Chapter 15: Company Accounts – II (JAIIB – Paper 3)

1. As per Companies Act, 2013, financial statements of companies must be prepared in which format of Balance Sheet?

• A. Horizontal format
• B. Consolidated format
• C. Vertical format (as per Schedule III)
• D. Comparative format

Companies Act, 2013 mandates Balance Sheet presentation in the vertical format as per Schedule III, replacing the earlier horizontal format.

2. Under Schedule III of the Companies Act, 2013, 'Reserves and Surplus' are shown under which main heading?

• A. Current Liabilities
• B. Non-current Assets
• C. Current Assets
• D. Shareholders’ Funds

'Reserves and Surplus' form part of Shareholders’ Funds in the Balance Sheet under Schedule III.

3. Which of the following will be classified as a Current Liability in the Balance Sheet?

• A. Long-term borrowings
• B. Trade payables
• C. Share capital
• D. Tangible fixed assets

Trade payables are obligations due within 12 months and are classified as Current Liabilities.

4. As per Schedule III, 'Tangible Assets' such as land and machinery are shown under which heading?

• A. Non-current Assets
• B. Current Assets
• C. Intangible Assets
• D. Miscellaneous Expenditure

Land, building, plant, and machinery are examples of Tangible Non-current Assets.

5. Which of the following is not a sub-heading under Current Assets in Schedule III Balance Sheet?

• A. Inventories
• B. Trade receivables
• C. Share capital
• D. Cash and cash equivalents

Share capital is shown under Shareholders’ Funds, not under Current Assets.

6. Ind AS in India are largely converged with which international accounting standards framework?

• A. US GAAP
• B. IFRS
• C. IAS 39
• D. Basel Norms

Indian Accounting Standards (Ind AS) are largely aligned with International Financial Reporting Standards (IFRS) to bring uniformity and comparability.

7. Under Ind AS, how are financial instruments generally measured?

• A. Always at historical cost
• B. Only at book value
• C. At estimated realizable value
• D. At fair value or amortized cost depending on classification

Ind AS requires financial instruments to be classified and measured either at fair value or amortized cost, depending on their nature and business model.

8. Which accounting concept is emphasized more strongly under Ind AS compared to old Indian GAAP?

• A. Conservatism
• B. Historical cost principle
• C. Fair value measurement
• D. Consistency

Ind AS emphasizes fair value measurement, giving investors more realistic information compared to the older historical cost-based reporting.

9. Under Ind AS 16, how are Property, Plant, and Equipment (PPE) depreciated?

• A. Component-wise useful life approach
• B. Fixed rate for all assets
• C. As per Companies Act Schedule III only
• D. No depreciation required

Ind AS 16 requires assets to be depreciated based on component-wise useful life, unlike earlier uniform depreciation methods.

10. Which one of the following is a key impact of Ind AS adoption on financial statements of banks and companies?

• A. Lower disclosure requirements
• B. Increased volatility in profits due to fair value accounting
• C. Removal of consolidation requirement
• D. Elimination of depreciation accounting

Ind AS leads to more fair value-based measurements, which can create fluctuations in reported profits and assets compared to historical cost-based methods.

11. Under Ind AS 109, if a bank invests in equity shares for trading purposes, how should these be classified?

• A. At Amortized Cost
• B. As Held-to-Maturity
• C. As Loans and Advances
• D. At Fair Value through Profit or Loss (FVTPL)

Ind AS 109 requires equity instruments held for trading to be measured at FVTPL, meaning changes in fair value affect the Profit & Loss account.

12. A company purchased machinery for ₹50 lakh. As per fair valuation under Ind AS, its current market value is ₹55 lakh. How is this treated?

• A. Shown only at ₹50 lakh (historical cost)
• B. Revalued to ₹55 lakh, with surplus in Other Comprehensive Income (OCI)
• C. Profit of ₹5 lakh shown in P&L
• D. Ignored as unrealized gain

Ind AS 16 allows revaluation of fixed assets. The revaluation surplus is transferred to OCI and shown under Equity, not directly in P&L.

13. Ind AS 115 deals with which of the following areas?

• A. Revenue recognition from contracts with customers
• B. Accounting for income taxes
• C. Employee benefits
• D. Leases

Ind AS 115 provides a five-step model for recognizing revenue from contracts with customers, ensuring consistency and comparability.

14. A company leases office equipment. Under Ind AS 116, this lease must be recorded as:

• A. Expense in P&L every year
• B. Contingent liability
• C. Right-of-use asset with corresponding lease liability
• D. Off-balance sheet item

Ind AS 116 requires lessees to recognize a Right-of-Use asset and a Lease Liability on the Balance Sheet, replacing the earlier operating lease model.

15. A bank classifies a loan of ₹10 crore as Non-Performing Asset (NPA). Under Ind AS, how should Expected Credit Loss (ECL) be recognized?

• A. Provision based on forward-looking ECL model
• B. Provision only when actual default occurs
• C. Provision as per historical cost model
• D. No provision required if collateral exists

Ind AS 109 requires banks to use an Expected Credit Loss (ECL) model, which incorporates forward-looking information to estimate provisions even before default occurs.

16. Ind AS 1 deals with which of the following?

• A. Segment reporting
• B. Employee benefits
• C. Consolidated financial statements
• D. Presentation of financial statements

Ind AS 1 prescribes the overall framework and guidelines for the presentation of financial statements.

17. As per Ind AS 24, which of the following is treated as a related party transaction?

• A. Loan given to a subsidiary company
• B. Sale to an unrelated customer
• C. Purchase from an independent supplier
• D. Dividend received from government bonds

Ind AS 24 requires disclosure of related party transactions, such as loans, sales, or services with subsidiaries, associates, or key management personnel.

18. Under Ind AS 36, when should an impairment test for goodwill be performed?

• A. Once in every 3 years
• B. Only when management decides
• C. At least annually, and whenever indicators of impairment exist
• D. Never, goodwill is not impaired

Ind AS 36 mandates annual impairment testing for goodwill and also when events indicate impairment.

19. A company pays ₹10 lakh as gratuity liability to employees. As per Ind AS 19, this is classified as:

• A. Current liability
• B. Employee benefits expense
• C. Contingent liability
• D. Deferred tax expense

Ind AS 19 deals with employee benefits such as gratuity, pension, and leave encashment. These are recognized as employee benefits expense.

20. Which of the following is NOT true about Ind AS compared to old Indian GAAP?

• A. Ind AS uses Expected Credit Loss model for financial assets
• B. Ind AS requires consolidation of subsidiaries
• C. Ind AS mandates fair value accounting in many cases
• D. Ind AS eliminates disclosure of segment reporting

Ind AS does not eliminate segment reporting. In fact, Ind AS 108 prescribes detailed segment disclosures.

21. Ind AS 12 deals with which aspect of accounting?

• A. Revenue recognition
• B. Borrowing costs
• C. Accounting for Income Taxes
• D. Leases

Ind AS 12 prescribes accounting for current tax and deferred tax arising from temporary differences.

22. A company earns ₹5 lakh profit but has temporary differences creating a deferred tax liability of ₹1 lakh. How will profit be reported under Ind AS 12?

• A. ₹5 lakh
• B. ₹4 lakh after accounting deferred tax
• C. ₹6 lakh
• D. Deferred tax is ignored

Deferred tax liabilities reduce net profit, hence profit will be ₹4 lakh after charging ₹1 lakh deferred tax expense.

23. Which Ind AS requires entities to disclose earnings per share (EPS)?

• A. Ind AS 27
• B. Ind AS 33
• C. Ind AS 108
• D. Ind AS 33

Ind AS 33 requires presentation of basic and diluted earnings per share in the financial statements.

24. A company enters into a forward contract to hedge foreign currency risk. Under Ind AS 109, how should this be treated?

• A. Accounted using hedge accounting principles
• B. Ignored until maturity
• C. Shown only as note disclosure
• D. Treated as contingent liability

Ind AS 109 requires derivative contracts to be accounted at fair value and hedge accounting principles applied when designated as hedges.

25. Which of the following is a major advantage of adopting Ind AS?

• A. Reduced transparency
• B. Higher compliance burden only
• C. Better global comparability of financial statements
• D. No impact on investors

The biggest advantage of Ind AS is global comparability and increased investor confidence due to IFRS convergence.