JAIIB AFM Module C Important Questions 2026 (With Answers & Explanations)

If you are hunting for the most reliable set of JAIIB AFM Module C important questions. You have landed in the right place. This 2026 guide turns the hardest.

Most repeated topics of the Accounting. Financial Management for Bankers (AFM) paper into a clean. Exam-ready revision pack.

Every question below comes with the correct answer and a plain-English explanation. So you understand the logic instead of memorising blindly.

Module C is where many JAIIB candidates either gain easy marks or lose them carelessly. The topics are conceptual, numerical, and application-based all at once. Master them. And you build a strong scoring cushion for the whole paper.

What Is Module C of JAIIB AFM?

Module C of the JAIIB Accounting. Financial Management for Bankers paper deals with the practical accounting that bankers actually meet on the job. It blends Balance Sheet and Profit & Loss analysis with specialised entries.

The module focuses on lease accounting, hire purchase, depreciation methods, bills of exchange, and core accounting principles. Because the questions are part theory and part calculation, regular practice with the right mock tests matters more here than in any other section.

Core Topics You Must Revise

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

Why Module C Decides Your AFM Score

AFM is one of the most feared JAIIB papers. And Module C is its application-heavy heart. The examiner loves twisting small concepts. A single word like "operating" versus "finance" lease can flip the correct option.

Students who only mug up definitions get trapped. Students who understand why an answer is correct score consistently. That is exactly what the explanations below are built to do.

JAIIB AFM Module C Important Questions With Answers

Below are ten high-yield. Exam-style questions on the most tested concepts of Module C. Attempt each one first, then check the answer and read the reasoning.

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 to convert accrual-basis income into actual receipts is: Receipts = Income &ndash. Outstanding income of current year + Outstanding income of previous year. Current-year outstanding income (Idi) is earned but not yet received.

So you subtract it. Previous-year outstanding income (Id) was earned earlier but received this year. So you add it.

Hence Receipts = I – Idi + Id.

Question 2: Lease Terminal Adjustment Account

The Lease Terminal Adjustment Account is a balance sheet account. Identify the correct treatment:

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

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

Explanation: The Lease Terminal Adjustment Account is maintained by the lessor. A credit balance represents an over-recovery of the asset's cost through lease rentals. In that case. The credit balance is deducted from the Written Down Value (WDV) of the asset. Preparing the balance sheet.

Question 3: Lease vs Hire Purchase — Spot the Wrong Statement

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 an instalment basis in both
• d. The users of assets in both lease. HP run the risk of obsolescence

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

Explanation: In an operating lease. The lessor (owner) carries the risk of obsolescence — not the lessee. In hire purchase.

The purchaser does run that risk because they ultimately own the asset. So statement (d) is NOT true. Options (a), (b), and (c) are correct distinctions between lease and HP.

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 a fixed percentage on the opening book value of each year. Since the base keeps shrinking. The WDV approaches zero asymptotically but never actually reaches it. Therefore, the WDV is always greater than zero.

Question 5: Operating Lease — 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 arrangement where the lease period is shorter than the asset's useful life. And the asset is returned to the lessor at the end. This contrasts with a finance lease. Where the lease period covers most or all of the useful life. Effective ownership transfers to the lessee.

Question 6: Sum of Digits Method of Depreciation

Under the Sum of Digits method for a 5-year asset. 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: The denominator is the sum of the years' digits. For 5 years: 1 + 2 + 3 + 4 + 5 = 15. Depreciation is highest in Year 1 and falls each year — Year 1 = 5/15. Year 2 = 4/15, and so on. This is an accelerated depreciation method, shown in the table below.

Question 7: GAAP — Full Form and Meaning

What does GAAP stand for?

• 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. A set of standardised rules companies follow when preparing financial statements. In India. The Institute of Chartered Accountants of India (ICAI) formulates Accounting Standards that align with GAAP requirements.

Question 8: Principle Behind the Lease Rental Breakup

Breaking 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 lease rentals to be allocated fairly over the lease period. Splitting rentals into finance income. Lease equalisation.

And depreciation ensures income. Expenses are recognised on an equitable basis across the life of the lease. Instead of distorting any single year's accounts.

Question 9: Bills Payable — The Journal Entry

The entry "Bills Payable A/c Dr. To Bank" 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 on or before the due date). The Bills Payable Account is debited (liability discharged). The Bank Account is credited (cash goes out). So "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. The drawer drags the drawee to court if an accommodation bill is dishonoured
• c. A bill drawn for mutual help is an accommodation bill
• d. The drawee is the 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. Accepted without any underlying trade transaction. Purely to accommodate a friend or business associate who needs funds.

It is drawn for mutual help. Not for an actual purchase or sale of goods. That is the correct definition.

Lease vs Hire Purchase — Comparison Table

This is one of the most repeated comparison areas in AFM. Memorise the row that trips most students: risk of obsolescence.

Depreciation Methods — Comparison Table

Expect at least one direct question on how these three methods behave over an asset's life.

How to Study Module C Smartly (Step-by-Step)

Module C rewards a method-first approach. Follow this simple sequence to lock in marks fast.

1. Learn the definitions cold. Operating vs finance lease. Lease vs HP, and the three depreciation methods are the backbone.
2. Memorise the formulas. Receipts conversion, WDV behaviour, and Sum of Digits ratios are guaranteed marks.
3. Drill journal entries. Bills Payable, retirement, and dishonour entries are tested almost every cycle.
4. Practise with timed papers. Solve full-length mock tests so calculation speed becomes automatic.
5. Revise with comparison tables. Tables like the two above are the fastest way to revise the night before the exam.

For deeper conceptual notes and chapter walkthroughs, browse our free guides built specifically for JAIIB aspirants.

Common Mistakes to Avoid in Module C

Most lost marks here come from avoidable slips, not tough concepts. Watch for these traps.

• Confusing who bears obsolescence risk. In an operating lease it is the lessor. Not the user.
• Assuming WDV hits zero — it never mathematically reaches zero.
• Reversing the Sum of Digits ratios — Year 1 is the highest (5/15). Not the lowest.
• Mixing up the receipts formula signs — subtract current-year outstanding, add previous-year outstanding.
• Misreading bill entries — "Bills Payable A/c Dr. To Bank" is a retirement, not an acceptance.

Frequently Asked Questions (FAQ)

What is covered in Module C of JAIIB AFM?

Module C of the JAIIB AFM paper covers Balance Sheet. Profit &. Loss analysis.

Lease and hire purchase accounting. Depreciation methods, bills of exchange, and accounting principles. It carries both theory and numerical questions.

So it is a high-importance scoring module.

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 stays with the lessor, and the lessor bears obsolescence risk.

In a finance lease. The lease period covers most of the 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. Which reduces taxable income more in those initial years. The Income Tax Act in India permits 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 rises).

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

Where can I find the latest JAIIB exam schedule and fees?

JAIIB is conducted by IIBF, usually twice a year. For exam dates. Registration windows.

Fees. And results. Always confirm on the latest official IIBF notification at iibf.org.in.

Since these details can change each cycle.

Final Word: Turn Module C Into Easy Marks

Module C of JAIIB AFM is not about memorising hundreds of facts. It is about owning a handful of powerful concepts. Lease versus hire purchase. The three depreciation methods. Bill entries, and GAAP — and applying them with confidence.

Revise these JAIIB AFM Module C important questions until the reasoning feels obvious. Lean on the comparison tables for last-minute recall. And put in regular timed practice.

Do that. And Module C becomes one of your strongest scoring zones in the entire paper. Keep going — your JAIIB success is built one concept at a time.

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