Chapter:

50+ Accounting for Leases Solved MCQs

in Financial Accounting

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Business Administration in Computer Applications (BBA [CA]) , Bachelor of Business Administration (BBA) , Bachelor of Accounting and Finance (BAF) , Bachelor of Commerce (B Com) , Cost Accounting .

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1.	What is Royalty? Sol:
A.	A payment is made for the use of Assets
B.	A fixed payment for the use of Fixed Assets
C.	Payment made by owners
D.	None of the above
Answer» A. A payment is made for the use of Assets

2.	Mining Royalty is based on Sol:
A.	Production
B.	Sales
C.	Purchase
D.	Both A and B
Answer» A. Production

3.	Patent Royalty is based on Sol:
A.	Production
B.	Sales
C.	Purchase
D.	Both A and B
Answer» A. Production

4.	Copyright royalty is based on Sol:
A.	Sales
B.	Production
C.	Purchase
D.	Both A and B
Answer» A. Sales

5.	Lessor is the ………… Sol:
A.	Qwner
B.	User
C.	None
D.	Both
Answer» A. Qwner

6.	Lessee is the………… Sol:
A.	Owner
B.	User
C.	None
D.	Both
Answer» B. User

7.	What is minimum Rent? Sol:
A.	Payment for use of land which is fixed
B.	Payment for the use of land on the basis of output
C.	A payment made to owner
D.	None of the above
Answer» A. Payment for use of land which is fixed

8.	Minimum Rent is also called Sol:
A.	Dead Rent
B.	Rock Rent
C.	Fixed rent
D.	All of the above
Answer» D. All of the above

9.	Short working = …………………- Royalty Payable Sol:
A.	Minimum rent
B.	Capital
C.	Cash
D.	None
Answer» A. Minimum rent

10.	The minimum rent can ……………………….be proportionately, if there is a stoppage due to strike. Sol:
A.	Increase
B.	Decrease
C.	No change
D.	all
Answer» B. Decrease

11.	Royalty is a revenue expenditure to lessor Sol:
A.	True
B.	False
C.	none
D.	all
Answer» B. False

13.	Royalty Account is …… Sol:
A.	Nominal account
B.	Real account
C.	Personal Account
D.	None of the above
Answer» A. Nominal account

16.	When the royalty are less than the minimum rent ? Sol:
A.	Royalties account is debited with the actual amount of royalties earned
B.	Royalties account is debited with minimum rent
C.	Royalties account is debited with the amount paid to landlord
D.	Royalties account is debited with the excess of minimum rent over actual rent
Answer» A. Royalties account is debited with the actual amount of royalties earned

17.	Which of the following statement is false? Sol:
A.	Recoupable short working is a current assets
B.	Lapsed short working is a real account
C.	Short working is the part of minimum rent not represent by the use of right
D.	Both A and B
Answer» B. Lapsed short working is a real account

18.	Which of the following statement is false Sol:
A.	If a lessee leases a part of the leased property to another person , it is called sublease
B.	Royalty receivable account is opened in the books of Lessor
C.	Recoupable short working is a current assets
D.	None of the above
Answer» B. Royalty receivable account is opened in the books of Lessor

12.	minimum rent is also term as dead rent Sol:
A.	True
B.	False
C.	none
D.	all
Answer» A. True

14.	Short working is …………. Sol:
A.	Excess of minimum rent over the actual royalty
B.	Excess of actual royalty over minimum rent
C.	Excess of standard output over Actual output
D.	None of the above
Answer» A. Excess of minimum rent over the actual royalty

15.	Surplus is……………. Sol:
A.	Excess of minimum rent over the actual royalty
B.	Excess of actual royalty over minimum rent
C.	Excess of actual royalty over minimum rent
D.	None of the above
Answer» B. Excess of actual royalty over minimum rent

19.	In the books of Lessee , short working recovered amount is debited to Sol:
A.	Profit and loss account
B.	Minimum rent Account
C.	Royalty Account
D.	Landlord’s Account
Answer» A. Profit and loss account

20.	If the royalty is less than minimum rent , the balance of royalty account at the end of the year has to be transfer to Sol:
A.	Capital reserve account.
B.	Reserve capita account
C.	Profit and loss account
D.	None of the above
Answer» C. Profit and loss account

21.	In case f recoupment of shortworking, the lessee: Sol:
A.	Debits Shortworking Account
B.	Credit Profit and loss account
C.	Credit short working Account
D.	None of the above
Answer» C. Credit short working Account

22.	Shortworking means…… Sol:
A.	Excess of Minimum rent over royalty
B.	Excess of royalty over minimum rent
C.	None of the above
D.	all
Answer» A. Excess of Minimum rent over royalty

23.	Royalties are connected with the following types of business Sol:
A.	Mining
B.	Construction
C.	Textile
D.	All of the above
Answer» A. Mining

24.	royalty is an agreement between the following person Sol:
A.	Seller and buyer
B.	Banker and customer
C.	Among all partners
D.	Lessor and lessee
Answer» D. Lessor and lessee

25.	Dead rent is also called ………… Sol:
A.	Outstanding rent
B.	Minimum rent
C.	Prepaid rent
D.	All of the above
Answer» B. Minimum rent

50+ Accounting for Leases Solved MCQs

What is Royalty? Sol:

Mining Royalty is based on Sol:

Patent Royalty is based on Sol:

Copyright royalty is based on Sol:

Lessor is the ………… Sol:

Lessee is the………… Sol:

What is minimum Rent? Sol:

Minimum Rent is also called Sol:

Short working = …………………- Royalty Payable Sol:

The minimum rent can ……………………….be proportionately, if there is a stoppage due to strike. Sol:

Royalty is a revenue expenditure to lessor Sol:

minimum rent is also term as dead rent Sol:

Royalty Account is …… Sol:

Short working is …………. Sol:

Surplus is……………. Sol:

When the royalty are less than the minimum rent ? Sol:

Which of the following statement is false? Sol:

Which of the following statement is false Sol:

In the books of Lessee , short working recovered amount is debited to Sol:

If the royalty is less than minimum rent , the balance of royalty account at the end of the year has to be transfer to Sol:

In case f recoupment of shortworking, the lessee: Sol:

Shortworking means…… Sol:

Royalties are connected with the following types of business Sol:

royalty is an agreement between the following person Sol:

Dead rent is also called ………… Sol:

The objectives od fixing dead rent is ……….. Sol:

Shortworking can be recouped only out of ……………….. Sol:

Royalties is calculated either on the basis of ……………….. Sol:

Shortworking not recouped is debited to P/L Account Sol:

Recoupment of shortworking can be restricted or unrestricted Sol:

Calculate units manufactured during the year; Units Sold – 500, Opening stock – 100; Closing stock – 200 Sol:

Minimum Rent in the first year Rs 1,00,000 and will be increased by Rs 10,000 p.a. for three years and then after by 10% per year. What is the amount at the end of 6th year?

Royalty is Rs 64,000, Minimum rent Rs 80,000. Strike is for 3 months with no work done, Minimum rent to be reduced in proportion of time, find the amount paid to Landlord.

What is the example of wasting assets

Who is the person take the property on the lessee agreement

Royalty is an ………………….to lessee

When the lessor receives payment, the credits—

The balance of royalty‟s receivable account is transferred to — Sol:

The balance of royalty payable account is transferred to— Sol:

Under the average clause, the loss is suffered by both insurer and insured in the ratio of risk covered Sol:

………………..account is credited when lessor receive an amount Sol:

Royalty is an income to lessee Sol:

Fixed payment made for the used of an assets is called Financial Lease Sol:

Patent Royalty is based in Sales of a Product Sol:

Shortworking is Excess of Minimum Rent over Actual Production Sol:

Royalty is Rs 44,000, Minimum rent Rs 50,000. Strike is for 2 months with no work done, Minimum rent to be reduced in proportion of time, find the amount paid to Landlord.

Short working is a type of taxes paid by the lessee Sol:

Recoupment is always necessary in royalties Sol:

A person who take property on lease is called customer Sol:

Royalty accounting is covered under Companies Act 1956 Sol:

The minimum rent can ……………………….be proportionately, if there is a stoppage
due to strike.
Sol:

If the royalty is less than minimum rent , the balance of royalty account at the end of the
year has to be transfer to
Sol:

Calculate units manufactured during the year; Units Sold – 500, Opening stock – 100;
Closing stock – 200
Sol:

Under the average clause, the loss is suffered by both insurer and insured in the ratio of
risk covered
Sol:

26.	The objectives od fixing dead rent is ……….. Sol:
A.	Landlord should not get more than a certain amount per year
B.	Landlord must receive a minimum amount in case of low output or sales
C.	Both A and B
D.	None of the above
Answer» B. Landlord must receive a minimum amount in case of low output or sales

27.	Shortworking can be recouped only out of ……………….. Sol:
A.	Surplus
B.	Loss
C.	Extra Income
D.	Taxes
Answer» A. Surplus

31.	Calculate units manufactured during the year; Units Sold – 500, Opening stock – 100; Closing stock – 200 Sol:
A.	500
B.	700
C.	550
D.	600
Answer» D. 600

32.	Minimum Rent in the first year Rs 1,00,000 and will be increased by Rs 10,000 p.a. for three years and then after by 10% per year. What is the amount at the end of 6th year?
A.	Rs 100000
B.	Rs 157300
C.	Rs 168000
D.	Rs 200000
Answer» B. Rs 157300

33.	Royalty is Rs 64,000, Minimum rent Rs 80,000. Strike is for 3 months with no work done, Minimum rent to be reduced in proportion of time, find the amount paid to Landlord.
A.	Rs 60000
B.	Rs 80000
C.	Rs 64000
D.	Rs 100000
Answer» B. Rs 80000

34.	What is the example of wasting assets
A.	Land
B.	Mine
C.	Stock
D.	Fixed Assets
Answer» B. Mine

35.	Who is the person take the property on the lessee agreement
A.	Lessor
B.	Lessee
C.	Payee
D.	None of these
Answer» B. Lessee

36.	Royalty is an ………………….to lessee
A.	Income
B.	Expense
C.	Both
D.	None
Answer» B. Expense

37.	When the lessor receives payment, the credits—
A.	Lessee account
B.	Royalty account
C.	Short workings account.
D.	all
Answer» A. Lessee account

38.	The balance of royalty‟s receivable account is transferred to — Sol:
A.	Profit and loss account
B.	Royalties suspense account
C.	Production account.
D.	all
Answer» A. Profit and loss account