0801 FSA (CFA560) - Question Paper Financial Statement...

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1 Question Paper Financial Statement Analysis (CFA560): January 2008 Answer all 70 questions. Marks are indicated against each question. Total Marks : 100 1. Which of the following statements is false with respect to concept of capital and capital maintenance? (a) Capital is the contribution made by the owner(s) in the business (b) Capital is regarded as a liability to the business in the nature of owner’s equity (c) The main feature of the concept is the distinction between the owner(s) and that of the business owned by them (d) Income is the increase in capital which cannot be withdrawn bereft of any distortion of the capital (e) The method of ascertaining and reporting results of business helps in comprehending the concept of capital maintenance. (1 mark) <Answer> 2. The current ratio of a company is 2:1. Which of the following transactions would improve the ratio? (a) Purchase of a fixed asset on credit (b) Redemption of preference shares (c) Sale of office furniture for cash at a loss (d) Purchase of stock-in-trade for cash (e) Acceptance of bills of exchange drawn by creditors. (1 mark) <Answer> 3. Revenue manipulation can be done by (a) Cookie-jar accounting (b) Capitalizing revenue costs (c) Understating liabilities (d) Not recognizing rebates or discounts (e) Non-current assets depreciation. (1 mark) <Answer> 4. According to which of the qualitative characteristics of financial statements, the use of same accounting principles from one period to another is required? (a) Relevance (b) Reliability (c) Comparability (d) Consistency (e) Matching. (1 mark) <Answer> 5. Significant diversities are observed in the following areas except (a) Accounting for Brands (b) Accounting for Joint Ventures (c) Treatment of ordinary items (d) Treatment of Goodwill (e) Treatment of Taxation in Accounts. (1 mark) <Answer>
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2 6. The depreciation provided by Exotica Ltd., as per the tax records exceeds the depreciation provided by its accounting records by Rs.3,00,000. Unamortised preliminary expenses, as per tax records is Rs.5,600. There is adequate evidence of future profit sufficiency. Assuming the company adheres to Indian Accounting Standards, the amount of deferred tax asset/liability to be recognized as transaction adjustment, if the tax rate is 40%, is (a) Rs.1,20,000 (deferred tax liability) (b) Rs.1,17,760 (deferred tax liability) (c) Rs.1,20,000 (deferred tax asset) (d) Rs.1,17,760 (deferred tax asset) (e) Rs.1,22,240 (deferred tax asset). (2 marks) <Answer> 7. Short-term receivables are reported on the basis of their (a) Historical cost (b) Current cost (c) Net realizable value (d) Present value of future cash flows (e) Written down value. (1 mark) <Answer> 8. The currency of the environment in which an entity primarily generates and expends cash is known as (a) Blended rate (b) Foreign currency (c) Functional currency (d) Local currency (e) Reporting currency. (1 mark)
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0801 FSA (CFA560) - Question Paper Financial Statement...

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