FMA MCQs

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Financial management & accounting

SOURCE 1(examveda)


MCQs Examveda

1. In value chain analysis, coordination, acquiring and assembling of resources to
produce a product is classified as
A. resourcing
B. value acquiring
C. production
D. value acquaintance
Answer: Option C
Solution:
In value chain analysis, coordination, acquiring and assembling of resources to produce a
product is classified as production. Value chain analysis is a strategy tool used to analyze
internal firm activities. Its goal is to
recognize, which activities are the most valuable (i.e. are the source of cost or differentiation
advantage) to the firm and which ones could be improved to provide competitive advantage.


2. Examining of past performance, exploring alternative and planning future is
A. learning
B. alternating
C. examining
D. deciding
Answer: Option A
Solution:
Examining of past performance, exploring alternative and planning future is learning.
Learning is the process of acquiring new, or modifying existing, knowledge, behaviors,
skills, values, or preferences.


3. Time that a company takes to create and produce a new product is classified as
A. management factor
B. time factor
C. customer factor
D. chain factor
Answer: Option B
Solution:
Time that a company takes to create and produce a new product is classified as time factor.


4. Purpose of management accounting is to
A. past orientation
B. help banks make decisions
C. help managers make decisions
D. help investors make decision
Answer: Option C
Solution:
Purpose of management accounting is to help managers make decisions. Management
accounting helps organizations improve their ability to control costs and plan for the future
through financial forecasts. It also
focuses on providing reports to ensure comprehensive management oversight.


5. An accounting approach, in which expected benefits exceed expected cost is
classified as
A. benefit approach
B. cost approach
C. cost-benefit approach
D. accounting approach
Answer: Option C
Solution:
An accounting approach, in which expected benefits exceed expected cost is classified as
cost-benefit approach. A cost-benefit analysis is a process businesses use to analyze
decisions. The business or analyst sums
the benefits of a situation or action and then subtracts the costs associated with taking that
action.


6. Flow of goods and services, from start of gathering materials until delivery of
products, is known as
A. flow chart analysis
B. supply chain analysis
C. resource chain analysis
D. acquiring analysis
Answer: Option B
Solution:
Flow of goods and services, from start of gathering materials until delivery of products, is
known as supply chain analysis. Supply chain analysis is the process of evaluating every
stage of a supply chain starting from
the time the business acquires raw materials or supplies from its suppliers to the delivery of
final products to the customers.


7. Step by step business functions, in which product or services must have customer
usefulness is classified as
A. value chain
B. useful chain
C. product chain
D. services chain
Answer: Option A
Solution:
Step by step business functions, in which product or services must have customer
usefulness is classified as value chain. A value chain is a set of activities that a firm
operating in a specific industry performs in order to
deliver a valuable product (i.e., good and/or service) for the market.


8. Decisions regarding usage of material, kind and changes in plant processing are a
part of
A. past management
B. future management
C. help management
D. cost management
Answer: Option D
Solution:
Decisions regarding usage of material, kind and changes in plant processing are a part of
cost management. Cost management is the process of planning and controlling the budget
of a business. Cost management is a
form of management accounting that allows a business to predict impending expenditures
to help reduce the chance of going over budget.


9. Function of management accountant, who works as business partner comes under
category of
A. asset function
B. investment function
C. line function
D. staff function
Answer: Option D
Solution:
Function of management accountant, who works as business partner comes under category
of staff function. A staff function is a secondary business activity that supports the line
functions of a business to achieve the
objectives. In business management, staff functions are usually defined as all functions that
are not line functions. The nature of this function is advisory.


10. An officer responsible for financial operations of organization is considered as
A. chief financial officer
B. chief manager
C. chief line function
D. chief staff function
Answer: Option A
Solution:
An officer responsible for financial operations of organization is considered as chief financial
officer. A Chief Financial Officer is an executive who is in charge of monitoring cash flow,
financial planning and other financial
activities within an organization.


11. Decision making step, which consists of organization goals, predicting
alternatives and communicating goals is called
A. organization
B. alternation
C. planning
D. valuing
Answer: Option C
Solution:
Decision making step, which consists of organization goals, predicting alternatives and
communicating goals is called planning. Planning is also a management process,
concerned with defining goals for a company's
future direction and determining the missions and resources to achieve those targets. To
meet objectives, managers may develop plans, such as a business plan or a marketing
plan.


12. An availability of financial information, to oversee operations and system of
accounting is known as
A. manager ship
B. controllership
C. proprietorship
D. functional line
Answer: Option B
Solution:
An availability of financial information, to oversee operations and system of accounting is
known as controllership. A financial controller is responsible for ensuring that all accounting
allocations are appropriately made
and documented.


13. An availability of after sale support, to existing or potential customers in value
chain analysis is known as
A. customer services
B. utility services
C. resource services
D. acquiring services
Answer: Option A
Solution:
An availability of after sale support, to existing or potential customers in value chain analysis
is known as customer services. Customer service is the act of taking care of the customer's
needs by providing and delivering
professional, helpful, high quality service and assistance before, during, and after the
customer's requirements are met.


14. Quantitative expression of decided plan and coordination, for plan
implementation is known as
A. cost format
B. decided plan
C. coordination plan
D. budget
Answer: Option D
Solution:
Quantitative expression of decided plan and coordination, for plan implementation is known
as budget. A budget is an estimation of revenue and expenses over a specified future
period of time and is usually compiled
and re-evaluated on a periodic basis.


15. In management accounting, an emphasis and focus must be
A. future oriented
B. past oriented
C. communication oriented
D. bank oriented
Answer: Option A
Solution:
In management accounting, an emphasis and focus must be future oriented. Management
Accounting is the presentation of accounting information in order to formulate the policies to
be adopted by the management
and assist its day-to-day activities.


16. Strategy that interlinks technology and people, to enhance relationships in all
business functions is classified as
A. technology management
B. people management
C. customer relationship management
D. resource management
Answer: Option C
Solution:
Strategy that interlinks technology and people, to enhance relationships in all business
functions is classified as customer relationship management. Customer relationship
management (CRM) refers to the principles,
practices, and guidelines that an organization follows when interacting with its customers.


17. Experimentation and generation of ideas related to new product or services are
included in
A. addressing management
B. research and development
C. value development
D. service provider
Answer: Option B
Solution:
Experimentation and generation of ideas related to new product or services are included in
research and development. Research and development (R&D) refers to the activities
companies undertake to innovate and
introduce new products and services. It is often the first stage in the development process.


18. Philosophy, in which management works to improve value chain of products, to
exceed customer expectations is classified as
A. quality
B. management chain
C. customer chain
D. cost chain
Answer: Option A
Solution:
Philosophy, in which management works to improve value chain of products, to exceed
customer expectations is classified as quality. Quality means "the totality of features and
characteristics of a product or service that
bears its ability to satisfy stated or implied needs."


19. Cash management, investments, long and short term financing are included in
A. proprietorship
B. functional line
C. treasury
D. controllership
Answer: Option C
Solution:
Cash management, investments, long and short term financing are included in treasury.
Treasury management is defined as 'the corporate handling of all financial matters, the
generation of external and internal funds
for business, the management of currencies and cash flows and the complex strategies,
policies and procedures of corporate finance.'


20. In financial accounting, investors, banks, suppliers and government agencies are
classified as
A. external parties
B. internal parties
C. environmental parties
D. transactional parties
Answer: Option A
Solution:
In financial accounting, investors, banks, suppliers and government agencies are classified
as external parties. An external party can be an individual or organization that is a legal
entity. If the external party is an
individual, the individual may or may not be a contact for an organization.


21. Marketing, production and management of distribution comes under category of
A. staff management
B. line management
C. marketing management
D. production management
Answer: Option B
Solution:
Marketing, production and management of distribution comes under category of line
management. Line management is the universal term which refers to the style of
administrative management of a businesses
employees.


22. Function of plant manager, in which he is responsible for new assets investment
is termed as
A. line function
B. staff function
C. asset function
D. investment function
Answer: Option A
Solution:
Function of plant manager, in which he is responsible for new assets investment is termed
as line function. Line function is the one which is directly involved in the core work of an
organization. It involves the primary
activities such as manufacturing, selling, purchasing etc which are required to meet the
business objectives.


23. Process of analyzing and reviewing financial records to check integrity of
company financial reports is a/an
A. internal audit
B. external audit
C. functional audit
D. treasury audit
Answer: Option A
Solution:
Process of analyzing and reviewing financial records to check integrity of company financial
reports is an internal audit. An internal audit offers risk management and evaluates the
effectiveness of a company's internal
controls, corporate governance, and accounting processes.


24. Type of accounting, which reports financial and non-financial data about cost of
material and acquiring of resources is classified as
A. material accounting
B. cost accounting
C. supplies accounting
D. business accounting
Answer: Option B
Solution:
Type of accounting, which reports financial and non-financial data about cost of material
and acquiring of resources is classified as cost accounting. Cost accounting is a form of
managerial accounting that aims to
capture a company's total cost of production by assessing the variable costs of each step of
production as well as fixed costs, such as a lease expense.


25. An approach in which managers use resources to increase customer value is
classified as
A. help management
B. cost management
C. past management
D. future management
Answer: Option B
Solution:
An approach in which managers use resources to increase customer value is classified as
cost management. Cost management is the process of planning and controlling the budget
of a business. Cost management is
a form of management accounting that allows a business to predict impending expenditures
to help reduce the chance of going over budget.


26. An engineering of products or detailed planning of products or services is called
A. product design
B. research steps
C. useful chain
D. value added
Answer: Option A
Solution:
An engineering of products or detailed planning of products or services is called product
design. Product design is the process of creating a new product to be sold by a business to
its customers. A very broad concept, it
is essentially the efficient and effective generation and development of ideas through a
process that leads to new products.


27. Type of accounting which measures, reports and analysis non-financial and
financial information to help in decision making is called
A. financial accounting
B. management accounting
C. cost accounting
D. decision accounting
Answer: Option B
Solution:
Type of accounting which measures, reports and analysis non-financial and financial
information to help in decision making is called management accounting. Management
Accounting is the presentation of accounting
information in order to formulate the policies to be adopted by the management and assist
its day-to-day activities.


28. Type of accounting which reports to external parties of organization is known as
A. cost accounting
B. decision accounting
C. financial accounting
D. management accounting
Answer: Option C
Solution:
Type of accounting which reports to external parties of organization is known as financial
accounting. Financial accounting is a specific branch of accounting involving a process of
recording, summarizing, and reporting
the myriad of transactions resulting from business operations over a period of time.


29. Human resource management, IT management and management accountants are
categorized under
A. marketing management
B. production management
C. staff management
D. line management
Answer: Option C
Solution:
Human resource management, IT management and management accountants are
categorized under staff management. STAFF MANAGEMENT is the function of managing
all employees in the organization, including
the development of staff skills through training and other forms of staff development as well
as the identification, development and implementation of training needs and programs
available for staff.


30. In cost benefit approach, type of costs include
A. cost of ongoing operations
B. investments in physical assets
C. training of managers
D. all of above
Answer: Option D
Solution:
In cost benefit approach, type of costs include cost of ongoing operations, investments in
physical assets and training of managers. A cost-benefit analysis is a process businesses
use to analyze decisions. The
business or analyst sums the benefits of a situation or action and then subtracts the costs
associated with taking that action.


31. In financial accounting, an emphasis and focus is considered as
A. communication oriented
B. bank oriented
C. future oriented
D. past oriented
Answer: Option D
Solution:
In financial accounting, an emphasis and focus is considered as past oriented. They tend to
be conservative in management and slow to change those things that are tied to the past.


32. In value chain analysis, selling and promotion to prospective customers is
classified as
A. researching
B. marketing
C. acquaintance
D. usefulness
Answer: Option B
Solution:
In value chain analysis, selling and promotion to prospective customers is classified as
marketing. Value chain analysis is a strategy tool used to analyze internal firm activities. Its
goal is to recognize, which activities are
the most valuable (i.e. are the source of cost or differentiation advantage) to the firm and
which ones could be improved to provide competitive advantage.


33. In value chain analysis, delivery of services or products to end customers is
classified as
A. resource research
B. market research
C. utilization
D. distribution
Answer: Option D
Solution:
In value chain analysis, delivery of services or products to end customers is classified as
distribution. Value chain analysis is a strategy tool used to analyze internal firm activities. Its
goal is to recognize, which activities
are the most valuable (i.e. are the source of cost or differentiation advantage) to the firm
and which ones could be improved to provide competitive advantage.
Answer & Solution


34. An implementation of planning decisions and evaluating performance is
classified as
A. control
B. evaluation
C. deciding
D. performing
Answer: Option A
Solution:
An implementation of planning decisions and evaluating performance is classified as
control. Planning can be defined as the process of selecting a future course of action.
Decision-making defined as the process of
selecting a course of action from the alternatives. They need to be accurate for the welfare
of the organization.


35. Continuous pressure of reducing cost of products to be sold is classified as
A. supply efficiency
B. material affectivity
C. processing effective
D. cost and efficiency
Answer: Option D
Solution:
Continuous pressure of reducing cost of products to be sold is classified as cost and
efficiency. It is the act of saving money by making a product or performing an activity in a
better way.


36. Cost management technique which specially addresses strategic issues is
classified as
A. address management
B. issue management
C. strategic cost management
D. managerial cost
Answer: Option C
Solution:
Cost management technique which specially addresses strategic issues is classified as
strategic cost management. Strategic cost management is the process of reducing total
costs while improving the strategic
position of a business. This goal can be accomplished by having a thorough understanding
of which costs support a company's strategic position and which costs either weaken it or
have no impact.


37. Purpose of financial accounting is
A. communicating company position to investors
B. helping managers make decisions
C. future oriented
D. single person orientation
Answer: Option A
Solution:
Purpose of financial accounting is communicating company position to investors. The
purpose of accounting is to provide the information that is needed for sound economic
decision making. The main purpose of
financial accounting is to prepare financial reports that provide information about a firm's
performance to external parties such as investors, creditors, and tax authorities.


38. An accounting which records and measures business transactions and is
followed by general accepted accounting principles is classified as
A. external accounting
B. internal accounting
C. business accounting
D. financial accounting
Answer: Option D
Solution:
An accounting which records and measures business transactions and is followed by
general accepted accounting principles is classified as financial accounting. Financial
accounting is a specific branch of accounting
involving a process of recording, summarizing, and reporting the myriad of transactions
resulting from business operations over a period of time.


39. Formal way of differentiating, between non-random and random variations, in
manufacturing process is classified as
A. statistical process control
B. statistical failure control
C. statistical control of prevention cost
D. statistical control of sunk cost
Answer: Option A
Solution:
Formal way of differentiating, between non-random and random variations, in manufacturing
process is classified as statistical process control. Statistical process control (SPC) is a
method of quality control which
employs statistical methods to monitor and control a process.


40. If value added manufacturing time is 65 minutes, total manufacturing time is 80
minutes, then manufacturing cycle time will
A. 0.8125
B. 0.6125
C. 0.9125
D. 1.725
Answer: Option A
Solution:
Cycle manufacturing time = Value added manufacturing time ÷ Total manufacturing time
= 65 minutes ÷ 80 minutes
= 0.8125


41. Cost operations such as wages, salaries, depreciation, utilities and rent are
summed together to calculate
A. throughput costs
B. investments
C. operating costs
D. marginal costs
Answer: Option C
Solution:
Cost operations such as wages, salaries, depreciation, utilities and rent are summed
together to calculate operating costs. Operating costs are expenses associated with the
maintenance and administration of a
business on a day-to-day basis.


42. Cost incur for defective products, after their shipment to customers is classified
as
A. prevention costs
B. external failure costs
C. appraisal costs
D. internal failure costs
Answer: Option B
Solution:
Cost incur for defective products, after their shipment to customers is classified as external
failure costs. External failure costs are those costs incurred due to product failures after
they have been sold to customers.


43. Quality aspect, that refers how well product fulfils customer demands, is
classified as
A. learning quality
B. design quality
C. conformance quality
D. business process quality
Answer: Option B
Solution:
Quality aspect, that refers how well product fulfils customer demands, is classified as design
quality. Design quality is the value of a design to customers. Design is the root of all quality
including the quality of products,
services, experiences, systems and processes.
Answer & Solution


44. If number of employees who left job is 40, total number of employees are 200,
then employee turnover ratio will be
Answer & Solution Discuss in Board (https://www.examveda.com/if-number-of-employeeswho-
left-job-is-40-total-number-of-employees-are-200-then-employee-turnover-ratio-will-be-
37801) Save for Later
A. 0.6
B. 0.5
C. 0.2
D. 0.7
Answer: Option C
Solution:
If number of employees who left job is 40, total number of employees are 200, then
employee turnover ratio will be 0.2.
Employee turnover ratio = Number of employees who left job ÷ Total number of employees
= 40 ÷ 200
= 0.2.


45. Fishbone diagram is an example of
A. relevant costing diagram
B. cause and effect diagram
C. control chart
D. Pareto diagram
Answer: Option B
Solution:
Fishbone diagram is an example of cause and effect diagram. It is a more structured
approach than some other tools available for brainstorming causes of a problem (e.g., the
Five Whys tool). The problem or effect is
displayed at the head or mouth of the fish.


46. Incurred costs to exclude production of goods, that do not meet specification, are
called
A. rework costs
B. prevention costs
C. incremental costs
D. reengineering costs
Answer: Option B
Solution:
Incurred costs to exclude production of goods, that do not meet specification, are called
prevention costs. Preventive costs are any expenditures incurred that are intended to
minimize the number of defects in products
and services.


47. Number of employees who left company, divided by average number of
employees to calculate ratio is called
A. employee turnover ratio
B. employee empowerment ratio
C. employee satisfaction ratio
D. employee training percentage
Answer: Option A
Solution:
Number of employees who left company, divided by average number of employees to
calculate ratio is called employee turnover ratio. Employee turnover rate is calculated by
dividing the number of employees who left
the company by the average number of employees in a certain period in time.


48. Revenues are subtracted from cost of direct materials of sold goods is to
calculate
A. throughout contribution
B. operating cost contribution
C. operating contribution
D. marginal contribution
Answer: Option A
Solution:
Revenues are subtracted from cost of direct materials of sold goods is to calculate
throughout contribution.


49. Carrying costs of inventories and price discounts related to delayed deliveries are
examples of
A. measures of growth and learning
B. measures of internal business processes
C. customer measures
D. financial measures
Answer: Option D
Solution:
Carrying costs of inventories and price discounts related to delayed deliveries are examples
of financial measures. Financial measures or financial ratios are often used as very simple
mechanisms to describe the
performance of a business or investment.


50. Basic aspects of product quality must include the
A. design quality
B. conformance quality
C. scorecard quality
D. both a and b
Answer: Option D
Solution:
Basic aspects of product quality must include the design quality and conformance quality. A
product is known as a quality product only when it satisfies various criteria for its functioning
for the consumer.


51. Sum of manufacturing and waiting time for an order is classified as
A. manufacturing efficiency time
B. manufacturing cycle time
C. responding time
D. value chain time
Answer: Option B
Solution:
Sum of manufacturing and waiting time for an order is classified as manufacturing cycle
time. Manufacturing cycle time refers to the time required or spent to convert raw materials
into finished goods. It is also known as
throughput time. Technically, it is the length of time from the start of production to the
delivery of the final products.


52. A theory which describes techniques of operating income maximization, facing
with non-bottleneck and bottle neck operations is
A. theory of contribution
B. theory of constraints
C. theory of conflicts
D. theory of maximization
Answer: Option B
Solution:
A theory which describes techniques of operating income maximization, facing with nonbottleneck
and bottle neck operations is theory of constraints. The Theory of Constraints is
a methodology for identifying the most
important limiting factor (i.e. constraint) that stands in the way of achieving a goal and then
systematically improving that constraint until it is no longer the limiting factor.


53. A process by which employees can make decisions is divided by total number of
processes to calculate
A. employee turnover ratio
B. employee empowerment ratio
C. employee satisfaction ratio
D. employee training percentage
Answer: Option B
Solution:
A process by which employees can make decisions is divided by total number of processes
to calculate employee empowerment ratio. Employee empowerment is a strategy and
philosophy that enables employees to
make decisions about their jobs. Employee empowerment helps employees own their work
and take responsibility for their results, serve customers at the level of the organization
where the customer interface exists.


54. Statistical quality control is also called
A. statistical process control
B. statistical failure control
C. statistical control of prevention cost
D. statistical control of sunk cost
Answer: Option A
Solution:
Statistical quality control is also called statistical process control. Statistical process control
(SPC) is a method of quality control which employs statistical methods to monitor and
control a process.


55. A product performance in comparison to its features and design is classified as
A. learning quality
B. design quality
C. conformance quality
D. business process quality
Answer: Option C
Solution:
A product performance in comparison to its features and design is classified as
conformance quality. Quality of conformance is the ability of a product, service, or process
to meet its design specifications. Design
specifications are an interpretation of what the customer needs.


56. Sum of cost of direct materials, costs of buildings, equipment, research and
development costs is classified as
A. throughput costs
B. investments
C. operating costs
D. marginal costs
Answer: Option B
Solution:
Sum of cost of direct materials, costs of buildings, equipment, research and development
costs is classified as investments. An investment is a monetary asset purchased with the
idea that the asset will provide income
in the future or will later be sold at a higher price for a profit.


57. Consumed time to deliver a complete order to its customers is termed as
A. responding time
B. value chain time
C. delivery time
D. manufacturing cycle efficiency
Answer: Option C
Solution:
Consumed time to deliver a complete order to its customers is termed as delivery time.


58. Number of employees that indicate high ratings of satisfaction, divided by
number of surveyed employees are to calculate
A. employee satisfaction
B. employee turnover
C. employee training
D. employee failures
Answer: Option A
Solution:
Number of employees that indicate high ratings of satisfaction, divided by number of
surveyed employees are to calculate employee satisfaction. "Employee satisfaction" is the
term used to describe whether employees
are happy and fulfilling their desires and needs at work.


59. If number of processes, in which employees who can make decisions are 20 and
number of processes are 50, then employee empowerment ratio will
be
A. 0.9
B. 0.4
C. 0.3
D. 0.8
Answer: Option B
Solution:
Employee empowerment ratio = Employees who can make decisions ÷ Number of
processes
= 20 ÷ 50
= 0.4.


60. Time between a customer's order placement till customer receives its delivery is
known as
A. manufacturing lead time
B. manufacturing cycle time
C. customer response time
D. system process time
Answer: Option C
Solution:
Time between a customer's order placement till customer receives its delivery is known as
customer response time. It is the time between when a customer makes an inquiry about a
product or commits to a purchase a
good or service and when it is actually received by said customer.


61. Costs that are incurred to find manufactured products, which does not meet
specifications are called
A. prevention costs
B. external failure costs
C. appraisal costs
D. internal failure costs
Answer: Option C
Solution:
Costs that are incurred to find manufactured products, which does not meet specifications
are called appraisal costs. Appraisal costs are a specific category of quality control costs.
Companies pay appraisal costs as
part of the quality control process to ensure that their products and services meet customer
expectations and regulatory requirements. These costs could include expenses for field
tests and inspections.


62. Reduction in setup time, manufacturing cycle efficiency and average time of
manufacturing for key products are examples of
A. measures of growth and learning
B. measures of internal business processes
C. customer measures
D. financial measures
Answer: Option B
Solution:
Reduction in setup time, manufacturing cycle efficiency and average time of manufacturing
for key products are examples of measures of internal business processes. In other words,
internal processes create and
deliver the value proposition for customers. Thus objectives in your strategy map's internal
process perspective must describe how you intend to accomplish your organization's
strategy.


63. Employees that are trained to manage bottlenecks, during production operations
and employee satisfaction are related to
A. measures of growth and learning
B. measures of internal business processes
C. customer measures
D. financial measures
Answer: Option A
Solution:
Employees that are trained to manage bottlenecks, during production operations and
employee satisfaction are related to measures of growth and learning.


64. Graph which plots series of successive observations of specific procedure,
operation or step at regular time intervals is called
A. relevant costing diagram
B. cause and effect diagram
C. control chart
D. pareto diagram
Answer: Option C
Solution:
Graph which plots series of successive observations of specific procedure, operation or
step at regular time intervals is called control chart. The control chart is a graph used to
study how a process changes over time.
Data are plotted in time order. A control chart always has a central line for the average, an
upper line for the upper control limit, and a lower line for the lower control limit. These lines
are determined from historical data.


65. Timeframe between placement of order until a finished good produces is
classified as
A. customer response time
B. manufacturing lead time
C. manufacturing cycle time
D. both b and c
Answer: Option D
Solution:
Timeframe between placement of order until a finished good produces is classified as
manufacturing lead time and manufacturing cycle time. The manufacturing lead time is the
time period between the placement of an
order and the shipment of the completed order to the customer. Manufacturing cycle time
refers to the time required or spent to convert raw materials into finished goods. It is also
known as throughput time.


66. Total manufacturing time is multiplied to manufacturing cycle efficiency to
calculate
A. manufacturing cycle efficiency
B. value added manufacturing time
C. responding time
D. delivery time
Answer: Option B
Solution:
Total manufacturing time is multiplied to manufacturing cycle efficiency to calculate value
added manufacturing time. Value added time is the processes and activities in the
production or manufacturing process that
improve the product or add usefulness to it.


67. Costs incur for defective products, before their shipment to customers can be
categorized as
A. prevention costs
B. external failure costs
C. appraisal costs
D. internal failure costs
Answer: Option D
Solution:
Costs incur for defective products, before their shipment to customers can be categorized
as internal failure costs. Internal failure costs are those costs of quality associated with
product failures that are discovered
before a product leaves the factory.


68. Costs that are incurred to prevent low quality goods production are classified as
A. costs of quality
B. costs of learning
C. costs of reengineering
D. costs of spoilage inventory
Answer: Option A
Solution:
Costs that are incurred to prevent low quality goods production are classified as costs of
quality. Cost of quality (COQ) is defined as a methodology that allows an organization to
determine the extent to which its
resources are used for activities that prevent poor quality, that appraise the quality of the
organization's products or services, and that result from internal and external failures.


69. If total number of employees surveyed are 200 and employees that indicate higher
rating for satisfaction are 195, then employee satisfaction would be
A. 94.00%
B. 93.00%
C. 95.00%
D. 97.50%
Answer: Option D
Solution:
Employee satisfaction = Employees that indicate higher rating for satisfaction ÷ Total
number of employees surveyed × 100
= 195 ÷ 200 × 100
= 97.50%.


70. On-time performance and customer-response time are examples of
A. customer measures
B. financial measures
C. measures of growth and learning
D. measures of internal business processes
Answer: Option A
Solution:
On-time performance and customer-response time are examples of customer measures. It
is a measure of how products and services supplied by a company meet or surpass
customer expectation

Section-2

1. Types of costs of quality consist of
A. appraisal costs
B. internal and external failure costs
C. prevention costs
D. all of above
Answer: Option D
Solution:
Types of costs of quality consist of appraisal costs, internal and external failure costs and
prevention costs.


2. If cost of direct materials use in goods sold is $5000 and total revenues are $9000
then throughput contribution would be
A. $5,000
B. $14,000
C. $4,000
D. $9,000
Answer: Option C
Solution:
Throughput contribution = Total revenues - Cost of direct materials use in goods sold
= $9000 - $5000
= $4,000.


3. Time a company takes until a good is produced after order placement is known as
A. manufacturing lead time
B. manufacturing cycle efficiency
C. customer response time
D. system process time
Answer: Option A
Solution:
Time a company takes until a good is produced after order placement is known as
manufacturing lead time. The manufacturing lead time is the time period between the
placement of an order and the shipment of the
completed order to the customer.


4. Factors identified by cause and effect diagrams include
A. component and material factors
B. machine-related factors
C. human factors
D. all of above
Answer: Option D
Solution:
Factors identified by cause and effect diagrams include component and material factors,
machine-related factors and human factors.


5. Delivery of goods by time it is contracted to be delivered is known as
A. effective performance
B. efficient performance
C. in-time performance
D. on-time performance
Answer: Option D
Solution:
Delivery of goods by time it is contracted to be delivered is known as on-time performance.
On time performance, sometimes referred to as on time running, is normally expressed as a
percentage, with a higher
percentage meaning more vehicles are on time.


6. Value added manufacturing time is divided by total manufacturing is to calculate
A. value chain efficiency
B. value chain effectively
C. manufacturing cycle effectively
D. manufacturing cycle efficiency
Answer: Option D
Solution:
Value added manufacturing time is divided by total manufacturing is to calculate
manufacturing cycle efficiency. Manufacturing cycle efficiency measures the proportion of
production time spent on value-added activities.


7. Chart which represents how regularly defect occurs in production process is
classified as
A. relevant costing diagram
B. cause and effect diagram
C. control chart
D. Pareto chart
Answer: Option D
Solution:
Chart which represents how regularly defect occurs in production process is classified as
Pareto chart. A Pareto chart is a type of chart that contains both bars and a line graph,
where individual values are represented
in descending order by bars, and the cumulative total is represented by the line.


8. If manufacturing cycle efficiency is 0.725 and total manufacturing time is 45
minute, then value added manufacturing time will be
A. 42.625
B. 36.724
C. 32.625
D. 41.625
Answer: Option C
Solution:
Value added manufacturing time = Manufacturing cycle efficiency × Total manufacturing
time
= 0.725 × 45
= 32.625.
Answer & Solution


9. In response to challenges arisen by competitors and new entrants, strategy which
must be considered by company does include
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A. cost leadership
B. demand inelasticity
C. differentiated products
D. both a and c
Answer: Option D
Solution:
In response to challenges arisen by competitors and new entrants, strategy which must be
considered by company does include cost leadership and differentiated products.


10. Considering two fiscal years 2013 and 2014, actual units sold in 2013 and 2014
are 11000 and 12500 units respectively, and selling price in year 2013 is
$50, then revenue effect of growth will be
A. $70,000
B. $75,000
C. $65,000
D. $73,000
Answer: Option B
Solution:
Revenue effect of growth = (12500 - 11000) × $50
= $75,000.


11. Balanced scorecard perspective measures company's success in targeted
segments of customers, this perspective can also be classified as
A. internal business process perspective
B. customer perspective
C. learning perspective
D. financial perspective
Answer: Option B
Solution:
Balanced scorecard perspective measures company's success in targeted segments of
customers, this perspective can also be classified as customer perspective. Customer
perspective measures consider the
organization's performance through the eyes of its customers, so that the organization
retains a careful focus on customer needs and satisfaction.


12. An amount of available capacity other than employed capacity, to meet
customer's demand, is classified as
A. targeted capacity
B. budgeted capacity
C. recovery capacity
D. unused capacity
Answer: Option D
Solution:
An amount of available capacity other than employed capacity, to meet customer's demand,
is classified as unused capacity. Idle capacity is the remaining amount of capacity left in a
company after productive capacity
and protective capacity have been eliminated from consideration.


13. In operating income strategic analysis, strategic component which measures
change in cost attributed to price of input in current year, relative to price
of input material in last year can be classified as
A. internal process component
B. growth component
C. price recovery component
D. productivity component
Answer: Option D
Solution:
In operating income strategic analysis, strategic component which measures change in cost
attributed to price of input in current year, relative to price of input material in last year can
be classified as productivity
component.


14. An organization's ability to offer market offerings at lower prices, in comparison
with its competitors is known as
A. inelastic demand
B. product differentiation
C. cost leadership
D. elastic demand
Answer: Option C
Solution:
An organization's ability to offer market offerings at lower prices, in comparison with its
competitors is known as cost leadership. Cost Leadership is the mechanism of establishing
a competitive advantage by having the
lowest cost of operation in the industry.


15. Balanced scorecard perspective focuses on all operations, which leads to value
creation process for customers, can be categorized as
A. learning perspective
B. financial perspective
C. internal business process perspective
D. customer perspective
Answer: Option C
Solution:
Balanced scorecard perspective focuses on all operations, which leads to value creation
process for customers, can be categorized as internal business process perspective. This
perspective explains how the company
is going to satisfy customer needs and meet financial goals.


16. Quantity of produced output is divided with cost of all used inputs to calculate
A. engineered productivity
B. targeted productivity
C. partial productivity
D. total factor productivity
Answer: Option D
Solution:
Quantity of produced output is divided with cost of all used inputs to calculate total factor
productivity. Total factor productivity (TFP) is a measure of productivity calculated by
dividing economy-wide total production by
the weighted average of inputs i.e. labor and capital. It represents growth in real output
which is in excess of the growth in inputs such as labor and capital.


17. In operating income strategic analysis, a component which measures change in
operating income attributed to change in output quantity is classified
as
A. internal process component
B. growth component
C. price recovery component
D. productivity component
Answer: Option B
Solution:
In operating income strategic analysis, a component which measures change in operating
income attributed to change in output quantity is classified as growth component. Operating
income is an accounting figure that
measures the amount of profit realized from a business's operations, after deducting
operating expenses such as wages, depreciation, and cost of goods sold (COGS).


18. An example of financial perspective in balanced scorecard is
A. employee turnover rates
B. operating capabilities and number of patents
C. operating income and revenue growth
D. customer satisfaction and market share
Answer: Option C
Solution:
An example of financial perspective in balanced scorecard is operating income and revenue
growth. For organisations that do not have shareholders, the financial perspective indicates
how well the strategy and
operations contribute to improving the organisation's financial health.


19. An ability of an organization, to offer its services or products that must be
perceived by customers as unique and superior, in comparison to its
competitors is called
A. inelastic demand
B. product differentiation
C. cost leadership
D. elastic demand
Answer: Option B
Solution:
An ability of an organization, to offer its services or products that must be perceived by
customers as unique and superior, in comparison to its competitors is called product
differentiation. Product differentiation (or just
differentiation) is a marketing process of differentiating an offering (product or service) from
others in the market, to make it more appealing to the target audience.


20. If quantity of manufactured jackets is 2250000 units and leather used to produce
output is 3500000 sq.m, then direct materials' partial productivity will
be
A. 0.642 unit of jacket per sq.m of leather
B. 0.342 unit of jacket per sq.m of leather
C. 0.442 unit of jacket per sq.m of leather
D. 0.542 unit of jacket per sq.m of leather
Answer: Option A
Solution:
DIrect materials' partial productivity = Quantity of manufactured jackets ÷ Leather used to
produce output
= 2250000 units ÷ 3500000 sq.m
= 0.642 unit of jacket per sq.m of leather.


21. Considering two years 2013 and 2014, quantity of output produced in 2014 is
divided by cost of input used in 2013, to produce output in 2014 to
calculate
A. benchmark engineered productivity
B. benchmark total factor productivity
C. benchmark partial productivity
D. benchmark total productivity
Answer: Option B
Solution:
Considering two years 2013 and 2014, quantity of output produced in 2014 is divided by
cost of input used in 2013, to produce output in 2014 to calculate benchmark total factor
productivity.


22. Quantity of produced output is divided by quantity of used input to calculate
A. targeted productivity
B. total factor productivity
C. partial productivity
D. unused productivity
Answer: Option C
Solution:
Quantity of produced output is divided by quantity of used input to calculate partial
productivity. Partial productivity refers to the measurement solutions which do not meet the
requirements of total productivity
measurement, yet, being practicable as indicators of total productivity. In practice,
measurement in production means measures of partial productivity.


23. Considering balanced scorecard, perspective in which performance of
organization includes is
A. financial perspective
B. learning and growth perspective
C. customer perspective
D. all of above
Answer: Option D
Solution:
Considering balanced scorecard, perspective in which performance of organization includes
is financial perspective, learning and growth perspective and customer perspective.


24. In operating income strategic analysis, strategic component which measures
change in operating income, attributed for change in price of outputs and
inputs is classified as
A. internal process component
B. growth component
C. price recovery component
D. productivity component
Answer: Option C
Solution:
In operating income strategic analysis, strategic component which measures change in
operating income, attributed for change in price of outputs and inputs is classified as price
recovery component. The price-recovery
component measures change in output price compared with changes in input prices.


25. In strategy formulation, forces that must be focused for industry analysis include
A. potential entrants in market
B. customer's bargaining power
C. supplier's bargaining power
D. all of above
Answer: Option D
Solution:
In strategy formulation, forces that must be focused for industry analysis include potential
entrants in market, customer's bargaining power and supplier's bargaining power.


26. An example of customer perspective in balanced scorecard is
A. employee turnover rates
B. operating capabilities and number of patents
C. operating income and revenue growth
D. customer satisfaction and market share
Answer: Option D
Solution:
An example of customer perspective in balanced scorecard is customer satisfaction and
market share. A balanced scorecard is a strategic management performance metric used to
identify and improve various internal
business functions and their resulting external outcomes.


27. Considering two fiscal years 2013 and 2014, if selling price in 2013 and 2014 is
$55 and $60 per unit respectively and actual units sold in 2013 are 25000
units, then revenue effect of price recovery will be
A. $14,500
B. $135,000
C. $125,000
D. $12,500
Answer: Option C
Solution:
Revenue effect of price recovery = ($60 - $55) × 25000
= $125,000.


28. Way an organization matches its capabilities with available opportunities to
accomplish its goals is called
A. elasticity incurrence
B. off shoring
C. strategy
D. engineering
Answer: Option C
Solution:
Way an organization matches its capabilities with available opportunities to accomplish its
goals is called strategy. Strategy can also be defined as “A general direction set for the
company and its various components to
achieve a desired state in the future. Strategy results from the detailed strategic planning
process”.


29. Which of following is an example of internal business perspective in balanced
scorecard?
A. employee turnover rates
B. operating capabilities and number of patents
C. operating income and revenue growth
D. customer satisfaction and market share
Answer: Option B
Solution:
Operating capabilities and number of patents is an example of internal business perspective
in balanced scorecard. A balanced scorecard is a strategic management performance
metric used to identify and improve
various internal business functions and their resulting external outcomes. Balanced
scorecards are used to measure and provide feedback to organizations.


30. Balanced scorecard perspective, which measures strategy profitability and
amount of operating income results from cost reduction is classified as
A. learning perspective
B. financial perspective
C. internal business process perspective
D. customer perspective
Answer: Option B
Solution:
Balanced scorecard perspective, which measures strategy profitability and amount of
operating income results from cost reduction is classified as financial perspective. The
Financial perspective Essentially, any key
objective that is related to the company's financial health and performance may be included
in this perspective. Revenue and profit are obvious objectives that most organisations list in
this perspective.


31. An approach is used to manage unused capacity is
A. reengineering
B. downsizing
C. upgrading
D. none of above
Answer: Option B
Solution:
An approach is used to manage unused capacity is downsizing. Downsizing (also called
rightsizing) is an integrated approach configuring processes, products, and people to match
costs to the activities that need to be
performed to operate effectively and efficiently in the present and future. Downsizing is an
attempt to eliminate unused capacity.


32. An example of learning and growth perspective in balanced scorecard is
A. employee turnover rates
B. operating capabilities and number of patents
C. operating income and revenue growth
D. customer satisfaction and market share
Answer: Option A
Solution:
An example of learning and growth perspective in balanced scorecard is employee turnover
rates. Employee turnover rate is calculated by dividing the number of employees who left
the company by the average number
of employees in a certain period in time. This number is then multiplied by 100 to get a
percentage.


33. In an innovation process, operation process and post sales services are all sub
processes of a perspective named
A. internal business process perspective
B. external business process perspective
C. leadership perspective
D. reengineering perspective
Answer: Option A
Solution:
In an innovation process, operation process and post sales services are all sub processes
of a perspective named internal business process perspective. This perspective explains
how the company is going to satisfy
customer needs and meet financial goals.


34. Fundamental redesigning and rethinking of business processes to improve
critical measures such as quality, speed, cost and customer satisfaction is
called
A. reengineering
B. differentiation
C. bargaining
D. targeting
Answer: Option A
Solution:
Fundamental redesigning and rethinking of business processes to improve critical
measures such as quality, speed, cost and customer satisfaction is called reengineering.
Reengineering is most commonly defined as
the redesign of business processes and the associated systems and organizational
structures to achieve a dramatic improvement in business performance.


35. Considering two fiscal years 2013 and 2014, an input price in 2013 and 2014 are
$9 and $11 per unit respectively and input required units in 2013 to
produce output in 2014 are 30000 units, then cost effect of price recovery will be
A. $60,000
B. $6,000
C. $65,000
D. $6,500
Answer: Option A
Solution:
Cost effect of price recovery = ($11 - $9) × 30000 units
= $60,000.


36. Translation of organization strategy, and mission into performance measures to
provide framework for strategy implementation is termed as
A. differentiation scorecard
B. bargaining scorecard
C. leadership scorecard
D. balanced scorecard
Answer: Option D
Solution:
Translation of organization strategy, and mission into performance measures to provide
framework for strategy implementation is termed as balanced scorecard. A balanced
scorecard is a strategic management
performance metric used to identify and improve various internal business functions and
their resulting external outcomes. Balanced scorecards are used to measure and provide
feedback to organizations.


37. An example of direct engineered cost is
A. indirect material cost
B. direct material cost
C. direct labour cost
D. indirect labour cost
Answer: Option B
Solution:
An example of direct engineered cost is direct material cost. Direct material cost is the cost
of the raw materials and components used to create a product. The materials must be
easily identifiable with the resulting
product (otherwise they are considered to be joint costs).


38. If net initial investment is $985000, returned working capital is $7500, then an
average investment over five years will be
A. $596,300
B. $485,300
C. $496,250
D. $486,250
Answer: Option C
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39. If an initial investment is $765000, payback period is 4.5 years, then increase in
future cash flow will be
A. $5,645,000
B. $6,442,500
C. $3,442,500
D. $5,442,500
Answer: Option C
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40. Categories of cash flows include
A. net initial investment
B. cash flow from operations after paying taxes
C. cash flow from terminal disposal after paying taxes
D. all of above
Answer: Option D
Solution:
Categories of cash flows include net initial investment, cash flow from operations after
paying taxes and cash flow from terminal disposal after paying taxes.


41. If net initial investment is $6850000 and uniform increases yearly cash flows is
$2050000, then payback period will be
A. 3.34 years
B. 4.34 years
C. 5.34 years
D. 6.34 years
Answer: Option A
Solution:
Payback period = Net initial investment ÷ Uniform increases yearly cash flows
= $6850000 ÷ $2050000
= 3.34 years.


42. Net initial investment is divided by uniform increasing in future cash flows to
calculate
A. discounting period
B. investment period
C. payback period
D. earning period
Answer: Option C
Solution:
Net initial investment is divided by uniform increasing in future cash flows to calculate
payback period. The payback period refers to the amount of time it takes to recover the cost
of an investment. Simply put, the
payback period is the length of time an investment reaches a breakeven point. The
desirability of an investment is directly related to its payback period.


43. If nominal rate is 26% and inflation rate is 12%, then real rate can be
A. 13.75%
B. 11.65%
C. 12.50%
D. 13.50%
Answer: Option C
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44. A concept which explains a received money in present time, is more valuable
than money received in future is called
A. lead value of money
B. storage value of money
C. time value of money
D. cash value of money
Answer: Option C
Solution:
A concept which explains a received money in present time, is more valuable than money
received in future is called time value of money. The time value of money (TVM) is the
concept that money available at the
present time is worth more than the identical sum in the future due to its potential earning
capacity.


45. If payback period is 4 years and uniform increases in cash flows per year is
$2750000, then net initial investment can be
A. $10,511,000
B. $12,105,000
C. $1,100,000
D. $11,000,000
Answer: Option D
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46. If real rate is 16% and an inflation rate is 8%, then nominal rate of return will be
A. 27.28%
B. 25.28%
C. 22.28%
D. 21.28%
Answer: Option B
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47. Method, which calculates time to recoup initial investment of project in form of
expected cash flows is known as
A. net value cash flow method
B. payback method
C. single cash flow method
D. lean cash flow method
Answer: Option B
Solution:
Method, which calculates time to recoup initial investment of project in form of expected
cash flows is known as payback method. The payback period refers to the amount of time it
takes to recover the cost of an
investment. Simply put, the payback period is the length of time an investment reaches a
breakeven point.
48. Vertically upward dimension of cost analysis is also called
A. project dimension
B. accounting-period dimension
C. back-flush accounting dimension
D. lean accounting dimension
Answer: Option B
Solution:
Vertically upward dimension of cost analysis is also called accounting-period dimension.
The Period dimension represents time periods, such as quarters and months. It contains
time periods and frequencies by
displaying the time periods in a hierarchy.


49. Rate of return to cover a risk of investment and decrease in purchasing power, as
a result of inflation is known as
A. nominal rate of return
B. accrual accounting rate of return
C. real rate of return
D. required rate of return
Answer: Option A
Solution:
Rate of return to cover a risk of investment and decrease in purchasing power, as a result of
inflation is known as nominal rate of return. The nominal rate of return is the amount of
money generated by an investment
before factoring in expenses such as taxes, investment fees, and inflation.


50. Process of making long term decisions, for capital investment in projects is
called
A. lead budgeting
B. lean budgeting
C. capital budgeting
D. relevant budgeting
Answer: Option C
Solution:
Process of making long term decisions, for capital investment in projects is called capital
budgeting. Capital budgeting is the process a business undertakes to evaluate potential
major projects or investments.


51. Dimensional analysis of cost includes
A. horizontally across dimension
B. horizontally upward dimension
C. vertically upward dimension
D. both a and c
Answer: Option D
Solution:
Dimensional analysis of cost includes horizontally across dimension and vertically upward
dimension.


52. Capital budgeting method to analyze information of financials include
A. internal rate of return
B. accrual accounting rate of return
C. net present value
D. all of above
Answer: Option D
Solution:
Capital budgeting method to analyze information of financials include internal rate of return,
accrual accounting rate of return and net present value. The process involves analyzing a
project's cash inflows and outflows
to determine whether the expected return meets a set benchmark. The major methods of
capital budgeting include throughput, discounted cash flow, and payback analyses.


53. Payback period is multiplied for constant increase in yearly future cash flows to
calculate
A. cash value of money
B. net initial investment
C. net future value
D. time value of money
Answer: Option B
Solution:
Payback period is multiplied for constant increase in yearly future cash flows to calculate
net initial investment. Net investment is the amount spent by a company or an economy on
capital assets, or gross investment,
less depreciation. Net investment helps give a sense of how much money a company is
spending on capital items used for operations, such as property, plants, equipment, and
software.


54. Rate of return, which is made up of risk free and business risk element is known
A. nominal rate of return
B. accrual accounting rate of return
C. real rate of return
D. required rate of return
Answer: Option C
Solution:
Rate of return, which is made up of risk free and business risk element is known as real rate
of return. A real rate of return is the annual percentage return realized on an investment,
which is adjusted for changes in
prices due to inflation or other external factors.


55. Sum of returned working capital and net initial investment is divided by 2 to
calculate
A. increase in operating income
B. average investment over five years
C. average capital invested
D. average rate of return
Answer: Option B
Solution:
Sum of returned working capital and net initial investment is divided by 2 to calculate
average investment over five years.


56. Project's expected monetary loss or gain by discounting all cash outflows and
inflows, using required rate of return is classified as
A. net present value
B. net future value
C. net discounted value
D. net recorded cash value
Answer: Option A
Solution:
Project's expected monetary loss or gain by discounting all cash outflows and inflows, using
required rate of return is classified as net present value. Net present value (NPV) is the
difference between the present value
of cash inflows and the present value of cash outflows over a period of time.


57. Rate of required return to cover risk of investment in absence of inflation is
classified as
A. real rate of return
B. required rate of return
C. nominal rate of return
D. none of above
Answer: Option A
Solution:
Rate of required return to cover risk of investment in absence of inflation is classified as real
rate of return. A real rate of return is the annual percentage return realized on an
investment, which is adjusted for changes in
prices due to inflation or other external factors.


58. Annual earned income is divided from a project by capital invested to calculate
A. accrual accounting rate of return
B. returned working capital
C. increase in expected average annual
D. decrease in expected average annual
Answer: Option A
Solution:
Annual earned income is divided from a project by capital invested to calculate accrual
accounting rate of return. The accrual accounting rate of return takes the accounting rate of
return calculation and applies the
accrual method of accounting.


59. Horizontally across dimension of cost analysis is also called
A. project dimension
B. accounting-period dimension
C. back-flush accounting dimension
D. lean accounting dimension
Answer: Option A
Solution:
Horizontally across dimension of cost analysis is also called project dimension.


60. According to net present value, projects that would be acceptable must have a
A. negative net present value
B. zero net present value
C. positive net present value
D. both b and c
Answer: Option D
Solution:
According to net present value, projects that would be acceptable must have a zero net
present value and positive net present value.


61. Cash flows method, used by net present value method and internal rate of return
are
A. vertical cash flows
B. discounted cash flows
C. lean cash flows
D. future cash flows
Answer: Option B
Solution:
Cash flows method, used by net present value method and internal rate of return are
discounted cash flows. Discounted cash flow (DCF) is a valuation method used to estimate
the value of an investment based on its
future cash flows.


62. Working capital cash outflow, cash outflow to buy machine and cash inflow from
machine are examples of
A. cash flow from operations
B. terminal disposal of investment
C. net initial investment
D. average return on investment
Answer: Option C
Solution:
Working capital cash outflow, cash outflow to buy machine and cash inflow from machine
are examples of net initial investment. Net investment is the amount spent by a company or
an economy on capital assets, or
gross investment, less depreciation. Net investment helps give a sense of how much money
a company is spending on capital items used for operations, such as property, plants,
equipment, and software.


63. Decrease in purchasing power of any monetary unit such as euro, dollars etc. is
classified as
A. net investment parity
B. inflation
C. purchasing parity
D. buying parity
Answer: Option B
Solution:
Decrease in purchasing power of any monetary unit such as euro, dollars etc. is classified
as inflation. Price Inflation is when prices get higher or it takes more money to buy the same
item and this is what people
commonly think of when they hear the word inflation.


64. If tax operating income is $885000 per year and net initial investment is
$35750000 then increase in average is
A. 2.475% per year
B. 4.475% per year
C. 3.475% per year
D. 2.475% per year
Answer: Option D
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65. If actual price input is $700, budgeted price of input is $400 and actual quantity of
input is 50 units, then price variance will be
A. $15,000
B. $13,000
C. $11,000
D. $9,000
Answer: Option A
Solution:
Price variance = (actual price input - budgeted price of input) × actual quantity of input
= ($700 - $400) × 50 = $15,000.


66. If actual input price is $150 and budgeted input price is $80, then price variance
will be
A. $130
B. $70
C. $150
D. $80
Answer: Option B
Solution:
Price variance = Actual price input - Budgeted price of input
= $150 - $80 = $70.


67. Standard input allows one unit, to be divided by standard cost per output unit for
variable direct cost input, to calculate
A. standard price per input unit
B. standard price per output unit
C. standard cost per input unit
D. standard cost per output unit
Answer: Option A
Solution:
Standard input allows one unit, to be divided by standard cost per output unit for variable
direct cost input, to calculate standard price per input unit. A standard cost is described as a
predetermined cost, an estimated
future cost, an expected cost, a budgeted unit cost, a forecast cost, or as the "should be"
cost.


68. Consideration of decreased operating income relative to budgeted amount in
static budget is classified as
A. revenue variance
B. cost variance
C. favourable variance
D. unfavourable variance
Answer: Option D
Solution:
Consideration of decreased operating income relative to budgeted amount in static budget
is classified as unfavourable variance. 'Unfavorable variance' is an accounting term that
describes instances where actual costs
are greater than the standard or expected costs.


69. If flexible budget variance is $105000, actual cost is $65000 then flexible budget
cost will be
A. $40,000
B. $50,000
C. $150,000
D. $170,000
Answer: Option A
Solution:
Flexible budget cost = Flexible budget variance - Actual cost
= $105000 - $65000
= $40000.


70. An actual input quantity is 200 units and budgeted input quantity is 50 units, then
efficiency variance will be
A. 275 units
B. 250 units
C. 150 units
D. 650 units
Answer: Option C
Solution:
Efficiency variance = Actual input quantity - Budgeted input quantity
= 200 units - 50 units = 150 units.

Section-3

1. Degree which predetermines target or income achieved, can be grouped under
A. growth evaluation
B. performance evaluation
C. efficiency
D. effectiveness
Answer: Option D
Solution:
Degree which predetermines target or income achieved, can be grouped under
effectiveness.


2. If budgeted input price is $50, price variance is $30 then an actual price will be
A. $100
B. $20
C. $80
D. $60
Answer: Option C
Solution:
Actual price = Budgeted input price + Price variance
= $50 + $30 = $80.


3. Quantity of input which is carefully determined is called
A. output unit
B. input unit
C. standard input
D. standard output
Answer: Option C
Solution:
Quantity of input which is carefully determined is called standard input. The standard input
device, also referred to as stdin, is the device from which input to the system is taken.


4. If actual cost is $356000 and flexible budget cost is $255000, then flexible budget
variance will be
A. $104,000
B. $103,000
C. $101,000
D. $102,000
Answer: Option C
Solution:
Flexible budget variance = Actual cost - Flexible budget cost
= $356000 - $255000 = $101,000.


5. Variance is stated difference between expected performance and the
A. revenue planning
B. actual results
C. marketing results
D. cost planning
Answer: Option B
Solution:
Variance is stated difference between expected performance and the actual results.
Variance is used to compare the relative performance of each asset in a portfolio.


6. A costing system, which focuses on individual activities as particular cost object
is classified as
A. activity based costing
B. improved costing
C. learned improvements
D. positive effectiveness
Answer: Option A
Solution:
A costing system, which focuses on individual activities as particular cost object is classified
as activity based costing. Activity-based costing (ABC) is a costing method that assigns
overhead and indirect costs to related
products and services.


7. Difference between actual input variance and budgeted input variance is called
A. price variance
B. actual output price
C. budgeted output price
D. actual selling price
Answer: Option A
Solution:
Difference between actual input variance and budgeted input variance is called price
variance. Price variance is the difference between the actual price paid by a company to
purchase an item and its standard price,
multiplied by the number of units purchased.


8. An efficiency variance is 200 units and actual input quantity is 500 units, then
budgeted input quantity will be
A. 300 units
B. 700 units
C. 800 units
D. 500 units
Answer: Option A
Solution:
Budgeted input quantity = Actual input quantity - Efficiency variance
= 500 units - 200 units = 300 units.


9. Performance is evaluated only on basis of price variance, if performance
evaluation is
A. positive
B. negative
C. zero
D. one
Answer: Option A
Solution:
Performance is evaluated only on basis of price variance, if performance evaluation is
positive. Performance Evaluation is defined as a formal and productive procedure to
measure an employee's work and results
based on their job responsibilities.
Answer & Solution


10. Budget which is planned around a single output level is called
A. marketing budget
B. methodological budget
C. static budget
D. varied budget
Answer: Option C
Solution:
Budget which is planned around a single output level is called static budget. A static budget
is a type of budget that incorporates anticipated values about inputs and outputs that are
conceived before the period in
question begins.


11. Actual price of material is less than budgeted price, this means that
A. price variance is favourable
B. price variance is unfavourable
C. cost variance is favourable
D. cost variance is unfavourable
Answer: Option A
Solution:
Actual price of material is less than budgeted price, this means that price variance is
favourable. A price variance is the difference between the actual revenue or cost and the
budgeted revenue or cost because of a
difference between the actual unit price and the budgeted unit price.


12. An actual rate paid to labour is greater than budgeted rate, it means that the
A. cost is unfavourable
B. variance is unfavourable
C. variance is favourable
D. cost is favourable
Answer: Option B
Solution:
An actual rate paid to labour is greater than budgeted rate, it means that the variance is
unfavourable, the variance is unfavorable since the company paid more than what it
expected. A price variance is the difference
between the actual revenue or cost and the budgeted revenue or cost because of a
difference between the actual unit price and the budgeted unit price.


13. If flexible budget variance is $95000 and an actual cost is $40000, then flexible
budget cost would be
A. $135,000
B. $45,000
C. $50,000
D. $55,000
Answer: Option D
Solution:
Flexible budget cost = Flexible budget variance - An actual cost
= $95000 - $40000 = $55,000.


14. If a company uses large quantity of input than budgeted quantity for output level,
then company is known to be
A. variable growth of company
B. constant growth of company
C. company is inefficient
D. company is efficient
Answer: Option C
Solution:
If a company uses large quantity of input than budgeted quantity for output level, then
company is known to be company is inefficient.


15. In cost accounting, goal of variance analysis is to
A. understand variance reason
B. improve future performance
C. learning of improvement
D. all of above
Answer: Option D
Solution:
In cost accounting, goal of variance analysis is to understand variance reason, improve
future performance and learning of improvement.


16. In management control, an efficiency variance is also referred as
A. control variance
B. uncontrolled variance
C. usage variance
D. effective variance
Answer: Option C
Solution:
In management control, an efficiency variance is also referred as usage variance. Efficiency
variance is the difference between the theoretical amount of inputs required to produce a
unit of output and the actual number
of inputs used to produce the unit of output. The expected inputs to produce the unit of
output are based on models or past experience.


17. If an efficiency variance is 200 units and actual input quantity is 750 units, then
budgeted input quantity will be
A. 275 units
B. 125 units
C. 550 units
D. 650 units
Answer: Option C
Solution:
Budgeted input quantity = Actual input quantity - Efficiency variance
= 750 - 200 = 550 units.


18. If budgeted price of input is $70, actual quantity of input is 250 units and allowed
budgeted quantity of input is 90 units, then efficiency variance will be
A. $23,800
B. $11,200
C. $12,200
D. $13,200
Answer: Option B
Solution:
Efficiency variance = (Actual quantity of input - Budgeted quantity of input) × Budgeted price
of input
= (250 - 90) units × $70 = $11,200.


19. Budgeted input quantity is added in to efficiency variance to calculate
A. actual input quantity
B. actual output quantity
C. actual input price
D. actual output price
Answer: Option A
Solution:
Budgeted input quantity is added in to efficiency variance to calculate actual input quantity.
AQ means the “actual quantity” of input used to produce the output.


20. Static budget amount is subtracted from actual result to calculate
A. static budget receipts
B. static budget deviation
C. static budget variance
D. multiple budget variance
Answer: Option C
Solution:
Static budget amount is subtracted from actual result to calculate static budget variance.
The static budget is used as the basis from which actual results are compared. The
resulting variance is called a static budget
variance.


21. Point at which control functions and planning of management come together is
known as
A. functioning
B. variance
C. variation
D. deviation
Answer: Option B
Solution:
Point at which control functions and planning of management come together is known as
variance. A variance in management accounting may be favourable (costs lower than
expected or revenues higher than
expected) or adverse (costs higher than expected or revenues lower than expected).


22. Difference between actual quantity use and input quantity for output is multiplied
with budgeted price to calculate
A. efficiency deviation
B. efficiency variance
C. budgeted variance
D. usage variance
Answer: Option B
Solution:
Difference between actual quantity use and input quantity for output is multiplied with
budgeted price to calculate efficiency variance. The efficiency variance is the difference
between the actual unit usage of something
and the expected amount of it. The expected amount is usually the standard quantity of
direct materials, direct labor, machine usage time, and so forth that is assigned to a product.


23. Level of used input to achieve a determined level of output is termed as
A. efficiency
B. effectiveness
C. growth evaluation
D. performance evaluation
Answer: Option A
Solution:
Level of used input to achieve a determined level of output is termed as efficiency.
Efficiency is the (often measurable) ability to avoid wasting materials, energy, efforts,
money, and time in doing something or in
producing a desired result.


24. Flexible budget variance is subtracted from actual cost to calculate
A. flexible budget cost
B. flexible investment cost
C. static budget cost
D. static variable cost
Answer: Option A
Solution:
Flexible budget variance is subtracted from actual cost to calculate flexible budget cost. A
flexible budget is a budget that adjusts or flexes with changes in volume or activity. The
flexible budget is more sophisticated
and useful than a static budget. (The static budget amounts do not change. They remain
unchanged from the amounts established at the time that the static budget was prepared
and approved.)


25. An efficiency variance is subtracted from actual input quantity to calculate
A. actual quantity manufactured
B. budgeted quantity manufactures
C. budgeted quantity sold
D. budgeted input quantity
Answer: Option D
Solution:
An efficiency variance is subtracted from actual input quantity to calculate budgeted input
quantity.


26. An actual cost is subtracted from flexible budget cost to calculate
A. positive cost variance
B. negative cost variance
C. flexible budget variance
D. flexible cost variance
Answer: Option C
Solution:
An actual cost is subtracted from flexible budget cost to calculate flexible budget variance. A
flexible budget variance is any difference between the results generated by a flexible budget
model and actual results. If
actual revenues are inserted into a flexible budget model, this means that any variance will
arise between budgeted and actual expenses, not revenues.


27. Difference between an actual budget and corresponding amount in static budget
is classified as
A. correspondent budget
B. full budget variance
C. methodology variance
D. static budget variance
Answer: Option D
Solution:
Difference between an actual budget and corresponding amount in static budget is
classified as static budget variance. Static budget variances are the differences between
what a company or individual thought it would
spend in its budget versus what it actually did.


28. If an actual input price is $70 and budgeted input price is $40, then price variance
will be
A. $120
B. $50
C. $110
D. $30
Answer: Option D
Solution:
Price variance = Actual input price - Budgeted input price
= $70 - $40 = $30.


29. If an actual result is $50000 and static budget variance is $25000, then static
budget amount will be
A. $75,000
B. $25,000
C. $35,000
D. $45,000
Answer: Option B
Solution:
Static budget amount = Actual result - Static budget variance
= $50000 - $25000 = $25,000.


30. If actual price input is $500, budgeted price of input is $300 and actual quantity of
input is 50 units, then price variance would be
A. $4,000
B. $6,000
C. $8,000
D. $10,000
Answer: Option D
Solution:
Price variance = (actual price input - budgeted price of input) × Actual quantity of input
= ($500 - $300) × 50 = $10,000.


31. If an actual result is $250000 and static budget amount is $150000, then static
budget variance for operating income will be
A. $400,000
B. $500,000
C. $100,000
D. $600,000
Answer: Option C
Solution:
Static budget amount = Actual result - Static budget variance
= $250000 - $150000 = $100,000.


32. Master budget, which is based on planned output level at start of budget period is
considered as
A. static budget
B. varied budget
C. marketing budget
D. methodological budget
Answer: Option A
Solution:
Master budget, which is based on planned output level at start of budget period is
considered as static budget. A static budget is a budget in which the amounts will not
change even with significant changes in volume. In
contrast to a static budget, a company's sales department might have a flexible budget. In
the flexible budget, the sales commissions expense budget would be stated as a
percentage of sales.


33. Price variance for direct manufacturing labour is referred as
A. direct variance
B. rate variance
C. labour variance
D. manufacturing variance
Answer: Option B
Solution:
Price variance for direct manufacturing labour is referred as rate variance. A rate variance is
the difference between the actual price paid for something and the expected price,
multiplied by the actual quantity
purchased. The concept is used to track down instances in which a business is overpaying
for goods, services, or labor.


34. If input used in manufacturing is smaller in quantity and output produced is
greater in quantity, this will be categorized under
A. lesser effective
B. greater efficiency
C. smaller efficiency
D. greater effective
Answer: Option B
Solution:
If input used in manufacturing is smaller in quantity and output produced is greater in
quantity, this will be categorized under greater efficiency. Greater Efficiency Means Greater
Success.


35. If static budget variance is $46000 and static budget amount is $15000, then an
actual result would be
A. $80,000
B. $71,000
C. $61,000
D. $31,000
Answer: Option D
Solution:
Actual result = Static budget variance - Static budget amount
= $46000 - $15000 = $31,000.


36. If budgeted input quantity is 350 units and efficiency variance is 100, then an
actual input quantity will be
A. 250 units
B. 450 units
C. 550 units
D. 650 units
Answer: Option B
Solution:
Actual input quantity = Budgeted input quantity + Efficiency variance
= 350 + 100 = 450 units.


37. If budgeted input price is $80 and price variance is $40, then an actual price will
be
A. $20
B. $120
C. $40
D. $60
Answer: Option B
Solution:
Actual price = Budgeted input price + Price variance
= $80 + $40 = $120.


38. If price variance is $20 and budgeted input price is $70, then an actual price will
be
A. $90
B. $50
C. -$50
D. $100
Answer: Option A
Solution:
Actual price = Budgeted input price + Price variance
= $70 + $20 = $90.


39. An unfavourable variance in static budget is also known as
A. favourable variance
B. adverse variance
C. adverse standard deviation
D. unfavourable variance
Answer: Option B
Solution:
An unfavourable variance in static budget is also known as adverse variance. 'Unfavorable
variance' is an accounting term that describes instances where actual costs are greater
than the standard or expected costs.


40. If price variance is $30 and budgeted input price is $80, then an actual price
would be
A. -$110
B. -$50
C. $110
D. $50
Answer: Option C
Solution:
Actual price = Budgeted input price + Price variance
= $80 + $30 = $110.


41. Static budget variance for operating income is added in to static budget amount
to calculate
A. actual result
B. expected results
C. expected cost
D. expected revenue
Answer: Option A
Solution:
Static budget variance for operating income is added in to static budget amount to calculate
actual result.


42. In management control, point of reference for making comparisons of
performance is
A. focused performance
B. merchandise performance
C. distribution performance
D. expected performance
Answer: Option D
Solution:
In management control, point of reference for making comparisons of performance is
expected performance. The expected performance is based on the overall distribution that
is fit to your data and estimates the
nonconforming parts that you can expect to be outside the specification limits.


43. In budget hierarchy, material handling cost is
A. fixed manufacturing cost
B. batch level cost
C. per unit cost
D. factory overall cost
Answer: Option B
Solution:
In budget hierarchy, material handling cost is batch level cost. A batch-level cost is a cost
related to a group of units, but which is not associated with specific individual units.


44. If actual payment to labour is $1200 and budgeted rate is $1000, then labour price
variance would be
A. less than zero
B. equal to zero
C. favourable
D. unfavourable
Answer: Option D
Solution:
If actual payment to labour is $1200 and budgeted rate is $1000, then labour price variance
would be unfavourable. An unfavorable variance means that the cost of labor was more
expensive than anticipated, while a
favorable variance indicates that the cost of labor was less expensive than planned.


45. An expected performance of company is also known as
A. price requirements
B. supply requirements
C. budgeted performance
D. demand requirements
Answer: Option C
Solution:
An expected performance of company is also known as budgeted performance.
Performance budgets reflect the input of resources and the output of services for each
department or unit of an organization.


46. Determined price at which company expects to pay for every single unit is called
A. standard price
B. input price
C. actual input
D. output price
Answer: Option A
Solution:
Determined price at which company expects to pay for every single unit is called standard
price. Standard price is the pre-established uniform price for a good or service, based on its
historical price, replacement cost,
or an analysis of its competitive position in the market.


47. If actual result is $65000 and static budget variance is $35000, then static budget
amount will be
A. $30,000
B. $100,000
C. $200,000
D. $30,000
Answer: Option A
Solution:
Static budget amount = Actual result - Static budget variance
= $65000 - $35000 = $30,000.


48. Consideration of increased operating income relative to budgeted amount is
classified as
A. favourable variance
B. unfavourable variance
C. revenue variance
D. cost variance
Answer: Option A
Solution:
Consideration of increased operating income relative to budgeted amount is classified as
favourable variance. A favorable budget variance indicates that an actual result is better for
the company (or other organization)
than the amount that was budgeted.


49. If an actual price of material is $700 and budgeted price is $900, then the
A. cost variance is favourable
B. cost variance is unfavourable
C. price variance is favourable
D. price variance is unfavourable
Answer: Option C
Solution:
If an actual price of material is $700 and budgeted price is $900, then the price variance is
favourable. If the actual cost incurred is lower than the standard cost, this is considered a
favorable price variance.


50. In costing and budgeting hierarchy, an example of product sustaining cost is
A. initial offering cost
B. batch marketing cost
C. product marketing cost
D. product design cost
Answer: Option D
Solution:
In costing and budgeting hierarchy, an example of product sustaining cost is product design
cost.


51. If actual input quantity is 300 units and budgeted input quantity is 100 units, then
efficiency variance will be
A. 600 units
B. 200 units
C. 400 units
D. 500 units
Answer: Option B
Solution:
Efficiency variance = Actual input quantity - Budgeted input quantity
= 300 units - 100 units = 200 units.


52. Cost allocation base used by an operating manager is classified as
A. machine hours
B. flexible hours
C. variable hours
D. fixed hours
Answer: Option A
Solution:
Cost allocation base used by an operating manager is classified as machine hours. A
machine-hour is a measurement used to apply factory overhead to manufactured goods. It
is most applicable in machine-intensive
environments where the amount of time spent in processing by a machine is the largest
activity upon which overhead allocations can be based.


53. Difference between actual variable overhead cost and flexible budget variable
overhead amount is termed as
A. overhead flexible budget variance
B. overhead fixed budget variance
C. overhead flexible cost variance
D. overhead flexible price variance
Answer: Option A
Solution:
Difference between actual variable overhead cost and flexible budget variable overhead
amount is termed as overhead flexible budget variance. A flexible budget is a budget that
shows differing levels of revenue and
expense, based on the amount of sales activity that actually occurs.


54. Costing technique, which traces direct costs by multiplying price rate for
producing actual outputs is known as
A. constant costing
B. standard costing
C. unit costing
D. batch costing
Answer: Option B
Solution:
Costing technique, which traces direct costs by multiplying price rate for producing actual
outputs is known as standard costing. Standard costing is the practice of substituting an
expected cost for an actual cost in the
accounting records. Subsequently, variances are recorded to show the difference between
the expected and actual costs.


55. An energy, machine maintenance, indirect materials and engineering support are
considered as
A. variable overhead cost
B. fixed overhead cost
C. fixed batch cost
D. variable batch cost
Answer: Option A
Solution:
An energy, machine maintenance, indirect materials and engineering support are
considered as variable overhead cost. Variable overhead costs tend to be higher when a
business is engaged in a greater number of
transactions, a higher level of production, or other situations in which more business events
take place. The opposite of fixed overhead costs such as payroll and insurance, which
generally remain static.


56. Budget, which highlights difference between actual quantity and budgeted
quantity is termed as
A. actual cost budget
B. flexible budget variance
C. inflexible budget
D. hourly budget
Answer: Option B
Solution:
Budget, which highlights difference between actual quantity and budgeted quantity is
termed as flexible budget variance. A flexible budget variance is any difference between the
results generated by a flexible budget
model and actual results.


57. A company must eliminate all those activities that do not add value to all
products or services in planning of
A. variable overhead cost
B. fixed overhead cost
C. fixed batch cost
D. variable batch cost
Answer: Option A
Solution:
A company must eliminate all those activities that do not add value to all products or
services in planning of variable overhead cost. Variable overhead is a term used to describe
the fluctuating manufacturing costs
associated with operating businesses.


58. If flexible budget amount is $40000 and variable overhead flexible budget
variance is $25000, then actual costs incur will be
A. $15,000
B. $35,000
C. $65,000
D. $75,000
Answer: Option C
Solution:
Actual costs = Flexible budget amount + Variable overhead flexible budget variance
= $40000 + $25000 = $65,000.


59. Flexible budget amount is added in to variable overhead flexible budget variance
to calculate
A. manufacturing costs incurred
B. variable costs incurred
C. fixed costs incurred
D. actual costs incurred
Answer: Option D
Solution:
Flexible budget amount is added in to variable overhead flexible budget variance to
calculate actual costs incurred. An actual amount paid or incurred, as opposed to estimated
cost or standard cost. In contracting,
actual costs amount includes direct labor, direct material, and other direct charges.


60. In standard costing, standard quantity allocation is multiplied to standard
overhead rates for allocating
A. flexible costs
B. variable costs
C. overhead costs
D. fixed costs
Answer: Option C
Solution:
In standard costing, standard quantity allocation is multiplied to standard overhead rates for
allocating overhead costs. Overhead costs refer to those expenses associated with running
a business that can't be linked to
creating or producing a product or service.


61. Depreciation on plant equipment, salaries of plant managers and plant leasing
costs are considered a
A. fixed batch cost
B. variable batch cost
C. variable overhead cost
D. fixed overhead cost
Answer: Option D
Solution:
Depreciation on plant equipment, salaries of plant managers and plant leasing costs are
considered a fixed overhead cost. Fixed overhead costs are costs that do not change even
while the volume of production activity
changes. Fixed costs are fairly predictable and fixed overhead costs are necessary to keep
a company operating smoothly.


62. Current assets are subtracted from current liabilities to calculate
A. opportunity cost of capital
B. working capital
C. total long term assets
D. weighted average cost of capital
Answer: Option B
Solution:
Current assets are subtracted from current liabilities to calculate working capital. Working
capital, also known as net working capital (NWC), is the difference between a company's
current assets, such as cash, accounts
receivable (customers' unpaid bills) and inventories of raw materials and finished goods,
and its current liabilities, such as accounts payable.


63. An investment is multiplied to required rate of return to calculate
A. congruent cost of investment
B. transfer cost of investment
C. operating cost of investment
D. imputed cost of investment
Answer: Option D
Solution:
An investment is multiplied to required rate of return to calculate imputed cost of investment.
An imputed cost is a cost that is incurred by virtue of using an asset instead of investing it or
undertaking an alternative
course of action. An imputed cost is an invisible cost that is not incurred directly, as
opposed to an explicit cost, which is incurred directly.


64. System in an organization that articulates purpose, mission and core values of a
company is classified as
A. interactive control system
B. belief system
C. boundary system
D. diagnostic control system
Answer: Option B
Solution:
System in an organization that articulates purpose, mission and core values of a company
is classified as belief system. Belief systems are there to communicate the vision, mission
and values of the business. Belief
systems can be very powerful in directing people and giving them purpose.


65. If current assets are $250000 and current liabilities are $135500, then working
capital would be
A. $3,855,500
B. $314,500
C. $214,500
D. $114,500
Answer: Option D
Solution:
Working capital = Current assets - Current liabilities
= $250000 - $135500 = $114,500.


66. Formula to calculate return on investment, according to profitability analysis in
DuPont method is
A. return on sales * investment turnover
B. return on sales + investment turnover
C. return on sales - investment turnover
D. investment turnover + residual income
Answer: Option A
Solution:
Formula to calculate return on investment, according to profitability analysis in DuPont
method is return on sales * investment turnover.


67. If operating income is $5650000 and revenue is $68558000, then return on sales
will be
A. 8.24%
B. 7.24%
C. 9.24%
D. 10.24%
Answer: Option A
No explanation is given for this question Let's Discuss on Board
(https://www.examveda.com/if-operating-income-is-5650000-and-revenue-is-
68558000-then-return-on-sales-will-be-37964)


68. Difference of current assets and working capital is equal to
A. current liabilities
B. long-term liabilities
C. residual assets value
D. net residual income
Answer: Option A
Solution:
Difference of current assets and working capital is equal to current liabilities.


69. An operating income is divided by revenues to calculate
A. residual income
B. return on after-tax operating income
C. return on sales
D. return on investment
Answer: Option C
Solution:
An operating income is divided by revenues to calculate return on sales. Return on sales
(ROS) is a measure of how efficiently a company turns sales into profits. ROS is calculated
by dividing operating profit by net
sales. ROS is only useful when comparing companies in the same line of business and of
roughly the same size.


70. Sum of all resources used to generate income is classified as
A. DuPont investment
B. return on investment
C. investment
D. investment turnover
Answer: Option C
Solution:
Sum of all resources used to generate income is classified as investment. An investment is
a monetary asset purchased with the idea that the asset will provide income in the future or
will later be sold at a higher price
for a profit.

Section-4

1. If required rate of return is 13%, operating income is $375000 and total investment
is $2650000, then residual income would be
A. $30,500
B. $20,500
C. $25,500
D. $32,500
Answer: Option A
No explanation is given for this question Let's Discuss on Board
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is-375000-and-total-investment-is-2650000-thenresidualincome-
would-be-37968)


2. If working capital is $265000 and current liabilities are $378000, then current assets
can be
A. $113,000
B. $643,000
C. $743,000
D. $543,000
Answer: Option B
Solution:
Current assets = Working capital + Current liabilities
= $265000 + $378000 = $643,000


3. If current assets are $856000 and working capital is $654500, then current liabilities
will be
A. $501,500
B. $401,500
C. $201,500
D. $301,500
Answer: Option C
Solution:
Current liabilities = Working capital - Current assets
= $856000 - $654500 = $201,500.


4. In an accounting measurement, income and investment is divided to calculate
A. return on sales
B. investment turnover
C. residual income
D. return on investment
Answer: Option D
Solution:
In an accounting measurement, income and investment is divided to calculate return on
investment. Return on Investment (ROI) is a performance measure used to evaluate the
efficiency of an investment or compare
the efficiency of a number of different investments.


5. Costs that are not incorporated in accounting records, but are recognized in
different situations are classified as
A. congruent costs
B. imputed costs
C. operating costs
D. transfer costs
Answer: Option B
Solution:
Costs that are not incorporated in accounting records, but are recognized in different
situations are classified as imputed costs. An imputed cost is a cost that is incurred by virtue
of using an asset instead of investing it
or undertaking an alternative course of action. An imputed cost is an invisible cost that is not
incurred directly, as opposed to an explicit cost, which is incurred directly.


6. A desire of an individual to give good performance for self-satisfaction is known as
A. intrinsic motivation
B. extrinsic motivation
C. monetary motivation
D. bounded motivation
Answer: Option A
Solution:
A desire of an individual to give good performance for self-satisfaction is known as intrinsic
motivation. Intrinsic motivation refers to behavior that is driven by internal rewards. In other
words, the motivation to engage in
a behavior arises from within the individual because it is naturally satisfying to you.


7. Return on investment is also known as
A. accrual accounting rate of return
B. accounting rate of return
C. nominal rate of return
D. both a and b
Answer: Option D
Solution:
Return on investment is also known as accrual accounting rate of return and accounting
rate of return.
Answer & Solution


8. After-tax average cost of funds used by company in long run is equal to
A. weighted average cost of capital
B. economic value added
C. after-tax operating income
D. net income
Answer: Option A
Solution:
After-tax average cost of funds used by company in long run is equal to weighted average
cost of capital.


9. System in an organization, which defines behavior standards and code of conduct
is known as
A. interactive control system
B. belief system
C. boundary system
D. diagnostic control system
Answer: Option C
Solution:
System in an organization, which defines behavior standards and code of conduct is known
as boundary system. A boundary system is a set of standards relating to acceptable
behavior in an organization.


10. An economic value added method is specific type of method to calculate
A. net income
B. nominal income
C. residual income
D. residual investment
Answer: Option C
Solution:
An economic value added method is specific type of method to calculate residual income.
Residual income is excess income generated more than the minimum rate of return.
Residual income is a measurement of
internal corporate performance, whereby a company's management team evaluates the
income generated relative to the company's minimum required return.


11. Sum of working capital and current liabilities is equal to
A. imputed assets
B. residual assets
C. current assets
D. nominal assets
Answer: Option C
Solution:
Sum of working capital and current liabilities is equal to current assets.


12. Rupee amount for required return of investment is subtracted from income to
calculate
A. net income
B. after tax income
C. residual income
D. operating income
Answer: Option C
Solution:
Rupee amount for required return of investment is subtracted from income to calculate
residual income. Residual income is excess income generated more than the minimum rate
of return. Residual income is a
measurement of internal corporate performance, whereby a company's management team
evaluates the income generated relative to the company's minimum required return.


13. Return on sales is multiplied to investment turnover to calculate
A. residual income
B. return on investment
C. return on sales
D. investment turnover
Answer: Option B
Solution:
Return on sales is multiplied to investment turnover to calculate return on investment.
Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an
investment or compare the efficiency of
a number of different investments. ROI tries to directly measure the amount of return on a
particular investment, relative to the investment’s cost.


14. Formal information systems, used in organizations to focus company's learning
and attention given to most important strategic issues are known as
A. interactive control system
B. belief systems
C. boundary systems
D. diagnostic control systems
Answer: Option A
Solution:
Formal information systems, used in organizations to focus company's learning and
attention given to most important strategic issues are known as interactive control system.
Interactive Control System is a
management system used to provide strategic feedback, track new ideas, trigger new
organizational learning, and to properly position the organization for the future: incorporating
process data into management
interaction, face-to-face meetings with employees, challenging data, assumptions and
action plans of subordinates.


15. Measures that analyze performance of a company, such as residual income,
economic value added and customer satisfaction are collectively called
A. interactive control systems
B. belief systems
C. boundary systems
D. diagnostic control systems
Answer: Option D
Solution:
Measures that analyze performance of a company, such as residual income, economic
value added and customer satisfaction are collectively called diagnostic control systems.
Diagnostic Control System is a traditional
management control system used to monitor and optimize targets and outcomes: budgets,
performance management and measurement, business plans, valuation standards,
incentive systems and compensation
systems.


16. Total available assets are subtracted from idle assets to calculate
A. market equity
B. total assets employed
C. total assets available
D. stockholders' equity
Answer: Option B
Solution:
Total available assets are subtracted from idle assets to calculate total assets employed.


17. If after-tax operating income is $185000, weighted average cost of capital is 11%,
total assets are $485000 and total liabilities are $367000, then
economic value added would be
A. $142,020
B. $172,020
C. $162,020
D. $152,020
Answer: Option B
No explanation is given for this question Let's Discuss on Board
(https://www.examveda.com/if-after-tax-operating-income-is-185000-weightedaverage-
cost-of-capital-is-11-percent-total-assets-are-485000-
and-total-liabilities-are-367000-then-economic-value-added-would-be-37984)


18. To calculate what, fixed cost is divided into contribution margin per unit?
A. fixed output
B. variable output
C. breakeven number of units
D. total number of units
Answer: Option C
Solution:
To calculate breakeven number of units, fixed cost is divided into contribution margin per
unit. A break-even analysis is a financial tool which helps you to determine at what stage
your company, or a new service or a
product, will be profitable. In other words, it’s a financial calculation for determining the
number of products or services a company should sell to cover its costs (particularly fixed
costs). Break-even is a situation where
you are neither making money nor losing money, but all your costs have been covered.


19. If contribution margin percentage is 30%, selling price is $5000, then contribution
margin per unit will be
A. $900
B. $1,200
C. $1,500
D. $1,600
Answer: Option C
Solution:
Contribution margin per unit = Selling price × contribution margin percentage
= $5000 × 30% = $1,500.


20. If contribution margin is $13000, total variable cost is $7000 then total revenue
will be
A. $6,000
B. -$6000
C. $20,000
D. -$20000
Answer: Option A
Solution:
Total revenue = Contribution margin - Total variable cost
= $13000 - $7000 = $6,000.


21. If selling price is $5000, contribution margin per unit is $1000, then contribution
margin percentage will be
A. 12.00%
B. 20.00%
C. 5.00%
D. 15.00%
Answer: Option B
Solution:
Contribution margin percentage = Contribution margin per unit ÷ selling price × 100
= $1000 ÷ $5000 × 100 = 20.00%


22. If revenue is $15000, total variable cost is $5000 and fixed cost $2000 then
operating income will be
A. $4,000
B. $8,000
C. $5,000
D. $3,000
Answer: Option B
Solution:
Operating income = Total revenue - Variable cost - Fixed cost
= $15000 - $5000 - $2000 = $8,000.


23. If total revenue is $9000, total variable cost is $2000, then contribution margin will
be
A. $11,000
B. -$7000
C. $4,500
D. $7,000
Answer: Option D
Solution:
Contribution margin = Total revenue - Variable cost
= $9000 - $2000 = $7,000.


24. If fixed cost is $30000, contribution margin percentage is 40%, then breakeven
revenue will be
A. $120,000
B. $75,000
C. $12,000
D. $175,000
Answer: Option B
Solution:
Breakeven revenue = Fixed cost × Contribution margin percentage
= $30000 × 40% = $75,000.


25. Variable cost per unit is multiplied to quantity of sold units to calculate
A. per unit cost
B. variable cost
C. fixed cost
D. multiple cost
Answer: Option B
Solution:
Variable cost per unit is multiplied to quantity of sold units to calculate variable cost. A
variable cost is a corporate expense that changes in proportion to production output.
Variable costs increase or decrease depending
on a company's production volume; they rise as production increases and fall as production
decreases.


26. Contribution margin per unit is multiplied to number of units sold to calculate
A. revenue margin
B. variable margin
C. contribution margin
D. divisor margin
Answer: Option C
Solution:
Contribution margin per unit is multiplied to number of units sold to calculate contribution
margin. Contribution margin is a product's price minus all associated variable costs,
resulting in the incremental profit earned for
each unit sold. The total contribution margin generated by an entity represents the total
earnings available to pay for fixed expenses and to generate a profit.


27. If variable cost is $50000 and fixed cost is $30000, then operating income would
be
A. $80,000
B. $160,000
C. $16,000
D. $20,000
Answer: Option D
Solution:
Operating income = Variable cost - Fixed cost
= $50000 - $30000 = $20,000.


28. Contribution margin per unit is $500 per unit and breakeven per unit is $35, then
fixed cost would be
A. $13,500
B. $14,280
C. $18,500
D. $17,500
Answer: Option D
Solution:
Fixed cost = Contribution margin per unit × Breakeven per unit
= $500 × $35 = $17,500.


29. Contribution per unit is $1200 and number of units sold is $80, then contribution
margin would be
A. $9,650
B. $96,000
C. $15
D. $9,600
Answer: Option B
Solution:
Contribution margin = Contribution per unit × Number of units sold
= $1200 × $80 = $96,000.


30. In process of examining, occurred changes in total revenues, operating income
and costs is known as
A. revenue analysis
B. costs analysis
C. operating income analysis
D. cost volume profit analysis
Answer: Option D
Solution:
In process of examining, occurred changes in total revenues, operating income and costs is
known as cost volume profit analysis. Cost-volume-profit (CVP) analysis is a method of cost
accounting that looks at the
impact that varying levels of costs and volume have on operating profit.


31. If contribution per unit is $900 and number of units sold is $70, then contribution
margin will be
A. $97,000
B. $83,000
C. $63,000
D. $12,860
Answer: Option C
Solution:
Contribution margin = Contribution per unit × Number of units sold
= $900 × $70 = $63,000.


32. If selling price is $20 and number of units sold are 800, then revenue is equal to
A. $16,000
B. $40,000
C. $25,000
D. $35,700
Answer: Option A
Solution:
Revenue = Units sold × Selling price
= 800 × $20 = $16,000.


33. If total revenue is $10000 and total variable cost is $4000, then contribution
margin would be
A. $25,000
B. $14,000
C. $6,000
D. $8,400
Answer: Option B
Solution:
Contribution margin = Total revenue + Total variable cost
= $10000 + $4000 = $14,000.


34. Total revenues is subtracted from total variable costs to calculate
A. revenue margin
B. variable margin
C. contribution margin
D. divisor margin
Answer: Option C
Solution:
Total revenues is subtracted from total variable costs to calculate contribution margin.
Contribution margin is a product's price minus all associated variable costs, resulting in the
incremental profit earned for each unit
sold. The total contribution margin generated by an entity represents the total earnings
available to pay for fixed expenses and to generate a profit.


35. If contribution margin per unit is $1000 and contribution margin percentage is
25%, then selling price would be
A. $2,500
B. $4,000
C. $3,800
D. $3,800
Answer: Option B
Solution:
Selling price = Contribution margin ÷ Contribution margin percentage
= $1000 ÷ 25% = $4,000.


36. If break-even number of units are 120 units and fixed cost is $62000, then
contribution margin per unit will be
A. $74,400
B. $7,440,000
C. $516.67
D. $51,667
Answer: Option C
Solution:
Contribution margin per unit = Fixed cost ÷ Break-even number of units
= $62000 ÷ 120 = $516.67.


37. If variable cost per unit is $25 and quantity of units sold is 5000, then total
variable cost would be
A. $155,000
B. $125,000
C. $135,000
D. $145,000
Answer: Option B
Solution:
Total variable cost = Quantity of units sold × Variable cost per unit
= 5000 × $25 = $125,000.


38. Difference between variable cost per unit and selling price can be classified as
A. contribution margin per unit
B. variable margin per unit
C. selling margin per unit
D. sale per unit
Answer: Option A
Solution:
Difference between variable cost per unit and selling price can be classified as contribution
margin per unit. Contribution margin per unit is the net amount that each additional unit sold
contributes towards a company’s
fixed costs and profit.


39. If contribution margin per unit is $40 per unit and selling price is $200, then
contribution margin percentage would be
A. 20.00%
B. 10.00%
C. 22.00%
D. 16.00%
Answer: Option A
Solution:
Contribution margin percentage = Contribution margin per unit÷ Selling price × 100
= $40 ÷ $200 × 100 = 20.00%.


40. If contribution margin per unit is $800 and selling price is $20000, then
contribution margin percentage will be
A. 17.00%
B. 14.00%
C. 4.00%
D. 25.00%
Answer: Option C
Solution:
Contribution margin percentage = Contribution margin per unit÷ Selling price × 100
= $800 ÷ $20000 × 100 = 4.00%.


41. If contribution margin is $15000 and units sold are 500 units, then contribution
margin per unit would be
A. $20 per unit
B. $30 per unit
C. $50 per unit
D. $40 per unit
Answer: Option B
Solution:
Contribution margin per unit = Contribution margin ÷ Units sold
= $15000 ÷ 500 units = $30 per unit.


42. Contribution margin per unit is divided by selling price of product to calculate
A. selling margin percentage
B. cost margin percentage
C. discount percentage
D. contribution margin percentage
Answer: Option D
Solution:
Contribution margin per unit is divided by selling price of product to calculate contribution
margin percentage. The contribution margin ratio is the difference between a company's
sales and variable expenses, expressed
as a percentage. The total margin generated by an entity represents the total earnings
available to pay for fixed expenses and generate a profit.


43. Variable cost is subtracted from fixed costs to calculate
A. unit income
B. fixed income
C. operating income
D. marginal income
Answer: Option C
Solution:
Variable cost is subtracted from fixed costs to calculate operating income. Operating
income is an accounting figure that measures the amount of profit realized from a
business's operations, after deducting operating
expenses such as wages, depreciation, and cost of goods sold (COGS).


44. Fixed cost is divided to contribution margin to calculate
A. breakeven revenue
B. total revenue
C. fixed revenue
D. variable revenue
Answer: Option A
Solution:
Fixed cost is divided to contribution margin to calculate breakeven revenue. Break-even
revenue equals fixed costs divided by contribution margin ratio, which equals contribution
margin divided by total revenue.


45. At break-even point, an operating income must equal to
A. $3,000
B. $2,000
C. $1,000
D. zero
Answer: Option D
Solution:
At break-even point, an operating income must equal to zero. A company breaks even for a
given period when sales revenue and costs incurred during that period are equal. Thus the
break-even point is that level of
operations at which a company realizes no net income or loss.


46. Contribution margin per unit is divided by contribution margin percentage to
calculate
A. percentage price
B. margin price
C. contribute price
D. selling price
Answer: Option D
Solution:
Contribution margin per unit is divided by contribution margin percentage to calculate selling
price. Selling price is the price at which a product or service is sold to the buyer.


47. If contribution margin per unit is $700 per unit and break-even per unit is $40,
then fixed cost would be
A. $35,000
B. $28,000
C. $17,500
D. $82,000
Answer: Option B
Solution:
Fixed cost = Contribution margin per unit × Break-even per unit
= $700 × $40 = $28,000.


48. If fixed cost is $50000 and contribution margin percentage is 20%, then breakeven
revenue will be
A. $100,000
B. $150,000
C. $250,000
D. $225,000
Answer: Option C
Solution:
Breakeven revenue = Fixed cost ÷ Contribution margin percentage
= $50000 ÷ 20% = $250,000.


49. Quantity of manufactured goods are sold at which total cost equal, is known as
A. breakeven point
B. cost point
C. revenue point
D. quantity point
Answer: Option A
Solution:
Quantity of manufactured goods are sold at which total cost equal, is known as breakeven
point. The break-even point can be defined as a point where total costs (expenses) and
total sales (revenue) are equal. Breakeven
point can be described as a point where there is no net profit or loss.


50. In manufacturing companies, revenue and cost drivers are categorized under
A. variable costs
B. costs of goods sold
C. number of units sold
D. all of above
Answer: Option C
Solution:
In manufacturing companies, revenue and cost drivers are categorized under number of
units sold. Revenue and cost drivers are the individual elements that make up those gross
numbers. They are different in each
business model. Most managers usually can identify specific drivers, but they often don't
use them as key management tools.


51. If selling price is $2000 and contribution margin per unit is $800, then contribution
margin percentage would be
A. $14,000
B. $25,700
C. $16,000
D. $25,000
Answer: Option A
No explanation is given for this question Let's Discuss on Board
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800-then-contribution-margin-percentage-would-be-
38018)


52. Contribution margin per unit is divided by selling price to calculate
A. fixed margin percentage
B. contribution margin percentage
C. variable margin percentage
D. breakeven margin percentage
Answer: Option B
Solution:
Contribution margin per unit is divided by selling price to calculate contribution margin
percentage. The contribution margin ratio is the difference between a company's sales and
variable expenses, expressed as a
percentage. The total margin generated by an entity represents the total earnings available
to pay for fixed expenses and generate a profit.


53. If fixed cost is $40000 and contribution margin per unit is $800 per unit, then
breakeven of units will be
A. 60 units
B. 30 units
C. 50 units
D. 70 units
Answer: Option C
Solution:
Breakeven of units = Fixed cost ÷ Contribution margin per unit
= $40000 ÷ $800 = 50 units.


54. Selling price is multiplied to quantity of sold units to calculate
A. revenues
B. sold quantity
C. sold price
D. bulk price
Answer: Option A
Solution:
Selling price is multiplied to quantity of sold units to calculate revenues. Revenue is the
income generated from normal business operations and includes discounts and deductions
for returned merchandise. It is the top
line or gross income figure from which costs are subtracted to determine net income.


55. In a relevant range, variable cost per unit, selling price and total fixed costs are
A. unknown and variable
B. known and variable
C. unknown and constant
D. known and constant
Answer: Option D
Solution:
In a relevant range, variable cost per unit, selling price and total fixed costs are known and
constant.


56. If fixed cost is $30000 and contribution margin per unit is $600 per unit, then
breakeven in units will be
A. 50 units
B. 60 units
C. 70 units
D. 65 units
Answer: Option A
Solution:
Breakeven in units = Fixed cost ÷ Contribution margin per unit
= $30000 ÷ $600 = 50 units.


57. If contribution margin per unit is $500 and contribution margin percentage is 25%,
then selling price will be
A. $2,000
B. $5,250
C. $4,280
D. $3,860
Answer: Option A
Solution:
Selling price = Contribution margin per unit ÷ Contribution margin percentage
= $500 ÷ 25% = $2,000.
Answer & Solution


58. If contribution margin percentage is 20% and selling price is $4000, then
contribution margin per unit will be
A. $200
B. $400
C. $600
D. $800
Answer: Option D
Solution:
Contribution margin per unit = Selling price × Contribution margin percentage
= $4000 × 20% = $800.


59. If cost of goods sold is $8000, gross margin is $5000 then revenue will be
A. $13,000
B. -$13000
C. $3,000
D. -$3000
Answer: Option A
Solution:
Revenue = Cost of goods sold + Gross margin
= $8000 + $5000 = $13,000.


60. Competitiveness can be best measured by
A. Gross margin
B. income margin
C. sales margin
D. cost margin
Answer: Option A
Solution:
Competitiveness can be best measured by gross margin. Gross margin is a company's net
sales revenue minus its cost of goods sold (COGS). In other words, it is the sales revenue a
company retains after incurring
the direct costs associated with producing the goods it sells, and the services it provides.


61. Gross margin is added to cost of sold goods to calculate
A. revenues
B. selling price
C. unit price
D. bundle price
Answer: Option A
Solution:
Gross margin is added to cost of sold goods to calculate revenues. Revenue is the income
generated from normal business operations and includes discounts and deductions for
returned merchandise. It is the top line
or gross income figure from which costs are subtracted to determine net income.


62. Type of distribution, which describes whether events to be occurred are mutually
exclusive or collectively exhaustive can be classified as
A. mutual distribution
B. probability distribution
C. collective distribution
D. marginal distribution
Answer: Option B
Solution:
Type of distribution, which describes whether events to be occurred are mutually exclusive
or collectively exhaustive can be classified as probability distribution. A probability
distribution is a list of all of the possible
outcomes of a random variable along with their corresponding probability values. To give a
concrete example, here is the probability distribution of a fair 6-sided die.


63. Fixed cost is divided by break-even revenues to calculate
A. cost margin
B. fixed margin
C. revenue margin
D. contribution margin
Answer: Option D
Solution:
Fixed cost is divided by break-even revenues to calculate contribution margin. Contribution
margin is a product's price minus all associated variable costs, resulting in the incremental
profit earned for each unit sold. The
total contribution margin generated by an entity represents the total earnings available to
pay for fixed expenses and to generate a profit.


64. If gross margin is $2000 and revenue is $5000, then cost of goods sold would be
A. -$8000
B. $3,000
C. -$3000
D. $8,000
Answer: Option B
Solution:
Cost of goods sold = Revenue - Gross margin
= $5000 - $2000 = $3,000.


65. Fixed cost is added to target operating income and then divided to contribute
margin per unit to calculate
A. quantity of units required to sold
B. selling of units
C. sold units
D. contributed units
Answer: Option A
Solution:
Fixed cost is added to target operating income and then divided to contribute margin per
unit to calculate quantity of units required to sold.


66. Contribution margin is $34000 and operating income is $12000, then degree of
operating leverage will be
A. 4.84
B. 2.84
C. 3.84
D. 5.84
Answer: Option B
Solution:
Degree of operating leverage = Contribution margin ÷ Operating income
= $34000 ÷ $12000 = 2.84.


67. If budgeted sales in unit is 50 and breakeven sales in unit is 12, then margin of
safety in units will be
A. 62
B. 38
C. 48
D. 58
Answer: Option B
Solution:
Margin of safety = Budgeted sales - Breakeven sales
= 50 - 12 = 38 units.


68. Type of distribution, which consists of alternative outcomes and probabilities of
events is classified as
A. event table
B. outcome table
C. decision table
D. probability table
Answer: Option C
Solution:
Type of distribution, which consists of alternative outcomes and probabilities of events is
classified as decision table. Decision tables are a concise visual representation for
specifying which actions to perform depending
on given conditions.


69. An effect of fixed cost to change in operating income is classified as
A. uncertain margin
B. certain margin
C. operating margin
D. operating leverage
Answer: Option D
Solution:
An effect of fixed cost to change in operating income is classified as operating leverage.
Operating leverage is a cost-accounting formula that measures the degree to which a firm
or project can increase operating
income by increasing revenue. A business that generates sales with a high gross margin
and low variable costs has high operating leverage.


70. Target operating income is multiplied to tax rate and then subtracted from target
operating income to calculate
A. target net cost
B. target net income
C. target net gain
D. target net loss
Answer: Option B
Solution:
Target operating income is multiplied to tax rate and then subtracted from target operating
income to calculate target net income. Target income is the profit that the managers of a
company expect to attain for a
designated accounting period.

Section-5

1. If gross margin is $6000 and total revenue is $26000, then gross margin percentage
will be
A. 23.08%
B. 24.08%
C. 25.08%
D. 26.08%
Answer: Option A
Solution:
Gross margin percentage = Gross margin ÷ Total revenue × 100
= $6000 ÷ $26000 = 23.08%


2. Fixed cost, and contribution margin percentage for bundle are divided to calculate
A. breakeven costs
B. breakeven revenues
C. breakeven units
D. breakeven sales
Answer: Option B
Solution:
Fixed cost, and contribution margin percentage for bundle are divided to calculate
breakeven revenues. Break-even analysis entails the calculation and examination of the
margin of safety for an entity based on the
revenues collected and associated costs. Analyzing different price levels relating to various
levels of demand a business uses break-even analysis to determine what level of sales are
necessary to cover the company's
total fixed costs.


3. Revenue is $11000 and all variable cost is $6000, then contribution margin would
be
A. -$17000
B. $17,000
C. $5,000
D. -$5000
Answer: Option C
Solution:
Contribution margin = Revenue - Variable cost
= $11000 - $6000 = $5,000.


4. If contribution margin of bundle is $4000 and revenue of bundle is $16000, then
contribution margin percentage for bundle will be
A. 10.00%
B. 15.00%
C. 25.00%
D. 35.00%
Answer: Option C
Solution:
Contribution margin percentage = Contribution margin ÷ Revenue × 100
= $4000 ÷ $16000 × 100 = 25.00%.


5. Quantity or number of units of different products that together make up total sales
of company is called
A. sales mix
B. product mix
C. unit mix
D. quantity mix
Answer: Option A
Solution:
Quantity or number of units of different products that together make up total sales of
company is called sales mix. Sales mix is the relative proportion or ratio of a business's
products that are sold. Sales mix is important
because a company's products usually have different degrees of profitability. Sales mix also
applies to service businesses since the services provided will likely have different levels of
profitability.


6. In cost accounting, financial way of charging price for product above cost, of
acquiring or producing goods is known as
A. sales margin
B. cost margin
C. Gross margin
D. income margin
Answer: Option C
Solution:
In cost accounting, financial way of charging price for product above cost, of acquiring or
producing goods is known as Gross margin. Gross margin is a company's net sales
revenue minus its cost of goods sold
(COGS). In other words, it is the sales revenue a company retains after incurring the direct
costs associated with producing the goods it sells, and the services it provides.


7. If contribution margin is $3000 and revenues are $9000, then all variable costs will
be
A. $12,000
B. $6,000
C. -$6000
D. -$12000
Answer: Option B
Solution:
Variable costs = Revenue - Contribution margin
= $9000 - $3000 = $6,000.


8. In monetary terms, an expected value of outcome is classified as
A. expected value
B. expected decision value
C. expected outcome value
D. expected monetary value
Answer: Option D
Solution:
In monetary terms, an expected value of outcome is classified as expected monetary value.
Expected monetary value (EMV) is a risk management technique to help quantify and
compare risks in many aspects of the
project.


9. All choices for decision that are easily available to managers are classified as
A. outcome
B. actions
C. events
D. distribution
Answer: Option B
Solution:
All choices for decision that are easily available to managers are classified as actions.
Action, act, deed mean something done. Action applies especially to the doing, act to the
result of the doing.


10. In accounting, possibility of deviation of actual amount from an expected amount
is classified as
A. contribution
B. certainty
C. uncertainty
D. margin
Answer: Option C
Solution:
In accounting, possibility of deviation of actual amount from an expected amount is
classified as uncertainty. Uncertainty refers to epistemic situations involving imperfect or
unknown information. It applies to predictions
of future events, to physical measurements that are already made, or to the unknown.


11. If breakeven revenue is $220000 and revenue per bundle is $10000, then number
of bundles to be sold to breakeven will be
A. 32 bundle
B. 22 bundle
C. 42 bundle
D. 38 bundle
Answer: Option B
Solution:
Number of bundles to be sold to breakeven = Breakeven revenue ÷ Revenue per bundle
= $220000 ÷ $10000 = 22 bundle.


12. Gross margin is $7000 and revenues are $16000, then cost of goods sold would
be
A. $23,000
B. -$23000
C. -$9000
D. $9,000
Answer: Option D
Solution:
Cost of goods sold = Revenues - Gross margin
= $16000 - $7000 = $9,000.


13. If sales quantity is 7000 units and breakeven quantity is 1500 units, then margin
of safety would be
A. 4500 units
B. 5500 units
C. 8500 units
D. 9500 units
Answer: Option B
Solution:
Margin of safety = Sales quantity - Breakeven quantity
= 7000 - 1500 = 5500 units.


14. If target net income is $9600 and tax rate is 40%, then target operating income
would be
A. $10,000
B. $12,000
C. $16,000
D. $14,000
Answer: Option C
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15. If budgeted revenue is $50000 and breakeven revenue is $35000, then margin of
safety would be
A. $12,000
B. $14,000
C. $15,000
D. $16,000
Answer: Option C
Solution:
Margin of safety = Budgeted revenue - Breakeven revenue
= $50000 - $35000 = $15,000.


16. If fixed cost is $20000, target operating income is $10000 and contribution margin
per unit is $1200 then required units to be sold will be
A. 55 units
B. 45 units
C. 35 units
D. 25 units
Answer: Option D
Solution:
Required units = ( fixed cost + operating income) ÷ Contribution margin per unit
= ($20000 + $10000) ÷ $1200 = 25 units.


17. If target net income is $36000 and tax rate is 40%, then target operating income
will be
A. $10,000
B. $20,000
C. $40,000
D. $60,000
Answer: Option D
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target-operating-income-will-be-38054)


18. Set of all occurrences that may happen in near future or in any other fixed time
are called
A. events
B. distribution
C. outcome
D. actions
Answer: Option A
Solution:
Set of all occurrences that may happen in near future or in any other fixed time are called
events.


19. If gross margin is $9000 and cost of goods sold is $8000 then revenue will be
A. $1,000
B. -$1000
C. $17,000
D. -$17000
Answer: Option C
Solution:
Revenue = Gross margin + Cost of goods sold
= $9000 + $8000 = $17,000.


20. Economic results that are predicted for possible combinations of events are
classified as
A. margin
B. distribution
C. collection
D. outcome
Answer: Option D
Solution:
Economic results that are predicted for possible combinations of events are classified as
outcome.


21. Formula to calculate contribution margin is
A. revenue - all variable cost
B. revenue + all variable cost
C. cost + revenue
D. revenue - breakeven units
Answer: Option A
Solution:
Formula to calculate contribution margin is revenue - all variable cost. Also known as dollar
contribution per unit, the measure indicates how a particular product contributes to the
overall profit of the company.


22. If margin of safety is $25000 and budgeted revenue is $45000, then margin of
safety in percentage will be
A. 55.56%
B. 25.50%
C. 28.00%
D. 45.00%
Answer: Option A
Solution:
Margin of safety in percentage = Margin of safety ÷ Budgeted revenue × 100
= $25000 ÷ $45000 × 100 = 55.56%.


23. Fixed cost is $25000 and breakeven revenue is $95000, then contribution margin
will be
A. $32
B. $30
C. $25
D. $26.31
Answer: Option B
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then-contribution-margin-will-be-38060)


24. If breakeven revenue is $360000 and revenue per bundle is $12000, then number
of bundles to be sold to breakeven can be
A. 52 bundles
B. 48 bundles
C. 45 bundles
D. 30 bundles
Answer: Option D
Solution:
Number of bundles to be sold to breakeven = Breakeven revenue ÷ Revenue per bundle
= $360000 ÷ $12000 = 30 bundles.


25. If fixed cost is $15000 and breakeven revenue is $45000 then contribution margin
will be
A. 33.34%
B. 43.34%
C. 23.00%
D. 25.00%
Answer: Option A
Solution:
Contribution margin = Fixed cost ÷ Breakeven revenue × 100
= $15000 ÷ $45000 × 100 = 33.34%.


26. If contribution margin is $72000 and operating income is $12000, then degree of
operating leverage would be
A. 8
B. 7
C. 6
D. 5
Answer: Option C
Solution:
Degree of operating leverage = Contribution margin ÷ Operating income
= $72000 ÷ $12000 = 6.


27. Gross margin is divided by revenues to calculate the
A. income margin percentage
B. Gross margin percentage
C. cost margin percentage
D. sales margin percentage
Answer: Option B
Solution:
Gross margin is divided by revenues to calculate the Gross margin percentage.


28. If fixed cost is $65000 and contribution margin percentage for bundle is 0.575,
then breakeven revenue will be
A. $113,043.48
B. $1,200,000
C. $130,000
D. $140,000
Answer: Option A
Solution:
Breakeven revenue = Fixed cost ÷ Contribution margin percentage for bundle
= $65000 ÷ 0.575 = $113,043.48.


29. Gross margin is added into cost of sold goods is to calculate the
A. revenues
B. operating leverage
C. contribution margin
D. operating margin
Answer: Option A
Solution:
Gross margin is added into cost of sold goods is to calculate the revenues. Revenue is the
income generated from normal business operations and includes discounts and deductions
for returned merchandise. It is the
top line or gross income figure from which costs are subtracted to determine net income.
Sales Revenue formula. Revenue is also known as sales on the income statement.


30. Amount of money by which total revenues exceed breakeven revenues is
classified as
A. margin of safety
B. margin of profit
C. margin of loss
D. margin of income
Answer: Option A
Solution:
Amount of money by which total revenues exceed breakeven revenues is classified as
margin of safety. Margin of safety is a principle of investing in which an investor only
purchases securities when their market price is
significantly below their intrinsic value.


31. If budgeted revenue is $20000 and breakeven revenue is $15000, then margin of
safety will be
A. $35,000
B. $13,000
C. $5,000
D. $10,000
Answer: Option C
Solution:
Margin of safety = Budgeted revenue - Breakeven revenue
= $20000 - $15000 = $5,000.


32. Graph, which shows change in sold quantity and its effect on operating income is
called
A. PV graph
B. CV graph
C. SO graph
D. QI graph
Answer: Option A
Solution:
Graph, which shows change in sold quantity and its effect on operating income is called PV
graph. The PV diagram models the relationship between pressure (P) and volume (V) for an
ideal gas.


33. Contribution margin is divided to operate income to calculate
A. degree of operating leverage
B. degree of change
C. degree of change in margin
D. degree of change in income
Answer: Option A
Solution:
Contribution margin is divided to operate income to calculate degree of operating leverage.
The Degree of Operating Leverage (DOL) is the leverage ratio that sums up the effect of an
amount of operating leverage on
the company's earnings before interests and taxes (EBIT).


34. If total units of product A, B and C are as 200,300 and 400 respectively then sales
mix would be
A. 100 units
B. 900 units
C. 400 units
D. 500 units
Answer: Option B
Solution:
Sales mix = Total units of product (A + B + C)
= 200 + 300 + 400 = 900 units.


35. Difference between actual result and corresponding amount of flexible budget, on
basis of actual level of output is classified as
A. sales mix variance
B. sales volume variance
C. flexible budget variance
D. static budget variance
Answer: Option C
Solution:
Difference between actual result and corresponding amount of flexible budget, on basis of
actual level of output is classified as flexible budget variance. A flexible budget variance is
any difference between the results
generated by a flexible budget model and actual results. If actual revenues are inserted into
a flexible budget model, this means that any variance will arise between budgeted and
actual expenses, not revenues.


36. In corporate costs, costs incur for employee recruitment, development and
training are classified as
A. discretionary costs
B. human resource management costs
C. corporate administration costs
D. treasury costs
Answer: Option B
Solution:
In corporate costs, costs incur for employee recruitment, development and training are
classified as human resource management costs. They include all of the direct costs of
recruitment, selection, hiring, and
placement, as well as certain indirect costs. Recruitment costs are costs incurred to identify
sources of human resources, including those both inside and outside an organization.


37. In customer cost hierarchy, cost of activities related to specific channel of
distribution is classified as
A. discretionary channel costs
B. corporate-sustaining costs
C. distribution-channel costs
D. engineered resource costs
Answer: Option C
Solution:
In customer cost hierarchy, cost of activities related to specific channel of distribution is
classified as distribution-channel costs. A distribution channel is a chain of businesses or
intermediaries through which a good or
service passes until it reaches the final buyer or the end consumer. Distribution channels
can include wholesalers, retailers, distributors, and even the Internet.


38. Difference between corresponding static budget and flexible budget amount is
called
A. sales volume variance
B. sales mix variance
C. sales quantity variance
D. market share variance
Answer: Option A
Solution:
Difference between corresponding static budget and flexible budget amount is called sales
volume variance. Sales volume variance is the change in revenue or profit caused by the
difference between actual and
budgeted sales units.


39. Difference between budgeted contribution margin for actual sales mix and
budgeted sales mix is called
A. sales quantity variance
B. cost mix variance
C. volume mix variance
D. sales mix variance
Answer: Option D
Solution:
Difference between budgeted contribution margin for actual sales mix and budgeted sales
mix is called sales mix variance. Sales mix variance is the difference between a company's
budgeted sales mix and the actual
sales mix. Sales mix is the proportion of each product sold relative to total sales.


40. executive salaries, rent and other general administration cost in corporate costs
are classified under
A. human resource management costs
B. corporate administration costs
C. treasury costs
D. discretionary costs
Answer: Option B
Solution:
Executive salaries, rent and other general administration cost in corporate costs are
classified under corporate administration costs. Administrative expenses are costs related
to the general administration of the
business. This category of costs does not relate specifically to any business function such
as production and sales. These costs are incurred at the corporate level, rather than by
individual departments or business
units.


41. If sales volume variance is $8500 and static budget amount is $2000, then flexible
budget amount would be
A. $6,500
B. $6,600
C. $6,700
D. $6,800
Answer: Option A
Solution:
Flexible budget amount = Sales volume variance - Static budget amount
= $8500 - $2000 = $6,500.


42. Difference between static budget amount and flexible budget amount is named as
A. sales mix variance
B. sales volume variance
C. flexible budget variance
D. static budget variance
Answer: Option B
Solution:
Difference between static budget amount and flexible budget amount is named as sales
volume variance. Sales volume variance is the change in revenue or profit caused by the
difference between actual and budgeted
sales units.


43. Corporate sustaining costs and distribution channel costs are also classified as
Answer & Solution Discuss in Board (https://www.examveda.com/corporate-sustainingcosts-
and-distribution-channel-costs-are-also-classified-as-38080) Save for Later
A. indirect costs
B. variable costs
C. fixed costs
D. direct costs
Answer: Option C
Solution:
Corporate sustaining costs and distribution channel costs are also classified as fixed costs.
A fixed cost is a cost that does not change with an increase or decrease in the amount of
goods or services produced or sold.
Fixed costs are expenses that have to be paid by a company, independent of any specific
business activities.


44. In customer cost hierarchy, costs of all activities incurred to sell group of units to
end consumers are classified as
A. customer sustaining costs
B. customer output unit-level costs
C. customer batch-level costs
D. corporate sustaining costs
Answer: Option C
Solution:
In customer cost hierarchy, costs of all activities incurred to sell group of units to end
consumers are classified as customer batch-level costs. Batch-level costs are expenses
related to a group of products that cannot
readily be traced back to an individual item. In other words, these production costs are
incurred to produce a set of products or a batch and can't be allocated to an individual unit.


45. If an actual result is $5500 and corresponding amount of flexible budget on basis
of actual level of output is $3500, then flexible budget variance will be
A. $2,500
B. $5,500
C. $3,500
D. $2,000
Answer: Option D
Solution:
Flexible budget variance = Actual result - Flexible budget
= $5500 - $3500 = $2,000.


46. If flexible budget amount is $7500 and sales volume variance is $6500, then static
budget amount would be
A. $7,500
B. $6,500
C. $1,000
D. $10,000
Answer: Option C
Solution:
Static budget amount = Flexible budget amount - Sales volume variance
= $7500 - $6500 = $1,000.


47. For increasing sales, decrease in selling price below selling price list is known as
A. partial discount
B. corporate discount
C. treasury discount
D. price discount
Answer: Option D
Solution:
For increasing sales, decrease in selling price below selling price list is known as price
discount. Typically, a store will discount an item by a percent of the original price. The rate
of discount is usually given as a percent,
but may also be given as a fraction.


48. Customer sustaining costs, customer batch-level costs and customer output-unit
level costs are classified as
A. customer level indirect costs
B. customer level direct costs
C. corporate level direct costs
D. corporate level indirect costs
Answer: Option A
Solution:
Customer sustaining costs, customer batch-level costs and customer output-unit level costs
are classified as customer level indirect costs. Indirect costs include administration,
personnel and security costs. These are
those costs which are not directly related to production. Some indirect costs may be
overhead. But some overhead costs can be directly attributed to a project and are direct
costs.


49. If budgeted contribution margin for budgeted and actual sales mix are $35000 and
$27000, then sales mix variance will be
A. $8,000
B. $80,000
C. $62,000
D. $35,000
Answer: Option A
Solution:
Sales mix variance = Budgeted sales - Actual sales
= $35000 - $27000 = $8,000.


50. In corporate costs, cost incurred to finance construction of new equipment are
classified as
A. treasury costs
B. discretionary costs
C. human resource management costs
D. corporate administration costs
Answer: Option A
Solution:
In corporate costs, cost incurred to finance construction of new equipment are classified as
treasury costs.


51. In static budget, difference between corresponding budgeted amount and actual
result is called
A. sales mix variance
B. sales volume variance
C. flexible budget variance
D. static budget variance
Answer: Option D
Solution:
In static budget, difference between corresponding budgeted amount and actual result is
called static budget variance. Static budget variances are the differences between what a
company or individual thought it would
spend in its budget versus what it actually did.


52. An analysis and reporting of revenues earned, and incurred costs to earn these
revenues from customers is classified as
A. partial productivity analysis
B. treasury cost analysis
C. customer profitability analysis
D. customer cost analysis
Answer: Option C
Solution:
An analysis and reporting of revenues earned, and incurred costs to earn these revenues
from customers is classified as customer profitability analysis. Customer Profitability
Analysis is a tool from managerial
accounting that shifts the focus from product line profitability to individual customer
profitability.


53. Cost of particular cost object which cannot be traced in economically plausible
way is termed as
A. indirect cost
B. partial cost
C. benchmark cost
D. direct cost
Answer: Option A
Solution:
Cost of particular cost object which cannot be traced in economically plausible way is
termed as indirect cost. Indirect costs are costs used by multiple activities, and which
cannot therefore be assigned to specific cost
objects.


54. Division of all costs related to customers on basis of different cost allocation
bases or cost drivers is called
A. customer cost hierarchy
B. customer profitability hierarchy
C. treasury costing hierarchy
D. partial costing hierarchy
Answer: Option A
Solution:
Division of all costs related to customers on basis of different cost allocation bases or cost
drivers is called customer cost hierarchy. The cost hierarchy is a classification system used
in activity-based costing that
designates activities based on how easily they can be traced to a product.


55. In customer cost hierarchy, costs of all incurred activities to sell a unit of product
are classified as
A. customer sustaining costs
B. customer output unit-level costs
C. customer batch-level costs
D. corporate sustaining costs
Answer: Option B
Solution:
In customer cost hierarchy, costs of all incurred activities to sell a unit of product are
classified as customer output unit-level costs. Output unit-level costs are the costs of
activities performed on each individual unit of a
product or service.


56. Which of following do not include among major categories of corporate costs?
A. human resource management costs
B. corporate administration costs
C. treasury costs
D. discretionary costs
Answer: Option D
Solution:
Corporate administration costs do not include among major categories of corporate costs.
These costs include the accounting, human resources, legal, marketing, and sales
functions. When corporate costs are
incurred, they are considered to be period costs, and so are charged to expense as
incurred.


57. In customer cost hierarchy, costs of those activities that cannot be traced to
distribution channels or individual customers are called
A. discretionary channel costs
B. corporate-sustaining costs
C. distribution-channel costs
D. engineered resource costs
Answer: Option B
Solution:
In customer cost hierarchy, costs of those activities that cannot be traced to distribution
channels or individual customers are called corporate-sustaining costs.


58. If an actual result in static budget is $2500 and corresponding budgeted amount
is $2200, then static budget variance will be
A. $3,000
B. $300
C. $4,700
D. $4,500
Answer: Option B
Solution:
Static budget variance = Static budget - Corresponding budgeted amount
= $2500 - $2200 = $300.


59. In customer cost hierarchy, costs of individual customer support activities are
classified as
A. discretionary channel costs
B. corporate-sustaining costs
C. distribution-channel costs
D. customer-sustaining costs
Answer: Option D
Solution:
In customer cost hierarchy, costs of individual customer support activities are classified as
customer-sustaining costs. A customer-sustaining cost is the cost of resources consumed to
service a customer regardless of
the number of units sold to the customer.


60. Pricing method used by services companies, such as home repair services,
architectural firms and automobile repair services is known as
A. product life cycle method
B. life cycle budgeting method
C. life cycle costing method
D. time and material method
Answer: Option D
Solution:
Pricing method used by services companies, such as home repair services, architectural
firms and automobile repair services is known as time and material method. The Pricing
Methods are the ways in which the price
of goods and services can be calculated by considering all the factors such as the
product/service, competition, target audience, product's life cycle, firm's vision of expansion,
etc. influencing the pricing strategy as a
whole.


61. Practice by seller of offering same product at different prices, to different
customers is known as
A. price incurrence
B. price discrimination
C. price targeting
D. price engineering
Answer: Option B
Solution:
Practice by seller of offering same product at different prices, to different customers is
known as price discrimination. Price discrimination is a selling strategy that charges
customers different prices for the same product
or service based on what the seller thinks they can get the customer to agree to.


62. Total cost incur by customer to use, acquire, maintain and dispose service or
product is classified as
A. budgeted life cycle
B. targeted life cycle
C. customer life cycle
D. operating life cycle
Answer: Option C
Solution:
Total cost incur by customer to use, acquire, maintain and dispose service or product is
classified as customer life cycle. The customer lifecycle is a term that describes the different
steps a customer goes through when
they are considering, buying, using, and remaining loyal to a particular product or service.
This lifecycle has been broken down into five distinct stages: reach, acquisition, conversion,
retention, and loyalty.


63. If cost is eliminated, then reducing perceived usefulness that customers can
obtain by using market offering will come under
A. designed-in costs
B. locked-in costs
C. value added cost
D. non-value added cost
Answer: Option C
Solution:
If cost is eliminated, then reducing perceived usefulness that customers can obtain by using
market offering will come under value added cost. A value added cost is incurred when an
asset is consumed in order to
increase the value of goods or services to the consumer.


64. If total production is 25000 units and target annual operating income is $300000
then target operating income per unit would be
A. $15
B. $12
C. $16
D. $18
Answer: Option B
Solution:
Target operating income = Target annual operating income ÷ Total production
= $300000 ÷ 25000 = $12.


65. Costs that are planned in future and has not been incurred are known as
A. designed-in costs
B. locked-in costs
C. value added cost
D. both a and b
Answer: Option A
Solution:
Costs that are planned in future and has not been incurred are known as designed-in costs.
Design to cost is the process of reducing cost in the requirements and design phase of a
project.


66. Target annual operating income is divided with invested capital to calculate
A. target rate of return on investment
B. operating income per unit
C. operating cost per unit
D. cost of goods sold
Answer: Option A
Solution:
Target annual operating income is divided with invested capital to calculate target rate of
return on investment. A rate of return (RoR) is the net gain or loss on an investment over a
specified time period, expressed as a
percentage of the investment's initial cost.


67. A technique, which accumulates and tracks costs of business function in value
chain attributed to each market offering from R&D to final customer
support, is called
A. product life cycle
B. life cycle budgeting
C. life cycle costing
D. target costing
Answer: Option C
Solution:
A technique, which accumulates and tracks costs of business function in value chain
attributed to each market offering from R&D to final customer support, is called life cycle
costing. Life cycle costing is the process of
compiling all costs that the owner or producer of an asset will incur over its lifespan.


68. If cost base is $350 and markup component is 11% then prospective selling price
will be
A. 388.5
B. 350
C. 362
D. 368.5
Answer: Option A
Solution:
Prospective selling price = $350 × 111% = 388.5.


69. An estimated price, which is expected to be paid by customers for particular
market offering is classified as
A. target price
B. target cost
C. outsource price
D. off shore price
Answer: Option A
Solution:
An estimated price, which is expected to be paid by customers for particular market offering
is classified as target price. Target price is on which Investor want to sell the security.so
investor put his target price in his/her
demat account while place selling order.


70. An insensitivity of demand in relevance to change in price will be called
A. demand elasticity
B. price elasticity
C. price inelasticity
D. demand inelasticity
Answer: Option D
Solution:
An insensitivity of demand in relevance to change in price will be called demand inelasticity.
Inelastic demand is when the buyer's demand does not change as much as the price
changes.

Section-6


1. An estimated cost per unit in long run, which enables company to achieve it's per
unit target, operating income is classified as
A. target operating income per unit
B. target cost per unit
C. total current full cost
D. total cost per unit
Answer: Option B
Solution:
An estimated cost per unit in long run, which enables company to achieve it's per unit
target, operating income is classified as target cost per unit. The target cost of a product is
the expected selling price of the product
minus the desired profit from selling it. In other words, target cost is really a measure of how
low costs need to be to make a certain profit.


2. Concept, which states that resources are used to meet particular goals is
A. cost incurrence
B. valued incurrence
C. locked incurrence
D. non valued incurrence
Answer: Option A
Solution:
Concept, which states that resources are used to meet particular goals is cost incurrence.
Cost incurrence refers to the receipt of goods or services at a bargained price in an
exchange.


3. Target price is subtracted from per unit target operating income to calculate
A. total current full cost
B. total cost per unit
C. target operating income per unit
D. target cost per unit
Answer: Option D
Solution:
Target price is subtracted from per unit target operating income to calculate target cost per
unit. The target cost of a product is the expected selling price of the product minus the
desired profit from selling it. In other
words, target cost is really a measure of how low costs need to be to make a certain profit.


4. Selection of target price, understanding customer requirements, improving
product designs and use of cross functional teams are considered as
aspects of
A. target pricing
B. target costing
C. value engineering
D. all of above
Answer: Option D
Solution:
Selection of target price, understanding customer requirements, improving product designs
and use of cross functional teams are considered as aspects of target pricing, target costing
and value engineering.


5. Kind of cost which on elimination, would not reduce perceived usefulness that
customers can obtain by using market offering is known as
A. designed-in costs
B. locked-in costs
C. value added cost
D. non-value added cost
Answer: Option D
Solution:
Kind of cost which on elimination, would not reduce perceived usefulness that customers
can obtain by using market offering is known as non-value added cost. A non-value added
cost is a production expense that
does not increase the amount customers are willing to pay for the finished product.


6. Companies that perform in competitive markets using pricing approach are known
as
A. independent revenue approach
B. market based approach
C. dependent revenue approach
D. cost based approach
Answer: Option B
Solution:
Companies that perform in competitive markets using pricing approach are known as
market based approach. In the Market-Based Approach, the value of an asset is determined
by comparing it with the market prices
of recently sold similar sized assets in recent time period like a quarter.


7. An income, which a company aims to earn by selling each unit of market offering
is classified as
A. target operating income per unit
B. target cost per unit
C. total current full cost
D. total cost per unit
Answer: Option A
Solution:
An income, which a company aims to earn by selling each unit of market offering is
classified as target operating income per unit. Target income is the profit that the managers
of a company expect to attain for a
designated accounting period.


8. Systematic evaluation of value chain, to reduce costs and high quality to achieve
satisfied customers is known as
A. reverse engineering
B. value engineering
C. target engineering
D. operation engineering
Answer: Option B
Solution:
Systematic evaluation of value chain, to reduce costs and high quality to achieve satisfied
customers is known as value engineering. Value engineering is a systematic and organized
approach to providing the necessary
functions in a project at the lowest cost. Value engineering promotes the substitution of
materials and methods with less expensive alternatives, without sacrificing functionality.


9. Major approaches to make decisions about pricing include
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A. market based
B. sunk cost
C. cost based
D. both a and c
Answer: Option D
Solution:
Major approaches to make decisions about pricing include market based and cost based.


10. Practice of seller to charge higher price for same market offering is classified as
A. peak-load pricing
B. elastic pricing
C. elastic demand
D. inelastic demand
Answer: Option A
Solution:
Practice of seller to charge higher price for same market offering is classified as peak-load
pricing. The Peak Load Pricing is the pricing strategy wherein the high price is charged for
the goods and services during times
when their demand is at peak.


11. Companies that perform in less competitive markets and their market offerings
significantly differ are classified as
A. independent revenue approach
B. market based approach
C. cost based approach
D. dependent revenue approach
Answer: Option C
Solution:
Companies that perform in less competitive markets and their market offerings significantly
differ are classified as cost based approach. Cost based pricing is one of the pricing
methods of determining the selling price of
a product by the company, wherein the price of a product is determined by adding a profit
element (percentage) in addition to the cost of making the product.


12. Process which leads to disassembling and analysis of competitors, operating
activities to become acquainted with competitors' technologies is called
A. outsource engineering
B. reverse engineering
C. target engineering
D. off shore engineering
Answer: Option B
Solution:
Process which leads to disassembling and analysis of competitors, operating activities to
become acquainted with competitors' technologies is called reverse engineering. Reverse
engineering, also called back
engineering, is the process by which a man-made object is deconstructed to reveal its
designs, architecture, or to extract knowledge from the object; similar to scientific research,
the only difference being that scientific
research is about a natural phenomenon.


13. Technique, which accumulates and tracks revenues of business function in value
chain attributed to each market offering from R&D to final customer
support is called
A. product life cycle
B. life cycle budgeting
C. life cycle costing
D. target costing
Answer: Option B
Solution:
Technique, which accumulates and tracks revenues of business function in value chain
attributed to each market offering from R&D to final customer support is called life cycle
budgeting. A life-cycle budget is an
estimate of the total amount of sales and profits to be garnered from a product over its
estimated life span.


14. Major influential factors on supply and demand include
A. customers
B. costs
C. competitors
D. all of above
Answer: Option A
Solution:
Major influential factors on supply and demand include customers.


15. Product costing technique in which markup component is added into cost base,
to set a target price is known as
A. market based approach
B. cost incurrence pricing
C. cost plus pricing
D. locked-in cost pricing
Answer: Option C
Solution:
Product costing technique in which markup component is added into cost base, to set a
target price is known as cost plus pricing. Product costing methods are used to assign a
cost to a manufactured product.


16. If invested capital is $150000 and target rate of return on investment is 16%, then
target annual operating income would be
A. $27,000
B. $26,000
C. $24,000
D. $25,000
Answer: Option C
Solution:
Target annual operating income = Invested capital × Target rate of return on investment
= $150000 × 16% = $24,000.


17. In cost-plus pricing, 'plus' refers to a component named as
A. off shore cost
B. markup
C. sunk cost
D. outsource cost
Answer: Option B
Solution:
In cost-plus pricing, 'plus' refers to a component named as markup. Cost-plus pricing, also
called markup pricing, is the practice by a company of determining the cost of the product to
the company and then adding a
percentage on top of that price to determine the selling price to the customer.


18. Span time from initial research and development of product till support and
customer service, if not offered for that particular product will be called
A. product life cycle
B. life cycle budgeting
C. life cycle costing
D. target costing
Answer: Option A
Solution:
Span time from initial research and development of product till support and customer
service, if not offered for that particular product will be called product life cycle. This concept
is used by management and by
marketing professionals as a factor in deciding when it is appropriate to increase
advertising, reduce prices, expand to new markets, or redesign packaging.


19. Kind of costs that has been occurred in past are also known as
A. unrecorded costs
B. recorded costs
C. sunk costs
D. bunked costs
Answer: Option C
Solution:
Kind of costs that has been occurred in past are also known as sunk costs. A sunk cost is a
cost that an entity has incurred, and which it can no longer recover. Sunk costs should not
be considered when making the
decision to continue investing in an ongoing project, since these costs cannot be recovered.


20. Factor, which are largely considered in making or buying decisions is
A. quality of suppliers
B. dependability of suppliers
C. production irrelevancy
D. both a and b
Answer: Option D
Solution:
Factor, which are largely considered in making or buying decisions isquality of suppliers and
dependability of suppliers .


21. third step in decision making process is
A. linear predictions
B. dependent predictions
C. making predictions
D. independent predictions
Answer: Option C
Solution:
Third step in decision making process is making predictions. A step-by-step approach to the
decision making process is an efficient way to make thoughtful, informed decisions.


22. As compared to irrelevant cost, occurrence of relevant costs must
A. have high correlation
B. be in future
C. be in past
D. be zero correlated
Answer: Option B
Solution:
As compared to irrelevant cost, occurrence of relevant costs must be in future. Relevant
costs are affected by a new decision. Irrelevant costs have to be incurred irrespective of a
new decision. The relevant costs affect
the future cash flows, whereas the irrelevant costs do not affect future cash flows.


23. Decisions made by team of individuals or single person, whether to outsource
products or in-source are classified as
A. demand or supply decisions
B. make or buy decisions
C. relevant or irrelevant decision
D. idle or busy decisions
Answer: Option B
Solution:
Decisions made by team of individuals or single person, whether to outsource products or
in-source are classified as relevant or irrelevant decision.


24. Difference that exists between total revenues, can be earned from two different
alternatives is termed as
A. independent revenue
B. incremental revenue
C. differential revenue
D. dependent revenue
Answer: Option C
Solution:
Difference that exists between total revenues, can be earned from two different alternatives
is termed as differential revenue. Differential revenue is the difference in sales that will be
generated by two different courses
of action. The concept is commonly used when evaluating which of two (or more)
investments to make in a business.


25. An example of quantitative factor is
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A. employee behavior at workplace
B. employee satisfaction
C. employee morale
D. cost of materials
Answer: Option D
Solution:
An example of quantitative factor is cost of materials. Material cost is the cost of materials
used to manufacture a product or provide a service.


26. relevant costs are classified in relevance concepts as
A. expected future costs
B. serial costs
C. parallel costs
D. abnormal costs
Answer: Option A
Solution:
Relevant costs are classified in relevance concepts as expected future costs. A relevant
cost is a cost that only relates to a specific management decision, and which will change in
the future as a result of that decision.


27. Financial factors measured in numerical terms, having some monetary value are
considered as
A. qualitative factors
B. quantitative factors
C. expected factors
D. recorded factors
Answer: Option B
Solution:
Financial factors measured in numerical terms, having some monetary value are considered
as quantitative factors. Quantitative factors are numerical outcomes from a decision that
can be measured. These factors are
commonly included in various financial analyses, which are then used to evaluate a
situation.


28. Forgone contribution of resources, in to revenues because of not using
resources, in next best use is classified as
A. in-source cost
B. opportunity cost
C. offshore cost
D. outsource cost
Answer: Option B
Solution:
Forgone contribution of resources, in to revenues because of not using resources, in next
best use is classified as opportunity cost. Opportunity cost refers to what you have to give
up to buy what you want in terms of
other goods or services.


29. Difference of cost, which occurs while considering alternatives can be classified
as
A. dependent cost
B. independent cost
C. incremental cost
D. differential cost
Answer: Option D
Solution:
Difference of cost, which occurs while considering alternatives can be classified as
differential cost. Differential cost is the difference between the cost of two alternative
decisions, or of a change in output levels. The
concept is used when there are multiple possible options to pursue, and a choice must be
made to select one option and drop the others.


30. Costs such as book value of old machines are $25000 can be a classified as an
example of
A. salvages
B. relevant
C. irrelevant
D. depreciated cost
Answer: Option C
Solution:
Costs such as book value of old machines are $25000 can be a classified as an example of
irrelevant cost. An irrelevant cost is a cost that will not change as the result of a
management decision.


31. An example of qualitative factor is
A. employee morale
B. cost of materials
C. cost of workers
D. cost of marketing
Answer: Option A
Solution:
An example of qualitative factor is employee morale. Employee morale describes the overall
outlook, attitude, satisfaction, and confidence that employees feel at work.


32. Fourth step in decision making process is
A. linear correlation
B. making decisions
C. implement decisions
D. evaluate performance
Answer: Option B
Solution:
Fourth step in decision making process is making decisions. Decision Making Process
helps manager and other professional to make choices by examining a decision , collecting
information for solving problem.


33. Formal method of making choices, considering help of quantitative and
qualitative analysis is classified as
A. quantitative analysis
B. decision method
C. qualitative method
D. linearity method
Answer: Option B
Solution:
Formal method of making choices, considering help of quantitative and qualitative analysis
is classified as decision method. Decision-making is the process of identifying and choosing
alternatives based on the values,
preferences and beliefs of the decision-maker. Every decision-making process produces a
final choice, which may or may not prompt action.


34. Type of outcomes, which can never be measured in numerical terms in books of
accounts are classified as
A. expected factors
B. recorded factors
C. qualitative factors
D. quantitative factors
Answer: Option C
Solution:
Type of outcomes, which can never be measured in numerical terms in books of accounts
are classified as qualitative factors. Qualitative factors are outcomes from certain actions
that are difficult or impossible to
measure.


35. Decisions made by company, which products to manufacture and sell and in what
quantities out, of many product lines are called
A. incremental decisions
B. outsource decisions
C. product mix decisions
D. in-source decisions
Answer: Option C
Solution:
Decisions made by company, which products to manufacture and sell and in what quantities
out, of many product lines are called product mix decisions. Product mix decision refers to
the decisions regarding adding a
new or eliminating any existing product from the product mix, adding a new product line,
lengthening any existing line, or bringing new variants of a brand to expand the business
and to increase the profitability.


36. Production of goods or services that can be bought from outside suppliers is
classified as
A. idle sourcing
B. sunk sourcing
C. outsourcing
D. in-sourcing
Answer: Option D
Solution:
Production of goods or services that can be bought from outside suppliers is classified as
in-sourcing. Insourcing is a business practice in which work that would otherwise have been
contracted out is performed in
house. Insourcing often involves bringing in specialists to fill temporary needs or training
existing personnel to perform tasks that would otherwise have been outsourced.


37. Cost such as dispose value of an old machine is $6000 is classified as
A. irrelevant
B. depreciated cost
C. salvages
D. relevant
Answer: Option D
Solution:
Cost such as dispose value of an old machine is $6000 is classified as relevant cost.
Relevant cost is a managerial accounting term that describes avoidable costs that are
incurred only when making specific business
decisions.


38. Costs which are related to different functions of value chain of company, such as
marketing and manufacturing costs are considered as
A. value costs
B. future function costs
C. business function costs
D. sunk function costs
Answer: Option C
Solution:
Costs which are related to different functions of value chain of company, such as marketing
and manufacturing costs are considered as business function costs. Business function
costs are the total sum of all expenses
both fixed and variable for a specific step in the value chain. In other words, it's the total
cost associated with each step a product takes from the manufacturer to the consumer.


39. Type of outcomes that can be measured in numerical terms are classified as
A. qualitative factors
B. quantitative factors
C. expected factors
D. recorded factors
Answer: Option B
Solution:
Type of outcomes that can be measured in numerical terms are classified as quantitative
factors. Quantitative factors are outcomes from certain actions that are measurable in
numbers or numeric terms. In other words,
managers can quantify the effects of a decision. This could include measuring costs,
revenues, or even non-financial data for outcomes to a decision.


40. Low level managers in organizations are to make decisions about
A. net income irrelevancy
B. operating income maximization
C. operating income minimization
D. operating income relevancy
Answer: Option B
Solution:
Low level managers in organizations are to make decisions about operating income
maximization. Income smoothing is the shifting of revenue and expenses among different
reporting periods in order to present the
false impression that a business has steady earnings. Management typically engages in
income smoothing to increase earnings in periods that would otherwise have unusually low
earnings.


41. Second step in decision making process is
A. multi-collinearity information
B. quantitative information
C. qualitative analysis
D. obtaining information
Answer: Option D
Solution:
Second step in decision making process is obtaining information. Gather relevant
information Collect some pertinent information before you make your decision: what
information is needed, the best sources of
information, and how to get it. This step involves both internal and external “work.” Some
information is internal: you'll seek it through a process of self-assessment.


42. Costs that behaves as irrelevant costs in process of decision making are
classified as
A. past costs
B. future costs
C. expected costs
D. sunk costs
Answer: Option A
Solution:
Costs that behaves as irrelevant costs in process of decision making are classified as past
costs. A past cost is money that has already been spent. These funds cannot be recovered,
so the related cost is irrelevant for
decision-making purposes. A past cost is also known as a sunk cost.


43. An amount of additional cost incurred for any particular activity is classified as
A. incremental cost
B. differential cost
C. dependent cost
D. independent cost
Answer: Option A
Solution:
An amount of additional cost incurred for any particular activity is classified as incremental
cost. Incremental cost also referred to as marginal cost, is the total change a company
experiences within its balance sheet or
income statement due to the production and sale of an additional unit of product.
Incremental costs may be classified as relevant costs in managerial accounting.


44. In today's global world, an outsourcing of products or services from lower cost
countries is classified as
A. differential in-sourcing
B. off-shoring
C. incremental outsourcing
D. differential outsourcing
Answer: Option B
Solution:
In today's global world, an outsourcing of products or services from lower cost countries is
classified as off-shoring. Offshoring is the relocation of a business process from one country
to another—typically an operational
process, such as manufacturing, or supporting processes, such as accounting.


45. Costs that are unavoidable and remain unchanged no matter what done are
classified as
A. sunk costs
B. bunked costs
C. unrecorded costs
D. recorded costs
Answer: Option A
Solution:
Costs that are unavoidable and remain unchanged no matter what done are classified as
sunk costs. A sunk cost is a cost that an entity has incurred, and which it can no longer
recover. Sunk costs should not be
considered when making the decision to continue investing in an ongoing project, since
these costs cannot be recovered.


46. When an essential information for calculation of income statement is missing,
then costs that can be considered for this purpose is called
A. expected cost
B. expected revenues
C. irrelevant costs
D. relevant costs
Answer: Option D
Solution:
When an essential information for calculation of income statement is missing, then costs
that can be considered for this purpose is called relevant costs. Relevant cost is a
managerial accounting term that describes
avoidable costs that are incurred only when making specific business decisions. The
concept of relevant cost is used to eliminate unnecessary data that could complicate the
decision-making process.


47. In relevance concepts, relevant revenues are also termed as
A. parallel revenues
B. abnormal revenues
C. expected future revenues
D. serial revenues
Answer: Option C
Solution:
In relevance concepts, relevant revenues are also termed as expected future revenues. The
revenue recognition principle is a cornerstone of accrual accounting together with the
matching principle. They both determine
the accounting period in which revenues and expenses are recognized. According to the
principle, revenues are recognized when they are realized or realizable, and are earned
(usually when goods are transferred or
services rendered), no matter when cash is received.


48. First step in decision making process is to
A. identify problem
B. identify linear variable
C. identify certainty
D. identify multiplier
Answer: Option A
Solution:
First step in decision making process is to identify problem. The first step in making the right
decision is recognizing the problem or opportunity and deciding to address it. Determine
why this decision will make a
difference to your customers or fellow employees.


49. Buying of goods or services from suppliers or vendors of some other country
instead of local supplier is classified as
A. outsourcing
B. insourcing
C. idle sourcing
D. sunk sourcing
Answer: Option A
Solution:
Buying of goods or services from suppliers or vendors of some other country instead of
local supplier is classified as outsourcing. Outsourcing is the business practice of hiring a
party outside a company to perform
services and create goods that traditionally were performed in-house by the company's own
employees and staff. Outsourcing is a practice usually undertaken by companies as a costcutting
measure.


50. In broader categories, outcomes of decisions are classified as
A. sunk factors
B. quantitative factors
C. qualitative factors
D. both B and C
Answer: Option D
Solution:
In broader categories, outcomes of decisions are classified as quantitative factors and
qualitative factors


51. Cost of new machine is considered as
A. relevant
B. bunk
C. dispose value
D. sunk
Answer: Option A
Solution:
Cost of new machine is considered as relevant. Relevant cost is a managerial accounting
term that describes avoidable costs that are incurred only when making specific business
decisions.


52. An investment of money in idle inventory, in place of investing same amount of
money somewhere else is an example of
A. offshore cost
B. outsource cost
C. in-source cost
D. opportunity cost
Answer: Option D
Solution:
An investment of money in idle inventory, in place of investing same amount of money
somewhere else is an example of opportunity cost. Opportunity costs represent the benefits
an individual, investor or business
misses out on when choosing one alternative over another.


53. Book value of existing equipment is a historical cost and not necessary for
deciding equipment replacement, thus it can be considered as
A. operating cost
B. sunk cost
C. in-house cost
D. out-house cost
Answer: Option B
Solution:
Book value of existing equipment is a historical cost and not necessary for deciding
equipment replacement, thus it can be considered as sunk cost. A sunk cost is a cost that
an entity has incurred, and which it can no
longer recover.


54. Some of methods used for determining transfer prices are
A. market-based transfer prices
B. cost-based transfer prices
C. negotiated transfer prices
D. all of above
Answer: Option D
Solution:
Some of methods used for determining transfer prices are market-based transfer prices,
cost-based transfer prices and negotiated transfer prices.


55. A situation when groups and individuals work together for achieving a particular
goal can be classified as
A. motivation
B. goal congruence
C. effort
D. autonomy
Answer: Option B
Solution:
A situation when groups and individuals work together for achieving a particular goal can be
classified as goal congruence. Goal congruence is a situation in which people in multiple
levels of an organization share the
same goal. A well thought-out organizational design causes goal congruence and results in
an organization being able to work together to accomplish a strategy.


56. An exertion for achieving a set goal is known as
A. motivation
B. goal congruence
C. effort
D. autonomy
Answer: Option C
Solution:
An exertion for achieving a set goal is known as effort. The term effort refers to the specific
and quantifiable count and/or measure of definable labor units that it is deemed are to be
required in the attempts to arrive at
completion of a phase (or of the entirety) of a particular schedule activity and/or work
breakdown structure component, a distinct control account, or the project as a whole.


57. If opportunity cost per barrel is $45 per unit, incremental cost per barrel is $65,
then minimum transfer price will be
A. $45
B. $110
C. $20
D. $65
Answer: Option B
Solution:
Minimum transfer price = Opportunity cost per barrel + incremental cost per barrel
= $45 + $65
= $110.


58. A desire to achieve a particular goal with pursuit of that goal is called
A. motivation
B. goal congruence
C. effort
D. autonomy
Answer: Option A
Solution:
A desire to achieve a particular goal with pursuit of that goal is called motivation. Motivation
in management is the process through which managers encourage employees to be
productive and effective.


59. Decision making methods, used for subunits of company are highly
interdependent on each other is called
A. incongruent decision making
B. functional decision making
C. congruent decision making
D. duplication decision making
Answer: Option A
Solution:
Decision making methods, used for subunits of company are highly interdependent on each
other is called incongruent decision making.


60. Method of pricing, when two separate pricing methods are used to price transfer
of products from one subunit to another, is called
A. dual pricing
B. functional pricing
C. congruent pricing
D. optimal pricing
Answer: Option A
Solution:
Method of pricing, when two separate pricing methods are used to price transfer of products
from one subunit to another, is called dual pricing. Dual pricing is a situation in which the
same product or service is sold at
different prices in different markets.


61. An organizational practice, according to which decision making freedom is
available to lower level managers is known as
A. decentralization
B. centralization
C. autonomy of effort
D. congruency
Answer: Option A
Solution:
An organizational practice, according to which decision making freedom is available to
lower level managers is known as decentralization. Decentralization refers to a specific form
of organizational structure where the
top management delegates decision-making responsibilities and daily operations to middle
and lower subordinates.


62. Products or services that are transferred between different subunits of a
company are classified as
A. mobile products
B. dysfunctional products
C. intermediate product
D. territorial product
Answer: Option C
Solution:
Products or services that are transferred between different subunits of a company are
classified as intermediate product. An intermediate good is a product used to produce a
final good or finished product also referred
to as a consumer good.


63. Means of collecting and using information, to coordinate decision and planning
through an organization are termed as
A. customer control system
B. business control system
C. financial control system
D. management control systems
Answer: Option D
Solution:
Means of collecting and using information, to coordinate decision and planning through an
organization are termed as management control systems. Management control systems are
the formal and informal structures
put in place by a business that compare the goals and strategy of the organization against
the actual outcomes.


64. Minimum freedom for managers and maximum constraints are main features of
A. total autonomy
B. total centralization
C. total decentralization
D. total congruency
Answer: Option B
Solution:
Minimum freedom for managers and maximum constraints are main features of total
centralization. Centralization of authority means the power of planning and decision making
are exclusively in the hands of top
management.


65. Price charged by one subunit to supply products or services to another unit is
called
A. subunit autonomy cost
B. transfer price
C. performance prices
D. effort cost
Answer: Option B
Solution:
Price charged by one subunit to supply products or services to another unit is called transfer
price. Transfer pricing is an accounting practice that represents the price that one division in
a company charges another
division for goods or services provided. A transfer price is based on market prices in
charging another division, subsidiary, or holding company for services rendered.


66. Dysfunctional decision making is also known as
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A. dysfunctional decision making
B. congruent decision making
C. incongruent decision making
D. both a and c
Answer: Option D
Solution:
Dysfunctional decision making is also known as dysfunctional decision making and
incongruent decision making. Dysfunctional decision making can be a big drag on the
results unless properly addressed.


67. Maximum freedom for managers and minimum constraints are main features of
A. total autonomy
B. total centralization
C. total decentralization
D. total congruency
Answer: Option C
Solution:
Maximum freedom for managers and minimum constraints are main features of total
decentralization. Decentralization is the process of distributing or dispersing functions,
powers, people or things away from a central
location or authority.


68. Degree to which freedom is given to lower level managers for decision making is
classified as
A. decentralization
B. centralization
C. autonomy
D. congruency
Answer: Option C
Solution:
Degree to which freedom is given to lower level managers for decision making is classified
as autonomy. Autonomy is the control or government of a country, organization, or group by
itself rather than by others.


69. Per unit opportunity cost to selling subunit of company, is added into per unit
incremental cost is incurred at point of transfer to calculate
A. minimum operating cost
B. maximum operating costs
C. maximum transfer price
D. minimum transfer price
Answer: Option D
Solution:
Per unit opportunity cost to selling subunit of company, is added into per unit incremental
cost is incurred at point of transfer to calculate minimum transfer price. The minimum
transfer price equals the incremental cost
to create one product. The incremental price includes direct labor, direct material and direct
overhead costs but excludes the expenses the transferring center would have incurred
whether or not it made the product.

70. Shares having no face value are known as

A. no par stock

B. at par stock

C. equal stock

D. debt equity stock

Answer: Option A

Solution:

No par stock means shares having no face value. this is issued in USA, UK and Canada.




SOURCE 2

Financial management & accounting

MCQs

1-The following is (are) the indirect labour cost(s)

(A)Wages paid to storekeeper

(B) Salary of works manager

(C) Wages paid to gatekeeper

(D) All of the above(*)

 

2- Question Selling price per tonne is Rs. 69.50, variable cost per tonne is Rs. 35.50 and

fixed cost is Rs. 18,02,000. Find out the BEP in units

(A) 49000

(B) 51000

(C) 53000(*)

(D) 55000

 

3- Labour Efficiency Standards are decided by considering following factor(s)

(A) Records of past performance

(B) Time & Motion Study

(C) Trial Runs

(D) All of the above(*)

 

4- Balance sheet indicates the financial status of the business ____.

(A) For a day

(B) For a month

(C) For a year

(D) At given period(*)

 

5- A good _____ system will not punish the workers for the matters beyond the control of

the workers.

(A) Wage payment(*)

(B) Appraisal

(C) Promotion

(D) None of the above

 

6- ________ do not give the returns during the same period during which they are paid for

(A) Intangible assets

(B) Fixed assets(*)

(C) Both (A) and (B)

(D) None of the above

 

7- Following is (are) called the element(s) of Cost

(A) Material

(B) Labour

(C) Expenses

(D) All of the above(*)

 

8- The cause(s) of idle time can be analysed as

(A) Administrative causes

(B) Productive causes

(C) Economic causes

(D) All of the above(*)

 

9-__________ Accounting becomes a source of information for Management Accounting.

(A) Financial(*)

(B) Cost

(C) Both (A) and (B)

(D) None of the above

 

10- Profit and Loss Account debit side includes

(A) Salary

(B) Discount allowed

(C) Postage & telegram

(D) All of the above(*)

 

11- Profit & Loss Account credit side has

(A) Gross profit

(B) Commission received

(C) Interested received

(D) All of the above(*)

 

12- A started business with cash 5000, building 5000, furniture 2000, having

depreciation of 10% on building. The total amount of capital comes to Rs. _______ .

(A) 11,500(*)

(B) 12,000

(C) 12,500

(D) 13,000

 

13- Goods distributed as free sample amounted to Rs. 10,000. Prepare Neonboard Rs.

5000. The total amount transfer to advertisement account is Rs.____

(A) 5,000

(B) 10,000

(C) 15,000(*)

(D) 20,000

 

14- Following error(s) does (do) not affect the trial balance

(A) Error of Principle

(B) Error of Omission

(C) Error of Commission

(D) All of the above(*)

 

15-Dividend received is _________ income.

(A) An operating

(B) A non-operating(*)

(C) Both (A) and (B)

(D) None of the above

 

16- Standard may not be necessarily useful for this purpose.

(A) Forecasting(*)

(B) Coordinating

(C) Planning

(D) None of the above

 

17- If during a month anticipated sales are 5,000 kg, opening stock is 1,000 kg and

closing stock is 500 kg then what will be the quantity of production.

(A) 3,500 kg

(B) 4,000 kg

(C) 4,500 kg(*)

(D) 5,000 kg

 

18-The following method(s) is (are) used to measure labour turnover

(A) Separation method

(B) Replacement method

(C) Flux method

(D) All of the above(*)

 

19- If the profit volume ratio is 25%, then the variable cost is equal to ________ of sales

value.

(A) 0.25

(B) 0.50

(C) 0.75(*)

(D) 0.90

 

20- Contribution represents pool of resources available for meeting all costs other than

________.

(A) Fixed costs

(B) Variable costs(*)

(C) Labour costs

(D) Material costs

 

1. Which phrase best describes the current role of the managerial accountant?

a. Managerial accountants prepare the financial statements for an organization.

b. Managerial accountants facilitate the decision-making process within an organization. (*)

c. Managerial accountants make the key decisions within an organization.

d. Managerial accountants are primarily information collectors.

e. Managerial Accountants are solely staff advisors in an organization.

 

2. An example of qualitative data is:

a. product cost

b. customer satisfaction (*)

c. net income

d. inventory cost

e. net worth.

 

3. Product and service costing information is prepared for

a. manufacturing companies with inventory.

b. merchandising companies.

c. service providers.

d. each of the other four answers.. (*)

e. manufacturing companies without inventory.

 

4. Manufacturing costs typically consist of

a. direct materials, direct labor, and manufacturing overhead. (*)

b. production and shipping costs.

c. production and marketing costs.

d. direct materials, direct labor, and administrative costs.

e. direct materials, direct labor, marketing and administrative costs.

 

5. In comparison to the traditional manufacturing environment, overhead costs in a JIT environment

all the following are true except:

a. are more easily tracked to products.

b. are frequently direct in nature.

c. include rent, insurance and utilities.

d. most of the costs are likely to be indirect in nature. (*)

e. labor need not be tracked to the product.

 

6. As production increases within the relevant range,

a. variable costs will vary on a per unit basis.

b. variable costs will vary in total. (*)

c. fixed costs will vary in total.

d. fixed and variable cost stay the same in total.

e. none of the other four answers is true.

 

7. You are given the cost and volume information below:

Volume Cost

1 unit $ 15

10 units 150

100 units 1500

What type of a cost is given?

a. fixed cost

b. variable cost (*)

c. step cost

d. mixed cost

e. rent cost.

 

8. Which of the following statements regarding graphs of fixed and variable costs is true?

a. Variable costs can be represented by a straight line where costs are the same for each

data point.

b. Fixed costs can be represented by a straight line starting at the origin and continuing

through each data point.

c. Fixed costs are zero when production is equal to zero.

d. Variable costs are zero when production is equal to zero. (*)

e. Fixed and Variable costs are curvilinear form above zero on the “Y” axis.

 

9. All of the following statements regarding budgeting is true except

a. Budgeting helps managers determine the resources needed to meet their goals and

objectives.

b. Budgeting is a key ingredient in good decision-making.

c. Budgeting is a bookkeeping task (*)

d. The focus of budgeting is planning.

e. Budgeting is an executive responsibility.

 

10. Broihan Corporation has the following purchases budget for the last half of 2002:

July $100,000 October $ 90,000

August 80,000 November 100,000

September 110,000 December 94,000

Historically, the company pays one half at the time of purchase and the remainder in the month

following purchase.

What are the expected cash disbursements in August?

a. $ 80,000.

b. $ 90,000. (*)

c. $ 95,000.

d. $100,000

e. $105,000

 

11. The Inground Sprinkler Supply sells sprinkler systems suited for large or small yards. The

company has decided to adopt an activity-based costing system. Last year the company incurred

$1,000,000 in overhead costs related to the following activities:

Activity Allocation Base Overhead Cost

Purchasing number of purchase orders $ 350,000

Material handling number of shipments received 200,000

Quality inspection number of inspections 450,000

The activities for large and small yard systems were as follows:

Large Small

purchase orders 15,000 20,000

shipments received 7,500 12,500

inspections 11,500 11,000

If a customer requested a bid on a specially designed sprinkler that would probably require four

inspections, how much quality inspection overhead would you include in the bid?

a. $ 0

b. $40

c. $80 (*)

d. $120.

e. $160.

 

12. Bubblemania has three product lines - A, B, and C.

A B C Total

Sales $10,000 9,000 12,000 31,000

Variable costs 4,500 7,000 6,000 17,500

Contribution Margin 5,500 2,000 6,000 13,500

Fixed costs 3,500 6,000 3,000 12,500

Net income 2,000 (4,000) 3,000 1,000

Product line B appears unprofitable, and management is considering discontinuing the line. How

would the discontinuation of Product line B affect net income?

a. increase by $4,000

b. decrease by $4,000

c. increase by $2,000

d. decrease by $2,000 (*)

e. increase by $6,000

 

13. Coed Novelties manufactures key chains for college bookstores. During 2003, the company had

the following costs:

Direct materials used $ 31,000

Direct labor 18,000

Factory rent 12,000

Equipment deprecation – factory 2,000

Equipment depreciation – office 750

Marketing expense 2,500

Administrative expenses 40,000

35,000 units produced were in 2003. What is the product cost per unit?

a. approximately $1.24

b. $1.80 (*)

c. approximately $3.04

d. $1.40

e. approximately $1.82

 

14. The time value of money focuses on

a. accounting net income.

b. earnings per share.

c. cash flow. (*)

d. current earnings

e. accrual net income.

 

15. The Unique Bookshelf Company is considering the purchase of a custom delivery van costing

approximately $50,000. Using a discount rate of 20%, the present value of future cost savings is

estimated at $51,200. To yield the 20% return, the actual cost of the van should not exceed the

$50,000 estimate by more than:

a. $50,000

b. $51,200

c. $25,000

d. $ 1,200 (*)

e. 20%

 

16. The Cape Cod Cotton Candy Company had the following information available regarding last

year's operations:

Sales (100,000 units) $200,000

Variable costs 100,000

Contribution margin 100,000

Fixed costs 50,000

Net Income 50,000

If sales were to increase by 200 units, what would be the effect on net income?

a. $400 increase

b. $200 increase (*)

c. $150 increase

d. $100 increase

e. $200 loss


SOURCE 3

1. Which phrase best describes the current role of the managerial accountant?

a. Managerial accountants prepare the financial statements for an organization.

b. Managerial accountants facilitate the decision-making process within an organization. (*)

c. Managerial accountants make the key decisions within an organization.

d. Managerial accountants are primarily information collectors.

e. Managerial Accountants are solely staff advisors in an organization.

 

2. An example of qualitative data is:

a. product cost

b. customer satisfaction (*)

c. net income

d. inventory cost

e. net worth.

 

3. Product and service costing information is prepared for

a. manufacturing companies with inventory.

b. merchandising companies.

c. service providers.

d. each of the other four answers.. (*)

e. manufacturing companies without inventory.

 

4. Manufacturing costs typically consist of

a. direct materials, direct labor, and manufacturing overhead. (*)

b. production and shipping costs.

c. production and marketing costs.

d. direct materials, direct labor, and administrative costs.

e. direct materials, direct labor, marketing and administrative costs.

 

5. In comparison to the traditional manufacturing environment, overhead costs in a JIT environment all the following are true except:

a. are more easily tracked to products.

b. are frequently direct in nature.

c. include rent, insurance and utilities.

d. most of the costs are likely to be indirect in nature. (*)

e. labor need not be tracked to the product.

 

6. As production increases within the relevant range,

a. variable costs will vary on a per unit basis.

b. variable costs will vary in total. (*)

c. fixed costs will vary in total.

d. fixed and variable cost stay the same in total.

e. none of the other four answers is true.

 

7. You are given the cost and volume information below:

Volume Cost

1 unit $ 15

10 units 150

100 units 1500

What type of a cost is given?

a. fixed cost

b. variable cost (*)

c. step cost

d. mixed cost

e. rent cost.

 

8. Which of the following statements regarding graphs of fixed and variable costs is true?

a. Variable costs can be represented by a straight line where costs are the same for each data point.

b. Fixed costs can be represented by a straight line starting at the origin and continuing through each data point.

c. Fixed costs are zero when production is equal to zero.

d. Variable costs are zero when production is equal to zero. (*)

e. Fixed and Variable costs are curvilinear form above zero on the “Y” axis.

 

9. All of the following statements regarding budgeting is true except

a. Budgeting helps managers determine the resources needed to meet their goals and objectives.

b. Budgeting is a key ingredient in good decision-making.

c. Budgeting is a bookkeeping task (*)

d. The focus of budgeting is planning.

e. Budgeting is an executive responsibility.

 

10. Broihan Corporation has the following purchases budget for the last half of 2002:

July $100,000 October $ 90,000

August 80,000 November 100,000

September 110,000 December 94,000

Historically, the company pays one half at the time of purchase and the remainder in the month following purchase.

What are the expected cash disbursements in August?

a. $ 80,000.

b. $ 90,000. (*)

c. $ 95,000.

d. $100,000

e. $105,000

 

11. The Inground Sprinkler Supply sells sprinkler systems suited for large or small yards. The company has decided to adopt an activity-based costing system. Last year the company incurred $1,000,000 in overhead costs related to the following activities:

Activity Allocation Base Overhead Cost

Purchasing number of purchase orders $ 350,000

Material handling number of shipments received 200,000

Quality inspection number of inspections 450,000

The activities for large and small yard systems were as follows:

Large Small

purchase orders 15,000 20,000

shipments received 7,500 12,500

inspections 11,500 11,000

If a customer requested a bid on a specially designed sprinkler that would probably require four inspections, how much quality inspection overhead would you include in the bid?

a. $ 0

b. $40

c. $80 (*)

d. $120.

e. $160.

 

12. Bubblemania has three product lines - A, B, and C.

A B C Total

Sales $10,000 9,000 12,000 31,000

Variable costs 4,500 7,000 6,000 17,500

Contribution Margin 5,500 2,000 6,000 13,500

Fixed costs 3,500 6,000 3,000 12,500

Net income 2,000 (4,000) 3,000 1,000

Product line B appears unprofitable, and management is considering discontinuing the line. How would the discontinuation of Product line B affect net income?

a. increase by $4,000

b. decrease by $4,000

c. increase by $2,000

d. decrease by $2,000 (*)

e. increase by $6,000

 

13. Coed Novelties manufactures key chains for college bookstores. During 2003, the company had the following costs:

Direct materials used $ 31,000

Direct labor 18,000

Factory rent 12,000

Equipment deprecation – factory 2,000

Equipment depreciation – office 750

Marketing expense 2,500

Administrative expenses 40,000

35,000 units produced were in 2003. What is the product cost per unit?

a. approximately $1.24

b. $1.80 (*)

c. approximately $3.04

d. $1.40

e. approximately $1.82

 

14. The time value of money focuses on

a. accounting net income.

b. earnings per share.

c. cash flow. (*)

d. current earnings

e. accrual net income.

 

15. The Unique Bookshelf Company is considering the purchase of a custom delivery van costing approximately $50,000. Using a discount rate of 20%, the present value of future cost savings is estimated at $51,200. To yield the 20% return, the actual cost of the van should not exceed the $50,000 estimate by more than:

a. $50,000

b. $51,200

c. $25,000

d. $ 1,200 (*)

e. 20%

 

16. The Cape Cod Cotton Candy Company had the following information available regarding last year's operations:

Sales (100,000 units) $200,000

Variable costs 100,000

Contribution margin 100,000

Fixed costs 50,000

Net Income 50,000

If sales were to increase by 200 units, what would be the effect on net income?

a. $400 increase

b. $200 increase (*)

c. $150 increase

d. $100 increase

e. $200 loss 

 

SOURCE 4 (ScholarExpress)

1-Accounting provides information on

(A) Cost and income for managers

(B) Company’s tax liability for a particular year

(C) Financial conditions of an institution

(D) All of the above

(Ans: D)

 

2-The long term assets that have no physical existence but are rights that have value is known as

(A) Current assets

(B) Fixed assets

(C) Intangible assets

(D) Investments

(Ans: C)

 

3-The assets that can be converted into cash within a short period (i.e. 1 year or less) are known as

(A) Current assets

(B) Fixed assets

(C) Intangible assets

(D) Investments

(Ans: A)

 

4-Patents, Copyrights and Trademarks are

(A) Current assets

(B) Fixed assets

(C) Intangible assets

(D) Investments

(Ans: C)

 

5-The following is not a type of liability

(A) Short term

(B) Current

(C) Fixed

(D) Contingent

(Ans: A)

 

6-The liabilities that are payable in more than a year and are not be liquidated from current assets

(A) Current liabilities

(B) Fixed liabilities

(C) Contingent liabilities

(D) All of the above

(Ans: B)

 

7-The debts, which are to be repaid within a short period (year or less) are known as

(A) Current liabilities

(B) Fixed liabilities

(C) Contingent liabilities

(D) All of the above

(Ans: A)

 

8-The sales income (Credit and Cash) of a business during a given period is called

(A) Transactions

(B) Sales returns

(C) Turnover

(D) Purchase returns

(Ans: C)

 

9-Any written evidence in support of a business transaction is called

(A) Journal

(B) Ledger

(C) Ledger posting

(D) Voucher

(Ans: D)

 

10-The accounts that records expenses, gains and losses are

(A) Personal accounts

(B) Real accounts

(C) Nominal accounts

(D) None of the above

(Ans: C)

 

11-Real accounts records

(A) Dealings with creditors or debtors

(B) Dealings in commodities

(C) Gains and losses

(D) All of the above

(Ans: B)

 

12-In journal, the business transaction is recorded

(A) Same day

(B) Next day

(C) Once in a week

(D) Once in a month

(Ans: A)

 

13-The following is (are) the type(s) of Journal

(A) Purchase journal

(B) Sales journal

(C) Cash journal

(D) All of the above

(Ans: D)

 

14-The process of entering all transactions from the journal to ledger is called

(A) Posting

(B) Entry

(C) Accounting

(D) None of the above

(Ans: A)

 

15-The following is a statement showing the financial status of the company at any given time

(A) Trading account

(B) Profit and Loss statements

(C) Balance sheet

(D) Cash book

(Ans: C)

 

16-The following is a statement of revenues and expenses for a specific period of time

(A) Trading account

(B) Trial balance

(C) Profit and loss statements

(D) Balance sheet

(Ans: C)

 

17-Balance sheet is a statement of

(A) Assets

(B) Liability

(C) Capital

(D) All of the above

(Ans: D)

 

18-Balance sheets are prepared

(A) Daily

(B) Weekly

(C) Monthly

(D) Annually

(Ans: D)

 

19-The ratios that refer to the ability of the firm to meet the short term obligations out of its short term resources

(A) Liquidity ratio

(B) Leverage ratios

(C) Activity ratios

(D) Profitability ratios

(Ans: A)

 

20-The measure of how efficiently the assets resources are employed by the firm is called

(A) Liquidity ratio

(B) Leverage ratios

(C) Activity ratios

(D) Profitability ratios

(Ans: C)

 

21-The following is (are) the current liability (ies)

(A) Bills payable

(B) Outstanding expenses

(C) Bank overdraft

(D) All of the above

(Ans: D)

 

22-Current ratio =

(A) Quick assets / Current liabilities

(B) Current assets / Current liabilities

(C) Debt. / Equity

(D) Current assets / Equity

(Ans: B)

 

23-A current ratio of ______ and above indicates that the availability of sufficient net working capital and the ability of the firm to meet current liabilities.

(A) 1.33:1

(B) 1.44:1

(C) 1.55:1

(D) 1.66:1

(Ans: A)

 

24-Liquid or Quick assets =

(A) Current assets – (stock + work in progress)

(B) Current assets + stock + work in progress

(C) (Current assets + stock) + work in progress

(D) (Current assets + work in progress) – stock

(Ans: A)

 

25-The following is also known as External Internal Equity ratio

(A) Current ratio

(B) Acid test ratio

(C) Debt Equity ratio

(D) Debt service coverage ratio

(Ans: C)

 

26-Lower the Debt Equity ratio

(A) Lower the protection to creditors

(B) Higher the protection to creditors

(C) It does not affect creditors

(D) None of the above

(Ans: B)

 

27-A higher inventory ratio indicates

(A) Better inventory management

(B) Quicker turnover

(C) Both ‘A’ and ‘B’

(D) None of the above

(Ans: C)

 

28-Return on Investment Ratio (ROI) =

(A) (Gross profit / Net sales) x 100

(B) (Gross profit x Sales / Fixed assets) x 100

(C) (Net profit / Sales) x 100

(D) (Net profit / Total assets) x 100

(Ans: D)

 

29-A Low Return on Investment Ratio (ROI) indicates

(A) Improper utilization of resources

(B) Over investment in assets

(C) Both ‘A’ and ‘B’

(D) None of the above

(Ans: C)

 

30-Following is (are) the characteristic(s) of a budget

(A) It outlines projected activities

(B) Expressions are made in quantitative terms

(C) It is for a fixed period

(D) All of the above

(Ans: D)

 

31-Sales expenditure budget is prepared by estimating the expense(s) of

(A) Advertisement

(B) Market analysis

(C) Salesman’s salary

(D) All of the above

(Ans: D)

 

32-Budgeting is difficult to apply in the following cases

(A) Products subjected to rapid changes

(B) Job order manufacturing

(C) Uncertain market conditions

(D) All of the above

(Ans: D)

 

33-A Master Budget consists of

(A) Sales budget

(B) Production budget

(C) Material budget

(D) All of the above

(Ans: D)


SOURCE 5 (careerride)

1. The only feasible purpose of financial management is

a) Wealth Maximization

b) Sales Maximization

c) Profit Maximization

d) Assets maximization

ANSWER: a) Wealth Maximization

 

 

2. Financial management process deals with

a) Investments

b) Financing decisions

c) Both a and b

d) None of the above

ANSWER: b) Financing decisions

 

 

3. Agency cost consists of

a) Binding

b) Monitoring

c) Opportunity and structure cost

d) All of the above

ANSWER: d) All of the above

 

 

4. Finance Function comprises

a) Safe custody of funds only

b) Expenditure of funds only

c) Procurement of finance only

d) Procurement & effective use of funds

ANSWER: d) Procurement & effective use of funds

 

 

5. The objective of wealth maximization takes into account

a) Amount of returns expected

b) Timing of anticipated returns

c) Risk associated with uncertainty of returns

d) All of the above

ANSWER: d) All of the above

 

 

6. Financial management mainly focuses on

a) Efficient management of every business

b) Brand dimension

c) Arrangement of funds

d) All elements of acquiring and using means of financial resources for financial activities

ANSWER: d) All elements of acquiring and using means of financial resources for financial activities

 

SOURCE 6(Byjus)

1. Investment can be defined.

A) Person’s dedication to purchasing a house or flat

B) Use of capital on assets to receive returns

C) Usage of money on a production process of products and services

D) Net additions made to the nation’s capital stocks

Answer: B

 

2. The concept of Financial management is.

A) Profit maximization

B) All features of obtaining and using financial resources for company operations

C) Organization of funds

D) Effective Management of every company

Answer: B

 

3. What is the primary goal of financial management?

A) To minimize the risk

B) To maximize the return

C) To maximize the owner’s wealth

D) To raise profit

Answer: B

 

4. GST is a consumption of goods and service tax based on.

A) Development

B) Dividend

C) Destiny

D) Duration

E) Destination

Answer: E

 

5. The finance manager is accountable for.

A) Earning capital assets of the company

B) Effective management of a fund

C) Arrangement of financial resources

D) Proper utilization of funds

Answer: C

 

6. The market value of a share is responsible for.

A) The investment market

B) The government

C) Shareholders

D) The respective companies

Answer: A

 

7. The capital budget is associated with.

A) Long terms and short terms assets

B) Fixed assets

C) Long terms assets

D) Short term assets

Answer: C

 

8. CAPM stands for.

A) Capital asset pricing model.

B) Capital amount printing model.

C) Capital amount pricing model.

D) Capital asset printing model.

Answer: A

 

9. What does financial leverage measured?

A) No change with EBIT and EPS

B) The sensibility of EBIT with % change with respect to output

C) The sensibility of EPS with % change in the EBIT level

D) % variation in the level of production

Answer: C

 

10. From the below-mentioned items which are financial assets?

A) Machines

B) Bonds

C) Stocks

D) B and C

Answer: B


SOURCE 7(career launcher)

  

1. Financial management is concerned with managerial activities relating to
(a) Planning
(b) Procurement and administration of funds
(c) Optimum utilization of funds
(d) All of the above(*)

2.Which of the following factors affect financial decision?
(a) Cost
(b) Risk
(c) Cash flow position
(d) All of the above (*)

3._________ refers to planning regarding financial needs of the enterprise various sources of raising funds and their optimum utilization.
(a) Financial planning(*)
(b) Capital structure
(c) Financial management

4.Which of the following is not a feature of a financial plan?
(a) Simplicity
(b) Cost(*)
(c) Flexibility
(d) Foresight

5._____ is the decision related to composition of capital structure & also depends upon ability of the business to generate cash.
(a) Market condition
(b) Flexibility
(c) Cash flow ability(*)
(d) Control

6.Rate of return on capital is exceptionally high in
(a) Under – capitalization(*)
(b) Over – capitalization
(c) Working capital
(d) Fixed capital

7.Which of the factors affect dividend decisions?
(a) Preference of shareholders
(b) Earning
(c) Stability of dividend
(d) All of the above(*)

8._____ refers to the structure of total capital funds raised by the company.
(a) Fixed capital
(b) Capital structure(*)
(c) Capital requirements
(d) Under capitalization


 SOURCE 8

MCQ on Financial Management

1. "Shareholder wealth" in a firm is represented by:

a) the number of people employed in the firm.

b) the book value of the firm's assets less the book value of its liabilities

c) the amount of salary paid to its employees.

d) the market price per share of the firm's common stock. (*)

 

2. The long-run objective of financial management is to:

a) maximize earnings per share.

b) maximize the value of the firm's common stock. (*)

c) maximize return on investment.

d) maximize market share.

 

3. What are the earnings per share (EPS) for a company that earned Rs. 100,000 last year in

after-tax profits, has 200,000 common shares outstanding and Rs. 1.2 million in retained

earning at the year end?

a) Rs. 100,000

b) Rs. 6.00

c) Rs. 0.50 (*)

d) Rs. 6.50

 

4. A(n)

would be an example of a principal, while a(n)

an agent.

a) shareholder; manager (*)

b) manager; owner

c) accountant; bondholder

d) shareholder; bondholder


1 | Page

 

5. would be an example of5. The market price of a share of common stock is determined by:

a) the board of directors of the firm.

b) the stock exchange on which the stock is listed.

c) the president of the company.

d) individuals buying and selling the stock.(*)

 

6. The focal point of financial management in a firm is:

a) the number and types of products or services provided by the firm.

b) the minimization of the amount of taxes paid by the firm.

c) the creation of value for shareholders.(*)

d) the dollars profits earned by the firm.

 

7. ___________________ of a firm refers to the composition of its long-term funds and its

capital structure.

a) Capitalisation (*)

b) Over-capitalisation

c) Under-capitalisation

d) Market capitalization

 

8. In the _______________, the future value of all cash inflow at the end of time horizon at

a particular rate of interest is calculated.

a) Risk-free rate

b) Compounding technique

c) Discounting technique(*)

d) Risk Premium


2 | Page

9. ______________ is the price at which the bond is traded in the stock exchange.

a) Redemption value

b) Face value

c) Market value(*)

d) Maturity value

 

10. _____________ enhance the market value of shares and therefore equity capital is not

free of cost.

a) Face value

b) Dividends(*)

c) Redemption value

d) Book value

 

11. In _______________ approach, the capital structure decision is relevant to the valuation

of the firm.

a) Net income(*)

b) Net operating income

c) Traditional

d) Miller and Modigliani

 

12. When __________ is greater than zero the project should be accepted.

a) Internal rate of return

b) Profitability index

c) Net present value(*)

d) Modified internal rate of return


13. ____________ is defined as the length of time required to recover the initial cash out-lay.

a) Payback-period(*)

b) Inventory conversion period

c) Discounted payback-period

d) Budget period


3 | Page

14. _______________ refers to the amount invested in various components of current assets.

a) Temporary working capital

b) Net working capital

c) Gross working capital(*)

d) Permanent working capital


15. ____________ is the length of time between the firm’s actual cash expenditure and its

own cash receipt.

a) Net operating cycle(*)

b) Cash conversion cycle

c) Working capital cycle

d) Gross operating cycle

 

16. _______________ refers to a firm holding some cash to meet its routine expenses that are

incurred in the ordinary course of business.

a) Speculative motive

b) Transaction motive(*)

c) Precautionary motive

d) Compensating motive

 

17. _______________ refers to the length of time allowed by a firm for its customers to

make payment for their purchases.

a) Holding period

b) Pay-back period

c) Average collection period

d) Credit period(*)

 

4 | Page18. Amounts due from customers when goods are sold on credit are called _____________.

a) Trade balance

b) Trade debits(*)

c) Trade discount

d) Trade off

 

19. ____________________ and __________________________ are the two versions of

goals of the financial management of the firm.

a) Profit maximisation, Wealth maximization(*)

b) Production maximisation, Sales maximisation

c) Sales maximisation, Profit maximization

d) Value maximisation, Wealth maximisation

 

20. Consider the below mentioned statements: 1. A company is considered to be over-

capitalised when its actual capitalisation is lower than the proper capitalisation as

warranted by the earning capacity 2. Both over-capitalisation and under-capitalisation are

detrimental to the interests of the society. State True or False:

a) 1-True, 2-True

b) 1-False, 2-True(*)

c) 1-False, 2-False

d) 1-True, 2-False

 

21. Consider the below mentioned statements: 1. The dividends are not cumulative for equity

shareholders, that is, they cannot be accumulated and distributed in the later years. 2.

Dividends are taxable. State True or False:

a) 1-True, 2-True

b) 1-False, 2-True

c) 1-False, 2-False

d) 1-True, 2-False(*)

 

5 | Page

22. ____________ and____________ carry a fixed rate of interest and are to be paid off

irrespective of the firm’s revenues.

a) Debentures, Dividends

b) Debentures, Bonds(*)

c) Dividends, Bonds

d) Dividends, Treasury notes

 

23. Consider the below mentioned statements: 1. A debt-equity ratio of 2:1 indicates that for

every 1 unit of equity, the company can raise 2 units of debt. 2. The cost of floating a

debt is greater than the cost of floating an equity issue. State True or False:

a) 1-True, 2-True

b) 1-False, 2-True

c) 1-False, 2-False

d) 1-True, 2-False(*)

 

24. Credit policy of every company is largely influenced by _____________ and

_____________.

a) Liquidity, accountability

b) Liquidity, profitability(*)

c) Liability, profitability

d) Liability, liquidity

 

25. XYZ is an oil based business company, which does not have adequate working capital. It

fails to meet its current obligation, which leads to bankruptcy. Identify the type of

decision involved to prevent risk of bankruptcy.

a) Investment decision

b) Dividend decision

c) Liquidity decision(*)

d) Finance decision

 

6 | Page26. The rate of interest offered by the fixed deposit scheme of a bank for 365 days and above

is 12%. What will be the status of Rs. 20000, after two years if it is invested at this point

of time?

a) Rs. 28032

b) Rs. 24048

c) Rs. 22056

d) Rs. 25088(*)

 

27. How are earnings per share calculated?

a) Use the income statement to determine earnings after taxes (net income) and divide by

the previous period's earnings after taxes. Then subtract 1 from the previously calculated

value.

b) Use the income statement to determine earnings after taxes (net income) and divide by

the number of common shares outstanding.(*)

c) Use the income statement to determine earnings after taxes (net income) and divide by

the number of common and preferred shares outstanding.

d) Use the income statement to determine earnings after taxes (net income) and divide by

the forecasted period's earnings after taxes. Then subtract 1 from the previously

calculated value

 

28. Which of the following would NOT improve the current ratio?

a) Borrow short term to finance additional fixed assets.(*)

b) Issue long-term debt to buy inventory.

c) Sell common stock to reduce current liabilities.

d) Sell fixed assets to reduce accounts payable.

 

Page29. The gross profit margin is unchanged, but the net profit margin declined over the same

period. This could have happened if

a) cost of goods sold increased relative to sales.

b) sales increased relative to expenses.

c) Govt. increased the tax rate.(*)

d) dividends were decreased.

 

30. Palo Alto Industries has a debt-to-equity ratio of 1.6 compared with the industry average

of 1.4. This means that the company

a) will not experience any difficulty with its creditors.

b) has less liquidity than other firms in the industry.

c) will be viewed as having high creditworthiness.

d) has greater than average financial risk when compared to other firms in its industry.(*)

 

31. Kanji Company had sales last year of Rs. 265 million, including cash sales of Rs. 25

million. If its average collection period was 36 days, its ending accounts receivable

balance is closest to

. (Assume a 365-day year.)

a) Rs. 26.1 million

b) Rs. 23.7 million(*)

c) Rs. 7.4 million

d) Rs. 18.7 million

 

32. A company can improve (lower) its debt-to-total assets ratio by doing which of the

following?

a) Borrow more.

b) Shift short-term to long-term debt.

c) Shift long-term to short-term debt.

d) Sell common stock.(*)

8 | Page

 

33. Which of the following statements (in general) is correct?

a) A low receivables turnover is desirable.

b) The lower the total debt-to-equity ratio, the lower the financial risk for a firm.(*)

c) An increase in net profit margin with no change in sales or assets means a poor ROI.

d) The higher the tax rate for a firm, the lower the interest coverage ratio.

 

34. Debt-to-total assets (D/TA) ratio is .4. What is its debt-to-equity (D/E) ratio?

a) .2

b) .6

c) .667(*)

d) .333

 

35. A firm's operating cycle is equal to its inventory turnover in days (ITD)

a) plus its receivable turnover in days (RTD).(*)

b) minus its RTD.

c) plus its RTD minus its payable turnover in days (PTD).

d) minus its RTD minus its PTD.

 

36. If the following are balance sheet changes:

Rs. 5,005 decrease in accounts receivable

Rs. 7,000 decrease in cash

Rs. 12,012 decrease in notes payable

Rs. 10,001 increase in accounts payable

a "use" of funds would be the:

a) Rs. 7,000 decrease in cash.

b) Rs. 5,005 decrease in accounts receivable.

c) Rs. 10,001 increase in accounts payable.

d) Rs. 12,012 decrease in notes payable.(*)


9 | Page37. Uses of funds include a (an):

a) decrease in cash.

b) increase in any liability.

c) increase in fixed assets.(*)

d) tax refund.

 

38. Which of the following would be included in a cash estimation/ budget?

a) depreciation charges.

b) dividends.(*)

c) goodwill.

d) patent amortization.

 

39. Which of the following is NOT a cash outflow for the firm?

a) depreciation.(*)

b) dividends.

c) interest payments.

d) taxes.

 

40. Which of the following would be considered a application of funds?

a) a decrease in accounts receivable.

b) a decrease in cash.

c) an increase in account payable.

d) an increase in cash.(*)

 

41. All of the following influence capital budgeting cash flows EXCEPT:

a) accelerated depreciation.

b) salvage value.

c) tax rate changes.

d) method of project financing used.(*)

 

10 | P a g e42. The estimated benefits from a project are expressed as cash flows instead of income

flows because:

a) it is simpler to calculate cash flows than income flows.

b) it is cash, not accounting income, that is central to the firm's capital budgeting decision.(*)

c) this is required by the Internal Revenue Service.

d) this is required by the Securities and Exchange Commission.

 

43. A capital investment is one that

a) has the prospect of long-term benefits.(*)

b) has the prospect of short-term benefits.

c) is only undertaken by large corporations.

d) applies only to investment in fixed assets.

 

44. A profitability index of .85 for a project means that:

a) the present value of benefits is 85% greater than the project's costs.

b) the project's NPV is greater than zero.

c) the project returns 85 cents in present value for each current dollar invested.(*)

d) the payback period is less than one year.

 

45. Which of the following statements is correct?

a) If the NPV of a project is greater than 0, its PI will equal 0.

b) If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0.

c) If the PI of a project is less than 1, its NPV should be less than 0.(*)

d) If the IRR of a project is greater than the discount rate, k, its PI will be less than 1 and its

NPV will be greater than 0.

 

11 | P a g e

46. A project's profitability index is equal to the ratio of the

flows to the project's

of a project's future cash

.

a) present value; initial cash outlay(*)

b) net present value; initial cash outlay

c) present value; depreciable basis

d) net present value; depreciable basis

47. The discount rate at which two projects have identical

is referred to as Fisher's rate of

intersection.

a) present values

b) net present values(*)

c) IRRs

d) profitability indexes

 

48. Two mutually exclusive investment proposals have "scale differences" (i.e., the cost of

the projects differ). Ranking these projects on the basis of IRR, NPV, and PI

methods

give contradictory results.

a) will never

b) will always

c) may(*)

d) will generally

 

49. Preferred shareholders' claims on assets and income of a firm come

creditors

those of common shareholders.

a) before; and also before

b) after; but before(*)

c) after; and also after

d) equal to; and equal to

12 | P a g e

those of

50. You are considering two mutually exclusive investment proposals, project A and project

B. B's expected value of net present value is $1,000 less than that for A and A has less

dispersion. On the basis of risk and return, you would say that

a) Project A dominates project B.(*)

b) Project B dominates project A.

c) Project A is more risky and should offer greater expected value.

d) Each project is high on one variable, so the two are basically equal.

 

51. To increase a given present value, the discount rate should be adjusted

a) upward.

b) downward.(*)

c) No change.

d) constant

 

52. In finance, "working capital" means the same thing as

a) total assets.

b) fixed assets.

c) current assets.(*)

d) current assets minus current liabilities.

 

53. Which of the following would be consistent with a more aggressive approach to

financing working capital?

a) Financing short-term needs with short-term funds.

b) Financing permanent inventory buildup with long-term debt.

c) Financing seasonal needs with short-term funds.

d) Financing some long-term needs with short-term funds.(*)

 

13 | P a g e

54. Which asset-liability combination would most likely result in the firm's having the

greatest risk of technical insolvency?

a) Increasing current assets while lowering current liabilities.

b) Increasing current assets while incurring more current liabilities.

c) Reducing current assets, increasing current liabilities, and reducing long-term debt.(*)

d) Replacing short-term debt with equity.

 

55. Which of the following illustrates the use of a hedging (or matching) approach to

financing?

a) Short-term assets financed with long-term liabilities.

b) Permanent working capital financed with long-term liabilities.(*)

c) Short-term assets financed with equity.

d) All assets financed with 50 percent equity, 50 percent long-term debt mixture.


56. In deciding the appropriate level of current assets for the firm, management is confronted

with

a) a trade-off between profitability and risk.(*)

b) a trade-off between liquidity and marketability.

c) a trade-off between equity and debt.

d) a trade-off between short-term versus long-term borrowing.

 

57.varies inversely with profitability.

a) Liquidity.(*)

b) Risk.

c) Financing.

d) Liabilities.

 

14 | P a g e

58. Spontaneous financing includes

a) accounts receivable.

b) accounts payable.(*)

c) short-term loans.

d) a line of credit.

 

59. Permanent working capital

a) varies with seasonal needs.

b) includes fixed assets.

c) is the amount of current assets required to meet a firm's long-term minimum needs.(*)

d) includes accounts payable

 

60. Financing a long-lived asset with short-term financing would be

a) an example of "moderate risk -- moderate (potential) profitability" asset financing.

b) an example of "low risk -- low (potential) profitability" asset financing.

c) an example of "high risk -- high (potential) profitability" asset financing.(*)

d) an example of the "hedging approach" to financing.

 

61. Net working capital refers to

a) total assets minus fixed assets.

b) current assets minus current liabilities.(*)

c) current assets minus inventories.

d) current assets.


62. Marketable securities are primarily

a) short-term debt instruments.(*)

b) short-term equity securities.

c) long-term debt instruments.

d) long-term equity securities.

 

15 | P a g e

63. Which would be an appropriate investment for temporarily idle corporate cash that will

be used to pay quarterly dividends three months from now?

a) A long-term AAA-rated corporate bond with a current annual yield of 9.4 percent.

b) A 30-year Treasury bond with a current annual yield of 8.7 percent.

c) Ninety-day commercial paper with a current annual yield of 6.2 percent.(*)

d) Common stock that has been appreciating in price 8 percent annually, on average, and

paying a quarterly dividend that is the equivalent of a 5 percent annual yield.

 

64. Which of the following marketable securities is the obligation of a commercial bank?

a) Commercial paper

b) Negotiable certificate of deposit(*)

c) Repurchase agreement

d) T-bills

 

65. The basic requirement for a firm's marketable securities.

a) Safety

b) Yield

c) Marketability

d) All of the above.(*)

 

66. A firm's inventory turnover (IT) is 5 times on a cost of goods sold (COGS) of $800,000.

If the IT is improved to 8 times while the COGS remains the same, a substantial amount

of funds is released from or additionally invested in inventory. In fact,

a) $160,000 is released.

b) $100,000 is additionally invested.

c) $60,000 is additionally invested.

d) $60,000 is released.(*)

 

16 | P a g e

67. Ninety-percent of X company's total sales of $600,000 is on credit. If its year-end

receivables turnover is 5, the average collection period (based on a 365-day year) and the

year-end receivables are, respectively:

a) 365 days and $108,000.

b) 73 days and $120,000.

c) 73 days and $108,000.(*)

d) 81 days and $108,000.

 

68. Costs of not carrying enough inventory include:

a) lost sales.

b) customer disappointment.

c) possible worker layoffs.

d) all of these.(*)

 

69. Which of the following relationships hold true for safety stock?

a) the greater the risk of running out of stock, the smaller the safety of stock.

b) the larger the opportunity cost of the funds invested in inventory, the larger the safety

stock.

c) the greater the uncertainty associated with forecasted demand, the smaller the safety

stock.

d) the higher the profit margin per unit, the higher the safety stock necessary.(*)

 

70. Increasing the credit period from 30 to 60 days, in response to a similar action taken by

all of our competitors, would likely result in:

a) an increase in the average collection period.(*)

b) a decrease in bad debt losses.

c) an increase in sales.

d) higher profits.

 

17 | P a g e

71. The credit policy of Spurling Products is "1.5/10, net 35." At present 30% of the

customers take the discount, 62% pay within the net period, and the rest pay within 45

days of invoice. What would receivables be if all customers took the cash discount?

a) Lower than the present level.(*)

b) No change from the present level.

c) Higher than the present level.

d) Unable to determine without more information.

 

72. An increase in the firm's receivable turnover ratio means that:

a) it is collecting credit sales more quickly than before.(*)

b) cash sales have decreased.

c) it has initiated more liberal credit terms.

d) inventories have increased.

 

73. A single, overall cost of capital is often used to evaluate projects because:

a) it avoids the problem of computing the required rate of return for each

investment proposal.(*)

b) it is the only way to measure a firm's required return.

c) it acknowledges that most new investment projects have about the same degree of risk.

d) it acknowledges that most new investment projects offer about the same expected return.

 

74. The cost of equity capital is all of the following EXCEPT:

a) the minimum rate that a firm should earn on the equity-financed part of an investment.

b) a return on the equity-financed portion of an investment that, at worst, leaves the

market price of the stock unchanged.

c) by far the most difficult component cost to estimate.

d) generally lower than the before-tax cost of debt.(*)

 

18 | P a g e75. In calculating the proportional amount of equity financing employed by a firm, we should

use:

a) the common stock equity account on the firm's balance sheet.

b) the sum of common stock and preferred stock on the balance sheet.

c) the book value of the firm.

d) the current market price per share of common stock times the number of shares

outstanding.(*)

 

76. In calculating the costs of the individual components of a firm's financing, the corporate

tax rate is important to which of the following component cost formulas?

a) common stock.

b) debt.(*)

c) preferred stock.

d) none of the above.

 

77. The common stock of a company must provide a higher expected return than the debt of

the same company because

a) there is less demand for stock than for bonds.

b) there is greater demand for stock than for bonds.

c) there is more systematic risk involved for the common stock.(*)

d) there is a market premium required for bonds.

 

78. A quick approximation of the typical firm's cost of equity may be calculated by

a) adding a 5 percent risk premium to the firm's before-tax cost of debt.(*)

b) adding a 5 percent risk premium to the firm's after-tax cost of debt.

c) subtracting a 5 percent risk discount from the firm's before-tax cost of debt.

d) subtracting a 5 percent risk discount from the firm's after-tax cost of debt.

 

19 | P a g e

79. Market values are often used in computing the weighted average cost of capital because

a) this is the simplest way to do the calculation.

b) this is consistent with the goal of maximizing shareholder value.(*)

c) this is required in the U.S. by the Securities and Exchange Commission.

d) this is a very common mistake.

80. Rank in ascending order (i.e., 1 = lowest, while 3 = highest) the likely after-tax

component costs of a Company's long-term financing.

a) 1 = bonds; 2 = common stock; 3 = preferred stock.

b) 1 = bonds; 2 = preferred stock; 3 = common stock.(*)

c) 1 = common stock; 2 = preferred stock; 3 = bonds.

d) 1 = preferred stock; 2 = common stock; 3 = bonds.

 

81. Lei-Feng, Inc.'s $100 par value preferred stock just paid its $10 per share annual

dividend. The preferred stock has a current market price of $96 a share. The firm's

marginal tax rate (combined federal and state) is 40 percent, and the firm plans to

maintain its current capital structure relationship into the future. The component cost of

preferred stock to Lei-Feng, Inc. would be closest to

a) 6 percent

b) 6.25 percent

c) 10 percent

d) 10.4 percent(*)

 

20 | P a g e

 

.82. The term "capital structure" refers to:

a) long-term debt, preferred stock, and common stock equity.(*)

b) current assets and current liabilities.

c) total assets minus liabilities.

d) shareholders' equity.

83. A critical assumption of the net operating income (NOI) approach to valuation is:

a) that debt and equity levels remain unchanged.

b) that dividends increase at a constant rate.

c) that k o remains constant regardless of changes in leverage.(*)

d) that interest expense and taxes are included in the calculation.

 

84. The traditional approach towards the valuation of a company assumes:

a) that the overall capitalization rate holds constant with changes in financial leverage.

b) that there is an optimum capital structure.(*)

c) that total risk is not altered by changes in the capital structure.

d) that markets are perfect.

 

85. Two firms that are virtually identical except for their capital structure are selling in the

market at different values. According to M&M

a) one will be at greater risk of bankruptcy.

b) the firm with greater financial leverage will have the higher value.

c) this proves that markets cannot be efficient.

d) this will not continue because arbitrage will eventually cause the firms to sell at the

same value.(*)

 

21 | P a g e

86. What is the value of the tax shield if the value of the firm is $5 million, its value if

unlevered would be $4.78 million, and the present value of bankruptcy and agency costs

is $360,000?

a) $140,000

b) $220,000

c) $360,000

d) $580,000(*)

 

87. Reserves & Surplus are which form of financing?

a) Security Financing

b) Internal Financing(*)

c) Loans Financing

d) International Financing

 

88. What are the different options other than cash used for distributing profits to

shareholders?

a) Bonus shares

b) Stock split

c) Stock purchase

d) All of these(*)

 

89. In Walter model formula D stands for

a) Dividend per share(*)

b) Direct Dividend

c) Dividend Earning

d) None of these

 

90. In MM model MM stands for...

a. M.Khan and Modigiliani

22 | P a g eb. Miller and M.Khan

c. Modigiliani and M.Khan

d. Miller and Modigliani(*)

 

91. The addition of all current assets investment is known as...

a. Net Working Capital

b. Gross Working capital(*)

c. Temporary Working Capital

d. All of these

 

92. When total current assets exceeds total current liabilities it refers to.

a. Gross Working Capital

b. Temporary Working Capital

c. Both a and b

d. Net Working Capital(*)

 

93. If the weighting of equity in total capital is 1/3, that of debt is 2/3, the return on equity is

15% that of debt is 10% and the corporate tax rate is 32%, what is the Weighted Average

Cost of Capital (WACC)?

a) 10.533%

b) 7.533%

c) 9.533%(*)

d) 11.350%

 

94. Which of the following would not be financed from working capital?

a) Cash float.

b) Accounts receivable.

c) Credit sales.

d) A new personal computer for the office.(*)

 

23 | P a g e

95. What is the difference between the current ratio and the quick ratio?

a) The current ratio includes inventories and the quick ratio does not.(*)

b) The current ratio does not include inventories and the quick ratio does.

c) The current ratio includes physical capital and the quick ratio does not.

d) The current ratio does not include physical capital and the quick ratio does.

 

96. Which of the following working capital strategies is the most aggressive?

a) Making greater use of short term finance and maximizing net short term asset.

b) Making greater use of long term finance and minimizing net short term asset.

c) Making greater use of short term finance and minimizing net short term asset.(*)

d) Making greater use of long term finance and maximizing net short term asset.

 

97. Which of the following is not a metric to use for measuring the length of the cash cycle?

a) Acid test days.(*)

b) Accounts receivable days.

c) Accounts payable days.

d) Inventory days.

 

98. Which of the following is not the responsibility of financial management?

a) allocation of funds to current and capital assets

b) obtaining the best mix of financing alternatives

c) preparation of the firm's accounting statements(*)

d) development of an appropriate dividend policy

 

99. Which of the following are not among the daily activities of financial management?

a) sale of shares and bonds(*)

b) credit management

c) inventory control

d) the receipt and disbursement of funds

 

24 | P a g e

100.Debt Equity Ratio is 3:1,the amount of total assets Rs.20 lac,current ratio is 1.5:1

and owned funds Rs.3 lac.What is the amount of current asset?

a) Rs.5 lac

b) Rs.3 lac

c) Rs.12 lac(*)

d) none of the above.

 

101.Banks generally prefer Debt Equity Ratio at :

a) 1:1

b) 1:3

c) 2:1(*)

d) 3:1

 

102.An asset is a-

a. Source of fund

b. Use of fund(*)

c. Inflow of funds

d. none of the above.

 

103.If a company issues bonus shares the debt equity ratio will

a) Remain unaffected

b) Will be affected

c) Will improve(*)

d) none of the above.

 

25 | P a g e104.

In the balance sheet amount of total assets is Rs.10 lac, current liabilities Rs.5 lac

& capital & reserves are Rs.2 lac .What is the debt equity ratio?

a) a)1;1

b) 1.5:1

c) c)2:1

d) none of the above.(*)

 

105.In last year the current ratio was 3:1 and quick ratio was 2:1.Presently current

ratio is 3:1 but quick ratio is 1:1.This indicates comparably

a. high liquidity

b. higher stock(*)

c. lower stock

d. low liquidity

 

106. Authorised capital of a company is Rs.5 lac, 40% of it is paid up. Loss incurred

during the year is Rs.50,000. Accumulated loss carried from last year is Rs.2 lac. The

company has a Tangible Net Worth of

a. Nil

b. Rs.2.50 lac

c. (-)Rs.50,000(*)

d. Rs.1 lac.

 

107. Proprietary ratio is calculated by

a. Total assets/Total outside liability

b. Total outside liability/Total tangible assets

c. Fixed assets/Long term source of fund

d. Proprietors’’ Funds/Total(*)

 

26 | P a g e

108. Current ratio of a concern is 1,its net working capital will be

a) Positive

b) Negative

c) Nil(*)

d) None of the above

 

109.Current ratio is 4:1.Net Working Capital is Rs.30,000.Find the amount of current

Assets.

a) Rs.10,000

b) Rs.40,000(*)

c) Rs.24,000

d) Rs.6,000

 

110.Current ratio is 2:5.Current liability is Rs.30000.The Net working capital is

a) Rs.18,000

b) Rs.45,000

c) Rs.(-) 45,000

d) Rs.(-)18000(*)

 

111.Quick assets do not include

a) Govt.bond

b) Book debts

c) Advance for supply of raw materials

d) Inventories.(*)

27 | P a g e

 

112. The ideal quick ratio is

a) 2:1

b) 1:1(*)

c) 5:1

d) None of the above


SOURCE (avatto)

Financial and Management Accounting MCQ

1: 

In the calculation of return on shareholders investments the referred investment deals with

A.      All reserves

B.      Preference and equity capital only

C.      All appropriations

D.      All of the above

Option: D

 

2: 

Which of the following is an advantage of standard costing?

A.      Measuring efficiency

B.      Facilitates cost control

C.      Determination of variance

D.      All of the above

Option: D

 

3: 

The following item is shown in profit and loss appropriation account.

A.      Dividends declared

B.       Discount of issue of shares

C.      Non-operating expenses

D.       Current assets

Option: A

 

4: 

The assets of a business can be classified as

A.      Only fixed assets

B.      Only current assets

C.      Fixed and current assets

D.      None of the above          

Option: C

 

5: 

Which of the following is the test of the long term liquidity of a business?

A.      Interest coverage ratio

B.      Stock turnover ratio

C.      Operating ratio

D.      Current ratio     

Option: A

 

6: 

Identify the item that is not taken into account in computing the current ratio.

A.      Bank overdraft

B.      Bank

C.      Stock

D.      Cash     

Option: A

 

7: 

Dividing the net profit by the paid up amount of equity share capital yields __ .

A.      Temporary investment

 

B.      Earning per share

 

C.      Rate of return on equity share capital

 

D.      None of the above          

Option: C

 

8: 

Price-earning ratio is equal to market price per equity share divided by ___

A.      Earning per share

 

B.      Current assets

 

C.      Current liabilities

 

D.      Liquid assets     

Option: A

 

9: 

The sale of inventory on account will cause the quick ratio to

A.      Decrease

 

B.      Increase

 

C.      Not change

 

D.      Become zero

Option: B

 

 

10: 

Given that fixed assets are at Rs. 600,000 current assets Rs. 400,000 share capital Rs. 500,000, fixed liabilities Rs. 2,50,000, Current liabilities Rs. 2,50,000, the solvency ratio will be

A.           

20%

 

B.           

30%

 

C.           

40%

 

D.           

50%

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

Total assets/total liabilities=solvency ratio which means 1000000/500000=20%

 

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Financial and Management Accounting MCQ

11: 

Return on total assets ratio is equal to _____ divided by total asset

A.           

Current liabilities

 

B.           

Net income before preference dividend and interest paid

C.           

Current assets

 

D.           

Earning per share

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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12: 

Which of the following Iiabilities are taken into account for the quick ratio?

1. Bills payable

2. Sundry Creditors

3. Loans           

4. Debtors

5. Bank overdraft

 

 

A.           

1, 3 and 5

 

B.           

2,3, and 4

 

C.           

1,3, and 4

 

D.           

2, 4, and 5

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

Quick ratio is also known as liquid ratio or acid test ratio. Current ratio provides a rough idea of the liquidity of a firm so subsequently a second testing device was developed named as acid test ratio or quick ratio. It establishes relationship between liquid assets and current liabilities.

 

Quick ratio = Liquid (quick) assets / Current Liabilities

 

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13: 

If the stock turnover ratio is 4 times and the collection period is 30 days the operating cycle would be

A.           

30 days

 

B.           

60 days

 

C.           

90 days

 

D.           

120 days

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

operating cycle = inventory conversion period + average collection period

 

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14: 

Given that current liabilities are at Rs. 300,000, current ratio is 3:1 and quick ratio is 1:1, the value of stock will be:

A.           

Rs. 600,000

 

B.           

Rs. 1,600,000

 

C.           

Rs. 900,000

 

D.           

Rs. 12,00,000

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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15: 

If the current ratio stands at 2 : 1 an equal increase in current assets and current liabilities would ------- the current ratio.

A.           

Decrease

 

B.           

increase

 

C.           

Not change

 

D.           

Cause fluctuations in

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

 

 

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Financial and Management Accounting MCQ

16: 

Consider the following information

1. Gross sales Rs. 20,00,000

2. Sales tax 7% on gross sales

3. Income tax 40%

4. Profit before tax 400,000

What is net profit before tax ratio?

A.           

21.5%

 

B.           

22.5%

 

C.           

23.5%

 

D.           

24.5%

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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17: 

ZBB stands for?

 

A.           

Zero Base Budgeting

 

B.           

Zero Basel Budgeting

 

C.           

Zero Bond Budget

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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18: 

The stock turnover ratio is ____

 

A.           

Financial ratio

 

B.           

Activity ratio

 

C.           

Solvency ratio

 

D.           

Profitability ratio

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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19: 

AS-19 deals with

 

A.           

Borrowing Costs

 

B.           

Earning Per share

 

C.           

Leases

 

D.           

Segment Reporting

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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20: 

The return on investment (ROI) may be calculated as

A.           

Net profit before interest, tax and dividend / Capital employed

B.           

Net profit after interest, tax and dividend / Shareholder's fund

 

C.           

( Net profit - preference dividend )/ No. of equity shares

 

D.           

Return on Investment / Net profit ratio

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting MCQ

21: 

Which of the following transactions will

improve the current Ratio?

1. Bills receivable Dishonoured

2. Cash collected from customers

3. Issue of new shares

4. Payment of preliminary expenses by way of equity shares

Select the correct answer using the codes given below

 

 

A.           

1, 2, and 3

 

B.           

only 4

 

C.           

only 3

 

D.           

2 and 4

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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22: 

The stock turnover ratio may be calculated as ___

A.           

Cost of goods sold / Average stock

 

B.           

Turnover at cost / stock at cost

 

C.           

Turnover at selling price / Stock at selling price

 

D.           

Any of the above

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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23: 

ROI stands for?

 

A.           

Return on Investment

 

B.           

Ratio of Investment

 

C.           

Return of Income

 

D.           

None of these

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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24: 

The satisfactory ratio between internal and external equity is  ____

A.           

1:1

 

B.           

2:1

 

C.           

3:1

 

D.           

4:1

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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25: 

Match List 1- with List-II and select the correct answer using the codes given below the lists

     List-I                                                                 List-II

1. Acid test ratio                                          a. Liquidity ratio

2. Gearing ratio                                          b. Profitability ratio

3. Working capital turnover ratio             c. Leverage ratio

4. Return on capital employed               d. Long term solvency ratio

                                                                      e. Activity ratio

A.           

1 - a, 2 - c, 3 - e, 4 - b

 

B.           

1 - b, 2 - e, 3 - a, 4 - c

 

C.           

1 - a, 2 - e, 3 - d, 4 - b

 

D.           

1 - e, 2 - c, 3 - d, 4 - a

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting MCQ

26: 

The gross profit ratio is the ratio of gross profit to

A.           

Net cash sales

 

B.           

Net credit sales

 

C.           

Closing stock

 

D.           

Net total sales

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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27: 

Acid test ratio is equal to quick current assets divided by ____

A.           

Current liabilities

 

B.           

Current assets

 

C.           

Total liabilities

 

D.           

Total assets

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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28: 

Match List-I with List-II and select the correct answer using the codes given below the lists

    List-I                                             List-II

1. Leverage Ratio                      a. Liquidity position

2. Acid test                                  b. Efficiency of assets management

3. Turnover Ratio                      c. Management of working Capital

4. Current Ratio                        d. Debt and equity relationship

 

 

A.           

1 - d, 2 - a, 3 - c, 4 -b

 

B.           

1- b, 2- d, 3 - a, 4- c

 

C.           

1 - b, 2 - c, 3 - a, 4 - d

 

D.           

1-d, 2 -a, 3 - b,4 - c

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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29: 

Which of the following assets would be taken into account for working capital turnover ratio.

1. Plant          2. Stock

3. Mortgage  4. Sales

5. Reserve    6. Bank

 

A.           

1,5, and 6

 

B.           

4,5, and 6

 

C.           

2,4, and 6

 

D.           

3,5, and 6

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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30: 

In the debt equity ratio, external equity refers to

 

A.           

Only Debentures

 

B.           

Only current liabilities

 

C.           

Debentures and current liability

 

D.           

Reserves

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting MCQ

31: 

Acid test ratio should normally be ----

 

A.           

2:1

 

B.           

1:1

 

C.           

1:2

 

D.           

2:2

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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32: 

Match List-I (objectives of analysis) with List -II (ratios to be computed) and select the correct answer using the codes given below:

        List -I                                                       List - II

l. Trading on Equity                                  a. Earning per share

2. Efficiency of inventory control             b. Liquidity Ratio

3. Overall Efficiency                                  c. Capital Gearing

4. Immediate solvency                            d. Stock turnover Ratio

A.           

1 - b, 2 - a, 3 - d, 4 - c

 

B.           

1 - c, 2 - d, 3 - a, 4 - b

 

C.           

1 - c, 2 - a, 3 - d, 4 - b

 

D.           

1- b, 2 - d, 3 - a,4 - c

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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33: 

Which of the following is a type of budget according to function?

A.           

Fixed Budget

 

B.           

Operating Budget

 

C.           

Long term Budget

 

D.           

Flexible Budget

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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34: 

In the computation of the debtors turnover ratio accounts receivable includes

A.           

Debtors and B/R

 

B.           

Creditors and B/P

 

C.           

Bank overdraft and loan

 

D.           

Debtors and creditors

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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35: 

Identify the formula that is used to calculate the capital turnover ratio

A.           

Credit sales/ Capital employed

 

B.           

Credit sales/net worth

 

C.           

Net sales/ Average accounts payable

 

D.           

Net sales/Capital employed

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting MCQ

36: 

The satisfactory ratio between share-holder's funds and long terms loan is ____

A.           

1:1

 

B.           

2:1

 

C.           

3:1

 

D.           

4:1

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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37: 

Which accounting standard deals with Interim Financial Reporting?

A.           

AS-25

 

B.           

AS-10

 

C.           

AS-21

 

D.           

AS-22

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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38: 

In the debt equity ratio, equity refers to

 

A.           

Only preference capital

 

B.           

Only equity capital

 

C.           

Both preference and equity capitals plus all reserves

D.           

Only reserves

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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39: 

Current ratio is a ------ ratio

 

A.           

Trading account

 

B.           

Profit and loss

 

C.           

Profitability

 

D.           

Balance sheet

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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40: 

What does the return on total assets take into account?

A.           

Income before tax and interest on fixed liability.

B.           

Shareholder's fund

 

C.           

Income after taxation

 

D.           

Total outside liability

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting MCQ

41: 

The net income of the company should ideally be ----- times of the fixed internal charges.

A.           

3 or 4

 

B.           

4 or 5

 

C.           

5 or 6

 

D.           

6 or 7

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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42: 

What does the ROI take into account?

 

A.           

Net fixed assets

 

B.           

Shareholder's investment

 

C.           

Net worth

 

D.           

Operating expenses

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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43: 

If cost of goods sold is Rs. 100,000, other; operating expenses are Rs. 20,000 and total net sales are Rs. 150,000 the operating ratio will be equal to ____

A.           

70%

 

B.           

80%

 

C.           

90%

 

D.           

100%

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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44: 

The ideal ratio between total long term funds and total long terms loan is ----

A.           

4:1

 

B.           

3:1

 

C.           

2:1

 

D.           

1:1

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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45: 

The current ratio of a company is 2: 1 which of the following suggestions would Improve, reduce and net change it.

I.   Payment to trade creditors

II.  Sell machinery for cash

Ill. Purchased goods for cash

IV. Issue of equity shares

A.           

Decrease, Increase, Increase, No effect

 

B.           

No effect, Increase, Decrease, Increase

 

C.           

Increases, Increase, No effect, Increase

 

D.           

Increase, No effect, Decrease, Increase

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting MCQ

46: 

In case of a limited company, the term financial statements includes

A.           

Profit and loss and balance sheet

 

B.           

Profit and loss account, profit and loss appropriation account and balance sheet

C.           

Balance sheet

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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47: 

The issue of equity capital in exchange of plant and machinery will cause the return on equity capital to

A.           

Fluctuate

 

B.           

Decrease

 

C.           

Increase

 

D.           

Remain unchanged

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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48: 

The return on equity capital ratio is obtained by dividing net profit (after tax) less preference dividend by

A.           

Equity capital

 

B.           

Total capital

 

C.           

Current assets

 

D.           

Current liabilities

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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49: 

The net profit ratio is the ratio of net profit to

 

A.           

Net cash sales

 

B.           

Net credit sales

 

C.           

Net total sales

 

D.           

Capital employed

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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50: 

Identify the transaction that has no effect on the current ratio.

A.           

Preference shares redeemed

 

B.           

Bills receivable collected

 

C.           

Motor car sold for cash

 

D.           

Machinery bought for cash

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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Financial and Management Accounting MCQ

51: 

The profit on the reissue of forfeited share are transferred to

A.           

Capital A/ c

 

B.           

Capital Reserve

 

C.           

Profit & Loss A/c

 

D.           

General Issues

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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52: 

What does creditors turnover ratio take into account?

A.           

Total credit sales

 

B.           

Total credit purchase

 

C.           

Total cash sales

 

D.           

Total cash purchases

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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53: 

The current ratio of a company is 2: 1. Which of the following suggestions would improve the ratio?

A.           

To pay a current liability

 

B.           

To borrow money on an interest-bearing promissory note

C.           

To purchase stocks for cash

 

D.           

To give an interest-bearing promissory note to a creditor to whom money was owed on current account

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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54: 

The direct advantages of accounting do not include

A.           

Preparation of financial statements

 

B.           

Comparison of results

 

C.           

Competitive advantage

 

D.           

Information to interested groups

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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55: 

The basic rule of book-keeping "Debit all expenses and losses and credit all gains and incomes" is applicable to

A.           

Personal account

 

B.           

Real account

 

C.           

Nominal account

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting MCQ

56: 

Which of the following statements is not correct?

A.           

For the purpose of Funds Flow Statement, the term 'fund ' generally refers to net working capital

B.           

Funds flow is a wider concept than the Cash flow

C.           

The flow of funds must arise due to external and not internal transactions of the business

D.           

The capitalisation of reserves by the issue of bonus shares also involves flow of funds

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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57: 

Match List I with List II and select correct answer using the codes given below:

     List I                                                                       List II

a. ABC Analysis                                                 I. Capital Structure

b. Fund Flow  Analysis                                    II. Inventory Control

c. ROI                                                                 Ill. Working Capital Management

d. M M Theory                                                   IV. Overall Profitability

A.           

 a    b    c    d

 

 II     III    IV   I

 

B.           

 a    b    c    d

 

  I    II    IV    III

 

C.           

 a    b    c    d

 

 IV   III    I     II

 

D.           

 a    b    c    d

 

 I     III    II   IV

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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58: 

Match List I with List II and select the correct answer using the codes given below the lists

    List I                                                                                                                          List II

a. Balance of DebentureRedemption Fund account                                    I. Realisation account

b. Balance of Sinking Fund account for the  replacement of an asset     II. Funds flow statement

c. On dissolution of a firm, the provisions made for doubtful debts         Ill. General reserve

    appearing in Balance Sheet

d. Financial consequences of business operations                                   IV. Asset account

A.           

 a   b    c    d

 

 I    II    III    IV

 

B.           

 a   b    c    d

 

III   IV    I    II

 

C.           

 a   b    c    d

 

 I    II    IV    III

 

D.           

 a   b    c    d

 

 III  IV    II    I

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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59: 

Acid-test ratio should normally be

 

A.           

2:1

 

B.           

1:1

 

C.           

3:1

 

D.           

4:1

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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60: 

Which one of the following is an example of sources of funds?

A.           

Decrease in share capital

 

B.           

Increase in long-term liabilities

 

C.           

Decrease in long-term liabilities

 

D.           

Increase in fixed assets

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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Financial and Management Accounting MCQ

61: 

Match List I (Objectives of analysis) with List II (Ratios to be computed) and select correct answer using the codes given below the lists

    List I                                                         List II

a. Trading on Equity                             I. Earnings per share

b. Efficiency of Inventory Control       II. Liquidity ratio

c. Overall Efficiency                            III. Capital gearing

d. Immediate Solvency                      IV. Stock turnover ratio

A.           

 a   b   c    d

 

 II    I    IV   III

 

B.           

 a   b   c    d

 

 III  IV   I   II

 

C.           

 a   b   c    d

 

III    I    IV   II

 

D.           

 a   b   c    d

 

 II    IV   I   III

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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62: 

Which of the following statement is correct?

 

A.           

Fixed assets must always be shown at market value

B.           

Book-keeping and accounting are different terms

C.           

Owner's Equity = Assets + Liabilities

 

D.           

Patents is an example of current asset

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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63: 

Which of the following statement is not correct in relation to cash discount?

A.           

Cash discount is an allowance made by the person who receives cash to the payer for prompt payment

B.           

Cash discount is an allowance in addition to the trade discount

C.           

Cash discount is recorded in account books

D.           

Cash discount is always allowed at a rate higher than the rate of trade discount

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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64: 

Bonus shares can be issued by a company

 

A.           

Out of the Reserves created by revaluation of fixed assets

B.           

Out of share premium not collected in cash

C.           

Without any provision for it in the Articles of Association of the company

D.           

Out of free reserves built out of genuine profit

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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65: 

Current assets include

 

A.           

Stores & Spare parts

 

B.           

Stock in trade

 

C.           

Sundry Debtors

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting MCQ

66: 

Which one of the following statements is not correct?

A.           

Bonus shares can be issued out of General Reserves

B.           

Bonus shares can be issued in lieu of dividends

C.           

The partly-paid shares, if any, should be made fully paid up before the company can make a bonus issue

D.           

The bonus issue should be out of free reserves built out of the genuine profits or security premium collected in cash only

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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67: 

EPS is calculated as

 

A.           

EBIT / Equity shares

 

B.           

(EBIT - Preference Dividend) / Equity shares

C.           

EIT / Equity shares

 

D.           

(EAT - Preference Dividend) / Equity shares

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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68: 

Match List I (Financial Statements and Accounts) with List II (special matters associated with statements and accounts) and select the correct answer using the codes given below the lists:

    List I                                                                                      List II

a. Receipts and Payments Account                                 I. Revenue

b. Income and Expenditure Account                               II. Cash

c. Dividend Equalisation Reserve                                 llI. Liability

d. Club subscription received in Advance Account    IV. Balance Sheet

                                                                                             V. General Reserve

A.           

 a   b    c    d

 

 II    I    IV    III

 

B.           

 a   b    c    d

 

 III   II   IV    V

 

C.           

 a   b    c    d

 

 II    I     V    III

 

D.           

 a   b    c    d

 

 I    II    IV    V

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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69: 

Which one of the following ratios is most important for judging the long-term solvency of a firm?

A.           

Debt-Equity Ratio

 

B.           

Stock Turnover Ratio

 

C.           

Return on Investment

 

D.           

Fixed Assets Turnover Ratio

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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70: 

Match List I (Items) with List II (Heads in Balance Sheet) and select the correct answer using the codes given below the lists

     List I                                                                                               List II

a. Loss on issue of debentures                                              I. Reserves and Surpluses

b. Unclaimed dividend                                                             II. Miscellaneous Expenditure

c. Prepaid rent                                                                          IlI. Current Liability

d. Profit prior to incorporation                                                IV. Current Assets

A.           

 a    b    c    d

 

III    II     I     IV

 

B.           

 a    b    c    d

 

III    II     IV     I

 

C.           

 a    b    c    d

 

 II    III    IV     I

 

D.           

 a    b    c    d

 

 II    III     I     IV

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting MCQ

71: 

Choose the wrong statement

 

A.           

Overhaul expenses of secondhand machinery purchased are revenue expenditure

B.           

Legal fee to acquire property is capital expenditure

C.           

Expenses in connection with obtaining a licence for running the cinema is capital expenditure

D.           

Amount spent for the construction of temporary hunts, which were necessary for the construction of the cinema house and were demolished when the cinema house was ready, is capital expenditure

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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72: 

Consider the following statements:

Redeemable preference shares can be redeemed out of

1. Sale proceeds of the new issue of shares

2. Sale proceeds of the new issue of debentures

3. Profits available for dividends

4. Sales proceeds of the assets of the company

Of these statements

A.           

1 and 3 are correct

 

B.           

1 alone is correct

 

C.           

2, 3 and 4 are correct

 

D.           

1, 2, 3 and 4 are correct

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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73: 

Accounting is concerned with

 

A.           

Monetary transactions

 

B.           

Non-monetary transactions

 

C.           

Monetary and non-monetary transactions

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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74: 

Which of the following accounting equation is correct?

A.           

Capital + Liabilities= Assets

 

B.           

Capital = Assets + Liabilities

 

C.           

Capital- Liabilities = Assets

 

D.           

Capital + Assets =  Liabilities

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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75: 

Goods withdrawn by the proprietor for his personal use are

A.           

Shown as a deduction from the purchases

 

B.           

Shown as a deduction from the sales

 

C.           

Treated as sales at cost price

 

D.           

Added to the purchases

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting MCQ

76: 

Unpaid calls are shown in the balance sheet of a company

A.           

By adding it to the share capital

 

B.           

By deducting it from the called-up share capital

C.           

Under the head 'current assets'

 

D.           

Under the head 'current liabilities'

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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77: 

Match List I with List II and select correct answer using the codes given below the lists

   List  I                                             List II

a. Current Ratio                       I. Sufficiency of EBIT to cover interest charges

b. Debt-Equity Ratio               II. Short-term solvency

c. Net Profit Margin Ratio      III. Exposure to financial risk

d. Interest Coverage Ratio   IV. Earning left for shareholders

A.           

 a   b   c    d

 

 II   III   I    IV

 

B.           

 a   b   c    d

 

 III  II   I    IV

 

C.           

 a   b   c    d

 

 III  II   IV    I

 

D.           

 a   b   c    d

 

 II   III   IV    I

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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78: 

Match List I with List II and select correct answer using the codes given below:

     List I                                       List II

a. G.P. Ratio                           I. Convention of conservatism

b. Cash budget                     II. Profitability

c. E.O.Q.                                 III. Inventory management

d. Provision for bad debts  IV. Management of liquid assets

A.           

 a    b    c    d

 

 II     IV    I    III

 

B.           

 a    b    c    d

 

 IV   II    III    I

 

C.           

 a    b    c    d

 

 IV    II    I    III

 

D.           

 a    b    c    d

 

 II     IV   III   I

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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79: 

Match List I (Ratios) with List II (Method of calculation) and select correct answer using the codes given the lists

      List I                                       List II

a. Debt-EquityRatio                   I. Equity Capital / Total Debt Capital

b. Proprietary Ratio                   II. External Equity / Owner's Equity

c. Capital Gearing Ratio         III. Total Shareholders Funds / Total Assets

d. ROI                                         IV. Profit before Interest and Tax / Net Assets

A.           

 a    b   c    d

 

 II    III   I    IV

 

B.           

 a    b   c    d

 

 II    III   IV   I

 

C.           

 a    b   c    d

 

 III   II    I    IV

 

D.           

 a    b   c    d

 

 III   II    IV   I

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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80: 

Match List I with List II and select correct answer using the codes given below:

      List I                                                List II

a. Financial leverage                  I. Efficiency

b. Quick ratio                               II. Profitability

c. Stock turnover ratio               Ill. Risk

d. Margin on sales                    IV. Liquidity

A.           

 a   b   c    d

 

III   IV   I    II

 

B.           

 a   b   c    d

 

IV   III   I    II

 

C.           

 a   b   c    d

 

IV   III   II    I

 

D.           

 a   b   c    d

 

III   IV   II    I

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting MCQ

81: 

Stock is

 

A.           

Included in the category of fixed assets

 

B.           

Part of current assets

 

C.           

Intangible

 

D.           

Tangible

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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82: 

Which of the following information related to fixed assets should be disclosed in the financial statements as per Accounting Standard - 10 (Accounting Standard on Fixed Assets)?

A.           

Gross and net book values of fixed assets at the beginning and end of an accounting period showing additions, disposals, acquisitions and other movements

B.           

Expenditure incurred on account of fixed assets in the course of construction or acquisition

C.           

Revalued amount substituted for historical cost of fixed assets, the method adopted to compute the revalued amounts, the nature of any indices used, the year of any appraisal made and whether an external valuer was involved, in case where fixed assets are stated at revalued amounts

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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83: 

Which of the following is not included in the category of 'Intangible Assets' ?

A.           

Patents rights

 

B.           

Copy rights

 

C.           

Competitive benefit and privileges

 

D.           

Machinery

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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84: 

AS -10 (Accounting Standard on Fixed Assets) does not deal with accounting for the following items to which special considerations apply

A.           

Forests, plantations and similar regenerative natural resources

B.           

Wasting assets including material rights, expenditure on the exploration for and extraction of minerals, oil, natural gas and similar non-regenerative resources

C.           

Expenditure on real estate development and livestock

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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85: 

What are the important objectives of accounting?

l. To maintain records of a business

II. Calculation of profit or loss

Ill. Depiction of financial position

IV. To make information available to variousgroups and users

A.           

I and II

 

B.           

I and III

 

C.           

I, II, and III

 

D.           

I, II, III and IV

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting MCQ

86: 

Which of the following assets are dealt with by AS - 10 (Accounting Standard on Fixed Assets)?

A.           

Land, building, plant and machinery, vehicles, furniture and fittings

B.           

Goodwill and patents

 

C.           

Trademarks and designs

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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87: 

Cost of inventories includes

 

A.           

Direct Material + Direct Expenses

 

B.           

Direct Labour + Direct Expenses

 

C.           

All costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition

D.           

Direct material only

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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88: 

Closing stock is valued at

 

A.           

Cost

 

B.           

Market value

 

C.           

Cost or market price whichever is lower

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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89: 

Choose the correct statement:

 

A.           

According to AS - 6, depreciation is to be provided on land

B.           

According to AS - 6, depreciation is not to be provided on land under any situation

C.           

According to AS - 6, depreciation is not to be provided on land unless it has a limited useful life for the enterprise

D.           

AS - 6 is silent on the question of providing depreciation on land

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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90: 

Match List I with List II and select correct answer using the codes given below:

            List l                                       List II

(Accounting Convention)        (Principles Involved)

a. Consistency                       I. Losses are an ticipated and accounted for in advance but profits are not accotrnted

                                                     for until realised.

b. Comparability                    II. All the relevant financial information should be summarised and presented in the                                                          accounting statements.

c. Conservatism                   III. Accounting procedures in an entity should be followed uniformly from period to                                                              period.

d. Disclosure                         IV. Accounting statements of different periods of an entity and those of different                                                                     entities of a period should be based on the same accounting principles and                                                                   procedures.

 

 

A.           

 a   b   c    d

 

IV   III   I    II

 

B.           

 a   b   c    d

 

III   IV   I    II

 

C.           

 a   b   c    d

 

IV   III   II    I

 

D.           

 a   b   c    d

 

III   IV   II    I

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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Financial and Management Accounting MCQ

91: 

The fundamental accounting equation' Assets = Liabilities + Capital' is the formal expression of

A.           

Dual aspect concept

 

B.           

Matching concept

 

C.           

Going concern concept

 

D.           

Money measurement concept

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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92: 

Stock is valued in the books of accounts at

 

A.           

Cost price

 

B.           

Market price

 

C.           

Cost price of market price whichever is less

D.           

Depends whether LIFO method is used or FIFO method is used

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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93: 

Which of the following statements is true in relation to liabilities?

A.           

Claims against the resources.

 

B.           

Currently existing obligations which the firm intends to meet at some time in the future.

C.           

It must be capable of being expressed in money terms.

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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94: 

All capital expenditures and receipts are taken to

A.           

Trading and Profit and Loss Account

 

B.           

Balance sheet

 

C.           

Trial balance

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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95: 

Which one of the following branches of accounting primarily deals with processing and presenting of accounting data for internal use?

A.           

Financial accounting

 

B.           

Tax accounting

 

C.           

Management accounting

 

D.           

Inflation accounting

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting MCQ

96: 

Amount spent on an advertisement campaign, the benefit of which is likely to last for three years is a

A.           

Capital expenditure

 

B.           

Revenue expenditure

 

C.           

Deferred revenue expenditure

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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97: 

As per AS - 2, inventory is to be valued at

 

A.           

Actual cost

 

B.           

Sales value

 

C.           

Net realisable value

 

D.           

The lower of cost, or net realisable value

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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98: 

Which of the following can be treated as capital expenditure?

A.           

Acquisition of land, building, machinery etc.

 

B.           

Amount spent on increasing the Sitting accommodation in picture hall.

C.           

Expenditure incurred for acquiring the right to carry on a business, for example, patent rights, copyright, goodwill.

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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99: 

Which of the following Accounting standards is recommendatory and not mandatory?

A.           

AS - 1 - Disclosure of accounting policies

 

B.           

AS - 2 (Revised) - Valuation of inventories

 

C.           

AS -3 - Cash Flow Statement

 

D.           

AS - 4 - Contingencies and Events occurring after the Balance Sheet date

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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100: 

Which of the following is not required to be disclosed according to AS-6?

A.           

The depreciation methods used

 

B.           

The total depreciation for the period for each class of assets

C.           

The gross amount of each class of depreciable assets and the related accumulated depreciation

D.           

Depreciated value of the assets

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting MCQ

101: 

What are the limitations of 'money measurement' concept?

A.           

Any transaction / event inspite of being very important cannot be recorded in the books of accounts, if it cannot be expressed in money value.

B.           

As per this concept, a transaction is recorded at its money value on the date of occurrence and the subsequent changes in the money value are conveniently ignored.

C.           

Both (A) and (B)

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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102: 

AS - 9 (Revenue Recognition) is concerned with the recognition of revenue arising in the course of the ordinary activities of the enterprise from

A.           

The sale of goods

 

B.           

The rendering of services

 

C.           

The use by others of enterprise resources yielding interest, royalties and dividends

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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103: 

According to AS - 6, 'Depreciable assets' are assets which

A.           

Are expected to be used during more than one accounting period

B.           

Have a limited useful life

 

C.           

Are held by an enterprise for use in the production or supply of goods and services, for rental to others, or for administrative purposes and not for the purpose of sale in the ordinary course of business

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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104: 

The method of depreciation is applied consistently to provide comparability of the results of the operations of the enterprise from period to period. A change from one method of providing depreciation to another is made only

A.           

If the adoption of the new method is required by statute

B.           

For compliance with an accounting standard

C.           

If it is considered that the change would result in a more appropriate preparation or presentation of the financial statements of the enterprise

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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105: 

Which of the following can be treated as revenue expenditure?

A.           

Expenses incurred in the normal course of business, for example, expenses of administration, expenses incurred in manufacturing and selling products. Examples of such expenses are salaries, rent, insurance, postage, stationary, repairs to assets.

B.           

Expenses incurred to maintain the business, for example, replacements for maintaining the existing permanent assets cost of stores consumed in the course of manufacturing, for example, oil, cotton-waste, machinery, spares consumed.

C.           

Depreciation on fixed assets, interest on loans for business, loss from sale of fixed asset.

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting MCQ

106: 

Which of the following is not deferred revenue expenditure?

A.           

Heavy advertisement expenditure.

 

B.           

Expenses incurred in removing the business to more convenient premises.

C.           

Preliminary expenses.

 

D.           

Depreciation on fixed assets.

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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107: 

Assessment of depreciation and the amount to be charged in respect thereof in an accounting period are usually not based on

A.           

Market value of the asset

 

B.           

Historical cost or other amount substituted for the historical cost of the depreciable asset when the asset had been revalued

C.           

Expected useful life of the depreciable asset

D.           

Estimated residual value of the depreciable asset

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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108: 

Accounting Standard Board was set up by

 

A.           

Institute of Chartered Accountants of India

B.           

Institute of Cost and Works Accountants of India

C.           

Institute of Company Secretaries of India

D.           

Government of India

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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109: 

Which of the following cannot be treated as revenue expenditure?

A.           

Cost of goods purchased for resale.

 

B.           

Wages paid for the erection of plant and machinery.

C.           

Obsolescence cost.

 

D.           

Expenses incurred by way of repairs of existing assets which do not in any way add to their earning capacity.

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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110: 

In reference to the accounting standards, choose the correct statement:

A.           

Accounting standards codify the generally accepted accounting principles

B.           

They lay down the norms of accounting policies and practices by way of codes or guidelines

C.           

The main purpose of accounting standards is to provide information to the user as to the basis on which the accounts have been prepared

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

Click on Financial and Management Accounting MCQ

111: 

In case the depreciable assets are revalued, the provision for depreciation is based on

A.           

The revalued amount on the estimate of the remaining useful life of such assets

B.           

Original cost of the assets

 

C.           

Depreciated value of the assets

 

D.           

AS - 6 is silent in this regard

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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112: 

Contingent liability is shown due to

 

A.           

Convention of full disclosure

 

B.           

Convention of conservatism

 

C.           

Convention of materiality

 

D.           

Dual aspect concept

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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113: 

According to which of the following concepts, fixed assets are depreciated over their useful life rather than over a shorter period on the expectation of early liquidation?

A.           

Cost concept

 

B.           

Matching concept

 

C.           

Going concern concept

 

D.           

Business entity concept

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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114: 

Which of the following factors should be considered while estimating the useful life of a depreciable asset?

A.           

Expected physical wear and tear

 

B.           

Obsolescence

 

C.           

Legal or other limits on the use of asset

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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115: 

Match List I with List II and select correct answer using the codes given below:

     List I                                       List II

a. Real Accounts            I. Dr. the receiver Cr. the giver

b. Nominal Accounts    II. Dr. what comes in Cr. what goes out

c. Personal Accounts  Ill. Dr. all expenses and losses Cr. all gains and incomes

A.           

 a   b   c

 

III   II    I

 

B.           

 a   b   c

 

  I   III    II

 

C.           

 a   b   c

 

 II   III    I

 

D.           

 a   b   c

 

 I   II    III

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting MCQ

116: 

Valuation of inventory is dealt with in

 

A.           

AS-1

 

B.           

AS-2

 

C.           

AS-3

 

D.           

AS-4

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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117: 

Which of the following accounting equations is not correct?

A.           

Assets = Liabilities + Capital

 

B.           

Capital = Assets - Liabilities

 

C.           

Liabilities = Assets - Capital

 

D.           

Liabilities = Assets + Capital

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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118: 

How the deferred revenue expenses are treated in the books of accounts?

A.           

Such expenses are taken to Profit and Loss Account in part every year and thus unwritten off portion may be allowed to stand in the balance sheet on the asset side.

B.           

Such expenses are charged fully to the Profit and Loss Account of the year in which these are incurred.

C.           

Either (A) or (B)

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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119: 

Which of the following aspects of revenue recognition is not dealt by AS-9?

A.           

Revenue arising from construction contracts

 

B.           

Revenue arising from hire-purchase, lease agreements

C.           

Revenue arising from governments grants and other similar subsidies

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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120: 

AS - 6 deals with depreciation accounting and applies to all depreciable assets, except

A.           

Forests, plantations and similar regenerative natural resources

B.           

Wasting assets and expenditure on research and development

C.           

Goodwill and livestock

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Multiple Choice Questions

1: 

Identify the item which is not an operating expense

A.           

Advertising expenses

 

B.           

General management salaries

 

C.           

Depreciation of office equipment

 

D.           

Loss on sale of motor car

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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2: 

Assertion (A). There is no error, when the totals of the debit side and the credit side of the Trial Balance are equal.

Reason (R). Trial Balance is a two-column statement showing names and balances of all the accounts in the order in which they appear in the ledger.

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.

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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3: 

Match List-I with List-II and select the correct answer using the codes given below the lists:

      List-I                                                            List-II

a. Net loss from operations                   I. Source of funds

b. Changes in working capital              II. Drain on working capital

c. Depreciation                                       III. Flow of funds

d. Issue of fully paid bonus shares    IV. Neither source nor application of funds.

A.           

a    b     c     d

 

III    II     I      IV

 

B.           

a    b     c     d

 

II    III     IV    I

 

C.           

a    b     c     d

 

II    III     I      IV

 

D.           

a    b     c     d

 

III    II     IV   I

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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4: 

Match List I (Provision of partnership act) with List II (Matters with which the provision are released) and select the correct answer using the codes given below the lists:

       List - I                                                                             List - II

1. lnterest must be allowed @ 6% p.a.                     (a) Drawings of partners

2. No interest shall be allowed                                   (b) Net loss of the firm for an accounting year.

3. No interest shall be charged                                  (c)  Capitals contributed by the partners.

4. Must be shared equally by all the partners          (d)  Loan given by a partner to the firm

     unless otherwise agreed.

A.           

1- a, 2 - c, 3 - b, 4 - d

 

B.           

1- d, 2 - c,3 - b, 4- a

 

C.           

1- c, 2 - b, 3 - d, 4 - a

 

D.           

1 - d, 2 - c, 3 - a, 4 - b

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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5: 

Assertion (A). Under 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 per cent at which depreciation is written off goes on diminishing from year to year.

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.

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting Multiple Choice Questions

6: 

Assertion (A) .A new firm can be profitable and yet not be able to pay its debts as they become due.

Reason (R). New firms often have the problem of having increased investments in inventory and fixed assets at an amount which exceeds cash generated from operations.

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.

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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7: 

Revenue is generally recognised as being earned at that point of time when

A.           

sale is effected

 

B.           

cash is received

 

C.           

production is completed

 

D.           

debts are collected

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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8: 

Redeemable preference shares is __

 

A.           

Current assets

 

B.           

Non-current assets

 

C.           

Current liability

 

D.           

Non-Current liability

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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9: 

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.

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.

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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10: 

For the purpose of calculating ROI capital employed means

A.           

Net Fixed assets

 

B.           

Current assets - current liabilities

 

C.           

Gross Block

 

D.           

Fixed assets + current assets - current liabilities

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Multiple Choice Questions

11: 

Match List I with List II and select the correct answer using the codes given below the lists:

    List I                                                                                        List  II

a. Heavy amount of premium on redemption of            1. Capital expenditure

    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

A.           

a  b  c  d

2  3  4  1

B.           

a  b  c  d

3  2  4  1

C.           

a  b  c  d

2  3  1  4

D.           

a  b  c  d

3   2  1  4

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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12: 

A, B and C were partners sharing profits in the ratio of 3 : 5 : 7. C retires and his share were taken up by A and B in the ratio of 3: 2. What is new ratio?

A.           

13:12

 

B.           

2:13

 

C.           

6:7

 

D.           

7:6

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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13: 

What does the 'net worth' of a business signify?

 

A.           

Total assets

 

B.           

Current - total liabilities

 

C.           

Fixed assets - current assets

 

D.           

Total assets - total liabilities

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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14: 

Match the following by writing the number of correct choice

Column A                                                                        Column B

(i) Debit and Credit Vouchers are also called     (a) Non-cash  transactions

(ii) Credit vouchers are prepared for                     (b) Cash payment of the business

(iii) Transfer Vouchers are prepared for               (c) Cash Vouchers

(iv) Debit Vouchers are prepared for                     (d) Cash receipts of the business

 

A.           

 i       ii      iii     iv

 

(c)   (d)   (a)   (b)

 

B.           

 i       ii      iii     iv

 

(a)   (b)    (c)   (d)  

 

C.           

 i       ii      iii     iv

 

(d)   (c)    (b)   (a)  

 

D.           

 i       ii      iii     iv

 

(c)   (a)    (b)   (d)  

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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15: 

Which of the following is a type of partner?

 

A.           

Sleeping or Dormant

 

B.           

Nominal

 

C.           

Minor

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Multiple Choice Questions

16: 

A, B and C were partners sharing profits and losses in the ratio of 2 : 2 : 1. A retires, Band C purchase share of A by paying Rs 30,000 and Rs 40,000. What is new profit sharing ratio

A.           

4:3

 

B.           

2:1

 

C.           

3:4

 

D.           

1:2

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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17: 

Which of the following statements is correct?

 

A.           

A decrease in current liabilities causes an increase in the working capital.

B.           

An increase in current liabilities causes an increase in the working capital.

C.           

A decrease in the current assets causes an increase in the working capital.

D.           

An increase in the current assets causes a decrease in the working capital.

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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18: 

Assertion (A). Management accounting provides management with information for decision making.

Reason (R). Management accounting is a branch of cost accounting.

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.

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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19: 

Match List-I with List-II and select the correct answer using the codes given below the lists:

    List-I                                                                                                   List-II

a. Balance of Debenture Redemption Fund account                 I. Realisation Account

b. Balance of Sinking Fund account for                                        II. Funds flow statement

     the replacement of an asset.

c. On dissolution of a firm, the provisions made for                  III. General Reserve

    doubtful debts appearing in Balance Sheet.

d. Financial consequences of business operations.                 IV. Asset account

 

 

 

A.           

a     b      c      d 

 

IV    III      I      II

 

B.           

a     b      c      d 

 

III    IV      I      II

 

C.           

a     b      c      d 

 

I       II      IV    III

 

D.           

a     b      c      d 

 

III    IV      II      I

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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20: 

Which one of the following is correct about margin of safety ratio?

A.           

Capital employ / Net worth

 

B.           

Contribution / sales value

 

C.           

Operating profit / contribution

 

D.           

Contribution / Sales of BEP

 

               

 Answer  Report  Discuss

               

Option: D

 

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Financial and Management Accounting Multiple Choice Questions

21: 

Match List-I with List-II and select the correct answer using the codes given below the lists:

    List-I                                                                                         List-II

a. Income measurement                                                  I. Accrues to owner's equity

b. Expense recognition                                                    II. Revenue recognition

c. Basis for  realisation in accounting                          Ill. Matching revenues and expenses

d. Recognised revenue                                                   IV. Accounting period

 

 

A.           

a      b      c      d

 

III      IV     II      I

 

B.           

a      b      c      d

 

III      IV     I      II

 

C.           

a      b      c      d

 

II      III      IV     I

 

D.           

a      b      c      d

 

II      III      I      IV

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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22: 

Identify the item that is not taken into account in computing the current ratio

A.           

Land

 

B.           

Bills recoverable

 

C.           

Cash

 

D.           

Bank

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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23: 

Expenditure incurred on research is an example of

A.           

Capital expenditure

 

B.           

Revenue expenditure

 

C.           

Deferred revenue expenditure

 

D.           

Partly capital expenditure are partly revenue expenditure

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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24: 

Match List I (organisation) with List II (Basis of membership) and select the correct answer using the codes given below the lists:

    List - I                                                                                                      List - II

a. Cooperative Society                                                        1. Collective business

b. Joint Hindu                                                                       2. Purchase/ Family Transfer of shares

c. Joint Stock                                                                        3. By virtue of company Birth

d. Partnership firm                                                              4. Common mutual interest

                                                                                                5. Mutual contract

A.           

a   b    c    d

 

1   3     2    5

 

B.           

a   b    c    d

 

5    4    1   3

 

C.           

a   b    c    d

 

4   3     2    5

 

D.           

a   b    c    d

 

4    1   2    3

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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25: 

Amount spent on an advertisement campaign, the benefit of which is likely to last for three years is a

A.           

Capital revenue expenditure

 

B.           

Revenue expenditure

 

C.           

Deferred revenue expenditure

 

D.           

Contingent expenditure

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting Multiple Choice Questions

26: 

Assertion (A).ROI is the index to study management efficiency.

Reason (R). Earning power in relation to total investment is measured by ROl.

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.

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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27: 

If a particular current asset in the current year is more than what was in the previous year, then the change in the current assets results in of working capital.

A.           

decrease

 

B.           

increase

 

C.           

zero

 

D.           

none of these

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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28: 

A firm earns a profit of Rs. 15,000 per year. In the same business a 10% return is generally expected. The total assets of the firm are Rs. 1,70,000. The value of other liabilities is Rs. 60,000. What is the value of goodwill?

A.           

Rs. 20,000

 

B.           

Rs. 30,000

 

C.           

Rs. 40,000

 

D.           

Rs. 50,000

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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29: 

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

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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30: 

EBIT /Total Assets Ratio is

 

A.           

Liquidity Ratio

 

B.           

Profitability Ratio

 

C.           

Solvency Ratio

 

D.           

Turnover Ratio

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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Financial and Management Accounting Multiple Choice Questions

31: 

Which one in the following is least suited for measuring return on investment?

A.           

Income

 

B.           

Net operating income before interest and taxes, average total assets

C.           

Operating income ratio, Total assets turnover

D.           

Net income after interest but before taxes average total shareholders equity

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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32: 

The equation for the Debt equity ratio is

 

A.           

Long term Debt / Equity Capital

 

B.           

Liquid Assets / Current Liability

 

C.           

Current Assets / Current Liability

 

D.           

Net Profit / Net Sales

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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33: 

Which of the following accounting standards is not mandatory in India?

A.           

Fixed assets accounting and revenue recognition

B.           

Inventory and depreciation accounting

 

C.           

Non-monetary assets and fixed assets

 

D.           

Monetary assets and depreciation accounting

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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34: 

Which of the following is a type of efficiency ratio?

A.           

Debt-equity Ratio

 

B.           

Earning Per share

 

C.           

Working Capital turnover Ratio

 

D.           

Net Profit Ratio

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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35: 

Match List I (Transaction) with List II (Entry to be made) and select the correct answer by using the codes given below the list:

    List-I                                                          List- II

1. Loss on realisation                         (a) Debits partner's capital A/C

2. Profit on realisation                         (b) Credit realisation A/C

3. Assets sold                                      (c) Credit Partner's A/C

4. Creditors paid                                  (d) Debit realisation A/C

A.           

1-a,2 - c,3 - b,4-d

 

B.           

1 - c, 2 - a, 3 - b, 4 - d

 

C.           

1 - c, 2 - a, 3 - d, 4 - b

 

D.           

1 - a, 2 - c, 3 - d, 4 -b

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting Multiple Choice Questions

36: 

Assertion (A). Companies are required to use Written Down Value (WDV) method and the rates specified in Schedule XIV to the Companies Act.

Reason (R). A change from WDV method of providing depreciation to Straight Line Method (SLM) should be made if it is considered that the change would result in a more appropriate preparation or presentation of the financial statements of the company.

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.

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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37: 

Which of the following is a branch of Accounting?

 

A.           

Financial Accounting

 

B.           

Cost Accounting

 

C.           

Management Accounting

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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38: 

Assertion (A). The fixed assets in the balance sheet of a limited company are required to be shown at cost less depreciation.

Reason (R). The balance sheet and profit and loss account are to disclose a true and fair view.

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.

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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39: 

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 as 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 cannot have more than 10 partnership.

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 using the codes given below:

A.           

1 and 2

 

B.           

2,3 and 4

 

C.           

1 and 3

 

D.           

1,3 and 4

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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40: 

Assertion (A). Performance ratios show where we are going.

Reason (R). Balance sheet ratios show where we stand.

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.

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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Financial and Management Accounting Multiple Choice Questions

41: 

Match List-I with List-II and select the correct answer using the codes given below the lists:

    List-I                                                                                 List-II

a. Profit prior to incorporation                               I. Provisions

b. Proposed dividend                                            II. Miscellaneous expenditure

c. Interest paid out of capital                               Ill. Current liabilities

d. Unclaimed dividend                                         IV. Reserves and surplus

A.           

a   b    c    d

 

IV   I    III    II

 

B.           

a   b    c    d

 

IV   I    II    III

 

C.           

a   b    c    d

 

I   IV    II    III

 

D.           

a   b    c    d

 

I   IV    III    II

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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42: 

Assercion (A). Securities premium amount can be refunded in cash to equity shareholders for issuing fully paid bonus shares to members.

Reason (R). Share premium is usually collected when the market price of the shares is higher than the face value of the share.

A.           

Both A and R are true and R is the correct explanation of A.

B.           

Both A and R are true and R is not the correct explanation of A.

C.           

A is true but R is false

 

D.           

A is false but R is true.

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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43: 

Profit and Loss Account is also called.

 

A.           

Funds Flow Statement

 

B.           

Income Statement

 

C.           

Cash Flow Statement

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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44: 

Which one of the following ratio is the indicator of the long term solvency of the firm?

A.           

Acid test ratio

 

B.           

Debt equity ratio

 

C.           

Time interest earned ratio

 

D.           

None of these

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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45: 

Interest coverage Ratio is given by

 

A.           

Net profit / Interest on Debt

 

B.           

Debt capital / Interest on Debt

 

C.           

Earning Before Interest and Tax / lnterest on Debt

D.           

Profit Before Tax / Interest on Debt

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting Multiple Choice Questions

46: 

The balance sheet is a __ of the assets, liabilities and capital of a concern as on particular date.

A.           

Statement

 

B.           

Document

 

C.           

Picture

 

D.           

Balance

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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47: 

If the change, because of a business transaction results in the increase of fund then the transactions responsible for such a change is said to be ____

A.           

uses of fund

 

B.           

schedule of change in working capital

 

C.           

source of fund

 

D.           

funds flow statements

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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48: 

Match List I (Names of accounts) with List II (Points with which the accounts are concerned) and select the correct answer using the codes given below the lists:

    List - I                                                              List - II

1. Partners current account                      (a) Dissolution of partnership

2. Goodwill account                                   (b) Revaluation of assets on the admission of a partner.

3. Partners drawings account                 (c)  Fixed capitals of partners

4. Profit and Loss                                       (d) Goods taken by partners for private consumption

A.           

1-a,2-c,3-b,4-d

 

B.           

1 - c, 2 - a, 3 - d, 4 - b

 

C.           

1- a, 2 - c, 3 - d, 4 -b

 

D.           

1 - c, 2- a, 3 - b,4 - d

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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49: 

Which one of the following will be treated as revenue expenditure?

A.           

Cost incurred for a new exit as required under the local bodies by 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 purchasing sewing machines and spends some money on the repair of ten machines damaged while in transit.

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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50: 

Match list-I (Ratio) with List-II (Method of calculation) and select the correct answer using the codes given below the lists

    List I                                                    List II

 l. Financial coverage                      a. Efficiency

2. Quick Ratio                                   b. Profitability

3. Stock Turnover Ratio                  c. Risk

4. Margin on sales                          d. Liquidity

A.           

1 - c, 2 - d, 3 - a, 4 - b

 

B.           

1 - d, 2 - c, 3 - a, 4 - b

 

C.           

1- d, 2 - c,3 - b,4- a

 

D.           

1 - c, 2 - d, 3 - b, 4 - a

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting Multiple Choice Questions

51: 

A balance sheet is

 

A.           

Trial balance

 

B.           

Trading account

 

C.           

Position statement

 

D.           

Loss of assets & liabilities

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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52: 

To test the liquidity of a concern which of the following ratios are useful?

A.           

Acid test ratio

 

B.           

Capital turnover ratio

 

C.           

Bad Debt to sales ratio

 

D.           

lnventory turnover ratio

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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53: 

Budgets can be classified according to

 

A.           

Time

 

B.           

Functions

 

C.           

Flexibility

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Objective Type Questions

1: 

Accounting ratios can be expressed in the following forms:

1 Pure number

2. Percentage

3. Times

4. Fraction

Select the correct answer using the codes given below

A.           

1 and 2

 

B.           

1,2 and 3

 

C.           

2 and 3

 

D.           

1,2,3 and 4

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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2: 

The firm is said to be more geared, if equity capital is more than the debentures and -------

A.           

Preference share capital

 

B.           

Loan

 

C.           

Both (a) +(b)

 

D.           

Total assets

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

Capital Gearing Ratio = (Equity Share Capital ) / (Preference Share Capital + Debentures + Loans)

 

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3: 

Which of the following items is considered as a revenue expenditure?

A.           

Expenditure by way of maintenance that has increased productivity

B.           

Repair of a gearbox in a car that has enhanced its operational life.

C.           

Complete overhaul of a machine, spending around 20% of its value.

D.           

Changing a small component of a machine to maintain its operating efficiency.

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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4: 

The basis adopted for piecemeal distribution of cash among the partners should be such that amounts finally left unpaid are in the ratio in which

A.           

Capital stands on the date of dissolution

 

B.           

Profits and losses are shared

 

C.           

Capital balances stood at the beginning of partnership

D.           

Private assets appear on the date of dissolution.

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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5: 

A company can buy-back its own shares out of

1 Free reserves

2 Securities premium account

3. Proceeds of any shares

Select the correct answer using the codes given below:

A.           

1 and 2

 

B.           

1 and 3

 

C.           

2 and 3

 

D.           

1, 2 and 3

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Objective Type Questions

6: 

The fund as used in funds flow statement means

A.           

Cash

 

B.           

Current assets

 

C.           

Current liabilities

 

D.           

Current assets minus current liabilities

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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7: 

Consider the following statements with respect to the sinking-fund method of depreciation

1. Depreciation is smaller than the assets annual depreciable cost.

2. Amount of interest constantly declines due to assets reducing balance.

3. Annual net incidence on profit and loss account remains constant due to changing fixed depreciation.

4. Periodic depreciation is recorded through the asset account.

Which of the above statements are correct?

A.           

2 and 3

 

B.           

1 and 3

 

C.           

1,2 and 4

 

D.           

2, 3 and 4

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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8: 

Consider the following statements:

1. Operational loss is a source of funds.

2.Decrease in working capital is a source of funds.

3. Additions to fixed assets are an application of funds.

4. Fresh introduction of c3pital is an application of funds.

Which of the above statements are applicable while preparing the funds flow statement?

A.           

1 and 2

 

B.           

1 and 3

 

C.           

2 and 3

 

D.           

1 , 3 and 4

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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9: 

Financial statements are aflected by

1 Recorded facts

2. Accounting conventions

3. Personal judgements

Select the correct answer using the codes given below:

A.           

1 and 2

 

B.           

2 and 3

 

C.           

1 and 3

 

D.           

1,2 and 3

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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10: 

Operating profit ratio may be calculated by

1. 100 - Operating ratio

2. (Operating profit /  Net Sales) x 100

3. ((Cost of goods sold -Cost of operation)/Sales) x 100

Select the correct answer using the codes given below:

 

 

A.           

1 and 2

 

B.           

2 and 3

 

C.           

1 and 3

 

D.           

1,2 and 3

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting Objective Type Questions

11: 

Proprietary ratio indicates the relationship between proprietor's funds and __ .

A.           

Reserve

 

B.           

Total assets

 

C.           

Share capital

 

D.           

Debentures

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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12: 

For the purpose of analysing change in financial position, enterprises prepare

A.           

Balance Sheet and Profit & Loss A/ c

 

B.           

Cash flow statement and Funds flow statement

C.           

Statement of cash from operations and Balance Sheet

D.           

Statement of changes in working capital and Statement of cash from operations.

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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13: 

Ratios may be classified as

1 Profitability ratios

2. Coverage ratios

3. Turnover ratios

4. Financial ratios

5. Leverage ratios

Select the correct answer using the codes given below:

A.           

1,3 and 4

 

B.           

1,2,3 and 4

 

C.           

1,3,4 and 5

 

D.           

1,2,3,4 and 5

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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14: 

Legal cost incurred in case of disputed land and building is classified as

A.           

Operating activity

 

B.           

Investing activity

 

C.           

Financing activity

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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15: 

Match List-I with List-II and select the correct answer using the codes given below the lists:

List-I (Transactions)                                        List-II (Impact on current ratio)

a. Goods sold at profit                                     I. Improvement

b. Creditors paid                                              II. Deterioration

c. Debts realised                                            III. No change

d . Materials purchased on credit.

A.           

a    b    c    d

 

I     III    II   II

 

B.           

a    b    c    d

 

II     III    I   II

 

C.           

a    b    c    d

 

I     I     III   II

 

D.           

a    b    c    d

 

II     I    III   III

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting Objective Type Questions

16: 

Which of the following is a capital expenditure?

 

A.           

Compensation paid for breach of a contract to supply goods.

B.           

Interest on borrowings during the period of construction of works

C.           

Loss of stock by fire

 

D.           

Loss due to embezzlement by the manager.

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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17: 

Cost of goods sold equals

 

A.           

Opening stock + Purchases + Direct expenses + Manufacturing expenses - Closing stock

B.           

Sales - Net Profit

 

C.           

Sales - Gross Profit

 

D.           

Both (A) and (C)

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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18: 

Match List-I with List-II and select the correct answer using the codes given below the lists:

      List-I                                       List-II

a. Current Ratio                      I. Sufficiency of EBIT to cover interest charges

b. Debt-Equity Ratio              II. Short-term solvency

c. Net Profit Margin Ratio     Ill. Exposure to financial risk

d. Interest Coverage Ratio   IV. Earnings left for shareholders.

 

 

 

A.           

 a    b    c    d

 

 II    III    I     IV

 

B.           

 a    b    c    d

 

 III    II    I     IV

 

C.           

 a    b    c    d

 

 III   II    IV   I

 

D.           

 a    b    c    d

 

 II    III    IV   I

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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19: 

Which of the following cash flows is not a cash flow from operating activity?

A.           

Cash receipts from royalties, fees, commissions and other revenue.

B.           

Cash payments to suppliers for goods and services.

C.           

Cash payment to and on behalf of employees.

 

D.           

Payment of dividend.

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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20: 

Consider the following statement:

A low inventory turnover may be the result of

1. Obsolescence of some of the stock

2. Slow-moving inventory

3. Frequent stock-outs

4. Fast-moving inventory

Which of the above statement(s) is/are correct?

 

 

A.           

1 and 2

 

B.           

1 and 4

 

C.           

2 only

 

D.           

2 and 3

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting Objective Type Questions

21: 

Accounting is generally understood as

1. Summarisation of business transactions.

2. Language of the business

3. Source of business information

4. Means of communication.

Select the correct answer using the codes given below:

A.           

1 only

 

B.           

1 and 2

 

C.           

2 and 3

 

D.           

1,2,3 and 4

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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22: 

Which of the following statements is correct

 

A.           

Whenever there is inflow of cash there will definitely be inflow of funds though reverse is not true.

B.           

Cash from operations and funds from operations mean the same thing.

C.           

Cash flow statement is a substitute of Cash Account

D.           

Cash generated from trading operations is equal to the net profit as reported in the Profit and Loss Account.

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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23: 

Cash flows denominated in foreign currency are reported in a manner consistent with

A.           

AS-3

 

B.           

AS-5

 

C.           

AS-11

 

D.           

AS-21

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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24: 

When prices show a rising trend, which of the following methods of inventory valuation will result in lower income and lower valuation of inventory?

A.           

FIFO

 

B.           

LIFO

 

C.           

Simple average method

 

D.           

Weighted average method

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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25: 

In case of disclosure of accounting policies, the following fundamental accounting assumptions may not be required to be stated if they are followed in the preparation of final accounts of a company

1. Materiality and accounting period

2. Going concern and consistency

3. Accrual basis of accounting

4. Conservatism and accounting period

Select the correct answer using the codes given below:

A.           

2 and 3

 

B.           

1 and 4

 

C.           

1,2 and 3

 

D.           

1,2,3, and 4

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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Financial and Management Accounting Objective Type Questions

26: 

Which of the following pairs is not correctly matched?

A.           

Accounting equation: Assets = Liabilities + Capital

B.           

Accounting year: 1st April to 31st March

 

C.           

Accrual concept: Recognising revenue on receipt of cash

D.           

Cost concept: Recognising transactions at historical cost

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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27: 

Match List-I with List-II and select the correct answer using the codes given below the lists:

   List-I                                              List-II

a. Leverage Ratio                       I. Short-term solvency

b. Liquidity Ratio                        II. Earning capacity

c. Turn-over Ratio                     III . Relationship of Debt and Equity

d. Profitability Ratio                  IV. Efficiency of Assets Management

A.           

a   b    c   d

 

II    I    III   IV

 

B.           

a   b    c   d

 

III   II    I   IV

 

C.           

a   b    c   d

 

IV  III    I   II

 

D.           

a   b    c   d

 

III   I    IV   II

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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28: 

Capital employed equals

1. Fixed Assets + Working Capital

2. Long-term debt + Share Capital + Reserves & Surplus - Fictitious Assets - Non-business Assets

3. Tangible Fixed and Intangible Assets + Current Assets - Current liabilities

Select the correct answer using the codes given below:

A.           

1 and 2

 

B.           

2 and 3

 

C.           

1 and 3

 

D.           

1,2 and 3

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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29: 

Which of the following is a type of responsibility centre?

A.           

Cost or Expense Centre

 

B.           

Profit Centre

 

C.           

Investment Centre

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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30: 

Amount of premium on issue of shares is decided by the __ as per the guidelines issued by SEBI

A.           

Company Law Board

 

B.           

Board of Directors

 

C.           

Registrar of Companies

 

D.           

Shareholders.

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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Financial and Management Accounting Objective Type Questions

31: 

There should be a provision in the __ of the company for capitalisation of reserves.

A.           

Articles of Association

 

B.           

Prospectus

 

C.           

Memorandum of Association

 

D.           

Both (A) and (B)

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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32: 

The cash flow associated with extraordinary items should be classified as arising from

A.           

Operating activities

 

B.           

Investing activities

 

C.           

Financing activities

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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33: 

If depreciation is calculated on the basis of the formula, (n (n + 1))/2 , then which of the following methods is adopted?

 

A.           

Diminishing value method

 

B.           

Annuity method

 

C.           

Sum of years digits method

 

D.           

Sinking fund method

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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34: 

The issue of sweat equity shares is authorised by a special resolution passed by the company in the

A.           

General meeting

 

B.           

Statutory meeting

 

C.           

Board meeting

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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35: 

SEBI guidelines require that bonus shares should not dilute the rights of the holders of debentures, convertible fully or partly. Bonus shares reserved to be issued at the time of conversion become part of

A.           

Right shares

 

B.           

Sweat equity shares

 

C.           

Potential equity shares

 

D.           

Deferred equity shares

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting Objective Type Questions

36: 

For piecemeal distribution of cash for return of capital among the partners on dissolution, the method adopted should ensure that the amount finally left unpaid i.e., the loss to be borne by the partners is in

A.           

Profit-sharing ratio

 

B.           

Proportion to closing capital at the time of dissolution

C.           

Equal proportion

 

D.           

Proportion to assets realised.

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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37: 

The current ratio of a company is 2 : 1. Which of the following suggestions would not change it?

A.           

To borrow money for a short time on an interest bearing promissory note

B.           

To discount accounts receivable

 

C.           

Purchase of fixed assets

 

D.           

Bills receivable dishonoured.

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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38: 

Under the head 'provisions' in the balance sheet of a limited company, the following provisions made for, are to be disclosed

1. Proposed dividend

2. Provident Fund schemes

3. Pension and other staff-benefit schemes

4. Taxation

The correct chronological order of their disclosure is

A.           

4,2,1,3

 

B.           

3,2,1,4

 

C.           

4,1,2,3

 

D.           

3,1,2,4

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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39: 

Which accounting standard deals with Earning per share?

A.           

AS-14

 

B.           

AS-26

 

C.           

AS-9

 

D.           

AS-20

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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40: 

A low stock turnover ratio is not desirable because it reveals the

1. Accumulation of obsolete stock

2. Carrying of too much stock

3. High cost of goods sold

Select the correct answer using the codes given pelow :

A.           

1 and 2

 

B.           

2 and 3

 

C.           

1 and 3

 

D.           

1, 2 and 3

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting Objective Type Questions

41: 

In the case of a particular depreciation method, the periodic depreciation is smaller than the asset's actual annual depreciation cost. The annual net incidence on profit and loss account remains constant due to incorporation of only fixed depreciation. The periodic depreciation is not recorded through the asset account. The depreciation method used in this case is

A.           

Sinking fund method

 

B.           

Diminishing balance method

 

C.           

Annuity method

 

D.           

Sum-of-year digits method

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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42: 

When it is not registered, a partnership firm is

A.           

Deemed to be an illegal association and is disallowed to carryon business.

B.           

Allowed to carryon business subject to payment of penalty.

C.           

Allowed to carryon business subject to certain disabilities

D.           

Allowed to carry on business only with the special permission of the Registrar of Firms.

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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43: 

Consider the following ratios:

1. Acid test ratio

2. Capital turnover ratio

3. Bad debts to sales ratio

4. Inventory turnover ratio

Which of these ratios are more appropriate for testing the liquidity of a concern?

 

 

A.           

1 and 3

 

B.           

1 and 4

 

C.           

2 and 4

 

D.           

2 and 3

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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44: 

The current ratio of a company is 2 : 1. Which of the following suggestions would reduce it?

A.           

Paying off a current liability

 

B.           

Selling off a motor car for cash at a slight loss

C.           

To borrow from money for a short time on an interest bearing promissory note

D.           

Issuing new shares.

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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45: 

The ratios which measure the relative contribution of financing by owners and financing provided by outsiders are called

A.           

Liquidity ratios

 

B.           

Leverage ratios

 

C.           

Activity ratios

 

D.           

Profitability ratios

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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Financial and Management Accounting Objective Type Questions

46: 

With regard to the rate of return on investment (ROI), which of the following statements is not valid?

A.           

It is an overall indicator of the profitability of an enterprise.

B.           

It is a triangular relationship in the sense that ROI = Profit margin x Asset turnover

C.           

It is a superior measure compared to the cash flow generated per share.

D.           

It was first developed by Du Pont, USA

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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47: 

Match List-I with List-II and select the correct answer using the codes given below the lists:

 

     List-I                                                                                  List-II

 

a. Current assets ÷ Current liabilities                     I. Performance of equity capital

 

b. Fixed assets ÷  Long-term funds                        II Short-term  solvency

 

c. Debt ÷ Equity                                                           Ill. Capital Structure

 

d. Earnings after interest and taxes ÷ Number    IV. Overall Performance

 

 of  shares issued                                                      V. Long-term solvency

 

 

 

A.           

 a   b   c    d

 

 II   V    III   IV

 

B.           

a  b   c    d

 

I   II   III   IV

 

C.           

a  b   c    d

 

II   V   IV   III

 

D.           

a  b   c    d

 

I   II   IV   III

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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48: 

A company with a paid up capital of 5000 equity shares of Rs. 10 each has a turnover of four times with a margin of 8% on sales. The ROI of the company will be

A.           

28%

 

B.           

32%

 

C.           

35%

 

D.           

42%

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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49: 

Comparison of financial variables of a business enterprise over a period of time is called

A.           

Intra-firm analysis

 

B.           

Inter-firm analysis

 

C.           

Standard analysis

 

D.           

Vertical analysis

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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50: 

What is the correct sequence of the following items of current assets in the balance sheet of a company as per the Companies Act, 1956?

1. Cash balance in hand

2. Interest accrued on investments

3. Stores and spare parts

4. Loose tools

5. Sundry debtors

6. Stock-in-trade

7. Work-in-progress

Select the correct answer using the codes given below:

A.           

2,5,4,6,7,3,1

 

B.           

1,2,4,3,5,7,6

 

C.           

7,6,4,1,2,5,3

 

D.           

2,3,4,6,7,5,1

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Objective Type Questions

51: 

Consider the particulars given below:

Sales                    Rs.60,000

Variable cost       Rs.25,000

Fixed cost            Rs.30,000

Based on these data, the operating leverage shall be

 

 

A.           

5

 

B.           

7

 

C.           

8

 

D.           

9

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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52: 

The following four assets normally appear in the balance sheet

1. Advance salary

2. Copyright

3. Preliminary expenses

4. Loose tools

The correct order in which these are to appear in the balance sheet if drawn in order of permanency will be

A.           

4,2,1,3

 

B.           

3,2,4,1

 

C.           

1,2,3,4

 

D.           

2,4,1,3

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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53: 

Match List-I with List-II and select the correct answer using the codes given below the lists:

    List-I                                                                   List-II

a. Reducing capital                                    I. Contribution margin

b. Sales> Variable cost                            II. Reorganization

c. Sales> Break even sales                   III. Absorption

d. Take-over of firm                                  IV. Margin of safety

A.           

a    b    c     d

 

II    I     III    IV

 

B.           

a    b    c     d

 

I     II     III    IV

 

C.           

a    b    c     d

 

I      II     IV   III

 

D.           

a    b    c     d

 

II    I     IV    III

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Practice Questions

1: 

The major sources where from debentures can be redeemed are

1. Profits

2.Capital

3. Provisions made for redemption

4. Conversion into shares or new debentures.

Select the correct answer using the codes given below:

A.           

1,3 and 4

 

B.           

1 and 4

 

C.           

3 and 4

 

D.           

1,2,3 and 4

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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2: 

General donations of relatively large amount is recorded on the

1. Income side of Income and Expenditure Account

2. Liabilities side of Balance Sheet

3. Receipts side of Receipts and Payments Account

Select the correct answer using the codes given below:

A.           

1 only

 

B.           

2 and 3

 

C.           

1 and 3

 

D.           

3 only

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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3: 

Amalgamation of firms takes place to

1. Avoid competition

2. Reduce unnecessary advertisement expenditure

3. Gain monopoly in the market

4. Have more capital and skill

5. To secure internal and external economies of scale.

Select the correct answer using the codes given below:

A.           

1,3,4 and 5

 

B.           

2,3,4 and 5

 

C.           

1,2, and 3

 

D.           

1,2,3,4 and 5

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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4: 

Which of the following profits are capital profits?

l. Profit prior to incorporation

2. Premium received on issue of shares or debentures

3. Profit made on redemption of debentures

4. Profit set aside for redemption of preference shares.

Select the correct answer using the codes given below:

A.           

2,3 and 4

 

B.           

1,3 and 4

 

C.           

1,2 and 3

 

D.           

1,2,3 and 4

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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5: 

According to guidelines issued by SEBI, a new company set up by entrepreneurs without a track record can issue capital to public only

A.           

At par

 

B.           

At premium

 

C.           

at discount

 

D.           

all of the above

 

               

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Option: A

 

Explanation :

 

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Financial and Management Accounting Practice Questions

6: 

Which of the following statements is not correct?

A.           

In case of life membership fees, if it is amortised over a period of time, a separate life membership fund is created.

B.           

If the amount of general donation is very large, it can be treated as a capital receipt.

C.           

If the amount of legacy is small, it can be credited to income and expenditure account.

D.           

The gift is not a restricted fund from the point of view of organisation.

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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7: 

Any amount to be written off after the admission of a partner is transferred to the capital accounts of all partners in

A.           

Their capital ratio

 

B.           

New profit sharing ratio

 

C.           

Old profit sharing ratio

 

D.           

Sacrificing ratio

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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8: 

Capital profits can be distributed as dividend only if

1. The Articles of a company permit.

2. They are realised in cash

3. The surplus remains after the revaluation of all assets

4. The capital losses have been written off.

Select the correct answer using the codes given below:

A.           

1,3 and 4

 

B.           

1 and 4

 

C.           

2 and 3

 

D.           

1,2,3 and 4

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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9: 

According to the guidelines issued by SEBI, a company has to create Debenture Redemption Reserve equivalent to --- of the amount of debentures issue before redemption of debentures commences.

A.           

25%

 

B.           

50%

 

C.           

60%

 

D.           

75%

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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10: 

Under the head 'current liabilities', the following items are disclosed

1. Sundry creditors

2. Acceptances

3. Unclaimed dividends

4. Advance payments

5. Subsidiary companies

The correct chronological order of their disclosure is

A.           

2,1,5,4,3

 

B.           

1,2,4,3,5

 

C.           

2,1,3,4,5

 

D.           

1,2,3,4,5

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting Practice Questions

11: 

Which of the following provisions held for various assets should be transferred to the realisation account upon dissolution of the firm?

1. Provision for Discounts

2. Provision for Depreciation

3. Joint Life Policy Reserve

4. Contingency Reserve

5. Investment Fluctuation Fund

Select the correct answer using the codes given below

A.           

1 and 2

 

B.           

1,2 and 3

 

C.           

1,2,3 and 4

 

D.           

1,2,3,4 and 5

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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12: 

Consider the following statements:

1. A private company can commence business after getting the certificate of incorporation from the Registrar of Companies.

2. The quorum for a meeting of a private company is three

3. Private limited company cannot pay managerial remuneration in any financial year more than 11 % of the net profits of the company.

Which of the above statements are correct?

A.           

Only 1

 

B.           

2 and 3

 

C.           

1 and 2

 

D.           

1,2 and 3

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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13: 

Which of the following statements distinguishing between a company's balance sheet and a firm's balance sheet is correct?

A.           

A company's balance sheet is prepared in the order of permanence whereas a partnership firm's balance sheet is usually, prepared in order of liquidity.

B.           

For a company's balance sheet, there are two standard forms prescribed under the Companies Act, 1956 whereas, there is no standard form prescribed under the Indian Partnership Act. 1932 for a partnership firm's balance sheet.

C.           

In case of a company's balance sheet, previous year's figures are required to be given, whereas, it is not so in the case of a partnership firm's balance sheet.

D.           

All of the above

 

               

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Option: D

 

Explanation :

 

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14: 

Indicate the item that appears below the line in the Profit and Loss Account

A.           

Proposed Dividend

 

B.           

Provision for Taxation

 

C.           

Contribution to Provident Fund

 

D.           

Miscellaneous expenditure written off

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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15: 

Which of the following reserves can be utilised only for issuing fully paid bonus shares and not for making partly paid shares fully paid shares?

l. Dividend equalisation reserve

2. Capital reserve arising from profit on sale of fixed assets received in cash

3. Capital redemption reserve account created at the time of redemption of redeemable preference shares out of the profits.

4. Securities premium collected in cash only.

Select the correct answer using the codes given below:

A.           

1,3 and 4

 

B.           

1,2 and 3

 

C.           

2 and 4

 

D.           

3 and 4

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Practice Questions

16: 

Which of the following statements is not correct?

A.           

A minor can only be admitted to the benefits of an existing partnership with the consent of all the partners.

B.           

A minor partner is not personally liable for the debts of the partnership firm.

C.           

A minor is not liable to share the loss, if there is any

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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17: 

GAAP stands for?

 

A.           

Generally Accepted Accounting Principles

 

B.           

General Annual Accounting Principles

 

C.           

General Accepted Accounting Practices.

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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18: 

Under the head 'Provisions', in the balance sheet of a company, the following provisions made for, are to be disclosed:

1. Proposed dividends

2. Provision for taxation

3. For contingencies

4. For provident fund scheme

5. For insurance, pension and similar staff benefit schemes

The correct chronological order of their disclosure is

A.           

1,2,3,4,5

 

B.           

2,1,4,5,3

 

C.           

2,1,3,4,5

 

D.           

1,2,4,5,3

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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19: 

Which of the following reserves cannot be utilised for making the partly paid up shares fully paid up?

1. Capital Redemption Reserve Account

2. Securities Premium Account

3. Plant Revaluation Reserve

Select the correct answer using the codes given b elow:

A.           

1 and 2

 

B.           

2 and 3

 

C.           

1 and 3

 

D.           

1,2 and 3

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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20: 

A firm is compulsorily dissolved when

1. All the partners except one become is insolvent.

2. The business becomes illegal

3. All the partners become insolvent.

Select the correct answer using the codes given below:

A.           

1 and 2

 

B.           

2 and 3

 

C.           

1 and 3

 

D.           

1,2 and 3

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Practice Questions

21: 

Capital bonus is given

 

A.           

By making partly paid shares as fully paid without getting cash from the shareholders

B.           

By the issue of free fully paid shares known as bonus shares

C.           

By cash payment to shareholders

 

D.           

Both (A) and (B)

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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22: 

X and Yare partners sharing profits and losses in the proportion of 7 : 5. They agree to admit Z into partnership who is to get 1/6th share in profits. He acquires this share as 1/24 from X and 1/8th from Y. Calculate new profit sharing ratio.

A.           

13:7:4

 

B.           

7:5:3

 

C.           

3:2:1

 

D.           

5:4:2

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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23: 

Which of the following statements is not correct?

A.           

Realisation A/c is a real account

 

B.           

A partnership firm is not dissolved on the death of a partner

C.           

On dissolution of the partnership, the share of the outgoing partner is determined and the firm is not closed.

D.           

Before Garner vs. Murray decision, no distinction was made between trading and capital loss.

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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24: 

Change in the constitution of the firm may be due to

1.The admission of a new partner

2. The retirement of a partner

3. The death of a partner

Select the correct answer using the codes given below:

A.           

1 and 2

 

B.           

2 and 3

 

C.           

1 and 3

 

D.           

1,2 and 3

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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25: 

Which of the following reserves are free reserves that can be used for issue of bonus shares?

l. Surplus in profit and loss account

2. General reserve

3. Capital reserve arising due to revaluation of assets.

4. Dividend equalisation reserve

5. Securities premium collected in cash only

6. Securities premium arising on issue of shares on amalgamation or take over.

Select the correct answer using the codes given below:

A.           

1,2 4 and 5

 

B.           

1,2,3,4 and 5

 

C.           

1,2,4,5 and 6

 

D.           

1,2,3,4,5 and 6

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting Practice Questions

26: 

Assets and liabilities are revalued at the time of admission of a new partner because

A.           

The new partner should not be benefitted from any appreciation in the value of assets.

B.           

The new partner should not suffer because of any depreciation in the value of assets.

C.           

The new partner should not benefit from any diminution in liabilities or suffer from any appreciation in liabilities.

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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27: 

According to section  ---- of the Indian Partnership Act, 1932, dissolution of partnership between all the partners of a firm is called the 'dissolution of the firm'.

A.           

37

 

B.           

38

 

C.           

39

 

D.           

40

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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28: 

All the fully paid up shares of a company may be converted into stock if so authorised by the ----- of a company.

A.           

Articles of Association

 

B.           

Memorandum of Association

 

C.           

Registrar of Companies

 

D.           

Company Law Board

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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29: 

As per SEBI's guidelines, an existing company is free to price its issue, if it has a

A.           

Five years track record of consistent profitability

 

B.           

Three years track record of consistent profitability

 

C.           

Four years track record of consistent profitability

 

D.           

Six years track record of consistent profitability

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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30: 

The listed companies are allowed to pay brokerage on private placement of capital at the maximum rate of

A.           

1%

 

B.           

0.5%

 

C.           

1.5%

 

D.           

2%

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting Practice Questions

31: 

The dissolution of partnership takes place in the following cases

1. On the expiry of the period of partnership if constituted for a fixed period.

2. On completion of a venture if constituted to carry out a venture.

3. On death of a partner.

4. On adjudication of a partner as an insolvent.

Select the correct answer using the codes given below:

A.           

1 and 3

 

B.           

2,3 and 4

 

C.           

1,2,3 and 4

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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32: 

Premium received on issue of shares shall be credited to a separate account called

A.           

Share premium account

 

B.           

Securities premium account

 

C.           

Securities reserve account

 

D.           

Premium account

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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33: 

Company may pay dividend on advance calls, if it is authorised by the

A.           

Company Law Board

 

B.           

Articles of Association

 

C.           

Registrar of Companies

 

D.           

Memorandum of Association

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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34: 

Which of the following is not a type of a share?

A.           

Debenture

 

B.           

Equity

 

C.           

Preference

 

D.           

Bonus

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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35: 

Profit from the date of ------ to the date of __ is called as profit prior to incorporation.

A.           

Purchase, commencement of business

 

B.           

Purchase, incorporation

 

C.           

Commencement of business, incorporation

 

D.           

Incorporation, commencement of business.

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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Financial and Management Accounting Practice Questions

36: 

The power to forfeit shares must be provided in the

A.           

Articles of Association of the company as the Companies Act does not contain any provision regarding forfeiture of shares.

B.           

Memorandum of Association

 

C.           

Registrar of Companies

 

D.           

Company Law Board.

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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37: 

Income and Expenditure Account is prepared in non-trading concerns in lieu of

A.           

Manufacturing account

 

B.           

Profit and loss account

 

C.           

Trading account

 

D.           

Cash book

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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38: 

Which of the following statements about goodwill is not correct?

A.           

It is an intangible asset

 

B.           

It is not visible but it subject to fluctuations

 

C.           

It becomes obsolete

 

D.           

It does not become obsolete.

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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39: 

Public limited companies cannot issue

 

A.           

Preference shares

 

B.           

Deferred shares

 

C.           

Equity shares

 

D.           

Sweat equity shares

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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40: 

If forfeited shares are reissued at a discount then the amount of discount should not exceed the

A.           

Actual amount received on forfeited shares

B.           

Original discount on reissued shares, if any

C.           

10% of face value of shares

 

D.           

Total amount of (A) and (B).

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Practice Questions

41: 

According to the decision in Garner vs. Murray, in the absence of any agreement to the contrary, the deficiency of the insolvent partner must be borne by other solvent partners in proportion to

A.           

Profit and loss sharing ratio

 

B.           

Capital ratio

 

C.           

Their initial capital invested in the firm

 

D.           

Capital which stood before dissolution of the firm.

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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42: 

When goodwill is received in cash and retained in the business upon admission of a new partner the old partners' capital accounts are credited in the

A.           

Old profit sharing ratio

 

B.           

New profit sharing ratio

 

C.           

Capital ratio

 

D.           

Sacrificing ratio

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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43: 

Receipts and payments account of non-trading concerns is a

A.           

Nominal Account

 

B.           

Real Account

 

C.           

Personal Account

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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44: 

Right shares can be issued at any time after the expiry of

A.           

Two years from the formation of a company

 

B.           

One year from the first allotment of shares in the company

C.           

(A) or (B) whichever is earlier.

 

D.           

(A) or (B) whichever is latter.

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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45: 

Income and Expenditure Account is prepared on the basis of

A.           

Cash system of accountancy

 

B.           

Mercantile system of accountancy

 

C.           

Credit system of accountancy

 

D.           

Both (A) and (B)

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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Financial and Management Accounting Practice Questions

46: 

Which one of the following statements is correct?

 

A.           

A decrease in current liabilities causes an increase in the working capital

B.           

An increase in current liabilities causes a increase in the working capital

C.           

A decrease in the current assets causes an increase in the working capital

D.           

An increase in the current assets causes a decrease in the working capital

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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47: 

Which of the following statements is not correct?

A.           

Dissolution of the firm refers to the winding up of business in partnership.

B.           

Dissolution of partnership involves complete break-down of relations among all the partners.

C.           

Dissolution of the firm is dissolution of partnership between all the partners of a firm.

D.           

Dissolution of the firm results in discontinuation of the business in partnership.

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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48: 

As per SEBI's guidelines underwriting is

 

A.           

optional

 

B.           

Not mandatory

 

C.           

Not necessary

 

D.           

Mandatory

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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49: 

According to the Companies Act, 1956 a private company means a company which by its Articles

1. Restricts the right to transfer its shares, if any

2. Limits the number of its members to 50.

3. Prohibits invitation to the public to subscribe for any shares in or debentures of, the company.

4. Private companies do not involve participation of public in general.

Select the correct answer using the codes given below:

A.           

1,2 and 4

 

B.           

1,2 and 3

 

C.           

2,3 and 4

 

D.           

1,2,3 and 4

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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50: 

Advantages of Budgetary control include

 

A.           

Maximization of Profit

 

B.           

Reduces Cost

 

C.           

Corrective Action

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Practice Questions

51: 

Which of the following statements is not correct?

A.           

Law creates a company and law only can dissolve it.

B.           

Company's existence is altogether independent of the life of its members.

C.           

A company can buy its shares under certain conditions.

D.           

A shareholder can incur any debt so as to bind the company.

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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52: 

Which of the following statements is correct?

 

A.           

Capital redemption reserve account cannot be utilised for issuing fully paid bonus shares.

B.           

Redemption of preference shares cannot be made out of the fresh issue of debentures.

C.           

An amount equal to redemption of preference shares out of the profits must be transferred to General Reserve.

D.           

A company can issues irredeemable preference shares.

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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Financial and Management Accounting Questions

1: 

In accrual basis or mercantile basis of accounting, the financial effect of the transaction is recorded in the books

A.           

As and when they occur

 

B.           

On the basis of actual receipt and payment of cash

 

C.           

On confirmation of orders but before the delivery of goods take place

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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2: 

Match List-I with List-II and select the correct answer using the codes given below the lists:

     List-I                                                         List-II

a. Purchases Account                          I. Real Account

b. Sales Account                                  II. Nominal Account

c. Rent Outstanding                           Ill. Personal Account

d. Sales tax payable                          IV. Personal Account

 

A.           

a   b   c    d

 

I    I     II    III

 

B.           

a   b   c    d

 

II    II   I    III

 

C.           

a   b   c    d

 

II    I     II    IV

 

D.           

a   b   c    d

 

I    II    III   IV

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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3: 

If the premium is paid on the life policy of the proprietor of the business, it is

A.           

Treated as the drawings and is shown by way of deduction from the capital account

B.           

Taken to the Trading Account

 

C.           

Taken to the Profit and Loss Account

 

D.           

Taken to the Balance Sheet and is shown as an asset

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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4: 

Accelerated depreciation method is also called

A.           

Sum of the years digit method

 

B.           

Insurance Policy method

 

C.           

Annuity Method .

 

D.           

Fixed installment method

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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5: 

Which method of inventory valuation helps in reducing the burden of income tax in times of rising prices?

A.           

Last-in-first-out

 

B.           

First-in-first-out

 

C.           

Average cost

 

D.           

Base stock method

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting Questions

6: 

Consider the following Accounting Concepts

1. Business Entity Concept

2. Going Concern Concept

3. Dual Aspect Concept

4. Money Measurement Concept

Which of the above accounting concepts are generally called fundamental accounting concepts?

A.           

1,2 and 4

 

B.           

1,2 and 3

 

C.           

2 and 3

 

D.           

2 and 4

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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7: 

The information provided by the financial accounting system is

A.           

Significant

 

B.           

Sufficient for smooth, orderly and efficient conduct of business

C.           

Not sufficient for smooth, orderly and efficient conduct of business

D.           

Both (A) and (B).

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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8: 

Match List-I with List-II and select the correct answer using the codes given below the lists:

      List-I                                    List-II

     (Term)                             (Qts application)

a. Depreciation                   I. Wasting assets

b. Depletion                        II. Intangible assets

c. Amortisation                  III. Fixed assets

d. Dilapidation                  IV . Damage due to a building or other property during tenancy

A.           

 a  b   c   d

 

III   II   I    IV

 

B.           

 a  b   c   d

 

III   I   II    IV

 

C.           

 a  b   c   d

 

III   IV  II    I

 

D.           

 a  b   c   d

 

III   IV   I   II

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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9: 

Which accounting standard deals with intagible assets?

A.           

AS-15

 

B.           

AS-18

 

C.           

AS-22

 

D.           

AS-26

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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10: 

Under the head 'current assets', the following items are disclosed

1. Interest accrued on investments

2. Loose tools

3. Work-in-progress

4. Sundry debtors

5. Stock in trade

6. Stores and spare parts

The correct chronological order of their disclosure is

A.           

1,2,6,3,5,4

 

B.           

5,3,1,6,4,2

 

C.           

2,6,1,5,3,4

 

D.           

1,6,2,5,3,4

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Questions

11: 

In cash system of accounting, entries are recorded

 

A.           

When income is earned by a business of expenditure is incurred by it

B.           

On the basis of actual receipt of cash and actual payment of cash

C.           

When order for goods to be purchased is placed and order for goods to be sold is received

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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12: 

What are the advantage of double entry system?

 

A.           

Arithmetical accuracy of records

 

B.           

Lesser possibility of fraud

 

C.           

Helps users of accounting information

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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13: 

If bad debts appear as an adjustment outside the trial balance, then it is adjusted

A.           

By debiting bad debts account and crediting sundry debtors account

B.           

By debiting to bad debts only

 

C.           

By debiting to sundry debtors only

 

D.           

By debiting to sundry debtors account and crediting to bad debts account

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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14: 

Bills of exchange are shown under the head

 

A.           

Current Assets

 

B.           

Loans and Advances

 

C.           

Fixed Assets

 

D.           

Miscellaneous expenditures

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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15: 

Consider the following statement:

1. Operational loss is a source of fund

2. Decrease in working capital is a source of fund

3. Additions to fixed assets are an application of fund

4. Fresh introduction of capital is an application of funds

Which of the above statements are applicable while preparing the funds flow statement?

A.           

1 and 2

 

B.           

1 and 3

 

C.           

2 and 3

 

D.           

1,3 and 4

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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Financial and Management Accounting Questions

16: 

Which of the following branches of accounting are of recent origin?

1. Management accounting

2. Social responsibility accounting

3. Human resources accounting

4. Cost accounting

Select the correct answer using the codes given below:

A.           

1 and 2

 

B.           

1,2 and 3

 

C.           

2 and 4

 

D.           

2 and 3

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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17: 

Match List I with List II and select correct answer using the codes given below:

    List-l                                           List-ll

a. Endowment Fund                 I. Posted to the credit side of the income and expenditure account

b. Entrance Fee                        II. Any income or loss adjusted in the income and expenditure account

c. Sale of old assets               III. Sometimes capitalized and sometimes treated as revenue income

d. Sale of newspaper             IV. Permanent means of support

A.           

 a    b    c    d

 

IV    III    II    I

 

B.           

 a    b    c    d

 

 I     II    III    IV

 

C.           

 a    b    c    d

 

III    IV    I    II

 

D.           

 a    b    c    d

 

III    IV    II    I

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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18: 

Accounting rules, practices and conventions should not change from one year to another as per the

A.           

Convention of consistency

 

B.           

Convention of full disclosure

 

C.           

Convention of conservatism

 

D.           

Convention of materiality

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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19: 

The expired portions of capital/deferred revenue expenditures and revenue expenditures (adjusted for outstanding and prepaid expenses) are regarded as

A.           

Loss

 

B.           

Expenses

 

C.           

Payments

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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20: 

Who has defined accounting as "the art of recording, classifying and summarising in a significant manner and in terms of money, transactions and events, which are, in part at least, of a financial character and interpreting the results thereof"?

A.           

American Institute of Certified Public Accountants

B.           

American Accounting Association

 

C.           

Institute of Chartered Accountants of India

D.           

Institute of Cost & Works Accountants of India

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting Questions

21: 

Following expenses are not shown in Profit & Loss Account

1. Domestic and household expenses

2. Interest on capital

3. Income tax

4. Life insurance premium

Select the correct answer using the codes given below :

A.           

1,2 and 3

 

B.           

2,3 and 4

 

C.           

1,3 and 4

 

D.           

1 and 4

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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22: 

When the proprietor withdraws or takes away some goods from the business for his personal use or consumption, he records the withdrawals at

A.           

Selling price

 

B.           

Cost price

 

C.           

Selling price or cost price whichever is higher

D.           

Selling price or cost price whichever is lower

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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23: 

The accounting equation (i.e., Assets = Liabilities + Capital) is an expression of the

A.           

Cost Concept

 

B.           

Business Entity Concept

 

C.           

Money Measurement Concept

 

D.           

Matching Concept

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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24: 

Which of the following statements is correct?

 

A.           

Cost of goods sold is calculated at the time of sale

B.           

Adjustment entries are required because of accrual basis used for accounting

C.           

Trial balance is a conclusive proof of accuracy of accounts

D.           

Debit balance means that debit side total is less than credit side total.

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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25: 

Single entry in the popular sense may consist of

A.           

Double entry for certain transactions such as cash received from debtors

B.           

Single entry in respect of some transactions such as purchase of fixed assets etc.

C.           

No entry in respect of some transactions such as bad debts etc

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Questions

26: 

Capital Redemption Reserve can be utilised by the company only for

A.           

Redemption of shares

 

B.           

Distribution of dividend

 

C.           

Issue of fully paid bonus shares

 

D.           

All of the above

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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27: 

What are the ways of creating secret reserves?

1. By charging excessive depreciation

2. By overvaluing stock in trade and goodwill

3. By suppressing sales

4. By showing a contingent liability as a real liability

5. By grouping free reserves as creditors.

Select the correct answer using the codes given below:

A.           

1,2,4 and 5

 

B.           

1,3,4 and 5

 

C.           

2,3 and 5

 

D.           

1,2 and 4

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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28: 

Section ---- of the ----- restricts the maximum number of members in partnership to 10 in case of banking firms and 20 to carry on any other business in partnership.

A.           

4 ,Indian Partnership Act, 1932

 

B.           

11, Indian Partnership Act, 1932

 

C.           

4, Indian Companies Act, 1956

 

D.           

11, Indian Companies Act, 1956

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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29: 

A very important component of management accounting is

A.           

Financial accounting

 

B.           

Contract accounting

 

C.           

Cost accounting

 

D.           

Management auditing

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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30: 

Match List I with List II and select correct answer using the codes given below:

   List-l                            List-ll

a. Depreciation          I. Loss of usefulness arising from factors such as technological changes, improvement in

                                         production methods, change in market demand for the product etc.

b. Depletion               II. Process of writing down the longterm investments in intangibles such as lease

                                         holds, patents, copyrights, trade marks etc.

c. Amortization          Ill. Process of measuring and recording the exhaustion of natural resources such as ore                                                        deposits, oil wells, timber stands, quarries, etc.

d. Obsolescence      IV. Accounting process of converting the cost of fixed assets to expense

 

A.           

  a    b    c    d

 

 IV   III     II    I

 

B.           

  a    b    c    d

 

 III    IV     II    I

 

C.           

  a    b    c    d

 

 IV   III     I    II

 

D.           

  a    b    c    d

 

  I     II     III   IV

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting Questions

31: 

All information which is of material interest to --- should be disclosed in accounting statements.

1. Proprietors  2. Creditors

3. Investors     4. Debtors

Select the correct answer using the codes given below:

 

 

A.           

1 and 2

 

B.           

2 and 3

 

C.           

1,3 and 4

 

D.           

1,2 and 3

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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32: 

Which of the following statements is correct?

1. Indian Companies Act, 1956 restricts the maximum number of members in partnership.

2. The Partnership Act implies that a partnership firm cannot be formed to carry on a charitable work.

3. To become a partner, sharing of profits by the member is not necessary.

4. To become a partner, sharing of losses by the member is not necessary.

Select the correct answer using the codes given below:

A.           

2 and 4

 

B.           

1,2 and 3

 

C.           

1,2 and 4

 

D.           

1,2,3 and 4

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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33: 

Under the head 'current liabilities', the following items are disclosed in the Final Accounts of a company

1. Short term loan

2. Acceptance or Bills Payable

3. Sundry creditors

4. Unclaimed dividend

5. Outstanding expenses and Advance Incomes

6. Interest accrued and due on loans

Select the correct answer using the codes given below:

A.           

2,3,4 and 5

 

B.           

1,2,3 and 5

 

C.           

1,2,3 and 6

 

D.           

1,2,3,4,5 and 6

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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34: 

----- reserve refers to the amount which are not free for distribution by way of dividend, whereas ------- reserve refers to the amount which are free for distribution by way of dividend.

 

A.           

Depreciation, Revaluation

 

B.           

Revenue, Capital

 

C.           

Capital, Revaluation

 

D.           

Capital, Revenue

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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35: 

The main objective of providing depreciation is

A.           

To calculate true profit

 

B.           

To show the true financial position in the balance sheet

C.           

To reduce tax burden

 

D.           

To provide funds for replacement of fixed assets

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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Financial and Management Accounting Questions

36: 

Which of the following statements about partnership firm is not correct?

A.           

It has no separate legal existence

 

B.           

It is managed by partners

 

C.           

A partner can transfer his interest without the consent of other partners

D.           

Acts of the partners are binding on the firm.

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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37: 

Under the head 'fixed assets', the following items are disclosed

1. Land

2. Buildings

3. Railway sidings

4. Leaseholds

5. Goodwill

The correct chronological order of their disclosure is

A.           

1,2,4,3,5

 

B.           

5,2,1,3,4

 

C.           

5,1,2,4,3

 

D.           

5,2,1,4,3

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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38: 

Which method of inventory valuation is very useful when prices are falling?

A.           

Last-in-first-out

 

B.           

First-in-first-out

 

C.           

Average cost

 

D.           

Base stock method

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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39: 

Inventory is valued at cost or market price whichever is lower. This principle of valuation is based on the accounting convention of

A.           

Consistency

 

B.           

Full disclosure

 

C.           

Conservatism

 

D.           

Materiality

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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40: 

Match List-I with List-II and select the correct answer using the codes given below the lists:

     List-I                                                                       List-II  

   (Particulars)                                                           (Section)

a. Liability of a partner for acts of the firm         I. Sec 31

b. Admission of a partner                                    ll. Sec. 25

c. Retirement of a partner                                   Ill. Sec. 34

d. Insolvency of a partner                                    IV. Sec.32

A.           

  a   b     c    d

 

  I    II     III    IV

 

B.           

  a   b     c    d

 

  I    II     IV    III

 

C.           

  a   b     c    d

 

  II    I     III    IV

 

D.           

  a   b     c    d

 

  II    I     IV    III

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Questions

41: 

Which of the following is a correct statement?

 

A.           

Accounting aims to communicate financial information to investors only

B.           

Financial accounting provides information to management

C.           

Book-keeping includes interpretation of financial statements

D.           

Chartered accountant as an auditor makes the financial statements reliable to the users.

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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42: 

Which of the following are the qualitative characteristics of financial statements?

1. Relevance

2. Reliability

3. Comparability

4. Understandability

Select the correct answer using the codes given below:

A.           

1,3 and 4

 

B.           

2,3 and 4

 

C.           

2 and 3

 

D.           

1,2,3 and 4

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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43: 

Which of the following accounting concepts has the working rule: "anticipate no profits but provide for all possible losses. "?

A.           

Conservatism concept

 

B.           

Materiality concept

 

C.           

Revenue recognition concept

 

D.           

Consistency concept

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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44: 

If 'Incomes received in advance" appears in the trial balance, it

A.           

Will be shown in Profit and Loss Account by way of deduction from the income received

B.           

Will be credited to Profit and Loss Account

 

C.           

Will not be shown anywhere

 

D.           

Will be shown on the liabilities side of the balance sheet only

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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45: 

Following are some of the objectives of accounting

1. To ascertain whether the business operations have been profitable or not

2. Maintaining systematic records and reporting on the custodianship of resources

3. Facilitating special functions and control

4. To ascertain the financial position of the business

Which of the above are main objectives of accounting?

A.           

1 and 4

 

B.           

1,2 and 4

 

C.           

1  and 3

 

D.           

2 and 3

 

               

 Answer  Report  Discuss

               

Option: A

 

Explanation :

 

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Financial and Management Accounting Questions

46: 

An expenditure in the nature of revenue enhancing activity is normally regarded as a

A.           

Revenue expenditure

 

B.           

Capital expenditure

 

C.           

Deferred revenue expenditure

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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47: 

Which accounting standard deals with accounting for amalgamations?

A.           

AS-24

 

B.           

AS-10

 

C.           

AS-20

 

D.           

AS-14

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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48: 

In case of fixed capital accounts, following are recorded in the capital accounts of partners

1. Balance of capital in the beginning of the year

2. Fresh capital introduced during the current year

3. Permanent withdrawal of excess capital and closing balance of capital

4. Income tax of partner.

Select the correct answer using the codes given below:

A.           

1 and 2

 

B.           

1,2 and 4

 

C.           

1,2 and 3

 

D.           

1,2,3 and 4

 

               

 Answer  Report  Discuss

               

Option: C

 

Explanation :

 

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49: 

What is the correct sequence of the following heads of assets in the balance sheet of a company, as per the Companies Act, 19567

1. Investments

2. Current Assets

3. Fixed Assets

4. Profit and Loss Account

5. Miscellaneous Expenditure

6. Loans and Advances

Select the correct answer using the codes given below:

A.           

3,2,1,6,4,5

 

B.           

2,1,3,6,5,4

 

C.           

2,3,1,6,4,5

 

D.           

3,1,2,6,5,4

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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50: 

Which of the following is an intangible asset?

 

A.           

Plant & Machinery

 

B.           

Land & Building

 

C.           

Furniture

 

D.           

Goodwill

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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Financial and Management Accounting Questions

51: 

In Accounting equation approach for recording business transactions all accounts are divided into three categories, namely

A.           

Personal, Real and Nominal

 

B.           

Assets, Liabilities and Capital

 

C.           

Expenditure, Revenue and Loss

 

D.           

None of the above

 

               

 Answer  Report  Discuss

               

Option: B

 

Explanation :

 

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52: 

Which of the following principles is not related to the preparation of profit and loss account?

A.           

Accounting period concept

 

B.           

Accrual concept

 

C.           

Matching concept

 

D.           

Dual aspect concept

 

               

 Answer  Report  Discuss

               

Option: D

 

Explanation :

 

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 SOURCE (smartvidya)

http://www.smartvidya.co.in/2017/09/mcqs-on-financial-accounting.html

MCQs on Financial Accounting - 1

1. Liability- side of the balance-sheet comprises:

(a) Capital and reserve

(b) Long-term liabilities

(c) Current liabilities

(d) All of the above(*)

2. Balance Sheet of a firm indicates which of the following?

(a) Profit or Loss over a period.

(b) Financial position of the unit over a period.

(c) Financial position of the unit as on a particular date.(*)

(d) Position of assets and liabilities over a period of time.

3. Economic life of an enterprise is split into the periodic interval as per ------- concept

(a) Matching

(b) Money measurement

(c) Periodicity(*)

(d) Accrual

4. Provision is provided for doubtful debts is based on the principle of

(a) Going concern

(b) Objectivity

(c) Materiality

(d) Conservation(*)

5. Prepaid salary has

(a) Debit balance(*)

(b) Negative balance

(c) Credit balance

(d) None of the above

6. X draws a bill on Y. X endorsed the bill to Z. Who is the Payee

(a) X

(b) Y

(c) Z(*)

(d) None of the above

7. A promissory note does not require

(a) Noting

(b) Discontinuing

(c) Acceptance(*)

(d) Charging

8. When money is withdrawn from the bank, the bank will ------- the account of customer

(a) Credit

(b) Debit and Credit

(c) Debit(*)

(d) None of the above

9. An entry with more than one debit or credit is known as

(a) Compound entry(*)

(b) Singly entry

(c) Multiple entry

(d) Double entry

10. Loss leads to

(a) reduction in income

(b) Reduction in capital(*)

(c) Reduction in profit

(d) Increase in capital

MCQs on Financial Accounting - 2

1. Residual value of an asset is

(a) The amount realized on the sale of an asset(*)

(b) The price paid on the purchase of the asset

(c) Reduced value of the asset every year

(d) one of the above

2. Depreciation account is closed by

(a) Transferring to balance sheet

(b) Transferring to profit & loss account(*)

(c) Transferring to asset account

(d) Totaling

3. In sinking fund method of depreciation, the amount of deprecation

(a) Decreasing every year

(b) Increasing every year

(c) Remains constant every year(*)

(d) Increase or decrease every year

4. Which of the following asset is not subject to depreciation

(a) Plant & Machinery

(b) Land

(c) Loose tools

(d) Furniture(*)

5. The term depletion is used in relation to

(a) Natural resources(*)

(b) Fixed assets

(c) Current assets

(d) None of the above

6. An asset is purchased for Rs.50,000 on which depreciation is provided annually

according to the straight line method. the useful life is 10 years and the scrap value is

10,000. The rate of depreciation is

(a) 18%

(b) 8%(*)

(c) 12%

(d) 10%

7. Secret reserve may result by

(a) Creating genera reserve

(b) Overvaluation of stocks

(c) Providing excessive depreciation(*)

(d) Undervaluation of liabilities

8. Gross profit is 25% on sales and cost of goods sold 75,000. The amount of sales will be

(a) 150000

(b) 125000

(c) 80000

(d) 100000(*)

9. Opening capital 9,000; closing capital 16,500; drawings during the year 2,600. The

amount of profit will be

(a) 10100(*)

(b) 4900

(c) 9100

(d) 10000

10. Specific donation received should be shown on

(a) Income side of income and expenditure account

(b) The liability side of balance sheet(*)

(c) The assets side of balance sheet

(d) None of the above

MCQs on Financial Accounting - 3

1. Where no document of title of goods are enclosed to the bill, it is called

(a) Clean bill(*)

(b) Demand bill

(c) Trade bill

(d) Accommodation bill

2. Cheque is payable on

(a) Usance

(b) Demand(*)

(c) After sight

(d) fixed future date

3.When the bill is dishonoured, the account debited in the book of drawee

(a) Acceptor's account

(b) Creditor's account

(c) Bills payable account(*)

(d) None of the above

4. A bank on whom a cheque is drawn by the customer is

(a) Collecting bank

(b) Issuing bank

(c) Accepting bank

(d) Paying bank(*)

5. The book in which all accounts are maintained is known as

(a) Ledger(*)

(b) Cash book

(c) Journal

(d) Purchase book

6. Under double account system, profit is disclosed in

(a) Net revenue account

(b) Capital account

(c) Revenue account(*)

(d) Receipts and expenditure on capital account

7. Profit or loss on voyage account is transferred to

(a) Profit and loss account of shipping company(*)

(b) Balance sheet

(c) Trail balance

(d) None of these

8. Bad debts written off previously, if recovered subsequently

(a) Credited to profit and loss account(*)

(b) Debited to profit and loss account

(c) Credited to bad debts recovered account

(d) Credited to debtors account

9. The balance of suspense account will shown in

(a) Profit and loss account debit side

(b) Balance sheet(*)

(c) Trial balance

(d) Income and expenditure account

10. Which of the following errors will not affect the trial balance

(a) Wrong balancing of an account

(b) Wrong totaling of an account

(c) Writing an amount in wrong account but on the correct side(*)

(d) None of the above

MCQs on Financial Accounting - 4

1. Amount spent to put second hand machinery in working condition is

(a) Revenue expenditure

(b) Deferred revenue expenditure

(c) Capital expenditure(*)

(d) None of the above

2. A liability which arises only on the happening of an uncertain event

(a) Current liability

(b) Non liability

(c) Long term liability

(d) Contingent liability(*)

3. Expenses which remains unpaid at the end of the accounting period

(a) Outstanding expenses(*)

(b) Reserve

(c) prepaid expenses

(d) Recoverable expenses

4. A customer's cheque returned dishonored is recorded in

 

(a) Purchase return book

(b) Cash book(*)

(c) Journal

(d) Sales return book

5. depreciation of an asset of Rs.40,000 at the rate of 10% per annum at the end of third

year is -------- on using reducing balance method

(a) 2000

(b) 3600

(c) 3240(*)

(d) 4000

6. The information for the preparation of receipts and payment account is taken from

(a) Income and expenditure account

(b) Balance sheet

(c) Cash book(*)

(d) Cash book and balance sheet

7. In journal, transactions are recorded on

(a) Ascending order

(b) Descending order

(c) Order of preference

(d) Chronological order(*)

8. Drawing account is

(a) Personal account(*)

(b) Nominal account

(c) Real account

(d) None of the above

9. A bill of exchange when drawn requires

(a) Noting

(b) Acceptance(*)

(c) Discounting

(d) Endorsing

10. X of Mumbai drawn a bill on Y of Delhi payable at USA is

(a) Foreign bill

(b) Clean bill

(c) Inland bill(*)

(d) Accommodation bill

MCQs on Financial Accounting - 5

1. The prime function of accounting is to

(a) record economic data(*)

(b) provide the informational basis for action

(c) classifying and recording business transactions

(d) attain non-economic goals.

2. The basic function of financial accounting is to

(a) record all business transactions(*)

(b) interpret financial data

(c) assist the management in performing functions,

(d) none of the above.

3. A person who brings capital in the business is called

(a) debtor

(b) creditor

(c) proprietor(*)

(d) none of the above.

4. A person who owes money to the firm is known as

(a) debtor(*)

(b) creditor

(c) supplier

(d) none of the above

5. Accounting principles are generally based on

(a) objectivity(*)

(b) subjectivity

(c) convenience and personal interpretation

(d) none of the above.

6.The policy ‘anticipate the profit and provide for all possible losses’ arises due to

(a) convention of consistency

(b) convention of conservatism(*)

(c) convention of full disclosure

(d) convention of materiality.

7. Revenue is generally recognized as being earned at the point of time

(a) sale is made and ownership of goods transferred(*)

(b) cash is received

(c) production is completed

(d) sales are effected or cash is received, whichever is earlier.

8. The system of recording transactions based on dual aspect is called

(a) dual account system

(b) double entry system(*)

(c) cash accounting

(d) single entry system.

9. According to which of the following accounting concept even the proprietor of business

treated as a creditor of the business to the extent of his capital

(a) money measurement concept

(b) dual entry concept

(c) going concern concept

(d) separate entity concept.(*)

10. According to going concern concept, a business is viewed as having

(a) a limited life

(b) going to be liquidated after 100 years

(c) an indefinite life(*)

(d) none of the above.

MCQs on Financial Accounting - 6

1. Accounting is a substitute of —————.

(a) recording

(b) book-keeping

(c) memory (*)

(d) none of these

2. The objective of financial accounting is to ascertain ———— for a particular period.

(a) profit

(b) loss

(c) transactions

(d) profit or loss (*)

3. Accounting is a language of —————.

(a) business (*)

(b) commerce

(c) economics

(d) none of these

4. Outstanding expenditure is a ———— account.

(a) nominal

(b) personal(*)

(c) real

(d) liability

5. Under ————— basis both cash and accrual basis are taken into account.

(a) single entry

(b) mixed(*)

(c) combined

(d) cash

6. Debit the receiver and credit the giver is the rule for ————..

(a) nominal

(b) personal(*)

(c) real

(d) liability

7. ———— states that assets equal liabilities plus capital.

(a) accounting equation (*)

(b) financial equation

(c) statements

(d) none of these

8. Accounting Standard 2 deals with valuation of ————.

(a) fixed assets

(b) inventory(*)

(c) cash flow statement

(d) none of these

9. Accounting Standard 10 deals with accounting for ————.

(a) fixed assets (*)

(b) inventory

(c) cash flow statement

(d) none of these

10. ————deals with accounting for investments.

(a) AS 11

(b) AS 12

(c) AS 13 (*)

(d) AS 14

MCQs on Financial Accounting - 7

1. An expenditure is a revenue expenditure because

(a) The amount is small

(b) It is intended to benefit the current period(*)

(c) It is deducted from the gross sale proceeds

(d) None of these.

2. A receipt is a revenue receipt because

(a) The amount is small

(b) It is received in the accounting year

(c) It related to the routine activity of business,(*)

(d) All of these.

3. A receipt is a capital receipt because

(a) The amount is heavy

(b) It is credited to capital account

(c) It relates to fixed assets

(d) It is received not in the regular course of business.(*)

4. A loss is a capital loss because

(a) it arises due to abnormal reasons(*)

(b) it means withdrawal of capital

(c) It relates to current assets

(d) None of these.

5. A loss is a revenue loss because

(a) It is incurred to reduce the tax liability

(b) It arises due to normal reasons(*)

(c) It relates to current assets

(d) None of these.

6. An expenditure is treated as that of a capital nature, when

(a) the receiver of the amount is going to use it for the purchase of fixed assets,

(b) it increases the quantity of fixed assets,(*)

(c) it is paid for meeting the normal expenses of the business,

(d) none of these.

7. Rs. 5,000 spent on replacement of worn-out part of the machine will be charged as

(a) capital expenditure

(b) Revenue expenditure(*)

(c) Deferred revenue expenditure

(d) None of these.

8. Which one is revenue expenditure ?

(a) Interest on capital,(*)

(b) Cost of building

(c) installation expenses of mechanic purchased,

(d) price of new car purchased for the M.D.

9. Which one is capital expenditure ?

(a) heavy repairs on used building,

(b) expenses incurred on acquisition of machines,

(c) Purchase of land for factory

(d) all of these(*)

10. Which is deferred revenue expenditure ?

(a) expenditure on specific research and development,(*)

(b) expenses on purchase of patents

(c) legal expenses on purchase of trademarks,

(d) heavy repairs on used mechanize at the time of purchase.

MCQs on Financial Accounting - 8

1. An allowance of Rs. 1000 given to Mr. Devan for prompt payment will be debited to the

....................... account

(a) discount received

(b) discount allowed(*)

(c) devan’s

(d) none of these

2. Cash discount allowed will appear on the ....................... side of the buyer’s account in the

books of the seller.

(a) debit

(b) credit (*)

(c) cost

(d) none of these

3. A debit in a nominal account denotes an ....................... .

(a) income

(b) loss

(c) revenue

(d) expense(*)

4. The receiver of goods returned will send a ....................... note to the returner.

(a) debit

(b) credit (*)

(c) revenue

(d) none of these

5. A ....................... balance in a personal account shows that the account concerned is a

creditor’s account

(a) debit

(b) credit (*)

(c) revenue

(d) none of these

6. The entries in the purchase returns book are based on ....................... issued by the

concern.

(a) debit note (*)

(b) credit note

(c) goods returned note

(d) none of these

7. An aspect that is debited in the journal entry will be given a ....................... in the ledger

account.

(a) debit (*)

(b) credit

(c) cost

(d) none of these

8. Non-Cash transactions are generally recorded through .......................

(a) journal proper

(b) ledger

(c) general journal (*)

(d) none of these

9. Summary of balances of ledger account is called .......................

(a) trial balance (*)

(b) balance sheet

(c) cash flow statement

(d) none of these

10. The subdivision of the journals into various books recording transactions of similar

nature is called.........................

(a) ledger

(b) journal proper

(c) trial balance

(d) subsidiary book(*)

MCQs on Financial Accounting - 9

1. If sales returns are Rs. 25,000, sales are Rs. 1,25,000, net purchases are Rs. 84,000, and

gross profit is Rs. 21,000, then the cost of goods sold will be

(a) Rs. 84000

(b) Rs, 64,000

(c) Rs. 79,000 (*)

(d) Rs. 92,000.

2. If opening stock Rs. 10,000, closing stock Rs. 11,000, purchases Rs,70,000 and goods

sold @ 30% profit on cost, the amount of sales will be

(a) Rs. 86,000

(b) Rs. 89,700(*)

(c) Rs. 21,000

(d) Rs. 91,000.

3. If sales are Rs. 60,000 gross profit is 1/3 of cost, purchases are Rs. 49,000 and closing

stock is Rs. 9,000, then opening stock will be

(a) Rs. 5,000(*)

(b) Rs. 20,000

(c) Rs. 15,000

(d) Nil.

4. Raju has a capital of Rs. 60,000 on 31-12-09. During the year, he has made a profit of Rs.

24,000. If his drawings had amounted to Rs.18,000, his capital on 01-01-09 will be

(a) Rs. 72,000

(b) Rs. 54,000(*)

(c) Rs. 36,000

(d) Rs. 18,000

5. If opening stock is Rs. 8,800, closing stock is Rs. 5,280 and cost of goods sold is Rs.

91,520, the amount of purchase will be

(a) Rs. 77,440

(b) Rs. 82,720

(c) Rs. 88,000(*)

(d) Rs. 72,160

6. Madhu purchased goods costing Rs. 20,000 at 5% trade discount and 2% cash discount.

Madhu will immediately pay for the goods

(a) Rs. 18,620 (*)

(b) Rs. 18,660,

(c) 18,360

(d) Rs. 18,600.

7. Contingent liability is shown

(a) on the liability side of the balance sheet

(b) on the asset side of the balance sheet

(c) in the profit and loss account

(d) below the balance sheet as a foot note.(*)

8. In double entry system every business transaction affects

(a) debit and credit side of the same account

(b) two accounts(*)

(c) the same side of the same account

(d) none of the these.

9.In accounting debit means

(a) an entry on the left hand side of an account(*)

(b) decrease in asset

(c) increase in liability

(d) none of these.

10. In accounting credit means

(a) an entry on the right hand side of an account(*)

(b) increase in asset

(c) decrease in liability

(d) none of these.

MCQs on Financial Accounting - 10

1. If the gross profit is Rs. 11,000, administrative expenses are Rs. 3,000 and miscellaneous

income is Rs. 700, the net profit will be ..................

(a) 8700 (*)

(b) 11000

(c) 8300

(d) 11300

2. The capital of a firm whose assets are Rs. 53,000 and liabilities are Rs.19,000 is Rs. ..........

(a) 40000

(b) 42000

(c) 44000 (*)

(d) 43000

3. The assets are Rs. 48,000 and liabilities are Rs, 18,000. The total of the liability side of the

balance sheet will be...........

(a) 48000 (*)

(b) 44000

(c) 45000

(d) 46000

4. Amount of ............ is deducted from the value of respective assets in the balance sheet.

(a) depreciation (*)

(b) gross value

(c) net value

(d) none of these

5. .............include cash and assets that can be normally converted into cash during the

operating cycle of the business.

(a) Current liability

(b) current assets(*)

(c) contingent assets

(d) none of these

6. Net profit / loss is transferred to the .............account.

(a) assets

(b) liability

(c) revenue

(d) capital(*)

7. Assets are usually listed on a balance sheet under two main groups namely ........... and

..........

(a) fixed and current (*)

(b) current and fixed

(c) tangible and intangible

(d) none of these

8. All ............. expenses are recorded in the Trading A/c.

(a) direct (*)

(b) indirect

(c) cost

(d) none of these

9. ............. expenses are shown in the P/L A/c.

(a) direct

(b) indirect (*)

(c) cost

(d) none of these

10. Accrued income is a/an ............

(a) liability

(b) assets(*)

(c) revenue

(d) none of these

MCQs on Financial Accounting - 11

1. According to concept of conservatism, stock in trade is valued at

(a) cost price

(b) market price

(c) cost price or market price whichever is less(*)

(d) cost price or market price whichever is higher.

2. Recording of capital contributed by the owner as liability ensures adherence to the

principle of

(a) double entry

(b) going concern

(c) separate entity (*)

(d) materiality.

3. The basic concepts related to balance sheet are

(a) cost concept

(b) business entity concept

(c) accounting period concept

(d) all of the above.(*)

4.The double entry concept is that

(a) assets + liabilities = capital

(b) capital – liability = asset

(c) capital = assets – liabilities(*)

(d) none of the above.

5. Only the events that affect the business must be recorded, as per the principle of

(a) separate entity

(b) accrual

(c) materiality

(d) none of the above.(*)

6.The accounting measurement that is not consistent with the going concern concept is

(a) historical concept

(b) realization(*)

(c) transaction approach

(d) liquidation value.

7. Accounting does not record non-financial transactions because of the concept of

(a) measurement (*)

(b) cost

(c) accrual

(d) entity

8. Fixed assets and current assets are categorized as per the concept of

(a) separate entity

(b) going concern

(c) time period (*)

(d) consistency.

9. If the total assets of the firm are Rs. 1,00,000, outside liabilities are Rs.40,000, the capital

contributed by the owner is

(a) Rs. 1,00,000

(b) Rs. 40,000

(c) Rs. 20,000

(d) Rs. 60,000.(*)

10. A business owes money to

(a) debtors

(b) creditors(*)

(c) investors

(d) shareholders

MCQs on Financial Accounting - 12

1. The amount brought in by the proprietor in the business shall be credited to

(a) Cash account

(b) Capital account(*)

(c) Drawings account

(d) None of these

2. The return of goods by a customer should be debited to

(a) Customer account

(b) Return inward account(*)

(c) Returns outward account

(d) Goods account

3. The amount of salary paid to Madhu should be debited to

(a) Madhu

(b) Cash account

(c) Salary account (*)

(d) None of these

4. The rent paid to the landlord should be credited to

(a) Rent account

(b) Landlord account

(c) Cash account (*)

(d) None of these

5. The cash discount allowed to a debtor should be credited to

(a) Debtor account (*)

(b) Discount account

(c) Cash account

(d) None of these

6. In case of a debt becoming bad, the amount should be credited to

(a) Bad debt account

(b) Sales account

(c) debtors account (*)

(d) Provision for bad debt account.

7. Payment of LIC premium of the proprietor is debited to

(a) Capital account

(b) Drawings account(*)

(c) LIC premium account

(d) None of these

8. Classification of accounts is made in

(a) Journal

(b) Ledger(*)

(c) Subsidiary book

(d) Balance Sheet.

9. ------------- is prepared to find the financial position of business

(a) Trial balance

(b) trading account

(c) P/L account

(d) Balance Sheet(*)

10. An expenditure is a capital expenditure because

(a) The amount is large

(b) It is intended to benefit the current period

(c) it is intended to benefit the future period(*)

(d) All of these.

MCQs on Financial Accounting - 13

1. Added in opening balance of capital is

(a) net profit(*)

(b) drawings

(c) net loss

(d) operating expenses

2. From income statement we find out

(a) gross profit

(b) financial position of business

(c) net profit(*)

(d) all of the above.

3. Which of the following is not an intangible asset

(a) stock(*)

(b) goodwill,

(c) trade mark

(d) patents.

4. Which of the following is correct

(a) opening stock + Purchases + Closing stock = Cost of goods sold,

(b) Cost of goods sold - closing stock - purchase = opening stock

(c) Cost of goods sold + Closing stock - opening stock = purchase,(*)

(d) opening stock + cost of goods sold - purchase = closing stock.

5. Which of the following is a fictitious asset

(a) goodwill

(b) copyright

(c) patents

(d) discount on issue of securities(*)

6. Which transaction results in increase in assets and increase in liabilities

(a) goodwill written off

(b) issue of bonus shares in the ratio 2:1,

(c) credit purchase of machine,(*)

(d) none of these.

7. Returns outward appearing in trial balance is to be deducted from

(a) sales,

(b) purchases,(*)

(c) returns outward,

(d) closing stock.

8. Returns inward appearing in trial balance is to be deducted from

(a) purchases,

(b) sales,(*)

(c) returns outward,

(d) closing stock.

9. Carriage outward is shown on the

(a) debit side of trading account,

(b) debit side of profit and loss account,(*)

(c) credit side of profit and loss account,

(d) liability side of the balance sheet.

10. Opening stock was shown at Rs. 9000, which was three - fourth of its actual cost. What

is the effect of this ?

(a) gross profit will increase by Rs. 3000,(*)

(b) Gross profit will decrease by Rs. 3000,

(c) gross profit will be more by Rs. 9000,

(d) there will be no effect on gross profit.

MCQs on Financial Accounting - 14

1. Creditors account is a

(a) Personal account (*)

(b) Real account

(c) Nominal account

(d) None of the above.

2. Which of the following accounts is not a real account

(a) Building account

(b) Bank account(*)

(c) Closing stock account

(d) Goodwill account.

3. Which of the following is a real account?

(a) Drawings account

(b) Outstanding rent account

(c) Bank account

(d) Closing stock account.(*)

4.Which of the following is a nominal account?

(a) Drawings account

(b) Outstanding interest account

(c) Salary account (*)

(d) Machinery account.

5. Sale of goods to Rani for cash shall be debited to

(a) Rani account

(b) Cash account(*)

(c) Sales account

(d) None of these

6. Cash account normally has

(a) Debit balance or credit balance

(b) Credit balance

(c) Debit balance (*)

(d) None of these

7. Entries in the journal are made with the help of

(a) Cash book

(b) Ledger

(c) Memorandum book (*)

(d) None of these

8. Account to be debited by the proprietor of business for purchasing furniture for his

private use for cash from Furniture House will be

(a) Purchase account

(b) Furniture account

(c) Drawing account (*)

(d) Furniture House account

9. Ledger is a set of

(a) Balance

(b) Accounts(*)

(c) Rules

(d) None of these

10. Purchase book records

(a) All purchases of goods

(b) All cash purchases of goods

(c) All credit purchases of goods (*)

(d) None of these

MCQs on Financial Accounting - 15

1. Double entry system refers to

(a) entry in two sets of books

(b) entry for two aspects of the transaction(*)

(c) entry at two dates

(d) none these.

2. Withdrawals by the proprietor would

(a) reduce owner’s equity and increase liability

(b) reduce assets and increase liabilities

(c) reduce both assets and owner’s equity(*)

(d) no change.

3. Which of the following changes would constitute valid accounting transactions

(a) increase in a liability, increase in an asset(*)

(b) increase in an asset decrease in proprietorship

(c) increase in a liability, decrease in an asset

(d) all of the above.

4. A business transaction affects

(a) at least one account

(b) maximum of three accounts.

(c) maximum of two accounts

(d) at least two account (*)

5 . Credit signifies

(a) increase in assets

(b) increase in liabilities(*)

(c) decrease in capital

(d) none of these.

6. In accounting, transactions and events which are of ———— are recorded.

(a) Financial nature (*)

(b) Quantitative nature

(c) Qualitative nature

(d) None of these

7. The objective of accounting information is to provide ——— review of the business.

(a) correct

(b) true and fair(*)

(c) fair only

(d) none of these

8. Where ———— ends ———— begins.

(a) book-keeping and accounting(*)

(b) accounting and book-keeping

(c) transaction and accounting

(d) none of these

9. The person to whom goods are sold on credit is known as —————.

(a) creditor

(b) debtor(*)

(c) borrower

(d) none of these

10. The person from who goods are bought on credit is known as ———.

(a) creditor (*)

(b) debtor

(c) borrower

(d) none of these

MCQs on Financial Accounting - 16

1. A purchase book is used to record all ......................made by the business from its

suppliers.

(a) purchases

(b) credit purchases(*)

(c) cash purchases

(d) none of these

2. ......................is an allowance or deduction made from the invoice price of goods sold.

(a) trade discount (*)

(b) cash discount

(c) commission

(d) none of these

3. ......................represents a note sent to the supplier for the value of goods returned by the

business.

(a) debit note (*)

(b) credit note

(c) goods returned note

(d) none of these

4. Recording of transactions in the books of original entry is ......................under subsidiary

books

(a) simplified (*)

(b) complicated

(c) modified

(d) none of these

5. A statement showing particulars of the goods bought by a trader on credit is known as

......................

(a) bill

(b) invoice(*)

(c) voucher

(d) none of these

6. A ......................is used for recording all residual transactions which cannot find place in

any of the subsidiary books.

(a) journal proper (*)

(b) ledger

(c) general journal

(d) none of these

7. When goods are taken back from or an allowance is granted to a customer, the note is

known as ...................... .

(a) debit note

(b) credit note(*)

(c) goods returned note

(d) none of these

8. The statement containing various ledger balances on a particular date is known as

......................

(a) trial balance (*)

(b) balance sheet

(c) cash flow statement

(d) none of these

9. If the two sides of the trial balance tally, it is an indication of the fact that the books of

account are ......................accurate

(a) logically

(b) recordically

(c) arithmetically (*)

(d) none of these

10. Sales Journal records all ......................sale of goods

(a) debit

(b) credit (*)

(c) cost

(d) none of these

MCQs on Financial Accounting - 17

1. The capital of the proprietor increases when the business makes....................

(a) revenue

(b) income

(c) loss

(d) profit(*)

2. The balance sheet is .............................. and not ..............................

(a) statement and account (*)

(b) account and statement

(c) document and account

(d) none of these

3. All expenses incurred by the proprietor which are not related to business are treated as

.............................

(a) withdrawal

(b) drawings(*)

(c) remittances

(d) none of these

4. Excess of debit over credit in the profit and loss account represents a ...........

(a) N/P

(b) N/L(*)

(c) gross profit

(d) gross loss

5. Properties and possessions of a business are termed as .......................

(a) assets (*)

(b) liabilities

(c) profit

(d) loss

6. Carriage inward is transferred to the .........................account whereas carriage outward is

transferred to .........................account

(a) trading and P/L account(*)

(b) P/L account and trading account

(c) carriage account and P/L

(d) none of these

7. An expense payable account will show a ......................... balance and will be shown on

the .......................side of the balance sheet.

(a) credit and liability (*)

(b) debit and assets

(c) credit and assets

(d) none of these

8. Prepaid expenses appearing in trial balance will appear in ..................

(a) trading a/c

(b) profit and loss a/c

(c) balance sheet (*)

(d) prepaid exp. a/c

9. A gross profit is transferred to the .......................side of the P/L A/c.

(a) debit

(b) credit (*)

(c) cost

(d) none of these

10 . If the opening and closing stock is Rs. 20,000 each, purchases are Rs.50,000,

manufacturing expenses are Rs. 10,000 and sales Rs. 90,000,the gross profit will be

..............................

(a) 10,000

(b) 20,000

(c) 30,000 (*)

(d) 40,000

MCQs on Financial Accounting - 18

1. Which one is capital loss?

(a) interest paid on debentures,

(b) redemption of debentures at par,

(c) underwriting commission(*)

(d) None of these

2. Payment made to creditors is a

(a) capital receipt

(b) capital expenditure

(c) revenue receipt(*)

(d) revenue expenditure

3. A motor car purchased for Rs. 80,000 whose book value is Rs. 48,000 was sold for Rs.

100000. Capital profit is

(a) Rs. 15,000

(b) 20,000(*)

(c) Rs. 30,000

(d) 40,000

4. Wages paid on the repairs of old furniture account

(a) furniture account (*)

(b) Cash account

(c) Wages account

(d) owner’s account.

5. Amount incurred on electric installations of a new building is

(a) revenue expenditure

(b) Capital expenditure,(*)

(c) Deferred revenue expenditure

(d) capital loss

6. Out of the following, direct expense is

(a) Salaries

(b) Carriage outward

(c) Rent of office building

(d) Carriage inward.(*)

7. The balance sheet gives information regarding

(a) Financial position during a particular period,

(b) Results of operation for a particular period,

(c) The operating efficiency of the firm,

(d) Financial position on a particular date.(*)

8. Goodwill is a

(a) fixed asset

(b) current asset

(c) intangible asset(*)

(d) fictitious asset

9. Income received in advance is

(a) an income

(b) a liability(*)

(c) an asset

(d) a loss

10. Sales are equal to

(a) Cost of goods sold plus profit(*)

(b) Cost of goods sold minus gross profit,

(c) Gross profit minus cost of goods sold,

(d) none of these.

MCQs on Financial Accounting - 19

1. Cash purchases are entered in the .......................

(a) cash account

(b) cash book(*)

(c) purchases book

(d) sales book

2. Supplier’s account will be ....................... when goods are received on credit.

(a) debited (*)

(b) credited

(c) closed

(d) none of these

3. Balance of real and personal accounts are ....................... to the next period

(a) carried forward (*)

(b) brought down

(c) recorded

(d) none of these

4. Withdrawal of goods by the proprietor are generally recorded in the ............

(a) journal proper

(b) ledger

(c) general journal (*)

(d) none of these

5. The main book of account is .......................

(a) journal

(b) ledger(*)

(c) trial balance

(d) none of these

6. If there are 15 credit purchases during a given month, then there will be .......................

posting from the purchase book at the end of the month

(a) 15

(b) 16(*)

(c) 14

(d) 17

7. Subsidiary journals are all books of ....................... entry.

(a) original (*)

(b) subsidiary

(c) secondary

(d) none of these

8. The ledger is a book of ....................... entry .

(a) original

(b) subsidiary

(c) secondary

(d) final(*)

9. The ....................... column in a ledger account shown the location of each entry in the

journal

(a) JF (*)

(b) LF

(c) FJ

(d) FL

10. Purchase account will always have ....................... balance

(a) debit (*)

(b) credit

(c) no balance

(d) None of the above

MCQs on Financial Accounting - 20

1. Purchase journal is a job division of

(a) Journal (*)

(b) Ledger

(c) Balance sheet

(d) None of these

2. Sale of old furniture will be recorded in

(a) Purchase journal

(b) Sales journal

(c) Journal proper (*)

(d) nowhere

3. Cash book is

(a) Principal book

(b) Subsidiary book(*)

(c) Both (a) and (b),

(d) None of these

4. Contra entries are related to

(a) Cash

(b) Bank

(c) Both cash and bank (*)

(d) None of these

5. Cash discount is recorded in

(a) Journal proper

(b) Purchase Journal

(c) Sales account

(d) Cash book(*)

6. Trial balance is

(a) Account

(b) A statement(*)

(c) Both (a) and (b),

(d) None of these

7. Trial balance is prepared from

(a) Journal

(b) Ledger(*)

(c) Cash book

(d) None of these

8. When a firm maintains a cash book, it need not maintain

(a) Sales journal

(b) Purchase journal

(c) General journal

(d) Cash account in the ledger(*)

9. The credit balance of bank account indicates

(a) Balance in bank

(b) Amount payable by the bank

(c) Amount payable to the bank (*)

(d) None of these

10. The debit balance in a nominal account shows

(a) Gains

(b) Expenses(*)

(c) Assets

(d) None of these

MCQs on Financial Accounting - 21

1. Interest on drawings is

(a) expenditure for the business,

(b) expense for the business,

(c) gain for the business (*)

(d) loss for the business

2. Goods given as samples should be credited to

(a) advertisement account,

(b) sales account

(c) purchase account, (*)

(d) none of the above.

3. Outstanding salaries are shown as

(a) an expense,

(b) a liability,(*)

(c) an income,

(d) an asset

4. Income tax paid by a sole proprietor on his business income should be

(a) debited to trading account,

(b) debited to profit and loss account,

(c) credited to profit and loss account

(d) deducted from the capital account in the balance sheet.(*)

5. Capital is shown under liabilities because of the

(a) entity concept, (*)

(b) accrual concept,

(c) dual aspect concept,

(d) going concern concept.

6. Which of the following is true

(a) Asset + equity = liabilities,

(b) asset - liability = owner’s fund,(*)

(c) outside liability + reserve = equity,

(d) asset + reserve = equity.

7. Provision for bad debt is made to

(a) prevent debts arising

(b) obtain a debtor’s figure for the balance sheet

(c) even out actual bad debts incurring,(*)

(d) encourage prompt payment of debts by debtors.

8. The provision for bad debts account represents

(a) Some of the profit

(b) some of the credit withheld(*)

(c) the total of actual bad debts,

(d) the total amount owing to the business

9. Which of the following is not a fixed asset

(a) motor vehicles,

(b) furniture,

(c) inventory, (*)

(d) freehold property

10. Which of the following is a current liability

(a) five year bank loan

(b) workmen compensation fund,

(c) bank overdraft, (*)

(d) dividend equalisation reserve.

MCQs on Financial Accounting - 22

1. ————deals with depreciation account.

(a) AS 3

(b) AS 4

(c) AS5

(d) AS6(*)

2. Journal is a book of ....................... entry

(a) original (*)

(b) secondary

(c) subsidiary

(d) none of these

3. A furniture account will indicate a ....................... balance

(a) debit (*)

(b) credit

(c) cost

(d) no balance

4. The process of recording transactions in a journal is known as ............

(a) recording

(b) journalizing(*)

(c) posting

(d) balancing

5. ....................... is a process of entering in the ledger the information given in the journal

(a) recording

(b) journalizing

(c) posting(*)

(d) balancing

6. An entry which has more than one debit and or credit is called ...........

(a) single

(b) multiple

(c) compound (*)

(d) none of these

7. ....................... Is the principal book of account

(a) journal

(b) ledger(*)

(c) trial balance

(d) none of these

8. An asset account shows a ....................... balance

(a) debit (*)

(b) credit

(c) no balance

(d) none of these

9. An ....................... is an amount which is incurred in return for some benefit and the

benefit is enjoyed immediately

(a) income

(b) loss

(c) revenue

(d) expense(*)

10. ....................... is a special term indicating the recording of entries in the ledger.

(a) recording

(b) journalizing

(c) posting (*)

(d) balancing

MCQs on Financial Accounting - 23

1. An estimate of future bad debt is called..............................

(a) provision for doubtful debts (*)

(b) debtors

(c) uncollected debts

(d) none of these

2. Expenses paid in advance is ...............................

(a) assets (*)

(b) liabilities

(c) profit

(d) loss

3. Outstanding expense is..............................

(a) assets

(b) liabilities(*)

(c) profit

(d) loss

4. A ......................balance in the suspense account will appear on the asset side of the

balance sheet.

(a) debit (*)

(b) credit

(c) cost

(d) none of these

5. ..............................is an expenditure which is incurred to meet the day to day expenses of

the business.

(a) capital expenditure

(b) revenue expenditure(*)

(c) deferred revenue expenditure

(d) none of these

6. Gross profit is made when the sales proceeds exceed the .....................

(a) purchases

(b) revenue

(c) cost of goods sold (*)

(d) none of these

7. ..............................wage incurred for the current period are shown as a liability in the

balance sheet unless it is paid.

(a) accrued

(b) outstanding(*)

(c) nominal

(d) current

8. A .............................. is a statement of affairs of a business, which reveals the financial

position of a business as on a particular date.

(a) trial balance

(b) balance sheet(*)

(c) cash flow statement

(d) none of these

9. Showing the assets and liabilities in the order of convertibility or solvency is

called..............................

(a) marshalling (*)

(b) balancing

(c) carry forwarding

(d) none of these

10. The assets whose existence or value is dependent on the happening or non-happening

of a certain event which is not definite is known as..............................

(a) fixed assets

(b) current assets

(c) tangible assets

(d) contingent assets(*)

MCQs on Financial Accounting - 24

1. ......................give item-wise information about the goods purchased, sold or returned

during a particular period

(a) columnar journal (*)

(b) journal proper

(c) general journal

(d) none of these

2. Total purchases are posted to the .................at the end of a week or a month.

(a) journal

(b) general account

(c) purchase account (*)

(d) none of these

3. Total of the discount column on the receipt side of the cash book is ...................... to

Discount A/c.

(a) debited (*)

(b) credited

(c) deducted

(d) none of these

4. Total of the total payment column in the petty cash book is ......................to petty cash

account.

(a) debited

(b) credited(*)

(c) deducted

(d) none of these

5. Journal proper is used for recording only those transactions as cannot be recorded in

any of the other ...................... books.

(a) ledger

(b) journal proper

(c) trial balance

(d) subsidiary book(*)

6........... give a concise idea about the profitability and financial position of the business.

(a) final accounts (*)

(b) balance sheet

(c) trial balance

(d) none of these

7. The expenses and incomes in the business can be classified into ..................... and

.............................. .

(a) capital and revenue(*)

(b) reserve and appropriation

(c) Both (a) & (b)

(d) none of these

8. Changing the accounting policy to show the rosy picture of business

is called..............................

(a) manipulation

(b) conservatism

(c) window dressing (*)

(d) none of these

9. Excess of debit over credit in the trading account means.....................

(a) gross loss (*)

(b) gross profit

(c) cost of goods sold

(d) none of these

10. The amount of money owed by a business to outsiders is known as ............

(a) assets

(b) liabilities(*)

(c) profit

(d) loss

 Trial Balance

Link 1 Byjus

Trial Balance MCQs

1. Trial balance is used to check the accuracy of

A) Balance sheet balances

B) Ledger accounts balances

C) Cash flow statement balances

D) Income statement balances

Answer: B

2. In the books of account if a transaction is completely deleted, will it affect the trial balance?

A) No

B) Yes

C) A transaction cannot be omitted

Answer: A

3. What is used in preparing trial balance?

A) Specialized Journals

B) Balance Sheet

C) Ledger Accounts

D) General Journal

Answer: C

4. What is the trial balance used?

A) It is a financial statement

B) It records balances of a balance sheet

C) It doesn’t contribute to the accounting cycle

D) It records balances of accounts

Answer: D

5. When debit balance is equal to credit balance then the trial balance means

A) Account balances are correct

B) Mathematically Capital+Liabilities=Assets

C) No mistake in recording transactions

D) No mistake in posting entries to ledger accounts

Answer: B

6. When is trial balance prepared?

A) At the end of an accounting period

B) At the end of a year

C) Frequently during the year

D) At the end of a month

Answer: A

7. Which items influence the trial balance agreement?

A) Deposit in transit

B) Compensating errors

C) Complete omission of a transaction

D) Partial omission of a transaction

Answer: D

8. When credit balances = debit balances, the trial balance check and shows ____________ . It also indicates that there were no errors made during posting and recording and posting.

A) Understatements of Balances

B) Errors of Commission

C) Arithmetic Accuracy

D) Omissions of Economic Events

Answer: C

9. Which of the following account with normal balance is shown at the debit side of a trial balance?

A) Creditors account

B) Unearned income account

C) Rent income account

D) Cash account

Answer: D

10. In trial balance, which accounts with normal balance is recorded at the credit side?

A) Bank account

B) Equipment account

C) Cash account

D) Accrued expenses account

Answer: D

Stay tuned to BYJU’S for more MCQ’s on Economics, question papers, sample papers, syllabus and Commerce notifications.

 

Accountancy Knowledge

Link2

1. The type of account with a normal credit balance is?

(a) An asset

(b) An expense

(c) Drawing

(d) Revenue

2. Which one of the following account would usually have a debit balance?

(a) Account Payable

(b) Cash

(c) Owner Equity

(d) Bank Loan

3. Which account has usually debit balance?

(a) Owner Equity

(b) Purchase

(c) Purchase returns

(d) Discount received

4. A Trial balance which shows equal totals for both debit and credit columns?

(a) Shows that there must be more than one error within the bookkeeping system

(b) Shows that the bookkeeping system is free of errors

(c) Shows that the arithmetic is correct, but errors may still be present in the bookkeeping system

(d) Shows that there is only one error within the bookkeeping system

5. Which of the following accounts normally has credit balance?

(a) Wages Outstanding

(b) Motor vehicles

(c) Prepaid Rent

(d) Return Inwards

6. Why does a business prepare a Trial Balance?

(a) To calculate the profit and loss

(b) To check the cash and bank balance

(c) To check the arithmetical accuracy of the ledgers

(d) To show the financial position

7. Is it true that the trial balance totals should agree?

(a) Yes, always

(b) No, because it is not a balance sheet

(c) Yes, except where the trial balance is extracted at the year end

(d) No, there are sometimes good reasons why they differ

8. The arithmetical accuracy of books of account is verified through?

(a) Journal

(b) Trial Balance

(c) Ledger

(d) None of the given options

9. Ahmed gives a cash discount of 40 to a customer. The discount is credited to the discounts allowed account. The effect of recording the discount in this way is that profit will be?

(a) Understated by 80

(b) Overstated by 80

(c) Correct

(d) Understated by 40

10. A Trial balance is a?

(a) Real account

(b) Nominal account

(c) Personal account

(d) None

 

11. The equality of debits and credits is tested periodically by preparing a?

(a) Income Statement

(b) General Journal

(c) Trial Balance

(d) Balance Sheet

12. Which of the following best describes a Trial balance?

(a) Shows all the entries in the books

(b) It is a list of total / balances of books

(c) Shows the financial position of a business

(d) It is a special account

13. Preparation of Trial Balance helps to deduction of?

(a) Error of Principle

(b) Clerical Errors

(c) Error of whole Omission

(d) Compensating Errors

14. For which of the following accounts is the normal balance a debit?

(a) Rent Payable

(b) Unearned Rent Revenue

(c) Rent Revenue

(d) Prepaid Rent

15. The Trial balance?

(a) Is formal financial statement

(b) Is used to prove that there are no errors in the journal or ledger

(c) Provides a listing of every account in the chart of accounts

(d) Provide a listing of the balance of each account in active use

16. Types of trial balance are?

(a) 1

(b) 2

(c) 3

(d) 4

17. Which one of the following could not be classified as revenue?

(a) Goods sold for cash

(b) Sales on credit

(c) Fee from the sale of services

(d) Income from the sale of fixed assets

18. Which most important reason for producing a trial balance prior to preparing the final accounting is?

(a) It confirms the accuracy of the ledger accounts

(b) It provides all the figures necessary to prepare the final accounts

(c) It shows that the ledger accounts contain debit and credit entries of an equal value

(d) It enables the accountant to calculate any adjustments required

19. Suspense account in the trial balance is entered in the?

(a) Trading A/c

(b) Profit and loss A/c

(c) Balance sheet

(d) Income statement

20. Wages paid to workers for the installation of new Machinery should be debited to?

(a) Wages Account

(b) Machinery Account

(c) Factory Expenses Account

(d) FOH


Link 3 Play Accounting

 

  1. The basic purpose of preparing a trial balance is:
    •  to find out profit of the business
    •  to show financial position of the business
    •  to test arithmetical accuracy of the ledger
    •  to calculate net purchases of the business
  2. Which of the following is correct about an agreed trial balance.
    •  both debit and credit aspects of each transaction have been recorded
    •  the books are arithmetically correct
    •  the debit and credit columns of trial balance have been correctly totaled
    •  all of the above
  3. Which one of the following represents correct sequence of accounting cycle?
    •  Journal > Trial balance > Ledger > Transaction analysis
    •  Transaction analysis > Journal > Ledger > Trial balance
    •  Purchases > Journal > Ledger > Trial balance
    •  Non of the above
  4. A trial balance prepared after taking into account the effect of adjusting entries is known as:
    •  Financial trial balance
    •  Adjusted trial balance
    •  Unadjusted trial balance
    •  Normal trial balance
  5. Two methods of preparing a trial balance are:
    •  Financial method and total method
    •  Total method and normal method
    •  Balance method and financial method
    •  Balance method and total method
  6. In addition to arithmetical accuracy of ledger, a trial balance provides:
    •  A summary of total capital invested in the business during the period
    •  A summary of sales made during the period
    •  A summary of total cash collected from customers during the period
    •  A summary of all transactions made since the end of the previous accounting period
  7. Which one of the following is the most popular method of preparing a trial balance:
    •  Balance method
    •  Total method
    •  Trial and error method
    •  Line method
  8. Under balance method, which one of the following is used for preparing trial balance at the end of an accounting period?
    •  Beginning balances of ledger accounts
    •  Ending balances of ledger accounts
    •  Total of beginning and ending balances of ledger accounts
    •  Difference of beginning and ending balances of ledger accounts
  9. Under total method, which of the following is used for preparing a trial balance:
    •  Totals of amount columns of ledger accounts
    •  Differences of amount columns of ledger accounts
    •  Opening balances of ledger accounts
    •  Closing balances of ledger accounts
  10. Which of the following errors in the journal entry will not be detected by trial balance.
    •  Debit part is overstated but credit part is correctly recorded
    •  Debit part is correctly recorded but credit part is overstated
    •  Both debit and credit parts are overstated by the same amount
    •  Debit part is correctly recorded but credit part is understated
  11. Which of the following will be placed in the credit column of the trial balance?
    •  Purchases
    •  Rent expense
    •  Furniture
    •  Sales
  12. Which of the following will be placed in the debit column of the trial balance?


Link 5 test mcq skills

 

1)  Sales to Mohsin on account should be debited to:

(A)  Cash A/C

(B)  Sales A/C

(C)  Mohsin

(D)  Account Receivable

Answer c

2) Amount of interest paid to Ali should be debited to:

(A)  Ali A/C

(B)  Interest A/C

(C)  Cash A/C

(D)  A/C Payable

Answer b

3)  Amount invested by the proprietor in the business should be credit to:

(A)  Cash

(B)  Drawing

(C)  A/c payable

(D) Capital

Answer d

4)  Goods returned to supplier should be debited to:

(A)  Sales return

(B)  Return outward

(C) Return inward

(D)  Supplier’s Account

Answer d

5)  Customer goods returned should be credited to:

(A)  Customer’s A/C

(B)  Return inward

(C)  Return outward A/C

(D)  Purchases A/C

Answer b

6)  Goods returned from Khubaib should be credited to:

(A)  Purchase Return

(B)  Return outward

(C)  Cash A/C

(D)  Khubaib A/C

Answer d

7)  A journal entry that requires more than two accounts is called:

(A)  Double entry

(B)  Compound entry

(C)  Combined entry

(D)  Single entry

Answer b

8)  Cash discount allowed to a debtor should be debited to:

(A)  Debtor’s A/C

(B)  Discount A/C

(C)  Creditor’s A/c

(D)  Cash A/C

Answer b

9)  Cash discount received from supplier should debited to:

(A)  Debtor’s A/c

(B)  Cash Discount

(C)  Cash A/C

(D)  Supplier A/C

Answer d

10)  Title of account is given in:

(A)  Journal

(B)  Title of Account

(C)  Ledger

(D)  Transaction

Answer c

11)  Firstly transaction is written in:

(A)  Ledger

(B)  Account

(C)  Journal

(D)  Trial Balance

Answer c

12)  A transaction is recorded on the same day it take plade so journal is also called.

(A)  An entry book

(B)  Ledger book

(C)  A day book

(D)  History book

Answer c

13)  Loss of goods by fire should be credited to:

(A)  Loss by fire

(B)  Sales A/C

(C)  Capital

(D)  Purchases A/c

Answer d

14)  Furniture purchased for personal use by a partner should be debited to:

(A)  Furniture A/C

(B)  Partner’s capital A/C

(C)  Private use A/C

(D)  Partner’s Drawings A/C

Answer d

15)  Salaries paid to clerks should be debited:

(A)  Salary A/c

(B)  Clerk A/C

(C)  Cash A/C

(D)  General exp: A/C

Answer a

 

 

Link 6 highschool accounts.weebly

CHAPTER 1 1. Which of the following jobs check accounting in ledgers and financial statements?

(A) Financial

 (B) Audit

(C) Management

 (D) Budget Analysis

 2. The process of accounting is needed to

 I. take a holiday

 II. assist in decision making

 III. invest in start up of a business

IV. track money spent

 (A) I, II and III

 (B) I, II and IV

(C)I, III and IV

(D)II, III and IV

3. Which of the following describes the practical framework of bookkeeping?

 (A) Classifying, recording and summarizing

(B) Reporting, analyzing and interpreting

(C)Classifying, analyzing and interpreting

(D)Recording, summarizing and reporting

4. Which of the following principles assumes that a business will continue for a long time?

(A) Historical cost

 (B) Periodicity

(C)Objectivity

 (D)Going concern

 5. Which of the following users assesses the attractiveness of investing in a business?

 (A) Tax authorities

(B) Financial analysts

 (C) Bank

(D) Employees

6. Accountants use Generally Accepted Accounting Principles (GAAP) to make the financial information communicated

I. relevant

 II. reliable

III. comparable

IV profitable

(A) I, II and III

 (B) I, II and IV

(C)I, III and IV

(d)II, III and IV

7. One of the detailed rules used to record business transaction is

(A) Objectivity

 (B) Accruals

(C) Double entry book keeping

 (D)Going Concern

 8. The diagram below refers to item 8. Numbers 4 and 8 in the diagram represents

(A) prepare a cheque and extract a Trial balance

 (B) extract a trial balance and prepare final reports

 (C) prepare final reports and prepare a cheque

(D) extract a trial balance and prepare a voucher


9. Which of the following highlights the correct order of the stages in the accounting cycle?

(A) Journalizing, final accounts, posting to the ledger and trial balance

(B) Journalizing, posting to the ledger, trial balance and final accounts

(C)Posting to the ledger, trial balance, final accounts and journalizing

(D)Posting to the ledger, journalizing, final accounts and trial balance

 

CHAPTER 2

 1. Dividends are paid by

 I. Sole trading businesses

 II. Partnership companies

III. Limited Liability companies

 IV. Co-operatives

 (A) I and II

(B)I and III

 (C)II and III

(D)III and IV

2. Which of the following companies has to pay corporation tax?

 (A) Co-operative society

(B)Limited liability Company

(C)Partnership Company

(D) Sole trading company

3. Which of the following companies has unlimited liability?

(A) Sole trading company

 (B)Co-operative society

(C)Limited liability Company

(D)Partnership Company

 4. The Trading and Profit and Loss account is also called

 (A)Balance Sheet (B)Cash Flow Statement (C)Income Statement (D)Trial Balance

 

CHAPTER 3

1. The elements of the accounting equation are

I. Assets II. Liabilities III. Trial Balance IV. Capital

(A) I, II and III (B)I, II and IV (C) I, III and IV (D)II, III and IV

2. Which of the following are assets?

I. Cash and cash at bank II. Land and fixtures III. Loans and creditors IV. Mortgage loans and debtors (A) I and II (B)I and III (C)I and IV (D) II and III

 The following balances refer to Item 3 T. Singh’s Assets and Liabilities Machinery 20 000 Cash in hand 2 000 Land and buildings 200 000 Bank loan 50 000 Creditors 5 000 Debtors 10 000

(3) What is T. Singh’s capital?

 (A) $55 000 (B) $177 000 (C)$232 000 (D)$287 000

 The following balances refer to Items 4 and 5 P. Stevens Balance Sheet As at December 31, 2010 LIABILITIES ASSETS Capital 100 000 Premises 100 000 Bank loan 95 000 Accounts receivable 10 000 Creditors 5 000 Cash 5 000 Furniture 20 000 Stock 10 000 Bank 55 000

4. What is P. Steven’s total current asset? (A) $60 000 (B) $80 000 (C)$120 000 (D)$200 000

5. What is P. Steven’s total liability? (A) $5 000 (B) $95 000 (C)$100 000 (D)$200 000

6. Which of the following items are used to prepare a balance sheet? I. The name of the firm II. The name of the financial statement III. The date it is being prepared IV.

The style use for the preparation of the statement

(A)    I and II (B) I and IV (C)I, II and III (D)I, III and IV

 

CHAPTER 4

 1. Arielle W. bought furniture on credit from Chanel.

Which of the following journal entries will be made for this transaction in Arielle W. books?

(A) Dr. Furniture Cr. Cash

(B) Dr. Purchases Cr. Arielle W.

(C)Dr. Arielle W. Cr. Purchases

(D)Dr. Furniture Cr. Arielle W.

 2. The following two T-accounts illustrate a transaction Bank $800 Advertising expense $800 Which of the following statements describes the information given in accounts?

(A) Advertising paid amounted to $800

(B)Advertising shows a decrease of $800

(C)Bank shows an increase of $800

 (D)Bank deposits amounted to $800

3. Which of the following concepts use the rules ‘every transaction affects two or more ledger accounts?’

(A) Going concern

(B) Double entry book-keeping

(C)Money measurement

 (D)Periodicity

 4. The purchase of a motor car on credit from Toy Automotive Company for use in a firm should be recorded as

(A) Dr. Maintenance of vehicle expense Cr. Toy Automotive Company

(B) Dr. Purchases Cr. Toy Automotive Company

(C) Dr. Motor vehicle Cr. Toy Automotive Company

 (D) Dr. Motor vehicle Cr.

Cash Item 5 refers to the following information Cash Capital $40 000 Drawings $10 000 Sales 15 000 Purchases 20 000 Balance c/d ???

5. Which of the following figures represents the balance c/d for the above account?

(A) $10 000

(B) $25 000

(C)$30 000

 (D)$55 000

 

CHAPTER 5 1. An item is subject to a 20% trade discount. Its list price is $1 000.

What is the sale price?

 (A) $200

(B) $800

(C) $1 000

(D)$1 200

2. A debit note is a document made out when goods are

 (A) returned

(B) overcharged

(C)sold

(D) undercharged

 3. Which of the following books of original entry should be used to record credit sales?

(A) Sales journal

 (B) Sales returns journal

 (C)Purchases journal

 (D)Purchases returns journal

 4. Credit notes issued for goods returned to a supplier will be entered firstly in the

 (A) General journal

 (B) Returns inwards journal

(C)Returns outwards journal

(D)Petty cash journal

 5. Dylan J paid Joel and Company $600 to settle an account of $720. What entries should be made in Joel’s books?

(A) Dr Joel and Company $720 Cr Jules $ 720

 (B) Dr Discount allowed $ 120 Dr Cash $ 600 Cr Joel and Company $ 720

 (C) Dr Cash $ 600 Cr Joel and Company $600

 (D) Dr Joel and Company $720 Cr Cash $600 Cr Discount received $120

6. A business operates its petty cash by using the imprest system. At the beginning of the month, the petty cashier was given $1 000 out of which she spent $800. How much will she be reimbursed?

 (A) $200

 (B) $800

 (C)$1 000

(D)$1 800

 7. Which of the following entries will be entered in the General journal?

 (A) Sold goods on credit

 (B) Goods purchased and paid by cash

(C)Investment made by the owner

 (D) Purchase goods on credit

Journal account Legder

Link 1

 

Green one is the answer

1. If debit side of bank account is greater than credit side it represents?

(a) Cash at Bank

(b) Bank Loan

(c) Bank Overdraft

(d) None of them

Wrong!

2. The payment to a creditor will?

(a) Increase one asset and decrease another

(b) Decrease an asset and decrease owner’s equity

(c) Decrease an asset and decrease a liability

(d) Increase an asset and increase a liability

Wrong!

3. The T-account is used to summarize which of the following?

(a) Increase and decrease to a single account in the accounting system

(b) Debit and credit to a single account in the accounting system

(c) Changes in specific account balances over a time period

(d) All of the above describe how T-accounts are used by accountants

Wrong!

4. Credit means?

(a) Entries on the right hand side

(b) A decrease in liabilities

(c) An increase in expenses

(d) An increase in assets

Wrong!

5. Ledger is a principal book in which?

(a) Only real account are kept

(b) Only personal accounts are kept

(c) All accounts are kept

(d) Only nominal accounts are kept

Correct!

6. The left hand side of account is referred to as?

(a) The Balance

(b) A Debit

(c) A Credit

(d) A footing

Correct!

7. Excess of Debit side over Credit side is called?

(a) Debit Balance

(b) Credit Balance

(c) Liability Accounts

(d) All of before

Wrong!

8. Which item will appear on the credit side of ledger account?

(a) Cash received

(b) Purchases

(c) Discount received

(d) Rent Expenses

Wrong!

9. The process of transferring the debit and credit items from a journal to their respective account in the ledger is termed as?

(a) Balancing

(b) Posting

(c) Arithmetic

(d) Entry

Correct!

10. Ledger is a book of?

(a) Original entry

(b) Final entry

(c) Secondary entry

(d) All cash transactions

Correct!

 CHAPTER 1

1. Which of the following jobs check accounting in ledgers and financial statements?

(A) Financial

(B) Audit

(C) Management

(D) Budget Analysis

 

2. The process of accounting is needed to

I. take a holiday

II. assist in decision making

III. invest in start up of a business

IV. track money spent

(A) I, II and III

(B) I, II and IV

(C)I, III and IV

(D)II, III and IV

 

3. Which of the following describes the practical framework of bookkeeping?

(A) Classifying, recording and summarizing

(B) Reporting, analyzing and interpreting

(C)Classifying, analyzing and interpreting

(D)Recording, summarizing and reporting

 

4. Which of the following principles assumes that a business will continue for a long time?

(A) Historical cost

(B) Periodicity

(C)Objectivity

(D)Going concern

 

5. Which of the following users assesses the attractiveness of investing in a business?

(A) Tax authorities

(B) Financial analysts

(C) Bank

(D) Employees

 

6. Accountants use Generally Accepted Accounting Principles (GAAP) to make the financial information communicated

I. relevant

II. reliable

III. comparable

IV profitable

(A) I, II and III

(B) I, II and IV

(C)I, III and IV

(d)II, III and IV


7. One of the detailed rules used to record business transaction is

(A) Objectivity

(B) Accruals

(C) Double entry book keeping

(D)Going Concern

 

8. The diagram below refers to item 8.

Numbers 4 and 8 in the diagram represents

(A) prepare a cheque and extract a Trial balance

(B) extract a trial balance and prepare final reports

(C) prepare final reports and prepare a cheque

(D) extract a trial balance and prepare a voucher

 

9. Which of the following highlights the correct order of the stages in the accounting cycle?

(A) Journalizing, final accounts, posting to the ledger and trial balance

(B) Journalizing, posting to the ledger, trial balance and final accounts

(C)Posting to the ledger, trial balance, final accounts and journalizing

(D)Posting to the ledger, journalizing, final accounts and trial balance

 

 

CHAPTER 2

1. Dividends are paid by

I. Sole trading businesses

II. Partnership companies

III. Limited Liability companies

IV. Co-operatives

(A) I and II

(B)I and III

(C)II and III

(D)III and IV

 

2. Which of the following companies has to pay corporation tax?

(A) Co-operative society

(B)Limited liability Company

(C)Partnership Company

(D) Sole trading company

 

3. Which of the following companies has unlimited liability?

(A) Sole trading company

(B)Co-operative society

(C)Limited liability Company

(D)Partnership Company

 

4. The Trading and Profit and Loss account is also called

(A)Balance Sheet

(B)Cash Flow Statement

(C)Income Statement

(D)Trial Balance

 

 

 

CHAPTER 3

1. The elements of the accounting equation are

I. Assets

II. Liabilities

III. Trial Balance

IV. Capital

(A) I, II and III

(B)I, II and IV

(C) I, III and IV

(D)II, III and IV

 

2. Which of the following are assets?

I. Cash and cash at bank

II. Land and fixtures

III. Loans and creditors

IV. Mortgage loans and debtors

(A) I and II

(B)I and III

(C)I and IV

(D) II and III

 

The following balances refer to Item

3 T. Singh’s Assets and Liabilities

Machinery 20 000

Cash in hand 2 000

Land and buildings 200 000

Bank loan 50 000

Creditors 5 000

Debtors 10 000

(3) What is T. Singh’s capital?

(A) $55 000

(B) $177 000

(C)$232 000

(D)$287 000

 

The following balances refer to Items 4 and 5

P. Stevens

Balance Sheet

As at December 31, 2010

LIABILITIES ASSETS

Capital 100 000 Premises 100 000

Bank loan 95 000 Accounts receivable 10 000

Creditors 5 000 Cash 5 000

Furniture 20 000

Stock 10 000

Bank 55 000

4. What is P. Steven’s total current asset?

(A) $60 000

(B) $80 000

(C)$120 000

(D)$200 000

 

5. What is P. Steven’s total liability?

(A) $5 000

(B) $95 000

(C)$100 000

(D)$200 000

 

6. Which of the following items are used to prepare a balance sheet?

I. The name of the firm

II. The name of the financial statement

III. The date it is being prepared

IV. The style use for the preparation of the statement

(A) I and II

(B) I and IV

(C)I, II and III

(D)I, III and IV

 

CHAPTER 4

1. Arielle W. bought furniture on credit from Chanel. Which of the following journal entries will be made for this transaction in Arielle W. books?

(A) Dr. Furniture

Cr. Cash

(B) Dr. Purchases

Cr. Arielle W.

(C)Dr. Arielle W.

Cr. Purchases

(D)Dr. Furniture

Cr. Arielle W.

2. The following two T-accounts illustrate a transaction

Bank $800

 

Which of the following statements describes the information given in accounts?

(A) Advertising paid amounted to $800

(B)Advertising shows a decrease of $800

(C)Bank shows an increase of $800

(D)Bank deposits amounted to $800

 

3. Which of the following concepts use the rules ‘every transaction affects two or more ledger accounts?’

(A) Going concern

(B) Double entry book-keeping

(C)Money measurement

(D)Periodicity

 

4. The purchase of a motor car on credit from Toy Automotive Company for use in a firm should be recorded as

(A) Dr. Maintenance of vehicle expense

Cr. Toy Automotive Company

(B) Dr. Purchases

Cr. Toy Automotive Company

(C) Dr. Motor vehicle

Cr. Toy Automotive Company

(D) Dr. Motor vehicle

Cr. Cash

 

Item 5 refers to the following information

Cash Capital $40 000

Drawings $10 000

Sales 15 000

Purchases 20 000

Balance c/d

5. Which of the following figures represents the balance c/d for the above account?

(A) $10 000

(B) $25 000

(C)$30 000

(D)$55 000

 

 

CHAPTER 5

1. An item is subject to a 20% trade discount. Its list price is $1 000. What is the sale price?

(A) $200

(B) $800

(C) $1 000

(D)$1 200

 

2. A debit note is a document made out when goods are

(A) returned

(B) overcharged

(C)sold

(D) undercharged

 

3. Which of the following books of original entry should be used to record credit sales?

(A) Sales journal

(B) Sales returns journal

(C)Purchases journal

(D)Purchases returns journal

 

4. Credit notes issued for goods returned to a supplier will be entered firstly in the

(A) General journal

(B) Returns inwards journal

(C)Returns outwards journal

(D)Petty cash journal

5. Dylan J paid Joel and Company $600 to settle an account of $720. What entries should be made in Joel’s books?

(A) Dr Joel and Company $720

Cr Jules $ 720

(B) Dr Discount allowed $ 120

Dr Cash $ 600

Cr Joel and Company $ 720

(C) Dr Cash $ 600

Cr Joel and Company $600

(D) Dr Joel and Company $720

Cr Cash $600

Cr Discount received $120

 

6. A business operates its petty cash by using the imprest system. At the beginning of the month, the petty cashier was given $1 000 out of which she spent $800. How much will she be reimbursed?

(A) $200

(B) $800

(C)$1 000

(D)$1 800

 

7. Which of the following entries will be entered in the General journal?

(A) Sold goods on credit

(B) Goods purchased and paid by cash

(C)Investment made by the owner

(D) Purchase goods on credit

 

 

1. _______________ is prepared at the end of the accounting period to show the financial position o f business a. Profit & low account b. Balance sheet c. Trail balance

2. Payment of monthly rent to land cord is a. Economic event b. Non-economic event c. None of these

3. _____________is the original form of accounting a. Financial accounting b. Cost accounting c. Management accounting

4. _____________is an example of fixed asset a. Receivable b. Stock c. Land & buildings

5. The term _________denotes the cost of services and things used for earning revenue a. Income b. Expense c. Loss

6. A person who owes money to the business is a __________ a. Debtor b. Creditor c. Investor

7. A _________ is a person to whom business owes money a. Creditor b. Debtor c. proprietor

8. ___________denote goods brought for sale. a. Sales b. Purchase c. Expenses

9. ________________ is an example of wasting asset a. Mines b. Land c. Closing stock

10. Asset acquired for long period of time in the business is known as ___________ a. Fixed asset b. Current asset c. Fictitious asset

11. Things which are purchased by the business for resale are called________ a. Purchase b. Sale c. Liability

12. ____________ expenditure is increased to maintain the business or to keep the assets in good working condition a. Revenue b. Capital c. Both of there

13. ______________ is the major source of revenue of any business a. Purchase b. Sale c. Interest d. Commission

14. _______________ represent the amount invested by the owner into business. a. Capital b. Revenue c. Asset

15. A___________ transaction is one where in items are exchanged for other items a. Cash b. Credit c. Barter

16. Excess of current asset over current liabilities is known as _________ capital a. Fixed b. Working c. Current

17. ___________ is not a tangible asset a. Goodwill b. Land c. Closing stock

18. According to _________ concept it is assumed that the business will last for long time a. Accounting entity b. Going concern c. Accounting period

19. Accounting is concerned with a. Monetary b. Non- monetary c. Monetary & Nonmonetary

20. Transaction& events not capable of being expressed in terms of money are not to be recorded in accounting due to a. Going concern b. Accounting entity c. Money measurement

21. Income is measured on the basics of a. Entity concept b. Accounting period concept c. Going concern concept

22. The policy of anticipate no profit and provide for all possible losses is followed due to a. Conservation concept b. Consistency concept c. Cost concept

23. In every business transaction at least ______parties are involved a. Two b. Three c. Four

24. Source documents include a. Vouchers b. Receipts c. Bill d. All these

25. All those to whom business owes to money are a. Debtor b. Creditor c. Investor

26. Accounts receivable normally has ________ balance a. Credit b. Debit c. Negative

27. Financial statements are the part of _________ a. Book- keeping b. Accounting c. None of the above

28. Bank account is a _________ a. Personal accounting b. Real account c. Nominal account

29. Cost of goods old can be calculated by: a. Balance sheet b. Profit& loss account c. Trading account

30. Capital expenditure are recorded in the __________ a. Balance sheet b. Profit & loss account c. Trading account

31. Nominal accounts are related to a. Assets& liability b. Expenses & losses c. Debtors & creditors 32. Sales journal is used for recording a. Cash sales b. Credit sales c. Total sale 33. Trading account is a ____________account a. Real b. Nominal c. Personal

34. Closing stock is valued at ____________ a. Market price b. Cost price c. Cost price or market price whichever is less

35. Balance sheet is an ______________ a. Statement b. Account c. Both

36. Wages paid on for the erection of machinery is debited to a. Machinery accounting b. Wage accounting c. Cash accounting

37. Income tax is debited to ________________ a. Profit and loss account b. Cash accounting c. Drawings account

38. Goods taken by the proprietor for personal is shown as a deduction from_____________ a. Sales b. Capital c. Purchase

39. Asset that can be converted into cash within a year are called _________asset a. Current b. Fixed asset c. Wasting asset

40. Balance sheet is prepared for a ____________ a. Period b. On a particular date c. Entire life of business

41. Income received in advance is an ___________ a. Asset b. Liability c. Expenses

42. If goods are destroyed by fire , the total value of loss is __________ to trading account. a. Debited b. Credited c. Not taken

43. Provision for account on creditors has a _________________balance a. Debit b. Credit c. None of these

44. Income earned but not received to known as _______________ income a. Accrued b. Prepaid c. Nominal

45. Prepaid expense is _________ to the business a. Asset b. Liability c. Expenses 46. Withdrawing more amount from bank than the deposit in the account is termed as____ a. Fixed deposit b. Current deposit c. overdraft

47. Income of overdraft, pass book will show __________balance a. Debit b. Credit c. None of these 48. Cash book shows ___________balance when there is an O.D. a. Debit b. Credit c. None of these 49. When bank charge incurred, overdraft will be __________________________ a. increased b. decreased c. no charge

50. __________________ balance in cash book indicate deposit balance a. Credit b. Debit c. Any balance

51. Special journal are also called________________ a. Journal b. Ledger c. Day book

52. Cash book is a ____________ a. Journal b. Ledger c. Journal & ledger

53. All cash purchases are entered in the _____________book a. Cash b. Purchase c. Journal proper 54. Discount columns in the cash book are a. Totaled b. Balanced c. Not shown

55. Trade discount is shown in the journal entry. a. True b. False

56. The book that records small payment. a. Single column b. Double column c. Petty cash book

57. A petty cash book is usually kept under system a. Mercantile b. Cash system c. Import system

58. If both the aspects of a same transaction appear in one account, it is called _______entry a. Simple journal entry b. Compound c. Contra entry

59. Journal is a book of ______entry a. Original b. Secondary c. None of these

60. Ledger is a book of ___________entry a. Original b. Secondary c. None of these

61. Recording of transaction in the journal is called a. Journalizing b. Posting c. Recording

62. Recording of transaction in ledger is called as a. Journalizing b. Posting c. Recording

63. Capital account is ________________ account a. Personal b. Real c. Nominal

64. Old furniture sold should be credited to __________ a. Sales account b. Furniture account c. Cash account

65. When salary paid by cheque ,____________account is credited a. Salary b. Personal c. Bank

66. A statement of debt & credit balance of account is ___________ a. Ledger b. Profit & loss account c. Trial balance

67. A collection of all accounts is a ___________ a. Journal b. Ledger c. Balance sheet 68. Debit is the asset means a. Increase b. Decrease c. No charge

69. Credit in the liability means a. Increase b. Decrease c. No charge

70. Capital always have a __________balance a. Debit b. Credit c. Either a or b

71. A short description of every transaction made in the journal is called a. Summary b. Description c. Narration

72. Capital expenditure are recorded in the __________ a. Balance sheet b. Trading account c. Profit & loss account

73. Bills receivable is a ___________ a. Tangible asset b. Fixed asset c. Current asset

74. Carriage outward is debited to___________ a. Trading accounting b. Profit & loss account c. Balance sheet

75. Sales return appearing in the trail balance are deducted from a. Capital b. Sales c. Purchase


Link 4 Pearsoned

Q. Which of thefollowing statements is correct: A trial balance:

a.    lists all entries made for accounting for business transactions

b.    proves the accuracy of the accounting records

c.    is prepared by a business on the last day of its accounting period

d.    lists the balances in all the accounts maintained on double entry basis(*)

 

Q. When attempting to identify accounting errors the trial balance can be relied on to detect which of the following errors:

A. all accounting errors

B. transactions not accounted for

C. amounts posted to the correct side of a wrong account

D. posting to the wrong side of any account(*)

 

 

Q.Which of the following errors would have caused a difference in the trial balance?

A. Recording a sale of £30,000 as £3,000 in the Cash Book

B. Posting to Motor vehicles account £600 paid for servicing vehicles

C. Not accounting for £15,000 paid for purchasing goods for sale

D. Posting payment of £21,000 for stationery as £12,000 to the Stationery account(*)

 

 

Q. £2,400 paid for staff training has been posted in error to Advertising account. Which of the following would be an appropriate description of this accounting error:

A. Error of principle

B. Error of commission(*)

C. Double entry error

D. Error of omission

 

Q.

Trial balance                      Debit       Credit

Capital account -              50,000

Motor vehicles a/c           20,000   -

Purchases account           112,000                 -

Sales account     -             186,000

Salaries account                -                  34,000

Other expenses a/c         22,000   -

Cash account                   48,000   -

                                          202,000        270,000

A trader, who commenced business in the year, extracted his trial balance on the last day of the first month and found that it failed to balance. Which of the following would explain the failure:

A.      Trial balance has been added wrongly

B.      A payment has been posted wrongly to the credit side of an account instead of debit

C.      Salaries, an expenditure, has been stated in error as a credit balance(*)

D.      The trial balance fails to include one or more of account balances

 

 

 

Question 2.

Q. The sales account will be found in:

A. Sales day book

B. Sales ledger

C. The Journal

D. General ledger(*)

 

 

Question 3.

Q. Which of the following would transactions would be entered in the journal?

(A)    Purchase of machinery for cash for business use

(B)    Purchase of vehicle on credit for business use(*)

(C)    Withdrawal of money from business by owner

(D)   Sale of goods on credit to new customers

 

Question 4.

Q. A fixed amount paid out of a UK bank account on a regular basis is known to the payer as a:

(A)    Direct debit

(B)    Cheque endorsement

(C)    Standing order(*)

(D)   Credit transfer

 

Question 5.

Q. We sell goods to S Knight on 19 October 20X2 for £600. The credit terms are for a 2 ½ % cash discount if payment is received within 14 days. If payment is received on 25 October then the correct double-entry to record the discount would be:

          Debit                                                         Credit

A  S Knight £15                                    Discounts received £15

 

B  S Knight £30                                   Discounts received £30

 

C  Discounts received £30                     S Knight £30

 

D  Discounts allowed £15                      S Knight £15

 

A

B

C

D(*)

 

 

Question 6.

Q. Which of the following is not a nominal account?

(A)    Capital

(B)    Insurance

(C)    Machinery(*)

(D)   Sales

 

 

Question 7.

Q. Which of the following should not be deducted from gross income at source?

(A)    Income tax

(B)    Value added tax(*)

(C)    Pension contributions

(D)   National insurance contributions

 

Question 8.

Q. Which of the following is not an advantage of introducing computerised accounting systems?

(A)    Time saved through speed of inputs

(B)    Increased accuracy of entries

(C)    Increased job satisfaction

(D)   Costs involved in training staff to use system(*)

 

 

Question 9.

Q. The reason for having a bank current account would not include:

(A)    The desire to earn maximum return on financial investments(*)

(B)    Have access to funds for emergency use

(C)    The need to make regular payments into and out of a bank

(D)   Not to have too much cash held on the business premises

 

Question 10.

Q. A contra entry in the cashbook would include:

(A)    Withdrawing cash from the bank account(*)

(B)    Totalling up the bank and cash columns at the end of each month

(C)    Transferring cash into the petty cash box

(D)   Transferring the discounts to the accounts in the general ledger

 

 

Question 11.

Q. The returns inwards day book would contain:

(A)    Goods purchased on credit

(B)    Fixed assets purchased that are unsuitable for business use

(C)    Stock that customers have returned(*)

(D)   Goods purchased on credit that are returned to the original supplier

 

 

Question 12.

Q. Which of the following statements concerning the three-column cashbook is true?

(A)    It is allowable for the cash column to have a credit balance at the end of the period

(B)    The discounts column totals should be the same to enable balancing off

(C)    The folio column represents the third column of the cashbook

(D)   The bank column can have either a debit or a credit balance(*)

 

Question 13.

Q. The account of a supplier would be found in:

(A)    Purchases ledger(*)

(B)    Sales day book

(C)    General ledger

(D)   Purchases day book

 

Question 14.

Q. From cash sales of £4,500 with VAT included, the net amount of sales would be:

(A)    £787.50

(B)    £670.21

(C)    £3,829.79(*)

(D)   £3,712.50

 

Question 15.

Q. Debiting the petty cash book with the exact amount spent in the previous period is an example of:

(A)    Prudence

(B)    Going concern

(C)    Contra entry

(D)   Imprest system(*)

 

 

Question 16.

Q. The source document for making entries in the returns inwards day book is:

(A)    Purchase invoice

(B)    Debit note

(C)    Credit note(*)

(D)   Cheque counterfoil

 

 

Question 17.

Q. Sales of £1,000 are subject to a trade discount of 20% and a cash discount of 5%. With VAT set at 17.5%, if the customer does not qualify for the cash discount, the amount we would receive would be:

(A)    £933.00(*)

(B)    £881.25

(C)    £893.00

(D)   £931.25

 

 

Question 18.

Q. Which if the following is not an advantage of maintaining columnar day books?

(A)    Profits can be calculated on a departmental basis

(B)    Sales can be analysed on a geographical basis

(C)    Checks can be kept on types of goods that are sold

(D)   The firm can spend more time on writing up entries(*)

 

 

Question 19.

Q. A firm purchases machinery for £5,000, paying by cheque, which includes VAT of £875. If the firm cannot reclaim VAT on fixed assets then the entries to record the purchase of the machine would be:

 

Debit                                                                     Credit

 

A   Machinery £4,125, VAT £875                   Banks £5,000

 

B   Machinery £5,000                                      Bank £5,000

 

C   Machinery £4,125, Bank £875               Creditor £5,000

 

D   Machinery £5,000                                 Bank £4,125, VAT £875

 

A

B(*)

C

D

 

 

Question 20.

Q. Which of the following is not a reason for maintaining day books in addition to the ledgers?

(A)    Transactions can be more easily verified

(B)    Having a dual system allows tighter controls to prevent fraud and theft within the firm

(C)    More time is spent on entering the transactions in both books and ledgers(*)

(D)   Day books and ledgers act as a back up for each other in case information is lost

 

 

Question 21.

Q. Ledger accounts of our credit customers will be found in the:

(A)    sales ledger.(*)

(B)    sales daybook.

(C)    sales journal.

(D)   sales account.

 

Question 22.

Q. A source document used to construct the cashbook would include

(A)    debit notes

(B)    sales invoices

(C)    credit note

(D)   cheque counterfoils.(*)

 

Question 23.

Q. A cheque deposited for which the bank will not transfer any money can be known a

(A)    the journal.

(B)    dishonoured cheque(*)

(C)    guaranteed cheque

(D)   credit transfer.

 

 

Question 24.

Q. Which of the following would transactions would not be entered in the journal?

(A)    Sale of vehicle used by the business on credit.

(B)    Transfer of a debt from one creditor to another.

(C)    Purchase of machinery for cash for business use.(*)

(D)   Return of fixed asset by the firm to the firm originally purchased from.

 

 

Question 25.

Q. We sell goods to H Clews on 5 April 20X6 for £1,200. The credit terms are for a 5 % cash discount if payment is received within 14 days. If payment is received on 15 April then the correct double-entry to record the discount would be:

 

        Debit                                                         Credit

 

A  H Clews £60                                      Discounts received £60

 

B  Discounts allowed £60                         H Clews £60

 

C  H Clews £60                                   Discounts allowed £60

 

D  Discounts received £60                        H Clews £60

 

A.

B.(*)

C.

D.

 

 

Question 26.

Q. A firm purchases a motor vehicle for £2,000, paying by cheque, which includes VAT of £500. If the firm can reclaim VAT on fixed assets then the entries to record the purchase of the machine would be:

 


 

              Debit                                                                   Credit

 

A   Motor vehicle £2,000                                           Bank £2,000

 

B   Motor vehicle £1,500, Bank £500                 Creditor £2,000

 

C   Motor vehicle £1,500, VAT £500                        Bank £2,000

 

D   Motor vehicle £2,000                        Bank £1,500, VAT £500

 

A.

B.

C.(*)

D.

 

Question 27.

Q. Which of the following would not be entered into the purchases daybook?

(A)    Stock purchases on credit.

(B)    Credit purchases.

(C)    Goods bought for resale for cash.(*)

(D)   Goods bought for resale but not paid for.

 

Question 28.

Q. Which of the following is not a disadvantage of introducing computerised accounting systems?

(A)    Required staff training.

(B)    High expenditure on set-up.

(C)    Savings made on labour costs.(*)

(D)   Possible demotivation through redundancies.

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Comments

  1. AdminJune 26, 2020 at 6:52 PM

    Very helpful content ✌️
    If you haven't prepared for you exams then go through this. It will help you a lot in the last moment of your exams.

    ReplyDelete

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