Mb0025 Financial Management Accounting

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. b. c. d.

Net Loss Net gain Gross loss 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. b. c. d.

15, 000 16, 000 26, 000 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. b. c. d.

2.

1, 2 3, 4 All of the above None of the above

‘Accounting’ may be defined as the art of ________ transactions in a significant manner 1. Recording 2. Classifying 3. Summarizing 4. Reading a. b. c. d.

1, 2 2, 3 1, 2, 3 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. b. c. d.

Only 1 None of the above 2, 3 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 a. P/V ratio = 1. b. Contribution = 2. c Margin of safety = 3. d. BE (units) = 4. 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

SET B Sales – Variable cost Actual sales – BEP Contribution/sales Total F.C/ C per unit

3.

Match the following SET A a. Gross profit ratio 1. b. Current ratio 2. c. Capital Gearing ratio 3. d. Debtors 4. 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

SET B Liquidity Profitability Activity Capital structure

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 a. Error of principal 1. b. Error of omission 2. c. Error of commission 3. d. Compensating Error 4. 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

Reason Lack of knowledge of accounting principles Amount received from Mr. X wrongly posted in the account of Mr. Y

Transaction not recorded in the journal Effect of one error set up by another error

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.

10.

11.

Match the following Journal a. Purchases Day Book b. Sales Day Book c. Return outward Book d. Cash Book 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

1. 2. 3. 4.

Match the following SET A a. Trading Account

1.

b. c. d.

2. 3. 4.

Profit & loss Account Profit & loss Appropriation Account

Balance sheet 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

Match the following RATIOS a. Current ratio b. Liquidity ratio c. Gross profit ratio d. Capital gearing ratio 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

Purposes Records cash receipts and payments Records credit purchase of stock Records credit sale of goods Records goods returned to the suppliers

SET B Showa the position of assets + liabilities of a business entity as on particular date Shows the distribution of partnership profits among partners Shows the net profit or loss earned during an accounting period Shows the gross profit or loss earned during in accounting period

OBJECTIVES 1. Trading on equity 2. Immediate solvency 3. Short-term financial solvency 4. Profitability

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 a. Fixed cost 1. b. Variable cost 2. c. Sunk cost 3. d. Imputed cost 4. 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 a. Budget 1. b. Budgetary Control 2. c. Master Budgets 3. d. Flexible Budget 4. 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

SET B Factory Rent Book vale of present fixed costs Direct material cost Interest on internally generated funds

SET B Technique of fixing the targets Informal expression of anticipated income and expenditure for a definite future

Consolidated summary of various functional budgets Changes according to the activity actually attained

15.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Match the following SET A a. Material cost variance 1. b. Material price variance 2. c. Material usage variance 3. d. Material yield variance 4. 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 B A B C A B D C A C C A A A A A B A B A B A B A C A D A A

30 31 32 33 34 35 36 37 38 39 40 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

SET B (SP – AP) * AQ (SP * SP) * (AQ * AP) (S4-A4) * STD cost per unit (SQ – AQ) * SP

A B A A A C D A B A C SECTION B C D D C C A B A A C C D D D A B C A

19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

SECTION C A B C D A A B A C C A B A A B