Kerala SET Paper 2 Mock Test - 5 (Commerce) - KTET MCQ

A company can be compared to a river, which maintains its identity. Although the parts from which it is made are constantly changing. The suitable characteristic here is Continuous succession.

• A company is capable to survive beyond the lives of its members.
• As a company is created by law therefore it can be dissolved only by law alone and it remains unaffected by the change, lunacy, retirement, death, or insolvency of its members
• The members of the company may come and go but a company goes on forever and remains the same entity
• The existence of the company continues even if its all members are dead.
• There can not be a succession forever without the incorporation.

1. Limited liability: An Limited Liability Company (LLC) is a type of business in which the owners are called members. The business entity is separate from the members so only the entity may be held liable if the company is sued or fails to pay its debts. An LLC contains elements of a sole proprietorship, a partnership, and a corporation.
2. An artificial person is an entity created by law and given similar legal rights and duties to that of a human being. It can be real or imaginary and for the purpose of legal reasoning is treated more or less as a human being. 

The basic assumption of cardinal utility analysis is :

•  Rationality of consumer
•  Utility cardinally measurable
• The hypothesis of independent utilities

ratio
Contribution Sales Variable cost


BEP

Rs. 5000

Key-Points

Tax Deduction on Home Loans:

1. Tax Deduction on Home Loan Interest:

• Homeowners can claim a deduction of Rs. 2,00,000 on their interest on loan taken to construct a residential house, if the owner or his family resides in the house property.
• The same treatment applies when the home is vacant.
• If the property is let out, the interest on the loan taken to construct a residential house will be deducted in full.
• However deduction on the interest on a loan is limited to Rs. 30,000 instead of Rs. 2 lakhs if both the following conditions are satisfied:
  • The loan is taken on or after 1 April 1999
  • The purchase or construction is not completed within 5 years from the end of the financial year in which the loan was availed.

Therefore, statement (A) is correct and (R) is incorrect.

Additional Information

2. Tax Deduction on Principal Repayment:

• The deduction to claim principal repayment is available up to Rs. 1,50,000 within the overall limit of Section 80C.
• Conditions to claim this deduction:
  • The home loan must be for the purchase or construction of a new house property.
  • The property must not be sold in five years from the time of possession. Doing so will add back the deduction to the income again in the year in which it will be sold.
• Stamp duty and registration charges and other expenses related directly to the transfer are also allowed as a deduction under Section 80C, subject to a maximum deduction amount of Rs. 1.5 lakh. Claim these expenses in the same year when the payment is made.

3. Tax Deduction for First-Time Homeowners - Section 80EE:  

• Section 80EE recently added to the Income Tax Act provides the homeowners, with only one house property on the date of sanction of loan, a tax benefit of up to Rs.50,000

4. Tax Deduction for First-Time Homeowners - Section 80EEA:

• A new section 80EEA is added to extend the tax benefits of interest deduction for housing loans taken for affordable housing during the period 1^st April 2019 to 31^st March 2020. The individual taxpayer should not be entitled to deduction under section 80EEA. These benefits are not available for an under-construction property.

The correct answer is Option 3

Key Points 

Important PointsAbsolute Cost Advantage Theory:  

• According to Adam Smith, the father of economics, the basis of international trade is absolute cost advantage. 
• According to his hypothesis, trade between two nations would benefit both sides if one country could manufacture one product at an absolute advantage over the other, and the other countries could create another commodity at an absolute advantage over the first.
• The principle of absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce a greater quantity of a good, product, or service than competitors, using the same amount of resources.

Comparative Cost Advantage Theory:

• The law of comparative advantage is widely credited to David Ricardo, an English political economist who published "On the Principles of Political Economy and Taxation" in 1817.
• The principle of comparative costs is based on the differences in production costs of similar commodities in different countries.
•  Production costs differ in countries because of geographical division of labour and specialisation in production
• According to this theory, Comparative differences in cost occur when one country has an absolute advantage in the production of both commodities, but a comparative advantage in the production of one commodity than in the other. 

Factor Endowment Theory:

• The H-O theory is also known as the factor-proportions theory or factor-endowment theory. Bertil Ohlin (1899–1979), a Swedish economist, created the idea based on the work of his master, Swedish economist Eli Filip Heckscher (1879–1952).
• The theory states that a nation will export the product that uses its most abundant factor intensively. 
• The H-O model explains comparative advantage in terms of the factor abundance of nations and the factor intensity of commodities.
• According to the H-O theory, a commodity will be produced more cheaply by a country that has a lot of the input that the commodity utilises the most. If a commodity requires a significant quantity of capital, capital-rich countries will have a comparative advantage in that commodity. A country will export the product that makes extensive use of its most abundant resource. This means that the country will import the product that makes extensive use of the country's scarce resource.

Leontief Paradox : 

• Leontief measured the labour and capital content of a representative basket of exports and import-competing goods. Leontief's result, known as the Leontief Paradox, was that the United States imports capital-intensive goods and exports labor-intensive goods, in direct opposition to the predictions of the H-O model
• In economics, the Leontief paradox states that a country with more capital per worker has a lower capital/labour ratio in exports than in imports.

Key-Points

Tax planning:

• Tax planning is a legal activity that not only covers the various aspects of tax filling but also aims at the need of reducing one's tax liability.
• It is a process of analyzing one's financial situation in the most efficient manner.
• It includes planning one's income following the intent of the law, with the help of various exemptions and deductions.
• Tax planning is an art in which there is logical planning of one's financial affairs in such a manner that it benefits the assessee with all eligible provisions of the taxation law.
• It is an honest approach to applying the provisions that come within the framework of taxation law.
• The best ways of saving tax are saving in PPF account, National Savings Certificate, Fixed Deposit, Mutual Funds, and Provident Funds. 

Tax avoidance:

• Tax avoidance is an act of applying legal methods to reduce tax liability.
• It is an act of using a tax regime in a particular territory for an individual's personal benefits to decrease his tax liability.
• Even if tax avoidance is a legal method, it is not advisable as it could be used to one's own advantage to reduce tax liability.
• Tax avoidance looks to the loophole in the law to serve the purpose by finding new ways to avoid the payment that are within the limits of the law.
• It can be done by adjusting accounts in such a manner that there will be no violation of tax rules.
• Tax avoidance is a lawful activity but still, it could come in the category of crime.

Therefore, both statements (A) and (R) are correct.

Additional Information

Tax evasion:

• Tax evasion is an illegal method used to minimize tax liability through fraudulent activities like a deliberate understatement of taxable income or inflating expenses.
• It is done with the motive of showing fewer profits in order to avoid the tax burden.
• It is an unlawful attempt to reduce an assessee's tax burden and is considered a crime for which the assessee could be punished under the law.
• Tax evasion involves illegal practices such as making false statements, hiding relevant documents, not maintaining complete records of the transactions, overstatement of a tax credit, or presenting personal expenses as business expenses. 

Role-plays are not recommended for top-level positions. Interviews, presentations and group discussions are mandatorily required for top-level positions.

The IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other.

Hence, the correct option (A).

• Principles of Political Economy and Taxation is a book by David Ricardo on economics, published in 1817.
• The General Theory of Employment, Interest, and Money was written by the English economist John Maynard Keynes, published in 1936.
• Value and Capital is a book by the British economist John Richard Hicks, published in 1939.
• Revision of Demand Theory was first published in 1956 written by the late Harry Johnson.

• The Section 80D deduction in the Income Tax Act, of 1961 allows a deduction of up to Rs.25,000 per year for medical insurance premium installments.
• The policy can be for you, your spouse, or your children.
• If you or your spouse are senior citizens (60 years or more), the deduction limit will go up to Rs.50,000.

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

This concept was originated by Paul Mazur. According to him, "Marketing is the delivery of standard of living." Prof. McNair made an important amendment in the definition. According to him, "Marketing if the creation and delivery of standard of living to the society." It is a consumer-oriented concept.

According to Pyle, “Marketing comprises both buying and selling activities.” This definition of marketing consists only of the purchase and sale. It ignores the functions of physical distribution and other auxiliary functions of marketing.

According to Philip Kotler "Marketing is a human activity directed at satisfying needs and wants through an exchange process" (Philip Kotler, 2013). It is clear from this definition that customer is the centre of marketing which begins with the identification of customer needs and wants and ends with his satisfaction.

According to Peter F. Drucker, "Marketing is a process which converts a resource distinct knowledge into a contribution of economic value in the market place. This definition recognizes marketing as a process in which the goods and services having economic value are manufactured and distributed". This presents the social approach to marketing.

The correct answer is An offer given to any number of people until is retracted

An offer is defined under Section 2(a) of The Indian Contract Act as:

• "When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal."

Important Points

• When a general offer is of continuing nature, it can be accepted by a number of people till it is retracted.
• However, when a similar offer requires information regarding a missing thing, it is closed as soon as the first information comes in.

Therefore, the correct answer is Option 2.

The correct answer is K Kasturirangan.

Key Points

• Krishnaswamy Kasturirangan is an Indian space scientist who served as the Director-General of the Indian Space Research Organisation (ISRO) between 1994 and 2003.
• He is currently the Chancellor of the Central University of Rajasthan and the National Institute of Technology.
• He is the chairman of the Karnataka Knowledge Commission and the former chancellor of Jawaharlal Nehru University.
• He was a member of the Rajya Sabha from 2003 to 2009, as well as the now-defunct Planning Commission of India.
• From April 2004 to 2009, he was the director of the National Institute of Advanced Studies in Bangalore. He has received the Padma Shri (1982), Padma Bhushan (1992), and Padma Vibhushan (1993) civilian honours from the Indian government (2000).

Important Points

• Dr. Manmohan Singh served as Governor of the Reserve Bank of India from 1982 to 1985, as Deputy Chairman of the Planning Commission from 1985 to 1987, and as India's Finance Minister from 1991 to 1996.
• From November 22, 1997, to September 6, 2003, Bimal Jalan was the Governor of the Reserve Bank of India.
• Duvvuri Subbarao was the Reserve Bank of India's 22nd Governor. 

Additional Information

• Reserve Bank of India:
  • First Governor: Sir Osborne Smith
  • First Indian Governor: Sir C D Deshmukh

In PLC, the introduction stage is a period of slow sales growth as the product is introduced in the market, profits are nonexistent because of the heavy expenses of product introduction. In this stage, promotional expenditure are at their highest ratio to sales because of the need to:

(1) inform potential consumers

(2) induce product trial and

(3) secure distribution in retail outlets

Capital structure designing has nothing to do with transferability. Capital Structure refers to the amount of debt and/or equity employed by a firm to fund its operations and finance its assets. There are very strong and positive relationships (over 0.5) between ROE and debt-to-equity.

Money can be transferred using mobile phones through the service called IMPS.

Immediate Payment Service is an instant payment inter-bank electronic funds transfer system in India. IMPS offers an inter-bank electronic fund transfer service through mobile phones. The service is available 24×7 throughout the year including bank holidays.

The scheduled commercial banks are those banks that are included in the second schedule of the RBI Act 1934.

• It carries out the normal business of banking such as accepting deposits, giving out loans and other banking services.
• The major difference between Scheduled Commercial Banks and Scheduled Cooperative Banks is their holding pattern since cooperatives are registered under the Cooperative Societies Act as cooperative credit institutions.
• Scheduled Commercial Banks can be further divided into four groups:
  • Public Sector Banks: This includes:
    • SBI & Associates
    • Nationalized Banks
    • Other Public Sector Banks
  • Private Banks
  • Foreign Banks
  • Regional Rural Banks

Thus, it is clear that In India a scheduled commercial bank is one that is included in the II schedule of the Reserve bank of India Act.

The correct answer is Unsystematic risk.

Key Points The risk arising from the unique uncertainties of individual securities is known as unsystematic risk or specific risk.

Unsystematic risk is the risk that is unique to a particular security or asset. It is the risk that cannot be diversified away by holding a well-diversified portfolio.

Additional Information Some examples of unsystematic risk include:

• Company-specific risk: This is the risk that is related to the specific company, such as the risk of a product recall or a lawsuit.
• Industry-specific risk: This is the risk that is related to the industry that the company operates in, such as the risk of a decline in demand for the product or service that the industry provides.
• Country-specific risk: This is the risk that is related to the country in which the company is located, such as the risk of political instability or economic sanctions.

Unsystematic risk can be reduced by diversification. Diversification means holding a portfolio of assets that are not perfectly correlated with each other. This means that the risk of one asset will not perfectly offset the risk of another asset

The correct answer is Both Assertion and Reasoning are true, and Reasoning is the correct explanation of Assertion.

Key PointsIn the passage, "The study of consumer behavior is an intricate exploration into the psyche of individuals navigating the marketplace. It demands a deep understanding of psychological, sociological, and economic factors..."

The passage directly supports both the Assertion and the Reasoning.

It asserts that the study of consumer behavior demands a multidisciplinary approach, and the reasoning correctly explains that it involves understanding psychological, sociological, and economic factors.

Additional InformationThe other options (b. Both Assertion and Reasoning are true, but Reasoning is not the correct explanation of Assertion, c. Assertion is true, but Reasoning is false, d. Both Assertion and Reasoning are false) are ruled out based on the accurate alignment of the Assertion and Reasoning with the passage.

The correct answer is Both Assertion and Reasoning are true, and Reasoning is the correct explanation of Assertion.

Key Points

• In the passage, "Psychographic segmentation is crucial for tailoring marketing strategies. It helps marketers connect with specific consumer segments based on their preferences and values."
• The passage directly supports both the Assertion and the Reasoning.
• Psychographic segmentation is deemed crucial for tailoring marketing strategies, and the reasoning correctly explains that it facilitates connecting with specific consumer segments based on preferences and values.

Additional InformationThe other options (2. Both Assertion and Reasoning are true, but Reasoning is not the correct explanation of Assertion, 3. Assertion is true, but Reasoning is false, 4 Both Assertion and Reasoning are false) are ruled out based on the accurate alignment of the Assertion and Reasoning with the passage.

The correct answer is Psychological elements.

Key Points

• In the passage, "On an internal level, psychological factors such as perception, motivation, and attitudes play a pivotal role in shaping an individual's response to marketing stimuli."
• The passage explicitly states that psychological factors are internal elements shaping consumer behavior, supporting option 3.
• The other options (1. Cultural influences, 2. Economic considerations, 4. Environmental factors) do not accurately reflect the internal factors mentioned in the passage.

Additional InformationThe mention of perception, motivation, and attitudes as psychological factors provides a more detailed understanding of the internal elements influencing consumer behavior.

The correct answer is Personality traits and values

Key Points

• In the passage,"Psychographic segmentation, for instance, seeks to categorize consumers based on their values, lifestyles, and personality traits."
• Psychographic segmentation is explicitly mentioned as focusing on values, lifestyles, and personality traits.
• Therefore, option c, "Personality traits and values," is the correct answer.

Additional Information The other options (1. Geographic factors, 2. Economic variables, 4. Technological preferences) are not aligned with the specific aspects mentioned in the passage regarding psychographic segmentation.

The correct answer is 139; 140.

Key Points

• An auditor is a person with the right to access financial operations, which includes looking through books of accounts, paperwork, and vouchers, confirming the accuracy of financial records, going over them, and determining whether or not they adhere to generally accepted accounting principles (GAAP).
• They significantly contribute to preventing business firm frauds and also improve the organization's operational effectiveness.

Important Points

Section 139 of Companies Act,2013: Appointment of Auditor

• Every company must name a person or company as an auditor of the company at the first AGM, according to Section 139 of the Companies Act of 2013.
• From the end of the AGM in which he was appointed until the end of the sixth AGM, the person so appointed shall hold the office.
• Although the auditor will occupy the position for a period of five years, the topic relating to such an appointment will be brought up at each AGM for member ratification.

Section 140 of Companies Act, 2013: Removal, resignation of auditor and giving of special notice

• The auditor appointed under Section 139 may be removed from his position prior to the end of his term, in accordance with Subsection (1) of Section 140 of the CA 2013.
• Since the relationship with the auditors has developed over a period of five or ten years, depending on the situation, certain requirements must be followed to get rid of the auditors before their term expires.

The following steps should be taken in accordance with section 140(1) read in conjunction with Rule 7 of the Companies (Audit and Auditors) Rules, 2014, in order to remove the company's auditor from office prior to the end of his term:

1. Pass a Board Resolution (BR) at Board Meeting (BM) of company
2. Obtaining the prior approval of the Central Government (CG).
3. A Special Resolution (SR) must be passed by the company for removal of auditors before expiry of term of office.
4. Before taking any action for removal of auditor before the expiry of his term, the auditor concerned shall be given a reasonable opportunity of being heard.

Hence, it can be concluded that an auditor appointed under section 139 of the Companies Act, 2013 may be removed from office before the expiry of his term by a special resolution of the company in accordance with the provisions of section 140 of the Companies Act, 2013.

Distribution channel:

• The prime purpose of the distribution channel is to get the product to the right place at the right time.
• It involves the movement of goods from the manufacturer or producer to the end consumer.
• The distribution channel serves as a bridge between the producer and the consumer, ensuring that the product reaches the target market efficiently and effectively.

Important Points

The distribution channel serves several important functions, including:

• Facilitating the movement of goods: It involves the physical transportation and logistics of products from production to consumption points.
• Providing market coverage: The distribution channel helps in reaching a wide customer base and expanding market reach.
• Managing inventory: It involves storing and managing stock levels to ensure the availability of products when and where they are needed.
• Offering customer service: The distribution channel provides customer support, after-sales service, and assistance in product usage and maintenance.
• Creating efficiency and cost-effectiveness: By consolidating and coordinating the flow of goods, the distribution channel helps in achieving economies of scale and reducing costs.

In summary, the primary purpose of the distribution channel is to ensure that products or services are delivered to the right place at the right time, meeting customer needs and maximizing value for all parties involved in the exchange process.

Standard deviation refers to how much the values are spread out from a given set of values. It is a measure of how far each observed values are from the mean.

The four commonly used confidence intervals for a normal distribution are:

68.27% of values fall within 1 standard deviation of the mean (-1s <= X <= 1s)

90% of values fall within 1.65 standard deviations of the mean (-1.65s <= X <= 1.65s)

95% of values fall within 1.96 standard deviations of the mean (-1.96s <= X <= 1.96s)

99.73% of values fall within 2.58 standard deviations of the mean (-2.58s <= X <= 2.58s)

The correct answer is b, c, a, d.

Key Points

As per the passage:

The passage doesn't explicitly relay this sequence. However, logical deduction considering the evolution of AI first leads to job displacement, which in turn necessitates adept professionals (AI specialists), followed by the realization for ethical regulations (AI Ethicists), and finally, a stage of human roles being complemented by AI in non-repetitive tasks.

The correctly matched pairs are given below-

Task - Preparing forms

Element - Signing paycheques

Duty - Payroll processing

Position - Compensation policy administrator

Job - Compensation design manager

Occupation - Compensation specialist