Assertion Reason Questions in commerce

Assertion Reason Questions in commerce
Objective Commerce Test containing Assertion Reason Type Questions
ASSERTION REASON QUESTIONS COMMERCE MCQ

Directions : The following Fourteen (14) items consist of two statements, one labelled as the ‘Assertion (A) ‘and the other as ‘Reason (R)’. You are to examine these two statements carefully and select the answers to these items using the Code given below:
(a) Both A and R are individually true and R is the correct explanation of A
(b) Both A and R are individually true but R is not the correct explanation of A
(c) A is true but R is false
(d) A is false but R is true


1. Assertion (A): The role of the Doctrine of Indoor Management is opposed to the rules of constructive notice.
Reason (R): The constructive notice seeks to protect the company against the outsider whereas the Doctrine of Indoor Management operates to protect outsider against the company.
Ans. (a)

2. Assertion (A): Rules of Constructive Notice and Articles of Association are known to everyone who deals with the company.
Reason (R): After re4stration of the company, Memorandum and Articles of Association become public documents.
Ans. (a)

3. Assertion (A): Doctrine of Indoor Management does not apply to forgery.
Reason (R): Company Law recognizes ultra vires or illegal acts.
Ans (c)

4. Assertion (A): A Director of a company in his individual capacity can exercise powers conferred on him by the Companies Act, Memorandum and the Article of Association of the company.
Reason (R): The Directors have the power to enter into contract on behalf of the company with other parties.
Ans. (d)

5. Assertion (A): Capital expenditure is incurred for the purpose f acquiring fixed asset.
Reason (R): Capital expenditure item is shown in the asset side of the Balance Sheet.
Ans. (b)

6. Assertion (A): Staff officers and assigned an ‘authority of ideas’ and line officers and ‘authority to command’.
Reason (R): Functional authority is not restricted to managers of a particular type of department.
Ans. (b)

7. Assertion (A): Management Audit should be conducted by a team of experts.
Reason (R): Management Audit is a critical examination of policy and practices of management from the highest level to downward in order to ascertain that sound management prevails in the business concern.
Ans. (a)

8. Assertion (A): If it is found that some errors and/or frauds are remaining undetected due to the fact that a statutory auditor depended upon test checking, then the said auditor will be held responsible for negligence in the performance of his duties.
Reason (R): A statutory auditor cannot, in any way, avoid or reduce the responsibility laid on him by the statutes.
Ans. (d)

9. Assertion (A): An auditor of a large business concern has to adopt test checking based on scientific statistical sampling technique instead of checking the whole of transaction- of a particular class.
Reason (R): Test checking based on scientific statistical sampling technique, reduces the volume of unnecessarily cumbersome audit work involved in detailed checking of all transactions.
Ans. (a)

10. Assertion (A): Revenue expenditure is written off in the year in which it occurs.
Reason (R): The benefit of revenue expenditure is consumed in the year in which it arises.
Ans. (a)

11. Assertion (A): Cash flow Statement and Fund Flow Statement disclose same information.
Reason (R): Both are prepared out of the same data.
Ans. (d)

12. Assertion (A): Liquid ratio reveals strength of liquidity of a business unit.
Reason (R): Liquid ratio analyses liquid assets and liquid liabilities of a business uhit in order to assess the extent of liquidity.
Ans. (a)

13. Assertion (A): Profit and Loss Account and Balance Sheet are financial statements showing financial position of a business unit.
Reason (R): Profit and Loss Account and Balance Sheet are prepared at the end of the financial year.
Ans. (d)

14. Assertion (A): The interest on debentures can be capitalized up to the complete construction of the fixed assets.
Reason (R): The construction of fixed assets could only be completed by the use of these funds.
Ans. (c)