Financial & Management Accounting New

Page No. 1

FINANCIAL & MANAGEMENT ACCOUNTING MB0025 Section 1

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1 Accounting is a branch of knowledge, concerned with recording classifying analyzing and reporting financial information to _____ regarding the financial performance of organisation. a) Owner b) Bankers c) Creditor d) All

a) Error of omission c) Error of principle

2 _____ is the discipline of measuring, communicating and interpreting financial activities and it is widely referred to as language of business a) Accounting b) Record keeping c) Financial management d) None

16 The basis for preparing final accounts is the Trial Balance. For Trial Balance, the _____ are the root. a) Ledger balance b) Journal entries c) Scientifically recording d) Book keeping

b) Error of commission d) None

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15 _____ error is also called off-setting error a) Compensating error b) Commission error c) Omission error d) None

17 Expenses due but not yet paid are known as ______ 3 _____ is a person whom the business owes some thing. a) Outstanding expenses b) Instanding expenses Ph:to011-65439499, 65066565/ 6/ 7, 28013999 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. 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 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:a) E.Y. b) Genou Ph: 011-65439499, 65066565/ 6/Youmans 7, 28013999d) 8 Purchases book is also called _____ c) Y.O Hertz 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 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 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 7,Margin 28013999b) Profit after taxes a) Net 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

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14 Which of the following is not an error which do not affects trial balance

29 Decrease in _____ is always a source of funds for the

Page No.2 (ii) All transaction of a business are recorded in terms of money. a) True True b) False False c) False True d) True False

business a) Assets c) Any of them

b) Liabilities d) none

30 CFS stand for a) Cash flow statement c) Cash flow stock

b) Credit flow statement d) None

31 _____ also known as ‘Statement Accounting for variations is cash’. a) Cash flow statement b) Fund flow statement c) Cash flow stock d) Cash transaction

44 There are two systems of double entry book keeping namely _____ a) Cash system & mercantile system b) Cash system & expenses system c) Credit system and debit system d) None

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32 ______ is the total of direct materials cost, direct labour cost and chargeable expenses a) Factory cost b) Prime cost c) Direct cost d) Total cost 33 Which Item is not include in cost sheet : a) Income tax b) Interest on capital c) Share premiumPh: 011-65439499, 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) c) (ii) (iii) (iv) d) (i) (ii) (iii) & (iv)

65066565/ 6/ 7, 28013999 46 Journal is subdivided into several books of original entry, they are also regarded as _____ a) Primary books or secondary books b) Cash books or money books c) Receive books or payable books d) None

34 Marginal cost is also known ______ a) Variable cost b) Direct cost c) Labour cost d) Primary cost 35 _____ is the volume of activity where the organisation’s revenues and expenses are equal a) CVP b) BEP c) BPE d) CPV 36 The formula to find out the BEP ( in units) is :a) Fixed expenses / Unit contribution margin b) Fixed expenses/ Contribution sales ratio c) Contribution / Expenses d) Expenses / Contribution

47 Cash purchases are recorded in _____ and credit purchses are recorded in _____ a) Cash books, credit book b) Purchase book, credit book c) Cash book, purchase book d) None

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48 _____ are the two techniques of preparing trial balance a) Total method & Trial method b) Trial method & Balance method 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 c) Preparation of budgets d) Reporting the system 38 Which one is not a limitation of budgeting a) Budget plan Ph: 011-65439499, b) Rigidity c) Replacement d) None

49 (i) In trial method balance when error are located, they should be rectified (ii) It is a good practice to erase the mistakes and re-write the correct ones a) False b) False False 65066565/ 6/True 7, 28013999 c) True True d) True False

39 Which one is not an essential features of Budgeting Contro a) Forecasting b) Formation of budget committee c) Accounting system d) Feedback process 40 Material cost variance is equals to : a) Standard cost x Actual cost b) Standard cost - Actual cost c) Actual cost - Standard cost d) Standard cost + Actual cost

50 Management Accounting function include a) Planning b) Organizing c) Coordinating d) All 51 (i) Financial Accounting is flexible (ii) Management Accounting is rigid a) True True b) True False c) False False d) False True

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SECTION 2

41 (i) Book keeping inclueds recording, analyzing & communicating. (ii) Book keeping is an adjunct of accounting a) True False b) False True c) True True d) False False

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53 (i) STO is also known as stock velocity (ii) DTO is also known debtors velocity a) True False b) False True 65066565/ 6/False 7, 28013999 c) False d) True True

42 (i) Purchase & Sale of goods is called ______ (ii) Goods sold to customers either for cash or for credit are regarded as _____ a) (i) Sales (ii) Trade b) (i) Trade (ii) Sales c) (i) Transaction (ii) Sales d) (i) Trade (ii) Transaction 43 (i) Expenses are different from payments.

52 (i) Ratio analysis is a techinque of analysis and interpretation of financial statements (ii) Ratio analysis is one of the most powerful tools of profitability concepts a) True True b) False False c) True False d) False True

54 (i) Working capital is current assets minus current liabilities (ii) Three common usages of the term “FUND” are cash, working capital & total financial resources a) True True b) False True c) True False d) False False

Page No. 3 55(i) FFS is rigid but CFS is flexible (ii) FFS is concerned with the total provision of funds. CFS is concerned with only cash a) True True b) False False c) True False d) False True 56 All managerial policies & decisions permeate all phases of cost accounting and cost information helps in :(i) Acquiring plant and machinery (ii) Adding or reducing a product (iii) Buying or making parts a) (i) & (ii) b) (i) & (iii) c) (i) (ii) & (iii) d) (ii) & (iii)

(iv) Increase in a liability, followed by increase in proprietor’s equity. (v) Decrease in an asset and corresponding decrease in owner’s equity. a) (i) true (ii) true (iii) false (iv) true (v) true b) (i) true (ii) false (iii) true (iv) true (v) true c) (i) true (ii) true (iii) true (iv) false (v) fasle d) (i) true (ii) true (iii) true (iv) false (v) true

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64 Types of journal include :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, 57 Calculate sales in in rupees cash book and journal proper Units produced 60,000. selling price per unit Rs 15. Profits to c) Purchases book, sales book, purchases returns book, sales be earned in Rs 87,500. returns book, bills credit book, bills payable book, cash book a) 7,12,000 b) 7,15,500 and journal proper c) 7,12,500 d) 8,12,000 d) a) Purchases book, sales book, purchases returns book, Ph:or 011-65439499, 65066565/ 7, book, 28013999 sales6/ returns bills receivalble book, bills payable book, 58 Calculate MCSR p/v ratio: Marginal cost Rs 24,000. Sales cash book and cash transaction book Rs 60,000 a) 80% b) 40% 65 Match the column c) 60% d) 30% (1) Error of omission (2) Erroe of commission 59 The budgets are normally classified according to their (3) Error of principle nature. They are (4) Compensating errors a) Fixed budget, flexible budget, functional budget (i) _____ occurs when a transaction is completely omitted from b) Fixed budget, flexible budget, operational budget the books of accounts. c) Functional budget, operational budget, fixed budget (ii) If the error of wrong posting, wrong casting, wrong d) Operational budget, flexible budget, fixed budget calculation etc. committed in the books of original entry or ledger, it is said to be _____ 60 DR Ltd. has decided to extend its range to include Denim (iii) While drawing journal entries, often _____ is committed jackets. One jacket requires a standard usage of 3 meters of and this goes un noticed because it does not affect the total of direct material which has been set at a standard price of Rs. trial balance. 2.20 per meter. In the period, 80 jackets were made and 260 (iv) It is also called off-setting error meters of material consumed at a cost of Rs. 1.95 per meter. a) 1(i) 2(ii) 3(iii) 4(iv) Calculate the direct material total variance. b) 1(ii) 2(i) 3(iii) 4(iv) a) Rs. 21 variance b) Rs. 22 variance c) 1(i) 2(iii) 3(ii) 4(iv) c) Rs. 31 variance d) Rs. 32 variance d) 1(iv) 2(ii) 3(i) 4(iii) SECTION 2 66 (i) due but not yet paid are known as doubtful Ph: 011-65439499, 65066565/ 6/Expenses 7, 28013999 expenses. 61 (i) Accounting is an art and science. (ii) Expenses paid in advance are regarded as prepaid ex(ii) Accounting involves a process of identifying, classifying penses. and recording financial information, expressed in terms of (iii) Depreciation is reduction in the value of an asset due to money. constant use of the same, which is called wear and tear. (iii) Accounting is an information system. (iv) Bad debts are those debts which are not recovered. If bad (iv) Accounting helps in taking managerial decisions debts are shown outside the trial balance, which means that a) (i) (ii) & (iv) b) (i) (ii) (iii) & (iv) they are identified after the preparation of Trial Balance. c) (i) (iii) & (iv) d) (ii) (iii) & (iv) (v) Provision for bad debts is a liability to be incurred in future and so it should appear on the liability side of balance sheet. 62 Types of Accounting concepts are:a) (i) true (ii) true (iii) true (iv) true (v) true (i) Business separate entity concept, Going concern concept, b) (i) false (ii) true (iii) true (iv) true (v) true Money measurement concept, Non Periodicity concept, c) (i) false (ii) false (iii) true (iv) true (v) false Accrual concept d) (i) true (ii) false (iii) true (iv) true (v) false (ii) Business separate entity concept, Cost & revenue concept, Money measurement concept, Non Periodicity concept, 67 Special features of Management Accounting are Accrual concept (i) Selective in nature (ii) Provides data (iii) Business separate entity concept, Going concern concept, (iii) Future oriented (iv) Cause and effect relationship Money measurement concept, Periodicity concept, Accrual (v) Adherence of rules (vi) Economic reality concept (vii) Goal congruence (viii) Quantitative techniques (iv) Business separate entity concept, Going concern concept, (ix) Certainty Money measurement concept, Cost & revenue concept, Ph: 011-65439499, 65066565/ 6/ 7, 28013999 a) (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Accrual concept b) (i) (ii) (iii) (v) (vi) (vii) (viii) (ix) c) (i) (ii) (iii) (iv) (vi) (vii) (viii) 63 Effect of Transactions on Accounting Equation d) (i) (ii) (iv) (v) (vi) (vii) (viii) (ix) (i) Increase in one asset with a decrease in another asset. (ii) An increase in one asset with an equal amount of increase 68 State true or false in liablility. (i) The objective of Financial Accounting is to collect informa(iii) An increase in asset with an equivalent rise in the tion for internal communication and use. proprietor’s equity.

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Page No.4 (ii) It is subjective in nature (iii) It covers entire organization (iv) It lays stress on future (v) It is a legal documents (vi) It is flexible a) (i) true (ii) false (iii) true (iv) true (v) true (vi) true b) (i) true (ii) false (iii) true (iv) false (v) true (vi) false 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

74 It is observed that one unit of product X requires 3 kgs of material M at Rs. 2 per kg. During January 2008, 200 units of product X were produced consuming 620 kgs of material M, all of which was purchased at Rs. 1.80 per kg. Compute material cost variances. a) Rs. 84 (FAV) b) Rs. 94 (FAV) c) Rs. 40 (FAV) d) Rs. 65 (FAV)

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75 State true or false (i) Budgetary control deals with costs and revenues. But 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 c) (i) False (ii) True (iii) False d) (i) True (ii) False (iii) False

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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 diagonsis and financial health of the firm. a) (i) true (ii) true (iii) true (iv) true (v) true (vi) true 011-65439499, b) (i) false (ii) truePh: (iii)true (iv) true (v) true (vi) true 65066565/ 6/ 7, 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 Current Assets 5,00,000 Represented by: Current Liabilities 1,00,000 Reserves and surplus 1,00,000 10% Debentures 2,00,000 6% Preference Share Capital 3,00,000 Equity Share Capital 8,00,000

SECTION 1 1d 2a 7a 8c 13a 14d 19b 20d 25b 26c 31a 32b 37d 38d

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3b 9c 15a 21c 27a 33d 39d

4d 10b 16a 22a 28d 34a 40b

5a 11b 17a 23c 29a 35b

6b 12c TM 18d 24d 30a 36a

45d 51c 57c

46a 52c 58c

65a 71b

66b 72c

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Calculate the Debt Ratio and Debt-equity ratio 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 d) Debt Ratio = 1:5, Debt-equity ratio = 1:5

SECTION 2 41b 42b 43a 44a 47c 48c 49d 50d 71 The written down value of a Machinery at the beginning 53d 54a 55d 56c and at close were Rs. 2,00,000 and 1,75,000. An old machine whose written down value was Rs. 12,000 was sold for Rs. 59a 6/ 60a Ph: 011-65439499, 65066565/ 7, 28013999 6,5000. Rs. 32,000 depreciation was charged during the current year. Calculate the purchase price. a) 18,000 b) 19,000 c) 19,500 d) 18500

72 State True or False Computation of changes in working capital and funds (i) Increase in a current asset item decreases working capital (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. 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

SECTION 3 61b 62c 67c 68d 73d 74a

63d 69a 75b

64a 70a

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73 Match the column:(1) Fixed budget (2) Flexible budget (3) Functional budget 65066565/ (i) These are also Ph: known011-65439499, 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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