As per AS 3, interest paid on loan is classified as: MCQ with Answer and Explanation

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As per AS 3, interest paid on loan is classified as:

A. Investing activity

B. Operating activity

C. Financing activity

D. None

Answer: Option C

Solution (By JKSSB Mock Tests)

Interest paid on borrowings is a financing activity under AS 3.

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Question #1

The accounting standard dealing with Property, Plant and Equipment (PPE) is:

A. AS 10

B. AS 2

C. AS 26

D. AS 9

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Correct Answer: Option A

Explanation:
AS 10 regulates the accounting for Property, Plant, and Equipment, covering recognition, measurement, and depreciation.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #2

If a business purchases goods worth ₹60,000 paying ₹20,000 cash and the balance on credit, the accounting equation will show:

A. Increase in assets ₹60,000, increase in liabilities ₹40,000, decrease in capital ₹0

B. Increase in assets ₹60,000, increase in liabilities ₹60,000

C. Increase in assets ₹60,000, increase in liabilities ₹40,000, decrease in capital ₹20,000

D. Increase in assets ₹40,000, increase in liabilities ₹40,000

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Correct Answer: Option A

Explanation:
Assets increase by ₹60,000 (stock), cash decreases by ₹20,000, net assets increase ₹40,000; liabilities increase by ₹40,000 (creditors). Capital is unchanged. Equation: Assets = Liabilities + Capital, here +40,000 = +40,000 + 0.

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Question #3

The 'Lease Liability' under Ind AS 116 is measured at:

A. Present value of lease payments not yet paid

B. Cost

C. Fair value

D. Undiscounted sum

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Correct Answer: Option A

Explanation:
Lease liability is initially measured at present value of future lease payments.

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