Under AS 19 'Leases', a lease is classified as finance lease if: MCQ with Answer and Explanation

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Under AS 19 'Leases', a lease is classified as finance lease if:

A. Lessor retains ownership

B. It is an operating lease

C. Lease term is less than one year

D. It transfers substantially all risks and rewards incidental to ownership

Answer: Option D

Solution (By JKSSB Mock Tests)

Finance lease transfers substantially all risks and rewards of ownership to the lessee.

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

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Question #1

The 'Comptroller and Auditor General' (CAG) is not responsible for audit of:

A. Public sector banks (statutory audit by CA firms)

B. Government companies

C. Government departments

D. Autonomous bodies substantially financed by government

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Correct Answer: Option A

Explanation:
Statutory audit of public sector banks is conducted by chartered accountant firms appointed by RBI/Central Government; CAG conducts supplementary audit.

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

Question #2

The 'Profit & Loss Account' begins with:

A. Opening stock

B. Capital

C. Gross profit or gross loss brought down from Trading Account

D. Net sales

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Correct Answer: Option C

Explanation:
Gross profit is transferred to the credit side of P&L Account; gross loss to debit side.

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

Question #3

Interest on drawings is charged to partners' capital/current accounts because:

A. It reduces partners' capital

B. It is a liability

C. It is an income for the firm

D. It is an expense for the firm

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Correct Answer: Option C

Explanation:
Interest on drawings is a gain for the firm, so it is credited to Profit & Loss Appropriation Account and debited to partners' capital accounts.

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

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