CITM - 1551 - V. V.

Technologies Society - Faridabad

MB0025 - Financial and Management Accounting
SECTION A
Each Question carries 1 mark each
1. According to the Entity concept, a business is an _________ distinct from its proprietor(s).
a. Business Entity
b. Artificial Entity
c. Corporate Entity
d. Separate Entity
2. According to the Cost concept, assets such as land, building etc should be recorded at
a. Historical cost
b. Actual cost
c. Opportunity cost
d. Sunk cost
3. Assets (A) = Liabilities + ________
a. Drawings
b. Equity
c. Shareholder funds
d. Creditors
4. A cashbook is a ______ as well as ledger
a. Subsidiary book
b. Secondary book
c. Journal
d. Primary book
5. Double entry concept has two aspects debit and ________
a. Credit
b. Decrease
c. Dual
d. Increase
6. Posting refers to the recording of transactions from _________ to ledger
a. Trial balance
b. Journal
c. Primary book
d. Cash book
7. A/c is an abbreviation of _______
a. Brought down
b. Carried down
c. Accountancy
d. Account
8. The arithmetical accuracy of ledger balances can be checked with the help of
a. Journal
b. Ledger
c. Trial balance
d. Cashbook
9. Trial balance becomes the source document for preparing ____________
a. Final accounts
b. Trading accounts
c. Balance accounts
d. P&L account
10. An error committed because of lack of knowledge of the basic accounting principles is called an error of _____
a. Error commission
b. Error of omission
c. Error of principle
d. Compensating error
11. Popularly, final accounts consist of two statements, profit & loss A/c and ________
a. Income statement
b. Trading account
c. Balance account
d. P & l A/c
12. Compensating error is the error of posting the account in one account instead of
a. Another account
b. Wrong account
c. Same account
d. Right account
13. Liquidity ratios involve two important and basic ratios: current ratio and
a. Quick ratio
b. Debt equity ratio
c. Solvency ratio
d. Liquidity ratio
14. An acceptable norm for debt equity ratio
a. 2:1
b. 3:1
c. 4:1
d. 1:1
15. Debt equity ratio is used to judge the _________ financial solvency of the business
a. Long term
b. Mid term
c. Short term
d. Long lasting
16. Ratio Analysis is mainly a _________ or an analysis of the past financial data
a. Historical analysis
b. Critical analysis
c. Crucial analysis
d. Hypothetical analysis
17. For the purpose of fund flow statements the term fund means _________
a. Cash
b. Working capital
c. Current assets
d. Long term assets
18. Fund flow statement is a technical device designed to highlight the changes in the financial condition of a
business enterprise between __________ balance sheets
a. Two
b. Three
c. Four
d. None
19. Cash flow statement helps in _________ financial decisions relating to liquidity
a. Long term
b. Short term
c. Sound
d. Strong
20. Cash flow statement reveals the inflow and outflow of _________ during a particular period.
a. Cash
b. Funds
c. Working capital
d. Assets
21. ________ cost is also called period cost
a. Sunk cost
b. Fixed cost
c. Historical cost
d. Current cost
22. Direct material cost and direct labor cost are a good examples of________ costs
a. Variable
b. Fixed
c. Semi-variable
d. Semi-fixed
23. The concept of marginal costing is developed to overcome the deficiencies of _________ costing.
a. Direct
b. Absorption
c. Variable
d. Differential
24. P/V ratio = Contribution/?
a. Sales
b. Selling price
c. Volume
d. Fixed cost
25. Contribution = Selling price - ________
a. Fixed cost
b. Semi-variable
c. Variable cost
d. Sunk cost
26. The difference between Actual sales and break even sales is called ________
a. Margin of safety
b. Margin of Line
c. Break even point
d. CVP
27. Break even chart shows the relation between cost, volume and _________
a. Output
b. Sales
c. Product
d. Profit
28. Budget is a formal expression of anticipated __________ and expenditure for a definite future period
a. Income
b. Loss
c. Profit
d. Expense
29. The standards for materials include material quantity (usage) standard and material _________ standard
a. Price
b. Yield
c. Cost
d. None
30. When standard cost is more than actual cost, it is called _________ variance
a. Favorable
b. Adverse
c. Reverse
d. Unfavorable
31. Material Cost Variance = Material price variance + Material _________ variance
a. Labor
b. Usage
c. Idle
d. Volume
32. Variable cost is one, which in the aggregate varies in proportion to the volume of production.
a. Direct
b. Does not change
c. Reverse
d. None of these.
33. Quick ratio is also known as ________
a. Liquidity ratio
b. Liquid ratio
c. Current ratio
d. Quick asset ratio
34. Earning per equity ratio = Dividend paid to equity shareholders/?
a. No. Of equity share
b. No. Of profit share
c. Total profit
d. Net profit
35. Decision making is linked with planning and ___________
a. Organizing
b. Staffing
c. Control
d. Directing
36. The excess of credit over debit is known as net profit, and the excess of debit side total over the credit side total is known as
a. Net Loss
b. Net gain
c. Gross loss
d. Gross profit
37. If the amount received from Mr. X is wrongly posted in the account of Mr. Y, an error of _____ has occurred
a. Commission
b. Omission
c. Principle
d. Compensating error
38. Purchases Day Book records credit _________
a. Sales
b. Purchases
c. Expenses
d. Income
39. _________ is a book of original or prime entry
a. Journal
b. Ledger
c. Subsidiary
d. Cash
40. A has a current ratio of 4.5 to 1 and liquidity ratio is 3:1. Its stock is Rs. 24, 000, Find out the total current liabilities
a. 15, 000
b. 16, 000
c. 26, 000
d. 30, 000
SECTION B
Each Question carries two marks each
.1 The success of a business entity depends on:
1. Land
2. Labor
3. Capital
4. Management
a. 1, 2
b. 3, 4
c. All of the above
d. None of the above
2. ‘Accounting’ may be defined as the art of ________ transactions in a significant manner
1. Recording
2. Classifying
3. Summarizing
4. Reading
a. 1, 2
b. 2, 3
c. 1, 2, 3
d. None of the above
3. A cash book is a
1. Journal
2. Ledger
3. Journal as well as ledger
4. Book of prime entry
a. 1, 2
b. 2, 3
c. Only 3
d. All of the above
4. Rules of journalization are:
1. Increase in assets and decrease in liabilities (also equity) = Debit
2. Decrease in assets and increase in liabilities (also equity) = Credit
3. Expenses and losses = Debit
4. Income and gains = Debit.
a. 1, 2
b. 2, 3
c. All of the above
d. 1, 2, 3
5. Trial balance consists of which of the following elements of financial statements?
1. Assets
2. Liabilities + Equity
3. Income
4. Expenses
a. 1, 4
b. 1, 2, 3
c. All of the above
d. 3, 4
6. Following errors exists in spite of an agreed Trial balance
1. Error of Principle
2. Error of commission
3. Error of omission
4. Compensating error
a. 1, 2, 3
b. 2, 3, 4
c. 1, 2, 3, 4
d. Only d
7. The profit and Loss Account and the Balance Sheet are together called
a. Final accounts
b. Financial statements
c. Income statement
d. Position statement
a. 1, 2
b. 2, 3
c. 3, 4
d. Only c
8. Which of the following are sub fields of accounting?
1. Book keeping
2. Financial Accounting
3. Management Accounting and cost accounting
4. Social Responsibility Accounting
a. 1, 2, 3
b. All of the above
c. 3, 4
d. None of the above
9. Preparation of financial statements, communication of accounting information to the users and interpretation
thereof are subject matter of
1. Financial Accounting
2. Management Accounting
3. Cost accounting
4. Social accounting
 a. Only 1
b. None of the above
c. 2, 3
d. Only 4
10. Liquidity ratios include:
1. Current ratio
2. Acid test ratio
3. Debt ratio
4. Gross profit ratio
a. 1, 2
b. 1, 2, 3
c. 1, 3
d. All of the above
11. Fund flow statement is also known by other names such as:
1. A statement of sources and uses of fund
2. Where got and where gone statement
3. Cash flow statement
4. Inflow and outflow of fund statement
a. 1, 2
b. 1, 2, 3
c. 1, 2, 4
d. All of the above
12. The main purposes of fund flow statement are:
1. To help to understand the changes in assets and asset sources
2. To inform as to how the loans to the business have been used
3. To point out the financial strengths and weakness of the business
a. 1, 2
b. Only 3
c. All of the above
d. None of the above
13. Uses of cash flow statement include:
1. It explains the reasons for low cash balance
2. It shows the major sources and uses of cash
3. Future projections can be made from past year statements
a. 1, 2
b. 2, 3
c. Only 3
d. All of the above
14. Inflow of cash results from the following activities
1. Cash from operations
2. Payment of tax
3. Sale of assets
4. Collection from debtors
a. 1, 2, 3
b. 2, 3, 4
c. Only 1
d. 1, 3, 4
15. Costs are classified on the basis of:
1. Nature or elements
2. Traceability
3. Functions or operations
4. Controllability
a. 1, 2
b. 2, 3
c. 1, 2, 3
d. All of the above
16. Contribution =
1. Selling price – Variable (marginal) cost
2. Fixed cost + profit (or – loss)
3. Selling price + variable (marginal) cost
4. Fixed cost + marginal cost
a. 1, 2
b. 1, 2, 3
c. None of the above
d. All of the above
17. Graphical representation of __________ showing their inter-relations at different volumes of output is called
break-even chart. It is the pictorial illustration of cost, volume & profit
1. Cost
2. Cost & revenue
3. Fixed cost
4. Fixed cost + variable cost
a. Only 1
b. Only 2
c. 2, 3
d. 3, 4
18. Following are the classification or types of budgets
1. Functional Budgets
2. Master Budgets
3. Fixed Budgets
4. House Budgets
a. Only 1
b. 2, 3
c. 1, 2, 3
d. None of these
19. Calculate material cost variance from the following information
Standard Quantity = 250 Units
Actual Quantity = 260 Units
Standard price Rs. 5 per unit
Actual price Rs. 5.5 per unit
a. Rs.180 (Adverse)
b. Rs.180 (favorable)
c. Rs 260(A)
d. Rs 260 (f)
SECTION C
Each Question carries 4Marks each
1. Standard costing involves
1. Ascertaining of standard costs for each element of cost i.e. material, labor, overhead
2. Measurement of actual costs
3. Use of standard costs as a guide and measure of actual costs
4. Measurement and analysis of deviations of actual costs from standard costs.
5. Comparison of actual costs with standard the standard costs
Arrange the above in correct order.
a. 1, 3, 2, 5, 4.
b. 1, 2, 3, 4, 5
c. 5, 4, 3, 2, 1
d. 1, 3, 2, 5, 4
2. Match the following
SET A SET B
a. P/V ratio = 1. Sales – Variable cost
b. Contribution = 2. Actual sales – BEP
c Margin of safety = 3. Contribution/sales
d. BE (units) = 4. Total F.C/ C per unit
A. a - 1, b - 2, c - 3, d - 4
B. a - 3, b - 1, c - 2, d - 4
C. a - 2, b - 1, c - 4, d - 3
D. a - 3, b - 2, c - 1, d - 4
3. Match the following
SET A SET B
a. Gross profit ratio 1. Liquidity
b. Current ratio 2. Profitability
c. Capital Gearing ratio 3. Activity
d. Debtors 4. Capital structure
a. a - 1, b - 2, c - 3, d - 4
b. a - 2, b - 3, c - 1, d - 4
c. a - 2, b - 1, c - 4, d - 3
d. a - 4, b - 3, c - 2, d - 1
4. Arrange the steps of decision-making process:
a. Feedback
b. Implementation
c. Control
d. Planning
A. a, b, c, d
B. d, c, b, a
C. a, c, d, b
D. d, b, c, a
5. Match the following
Errors Reason
a. Error of principal 1. Lack of knowledge of accounting principles
b. Error of omission 2. Amount received from Mr. X wrongly posted in the account of Mr. Y
c. Error of commission 3. Transaction not recorded in the journal
d. Compensating Error 4. Effect of one error set up by another error
A. a - 1, b - 3, c - 2, d - 4
B. a - 1, b - 2, c - 3, d - 4
C. a - 4, b - 3, c - 2, d - 1
D. a - 4, b - 1, c - 3, d - 2
6. Arrange the following steps involved in a journalization of transaction in a correct work
a. Identify a transaction or an event
b. Journalize i.e. record in primary books
c. Apply the ground rule of journalisation to confirm the dual effect
d. Identify the elements of the transaction.
A. a, d, c, b
B. a, b, c, d
C. d, c, b, a
D. c, d, a, b
7. The sequence of activities in an accounting process is jumbled. Please arrange it in a purpose sequence.
a. Preparation of vouchers
b. Transaction/event
c. Posting in secondary books
d. Recording in primary books
e. Preparation + presentation of financial statements
f. Preparation of trial books
A. a, b, c, d, e, f
B. b, a, d, c, f, e
C. f, e, d, c, b, a
D. b, d, a, f, c, e
8. Match the following
SET A SET B
a. Asset 1. Inflow of economic benefit or decrease of liabilities
b. Liability 2. Present obligation of the enterprise arising from the past events
c. Income 3. Outflow of economic benefits resulting in increase of liabilities
d. Expense 4. Resource legally owned by the enterprise
A. a - 4, b - 2, c - 1, d - 3
B. a - 3, b - 1, c - 2, d - 4
C. a - 1, b - 2, c - 3, d - 4
D. a - 4, b - 3, c - 2, d - 1
9. Match the following
Journal Purposes
a. Purchases Day Book 1. Records cash receipts and payments
b. Sales Day Book 2. Records credit purchase of stock
c. Return outward Book 3. Records credit sale of goods
d. Cash Book 4. Records goods returned to the suppliers
A. a - 1, b - 2, c - 3, d - 4
B. a - 4, b - 3, c - 2, d - 1
C. a - 2, b - 3, c - 4, d - 1
D. a - 3, b - 2, c - 1, d - 4
10. Match the following
SET A SET B
a. Trading Account 1. Showa the position of assets + liabilities of a business
entity as on particular date
b. Profit & loss Account 2. Shows the distribution of partnership profits among partners
c. Profit & loss Appropriation Account 3. Shows the net profit or loss earned during an accounting period
d. Balance sheet 4. Shows the gross profit or loss earned during in accounting period
A. a - 4, b - 3, c - 2, d - 1
B. a - 1, b - 2, c - 3, d - 4
C. a - 4, b - 2, c - 3, d - 1
D. a - 1, b - 4, c - 3, d - 1
11. Match the following
RATIOS OBJECTIVES
a. Current ratio 1. Trading on equity
b. Liquidity ratio 2. Immediate solvency
c. Gross profit ratio 3. Short-term financial solvency
d. Capital gearing ratio 4. Profitability
A. a - 1, b - 2, c - 3, d - 4
B. a - 3, b - 2, c - 4, d - 1
C. a - 4, b - 3, c - 2, d - 1
D. a - 2, b - 1, c - 4, d - 3
12. Arrange the steps involved in the preparation of fund flow statement
1. Preparation of schedule of changes in working capital
2. Preparation of adjusted profit & Loss account
3. Preparation of accounts for non-current items
4. Preparation of fund flow statement
a. 1, 2, 3, 4
b. 1, 4, 3, 2
c. 4, 3, 2, 1
d. 2, 4, 3, 1
13. Match the following
SET A SET B
a. Fixed cost 1. Factory Rent
b. Variable cost 2. Book vale of present fixed costs
c. Sunk cost 3. Direct material cost
d. Imputed cost 4. Interest on internally generated funds
A. a - 1, b - 3, c - 2, d - 4
B. a - 1, b - 2, c - 3, d - 4
C. a - 4, b - 3, c - 2, d - 1
D. a - 1, b - 4, c - 3, d - 2
14. Match the following
SET A SET B
a. Budget 1. Technique of fixing the targets
b. Budgetary Control 2. Informal expression of anticipated income and expenditure for a definite future
c. Master Budgets 3. Consolidated summary of various functional budgets
d. Flexible Budget 4. Changes according to the activity actually attained
A. a - 1, b - 2, c - 3, d - 4
B. a - 2, b - 1, c - 3, d - 4
C. a - 4, b - 3, c - 2, d - 1
D. a - 1, b - 3, c - 2, d - 4
15. Match the following
SET A SET B
a. Material cost variance 1. (SP – AP) * AQ
b. Material price variance 2. (SP * SP) * (AQ * AP)
c. Material usage variance 3. (S4-A4) * STD cost per unit
d. Material yield variance 4. (SQ – AQ) * SP
A. a - 1, b - 2, c - 3, d - 4
B. a - 4, b - 3, c - 2, d - 1
C. a - 3, b - 2, c - 4, d - 1
D. a - 2, b - 1, c - 4, d - 3

Section A 30 A 19
1 B 31 B SECTION C
2 A 32 A 1 A
3 B 33 A 2 B
4 C 34 A 3 C
5 A 35 C 4 D
6 B 36 D 5 A
7 D 37 A 6 A
8 C 38 B 7 B
9 A 39 A 8 A
10 C 40 C 9 C
11 C SECTION B 10 C
12 A 1 C 11 A
13 A 2 D 12 B
14 A 3 D 13 A
15 A 4 C 14 A
16 A 5 C 15 B
17 B 6 A
18 A 7 B
19 B 8 A
20 A 9 A
21 B 10 C
22 A 11 C
23 B 12 D
24 A 13 D
25 C 14 D
26 A 15 A
27 D 16 B
28 A 17 C
29 A 18 A