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MBA - First Semester > 3. Accounting and Finance > Flashcards

3. Accounting and Finance Flashcards

1
Q

It means that cash is received by the business from the proprietor. It results in the immediate receipt of cash.

A

Antony commenced business with ` 10,000

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2
Q

________accounting is a form of accounting which enables a business to be conducted more efficiently.

A

Management

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3
Q

The conventions, concepts, rules and procedures that together make up accepted accounting practice at any given time are called _______

A

GAAP

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4
Q

Which of the following is the art of recording, classifying and summarising in a significant manner, and in terms of money transactions and events which are in part at least, of a financial character and interpreting the results thereof.

A

Accounting

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5
Q

Which of the following accounting system provides a system of checks and balances?

A

Double Entry

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6
Q

Which of the following concept tells that to recognize revenue it has to be realized?

A

Realisation concept

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7
Q

Which of the following implies that a business unit is separate and distinct from the person who owns or controls it?

A

Business Entity

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8
Q

________basis is a process of accounting that recognizes the impact of transactions on the financial statements in the time periods when revenues and expenses occur instead of when cash is received.

A

Accrual

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9
Q

Inflation accounting is also called _______

A

Replacement

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10
Q

________ is an increase in economic benefits during the accounting period in the form of inflows or enhancements of assets or a decrease in liabilities, thereby increases equity and net worth.

A

Income

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11
Q

Outstanding wages A/c is________A/c

A

Personal

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12
Q

Debt may be of types

A

3

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13
Q

Bad Debts A/c is_______A/c

A

Nominal

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14
Q

Which of the following is a residual interest in the assets after deducting liabilities?

A

Equity

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15
Q

Which of the following is a concept that implies each transaction and event must be expressible in monetary terms ?

A

Money measurement

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16
Q

Prepaid Insurance A/c is ________A/c

A

Personal

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17
Q

Creditor may be types

A

4

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18
Q

A process of accounting where revenue and expense recognition would occur when cash is received and disbursed is called_______

A

Cash

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19
Q

________ they are the present obligations arising from past events. It also arises when an asset is created or acquired.

A

Liabilities

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20
Q

Which of the following is the after-tax cash flow generated by a business minus the cost of the capital it has deployed to generate that cash flow?

A

EVA

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21
Q

The basic sequence in the accounting process can best be described as

A

Transaction, source document, journal entry, ledger account, trial balance

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22
Q

Which one of the following systems of recording transactions has a dual aspect concept of accounting?

A

Double entry system

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23
Q

Indicate all of the following statements that correctly describe the net income. Net income

A

Increases owners’ equity.

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24
Q

A manufacturer is considering the point at which a transaction can be recognized within its profit and loss account. At which of the following stages is this permitted?

A

Order placed for the goods

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25
Q

In the books of account, if a transaction is completely deleted, will it affect the trial balance?

A

No

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26
Q

Which of the following accounts with normal balance is shown at the debit side of a trial balance?

A

Cash account

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27
Q

Which items influence the trial balance agreement?

A

Partial omission of a transaction

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28
Q

What is used in preparing trial balance?

A

Ledger accounts

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29
Q

When debit balance is equal to credit balance, then the trial balance means

A

Mathematically, Capital + Liabilities = Assets

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30
Q

What is the trial balance used for?

A

It records balances of accounts

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31
Q

The accounting system, in which accounting entries are made on the basis of amount, having become due for payment or receipt, is known as?

A

Accrual system of accounting

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32
Q

The documents relating to purchase of asset must be authorized by

A

Senior management

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33
Q

Bookkeeping is mainly concerned with

A

Recording the economic activities

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34
Q

Trial balance is used to check the accuracy of

A

Ledger accounts balances

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35
Q

When is trial balance prepared?

A

At the end of an accounting period

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36
Q

Accounting to the rules of debit and credit for balance sheet accounts:

A

Decrease in liability and owners’ equity accounts are recorded by debits.

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37
Q

Accrual-basis of accounting

A

Leads to the reporting of more complete information than cash-basis

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38
Q

Revenue is generally recognized being earned at the point of time when

A

Billed to customers

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39
Q

Double entry bookkeeping means

A

Entry for two aspects of transaction

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40
Q

Depreciation is calculated under diminishing balance method, based on

A

Book value

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41
Q

Depreciation amount charged on a machinery will be debited to:

A

Depreciation account

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42
Q

Which of the following is the example of revenue reserve?

A

Investment fluctuation fund

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43
Q

The loss on sale of an asset is debited to:

A

Profit and loss account

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44
Q

The main objective of depreciation is

A

To calculate net profit

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45
Q

Which of the following is the example of capital reserve?

A

Premium received on issue of shares or debentures

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46
Q

Which of the following methods of depreciation is not recognized by Income Tax Law?

A

Straight line Method

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47
Q

According to straight line method of providing depreciation, the depreciation

A

Remains constant

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48
Q

Salvage value means

A

Estimated disposal value

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49
Q

According to Companies Act, 1956, secret reserves can be created by:

A

Banking and insurance companies

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50
Q

According to fixed instalment method, depreciation is calculated on

A

Original cost

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51
Q

Asset Disposal A/c is prepared when:

A

Provision for depreciation a/c is prepared

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52
Q

In accounting, becoming out of date or obsolete is known as

A

Obsolescence

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53
Q

Depreciation is generated due to

A

Wear and tear

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54
Q

Total amount of depreciation of an asset cannot exceed its

A

Depreciable value

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55
Q

At the end of the year, depreciation account is transferred to:

A

Profit and loss account

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56
Q

What is the purpose of making a provision for depreciation in the accounts?

A

To charge the cost of fixed assets against profits

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57
Q

General reserves are shown in:

A

Balance sheet

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58
Q

Dividend equalisation reserve is:

A

Specific reserve

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59
Q

Depreciation is charged on:

A

Fixed tangible assets

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60
Q

Repairs to building and machinery are categorised under which of the following heads?

A

Miscellaneous expenditures

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61
Q

Schedule III of the Companies Act, 2013 provides general instructions for the preparation of _______ .

A

balance sheet only

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62
Q

In a profit and loss account, all indirect revenue expenses are shown in the ______ side and the indirect revenue incomes are shown in the ______ side.

A

debit; credit

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63
Q

The _______ refers to a statement that summarises and presents the financial position of a company on any given date.

A

balance sheet

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64
Q

The format of financial statements prescribed in Schedule III of the Companies Act, 2013 was voluntarily applicable from _______ .

A

April 2015

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65
Q

_______ is the final process for any accounting year.

A

Preparation of financial statements

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66
Q

Schedule III of the Companies Act, 2013 provides instructions for the preparation of the _______ of Indian corporations.

A

Balance sheet and the profit and loss statement

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67
Q

Which among the following are the forms of the balance sheet?

A

Horizontal or vertical

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68
Q

Which of these is NOT included in current liabilities?

A

Capital work-in-progress

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69
Q

Profit and loss statement is also called_______ . Choose the correct option.

A

Statement of income

70
Q

In order to achieve _______ , organisations prepare financial statements by following a uniform pattern or standards as instructed by the local Accounting Standards Board (ASB) and the relevant Act.

A

comparability

71
Q

Preparation of the financial statement is the _______ step of the accounting cycle.

A

final

72
Q

In a balance sheet, the _______ balances are reflected by assets.

A

debit

73
Q

_______ is the balance in the statement of profit and loss disclosing allocations and appropriations, such as dividend paid, bonus shares and transfer to/from reserves.

A

Surplus

74
Q

Capital work-in-progress is a _______ .

A

fixed asset

75
Q

On the bank statement, cash deposited by the company is known as

A

Credit

76
Q

What is “Deposit in transit” in bank reconciliation?

A

Added to Bank Balance

77
Q

Bank reconciliation statement compares a bank statement with_____________ .

A

Cashbook

78
Q

An unadjusted balance in a cash book is because of the result of which error?

A

The omission of Bank charges

79
Q

In a cash book, the favourable balance indicates

A

Debit Balance

80
Q

What type of cheques is that which is issued by a firm but not yet presented to the bank?

A

Outstanding cheques

81
Q

‘NSF’ marked in cheque sent back by the bank indicates

A

Not sufficient funds

82
Q

Bank reconciliation description is composed of

A

Business Accountant

83
Q

Unpresented cheques also referred to as

A

Outstanding cheques

84
Q

In a cash book, bank charges of `5,000 was not recorded. Name the correct cash book adjustment

A

It will be credited in cash book

85
Q

The ideal level of liquid ratio is:

A

1:1

86
Q

Operating Ratio is used to examine the profitability from ___________ .

A

sale of core products

87
Q

Current ratio is also known as

A

Working capital ratio

88
Q

In which of the following measures is the operating liquidity available to an organisation?

A

Working capital turnover ratio

89
Q

Which ones are also referred to as management ratios?

A

Activity ratios

90
Q

When the concept of ratio is defined in respected to the items shown in the financial statements, it is termed as

A

Accounting ratio

91
Q

Accounting ratios are divided into four main categories. Which one of the following was not included in it?

A

Control ratios

92
Q

Which of the following is not a limitation of ratio analysis?

A

It cannot be used in forecasting.

93
Q

Which of the following is not true about ratio analysis?

A

It is not useful in inter-firm and intra firm comparison.

94
Q

Which one is the ratio of cost of goods sold by an organisation to its average inventory during a given accounting period?

A

Inventory Turnover Ratio

95
Q

Liquid ratio is also known as:

A

Quick ratio

96
Q

Which of the following ratios is used to compare an organisation’s total loans against its shareholders’ investments in an organisation?

A

Debt-Equity ratio

97
Q

Quick assets divided by current liabilities is:

A

Liquid ratio

98
Q

The ideal level of current ratio is:

A

2:1

99
Q

___________ measures an organisation’s ability to meet its long-term obligations.

A

Solvency Ratio

100
Q

Which of the following ratios measures short-term solvency?

A

Liquidity ratios

101
Q

Quick Ratio is also referred to as the___________ . Which one is correct?

A

Acid test ratio

102
Q

A higher value of Debtors Turnover Ratio can ___________ the average collection period of the organisation.

A

lower

103
Q

Profit is equal to:

A

Contribution – Fixed cost

104
Q

Marginal cost is equal to:

A

Variable cost

105
Q

Marginal cost is equal to :

A

Total cost – Fixed cost

106
Q

The CVP analysis, break-even analysis, and MOS are the tools used for:

A

Financial business analysis

107
Q

P/V ratio establishes the relationship between:

A

Contribution and sales value

108
Q

Contribution is equal to:

A

Selling price – Variable cost

109
Q

The CVP analysis is used for finding __________ of a project.

A

Profitability

110
Q

The break-even analysis is done by finding __________ of an organisation.

A

BEP

111
Q

If an organisation deals with several products, its break-even point can be calculated with the help of:

A

Composite BEP

112
Q

If the P/V ratio is 30% of sales, then what is the remaining 70% of sales?

A

Variable cost

113
Q

The relationship between profit and volume can be represented through __________ ratio.

A

P/V

114
Q

MOS is known as:

A

Difference between total sales and sales at bep

115
Q

The CVP analysis helps a finance manager in framing:

A

Budget

116
Q

Where the cost under two alternatives is equal, the break-even point is calculated with the help of:

A

Cost BEP

117
Q

Which one of the following is not an advantage of P/V ratio?

A

Providing information on variations in capital invested

118
Q

__________ is the change in the total cost of production when an additional unit of product is produced.

A

Marginal cost

119
Q

Activity Ratios are also known as:

A
  1. Performance ratios
  2. Turnover ratios
  3. Efficiency ratios
120
Q

Activity ratios include:

A
  1. Stock turnover ratio
  2. Trade receivables turnover ratio
  3. Trade payables turnover ratio
121
Q

Ratio Analysis:

A
  1. is an arithmetical relationship between two accounting variables
  2. provide quantitative relationship between two variables
  3. It is one of the mean of financial analysis
122
Q

Liquidity ratio includes:

A
  1. Current ratios
  2. Quick or liquid or acid test ratio
  3. Absolute liquid ratio
123
Q

Solvency ratios include:

A
  1. Debt-equity ratio
  2. Propriety ratio
  3. Total asset to debt ratio
124
Q

Which of the following liabilities are taken into account for quick ratios?

A
  1. Trade creditors
  2. Outstanding expenses
  3. Bank overdraft
125
Q

Which of the following document is prepared for documentary evidence by business?

A
  1. Receipt
  2. Invoice
  3. Vouchers
126
Q

Profit and loss account is prepared to ascertain _____ by business over an accounting period. Choose correct option.

A
  1. The net profit earned

2. The net loss suffered

127
Q

As per the reverse order of liquidity format of the balance sheet, which of the following comes under the heading of a fixed asset?

A
  1. Tangible
  2. Intangible
  3. Capital work-in-progress
128
Q

As per schedule III, of the companies act, 2013, which of the following represents fixed assets?

A
  1. Tangible and Intangible
  2. Intangible assets under development
  3. Capital work-in-progress
129
Q

As per general instructions for the preparation of profit and loss account, in respect of a finance company, revenue from operations shall include revenue from _______ .

A
  1. Interest

2. Other financial services

130
Q

If the turnover of the corporate body is below one hundred crore rupees, then which of the following rounding off methods shall apply?

A
  1. Rounded off to the nearest lakhs, millions or crores, more or decimals there of.
  2. Rounded off to the nearest hundreds, thousands, rupees lakhs or millions or decimals there of.
131
Q

Any written evidence in support of a business transaction is called ______

A

Voucher

132
Q

The account that records expenses, gains and losses is

A

Nominal account

133
Q

__________ refers to the analysis of the percentage increase or decrease in corresponding items in comparative financial statements.

A

Horizontal Analysis

134
Q

The Profit and Loss account is prepared to ascertain __________ by the business over an accounting period. Choose the correct option.

a. The net profit earned
b. The net loss suffered
c. The gross profit or gross loss
d. Both a and b

A

d. both a and b

135
Q

In order to achieve __________ , organisations prepare financial statements by following a uniform pattern or standards as instructed by the international or local accounting standards board.

(a) Transparency
(b) Affordability
(c) Comparability
(d) Both a and c

A

(d) Both a and c

136
Q

Which among the following measures the actual cash generated by the organisation within a particular period?

A

Cashflow statement

137
Q

Which among the following are the activities that are related to the purchase or sale of long-term investments and assets?

A

Investing activities

138
Q

Which of the following is/are types of financial statement analysis?

(a) Horizontal analysis
(b) Vertical analysis
(c) External analysis
(d) All of these

A

(d) All of these

139
Q

Which of the following factors highlights the reliability of information?

(a) Free from errors
(b) Complete
(c) Free from bias
(d) All of these

A

(d) All of these

140
Q

Among the following, which one refers to the total amount of money received by a business entity after selling its products or services?

A

Revenue

141
Q

Among the following, which is/are the importance of financial statement analysis?

(a) Helps in forecasting the financial health of the organisation
(b) Helps creditors know the creditworthiness of the organisation
(c) Improves the decision making of investors
(d) All of these

A

(a) All of these

142
Q

The profit and loss account or the income statement shows which types of expenses are incurred by the organisation during a particular period?

A

Revenues and expenses

143
Q

Profit and loss statement is also called __________ . Choose the correct option.

A

Statement of income

144
Q

The cash inflows and outflows of any organisation can further be classified into how many activities?

A

Three

145
Q

Preparation of the financial statement is the __________ step of the accounting cycle.

A

final

146
Q

Which among the following refers to the ability of financial statements to stand useful over time against financial information obtained from other sources?

A

Comparability

147
Q

__________ can be defined as the difference between net total sales and cost of goods sales.

(a) Gross profit
(b) Gross loss
(c) Return of sales
(d) Both a and b

A

(b) Gross loss

148
Q

Which one is the expense that a business entity has to bear in day-to-day business operations?

(a) Operating expenses
(b) Administrative expenses
(c) Both a and b
(d) Production expense

A

(a) Operating expenses

149
Q

__________ part of financial statements reflects the financial performance of the organisation.

(a) Balance sheet
(b) Cash book
(c) Cash flow statement
(d) Profit and Loss

A

(a) Profit and Loss

150
Q

Which among the following expenses is/are not indirect expense(s)?

(a) Selling expense
(b) Office expense
(c) Financial expense
(d) Purchase of product

A

(a) Purchase of product

151
Q

Which among the following is also known as the statement of sources of funds and application of funds?

A

Balance sheet

152
Q

Which among the following are the forms of the balance sheet?

A

Horizontal or vertical

153
Q

Internal rate of return is …

A

Rate at which discounted cash inflow is equal to the discounted cash outflow

154
Q

Leasing of machinery can be categorised as ________

A

Financing decision

155
Q

Listed companies can be valued at

A

Market value

156
Q

Promotion of welfare of human by corporate is called ________

A

Corporate philanthropy

157
Q

Book value of assets includes

A

Fixed assets, current asset, intangible asset

158
Q

How is the P/E ratio calculated?

(a) (Market value) / (Quick ratio)
(b) (Earnings per share) / (Market capitalisation)
(c) (Market value per share) / (Earnings per share)
(d) (Earnings per share) / (Market value)

A

(c) (Market value per share) / (Earnings per share)

159
Q

What is the most important use of the P/E ratio for investors?

A

It helps investors decide whether a company’s shares are overpriced or under-priced.

160
Q

Which of the following valuation methods is based on “Going concern concept”?

A

Book value method

161
Q

Which of the following is not one of the three fundamental methods of firm valuation?

A

Market share

162
Q

What does a high P/E ratio suggest?

A

A company shares are currently overpriced.

163
Q

Unlisted company can be valued at

A

Net asset method

164
Q

What is the value of the firm usually based on?

A

The value of equity.

165
Q

A company has a profit attributable to ordinary shareholders of 100,000. The number of ordinary shares of £1 in issue during the year was 300,000. The market value of the company’s shares at the yearend was 6.50. The price/earnings ratio for this company is:

(Unverified question, doubtful)

A

19.5 times

166
Q

What does the price-to-earnings ratio (P/E) tell you?

A

How much investors are willing to pay per unit of a company’s earnings.

167
Q

Which of the following has net profit as basis for calculation?

A

Average rate of return

168
Q

Corporate wealth maximisation is the value maximisation for ________

A

Stakeholders

169
Q

Which of the following defines the market to book value?

A

The ratio of stock market valuation divided by the value of its NAV.

170
Q

A mutually exclusive decision means:

A

Accepting of an alternative, leads to rejecting of other

171
Q

Shareholder’s wealth increases with the increase in ________

A

Dividend and market value of the firm

172
Q

What does the price/earnings (PE) ratio measure?

A

The multiple that the stock market places on a company’s earnings

MBA - First Semester (17 decks)

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