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JAIIB AFM Unit 13 — Preparation of Final Accounts: Free MCQs with Explanations

By Swarnakshi Jha (ex-banker) · Updated 20 September 2026 · Paper 3 of the November 2026 cycle (28 November 2026)

This page is a free slice of our JAIIB AFM question bank for Unit 13 — Preparation of Final Accounts (Module B — Preparation of Financial Statements). The Mock Centre holds 55 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five of those questions to try, and the traps that cost marks.

AFM · Module B55 MCQs in the Mock Centre5 free belowPaper on 28 November 2026

Key facts examiners test from this unit

  1. Final accounts are prepared from the trial balance, which itself is NOT a financial statement.
  2. Adjusting entries = non-transaction entries pairing one P&L account with one balance sheet account; they convert records to the accrual basis (AS-1 fundamental assumption).
  3. Four cases: outstanding expense (payable), prepaid expense (asset/debtor), accrued income (receivable), advance income (liability).

5 free practice questions — tap an option

Five basic questions from this unit. Answers lock on the first tap, exactly as in the exam, and a short explanation opens underneath. The Mock Centre adds the moderate and tough questions, why every other option is wrong, the concept capsule and the exam tip — with your score and revision dates tracked.

Question 1 of 5
Final accounts are prepared:
Why (b): Final accounts (Trading, P&L, Balance Sheet) are prepared at the END of the accounting period — normally one year — from the trial balance.
Question 2 of 5
Undervaluation of closing stock will:
Why (b): Closing stock reduces COGS; valuing it too low inflates COGS and UNDERSTATES profit — the mirror of overvaluation inflating profit.
Question 3 of 5
The balance sheet is prepared __, while the P&L account is prepared ____:
Why (a): The balance sheet photographs the position AS ON the closing date; the P&L films the flows FOR the whole period — 'as on 31 March' vs 'for the year ended 31 March'.
Question 4 of 5
Insurance premium Rs 6,000 paid on 1 October covers one year. At the 31 March year-end, the prepaid (asset) portion is:
Why (b): Six months (Oct–Mar) belong to this year (Rs 3,000 expense); the remaining six months (Apr–Sep) are PREPAID — an asset of Rs 3,000.
Question 5 of 5
Interest accrued on a fixed deposit but not yet received is recorded as:
Why (a): Income EARNED but unreceived: recognise the income (credit) and raise the receivable asset (debit) — accrual basis in action.
0 of 5 answered.

Traps in this unit

Confusable AConfusable BThe difference
Outstanding expensePrepaid expenseLiability (incurred, unpaid) vs asset (paid, not incurred)
Accrued incomeAdvance incomeAsset (earned, not received) vs liability (received, not earned)
Practise all 55 questions on Unit 13. The free demo opens a slice of every subject with the same explanations; the AFM Online-only pass unlocks all 1,681 AFM questions, the full and module mocks, Smart Revision and the Readiness Score for one year (₹1,299). Not sure where you stand? Take the free 10-question test first.
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Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. Regulatory figures verified as of September 2026; verify from official sources before relying on them in practice.