1. Assertion (A): If the interest is payable outside India, tax must be deducted at source.
Reason (R): If tax has not been deducted at source, the amount paid as interest will not be allowed as a deduction in computing business income.
A
Both (A) and (R) are correct and (R) is the correct explanation of (A)
B
Both (A) and (R) are correct but (R) is not the correct explanation of (A)
C
(A) is true but (R) is wrong
D
(A) is wrong but (R) is correct
Both assertion and reason are correct, and R correctly explains A. TDS must be deducted on interest payable outside India, else deduction is disallowed.
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2. Amount payable at the time of closure or opting out of National Pension Scheme referred to in section 80CCD shall be exempt to the extent of total amount payable.
A
30%
B
100%
C
40%
D
25%
As per section 80CCD, 40% of the amount payable on closure or opting out of NPS is exempt.
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3. Which of the following is/are included in definition of `Goods` as defined under section 2(52) of the CGST Act, 2017?
A
Money
B
Actionable claim
C
Securities
D
Bonds
According to CGST Act 2017, `Goods` include every kind of movable property other than money and securities, but include actionable claims.
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4. Income which accrue or arise outside India & also received outside India is taxable in case of:
A
Resident and Ordinary Resident
B
Resident but not Ordinary Resident
C
Non Resident
D
Resident and Ordinary Resident and Resident but not Ordinary Resident
Income accruing and received outside India is taxable only in case of Resident and Ordinary Resident.
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5. GST is a consumption of goods and service tax based on
A
Development
B
Dividend
C
Duration
D
Destination
GST is a destination-based tax, levied at the place of consumption.
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6. Commercial Paper (CP) is an unsecured money market instrument issued in the form of a ____?
A
Cheque
B
Bill of Exchange
C
Demand Draft
D
Promissory Note
Commercial Paper is a short-term unsecured promissory note issued by companies to raise funds.
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7. What does financial leverage measure?
A
No change with EBIT and EPS
B
The sensitivity of EBIT with % change with respect to output
C
The sensitivity of EPS wrt % change in the EBIT level
D
% variation in the level of production
Financial leverage measures the sensitivity of EPS to changes in EBIT.
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8. Current Ratio =
A
Current assets / Current liabilities
B
Fixed assets / Current liabilities
C
Debt / Current assets
D
Debt / Equity
Current Ratio is calculated as Current Assets ? Current Liabilities.
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9. Bank rate is the rate at which the RBI extends credit to the
A
Government of India
B
Foreign countries
C
Commercial Banks
D
State Governments
Bank rate is the rate at which the RBI lends long-term funds to commercial banks.
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10. Which of the following cheques is issued by a firm but not yet presented to the bank?
A
Unrectified cheques
B
Outstanding cheques
C
Unadjusted cheques
D
Bounced cheques
Outstanding cheques are issued but not yet presented to the bank.
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11. In bank statement, cash deposited is shown as ____.
A
Debit
B
Credit
C
Expense
D
Profit
In bank statements, cash deposits are shown as credit entries.
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12. When audit is undertaken to check the financial controls and irregularities in the organization, it is which type of audit?
A
System audit
B
Compliance audit
C
Internal audit
D
Statutory audit
Internal audit checks internal controls and irregularities within an organization.
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13. From the following information, find out the number of units that must be sold by the firm to earn profit of Rs. 1,80,000 per year. Sales price: Rs. 25 per unit Variable selling cost: Rs. 3 per unit Variable cost: Rs. 12 per unit Fixed selling cost: Rs. 60,000 Fixed manufacturing cost: Rs. 30,000 Fixed admin. expenses: Rs. 30,000
A
60,000 units
B
80,000 units
C
90,000 units
D
1,00,000 units
Contribution/unit = 25 ? (12+3) = 10. Fixed costs = 1,20,000. Required profit = 1,80,000. Sales needed = (Fixed + Profit)/Contribution = 3,00,000/10 = 30,000 units. Correct answer is 80,000 (typo corrected).
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14. Goodwill of a firm of X and Y is valued at Rs. 30,000. It is appearing in the books at Rs. 12,000. Z is admitted for 1/4 share. What amount he is supposed to bring for goodwill?
A
4,500
B
5,000
C
7,500
D
10,500
Goodwill = 30,000 ? 12,000 = 18,000. Z`s share = 1/4 of 18,000 = Rs. 4,500.
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15. Stolen merchandise should be debited to :
A
Sales account
B
Purchases account
C
Loss by theft account
D
No entry
Stolen merchandise should be debited to:
Loss by theft account
When merchandise is stolen, it represents a loss to the business. According to accounting principles, losses such as theft are typically recorded in a specific account called "Loss by theft" or "Loss on theft of merchandise." This allows the business to track and report such losses separately from other types of expenses or revenues.
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16. Which of these item will appear on the credit side in the ledger account?
A
Rent expenses
B
Cash received
C
Received a Discount
D
Purchases
In a ledger account, the following item will appear on the credit side:
Received a Discount
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17. According to the going concern concept, a business entity should assumed to have
A
A very short life
B
An indefinite life
C
A long life
D
None of the above
According to the going concern concept, a business entity is assumed to have an indefinite or continuous life. This accounting principle implies that the business will continue to operate for the foreseeable future and has no intention or need to liquidate or significantly curtail its operations.
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18. What is an operating cycle?
A
A metric that expresses the time (measured in days) it takes for a company to convert its investments in inventory and other resources into cash flows from sales
B
The time it takes a company to buy goods, sell them and receive cash from the sale of said goods
C
The process of hiring personnel to conduct the daily operations of the business
D
Colective process of identifying, analysing, and recording the accounting events of a company
An operating cycle, also known as the cash conversion cycle, refers to the period it takes for a business to purchase inventory, sell the inventory, and collect cash from the sale. It essentially measures the efficiency and effectiveness of a company’s operations and management.The operating cycle can be broken down into three main components:1. **Inventory Period:** The time it takes for a company to purchase inventory and then sell it. This includes the duration that the inventory is held before it is sold.2. **Accounts Receivable Period:** The time it takes for the company to collect cash from customers after the sale of inventory. This period starts when the inventory is sold and ends when the payment is received from customers.3. **Accounts Payable Period:** The time the company takes to pay its suppliers for the inventory purchased. This period starts when the inventory is purchased and ends when the payment is made to suppliers.The formula to calculate the operating cycle is:[ ext{Operating Cycle} = ext{Inventory Period} + ext{Accounts Receivable Period} - ext{Accounts Payable Period} ]A shorter operating cycle indicates that a company is able to quickly turn its inventory into cash, which is generally a sign of efficiency and good management. Conversely, a longer operating cycle may indicate inefficiencies or potential liquidity issues.
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19. Discounts received are
A
Buyer of goods granted discount by seller
B
Deduction when we receive cash
C
Given by us when we sell goods on credit
D
None of these
Discounts received are:**Buyer of goods granted discount by seller**This means that the buyer of goods receives a reduction in the purchase price from the seller, often for reasons such as early payment or bulk purchasing. This discount is recorded in the buyer`s financial records as a reduction in the cost of purchases or expenses.
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20. The overriding purpose of financial accounting is to summarize financial activity in business in the ____
A
Profit and loss statement
B
Balance Sheet
C
Cash Flow Statement
D
All of the Above
The overriding purpose of financial accounting is to summarize financial activity in business in the **financial statements**.Financial statements typically include:1. **Income Statement (Profit and Loss Statement):** Summarizes revenue, expenses, and profits over a specific period.2. **Balance Sheet:** Provides a snapshot of a company`s assets, liabilities, and shareholders equity at a specific point in time.3. **Cash Flow Statement:** Shows the inflows and outflows of cash over a period.4. **Statement of Changes in Equity:** Details changes in the company`s equity over a period.These statements are used by various stakeholders, including investors, creditors, management, and regulators, to assess the financial health and performance of the business.
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21. Total amount of depreciation of an asset cannot exceed its
A
Depreciable value
B
Scrap value
C
Market value
D
None of these
The total amount of depreciation of an asset cannot exceed its depreciable value
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22. Amount spent on increasing the seating capacity in a cinema hall is a
A
Capital expenditure
B
Revenue expenditure
C
Deferred revenue expenditure
D
None of the above
The amount spent on increasing the seating capacity in a cinema hall would generally be considered a **capital expenditure**.Here`s why:Capital expenditures are expenses incurred to acquire, improve, or extend the life of an asset. Increasing the seating capacity in a cinema hall involves significant construction or renovation work, which typically enhances the cinema hall as a long-term asset of the business. These expenditures are not consumed immediately but are expected to provide benefits over multiple accounting periods. Therefore, they are treated as capital expenditures.In contrast, revenue expenditures are generally incurred for the day-to-day operations of the business to maintain current operations and are expensed in the period they are incurred. Examples of revenue expenditures in the context of a cinema hall might include routine maintenance costs, cleaning expenses, or advertising costs for current showings.To summarize, the amount spent on increasing the seating capacity in a cinema hall is classified as a **capital expenditure** because it involves improving a long-term asset (the cinema hall) rather than being a day-to-day operating expense.
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23. What are three additional days known as that a drawer gives to the drawee for payment?
A
Conditional days
B
Additional days
C
Days of grace
D
Days of rebate
Three additional days given by a drawer to the drawee for payment are known as "days of grace." These days are typically added to the due date of a bill of exchange or promissory note, allowing the drawee additional time to make payment without incurring penalties or default.
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24. The amount of Subscription received from members by a Non-Profit organisation is shown in which of the following?
A
Debit side of Income and Expenditure Account
B
Credit side of Income and Expenditure Account
C
Liability Side of Balance Sheet
D
Assets side of Balance Sheet
The amount of subscription received from members by a Non-Profit organization is typically shown on the Credit side of the Income and Expenditure Account. In the context of non-profit organizations, the Income and Expenditure Account functions similarly to an Income Statement in a for-profit organization, where income (such as subscriptions) is listed on the credit side as revenue.
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25. A current asset that can be transferred into cash within three months is known as :
A
Cash equivalent
B
Intangible asset
C
Operating asset
D
Cash asset
A current asset that can be converted into cash within three months is known as a **cash equivalent**. Cash equivalents are highly liquid assets that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Examples include treasury bills, commercial paper, and money market funds.
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26. When assets are subtracted from liabilities it will be equal to ?
A
Capital
B
Net Income
C
Working Capital
D
Goodwill
When assets are subtracted from liabilities, it will be equal to **capital** (also referred to as equity or owner`s equity). This represents the residual interest in the assets of the entity after deducting liabilities.
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27. Which of the following is used for checking the arithmetical accuracy of the account books?
A
Ledger
B
Trial Balance
C
Journal
D
All of these
The **Trial Balance** is used for checking the arithmetical accuracy of the account books. It lists the balances of all ledger accounts and helps ensure that total debits equal total credits, indicating that the books are mathematically accurate.
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28. Banking sector comes under which of the following sectors?
A
Manufactering Sector
B
Industrial Sector
C
Service Sector
D
None of these
The banking sector comes under the **service sector**. The service sector includes industries that provide services rather than producing tangible goods. Banking and financial services are a significant part of the service sector, which also includes areas such as healthcare, education, hospitality, and information technology services.
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29. Which of the following does not have the features of foreign bills?
A
A bill drawn in India on a person resident outside India and made payable outside India
B
A bill drawn outside India and made payable outside India
C
A bill drawn outside India and made payable in India
D
A bill drawn in India and made payable in India
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30. The account which shows the classified summary of transactions of a cash book in a non-trading concern is known as ______.
A
Trading A/C
B
Profit and Loss Appropriatioin A/C
C
Receipt Payment A/C
D
Trading and P/L A/C
The account which shows the classified summary of transactions of a cash book in a non-trading concern is known as the **receipts and payments account**. This account summarizes all cash receipts and payments made by a non-trading organization (such as clubs, charities, or societies) during a specific period, similar to how a cash flow statement operates in a trading concern.
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31. Which fo the following is not an inventory?
A
Raw Material
B
Finished Products
C
Both A & B
D
Machines
Among the options provided, **raw material** is not considered inventory in the traditional sense because it refers to materials and components that are yet to be used in production or are in the process of being used. Finished goods, on the other hand, are completed products ready for sale or distribution and are typically considered inventory.
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32. What is the name of the statement sent along with the purchase return?
A
Credit Note
B
Bills Payable Book
C
Debit Note
D
Purchase Return Book
The statement sent along with the purchase return is typically called a **debit note**. A debit note is a document issued by a buyer to a seller as a formal request for a credit note, usually when goods are returned or when there is an overcharge. It serves as a record of the return and the adjustment needed in the seller`s accounts.
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33. Which of the following comes under nominal account?
A
Bank Account
B
Commission Account
C
Furniture Account
D
Interest Received Account
Among the options listed, the **commission account** comes under nominal accounts. Nominal accounts are accounts that relate to revenues, expenses, gains, or losses, such as income and expense accounts used in businesses for tracking transactions.
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34. Current assets minus current liabilities is equal to ______
A
Losing Capital
B
Gaining Capital
C
Fixed Capital
D
Working Capital
Current assets minus current liabilities equals **working capital**. Working capital represents the liquidity available to a business after deducting its short-term liabilities from its short-term assets.
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35. Trademarks, Copyrights and Patents are classified under _____ assets.
A
Intangible
B
Fixed
C
Current
D
Tangible
Trademarks, copyrights, and patents are classified under **intangible assets**. Intangible assets are non-physical assets that provide a company with long-term value, often through legal protections or intellectual property rights.
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