CA Final Financial Reporting MCQs

Ind AS MCQs for Paper 1, with case scenarios and a reason for every option.

5 full-length tests. Each has 23 questions for 30 marks in 30 minutes. MCQ 1 is free.

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Try 4 questions from MCQ 1

Work each one out, then open the answer to see why every option is right or wrong.

Question 1, 1 mark

A company is committed to buy 10,000 components at Rs. 500 each. It now needs only 6,000; the surplus 4,000 can be resold for Rs. 380 each. The supplier will release it from the whole contract for a penalty of Rs. 6,00,000. What provision is required?

  1. Rs. 12,00,000, being the shortfall of Rs. 120 a unit between the contract price and the resale price, applied to the full quantity the contract commits it to buy.

    Wrong. The 6,000 units the company will actually use are not loss making.

  2. Rs. 6,00,000, being the penalty payable to be released from the contract, which is the amount the company would have to pay to escape its obligation.

    Wrong. The penalty is the higher of the two routes, so it is not the unavoidable cost.

  3. Rs. 4,80,000, being the net cost of fulfilling the contract in respect of the surplus units, which is lower than the penalty for cancelling it.

    Correct answer

    Correct - the lower of Rs. 4,80,000 and Rs. 6,00,000.

  4. Rs. 20,00,000, being the amount the company is committed to pay the supplier for the 4,000 surplus units that its own operations will not consume.

    Wrong. The resale proceeds have to be set against the purchase cost.

Show answer
Why

A contract is onerous where the unavoidable costs of meeting the obligations exceed the economic benefits expected from it. The unavoidable cost is the lower of the cost of fulfilling the contract and any compensation or penalty arising from failure to fulfil it. The 6,000 units the company will use carry no loss. On the surplus 4,000 it must pay Rs. 20,00,000 and can recover Rs. 15,20,000, a net cost of Rs. 4,80,000. That is lower than the Rs. 6,00,000 penalty, so the provision is Rs. 4,80,000 and the company would fulfil the contract rather than cancel it.

Reference: Ind AS 37, on onerous contracts and the unavoidable cost of meeting an obligation; Study Material Module 3, Chapter 6 Unit 2.

Question 2, 1 mark

A long term loan is repayable in 2030, but the borrower breached a covenant on 20 March 2026 and the lender did not grant a waiver until 12 April 2026. The reporting date is 31 March 2026. How is the loan classified?

  1. As non-current, because the lender had in fact agreed by the time the financial statements were approved and no repayment was ever actually demanded.

    Wrong. Events after the reporting period do not alter a classification determined by rights held at that date.

  2. As non-current, because a covenant breach does not alter the contractual repayment date agreed between the borrower and the lender in the loan agreement.

    Wrong. A breach that makes the loan repayable on demand overrides the stated repayment schedule.

  3. As current, and the classification is revisited if the lender confirms in writing before the financial statements are approved that it will not call the loan.

    Wrong. There is nothing to revisit; the classification is fixed by the position at the reporting date.

  4. As current, because the entity did not have at the end of the reporting period the right to defer settlement for at least twelve months after that date.

    Correct answer

    Correct - no right to defer for twelve months at the reporting date, so current.

Show answer
Why

Classification turns on the rights the entity holds at the end of the reporting period. A breach that makes the liability repayable on demand means the entity did not have, at 31 March 2026, the right to defer settlement for at least twelve months, so the loan is current. A waiver obtained after the reporting date does not change that; it is a non-adjusting event, disclosed but not reflected in the classification. Only a waiver or grace period of at least twelve months agreed on or before the reporting date would keep the loan non-current.

Reference: Ind AS 1, on classification of liabilities as current or non-current; Study Material Module 1, Chapter 3 Unit 1.

Question 3, 1 mark

Purchase price Rs. 10,00,000; import duty Rs. 1,20,000; recoverable GST Rs. 1,80,000; inward freight Rs. 40,000; trade discount Rs. 50,000; storage of finished goods before sale Rs. 25,000; abnormal wastage Rs. 35,000. What is the cost of the inventories?

  1. Rs. 12,90,000, taking in the goods and services tax charged on the purchase alongside the duty and the freight incurred in bringing the goods in.

    Wrong. Tax that is recoverable from the authorities is not part of cost.

  2. Rs. 11,60,000, being the purchase price with the import duty and inward freight added, before any adjustment for the discount allowed by the supplier.

    Wrong. Trade discounts are deducted in arriving at the cost of purchase.

  3. Rs. 11,70,000, adding to the purchase cost the storage of the finished goods and the wastage that arose in excess of normal levels during the period.

    Wrong. Storage of finished goods and abnormal wastage are both period expenses.

  4. Rs. 11,10,000, being the purchase price plus import duty and inward freight, reduced by the trade discount, with the other three items excluded.

    Correct answer

    Correct - Rs. 11,10,000.

Show answer
Why

Cost of purchase comprises the purchase price, import duties and other taxes that are not subsequently recoverable from the taxing authorities, and transport, handling and other costs directly attributable to acquisition, less trade discounts, rebates and other similar items. Recoverable goods and services tax is excluded because it is recoverable. Storage costs are excluded unless they are necessary in the production process before a further stage, and abnormal amounts of wasted material are excluded and charged as an expense of the period. Rs. 10,00,000 plus Rs. 1,20,000 plus Rs. 40,000 less Rs. 50,000 is Rs. 11,10,000.

Reference: Ind AS 2, on the cost of purchase and costs excluded from inventories; Study Material Module 2, Chapter 5 Unit 1.

Question 4, 1 mark

Profit was Rs. 48,00,000 for 2025-26 and Rs. 36,00,000 for 2024-25. There were 8,00,000 shares throughout until a one for four bonus issue on 1 January 2026. What are basic EPS for 2025-26 and the comparative?

  1. Rs. 6.00 and Rs. 4.50, the bonus shares being ignored in both years because they brought no fresh resources into the company at all.

    Wrong. The absence of fresh resources is exactly why the bonus shares are treated as always outstanding.

  2. Rs. 5.65 and Rs. 4.50, the bonus shares being weighted from 1 January 2026, the date on which they were actually issued to the shareholders.

    Wrong. Time-weighting applies to shares issued for consideration, not to a bonus issue.

  3. Rs. 4.80 and Rs. 3.60, the bonus shares being treated as outstanding from the start of the earliest period presented in the financial statements.

    Correct answer

    Correct - Rs. 4.80 and Rs. 3.60, both on 10,00,000 shares.

  4. Rs. 4.80 and Rs. 4.50, the current year reflecting the bonus shares in full while the comparative is left at the figure originally reported for it.

    Wrong. The comparative must be restated for a bonus issue.

Show answer
Why

A bonus issue gives shareholders more shares without any corresponding change in resources, so the number of shares is increased as if the issue had occurred at the beginning of the earliest period presented. Both years therefore use 10,00,000 shares. Basic EPS for 2025-26 is Rs. 48,00,000 divided by 10,00,000, or Rs. 4.80, and the comparative is restated to Rs. 36,00,000 divided by 10,00,000, or Rs. 3.60. Time-weighting the bonus shares from the issue date would be right for an issue for consideration, but not for a bonus issue.

Reference: Ind AS 33, on bonus issues and the restatement of earnings per share; Study Material Module 3, Chapter 8 Unit 2.

That is the review you get on every question after a full test, with your marks broken down by topic, weakest first, so you know what to revise next.

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What the FR tests cover

Part I of Paper 1 rewards the student who can take an Ind AS from principle to number under time pressure. These tests are built for that: case scenarios where two or three questions hang off one set of facts, and standalone questions on the provisions that are easiest to half-remember.

Most of the marks sit in computation. A question on an impairment, a business combination or a lease gives you the facts and four figures, and three of those figures are what you get by making one specific, common mistake: allocating a loss before writing off goodwill, discounting at the wrong rate, taking the shortfall instead of the lower of two amounts.

The questions cover the Ind AS across the syllabus, including Ind AS 1, 2, 7, 8, 10, 12, 16, 19, 21, 23, 28, 33, 36, 37, 38, 40, 102, 103, 105, 113, 115 and 116.

The questions are new, written from the Acts, the Standards and the study material, and are not reprints of ICAI papers.

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