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CAFT Set Code

Common Accounting and Finance Test 001

Time Allowed: Two Hours Thirty Minutes (2:30) Maximum Marks: 150

Instructions

1. CAFT Written Test consists of Eight sections: (10 Questions per Section)

Accountancy

Financial Management

Audit

Macroeconomics

Computer Skills

Taxation

Basic Numeracy & Reasoning

Miscellaneos Section

2. You have to mark all your responses on the answer sheet. See directions on the answer

sheet.

3. In case you feel that there is more than one correct response, mark the response which you

consider the best. In any case, choose only one response for each question.

4. There is negative marking of 0.25 marks for every incorrect answer.

5. After completion, handover Question Booklet, Rough Notebook and Answer Sheet to

Invigilator.

6. Use of basic calculator is allowed. Use of scientific calculator or mobile phones is strictly

prohibited.

DO NOT START THE TEST UNTIL YOU ARE ASKED TO DO SO

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SAMPLE PAPER CAFT

Section 1: Accountancy

Q-1) A, B and C are equal partners. After distributing the loss on realization of assets and

paying all liabilities their capital accounts show the following balances:

A- Rs. 10,000 (cr.)

B- Rs. 4,000 (cr.)

C- Rs. 14,000 (cr.)

What is the amount of cash with the firm?

a) Rs. 18,000

b) Rs. 4,000

c) Rs. 14,000

d) Rs. 10,000

Q-2) Expenses need to be recorded in the period in which the associated revenues are

recognised.

This is to be ensured as per which one of the following accounting principles?

a) Revenue recognition

b) Cost benefit

c) Matching

d) Periodicity

Q-3) If opening stock=Rs 15000

Purchases = Rs 37500

Direct expenses =Rs 1500

Closing stock = Rs 7500

Operating expenses = Rs 3000 and

Sales are Rs 60000 during the year, what is the net profit?

a) Rs 12000

b) Rs 10500

c) Rs 7500

d) Rs 3000



Q-4) Match List I with List II and select the correct answer using the code given below the

lists:

List I (nature of expenditures/receipts) List II (examples)

a. Capital receipt 1. Sale of fixed assets

b. Capital expenditure 2. Improvement of fixed assets

c. Revenue expenditure 3. Income received as interest

d. Revenue receipt 4. Interest on loan for business

Code:

A B C D

a) 1 2 4 3

b) 3 4 2 1

c) 1 4 2 3

d) 3 2 4 1

Q-5) According to the AS-2, the inventory is to be valued at which of the following?

a) actual cost or sales value whichever is lower

b) historical cost

c) net realisable value

d) historical cost or net realisable value , whichever is lower

Q-6) The cost of a machine is Rs 70,000. It has 10-year life at the end of which it is expected

to realise Rs 5000. The depreciation for the first four years on a straight line basis is:

a) Rs 28000

b) Rs 26000

c) Rs 22000

d) Rs 20000

Q-7) Goods worth Rs 24000 were returned by X. The accountant, however, credited the sales

return by Rs 42000. In order to rectify this error, what should be done?

a) Debit the sales return account by Rs 42000

b) Credit the sales return account by Rs 24000

c) Debit the sales return account by Rs 66000

d) Debit the sales return by Rs 18000



Q-8) Given the following data extracted from the books of Anand Traders:

Opening stock = Rs. 30,000 ; closing stock = Rs 40,000 ; Purchases= Rs.1,25,000 ;

carriage inwards =Rs 2000 ; carriage outwards = Rs 3,000 ; return outwards = Rs 5,000 ;

sales =Rs. 1,50,000 .

The cost of the goods sold will be:

a) Rs. 1,30,000

b) Rs. 1,12,000

c) Rs. 1,20,000

d) Rs. 1,15,000

Q-9) A partner’s capital at the end of the year was Rs.3, 00,000. His share of the profit for the

year was Rs. 60,000 and he had drawn Rs. 20,000 from the firm during the year. Then

his capital at the beginning of the year was:

a) Rs. 3,00,000

b) Rs. 320,000

c) Rs. 3,80,000

d) Rs. 2,60,000

10. The following information is available regarding subscription from the members of X

Club during the year 2003-04:

Subscription income : Rs.28, 000

Outstanding subscription at the year : Rs. 1,1,60

Outstanding subscription at the beginning of the year : Rs. 360

Subscription received in advance : Rs. 640

What is the amount of receipt of the club from subscription during the year 2003-04?

a) Rs. 28,160

b) Rs. 29,000

c) Rs. 27,840

d) Rs. 29,520



Section 2: Financial Management

Q-11 ) A company with a paid–up capital of 5,000 shares of Rs. 10 each has a capital

turnover of four times with a margin of 8 % on sales . What is the return on investment

of the company?

a) 28%

b) 32%

c) 35%

d) 42%

Q-12) As on 31-12-2006, a company’s liabilities were :

Equity capital = 1,00,000

Reserves = 10,000

Profit = 14,000

Loan = 1,10,000

Creditors= 30,000

Provision for taxation= 34,000

Proposed dividend =10,000

What is the proprietary ratio of the company?

a) 1:1.89

b) 0.89:1

c) 1.35: 1

d) 1:1.03

Q-13) The following information is available from the financial statements of a company:

Net profit = 20,000

Opening stock = 20,000

Closing stock = 24,000

Opening debtors= 30,000

Closing debtors = 40,000

What is the cash from operations of the company?

a) Rs. 10,000

b) Rs. 15,000

c) Rs. 12,000

d) Rs. 6,000



Q-14) Which one of the following statements is correct?

a) If the value of current assets (of the current year ) increases (compared with last year),

the working capital decreases

b) If the value of current liabilities ( in the current year ) decreases (compared with last

year) , the working capital increases

c) If the value of current liabilities (in the current year ) increases (compared with last

year) , the worki8ng capital increases

d) If the value of current assets ( in the current year ) decreases (compared with last year)

the working capital increases

Q-15) Which of the following is not disclosed in the cash flow statement, either on the face of

the statement or in a separate schedule?

a) The major classes of gross cash receipts

b) The amount of income tax paid

c) A reconciliation of net income to net cash flows from operations

d) A reconciliation of ending retained earnings to net cash flows from operations

Q-16) Which of the following is not the correct symptom of over-capitalisation?

a) When a company earns less than what it should have earned as a fair rate of return on

its total capital

b) When the book value of shares is lower than their real value

c) When earnings do not justify the amount of capital invested

Select the correct answer using then code given below:

Code: a) 1 only b) 2 only c) 1 and 2 d) 2 and 3

Q-17 ) When net profit is Rs 2,25,000 ; taxes Rs 25,000 ; and net worth Rs.10,00,000 . What

is the rate of return on shareholders’ equity?

a) 22.5 %

b) 20 %

c) 25%

d) Cannot be determined

Q-18) The following information relates to an organisation:

Equity share capital = Rs 10,00,000

18 % debentures = Rs 8,00,000

10 % preference share capital = Rs 5,00,000

Current liabilities = Rs 3,00,000

Loan at 15 %(long term )Rs 1,40,000

General reserve=Rs 8,00,000



Current assets =Rs 3,50,000

What is the capital gearing ratio of the organisation?

a) 1.6

b) 0.8

c) 1.2

d) 0.5

Q-19) Which of the following transactions can change the current ratio?

a) Purchase of goods for cash

b) Payment to outstanding trade creditors

c) Acceptance on a Bill of Exchange written by a trade creditor

d) Dishonour of a Bill of a Exchange

Q-20) The current ratio is 3:2 and the amount of current liabilities is Rs 40,000.What is the

amount of current assets ?

a) Rs.60,000

b) Rs.70,000

c) Rs. 80,000

d) Rs. 1,00,000



Section 3: Audit

Q-21) Analytical review by an auditor mainly includes:

a) Examining vouchers and other documents

b) Physical verification of assets

c) Examining day books with ledgers

d) Study of ratios and trends

Q-22) Internal audit report is submitted to:

a) Government

b) Shareholders

c) Creditors

d) Board of directors

Q-23) The main purpose of auditing is to:

a) Detect accounting offences and to punish the offender

b) Prepare and authenticate the accounts

c) Prepare the accounts and authenticate their true and fair value

d) Certify the financial position of the business

Q-24) In which of the following cases, does the auditor submit Long Form Audit Report

(LFAR) in addition to the main audit report?

a) Manufacturing company audit

b) Cooperative society audit

c) Bank audit

d) Educational institution audit

Q-25) Match list I and list II and select the correct answer by using the codes given below

the lists

LIST I LIST II

a) Vouching 1. Checking of cost and posting

b) Routine checking 2. Checking of entries

c) Verification 3. Checking partial entries

d) Test checking 4. Enquiry into the value

CODES:

A B C D

a) 4 3 2 1

b) 2 1 4 3

c) 4 1 2 3

d) 2 3 4 1



Q-26) Teeming and lading is a technique exercised with the motive of

a) Defalcation of cash

b) Misappropriation of goods

c) Falsification of accounts

d) Early completion of accounts

Q-27) What type of audit is compulsory for a banking organisation?

a) Periodic audit

b) Efficiency audit

c) Continuous audit

d) Interim audit

Q-28) Who among the following can fill a casual vacancy caused in a company by way of

resignation of the auditor?

a) Board of directors

b) Shareholders through general meeting

c) Central government

d) Comptroller and auditor general

Q-29) Which one of the following may be the opinion of the auditor where he fails to

obtain an expression of opinion ?

a) Qualified opinion

b) Adverse or negative opinion

c) Disclaimer of opinion

d) Piecemeal opinion

Q-30) What is the audit of executive actions and plans bearing on the finance and the

expenditure of the company, known as?

a) Proprietary audit

b) Efficiency audit

c) Performance audit

d) Operational audit



Section 4: Macroeconomics

Q-31) In Capital market, ‘BETA’ is used to measure:

a) The riskiness of securities

b) Profitability of securities

c) Marketability of securities

d) Volatility in prices of securities

Q-32) Underwriters are persons who:

a) Purchase the shares and debentures of the company

b) Work as agents of the company for the sale of shares and debentures

c) Undertake to buy those shares and debentures not subscribed for by the public

d) Publicise the share-issue on behalf of the company

Q-33) The movement of securities from one stock exchange to another with the object of

reaping a profit from the disparity in share prices is called:

a) Averaging

b) Arbitraging

c) Backwardation

d) Forward trading

Q-34) Gilt- Edged market means:

a) Bullion market

b) Market for government securities

c) Market for guns

d) Market of pure metals

35. Which of the following would include foreign direct investment in India?

1. Subsidiaries of foreign companies in India

2. Majority foreign equity holding in Indian companies

3. Companies exclusively financed by foreign companies

4. Portfolio investment

Select the correct answer using the codes given below:

a) 1,2,3 and 4

b) 2 and 4 only

c) 1 and 3 only

d) 1,2 and 3 only



Q-36) Devaluation of currency means :

a) Reduction in the value of the currency vis-à-vis major internationally traded

currencies

b) permitting the currency to seek its worth in the international market

c) fixing the value of the currency in conjunction with the movement in the value of

a basket of pre-determined currencies

d) fixing the value of currency in multilateral consultation with the IMF, the World

Bank and major trading partners

Q-37) Disguised unemployment in India is mainly related to:

1. agricultural sector

2. rural area

3. factory sector

4. urban area

a) 1 and 2

b) 1 and 3

c) 2 and 3

d) 3 and 4

Q-38) Which of the following measures would increase the money supply in the

economy?

1. purchase of government securities from the public by the central bank

2. deposit of currency in commercial banks by the public

3. borrowing by the government from the central bank

4. sale of government securities to the public by the central bank

Select the correct answer using the codes given below :

a) 1 only

b) 2 and 4 only

c) 1 and 3

d) 2,3 and 4

Q-39) Which bank is known as lender of last resort?

a) Reserve bank of India

b) State bank of India

c) World bank

d) International Monetary Fund



Q-40) Who is a bull?

a) A stock broker who deals or specializes in a few shares

b) An investor who sells securities in anticipation of being able to rebury them

later at a lower price

c) An investor who buys securities in anticipation of being able to sell them at a

higher price

d) An investor who expects the price of a security or of the market as a whole to

fall



Section 5: Computer Skills

Q-41 ) The shortcut key to quit from Tally is :-

(a) Ctrl + L

(b) Ctrl + P

(c) Ctrl + M

(d) Ctrl+Q

Q-42 ) To print a voucher from Tally we need to press

a) Ctrl + P

b) Shift + P

c) Alt + P

d) Ctrl + Alt + P

Q-43 ) To create Purchase Order press

a) Alt + F4

b) Ctrl + F4

c) F4

d) None of these

Q-44) While exporting Ledgers from Tally to Web Page, we use

a) XML Format

b) ASCII Format

c) SDF Format

d) HTML Format

Q-45) The shortcut used to change date in tally?

a) Alt+F2

b) Alt+F3

c) F2

d) F1

Q-46) The software which contains rows and columns is called?

a) database

b) drawing

c) spreadsheet

d) word processing



Q-47) What is the keyboard shortcut for creating a chart from the selected cell range IN

ms-excel?

a) F2

b) F8

c) F11

d) F4

Q-48) The formulae in MS-EXCEL Start with?

a) %

b) =

c) +

d) –

Q-49) The default header for a worksheet is?

a) Username

b) Date and time

c) Sheet tab name

d) None

Q-50) The cell reference for cell range of G2 to M12 is?

a) G2.M12

b) G2;M12

c) G2 : M12

d) G2-M12



Section 6: Taxation

Q-51) Under the Income tax act ,Marginal relief is available to?

a) Company

b) Individual

c) HUF

d) Partnership firm

Q-52) An HUF is Resident in India ,if ?

a) If the management and control is wholly within India

b) If the management and control is partially outside India

c) Its karta is resident

d) None of these

Q-53 When a person is considered having substantial interest in a firm?

a) share in profit of the firm should be 10 %

b) share in profit of the firm should be 40 %

c) share in profit of the firm should be 20 %

d) share in profit of the firm should be 51 %

Q-54 ) Incomes, which accrue or arise outside India but are received directly into India

are taxable in case of :

a) resident only

b) both ordinarily resident and not ordinarily resident

c) non-resident

d) all the assesses

Q-55 ) Any income of a minor child who is a person with disability shall be :

a) clubbed with the income of the parent whose income other than such income

is greater

b) taxable in the hands of the minor through his guardian/legal representative

c) exempt

d) none of these

Q-56) Under which of the following circumstances may ‘capital gains’ arise ?

1. when there is an increase in the sales of a product

2. when there is a natural increase in the value of the property owned

3. when you purchase a painting and there is growth in its value due to increase

in its popularity



Select the correct answer using the codes given below :

a) 1 only

b) 2 and 3 only

c) 2 only

d) 1,2 and 3 only

Q-57 )Mr.X purchased tenancy rights on 1.1.79 for Rs. 2 lakhs .The same was sold by

him on 2.1.2010 for Rs.16 lakhs .Fair market value of the tenancy rights as on 1.4.81 =

Rs.5 lakhs. What will be the capital gain ? ( index for P/Y = 632 )

a) Rs. 3,36,000

b) Rs . 3,34,000

c) Rs.3,40,000

d) Rs. 326,000

Q-58 ) Loss under the head house property :

a) Can be carried forward for 8 years

b) Cannot be carried forward

c) Can be carried forward for only 4 years

d) None of these

Q-59 Under the head ’salary ‘how is ‘entertainment allowance’ dealt with(for

Government employees) ?

a) It is allowed as deduction

b) It is included in income of the employee and then as deduction

c) It is included in the income of the employee

d) None of these

Q-60) A has two house properties. Both are self-occupied. The annual value

a) Of both house shall be nil

b) One house shall be nil

c) Of no house shall be nil

d) Both the houses will have value



Section 7: Basic Numeracy & Reasoning

Q-61) The cost of 10 bananas and 9 apples is Rs 40. The cost of 27 bananas and 25

apples is Rs. 102. What is the cost of 3 bananas and 2 apples?

a) 24

b) 12

c) 18

d) 32

Q-62) The ratio between 2 numbers is 3: 5 and their sum is 40. Find the larger of the 2

numbers.

a) 15

b) 20

c) 25

d) 40

Q-63) A purse contains money in the denominations of Rs10, Rs20, and Rs 100 in ratio

of 1:2:1. If the total amount in the purse is Rs750, find the number of Rs20 notes?

a) 20

b) 10

c) 5

d) 15

Q-64) 84% of a particular total is 714. What is 92 % of the total ?

a) 782

b) 728

c) 756

d) 765

Q-65) A shopkeeper sells a calculator at Rs120 for 33 .33 % profit. At what should he

sell it to gain 40 %

a) 160

b) 140

c) 120

d) 126



Q-66) A person stood alone in a desert on a dark night and wanted to reach his village

which was situated 5 km east of the point where he was standing. He had no instruments

to find the direction but he located the polestar .The most convenient way now to reach

his village is to walk in the

a) Direction facing the polestar

b) Direction opposite to the polestar

c) Direction keeping the polestar to his left

d) Direction keeping the polestar to his right

Q-67) Ram and Shyam can do a piece of work in 10 days. Shyam and Sanjay can do it

in 15 days. Ram and Sanjay can do it in 20 days. In how many days can Ram complete

the work individually?

a) 20

b) 16

c) 12

d) 24

Q-68) Find the length of the bridge which a train 120m long travelling at 54kmph can

cross in 30 seconds .

a) 330m

b) 300m

c) 360m

d) 230m

Q-69) In five flats, one above the other, live five professionals. The professor has to go

up to meet his IAS officer friend. The doctor is equally friendly to all, and has to go up

as frequently as go down. The engineer has to go up to meet his MLA friend above

whose flat lives the professor's friend.

From the ground floor to the top floor, in what order do the five professionals live?

a) Engineer, Professor, Doctor, IAS officer, MLA

b) Professor, Engineer, Doctor, IAS officer, MLA

c) IAS officer, Engineer, Doctor, Professor, MLA

d) Professor, Engineer, Doctor, MLA, IAS officer

Q-70 ) Examine the following statements:

1. None but the rich ran afford air-travel.

2. Some of those who travel by air become sick

3. Some of those who become sick require treatment

Which one of the following conclusions can be drawn from the above statements?

a) All the rich persons travel by air.

b) Those who travel by air become sick

c) All the rich persons become sick.

d) All those who travel by air are rich



Section 8 – Miscellaneous Section

Q-71) Which one of the following statement is correct ?

The balance of ‘capital Redemption Reserve ‘ can be used for :

a) Issuing partly paid up bonus shares

b) Issuing fully paid up bonus shares

c) Writing off preliminary expenses

d) Declaring dividends

Q-72) Which One of the following statements is correct for valuation of rights under

Right Issue ?

a) The market value of existing shares is to be considered with the issue price

b) The face value of existing shares is to be considered with the issue price

c) The market value of existing shares is to be considered with the face value

d) The market value of existing shares is to be considered with the average of

face value and market value

Q-73) A sum of Rs.50,000 was spent by a factory in overhauling its existing plant and

machinery , and it enhanced its working life by 5 years. The aforesaid

expenditure is:

a) Revenue expenditure

b) Deferred revenue expenditure

c) Capital expenditure

d) Partly capital and partly revenue expenditure

Q-74) Consider the following adjustment entries:

1. Outstanding expenses : Expense a/c dr.

To outstanding expenses a/c

2. Prepaid expenses : expense a/c dr.

To prepaid expense a/c

3. Income earned and not : Income a/c dr.

Received To outstanding income a/c

4. Income received in advance : Income a/c dr.

To prepaid income a/c

Which of the adjusting entries given above is/are correct?

a) 1 and 4

b) 2 and 3

c) 1 only

d) 1,2,3 and 4

Q-75) When net profit is Rs.2,25,000 ; taxes Rs.25,000 and net worth Rs. 10,00,000 ,

what is the rate of return on shareholders’ equity ?

a) 22.5 %

b) 20 %

c) 25 %

d) Cannot be determined



Q-76) XYZ ltd. provides the following information:

Net profit Rs.1600

Profit on sale of investments Rs.480

Depreciation Rs.5, 200

Loss on sale of machinery Rs. 200

Increase in stock Rs.1000

Increase in creditors Rs.1000

What is the amount of funds from operation of the company?

a) Rs. 7,000

b) Rs. 7520

c) Rs. 8520

d) Rs.6520

Q-77) With regard to the rate of return on investment ( ROI ),which one of the

following statements is NOT valid ?

a) It is an overall indicator of the profitability of an enterprise

b) It is a triangular relationship in the sense that ROI= profit margin x asset

turnover

c) It is a superior measure compared to the cash flow generated per share

d) It was first developed by Du Pont, USA

Q-78) The selection of items ,to be included in the audit on a subjective basis without

consideration of sample size of method of method of selection , is :

a) Probability sampling

b) Systematic sampling

c) Random sampling

d) Judgement sampling

Q-79) While establishing the statistical sampling plan, the degree of precision

required is determined by:

a) keenness of the management

b) suitability of accounting systems and procedures

c) allowable margin of error the auditors are willing to accept

d) random number table used for the purpose

Q-80) Which of the following relating to audit programme is NOT correct ?

a) The auditor cannot defend himself on the basis of audit programmes of

there is a charge of negligence against him

b) It is useful basis for planning the programme for the subsequent year

c) It helps in the final review before the report is signed

d) It simplifies the allocation of work amongst the audit staff



Key:

1 c 17 b 33 b 49 d 65 d

2 c 18 c 34 b 50 c 66 c

3 b 19 b 35 d 51 a 67 d

4 a 20 a 36 a 52 a 68 a

5 d 21 d 37 a 53 c 69 d

6 b 22 d 38 c 54 a 70 d

7 d 23 d 39 a 55 b 71 b

8 b 24 c 40 c 56 b 72 d

9 d 25 b 41 d 57 a 73 c

10 c 26 b 42 c 58 a 74 a

11 b 27 C 43 a 59 b 75 b

12 b 28 b 44 d 60 b 76 d

13 a 29 c 45 c 61 c 77 b

14 b 30 c 46 c 62 c 78 a

15 d 31 a 47 c 63 b 79 d

16 a 32 c 48 b 64 a 80 a


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