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Test: Accounting & Financial Management of Banking - 3 - Bank Exams MCQ


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100 Questions MCQ Test Mock Test Series for JAIIB Exam 2025 - Test: Accounting & Financial Management of Banking - 3

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Test: Accounting & Financial Management of Banking - 3 - Question 1

What is the purpose of using equivalent units in process costing?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 1

Equivalent units of production are a concept used to understand how much money partially completed products are worth to a company. They are useful for process costing, which is the analysis of money flow within the manufacturing process. Equivalent units is a cost accounting concept that is used in process costing for cost calculations
Hence, option (b) is the correct answer.

Test: Accounting & Financial Management of Banking - 3 - Question 2

Directions: On 1st April 2000, X Ltd purchased a Plant for 45,000. It was estimated that the effective life of the plant will be 10 years and after 10 years its scrap value will be 5000. On 1st April, 2001, the company purchased additional machine for 250000 of which the effective life will be 15 years and scrap value 2,500. On 1st October, 2002, a new machine was purchase for 12,000 of which the scrap value will be 2000 and the effective life 20 years. If the depreciation is provided on straight line method. Then,

Q. What will be the depreciation on first machine purchased.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 2

Depreciation on first machine will be = (Original Cost- Scrap Value)/ No of years
= (45,000-5000)/10
= 4000 per year.
Thus, the correct option is (a)

Test: Accounting & Financial Management of Banking - 3 - Question 3

For which of the following entries, compound entries can be passed?
I. By debiting one account and crediting two or more accounts.
II. By crediting one account and debiting two or more accounts.
III. By debiting two or more accounts and crediting two or more accounts such as Opening Entry.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 3

Sometimes, two or more transactions relating to one particular account take place on the same date. In such cases, instead of passing separate entries for all such transactions, only one entry is passed. Such a journal entry is termed a compound entry. Such entries can be passed in any of the following three ways:-

  • By debiting one account and crediting two or more accounts.
  • By crediting one account and debiting two or more accounts.
  • By debiting two or more accounts and crediting two or more accounts such as Opening Entry.

Thus, the correct option is (c)

Test: Accounting & Financial Management of Banking - 3 - Question 4

What are the different kinds of adjustments which are made to the bank statement balance while reconciliation?
I. Bank errors
II. Interest fees
III. Unpresented checks

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 4

The first step in reconciling a bank statement is to compare financial record activities to bank statement activities. For any bank errors, unaccounted-for deposits, and unpresented checks, adjustments to the bank statement balance should be made. Some personal or business accounts do not account for bank-related additions and charges, such as interest and maintenance fees. Adjustments should be made to the cash account records for these differences. Once corrections and adjustments are made, compare the balances to see if they match. If not, repeat the process until the accounts are reconciled.
Thus, the correct option is (a)

Test: Accounting & Financial Management of Banking - 3 - Question 5

A company bought machinery at a cost of ₹ 6500 and spent ₹ 300 on erection charges. It is estimated that its working life is 2 years and the value of scrap is ₹ 1020. Calculate the amount of annual depreciation.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 5

[The total cost of the machinery including erection charges is ₹ 6500 + ₹ 300 = ₹ 6800. The estimated scrap value of the machinery is ₹ 1020. So, the total depreciable amount is ₹ 6800 - ₹ 1020 = ₹ 5780. Since the working life of the machinery is estimated to be 2 years
Depreciation = (cost of the asset - estimated salvage value) /estimated useful life of an asset.
Depreciation = (6500+300) - 1020/2= 2890]

Test: Accounting & Financial Management of Banking - 3 - Question 6

From the following statements choose the one statement that justifies the Deferred payment guarantees?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 6

Deferred payment guarantees are financial instruments used in international trade to provide assurance to the seller that they will receive payment for goods or service at a later date. A deferred payment guarantee is typically issued by a bank or financial institution on behalf of the buyer guaranteeing payment to the seller within a specified period.
Hence, the correct answer is Option (b).

Test: Accounting & Financial Management of Banking - 3 - Question 7

Which of the following statement/s is/are incorrect regarding the bill of exchange?
I. Drawer is a person on whom the bill is drawn
II. It is signed by the maker of the bill
III. It contains a conditional order
IV. It is an instrument in writing

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 7

Bills of Exchange
Bill of exchange is defined as

  • An instrument in writing
  • signed by the maker
  • containing an unconditional order
  • To pay a certain sum of money and money only
  • To a person, named in the instrument or, to his order to the bearer
  • On a certain fixed future date or on demand (Section 5 of Negotiable Instruments Act).

From the above definition, you will observe that there are three parties to a bill of exchange. They are: Drawer: a person who draws the bill
Drawee: a person on whom the bill is drawn, and
Payee: a person who is going to receive money.
Hence the correct answer is Option (c).

Test: Accounting & Financial Management of Banking - 3 - Question 8

As per the companies act 2013, there should be the gap of how many months between the two call of share?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 8

The gap between the two calls of share should not be less than one month unless it is provided by the article of association of the company. No company can make a call within 15 days or beyond a one month gap. Also the amount of the call money should not be more than 25% of the face value of the share.

Test: Accounting & Financial Management of Banking - 3 - Question 9

Before the method LERMS the Reserve Bank fixed the buying and selling rates and the forex market would remain within the ceiling and the floor, thus fixed by the Reserve Bank. What does 'L' stand for in LERMS

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 9

Indian Forex Market

  • In India the free movement of capital in and out of the country is restricted.
  • Before the 'Liberalised Exchange Rate Management System' (LERMS), the RBI controlled the buying and selling rate, and the market would stay within the Reserve Bank's ceiling and floor.
  • The Exchange rate is currently determined by the dynamics of supply and demand in the local Interbank market.

Hence, option (b) is the correct answer.

Test: Accounting & Financial Management of Banking - 3 - Question 10

Which one of the following is not a feature of a written down value method of depreciation?
I. The book value of the asset becomes zero at any one point of time.
II. The depreciation is calculated on the book value of assets and not on the cost.
III. The amount of depreciation charged on a specific asset reduces every year.
IV. There is no need to estimate the residual value and estimated life at the time of deciding the amount of depreciation.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 10
  • The concerned asset is depreciated with an unequal amount every year, as the depreciation is charged to the book value and not to the cost of the asset
  • Under the written down value method of Depreciation, Depreciation is calculated at the fixed rate on the reducing balance of the asset therefore, the value of an asset is never zero under this method.
  • Thus, the correct option is (a)
Test: Accounting & Financial Management of Banking - 3 - Question 11

Which of the following statements are correct regarding the Profit and Loss Appropriation account
I. Profit and Loss Appropriation account is different from profit and loss account and is normally put below the net profit figure in the same statement.
II. The net profit is transferred to the debit side of the profit and loss appropriation account.
III. Profit and Loss account shows only the net profit or net loss from operation of business while the Profit and Loss appropriation accounts shows all non-operational adjustments.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 11

Profit and Loss Appropriation account

Net profit, as arrived at in the P&L A/c, is utilised by the company, for providing dividend, dividend distribution tax, adjustments to income tax and transfer to reserves etc. This is done through the profit and Loss Appropriation account. Profit and Loss Appropriation account is different from profit and loss account and is normally put below the net profit figure in the same statement. The net profit is transferred to the credit side of profit and loss appropriation account. Profit and Loss account shows only the net profit or net loss from operation of business while the Profit and Loss appropriation accounts shows all non-operational adjustments.

The credit side of this account shows the following items:

  • Balance of surplus brought forward from previous year.
  • Net Profit for the year.
  • Amount withdrawn from general reserve or any other reserve.
  • Income tax provision no longer required or excess provision written back.
  • The debit side of this account shows the following items:
  • Transfer to reserve/general reserve.
  • Debenture redemption account.
  • Transfer to dividend/interim dividend/proposed dividend.
  • Dividend Distribution Tax (If applicable).
  • Income tax for previous year(s) not provided for.
  • Surplus transferred to balance sheet.

Hence option (c) is correct

Test: Accounting & Financial Management of Banking - 3 - Question 12

Which among the following is not a feature of the Basel Committee on Bank Supervision (BCBS)?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 12

Basel Committee on Bank Supervision (BCBS)

  • It is a committee under the Bank For International Settlements.
    • Established in 1930, the BIS is owned by 60 central banks, representing countries from around the world that together account for about 95% of world GDP.
    • Its head office is in Basel, Switzerland.
    • Its mission is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks.
  • It is the primary global standard setter for the prudential regulation of banks and provides a forum for regular cooperation on banking supervisory matters.
  • The Committee identifies global systemically important banks (G-SIBs) using a methodology that includes both quantitative indicators and qualitative elements.

Hence, the correct answer is option (c).

Test: Accounting & Financial Management of Banking - 3 - Question 13

Mr A wants to implement the application and use of the same costing principles and procedures by different divisions of his company. Which of the following techniques of costing is more appropriate in the given situation?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 13
  • Standard Costing is defined as the preparation and use of standard cost, their comparison with actual costs and the measurement and analysis of variances to their causes and points of incidence. Standard Cost is a predetermined cost unit that is calculated from the management's standards of efficient operation and the relevant necessary expenditure.
  • Marginal Costing is the ascertainment of marginal costs and of the effect on profit of changes in volume or type of output by differentiating between fixed costs and variable costs.
  • Budgetary Control may be defined as the process of continuous comparison of actual costs and performance with the pre-established budgets in relation to the responsibilities of the executives to the specific budgets for the achievement of a target in accordance with the policy of the organisation and to provide a basis for revision of budget.
  • Uniform Costing may be defined as the application and use of the same costing principles and procedures by different Organizations under the same management or on a common understanding between members of an association. It is thus not a separate technique or method. It simply denotes a situation in which a number of organizations may use the same costing principles in such a way as to produce costs which are of the maximum comparability. From such comparable costs valuable conclusions can be drawn.

Hence, the correct answer is option (d).

Test: Accounting & Financial Management of Banking - 3 - Question 14

From the following equations find the correct accounting equation
I. Asset = liability + equity
II. Asset = liability + [Capital + (revenue - expenses) - drawings]
III. Asset + expenses + drawings = liability + Capital + revenue

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 14

The accounting equation is a representation of how the three important components of accounting namely asset, liabilities and equity are associated with each other. In the most simplistic form the accounting equation is represented as asset = liability + equity

Asset represent the valuable resources controlled by the company such as cash ,accounts receivable, fixed asset etc. liabilities represent its obligation of an organization to its external stakeholders while equity represents owners net claim on the asset. It is to be noted that, the liability and equity represent how the asset of the organization has been financed.

Expanded accounting equation
Asset = liability + equity
Asset = liability + [Capital + (revenue - expenses) - drawings]
Asset + expenses + drawings = liability + Capital + revenue

Test: Accounting & Financial Management of Banking - 3 - Question 15

Under Costing Profit and loss account which of the following are debited?
I. Cost of sales
II. Over-absorbed overheads
III. Abnormal losses

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 15

Costing Profit and loss account is debited with the cost of sales, under-absorbed overheads and abnormal losses and is credited with sales value, over-absorbed overhead and abnormal gains. The net profit or loss in this account is transferred to the Cost Ledger Control Account.

Test: Accounting & Financial Management of Banking - 3 - Question 16

Which of the following statements are correct regarding the Features of a Joint Stock Company
I. A company has a perpetual succession. Death or insolvency of any shareholder does not affect the existence of the company.
II. The common seal is treated as the company's signature and is affixed on all important documents and contracts as per the resolutions passed by the Board.
III. The liability of the members of the joint stock company is unlimited.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 16

Features of a Joint Stock Company

  • Incorporated association: A company is a registered body of individuals. According to the Companies Act, 2013, it is compulsory to register a joint stock company.
  • Artificial person: It is an artificial person created by law. It is different from its members. It can enter into contracts, purchase and sell the properties, can sue and be sued upon. Even a member can enter into a contract with the company.
  • Perpetual succession: A company has a perpetual succession. Death or insolvency of any shareholder does not affect the existence of the company.
  • Common seal: As the company is an artificial person created by law, it cannot sign its name. So it has a common seal on which the company's name is engraved. The common seal is treated as the company's signature and is affixed on all important documents and contracts as per the resolutions passed by the Board. Companies Act 2013 required common seal to be affixed on certain documents like share certificates, bill of exchange etc. CA Amendment 2015 has made the use of common seal optional. Such documents may now instead be signed by two directors or one director and a company secretary of the company.
  • Limited liability: The liability of the members of the joint stock company is limited to the face value of shares held by them.
  • Separation of management from ownership: Even though the shareholders are true owners, they do not participate in the management of the company. They elect their representatives known as the Board of Directors.

Hence option (b) is correct

Test: Accounting & Financial Management of Banking - 3 - Question 17

Which of the following statement/s is/are correct regarding calls in advance?
I. Interest on Calls-in-Advance must be paid even when no profit is earned by the company
II. The interest payable on Calls-in- Advance is an appropriation of the profits of the company
III. A Company is liable to pay interest @ 12% p.a on Calls-in- Advance, if the articles do not specify the rate of interest.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 17
  • If authorized by the articles, a company may receive from a shareholder the amount remaining unpaid on shares, even though the amount has not been called up. This is known as calls-in-advance. It is a debt of a company until the calls are made and the amount already paid is adjusted. Calls-in-advance may also arise when the number of shares allotted to a person is much smaller than the number applied for and the terms of issue permit the company to retain the amount received in excess of application and allotment money. Of course, the company can retain only so much as is required to make the allotted shares fully paid ultimately. The calls-in-advance account is ultimately closed by transfer to the relevant call accounts. It is noted that the money received on calls-in-advance does not become part of share capital. It is shown under a separate heading, namely 'calls-in-advance' on the liabilities side. No dividend is paid on calls-in-advance.
  • The amount received as calls-in-advance is a debt of the company, the company is liable to pay interest on the amount of Calls-in-Advance from the date of receipt of the amount till the date when the call is due for payment. Generally the Articles of the company specify the rate at which interest is payable. If the articles do not contain such rate, Table F will be applicable & company liable to pay interest @ 12% p.a.It is to be noted that the interest payable on Calls-in- Advance is a charge against the profits of the company.
  • As such, Interest on Calls-in-Advance must be paid even when no profit is earned by the company.
Test: Accounting & Financial Management of Banking - 3 - Question 18

Accounting Standard Board was set up by

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 18

The Institute of Chartered Accountants of India, recognizing the need to harmonize the diverse accounting policies and practices at present in use in India, constituted an Accounting Standards Board (ASB) on 21st April, 1977.

Hence option (a) is correct.

Test: Accounting & Financial Management of Banking - 3 - Question 19

Match the following classification of ratios?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 19

Classification of ratios is done on the basis of the financial statements from which the ratios are calculated.

Test: Accounting & Financial Management of Banking - 3 - Question 20

Which of the following statement/s is/are correct about forward rate agreement
I. A forward rate agreement (FRA) is an over-the-counter (OTC) contract between parties that determines the rate of debt to be paid on an agreed-upon date in the future.
II. A forward rate agreement (FRA) is an over-the-counter (OTC) contract between parties that determines the rate of interest to be paid on an agreed-upon date in the future.
III. A forward rate agreement (FRA) is an over-the-counter (OTC) contract between parties that determines the rate of commodity to be paid on an agreed-upon date in the future.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 20

A forward rate agreement (FRA) is an over-the-counter (OTC) contract between parties that determines the rate of interest to be paid on an agreed-upon date in the future. In other words, an FRA is an agreement to exchange an interest rate commitment on a notional amount. The forward rate agreement determines the rates to be used along with the termination date and notional value. FRAs are cash-settled. The payment is based on the net difference between the interest rate of the contract and the floating rate in the market - the reference rate. The notional amount is not exchanged. It is a cash amount based on the rate differentials and the notional value of the contract.

Test: Accounting & Financial Management of Banking - 3 - Question 21

Which of the following are features of the capital expenditure budget?
(l) Long-term perspective
(ll) Strategic focus
(lll) Comprehensive in nature
(lV) Cost Estimation

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 21

The features of the capital expenditure budget are:
(l) Long-term perspective: A capital expenditures budget is prepared for a long-term period, generally spanning over several years. This is because capital expenditures are made to acquire or improve fixed assets, which have a long useful life.
(ll) Strategic focus: The budget is prepared with a strategic focus to enhance the capacity and efficiency of the production process. The budget takes into consideration the strategic objectives of the organization and the need to remain competitive in the market.
(lll) Comprehensive in nature: A capital expenditures budget is comprehensive in nature, covering all the major capital projects that the organization is planning to undertake during the budget period. It includes both new projects and the replacement of old assets.
(lV) Cost estimation: The budget estimates the cost of each capital project. The cost estimation takes into account various factors such as material cost, labor cost, overhead cost, and other related expenses

Test: Accounting & Financial Management of Banking - 3 - Question 22

A company needs a methodology for quantifying risk and translating that risk into estimates of expected return on equity. Which approach of cost of equity will be used?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 22
  • An important task of the corporate financial manager is measurement of the company's cost of equity capital. But estimating the cost of equity causes a lot of head scratching; often the result is subjective and therefore open to question as a reliable benchmark.
  • A method for arriving at that figure, a method spawned in the rarefied atmosphere of financial theory. The capital asset pricing model (CAPM) is an idealized portrayal of how financial markets price securities and thereby determine expected returns on capital investments. The model provides a methodology for quantifying risk and translating that risk into estimates of expected return on equity.
  • Hence, the correct answer is option (c).
Test: Accounting & Financial Management of Banking - 3 - Question 23

Which of the following is the second step in accounting cycle?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 23

The accounting cycle's 8 steps are:

  • Identify and analyze transactions during the accounting period.
  • Record transactions in a journal.
  • Post transactions to the general ledger.
  • Calculate an unadjusted trial balance.
  • Analyze the worksheet to identify errors.
  • Adjust journal entries to fix errors.
  • Create and produce financial statements.
  • Close the books for the accounting period.

Hence option (d) is correct.

Test: Accounting & Financial Management of Banking - 3 - Question 24

__________ ratio are also known as financial ratios and used to evaluate the financial performance and position of the company.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 24

Accounting ratio are also known as financial ratios and used to evaluate the financial performance and position of the company. It is used by investors, analysts, creditors, and management to assess the financial health of the business.

  • Liquidity ratio measures the company's ability to meet its short term obligations and assess its liquidity position
  • Profitability ratio measures the company's ability to generate profits in relation to sales.

Solvency ratio measures a company's long term financial stability and its ability to meets long term obligations.
Hence, the correct answer is Option (b).

Test: Accounting & Financial Management of Banking - 3 - Question 25

____________ of a bond is the total return an investor can expect to receive if the bond is held until its maturity date.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 25

YTM (The yield to maturity) of a bond is the total return an investor can expect to receive if the bond is held until its maturity date. It is an essential measure for bond investors as it helps them assess the attractiveness of a bond investment and compare the potential return of different bonds .It is expressed as an annual percentage rate.
Hence, the correct answer is Option (a).

Test: Accounting & Financial Management of Banking - 3 - Question 26

Directions: Current ratio of X Ltd. is 4.5:1. It is found that the working capital of the company is Rs 81,000.

Q. The current assets of X Ltd. is Rs._______.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 26

[Working capital = current assets - current liabilities.
Current assets - current liabilities = 81,000
Also current ratio = current assets/current liabilities
Current ratio = 4.5/1
Current assets/ current liabilities = 4.5/1
Current assets = 4.5* current liabilities
Now putting the value of current assets in working capital formula
[4.5*current liabilities]- current liabilities= 81,000
Current liabilities = 81,000/3.5= 23,142
Current assets = 81,000- 23,142 = 57,858]
Hence, the correct answer is Option (a).

Test: Accounting & Financial Management of Banking - 3 - Question 27

According to which accounting concept fixed assets are kept at the cost of purchases and not their market value?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 27

Cost concept: Every business transaction is recorded in the books of accounts at cost price, irrespective of the market price, all the monetary transactions are recorded at the historical cost. e.g. the machinery is recorded in the books by that amount which is paid to the supplier plus the expenses of bringing and installing the machinery which are necessary to put it in working order.

Applications

  • Fixed assets are kept at the cost of purchases and not their market value.
  • Every transaction is recorded with the present value and not any future value.
  • Unrealized gains are ignored.
  • An item, that has no cost, is not taken in books.

Hence the correct answer is Option (c).

Test: Accounting & Financial Management of Banking - 3 - Question 28

Under the First In First out method of process costing, the Closing stock of work in process is valued at ____

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 28
  • Under the First In First out method of process costing, there is a segregation of opening WIP and Closing WIP.
  • The units completed and transferred are taken from both opening work-in-process (WIP) and freshly introduced materials/inputs.
  • The cost to complete the opening WIP and other completed units is calculated separately.
  • The cost of opening WIP is added to the cost incurred on completing the incomplete (WIP) units into a complete one.
  • The total cost of units completed and transferred is calculated by adding the opening WIP cost to the cost of freshly introduced inputs.
  • In this method, the closing stock of work in process is valued at the current cost.
  • The major difference between the FIFO method and the average method is that units of opening work in process and their cost are taken in full under the average method while under the FIFO method only the remaining work done now is considered.
Test: Accounting & Financial Management of Banking - 3 - Question 29

Which of the following terms represents the temporary assets acquired by the bank for granting loans and advances?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 29

Non-banking Assets

  • These are the temporary assets acquired by the bank for granting loans and advances. Eg. Immovable properties, stock, title deeds etc. Such assets are acquired by a bank from defaulters in satisfaction of their outstanding to the bank. In short, the asset acquired in satisfaction of the claim of the bank is called Non-banking assets. It showed under Schedule No. 11 Other assets. Such assets acquired should be disposed of within a period of seven years from the date of their acquisition.

Hence, the correct answer is option (b).

Test: Accounting & Financial Management of Banking - 3 - Question 30

Which of the following statement/s is/are incorrect regarding the Balance sheet?
I. Balance sheet is always prepared for a particular period.
II. It is an account containing information regarding assets, liabilities and capital.
III. It shows the nature and value of assets, the nature and value of liabilities and the position of capital.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 30

Balance sheet is a statement which shows the financial position i.e. the balances of assets, liabilities and capital of a business entity at a given date. It is prepared from the real accounts and personal accounts of trial balance. A debit balance in a real account or personal account represents an asset of the concern/firm.Likewise a credit balance in a personal account represents a liability. There can be some newly opened accounts as well on account of adjustment entries. The assets and liabilities are arranged in a proper way and the resultant statement is the balance sheet. On the right hand side, assets are arranged while on the left hand side, liabilities are recorded. The totals of the two sides of the balance sheet must agree because of the equation, viz. Assets = Liabilities + Capital.

If there is a difference, it means that there is some mistake. The difference, if it does occur, should be placed on the deficit side as Suspense Account to make the two sides agree apparently.

Features of Balance Sheet

  • The primary objective of the preparation of balance sheet is to ascertain the financial position of a concern.
  • It shows (a) the nature and value of assets, (b) the nature and value of liabilities and (c) the position of capital.
  • Balance sheet is always prepared on a certain date, never for a particular period.
  • Balance sheet, unlike a trading and profit and loss account, is not an account. It is a statement containing information regarding assets, liabilities and capital.
Test: Accounting & Financial Management of Banking - 3 - Question 31

Consider the following statement about Goods and Services Tax and choose the correct statement.
I. GST is applicable on manufacturing of goods or services.
II. GST is a destination-based tax.
III. Both Centre and States simultaneously have the power to impose GST across the entire supply chain.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 31

Some Salient features of Goods and Services Tax (GST) :

  • Supply Based Tax: GST is applicable on supply of goods or services as against the previous concept of tax on the manufacture of goods or on sale of goods or on provision of services.
  • Destination- Based Consumption Tax: GST is a destination-based tax. This implies that all SGST (or UTGST) collected will ordinarily accrue to the State (or Union Territory) where the consumer of the goods or services receives supply.
  • Dual GST: Both Centre and States simultaneously have the power to impose GST across the entire supply chain. Centre would levy and collect Central Goods and Services Tax (CGST) and States would levy and collect the State Goods and Services Tax (SGST) on all supplies within a State.

Hence, option (b) is the correct answer.

Test: Accounting & Financial Management of Banking - 3 - Question 32

A risk arising due to change in interest rate structure will be what type of risk?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 32

The type of risk that arises by the factor that affect essentially all companies and all projects of course in varying degrees. For example, changes in interest rate structure will affect the projects already taken as well as those yet to be taken both directly through the discount rate and indirectly through the cash flows. Other factor that affect all the projects may be inflation, economic conditions etc. Although the expected values of all these variable may be considered in the capital budgeting analysis, changes in these variables will affect their values. Firms cannot diversify away this risk in the normal course of business, although may be considered to some extent only.

Hence, the correct answer is option (c).

Test: Accounting & Financial Management of Banking - 3 - Question 33

Directions: On 1st April 2009, Ashoka Ltd purchased furniture costing 50,000. On July, 2009, the furniture was sold for 20,000. The depreciation is charged @10% on Original Cost Method.

Q. What will be the balancing figure when these transactions will be recorded in the journal.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 33

Cost of machine purchased= 50,000
Less : Sale of machine = 20,000
Depreciation = 1250
Balancing Figure = 50,000 - (20,000+1250)
= 28,750
Thus, the correct option is (c)

Test: Accounting & Financial Management of Banking - 3 - Question 34

Which of the following statement/s is/are correct regarding GAAP?
I. The rules or guidelines adopted for recording and reporting of business transactions is known as GAAP.
II. This brings in objectivity in the process of recording and makes the accounting statements more acceptable to various users.
III. To bring uniformity in the preparation and the presentation of financial statements.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 34

Generally Accepted Accounting Principles (GAAP) refers to the rules or guidelines adopted for recording and reporting of business transactions, in order to bring uniformity in the preparation and the presentation of financial statements. For example, one of the important rule is to record all transactions on the basis of historical cost, which is verifiable from the documents such as cash receipt for the money paid. This brings in objectivity in the process of recording and makes the accounting statements more acceptable to various users. The Generally Accepted Accounting Principles have evolved over a long period of time on the basis of past experiences, usages or customs, statements by individuals and professional bodies and regulations by government agencies and have general acceptability among most accounting professionals. However, the principles of accounting are not static in nature. These are constantly influenced by changes in the legal, social and economic environment as well as the needs of the users.

Test: Accounting & Financial Management of Banking - 3 - Question 35

From the following information find the amount of depreciation to be charged in the 3rd year under the diminishing balance method.
Cost of an asset is 40,000
The rate of depreciation is 15%,
Life of the asset 4 years

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 35

This is a depreciation method in which the percentage rate is applied to the residual balance, rather than to the original cost. Recall that the straight-line method assumes a constant depreciation value. Conversely, the diminishing balance method assumes a constant depreciation rate per year. More depreciation tends to occur earlier in the asset's life. This method is more relevant where the particular Asset (viz; Vehicles, Computer, Office Equipment, etc) is expected to give better performance in the initial periods of use as compared to the later. Thus the charge to the Profit & Loss account is higher in initial years as compared to the later years of life of such assets. In an equation, this looks like: Annual Depreciation = Previous year's value X Percentage rate

Test: Accounting & Financial Management of Banking - 3 - Question 36

Directions: Balance sheet of XYZ contains the following information:

10% debentures= 5 Lacs, 18% Term loan = ₹ 15 lacs, Current liabilities= ₹20000, Equity capital ₹ 300000, Preference capital ₹ 200000, Reserves and Surplus= ₹ 15 lacs, Securities Premium ₹ 7 lacs, Dividend ₹ 100000, Current Assets = ₹120000, Cost of Revenue from Operations = ₹80000 , Gross profit ₹ 1Lacs, Loss on sale of assets ₹ 50000, Salary₹25000, Interest expense ₹ 5000, Carriage outwards ₹ 7000, Sales ₹ 5 Lacs.

Q. What would be the operating Profit Ratio of XYZ?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 36

Operating Profit = (Gross profit- operating expenses)
Operating profit = (100000-25000-7000)
Operating profit Ratio = (operating profit/ sales) *100
= (68000/500000)* 100
= 13.6%
Hence, the correct answer is option (a).

Test: Accounting & Financial Management of Banking - 3 - Question 37

Directions: Balance sheet of XYZ contains the following information:

10% debentures= 5 Lacs, 18% Term loan = ₹ 15 lacs, Current liabilities= ₹20000, Equity capital ₹ 300000, Preference capital ₹ 200000, Reserves and Surplus= ₹ 15 lacs, Securities Premium ₹ 7 lacs, Dividend ₹ 100000, Current Assets = ₹120000, Cost of Revenue from Operations = ₹80000 , Gross profit ₹ 1Lacs, Loss on sale of assets ₹ 50000, Salary₹25000, Interest expense ₹ 5000, Carriage outwards ₹ 7000, Sales ₹ 5 Lacs.

Q. Calculate the Working Capital Turnover Ratio from the given information.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 37

Working Capital Turnover Ratio;= Revenue from Operations/ Working Capital
Revenue from Operations = Cost of Revenue from Operations + Gross Profit
= 80000 + 100000 = ₹180000
Working Capital = Current Assets- Current Liabilities = 120000 - 20000
= ₹100000
Working Capital Turnover Ratio
= 180000/ 100000 = 1.8times.
Hence, the correct answer is option (d).

Test: Accounting & Financial Management of Banking - 3 - Question 38

Which of the following statements are correct regarding the Trading Account?
I. It is not a part of the P&L account.
II. A trading account takes into account only the direct costs associated with the materialism which the firm is dealing.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 38

Preparation of Trading Account:

  • This is not a necessary step for preparation of the P&L account but many accountants prefer to prepare it. It forms part of the P&L account. A trading account takes into account only the direct costs associated with the materialsin which the firm is dealing. The operating costs are not included. This means that we calculate the 'Cost of Goods Sold' and subtract it from the Revenue to arrive at what is called 'Gross Profit'. It is important to note here that under 'Cost of Goods Sold', we calculate the cost of only those goods which are sold and not the cost of entire goods purchased. If we have only purchased the goods during a year and not sold anything, there will be no cost associated with selling of goods as the purchases resulted in only increasing the inventory (closing stock).

Hence option (b) is correct

Test: Accounting & Financial Management of Banking - 3 - Question 39

Which of the following statement/s is/are correct about capital structure
I. It acts as a tax management tool
II. It helps to brighten the image of the firm
III. It is an indicator of the risk profile of the firm
IV. It reflects the firm's strategy

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 39

Following are the features of Capital structure:

  • It reflects the firm's strategy: The capital structure reflects the overall strategy of the firm. The strategy includes the pace of growth of the firm. In case the firm wants to grow at a faster pace, it would be required to incorporate debt in its capital structure to a greater extent. Further, in case of growth through acquisitions or the inorganic mode of growth as it is called, the firm would find that financial leverage is an important tool in funding the acquisitions.
  • It is an indicator of the risk profile of the firm: One can get a reasonably accurate broad idea about the risk profile of the firm from its capital structure. If the debt component in the capital structure is predominant, the fixed interest cost of the firm increases thereby increasing its risk. If the firm has no long term debt in its capital structure, it means that either it is risk averse or it has cost of equity capital or cost of retained earnings less than the cost of debt.
  • It acts as a tax management tool: The capital structure acts as a tax management tool also. Since the interest on borrowings is tax deductible, a firm having healthy growth in operating profits would find it worthwhile to incorporate debt in the capital structure in a greater measure.
  • It helps to brighten the image of the firm: A firm can build on the retained earnings component of the capital structure by issuing equity capital at a premium to a spread out base of small investors. Such an act has two benefits. On the one hand, it helps the firm to improve its image in the eyes of the investors. At the same time, it reduces chances of hostile take-over of the firm.
Test: Accounting & Financial Management of Banking - 3 - Question 40

Which of the following statement/s is/are incorrect regarding TDS?
I. TDS is a kind of advance tax paid by the deductee.
II. Deductor and deductee is required to obtain a Tax Deduction Account Number
III. It is the deductor's responsibility to deduct TDS before making the payment and deposit the same with the company

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 40

As per the Income Tax Act, any company or person making a payment, is required to deduct tax at source, at the rates prescribed by the income tax department, if the payment exceeds certain threshold limits. The provisions of TDS apply to several payments like salary, interest, commission, brokerage, dividend payments, professional fees, royalty, etc. The person or the company that deducts the TDS before making the payment, is called a deductor and the company or person receiving the payment is called the deductee. It is the deductor's responsibility to deduct TDS before making the payment and deposit the same with the government. Each deductor (except when tax is deducted under Section 194-IA) is required to obtain a Tax Deduction Account Number (TAN). TDS is required to be deducted irrespective of the mode of payment-cash, cheque or credit-and is linked to the TAN of the deductor and PAN of the deductee. There are separate rules for individuals for deducting TDS when they make rent payments or pay fees to professionals like lawyers and doctors. TDS is a kind of advance tax paid by the deductee. The onus of the depositing the TDS on time lies with the deductor. For the deductees, the deducted TDS is claimed as a tax paid and a refund can be claimed if the tax liability is less than the TDS.

Hence the correct answer is Option (b).

Test: Accounting & Financial Management of Banking - 3 - Question 41

Which of the following statements regarding Quantitative credit control methods adopted by RBI are correct
I. It is designed to regulate the flow of credit for specific uses.
II. Bank rate, Margin requirements, regulation of consumer credit and open market operations are a few examples of Quantitative credit control methods used by RBI.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 41

RBI to control the credit creation power of the commercial banks uses quantitative controls and qualitative control methods. Quantitative controls are designed to regulate the volume of credit created by the banking system, qualitative measures or selective methods are designed to regulate the flow of credit for specific uses. Bank rate, Margin requirements, regulation of consumer credit and open market operations are a few examples of Qualitative credit control methods used by RBI.

Test: Accounting & Financial Management of Banking - 3 - Question 42

To calculate cash flow from operating activities, the company needs to deduct which of the following?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 42

The money brought in by the company for its regular business activities, such as manufacturing and selling goods or providing a service to customers, is referred to as cash flow from operating activities (CFO) . A company's cash flow statement is the first section.

  • Operating Cash Flow = Operating Income + Depreciation - Taxes + Change in Working Capital.
  • Operating income = Gross Profit - Operating Expenses - Depreciation - Amortization

[The adjustments done for cash flow from operating activities are Depreciation Gain / Loss on sale of fixed assets Foreign exchange Miscellaneous expenditure written off Investment income Interest Dividend.]

Test: Accounting & Financial Management of Banking - 3 - Question 43

A humped yield curve occurs when the medium-term securities yields are higher than long and short-term yields. It indicates ____________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 43

A humped yield curve occurs when the medium-term securities yields are higher than long and short-term yields. It indicates slowing economic growth. This may lead to an inverted yield curve, but not always.

Hence, option (a) is the correct answer.

Test: Accounting & Financial Management of Banking - 3 - Question 44

Which of the following is not an example of a Fictitious Asset?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 44

The term "fictitious assets" refers to assets that cannot be converted into cash or from which no further advantage can be received. These assets consist of unwritten-off expenses, such as advertising costs, and the debit balance of the profit and loss account.

Test: Accounting & Financial Management of Banking - 3 - Question 45

AS 2 is not applicable to
I. Work in progress arising under construction contracts
II. Work in progress of service providers
III. Shares, debentures, etc., held as stock-in-trade

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 45

Accounting Standard - 2 Valuation of inventory

  • The standard deals with the determination of the values at which inventories are carried in the financial statements until the related revenues are recognized. The standard also deals with determination of such value, including the ascertainment of cost of inventories and any write-down thereof to net realizable value. It states that inventories are to be valued at a lower cost or net realizable value. Weighted average cost or first in first out (FIFO) methods is permitted in cases where goods are ordinarily interchangeable. Specific identification methods are permitted only when goods are not ordinarily interchangeable. Techniques for measurement of the cost of inventories, such as the standard cost method or the retail method, are permitted to be used for convenience if the results approximate the actual cost.

This standard is not applied to:

  • Work in progress arising under construction contracts
  • Work in progress of service providers
  • Shares, debentures, etc., held as stock-in-trade
  • Inventories of livestock, agricultural and forest products, and mineral oils, ores and gases

Hence the correct answer is Option (d).

Test: Accounting & Financial Management of Banking - 3 - Question 46

What is the benefit of a zero based budgeting?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 46
  • Zero based budgeting requires managers to justify all the expenses and activities rather than just assuming that they are necessary. Option A and B are incorrect because zero-based budgeting is generally more complex in nature and require more detailed analysis. Option C is incorrect because zero- based budgeting is more rigid than traditional budgeting since it requires justification for all the expenses.
  • Zero-based budgeting is a method of budgeting where all expenses must be justified for each new period. This approach requires that all expenses be evaluated and approved, rather than simply carried over from the previous period. This can help ensure that all expenses are aligned with the company's goals and priorities.
Test: Accounting & Financial Management of Banking - 3 - Question 47

Under contract costing, the contractor makes periodic payments to the contractor based on work completed known as progress payment, which of the following is true regarding progress payment?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 47

Contract costing is the method of costing applied in a business where separate contracts of a non-repetitive nature are undertaken. Contract costing is a form of job costing involving big jobs that require a considerable amount of time to complete and comprise numerous activities. Under contract costing, the contractor makes periodic payments to the contractor based on work completed known as a progress payment.

  • Progress payment = Value of work certified - Retention money - Payment to date
  • Value of Work Certified = Value of Contract X Work certified (%)
Test: Accounting & Financial Management of Banking - 3 - Question 48

Consider the following pairs of Cost Accounting Standard (CAS) and their respective fields they deal with and choose the correct pair.
I. CAS 6 : Material Cost
II. CAS 7 : Cost of Utilities
III. CAS 10 : Direct Expenses

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 48

Some Cost Accounting Standards are:

  • CAS6 deals with Material Cost. It brings uniformity and consistency in the principles and methods of determining the material cost with reasonable accuracy in an economically feasible manner.
  • CAS7 deals with Employee Cost. It brings uniformity and consistency in the principles and methods of determining the Employee cost with reasonable accuracy.
  • CAS8 deals with Cost of Utilities. It brings uniformity and consistency in the principles and methods of determining the Cost of Utilities with reasonable accuracy.
  • CAS10 deals with Direct Expenses. It brings uniformity and consistency in the principles and methods of determining the Direct Expenses with reasonable accuracy.

Hence, option (c) is the correct answer.

Test: Accounting & Financial Management of Banking - 3 - Question 49

What is the type of tax levied on transactions made within a single state under the GST regime?
(l) Integrated GST (IGST)
(ll) State GST (SGST)
(lll) Central GST (CGST)
(lV) Union Territory GST (UGST)

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 49
  • Under the GST regime in India, there are two types of taxes levied on transactions made within a single state - State GST (SGST) and Central GST (CGST).
  • The State GST (SGST) is levied by the State government on intra-state supplies of goods and/or services, whereas the Central GST (CGST) is levied by the Central government on the same transaction. The rates for SGST and CGST are usually the same and are collectively known as GST.
Test: Accounting & Financial Management of Banking - 3 - Question 50

Find out that which of the companies are under the Based on Incorporation
I. Chartered Company
II. Holding Company
III. Registered Company
IV. Foreign Company

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 50

Based on Incorporation

  • Chartered Company
  • Statutory Company
  • Registered Company
  • Foreign Company

Based on Ownership

  • Private Company
  • Public Company
  • Government Company
  • Holding Company

Based on Liability

  • Company Limited by Shares
  • Company Limited by Guarantee
  • Company with Unlimited Liability
  • Subsidiary Company

Hence option (d) is correct

Test: Accounting & Financial Management of Banking - 3 - Question 51

P, Q and R are partners in a firm, sharing profits and losses, in ratio of 5:3:2 respectively. The balance of capital is 25000 for P and Q each and 20000 for C. 'P' decided to retire from firm. The goodwill of firm is valued at 15000 and profit on revaluation of assets at 2500. The firm also has a balance in reserve A/c for 7500 as on that date. What amount will be payable to P?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 51

The amount will be payable to P is 25000 + 7500 + 1250 + 3750 = 37500

Test: Accounting & Financial Management of Banking - 3 - Question 52

Why do we need inter branch reconciliation?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 52

The reconciliation of inter branch transaction ensures accuracy of financial data. Hence the banks can maintain balanced coordination between branches and avoid occurrence of errors in the books of accounts.

Test: Accounting & Financial Management of Banking - 3 - Question 53

A commoner visited the bank and asked the banker to open a savings account for him which gives him the yearly interest of 7 per cent per annum, the interest should be capitalized every month. The banker at the request of the commoner prepared the necessary documents and handed them to him. The document disclosed that the interest rate was 5.75% per quarter. Commoner on seeing that sued the bank for fraud. Who would win the case?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 53

The effective rate of interest demanded by a commoner was 7 per cent in a year
When 5.75 % interest will be provided per quarter it will not result in 7 per cent interest yearly
E = (1+i)n-1
This can be explained by -

Here if 5.75 is kept as r
Then

1.07 > 1.058 (round off)
Hence, the commoner was correct and he would win the case.

Test: Accounting & Financial Management of Banking - 3 - Question 54

The Debt-Equity Ratio of a Company is 1: 2. How will a Transaction of Goods purchased on credit affect the ratio?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 54

Debt-Equity = Long Term + Shareholder's Ratio Debts Funds Goods purchased on credit will affect only the Inventories and Trade Payables so there will be no change in the Debt-Equity Ratio because neither the Long-Term Debt nor the Shareholder's Funds are affected.

Test: Accounting & Financial Management of Banking - 3 - Question 55

A bill due on 12th June, 2021 is made payable at two months after date, then the due date of instrument is:

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 55

When the date of maturity is a public holiday, then the bill becomes due on the preceding business day. Therefore, here the maturity date is 15th August, 2021 which is a public holiday the due date of the bill is 14th August, 2021 i.e, preceding business day.

Test: Accounting & Financial Management of Banking - 3 - Question 56

In which Schedule of Companies Act, 2013, the format of Balance Sheet and Statement of profit and loss Account is Given?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 56

The General instructions related to the preparation of Financial Statements is given Schedule III of Companies Act, 2013. There are 7 Schedules in the Companies Act, 2013.

Test: Accounting & Financial Management of Banking - 3 - Question 57

Every company has to transfer ____________ to reserve fund as per the RBI notification.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 57

Every banking company incorporated in India is required to create a Reserve Fund and to transfer at least 25% of its profit to the reserve fund as per RBI notification.

Test: Accounting & Financial Management of Banking - 3 - Question 58

If the total debit balance of trial balance is not equal to the total credit balance, then the difference amount has to be shown under which account?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 58

If the debit column of trial balance is not matched with credit column, then the company has to open a suspense account which is a temporary account in the books of an organisation in which items are entered temporarily until the items are credited or debited to the correct account.

Test: Accounting & Financial Management of Banking - 3 - Question 59

Direction: Read the information carefully and answer questions based on these information
The following summary cash flow has been extracted from the company's accounting records.
I. Cash receipts from the sale of goods- ₹ 2,00,000
II. Wages and salaries paid- ₹ 15,000
III. Dividend paid for the year- ₹ 1,00,000
IV. Income tax paid during the year- ₹ 25,000
V. Cash receipt from sale of plant and equipment- ₹ 50,000
VI. Insurance claim received against laws of furniture by fire- ₹ 20,000
VII. Interest on investment received- ₹ 20,000
VIII. Interest on loan paid during the year- ₹ 12,000

Q. Calculate the amount of net cash flows from operating activities.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 59

Operating activities are the principal revenue generating activities of the organisation.
Cash receipt from the sale of goods = ₹ 2,00,000
Wages and salaries paid = ₹ 15,000
Income tax paid during the year = ₹ 25,000
= 2,00,000 - (15,000 + 25,000)
Hence, Net operating cash flow = ₹ 1,60,000

Test: Accounting & Financial Management of Banking - 3 - Question 60

Direction: Read the information carefully and answer questions based on these information
The following summary cash flow has been extracted from the company's accounting records.
I. Cash receipts from the sale of goods- ₹ 2,00,000
II. Wages and salaries paid- ₹ 15,000
III. Dividend paid for the year- ₹ 1,00,000
IV. Income tax paid during the year- ₹ 25,000
V. Cash receipt from sale of plant and equipment- ₹ 50,000
VI. Insurance claim received against laws of furniture by fire- ₹ 20,000
VII. Interest on investment received- ₹ 20,000
VIII. Interest on loan paid during the year- ₹ 12,000

Q. Which of the following activities are financing activity in preparing a cash flow statement?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 60

Financing activities are generally related to the changes in owner's equity and borrowings of the organisation which affect cash flows. Therefore Dividend paid during the year is an financing activity.

Test: Accounting & Financial Management of Banking - 3 - Question 61

Why does the Indian forex market do not follow the international trend of the exchange system, particularly in the short run?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 61

Indian forex market does not follow the international trend of the exchange system, particularly in the short run as there is more restriction on the free flow of capital into or out of the country. The restrictions are generally through the Reserve Bank of India who governs the buying and selling rates of money.

Test: Accounting & Financial Management of Banking - 3 - Question 62

At the time of death of a partner firm gets policy value from the insurance company of the joint life policy taken ______ for all the partners.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 62

At the time of death of a partner firm gets policy value from the insurance company of the joint life policy taken jointly for all the partners.

Test: Accounting & Financial Management of Banking - 3 - Question 63

When a company earned a profit of Rs 50,000 during the year. If the marginal cost and selling price of the product is Rs 10 and Rs 12 per unit respectively, FIND OUT the amount of margin of safety under marginal costing?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 63

P/V ratio = ( Selling price-Variable cost per unit)/Selling price
= (12-10)/12
= 16.67%
Margin of safety = (Profit)/ (P/v ratio)
= 50000/16.67%
= Rs 299,940

Test: Accounting & Financial Management of Banking - 3 - Question 64

Direction: Read the information carefully and answer questions based on these information.
In the books of Hiranya Ltd., following transactions have been taken place. The purchase book has been totalled ₹ 200 short, goods purchased ₹ 500 have been posted to the debit of supplier Nisha & company and furnitures purchased from Riya & company , ₹ 4000 has been entered in purchase day book. Prepare journal entries and answer the following questions.

Q. If suspense A/c is to be opened, what will be the total of suspense A/c?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 64

Since purchase book has been recorded ₹ 200 short and the wrong posting of Nisha & company A/c on debit side worth of ₹ 500 instead of crediting, these accounts can be rectified using suspense A/c.

Test: Accounting & Financial Management of Banking - 3 - Question 65

Direction: Read the information carefully and answer questions based on these information.
In the books of Hiranya Ltd., following transactions have been taken place. The purchase book has been totalled ₹ 200 short, goods purchased ₹ 500 have been posted to the debit of supplier Nisha & company and furnitures purchased from Riya & company , ₹ 4000 has been entered in purchase day book. Prepare journal entries and answer the following questions.

Q. "Purchase of furniture from Riya & co worth of ₹ 4000 has been entered in purchase day book". The rectified journal entry is:

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 65

Wrong entry: Purchase A/c Dr.
To Riya & co A/c
Correct entry: Furniture A/c Dr.
To Riya & co A/c
Rectified entry: Furniture A/c Dr.
To Purchase A/c

Test: Accounting & Financial Management of Banking - 3 - Question 66

____ are a new type of banks which are allowed to accept restricted deposits but they cannot issue loans and credit cards.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 66

Payment banks are a new type of banks which have been recently introduced by RBI. They are allowed to accept restricted deposits but they cannot issue loans and credit cards. However customers can open current and savings accounts and also avail facility of ATM cum debit cards, Internet banking. Example: Paytm payment Banks, NSDL payment banks.

Test: Accounting & Financial Management of Banking - 3 - Question 67

Which of the following is not an advantage of Job costing?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 67

Advantages and disadvantages of job costing include:

  • Disadvantages: Job Costing is a costly and laborious method, and a lot of clerical processes have involved the chances of error are more, It is not suitable under inflationary conditions when market conditions are changing.
  • Advantages: The profitability of each job can be derived, It facilitates production planning, Budgetary control and Standard Costing can be applied in job costing, Spoilage and detective can be identified and responsibilities can be fixed accordingly.
Test: Accounting & Financial Management of Banking - 3 - Question 68

_____ refer to that portion of the authorised capital which has been offered to the public for subscription.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 68

Issued capital refers to that portion of the authorised capital which has been offered to the public for subscription.

Test: Accounting & Financial Management of Banking - 3 - Question 69

G Ltd is of the opinion that no internal auditor is required to be appointed as the turnover is 150 crores. Whether the above statement is correct?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 69

G Ltd is a listed company and there is no threshold limits for a listed company and it is mandatory for listed company to appoint an internal auditor.

Test: Accounting & Financial Management of Banking - 3 - Question 70

Bank has to maintain certain minimum cash balance to meet requirements is known as _________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 70

For smoothly meeting cash payment requirement, banks have to maintain certain minimum ready cash balances at all times. This is called as Cash Reserve Ratio (CRR).

Test: Accounting & Financial Management of Banking - 3 - Question 71

Direction: Read the information carefully and answer questions based on these information.
On 1 January, the Managing Director of SK Ltd. wishes to know the amount of working capital that will be required during the year! From the following information prepare the working capital requirements forecast.

  1. Production during the previous year was 60,000 units. It is planned that this level of activity would be maintained during the present year.
  2. The expected ratios of the cost to selling prices are raw material 60%, direct wages 10% and overheads 20%.
  3. Raw materials are expected to remain in store for an average of 2 months before issued to production.
  4. Each unit is expected to be in process for one month, the raw materials being fed into the pipeline immediately and the labour and overhead cost accruing evenly during the month. Finished goods will stay in the warehouse awaiting dispatch to customers for approximately 3 months.
  5. Credit allowed by creditors is 2 months from the date of delivery of raw materials.
  6. Credit allowed to debtors is 3 months from the date of dispatch.
  7. Selling price is Rs. 5 per unit.
  8. There is a regular production and sales cycle.
  9. Wages and overheads are paid on the 1 of each month for the previous month.
  10. The company normally keeps cash in hand to the extent of 20,000.

Q. What would be the amount blocked in raw materials?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 71

Amount blocked in raw materials =  
Total Material cost = 5 × 60% × 60000 = 180000
Amount blocked in raw materials = (180000/2) x 2 = 30000

Test: Accounting & Financial Management of Banking - 3 - Question 72

Direction: Read the information carefully and answer questions based on these information.
On 1 January, the Managing Director of SK Ltd. wishes to know the amount of working capital that will be required during the year! From the following information prepare the working capital requirements forecast.

  1. Production during the previous year was 60,000 units. It is planned that this level of activity would be maintained during the present year.
  2. The expected ratios of the cost to selling prices are raw material 60%, direct wages 10% and overheads 20%.
  3. Raw materials are expected to remain in store for an average of 2 months before issued to production.
  4. Each unit is expected to be in process for one month, the raw materials being fed into the pipeline immediately and the labour and overhead cost accruing evenly during the month. Finished goods will stay in the warehouse awaiting dispatch to customers for approximately 3 months.
  5. Credit allowed by creditors is 2 months from the date of delivery of raw materials.
  6. Credit allowed to debtors is 3 months from the date of dispatch.
  7. Selling price is Rs. 5 per unit.
  8. There is a regular production and sales cycle.
  9. Wages and overheads are paid on the 1 of each month for the previous month.
  10. The company normally keeps cash in hand to the extent of 20,000.

Q. What shall be the amount blocked in debtors?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 72

Amount blocked in Debtors = (Cost of credit sales/365 or 12 or 52) × Average collection period
Total cost of sales = Material cost + Labour cost + overheads
= 5 × 60% × 60000 + 5 × 10% × 60000 + 5 × 20% × 60000
= 27000
Amount Blocked in debtors = (270000/12) × 3
= 67500

Test: Accounting & Financial Management of Banking - 3 - Question 73

Direction: AAA is planning to buy a new plant A, which would help in automation and reduce the time required for production, the plant A would require an initial investment in Machinery For Rs 250,000, at the same time there would be increased cash flow of Rs 45000 for 5 years. The company follows straight line method of depreciation and based on that the Scrap value of Machinery at the end of 5th year is estimated to be Rs 40000. It also has an option of Plant B where the initial costing may be Rs 250000, and the cash flows for the next five years shall be Rs 25000, 35000,45000,55000,60000 respectively and has a 9% cost of capital.

Q. You are required to calculate NPV for a Project X initially costing 400000. It has 12% cost of capital. It generates five years cash flows 100000, 90000, 80000, 70000, 60000 respectively:

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 73

Test: Accounting & Financial Management of Banking - 3 - Question 74

Direction: AAA is planning to buy a new plant A, which would help in automation and reduce the time required for production, the plant A would require an initial investment in Machinery For Rs 250,000, at the same time there would be increased cash flow of Rs 45000 for 5 years. The company follows straight line method of depreciation and based on that the Scrap value of Machinery at the end of 5th year is estimated to be Rs 40000. It also has an option of Plant B where the initial costing may be Rs 250000, and the cash flows for the next five years shall be Rs 25000, 35000,45000,55000,60000 respectively and has a 9% cost of capital.

Q. You are required to calculate the rate of return to the firm for project A?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 74

Annual Depreciation = (Initial Investment – Scrap Value) ÷ Useful Life in Years
Annual Depreciation = (250000 – 45000) ÷ 5 = 41000
Average Accounting Income = 45000 – 41000 = 4000
Accounting Rate of Return = (Average net profit/ Average investment) x 100
( 4000 ÷ 250,000) x 100 = 1.6%

Test: Accounting & Financial Management of Banking - 3 - Question 75

Controllable variances need to be adjusted in which of the following?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 75

Controllable variances are those which can be controlled under normal operating conditions by taking preventive measures Uncontrollable variances are those which occur due to conditions which are beyond the control of a responsibility centre and cannot be controlled even though all preventive measures are in place. Controllable variance can be adjusted in the Costing profit and loss account.

Test: Accounting & Financial Management of Banking - 3 - Question 76

The tax that is levied on intra state supply is _____.