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MB0025 - Financial And Management Accounting

1. _________ suggests that incomes should be recognized as and when they are earned and incurred,
irrespective of whether money is received or paid.
a. Cost concept
b. Accrual concept
c. Money Measurement concept
d. Concept of prudence

2. ___________voucher is drawn to record all non-cash transactions and events


a. Subsidiary
b. Receipt
c. Payment
d. None of the above

3. There are _____________ elements of Balance Sheet


a. 2
b. 3
c. 1
d. 4

4. ___________ accounting demands that each debit should have an equal and opposite credit
a. Double entry
b. Single entry
c. Management
d. Cost

5. True or false
1. Decrease in assets and increase in liability is debited
2. Sales Day Book records credit sale of goods
a. 1-true, 2-true
b. 1-false, 2-false
c. 1-false, 2-false
d. 1-true, 2-false

6. ____________ serves the purpose of both a book of prime entry and a book of secondary entry.
a. Purchase Day book
b. Cash book
c. Bills Receivable book
d. Return Outward Book

7. __________ column of cash book is not balanced


a. Cash
b. Bank
c. Discount
d. Ledger folio

8. ___________ ledger is a self-sufficient secondary book in the sense that all entries in the primary book will
posted, directly or indirectly in this ledger
a. Main
b. Debtors
c. Creditors
d. General

9. If a transaction is not recorded in the journal, this is called __________


a. Error of omission
b. Error of commission
c. Compensating error
d. Error of principle

10. Rectification entries are passed in __________


a. Trial Balance
b. Journal proper
c. P & L Account
d. General ledger

11. The Profit and Loss account consists of elements ______________


a. Incomes
b. Expenses
c. Both a and b
d. None

12. __________ is arrived at by deducting the direct cost of goods sold from sales proceeds
a. Net profit
b. Operating profit
c. Operating net profit
d. Gross profit

13. __________ is concerned with generation of data, processing data element for managerial decision-
making and communication thereof
a. Management accounting
b. Financial accounting
c. Cost accounting
d. Taxation accounting

14. Expand MIS


a. Management Intelligence System
b. Management Information System
c. Material Information System
d. None of the above

15. Indirect Expenses are technically called ___________


a. Manufacturing expenses
b. Chargeable expenses
c. Overheads
d. Variable expenses

16. What is 'V' in C.V.P analysis?


a. Volume
b. Variety
c. Variance
d. Value

17. Ideal Current ratio is


a. 2:1
b. 1.5:1
c. 1:1
d. None of the above

18. Equity > Loan Capital =


a. Over Capitalization
b. Under capitalization
c. Higher gear
d. Even gear

19. This ratio shows how many times Interest charges are covered by EBIT.
a. Dividend coverage
b. Interest coverage
c. Earning yield
d. Price earning ratio

20. ________ is also known as Acid test ratio


a. Current ratio
b. Liquid ratio
c. Debt-equity ratio
d. Proprietary ratio

21. Total of operating ratio and operating profit ratio will be equal to
a. 75%
b. 50%
c. 100%
d. 80%

22. __________ costs are either difficult or impossible to trace a single product
a. Direct
b. Indirect
c. Step
d. Variable

23.

Cost

Output
This graph is of
a. Total fixed cost
b. Variable cost
c. Step cost
d. Unit fixed cost

24. __________ refers to the cost of selection of one alternative course of action in terms of other alternatives
given up to carry out that course of action
a. Relevant costs
b. Opportunity costs
c. Incremental costs
d. Imputed costs

25. Direct material+ direct labor + direct expenses =


a. Factory cost
b. Prime cost
c. Production cost
d. Total cost

26. "Hire of special plant or machinery or total for a particular job" is an example of
a. Production Overhead
b. Indirect expenses
c. Direct expenses
d. Indirect expenses

27. ___________ is not recorded in the cost books


a. Goodwill written off
b. Welfare expenses
c. Depreciation on plant, machinery
d. Works stationary

28. The difference between selling price and marginal cost is called ___________
a. Cost of goods sold
b. Profit
c. Contribution
d. Break-even point

29. Under marginal costing only __________are charged to operations, processes or products
a. Variable cost
b. Fixed cost
c. Period cost
d. None of the above

30. P/V ratio can be improved by


a. Increasing the selling price per unit
b Decreasing the marginal cost
c. Increasing sales and decreasing marginal cost
d. All of the above

31. Larger the angle of incidence, _________ the profit


a. Smaller
b. Higher
c. Same
d. None of the above

32. ________ is also known as summarized budgets


a. Functional budget
b. Flexible budget
c. Master budget
d. Fixed budget

33. __________ is the difference between standard cost of direct materials specified for actual output and the
actual cost of direct materials
a. Material Usage Variance
b. Material Price Variance
c. Material Cost Variance
d. Material Mix Variance

34. Material Cost Variance consists of ______________


a. Material Usage Variance
b. Material Price Variance
c. Both a and b
d. Material Mix Variance

35. _______________ is the heart of standard costing technique


a. Variance Analysis
b. Budgetary Control
c. Historical costing system
d. Planning and decision making

36. Cash for operations can be calculated from


a. Cash sales Method
b. Net Profit Method
c. Both a and b
d. None of the above

37. "Schedule of changes in working capital into consideration only.


a. Current items
b. Non-current items
c. P & L items
d. None of the above

38. A supplier of goods on credit will be particularly interested in __________


a Investment ratios
b. Liquidity ratios
c. Profitability ratios
d. None

39. A typical cost sheet shows the total cost of _________ only
a. Production
b. Sales
c. Administration
d. None

40. If the total of the debit side of an account is greater than credit side, the difference is put on the credit side
and the same is called ___________
a. Credit balance
b. Debit balance
c. Contra entry
d. None of the above

41. Increase in Owner's equity can normally occur


a. When there has been a fresh injection of funds by the owners.
b. When there has arisen a surplus
c. Both a and b
d. When there has been redemption of shares

42. ____________ is a book of first entry, _____________is also called a ledger


a. Trial balance, Journals
b. Primary book, Ledger
c. Primary book, Trial balance
d. Ledger, Journals

43. Sold goods on credit Rs 1, 20, 000. What should be the correct journal entry?
a. Cash a/c Dr. 1, 20, 000
To Sales a/c 1, 20, 000
b. Sales a/c Dr. 1, 20, 000
To creditors a/c 1, 20, 000
c. Debtors a/c Dr. 1, 20, 000
To Sales a/c 1, 20, 000
d. Sales a/c Dr 1, 20, 000
To Debtors a/c 1, 20, 000

44. The highest form of Cash book is a triple column cash book
a. One for cash
b. One for debtors
c. One for bank
d. One for discount
A. Only a and c
B. Only b and d
C. Only a, b, and c
D. a, c, and d

45. Transactions recorded in journal proper are


a. Opening entries
b. Adjustment and rectification
c. Credit purchase of assets
d. All of the above
46. Sold goods to Kiran kumar & Sons for 30 days credit Rs 10, 75, 000. This transaction will be posted on
which side of the cash book.
a. Debit side
b. Credit side
c. It will not be posted in the cash book
d. This transaction is not at all recorded in the books of accounts
47. Closing stock which is taken from outside the Trial Balance, finds its place twice in the final accounts
a. On the credit side of the trading
b. On the debit side of P & L
c. On the assets side of Balance sheet
d. Both 1and 3
48. Short-term solvency ratio
a. Current ratio
b. Debt-equity ratio
c. Liquidity ratio
d. Gross Profit ratio
A. Only a and b
B. Only a and c
C. All of the above
D. Only b and c

49.
To Stock - in - hand 76, 250 By sales 5, 00, 000
To Purchases 3, 15, 250 By Closing stock 98, 500
To Carriage 2, 000
To wages 5, 000
To Gross profit 2, 00, 000

5, 98, 000 5, 98, 000

Find out Gross profit ratio


a. 25%
b. 40%
c. 30%
d. 45%

50. Marginal costing is used in


a. Fixation of prices
b. Cost of control
c. Utilization of scarce resources
d. All of the above

51. The following figures are available from the records of Venus Enterprises as at 31st March

Previous year Current year


Rs Lakhs Rs Lakhs

Sales 150 200


Profit 30 50

Calculate P/V ratio and break even sales.


a. 40%, 75 lakhs
b. 40%, 60 lakhs
c. 20%, 75 lakhs
d. 20%, 60 lakhs

52. Different names of FFS are:


a. A fund statement
b. Inflow and outflow of fund statement
c. A statement of sources and uses of fund
d. All of the above
53. B Ltd. Has a liquidity ratio of 2 to 1. If its merchandize inventory is Rs. 15, 000 and total current liabilities are
Rs. 30, 000. Ascertain the current ratio.
a. 2:1
b. 2.5:1
c. 3.5:1
d. 1.5:1
54. A _________ is not a part of books of accounts.
a. Ledger accounts
b. Journal
c. Trial Balance
d. Profit and loss account
55. Amount received from a customer Rs.20, 000. What is the correct journal entry for this transaction?
a. Cash a/c Dr. 19, 500
To discount a/c 500
To debtors a/c 19, 500
b. Cash a/c Dr. 19, 500
Discount a/c Dr 500
To Debtors a/c 20, 000
c. Cash a/c Dr. 19, 000
Discount a/c Dr. 500
To Debtors a/c 19, 500
d. Debtors a/c Dr. 20, 000
To Discount a/c 500
To cash 19, 500

56. Decrease in working capital appears on _____ side of fund flow statement and sale of fixed assets appears on
_______ side
a. Sources, sources
b. Sources, applications
c. Application, Source
d. Application, application

57. Calculate the break-even volume from the following information


Profit - Rs 10, 000 (20% of sales)
P/V ratio - 50%
a. Rs 30, 000
b. Rs 15, 000
c. Rs 25, 000
d. Rs 50, 000
58. Objectives of budgetary control
a. Planning the policies
b. Coordinating activities
c. Controlling costs
d. All of the above
59. The following information is given
Standard Quantity --- 250 Units
Actual Quantity --- 260 Units
Standard Price --- Rs. 5 per unit
Actual price --- Rs 5.5 per unit
Calculate Material Cost Variance
a. Rs.180 (adverse)
b. Rs.55 (adverse)
c. Rs.50 (adverse)
d. Rs.180 (adverse)
60. A mix variance arises due to difference between ___________ & ___________ of different materials
used in the actual mix
a. Actual price, Standard price
b. Actual quantity, Standard price
c. Actual productivity, Standard productivity
d. Actual ratio, Standard ratio
61. 1. Preparation of vouchers
2. Recording in the Primary Books
3. Transaction / event
4. Posting in the secondary Book
5. Preparation of Trial balance
6. Preparation and Presentation of Financial Statements
Arrange the activities in an accounting process
a. 1, 2, 3, 4, 5, 6
b. 3, 1, 4, 2, 6, 5
c. 3, 1, 2, 4, 5, 6
d. 2, 3, 1, 4, 5, 6
62. State True / false
1. Assets = Liabilities + Debt
2. A balance sheet has three elements
3. The valuation principle of assets and liabilities depend on going concern concept
4. Receipt voucher is drawn to record all non-cash transaction
a. T, T, F, F
b. F, T, T, F
c. F, T, F, F
d. T, T, T, f

63. True or False


1. If the credit side of the bank column is greater than the debit side, the balance is favorable balance
2. Discount column of cash book is not balanced
3. Journal proper is the book of orphan entries
4. Bills payable book records all bills raised by suppliers
a. T, T, T, T
b. F, T, T, T
c. F, F, F, F
d F, T, T, F

64. State true/false


1. As a rule, the opening balance in any account starts with the suffix 'b/d' and the closing
balance with the suffix 'c/d'
2. General ledger is a self-sufficient Primary Book
3. At the end of the accounting period, the accounts in the general ledger cannot be left open
4. Due date is normally calculated after giving 3 days grace from the date of maturity
a. All are true
b. All are true except 2
c. 1, 4 are true , 2, 3 are false
d. Only a is true

65. Match the following


SET A SET B
1. Error of omission a. Transaction is not recorded
2. Error of commission b. One error is set-off by other error
3. Error of principle c. Lack of knowledge of basic accounting principles
4. Compensating error d. Wrong posting of amount in one a/c instead of another
A. 1-a, 2-b, 3-c, 4-d
B. 1-a, 2-d, 3-c, 4-b
C. 1-a, 2-b, 3- d, 4-c
D. 1-a, 2-d, 3-b, 4-c

66. Match the following


SET A SET B
1. Profitability ratio a. Debtors Turnover ratio
2. Liquidity ratio b. Operating ratio
3. Activity ratio c. Proprietary ratio
A. 1-a, 2-b, 3-c
B. 1-a, 2-c, 3-b
C. 1-b, 2-c, 3-a
D. 1-c, 2-a, 3-b

Following are the ratios relating to the trading activities of National Traders Ltd
Debtors Velocity 3 months
Stock Velocity 8 months
Creditors Velocity 2 months
Gross Profit ratio 25%
Gross Profit for the year ended 31st Dec. 2006 amounts to Rs 4, 00, 000. Closing stock of the year is Rs 10,
000 above opening stock. Bills receivable amount of Rs.25, 000 and bills payable to Rs.10, 000
67. Find out sales
a. Rs.6, 00, 000
b. Rs.16, 00, 000
c. Rs.26, 00, 000
d. Rs.10, 000

68. What would be the closing stock?


a. Rs.7, 95, 000
b. Rs.8, 05, 000
c. Rs.8, 00, 000
d. None of the above

69. From the following details calculate fund from operations:


Opening balance of Profit & Loss a/c Rs.25, 000
Salaries Rs.5, 000
Discount on issue of debentures Rs.2, 000
Rent Rs.3, 000
Provision for bad debts Rs.1, 000
Transfer to G. Reserve Rs.1, 000
Refund of tax Rs.3, 000
Profit on sale of building Rs.5, 000
Depreciation on plant Rs.5, 000
Preliminary expenses written off Rs.2, 000
Loss in sale of plant Rs.2, 000
Provision for tax Rs.4, 000
Dividend received Rs.5, 000
Closing balance of P&L a/c Rs.60, 000
Proposed dividend Rs.6, 000
a. Rs.61, 000
b. Rs.48, 000
c. Rs.53, 000
d. Rs.50, 000

70. Which among the following is not true about cash flow statements?
1. CFS reveals the inflow and outflow of cash during a particular period
2. CFS helps in long term financial decisions relating to liquidity
3. CFS shows the effects of changes in cash balance between the balance sheet dates
4. CFS explains reasons for low cash balance
a. All are true
b. Only 2 is false
c. 2 and 3 are false
d. Only 1 and 4 are false

71. Which among the following is true statement?


1. WIP is the incomplete part of the product
2. Items of income or expenses of purely financial nature do not form the part of the costs.
3. Discount on issue of shares, debentures and underwriting commission are not entered in cost books
4. Debenture interest, hire purchase interest on capital and loans are entered in the cost books
a. All are true except 4
b. Only 1and 2 are true
c. All are true
d. Only 2 & 3 are true

72. Which among the following is true statement?


1. Variable cost per unit remains constant in a given period of time
2. Semi-Variable costs are partly variable and partly fixed
3. Fixed cost is also known as Period costs
d. Step cost remain constant for given volume of output and at a fixed amount
a. All are true
b. All are true except 2
c. 1, 2, 3 are true
d. Only 2 and 3 are true
73. Match the following
SET A SET B
1. Contribution a Change in profits/change in sales
2. P/V Ratio b. Fixed cost/(P/V ratio)
2. Break even sales c. Fixed cost + profit
a. 1-a, 2-b, 3-c
b. 1-c, 2-b, 3-a
c. 1-c, 2-a, 3-b
d. 1-b, 2-a, 3-c
74. Which is not true about the grand rules of journalization?
1. Debit increase in asset and decrease in liability
2. Credit decrease in asset and increase in liability
3. Debit all incomes
4. Credit all expenses
a. 3 and 4
b. 1 and 3
c. 1 and 4
d. All are true
75. Match the following
SET A SET B
1. Material cost variance a. (SQ-AQ) x SP
2. Material Usage Variance b. SQxSP-AQxAP
3. Material Price Variance c. (SP-AP)x AQ
a. 1-a, 2-b, 3-c
b. 1-b, 2-c, 3-a
c. 1-b, 2-a, 3-c
d. 1-a, 2-c, 3-b

SECTION A 31 B SECTION C
1 B 32 C 61 C
2 D 33 C 62 B
3 B 34 C 63 B
4 A 35 A 64 B
5 C 36 C 65 B
6 B 37 A 66 C
7 C 38 B 67 B
8 D 39 A 68 B
9 A 40 B 69 B
10 B SECTION B 70 C
11 C 41 C 71 A
12 D 42 B 72 A
13 A 43 C 73 C
14 B 44 D 74 A
15 C 45 D 75 C
16 A 46 C
17 A 47 D
18 A 48 B
19 B 49 B
20 B 50 D
21 C 51 A
22 B 52 D
23 D 53 B
24 B 54 C
25 B 55 B
26 C 56 A
27 A 57 A
28 C 58 D
29 A 59 A
30 D 60 D

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