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Test: Accounting & Financial Management of Banking - 5 - Bank Exams MCQ


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100 Questions MCQ Test Mock Test Series for JAIIB Exam 2025 - Test: Accounting & Financial Management of Banking - 5

Test: Accounting & Financial Management of Banking - 5 for Bank Exams 2024 is part of Mock Test Series for JAIIB Exam 2025 preparation. The Test: Accounting & Financial Management of Banking - 5 questions and answers have been prepared according to the Bank Exams exam syllabus.The Test: Accounting & Financial Management of Banking - 5 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 - 5 below.
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Test: Accounting & Financial Management of Banking - 5 - Question 1

Trial balance of the personal ledgers is prepared in every ______ time interval.

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

As per RBI guidelines, In every banking companies, trial balance of the personal ledgers is prepared periodically, usually every 2 weeks and agreed with general ledger control account.

Test: Accounting & Financial Management of Banking - 5 - Question 2

Banks maintain contra accounts with a view to control over transactions which have no direct effect on the bank’s position. For which of the following contra account is used by banks
I. letters of credit opened
II. bills received or sent for collection

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 2

Banks maintain contra accounts with a view to control over transactions which have no direct effect on the bank’s position. e.g., letters of credit opened, bills received or sent for collection, guarantees given, etc. In respect of bills for collection, contra vouchers reflecting both sides of the transaction are prepared at the time of the original entry, and this is reversed on realization.

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

D limited company sold Rs 2000, 12% perpetual debentures 10 years ago. Interest rates have risen since then so debentures of this company are now selling at a 15 per cent yield basis, determine the expected market price.

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

The expected market price of the debentures may be as follows, the annual interest on perpetual debenture is 240 and the yield is 15%.so. the market price may be,
=Annual interest /yield percentage: 2000 ×12%÷0.15= 1600

Test: Accounting & Financial Management of Banking - 5 - Question 4

___ Bonds have variable coupon rates which is reset at preannounced intervals.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 4

Floating Rate Bonds have variable coupon rates which is reset at preannounced intervals say 6 months or a year. The interest rate is tied to a short-term benchmark rate, such as LIBOR or the Fed funds rate, plus a quoted spread, or rate that holds steady.

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

Direction: Read the information carefully and answer the questions based on the given informations below:
In the books of Siva, the following transactions related to bills takes place,
(i) Jan 9. Sold goods to Varun for Rs.34000 and draws a bill for 45 days.
(ii) Mar 1. Sold goods to Bhuvanesh and draws a bill at three months for Rs.500000.
But on May 1, he retires his acceptance under rebate of 12% p.a.
(iii) Oct 1, Bill for 3 months was drawn on Sita for the amount of Rs.100000 owed by her. She accepted the bill. On Oct 3, Siva got the bill discounted with the bank for Rs.99000.

Q. The book with assorted transactions of an Account is called ______?

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

A ledger is a book that stores bookkeeping entries. The ledger shows the account’s opening balance, all debits and credits to the account for the period, and the ending balance.

Test: Accounting & Financial Management of Banking - 5 - Question 6

Direction: Read the information carefully and answer the questions based on the given informations below:
In the books of Siva, the following transactions related to bills takes place,
(i) Jan 9. Sold goods to Varun for Rs.34000 and draws a bill for 45 days.
(ii) Mar 1. Sold goods to Bhuvanesh and draws a bill at three months for Rs.500000.
But on May 1, he retires his acceptance under rebate of 12% p.a.
(iii) Oct 1, Bill for 3 months was drawn on Sita for the amount of Rs.100000 owed by her. She accepted the bill. On Oct 3, Siva got the bill discounted with the bank for Rs.99000.

Q. What will balance to be c/d in the cash account after preparing the ledgers?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 6

When the cash account was prepared, the debit side will contain Rs.8300
(Opening balance of Rs.8000 and Rahim's account for bad debts Rs.300.) and The credit side will contain Rs.4000.
(Purchase account of Rs.3800 for purchase on Jan1 and Rs.200 for installation charge of machinery on Jan 12.)
Therefore the balance to be carried down in the cash account will be Rs.4300 on credit side.

Test: Accounting & Financial Management of Banking - 5 - Question 7

Direction: Read the information carefully and answer the questions based on the given informations below:
In the books of Siva, the following transactions related to bills takes place,
(i) Jan 9. Sold goods to Varun for Rs.34000 and draws a bill for 45 days.
(ii) Mar 1. Sold goods to Bhuvanesh and draws a bill at three months for Rs.500000.
But on May 1, he retires his acceptance under rebate of 12% p.a.
(iii) Oct 1, Bill for 3 months was drawn on Sita for the amount of Rs.100000 owed by her. She accepted the bill. On Oct 3, Siva got the bill discounted with the bank for Rs.99000.

Q. Pass journal entry for the sale of goods on Jan 12.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 7

When passing journal entry for credit sales made, the debtor's account should be debited and the sales a/c should be credited with the respective value of the credit sales. The journal entry will be,
Rahim a/c dr.
To Sales a/c

Test: Accounting & Financial Management of Banking - 5 - Question 8

Direction: Read the information carefully and answer the questions based on the given informations below:
In the books of Siva, the following transactions related to bills takes place,
(i) Jan 9. Sold goods to Varun for Rs.34000 and draws a bill for 45 days.
(ii) Mar 1. Sold goods to Bhuvanesh and draws a bill at three months for Rs.500000.
But on May 1, he retires his acceptance under rebate of 12% p.a.
(iii) Oct 1, Bill for 3 months was drawn on Sita for the amount of Rs.100000 owed by her. She accepted the bill. On Oct 3, Siva got the bill discounted with the bank for Rs.99000.

Q. How many days are added as grace days for the bill of exchange after the end of due date?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 8

Every promissory note or bill of exchange which is not expressed to be payable on demand, at sight or on presentment is at maturity on the third day after the day on which it is expressed to be payable. Those three days are given as the days of grace.

Test: Accounting & Financial Management of Banking - 5 - Question 9

Direction: Read the information carefully and answer the questions based on the given informations below:
In the books of Siva, the following transactions related to bills takes place,
(i) Jan 9. Sold goods to Varun for Rs.34000 and draws a bill for 45 days.
(ii) Mar 1. Sold goods to Bhuvanesh and draws a bill at three months for Rs.500000.
But on May 1, he retires his acceptance under rebate of 12% p.a.
(iii) Oct 1, Bill for 3 months was drawn on Sita for the amount of Rs.100000 owed by her. She accepted the bill. On Oct 3, Siva got the bill discounted with the bank for Rs.99000.

Q. The Bills Receivable Book is a part of _____?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 9

Bills receivable book is used to record the bills received from debtors. When a bill is received, details of it are recorded in the bills receivable book. First step of accounting is to record transactions and that are recorded in journal so bill receivable book is a part of journal.

Test: Accounting & Financial Management of Banking - 5 - Question 10

Which of the following should be taken into consideration, While calculating NPV cash flow

  1. Taxes
  2. Salvage
  3. Depreciation
  4. Working Capital
Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 10

While calculating NPV, the cash flow should consider taxes and depreciation, salvage value and working capital release at the end.

Test: Accounting & Financial Management of Banking - 5 - Question 11

Under which among the following head is Salary of MP/MLA/MLC is taxable?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 11

Salary that received to MP/MLA/MLC is taxable under income from Other Sources.
Income that is taxable under head income from other sources is:
- [ ] Amount received as a family pension
- [ ] Agricultural income
- [ ] Director sitting fee
- [ ] Income sub-letting of house property
- [ ] Dividend
- [ ] Winning through lotteries, puzzles, card games
- [ ] Interest that is received through compensation of compulsory acquisition of a capital asset

Test: Accounting & Financial Management of Banking - 5 - Question 12

Direction: Using the following case study , choose the appropriate answers for the questions carefully.
M/s. No Ltd Bank is a commercial bank. The No Ltd bank has classified their advances into Performing assets and Non-Performing Assets. Non - Performing assets are further classified into Sub-Standard assets, Doubtful assets & Loss Assets. All the assets of M/s. XYZ ltd are secured assets.
As per RBI guidelines, loan upon becoming an NPA would first be classified as sub-standard for a period not exceeding 12 months and beyond that, it would have to be classified as DOUBTFUL. The doubtful assets are further categorised into Doubtful-1, Doubtful-2 and Doubtful-3 on the basis of their ageing from the date of classification of NPA. After if it become due it is classified as Loss Assets.
Taking into account the time lag between an asset becoming substandard/doubtful turning into loss asset, RBI has directed that bank should make provision against all assets (i.e) Loans & advances. The Management of XYZ Ltd want your help in creation Provision for Assets for the year ended 31-Mar-2022 as per the RBI Guidelines. The Following are details of XYZ Ltd for the year ending 31-Mar-2022.
Asset which do not carry Normal risk - Rs. 2500
Asset which carries risk less than 12 Months (NPA) - Rs. 2000

  • Doubtful Assets
  • from 01-04-2021 - 400
  • from 01-04-2019 - 300
  • from 01-04-2015 - 100
  • Loss Assets - 500

Q. What is the Rate of Provision for Substandard assets?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 12

As per the Guidelines, the Provision has to be created for different category of advances out of which advances to Sub standard assets is 15%.

Test: Accounting & Financial Management of Banking - 5 - Question 13

Direction: Using the following case study , choose the appropriate answers for the questions carefully.
M/s. No Ltd Bank is a commercial bank. The No Ltd bank has classified their advances into Performing assets and Non-Performing Assets. Non - Performing assets are further classified into Sub-Standard assets, Doubtful assets & Loss Assets. All the assets of M/s. XYZ ltd are secured assets.
As per RBI guidelines, loan upon becoming an NPA would first be classified as sub-standard for a period not exceeding 12 months and beyond that, it would have to be classified as DOUBTFUL. The doubtful assets are further categorised into Doubtful-1, Doubtful-2 and Doubtful-3 on the basis of their ageing from the date of classification of NPA. After if it become due it is classified as Loss Assets.
Taking into account the time lag between an asset becoming substandard/doubtful turning into loss asset, RBI has directed that bank should make provision against all assets (i.e) Loans & advances. The Management of XYZ Ltd want your help in creation Provision for Assets for the year ended 31-Mar-2022 as per the RBI Guidelines. The Following are details of XYZ Ltd for the year ending 31-Mar-2022.
Asset which do not carry Normal risk - Rs. 2500
Asset which carries risk less than 12 Months (NPA) - Rs. 2000

  • Doubtful Assets
  • from 01-04-2021 - 400
  • from 01-04-2019 - 300
  • from 01-04-2015 - 100
  • Loss Assets - 500

Q. What is the Rate of Provision for Doubtful assets from 1 year to 3 years?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 13

As per the Guidelines, the Provision has to be created for different category of advances out of which advances to lDoubtful assets for more than 1 year is 40%.

Test: Accounting & Financial Management of Banking - 5 - Question 14

Direction: Using the following case study , choose the appropriate answers for the questions carefully.
M/s. No Ltd Bank is a commercial bank. The No Ltd bank has classified their advances into Performing assets and Non-Performing Assets. Non - Performing assets are further classified into Sub-Standard assets, Doubtful assets & Loss Assets. All the assets of M/s. XYZ ltd are secured assets.
As per RBI guidelines, loan upon becoming an NPA would first be classified as sub-standard for a period not exceeding 12 months and beyond that, it would have to be classified as DOUBTFUL. The doubtful assets are further categorised into Doubtful-1, Doubtful-2 and Doubtful-3 on the basis of their ageing from the date of classification of NPA. After if it become due it is classified as Loss Assets.
Taking into account the time lag between an asset becoming substandard/doubtful turning into loss asset, RBI has directed that bank should make provision against all assets (i.e) Loans & advances. The Management of XYZ Ltd want your help in creation Provision for Assets for the year ended 31-Mar-2022 as per the RBI Guidelines. The Following are details of XYZ Ltd for the year ending 31-Mar-2022.
Asset which do not carry Normal risk - Rs. 2500
Asset which carries risk less than 12 Months (NPA) - Rs. 2000

  • Doubtful Assets
  • from 01-04-2021 - 400
  • from 01-04-2019 - 300
  • from 01-04-2015 - 100
  • Loss Assets - 500

Q. Out of the above information, what is the value of Standard assets?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 14

A standard assets are those which do not disclose any problems and which does not carry more than normal risk attached to the Business. Here Asset which do not carry risk is Rs. 2500.

Test: Accounting & Financial Management of Banking - 5 - Question 15

Direction: Following are the sales figures for different months.

  • Jan - 15000
  • Feb - 20000
  • Mar - 30000
  • Apr - 20000
  • May - 25000

Of the above 20% are cash sales.
50% of the customers pay in the next month and balance in the following month

Q. Find the amount of debtors realized for the month of April

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 15

In the April month, the sales of Feb and March shall be considered for the calculation of debtors realization.
(Credit sales × realisation %)
Feb - (20000×80%×50%) = 8000
Mar - (30000×80%×50%) = 12000
Total = 20000 rupees

Test: Accounting & Financial Management of Banking - 5 - Question 16

For services rendered in hospitals, they use which type of cost?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 16

Operating costing helps businesses account for the total cost of each operation, which allows accounting professionals to better understand and control costs. Operating costing is used by Companies rendering services such as power supply, transport, water works, hospitals etc.

Test: Accounting & Financial Management of Banking - 5 - Question 17

In the accounting system of banks, at the end, all the vouchers related to the transactions in all the savings banks account at the branch will be entered in the _____ book.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 17

In the accounting system of banks, at the end, all the vouchers related to the transactions in all the savings banks account at the branch will be entered in the SB day book.

Test: Accounting & Financial Management of Banking - 5 - Question 18

In a manufacturing unit, The difference between sales revenue and total variable costs is known as _________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 18

In a manufacturing and non-manufacturing unit, The difference between sales revenue and total variable costs is known as a contribution or contribution margin.

Test: Accounting & Financial Management of Banking - 5 - Question 19

Seperate blocked account should be shown in balance sheet under _____.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 19

Schedule 7 of the balance sheet is used to show the investments made by a company. A separate blocked account is a type of investment account that holds funds that are restricted for a specific purpose, such as security deposits, dividend payments, or legal claims. These funds cannot be used for general business operations or other purposes. Therefore, a separate blocked account should be shown in the balance sheet under Schedule 7 - Investments, along with other investment accounts.

Test: Accounting & Financial Management of Banking - 5 - Question 20

Calculate the minimum inventory holding cost from the following information
Monthly demand for a product of 100 units
Setting-up cost per batch is Rs 30
Cost of manufacturing per unit Rs 10
Rate of interest 10% p.a
Carrying cost per unit per month Rs 1

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 20

Minimum Inventory Cost = Average Inventory × Inventory Carrying Cost per unit per annum
Average Inventory: Optimum inventory is calculated from Economic batch quantity

Where, D = Annual demand for the product
S = Setting up the cost per batch
C = Carrying cost per unit of production

= 268.33 units
Average inventory = 268.33 units ÷ 2 = 134.16 units
Carrying Cost per unit per annum= 1 × 12 months = Rs 12
Minimum Inventory Holding Costs = 134.16 units × 12 = Rs 1610

Test: Accounting & Financial Management of Banking - 5 - Question 21

Which of the following items temporally recorded in suspense account?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 21

Suspense account is often used to temporary record certain items like losses caused due to frauds and awaiting adjustment, Debit balance arising from the payment is made by various branches in this account, etc.

Test: Accounting & Financial Management of Banking - 5 - Question 22

At the end, all the entries related to income and expenditure should be transferred to _________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 22

At the end of each accounting period, all the income and expenses account should be closed by transferring the balances to the Profit and loss account.

Test: Accounting & Financial Management of Banking - 5 - Question 23

Direction: Read the below case study carefully and answer the given questions:
ABC limited company was registered with the authorised capital of Rs 55 lakhs in the memorandum of association. The company issued 40000 equity shares of Rs.100 each payable at Rs.30 on application, Rs.30 on allotment, Rs.20 on first call, Rs.20 on final call and 36000 shares have been subscribed by the public. All the money was duly received except one member holding 100 shares who was not paid first call money. Final call was not made.

Q. If the public subscribed 42000 equity shares instead of 36000 equity shares, this indicates ____________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 23

Over subscription of shares refers to an issue of shares in which the demand of shares exceeds the issued shares. Here in the case, 42000 subscribed shares exceeds 40000 issued shares, hence it indicates over subscription.

Test: Accounting & Financial Management of Banking - 5 - Question 24

Direction: Read the below case study carefully and answer the given questions:
ABC limited company was registered with the authorised capital of Rs 55 lakhs in the memorandum of association. The company issued 40000 equity shares of Rs.100 each payable at Rs.30 on application, Rs.30 on allotment, Rs.20 on first call, Rs.20 on final call and 36000 shares have been subscribed by the public. All the money was duly received except one member holding 100 shares who was not paid first call money. Final call was not made.

Q. ABC Ltd. company is one of the type of companies based on _____.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 24

There are different types of companies they may be classified on the basis of their incorporation ownership and liability of members.
On the basis of ownership, it may be divided into private company, public company, government company, holding company, associate company, one person company, subsidiary company.
Hence, ABC Ltd. company is one of the type of companies based on ownership.

Test: Accounting & Financial Management of Banking - 5 - Question 25

A bond, with a par value of Rs. 2,000, bears a coupon rate of 12 per cent and has a maturity period of 4 years. The required rate of return on the bond is 11 per cent. What is the value of this bond?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 25

Annual interest payable = 1,000 x 12% =120
Principal repayment at the end of 3 years = Rs. 2,000
The value of the bond
= 120 (PVIFA 11%, 4 yrs) + Rs. 2,000 (PVIF 11%, 4 yrs)
= 120 (3.170) + 2,000 (0.659)
= 380.4 + 1318
= Rs. 1698.4

Test: Accounting & Financial Management of Banking - 5 - Question 26

__ is a Progressive Tax?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 26

Progressive tax is referred to the tax that is directly related to the taxpayer's ability to pay.
Every year, a fixed portion of our income is to be payed to the central government in the form of income tax.
As per the central government rules for Income tax, The income tax of all people is based on per slab.
Total funds that is collected through income tax is used by the government for services to fulfill the requirements for the country's development.

Test: Accounting & Financial Management of Banking - 5 - Question 27

Costs which do not involve immediate cash payment and are not recorded in books of accounts are known as __________

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 27

Implicit costs also known as Economic costs do not involve any immediate cash payment and they are not recorded in books of accounts. Example opportunity cost.

Test: Accounting & Financial Management of Banking - 5 - Question 28

The income or gain expected from the second-best use of resources lost due to the best use of the scarce resources is known as:

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 28

Opportunity costs are the possible advantages that a person or company forgo while choosing one alternative over another.
It is necessary to weigh the pros and cons of each choice offered to correctly assess opportunity costs.
For example, an owner can invest surplus capital in stocks or can buy an asset for the business. He will give up the benefit of one option by choosing an alternative one.
Hence, the income or gain expected from the second-best use of resources lost due to the best use of the scarce resources is known as Opportunity cost.

Test: Accounting & Financial Management of Banking - 5 - Question 29

Direction: Read the information carefully and answer the questions based on the given informations below:
A machinery was purchased on 1-1-2013 for Rs.180000. Installation was done on 1-3-2013 and costs Rs.20000. It was put to use from 1-4-2013. The depreciation to be provided for the machinery is decided at 10% p.a in diminishing balance method.
On 31-12-2014 the machinery was sold for Rs.160000. The books were closed on 31st December every year.

Q. Under the diminishing balance method, the depreciation amount will be ______?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 29

Under diminishing balance method, depreciation decreases every year. Since the book value reduces every year, hence the amount of depreciation also reduces every year. Under this method, the value of the asset never reduces to zero.

Test: Accounting & Financial Management of Banking - 5 - Question 30

Direction: Read the information carefully and answer the questions based on the given informations below:
A machinery was purchased on 1-1-2013 for Rs.180000. Installation was done on 1-3-2013 and costs Rs.20000. It was put to use from 1-4-2013. The depreciation to be provided for the machinery is decided at 10% p.a in diminishing balance method.
On 31-12-2014 the machinery was sold for Rs.160000. The books were closed on 31st December every year.

Q. What will be the profit/loss will arise from selling the machinery?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 30

The book value of the machinery after providing the depreciation will be Rs.166500. But the machinery was sold for Rs.160000. Therefore while selling the machinery, loss of Rs.6500 was suffered.

Test: Accounting & Financial Management of Banking - 5 - Question 31

_____ has become a part of the audit to process data of audit significance to improve the effectiveness and efficiency of the audit process.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 31

Computer aided technique is became a part of the audit to process data of audit significance to improve the effectiveness and efficiently of the audit process.

Test: Accounting & Financial Management of Banking - 5 - Question 32

Which among the following statement is correct regarding the fixed interest rate?
(i) The fixed interest rate is normally higher than the floating interest rate
(ii) In fixed interest rate, rate of interest changes depending upon market conditions
(iii) The rate of interest increases or decreases depending upon the benchmark

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 32

Fixed Interest Rate: the rate of interest is fixed. It does not change in the entire period of the loan. For instance, if a home loan is taken at an interest rate of 9 per cent and is repayable in 15 years, the rate remains the same during the entire 15 years even though the market rate increases or decreases. Under this method, the interest rate is, generally higher than the floating rate, as it is not affected by market fluctuations.

Test: Accounting & Financial Management of Banking - 5 - Question 33

Expand LERMS in terms of Forex?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 33
  • The exchange rate movements in the Indian forex market do not necessarily follow the international trend, particularly in the short run. The main reason for this is the restriction on the free flow of capital into or out of the country. Prior to the modified 'Liberalised Exchange Rate Management System
  • (LERMS) the Reserve Bank fixed the buying and selling rates and the market would remain within the ceiling and the floor, thus fixed by the Reserve Bank. However, at present, the forces of demand and supply in the local interbank market drive the exchange rate.
Test: Accounting & Financial Management of Banking - 5 - Question 34

In order of liquidity, Which would appear first on the liabilities side of the balance sheet, from the following?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 34

In a Balance Sheet which is prepared In order of liquidity, Liabilities which are to be paid at earliest will be written first. First the current liabilities then long term liabilities followed by capital.
Hence in the given case Creditors will appear first in the Balance sheet.

Test: Accounting & Financial Management of Banking - 5 - Question 35

Direction: Read the information carefully and answer the questions based on the given information below:
On 01.04.2018, Biju ltd. received Government grant of ₹ 50 lakhs for acquisition of plant costing ₹ 200 lakhs. The grant was credited to the cost of the asset. The life of the plant is 4 years. The plant is depreciated at 20% on WDV basis. The company had to refund the grant in June 2021 due to non-fulfillment of certain conditions. Assuming that the company did not charge any depreciation for year 2021?

Q. Above case study deals with AS __________ .

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 35

AS 12 deals with accounting for government grants such as subsidies, cash incentives, etc. It doesn't deal with any other forms of government assistance. Recognition of grants directly to the shareholder's fund is prohibited.

Test: Accounting & Financial Management of Banking - 5 - Question 36

Direction: Read the information carefully and answer the questions based on the given information below:
On 01.04.2018, Biju ltd. received Government grant of ₹ 50 lakhs for acquisition of plant costing ₹ 200 lakhs. The grant was credited to the cost of the asset. The life of the plant is 4 years. The plant is depreciated at 20% on WDV basis. The company had to refund the grant in June 2021 due to non-fulfillment of certain conditions. Assuming that the company did not charge any depreciation for year 2021?

Q. Revised book value for June month of 2021 shows _________ .

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 36

On 1st April, 2018, acquisition cost of plant is ₹ 150 lakhs ( ₹ 200 lakhs - ₹ 50 lakhs). Depreciation for 31st March, 2019, is ₹ 30 lakhs (₹ 150 × 20%). Depreciation for 31st March, 2020, is ₹ 24 lakhs i.e, ((₹ 150 lakhs - 30 lakhs) × 20%). Book value of the plant on 1.4.2020 is ₹ 96 lakhs and depreciation on 31.3.2021 is ₹ 19.2 lakhs ( ₹ 96 lakhs × 20%). Book value of the plant on 1.4.2021 is ₹ 76.8 ( ₹ 96 lakhs - ₹ 19.2 lakhs). Therefore, the revised book value for June, 2021 is ₹ 126.8 lakhs ( ₹ 76.8 lakhs + ₹ 50 lakhs of government grants).

Test: Accounting & Financial Management of Banking - 5 - Question 37

____ risk is Exposure to legal penalties when it fails in accordance with laws and regulations.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 37

Compliance risk is exposure to legal penalties, financial penalties and material loss an organization faces when it fails to comply with industry laws and regulations, internal policies or prescribed best practices.

Test: Accounting & Financial Management of Banking - 5 - Question 38

When the balance as per Pass Book is the starting point, direct payment by bank are _____?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 38

When direct payments by bank are done , it leads to decrease in the pass book balance but these entries would not be entered in the bank column of the cash book and the later would show a higher balance.
So, when the balance as per pass book is the starting point, direct payments by bank are to be added to the bank reconciliation statement to reach the balance as per cash book.

Test: Accounting & Financial Management of Banking - 5 - Question 39

Fund flow statement uses the _______ system of accounting.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 39

A Fund Flow Statement is a financial statement that provides information on the inflow and outflow of funds during a specific period of time. It tracks the movement of funds in a business and identifies how they have been obtained and how they have been used.
The Fund Flow Statement is based on the Cash System of Accounting, which records transactions when cash is received or paid, rather than when revenue is earned or expenses are incurred. It shows the changes in the cash balance of a business by analyzing its cash inflows and outflows, including operating activities, investing activities, and financing activities.

Test: Accounting & Financial Management of Banking - 5 - Question 40

NPV is the difference between the present value of ___ and the present value of initial outlays

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 40

NPV is the difference between the present value of future cash outflows and the present value of initial outlays. It is based on time adjusted technique or discounted cash flow technique.

Test: Accounting & Financial Management of Banking - 5 - Question 41

Which among the following are indirect taxes?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 41

​Indirect tax is collected by a single entity in the supply chain (usually a producer or retailer) and is paid to the government but passed on to the consumers through purchase price of the goods or services.
Ultimately, the consumer of the product is who pays the tax by way of overpaying for the product.

Test: Accounting & Financial Management of Banking - 5 - Question 42

A Manufacturing business had purchased raw material worth Rs. 20000. Thereafter, from that raw material worth Rs. 14000 used for production of inventory costing Rs. 26000 and finally inventory worth Rs. 20000 sold for Rs. 25000. Find out the cash & Inventory balance using above transaction. Assume that the opening cash balance is Rs. 50000.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 42

Cash balance:
Opening balance - 50000
(-) purchase of raw material - 20000
(+) Sale of inventory - 25000
Total cash balance - 55000
Inventory balance:-
Inventory Produced - 26000
(-) inventory sold - 20000
Total inventory balance - 6000

Test: Accounting & Financial Management of Banking - 5 - Question 43

How do you calculate cost of goods sold?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 43

Cost of goods sold (COGS) is calculated by taking the value of inventory at the beginning, adding the cost of inventory purchased over the period, and subtracting the value of inventory held at the end.

Test: Accounting & Financial Management of Banking - 5 - Question 44

Revenues and expenses must be recorded in the accounting period in which they were earned or incurred, no matter when cash receipts or outlays occur under which of the following accounting methods?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 44

Accrual accounting is an accounting method where revenue or expenses are recorded when a transaction occurs. The method follows the matching principle, which says that revenues and expenses should be recognized in the same period when they are earned or incurred.

Test: Accounting & Financial Management of Banking - 5 - Question 45

Lease payments should be recognized as an expense in the statement of Profit & Loss of a lessee.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 45

Under operating lease, lease payments are recognized as expense in the profit and loss account of lessee to have better matching between cost and revenue.

Test: Accounting & Financial Management of Banking - 5 - Question 46

Application money received for allotment and due for refund should be shown under _________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 46

If a company receives excess application money shares issued, some of such application money received on excess shares is adjusted against allotment and the remaining was refunded, such refunded application money should be shown in other current liabilities under the head current liabilities.

Test: Accounting & Financial Management of Banking - 5 - Question 47

Overhead costs such as Lighting and Rent are apportioned based on _______.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 47

Overhead costs such as Lighting and Rent are apportioned based on the Floor Area or volume of the department. Horsepower apportionment is used for electric power. Compensation to workers, Holiday pay, ESI and PF contribution and Perquisites are apportioned based on direct wages, Depreciation, and Insurance of stock apportioned based on capital values.

Test: Accounting & Financial Management of Banking - 5 - Question 48

_____ refers to the risk of losses in the Bank's Trading book due to changes in equity prices & Interest.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 48

Market risk refers to the risk of losses in the bank's trading book due to changes in equity prices, interest rates, credit spreads, foreign exchange rates, commodity prices, and other indicators whose values are set in Public.

Test: Accounting & Financial Management of Banking - 5 - Question 49

Cash payment for redemption of debentures is a cash out flow from ___________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 49

The financing activity in the cash flow statement focuses on how the business raises capital and pays back its investors. This activity includes issuing and selling of shares and other securities. Hence, Cash payment for redemption of debentures is a cash out flow from Financing activity.

Test: Accounting & Financial Management of Banking - 5 - Question 50

At the time of deduction of tax at source, surcharge and cess, are added in which of the following cases?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 50

At the time of deduction of tax at source, surcharge and cess, is added Where the resident assessee receives any income in the nature of salary.

Test: Accounting & Financial Management of Banking - 5 - Question 51

Provision created for unsecured doubtful advances is ________

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 51

Provision for unsecured advances is 100%

Test: Accounting & Financial Management of Banking - 5 - Question 52

Under ABC Analysis of Inventory Control " B" category of inventory refers to

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 52

Under ABC Analysis of Inventory Control which is based on basis of value and frequency of inventory.

A category of inventory refers to inventory which requires 70% of the total investment in inventory

B category of inventory refers to inventory which requires 20% of total investment in inventory

C category of inventory refers to inventory which requires 10% of the total investment in inventory.

Test: Accounting & Financial Management of Banking - 5 - Question 53

Which among the following statements is correct?
I. Provision for bad and doubtful debt is the result of the conservatism concept
II. Recording of fixed assets at cost is due to the accrual concept
III. Accounting equations are based on dual aspect concept

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 53
  • According to Accounting concepts and conventions, the conservatism Principle states that since future revenue and earnings are unclear, the accountant shouldn't recognize the gain. However, in case of loss that is possible but not certain, an accountant should be inclined to record the loss on the books. Example: Provision for bad and doubtful debts.
  • Recording of Fixed Asset at Cost is based on the Historical cost concept. According to the "historical cost principle," an asset must be valued using its cash or cash equivalent cost at the time of acquisition, as well as any additional costs incurred to set it up and get it ready for use.
  • According to the dual aspect notion, every transaction a business makes has an equal and opposing impact on two different parts of the business. All accounting frameworks employ this idea as the cornerstone of double-entry accounting to produce accurate and trustworthy financial accounts.
Test: Accounting & Financial Management of Banking - 5 - Question 54

Choose the incorrect pair from the following

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 54

Accounting Standard 16 : Borrowing cost

  • The main objective of this Accounting Standard is only to prescribe accounting principles for the accounting of borrowing cost. This Notified accounting standard is mandatorily applicable to all enterprises. It is specifically stated that this accounting standard is only related to External Borrowings and does not deal with the cost of raising Equity or Convertible Preference Shares. Borrowing Costs are interest and other costs incurred by an enterprise in connection with the borrowing of funds" .in this article, you will learn what are borrowing costs, how to account for borrowing costs, borrowing costs eligible for capitalization, commencement, and cessation of capitalization.
Test: Accounting & Financial Management of Banking - 5 - Question 55

The amount of stock that a company store to use it in the unforeseen event or can't sell unless the company goes bankrupt is known as________.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 55

Reserve capital are that part of the authorized capital that are not used by the company to raise money. It is created from the profits of the company. It is generally used by the company at the time of the expansion, merger, acquisition, or at bankruptcy.

Test: Accounting & Financial Management of Banking - 5 - Question 56

Given below is a set of two statements:
A: The Balance sheet represents the financial performance of the firm.
B: The Profit & Loss A/c is the depiction of the entity's revenue and expenses.

Q. Which of the above statement(s) is/are correct?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 56
  • The Balance Sheet reveals the entity's financial position whereas the Profit & Loss A/c discloses the entity's financial performance.
  • Balance Sheet gives an overview of the assets and liabilities of the company but Profit & Loss A/c depicts the entity's revenues and expenses
  • Hence, the correct answer is option (b).
Test: Accounting & Financial Management of Banking - 5 - Question 57

What is included in the private ledger?
I. Capital Account
II. Drawing Account
III. Personal loan Account

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 57

Private Ledger is prepared to maintain the personal records of the proprietor, and are not intended for general observation such as capital account, current account, drawing account, personal loan account. The General ledger account is divided into five categories. They are assets, liabilities, income, expense and capital.

Assets

  • Asset accounts include fixed assets items such as land and building, plant and machinery, motor van, etc. Current assets items such as cash in hand and cash at bank. Other assets such as prepaid expenses, accounts receivable, etc

Liabilities

  • Liability accounts include notes payable, lines of credit, accounts payable and debt, income received in advance, etc.

Stockholders' Equity

  • Common Stocks
  • Retained Earnings

Revenue accounts

  • Sales
  • Services Fees
  • Disposal of an asset
  • Interest
  • Investment

Expense accounts

  • Wages and Salaries Account
  • Depreciation Accounts
  • Electricity Account
  • Stationery Account

Thus, the correct option is (d)

Test: Accounting & Financial Management of Banking - 5 - Question 58

_________ may be defined as a system of costing in which the elements of cost are accumulated separately for each job or work order undertaken by an organisation.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 58

Job costing may be defined as a system of costing in which the elements of cost are accumulated separately for each job or work order undertaken by an organisation. Industries which manufacture products or render services against specific orders use job costing or job order method of cost accounting.
The system of job costing can be subdivided into two categories viz.

  • Factory job costing and
  • Contract costing.

Job costing is applicable to engineering concerns, construction companies, ship-building, furniture making, machine manufacturing industries, repair shops, automobile garages and such others in factories where jobs or orders can be kept separately.
Hence, option (b) is the correct answer.

Test: Accounting & Financial Management of Banking - 5 - Question 59

The Bank reconciliation statement can be prepared with the balance of which of the following?
I. Cash Book
II. Pass Book
III. Subsidiary Books

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 59
  • Bank Reconciliation Statement Meaning Bank Reconciliation Statement is a record book of the transactions of a bank account.
  • This statement helps the account holders to check and keep track of their funds and update the transaction record that they have made.
  • A reconciliation statement is prepared when an account holder gets the duly completed pass book from the bank.
  • It can be prepared by taking the balance either as per cash book or as per pass book as starting point.
  • Thus, the correct option is (c)
Test: Accounting & Financial Management of Banking - 5 - Question 60

Which are some of the errors that affect the agreement of the Trial Balance?
I. Wrong casting
II. Omission of posting of one side of an entry
III. Posting to the wrong side
IV. Error of complete omission

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 60

If a transaction remains altogether unrecorded either in the journal or in subsidiary books, it will be treated as an error of complete omission. Such an error will not affect the agreement of a trial balance. Errors like wrong casting, omission of posting of one side of an entry and posting to the wrong side are going to affect the agreement of trial balance.
Thus, the correct option is (d).

Test: Accounting & Financial Management of Banking - 5 - Question 61

In cash flow from operating activities ___________ is subtracted from the net income.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 61

Gain on sale of equipment is a non-operating item. It represents a transaction that is not directly related to the company's operation. It is a one-time non-recurring event that arises from the sale of the assets and therefore it is not considered an operating activity. Depreciation and decrease in accounts payable is an operating activity hence it added in the net income in the operating activity. Interest on long term loan is related to financing activity hence it will not be considered as part of operating activity.

Test: Accounting & Financial Management of Banking - 5 - Question 62

Under which type of costing products lose their individual identity as they are manufactured in a continuous flow?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 62

Under process costing the product produced is homogeneous. Costs are compiled on a time basis i.e., for production of a given accounting period for each process or department due to which Products lose their identity as they are manufactured in a continuous flow. The unit cost of the process is the average cost for the period.

Test: Accounting & Financial Management of Banking - 5 - Question 63

Shares that entitle the holder to a share in the profit of the company after the fixed dividend on preference shares has been paid are known as__________ shares.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 63
  • Participating shares entitles the holder of a share in the profit of the company after the fixed dividend on preference shares has been paid, whereas non- participating shares do not participate in the company's profit beyond their fixed dividend.
  • Preference shares have a fixed dividend but the preference shareholders have no voting rights. However during the dilution/winding-up of the company preference shareholders are given the preference over the equity shareholders in terms of payment.
  • Equity shares are a type of share capital representing ownership of the company.
  • A type of share capital that can be converted into another class of shares at a later stage is known as convertible shares.
Test: Accounting & Financial Management of Banking - 5 - Question 64

Opening Stock Rs 18500, Direct Wages- 14800, purchases 40700, interest on loan 3800, closing stock 24000, Cost of goods sold will be

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 64

Cost of goods sold= Opening stock + purchases + direct wages - closing stock
= 18500 + 14800 + 40700 - 24000 = 50000

Test: Accounting & Financial Management of Banking - 5 - Question 65

_________ technique is used for calculating future value of cash flows.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 65
  • A series of cash flows can be adjusted for Time Value of Money and made comparable using different techniques.
  • Compounding is the impact of the time value of money (e.g., interest rate) over multiple periods into the future, where the interest is added to the original amount.
  • The compounding technique is used to find out the future value of different cash flows occurring at different points of time. According to this technique, interest earned on the initial principal or cash outflow becomes part of the principal for calculating interest for the next period. As a result interest is earned on interest as well as on the initial principal. This interest earned on interest is known as compounding effect and hence compounding technique.
Test: Accounting & Financial Management of Banking - 5 - Question 66

Shares that have a fixed dividend and do not have voting rights are known as_______ shares.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 66
  • Preference shares have a fixed dividend but the preference shareholders have no voting rights. However during the dilution/winding-up of the company preference shareholders are given the preference over the equity shareholders in terms of payment.
  • Equity share is a type of share capital representing ownership of the company.
  • A type of share capital that can be converted into another class of shares at a later stage is known as convertible shares.
  • Cumulative share is a type of preference share that carries a right to accumulate unpaid dividends which must be paid before any dividend can be declared on equity shares.
Test: Accounting & Financial Management of Banking - 5 - Question 67

Which of the following statement/s is/are incorrect regarding the Accommodation Bill.
I. Accommodation Bill is drawn and accepted with consideration.
II. If this bill is dishonoured, payment cannot be taken with the help of the court.
III. If such a bill is discounted with the bank and the money received is distributed between the drawer and drawee.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 67

Sometimes a bill is drawn and accepted without any consideration. It is drawn and accepted just to help the drawer or both the drawer and the acceptor or raise funds temporarily by getting the bill discounted. A bill drawn without any consideration is known as Accommodation Bill. It is also termed as 'Kite Bill' or 'Fictitious Bill'.

  • Purpose:It is drawn and accepted to raise funds temporarily.
  • Proof: It is drawn and accepted for financial help.
  • Consideration: Accommodation Bill is drawn and accepted without any consideration.
  • Dishonour: If this bill is dishonoured, payment cannot be taken with the help of court.
  • Discounting of the Bill:If such a bill is discounted with the bank and the money received is distributed between the drawer and drawee.
Test: Accounting & Financial Management of Banking - 5 - Question 68

Which of the following is the correct accounting treatment of interest on drawings charged at Rs. 800 in the final accounts of a company?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 68
  • If the firm allows interest on capital, it should also charge interest on drawings made by the proprietor. Such an interest is an expense for the proprietor and a gain to the business. Hence, an entry is made by debiting the drawings account and crediting the interest account.
  • Thus, the correct option is (a)
Test: Accounting & Financial Management of Banking - 5 - Question 69

The price at which the company issues its shares to the public for the first time is known as the ________ price.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 69

When the company issues its shares to the public for the first time it is known as issue price.

  • Face value means the nominal value of shares as specified in the legal document of the company. It is often used to calculate the initial price of a company.
  • Issue price is the price at which the company issues its shares to the public for the very first time.
  • Market value of a security means the current value of the security in the open market.
  • Called up value of the shares means the amount of money that has been requested by the company from its shareholders for the payment of shares they have agreed to buy.
Test: Accounting & Financial Management of Banking - 5 - Question 70

Which of the following is not correct about standard costing?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 70
  • Standard costing is a system of accounting that uses predetermined standard costs for direct material, direct labor, and factory overheads.
  • It acts as a valuable guide to management in the formulation of price and production policies. For example, it assists management in the field of inventory pricing, product pricing and profit planning, etc.
  • One of the criticisms of standard costing is it is useful for a standard level of output, which when not achieved, the standard costs are said to be not realised. However, it can be overcome through forecasting and variance analysis. It is not suitable for industries producing non-standardized products. It is of little value in job or contract costing. Also it is difficult to apply this system when production takes more than one accounting period.
Test: Accounting & Financial Management of Banking - 5 - Question 71

Which of the following statement/s is/are correct regarding capital expenditure?
I. An expenditure incurred for acquiring intangible asset
II. An expenditure which increases earning capacity directly or indirectly
III. An expenditure incurred on extension or improvement of existing asset which enhance the productivity
IV. An expenditure which maintain the earning capacity

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 71

Any expenditure incurred for acquiring intangible assets like goodwill patent trademark copyright will be capital expenditure any expenditure which increases earning capacity directly or indirectly will be treated as capital expenditure. Cost of air conditioning renovation or shifting of the showroom at a more profitable point will be the expenditure of capital nature. Similarly, the cost of replacing a petrol driven engine by a diesel engine is a capital expenditure any expenditure incurred on extension or improvement of an existing asset will enhance the productive efficiency of the asset or reduce the cost of production is also classified as capital expenditure. Expenditure which maintain the earning capacity is the feature of revenue expenditure

Test: Accounting & Financial Management of Banking - 5 - Question 72

Which of the following statements is not true regarding the fundamental rule of debit and credit.
I. Increase in revenue/gain debited and decrease in revenue/gain is credited
II. Increase in asset is debited, and decrease in asset is credited.
III. Increase in liabilities is credited and decrease in liabilities is debited
IV. Increase in capital is credited and decrease in capital is debited.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 72

Rules of Debit and Credit
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:
I. 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."

II. 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
Test: Accounting & Financial Management of Banking - 5 - Question 73

Identify which of the following the correct statement is given below
Statement I : Patent rights are in the nature of nominal account
Statement II : Trade discount is not recorded in the books

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 73

Statement I is wrong = Patent account is an intangible asset and hence, is classified as a real account.
Statement II is true = Trade Discount is allowed as a general discount to all the customers to promote the sales. Trade discount is allowed on the list price and sales is done on the basis of net price i.e. list price minus trade discount. Hence trade discount is not recorded in books of account.

Test: Accounting & Financial Management of Banking - 5 - Question 74

Classification of Assets into Fixed and Current Assets is based on which Accounting concept and convention?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 74

Based on the Accounting Going Concern concept, the business is going to last for a very long time, it treats the life of the business as indefinite. Hence Those assets benefit of which is received in one accounting year itself are to be classified as current assets and those whose benefit extends to more than one accounting period are to be classified as fixed assets. The existence of more than one accounting period is supported by the going concern concept only which then further supports the classification of Assets into Current and Fixed.

Test: Accounting & Financial Management of Banking - 5 - Question 75

Which of the following is NOT included in Non-Current Liabilities in the Balance Sheet of a firm?

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 75

In a company's balance sheet, certain obligations that would become paid after a period of 12 months or more are categorised as non-current liabilities.
The items included in Non-current liabilities are:

  • Long term borrowings
  • Deferred tax liabilities
  • Other long term borrowings
  • Long term provisions

Inventories is included in current assets as it would be realised into cash within an year.
Hence, the correct answer is option (d).

Test: Accounting & Financial Management of Banking - 5 - Question 76

Which of the following types of errors are disclosed under the double entry system?
I. Errors of omission
II. Errors of commission
III. Errors of principle
IV. Compensating errors

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 76

Only the arithmetical accuracy of the accounts is checked by preparing a trial balance under the double entry system. Following types of errors are not disclosed under the system:-

  • Errors of omission- If a transaction remains altogether unrecorded in the books of original entry.
  • Errors of commission- If wrong amount is recorded in the books of original entry
  • Errors of principle- If the amount is recorded on the correct side though in a wrong account.
  • Compensating errors- If the effect of one error is cancelled by the effect of some other reason.

Thus, the correct option is (d)

Test: Accounting & Financial Management of Banking - 5 - Question 77

Which of the following statement/s is/are correct regarding financial leverage?
I. When EBIT is higher than Financial Break-even point, there is Positive Financial leverage
II. When EBIT is lower then Finance Break-even point, there is Negative Financial leverage

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 77

Financial Leverage

  • Financial leverage (FL) may be defined as 'the use of funds with a fixed cost in order to increase earnings per share.' In other words, it is the use of company funds on which it pays a limited return. Financial leverage involves the use of funds obtained at a fixed cost in the hope of increasing the return to common stockholders. A positive FL means the firm is operating at a level higher than break-even point and EBIT and EPS moves in the same direction. Negative FL indicates the firm is operating at lower than break-even point and EPS is negative
Test: Accounting & Financial Management of Banking - 5 - Question 78

___________ is a statement that provides details of any amount deducted as TDS or TCS from various sources of income of a taxpayer.

Detailed Solution for Test: Accounting & Financial Management of Banking - 5 - Question 78

Form 26 AS:

  • Form 26AS is a statement that provides details of any amount deducted as TDS or TCS from various sources of income of a taxpayer. It also reflects details of advance tax/self-assessment tax paid, and high-value transactions entered into by the taxpayer. Tax Credit Statement or Form 26AS is an important document for tax filing.
  • Hence, option (b) is the correct answer.
Test: Accounting & Financial Management of Banking - 5 - Question 79

Direction: XYZ Ltd. forfeited 500 shares of Aman of ₹10 each, fully called-up, for non-payment of first and final call of ₹3 per share and re-issued to Suresh as fully paid up for ₹10 per share.

Q. What will be the amount of profit on forfeiture that will be transferred to the Capital Reserve?