very important mcq for commerce.docx lecture 2

Very important MCQ for commerce

A person who prepares these mcqs will pass lecture paper of commerce....

Directions: The following ten (10) items consist of two statement, one labelled the ‘Assertion A’ and the other labelled the ‘Reason R’. You are to examine these two statements carefully and decide if the Assertion A and the Reason R are individually true and if so, whether the Reason is a correct explanation of the Assertion.

Select your answers to these items using the Code given below and mark your answer sheet accordingly.

Codes:

(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

42. Assertion (A): The matching concept requires that costs be recognized as expenses in the period in which revenue is realized.

Reason (R): There may not be a match between expenditure and revenue over a short period.

Ans. (c)

43. Assertion (A): According to International Accounting Standards Committee, fixed production expenses should be included in inventory valuation on the basis of normal capacity. According to the Institute of Chartered Accountants of India, it is for the management to decide the Question.

Reason (R): The Question to be decided is whether the fixed production expenses be excluded from inventory valuation and charged wholly to the revenue of that year or whether these expenses be included on the basis of normal level of production.

The former method is called ‘marginal costing’ and the latter ‘absorption’ costing’.

Ans. (c)

44. 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.

Ans. (a)

46. Assertion (A): Conventionally, a newly started company should adopt a low-geared capital structure where the share of equity capital and reserves is higher than the share of fixed interest bearing securities.

Reason (R): During initial years, the profit is low and the company tries to strengthen its financial position.

Ans. (a)

47. 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.

Ans. (a)

48. Assertion (A): A company is accountable to the society since it makes use of community owned assets and other infrastructural facilities and concessions provided by the State from the tax payers’ money.

Reason (R): The best way of social responsibility reporting is to prepare a Value Added Statement (VAS) which shows the income earned by shareholders.

Ans. (c)

49. Assertion (A): Audit procedure and audit techniques are two different aspects of auditing but are complementary to each other.

Reason (R): Audit procedure is concerned with determining the existence of documentary evidence and audit techniques are concerned with examination of those evidences.

Ans. (a)

50. Assertion (A): The auditor of a partnership firm is appointed under a contract with the firm but not under any statute.

Reason (R): The firm can also appoint him to act as an accountant for preparation of accounts.

Ans. (b)

All the questions in the quiz along with their answers are shown below. Your answers are bolded. The correct answers have a green background while the incorrect ones have a red background.1.The Branch of Accounting which is concerned with the processing and presenting data for decision making is known as?

Common Dollar AccountingSocial AccountingCost AccountingManagement Accounting

Question was not answered

2. According to Balance Sheet equation concept the capital will be?

Capital= Liabilities — AssetsCapital = Fixed Assets — Current AssetsCapital = Assets — LiabilitiesCapital = Assets + Liabilities


3. In common size Balance Sheet analysis we evaluate?

Increase or decrease over two years is analysedOnly increase over two years is analysedOnly decrease over two years is analysedAll assets and liabilities are expressed in terms of percentage of total


4. The following data, relates to manufacturing company for the year 2006-07Net Profit as per P & L A/c— Rs. 2,40,000;Depreciation—Rs. 80,000;Goodwill written-off—Rs. 40,000,Profit on Sale of Fixed Assets—Rs. 16,000,Proposed Dividend—RS. 96,000.The fund from operation would be?

Rs. 4,40,000Rs. 4,00,000Rs. 6,40,000None of the above


Rs 3,44,0005. Total sales is Rs. 7,60,000, cash sales is Rs. 30,000 collection period is 25 days, Debtors turnover will be?

Rs. 80,000Rs. 70,000Rs 60,000Rs. 50,000


6. Price earning ratio is 83.33% and E.P.S. is Rs. 30. The market price of equity share will be?

Rs. 33.33Rs. 66.66Rs. 20Rs. 25


7. If the current ratio is 2, current assets are worth Rs. 1,600, if current ratio is not allowed to fall below 1.5, how much additional can be borrowed by the company on the short term basis?

Rs. 400Rs. 600Rs. 2,733Rs. 800


8. Rate of Gross Profit on cost is 25%. Total sales is Rs. 1,00,000 and Average Stock is Rs. 1,60,000. Stock Turnover Ratio will be?

0.5 times0.8 times0.10 times0.4 times


9. Average stock of firm is Rs. 80,000, the opening stock is Rs. 10,000 less than closing stock. Find the opening stock.

Rs. 95,000Rs. 85,000Rs. 90,000Rs. 75,000


10.. Current Ratio is 3.75 Acid Test Ratio is 1.25 Stock Rs. 3,75,000.Calculate working capital.

Rs. 3,00,000Rs. 4,00,000Rs. 4,12,500Rs. 4,25,000


11. From the information given below, calculate Debt service coverage RatioNet profit after interest and Tax Rs. 40,000,Depreciation Rs. 5,000,Rate of Income Tax 50%,10% Mortgage Debentures Rs.60,000.Fixed Interest Charges Rs 6,000,Debenture Redemption Fund Appropriation of Out standing Debentures 10%

4.06 times5.06 times6.06 times7.06 times


12. Share premium account can be used for?

Paying tax liabilityMeeting the cost of issue of shares or debenturesPaying Dividend on sharesMeeting the loss on sale of old asset


13. Ploughing-back of profits means?

Dividend declared but not claimed by shareholdersNon-declaration of dividend in any yearProfits earned from illegal sources and employed in businessRetaining the earnings of business for future expansion programme


14. As per Schedule VI of the Companies Act,. 1956, Forfeited Share Account will be?

Added to paid up capitalDeducted from called up capitalAdded to capital reserveShown as a revenue reserve


15. A company invited application for subscription of 5,000 shares. The application were received for 6,000 shares, The shares were allotted on pro-rata basis. If X has applied for 180 shares how many shares would be allotted to him?

180 shares200 shares150 shares175 shares


16. The balance appearing in the books of a company at the end of year were CRR A/c Rs. 50,000, Security Premium Rs. 5,000, Revaluation Reserve Rs. 20,000, P & L A/c (Dr) Rs. 10,000. Maxi mum amount available for distribution of Bonus Share will be?

Rs. 50,000Rs. 55,000Rs. 45,000Rs. 57,000


17. ABC. Ltd. purchased machinery from KG Company for a book value of Rs. 4,00,000. The consideration was paid by issue of 10% Debenture of Rs. 100 each at a discount of 20%. The debenture account will be credited by?

Rs. 4,00,000Rs. 5,00,000Rs 3,20,000Rs, 4,80,000


18. Depletion method of depreciation is used in case of ?

Cattle, Loose Tools, etc.Mines, Quarries, etc.Machinery, Building, etc.Books


19. V. V. Bros. purchased a machine on 1st October, 2003 at cost Rs. 2,70,000 and spent Rs. 30,000 on its installation. The firm written off depreciation 10% per annum on original cost every year. The books are closed on 31st March every year. The machine is sold on 30 September, 2006 for Rs. 1,90,000. How much amount will be transferred to P & L A/c as loss on sale of machinery?

Rs. 10,000Rs. 20,000Rs 30,000Rs 40,000


20. Accounting for Intangible Assets are related to?

AS-10AS- 12AS-24AS-26


21. Indian Accounting Standard - 28 is related to ?

Accounting for taxes on incomeFinancial Reporting of Interests in Joint VentureImpairment of AssetsProvisions, Contingent Liabilities and Contingent Assets


22. Recording of capital contributed by the owner as liability ensures the adherence of principle of ?

ConsistencyGoing concernSeparate entityMateriality


23. A company made the purchases of an item during its financial year.January 2007 200 @ Rs. 50 EachMay 2007 400 @Rs.60 EachAugust 2007 600 @ Rs. 70 EachNovember- 2007 300 @ Rs 80 EachClosing inventories were 50 articles. Find out the value of closing stock as per Weighted Average Method

33,333.3316,666.6666,666.6796,666.66


24. It is given that cost of stock is Rs. 100. However, its market price is Rs, 98 (buying) and Rs. 140 (selling). If the market price is interpreted as the replacement cost, then the stock should be valued at ?

Rs. 98Rs. 100Rs. 140Rs. 40


25. Calculate Return on Investment/Return on Proprietor’s fund. Gross profit of a firm is Rs.3,20,000, Operating expenses Rs. 1,00,000, Taxes Rs. 20,000, Owner’s fund Rs. 5,00.000,Debenture Interest Rs. 50,000:

20%30%40%50%

1 ln double entry system of Book-keeping transaction means-

(A) Transfer of goods and services from one person to another(B) Transfer of goods and services within the firm(C) Producing and selling goods(D) None of the above

Answer.A

2. Goods taken for personal usewill be posted in the credit of»(A) Drawings Account(B) Sales Account(C) Purchases Account(D) Cash Account

Answer.C

1. The income from that house property is taxable under the head. Income from House property.

(A) The assessee has ownership on that

(B) The assessee uses that house for his business

(C) The assessee himself lives in that house

(D) The assessee has let out that house on rent for residence

Ans. (A)

2. Following is the deduction in respect of repair under the head of income from house property—

(A) 25 % of Annual Value

(B) 30 % of Net Annual Value

(C) 1/5 of Annual Value

(D) 1/5 of Net Annual Value

Ans. (B)

3. Single entry system can not be maintained by—

(A) Sole proprietorship

(B) Partnership concerns

(C) Joint stock company

(D) All of these

Ans. (D)

4. Cash account will not be affected by—

(A) Cash paid to creditors

(B) Discount received

(C) Cash sales

(D) Cash received from debtors

Ans. (B)

6. Current Ratio of a firm is 3:1 and working capital is Rs. 60000. What will be the amount of current Assets—

(A) Rs. 30000

(B) Rs90000

(C) Rs. 120000

(D) Rs. 180000

Ans. (B)

7. Mr. Rastogi of Meerut was declared insolvent. One of his liabilities related to one months rent due to his landlord. This liability will be treated as—

(A) Preferential Creditor

(B) Partly Secured Creditor

(C) Fully Secured Creditor

(D) Unsecured Creditor

Ans. (A)

8. When two or more companies liquidate to form a new company. It is called—

(A) Amalgamation

(B) Absorption

(C) Reconstruction

(D) Purchase of Business

Ans. (A)

9. A, B and C are partners in a firm. If D is to be admitted to the firm as a new partner—

(A) Old firm has to be dissolved

(B) Old partnership has to be dissolved

(C) Both the old firm and the old partnership have to be dissolved

(D) No need to dissolve either firm or the partnership

Ans. (D)

10. Remington sold one typewriter to Ramesh Chandra under installment purchase system on 1, January 1996, payment for which was to be made as under—

On 01.01.1996 -

On 31.12.1996 -

On 31.12.1997 -

On 31.12.1998 -

On 31.12.1999 -

Interest at 10% p.a. is included in each installment. The total interest charged amount

to-

(A) Rs.2100

(C) Rs. 1800

(B) Rs. 1950

(D) Rs. 1700

Ans. (B)

12. The liquidator of a company is entit1edio a remuneration of 2% on assets realized, and 3% on the amount distributed to unsecured creditors. The assets realized Rs. 100000 including cash balance of Rs. 3000. Amount available for distribution to unsecured creditors before paying liquidators remui4eration was Rs. 46350 liquidator’s remuneration will be—

(A) Rs.3100

(C) Rs. 3290

(B) Rs.3140

(D) Rs. 3350

Ans. (C)

13. EXIM Bank was established on—

(A) 1st Dec 1984

(B) 1st June 1985

(C) 1st Jan 1982

(D) 1st July 1980

Ans. (C)

14. For capital gain being long term capital gain, an assessee should retain the assets for a period of—

(A) 40 months

(B) 36 months

(C) More than 36 months

(D) Less than 36 months

Ans. (C)

15. The salary received by a member of parliament is—

(A) Exempt from Tax

(B) Taxable under the head of salary

(C) Taxable under the head of other sources

(D) Taxable under the lead of business

Ans. (C)

16. For the purpose of income tax it is necessary for agriculture income that—

(A) Land should be used for agricultural activities

(B) Land should be used for godown

(C) Land should be used for irrigation

(D) None of above

Ans. (A)

17. Depreciation is allowed on—

(A) Tangible Assets

(B) Current Assets

(C) Fixed Assets

(D) Intangible Assets

Ans. (C)

18. When shares are forfeited, the share capital account is debited by—

(A) Nominal value of forfeited shares

(B)Paid up amount of forfeited shares

(C) Called up amount on forfeited shares

(D) Forfeited amount of shares

Ans. (C)

19. The term ‘POIM’ for the four functions of management. Planning, organisation, integration and measuring was given by.—

(A) F.W. Taylor

(B) Harold Smiddy

(C) Tanon Brown

(D) Peter F. Drucker

Ans. (B)

20. The statutory meeting of a company is convened—

(A) Once in a year

(B) Once in the life time of the company

(C) Once in six months

(D) Once in three months

Ans. (B)

21. Secret reserves may be created by—

(A) Under-valuation of liabilities only

(B) Under-valuation of assets only

(C) Over-valuation of assets only

(D) Over-valuation of liabilities and under-valuation of assets

Ans. (D)

22. The current ratio of a firm is 2: 1. If it pays Rs. 5000 to it creditors, it will—

(A) Increase the current ratio

(B) Decrease the current ratio

(C) Increase working capital

(D) Neither increase nor decrease

Ans. (A)

3. e-commerce means—

(A) Economics Commerce

(B) Electronic Commerce

(C) Engineering Commerce

(D) Electrified Commerce

Ans. (B)

24. Which of the following is not a media of oral communication ?

(A) T.V. Transmission

(B) Interview

(C) Questionnaire

(D) None of above

Ans. (D)

25. Trade-tax is levied upon—

(A) Import of goods

(B) Export of goods

(C) Sale of goods

(D) Income of trader

Ans. (C)

1. On January 1, 1992 there was a balance of Rs. 4,000 in the plant and machinery account. An

addition of Rs. 2,000 was made on July 1, 1992. Accounts were closed for the year on December, 31, 1992. If depreciation was charged 10% per annum, the balance in the plant and machinery account on the closing date would be:

(a) Rs. 5,300

(b) Rs. 5,400

(c) Rs. 5,500

(d) Rs. 5,600

Ans. (c)

2. A machinery having a residual value of Rs. 5,000 was purchased on 1-1-1988 for Rs. 1, 00,000 and was depreciated @ 9.5% on a straight line method. On 1-1-91, it was estimated that its useful life has been reduced to eight years. Under the changed circumstances, the annual depreciation charges for the year 1991 and onwards will be:

(a) Rs. 11,875

(b) Rs. 13,300

(c) Rs. 9,500

(d) Rs. 12,500

Ans. (b)

3. In which one of the following methods of charging depreciation shall the balance never be reduced to zero?

(a) Fixed installment method

(b) Depreciation fund method

(c) Diminishing balance method

(d) Depletion unit method

Ans. (c)

4. Match List-I with List-II and select the correct answer using the following codes given below the lists:

List-I List-II

(Types of accounts) (Principles)

A. Real Accounts 1. Debit the receiver, credit the give.

B. Nominal Accounts 2. Debit what comes in credit what goes out.

C. Personal Accounts 3. Debit all expenses, credit all gains.

Codes:

A B C

(a) 3 2 1

(b) 1 3 2

(c) 2 3 1

(d) 1 2 3

Ans. (c)

5. Which one of the following branches of accounting primarily deals with processing and Goodwill presenting of accounting data for internal one?

(a) Financial Accounting

(b) Tax Accounting

(c) Management Accounting

(d) Inflation Accounting

Ans. (c)

6. “Holding gains in relation to stocks should not be used for payment of Dividend.” Which one of the following accounting principles is involved in this?

(a) Consistency

(b) Cost

(c) Materiality

(d) Realization

Ans. (d)

7. X started business with a capital of Rs. 20,000 and purchased goods worth Rs. 2,000 on credit. These transactions may be expressed in the form of ‘Accounting Equation’ such as:

(a) Rs. 22,000 = Rs. 20,000 – Rs. 2,000

(b) Rs. 20,000 = Rs. 22,000 – Rs. 2,000

(c) Rs. 22,000 = Rs. 22,000 + 0

(d) Rs. 22,000 = 0 + Rs. 22,000

Ans. (b)

8. Accounting records transaction in terms of:

(a) commodity units

(b) monetary units

(c) production units

(d) none of the above

Ans. (b)

9. Market price or actual cost, whichever is less, is the generally accepted accounting principle for valuation of:

(a) Stock in trade

(b) Fixed assets

(c) Current assets

(d) All assets

Ans. (a)

10. Capital employed in a business is Rs.1, 50,000. Profits are Rs. 50,000 and the normal rate of profits is 20%. The amount of goodwill as per capitalization method would be:

(a) Rs. 1, 00,000

(b) Rs. 1, 50,000

(c) Rs. 2, 00,000

(d) Rs. 3, 00,000

Ans. (a)

11. Consider the following data:

Jan. 1, 1989 Opening Stock 500 units Rs. 5 per unit

Jan. 15, 1989 Purchases 400 units @ Rs. 6 per unit

Jan. 30, 1989 issued 300 units

Feb. 15, 1989 Purchases 200 units Rs. 7 per unit

Feb. 28, 1989 Issued 300 units

March 25, 1989 Purchases 200 units @ Rs. 8 per unit

Based on the above data, the value of inventory in hand on 31st March, 1989 as per ‘First in First out’ (FIFO) method will be:

(a) Rs. 3,700

(b) Rs. 3,600

(c) Rs. 4,800

(d) None of the above

Ans. (c)

12. Renewal fee for Patents is a:

(a) capital expenditure

(b) revenue expenditure

(c) deferred revenue expenditure

(d) development expenditure

Ans. (a)

13. A manufacturing company spent the following amounts on the import and installation of a machine:

Rs. 50,000 Price of the machine

Rs. 5,000 Freight

Rs, 1,050 Insurance premium

Rs. 6,000 Replacement of a part damaged in transit, not covered under the insurance policy.

Based on the above data, Capital expenditure would be:

(a) Rs. 50, 000

(b) Rs. 56, 050

(c) Rs. 62, 050

(d) Rs.57, 050

Ans. (b)

14. Given, subscription received in 1990:

For the year 1989 Rs. 500

For the year 1990 Rs. 7,000

For the year 1991 Rs 400

1990-Subscription outstanding Rs. 250.

The amount of subscription to be posted to Income on 31st December 1990 and Expenditure account of 1990 is:

(a) Rs. 7,000

(b) Rs. 7,250

(c) Rs. 7,900

(d) Rs. 8,150

Ans. (b)

15. What is the correct sequence of the preparation of the following accounts and statements of a non-profit organization?

1. Income and Expenditure account

2. Receipts and Payment account

3. Balance Sheet

Select the correct answer from the codes given below:

(a) 1, 2, 3

(b) 1, 3, 2

(c) 2, 1, 3

(d) 2, 3, 1

Ans. (c)

16. Profit as per accounts from incomplete records may be construed as equivalent of:

(a) excess of assets over liabilities at the close of the period.

(b) excess of capital at the end over the capital at the beginning

(c) excess of assets over liabilities at the commencement of the period

(d) excess of capital at the beginning over the capital at the beginning

Ans. (b)

17. If the rate of gross profit is 20% on cost of goods sold and the sales are Rs. 1, 50,000 then the total gross profit would be:

(a) Rs. 25,000

(b) Rs. 30,000

(c) Rs. 37,500


Ans. (a)

18. According to records of a firm which does not keep its accounts on double entry system, all sales were made on credit so as to realize a profit of 33 % sale proceeds. The

3

stock of unsold goods at the beginning and at the end of the trading period were valued at Rs. 21,000 and Rs. 18,000 respectively. Goods worth Rs.1, 39,500 were purchased for resale during the period. The proprietor withdrew goods worth Rs. 1, 500 during the accounting period for personal use. What were the total sales during the period?

(a) Rs. 1, 80,000

(b) Rs. 2, 11,500

(c) Rs. 2, 25,000

(d) Rs. 2, 31,500

Ans. (b)

19. In the absence of partnership deed provision of Partnership Act, 1932 became applicable under which a partner is entitled to interest on money advances to the firm at:

(a) 4% p.a.

(b) 5% p.a.

(c) 6% p.a.

(d) 10% pa.

Ans. (c)

20. Which one of the following as not applicable to a co-operative form of business organization?

(a) Membership is open to all having a common interest

(b) Transferability of shares is permitted among general public

(c) Policy decisions are taken by the members in a general meeting

(d) Major portion of profit is distributed to members by way of dividend

Ans. (d)

21. Which one of the following statements is correct?

(a) A company consists of heterogeneous members

(b) A body corporate includes a co-operative society

(c) The expression ‘corporation’ or ‘Body corporate’ are the same

(d) A partner cannot contract with his firm, whereas a member of a company can

Ans. (d)

22. Dividend declared and paid by a company is:

(a) an expense of the company

(b) an income of the company

(c)the distribution of profit earned by the company

(d) the source of fund for the company

Ans. (c)

23. Long term liabilities are:

(a) fixed assets minus current assets

(b) fixed assets minus current liabilities

(c) current Assets plus current liabilities

(d) total liabilities minus current liabilities

Ans. (d)

24. A business entity has assets of Rs. 26,000 and liabilities of Rs. 6,000. Owner’s equity in this case is:

(a) Rs. 32,000

(b) Rs. 26,000

(c) Rs. 20,000

(d) Rs. 6,000

Ans. (c)

25. While preparing ‘Annual Financial Statements’, credit balance shown by the Bank pass book should be treated as:

(a) a liability

(b) an income

(c) an excess of payments over receipts

(d) an asset

Ans. (d)

26. If the trial balance does not tally in spite of through scruting and the difference is substantial, then which one of the following courses should an accountant adopt?

(a) Defer preparation of financial statements

(b) Open suspense account.

(c) Write off the difference to profit and losses A/c

(d) Ignore the difference and prepare financial statements

Ans. (b)

27. ‘A’ and ‘B’ are sharing profit and losses in the ratio of 4 I. ‘C’ is admitted as a new partner for 1/3rd share of profits for which he pays Rs. 30,000 as goodwill. Lf ’A’ and ‘B’ agree to share future profits equally, then the amount of goodwill to be credited to ‘A’ would be:

(a) Rs. 30.000

(b) Rs. 90,000

(c) Rs. 48,000

(d) Rs. 42,000

Ans. (d)

28. The joint life policy account received on the death of a partner is credited to the:

(a) Joint life policy reserve account

(b) Capital accounts of all the partners in their profit sharing ratio

(c) General Reserve account

(d) Profit and Loss Account

Ans. (b)

29. In setting the accounts of a firm after its dissolution, the assets of the firm shall be applied first in paying:

(a) each partner proportionately what is due to him on account of loans advanced by him

(b) each partner proportionately what is due to him account of capital

(c) each partner proportionately what is due to him on account of past profits

(d) the debts of the firm to the third parties

Ans. (d)

30. A limited company issued equity shares of Rs. 100 each. It has called up Rs. 75 on each share but received only Rs. 60 per share. The share capital account will be credited with:

(a) Rs. 60 per share

(b) Rs. 75 per share

(c) Rs. 100 per share


Ans. (b)

31. Redeemable preference shares can be redeemed:

(a) only if they are fully paid

(b) even if they are partly paid

(c) if they are paid not less than 50% of the nominal value of shares

(d) only if they are issued at a premium

Ans. (a)

32. Where all the debentures are redeemed, the balance left in the Debenture Sinking Fund Account is transferable to:

(a) Debentures Account

(b) Sinking Fund Investment Account

(c) Capital Redemption Reserve

(d) General Reserve

Ans. (d)

33. The balance in share forfeiture account, after the reissue of all forfeited shares, should be:

(a) added to paid up capital

(b) transferred to goodwill account

(c) transferred to capital reserve account

(d) shown as share forfeiture account

Ans. (c)

34. A company issued Rs. 20,000, 4% bonds repayable on equal installments over 10 years. What is the amount required in the initial year, to pay interest and to redeem the bonds (ignore tax and DCF)?

(a) Rs. 56,000

(b) Rs. 28,000

(c) Rs. 20,000

(d) Rs. 8,000

Ans. (b)

35. Match List-I with List-II and select the correct answer using the codes given below the lists:

List-I List-II

A. Deferred shares 1. Repayment obligation

B. Preference shares 2. Resembles Stock dividend

C. Bonus shares 3. No dividend obligation

D. Equity Shares 4. Not being used

Codes:

A B C D

(a) 4 3 1 2

(b) 4 1 3 2

(c) 3 2 1 4

(d) 4 1 2 3

Ans. (d)

36. Which one of the following statements is false?

(a) The process of issue of bonus shares is also known as capitalization of reserves

(b) Fully paid bonus shares are issued only out of capital reserves

(c) Only revenue reserves should be used when bonus is declared in order to make partly paid shares into fully paid shares.

(d) Bonus shares one shares issued without payment.

Ans. (b)

37. The Balance Sheet of a company showed the following balances at the end of the year under the head ‘Reserves and surplus’: General Reserve Rs. 5,00,000; Share Premium account Rs. 50,000; Premium on issue of Debentures account Rs. 20,000; Dividends equalization fund Rs. 40,000; Surplus on revaluation of assets Rs. 30,000 Profit and Loss account (credit) Rs. 60,000. Maximum amount available for distribution as dividend to the shareholders of the company will be:

(a) Rs. 60,000

(b) Rs.1, 00,000

(c) Rs. 6, 00,000

(d) Rs.6, 70,000

Ans. (c)

38. Capital Gearing ratio denotes the relationship between:

(a) assets and capital

(b) loan and capital

(c) equity shareholder’s fund and long term borrowed funds

(d) debentures and share capital

Ans. (c)

39. The following balances appear on the liability side of a company’s Balance Sheet:

Rs.

Equity Share Capital: 10,000 Shares of Rs. 10 each 1.00.000

10% Redeemable Preference shares 1, 00,000

5,000 shares of Rs 20 each

Capital redemption reserve account 40,000

14% Debentures 1, 00,000 Deb. of Rs. 2 each 2, 00,000

RFC loan 1, 50,000

Profit and Loss A/c 50,000

The Debt Equity ratio of the company is

(a) 35: 20

(b) 35: 26

(c) 35: 25

(d) 35: 21

Ans. (c)

40. Consider the following financial information in respect of two companies namely ‘M’ Co. and ‘Z’Co. :

Items of Assets and Liabilities ‘M’ Co. (Rs) ‘Z’ Co. (Rs)

Current Assets 7, 50,000 7, 50,000

Closing inventory 3, 00,000 2, 50,000

Goodwill 5, 00,000 3, 50,000

Current Liabilities 3, 00,000 5, 00,000

Based on the above data, acid test of M Co. in comparison to Z Co. is:

(a) lower

(b) equal

(c) higher

(d) indeterminate

Ans. (c)


List-I List-II

(Names of Accounting Ratios) (Nature of Accounting Ratios)

A. Capital gearing ratio 1. Revenue Statement Ratio

B. Stock velocity ratio 2. Coverage Ratio

C. Debtors velocity ratio 3. Market Price ratio

D. Dividend Yield ratio 4. Balance Sheet ratio

5. Balance Sheet and Revenue statement combined ratio

Codes:

ABCD

(a) 4 1 5 3

(b) 5 4 2 1

(c) 1 5 4 2

(d) 3 2 5 1

Ans. (a)

42. 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

Ans. (d)

43. Given that the net profit for a certain year of company ‘X’ Ltd. is Rs. 1,23,000, equity-share capital for the same period is Rs. 10,00,000 and reserve and surplus is Rs. 2,30,000 the rate of ‘return on owners fund’ would be:

(a) 12:3%

(b) 10%

(c) 9.98%

(d) none of the above

Ans. (b)

44. Consider the following data:

Costs: Fixed = Rs. 40,000

Variable Rs. 30,000

Rate of income tax = 30%

Return on capital employed = 10%

Based on the above data the sales volume required to increase the return on capital employed to 18% would be:

(a) Rs. 5,000

(b) Rs. 7,500

(c) Rs. 8,000

(d) Rs. 8,500

Ans. (c)

45. Consider the following details of companies ‘A’ ‘B’ ‘C’ and ‘D’:

A/Rs. B/Rs. C/Rs. D/Rs.

Fixed Assets 100 125 150 200

Net Current 50 55 50 40

Assets

Sales 200 250 250 300

Contribution 150 196 200 180

Fixed Cost 20 27 30 60

If the cut off point of return on investment is l5% then which of the following companies fulfill this criterion?

(a) A and C

(b) B and C

(c) A, B and D

(d) B, C and D

Ans. (c)

46. 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

Ans. (b)

41. Current Assets are Rs. 3, 00,000 and current liabilities are Rs. 1, 50,000. Now, if the debtors realized are Rs. 20,000, then its impact on working capital would be:

(a) an increase of Rs. 20,000

(b) a decrease of Rs. 40,000

(c) an increase of Rs. 40,000

(d) nil

Ans. (d)


List-I List-II

A. Fund flow Analysis 1. Working Capital Management

B. Common Size Profit 2. Inventory Control

and Loss Account

C. ABC analysis 3. Management of receivables

D. Debt Collection Period 4. Financial Statement Analysis

Codes:

ABC D

(a) 4 1 2 3

(b) 1 4 2 3

(c) 2 3 1 4

(d) 3 1 2 4

Ans. (b)

49. The main object of audit is to:

(a) detect the errors and faults

(b) help the company in developing a sound accounting system

(c) verify the correctness of final accounts

(d) prevent commission of errors and faults

Ans. (c)

50. ‘Surprise Checks’ are part of:

(a) an auditor’s working papers

(b) an audit programme

(c) an auditor’s report

(d) an accounting standard

Ans. (b)

Choose the correct alternative out of the given 3 or 4 options.

1. The possibilities of inadequate profits or even losses due to uncertainties are known as ____________(a) Business contingencies(b) Business risks(c) Business ventures(d) None of theseAns: 2

2. Which one of the following may not be a factor behind starting a business?(a) Routine workload(b) size of the firm(c) finance(d) location of the businessAns:1

3. Name the two broad categories of business activities.(a) Trade and commerce(b) trade and industry(c) industry and commerce(d) none of theseAns:3

4. Commerce includes activities relating to trade and _________________ to trade.(a) Supporting(b) subsidiaries(c) auxiliaries(d) none of theseAns:3

5. ‘Earning of profit is considered to be the subsidiary objective of the business.’ The given statement is(a) True(b) false(c) cannot sayAns:2

6. Following are the characteristics of business risks. One of then is not correct. Please identify it.(a) Loss is the reward for risk bearing(b) Business risks are due to uncertainties(c) Risk is an essential component of every business(d) Degree of risk depends mainly upon the nature and size of businessAns:1

7. Transfer of interest exists in the case of(a) Profession(b) employment(c) business(d) none of theseAns:3

8. Human activities are of ____________ types(a) One(b) two(c) three(d) fourAns:2

9. Which of the following is not an example of non-economic activity?(a) Patriotism

(b) teaching(c) sentiment(d) sympathyAns:2

10. Economic activities may be classified into business, ___________ and employment(a) Profession(b) occupation(c) vocation(d) workAns:1Multiple Choice Questions1. Countries CurrenciesA - China 1 - LiraB - Korea 2 - PesoC - Mexico 3 - WonD - Turkey 4 - YuanThe correct country-currency pairing is(a) A-1, B-3, C-4, D-2(b) A-4, B-2, C-1, D-3(c) A-2, B-4, C-3, D-1(d) None of the above2. Keeping other things constant, logic demands that US dollar should definitelybecome costlier when(e) both US interest rate and US inflation rate decreases(f) the US interest rate increases whereas the US inflation rate decreases(g) the US interest rate decreases whereas the US inflation rate increases(h) both US interest rate and US inflation rate increases3. INCOTERMS are devised and published by(a) International Chamber of Commerce(b) World Bank(c) World Trade Organization(d) United Nations4. In relation to INCOTERMS, which of the following is incorrect:(a) Under the "E"-term (EXW), the seller only makes the goods available to thebuyer at the seller's own premises.(b) Under the "F"-terms (FCA, FAS and FOB), the seller is called upon to deliverthe goods to a carrier appointed by the buyer.(c) Under the "C"-terms (CFR, CIF, CPT and CIP), the seller has to contract forcarriage, but without assuming the risk of loss or damage to the goods oradditional costs due to events occurring after shipment or dispatch.(d) Under the "D"-terms (DAF, DES, DEQ, DDU and DDP), the seller has to bearall costs and risks in avance needed to bring the goods to the place ofdestination.(e) All are correct5. A price agreed on CIF basis

(a) does not include the freight charges(b) includes freight charges up to the port of loading(c) includes freight charges up to the port of unloading (importer’s port)(d) includes freight charges up to the importer’s works6. Which of the following is not a party to a letter of credit:(a) Advising Bank(b) Confirming Bank(c) Governing Bank(d) Issuing Bank(e) Reimbursing Bank7. Under which of the following hedging techniques, that an MNC uses to eliminate itstransaction exposure, the associated cash flows cannot be determined withcertainty?(a) Forward hedge(b) Futures hedge(c) Money market hedge(d) Currency option hedgeFill in the Blanks1. The _________ treaty, signed on February 7, 1992, was aimed at transforming theEconomic and Monetary Union into a common Central Bank and a new currency.(Maastricht)2. Out of the 15 countries in the European Union, _________, ________ and _________decided not to join the EMU, whereas _________, despite its desire to become amember, was unable to join as it did not meet the eligibility criteria relating toinflation, interest rates, exchange rates and fiscal deficit.(Britain, Sweden, Denmark, Greece)3. SWIFT stands for ______________.(Society for Worldwide Interbank Financial Telecommunication)4. _________, a company wholly owned by the Government of India, provides exportcredit insurance support to exporters and banks.(Export Credit Guarantee Corporation)5. _________ is a document through which the buyer’s bank guarantees invoicepayments to a supplier; it promises to pay the beneficiary if the buyer fails to pay.(Standby letter of credit)6. The exposure of an MNC’s consolidated financial statements to exchange ratefluctuations is known as _________ exposure.(translation)7. An exporter prepares the __________ to give an idea to the importer that “if youplace the order with me and when I will export, your invoice will look like this”.(proforma invoice)8. _________ stock offering is the stock issued in the US (due to the liquidity of thenew-issues market there) by non-US firms or governments.(Yankee)9. _________ are sold in countries other than the country represented by the currencydenominating them.(Eurobonds)

10. _________-style currency options are similar to _________-style options except thatthey can only be exercised on the expiration date.(European, American)True / False1. An exchange rate between two countries’ currencies can get affected by changes in athird country’s interest rate.True / False2. The European Central Bank sets the monetary and fiscal policies for the EMUcountries.True / False3. While using the currency diversification technique for reducing transaction exposure,the local currency value of future foreign currency inflows will be more stable if theforeign currencies received are highly positively correlated.True / False4. When firms reduce their economic exposure, they reduce not only the unfavourableeffects of their home currency moving in a given direction but also the favourableeffects if the home currency moves in the opposite direction.True / False5. Translation exposure can be reduced by selling forward the foreign currency usedto measure a subsidiary’s income.True / False6. The forward premium (or discount) usually reflects the difference between thehome and foreign interest rates.True / False7. While call option premiums increase with increase in the variability of the currency,for put option premiums the relationship is just opposite.True / False8. In direct intervention, governments directly influence the economic factors thataffect equilibrium exchange rates.True / False

1. Rights issue refers to the shares issued to:(a) Employees(b) Public(c) Existing directors(d) None of the aboveAns. (d)

2. That portion of the state capital which can be called up only on the winding up of the company is the:(a) Authorized capital(b) Issued capital(c) Subscribed capital

(d) Reserve capitalAns. (d)

3. If vendor are issued fully paid shares of Rs. 80,000 in consi1eration of net assets of Rs. 60,000, then the balance of Rs. 20,000 will be:(a) Debited to profit and loss account(b) Debited to goodwill account(c) Credited to capital reserve account(d) Credited to share premium account.Ans. (b)

RATIO ANALYSIS

4. Owner’s equity stands for:(a) Fixed Assets minus Fixed Liabilities(b) Fixed Assets minus Current Liabilities(c) Current Assets minus Fixed Liabilities(d) Total Assets minus Total liabilitiesAns. (d)

5. Match List-I with List-II and select the correct answer:List-I List-IIA. G.P. Ratio 1. Convention of conservatismB. Cash Budget 2. ProfitabilityC. EOQ 3. Inventory ManagementD. Provision for Bad debts 4. Management of Liquid AssetsCodes:A B C D(a) 2 4 1 3(b) 4 2 3 1(c) 4 2 I 3(d) 2 4 3 1Ans. (d)

6. Given that the current ratio is 2:1, if the net working capital is Rs. 60,600, then the amount of current liabilities would be:(a) Rs. 30,300(b) Rs. 60,600(c) Rs. 1, 21,000(d) Rs. 90,900Ans. (b)

7. Project Engineering Ltd. has an adverse current ratio which one of the following would improve this ratio?(a) Sale of fixed assets for cash(b) Collection of some of the current accounts receivable

(c) Use of cash to pay off some long term debts(d) Collection from sundry debtorsAns. (a)

FUNDS FLOW STATEMENT

8. XYZ Ltd. incurs a net loss of Rs. 5,000 during are accounting years. Depreciation for the relevant year amount to Rs. 1000, preliminary expenses written off during the accounting years is Rs. 3,000 and a loss of Rs. 4,000 is due to sale of plant and machinery. Based on this data, found from operation would amount to:(a) Rs. 3,000(b) Rs. 2,000(c) Rs. 5,000(d) Rs. 4,000Ans. (a)AUDITING

9. Auditors of a company have to report to the:(a) Board of Director(b) Managing Director(c) Institutional Investors(d) Shareholders at the annual general meetingAns. (d)

10. Special Audit can be ordered by:(a) preference shareholders(b) the central Government(c) SEBI(d) debenture holdersAns. (b)

11. System of internal check is said to exist in an organization when:(a) an employee is specifically deputed to check the work of another employee(b) the departmental head checks the works of his subordinate(c) some outside experts check the work of employees(d) another employee of the same department checks the work of an employee in routine office procedure.Ans. (d)

12. Internal Auditor is appointed by the:(a) shareholders of the company(b) Statutory auditor(c) Institute of internal Auditors of India(d) Board of Directors of the CompanyAns. (d)

13. Which one of the following is true of the position of an auditor regarding the system of internal check in the organization?(a) He should acquaint himself with the system of internal check(b) He should monitor and supervise the system of internal check(c) He himself should lay down the system of internal check(d) He has nothing to do with the system of internal checkAns. (b)

14. A continuous audit is most suitable where the:(a) transactions are few but complicated(b) there is no urgency to finalize the accounts on a particular date(c) internal audit work is being carried On in a satisfactory manner(d) system of internal check in operation is not satisfactoryAns. (d)

15. Management audit is:(a) an independent appraisal of the total management process(b) a statutory requirement(c) an investigation into the conduct of direction(d) an independent appraisal of competitiveness of businessAns. (a)

16. Management audit is conducted by:(a) the statutory auditors(b) government auditors(c) cost auditors(d) none of the aboveAns. (d)

17. The auditor has a right to ask for information andexplanation from the:(a) past auditor of the company(b) directors of the company(c) officers of the company(d) internal auditors of the companyAns. (b), (c)

18. Working papers which contain a record of the audit works are the property of the:(a) company(b) auditor(c) Registrar of companies(d) Government of IndiaAns. (b)

19. The first Auditors of a company are appointed by the:(a) Registrar of Companies

(b) shareholders of the Company(c) Promoters of the Company(d) Board of Director of the CompanyAns. (d)

20. Sampling is used in the case of:(a) collection of debts by the accountant(b) test checks by the auditor(c) supervision by the works manager(d) checking pass book entries by the accountantAns. (b)

21. In the case of audit of Statutory Report, an auditor is expected to give his report on the:(a) numbers of shares allotted, amount received in cash and summarized Receipts and Payments account(b) authorized capital, subscribed capital and paid up capital(c) Profit and loss account, Balance sheet and director’s report(d) Directors’ qualification shares, Calls in arrears and Calls in AdvanceAns. (a)

CAPITAL MARKET (STOCK. EXCHANGE)

22. Match List-I (Activity) with list-II (Associated organization) and select the correct answer:List-I List-IIA. Mutual fund 1. Stock ExchangeB. Public issue of capital 2. Assets Management CompanyC. Forward Trading 3. Merchant BankingD. Option Pricing 4. Forex MarketCodes:A B C D(a) 3 2 4 1(b) 3 2 1 4(c) 2 3 1 4(d) 2 3 4 1Ans. (d)

23. The scope of MRTP Act, since 1992, has been confined only to the regulation of:(a) consumer monopolies(b) monopolistic trade practices(c) restrictive and unfair trade practices(d) restrictive trade practicesAns. (d)

24. EXIM bank can be described as a:(a) non-banking financial company(b) commercial bank

(c) non-banking non financial company(d) scheduled bankAns. (a)

BUSINESS ORGANISATION AND COMBINATION

25. One of the consequences of non-registration of a partnership firm is that:(a) a partner cannot such the other partner to enforce a right arising from a contract(b) the partner of such a firm cannot sue third parties(c) third parties cannot sue the firm for claims exceeding Rs. 100(d) The official Assignee or Receiver will have no power on the property of the dissolved firmAns. (a)

26. Consider the following rights:1. Right to take part in the business2. Right to share profits3. Right to interest on advances in excess of capital4. Right to expel a non-cooperative partnerThe legal rights of a partner would include:(a) 1 and 2(b) 2 and 4(c) 1, 2 and 3(d) 1, 3 and 4Ans. (c)

27. Match List-I with List-II and select the correct answer.List-I List-II(Type of combination) (Illustrations)A. Association 1.CartelB. Federation 2. Chamber of commerce and IndustryC. Partial consolidation 3.Holding companyD. Complete consolidation 4.AmalgamationCodes:A B C D(a) 2 1 3 4(b) 1 2 3 4(c) 2 1 4 3(d) 1 2 4 3Ans. (a)

28. Which one of the following is an example of a company incorporated by a Special Act of Parliament?(a) Life insurance Corporation of India(b) Indian Oil Corporation(c) State Trading Corporation of India(d) Bharat Heavy Electricals Limited

Ans. (a)

29. Match List-I with List-II and select the correct answer:List-I List-IIA. Contract of Uberrimae Fidei 1. Public Utility concernB. Right of Eminent Domain 2. Co-operative societyC. Statement in lieu of prospectus 3. PartnershipD. System of ‘one man one vote’ 4. Sole trading concern5. Public limited companyCodesA B C D(a) 1 3 5 4(b) 3 1 5 2(c) 3 2 1 4(d) 1 2 5 3Ans. (b)

30. Integration of various units of similar character producing similar products or engaged in the same sphere of business activity under a single form of management and control is called:(a) vertical combination(b) horizontal combination(c) circular or mixed combination(d) lateral or allied combinationAns. (b)

FOREIGN TRADE (IMPORT & EXPORT)31. Match List-I (Document) with List-II (Where used) and select the correct answer:List-I List-IIA. Shipping Bill 1. To certify the country of origin of goodsB. Bill of Lading 2. For having loaded the cargo in the shipC. Consular invoice 3. To Transport cargo by shipD. Packing slip 4. To identify the cargo in transitCodes:A B C D(a) 2 3 4 1(b) 2 3 1 4(c) 3 2 1 4(d) 3 2 4 IAns. (c)

32. In the context of foreign trade, the CIF cost may be obtained by:(a) adding freight and marine insurance premium to the FOB price(b) deducting freight and marine insurance premium from the FOB price(c) adding customs duties, freight and marine insurance premium to the cost(d) deducting customs duties, freight and marine insurance premium from the priceAns. (a)

INSURANCE (LIFE, FIRE,MARINE & GENERAL)

33. Paid up value is payable on a life insurance policy:(a) on. the maturity of the policy(b) when the policy lapses(c) when the policy is surrendered(d) on maturity or expiry whichever is earlierAns. (a)

MANAGEMENT

34. Setting the mission which encompasses objectives, policies and goals is known as:(a) operational planning(b) strategic planning(c) tactical planning(d) contingency planningAns. (b)

35. Which one of the following statements is correct?(a) Planning and controlling are essentially one and the same(b) Controlling is a part of the planning process(c) Controlling is a substitute for planning(d) A control process is meaningless without pre-set goalsAns. (d)

36. When jobs are broadened in scope and complexity so that the person’s overall area of job responsibility increases, it is a case of:(a) job rotation(b) job enrichment(c) job specification(d) job enlargementAns. (b)

37. Consider the following statements:Planning involves:1. Forecasting2. Choice among alternative courses of action3. Wishful thinking4. Decision only by production managerOf these statements:(a) 1, 2, 3 and 4 are correct(b) 1, 3 and 4 are correct(c) 1 and 2 are correct(d) 1, 2 and 3 are correct

Ans. (d)

38. Techniques of managerial control are useful in:(a) selection of Plant location(b) identifying appropriate technology(c) profit Planning(d) conducting shareholder’s meetingsAns. (b)

39. Motivational process and not the motivators as such is associated with:(a) need of Hierarchy theory(b) two-factor theory(c) ERG theory(d) expectancy theoryAns. (a)

40. “Perceived equity in reward results in satisfaction”. Which one of the following motivation theories takes this into account?(a) Porter and Lawler Model(b) Victor Varoom’s Expectancy Model(c) F.W. Taylor’s incentive scheme(d) Herzberg’s two-Factor TheoryAns. (a)

41. One of the steps that may be required for achieving effective coordination is:(a) reporting on performance and taking remedial measures(b) training in leadership and supervisory abilities of controllers of activity(c) transmission of messages in a full line communication channel(d) making an honest appraisal and initiating rewards/punishmentsAns. (c)42. Minimum wages are fixed by the:(a) trade unions(b) employers(c) state governments(d) courts of lawAns. (c)

43. An important aspect of control is that the:(a) manager motivates his subordinates to give better performance(b) manager sets an effective management information system(c) plans are checked before implementation against predetermined measures of performance(d) performance is checked against predetermined standardsAns. (d)

44. Consider the following steps:1. Analysis of variances

2. Initiating corrective action3. Measurement of actual performance4. Establishment of standardsThe correct sequence of these steps in process of control is(a) 4, 3, 2, l(b) 3, 4, 2, 1(c) 4, 3, 1, 2(d) 3, 4, 1, 2Ans. (c)

45. According to the principle of “Span of control” there is:(a) a tendency to overload supervisors with too much of works(b) a limit to the number of subordinates a supervisor can effectively supervise(c) no limit to the number of subordinate a supervisor can supervise(d) a limit to delegation of authority to the subordinateAns. (b)

46. Establishment of management by objectives presupposes:(a) that limits of authority are not defined(b) that the employees are provided with result expected(c) Unlimited freedom to operate in the assigned task(d) Unlimited freedom to set goalsAns. (b)

47. Each subordinate should have only one superior whose command he has to obey.This is known as:(a) acalar principle(b) exception principle(c) unity of command principle(d) authority responsibility principleAns. (c)

48. Consider the following elements:1. Indicators2. Objectives3. Controls4. Key result Areas5. Roles and Mission6. Action PlansTheir correct sequence in Management by Objectives and Result is:(a) 5, 4, 2, 1, 3, 6(b) 4, 5, 2, 1, 3, 6(c) 5, 4, 1, 2, 6, 3(d) 4, 5, 1, 2, 6, 3Ans. (d)

49. Delegation of authority takes place when a manager thinks that:(a) the job is too difficult and hazardous(b) the job requires the high skill that he does not possess(c) he cannot look after all the demanding tasks by himself(d) he needs to punish his subordinateAns. (c)

50. Brain storming is used by the management for:(a) work allocation on the shop floor(b) generating alternative for problem solving(c) the promotion of research and development(d) training employeesAns. (b)

Re: very important MCQ for commerce

by KalaJin » Thu Sep 22, 2011 7:21 pm

People dnt rely on the answers here because some answers are wrong. e.g

22. The current ratio of a firm is 2: 1. If it pays Rs. 5000 to it creditors, it will—

(A) Increase the current ratio

(B) Decrease the current ratio

(C) Increase working capital

(D) Neither increase nor decrease

Ans. (D)

Current ratio is 2:1 so it means 2xcurrent assets = current liabilities

Lets say, Current asset of company are 100000 and current liabilities are 50000so,current ratio = 100000/50000firm pays 5000 to creditors= 100000-5000/50000-5000= 95000/45000= 2.1:1Increase in current ratio

http://www.ppscforum.com/viewtopic.php?p=12152&sid=bc94d1435c01702ac3ec073fbab9fd47#p12152

very important mcq for commerce.docx lecture 2

Business

reason r

worth rs

assertion aand

reason isa correct explanation

assets liabilitiescapital

analysedall assets

inventory andfixed assets

correct answers