CA Inter Advanced Accounting MCQ Test 6: answer key
This practice test covers Advanced Accounting for CA Intermediate Group 1 students preparing for the January 2027 examination attempt. It carries 30 marks across 15 questions in 6 case scenarios with a time limit of 60 minutes and no negative marking.
15 questions across 7 chapters, 30 marks and 60 minutes in the timed paper. Every answer below is shown with the working behind it and the authority it rests on.
Law and standards used: Accounting Standards (AS 1 to AS 29 applicable to CA Intermediate), Framework for the Preparation and Presentation of Financial Statements, and Companies Act 2013 (Schedule III Division I and relevant Rules) as in the ICAI Study Material for Paper 1.
Questions
15
Marks
30
Time limit
60 minutes
Attempt
January 2027
Group
Group 1
Law basis
Accounting Standards (AS 1 to AS 29 applicable to CA Intermediate), Framework for the Preparation and Presentation of Financial Statements, and Companies Act 2013 (Schedule III Division I and relevant Rules) as in the ICAI Study Material for Paper 1
Content as of
2026-11-02
Chapters covered
AS 7 Construction Contracts (2 Q)
AS 9 Revenue Recognition (2 Q)
AS 13 Accounting for Investments (1 Q)
AS 22 Accounting for Taxes on Income (4 Q)
AS 1 Disclosure of Accounting Policies (1 Q)
Amalgamation of Companies and AS 14 (4 Q)
AS 28 Impairment of Assets (1 Q)
Questions, answers and explanations
Question 1 · 2 marks · AS 7 Construction Contracts · hard
Scenario. Vistara Infra Build Ltd. commenced a construction contract on 1 April 2025. The original contract price is ₹9,60,00,000. During 2025-26 the customer approved a variation of ₹48,00,000. Vistara has a claim of ₹20,00,000 for idle time; it is probable and reliably measurable. An early-completion incentive of ₹12,00,000 is also probable and measurable. The contract gives reimbursement of 70% of material-cost increase; actual increase is ₹30,00,000. Costs incurred up to 31 March 2026 are ₹6,20,00,000 and estimated further costs are ₹3,10,00,000. Progress billings are ₹5,80,00,000. No prior-year revenue exists and the cost-to-cost method is used. In a separate transaction, Vistara sent goods invoiced at ₹6,00,000 (cost ₹4,50,000) on consignment; the consignee sold 70% to third parties before year-end for ₹5,25,000 and confirmed the sale on 5 April 2026. Vistara also sold equipment on 1 April 2025 on installment terms: installment price ₹21,00,000, cash price ₹18,00,000, three equal annual installments, finance income at 10% on outstanding cash price. The first installment falls due on 31 March 2026.
What amount of contract revenue should Vistara recognise for FY2025-26 under AS 7?
Explanation. Total contract revenue is original price ₹9,60,00,000 plus variation ₹48,00,000 plus claim ₹20,00,000 plus incentive ₹12,00,000 plus escalation recovery 70% of ₹30,00,000 = ₹21,00,000, giving ₹10,61,00,000. Stage of completion is ₹6,20,00,000 divided by ₹9,30,00,000, i.e. two-thirds. Cumulative revenue is ₹10,61,00,000 × 2/3 = ₹7,07,33,333. Option c uses rounded stage and option d ignores escalation or claim.
Where it goes wrong. Candidates may ignore the probable claim or incentive, or may use total estimated cost instead of cost incurred plus estimated further cost.
Authority. AS 7
Question 2 · 2 marks · AS 7 Construction Contracts · hard
What is the gross amount due from the customer for contract work at 31 March 2026?
Explanation. Gross amount due is costs incurred plus recognised profits less recognised losses less progress billings. Costs are ₹6,20,00,000 and cumulative revenue is ₹7,07,33,333, so recognised profit is ₹87,33,333. Progress billings are ₹5,80,00,000. Thus due from customer = ₹6,20,00,000 + ₹87,33,333 − ₹5,80,00,000 = ₹1,27,33,333. Option a is only the profit and option b omits the claim or incentive effect.
Where it goes wrong. Candidates may show only profit as due, or may deduct progress billings from revenue instead of applying the AS 7 disclosure format.
Authority. AS 7
Question 3 · 2 marks · AS 9 Revenue Recognition · medium
How much revenue from the consignment should Vistara recognise in FY2025-26 under AS 9?
₹5,25,000 being sale by consignee (correct answer)
₹6,00,000 being invoice value dispatched
₹4,20,000 being 70% of invoice value
₹1,35,000 being unsold stock cost
Answer: A — ₹5,25,000 being sale by consignee
Working. Sale to third parties before 31 March 2026 = 70% of consignment, proceeds ₹5,25,000. Revenue = ₹5,25,000. Unsold stock remains inventory at cost ₹1,35,000.
Explanation. Under AS 9, consignment revenue is not recognised when goods are dispatched; it is recognised when the consignee sells to a third party. The consignee sold 70% before year-end for ₹5,25,000, so revenue is ₹5,25,000 even though confirmation came after year-end. Option b wrongly treats dispatch as sale, option c applies invoice value to sold units, and option d records unsold stock as revenue.
Where it goes wrong. Candidates may recognise the full invoice value on dispatch or ignore the post-year-end confirmation date.
Authority. AS 9
Question 4 · 2 marks · AS 9 Revenue Recognition · medium
For the installment sale, what should Vistara recognise in FY2025-26 as sale revenue and finance income?
Sale revenue ₹21,00,000 and finance income ₹Nil
Sale revenue ₹18,00,000 and finance income ₹90,000
Sale revenue ₹18,00,000 and finance income ₹3,00,000
Sale revenue ₹18,00,000 and finance income ₹1,80,000 (correct answer)
Answer: D — Sale revenue ₹18,00,000 and finance income ₹1,80,000
Working. Cash price = 18,00,000. Finance income for first year = 18,00,000 × 10% = 1,80,000. Sale revenue = 18,00,000.
Explanation. The installment price includes a finance element. Revenue from sale is measured at the cash price equivalent, ₹18,00,000, and the finance income is recognised on the outstanding cash price. For the first year, finance income is ₹18,00,000 × 10% = ₹1,80,000. Option a treats the gross installment price as revenue, option b applies half-year interest, and option c spreads the whole interest difference immediately.
Where it goes wrong. Candidates may recognise the gross installment price as revenue or spread the entire interest difference in the year of sale.
Authority. AS 9
Question 5 · 2 marks · AS 13 Accounting for Investments · hard
Scenario. Meera holds 12,000 equity shares of ₹10 each in Kaveri Ltd., acquired for ₹4,80,000. Kaveri Ltd. makes a rights issue of one share for every four shares held at ₹30 per share. Meera subscribes to 75% of her entitlement and sells the remaining rights entitlement for ₹18,000. The shares are held as long-term investments and the cum-right acquisition cost is not affected by any ex-right decline condition. Meera wants to record the subscribed rights and the sale of rights in accordance with AS 13.
What is the carrying amount of Meera's investment after the rights issue and the amount credited to profit or loss on sale of rights?
Carrying ₹5,47,500; credit to P&L ₹18,000 (correct answer)
Carrying ₹5,65,500; credit to P&L ₹Nil
Carrying ₹4,80,000; credit to P&L ₹67,500
Carrying ₹5,47,500; credit to P&L ₹67,500
Answer: A — Carrying ₹5,47,500; credit to P&L ₹18,000
Working. Rights = 12,000 / 4 = 3,000. Subscribed = 75% × 3,000 = 2,250 × 30 = 67,500. Sold = 750 rights for 18,000. Carrying amount = 4,80,000 + 67,500 = 5,47,500. P&L credit = 18,000.
Explanation. Entitlement is 12,000 × 1/4 = 3,000 rights shares. Meera subscribes 75%, i.e. 2,250 shares at ₹30 = ₹67,500, which is added to the investment cost. The remaining 750 rights are sold for ₹18,000; under AS 13, sale proceeds of unsubscribed rights are taken to profit or loss. Carrying amount = ₹4,80,000 + ₹67,500 = ₹5,47,500. Option b adds sale proceeds to cost and option d credits the subscribed amount.
Where it goes wrong. Candidates may add the sale proceeds of rights to investment cost or credit the amount paid on subscribed rights to profit or loss.
Authority. AS 13
Question 6 · 2 marks · AS 22 Accounting for Taxes on Income · hard
Scenario. Nova Precision Ltd. reports accounting profit before tax of ₹90,00,000 for the year ended 31 March 2026. Depreciation as per books is ₹15,00,000; depreciation allowed under the Income-tax Act is ₹24,00,000. The company accrued GST liability of ₹6,00,000 in the statement of profit and loss for FY 2025-26; under Section 43B of the Income-tax Act, it is deductible only on payment. The company paid this GST liability on 15 December 2026, after the due date for filing the return of income under Section 139(1). The tax rate for current and deferred tax is 25%. There was no opening deferred tax balance. The company expects sufficient future taxable income and has no brought-forward losses. No other timing or permanent differences exist. The CFO is finalising the deferred tax note and wants the current tax, deferred tax and reversal impact for FY 2026-27.
What is the current tax expense of Nova Precision Ltd. for FY2025-26?
Explanation. Taxable income starts with accounting profit ₹90,00,000; add book depreciation ₹15,00,000; deduct tax depreciation ₹24,00,000; add Section 43B disallowance ₹6,00,000. Taxable income = ₹87,00,000. Current tax at 25% = ₹21,75,000. Option a is total tax expense including deferred tax, option c uses an incorrect taxable base, and option d ignores the 43B add-back.
Where it goes wrong. Candidates may compute current tax on accounting profit or forget to add back the Section 43B disallowance.
Authority. AS 22
Question 7 · 2 marks · AS 22 Accounting for Taxes on Income · hard
What is the net deferred tax position at 31 March 2026?
Explanation. Excess tax depreciation is ₹9,00,000, creating a deferred tax liability of ₹2,25,000. The Section 43B GST disallowance of ₹6,00,000 creates a deferred tax asset of ₹1,50,000 because it reverses on payment in FY2026-27. Net position is DTL ₹2,25,000 − DTA ₹1,50,000 = DTL ₹75,000. Option b ignores the 43B asset and option a reverses the net position.
Where it goes wrong. Candidates may ignore the Section 43B timing difference or classify the net balance as an asset.
Authority. AS 22
Question 8 · 2 marks · AS 22 Accounting for Taxes on Income · medium
What is the total tax expense to be recognised in the statement of profit and loss for FY2025-26?
₹21,75,000
₹22,50,000 (correct answer)
₹24,00,000
₹20,25,000
Answer: B — ₹22,50,000
Working. Current tax = 21,75,000. Deferred tax expense = net DTL 75,000. Total = 21,75,000 + 75,000 = 22,50,000.
Explanation. Total tax expense is current tax plus deferred tax expense. Current tax is ₹21,75,000 and the net deferred tax liability increases by ₹75,000, so deferred tax expense is ₹75,000. Total tax expense = ₹21,75,000 + ₹75,000 = ₹22,50,000. Option a is only current tax, option c ignores the 43B asset, and option d nets the deferred tax in the wrong direction.
Where it goes wrong. Candidates may show only current tax or treat the deferred tax movement as a credit instead of an expense.
Authority. AS 22
Question 9 · 2 marks · AS 22 Accounting for Taxes on Income · medium
On payment of GST in FY2026-27, what is the deferred tax effect of the Section 43B reversal?
Deferred tax expense ₹1,50,000 (correct answer)
Deferred tax credit ₹1,50,000
Deferred tax expense ₹75,000
No deferred tax impact
Answer: A — Deferred tax expense ₹1,50,000
Working. DTA recognised in FY2025-26 = 6,00,000 × 25% = 1,50,000. In FY2026-27, DTA reverses: deferred tax expense = 1,50,000.
Explanation. At 31 March 2026, the GST disallowance created a deferred tax asset of ₹1,50,000. When GST is paid and allowed in FY2026-27, that asset reverses. Reversal of a deferred tax asset is recognised as deferred tax expense of ₹1,50,000. Option b treats reversal as a credit; option c mixes it with depreciation; option d ignores the timing difference.
Where it goes wrong. Candidates may debit the DTA reversal to P&L as a credit or may not reverse the DTA at all.
Authority. AS 22
Question 10 · 2 marks · AS 1 Disclosure of Accounting Policies · medium
Scenario. Orion Traders Ltd. prepares financial statements on going concern and consistency assumptions. For FY2025-26, it recognised revenue from a material segment on cash basis although the accrual assumption was not followed for that segment. The departure is material and the financial effect is measurable. The accountant is unsure whether only a note on accounting policies is enough, or whether the departure must be disclosed with reasons under AS 1.
What does AS 1 require when a fundamental accounting assumption such as accrual is not followed for a material segment?
Disclose only the change in accounting policy in the notes
Disclose the departure and its financial effect in the notes
Adjust opening reserves for the cash basis revenue
Disclose the fact of departure from accrual with reasons (correct answer)
Answer: D — Disclose the fact of departure from accrual with reasons
Working. Identify whether accrual is a fundamental accounting assumption. If not followed, disclose the fact and reasons as required by AS 1.
Explanation. AS 1 treats going concern, consistency and accrual as fundamental accounting assumptions. If a fundamental assumption is not followed, the fact must be disclosed. The financial statements otherwise are prepared on those assumptions. Option a is incomplete because this is not merely a policy choice; option b may be useful but is not the core AS 1 requirement; option c has no basis.
Where it goes wrong. Candidates may treat this as an ordinary change in accounting policy or adjust reserves instead of disclosing the departure.
Authority. AS 1
Question 11 · 2 marks · Amalgamation of Companies and AS 14 · hard
Scenario. Pinnacle Ltd. absorbs Summit Ltd. on 1 April 2025 in an amalgamation in the nature of purchase. Summit's summarised balance sheet shows: equity share capital 8,00,000 shares of ₹10 each ₹80,00,000; 12% preference shares ₹50,00,000; general reserve ₹12,00,000; profit and loss ₹6,00,000; 10% debentures ₹20,00,000; trade payables ₹14,00,000 including ₹2,00,000 due to Pinnacle; PPE ₹1,30,00,000; inventory ₹20,00,000; trade receivables ₹22,00,000; cash ₹10,00,000. Pinnacle's trade receivables include ₹2,00,000 due from Summit. Summit's inventory includes goods bought from Pinnacle for ₹5,00,000; Pinnacle's markup is 25% on cost. Pinnacle values Summit PPE at ₹1,42,00,000. Consideration: three equity shares of ₹10 each at fair value ₹22 for every five equity shares; preference shareholders get 9% preference shares of ₹100 each at 10% premium; Summit's 10% debentures are discharged at 10% premium by 11% debentures of ₹100 each at par. No cash is paid for fractional shares and no statutory reserves are involved.
What is the purchase consideration payable by Pinnacle Ltd. under AS 14?
Explanation. Equity consideration is 8,00,000 × 3/5 = 4,80,000 shares at fair value ₹22 = ₹1,05,60,000. Preference consideration is ₹50,00,000 × 110% = ₹55,00,000. Purchase consideration excludes the discharge of Summit's debenture holders. Total = ₹1,05,60,000 + ₹55,00,000 = ₹1,60,60,000. Option d wrongly includes the debenture discharge and option a ignores the preference premium.
Where it goes wrong. Candidates may include debenture holders in purchase consideration or compute preference shares without the premium.
Authority. AS 14
Question 12 · 2 marks · Amalgamation of Companies and AS 14 · hard
What is the amount of goodwill or capital reserve arising in Pinnacle's books on acquisition?
Explanation. Net assets taken over are: PPE ₹1,42,00,000; inventory ₹20,00,000 less unrealised profit ₹1,00,000 = ₹19,00,000; receivables ₹22,00,000; cash ₹10,00,000; total ₹1,93,00,000. Liabilities are debentures at discharge value ₹22,00,000 and trade payables ₹14,00,000 less inter-company ₹2,00,000 = ₹12,00,000; total ₹34,00,000. Net assets = ₹1,59,00,000. PC ₹1,60,60,000 gives goodwill ₹1,60,000. Option d ignores the unrealised profit adjustment.
Where it goes wrong. Candidates may omit the unrealised profit elimination or include the inter-company payable without cancellation.
Authority. AS 14
Question 13 · 2 marks · Amalgamation of Companies and AS 14 · medium
What amount of 11% debentures should Pinnacle issue to discharge Summit's 10% debentures?
Explanation. Summit's debentures are ₹20,00,000 and are discharged at a 10% premium. The amount of new 11% debentures issued at par is ₹20,00,000 × 110% = ₹22,00,000. This discharge is not part of purchase consideration under AS 14, but it is recorded as a liability taken over. Option a ignores the premium and option c applies a 20% premium.
Where it goes wrong. Candidates may include debenture discharge in purchase consideration or forget the 10% premium.
Authority. AS 14
Question 14 · 2 marks · Amalgamation of Companies and AS 14 · hard
How should Pinnacle adjust the unrealised profit in Summit's inventory after acquisition?
Reduce inventory and reduce goodwill by ₹1,00,000
Increase inventory and reduce capital reserve by ₹1,00,000
Reduce inventory and increase goodwill by ₹1,00,000 (correct answer)
Ignore it because the sale was before acquisition
Answer: C — Reduce inventory and increase goodwill by ₹1,00,000
Working. Unrealised profit = 5,00,000 × 25/125 = 1,00,000. Inventory reduced by 1,00,000; net assets reduced by 1,00,000; goodwill increases by 1,00,000.
Explanation. The inventory includes goods sold by Pinnacle to Summit at a markup of 25% on cost. Unrealised profit = ₹5,00,000 × 25/125 = ₹1,00,000. After acquisition, inventory is reduced to cost to the group, and because purchase consideration is unchanged, the reduction in net assets increases goodwill by ₹1,00,000. Option d wrongly ignores the intra-group profit.
Where it goes wrong. Candidates may add the profit back to inventory or ignore it as a pre-acquisition transaction.
Authority. AS 14
Question 15 · 2 marks · AS 28 Impairment of Assets · hard
Scenario. Helios Ltd. has two cash-generating units: Alpha carrying ₹800 lakh and Beta carrying ₹700 lakh. It also has a corporate research centre carried at ₹300 lakh that cannot be allocated on a reasonable and consistent basis to Alpha or Beta. The recoverable amount of Alpha is ₹850 lakh and of Beta is ₹600 lakh. The recoverable amount of the company as a whole, being the smallest group including the corporate asset, is ₹1,650 lakh. No goodwill exists. Helios applies the bottom-up test first and then the top-down test where needed.
What total impairment loss should Helios Ltd. recognise under AS 28?
₹100 lakh, being impairment of Beta under bottom-up test
₹50 lakh, being top-down impairment of corporate asset
₹250 lakh, being aggregate of Beta and corporate carrying values
₹150 lakh, being bottom-up ₹100 lakh plus top-down ₹50 lakh (correct answer)
Answer: D — ₹150 lakh, being bottom-up ₹100 lakh plus top-down ₹50 lakh
Working. Beta impairment = 700 − 600 = 100. Revised total = 800 + 600 + 300 = 1,700. Company recoverable = 1,650. Top-down loss = 50. Total = 150.
Explanation. Bottom-up test: Alpha carrying ₹800 lakh is below recoverable ₹850 lakh, so no loss; Beta carrying ₹700 lakh exceeds recoverable ₹600 lakh, so loss ₹100 lakh. After writing Beta down, total carrying amount is ₹800 + ₹600 + ₹300 = ₹1,700 lakh. Top-down test: company recoverable amount is ₹1,650 lakh, so additional loss ₹50 lakh. Total impairment loss = ₹100 lakh + ₹50 lakh = ₹150 lakh.
Where it goes wrong. Candidates may stop after the bottom-up test or allocate the top-down loss to Alpha instead of applying the company-level comparison.
Authority. AS 28
Authorities cited in this paper
AS 7 · AS 9 · AS 13 · AS 22 · AS 1 · AS 14 · AS 28
Questions people ask
What does this Advanced Accounting test cover?
This practice paper carries 30 marks across 15 questions arranged in 6 case scenarios covering AS 7 Construction Contracts, AS 9 Revenue Recognition, AS 13 Accounting for Investments, AS 22 Accounting for Taxes on Income, AS 1 Disclosure of Accounting Policies, AS 14 Accounting for Amalgamations, AS 28 Impairment of Assets. Each scenario presents realistic commercial transactions, financial statements, and statutory adjustments requiring practical computations and accounting standard applications.
How many questions are there and what is the time limit?
There are 15 questions carrying 2 marks each, giving a maximum score of 30 marks. The time limit is 60 minutes. There is no negative marking, so an incorrect answer costs nothing.
Which accounting standards and statutory enactments are tested?
The questions follow the ICAI Study Material for Paper 1: Advanced Accounting (relevant for the January 2027 examination attempt). This covers Accounting Standards (AS 1 to AS 29 applicable to CA Intermediate), the Framework for the Preparation and Presentation of Financial Statements, and Schedule III Division I of the Companies Act 2013.
Which specific chapters and standards are included in this paper?
The questions are drawn from AS 7 Construction Contracts, AS 9 Revenue Recognition, AS 13 Accounting for Investments, AS 22 Accounting for Taxes on Income, AS 1 Disclosure of Accounting Policies, AS 14 Accounting for Amalgamations, AS 28 Impairment of Assets. They evaluate balance sheet carrying amounts, profit and loss adjustments, journal entries, disclosure thresholds, and statutory reserve transfers.
Is this test affiliated with ICAI?
No. This is an independent practice paper prepared for CA Intermediate students. It is not issued by or affiliated with ICAI. Questions are prepared with AI tools and cross-checked by independent solvers; they are not reviewed by a Chartered Accountant.
How do exam mode and practice mode work?
In exam mode the test is timed and marked upon final submission, providing your score, tier, and a performance certificate. In practice mode you can review answers, step-by-step workings, and standard citations as you work through the questions.
Are the questions purely theoretical or numerical and application-oriented?
Every question is application-oriented and based on a detailed factual case scenario with realistic corporate events, ledger balances, transaction dates, and practical computations.
What should I do if I notice a potential mistake in a question?
Every question on the review screen includes a Report a mistake button that allows students to submit feedback directly.
