Unit-1: Accounting: Introductory Aspects
Total Question = 7
1. The process of accounting involves recording, classifying and summarizing of past occurrences of financial nature.
2. Cost concept implies that in accounting, all transactions are generally recorded at purchase price and not at market price.
3. Total Liabilities = Shareholder’s Equity + External Liability.
4. Institute of Charted Accountants of India issues accounting standards in India.
State True or False
5 Cost concept implies that all transactions are recorded at market cost. FALSE
6. Business Entity concept states that the accounting entity of a business is separate from its owner. TRUE
7. The Institute of standards of India issues the Accounting Standards. FALSE
Unit-2: Double Entry System andJournalizing
Total Question = 10
1. The basic accounting equation is Assets = Liabilities + capital.
2. A business’s net income is eventually recorded in the following account: Profit and Loss Account
3. The financial statement with a structure that is similar to the accounting equation is the Balance Sheet.
4. The financial statement that reports the portion of change in owner’s equity resulting from revenues and expenses during a specified time interval is the Income Statement.
5. Books of accounts of business are to be maintained as per Double entrysystem.
6. Double Entry system recognizes both debit and credit transactions
State True or False
7 Interest a/c, salary a/c, TA/DA etc. are examples of real a/c. FALSE
8. Normally revenue is said to be realised when efforts rendered are rewarded either in cash or in the form of promise. TRUE
9. Drawing account is nominal a/c. FALSE
10 Wages paid on installation of machinery should be debited to Machinery account.TRUE
Unit-3: Preparation of Ledger
Total Question = 4
1. The writing of balance at the end of the month as ” By Balance c/d” denotes carried downBalance.
2. Ledger is also called Principal Book.
3. The process of transferring entries from the Cash Book/ subsidiary books to the ledger is called posting.
4. Balances of the various accounts are used in preparing trial balance.
Unit-4: Practical System- Preparing Cash Book And Bank Reconciliation Statement
Total Question = 10
1. The cash book is meant to record all cash transactions whatever be their nature.
2. Cashbook is the book of first entry for cash transactions and the ledger accounts for cash and bank.
3. In three column Cash Book the discount column is not balanced.
4. The cash column of the cash book can only have the debit balance.
5. Contra entries are not to be recorded in the ledger.
Say True or False
6. The cash book can only be balanced at the month end.FALSE
7. All receipts are written on the credit side of the cash book. FALSE
8. Bank Statement and Bank Reconciliation Statement are the same.FALSE
9. BRS helps in detecting/ruling out the frauds besides facilitating the follow up actions. TRUE
10. BRS is prepared by only profit making organizations. FALSE
Unit-5: Preparing The Trial Balance
Total Question = 8
1. Trial Balance is prepared in the step called preparing a trial balance.
2. There are two popularly used methods of preparing Trial Balance totals method and balances method.
3. Partial omission of an entry is an example of error which will be disclosedby Trial Balance.
4. Trial Balance is normally prepared at the end of the month.
True or False
5. Errors of Principle do not affect the trial balance. TRUE
6. Trial Balance is left unaffected by compensating errors. TRUE
7. The suspense account shows the effect of only those errors that affect the trial balance.TRUE
8. All errors of commission will cause a difference in the trial balance. TRUE
Unit-6: Preparing Final Accounts
Total Question = 17
1. Depreciation is credited in the Profit& Loss Account.
2. Revenue is recognised when collection is made.
3. Capital is shown in the liabilities side of the Balance Sheet.
4. Direct Expenses are debited in the Trading Account.
5. As per the Accounting Standard the method of depreciation can be changed from retrospective effect.
6. Trading account enables the trader to find out Gross Profit or Loss
7. Profit and Loss a/c account enables the trader to find out the Net Profit or Loss.
8. Direct Expenses appears on debit side of trading account.
9. Indirect Expenses appears on debit side of profit and loss account.
10. Wages and Salaries appear on trading account
11. Salaries and wages appear on profit and loss account.
12 Trade Expenses will appear on debit side of P & L A/c.
13. If the Trail Balance contains Trade Expenses and Office Expenses, The Trade Expenses Posted to profit and loss account and office Expenses posted to profit and loss account.
14. Financial statementsshow the Financial Position of a Trader.
15. Assets – Liabilities = capital
16. Assets – Capital = Liabilities
17. Capital + Liabilities = Assets
Unit- 7: Financial Statement Analysis
Total Question = 8
1) Calculating the change (amount and percentage) from one year to the next is referred to as trend analysis.
2) Common size financial statements result from vertical analysis.
3) A higher debt to equity ratio indicates more risk than a lower ratio.
4) Another term for carrying value is book value.
5) The denominator of the accounts receivable turnover ratio is the average accounts receivable.
6) One way to determine the number of days’ sales in the average inventory is to divide 360 by the inventory turnover ratio.
7) Horizontal analysis is also referred to as trend analysis.
8) Working capital, the current ratio, and the quick ratio are indicators of a company’s short term liquidity.
Unit-8: Cash Flow Statement
Total Question = 1
1. Cash Flow Forecast is made up of three parts, these are:
a) Operating Activities
b) Investing Activities
c) Financing Activities
Unit-9 : Fund Flow Statement
Total Question = 8
1. Cash is the most commonly used term for the Fund.
2. The Fund Flow Statement is prepared just to judge the liquidity of the business.
3. Funds Flow Statement is a comparative statement of assets and liabilities and depicts the changes in cash and bank during the period of two Balance sheets.
4. Non- cash transactions are not shown in funds Flow Statement.
5. If shares are issued against the purchase of any fixed asset, it will not be a source of fund.
6. Item wise change in the components in the current assets and current liabilities are shown in the operating activity of fund flow statement.
7. Sale of non-current assets is investing source of funds.
8. Paying debtors by bills receivable is operating source of fund
Unit-10: Cost Accounting Basics
Total Question = 25
Say True or False
1 Cost accounting can be used only in manufacturing organization. FALSE
2 Cost Accounting is not a branch of financial accounting. FALSE
3 Cost accounting is not necessary for a non-profit making service organization.TRUE
4 Prosperous and profit making concerns do not need costing system. FALSE
5 All cost are not controllable. TRUE
6 Indirect costs are those, which are not identified with a particular cost centre. FALSE
7 Notional expenses are not included for ascertaining costs. TRUE
8 Prime cost is the total of direct material, direct labour and direct expenses. TRUE
9 Fixed costs per unit remain fixed. FALSE
10 Transactions of purely financial nature are excluded from cost accounts. TRUE
11 One of the functions of cost accounting is proper matching of cost with revenues. TRUE
12 The emphasis of cost accounting is on control. FALSE
13 Basic methods of costing are job costing and process costing. FALSE
14 Conversions cost plus direct material is factory cost. TRUE
15 Cost of sale is factory cost plus administration and selling and distribution cost TRUE
16 On the basis of behaviour of cost, overheads are classified into Fixed and variable cost FALSE
17 Opportunity costs are hypothetical or notional cost TRUE
18 The ascertainment of costs after they have been incurred is known as historical costs TRUE
19 Cost reduction is a never-ending process while cost control has a definite goal. TRUE
20 If an expenses can be identified with a specific cost unit, it is treated as direct expenses. TRUE
21 Notional expenses are included for ascertaining cost. FALSE
22 Future Cost are not relevant while making management decisions. FALSE
23 Cost allocation is the allotment of the whole items of costs to cost centre or cost units. TRUE
24 Irrelevant costs are important for decision-making. FALSE
25 Additional fixed cost is irrelevant cost. FALSE
Unit-11: Inventory Valuation Methods
Total Question = 5
1. Inventory includes raw material, work-in-progress and Finished Stock.
2. With high inflation, or in markets with prices increasing, companies will achieve a higher profits by following LIFO Method of inventory valuation.
3. In weighted average method the weighted average cost is required to be calculated on each receipt.
4. As per Accounting Standard-2 (AS2) , Inventories should be valued at lower of cost and net realizable value
5. Specific Identification Method to be used when goods are not ordinarily interchangeable or have been segregated for specific projects
Unit-12 : Basics Of Management Accounting
Total Question = 5
True or False
1. Is it necessary for accountants to know about management accounting? TRUE
2. Is Management Accounting a separate method of accounting? FALSE
3. Is Presentation of information important in MA? TRUE
4. Management Accounting uses the inflation effect while financial accounting does not. TRUE
5. Management Accounting does not have separate standards or principles. FALSE
Unit-13 : Marginal Costing And Break Even Analysis
Total Question = 10
1. Variable costing is some time referred to as direct costing or marginal costing.
2. Absorption costing includes all costs of production as product costs, therefore it is frequently referred to as full costing method.
3. Contribution Margin = Sales – Variable Cost
4. P/V Ratio is a ratio between contribution and Sales.
5. At break evenpoint , Profit is equal to fixed cost.
6. Margin of Safety is the difference between Actual Sales and break-even sales.
7. The break even point can be calculated using either the equation method or contribution margin method.
8. If the Fixed Cost is Rs 20000 and Profit is Rs 10000 and Sales is Rs50000 , what is P/V Ratio. 60%
9. In long run even fixed cost can be variable.
10. The major benefits to use break even analysis is that it indicates the level of business activity necessary to prevent losses.
Unit-14 : Budgeting
Total Question = 15
1. In order for budgeting to really work, we must link the budgeting process with:
a. Financial Statements
b. Accounting Transactions
c. Strategic Planning
d. Operating Reports
2. The first forecast we will prepare for budgeting will be the:
a. Budgeted Income Statement
b. Sales Forecast
c. Cash Budget
d. Budgeted Balance Sheet
3. Taylor Manufacturing has compiled the following production information for manufacturing jugs of beverages:
Planned production is 6,000 jugs
Materials required per jug: 10 pounds of powder
Desired Ending Inventory for Materials: 4,000 pounds
Beginning Inventory for Materials: 3,000 pounds
Purchase Cost for Materials: Rs 2.00 per pound
Based on the above information, what is the total cost for planned materials purchased?
a. Rs 110,000
b. Rs 120,000
c. Rs 122,000
d. Rs128,000
4. Which of the following detail budgets will help us prepare the Budgeted Income Statement?
a. Direct Labor Budget
b. Cash Budget
c. Budgeted Balance Sheet
d. Year End Balance Sheet
5. If accounts payable have historically been 20% of sales and we have estimated sales of Rs 200,000, than estimated accounts payable must be:
a. Rs 10,000
b. Rs 20,000
c. Rs 30,000
d. Rs 40,000
6. Which budget is prepared for determining how much external financing we will need to support estimated sales?
a. Cash Budget
b. Budgeted Income Statement
c. Budgeted Balance Sheet
d. Sales Forecast
7. A good place to start in preparing the Budgeted Balance Sheet is with the main link between the Income Statement and the Balance Sheet. This link is:
a. Cash
b. Retained Earnings
c. Current Assets
d. Long Term Liabilities
8. One way to improve the budgeting process is to include qualitative techniques into forecasting. Which of the following is an example of a qualitative technique?
a. 5 Year Trend Analysis
b. Ratio Analysis
c. Percent of Sales Method
d. Interviewing the President of the Company
9. Statistical methods can be used to improve the accuracy of forecasting. This approach is particularly useful for forecasting sales since we are searching for the right fit based on several observations. One popular approach to finding the right statistical fit is to use:
a. Exponential Smoothing
b. Regression Analysis
c. Executive Polling
d. Moving Average
10. Which of the following will contribute to making budgeting a non-value added activity; i.e. the cost of budgeting exceeds the benefit?
a. The budgeting process is included within the strategic planning process.
b. Detail and Summary Budgets are prepared at the same time and are distributed to management for approval.
c. Budgets throughout the organization are automated for enterprise-wide consolidation.
d. Line item detail in budgets is based on material thresholds
Say True or False
11. Standard hour is a hypothetical hour which represents the amount of work to be done in one hour under given circumstances . FALSE
12. To control cost either standard costing or budgetory control should be used but not both the techniques. TRUE
13. Standard cost is used as a yardstick to measure the efficiency with which actual cost has been incurred. TRUE
14. Standard cost is a projection of costs accounts whereas budgeting is a projection of financial accounts. TRUE
15. Standards are normally set for a longer period and revised annually. TRUE
Unit-15 : Standard Costing and Variance Analysis
Total Question = 15
1. When standards are set at high it may cause frustration and disbelief in the minds of workers.
2. Material Cost Variance = Material Price Variance + Material Usage Variance
3. Standard cost may become unrealistic if it is not revised according to the changed circumstances
4. Sales Price Variance = ( Actual Price – Standard Price) *AU
5. A variance also provides the yardstick to measure the fairness of the standard, allowing management to redirect its effort and to make reasonable adjustments
