Practice Basic Accounting Concepts Questions and Answers

• A company initiated the process of raising money by issue of equity shares. It received the share application money, but the allotment is pending. The mone...
• As per accounting standards, inventory is to be valued at cost or net realizable value. Which of the accounting principle forms the basis of this standard?...
• The Black-Scholes model is used for the pricing of:
• If a company delays publishing its quarterly financials, which qualitative characteristic is most negatively impacted?
• An ESOP (Employee stock ownership plan) is an employee benefit plan which offers employees an ownership interest in the organisation. Which of the followin...
• Which qualitative characteristic is MOST directly supported when different accountants, using the same data and assumptions, arrive at the same financial r...
• A company uses the Written Down Value (WDV) method to calculate depreciation on its fixed assets. On which of the following value of the fixed asset, will ...
• Depreciation is charged as per which accounting principle?
• MTG Ltd wants to buyback its shares. What is the maximum limit up to which it is allowed to buy-back its shares in a year?
• With respect to rights issue of shares, the Right of Renunciation allows existing shareholders to:
• A company decides not to record a calculator worth Rs.500 as a fixed asset and instead expenses it off. Which accounting concept is being applied?
• A company announces rights issue in the ratio of 1:4. The face value of the share is Rs.10 and market value is Rs.70. If the rights issue is done at Rs.50,...
• Which of the following is not true about nominal capital? 
• Which statement about cash-settled share-based payments is true? 
• Which accounting principle requires that financial statements are prepared for a specific period? 
• The following data relates to a semi-variable factory overhead: Using the High–Low Method, the fixed cost is:...
• A company shows the following balance sheet figures (₹ in crore): Equity 40, Reserves 20, Term Loan 60, Current Assets 80 and Current Liabilities 40. The...
• Using the same balance sheet data (Equity 40, Reserves 20, Term Loan 60, Current Liabilities 40), the bank wants to evaluate the long‑term solvency posit...
• Based on the same balance sheet data, the credit officer also wants to compute the capital gearing level of the borrower. Debt consists only of the term lo...
• A term loan installment and interest both remain overdue for more than 90 days. However, interest has been serviced once during this period but principal r...
• A project has annual cash accruals of ₹18 crore. Annual term loan obligation (principal + interest) is ₹12 crore. What is the DSCR and its interpretati...
• A borrower has limits of ₹50 crore from Bank A and ₹40 crore from Bank B without consortium arrangement. The borrower diverts stock financed by Bank A ...
• Case: Sales = ₹200 crore EBIT = ₹30 crore Interest = ₹10 crore Tax = ₹6 crore What is the Interest Coverage Ratio (ICR)?
• A company reports Sales of ₹200 crore, EBIT of ₹30 crore, Interest of ₹10 crore and Tax of ₹6 crore. The bank wants to assess bottom‑line profita...
• A borrower shows continuous losses, erosion of net worth by 60%, irregular operations in CC account, and diversion of funds to group companies. This exposu...
• A seasonal manufacturing unit submits a monthly cash budget showing peak cash deficits of ₹18 crore in August, ₹22 crore in September and ₹15 crore i...
• A company shows an increase in Fixed Assets of ₹30 crore during the year. During the same period, Working Capital decreases by ₹10 crore and a fresh Te...
• A project has an installed capacity of 1,00,000 units. The break‑even sales level is estimated at 55,000 units and expected sales are projected at 70,000...
• A project proposes Debt of ₹140 crore and Equity (including reserves) of ₹60 crore. The industry norm allows maximum Debt–Equity of 2:1. What is the ...
• An account classified as Sub-standard has accrued interest of ₹1.2 crore during the year, which has not been actually received. How should this interest ...
• A stressed MSME account is proposed for restructuring. The TEV study shows DSCR of 1.05, negative cash flows for first two years and high sensitivity to sa...
• A borrower shows Current Assets ₹120 crore, Current Liabilities ₹80 crore, Inventory ₹70 crore, Receivables ₹40 crore. Stock audit reveals obsolete...
• A CC account shows frequent excess drawings, decline in stock levels, delays in statutory payments and high turnover in sister concerns. These indicators m...
• Base case DSCR is 1.40. On 10% fall in sales, DSCR falls to 1.05. On 10% increase in cost, DSCR becomes 0.98. What is the correct appraisal inference?
• A term loan of ₹80 crore is secured by Plant & Machinery valued at ₹90 crore and land valued at ₹30 crore. The forced sale value of machinery is asse...
• A bank has funded exposure ₹100 crore with risk weight 100% and non-funded exposure ₹50 crore with credit conversion factor 50% and risk weight 100%. W...
• An MSME unit has projected annual turnover of ₹240 crore. As per the 20% working capital norm, total working capital requirement is taken at 20% of turno...
• A company shows Net Profit of ₹12 crore, Depreciation ₹8 crore, Increase in Receivables ₹10 crore and Increase in Payables ₹4 crore. What is the Ne...
• An NPA account has outstanding of ₹50 crore. The realisable value of security is estimated at ₹30 crore. The borrower offers a one‑time settlement of...
• A borrower has good past track record, moderate leverage, but current industry is in cyclical downturn and cash flows are under stress for next 12 months. ...