PT Test Questions Icai

1.
As per Ind AS 108 ‘Operating Segments’, if a financial statement contains both the
consolidated financial statements of a parent, as well as parent’s separate financial
statements, segment information is required:
a) Only in the consolidated financial statements.
b) Only in the parent’s separate financial statements.
c) Both sets of financial statements.
d) Either in the consolidated financial statement or in the parent’s separate financial
statements.
Answer‐ a) Only in the consolidated financial statements.

2. Which of these is an allowable cost of an asset under Ind AS 16 ‘Property, Plant and
Equipment’?
a) Professional fees
b) General overheads
c) Initial operating losses
d) Administration expenses
Answer‐ a) Professional fees
3. Commission on reinsurance ceded appears as
a) An expense in revenue account.
b) An income in revenue account
c) A liability in the balance sheet.
d) An asset in the balance sheet.
Answer‐ b) An income in revenue account.
4. As per Ind AS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’ warranty claims
normally generate:
a) A contingent liability.
b) A provision.
c) A contingent asset.
d) An onerous contract
Answer‐ b) A provision.
5. As per Ind AS 105‘Non‐current Assets Held for Sale and Discontinued Operations’, which of
the following is not allowed as a “cost to sell”?
a) Finance costs
b) Auctioneers commission
c) Advertisements
d) Legal fees for drafting contract of sale
Answer‐ a) Finance costs
6. How often should the useful life of an intangible asset with a finite useful life be reviewed as
per Ind AS 38 ‘Intangible Assets’?
a) Every six months
© The Institute of Chartered Accountants of India

b) Every year
c) Every five years
d) At management’s discretion

Answer ‐ b) Every year

7. As per Ind AS 23 ‘Borrowing cost’, when activities to prepare an asset for its sale or use are
suspended, borrowing costs must be
a) Capitalised
b) Expensed
c) Charged to equity
d) Ignored
Answer ‐ b) Expensed
8. In respect of an entity which is a first time adopter of Ind AS, Ind AS 102 would not
necessarily be required to be applied to which of the following equity instruments?
a) Equity instruments that vested before date of transition to Ind AS
b) Equity instruments that vested after date of transition to Ind AS
c) Equity instruments that vested on the date of transition to Ind AS
d) All equity instruments that vested before, on and after date of transition to Ind AS.
Answer‐ a) Equity instruments that vested before date of transition to Ind AS
9. As per Ind AS 38 ‘Intangible assets’, amortization of an intangible asset should commence
when
a) Expenditure is first incurred on that asset
b) The asset is available for use
c) Economic benefits start to realize from that asset
d) reasonable time passes.
Answer ‐ b) The asset is available for use
10. As per AS 26, which one of the following is not a development activity?
a) Search for alternatives for materials, devices, products,
b) Construction of pre‐production prototypes and models
c) Design of tools, jigs and dies involving new technology
d) Design, construction and operation of a new plant.
Answer ‐ a) Search for alternatives for materials, devices, products,

Question 1
‘X’ Company has prepared a Bank reconciliation statement (BRS) for a bank as at year end for which audit
is under progress which contains the following facts :‐
Balance as per bookS‐ 1000
Add Cheque deposited but not cleared‐ 200 (a)
Add : Amount credited to bank due to customer collections but not debited in the books – 150 (b)
Less : Interest charges on loan taken by the Company recorded by the bank and not by the
Company‐ 300 (c )
Closing balance as per bank‐ 1,050
Please identify the correct option based on the following facts :‐
(i) No observation noted in the BRS
(ii) (a) should be reversed in the books of the Company and (b) should be recorded in the books
(iii) (b ) and (c ) should be recorded in the books
(iv) (a) should be reversed in the books and (c ) should be recorded in the books
Response
Option (iii) is the correct answer as these entries should be recorded in the books of the Company
considering the fact that these relates to the financial year.
Question 2
A , a first year article trainee has been asked by Audit senior to go and perform the physical verification of
stock lying in the warehouse of a Company. He has been instructed to perform stock count of 100 items
considering A, B , C analysis and also review the working papers of management stock count and see if
any observations are noted by them.
A is performing the stock count of the warehouse and requested the client to show the number of
quantities for three products which are of highest value. The client was unable to respond to the request
and informed that these items are packed due to which these items cannot be counted. The client
requested A to pick any other sample and perform the stock count.
A agreed to the client request and picked other sample and completed the stock count and concluded that
there are no observations.
Following are the various options available for ‘A’ to respond to this situation.
(i) No additional work as he has performed the stock count as per the instructions
(ii) Ask the client to open the box and count the items and record the actual quantities in his
working papers.

(iii) Ask the client to open the box and count the items and record the actual quantities in his
working papers and reconcile the quantities with the management count. In case of any
difference, obtain the reasons for the same and satisfy the underlying rationale for the same.
(iv) In case the client refused to show the items, A should inform his senior, discuss with the client
to understand the reason for the same and identify the resolution of the issue including
impact on the audit opinion.

Considering the following options, identify the appropriate response what should have been done by ‘A’ ?
(a) (i)
(b) (iii) and (iv)
(c) (ii)
(d) (ii and (iv)
Response
(b) is the correct option. In case the client agrees to open the boX, he should have observed the count,
reconciled with the management count and in case of any difference, appropriate reason and
reconciliation should be obtained and audited by him in order to satisfy that the stock is physically
available. In case, the client disagreed for opening the box, he should inform the senior and raise this
matter as an issue for appropriate resolution including the impact on the audit opinion.
Question 3
‘C’ has been asked to perform the cash count of a Company as at year end. The Company has significant
amount of cash since their day to day operations involve lot of cash dealing as most of the transactions are
settled in cash. C goes to the client and requests to get the cash counted. The client prepared a cash
statement amounting to Rs. 1 crore. C decided to count the cash on sample basis and after counting cash
amounting to Rs. 52 lakhs, he decided to conclude that there are no issues in cash balances.
‘C’ has following options to respond to the situation.
(i) Perform no further audit procedures to obtain comfort on cash balance.
(ii) C performs the cash count of Rs. 1 crore and identify if there are any differences or
observations noted.
(iii) C performs the cash count of Rs. 1 crore, ensure the completeness of cash and reconcile the
cash count with the books of the accounts.
(iv) C confirms from the management that whether they have counted the cash, obtain their
confirmation over email, ensure the completeness of cash and reconcile the cash count with
the books of the accounts.

Considering the following options, identify the appropriate response what should have been done by ‘C’ ?
(a) (i)
(b) (ii)

(c) (iii)
(d) (iv)

Response

Options (iii) is the right option as the auditor planned to perform the cash count of 100% of the
cash and only doing cash count on sample basis/through client confirmation is not the appropriate
design of audit procedures to be performed. He should also ensure that whether all the cash has
been counted at that location and obtain reconciliation with the books of the accounts.

Question 4

‘A’ a first year intern has been entrusted to perform the vouching of indirect expenses. He decided
to perform the testing of mobile phone expenses as these were material. The client provided a
schedule of mobile phone expenses for each number and the amount billed in each month. A
decided to pick few sample testing of bill and requested the client to provide the bills against these
sample . He tested the same along with appropriate treatment of GST/service tax receivable for
financial year 2017‐18.
Has ‘A’ performed sufficient audit procedures or he should have performed few more audit
procedures to verify the communication expense ?

Below are the options

a) No further audit procedure required
b) A should have performed variation analysis of the expenses, obtained the agreement with
mobile operation to ensure the necessary compliance and also compare the number of
mobile numbers with number of employees.
c) A could have only performed scanning procedures and variation analysis to obtain
comfort on mobile phone expenses
d) Based on underlying risk assessment and internal control testing performed at the time of
planning procedures, A needs to tailor the audit plan with a mix of audit sampling,
analytical or other adequate procedures as per standard of auditing to obtain comfort on
the expenses.
Response
(d ) is the right response
Question 5
‘ X’ a CA firm has been appointed to perform the audit of a Company. The engagement partner
allocated ‘A’, a field incharge for the audit along with ‘B’ a first year article clerk. During the
discussion of the audit plan within the team, it was decided that B will perform testing of Cash and
Bank, statutory dues, revenue and expense vouching and rest will be preformed by A. The client
provided all schedules to the auditor and B started with the vouching and analysis of legal and
professional analysis. B remember that during the team discussion and client meeting as well, it

was noted that the client has no legal disputes and hence there are no contingent liabilities. B was
provided the breakup of legal and professional expenses as stated below:‐
Nature Amount
ABC consultancy 1000
Jain lawyer 100000
Mohit tax consultant 20000
ERP implementation by 40000
Wipro
Payroll outsource cost 30000
services provided by Z
Total 191000

Based on the review of the schedule mentioned below, B performed the vouching and concluded
that there are no observations.
Is the conclusion reached by ‘B’ appropriate ?
(a) B should have inquired about the legal cases handled by Jain lawyer and conclude if there any
indications about any outstanding litigations which need further evaluation ?
(b) B should evaluate the work done by ABC consultancy, Mohit tax consultant and Jain lawyer and
conclude if there any indications about any outstanding litigations which need further
evaluation ?
(c) Nothing needs to be done
(d) B should obtain comfort on all type of services and identify the services which could lead to
potential litigations /any other issues and perform further evaluation to conclude the impact on
the audit procedures and the financial statements ?

Response
(d ) is the right answer

Question 6

A is required to perform testing of repairs and maintenance expense account. The Company provided
him the GL dump of the expense item and A decided to perform the following audit
procedures:‐
 Vouching of expense account by matching of invoice with the amount captured in the GL
dump
 Variation of expense between current year and previous year
 Ensure the appropriate classification of expense in the right General Ledger
 Reconcile the GL dump with the trial balance


An external reviewer was entrusted to review the audit procedures done by the audit firm
where in he decided to perform the review of the work done by the audit team and picked
work done for the audit of repair and maintenance account. The reviewer identified the
following gaps in the testing:‐
(a) The work paper has not captured how the engagement team ensured the capital
expenditure has been debited to Profit and Loss Account
(b) Appropriate deduction of withholding taxes while booking the amount in the books.
(c) Any issue in the useful life of fixed assets if there is too much expenditure incurred on
the fixed assets.
(d) Whether expenditure was authorized and approved as well

Below are the options to pick out of the above mentioned options which the
engagement team should have performed while testing repairs and maintenance
expenses testing

(i) (a) and (c)
(ii) All of the above
(iii) (b) and (d)
(iv) (a), (c) and (d)

Response‐(ii)
All of the above as all the procedures are relevant to be performed while testing the repairs and
maintenance expenses. With respect to withholding taxes, the engagement team could have performed
the procedures differently as well while reviewing the entire expense dump along with the TDS entries but
in this example, it has been assumed that the withholding taxes testing was performed in conjunction with
the testing of the expense.

Question 7

A is working in an audit firm who are the auditors of ‘Y’ Company. A is part of the audit team
who is doing the audit of this Company and he has been allocated to handle cash and bank. As
part of the audit procedure, he also needs to circularize bank confirmation letters for all the
bank. A decided to perform the following audit procedures :‐

(a) Obtain the list of banks from the Company with the account number.
(b) Prepare a confirmation request and requested the Company to sign the confirmation
letters.
(c) The Company signs the letter and share one copy of the letter with A.
(d) The Company sends this confirmation letter to the bank seeking their confirmation on the
bank balances.


Out of the audit procedures stated above, which one are the right audit procedures
performed by A.

(i) All of the above
(ii) (a), (b) and (c)
(iii) (a), (c) and (d)
(iv) (b), (c) and (d)

Response
The option no. (ii) is correct as A should have sent confirmation letter request
under his supervision and control. As per SA 505‐ External confirmations, it is
stated that “When performing confirmation procedures, the auditor should maintain
control over the process of selecting those to whom a request will be sent, the
preparation and sending of confirmation requests, and the response to those
requests”.
Since the auditor didn’t perform this procedure under his control, therefore this is
not in line with the guidance stated in SA 505.

Question 8

The Company has appointed an external internal auditor for conducting the internal audit of
various financial statement line items. The internal audit firm conducted the internal audit of
fixed assets and shared the final report containing various observations. ‘Z’ audit firm are the
external auditors who are completing the internal audit of the Company. The engagement team
of external auditors became aware of the internal audit report and requested the Company to
share the internal audit report with them. The audit team receives the internal audit report and
requested one of their team member ‘Ashish’ to prepare the internal audit synopsis of the
issues having material financial implication or reporting implication on the audit carried out by
the audit firm. Below are the list of observations noted in the internal audit report.

(a) Physical verification of the fixed assets was carried out by the management and differences
amounting to Rs. 10 cores are not explained by the management.
(b) The Company has incorrectly capitalized the borrowing cost amounting to Rs. 2 crores and
wrongly applied AS 16.
(c) Approval of purchase of a Computer amounting to Rs. 50,000 was not obtained from the
authorized personnel.
(d) The Company should review their policy of obtaining five quotes for each purchases done by
the Company.
(e) FA vs GL reconciliation was performed by the Company and difference amounting to Rs.
10,000 was noted.
What are the observations which needs to be highlighted by Ashish for further evaluation ?
(i) (a) and (b)
(ii) All of the above
(iii) (a), (b), (d) and (e )

(iv) (a), (b), (c) and (d)
Response
(i) Is the correct option and the balance observations are not having material financial impact
or having insignificant impact on the audit.
Question 9
A is allocated to perform the audit of statutory dues wherein he needs to verify the challan payments
made by the Company for its material statutory dues and identify issues if any. The Company has prepared
the statutory dues schedule capturing the date of deposit and the due date of deposit along with the
amount. A verified the payment for all the material statutory dues and reconciled the same with the
schedule prepared by the Company and noted no issues.
Based on the work done, A concluded that all the payments were made on regular basis. What are the
potential audit procedures missed by A while doing verification of the statutory dues
However, A didn’t perform the following audit procedures or consider the following matters in his audit
plan.
a) The due date of deposit is correctly captured in each schedule as per the statutory law.
b) Any interest payment/penalty paid by the Company while making payment also indicates
regularity of the payment of the statutory dues.
c) Inquired with the client personnel about the regularity of the payment of statutory dues.
d) Considering the results of last year audit which had exception in regularity of the payment of
statutory dues of Income tax and service tax.
What are the matters which should have been considered by A ?
(ii) (a), (b) and (c)
(iii) (a), (b) and (d)
(iv) (b), (c) and (d)
Response
Option (i) is the correct option
Question 10
‘A’ was allocated to audit the rent expense of the Company. The client prepared a schedule capturing the
rent expense incurred against each lease. There were few leases which were discontinued after a certain
period. There was a gap of Rs. 1 crore between rent expense as per schedule and general ledger for which
no explanation was given by the Company. A decided to perform sample testing of rent expense by doing
testing of high value leases and concluded that no further audit procedure is required to be performed.
What are the potential audit issues which should have been followed up by A while performing testing of
rent expense.

(a) Difference of Rs. 1 crore between GL and rent schedule, documentation regarding reason for
discontinuation of lease expense and corresponding impact on other receivables like security
deposit etc.
(b) None
(c) Difference of Rs. 1 crore between GL and rent schedule
(d) Documentation regarding reason for discontinuation of lease expense
What are the matters which should have been considered by A ?
(ii) (c) and (d)
(iii) (a)
(iv) (b)
Response
(iii) is the appropriate option as A’s responsibility is to obtain comfort on rent expense and not only
perform sample testing of schedule provided by the client.


1. An entity has losses in its operations and would need immediate cash to fund its operations.
Hence to get immediate cash it sold one of its property appearing in the books at depreciated
value of Rs. 8,50,000. The property is sold at a price of Rs. 8,00,000. However, the normal
market price of the same property is Rs. 10,00,000. What would be the fair value of the
property as per Ind AS 113?
(a) Rs. 8,00,000
(b) Rs. 10,00,000
(c) Rs. 8,50,000
(d) Rs. 10,00,000 less Rs. 8,00,000
2. PQR Ltd. wants to make a change in the accounting policy which is being followed for last 10
years. However, it was impracticable to find out the impact of change in policy for the last 10
years. The maximum number of years for which company can find out the impact practically
is only current year. What shall company do in such a case?
(a) It can disclose the effect for current year only in case of impracticability to find the impact
in the earlier years.
(b) It has to give effect to current year and last comparative year, as the effect needs to be
given for latest prior period presented also.
(c) It can approximate the retrospective effect by doing a backward calculation in the light
of present information.
(d) It can apply the new policy prospectively from the start of the earliest period practicable.
3. ABC Ltd. initially estimated that the useful life of the plant and machinery will be 10 years.
However, after a period of 5 years, it found due to technological changes it will be impossible
to continue with the same machine for another 5 years. The maximum number of years for
which it can be used further is 3 years. Which of the following treatment will be correct for
the change in useful life in such a situation?
(a) ABC Ltd. will give the retrospective effect to the plant and machinery and depreciation
assuming estimated life of plant and machinery of 8 years instead of 10 years.
(b) ABC Ltd. will change the estimated life for the future to 3 years instead of 5 years.
(c) ABC Ltd. will change the estimated life from the immediately preceding year (i.e. the
latest prior period presented) to 4 years.
(d) ABC Ltd. need not make any change till it actually discards the plant and machinery.
4. ABC Ltd. is in the process of finalisation of accounts for 2017-2018. The financial statements
for the year ended 31st March 2018 has already been prepared but not yet approved. The
Accountant found that there is a mistake in the accounts of the year 2014-2015. Which of
the following would be the right action?
(a) Rectify and change the accounts retrospectively from the year 2014-2015.
(b) Rectify the mistake retrospectively but incorporate the effect only in the opening
balances of assets, liabilities and equity of 2015-2016.
(c) Rectify the mistake retrospectively but incorporate the effect only in the opening
balances of assets, liabilities and equity of 2017-2018.
(d) Rectify the mistake retrospectively but incorporate the effect only in the closing balances
of assets, liabilities and equity of 2017-2018.
5. A Ltd. has invested in debentures whose interest rate is floating in nature and as per the terms
of the instrument interest will be reset every month. Terms of interest is 0.5 x (MIBOR + 2%).
Classify the financial asset and determine the subsequent measurement for the aforesaid
instrument.
(a) Financial asset measured at amortised cost.
(b) Financial asset measured at FVOCI without recycling.
(c) Financial asset measured at FVTPL.
(d) Financial asset measured at FVOCI with recycling.
6. An entity has entered into a factoring arrangement with the bank and accordingly sold all its
debtors without recourse arrangement. However, as per the bank policy the company has
guaranteed a bad debt loss of 2%. Historically, the entity has had only 1% bad debt. What
will be the treatment of it under Ind AS 109?
(a) The debtors can be derecognised fully.
(b) The debtors cannot be derecognised.
(c) The debtors can be derecognised for 98% value.
(d) The debtors cannot be derecognised to the extent of continuing involvement only.
7. Entity A has issued preference shares to the investors which has similar voting rights and
dividend rights and will be converted into one is to one equity shares at the time of IPO. As
per the terms of the agreement, if the IPO does not happen by the end of the 7th year, then
the Company will have to buy back the shares from the investors. The Company is growing
very fast and is confident of going through the IPO within 3 years itself. How will the company
classify the above instrument in the financial statement?
(a) Equity
(b) Liability
(c) Hybrid
(d) Compound.
8. An entity has written a foreign currency call option. The aforesaid derivative was designated
as a hedge of the highly probable forecasted transaction. The aforesaid hedge:
(a) Will qualify as Cash flow hedge
(b) Will qualify as Fair value hedge
(c) Will qualify as Net investment hedge
(d) Is not permitted.
9. In which of the following cases can temporary differences arise?

(a) The identifiable assets acquired and liabilities assumed in a business combination are
recognised at their fair values in accordance with Ind AS 103, Business Combinations,
but no equivalent adjustment is made for tax purposes.
(b) Assets are revalued and no equivalent adjustment is made for tax purposes.
(c) Goodwill arises in a business combination.
(d) All of the above.
10. Entity A has calculated taxable temporary differences of Rs. 50,00,000 and deductible
temporary differences of Rs. 20,00,000 on separate items. The tax rate of the current year
is 35%. However, tax rate in the previous year is 30% and it is expected that in future the
tax rate would be 40%. What basis should be used for measurement of deferred tax assets
and liabilities?
(a) 30%
(b) 35%
(c) 40%
(d) 5%
11. The carrying amount of deferred tax assets and liabilities may change even though there is
no change in the amount of the related temporary differences. This can result from which of
the following?
(a) A change in tax rates or tax laws
(b) A reassessment of the recoverability of deferred tax assets
(c) A change in the expected manner of recovery of an asset
(d) Any of the above
12. S Ltd. is reviewing one of its business segments for impairment. The carrying value of its net
assets is ` 40 million. Management has produced two computations for the value-in-use of the
business segment. The first value of ` 36 million excludes the benefit to be derived from a
future reorganization, but the second value of ` 44 million includes the benefits to be derived
from the future reorganization. There is not an active market for the sale of the business
segments.
Whether the business segment needs to be impaired and if yes then why what amount?
(a) Yes, the business segment will be impaired by ` 4 million.
(b) Yes, the business segment will be impaired by ` 8 million.
(c) No, the business segment will be impaired by ` 36 million.
(d) No, the business segment will be not be impaired.
13. A company to present condensed interim financial statements for six months period
30th September 2017 would have a comparative balance sheet as of-
(a) 30th September, 2016
(b) 30th June, 2017
(c) 31st March, 2017
(d) Comparative may not be given.
14. A company to present condensed interim financial statements for the quarter ended
30th June, 2017 would have a comparative statement of profit and loss for which of the
following period?
(a) Quarter ended 30th June, 2016
(b) Quarter ended 31st March, 2017
(c) Both a & b
(d) Comparative may not be given
15. What will be the rounding off requirements in the financial statements for a company with a
turnover of Rs.300 crores?
(a) Round off to the nearest lakhs
(b) Round off to the nearest millions
(c) Round off to the nearest crores
(d) Any of the above
16. A Ltd. has following assets in its Balance Sheet:

(i) Property, plant and equipment of Rs. 5 crore
(ii) Brand with indefinite useful life of Rs. 10 crore
(iii) Trade receivable of Rs. 50 lakhs
(iv) Inventories of Rs. 80 lakhs
Which of the above assets are required to be tested for impairment at least on an annual
basis irrespective of whether there is any indication of impairment?
(a) (i) and (ii)
(b) (ii) only
(c) (iii) and (iv)
(d) (i), (ii) and (iv)
17. P Ltd. has a plant with the normal capacity to produce 5,00,000 unit of a product per annum
and the expected fixed overhead is ` 15,00,000. Fixed overhead on the basis of normal
capacity is ` 3 per unit (` 15,00,000 / 5,00,000 unit). However, actual production is 3,75,000
units. Amount of fixed overhead to be included in the cost of inventory would be
(a) Rs. 15,00,000
(b) Rs. 11,25,000
(c) Rs. 3,75,000
(d) Nil
18. V Ltd. purchases cars from several countries and sells them to Asian countries. V Ltd.
incurred many expenses during the period on such cars from their purchase to sale. Out of
those expenses, the accountant of V Ltd. is not sure about following expenses for inclusion
in the cost of inventory. Which of the following cost is allowed for inclusion in the cost of
inventory?
(a) Rs. 20,00,000 as Salaries of accounting department
(b) Rs. 15,00,000 of Sales commission paid to sales agents
(c) Rs. 30,00,000 as after sales warranty costs
(d) Rs. 10,00,000 as Insurance of purchases
19. Moon Ltd has acquired a heavy road trailer at a cost of ` 2,00,000 (with no breakdown of
component parts). The estimated useful life is 10 years. At the end of the sixth year, the
engine requires replacement, as further maintenance is uneconomical due to the off-road
time required. The remaining parts of the vehicle is perfectly road worthy and is expected to
last for the next four years. The cost of the new engine is ` 90,000. The discount rate
assumed is 5% and the discount factor is 0.746.
What should be the cost of old engine to be deducted from the cost of the trailer on recognition
of replaced new engine as per Ind AS 16?
(a) Rs. 90,000
(b) Rs. 2,00,000
(c) Rs. 67,140
(d) Rs. 22,860
20. PN Ltd. prepared its draft financial statements for the year ended 31st March, 2018 by 28th
May, 2018. The audit took place during June and July and the Management authorised them
for issue to the Board on 7th August, 2018. The Board approved the financial statements on
23rd August, 2018, with one amendment requested. Financial statements were sent to
shareholders on 30th August, 2018.
On what date did PN Ltd. authorise the financial statements for issue?
(a) 28th May, 2018
(b) 7th August, 2018
(c) 23rd August, 2018
(d) 30th August, 2018
Answers
1. (b) 2. (a)
3. (b) 4. (b)
5. (c) 6. (b)
7. (d) 8. (d)
9. (d) 10. (b)
11. (d) 12. (a)
13. (c) 14. (a)
15. (d) 16. (b)
17. (b) 18. (d)
19. (c) 20. (c)
1. Adrien is a foreign national residing in Nice, France. In the month of August, 2018 he is visiting India
for the purpose of incorporating a private limited company along with his resident Indian friend Aakaash.
He wants to know about a certain document which he is required to hold so that he may be allowed to
incorporate a company in India. Advise.
(a) He should hold an affidavit duly certified by Embassy of India in France stating his intention to
incorporate a company in India.
(b) He should hold a valid Tourist-cum-Working Visa.
(c) He should hold a valid Business Visa.
(d) He should hold a valid a valid Conference Visa
2. Mr. X, a director of the company, intimated of his participation in the meeting scheduled on August,
2018. He declared his participation through electronic mode, in June 2017. State whether Mr X is entitled
to participate in the meeting to be conducted in August 2018 –
(a) Yes, intimate about such participation was made at the beginning of the calendar year
(b) No, because intimation was made in previous calendar year
(c) Yes, because company was intimated of its participation in the meeting.
(d) No, because valid period of declaration (i.e., 1 year) of his participation expired.
3. In compliance to the Companies Act, 2013, at least one woman director shall be on Board of such
class or classes of companies as may be prescribed. Ms. Riya is keen to hold the office of woman director
in a company. She has selected some companies in which there is a vacancy for the woman director.
Advice Ms. Riya in selecting the companies which are mandatorily required to appoint a woman director:
a. PQR Limited which is a unlisted company and having paid up share capital of one 50 crore rupees
as per the last date of latest audited financial statements.
b. ABC Limited which is a listed company and having a turnover of 150 crore rupees as per the last
date of latest audited financial statements.
c. XYZ Limited which is a unlisted company and having a turnover of 350 crore rupees as per the last
date of latest audited financial statements.
d. Both in ABC Limited and XYZ Limited
4. Rukmani, a fresh science graduate, wants to make available the farmers good quality seeds and
manure. For her business she is contemplating to form a company and is weighing various options.
Sometimes before, she came to know that a ‘one person company’ has minimum one member and one
director whereas a private company has minimum two members and two directors. As regards a public
company, she has vague idea that there should be minimum three directors but she does not know about
the minimum members required in this case. Advise.
a) When there is requirement of minimum three directors, the public company can be formed by
minimum three persons.

b) There should be minimum five persons for formation of a public company though requirement of
minimum directors shall remain three.
c) There should be minimum seven persons for formation of a public company though requirement of
d) There should be minimum nine persons for formation of a public company though requirement of
5. Ravi is the owner of a grocery store. In March 2018, he got the idea of forming a ‘One Person
Company’ and convinced his sister Ruchika, an Indian citizen who resides in London but visits India from
time to time, to become nominee in his OPC. In the year 2017, Ruchika first came to India on 10th January
and left for London on 26th February. Thereafter, she again visited India on 7th June and remained here
till 10th October and boarded an evening flight for London on the same day. From then onward she did
not visit India in the year 2017 but on 2nd January 2018 she came to India for a short duration and left for
London on 14th February, 2018. Is it possible for Ravi to appoint Ruchika as nominee?
a) Ruchika can be appointed as nominee by Ravi because she is a natural person, an Indian citizen
and resided in India for more than 90 days during the year 2017.
b) Ruchika can be appointed as nominee by Ravi because she is a natural person, an Indian citizen
and resided in India for more than 182 days during the years 2017 and 2018 i.e. prior to March 2018
when Ravi contemplated to form his OPC.
c) Ravi cannot appoint Ruchika as nominee in his OPC because she did not reside in India for 182 days
or more during the year 2017 though she is a natural person and also an Indian citizen .
d) Since Ravi is the sole member of his OPC who will look after all its affairs and the appointment of
nominee is just a formality, a visit to India during 2017 for any number of days would make Ruchika
eligible to be appointed as nominee.
6. A director of XYZ, a Pvt. Ltd. takes a loan from its company. Due to some reasons, he fails to repay
the debt within the given time period. He request board of directors to give him time for repayment of
debt. State which of the below statements is correct with respect to the exercise of the power in the given
situation as per the Companies Act, 2013-
(a) Power to fix the time limit for repayment of any debt due from director can be exercised only by
members by special resolution at a general meeting.
(b) Power to fix the time limit for repayment of any debt due from director can be exercised by Board of
the company itself.
(c) Power to fix the time limit for repayment of any debt due from director can be exercised with the
prior permission of the company in general meeting while taking debt.
(d) Board shall not exercise this power if the provision related to repayment of debt is contained in the
articles of the company.
7. On 30th June 2017, the liability side of Balance Sheet of X Ltd. showed balance of paid up share
capital of Rs. 65 lacs, free reserve of Rs. 10 lacs, share premium account of Rs. 20 lacs, deposits of Rs.
25 lacs, repayable in the current financial year, during the month of September 2017.In July 2017, the

company was in need of some short term funds to the tune of Rs. 20 lacs for a period of 6 months. The
maximum amount which the company may hold as deposit together with existing deposits will be—
(a) Rs. 33.25 Lacs

(b) Rs. 11.25 lacs
(c) Rs. 95 lacs
(d) Rs. 9.5 lacs.
8. Ruchir Marcons Ltd. which provides marketing and consultancy services is keen to have a ‘significant
influence’ in Ruchika Marketing Ltd. so that it becomes its ‘associate company’. For having ‘significant
influence’ Ruchir Marcons Ltd. needs to control certain percentage of total voting power of Ruchika
Marketing Ltd. What is that?
a) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least five per cent of
total voting power of Ruchika Marketing Ltd.
b) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least ten per cent of total
voting power of Ruchika Marketing Ltd.
c) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least fifteen per cent of
d) For creating ‘significant influence’ Ruchir Marcons Ltd. must control at least twenty per cent of
9. Jatin is desirous of forming a ‘One Person Company (OPC)’ for which he wants to nominate his wife
Jasmin who in the event of his death shall become the member of OPC. However, he is not aware of as
to which document should contain the name of the nominee. Advise him in the matter.
(a) Name of the nominee should be mentioned in the Articles of Association after the names of the
directors.
(b) Name of the nominee should be mentioned in the Memorandum of Association
(c) Either Articles of Association or Memorandum of Association may contain the name of the
nominee.
(d) There is no need to mention the name of the nominee in either Articles of Association or
Memorandum of Association; a simple consent letter obtained from the nominee and kept in the
records is sufficient.
10. Priyank and Priyanka, got reserved a name and thereafter a private limited company was formed
using the reserved name on 1st June, 2018. Later on, a registered proprietor of a trade mark noted that
the name of this private limited company was identical to the trade mark he had earlier got registered
under the Trade Marks Act, 1999. Advise as to latest by which date, the proprietor of the registered
trade mark can move an application to the Central Government against this anomaly.
(a) Latest by 30th November, 2018, the registered proprietor of trade mark should move an
application to the Central Government for rectification of this anomaly.
(b) Latest by 30th May, 2019, the registered proprietor of trade mark should move an application to
the Central Government for rectification of this anomaly.

(c) Latest by 30th May, 2020, the registered proprietor of trade mark should move an application to
(d) Latest by 30th May, 2021, the registered proprietor of trade mark should move an application to
Answer Keys
1(c) 2(d) 3(d) 4(c) 5(c)
6(b) 7(a) 8(d) 9(b) 10(d)

MCQs for Practical Training Accounting +Auditing+ Law – Level 2
1. Marvin Ltd. is a renowned food chain supplier in a posh area providing restaurant facility along with food
delivering. CA. Felix was appointed as an auditor of the company for the Financial Year 2017-18. While
examining the books of account of the company, CA. Felix came to know about one of the major expenses
of the company i.e. rent expense of ` 1,20,000 per month, for which he applied substantive analytical
procedure for verification purpose. Explain, how would CA. Felix perform substantive analytical procedure in
the given scenario?
(a) CA. Felix would inspect every single rent invoice per month of ` 1,20,000 and verify other elements
appropriately.
(b) CA. Felix would compare the rental expense of the company with that of another nearby company
having corresponding dimensions, for high degree of accuracy.
(c) CA. Felix would select the first month rent invoice of ` 1,20,000 and appropriately verifying other
elements would predict that the rent for the whole year would be ` 14,40,000 (i.e. ` 1,20,000 * 12).
Thereafter, he would compare the actuals with his prediction and follow-up for any fluctuation.
(d) (a) and (b), both.
Answer (c) Reason: As provided under SA 520 ‘Analytical Procedures’, substantive
analytical procedures are generally more applicable to large volumes of transactions that tend to be
predictable over time. Analytical procedures involving, for example, the prediction of total rental income on
a building divided into apartments, taking the rental rates, the number of apartments and vacancy rates into
consideration, can provide persuasive evidence and may eliminate the need for further verification by means
of tests of details, provided the elements are appropriately verified.
2. Minnie Ltd., a listed company, appointed CA. Kranny for auditing complete set of consolidated financial
statements of the company. CA. Kranny is unable to obtain sufficient appropriate audit evidence regarding
an investment in a foreign associate. The possible effects of the inability to obtain sufficient appropriate audit
evidence are deemed to be material but not pervasive to the consolidated financial statements. Based on the
audit evidence obtained, CA. Kranny concludes that a material uncertainty does not exist related to events
or conditions that may cast significant doubt on the company’s ability to continue as a going concern in
accordance with SA 570. State what type of opinion CA. Kranny must have provided in the given scenario?
(a) Unmodified opinion.
(b) Qualified opinion.
(c) Adverse opinion.
(d) Disclaimer of opinion.
Answer (b) Qualified opinion.
Reason: According to SA 705 ‘Modifications to the Opinion in the Independent Auditor’s Report’, the
auditor shall express a qualified opinion when the auditor is unable to obtain sufficient appropriate audit
evidence on which to base the opinion, but the auditor concludes that the possible effects on the financial
statements of undetected misstatements, if any, could be material but not pervasive.
3. While auditing the books of accounts of QHMP Ltd., CA. Ranker, the statutory auditor of the company, came
to know that the management of the company has recognized internally generated goodwill as a fixed asset.
CA. Ranker discussed with the management that according to accounting standards, internally generated
goodwill is not recognized as an asset because it is not an identifiable resource controlled by the enterprise
that can be measured reliably at cost. However, the management is quite rigid to the accounting treatment
followed for internally generated goodwill and not paying attention to the auditor. Thus, through an example,
CA. Ranker explained which type of goodwill may be recognized as a fixed asset for which the management
got justified. State which of the following examples the auditor must have given to the management?
(a) If an item meeting the definition of an intangible asset is acquired in a business combination, it forms
part of the goodwill to be recognized at the date of the amalgamation.


(b) Only those goodwill needs to be recognized as a fixed asset which can be touched like physical assets,
for example, land and buildings.
(c) Goodwill is recognised only when there is a contractual or other legal rights for a physical asset which
shall not be amortized over the period.
Answer (a) Reason: Goodwill is of intangible nature which either arises on acquisition or
is internally generated. Internally generated goodwill is not recognized as an asset because it is not an
identifiable resource controlled by the enterprise that can be measured reliably at cost. However, if the item
is acquired in a business combination, it forms part of the goodwill to be recognized at the date of the
amalgamation.
4. Eeyore Pvt. Ltd. is incorporated on 1st July, 2017. During the Financial Year ending on 31st March, 2018, the
company did not opt for any borrowing at any point of time and have a total revenue of ` 60 Lakh. At the
year end, it provides the following information regarding its paid-up capital and reserve & surplus-
Particulars Amount (in ` )
Paid-up Capital
- Consideration received in cash for equity shares 40,00,000
(including unpaid calls of ` 5,00,000)
- Consideration received in cash for preference shares 25,00,000
- Bonus shares allotted 7,00,000
- Share application money received pending allotment 10,00,000
Sub-Total 82,00,000
Reserve & Surplus
- Balance in Statement of Profit and Loss 15,00,000
- Capital Reserves 10,00,000
Sub-Total 25,00,000
GRAND TOTAL 1,07,00,000
You are provided with the provisions regarding applicability of Companies (Auditor’s Report) Order, 2016,
(CARO, 2016) issued under section 143(11) of the Companies Act, 2013 to a private limited company that it
specifically exempts a private limited company having a paid up capital and reserves and surplus not more
than ` 1 crore as on the Balance Sheet date and which does not have total borrowings exceeding
` 1 crore from any bank at any point of time during the financial year and which does not have a total revenue
as disclosed in Scheduled III to the Companies Act, 2013 exceeding ` 10 crore during the financial year.
Considering the information given above, which of the following shall be considered as a reason regarding
applicability or non-applicability of CARO, 2016?
(a) Reporting under CARO, 2016 shall be applicable as the company is having a paid up capital and
reserves and surplus of ` 1.07 crore i.e. more than ` 1 crore as on the Balance Sheet date.
(b) Reporting under CARO, 2016 shall be applicable as the company is having a paid up capital and
reserves and surplus of ` 1.02 crore i.e. more than ` 1 crore as on the Balance Sheet date.
(c) Reporting under CARO, 2016 shall not be applicable as the company is having a paid up capital and
reserves and surplus of ` 0.92 crore i.e. not more than ` 1 crore as on the Balance Sheet date.
(d) Reporting under CARO, 2016 shall not be applicable as the company is having a paid up capital and
reserves and surplus of ` 0.82 crore i.e. not more than ` 1 crore as on the Balance Sheet date.
Answer (c) Reason: Reporting under CARO, 2016 shall not be applicable as the company
is having a paid up capital and reserves and surplus of ` 0.92 crore [(40-5) +25+7+0+15+10] i.e. not more


than ` 1 crore as on the balance sheet date, and the other conditions relating to borrowings & total revenue
are also within the limits of exemption.
5. CA. Goofy has been appointed as an auditor for audit of a complete set of financial statements of Dippy Ltd.,
a listed company. The financial statements of the company are prepared by the management in accordance
with the Accounting Standards prescribed under section 133 of the Companies Act, 2013. However, the
inventories are misstated which is deemed to be material but not pervasive to the financial statements. Based
on the audit evidences obtained, CA. Goofy has concluded that a material uncertainty does not exist related
to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern
in accordance with SA 570. Further, CA. Goofy is also aware of the fact that a qualified opinion would be
appropriate due to a material misstatement of the Financial Statements. State what phrases should the
auditor use while drafting such opinion paragraph?
(a) In our opinion and to the best of our information and according to the explanations given to us, except
for the effects of the matter described in the Basis for Qualified Opinion section of our report, the
aforesaid financial statements present fairly, in all material respects, or give a true and fair view in
conformity with the applicable financial reporting framework.
(b) In our opinion and to the best of our information and according to the explanations given to us, with
the foregoing explanation, the aforesaid financial statements present fairly, in all material respects, or
give a true and fair view in conformity with the applicable financial reporting framework.
(c) In our opinion and to the best of our information and according to the explanations given to us, subject
to the misstatement regarding inventories, the aforesaid financial statements present fairly, in all
material respects, or give a true and fair view in conformity with the applicable financial reporting
framework.
(d) In our opinion and to the best of our information and according to the explanations given to us, with
the explanation described in the Basis for Qualified Opinion section of our report, the aforesaid
financial statements present fairly, in all material respects, or give a true and fair view in conformity
with the applicable financial reporting framework.
Answer (a) Reason: According to SA 705 ‘Modifications to the Opinion in the Independent
Auditor’s Report’, when the auditor expresses a qualified opinion, it would not be appropriate to use phrases
such as “with the foregoing explanation” or “subject to” in the Opinion section as these are not sufficiently
clear or forceful. When the auditor expresses a qualified opinion due to a material misstatement in the
financial statements, the auditor shall state that, in the auditor’s opinion, except for the effects of the
matter(s) described in the Basis for Qualified Opinion section, the accompanying financial statements
present fairly, in all material respects (or give a true and fair view of) […] in accordance with [the applicable
financial reporting framework].
6. Mincy Ltd. appointed CA. John for auditing complete set of consolidated financial statements of the company.
CA. John need to perform group audit along with its subsidiaries. CA. John is unable to obtain sufficient
appropriate audit evidence about a single element of the consolidated financial statements, i.e., unable to
obtain audit evidence about the financial information of a joint venture investment that represents over 92%
of the entity’s net assets. The possible effects of this inability to obtain sufficient appropriate audit evidence
are deemed to be both material and pervasive to the consolidated financial statements. State what type of
opinion CA. John must have provided in the given scenario?
(a) Unmodified opinion.
(b) Qualified opinion.
(c) Adverse opinion.
(d) Disclaimer of opinion.
Answer (d) Disclaimer of opinion.


Reason: According to SA 705 ‘Modifications to the Opinion in the Independent Auditor’s Report’, the
auditor shall disclaim an opinion when the auditor is unable to obtain sufficient appropriate audit evidence on
which to base the opinion, and the auditor concludes that the possible effects on the financial statements of
undetected misstatements, if any, could be both material and pervasive
7. XoXo Ltd. is a newly incorporated mediocre company running a store dealing in readymade garments. The
company has huge amount of accounts payable. While examining the accounts payable, CA. Tasmanian,
the auditor of the company, verified each and every invoices shown under the head accounts payable and
made a decision that the balance shown has no material misstatement. However, test for segregation of
duties between person handling payments and person updating accounts is not possible due to newly
incorporated mediocre company. Thus, CA. Tasmanian misinterpreted the verification results which
enhanced the risk instead of reducing the audit risk to an acceptably low level that he would fail to detect a
misstatement in the purchasing process which could be material, either individually or when aggregated with
other misstatements. What type of risk is this?
(a) Audit risk.
(b) Inherent risk.
(c) Control risk.
(d) Detection risk.
Answer (d) Reason: Detection risk is the risk that the procedures performed by the auditor to reduce audit
risk to an acceptably low level will not detect a misstatement that exists and that could be material, either
individually or when aggregated with other misstatements.
8. Infringe Ltd. appointed CA. Bugs as an auditor of the company for the current Financial Year. After 3 months
of the appointment, the company arranged a small get together between all the staff, officers and members
of the company along with their family to celebrate company’s last 5 years achievements, where CA. Bugs
introduced Mr. Felix, his Father-in-Law, to the Board of Directors of the Company. Discovering that Mr. Felix
has created a niche in the field of book keeping, the Board of Directors offered him the service of book
keeping of the company, which was also accepted later on. Which of the following statement is best fitted in
the given scenario?
(a) CA. Bugs shall not continue holding office of the auditor of Infringe Ltd. as his relative, Mr. Felix, shall
be providing book keeping service to the company which is restrained as per section 144 of the
Company.
(b) CA. Bugs shall not continue holding office of the auditor of Infringe Ltd. as the Board of Directors shall
first ask for his permission before offering the book keeping service to his relative, Mr. Felix.
(c) CA. Bugs may continue holding office of the auditor of Infringe Ltd. as the restrained service accepted
by his relative, Mr. Felix, is after his appointment as auditor of the company.
(d) CA. Bugs may continue holding office of the auditor of Infringe Ltd. as Mr. Felix is not his relative as
per the provisions of the Companies Act, 2013.
Answer (d) Reason: Section 144 of the Companies Act, 2013 restrains, in the case of an individual,
the auditor or his relative, from providing certain services to the company which includes the book keeping
service. However, the term ‘relative’ as defined under the Companies Act, 2013 does not include Father-in-
Law. Thus, Mr. Felix, Father-in-Law of CA. Bugs, is allowed to provide any services as restrained under
section 144 of the said Act.
9. While auditing the complete set of consolidated financial statements of Tulips Ltd., a listed company, using
a fair presentation framework, M/s Pintu & Co., a Chartered Accountant firm, discovered that the consolidated
financial statements are materially misstated due to the non- consolidation of a subsidiary. The material
misstatement is deemed to be pervasive to the consolidated financial statements. The effects of the
misstatement on the consolidated financial statements have not been determined because it was not
practicable to do so. Thus, M/s Pintu & Co. decided to provide an adverse opinion for the same and further


determined that, there are no key audit matters other than the matter to be described in the Basis for Adverse
Opinion section. State whether M/s Pintu & Co. needs to report under SA 701 ‘Communicating Key Audit
Matters in the Independent Auditor’s Report’?
(a) M/s Pintu & Co. have the option to follow SA 701, thus, need not to report any key audit matters.
(b) SA 701 is mandatory in the case of audit of listed entities, however, as there are no key audit matters
other than the matter to be described in the Basis for Adverse Opinion section, no ‘Key Audit Matters’
para needs to be stated under audit report.
(c) SA 701 is mandatory in the case of audit of listed entities, however, as there are no key audit matters
other than the matter to be described in the Basis for Adverse Opinion section, M/s Pintu & Co. shall
state, under ‘Key Audit Matters’ para, that ‘except for the matter described in the Basis for Adverse
Opinion section, we have determined that there are no other key audit matters to communicate in our
report.’
(d) M/s Pintu & Co. is under compulsion to follow SA 701 as the audit is of a listed company and shall
report under ‘Key Audit Matters’ para the matter same as stated in ‘Adverse Opinion’ para regarding
non- consolidation of a subsidiary.
Answer (c), Reason: SA 701 is mandatory in the case of audit of listed entities and according to the same,
if the auditor has determined that there are no key audit matters to communicate, the auditor shall state
under ‘Key Audit Matters’ para, that ‘except for the matter described in the Basis for Qualified (Adverse)
Opinion section, we have determined that there are no [other] key audit matters to communicate in our
report.’
10. Mitshubish Ltd. is a worldwide automotive manufacturer. The company appointed CA. Knight after retirement
of pervious auditor on completion of 5 consecutive years due to rotational provisions. While preparing for
audit plan, CA. Knight discovered that the company has huge amount of other income in the name of interest
from fixed deposits in bank. Thus, for verification of fixed deposits shown in the Balance Sheet, he obtained
the list of fixed deposits matured and running during the year and prepared a reconciliation chart like opening
balance + additions made during the year - matured = closing balance. While for vouching the interest income
from fixed deposits, state what audit procedure shall he follow?
(a) Obtain a copy of Form 26AS (TDS withholding by the bank) and reconcile the interest reflected therein
to the income recognized.
(b) No need for confirmation from third party. Calculate the accrued interest income yourself and cross
verify the same from the accounts.
(c) Verify that only interest from outstanding fixed deposits in Balance Sheet has been recognised as
income.
(d) Obtain the calculation sheet from the management and verify that the same has been recorded as an
income.
Answer (a) Reason: While vouching for interest income from fixed deposits, the auditor may obtain
a copy of Form 26AS (TDS withholding by the bank/ financial institution) and reconcile the interest reflected
therein to the income recognized.

35 MCQs for second year of articleship
(1 Mark each)
1. Mr A is salaried employee who is working in a multinational company. Mr A has taken a

residential accommodation on rent from Mr B, who is non-resident in India. During P.Y. 2018-19
relevant to A.Y. 2019-20, Mr A has paid monthly rent of INR 75,000 per month to Mr B. Mr A is
not having any income other than salary income.
Determine, whether Mr A is under obligation to deduct TDS as per the provisions of Income-tax
Act, 1961 and if yes, under which section;
(a) Not liable to deduct TDS as Mr A is individual not subject to tax audit in the immediately
preceding AY.
(b) liable to deduct tax u/s 194-I
(c) liable to deduct tax u/s 194-IB
(d) liable to deduct tax u/s 195
2. In continuation of the above facts given in Q.1, in case TDS is applicable, what would be the rate
of TDS;
(a) Since not liable to deduct TDS, hence no rate applicable.

(b) 10%
(c) 5%
(d) 31.20%
3. ABC Charitable trust registered u/s 12AA, was formed with the main objective of providing
medical relief in the year 2017-18. The total income of the trust before exemption u/s 11 and 12,
were Rs.5,50,000 in the P.Y. 2017-18. The trustee of the trust wants you to be the tax consultant
and wishes to know the due date for filing of return for A.Y. 2018-19;
(a) 31.07.2018
(b) 30.09.2018
(c) 31.10.2018
(d) 30.11.2018
4. In case of a company, the assessment proceedings u/s 143(3) for A.Y. 2016-17 was completed on
31.05.2018. The assessment order was issued on 31.05.2018 and which was served on the
assessee on 06.06.2018. The notice of demand was served on the assessee on 10.06.2018. The
assessee is aggrieved by the order of the Assessing Officer and wish to file an appeal with the CIT
(A). What is the time limit by which the assessee has to file an appeal?
(a) No time limit

(b) Within 30 days from the date of issue of assessment order
(c) Within 30 days from the date of issue of service of assessment order
(d) Within 30 days from the date of issue of service of notice of demand
5. In continuation of the facts given in the Q.4, is there any prescribed Form in which appeal has to
be filed? If yes, in which form?

(a) Form 36
(b) Form 35
(c) Form 15
(d) No prescribed Form
6. In continuation of the facts given in the Q.4, who is authorised to verify the appeal?
(a) Only the Managing Director

(b) Managing Director; If there is no managing director, then, by any director of the company
(c) Any person who is authorised to do so by the company
(d) Chartered Accountant of the company
7. Mr A is planning to enjoy his summer vacation in Goa and is considering booking rooms in a
hotel. He has booked two rooms, one for his brother and one for himself and the room charges
for the entire period is Rs.75,000 equally divided between both of them. However, the payment
to the hotel is to be made by Mr A and he will make the payment in cash. Mr A has enquired
whether he needs to give copy of PAN while making payment to hotel;
(a) No, copy of PAN is required when the payment exceeds Rs.1 lakh
(b) Yes, copy of PAN is required to be furnished
(c) No, as the amount relating to each person is less than Rs.50,000
(d) None of above
8. Mr A is planning to invest in bonds to be issued by Reserve Bank of India (RBI) for INR 99,000 in
June 2018. Determine whether Mr A is required to furnish copy of PAN while acquiring bonds to
be issued by RBI;
(a) Yes, as the payment exceeds Rs.50,000

(b) No, the threshold for submission of PAN is Rs.1,00,000
(c) No, the threshold for submission of PAN is Rs.2,00,000
(d) No, the threshold for submission of PAN is Rs.5,00,000
9. M/s PQR Limited is planning to purchase immovable property worth Rs.29,00,000. The company
has asked you to determine the requirement for furnishing of PAN in this case;
(a) No, as the cost of immovable property is less than Rs.30,00,000

(b) No, PAN is required only in case of movable property
(c) Yes, since the amount exceeds Rs.10,00,000
(d) None of above
10. If the assessee, Mr C, has paid self-assessment tax and the amount so paid falls short of the
aggregate amount of tax, interest and fee for A.Y. 2018-19, what would be criteria for
adjustment of self- assessment tax paid by the assessee:
(a) The amount so paid shall be first adjusted towards fee payable, if any, then towards interest
and balance, if any left, towards tax payable.
(b) The amount so paid shall be first adjusted towards tax payable, then towards interest and
balance, if any left, towards fee payable.

(c) The amount so paid shall be first adjusted towards interest payable, thereafter against tax
payable and the balance, if any, shall be towards fee payable.
(d) The amount so paid shall be first adjusted towards interest payable, thereafter against fee
payable and the balance, if any, shall be towards tax payable.
11. Mr. Ram has prepared his computation of total income and tax liability for A.Y. 2019-20 relevant
to P.Y. 2018-19 and the tax payable is Rs.15,000. He has prepaid taxes i.e TDS amounting to
Rs.5,500 and the balance tax payable is Rs.9,500. He has appointed you to advise him regarding
the applicability of interest under the various provisions of the Income Tax Act. He wanted to file
the return of income in July 2019
(a) Interest u/s 234B is applicable

(b) Interest u/s 234C is applicable
(c) Interest u/s 234B & 234C is applicable
(d) No interest is applicable.
12. ABC (P) Ltd. has deducted tax of a foreign company u/s 195 read with 115A of the Income- tax
Act in the month of December 2018. What would be the due date of deposit of tax deducted by
ABC (P) Ltd.;
(a) 07th of the following month i.e., 07th January, 2019

(b) 15th of the following month i.e., 15th January, 2019
(c) 31st of the following month i.e., 31st January, 2019
(d) None of above
13. In continuation of the above facts given in Q.12, under which Form, the return of TDS would be
filed;
(a) Form 24Q

(b) Form 26Q
(c) Form 26QB
(d) Form 27Q
14. Ms Deepika has the total income of Rs.75,00,000 under the following heads:
 Income under head salaries

 Interest income taxable under “Income from other sources”
 Income from one house property
Considering the above heads of income, which Income-tax return should he file for A.Y. 2018-19
(a) ITR 1 - Sahaj

(b) ITR 2
(c) ITR 3
(d) ITR 4
15. BCI Ltd. is a company registered under section 8 of the Companies Act, 2013. It has gross
receipts of Rs.50,00,000 before claiming any exemptions and deductions. The company is also

registered under Section 12AA of the Income-tax Act. Which Income-tax return should it file for
A.Y. 2018-19
(a) ITR 5
(b) ITR 6
(c) ITR 7
(d) None of above
16. THP, a charitable trust registered under section 12AA of the Act, has the gross receipts of
Rs.15,00,000 and total income od Rs.4,05,000, before claiming any exemption under section 11
& 12, during P.Y. 2018-19. Determine the applicability of audit under the provisions of Income-
tax Act, 1961;
(a) Audit is not required as the gross receipts are less than Rs.1 crore as prescribed u/s 44AB
(b) Audit is required u/s 12A(1)(b)
(c) Income of the charitable trust is exempt u/s 11 & 12, hence audit is not required
(d) None of above
17. Aakash HUF, a resident HUF, has incurred Rs.22,000 for medical treatment of Mrs. Aarti,
Aakash’s wife, who is a person with disability and has deposited Rs.30,000 with LIC for her
maintenance. For A.Y.2019-20, the HUF would be eligible for deduction of an amount equal
to –
(a) Rs.22,000
(b) Rs.52,000
(c) Rs.75,000
(d) Rs.1,25,000
18. A firm pays salary and interest on capital to its resident partners. The salary and interest
paid fall within the limits specified in section 40(b). Which of the following statements is
true?
(a) Tax has to be deducted u/s 192 on salary and u/s 194A on interest
(b) Tax has to be deducted u/s 192 on salary but no tax needs to be deducted on interest
(c) No tax has to be deducted on salary but tax has to be deducted u/s 194A on interest
(d) No tax has to be deducted at source on either salary or interest
19. Mr. Dinesh owns 8 light goods vehicle and declares profit on presumptive basis under
section 44AE for A.Y.2019-20. He is –
(a) liable to pay advance tax in four instalments in June, September, December and March
(b) liable to pay advance tax in three instalments in September, December and March
(c) liable to pay advance tax in one instalment in March
(d) not liable to pay advance tax since he is declaring profit on presumptive basis.
20. In respect of any payment made to a person located in a Notified Jurisdictional Area (NJA), tax is
deductible at higher of the rate specified in the Income-tax Act 1961 or rates in force or –
(a) 10%
(b) 15%

(c) 20%
(d) 30%
21. Mr. Manas, a salaried individual, pays rent of Rs.67,000 per month to Mr. Atishay from May,
2018. Which of the following statements is correct?
(a) No tax is required to be deducted for F.Y.2018-19 since Mr. Manas is not subject to tax audit
u/s 44AB
(b) Mr. Manas has to deduct tax@5% from rent paid every month
(c) Mr. Manas has to deduct tax@5% on the entire rent paid for F.Y.2018-19 from the rent
payable for March, 2019
(d) Mr. Manas has to deduct tax of Rs.67,000 from rent payable for March, 2019
22. A motor car of the value of Rs.15 lakhs was sold by a dealer to a customer. Rs.9 lakhs was
received in cash and the balance by account payee cheque. Which of the following
statements is correct?
(a) Tax @1% has to be collected on Rs.15 lakhs

(b) Tax @1% has to be collected on Rs.9 lakhs only
(c) Tax @1% has to be collected on Rs.6 lakhs only
(d) No tax collection at source is required in this case, since the amount received in cash
does not exceed Rs.10 lakhs.
23. Mr. Jindal gifted a house property to his wife Ms. Tina and a flat to his daughter-in law Ms.
Trisha. Both of the properties were let out. Which of the following statements is correct?
(a) Income from both properties are to be included in the hands of Mr. Jindal by virtue of
section 64.
(b) Income from property gifted to wife alone is to be included in his hands by virtue of section
64
(c) Mr. Jindal is the deemed owner of house property gifted to Ms. Tina and Ms. Trisha
(d) Mr. Jindal is the deemed owner of property gifted to Ms. Tina. Income from property gifted
to Ms. Trisha would be included in his hands by virtue of section 64.
24. As per section 115JB, every taxpayer, being a company is liable to pay MAT, if the Income-tax
payable on the total income, computed as per the provisions of the Income-tax Act in respect of
any year is less than X% of its book-profit. What is that X%;
(a) 18.5%
(b) 15.5%
(c) 18%
(d) 16%
25. There are certain specified financial transactions in which quoting of PAN is mandatory. If a
person intending to enter into such transaction does not hold PAN then, he has to furnish;
(a) Form 60
(b) Form 49A

(c) Form 49C
(d) Form 49AA
26. Mr. Sameer has gone to buy Honda Activa and vendor quoted the price of the Honda Activa
Rs.40,000. He has consulted you to provide the threshold for furnishing of PAN on purchase of
two vehicles. PAN has to be furnished
(a) in case the value of each vehicle exceeds Rs.50,000

(b) in case the value of both vehicles exceeds Rs.50,000
(c) in case of payment in cash of an amount exceeding Rs.50,000
(d) irrespective of the value of transaction and mode of payment
27. Equity oriented mutual fund means a mutual fund specified under section 10(23D) and X% of its
investible funds out of total proceeds are invested in equity shares of a domestic company listed
on a recognised stock exchange. Presume that, the fund does not invest in units of another fund
but directly invests in listed equity shares of domestic company. What is that X%?
(a) 51%
(b) 65%
(c) 90%
(d) 100%
28. Penalty under section 271BA for failure to furnish a report from an accountant as is required by
section 92E is ____________.
(a) Rs.50,000
(b) Rs.10,000
(c) 1% of the transaction amount
(d) Rs.1,00,000
29. Every person entering into specified domestic transactions shall keep and maintain documents
relating to such transactions for a period of ________ from the end of the relevant assessment
year.
(a) 10 Years
(b) 2 Years
(c) 5 Years
(d) 8 years
30. Mr Kapil Khurana has purchased Life Insurance Policy, the premium of which is Rs.12,000 per
annum. He has advised you on the matter of furnishing of PAN to the Insurer company on the
said transaction;
(a) Yes, PAN is required since premium exceeds Rs.10,000

(b) No, since the premium does not exceed Rs.50,000
(c) No, since the premium does not exceed Rs.20,000
(d) Yes, PAN is required irrespective of the amount of premium

31. In a case where letting out of building and letting out of other assets are separable, rent of
building will be charged to tax under the head ___________ and rent of other assets will be
charged to tax under the head __________.
(a) Income from House Property, Income from House Property

(b) Profits and gains of business and profession, Income from House Property
(c) Income from House Property, Profits and gains of business and profession” or “Income from
other sources” (as the case may be)
(d) Profits and gains of business or profession, Income from other sources
32. An individual client has consulted you on the matter of PAN. He is carrying on the business of
sale & purchase of garments. His turnover is Rs.3,00,000 and the profit is Rs.75,000 for the P.Y.
2018-19. He has asked you to provide him threshold of turnover exceeding which he has to
apply for PAN, if any;
(a) Rs.2,00,000
(b) Rs.2,50,000
(c) Rs.3,00,000
(d) Rs.5,00,000
33. Mr. A is not a citizen of India. He wants to apply for PAN in India and he has consulted you to
provide him the applicable form for application of PAN. What would be correct Form;
(a) Form 49A

(b) Form 49B
(c) Form 49AA
(d) None of above
34. Every corporate taxpayer to whom the provisions of MAT apply is required to obtain a report
from a chartered accountant on or before the due date of filing the return of income. What is
that Form No;
(a) Form 29C

(b) Form 29D
(c) Form 29B
(d) None of above
35. Book profit for the purposes of section 115JB means net profit as shown in the statement of
profit and loss prepared in accordance with;
(a) Schedule I
(b) Schedule III
(c) Schedule II
(d) Schedule VI

Answers
Question Number Answer
1 (d)
2 (d)
3 (b)
4 (d)
5 (b)
6 (b)
7 (b)
8 (a)
9 (c)
10 (a)
11 (d)
12 (a)
13 (d)
14 (b)
15 (c)
16 (b)
17 (c)
18 (d)
19 (a)
20 (d)
21 (c)
22 (a)
23 (d)
24 (a)
25 (a)
26 (d)
27 (b)
28 (d)

29 (d)
30 (b)
31 (c)
32 (d)
33 (c)
34 (c)
35 (b)
10 MCQs for second year of articleship

(2 Marks each)
1. Mr. A, non-resident aged 65 years, has income under the following heads for P.Y.2018-19;
 Interest income taxable under “Income from other sources”

 Income from Capital Gains
His estimated tax liability is Rs.1,05,575. Tax of Rs.20,000 was deducted on interest income. Mr.
has not paid any advance tax during P.Y. 2018-19. Calculate the amount of interest payable u/s
234B, if applicable, assuming he file his return of income on 15.07.2019
(a) Interest u/s 234B is not applicable

(b) Rs.3,420
(c) Rs.4,264
(d) Rs.5,130
2. In continuation of the above facts given in Q.1, calculate the amount of interest payable u/s
234B, if applicable, assuming Mr. A is a resident individual
(a) Interest u/s 234B is not applicable

(b) Rs.3,420
(c) Rs.4,264
(d) Rs.5,130
3. Mr. Harish, a resident aged 61 years, earned interest income of Rs.16,000 from post office
savings bank account and Rs.37,000 from bank fixed deposits for A.Y. 2019-20. What portion
of such income would be ultimately included in his total income?
(a) Nil
(b) Rs.3,000
(c) Rs.39,500
(d) Rs.43,000

4. Mr. Shalini made a donation of Rs.80,000 to National Children's Fund and Rs.20,000 to Rajiv
Gandhi Foundation by cheque. She made a cash donation of Rs.15,000 to a public charitable
trust. The deduction allowable to her under section 80G is Rs.
(a) 1,15,000
(b) 1,00,000
(c) 90,000
(d) 60,000
5. Alpha Ltd.’s total income of A.Y. 2019-20 has increased by Rs.34 lakhs due to application of
arm’s length price by the Assessing Officer on transactions of purchase of goods from its
foreign holding company in respect of a retail trade business carried on by it, and the same
has been accepted by Alpha Ltd., then, -
(a) deductions under Chapter VI-A cannot be claimed in respect of the enhanced income
(b) business loss of A.Y. 2014-15 cannot be set-off against the enhanced income
(c) unabsorbed depreciation of A.Y. 2010-11 cannot be set-off against the enhanced income
(d) None of the above can be claimed or set-off against the enhanced income
6. Mr. X, a retailer, acquired furniture on 10th May 2018 for Rs.10,000 in cash and on 15th May
2018, for Rs.15,000 and Rs.20,000 by a bearer cheque and account payee cheque, respectively.
Depreciation allowable for A.Y. 2019-20 would be –
(a) Rs.2,000
(b) Rs.3,000
(c) Rs.3,500
(d) Rs.4,500
7. Mr. Amir has gross total income of Rs.5,50,000 for P.Y. 2018-19. During the P.Y. 2017-18, Mr.
Amir has bought one commercial property which he has given on rent and the income from
house property is included in total income of Mr. Amir. During the P.Y. 2018-19, Mr. Amir has
made repayment towards the loan he took for purchase of property and the principal amount of
repayment was Rs.1,75,000. Determine the amount of deduction eligible u/s 80C to him for A.Y.
2019-20;
(a) Rs.1,75,000
(b) Rs.1,50,000
(c) Rs. 1,00,000
(d) Nil
8. Mr. Kapoor, aged 57 years and resident is a retired person. He purchased a piece of land in
December, 2010 and sold the same in April, 2018. Taxable Long term capital gains on such sale
amounted to Rs.4,00,000. Apart from gain on sale of land he is not having any income. He
deposited Rs.1,00,000 in Public Provident Fund (PPF) and Rs.50,000 in NSC. He wants to claim
deduction of Rs.1,50,000 under section 80C for amount deposited in PPF and NSC. What would
be his tax liability?
(a) Rs.7,800

(b) Rs.31,200
(c) Rs.52,000
(d) NIL
9. Mr. Kapil Khurana is running an Utencil shop. Tax liability of Mr. Kapil Khurana for the P.Y. 2018-
19 is Rs.51,400. He has paid advance tax of Rs.49,000 till 31st March, 2019. Balance tax of
Rs.2,400 is paid by him at the time of filing the return of income on 31.07.2019 for A.Y. 2019-20.
Will he be liable to pay interest under section 234B? If yes, what is the amount of interest?
(a) No
(b) Yes; Rs.96
(c) Yes; Rs.120
(d) Yes; Rs.144
10. Mr. Mukesh Rai Sapra, aged 67 years and non-resident is a retired person. He purchased a piece
of land (at Delhi) in January, 2014 and sold the same in August, 2018. Taxable long-term capital
gain on such sale amounted to Rs.2,84,000. Apart from gain on sale of land, he is not having any
other income. What will be his tax liability for the A.Y. 2019-20?
(a) Nil
(b) Rs.7,070
(c) Rs.1,770
(d) Rs.59,070
Answers
1 (b)
2 (a)
3 (a)
4 (c)
5 (a)
6 (b)
7 (d)
8 (b)
9 (a)
10 (d)

1. Notice under section 143(2) of the Income-tax Act, 1961 (i.e. notice of scrutiny assessment)
should be served within a period of _______from the end of the financial year in which the
return of income is filed by the assessee.
(a) 6 months
(b) 24 months
(c) 12 months
(d) 18 months
2. MNJ Pvt. Ltd., provided following information for calculation of perquisite value of company
leased accommodation for its one of employee, Mr. Z for A.Y. 2019-20:
Rent paid to landlord - Rs.35,000 p.m.
Interest free refundable security deposit – Rs.1,80,000
15% salary of Mr. Z (computed) - Rs.36,325 p.m.
Notional Interest Rate – 10% p.a. (return that might have been earned, if the amount of
security deposit was invested)
What will be treatment of notional interest?
(a) Notional interest has to be added after total value of perquisite is calculated i.e. 15% of
salary or rent, whichever is lower
(b) Notional interest has to be included in total value of rent and then compare with 15% of
salary to calculate the perquisite value
(c) Notional interest has to be added in the total of 15% of salary to calculate the perquisite
value
(d) Notional interest should not be considered
3. MNJ Pvt. Ltd. provided following information for calculation of perquisite value of company
leased accommodation for its one of employee, Mr. Z:
Rent paid to landlord - Rs.35,000 p.m.
Interest free refundable security deposit – Rs.1,80,000
15% salary of Mr. Z (computed) - Rs.36,325 p.m.
Notional Interest Rate – 10% p.a. (return that might have been earned, if the amount of
security deposit was invested)
Determine the perquisite value for company leased accommodation for Mr. Z for A.Y. 2019-
20
(a) Rs.4,38,000
(b) Rs.4,35,900

(c) Rs.4,53,900
(d) Rs.4,20,000
4. A Ltd. is a domestic company which has declared dividend on its equity shares for the
quarter ending June, 2018 on 15.07.2018. The said dividend is distributed to the
shareholders on 20.07.2018. Determine the due date by which A Ltd. is required to pay the
tax on distributed profits to the credit of the Central Government.
(a) 03.08.2018
(b) 29.07.2018
(c) 27.07.2018
(d) 22.07.2018
5. Your client Mr. Shah, did not oppose during the proceedings of scrutiny assessment. The
Assessing Officer passed the order with a demand to be paid. Mr. Shah, however, now he
feels that he missed to report a major expenditure during filing of return and proceedings.
Assuming he can act in time limit, the remedial course available to him is to –
(a) File an appeal before Commissioner of Income- tax (Appeals) under section 246A(1)
(b) Move a revision petition before the Principal Commissioner or Commissioner of Income-
tax under section 264
(c) Either of the above. However revision option can be opted for only if time limit for filing
appeal has expired, unless Mr. Shah has waived his right of appeal
(d) He cannot opt for remedial course since he did not oppose during proceedings.
6. Total turnover of M/s Rajan & Traders, a proprietorship concern, for P.Y. 2017 -18 was
Rs.89.70 lacs. It is likely to exceed Rs.100 lacs during P.Y.2018-19. He does not opt for
presumptive taxation scheme. While going through the books of account, no TDS was
deducted on following payments :
‐ Salary of Rs.4,75,000 paid to manager
‐ Interest of Rs.18,000 paid on loan taken from NBFC
‐ Interest of Rs.25,000 paid on loan taken from a banking company
The disallowance attracted under section 40(a)(ia) is:
(a) Rs.5,400
(b) Rs.1,42,500
(c) Rs.1,47,900
(d) Rs.1,55,400

7. Total turnover of M/s Rajan & Traders, a partnership firm, for P.Y. 2017 -18 was Rs.89.70 lacs.
It is likely to exceed Rs.100 lacs during P.Y.2018-19. Firm does not opt for presumptive
taxation scheme. While going through the books of account, no TDS was deducted on
following payments :
(a) Rs.5,400
(b) Rs.1,42,500
(c) Rs.1,47,900
(d) Rs.1,55,400
8. Total turnover of M/s Rajan & Traders, a partnership firm, for P.Y. 2017 -18 was Rs.89.70 lacs.
It is likely to exceed Rs.100 lacs during P.Y.2018-19. It does not opt for presumptive taxation
scheme. While going through the books of account, no TDS was deducted on following
payments :
‐ Rs.9,00,000 as salary to partners. However, Salary allowed as per provisions of section
40(b) is Rs.7,15,000
(a) Rs.1,47,900
(b) Rs.1,55,400
(c) Rs.3,62,400
(d) Rs.4,17,900
9. Which of the following is NOT TRUE in respect of provisions of Alternate Minimum Tax
(AMT) :
(i) AMT provisions are not applicable to an individual, Hindu Undivided Family (HUF) and
firm (including LLP) person whose adjusted total income does not exceed Rs.20,00,000.
(ii) The provisions of AMT will apply to every non-corporate taxpayer who has claimed
deduction under section 35AD

(iii) Every non-corporate taxpayer to whom the provisions of AMT apply is required to obtain
a report from a Chartered Accountant in Form No. 29C on or before the due date of
filing the return of income
(a) (i) only
(b) (i) & (ii)
(c) (ii) & (iii)
(d) (i) & (iii)
10. On 19.08.2018, Mr. Khera moved to Turkey for employment. His family shall accompany him,
owning to long term nature of employment. Mrs. Khera is also planning to start a fashion
boutique in Turkey soon, once she gets settled. Both, Mr. & Mrs. Khera, are Indian citizens
and have been working in India for more than a decade now. Comment on their residential
status for A.Y. 2019-20, assuming they did not visit India after August 2018 -
(a) Mr. & Mrs. Khera will qualify to be non-resident

(b) Mr. Khera will qualify to be non-resident and Mrs. Khera will be resident but not
ordinarily resident
(c) Mr. Khera will qualify to be non-resident and Mrs. Khera will be resident and ordinarily
resident
(d) Mr. & Mrs. Khera will qualify to be resident but not ordinarily resident
11. XY India Pvt. Ltd. sold its major machinery held for manufacturing auto parts on
discontinuity of line of business on 01.06.2018 for 1.70 crore. The machinery was acquired on
31.01.2015 and WDV on 01.04.2018 was Rs. 1.25 crore. What is amount of capital gain to be
reported in return of income :
(a) Short Term Capital Gain of Rs.45 lakh

(b) Short Term Capital Gain of Rs.63.75 lakh
(c) Long Term Capital Gain of Rs.45 lakh
(d) Long Term Capital Gain of Rs.63.75 lakh
12. XY India Pvt. Ltd. sold its major machinery held for manufacturing auto parts on
discontinuity of line of business on 01.06.2018 for 1.70 crore. The machinery was acquired on
31.01.2015 and WDV on 01.04.2018 was Rs.1.25 crore. Can XY India Pvt. Ltd claim any
exemption of capital gain? If yes, then choose the correct answer:
(a) Section 54G

(b) Section 54EC

(c) Both of the above
(d) None of the above
13. Bill & Hill Pvt. Ltd. is bearing the taxes on perquisite for Ms. Lily, their Production Head from
Germany for their newly set plant. In the initial years of run, the company foreseen losses
with minimum recovery. Also, Ms. Lily’s India taxable income falls in the highest slab. On this
arrangement of salary and taxes, which of the following is the correct treatment of taxes
borne by employer in Lily’s tax computation:
(a) Only offer tax borne by employer on monetary salary as perquisite in her tax
computation
(b) Only offer tax borne by employer on non-monetary salary as perquisite
(c) Offer tax borne by employer on complete salary as perquisite
(d) No perquisite on tax borne by employer to be reported in her tax computation
14. What would be the impact on company’s taxable profit of tax borne by employer on
perquisites and allowances provided to employees?
(a) Tax borne by employer on entire salary of employee would be allowable expenditure
(b) Tax borne by employer on monetary salary alone would be disallowed
(c) Tax borne on non-monetary perquisite will be allowed
(d) Tax borne on non-monetary perquisite will be disallowed
15. Mr. Shahid, a wholesale supplier of dyes, provides you with the details of the following cash
payments he made throughout the year –
‐ 12.06.2018: loan repayment of Rs.27,000 taken for business purpose from his friend
Kunal. The repayment also includes interest of Rs.5,000.
‐ 19.08.2018: Portable dye machinery purchased for Rs.15,000. The payment was made in
cash in three weekly instalments.
‐ 26.01.2019: Payment of Rs.10,000 made to electrician due to unforeseen electric circuit at
shop
‐ 28.02.2019: Purchases made from unregistered dealer for Rs.13,500
The total disallowance under 40A(3), if any, will be –
(a) Rs.23,500
(b) Rs.28,500
(c) Rs.13,500
(d) Nil

Answers
Question no. Answer
1 (a)
2 (d)
3 (d)
4 (b)
5 (c)
6 (b)
7 (c)
8 (a)
9 (a)
10 (c)
11 (a)
12 (d)
13 (a)
14 (d)
15 (c)
(5 MCQs of 2 Marks each)
1. X Ltd. files its return of loss for the A.Y. 2019-20 on 01.12.2019. The following data is taken
from return submitted by the company:
Business Loss for P.Y. 2018-19 (before depreciation) Rs.1,70,000

Depreciation Rs.30,000
Short term capital loss Rs.45,000
Long term capital gain Rs.10,000
Income from other sources Rs.23,000
Brought forward loss of earlier years which has been determined

in pursuance of return filed within time limit of section 139(1):
a. Unabsorbed deprecation pertaining to A.Y. 2017-18 and
A.Y. 2018-19 Rs.57,000
b. Business loss of previous year 2015-16 Rs.18,000
Compute the amount of loss that can be carried forward by X Ltd.
(a) Rs.1,05,000
(b) Rs.87,000
(c) Rs.2,87,000
(d) Rs.57,000
2. On 26.05.2018, Z Ltd. purchases its own shares (face value: Rs.10, amount offered to
shareholders: Rs.90 per share). Total amount distributed by Z Ltd. on buy-back of 30,000
shares is Rs.27,00,000. These shares were issued in F.Y. 2009-10 at a premium of Rs.15. Mr. A
is one of the shareholders. He holds 5,000 shares (cost of acquisition: Rs.27 per share, year of
acquisition 2011-12). He gets Rs.4,50,000.
Determine the tax consequences in the hands of Z Ltd. and Mr. A assuming that the shares
of Z Ltd. are not listed.
(a) Z Ltd. shall be liable to pay additional income tax at the rate of 20% on distributed
income and income of Mr. A is chargeable to tax under the head capital gains.
(b) Z Ltd. is not liable to pay tax and income of Mr. A is taxable under the head capital gains.
(c) Z Ltd. shall be liable to pay additional income tax at the rate of 20% on distributed
income and income of Mr. A is exempt from tax by virtue of section 10(34A).
(d) Both Z Ltd. and Mr. A are not liable to pay income on the above-mentioned transaction.
3. Apeksha Ltd. is a wedding planner. The wedding day of Mr. Neeraj’s son is arranged by
Apeksha Ltd. For this event, four different invoices are issued by Apeksha Ltd. to Mr. Neeraj
as follows:
 Invoice 1 for Lighting: Rs.15,50,000
 Invoice 2 for Flowers and Decoration: Rs.12,30,000
 Invoice 3 for Food and catering: Rs.38,00,000
 Invoice 4 for Gifts and Hampers distributed: Rs.25,00,000
Apeksha Ltd. has received the payment from Mr. Neeraj as per the details given below:
 Rs.1,80,000 for Invoice 1 on 24.06.2018 through a crossed cheque

 Rs.35,000 for Invoice 2 on 06.07.2018 in cash
 Balance amount of Rs.88,65,000 received in bank through RTGS on 25.07.2018

Discuss whether provisions of Section 269ST of the Income-tax Act, 1961 are applicable in
this case and if yes, determine the amount on which penalty can be levied.
(a) Yes, provisions of Section 269ST of the Act are applicable and 100% penalty can be
levied on the amount of Rs.35,000
(b) No, provisions of Section 269ST of the Act are not applicable since the payments
received on different dates are less than Rs.2,00,000 respectively
(c) Yes, provisions of Section 269ST of the Act are applicable and 100% penalty can be
levied on the amount of Rs.2,15,000
(d) No, provisions of Section 269ST of the Act are not applicable since the amount received
in cash of Rs.35,000 is less than Rs.2,00,000
4. Mr. A purchased equity shares of a listed company on 01.05.2018 through Bombay Stock
Exchange. He will sell the said shares after holding them for 18 months on BSE. Mr. A is
predicting that he will make a profit of Rs.1,20,000 by selling the equity shares and further, is
of the view that the said profit shall be exempt from income-tax. Determine whether Mr. A’s
view is correct in the light of the tax implications that shall arise in his hands in the year of
transfer of the said equity shares.
(a) Mr. A’s view is correct. The resultant gain would be a long term capital gain arising from
sale of STT paid listed equity shares, which is fully exempt from tax.
(b) Mr. A’s view is incorrect. The resultant gain would be a long term capital gain, chargeable
to tax in his hands at the rate of 20%.
(c) Mr. A’s view is incorrect. The resultant gain would be a short term capital gain,
chargeable to tax in his hands at the rate of 15%.
(d) Mr. A’s view is correct. The resultant gain would be a long term capital gain, exempt to
the extent of Rs.1,00,000. The long-term capital gain in excess of Rs.1,00,000 would be
taxable@10%.
5. For the Previous Year 2018-19, the taxable income of Mr. Khurana (resident and aged 49
years) computed as per the provisions of Income-tax Act is Rs.30,40,000. The taxable income
has been computed after deduction of Rs.3,00,000 under section 80QQB in respect of royalty
on books. Will provisions of Alternate Minimum Tax (“AMT”) apply to Mr. Khurana for A.Y.
2019-20? What will be his tax liability for the said A.Y.?
(a) Yes, provisions of AMT will apply to Mr. Khurana and his tax liability for A.Y. 2019-20 shall
be Rs.6,42,616.

(b) No, provisions of AMT will not apply to Mr. Khurana and his tax liability for A.Y. 2019-20
shall be Rs.7,53,480.
(c) Yes, provisions of AMT will apply to Mr. Khurana and his tax liability for A.Y. 2019-20 shall
be Rs.7,53,480.
(d) Yes, provisions of AMT will apply to Mr. Khurana and his tax liability for A.Y. 2019-20 shall
be Rs.8,47,080.
Answers
Question no. Answer
1 (a)
2 (c)
3 (c)
4 (d)
5 (c)

Q.1 M/s. Gabbar Associates, a registered person in Delhi issued a credit note
amounting to Rs. 25,000 (inclusive of GST) to Mr. Kalia, an un-registered person
residing in Delhi against an invoice amounting to Rs. 1,50,000. How the credit
note is to be treated in FORM GSTR-1?
(a) Credit note will be shown separately in Table No. 9B of FORM GSTR-1
(b) Taxable supplies to un-registered person is to be shown net of credit
note in Table No. 7 of FORM GSTR-1
(c) Credit note need not to be shown in FORM GSTR-1
(d) Credit note cannot be issued to an un-registered person
Q.2 Mr. Jolly, lawyer is registered in Delhi. He has income of Rs. 32,00,000 from
legal services. Also, he has given a commercial land on rent for which he is
charging Rs. 5,00,000 per month. He has also extended loan of Rs. 1 crore for
which he received interest amounting to Rs. 12,00,000 annually. What will be the
value of exempt supply for the purpose of reversal of input tax credit under rule
42?
(a) Rs. 44,00,000
(b) Rs. 12,00,000
(c) Rs. 32,00,000
(d) Rs. 60,00,000
Q.3 Mr. Kanjoos located in Delhi wants to opt for composition scheme for
financial year 2018-19. He is engaged in trading of branded flour which is taxable
@ 5% and unbranded flour which is taxable at 0%.
Turnover of branded flour in FY 2017-18: Rs. 70,00,000
Turnover of unbranded flour in FY 2017-18: Rs. 20,00,000
He was also providing service in the previous year by way of renting of a
residential unit for which he is charging Rs. 1,00,000 per month as rent.
Calculate his aggregate turnover to determine his eligibility to opt for
composition scheme?
(a) Rs. 90,00,000

(b) Rs. 70,00,000
(c) Rs. 1,02,00,000
(d) Rs. 91,00,000
Q.4 Time limit for issue of tax invoice, state which of the following statement is
correct:
(i) In case of supply of goods in non-working hours (like weekends) the invoice
may be issued on the next immediately working day
(ii) In case the recipient of the goods requires the supply of goods at his place of
business, the invoice can be issued when the goods reaches at the recipient
place of business
(iii) In case of a banking company the invoice can be issued after the end of each
month/ quarter, and such practise should be followed regularly
(iv) In case of supply of services the tax invoice must be issued on receipt of
acknowledgement that the recipient has duly received the services or 30 days
whichever is earlier
(a) (ii), (iii)
(b) (i), (ii)
(c) (ii), (iii), (iv)
Q.5 A registered GTA, Smooth Carriers wants to file its GST returns. Its entire
turnover include supplies on which recipient is liable to pay tax on reverse charge
basis. Where it is to be shown in GST returns?
(a) Table No. 4 of GSTR-1: Supplies made to registered person
(b) Table No. 7 of GSTR-1: Supplies made to unregistered person
(c) To be shown in GSTR-2 of GTA
(d) Not to be shown in any return as his entire supplies are taxable on reverse
charge basis
Q.6 Which one of the following statement is correct while issuing a tax invoice:
(i) Place of supply in case of inter-State supply is not required to be mentioned

(ii) The power of attorney holder can sign the tax invoice in case the taxpayer or
his authorised representative has been travelling abroad
(iii) Quantity is not required to be mentioned in case of goods when goods are
sold on “as is where is basis”
(iv) Description of goods is not required to be given in case of mixed supply of
goods
(a) (ii), (iii)
(b) (i), (ii), (iii)
(c) None of the above
(d) All of the above
Q.7 Mr. Kabira is engaged in the business of sale and purchase of handbags
taxable @ 18%. Calculate his tax liability to be paid in cash for the month of Jul-
2018 considering the following details-
PARTICULARS AMOUNT (Rs.)
Value of inter-State outward supply to registered persons 30 lakh
Value of intra-State outward supply to registered persons 50 lakh
Value of intra-State outward supply to un-registered persons 15 lakh
Value of intra-State inward supply from registered persons 10 lakh
Value of inter-State inward supply from registered persons 5 lakh
Value of intra-State inward supply from un-registered persons 2 lakh
IGST credit on capital goods purchased in the month of July 1.5 lakh
CGST/ SGST credit on other inward supplies (including credit of Rs. 0.5 lakh each
5,000 each on account of Food and Beverages expenses)
Carried forward credits
CGST: Rs. 2 lakh
SGST: Rs. 2 lakh
IGST: Rs. 5 lakh
Mr. Kabira has also procured consultancy services from lawyer for Rs. 1 lakh
who is situated in same State in which Mr. Kabira is registered being taxable @
18%.

(a) IGST: Rs. 2,00,000; CGST: Rs. 2,50,000; SGST: Rs. 2,50,000
(b) IGST: Nil; CGST: Rs. 50,000; SGST: Rs. 2,50,000
(c) IGST: Nil; CGST: Rs. 59,000; SGST: Rs. 2,59,000
IGST: Rs. 3,00,000; CGST: Rs. 4,50,000; SGST: Rs. 4,50,000
Q.8 Calculate the amount of eligible ITC?
Particulars Amount of credit
(Rs.)
Purchase of mobile phones for employees to be used for business 20,000
purposes
Taxes paid on telephone expenses 5,000
Taxes paid on security services availed by registered person for 18,000
his factory
Motor vehicle purchased for employees to be used for personal as 1,50,000
well as business purposes
Motor vehicle purchased for transportation of goods within the 2,00,000
factory of registered person
Taxes paid on food expenses incurred by registered person for his 2,000
employees
Rent-a-cab facility given to employees as it is obligatory for the 36,000
employer to provide it under an applicable law The service has
been notified by the Government.
Taxes paid on purchase of cement and other material for 16,000
renovation of the office room (not capitalised)
(a) Rs. 2,95,000

(b) Rs. 4,47,000
(c) Rs. 2,43,000
(d) Rs. 2,59,000
Q.9 Which of the following activity is taxable under GST: -
(i) Services by a hotel having declared tariff of Rs. 1,200 but amount charged
from customer is Rs. 800

(ii) Transportation of passengers by non-air-conditioned railways
(iii) Transportation of passengers by vessel predominantly for tourism purpose
for places located in India
(iv) Transportation of agriculture produce by air from one place to another place
in India
(v) Services by way of loading, unloading, packing, storage or warehousing of
rice
(vi) Service provided by GTA where consideration charged for transportation
of goods for a single carriage is Rs. 900
(a) (i), (v), (vi)
(b) (iii), (iv), (v)
(c) (i), (iii), (iv)
(iv), (v)
Q.10 Ms. Chulbuli is registered in Delhi. She has been engaged in the modeling
business. Her taxable turnover during the month of Jul-2018 is 48 lakh taxable @
18%. She has made all supplies within the State. The carried forward ITC are as
under:-
(i) CGST: Rs. 2,35,000
(ii) SGST: Rs. 1,30,000
(iii) IGST: Rs. 1,00,000
During the month of Jul-2018, she travelled abroad and purchased camera for Rs.
5 lakh on which she paid IGST of Rs. 90,000. She utilized this camera partly for
business purpose and partly for non-business purposes. Calculate the net GST
liability on her output supplies (to be paid in cash) for the month of Jul-2018.
(a) CGST: Rs. 4,32,000; SGST: Rs. 4,32,000; IGST: Rs. 90,000
(b) CGST: Rs. 1,97,000; SGST: Rs. 3,02,000; IGST: Rs. Nil
(c) CGST: Rs. 1,01,000; SGST: Rs. 3,02,000; IGST: Rs. 90,000
(d) CGST: Rs. 11,500; SGST:Rs. 3,02,000; IGST: Rs. Nil


1. Which of the following persons can opt for the composition scheme?
1) Registered person whose aggregate turnover in the preceding financial year did not exceed Rs. 75 lakh.
2) Registered person whose aggregate turnover in the preceding financial year did not exceed Rs. 1 crore.
3) A person engaged in business of Pan Masala, Tobacco and manufactured tobacco substitutes
4) A person engaged in the business of Ice Cream, other edible ice, whether or not containing Cocoa.
5) A person engaged exclusively in the providing restaurant service.
6) A person engaged exclusively in supply of medicines.
Which of the above are correct:-
(a) 1,2,3,5
(b) 1,2,5,6
(c) 2,3,4,5
(d) 3,4,5,6
2. Which of the following statements is not correct for a tax payer who has opted for composition scheme?
(a) A registered person supplying goods under the composition scheme shall issue a bill of supply.
(b) Last date for payment of liability towards tax, interest, penalty, fee or any other sum is 20th day of
each month.
(c) A composition dealer shall mention the words “Composition taxable person, not eligible to collect tax on
supplies” at the top of the bill of supply issued by him.
(d) Last date for payment of liability towards tax, interest, penalty, fee or any other sum is 18th day of the
month following each quarter.
3. M/s. Tanatan received testing services from Aquarian Solution (P) Ltd. on 10-May-2018. The payment was
entered in the books of account of M/s. Tanatan on 16-May-2018 and was credited in the bank account of
supplier on 19-May-2018. In the meantime, supplier issued invoice on 18-May-2018. What will be the time of
supply in this case?
(a) 10-May-2018
(b) 18-May-2018
(c) 16-May-2018
(d) 19-May-2018
4. Which one of the following cannot be a reason for cancellation of registration?
(a) There is a change in the constitution of business from partnership firm to proprietorship.
(b) The business has been discontinued.
(c) A composition taxpayer has not furnished returns for three consecutive tax periods.
(d) A registered person, other than composition taxpayer, has not furnished returns for three
consecutive tax periods.
5. Which of the following transactions does not qualify as supply under GST law?
(i) When the Head Office makes a supply of services to its own branch outside the State.

(ii) When a person import services without consideration for the purposes of his business from his elder
brother living outside India.
(iii) Disposal of car without consideration and where the supplier has not claimed input tax credit on such
car.
(iv) When a principal makes supplies to his agent who is also registered and is situated within the same
State.
(a) (i) & (iii)
(b) (i), (ii) & (iii)
(c) (iii)
(d) (iii) & (ii)
6. State which of the following statements are not true?
(i) A taxpayer who makes delayed payment of tax is liable to pay interest at the rate of 18% for a month or
part of the month.
(ii) A taxpayer who makes delayed payment of tax is liable to pay interest at the rate of 15% for a month or
part of the month, if he has bona fide reasons for delay.
(iii) A taxpayer who made delayed payment of tax shall be liable to pay interest at the rate of 24% for a month
or part of the month, if he has mala fide reasons for delay.
(iv) A taxpayer who made delayed payment of tax shall be liable to pay interest at the rate of 18% per annum.
(a) (i)
(b) (i), (ii), (iii)
(c) All of the above
7. Mr. Chipku wants to transport exempted goods i.e. wood charcoal worth Rs. 75,000 along with taxable goods
worth Rs. 48,000 (excluding GST amounting to Rs. 2,000) from Delhi to Gujarat. Which of the following
statements is true in this situation?
(a) E-way Bill is mandatorily required to be issued for both taxable as well as exempted goods.
(b) E-way Bill is not required.
(c) E-way Bill is mandatorily required to be issued only for taxable goods.
(d) E-way Bill is mandatorily required to be issued only for exempted goods.
8. M/s. Kuber Anand is registered under GST. He has output tax liability as under-
CGST: Rs. 85,00,000
SGST: Rs. 85,00,000
IGST: Rs. 1,05,00,000
It has input tax credits as under-
CGST: Rs. 1,50,00,000 including credit of Rs. 75,00,000 carried forward from TRAN-1
SGST: Rs. 30,00,000
IGST: Rs. 1,20,00,000

Calculate the amount of tax to be deposited in cash?
(a) CGST: Nil; SGST: Rs. 55,00,000; IGST: Nil
(b) CGST: Rs. 10,00,000; SGST: Rs. 55,00,000; IGST: Nil
(c) CGST: Nil; SGST: Rs. 50,00,000; IGST: Nil
(d) CGST: Nil; SGST: Rs. 40,00,000; IGST: Nil
9. Can registration be granted to a person separately for different premises for same product within a State as
business vertical?
(a) Yes, if he applies for a separate GST registration
(b) Yes, if the premises have different names on their signboards
(c) Yes, if the premises is 25 Kilometres away from each other
(d) Yes, if the class of customers are different for the two premises
10. In which form does an Embassy of a foreign country apply for registration under GST law?
(a) Form GST REG-11
(b) Form GST REG-09
(c) Form GST REG-13
(d) Form GST REG-10
11. Which of the following is included while computing the value of supply of goods under GST?
(a) Price of the goods
(b) Packing charges of the goods
(c) Tax levied by Municipal Authority on sale of the goods
12. Which documents are required to send goods from branch office in one State to head office in another State?
(a) Tax invoice and e way bill
(b) Receipt Voucher and e way bill
(c) Payment Voucher and e way bill
13. Is e-way bill mandatory in case of transport of the handicraft goods from one State to another State by a
person who has been exempted from the requirement of obtaining registration?
(a) E-way Bill is not required as the supplier is exempt from the requirement of obtaining registration.
(b) E-way Bill is mandatory only if the value of consignment is more than Rs. 50,000
(c) E-way Bill is mandatory even if the value of consignment does not exceed Rs. 50,000
(d) None of the above.
14. A registered person can claim refund any unutilised input tax credit on zero rated supplies without payment
of tax or the credit accumulated on account of inverted tax rate structure:
(a) before the expiry of 2 years from the relevant date.
(b) before the expiry of the tax period.

(c) before the expiry of 3 years from the relevant date.
(d) before the expiry of 18 months from the relevant date.
15. A registered person, who is under investigation for an offence under Chapter XIX, needs to retain the books
of accounts/other records pertaining to such investigation until the expiry of:
(a) 72 months from the due date of furnishing of annual return for the year pertaining to such accounts and
records.
(b) 1 year after final disposal of such investigation.
(c) (a) or (b), whichever is later
16. In which of the following cases, a tax invoice under GST is not required to be issued by a registered person?
(a) Value of the goods/services/both supplied is less than Rs.200 and recipient is unregistered.
(b) Value of the goods/services/both supplied is less than Rs.200 and recipient is registered.
(c) Value of the goods/services/both supplied is more than Rs.200 and recipient is unregistered.
(d) Value of the goods/services/both supplied is equal to Rs.200 and recipient is unregistered.
17. What is the maximum time limit for passing the demand order in case of short payment of tax for reasons
other than fraud, or wilful misstatement or suppression?
(a) 3 years from the due date of filing of Annual Return for the Financial Year to which the demand
pertains.
(b) 2 years and 9 months from the due date of filing of Annual Return for the Financial Year to which the
demand pertains.
(c) 5 years from the due date of filing of Annual Return for the Financial Year to which the demand pertains.
(d) 4 years and 9 months from the due date of filing of Annual Return for the Financial Year to which the
demand pertains.
18. What is the maximum time limit for issuance of show cause notice in case of short payment of tax on account
of fraud?
(a) 3 years from the due date of filing of Annual Return for the Financial Year to which the demand pertains.
(b) 2 years and 9 months from the due date of filing of Annual Return for the Financial Year to which the
demand pertains.
(c) 5 years from the due date of filing of Annual Return for the Financial Year to which the demand pertains.
(d) 4 years and 9 months from the due date of filing of Annual Return for the Financial Year to which
the demand pertains.
19. Which of the following statement is not correct with respect to input tax credit?
(a) Input tax credit is allowed on purchase invoices less than 1 year old.
(b) Input tax credit is allowed on capital goods
(c) Input tax credit is not allowed on goods/services for personal use.
(d) No input tax credit shall be allowed after GST return has been filed for September following the end of
the financial year to which such invoice pertains or filing of relevant annual return, whichever is earlier.
20. 'Zero rated supply' shall not include the following:

(a) Export of goods or services under bond or LUT.
(b) Export of goods or services on payment of IGST.
(c) Supplies by SEZ unit or SEZ developer.
(d) Supplies to SEZ unit or SEZ developer.

Second Level
1. Mr. Tommy entered into a contract for supply of service of exploration of petroleum crude on 15-Jan-
2018. He raised the invoice on 20-Jan-2018 and received the payment via cheque on 24-Jan-2018
which he presented to bank for clearance on the same day. On 25-Jan-2018, the rate of tax on this
service changed from 18% to 12%. The payment was credited in his bank account on 31-Jan-2018,
assuming 27-Jan-2018, 28-Jan-2018, 29-Jan-2018, and 30-Jan-2018 to be working days. The service
was rendered to the recipient on 1-Feb-2018. What will be the rate of tax and time of supply in this
case?
(a) 18%, 20-Jan-2018
(b) 18%, 24-Jan-2018
(c) 12%, 31-Jan-2018
(d) 12%, 1-Feb-2018
2. M/s. Rajdhani (P) Ltd., registered in Delhi, wishes to transfer the taxable goods to one of its business
vertical having same PAN and registered within same State. Which document shall be issued by the
Company in this situation?
(a) Delivery Challan
(b) Tax Invoice
(c) Bill of Supply
(d) Invoice-cum-bill of supply
3. In which of the following cases, compounding of offence is not allowed under section 138 of CGST
Act, 2017?
(i) a person who has been allowed to compound once in respect of any of the offences specified in
clauses (a) to (f) of section 132(1).
(ii) a person who has been allowed to compound once in respect of any offence, other than those in
clause (i) in respect of supplies of value upto one crore rupees.
(iii) a person who has been accused of committing an offence under this Act which is also an offence
under any other law for the time being in force.
(iv) a person who has been convicted for an offence under this Act by a Court.
(a) (i), (iii), (iv)
(b) (ii), (iii)
(c) (ii), (iii), (iv)
4. Which of the following information is not required to be furnished by a composition taxpayer for quarter
April to June in FORM GSTR-4?
(i) import of service
(ii) invoice wise inter-State and intra-State inward supplies received from un-registered persons
(iii) invoice wise inter-State and intra-State outward supplies made to registered persons
(iv) invoice wise inter-State and intra-State outward supplies made to un-registered persons

(a) (i), (ii)
(b) (iii), (iv)
(c) (i), (ii), (iv)
5. Mr. Radhey Shyam, a Chartered Accountant registered in Delhi, wish to purchase an office in
Bengaluru. Mr. Radhey Shyam took financial services from ICICI Bank registered in Gurugram in
which he is an account holder, to procure loan for an office property situated in Bengaluru. He paid Rs.
20,000/- as processing fee for this loan to the bank. What will be the place of supply for the bank in
this situation?
(a) Delhi
(b) Bangalore
(c) Chandigarh
6. Mr. Albert exported goods to Nepal worth Rs. 20 lakh in the month of July-2018 with payment of IGST.
He received payment in Indian Rupees and not in foreign convertible exchange. He wants to seek an
expert’s advice that under which table of FORM GSTR-1 this supply is to be shown?
(a) Table 4: Taxable outward supplies made to registered persons
(b) Table 6: Zero rated supplies and deemed exports
(c) Table 7: Taxable supplies to unregistered persons
(d) Not to be shown in GSTR-1
7. Mr. Hira, a registered person in Gurugram, avails architect services of Sweet Homes (P) Ltd.
registered in Mumbai for a property situated in London. What will be the place of supply for Sweet
Homes (P) Ltd. in this case?
(a) Gurugram
(b) Mumbai
(c) London
8. M/s. ABC Ltd. received Rs. 1 lakh as advance for testing and quality control services. What will be the
rate of tax and nature of supply, if the same is not determinable at the time of receipt of advance?
(a) 12%, Inter-State supply
(b) 12%, Intra-State supply
(c) 18%, Inter-State supply
(b) 18%, Intra-State supply
9. The adjudicating authority determined Rs. 50 lakh as tax, interest and penalty to be payable by Mr. X
on account of wrong availment of input tax credit. Mr. X wants to prefer an appeal before the first
Appellate Authority against such orders. Out of Rs. 50 lakh, Mr. X admitted Rs. 15 lakh as his liability
and wants to litigate for Rs. 35 lakh. Calculate the amount of pre-deposit to be paid by Mr. X.
(a) Rs. 18,50,000/-

(b) Rs. 22,00,000/-
(c) Rs. 50,00,000/-
(d) Rs. 15,00,000/-
10. Mr. A defaulted in payment of IGST amounting to Rs. 1.5 crore. The Proper Officer treated this default
on the part of the taxpayer being made with the intention of fraud. Which of the following Proper
Officer can issue a show cause notice to the taxpayer under section 74 of CGST Act, 2017 in this
case?
(a) Assistant Commissioner of Central Tax
(b) Additional Commissioner of Central Tax
(c) Joint Commissioner of Central Tax
(d) Superintendent of Central Tax
11. The Head Office of XYZ Ltd. is registered as Input Service Distributor in Delhi. Its Branch Office in
Mumbai is engaged in the supply of readymade garments. The Head Office received an invoice from
Software Solutions (P) Ltd. registered in Delhi for software maintenance service. However, the
software is used in Branch Office in Mumbai. Tax invoice indicates amount as CGST: Rs. 25,000/- and
SGST: Rs. 25,000/-. Calculate the amount of tax to be distributed by Head Office to its Branch Office.
(a) IGST: Rs. 25,000/-
(b) CGST: Rs. 25,000/-; SGST: Rs. 25,000/-
(c) CGST: Rs. 25,000/-
(d) IGST: Rs. 50,000/-
12. Which of the following is a correct method of serving notice?
(i) By giving it to any adult member of the family residing with the taxable person
(ii) By making it available on the common portal
(iii) By sending a courier to a person regularly employed by him in connection with the business
(iv) By registered post with acknowledgement due to his authorised representative
(v) Affixing a copy on the notice board of the office of the concerned officer who issued such notice
(a) (ii), (iv)
(b) (i), (iii), (v)
(c) (i), (ii), (iii), (iv)
(d) (i), (ii), (iii), (iv) and (v)
13. Metrowalk (P) Ltd. has four units registered in Mumbai, Gurgaon, Kolkata and Punjab with its Head
Office registered as ISD in Delhi. Due to some dispute with one of the common customers of Gurgaon
and Punjab Branch, the Delhi Head Office took legal services of a lawyer whose consultation fee was
Rs. 2,00,000/-. Since the legal advice was usable by all units, the Delhi ISD office wants to distribute
the credit to all its four units.
As a consultant of Metrowalk (P) Ltd., advice what is the best course of action?
(a) Delhi unit should pay tax on legal services obtaining separate registration as a normal tax payer.
The credit of said tax should be distributed to Gurgaon and Punjab Branch equally.

(b) Delhi unit should pay tax on legal services with its ISD registration. The credit of said tax should
be distributed to Gurgaon and Punjab Branch equally.
(c) Delhi unit should pay tax on legal services with its ISD registration. The credit of said tax should
be distributed to all units in the ratio of their turnover.
(d) Delhi unit should pay tax on legal services obtaining separate registration as a normal tax
payer. The credit of said tax should be distributed to all units in the ratio of their turnover.
14. Mr. X of Haryana purchased goods worth Rs. 1,00,000/- from Mr. Y of Delhi and ordered him to deliver
the goods to Mr. Z of Chandigarh. Now, Mr. X wants to generate e-way bill for this transaction and
while generating the e-way bill he is struck up with two fields-invoice details and place of dispatch. He
came to seek your expert advice, kindly suggest him whose details are to be included in these two
fields?
(a) Invoice details: Details of invoice issued by Y to X; Place of dispatch: Principal place of business
of X
(b) Invoice details: Details of invoice issued by Y to X; Place of dispatch: Principal place of business
of Y
(c) Invoice details: Details of invoice issued by X to Z; Place of dispatch: Principal place of business
of X
(d) Invoice details: Details of invoice issued by X to Z; Place of dispatch: Principal place of
business of Y
15. Which of the following is an OIDAR service?
(i) Online course consisting of pre-recorded videos and downloadable PDFs
(ii) PDF document manually emailed by provider
(iii) Individually commissioned content sent in digital form e.g., photographs
(iv) Stock photographs available for automatic download
(v) PDF document automatically emailed by provider’s system.
(a) (i), (iv), (v)
(b) (iv), (v), (vi)
(c) (i), (iv), (v)

1. Input tax Credit is available on all supplies which are used or intended to be used in
the course or furtherance of business. Input tax credit will be available under which
of the following situations?
a) GST paid on motor vehicle used in the course and furtherance of business.
b) GST paid on club membership fees.
c) GST paid on goods or services or both used for personnel consumption.
d) IGST @18% paid on inputs purchased from a vendor in Bangalore where the
supplier is registered in Rajasthan.
2. Table 6 in GSTR-1 captures information related to:
a) Exports out of India
b) Supplies to SEZ unit/ and SEZ developer
c) Deemed Exports
d) All of the above
3. Which of the following is FALSE w.r.t HSN disclosure in GSTR 1?
a) Disclosure is not required for taxpayers having annual turnover upto Rs. 1.5 Crore
b) It will be mandatory to report HSN code at 2 digit level for taxpayer having annual
turnover in the preceding year above Rs. 1.50 Crore but upto 5.00 Crore
c) Taxpayers having turnover above Rs. 5 Crore have to mandatorily report 8
digit level HSN code.
d) Taxpayers having turnover above Rs. 5 Crore have to mandatorily report 4 digit
level HSN code.
4. Which of the statement is FALSE with regard to filing of GST return of Mr. Anup, a
proprietor registered under GST (non-composition) who is filing quarterly return as
his annual turnover is less than 1.5 crore
a) Mr. Anup has to file GSTR-1 quarterly
b) Mr. Anup has to pay tax quarterly.
c) Mr. Anup has to settle his tax liabilities before filing of return
d) Mr. Anup has to pay tax monthly.
5. Mr. Alok had to transport his personal goods from Mumbai to Goa. He contacts
Sigma travel services. Sigma travels is passenger bus traveler and also does
transportation of goods i.e., Goods Transport Agency. He transports goods of all
persons including non- passengers.
Mr. Alok hands over the goods to Sigma travel services. Sigma travels issues
consignment note for his goods. Alok is an unregistered person. What will be GST
scenario in this case?
a) Goods transport agency service rendered to un-registered person is exempt
from tax

b) Goods transport agency is required to pay GST under reverse charge for service
rendered to un-registered person
c) Unregistered person is required to pay GST to transport agency which in turn will
be deposited by Goods transport agency to government.
d) None of the above
6. Which of the following statements are true w.r.t. accounts and records?
1) All accounts and records are to be retained for 6 years.
2) Stock record is to be maintained by all registered dealers except the dealers
registered under composition scheme.
3) Stock record is to be maintained by all registered dealers including composition
dealers.
4) Monthly production records are to be maintained by all dealers except the dealers
who have taken option for composition.
5) Monthly production records are to be maintained by all dealers including
composition dealers
6) Records are to be maintained at principal place of business.
7) Records are to be maintained at principal place of business as also at all
additional places of business.
Which of the above are correct?
a) 1,2,5,6
b) 1,3,5,7
c) 1,3,4,7
d) 1,2,4,6
7. A special Audit under GST is conducted by :
a) The CGST Officials
b) The SGST Officials
c) Chartered Accountant or Cost Accountant
d) Any of the above
8. Suppose, One Business Group has 35 Business Verticals within a state and has to take
separate GST registrations under the same PAN. How many online registration
applications with scanned documents have to be filed by that Business Group?
a) 35 separate applications in GST REG-01
b) Only one registration application incorporating the entire business verticals in one
go
c) Either of the above at the option of the Business Group
d) Either of the above at the discretion of the Proper Officer

9. Rakesh & Company has got multiple retail outlets of cosmetic products in Mumbai.
He receives an order from a customer of Kerala worth Rs. 1,20,000/- at one store.
While checking the stock he found that order worth Rs. 55,000/- can be fulfilled from
his one store situated in Dadar and remaining goods worth Rs. 65,000/- can be sent
from his another store situated in Malad. He instructs both the stores to bill
separately the goods to Kerala customer. Which one of the below is TRUE?
a) He would be required to prepare one e-way bill since one order shall be
considered as one consignment for the purpose of e-way bills.
b) He will not be required to prepare e-way bill.
c) Rakesh & Company would be required to prepare 3 e-way bills. One for
movement from Dadar Store, one for movement from Malad store and one
consolidated for movement from Transporter to Customer.
d) He would be required to prepare two separate e-way bills since each invoice
value exceeds Rs. 50,000/- and each invoice shall be considered as one
consignment for the purpose of generating e-way bills.
10. Mr. Anand, one of your clients in Mumbai is presently trading in electronic products
within India and also all his purchases are made within India. He is now interested to
import certain raw material directly from another country to Mumbai, Nhava Sheva
port and puts up a question to you w.r.t applicability of GST and input tax credit of
applicable GST. What would be your advice out of below options?
a) Import of goods will be treated as inter-state supplies and IGST will be levied
on import of goods into the country. The input tax credit equivalent to
IGST paid on imports shall be available. Basic custom duty (BCD) as
applicable shall be paid as per specified tariff, no input tax credit on BCD is
allowed.
b) Import of goods in Mumbai by a local trader will be intra-state supplies and CGST,
SGST will be levied. The input tax credit equivalent to CGST / SGST paid on
imports shall be available. Basic custom duty as applicable shall be paid as per
specified tariff, no input tax credit on BCD is allowed.
c) Import of goods will be treated as inter-state supplies and IGST will be levied on
import of goods into the country. The input tax credit equivalent to IGST paid on
imports shall be available. BCD shall not be levied as custom duty is subsumed
under GST
d) Import of goods in Mumbai by a local trade will be intra-state supplies and CGST,
SGST will be levied. The input tax credit equivalent to CGST / SGST paid on
imports shall be available.BCD shall not be levied as custom duty is subsumed
under GST.
11. GSTN stands for Goods and Service Tax Network. Which of the following is not the
role of GSTN in GST regime?
a) Facilitating registration, forwarding return to Central and State authorities.
b) Computation and Settlement of IGST, matching tax payment details with banking
network

c) Providing platform for litigation
d) Providing various MIS reports to Central and State Governments, providing
analysis on tax payers profile, running the matching engine, reversal and reclaim
of Input tax credit
12. There is a difference in taxability of goods forming part of composite supply and
mixed supply. Here are few examples from which you need to identify which is
correct example of composite supply and mixed supply.
i) Mr. A buys a car and purchases warranty and maintenance of the car by paying
nominal amount. Car, warranty and maintenance here are a mixed supply.
ii) Mr. A buys a car and purchases warranty and maintenance of the car by paying
nominal amount. Car, warranty and maintenance here are a composite supply.
iii) Mrs. A buys a microwave oven and some utensils for use in microwave oven. Both
microwave oven and utensils are sold at a single price. Microwave oven and its
utensils here are a mixed supply.
iv) Mrs. A buys chocolates, juices and biscuits from a shop. All items have different
prices. Chocolates, juices and biscuitsare a mixed supply.
The correct examples of composite and mixed supply are: -
a) i,iv
b) ii,iii
c) ii,iii,iv
13. Mr. Z has an agency of wholesale trading of a particular brand in Gas Stoves for
Rajasthan and Gujarat and has separate proprietorship firms in each of the two
States. In Gujarat, Mr. Z additionally trades in shoes from the same firm.
In the context of the above information, which of the following statement is correct?
a) Mr. Z can operate with single registration for Gas Stoves business for Rajasthan
and Gujarat. For Shoes business, he has to compulsorily take separate
registration since it is different business vertical.
b) Mr. Z will have to get separate registration for each of the States i.e.,
Rajasthan and Gujarat for Gas stove Business. For shoes business, he has an
option to register separate business verticals independently.
c) Mr. Z will have to compulsorily take 3 registrations two for Gujarat (Gas Stoves
and Shoes separately) and one for Rajasthan business (Gas stoves).
d) Mr. Z can operate with single registration for Gas Stoves business for Rajasthan
and Gujarat and Shoes business for Gujarat.
14. A new client Mr. Z has recently obtained GST registration and keeps manual
accounts. He has got his GSTIN printed on top of every page of new booklet printed
for Tax Invoice. Apart from his principal place of business he owns 2 godowns where
he keeps stock of his goods and does some wholesale trading. He asks you weather
he needs to display the GSTIN registration and GSTIN at any other places?

a) Mr. Z is required to display his certificate of registration in a prominent location at
his principal place of business only. Name board at entry shall display GSTIN at
his principal place of business only.
b) Mr. Z has to display his certificate of registration in a prominent location at
his place of business and at every additional place or places of business.
Also, he should display GSTIN in the name board exhibited at the entry of
his principal place of business and at every additional place or places of
business.
c) The certificate of registration is not required to be displayed. Only name board at
entry of principal and additional places of business shall display GSTIN.
d) The certificate of registration in a prominent location is required to be displayed
only at principal place of business. Name board at entry of principal and
additional places of business shall display GSTIN.
15. Mr. Y was registered under VAT and got provisional registration under GST during
migration to GST. Registration formalities were completed by submitting the
required documents and registration certificate was obtained. After working for few
months, he found that he will not cross the threshold limit required for obtaining
registration nor will he fall into any case where registration is compulsory. Thus, he
decides to surrender the GST number. He has following queries: -
1) What would happen to stock of goods and GST liability held on the date of
cancellation of GST number?
2) Can he claim input tax credit and collect tax after cancellation of GST?
What would you suggest your client on the above matter?
a) After cancellation of registration,Mr. Y can sell the stock without any tax liability
since GST number is cancelled. Whatever is the GST liability,except during the
month of cancellation, has to be discharged. After cancellation of GST, he can
collect GST from his customer but he cannot claim any input tax credit of GST
paid by him.
b) Before cancellation of GST, Mr. Y has to pay an amount equivalent to the
credit of input tax in respect of inputs held in stock on the day immediately
preceding the date of such cancellation or the output tax payable on such
goods, whichever is higher. After cancellation, of GST, he cannot collect
GST from his customer nor can he claim any input tax credit of GST paid by
him.
c) Before cancellation of GST, Mr. Y has to pay an amount equivalent to the credit of
input tax in respect of inputs held in stock on the day immediately preceding the
date of such cancellation or the output tax payable on such goods, whichever is
lower. After cancellationof GST, he cannot collect GST from his customer nor can
he claim any input tax credit of GST paid by him.
d) After cancellation of registration, he can sell the stock without any tax liability
since GST number is cancelled. Whatever is the GST liability, except during the
month of cancellation, has to be discharged. After cancellationof GST, he cannot

collect GST from his customer, but he can claim input tax credit of GST paid by
him.
16. Mr. Z, a job worker of cotton bedsheets approaches you to know whether he is
required to be compulsorily registered under GST. His job-work is the last stage of
work for the product to be a finished product. Can he dispatch goods from his place
directly to the customer on direction of his principal? What would be your advice
from the following options:
a) Mr. Z is supplier of services and is required to obtain compulsory registration
under GST. He can supply goods from his place directly to customer since he is
registered.
b) Mr. Z is a supplier of services and is liable to take registration only when his
turnover crosses the prescribed threshold limit of INR 10/20 lakh as applicable.
He can supply the goods to customer directly only if he is registered under GST.
c) Mr. Z is a supplier of services and is liable to take registration only when his
turnover crosses the prescribed threshold limit of INR 10/20 lakh as
applicable. He can supply the goods to customer directly if he is registered
under GST or if the principal declares Mr. Z’s place as his additional place of
business.
d) Mr. Z is not required to obtain registration under GST. He cannot supply goods
from his place directly to customer since he is not registered.
17. Mr. A purchases redeemable vouchers worth INR 8000/- on 1st January. The vouchers
are redeemable against purchase of any goods. The vouchers are valid till 30th June.
What will be the time of supply in case of such vouchers?
a) 1st January
b) 30th June
c) The date of redemption of vouchers
18. Mr. A, registered under regular scheme of payment of GST, had annual turnover of 3
crores last year. He is required to file GSTR-1 on a monthly basis. While filing the
GSTR-1 for July month he found that he has received advances worth INR 2,00,000/-
for which goods have not been supplied till month end. The goods will be supplied
in coming months. What would be his reporting for the above transaction in GSTR-1?
a) Mr. A is exempt from payment of GST on receipt of advance payments.
b) He needs to report the details of advances received in table 11A rate wise in the
tax period and tax to be paid thereon along with respective point of sale.
c) He needs to report the details of advances received in table 8 rate wise in the tax
period and tax to be paid thereon along with respective point of sale.
d) Mr. A has to pay tax on advances and adjust the same on issue of invoice.
Recipient will only be able to take input tax credit only in the month of issue of
Invoice.

19. Mr. R, a resident of Delhi, holds an account in ICICI Bank in Delhi. Mr. R goes to
Jaipur for work. During his visit to Jaipur he takes certain services relating to his
account from ICICI bank in Jaipur in relation to some transaction to be carried out at
Mumbai. What will be place of supply in this case?
a) The place of supply shall be Delhi
b) The place of supply shall be Jaipur
c) The place of supply shall be Mumbai
20. M/s ABC Ltd is filing his GSTR-3B for the month of August 2018. His total credit
balance of inputs and total tax liability payable is given in the table below. He needs
your guidance to understand the utilization of credit. Guide him with the rules
towards credit utilization of IGST, CGST, SGST and cash payable towards tax liability.
Tax Total Credit Total Tax

Balance liability
payable
IGST 80,000 90,000
CGST 87,000 85,000
SGST 75,000 77,000
TOTAL 2,42,000 2,52,000
a) IGST payable – 10,000, CGST Payable – 0, SGST payable – 2,000

b) IGST payable – 8,000, CGST Payable – 0, SGST payable – 2,000
c) IGST payable – 0, CGST Payable – 2000, SGST payable – 2,000
d) IGST payable – 10,000, CGST Payable – 1,000, SGST payable – 1,000

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© The Institute of Chartered Accountants of India

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© The Institute of Chartered Accountants of India

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© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

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9. In which of the following cases can temporary differences arise?

16. A Ltd. has following assets in its Balance Sheet:

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(a) Rs. 33.25 Lacs

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1(c) 2(d) 3(d) 4(c) 5(c)

6(b) 7(a) 8(d) 9(b) 10(d)

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MCQs for Practical Training Accounting +Auditing+ Law – Level 2

1. Mr A is salaried employee who is working in a multinational company. Mr A has taken a

(a) Since not liable to deduct TDS, hence no rate applicable.

(a) No time limit

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(a) Only the Managing Director

(a) Yes, as the payment exceeds Rs.50,000

(a) No, as the cost of immovable property is less than Rs.30,00,000

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(a) Interest u/s 234B is applicable

(a) 07th of the following month i.e., 07th January, 2019

(a) Form 24Q

 Income under head salaries

(a) ITR 1 - Sahaj

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© The Institute of Chartered Accountants of India

(a) Tax @1% has to be collected on Rs.15 lakhs

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(a) in case the value of each vehicle exceeds Rs.50,000

(a) Yes, PAN is required since premium exceeds Rs.10,000

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(a) Income from House Property, Income from House Property

(a) Form 49A

(a) Form 29C

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Question Number Answer

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10 MCQs for second year of articleship

 Interest income taxable under “Income from other sources”

(a) Interest u/s 234B is not applicable

(a) Interest u/s 234B is not applicable

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© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(a) Mr. & Mrs. Khera will qualify to be non-resident

(a) Short Term Capital Gain of Rs.45 lakh

(a) Section 54G

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The total disallowance under 40A(3), if any, will be –

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