commerce Solved MCQ for exams
Free Commerce Financial Quiz mcq
finance & economics quiz
Directions: The following items consist of two statements are labelled the ‘Assertion A’ and the other labelled the ‘Reason R’. You are to examine these two statements carefully and decide if the Assertion A and the Reason. R are individually true and if so, whether the Reason is a correct explanation of the Assertion. Select your answer to these items using the codes given below and mark your answer sheet accordingly.
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but l. is not a correct explanation of A
(c) A is true but R is false
(d) A is false but R is true
1. Assertion (A): ROI has aptly been regarded as the primary ratio as it specifies the relative net profit earned on capital employed. Du Pont Chart shows the manner in which the key elements coverage into the ROI
Reason (R): An approximate measure of Return on Equity (ROE) cannot be derived from ROI as the portion of assets financed by equity is difficult to determine.
Ans. (b)
2. Assertion (A): The cost of demolishing an old building preparatory to the construction of a new building in that place is to be treated as Capital Expenditure.
Reason (R): Such cost is not incidental to the construction of the new building.
Ans. (c)
3. Assertion (A): Once incorporated, the name of a Public Limited Co. cannot be changed.
Reason (R): The name of a public limited company must be distinct and should not mislead or resemble that of any other Company.
Ans. (d)
4. Assertion (A): An office system is a standard sequence of operations in a particular business activity and is concerned with how these operations are performed as well as by whom and when they are performed.
Reason (R): Systems include operations; people and purpose.
Ans. (b)
5. Assertion (A): Franking Machines are used for printing postage on mailed letters.
Reason (R): Franking Machines are to be purchased from the market and if doesn’t require a license from the postal deptt.
Ans. (c)
6. Assertion (A): Organization and Methods .is a conscious attempt to improve the quality of management and maintains efficient administrative machinery.
Reason (R): It involves detailed investigation with regard to the subject to be investigated, say proce4ures already being followed.
Ans. (a)
7. Assertion (A): A transferee of shares cannot sue the promoters of a Company for misinformation in the prospectus.
Reason (R): The information provided by the company promoters in the prospectus is addressed only to the original allottees.
Ans. (a)
8. Assertion (A): Effective motivation is moderated by organizational complexity and conflicts.
Reason (R): An individual’s motives may be complex and conflicting.
Ans. (b)
9. Assertion (A): According to theory ‘X’ all employees dislike work and must be coerced, controlled or threatened to make them work.
Reason (R): Theory X makes an assumption about the basic human nature which is relevant to the employees also.
Ans. (d)
10. Assertion (A): Everything that goes to increase the importance of the subordinate’s role is delegation.
Reason (R): Subordinates can be trained by delegation.
Ans. (b)
11. Assertion (A): E-commerce is an emerging field, which cannot be ignored.
Reason (R): The legal framework relating the E-commerce is yet to be crystallized.
Ans. (b)
12. Assertion (A): External alignment of wage rates is possible only when internal alignment is achieved.
Reason (R): Internal alignment of wage rates is dependent on increase in profits.
Ans. (b)
13. Assertion (A): Job evaluation facilitates framing a suitable incentive system for workers.
Reason (R): Incentive can be rationally based on time-saving by workers on a particular job, which can rightly be known from job evaluation.
Ans. (a)
14. Assertion (A): For a company, every debt is not a loan, but every loan is a debt.
Reason (R): In the case of deposit of money with the company, it is the depositor who is the prime mover, whereas in the case of loan it is the company who is the prime mover.
Ans. (a)
15. Assertion (A): The floating policy protects the policy holders against errors and omissions.
Reason (R): Goods are insured even if the policy holder fails to report that goods have already been forwarded from the place of shipment:
Ans. (c)
16. Assertion (A): Social responsibility of business is an idea that cannot be put into practice by most of the business.
Reason (R): There is no norm to measure the extent of responsibility forwards each segment of the society.
Ans. (d)
17. Assertion (A): Prediction of share price movement in a stock exchange s almost impossible.
Reason (R): Speculative activity has made the fundamentals of share quite insignificant.
Ans. (c)
18. Assertion (A): Management accounting provides management with information for decision making.
Reason (R): Management accounting is a branch of cost accounting
Ans. (c)
19. Assertion (A): tinder diminishing balance method of depreciation, the charge for depreciation keeps on diminishing year after year in all subsequent years.
Reason (R): Under diminishing balance method, the rate percent at which depreciation is written off goes on diminishing from year to year.
Ans. (c)
20. Assertion (A): No item of capital expenditure finds its place in the Trading and Profit & Loss Account or some other form of revenue accounts.
Reason (R): Capital expenditure consists of expenditure, the benefit of which is not fully consumed in one accounting period but is spread over several periods.
Ans. (a)
21. Assertion (A): Now-a-days many companies prepare their Balance Sheet in a vertical form rather than in the traditional horizontal form.
Reason (R): Part IV of Schedule VI -to the Companies Act, 1956 permits both the forms.
Ans. (b)
22. Assertion (A): When pro-rata at allotment of shares is made, the surplus application money is transferred to Share Allotment A/c.
Reason (R): The company is not required to pay any interest on such surplus application money.
Ans. (b)
23. Assertion (A): One single primary ratio, that measures the financial outcome of all recorded business activities, is R.O.I.
Reason (R): In practice, however, variations are also found in the ratio because capital and return are subject to different interpretations by firms.
Ans. (b)
24. Assertion (A): ROI is the index to study management efficiency.
Reason (R): Earning power in relation to total investment is measured by ROI
Ans. (b)
25. Assertion (A): Detection of errors is not of considerable importance to an auditor.
Reason (R): Some mistakes which appear to be in the first instance merely clerical errors are ultimately found to be fraudulent manipulation of accounts, but vast majority of mistakes are merely clerical errors committed due to either carelessness or ignorance on the part of clerical staff.
Ans. (d)
26. Assertion (A): Detection of frauds committed by the manipulation of accounts is a very difficult task for an auditor.
Reason (R): Frauds of the type ‘Manipulation of Accounts’ are committed without any misappropriation of cash or goods.
Ans. (a)
27. Assertion (A): A construction company, which by its Memorandum and Articles had powers to borrow and lend, carries on a banking business. This is considered to be ultravires the memorandum.
Reason (R): The borrowing and lending should be related to the main (construction) activity only.
Ans. (a)
28. Assertion (A): A minor can be admitted to the benefits of partnership with the consent of all the partners.
Reason (R): His liability is confined only to the extent of his share in the profits and property of the firm.
Ans. (a)
29. Assertion (A): The auditor should examine the objects Clause of the Memorandum of Association.
Reason (R): This would ensure that the company is carrying on business as specified in the Memorandum of Association.
Ans. (a)
30. Assertion (A): The auditor of a proprietary firm need not be bound by professional propriety.
Reason (R): Proprietary auditor is responsible only to the person(s) who appoint(s) him.
Ans. (d)
31. Assertion (A): The main purpose of auditing is to verify that the accounts have been prepared according to the principles of accounting and to see whether the financial statements so prepared reflect a true and fair view of the state of affairs of a business.
Reason (R): Auditing starts after the completion of recording to transactions in the books of account.
Ans. (b)
32. Assertion (A): The auditor should visit the particular concern at intervals and check the book of accounts.
Reason (R): Some precaution is required to be taken by the auditor to avoid weaknesses of. continuous audit.
Ans. (b)
33. Assertion (A): Return on investment is the ultimate relationship between earnings and investment.
Reason (R) Sales play the pivotal role in such a relationship as sales govern the earnings and investments in turn govern sales.
Ans. (b)
34. Assertion (A): In accounting, a distinction is made between the business and the owner.
Reason (R): Accounting concepts are based on objectivity and not on subjectivity.
Ans. (a)
35. Assertion (A): The investors in the capital market have been showing a decisive shift in favour of fixed income instruments.
Reason (R): The debt instruments have active secondary market.
Ans. (b)
Wednesday, February 2, 2011
commerce Solved quiz
commerce Solved quiz
IAS commerce solved papers
Commerce Solved MCQs
1. The statutory meeting of the company must be held within six months:
(a) From filing of statement in lieu of prospectus
(b) Of obtaining the certificate of commencement of business
(c) Of obtaining the certificate of incorporation
(d) From the date when the first Board of Directors meeting was held
Ans. (b)
2. Which one of the following reports is tc be placed before the Parliament by a Government Company?
(a) Director’s Report
(b) Annual Report
(c) Income Report
(d) Statutory Report
Ans. (b)
3. Under the Companies Act, which one of the following powers can be exercised by the Board of Directors?
(a) Power to sell any of the company’s undertakings
(b) Power to make call
(c) Power to borrow money in excess of the paid up capital
(d) Power to reappoint an auditor
Ans. (b)
4. Match List-I with List-II and select the correct answer using the Code given below the Lists:
List-I List-II
A. Screen trading 1. Capital market reforms
B. G.V. Ramakrishna Committee Report 2. Industrial sickness
C. BIFR 3. Disinvestment of PSU shares
D SEBI 4. Stock Exchange
Code:
A B C D
(a) 3 4 1 2
(b) 4 3 2 1
(c) 4 3 1 2
(d) 3 4 2 1
Ans. (b)
5. Which one of the following does not constitute the purpose of setting up SEBI?
(a) To protect the interests of the investors in securities
(b)To promote the development of the securities markets
(c) To regulate the global securities markets
(d) To deal with matters connected with fraudulent and unfair trade practices relating to securities markets
Ans. (c)
6. Members of the WTO/GATT have not agreed even in principle on which one of the following issues?
(a) Observance of minimum labour standards
(b) Protection of intellectual property rights
(c) Dispute settlement mechanism
(d) Export subsidies to agricultural produce
Ans. (d)
7. Match List-I with List-II and select the correct answer using the Code given below the Lists:
List-I List-II
A. Statutory functions of 1. Secretary
B. Advice to the Managing 2. Body
C. Filing tax returns 3. Functions imposed by
D. Image of organization 4. Public Relations Officer
Codes:
A B C D
(a) 1 2 3 4
(b) 3 2 1 4
(c) 4 3 2 1
(d) 3 4 1 2
Ans. (b)
8. Minimum Alternative Tax (MAT) is applicable to the:
(a) joint stock company
(b) co-operative society
(c) partnership firm
(d) sole proprietary concern
Ans. (a)
9. The latest generation of Personal Computers (PCs) being used in an office set-up is:
(a) PC XT
(b) PC Pentium
(c) PC AT
(d) PC 486
Ans. (b)
Directions: The following 11 (eleven) items consist of two statements one labelled the ‘Assertion A’ and the other labelled the ‘Reason R’. You are to examine these two statements carefully and decide if the Assertion A and the Reason R are individually true and if so, whether the Reason is a correct explanation of the Assertion. Select your answers to these items using the Code given below and mark your answer sheet accordingly.
Code:
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but R is not a correct explanation of A
(c) A is true but R is false
(d) A is false but R is true
Ans. (d)
10. Assertion (A): Amount realized on the disposal (sale) of a discarded machine of the factory should be treated as revenue receipt.
Reason (R): Sale proceeds are usually of revenue in nature.
Ans. (a)
11. Assertion (A): If the directors of a company commit any irregular act but within the provisions of the Companies Act or Memorandum of Articles, such acts will be binding on the company. But, in turn, the company may claim damages from the directors for such acts.
Reason (R): The directors have to conduct the affairs of the business in a manner which is not detrimental to the interests of the company.
Ans. (a)
12. Assertion (A): Programmed decisions are under conditions of certainty.
Reason (R): Conditions of certainty provide reliable information about consequences of alternatives.
Ans. (a)
13. Assertion (A): Internal audit must be carried out by a qualified Chartered Accountant.
Reason (R): It is a management tool.
Ans. (d)
14. Assertion (A): An accounting principle is that the relatively small item and values should be ignored from accounts.
Reason (R): The cost of the effort in the allocation of small items over a long period does not justify the benefit derived from this operation and the cost of such items is treated as expense for the period in which they are acquired.
Ans. (d)
15. Assertion (A): Break-even chart merely depicts the relationship between sales and expenses in such a way as to show at what volume revenues exactly cover expenses.
Reason (R): The break-even chart shows that at any lesser volume of sale, the company would suffer a loss, and at a greater volume of sale it would enjoy a profit.
Ans. (b)
16. Assertion (A): Financial leverage is beneficial only when the rate of earning is higher than the cost of debt.
Reason (R): Debt-equity ratio indicates the short-term financial soundness of a business concern.
17. Assertion (A): Management by Exception is not a control technique.
Reason (R): The principles of Management by Exception was first propounded by F.W. Taylor.
Ans. (d)
18. Assertion (A): Now-a-clays, it is obligatory on the part of companies to disclose in their Annual Reports, work done for the benefit of the society.
Reason (R): Annual Reports are used by members of the society in one capacity or another.
Ans. (d)
19. Assertion (A): Co-ordination implies the avoidance of all splintering efforts.
Reason (R): One of the four benefits of co-ordination is unity of direction.
Ans. (a)
20. Assertion (A): Audit is conducted to find out the financial position of a concern.
Reason (R): The objects of audit are the detection and prevention of errors and frauds.
Ans. (d)
21. Accounting is:
(a) the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in the at part at best financial in character, and interpreting thereof.
(b) A systematic and regular record of events affecting a firm with a view to obtaining a clear financial picture.
(c) preparation of various financial statements over a period of time of a firm to measure its performance in monetary terms.
(d) nothing but book-keeping
Ans. (a)
22. In stock valuation application of the principle at cost price or market price whichever is lower’ will result in the valuation of stock sometimes at cost price and at other times at market price.
This is an application of the principle of:
(a) Consistency
(b) Materiality
(c) Conservatism
(d) Disclosure
Ans. (c)
23. On using reducing balance method on an asset of Rs. 20,000 at the rate of 10% per annum, depreciation after three year will be:
(a) Rs. 6,000
(b) Rs. 1,800
(c) Rs. 1,620
(d) Rs. 2,000
Ans. (c)
24. Which one of the following depreciation methods is most suitable for a coal mine?
(a) Diminishing Balance Method
(b) Depletion Method
(c) Fixed installment Method
(d) Sum of years’ digits method
Ans. (b)
25. Which one of the following statements is correct?
(a) Depreciation is not the process of valuation of assets
it is a process of allocation of cost of assets to the period of its economic life.
(b) If the cost of machinery is more than the book value, then depreciation need not be provided.
(c) When the plant and machinery are maintained in good condition, through repairs and renewals, depreciation need not be provided.
(d) In the absence of any legal provisions, if the auditor finds that provision made for depreciation is inadequate then he is not required to refer to it in his report.
Ans. (a)
26. Social obligation of accounting refers to:
(a) the completion of journal entries
(b) the preparation of final accounts
(c) cost recording
(d) servicing the needs of various state holders
Ans. (d)
27. Match List-I with List-II and select the correct answer:
List- List-II
A. Heavy amount of premium on 1. Capital expenditure
redemption of preference shares
B. Excess of sale proceeds of fixed 2. Deferred Revenue Expenditure
assets over their original cost
C. Cost of installation of an old machine 3. Capital Gain
D. Freight paid on purchase of raw material 4. Revenue Expenditure
Codes:
A B C D
(a) 2 3 4 1
(b) 3 2 4 1
(c) 2 3 1 4
(d) 3 2 1 4
Ans. (c)
28. Which one of the following is capital expenditure?
(a) Cost of advertisement
(b) Purchase of a delivery van
(c) Purchase of raw material
(d) Purchase of machine oil
Ans. (b)
29. Amount spent on an advertisement companies, the benefits of which is likely to last for three years is a:
(a) capital expenditure
(b) revenue expenditure
(c) deferred revenue expenditure
(d) contingent expenditure
Ans. (c)
30. Revenue is generally recognized as being earned at the point of time when:
(a) sale is affected
(b) cash is received
(c) production is completed
(d) debts are collected
Ans. (a)
31. Which one of the following will be treated as revenue expenditure?
(a) Cost incurred for a new exit as required under the local bodies’ bye laws
(b) Interest paid on loan during the construction of works
(c) Cost of pulling down an old building as also the payment made to the architect for the plan of a new building
(d) A dealer in sewing machines purchases sewing machines and spends some money on the repair of ten machines damaged while in transit
Ans. (d)
32. Match List-I with List-II and select the correct answer:
List—I List—II
A. Preliminary expenses 1. Capital expenditure
B. Travelling expenses of the salesman 2. Revenue Expenditure
C. Profit on sale of a part of 3. Capital gain
the business building
D. Nazrana paid on the 4. Deferred revenue expenditure
purchase of land for business
Codes:
A B C D
(a) 4 2 3 1
(b) 4 2 1 3
(c) 2 4 3 1
(d) 2 4 1 3
Ans. (a)
33. A person started business with a cash of Rs. 22,000 and stock of Rs. 3,000 on 1st January, 1996. During the year he made a profit of Rs. 6,000. His creditors were paid Rs. 4,500 for the office furniture supplied. He took goods worth Rs. 3,500 for his daughter’s
wedding on 30th June, 1996, the gross assets of his business on 31st December, 1996 was:
(a) Rs. 27,500
(b) Rs. 26,500
(c) Rs. 23,500
(d) Rs. 20,500
Ans. (a)
34. In the case of a sole proprietorship, Assets in Balance sheet items are conveniently shown in
(a) order of fixity
(b) order of Liquidity
(c) alphabetical order
(d) order of dates of acquisition
Ans. (b)
35. Match List-I (Names of accounts) with List-II (Matter with which the accounts are concerned) and select the correct answer:
List-I List-II
A. Partners’ current accounts 1. Dissolution of Partnership
B. Goodwill account 2. Revaluation of assets on the admission of-a partner
C. Partners’ drawings accounts 3. Fixed capital of partners
D. Profit and Loss 4. Goods taken by partners for private consumption
adjustment account
Codes:
A B C D
(a) 1 3 2 4
(b) 1 3 4 2
(c) 3 1 4 2
(d) 3 1 2 4
Ans. (c)
36. Match List-I (Transaction) with List-II (Entry to be made) and select the correct answer:
List-I List-II
A. Loss on realization 1. Debit Partners capital A/c
B. Profit on realization 2. Credit Realization A/c
C. Assets sold 3. Credit Partners Capital A/c
D. Creditors paid 4. Debit Realization A/c
Codes:
A B C D
(a) 1 3 2 4
(b) 3 1 2 4
(c) 3 1 4 2
(d) 1 3 4 2
Ans. (a)
37. A business concern provides that following details:
Cost of goods sold Rs. 1, 50,000
Sales Rs. 2, 00,000
Opening Stock 60,000
Closing Stock 40,000
Debtors 45,000
Creditors 50,000
The concerns purchases would amount to (in Rs.):
(a) 1, 30,000
(b) 2, 20,000
(c) 2, 60,000
(d) 2, 90,000
Ans. (a)
38. Which of the following statements are appropriate in respect of partnership accounts?
1. In the absence of any provision in the partnership agreement to the contrary, partners can charge
interest at 6% per annum on loans given by them to the partnership firm.
2. An ordinary partnership firm can have not more than 50 partners.
3. A banking partnership firm can have not more than 10 partnerships.
4. In the absence of any provision in the partnership agreement to the contrary, profits and losses are shared by the partners in the ratio of their capitals.
Select the correct answer from the codes given below:
(a) 1 and 2
(b) 1 and 3
(c) 2, 3 and 4
(d) 1, 3 and 4
Ans. (b)
39. A and B are equal partners in a firm. They submitted C is one-sixth partner who brought in Rs. 60,000 as goodwill; The new profit sharing ratio 3:2:1. If goodwill of Rs. 60,000 is to be paid to the old partners as per profit sacrificing ratio, B will receive:
(a) Rs. 30,000
(b) Rs. 60,000
(c) Rs. 45,000
(d) Nil
Ans. (b)
40. R admitted as a new partner for one fourth share of future profits, fails to bring in cash of Rs. 5,000 towards goodwill but the existing (old) partners S and T, sharing profits in the ratio of 3:2, raise the goodwill accounts at its full value. Therefore, the partners will be credited for goodwill as:
S (Rs.) T (Rs.) R (Rs.)
(a) 3,000 2,000 Nil
(b) 9,000 6,000 5,000
(c) 12,000 8,000 Nil
(d) 2,250 1,500 1,250
Ans. (a)
41. The following figures (all in Rs) relate to a non-trading concern:
1st January, 1995 stock of Medicines 5,000
1st January, 1995 outstanding creditors for medicines 3,000
Amount paid for medicines during the years 15,000
Value of medicines spoiled during the year 400
Stock of medicines on 31st December, 1995 3,500
The amount to be debited to Income and Expenditure Account would be:
(a) Rs. 15,000
(b) Rs. 18,500
(c) Rs. 18,000
(d) Rs. 13,500
Ans. (d)
42. Which of the following items should be entered in the Receipts and Payments account of a club?
1. Sale of old newspapers
2. Loss on sale of some assets
3. Payments for investment
Select the correct answer from the codes given below:
(a) 1, 2 and 3
(b) 1 and 3
(c) 1 and 2
(d) 2 and 3
Ans. (b)
43. A cultural club discloses that subscription received during a particular accounting period as per receipts and payments account amount to Rs. 57,360.
Subscription outstanding (opening and closing) was Rs. 4,800 and Rs. 6,000 respectively. Subscription received in advance (opening balance and closing balance) amounted to Rs. 3,600 and Rs.2, 160 respectively.
The amount to be posted to income and expenditure account would be:
(a) Rs. 57,360
(b) Rs. 54,000
(c) Rs. 60,000
(d) Rs. 63,360
Ans. (c)
44. If the operating expenses exceed gross profit, the excess is referred to as
(a) operating Income
(b) operating loss
(c) non-operating expenses
(d) non-operating income
(a) 1, 2 and 3
(c) 1 and 2
(b) 1 and 3
(d) 2 and 3
Ans. (b)
45. Ansh started business on 1st April 1995 with a capital a Rs. 25,000 and a loan of Rs. 12,500. Total assets and total liabilities at the end of 31st March, 1996 amounted to Rs. 75,000 and Rs. 12,500 respectively. He invested a further capital of Rs. 12,500 during the year and withdrew Rs. 7,500 during the relevant financial period. His closing capital and profits would be respectively:
(a) Rs. 62,500 and Rs. 32,500
(b) Rs. 50,000 and Rs. 40,000
(c) Rs. 70,000 and Rs. 47,500
(d) Rs. 55,000 and Rs. 42,500
Ans. (a)
46. Match List-I with List-II and select the correct answer:
List—I List—II
(Item) (Type of Asset)
A. Brand equity 1. Tangible
B. Plant and Machinery 2. Current
C. Advances to suppliers 3. Intangible
D. Deferred Revenue Expenditure 4. Fictitious
Codes:
A B C D
(a) 3 1 4 2
(b) 1 3 2 4
(c) 3 1 2 4
(d) 1 3 4 2
Ans. (c)
47. Which one of the following is an intangible asset?
(a) Furniture
(b) Patent right
(c) Investment in shares
(d) Loose tools
Ans. (b)
48. What is the correct sequence of the following actions required for the preparation of Final Accounts?
(1) Preparation of Trial Balance
(2) Balancing of Accounts
(3) Preparation of Annual Financial Statements
(4) Making Adjusting Entries
Select the correct answer from the codes given below:
(a) 4, 2, 1, 3
(b) 2, 4, 3, 1
(c) 2, 1, 4, 3
(d) 4, 2, 3, 1
Ans. (a)
49. Consider the following items:
1. Debentures
2. Prepaid rent
3. Accrued interest
4. Bank overdraft
Current liabilities would include:
(a) 2, 3 and 4
(b) 1, 2 and 3
(c) 1 and 4
(d) 1, 2, 3 and 4
Ans. (c)
50. Having reissued all forfeited shares, the credit balance remaining in forfeited shares account is transferred to:
(a) General reserve
(b) Reserve capital
(c) Capital reserve
(d) None of the above
Ans. (c)
IAS commerce solved papers
Commerce Solved MCQs
1. The statutory meeting of the company must be held within six months:
(a) From filing of statement in lieu of prospectus
(b) Of obtaining the certificate of commencement of business
(c) Of obtaining the certificate of incorporation
(d) From the date when the first Board of Directors meeting was held
Ans. (b)
2. Which one of the following reports is tc be placed before the Parliament by a Government Company?
(a) Director’s Report
(b) Annual Report
(c) Income Report
(d) Statutory Report
Ans. (b)
3. Under the Companies Act, which one of the following powers can be exercised by the Board of Directors?
(a) Power to sell any of the company’s undertakings
(b) Power to make call
(c) Power to borrow money in excess of the paid up capital
(d) Power to reappoint an auditor
Ans. (b)
4. Match List-I with List-II and select the correct answer using the Code given below the Lists:
List-I List-II
A. Screen trading 1. Capital market reforms
B. G.V. Ramakrishna Committee Report 2. Industrial sickness
C. BIFR 3. Disinvestment of PSU shares
D SEBI 4. Stock Exchange
Code:
A B C D
(a) 3 4 1 2
(b) 4 3 2 1
(c) 4 3 1 2
(d) 3 4 2 1
Ans. (b)
5. Which one of the following does not constitute the purpose of setting up SEBI?
(a) To protect the interests of the investors in securities
(b)To promote the development of the securities markets
(c) To regulate the global securities markets
(d) To deal with matters connected with fraudulent and unfair trade practices relating to securities markets
Ans. (c)
6. Members of the WTO/GATT have not agreed even in principle on which one of the following issues?
(a) Observance of minimum labour standards
(b) Protection of intellectual property rights
(c) Dispute settlement mechanism
(d) Export subsidies to agricultural produce
Ans. (d)
7. Match List-I with List-II and select the correct answer using the Code given below the Lists:
List-I List-II
A. Statutory functions of 1. Secretary
B. Advice to the Managing 2. Body
C. Filing tax returns 3. Functions imposed by
D. Image of organization 4. Public Relations Officer
Codes:
A B C D
(a) 1 2 3 4
(b) 3 2 1 4
(c) 4 3 2 1
(d) 3 4 1 2
Ans. (b)
8. Minimum Alternative Tax (MAT) is applicable to the:
(a) joint stock company
(b) co-operative society
(c) partnership firm
(d) sole proprietary concern
Ans. (a)
9. The latest generation of Personal Computers (PCs) being used in an office set-up is:
(a) PC XT
(b) PC Pentium
(c) PC AT
(d) PC 486
Ans. (b)
Directions: The following 11 (eleven) items consist of two statements one labelled the ‘Assertion A’ and the other labelled the ‘Reason R’. You are to examine these two statements carefully and decide if the Assertion A and the Reason R are individually true and if so, whether the Reason is a correct explanation of the Assertion. Select your answers to these items using the Code given below and mark your answer sheet accordingly.
Code:
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but R is not a correct explanation of A
(c) A is true but R is false
(d) A is false but R is true
Ans. (d)
10. Assertion (A): Amount realized on the disposal (sale) of a discarded machine of the factory should be treated as revenue receipt.
Reason (R): Sale proceeds are usually of revenue in nature.
Ans. (a)
11. Assertion (A): If the directors of a company commit any irregular act but within the provisions of the Companies Act or Memorandum of Articles, such acts will be binding on the company. But, in turn, the company may claim damages from the directors for such acts.
Reason (R): The directors have to conduct the affairs of the business in a manner which is not detrimental to the interests of the company.
Ans. (a)
12. Assertion (A): Programmed decisions are under conditions of certainty.
Reason (R): Conditions of certainty provide reliable information about consequences of alternatives.
Ans. (a)
13. Assertion (A): Internal audit must be carried out by a qualified Chartered Accountant.
Reason (R): It is a management tool.
Ans. (d)
14. Assertion (A): An accounting principle is that the relatively small item and values should be ignored from accounts.
Reason (R): The cost of the effort in the allocation of small items over a long period does not justify the benefit derived from this operation and the cost of such items is treated as expense for the period in which they are acquired.
Ans. (d)
15. Assertion (A): Break-even chart merely depicts the relationship between sales and expenses in such a way as to show at what volume revenues exactly cover expenses.
Reason (R): The break-even chart shows that at any lesser volume of sale, the company would suffer a loss, and at a greater volume of sale it would enjoy a profit.
Ans. (b)
16. Assertion (A): Financial leverage is beneficial only when the rate of earning is higher than the cost of debt.
Reason (R): Debt-equity ratio indicates the short-term financial soundness of a business concern.
17. Assertion (A): Management by Exception is not a control technique.
Reason (R): The principles of Management by Exception was first propounded by F.W. Taylor.
Ans. (d)
18. Assertion (A): Now-a-clays, it is obligatory on the part of companies to disclose in their Annual Reports, work done for the benefit of the society.
Reason (R): Annual Reports are used by members of the society in one capacity or another.
Ans. (d)
19. Assertion (A): Co-ordination implies the avoidance of all splintering efforts.
Reason (R): One of the four benefits of co-ordination is unity of direction.
Ans. (a)
20. Assertion (A): Audit is conducted to find out the financial position of a concern.
Reason (R): The objects of audit are the detection and prevention of errors and frauds.
Ans. (d)
21. Accounting is:
(a) the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in the at part at best financial in character, and interpreting thereof.
(b) A systematic and regular record of events affecting a firm with a view to obtaining a clear financial picture.
(c) preparation of various financial statements over a period of time of a firm to measure its performance in monetary terms.
(d) nothing but book-keeping
Ans. (a)
22. In stock valuation application of the principle at cost price or market price whichever is lower’ will result in the valuation of stock sometimes at cost price and at other times at market price.
This is an application of the principle of:
(a) Consistency
(b) Materiality
(c) Conservatism
(d) Disclosure
Ans. (c)
23. On using reducing balance method on an asset of Rs. 20,000 at the rate of 10% per annum, depreciation after three year will be:
(a) Rs. 6,000
(b) Rs. 1,800
(c) Rs. 1,620
(d) Rs. 2,000
Ans. (c)
24. Which one of the following depreciation methods is most suitable for a coal mine?
(a) Diminishing Balance Method
(b) Depletion Method
(c) Fixed installment Method
(d) Sum of years’ digits method
Ans. (b)
25. Which one of the following statements is correct?
(a) Depreciation is not the process of valuation of assets
it is a process of allocation of cost of assets to the period of its economic life.
(b) If the cost of machinery is more than the book value, then depreciation need not be provided.
(c) When the plant and machinery are maintained in good condition, through repairs and renewals, depreciation need not be provided.
(d) In the absence of any legal provisions, if the auditor finds that provision made for depreciation is inadequate then he is not required to refer to it in his report.
Ans. (a)
26. Social obligation of accounting refers to:
(a) the completion of journal entries
(b) the preparation of final accounts
(c) cost recording
(d) servicing the needs of various state holders
Ans. (d)
27. Match List-I with List-II and select the correct answer:
List- List-II
A. Heavy amount of premium on 1. Capital expenditure
redemption of preference shares
B. Excess of sale proceeds of fixed 2. Deferred Revenue Expenditure
assets over their original cost
C. Cost of installation of an old machine 3. Capital Gain
D. Freight paid on purchase of raw material 4. Revenue Expenditure
Codes:
A B C D
(a) 2 3 4 1
(b) 3 2 4 1
(c) 2 3 1 4
(d) 3 2 1 4
Ans. (c)
28. Which one of the following is capital expenditure?
(a) Cost of advertisement
(b) Purchase of a delivery van
(c) Purchase of raw material
(d) Purchase of machine oil
Ans. (b)
29. Amount spent on an advertisement companies, the benefits of which is likely to last for three years is a:
(a) capital expenditure
(b) revenue expenditure
(c) deferred revenue expenditure
(d) contingent expenditure
Ans. (c)
30. Revenue is generally recognized as being earned at the point of time when:
(a) sale is affected
(b) cash is received
(c) production is completed
(d) debts are collected
Ans. (a)
31. Which one of the following will be treated as revenue expenditure?
(a) Cost incurred for a new exit as required under the local bodies’ bye laws
(b) Interest paid on loan during the construction of works
(c) Cost of pulling down an old building as also the payment made to the architect for the plan of a new building
(d) A dealer in sewing machines purchases sewing machines and spends some money on the repair of ten machines damaged while in transit
Ans. (d)
32. Match List-I with List-II and select the correct answer:
List—I List—II
A. Preliminary expenses 1. Capital expenditure
B. Travelling expenses of the salesman 2. Revenue Expenditure
C. Profit on sale of a part of 3. Capital gain
the business building
D. Nazrana paid on the 4. Deferred revenue expenditure
purchase of land for business
Codes:
A B C D
(a) 4 2 3 1
(b) 4 2 1 3
(c) 2 4 3 1
(d) 2 4 1 3
Ans. (a)
33. A person started business with a cash of Rs. 22,000 and stock of Rs. 3,000 on 1st January, 1996. During the year he made a profit of Rs. 6,000. His creditors were paid Rs. 4,500 for the office furniture supplied. He took goods worth Rs. 3,500 for his daughter’s
wedding on 30th June, 1996, the gross assets of his business on 31st December, 1996 was:
(a) Rs. 27,500
(b) Rs. 26,500
(c) Rs. 23,500
(d) Rs. 20,500
Ans. (a)
34. In the case of a sole proprietorship, Assets in Balance sheet items are conveniently shown in
(a) order of fixity
(b) order of Liquidity
(c) alphabetical order
(d) order of dates of acquisition
Ans. (b)
35. Match List-I (Names of accounts) with List-II (Matter with which the accounts are concerned) and select the correct answer:
List-I List-II
A. Partners’ current accounts 1. Dissolution of Partnership
B. Goodwill account 2. Revaluation of assets on the admission of-a partner
C. Partners’ drawings accounts 3. Fixed capital of partners
D. Profit and Loss 4. Goods taken by partners for private consumption
adjustment account
Codes:
A B C D
(a) 1 3 2 4
(b) 1 3 4 2
(c) 3 1 4 2
(d) 3 1 2 4
Ans. (c)
36. Match List-I (Transaction) with List-II (Entry to be made) and select the correct answer:
List-I List-II
A. Loss on realization 1. Debit Partners capital A/c
B. Profit on realization 2. Credit Realization A/c
C. Assets sold 3. Credit Partners Capital A/c
D. Creditors paid 4. Debit Realization A/c
Codes:
A B C D
(a) 1 3 2 4
(b) 3 1 2 4
(c) 3 1 4 2
(d) 1 3 4 2
Ans. (a)
37. A business concern provides that following details:
Cost of goods sold Rs. 1, 50,000
Sales Rs. 2, 00,000
Opening Stock 60,000
Closing Stock 40,000
Debtors 45,000
Creditors 50,000
The concerns purchases would amount to (in Rs.):
(a) 1, 30,000
(b) 2, 20,000
(c) 2, 60,000
(d) 2, 90,000
Ans. (a)
38. Which of the following statements are appropriate in respect of partnership accounts?
1. In the absence of any provision in the partnership agreement to the contrary, partners can charge
interest at 6% per annum on loans given by them to the partnership firm.
2. An ordinary partnership firm can have not more than 50 partners.
3. A banking partnership firm can have not more than 10 partnerships.
4. In the absence of any provision in the partnership agreement to the contrary, profits and losses are shared by the partners in the ratio of their capitals.
Select the correct answer from the codes given below:
(a) 1 and 2
(b) 1 and 3
(c) 2, 3 and 4
(d) 1, 3 and 4
Ans. (b)
39. A and B are equal partners in a firm. They submitted C is one-sixth partner who brought in Rs. 60,000 as goodwill; The new profit sharing ratio 3:2:1. If goodwill of Rs. 60,000 is to be paid to the old partners as per profit sacrificing ratio, B will receive:
(a) Rs. 30,000
(b) Rs. 60,000
(c) Rs. 45,000
(d) Nil
Ans. (b)
40. R admitted as a new partner for one fourth share of future profits, fails to bring in cash of Rs. 5,000 towards goodwill but the existing (old) partners S and T, sharing profits in the ratio of 3:2, raise the goodwill accounts at its full value. Therefore, the partners will be credited for goodwill as:
S (Rs.) T (Rs.) R (Rs.)
(a) 3,000 2,000 Nil
(b) 9,000 6,000 5,000
(c) 12,000 8,000 Nil
(d) 2,250 1,500 1,250
Ans. (a)
41. The following figures (all in Rs) relate to a non-trading concern:
1st January, 1995 stock of Medicines 5,000
1st January, 1995 outstanding creditors for medicines 3,000
Amount paid for medicines during the years 15,000
Value of medicines spoiled during the year 400
Stock of medicines on 31st December, 1995 3,500
The amount to be debited to Income and Expenditure Account would be:
(a) Rs. 15,000
(b) Rs. 18,500
(c) Rs. 18,000
(d) Rs. 13,500
Ans. (d)
42. Which of the following items should be entered in the Receipts and Payments account of a club?
1. Sale of old newspapers
2. Loss on sale of some assets
3. Payments for investment
Select the correct answer from the codes given below:
(a) 1, 2 and 3
(b) 1 and 3
(c) 1 and 2
(d) 2 and 3
Ans. (b)
43. A cultural club discloses that subscription received during a particular accounting period as per receipts and payments account amount to Rs. 57,360.
Subscription outstanding (opening and closing) was Rs. 4,800 and Rs. 6,000 respectively. Subscription received in advance (opening balance and closing balance) amounted to Rs. 3,600 and Rs.2, 160 respectively.
The amount to be posted to income and expenditure account would be:
(a) Rs. 57,360
(b) Rs. 54,000
(c) Rs. 60,000
(d) Rs. 63,360
Ans. (c)
44. If the operating expenses exceed gross profit, the excess is referred to as
(a) operating Income
(b) operating loss
(c) non-operating expenses
(d) non-operating income
(a) 1, 2 and 3
(c) 1 and 2
(b) 1 and 3
(d) 2 and 3
Ans. (b)
45. Ansh started business on 1st April 1995 with a capital a Rs. 25,000 and a loan of Rs. 12,500. Total assets and total liabilities at the end of 31st March, 1996 amounted to Rs. 75,000 and Rs. 12,500 respectively. He invested a further capital of Rs. 12,500 during the year and withdrew Rs. 7,500 during the relevant financial period. His closing capital and profits would be respectively:
(a) Rs. 62,500 and Rs. 32,500
(b) Rs. 50,000 and Rs. 40,000
(c) Rs. 70,000 and Rs. 47,500
(d) Rs. 55,000 and Rs. 42,500
Ans. (a)
46. Match List-I with List-II and select the correct answer:
List—I List—II
(Item) (Type of Asset)
A. Brand equity 1. Tangible
B. Plant and Machinery 2. Current
C. Advances to suppliers 3. Intangible
D. Deferred Revenue Expenditure 4. Fictitious
Codes:
A B C D
(a) 3 1 4 2
(b) 1 3 2 4
(c) 3 1 2 4
(d) 1 3 4 2
Ans. (c)
47. Which one of the following is an intangible asset?
(a) Furniture
(b) Patent right
(c) Investment in shares
(d) Loose tools
Ans. (b)
48. What is the correct sequence of the following actions required for the preparation of Final Accounts?
(1) Preparation of Trial Balance
(2) Balancing of Accounts
(3) Preparation of Annual Financial Statements
(4) Making Adjusting Entries
Select the correct answer from the codes given below:
(a) 4, 2, 1, 3
(b) 2, 4, 3, 1
(c) 2, 1, 4, 3
(d) 4, 2, 3, 1
Ans. (a)
49. Consider the following items:
1. Debentures
2. Prepaid rent
3. Accrued interest
4. Bank overdraft
Current liabilities would include:
(a) 2, 3 and 4
(b) 1, 2 and 3
(c) 1 and 4
(d) 1, 2, 3 and 4
Ans. (c)
50. Having reissued all forfeited shares, the credit balance remaining in forfeited shares account is transferred to:
(a) General reserve
(b) Reserve capital
(c) Capital reserve
(d) None of the above
Ans. (c)
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