✅ FAA Accountancy — All 90 Questions Solved

Every accountancy question from both real FAA papers — plus the PAA 2020 block as practice — tagged by book chapter, with the working. Format: Question → options (correct one bolded) → answer → explanation.

---

🗂️ Chapter index

---

📗 FAA 2024 PAPER — Q31–60

28 January 2024 · the most recent real FAA paper

---

🏷️ Ch 24 — Cost Accounting

Q31. Fixed cost is a cost:

a) Which changes in total in proportion to changes in output · b) Which is partly fixed and partly variable · c) Which do not change in total during a given period despite changes in output · d) Which remains same for each unit of output → Ans: C

Fixed cost is fixed in TOTAL, not per unit. As output rises, total fixed cost stays flat but fixed cost per unit falls. ⚠️ D is the trap — that describes a variable cost, which is constant per unit and changes in total.

Q32. Calculate the prime cost: Direct material purchased ₹1,00,000 · Direct material consumed ₹90,000 · Direct labour ₹60,000 · Direct expenses ₹20,000 · Manufacturing overheads ₹30,000

a) ₹1,80,000 · b) ₹2,00,000 · c) ₹1,70,000 · d) ₹2,10,000 → Ans: C

Prime Cost = Direct Material CONSUMED + Direct Labour + Direct Expenses = 90,000 + 60,000 + 20,000 = ₹1,70,000 ✅

⚠️ Two traps in one question:

1. Use consumed (90,000), not purchased (1,00,000). Using purchased gives 1,80,000 — option (a).
2. Overheads are NOT part of prime cost. Adding them gives 2,00,000 — option (b).

📌 Cost ladder: Prime Cost → + factory overheads = Works/Factory Cost → + office overheads = Cost of Production → + selling & distribution = Cost of Sales.

Q60. Sales ₹25/unit · variable manufacturing ₹12/unit · variable selling ₹3/unit · fixed factory ₹5,00,000 · fixed selling ₹3,00,000. Units to earn a profit of ₹1,80,000?

a) 60,000 · b) 88,000 · c) 98,000 · d) 1,00,000 → Ans: C

Contribution per unit = Selling price − ALL variable costs = 25 − (12 + 3) = ₹10 Total fixed cost = 5,00,000 + 3,00,000 = ₹8,00,000

$\text{Units} = \frac{\text{Fixed cost} + \text{Target profit}}{\text{Contribution per unit}} = \frac{8,00,000 + 1,80,000}{10} = \mathbf{98,000}$

⚠️ Trap: forgetting variable selling cost gives a contribution of ₹13 and ~75,400 units. Both variable costs come off.

---

🏷️ Ch 7 — Ledger Accounts

Q33. Suppliers' personal a/c are seen in the

a) Sales Ledger · b) Nominal ledger · c) Purchases Ledger · d) General Ledger → Ans: C

Suppliers = creditors = Purchases Ledger (also called the Creditors Ledger or Bought Ledger). Customers = debtors = Sales Ledger. Remember the direction: you purchase from suppliers.

Q46. The method of transferring items from a journal into their respective ledger accounts is known as

a) Balancing · b) Arithmetic · c) Entry · d) Posting → Ans: D

Journal → posting → Ledger. Balancing is the later step of totalling a ledger account to find its closing balance. 🔗 FAA 2022 · Q54 asked the same relationship from the other side: "a ledger account is prepared with the help of…" → Journals.

---

🏷️ Ch 1 — Introduction to Accounting

Q34. Book Keeping is regarded as the ___ step of accounting.

a) Fourth · b) Secondary · c) Third · d) First → Ans: D

The ladder: Book-keeping → Accounting → Auditing. Book-keeping is the first/primary stage — the routine recording of transactions. ⚠️ B "Secondary" is the trap — book-keeping is primary; accounting is the secondary stage that summarises and interprets it.

---

🏷️ Ch 4 — Accounting Equation

🔁 Q35. ⭐ (verbatim in FAA 2022 · Q36) Which of the following is correct?

a) equity = asset + liability · b) liability = asset + equity · c) asset = liability + equity · d) equity = liability → Ans: C

Assets = Liabilities + Capital (Equity). Everything the business owns is financed either by outsiders (liabilities) or by owners (equity). 🔁 Asked in both FAA papers, identical wording and identical options. A free mark.

---

🏷️ Ch 3 — Basic Accounting Concepts

Q36. Which concept suggests the exclusion of human resource from the balance sheet?

a) Account Concept · b) Money Measurement Concept · c) Going Concern Concept · d) Cost Concept → Ans: B

Money Measurement Concept: only what can be expressed in money is recorded. Employee skill, morale and loyalty are real assets economically, but cannot be measured in rupees, so they never appear on the balance sheet. ⭐ This one also appeared in the PAA 2020 paper (Q93) — one of four that crossed from the Panchayat paper into FAA 2024.

Q51. Which entities generally prepare books under the single entry system?

a) Joint stock companies · b) Sole traders · c) Government organisations · d) Not-for-profit organisations → Ans: B

Single entry suits small sole traders — cheap, simple, no need for a full ledger. Companies are legally required to use double entry. (Also Ch 17.)

---

🏷️ Ch 6 — Voucher Approach in Accounting

Q37. Which procedures should an accountant follow while preparing a voucher?

a) Verify date, amount, signature and transaction details · b) Confirm an authorised signatory approved the documents · c) Select the type of voucher · d) All of the above → Ans: D

All three are genuine steps. When every option is a plausible step of one process, "All of the above" is usually right.

Q38. Which business document is proof of payment?

a) Receipt · b) Invoice · c) Debit note · d) None of the above → Ans: A

Receipt = money has been PAID. Invoice = money is DEMANDED (a request, not proof). Debit note = a claim for a reduction, usually on a return or overcharge. 🔗 FAA 2022 · Q44 asked the companion: documentary evidence of a transaction → Voucher.

---

🏷️ Ch 15 — Bank Reconciliation Statement ⭐⭐ (4 marks — the biggest chapter in 2024)

🔁 Q39. ⭐ (verbatim in FAA 2022 · Q41) In a bank statement, cash deposited is shown as ___

a) debit · b) credit · c) expense · d) profit → Ans: B

Your deposit increases what the bank owes you → to the bank you are a creditor, so it credits your account. In your own cash book the same deposit is a debit. ⭐ This mirror-image is the whole logic of BRS. Every BRS item is the same transaction seen from two sides.

Q40. What is a "Deposit in transit" in bank reconciliation?

a) Added to Bank Balance · b) Subtracted from Bank Balance · c) Subtracted from Cash Book Balance · d) Added to Cashbook Balance → Ans: A

You have recorded the deposit; the bank has not yet credited it. So starting from the bank balance, you add it to reach your cash book balance.

🔁 Q41. ⭐ (rephrased from FAA 2022 · Q37) Cheques issued by a firm but not yet presented to the bank are called

a) Uncredited cheques · b) Outstanding cheques · c) Uncollected cheques · d) Bounced cheques → Ans: B

Also called unpresented cheques. You have deducted them in your cash book; the bank has not yet paid them out. 🔁 2022 asked it the other way round: "An unpresented cheque is also commonly known as…" → outstanding cheque.

Q49. A bank pass book is a copy of

a) The cash column of a customer's cash book · b) The bank column of a customer's cash book · c) The customer account in the bank's ledger · d) The debtor's account in the bank's ledger → Ans: C

The pass book is the bank's own record of your account, handed to you. It is not a copy of anything you wrote.

---

🏷️ Ch 22 — PFMS ⭐

🔁 Q42. ⭐ (also in FAA 2022 · Q59 and PAA 2020 · Q83) PFMS was earlier known as

a) Central Plan Schemes Monitoring System (CPSMS) · b) Controller General of Accounts (CGA) · c) Central Sector Scheme of Planning Commission · d) Core Banking System (CBS) → Ans: A

CPSMS → PFMS. Run by the Controller General of Accounts under the Ministry of Finance — CGA is the operator, not the old name, which is why (b) is the trap. ⭐⭐ This is the only question confirmed in three genuinely different exams. Learn it and never lose the mark.

---

🏷️ Ch 17 — Cash-Based Single Entry System

Q43. Statement of financial position produced from incomplete accounting records is commonly known as

a) Balance sheet · b) Statement of affairs · c) Statement of financial operations · d) Cash flow statement → Ans: B

A balance sheet comes from complete double-entry records. A statement of affairs is its estimate, built from incomplete single-entry records — some figures are derived, not extracted. ⭐ Also appeared as PAA 2020 · Q90.

---

🏷️ Ch 16 — Partnership Accounts ⭐⭐ (3 marks)

Q44. What happens when interest on drawings is charged to a partner?

a) Credited to partner's current a/c · b) Not shown in current account · c) Debited to partner's capital a/c · d) None of the above → Ans: C

Interest on drawings is income for the firm and a charge on the partner → debit the partner. 📌 The reverse pair: interest on capital is an expense for the firm → credit the partner.

🔁 Q45. ⭐ (verbatim in FAA 2022 · Q53 — only the names changed) M and N share profits 3:2. They admit P with a 1/5 share. New ratio?

a) 12:4:7 · b) 12:8:5 · c) 12:5:8 · d) 8:5:12 → Ans: B

P takes 1/5. The remaining 4/5 is shared by M and N in their old 3:2 ratio: $M = \frac{4}{5}\times\frac{3}{5} = \frac{12}{25}, \qquad N = \frac{4}{5}\times\frac{2}{5} = \frac{8}{25}, \qquad P = \frac{1}{5} = \frac{5}{25}$ New ratio = 12 : 8 : 5 ✅ ⚠️ C (12:5:8) is the trap — it swaps N and P. Keep the old partners in their original order.

Q58. Goodwill of the firm of X and Y is valued at ₹30,000; it appears in the books at ₹12,000. Z is admitted for a 1/4 share. What must he bring for goodwill?

a) 3,000 · b) 4,500 · c) 7,500 · d) 10,500 → Ans: C

$\text{Z's goodwill} = \text{Firm's goodwill} \times \text{Z's share} = 30,000 \times \frac{1}{4} = \mathbf{7,500}$

⚠️ The ₹12,000 book value is a deliberate distraction. The incoming partner pays on the valued goodwill, not the book figure. The existing ₹12,000 is written off among the old partners in their old ratio — a separate entry.

---

🏷️ Ch 19 — Financial Audit

🔁 Q47. ⭐ (verbatim in FAA 2022 · Q48) Audit undertaken to check financial controls and irregularities in the organization is which type?

a) System audit · b) Compliance audit · c) Internal audit · d) Statutory audit → Ans: C

Internal audit is a continuous, management-appointed review of controls and irregularities. Statutory audit is legally required and external. Compliance audit tests adherence to specific rules.

---

🏷️ Ch 18 — Financial Management

Q48. Current Ratio = ______

a) Current assets / Current liabilities · b) Fixed assets / Current liabilities · c) Debt / Current assets · d) Debt / Equity → Ans: A

Ideal current ratio = 2 : 1. Related: Quick/Acid-test ratio = (Current assets − Stock − Prepaid) / Current liabilities, ideal 1 : 1. Debt/Equity is option (d) — a solvency ratio, not liquidity.

Q53. What does financial leverage measure?

a) No change with EBIT and EPS · b) Sensibility of EBIT w.r.t % change in output · c) The sensibility of EPS w.r.t % change in the EBIT level · d) % variation in the level of production → Ans: C

$\text{Financial Leverage} = \frac{\%\ \Delta\ \text{EPS}}{\%\ \Delta\ \text{EBIT}}$

⚠️ B is the trap — that is OPERATING leverage (% Δ EBIT ÷ % Δ Sales). Remember the chain: Operating leverage links Sales→EBIT; Financial leverage links EBIT→EPS; Combined leverage links Sales→EPS.

---

🏷️ Ch 10 — Trial Balance

🔁 Q50. ⭐ (verbatim in FAA 2022 · Q57) Trial balance helps to check the accuracy of the:

a) Balance sheet · b) Ledger · c) Journals · d) Cash flow statement → Ans: B

The TB proves the arithmetical accuracy of ledger postings — that total debits equal total credits. ⚠️ It does NOT prove the entries are correct. A TB still balances despite errors of omission, principle, commission and compensating errors. That distinction is the standard follow-up question.

---

🏷️ Ch 23 — Taxation ⭐⭐ (5 marks — the biggest chapter in 2024)

Q52. GST is a consumption tax based on

a) Development · b) Dividend · c) Duration · d) Destination → Ans: D

GST is a destination-based consumption tax — revenue goes to the state where goods/services are consumed, not where produced.

Q55. Income which accrues outside India AND is received outside India is taxable for

a) Resident and Ordinary Resident · b) Resident but not Ordinary Resident · c) Non Resident · d) ROR and RNOR → Ans: A

The residential-status table — learn this grid, it is the most examinable thing in the chapter

Income	ROR	RNOR	NR
Received in India	✅	✅	✅
Accrues in India	✅	✅	✅
Accrues outside, from a business controlled from India	✅	✅	❌
Accrues outside and received outside	✅	❌	❌

⭐ Only ROR is taxed on global income. That single line answers this question and most others in the topic.

Q56. Which is included in the definition of "Goods" under section 2(52) of the CGST Act, 2017?

a) Money · b) Actionable claim · c) Securities · d) Bonds → Ans: B

Section 2(52) defines goods as every kind of movable property, including actionable claims, but excluding money and securities. ⚠️ Money and securities are excluded by name — (a), (c) and (d) all fall on the wrong side of that line.

Q57. Amount payable on closure or opting out of the National Pension Scheme (section 80CCD) is exempt to the extent of

a) 30% · b) 100% · c) 40% · d) 25% → Ans: C

40 % of the total amount payable is exempt under section 10(12A). 📌 Companion figure: on partial withdrawal, 25 % of the employee's own contribution is exempt under 10(12B) — that is the decoy in option (d).

Q59. Assertion (A): If interest is payable outside India, tax must be deducted at source. Reason (R): If tax has not been deducted at source, the interest paid will not be allowed as a deduction in computing business income.

a) Both correct and (R) explains (A) · b) Both correct but (R) does not explain (A) · c) (A) correct, (R) wrong · d) (A) wrong, (R) correct → Ans: A

Both statements are true, and R is precisely why A must be done — section 40(a)(i) disallows the expense if TDS is not deducted, which is the enforcement mechanism behind the obligation. 📌 Assertion–Reason technique: judge A alone, then R alone, and only then ask whether R causes A. Here all three checks pass.

---

🏷️ Ch 26 — Indian Financial System

Q54. A Finance Bill becomes the Finance Act when passed by

a) Lok Sabha · b) Both Lok Sabha and Rajya Sabha · c) Both Houses of Parliament and signed by the President · d) Both Houses and signed by the Prime Minister → Ans: C

⚠️ D is the trap — the President assents to bills, never the Prime Minister. (The vault maps this to Ch 26 — see 2024-Accountancy-Chapterwise.)

---

📕 FAA 2022 PAPER — Q31–60

6 March 2022 · the cancelled paper — the questions are genuine JKSSB material

---

🏷️ Ch 2 — Basic Accounting Terms (4 marks — the biggest chapter in 2022)

Q31. Copyright is a/an

a) Asset · b) Liability · c) Expense · d) Profit → Ans: A

An intangible asset — no physical form, but it has value and is owned. Family: patents, trademarks, goodwill, copyrights.

Q33. ______ refers to anything that has an economic value attached to it

a) Asset · b) Liability · c) Expense · d) Profit → Ans: A

The textbook definition of an asset. Note the paper asked essentially the same concept twice (Q31 and Q33) — Ch 2 is cheap marks.

Q51. Decreasing value in tangible assets due to normal wear and tear is

a) expense · b) amortization · c) reserve · d) depreciation → Ans: D

⚠️ The word "tangible" in the stem is what rules out amortization.

Q60. Expense incurred to start a business is a

a) fictitious asset · b) fixed asset · c) current asset · d) liability → Ans: A

Preliminary expenses are a fictitious asset — not a real asset at all, just an expense not yet written off. It has no resale value; it sits on the asset side only until amortised.

---

🏷️ Ch 4 — Accounting Equation

🔁 Q36. ⭐ (verbatim in FAA 2024 · Q35) Which of the following is correct?

a) equity = asset + liability · b) liability = asset + equity · c) asset = liability + equity · d) equity = liability → Ans: C

Assets = Liabilities + Capital. 🔁 A free mark in both papers.

Q40. Assets ₹2,00,000 and equity ₹50,000. What is the liability?

a) 2,50,000 · b) 2,00,000 · c) 1,50,000 · d) 2,20,000 → Ans: C

Rearranging: Liabilities = Assets − Equity = 2,00,000 − 50,000 = ₹1,50,000 ✅ ⚠️ (a) 2,50,000 is the trap — that is assets plus equity, the mistake option (a) of Q36 describes.

---

🏷️ Ch 5 — Double Entry, Journal & Rules of Journalizing

Q50. In the double-entry book keeping system:

a) the same transaction is recorded in two people's accounts · b) two books are kept · c) recording a transaction and giving it debit & credit entry · d) recording the transaction twice → Ans: C

The dual aspect — every transaction affects two accounts, one debited and one credited, by equal amounts. ⚠️ D is the trap — it is not the same entry made twice; it is one transaction with two opposite effects.

---

🏷️ Ch 6 — Voucher Approach in Accounting

Q44. ______ is documentary evidence of a transaction done

a) Journal · b) Index · c) Voucher · d) Ledger → Ans: C

The voucher is the source document that proves a transaction happened; the journal and ledger are the books that record it. 🔗 Compare FAA 2024 · Q38: a receipt is proof of payment specifically.

---

🏷️ Ch 7 — Ledger Accounts

Q52. In the ledger book, which accounts are maintained?

a) only nominal · b) only real · c) real, personal and nominal · d) real and nominal → Ans: C

All three classes live in the ledger: Real = assets · Personal = persons/firms · Nominal = incomes and expenses.

Q54. A ledger account is prepared with the help of

a) Transactions · b) Vouchers · c) Journals · d) Pass book → Ans: C

Journal → posting → Ledger. The voucher (b) evidences the transaction; the journal is what the ledger is built from. 🔗 FAA 2024 · Q46 named that step: posting.

---

🏷️ Ch 8 — Subsidiary Books

Q56. In case of an overcharge, which document is issued?

a) Debit note · b) Credit note · c) Bank note · d) Ledger note → Ans: A and B (double-keyed)

---

🏷️ Ch 10 — Trial Balance

Q38. How frequently is the Trial Balance prepared?

a) quarterly · b) during the year · c) end of month · d) end of financial year → Ans: Null — DROPPED

🔁 Q57. ⭐ (verbatim in FAA 2024 · Q50) Trial balance helps to check the accuracy of the:

a) balance sheet · b) ledger · c) journals · d) cash flow statement → Ans: B

Arithmetical accuracy of ledger postings only. 🔁 A free mark in both papers.

---

🏷️ Ch 13 — Profit & Loss Account

Q32. A positive balance on the debit side of the P&L account indicates

a) gross profit · b) net profit · c) gross loss · d) net loss → Ans: B and D (double-keyed)

Q35. Loss due to fire in a factory is recorded in the

a) balance sheet · b) insurance account · c) profit and loss statement · d) factory account → Ans: C

Fire loss is an abnormal loss — not a normal trading expense, so it bypasses the Trading Account and is charged to P&L. Any insurance recovery is set off against it.

---

🏷️ Ch 15 — Bank Reconciliation Statement ⭐⭐

🔁 Q37. ⭐ (rephrased in FAA 2024 · Q41) An unpresented cheque is also commonly known as

a) bounced cheque · b) credited cheque · c) uncollected cheque · d) outstanding cheque → Ans: D

Issued and entered in your cash book, but not yet presented at the bank. ⚠️ C "uncollected" is the trap — that refers to cheques you received and deposited which the bank has not yet collected. Opposite direction.

🔁 Q41. ⭐ (verbatim in FAA 2024 · Q39) In a bank statement, cash deposited is shown as

a) debit · b) credit · c) expense · d) profit → Ans: B

The bank owes you more, so it credits you. 🔁 A free mark in both papers.

---

🏷️ Ch 16 — Partnership Accounts ⭐⭐

Q49. In the absence of any profit-sharing ratio, how is profit divided?

a) equally amongst all partners · b) on the basis of capital · c) on the basis of experience · d) as the court may decide → Ans: A

The Indian Partnership Act defaults — when the deed is silent:

Item	Default
Profit sharing	Equally, regardless of capital
Interest on capital	None
Interest on partner's loan	6 % p.a.
Salary/commission to a partner	None

⚠️ B is the intuitive-but-wrong answer — capital does not determine the share unless the deed says so.

🔁 Q53. ⭐ (verbatim in FAA 2024 · Q45) P and Q share 3:2; they admit Y with a 1/5 share. New ratio?

a) 12:4:7 · b) 12:8:5 · c) 12:5:8 · d) 8:5:12 → Ans: B

Y takes 1/5; the remaining 4/5 splits 3:2 → 12/25 : 8/25 : 5/25 = 12 : 8 : 5 ✅ 🔁 Identical to 2024 apart from the partners' names.

---

🏷️ Ch 17 — Cash-Based Single Entry System

Q55. Opening capital ₹80,000, closing capital ₹1,00,000. Profit or loss?

a) profit 1,00,000 · b) loss 1,00,000 · c) profit 20,000 · d) loss 20,000 → Ans: C

Statement of Affairs / net-worth method: $\text{Profit} = \text{Closing capital} - \text{Opening capital} + \text{Drawings} - \text{Fresh capital introduced}$ Here no drawings or fresh capital are given → 1,00,000 − 80,000 = ₹20,000 profit ✅ 📌 Remember the two adjustments — drawings are added back (they reduced capital but were not a loss) and fresh capital is deducted (it raised capital but was not a profit).

---

🏷️ Ch 18 — Financial Management

Q45. What is the main goal of financial management?

a) minimize risk of business · b) maximize sales · c) minimize loss · d) maximize shareholder's wealth → Ans: D

⚠️ The classic trap is "profit maximisation". Wealth maximisation is superior because it accounts for the time value of money and risk, and it is measured by share price, not accounting profit.

---

🏷️ Ch 19 — Financial Audit

Q43. What is the main objective of audit?

a) To detect errors and fraud · b) To express a true and fair opinion on financial statements · c) To give a message to shareholders · d) To pay tax to the government → Ans: B

⚠️ (a) is the near-universal wrong answer. Detecting fraud is an incidental/secondary objective. The primary objective is the independent opinion on a true and fair view.

🔁 Q48. ⭐ (verbatim in FAA 2024 · Q47) Audit of financial controls & irregularities is which type?

a) system audit · b) compliance audit · c) internal audit · d) statutory audit → Ans: C

🔁 A free mark in both papers.

---

🏷️ Ch 20 — Social Accounting

Q34. Classifications under social accounting include:

a) assets, liabilities, debt position · b) households, governments, enterprise · c) income, product, expenditure · d) public sector, private sector and joint sector → Ans: Null — DROPPED

Q58. The term "social accounting" was first introduced by

a) Abraham Lincoln · b) J. R. Hicks · c) Adam Smith · d) William Scott → Ans: B

Pure name-recall. J. R. Hicks. Pair it with Q34 — both came from this chapter in the same paper.

---

🏷️ Ch 22 — PFMS ⭐

🔁 Q59. ⭐ (also FAA 2024 · Q42 and PAA 2020 · Q83) PFMS was earlier known as

a) compliance plan scheme monitoring system · b) central plan scheme monitoring system · c) fund planning monetary system · d) state plan scheme monitoring system → Ans: B

CPSMS → PFMS. ⭐⭐ The only question confirmed across three genuinely different exams.

---

🏷️ Ch 23 — Taxation ⭐⭐

Q39. What is the meaning of incidence of tax?

a) Effect of tax on demand & supply · b) Escaping tax payment legally · c) Who will bear the burden of tax · d) Rate of tax charged → Ans: C

The four-term family — examiners rotate between them:

Term	Meaning
Impact	Who pays the tax first (the statutory payer)
Incidence	Who finally bears the burden
Shifting	Passing the burden from impact to incidence
Tax avoidance	Reducing tax legally (option b) — vs evasion, which is illegal

Q46. On which income is direct tax NOT applicable?

a) household property · b) agricultural income · c) business income · d) property tax → Ans: B

Agricultural income is exempt under section 10(1). ⚠️ Note: it can still be used for partial integration to fix the rate on other income — exemption is not the same as being ignored entirely.

Q47. GST was implemented on

a) 1st July 2019 · b) 1st July 2017 · c) 1st July 2018 · d) 1st July 2020 → Ans: B

1 July 2017. A free mark. (Constitutional basis: the 101st Amendment Act, 2016.)

---

🏷️ Ch 26 — Indian Financial System

Q42. When a company raises money from the public for the first time, it is known as

a) private placement · b) initial public offer · c) further public offer · d) green shoe option → Ans: B

---

📙 PAA 2020 PAPER — Q81–110 (practice only)

Chapter spread of this block

⚠️ Look at the shape: Ch 5 and Ch 12 take 8 of the 30 marks here — but only 1 mark across both FAA papers. This is exactly the trap described in Accountancy-Chapterwise-Weightage.

---

🏷️ Ch 1 — Introduction to Accounting

Q91. Root cause for financial accounting is

a) Social accounting · b) Management accounting · c) Human resource accounting · d) Stewardship accounting → Ans: D

Stewardship accounting — the original purpose: an agent accounting to the owner for resources entrusted to them. Financial accounting grew out of it.

---

🏷️ Ch 2 — Basic Terms · Capital vs Revenue

Q87. Drawings must be deducted from

a) Liability · b) Gross Profit · c) Capital · d) Net Profit → Ans: C

Drawings reduce the owner's capital, not profit. They are not a business expense.

Q92. Wages paid for installation of new machinery should be

a) Credited to the Machinery Account · b) Debited to the Machinery Account · c) Credited to the Wages Account · d) Debited to the Wages Account → Ans: B

⭐ Capital vs revenue expenditure — the classic test. Any cost of bringing an asset into working condition is capitalised into the asset. Installation wages become part of the machinery's cost, not a wages expense.

Q106. Depreciation is a

a) Cash operating expenditure · b) Non-cash operating expenditure · c) Cash non-operating expenditure · d) Non-cash non-operating expenditure → Ans: B

Non-cash (no money leaves the business) and operating (it arises from normal trading use). This is why depreciation is added back in the cash-flow statement.

---

🏷️ Ch 3 — Basic Accounting Concepts

Q93. ⭐ (also FAA 2024 · Q36) Which concept suggests the exclusion of human resource from the balance sheet?

a) Account Concept · b) Money Measurement Concept · c) Going Concern Concept · d) Cost Concept → Ans: B

Only what can be expressed in money is recorded. ⭐ One of the four questions that crossed from this paper into FAA 2024.

---

🏷️ Ch 5 — Double Entry & Account Classification (5 marks — the biggest chapter here, and near-worthless for FAA)

Q85. Drawings account is classified under

a) Real Account · b) Personal Account · c) Impersonal Account · d) Nominal Account → Ans: B

Drawings belong to the proprietor, a person → Personal Account.

Q86. What does a Nominal account with a debit balance represent?

a) Income/Gain · b) Cash · c) Asset · d) Expenses/Losses → Ans: D

Nominal accounts carry incomes and expenses. Debit = expense or loss; credit = income or gain.

Q102. Nominal account is classified under

a) Impersonal Account · b) Real Account · c) Personal Account · d) Representative Personal Account → Ans: A

The account tree — learn it once, it answers Q85, Q86 and Q102 together:

Class	Sub-class	Examples	Golden rule
Personal	Natural · Artificial · Representative	Ram, XYZ Ltd, Outstanding Wages	Debit the receiver, credit the giver
Impersonal → Real	Tangible · Intangible	Cash, Machinery, Goodwill	Debit what comes in, credit what goes out
Impersonal → Nominal	—	Rent, Salary, Commission	Debit expenses/losses, credit incomes/gains

⭐ Real and Nominal are both "Impersonal" — that single fact answers Q102.

Q107. Goods given as charity should be

a) Credited to Purchases account · b) Debited to purchases Account · c) Not recorded in purchase account · d) Credited to sales account → Ans: A

Goods leaving the business at cost reduce purchases: Debit Charity/Donation A/c, Credit Purchases A/c. ⚠️ Not sales — nothing was sold, so no revenue arises.

Q110. Which best explains the double entry system?

a) Purchase increases debit; income decreases credit · b) Expense increases debit; income decreases credit · c) Receiver is debit; giver is credit · d) Receiver is credit; giver is debit → Ans: C

The personal-account golden rule. Option (d) is its exact reversal — the standard decoy.

---

🏷️ Ch 6 — Voucher Approach

Q97. Receipt Voucher is

a) Record of purchase of raw material · b) Record of purchase of stationery · c) Record of sale of machinery · d) Record of receipt of cash and bank → Ans: D

Receipt voucher = money coming IN. Its opposite is the payment voucher (money going out).

---

🏷️ Ch 11 — Financial Statements · Adjustments & Provisions

Q88. Which adjusting double entry is correct for prepaid expenses?

a) Debit = Prepaid Expense, Credit = Expense · b) Debit = Expense, Credit = Prepaid Expense · c) Debit = Cash, Credit = Expense · d) Debit = Prepaid Expense, Credit = Cash → Ans: A

At year end the unexpired portion is pulled out of the expense and parked as an asset: Dr Prepaid Expense, Cr Expense. ⚠️ (d) is the trap — that is the entry when you pay in advance, not the year-end adjustment. (b) is next year's reversal.

Q89. Closing debtors ₹1,00,000 · opening provision ₹1,000 · provision to be maintained at 5 %. Additional provision charged to this year's P&L?

a) ₹1,000 · b) ₹5,000 · c) ₹4,000 · d) ₹6,000 → Ans: C

$\text{Required provision} = 5\% \times 1{,}00{,}000 = 5{,}000$ $\text{Additional charge} = 5{,}000 - 1{,}000\ (\text{already there}) = \mathbf{4{,}000}$

⚠️ (b) ₹5,000 is the trap — the existing provision is not re-charged. Only the top-up hits P&L.

Q109. A firm omitted to record the provision for bad and doubtful debts. Impact?

a) Net Profit would decrease · b) Net profit would increase · c) Gross profit would be overstated · d) Gross Profit would be understated → Ans: B

An omitted expense means profit is overstated → net profit increases. ⚠️ (c) and (d) are wrong for a structural reason: provisions are charged in the P&L, never the Trading Account, so gross profit is untouched.

---

🏷️ Ch 12 — Trading Account & Stock (3 marks here, ZERO in both FAA papers)

Q82. Basis for allocating carriage inward between pre- and post-incorporation periods?

a) Time · b) Sales · c) Purchase · d) Credit Sales → Ans: C

Carriage inward varies with purchases, so it is apportioned in the purchase ratio. 📌 The family: sales-based → carriage outward, selling expenses · purchase-based → carriage inward · time-based → rent, salaries, depreciation.

Q94. Which is excluded from the cost of stock?

a) Carriage inward · b) Import duties · c) Purchases of raw material · d) Salary of purchasing staff → Ans: D

Cost of stock includes purchase price + import duties + carriage inward + directly attributable costs. Administrative salaries are excluded — they are period costs, not part of bringing the stock to its present location and condition.

Q105. The balance remaining after deducting gross profit from sales is called

a) Cost of goods Sold · b) Net sales · c) Gross Sales · d) Liabilities → Ans: A

Rearranging Gross Profit = Sales − COGS gives COGS = Sales − Gross Profit ✅

---

🏷️ Ch 13 — Profit & Loss Account

Q96. The credit balance of the retained earnings statement represents

a) Undistributed Profit · b) Undisclosed Profit · c) Distributed Profit · d) Unearned Profit → Ans: A

Retained earnings = profit earned but not yet distributed as dividend.

Q99. Income tax paid on business income by a sole proprietor is

a) debited to trading account · b) debited to profit and loss account · c) deducted from capital account in the balance sheet · d) added to capital account → Ans: C

⭐ A sole proprietor and their business are the same legal person, so their income tax is a personal expense — treated like drawings and deducted from capital. ⚠️ (b) is the intuitive-but-wrong answer. (For a company, tax IS a P&L charge — that is the distinction being tested.)

---

🏷️ Ch 14 — Balance Sheet

Q108. Ledger balances: Capital ₹4,00,000 · Net profit ₹3,00,000 · Accrued income ₹1,00,000 · Provision for taxes ₹75,000 · Cash & Bank ₹1,25,000 · Investments ₹2,00,000 · Liabilities ₹80,000 · Fixed assets ₹4,30,000. Balance Sheet total?

a) ₹5,55,000 · b) ₹7,80,000 · c) ₹8,55,000 · d) ₹9,55,000 → Ans: C

Sort each item to its side, then total either side — they must agree.

⚠️ Two traps: accrued income is an ASSET (income earned, not yet received), and provision for taxes is a LIABILITY. Misplacing either gives one of the decoys.

---

🏷️ Ch 15 — Bank Reconciliation Statement

Q95. ⭐ (also FAA 2024 · Q49) A bank pass book is a copy of

a) The cash column of a customer's cash book · b) The bank column of a customer's cash book · c) The customer account in the bank's ledger · d) The debtor's account in the bank's ledger → Official key: B · ⚠️ correct answer: C

Q103. A cheque received from a customer is deposited for collection and is later dishonoured. This results in

a) customer's account being credited · b) customer's account being debited · c) no change in customer's account · d) no change in bank account → Ans: B

The original receipt is reversed: the customer owes you again, so you debit them (a debtor's balance is a debit).

Q104. Starting from the Cash Book balance, how are direct deposits by customers adjusted to reach the Pass Book balance?

a) Added · b) Subtracted · c) Adjusted · d) Not adjusted → Ans: A

The bank has already credited the deposit; your cash book has not recorded it. Going cash book → pass book, you add it. ⭐ The BRS rule: ask "who knows about it already?" Anything the bank knows and you don't gets added when moving toward the pass book.

---

🏷️ Ch 16 — Partnership Accounts

Q81. John and James share profits equally. Jack joins and contributes land: historical cost ₹50,000, book value ₹25,000, current market value ₹30,000. By what amount should Jack's account be increased?

a) ₹50,000 · b) ₹30,000 · c) ₹25,000 · d) ₹1,05,000 → Ans: B

⭐ An incoming partner's capital is credited with the CURRENT MARKET VALUE of what they bring — the fair value on the date of admission. ⚠️ All three decoys are the other figures in the stem, and (d) is their sum. Historical cost and book value are the previous owner's numbers and are irrelevant to the firm.

Q98. "The liability of at least one partner is unlimited whereas the liability of the other partners is limited." Which type of partnership?

a) Partnership at will · b) Limited Partnership · c) General Partnership · d) Particular Partnership → Ans: B

---

🏷️ Ch 17 — Single Entry System

Q84. Which account is generally used in single entry / incomplete records to obtain the amount of credit sales?

a) Accounts Payable Account · b) Total Revenue Account · c) Debtors Account · d) Stocks Account → Ans: C

The Total Debtors Account is reconstructed and credit sales fall out as the balancing figure. 📌 Its mirror: the Total Creditors Account yields credit purchases the same way.

Q90. ⭐ (also FAA 2024 · Q43) Statement of financial position produced from incomplete accounting records is commonly known as

a) Balance sheet · b) Statement of affairs · c) Statement of financial operations · d) Cash flow statement → Ans: B

⭐ One of the four questions that crossed into FAA 2024.

---

🏷️ Ch 19 — Financial Audit

Q101. What is the first step of a financial audit?

a) Planning the audit · b) Interviewing the company's manager to find out what they want the auditors to say · c) Determining the scope or boundaries of the audit · d) Conducting surprise cash counts → Ans: A

Planning comes first — and defining the scope (c) happens within planning, which is why (c) is the near-miss. ⚠️ (b) is not merely wrong, it is unethical — it would destroy the auditor's independence.

---

🏷️ Ch 22 — PFMS

Q83. ⭐⭐ (also FAA 2022 · Q59 and FAA 2024 · Q42) PFMS was earlier known as

a) Central Plan Schemes Monitoring System (CPSMS) · b) Controller General of Accounts (CGA) · c) Central Sector Scheme of Planning Commission · d) Core Banking System (CBS) → Ans: A

⭐⭐ The only question confirmed across THREE genuinely different exams. Learn it and never lose the mark. ⚠️ CGA is the operator, not the old name — that is why (b) is the decoy.

Q100. The biggest strength of PFMS is its integration with the

a) Core defence system · b) Core insurance sector · c) Core social security sector · d) Core banking system in the country → Ans: D

PFMS is integrated with the Core Banking Solution of banks, which is what enables real-time DBT tracking to beneficiary accounts. 📌 Note (d) here and (d) in Q83 are different things — CBS = Core Banking System appears as a decoy in one and the answer in the other.

---

📋 PAA 2020 answer key

29 of 30 verified correct against my own working. Q95's official key is wrong.

---

📋 Answer key at a glance

FAA 2022 defects: Q34 and Q38 dropped (Null); Q32 and Q56 double-keyed. FAA 2024: no defects in the accountancy section.

---

🪤 The traps, in one place

---

🔗 Related

• ⭐ Real FAA papers: FAA-2022-paper · 2024-paper
• Practice only: PAA-2020 · its series-A booklet
• Chapter maps: FAA-2022-Accountancy-Chapterwise · 2024-Accountancy-Chapterwise
• Weightage: Accountancy-Chapterwise-Weightage
• Cross-paper: Four-Paper-Comparison · PAA-2020-Accountancy-Analysis
• Revision: FAA-ACCOUNTANCY-CHEAT-SHEET · FAA-ACCOUNTANCY-ALL-SHORT-NOTES · INDEX
• PROJECT-LOG · Home