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Free CA Accounting Practice Questions & Answers
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100% free · No login to startQuestion 61
Profit before charging the manager's commission is Rs.5,50,000. The manager is entitled to a commission of 10% of the profit remaining AFTER charging such commission. The commission is:
Select an option first.
Correct answer: A — Rs.50,000
Explanation: Commission after charging itself = profit x rate / (100 + rate) = 5,50,000 x 10/110 = Rs.50,000. Verify: profit after commission = Rs.5,00,000, and 10% of that is exactly Rs.50,000. Distractor B is the 10/100 answer, which applies when the commission is 'on profit BEFORE charging such commission' - read that phrase carefully, it is the whole question.
Question 62
Salaries paid during the year were Rs.5,40,000. Salaries of Rs.50,000 for March 2026 remain unpaid, and the Rs.5,40,000 includes Rs.30,000 paid in respect of April 2026. The amount to be debited to the Profit and Loss Account is:
Select an option first.
Correct answer: C — Rs.5,60,000
Explanation: 5,40,000 - 30,000 prepaid + 50,000 outstanding = Rs.5,60,000. Both adjustments also hit the Balance Sheet: Rs.30,000 as a current asset and Rs.50,000 as a current liability. A written answer that shows the P&L figure but omits the two Balance Sheet items collects roughly half the available marks.
Question 63
Sundry debtors are Rs.4,00,000. Further bad debts of Rs.20,000 are to be written off, a provision for doubtful debts is to be created at 5%, and a provision for discount on debtors at 2%. The provision for discount on debtors is:
Select an option first.
Correct answer: D — Rs.7,220
Explanation: Apply the adjustments in sequence. Debtors after further bad debts = Rs.3,80,000. Provision for doubtful debts at 5% = Rs.19,000. Discount is allowed only to debtors expected to PAY, so the base is 3,80,000 - 19,000 = Rs.3,61,000, and 2% of that is Rs.7,220. Distractor A applies 2% to Rs.3,80,000, which is the classic sequencing error.
Question 64
Closing stock appears INSIDE the Trial Balance (that is, it has already been adjusted against purchases). It should be shown:
Select an option first.
Correct answer: B — In the Balance Sheet only
Explanation: The golden rule: an item inside the Trial Balance gets ONE effect; an item given as an adjustment outside it gets TWO. Here the adjusting entry (Closing Stock Dr., To Purchases) has already been passed, so purchases are net of it and the stock appears only as a current asset. Showing it in the Trading Account as well would deduct it twice and inflate gross profit.
Question 65
A material legacy is received by a club, the donor having specified no particular purpose. It is generally:
Select an option first.
Correct answer: C — Capitalised and added to the Capital Fund
Explanation: A legacy is a non-recurring receipt of a capital nature, so a material amount is added to the Capital Fund. Where the donor has specified a purpose, it is credited to a separate earmarked fund and utilised only for that purpose. Only small or recurring legacies are treated as income - and any answer should state the materiality judgement explicitly rather than assume it.
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Question 66
The Receipts and Payments Account of a not-for-profit organisation is:
Select an option first.
Correct answer: A — A summary of all cash and bank transactions, capital and revenue alike, relating to any period
Explanation: It is simply a classified summary of the cash book: it starts and ends with cash and bank balances, includes capital as well as revenue items, and takes in amounts relating to previous and future periods. The Income and Expenditure Account, by contrast, is on the accrual basis and carries only revenue items of the CURRENT year - contrasting the two is a recurring theory question.
Question 67
Subscriptions received during the year were Rs.4,80,000. Subscriptions outstanding were Rs.35,000 at the beginning and Rs.52,000 at the end; subscriptions received in advance were Rs.18,000 at the beginning and Rs.25,000 at the end. Subscription income for the year is:
Select an option first.
Correct answer: D — Rs.4,90,000
Explanation: 4,80,000 - 35,000 (last year's arrears collected this year) + 52,000 (this year's arrears) + 18,000 (advance received last year, earned now) - 25,000 (advance for next year) = Rs.4,90,000. Prepare it as a working Subscription Account rather than a mental adjustment - four adjustments in one line is where sign errors creep in.
Question 68
Which of the following is INCLUDED in the cost of inventories under AS 2?
Select an option first.
Correct answer: C — Storage costs that are necessary in the production process before a further stage of production
Explanation: AS 2 includes costs of purchase, costs of conversion and other costs incurred in bringing inventories to their present location and condition. Storage that is a necessary part of the process (for instance maturing or seasoning) qualifies; storage of finished goods does not. Abnormal waste, selling and distribution costs, and non-contributing administrative overheads are all excluded and expensed as incurred.
Question 69
Opening stock was 100 units at Rs.40. Purchases during the year were 250 units at Rs.45 and then 200 units at Rs.50. 350 units were sold. Under FIFO, closing inventory is:
Select an option first.
Correct answer: B — Rs.10,000
Explanation: Units available = 100 + 250 + 200 = 550; sold 350; closing = 200 units. Under FIFO the earliest units are deemed sold, so closing stock consists of the LATEST purchase: 200 units x Rs.50 = Rs.10,000. Distractor D is the weighted average answer - in a written question, state the cost formula you are applying before the figures, because using a valid formula consistently is itself examinable.
Question 70
Physical stock counted on 5 April 2026 was Rs.6,50,000. Between 1 and 5 April, purchases were Rs.80,000 and sales were Rs.1,20,000, all sales being made at cost plus 25% on cost. Closing stock as at 31 March 2026 was:
Select an option first.
Correct answer: D — Rs.6,66,000
Explanation: Work BACKWARDS from the count date: deduct post-year-end purchases and add back the COST of post-year-end sales. Cost of sales = 1,20,000 x 100/125 = Rs.96,000. So 6,50,000 - 80,000 + 96,000 = Rs.6,66,000. The single most common error is adding back sales at selling price; when the margin is given 'on cost', the multiplier is 100/125, not 100/100 or 75/100.
Question 71
Using the same data - opening stock 100 units at Rs.40, purchases of 250 units at Rs.45 and 200 units at Rs.50, and 350 units sold - closing inventory under the weighted average (periodic) method is, to the nearest rupee:
Select an option first.
Correct answer: D — Rs.9,182
Explanation: Total cost = 4,000 + 11,250 + 10,000 = Rs.25,250 for 550 units, giving a weighted average of Rs.45.909 per unit. Closing 200 units x 45.909 = Rs.9,182. Compare with the FIFO answer of Rs.10,000 on identical facts: in a period of RISING prices FIFO reports higher closing stock and therefore higher profit - a comparison worth one line in any theory answer on cost formulas.
Question 72
There is no partnership deed. A partner has advanced a loan of Rs.5,00,000 to the firm. He is entitled to interest at:
Select an option first.
Correct answer: B — 6% per annum
Explanation: Section 13(d) of the Indian Partnership Act, 1932 allows a partner who makes an advance BEYOND his agreed capital interest at 6% per annum. Note the contrast that examiners test: interest on a partner's LOAN is a charge against profit and is payable even in a loss year, whereas interest on CAPITAL is not allowed at all when the deed is silent. Verify the section against the ICAI study material for your attempt.
Question 73
A, B and C contributed capitals of Rs.6,00,000, Rs.4,00,000 and Rs.2,00,000 respectively. There is no partnership deed. A profit of Rs.3,60,000 is to be shared:
Select an option first.
Correct answer: D — Equally, Rs.1,20,000 to each partner
Explanation: Where the deed is silent, section 13(b) requires profits and losses to be shared EQUALLY, however unequal the capitals may be. The reasoning is that a partnership rests on agreement, and in the absence of one the law presumes equality of both contribution and reward. Candidates instinctively divide by capital, which is exactly the trap the question is set to catch.
Question 74
A General Reserve of Rs.1,50,000 stands in the books when D is admitted. It should be:
Select an option first.
Correct answer: C — Transferred to the old partners' Capital Accounts in their old ratio
Explanation: Reserves and undistributed profits are past earnings belonging to the old partners alone, so they are distributed in the OLD ratio before the new partner is admitted. The same treatment, in reverse, applies to a debit balance in the Profit and Loss Account, which is an accumulated loss borne by the old partners in the old ratio.
Question 75
After N's retirement, L and M decide to hold a total capital of Rs.15,00,000 in their new ratio of 3 : 2. L's capital after all adjustments stands at Rs.8,40,000. L must:
Select an option first.
Correct answer: B — Bring in a further Rs.60,000
Explanation: L's proportionate capital = 15,00,000 x 3/5 = Rs.9,00,000 against an adjusted balance of Rs.8,40,000, so he brings in Rs.60,000. Where instead the question fixes total capital by reference to the sum of the ADJUSTED balances, compute that total first - the arithmetic is the same but the starting figure is not, and the question always specifies which.
Question 76
After admission the total capital of the firm is fixed at Rs.24,00,000, to be held in the new ratio of 2 : 1 : 1. B's adjusted capital before this exercise is Rs.5,20,000. B must:
Select an option first.
Correct answer: A — Bring in a further Rs.80,000
Explanation: B's proportionate capital = 24,00,000 x 1/4 = Rs.6,00,000, against an adjusted balance of Rs.5,20,000, so he brings in the shortfall of Rs.80,000. Take the ADJUSTED capital - after revaluation, reserves and goodwill have been put through - never the opening figure; using the wrong starting balance is the usual reason this three-mark step is lost.
Question 77
Average profit is Rs.5,00,000, but it includes an abnormal gain of Rs.60,000 and no provision has been made for partners' remuneration of Rs.1,20,000. The adjusted profit for goodwill purposes is:
Select an option first.
Correct answer: D — Rs.3,20,000
Explanation: 5,00,000 - 60,000 abnormal gain - 1,20,000 remuneration = Rs.3,20,000. Goodwill must be based on MAINTAINABLE profit, so non-recurring gains are removed, non-recurring losses added back, and any expense the business will have to bear in future - such as the partners' own remuneration - is deducted even if it was never charged in the accounts.
Question 78
X and Y are partners sharing profits equally. Z is admitted for a 1/5 share, which he acquires from X and Y in their old ratio. The new profit sharing ratio of X : Y : Z is:
Select an option first.
Correct answer: D — 2 : 2 : 1
Explanation: Z takes 1/5, leaving 4/5 to be shared between X and Y in their old ratio of 1:1, so each gets 2/5. The ratio is 2/5 : 2/5 : 1/5 = 2 : 2 : 1. Set the working out as 'share surrendered' then 'balance shared in old ratio' - stating the sacrifice explicitly is what makes the goodwill entry that usually follows fall out correctly.
Question 79
P and Q share profits in the ratio 5 : 3. R is admitted for a 1/4 share, which he acquires entirely from P. The new profit sharing ratio of P : Q : R is:
Select an option first.
Correct answer: C — 3 : 3 : 2
Explanation: Express everything in eighths: P has 5/8 and surrenders 1/4 = 2/8, leaving 3/8. Q is unaffected at 3/8. R has 2/8. Ratio = 3 : 3 : 2. Because the entire sacrifice is P's, the whole of the goodwill premium brought in by R is credited to P alone - a point examiners test by pairing this ratio with a premium in the next part of the question.
Question 80
A and B share profits 3 : 2. C is admitted for a 1/5 share and brings in Rs.1,20,000 as his share of goodwill, which the old partners withdraw. A and B sacrifice in their old ratio. A's share of the premium is:
Select an option first.
Correct answer: C — Rs.72,000
Explanation: The premium is shared in the SACRIFICING ratio, which here equals the old ratio of 3 : 2, so A gets 1,20,000 x 3/5 = Rs.72,000 and B Rs.48,000. Entries: Cash Dr., To Premium for Goodwill; then Premium for Goodwill Dr., To A and B in the sacrificing ratio; then their withdrawal. Distributing a premium in the NEW ratio is the single commonest mistake on this topic.
Question 81
The amount finally due to a retiring partner, where it is not paid immediately, is transferred to:
Select an option first.
Correct answer: C — His Loan Account, and is shown as a liability of the firm
Explanation: The retiring partner ceases to be a partner but remains a creditor of the firm until paid, so the balance of his Capital Account is transferred to a Loan Account carrying interest. Where the deed is silent, section 37 of the Indian Partnership Act gives him the choice between interest at 6% per annum and a share of the profits earned with his money.
Question 82
On dissolution a partner takes over stock having a book value of Rs.1,10,000 at an agreed value of Rs.95,000. The entry is:
Select an option first.
Correct answer: C — The partner's Capital A/c Dr. Rs.95,000; To Realisation A/c Rs.95,000
Explanation: The partner is treated exactly like an outside buyer, so the AGREED value of Rs.95,000 is credited to Realisation and debited to his Capital Account, reducing what the firm owes him. The book value of Rs.1,10,000 is irrelevant once the asset has already been transferred to the Realisation Account at that figure - the difference emerges as part of the overall realisation loss.
Question 83
Two existing partners agree to change their profit sharing ratio, with no admission or retirement. Goodwill must be adjusted:
Select an option first.
Correct answer: C — Between the gaining and the sacrificing partner only
Explanation: A change of ratio means one partner acquires part of another's future share, so the gaining partner compensates the sacrificing partner for that share of goodwill - exactly as on admission, only without a new partner. Accumulated reserves and revaluation gains are likewise adjusted in the old ratio first, because they belong to the period before the change.
Question 84
Which of the following is debited to the Profit and Loss APPROPRIATION Account?
Select an option first.
Correct answer: B — Interest on partners' capital
Explanation: Appropriations are distributions of profit among the partners as partners: interest on capital, partners' salary and commission, and transfers to reserve. Charges are costs the firm would incur whoever the counterparty was - interest on a partner's loan, rent for his building, and the manager's commission - and these are debited to the Profit and Loss Account BEFORE the appropriation account begins.
Question 85
A partner died on 30 June 2026. The deed provides that his share of profit to the date of death be estimated on the basis of the previous year's profit of Rs.7,20,000. His share was one-fourth. The amount credited to his account is:
Select an option first.
Correct answer: D — Rs.45,000
Explanation: Profit for the three months from 1 April to 30 June = 7,20,000 x 3/12 = Rs.1,80,000; his one-fourth share = Rs.45,000. Distractor A forgets to apply his share; distractor C applies the share to the full year. The credit goes to the deceased partner's Capital Account, which is then transferred to his Executors' Account along with goodwill, reserves and revaluation.
Question 86
On dissolution of a firm, which of the following is NOT transferred to the Realisation Account?
Select an option first.
Correct answer: B — A partner's loan to the firm
Explanation: A partner's loan is settled through its own separate account, AFTER outside liabilities are paid but BEFORE anything is returned on capital, so it never enters the Realisation Account. Assets other than cash, fictitious assets and outside liabilities do go there - and a provision such as that for doubtful debts is transferred along with the debtors so the realisation gain or loss is computed on the gross figure.
Question 87
The Revaluation Account shows a profit of Rs.90,000 on the admission of C. A and B shared profits 2 : 1 before admission; afterwards A, B and C share 2 : 1 : 1. The profit is credited:
Select an option first.
Correct answer: B — To A Rs.60,000 and B Rs.30,000
Explanation: Revaluation profit arises from changes in value that accrued before C joined, so it belongs to the OLD partners in their OLD ratio of 2 : 1 - A Rs.60,000 and B Rs.30,000. Giving C any part of it would hand him a gain he did not earn. The same principle governs the distribution of accumulated reserves and the balance of the Profit and Loss Account on admission.
Question 88
Under the fixed capital method, which of the following appears in the Partner's Current Account?
Select an option first.
Correct answer: C — Interest on capital, salary, drawings and the share of profit
Explanation: Under the fixed capital method the Capital Account moves only when capital is actually brought in or permanently withdrawn, so it stays fixed; every other item is routed through the Current Account. A Current Account can therefore show a DEBIT balance, which is disclosed on the assets side of the Balance Sheet - a presentation point worth one mark on its own.
Question 89
Under the fluctuating capital method, the Partner's Capital Account:
Select an option first.
Correct answer: B — Records every item - capital, drawings, interest, salary and the share of profit
Explanation: With fluctuating capitals there is no Current Account, so the single Capital Account absorbs everything and its balance changes each year. It may even show a DEBIT balance if drawings and losses exceed the capital and profits credited. In the absence of any agreement, the fluctuating method is the one presumed to apply.
Question 90
X, Y and Z share profits 5 : 3 : 2. Y retires and no new ratio is agreed between X and Z. The gaining ratio of X : Z is:
Select an option first.
Correct answer: D — 5 : 2
Explanation: In the absence of agreement the continuing partners are presumed to acquire the retiring partner's share in their OLD mutual ratio, so X and Z gain in 5 : 2 and their new ratio also becomes 5 : 2. Never assume an equal gain. This ratio then drives the goodwill adjustment, so getting it wrong carries the error through the rest of the question.
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