Management
Accounting SEM III
Important
Objectives
1) Balance
Sheet is a statement of assets and
liabilities.
(a)
Statement of assets and liabilities
(b)
Statement of operating results
(c)
Statement of working capital
(d)
None of the above
2) Face
value of a share is fixed
denomination of a share mentioned in the M/A
(a)
Issue price of a share
(b)
Book value of a share
(c)
Market value of a share
(d)
Fixed denomination of a share mentioned in the M/A
3) Authorised
capital is maximum capital that can
be raised as per the M/A
(a)
Minimum capital of the company can raise
(b)
Maximum capital that can be raised as per the M/A
(c)
Optimum capital that can be raised.
(d)
Needed Capital
4) Securities
Premium can be used for issue of
fully paid bonus share
(a)
Issue of fully paid bonus share
(b)
Issue of right shares
(c)
Payment of dividend
(d)
Issue of partly paid bonus shares
5) General
reserve is credited out of profit
(a)
Profit
(b)
Income
(c)
Expenditure
(d)
Dividend received
6) Point
out from the following which is not a secured loan public deposits.
(a)
Public deposits
(b)
Mortgage loans
(c)
Bank overdraft on hypothecation of stock
(d)
Debentures issued on floating charge
7) Fixed
deposits should be disclosed in Balance sheet at cost
(a)
Cost
(b)
Market Value
(d)
Cost or market value whichever is more
(d)
Cost or market value whichever is less
8) Live
Stock is a fixed assets
(a)
Current asset
(b)
Fictitious assets
(c)
Fixed asset
(d)
None of these
9) Patents
and Copyrights is an intangible fixed
asset
(a)
Intangible asset
(b)
Movable asset
(c)
Intangible fixed asset
(d)
Fictitious asset
10) Goodwill
is an intangible fixed asset having
realizable value
(a)
Intangible assets
(b)
Fixed assets
(c)
Intangible fixed asset having realizable value
(d)
Fictitious assets
11) Land
& Building is a fixed tangible
immovable asset
(a)
Fixed tangible movable asset
(b)
Fixed intangible movable assets
(c)
Intangible assets
(d)
Fixed tangible immovable asset
12) Capital
Work in progress is disclosed under fixed
assets
(a)
Fixed assets
(b)
Current assets
(c)
Capital
(d)
Intangible asset
13)
Provision for depreciation is deducted
from cost of fixed assets
(a)
Shown under provision
(b)
Shown under secured loans
(c)
Deducted from cost of fixed assets
(d)
Ignored
14) Underwriting
commission is a fictitious assets
(a)
Tangible asset
(b)
Intangible asset
(c)
Fixed asset
(d)
Fictitious assets
15) Stock
is a current asset
(a)
Current asset
(b)
Quick asset
(c)
Fixed asset
(d)
Fictitious asset
16) Bank
Overdraft is a non quick liability
(a)
Non quick liability
(b)
Current liability
(c)
Urgent liability
(d)
Fixed liability
17) Gross
Profit is excess of sales over cost
of goods sold
(a)
Excess of sales over total cost
(b)
Excess of sales over cost of goods sold
(c)
Excess of sales over purchase
(d)
Excess of sales over cost of materials
18) Operating
Profit is gross profit less operating
expenses plus operating income
(a)
Gross profit plus operating income
(b)
Gross profit less operating expenses plus operating income
(c)
Gross profit less Non-operating expenses
(d)
Gross profit plus operating losses
19) Bills
payable is a quick liability
(a)
Quick liability
(b)
Long-term liability
(c)
Fixed liability
(d)
Non-current liability
20) Staff
salary is an operating expenditure
(a)
Operating expenditure
(b)
Operating income
(c)
Non-operating expenditure
(d)
Capital expenditure
21) Fixed
assets are Rs. 5,00,000, Current assets
are Rs. 3,00,000, Current liabilities are Rs. 1,00,000, There is no
investments. Capital employed will be Rs.
7,00,000
(a)
Rs. 8,00,000
(b)
Rs. 7,00,000
(c)
Rs. 9,00,000
(d)
Rs. 6,00,000
22) Current
Liabilities include creditors Rs. 2,00,000, Bills Payable Rs. 1,00,000.
Expenses Payable Rs. 50,000, Bank OD Rs. 2,00,000. Quick Liabilities will be Rs. 3,50,000
(a)
Rs. 3,00,000
(b)
Rs. 3,50,000
(c)
Rs. 2,50,000
(d)
Rs. 2,00,000
23) Gross
Profit is Rs. 47,000, administrative expenses Rs. 10,500, Selling expenses Rs.
5,000, dividend on investment Rs. 2,000, loss on sale of car is Rs. 500, Net
operating profit will be Rs. 31,500
(a)
Rs. 31,500
(b)
Rs. 35,000
(c)
Rs. 57,000
(d)
Rs. 33,500
24) Sales
are Rs. 5,00,000, operating cost is Rs. 2,00,000 profit on sale of machinery is
Rs. 10,000, operating profit will be Rs.
3,00,000
(a)
Rs. 3,00,000
(b)
Rs. 3,10,000
(c)
Rs. 2,10,000
(d)
Rs. 3,50,000
25) In
comparative statement analysis
figures of two or more periods are placed side by side to facilitate easy and
meaningful comparisons.
(a)
Comparative statement analysis
(b)
Common-size statement analysis
(c)
Trend percentage analysis
(d)
None of these
26) The
technique of converting figures into percentages to some common base is called common-size statement analysis.
(a)
Common-size statement analysis
(b)
Trend percentages
(c)
Ratio analysis
(d)
None of these
27) The
technique of taking first year figures as base and comparing with subsequent
year is called trend analysis.
(a)Trend
analysis
(b)
Ratio analysis
(c)Common-size
statement
(d)None
of these
28) Capital
employed is equal to net worth + long
term liabilities
(a)
Fixed assets + current assets
(b)
Shareholders fund
(c)
Net worth + long term liabilities
(d)
None of the above
29) Common
size statement is a tool of Vertical
analysis
(a)
Vertical analysis
(b)
Horizontal Analysis
(c)
Technical analysis
(d)
Fundamental analysis
30) Common
size statement is also known as 100%
statement
(a)
Percentage statement
(b)
100% statement
(c)
Most common statement
(d)
Small sized statement
31) In
common size income statement the basis of Sales.
(a)
Total Rent
(b)
N.P
(c)
G.P
(d)
Sales
32) In
common size vertical Balance Sheet the basis is capital employed
(a)
Capital employed
(b)
Total assets
(c)
Total liabilities
(d)
Proprietor’s fund
33) Comparative
statement shows comparative
performance.
(a)
One year’s performance
(b)
Comparative statement
(c)
Financial performance
(d)
Profitability performance
34) Performance
over two years can be understood from comparative
income statement
(a)
Income statement
(b)
Balance sheet
(c)
Comparative Income statement
(d)
Common size statement
35) Trend
in performance is understood from trend
analysis
(a)
Fundamental analysis
(b)
Horizontal analysis
(c)
Vertical analysis
(d)
Trend analysis
36) For
inter firm comparison, a comparative
statement is prepared
(a)
a comparative statement is prepared
(b)
a common size statement is prepared
(c)
Balance Sheet is prepared
(d)
Income statement is prepared
37) Trend
shows direction of the changes
(a)
Direction of the changes
(b)
Composition of the changes
(c)
Upward change
(d)
Downward change
38) In
comparative income statement net profit in 2014 showed decline of 20% as
compared to 2013. If net profit in 2014 is Rs 15,00,000 then net profit in 2013
was Rs 18,75,000 .
(a) Rs 11,25,000
(b)
Rs 18,75,000
(c)
Rs 18,00,000
(d)
Rs 12,00,000
39) In
common size income statement the direct wages component amounting to Rs
18,00,000 was 20% of the turnover then the selling expenses amounting to Rs
22,50,000 would be 25% of turnover.
(a) 22%
(b)
25%
(c)
30%
(d)
40%
40) Fixed
interest / dividend bearing funds do not include equity share capital .
(a) Debentures
(b)
Equity share capital
(c)
Bank loan
(d)
Public deposits
41) Loss
due to fire is non operating expenses .
(a) Operating loss
(b)
Non operating expenses
(c)
Non operating income
(d)
None of above
42) Generally
quick liabilities means all liabilities excluding bank overdraft.
(a) Outstanding
expenses
(b)
Bank overdraft
(c)
Outstanding wages
(d)
None of above
43) Prepaid expenses refers to those
expenses which the company has incurred of which the benefits are yet to be
realized.
(a) Outstanding
(b)
Prepaid
(c)
Non cash
(d)
None of above
44) Loose tools is not considered as
an intangible asset.
(a) Loose tools
(b)
Patents
(c)
Trade marks
(d)
None of above
45) Current
Ratio shows short term financial
position
(a)
Short term financial position
(b)
Financial stability
(c)
Collection efficiency
(d)
Higher profitability
46) Favorable
Liquid ratio is 1:1
(a)
2 : 1
(b)
1 : 1
(c)
1 : 3
(d)
2 : 5
47) Proprietary
ratio shows long term financial
position
(a)
Long term financial position
(b)
Short term financial position
(c)
Liquidity position
(d)
All of the above
48) Fixed
interest bearing funds do not include long
term investment
(a)
8% Debentures
(b)
Long term investment
(c)
10% Preference capital
(d)
6% Public Deposit
49) The
ratio that indicates ability of the company to pay urgent obligation immediately
is liquidity ratio
(a)
Current ratio
(b)
Debt equity ratio
(c)
Liquidity ratio
(d)
Proprietary ratio
50) Longer
collection period indicates that debtors
are not prompt in payment
(a)
Debtors are not prompt in payment
(b)
Creditors are allowing longer period of credit
(c)
Short term financial position is good
(d)
Long term position is good
51) Shareholder’s
equity does not include Debentures
(a)
Equity capital
(b)
Reserves & Surplus
(c)
Debentures
(d)
Preliminary expenses
52) Operating
performance is best measured by operating
profit ratio
(a)
Operating profit ratio
(b)
Return on capital
(c)
Return on fixed assets
(d)
Return on equity
53) Current
ratio is 2.5 working capital is Rs 60,000 current assets will Rs 1,00,000
(a)
Rs 1,00,000
(b)
Rs 1,40,000
(c)
Rs 50,000
(d)
Rs 1,25,000
54) Current
Ratio 2.5, Working Capital is Rs 60,000 current liabilities will be Rs 40,000
(a)
Rs 60,000
(b)
Rs 40,000
(c)
Rs 75,000
(d)
Rs 40,000
55) G.P.
Rs 1,00,000, Total sales Rs 5,25,000 sales return Rs 25,000, G.P. Ratio will be
20%
(a)
25%
(b)
21%
(c)
20%
(d)
28%
56) Opening
stock Rs. 29,000, closing stock Rs. 31,000, sales Rs. 3,00,000, G.P. 25% on
cost. Stock Turnover ratio will be 8
times.
(a)
8 times
(b)
9 times
(c)
4.5 times
(d)
7 times
57) Cost
of goods sold is Rs. 5,40,000, Net Sales Rs. 6,00,000, Sales Returns Rs.
10,000. The G.P. ratio is 10%.
(a)
20%
(b)
15%
(c)
12%
(d)
10%
58) Working
capital is Rs. 1,20,000. Total debt Rs. 2,60,000, Long term debt Rs. 2,00,000.
The current ratio is 3 : 1
(a)
2 : 1
(b)
1 : 1
(c)
1.5 : 1
(d)
3 : 1
59) Liquidity
ratio indicates the ability of the company to meet its current liability.
(a)
Current liability
(b)
Long-term liabilities
(c)
Shareholders’ claim
(d)
Tax obligations
60) Quick
liabilities is equal to current
liabilities – bank OD
(a)
Current liabilities – bank OD
(b)
Current liabilities + bank OD
(c)
Current assets – current liabilities
(d)
Current liabilities – liquid liabilities
61) The
creditors turnover ratio shows the
time taken to repay creditors
(a)
the amount of creditors
(b)
the time taken to repay creditors
(c)
the due date of repay creditors
(d)
None of these
62) Acid test ratio is a liquidity
ratio.
(a)
Debt-equity ratio
(b)
Dividend pay-out ratio
(c)
Net profit margin
(d)
Acid test ratio
63) Debtors turnover ratio is
calculated to find out the efficiency of collection department.
(a) Acid test ratio
(b)
dividend payout ratio
(c)
Creditors turnover ratio
(d)
Debtors turnover ratio.
64) The
main purpose of stock working capital ratio is to show the extent to which
working capital is blocked in inventories.
(a) Inventory turnover
(b)
stock working capital
(c)
Stock velocity
(d)
None of above
65) Current
ratio serves as an index of short term solvency.
(a) Short term
(b)
long term
(c)
Immediate
(d)
None of above
66) Satisfactory
level of Current Ratio is –––––
(a) 1:1
(b) 2:1
(c) 3:1
(d) 4:1
67) Working
Capital is capital required to
finance day to day operations.
(a)
Capital required to finance day to day operations
(b)
Capital to finance fixed assets
(c)
Capital working in the organization
(d)
None of the above
68) Working
capital is excess of current assets
over current liabilities.
(a)
Excess of fixed assets over current assets
(b)
Excess of current assets over current liabilities.
(c)
Excess of share capital over loans
(d)
None of the above
69) Gross
Working capital is equal to gross
current assets
(a)
Gross fixed assets
(b)
Gross current liabilities
(c)
Gross current assets
(d)
None of the above
70) Net
working capital is equal to current
assets less current liabilities
(a)
Current assets less fixed asset
(b)
Current liabilities less current assets
(c)
Current assets less current liabilities
(d)
None of the above
71) Permanent
working capital is minimum working
capital required at all the time
(a)
Minimum working capital required at all the time
(b)
Seasonal in nature
(c)
Permanently blocked up in stock
(d)
None of the above
72) Seasonal
working capital is required to meet
seasonal needs of the organization
(a)
Permanently required
(b)
Fluctuating in nature
(c)
Required to meet seasonal needs of the organization
(d)
None of the above
73) Manufacturing
organization requires larger working
capital
(a)
Larger working capital
(b)
Smaller working capital
(c)
Moderate working capital
(d)
None of the above
74) Service
organization requires minimum working
capital
(a)
Larger working capital
(b)
Smaller working capital
(c)
Minimum working capital
(d)
None of the above
75) Longer
the process period larger will be the
working capital
(a)
Lesser will be the working capital
(b)
Larger will be the working capital
(c)
Minimum will be the working capital
(d)
Moderate will be the working capital
76) Shortage
of working capital may result in poor
credit worthiness
(a)
Poor credit worthiness
(b)
Higher trade discount
(c)
Higher cash discount
(d)
None of the above
77) Tax structure of the company is
not a factor that affects the composition of the working capital.
(a) Nature of business
(b)
Nature of raw materials used
(c)
Tax structure of the company
(d)
Process technology used
78) Goodwill is not considered as
current asset.
(a) Sundry debtors
(b)
Cash
(c)
Marketable securities
(d)
Goodwill
79) The
amount of funds invested in current assets is called Gross working capital
(a) Gross working
capital
(b)
Net working capital
(c)
Surplus working capital
(d)
None of these
80) The
minimum amount of working capital required to enable the concern to operate at
the lowest level of activity permanent working capital
(a) Gross working
capital
(b)
Net working capital
(c)
Permanent working capital
(d)
Temporary working capital
81) Permanent
working capital is also known as core working capital.
(a) Core working
capital
(b)
Gross working capital
(c)
Fixed capital
(d)
Net working capital
82) When
activity is at higher level, the concern needs more working capital, which is
known as temporary working capital.
(a) Gross working
capital
(b)
Temporary working capital
(c)
Net working capital
(d)
Permanent working capital
83) Debentures of the following is
not an item of current liabilities.
(a) Creditors
(b)
Debentures
(c) Bills payable
(d)
Outstanding expenses
84) If
expected sales are only cash then working capital required will be less .
(a) More
(b)
Less
(c)
Maximum
(d)
None of the above
85) Nature of Raw material is not a
factor that affect the composition of the working capital.
(a) Process of
technology used
(b)
Nature of raw material
(c)
Nature of business
(d)
Tax structure of the company
86) Operating
cycle refers to the time required to convert the –––––– to be converted into
products and time it takes for those
products to be sold and turned back into cash.
(a) Assets
(b) Cash
(c)
Liabilities
(d) None of these
87) Long-term decisions are called as capital budgeting decisions
(a) Capital budgeting decisions
(b) Working capital decisions
(c) Future decisions
(d) None of these
88) Capital budgeting decisions involve huge
amount of risk due to time factor
(a) Time factor
(b) Money factor
(c) Human factor
(d) None of these
89) Payback period is the time required to recover the original investment
(a) the time required to recover the original investment
(b) the time required to depreciate asset
(c) the time required to pay to creditor.
(d) None of these
90) For capital budgeting decisions depreciation is to be considered
(a) Depreciation is to be considered
(b) Depreciation is to be ignored
(c) Depreciation is to be calculated at 20%
(d) None of these
91) The following affects PV of an investment all of these
(a) Rate of interest
(b) Length of investment
(c) Type of investment
(d) All of these
92) Equity shareholders are eligible for
dividend after preference
shareholders
(a) after preference shareholders
(b) before preference shareholders
(c) along with preference shareholders
(d) none of these
93) The rate of dividend on equity capital is subject to available profits
(a) Predetermined
(b) Subject to available profits
(c) Guaranteed
(d) None of these
94) Equity
capital is the permanent source of capital of the company.
(a) Preference capital
(b) Equity capital
(c) Both
(d) None of these
95) Out of the total profits of the company, a
part is retained and reinvested or reemployed in the business, this process is
called ploughing back of profit.
(a) Ploughing back of profit
(b) Outside-financing
(c) Trading on equity
(d) None of these
96) Bank
Overdraft is not a source of long-term finance.
(a) Equity capital
(b) Preference capital
(c) Debenture capital
(d) Bank O/D
97) Capital budgeting is the process of making
investment decisions for capital
expenditure.
(a) Capital expenditure
(b) Revenue expenditure
(c) Deferred revenue expenditure
(d) None of these
98) The expenditures incurred on fixed assets
are expected to give return over a
number of years.
(a) One year
(b)Two years
(c) Number of years
(d) Five years
99) The capital expenditure decisions are irreversible
(a) Reversible
(b) Irreversible
(c) Reversible or irreversible
(d) None of these
100) A sound capital expenditure decisions will increase overall growth of a
company
(a) Decrease the profit
(b) Increase sales
(c) Increase overall growth
(d) None of these
101) The number of years taken by a project to
recover the initial investment is called payback
period
(a) Payback period
(b) Investment period
(c) Profit period
(d) None of these
102) In payback period method, the annual cash
inflow means net income before
depreciation but after tax
(a) Net income after tax
(b) Net income before depreciation but after tax
(c) Net income before tax
(d) Net income after tax and depreciation
103) If the annual cash inflows are not constant,
the payback period is calculated by taking cumulative
cash inflows
(a) Average cash flows
(b) Total cash flows
(c) Cumulative cash inflows
(d) None of these
105) Liquidity
factor is given utmost importance under payback period method.
(a) Liquidity
(b) Flexibility
(c) Time value of money
(d) None of these
106) In accounting
rate of return method the project which yields the highest rate of
return is selected.
(a) Net present value method
(b) Pay-back period
(c) Accounting rate of return method
(d) None of these
107) Under Accounting rate of return profit after depreciation and tax is taken into account
(a) Profit after depreciation and tax
(b) Profit after tax but before depreciation
(c) Profit before tax but after depreciation
(d) Cash inflows.
108) The number of years taken by a period to
recover the initial investment is called payback
period.
(a) Payback period
(b) Investment period
(c) Profit period
(d) None of these
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