the bank and refused for the payment.

C). A cheque the amount has not been filled.

D). A cheque which is not signed.

5- Commercial Bank is called:

A). Banker’s Bank

B). Custodian of exchange.

C). Banker to Government

D). Bank of Public

6- The World Bank has been derived from?

A). Bank

B). Bancus

C).Banco

D). None of these

7- Which account is suitable for business community?

A). Saving account

B). Current account

C). Profit and loss account

D). Deposit account

8-  The objective of central bank is:

A). Welfare of public

B). To earn profit

C). Economic prosperity & development.

D). Receiving Deposits

9- The State Bank of Pakistan was inaugurated by:

A). Liaqat Ali Khan

B). Abdul Rub Nishter

C). Allama Iqbal

D). Quaid-e-Azam

10- Commercial Banks creates the following:

(a) Metallic Money

B). Credit

C). Paper

D). All of above

11- On what type of bank account may a trader draw cheques?

A). Current Account

B). Deposit Account

C). Investment Account

D). Loan Account

12-  A trader with a bank current account wishes to make monthly payments for trade journal. Which method of payment would be most suitable to use?

A). Bank Draft

B). Bank Notes

C). Cable Transfer

D). Standing Order

13-  Which service is not available to bank customer through ATM’s?

A). Requesting Printed Bank Statements

B). Checking the balance of their accounts.

C). Organizing personal loans.

D). With drawing cash

14- ABC Corporation is a large manufacturing company. It needs immediate finance as it is having cash flow problems. Which sources of finance would be the most suitable for ABC Corporation?

A).  Higher purchase

B). Over draft

C). Trade Credit

D). Shares

15- Using credit means that the customer.

A). Always pays extra for the goods

B). Gets goods repaired for nothing.

C). Obtain discounts on goods.

D). uses of goods but pay later

16- A customer wishes to buy a laptop computer on credit. Which form of credit will ensure the laptop computer becomes the customer property immediately?

A). Credit card

B). Credit Transfer

C). Higher Purchase

D). Leasing

17- Telephone banking is used by customers. who do not wish to visit their bank in person. Which service can customer receive through telephone banking?

A). Buying and selling shares.

B). Confirming account balances.

C). Organizing insurance cover.

D). Safeguarding legal documents

18- What is a current account at a commercial bank?

A). An account for daily transactions.

B). An account requiring a passbook.

C). An account used for saving.

D). An accounting which cannot be overdrawn.

19- What is the meaning of the term “limited liability”?

A). Shares are issued only to a certain total value.

B). Shareholders are paid back only certain percentage of their investment.

C). Shareholders can lose only the value of their investment

D). Shareholders can buy only a certain sum of share capital.

20-  A company raises finance by issuing debentures. The debentures holders entitled to:

A). Interest after the shareholders have been paid.

B). One vote per share.

C). Repayment before shareholders if the company goes into liquidation

D). Variable dividend

21- A contract comprises of:

A). Offer + Acceptance

B). Agreement + Consideration

C). Offer + Acceptance + Agreement.

D). Agreement + Enforceability

22-  An agreement is void ab-initio is called.

A). Void contract

B). Void Agreement

C). Voidable contract

D). Illegal agreement

23- Which of the following is an offer?

A). An invitation to offer

B). An advertisement

C). Both A & B

D). None of these

24- specific offer can be accepted by:

A). Any person

B). Any friend of offer or

C). The person to whom offer is made

D). Any one of the public. 25- An agreement without consideration is:

A). Void

B). Valid

C). Illegal

D). Voidable

26- Consideration must move from:

A). Promisor

B). Promisee

C). Third party

D). Promisee or any other person.

27- Incapacity of contract may be due to:

A). Absence of legal formalities.

B). Lack of consideration

C). Minority

D). None of these

28- Contract of insurance is a:

A). Unilateral contract

B). Contingent contract

C). Wagering contract

D). Contract of guarantee

29- Quantum meruit means:

A). As much as is earned

B). As much as is paid

C). A non-gratuitous act

D). None of these

30- Each party to a contract is both promisor and promisee in case of:

A). Present consideration

B). Valid contract

C). Reciprocal promises

D). Part of consideration

31- Income tax ordinance 2001, was promulgated on:

A). 1″ July 2001

B). 13th September 2001

C). 1 January 2001

D). 1 July 2002

32- Normal tax year starts from:

A). 1st September each year.

B). 1st July each year

C). 1st January each year

D). 1st March each year

33-  Income from property is taxable under:

A). NTR

B). FTR

C). Both A & B

D). None of these

34-  A person shall be resident if he spends the following days in Pakistan.

A).182 days

B). 181 days

C). 180 days

D).183 days

35- Benchmark rate for loan given by employer to employee for tax year 2011 is:

A). 11%

B). 12%

C). 13%

D). 10%

36- The rates of tax are specified in:

A).1st Schedule

B). 3rd Schedule

C). 5th Schedule

D). 7th Schedule case

37- Employer’s contribution in case of Government provident fund is:

A). Taxable

B). Exempt

C). No treatment

D). Exempt up to 10% of basic salary

38- Income tax appellate tribunal is appointed by the.

A). Federal board of revenue.

B). Federal Government

C). Supreme court of Pakistan.

D). Income tax ordinance 2001.

39- There can be no loss under the head:

A). Income from salary

B). Income from business.

C). Income from other sources.

D). None of above

40-  Revenues can be defined as:

A). Economics resources owned by the entity that is expected to provide future benefits.

B). Inflows of assets in exchange for goods sold or services rendered by the entity

C). Any increase in owner’ equity.

D). An increase in cash.

41- The objectivity principle requires that:

A). Business transactions must be consistent with the objectives of the entity.

B). Accounting principles must meet the objectives of the securities and exchange commission.

C). Amounts recorded in the financial statement must be based on independently verifiable evidence

D). FASB must be fair and unbiased in its deliberation over new accounting standards.

42- A liability in the amount of Rs. 500 is paid in cash. Which of the following is true.

A). An asset is increased a liability is decreased.

B). An asset is increased and a liability is increased.

C). An asset is decreased and a liability is decreased.

 D). A liability is decreased and owner’s equity is increased.

43- An owner withdraws Rs. 300 each from the business. Which of the following is true?

A). An asset is decreased and owner’ equity is decreased

B). An asset is decreased and owner’ equity is increased.

C). An asset is increased and a liability is decreased.

D). There is no effect on any asset, liability, or owner’s equity.

44-  An expense is incurred that will be paid for the next month. Which of the following is true?

A). An asset is decreased and owner’s equity is decreased.

B). An asset is increased and a liability is increased

C). A liability is increased and owner’ equity I increased.

D). A liability is increased and owner’s equity is decreased.

45- A customer is billed for services rendered. Which of the following is true?

A).  An asset is increase and a liability is decreased.

B). An asset is increased an owner’s equity is increased.

C). One asset is increased and another asset is decreased.

D). There is no effect on any asset, liability or owner’s equity

46- The amount due from a customer whose was billed last month is collected.

A). An asset is decreased and owner’s equity is decreased.

B). An asset is increased and owner’s equity is increased.

C). One asset is increased and another asset is decreased✔

D). An asset is increased and a liability is increased.

47-  Which one of the following accounts would most likely be included in an accrual type adjusting entry?

A). Insurance expense

B). Prepaid rent

C). Interest expense

D). Unearned revenue

48- The revenue recognition principle states that:

A). Revenue should be recorded when earned

B). Revenue should be recorded when the cash is collected.

C). Expenses should be recorded in the same period as the associated revenue.

D). Revenue should be listed on the income statement first.

49- A company purchased a 1-year insurance policy on June 1 for Rs. 720. The entire amount was debited to prepaid insurance at that time. At Dec. 31 year end the proper adjusting entry would include.

A). A debit to insurance expense for Rs.300.

B). A credit to insurance expense for Rs. 420.

C). A credit to prepaid insurance for Rs.720.

D). The credit to prepaid insurance for Rs.420

50- A company collected 1 year’s rent in advance on Oct. 1. The entire amount Rs. 1,200 was credited to unearned revenue the proper adjusting entry at the Dec 31 year end would to include.

A). A debit to unearned revenue for Rs.900

B). A debit to unearned revenue for Rs.300✔️

C). A credit to unearned revenue for Rs. 900

D). A debit to revenue earned for Rs. 900

51- Which of the following items is a current asset?

A). Unearned Revenue

B). Real estate held for resale

C). Temporary investments

D). Patents

52- When interest earned but not yet collected is accrue at year end, the proper adjusting entry includes a:

A). Debit to interest receivable.

B). Debit to cash

C). Credit to interest expense

D). Credit to interest payable

53-  The operating cycle is:

A). The average length of time between the purchase of merchandise inventory and the realization of cash from the sale of the inventory.

B). The length of time between the preparation of financial statements.

C). The estimate length of time that the entity will remain in business.

D). The average length of time between the sale of merchandise inventory and the replacement of inventory.

54- Which one of the following accounts would usually have a credit balance?

A). Cash

B). Account payable

C). Equipment

D). Salaries Expense

55- Which one of the following account would usually have a debit balance?

A). Notes payable

B). Bilal, Capital

C). Bilal, Withdraws

D). Service’s Fees Earned

56- A trail balance is prepared to:

A). Prove that there were no error is made in recording the business transaction in the general journal.

B). Prove that there were no error is made in posting form general journal to the general ledger.

C). Prove that each account balance is correct.

D). Summarize the account balances as an aid in the preparation of the financial statements

57- Which of the following does not appear on a work sheet?

A). The unadjusted trial balance

B). Adjusting entries

C). Closing entries

D). The withdrawals account.

58- Which of the following indicates that a company earned a net income for the period? A). Adjusting entries were not made.

B). The sum of the debits exceeds the sum of the credit in the income statements columns of the worksheet.

C). The sum of the credits exceeded the sum of the debits in the income statement columns of the worksheet

D). The withdrawals account had a debit balance.

59- Balance sheet accounts:

A). Are called real accounts.

B). Represent amounts accumulated during a specific period of time

C). Have zero balances after the closing process is complete.

D). Are called nominal accounts.

60- It is useful to make reversing entries for:

A). Adjusting entries recording depreciation expense.

B). Adjusting entries relate to accruals.

C). Adjusting entries relate to deferrals that were recorded initially in a liability account.

D). All of the above

61-  A company collected Rs. 3600 for 1 year’ rent in advance on Nov. 1″ of the current year. The entire amount recorded by making a credit to rental revenue. The year end adjusting entry on Dec 31 should include.

A). A credit to the rental revenue for Rs.600.

B). A debit to unearned revenue for Rs.3000.

C). A debit to rental revenue for Rs.3000

D). A debit to uneared rental revenue forRs. 6000.

62- Net income plus operating expenses is equal to:

A). Net sales

B). Cost of goods available for sale.

C). Cost of goods sold

D). Gross profit

63- When purchase merchandise is returned, a credit would be made to:

A). Merchandise inventory.

B). Purchase return and allowances.

C). Accounts payable

D). Purchases

64- A cash payment journal would not include a:

A). Cash credit column

B). Accounts payable debit column

C). Sales discount credit column

D). Sundry accounts debit column.

65- A customer return merchandise that was sold on account. The account has not been paid. This transaction should be recorded in:

A). Sales journal

B). Cash receipts journal

C). Cash payments journal.

D). General journal

66- A cash sale of merchandise should be

recorded in the:

A). Sales journal

B). General ledger

C). Cash receipts journal

D). Cash payments journal.

67-  When posting the column totals of a cash payments journal a debit should be posted to:

A). Cash

B). Purchase discounts

C). Accounts receivable

D). Account payable

68- A purchase requisition is:

A). An internal document to indicate the quantity and specification of goods needed and to request that the company acquire them

B). Written authorization to pay vendor.

C). An internal document to indicate the quantity an condition of good received.

D). Document sned to a vendor requesting that goods to shipped.

69- One of the weaknesses of the direct written off method is that:

A). It under states accounts receivable on the balance sheet.

B). It violates the matching principles.

C). It is too difficult to use or many companies.

D). It is base on estimates

70- Saname Company receives a 10%, Rs. 15,000 note receivable from Halima Company. The note is due in omonth. The maturity value of the note is:

A). Rs. 13,500

B). Rs. 15,750

C). Rs. 15,000

D).  Rs. 16,500

71- Which of the following inventory cost methods is most appropriate for a merchandise inventory with a relatively small number of unique items and a high cost per item?

A). FIFO

B). LIFO

C). Weighted average

D). Specific identification

72- The inventory method that assigns the most recent costs to cost of goods sold is:

A). LIFO

B). FIFO

C). Weighted average

D). Specific identification

73- In a period of rising prices, the inventory method that results in the high net income is:

A). FIFO

B). LIFO

C). Weighted average

D). Specific identification

74- The lower of cost or market rule for inventory is justified by the:

A). Matching principle

B). Consistency principle

C). Conservatism principle

D). Historical cost principle.

75- Which of the following is an example of a capital expenditure?

A). Cost of cleaning the carpet in the main office.

B). Cost of replacing light bulbs in the factory

C). Cost of replacing the roof on the office factory.

D). Cost of turn up the delivery trucks.

76-  The time period over which an intangible asset should be amortized is:

A). Its estimate useful life

B). Its estimated useful life or 40 years, whichever is shorter

C). 40 years

D). Its estimate useful life or 40 years,whichever is longer.

 77- An advantage of a partnership form of business organization is:

A). Unlimited liability

B). Mutual agency

C). Ease of formation

D). Limited life

78- Partnership liquidation occur when:

A). A new partner is admitted

B). The ownership interest of one partner is sold to a new partner.

C). The assets are sol, liabilities paid and business operations terminated

D). None of the above

79- When a limited partnership is formed.

A). The partnership activities are limited

B). All of the partners have limited liabilities.

C). Some of the partners have limited liabilities.

D). None of the partners have limited liabilities.

80-  Which of the following is not a right possessed by common stockholders of a corporation?

A). The right to vote in the election of the board of directors.

B). The right to receive the minimum amount of dividends each year.

C). The right to sell their stock to anyone they choose.

D). The right to purchase their proportionate of any new stock issue

81- A corporation issues 2000 shares of common stock for Rs. 32000. The stock has a state value of Rs. 10 per share. The journal entry to record the stock issuance would include a credit to common stock for.

A). Rs. 20,000

B). Rs. 12,000

C). Rs. 32,000

D). Rs. 2,000

82-  The par value per share of common stock represents:

A). The minimum selling price of the stock established by the articles of incorporation

B). The minimum amount the stock holder will receive when the corporation is liquidated.

 C). An arbitrary amount established in the articles of incorporation.

D). The amount of dividends to be received each year.

83- When a stock subscription at a price above par is recorded, which of the following accounts would be credited?

A). Common stock

B). Common stock subscribed.

C). Paid in capital in excess of par common.

D). None of the above

84- When common stock is issued in exchange for a non-cash asset, the transaction should be recorded at:

A). The par value of the stock issue.

B). The fair value of the stock issue.

C). The fair value of the asset acquired.

D). The fair value of the stock issue or the fair value of an asset acquired, whichever can be determined more objectively.

85-  How is treasury stock shown on the balance sheet?

A). As an asset

B). As a decrease in a stockholder’s equity

C). As an increase in a stockholder’s equity.

D). Treasury stock is not shown on the balance sheet.

86-  If preferred stock has dividends in arrears, the preferred stock must be:

A). Participating

B). Callable

C). Convertible

D). Cumulative

87- Which of the following is not classified as paid in capital on the balance sheet.

A). Common stock

B). Common stock subscribed.

C). Donated capital

D). Treasury stock

88- An appropriation of retained earnings:

A). Decreases total retained earnings.

B). Increases total retained earnings.

C). Decreases total retained earnings

D). Has no effect no total retain earnings.

89- When a small stock dividend is declared, which of the following account is credited?

A). Common stock

B). Dividends payables

C). Stock dividend distributable

D). Retain earnings un-appropriated.

90- Which of the following increase cash?

A). Depreciation expense

B). Acquisition of treasury stock.

C). The declaration of a cash dividend.

D). Borrowing money by issuing a 6 month note payable

91- Which of the following should be shown on a statement of cash flows under cash

 flows from financing activities.

A). The purchase of a long term investment in the common stock of another company.

B). The payment of cash to retire a long term note payable.

C). The purchased from the sale on a building.

D). The insurance of a long term note payable to acquire land.

92-  Common size financial statements are:

A). Financial statements for companies of the same size in the same industry.

B). Comparative financial statements in which each item is expressed as percentage of the item in a base year .

C). Financial statements for different companies that have the same number of income statement and balance sheet accounts.

D). Financial statements in which each item on a statement is expressed as a percentage of a key item on the same statement

93- Which of the following generally is the most useful in analyzing companies of different size?

A). Constant dollar accounting.

B). Comparative financial statements.

C). Common size financial statements

D). The accounting policies note

94- Quick assents include which of the following?

A). Cash

B). Account receivable

C). Marketable securities

D). All of the above

95- The numerator of the rate of return on common stock holder’s equity ratio is equal to:

A). Net income

B). Net income minus preferred dividends

C). Income before interest expense.

D). Dividend per share of common stock .

96- All of the following are true of product costs except.

A). Product costs are assets.

B). Product costs are the costs incurred to acquire products to sell.

C). Product costs are expensed when incurred.

D).  Product costs may be fixed or variable.

97- Which of the following cost is not a period cost?

A). Sales people’s salaries

B). Factory rent

C). General administrative costs.

D). Research and development costs.

98- Total manufacturing costs for a period include all of the following costs except.

A). Raw materials used

B). Direct labor cost.

C). Cost of goods completed

D). Factory overhead

99-  The total cost of units completed from work in process is transferred to which of the following accounts?

 A). Cost of Goods sold

B). Finished Goods

C). Cost of Goods Complete.

D). Merchandise inventory.

100-  The numerator of the rate of return on total assets ratio is equal to:

A). Net Income

B). Income before taxes

C). Income before interest expense.

D). Net income minus preferred dividends

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