Model Question Paper

Subject Code: BCA4040

Subject Name: PRINCIPLES OF FINANCIAL ACCOUNTING AND
MANAGEMENT
Credits: 4

Marks: 140

Part A: (Descriptive type Questions. Attempt any 4 questions. Each

question carries 10 marks)
[4 x 10 = 40 Marks]
1. Define Accounting. Briefly explain the Entity Concept and Money Measurement
Concept of accounting.
2. What is rectification of errors? List and explain the stages where the errors are deducted
for rectification.
3. Explain the various steps in financial planning
4. What is inventory management and explain the following
a.

Economic Order Quantity

b.

Reorder Point

5. Explain the different steps involved in preparation of Fund Flow Statements.

6. What is cost? Discuss the factors involved in estimating the cost.

Part B (One mark questions) [ 50 x1 = 50 Marks]

1. An entity that has neither the intention nor the necessity of the liquidation or of curtailing
materially the scale of the operations: a. The cost concept
b. The Going Concern concept 3
c. The accrual concept
d. The periodicity concept

2. Expenses are recognized by following the:

a.

Matching principles

b.

Accrual concept

c.

Cost concept

d.

Periodicity Concept

3. If furniture is purchased in cash, the effect is .

a.

Increase in asset

b.

Increase in one asset and decrease in another asset

c.

Increase in one asset and decrease in liability

d.

Increase in current liability

4. Purchased stationery worth Rs. 2500. The transaction results in.

a.

Increase in expenses and no effect in asset

b.

Increase in expenses and decrease in asset

c.

Increase in expenses and increase in liability

d.

Increase in expenses and decrease in liability

5. Two control amounts are maintained in the general ledger.

a.

Debtors & creditors account

b.

Debtors & general ledger

c.

Creditors & general ledger

d.

Debtors & cash ledger

6. To close 'Rent Received Account' at the end of the year, what closing entry is drawn in Journal
proper?
a.

Rent Received account

Dr

To P & L account
b.

P & L Account

Dr

To Rent Received Account

c.

Rent Received Account

Dr

To Total rent account

d.

Trading Account

Dr

To Rent Received account

7. Subsidiary books are also books of original entry because .
a.

They contain recorded of transaction

b.

They contain original record of transaction

c.

They contain non-business transaction

d.

They contain record of subsidiary transaction

8. Sales made to John Rs.5120 is wrongly taken as Rs.1520.What rectification entry is passed?
a.

John account

Dr 5,120

To Sales account
b.

Sales account

5,120

Dr 1,520

To John account
c.

John account

Dr 3,600

To Sales account
d.

Sales account

1,520

3,600

Dr 3,600

To John account

3,600

9. Why is transferring entry needed?

a.

To transfer certain minor accounts to a related major head of account.

b.

To transfer one account to a related account

c.

To transfer one entry to another book

d.

To transfer an entry to next accounting year.

10. Weath maximization is possible only when an organizationvalue of share a. Increases

b. Decreases
c. Normalises
d. None
11. Wealth maximization to based on.
a.

Cash flow

b.

Accounting profit

c.

Fund flow

d.

None

12. Long term investments should be normally created out of

a.

Short term basis

b.

Medium term basis

c.

Long term basis

d.

None

13. Capitalization refers to the composition of .. funds

a.

Short term

b.

Long term

c.

Mid term

d.

None

14. Overcapitalization refers to

a.

True value of assets exceeds total capital

b.

True value equals total capital

c.

Total capital exceeds true value of assets

d.

Total capital equals true value

15. Under capitalised is identified when

a.

Actual is less than proper capitalization

b.

Actual is greater than proper capitalization

c.

Proper capitalization is less than actual

d.

None

16. Positive net working capital indicate the use of finance

a.

Immediate

b.

Concurrent

c.

Spontaneous

d.

None

17. Temporary working capital is also known as working capital a. Variable

b. Nominal
c. Serial
d. Social
18. In spontaneous finance , reduction in. is noticed
a.

Fixed assets

b.

Current assets

c.

Working assets

d.

Idle assets

19. Cash conversion cycle show the .interval over which non-spontaneous sources of
working capital must be obtained a. Space b, Lunch c. Sales
d. Time
20. Average inventory is obtained as ... stock

a.

Opening + closing

b.

Opening / closing

c.

Opening x closing

d.

Opening closing / 2

21. Current ratio deals with

a.

Short-term obligation

b.

Long-term obligation

c.

Mid-term obligation

d.

Mutual obligation

22. Current ratio is

a.

current assets current liability

b.

current assets + current liability

c.

current assets * current liability

d.

current asset / current liabilities

23. Acid test ratio excludes

a.

Capital

b.

Asset

c.

Liability

d.

Inventory

24. Capital structure affects a firm's

a.

Income.

b.

Value

c.

Profit

d.

Saving

25. Stock turn over ratio evaluation the efficiency to manage

a.

Debt

b.

Stock

c.

Cash

d.

Current asset

26. Debtors are include in

a.

Financial account

b.

Current account

c.

Cost account

d.

Management account

27. DTO involves in debt collection of

a.

Velocity

b.

Veracity of

c.

Capacity

d.

None

28. Decrease in WC will be the result of decrease in

a.

CL

b.

FA

c.

FL

d.

CA

29. Changes in CL are _____________ correlated to the changes in WC

a.

Diagonally

b.

Inversely

c.

Directly

d.

Proportionally

30. Transactions that increase the working capital are

a.

Sources of funds

b.

Application of funds

c.

Use of funds

d.

Usage of funds

.
.
.
.
.
.(One mark question continued till 50)

Part C (Two mark questions) [ 25x 2= 50 Marks]

1. The concept tells that to recognize revenue it has to be realized. It does not demand that the
revenue has to be received in cash. a. Concept of Prudence
b. The realization concept
c. The matching concept
d. Accrual concept
2. The concept of recording assets and liabilities at historical cost is known as a. Cost Concept
b. Going concern concept
c. Money measurement concept
d. Accrual concept
3. If liabilities to outsiders are more than assets of a business, how do you account for owner's
equity?
a. Owner's equity shows nil balance
b. Owner's equity does not appear in the balance sheet
c. It shows excess of loss, having eaten away capital and is shown on asset side
d. Owner's equity is not there and so business is closed
4. The left hand side of the cash book shows.
a. Cash & bank disbursement
b. Cash & bank disbursement & discounts received
c. Cash & bank receipt
d.Cash & bank receipts & discount allowed.
5. Business cash is withdrawn by proprietor for personal use. How does this affect accounting
equation?
a. Cash A/c on asset side and capital A./c on liabilities side are reduced by the same amount
b. Cash account is reduced and drawings account is increased
c. Cash account is not affected at all

d. Owner's account is increased and cash A/c balance is reduced

6. John is a creditor to whom Rs 5000 is due, If Rs 3000/- is paid to him, what entry do you make
a. Creditor are Rs 3000
To cash a/c 3000
b. John a/c Dr 5000
To cash a/c 3000
c. cash a/c Dr 3000
To john 3000
d. John a/c Dr 3000
To cash a/c 3000
7. If goods are bought from sundar and co. for Rs 1000 for cash what entry is recorded a. Sundar
and co a/c
To purchase are
b. Purchase are Dr
To Sundar and co are
c. Sunder a/c Dr
To goods are
d. Goods a/c Dr
To cash a/c
8. A trial balance will not reveal the following error.
a. A credit sale of Rs.700 to Uday is debited to Uday account only.
b. A credit sale of Rs. 700 made to Uday, posted as debit in the sale account as Rs.700 and
credit Uday account Rs.70
c. A cash sale of Rs. 1000, posted as credit sale of Rs. 1000 and debited Cash account by
Rs. 100
d. A cash sale of Rs100 posted to the credit sales account only.
9. Identify in the following, where the error of duplication is committed.
a. Radheshyam a/c is debited by Rs. 672 instead of 762
b. Manorama a/c is credited by Rs. 6,770 instead of crediting Manojrama a/c.
c. Kumar a/c shows Rs.574 debited twice for the same transaction
d. Tamal Kanti Roy's is debited by Rs. 17,000 without any corresponding credit entry to any
account

10. Financial management is concerned with procurement and effective utilization of funds for the
benefit of the: a. Employees
b. Stakeholders
c. Promoters
d. Employees and Stakeholders
11. To establish any business the two main sources of funds are debt and equity. To determine
the propotion of debt and equity we formulate; a. Economic plan
b. Financing plan
c. Budget plan
d. Business goal, mission and vision
12. The cardinal rule of efficient financial management is:
a. Profit maximization
b. Shareholder's value maximization
c. Creating real assets
d. Both A and B
13. Through financial planning.. of asset is enhanced
a. Selectivity
b. Capacity
c. Normality
d. Productivity
14. Short term and long term objectives are needed for to operate in ..environ a. Dynamite
b. Dynamic
c. Dynasty.
d. None
15. Working Capital is the result of
a. Current assets current liabilities
b. Current assets + current liabilities
c. Current assets / current liabilities
d. Current assets * current liabilities
16. Acid test ratio is
a. Current assets stock / current liabilities
b. Current assets / current liabilities

c. Current assets + stock / current liabilities

d. None
17. High debt ratio indicates
a. Too much of equity
b. Too much of debt
c. Too much of cash
d. Too much of risk
18. Redeemable preference shares are taken as debt of
a. Long term
b. Short term
c. Medium
d. None
19. Lower debt equity ratio indicates
a. Comfort zone
b. Conflict zone
c. Complimentary zone
d. Confusion zone
20. Excess of current assets over current liabilities is known as
a. Positive WC
b. Negative WC
c. WC
d. None

.
.
.
.
.( Two marks question continued till 25)

Answer Keys
Part - B
Q. No.

Ans. Key

Part - C

Q. No.

Ans. Key

Q. No.

Ans. Key

21

22

23

24

25

26

27

28

29

10

30

10

11

31

11

12

32

12

13

33

13

14

34

14

15

35

15

16

36

16

17

37

17

18

38

18

19

39

19

20

40

20