Management Accounting 1 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS 18.1 MULTIPLE CHOICE QUESTIONS 1. Management Accounting {a) classifies, records and allocates expenditure for determination of costs (©) enables a business to be conducted more efficiently (6) records and reports accounting information (d) none of the above 2. An expenditure carrying probable future benetis. (a) Expenditure (b) Capital expenditure (c) Revenue expenditure (2) Allthe above 3, Tangible objects or intangible rights, owned by a concern, carrying probable future benefits {a) Assets (b) Current assets {c) Fixed asset (@) Depreciable asset 4, Assets that are expected to be converted into cash in the normal course of business, {a) Tangible Assets (©) Current assets {c) Fixed asset (@) Depreciable asset 5. An asset held for the purpose ot providing or producing goods or services, and which is not held {or resale in the normal course of business. (2) Investment (b) Current asset (6) Fixed asset (@) Depreciable asset 6. Natural resources like mine, oll-well etc. which are exhausted due to extraction or use. {a) Ficltious Asset (b) Wasting asset {c) Intangible asset (@) Current asset 7. Assets held, not for business operations, but o earn interest, income, profit or other benefits {a) Investment (b) Current asset (6) Fixed asset (4) Intangible asset 8. An asset which does nat have a physical identity. (a) Depreciable asset (b) Wasting asset {c) Intangible asset (@) Current asset 9. An item shown under assets in the balance sheet which has no real value, {a) Ficltious Asset (b) Wasting asset {e) Tangible asset (@) Current asset 10, An expenditure from which no future benefit is expected. (a) Capital expenditure {b) Revenue expenditure (6) Deferred revenue expenditure (4) none of the above 11. Revenue expenditure pertaining to current year (a) shown as expenses in the Profit & Loss Account (©) shown as Asset (pre-paid expenses) in Balance Sheet (c) shown as Liability (outstanding expenses) in Balance Sheet (a) none of the above 12, Revenue expenditure pertaining to future period (a) shown as expenses in the Profit & Loss Account (©) shown as Asset (pre-paid expenses) in Balance Sheet (c) shown as Liability (outstanding expenses) in Balance Sheet {d) none of the above2 Management Accounting 18, Revenue expenditure incurred but not yet paid (a) shown as expenses in the Profit & Loss Account (©) shown as Asset (pre-paid expenses) in Balance Sheet (¢) shown as Liability (outstanding expenses) in Balance Sheet (@) none of the above 14, Expenditure which is carried forward (a) Expired Cost (&) Revenue expenditure () Deferred revenue expenditure (2) none of the above 15.Gradual and systematic writing off of deferred revenue expenditure (@) Depreciation (©) Amortisation (6) Depletion (2) None of the above 16.Revenue receipts during current year pertaining to current year (@) shown as income in the Profit & Loss Account of current year (©) shown as Liability (income received in advance) in Balance Sheet of current year (6) shown as Asset {income receivable} in Balance Sheet of current year (4) none of the above 17. Revenue receipts during current year pertaining to next year (4) shown as income in the Profit & Loss Account of current year (©) shown as Liability (income received in advance) in Balance Sheet of current year (6) shown as Asset {income receivable} in Balance Sheet of current year (4) none of the above 18. Revenue income pertaining to current year received in next year (2) shown as income in the Profit & Loss Account of current year (©) shown as Liability (income raceived in advance) in Balance Sheet of currant year (6) shown as Asset {income receivable} in Balance Sheet of current year (4) none of the above 19.Capial assets, (a) include fixed assets and current assets (©) Include fixed assets and investments (6) include investments and current assets (@) include fed assets but exclude investments 20.Intemal analysis of financial statements is done by (a) Potential investors (b) the owners or managers of the concern (6) Creditors and Lenders (4) Government 21.Horizontal analysis of financial statements involves (a) comparison of two concerns in respect of the same item (©) comparison over two years in respect of the same item (6) both the above (4) none of the above 22. Which of the following statements regarding Horizontal analysis of financial statements is/are ‘true? () Ibis known as ‘Dynamic Analysis’ (i) Trend Percentages is an example of Horizontal Analysis (a) Only () (©) Only (i) () Both () and (i) 4a) None of () and ( 23. Nertical analysis involves (a) finding out the relationship between an item in respect of two concerns in different years. (6) finding out the relationship between two items in respect of two concems over two years. (6) finding out the relationship between two items in respect of the same concern and in the same year. (4) finding out the relationship between two items in respect of the same concern over two years. 24. Following are examples ot Vertical Analysis (@) Ratio Analysis (©) Cash Flow Statements (6) Trend Percentages {ai {a) andl (b)Management Accounting 3 25.Owner's Funds (a) Capital - Reserves and Surplus - P & L Alc Dr. Balance - Misc. Expenditure not written off, (©) Capital + Reserves and Surplus + P & L A/c Dr. Balance - Misc, Expenditure not wrtten off (c) Capital + Reserves and Surplus - P & LA/c Dr. Balance - Misc. Expenditure not writen off (@) Capital + Reserves and Surplus - P & L Alc Dr. Balance + Misc. Expenditure not writen off 26.Own Funds + Loan Funds equal to {a) Total Funds Available (©) Capital Employed only {c) Fixed Assets + Investments + Working Capital only (a) Each of the above 27. tal Assets are equal to (a) Fixed Assets + Investments + Current Assets (0) Fixed Assets + Investments + Working Capital (6) Own Funds + Loan Funds - Current Liabilities (a) Fixed Assets + Investments + Current Liabilities 28. Capital Employed is equal to (a) Fixed Assets + Investments + Current Assets (0) Fixed Assets + Investments + Working Capital {c) Fixed Assets + Investments + Current Liabilities (@) None of the above 29.Owners' Funds are equal to (a) Capital Employed (0) Fixed Assets + Investments + Working Capital {c) Total Assets - Current Liabilties - Loan Funds (@) None of the above 80.Fund is defined as a {a) reserve of a company which is not available for distribution as dividend (©) Reserve represented by specifically earmarked asset (¢) Revenue Reserve not earmarked for any specific purpose (a) None of the above 81. Reserve of a company which is not available for distribution as dividend (a) General Reserve (©) Capital Reserve {¢) Both the above (d) None of the above 82. In a Vertical Financial Statement, accumulated losses. {a) are added to the total of (a) Capital and (b) Reserves & Surplus (©) are deducted from the total of Capital and Reserves & Surplus {¢) are shown under ‘Application of Funds’ {(@) are ignored 88.Following is not a Quick asset {a) Loose tools (b) Advance tax (6) Bills Receivable (4) Interest Accrued 94.Following is not a Quick liability (2) Unclaimed Dividends (©) Public Deposits (¢) Bank Overdraft (@) Advances Received 95.Calls-in-arrears (2) will increase the owners funds (©) will have no effect on the owners funds {c) will reduce the owners funds (4) will increase the Current Liabilities 36. Balance in Forfeited Shares Account (a) will increase the owners funds (©) will have no effect on the owners funds {c) will educe the owners funds (4) willincrease the Current assets