The 'Closing Stock' is valued on the basis of: MCQ with Answer and Explanation

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The 'Closing Stock' is valued on the basis of:

A. Cost or market price whichever is higher

B. Cost or net realizable value whichever is lower

C. Market price only

D. Net realizable value only

Answer: Option B

Solution (By JKSSB Mock Tests)

Prudence convention and AS 2 require lower of cost and NRV.

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

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Question #1

The term 'Substantive Testing' in audit refers to:

A. Testing the internal controls

B. Testing the details of balances and transactions

C. Issuing the audit report

D. Planning the audit

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Correct Answer: Option B

Explanation:
Substantive testing involves detailed testing of transactions and balances to detect material misstatements in the financial statements.

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

Question #2

The 'Indian Audit and Accounts Department' works under:

A. Comptroller and Auditor General

B. Ministry of Finance

C. RBI

D. Planning Commission

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Correct Answer: Option A

Explanation:
The IA&AD is headed by the CAG.

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

Question #3

A firm's assets ₹6,00,000, liabilities ₹1,00,000, normal rate 10%, average profit ₹75,000. Value of goodwill by capitalization of average profit method (total value less net assets) is:

A. ₹1,00,000

B. ₹2,50,000

C. ₹1,50,000

D. ₹75,000

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Correct Answer: Option B

Explanation:
Capitalized value of average profit = 75,000 / 10% = ₹7,50,000. Net assets = 6,00,000 - 1,00,000 = ₹5,00,000. Goodwill = 7,50,000 - 5,00,000 = ₹2,50,000.

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