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Test: Accounting & Financial Management of Banking - 1 - Bank Exams MCQ


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100 Questions MCQ Test Mock Test Series for JAIIB Exam 2025 - Test: Accounting & Financial Management of Banking - 1

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Test: Accounting & Financial Management of Banking - 1 - Question 1

Mr X made an investment of ₹ 8,000 and expects a return of ₹2000 per annum for 5 years. What is the net present value of cash flow assuming the discount rate as 9%?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 1

Present value of cash flows:

Present value of inflows = 1834 + 1684 + 1544 + 1416 + 1300 = 7778
Net Present Value = Inflows - Outflows = 7778 - 8000 =-222
Hence, the correct answer is option (b).

Test: Accounting & Financial Management of Banking - 1 - Question 2

Which of the following scenarios will result in a higher profit as per absorption costing compared to the profit calculated by marginal costing approach?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 2
  • When the opening and closing stock is zero, both absorption costing and marginal costing will give the same profit.
  • When the opening and closing stock have the same fixed cost component, both absorption costing and marginal costing will give the same profit.
  • When the closing stock is greater than the opening stock, a part of the fixed cost component is carried forward to the next accounting period, resulting in a higher profit as per absorption costing.
  • When the opening stock is greater than the closing stock, a part of the fixed cost component from the preceding period is added to the cost of goods sold, resulting in a higher profit as per marginal costing.
  • The difference in the profit between absorption costing and marginal costing depends on the level of fixed costs. The variable cost per unit being higher than the fixed cost per unit does not necessarily determine the difference in the profit between the two methods.
  • Therefore, the correct answer is option (c).
Test: Accounting & Financial Management of Banking - 1 - Question 3

Which of the following is a component of a standard costing system?
(l) Establishment of standard costs for materials, labor, and overheads for a particular production line
(ll) Developing a marketing plan for the products
(lll) Comparison of actual costs with the established standards to determine the variances
(lV) Analysis of the variances and initiation of corrective actions where necessary

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 3
  • The component of a standard costing system is the establishment of standard costs for materials, labor, and overheads for a particular production line. This involves setting predetermined costs that a company expects to incur during production.
  • Comparison of actual costs with the established standards to determine the variances is also a component of a standard costing system. This involves analyzing the difference between the actual costs incurred during production and the standard costs set by the company.
  • The final component of a standard costing system is the analysis of the variances and initiation of corrective actions where necessary. This involves analyzing the reasons for the variances and taking corrective actions to improve the company's production and cost-control processes
Test: Accounting & Financial Management of Banking - 1 - Question 4

Marginal Cost of Capital is calculated using which of the following Formula?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 4

The marginal cost of capital refers to the cost of raising an additional rupee of capital. MCC is calculated based on the average cost of capital using the marginal weights.
The marginal weights represent the proportion of funds the firm intends to employ. Hence, the problem of choosing between the book value weights and the market value weights does not arise in the case of the marginal cost of capital computation.

Test: Accounting & Financial Management of Banking - 1 - Question 5

From the following information identify the total amount that should be debited to P&L account
Trial balance

Adjustment :
Maintain the provision at 5% on sundry debtors

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 5


New provision
25000 x 5/100 = 1250
When the amount due from debtors is found irrecoverable it is called bad actor it is a loss to the business. When a bad act is given in trial balance in this Case No adjusting entry is needed; it should be taken on the debit side of P&L account. When a bad act is given as an adjustment it should be taken at two places. one is at the debit side of the profit and loss account and should also be deducted from debtors on the asset side of the balance sheet. Provision for bad and doubtful debt

A part of the debtor at the end of the year may be irrecoverable. This means that some of the debtors are doubtful. A doubtful debt is the debt which may or may not be recovered.it is necessary to show every asset at its true value. Hence all enterprise based on their past experience create a provision for doubtful debts to meet such a probable loss in case it happens. The provision should be created during the current year itself because the debtors relate to the current year. When a debt irrecoverable in the next year it can be adjusted from this provision created. By creating such a provision for doubtful debts it is possible to show debtors at its true value. Provision is created at a certain percentage on sundry dipterous. If bad debt written off plus new provision as per adjustment is more than the existing provision the difference should be debited to P&L account.

Test: Accounting & Financial Management of Banking - 1 - Question 6

Assertion: The current yield of a bond increases when the bond's market price decreases.

Reason: Current yield of bond is calculated by dividing the bond's annual interest payment by its current market price

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 6

Both assertion and reason are correct and reason is the suitable explanation of the assertion. The current yield of a bond is the measure of the annual income generated by the bond as a percentage of its current market price. It is calculated by dividing the bond's annual interest payment by its current market price. The current yield of a bond increases when the bond's market price decreases.

Hence, the correct answer is Option (d).

Test: Accounting & Financial Management of Banking - 1 - Question 7

Tax at source is not deductible under which of the following interest payable
I. National Development Bonds
II. 7-year National Savings Certificates (IV Issue)
III. Debentures issued by any institution or authority or any public sector company or any cooperative society

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 7

No tax deduction is to be made from any interest payable:
(i) on National Development Bonds;
(ii) on 7-year National Savings Certificates (IV Issue);
(iii) on debentures issued by any institution or authority or any public sector company or any co-operative society (including a co-operative land mortgage bank or a co-operative land development bank), as notified by the Central Government).

Test: Accounting & Financial Management of Banking - 1 - Question 8

__________ helps in the review of the current trends and framing of future policies.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 8

Budgetary control is the establishment of budgets relating to the responsibilities of executives to the requirement of a policy and the continuous comparison of actual with budgeted results. It provides a basis for revision for current and future policies.

Test: Accounting & Financial Management of Banking - 1 - Question 9

What is the purpose of preparing a bank reconciliation statement?
I. Detecting errors such as double payments, missed payments, calculation errors etc.
II. Tracking and adding bank fees and penalties in the books
III. Spot fraudulent transactions and theft
IV. Keeping track of accounts payable and receivables of the business

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 9

To do bank reconciliation you would match the cash balances on the balance sheet to the corresponding amount on your bank statement, determining the differences between the two in order to make changes to the accounting records, resolve any discrepancies and identify fraudulent transactions. The purpose of preparing bank reconciliation statement:-

  • Detecting errors such as double payments, missed payments, calculation errors etc.
  • Tracking and adding bank fees and penalties in the books
  • Spot fraudulent transactions and theft
  • Keeping track of accounts payable and receivables of the business

Thus, the correct option is (d)

Test: Accounting & Financial Management of Banking - 1 - Question 10

Given below is one of the features related to double entry system, the statement in incomplete, comprehend the feature of the following and complete the sentence.
Double Entry System does not record _______________aspects of the transaction.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 10

Double Entry System seeks to record every transaction in money or money's worth in its double aspect. Recording of both personal and impersonal aspects is an important feature of the double entry system. Both personal and impersonal aspects of a transaction are recorded.
Non monetary aspect of the transactions is not recorded under double entry system.
Thus, the correct option is (a)

Test: Accounting & Financial Management of Banking - 1 - Question 11

Which of the following statement is correct regarding the approaches for determining the working capital mix
I. According to the hedging approach the permanent working capital requirements should be financed by long term funds while the temporary capital requirement should be financed out of a short term fund.
II. According to conservative approach all requirements of working capital fund should be met from the long term source
III. According to an aggressive approach the firm relies more on short term sources than long term sources to finance its current asset.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 11

Statement I: Correct
Hedging approach: according to the hedging approach the permanent working capital requirements should be financed by long term funds while the temporary or seasonal working capital requirement should be financially out of short term funds or current liability. According to this approach, the expected life of an asset is matched with the period of source of finance with which the asset is financed. In other words, the life of an asset should match with the maturity of the source of finance. That is why it is also known as the matching approach.

Statement II: Correct
Conservative approach: this approach emphasizes safety. According to this approach, all requirements of a working capital fund should be met from long term sources. The short term source should be used only during emergency time. According to conservative strategy, It is necessary to maintain a high level of working capital and it should be financed by long term funds like share capital or long term debt. Availability of sufficient working capital shall enable the smooth operation of business. When sufficient working capital is available, there would be no stoppage of production. Sufficient stock of finished goods can be maintained to meet the market fluctuation. The higher liquidity levels reduce the risk of insolvency.

Statement III: Correct
Aggressive approach: under this approach, the firm relies more on short term sources then on long term sources to finance its current assets. In other words, the entire estimated amount of current asset is financed from short term sources. This approach makes the finance mix more risky, costly and profitable.

Test: Accounting & Financial Management of Banking - 1 - Question 12

Match the examples with following types of profits and losses.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 12

Capital Loss- The losses which are not related with the normal course of business are capital losses. For example:-

  • Loss of fixed assets.
  • Loss on sale of a fixed asset.
  • Theft committed by an employee or by the outsiders after business hours.
  • Loss on issue of shares and debentures.

Revenue Loss- The losses which are incurred in the normal course of business are revenue losses. Examples are:-

  • Loss of stock by fire or theft
  • Misappropriation or embezzlement of cash by employees during usual business hours.
  • Bad Debts

Capital Profit- Profits earned on sale of fixed assets or in connection with share capital are known as capital profits. When shares are issued at premium, the amount of premium is called capital profit.

Revenue Profit- The profits which are earned in the normal course of business are termed as revenue profits.
Thus, the correct option is (d)

Test: Accounting & Financial Management of Banking - 1 - Question 13

What are the benefits of GST compliance for businesses in India?
(l) Streamlining of the tax system
(ll) increased compliance burden
(lll) Increased tax revenue for the government
(lV) Reduction in tax evasion

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 13

GST compliance provides multiple benefits for businesses in India, including streamlining of the tax system, reduction in tax evasion, and increased tax revenue for the government. By implementing GST compliance, businesses can ensure a more transparent and efficient tax system, which ultimately benefits all stakeholders.

Test: Accounting & Financial Management of Banking - 1 - Question 14

Which of the following statement/s is/are correct regarding accounting ratio?
I. Accounting ratios are a group of metrics used to measure the efficiency and profitability of a company based on its financial reports.
II. An accounting ratio compares two line items in a company's financial statements
III. Accounting ratios are used by both the company itself to make improvements or monitor progress as well as by investors to determine the best investment option
IV. These ratios can be used to evaluate a company's fundamentals and provide information about the performance of the company over the last quarter or fiscal year.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 14

Accounting ratios, an important sub-set of financial ratios, are a group of metrics used to measure the efficiency and profitability of a company based on its financial reports. They provide a way of expressing the relationship between one accounting data points to another and are the basis of ratio analysis.

  • Accounting ratios, an important sub-set of financial ratios, are a group of metrics used to measure the efficiency and profitability of a company based on its financial reports.
  • An accounting ratio compares two line items in a company's financial statements, namely made up of its income statement, balance sheet, and cash flow statement.
  • These ratios can be used to evaluate a company's fundamentals and provide information about the performance of the company over the last quarter or fiscal year.
  • Common accounting ratios include the debt-to-equity ratio, the quick ratio, the dividend payout ratio, gross margin, and operating margin.
  • Accounting ratios are used by both the company itself to make improvements or monitor progress as well as by investors to determine the best investment option.
Test: Accounting & Financial Management of Banking - 1 - Question 15

Which of the following statement/s is/are correct regarding Accounting standards?
I. Accounting standards codified the generally accepted principle
II. Accounting standards are regulatory framework within which financial statements are prepared
III. The rule that ensure uniformity in preparation, presentation and reporting of accounting information
IV. It harmonize diverse accounting practice

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 15

Accounting standards are designed to harmonise diverse accounting practises and are issued from time to time by accounting professional bodies such as institute of Chartered Accountants certified public accountants or institution which are established for this purpose accounting standards codify the generally accepted principle they lay down the norms of accounting policies and practises by way of codes or guidelines with regard to financial statement.

Test: Accounting & Financial Management of Banking - 1 - Question 16

A company reports a positive change in working capital and a negative change in long term investments. What can be inferred about the company's fund flow?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 16

A positive change in working capital suggests that the company is able to finance its operation through its own resources. A negative change in long-term investments means that the company is selling off its long term investments. This would help in freeing the cash for the company to use in other areas. Like purchasing long term assets like building, plant and machinery etc.

Test: Accounting & Financial Management of Banking - 1 - Question 17

Which of the following statement/s is/are correct regarding equity share capital.
I. The dividend payable to equity shareholders is an appropriation of profit and not a charge against profit.
II. The dividend payable to equity shareholders is a charge against profit and not an appropriation of profit.
III. The company has no liability for cash outflows associated with the redemption of equity share capital.
IV. The company has liability for cash outflows associated with the redemption of equity share capital.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 17
  • Equity shareholders are entitled to dividends after the income claims of other stakeholders are satisfied. The dividend payable to them is an appropriation of profits and not a charge against profit.
  • It is a permanent source of finance. Since such shares are not redeemable. The company has no liability for cash outflow associated with its redemption. In other words once the company has issued equity shares they are tradable i.e. they can be purchased and sold. So a company is in no way responsible for any cash outflows of investors by which they become the shareholders of the company by purchasing the shares of existing shareholders.
Test: Accounting & Financial Management of Banking - 1 - Question 18

From the following balances, calculate the cost of goods sold during the year
Opening stock = 15000
Net purchase = 950000
Closing stock = 25000

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 18

[Cost of Goods Sold = (opening stock + purchases + expenses) - (closing stock)
= 15000 + 950000 - 25000 = 940000]
Hence option (a) is correct

Test: Accounting & Financial Management of Banking - 1 - Question 19

Which of the following statement/s is/are correct regarding marginal costing and absorption costing?
I. In marginal costing only variable cost is allocated to a product
II. In absorption costing only fixed overhead cost is allocated to a product
III. In absorption costing variable cost and fixed overhead cost is allocated to a product
IV. In marginal costing variable cost and fixed overhead cost is allocated to a product

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 19

Under marginal costing, only the variable cost is allocated to a product. So, the cost of a finished unit in inventory will include only the direct materials, direct labor, and variable overhead costs. It will not include the fixed overhead costs, which are directly taken to the profit and loss account. In absorption costing, these fixed overhead costs are also allocated to the product, in addition to the variable costs. Therefore, the absorption costing is also called full costing or the full absorption costing.

Hence the correct answer is Option (c)

Test: Accounting & Financial Management of Banking - 1 - Question 20

An entry made at the end of the financial year to record any unnoticed/unrecognized income or expenses of the period is known as___________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 20

Adjustment entries are basically a change in journal entries previously recorded. All the entries are not adjustment entries. Few entries are taken into account as adjustment entries like bad debts, closing balance, prepaid expenses etc.

Test: Accounting & Financial Management of Banking - 1 - Question 21

Which of the following points is required for fund flow statement preparation ?
(I) Schedule of changes in working capital
(II) Statement of sources and application of fund
(III) Statement of fund from operations.
(IV) Statement of funds by other institutions.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 21

Fund flow statement is a Statement of sources and application of fund is a technical device designed to analyse the changes in the financial condition of a business enterprise between two dates.
The statement helps in determining how the funds are being used. As a result, analysts can assess the company's fund flow in the future.

The Statement comprises the following 2 components.

  • sources of fund= includes where the funds have come from and their source.
  • application of fund = denotes the usage of funds for short term and long term needs.

Among the options provided, the required points for fund flow statement preparation are:

(I) Schedule of Changes in Working Capital
(II) Statement of Sources and Application of Funds
(III) Statement of Fund from Operations

The fund flow statement is used to analyze the changes in a company's financial position over a specific period of time. It helps in understanding how funds are generated and utilized in a business. Points (I), (II), and (III) are directly related to the preparation of a fund flow statement:

  • Schedule of Changes in Working Capital (I): This is essential because it shows how working capital (current assets minus current liabilities) has changed during the period. It indicates whether funds were tied up in working capital or released.
  • Statement of Sources and Application of Funds (II): This statement provides an overview of where the funds came from (sources) and how they were used (applications). It helps identify the inflows and outflows of funds.
  • Statement of Fund from Operations (III): This statement shows the funds generated or utilized from the core operating activities of the business. It involves adjustments to the net profit for non-cash items and changes in working capital.

(IV) Statement of Funds by Other Institutions is not typically required for the preparation of a fund flow statement. This option is not directly related to the fundamental analysis of a company's financial position and its sources and uses of funds

Test: Accounting & Financial Management of Banking - 1 - Question 22

Match the following List I with List II

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 22

Organization Chart: This chart lists the functionaries responsible for accomplishment of various distinct tasks specified in the budget. This chart shows the functional responsibilities of each functional executive, the delegation of authority to him and his relative position with other functional heads.

Budget Manual: The document setting out instructions and guidelines relating to the preparation and use of budgets is known as the budget manual. It instructions and guidelines pertain to forms and records, responsibilities of persons, the procedures to be followed and the time schedules to be followed etc.

Budget Committee: The master budget of an organization can be assumed to be a combination of various individual budgets of all the budget centers in the organization. These budget centers or functionaries are inter-related and budget for each cannot be set in isolation. They have to consult each other before finalizing the budget. For example; the sales promotion department may plan a budget for promoting new products but it may turn out that the production department will not be ready to produce these in near future. Unless there is co-ordination between the two departments, a realistic budget for the organization will not be finalized. The budget committee consists of the representatives of various departments of the organization. This committee co-ordinate in preparing and finalizing the budget.

Budget Reports: The budget reports contain the comparison of actual performance with the budgeted one. These reports are submitted periodically and regularly to the management. The frequency of submission of these reports is decided by the management. The budget reports are submitted irrespective of whether the variance is positive or negative. The format of the report is normally pre-decided.

Hence the correct answer is Option (d).

Test: Accounting & Financial Management of Banking - 1 - Question 23

Which of the following statements are correct regarding the long term borrowings?
I. Where loans have been guaranteed by directors or others, the aggregate amount of such loans under each head shall be disclosed.
II. Period and amount of continuing default as on the balance sheet date in repayment of loans and interest, shall be specified separately in each case.
III. Where bonds/debentures are redeemable by installments, the date of maturity for this purpose must be reckoned as the date on which the first installment becomes due.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 23

Long-Term Borrowings
Long-term borrowings shall be classified as:

  • Bonds/debentures;
  • Term loans: from banks, from other parties.
  • Deferred payment liabilities;
  • Deposits;
  • Loans and advances from related parties;
  • Long term maturities of finance lease obligations;
  • Other loans and advances (specify nature).
  • Borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in each case.
  • Where loans have been guaranteed by directors or others, the aggregate amount of such loans under each head shall be disclosed.
  • Bonds/debentures (along with the rate of interest and particulars of redemption or conversion, as the case may be) shall be stated in descending order of maturity or conversion, starting from farthest redemption or conversion date, as the case may be. Where bonds/debentures are redeemable by instalments, the date of maturity for this purpose must be reckoned as the date on which the first instalment becomes due.
  • Particulars of any redeemed bonds/debentures which the company has power to reissue shall be disclosed.
  • Terms of repayment of term loans and other loans shall be stated.
  • Period and amount of continuing default as on the balance sheet date in repayment of loans and interest, shall be specified separately in each case.

Hence option (a) is the correct

Test: Accounting & Financial Management of Banking - 1 - Question 24

From the following statements choose the correct one.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 24

Exchange rates can be quoted in two ways, Direct and Indirect. Exchange rates are typically quoted in pairs as base currency and counter currency. In a direct quote the domestic currency is the base currency and foreign currency is the counter currency. Whereas, in the indirect quote, the foreign currency is the base currency and the domestic currency is the counter currency.
Hence, the correct answer is Option (b).

Test: Accounting & Financial Management of Banking - 1 - Question 25

From the following information find the amount of capital
Outsider's Claims - 170000
Bank - 42000
Stock - 30,000
Fixed asset - 500000

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 25

Accounting equation signifies that the assets of a business are always equal to the total of its liabilities and capital (owner's equity). The equation reads as follows:
A = L + C
Where,
A = Assets
L = Liabilities
C = Capital
[Assets = Bank + Stock +Fixed asset
= 42000 + 30,000 +500000
= 572000
Liabilities = Outsider's Claims
=170000]
[Capital = Asset - Liability
= 572000- 170000 = 402000]
Hence the correct answer is Option (a).

Test: Accounting & Financial Management of Banking - 1 - Question 26

A firm produce 1000 units of TV, incurred fixed costs of 150000 and variable cost of 145 per unit. During the year, it sold all TV produced @ 450 per TV. What is the profit of the firm during the year?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 26

The basic formula of CVP analysis, when profit, sales volume and costs, all are expressed in money terms, is: Profit = Sales Volume - Costs
The concept of marginal costing has refined this formula as under:
Profit = Sales Volume - (Fixed Costs + Variable Costs) or,
P = (S X N) - [F + (V X N)] where,
P = Profit,
S = Sales value per unit
N = Number of units sold
F = Fixed Costs
V = Variable Cost per unit
Applying the CVP analysis, we calculate the profit as under:
S = 450
N = 1000
F = 150000
V = 145
Profit = (S X N) - [F + (V X N)]
= (450 X 1000) - [150000 + (145 X 1000)]
= 450000 - (150000 + 145000)
= 450000 - 295000 =155000
Hence the correct answer is Option (a).

Test: Accounting & Financial Management of Banking - 1 - Question 27

Choose the correct statements.
I. A document used in job costing systems to record and track the direct and indirect costs associated with a particular job is known as a job cost card.
II. The method of costing in which the cost of production is calculated for each unit of product or services is known as product costing.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 27

Job cost card is a document used in a job costing system to record and track the direct and indirect costs associated with a particular job or project. It is used to accumulate the costs incurred on a job or project and to calculate the total cost of the job at the end of the project.

The costing method in which the cost of production is calculated for each unit of product or service is known as unit costing. It focuses on the cost of producing a single unit of a product or services.

Test: Accounting & Financial Management of Banking - 1 - Question 28

Equivalent production means converting incomplete production units into their equivalent completed units. Which of the following is true regarding the equivalent production concept applied in work in process?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 28

The concept of equivalent production is used in industries where manufacturing is a continuous activity and process costing is used.
Under this method, the partly finished units are converted into equivalent finished units.
Equivalent production means converting the incomplete production units into their equivalent completed units by estimating material, labour and overhead.
Equivalent completed units = {Actual number of units in the process of manufacture} X {Percentage of work completed}

Test: Accounting & Financial Management of Banking - 1 - Question 29

From the following information calculate the quick ratio

Trade receivables= 7,00,000 Cash and cash equivalents = 2,50,000 Short term loans and advances = 45,000 Trade payables = 4,00,000, short term borrowings = 3,40,000, Inventories = 12,00,000. Tangible assets = 45,000,000, Share capital = 24,00,000, Reserve and surplus = 6,00,000

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 29

[Quick ratio= Quick assets/current liabilities
Quick assets = Trade receivables [7,00,000]+ Cash and cash equivalents [2,50,000] + Short term loans and advances [45,000]= 9,95,000
Current liabilities = Trade payables [4,00,000]+ short term borrowings [3,40,000]= 7,40,000
Quick ratio = 9,95,000/7,40,000 = 1.34:1]
Hence, the correct answer is Option (a).

Test: Accounting & Financial Management of Banking - 1 - Question 30

Which of the following statements are correct regarding the non-voting shares?
I. Such shareholders are entitled to all rights and bonus shares and enjoy voting rights.
II. Both private and public companies, limited by shares, can issue non-voting equity shares.
III. Only 25 per cent of the paid-up capital of the company can be issued as equity shares without voting rights.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 30

NON-VOTING SHARES
Section 43 of the Companies Act 2013, provides that share capital of the company shall consist of the following:

  • Equity shares with voting rights
  • Equity shares with differential rights as to dividend, voting or otherwise in accordance with such rules as may be prescribed; and
  • Preference share capital The demand for non-voting equity shares has been made by several sections of the industry basically on the ground that they do exist in many other countries and also provide a measure to the management to tap a class of investors who are interested in higher dividend against absence of voting rights.

The main object of permitting the company to issue non-voting equity shares is to enable them to raise resources without losing management control.

Conditions for issue of non-voting equity shares are as follows:

  • Issue of non-voting equity shares shall be authorised by the Articles of Association of the company and approved by the shareholders at their general body meeting by passing a special resolution.
  • Special resolution must state the price at which the shares can be issued and higher rate of dividend which non-voting equity shares shall carry.
  • Such shareholders are entitled to all rights and bonus shares but do not enjoy voting rights.
  • Only 25 per cent of the paid-up capital of the company can be issued as equity shares without voting rights.
  • Both private and public companies, limited by shares, can issue non-voting rights equity shares.
  • No company will be permitted to convert shares with voting rights into shares without voting rights.

Hence the option (d) is correct

Test: Accounting & Financial Management of Banking - 1 - Question 31

Match the following List I with List II regarding Accounting Standards.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 31
  • Accounting Standard - 9 It deals with the basis for the recognition of revenue, i.e. income and the time when the income can be said to have arisen. It also states the quantum of income to be credited to the profit and loss account. The statement shows how revenue is to be recognised from the various activities carried on by the enterprise. Let us say, from sale of goods, rendering of services and use by others of enterprise resources yielding interest, royalties, and dividends, etc.
  • Accounting Standard - 10 (Revised 2016) Accounting Standard AS-10 Property, Plant and Equipment The objective of this Standard is to prescribe the accounting treatment for property, plant and equipment (PPE). PPE are tangible items that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and are expected to be used during more than a period of twelve months.
  • Accounting Standard - 14 (Revised 2016) It deals with the accounting for amalgamation and the treatment of any resultant goodwill or reserves. Amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 2013 or any other statute which may be applicable to companies and includes 'merger'. The standard does not deal with cases of acquisitions, which arise when there is a purchase by one company of the whole or part of the shares, or the whole or part of the assets, of another company. The distinguishing feature of an acquisition is that the acquired company is not dissolved and its separate entity continues to exist. The standard lays down the methods of amalgamation and the accounting adjustment under each method. This accounting standard deals with accounting to be made in the books of Transferee Company in case of amalgamation.
  • Accounting Standard - 13 (Revised 2016) It deals with accounting for investments made by an entity and its presentation in the financial statements. The standard defines the current and long-term investments and their basis of classification. To the extent the standard relates to current investments, it is also applicable to shares, debentures and other securities held as stock-in-trade, with suitable modification as specified in the standard itself. It lays down the criteria for bifurcation between the current and long-term investments and how they are to be classified as such.
  • Hence the correct answer is Option (a).
Test: Accounting & Financial Management of Banking - 1 - Question 32

In terms of Banking Regulation Act, 1949, RBI provides a framework of the rules, regulations, and instructions with regard to bank lending.
Which of the following is/are the directions issued by RBI to the banks in this regard?
I. A bank cannot grant any loans and advances on the security of its own shares.
II. Bank's aggregate investment in shares, certificate of deposits, bonds etc. shall not be less than 40 percent of banks owned funds as at the end of previous year.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 32

In terms of Banking Regulation Act, 1949, RBI provides a framework of the rules, regulations, and instructions with regard to bank lending. Accordingly it has issued following directions to scheduled commercial banks on statutory and other restrictions on loans and advances.

  • A bank cannot grant any loans and advances on the security of its own shares.
  • Enter into any commitment for granting any loan or advance to or on behalf of- (a) any of its Directors,(b) any firm in which any of its Directors is interested as Partner, Manager, Employee or Guarantor.
  • Under section 19 of Banking Regulation Act 1949, a bank cannot hold shares in a company as (a) pledgee or mortgagee in excess 30 percent of paid up of that company or 30 percent of bank's paid capital and reserves whichever is less. (b) in the management of which Managing Director or Manager of the bank is interested.
  • Bank's aggregate investment in shares, certificate of deposits, bonds etc. shall not exceed the 40 percent of banks owned funds as at the end of previous year.
  • A bank cannot grant credit facilities against Certificate of deposits, Term deposits issued by other banks or money market mutual funds.

Hence, the correct answer is option (a).

Test: Accounting & Financial Management of Banking - 1 - Question 33

Directions: ABC company purchases machinery for $30,000. This asset's salvage value is $500 and its useful life is 10 years. Estimated units over asset's life is 50,000

Q. Calculate the value of depreciation with the help of the Sum-of-the-Years' Digits Method in the first year.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 33

The formula for calculating depreciation using the SYD method is:
[Depreciation = (Remaining life / Sum of the years' digits) * (Cost - Salvage value)]
[In this case, the cost of the machinery is $30,000, its salvage value is $500 and its useful life is 10 years. The sum of the years' digits for an asset with a 10-year useful life is 1 + 2 + 3 + .. + 10 = 55.]
In the first year, the remaining life of the asset is 10 years. So, the depreciation in the first year using the SYD method would be:
[Depreciation = (10 / 55) * ($30,000 - $500) = $5,363.63]

Test: Accounting & Financial Management of Banking - 1 - Question 34

From the following information calculate breakeven point
Fixed cost: 60000
Variable cost Rs. 13 per unit
Selling price Rs. 18 per unit

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 34

The break-even point is the point at which total cost and total revenue are equal, meaning there is no loss or gain for your small business.
Breakeven point = Fixed cost/Contribution per unit
Contribution per unit = Selling price - Variable cost
= 18 -13 = Rs. 5
Breakeven point = 60000/5 = 12000 units
Hence the correct answer is Option (a).

Test: Accounting & Financial Management of Banking - 1 - Question 35

Which of the following can be the assumption of IFRS (International Financial Reporting Standards)?
I. Going Concern Assumption
II. Accrual Assumption
III. Constant Purchasing Power Assumption

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 35

Following can be the assumptions of IFRS (International Financial Reporting Standards) are:-

  • Going Concern Assumption- It is assumed that the life of the business is infinite. The entity will continue to exist for an indefinite period in the future.
  • Accrual Assumption-As per this assumption, transactions are recorded on the accrual basis, as and when they occur and the date of settlement is immaterial.
  • Constant Purchasing Power Assumption-This assumption requires that the value of capital be adjusted to inflation at the end of the financial year.
  • Measuring Unit Assumption-Measuring unit is the current purchasing power. It means that the assets are not shown in the Balance Sheet at historical cost but they are shown at current or fair value.

Thus, the correct option is (c)

Test: Accounting & Financial Management of Banking - 1 - Question 36

Which of the following statement/s is/are correct regarding trial balance
I. It forms a part of the double entry system
II. It does not appear in the actual books of accounts. It is usually prepared as a separate document.
III. It is prepared for a period
IV. A trial balance is just a statement, not an account

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 36

The trial balance is a statement drawn up using the Ledger balances to test the arithmetical accuracy of the Ledger account. The primary purpose of drafting a trial balance is to ensure that there are no arithmetical error.

Features of trial balance
A trial balance is just a statement, not an account
It forms no part of the double entry system
It does not appear in the actual books of accounts. It is usually prepared as a separate document.
It is prepared as on a particular date, not for a period
A trial balance may be prepared at any time say on monthly quarterly half yearly or on annual basis.

Test: Accounting & Financial Management of Banking - 1 - Question 37

Match the following on the required information needed by different category of people.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 37

Management- They need timely information regarding sales, costs, and profitability for planning, controlling and decision making.
Long term lenders- They want information about the creditworthiness and the ability of the enterprise to pay interest and repayment of their loans.
Investors- They want information regarding risks and returns on their investments in the business enterprise.
Thus, the correct option is (a)

Test: Accounting & Financial Management of Banking - 1 - Question 38

Which of the following statement/s is/are correct regarding possible causes of Material usage variance?
I. Inferior quality of material purchased
II. The inventory control department has not been efficient enough to notify the requirement of material.
III. Increased wastage due to careless handling during manufacturing
IV. Theft and pilferage

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 38

Material usage variance: The cost of the material in the standard cost of the product is estimated by taking into account the quantities of material expected to be consumed in production of each unit. These estimates may not materialize during the actual manufacturing process.

Possible causes of Material usage variance: Some of the possible causes of variance in material usage can be as under:

  • Inferior quality of material purchased
  • Theft, pilferage
  • Increased wastage due to careless handling during manufacturing
  • Not following the standard production procedures
  • Changes in quality of the finished goods compared to that envisaged in standard costing

Hence the correct answer is Option (d).

Test: Accounting & Financial Management of Banking - 1 - Question 39

Which of the following is a form of depreciation which is assumed to occur even when an item is used competently and with care and proper maintenance?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 39

Obsolescence is referred to as the state of becoming obsolete. It is applied in the case of fixed assets in accounting which become obsolete at the end of their useful life.

Depletion is a non-cash expense. It incrementally lowers an asset's cost value through scheduled income charges. Where depletion differs, it refers to the gradual degradation of natural resources reserves, as opposed to wearing depreciable assets or ageing intangible lives

Wear and tear is a form of depreciation which is assumed to occur even when an item is used competently and with care and proper maintenance.

The permanent decrease in the value of an asset through wear and tear in use or the passage of time." "The primary meaning of the word depreciation is loss of value through wear and the tear or some other form of material deterioration.

Test: Accounting & Financial Management of Banking - 1 - Question 40

How is the value of furniture (if owned by the employer) in case of perquisite of furnished accommodation calculated for Income tax purposes?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 40

The value of furniture is calculated on the following basis -

  • 10% (p.a.) of the original cost of furniture, if furniture is owned by the employer;
  •  actual hire charges (whether paid or payable) if furniture is hired by the employer.

as reduced by any charges paid or payable for the same by the employee during the previous year
Hence, the correct answer is option (a).

Test: Accounting & Financial Management of Banking - 1 - Question 41

I. A fixed budget change with the change in the level of activity.
II. A flexible budget is prepared after considering the fixed and variable elements of cost.
Which of the above statements is/are NOT true?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 41

Budget can also be classified in the following categories:

Fixed Budget: A budget prepared on the basis of a standard or a fixed level of activity is called a fixed budget. It does not change with the change in the level of activity.

Flexible Budget: A budget designed in a manner so as to give the budgeted cost of any level of activity is termed as a flexible budget. Such a budget is prepared after considering the fixed and variable elements of cost and the changes that may be expected for each item at various levels of operation.

Hence, option (a) is the correct answer.

Test: Accounting & Financial Management of Banking - 1 - Question 42

Considering the ABC method of inventory control, which of the following statements is correct?

I. ABC analysis involves a system that controls inventory and is used for materials throughout the distribution management.
II. The items in the A category of this analysis need the highest level of control.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 42

The ABC method of inventory control involves a system that controls inventory and is used for materials throughout the distribution management. It is also known as selective inventory control or SIC.

ABC analysis is a method in which inventory is divided into three categories, i.e. A, B, and C in descending value.

  • Category A items are the most valuable and typically require the highest level of control and attention. These items may need more frequent monitoring and reordering to ensure that stock levels are maintained.
  • B category items are of lower value than A, and
  • C category items have the lowest value.

Hence, option (c) is the correct answer.

Test: Accounting & Financial Management of Banking - 1 - Question 43

Rearranging the process of capital budgeting involves the following points?
I. Selecting a project
II. Performance review
III. Identify and generating projects
IV. Evaluating the project
V. Implementation

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 43

Capital budgeting process

  • Identify and generating projects
  • Evaluating the project
  • Selecting a project
  • Implementation
  • Performance review

Identifying and generating projects

  • Investment proposals are the first step in capital budgeting. Taking up investments in a business can be motivated by a number of reasons. There could be the addition or expansion of a product line. An increase in production or a decrease in production costs could also be suggested.

Evaluating the projects

  • It mainly consists of selecting all criteria necessary for judging the need for a proposal. In order to maximize market value, it has to match the company's mission. It is crucial to consider the time value of money here.
  • In addition to estimating the benefits and costs, you should weigh the pros and cons associated with the process. There could be a lot of risks involved with the total cash inflows and outflows. This needs to be scrutinized thoroughly before moving ahead.

Selecting a project

  • Since there is no 'one-size-fits-all' factor, there is no defined technique for selecting a project. Every business has diverse requirements and therefore, the approval over a project comes based on the objectives of the organization

Implementation

  • Once the project is implemented, now come the other critical elements such as completing it in the stipulated time frame or reduction of costs. Hereafter, the management takes charge of monitoring the impact of implementing the project.

Performance review

  • This involves the process of analyzing and assessing the actual results over the estimated outcomes. This step helps the management identify the flaws and eliminate them for future proposals.
Test: Accounting & Financial Management of Banking - 1 - Question 44

A land was purchased by the firm for Rs 250000 and the intermediary involved in the purchase was paid a commission of Rs 10000 on the Purchase of land. What shall be the amount of capital expenditure to be recorded in the books of the firm?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 44

Commission paid to the broker for the purchase of land is to be capitalized, Any and every expense which Is incurred to acquire the asset, to bring the asset to the usable location and condition is to be capitalized. All expenses which provide long-term economic benefit is to be capitalized I. e increased incapacity or an increasing inefficiency.

Test: Accounting & Financial Management of Banking - 1 - Question 45

From the following options choose the one which is not a feature of programme budgeting?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 45

Programme budgeting is a budgeting system that involves identifying and organizing the programs within an organization and allocating resources to them based on their relative importance.

Programme based budgeting focuses on outcomes rather than output. This means that the program is evaluated based on their ability to achieve specific outcomes. Hence option D is not the feature of Programme based budgeting.

Test: Accounting & Financial Management of Banking - 1 - Question 46

XYZ Ltd. produces and sells a single product. The following information is available for the financial year ending 31st March 2023:
[Direct Materials: Rs. 40 per unit
Direct Labour: Rs. 20 per unit
Variable Overheads: Rs. 10 per unit
Fixed Overheads: Rs. 4,00,000 per annum
Selling Price: Rs. 100 per unit
Production: 20,000 unit]

Calculate the total cost, total revenue, and the profit/loss of the company for the financial year.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 46

The total cost of production can be calculated as follows:
{[Direct materials cost = Rs. 40 x 20,000 units = Rs. 8,00,000
Direct labour cost = Rs. 20 x 20,000 units = Rs. 4,00,000
Variable overhead cost = Rs. 10 x 20,000 units = Rs. 2,00,000
Total variable cost = Rs. 14,00,000
Fixed overhead cost = Rs. 4,00,000
Total cost = Variable cost + Fixed cost = Rs. 14,00,000 + Rs. 4,00,000 = Rs. 18,00,000]}
The total revenue can be calculated as follows:
{[Selling price per unit = Rs. 100
Total units produced = 20,000
Total revenue = Selling price per unit x Total units produced = Rs. 100 x 20,000 = Rs. 20,00,000]}
{[The profit/loss can be calculated as follows:
Profit/Loss = Total revenue - Total cost = Rs. 20,00,000 - Rs. 18,00,000 = Rs. 2,00,000]}
Hence, option (c) is the correct answer.

Test: Accounting & Financial Management of Banking - 1 - Question 47

Identify the contents of the lease agreement from the following options given below.
I. Lessee's responsibility for taking delivery and possession of the leased equipment.
II. Options of lease renewal for the lessee.
III. Insurance to be taken by the lessor on behalf of the lessee.
IV. Return of equipment on expiry of the lease period.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 47

Contents of a lease agreement:
The lease agreement specifies the legal rights and obligations of the lessor and the lessee. It typically contains terms relating to the following:

  • Description of the lessor, the lessee, and the equipment.
  • Amount, time and place of lease rentals payments.
  • Time and place of equipment delivery.
  • Lessee's responsibility for taking delivery and possession of the leased equipment.
  • Options of lease renewal for the lessee.
  • Insurance is to be taken by the lessee on behalf of the lessor. Therefore, Option (III) is incorrect.
  • Return of equipment on expiry of the lease period.

Hence, Option (b) is the correct answer.

Test: Accounting & Financial Management of Banking - 1 - Question 48

Which of the following is not related to decision tree analysis?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 48

The second point is not related to decision tree analysis.

  • Decision trees are used to represent alternative course of action states of nature, and the likely outcomes of alternatives diagrammatically.
  • This consists of nodes and branches
  • The nodes are 2 types, decision node and chance node
  • Course of action originate from the decision nodes as the main branches.
  • At the terminal of each main branch, there is a chance of node.
  • The respective payoffs and the probabilities associated with alternative courses and the chance events are shown along the sub branches
  • At the terminal of the sub branches are shown the expected value of the outcome.
  • A decision tree is highly useful to a decision maker in multi stage situations which involves a series of decisions each dependent on the precede one
  • Working backward from future to the present, we are able to determine unprofitable branches and determine optimum decisions.
  • Advantage is that complex managerial problems and decisions of a chain - like nature can be systematically and explicitly defined and evaluated.
Test: Accounting & Financial Management of Banking - 1 - Question 49

From the following: what are the limitations of a computerized accounting system?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 49

A computerized accounting system is that accounting information system that helps in processing the financial transactions and events

The limitation of computerized accounting system are:

Staff operation

  • High cost of training
  • Adverse effects on health
  • Security problems
  • System failure
  • Wastage of time
  • Lots of errors.

Hence option d is correct.

Test: Accounting & Financial Management of Banking - 1 - Question 50

Which of the following assertions supports the statement given below?
Statement I: Accounting standards are most useful for auditors in the firm.
Assertion I: It is the duty of auditors to ensure that the accounting standards have been followed in the preparation of financial statements.
Statement II: The biggest strength of accounting is that it is based on accounting convention.
Assertion II: This strength disclosed the financial position which is completely reliable and represents quantitative data.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 50

For statement I, Accounting standards are most useful to auditors. It is their duty to make adequate disclosure in their reports so that the users of such user statements may be aware of such deviations. It is the duty of auditors to ensure that the accounting standards have been followed in the preparation of financial statements.

For statement II, Evidence in legal matters is the strength of accounting because authenticated documents are accepted by the judiciary as firm legal evidence.

All other are the weaknesses of accounting because of following reasons like financial position disclosed by it may not be reliable. Accounts only represent quantitative data and qualitative realms are all ignored.

Thus, the correct option is (b)

Test: Accounting & Financial Management of Banking - 1 - Question 51

Why is it important to understand the manual accounting system in banking even though all the accounting systems are computerized?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 51

The understanding of the manual system of accounting is important because the staff concerned is clear about the process involved in accounting system and they can able to reply to the queries of the customers.

Test: Accounting & Financial Management of Banking - 1 - Question 52

This standard prescribes mainly the basis for the presentation of financial statements to ensure ______.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 52

This standard prescribes mainly the basis for the presentation of financial statements to ensure comparability with both the company's financial statements and financial position of previous periods and also comparison with those of other companies.

Test: Accounting & Financial Management of Banking - 1 - Question 53

The Exchange rate for settlement on a date beyond the spot is generally different and the same is known as _____________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 53

The Exchange rate for settlement on a date beyond the spot is generally different and the same is known as the Forward rate. 

Test: Accounting & Financial Management of Banking - 1 - Question 54

As per the Rule of 72 if the FD interest rate is 12% and is compounded annually, in how much time is the money doubled?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 54

The Rule of 72 is a useful formula that is generally used to estimate the number of years required to double the invested money compounded annually at a given rate of return.
Period for Money Double = 72/r; Therefore, FD interest rate(r) is 12%; Time Period for Money Double = 72/12 = 6 Year

Test: Accounting & Financial Management of Banking - 1 - Question 55

Heads of Accounts - Amount (Rs.)
Capital 10,000
Inventory 5,000
Sales 15,000
Purchases 10,000
Drawings 2,850
Discount allowed 500
Prepare a trial balance and calculate what is the amount of suspense account.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 55

Credit (has a higher total) - Debit (has a lower total) = balancing figure. Credit (Rs. 10,000 + Rs. 15,000) - Debit (Rs. 5,000 + Rs. 10,000 + Rs. 2,850 + Rs. 500) = Rs. 6,650, dr.

Test: Accounting & Financial Management of Banking - 1 - Question 56

Calculate Gross profit ratio from the details given: Sales = Rs. 10,00,000, Opening stock = Rs.300,000, Purchases = Rs. 500,000, COGS = Rs.700,000

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 56

Gross profit= Sales - COGS i.e., 10,00,000- 700,000 = Rs.300,000. Gross profit ratio = Gross profit/ Sales × 100 i.e., 30%

Test: Accounting & Financial Management of Banking - 1 - Question 57

A Bank Reconciliation Statement is prepared by?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 57

Bank reconciliation statement is generally prepared by Business accountant. The customer of the bank or the bookkeeper of a company with the purpose to compare the bank's records with the company's records.

Test: Accounting & Financial Management of Banking - 1 - Question 58

Book of primary entry in which cash and Bank transactions are recorded in a chronological order is

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 58

Cash Book:

  • A cash book is a book of prime entry where cash and bank transactions are recorded in a chronological order.
  • It serves as a record of all cash receipts and payments made by an organization.
  • The cash book includes entries for cash sales, cash purchases, payments made in cash, cash received from debtors, and other cash-related transactions.
  • In a cash book, all transactions involving the inflow or outflow of cash are recorded, typically in a double-entry format.
  • Cash receipts are entered on the left-hand side (debit side), while cash payments are recorded on the right-hand side (credit side).
  • The cash book helps maintain an accurate and up-to-date record of cash transactions, allowing for easy tracking of cash flows and reconciliation of cash balances.
Test: Accounting & Financial Management of Banking - 1 - Question 59

If Variable Cost = Rs 70,000, Fixed Cost = 40,000, and Selling Price = 100,000, what shall be the profit/ loss?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 59

Contribution = Selling Price – Variable Cost = 100,000 – 70,000 = Rs 30,000
Since Fixed cost is more than contribution there is a loss.
Loss = Fixed Cost - contribution = 40000-30000= 10000
The amount of 10,000 represents the extent of loss since the fixed costs are more than the contribution.

Test: Accounting & Financial Management of Banking - 1 - Question 60

Bee Ltd. had the following items under the head reserves and surplus in the balance sheet as of 31st March 2023.
Security premium account - 80 lakhs
Capital Reserve - 60 lakhs
General reserve - 90 lakhs
The company had an accumulated loss of Rs.250 lakhs on the same date. How will you show the accumulated loss as per schedule III of the Companies Act, 2013?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 60

The Debit balance of profit and loss Rs. 250 lacs exceeds the total of all the reserves Rs.230 lacs. Therefore, balance of reserves & surplus after adjusting Debit balance of profit and loss account is negative by Rs.20 lacs.

Test: Accounting & Financial Management of Banking - 1 - Question 61

Z limited purchases new Machinery for Rs.2 lac to be used for job work. It provides depreciation at 20% on an SLM basis. The machine shall give revenue to the company of Rs.1.80 lac per annum for 5 years. Other expenses include 40% as operating expenses and 10% as tax. What shall be the Net Present Value of Cash flow by discounting it at 10%?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 61

Cash inflow = Revenue - (operating expenses + depreciation + tax) = 160000 - (64000 + 40000 + 5600 ) = Rs. 50400; PV = C [(1+r)n -1] / [r(1+r)n] = 50400 [(1+0.1)n -1] / [0.1(1+0.1)5] = Rs.191056; NPV = 191056 - 200000 = - Rs.8944

Test: Accounting & Financial Management of Banking - 1 - Question 62

Direction: Read the information carefully and answer the questions based on the given information below.
Vishal sold goods to Varun for Rs.25000 on 23/10/2021. 10000 was immediately paid. 3 months bill was drawn and accepted for the remaining amount. Vishal got the bill discounted with his bank for Rs.13000 on 10/12/2021.

Q. What will the entry be made on the book of Varun for acceptance of the bill by him?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 62

The journal entry to be passed on the books of Varun for acceptance of the bill was,
Vishal's a/c dr.
To Bills payable a/c

Test: Accounting & Financial Management of Banking - 1 - Question 63

Direction: Read the information carefully and answer the questions based on the given information below.
Vishal sold goods to Varun for Rs.25000 on 23/10/2021. 10000 was immediately paid. 3 months bill was drawn and accepted for the remaining amount. Vishal got the bill discounted with his bank for Rs.13000 on 10/12/2021.

Q. What will be the journal entry for discounting the bill with the bank in the books Vishal?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 63

While recording the journal entry for discounting of the bill with the bank, the Bank and Discount account will be debited while the Bills receivable account was credited. Therefore the entry will be,
Bank a/c dr. 13000
Discount a/c dr. 2000
To Bills receivable a/c 15000

Test: Accounting & Financial Management of Banking - 1 - Question 64

Direction: Read the following case study carefully and answer the questions.
J Ltd. runs a cold beverage business and earned good profits in the current year and received income from other sources. The current financial year is 2022-23. Following are the extracts of the asset side of the Balance sheet:
Investments in
Shares of B ltd. - Rs. 16,50,000
(Purchased on 15.08.2022)
Debentures of AQ ltd. - Rs. 7,50,000
(Purchased on 14.01.2019)
Preference shares of PQR ltd. - Rs. 20,00,000
(Purchased on 04.04.2021)

Q. Above given case study discussed which AS?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 64

AS 13 deals with accounting for investments made in another firm and the disclosure of such investments in the financial statements. 

Test: Accounting & Financial Management of Banking - 1 - Question 65

Direction: Read the following case study carefully and answer the questions.
J Ltd. runs a cold beverage business and earned good profits in the current year and received income from other sources. The current financial year is 2022-23. Following are the extracts of the asset side of the Balance sheet:
Investments in
Shares of B ltd. - Rs. 16,50,000
(Purchased on 15.08.2022)
Debentures of AQ ltd. - Rs. 7,50,000
(Purchased on 14.01.2019)
Preference shares of PQR ltd. - Rs. 20,00,000
(Purchased on 04.04.2021)

Q. In the above case study, which of the investments are long-term investments?
i) Debentures of AQ ltd.
ii) Shares of B ltd.
iii) Preference shares of PQR ltd.

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 65

Long-term investment refers to an investment other than the current investment which is readily realizable. Long-term investments are intended to be held for more than one year and such investments are made.

Test: Accounting & Financial Management of Banking - 1 - Question 66

Which among the following formulas is correct from the point of view of the lessor?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 66

Minimum lease payment from the point of view of the lessor includes: 1. lease payment, 2. Guaranteed residual value (By the lessee and on behalf of the lessee), 3. Guarantee by an independent third party to the lessor.

Test: Accounting & Financial Management of Banking - 1 - Question 67

Subsidiary books are the following except:

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 67

Subsidiary books are purchase books, sales books, purchase return books, sales return books, bills payable books, bills receivable books, and journal proper. 

Test: Accounting & Financial Management of Banking - 1 - Question 68

For what purpose the engagement team should hold discussions?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 68

The engagement team should hold discussions to gain a better understanding of banks and their environment, including internal control, and also to assess the potential for material misstatements of the financial statements.

Test: Accounting & Financial Management of Banking - 1 - Question 69

A Businessman starts his business from 1st July 2022. What shall be the previous year for the assessment year 2023-24?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 69

Previous year means the financial year immediately preceding the assessment year. The previous year will be from 1.7.2022 to 31.3.2023 for Businessman who starts his business on 1st July 2022.

Test: Accounting & Financial Management of Banking - 1 - Question 70

Which one of the following transactions is credit vouchers in the accounting system of banks?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 70

Challans for deposits into the accounts of the Central/State Government is a credit voucher.

Test: Accounting & Financial Management of Banking - 1 - Question 71

Which of the following is Front end Application?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 71

Branch Banking is the front-end application whereas Back office, ATM Switch, and Credit card System are Back-end Application as it does not require intervention of Customers.

Test: Accounting & Financial Management of Banking - 1 - Question 72

I. If Lessor transfers ownership of an asset to the lessee by the end of the lease term, then finance Lease
II. If the lessee has the option to purchase the asset at a price that is expected to be
Sufficiently lower than the Fair value of the asset at the date the option becomes exercisable such that, at the inception of the lease, it is reasonably certain that the option will be exercised, then FL.
III. If the Lease Term is for a major part of the economic life of the asset, then the Finance Lease. The major part simply doesn't mean more than 50%, it means substantially the whole life of the asset.
IV. If the gains/losses from the fluctuations to residual value accrue to the lessor, then finance the lease.
Which among the following points is correct?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 72

The points are correct:
I. If Lessor transfers ownership of an asset to the lessee by the end of the lease term, then finance Lease
II. If the lessee has the option to purchase the asset at a price that is expected to be
Sufficiently lower than the Fair value of the asset at the date the option becomes exercisable such that, at the inception of the lease, it is reasonably certain that the option will be exercised, then FL.
III. If the Lease Term is for a major part of the economic life of the asset, then the Finance Lease. The major part simply doesn't mean more than 50%, it means substantially the whole life of the asset.

Test: Accounting & Financial Management of Banking - 1 - Question 73

Students were asked which among the following was an Annuity.
Case 1 -Amount paid in Apr - 1000
Amount paid in May - 1000
Amount paid in Jun - 500
Case 2 -Amount paid in Apr - 500
Amount paid in May - 500
Amount paid in Jun - 1000
Case 3- Amount paid in Apr - 1000
Amount paid in May - 1000
Amount paid in Jun - 1000
Case 4- Amount paid in Apr - 1000
Amount paid in May - Nil
Amount paid in Jun - 1000
Student 1 - case 1
Student 2 - case 2
Student 3 - case 4
Student 4 - case 3
Which student answered correctly?

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 73

To be called an annuity a series of payments or receives must have the following features (1) Amount paid or received must be constant over the period of the annuity, (2) time interval between the two consecutive payments or receipts must be the same.

Test: Accounting & Financial Management of Banking - 1 - Question 74

If a company manufactures 80 units that are processed at a total cost of Rs140, the normal loss is 10%, & scrap units are sold @ 0.15 each. If the output is 60 units, then the value of the abnormal loss is:

Detailed Solution for Test: Accounting & Financial Management of Banking - 1 - Question 74

Abnormal loss= (Total Cost- Realisable value of normal loss )/
(Total input units - Normal loss units) × Abnormal loss units = ((140 - 8× 0.15)/80 - 8 )× 12 = (138.8/ 72)×12 =1.93×12 = Rs 23.16

Test: Accounting & Financial Management of Banking - 1 - Question 75

Section 87A provides a rebate from the tax payable by an assessee, being an individual resident in India, whose total income does not exceed _________.