Veda AI Learning & Classroom
Get the app
For teachers Teacher overview Answer key generator Quiz generator Question paper generator Attendance app Student reports All free tools
For students Student overview Solve a question paper NCERT syllabus Flashcard maker Important questions Play a challenge Daily GK quiz
For schools Schools overview Start a pilot Tuition & coaching Teaching diary
Library NCERT syllabus Study kits by subject Browse every topic Previous year papers Board paper solutions Blog
Your account Log in — teachers, students & schools About Veda Get the app — free

Company Reconstruction & Taxable Income Computation: 16 MCQs with answers

All 16 multiple-choice questions from this kit, free and with no sign-up.

Full kit · everything Flashcards · 30 Quick Revision · 15

Warm-up · 6 questions

Q1. What is the primary purpose of capital reduction in internal reconstruction?

Beginner
A To attract new investors B To shrink the capital base and write off losses C To increase the company's share capital D To pay off all creditors immediately
Show answer & explanation

To shrink the capital base and write off losses

Capital reduction shrinks the capital base so the balance sheet reflects reality by writing off accumulated losses and fictitious assets.

Q2. In Devis Ltd., what is the total reduction pool from equity and preference shares before adding depreciation provision?

Beginner
A ₹2,50,000 B ₹3,37,500 C ₹1,75,000 D ₹75,000
Show answer & explanation

₹2,50,000

Equity reduction ₹1,75,000 + Preference reduction ₹75,000 = ₹2,50,000.

Q3. Which section of the Companies Act, 2013 governs internal reconstruction?

Beginner
A Section 80U B Section 44 C Section 66 D Section 12
Show answer & explanation

Section 66

Section 66 of the Companies Act, 2013 governs internal reconstruction.

Q4. Under the Default Tax Regime (DTR), what deduction is available for a person with 82% disability?

Beginner
A No deduction is available B ₹1,25,000 under Section 80U C ₹50,000 under Section 80U D ₹75,000 under Section 80U
Show answer & explanation

₹1,25,000 under Section 80U

Under DTR, a person with 82% disability can claim ₹1,25,000 deduction under Section 80U.

Q5. How is Gross Annual Value (GAV) determined for a let-out property?

Beginner
A Average of Fair Rent and Municipal Valuation B Lower of Fair Rent, Municipal Valuation, or Standard Rent C Higher of Fair Rent, Municipal Valuation, or Standard Rent D Municipal Valuation only
Show answer & explanation

Higher of Fair Rent, Municipal Valuation, or Standard Rent

GAV for a let-out property is the higher of Fair Rent, Municipal Valuation, or Standard Rent.

Q6. In the Devis Ltd. reconstruction, the final Capital Reserve is ₹40,875, computed as opening ₹36,000 plus surplus ₹34,875 from the reduction pool after write-offs.

Beginner
A True B False
Show answer & explanation

True

In the Devis Ltd. reconstruction, the final Capital Reserve is ₹40,875, computed as opening ₹36,000 plus surplus ₹34,875 from the reduction pool after write-offs.

Building up · 5 questions

Q7. In Devis Ltd., what is the total write-off amount?

Intermediate
A ₹2,50,000 B ₹3,37,500 C ₹3,02,625 D ₹1,67,625
Show answer & explanation

₹3,02,625

Goodwill ₹50,000 + P&L A/c ₹1,10,375 + Formation Expenses ₹7,250 + P&M excess ₹1,35,000 = ₹3,02,625.

Q8. Why is the Depreciation Provision released in Devis Ltd.'s reconstruction?

Intermediate
A Because depreciation is a non-cash expense B Because Plant and Machinery is written down and the provision is no longer needed C Because the scheme explicitly requires it D Because the company wants to increase profits
Show answer & explanation

Because Plant and Machinery is written down and the provision is no longer needed

When Plant and Machinery is written down to ₹75,000, the related depreciation provision of ₹87,500 is no longer needed and is transferred back.

Q9. In Mr. Rahul's P&L, what is the depreciation adjustment?

Intermediate
A ₹50,000 is fully disallowed B No adjustment is needed C ₹45,000 is fully allowed D ₹5,000 extra deduction as IT Rules allow ₹50,000 vs books ₹45,000
Show answer & explanation

₹5,000 extra deduction as IT Rules allow ₹50,000 vs books ₹45,000

Depreciation as per IT Rules is ₹50,000 vs books ₹45,000 — difference of ₹5,000 is allowed as extra deduction.

Q10. Which municipal tax is deductible from GAV for a let-out property?

Intermediate
A Neither owner nor tenant payments B Both owner and tenant payments C Only municipal tax paid by the owner D Only municipal tax paid by the tenant
Show answer & explanation

Only municipal tax paid by the owner

Only municipal tax paid by the owner is deductible from GAV, not tax paid by the tenant.

Q11. Why is 'Gift to Son ₹12,000' disallowed in Mr. Rahul's P&L?

Intermediate
A It is a capital expenditure B It is a personal expense, not a business expense C It exceeds the gift limit D It is exempt income
Show answer & explanation

It is a personal expense, not a business expense

Gift to son is a personal expense and is disallowed under Income Tax.

Topper level · 5 questions

Q12. In Devis Ltd., what is the final Capital Reserve after reconstruction?

Advanced
A ₹40,875 B ₹36,000 C ₹34,875 D ₹70,875
Show answer & explanation

₹40,875

Opening Capital Reserve ₹36,000 + surplus ₹34,875 = ₹40,875.

Q13. In Devis Ltd., what are the Shareholders' Funds after reconstruction?

Advanced
A ₹1,00,000 B ₹1,40,875 C ₹2,50,000 D ₹1,75,000
Show answer & explanation

₹1,40,875

Equity ₹25,000 + Preference ₹75,000 + Capital Reserve ₹40,875 = ₹1,40,875.

Q14. In Devis Ltd., what are the Current Liabilities after reconstruction?

Advanced
A ₹93,500 B ₹1,09,375 C ₹42,500 D ₹51,000
Show answer & explanation

₹93,500

Sundry Creditors ₹42,500 + Bank Overdraft ₹51,000 = ₹93,500.

Q15. In Devis Ltd., what are the Current Assets after reconstruction?

Advanced
A ₹93,500 B ₹1,09,375 C ₹79,175 D ₹30,200
Show answer & explanation

₹1,09,375

Stock ₹79,175 + Debtors ₹30,200 = ₹1,09,375.

Q16. In Mr. Rahul's P&L, how is Provision for Doubtful Debts treated?

Advanced
A Provision is allowed but bad debts are disallowed B Full provision of ₹16,000 is allowed C Provision is disallowed; only actual bad debts of ₹2,000 are allowed D Both provision and bad debts are disallowed
Show answer & explanation

Provision is disallowed; only actual bad debts of ₹2,000 are allowed

Provision for doubtful debts is disallowed; only actual bad debts written off (₹2,000) are allowed.

Open the full Company Reconstruction & Taxable Income Computation kit Flashcards · 30 Quick Revision · 15
Make your own

Your notes can be a kit like these

Every kit here was made from real study material. Point Veda at a chapter, a PDF, a photo or a link and get notes, flashcards, practice MCQs, games and a scored test — free, in 42 languages.

  • Chapter notes
  • Flashcards
  • Practice MCQs
  • Scored tests
  • Exam prep

Get Veda free See what students get

Free to start · No ads · Works in 42 languages