MH SET Paper 2 Mock Test - 9 (Commerce) - MAHA TET MCQ

The correct answer is July 2017.

Key Points

• Goods and Service tax
  • In 2016, the Indian Parliament passed a law, the Goods and Services Tax Act 2016, to simplify and introduce a unified indirect tax system in India.
  • This is expected to generate additional revenue for the government, reduce tax evasion and create ‘one nation, one tax, and one market’.
  • Another component of reform in this area is simplification. To encourage better compliance on the part of taxpayers, many procedures have been simplified and the rates have also been substantially lowered.
  • The GST is a value-added tax levied on most goods and services sold for domestic consumption.
  • The GST is paid by consumers, but it is remitted to the government by the businesses selling the goods and services.
  • GST, which subsumed almost all domestic indirect taxes (petroleum, alcoholic beverages, and stamp duty are the major exceptions) under one head, is perhaps the biggest tax reform in the history of independent India.
  • It was launched into operation on the midnight of 1^st July 2017. Hence, Option 1 is correct.
  • GST is applicable on ‘supply of goods or services as against the old concept on the manufacture of goods or sale of goods or the provision of services.
  • GST is based on the principle of destination-based consumption taxation as against the principle of origin-based taxation.
  • It is a dual GST with the Centre and the States simultaneously levying tax on a common base.
  • The GST to be levied by the Centre is called Central GST (CGST) and that to be levied by the States is called State GST (SGST).
  • Import of goods or services would be treated as inter-state supplies and would be subject to Integrated Goods & Services Tax (IGST) in addition to the applicable customs duties.
  • GST rates to be mutually decided: CGST, SGST & IGST are levied at rates to be mutually agreed upon by the Centre and the States.
  • The rates are notified on the recommendation of the GST Council.
  • GST is levied at four rates viz. 5%, 12%, 18% and 28%. The schedule or list of items that would fall under these multiple slabs is worked out by the GST council.

For the purpose of extending rural banking and agro finance, the NABARD Refinances the banks extending rural finance. NABARD's refinance is available to State Co-operative Agriculture and Rural Development Banks (SCARDBs), State Co-operative Banks (SCBs), Regional Rural Banks (RRBs), Commercial Banks (CBS), and other financial institutions approved by RBI. While the ultimate beneficiaries of investment credit can be individuals, partnership concerns, companies, State-owned corporations, or co-operative societies, production credit is generally given to individuals.

The correct answer is C. K. Prahlad.

Key Points "The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits" has been written by C.K. Prahalad. The book, published in 2004, explores the idea that the world's poor can be considered as a lucrative market for businesses, and by addressing their needs and creating products and services tailored for them, both social and economic goals can be achieved. Prahalad suggests that businesses can play a crucial role in poverty alleviation while also generating profits by engaging with the large and untapped market represented by the world's poor.

Additional Information

"The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits" is a book written by C.K. Prahalad, an influential management thinker and professor of corporate strategy. The book, first published in 2004, introduces the concept of the "Bottom of the Pyramid" (BoP) as a significant yet underserved market segment comprising the world's poor.

Key points and details from the book include:

• Bottom of the Pyramid (BoP):

Prahalad argues that the traditional view of the world's poor as passive recipients of aid should be reconsidered. Instead, he sees them as an untapped market, constituting a potential source of innovation, growth, and profits for businesses.

• Market Potential:

Prahalad contends that there is a vast market opportunity at the bottom of the economic pyramid. Despite their low individual purchasing power, when aggregated, the purchasing power of the poor is substantial. He advocates for businesses to develop products and services that are affordable, accessible, and sustainable for this market.

• Role of Business in Poverty Alleviation:

The book challenges businesses to go beyond traditional corporate social responsibility (CSR) initiatives and philanthropy. Prahalad argues that by addressing the needs of the poor and integrating them into the market, businesses can contribute to poverty alleviation while simultaneously creating value for themselves.

• Innovative Business Models:

Prahalad highlights examples of companies that have successfully implemented innovative business models to serve the BoP market. These include products such as affordable healthcare, telecommunications, and financial services designed to meet the unique needs of low-income consumers.

• Co-Creation and Partnerships:

Prahalad emphasizes the importance of involving the poor as active participants in the design and development of products and services. Co-creation and collaboration with local communities are seen as key elements for success.

• Sustainability and Inclusivity:

The book argues that sustainable business practices and inclusive growth strategies are essential for long-term success. It promotes the idea that businesses can achieve economic prosperity while contributing to the well-being of society.

For example:

• The slowdown in the restaurants during the period between lunch and dinner.
• Less number of tourists during summers at resorts.
• In India, where most of the expensive products are bought only during festival seasons (Diwali, Eid, etc.)

Budgets may be classified on the basis of:

(A) Functions

(B) Conditions

(C) Periods (time)

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 correct answer is Individual/HUF

Key Points

Section 80C of Income Tax Act, 1961: 

Eligibility: It is available for individuals and Hindu Undivided Families (HUFs)

Conditions for Deduction: 

The investments in the following schemes are deductible under the Section 80C of tax deduction: -

• PPF, EPF,
• LIC premium
• Equity-linked saving scheme
• Principal amount payment towards home loan
• stamp duty and registration charges for the purchase of property
• Sukanya smriddhi yojana (SSY)
• National saving certificate (NSC)
• Senior citizen savings scheme (SCSS)
• ULIP
• tax saving FD for 5 years
• Infrastructure bonds etc.

​

The maximum amount of Deduction: Rs. 1,50,000

Matrix organization aims to combine the benefits of decentralization with those of coordination. It usually requires employees from distinct departments to form a group to achieve a specific target.

A functional structure is common in organizations, not divisional structures that have outgrown the entrepreneurial structure. It is appropriate for small companies having few products.

An income tax is a tax imposed on individuals or entities (taxpayers) that varies with respective income or profits (taxable income).

Income tax generally is computed as the product of a tax rate times taxable income. Taxation rates may vary by type or characteristics of the taxpayer.

In India, the nature of the income tax is progressive. The tax rate may increase as taxable income increases (referred to as graduated or progressive rates). 

The first income tax is generally attributed to Egypt. In the early days of the Roman Republic, public taxes consisted of modest assessments on owned wealth and property. The tax rate under normal circumstances was 1% and sometimes would climb as high as 3% in situations such as war.

Retirement oriented taxes, such as Social Security or national insurance, also are a type of income tax, though not generally referred to as such.

The correct answer is A- IV, B- III, C- I, D- II.

Key PointsThe correct match is: 

Sale by Auction: A sale by auction is a public sale in which goods or property are sold to the highest bidder. The auctioneer, who is the person conducting the auction, will start the bidding at a certain price and then accept bids from interested buyers. The bidding will continue until there is only one bidder left, who will then be the buyer of the goods or property.

Breach of Warranty: A breach of warranty occurs when a seller fails to fulfill the terms of a warranty that they have made to a buyer. For example, if a seller sells a car with a warranty that it is in good working condition, but the car turns out to have a major problem, the buyer may be able to sue the seller for breach of warranty.

Sale by Description: A sale by description is a sale in which the goods are sold based on their description rather than physical inspection. This type of sale is often used for goods that are sold online or over the phone, where the buyer is not able to see the goods before they buy them. The seller is responsible for making sure that the description of the goods is accurate.

Transfer of Title: The transfer of title is the legal process of transferring ownership of property from one person to another. This can happen in a number of ways, such as through a sale, a gift, or an inheritance. When title is transferred, the new owner of the property is legally responsible for it.

Important Points 

The correct answer is Franchising.

Key Points

•  A system based on the licensing of the right to duplicate a successful business format in foreign markets is known as franchising. Franchising is a business model in which a franchisor (the owner of a successful business format) grants a franchisee (an individual or company) the right to operate a business under the franchisor's name and using the franchisor's business model and system.
• The franchisor typically provides the franchisee with training, marketing support, and other resources to help the franchisee succeed. In return, the franchisee pays the franchisor a fee and a share of the franchise's profits.
• Franchising is a popular business model for both franchisors and franchisees. Franchisors benefit from the ability to expand their business without having to invest in new locations or hire new employees. Franchisees benefit from the support and resources of the franchisor, as well as the proven business model.
• There are many different types of franchises, including restaurants, retail stores, and service businesses. Some of the most popular franchises include McDonald's, Subway, and Dunkin' Donuts.
• Franchising can be a successful business model, but it is important for both franchisors and franchisees to do their research before entering into a franchise agreement. There are a number of factors to consider, such as the size of the market, the competition, and the financial resources of the franchisee.

Sales and Goods Act was created from the sections of the Indian Contract Act 1872.

The Indian Contract Act codifies the way we enter into a contract, execute it and the way we implement its provisions. The act is divided into total 266 sections. Important sections among those are

• Section 1 to 75 – General Provisions
• Section 76 to 123 – Sales of Goods
• Section 124 to 147 – Indemnity and Guarantee
• Section 148 to 181 – Bailment and Pledges
• Section 182 to 238 – Agency
• Section 239 to 266 – Partnership

A is false that the demand for the product of a firm under an Oligopoly is at prices higher than the prevailing market prices. Demand can be above or below the prevailing price. The kink demand curve is formed at the prevailing price level.

The Demand curve above the prevailing price is highly elastic and below the prevailing price is less elastic. So, R is true that The Oligopolistic firm faces a kinked demand curve.

The correct answer is (3) Data processing system

Key Points

Data processing system is one of the following MIS systems which is designed to capture, collect or enter the data to process in a certain specified manner for further processing.

Additional Information

Business function processing system: Business processes are a collection of actions involving one or more business functions that assist in achieving the objectives of the organization.

Transaction processing system: The data transactions of an enterprise are gathered, stored, modified, and accessed using this kind of information system.

Data processing system: It is a kind of information system that gathers raw data, transforms it into a more useful format, and then stores it for later processing.

Integrated information processing system: It consists of various information sets that are logically connected.

Inflation accounting is a term describing a range of accounting models designed to correct problems arising from historical cost accounting in the presence of high inflation and hyperinflation. Inflation accounting is used in countries experiencing high inflation or hyperinflation. Inflation accounting is not fair value accounting. Inflation accounting, also called price level accounting, is similar to converting financial statements into another currency using an exchange rate. Under some (not all) inflation accounting models, historical costs are converted to price-level adjusted costs using general or specific price indexes.

The correct combination is a - (i), b - (ii), c - (iii), d - (iv).

The foreign trade of India is guided by the Export-Import policy of the Government of India. Exim Policy is prepared and announced by the central government. Exim Policy of India aims to develop export potential, improving export performance, encouraging foreign trade and creating a favorable balance of payment position.

Every society constructs its own social environment. Some of the customs, beliefs, practices and behaviours are similar across cultures, and some are not.

The political-legal environment is a combination of a lot of factors such as the current political party in power, the degree of politicization of trade and industry, the efficiency of the current government, government policies, current legal framework, the public attitude towards the economy, etc.

The correct answer is To be assessed in the hands of the minor child.

Key Points

Section 80U

• A resident who has been certified by a medical authority as a person with a disability can receive the tax benefit under Section 80U.
• A person with a disability is defined in this section as someone who has a disability of at least 40%, as determined by medical authorities.

For the purpose of this section, disability has been defined as one of the following:

• Blindness
• Low vision
• Leprosy-cured
• Hearing impairment
• Locomotor disability
• Mental retardation
• Mental illness

Amount of Deduction: A deduction of Rs. 75,000 is allowed for people with disabilities, and Rs. 1,25,000 deduction for people with severe disabilities.

Important Points

• For the minor child suffering from disability of any nature mentioned in Section 80 U, the income cannot be clubbed with any other person. Income has to be assessed in the hands of the minor child. 

Trading Agreements - An extensive tax, tariff, and trade treaty known as a trade agreement (known as a trade pact) frequently includes investment guarantees. It exists when two or more nations come to an agreement on conditions that facilitate trade between them.

Regional economic integration - 

• An agreement among nations in an area to lower and eventually eliminate tariff and non-tariff barriers to the free movement of goods, services, and production inputs amongst one another is known as regional economic integration.
• Economic integration can also be used to describe any form of agreement between nations to coordinate their trade, fiscal, and/or monetary policies. Clearly, there exists a wide range of integration levels.

• Regional economic integration has made it possible for nations to concentrate on issues pertinent to their stage of development and promote trade between neighbours.

Important Points

Regional economic integration can be divided into four primary categories are as follows - 

1. Free Trade Zones - The most fundamental type of economic collaboration is this. All trade restrictions between member states are eliminated, but each country is free to choose its own commercial relations with non-member countries. The North American Free Trade Agreement is one illustration (NAFTA). A trade bloc is basically a free-trade zone, or near-free-trade zone, formed by one or more tax, tariff, and trade agreements between two or more countries.

2. Customs Union - This kind offers economic cooperation similar to that found in a free-trade zone. Trade restrictions between members are eliminated. The members agree to treat trade with non-member nations similarly, which is the main distinction from a free trade area.

3. Common Market - This kind enables the development of economically interconnected markets among member nations. Any restrictions on the movement of labour and capital between member countries are also lifted.

4. EU - This kind is produced when nations enter into a trade agreement to abolish trade restrictions and implement shared economic objectives. The European Union is one illustration (EU).

Thus, Regional economic integration is defined as the creation of trading agreements between Blocs of countries.

As per the passage, any new law when implemented, is bound to have issues at first with the enforcing authority facing obstacles in implementation and have to make sure that the law provides the intended outcome or results, which takes time.

The statement talks about how GST is an umbrella comprised of several laws and it has to overcome obstacles to ensure the best results which is an ‘abiding challenge’ i.e. a challenge which will prevail for a long period of time.

Computation of Income under the head "Salaries"

Therefore, his income from salary for the A.Y. 2015-16 will be Rs. 3,73,860.

A manager's ethical behaviour is required to lead the organization towards success and for the benefit of stakeholders such as employees, investors, creditors, etc., not dividing trade secrets to competitors is one of the ethical behaviours of managers. Keeping trade secrets securely and maintaining secrecy about business practices is an essential element to the success of an organization

The Competition Act, 2002 was enacted by the Parliament of India and replaced The Monopolies and Restrictive Trade Practices Act, 1969. Two of the main features of the Competition Act, 2002 is the framework it provides for the establishment of the Competition Commission, and the tools it provides to prevent anti-competitive practices and to promote positive competition in the Indian market.

Objectives of the Competition Act, 2002: An Act, keeping in view of the economic development of the country, was laid down to provide for an establishment of a commission with the following object:

1. to provide the framework for the establishment of the Competition Commission.
2. to prevent monopolies and to promote competition in the market
3. to protect the freedom of trade for the participating individuals and entities in the market.
4. to prevent practices having an adverse effect on competition,
5. to promote and sustain competition in markets.
6. to protect the interests of consumers.
7. to regulate the operation and activities of combinations (acquisitions, mergers, and amalgamation) for matters connected therewith or incidental thereto.

The nature of Realization account is a Nominal Account. The purpose of preparing a Realization account is to close the dissolved firm's books of accounts and determine profit or loss on the Realization of assets and payment of liabilities. It is put together by:

• Transferring all assets, except cash and bank accounts, to the account's debit side.
• Transferring all liabilities to the credit side of the account except the Partner's Loan Account and the Partners' Capital Accounts.
• Crediting the asset sale receipt to the account.
• Debiting the account for the payment of liabilities.
• Deducting the firm's dissolution expenses.
• The account balance can be either profit or loss. This balance is transferred to the Partners' Capital Accounts in their profit-sharing ratio.
• The partner's capital account on the assets side of a balance sheet is transferred to the Debit of Partner’s Capital Account.