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Test: Accounting & Financial Management of Banking - 4 - Bank Exams MCQ


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100 Questions MCQ Test Mock Test Series for JAIIB Exam 2025 - Test: Accounting & Financial Management of Banking - 4

Test: Accounting & Financial Management of Banking - 4 for Bank Exams 2024 is part of Mock Test Series for JAIIB Exam 2025 preparation. The Test: Accounting & Financial Management of Banking - 4 questions and answers have been prepared according to the Bank Exams exam syllabus.The Test: Accounting & Financial Management of Banking - 4 MCQs are made for Bank Exams 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Accounting & Financial Management of Banking - 4 below.
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Test: Accounting & Financial Management of Banking - 4 - Question 1

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. Some of the words are given below, identify which of these words describes the nature of depreciation process.
I. Permanent nature
II. Gradual process
III. Restoration
IV. Decline causing

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

Characteristics of depreciation are:-

  • It is decline in the value of fixed assets.
  • The fall is of permanent nature.
  • It is a gradual and continuing process.
  • Allocates the cost of an asset to its effective value.
  • It is a non-cash expense.

Thus, the correct option is (b)

Test: Accounting & Financial Management of Banking - 4 - Question 2

Identify the incorrect fundamental rule of accounting

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 2

All accounts are divided into five categories for the purposes of recording the transactions:
(a) Asset (b) Liability (c) Capital (d) Expenses/Losses, and (e) Revenues/Gains.
Two fundamental rules are followed to record the changes in these accounts:
For recording changes in Assets/Expenses (Losses):

  • "Increase in asset is debited, and decrease in asset is credited."
  • "Increase in expenses/losses is debited, and decrease in expenses/ losses is credited."
  • For recording changes in Liabilities and Capital/Revenues (Gains):
  • "Increase in liabilities is credited and decrease in liabilities is debited."
  • "Increase in capital is credited and decrease in capital is debited."
  • "Increase in revenue/gain is credited and decrease in revenue/gain is debited."

Hence the correct answer is Option (b).

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

Chetan sold goods to Ramesh at a cost of 15% profit, and Ramesh sold goods to Suresh at 20% profit on sales. If the cost of goods to Chetan is Rs 75000 what is the cost of cost to Suresh?

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

Cost of Goods sold to Suresh =
75000+15%+25% = Rs 107812. 5
(Profit of 20% on sales means 25% on cost)

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

Arrange the following assets in the order of liquidity
I. Bills receivable
II. Prepaid insurance
III. Debtors
IV. Goodwill
V. Closing Stock

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 4
  • The items in the balance sheet can be arranged either in the order of liquidity or in the order of permanence.
  • In the order of liquidity, most liquid assets come first and the least liquid assets come last.
  • In the given question, assets in order of liquidity are Bills Receivable, Debtors, Closing Stock, Prepaid Insurance and Goodwill.
Test: Accounting & Financial Management of Banking - 4 - Question 5

I. The future value of an annuity is the value of a group of recurring payments at a certain date in the future.
II. The higher the discount rate, the greater the annuity's future value.
Q. Which of the above statements are NOT true?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 5
  • The future value of an annuity is the value of a group of recurring payments at a certain date in the future, assuming a particular rate of return, or discount rate.
  • The higher the discount rate, the greater the annuity's future value.
  • As long as all of the variables surrounding the annuity are known such as payment amount, projected rate, and number of periods, it is possible to calculate the future value of the annuity.
  • Hence, option (d) is the correct answer.
Test: Accounting & Financial Management of Banking - 4 - Question 6

The company paid Rs. 12,500 to Raju (supplier of goods)
This transaction was correctly recorded in the cashbook. But while posting to the ledger, Raju's account was debited with Rs. 1250.
Find the type of error occurred here.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 6

Errors of Commission
These are the errors which are committed due to wrong posting of transactions, wrong totaling or wrong balancing of the accounts, wrong casting of the subsidiary books, or wrong recording of amount in the books of original entry, etc.
Hence the correct answer is Option (a).

Test: Accounting & Financial Management of Banking - 4 - Question 7

Under which method of valuation of work in progress the cost to complete the opening WIP and other completed units are calculated differently?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 7

Under FIFO (First In First out) method 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 a WIP is added to the cost incurred on completing the incomplete (WIP). Further, the closing stock of work in process is valued at the current cost.

Test: Accounting & Financial Management of Banking - 4 - Question 8

Amith purchased machinery worth 1,50,000 for cash from Rajesh From the following choose the correct journal entry

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 8

Amith purchased machinery worth Rs 15, 0000 for cash from Rajesh

In the books of Amit: The accounts affected are: (i) Machinery and (ii) Cash; Machinery comes in and as such Machinery account is debited and cash goes out and as such cash account is credited.

Hence the correct answer is Option (a).

Test: Accounting & Financial Management of Banking - 4 - Question 9

Pass the journal entry of the following transaction given below:
Bought goods from K for 20,000 at a trade discount of 10% and cash discount of 2%. He paid 60% immediately.
(I) M Dr. 18,000
To Discount Received 216
To K 7200
To Cash 10,584

(II) M Dr. 18,000
To Discount Received 319
To K 7200
To Cash 10,544

(III) M Dr. 19,000
To Discount Received 216
To K 2200
To Cash 10,584

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 9

Total amount 20,000
Less: 10% trade discount 2000
Net 18,000 (20,000- 2000)
Cash purchases 60% of 18,000 10,800
Less: Cash discount 2% of 10,800 216
Amount paid 10,584
Credit purchase 40% of 18,000 7200
Thus, the correct option is (a)

Test: Accounting & Financial Management of Banking - 4 - Question 10

Consider the following statements and choose the correct answer.
I. Bond price volatility refers to the degree of fluctuation in the premium price of the bond in response to the change in the market price of the foreign market.
II. Bond price has an inverse relationship with the interest rate.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 10

Bond price volatility refers to the degree of fluctuation in the price of the bond in response to the change in the market interest. Bonds have an inverse relationship with interest rates. Bond price volatility is influenced by the time to maturity. Bond price volatility leads to the price movement of the bond.
Hence, the correct answer is Option (b).

Test: Accounting & Financial Management of Banking - 4 - Question 11

Which of the following statement/s is/are correct regarding the concept of conservatism?
I. Creating provision for doubtful debts valuing closing
II. Valuing closing stock at cost or market value whichever is higher
III. Writing of intangible assets like goodwill
IV. Provision for discount on debtors

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 11
  • The concept of conservatism requires that profits should not to be recorded until realised but all losses, even those which may have a remote possibility, are to be provided for in the books of account. To illustrate, valuing closing stock at cost or market value whichever is lower; creating provision for doubtful debts, discount on debtors; writing of intangible assets like goodwill, patents, etc. from the book of accounts are some of the examples of the application of the principle of conservatism.
  • Statement II, valuing closing stock at cost or market value whichever is higher, is not related to the concept of conservatism but rather the principle of lower of cost or market (LCM) rule for valuing inventory.
  • Hence the correct answer is Option (c).
Test: Accounting & Financial Management of Banking - 4 - Question 12

From the following options choose the one who is known as deemed assessee.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 12

A person who is assigned the obligation to pay taxes by the judicial system is known as deemed assesses. For the assessment of other ones who are liable to pay tax is known as representative assesse or deemed assessee. In that case all the above options are true.

Test: Accounting & Financial Management of Banking - 4 - Question 13

What would be the total late fee and interest payable by a registered person with an aggregate turnover of ₹ 2.5 crores if they fail to file GSTR-1 and GSTR-3B returns within the due date and make the payment after 20 days, with a tax liability of ₹ 1 lakh?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 13
  • Late fee: ₹ 10,000 (₹ 5,000 for GSTR-1 and ₹ 5,000 for GSTR-3B) + ₹ 100 per day for each return from the due date until the actual date of filing, subject to a maximum of ₹ 5,000 per return. Therefore, the total late fee will be ₹ 10,000 + (20 days x ₹ 100 x 2 returns) = ₹ 12,000.
  • Interest: The interest payable will be calculated at 18% per annum on the tax liability of ₹ 1 lakh from the next day of the due date of return till the actual date of payment. Therefore, the interest payable will be (₹ 1 lakh x 18% x 20 days)/365 days = ₹ 1,013.
  • Hence, the total late fee and interest payable will be ₹ 12,000 + ₹ 1,013 = ₹ 13,013, which is closest to option B - ₹ 3,000 late fee and ₹ 5,048 interest.
  • Therefore, the correct answer is - ₹ 3,000 late fee and ₹ 5,048 interest.
Test: Accounting & Financial Management of Banking - 4 - Question 14

Match the following List I with List II

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 14
  • Right issue is an issue of rights to a company's existing shareholders that entitles them to buy additional shares directly from the company in proportion to their existing holding, within a fixed time. In a right offering, the subscription price at which each share may be purchased is generally at a discount to the current market price. Rights are often transferable, allowing the holder to sell them in the open market. The difference between the cum right and ex rate value of the share is the value of the right
  • Bonus issue means an issue of additional shares to existing shareholders free of cost in proportion to their existing holding. Bonus shares should not be issued out of revaluation reserve.
  • Private placement is the issue of security of a company direct to one investor or a small group of investors.
  • A sweat equity share is an equity share issued by the company to employees or directors at a discount or for consideration other than cash for providing their talent to the company.
Test: Accounting & Financial Management of Banking - 4 - Question 15

Which of the following statement/s is/are incorrect regarding the difference between operating leverage and financial leverage?
I. Tax rate and interest rate will affect both operating leverage and financial leverage
II. Operating leverage is associated with investment activities of the company. Financial leverage is associated with financing activities of the company.
III. Operating leverage represents the ability to use fixed operating costs. Financial leverage represents the relationship between EBIT and EPS
IV. Operating leverage depends upon the operating profits.Financial leverage depends upon fixed cost and variable cost

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 15

Financial leverage is defined as "the ability of a firm to use fixed financial charges to magnify the effects of changes in EBIT on the earnings per share". It involves the use of funds obtained at a fixed cost in the hope of increasing the return to the shareholders. "The use of long-term fixed interest bearing debt and preference share capital along with share capital is called financial leverage or trading on equity".

Operating leverage may be defined as the company's ability to use fixed operating costs to magnify the effects of changes in sales on its earnings before interest and taxes. Operating leverage consists of two important costs viz., fixed cost and variable cost.

Difference between Operating leverage and financial leverage

Test: Accounting & Financial Management of Banking - 4 - Question 16

RBI comes to the rescue of a bank that is solvent but faces temporary liquidity problems by supplying it with much needed liquidity when no one else is willing to extend credit to that bank.
Q. Which of the following functions of RBI is highlighted in the above statement?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 16
  • Lender of the Last Resort: The RBI also acts as the 'lender of last resort'. It can come to the rescue of a bank that is solvent but faces temporary liquidity problems by supplying it with much needed liquidity when no one else is willing to extend credit to that bank.
  • The RBI extends this facility to protect the interest of the depositors of the bank and to prevent possible failure of a bank, which in turn may also affect other banks and institutions and can have an adverse impact on financial stability and thus on the economy.
  • Hence, the correct answer is option (c).
Test: Accounting & Financial Management of Banking - 4 - Question 17

Which of the following is the primary purpose of project appraisal?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 17

The primary purpose of project appraisal is to assess the viability and financial feasibility of a project. It involves analysing various aspects, such as market demand, technical feasibility, financial projection, risks, and other factors to determine whether the project is economically viable and financially sustainable.
Hence, the correct answer is Option (a).

Test: Accounting & Financial Management of Banking - 4 - Question 18

Which of the following is the correct treatment regarding rebates on bills discounted?
I. It is debited from Interest earned in the profit and loss account and is shown under Schedule 13
II. It is shown under the Asset side of the Balance Sheet under Schedule 5

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 18
  • Rebate on bills discounted refers to the interest received in advance or unearned discounts for those bills which will mature after the close of the financial year.
  • Rebate on bills discounted for the current year is debited to the discount account. In the Profit and Loss account, this item is deducted from Interest earned, schedule No.13 and in the Balance sheet it is shown on the liability side under the head other liabilities and provisions schedule No.5. In case of a ledger balance, it is shown under schedule No.5 only.
  • The journal entry for the same is Interest and discount A/c Dr To Rebate on bills discounted.
Test: Accounting & Financial Management of Banking - 4 - Question 19

Which of the following statement/s is/are correct regarding distinction between Journal and Ledger?
I. The Journal, as a book of source entry, gets greater importance as legal evidence than the ledger.
II. The Journal is the book of original entry; the ledger is the book of second entry
III. The Journal is the book for analytical record; the ledger is the book for chronological record

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 19

Distinction between Journal and Ledger
The Journal and the Ledger are the most important books of the double entry mechanism of accounting and are indispensable for an accounting system.

Following points of comparison are worth noting :

  • The Journal is the book of first entry (original entry); the ledger is the book of second entry.
  • The Journal is the book for chronological record; the ledger is the book for analytical record.
  • The Journal, as a book of source entry, gets greater importance as legal evidence than the ledger.
  • Transaction is the basis of classification of data within the Journal;
  • Account is the basis of classification of data within the ledger.
  • Process of recording in the Journal is called Journalizing; the process of recording in the ledger is known as Posting.

Hence the correct answer is Option (a).

Test: Accounting & Financial Management of Banking - 4 - Question 20

_______ is an instrument which involves buying/selling of securities like government bond from or to the public and banks.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 20
  • An open market operation is an instrument which involves buying/selling of securities like government bond from or to the public and banks. The RBI sells government securities to control the flow of credit and buys government securities to increase credit flow. When the central bank buys government bonds, it increases the money supply in the economy. The central banks sell government bonds to banks when the economy faces inflation. The central bank tries to control inflation by selling government bonds to banks.
  • Hence, the correct answer is option (b).
Test: Accounting & Financial Management of Banking - 4 - Question 21

From the following calculate the net purchase.
Cash purchase = 235000
Credit purchase = 85000
Purchase return = 4000

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 21

[Total purchase = cash purchase + credit purchase
Net purchase = total purchase - purchase return
Total purchase = 235000 + 85000 = 320000
Net purchase = 320000 - 4000 = 316000]
Hence option (c) is correct

Test: Accounting & Financial Management of Banking - 4 - Question 22

Which principle has an important bearing on the capital-revenue classification?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 22
  • The principle of materiality is essential in preparing financial statements, as it helps companies determine what information to include and what to exclude to prepare the entity's financial reports. Materiality is one of the four constraints of GAAP (Generally Accepted Accounting Principle). Companies use the materiality principle when accounting and measuring their transaction and expense in a year. This concept has an important bearing on the capital-revenue classification as some expenditures can be very small at times. So, it is important to distinct which is revenue and which is capital transactions.
  • Hence option (a) is correct.
Test: Accounting & Financial Management of Banking - 4 - Question 23

(I) The analysis also known as Scenario analysis
(II) It is a technique in which the profit (NPV) in relation to change in a particular factor is determine
(III) The objectives of this analysis is to ascertain profitability (NPV) under different situation

Q. Which kind of analysis is being referred to here.? And the above three statements about this analysis are true or false?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 23

Sensitivity analysis is a financial model that determines how target variables are affected based on changes in other variables known as input variables. It is a way to predict the outcome of a decision given a certain range of variables. A sensitivity analysis generates quantitative data based on the behavior of outputs in response to changing inputs. It allows us to understand the effect of fluctuations in selected variables on your profitability . So the sensitivity analysis is used to understand the effect of a set of independent variables on some dependent variable under certain specific conditions.

Eg ; a financial analyst wants to find out the effect of a company's net worked capital on its profit margin.

Test: Accounting & Financial Management of Banking - 4 - Question 24

Which of the following statement/s is/are correct regarding depreciation?.
I. It is a decline in the market value of fixed assets.
II. It is an expired cost
III. It is a non-cash expense.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 24

Features of Depreciation

  • It is a decline in the book value of fixed assets.
  • It includes loss of value due to effluxion of time, usage or obsolescence.
  • It is a continuing process.
  • It is an expired cost and hence must be deducted before calculating taxable
  • It is a non-cash expense. It does not involve any cash outflow. It is the process of writing-off the capital expenditure already incurred.
  • Hence the correct answer is Option (b).
Test: Accounting & Financial Management of Banking - 4 - Question 25

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

Q. Calculate the amount of current liabilities?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 25

[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]
Hence, the correct answer is Option (b).

Test: Accounting & Financial Management of Banking - 4 - Question 26

Complete the following information.
Ind AS-16 _________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 26
  • Ind AS-16 This standard deals with accounting treatment for property, plant and equipment. The main issues are the recognition of assets, the determination of their carrying amounts, and the depreciation charges to be recognized. The standard does not apply to: (a) assets classified as held for sale in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations (b) biological assets related to agricultural activity accounted for under Ind AS 41 Agriculture (c) the recognition and measurement of exploration and evaluation assets recognized in accordance with Ind AS 106 Exploration for and Evaluation of Mineral Resources (d) mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources.
  • Hence the correct answer is Option (c).
Test: Accounting & Financial Management of Banking - 4 - Question 27

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below.

Assertion (A): The Statement of profit and loss is prepared for a specific period to determine the operational results of an undertaking
Reason (R): It is a statement of revenue earned and the expenses incurred for earning the revenue.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 27
  • The Statement of profit and loss is prepared for a specific period to determine the operational results of an undertaking.
  • It is a statement of revenue earned and the expenses incurred for earning the revenue.
  • It is a performance report showing the changes in income, expenses, profits and losses as a result of business operations during the year between two balance sheet dates.
  • Hence, the correct answer is option (a).
Test: Accounting & Financial Management of Banking - 4 - Question 28

The profit and loss account of the banking company is prepared in __ as per the third schedule of the Banking Regulation Act, 1949

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 28

The profit and loss account of a banking company is prepared in Form B as per the third schedule of the Banking Regulation Act, 1949 and the Balance sheet is prepared as per Form A of the third schedule.

Test: Accounting & Financial Management of Banking - 4 - Question 29

_____________ is a measure of the annual income generated by the bond as a percentage of its current market price.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 29
  • 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.
  • Hence, the correct answer is Option (d).
Test: Accounting & Financial Management of Banking - 4 - Question 30

Match the following sections of Income tax Act in column I with their respective tax deduction in column II.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 30
  • Section 80C: Deduction on life insurance premia, contribution to provident fund, etc. available to individual/HUF for a maximum amount of Rs. 1,50,000.
  • Section 80CCC: Deduction for contribution to pension fund - available to individuals for a maximum amount of Rs. 1,50,000.
  • Section 80D: Deduction in respect of medical insurance premia - available to individual/HUF.
  • Section 80G: Deduction in respect of donations to certain funds, charitable institutions, etc. available to all assessee subject to maximum of 50% of qualifying amount, 100% as the case may be.
  • Hence, option (c) is the correct answer.
Test: Accounting & Financial Management of Banking - 4 - Question 31

Demand deposit, Savings Bank deposit and term deposit are shown under schedule ___ of balance sheet of banking company

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 31

Deposit are shown under schedule3 of balance sheet of banking company, It includes
Demand deposit:
i. From banks
ii. From others: include all bank deposits, repayable on demand of the non-bank sector. Credit balance in overdrafts, cash credit accounts, deposits payable at call, overdue deposits, matured time and term deposits etc
Saving Deposits: Include all saving bank deposits including inoperative savings bank accounts.
Term Deposits:
i. From banks :includes all types of bank deposits from banks repayable after a specified term.
ii. From others: Includes all type of deposits of the non-bank sector repayable after a specified term

Test: Accounting & Financial Management of Banking - 4 - Question 32

Direction: 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. Calculate the amount of depreciation from the time it was purchased.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 32

The amount of depreciation will be charged for 3 months from April to July.
Cost of the machine = 50,000
Depreciation = (50,000*10*3)/ 12*100
= 1250
Thus, the correct option is (d)

Test: Accounting & Financial Management of Banking - 4 - Question 33

A company has to meet the objective of determination of the profitability of each of the products and help management in the maximization of these profits.Which type of accounting will serve the purpose?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 33

The following are the main objectives of cost accounting:

  • Ascertainment of the cost per unit of the different products that a business concern manufacture₹
  • To correctly analyze the cost of both the process and operations.
  • Disclosure of sources for wastage of material, time, expenses or in the use of the equipment and the preparation of reports which may be necessary to control such wastage.
  • Provide requisite data and help in fixing the price of products manufactured or services rendered.
  • Determination of the profitability of each of the products and help management in the maximization of these profits.
  • Exercise effective control of stocks of raw material, work-in-progress, consumable stores, and finished goods so as to minimize the capital invested in them.
  • Present and interpret data for management planning, decision-making, and control.

Hence, the correct answer is option (b).

Test: Accounting & Financial Management of Banking - 4 - Question 34

X Ltd decided to raise capital through the issue of 2 00 000 shares @Rs 100 each, However, received an application for 250000 shares and it decided to allot all the applicants shares on Pro-rata Basis, What would be the pro rata ratio in which shares would be allotted to the applicant?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 34
  • Pro rata adjustment is done when there is an oversubscription in the company. The Pro-rata ratio is calculated as the Total Application received for shares/ Originally issued shares
  • 2 50 000/2 00 000 = 5:4. Hence the Pro-rata is 5:4. Hence for every 5 shares applied by the applicant 4 shares shall be allotted. The excess application money received is adjusted towards Allotment money to be paid by the shareholder in the future.
Test: Accounting & Financial Management of Banking - 4 - Question 35

Which of the following statement/s is/are correct regarding forward contracts
I. They are bilateral contracts
II. They are customized contracts
III. They are private contracts
IV. A forward contract is a zero sum game

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 35
  • A forward is a negotiated agreement between two parties. There is no third party or middleman. The transaction occurs between by year and seller only. Thus it is a bilateral agreement.
  • They are customized contracts. The terms of the contract are individually agreed between two counterparties according to their requirements.
  • They are private contracts that are traded over the counter. it is not traded on organized exchange. It does not require an initial payment when signing the contract.
  • A forward contract is a zero sum game because the gain of one party is the loss of the other or counterparty.
Test: Accounting & Financial Management of Banking - 4 - Question 36

Direction: 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. From the above particulars what shall be the debt to equity ratio of XYZ?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 36

Debt equity ratio = (debt/ equity)
Debt = non-current liabilities
Equity = Shareholders' fund + reserves surplus.
Securities premium not included because it is already included in reserves.
= (500000+1500000)/(300000+200000+1500000)
= (2000000/2000000)
= 1:1
Hence, the correct answer is option (a).

Test: Accounting & Financial Management of Banking - 4 - Question 37

Series of cash flows occurring at regular intervals for an infinite period of time is called ____________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 37
  • An annuity is a stream of cash flows. A perpetuity is a type of annuity that lasts forever, into perpetuity. The stream of cash flows continues for an infinite amount of time.
  • A perpetuity, in finance, refers to a security that pays a never-ending cash stream.
  • It is essentially an annuity with no termination date.
  • The present value of a perpetuity is determined by simply dividing the amount of the regular cash flows by the discount rate.
  • PV = Present value. FV = Future value. r = Rate of interest (percentage ÷ 100) n = Number of times the amount is compounding.
Test: Accounting & Financial Management of Banking - 4 - Question 38

Which of the following leases is also known as capital lease?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 38
  • A finance lease is also known as capital lease. It is a type of lease agreement in which the lessee assumes many of the risks and rewards associated with the ownership. In a finance lease the lessee effectively finances the purchase of the asset and has a long term commitment to the lease.
  • Operating lease is a type of lease agreement in which the lessor retains most of the risks and reward of ownership. In an operating lease the lessee essentially rents the assets for a relatively short period which is typically shorter than the assets economic life.
  • Hence, the correct answer is Option (a).
Test: Accounting & Financial Management of Banking - 4 - Question 39

A ________is an examination of a company's financial records to derive evidence that can be used in a court of law or legal proceeding.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 39

A forensic audit examines and evaluates a firm's or individual's financial records to derive evidence used in a court of law or legal proceeding. Forensic auditing is a specialization within accounting, and most large accounting firms have a forensic auditing department. Forensic audits require accounting and auditing procedures and expert knowledge about the legal framework of such an audit.

Test: Accounting & Financial Management of Banking - 4 - Question 40

Match the following

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 40
  • The business entity concept states that the transactions associated with a business must be separately recorded from those of its owners or other businesses. Doing so requires the use of separate accounting records for the organization that completely exclude the assets and liabilities of any other entity or the owner.
  • The dual aspect concept indicates that each transaction made by a business impacts the business in two different aspects which are equal and opposite in nature. This concept form the basis of double-entry accounting and is used by all accounting frameworks for generating accurate and reliable financial statements.
  • This principle justify the significance of verifiable documents supporting various transactions. According to it, each transaction should be supported by Objective evidence like Voucher. Objective evidence, here, means evidence free from bias of the accountant.
  • The conservatism concept is a concept in accounting which refers to the idea that expenses and liabilities should be recognised as soon as possible in a situation where there is uncertainty about the possible outcome and in contrast record assets and revenues only when they are assured to be received.
  • Materiality concept in accounting refers to the concept that all the material items should be reported properly in the financial statements. Material items are considered as those items whose inclusion or exclusion results in significant changes in the decision making for the users of business information
Test: Accounting & Financial Management of Banking - 4 - Question 41

Which of the following statements about zero base budgeting is true?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 41
  • Zero base budgeting is a budgeting technique that requires all expenses to be justified from scratch each year, starting from a zero base. This means that each expense item is evaluated based on its necessity and the benefits it provides, regardless of whether it was included in the previous year's budget. This approach is different from traditional budgeting methods that simply adjust expenses from the previous year. By requiring justification for every expense, zero base budgeting can help identify unnecessary or inefficient spending and improve overall financial management.
  • Hence, the correct answer is option (b).
Test: Accounting & Financial Management of Banking - 4 - Question 42

__________ is a conflict of interest inherent in any relationship where one party is expected to act in the best interest of another

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 42

An agency problem is a conflict of interest inherent in any relationship where one party is expected to act in another's best interests. In corporate finance, an agency problem usually refers to a conflict of interest between a company's management and the company's stockholders. The manager, acting as the agent for the shareholders, or principals, is supposed to make decisions that will maximize shareholder wealth even though it is in the manager's best interest to maximize their own wealth. Agency problems arise when incentives or motivations present themselves to an agent to not act in the full best interest of a principal.

Test: Accounting & Financial Management of Banking - 4 - Question 43

To calculate NPV, you need to pick a discount rate equal to the minimum acceptable rate of return. What does this discount rate reflect?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 43
  • Net present value (NPV) is used to calculate the current value of a future stream of payments from a company, project, or investment.
  • To calculate NPV, you need to estimate the timing and amount of future cash flows and pick a discount rate equal to the minimum acceptable rate of return.
  • The discount rate may reflect your cost of capital or the returns available on alternative investments of comparable risk.
  • The discount rate used in calculating Net Present Value (NPV) represents the minimum acceptable rate of return or the opportunity cost of capital. In other words, it reflects the rate of return that an investor or a company requires as compensation for tying up their capital in a particular investment or project, considering the level of risk associated with that investment.

If the NPV of a project or investment is positive, it means its rate of return will be above the discount rate.

Hence, the correct answer is option (c).

Test: Accounting & Financial Management of Banking - 4 - Question 44

Match the following different types of financial decisions?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 44
  • Financial decisions refers to the decisions that companies need to take regarding what proportion of equity and debt capital to have in their capital structure.
  • Decision making helps to utilise the available resources for achieving the objectives of the organization, unless minimum financial performance levels are achieved , it is impossible for a business enterprise to survive over time. Therefore financial management basically provides a conceptual and analytical framework for financial decisions making.
Test: Accounting & Financial Management of Banking - 4 - Question 45

Consider the following case:
A parent company overseas is the supplier for its U.S. subsidiary, meaning the U.S company would be charged by the parent for any purchases of materials.

Q. Which branch of accounting can help with the functioning of the company above?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 45

In the above example, Cost accounting can help with internal costs such as transfer prices for companies that transfer goods and services between divisions and subsidiaries.
Thus, the correct option is (b)

Test: Accounting & Financial Management of Banking - 4 - Question 46

Which of the following statements best defines the term "bond"?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 46
  • A bond is a fixed term security or a debt instrument issued by government, municipality, corporation or other entities. Bond means borrowing funds from the investors. They are essentially IOUs that represent a loan from the bondholder to the issuer.
  • Hence, the correct answer is Option (c).
Test: Accounting & Financial Management of Banking - 4 - Question 47

A firm earned an operating profit of RS 70000 during a year. Its non-operating expenses were RS 40000 and non operating incomes were RS 7000. Calculate the amount of net profit earned by the firm?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 47

Net profit = operating profit - non operating expenses + non operating incomes
[Net profit= 70000 - 40000 + 7000 = 37000]
Hence option (a) is correct

Test: Accounting & Financial Management of Banking - 4 - Question 48

Which of the following statements best defines debt?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 48
  • Debt refers to the amount of money borrowed by an individual, company, or entity from another party with the agreement to repay it in the future. Such as loans, bonds, mortgage, credit card balance etc.
  • Hence, the correct answer is Option (b).
Test: Accounting & Financial Management of Banking - 4 - Question 49

If sales return are rupees 22,000, sales are 124000 net purchases are 54000 and gross profit is 21,000 then the cost of goods sold will be

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 49

Gross profit = net sales - cost of goods sold
Cost of goods sold = net sales - Gross profit
[Net sales = sales- sales return = 124000-22000 = 102000
Cost of goods sold = 102000- 21000 = 81000]

Test: Accounting & Financial Management of Banking - 4 - Question 50

Consider the following statements and choose the correct answer from the options.
I. The forward rate agreement allows one party to speculate on future interest rates.
II. Forward rate agreement is a financial contract between two parties that allow them to lock in an interest rate for a future period.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 50
  • Forward rate agreement is a financial contract between two parties that allow them to lock in an interest rate for a future period. The forward rate agreement allows one party to speculate on future interest rates. The borrower expects interest rates to increase, and by entering into an FRA, they can secure a fixed interest rate for borrowing funds at a future date.
  • Hence, the correct answer is Option (d).
Test: Accounting & Financial Management of Banking - 4 - Question 51

Date on which the term of the bill expires is known as ______.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 51

The date on which the term of the bill expires is known as the due date of the bill.
Date of maturity = Due date + 3 days

Test: Accounting & Financial Management of Banking - 4 - Question 52

On the basis of computerisation, banks may be divided into ____.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 52

On the basis of computerisation banks may be divided into three broad categories. They are:

  • Non computerised banks
  • Partially computerised banks
  • Fully computerised banks
Test: Accounting & Financial Management of Banking - 4 - Question 53

______ is a core Banking software that provides universal banking functionality which covers all Banking services.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 53

One among the core banking systems developed in India by Infosys is Finacle which gives a pervasive function in banking by covering all types modules and all types banking services for Banks.

Test: Accounting & Financial Management of Banking - 4 - Question 54

______ may also be called the capital structure of that firm/company.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 54

Debt is a sum of money that is due by one party to another. Generally, businesses need a mix of debt and equity to run their business operations. It is also known as the capital structure of that firm/company. Debts can be through bank borrowings, fixed deposits, bonds or any other instruments.

Test: Accounting & Financial Management of Banking - 4 - Question 55

No. of conversion period in a year, if the principal is compounded quarterly is:

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 55

Type 1: compounded daily - conversions = 365
Type 2: compounded monthly - conversions = 12
Type 3: compounded quarterly - conversions=4
Type 4: compounded semi annually-conversions = 2
Type 5: compounded annually - conversions = 1

Test: Accounting & Financial Management of Banking - 4 - Question 56

As per section 2 (68), The right to transfer its shares in a private company, is been:

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 56

Any Private Company by its articles should restricts the right to transfer the shares, and there is no prohibition of transfer as per Section 2 (68) of the Companies Act,2013.

Test: Accounting & Financial Management of Banking - 4 - Question 57

Amount for lawyer's fee to defend a suit claiming that the firm's factory site belonged to the plaintiff's land. Classify the statement.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 57

Legal expenses incurred to defend a suit claiming that the firm's factory site belonged to the plaintiff is maintenance expenditure of the asset. Any endurable benefit cannot be obtained in future and the capacity of the asset will not be increased.

Test: Accounting & Financial Management of Banking - 4 - Question 58

Under which method of capital budgeting, the relationship between annual savings and the total amount of capital expenditure is calculated to get back the original investment?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 58

Simple payback period method is a traditional method of capital budgeting, It is described in terms of the period required to recover the original investment, wherein the relationship between annual savings and the total amount of capital expenditure is calculated.

Test: Accounting & Financial Management of Banking - 4 - 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. Insurance claim received against loss of furniture by fire -₹20,000 will be disclosed in the cash flow statement as:

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 59

Investing activities are the acquisition and disposal of long term assets and investments. Extraordinary items are referred to as any kind of abnormal loss or gain that is not earned from the day to day business operations. Hence, insurance claim received against loss of furniture by fire will be disclosed in the cash flow statement us extraordinary item under investing in cash inflow.

Test: Accounting & Financial Management of Banking - 4 - 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. All of the followings are cash flows arising from investing activity except:

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 60

Investing activities are the acquisition and disposal of long term assets and investments whereas operating activities are the principal revenue generating activities. Hence, cash receipt from sale of goods is not a investing activity.

Test: Accounting & Financial Management of Banking - 4 - Question 61

Current Ratio is also known as ________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 61

The Current Ratio is also known as Working Capital Ratio. This ratio explains the relationship between Current Assets and Current Liabilities of a business. The formula for calculating the ratio is; Current Assets ÷ Current Liabilities. Thus Current Ratio is also known as the Working Capital Ratio.

Test: Accounting & Financial Management of Banking - 4 - Question 62

Del-credere commission is fixed in terms of percentage of 15%.The credit sales for 100000 and cash sales is of 50000, amount of del-credere commission will be ________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 62

Del-credere commission is used to encourage the consignee to make credit sales therefore the commission is calculated as:
(100000 + 50000) × 15% = 22500

Test: Accounting & Financial Management of Banking - 4 - Question 63

_____ also called as front office operation.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 63

Retail Banking has another name which is Front office operation. Direct retail services have been given to the customers in the nature of personal use.

Test: Accounting & Financial Management of Banking - 4 - Question 64

If the due date of a bill is after the date of closing the account, then we charge no interest for that. In such case, the interest will be recorded in some other ways in the appropriate side of the 'Account Current' and it is called:

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 64

If the due date of bill falls after the date of closing the account, no interest is allowed for that. However, the interest from the date of closing to such due date is written in "Red-Ink" in the appropriate side of the 'Account current' and the interest is called "Red-Ink" interest.

Test: Accounting & Financial Management of Banking - 4 - 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. "Goods purchased ₹ 500 has been posted to the debit of the supplier Nisha & co".
(i) Nisha & co. should be credited with ₹ 500.
(ii) Suspense a/c should be debited with ₹ 1000

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 65

Nisha & co. account should be credited with ₹ 1000 and not with ₹ 500 while suspense account should with ₹ 1000.

Test: Accounting & Financial Management of Banking - 4 - Question 66

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 the suspense a/c is not opened, which of the following rectification entries are to be recorded?

  1. Purchase a/c will be debited with ₹ 200
  2. Nisha & co a/c will be debited with ₹ 500
  3. Purchase a/c will be credited with ₹ 200
  4. Nisha & co a/c will be credited with ₹ 1000
Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 66

Since purchase account is a debit a/c and casted ₹ 200 short, it should be debited.
Since wrong debit of ₹ 500 has been done to Nisha & co., it should be credited twice.

Test: Accounting & Financial Management of Banking - 4 - Question 67

When the rate of return is equal to the cost of capital, what would happen to NPV?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 67

NPV will be positive only when the actual rate of return is more than the cut off rate or the cost of capital. When the rate of return is equal to the cost of capital, the NPV would be zero and when the rate of return is less than the cost of capital, NPV would be Negative.

Test: Accounting & Financial Management of Banking - 4 - Question 68

Cost of machine- ₹ 1050000, Residual value- ₹ 50000, Useful life - 10 years. The company charges depreciation on straight line method for the first 2 years and adopted written down value method by charging depreciation @25%. You are required to calculate depreciation for the 3rd year.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 68

Depreciation already charged for the first 2 years as per straight line method is ₹ 200000. Therefore, written down value for the 2nd year is ₹850000. In the profit and loss account for the 3rd year, the depreciation would be ₹ 212500 i.e, 25% of ₹ 850000, which is to be debited.

Test: Accounting & Financial Management of Banking - 4 - Question 69

Entries for recording Bills discounted in the books of Ms. Rekha are:
1) Bank A/c Dr.
To discount A/c
2) Bank A/c Dr.
To discount A/c
To bills receivables A/c
3) Bank A/c Dr.
Discount A/c Dr.
To Bills receivables A/c

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 69

The correct entry to be recorded while calculating and recording discount allowed to the drawer on whom the bill is drawn is the entry 3. The amount should be split when discount is given.

Test: Accounting & Financial Management of Banking - 4 - Question 70

Which one of the following is not a function of commercial banks?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 70

Notes are issued for circulation only through RBI. Hence, issuing notes is not a function of a commercial banks.

Test: Accounting & Financial Management of Banking - 4 - Question 71

A ltd is a holding company where Telangana State Government owns 50% of its share capital. A ltd holds 52% of B ltd. B Ltd. is:

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 71

According to Section 2(45) of Companies Act, 2013, a company in which not less than 51% is held by central government or state government or partly by central and state government and a subsidiary of a government company is also a government company. In the above A ltd is a not a government company by which B ltd is also not a government Company.

Test: Accounting & Financial Management of Banking - 4 - 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 is the average cash balance of SK Ltd. as per working capital statement?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 72

Average cash balance would be Rs. 20000.
As specified in the qoestion that the company normally keeps a cash balance of Rs. 20000.

Test: Accounting & Financial Management of Banking - 4 - Question 73

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 average creditors?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 73

Amount blocked in creditors = (Annual credit purchases/365 or 12 or 52) × Credit period
Total Material purchased = 5 × 60% × 60000 = 180000
Amount blocked in creditors = (180000/12) × 2 = 30000

Test: Accounting & Financial Management of Banking - 4 - 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. What shall be the profitability percentage for project B and which project should he accept?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 74


Profitability Index = Present value of cash inflows/ present values of cash outflows = 165075/250000 = 0.66%
Since the profitability Index is less than 1, project B should be rejected.

Test: Accounting & Financial Management of Banking - 4 - Question 75

Yield on investment method of capital budgeting calculates?

  1. Rate of return on a project.
  2. Present value of future cash flows.
Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 75

Yield on investment method of capital budgeting refers to Internal rate of return method also known as Time adjusted rate of return method. It is calculated by finding the discount rate wherein Net investment equals to total present value of all cash flows.

Test: Accounting & Financial Management of Banking - 4 - Question 76

Under Economic batch quantity of cost, the total cost of set-up and holding costs are __________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 76

Under Batch costing, Economic batch quantity refers to the size of a batch where the total cost of set-up and holding costs are at a minimum.

Test: Accounting & Financial Management of Banking - 4 - Question 77

Under which concept, the effects of transactions and other events are recognised on mercantile basis?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 77

Accrual system of Accounting is also known as the mercantile system of accounting since a company recognizes revenue during the period it is earned, and recognizes expenses when they are incurred.

Test: Accounting & Financial Management of Banking - 4 - Question 78

Direction: Read the information carefully and answer questions based on these information
Ms. Rekha draws a bill on Mr. Liam for ₹500000 on 1.4.2020 for 2 months. Mr. Liam returned the bill after acceptance of the same date. Ms. Rekha discounts from his bankers @12% per annum. Before the bill is due for payment 'Mr. Liam' becomes insolvent and only 30% of the amount could be recovered from his estate.

Q. What is the amount of discount of the bill?

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 78

( ₹ 500000 × 12%) × (2/12) = ₹ 10000

Test: Accounting & Financial Management of Banking - 4 - Question 79

CBS stands for __________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 79

Core Banking systems is a full form of abbreviation CBS.

Test: Accounting & Financial Management of Banking - 4 - Question 80

Study the below-given case and calculate the equated monthly instalment to be charged by the bank.
Suppose your friend purchases a car for 12,00,000 and makes a down payment of 7,00,000 and gets a loan for the remaining 5,00,000 from the bank @ 15% per annum. He has to pay the whole amount in 12 equated monthly instalments with interest starting from the end of the first month.

Detailed Solution for Test: Accounting & Financial Management of Banking - 4 - Question 80


A = 45130.43
Hence equated monthly installment = 45130.43

Test: Accounting & Financial Management of Banking - 4 - Question 81

In the Mumbai market rate of US 1 Dollar is Rs 75.8545 and rates in the London market are US 1 Dollar = Euros 0.8977 Then as per chain rule what is the price of per Euro in the Indian market?