Vous êtes sur la page 1sur 282

COMMERCE MATERIAL

Time Allowed: Two hours Maximum Marks: 300


1. If the operating expenses exceed gross profit, the excess is referred to as
(a) Operating income
(a) Operating loss
(c) non-operating expenses
(d) non-operating income
2. On using reducing balance method on an asset of Rs.20, 000 at the rate of 10% per annum,
depreciation after three years will be.
(a) Rs. 6,000 (b) Rs. 1,800
(c) Rs. 1,620 (d) Rs. 2,000
3. Owner's equity stands for
(a) Fixed Assets minus Fixed Liabilities
(b) Fixed Assets minus Current Liabilities
(c) Current Assets minus Fixed Liabilities
(d) Total Assets minus Total Liabilities
4. Accounting is
(a) the art of recording, classifying and summarizing in a significant manner and in terms of
money, transactions and events which are, in the at part at best financial in character, and
interpreting thereof.
(b) A systematic and regular record of events affecting a firm with a view to obtaining a clear
financial picture.
(c) Preparation of various financial statements over a period of time of a firm to measure its
performance in monetary terms.
(d) nothing but book-keeping
5. Aush started business on 1st April, 1995 with a capital of Rs. 25,000 and a loan of Rs.
12,500. Total assets and liabilities at the end of 31st March, 1996 amounted to Rs. 75,000 and
Rs. 12,500 respectively. He invested a further capital of Rs. 12,500 during the year and
withdrew Rs. 7,500 during the relevant financial period. His closing capital and profits would
be respectively
(a) Rs. 62,500 and Rs. 32,500
(b) Rs. 50,000 and Rs. 40,000
(c) Rs. 70,000 and Rs. 47,500
(d) Rs. 55,000 and Rs. 42,500

6. A person started business with a cash of Rs. 22,000 and stock of Rs. 3,000 on 1st January,
1996.,Durihg the year , he made a profit of Rs. 6,000. His creditors were paid Rs. 4,500 for the
office furniture supplied. He took goods worth Rs. 3,500 for his daughter's wedding on 30th
June, 1996. The 9ross assets of his business on 31st December, 1996 was
(a) Rs. 27,500
(b) Rs. 26,500
(c) Rs. 23,500
(d) Rs. 20,500
7. Match List I with List II and select the correct answer:
List I List II
(Item) (Type of asset)
A. Brand equity 1. Tangible
B. Plant and Machinery 2. Current
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 1
C. Advances to suppliers 3. Intangible
D. Deferred revenue expenditure 4. Fictitious
ABCDABCD
(a) 3 1 4 2 (b) 3 1 2 4
(c) 1 3 2 4 (d) 1 3 4 2
8. In stock valuation, application of the principle 'at cost price or market price whichever is
lower' will result in the valuation of stock sometimes at cost price and at other times at market
price. This is an application of the principle of
(a) Consistency (b) Materiality (c) Conservatism (d) Disclosure
9. Match List I with List II and select the correct answer:
List I List II
A. Heavy amount of 1. Capital expenditure
premium on redemption of
preference shares .
B. Excess of sale proceeds 2. Deferred revenue expenditure
fixed assets over their
original cost
C. Cost of installation 3. Capital gain of an old machine
D. Freight paid on purchase 4. Revenue of raw material expenditure
ABCDABCD
(a) 2 3 4 1 (b) 3 2 4 1
(c) 2 3 1 4 (d) 3 2 1 4
10. Amount spent on an advertisement campaign, the benefit of which is likely to last for three
years is a
(a) capital expenditure
(b) revenue expenditure
(c) deferred revenue expenditure
(d) contingent expenditure
11. Match List I with List II and select the correct answer :
List I List II
A. Preliminary expenses 1. Capital expenditure
B. Traveling expenses of 2. Revenue expenditure r the salesman
C. Profit on sale of a part 3. Capital gain of the business building
D. Nazarene paid on the 4. Deferred revenue purchase of Land for expenditure business
ABCDABCD
(a) 4 2 3 1 (b) 4 2 1 3
(c) 2 4 3 1 (d) 2 4 1 3
12. Revenue is generally recognized as being earned at that point of time when
(a) sale is effected (b) cash is received
(c) production is completed (d) debts are collected
13. Which one of the following will be treated as revenue expenditure ?
(a) Cost incurred for a new exit as required under the local bodies' bye laws
(b) Interest paid on loan during the construction of works
(c) Cost of pulling down an old building as also the payment made to the architect for the plan
of a
new building
(d) A dealer in sewing machines purchases sewing machines and spends some money on the
repair of ten machines damaged while in transit.

14. Which one of the following is capital expenditure ?


KAVITHA TUTORIALS, TIRUVURU[Type text] Page 2
(a) Cost of advertisement (b) Purchase of a delivery van
(b) Purchase of raw material (d) Purchase of machine oil

15. Which one of the following is an intangible asset ?


(a) Furniture (b) Patent Right
(c) Investment in shares (d) Loose tools

16. Which one of the following depreciation methods is most suitable for a coal mine ?
(a) Diminishing balance method
(b) Depletion method
(c) Fixed installment method
(d) Sum of years' digits method
17. In the case of a sole proprietorship, Assets in Balance Sheet items are conveniently shown
in (a) order of fixity (b) order of liquidity
(c) alphabetical order. (d) order of dates of acquisition
18. Match List I (Names of accounts) with List II (Matters with which the accounts are
concerned) and select the correct answer :
List-I List-II
A. Partners current 1. Dissolution of partnership
accounts
B. Goodwill account 2. Revaluation of assets on the admission of a partner
C. Partners drawings 3. Fixed capitals of partners
accounts
D. Profit and Loss
adjustment account 4. Goods taken by partners for private consumption
ABCDABCD
(a) 1 3 2 4 (b) 1 3 4 2
(c) 3 1 4 2 (d) 3 1 2 4
19. A business concern provides the following details :
Cost of goods sold 1,50,000
Sales 2,00,000
Opening stock 60,000
Closing stock 40,000
Debtors 45,000
Creditors 50,000
The concerns' purchases would amount to (in Rs.)
(a) 1,30,000 (b) 2,20,000
(c) 2,60,000 (d) 2,90,000
20. Match List I (transaction) with List II (Entry to be made) and select the correct :
List I List II
A. Loss on realisation 1. Debits partner's capital A/c
B. Profit on realization 2. Credit realization A/c
C. Assets sold 3. Credit partner's capital A/c
D. Creditors paid 4. Debit realisation A/c
ABCDABCD
(a) 1 3 2 4 (b) 3 1 2 4
(c) 3 1 4 2 (d) 1 3 4 2
21. Which of the following statements are appropriate in respect of partnership accounts ?
1. In the absence of any provision in the partnership agreement to the contrary, partners can
charge interest at 6% per annum on loans given by them to the partnership firm.
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 3
2. An ordinary partnership firm can have not more than 50 partners.
3. A banking partnership firm can have not more than 10 partnership.
4. In the absence of any provision in the partnership agreement to the contrary, profits and
losses are shared by the partners in the ratio of their capitals.
Select the correct answer from the codes given below :
(a) 1 and 2 (b) 1 and 3
(c) 2, 3 and 4 (d) 1, 3 and 4

22. A and B are equal partners in a firm. They submitted C as one-sixth partner who brought in
Rs. 6O,000 as godown. The new profit sharing ratio is 3 : 2 : 1.lf goodwill of Rs. 60,000 is to be
paid to the old partners as per profit sacrificing ratio, B will receive
(a) Rs. 30,000 (b) Rs. 60,000
(c) Rs. 45,000 (d) Nil
23. R, admitted as a new partner for one-fourth share of future profits, fails to bring in cash of
Rs. 5,000 to wards goodwill but the existing (old) partners S and T, sharing profits in the ratio
of 3 : 2, raise the goodwill account at its full value. Therefore the partners will be credited for
goodwill as S (Rs) T (Rs) R (Rs)
(a) 3,000 2,000 Nil
(b) 9 000 6000 5 000
(c) 12,000 8,000 Nil
(d) 2,250 1,500 1,250
24. The following figures {all in Rs.) relate to a non trading concern :
1st January, 1995 stock of medicines 5,000 1st January, 1995 outstanding creditors for
medicines 3,000 Amount paid for medicines during the years 15,000 Value of medicines
spoiled during the year 400 Stock of medicines on 31st December, 1995 3,500 The amount to
be debited to Income and Expenditure account would be
(a) Rs. 15,000 (b) Rs. 18,500
(c) Rs. 18,000 (d) Rs. 13,500
25. Which one of the following statements is correct ?
(a) Depreciation is not the process of valuation of asset it is a process of allocation of cost of
asset to the period of its economic life
(b) If the cost of machinery is more than the book value, then depreciation need not be provided
(c) When the plant and machinery are maintained in good condition, through repairs and
renewals, depreciation need not be provided
(d) In the absence of any legal provisions, if the auditor finds that provision made for
depredation is inadequate, then he is not required to refer to it in his report
26. What is the correct sequence of the following actions required for the preparation of Final
Accounts ?
(a) Preparation of Trial Balance
(b) Balancing of Accounts
(c) Preparation of Annual Financial Statements
(d) Making Adjusting Entries
Select the correct answer from the codes given below:
(a) 4, 2, 1, 3 (b) 2, 4,3, 1
(c) 2, 1, 4, 3 (d) 4, 2, 3, 1

27. Consider the following items :


1.Debentures
2. Prepaid rent
3. Accrued interest
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 4
4. Bank overdraft ,
Current liabilities would include
(a) 2, 3 and 4 (b) 1, 2 and 3
(c) 1 and 4 (d) 1, 2, 3 and 4
28. Which of the following items should be entered in the I Receipts and Payments account of a
club ?
1. Sale of old newspapers
2. Loss on sale of some asset
3. Payments for investment
Select the correct answer from the codes given below:
(a) 1, 2 and 3 (b) 1 and 3
(c) 1 and 2 (d) 2 and 3
29. A cultural club discloses that subscription received during a particular accounting period as
per Receipts and Payments account amount to Rs. 57,360. Subscription outstanding (opening
and closing) was Rs. 4,800 and Rs. 6,000 respectively. Subscription received in advance
(opening balance and closing balance) amounted to Rs. 3,600 and Rs. 2,160 respectively. The
amount to be posted to Income and Expenditure account would be
(a) Rs. 57, 360 (b) Rs. 54,000
(c) Rs. 60,000 (d) Rs. 63,360
30. Having reissued all forfeited shares, the credit balance remaining in forfeited shares account
is transferred to
(a) general reserve (b) reserve capital
(c) capital reserve (d) none of the above
31. Rights issue refers to the shares issued to
(a) employees (b) public
(c) existing directors (d) none of the above
32. That portion of the share capital which can be called up only on the winding up of the
company is the
(a) authorised capital (b) issued capital
(c) subscribed capital (d) reserve capital
33. If vendors are issued fully paid shares of Rs. 80,000 in consideration of net assets of Rs.
60,000, then the balance of Rs. 20,000 will be
(a) debited to profit and loss account
(b) Debited to goodwill account
(c) credited to capital reserve account
(d) credited to share premium account
34. Match List I with List II and select the correct answer :
List I List II
A. G.P. Ratio 1. Convention of conservatism
B. Cash budget 2. Profitability
C. E.O.Q. 3. Inventory management
D. Provision for bad debts 4. Management of liquid assets
ABCDABCD
(a) 2 4 1 3 (b) 4 2 3 1
(c) 4 2 1 3 (d) 2 4 3 1
35. Given that the current ratio is 2 : 1, if the net working capital is Rs. 60,600, then the amount
of current liabilities would be
(a) Rs.30,300 (b) Rs.60,600
(c) Rs.1,21,200 (d) Rs.90,900

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 5


36. Project Engineering Ltd. has An adverse current ratio. Which one of the following would
improve this ratio ?
(a) Sale of fixed assets for cash
(b) Collection of some of the current accounts receivables
(c) Use of cash to pay off some long-term debts
(d) Collection from sundry debtors
37. XYZ Ltd. incurs a net loss of Rs. 5,000 during an accounting year. Depreciation for the
relevant year amount to Rs.1,000, preliminary expenses written off during the accounting year
is Rs. 3,000 and a loss of Rs. 4,000 is due to sale of plant and machinery. Based on this data,
found from operations would amount to
(a) Rs. 3,000 (b) Rs. 2,000 (c) Rs. 5,000 (d) Rs. 4,000
38. Social obligation of accounting refers to
(a) the completion of journal entries
(b) the preparation of final accounts
(c) cost recording
(d) servicing the needs of various stake-holders
39. A countiuous audit is most suitable where the
(a) transactions are few but complicated
(b) there is no urgency to finalise the accounts on a particular date
(c) internal audit work is being carried on in a satisfactory manner
(d) system of internal check in operation is not satisfactory
40. Management audit is
(a) an independent appraisal of the total management process
(b) a statutory requirement
(c) an investigation into the conduct of director
(d) an independent appraisal of competitiveness of business
41. Management audit is conducted by
(a) the statutory auditors (b) government auditors
(c) cost auditors (d) none of the above
42. System of internal check is said to exist in an organisation when
(a) an employee is specifically deputed to check the work of another employee
(b) the departmental head checks the works of his subordinate
(c) some outside experts check the work of employees
(d) another employee of the same department checks the work of an employee in routine office
procedure
43. Internal Auditor in appointed by the
(a) shareholders of the company
(b) statutory auditor
(c) Institute of Internal Auditors of India
(d) Board of Directors of the company
44. Which one of the following is true of the position of an auditor regarding the system of
internal check in the organisation?
(a) He should acquaint himself with the system of internal check
(b) He should monitor and supervise the system of internal check
(c) He himself should lay down the system of internal check
(d) He has nothing to do with the system of internal check
45. The auditor has a right to ask for information and explanation from the
(a) past auditors of the company
(b) directors of the company
(c) officers of the company
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 6
(d) internal auditors of the company
46. In the case of audit of Statutory Report, an auditor is expected to give his report on the
(a) number of shares allotted, amount received in cash and summarised Receipts and Payments
account
(b) authorised capital, subscribed capital and paid up capital
(c) Profit and loss account, Balance Sheet and directors' report
(d) directors' qualification shares, calls in arrears and calls in advance
47. Working papers which contain a record of the audit work are the property of the
(a) company (b) auditor
(c) Registrar of Companies (d) Government of India
48. Sampling is used in the case of
(a) collection of debts by the accountant
(b) test checks by the auditor
(c) supervision by the works manager
(d) checking pass-book entried by the accountant
49. One of the consequences of non-registration of a partnership firm is that
(a) a partner cannot sue the other partner to enforce a right arising from a contract
(b) the partner of such a firm cannot sue third parties
(c) third parties cannot sue the firm for claims exceeding Rs. 100
(d) the official Assignee or Receiver will have no power on the property of the dissolved firm
50. In the case of a deemed public limited company, the maximum number of members is
restricted to
(a) 10 (b) 50 (c) 100 (d)200
51. Consider the following rights :
1. Right to take part in the business
2. Right to share profits
3. Right to interest on advances in excess of capital
4. Right to expel a non-cooperative partner
The legal rights of a partner would include
(a) 1 and 2 (b) 2 and 4 (c) 1, 2 and 3 (4) 1, 3 and 4
52. Match List I with List II and select the correct answer :
List I List II
(Type of combinations) (Illustrations)
A. Association 1. Cartel
B. Federation 2. Chamber of commerce and industry
C. Partial consolidation 3. Holding company
D. Complete consolidation 4. Amalgamation
ABCDABCD
(a) 2 1 3 4 (b) 1 2 3 4
(c) 2 1 4 3 (d) 1 2 4 3
53. Which one of the following is an example of a company incorporated by a special Act of
Parliament ?
(a) Life Insurance Corporation of India
(b) Indian Oil Corporation
(c) State Trading Corporation of India
(d) Bharat Heavy Electricals limited
54. Which one of the following types of registered companies will be the most appropriate for
the promotion of science, culture, religion etc.?
(a) Company limited by share
(b) Company limited by guarantee
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 7
(c) Unlimited company
(d) Government company
55. Match List I with list II and select the correct answer :
List I List II
A. Contract of Uberrimae fidei 1. Public utility concern
B. Right of Eminent Domain 2. Co-operative society
C. Statement in lieu of prospectus 3. Partnership
D. System of 'one man one vote' 4. Sole trading concern
5. Public limited company
ABCDABCD
(a) 1 3 5 4 (b) 3 1 5 2
(c) 3 2 1 4 (d) 1 2 5 3
56. A joint stock company's letterhead must by law, have the address of the
(a) Managing Director (b) Factory
(c) Registered Office (d) Head Office
57. Which of the following are stated in the objects clause of the Memorandum of Association
of a Public Limited Company?
1. General and specific objects
2. Main objects
3. Secondary objects
4. Objects incidental to main objects
5. Other objects
(a) 2, 4 and 5 (b) 1, 3 and 5
(c) 2, 3 and 4 (d) 1, 2 and 4
58. The first auditors of a company are appointed by the
(a) Registrar of Companies
(b) shareholders of the company
(c) promoters of the company
(d) Board of Directors of the company
59. Who among the following has NO right to speak at the AGM ?
(a) Chairman of the company
(b) Whole-time director of the company
(c) Proxy holder
(d) None of the above, as everybody has a right to speak at the AGM
60. Which one of the following is the correct sequence of steps in the formation and
commencement of business of a public limited company ?
(a) Memorandum, Issue of Prospectus, Filing of Prospectus, Minimum subscription
(b) Memorandum, Minimum subscription, Filing of Prospectus, Issue of Prospectus
(c) Memorandum, Filing of Prospectus, Issue of Prospectus, Minimum subscription
(d) Memorandum, Issue of Prospectus, Minimum subscription, Filing of Prospectus
61. Which of the following statements are correct?
1. A minor is not competent to become a member of a company.
2. A firm cannot be treated as a member of a company.
3. A foreigner may become a member of a company.
4. A partnership firm cannot hold shares in a company in the individual names of partners as
joint holders.
(a) 1 and 2 (b) 2, 3 and 4
(c) 1, 3 and 4 (d) 1, 2 and 3
62. In the case of a company making a public issue, 'Minimum Subscription' must provide for
which of the following?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 8
1. Investments to be made
2. Preliminary expenses
3. Repayment of money borrowed for preliminary expenes
4. Working capital
5. Any other expenditure if it is specifically stated
(a) 1, 2, 3, 4 and 5 (b) 1, 3 and 5
(c) 1, 2 and 4 (d) 2, 3, 4 and 5
63. Those preference shares which do not enjoy the right to share additional profits come under
the category of
(a) irredeemable preference shares
(b) participating preference shares
(c) non-cumulative preference shares
(d) non-participating preference shares
64. Clauses in the Articles of Association can be altered by
(a) a special resolution of the board of Directors
(b) an ordinary resolution in the general meeting
(c) a special resolution in the general meeting
(d) obtaining permission from the Central Government
65. Under the Companies Act, 1956, the 'financial year' of a company
(a) must be exactly 12 months
(b) must not be less than 12 months
(c) may be more or less than a calendar year, but it shall not exceed 15 months
(d) may be more or less than a calendar year, but it shall not exceed 20 months
66. 'Doctrine of Constructive Notice' is the notice
(a) of alteration of 'Objects' clause to the Registrar of Companies
(b) of change of name to the members of the company
(c) to the public as to the issue of prospectus
(d) to outsiders delaing with the company as to the contents of the Memorandum and Articles of
Association
67. A 'blue chip' security is one which
(a) given assured high returns
(b) almost every investor is willing to buy
(c) offers the highest liquidity and sells always much above par
(d) is issued by the reputed and profit making companies
68. Under the guidelines of SEBI, pricing of first capital issues should be on par value only in
the case of
(a) an existing company with no past reserves
(b) a private company converting into a public company
(c) a new company promoted by an existing company
(d) a new company with no connections with other companies
69. Match List I (Activity) with List II (Associated organisation) and select the correct answer :
List I List II
A. Mutual fund 1. Stock exchange
B. Public issue of capital 2. Assets management company
C. Forward trading 3. Merchant banking
D. Option pricing 4. Forex market
ABCDABCD
(a) 3 2 4 1 (b) 3 2 1 4
(c) 2 3 1 4 (d) 2 3 4 1

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 9


70. Integration of various units of similar character producing similar products or engaged in
the same sphere of business activity under a single form of management and control is called
(a) vertical combination
(b) horizontal combination
(c) circular or mixed combination
(d) lateral or allied combination
71. The scope of MRTP Act, since 1992, has been confined only to the regulation of
(a) consumer monopolies
(b) monopolistic trade practices
(c) restrictive and unfair trade practices
(d) restrictive trade practices
72. EXIM bank can be described as a
(a) non-banking financial company
(b) commercial bank
(c) non-banking non-financial company
(d) scheduled bank
73. Match List I (Document) with List II (where used) and select the correct answer :
List I List II
A. Shipping bill 1. To certify the country of origin of goods
B. Bill of lading 2. For having loaded the cargo in the ship
C. Consular invoice 3. To transport cargo by ship
D. Packing slip 4. to identify the cargo in transit
ABCDABCD
(a) 2 3 4 1 (b) 2 3 1 4
(c) 3 2 1 4 (d) 3 2 4 1
74. In the context of foreign trade, the CIF cost may be obtained by
(a) adding freight and marine insurance premium to the FOB price
(b) deducting freight and marine insurance premium from the FOB price
(c) adding customs duties, freight and marine insurance premium to the cost
(d) deducting customs duties, freight and marine insurance premium from the price
75. 'Paid up value' is payable on a life insurance policy
(a) on the maturity of the policy
(b) when the policy lapses
(c) when the policy is surrendered
(d) on maturity or expiry whichever is earlier
76. Setting the mission which encompasses objectives, policies and goals is known as
(a) Operational planning (b) Strategic planning
(c) Tactical planning (d) Contingency planning
77. Which one of the following statements is correct ?
(a) Planning and controlling are assentially one and the same
(b) Controlling is a part of the planning process
(c) Cotrolling is a substitute for planning
(d) A contral process is meaningless without pre-set goals
78. When jobs are broadened in scope and complexity so that the person's overall area of job
responsibility increases, it is a case of
(a) job rolation (b) job enrichment
(c) job specification (d) job enlargement
79. Consider the following statements
Planning involves
1. forecasting
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 10
2. choice among alternative courses of action.
3. wishful thinking
4. decision only by production manager.
Of these statements
(a) 1, 2, 3 and 4 are correct (b) 1, 3 and 4 are correct
(c) 1 and 2 are correct (d) 2 and 3 are correct
80. Techniques of managerial control are useful in
(a) Selection of plant location
(b) identifying appropriate technology
(c) profit planning
(d) conducting shareholder's meetings
81. Motivational process and not the motivators as such is associated with the
(a) Need hierarchy theory (b) Two-factor theory
(c) ERG theory (d) Expectancy theory
82. "Perceived equity in reward results in satisfaction." Which one of the following motivation
theories take this into account ?
(a) Porter and Lawler Model
(b) Victor Vroom's Expectancy model
(c) F.W. Taylor's incentive scheme
(d) Herzberg's Two-factor theory
83. One of the steps that may be required for achieving effective coordination is
(a) reporting on performance and taking remedial measures
(b) training in leadership and supervisory abilities of controllers of activity
(c) transmission of messages in a full line communication channel
(d) making an honest appraisal and initiating rewards/ punishments
84. An important aspect of control is that the
(a) manager motivates his subordinates to give better performance
(b) manager sets an effective management information system
(c) plans are checked before implementation against predetermined measures of performance
(d) performance is checked against predetermined standards
85. Consider the following steps
1. Analysis of variances
2. Initiating corrective action
3. Measurement of actual performance
4. Establishment of standards
The correct sequence of these steps in the process of control is
(a) 4, 3, 2, 1 (b) 3, 4, 2, 1 (c) 4, 3, 1, 2 (d) 3, 4, 1, 2
86. Consider the following elements :
1. Indicators 2. Objectives 3. Controls 4. Key Result Areas 5. Roles and Mission
6. Action Plans
Their correct sequence in Management by Objectives and Results is
(a) 5, 4, 2, 1, 3, 6 (b) 4, 5, 2, 1, 3, 6
(c) 5, 4, 1, 2, 6, 3 (d) 4, 5, 1, 2, 6, 3
87. Delegation of authority takes place when a manager thinks that
(a) the job is too difficult and hazardous
(b) the job requires the high skill that he does not possess
(c) he cannot look after all the demanding tasks by himself
(d) he needs to punish his subordinate
88. According to the principle of "span of control", there is
(a) a tendency to overload supervisors with too much of work
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 11
(b) a limit to the number of subordinates a supervisor can effectively supervise
(c) no limit to the number of subordinates a supervisor can supervise
(d) a limit to delegation of authority to the subordinate
89. Establishment of management by objectives presupposes
(a) that limits of authority are not defined
(b) that the employees are provided with result expected
(c) unlimited freedom to operate in the assigned task
(d) unlimited freedom to set goals
90. Each subordinate should have only one superior whose command he has to obey. This is
known as
(a) Scalar principle (b) Exception principle
(c) Unity of command principle (d) Authority-responsibility principle
91. Minimum wages are fixed by the
(a) trade unions
(b) employers
(c) state government merits
(d) Courts of Law
92. Brainstorming is used by the management for
(a) work allocation on the shop floor
(b) generating alternative for problem solving
(c) the promotion of research and development
(d) training employees
93. Which one of the following is the oldest form of organization ?
(a) Functional organization
(b) Line organization
(c) Line and staff organization
(d) Departmentation
94. The given chart represents

(a) simple matrix structure


(b) complex matrix structure
(c) decentralization
(d) General manager's span of control
95. Is card indexing system and improvement over simple indexing system ?
(a) Yes, because it facilitates location of any name or subject with the minimum of searching as
the cards are arranged in an alphabetical order
(b) Yes, because the cards can be arranged in a particular order and the. order cannot be
changed at will
(c) No, because the cards wanted for reference cannot be taken out without holding up the work
of recording of information ,as the other cards are left behind
(d) No, because the system has a limited capacity for expansion as the number of drawers
cannot be increased as desired

96. Which one of the following is the latest and most form of communication ?
(a) Speed post (b) Telex
(c) Fax (d) E-mail
97. Which one of the following pairs is correctly matched?
(a) Manual of office procedures------ In its absence the workload cannot be distributed equitably
and full-day's work cannot be assigned to different employees

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 12


(b) Methods study-------- Determine the share of things pertaining to office activities and
provide a broad guide to the course of future operation
(c) Organizing Undertaken by the office manager in respect of office services only
(d) Office policies Compiled for the information and guidance of an office personnel
98. O & M in office management refers to
(a) operations and management planning
(b) organization and management
(c) office orders and manuals
(d) none of the above

99. A meeting of the Board of Directors must be held at least once every
(a) two months
(b) two months and at least three such meeting must be held every year
(c) three month and at least four such meeting must be held every year
(d) six months

100. The power to make cans on shares can be exercised by the


(a) shareholders of the company in general meeting
(b) company secretary on his own
(c) Board of Directors of the company
(d) Managing Directors of the company
101. One of the important powers that must be exercised by the Board of Directors. and cannot
be delegated to a committee or any of the managerial personnel is the power to
(a) issue debentures
(b) take decisions on investment of company funds
(c) make loans
(d) declare dividends
102.Auditors of a company have to report to the
(a) Board of Directors
(b) Managing Director
(c) institutional investors
(d) shareholders at the annual general meeting
103. The annual general meeting can be called by the
(a) Company Secretary
(b) Board of Directors
(c) Managing Director
(d) non-executive director of the company 1
104. Under the companies Act, -1956, the Balance Sheet and Profit and loss account of a
company are required to be signed by the manager or the secretary of the company and by how
many directors including the Managing Director?
(a) One (b) Two (c) Three (d) All
105.Special audit can be ordered by
(a) preference shareholders
(b) the Central Government
(c) SEBI
(d) debenture holders
106.A law graduate with specialization in company Law can be appointed as company secretary
of a company having a id-up capital of
(a) Above one core rupees
(b) Above two crores rupees
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 13
(c) Above five crores rupees
(d) None of the above

Directions: The following fourteen items consist of two statements one labeled the Assertion At
and the other labeled 'Reason R' You are to examine these two statements carefully and decide
if the Assertion A and the Reason R are individually are and if so, whether the Reason is a
correct explanation of the Assertion. select your answers to these items using the codes given
below and mark your answer sheet accordingly.
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but R is not a correct explanation of A
(c) A is true but R is false
(d) A is false but R is true
107. Assertion (A) : A construction company which by .Memorandum and Articles had powers
to borrow and lend carries on a banking business. This is considered to be ultra vires the
memorandum
Reason (R) : The borrowing and lending should be received to the main (construction) activity
only.
108. Assertion (A) : A minor can be admitted to the benefits of partnership with the consent of
all the partners.
Reason (R) : His liability is confined only the extent of his share in the profits and property of
the firm.
109. Assertion (A) : The auditor should examine the “Objects clause" of the Memorandum of
Association.
Reason (R) : This would ensure that the company is carrying on business as specified in the
Memorandum of Association.
110. Assertion (A) : The auditor of a proprietary firm need not be bound by professional
propriety.
Reason (R) : Proprietary auditor is responsible only to the person (s) who appoints (s) him.
111. Assertion (A) : The main purpose of auditing is to verify that the accounts have been
prepared according to the principles of accounting and to see whether the financial statements
so prepared reflect a true and fair view of the state of affairs of a business.
Reason (R) : Auditing starts after the completion of recording of transactions in the books of
account.
112. Assertion (A) : The auditor should visit the particular concern at intervals and check the
book of accounts.
Reason (R) : Some precaution is required to be taken by the auditor to avoid weaknesses of
continuous audit.

113. Assertion (A) : Return on Investment is the ultimate relationship between earnings and
investment.
Reason (R) : Sales play the pivotal role in such a relationship as sales govern the earnings and
investments in turn government sales.
114. Assertion (A) : In accounting, a distinction is made between the business and the owner .
Reason (R) : Accounting concepts are based on objectivity and not on subjectivity.
115.Assertion (A) : Materiality concept refers to the state of ignoring relatively small items and
values from accounts.
Reason (R) : The effort involved in allocating the cost of a small item over a long period should
be justified m terms of the benefit derived from this operation. Therefore. cost of such items
may be treated as expenses for the period In which they are acquired.

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 14


116. Assertion (A) : In a joint stock company, the shareholders have very restricted powers.
Reason (R) : The personality of the company is separate and distinct from the humans who
compose it.
117. Assertion (A) : Prediction of share price movement in a stock exchange is almost
impossible.
Reason (R) : Speculative activity has made the fundamentals of shares quite insignificant.
118. Assertion (A) : The investors in the capital market have been showing a decisive shift in
favour of fixed income instruments.
Reason (R) : The debt instruments have active secondary market.
119. Assertion (A): The floating policy protects the policy holder against errors and omissions.
Reason (R): Goods are insured even if the policy holder fails. to report that goods have already
been forwarded from the place of shipment.
120. Assertion (A): Social responsibility of business is an idea that cannot be put into practice
by most of the businesses.
Reason (R) : There are no norms to measure the extent of responsibility towards each segment
of the society

Commerce 98
1. A second hand machinery was purchased for Rs. 1,00,000 five years ago and was overhauled
by carrying out some current repairs at a cost of Rs.10,000. It has also accumulated depreciation
of Rs. 50,000. It has been disposed of in the beginning of the sixth year for Rs. 60,000.
Profit/loss on such disposal shall be
(a) Profit of Rs. 10,000
(b) Loss of Rs. 50,000
(c) Loss of Rs. 40,000
(d) No profit, no loss
2. Match List I with List II and select the correct answer :
List I List II
A. Income measurement 1. Accrues to owner's equity
B. Expense recognition 2. Revenue recognition
C. Basis for realisation in 3. Matching revenue and expenses
accounting
D. Recognized revenue 4. Accounting period
ABCDABCD
(a) 3 4 2 1 (b) 3 4 1 2
(c) 2 3 4 1 (d) 2 3 1 4
3. It is given that the cost of the stock is Rs. 100. However, its current market price is Rs .95
(buying) and Rs. 90 selling). If the market price is interpreted in the sense of replacement cost,
the stock should be valued at
(a) Rs.95 (b) Rs. 100 (c) Rs.90 (d) Rs.93
4. In the last-in-first-out (LIFO) method, the closing stock is valued at
(a) a price which is paid for the last consignment
(b) a price which is paid for the earlier consignment
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 15
(c) an average price of all the consignments
(d) none of the above

5. Charging a period for the proportionate cost of an intangible asset is termed as


(a) depreciation (b) diminution
(c) amortization (d) expiration
6. Obsolescence means decline in the value due to
(a) fall in the market price (b) physical wear and tear
(c) innovations and inventions (d) efflux of time
7. Concept of conservation refers to taking into account
(a) all profit
(b) only cash profit
(c) only profit realised
(d) profit realised and all possible losses
8. Which one of the following accounting standards is NOT mandatory in India ?
(a) Fixed assets accounting and revenue recognition
(b) Inventory and depreciation accounting
(c) Non-Monetary assets and fixed assets
(d) Monetary assets and depreciation accounting
9. If the total charge of depreciation and maintenance is considered, the method which would
provide a uniform charge is
(a) Annuity method
(b) Straight-line method
(c) Diminishing balance method
(d) Insurance policy method
10. Which of the following expenditures are to be treated as revenue expenditure ?
1. Interest paid on money borrowed during construction period.
2. Cost of Patent Rights.
3. Loss of uninsured stock due to fire.
4. Retirement gratuity paid to an employee
(a) 1, 2 and 3 (b) 2, 3 and 4
(c) 3 and 4 (d) l and 2
11. Payment of compensation to a worker, who has been discharged from service, is a
(a) Capital expenditure
(b) revenue expenditure
(c) deferred-revenue expenditure
(d) non-business expenditure
12. Expenditure incurred on research is an example of
(a) Capital expenditure
(b) revenue expenditure
(c) deferred-revenue expenditure
(d) party capital expenditure and partly revenue expenditure
13. Rs. 19,500 debited to building repairs on 31st Dec.1993 included Rs 9,500 as the cost of
building a small room for the watch- man bill of Rs. 800 for color wash of the whole building
during the year was not received till Dec. The amount to be debited to profit & loss account
would be
(a) Rs. 20,300 (b) Rs.19,500
(c) Rs. 10,800 (d) Rs.9,500
14. The term loan of Rs. 5,00,000 was received from IFCI. It was used as under :
1. Rs. 2,00 ,000 was advanced to suppliers for capital work in progress and
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 16
2. Rs. 3,00,000 was used for financing the working capital. The interest payable would be
treated (a) on both (1) and (2) as capital expenditure
(b) on (1) as capital expenditure and on (2) as revenue expenditure
(c) on (1) as deferred expenditure and on {2) as revenue expenditure
(d) on (1) as deferred revenue expenditure and on (2) as capital expenditure
15. The basic flow of activities of a business firm follows a certain cyclical sequence. A
business would like to have as many such cycles as possible during a given time period, say a
year. What will be the sequential flow of some of these activities in the cycle ?
1. Financing decision.
2. Investment decision.
3. Disposal of output.
4. Acquisition of resources.
(a) 2, 1,4,3 (b) 4, 1,2,3
(c) 1,3,4,2 (d) 2,3, 1,4
16. Provision for discount on debtors shall be made on
(a) Book debts before incurring bad debt and before providing for bad debt
(b) Book debts after incurring bad debt and after providing for bad debt
(c) Book debts before incurring bad debt but after providing for bad debt
(d) Book debts after incurring .bad debt but before providing for doubtful debt
17. When sale is Rs. 4,80,000, gross loss is 25% on cost, purchase is Rs. 3,50,000 and closing
stock is Rs. 60,000, the stock in the beginning would be :
(a) Rs 70,000 (b) Rs 94,000
(c) Rs. 1,34,000 (d) Rs.3,50,000
18. Closing stock appearing in trial balance will be taken to
(a) trading account only
(b) balance sheet only
(c) trading account and balance sheet
(d) profit & loss account only
19. In a trial balance, debtors appear at Rs. 45,000. Provision for doubtful debts at 5% to be
made after considering the following adjustments :
1. An amount of Rs. 1,000 is included in debtor who is bankrupt and his estate is expected to
realize 50 (fifty) paise in the rupee
2. Debtors include an amount of Rs. 2,000 for goods supplied to proprietor.
3. Bills receivable include a dishonored bill for Rs. 1,000.
4. Goods sold in 'Sale or Return' basis not approved by the customer for &. 5,000 recorded as
sale.
5. Debtors include an amount of Rs. 500 from a customer whose financial position is doubtful.
The total provision to be made for doubtful debts is
(a) Rs. l,900 (b) Rs. 2,250
(c) Rs. 2,425 (d) none of the above
20. In the event of dissolution of a firm, the partners' personal assets are first applied for
payment of
(a) the personal liabilities
(b) the firm's liabilities
(c) both the personal and firm's liabilities
(d) the preferential and tax liabilities

21. ' A' and 'B' are partners in a business sharing profits in the ratio of 5 : 3. They admit 'C' as a
partner with 1/4 share in the profits which he acquires 3/4 from 'A' and 1/4 from 'B'. He pays
Rs. 4,000 as his share of goodwill. 'A' and 'B' will be credited by
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 17
(a) Rs. 2,500 and Rs. 1,500 respectively
(b) Rs. 2,000 each
(c) Rs. 1,000 and Rs. 3,000 respectively
(d) Rs. 3,000 and Rs. 1,000 respectively
22. ‘A' and ‘B', who are partners, share profits in the ratio of 7: 3. 'C' is admitted as a new
partner. ' A' surrenders 1/7 of his share and 'B' surrenders 1/3 of his share in favor of ‘C'. The
new profit sharing ratio will be
(a) 6 : 2 : 2 (b) 4 : 1 : 1
(c) 3 : 2 : 2 (d) none of the above
23. ' A' and 'B' are two partners of a firm having capitals of Rs. 15000 and Rs. 5000
respectively, snaring profit and loss in the ratio of 2 : 1. On dissolution of the firm the assets
realised is : 1st installment Rs. 3000 ; 2ndinstalment Rs.5000 Under Proportionate Capital
Method, the loss to 'B' will be
(a) Rs.1000 (b) Rs.2100 (c) Rs.3000 (d) Rs.4000
24. A, B, C, D are partners sharing profit and losses in the ratio 3 : 3 : 2 : 1. The partnership is
dissolved and D becomes insolvent. C brings only his share of loss and shows inability to
contribute any thing towards D's deficiency. According to Garner Vs Murray ruling. D's
deficiency in the total will be shared by
(a) A and B in their capital ratio
(b) A, B and C in their profit sharing ratio
(c) A, B and C in their capital ratio
(d) A, B and C equally
25. According to Companies Act, "reserve capital" is created
(a) for a specific purpose at any time during its working life
(b) for issue to the existing shareholder as rights issue of shares
(c) as the uncalled portion of share capital of a limited company to be called only in the event of
winding up
(d) for conversion of FCDS into equity shares
26. If a company adopts Table' A', the compare is required to pay interest on calls in advance at
the rate of
(a) 8% (b) 7% (c) 6% (d) 5%

27. Match List I with List II and select the correct answer :
List I List II
(Items of balance sheet (Heading of balance sheet)
of a company)
A. Profit prior to Incorporation 1. Provisions
B. Proposed dividend 2. Miscellaneous expenditure
C. Interest paid out of Capital 3. Current liabilities
D. Unclaimed dividend 4. Reserves and Surplus
ABCDABCD
(a) 4 1 3 2 (b) 4 1 2 3
(c) 1 4 2 3 (d) 1 4 3 2
28. Amount set apart to meet probable losses on account of bad debts is a
(a) liability (b) reserve
(c) provision (d) contingent liability
29. Which one of the following is NOT a current Liability ?
(a) Acceptances
(b) Local installment payable in the current year
(c) Temporary bank overdraft
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 18
(d) Arrears of preference dividend
30. Consider the following statements : Redeemable preference shares can be redeemed out of
1. sale proceeds of the new issue of shares.
2. Sale proceeds of the new issue of debentures.
3. profits available for dividends.
4. Sales proceeds of the assets of the company.
Of these statements :
(a) 1 and 3 are correct (b) 1 alone is correct
(c) 2, 3 and 4 are correct (d) 1, 2, 3 and 4 are correct

31. Match List I with List II and select the correct answer:
List I List II
A. Balance of Debenture 1. Realisation account
Redemption Fund
B. Balance of Sinking Fund account 2. Funds-Flow statement
for the replacement of an asset
C. On dissolution of a firm, the 3. General Reserve
provisions made for doubtful debts
appearing in Balance sheet
D. Financial consequences of 4. Asset account
business operations
ABCDABCD
(a) 1 2 3 4 (b) 3 4 1 2
(c) 1 2 4 3 (d) 3 4 2 1
32. A company .issue 10,000 shares of Rs. 10 each at a discount of 10% payable as follows : On
application Rs. 2.50 On allotment Rs. 3.00 On first & final call Rs. 3.5 A holder of 100 shares
did not pay the final call and his shares were forfeited. Share Capital a/c will be debited by
(a) Rs.650 (b) Rs.850
(c) Rs, 1000 (d) Rs.900
33. Whenever debentures are cancelled, any profit on cancellation is transferred to
(a) profit and loss account
(b) sinking fund account
(c) capital redemption reserve account
(d) capital reserve account
34. Given that :- Closing Stock Rs. 30,000 Opening Stock Rs, 20,000 Sales Rs. 1,00,000
Administrative and selling expenses Rs. 20,000 Purchases Rs. 70,000 the operating ratio is
(a) 50% (b) 65% (c) 75% (d) 80%
35. Match List I with List II and select the correct answer :
List I List II
A. EAIT No. of equity shares 1. Liquidity outstanding
B. Debt / equity 2. Solvency
C. FA+ long term funds 3. Capital structure
D. CA + CL 4. Overall performance
ABCDABCD
(a) 4 3 2 1 (b) 4 3 1 2
(c) 2 3 1 4 (d) 2 3 4 1

36. If the Stock turnover ratio is 4 times and the collection period is 30.days, the operating cycle
would be
(a) 30 days (b) 60 days (c) 90 days (d) 120 days
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 19
37. Given:
Fixed assets Rs. 10,00,000
Current assets Rs. 6,00,000
Total net profit Rs. 2,60,000
Current liabilities Rs.3,00,000
Which one of the following will be the correct ROI ?
(a) 26% (b) 25% (c) 20% (d) 16.5%
38. Consider the following income statement :

Which one of the following will be the correct 'Fund from operation ?
(a) Rs.73,000 (b) Rs.75,000
(c) Rs.83,000 (d) Rs.92,000
39. Minimum Alternative Tax (MAT) is applicable to the
(a) joint stock company
(b) co-operative society
(c) partnership firm
(d) sole proprietor concern
40. Non-registration of a partnership does NOT affect
(a) the right of a partner to sue the firm
(b) the right of the firm to sue, third parties
(c) the right of a third party to proceed against the firm or its partners
(d) any of the above
41. If a minor chooses to continue as a partner on attaining the age of majority, he \\ill be liable
to the debts of the firm from the date of his
(a) attaining majority
(b) admission to profits of the firm
(c) choosing to become a partner at a subsequent date
(d) guardian giving the options
42. The liability of the Karla in a joint Hindu family is
(a) limited to his interest in the joint family
(b) unlimited
(c) limited to the entire property of the family
(d) limited to the private properties of all the members
43. Which one of the following is NOT an advantage of the incorporation of company ?
(a) Perpetual succession
(b) Limited liability of Members
(c) Capital contributions fofll1ing part of the joint stock of the company
(d) Freedom to do any business
44. Match List I with List II and select the correct answer:
List I List II
(Organisation) (Associated with)
A. Joint stock company 1. Memorandum of Association (M/A)
B. Co-operative society 2. Special Act
C. Statutory corporation 3. Mutual contract
D. Partnership 4. Bye-laws
5. Shareholding
ABCDABCD
(a) 1 4 3 2 (b) 5 2 4 3
(c) 1 4 2 3 (d) 5 2 3 4

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 20


45. Economic oligarchy, fraudulent practices, bureaucratic management and difficulty in
formation are the limitations of a
(a) sole proprietor concern
(b) partnership firm
(c) joint stock company
(d) co-operative society
46. Which one of the following is NOT the distinctive feature of the co-operative form of
business organisation ?
(a) Service before self
(b) Democratic management
(c) Corporate status
(d) One-share o1le-vote system
47. Consider the following statements regarding Indian industries :
1. Industrial modernization has not come up even in a modest way
2. A support system and a regulatory frame work has been developed so as to encourage and
direct the industrial houses to modernize their plants.
3. Considerable advances have been made in the fields of managerial and technological skills in
the country.
4. No effort has so far been made towards attaining the goal of self reliance in the manufacture
of consumer items.
Of these statements :
(a) 1 and 2 are correct (b) 2 and 3 are correct
(c) 3 and 4 are correct (d) 1 and 4 are correct
48. Which one of the following does NOT constitute the purpose of setting up SEBI ?
(a) To protect the interest of the investors in securities
(b) To promote the development of the securities' market
(c) To regulate the global securities' markets
(d) To deal with matters connected with fraudulent and unfair trade practices relating to
securities' markets

49. Financial disintem1ediation results in larger


(a) access to financial institutions
(b) participation of foreign financial institutions
(c) fee-based income
(d) securities-related income
50. Which one of the following BEST supports the theory that Stock Exchange is a secondary
market ?
In a Stock Exchange
(a) securities are bought and sold by way of transfer
(b) an existing holder of securities can dispose of the holdings it another invest of who intends
to buy them
(c) no new investment is created
(d) securities are dealt ill for dual purposes -investment and speculation
51. Match List 1 with List II and select the correct answer :
List I List II
(Type of mutual fund) (Features)
A. Open-ended fund 1. Maximizes short term return to investors
B. Income fund 2. Can sell unlimited number of units
C. Close-ended fund 3. The units are not redeemable at their N A V
D. Growth fund 4. Maximizes long term return to investors
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 21
ABCDABCD
(a) 3 4 2 1 (b) 3 4 1 2
(c) 2 1 4 3 (d) 2 1 3 4
52. Match List I with List II and select the correct answer :
List I List II
A. Screen trading 1. Capital market reforms
B. G. V. Ramakrishna 2. industrial sickness Committee Report
C. B I F R 3. Disinvestment of PSU shares
D. SEBI 4. Stock Exchange.
ABCDABCD
(a) 3 4 1 2 (b) 4 3 2 1
(c) 4 3 1 2 (d) 3 4 2 1
53. Combination of Printing and Dyeing Companies is a type of
(a) vertical combination
(b) horizontal combination
(c) circular combination
(d) allied combination
54. In addition to Consumer Forums which one of the following looks after the interests of
consumers ?
(a) High courts (b) Company Law Board
(c) M R T P (d) Bureau of Industrial Costs and Prices
55. LIBOR refers to
(a) Liberalized system of foreign exchange transfer between Banks
(b) inter-bank lending rate for Eurodollars at London
(c) lowest rate of interest at which banks in London lend Pound Sterling
(d) lowest raleofiI1terest prescribed by the Reserve Bank of India
56. Members of the WTO/GA TT have NOT agreed even in principle on which one of the
following issues ?
(a) Observance of minimum labour standards
(b) Protection of intellectual property rights
(c) Dispute settlement mechanism
(d) Export subsidies to agricultural produce
57. Match List I with List II and select the correct answer: :
List I List II
(some usages in trade & marine insurance) (Practical implication or name)
A. Ex-workers contract 1. C.I.F.
B. Freight paid by Importer 2. Method of settlement of disputes
C. FORCE MAJEURE 3. Minimum obligation for the exporter
D. Arbitration 4. Condition to be included in the contract if natural calamities are to be covered
5. F O B contract
ABCDABCD
(a) 3 5 2 1 (b) 1 2 3 4
(c) 1 2 4 3 (d) 3 5 4 2
58. Which one of the following is NOT a commercial risk ?
(a) Insolvency of the buyer
(b) New restrictions placed on import-export trade
(c) Damage to goods in transit
(d) Change in the exchange rate
59. The average clause in a fire policy states that the insured change it back ,
(a) only that portion of the actual loss suffered as the sum insured bears to total value
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 22
(b) the entire account of the total loss suffered
(c) the entire amount of partial loss suffered
(d) a fixed percentage of loss suffered
60. Consider the following statements :
The social responsibility of business is to
1. do a business as per the public policy
2. obey all the rules and regulations of the Government.
3. make payment of the taxes imposed by the Government.
4. provide no necessarily adequate but good quality of goods.
Of These statements
(a) 2 and 3 are correct (b) 1 and 4 are correct
(c) 1,2 and 3 are correct (d) 1,2,3 and 4 are correct

61. Which of the following pairs are correctly matched ?


1. Henry Fayol Administration Industrial at General.
2. F. W. Taylor The functions, of the Executive.
3. Douglas McGregor The Human Side of Enterprise.
4. Peter Drucker Management Tasks, Responsibilities and Practices
(a) 1,2,3 and 4 (b) 3 and 4
(c) 2 and 4 (d) l and 3
62. According to the Peter Principle, managers tend to
(a) work late as they go higher up the hierarchy
(b) work even beyond their retirement age
(c) get promoted to the level of their incompetence
(d) lose their competence with successive promotions
63. Which of the following constitute man power planning ?
1. Determining human resource requirements both quantitatively and qualitatively.
2. Finding the sources of talented individuals.
3. Planning for the human resource needs of an organisation
4. Reaching out to the right source for procuring the right people.
(a) 1, 2 and 4 (b) 2 and 3
(c) 1 and 3 (d) 1, 2, 3 and 4
64. Which one of the following may NOT necessarily be advantage of co-ordination ?
(a) Effective supervision
(b) Unity of distribution
(c) Creative force
(d) Summarization of all management functions
65. Understanding control does NOT signify understanding
(a) how one controls
(b) what is meant by control.
(c) who controls
(d) what is controlled
66. Consider the following statements :
Strategic management process comprises .
1. goal setting, strategy formulation, administration and strategic control
2. setting courses of action attaining objective, process of seeking key areas and strategy
formulation.
3. integrating the organisation with culture.
4. strategic planning and acting on these plans.
Of these statements
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 23
(a) 1, 2 and 3 are correct (b) 2, 3 and 4 are correct
(b) 1, 2 and 4 are correct (d) 1, 3 and 4 are correct
67. Match List I with List II and select the correct answer :
List I List II
A. Line authority 1. Some people in an organisation are vested with primary source of
authority .
B. Staff authority 2. Some people in an organisation have legitimate right to exert influence
on others
C. Functional 3. Some people in an organisation authority lack independent formal
authority.
D. Forma authority 4. Some people right to control activities of other departments as they
relate to specific staff.
ABCDABCD
(a) 1 2 3 4 (b) 2 4 3 1
(c) 1 3 4 2 (d) 2 3 4 1
68.Consider the given structure of an Organisation :

Which one of the following is represented by the same ?


(a) Druckers' effective structure
(b) Spane of festive control
(c) Functional form of organisation
(d) General Manager's view of the organisation
69. According to Graicuna's theory total number of relations among superior and subordinates
can found by the formula

70. Match List I with List II and select the correct answer :
List I List II
A. Span of control 1. Tile superior helps, through continuous guidance the subordinate
to reach his goals
B. M. B. O. 2. Numerical limit of subordinates to be supervised by an executive C. M. B. E. 3.
Subordinate remains accountable to his superior and the superior
has authority to demand accountability from his subordinate.
D. Delegation 4. The management will concern itself and of confirms its activities
of authority to those areas and operations where the actual performance is
short of the target.
ABCDABCD
(a) 1 2 3 4 (b) 1 2 4 3
(c) 2 1 3 4 (d) 2 1 4 3
71. Consider the following statements :
1. MBO is a control technique in which managers devote time only on the areas of deviation.
2. MBO integrates the individual with the organization and the organization with the
environment.
3. In MBO the control over people is shifted to control over operations
4. The MHO principle must be accompanied in practice by the principle of critical-point control
Of these statements:
(a) 1 and 2 are correct (b) 2 and 3 are correct
(c) 3 and 4 are correct (d) 1 and 4 are correct
72. Match List I with List II and select the correct answer :
List I (Name) List II (Model)
A. Kurt Levin 1. Action Research process model
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 24
B. H.J. Leavitt 2. Sequential process model
C. Larry Greener 3. System model
D. Floyd C. Mann 4. Three-step model
ABCDABCD
(a) 1 2 3 4 (b) 1 4 3 2
(c) 3 2 1 4 (d) 4 3 2 1
73. In the process of controlling office management, certain steps are normally taken. These
include
1. Analyzing the actual performance.
2. Finding out the reasons for discrepancies.
3. Evaluating the performance.
4. Establishing the standards of work performance.
The correct sequence in which these steps are usually taken is
(a) 4, 1, 2, 3 (b) 1, 4, 2, 3
(c) 1, 4, 3, 2 (d) 4, 1, 3, 2

74. Steps to be taken in a selling system include :


1. Receipt of order.
2. Processing order
3. Shipment of merchandise.
4. Accounting for sale.
The correct chronological sequence of these steps is
(a) 1, 4, 3, 2 (b) 1, 4, 2, 2, 3
(c) 1, 2, 4, 3 (d) 1, 2, 3, 4
75. Which of the following advantages accrue from vertical filing ?
1. The system has universal application, as all types of papers and documents can be filed.
2 It products ample scope for the expansion of the filing facility
3. It is comparatively a cheap method.
4. The papers are kept in a chronological order
(a) 1 and 3 (b) 1 and 2
(c) 2, 3 and 4 (d) 1, 2, 3 and 4
76. Organisation and Methods aim at simplification of office procedures through
(a) elimination of all unnecessary work, minimizes the number of forms and direct
communication (b) elaboration of specific work processes for better implementation
(c) discarding all the records and treating each work on merit
(d) allowing existing procedures to continue without adding an new procedures or amendments
77. The latest generation of personal computer (PCs) being used in an office set-up is
(a) PC XT (b) PC Pentium
(c) PC A T (d) PC 486
78. Which of the following advantages could be derived from the use of Franking machine?
1. It saves time because of its speed.
2. Valuable facts and figures can be obtained.
3. It is very convenient to use.
4. It ensures greater accuracy.
(a) 1 and 4 (b) 1 and 3
(c) 1 and 2 (d) 2 and 3
79. According to the latest guidelines a company cannot issue
(a) both equity and preference shares simultaneously
(b) non convertible debentures
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 25
(c) irredeemable preference shares
(d) partially convertible debentures
80. To enable a company to pay dividends a special authority is
(a) not needed either in the Memorandum or in the Articles
(b) needed either in the Memorandum or in the Articles
(c) needed only in tile Memorandum
(d) needed only in the Articles
81. A company can invest money in another company only if it is so authorized by its
(a) Memorandum of Association
(b) Articles of Association
(c) Auditors
(d) Company Secretarial
82. Which one of the following is NOT a feature of a Private Company as per Indian
Companies Act?
(a) Limitation on the number of its members
(b) Restriction on the right to transfer its shares
(c) Ban on floating of debentures
(d) Prohibition of any invitation to tile public
83. According to the Companies Act. which one of tile following companies can commence
allotment of shares even before the minimum subscription is subscribed or paid ?
(a) Chartered Company
(b) Private Company
(c) Government Company
(d) Public Limited Company
84.Which one of tile following types of Companies deals with only its shareholders for their
benefit ?
(a) Private Limited Companies
(b) Chit Fund Company
(c) Nidhi Company
(d) Banking Company
85. Which one of the following is known as Registered Capita of the Company ?
(a) Paid up capital
(b) Authorized capital
(c) Uncalled capital
(d) Reserve capital
86. Those companies which can register themselves without the word "limited" under license
granted by Central Government are
(a) Private Companies
(b) Charitable Companies
(c) Public Companies
(d) None of the above
87. Which one of the following reports is to be placed before the Parliament by a Government
company?
(a) Director's Report
(b) Annual Report
(c) Income Report
(d) Statutory Report
88. Share premium received by issuing shares call be used for
(a) payment of dividend
(b) issue of bonus shares
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 26
(c) remuneration to management
(d) any business purpose
89. Which one of the following is a joint stock company as per Companies Act, 1956 ?
(a) A charitable trust
(b) A partnership firm with fixed capital
(c) A society with fixed reserve fund
(d) None of the above
90. Which one of the following documents is known as Doctrine of constructive notice ?
(a) The prospectus of the company
(b) The certificate of commencement of business
(c) The Memorandum and the Article of Association
(d) List of working directors

91. Match List I with List II and select the correct answer :
List I List II
A. Compensating 1. Not recording a business transaction
errors
B. Errors of omission 2. Charging a Revenue item to capital
C. Errors of principle 3. Writing a debit item on the credit side and a credit item on the debit
side of equal amount
D. Errors of 4. Posting a correct amount to a wrong Account
commission
ABCDABCD
(a) 3 1 4 2 (b) 2 1 4 3
(c) 3 1 2 4 (d) 2 1 3 4
92. Audit report along with accounts is given by
(a) Statutory Auditor (b) Internal Auditor
(c) Government Auditor (d) Secretariat Auditor
93. Consider the following statements :
Management audit may
1. cover performance audit.
2. protect the interest of the share holders
3.cover proprietor audit
4. refer to audit of work done by the management accountant.
Of these statements
(a) 1 and 2 arc correct (b) 3 and 4 arc correct
(c) 1 and 3 are correct (d) 2 and 4 are correct
94. Management audit is ordered by the
(a) Workers of a company
(b) Government
(c) Board of Directors
(d) Securities Exchange Board of India
95. When an auditor detects material weaknesses in 1he internal checks and control system of
the company under audit, he should report his findings as per
(a) ICAI orders (b) SEBI orders
(c) MAOC AR orders (d) ICW AI orders
96. Which of1he following statements are true ?
1. Dividend can be paid out of capital profits if only Articles of Association of the company
permits.
2. Goodwill taken over may be written off out of profit prior to Incorporation
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 27
3. Dividend can be paid out of current profits in spite of un-provided depreciation for past
years. 4. Capital redemption reserve can be used for issuing fully paid bonus shares to the
shareholders according to Company's Act.
(a) l and 2 (b) 1, 2 and 3
(c) 2 and 4 (d) 3 and 4
97. The remuneration of an auditor of a partnership firm is fixed by
(a) the Partnership Act
(b) The Companies Act
(c) the Government
(d) none of the above
98. If the shareholders fail to appoint or reappoint auditors of limited company in au Annual
General Meeting. the vacancy will be filled by the
(a) Securities Exchange Board of India (b) Comptroller and Auditor General of India
(c) Central Government (d) Registrar of companies
99. Match list I List II and select the correct answer :
List I List II
(Appointment of auditor) (Appointing authority)
A. First auditor of a non-Govt. 1. Shareholder of the company
limited company
B. Reappointment of a retiring 2. Board of directors limited of the company
auditor of non-Govt limited
C. Auditor of a Government 3. Central Government on the advice of
Company Comptroller the and Auditor General of India
D. Auditor of a non-Govt. 4. Central Government
limited company, when
shareholders fail to
reappoint or reappoint an auditor
ABCDABCD
(a) 1 2 4 3 (b) 2 1 3 4
(c) 1 2 3 4 (d) 2 1 4 3
100. In so far as a company is concerned, which one of the following pairs is NOT correctly
matched ?
(a) Internal audit Obligatory
(b) Statutory audit Mandatory
(c) Continuous audit Optional
(d) Management audit Voluntary
101. A file which contains rules governing the organisation Under audit is known as
(a) current file (b) permanent file
(c) routine file (d) precedence file
102. Where the auditor places a high degree of reliance on an internal control procedure. the
acceptable risk of over reliance would be
(a) low (b) high
(c) moderate (d) nil
103. Under the Companies Act. which one of the following powers can be exercised by the
Board of Directors ?
(a) Power to sell any of the company's undertakings
(b) Power to make call
(b) Power to borrow money in excess of the paid up capital
(d) Power to reappoint an auditor
104.The statutory meeting of the company must be held within six months
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 28
(a) from filing of statement in lieu of prospectus
(b) of obtaining the certificate of commencement of business
(c) of obtaining the certificate of incorporation
(d) from the date when the first Board of Directors meeting was held

105. A public limited company can offer pre-emptive rights only to the
(a) directors of the company
(b) existing equity shareholders
(c) debenture holders
(d) short-term creditors of the company
106. Under the law, the inspector who does the inspection of the company's accounts has to
submit his report to the
(a) company's Board of Directors
(b) Secretary to the company
(c) Central Government
(d) shareholders of the company
107. Account books for how many preceding years should be preserved in good condition ?
(a) 5 (b) 8
(c) 10 (d) 13
108. A qualified company Secretary is needed to be appointed as Secretary to a company only
on the basis of the
(a) business of the company
(b) paid up capital of the company
(c) location of the company
(d) listing of the company on any stock exchange
109. Match List I with List II and select the correct answer :
List I List II
A. Statutory functions of a Secretary 1. Non-statutory function
B. Advice to the Managing Body 2. Executive function
C. Filing tax returns 3. Functions imposed by law
D. Image of organisation 4. Public Relations Officer
ABCDABCD
(a) 1 2 3 4 (b) 3 2 1 4
(c) 4 3 2 1 (d) 3 4 1 2

Directions:- The following 11 (eleven) items consist of two statements, one labeled as '
Assertion A' and the other labeled .as 'Reason R'. You are to examine these no statements
carefully and decide if the Assertion A and the Reason R: are individually true and if so,
whether the Reason is a correct explanation of the Assertion. Select your answers to these items
using the codes given below and mark your answer sheet accordingly.
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but R is NOT the correct explanation of A
(c) A is true but R is false
(d) A is false but R is true
110. Assertion (A) : Amount realised on the disposal (sale) of discarded machine of the factory
should be treated as revenue receipt.
Reason (R): Sale proceeds are usually of revenue in nature.
111. Assertion (A) : Financial leverage is beneficial only when the rate of earning is higher than
the cost of debt.

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 29


Reason (R): Debt-equity ratio indicates the short- term financial soundness of a business
concern.
112. Assertion (A) : Now-a-days, it is obligatory on the part of companies to disclose in their
Annual Reports, work done for the benefit of the society .
Reason (R): Annual Reports are used by members of the society in one capacity or another.
113. Assertion (A) : Co-ordination implies the avoidance , of all splintering efforts.
Reason (R): One of the four benefits of co-ordination is unity of direction.
114. Assertion (A) : Break-even chart merely depicts the relationship between sales and
expenses in such a way as to show at what volume revenues exactly cover expenses.
Reason (R): The break-even chart shows that at any lesser volume of sale, the company would
suffer a loss. and at a greater volume of sale it would enjoy a profit.
115. Assertion (A) : Programmed decisions are under conditions of certainty.
Reason (R): Conditions of certainty provide . reliable information about consequences of
alternatives
116. Assertion (A) : Management by Exception is not a control technique
Reason (R): The principles of Management by Exception has first propounded by F. W. Taylor
117. Assertion (A) : Audit is conducted to find out the financial position of a concern.
Reason (R): The objects of audit are the detection and prevention of errors and fraud
118. Assertion (A) : Internal audit must be carried out by a qualified Chartered Accountant.
Reason (R): It is a management tool.
119. Assertion (A) : If the directors of a company commit any irregular act but within the
provisions of the Companies Act or Memorandum of Articles, such acts will be binding on the
company. But, in turn, the company may claim damages from the directors for such acts.
Reason (R) : The directors have to conduct the , affairs of the business in a manner which is not
detrimental to the interests of the company.
120. Assertion (A) : An accounting principle is that the relatively small item and values should
be ignored from accounts
Reason (R) : The cost of the efforts in the allocation of small. items over a long period does not
justify the t benefit deprived from this operation and the cost of such items is treated as expense
for the period in which they are acquired.

Commerce 99

Time Allowed : Two Hours Maximum Marks : 300

1. what is the correct sequence of the following functions of a Manager in an organization?


1. Motivating
2. Controlling
3. Organizing
4. Planning
(a) 4, 3, 2, 1 (b) 4, 3, 1, 2
(c) 3, 4, 2, 1 (d) 3, 4, 1, 2
2. According to Need Hierarchy Theory of Maslow, human needs arise arise in which one of
the following orders ?
(a) Physiological needs -- Social need -Safety needs - Ego needs -Self-actualization needs
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 30
(b) Physiological needs -- Social needs- Ego needs - Safety needs -Self-actualization needs
(c) Physiological needs --Safety. needs -Social needs - Ego needs -Self-actualization needs
(d) Physiological needs--Safety needs -- Ego needs Social needs -Self-actualization needs

3. Scalar principle of organization implies that


(a) all subordinates have only one. supervisor
(b) line of authority is defined clearly
(c) manager can directly supervise only a limited number of persons
(d) The subordinates need not necessarily have a supervisor
4. consider the following statements
1. Planning is looking ahead.
2. Controlling is looking back
3. Delegation multiplies leadership.
4. Life insurance is a contract of indemnity.
(a) 1, 2 and 4 are correct (b) 1, 2 and 3 are correct
(c) 1, 3 and 4 are correct (d) 2, 3 and 4 are Correct

5. To indicate the functions of management, the catchword POSDCORB was coined by


(a) Luther Gulik (b) Henry Fayol
(c) Ernest Dale (d) None of the above
6. Job analysis involves
1. Developing training skills, knowledge and personal traits of the worker necessary for a
specific job.
2. Identifying machines, tools and equipment to be used for the job.
3. Identification of the task to be performed by an individual.
4. Determination of the materials, products or services needed.
The correct sequence of these steps while conducting job analysis is:
(a) 3, 2, 4, 1 (b) 3, 2, 1, 4
(c) 2, 3, 4, 1 (d) 2, 3, 1, 4
7. Consider the following statements:
1. Authority flows downward but responsibility flows upward.
2. Authority should be equal to responsibility.
3.both authority and responsibility are divisible.
4. If delegation is the end then decentralization should be the means.
(a) 1 and 2 are correct (b) 3 and 4 are correct
(c) 1, 2 and 3 are correct (d) 2, 3 and 4 are correct
8. Following are the steps in the process of Delegation of Authority:
1. Assignment of task.
2. Creation of responsibility.
3. Granting authority.
4. Fixing accountability.
The correct sequence of these steps is:
(a) 1, 3, 2, 4 (b) 1, 4, 3, 2
(c) 1, 3, 4, 2 (d) 1, 2, 3, 4
9. Consider the following Organization Chart:

Which one of the following is indicated by this chart ?


(a) Wide span (b) Multiple levels of supervision
(c) Narrow span (d) Decentralization

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 31


10. Match List I (Wage incentive plans) with List II (Name o contributors} and select the
correct answer:
List I List II
A. Premium Plan 1. Gantt
B. Efficiency Bonus Plan 2. Emerson
C. Points Premium Plan 3. Beaux
D. Task and Bonus Plan 4. Taylor
5. Halsey
ABCDABCD
(a) 5 3 2 1 (b) 1 2 3 4
(c) 2 3 4 1 (d) 5 2 3 1
11. Match List I (Management terms) with List II (Factors related to these terms) and select the
correct answer :
List I List II
A. Resisting forces of change 1. Organization
B. O. D. 2. New policy
C. Driving. forces of change 3. Fear
D. Conflict 4. Interpersonal relationships
ABCDABCD
(a) 3 1 2 4 (b) 1 2 3 4
(c) 1 3 2 4 (d) 3 4 2 1
12. Which one of the following routines best describes the chronology of steps taken in the
selling process?
(a) Receipt of order, invoicing, processing order, and shipment of goods
(b) invoicing, processing order, shipment of goods, accounting for sale
(c) Receipt of order, processing order, accounting for sale, shipment of goods
(d) Processing order, invoicing, shipment of goods, accounting for sale.
13. Is Card indexing an improvement over the simple indexing system?
(a) Yes, because the cards can be arranged in a particular order and the order can't be changed at
will
(b) No, because the cards wanted for reference can't be taken out without holding up the work
of
recording information as other cards are left behind
(c) Yes, because it facilitates location of any name or subject with the minimum of searching, as
the cards are arranged in alphabetical order
(d) No, because the system has a limited capacity for expansion, as the number of drawers can't
be increased or desired
14. The altered Memorandum of Association must be filed with the Registrar within
(a) 6 months of the Company Law Board's order
(b) 5 months of the Company Law Board's order
(c) 3 months of the Company Law Board's order
(d) 2 months of the Company Law Board's order
15. Whenever a company wants to alter its Memorandum for changing the place of registered
office from one State to another, it has to pass.
(a) ordinary resolution
(b) special resolution
(c) resolution requiring special notice
(d) unanimous resolution
16. The document required to be filed with the Registrar of Companies at the time of
incorporation of a company includes
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 32
(a) An agreement, if any, which the company proposes to enter into with any individual for
appointment as manager or managing director
(b) the Prospectus
(c) an application for name availability
(d) a statement of minimum subscription
17. A public company can be called as a body corporate alters it
(a) Receives certificate of commencement of business
(b) issues prospectus
(c) receives certificate of incorporation
(d) Receives approval from the Registrar for the proposed name of the company
18. Consider the following statements :
1. A Private Limited Co. must have at least 3 (three) directors and a Public Ltd. Co. at least
(seven) Directors.
2. Liability of shareholder of a Public Ltd. Co. is limited to the extent of the total authorized
Capital and liability of the company.
3. Transfer of shares is restricted in case of Private Ltd. Co.
4. A Private Ltd. Co. before commencement of business must issue statement in lieu of
Prospectus.
(a) 2 alone is correct (b) 2, 3 and 4 are correct
(c) 3 alone is correct (d) 1,2 and 4 are correct
19. Under: Section 68A of the Companies Act 1956, any person who induces a company to
allot shares or register transfer of shares in a fictitious name shall be punishable with
(a) A fine of Rs. 500
(b) a fine of Rs. 5,000
(c) imprisonment up to 5 years
(d) a fine of Rs. 500 and imprisonment up to 5 years
20. Which one of the following is an 'Ordinary Business' for the purpose of an Annual General
meeting?
(a) Change in the Articles of Association of the company
(b) Issue of debentures
(c) Change in the 'objects clause' of the Memorandum of Association
(d) None of the above
21. When an act is performed or a transaction is carried out, which, though legal n itself, is not
authorized by the object clause in the Memorandum or by Statute, It is said to be
(a) Ultra vireos the powers of the company
(b) intro vireos the powers of the company
(c) ultra vireos the powers of the Board
(d) ultra vireos the implied authority
22. An exception to the application of Doctrine of Indoor Management is made when
(a) a person represents the company with or without actual authority to do so
(b) outsiders have knowledge of irregularity of the conduct
(c) the sum of the company is not affixed on the documents Issued to outsider’s
(d) the directors of the company have delegated authority for the internal management to the
Managing Director
23. A special notice is required for a resolution when
(a) A director is to be removed before the expiry of his period of office
(b) A statutory report has to be adopted
(c) there is alteration of share capital
(d) A Company wants to convene a meeting of creditors
24. A director should obtain his qualification shares within
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 33
(a) one month of his appointment
(b) two months of his appointment
(c) three months of his appointment
(d) six months of his appointment
25. Which one of the following powers CANNOT be delegated to any person by the Board of
Directors ?
(a) Investment of funds of the company
(b) Issue of debentures
(c) Borrowing money otherwise than on debentures
(d) making loans
26. The Board of Directors CANNOT appoint
(a) additional directors
(b) alternate directors
(c) directors in casual vacancy
(d) directors under Section 408 of Companies Act, 1956
27. Special audit of accounts of a company is directed by
(a) Shareholders of the company
(b) Comptroller and Auditor General of India
(c) Company Law Board,
(d) Central Government
28. Section 224 of the Companies Act 1956, deals with
(a) special audit, (b) secretarial audit
(c) cost audit (d) appointment and remuneration of auditors
29. Part II, schedule VI of the Companies Act; 1956 prescribes
(a) Vertical form, of balance sheet
(b) requirements as to profit and loss account
(c) horizontal form of Balance sheet
(d) contents of prospectus
30. Match List l (items) with List II (Section of Companies Act, 1956) and select the correct
answer:
List I List II
A. Appointment of Auditors 1. Sec., 226 (1) by Central Govt.
B. Qualification of Auditors 2. Sec. 224 (5)
C. Appointment of Auditors 3. Sec. 224 (8)
by Board of Directors
D. Remuneration of Auditors 4. Sec. 224 (3)
ABCDABCD
(a) 4 1 3 2 (b) 1 4 2 3
(c) 4 1 2 3 (d) 1 4 3 2

31. A Secretary's duties under the Companies Act are


(a) purely ministerial
(b) either ministerial or administrative
(c) Managerial
(d) supervisory
32. The Secretary of a company is generally appointed by
(a) Registrar of Companies
(b) Central Government
(c) Board of Directors
(d) Board of Directors with the consent of the Institute of Company Secretaries of India
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 34
33. A person can act as Secretary for NOT more than
(a) 2 companies (b) 3 companies
(c) 5 companies (d) None of the above
Directions : The following 10 (ten) items consist of two statements, one labeled as 'Assertion A'
and the other labeled as 'Reason R'. You are to examine these two statements carefully and
decide if the Assertion A and the Reason R are individually true and if so, whether the Reason
is a correct explanation of the Assertion. Select your answers to these items using the codes
given below and mark your answer sheet accordingly,
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but R is NOT the correct explanation or A
(c) A is true but R is false
(d) A is false but R is true
34. Assertion (A) : A common projectionist argument has been that nurse the baby, protect the
child, guide the boy and free the adult.
Reason (R) : Protection given in most cases creates vested interests, which are averse for the
removal of the protection.
35. Assertion (A) : The matching concept requires that costs be recognized as expenses in the
period in which revenue is realised
Reason (R) : There may not be a match between expenditure and expense over a short period.
36. Assertion (A) : According to Inter-national Accounting Standards Committee, fixed
production expenses should be included in inventory valuation on the basis of normal capacity.
According to the Institute of Chartered Accountants of India, it is for the management to decide
the Question.
Reason (R) : The Question to be decided is whether the fixed production expenses be excluded
from inventory valuation and charged wholly to the revenue of that year or whether these
expenses. Are includes on the basis of normal level of production. The former method IS called
marginal costing' and the latter 'absorption costing'.
37. Assertion (A) : The fixed assets in the balance sheet of a limited company are required to be
shown at cost less depreciation.
Reason (R) : The balance sheet and profit and loss accounts are to disclose a true and fair view.
38. Assertion (A) : Share premium amount can be re- funded in cash to equity shareholders.
Reason (R) : Share premium is usually collected when the market price of shares is higher than
the face value of the share.
39. Assertion (A) : Conventionally, a newly started comp-any should adopt. A low-geared
capital structure where the share of equity capital and reserves is higher than the share of fixed
interest-bearing securities.
Reason (R) : During initial years, the profit is low and the company tries to strengthen its
financial position.
40. Assertion (A) : A new firm can be profitable and yet not be able to pay its debts as they
become due.
Reason (R) : new firms often have problem of having increased investments in inventory and
fixed assets at an amount which exceeds cash generated from operations.
41. Assertion (A) : A company is accountable to the society since it makes use of community
owned assets and other infrastructure facilities and concessions provided by the State from the
tax payers' money.
Reason (R) : The best way of social responsibility reporting is to prepare a Value Added
Statement (VAS) which shows the income earned by shareholders.
42. Assertion (A) : Audit procedure and audit techniques are two different aspects of auditing
but are complementary to each other.

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 35


Reason (R) : Audit procedure is concerned with deter- mining the existence of documentary
evidence and audit techniques are concerned with examination of those evidences.
43. Assertion (A) : The auditor of a partnership firm is appointed under a contract with firm but
not under any statute
Reason (R) : The firm can also appoint him to act as an accountant for preparation of accounts.
44. The author of the book Suma de Arithmetical is
(a) H. A. Castle (b) Luca Paciolli
(c) Adam Smith (d) Batliboi
45. When prices show a rising trend, which one of the following methods of inventory valuation
will result in lower income and lower valuation .of inventory?
(a) FIFO (b) LIFO
(c) Simple average method (d) Weighted average method
46. Under which one of the following methods of depreciation is the amount of the asset never
reduced to zero?
(a) Straight line method
(b) Diminishing balance method
(c) Sum of years digit method
(d) Annuity method
47. Consider the following statements : Secret reserves serve the purpose of
1. Enabling the directors to tide over unfavorable items.
2. Meeting exceptional losses.
3. Increasing the working capital.
(a) 1 and 2 are correct (b) 2 and 3 are correct
(c) 1 and 3 are correct 4 (d) 1,2and 3 are correct
48. A BC analysis is a
(a) System of profit and loss appropriation
(b) technique of financial planning
(c) technique of inventory control
(d) Technique of profit determination
49. A sum of Rs. 50,000 was spent by a factory in overhaul- 19 its existing plant and machinery
and it enhanced its working by five years. The aforesaid expenditure is
(a) capital expenditure (b) Partly capital and partly 'revenue expenditure
(c) Revenue loss (d) deferred revenue expenditure
50. Match List I (Items of Expenditure and Receipt) with List II (Nature of Expenditure and
Receipt) and select the correct answer:
List I List II
A .Replacement cost of 1. Revenue Expenditure
an old asset
B. Special repairing charges 2. Capital Receipt of an asset
C. Huge advertisement 3. Deferred Revenue expenses Expenditure
D. Sale value of an old 4. Capital Expenditure
motor car
ABCDABCD
(a) 4 1 3 2 (b) 4 1 2 3
(c) 1 4 3 2 (d) 1 4 2 3
51. Which one of the following is NOT a capital expenditure?
(a) Legal expenses incurred in raising a debenture loan
(b) compensation paid to a dismissed employee
(c) Brokerage paid to the broker at the time of purchase of land.
(d) Expenses for pulling down an old structure
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 36
52. Outstanding wages is an item of
(a) current asset (b) current liability
(c) non-current asset (d) non-current liability
53. A and B are partners sharing profits and losses in the ratio of 3 : 1 they have agreed to admit
C into the partnership firm, C is given 1/4th share of future profits which he acquires in the ratio
of 2 : 1 from A and B. The new profit-sharing ratio would be :
(a) 4 : 1 (b) 7 : 2 : 3 (c) 3: 1 : 7 (d) 7: 3 : 2
54. A, B, C were partners sharing profits in the proportion of 112, 113 and 116 respectively. On
31st March 1997 their capital stood as follows :
A = Rs. 4,00,000
B = Rs. 3,00,000
C = Rs. 2, 50,000
A sum of Rs. 1,20,000, also appeared as reserve fund in their Balance sheet on this date. B
retires on this date when the good: will of the firm was valued at Rs. 1,80,000 Profit and loss
adjustment account prepared on that date with- out taking goodwill and reserve fund into
consideration showed a net profit of Rs. 28,500 The net amount payable to B will be:
(a) Rs. 3,82,500 (b) Rs. 4,09,500
(c) Rs. 3,63,800 (d) Rs. 4,04,000
55. X and Y are partners sharing profit in the ratio of 1 : 1. They admit Z for 115th share who
contributed Rs. 25,000 for his share of goodwill. The total value of the goodwill of the firm will
be (a) Rs. 25,000 (b) Rs. 50,000
(c) Rs. 1,00,000 (d) Rs. 1,25,000
56. In the absence of an agreement to the contrary, the partners are
(a) entitled to 6% interest on their capitals, only when there are profits
(b) entitled to 9% interest on their capitals only when there are profits
(c) entitled to interest on capital at the bank rate, only when there are profits
(d) not entitled to any interest on their capitals
57. On the death of a partner; the amount of joint life policy showed be credited to the capital
accounts of.
(a) All partners including the deceased partner in their profit sharing ratio.
(b) Remaining partners in the new. Profit-sharing ratio
(c) remaining partners equally
(d) All partners including the deceased partner in their Capitals ratio
58. In the absence of any contract to the contrary, capital profit arising on dissolution of a
partnership firm is credited to the partners' capital account in
(a) Equal proportion (b) capital ratio
(c) Profit-sharing ratio (d) proportion to assets realized ,
59. For piecemeal distribution of cash for return of capital among the partners on dissolution,
the method adopted should ensure that the amount finally left unpaid i.e. the loss to be borne by
the partners is in
(a) Profit-sharing ratio
(b) Proportion to closing capital at the time of dissolution
(c) equal proportion
(d) proportion to assets realised
60. According to the decision in Garner Vs Murray, in the absence of any agreement to the
contrary, the deficiency of the insolvent partner must be borne by other solvent partners in
(a) Profit-sharing ratio.
(b) Capital ratio which stood after the dissolution of the firm
(c) capital ratio which stood before the dissolution of firm
(d) equal proportion
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 37
61. Writing off the expired cost of an intangible asset is called
(a) amortization (b) capitalization
(c) depletion (d) depreciation
62. The debt: equity ratio of a .company is 8 : 1. It was decided to issue bonus shares in the
ratio of 1 : 2. The debt: equity ratio after the issue of bonus shares would be
(a) 8:1 (b) 4:1 (c) 1:8 (d) 1:4
63. In the case of a particular depreciation method, the periodic depreciation is smaller than the
asset's actual depreciation cost. The annual net incidence on profit and loss account remains
constant due to incorporation of only fixed depreciation. The periodic depreciation 1s not
recorded through the asset account. The depreciation method used in this case is :
(a) Sinking fund method
(b) Diminishing balance method
(c) Annuity method
(d) Sum-of-years digits method
64. X Ltd. forfeited 30 shares of Rs. 10 each fully called-up, for non-payment of allotment
money of Rs. 3 per share and call money of Rs. 4 per share. These share and call money of Rs.
4 per share. These shares are re-issued for Rs. 8 per share fully paid" What is the amount to be
transferred to Capital Reserve Account ?
(a) Rs. 300 (b) Rs. 60 (c) Rs. 30 (d) Rs. 90
65. Right's shares are the shares that are offered to the
(a) directors of the company
(b) debenture holders
(c) existing shareholders
(d) creditors of the company
66. Unpaid calls are shown in the balance sheet of a Company .
(a) .By adding it to the share capital
(b) by deducting it from the called-up share capital
(c) under the head 'Current assets'
(d) under the head, 'Current liabilities'
67. Pro-rata allotment of shares means allotment of share
(a) equally amongst .the applicants
(b) at the discretion of the Directors
(c) to all the applicants in proportion to the shares applied for
(d) to only a few selected applicants
68. Profit prior to incorporation is an example of
(a) revenue reserve (b) secret reserve
(c) Capital reserve (d) general reserve
69. Interest on calls in arrears is charged according to Table A of Schedule I to the Companies
Act 1956 at the rate of
(a) 5% p.a. (b) 6% p.a. (c) 12% p.a. (d) 10% p.a.
70. The ratios which measure the relative contribution of financing by owners and financing
provided by outsiders are called
(a) Liquidity ratios (b) leverage ratios
(c) activity ratios (d) profitability ratios

71. Match List I with List II and select the correct answer:
List I List II
A. acid tests ratio 1. Liquidity ratio
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 38
B. Gearing ratio 2. Profitability ratio
C. Working capital turnover 3. Leverage ratio
ratio
D.Return on capital employed4. Long-term solvency ratio
5. Activity ratio
ABCDABCD
(a) 1 3 5 2 (b) 2 5 1 3
(c) 1 5 4 2 (d) 5 3 4 1
72. Which of the following transaction (s) will 1tnprove the Current Ratio ?
1. Bills receivable dishonored.
2. Cash collected from customers.
3. Issue of new shares,
4. Payment of preliminary expenses by way of equity shares.
Select the correct answer using the codes given below :
(a) 1, 2 and 3 (b) 4 alone
(c) 3 alone (d) 2 and 4
73. Credit sales of a company during the year are Rs. 1,20,000; Debtors, Rs. 20,000 and Bills
receivable Rs. 10,000. The average collection period is
(a) 3 months (b) 4 months (c) 5 months (d) 6 Months
74. Collection 0! sundry debtors would
(a) increase current ratio
(b) decrease current ratio
(c) have no effect on current ratio
(d) increase debtors' turnover
75. Which one of the following statements is NOT correct?
A high gross profit margin ratio is the result of
(a) Higher sales prices, cost of goods sold remaining constant
(b) Lower cost of good sold, sales price remaining constant
(c) an increase in the proportionate volume of higher margin items
(d) Increase in the sales return, cost of goods sold remaining the same
76. A company with a paid up capital of 5000 equity shares of Rs. 10 each has a turnover of
four
times with a margin of 8% on sales. The ROI of the company will be
(a) 28% (b) 32% (c) 35% (d) 42%
77. The best definition of 'Capital employed' in calculating the rate of return on investment is
(a) current assets + gross fixed assets
(b) current assets + net fixed assets
(c) working capital + gross fixed assets
(d) working capital + net fixed assets
78. While calculating the net present value under discounted cash flow method of return on
investment analysis, the calculations involved are:
1. Cash outflow
2. Discounted net cash flow
3. Cash inflow
4. Net present value the correct sequence of these calculations is
(a) 4,1, 3, 2 (b) 1, 3, 2, 4
(c) 1, 2, 3, 4 (d) 3, 1, 4, 2
79. Patents and copyrights fall under the category of
(a) current assets (b) liquid assets
(c) Intangible assets (d) nominal assets
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 39
80. Match List I (Balance sheet items) with List II (Classification) and select the correct
answer: List I List II
A Discount on debenture 1. Current liability
B. Forfeited shares account 2. Non-current asset
C. Income taxes payable 3. Current asset
D. Debtors' acceptance 4. Non-current liability
ABCDABCD
(a) 2 4 1 3 (b) 4 2 3 1
(c) 2 4 3 1 (d) 4 2 1 3
81. Ajoy Ltd. makes a profit of Rs. l,00,000, after providing for depreciation on assets
amounting to Rs. 2.0,000 and writing off preliminary expenses amounting to Rs. 10,000 and
gain of Rs. 5,000 on sale of a piece of machinery. Funds from operation of Ajoy Ltd. would be
(a) Rs. 1,00,000 (b) Rs. 1,20,000
(c) Rs. 1,25,000 (d) Rs. 1,35,000
82. Which one of the following statements is correct ?
(a) A decrease in current liabilities causes an increase in the working capital
(b) An increase in current liabilities causes a decrease in the working capital
(c) A decrease in the current assets causes an increase in the working capital
(d) An increase in the current assets causes a decrease in the working capital,
83. Match List I with List II and select the correct answer.
List I List II
A. Net loss from operations 1. Source of funds
B. Changes in working 2. Drain on working capital
C. Depreciation 3. Flow of Funds
D. Issue of fully paid bonus shares 4. Neither source nor application of funds
ABCDABCD
(a) 3 2 1 4 (b) 2 3 4 1
(c) 2 3 1 4 (d) 3 2 4 1
84. Vouching may be termed as
(a) Identification of the documentary evidence supporting the transaction
(b) Verification of the document supporting the transaction
(c) authentication of document supporting the transaction
(d) Verification of the accuracy and authenticity of the transaction
85. Interim audit refers to an audit conducted
(a) in two different accounting years
(b) In-between two statutory annual audits within the same accounting period.
(c) In-between one statutory audit and an internal audit in the same accounting period
(d) In-between one statutory audit, one management audit and one internal audit
86. Audit Techniques are concerned with the
(a) examination of those evidences which have. been traced by audit procedures
(b) Application of generally accepted accounting principles to particular phases of a financial
statement
(c) accuracy and validity of management authorization to the account section employees
(d) Method of conducting a business affair and reporting in annual report
87.What is the correct sequence of the following aspects in auditing?
1. Special audit 2. Internal audit
3. Internal check 4. Annual audit
(a) 1., 3, 2, 4 (b) 3, 4, 1, 2
(c) 3, 2, 4, 1 (d) 1, 2, 3, 4
88. The main purpose of an independent audit is to
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 40
(a) check and correct frauds and errors
(b) help in detecting frauds and errors
(c) Determine if the financial statements fairly represent the actual financial position. and the
working results of the organization
(d) help in formulating future plans
89. Match List I (types of audit) with List II (purposes) and select the correct answer using the
codes given below:
List I List II
A. Continuous 1. To ensure efficient conduct of the business and prevent wastage
audit
B. Periodical 2. Detailed examination of the books of accounts at regular intervals
audit
C. Interim 3. Audit taken up at the close of the financial period
audit
D. Internal 4. Audit conducted between the end of two financial periods
audit
ABCDABCD
(a) 1 3 4 2 (b) 2 3 4 1
(c) 3 2 1 4 (d) 3 1 2 4
90. Management audit refers to
(a) examination of books and audit of accounts done by the management
(b) the periodic assessment of company's activities by the statutory auditor
(c) Periodic assessment of company's managerial is planning. Organizing. Actuating and
controlling compared to norm of successful operation
(d) auditor's assessment of the financial statement of the entity

91. An arrangement in which the accounting work of each individual is checked by other
members is known as
(a) Internal audit (b) external audit
(c) internal check (d) test checking

92. The most important objective of internal audit is


(a) early detection of errors and frauds (b) facilitating final audit
(c) Early finalization of annual accounts (d) ensuring systematic accounting
93. Consider the following documents:
1. Audit Notebook 2. Audit Program
3. Audit Report 4. Audit Files
The correct sequence. In which an auditor prepares these documents is
(a) 2, 1, 4, 3 (b) 1, 2, 3, 4
(c) 2, 1, 3, 4 (d) 1, 2, 4, 3

94. Test checking reduces the


(a) Powers of an auditor (b) expenses of audit
(c) Work of an auditor (d) liability of an auditor
95. Which one of the following clearly defines 'organization' as a function?
(a) Management of business
(b) Accomplishment of goals through means
c) Centralized authority in the funds of an individual to achieve business goals
(d) Process of assigning duties to individuals to achieve specific ends effectively

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 41


96. Which one of the following is NOT applicable to a Co- operative form of business
organization?
(a) Major portion of profit is distributed to members by way dividend
(b) Policy decisions are taken by the members in a General Meeting
(c) Membership is open to all having a common interest
(d) It is formed generally by the artisans and consumers of Limited means
97. Match List I (Forms of business organization) with List II (Distinctive characteristics) and
select the correct answer:
List I List II
A. Joint Hindu Family Firm 1. Association of persons for their common interests
B. Public Enterprise 2. Ownership and control by Government
C. Section 25 of Company 3. Ownership by copartners
D. Co-operative organization 4. Limited company formed for promoting commerce,
art, science etc.
ABCDABCD
(a) 3 2 1 4 (b) 1 3 2 4
(c) 3 2 4 1 (d) 1 3 4 2
98. Consider the following statements:
A mutual fund helps the investor in securing
1. Professional management
2. Diversification of risk
3. Steady appreciation
4. Lower cost of operation of these statements
(a) 1, 2, 3 and 4 are correct (b) 1, 2 and 4 are correct
(c) 2 and 3 are correct (d) 3 and 4 are correct.
99. Which of the following are the means of marketing new issues of securities?
1. By listing of securities
2. Through jobbers and brokers.
3. By private placing of securities
4. Through privileged subscriptions
(a) 1 and 2 (b) 1, 2 and 3
(c) 3 and 4 (d) 1, 2, 3 and 4
100. Dow and Jones, now popularly known as 'Dow-Jones' in the stock market parlance were
the
(a) first financial journalists
(b) First bull operators in the New York stock exchange
(c) first to predict the Great Depression
(d) Architects of shop-floor trading
101. "Arbitrage" means.
(a) A business arrangement by which a share broker tries to take advantage of difference in
'Spot' and 'Futures' prices of a share
(b) a business arrangement in which a share broker tries to take advantage of difference in
prices between two Stock Exchange centers on a particular share
(c) an arbitration proceedings that is invoked by either the buyer or the seller when the other
party is unable to meet its commitment
(d) A compromise arrangement by which the transaction is postponed to the next settlement
date
102. The primary function of Stock Exchange is to
(a) mobilize savings from the public for long-term investment
(b) offer a secondary market for shares and other securities
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 42
(c) facilitate barter deals between buyer and seller holding different securities
(d) Enable Reserve Bank of India to trade in Government securities in their efforts to control
money supply in the economy
103. Consider the following statements:
1. Foreign institutional investors have been allowed to in- vest in Mutual Funds.
2. The main objective of SEBI is to protect the investors.
3. Private placement is the route through which Promoters' contribution is mobilized by a public
company.
4. RBI lays down the guidelines governing the capital market operation.
Of these statements:
(a) 1 and 2 are correct (b) 2, 3 and 4 are correct
(c) 1, 2 and 3 are correct (d) 1, 3 and 4 are correct
104. Narasimha Committee has apart from other things, recommended
(a) expanding priority sector financing
(b) restricting priority sector financing
(c) asking new foreign and private sector banks to follow the existing norms for priority sector
financing
(d) Total elimination of priority sector financing
105. Which one of the following sets is correct with regard to liberalization in financial sector?
(a) Globalization, devaluation and privatization
(b) Deregulation, moral suasion and branch expansion
(c) Privatization, computerization and standardization
(d) Globalization, deregulation and privatization
106. Prospectus issued by a company is to be vetted arid approved by the SEBI. This, however,
does not mean that
(a) Disclosures are adequate as per its. Guidelines
(b) project proposal has been presented in conformity with its guidelines
(c) Disclosures are adequate to take an informed decision investors
(d) project proposal is sound or satisfactory
107. Commercial papers represent a new financial instrument issued for the purpose of
(a) Project financing (b) working capital
(c) leasing of plant and equipment (d) import of capital goods
108. Match List I (landmark case) with List II (the legal point established by that case) and
select the correct answer:
List I List II
A. Solomon Vs Solomon 1. The scope and limits of the Objects Clause
B. Ewing Vs Butier 2. A Company should not be Cup Margarine registered with a
name Co. Ltd. which resembles the name of an existing company
C. Asbury Rail Carriage 3. Company is a distinct entity, different from its members
& Iron Co. Vs Ritchie
D. Royal British Bank 4. Limitation to the Doctrine of constructive notice
Vs Turquand 5. Doctrine of Indoor Management
ABCDABCD
(a) 2 3 1 4 (b) 3 2 4 5
(c) 3 2 1 4 (d) 2 3 4 5
109. Which of the following pairs are correctly matched?
1. Cooperative movement : Nanavathi
in India is breast-fed,
Committee bottle-fed
and spoon-fed
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 43
2. Tax on sole proprietor : Direct Taxes Enquiry Committee
and partnership firms
needs rationalization
3. Capital market in India : Narasimham Committee
is tightly controlled by the
Government
(a) 1, 2 and 3 (b) 1 and 3 (c) 2 and 3 (d) 1 and 2
110. Does modernization of industrial enterprises call for mechanization?
(a) Yes, because manual labors alone cannot deliver the goods.
(b) Yes, because mechanization holds the key to industrial success in most developing countries
(c) No. because it is rationalization and not mechanization that holds the key to modernization
and higher productivity in the industrial sector
(d) No. Because mechanization will aggravate the unemployment situation in the country and
will ultimately result in the collapse of the economy
111. A Red clause letter of credit authorizes the
(a) banker to transfer the L/C to some other person
(b) Banker to take recourse to the drawer in case of default
(c) banker to fix the amount of credit
(d) Negotiating banker to provide advance credit to the beneficiary for purchase of materials
112. Which of the following pairs are correctly matched?
1. Cash Compensatory Scheme : It is allowed in a selective basis for compensating the
exporters for the elements of unrefined taxes and duties paid on the imports required for the
manufacture of goods exported.
2. Inland container depots : confer all the facilities of dry ports and facilitate the movement of
exports.
3. Duty Drawback Scheme : the exporters are allowed reimbursement of customs and central
excise duties paid on raw materials components and packaging.
Select the correct answer using the codes given below:
(a) 1 and 3 (b) 1, 2 and 3 (c) 1 and 2 (d) 2 and 3
113. Which one of the following is NOT the primary cause of India's chronic balance of
payments problem?
(a) Value of imports not matched by value of exports
(b) Deficits in merchandise trade
(c) Membership of W.T.O.
(d) POL imports
114. The following steps are normally taken in an import trade:
1. Indent and letter of credit
2. Ship's report
3. Delivery and customs formalities
4. Exchange and Bill of Exchange
The correct sequence of these steps is:
(a) 1, 4, 2, 3 (b) 4, 1, 2, 3 (c) 4, 1, 3, 2 (d) 1, 4,3, 2
115. Match List 1 with List II and select the correct answer :
List I List II
A. L U T 1. D G F T
B. E P Z 2. Export promotion
C. E p C G scheme 3. 100 % Exports
D. Value Addition 4. 100% E O U
ABCDABCD
(a) 1 3 2 4 (b) 3 2 1 4
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 44
(c) 1 4 3 2 (d) 2 4 1 3
116. Globalization of financial services is being promoted by
(a) World Trade Organization
(b) International Finance Corporation
(c) International Bank for Reconstruction and Development
(d) International Monetary Fund
117. Which of the following pair’s is/are correctly matched:
1. Presence of insurance at the time of taking the interest in life policy and at the time of
making the claim
2. Presence of insurable At the time of loss but may interest in a fire policy not be required at
the time of taking the policy
3. Presence of insurable at the time of taking the policy interest in marine policy and also at the
time of loss
(a) 1 and 2 (b) 2 alone (c) 2 and 3 (d) 3 alone
118. Which one of the following generalizations can be drawn from the Principle of
Subrogation?
(a) It is the principle by which the insurer, after having paid the loss to the insured, step into the
shoes of the insured person and acquires all rights and remedies as the insured would have
enjoyed regarding the said loss
(b) A person who keeps a stock of inflammable material in his premises must mention the fact
while taking out a fire policy
(c) The insured can get only the compensation against ac- tulles and he can't make profit out of
insurance.
(d) In marine insurance the immediate cause arid not the Remote cause shall be considered for
bearing the loss
119. A clause included in the marine policy which covers all losses due to willful misconduct of
the master or re of the ship to the prejudice of the insured is called
(a) Jettison (b) waiver
(c) Preventive penalty (d) barratry
120. Which one of the following is the first industrial organization to have conducted social
audit of its performance?
(a) Associated Cement, Companies
(b) Reliance Industries Limited
(c) Bharat Heavy Electricals Limited
(d) rata Iron & Steel

Commerce 2000

Time Allowed : Two Hours Maximum Marks : 300

1. Consider the following ratios


1. Acid test ratio 2. Capital turnover ratio
3. Bad debts to sales ratio 4. Inventory turnover ratio
Which of these ratios are more appropriate for testing the liquidity of a concern ?
(a) 1 and 3 (b) 1 and 4
(c) 2 and 4 (d) 2 and 3
2. Consider the given data
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 45
1. Proprietary ratio = 0.75
2. Current ratio = 2 : 1
3. Proprietary fund = Rs. 60,000
4. Fixed assets = Rs. 50,000
The working capital will be computed as
(a) Rs.10,000 (b) Rs.15,000
(c) Rs.20,000 (d) Rs.25,000

3. Consider the following Balance Sheet of ABC Company Limited as on March 31, 1999 :
Liabilities Rs Assets Rs
Equity share capital 20,00,000 Fixed assets 60,00,000
Preference share capital 10,00,000 Less depreciation 20,00,000
General reserve 5,00,000 40,00,000
10% debentures 11,00,000 Debtors 10,00,000
Creditors 7,00,000 Stock 6,00,000
Outstanding expenses 3,00,000 Cash 1,00,000
Profit & Loss A/c 1,05,000 Formation expenses 5,000
57,05,000 57,05,000
The current ratio of ABC Company Limited is
(a) 2.00 (b) 1.90 (c) 1.85 (d)1.70

4. Match List I with List II and select the correct answer


List I List II
A. Current assets 1. Performance of equity capital
Current liabilities
B. Fixed assets 2. Short-term solvency
Long-term funds
C. Debt 3. Capital structure
Equity
D. Earnings after interest and taxes 4. Overall performance
Number of shares issued 5. Long-term solvency
ABCDABCD
(a) 2 5 3 4 (b) 1 2 3 4
(c) 2 5 4 3 (d) 1 2 4 3
Directions :
The next three questions are based on the following Balance Sheet of Messrs A Limited as on
31st December, 1998
Liabilities Rs. (in lacks) Assets Rs. (in lacks)
Owned funds 25.00 Fixed assets 27.00
Long – term debt 5.00 Current assets 6.10
Current liabilities 1.50 Other assets 0.40
Unclaimed dividends 0.20
Provisions 1.80
33.50 33.50
Study the Balance Sheet carefully and attempt the following three questions

5. Owned funds' would be


(a) Rs.25 lakhs (b) Rs.8.50 lakhs
(c) Rs.25.20 lakhs (d) Rs.27 lakhs

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 46


6. The 'margin of safety', i.e., the cushion of protection for creditors is
(a) 4.06 : 1 (b) Rs 4.60 lakhs
(c) 0.20 : 1 (d) Rs 22 lakhs
7. If the management of A Limited want to evaluate the general efficiency, which one of the
following additional information is required ?
(a) Sales and earnings after income tax and interest
(b) Break-up of owned funds into share capital, reserves and surpluses, etc.
(c) Earnings before income tax and interest
(d) Operating expenses and sales

8. Financial indicators of four companies are as follows


Company Current ratio Debt- equity ratio Rate of return on investment Fixed assets turnover
A 2.0 : 1 2.5 : 1 10% 5
B 2.5 : 1 3.0 : 1 25% 4
C 1.5 : 1 4.0 : 1 20% 3
D 1.0 : 1 3.5 : 1 15% 2
In general, which of the above companies would fall in the highest risk class ?
(a) A and B (b) B and C
(c) C and D (d) A and D

9. Consider the particulars given below


Sales = Rs. 60,000 Variable cost = Rs. 25,000
Fixed cost = Rs. 30,000
Based on these data, the operating leverage shall be
(a) 5 (b) 7 (c) 8 (d) 9

10. The main purpose of depreciation accounting is to


(a) charge the cost of asset
(b) allocate the cost of the asset over its estimated useful life
(c) provide for replacement of the asset on the expiry of its useful life
(d) value the assets on the closing date of the year
11. Which one of the following pairs is not correctly matched?
(a) Increase in working capital : Application of fund
(b) Increase in current liability : Source of fund
(c) Issue of shares : Source of fund
(d) Issue of bonus shares : Source of fund
12. Consider the following statements
1. Operational loss is a source of funds
2. Decrease in working capital is a source of funds
3. Additions to fixed assets are an application of funds
4. Fresh introduction of capital is an application of funds
Which of the above statements are applicable while preparing the funds flow statements ?
(a) 1 and 2 (b) 1 and 3
(c) 2 and 3 (d) 1, 3 and 4

13. A company's reported current profit is Rs 70,000 after incorporating the following :
Loss on sale of investments Rs 10,000; Premium on redemption of debentures Rs 1,500;
Depreciation on machinery and plant Rs 20,000; Goodwill and preliminary expenses written off
Rs 30,000; Gain from sale of non-current assets Rs 40,000
The net inflow of funds from the operation would be
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 47
(a) Rs 91,500 (b) Rs 80,000
(c) Rs 70,000 (d) Rs 59,500
14. For the purpose of analysing changes in financial position, enterprises prepare
(a) Balance Sheet and Profit & Loss A/c
(b) Cash flow statements and Funds flow statement
(c) Statement of cash from operations and Balance Sheet
(d) Statement of changes in working capital and Statement of cash from operations

15. Consider the following actions taken by an auditor


1. Carrying on vouching 2. Preparing the audit report
3. Checking the valuation of assets 4. Decision to qualify the report
The correct sequence of these actions is
(a) 1, 3, 4, 2 (b) 4, 1, 3, 2
(c) 3, 4, 2, 1 (d) 1, 2, 4, 3

16. It is necessary that an auditor should prepare an 'Audit Programme'; maintain an 'Audit Note
Book'; use an Internal Control Questionnaire' and a 'Flow Chart of Accounting System adopt
'Special Ticks' for each class of transaction checked and divide work as well as responsibility
among the members of his staff for an efficient conduct of audit work. All these refer to
(a) general principles of internal auditing
(b) general principles of internal checking
(c) basic principles of auditing
(d) general techniques of auditing
17. Materiality in accounting is decided
(a) by the size of an item
(b) by the knowledge as to whether an individual item is having a significant influence on
financial statement
(c) solely by the discretion of the accountant
(d) by the physical volume of the transaction

18. Match List I (Event) with List II (Result) and select the correct answer using the codes
given below :
List I List II
A. Collusion between two 1. Payments of dividends
or more persons otherwise not possible
B. Falsification of accounts 2. Error of principle committed
to increase apparent profits
C. Operation of an effective 3. Trial balance may agree
system of internal check
D. Purchase of raw 4. Frauds per-petrated and concealed
materials is debited to
loose tools account 5. Possibility of errors and frauds
is considerably reduced
ABCDABCD
(a) 3 4 5 2 (b) 4 1 5 2
(c) 4 1 2 5 (d) 2 4 1 3

19. Which one of the following is the main object of auditing?


(a) Ascertaining whether all cash receipts and payments of an organisation have been correctly
recorded and accounted for
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 48
(b) Preventing errors and frauds connected with financial trans, actions of an organisation
(c) Verifying books of accounts and annual financial statements of an organisation so as to give
a report on the view presented by the said accounts and statements
(d) Recording properly all financial transactions in various books of accounts and preparing
annual financial statements indicating the resuits of such transactions
20. Management audit refers to
(a) audit on behalf of the management
(b) audit of management accounting system in operation
(c) systematic appraisal of management's objectives and procedures
(d) audit of managerially initiated financial transactions
21. In evaluating internal control, the first step is to prepare an internal control questionnaire or
a flow chart of the system. The subsequent steps should be to
1. determine the extent of audit work necessary to form an opinion
2. gather enough evidence to determine as to whether the internal control system is functioning
as described
3. write a letter to the management describing the weaknesses in the internal control system
4. form a final judgement on the effectiveness of the internal control system
The correct sequence of these steps would be
(a) 1, 2, 3, 4 (b) 2, 4, 1, 3
(c) 2, 1, 3, 4 (d) 2, 4, 3, 1
22. When an auditor tests sales transactions, one step is tracing a sample of sales invoices to
debits in the accounts receivable ledger. Based upon this step, he will form an opinion as to
whether
(a) each sales invoice represents a valid sale
(b) all sales have been recorded
(c) all debits in accounts receivable ledger are supported by sales invoices
(d) recorded sales invoices are properly posted to customer accounts
23. Accounting is the process of matching
(a) benefits and costs
(b) revenues and costs
(c) cash inflows and outflows
(d) potential and real performance

24. A had started business with Rs 20,000 in the beginning of the year. During the year he
borrowed Rs 10,000 from B. He further introduced Rs 20,000 in the business. He also gave Rs
5,000 as loan to his son. Goods given away as charity by him was Rs 2,000. Profits earned by
him was Rs 25,000. He also withdrew Rs 3,000 from the business. His capital at the end of the
year would be
(a) Rs 50,000 (b) Rs 40,000
(c) Rs 62,000 (d) Rs 48,000
25. When it is not registered, a partnership firm is
(a) deemed to be an illegal association and is disallowed to carry on business
(b) allowed to carry on business subject to payment of penalty
(c) allowed to carry on business subject to certain disabilities
(d) allowed to carry on business only with the special permission of the Registrar of Firms

26. Match List I (Organisation) with List II and select the correct answer using the codes given
below
List I List II
A. Cooperative society 1. Collective business
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 49
B. Joint Hindu family 2. Purchase/Transfer of share
C. Joint Stock company 3. By virtue of birth
D. Partnership firm 4. Common mutual interest
5. Mutual contract
ABCDABCD
(a) 1 3 2 5 (b) 5 4 1 3
(c) 4 3 2 5 (d) 4 1 2 3

27. Match List I with List II and select the correct answer
List I List II
A. Ashbury Rail Carriage & Iron 1. Corporate entity
Co. Ltd. vs. Riche
B. Peek vs. Gurney 2. Objects clause
C. Saolmon vs. Salomon & Co. 3. Misstatement in
prospectus
D. Royal British Bank vs. Turquand 4. Indoor management
ABCDABCD
(a) 2 1 3 4 (b) 3 4 1 2
(c) 2 3 1 4 (d) 2 3 4 1

28. A special resolution passed for the purpose of reduction of capital of a company must be
confirmed by the
(a) Registrar of Companies (b) Company Law Board
(c) SEBI (d) Appropriate Law Court
29. Equity shares issued by a company to its-employees or directors at a discount or for
consideration other than cash for providing know-how or making available rights in the nature
of intellectual property rights or value additions are known as
(a) Employees'/ Directors' stock option
(b) Promoters' quota
(c) Sweat equity
(d) Right shares

30. A preliminary contract refers to a contract made on behalf of a company


(a) before the incorporation of the company
(b) after the incorporation of the company
(c) after the company obtains the certificate to commence business
(d) after incorporation but before obtaining the certificate of commencement of business

31. The criterion for deeming a private company as a public company on the basis of average
annual turnover is
(a) Rs 25 crores (b) Rs 20 crores
(c) Rs 10 crores (d) Rs 5 crores
32. Match List I with List II and select the correct answer
List I List II
A. Registrar of Companies 1. Specified Securities
B. Memorandum of Association 2. Rules and Regulations of the Company
C. Buy back of shares 3. Certificate of Incorporation
D. Articles of Association 4. Objects of the Company
5. Minimum Subscription
ABCDABCD
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 50
(a) 3 4 5 1 (b) 4 3 1 2
(c) 3 4 1 2 (d) 1 2 5 4
33. All those who are dealing with the company are expected to know the contents of the
Memorandum and Articles of Association. This is called
(a) Doctrine of indoor management
(b) Doctrine of ultra virus
(c) Constructive notice
(d) Doctrine of merger

34. An act of a director which is intra vires the Memorandum and ultra vires the Articles of
Association
(a) cannot be ratified by the company
(b) must necessarily be ratified by the company
(c) may be ratified by the company
(d) is void ab initio

35. Match List I with List II and select the correct answer
List I List II
A. Doctrine of ultra vires 1. Articles of Association
B. Doctrine of indoor management 2. Prospectus
C. Doctrine of golden rule 3. Memorandum of Association
ABCABC
(a) 1 3 2 (b) 3 1 2
(c) 2 1 3 (d) 3 2 1
36. Which one of the following statements correctly explain the term 'Doctrine of Indoor
Management' ?
(a) The doctrine seeks to protect the outsiders against the company
(b) Every person dealing with the company is presumed to have read and understood the
contents of company's Memorandum and Articles of Association
(c) If a person enters into a contract with the company which is contrary to the provisions of
Memorandum and Articles of Association, he will not get any right under such contract
(d) It protects the company against the outsiders.
37. Match List I with List II and select the correct answer
List I List II
A. A long-term debt instrument on which 1. Mutual Fund
interest is accumulated and paid on maturity
B. A debt instrument on which rebate is 2. Deep Discount Bond
available under the Income Tax Act
C. Pooling together the money of different 3. Infrastructure Bond
investors and investing it in diversified securities
D. Buying the right but not the obligation 4. Put option
to sell a security for a specific price
ABCDABCD
(a) 4 1 2 3 (b) 2 3 1 4
(c) 3 1 2 4 (d) 3 1 4 2
38. The comprehensive meaning of an efficient stock market is that it is a market which
(a) allocates resources efficiently
(b) reflects the effective use of information in the price of the shares traded therein
(c) signals the changes in the listed company's performance
(d) safeguards the investors' money
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 51
39. Global depository receipts (GDRs) are issued by successful corporations with a view to
attracting
(a) overseas loan funds
(b) remittances from NRIs
(c) foreign equity capital
(d) foreign direct investment
40. Stock Holding Corporation of India Ltd. is expected to achieve, in the long run, the
objective of
(a) sale of all kinds of securities in all stock exchanges
(b) purchasing all shares issued in the country
(c) paperless trading in respect of all stock market transactions
(d) holding shares of all new companies and selling them later
41. Which one of the following documents attests the fact that goods of specified quantity,
value and description are entering the bounds of the country ?
(a) Bill of lading (b) Consular invoice
(c) Documentary bill (d) Bill of entry
42. Match List I (Name of the Authority) with List II (Function/Activity) and select the correct
answer
List I List II
A. Port Authority 1. Claim for damage
B. Insurance Company 2. Demurrage for goods unloaded
C. ECGC 3. Export finance guarantee
D. Advising Bank 4. Bank in the ekporters country
5. Bank issuing L/C on the request of controller
ABCDABCD
(a) 2 1 4 3 (b) 1 4 3 5
(c) 2 1 3 4 (d) 4 1 3 5
43. Which one of the following is an example of a trading block (regional integration in trade) ?
(a) North American Free Trade Agreement
(b) Madras Export Trade Processing Zone
(c) Free Trade Zone at Kandla
(d) Indo-American Chamber of Commerce

44. To guard against the dangers of excess payment arising out of double insurance or over-
insurance made by the insured, insurance companies provide in their agreement
(a) Average clause (b) Subrogation clause
(c) Risk clause (d) Indemnity clause
45. A person insured his property worth Rs 10,000 against fire for Rs 8,000. His actual loss by
fire is Rs 5,000 and there is an average clause in the policy. His claim will be
(a) Rs 10,000 (b) Rs 8,000
(c) Rs 5,000 (d) Rs 4,000

46. Scalar principle refers to the


(a) responsibility of a subordinate to a superior
(b) conflict of instructions from two or more superior
(c) existence of a clear line of authority in all parts of the organisation
(d) delegation of authority at all levels of an organisation
47. 'Matrix Organisation' refers to a form of
(a) organisation where authority and responsibility coexist
(b) organisation in which two or more basic types of departmentation are combined
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 52
(c) mathematical arrangement of events in columns and rows
(d) organisation where mathematical simulation is used
48. Match List I (Management Functions) with List II (Terms related to each of them) and
select the correct answer
List I List II
A. Planning 1. Morale
B. Controlling 2. Goal
C. Directing 3. Coding
D. Communicating 4. Deviation
5. Recruitment
ABCDABCD
(a) 1 2 3 5 (b) 2 4 1 3
(c) 1 2 5 3 (d) 2 4 3 1
49. Consider the following steps
1. Measurement of performance
2. Establishment of standards
3. Comparison between performance and standards
4. Correction of deviations
The correct sequence in which these steps are undertaken in the process of controlling is
(a) 1, 2, 3, 4 (b) 2, 1, 3, 4
(c) 3, 1, 2, 4 (d) 1, 3, 2, 4
50. Consider the following elements
1. Policies 2. Objectives
3. Programmes 4. Procedures
The correct sequence of these elements in the planning process is :
(a) 1, 2, 3, 4 (b) 1, 2, 4, 3
(c) 2,1, 4, 3 (d) 2, 1, 3, 4
51. Match List I with List II and select the correct answer
List I List II
A. Ohio State University study 1. Production-centred and Employee-centred
B. University of Michigan study 2. Consideration and initiating structure
C. Likert's System Four 3. Country-club, Team manager,
Impoverished, Task manager
D. Fiedler's Leadership Model 4. Exploitative authoritative,
Benevolent authoritative,
Consultative, Participative
5. Leader-member relations,
Task structure, Position power
ABCDABCD
(a) 1 2 4 5 (b) 2 1 3 4
(c) 2 1 4 5 (d) 5 2 3 4

52. Match List I with List II and select the correct answer
List I List II
A. Principles of Management 1. Douglas McGregor
B. Management by objectives 2. Chester Barnard
C. Human Resources 3. Henry Fayol
Approach School
D. Human Relations School 4.George Elton Mayo
5. Peter Drucker
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 53
ABCDABCD
(a) 1 2 3 4 (b) 4 5 1 2
(c) 2 1 3 4 (d) 4 5 2 1

53. Consider the following principles


1. Harmony of objectives 2. Unity of command
3. Division of work 4. Responsibility
Which of these principles are NOT parts of 'Direction'?
(a) 1 and 2 (b) 2 and 3
(c) 3 and 4 (d) 1 and 4

54. An optimising model is designed to


(a) get the maximum results with minimum inputs
(b) solve problems by eliminating the blocks in the process of goal achievement
(c) lead the selection of the best course of action from among available alternatives
(d) reduce the burden of organisational hierarchy.

55. Gantt chart is essentially a pictorial presentation of


(a) a modified procedure for productivity improvement
(b) an organisation chart in the form of bar diagram
(c) a time-event network analysis
(d) position chart of the functions to be carried out by the members of a work team
56. Match List I with List II and select the correct answer
List I List II
A. Managerial Grid 1. H. Koontz
B. 3-D Approach 2. E E. Fiedler
C. Contingency Model 3. R. R. Blake
D. Systems Approach 4. R. Likert
5. W. I. Reddin
ABCDABCD
(a) 1 4 2 3 (b) 3 5 4 2
(c) 4 1 2 3 (d) 3 5 2 4

57. Consider the following steps


1. Analysis of each decision unit in the context of total decision package
2. Identification of decision units
3. Allocation of resources to each unit based upon ranking
4. Evaluation and ranking of all decision units to develop the budget request
The correct sequence of these steps in Zero-base budgeting is
(a) 1, 2, 3, 4 (b) 2, 1, 4, 3
(c) 2, 4, 1, 3 (d) 2, 3, 4, 1
58. TQM's major emphasis is on
(a) product quality
(b) company profitability
(c) customer delight
(d) employee training

59. The approach that considers an organisation to be in a dynamic relationship with its
environment, is called
(a) Contingency approach
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 54
(b) Scientific approach
(c) Societal approach
(d) Systems approach

60. Under which one of the following types of organizational structure does a person become
accountable to two or more bosses at the same time ?
(a) Matrix structure (b) Centralized structure
(c) Decentralized structure (d) Vertical structure

61. Consider the following stages in delegation of authority :


1. Creation of obligation
2. Determination of results expected
3. Assignment of duties
4. Authorisation for actions
The correct sequence of these stages is
(a) 1, 2, 3, 4 (b) 2, 1, 4, 3
(c) 2, 3, 4, 1 (d) 1, 3, 4, 2
62. Consider the following stages in Management by Exception
1. Setting criteria that the management will use to follow progress towards organisational
objectives
2. Measurement of current performance in the organisation
3. Making comparison of actual and planned performance and identifying the exceptions
4. Decision-making prescribing the action to be taken
The correct sequence of these stages is
(a) 2, 3, 4, 1 (b) 2, 1, 3, 4
(c) 1, 3, 2, 4 (d) 1, 2, 3, 4

63. The delegation of authority from higher to lower levels of an organisation is called
(a) Diminution of authority (b) Division of labour
(c) Departmentalisation (d) Decentralisation

64. In an organisation, performance appraisal is NOT expected to


(a) integrate and coordinate the endeavour of individuals
(b) monitor the efforts of inviduals
(c) provide a means of correcting or commending the efforts of individuals
(d) calculate the living wage of the worker

65. A collection of duties, tasks and responsibilities assigned to a single individual is


(a) occupation (b) position
(c) job (d) grade

66. Consider the following steps in Management of change :


1. Identifying the elements to be changed
2. Identifying need for change
3. Assessing change forces
4. Implementing change
The correct sequence of these steps is
(a) 1, 2, 3, 4 (b) 2, 1, 3, 4
(c) 1, 3, 2, 4 (d) 2, 3, 1, 4

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 55


67. Consider the following statements :
The difference between office systems and routines are that the
1. systems are plans while routines are procedures
2. systems are all-inclusive while routines are parts of systems
3. systems are people oriented while routines are financial in nature
4. systems are the goals while routines are the means
Which of the above statements are correct ?
(a) 1, 2 and 3 (b) 1 and 2
(c) 1, 3 and 4 (d) 2 and 4

68. Computerised communication system existing within an organisation is called


(a) Internet (b) Extranet
(c) Local Area Network (d) Intranet
69. The Board's Report shall give the prescribed particulars of employees, who are in receipt of
yearly remuneration, which is not less than
(a) Rs 1.44 lakhs (b) Rs 3 lakhs
(c) Rs 6 lakhs (d) Rs 12 lakhs

70. The provisions relating to inter-corporate loans are interalia laid down in
(a) Section 370 of the Companies Act, 1956
(b) Section 372 of the Companies Act, 1956
(c) Section 372 A of the, Companies Act,. 1956
(d) Section 371 of the Companies Act, 1956

71. The books of account of a company should be preserved for a period of not less than
(a) 2 years (b) 5 years
(c) 8 years (d) 10 years
72. In the Balance Sheet, under the subheading 'current liabilities and provisions', disclosure of
the name(s) of small-scale industries/undertakings is required if the company owes a sum
(a) exceeding Rs 1 lakh as outstanding for more than 6 months
(b) not exceeding Rs 1 lakh as outstanding for more than 6 months
(c) exceeding Rs 1 lakh as outstanding for more than 30 days
(d) exceeding Rs 50,000 as outstanding for more than 2 months
73. Investor Education and Protection Fund is required to be established by
(a) the Central Government
(b) the SEBI
(c) over the Counter Exchange
(d) the National Stock Exchange

74. If an auditor, after his appointment, becomes disqualified as specified in Section 226 (3) and
(4) of the Companies Act, 1956
(a) the appointing authority will ask him to vacate his office
(b) the Company Law Board will ask him to tender his resignation
(c) he will be deemed to have vacated his office
(d) the Institute of Chartered Accountants of India will terminate him from office
75. According to Companies Act, when the dividend proposal is exceeding 20 per cent of the
paid-up capital, the amount to be transferred to reserve shall not be less than
(a) 7.5 per cent of the current profit
(b) 10 per cent of the current profit
(c) 12.5 per cent of the current profit
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 56
(d) 15 per cent of the current profit

76. The cost auditor in a company shall be appointed by


(a) the Board of Directors
(b) the Board of Directors with the previous approval of the Central Government
(c) the members of the company with the previous approval of the Central Government
(d) the C & AG

77. For appointing an auditor other than a retiring auditor


(a) special resolution is required
(b) ordinary resolution and approval of C & AG are required
(c) unanimous resolution and approval of the Central Government are required
(d) special notice is required

78. A company Secretary has


(a) neither statutory liabilities nor contractual liabilities
(b) only statutory liability
(c) only contractual liability
(d) both statutory and contractual liabilities

79. Secretarial Audit is


(a) compulsory in companies having paid-up share capital of less than Rs 50 lakhs
(b) compulsory where the statutory audit reveals inadequacy of internal check in secretarial
department
(c) optional and would help the Board of Directors and the Registrar of Companies in regard to
compliance aspects, mainly under the Companies Act, 1956
(d) compulsory in such companies as may be notified by the Central Government
80. The membership of the Institute of Company Secretaries of India is a must for a person to
become the Secretary of a company having paid-up share capital of
(a) Rs 25 lakhs (b) Rs 50 lakhs
(c) Rs 1 crore (d) Rs 2 crores

Directions :- The following 13 (thirteen) items consist of two statements, one labelled as
'Assertion A' and the other labelled as 'Reason R'. You are to examine these two statements
carefully and decide if the Assertion A and the Reason R are individually true and if so,
whether the Reason is a correct explanation of the Assertion. Select your answers to these items
using the codes given below and mark your answer sheet accordingly.
(a) Both A and Rare true and R is the correct explanation of A
(b) Both A and R are true but R is NOT the correct explanation of A
(c) A is true but R is false
(d) A is false but R is true

81. Assertion (A) : Management accounting provided management with information for
decision making.
Reason (R) : Management accounting is a branch of cost accounting
82. Assertion (A) : Under diminishing balance method of depreciation, the charge for
depreciation keeps on diminishing year after year in all subsequent years.
Reason (R) : Under diminishing balance method, the rate per cent of which depreciation is
written off goes on diminishing from year to year.

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 57


83. Assertion (A) : No item of capital expenditure finds its place in the Trading and Profit &
Loss Account or some other form of revenue accounts.
Reason (R) : Capital expenditure consists of expenditure, the benefit of which is not fully
consumed in one accounting period but is spread over several periods.

84. Assertion (A) : Now-a-days many companies prepare their Balance Sheet in a vertical form
rather than in the traditional horizontal form.
Reason (R) : Part IV of Schedule VI to the Companies Act, 1956 permits both the forms.

85. Assertion (A) : When pro-rate allotment of shares is made, the surplus application money is
transferred to Share Allotment A/c.
Reason (R) : The company is not required to pay any interest on such surplus application
money.

86. Assertion (A) : One single primary ratio, that measures the financial outcome of all recorded
business activities, is RO'
Reason (R) : In practice, however, variations are also found in the ratio because capital and
return are subject to different interpretations by firms.

87. Assertion (A) : ROI is the index to study management efficiency.


Reason (R) : Earning power in relation to total investment is measured by ROI.

88. Assertion (A) : Detection of errors is not of considerable importance to an auditor.


Reason (R) : Some mistakes which appear to be in the first instance merely clerical errors are
ultimately found to be fraudulent manipulation of accounts, but vast majority of mistakes are
merely clerical errors committed due to either carelessness or ignorance on the part of clerical
staff.
89. Assertion (A) : Detection of frauds committed by the manipulation of accounts is a very
difficult task for an auditor.
Reason (R) : Frauds of the type 'Manipulation of Accounts' are committed without any
misappropriation of cash or goods.

90. Assertion (A) : E-commerce is an emerging field, which cannot be ignored.


Reason (R) : The legal framework relating to E-commerce is yet to be crystallised.

91. Assertion (A) : External alignment of wage rates is possible only when internal alignment is
achieved.
Reason (R) : Internal alignment of wage rates is dependent on increase in profits.
92. Assertion (A) : Job evaluation facilitates framing a suitable incentive system for workers.
Reason (R) : Incentives can be rationally based on timesaving by workers on a particular job,
which can rightly be known from job evaluation.
93. Assertion (A) : For a company, every debt is not a loan, but every loan is a debt.
Reason (R) : In the case of deposit of money with the company, it is the depositor who is the
prime mover, whereas in the case of loan it is the company who is the prime mover.
94. Consider the following activities connected with the accounting information system
1. Preparation of the table of accounting
2. Communication of accounting information
3. Preparation of accounting information report
4. Collection of accounting data
The correct sequence of these activities is
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 58
(a) 4, 1, 3, 2 (b) 1, 4, 3, 2
(c) 4, 3, 1, 2 (d) 1, 2, 4, 3
95. A cooperative store having a turnover of Rs 10 lakhs and profit of Rs 50,000 purchase locks
costing Rs 300 for use in the shop. The accountant charged it in the P & L A/c of current year,
but the auditor raised an objection saying that it should be capitalised. On which one of the
following conventions could the accountant be defended ?
(a) Disclosure (b) Materiality
(c) Conservation (d) Consistency
96. Consider the following statements
Notes forming part of accounts of companies invariably display significant Accounting Policies
1. as per the requirement of SEBI guidelines for disclosure and investor protection
2. because it is a mandatory requirement under the Companies Act, 1956
3. as required by AS-1-disclosure of accounting policies, which is mandatory
4. as it is required under the listing agreement with the stock exchanges
Which of the above statements are correct ?
(a) 1, 2 and 3 (b) 2 and 3
(c) 2, 3 and 4 (d) 1 and 4

97. Match List I with List II and select the correct answer
List I List II
A. Showing joint life policy at 1. Concept of consistency
surrender value
B. Team spirit and dedication of 2. Concept of cost
employees are not recorded
in the books of accounts
C. Methods of depreciation and 3. Concept of conservatism
inventory valuation should
not be changed frequently
D. Fixed assets are recorded 4. Concept of money measurement
at 'cost less depreciation'
ABCDABCD
(a) 3 4 1 2 (b) 3 4 2 1
(c) 4 3 1 2 (d) 4 3 2 1

98. If depreciation is calculated on the basis of formula, n (n + 1) then which one of the
following methods is adopted? 2
(a) Diminishing value method
(b) Annuity method
(c) Sum of years digits method
(d) Sinking fund method
99. Consider the following methods of inventory valuation
1. Simple average
2. First in first out
3. Last in first out
4. Weighted average.
Which of these methods DO NOT match current cost with current revenues ?
(a) 1 and 3 (b) 1, 2 and 3
(c) 1. 2 and 4 (d) 2, 3 and 4

100. Consider the following fundamental assumptions


KAVITHA TUTORIALS, TIRUVURU[Type text] Page 59
1. Prudence 2. Going concern
3. Accrual . 4. Consistency
As per Accounting Standard-1, which of these assumptions are taken into consideration while
preparing financial statements ?
(a) 1 and 4 (b) 2 and 3
(c) 1, 2, 3, and 4 (d) 2, 3 and 4

101. Which one of the following statements is correct ?


(a) Preliminary expenses are revenue expenses
(b) Cost of issuing shares and debentures and raising loans, such as legal expenses and
underwriting commission are capital expenditure
(c) Interest on loan is a capital expenditure
(d) Cost of machinery purchased is a revenue expenditure

102. The ending balance of owner's equity is Rs 21,000. During the year, the owner contributed
Rs 6,000 and withdrew Rs 4,000. If the firm had Rs 8,000 net income for the year, what was the
owners equity at the beginning ?
(a) Rs 23,000 (b) Rs 21,000
(c) Rs 19,000 (d) Rs 11,000
103. The ending balance of the accounts receivable account was Rs 12,000. Services billed to
customers for the period were Rs 21,500 and collection on account from customers was Rs
23,600. The beginning balance of account receivable was
(a) Rs 33,500 (b) Rs 14,100
(c) Rs 9,800 (d) Rs 33,300

104. Which one of the following is a capital expenditure ?


(a) Compensation paid for breach of a contract of supply of goods
(b) Interest on borrowing during the period of construction of works
(c) Loss of stock by fire
(d) Loss due to embezzlement by the Manager

105. A company issues 14% debentures of Rs 10,00,000 at a discount of 10%. The discount
allowed will be treated in the account books as
(a) Capital expenditure
(b) Revenue expenditure
(c) Deferred revenue expenditure
(d) Capital loss
106. A building standing in the books at Rs 30,000, was sold for Rs 45,000. The gain on the
sale of building was transferred to profit and loss account thus taking the net profit to Rs
1,70,000. The fund from operation will be
(a) Rs 2,15,000
(b) Rs 1,70,000
(c) Rs 1,55,000
(d) Rs 2,00,000

107. Match List I with List II and select the correct answer
List I List II
A. Leasehold property 1. Depreciation fund method
B. Mines, quarries, etc. 2. Annuity method
C. The interest lost on the 3. Fixed instalment method
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 60
acquisition of an asset
D. To provide for replacement 4. Depletion method
of asset at the end of its useful life
ABCDABCD
(a) 2 1 4 3 (b) 3 4 1 2
(c) 3 4 2 1 (d) 4 3 1 2
108. Following are the extracts from the Trial Balance of a firm :
Particulars Dr. (Rs) Cr. (Rs)
Sunday debtors 50,000 -
Provision for doubtful debts - 5,000
Bad debts 3,000 -
Additional information
(i) Additional bad debts Rs 3,000
(ii) Keep the provision for bad debts @ 10% on debtors
The net amount of bad debts that will appear in the Profit and Loss Account will be
(a) Rs 8,000 (b) Rs 7,500
(c) Rs 5,700 (d) Rs 4,500
109. A and B sharing profits in the ratio of 3 : 2 and having capitals of Rs 30,000 and Rs 15,000
respectively decided to dissolve the firm. After paying off all liabilities, cash realised from
various assets is Rs 15,000. This amount will be distributed between A and B as
(a) Rs 9,000 and Rs 6,000 respectively
(b) Rs 10,000 and Rs 5,000 respectively
(c) Rs 7,500 and Rs 7,500 respectively.
(d) Rs 12,000 and Rs 3,000 respectively

110. A, B and Care partners sharing profits in the ratio of 6 :3 : 1. They decided to dissolve the
firm when their capitals were Rs 8,000, Rs 3,000 and Rs (-) 1,000 respectively. Other liabilities
and assets were-Bank overdraft Rs 3,500. A's advance to the firm Rs 500; sundry creditors Rs
2,500; plant and machinery Rs 7,500; stock in trade Rs 2,500; sundry debtors Rs 6,000 and cash
Rs 500. Plant and machinery realised at.20% less, stock in trade at 25% less and sundry debtors
at 30% less than their respective book value. Expenses of dissolution amounted to Rs 250. C
became insolvent and his private estate yielded Rs 100 only. What is the loss on realisation?
(a) Rs 4,125 (b) Rs 4,150
(c) Rs 4,175 (d) Rs 4,225
111. A, Band Care the partners in a business firm sharing their profits in the ratio of 4 : 3 : 2. A
new partners D enters the firm. The new profit sharing of A, B, C and D is 5 : 4 : 2 : 1. D
contributes a goodwill of Rs 36,000. This goodwill is to be allocated among A, B and C. Which
one of the following will be the correct allocation ?
A
Rs B
Rs C
Rs
(a) 16,000 12,000 8,000
(b) 12,000 8,000 16,000
(c) 12,000 Nil 24,000
(d) 24,000 Nil 12,000
112. A, Band Care equal partners in a firm with capital of Rs 16,800, Rs, 12,600 and Rs 6,000
respectively. With bills payable Rs 3,300; creditors Rs 6,000; cash Rs 600; debtors Rs 10,800;
stocks Ps. 11,400; furniture Rs 2,400 and building Rs 19,500. E is admitted to the firm and
brings Rs 9,000 as goodwill and Rs 15,000 as capital. Half the goodwill is withdrawn by old
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 61
partners, and stock and furniture is depreciated by 10%. A provision of 5% on debtors is created
and value of building is taken at Rs 27,000.
The profit on revaluation will be
(a) Rs 5,500 (b) Rs 5,580
(c) Rs 5,400 (d) Rs 5,680
113. A and Bare partners in a firm sharing profits in the ratio of 3 : 2. They admit C as a new
partner for 1/3 share in the profits of the firm. The new profit sharing ratio of A, B and C is
(a) 3 : 2 : 1 (b) 3 : 2 : 2
(c) 3 : 2 : 3 (d) 6 : 4 : 5
114. Some companies give cash flow statements in their annual reports as prescribed by
(a) Part IV of Schedule VI to the Companies Act, 1956
(b) the listing agreement with the stock exchanges
(c) the SEBI regulations
(d) the Accounting Standard-3 on cash flow statements
115. Under the net worth method, the basis of ascertaining profit is the
(a) difference between the liabilities on two dates
(b) difference between the gross assets on two dates
(c) difference between the capital on two dates
(d) increase in net worth before adjusting for drawings and additions to capital
116. A non-performing asset with a financial institution denotes an asset on which
(a) regular dividend is not being received
(b) interest is on default for two quarters or more
(c) repayment of capital appears difficult
(d) there is no earning of profit
117. Consider the following statements :
Redeemable preference shares of a company can be redeemed out of
1. profits of the company which would otherwise be available for dividend
2. company's share premium account
3. fresh issue of shares made for the purpose of redemption
Which of the above statements are correct
(a) 1 and 2 (b) 1 and 3
(c) 2 and 3 (d) 1, 2 and 3
118. A company forfeited 100 shares of Rs 10 each owing to the default in the payment of share
call money of Rs 5 each. These shares were issued at Rs 9 each, payable at Rs 2 on application,
Rs 2 on allotment and the balance of Rs 5 on call. The shares were then reissued to another
shareholder at a price of Rs 6 per share.
The amount to be debited to forfeited shares account on account of discount on reissue of shares
would be
(a) Rs 100 (b) Rs 300
(c) Rs 400 (d) Rs 500
119. The issue of bonus shares must be in accordance with the guidelines issued by the
(a) Company Law Board
(b) Controller of capital issues
(c) Securities and Exchange Board of India
(d) Registrar of Companies
120. Consider the following statements :
A low inventory turnover may be the result of
1. obsolescence of some of the stock
2. slow-moving inventory
3. frequent stock-outs
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 62
4. fast-moving inventory
Which of the above statement(s) is/are correct ?
(a) 1 and 2 (b) 4 alone
(c) 2 alone (d) 2 and 3

Commerce 2006
Questions
1)."Each individual in an organization must know in advance what one is expected to achieve."
It is related to which of the following steps of MBO?
(a) Setting of organizational purpose and objectives
(b) Key result areas.
(c) Setting subordinates' objectives
(d) Appraisal
2).Which one of the following statements about MBO (Management by Objectives) is not
correct?
(a) The greater the participation of the manager and his Employees in setting goals, the more
likely that the goals would be achieved
(b) Autonomy in implementation of the plans is a pre Requisite for the success of MBO
(c) Individual goal setting is not necessary for the success Of MBO
(d) Top level goal setting is a pre-requisite for the success Of MBO.
3). Match List- I with List-II and select the correct answer using the code given below the lists:
List-I (Description) List-II (Functional Feature
A. Decentralization in Organization 1. Machine-oriented and not man-oriented
B. Chain of communication 2. Line authority
C. Task of top management 3. Setting goals of Organization
D. Movement of task Management 4. Empowerment of sub ordinates

ABCD ABCD
(a) 3 1 4 2 (b) 4 2 3 1
(c) 3 2 4 1 (d) 4 1 3 2
4).What is the job evaluation method in which a number d compensable factors are identified
and then the degree to which each of these factors is present on the job is determined, called?
(a) Job classification (b) Point rating
(c) Factor comparison (d) Job ranking
5). Consider the following steps with regard to job 'ranking' method:
1. Obtain job information
2. Rank jobs
3. Select jobs
4. Select compensable factors
5. Combine ratings what is the
correct sequence of the steps given above?
a) 1 - 3 - 2 - 5 -4 (b) 2 - 1 - 3 - 5 - 4
(c) 2 - 3 - 1 - 4 - 5 (d) 1 - 3 - 4 - 2 - 5
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 63
6). Match List- I with List-II and select the correct answer using the code given below the lists:
List - I (Concept) List - II (Explanation)
A.Theory of Specialisation 1. Number of subordinates to be supervised
B.Departmentation 2. Plan of reporting in an Organization
C.Span of Management 3. Pattern of grouping Activities
D.Chain of command 4. Breakdown of a complex task

ABCD ABCD
(a) 2 1 3 4 (b) 4 3 1 2
(c) 2 3 1 4 (d) 4 1 3 2
7). What is the method used in a standard costing system which analyses the factors that
resulted in the deviation between standard costs and actual costs, called?
a) Bill of Materials (b) Progress Report
(c) Variance Analysis (d) Cost Statement
8). Consider the following statements regarding coordination
1. Coordination cannot be voluntarily produced by a number of cooperating persons
2. Most part of it is the result of voluntary attitudes on the part of people in an organization.
3. Coordination is a far more inclusive term embracing the idea of cooperation.
4. Charismatic leaders do not give weightage to coordination
Which of the statements given above are correct?
(a) 1 and 2 only (b) 1 and 3 only
(c) 2 and 4 only (d) 1 and 4 only
9). Which one of the following describes best the organization's values, aspirations and reasons
for being?
(a) Vision
(b) Mission
(c) Objectives
(d) Goals
10).In. the Blake and Mouton's Managerial Grid Theory, what is the point (1.9) known as?
(a) Improverished management
(b) Country club management
(c) Middle of the road management
(d) Team management
11. Ann effective direction tries to get work. accomplished by subordinates without affecting
their need satisfaction adversely. What. Is this principle of directing known as?
(a) Principle of maximum individual contribution
(b) Principle of harmony of objectives
(c) Principle of efficiency of direction
(d) Principle of authoritative direction
12). In Vroom's theory of motivation, what is valence related to?
List I (Types of Cloud)
(a) The strength of an individual's preference to a total outcome.
(b) The strength of a group's preference to a total outcome.
(c) The strength of a group's preference to a. particular outcome
(d) The strength of an individual's preference to a particular outcome
13. Match List-I (Basic Components of Expectancy Theory) with List-II (Definition) and select
the correct answer using i I the code given below the Lists :
List-I List-II
A. Expectancy 1. Force directing specific behavioural alternatives
B. Instrumentality 2. Preference of an 'individual for a particular outcome
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 64
C. Motivation 3. Probability that effort will lead to good performance
D. Valence 4. Probability that successful performance will lead to certain outcomes
ABCD ABCD
(a) 1 4 2 3 (b) 2 3 1 4
(c) 1 3 2 4 (d) 2 4 1 3
14). 14. The following information is given:
Sales 70,000
Purchases 40,000
Expenses 8,000
Creditors at the end 15,000
Creditors at the beginning 12,000
What is the value of cash from operations?
(a) Rs 22,000 (b) Rs 19,000
(c) Rs 30,000 (d) Rs 25,000
15. Which one of the following statements is correct?
(a) If the value of current assets (in the current year) increases (compared with last year), the
working capital decreases
(b) If the value of current liabilities (in the current year) decreases (compared with last year),
'the working capital increases
(c) If the value of current liabilities (in the current year) increases (compared with last year), the
working capital increases
(d),If the value of current assets (in the current year) decreases (compared with last year), the
working capital increases
16).A machinery whose book value was Rs 1,20,000 was sold for Rs 1,68,000. The gain on sale
of machinery was taken to Profit and Loss Account which ultimately showed net profit for the
year as Rs 1,50,000. What is the value of funds from operations?
(a) Rs 1,02,000 (b) Rs 1,98,000
(c) Rs 48,000 (d) Rs 1,68,000
17. Which one of the following is the correct statement? Business draws benefit from the
society; it has an obligation to communicate its contribution to society. For this purpose
accounting must
(a) deal with measurement and reporting of the performance to its stakeholders
(b) confine to going concern stipulation
(c) show its concern for revenue recognition and distribution
(d) be secluded from commercial consideration
18. Which one of the following is the correct statement? The most important factor influencing
evolution and growth of auditing is
(a) Industrial Revolution
(b) divorce of ownership from management
(c) establishment of the Institute of Chartered Accountants of India
(d) adoption of mechanised accounting
19. Match List-I with List-II and select the correct answer using the code given below the
Lists :
List-I List-II
(Basis of Classification) (Types of Audit)
A. Time 1. Complete Audit
B. Subject matter 2. Public Audit
C. Extent or coverage 3. Periodical Audit
D. Organization structure 4. Government Audit
5. Cost Audit
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 65
ABCD ABCD
(a) 3 4 1 5 (b) 1 5 2 3
(c) 3 5 1 4 (d) 1 4 2 5
20)What does the total auding situation comprise?
(a) Inherent risk, process risk and control risk
(b) Appropriate evidence and oral evidence
(c) Detailed evidence and appropriate evidence
(d) Sufficient evidence and appropriate evidence
21. Which of the following should be obtained as a basis of 10 conclusions by the auditor?
(a) Sufficient evidence and detailed evidence
(b) Terrigenous deposits
(c) Pelagic deposits
(d) Coral reefs
22. Which one of the following is the correct statement? An independent financial audit is
conducted because
(a) the top management may have indulged in fraud and the auditor would detect the same and
report to the shareholders
(b) the audit may result in suggesting improvement in the internal control system
(c) the audit enhances credibility to financial statement
(d) the audit guaran~ees that no material misstatement intentional or unintentional-remains in
the financial statements
23. What is an in-depth examination to detect a suspected fraud in an enterprise termed as ?
(a) Internal audit (b) Independent financial audit
(c) Operations audit (d) Investigation
24. Match List- I (Audit Test) with List-II (Situation) and select the correct answer using the
code given below:
list-I list-II
(A) Depth testing 1. Examination in depth by the auditor of the accounting function or
department at an interval planned by auditor
(B)Vouching audit 2. Used in situations where evidence of a single error gives hint to the
auditor of a serious lapse which may require
(C)Discover Sampling 3. Applied in situations where auditor has absent or unreliable adn as a
result, it would be necessary to check all the documentary evidences.
(d)Rotational test 4. Involves tracing through the entire system all the aspects of a transaction
which the auditor wishes to check.
ABCD ABCD
(a)1 3 4 2 (b)4 2 3 1
(c)1 4 3 2 (d)4 3 2 1
25. Which one of the following is the best way for an auditor to satisfy himself that the amount
of cash-in-hand shown in the balance sheet is correct ?
(a) To obtain a certificate from the cashier to this effect
(b) To visit the location where cash is kept at the close of business hours on the last working
day of the financial year and count the cash-in-hand
(c) To visit the location where cash is kept at the close of business hours on the first working
day of the financial year and count the cash-in-hand
(d) To compare the amount of cash-in-hand at the balance sheet date with the corresponding
amount in the previous year's balance sheet
26. Match List- I (Method of Auditing) with List-II (Pr.ocedure) and select the correct answer
using the code given below the Lists :
list-I list-II
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 66
A. Vouching 1. To select and examine a representative sample from large number of similar
items.
B. Audit programme 2.Testion and checking done by quality control department of an
organization .
C. Internal Audit 3. Audit conducted by regular employees of a business concern.
D. Test Checking 4. The inspection of documentary evidence supporting and substantiating a
transaction.
5. A detailed plan of the auditing work to be performed.
ABCD ABCD
(a)3 1 2 5 (b)4 5 3 1
(c)3 5 2 1 (d)4 1 3 5
27. Match list- I with List-II and select the correct answer using the code given below the Lists :
list-I list-II
A. Minutes Book 1. Recording entires of creditors payment
B.Log Book 2.Recording entries of raw matrial receipts
C.Subsidiary Ledger 3.Recording entries of resolution passed
D.Stores Ledger 4.Recording entries of production
5. Recording entries of cash withdrawn from bank
ABCD ABCD
(a)2 4 1 3 (b)3 1 5 2
(c)2 1 5 3 (d)3 4 1 2
28) Which of the following are examined to verify the legal charges?
1. Examine the payment made to the lawyer by reference to the bill and money receipt from the
lawyer as well as any amount paid in advice.
2. Examine the basis of allocation of expenditure under capital and revenue head
C.Subsidiary Ledger 3.Recording entries of resolution passed
Inspect the register of law suits, if maintained by the company.
(a) 1 and 3 only (b)1,2 and only
(c)2 and 4 only (d)1,2,3 and 4
29)Which one of the following is the correct statement? Book Debts should be verified with the
help of
(a) book debts from the balance sheet
(b) amount received from debtors
(c) debtors' schedule
(d) certificate of book debts from the management
30. Which one of the following is the correct statement? Negative confirmation procedure in
relation to debtors is applied where
(a) the number of debtors is small & each owes a large sum
(b) the number of debtors is large & each owes a small sum
(c) the number of debtors is small & each owes a small sum
(d) the number of debtors is large & each owes a large sum
31. Under which of the following circumstances an auditor may refuse to accept the vouchers?
1. The amount written in words does not match with the amount written in figures
2. The date of voucher does not match with the date of entry in the books of accounts
3. The amount mentioned in the voucher does not correspond to the entry in the cash book
4. The voucher has not been endorsed by a competent authority
Select the correct answer using the code given below:
(a) 1 'and 2 only (b) 2 and 3 only
(c) 1, 3 and 4 only (d) 1, 2, 3 and 4

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 67


32. Which one of the following statements is correct ? The auditor in a cooperative society
conducts the audit on behalf of the
(a) Members of Cooperative Society
(b) Central Government
(c) Registrar of Cooperative Societies
(d) Managing Committee of Cooperative Society
33).Which one of the following statements is correct ? Management audit is an extension of
(a) cost audit
(b) efficiency auditc
(c) special audit
(d) internal audit
34. In case of insolvency of a partner, how is the loss due to insolvency borne by other solvent
partners ?
(a) Equally
(b) In the profit sharing ratio
(c) In the ratio of their capitals
(d) In the ratio of their assets
35. Which one of the following statements regarding appointment of auditor is correct ?
((a) A company where sixty percent shares are owned by private investors and forty percent
shares are owned by the Central Government; private investors shall appoint the auditor
(b) A company where thirty percent shares are owned by the Centre and twenty-five percent by
a State Government; auditor is appointed by the Comptroller and .Auditor-General of India
(c) A company where thirty percent shares are owned by the State Government and forty-five
percent shares are owned by private investors; auditor is appointed by the State Government
(d) A company where controlling shares are held neither by Central Government nor by State
Government; auditor is appointed by the Comptroller and AuditorGeneral of India
36. What is the trading activity that seeks a profit from price variations of securities in the
different markets termed as?
(a) Margin trading (b) Market rigging
(c) Option dealings (d) Arbitrage
37. Consider the following procedures adopted for settlement of accounts at the time of
dissolution of a partnership firm:
1. The loans of partners are returned
2. All outside creditors are paid
3. Capital of each partner is returned
What is the correct sequence of using the proceeds of assets of the firm?
(a) 1 - 2 - 3 (b) 3 - 1 - 2
(c) 2 - 1 - 3 (d) 2 - 3 - 1
38)Consider the following in respect of the procedure adopted for buying and selling at stock
exchange
1. Making the contract
2. Contract note
3. Selection of broker
4. Placing order
5. Settlement
What is the correct sequence of the procedure for dealing at stock exchange
(a) 1-3-2-5-4 (b) 3-1-5-2-4
(c) 1-4-2-3-5 (d) 3-4-1-2-5
39. Consider the following statements :

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 68


1. Shares payable in cash must have been a110ted up to the amount of the minimum
subscription
2. Directors must have paid in cash the application and allotment money in respect of the shares
contracted to be taken by them for cash.
3.No money is liable to be repaid to the applicants by reason of failure to apply for or to obtain
permission for shares or debentures to be dealt on in any recognised stock exchange.
As per Section 149 (1) of the Companies Act, 1956, the above conditions are imposed on
companies for which one of the following?
(a) For listing of shares at the stock exchange
(b) To obtain Certificate of Commencement of Business
(c) To obtain Certificate of Incorporation
(d) To hold Statutory Meeting of the company
40)Consider the following statements :
The Bill of Lading issued by the Master of ship serves as at an .
1. receipt for the goods shipped
2. open general license
3. evidence of the contract
4. dock challan
Which of the statements given above are correct ?
(a) 1 and 3 only (b) 1 and 2 only
(c) 2 and 4 only (d) 3 and 4 only
41). Consider the following statements
The Life Insurance Contracts are contracts of utmost good faith because
1. only insured knows about his health
2. only insured knows about his family
3. insured cannot attempt to make profit out of his health condition
4. insurer's risk is related to the disclosures made by insured
Which of the statements given above is/are correct ?
(a) 1, 2 and 3 only (b) 1, 2, 3 and 4
(c) 4 only (d) 2, 3 and 4 only
42. In a contract of insurance, under which of the following principles the insurer, after having
paid the loss to the insured, acquires all rights and remedies as the insured would have enjoyed
regarding the said loss?
(a) Principle of Subrogation
(b) Principle of Contribution
(c) Principle of Causa Proxima
(d) Principle of Insurable Interest
43. Which of the following theories offers ways to profile or ~ analyse individuals to identify
the needs that motivate their behaviour?
(a) Process theories
(b) Content theories
(c) Reinforcement theories
(d) Adams's theory
44. Which one of the following functions involves conceptualising ~ missions and objectives of
the organization and also the actions for achieving them?
(a) Planning
(b) Organizing
(c) Staffing
(d) Directing

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 69


45. Which one of the following is the correct hierarchy of the strategies formulated in
organizations?
(a) Corporate strategies - business strategies-functional strategies
(b) Functional strategies - corporate strategies - business strategies .
(c) Business strategies - functional strategies-corporate strategies
(d) Business strategies-corporate strategies-functional strategies
46. Which one of the following helps in determining long, out of his objectives of an
organization, adoption of course of allocation of resources necessary to achieve the goals?
(a) Rules
(b) Policies
(c) Procedures
(d) Strategies
47. An organization which was earlier operating in highly 51 conditions, is now facing stiff
competition in the libera era. For quick response to rapidly changing environn how should the
organization change its organizati structure?
(a) From flat structure to tall structure
(b) From tall structure to flat structure
(c) From flat structure to bureaucratic structure
(d) From flexible structure to rigid structure
48. Which one of the following approches to the organization gives managers a way of looling
at the organization as a whole and as a part of the large external environment?
(a).Behavioural science
(b). Contingency
(c). Human relations
(d). Systems.
49.Consider the following steps with regard to a recruitment process.
1. Develope a job specification.
2. Perform job analysis
3. Design job description.
4. Attract a pool of applicants
5. Select the best recruits.
50. Which one of the following training methods compels trainees to assume different identities
(a). Vestibule
(b). Role playing
(c). On-the-Job training
(d). Job rotation
51. Match List-I (Staff AuthoritY) with List-II (function) and select the correct answer using the
code given below:
List-I List-II
A. Service Staff 1. Provides specialised Authority counselling to line managers
B. Control Staff 2. Provides service authority Authority relationship to the line manager
C. Advisory Staff 3. Specific authority for Authority certain functions
D. Functional 4. Not only advises but Staff Authority restrains line authority
ABCD ABCD
(a) 1 3 2 4 (b) 2 4 1 3
(c) 1 4 2 3 (d) 2 3 1 4
52. Consider the following statements :
1. According to Trait theory of leadership, leaders are born, not made.
2. There is high concern for production but low concern for people. It is called as Middle of the
road management.
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 70
3. There is a high concern for both production as well as people. It is called as Impoverished
management. Which of the statements given above is/are correct ?
(a) 1 only (b) 1 and 2 only
(c) 2 and 3 only (d) 1 and 3 only
53. Consider the following statements : Managerial Grid is a leadership style that emphasizes
on
1. Concern for production
2. concern for people
3. concern for personality traits
4. concern for credibility of leadership
Which of the statements given above are correct ?
(a) 1 and 2 only (b) 2 and 3 only
(c) 3 and 4 only (d) 2 and 4 only
54. Match List-I (Style. of Leadel) with List-II (Approach) and . select the correct answer using
the. code given below
List-I List-II
A. Impoverished Management 1. Highest concern for production and people
B. Country Club Management 2. Highest concern for production but low concern for people
C. Autocratic Task Managers 3. Very low concern for production but concern for people
D. Team Managers 4.4. Very low concern for production and people
ABCD ABCD
(a) 4 3 2 1 (b) 2 1 4 3
(c) 4 1 2 3 (d) 2 3 4 1
55. Which one of the following types of leadership is based on organizational status?
(a) Informal leadership
(b) Diplomatic leadership
(c) Charismatic leadership
(d) Bureaucratic leadership
56. Which of the following is the most appropriate management control technique for timely
completion of a project ?
(a) Organization Chart
(b) Bar Chart
(c) PERT
(b) Load Chart
Directions: The next five (5) items consist of two statements : one labelled as the 'Assertion (A)'
and the other as 'Reason (R)' You are to examine these two statements carefully and select the
answers to these items using the code given below:
(a) Both A and R are individually true but R is the correct explanation of A
(b) Both A andR are individually true but R is not the correct explanation of A
(c) A is true but R is false
(d) A is false but R is true
57. Assertion (A) : The top management in an organization should be mainly concerned with
very important and complex problems and not with routine day-to-day problems
Reason (R): This is stated by the scalar principle of organization.
58. Assertion (A): Only listed securites are dealt with in the stock exchanges.
Reason (R): Listion at stock exchanges indicates that a company is a blue chip.
59.Assertion: While vouching an auditor should check entries against related vouchers and
ascertain the genuineness and validity of vouchers.
Reason (R): Vouching is a method of examination to substantiate an entry in the books of
account.
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 71
60. Assertion (A): While vouching an auditor should check entries against related vouchers and
ascertain the genuineness and" validity of vouchers,
Reason (R): Vouching is a method of examination to substantiate an entry in the books of
account.
61. Assertion (A): The total assets of a business are always equal to its liabilities.
Reason (R): All assets of the business are claimed either by the owners or by the outsiders.
62. What is the limit of paid up capital for a company to mandatorily appoint a whole time
company secretary ?
(a) Not less than Rs 25 lakhs
(b) Not less than Rs 50 lakhs
(c) Not less than Rs 1 crore
I (d) Not less than Rs 2 crores
63. Which one of the following statements is correct ? A company's balance sheet and profit
and loss account, other than a banking company, require the authenticity from
(a) the Managing Director only
(b) the Manager or the Secretary, if any, and by not less than two Directors of the company one
of whom is Managing Director, if there is one
(c) any two Directors of the company and one of whom is the Managing Director, if there is one
(d) one of the Directors who is looking after the finance
64. Any dividend remaining unpaid/unclaimed for seven years is transferred to which one of
following accounts ?
(a) Investor Education and Protection Fund (b) Central Government's General Revenue Fund
(c) Capital Redemption Reserve Account (d) General Reserve Account

65. Consider the following statements : Share premium account may be used by the company
1. in paying up un-issued share~ of the company to be issued to members of the company as
fully paid bonus shares
2. in providing for premium payable on redemption of preference shares or debentures
3. in buying back of securities
4. in writing off the expenses or commission paid or discount allowed on issue of securities
Which of the statements given above is/are correct ?
(a) 1, 2, 3 and 4 (b) 1, 2 and 4 only
(c) 2 and 4 only (d) 3 only

66. Which doctrine emanated from the famous case of Royal British Bank v. Turquand (1856)
119 ER 886 ?
(a) Doctrine of ultra vires(b) Doctrine of subjugation
(c) Doctrine of indoor management (d) Doctrine of proportional representation

67. In the event of not accepting the recommendations of the Audit Committee, what is the
responsibility of the Board of Directors ?
(a) That it will simply pass a resolution by recording the reasons' for not accepting the report.
(b) That it will record the reasons and communicate such reasons to the shareholders
(c) That it will record the reasons and communicate to the Central Government
(d) That it will record the reasons and communicate to the Registrar of Companies
68. The public documents of a company should not only be read but to be understood as they
are and therefore
deemed to have been read by those who deal with the company. What is this rule known as ?
(a) The rule of equality (b) The rule of constructive notice
(c) The rule of increasing liability (d) The rule of abrogation
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 72
69. What is the penalty for making any statement, promise or forecast which is false, deceptive
or misleading, or by any other dishonest concealment of material fact to enter into any
agreement for acquiring shares or debentures through the pr'Jspectus ?
(a) With imprisonment extending to five years or with a fine of rupees one lakh or with both
(b) With imprisonment extending to three years or with a fine of rupees one lakh or with both
(c) With imprisonment extending to five years only
(d) With a fine of rupees one lakh only
70. Which one of the following statements in the context of the famous case of Solomon v.
Solomon & Co. Ltd. (1897), AC 22, is correct ?
(a) A company is entirely distinct from and independent of its members even if a member owns
virtually the whole of its shares
(b) A company is distinct from and independent of its members; but in case a member owns
virtually the whole of its shares, they are actually the same
(c) A company and its members are not distinct and independent from each other
(d) A person having issued at least 51% of company's share would only be treated distinctly
71. Match List-I (Office Equipment) with List-II (Function and Utility) and select the correct
answer using the code given below the Lists :
List-I List-II
A. Pen Drive 1. Fixed data storage device
B. Hard Disc 2. Conversion of Hard copy of text/picture into soft copy D. Scanner
C. Administrative Manual 3. Mobile data storage device
D. Handbook 4. Weather forecasting.
ABCD ABCD
(a) 3 1 4 2 (b) 2 4 1 3
(c) 3 4 1 2 (d) 2 1 4 3

72)Match List-I (Manual/Handbook) with List-II (Activity) and select the correct answer using
the code given below:
List -IList - II
A. Policy Manual 1. Filing, correspondence and communication
B. Organization Manual 2. Selected aspects in combined form
C. Administrative Manual 3. Decisions and pronouncements of management
D. Handbook 4. Responsibility and authority of different positions
ABCD ABCD
(a) 3 2 1 4 (b) 1 4 3 2
(c) 3 4 1 2 (d) 1 2 3 4

73).Which one of the following is the correct statement? The most appropriate purpose of
accounting standards is
(a) to facilitate auditing task of diverse nature
(b) reduction of alternatives and bringing uniformity
(c) to make adequate volume of information available to its end-users
(d) to ensure better tax compliance including VAT
74). Which one of the following is the correct statement? The first Accounting Standard (AS-1)
relates to
(a) information to be disclosed in financial statements
(b) consolidated financial statements
(c) disclosure of accounting policies
(d) reporting of financial information by segments

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 73


75). Outstanding wages due for the month of March, 2005 and prepaid expenses and incomes
are taken into account in determining profit or loss for the year ended on 31st March, 2005
Under which one of the following systems is the above practice carried out?
(a) Cash system of accounting (b) Accrual system of accounting
(c) Hybrid system of accounting ( d) Stock and debtor system

76. Which one of the following is the correct statement? According to the convention of
conservatism, the stock in trade is valued at
(a) the market price (b) the cost price
(c) the market price or cost price whichever is more B (d) the market price or cost price
whichever is less

77. On which one of the following concepts is determination of expenses for an accounting
period based ?
(a) Accounting period concept (b) Matching concept
(c) Cost concept (d) Money measurement concept

78). Match Ust-I (Accounting Concept) with List-II (Assumption Involved) and select the
correct answer using the code given below the Lists :
List -IList - II
A. Accrual concept 1. Entity shall remain in operation long enough to carry out its
existing commitments
B. Entity concept 2. Existence of business separate from its owners, creditors,employees and
customers, etc.
C. Going concern concept 3. Method of identifying revenue and expenses with specific
period of time
D. Consistency concept 4. Accounting principles and procedures should be followed
uniformly from one period to another
5. All material information should be disclosed in the financial statements
ABCD ABCD
(a) 4 2 1 5 (b) 3 1 2 4
(c) 4 1 2 5 (d) 3 2 1 4

79). Which one of the following is the correct statement? The revenue is generally considered
as realized at the time of
(a) receipt of order (b) Agreement to sell
(c) receipt of cash (d) sale

80). In XY partnership firm, X is to get 10% commission on net profit before charging any
commission, and Y is to get 10% commission after commissions of both X and Yare charged.
Net profit is Rs 40,000. What is the value (approximate) of commission of Y?
(a) Rs 3,272 (b) Rs 4,508
(c) Rs 4,896 (d) Rs 5,255

81)What is the amount of sales, when


Opening stock Rs 50,000
Purchases Rs 1,50,000
Wages Rs 20,000
Closing stock Rs 40,000
and the Gross profit IS 1/7th on sales?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 74
(a) Rsl,37,142 (b) Rs 2,00,000
(c) Rs 2,10,000 (d) Rs 1,86,669

82). If land and property are recorded in the books of accounts at market price and profit on
disposal of an item of the same is credited to Profit and Loss Account, which accounting
principle is violated ?
(a) Cost principle (b) Realization principle
(c) Matching principle (d) Principle of Quality

83). Which one of the following is prescribed by the generally accepted accounting principles ?
(a) Uniformity in accounting practices in all enterprises within a country (b) Uniform
accounting practices in all enterprises all over the world
(c) Different accounting practices in different industries (d) Different accounting practices in
different regions

84). Given:

Rs
Opening Capital 10,000
Closing Capital 12,000
New Capital introduced 1,000
What is the profit for the year?
(a) Rs 4,000 (b) Rs 3,000
(c) Rs 2,000 (d) Rs 1~000

85). Accounting as an information system in business is looked upon as the process of


communication. It consists of the following four steps:
1. Communication 2. Recording of data
3. Business activities and transactions 4. Processing of data

86).Match List-I (Accounting Concept) with List-II (Example) and select the correct answer
using the code given below the Lists
List -IList - II
A. Business entity 1. Capital in the liability side of Balance Sheet
B. Dual aspect 2. Balance Sheet as on 31st December, 2004
C. Accounting period 3. Wages paid Rs 5,000
D. Money measurement 4. Goodwill in Balance Sheet for Rs 10,000
ABCD ABCD
(a) 1 4 2 3 (b) 2 3 1 4
(c) 1 3 2 4 (d) 2 4 1 3

87). Which one of the following contains two frequently discussed cross-sectional techniques of
accounting information and their analysis? (a) Abridged profit and loss account and balance
sheet
(b) Cash flow statement and statement of changes in financial position
(c) Common size statements and financial ratio analysis
88).Which one of the following is the correct statement? When an auditor finds significant
unexplained fluctuations in various financial ratios while performing analytical review
procedures, he should normally
(a) qualify the audit report

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 75


(b) issue a letter of weaknesses to the management
(c) extend his substantive procedures for detailed verification of transactions and balances
(d) make other quantitative checks
89). During analytical review, which one of the following is used by an auditor to calculate the
Return on Investment (ROI)?
(a) Net profit before tax and interest/Fixed assets plus current assets
(b) Net profit before tax and interest/Fixed assets
(c) Net profit before tax and interest/Working capital
(d) Net profit before tax and interest/Fixed assets plus working capital
90). Text checking is applied in which of the following audit functions?
1. Vouching
2. Cash verification
3. Physical stock verification
4. Internal control evaluation Select the correct answer using the code given below:
(a) 1 and 2 only (b) 2, 3 and 4 only
(c) 1, 2 and 4 only (d) 1 and 3 only

91).Match List-I (Explanation) with List-II (Types of Audit) and select the correct answer using
the code given below
List –I List - II
A. Audit work is carried on almost simultaneously with recording transaction 1. Balance
Sheet Audit
B. Auditor starts his work after the final accounts have been prepared 2. Continuous Audit
C. Audit conducted in between two annual audits 3. Interim Audit
D. Some of the books & records of the whole period or specific period are audited 4. Partial
Audit
ABCD ABCD
(a) 2 4 3 1 (b) 3 1 2 4
(c) 2 1 3 4 (d) 3 4 2 1

92). What is/are the purpose(s) of using working papers prepared by an auditor?
1. Planning' and conduct of the audit efficiently
2. Supervision and review of audit work performed by the juniors .
3. Producing the working papers as evidence of the audit work performed by him
Select the correct answer using the code given below.:
(a) 1, 2 and 3 (b) 2 only
(c) 2 and 3 only (d) 1 and 3 only

93). Match List-I (Method of Collecting Audit Evidence) with List-II (Example) and select the
correct answer using the code given below the Lists
List -IList - II
A. Observation 1. Auditor finds that although there is no increase in salaries and wages,
contribution to Provident Fund has increased
B. Correlation with related information 2. On a thorough Scrutiny of payroll auditor comes
across 13 entries instead of 12 entries, one extra entry being for the succeeding month of next
year
C. Enquiry 3. Auditor, on a visit of company's godowns, finds that there is a huge pile of
damaged and obsolete stock. On investigation he is told that the same are not shown as such in
the inventory sheets

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 76


D.Scanning 4. On a prolonged interaction with various persons connected with cash
transactions auditors find that there is system of internal check in regard to cash transactions
ABCD ABCD
(a) 3 2 4 1 (b) 4 1 3 2
(c) 3 1 4 2 (d) 4 2 3 1

94). Match List-I (Specific Item) with List-II Relevant internal Control Query) and select the
correct answer using the code given below the Lists :
List -IList - II
A. Fixed assets 1. Are bank reconciliation statements prepared from time to time?
B. Purchase 2. Are invoices checked and verified in regard to description of materials, terms of
payments, etc?
C. Sales 3. Are all invoices duly approved for payment?
D. Disbursement 4. Who authorises for the sale of scraps?
5. Who prepares payroll ?
ABCD ABCD
(a) 2 3 4 1 (b) 4 1 2 5
(c) 2 1 4 5 (d) 4 3 2 1

95)What is an independent appraisal function established with in an organisation to examine


and evaluate its activities as a service to the organisation called?
(a) Internal auditing (b) Internal Check
(c) Internal Control (d) Adminstrative Control

96. Consider the following statements :


The techniques of auditing' include
1. physical examination of tangible assets
2. confirmation from third parties
3. interview with the article clerk
4. study of the type of the organization
Which of the statements given above are correct ?
(a) 1 and 4 only (b) 2, 3 and 4 only
(c) 1, 2 and 3 only (d) 1 and 2 only

97). Match Ust-I (Accounting Standard) with List-II (Subject and select the correct answer
using the code given below,
List -IList - II
A. AS-13 1. Consolidated Financial Statements
B. AS-2 2. Accounting for Investments
C. AS- 3 3. Cash Flow Statements
D. AS-12 4. Valuation of Inventories
5. Accounting for Government
ABCD ABCD
(a) 3 4 2 5 (b) 2 1 3 4
(c) 3 1 2 4 (d) 2 4 3 5

98). A company purchased a machine for Rs 30 lakhs on 1st April, 2002. The estimated life of
the machine is 9 years and scrap value is Rs 3 lakhs. The company follows straigh~ line method
for charging depreciation.' If the method of depreciation is changed from straight line method

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 77


(SLM) to written down method, what is the depreciation provided on the machine in the
financial year 2003-04 ?
(a) Rs 3,00,000 (b) Rs 2,70,000
(c) Rs 2,40,000 (d) Rs 2,43,000

99). 99. Which one of the following reasons provides the best theoretical support for
accelerated depreciation?
(a) Assets are more efficient in early years and initialiy generate more revenue
(b) Expenses should be allocated in a manner so as to smoothen earnings
(c) Repairs and maintenance costs will increase in later years so depreciation should decline
(d) Accelerated depreciation provides earlier replacement because of time value of money
100). Which one of the following is the correct statement? Drawings by proprietor in
anticipation of future profit, made during the year would
(a) reduce owner's equity and increase assets
(b) reduce owner's equity and increase liabilities
(c) reduce both owner's equity and assets
(d) increase liabilities and assets and reduce owner's equity
101). In which account are the revenue as well as expenses shown on cash basis?
(a) Income and Expenditure account (b) Profit and Loss account
(c) Profit and Loss Appropriation account (d) Receipts and Payments account

102). X and Yare partners in a firm sharing profits and losses in the ratio 5:3. They admitted Z
into the firm. The new. profit and loss sharing ratio is 3 : 2 : 1. What are the values of
sacrificing ratios of X and Y?
X Y
(a) 1/8 1/24
(b) 1/3 1/6
(c) 3/8 1/24
(d) 1/12 1/12 (Le., equal)

103).Match List.I (Transaction) with List-II (Entry to be Made) and select the correct answer
using the code given below the Lists :
List -IList - II
A. Loss on realization 1. Debit partner's capital account
B. Profit on realization 2. Credit realization account
C. Assets sold 3. Credit partner's capital account
D. Creditors paid 4. Debit drawings account
5. Debit realization account
ABCD ABCD
(a) 1 3 2 5 (b) 2 5 4 3
(c) 1 5 2 3 (d) 2 3 4 5

104. Which one of the following is the correct statement? As per the provisions in the
Companies Act & the relevant Accounting Standard AS-5, depreciation provision is :
(a) a process of allocation of the depreciable amount of an asset over its estimated useful life
(b) a process of valuation of the depreciable amount of an asset over its remaining useful life
(c) a process of writing off the unrealized portion of an asset at the end of its useful life
(d) simply a statutory provision optional for a business entity
105. Which one of the following is the correct statement? By maintaining the provision for
depreciation account, the asset account
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 78
(a) is shown after deducting the annual provision made for depreciation
(b) is maintained at its original cost throughout its lifetime
(c) is reduced annually by the depreciation amount
(d) is reproduced at net realizable value
106. Subscriptions received by a non-profit organization during the year 2004 amounted to Rs
10,000. The subscriptions outstanding on 31-12-2003 and 31-12-2004 were Rs 2,000 and Rs
4,000 respectively, while the subscriptions received in advance on those dates were Rs 3,000
and Rs 2,000 respectively. What was the income from subscriptions of the organization for the
year 2004 ?
(a) Rs 16,000 (b) Rs 15,000
(c) Rs 13,000 (d) Rs 9,000

107. Which one of the following is the correct statement? In the case of non-profit organization,
ifafter the adjustment of incomes and expenses related to specific fund the fund balance is
negative, it is transferred to
(a) the assets side of the Balance Sheet
(b) the liabilities side of the Balance Sheet
(c) the credit side of Income and Expenditure Account
(d) the debit side of Income and Expenditure Account
108. If proprietary ratio (Shareholders funds/Net assets) is 0.75; and the debentures, current
liabilities and current assets are Rs 45,000, .Rs 40,000 and Rs 85,000 respectively, what is the
amount of Net Block (Fixed assets)?
(a) Rs 1,35,000 (b) Rs 1,40,000
(c) Rs 1,80,000 (d) Rs 1,00,000

109. Match List-I (Computation of goodwill) with List-II (Method) and select the correct
answer using the code given below
List -IList - II
A. Goodwill is determined on the basis of the excess of actual profits over the normal profits
expected in future 1. Super Profit Method
B. Goodwill is determined on the basis of the total value of the firm

Commerce 2009 answers


1.(D) Audit Note Book-Which one is maintained by auditor
2.(D) 2-3-1-4 Consider the following functions of purchase department
3.Not Sure
4.(c) As per AAS 15
5.(A) In which meeting auditor has right to attend
6.(C) When an auditor certifies a financial statement
7.(B) Who among the following....resignation of auditor
8.(c) Within which one..first auditor appointed
9.(a) How would...machinery damaged
10.(c) Which one.... warrant an expression of opinion
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 79
11.(b) but many guys including me favour (d) ......Management auditor
12.( b) i think maybe (a)
13.(a) Directing Which one ... unifying actions of a group of people in an organization
14.(a) force field analysing
15.(c) Consider ...partnership registered compulsory
16.(b) Bill Lading, Consular Invoice
17.(c) Mutual Fund .... though i believe it should be (a) as steady appreciation doesn't happen
always
18.(b) Particular average....marine insurance
19.(d) auditor...special resolution
20.(d) F.W. Taylor...separating planning from operation
21.(d) Satisficing Model...Herbert A Simon
22.(d) Need Based Minimum Wage
23.(d) Northcote Parkinson
24.(c) Selection Scores
25.(a) Match List....Reference Checks, Preliminary Interview
26.(c) Kurt Lewin
27.(a) Robert Blake, W.J. Reddin
28.(d) Entreprunership Management
29.(d) Sender-Message-Encoding
30.(c) Gang Plank
31.(d) Match List X Y Theory, Expectancy Theory
32.(b) Maslow
33.(a) Under... dissolution partnership
34.(d) Henry Mintzberg
35.(b) Coordination
36.(d) David C McClelland
37.(a) Grading Method
38.(c) 20,000
39.(c) Collection of Rs 40,000 from debtors
40.(d) X ltd...40% dividend
41.(c) Policy surrender Value
42.(b) ..preferential payments
43.(c) non compliance of accounting standards
44.(c) profit prior to incorporation
45.(d) Schedule VI
46.(b) Rs 800 Cr
47.(d) Issue of fully paid bonus shares
48.(c) Rs 11,200
49.(a) X Y Z Partners
50.(c) 6:4:5
51.(c) between A and B
52.(d) Consider.. Reserves Surplus...Securities Premium Account
53.(b) Bonus to Shareholders Account
54.(a) Forfeited
55.(b) 4 % ..Journal entry in books of F ltd
56.(a) Rs 12.50 Rights
57.(a) Rs 20,000 X ltd issued ...discount to be written off
58.(b) Rs 60
59.(b) Rs 20..XYZ LTD forfeited
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 80
60.(b) Reduce Liquidity
61.(c) Acid test Ratio.. issue of convertible debentures
62.(b) 1.125: 1 acid test ratio
63.(c) operating profit ratio
64.(d) ICAI Guidelines
65.(c) Information Memorandum
66.(a) Statutory Report
67.Not Sure (D)
68.(C) Shelf Prospectus
69.(b) Statutory Meeting
70.(b) Doctrines..
71.(b) Ruben V/S Great Fingall
72.(a) Indoor Management
73.(c) Sec 292 A
74.(a) removal Secretary
75.(c) Freud
76.(c) Matrix
77.(d) Eric Berne
78.(a) Sec 233 A
79.A...Assertion
80.b
81.d
82.d....NAME CHANGE
83.c...power BOD
84.(b) Share premium increase
85.(d) if due to certain circumstances..no auditor appointed
86.(c) Match List...Suppression Receipts
87.(a) Secret Reserve
88.(c) which..correct sequence..auditor
89.(c) Balance Sheet Audit
90.(a) Teeming Lading
91.(b) kiting
92.(c) Consider..verification
93.(a) Inventory by product
94.(b) advantage..direct confirmation
95.(c) ..example direct confirmation
96.(d) Performance Peer Firms...AAS 8
97.(a) consider the following steps,,audit programme
98.(d) Match List..Test Checking
99.(b) which..correct..sequence..accounting..transactions
100.(c) Match List Fixed Asserts
101.(c) Rs 68,000
102.(a) Purchases equal to..
103.(b) If Assets of a business
104.(d) Rs 16,800..Given Below..income expenses
105.(a) Match List..Valued At Cost
106.(c) Match List Capital Expenditure
107.(a) Match List..Accounting Amalgamations
108.(c) Revenue Expenditure...Patent renewal fees
109.(b) Rs 39,000 Given Purchases ...33 1/3 % on cost
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 81
110.(a) Rs 70,000 X started a garment ..her profit year ended 31.12.2007
111.(c) Rs 3,600 If a traders sales account..no indirect income
112.(c) Rs 8,400 S Ltd has in stock
113.(d) Consider,, Individual Incentive Plans
114.(b) subsequent auditor removal
115.(b) Point Rating Method...Analytical method Job Evaluation
116.(b) Match List Mary Parker
117.(d) identify...correct..sequence..
118.(a) Consider MBO
119.(a) 30 Days...A Private Company..altered ..public company
120.(a) Moosa Goolam Arif

IAS Prelims Commerce 1995


1. Interim payments to partners of a
dissolved partnership firm are made
according to the
a. Assumption that remaining unrealized
assets would be able to realize their
book value
b. Balances of capital of the partners
c. Existing profit-sharing ratios of the
partners
d. Assumption that the realizable value of
the remaining assets is zero
2. A, B and C are partners in a business
sharing profits at the ratio of 2 : 2 : 1. C
dies on 31.3.94. The profits for the
financial year 93-94 (April-March) is Rs.
64,000. The share of the deceased partner
in the profits for the year will be rupees
a. 12,800
b. 9,600
c. 6,400
d. 3,200
3. Consider the following balance Sheet as
on 1.1.94
Liabilities Rs. Assets Rs.
300
12,350
350
1,000
11,000
300
Salaries
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 82
Outstanding
XXXX
12,650
Cash
Furniture
Books &
buildings
Subscriptions
outstanding
12,650
In the above Balance Sheet, the missing narration
XXXX is
a. Capital
b. Capital fund
c. Profit for the year
d. Reserve fund
4. Match List I (Financial Statements and
Accounts) with List II (Special matters
associated with Statements and Accounts)
and select the correct answer using the
codes given below the lists:
List I
A. Receipts and Payments Account
B. Income and Expenditure Account
C. Dividend Equalisation Reserve
D. Club subscription received in Advance
Account
List II
1. Revenue
2. Cash
3. Liability
4. Balance Sheet
5. General Reserve
Codes;
ABCD
a. 2 1 4 3
b. 3 2 4 5
c. 2 1 5 3
d. 1 2 4 5
5. Profit under single entry system of Book
Keeping means
a. the difference between opening and
closing cash balances as reduced by
fresh capital introduced
b. the difference between opening net
assets and closing net assets as
increased by drawings and reduced by
new capital introduced
c. profit shown by Trading and Profit and
Loss Account and Balance Sheet
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 83
d. the amount of closing cash balance as
reduced by expenses
6. Given that
Opening Capital : Rs. 5,000
Closing Capital : Rs. 6,000
Drawings : Rs. 1,000
New Capital invested : Rs. 500
The profit for the year will be
a. Rs. 2,000
b. Rs. 1,500
c. Rs. 1,000
d. Rs. 500
7. Which of the following are prepared by the
organizations keeping only incomplete
accounting records
1. Cash Book
2. Customers Accounts
3. Expenses Accounts
4. Day Books
Choose the correct answer using the codes
given below:
Codes
a. 1, 2 and 3
b. 1, 2 and 4
c. 1, 3 and 4
d. 2, 3 and 4
8. Which one of the following statements is
INCORRECT?
a. Share premium received on issue of
shares can be utilized for writing off
the preliminary expenses of the
Company
b. Capital Redemption Reserve is
available only for issuing fully paid
bonus share
c. Discount on issue of shares is shown as
a reduction from Capital Account in
the Balance Sheet
d. At the time of Rights issue, the
existing shareholders gain because the
shares are generally issued at a price
lower than the market price
9. The Directors of a Limited Company
resolved to forfeit 1,000 equity shares of
Rs. 10 each, Rs. 7.50 paid up, for nonpayment
of the final call money of Rs.
2.50 per share. 700 of these shares were
reissued at Rs. 7 per share. The amount to
be transferred to the Capital Reserve
Account would be
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 84
a. Rs. 2,500
b. Rs. 3,150
c. Rs. 3,500
d. Rs. 3,750
10. The nominal and book value of Sinking
Fund Investments Account are
respectively Rs. 1,00,000 and Rs. 6,000.
The company has sold investments, of the
nominal value of Rs. 20,000 at a price that
was sufficient to redeem the debentures of
Rs, 20,000 at Rs. 102. The profit on’ sale
of investments is
a. Rs. 800
b. Rs. 1,000
c. Rs. 1200
d. nil
11. A company’s Balance Sheet inter alia
contains Rs. 1,60,000 fully paid 10%
redeemable preference shares, Rs. 1,000 as
share premium and Rs. 1,3 1,000 as
Revenue Reserves. It resolves to
immediately redeem the above-mentioned
shares at 5% premium by maximum
utilization of earnings from fresh issue. if
the issue is made at 20% premium, the
MINIMUM amount of fresh equity issue
proceeds will be
a. Rs. 28,800
b. Rs. 32,000
c. Ps. 36,000
d. Rs. 37,000
12. The following accounting entries are
required in connection with the allotment
of shares of a Company
1. Adjustment entry in respect of the
discount allowed, if any, on the issue
of shares
2. Transfer entry for the application
money received on shares allotted
3. Adjustment entry for the excess
application money, if any, being
adjusted against the allotment money
due
The correct sequence of these entries is
a. 1, 2, 3
b. 2, 1, 3
c. 2, 3, 1
d. 3, 2, 1
13. What is the correct sequence of the
following functionaries/authorities in the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 85
life of a company?
1. Board of Directors
2. Promoters
3. Registrar of Companies
4. Underwriters
5. Liquidators
Select the correct answer using the codes
given below
Codes:
a. 1, 2, 3,4,5
b. 2, 1,3,4,5
c. 5,4, 1,3,2
d. 2,4, 1,3,5
14. Depreciation Accounting is a process of
a. allocation of cost
b. valuation of assets
3 of 15
c. provision for replacement of assets
d. estimation of net profit
15. When shares are forfeited, called up
amount on shares is debited to
a. Forfeiture Account
b. Capital Reserve Account
c. General Reserve Account
d. Capital Account
16. Given that the value of furniture on 1.1.93
is Rs. 8000, furniture purchased during the
year is Rs. 4,000, sale of furniture on no
loss no profit basis is Rs. 2,000, and the
furniture is valued at Rs. 7,000 on
31.12.93, the depreciation for the year
1993 will be
a. Rs. 1,000
b. Rs. 3,000
c. Rs. 5,000
d. Rs. 7,000
17. Which one of the following statements is
NOT correct?
a. Bonus shares can be issued out of
General Reserves
b. Bonus shares can be issued in lieu of
dividends
c. Bonus shares, can be issued even if the
shares of the company are partly paid
up
d. Bonus shares can be issued even if
there is a default in the payment of any
term loans outstanding to any Public
Financial Institution
18. Which of the following are applicable to
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 86
Sinking Fund method of depreciation?
1. Periodic depreciation is smaller than
the assets’ actual annual depreciable
cost.
2. Amount of interest constantly declines
due to assets’ reducing balances.
3. Annual net incidence on Profit and
Loss Account remains constant due to
incorporation of only fixed
depreciation.
4. Periodic depreciation is recorded
through the Asset Account.
Select the correct answer using the codes
given below:
Codes:
a. 2 and 4
b. 1 and 3
c. 1, 2 and 3
d. 2, 3 and 4
19. Match List I with List II and select the
correct answer using the codes given
below the lists:
List I
A. Amortisation
B. Depreciation
C. Depletion
D. Obsolescence
List II
1. Diminution in the life of the asset due
to excessive use Exhaustion of natural
resource
2. Expiration, of tangible assets
3. Expiration of intangible assets
4. Economic deterioration due to
improved inventions
Codes:
ABCD
a. 1 2 3 4
b. 1 2 4 5
c. 5 2 3 4
d. 4 3 2 5
20. Which one of the -following methods of
inventory valuation matches current cost
with current revenues?
a. Last in first out
b. First in first out
c. Simple average
d. Weighted average
21. Which of the following statements are
correct?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 87
1. Inventory includes raw materials,
finished goods and goods in process.
2. Inventory is a part of the working
capital.
3. Inventory-includes goods likely to be
purchased in coming months.
Select the correct answer using the codes
given below:
Codes:
a. 1, 2 and 3
b. 2 and 3
c. 1 and 3
d. 1 and 2
22. The success of perpetual inventory system
depends upon
4 of 15
a. placing order for materials at regular
intervals
b. exercising control over the issue of
materials
c. recording the receipt and issue of
materials immediately after each
transaction
d. recording the receipt of materials by
storekeeper in the Bin cards
23. Consider the following factors
1. Margin of safety
2. Lead time
3. Ordering cost
4. Economic Order Quantity
5. Average quantity consumed
6. Storage cost
The ordering level’ is fixed by taking into
account
a. 1, 4 and 6
b. 1, 2 and 5
c. 2, 3 and 4
d. 3, 5 and 6
24. Operating Ratio is given by
a. Total Operating Profit
Total Shareholders' Equity
b. Total Operating Cost
Total Operating Revenue
c. Total Operating Cost
Total Capital Employed
d. Total Operating Profit
Total Operating Capital
25. Interest Coverage Ratio is given by
a. Net Profit/Interest on Debt
b. Debt Capital/Interest on Debt
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 88
c. Earnings Before Interest and
Taxes/Interest on Debt
d. Profit Before Tax/Interest on Debt
26. In a common-size balance Sheet each item
is expressed as a percentage of
a. Equity Capital
b. Debt Capital
c. Fixed Assets
d. Total Assets
27. Given that
Current Ratio = 2.5
Acid-test ratio = 1.5
Net Working Capital = Rs. 60, 000
The value of Current Liabilities will be
a. Rs. 15,000
b. Rs. 40,000
c. Rs. 60,000
d. Rs. 1,00,000
28. Match List I (Ratios) with List II (Method
of calculation) and select the correct
answer using the codes giver below the
lists:
List I
A. Debt-Equity Ratio
B. Proprietary Ratio
C. Capital Gearing Ratio
D. ROI
List II
1. Equity Capital! Total Debt Capital
2. External Equity/ Owners’ Equity
3. Total Shareholders’ Funds/Total
Assets
4. Profit Before Interest & Tax/ Net
Assets
Codes;
ABCD
a. 2 3 1 4
b. 2 3 4 1
c. 3 2 1 4
d. 3 2 4 1
29. Match List I with List II and select the
correct answer using the codes given
below the lists
List I
A. Financial Leverage
B. Quick Ratio
C. Stock Turnover Ratio
D. Margin on Sales
List II
1. Efficiency
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 89
2. Profitability
3. Risk
4. Liquidity
Codes;
ABCD
a. 3 4 1 2
b. 4 3 1 2
c. 4 3 2 1
d. 3 4 2 1
30. Trading on equity takes place
a. when Capital other than that of equity
shareholders also employed
5 of 15
b. only when equity Capital is employed
c. only when debenture funds are
employed
d. when profits are ploughed back

31. Pay out ratio means the ratio of


a. debtors to creditors
b. profit distributed to profit retained
c. earnings that are distributed through
dividends
d. interest payment to dividends
32. Given that
Sales = Rs. 50,000
Variable Cost = Rs. 20,000
Fixed Cost = Rs. 10,000
Capital employed = Rs. 2,00,000
the profit-volume ratio will be
a. 10%
b. 15%
c. 50%
d. 60%
33. Consider the following activities:
1. Valuation
2. Verification
3. Vouching
The correct sequence of these activities
undertaken by an auditor is
a. 3, 1, 2
b. 3, 2, 1
c. 2, 3, 1
d. 1, 2, 3
34. The value of which one of the following
assets increases in the initial years of its
life remains constant thereafter and finally
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 90
begins to decline?
a. Livestock
b. Patents
c. Goodwill
d. Machinery
35. Consider the following statements
Continuous audit is useful because
1. more detailed checking is possible
2. audit can be completed quite quickly
3. figures in the accounts cannot be
altered as the auditor visits several
times during the year
4. internal check can be done away with
Of these statements
a. 1 and 2 are correct
b. 2 and 4 are correct
c. 2, 3 and 4 are correct
d. 1, 3 and 4 are correct
36. Match List I (Nature of audit) with List II
(Related types of audit) and select the
correct answer using the codes given
below the lists:
List I
A. Audit work is carried on almost
simultaneously with the recording, of
transactions
B. Auditor starts his work when the final
accounts have been prepared
C. Audit conducted in between two
annual audits
D. Some of the books and records of the
whole period or specific period are
audited
List II
1. Balance Sheet Audit
2. Continuous Audit
3. Interim Audit
4. Cost Audit
5. Partial Audit
Codes;
ABCD
a. 4 1 2 3
b. 2 1 5 3
c. 2 1 3 5
d. 1 2 3 4
37. Which one of the following would be a
sufficient ground for an auditor to submit a
qualified report even though the
management had given a note to the
accounts?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 91
a. Securities belonging to the client are
lodged with a depository
b. Fixed assets have been mortgaged
c. Bank balance as shown by the passbock
is different from that indicated by
the cash book
d. Closing stock is valued at cost plus
10%
38. Consider the following documents
1. Audit Notebook
2. Audit Programme
3. Audit Report
4. Audit Files
The correct sequence which an auditor
prepares these documents is
6 of 15
a. 1, 2, 3, 4
b. 2, l, 3, 4
c. 2, 1, 4, 3
d. 1, 2, 4, 3
39. Which of the following pairs are correctly
matched?
1. Test check …………Random checking
2. Internal check …………A system of
automatic checking
3. Internal control ………….Includes
internal check and internal audit
4. Investigation …………………General
examination of all accounting records
Select the correct answer using the codes
given below:
Codes:
a. 1, 2, 3 and 4
b. 1, 2 and 4
c. 3 and 4
d. 1, 2 and 3
40. The scope of external audit in the case of a
partnership firm is decided by the
a. Companies Act
b. Partnership Act
c. letter of appointment of the auditor
d. Income Tax Act
41. A Chartered Accountant who has
purchased on credit goods worth Rs. 2,000
from a company ‘Z’ Ltd., is
a. not disqualified from being appointed
an auditor of Z Ltd.
b. disqualified from being appointed an
auditor of any company of the group
c. disqualified from being appointed an
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 92
auditor of Z Ltd.
d. Disqualified from being appointed an
auditor of any company having
dealings with Z Ltd.
42. The auditors of a company are NOT
supposed to issue an unqualified report
when
a. Goodwill worth Rs. 1,00,000 built up
by the company is not shown in the
Balance Sheet
b. Goodwill is shown in the Balance
Sheet of the company although it has
been totally lost
c. Balance Sheet and Profit and Loss
Account show a true and correct view
of the company’s affairs and are drawn
in conformity with the Law
d. proper Books of Accounts as required
by Law have been kept by the
company but the auditor has been
refused access to some of these books
43. Consider the following situations
1. The business of the company is being
conducted fraudulently
2. The persons connected with the
formation of the company have been
guilty of fraud
3. The company so desires it by way of a
Special Resolution
4. The Central Government NEED NOT
NECESSARILY appoint inspectors to
investigate the affair of the company in
respect of situations listed at
a. 1, 2 and 3
b. 1 and 2
c. 1 and 3
d. 2 and 3
44. Which of the following pairs is/are
correctly matched.
1. Sinking Fund Replacement of wasting
assets
2. Secret Reserve Overvaluation of
liabilities
3. General Reserve Provision for drop in
value of assets
Select the correct answer using the codes
given below
Codes
a. 1, 2 and 3
b. 1 and 3
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 93
c. 2 alone
d. 1 alone
45. Assertion (A): The Chairman’s speech in
NOT required under the-Companies Act. It
is a matter of custom or tradition.
Reason (R) The Chairman’s speech is
comp1emen material and has to be read in
conjunction with the Annual Report where
he provides’ additional information on the
status of the company’s activities and the
overall development taking place in that
industry.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
7 of 15
c. A is true but R is false
d. A is false but R is true
46. Assertion (A): Intrusion of an outsider as
member is. undesirable unless he is found
to be a persona grata to the existing
Reason (R): The Articles of a private
limited company must for this reason
contain restrictions 85 to transfer of
Shares, limitation of members to 50 and
prohibition of invitation to public to
subscribe to any share in the company.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
47. Assertion (A): The Prospectus of a
company must state the management
perception of the risk factors.
Reason (R): The investor can make the
decision to invest or not to invest at his
own risk.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
48. Assertion (A): Everything that goes to
increase the importance of the
subordinate’s role is decent ration
Reason (R): When the degree of
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 94
delegation of authority is more than the
degree of reservation of authority, it is a
case of decentralization
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
49. Assertion (A): MBO is effective way of
planning and organizing the work.
Reason (R): Employees participate in
setting the objectives.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
50. Assertion (A): O & M is a conscious
attempt to improve the quality of
management and to maintain efficient
administrative machinery.
Reason (R): 0 & M involves a detailed
study of the subject to be investigated, say
procedures currently being followed.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
51. Assertion (A): A Company Secretary with
the requisite qualification and experience
may still not be appointed by the Board if
he is judged by the Board to be not
trustworthy.
Reason (R): The Company Secretary deals
with several confidential matters of the
company.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
52. Assertion (A): Agenda is the genesis of the
meeting to be held and of the minutes to be
recorded subsequently,
Reason (R): The agenda, if prepared in
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 95
brief, would enable the Secretary and the
Chairman to prepare and finalize the
minutes correctly and without difficulty.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
53. Assertion (A): Owners’ claims (equities)
are often referred to as Residual.
Reason (R): Owners do not have any claim
on the assets until all the claims of the
creditors have been satisfied in full.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
8 of 15
d. A is false but R is true
54. Assertion (A): Interest on Working Capital
should be treated as an item of Revenue
Expenditure.
Reason (R): Interest is the cost of Capital
employed in the business.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
55. Assertion (A): Wages paid for the
installation of a new machine are treated as
Capital Expenditure.
Reason (R): It is connected with the task
of putting a new asset in working
condition.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
56. Assertion (A): Legacy is treated as Capital
Receipt and shown in the liability side of
the Balance Sheet of a non-profit
organization.
Reason (R): Property received under
legacy creates liability for the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 96
organization.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
57. Assertion (A): Depreciation amount is
added back to net profit for calculating
‘funds from operations’ in preparing a
funds flow statement.
Reason (R): Depreciation is an item of cost
but not funds.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
58. Assertion (A): Quick realization of
receivables will improve the debtor’s
turnover of an enterprise.
Reason (R): Realization of receivables
increases the quantum of Working Capital.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
59. Assertion (A): In a large company, internal
control is the responsibility of the
management.
Reason (R): The external auditor has to
certify that the company has internal
control commensurate with the size of its
operations.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
60. Assertion (A): The return On Investment
(ROI) is regarded as a primary ratio
because it is one single measure where the
final outcome of all business activities is
recorded.
Reason (R): The ‘Capital’ and ‘Return’ are
subject to varying interpretations by firms.
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 97
Therefore ROI is in practice.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R are true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true

IAS Prelims Commerce 1995

61. Which one of the following statements is


correct?
a. Cooperative organizations are based on
the principle of “One Share One Vote”
b. A public limited company does not
invite capital from the public
c. Most of the public enterprises in India
are organized on the pattern of private
limited companies
d. Registration of partnership is
compulsory
62. Match List I with List II and select the
correct answer using the codes given
below the lists:
List I (Type of organization)
A. Sole Trader
B. Partnership
C. Cooperatives
D. Public Limited Company
List II (Important characteristic)
1. Larger number of risk takers
2. Betterment of the weaker sections
3. Contractual relationship
4. Unlimited liability
Codes;
ABCD
a. 1 2 3 4
b. 4 3 2 1
c. 4 2 3 1
d. 1 3 2 4
63. The liability of shareholders of a public
limited company is limited to the
a. paid up value of shores
b. extent of their private assets
c. nominal value of shares
d. amounts called up
64. The “Instrument of transfer” is used at the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 98
time of
a. issue of new shares to the public by the
company
b. issue of debentures. to the public by
the company
c. sale of shares by a member
d. conversion of shares into stock
65. Match List I with List II and select the
correct answer using the codes given
below the lists
List I
A. Dividend
B. Interest
C. Bonus shares
D. Premium on share price
List II
1. Accumulated Reserves
2. Always paid whenever the firm makes
a profit
3. Can be used for issue of Bonus shares
4. Can be paid out of Capital
5. Divisible part of profit
Codes;
ABCD
a. 2 1 5 4
b. 5 4 1 3
c. 5 1 2 4
d. 2 5 1 3
66. Which one of the following statements is
correct?
a. A prospectus is a notice, circular,
advertisement other intimation inviting
offers from the public for the purchase
of goods of a company
b. The amount of minimum subscription
is mentioned in the Memorandum of
Association
c. All the directors must sign the
Prospectus
d. Investors are not duly protected against
any misstatement in a Prospectus
67. Match List I with List II and select the
correct answer using the codes given
below the lists
List I (Post held in the company)
A. Director
B. Company Secretary
C. Managing Director
D. Statutory auditor
List II (Duties responsibility)
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 99
1. In charge of statutory and
administrative duties
2. Reports to the management
3. Reports to the shareholders
4. Reports to the Board of Directors
5. Trustee of Company’s assets
Codes;
ABCD
a. 2 4 5 1
b. 5 1 2 3
c. 5 1 4 3
d. 3 2 5 4
68. Which one of the following statements
correctly explains the “Doctrine of Indoor
management”?
a. Every person dealing with the
company is presumed to have read and
understood the contents of the
company’s Memorandum and Articles
of Association
b. It is aimed at protecting outsiders
while dealing with the company
c. If a person enters into a contract with
the company which is contrary to the
provisions of the Memorandum and
articles of Association, he will not
have any right under such a contract
d. It is a rule that seeks to protect the
company while dealing with the
outsiders
69. Match List I (Types of securities) with List
II (Special features) and select the correct
answer using the codes given below the
lists
List I
A. Blue Chip
B. Deep Discount Bonds
C. Commercial Paper
D. Debentures
List II
1. Issued by a private limited company
2. Highly profitable investments in a
stock exchange
3. Issued by financially sound companies
4. Small investments yielding a big sum
after a long-term
5. Issued by companies having large
reserves
6. Issued in lieu of loans
Codes;
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 100
ABCD
a. 2 1 3 6
b. 1 4 6 5
c. 2 3 1 5
d. 2 4 3 6
70. A public limited company CANNOT issue
a. Debentures
b. Deferred shares
c. Participating Preference shares
d. Redeemable Preference shares
71. Which one of the following statements is
correct?
a. Merchant bankers shall furnish a Due
Diligence certificate while forwarding
a draft prospectus/letter of offer to
Registrar of Companies
b. Employee stock option scheme is a
compulsory scheme on the part of the
company to encourage employees to
have a greater sense of participation in
the activities of the company
c. When a private limited or a closely
held or an unlisted public company
desires to get listed in a Stock
Exchange by disinvestment, it may do
so
d. A company issuing shares to the public
has no right to select a Merchant
Banker to manage the issue
72. Which of the following are the methods of
marketing new issues of securities
1. Listing of securities
2. Jobbers and brokers
3. Private placement of securities
4. Privileged subscriptions
Select the correct answer using the codes
given below
Codes:
a. 1 and 2
b. 2 and 3
c. 3 and 4
d. 1, 2, 3 and 4
73. Consider the following institutions
1. Securities Exchange Board of India
2. Board for Industrial and Financial
Reconstruction
3. EXIM bank
4. National Stock Exchange
The correct chronological sequence of the
establishment of these institutions is
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 101
a. 4, 1, 2, 3
b. 3, 1, 2, 4
c. 3, 2, 1, 4
d. 4, 2, 1, 3
74. Vertical combination helps to
a. achieve economy by combining allied
activities
b. survive during the times of depression
c. fight a common enemy
d. add new product lines
75. A part dealing with restrictive trade
practices of the MRTP Act was amended
in 1991. This Amendment is applicable
a. only to private sector companies
b. only to public sector companies
c. to both public and private limited
companies
d. both public and private sector
companies
76. Modernization leads to
a. higher productivity and higher
production
b. lower investment and cheaper quality
c. cost reduction through reduced
expenditure
d. higher cost of production
77. Technological updating would invariably
require
a. change in Management
b. privatization of public enterprises
c. retrenchment of workers
d. induction of fresh capital
78. Letter of credit is now becoming an
increasingly popular method of financing
a. fixed capital needs
b. working capital needs
c. redemption o1 debentures
d. distribution of dividend
79. Deferred payment arrangements
a. working capital needs
b. redemption of debts
c. purchase of GDRs
d. import of plant and machinery aim at
financing
80. In general, export incentives are permitted
within the regulatory framework of
a. OECD
b. UNCTAD
c. IMF
d. WTO
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 102
81. Import procedure begins with
a. indent
b. marine insurance
c. Mate’s certificate
d. shipping order
82. Which one of the following statements is
correct?
a. EXIM Bank promotes Indian exports
through a wide variety and range of
lending programmes
b. EXIM Bank does not extend nonfunded
hci1ity to Indian exporters
c. Overseas Investment Finance facility is
not a part of the functions of EXIM
Bank
d. EXIM Bank was established to provide
assistance in raising capital in
international markets
83. In which of the following types of
insurance should insurable interest be
present only at the time when policy is
taken?
a. Fire insurance
b. Life insurance
c. Marine insurance
d. Life and Marine instirance
84. Match List I with List H aid select the
correct answer using the codes given
below the lists
List I
A. Causa Proxima
B. Reinsurance
C. Indemnity
List II
1. Financial stake
2. Main reason behind the event
3. Compensation for the loss
4. Risking with other insurer
Codes;
ABC
a. 2 4 3
b. 1 2 3
c. 2 3 1
d. 2 4 1
85. ‘Insurer’ is a person
a. insured his life or goods
b. helped a person to get an insurance
policy
c. undertaken to make good the loss of
the subject matter of insurance
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 103
d. filed a suit in a court of law to recover
an insurance claim
86. In insurance contract Uberima Fidel aspect
is used as synonym of
a. insurable interest
b. free consent of parties
c. utmost good faith
d. legality of consideration
87. Both ‘security’ and investment’ elements
are available
a. only in Life Insurance
b. in both Life and Fire Insurance
c. in both Marine and Fire Insurance
d. in Life, Marine and Fire insurance
88. Match List I (Management experts) with
List II (Sequence of functions advocated
12 of 15
by them) and select the correct answer
using the codes given below the lists
List I
A. Newman and Summer
B. Henry Fayol
C. Luther Gulick
D. Koontz and O’Donnel
List II
1. Organizing, Planning, Leading and
Controlling
2. Planning, Organizing, Commanding,
Coordinating and Controlling
3. Planning, Organizing, Staffing,
Directing and Controlling
4. “POSDCORB”
Codes;
ABCD
a. 1 2 4 3
b. 2 1 3 4
c. 1 2 3 4
d. 2 1 4 3
89. Which one of the following statements
regarding “Skill-mix” of management is
correct?
a. Top management requires more human
relations skill than others
b. Middle-level manage pent requires
more technical skills than others
c. Supervisory level men require less
technical skill than others
d. Top management requires more
conceptual skill than ethers
90. From the point of view of Functional
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 104
Organization, which one of the following
CANNOT be claimed to be an advantage?
a. It ensures a greater division of labour
b. It leads to a higher degree of efficiency
c. It helps in the assignment of specific
responsibilities
d. It facilitates small scale production
91. Match List I (Managerial Activity) with
List II (Managerial Function) and select
the correct answer using the codes given
below the lists:
List I
A. Forecasting
B. Communication
C. Selection of managers
D. Establishing performance standards
List II
1. Controlling
2. Planning
3. Leading
4. Staffing
Codes;
ABCD
a. 2 3 4 1
b. 1 2 4 3
c. 2 4 3 1
d. 1 3 4 2
92. The potential DISADVANTAGE of MBO
is
a. its inability to control progress of work
and achievement of results
b. its over-emphasis on production and
productivity
c. the additional commitment to the
organization
d. the absence of short-term and longterm
planning
93. Consider the following statements:
1. Decentralization and delegation are
closely interrelated
2. Delegation and decentralization are
both desirable
3. Decentralization is not suitable for
large organizations
4. Delegation is not possible in the case
of small organizations
Of these statements
a. 1 and 2 are correct
b. 2 and 3 are correct
c. 1 and 4 are correct
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 105
d. 1, 3 and 4 are correct
94. Organization Theory deals with
a. forms of business organization
b. structure of an organization
c. industrial relations
d. incentives and wage policy
95. Which one of the following statements is
correct?
a. Responsibility of the delegatee cannot
be greater than the authority delegated
b. Delegation frees the delegator of the
responsibility
c. Delegation is merely the division of
work
13 of 15
d. Delegation does not bestow an
obligation on the part of the delegatee
96. The basis of Theory ‘Z’ is the reliance on
a. external control of human behaviour
b. self-control and self-direction
c. the belief that productivity is linked to
trust, openness, subtlety and intimacy
in the work environment
d. governmental regulatory framework
97. Delegation of authority is linked to
a. managerial planning
b. management coordination
c. management control
d. scientific management
98. Match List I with List II and select the
correct answer using the codes given
below the lists:
List I
A. F.W. Taylor
B. Henry Fayol
C. Elton Mayo
D. Peter Drucker
List II
1. MBO
2. Scientific Management
3. Fourteen principles of Management
4. Theory ‘X’
Codes;
ABCD
a. 2 3 - 1
b. 1 2 4 -
c. 2 - 4 1
d. 3 2 - 1
99. When an office manager selects different
colours of paper and ink for printing forms
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 106
according to the purpose for which they
are intended, he is following the principle
of
a. systems integration
b. standardization
c. identification
d. multiple use
100. Office management is generally speaking,
the responsibility area of
a. Corporate Controller
b. Works Manager
c. Chairman, Board ‘of Directors
d. Chief Executive
101. File Movement register keeps track of
a. indexing of records
b. classification of records
c. inventory of records
d. none of the above
102. The use of office machine CANNOT
a. enhance production
b. save labour
c. promote accuracy
d. relieve monotony.
103. Which one of the following sections of the
Company’s Act 1956 makes it obligatory
that with effect from 1994, every company
with a paid-up share capital of Rs. 50 lakhs
or more should have a qualified wholetime
Company Secretary?
104. Consider the following steps in the
process of allotment of shares
1. Issue of prospectus
2. Appointment of Manager to the issue
3. Receipt of application money
4. Listing in a stock exchange
5. Minimum subscription
The correct chronological sequence of
these steps is
a. 1,2,5,4,3
b. 2,1,3,5,4
c. 2,1,5,3,4
d. 1,2,4,5,3
105. Which one of the following statements
regarding the rights, duties and liabilities
of a Company Secretary is correct?
a. A Company Secretary does not have
access to the books of accounts of the
Company
b. Remuneration of a Company Secretary
is taken into account for the purpose of
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 107
calculating the overall managerial
remuneration under Section 198 of the
Companies Act
c. A Company Secretary is liable for any
misstatement made in the prospectus
d. A Company Secretary is responsible
for Signing various returns and
statement. and filing the same with the
Registrar of Companies
106. Match List I with List II and select the
correct answer using the codes given
below the lists
List I (Relevant materials for a Company
meeting)
A. Agenda
B. Quorum
C. Adjournment
D. Proxy
List II (Meaning)
1. Minimum number of members
required to be present
2. Entitlement to. vote
3. Matters to be taken up for decision
4. A meeting in progress postponed to
some other date
5. Minimum number of directors
6. Entitlement to participate
Codes;
ABCD
a. 1 6 4 2
b. 3 5 1 2
c. 3 1 4 2
d. 2 1 4 6
107. Consider the following events
1. Demand for poll
2. Chairman’s declaration of result of
voting by show of hands
3. Appointment of scrutinizers at poll
4. Declaration of the result of the poll
The correct sequence of these events is
a. 1,3,4,2
b. 1,4,3,2
c. 2,3,1,4
d. 2, 1,3,4
108. An estimate of the assets and liabilities of
a firm as on a given date is called
a. Balance Sheet
b. Statement of Affairs
c. Statement of Capital
d. Income Statement
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 108
109. A provision is a
a. General Reserve
b. Specific Reserve
c. Capital Reserve
d. Contingency Reserve
110. A person starts a business with a Capital of
Rs. 45,000. He purchases goods on credit
worth Rs.5,000. These transactions can be
expressed in an Accounting Equation as
a. Rs. 5,000 Rs. 50,000 — Rs. 45,000
b. Rs. 50,000 = Rs. 50,000 + 0
c. Rs. 50,000 = Rs. 45,000 + Rs. 5,000
d. Rs. 45,000 = Rs. 50,000 — Rs. 5,000
111. Match List I with List II and select the
correct answer using the codes given
below the lists:
List I (Accounting concept)
A. Consistency
B. Comparability
C. Conservatism
D. Disclosure
List II (Principle involved)
1. Losses- are anticipated and accounted
for in advance but profits are not
accounted for until realized
2. All the relevant financial information
should be summarized and presented in
the accounting statements
3. Accounting procedures in an entity
should be followed uniformly from
period to period
4. Accounting statements of different
periods of an entity and those of
different entities of a period should be
based on the same accounting
principles, and procedures
5. Personal judgment of accountants
should not influence accounting
measurements
Codes;
ABCD
a. 4 3 5 2
b. 3 4 1 2
c. 4 3 1 5
d. 3 4 2 5
112. Which one of the following should be
considered venue expenditure?
a. Rs. 1,000 paid for the erection of a
new plant
b. Cost of Rs. 10,000 incurred in
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 109
increasing the sitting accommodation
of a hotel
c. Damages paid on account of breach of
a contract to supply certain goods
d. Repairs to machinery purchased
secondhand
113. The written down value of a plant is Rs.
6,000 (the original value being Rs.
10,000). It is sold for Rs. 12,000 during
the current financial year. Which one of
the following is true in this regard?
a. Capital Profit = Rs. 6,000
15 of 15
b. Revenue Profit = Rs. 6,000
c. Capital Profit = Rs. 2,000 and Revenue
Profit = Rs. 4,000
d. Capital Profit = Rs. 12,000
114. Match List I (Item of expenditure/receipt)
with List II (Nature of expenditure/receipt)
and select the correct answer using the
codes given below the lists:
List I
A. Carriage charges on a new machine
purchased for factory
B. Legal expenses incurred in defending a
case of violation of a provision of
Factories Act
C. Grant-in-aid received from the
Government for the construction of a
building
D. Amount received for a part of the
office building sub-let
List II
1. Revenue Receipt
2. Revenue Expenditure
3. Deferred Revenue Expenditure
4. Capital Expenditure
5. Capital Receipt
Codes:
ABCD
a. 2 3 1 5
b. 4 2 5 1
c. 3 4 1 5
d. 4 3 1 5
115. Advance received from customers is
a. an item of current liability
b. an item of non-current asset
c. an item of contingent liability
d. an item of non-cash cost
116. While preparing the Annual Financial
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 110
Statements, the balance of Prepaid Rent
Account should be treated as the balance
of a
a. Personal Account
b. Nominal Account
c. Real Account
d. Deferred Expenditure Account
117. Consider the following statements:
Whale preparing Annual Financial
Statements, the balance of Bills
Receivable Account can be treated as
1. an Accrued Income 2. an item of assets
2. a “Personal Account” balance Of these
statements
a. 2 and 3 are correct
b. 1 and 3 are correct
c. 1 and 2 are correct
d. none is correct
118. Final Accounts’ of a manufacturing
company generally include the following
types of documents
1. Balance Sheet
2. Manufacturing Account
3. Profit and Loss Account
4. Trading Account
5. Profit and Loss Appropriation Account
The correct sequence in which these
documents are prepared
a. 1,4,3,2,5
b. 2,4,3,5,1
c. 1,2,4,3,5
d. 2,4,5,3,1
119. Match List I with List II and select the
using the codes given below the lists:
List I
A. Operating Income
B. Capital Employed
C. Inventory Turnover
D. Gross Cash Flow
List II
1. Cost of goods sold to average stock
2. Profits before depreciation, interest and
taxes
3. Net Fixed Asset Investment and Net
Working Capital
4. Total Funds invested
5. Profit before interest and taxes only
120. A and B are partners sharing profits and
losses in the ratio of 2:5. They admit C on
the condition that he will bring goodwill in
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 111
cash which is distributed between A and
B. C’s share in future profits or losses is to
be one-fourth. The new profit sharing ratio
of A, B and C will be
a. 6 : 15 : 7
b. 15 : 6 : 7
c. 7 : 6 : 15
d. 6 : 7 : 15

IAS Prelims Commerce 1996


1. Which of the following pairs are correctly
matched?
1. Planning ………………. Sets out the
objectives and a complete set of
policies
2. Organization ……………. Enables the
owner or top executive of a business to
interweave men, money, materials and
methods
3. Coordination ……………. Ordely
arrangement of group effort to provide
unity of action
4. Control …………. Verifying whether
everything occurs in conformity with
the plan adopted, the instructions
issued and principles established
Select the correct answer using the codes
given below:
a. 1, 3 and 4
b. 2 and 4
c. 1, 3 and 4
d. 1, 2 and 3
2. A written statement of the main duties and
responsibilities which a particular job
entails is called
a. Job analysis
b. Job specification
c. Job description
d. Job evaluation
3. Selection process in any organization is
usually preceded by the preparation of
a. Human resources audit
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 112
b. Operations audit
c. Human resources inventory
d. Human resources accounting
4. Which one of the following monitors
critical inputs and suggests preventive
measures in the form of correctives action
to correct inputs and processes?
a. Feedback control
b. Feedforward control
c. Budgetary control
d. Operational control
5. Consider the following elements in a
feedback loop:
1. Identification of deviations
2. measurement of actual performance
3. Actual performance
4. Comparison of actual against standards
The correct sequence of these elements in
the feedback loop is
a. 3, 2, 1, 4
b. 3, 2, 4, 1
c. 2, 3, 1, 4
d. 2, 3, 4, 1
6. Span of Management may be larger in the
case of
a. hard working subordinates
b. loya subordinates
c. centralized works and less
responsibility
d. repetitive work and clear responsibility
7. If the span of control is narrow, a number
of managers would be required in each
unit of the organization and there would be
many managerial levels or layers. Such an
organizational structure is referred to as
a. Flat structure
b. Tall structure
c. Matrix structure
d. Project structure
8. Span of management means that
a. An organization must have well
defined golas or objectives
b. Each person is the organization must
manage within a clearly defined
functional area
c. Each subordinate should report to only
one supervisor
d. A manager can supervise only limited
number of subordinates
9. The following steps are involved in the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 113
process of organizing:
1. Forming supportive objectives
2. Delegating to the head of each group
the authority necessary to perform the
activities
3. Establishing enterprise objectives
4. Identifying and classifying activities
The correct sequence of these steps is
a. 3, 1, 2, 4
b. 3, 1, 4, 2
c. 1, 3, 4, 2
d. 1, 3, 2, 4
10. When management pays attention to more
important areas and when the day-to-day
routine problems are looked after by lower
level management, it is known as
a. Management by Objectives
b. Management by Exception
c. Participative Management
d. Critical path method
11. The following steps are involved in
managing by objectives:
1. Preliminary setting of objectives at the
top
2. Setting subordinate’s objectives
3. Tying resources with the goals
4. Clarifying the organizational roles
The correct sequence of these steps is
a. 1, 2, 3, 4
b. 1, 2, 4, 3
c. 1, 3, 2, 4
d. 1, 4, 2, 3
12. A company Secretary must always be
a. A part of a secretarial agency
b. A firm or a corporation
c. Registered with the Securities and
Exchange Board of India
d. An individual with specified
professional qualifications
13. The company Secretary is the agent of the
a. Managing Director
b. Shareholders
c. Board of Directors
d. promoters
14. In the case of transmission of shares, the
Company Secretary is required to check
a. The ‘letter of request’ submitted by the
executor
b. Whether the transfer from submitted
by the administrator is duly stamped
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 114
c. The deed of settlement between the
parties
d. If everything is in conformity with the
orders the central Government.
15. In principle, in the case of transfer of
share, the Company Secretary after he is
satisfied that everything is in order is
required to issue
a. Transfer receipt to the transferee and
the transferor
b. Letter of probate receipt to the
transferee and the transferor
c. Notices of lodgment of transfer’ to the
transferee and the transferee
d. An advertisement by way of public
notice regarding the transfer
16. Declaration of dividend is and important
part of the agenda of
a. statutory meeting
b. Annual General meeting
c. Extraordinary general meeting
d. Joint meeting of the shareholders and
debenture
17. The minutes of the proceedings of every
general meeting should be recorded in the
books kept for that purpose within
a. 30 days of every such meetin
b. Three months of any such meeting
c. The intervening period between that
meeting and the next meeting
d. Such time as approved by the
Chairman of the company
18. Which one of the following statements is
correct?
a. Minutes has Company’s Act, while
reports have no such legal sanctity
b. Minutes have no legal sanctity but
reports have legal sanctity by virtue of
the provisions contained in the
Company’s act
c. Minutes contain a much more detailed
account of all matters of the meeting
whereas report have fewer details
d. There is very little difference between
the minutes and reports except that one
is brief and contains only action points
while the other (reports) contains
details including pros and cons of a
particular decision
19. Assertion (A): The balance Sheet fails to
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 115
reveal the worth of a business.
Reason (R): Assets are merely
unamortized costs
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
20. Assertion (A): For ascertaining the correct
profit current cost are to be matched with
current revenues.
Reason (R): LIFO method ensures
matching of current cost with current
revenues.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
21. Assertion (A): An equal increases in both
current assets and current liabilities
decreases current ratio.
Reason (R): Equal decreases in current
assets and current liabilities also decrease
current ratio.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
22. Assertion (A): ROI has aptly been
regarded as theprimary ration as it
specifies the relative net profit earned on
capital employed. Du pont chart shows the
manner in which the key elements
converge into the ROI.
Reason (R): An approximate measure of
Return on Equity (ROE) cannot be derived
from ROI as the portion of assets financed
by equity is difficult to determine.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
23. Assertion (A): The cost of demolishing an
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 116
old building preparatory to the
construction of a new building in that
place is to be treated as Capital
Expenditure.
Reason (R): Such cost is not incidental to
the construction of the new building.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
24. Assertion (A): Once incorporated, the
name of a public limited company cannot
be changed.
The name of a public limited company
must be distinct and should not mislead or
resemble that any other company.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
25. Assertion (A): A transferee of shares
cannot sue the promoters of a company for
misinformation in the prospectus.
Reason (R): The information provided by
the company promoters in the prospectus
is addressed only to the original allottees.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
4 of 15
d. A is false but R is true
26. Assertion (A): Effective motivation is
moderated by organizational complexity
and conflicts.
Reason (R): An individual’s motives may
be complex and conflicting.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
27. Assertion (A): According to Theory X all
employees dislike workd and must be
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 117
coerced, controlled or threatened to make
them work.
Reason (R): Theory X makes an
assumption about the basic human nature
which is relevant to the employees also.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
28. Assertion (A): Everything that goes to
increase the importance of the
subordinate’s role is delegation.
Reason (R): Subordinates can be trained
by delegation
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
29. Assertion (A): An office system is a
standard sequence of operations in a
particular business activity and is
concerned with how those operations are
perfumed as well as by whom and when
they are perfumed.
Reason (R): Systems include operations,
people and purpose.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
30. Assertion (A): Franking machines are used
for printing postage on mailed letters.
Reason (R): Franking machines are to be
purchased from the market and it does not
require a license from the postal dept.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
IAS Prelims Commerce 1996
31. Assertion (A): Organization and methods
is a conscious attempt to improve the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 118
quality of management and maintain
efficient administrative machinery.
Reason (R): It involves detailed
investigation with regard to the subject to
be investigated, say procedures already
being followed.
a. Both A and R are true and R is the
correct explanation of A
b. Both A and R or true but R is NOT a
correct explanation of A
c. A is true but R is false
d. A is false but R is true
32. The fundamental accounting equation,
Assets = Equities,
is the formal expression of
a. Dual aspect concept
b. Matching concept
c. going-concern concept
d. money measurement concept
33. A business is considered to be having and
indefinite life according to
a. Accounting period concept
b. Cost concept
c. Going concern concept
d. Dual aspect concept
34. Which of the following pairs are correctly
matched?
1. Business entity ………….. Accounting
standard
2. Stock valuation ………. Consistency
3. Capital ………. Drawings
5 of 15
4. Going concern ………… Assumption
Select the correct answer using the codes
given below:
Codes:
a. 2, 3 and 4
b. 1, 2 and 3
c. 1, 2 and 4
d. 1, 3 and 4
35. Money-measurement concept of
Accounting Theory is based on the
assumption that the value of money will
a. Remain constant
b. Fluctuate
c. Decreases
d. go up
36. match List I (Items of Expenditure and
Receipt) with List II (Nature of
Expenditure and Receipt) and select the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 119
correct answer using the codes given
below the list:
List I
A. Premium paid for a leasehold property
B. Insurance premium paid for risks
against accidental losses of properties
(fixed assets)
C. Amount realized from the sale of
securities (investments) purchased
earlier
D. Huge sales promotion expense
List II
1. Revenue expenditure
2. Capital receipt
3. Deferred revenue expenditure
4. Capital expenditure.
Codes;
ABCD
a. 4 2 1 3
b. 3 2 1 4
c. 4 1 2 3
d. 3 1 2 4
37. Match List I (Items of Expenditure and
Receipt) with List II (Nature of
expenditure and receipt) and select the
correct answer using the codes given
below the lists:
List I
A. Compensation paid to retrenched
workers of the factory for the loss of
service
B. Legal expenses incurred in connection
with the purchase of a plot of land
C. Compensation received from the
government for the compulsory
removal of a business premises to
another place
D. Sale proceeds of merchandise (goods)
List II
1. Capital expenditure
2. Capital receipt
3. Revenue Expenditure
4. Revenue receipt
Codes;
ABCD
a. 1 3 4 2
b. 1 3 2 4
c. 3 1 4 2
d. 3 1 2 4
38. The cash price of a machine is Rs.
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 120
1,20,000 and its hire purchase price is Rs.
1,50,000 to be paid in five equal yearly
installments. If a company purchases the
machine on hire purchase basis, the
amount of capital expenditure will be
a. Rs. 1,20,000
b. Rs. 1,35,000
c. Rs. 1,50,000
d. Rs. 1,60,000
39. Which one of the following is a capital
expenditure?
a. Compensation paid to Directors on
termination of their services
b. Expenditure incurred in connection
with the renewal of a Trade Mark
c. Gratuities paid to employees on their
retirement
d. Royalty paid in installments for the
purchase of rights to manufacture and
sell patient medicines
40. A private limited company earns a net
profit of Rs. 2,00,000 after tax during a
certain financial period. Provision for
taxation is Rs. 2,00,000 and income from
investment is Rs 20,000 Capital employed
6 of 15
during the same period is Rs. 10,00,000
return on capital employed is
a. 10%
b. 20%
c. 38%
d. 42%
41. After taking into consideration the noncash
charges of Rs. 30,000 the operating
loss of a company is Rs. 20,000. The fund
generated from operations is
a. Rs. 50,000
b. Rs. 30,000
c. Rs. 20,000
d. Rs. 10,000
42. If profit is one-fourth of selling price. The
share of profit to cost will be
a. 1/3
b. 1/4
c. 1/5
d. 1/6
43. If balance sheets on two different dates
show machinery account at Rs. 1,85,600
and Rs. 1,73,800 respectively and the
machinery and depreciated by Rs. 30,000
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 121
and one piece of machinery of book value
of Rs. 5,000 had been sold in the
beginning of the year for Rs. 3,100 then
the application of fund is
a. Rs. 6,800
b. Rs. 11,800
c. Rs. 14,900
d. Rs. 23,200
44. Given that
M = opening stock,
N = purchases,
O = closing stock,
P = cost of goods sold,
The correct equation will be
a. M – N = O + P
b. M – O = P – P
c. M – O = P – N
d. P – M = N + O
45. Messers. XXXX Ltd., provides the
following information:
Net profit before income tax : Rs. 40,000
Depreciation charged during the year
: Rs. 10,000
Goodwill written off during the year
: Rs. 10,000
Income tax for the year : Rs. 20,000
Funds from operations will be
a. Rs. 60,000
b. Rs. 50,000
c. Rs. 40,000
d. Rs. 20,000
46. A business entity has an opening balance
of Rs. 5,000 as provision for bad and
doubtful debts. Total sales amounts to Rs.
6,00,000 and out of which Rs. 1,00,000
worth of sales is for cash. A provision of
1% is to be made on outstanding debtors.
The amount to be debited to profit and loss
account for current year’s provision on
debtors will be
a. Rs. 6,000
b. Rs. 5,000
c. Rs. 1,000
d. Nil
47. Which of the following method(s) is/are
followed for the purpose of piecemeal
distribution in the case of dissolution of a
partnership firm?
1. Proportionate Capital Method
2. Maximum Possible Loss Method
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 122
3. Reconstruction and Distribution
Method
Select the correct answer using the codes
given below:
a. 3 alone
b. 1 and 3
c. 2 and 3
d. 1 and 2
48. Consider the following parties:
1. Secured creditors
2. unsecured creditors
3. Partners who granted loans
4. partners who contributed capitals in
excess as compared to the profit
sharing ratio
7 of 15
The correct sequence is which payments
are to be made to these parties in the event
of the dissolution of a partnership firm is
a. 2, 1, 3, 4
b. 1, 2, 4, 3
c. 1, 2, 3, 4
d. 2, 1, 4, 3
49. Match list I (Provision of partnership Act
with List II (Matters with which the
provision are related) and select the correct
answer using the codes given below the
list:
List I
A. Interest must be allowed @6% p.a.
B. No interest shall be allowed
C. No interest shall be charged
D. Must be shared equally by all the
partners unless otherwise agreed
List II
1. Drawings of partners
2. Net loss of the firm for an accounting
year
3. capitals contributed by the partners
4. Loan given by a partner to the firm
Codes:
ABCD
a. 1 3 2 4
b. 4 3 2 1
c. 3 2 4 1
d. 4 3 1 2
50. The following information pertains to a
cultural club:
Stock of tinned provisions: Rs. 25,000
(as on 1.4.94)
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 123
Purchased during the year: Rs.1, 50, 000
Stock of tinned provisions: Rs. 50,000
(as on 31.3.95)
Sale of tinned provisions: Rs. 1,50,000
Suring the year
The amounts to be debited and credited
respectively to the income and
Expenditure Account would be
a. Rs. 1,75.000 and Rs. 1,50,000
b. Rs. 1,25,000 and Rs. 1,75,000
c. Rs. 1,25,000 and Rs. 1,50,000
d. Rs. 1,75,000 and Rs. 1,25,000
51. A cricket club has 50 members and each
member pays Rs. 20 as monthly
subscription 5 members paid advance
subscription for the financial year. 1994-
94 and 10 members failed to pay
subscription for the year. 1993-94. The
amount to be credited as subscription to
Income and Expenditure Account would
be
a. Rs. 12,000
b. Rs. 10,800
c. Rs, 9,600
d. Rs. 8,000
52. The following information is provided by
a culture club:
Stock of sports goods : Rs. 20,000
Purchase of sports goods : Rs. 80,000
during the accounting period
Sports goods sold as scrap : Rs. 500
Closing balance : Rs. 30,000
The amount to be charged to Income and
Expenditure Account as sports goods
consumed will be
a. Rs. 69,500
b. Rs. 70,000
c. Rs. 70,500
d. Rs. 80,000
53. A trader maintains his books of accounts
on Single Entry basis. His books of
accounts show that his total purchases
during the year were Rs. 90,000.of which
he returned goods worth Rs. 10,000. His
credit sales were Rs. 50,000 and eash sales
were Rs. 80,000. Of the total sales goods
returned was Rs. 30,000. Closing stock is
Rs. 12,000. He sells his goods at cost plus
33 1/3%. His opening stock is
a. Rs. 12,000
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 124
b. R.s. 10,000
c. Rs. 8,000
d. Rs. 7,00
54. A firm which keeps its books of accounts
on Single Entry system has opening
balance and closing balance of Bills
Receivable as Rs. 9,000 and Rs. 11,000
respectively. Bills collected during the
financial period amount to Ps. 29,000,
8 of 15
Bi1s Receivable received during the
financial period amount to
a. R.s. 22,000
b. Rs. 18,000
c. Rs. 12,000
d. Rs. 11,000
55. Which preparing accounts from
incomplete records, the amount of credit
sales is determined by
a. preparing total creditors account
b. preparing total debtors account
c. ascertaining the balance in trading
account other than closing stock
d. ascertaining the balance in debtors
account and cash book
56. The minimum share application money is
a. Rs. 5 per share
b. 5% of the nominal value of shares
c. 10% of the nominal value of shares
d. 20% of the nominal value of shares
57. When shares are forfeited, Capital
Account is debited by
a. forfeited art amount
b. called up amount on shares
c. paid up amount on shares
d. amount of Capital Reserve
58. After the redemption of debentures, the
balance of debenture sinking fund is
transferred to
a. Debenture account
b. General Reserve
c. Profit and Loss account
d. Capital Reserve
59. Right shares are the shares
a. issued to the directors of the company
b. first offered to the debenture holders
c. first offered to the existing
shareholders
d. issued by a newly formed company
60. Debentures can be redeemed be
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 125
a. purchase of own debentures in the
open market
b. convening them into a new class of
debenture
c. converting them into shares
d. any of the methods mentioned in(a),
(b) and (c) above
IAS Prelims Commerce 1996
61. A company wishes to redeem its
preference shares amounting to Rs.
1,00,000 at a premium of 5% and for this
purpose issues 5,000 equity shares of Rs.
10 each at a premium of 5%. The company
also has a balance of Rs. 1,00,000 as
General Reserves and Rs. 50,000 in profit
and loose account. The amount to be
transferred to Capital Redemption Reserve
account for the purpose of redemption is
a. Rs. 47,500
b. Rs. 50,000
c. Rs. 52,500
d. Rs. 1,05,000
62. An asset is purchased for Rs. 50,000 on
which depreciation is to be provided
annually according to the straight line
method. The useful life of the asset is 10
years and the residual value is Rs. 10,000.
The rate of depreciation is
a. 20%
b. 18%
c. 10%
d. 8%
63. An asset is NEVER reduced to zero in the
a. fixed installment method
b. reducing balance method
c. annuity method
d. sum of years’ method
64. The main objective of providing
depreciation is to
a. create secret Reserves
b. reduce the book value of assets
c. value the assets properly
d. allocate cost of the assets
65. Bonus shares can be issued by a company
a. out of the Reserves created by
revaluation of fixed assets
b. out of share premium not collected in
cash
c. without any provision for it in the
Articles of Association of the company
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 126
d. out of free Reserves built out of
genuine profits
9 of 15
66. Revaluation method of ‘depreciation is
generally used in the case of
a. plant
b. land and building
c. stock
d. loose tools
67. The Balance Sheet of a limited company
as on 31.12.1992 is as under:
Rs. Rs
Share
Capital:
5,000
equity
shares of
Rs. 10
each
2,000
equity
shares of
Rs. 10
each, Rs. 8
Per share
paid up
General
Reserve
50,000
16,000
50,000
Sundry
Assets 1,16,000
1,16,000 1,16,000
The company decided to capitalize the
necessary part of the General Reserve by
issuing.
1. a bonus share per share on the partly
paid up shares in order to make them
fully paid and
2. fully paid bonus shares at a premium
of 5% per share amongst the existing
shareholders to be distributed in the
ratio of one share for every five shares
held.
The amount to be transferred from the
General Reserve account is
a. Rs. 14,700
b. Rs. 15,000
c. Rs. 18,000
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 127
d. Rs. 21,000
68. Rate of consumption of materials is one of
the most important factors while fixing
a. maximum level
b. maximum level and reorder level
c. maximum level and reorder level
d. maximum level, minimum level and
reorder level
69. During a period of declining prices, which
one of the following inventory pricing
methods will result in lower cost of goods
sold?
a. FIFO
b. LIFO
c. Simple average method
d. Inflated price method
70. Match List I with List II and select the
correct answer using the codes given
below the lists:
LIST I
A. ABC Analysis
B. Fund Flow Analysis
C. ROI
D. MM Theory
LIST II
1. Capital Structure
2. Inventory Control
3. Working Capital Management
4. Overall Profitability
Codes;
ABCD
a. 2 3 4 1
b. 1 2 4 3
c. 4 3 1 2
d. 1 3 2 4
71. Match List I (Objectives of Analysis with
List II (Regions to be Computed) and
select the correct answer using the codes
given below the lists:
LIST I
A. Trading on Equity
B. Efficiency of Inventory Control
C. Overall Efficiency
D. Immediate Solvency
LIST II
1. Earnings Per Share
2. Liquidity Ratio
3. Capital Gearing
4. Stock Turnover Ratio
Codes;
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 128
ABCD
a. 2 1 4 3
b. 3 4 1 2
c. 3 1 4 2
d. 2 4 1 3
72. A particular firm provided the following
data for 1994:
Current Ratio : 2.5:1
Liquid Ratio : 1.5:1
Net Working Capital : Rs. 3,00,000
Current Assets and Current Liabilities of
this firm are respectively
a. Rs. 3,00,000 and Rs. 1,50,000
b. Rs. 5,00,000 and Rs. 2,00.000
c. Rs. 5,00,000 and Rs. 1,00,000
d. Rs. 3,00,000 and Rs. 1,00,000
73. Match List I with List II and select the
correct answer using the codes given
below the lists:
LIST I
A. Leverage Ratio
B. Acid Test
C. Turn-over Ratio
D. Current Ratio
LIST II
1. Liquidity position
2. Efficiency of assets management
3. Management of working capital
4. Debt and Equity relationship
CODES:
ABCD
a. 4 1 3 2
b. 2 4 1 3
c. 2 3 1 4
d. 4 1 2 3
74. Match List I with List II and select the
correct answer using the codes given
below the lists:
LIST I
A. Debt Service Coverage Ratio
B. Turn-over of Receivable
C. Proprietary Ratio
D. Capital Turn-over Ratio
LIST II
1. Solvency Ratio
2. Structural Ratio
3. Activity Ratio
4. Efficiency of Credit and Collection
Policy
CODES:
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 129
ABCD
a. 1 4 3 2
b. 4 1 3 2
c. 1 4 2 3
d. 4 1 2 3
75. Which one of the following ratios is most
important for judging the long-term
solvency of a firm?
a. Debt-Equity Ratio
b. Stock-Turn over ratio
c. Return on Investments
d. Fixed Assets Turn-over Ratio
76. Given that
Opening Stock : Rs. 12,000
Purchases : Rs. 90,000
Return Outward : Rs. 4,000
and that the closing stock is Rs. 2,000 less
than the opening stock the Stock Turnover
ratio is
a. 5 times
b. 7 times
c. 8 times
d. 10 times
77. EBIT/Total Assets Ratio is
a. Liquidity Ratio
b. Profitability Ratio
c. Solvency Ratio
d. Turn-over Ratio
78. The dividend declared by a limited
company is Rs. 2/- per share of face value
of Rs. 10/- and the average market value is
Rs. 25/- The yield is
a. 5%
b. 8%
c. 10%
11 of 15
d. 12.5%
79. The primary objective of audit is to
a. verify and value assets as per
Company’s Act
b. verify liabilities and report to Registrar
of Companies
c. verify and report on the state of affairs
of the business
d. appoint auditors
80. Balance Sheet audit is useful if the concern
a. is weak in internal check
b. has no internal check
c. is a small one
d. is a big one
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 130
81. When the auditor examines and tests the
client’s accounting and other control
systems to see whether or not they
constitute a reliable base for the
preparation of accounts, the it is known as
a. Balance Sheet audit
b. System audit
c. Continuous audit
d. Internal audit
82. Match List I (Items) with List II (Heads in
Balance Sheet) and select the correct
answer using the codes given below the
lists:
LIST I
A. Loss on issue of debentures
B. Unclaimed dividend
C. Prepaid rent
D. Profit prior to incorporation
LIST II
1. Reserves and Surpluses
2. Miscellaneous Expenditure
3. Current Liabilities
4. Current Assets
CODES:
ABCD
a. 3 2 1 4
b. 3 2 4 1
c. 2 3 4 1
d. 2 3 1 4
83. Audit Notebook is a
a. personal notebook of and auditor
b. record of work performed by an
auditor
c. record of important points and
enquiries which as auditor has to refer
to his clients
d. record of mistakes and errors detected
during the course of audit of account
books
84. Consider the following statements:
In order to plan and prepare his audit
programme, an auditor must obtain
information relating to
1. client’s history and business
2. purpose and nature of engagement
3. time schedule for the completion of
audit
Of these statements
a. 1, 2 and 3are correct
b. 1 and 3 are correct
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 131
c. 2 and 3 are correct
d. 3 alone is correct
85. Which one of the following statements
regarding the internal check system is
correct?
Its purpose is to
a. have an accurate record of all the
business transactions
b. know the accounting method followed
in the business
c. plan for future audit works
d. ascertain the profit, earning capacity of
the business
86. By observing, testing and assessing, an
auditor examines the system of
a. internal audit
b. internal control
c. continuous audit
d. statutory audit
87. An auditor of a partnership firm is
appointed as per
a. statute
b. government orders
c. agreement
d. convention
88. A company auditor may be removed in the
meeting of the
a. Board of Directors when the Managing
Director is also present
b. Board of Directors
c. majority shareholders
d. General Body of shareholders
89. According to Sec. 224 of the Companies
Act, 1956, a company auditor may be
appointed by any of the three appointing
authorities. The correct sequence of the
order in which they can exercise their
power to appoint a company auditor in the
life of a company other than a government
company is
a. Board of Directors, Central
Government, Shareholders
b. Central Government, Shareholders,
Board of Directors
c. Shareholders, Board of Directors,
Central Government
d. Board of Directors Shareholders,
Central Government
90. The liability of auditor can be
a. only civil
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 132
b. only criminal
c. either civil or criminal
d. civil and/or criminal
91. Match List I (Items) with List II
(Heagings) a select the correct answer
using the codes given below the lists
LIST I
A. Interim Dividend
B. Share Premium
C. Unclaimed Dividend
D. Discount on Issue of Shares
LIST H
1. Miscellaneous expenses
2. Current Liabilities
3. Reserves and Surpluses
4. Profit and Loss Appropriation Account
Codes;
ABCD
a. 3 4 1 2
b. 4 3 1 2
c. 3 4 2 1
d. 4 3 2 1
92. A ‘Co-parcener’ is one who is
a. an active member of a partnership
b. a member of a Joint Hindu Family firm
c. a member of a Joint Stock company
d. a member of a co-operative society
93. Every partner must account to the firm for
any benefit derived by bun without the
consent of the other partners and thus
make no secret profits. This is based on
a. the general law of contract
b. the general law of agency
c. the law of sale of goods
d. business ethics
94. In a broader sense, the activities of a cooperative
organization are expected to
ensure primarily
a. Profitability to the members
b. Socialism in the economy
c. Equity to the members
d. Productivity to the society
95. Which of the following statements are
correct?
1. A Trust form of organization cannot do
business.
2. A society registered under the
Societies Registration Act can be
formed only for non-profit purpose
3. A partnership does not require
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 133
registration.
4. A company limited by guarantee is
almost always registered for non-profit
activities.
Select the correct answer using the codes
given below:
a. 2, 3 and 4
b. 1 and 4
c. 2 and 3
d. 1, 2, 3 and 4
96. The basic charactereristics of a partnership
firm include
a. Existence of relationship, plurality of
persons, contract and profit
maximization
13 of 15
b. Unlimited liability, contractual binding
principal agent relationship and profit
motive
c. Existence of business, contractual
relationship, group of persons, task
orientation and employment conditions
d. Existence of business, plurality of
persons, contractual relationship, profit
motive and principal-agent relationship
97. Converting a public company into a
private company requires a special
resolution
a. passed by members
b. passed by members and approval of
the Registrar of Companies
c. of the member and approval of the
Company Law Board
d. of the members and approval by the
creditors
98. The Stock Invest is used for the payment
of
a. Allotment money
b. calls in arrears
c. application money
d. allotment money, application money
and calls in arrears.
99. In a public limited company, there
CANNOT be
a. equity shares without voting rights
b. bonus shares where current profit are
low
c. preference share with voting rights
when dividends are not paid
d. equity shares with high premium
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 134
100. The contents of the prospectus of a public
limited company should be approved by
the
a. Registrar of Companies
b. Merchant Banker
c. Stock Exchange in which the company
is to be listed
d. Securities and Exchange Board of
India
101. Principle of Constructive Notice means
a. notice of the objects clause of the
Memorandum of Association
b. any notice issued/published in
newspapers
c. notice to outsiders dealing with the
company as to the contents of the
Memorandum and Articles of
Association
d. notice to the public regarding the issue
of prospectus
102. Which one of the following statements
illustrates the Doctrine of Indoor
Management?
Persons dealing with the company are
a. bound to enquire whether the internal
proceedings of the company are
regular or not
b. bound to enquire whether the decisions
of the management are taken with
proper authority
c. entitled to assume that what has been
done, has been regularly done by the
company
d. always to presume that the internal
affairs of a Company cannot be
questioned.
103. It is compulsory for a share. broker to
register with the
a. concerned Stock Exchange
b. Securities and Exchange Board of
India
c. Department of Company Affairs
d. Concerned Stock Exchange in
concurrence with the Securities and
Exchange Board of India
104. Who among the following is NOT a
speculator Stock Exchange?
a. Broker
b. Bull
c. Bear
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 135
d. Stag
105. Match List I with List II and select the
correct answer using the codes given
below the lists
List I
A. Option dealing
B. Private placement
C. Deep discount
D. Law of large numbers
List II
1. Stock Exchâne
2. Bonds of big companies
3. New Public Limited Companies
4. Statistical probability
CODES;
ABCD
a. 1 2 3 4
b. 4 2 3 1
c. 1 3 2 4
d. 4 3 2 1
106. One of the uses of ‘Commercial Paper’ is
that it can
a. help to understand business news
b. transactions
c. be circulated to raise money just like a
Bill of Exchange
d. be issued to finance an important
transaction
107. The gilt-edged market refers o the marketfor
a. industrial securities
b. govt. and semi-govt. securities ties
c. shares and debentures
d. public limited company securities
108. Match List I with List II and select the
correct answer using the codes given
below the lists:
List I
A. Simple Association
B. Federation
C. Partial consolidation
D. Complete’ Consolidation
List II
1. Pool
2. Chamber of Commerce
3. Merger
4. Holding Company
CODES:
ABCD
a. 3 1 2 4
b. 2 4 1 3
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 136
c. 2 1 4 3
d. 3 2 4 1
109. The combination of firms in successive
stages of the same industry may be
referred to as
a. Horizontal integration
b. Vertical integration
c. Forward integration
d. Backward integration
110. Modernisation of an industrial unit
involves mainly
a. technological up gradation of its
production process
b. technological reorientation towards
low-cost production
c. reengineering the basics of production
and procedures
d. reduction in labour and cost to the
absolute minimum
111. Which one of the following statements is
true?
a. Supplier’s credit and buyer’s credit are
one and same thing
b. EXIM hank generally deals with
export transactions above Rs. 5 crore
c. The main focus of EXIM bank is on
Export and Import credits for shortterm
d. ECGC provides no protection against
hazards of nature
112. Which one of the following statements is
true in the context of Import-Export
Trade?
a. Under a C & F contract, the cost of
insurance is to be borne .by the buyer
or the importer
b. Marine insurance covers the risks
during the sea voyages only
c. The standard “all risks cover”
automatically covers war risk as well
d. Under a C & F contract, the exporter
need not bother about insuring goods
113. The special facilities and benefits provided
to approved Export Houses (EH), Trading
Houses (TH) and Star Trading Houses
(STH) may be arranged in descending
order as
a. EH, TH and STH
b. STH, EH and TH
c. TH, STH and EH
15 of 15
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 137
d. STH, TH and EH
114. A letter of credit is opened on behalf of
a. an exporter
b. an importer
c. a buying agent
d. a bank
115. Which of the following guarantees are
offered by the ECGC which help the banks
to extend credit to exporters?
1. Packing credit guarantee
2. Post shipment export credit guarantee
3. Export production finance guarantee
4. Transfer of funds guarantee
Select the correct answer using the codes
given below
CODES:
a. l, 2 and 3
b. 2 and 3
c. 1, 3 and 4
d. 1, 2, 3 and 4
116. Which of the following statements are
correct?
1. Bill of lading is a document of title.
2. Green shipping bill is used for export
of goods entitled to duty draw back.
3. An airway bill is not a document of
title.
4. A consular invoice and a proforma
invoice are one and the same.
a. 2 and 4
b. 1, 3 and 4
c. 1, 2 and 4
d. 1, 2 and 3
117. Actuary is a person who
a. acts as an insurance agent
b. certifies the loss incurred by the
insured
c. audits claims relating to insurance
claims
d. computes the net liability of an
insurance business
118. Life insurance is a contact on the life- of a
man in which the insurer promises to pay a
sum of money. For the Consideration of a
definite premium, to the insured person on
his death or on attaining a particular age.
Which one of the following assumptions is
implicit in the above definition?
a. It is a contract of indemnity
b. It is a contract of guarantee
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 138
c. It is a contract of compensation
d. It is a contract of return on investment
119. “Causa promixa” implies that the loss
must arise from
a. the nearest place
b. an ascertainable source
c. the cause insured against
d. unforeseen sources
120. Which of the following risks are NOT
covered by a marine insurance policy?
1. Damage caused by delay in ships’
transit
2. Damage caused by unsuitable package
3. Loss due to sinking of the vessel
4. Loss due to jettison
Select the correct answer using the codes
given below
a. 1, 3 and 4
b. 1 and 2
c. 2 and 4
d. 1, 2, 3 and
IAS Prelims Commerce 2001
1. Which one of the following is an
ingredient of the entity convention of
accounting?
a. The owner of a unit and the unit itself
is one and the same
b. The owner and the unit are treated
separately
c. No separate accounts for the unit is
required
d. The unit is a private affair of the
owner, hence no accounting is required
2. Which one of the following accounting
equations is correct?
a. Assets = Owner’s Equity
b. Assets = Liabilities + Owner’s Equity
c. Assets = Liabilities — Owner’s Equity
d. Assets + Liabilities = Owner’s Equity
3. Which one of the following accounting
conventions stipulates that contingent
assets appear as a footnote in the balance
sheet?
a. Materiality
b. Consistency
c. Disclosure
d. Conservatism
4. Which one of the following is NOT related
to the convention of conservatism?
a. Making provision for doubtful debts
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 139
and discount on debtors in anticipation
of actual bad debts and discount
b. Valuation of stock at Market Price or
Cost Price which ever is higher
c. Charging of small capital items as
Revenue
d. Adopting Written - down Value
Method of depreciation as against
Straight- line Method
5. Match List I (Standards issued by ICAI)
with List II (Objects/areas covered) and
select the correct answer:
List I
A. AS-1
B. AS-2
C. AS-3
D. AS-9
List II
1. Valuation of Inventories
2. Cash Flow Statement
3. Revenue Recognition
4. Disclosure of Accounting Policies
Codes;
ABCD
a. 4 1 2 3
b. 4 1 3 2
c. 1 4 3 2
d. 1 4 2 3
6. On 31st March 2001, the closing stock of
X Ltd. was Rs. 3,45,000. On April 1, 2001,
stock of Rs. 2,25,000 was destroyed by
fire. The company closes its account on
31st March. If the balance sheet of the
company on 31st March 2001 was
finalized on 25th April 2001, then the
balance sheet will show the closing stock
at
a. Rs. 3,45,000 with no mention of fire
b. Rs. 1,20,000 with no mention of fire
c. Rs. 3,45,000 showing loss by fire in
footnote
d. Rs. 1,20,000 showing loss by fire in
footnote
7. Consider the following
The investment portfolio of a business as
on 31-12-2000 stood as follows
1. 8% Debentures of X Co. Ltd. (Rs.
6,000). Interest payable on 31st March
and 30th September.
2. 7% Debentures of Y Co. Ltd. (Rs.
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 140
4,000). Interest payable on 30th June
and 31st December.
3. 10% Debentures of Z Co. Ltd. (Rs.
9,000). Interest payable on 1st June
and 1st December.
Amount of interest accrued on the closing
date will be.
a. Rs. 335
b. Rs. 1,025
c. Rs. 195
d. Rs. 830
8. Which one of the following is correct with
respect to going concern convention?
a. The enterprise is not going to terminate
its operations in the period ahead
b. The enterprise may go out of business
in the next accounting period
c. The enterprise may not divest or
diversify its operational spheres
d. The enterprise may not revalue its
assets during the current accounting
Period
9. Consider the following statements:
Continuous evaluation of the relevance of
generally accepted accounting principles is
required, because
1. They are the everlasting operating
realities.
2. The environment, in which business
operates, undergoes constant change.
3. The business enterprises can develop
financial statements of value to the
end-users.
4. Realities of social, economic and legal
framework have to be considered by
professional accountants.
Which of the above statements are correct?
a. 1, 2 and 3
b. 2, 3 and 4
c. 3 and 4
d. 1 and 4
10. Which one of the following will lead to
understate merit of net profit?
a. Amortization of Fictitious Assets
b. Treating capital expenditure as revenue
expenditure
c. Treating revenue expenditure as capital
expenditure
d. Creation of general reserve
11. Which one of the following items is
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 141
considered revenue expenditure?
a. Expenditure by way of maintenance
that has increased productivity
b. Repair of gearbox in a car that has
enhanced its operational life
c. Complete overhaul of a machine,
spending around 20% of its value
d. Changing a small component of a
machine to maintain its operating
efficiency
12. After the construction of their new factory
building M/s XYZ Co. shifted to it. During
this process Rs. 20,000 were s1d on
pulling down the old structure and Rs.
2,000 were spent on shifting the stocks to
new building. These expenditures are to be
classified as
a. Capital expenditure
b. Revenue expenditure
c. Capital and Revenue expenditure
respectively
d. Deferred Revenue expenditure
13. Match List I with List II and select the
correct answer
List I
A. Reducing capital
B. Sales > Variable cost
C. Sales > Break-even sales
D. Take-over of firm
List II
1. Contribution margin
2. Reorganization
3. Absorption
4. Margin of safety
Codes;
ABCD
a. 2 1 3 4
b. 1 2 3 4
c. 1 2 4 3
d. 2 1 4 3
14. Preparation of Trial Balance helps, mainly,in
a. summarizing business transactions
b. verifying that ‘generally accepted
accounting principles’ have been
observed
c. finalizing the ‘sources and uses of
funds’ statement
d. locating errors, if any, in books of
accounts
15. Match List I with List II and select the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 142
correct answer:
List I
A. Goodwill
B. Overdraft
C. Preliminary expenses
D. Premium on issue of Shares
List II
1. Current liability
2. Fixed assets
3. Reserves and surpluses
4. Fictitious assets
Codes;
ABCD
a. 2 1 4 3
b. 1 2 4 3
c. 1 2 3 4
d. 2 1 3 4
16. If opening stock = Rs. 2,45,000; purchases
= Rs. 15,00,000; sales = Rs. 17,40,000 and
rate of gross profit = 20% on cost of goods
sold, then the closing stock would be at
a. Rs. 3,53,000
b. Rs. 2,95,000
c. Rs. 2,45,000
d. Rs. 1,95,000
17. Match List I (Items) with list II (Recorded
in) and select the correct answer
List I
A. Wrapping material
B. Wages and salaries
C. Prepaid expenses
D. Opening stock
List II
1. Trading account
2. Profit and loss account
3. Balance sheet
Codes;
ABCD
a. 2 1 1 3
b. 2 1 3 1
c. 3 2 2 1
d. 3 2 1 3
18. The basis adopted for piecemeal
distribution cash of among the partners
should be such that amounts finally left
unpaid are in the ratio in which
a. capital stands on the date of dissolution
b. profits and losses are shared
c. capital balances stood at the beginning
of partnership
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 143
d. private assets appear on the date of
dissolution
19. The capital of a firm is Rs. 80,000. The
reasonable return in the industry is 7.5
percent, If the profit earned by the firm
during past five years was Rs. 8.000: Rs.
9,000; Rs. 7,000; Rs. 8,500 and Rs.
10.000: then the super profit of the firm
will be
a. Rs. 2,000
b. Rs. 2,500
c. Rs. 3,000
d. Rs. 3,500
20. Consider the following
A football club has received the following
subscriptions during the year ending 31st
March 2001:
31-3-00 31-3-01
Outstanding subscription 19,500 25,500
Advance subscription 12,800 9,500
Subscription received during the year
2000-01: Rs. 2,45,000 The subscription
income of the club for the year 2000-01
was
a. Rs. 2,63,800
b. Rs. 2,80,000
c. Rs. 2,47,700
d. Rs. 2,84,000
21. ‘A’ and ‘B’ are partners in a firm sharing
profits and losses in the ratio of 2 : 3. ‘C’,
a new partner is admitted for 1/4th share.
‘A’ and ‘B’, old partners share C’s profit
into their profit sharing ratio. The new
profit sharing ratio of ‘A’, ‘B’ and ‘C’
would be
a. 1:1:1
b. 2:3:4
c. 1:2:2
d. 6:9:5
22. Consider the following statements with
respect to the sinking-fund method of
depreciation
1. Depreciation is smaller than the assets’
annual depreciable cost.
2. Amount of interest constantly declines
due to assets’ reducing balance.
3. Annual net incidence on profit and loss
account remains constant due to
changing fixed depreciation.
4. Periodic depreciation is recorded
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 144
through the asset account.
Which of the above statements are correct?
a. 2 and 3
b. 1 and 3
c. 1, 2 and 4
4 of 15
d. 2, 3 and 4
23. The following information about share -
capital is required to be disclosed in the
balance sheet of a Ltd. Company
1. Issues, subscribed and paid-up capital
2. Add forfeited shares
3. Less calls in arrear from directors
4. Less calls in arrear from others
The chronological order of their disclosure
under the head ‘Share Capital’ in the
balance sheet would be
a. 1, 2, 3, 4
b. 1, 3, 4, 2
c. 1, 4, 3, 2
d. 1, 2, 4, 3
24. Match List I (Fund) with list II (Purpose of
fund) and select the correct answer:
List I
A. Sinking fund
B. Capital redemption reserve fund
C. Dividend equalization fund
D. General reserve fund
List II
1. Maintaining stable rate of dividend
2. Periodical redemption of debentures
3. Strengthening financial position
4. Redeeming preference shares
ABCD
a. 4 2 1 3
b. 2 4 3 1
c. 4 2 3 1
d. 2 4 1 3
25. Provisions are amounts set aside out of
profits and other surpluses for
a. meeting a liability, the amount of
which can be determined with exact
figure
b. any known liability of which the
amount cannot be determined with
substantial accuracy
c. meeting an eventuality arising out of
revaluation of assets in ordinary course
of business
d. meeting a liability arising out of
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 145
arbitration
26. A trader does not keep a complete set of
books and gives the following information:
He started business with Rs. 10,000 on 1st
June. 2000. He drew at the rate of Rs. 500
per month for the last six months. He also
introduced further capital of Rs. 2,000 in
the business during the year.
His total assets on 31st December, 2000
were Rs. 23,700 and his creditors were Rs.
3,000 on the same date: Outstanding
expenses on 31st December, 2000 were
Rs. 500. His net profit during the year
would be
a. Rs. 11,200
b. Rs. 11,500
c. Rs. 13,000
d. Rs. 14,200
27. X, who holds 100 shares of Rs. 10/- each,
fails to pay a finall call of Rs. 2/-. The
directors forfeited all the shares and
subsequently reissued 50 shares of is. 6/-
each as fully paid. The amount to be
transferred to ‘Capital Reserve A/c would
be
a. Rs. 200
b. Rs. 300
c. Rs. 400
d. Rs. 800
28. A Ltd. Company issues 3000, 15%
debentures of Rs. 100 each at a discount of
7.5% repayable at a premium of 5% at the
end of 5 years. The loss on issue of
debentures will be:
a. Rs. 22,500
b. Rs. 30,000
c. Rs. 37,500
d. Rs. 45,000
29. Match List I with List II and select the
correct answer:
List I
A. Technique of Cash Management
B. Technique of Working Capital
Management
C. Technique of Inventory Management
D. Technique of Analysis of Financial
Statements
List II
1. Fund Flow Analysis
2. Economic Order Quantity
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 146
3. Common size Balance Sheets
4. Cash Flow Analysis
Codes
ABCD
a. 1 4 2 3
b. 1 4 3 2
c. 4 1 3 2
d. 4 1 2 3
30. Match List I (Transactions) with List II
(Impact on current ratio) and select the
correct answer
List I
A. Goods sold at profit
B. Creditors paid
C. Debts realized
D. Materials purchased on credit
List II
1. Improvement
2. Deterioration
3. No change
Codes;
ABCD
a. 1 3 2 2
b. 2 3 1 3
c. 1 1 3 2
d. 2 1 3 3

IAS Prelims Commerce 2001


31. The following information had been made
available from the profit and loss account
for the year ending 31st March, 2001:
Gross profit Rs. 2,00,000
Gross profit margin 20%
Stock velocity 4
If, in current year, the sales are expected to
increase by 50%, then the average
inventory, required would be
a. Rs. 2,00,000
b. Rs. 2,50,000
c. Rs. 3,00,000
d. Rs. 3,50,000
32. X Ltd. has current ratio of 2 : 1 and quick
ratio of 1.5 : 1: If its current liabilities are
Rs. 80,000, then the value of-stock would
be
a. Rs. 1,60,000
b. Rs. 1,20,000
c. Rs. 40,000
d. Rs. 80,000
33. If earnings per share of a company is Rs. 5
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 147
and the price earning ratio of other similar
companies is 4, then the market value of
the share of the company would be
a. Rs. 0.80
b. Rs. 1.25
c. Rs. 9
d. Rs. 20
34. If the cost of goods sold is Rs. 1,00,000/-,
the value of opening stock is Rs. 20,000/-
and the value of closing stock is Rs.
80,000/-, then the stock turnover ratio
would be
a. 5 Times
b. 4 Times
c. 2 Times
d. 1 Times
35. Match List I with List II and select the
correct answer:
List I
A. Current Ratio
B. Debt-Equity Ratio
C. Net Profit Margin Ratio
D. Interest Coverage Ratio
List II
1. Sufficiency of EBIT to cover interest
charges interest charges
2. Short-term solvency
3. Exposure to financial risk
4. Earnings left for shareholders
Codes;
ABCD
a. 2 3 1 4
b. 3 2 1 4
c. 3 2 4 1
d. 2 3 4 1
36. Match list I with List II and select the
correct answer:
List I
A. Leverage Ratio
B. Liquid Ratio
C. Turn-over Ratio
D. Profitability Ratio
List II
1. Short-term solvency
2. Earning capacity
3. Relationship of Debt and Equity
4. Efficiency of Assets Management
Codes;
ABCD
a. 2 1 4 3
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 148
b. 3 2 1 4
c. 4 3 1 2
6 of 15
d. 3 1 4 2
37. EPS is calculated as
a. EBIT
Equity shares
b. EBIT - Preference Dividend
Equity shares
c. EAT
Equity shares
d. EAT - Preference Dividend
Equity shares
38. Consider the following information
provided by XY.Ltd.:
Net profit before depreciation and taxes:
Rs. 44,000
Depreciation for the year: Rs. 8,000
Goodwill written-off during the year: Rs.
10,000
Rate of tax: 50%
The cash flow of Ltd. from operations will
be
a. Rs. 36,000
b. Rs. 28,000
c. Rs. 26,000
d. Rs. 13,000
39. If profit made during the year is Rs.
10,000; increase and decrease in the
current assets is Rs. 5,000 and Rs. 4,000
respectively, then the cash from operation
equals
a. Rs. 9,000
b. Rs. 10,000
c. Rs. 11,000
d. Rs. 19,000
40. Consider the following statements:
The important techniques of auditing are
1. Test check and sampling.
2. Flow charting of interrelated
operations in the accounting system of
an organization.
3. Using Internal Control Questionnaire.
4. Collecting information on price
fluctuations from market- research
organizations.
Which of the above statements are correct?
a. 1, 2 and 3
b. 1, 2 and 4
c. 2, 3 and 4
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 149
d. 1, 3 and 4
41. Match List I with List II and select the
correct answer:
List I
A. Auditor is a watch dog but not a blood
hound
B. An auditor should sign the balance
sheet with open eyes. He should not
depend on the officials of the company
C. Capital profit cannot be divided as
dividend unless all the assets have
been revaluated and the profit has been
actually realized
D. An action for negligence can be
brought against the auditor in tort by a
person with whom he is not in a
contractual relationship but to whom
he owes duty
List II
1. Union Bank of Allahabad case
2. Hedley Byrne and Co. Ltd. Vs. Hiller 4
partners case
3. Kingston Cotton Mills case
4. Fostar Vs. The Trinidad Lake Ashalte
Co. case
Codes;
ABCD
a. 1 3 2 4
b. 3 1 2 4
c. 1 3 4 2
d. 3 1 4 2
42. Consider the following documents:
1. Audit Report
2. Audited Final Accounts
3. Audit Note Book
4. List of Lost Vouchers
5. Audit Programme
Which of the above documents re
Auditor’s working papers?
a. 1,2 and 4
b. 1, 3 and 4
c. 1, 3, 4 and 5
d. 2, 3 4 and 5
43. Match List I with List II and select the
correct answer
List I
A. Interest on capital in construction
works
B. Management Audit
C. Financial Audit
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 150
7 of 15
D. Valuation in Balance Sheet
List II
1. Performance and Propriety
2. Capital Expenditure
3. Authorization of Expenditure
4. Critical review by Management
5. Entity Concept
Codes;
ABCD
a. 2 4 5 3
b. 4 1 2 5
c. 2 1 3 5
d. 4 2 3 1
44. Which of the following is NOT correct
about the management auditor?
a. He appraises and reviews the past
performance and future plans of the
company
b. He evaluates the performance of
management and finds out whether
they are efficient or not
c. He works simultaneously with the
statutory auditor verifying the financial
state of affairs of the company
d. He examines both financial and non financial
records of the organization
45. The Companies Act 1956 require the
annual accounts to show a ‘true and fair
view’ of the financial position of the
company instead of ‘true and correct view’
because
a. too much of dependence on
arithmetical accuracy may lead to
window dressing
b. annual accounts should not only be
made correctly but should also convey
an overall fair view without any
misleading impression
c. all financial transactions cannot be
correctly expressed in terms of money
d. most of the stake holders do not have
reasonable idea about accounting rules
and regulations
46. Which one of the following pairs is not
correctly matched?
a. Internal check: Staff of the concern
b. Internal Audit: Chartered Accountant
c. Cost Audit: Cost Accountant or
Chartered Accountant
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 151
d. Propriety Audit: Comptroller, and
Auditor General of India
47. Consider the following statements:
1. Audit working papers enable the
auditor to know the weaknesses of the
internal check system.
2. Audit programme assures adherence to
the principles of auditing and
accounting.
3. Manipulation of accounts is done by
under valuation of assets.
4. Internal check maximizes the
possibilities of errors and frauds.
Which of the above statements are correct?
a. 1, 2 and 3
b. 2, 3 and 4
c. 1, 2 and 4
d. 1, 2, 3 and 4
48. Consider the following duties of the
auditor:
1. He should see that the provisions of
Sec. 78 have been complied with.
2. He should see that the sum available
has been utilized in the manner as laid
down by the Articles.
3. He should examine the Prospectus, the
Articles and the Minutes of the
Directors’ meeting to see whether the
issue of shares at a premium is duly
authorized or not.
The correct sequence of these duties in
case of audit of issue of shares at a
premium, is
a. 1,2,3
b. 2,1,3
c. 3,1,2
d. 3, 2 1
49. Consider the following with regard to
furniture and fixtures
1. Valuation with reference to bills and
invoices.
2. Authorization of expenditure and its
capitalization.
3. Adequate provision of depreciation.
4. Whether furniture is mortgaged or free
from any mortgage.
The correct sequence to be adopted by the
auditor during the course of analytical
review, vouching and examination of
document would be
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 152
8 of 15
a. 1, 2, 3, 4
b. 2, 3, 1, 4
c. 3, 4, 2, 1
d. 4, 1, 2, 3
50. Match List I with List II and select the
correct answer:
List I
A. Public limited company
B. Partnership firm
C. Cooperative society
D. Private limited company
List II
1. One man one vote
2. Can make public issue
3. Restricted membership
4. Unlimited liability
5. Direct supervision
Codes;
ABCD
a. 5 4 2 3
b. 2 4 1 3
c. 5 3 2 1
d. 2 3 1 4
51. The account of a company shall be audited
by the company auditor, or by a person
qualified to be appointed as auditor, if the
company has to
a. wind up
b. amalgamate
c. finalize branch office accounts
d. declare interim dividend
52. Which one of the following is NOT
included under the rights and powers of an
Auditor in the Companies Act 1956?
a. Right of access to books of Accounts
b. Right to call for a General Meeting
c. Right to receive notice of and attend
the General Meeting
d. Right to make statement at the General
Meeting
53. Consider the following rights:
1. The right of a partner to sue for
dissolution of the firm or for accounts
thereof.
2. The power of the receiver to realize the
properties of an insolvent partner.
3. The right of the firm to sue any
partner.
4. The right of a partner to file a suit
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 153
against the firm for enforcing his
rights.
Which of the above rights are NOT
affected due to on registration of .a
partnership firm?
a. 1 and 2
b. 2 and 3
c. 1, 2 and 3
d. 2, 3 and 4
54. The most suitable form of business
organization for the people of weaker
sections is
a. partnership firm
b. cooperative society
c. sole-trading business
d. joint stock company
55. Which one of the following is NOT a
feature of sole-proprietorship business?
a. Undivided risk
b. No government regulation
c. Separate entity of the firm
d. Unlimited liability
56. A partner under his ‘Implied Authority’
can
a. enter into partnership with others on
behalf of the firm
b. submit a dispute relating to the
business of the form for arbitration
c. defend any suit filed against the firm
d. withdraw any suit or proceedings filed
on behalf of the firm
57. Which one of the following firm is
considered to be illegal to do trading
business?
a. A firm with 11 partners
b. A firm with 18 partners
c. A firm with 20 partners
d. A firm with 22 partners
58. Match list I with List II and select the
correct answer
List I
A. The Indian Partnership Act
B. SEBI
C. The Cooperative Societies Act
D. Stock exchange
List II
1. listing of company shares
2. Members mutual benefit
9 of 15
3. Brokers deal with their customers
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 154
4. Listed companies are supervised
5. No compulsory registration:
Codes;
ABCD
a. 3 2 4 5
b. 5 4 2 1
c. 5 2 4 1
d. 3 4 2 5
59. The fund available with a company after
paying all claims including tax and
dividend is called
a. net profit
b. net operating profit
c. capital profit
d. retained earnings
60. The capital of a public limited company
can be reduced with the confirmation of
the
a. Registrar of Companies
b. Company Law Board
c. Securities and Exchange Board of
India
d. High Court
61. Merchant Banker does NOT offer services
in regard to.
a. project appraisal
b. capital issue
c. project preparation
d. Subscription to Equity shares.
62. The net asset value (NAV) of a unit of
mutual fund scheme is compared as
a.
Market value of the fund's
investments + Receivables +
Accrued incom - Liabilities
- Accrued expenses
No. of units outstanding
b. Market value of the fund' sinvestments
No. of units outstanding
c. Liabilities of the fund
No. of units outstanding
d. Face the value of the unit + Dividend
per unit
63. Match List I with List II and select the
correct answer:
List I
A. S E B I
B. OTCEI
C. IDBI
D. CRISIL
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 155
List II
1. Apex institu1on of development banks
2. Credit rating
3. Trading in securities of small company
and government
4. Regulation and development of capital
market
Codes;
ABCD
a. 4 3 1 2
b. 3 4 1 2
c. 4 3 2 1
d. 3 4 2 1
64. Combination of Printing and Dyeing in a
textile company is called
a. circular combination
b. vertical combination
c. allied combination
d. horizontal combination
65. 65. A voluntary association of traders,
industrialists, bankers and professionals
formed for the purpose of promotion of
common business interests in a particular
locality is called
a. Association of industrialists
b. Chamber of Commerce
c. Entrepreneurs’ Association
d. Barkers’ Union
66. Match List I with List II and select the
correct answer:
List I
A. Simple Association
B. Federation
C. Complete consolidation
D. Partial consolidation
List II
1. Amalgamation
2. Cartels
3. Chamber of Commerce
4. Holding company
Codes;
ABCD
a. 3 2 4 1
b. 2 3 1 4
c. 2 3 4 1
10 of 15
d. 3 2 1 4
67. Dumping is an example of
a. monopolistic practice in international
trade
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 156
b. monopoly in international trade
c. oligopoly in international trade
d. perfect competition in international
trade
68. Who among the following does NOT have
insurable interest in fire insurance?
a. A shop owner in the property of his
customers
b. A creditor in the property mortgaged
with him
c. A trustee in the property of the trust
d. An insurance company in the property
insured
69. In marine insurance, warranty means a
guarantee
a. against the loss of the ship in the
voyage
b. for the safety of the captain of the ship
c. for payment of shipping freight
d. to comply with conditions mentioned
in the policy
70. In a consequential loss policy which one of
the following losses is indemnified?
a. Loss of corporate image
b. Loss of net profits due to fire
c. Loss due to theft during fire
d. Loss due to damage around the venue
of fire
71. Which one of the following indicates the
correct chronological order of
management approaches in the History of
Management Thoughts?
a. Classical, Human Relations,
Behavioural, Systems, Contingency
b. Contingency, Systems, Behavioural,
Human Relations, Classical
c. Classical, Behavioural, Human
Relations, Systems, Contingency
d. Classical, Human Relations,
Behavioural, Contingency, Systems
72. David C. McClelland’s mOtivát1ig needs
are
a. Needs for power, affiliation and
growth
b. Needs for affiliation, achievement and
security
c. Needs for power, achievement and
relatedness
d. Needs for power, affiliation and
achievement
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 157
73. Which one of the following gives the
correct sequence with respect to
communication process?
a. Sender Message, Encoding, Receiver,
Channel, Decoding and Feedback
b. Message, Sender, Encoding, Receiver,
Channel, Decoding and Feedback
c. Encoding, Message, Sender, Decoding,
Feedback, Receiver and Channel
d. Sender, Message, Encoding, Channel,
Receiver, Decoding and Feedback
74. Mechanistic structures are designed to
a. promote flexibility and quick
responses to fast changing situations
b. induce people to behave in predictable
and accountable manner
c. make people happy by assigning
specific tasks to them
d. perform assigned tasks within the
scheduled time
75. The degree of decentralization in an
organization depends most on
a. technology
b. size of workforce
c. volume of transactions
d. competence of subordinates
76. One of the major disadvantages of the
Matrix form of organization structure is
that
a. it does not pinpoint product-profit
responsibility
b. it is not oriented towards results
c. there is possibility of disunity of
command
d. it generates rivalry between line and
staff members
77. Wider span of control is effective in
organizations where
a. authority delegation is inadequate
b. tasks are complex
c. thorough subordinate training scheme
exists
d. the leadership style is authoritarian
78. Maintenance of intended delegation
requires that decisions lying within the
individual managers’ authority should be
11 of 15
made by them and not referred upwards in
the organizational hierarchy. This is
known as
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 158
a. principle of unity of command
b. scalar principle
c. authority level principle
d. principle of absoluteness of
responsibility
79. Management by Exception is to improve
a. control over personnel
b. strategic management
c. steady flow of information
d. high morale
80. Job Evaluation is carried on mainly for
a. identifying geographical locational
factors of business enterprise
b. promoting job satisfaction
c. simplifying wage administration
d. meeting competition effectively
81. Consider the following stages of planned
change:
1. Moving
2. Refreezing
3. Unfreezing.
According to Kurf Lewin, the correct
sequence of these is
a. 1,2,3
b. 2,3, 1
c. 3,1,2
d. 1,3,2
82. In which one of the following, Crisis
Management is reflected?
a. Future expansion plans of business
b. Organization Development Programme
c. Short-term Manpower Planning
d. Prudent managerial leadership
83. Which one of the following is the most
appropriate task of office management?
a. Creation of profit centre
b. Creation of control centre
c. Making office supplies available
d. Supervision of production Quality
Control
84. Which one of the following functions is
served most by information technology?
a. Replacement of human labour
b. Provision for a handle to the
management to improve industrial
relations
c. Substitution of human information
processing
d. Rationalization of office work
85. The most suitable method of filing for a
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 159
transnational corporation is
a. Numerical
b. Alphabetical — Numerical
c. Numerical — Territorial
d. Territorial
86. Which one of the following correctly
signifies the purpose of an Organization
Chart?
a. Office Decor
b. Indication of available Office services
c. Flow of Authority
d. High Morale
87. The most important advantage of
centralization of office services is
a. Specialization
b. higher departmental loyalty
c. no delay, in providing services
d. less burden of work
88. Which one of the following aims is
achieved most through Office Record
keeping?
a. Efficiency of operations on shop floor
b. Business reputation
c. Storage of documents
d. Helping decision making
89. Increase in the installation of Personal
Computer is mainly due to
a. monotony of work
b. reduction of fatigue
c. improvement of efficiency
d. lowering work load
90. Greater mechanization of offices, results in
a. better house keeping
b. greater accuracy in the work
c. making employees cogs of the
machines
d. higher cost of running office
91. O & M can be strengthened chiefly
through
a. wage incentive plans
b. good store-keeping
12 of 15
c. improved office layout
d. better work measurement
92. Informal organization is as necessary as
formal organization chiefly for the reason
that it
a. resists change
b. builds morale
c. has close association with decision
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 160
making
d. fulfils separate goals and standards
93. After the commencement of the
Companies Act, 1956 no person, save as
otherwise provided in Section 276, shall
hold office as director at the same time in
more than
a. 5 Companies
b. 10 Companies
c. 15 Companies
d. 20 Companies
94. Consider the following statements :
1. Board of Directors appoints the first
auditor of the company.
2. A shareholder of a company can
become member of the Board.
3. Board of Directors can act as auditors.
4. Director of one company can be
appointed as Director to any number of
companies.
Which of the above statements are correct?
a. 1, 2 and 3
b. 1 and 3
c. 1 and 2
d. 2, 3 and 4
95. Match List I with List II and select the
correct answer
List I
A. Company Secretary
B. Director
C. Managing Director
D. Internal Auditor
List II
1. In charge of statutory and
administrative duties
2. Reports to the shareholders
3. Reports to the Management
4. Trustee of Company’s assets
5. Reports to the Board of Directors
Codes;
ABCD
a. 1 5 2 3
b. 3 5 2 1
c. 1 4 5 3
d. 3 4 5 1
96. Consider the following statements
1. The minimum number of directors in a
public company is three.
2. The first directors are appointed by the
first general meeting.
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 161
3. An official director appointed by the
government in a public company is
required to possess qualification shares
within 2 months of his appointment.
4. The Company Secretary is appointed
by Board of Directors.
Which of the above statements are correct?
a. 1 and 2
b. 1 and 4
c. 2 and 3
d. 2 and 4
97. A director having direct or indirect,
interest or concern in a transaction of the
company, has to disclose his interest in a
meeting to the
a. Board of Directors
b. Shareholders
c. Company Secretary
d. Registrar of Companies
98. Which one of the following reports should
have “responsibility statement” under the
Companies Act, 1956?
a. Auditor’s report
b. Board of Director’s report
c. Company Secretary’s report
d. Audit Committee’s report
99. Which ore of the following reports deals
with “Corporate governance”?
a. Sabhanayagam Report
b. Kumaramangalam Birla Report
c. Narasimhan Report
d. L. C. Gupta Report
100. Minimum paid - up capital required to
incorporate a public -limited company is
a. Rs. 20,000
b. Rs. 1,00,000
c. Rs. 5,00,000
d. Rs. 10,00,000
13 of 15
101. As per the Companies Act, 1956, who
among the following must be included in
the Audit Committee constituted in a
company?
a. Managing Director and whole-time
Director
b. Auditor and Internal Auditor
c. Company Secretary V
d. Directors who are not whole-time and
Managing Director
102. Match List I (Concept relating to company
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 162
meetings) with List II (Meaning) and
select the correct answer:
List I
A. Proxy
B. Quorum
C. Statutory Meeting
D. Annual General Meeting
List II
1. Minimum number of members
required to be present
2. Getting the right to vote only
3. Conducted once in a year
4. Once in the lift time of a company
5. Meeting of a particular group of
shareholders
Codes;
ABCD
a. 5 3 2 1
b. 2 1 4 3
c. 5 1 2 3
d. 2 3 4 1
103. Match List I (Company having paid-up
capital more than) with list II (Must have /
be a) and select the correct answer using
the codes given below:
List I
A. One lakh rupees
B. Ten lakh rupees
C. Fifty lakh rupees
D. Five crore rupees
Lift II
1. Whole-time Director
2. Secretarial compliance report
3. Qualified Company Secretary
4. Public limited Company
5. Private limited Company
Codes;
ABCD
a. 5 4 3 1
b. 3 4 1 5
c. 5 2 3 1
d. 3 2 1 5
104. Assertion (A): The best way of reporting
of social responsibility is to prepare a
Value Added Statement (VAS) to show
the income earned by the providers of
capital, the employees and the
government.
Reason (R): A business is accountable to
the society since it makes use of
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 163
community-owned assets such as roads,
railways, communication and other
infrastructural facilities and concessions
provided by the state from the tax-payers’
money.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
105. Assertion (A): The interest on borrowed
funds can be capitalized upto the
completion of fixed assets.
Reason (R): The completion of fixed
assets has been possible only because of
these funds.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
106. Assertion (A): A claim lodges with
Railways in March 1998 for loss of goods
of Rs. 2,00,000 had been passed for
payment in March 2001 for Rs. 1,50,000.
No entry was passed in 1998.
Reason (R): The collect ability of the
claim was not certain in 1998.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
107. Assertion (A): Life-membership fees are to
be capitalized.
Reason (R): Often these are non-recurring
receipts and the members take advantage
of the services provided during the tenure
of membership.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 164


108. Assertion (A): The Company is said to be
trading on equity.
Reason (R): The capital structure of the
company is highly geared.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
109. Assertion (A): R.O.I. measures the final
outcome of all recorded business activities.
It is the ratio that measures the
performance of the firm that generates
returns.
Reason (R): However, interpretation
regarding the amount of capital invested
and size of returns generated by a firm
differ from one interpreter to another and
one organization to another. In other
words, practices are not uniform and as
such the acceptability of the concept is
being questioned.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
110. Assertion (A): An auditor of a company
gives a critical review of accounts.
Reason (R): He gives collaborative
evidence that accounts are properly drawn
up.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
111. Assertion (A): Internal Audit does not
comprise a means by which the
management of a business concern
maintains Internal Control
Reason (R): Internal Audit is a continuous
critical examination of accounts of a
business concern by its employees.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 165
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
112. Assertion (A): The Auditors Report is very
significant; it should be read very
carefully, particularly any qualificatory
notes that it may contain. The
Manufacturing and other Companies
(Auditors Report) Orders, 1975, as
amended in September 1998, required the
auditors to include a statement of certain
matters in their report on the accounts of
the company.
Reason (R): A the auditor should make a
specific observation and in case the report
is qualified, then reason for such
qualification should also be mentioned. In
case the auditor is not able to give any
answer against any particular point, he
should also explain the reasons thereof.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
113. Assertion (A): Section 227(1) of the
Companies Act, 1956 has empowered an
auditor of a limite4 company with certain
rights.
Reason (R): Section 227(2) of the
Companies Act, 1956 has given an auditor
of a limited company certain duties to be
performed in connection with his audit
work.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
114. Assertion (A): Audit requires application
of professional judgment in a
tremendously wide variety of situation and
circumstances. An auditor broadly
expresses his judgment of the fairness with
which these statements present the state of
affairs of a particular organization. Thus
even the audited accounts may be
incorrect, sometimes.
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 166
Reason (R): The very object of auditing is
to find out the truth and fiamess of the
financial position of the concern and also
to prevent and detect errors and frauds.
Auditor will be liable for any incorrect
information in the audited accounts.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
115. Assertion (A): The dissolution of
partnership may or may not include the
dissolution of the firm, but the dissolution
of the fin-n includes dissolution of
partnership.
Reason (R): When the dissolution of
partnership takes place, all businesses
come to a close, but on the dissolution of
the firm, the business may be carried on by
a reconstituted firm.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
116. Assertion (A): The provisions of double
insurance are not applicable to life
insurance.
Reason (R): Life insurance is not a
contract of indemnity.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
117. Assertion (A): To-day managers with
leadership qualities and skills are preferred
to managers with expertise alone.
Reason (R): The major organizational
changes now emphasize managing people
and processes.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 167
d. A is false but R is true
118. Assertion (A): Larger number of people
report to one manager.
Reason (R): Organization has a tall
structure.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
119. Assertion (A): MBO is an effective way of
planning and organizing.
Reason (R): Employees participate in
setting objectives.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
120. Assertion (A): Among efficiency conscious
enterprises, integrated office is
becoming popular.
Reason (R): Greater flexibility, better
work flow and lower operating cost are
benefits of open office.
a. Both A and Rare true and R is the
correct explanation of A
b. Both A and R are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false but R is true
IAS Prelims Commerce 2002

1. Contingency School of Management says


that management is
a. practice - oriented
b. principle - oriented
c. result- oriented
d. profit and loss - oriented
2. Which among the following is the oldest
and simplest device for achieving
coordination?
a. Hierarchy
b. Planning
c. Incentives
d. Rules
3. Which one among the following is an
instance of Participative Management?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 168
a. Board of Directors
b. Trade Unions
c. Work Committees
d. Task Force
4. Which one of the following is the correct
sequence in terms of the four management
functions, first identified by Henry Fayol?
a. Planning, Organizing, Leading and
Controlling
b. Planning Organizing, Staffing and
Coordinating
c. Planning, Motivating, Directing and
Reporting
d. Planning, Staffing, Communicating
and Leading
5. According to behavioural scientists,
organization means the structure of
a. physical facilities
b. tasks and relationships
c. behaviour of the management with the
working force
d. attitude of workers with the
management
6. Which one of the following styles of
leadership is the most effective for a Job
Order firm?
a. Participative leadership
b. Authoritarian leadership
c. Transformational leadership
d. Free-rein leadership
7. Match List I with List II and select the
correct answer:
List I
A. F. W. Taylor
B. Maslow
C. Esprit de Corps
D. Henry Fayol
List II
1. Principles of Management
2. Tarn Work
3. Scientific Management
4. Theory of Human Motivation
Codes;
ABCD
a. 1 4 2 3
b. 3 2 4 1
c. 1 2 4 3
d. 3 4 2 1
8. The managerial function of organizing
involves
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 169
a. reviewing and adjusting plan in the
light of changing conditions
b. establishing programme for the
accomplishment of objectives
c. creating a structure of functions and
duties to be performed by a group
d. getting, things done through others
9. Which one of the following is the most
important function of a manager?
a. Communication
b. Directing
c. Supervising
d. Decision - making
10. When there are large number of smaller
projects and the activities of those projects
are to be accomplished by setting up some
temporary departments the appropriate
organizational structure should be
a. project organisation
b. functional organisation
c. matrix organisation
d. divisional organisation
11. Which one of the following is the major
consideration for decentralization?
a. Organization’s environment
b. Nature of management function
c. Size of the organisation
d. Ability of higher-level managers
12. Organizations require narrow span of
control if there are
a. mature subordinates within
b. competent and trained managers
c. unclear plans for non-repetitive
operations
d. well-defined plans for repetitive
operations
13. Which one of the following traits describes
properly organic or behavioural structure
of an organisation?
a. Wider spans of control
b. More centralization
c. I lighter degree of specialization
d. Taller hierarchy
14. Which among the following is the most
popular approach for accomplishing the
results?
a. Management by exception
b. Reward system
c. Management by objectives
d. Mentor system,
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 170
15. systematic and orderly process of
determining the of worth of a job in
relation to other jobs is known as
a. job analysis
b. job evaluation
c. job specification
d. job description
16. Which one of the following factors does
NOT influence wage and salary structure?
a. Demand and supply
b. Cost of living
c. Job rotation
d. Job requirements
17. Which among the following is a direct
advantage of incentive compensation?
a. Mutual cooperation among the workers
b. Decrease in absenteeism
c. Increase in j3roductivity
d. Better industrial relations
18. Among tile following ‘change
management’ methods which one is the
most appropriate when the employees are
unwilling to accept change?
a. Participative method
b. Directive method
c. Leading by example
d. Negative reinforcement
19. In a group process there are some forces
favoring and some other forces opposing
changes. As a result equilibrium is
maintained. This is described by Kurt
Lewin as
a. field of forces
b. field of disputes
c. field of conflicts
d. cognitive dissonance
20. People resist change in organizations
because of
a. fear of unemployment
b. increase in responsibility
c. need for new social adjustments
d. All the above
21. The size of an office can be measured in
which of the following ways?
1. Production capacity of the
organisation.
2. Number of employees
3. Investment in equipment and machines
4. Total administrative expenses
Select the correct answer using the codes
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 171
given below
a. 1 and 4 are correct
b. 1 and 2 are correct
c. 1, 2 and 3 are correct
d. 2, 3 and 4 are correct
22. Centralizing the office work is5lesirable
mostly because it
a. fixes responsibility
b. avoids duplication
c. permits better supervision
d. permits better delegation
23. Which one of the following indicates the
correct chronological order of the ‘system’
designed for purchasing ‘office supplies’?
a. Select sources of supply, initiate
question, order supplies, receive
supplies and pay vendor
b. Initiate requisition order supplies,
select sources of supply receive
supplies and pay vendor
c. Select sources of supply initiate
requisition. order supplies, pay vendor
and receive supplies
d. Initiate requisition, select sources of
supply, order supplies, receive supplies
and pay vendor
24. Match List I with List II and select the
correct answer:
List I (Office records)
A. File
B. Ledger
C. Petty cash book
D. Office manual,
List II (Need of such record)
1. Recording small and necessary
expenses
2. Recording transactions
3. Keeping necessary documents
4. Various rules of office procedures
5. Computerizing office system
Codes;
ABCD
a. 3 2 1 4
b. 4 5 3 1
c. 3 5 1 2
d. 4 2 3 1
25. Impact of O & M is that
a. promotion possibility becomes
restricted
b. it leads to less scope for high salary
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 172
and wages
c. entire organization is streamlined
d. work measurement is costly
26. The term ‘organizational climate’ best
represents
a. human environment prevailing in an
organisation
b. union-management relations within an
organisation
c. problems introduced by faulty
organizational structure
d. socio - cultural environment in an
organisation
27. The Memorandum of Association shall be
signed by each
a. director
b. shareholder
c. subscriber
d. promoter and director
28. Changing the name of a company requires
a. special resolution and approval of
Company Law Board
b. special resolution and approval of
Securities and Exchange Board of
India
c. special resolution and approval of
Central Government
d. ordinary resolution and approval of
Company Law Board
29. Registration of Articles of Association is
optional in the case of
a. unlimited company
b. priv1te company limited by shares
c. company limited by guarantee public
d. company limited by shares
30. Power to use official seal of a company
outside India is to be authorized by
a. Articles of Association
b. Memorandum of Association
c. Both Memorandum and Articles of
Association
d. Central Government

IAS Prelims Commerce 2002


31. The approval of which one of the
following authorities is required to shift
registered office of the company iron the
jurisdiction of one Registrar of Companies
to another Registrar of Companies within a
State?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 173
a. Company Law Board
b. Central Government
c. Regional Director
d. Registrar of Companies
32. Body corporate’ under the Companies Act,
1956 includes
a. cooperative society
b. company incorporated outside India
c. corporation sole
d. any other body corporate. not being a
company, which the Central
Government may specify
33. Which one of the following is the correct
statement?
a. One can be a shareholder without
voting right
b. A preference shareholder can exercise
voting right from the date of allotment
c. An equity shareholder has no voting
right
d. A debenture holder can vote at annual
general meeting
34. A person shall not he appointed as
Director if he is found to be of unsound
mind by
a. the company
b. the company court
c. a court of competent jurisdiction and
the finding is in force
d. the shareholders
35. Which one of the following statutory
committees needs to be constituted in a
listed company?
a. Tender Committee
b. Audit Committee
c. Management Committee
d. Recruitment Committee.
36. Which one of the following pairs is NOT
correctly matched?
a. Suppression of invoices: Window
dressing
b. Overcharging depreciation: Secret
reserves
c. Omission of cash receipts from
debtors: Understatement of sales
d. Omission of credit sale:
Understatement of debtors
37. The main purpose of auditing is to
a. detect accounting offences and to
punish the offender
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 174
b. prepare and authenticate the accounts
c. prepare the accounts and authenticate
their true and fair view
d. certify the financial position of the
business
38. Statement of Standard Auditing Practices
(SAPs) are important while discharging
the auditing function by a member of the
ICAI in case of a company, because SAPS
are
a. prescribed by the ICAI
b. contained in the Companies Act, 1956
c. Approved by the Department of
Company Affairs.
d. approved by the Central Government
in consultation with Comptroller and
Auditor General
39. The selection’ of items, to be included in
the audit on a subjective basis without
consideration of sample size or method of
selection, is
a. probability sampling
b. systematic sampling
c. random sampling
d. judgment sampling
40. Internal audit report is submitted to
a. Government
b. Shareholders
c. Creditors
d. Board of Directors
41. The scope of audit in a partnership firm, is
governed by
a. partnership act
b. partnership deed
c. agreement between partnership firm
and auditor
d. number of partners of the firm
42. If an auditor does something wrongfully in
the performance of his duties resulting in
financial loss to the company, he will be
held guilty of
a. civil negligence
b. misfeasance
c. criminal negligence
d. financial irregularity
43. What are the aspects to be considered
while qualifying the audit report on the
accounts of a company?
1. An item requiring specific disclosure
under the Companies Act is not so
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 175
disclosed
2. Where the auditor has not been able to
form an opinion due to his inability to
obtain sufficient, appropriate evidence,
information and, explanation
3. An auditor realizes that items in a
financial statement are misstated to
such an extent that the financial
statement does not give a true and fair
view
Select the correct answer using the codes
given below:
a. 1 only
b. 1 and 2
c. 2 and 3
d. 1 and 2, 3
44. Match the List I with List II and select the
correct answer:
List I
A. Reduction of share capital
B. Reissue of redeemed debentures
C. Branch audit
D. Presentation of annual accounts
List II
1. Sec. 100
2. Sec. 228
3. Sec. 121
4. Sec. 210
Codes;
ABCD
a. 4 2 3 1
b. 1 3 2 4
c. 4 3 2 1
d. 1 2 3 4
45. Match List with List II and select the
correct answer:
List I
A. Statutory report
B. Prohibition of tax-free remuneration
C. Underwriting commission
D. Issue of shares at premium
List II
1. Sec. 200
2. Sec. 165
3. Sec. 78
4. Sec. 76
Codes;
ABCD
a. 4 1 2 3
b. 2 3 4 1
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 176
c. 4 3 2 1
d. 2 1 4 3

46. The first Standard Auditing practice (SAP


– 1) is related to
a. objectives and scope of the audit of
financial statements
b. basic principles governing an audit
c. documentation
d. detecting fraud and error
47. Which of the following relating to Audit
Programme is NOT correct?
a. The auditor cannot defend himself on
the basis of audit programme if there is
a charge of negligence against him
b. It is useful basis for planning the
programme for the subsequent year
c. It helps in the final review before the
report is signed
d. simplifies the allocation of work
amongst the audit staff
48. The scope of ‘management audit’ is
determined by the
a. Shareholders
b. Board of Directors
c. Comptroller and Auditor-General (C &
AG)
d. Comptroller and Auditor General in
consultation with the Central
Government
49. Test checking of entries in the audit work
refers to
a. the internal checks
b. the internal controls
c. checking some sample items from a
large number of similar items
d. checking the cash flow of business
50. Test checking reduces
a. the work of an auditor
b. the liability of an auditor
c. both work and liability of an auditor
d. the remuneration of an auditor
51. While establishing the sta1itical sampling
plan, the degree of precision required is
determined by
a. keenness of the management
b. suitability of accounting systems and
procedures
c. allowable margin of error the auditors
are willing to accept
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 177
d. random number table used for the
purpose
52. consider the following statements:
An unregistered partnership firm suffers
from the following disabilities
1. A partner of such firm cannot file a
suit for the dissolution of the firm
2. The firm cannot file a suit against any
third party for realization of its dues
3. A partner cannot file a suit against any
other partner to enforce any Fight
arising out of partnership deed
6 of 13
Which of the above statements arc correct?
a. 1, 2 and 3
b. 1 and 3
c. 1 and 2
d. 2 and 3
53. The distinctive characteristic of ‘perpetual
succession’ of a joint stock company refers
to
a. uninterrupted business in spite of
continuous losses
b. immunity from government direction
for the closure of the company
c. immunity from resolution passed n the
annual general body meeting for
closure of the company
d. uninterrupted existence not affected by
the death or insolvency of members of
the company
54. Who is a bull’?
a. A stock broker who deals or
specializes in a few shares
b. An investor who sells securities in
anticipation of being able to rebuy
them later at a lower price
c. An investor who buys securities in
anticipation of being able to sell them
later at a higher price
d. An investor who expects the price of a
security or of the market as a whole to
fall
55. Commercial paper is a
a. long-term corporate security meant for
small investors
b. medium-term corporate security meant
for institutional investors
c. treasury paper meant for corporate
investors
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 178
d. short - term corporate security meant
for large-scale investors
56. A cartel is a combination of firms
a. which are functioning in a particular
industry
b. whose combined assets are worth more
than 90% of total assets of the industry
c. who control major chunk of the market
d. whose combined profits are enormous
57. The takeover of a company in which most
of the purchase price is paid with
borrowed money is referred to as
a. hostile takeover
b. illegal takeover
c. leverage buy-out
d. management buy-out
58. One of the major difficulties in improving
the industrial efficiency in enterprises is
a. low investment
b. low productivity
c. ineffective marketing
d. poor inventory control
59. Exam Bank of India provides financial
assistance to exporters and importers in
India
a. in foreign currency only
b. both in Indian currency and foreign
currencies
c. as zero-interest loans
d. as subsidies
60. The national re-insurer in India is
a. General Insurance corporation of India
b. United India Insurance Company Ltd.
c. Insurance Regulatory and
Development Authority
d. Oriental Fire and General Insurance
Company Ltd

61. In life insurance, the risk insured is


a. certain to occur and also the timing of
its occurrence is known
b. certain to occur, but its timing of
occurrence is not known
c. not certain to occur and also the timing
of its occurrence is not known
d. not likely to occur
62. Which one of the following risks is not
insured by the Export Credit and
Guarantee Corporation?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 179
a. The risk of non-payment by the foreign
buyer
b. The risk that the importer may return
the goods on the ground of lower
quality
c. The political risk that the import
license may be revoked
d. The risk of war, revolution. etc., in the
buyer’s country
63. Social responsibility of business assumes
considerable importance towards
a. owners and workers
b. consumers and community
c. government and nation
7 of 13
d. All the above
64. Which one of the following is NOT a
useful tool in decision - making?
a. Annual return
b. linear programming
c. Sales forecasts
d. Operation research
65. A statutory corporation is one, which
COCS into being by
a. Registration under Companies Act. I
956
b. virtue of enactment of a special Act
c. registration under the enforceable Act
operating in India
d. the entrepreneurial effort of the
government
66. Match List I with List II and select the
correct answer
List I
A. Inspection of books of account under
Section 209 A of the Companies-Act
1956
B. Constitution of National Advisory
Committee on Accounting Standards
C. Books of account
D. Reasons for failure to buy back shares
List II
1. Central Government
2. Registrar of Companies
3. Registered office
4. The ICAI
5. Directors’ Report
Codes;
ABCD
a. 2 1 3 5
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 180
b. 3 1 2 4
c. 2 4 3 5
d. 3 4 2 1
67. Every auditor appointed under Section
224(1) of the Companies Act, 1956 shall
inform in writing as to whether he has
accepted or refused to accept the
appointment. Such an intimation shall be
given by him to the
a. company within 30 days of receipt
from the company of the intimation of
his appointment
b. Company Law Board within 30 days
of receipt from the company of the
intimation of his appointment
c. company within 7 days of receipt from
the company of the intimation of his
appointment
d. Registrar within 30 days of receipt
from the company of the intimation of
his appointment.
68. Audit Committee shall act in accordance
with the terms of reference to be specified
by
a. Statutory Auditors
b. SEBI
c. Beard of Directors
d. Central Government
69. X is proposed to be appointed as the
auditor of ABC Co. Ltd. at the ensuing
AGM in place of the retiring auditor Y.
This requires
a. a special resolution and approval of the
Company Law Board
b. a special notice
c. an ordinary resolution and approval of
the Company Law Board
d. a special resolution and approval of
Central Government
70. In the case of an auditor appointed under
Section 619 of the Companies Act, 1956
by the Comptroller and Auditor- General
of India, the remuneration shall be fixed
by the
a. company in general meeting
b. Comptroller and Auditor — General of
India
c. Comptroller and Auditor—General of
India in consultation with the Central
Government
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 181
d. Company Law Board
71. Financial year of a company shall not
exceed
a. calendar year
b. 15 months
c. 18 months with special permission of
Registrar of Companies
d. 15 months with special permission of
Registrar of Companies
72. Secretarial Compliance Report is
a. optional for a company
8 of 13
b. required when a company does not
have a whole-time secretary
c. required If a company is not required
to employ a whole- time secretary and
has a paid-up share capital of Rs 10
lakh or more
d. required for, companies as are notified
by the Central Government
73. Assertion (A): There is no error when the
totals of the debit side and the credit side
of the Thai Balance are equal.
Reason (R): Trial Balance is a two-column
statement showing names and balances of
all the accounts in the order in which they
appear in the ledger.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
74. Assertion (A): Companies are required to
use Written down Value (WDV) method
and the rates specified in Schedule XIV to
the Companies Act.
Reason (R): A change from WDV method
dl providing depreciation to Straight line
Method (SLM) should he made if it is
considered that the change would result in
a more appropriate preparation or
presentation of the financial statements of
the company.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 182
75. Assertion (A): Section 205 of the
Companies Act makes it obligatory for
every company to make provision for
depreciation.
Reason (R): Depreciation is a charge
against revenue.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
76. Assertion (A): Existence of secret reserve
contradicts the disclosed network of a
business.
Reason (R): Secret reserve helps promote
managerial efficiency.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
77. Assertion (A): Entrance fees in case of
non-profit concerns can be treated as
revenue receipt or capital receipt.
Reason (R): Some accountants consider
entrance fees to be recurring in nature,
whereas others consider it to be nonrecurring.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
78. Assertion (A): Performance ratios show
where we are going
Reason (R): Balance Sheet ratios show
how we stand.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
79. Assertion (A): One single primary ratio
that measures the final outcome of all
recorded business activities is ROI.
Reason (R): In practice, however
variations are also found in the ratio
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 183
because capital and return are subject to
different interpretations by firms.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
80. Assertion (A): According to Accounting
Standard 3 (revised) of the Institute of
Chartered Accountants of India, a Cash
9 of 13
Flow Statement should be divided into
three heads—cash flows from operating
activities, cash flows from investing
activities and cash flows from financing
activities.
Reason (R): Operating activities involve
income determining items and relate to
changes in current assets and liabilities;
investing activities concern changes in
non-current assets and financial activities
concern changes in non-current liabilities
and shareholder& equity.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
81. Assertion (A): It is the duty of the auditor
to see that costing records as required
under Section 209(1)(d) of the Cornpones
Act, 1956, have been maintained by
certain class of companies.
Reason (R): Mere-maintenance of cost
records does not make manufacturing
companies cost-effective.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
82. Assertion (A): Analytical Review is not
the part of Company Statutory Audit.
Reason (R): Analytical Review goes
beyond true and fair presentation of the
financial position.
a. Both A and R are true and R is the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 184
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
83. Assertion (A): Management audit is a
statutory audit.
Reason (R): Management audit is
performed through innovative ideas.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
84. Assertion (A): The Companies Act. 1956
requires that internal audit must be carried
out by a Chartered Accountant.
Reason (R): It is to help the management
to protect the interests of the shareholders
and the society.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
85. Assertion (A): Certificate of Origin is an
export-related document and it is issued by
the Chamber of Commerce.
Reason (R): Certificate of Origin is used
by importer to take delivery of goods.
86. Assertion (A): A company registered
under the Companies Act, 1956 is a
judicial person distinct from its members.
Reason (R): Corporate veil cannot be
lifted.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
87. Assertion (A): The doctrine of indoor
management does not give absolute
protection to outsiders who deal with a
company.
Reason (R): lithe majority of members
have their way, the minority has its say.
a. Both A and R are true and R is the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 185
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
88. Assertion (A): The powers of Board of
Directors that are to be exercised by Board
only at its meeting cannot go beyond those
prescribed under Section 292 of the
Companies Act, 1956.
Reason (R): The members in general
meeting cannot impose restriction on the
exercise of powers by the Board of
Directors.
a. Both A and R are true and R is the
correct explanation A
b. Both A and H are true but R is NOT
the correct explanation of A
c. A is true but R is false
d. A is false hut R is true
89. Accounting is generally understood as
1. summarization of business transactions
2. language of the business
3. source of business information
4. means of communication
Select the correct answer using the codes
given below:
a. 1 only
b. 1 and 2
c. 2 and 3
d. 1. 2, 3 and 4
90. Which one of the following types of
information, a creditor would be interested
to gather while reading Annual Reports of
an enterprise?
a. Profitability
b. Liquidity
c. Continuity
d. Solvency

91. Consider the following statements:


1. Closing stock is valued on the
principle of cost price or market price
whichever is lower
2. The manufactured goods in a year are
transferred from the manufacturing
account to trading account at selling
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 186
price
3. The going concern concept assumes
that a business will continue its
operations indefinitely
4. Revenue is not increased by taking
loans although assets and liabilities are
increased
Which of the above statements are correct?
a. 1, 3 and 4
b. 1 and 2
c. 2 and 3
d. 2, 3 and 4
92. In case of disclosure of accounting
policies, the following fundamental
accounting assumptions may NOT be
required to be stated if they are followed in
the preparation of final accounts of a
company
1. Materiality and accounting period
2. Going concern and consistency
3. Accrual basis of accounting
4. Conservatism and accounting period
Select the correct answer using the codes
given below:
a. 2 and 3
b. 1 and 4
c. 1, 2 and 3
d. 1, 2, 3 and 4
93. Match List I (Accounting Standards (AS)
issued by the Institute of Chartered
Accountants of India) with List II
(Standard on) and select the correct answer
List I
A. AS - 1
B. AS - 2
C. AS - 3
D. AS – 6
List II
1. Valuation of Inventories
2. Disclosure of Accounting Policies
3. Depreciation Accounting
4. Cash Flow Statement
Codes;
ABCD
a. 2 3 4 1
b. 4 1 2 3
c. 4 3 2 1
d. 2 1 4 3
94. Which one of the following pairs is not
correctly matched?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 187
a. Accounting equation: Assets -
Liabilities- Capital
b. Accounting year: 1st April 31st March
c. Accrual concept: Recognizing revenue
on receipt of cash
d. Cost concept: Recognizing transactions
at historical cost
95. Included in production overhead of
hardware division of Rs. 3,00,000 is Rs
50,000 being the cost of prototype
computers manufactured by the company
itself. These are not to be sold but to be
kept for demonstrating alive the medical
imaging software programme.
11 of 13
The cost of prototype computers of Rs.
50,000 should be treated as
a. fixed assets
b. deferred revenue expenditure
c. production overhead cost of hardware
division
d. advertising cost
96. The loss on the sale of old furniture is
debited to
a. profit & loss account
b. furniture account
c. trading account
d. depreciation account
97. If the purchases made during the year were
Rs. 60,000, the balance of stock in trade at
the beginning and at the end of the year
were Rs. 12,000 and Rs. 9,000
respectively and the gross profiting sale
was 1/5th then which one of the following
represents the figure of gross profit for the
year?
a. Rs. 15.750
b. Rs. 14,000
c. Rs. 12.500
d. Rs. 17,250
98. Given:
Opening stock: Rs. 5,000
Closing stock: Rs. 7,000
Purchase: Rs. 10,000
Manufacturing expenses: Rs. 20,000
Loss of materials due to fire: Rs. 1,000
The cost of production would be
a. Rs. 28,000
b. Rs. 29,000
c. Rs. 27,000
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 188
d. Rs. 30,000
99. A and B are sharing profits in the ratio of 2
: 1. They admit C into the firm with 1/4th
share in profits for which he brings Rs.
12.000 as his share of capital. Therefore,
the adjusted capital of B will be
a. Rs. 48,000
b. Rs. 12,000
c. Rs. 16,000
d. Rs. 24,000
100. While making an adjusting entry in respect
of interest on capital, we credit
a. capital account
b. profit & loss account
c. interest on capital account
d. drawing account
101. A and B are partners sharing profits \and
losses, in proportion 2: 1. They admist new
partner C whom they give 1/5th share in
profits. The new profit-sharing ratio will
be
a. 8:4:3
b. 3:2:1
c. 2:1:1
d. 4:2:1
102. Match List I with List II and select the
correct answer:
List I
A. Revaluation Account
B. Realization Account
C. Piecemeal Distribution
D. Gaining Ratio
List II
1. Retirement of a partner
2. Maximum loss method
3. Admission of a partner
4. Dissolution of partnership firm
Codes;
ABCD
a. 2 1 3 4
b. 3 4 2 1
c. 2 4 3 1
d. 3 1 2 4
103. Dividend can be paid generally out of
a. share premium account
b. capital redemption reserve account
c. current years profits
d. All of these
104. The following four assets normally appear
in the balance sheet:
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 189
1. Advance salary
2. Copyright
3. Preliminary expenses
4. Loose tools
The correct order in which these are to
appear in the balance sheet if drawn in
order of permanency will be
a. 4, 2, 1, 3
b. 3, 2, 4, 1
c. 1,2,3,4
d. 2,4,1,3
12 of 13
105. What is the correct sequence of the
following items of current assets in the
balance sheet of a company as per the
Companies Act, 1956?
1. Cash balance on hand
2. Interest accrued on investments
3. Stores and spare parts
4. Loose tools
5. Sundry debtrs
6. Stock-in-trade
7. Work-in-progress
Select the correct answer using the codes
given below:
a. 2, 5, 4, 6, 7, 3, 1
b. 1, 2, 4, 3, 5, 7, 6
c. 7, 6, 4, 1, 2, 5, 3
d. 2, 3, 4, 6, 7, 5, 1
106. Under the head ‘provisions’ in the balance
sheet of a limited company. the following
provisions made for, are to be disclosed
1. Proposed dividend
2. PF schemes
3. Pension and other staff-benefit
schemes
4. Taxation
The correct chronological order of their
disclosure is
a. 4, 2, 1, 3
b. 3, 2, 1, 4
c. 4, 1, 2, 3
d. 3, 1, 2, 4
107. Under the head ‘current ‘liabilities’, the
following are disclosed :
1. Unclaimed dividend
2. Sundry creditors
3. Unexpired discounts
4. Bills payable
The correct chronological order of their
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 190
disclosure is
a. 4, 3. 2, 1
b. 1, 3, 2. 4
c. 4, 2, 3, 1
d. 1, 2, 3.4
108. A company can forfeit shares if the
a. shareholder fails to pay the amount of
the call during the stipulated time
b. shareholder pays calls in advance
c. shareholder does not pay the
application money
d. shares have been issued at par
109. The balance appearing the books of a
company at the end of the financial year
were
Capital Redemption Reserve Account Rs.
5000O; Share Premium Account Rs.
10,000: General Reserve Account Rs.
5.000; Revaluation Reserve Rs. 2,000;
Profit & Loss Account (Debit) Rs. 10,000
Maximum amount available for
distribution as; Bonus Shares’ will be
a. Rs. 50,000
b. Rs. 55,000
c. Rs. 45,000
d. Rs. 57,000
110. A company forfeited 30 equity shares of
Rs 10 each fully called-up, for nonpayment
of allotment money of Rs 3 and
call- money of Rs 4 per share, If these
shares are reissued at Rs 8 per share fully
paid, the amount transferable to capital
reserve will be
a. Rs 300
b. Rs 60
c. Rs 90
d. Rs 30
111. Match List I with List II and select the
correct answer
List I
A. Nominal share capital
B. Right shares
C. Bonus shares
D. Preference shares
List II
1. Capitalization of reserve
2. Fixed dividend
3. Maximum amount of share capital of a
company
4. First offered to the existing
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 191
shareholders
ABCD
a. 3 4 1 2
b. 2 1 4 3
c. 2 4 1 3
d. 3 1 4 2
13 of 13
112. The current ratio is 3:2 and the amount of
current liabilities is Rs. 40.000. What is
the amount of current assets?
a. Rs. 60,000
b. Rs. 70,000
c. Rs. 80,000
d. Rs. 1,00,000
113. Which one the following ratios is likely to
be of affected the most on account of price
level changes?
a. Current Ratio
b. Inventory Turnover Ratio
c. Debtors’ Turnover Ratio
d. Fixed Assets Turnover Ratio
114. Consider the following statements:
The current ratio would reduce by
1. collection of book debts
2. payment to trade creditors
3. purchase of machinery for cash
4. cash deposited into bank
Which of the above statements are correct?
a. 1 and 3
b. 2 and 3
c. 2 and 4
d. 1, 3 and 4
115. The return on capital employed shows the
combined effect of
a. net profit ratio and inventory turnover
ratio
b. operating ratio and net profit ratio
c. net profit ratio and capital turnover
ratio
d. gross profit ratio and capital turnover
ratio
116. With regard to the rate of return on
investment (ROI), which one of the
following statements is NOT valid?
a. It is an overall indicator of the
profitability of an enterprise
b. It is a triangular relationship in he
sense that ROI = Profit margin x Asset
turnover
c. It is a superior measure compared to
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 192
the cash flow generated per share
d. It was first developed by du Pont, USA
117. Alfa Company Limited acquired the
business of M/s Bharat Traders. The
valuation of the items acquired wasbuildings
Rs. 1,20,000; machinery Rs.
80,000 and stock-in-trade Rs. 30,000. The
company issued in lieu of the above items
800, 10% debentures of Rs 100 each at par
and 15000 equity spares of Rs 10 each.
How much was the flow of funds in the
above transaction?
a. Rs. 2,30,000
b. Rs. 1,00,000
c. Rs. 50,000
d. Rs. 30,000
118. Which among the following is the societal
obligation of accounting?
a. To ascertain profit correctly
b. To maintain the records of the assets
and liabilities of organization
c. To establish effective organizational
control
d. To be helpful in correct tax assessment
119. When audit is carried out during the
accounting period with some interval, it is
called
a. periodic audit
b. partial audit
c. continuous audit
d. interim audit
120. Analytical review by an auditor mainly
includes
a. examining vouchers and other
documents
b. physical verification of assets
c. examining day books with ledgers
d. study of ratios and trends

IAS Prelims Commerce 2003


1. A company takes a loan of Rs. 70 lakhs on
which it has to pay interest @ 15% p.a.
Company’s return on investment is 25%
before tax and the tax payable on net
earnings is 60%. What gain accrues to the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 193
shareholders because of this loan?
a. Rs. 2,40,000
b. Rs. 2,43,000
c. Rs. 2,77,000
d. Rs. 2,80,000
2. Equity shares represent owner’s capital.
Therefore, an equity shareholder
a. has preferential claim over income and
wealth of the company
b. has residual claim over income and
width of the company
c. has no. right over income and wealth
of the company
d. is personally liable for all the liabilities
of the company even beyond his paidup
capital
3. Which one of the following is not true of
GDR?
a. It is an instrument issued abroad and is
listed and traded on a foreign stock
exchange
b. A GDR may represent one or more
shares of the issuing company
c. It can be converted into equity shares
at any time
d. A GDR may represent either equity
shares or debentures or preference
shares
4. A company must refund the amour4 of
subscription received from the public
including the development of the amount
received is less than the mandatory
minimum subscription. The mandatory
minimum subscription is
a. 75%
b. 80%
c. 90%
d. 95%
5. For a firm, the particulars are
Rs.
Stock 60,000
Debtors 45,000
Bill Receivable 12,000
Advances (Recoverable cash or kind)
4,000
Cash in Hand 40,000
Creditors 70,000
Bills Payable 45,000
Bank Overdraft 4,000
Net Sales 7,50,000
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 194
Gross Profit 60,000
Net Profit 40,000
The Current Ratio for the firm is, nearly
a. 27 : 20
b. 17 : 13
c. 9 : 7
d. 11 : 9
6. Z is admitted in a firm for a 1/4 share in
the profits for which he brings Rs. 30,000
for goodwill. It will be taken away by the
old partners X and Y in
a. old profit-sharing ratio
b. new profit-sharing ratio
c. sacrificing ratio
d. capital ratio
7. Forty thousand 10% redeemable
preference shares of Rs. 10 each are
redeemed at a premium of Rs. 10 each by
the issue o120000 equity shares of Rs. 10
each at a premium of Rs. 10 each.
The amount transferred to Capital
Redemption Reserve Account would be
a. Rs. 1,80,000
b. Rs. 2,00,000
c. Rs. 2,20,000
d. Rs. 2,40,000
8. Consider the following two statements and
select the correct answer using the codes
given, below:
1. The office supervisor is concerned
with the overall managerial functions
of the office activities.
2. The office manager is concerned with
guiding and directing the routing work
assigned to his subordinates.
a. Only 1 is correct
b. Only 2 is correct
c. Both 1 and 2 are correct
d. Neither 1 nor 2 is correct
9. A planned sequence of operations for
handling recurring business transactions
uniformly and consistently is known as
a. System
b. Procedure
c. Routine
d. Control
10. The undertaking by insurer to compensate
the insured for the loss caused to him by
the damage or destruction of the property
insured is under the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 195
a. principle of utmost good faith
b. principle of insurable interest
c. principle of indemnity
d. principle of contingency
11. In a draft Balance Sheet, the stock at
valuation Rs. 1,00,000 was shown on
assets side. While finalizing the Balance
Sheet, an item which was valued at Rs.
37,400 had realizable of Rs. 26,000 only.
In the Profit and Loss Account, the stock
would be shown at
a. Rs. 62,600
b. Rs. 88,600
c. Rs. 1,00,000
d. Rs. 1,26,000
12. Consider the following statements:
Capital expenditure is incurred for the
purpose of
1. Obtaining a long-term benefit for the
business.
2. Increasing earning capacity of the
business.
3. Purchasing of marketable securities.
4. Acquiring of an asset in the business.
Which of these statements are corrects?
a. 1 and 4
b. 1, 2 and 4
c. 2 and 3
d. 3 and 4
13. Which one among the following shall
result in ‘capital losses to a firm?
a. Pilferage of certain items
b. Loss of goods in transit
c. Loss due to delay in delivery by port
authorities
d. Confiscation of goods by custom
authorities on account of false
declaration
14. Which one of the following is the correct
sequence regarding preparation of final
accounts?
a. Ledger - Trial Balance - Journal -
Profit and Loss Account - Balance
Sheet
b. Journal - Ledger - Trial Balance -
Profit and Loss Account - Balance
Sheet
c. Trial Balance - Ledger – Journal -
Balance Sbeet - Profit and Loss
Account
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 196
d. Journal - Trial Balance - Ledger -
Profit and Loss Account - Balance
Sheet
15. A, B and C are equal partner. After
distributing the loss on realization of assets
and paying all liabilities, their capital
accounts show the following balances
A - Rs. 10,000 (Cr.)
B - Rs. 4,000 (Cr.)
C - Rs. 14,000 (Dr.)
What is the amount of cash with the firm?
a. Rs. 18,000
b. Rs. 4,000
c. Rs. 14,000
d. Rs. 10,000
16. An investor while trading in a stock in the
share market Lays greatest emphasis upon
a. earning before interest and tax
b. rate of return on equity
c. earning, price ratio
d. dividend price ratio
17. Which one of the following statements is
true of bonus shares?
a. Bonus shares are issued to the
promoters only
b. Bonus shares are issued only to the
existing shareholders
c. Bonus shares are the shares issued to
the employees of the company as an
incentive
d. Bonus shares are issued at par value
18. Which one of the following is a leveraged
buy-out?
a. When a company is taken over by
financing through borrowed funds
b. When a company is taken over by the
employees’ funds
c. When a lender takes over a company to
whom it is indebted
d. When a company is bought out directly
by buying its shares in the market
19. Profit from re-issue of forfeited shares
should be transferred to
a. Profit and Loss Account
b. General Reserve
c. Share Premium Account
d. Capital Account.
20. The quotation that includes all charges for
delivery of goods at the buyer’s stated
place is known as
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 197
a. Franco randu
b. Landed price
c. CIF price
d. FOB
21. Consider the following statements:
In social accounting, the following are the
measuring parameters
1. Value added statement
2. Employee turnover ratio
3. Saving in the foreign exchange
4. Capital output ratio
Which of these statements are correct?
a. 1 and 4
b. 1 and 2
c. 2, 3 and 4
d. 1, 2, 3 and 4
22. Which one of the following pairs is
correctly matched?
a. Adjusted Profit and Loss Account:
Fund from operations
b. Proposed Dividend: Current liability
c. Investment: Current assets
d. Depreciation: Inflow of fund
23. The main function of the Export Credit
and Guarantee Corporation is
a. to provide clearing facility to exporters
b. to cover the risk related to exports
c. to act as a trade association
d. to finance directly the exports and
imports
24. Consider the following
1. Preparation of Balance Sheet
2. Preparation of Funds Flow Statement
3. Preparation of Trial Balance
4. Preparation of Profit and Loss Account
The correct chronological sequence of the
above in the preparation of periodical
financial statement is
a. 4, 2, 3, 1
b. 3, 4, 1, 2
c. 2, 4, 3, 1
d. 1, 3, 2, 4
25. The current assets to the current liabilities
ratio is said to be satisfactory if it is
a. 1:2
b. 2:1
c. 1:1
d. 1.5:1
26. Under which principle is the insurer
entitled to succeed to all the rights of the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 198
insured regarding the subject matter of
insurance after the claim of insurance has
been fully and finally settled?
a. Principle of indemnity
b. Principle of subrogation
c. Principle of insurance
d. Principle of causa proxima
27. The balance left in the capital accounts on
dissolution of a firm is transferred to
a. Realization Account
b. Profit and Loss Account
c. Bank Account
d. None of the above
28. Consider the following statements:
The purposes of charging depreciation to
the Profit and Loss Account are
1. to provide for replacement of an asset
2. to ascertain true profit
3. to present real financial position
4. to arrive at the scrap value of the asset
Which of these statements are correct?
a. 1 and 4
b. 1 and 2
c. 1, 2 and 3
d. 2, 3 and 4
29. Insurable interest in a life Insurance
Contract should be
a. at the time of contract
b. at the time of maturity
c. at the time of claim
d. at the time of surrender
30. One of the consequences of highly
protective tariff walls would be that
a. foreign producers find their imports
attractive
b. domestic producers sell exportable
goods at a premium in the domestic
market
c. foreign producers find their exports
attractive
d. domestic producers find imports to be cheaper

IAS Prelims Commerce 2003


31. What is the kind of expenditure incurred
on heavy advertising whose benefit is to
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 199
continue for years to come?
a. Revenue Expenditure
b. Capital Expenditure
c. Deferred Revenue Expenditure
d. Prepaid Expenditure
32. Consider the following statements
The importance of the Memorandum of
Association of a Joint-Stock Company is
that
1. It is an unalterable Charter of the
company
2. for the incorporation of every
company, it is essential
3. its objective is to express clearly the
risks to its shareholders and members
4. it ascertains the limit within which the
company works and deals
Which of these statements are correct?
a. 1, 2 and 3
b. 2 and 4
c. 1 and 3
d. 1, 2, 3 and 4
33. According to Section 33(2) of the
Companies Act, a declaration stating that
all the requirements of the Companies. Act
and other formalities relating to
registration have been corn- piled with,
shall be signed by which one of the
following?
a. An Advocate of the Supreme Court or
High Court
b. An Attorney or a Pleader entitled to
appear before the High Court
c. A whole-time practicing Secretary or a
Chartered Accountant in India and
engaged in the formation of the
Company
d. A person named in the Articles of the
Company as a Director / Manager /
Secretary
34. Financial audit in Joint-Stock Company in
India is
a. necessary
b. voluntary
c. statutory
d. voluntary for companies which operate
in certain activities only
35. Select the pairs which are correctly
matched
1. Statutory Audit: Review of various
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 200
operations of a company
2. Management Audit: Verification of top
level policy and its implications
3. Operational Audit: Examining the
production planning and control
operations
4. Internal Audit: According to the
company objectives
Select the correct answer using the codes
given below:
a. 1 and 2
b. 1 and 3
c. 2 and 3
d. 1 and 4
36. Consider the following statements:
According to Section 34 of the Companies
Act when a company is registered and a
certificate of incorporation is issued by the
Registrar, important consequences which
follow ate that
1. the company becomes a distinct entity
2. the company acquires a perpetual
succession
3. a private company can commence its
business immediately
4. the company becomes owner of its
properties
Which of these statements are correct?
a. 1 and 2
b. 3 and 4
c. 1, 2, 3 and 4
d. 1 and 3
37. According to Section 385 of the
Companies Act, which one of the
5 of 14
following is not disqualified for the post of
Manager in a company?
a. An undercharged insolvent, or one
who has at any time within the
preceding five years been adjudged an
insolvent
b. One who suspends, or has at any time
within the preceding five years
suspended, payment to his creditors, or
makes, or has at any time within the
preceding five years made, a
composition with them
c. One who has not attained the age of 48
years
d. One who is, or has at any time within
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 201
the preceding five years been,
convicted by a Court in India of an
offence involving moral turpitude
38. Internal Auditor is appointed by the
a. Board of Directors of the Company
b. Shareholders of the Company
c. Institute of Chartered Accountants of
India
d. Company Secretary
39. Consider the following statements:
An ‘Internal- Audit’ is not a part of
1. Continuous Statutory Audit
2. Internal Check System
3. Internal Control System
Which of these statements are correct?
a. 1, 2 and 3
b. 1 and 2
c. 2 and 3
d. 1 and 3
40. In case of winding-up of a company, an
official liquidator realizes the amount due
and proceeds from the sale of the assets
and distributes the same among the
following:
1. Preferential creditors
2. Debenture holders
3. Legal expenses and cost of liquidation
4. Shareholders
5. Unsecured creditors
The correct sequence of distribution s
a. 1,2, 3, 4, 5
b. 2, 4, 5, 1, 3
c. 3, 1, 2, 5, 4
d. 4, 2, 5, 3, 1
41. Consider the following sacraments:
The Auditor is generally expected to carry
out the following in a particular seriatim:
1. Verification of assets and liabilities
2. Vouching of transactions
3. Checking of valuation of assets and
liabilities
The correct chronological sequence of
these acts is
a. 1, 3, 2
b. 3, 2, 1
c. 2, 1, 3
d. 3, 1, 2
42. Which of the following chief
characteristics of a Joint- stock Company
are false?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 202
1. A company is a legal person
2. A company has its separate entity
3. A company has its citizenship
4. A company owns, enjoys, sells and
purchases properties in its name
5. A company has voting rights and caste
votes in its favour
6. A company can sue and be sued
against
Select the correct answer using the codes
given below:
a. 1, 3 and 6
b. 2, 4 and 5
c. 3 and 5
d. 2 and 4
43. According to the Company Law, the First
Ordinary General Meeting of the Company
must be convened within
a. 18 months of its incorporation
b. 12 months of its incorporation
c. 9 months of its incorporation
d. 3 months of its incorporation
44. Consider the following functions
1. Checking of valuation and physical
verification of assets
2. Routine checking and vouching
3. Scrutiny of internal check system
The correct sequence of these functions to
be performed by an Auditor during the
course of auditing is
a. 2, 1, 3
b. 3, 1, 2
c. 3, 2, 1
d. 1, 2, 3
45. Various plans that an organization may
formulate are for - purpose or mission,
objectives, strategies, policies, rules and
procedures, programmes or projects and
budget. These can be arranged in a
hierarchy because higher level plans
give/generate lower level plans.
Identify the correct Order according to
hierarchy of plans from amongst the
following
a. Purpose or mission, objectives,
strategies, policies, rules and
procedures, programmes or projects
and budget
b. Budget, objectives, policies, rules and
procedures, purpose or mission,
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 203
strategies and programmes or projects
c. Purpose or mission, objectives,
policies, strategies, programmes or
projects, budget and rules and
procedures
d. Strategies, objectives, policies, purpose
or mission, programmes or projects,
rules and procedures, and budget
46. Match List I with List II and select the
correct answer:
List I
A. Holding Company
B. Government Company
C. Public Company
D. Private Company
List II
1. Maximum of 50 Members
2. Minimum of 7 Members
3. Partly Public
4. Business Combination
Codes;
ABCD
a. 2 1 4 3
b. 4 1 2 3
c. 2 3 4 1
d. 4 3 2 1
47. The Balance Sheet of M/s ABC as on 31
December is
The liquidity Ratio is
a. 2 : 5
b. 9 : 20
c. 1 : 2
d. 1: 1
48. Four important acts performed by an
Auditor in. connection with an audit work
are
1. verification of assets and checking
valuation of the same
2. checking of Annual Accounts and
Balance Sheet
3. preparation of an audit programme
4. test checking of financial, transactions
The correct sequence in which these acts
are performed by the Auditor is
a. 2, 1, 3, 4
b. 2, 3, 4, 1
c. 3, 1, 4, 2
d. 3, 4, 1, 2
49. The type of control that provides a means
for taking corrective action even ‘after
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 204
viability of the programme is known as
a. pre-action control
b. post-action control
c. screening control
d. steering control
50. The Mechanistic Model of organizational
design achieves high levels of production
and efficiency because’.
a. of its de-emphasis of specialization and
its emphasis on increasing job range
b. it is highly decentralized and informal
c. of both (a) and (b) above
d. it is highly complex, centralized and
formalized
51. Match List I with List II and select the
correct answer:
List I (Concepts of Accounting)
A. Money measurement concept
B. Business entity concept
C. Cost concept
D. Dual aspect concept
List II (Suitability of the Accounting
Concepts)
1. Applicable to all forms of business
organizations
2. Basic accounting
3. Original purchase price of assets
7 of 14
4. Applicable to those trans
actions/events which are of financial
nature in accounting
Codes;
ABCD
a. 4 2 3 1
b. 3 1 4 2
c. 4 1 3 2
d. 3 2 4 1
52. Which of the following may be included in
Audit Working Papers’?
1. Audit notebook
2. Audit programmes
3. Schedules of sundry debtors and
sundry creditors
4. Audit manuals
Select the correct answer using the codes
given below:
a. 1 and 4
b. 1 and 2
c. 2, 3 and 4
d. 1, 2 and 3
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 205
53. Consider the following statements:
An ‘Internal Control System’ may include
1. interim audit
2. internal audit
3. financial controls
Which of these statements are correct?
a. 1, 2 and 3
b. 1 and 2
c. 2 and 3
d. 1 and 3
54. For a firm
Opening Stock - Rs. 32,000
Closing Stock - Rs. 34,000
Sales - Rs. 4,40,000
Gross Profit Ratio - 25% on sales
The stock turnover ratio of the firm is
a. 8.0
b. 8.5
c. 9.0
d. 10.0
55. The traditional concept is that authority
flows from top to bottom. But a new
concept of authority has been developed.
This is known as acceptance theory. Who
is the exponent of this view?
a. Herbert A. Simon
b. Douglas McGregor
c. Chester Barnard
d. Keith Davis
56. The principle that a natural and unbroken
series of event is responsible for a loss or
damage, is known as
a. principle of subrogation
b. principle of mitigation of loss
c. principle of contribution
d. principle of causa proxima
57. Match List I (Different Types of
Shares/Events) with List II (Transaction by
the Company) and select-the correct
answer:
List I
A. Sweat equity shares.
B. Bonus shares
C. Right shares
D. Buy-back of shares
List II
1. A company gives its shares to the
shareholders in the form of extra
dividend
2. Shares issued by the company at a
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 206
discount
3. A company provides an opportunity to
the existing shareholders to purchase
subsequent issue of shares on priority
basis
4. A company exercises its call option to
buy shares from the shareholders
Codes;
ABCD
a. 3 1 2 4
b. 2 4 3 1
c. 3 4 2 1
d. 2 1 3 4
58. If net profits are Rs. 30,000 and expenses
not resulting in the application of fund are
Rs. 10,000, then the funds from operation
will be
a. Rs. 30,000
b. Rs. 40,000
c. Rs. 10,000
d. Rs. 20,000
59. Premium Method is used for good will
treatment in the case of
a. retirement of partner
b. admission of partner
c. dissolution of partnership firm
d. sale of partnership to a company
60. Compatibility of technology refers to
suitability of technology with respect to
a. consumption pattern of consumers
b. skills of available human resource
c. development of product line of the
company
d. changing taste of consumers

IAS Prelims Commerce 2003


61. Which one of the following functions does
not relate to O & M Division?
a. To enlarge the organization
b. To improve organization
c. To simplify methods
d. To create and maintain an efficient
administrative machinery
62. Which one of the following statements
explains the concept of unity of command?
a. All the workers focus on a common
goal
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 207
b. All the workers receive instructions
from one authority
c. All the workers are accountable to one
authority
d. All the workers aim at One objective at
a time
63. An organizational manual is designed to
promote
a. better clientele for a company
b. better relationship between the units in
an industry
c. better understanding of basic
organizational structures
d. better information about business of
the company
64. The psychologist A. H. Maslow has
developed a widely acclaimed conceptual
framework for understanding human
motivation. Human needs, according to
Maslow, tend to follow the classification
of five categories of needs given as under
1. Egoistic needs
2. Safety needs
3. Social needs
4. Physiological needs
5. Self-fulfillment needs
These needs, according to Maslow, follow
a basic hierarchical pattern from the most
basic to the highest level needs as follows
a. 1, 2, 3, 4,5
b. 4, 2, 3, 1, 5
c. 5, 4, 3, 2, 1
d. 1, 3, 2, 4, 5
65. Douglas McGregor made five basic
assumptions about people in his theory Y.
First four assumptions are
1. People are ambitious
2. They seek responsibility
3. They are dynamic
4. They recognize and accept
organizational goals
The fifth assumption is
a. people are always cooperative and
cheerful at their work
b. people are not self-centered
c. people are by nature resistant to
change
d. people are intelligent and possess
creative potential
66. In case of retirement of a partner, the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 208
partner’s loan account would be shown
a. in his capital account
b. in his wife’s loan account
c. in his loan account
d. in the total amount due to him
67. As per Garner v. Murray Rule, the loss
resulting from a partner’s. insolvency, is
borne by other partners in
a. equal ratio
b. their capital ratio
c. their profit-sharing ratio
d. 3 : 1 ratio
68. The movement of securities from one
stock exchange to another with the object
of reaping a profit from the disparity in
share prices is called
a. Averaging
b. Arbitraging
c. Backwardation
d. Forward trading
69. Consider the following statements
1. Transfer and transmission of shares are
the same thing
2. ‘Stag’ is a speculative person who
applies for shares in a new issue
expected to be over-subscribed to
make profit by selling such shares at a
premium
3. Stock is a bundle of fully paid shares
put together for convenience
9 of 14
Which of the above statements is/are
correct?
a. 1 and 2
b. 2 and 3
c. 3 only
d. 2 only
70. When a company exceeds the powers
granted to it by its Memorandum of
Association, it is called
a. Intra vires
b. Ultra vires
c. Lien
d. Mutatis mutandis
71. Consider the following statements:
Issue of bonus shares can be made out of
the
1. General Reserve Account
2. Realized Capital Profits Account
3. Revaluation Reserve Account
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 209
4. Profit and Loss Account (Cr.)
Which of these statements are correct?
a. 1 and 4
b. 2 and 3
c. 1, 2 and 4
d. 2, 3 and 4
72. In case the partnership deed does not
specify the rights and obligations, the
provisions of the Partnership Act, 1932 lay
down which of the following rights and
duties of a partner?
1. Every partner has a right to take part in
the conduct and management of the
firm’s business
2. Every partner has the right to receive
interest on loans and advances made
by him to the firm. The rate of interest
should be 8% unless otherwise agreed
to by the parties
3. Every partner has the right to be
indemnified for the expenses incurred
and losses sustained by him in the
firm’s business
Select the correct answer using the codesgiven
below
a. 1 and 3
b. 2 only
c. 1, 2 and 3
d. 2 and 3
73. Which of the following is not the legal
position of sole proprietorship?
a. The proprietor and his business have
separate personality
b. Free from legal formalities in operation
c. The liability is unlimited
d. Not governed by any Special Act
74. Kurt Lewins’ three phases of
organizational change consist of
a. unfreezing, changing, feedback
b. Changing, refreezing. feedback
c. unfreezing, evaluation, refreezing
d. unfreezing, changing, refreezing
75. Which one of the following statements is
not correct?
a. Management by objectives is a
philosophy of management
b. Management by objectives is an
approach of management
c. Management by objectives is a process
of participative management
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 210
d. Management by objectives is a control
technique
76. The quality of information is measured by
its
a. accuracy
b. cost
c. degree of statistical validity
d. timeliness
77. Which one of the following transactions
can change the current ratio?
a. Purchase of goods for cash
b. Payment to outstanding trade creditors
c. Acceptance on a Bill of Exchange
written by a trade creditor
d. Dishonour of a Bill of Exchange

78. Which one of the following is not correctly


matched?
a. Company : Authorized capital
b. Shares : Face value
c. Bonus shares : Market value
d. Preference shares : Fixed dividend
79. Auditing is compulsory in case of
a. Joint-stock Company
b. Charitable Trust
c. Cooperative Society
d. All of the above
80. Which one of the following statements is
not correct in respect of private limited
companies?
a. Number of members is limited to 50
b. Operations are restricted to a particular
State
c. Invitation to public for subscription to
capital is prohibited
d. Transfer of shares is restricted
81. A company needs to issue prospectus
a. for every Public issue
b. for every Public issue as well as Rights
issue
c. for every Public issue. Rights issue and
Bonus shares
d. for every Public issue if it is a private
limited company
82. Assertion (A): Management Audit should
be conducted by a team of experts.
Reason (R): Management Audit is a
critical examination of policy and practices
of management from the highest level to
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 211
downward in order to ascertain that sound
management prevails in the business
concern.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
83. Assertion (A): If it is found that some
errors and/or frauds are remaining
undetected due to the fact that a statutory
auditor depended upon test checking, then
the said auditor will be held responsible
for negligence in the performance of his
duties.
Reason (R): A statutory auditor cannot, in
any way, avoid or reduce the responsibility
laid on him by the statutes.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
84. Assertion (A): An auditor of a large
business concern has to adopt test
checking based on scientific statistical
sampling technique instead of checking the
whole of transaction of a particular class.
Reason (R): Test checking on scientific
statistical sampling technique, reduces the
volume of unnecessarily cumbersome
audit work involved in detailed checking
of all transactions.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
85. Assertion (A): Revenue expenditure is
written off in the year in which it occurs.
Reason (R): The benefit of revenue
expenditure is consumed in the year in
which it arises.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 212
c. A is true but R is false
d. A is false but R is true
86. Assertion (A): Cash Flow Statement and
Fund Flow Statement disclose same
information.
Reason (R): Both are prepared out of the
same data.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
87. Assertion (A): Liquid ratio reveals strength
of liquidity of a business unit.
Reason (R): Liquid ratio analyses liquid
assets and liquid liabilities of a business
unit in order to assess the extent of
liquidity.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
88. Assertion (A): Profit and Loss Account,
and Balance Sheet are financial statements
showing financial position of a business
unit.
Reason (R): Profit and Loss Account and
Balance Sheet are prepared at the end of
the financial year.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
89. Assertion (A): The interest on debentures
can be capitalized up to the complete
construction of the fixed assets.
Reason (R): The construction of fixed
assets could only be completed by the use
of these funds.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 213
90. Assertion (A): The role of the Doctrine of
Indoor Management is opposed to the
rules of constructive notice.
Reason (R): The constructive notice seeks
to protect the company against the outsider
whereas the Doctrine of Indoor
Management operates to protect outsider
against the company.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
91. Assertion (A): Rules of Constructive
Notice and Articles of Association are
known to everyone who deals with the
company.
Reason (R): After registration of the
company, Memorandum and Articles of
Association become public documents.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
92. Assertion (A): Doctrine of Indoor
Management does not apply to forgery.
Reason (R): Company Law recognizes
ultra virus or illegal acts.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
93. Assertion (A): A Director of a company in
his individual capacity can exercise
powers conferred on him by the
Companies Act, Memorandum and the
Articles of Association of the company.
Reason (R): The Directors have the power
to enter into contract on behalf of the
company with other parties.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 214
d. A is false but R is true
94. Assertion (A): Capital expenditure is
incurred for the purpose of acquiring fixed
asset.
Reason (R): Capital expenditure item is
shown in the asset side of the Balance
Sheet.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
95. Assertion (A): Staff officers are assigned
an ‘authority of ideas’ and line officers an
‘authority to command.
Reason (R): Functional authority is not
restricted to managers of a particular type
of department.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
96. According to the Companies Act, account
books of a company are to be preserved
for the preceding
a. six years
b. eight years
c. five years
d. nine years
97. Cost of goods purchased for resale is an
example of
a. capital expenditure
12 of 14
b. revenue expenditure
c. deferred revenue expenditure
d. None of the above
98. One of the important weaknesses of the
decentralized structure is
a. unsuitability in a fast-changing
environment
b. difficulty in pinpointing
responsibilities
c. difficulty in coordinating common
functions
d. difficulty in promoting innovations
99. Which of the following is/are included in
income and expenditure account?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 215
1. Accrued expenses
2. Credit purchases
3. Prepaid expenses
4. Opening cash balance
Select the correct answer using the codes
given below
a. 1 only
b. 1 and 2
c. 2 and 3
d. 3 and 4
100. For which of the following
industry/industries, I. G. Patel Enquiry
Committee was constituted by the
Government of India for examining the
justification of existence of Managing
Agency System in the Company?
1. Sugar industry
2. Cotton-textile industry
3. Jute Industry
4. Cement Industry
5. Paper Industry
Select the correct answer using the codes
given below:
a. 1 and 2
b. 5 only
c. 1, 2, 3, 4 and 5
d. 3 and 4
101. Under which of the following
circumstances, the Directors of a
Company, being the agents/representatives
become personally responsible?
1. When they act beyond their power
2. When they are convicted for any fraud
3. When they have given any false
statement in the prospectus
4. When they have clearly accepted the
responsibility of being liable for some
fault of theirs.
Select the correct answer using the codes
given below:
a. 2 and 3
b. 1 and 4
c. 1, 2, 3 and 4
d. 1, 3 and 4
102. Which one of the following types of
duties, is not to be performed by a dulyappointed
Secretary of a Company?
a. All statutory duties of the Company
b. Duties towards Directors of the
Company
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 216
c. Duties towards Shareholders of the
Company
d. Duties towards Registrar of the
Company
103. Within how much period a copy of the
Profit and Loss Account and Balance
Sheet of Company are to be filed with the
Registrar?
a. 14 days of Annual Meeting of the
Company
b. 21 days of Annual Meeting of the
Company
c. 30 days of Annual Meeting of the
Company
d. 45 days of Annual Meeting of the
Company
104. Following particulars are given for a firm:
Closing Stock - Rs. 45,000
Other Current Assets -Rs. 1,05,000
Current Liabilities - Rs. 70,000
Sales - Rs. 3,20,000
The Working Capital Turnover Ratio is
a. 5 : 1
b. 4 : 1
c. 3 : 1
d. 2 : 1
105. Match List I with List Il and select the
correct answer:
List I
A. VED Analysis
B. Ratio Analysis
C. Fund-flow Analysis
D. Income and Expenditure Analysis
List II
1. Sources and uses of fund
2. Inventory control
3. Analysis and interpretation of financial
statements
4. Non-profit organization
Codes
ABCD
a. 1 4 2 3
b. 2 3 1 4
c. 1 3 2 4
d. 2 4 1 3
106. Management by objectives is implemented
in an organization by stages. One such
stage action planning includes
1. assigning responsibilities for achieving
objectives
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 217
2. choosing strategies appropriate to the
objectives
3. allocating resources for achieving
objectives
4. scheduling specific activities to
achieve maximum resource utilization
Identify horn the following combinations
the correct sequence in which the, action
planning stage& are implemented
a. 1, 2, 3, 4
b. 2, 3, 4, 1
c. 3, 4, 1, 2
d. 2, 1, 3, 4
107. The concept ‘Management by Exception’
implies
a. Exceptional contributions by the top
management
b. achievement of objectives by
participation of all concerned
c. that the immediate superior has to deal
with deviations only and not with
details of the work assigned to the
subordinate
d. that the highest officer need not worry
about the results if he/she has
delegated his/her authority
108. Match List l with List II and select the
correct answer:
List I
A. Partners and Firm
B. Sole Proprietorship
C. Public Limited Company
D. Nominal Partnership
List II
1. Agent and Principal relationship
2. Prospectus
3. Personal supervision
4. Firm image
Codes;
ABCD
a. 1 3 2 4
b. 4 2 3 1
c. 1 2 3 4
d. 4 3 2 1
109. Following particulars are given for a firm:
Quick Ratio - 1.5
Current Assets - Rs. 1,50,000
Current Liabilities - Rs. 60,000
The value of stock is:
a. Rs. 60,000
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 218
b. Rs. 70,000
c. Rs. 80,000
d. Rs. 90,000
110. The most complex and widely used
method of job evaluation is
a. the job ranking method
b. the job classification method
c. the market pricing method
d. the points method
111. Consider the following
1. Measurement
2. Projection
3. Selection
4. Observation
5. Comparison
6. Decision making
7. The correct sequence of the above
ingredients of management by
exception is
a. 1, 2, 3, 4, 5, 6
b. 1, 2, 3, 5, 4, 6
c. 1, 2, 3, 6, 4, 5
d. 1, 2, 3, 4, 6, 5
112. A wage which should enable a worker to
provide for himself’ and his family not
merely the bare essentials like food
clothing and shelter but also a measure of
comfort in the form of education for his
children and protection against diseases
and illness is. known as
a. Fair Wage
b. Minimum Wage
c. Living Wage
14 of 14
d. Incentive Wage
113. 113. Emerson Efficiency System of wage.
payment means
a. the worker is allowed a certain time
within which he is required to
complete his job
b. the completion of job within the
prescribed time, the worker is paid
bonus of a certain percentage
c. where the worker takes 50% more than
the prescribed time, he is paid no
bonus
d. All of the ‘above
114. Match List I (Basis of Departmentation)
with List II (Example) and select the
correct answer
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 219
List I
A. Customer
B. Functional
C. Geographical
D. Temporal
List II
1. Day and night shifts in a hospital
2. Retail and ‘wholesale sales of a trader
3. Northern and Southern Divisions of a
railway
4. Production and sales of a factory
5. Consumer durables and fast moving
consumable goods
Codes;
ABCD
a. 2 3 4 1
b. 1 4 3 5
c. 2 4 3 1
d. 1 3 4 5
115. The cost of a machine is Rs. 70,000. It has
10-year life at the end of which it is
expected to realize Rs. 5,000. The
depreciation for first four year on a straight
line basis is
a. Rs. 28,000
b. Rs. 26,000
c. Rs. 22,000
d. Rs. 20,000
116. A partner’s capital at the end of a year was
Rs. 3,00,000. His share of profit for the
year was Rs. 60,000 and he had drawn Rs.
20,000 from the firm during the year. Then
his capital at the beginning of the year was
a. Rs. 3,00,000
b. Rs. 3,20,000
c. Rs. 3,80,000
d. Rs. 2,60,000
117. The source of the rules relating to internal
management of a company is known from
a. Memorandum of Association
b. Prospectus
c. Articles of Association
d. Fundamental Rules
118. The phenomenon of the stock market in
which almost the entire supply of a
particular security is held by a few people
is named as
a. Wash Sales
b. Cornering
c. Rigging
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 220
d. Arbitrage
119. Which one of the following statements
pertaining to mutual funds is true?
a. Mutual funds can be operated only by
government organizations
b. The maximum investment in mutual
funds by an individual should not
exceed a particular ceiling fixed by
government from time to time
c. Return on investment and safety of
principal is not guaranteed in mutual
funds
d. Unit Trust of India is the regulatory
authority for mutual funds in India
120. Underwriters are persons who
a. purchase the shares and debentures of
a company
b. work as agents of the company for the
sale of shares and debentures
c. undertake to buy those shares and
debentures not subscribed for by the
public
d. publicize the share-issue on behalf of
the company

IAS Prelims Commerce 2004

1. Which one of the following is the correct


explanation of the Principle of
Constructive Notice?
a. The company will have to deliberately
inform everybody about what it is for
and what it is doing
b. The company will canvass about its
Articles of Association and
Memorandum of Association time and
again
c. The Articles of Association and
Memorandum of Association are
considered to be public documents and
accessible to all
d. Every one dealing with the company is
not supposed to know the contents of
the Articles of Association and
Memorandum of Association
2. In case of a cultural club subscriptions
received during a particular accounting
period as per Receipt and Payment
Account amount to Rs. 57,360.
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 221
Subscription outstanding (Opening and
Closing) were Rs. 4,800 and Rs. 6,000
respectively. Subscription received in
advance (Opening and Closing) were Rs.
3,600 and Rs. 2,160 respectively. The
amount to be credited to Income and
Expenditure account would be
a. Rs. 57,360
b. Rs. 54,000
c. Rs: 60,000
d. Rs. 63,360
3. Receipts and Payments account records
transaction of
a. Revenue receipts and payments only
b. Capital receipts and payments only
c. All receipts and payments relating to
the current year only
d. All receipts and payments relating to
the current year, succeeding year as
well as preceding year
4. X and Y are sharing profits in the ratio of
2 : 1. They admit Z into the firm with 1/4
shares in profits for which he brings Rs.
12,000 as his share of capital. The partners
decide to have their capitals according to
the new profit sharing ratio. As a result,
the adjusted capital of Y will be
a. Rs. 10,000
b. Rs. 12,000
c. Rs. 16,000
d. Rs. 24,000
5. Which of the following will not be the
source for buying back of share by a
company?
a. Company’s free reserves
b. Company’s securities premium
account
c. Proceeds of any shares or other
specified securities as per Section 77
A(1) (iii)
d. Company’s borrowings from financial
institutions
6. Any person aggrieved by any decision or
order of the National Company Law
Appellate Tribunal can appeal to which
one of the following and within how much
period?
a. High Court, within 30 days
b. Supreme Court, within 60 days
c. SEBI, within 90 days
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 222
d. Department of Companies Affairs,
within 60 days
7. When an incoming partner purchases his
share from any one of the existing
partners, then
a. Total assets of the firm do not change
b. Total assets of the firm will be
augmented to the extent of payment
received from the new partner
c. Total assets of the firm will be reduced
to the extent of payment received from
the new partner
d. Change in total assets of the firm will
depend upon the new profit sharing
ratio of the partners
8. If the goodwill raised at the time of
retirement of a partner is to be written off,
then the capital accounts of the remaining
partners are debited in
a. New profit sharing ratio
b. Capital ratio
c. Old profit sharing ratio
d. Sacrificing ratio
9. Consider the following statements
regarding proceedings at general meetings
of a company
1. The chairman, if any, of the Board
shall preside as chairman at every
general meeting of the company
2. The chairman may adjourn the meeting
3. When a meeting is adjourned for 15
days or more, notice of the adjourned
meeting shall be given as in the case of
an original meeting
Which of the above statements is/are
correct?
a. 1 only
b. 2 and 3
c. 3 only
d. 1 and 2
10. Consider the following statements:
1. Audit programme is the management’s
plan of action
2. The primary basis of preparing an
audit programme is the system of
internal control
3. The idea implied in the preparation of
an audit programme is to ensure to the
auditor a complete grip over his staff
Which of the statements given above is/are
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 223
correct?
a. 3 only
b. 1, 2 and 3
c. 1 and 2
d. 2 and 3
11. Match List I with List II and select the
correct answer using the codes given
below the Lists
List I
A. Partners’ current accounts
B. Goodwill account
C. Partners’ drawings account
D. Realization account
List II
1. Dissolution of partnership
2. Admission of a partner
3. Fixed capital of partners
4. Goods taken by partner for self –
consumption
Codes
ABCD
a. 1 4 2 3
b. 3 2 4 1
c. 1 2 4 3
d. 3 4 2 1
12. Identify the correct sequence of the
following steps with regard to delegation
of authority
1. Creation of obligation
2. Authorization for actions
3. Determination of the expected results
4. Assignment of duties
Select the correct answer using the codes
given .below
a. 3-2-4-1
b. 1-2-4-3
c. 1 -4-2-3
d. 3-4-2-1
13. Which one of the following securities
cannot be issued by a Public limited
company in India?
a. Participating preference shares
b. Redeemable preference shares
c. Deferred shares
d. Debentures

14. Which of the following are included in


auditor’s working papers?
1. Audit manuals
2. Audit programme
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 224
3. Audit procedures
4. Audit note - book
Select the correct answer using the codes
given below
a. 1 and 2
b. 3 and 4
c. 1, 2 and 3
d. 2 and 4
15. Match List (Theories of Wages) with List
II (Theorists Who Developed) and select
the correct answer using the codes given
below:
List I
A. Subsistence theory
B. The surplus value theory of wage
C. Residual claimant theory
D. Marginal productivity theory
List II
1. Philip Henry and John Bats
2. Francis A. Walker
3. David Ricardo
4. Karl Marx
Codes;

ABCD
a. 3 1 2 4
b. 2 4 3 1
c. 3 4 2 1
d. 2 1 3 4
16. The tool used by auditor to monitor and
control the progress of audit work is
a. Engagement diary
b. Audit programme
c. Audit working papers
d. Audit notes
17. Which one of the following is the most
appropriate management control technique
for timely completion of a project?
a. Organization chart
b. Management by Objectives
c. PERT
d. Span of control
18. Which of the following pairs are correctly
matched?
1. Frederick Herzberg: Scientific
management
2. Henry Fayol: Modern management
3. Max Weber: Bureaucracy
4. Philip Kotler: Marketing
Select the correct answer using the codes
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 225
given below
a. 1 and 2
b. 2 and 3
c. 1 and 3
d. 2, 3 and 4
19. Hawthorne studies have underlined the
significance of which of the following?
a. System approach to management
b. Contingency approach to management
c. Modern approach to management
d. Human relations approach to
management
20. Which of the following is called
‘Backbone of auditing?
a. Routine checking
b. Vouching
c. Internal checks
d. Internal control
21. Match List I with List II and select the
correct answer using the codes given
below:
List I
A. Receipts and payments account
B. Income and expenditure account
C. Dividend equalization reserve.
D. Subscription received in advance
account
List II
1. Revenue
2. Cash
3. Liability
4. General reserve
ABCD
a. 2 1 4 3
b. 3 4 1 2
c. 2 4 1 3
d. 3 1 4 2
22. Burns and Stalker, model for categorizing
organization by structural design uses the
terms
a. Functional and geographic
b. Functional and organic
c. Geographic and mechanistic
d. Mechanistic and organic /
23. In management principles, grid refers to
a. Diverse managerial styles
b. Coordination
c. Communication
d. Motivation
24. Who among the following is a bear
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 226
operator?
a. A stock broker who sells shares now
and buys the same shares later
b. An investor who expects the price of a
security or that of the whole securities
market to rise
c. An investor who sells securities in
anticipation’ of being able to
repurchase them later at a lower price
d. A broker who indulges in rigging of
share prices
25. Consider the following statements
regarding’ Information ‘Memorandum
1. A company inviting subscription by an
information memorandum shall be
bound to file a prospectus prior to the
opening of the subscription lists and
the offer as a red-herring prospectus, at
least 10 days before the opening of the
offer.
2. The information memorandum and
red-herring prospectus shall carry same
obligations as are applicable in the
case of a prospectus.
3. 3. Any variation between the
information memorandum and the red4
of 15
herring prospectus shall be highlighted
as variations by the issuing company.
Which of the statements given above is/are
correct?
a. 1 only
b. 1, 2 and 3
c. 2 and 3
d. 3 only
26. Match List I with List II and select the
correct answer:
List I
A. Financial leverage
B. Quick ratio
C. Stock turnover
D. Margin on sales
List II
1. Efficiency
2. Profitability
3. Liquidity
4. Risk
Codes;
ABCD
a. 4 3 1 2
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 227
b. 1 2 4 3
c. 4 2 1 3
d. 1 3 4 2
27. In a partnership business if there is no
specific agreement among partners, profit
is distributed in the
a. Ratio of capital contributions
b. Ratio of time spent in the business
c. Ratio to be decided by the Court
d. Equal ratio
28. Rules concerning meetings and reports of
a joint stock company are contained in its
a. Prospectus
b. Memorandum of Association
c. Articles of Association
d. Bye -laws
29. Consider the following statements about
management of change:
1. Job enlargement and job enrichment
are examples of techno-structural
approaches to change
2. Organizational development is short -
range effort supported by top
management to increase an
organization’s problem solving and
renewal processes
Which of the statements given above is/are
correct?
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 nor 2
30. Consider the following statements about
organizational structure
1. Functional organization is used by
large, multi - product companies
2. Product or market organization is used
by smaller firms that offer a limited
line of products
3. Matrix organizational structure is a
hybrid
Which of the statements given above is/are
correct?
a. 1 and 2
b. 3 only
c. 2 and 3
d. 1, 2 and 3
IAS Prelims Commerce 2004
31. Consider the following statements about
office auto-motion:
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 228
1. The growth of EDP (electronic data
processing) departments and
emergence of MIS (management
information system) are two
independent entities
2. DSS (decision support system) is
accessible only to the computer
specialists
3. Which of the statements given above
is/are correct?
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 nor 2
32. A company purchased 8% bonds at a cost
of Rs. 12,00,000 (Face value Rs.
10,00,000) on January 1,2003. Half yearly
interest is payable on this investment on
June 30 and December 31 each year. The
Company closes its accounts on 31.3.2003.
The amount of accured interest shown in
profit and loss account for the year ended
is
a. Rs. 40,000
b. Rs. 60,000
c. Rs. 20,000
d. Rs. 80,000
33. Goods worth Rs. 24,000 were returned by
X. The accountant, however, credited the
sales returns account by Rs. 42,000. In
5 of 15
order to rectify this error, what should be
done?
a. Debit the sales return account by Rs.
42,000
b. Credit the sates return account by Rs.
24,000
c. Debit the sales return account by Rs.
66,000
d. Debit the sales return account by Rs.
18,000
34. A machine with a written down value of
Rs. 10,000 has been sold for Rs. 13,000.
The amount realized is a
a. Capital receipt and profit involved
should be transferred to Capital.
Reserve
b. Revenue receipt
c. Capital receipt and profit involved
should be transferred to General
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 229
Reserve
d. Capital receipt and profit involved
should be transferred to Profit and
Loss A/c
35. In case of winding up of a company, in
what order does the official liquidator
distribute the amounts realized among the
following different creditors?
1. Legal expenses and the cost of
liquidation
2. Debenture holders
3. Unsecured creditors
Select the correct answer using the codes
given below
a. 1-2-3
b. 3-2-1
c. 3-1-2
d. 1-3-2
36. Rs. 10,000 spent on the replacement of
worn - out parts of an electronic machinery
is treated as
a. Capital expenditure
b. Revenue expenditure
c. Deferred revenue expenditure
d. Capital loss
37. Preliminary expenses are an example of
a. Revenue expenditure
b. Capital expenditure
c. Deferred revenue expenditure
d. All of the above
38. Which of the following is/are capitalized
along with the purchase of a fixed asset?
1. Import duty
2. Delivery and handling cost
3. Cash discount
4. Cost of installation
Select the correct ‘answer using the codes
given below
a. 3 only
b. 2 and 3
c. 1, 2 and 4
d. 1, 2, 3 and 4
39. Match List I (Items) with List II
(Standards) and select the correct answer
using the codes given below:
List I
A. Accounting for fixed assets
B. Revenue recognition
C. Depreciation accounting
D. Cash flow statement
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 230
List II
1. AS – 9
2. AS - 10
3. AS - 3
4. AS - 6
Codes;
ABCD
a. 2 3 4 1
b. 4 1 2 3
c. 2 1 4 3
d. 4 3 2 1
40. Accounting Standard AS - 2 provides that
inventories should be valued at
a. Lower of historical cost and net
realizable value
b. Lower of historical cost and market
value
c. Only estimated selling price
d. All of the above three
41. ABC Company purchased cassettes during
three months as follows
The Company sold 1600 cassettes @ Rs.
100 each. What will be the value of
closing stock if the cost flow assumption
of weighted average method is followed?
a. Rs. 23,500
b. Rs. 35,200
c. Rs. 37,500
d. Rs. 36,200
42. While making an adjustment entry in
respect of interest on capital, credit is
made to
a. Capital account
b. Interest on capital account
c. Profit & Loss account
d. Interest account
43. Given the following data extracted from
the book of
Abdul Traders: (Rs)
Opening stock: 30,000
Closing stock: 40,000
Purchases: 1,25,000
Carriage inwards: 2,000
Carriage outwards: 3,000
Return outwards: 5,000
Sales: 1,50,000
The cost of goods sold will be
a. Rs. 1,30,000
b. Rs. 1,12,000
c. Rs. 1,20,000
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 231
d. Rs. 1,15,000
44. Consider the following statements:
A credit purchase during the accounting
year which was not recorded in the books
of account but included in the closing
stock is to be
1. added to the credit purchases account
2. added to the creditors account
3. subtracted from the closing stock
4. added to the opening stock
Which of the statements given above is/are
correct?
a. 3 only
b. 1 and 2
c. 2 and 3
d. 2, 3 and 4
45. In which of the following ways Secretary
of a company can be removed from his
office?
a. By a resolution passed in the meeting
of the Board of Directors
b. By an order of the Registrar of the
company
c. By a resolution passed in the Annual
General Meeting
d. None of the above three

46. Match List I (Items) with List II


(Headings) and select the correct answer
using the codes given below
List I
A. Provision for income tax
B. Share premium
C. Unclaimed dividend
D. Discount oh issue of shares
List II
1. Miscellaneous expenses not written off
2. Current liabilities
3. Reserves and surplus
4. Profit and Loss account
Codes;
ABCD
a. 4 3 2 1
b. 2 3 4 1
c. 4 1 2 3
d. 2 1 4 3
47. Match List I (Item of Balance Sheet) with
List II (Head in the Balance Sheet) and
select the correct answer using the codes
given below:
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 232
List I
A. Govt. securities
B. Stock in trade
C. Unclaimed dividend
D. Proposed dividend
List II
1. Current liabilities
2. Provisions
3. Liquid assets
4. Current assets
Codes;
ABCD
a. 3 1 4 2
b. 2 4 1 3
c. 3 4 1 2
d. 2 1 4 3
48. Continuous audit is used
a. where volume of the transactions is not
very large
b. where it is desired to present the
accounts just after the close of the
financial year and where the statement
of accounts is to be presented to the
management after every month or
quarter
c. where satisfactory system of internal
check is not in operation
d. where interim audit is not in operation
49. Which one of the following is a conclusive
proof of the existence of a company?
a. Certificate of incorporation
b. Certificate of commencement of
business
c. Filing of registration papers duly
stamped with the Registrar of the
Companies
d. Share certificate
50. Secret reserves are created by means of
a. transfer to general reserve
b. providing excessive depreciation
c. overvaluation of inventories
d. undervaluation of liabilities
51. Match List I with List II and select the
correct answer using the codes given
below:
List I
A. Inventory of material
B. Retained earnings
C. Listing fees of shares in a stock
exchange
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 233
D. Plant and machinery
List II
1. Shareholders equity
2. Fixed asset
3. Current asset
4. Fictitious asset
5. Intangible asset
52. A company purchased the following assets
and paid through 1,00,000 fully paid
equity shares of Rs. 10 at a premium of Rs.
2:
Building: Rs. 5,00,000
Machinery: Rs. 4,00,000
Stock in trade: Rs. 1,00,000
In the context of funds flow statement, this
transaction will result in
a. Funds inflow of Rs. 10,00,000
b. Funds outflow of Rs. 12,00,000
c. Funds inflow of Rs. 1,00,000
d. Funds inflow of Rs. 9,00,000
53. Call option is
a. A contract to buy a certain number of
shares at a stated price within a
specified period of time
b. A contract to sell a certain number of
shares at a stated price within a
specified period of time
c. The option of the issuing company to
demand the shareholders to pay for the
partly paid shares
d. The option available to the convertible
debenture holders to demand equity
shares in conversion of debentures
54. Following is the summarized balance sheet
of a company earning profit (before tax) of
Rs. 3,00,000 during the previous financial
year
The rate of return on investment of the
company during the relevant financial year
is
a. 25%
b. 20%
c. 21.5%
d. 23%
55. An audit in which the auditor examines the
financial statements of an enterprise to
express an opinion as to whether or not
they reflect a true and fair view of its state
of affairs and working results is known as
a. Management audit
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 234
b. Cost audit
c. Financial audit
d. Periodical audit
56. Which of the following are statutory
audits?
1. Financial audit of insurance companies
2. Financial audit of partnership firms
3. Financial audit of proprietorship firms
4. Financial audit of manufacturing
companies
Select the correct answer using the codes
given below:
a. 1 and 4
b. 1 and 2
c. 1 and 3
d. 3 and 4
57. Is management by exception one of the
important principles of control?
a. Yes; because only the unusual
deviations from standards should be brought to the notice of the
management
b. No; because less significant deviations
and the actual performance according
to the standards are not brought to the
notice of the management
c. Yes; because exception principle saves
time of the subordinate staff
d. No; because the manager can attend to
operative decisions and the strategic
problems can be left to the technocrats.
58. Consider the following statements
1. in a computer, operating system acts as
an interface between the user and the
hardware
2. Operating system takes care of the
power supply and other hardware
requirements
3. CPU is the control centre for a
computer
Which of the statements given above is/are
correct?
a. 1 and 3
b. 2 and 3
c. 1 only
d. 2 only
59. Job evaluation is used for
a. Study of progress of production
b. Study of job composition
c. Determining wage - rate differentials
d. Rating the merit of an employee
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 235
60. The first step of the control process
actually gets initiated in the managerial
function of
a. Staffing
b. Planning
c. Communication
d. Coordination
61. Which one of the following statements is
correct?
a. Business policy is another name for
long range planning
b. Strategic planning is the function of
middle management
c. Operational planning is the function of
top management
d. Strategic planning is largely influenced
by external environment
62. What is indent in foreign trade?
a. Shipping documents in duplicate
b. A certificate indicating that the goods
have been loaded on board the ship
c. A firm and binding order from the
importer
d. A letter of intent from the overseas
supplier
63. Assertion (A): According to the Doctrine
of Indoor Management, persons dealing
with the company are only required to see
that the proposed dealings are apparently
regular and consistent With the
Memorandum of Association and Articles
of Association.
Reason (R): It is presumed that the
Directors are acting lawfully
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
64. Assertion (A): Individual perceptions,
expectations, expected outcome of a given
behaviour and situational factors also play
a vital role in motivation.
Reason (R): Though need is not fully
rejected, need satisfaction is not the only
aspect of a person’s behaviour.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 236
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
65. Assertion (A): Holding company is a
partial consolidation.
Reason (R): If company C is the subsidiary
of B, and B is a subsidiary of A, then C
will be deemed to be a subsidiary of A
through the medium of B.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
66. Assertion (A): A private limited company
must prepare its own Articles of
Association.
Reason (R): A private limited company
can invite public to subscribe to its share
and debentures.
9 of 15
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
67. Assertion (A): While preparing Trading
and Profit and Loss A/c and Balance
Sheet, the adjustments given outside the
trial balance are to be shown in final
accounts at two places, if treated directly.
Reason (R): Adjustments are to be made to
comply with the matching principle.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
68. Assertion (A): Current ratio shows the
ability of the firm to meet its short term
obligations.
Reason (R): Current ratio is also used in
inventory
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 237
c. A is true but R is false
d. A is false but R is true
69. Assertion (A): Vouching refers to
examination by the auditor of documentary
evidence supporting and substantiating a
transaction recorded in books.
Reason (R): Verification refers to
confirming the actual existence,
possession, ownership, basis of valuation
and freedom from encumbrance.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
70. Consider the following statements
1. A. letter of credit eliminates the risk of
payment in foreign trade
2. Revolving letter of credit and circular
letter of credit are two different entities
3. Revocable letter of credit is a
confirmatory letter of credit
Which of the statements given above is/are
correct?
a. 1 only
b. 2 and 3
c. 1 and 3
d. 1, 2 and 3
71. Consider the following statements:
1. A public limited company can
commence business only after getting
the Certificate of Commencement of
Business
2. In a public limited company, Directors
cannot borrow from the company
without the approval of the Central
Government
Which of the statements given above is/are
correct?
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 nor 2
72. Consider the following statements
1. Sole - proprietorship type of business
unit is not governed by the Contract
Act.
2. A private limited company is governed
by the Partnership Act whereas a
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 238
public limited company is governed by
the Companies Act
Which of the statements given above is/are
correct?
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 nor 2
73. Consider the following statements
1. In case of the marine insurance, the
insurable interest must exist at the time
the loss occurs
2. In case of fire insurance, insurable
interest must exist both at the time of
the contract and at the time of loss
Which of the statements given above is/are
correct?
a. 1 only
b. 2.oniy
c. Both 1 and 2
d. Neither 1 nor 2
74. Consider the following statements
10 of 15
1. Workmen’s Compensation and Third
Party insurance are examples of
guarantee insurance
2. Re-insurance is more common under
fire and marine insurance
Which of the statements given above is/are
correct?
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 nor 2
75. A change in the exchange rate will change
the amount of local currency receivable on
a bill denominated in a foreign currency.
The risk involved is called
a. Foreign exchange risk
b. Import risk
c. Transaction risk
d. Monetary risk
76. Export promotion is indispensable for
overcoming disequilibrium in
a. balance of payments
b. Balance of trade
c. Terms of trade
d. All the above three
77. Match List I with List II and select the
correct answer using the codes given
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 239
below the Lists
List I
A. Horizontal combination
B. Vertical combination
C. Diagonal combination
D. Circular combination
List II
1. Mixed combination
2. Service combination.
3. Industry combination
4. Trade combination
Codes;
ABCD
a. 4 3 2 1
b. 2 1 4 3
c. 4 1 2 3
d. 2 3 4 1
78. The marine policy which insures incidental
inland risks along with the marine perils is
called
a. Block policy
b. Currency policy
c. Blanket policy
d. Voyage policy
79. Which of the following does not mean the
Qualified Institutional Buyer (QIB) under
the SEBI (Disclosure & Investor
Protection) guidelines as amended by the
recent DIP Circular?
a. Mutual Funds
b. Pension Funds with a corpus below Rs.
20 crores
c. Pension Funds with minimum corpus
of Rs. 25 crores.
d. Provident Funds with minimum corpus
of Rs. 25 crores
80. The process of determining how to pursue
long - term goals with the expected
resource available to the organization is
called
a. Operational planning
b. Strategic planning
c. Intermediate planning
d. Tactical planning
81. The dividend per share in a company is Rs.
2, earning per share is Rs. 5, and the
market value is Rs. 25. What will e its
yield?
a. 20%
b. 12.5%
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 240
c. 8%
d. 25%
82. Which one of the following statements
related to auditing is not correct?
a. Chances of frauds are maximum in the
case of cash sales
b. While routine checking is carried out,
vouching may be considered
unnecessary
c. While vouching the cash receipts, the
auditor should study the system of
internal check in operation
d. Vouching is the essence of auditing
83. When an Annual General Meeting can be
called after giving shorter notice than that
specified?
a. If consent is accorded to by all the
members entitled to vote
b. If consent is accorded to by 30% of the
members entitled to vote
c. If Board of Directors takes a majority
decision in this regard
d. If the company secretary so wishes
84. Under which one of the following
circumstances, the Central Government is
11 of 15
empowered to direct special audit of the
companies?
a. Where any director has
misappropriated the company’s fund
b. Where a shareholder has complained to
the Government about the non -
payment of dividend
c. Where the company has continuously
defaulted in the payment of interest to
the debenture holders
d. Where the conduct of management is
in the manner which is injurious to
trade, industry or business to which it
pertains
85. Consider the following statements
1. Although purchasing department in a
Departmental Store is a key
department, only the sales department
and not the purchasing department can
be considered as line activities
2. Line managers offer staff managers
advice through research and analysis
3. Functional authority is the authority of
members of staff department to control
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 241
the activities of other departments
Which of the statements given above is/are
correct?
a. 1 and 2
b. 2 only
c. 3 only
d. 1 and 3
86. While auditing the financial statements of
non - corporate enterprises, the auditor’s
duties and scope of work would be
governed by
a. The Statute passed by the Parliament
b. The Companies Act, 1956 & the client
concerned jointly
c. The agreement with his client
d. The provisions of the Income Tax Act,
1961
87. Consider the following statements
1. First auditors of a company are
appointed by the Board of Directors
within one month of the, incorporation
2. Subsequent auditors of a company are
appointed every year by the
shareholders in the Annual General
Meeting
3. A body corporate can be appointed as
auditor of a company
4. Section 226 of the Companies Act,
1956 prescribes the qualifications and
disqualifications for appointment of
the auditors of companies
Which of the statements given above are
correct?
a. 1, 2 and 3
b. 1 and 2
c. 1, 2 and 4
d. 2 and 3
88. Consider the following statements
1. The auditor should verify that the
Directors do not enter into contracts
for which they are not authorized to do
so by the Articles of Associations, the
Board and the Statute
2. The auditor should ensure that the
qualification shares are held by the
Directors as laid down by the Articles
of Association
3. The auditor should refer to the Minutes
of the Meeting of Board of Directors if
remuneration hs been paid on the bills
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 242
of their attendance at the Board’s
Meetings
Which of the statements given above is/are
correct?
a. 1 only
b. 2 and 3
c. 2 only
d. 1, 2 and 3
89. Under Section 25 of the Companies Act;
1956 there is a power to dispense with the
word “Limited” in name to certain
association that may be registered as a
company with limited liability. Who has
the power of this dispensation?
a. National Company Law Tribunal
b. Central Government
c. SEBI
d. Registrar of Companies
90. Which one of the following is not a valid
observation with reference to the
declaration or payment of dividend for any
financial year?
a. Depreciation for the current financial
year must be provided
b. Arrears of depreciation must be
provided
c. Losses incurred in previous year (s)
must be set off
d. 10% of the profits must be transferred
to the reserves in all cases
91. The auditor must ensure that the amount of
premium on the issue of shares is not
utilized for
a. issue of bonus shares
b. writing off commission paid on the
issue of shares
c. providing for premium paid on
redemption of preference shares
d. transfer to capital redemption reserve
92. According to the Companies Act, 1956
every registered company shall have to
prepare which of the following accounts
and statements at the end of the financial
year for approval of the shareholders and
submission to the Register of Companies?
a. Profit and Loss Account and Balance
Sheet after making adjustments for
inflation
b. Profit and Loss Account, Balance
Sheet and Funds Flow statement
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 243
c. Profit and Loss Account, Balance
Sheet and Cash Flow statement
d. Profit and Loss Account and Balance
Sheet
93. Under which of the following
circumstances can an auditor give a
qualified report?
1. When the accounts have not been
prepared in accordance with the
provisions of the Companies Act
2. When books of accounts have not been
kept
3. When the financial statements are in
agreement with books of accounts and
returns
4. When the accounts of the company do
not show a true and fair view of the
company as at the end of the financial
year
5. Select the correct answer using the
codes given below
a. 1, 2 and 4
b. 1, 2 and 3
c. 2, 3 and 4
d. 1, 3 and 4
94. The system of internal check ensures that
a. Work is distributed among the
employees according to their merit and
qualifications
b. Work is completed as per the
prescribed time schedule
c. Work performed by one employee is
automatically checked by another
employee
d. Work performed by an employee is
checked by internal audit staff
95. Section 210A concerning the Constitution
of National Advisory Committee on
Accounting Standards by the Central
Government for advice on the formulation
and laying down of accounting policy and
accounting standards for adoption by the
companies or class of companies under the
Act, has been inserted by
a. the Companies (Amendment) Act,
1999 with retrospective effect of
31.10.1998
b. the Companies (Amendment).Act,
1988
c. the Companies (Central Government)
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 244
General Rules and Forms, 1956
d. None of the above
96. Which of the following Is not disqualified
for appointment as auditor of a company?
a. A firm having chartered accountants as
its partners
b. An officer or employee of the
company
c. A person who is a partner or who is in
the employment of an officer or
employee of the company
d. A person who is indebted to the
company for an amount exceeding Rs.
1000 or a guarantor for more than Rs.
1000
97. The auditor is generally expected to carry
out the following in a particular sequence
1. Verification of assets and liabilities
2. Vouching the transactions
3. Checking the valuation of assets and
liabilities
Select the correct sequence using the codes
given below:
a. 2-3-1
b. 1-2-3
c. 2-1-3
d. 3-1-2
98. Match List I (Statements) with List II
(Forms of combination) and select the
correct answer using the codes:
List I
13 of 15
A. A. X Co. Ltd. buys up the Y Co. Ltd.
& shareholders of Y Co. Ltd. get
shares in the X Co. Ltd.
B. X Co. Ltd. and Y Co. Ltd. both join to
form a new company, namely, Z Co.
Ltd. to which they transfer all of their
assets and liabilities; and their
shareholders receive the shares of Z
Co. Ltd.
C. X Co. Ltd. buys 51% of shares in the Y
Co. Ltd.
D. X Co. Ltd. and Y Co. Ltd. have the
same Directors
List II
1. Amalgamation
2. Merger
3. Cartel
4. Holding Company
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 245
5. Community of Interest
Codes;
ABCD
a. 4 5 3 1
b. 2 1 4 5
c. 4 1 3 5
d. 2 5 4 1
99. Which of the following amounts shall be
credited to Investor Education and
Protection Fund, if they remain unpaid/
unclaimed for seven years from the date
they become due?
a. Matured debentures of a company
b. Tax arrears
c. Proceeds of sale of property
d. Provision for doubtful debts
100. Match List I with List II and select the
correct answer using the codes given
below
List I
A. Uncertain liability
B. Expiry of tangible asset
C. Basis for all valuations in the Balance
Sheet
D. Accounting Standard - AS -8
List II
1. Amortization
2. Long term liability
3. Research and development
4. Estimated obligation
5. Conservatism convention
Codes;
ABCD
a. 5 1 2 3
b. 4 3 5 1
c. 5 3 2 1
d. 4 1 5 3
101. Any causal vacancy in the office of a
statutory auditor caused by the resignation
of the auditor shall be filled by the
company
a. At the Board Meeting
b. At the Annual General Meeting
c. By means of a circular resolution
d. At the Statutory Meeting
102. In verification of assets, the duty of the
auditor is
a. to ensure that assets have actually been
acquired
b. to ensure that they are clearly stated in
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 246
the balance sheet
c. to satisfy himself that they are properly
valued
d. to satisfy himself with regard to the
existence, ownership and value of the
assets
103. Consistency with reference to application
of accounting principles refer to the fact
that
a. Companies in the same industry use
identical accounting procedures and
methods
b. Income and assets have not been
overstated
c. Accounting methods and procedures
used have been consistently applied
from year to year
d. All the methods and procedures have
been utilized
104. Making the provision for bad and doubtful
debts in anticipation of actual bad debts is
on the basis of
a. Convention of disclosure
b. Convention of consistency
c. Convention of conservatism
d. Conventions of disclosure and
consistency
105. Following data appear in the books of XY
& Co. as on 31.03.03
Capital account: Rs. 13,00,000
Drawing account: Rs. 12,000
Land & Building account: Rs. 10,00,000
Goodwill account: Rs. 3,50,000
Suspense account (Dr): Rs. 50,000
Loss by theft account: Rs. 20,000
Business loss: Rs. 50,000
Loan given to AB & Co.: Rs. 60,000
What will be the amount of sundry
creditors?
a. Rs. 2,30,000
b. Rs. 1,72,000
c. Rs. 3,42,000
d. Rs. 2,42,000
106. Who among the following is the ‘Officer
who is in default’ within the definition
given under Section 5 of the Companies
Act, 1956?
a. All employees
b. Secretary
c. Contractor who has been assigned to
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 247
complete certain work within
stipulated time
d. Supplier of raw material
107. Under the accrual concept, which one of
the following will not be shown as an
asset/liability in the balance sheet of an
entity?
a. Interest due but not paid
b. Interest due but not received
c. Interest due and paid
d. Interest paid but not due
108. Which of the following is/are the reason(s)
for centralization of authority in an
organization?
1. Specialized skills, talent and
technology are neither affordable nor
practical in multiple locations.
2. Decentralization usually results in an
increase in overhead and staff
3. Recent improvements in
communication technology facilitate
the movement of money, credit
information and data processing from a
single centre of authority
Select the correct answer using the codes
given below
a. 3 only
b. 1 and 2
c. 1 and 3
d. 1, 2 and 3
109. Consider the following statements about
Management by Objectives (MBO)
1. Effective MBO programmes usually
start with the top managers who
determine the organization’s strategy
and set preliminary goals.
2. Employees enjoy wide autonomy in
implementation of plans.
3. Managers and employees periodically
meet to review progress towards the
objectives.
Which of the statements given above is/are
correct?
a. 2 and 3
b. 1 and 3
c. 1 only
d. 1, 2 and 3
110. A particular firm provided the following
data for an accounting year:
Current ratio: 25:1
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 248
Liquid ratio: 1.5:1
Net Working capital: Rs. 6,00,000
Current assets and current liabilities of the
firm are, respectively
a. Rs. 9,00,000 and Rs. 3,00,000
b. Rs. 10,00,000 and Rs. 4,00,000
c. Rs. 8,50,000 and Rs. 2,50,000
d. Rs. 7,50,000 and Rs. 1,50,000
111. Match List I (Motivation Theory) with List
II (Management Expert) and select the
correct answer using the codes given
below
List I
A. Hygiene Theory
B. Theory ‘X’ and Theory ‘Y’
C. Expectancy theory
List II
1. Abraham H. Maslow
2. Victor Vroom
3. Fredrick Hertzberg
4. Douglas McGregor
Codes;
ABC
a. 3 4 2
b. 1 4 2
c. 3 2 4
d. 1 2 4
112. In vouching, an auditor verifies
a. The authority of transactions only
b. The authenticity of transactions only
c. Both the authority and authenticity of
transactions
d. The arithmetical accuracy of the
transactions only
113. When shares are forfeited, the share capital
account is debited by
a. Paid-up amount
b. Called-up amount
c. Nominal value of the shares
d. Market value of the shares
114. Which one of the following reflects the
overall efficiency with which capital is
used?
a. Return on shareholders’ funds
b. Investment turnover ratio
c. Earning per share
d. Operating ratio
115. The following journal entry appears in the
books of X
Co. Ltd. Dr. (Rs.) Cr. (Rs.)
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 249
Bank A/c 96,000
Loss on issue of
debentures A/c
10,000
To 8%
debentures N/c
1,00,000
To premium on
redemption of
debentures A/c
6,000
The debentures have been issued at
a. Discount of 4%
b. Discount of 6%
c. Premium of 6%
d. Discount of 10%
116. A company can pay dividend out of
a. Profits of the company for the year for
which dividends are to be paid
b. Undistributed profits of the previous
financial years
c. Money provided by the Central and
State Governments for the payment of
dividends in pursuance of their
guarantees
d. All of the above three
117. A limited company has to redeem
redeemable preference shares of the value
of Rs. 1,00,000 for which the company has
issued 3000 equity shares of Rs. 10 each at
a premium of 10%. The amount to be
transferred to capital redemption reserve
account will be
a. Rs. 1,00,000
b. Rs. 97,000
c. Rs. 70,000
d. Rs. 67,000
118. To test the liquidity of a concern, which of
the following ratios are useful?
1. Acid test ratio
2. Capital turnover ratio
3. Bad debts to sales ratio
4. Inventory turnover ratio
Select the correct answer using the codes
given below
a. 1 and 3
b. 1 and 4
c. 2 and 4
d. 2 and 3
119. The following figures are taken from a
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 250
Balance:
Sheet Rs.
Equity share capital : 1,10,000
6% Preference share capital : 30,000
General reserve : 50,000
Reserve for contingencies : 20,000
6% Mortgage debentures : 50,000
Sundry creditors : 20,000
Preliminary expenses : 5,000
Prepaidexpensés : 4,000
In this case, the debt equity ratio is
a. 1:2
b. 2:1
c. 24 : 1
d. None of the above
120. Match List I (Type of Audit) with List II
(Feature) and select the correct answer
using the codes given below
List I
A. Continuous audit
B. Internal audit
C. Occasional audit
D. Periodical audit
List II
1. Continuous review of the operations
and records of the business by special
staff
2. Audit which is not statutory
3. Audit convenient and useful specially
in the case of small concerns
4. Audit work carried on almost
simultaneously with the recording of
transactions
Codes;
ABCD
a. 2 1 4 3
b. 4 3 2 1
c. 2 3 4 1
d. 4 1 2 3IAS Prelims Commerce 2005
1. Which one of the following is a contract
for the purchase or sale of securities for
the performance of which no time is
specified, and which is to be performed
immediately or within a reasonable time?
a. Spot delivery contract
b. Ready delivery contract
c. Forward contract
d. Option in securities
2. Match List-I with List-II and select the
correct answer using the codes given
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 251
below the lists
List-I (Types of Mutual Fund)
A. Open-ended mutual fund
B. Interval fund
C. Close—ended mutual fund
D. Balanced fund
List-II (Explanation)
1. They are open for sale or redemption
during pre—determined intervals at
NAV related prices
2. The fund is open for subscription only
during a specified period
3. Provides both growth and regular
income
4. One that is available for subscription
all throughout the year
ABCD
a. 2 1 4 3
b. 4 3 2 1
c. 2 3 4 1
d. 4 1 2 3
3. Following are the information pertaining
to X Company Ltd.
Right to buy one share @ Rs. 17 per share
for every five shares of Rs. 10 each held in
the company. Market value of the shares
on the date of such offer is Rs. 35 per
share.
Which one of the following is the value of
the right?
a. Rs. 8.67
b. Rs. 3.00
c. Rs. 4.50
d. Rs. 13.00
4. Which one of the following statements
regarding forfeiture of shares is not
correct?
a. Forfeited shares may be re-issued at a
discount or at a premium
b. The title of the new purchaser is not
affected by any irregularity in the
forfeiture or sale of the shares
c. Return of allotment of re-issue of
forfeited shares is filed with the
Registrar of Companies
d. Board may. consider the request from
the defaulting ex-shareholder for the
cancellation of forfeiture before the
disposal of forfeited shares
5. For which of the following purposes can
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 252
the share premium of the company be used
in case the company issues share at
premium?
1. For the cost of underwriting and
distributing the share capital.
2. For—the issues of fully paid bonus
shares to the members of the company.
3. For writing off preliminary expenses of
the company. For providing premium
payable on the redemption of any
redeemable preference shares or
debentures of the company.
Select the correct answer using the code
given below
a. 1, 2 and 3
b. 1,2 and 4
c. 1 and 4
d. 2, 3 and 4
6. Which one of the following is correct for
cooperative organizations?
a. There is a cap on the maximum
number of members
b. There is a cap on the dividend payment
c. There are restrictions on their business
growth
d. There is a ceiling on the salaries paid
to employees of cooperative
organizations.
7. Which of the following tate9ents regarding
a private company are correct?
1. A private company can proceed to allot
shares without having to wait for
minimum subscription.
2. There are restrictions on the powers of
Board of Directors of a private
company as to the selling of whole or
part of the undertaking.
3. A private company can keep its affairs
secret.
4. Right of pre-emption does not apply to
a private company.
Select the correct answer using the code
given below:
a. 1, 2, 3 and 4
b. 1, 3 and 4
c. 2 and 3
d. 1, 2 and 4
8. Consider the following statement
A company can be compared with a river
which retains its identity though the parts
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 253
which compose it are constantly changing.
Which one of the following characteristic
of a company is implied from the above
statement?
a. Limited liability
b. Artificial legal person
c. Perpetual succession
d. Separate property
9. Which one of the following describes the
correct effect when a registered
partnership firm is dissolved?
a. All the partners will be relieved from
the debt obligations of the firm
b. The partners cannot start any other
business within one year of dissolution
c. One or two of the old partners can
continue the business of the firm with a
new name
d. The partners will not be entitled to any
personal loans from banks
10. When does a retiring partner of a
partnership firm continue to be liable for
obligations incurred after his retirement?
a. When he does not give public notice
b. When unpaid amount is not transferred
to him
c. When he had left the firm within 3
months of joining it
d. All the above
11. Match List-I with List-II and select the
correct answer using the codes given
below the lists
List-I (Provision of Partnership Act)
A. Interest must be allowed @ 6% p.a.
B. No interest shall be paid
C. No interest shall be charged
D. Must be shared equally by all the
partners unless otherwise agreed
List-II (Matter with Which the Provisions
are Related)
1. Drawings of partners
2. Net loss of the firm for an accounting
year
3. Capital contributed by the partners
4. Loan given by a partner to the firm
Codes;
ABCD
a. 1 3 4 2
b. 4 2 1 3
c. 1 2 4 3
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 254
d. 4 3 1 2
12. What is/are the effect(s) of non registration
of a partnership firm?
1. The partners cannot sue outsiders.
2. Outsiders cannot sue the firm.
3. A partner cannot sue for the
dissolution of the firm.
4. A partner cannot sue the firm or any
other partner of the firm.
Select the correct answer using the code
given below
a. 2, 3 and 4
b. 3 and 4
c. 4 only
d. 1 and 2
13. Consider the following statements:
1. Management, auditor makes the audit
of planning and policies of the
company.
2. Statutory auditor makes the comments
on the financial position statements of
the company.
3. The work of statutory auditor begins
with the end of management auditor’s
work.
4. Statutory auditor comments on the
operational areas of the concern.
Which of the statements given above are
correct?
a. 1 and 2
b. 3 and 4
c. 1, 2 and 3
d. 2, 3 and 4

14. Match List-I with List-Il and select the


correct answer using the codes given
below the lists
List-I (Type of Audit)
A. Management audit
B. Statutory audit
C. Audit of non-Corporate enterprise
D. Internal control and audit
List-II (Function)
1. Report to the shareholders
2. A future oriented, independent and
systematic evaluation of activities at all
levels
3. Both accounting and operational
controls
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 255
4. Voluntary
5. Report to Company Law Board
Codes;
ABCD
a. 2 3 4 1
b. 4 1 5 3
c. 2 1 4 3
d. 4 3 5 1
15. Which one of the following is correct
regarding management audit?
It is a method
a. to evaluate the efficiency of
management at all levels throughout
the organization from the highest to
lower levels
b. to evaluate the efficiency of accounts
departments throughout the
organization from the highest to lower
levels
c. to determine the efficiency of
Management Information System
(MIS)
d. to determine the compliance with
accounting standards by the management
16. Which one of the following documents is
not required for permanent file in audit of
a non-corporate enterprise?
a. Copy of the constitution of the
enterprise
b. Copy of the appointment letter of an
auditor
c. Copy of the registration certificate of
the enterprise
d. Copy of the financial statements of the
enterprise
17. Change of the Registered Office of a
company from one place to another in the
same city required which one of the
following resolution?
a. Board resolution
b. Ordinary resolution
c. Special resolution
d. Special resolution with government
approval
18. Liability of shareholders of a limited
company or of a company limited by
guarantee can be made unlimited only it is
expressly agreed to by which of the
following?
a. A qualified majority
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 256
b. A majority of shareholders
c. Each and every member concerned
d. The Registrar of joint stock companies
19. Match List I (Part and Component of
Computer) with List II (Function and
Utility) and select the correct answer using
the codes given below:
List I
A. Portable Disk
B. RAM
C. Key Board
D. Mouse
List II
1. Selection and movement of files and
objects
2. Data entry
3. Floppy drive
4. Speed
Codes;
ABCD
a. 3 1 2 4
b. 2 4 3 1
c. 3 4 2 1
4 of 16
d. 2 1 3 4
20. What is PERT in management?
a. A refinement of the original Gantt
Charts
b. A refinement of what Dr. Taylor said
c. A refinement of what Alwin Toffler
envisioned as an “Electronic Cottage”
with computer terminals installed at
home
d. A refinement of Critical Path Method
(CPM).
21. Computer system accessible to nonspecialists
to assist in planning and
decision making is called
a. Decision Support System
b. Management Information System
c. Disk Operating System
d. Expert System
22. What is Mimeography?
a. A method of photocopying
b. A method of stencil duplication
c. A process of blue printing
d. A process of digital photography
23. Match List I (Type of Record) with List II
(Example) and select the correct answer
using the codes given below:
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 257
List I
A. Accounting Records
B. Legal Records
C. Correspondence Records
D. Personnel Records
List II
1. Casual leave report
2. Invoice
3. Minutes
4. Copy of letter sending product details
& rates
Codes;
ABCD
a. 2 3 4 1
b. 1 4 3 2
c. 2 4 3 1
d. 1 3 4 2
24. Match List I (1’pe of Report) with List II
(Example) and select the correct answer
using the codes given below:
List I
A. Routing Reports
B. Special Reports
C. Statutory Reports
D. Technical Reports
List II
1. Project Report
2. Market research Report
3. Production Report
4. Auditor’s Report
Codes;
ABCD
a. 3 1 4 2
b. 4 2 3 1
c. 3 2 4 1
d. 4 1 3 2
25. Theory Z refers to which one of the
following?
a. Selected Japanese managerial practices
adapted to the environment of the USA
b. Selected Indian managerial practices
adapted to the environment of the UK
c. Selected Russian managerial practices
adapted to Chinese environment
d. Selected German managerial practices
adapted to Japan’s environment
26. The continuous process of comparing
organizational strategies, products or
processes with those of the best-in-class
organizations is
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 258
a. Quality circle
b. Benchmarking
c. Kaizen
d. TQM
27. Following are the ingredients of
management by exception. What should be
their correct logical sequence?
1. Measurement
2. Observation
3. Projection
4. Comparison
5. Selection
6. Decision making
Select the correct answer using the codes
given below
a. 1—3—5—2—4—6
b. 5—2—6—3—1—4
c. 5—3—6—2—1—4
d. 1—2—5—3—4—6
5 of 16
28. Match List I (Type of Committee) with
List II (Explanation) and select the correct
answer using the codes given below
List I
A. Standing Committee
B. Ad hoc Committee
C. Executive Committee
D. Advisory Committee
List II
1. Authority to take and execute decisions
2. Exists continuously far an indefinite
period of time
3. Authority only to make
recommendations
4. Constituted temporarily for specific
purpose
Codes;
ABCD
a. 4 2 1 3
b. 2 4 3 1
c. 4 2 3 1
d. 2 4 1 3
29. Consider the following steps
1. Assignment of duties
2. Authorization for actions
3. Creation of obligation
4. Determination of results expected.
Select the correct sequence of these
processes of delegation of authority using
the following code
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 259
a. 4—2—l—3
b. 3—1—2—4
c. 4— 1 —2 —3
d. 3—2—1—4
30. Following are the steps in designing an
organization structure:
1. Grouping of activities
2. Delegation of authority
3. Identification of activities
4. Assignment of duties
The correct sequence of the steps is
a. 4—2—3— 1
b. 3—1—4—2
c. 4—1—3—2
d. 3—2—4—1
31. M/s. ABC Ltd. forfeited 20 shares of Rs.
10 each, Rs. 8 called up, on which X had
paid application and allotment money of
Rs. 2 and Rs. 3 respectively. These shares
were re-issued to Y at Rs. 6 each fully
paid. What was the balance in share
forfeiture account before the shares were
re-issued?
a. Rs. 40
b. Rs. 60
c. Rs. 100
d. Rs. 160
32. X Ltd. issued 1,000 9% preference shares
of Rs. 100 each at a premium of 10%,
redeemable at par after 5 years. What is
the cost of preference capital of the
company?
a. 3.5%
b. 6.7%
c. 5.3%
d. 7.6%
33. A firm employs Rs. 10,00,000 as capital.
Investors expect an income of 15%. The
actual profits (likely to be continued) is
Rs. 2,00,000. What will be the value of
Goodwill of the firm according to Super
Profit method if it is to be valued at 3
years purchase?
a. Rs. 50,000
b. Rs. 1,50,000
c. Rs. 2,00,000
d. Rs. 2,15,000
34. Income and Expenditure account of a
college is credited with which of the
following?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 260
1. Tuition fees paid by the students
2. Cost of science laboratory equipments
3. Fines realized by the authority from
students
4. Price of prizes
Select the correct answer using the codes
given below
a. 1 and 2
b. 2 and 3
c. 1 and 3
d. 2 and 4
35. The following information is available
regarding subscription from the members
of X Club during the year 2003-04
Subscription Income : Rs. 28,000
Outstanding subscription at
the end of the year : Rs. 1,160
6 of 16
Outstanding subscription
at the beginning of the year : Rs. 360
Subscription received in
advance : Rs. 640
What is the amount of receipt of the club
from subscription during the year 200.3-
04?
a. Rs. 28,160
b. Rs. 29,000
c. Rs. 27,840
d. Rs. 29,520
36. Consider the following adjusting entries:
1. Outstanding expenses: Expense A/c
Dr To outstanding expense A/c
2. Prepaid expenses: Expense A/c Dr To
prepaid expenses A/c
3. Income earned and not received:
Income A/c Dr To outstanding income
A/c
4. Income received in advance: Income
A/c Dr To prepaid income A/c
Which of the adjusting entries given above
is/are correct?
a. 1 and 4
b. 2 and 3
c. 1 only
d. 1, 2, 3 and.4
37. A steel fabrication firm receives an income
for service rendered by its design engineer
to a friendly party. How should this be
treated in the profit and loss account of the
firm?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 261
a. Should be shown as sales income
b. Should be shown as miscellaneous
income
c. Should be shown as non-operating
income
d. Not an income of the firm
38. The balances in the books of X, a sole
proprietor were:
Opening stock Rs. 17,000; Purchases Rs.
52,000; Wages Rs. 46,500; Fuel Rs.
15,000; Sales Rs. 1,45,000 and Closing
stock on hand Rs. 25,000 whose net
realizable value was Rs. 28,000.
The Gross Profit calculated would be:
a. Rs. 39,500
b. Rs. 42,500
c. Rs. 54,500
d. Rs. 57,000
39. Which one of the following Accounting
Standard is not having the correct title?
a. AS.22 Accounting for taxes on income
b. AS-20 Earning per share
c. AS.24 Accounting for borrowings
d. AS-18 Related party disclosures
40. A sum of Rs. 50,000 was spent by a
factory in overhauling its existing plant
and machinery and it enhanced its working
life by five years. The aforesaid
expenditure is
a. Revenue expenditure
b. Deferred revenue expenditure
c. Capital expenditure
d. Partly capital and partly revenue
expenditure
41. If a radio seller-proprietor buys a radio for
his personal use from out of business
funds, the amount paid for the radio will
be treated as “drawings” of the proprietor
because of the
a. Dual Aspect Concept
b. Going Concern Concept
c. Business Entity Concept
d. Matching Concept
42. Which of the following is not the correct
symptom of over-capitalization?
1. When a company earns less than what
it should have earned as a fair rate of
return on its total capital.
2. When book value of shares is lower
than their real value.
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 262
3. When earnings do not justify the
amount of capital invested.
Select the correct answer using the codes
given below
a. 1 only
b. 2 only
c. 1 and 2
d. 2 and 3
43. Consider the following statements
As per section 46AA of the Companies
(Second Amendment) Act; 2002, sick
industrial company means an industrial
company which has
1. the accumulated losses in any financial
year equal to fifty percent or more of
its average net worth during four years
7 of 16
immediately preceding such financial
year
2. failed to repay its debts within any
three consecutive quarters on demand
made in writing for its repayments. by
a creditor or creditors of such
company.
Which of the statements given above is/are
correct?
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 nor 2
44. Match List I (Accounting Concept) with
List II (Principle involved) and select the
correct answer using the codes given
below:
List I
A. Consistency
B. Comparability
C. Conservatism
D. Disclosure
List II
1. Losses are anticipated and accounted
for in advance but profits are not
accounted for until realized
2. All the relevant financial information
should be summarized and presented in
the accounting statements
3. Accounting procedures in an entity
should be followed uniformly from
period to period
4. Accounting statements of different
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 263
periods of an entity and those of
different entities of a period should be
based on the same accounting
principles and procedures
5. Personal judgment of accountants
should not influence accounting
statements
Codes;
ABCD
a. 4 5 1 3
b. 1 3 2 5
c. 4 3 1 5
d. 1 5 2 3
45. Consider the following statements about
balance sheet of a company
1. It is always prepared from the point of
view of the firm, company or business,
and not from that of its owners,
creditors, directors or employees.
2. The financial relationship of the
business to its owners is shown in the
amount of capital, reserves and
undistributed profits.
3. It always relates to a particular period
of time. Which of the statements given
above is/are correct?
a. 1, 2 and 3
b. 1 and 2
c. 1 only
d. 2 only
46. What would be the amount of sales when
opening stock is Rs. 50,000; purchases Rs.
1,50,000; wages Rs. 20,000; closing stock
Rs. 40,000 and gross profit is 1/7th of
sales ?
a. Rs. 2,00,000
b. Rs. 1,86,669
c. Rs. 1,80,000
d. Rs. 2,10,000
47. Consider the following statements
regarding grey market in the context of
security exchange:
1. It is a market wherein trading in a
security takes place before it is
officially listed.
2. It is legal and a form of private
placement business.
3. Securities are sold through prospectus.
Which of the statements given above is/are
correct?
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 264
a. 1 only
b. 2 and 3
c. 3 only
d. 1, 2 and 3
48. How is a speculator, who buys the shares
of a new company with a view to selling
them at a premium to genuine investors
before allotment, known?
a. As a Stag
b. As a Lame Duck
c. As a Bull
d. As a Bear
49. In India, what is the term used to describe
a company which actually deals with the
corpus of the mutual fund?
a. Sponsor company
8 of 16
b. Trustee company
c. Asset management company
d. Mutual fund company
50. In order to tackle with the grievances of
the investors on priority basis, regulatory
bodies of capital market have categorized
the complaints of the investors in different
types:
1. Type I — Non-receipt of Annual
Report, right forms/interest on delayed
receipt of refund orders/dividend.
2. Type — II Non-receipt of dividend.
3. Type — III Non-receipt of share
certificates/bonus shares.
4. Type — IV Non-receipt of refund
orders/allotment letters/stock invests.
Which of the above is/are trot correctly
matched?
a. 1 only
b. 2 and 3
c. 2 only
d. 1 and 4
51. Which of the following is an important
advantage of vertical combination?
a. It helps in avoiding competition
b. It helps in coordinating the sequential
operations
c. It helps in controlling quality
d. It helps in capturing the market
52. In the context of social responsibility of
business, the enlightened self interest
concept refers to which of the following?
1. Treating natural resources as the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 265
property of future generations.
2. Considering long term survival
interests of business.
3. Contributing to community
development.
4. Enhancing profit prospects of business.
Select the correct answer using the codes
given below
a. 1 and 2
b. 4 only
c. 1, 2 and 3
d. 3 and 4
53. Which one of the following best explains
the term “Duty Draw Back”?
a. Duty free import of raw materials and
refund of excise duty on other
indigenous purchases
b. Refund of excise duty for manufacture
of goods exported out of the country
c. Payment of duties in rupees and not in
foreign currency
d. Refund of customs duty paid on
imports and excise duty on indigenous
purchases
54. Which one of the following is not a feature
of a confirmed letter of credit?
a. The negotiating bank adds its own
confirmation to the credit
b. The negotiating bank entails a definite
commitment on its part to carry out the
provisions of payment
c. The opening and negotiating banks
carry confirmed guarantee for payment
d. The opening bank cannot modify the
letter of credit once it is opened
55. Consider the steps in Risk Management
1. Risk Evaluation
2. Risk Avoidance
3. Risk Identification
4. Risk Elimination
5. Risk Reduction 6. Risk Financing
The correct sequence of these steps are
a. 2—4—5—1—6—3
b. 3—1—2—4—5—6
c. 3—4—2—5—6—1
d. 4—1—2—3—5—6
56. Match List I (Table Containing Forms of
Memorandum of Association) with List II
(Type of Company) and select the correct
answer using the codes given below:
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 266
List I
A. Table B
B. Table C
C. Table D
D. Table E
List II
1. Company limited by guarantee not
having share capital
2. Company limited by guarantee having
a share capital
3. Unlimited liability company
4. Company limited by shares
Codes;
9 of 16
ABCD
a. 4 3 2 1
b. 2 3 4 1
c. 2 1 4 3
d. 4 1 2 3
57. When a statement in lieu of prospectus is
to be filed with the Registrar of
Companies, it must be drafted in
accordance with the particulars set out in
which of the following?
a. Table E
b. Schedule II
c. Schedule HI
d. Rule 4—CCCA
58. Consider the following conditions to be
fulfilled by a company regarding issue of
sweat equity shares
1. The issue of sweat equity shares is
authorized by an ordinary resolution
passed by the company in the general
meeting.
2. Not less than 6 months should have, at
the date of the issue elapsed since the
date on which’ the company was
entitled to commence business.
3. All the limitations, restrictions and
provisions relating to equity shares
shall be applicable to such sweat
equity shares.
Which of the conditions given above is/are
applicable?
a. 1 only
b. 1 and 2
c. 3 only
d. 1, 2 and 3
59. Consider the following cases regarding
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 267
doctrine of indoor management
1. Where the outsider had actual or
constructive notice of the internal
irregularity.
2. Where the outsider had not made
proper enquiries which would have
revealed the irregularities, despite so
suspicious circumstances as to invite
further enquiries.
3. Where the outsider is found to have
relied upon a document which is
forged one, for a forgery is a nullity
4. Where the outsider had relied on a
resolution of a company meeting
which was not properly passed.
Protection under the doctrine of indoor
management cannot be claimed in which
of the above circumstances?
a. 1 and 2
b. 2 and 4
c. 4 only
d. 1, 2 and 3
60. Who among the following is an insider/are
insiders as per provisions of the SEBI
(Insider Trading) Regulations 1992?
1. A broker who trades in the company’s
share.
2. A lender who has provided term loans
to the company.
3. A person who is or was connected with
the company and is expected to have
access to unpublished price— sensitive
information with respect to the
securities of the company.
4. An underwriter who regularly
underwrites the securities of the
company.
Select the correct answer using the code
given below
a. 1 and 2
b. 1, 3 and 4
c. 3 only
d. 1, 2, 3 and 4
IAS Prelims Commerce 2005
61. First Auditors of a company are appointed
by Board of Directors
a. Within gestation period
b. After commencement of the
production
c. Within one month of the date of
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 268
registration of the company
d. Within six months of the date of
registration of the. company
62. Consider the following statements:
The books of accounts and other books
and papers of every company shall be open
to inspection during business hours by the
following:
1. The Registrar of Companies
2. Such officers of the government as
may be authorized by the Central
Government in this behalf.
3. Such officers of the Securities and
Exchange Board of
India as may be authorized by it.
Which of the above is/are correct when
such inspection is made without giving
any previous notice to the company?
a. 1 only
b. 1 and 2
c. 2 and 3
d. 1, 2 and 3
63. Consider the. following statements:
The National Advisory Committee on
Accounting Standards shall consist of
1. One member each to be nominated by
ICAI, ICWAI and ICSI’
2. One representative each of the Central
Government, RBI and Comptroller and
Auditor General of India.
3. A professor of Accountancy, Finance
or Business Management from any
university or a deemed university.
Which of the statements given above is/are
correct?
a. 1 only
b. 1 and 2
c. 1, 2 and 3
d. 2 and 3
64. Section 161(1) of the Companies Act
requires the Annual Report of the
companies to be signed by which of the
following?
a. Auditor and Company Secretary
b. Chairman and Company Secretary
c. Managing Director and Company
Secretary
d. General Manager and Company
Secretary
65. Assertion (A): Improvement in the social
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 269
environment benefits both society and
business.
Reason (R): Society must pay for the
social environment of business through
higher prices.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
66. Assertion (A): The companies prefer to
issue debt securities in their private
placements.
Reason (R): It helps them to go for trading
on equity.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
67. Assertion (A): Internal check is a system
of organizing accounting function whereby
duties of different clerks are arranged in
such a way that work of one person is
automatically checked by another.
Reason (R): Fraud is not possible without
collusion between two or more persons,
and at the same time possibilities of errors
are reduced to a minimum by internal
check.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
68. Assertion (A): Vouching is an inspection
by auditor of documentary evidence
supporting and substantiating transactions
in the books of accounts.
Reason (R): A thorough vouching system
reduces the need for verification of assets
& liabilities.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 270
d. A is false but R is true
69. Assertion (A): Accounting information
refers to only those events which are
concerned with entity.
Reason (R): Accounting information is
presented in the form of financial
statements.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
11 of 16
c. A is true but R is false
d. A is false but R is true
70. Assertion (A): An agreement of a trial
balance is not a conclusive evidence of
accuracy of ledger posting.
Reason (R): A ledger may contain
mistakes relating to errors of commission.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
71. Assertion (A): In a fund flow statement, an
issue of shares for an asset is to be
disclosed on its both sides.
Reason (R): The fund flow statement
discloses what is not disclosed by the
balance sheet.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
72. Assertion (A): Matters which cannot be
decided because of limitation of authority
may be referred to superiors.
Reason (R): Maintenance of intended
delegation requires that decisions without
authority of individual be made by them.
a. Both A and R are individually true and
R is the correct explanation of A
b. Both A and R are individually true but
R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
73. Consider the following statements:
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 271
Redeemable Preference Shares can be
redeemed
1. out of the proceeds of new issue of
shares for the purpose.
2. out of profits available for dividend.
3. out of sale proceeds of the assets.
4. out of the grants received from the
government.
Which of the statements given above are
correct?
a. 1 and 2
b. 3 and 4
c. 1 and 3
d. 1, 2, 3 and 4
74. On 1.4.2002, the position o X Company
Ltd. was as follows
On 31.3.2003, the company’s ship sank
and all records and the cash were sunk.
However, it was revealed that creditors
and debtors were 20% more than at
1.4.2002 position. Stock and Bank was at
the same level. The current ratio -had
always been 2. What was the amount of
cash sunk on 31.3.2003?
a. Rs. 5,000
b. Rs. 15,000
c. Rs. 10,000
d. Rs. 20,000
75. The following is the Balance Sheet of Z
company:
What is the absolute liquidity ratio of the
company?
a. 2 : 1
b. 1.06 : 1
c. 0.92 : 1
d. 1.90 : 1
76. When net profit is Rs 2,25,000; taxes Rs.
25,000; and net worth Rs. 10,00,000, what
is the rate of return on shareholders
equity?
a. 22.5%
b. 20%
c. 25%
d. Cannot be calculated
77. Which one of the following is not
indicated by an increase in the gross profit
ratio as compared to that for the previous
period?
a. An increase in the sale price of the
goods sold without corresponding
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 272
increase in costs
b. Stock omitted from the inventory at the
end of the period
c. Invoices for purchases omitted from
the account
d. Stock in trade at the beginning valued
at a figure lower than it should have
been
78. The following information relates to an
organization:
Equity share capital Rs. 10,00,000;
18% debentures Rs. 8,00,000;
10% preference share capital Rs. 5,00,000;
Current liabilities Rs. 3,00,000;
Loan at 15% (Long term) Rs. 1,40,000;
General Reserve Rs. 8,00,000;
Current Assets Rs. 3,50,000.
What is the Capital gearing ratio of the
organization?
a. 1.6
b. 0.8
c. 1.2
d. 0.5
79. By adopting which of the following
tactics, return on investment of a company
can be enhanced?
1. Postponing the replacement.
2. Valuing closing stock on LIFO basis
during rising prices.
3. Providing less depreciation.
4. Making higher provisions.
Select the correct answer using the code
given below:
a. 1 and 3
b. 2 and 4
c. 1, 3 and 4
d. 1, 2, 3 and 4
80. XYZ Ltd. provides the following
information:
Net Profit Rs. 1,600
Profit on sale of investments Rs. 480
Depreciation Rs. 5,200
Loss on sale of machinery Rs. 200
Increase in stock Rs. 1,000
Increase in creditors Rs. 1,000
What is the amount of funds from
operations of the company?
a. Rs. 7000
b. Rs. 7520
c. Rs. 8520
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 273
d. Rs. 6520
81. In corporate sector, the expenses on
account of social obligation are
a. Compulsory
b. Legitimate
c. Optional
d. None of the above
82. Consider the following functions
1. Compare the lists of debtors and
creditors.
2. Check the total of cash book.
3. Ensure that no entry remained
unspotted.
4. Check the trial balance.
What is the correct balance of these
functions to be performed by an auditor to
locate errors?
a. 4—2—1—3
b. 1—3—4—2
c. 4—3—1—2
d. 1—2—4—3
83. Which one of the following is not an
advantage of Interim Audit?
a. Audit staff will prepare notes when
they finish the interim audit
b. The final audit can be completed soon
c. It is good where publication of figures
is necessary
d. There is moral check on the staff
84. Which one of the following is applicable
to vouching and Post audit?
a. Procedural tests are applied
b. Important items from the balance sheet
are taken
c. Examination of profit & loss account,
and balance sheet for present and past
years
d. Investigation into the items of nonrecurring
nature
85. Which one of the following statements is
correct?
13 of 16
While conducting audit, the auditor should
ensure that the stock is valued at
a. cost price
b. market price
c. cost or market price whichever is
lower
d. cost or market price whichever is
higher
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 274
86. Match List I (Matter for Audit
Examination) with List II (Audit
Technique Adopted) and select the correct
answer using the codes given below
List I
A. Cash payments
B. Plant and machinery
C. Bank O.D. balance
D. Disagreement between the bank
balance shown by cash book and bank
pass book
List II
1. Direct confirmation
2. Physical verification
3. Vouching
4. Reconciliation review
5. Test checking
Codes;
ABCD
a. 3 1 2 4
b. 4 2 1 5
c. 3 2 1 4
d. 4 1 2 5
87. Consider the following statements
“Teaming and lapping” method of fraud is
committed by
1. Concealment of a shortage by delaying
the recording of cash receipts.
2. When a cheque is received, it is not
credited to customers but
misappropriated.
3. When another customer sends a
cheque, it is credited to first customer’s
account.
4. inflating the payment vouchers’
Which of the statements given above are
correct?
a. 1 and 4
b. 1, 2 and 3
c. 2 and 4
d. 3 and 4
88. The steps used to derive the deduction
approach in accounting are as under
1. Developing the techniques of
accounting.
2. Selecting the postulates — the basic
accounting propositions or premises.
3. Specifying the objectives of financial
statements.
4. Deriving the principles of accounting.
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 275
Which one of the following is the correct
sequence of the above steps?
a. 4 —1—3—2
b. 3—2—4—1
c. 4—2—3—1
d. 3—1—4—2
89. Consider the following statements related
to non— corporate audit
1. The auditor is to ascertain the nature of
revenue expenses.
2. The auditor is to ascertain the
weakness of internal control system.
3. The auditor is not to ascertain the type
of internal control system applicable
for sensitive items in organization.
4. The auditor is not to ascertain the
appropriateness of books of accounts.
Which of the statements given above are
correct?
a. 1 and 2
b. 1, 2 and 3
c. 3 and 4
d. 1, 2 and 4
90. To whom, is the auditor’s report pursuant
to a special audit of a company furnished?
a. Shareholders of the company
b. Board of directors of the company
c. Central Government
d. Concerned State Government(s)
91. Which one of the following is not a
specific duty of an Internal Auditor?
a. Examination of organizational
structure
b. Assessment of plans and targets
c. Testing the adequacy of internal,
control system
d. Carrying out investigations, suo moto
92. What do Testing and Test checking in
relation to auditing mean?
a. To select and examine a representative
sample from a large number of similar
items
b. To select and examine total universe
from a large number of similar items
c. To select and examine a representative
sample even when discrepancies are
found
d. To select and examine a representative
small item from among a small
universe
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 276
93. Match List I (System) with List II (Event)
and select the correct answer using the
codes given below:
List I
A. Procedural Test
B. Stratified Random Sampling
C. Substantive Test
D. Depth Test
List II
1. PopuIatio is divided into two or more
than two groups
2. Verification of procedures and their
implementation
3. Tracing through the system all aspects
of a transaction
4. Obtaining an evidence as to the
completeness and accuracy of data
Codes;
ABCD
a. 2 1 4 3
b. 4 3 2 1
c. 2 3 4 1
d. 4 1 2 3
94. While evaluating the internal control
system which one of the following stages
is not required?
a. Ascertaining the system
b. Evaluating the system
c. Formulating the internal control
schemes
d. Formulating the inter control
questionnaire
95. Match List I (Function) with List II (Type)
and select the correct answer using the
codes given below:
List I
A. Audit work is carried on almost
simultaneously with the recording of
transactions
B. Auditor starts his work when the final
accounts have been prepared
C. Audit conducted in between two
annual audits
D. Some of the books and records of the
whole period or specific period are
audited
List II
1. Balance Sheet Audit
2. Continuous Audit
3. Interim Audit
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 277
4. Partial Audit
Codes;
ABCD
a. 2 1 3 4
b. 4 1 3 2
c. 2 3 1 4
d. 4 3 1 2
96. While auditing, the auditor finds a balance
of Rs. 10,000 in Goodwill account and
ascertains that the amount has not been
written off for a long period. What may be
the course of action for the auditor?
a. He may advise the concern to write off
the goodwill
b. He may insist the: concern to write off
the goodwill in the same year
c. He may recommend the concern to
write off goodwill over a period of 5
years
d. He may allow goodwill to appear
forever
97. What does third party confirmation in
auditing mean?
a. Confirmation of balances of sundry
debtors or creditors
b. Confirmation of bank balances
c. Confirmation of contingent Liabilities
d. Confirmation of security deposits
98. Working papers should not record
a. The audit plan
b. The nature, timing and extent of audit
procedures performed
c. The conclusions drawn from the
evidence obtained
d. The audit programmes
99. Which one of the following is not the
primary purpose of audit working papers?
a. Basis for planning an audit
b. Record of the evidence accumulated
and results of the tests
c. Basis for preparing tax return and
filings with SEBI
d. Data for determining the proper type of
audit report
100. Audit notebook is a
a. Personal notebook of an auditor
b. Record of work performed by an
auditor
c. Record of important points and
enquiries which an auditor has to refer
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 278
to his clients
d. Record of mistakes and errors detected
during the course of auditing accounts
books
101. A file which contains rules governing the
organization under audit is known as
a. Current file
b. Permanent file
c. Routine file
d. Precedence file
102. Which one of the following statements is
correct?
Civil liability of an auditor implies liability
for
a. misappropriation of cash
b. misappropriation of goods
c. fraud
d. misfeasance
103. Any organization that employs a multiple
command structure but also related
support. mechanisms and an associated
Organizational culture and behaviour
pattern, is known as
a. Project organization
b. Tall structure
c. Matrix organization
d. Flat structure

104. A process of combining a series of tasks


into a new, broader job that provides the
worker with greater work variety and a
greater sense of responsibility is known as
a. Job enlargement
b. Job enrichment
c. Job analysis
d. Job simplification
105. The strategic approach to total
compensation involved splitting the total
compensation. into three parts as under
1. Variable pay
2. Indirect pay
3. Base pay
Which of the above components is/are
linked to the organization’s success?
Select the correct answer using the codes
given below:
a. 1 only
b. 1 and 2
c. 1, 2 and 3
d. 2 and 3
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 279
106. When the output of one depart nit becomes
the input for the other department, the
relationship between the two departments
is called
a. Pooled interdependence
b. Reciprocal interdependence
c. Sequential interdependence
d. Mutual interdependence
107. Scalar principle in management is also
known as
a. Unity. of command
b. Chain of command
c. Management by exception
d. Esprit de corps
108. Which one of the following defines coordination?
a. Actuating force which inspires a
person to put his best for the
fulfillment of a task
b. Orderly arrangement of group effort to
provide unity of action in the pursuit of
a common goal
c. Process of transmitting information
from one person to another or from one
unit to another
d. Process of determining what is to be
accomplished and what has been
accomplished
109. The formal procedure for obtaining
consensus of a number of expert through a
series of questionnaires is
a. Delphi technique
b. Brainstorming
c. Nominal group technique
d. Synectics
110. In Vroom’s theory, motivation results
from
a. Valence × Expectancy
b. Valence + Expectancy
c. Valence — Expectancy
d. Valence/Expectancy
111. Which of the following motivational
theories states .that the average human
being avoids responsibility and needs to be
controlled and directed by his superiors?
a. Maslow’s Theory
b. Theory X
c. Theory Y
d. Herzberg’s Theory
112. Communication between departments of
an organization that generally follows the
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 280
work flow rather, than the chain of
command is termed as.
a. Informal communication
b. Grapevine chains
c. Lateral communication
d. Vertical communication
113. Which one of the following is not related
to the trait theory of leadership?
a. Physical factors such as height
b. Intelligence and extroversion
c. Self confidence and ambition
d. Training and experience of employees
114. Match List I (Likert’s Management
System) with List II (Managerial Grid) and
select the correct answer using the codes
given below:
List I
A. High consideration and low structure
B. Low structure and low consideration
C. High structure and high consideration
D. High structure and low consideration
List II
1. Team
2. Task
3. Impoverished
4. Country club
Codes;
ABCD
a. 4 2 1 3
b. 1 3 4 2
c. 4 3 1 2
d. 1 2 4 3
115. Leaders who guide their followers in the
direction of established goals by clarifying
role and task requirements are known as
a. Transactional. leaders
b. Transformational leaders
c. Charismatic leaders
d. Autocratic leaders
116. In Taylor’s functional organization, what
does the gangboss perform?
a. He inspects the quality of work done
b. He issues instructions to workers
c. He sets up tools and machines for the
workers
d. He compiles cost of production
117. Broad organizational goals, based on
planning premises, which justifies an
organization’s existence, is called
a. Vision statement
KAVITHA TUTORIALS, TIRUVURU[Type text] Page 281
b. Strategic plan
c. Operational Plan
d. Mission statement
118. The plans that establish a required method
of handling future activities are called
a. Programs
b. Procedures
c. Objectives
d. Mission
119. Insurance to cover risks arising out of
professional negligence is known as
a. Business insurance
b. Professional insurance
c. Liability insurance
d. Risk insurance
120. Risk of loss against strikes and riots is
covered in which of the following fire
insurance policies?
a. Comprehensive
b. Floating
c. Average
d. Denary

KAVITHA TUTORIALS, TIRUVURU[Type text] Page 282