MBA Drills & Vocab 2 Flashcards
It means that cash is received by the business from the proprietor. It results in the immediate receipt of cash.
Antony commenced business with ` 10,000
________accounting is a form of accounting which enables a business to be conducted more efficiently.
Management
The conventions, concepts, rules and procedures that together make up accepted accounting practice at any given time are called _______
GAAP
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.
Accounting
Which of the following accounting system provides a system of checks and balances?
Double Entry
Which of the following concept tells that to recognize revenue it has to be realized?
Realisation concept
Which of the following implies that a business unit is separate and distinct from the person who owns or controls it?
Business Entity
________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.
Accrual
Inflation accounting is also called _______
Replacement
________ 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.
Income
Outstanding wages A/c is________A/c
Personal
Debt may be of types
3
Bad Debts A/c is_______A/c
Nominal
Which of the following is a residual interest in the assets after deducting liabilities?
Equity
Which of the following is a concept that implies each transaction and event must be expressible in monetary terms ?
Money measurement
Prepaid Insurance A/c is ________A/c
Personal
Creditor may be types
4
A process of accounting where revenue and expense recognition would occur when cash is received and disbursed is called_______
Cash
________ they are the present obligations arising from past events. It also arises when an asset is created or acquired.
Liabilities
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?
EVA
The basic sequence in the accounting process can best be described as
Transaction, source document, journal entry, ledger account, trial balance
Which one of the following systems of recording transactions has a dual aspect concept of accounting?
Double entry system
Indicate all of the following statements that correctly describe the net income. Net income
Increases owners’ equity.
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?
Order placed for the goods
In the books of account, if a transaction is completely deleted, will it affect the trial balance?
No
Which of the following accounts with normal balance is shown at the debit side of a trial balance?
Cash account
Which items influence the trial balance agreement?
Partial omission of a transaction
What is used in preparing trial balance?
Ledger accounts
When debit balance is equal to credit balance, then the trial balance means
Mathematically, Capital + Liabilities = Assets
What is the trial balance used for?
It records balances of accounts
The accounting system, in which accounting entries are made on the basis of amount, having become due for payment or receipt, is known as?
Accrual system of accounting
The documents relating to purchase of asset must be authorized by
Senior management
Bookkeeping is mainly concerned with
Recording the economic activities
Trial balance is used to check the accuracy of
Ledger accounts balances
When is trial balance prepared?
At the end of an accounting period
Accounting to the rules of debit and credit for balance sheet accounts:
Decrease in liability and owners’ equity accounts are recorded by debits.
Accrual-basis of accounting
Leads to the reporting of more complete information than cash-basis
Revenue is generally recognized being earned at the point of time when
Billed to customers
Double entry bookkeeping means
Entry for two aspects of transaction
Depreciation is calculated under diminishing balance method, based on
Book value
Depreciation amount charged on a machinery will be debited to:
Depreciation account
Which of the following is the example of revenue reserve?
Investment fluctuation fund
The loss on sale of an asset is debited to:
Profit and loss account
The main objective of depreciation is
To calculate net profit
Which of the following is the example of capital reserve?
Premium received on issue of shares or debentures
Which of the following methods of depreciation is not recognized by Income Tax Law?
Straight line Method
According to straight line method of providing depreciation, the depreciation
Remains constant
Salvage value means
Estimated disposal value
According to Companies Act, 1956, secret reserves can be created by:
Banking and insurance companies
According to fixed instalment method, depreciation is calculated on
Original cost
Asset Disposal A/c is prepared when:
Provision for depreciation a/c is prepared
In accounting, becoming out of date or obsolete is known as
Obsolescence
Depreciation is generated due to
Wear and tear
Total amount of depreciation of an asset cannot exceed its
Depreciable value
At the end of the year, depreciation account is transferred to:
Profit and loss account
What is the purpose of making a provision for depreciation in the accounts?
To charge the cost of fixed assets against profits
General reserves are shown in:
Balance sheet
Dividend equalisation reserve is:
Specific reserve
Depreciation is charged on:
Fixed tangible assets
Repairs to building and machinery are categorised under which of the following heads?
Miscellaneous expenditures
Schedule III of the Companies Act, 2013 provides general instructions for the preparation of _______ .
balance sheet only
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.
debit; credit
The _______ refers to a statement that summarises and presents the financial position of a company on any given date.
balance sheet
The format of financial statements prescribed in Schedule III of the Companies Act, 2013 was voluntarily applicable from _______ .
Apr-15
_______ is the final process for any accounting year.
Preparation of financial statements
Schedule III of the Companies Act, 2013 provides instructions for the preparation of the _______ of Indian corporations.
Balance sheet and the profit and loss statement
Which among the following are the forms of the balance sheet?
Horizontal or vertical
Which of these is NOT included in current liabilities?
Capital work-in-progress
Profit and loss statement is also called_______ . Choose the correct option.
Statement of income
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.
comparability
Preparation of the financial statement is the _______ step of the accounting cycle.
final
In a balance sheet, the _______ balances are reflected by assets.
debit
_______ 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.
Surplus
Capital work-in-progress is a _______ .
fixed asset
On the bank statement, cash deposited by the company is known as
Credit
What is “Deposit in transit” in bank reconciliation?
Added to Bank Balance
Bank reconciliation statement compares a bank statement with_____________ .
Cashbook
An unadjusted balance in a cash book is because of the result of which error?
The omission of Bank charges
In a cash book, the favourable balance indicates
Debit Balance
What type of cheques is that which is issued by a firm but not yet presented to the bank?
Outstanding cheques
‘NSF’ marked in cheque sent back by the bank indicates
Not sufficient funds
Bank reconciliation description is composed of
Business Accountant
Unpresented cheques also referred to as
Outstanding cheques
In a cash book, bank charges of `5,000 was not recorded. Name the correct cash book adjustment
It will be credited in cash book
The ideal level of liquid ratio is:
1:01
Operating Ratio is used to examine the profitability from ___________ .
sale of core products
Current ratio is also known as
Working capital ratio
In which of the following measures is the operating liquidity available to an organisation?
Working capital turnover ratio
Which ones are also referred to as management ratios?
Activity ratios
When the concept of ratio is defined in respected to the items shown in the financial statements, it is termed as
Accounting ratio
Accounting ratios are divided into four main categories. Which one of the following was not included in it?
Control ratios
Which of the following is not a limitation of ratio analysis?
It cannot be used in forecasting.
Which of the following is not true about ratio analysis?
It is not useful in inter-firm and intra firm comparison.
Which one is the ratio of cost of goods sold by an organisation to its average inventory during a given accounting period?
Inventory Turnover Ratio
Liquid ratio is also known as:
Quick ratio
Which of the following ratios is used to compare an organisation’s total loans against its shareholders’ investments in an organisation?
Debt-Equity ratio
Quick assets divided by current liabilities is:
Liquid ratio
The ideal level of current ratio is:
2:01
___________ measures an organisation’s ability to meet its long-term obligations.
Solvency Ratio
Which of the following ratios measures short-term solvency?
Liquidity ratios
Quick Ratio is also referred to as the___________ . Which one is correct?
Acid test ratio
A higher value of Debtors Turnover Ratio can ___________ the average collection period of the organisation.
lower
Profit is equal to:
Contribution – Fixed cost
Marginal cost is equal to:
Variable cost
Marginal cost is equal to :
Total cost – Fixed cost
The CVP analysis, break-even analysis, and MOS are the tools used for:
Financial business analysis
P/V ratio establishes the relationship between:
Contribution and sales value
Contribution is equal to:
Selling price – Variable cost
The CVP analysis is used for finding __________ of a project.
Profitability
The break-even analysis is done by finding __________ of an organisation.
BEP
If an organisation deals with several products, its break-even point can be calculated with the help of:
Composite BEP
If the P/V ratio is 30% of sales, then what is the remaining 70% of sales?
Variable cost
The relationship between profit and volume can be represented through __________ ratio.
P/V
MOS is known as:
Difference between total sales and sales at bep
The CVP analysis helps a finance manager in framing:
Budget
Where the cost under two alternatives is equal, the break-even point is calculated with the help of:
Cost BEP
Which one of the following is not an advantage of P/V ratio?
Providing information on variations in capital invested
__________ is the change in the total cost of production when an additional unit of product is produced.
Marginal cost
Activity Ratios are also known as:
- Performance ratios
- Turnover ratios
- Efficiency ratios
Activity ratios include:
- Stock turnover ratio
- Trade receivables turnover ratio
- Trade payables turnover ratio
Ratio Analysis:
- is an arithmetical relationship between two accounting variables
- provide quantitative relationship between two variables
- It is one of the mean of financial analysis
Liquidity ratio includes:
- Current ratios
- Quick or liquid or acid test ratio
- Absolute liquid ratio
Solvency ratios include:
- Debt-equity ratio
- Propriety ratio
- Total asset to debt ratio
Which of the following liabilities are taken into account for quick ratios?
- Trade creditors
- Outstanding expenses
- Bank overdraft
Which of the following document is prepared for documentary evidence by business?
- Receipt
- Invoice
- Vouchers
Profit and loss account is prepared to ascertain _____ by business over an accounting period. Choose correct option.
- The net profit earned
2. The net loss suffered
As per the reverse order of liquidity format of the balance sheet, which of the following comes under the heading of a fixed asset?
- Tangible
- Intangible
- Capital work-in-progress
As per schedule III, of the companies act, 2013, which of the following represents fixed assets?
- Tangible and Intangible
- Intangible assets under development
- Capital work-in-progress
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 _______ .
- Interest
2. Other financial services
If the turnover of the corporate body is below one hundred crore rupees, then which of the following rounding off methods shall apply?
- Rounded off to the nearest lakhs, millions or crores, more or decimals there of.
- Rounded off to the nearest hundreds, thousands, rupees lakhs or millions or decimals there of.
Any written evidence in support of a business transaction is called ______
Voucher
The account that records expenses, gains and losses is
Nominal account
__________ refers to the analysis of the percentage increase or decrease in corresponding items in comparative financial statements.
Horizontal Analysis
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
d. both a and b
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
(d) Both a and c
Which among the following measures the actual cash generated by the organisation within a particular period?
Cashflow statement
Which among the following are the activities that are related to the purchase or sale of long-term investments and assets?
Investing activities
Which of the following is/are types of financial statement analysis?
(a) Horizontal analysis
(b) Vertical analysis
(c) External analysis
(d) All of these
(d) All of these
Which of the following factors highlights the reliability of information?
(a) Free from errors
(b) Complete
(c) Free from bias
(d) All of these
(d) All of these
Among the following, which one refers to the total amount of money received by a business entity after selling its products or services?
Revenue
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) All of these
The profit and loss account or the income statement shows which types of expenses are incurred by the organisation during a particular period?
Revenues and expenses
Profit and loss statement is also called __________ . Choose the correct option.
Statement of income
The cash inflows and outflows of any organisation can further be classified into how many activities?
Three
Preparation of the financial statement is the __________ step of the accounting cycle.
final
Which among the following refers to the ability of financial statements to stand useful over time against financial information obtained from other sources?
Comparability
__________ 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
(b) Gross loss
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) Operating expenses
__________ 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) Profit and Loss
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) Purchase of product
Which among the following is also known as the statement of sources of funds and application of funds?
Balance sheet
Which among the following are the forms of the balance sheet?
Horizontal or vertical
Internal rate of return is …
Rate at which discounted cash inflow is equal to the discounted cash outflow
Leasing of machinery can be categorised as ________
Financing decision
Listed companies can be valued at
Market value
Promotion of welfare of human by corporate is called ________
Corporate philanthropy
Book value of assets includes
Fixed assets, current asset, intangible asset
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)
(c) (Market value per share) / (Earnings per share)
What is the most important use of the P/E ratio for investors?
It helps investors decide whether a company’s shares are overpriced or under-priced.
Which of the following valuation methods is based on “Going concern concept”?
Book value method
Which of the following is not one of the three fundamental methods of firm valuation?
Market share
What does a high P/E ratio suggest?
A company shares are currently overpriced.
Unlisted company can be valued at
Net asset method
What is the value of the firm usually based on?
The value of equity.
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)
19.5 times
