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Accountancy: CUET Mock Test - 5 - CUET MCQ


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40 Questions MCQ Test CUET Mock Test Series - Accountancy: CUET Mock Test - 5

Accountancy: CUET Mock Test - 5 for CUET 2024 is part of CUET Mock Test Series preparation. The Accountancy: CUET Mock Test - 5 questions and answers have been prepared according to the CUET exam syllabus.The Accountancy: CUET Mock Test - 5 MCQs are made for CUET 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Accountancy: CUET Mock Test - 5 below.
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Accountancy: CUET Mock Test - 5 - Question 1

Ratio analysis can help know about the potential areas which can be improved with the effort in the desired direction.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 1

Ratio analysis is a financial analysis tool that involves evaluating various financial ratios to gain insights into a company's performance, financial health, and efficiency. By comparing different ratios and trends over time, ratio analysis can help identify areas of strength and weakness in a company's operations. This information can be used to determine potential areas that could be improved with focused efforts in the desired direction.

Accountancy: CUET Mock Test - 5 - Question 2

The working capital of IAN Ltd. is ₹ 2,00,000 and its current assets are ₹ 6,00,000. What is its current ratio?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 2

Working capital = Current assets - Current liabilities
Current liabilities = Current assets - Working capital
= 6,00,000 - 2,00,000 = ₹ 4,00,000
Current ratio = Current assets/Current liabilities = 6,00,000/4,00,000 = 1.5

Accountancy: CUET Mock Test - 5 - Question 3

Working capital is the excess of current assets over current liabilities.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 3

Working capital = Current assets - Current liabilities 

Accountancy: CUET Mock Test - 5 - Question 4

If current assets and current liabilities both reduce by the same amount, the current ratio will

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 4

If the numerator and denominator reduces by the same amount the ratio improves.

Accountancy: CUET Mock Test - 5 - Question 5

Purchase of goods ₹ 40,000 for cash will increase the operating ratio.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 5

Operating Ratio = Operating Cost/Net Sales × 100

Also, Operating Cost = Cost of Goods Sold + Operating Expenses

Since cost of goods sold includes purchases as well as closing stock so a purchase of ₹ 40,000 worth of goods will increase the value of both closing stock as well as purchases and hence will lead to change in the value of COGS.

Thus, the operating ratio will remain unchanged.

Accountancy: CUET Mock Test - 5 - Question 6

A ratio reflects quantitative as well as qualitative aspects of results.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 6

Accounting data provides information about quantitative (or monetary) aspects of business. Hence, the ratios also reflect only the monetary aspects, ignoring completely the non-monetary (qualitative) factors.

Accountancy: CUET Mock Test - 5 - Question 7

Current ratio of Vidur Pvt. Ltd. is 3:2. Accountant wants to maintain it at 2:1. Following options are available
(i) He can repay bills payable.
(ii) He can take short-term loan.
(iii) He can purchase goods on credit. 
Choose the correct option.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 7

Repayment of bills payable will reduce current assets and liabilities by the same amount. This will improve the current ratio. Other two options will deteriorate it

Accountancy: CUET Mock Test - 5 - Question 8

What will be the effect on current ratio if a bills payable is discharged on maturity?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 8

Repayment of bills payable will reduce current assets and liabilities by the same amount. This will improve the current ratio.

Accountancy: CUET Mock Test - 5 - Question 9

Ratios are comparable even if different accounting policies and procedures are followed by different firms.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 9

There are differing accounting policies for valuation of inventory, calculation of depreciation, etc., available for various aspects of business transactions. As there are variations in accounting practices followed by different business enterprises, ratios may not be comparable.

Accountancy: CUET Mock Test - 5 - Question 10

Which of the following ratios measure the long-term solvency of an organisation?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 10

Liquid ratio measures short-term solvency of an enterprise. It indicates whether a firm is able to pay its current liabilities immediately.

Accountancy: CUET Mock Test - 5 - Question 11

Which of the following is/are not the component(s) of quick asssets?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 11

Quick assets = Current assets - Inventories - Prepaid expenses

Accountancy: CUET Mock Test - 5 - Question 12

The Current Assets of APE Ltd. are T 6,00,000 ; Current Liabilities are ₹ 2,00,000; Inventories are ₹ 1,50,000; Prepaid Expenses are ₹ 50,000 and Cash and Cash Equivalents are ₹ 1,00,000. What is its quick ratio?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 12

Quick assets = Current assets - Inventories - Prepaid expenses
= 6,00,000 - 1,50,000 - 50,000 = ₹ 4,00,000 
Quick ratio = Quick assets/Current liabilities = 4,00,000/2,00,000 = 2

Accountancy: CUET Mock Test - 5 - Question 13

Generally, a lower current ratio is considered better.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 13

Generally, higher the current ratio the better it is because it indicates that the firm will be able to meet its current liabilities.

Accountancy: CUET Mock Test - 5 - Question 14

Purchase of machinery for cash will _____ the quick ratio.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 14

This is purchase of machinery for cash will reduce the current assets but current liabilities remain unchanged, so the ratio will decrease.

Accountancy: CUET Mock Test - 5 - Question 15

What is the debt to equity ratio when the following information is available Total Assets ₹ 35,00,000; Total Debts ₹ 25,00,000; Current Liabilities ₹ 8,00,000.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 15

Debt to equity ratio = Debt/Equity
Debt = Total debt - Current liabilities = 25,00,000 - 8,00,000 = ₹ 17,00,000
Equity = Total assets - Total debts = 35,00,000 - 25,00,000 = ₹ 10,00,000
Debt to equity ratio = 17,00,000/10,00,000 = 1.7 : 1

Accountancy: CUET Mock Test - 5 - Question 16

ARYA Ltd has a term Loan of ₹ 10,00,000. Interest on Loan for the year is ₹ 1,25,000 and its PBIT is ₹ 5,00,000. Its interest coverage ratio is

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 16

Interest coverage ratio — PBIT/Interest on long-term debt = 5,00,000/1,25,000 = 4 times.

Accountancy: CUET Mock Test - 5 - Question 17

If P Ltd obtains a Bank Loan of ₹ 30,00,000 payable after 5 years, then its proprietary ratio will

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 17

Total assets will increase by the amount of loan but Shareholders’ funds will remain the same so proprietary ratio will decrease.

Accountancy: CUET Mock Test - 5 - Question 18

Purchase returns amounting to ₹ 20,000 will deteriorate the inventory turnover ratio

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 18

It will improve the ratio as COGS remains unchanged but average stock decreases.

Accountancy: CUET Mock Test - 5 - Question 19

Debt-equity ratio expresses the relationship between short-term debt and equity share capital of an enterprise.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 19

Debt-equity ratio = Long-term debt/Shareholder’s funds

Accountancy: CUET Mock Test - 5 - Question 20

What is the inventory turnover ratio, when the following is given?
COGS = ₹ 1,50,000;
Closing Inventory = ₹ 60,000;
Excess of Closing Inventory over Opening Inventory ₹ 20,000.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 20

Inventory turnover ratio = COGS/Average inventory
Opening inventory = Closing inventory - 20,000 = 60,000 - 20,000 = ₹ 40,000
Average inventory = (Opening inventory + Closing inventory)/2 = 40,000 + 60,000/2
= 1,00,000/2
= ₹ 50,000
Inventory turnover ratio = 1,50,000/50,000 = 3 times

Accountancy: CUET Mock Test - 5 - Question 21

A rise in operating ratio will indicate a rise in efficiency.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 21

A higher operating ratio indicates a decline in efficiency. It is a cost ratio. Higher operating ratio will mean there is a greater component of cost in price and hence lesser profits.

Accountancy: CUET Mock Test - 5 - Question 22

Debt-equity ratio of a company is 1:2.
Purchase of a fixed asset for ₹ 5,00,000 on long-term deferred payment basis will

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 22

Purchase of a fixed asset for 5,00,000 on long-term deferred payment basis will increase the debt component but not the equity component and hence ratio will increase.

Accountancy: CUET Mock Test - 5 - Question 23

If the debtor’s turnover ratio of MON Ltd. is 6 times, creditors turnover ratio is 4 times then what is its average collection period in months?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 23

Average collection period = 12/Debtor’s turnover ratio = 12/6 = 2

Accountancy: CUET Mock Test - 5 - Question 24

Which ratio indicates the speed with which amount is being paid to the creditors?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 24

Trade payables turnover ratio indicates the speed with which amount is being paid to creditors.

Accountancy: CUET Mock Test - 5 - Question 25

XYZ Ltd. extends credit terms of 45 days to its customers. Its credit collection would be considered poor if its average collection period was.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 25

If the average collection period exceeds the credit terms its credit collection would be considered poor.

Accountancy: CUET Mock Test - 5 - Question 26

Which of the following groups of ratios primarily measure risk?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 26

By considering liquidity, debt, and profitability ratios together, stakeholders can gain a comprehensive understanding of a company's financial risk. Liquidity ratios indicate short-term risk, debt ratios assess financial risk, and profitability ratios provide insight into the company's ability to manage risk and generate returns.

Accountancy: CUET Mock Test - 5 - Question 27

What will be the effect of purchase of goods for cash ₹ 3,000 on gross profit ratio?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 27

Operating profit ratio = Operating Profit / Net Sales x 100

Accountancy: CUET Mock Test - 5 - Question 28

What will be the current ratio of a company whose net working capital is zero?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 28

Net working capital = 0
Current assets - Current liabilities = 0
So, Current assets = Current liabilities ....(i)
Current ratio = Current assets/Current liabilities
Using Eq.(i); Current ratio = Current liabilities/Current liabilities = 1 

Accountancy: CUET Mock Test - 5 - Question 29

Directions: There are two statements marked as Assertion (A) and Reason (R). Read the statements and choose the appropriate option from the options given below
Assertion (A): The debt to equity ratio will increase at the time of issue of equity shares for cash.
Reason (R): Issue of equity shares will increase the shareholders’ funds but the long-term debts will remain the same.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 29

The debt to equity ratio will decrease at the time of issue of equity shares for cash.

Accountancy: CUET Mock Test - 5 - Question 30

Directions: There are two statements marked as Assertion (A) and Reason (R). Read the statements and choose the appropriate option from the options given below
Assertion (A): Inventories and prepaid expenses are not considered as quick assets.
Reason (R): Inventories take some time before it is converted into cash while prepaid expenses can be converted into cash.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 30

Inventories take some time before it is converted into cash and prepaid expenses are the expenses paid in advance and cannot be converted into cash.

Accountancy: CUET Mock Test - 5 - Question 31

Directions: Read the following case study and answer questions on the basis of the same.
Tony and Rony started a partnership firm, TR CDs to manufacture music CDs way back in 1990. Now since the music CDs are out of business, they plan to sell the business to one of the major content production houses in Mumbai. For the purpose of selling business, they reached to their accountant to calculate the goodwill and other financial advice. He suggested that since the CDs are very less in demand, their goodwill value will be hampered. Nonetheless, the framework for goodwill calculation was decided as follows
‘The goodwill be valued at 4 years’ purchase of super profits.’ The following financial information was obtained at the end of this transaction
• Assets ₹ 8,000 • Creditors ₹ 1,000 • Normal rate of return 10% • Goodwill of the firm ₹1,000
What is the average profit of business?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 31

Super Profit = Average Profit - Normal Profit
250 = Average Profit - 700
Average Profit = ₹ 950

Accountancy: CUET Mock Test - 5 - Question 32

Directions: Read the following case study and answer questions on the basis of the same.
Tony and Rony started a partnership firm, TR CDs to manufacture music CDs way back in 1990. Now since the music CDs are out of business, they plan to sell the business to one of the major content production houses in Mumbai. For the purpose of selling business, they reached to their accountant to calculate the goodwill and other financial advice. He suggested that since the CDs are very less in demand, their goodwill value will be hampered. Nonetheless, the framework for goodwill calculation was decided as follows
‘The goodwill be valued at 4 years’ purchase of super profits.’ The following financial information was obtained at the end of this transaction
• Assets ₹ 8,000 • Creditors ₹ 1,000 • Normal rate of return 10% • Goodwill of the firm ₹1,000
What is the super profit of business?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 32

Goodwill = Super Profit x Number of Years’
Purchase 1,000 = Super Profit x 4
Super Profit = ₹250 

Accountancy: CUET Mock Test - 5 - Question 33

Directions: Read the following case study and answer questions on the basis of the same.
Tony and Rony started a partnership firm, TR CDs to manufacture music CDs way back in 1990. Now since the music CDs are out of business, they plan to sell the business to one of the major content production houses in Mumbai. For the purpose of selling business, they reached to their accountant to calculate the goodwill and other financial advice. He suggested that since the CDs are very less in demand, their goodwill value will be hampered. Nonetheless, the framework for goodwill calculation was decided as follows
‘The goodwill be valued at 4 years’ purchase of super profits.’ The following financial information was obtained at the end of this transaction
• Assets ₹ 8,000 • Creditors ₹ 1,000 • Normal rate of return 10% • Goodwill of the firm ₹1,000
What is the normal profit of business?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 33

Normal Profit = Capital Employed x Normal Rate of Return / 100
= (8,000 -1,000) x 10/100 = ₹ 700 100

Accountancy: CUET Mock Test - 5 - Question 34

Pinky and Chinky are partners in a firm. They share their profits in 2 : 3 ratio. The accountant of the firm, finalised the profit and loss and capital account and presented the accounts to them. Pinky disagreed with accounts because Pinky’s capital account showed negative balance. Pinky is in doubt, this cannot happen. Give your opinion.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 34

Pinky is wrong because, if debit side of the partners’ capital account is more than its credit side, then it shows negative balance.

Accountancy: CUET Mock Test - 5 - Question 35

Jay and Viru started partnership with guarantee given to Jay of ₹30,000 profits per year. The profits for 2020-21 are ₹60,000. Assuming 2 : 1 as profit sharing ratio, calculate Jay’s share of profit.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 35

Jay’s share without guarantee (₹ 40,000) is already more than guarantee.

Accountancy: CUET Mock Test - 5 - Question 36

Munit and Seema came together to provide free food to poor covid patients during the pandemic. They can call this as partnership.

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 36

Profit making is mandatory purpose for business partnership. 

Accountancy: CUET Mock Test - 5 - Question 37

Mr. X and Mr. Y are partners in a firm. Mrs. X extended loan to firm @10% p.a. of ₹ 1,00,000. Interest on loan given to Mr. X will be

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 37

No interest will be provided to Mr. X as loan is of Mrs. X and not Mr. X.

Accountancy: CUET Mock Test - 5 - Question 38

Directions: Read the following case study and answer questions on the basis of the same.
Sam and Tom decided to set up a partnership to sell low-sodium, plant based vegan snacks. Since both of them had a family, they decided to withdraw a salary of 12,000 per quarter.
Sam also withdrew ₹ 1,00,000 on 31st December, 2020 to get her wife treated for Covid-19. The partnership deed provided for 10% p.a. interest on drawings.
Tom introduced ₹ 50,000 as additional capital on 31stjanuary, 2021 to increase the inventory. The net distributable profit was ₹ 2,00,000 which was divided between Sam and Tom after providing 25% to general reserve.
Total amount of salary credited to the partner’s account is

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 38

Total Salary = 2 x (4 x 12,000) = ₹ 96,000

Accountancy: CUET Mock Test - 5 - Question 39

Directions: Read the following case study and answer questions on the basis of the same.
Sam and Tom decided to set up a partnership to sell low-sodium, plant based vegan snacks. Since both of them had a family, they decided to withdraw a salary of 112,000 per quarter.
Sam also withdrew ₹ 1,00,000 on 31st December, 2020 to get her wife treated for Covid-19. The partnership deed provided for 10% p.a. interest on drawings.
Tom introduced ₹ 50,000 as additional capital on 31stjanuary, 2021 to increase the inventory. The net distributable profit was ₹ 2,00,000 which was divided between Sam and Tom after providing 25% to general reserve.
Interest on Tom’s capital will be

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 39

Interest on Tom’s Capital = Nil (Deed is silent)

Accountancy: CUET Mock Test - 5 - Question 40

Directions: Read the following case study and answer questions on the basis of the same.
Sam and Tom decided to set up a partnership to sell low-sodium, plant based vegan snacks. Since both of them had a family, they decided to withdraw a salary of 112,000 per quarter.
Sam also withdrew ₹ 1,00,000 on 31st December, 2020 to get her wife treated for Covid-19. The partnership deed provided for 10% p.a. interest on drawings.
Tom introduced ₹ 50,000 as additional capital on 31stjanuary, 2021 to increase the inventory. The net distributable profit was ₹ 2,00,000 which was divided between Sam and Tom after providing 25% to general reserve.
What was the profit credited in both partner’s accounts?

Detailed Solution for Accountancy: CUET Mock Test - 5 - Question 40

Profit credited = 2,00,000 - 25% = ₹ 1,50,000

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