JAIIB AFM Module C Important Questions with Answers

Jaiib afm module c questions — this guide gives you the latest 2026 information, key dates, eligibility, fees and study tips for the JAIIB exam.

JAIIB Accounting and Finance for Bankers — Important Questions from Module C

Module C of the JAIIB Accounting and Financial Management for Bankers (AFM) paper covers topics related to leasing, hire purchase, depreciation methods, and accounting principles. These are important theoretical and application-based topics that frequently appear in the JAIIB examination. The questions below with detailed answers will help you revise Module C effectively.

Module C — Key Topics Covered

• Lease accounting and hire purchase
• Depreciation methods (SLM, WDV, Sum of Digits)
• Bills of Exchange — drawer, drawee, accommodation bills
• Generally Accepted Accounting Principles (GAAP)
• Receipts and payments accounting
• Lease terminal adjustment account

Important Questions — Module C with Answers

Question 1: Receipts Calculation from Income

Income for the year = I, Outstanding Income for previous year = Id, Outstanding Income of current year = Idi. Then Receipts for the year is:

• a. I – Idi + Id
• b. I + Idi – Id
• c. I + Idi + Id
• d. None of the above

Answer: a. I – Idi + Id

Explanation: The formula for calculating actual receipts from accrual-basis income is: Receipts = Income – Outstanding income of current year + Outstanding income of previous year. Current year outstanding income (Idi) is income earned but not yet received (subtract it). Previous year outstanding income (Id) was earned earlier but received this year (add it). Therefore: Receipts = I – Idi + Id.

Question 2: Lease Terminal Adjustment Account

Lease terminal adjustment account is a balance sheet account. Its treatment is as follows — identify the correct one:

• a. If it is debit balance, it is deducted from the WDV of the asset
• b. If it is credit balance, it is added to the WDV of the asset
• c. If it is credit balance, it is deducted from the WDV of the asset
• d. None of the above

Answer: c. If it is credit balance, it is deducted from the WDV of the asset

Explanation: The Lease Terminal Adjustment Account is a balance sheet account maintained by the lessor. When it has a credit balance, it represents an over-recovery of the asset's cost through lease rentals. In such a case, the credit balance is deducted from the Written Down Value (WDV) of the asset while preparing the balance sheet.

Question 3: Lease vs Hire Purchase — Key Differences

In comparing lease and hire purchase (HP), which of the following is NOT true?

• a. In lease, the user of the asset does not retain it, while in HP, the user does
• b. In lease, the user does not claim depreciation, while in HP, the user does
• c. Payment of rentals is on instalment basis in both
• d. The users of assets in both lease and HP run the risk of obsolescence

Answer: d. The users of assets in both lease and HP run the risk of obsolescence

Explanation: In an operating lease, the lessor (owner) retains the risk of obsolescence — not the lessee (user). In hire purchase, the purchaser does run the risk of obsolescence since they ultimately own the asset. Therefore, statement (d) is NOT true for operating leases. Statements (a), (b), and (c) are correct distinctions between lease and hire purchase.

Question 4: Written Down Value (WDV) Method

Under the Written Down Value method of depreciation, the WDV of the asset is always:

• a. Equal to zero
• b. Less than zero
• c. Greater than zero
• d. None of the above

Answer: c. Greater than zero

Explanation: Under the WDV method, depreciation is charged as a fixed percentage on the book value (WDV) at the beginning of each year. Since each year's depreciation is applied to a progressively smaller base, the WDV approaches zero asymptotically but mathematically never reaches zero. Therefore, the WDV is always greater than zero.

Question 5: Operating Lease — Period

In an operating lease, the lease period is:

• a. Less than the useful life of the asset
• b. Greater than the useful life of the asset
• c. Equal to the useful life of the asset
• d. None of the above

Answer: a. Less than the useful life of the asset

Explanation: An operating lease is a short-term lease where the lease period is less than the useful life of the asset. The asset is returned to the lessor at the end of the lease period. This contrasts with a finance lease (capital lease). Where the lease period covers most or all of the asset's useful life and effective ownership transfers to the lessee.

Question 6: Sum of Digits Method of Depreciation

In the Sum of Digits method for 5 years, what is the first year's allocation ratio?

• a. 1/15
• b. 2/15
• c. 4/15
• d. 5/15

Answer: d. 5/15

Explanation: Under the Sum of Digits method, the denominator is the sum of the years' digits. For a 5-year asset: 1 + 2 + 3 + 4 + 5 = 15. Depreciation is highest in the first year and declines each year. The allocation ratio for Year 1 = 5/15, Year 2 = 4/15, Year 3 = 3/15, Year 4 = 2/15, Year 5 = 1/15. This is an accelerated depreciation method.

Question 7: GAAP — Full Form and Meaning

What is GAAP?

• a. General American Accounting Practices
• b. Greatly Accepted Accounting Practices
• c. Generally Accepted Accounting Principles
• d. Good American Accounting Practices

Answer: c. Generally Accepted Accounting Principles

Explanation: GAAP stands for Generally Accepted Accounting Principles. These are a set of standardised rules and guidelines that companies must follow when preparing financial statements. In India, the Institute of Chartered Accountants of India (ICAI) has formulated Accounting Standards that align with GAAP requirements.

Question 8: Principle of Lease Rental Breakup

The breakup of lease rentals into total finance income, lease equalisation, and depreciation represents the principle of:

• a. Equity
• b. Consistency
• c. Conservatism
• d. Materialism

Answer: a. Equity

Explanation: The principle of Equity (fairness) requires that lease rentals be fairly allocated over the lease period. Breaking down lease rentals into finance income. Lease equalisation, and depreciation ensures that income and expenses are recognised on an equitable basis over the life of the lease, rather than distorting any single year's accounts.

Question 9: Bills Payable — Journal Entry

Bills Payable A/c Dr. to Bank — This entry represents:

• a. Bill accepted by B
• b. Bill retired by B
• c. Bill dishonoured by B
• d. Bill sent by A for payment

Answer: b. Bill retired by B

Explanation: When B retires a bill (pays it before or on due date). Bills Payable Account is debited (the liability is discharged) and Bank Account is credited (cash goes out). This entry — Bills Payable A/c Dr. to Bank — records B's payment of the bill obligation.

Question 10: Accommodation Bill

Which of the following is true?

• a. An insolvent is a person from whom some portion of the debt is recoverable
• b. Drawer drags the drawee to court in case of dishonour of accommodation bill
• c. A bill drawn for mutual help is an accommodation bill
• d. Drawee is a person to whom a bill is endorsed

Answer: c. A bill drawn for mutual help is an accommodation bill

Explanation: An accommodation bill is a bill of exchange drawn and accepted without any underlying trade transaction — purely to accommodate a friend or business associate in need of funds. Such a bill is drawn for mutual help, not for actual purchase or sale of goods. This is the correct definition of an accommodation bill.

Comparison: Lease vs Hire Purchase

Comparison: Depreciation Methods

Key Points Summary

• Under the WDV method, an asset's book value never reaches zero — it is always greater than zero
• An operating lease period is shorter than the useful life of the asset; a finance lease transfers effective ownership to the lessee
• The Sum of Digits method is an accelerated depreciation method — highest charge in Year 1
• GAAP stands for Generally Accepted Accounting Principles — the foundation of financial reporting standards
• An accommodation bill is drawn for mutual help without an underlying trade transaction

Frequently Asked Questions (FAQ)

What is Module C of JAIIB AFM?

Module C of the JAIIB AFM paper covers Balance Sheet and Profit and Loss Account analysis. Leasing and hire purchase accounting, depreciation methods, bills of exchange, and accounting principles. It is a high-importance module with both theoretical and numerical questions.

What is the difference between an operating lease and a finance lease?

In an operating lease. The lease period is shorter than the asset's useful life, ownership remains with the lessor, and the lessor bears the risk of obsolescence. In a finance lease. The lease period covers most of the asset's useful life, effective ownership transfers to the lessee, and the lessee claims depreciation and bears obsolescence risk.

Why is the WDV method popular for tax purposes?

The WDV method allows higher depreciation in the early years of an asset's life, which reduces taxable income more in the initial years. The Income Tax Act in India allows depreciation on the WDV basis for most assets, making it the most commonly used method for tax computation.

What is the golden rule for Bills Payable in accounting?

Bills Payable is a liability. When a bill is accepted, Bills Payable A/c is credited (liability increases). When the bill is paid on due date or retired early. Bills Payable A/c is debited (liability reduces) and Bank A/c is credited (cash reduces).

Where can I access the latest JAIIB exam schedule?

JAIIB is conducted twice a year by IIBF. Visit iibf.org.in for the official exam calendar, registration dates, admit card downloads, and result announcements.

Conclusion

Module C of the JAIIB AFM paper covers important practical accounting topics including lease accounting, depreciation methods, bills of exchange, and accounting principles. A thorough understanding of these topics — especially the distinction between operating and finance leases. The WDV method's key property, and the Sum of Digits ratios — will help you answer both theory and application-based questions confidently. Revise these questions regularly and refer to iibf.org.in for official exam updates and registration information.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

For more on jaiib afm module c questions, see the official IIBF circulars and our chapter-wise free notes on iibf.store.

Browse the full JAIIB syllabus + free classes to jumpstart your prep.

Practice on our latest mock tests with bilingual explanations and a public leaderboard.

Sharpen recall with the matching games — 60-second drills on dates, schemes and definitions.

Source: Indian Institute of Banking & Finance — iibf.org.in