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Page No.

FINANCIAL & MANAGEMENT ACCOUNTING


MB0025
Section 1
TM
1 Accounting is a branch of knowledge, concerned with a) Error of omission b) Error of commission
recording classifying analyzing and reporting financial c) Error of principle d) None
information to _____ regarding the financial performance of

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organisation. 15 _____ error is also called off-setting error
a) Owner b) Bankers a) Compensating error b) Commission error
c) Creditor d) All c) Omission error d) None

2 _____ is the discipline of measuring, communicating and 16 The basis for preparing final accounts is the Trial Balance.
interpreting financial activities and it is widely referred to as For Trial Balance, the _____ are the root.
language of business a) Ledger balance b) Journal entries
a) Accounting b) Record keeping c) Scientifically recording d) Book keeping
c) Financial management d) None
17 Expenses due but not yet paid are known as ______
Ph:to011-65439499,
3 _____ is a person whom the business owes some 65066565/
thing. 6/ 7, 28013999
a) Outstanding expenses b) Instanding expenses
a) Debtor b) Creditor c) Debts d) Credit
c) Trader d) Stock Holder
18 _____ debts are those debts which are not recovered
4 Institute of Chartered Accountants of India established a) Outstanding debts b) Unrecovered debts
Accounting Standards Board in _____ c) Unaccepted debts d) Bad debts
a) 1978 b) 1877
c) 1976 d) 1977 19 There are _____ types of discounts allowed to customers in
a business. TM
5 While revenue expenses are charged against profit, capital a) Three b) Two
expenses are shown in the balance sheet as _____ c) Four d) Five
a) Asset b) Liabilities

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c) Cash d) None 20 Which one is not a management accounting technique
a) Break-even analysis b) Ratio analysis
6 _____ is a business activity involving transfer of money or c) Variance analysis d) ABC analysis
money’s worth
a) Sale b) Transaction 21 Costs incurred in the past is _____ cost
c) Cash flow d) None a) Relevant cost b) Sundry cost
c) Sunk cost d) None
7 _____ is a book of original entry
a) Journal b) Book keeping 22 ‘Every fact that is learned becomes a key to other facts’.
c) Both a & b d) None said by:-
Ph: 011-65439499,
8 Purchases book is also called _____
65066565/ 6/Youmans
a) E.Y. 7, 28013999d)
c) Y.O Hertz
b) Genou
None
a) Purchases keeping b) Cash journal
c) Purchases journal d) Any of them 23 Which one is not correct
Ratio can be expressed in the following form:
9 What is bills receivable for a _____ is bills payable to the a) As proportion b) As percentage
_____ c) As decimal d) As turnover or rate
a) Drawee, Drawer b) Creditor, Debtor
c) Drawer, Drawee d) Debtor, Creditor TM
24 _____ measures the firm’s ability to meet its short term
obligations.
10 Cash book containing cash and bank columns is known as a) Liquidity Ratio b) Profitability Ratio
a) Multi column cash book b) Double column cash book c) Leverage Ratio d) Current Ratio

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c) Debit or credit cash book d) None
25 Which one is not a current ratio
11 _____ contains accounts of creditors from whom goods are a) Trade debtors b) Bank overdraft
purchase on credit c) Marketable securities d) Cash inhand
a) Debtor’s ledger b) Creditor’s ledger
c) General ledger d) None 26 Liquid Ratio is also known as _____
a) Quick Ratio b) Acid Test Ratio
12 Posting is done from ______ c) Both d) None
a) Journal book b) Subsidiary book
c) Any of them d) None of them 27 Net profit ratio is also called _____
Ph: 011-65439499, 65066565/ 6/profit
a) Net 7,Margin
28013999b) Profit after taxes
13 _____ stands as a bridge between primary and secondary c) Operating profit margin d) None
books on one hand and final statements of accounts on the
other hand 28 STO stand for
a) Trial balance b) Ledger a) Sales Turnover Ratio b) Stock Trade Ratio
c) Journal d) None c) Sales Takeover Ratio d) Stock Turnover Ratio

14 Which of the following is not an error which do not affects 29 Decrease in _____ is always a source of funds for the
trial balance
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business (ii) All transaction of a business are recorded in terms of
a) Assets b) Liabilities money.
c) Any of them d) none a) True True b) False False
c) False True d) True False
30 CFS stand for
a) Cash flow statement b) Credit flow statement 44 There are two systems of double entry book keeping
c) Cash flow stock d) None namely _____ TM
a) Cash system & mercantile system
31 _____ also known as ‘Statement Accounting for variations b) Cash system & expenses system
is cash’. c) Credit system and debit system

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a) Cash flow statement
c) Cash flow stock

cost and chargeable expenses


a) Factory cost
c) Direct cost
b) Fund flow statement
d) Cash transaction

32 ______ is the total of direct materials cost, direct labour

b) Prime cost
d) Total cost
d) None

45 Accounting trail is the process of identifying the _____


i) Transaction or events
(ii) Preparation of vouchers
iii) Recording them as journal entries
iv) Preparation of ledger accounts
a) (i) & (ii) b) (i) (ii) & (iii)
33 Which Item is not include in cost sheet : c) (ii) (iii) (iv) d) (i) (ii) (iii) & (iv)
a) Income tax b) Interest on capital
c) Share premiumPh: 011-65439499,
d) None 65066565/ 6/ 7,
46 Journal 28013999
is subdivided into several books of original entry,
they are also regarded as _____
34 Marginal cost is also known ______ a) Primary books or secondary books
a) Variable cost b) Direct cost b) Cash books or money books
c) Labour cost d) Primary cost c) Receive books or payable books
d) None
35 _____ is the volume of activity where the organisation’s
revenues and expenses are equal 47 Cash purchases are recorded in _____ and credit purchses
a) CVP b) BEP are recorded in _____ TM
c) BPE d) CPV a) Cash books, credit book b) Purchase book, credit book
c) Cash book, purchase book d) None
36 The formula to find out the BEP ( in units) is :-

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a) Fixed expenses / Unit contribution margin 48 _____ are the two techniques of preparing trial balance
b) Fixed expenses/ Contribution sales ratio a) Total method & Trial method
c) Contribution / Expenses b) Trial method & Balance method
d) Expenses / Contribution c) Total method & Balance method
d) Trial method & Direct method
37 Which one is not a step in Budgeting control
a) Formulation of policies b) Preparation of forecasts 49 (i) In trial method balance when error are located, they
c) Preparation of budgets d) Reporting the system should be rectified
(ii) It is a good practice to erase the mistakes and re-write the
38 Which one is not a limitation of budgeting correct ones
a) Budget plan Ph: 011-65439499,
b) Rigidity 65066565/
a) False6/True7, 28013999 b) False False
c) Replacement d) None c) True True d) True False

39 Which one is not an essential features of Budgeting Contro 50 Management Accounting function include
a) Forecasting a) Planning b) Organizing
b) Formation of budget committee c) Coordinating d) All
c) Accounting system
d) Feedback process 51 (i) Financial Accounting is flexible
(ii) Management Accounting is rigid TM
40 Material cost variance is equals to : a) True True b) True False
a) Standard cost x Actual cost c) False False d) False True
b) Standard cost - Actual cost

SECTION 2
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c) Actual cost - Standard cost
d) Standard cost + Actual cost

41 (i) Book keeping inclueds recording, analyzing & communi-


cating.
(ii) Book keeping is an adjunct of accounting
52 (i) Ratio analysis is a techinque of analysis and interpreta-
tion of financial statements
(ii) Ratio analysis is one of the most powerful tools of
profitability concepts
a) True True
c) True False
b) False False
d) False True

53 (i) STO is also known as stock velocity


a) True False b) False True (ii) DTO is also known debtors velocity
c) True True
Ph: 011-65439499,
d) False False
65066565/ 6/False
c) False 7, 28013999
a) True False b) False True
d) True True
42 (i) Purchase & Sale of goods is called ______
(ii) Goods sold to customers either for cash or for credit are 54 (i) Working capital is current assets minus current liabilities
regarded as _____ (ii) Three common usages of the term “FUND” are cash,
a) (i) Sales (ii) Trade b) (i) Trade (ii) Sales working capital & total financial resources
c) (i) Transaction (ii) Sales d) (i) Trade (ii) Transaction a) True True b) False True
c) True False d) False False
43 (i) Expenses are different from payments.
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55(i) FFS is rigid but CFS is flexible (iv) Increase in a liability, followed by increase in proprietor’s
(ii) FFS is concerned with the total provision of funds. CFS is equity.
concerned with only cash (v) Decrease in an asset and corresponding decrease in
a) True True b) False False owner’s equity.
c) True False d) False True a) (i) true (ii) true (iii) false (iv) true (v) true
b) (i) true (ii) false (iii) true (iv) true (v) true
56 All managerial policies & decisions permeate all phases of c) (i) true (ii) true (iii) true (iv) false (v) fasle
TM
cost accounting and cost information helps in :- d) (i) true (ii) true (iii) true (iv) false (v) true
(i) Acquiring plant and machinery
(ii) Adding or reducing a product 64 Types of journal include :-

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(iii) Buying or making parts
a) (i) & (ii)
c) (i) (ii) & (iii)
b) (i) & (iii)
d) (ii) & (iii)

57 Calculate sales in in rupees


Units produced 60,000. selling price per unit Rs 15. Profits to
be earned in Rs 87,500.
a) 7,12,000 b) 7,15,500
a) Purchases book, sales book, purchases returns book, sales
returns book, bills receivable book, bills payable book, cash
book and journal proper
b) Purchases book, receive book, purchases returns book,
sales returns book, bills receivable book, bills payable book,
cash book and journal proper
c) Purchases book, sales book, purchases returns book, sales
returns book, bills credit book, bills payable book, cash book
c) 7,12,500 d) 8,12,000 and journal proper
d) a) Purchases book, sales book, purchases returns book,
58 Calculate MCSR Ph:or 011-65439499, 65066565/
p/v ratio: Marginal cost Rs 24,000. Sales sales6/ 7, book,
returns 28013999
bills receivalble book, bills payable book,
Rs 60,000 cash book and cash transaction book
a) 80% b) 40%
c) 60% d) 30% 65 Match the column
(1) Error of omission
59 The budgets are normally classified according to their (2) Erroe of commission
nature. They are (3) Error of principle
a) Fixed budget, flexible budget, functional budget (4) Compensating errors
b) Fixed budget, flexible budget, operational budget
TM
(i) _____ occurs when a transaction is completely omitted from
c) Functional budget, operational budget, fixed budget the books of accounts.
d) Operational budget, flexible budget, fixed budget (ii) If the error of wrong posting, wrong casting, wrong
calculation etc. committed in the books of original entry or

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60 DR Ltd. has decided to extend its range to include Denim
jackets. One jacket requires a standard usage of 3 meters of
direct material which has been set at a standard price of Rs.
2.20 per meter. In the period, 80 jackets were made and 260
meters of material consumed at a cost of Rs. 1.95 per meter.
Calculate the direct material total variance.
a) Rs. 21 variance
c) Rs. 31 variance
b) Rs. 22 variance
d) Rs. 32 variance
ledger, it is said to be _____
(iii) While drawing journal entries, often _____ is committed
and this goes un noticed because it does not affect the total of
trial balance.
(iv) It is also called off-setting error
a) 1(i) 2(ii) 3(iii) 4(iv)
b) 1(ii) 2(i) 3(iii) 4(iv)
c) 1(i) 2(iii) 3(ii) 4(iv)
d) 1(iv) 2(ii) 3(i) 4(iii)
SECTION 2
Ph: 011-65439499, 65066565/ 6/Expenses
66 (i) 7, 28013999
due but not yet paid are known as doubtful
61 (i) Accounting is an art and science. expenses.
(ii) Accounting involves a process of identifying, classifying (ii) Expenses paid in advance are regarded as prepaid ex-
and recording financial information, expressed in terms of penses.
money. (iii) Depreciation is reduction in the value of an asset due to
(iii) Accounting is an information system. constant use of the same, which is called wear and tear.
(iv) Accounting helps in taking managerial decisions (iv) Bad debts are those debts which are not recovered. If bad
a) (i) (ii) & (iv) b) (i) (ii) (iii) & (iv) debts are shown outside the trial balance, which means that
c) (i) (iii) & (iv) d) (ii) (iii) & (iv)
TM
they are identified after the preparation of Trial Balance.
(v) Provision for bad debts is a liability to be incurred in future
62 Types of Accounting concepts are:- and so it should appear on the liability side of balance sheet.
(i) Business separate entity concept, Going concern concept, a) (i) true (ii) true (iii) true (iv) true (v) true

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Money measurement concept, Non Periodicity concept,
Accrual concept
(ii) Business separate entity concept, Cost & revenue concept,
Money measurement concept, Non Periodicity concept,
Accrual concept
(iii) Business separate entity concept, Going concern concept,
Money measurement concept, Periodicity concept, Accrual
concept
b) (i) false (ii) true (iii) true (iv) true (v) true
c) (i) false (ii) false (iii) true (iv) true (v) false
d) (i) true (ii) false (iii) true (iv) true (v) false

67 Special features of Management Accounting are


(i) Selective in nature
(iii) Future oriented
(v) Adherence of rules
(ii) Provides data
(iv) Cause and effect relationship
(vi) Economic reality
(iv) Business separate entity concept, Going concern concept, (vii) Goal congruence (viii) Quantitative techniques
Ph: 011-65439499,
Money measurement concept, Cost & revenue concept,
Accrual concept
65066565/ 6/
(ix) Certainty
7, 28013999
a) (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix)
b) (i) (ii) (iii) (v) (vi) (vii) (viii) (ix)
63 Effect of Transactions on Accounting Equation c) (i) (ii) (iii) (iv) (vi) (vii) (viii)
(i) Increase in one asset with a decrease in another asset. d) (i) (ii) (iv) (v) (vi) (vii) (viii) (ix)
(ii) An increase in one asset with an equal amount of increase
in liablility. 68 State true or false
(iii) An increase in asset with an equivalent rise in the (i) The objective of Financial Accounting is to collect informa-
proprietor’s equity. tion for internal communication and use.
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(ii) It is subjective in nature 74 It is observed that one unit of product X requires 3 kgs of
(iii) It covers entire organization material M at Rs. 2 per kg. During January 2008, 200 units of
(iv) It lays stress on future product X were produced consuming 620 kgs of material M, all
(v) It is a legal documents of which was purchased at Rs. 1.80 per kg. Compute material
(vi) It is flexible cost variances.
a) (i) true (ii) false (iii) true (iv) true (v) true (vi) true a) Rs. 84 (FAV) b) Rs. 94 (FAV)
b) (i) true (ii) false (iii) true (iv) false (v) true (vi) false c) Rs. 40 (FAV) d) Rs. 65 (FAV) TM
c) (i) false (ii) true (iii) true (iv) false (v) true (vi) false
d) (i) false (ii) false (iii) true (iv) false (v) true (vi) false 75 State true or false
(i) Budgetary control deals with costs and revenues. But

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69 The various advantages of ratio analysis are as follows:
(i) Ration analysis helps in the financial forecasting and
planning activities.
(ii) It enables for making strategic decisions
(iii) It indicates the trends in the financial solvency of the firm.
(iv) It evaluates the overall efficiency of the business entity.
(v) It helps in making effective control of the business.
(vi) Financial ratios are very helpful in the early and proper
standard costing restricts only with cost.
(ii) Budgetary control targets are based on past actual adjusted
to future trends. In Standard costing, standards are based on
technical assessment.
(iii) Budget are projection of only cost accounts. Standard
costs are projection of final accounts.
a) (i) True (ii) false (iii) True
b) (i) True (ii) True (iii) False
diagonsis and financial health of the firm. c) (i) False (ii) True (iii) False
a) (i) true (ii) true (iii) true (iv) true (v) true (vi) true d) (i) True (ii) False (iii) False
b) (i) false (ii) truePh: 011-65439499,
(iii)true (iv) true (v) true (vi) true 65066565/ 6/ 7, 28013999
c) (i) true (ii) false (iii) true (iv) true (v) true (vi) true
d) (i) true (ii) true (iii) false (iv) true (v) true (vi) true ANSWERS
70 The Balance Sheet of DR Ltd is as follows
Assets : Fixed Assets 10,00,000 SECTION 1
Current Assets 5,00,000 1d 2a 3b 4d 5a 6b
Represented by:
Current Liabilities 1,00,000
7a 8c 9c 10b 11b TM
12c
Reserves and surplus 1,00,000 13a 14d 15a 16a 17a 18d
10% Debentures 2,00,000 19b 20d 21c 22a 23c 24d
6% Preference Share Capital 3,00,000

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Equity Share Capital 8,00,000
25b 26c 27a 28d 29a 30a
31a 32b 33d 34a 35b 36a
Calculate the Debt Ratio and Debt-equity ratio 37d 38d 39d 40b
a) Debt Ratio = 1:5, Debt-equity ratio = 1:4
b) Debt Ratio = 1:4, Debt-equity ratio = 1:5
c) Debt Ratio = 1:8, Debt-equity ratio = 1:3 SECTION 2
d) Debt Ratio = 1:5, Debt-equity ratio = 1:5 41b 42b 43a 44a 45d 46a
71 The written down value of a Machinery at the beginning
47c 48c 49d 50d 51c 52c
and at close were Rs. 2,00,000 and 1,75,000. An old machine 53d 54a 55d 56c 57c 58c
whose written downPh: 011-65439499,
value 65066565/
was Rs. 12,000 was sold for Rs. 59a 6/ 60a
7, 28013999
6,5000. Rs. 32,000 depreciation was charged during the current
year. Calculate the purchase price.
a) 18,000 b) 19,000 SECTION 3
c) 19,500 d) 18500 61b 62c 63d 64a 65a 66b
67c 68d 69a 70a 71b 72c
72 State True or False
Computation of changes in working capital and funds 73d 74a 75b
(i) Increase in a current asset item decreases working capital TM
(ii) Decrease in a current asset item increases working capital
(iii) Increase in a current liability item increases working capital
(iv) Decrease in a current liability item decreases working
capital.

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a) (i) True (ii) False (iii) True (iv) True
b) (i) False (ii) False (iii) True (iv) True
c) (i) False (ii) False (iii) False (iv) False
d) (i) True (ii) True (iii) True (iv) True

73 Match the column:-


(1) Fixed budget
(2) Flexible budget

(i) These are also Ph:


known011-65439499, 65066565/ 6/ 7, 28013999
(3) Functional budget
as subsidiary budgets.
(ii) It is prepared with a view to take into account the periodic
changes in the level of activity attained.
(iii) It is also known as subsidiary budgets
a) 1(i) 2(ii) 3(iii) b) 1(iii) 2(ii) 3(i)
c) 1(iii) 2(i) 3(ii) d) None

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