A company bought a machine for Rs. 5,00,000 and the cost of installation is Rs. 20,000. Under AS 10, what is the cost of the machine to be capitalised?

Rs. 5,20,000 less 5% trade discount

Under AS 16, borrowing costs incurred on a qualifying asset must be capitalised when the asset is which of the following?

Under construction for its intended use

Held for sale in the ordinary course

Purchased ready for immediate use

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Advanced Accounting MCQs for CA Inter

Chapter-wise Advanced Accounting MCQs with answers and explanations. Try the sample questions below, then practise a set of 10 with instant right/wrong.

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Sample Advanced Accounting MCQs with answers

Q1 · Introduction to Accounting Standards
Under AS 1, which of the following is NOT a fundamental accounting assumption?
- (a) Going concern
- (b) Consistency
- (c) Accrual
- (d) Materiality
Show answer ↓
Answer: (d) Materiality
(d) is correct: Materiality is a consideration in preparing statements, not one of the three fundamental assumptions in AS 1, which are going concern, consistency and accrual. Consistency and accrual are the fundamental assumptions, so they are not the answer.
Q2 · Property, Plant and Equipment
A company bought a machine for Rs. 5,00,000 and the cost of installation is Rs. 20,000. Under AS 10, what is the cost of the machine to be capitalised?
- (a) Rs. 4,80,000
- (b) Rs. 5,00,000
- (c) Rs. 5,20,000
- (d) Rs. 5,20,000 less 5% trade discount
Show answer ↓
Answer: (c) Rs. 5,20,000
(c) is correct: Cost of PPE includes purchase price plus installation costs, so Rs. 5,00,000 + Rs. 20,000 = Rs. 5,20,000. Option (b) omits the installation cost, and option (d) wrongly applies a discount not given in the question.
Q3 · Borrowing Costs
Under AS 16, borrowing costs incurred on a qualifying asset must be capitalised when the asset is which of the following?
- (a) Under construction for its intended use
- (b) Fully completed and put to use
- (c) Held for sale in the ordinary course
- (d) Purchased ready for immediate use
Show answer ↓
Answer: (a) Under construction for its intended use
(a) is correct: Borrowing costs are capitalised while the qualifying asset is being acquired or constructed for its intended use. Once the asset is ready for use, capitalisation stops, and inventories held for sale or assets bought ready for use are not qualifying assets.
Q4 · CH-4 AS 20 Earnings Per Share
X Ltd. has 10,00,000 equity shares outstanding on 1 April. On 1 October it issues 2,00,000 fresh equity shares at full market price. What is the weighted average number of equity shares for basic EPS under AS 20 for the year ended 31 March?
- (a) 10,00,000
- (b) 12,00,000
- (c) 11,00,000
- (d) 11,50,000
Show answer ↓
Answer: (c) 11,00,000
(c) is correct: 10,00,000 + 2,00,000 × 6/12 = 11,00,000, because shares issued for cash are weighted from the date of issue. 12,00,000 wrongly treats the new shares as outstanding for the full year.
Q5 · CH-5 AS 2 Valuation of Inventories
Under AS 2, inventory costing Rs. 80,000 has an estimated selling price of Rs. 90,000 and estimated costs to sell of Rs. 15,000. At what value should the inventory be carried?
- (a) Rs. 80,000
- (b) Rs. 75,000
- (c) Rs. 90,000
- (d) Rs. 65,000
Show answer ↓
Answer: (b) Rs. 75,000
(b) is correct: NRV is 90,000 − 15,000 = Rs. 75,000, which is lower than the cost of Rs. 80,000. Rs. 80,000 ignores the lower of cost and NRV rule.

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