IC 46 - GENERAL INSURANCE

ACCOUNTS EXAM
EXAM
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

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 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

LAST DAY REVISION TEST 1

Question 1 As per Companies Act 2013, for existing companies, the books of account must be
preserved for a minimum period of ______ .
(a) 3 years
(b) 5 years
(c) 7 years
(d) 8 years
(e) 10 years

Correct Answer 8 years

Question 2 The amount of liability the ceding company (primary insurer) keeps for its
account on a risk is known as ____ .
(a) Retrocession
(b) Retention
(c) Cession
(d) Brokerage
(e) None of the above

Correct Answer Retention

 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 3 Reinsurers may reinsure some of the loss exposures they assume under
reinsurance contracts. Such a transaction is known as _____ .
(a) Pool arrangements
(b) Cession
(c) Retrocession
(d) Reinsurance Portfolio
(e) None of the above

Correct Answer Retrocession

Question 4 When the taxable income is more than the accounting income, it gives rise to
_____ .
(a) Extraordinary income
(b) Current tax
(c) Future tax
(d) Deferred tax asset
(e) Deferred tax liability

Correct Answer Deferred tax asset

 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 5 Which of the following is a CURRENT ASSET which is to be included in the current
assets section of a company’s balance sheet ?
(a) Loans and advances to related parties
(b) Non-current investments
(c) Current investments
(d) Inventories
(e) Deferred tax assets

Correct Answer Current investments

Answer In accounting, a current asset/ investments is any asset which can reasonably be
Explanation expected to be sold, consumed, or exhausted through the normal operations of a
business within the current fiscal year or operating cycle. Long term investments
are those investments which are held for more than one year from the date of
their acquisition and current investments are readily realisable & intended to be
held for not more than a year, it shall be included in the current assets section of
a company’s balance sheet. This follows the AS 13 requirements.

Question 6 Following is the data of XYZ General Insurance Co. Ltd. for the year 2016-17:

1. Gross direct premium income Rs 115 crore 2. Premium on Reinsurance

Accepted Rs 42 crore 3. Premium on Reinsurance Ceded Rs 53 crore 4. Net
premium for 2015-16 Rs 92 crore What is the Net Premium for 2016-17 ?

(a) Rs. 104 crores

(b) Rs. 101 crores
(c) Rs. 109 crores
(d) Rs. 89 crores
(e) Rs. 116 crores

Correct Answer Rs. 104 crores

Answer Net premium = Gross direct premium + Premium on Reinsurance Accepted -
Explanation Premium on Reinsurance Ceded

115 + 42 – 53 = 104

Answer: Net Premium for 2016-17 is Rs. 104 crores.

 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 7 In case of the whole or an agreed portion of the issue is not subscribed by the
public, and then the underwriters will themselves take up the shares or
debentures in lieu of a commission. This is known as ______ .
(a) Guarantee
(b) Agreement
(c) Underwriting
(d) Memorandum of Understanding
(e) Debt trap

Correct Answer Underwriting

Question 8 Which event does not require a special resolution in general meeting ?
(a) For issue of shares under the employees stock option scheme
(b) For buyback of 25% of the total paid up equity share capital
(c) For buyback of less than 10% percent of the total paid up equity share capital
Issue of bonus shares
(d) Providing managerial remuneration as per schedule XIII

Correct Answer For buyback of less than 10% percent of the total paid up equity share capital
Issue of bonus shares
Answer Sec. 68 of the Act provides that no company shall purchase its own share or other
Explanation specified securities unless a special resolution has been passed at a general
meeting authorizing the buy-back. This is not applicable in case where the buy-
back is 10% or less of the total paid-up equity capital and free reserves of the
company.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 9 Which of these options do NOT fall in the scope of AS 28 impairment of assets ?
1. Deferred tax assets 2. Financial assets 3. Impairment of inventories
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 1 and 2
(e) Both 2 and 3

Correct Answer Both 1 and 2

Answer As 28 prescribes the procedure of accounting for impairment of all assets, other
Explanation than Financial assets and Deferred tax assets.

Question 10 Which reserve is created by the insurance companies to meet the claims which
arise when the policies mature in the subsequent years ?
(a) Premium Reserve
(b) Capital Reserve
(c) Technical Reserve
(d) Reserve for bad and doubtful debts
(e) Outstanding Reserve

Correct Answer Technical Reserve

Answer Most of the general insurance policies are annual policies issued throughout the
Explanation year. The reserve created for such policies that extend beyond the reporting date
into the following years during which the coverage of the risk continuous, is
called Technical reserve. Or the reserve created to meet the claims which arise
when the policies mature in the subsequent years, is called Technical reserve.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 11 When the Government Securities are sold from an investment portfolio, the
profit or loss is calculated on _______ .
(a) FIFO - First In First Out basis
(b) LIFO - Last In First Out basis
(c) Percentage basis
(d) Weighted Average Basis
(e) Sharpe Basis

Correct Answer FIFO - First In First Out basis

Question 12 As per the Companies Act 2013, the ______ can sign the financial statements.
(a) Managing director
(b) Chairperson authorized by the board
(c) Company secretary
(d) Only 1 and 2
(e) All 1, 2 and 3

Correct Answer All 1, 2 and 3

Answer Under Companies Act 2013. all of the above can sign the financial statement of
Explanation the company whenever they are appointed. However, in case of one Person
Company, it can be signed only by one director.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 13 Comment on the statement - The Board of directors of a company can declare
interim dividend.
(a) Its correct
(b) Its wrong
(c) Its partially wrong
(d) The shareholders declare the interim dividend
(e) Only on the approval of 100% shareholders of the company, the interim dividend
can be declared

Correct Answer Its partially wrong

Answer The interim dividend needs approval of members at the general meeting for
Explanation Interim dividend and also in the director’s report for the approval of members at
the forthcoming AGM. 100% approval of shareholders is not required.

Question 14 ________ is / are a part of the financial statements.

(a) Journal
(b) Balance sheet
(c) Profit and loss account
(d) Both 1 and 2
(e) Both 2 and 3

Correct Answer Both 2 and 3

Answer Financial statements are the basic documents through with financial information
Explanation are communicated to the stakeholders. The financial statement generally
includes Balance sheet and Profit and loss account along with notes to accounts.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 15 A cheque which has been deposited in the bank but the bank does not honor it,
such a cheque is known as _______ .
(a) Cancelled cheque
(b) Unpaid cheque
(c) Dishonored cheque
(d) Post-dated cheque
(e) Pre-dated cheque

Correct Answer Dishonored cheque

Question 16 How is the premium income is recognized? ( As per the IRDAI (Preparation of
Financial Statements and Auditor’s Report of Insurance Companies) Regulations,
2002 )
(a) When the insured pays it
(b) When it is earned
(c) Period of risk
(d) Over the contract period or the period of risk, whichever is appropriate
(e) Over the contract period

Correct Answer Over the contract period or the period of risk, whichever is appropriate
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 17 The basis of measurement of equity securities and derivative instruments that
are traded in active markets at each balance sheet date, for General Insurance
companies, is at ______ .
(a) Present value
(b) Fair value
(c) Value in use
(d) Historical cost
(e) Amortized cost

Correct Answer Fair value

Answer Equity securities and derivative instruments that are traded in active markets
Explanation shall be measured at fair value at the balance sheet date. Fair value would be the
lowest of the last quoted price on the stock exchange.

Question 18 As per AS 19 Accounting for lease, which are the two broad classifications of
leases ?
1. Capital lease 2. Investment lease 3. Finance lease 4. Operating lease
(a) 1 and 2
(b) 2 and 3
(c) 3 and 4
(d) 1 and 4
(e) 2 and 4

Correct Answer 3 and 4

Answer As per AS 19 ‘Accounting for lease’, leases are broadly classified into two types
Explanation i.e. 1) Finance lease and 2) Operating lease. A finance lease transfers substantially
all risks & rewards incident to ownership against operating lease where the
above two elements are basically absent.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 19 How is depreciation charged on revalued figure of any asset ?

(a) With Prospective effect
(b) With Retrospective effect
(c) With Current effect
(d) Both 1 and 2
(e) All 1, 2 and 3

Correct Answer With Prospective effect

Answer As per AS 6, for any revalued figure of an asset, the depreciation is charged with
Explanation prospective effect.

Question 20 A Directors Report will have to show comparative information with respect to
_____ .
(a) The Net Premium Earned
(b) The Net premium and percentage of growth over previous year
(c) The increase in Unexpired Risks Reserve and percentage to net premium
(d) Both 1 and 2
(e) All 1, 2 and 3

Correct Answer All 1, 2 and 3

Answer As per the Companies Act, a Directors Report should disclose comparative
Explanation information with regards to all of the above i.e. Net premium and percentage of
growth over previous year, Increased in Unexpired Risks Reserve and percentage
to net premium and Net Premium Earned.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 21 ________ recommends the ‘Indian Accounting Standards' to the Central

Government.
(a) IRDA
(b) National Advisory Board
(c) ICAI (Institute of Chartered Accountants of India)
(d) Institute of Companies Secretaries of India
(e) Institute of Costs and Works Accountants of India

Correct Answer ICAI (Institute of Chartered Accountants of India)

Answer Indian accounting standards (India-AS) are set of accounting standards which are
Explanation formulated by ICAI (Institute of Chartered Accountants of India). There are 39
Ind-AS which are notified by MCA.

Question 22 What is the purpose of the procedure wherein the auditor checks if all the claims
have been recorded in the books of account and none of the claims have been
kept outside the books for any reason whatsoever ?
1. It is to verify completeness of liability account
2. It is to verify classification and accounting under appropriate headings in the FS
3. It is to verify accuracy of expenses
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 1 and 2
(e) All 1, 2 and 3

Correct Answer All 1, 2 and 3

 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 23 Which of the following entries may not appear in the bank statement even
though it may have been recorded in Cash Book ?
1. Cheques which have been issued and presented
2. Cheques which have been issued but not presented
3. Bank commission
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 1 and 3
(e) Both 2 and 3

Correct Answer Only 2

Answer The difference between the cash book and pass book i.e. transaction may have
Explanation been recorded in the Cash Book and fails to appear in the bank statement, may
be numerous. One of them is cheques issued but not presented. The cash book is
credited on presentation of a cheque but the no entry is passed by the bank until
the payment of the cheque is made by the issuing bank.

Question 24 Which are the conditions which need to be satisfied to make a Bonus Issue ? ( As
per SEBI rules )
1. A bonus issue can be out of Capital Redemption Reserve
2. There should no issue within 12 months of public issue
3. A bonus issue can be made in lieu of dividend
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 1 and 2
(e) Both 2 and 3

Correct Answer Both 1 and 2

Answer Sec. 63 of the Companies Act 2013 provides that fully paid-up bonus shares can
Explanation be issued to the members out of capital redemption reserve and no issue can be
made within 12 months of public issue.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 25 Consider the following data :

Gross Direct Premium - Rs 900000, Shareholders fund - Rs 888000, Net premium -
Rs. 624000, Management Expenses - Rs 84,000, Commission - Rs 27000.
Calculate the Net Commission ratio.
(a) 6.77%
(b) 5.10%
(c) 4.32%
(d) 3.85%
(e) 2.09%

Correct Answer 4.32%

Answer Net commission ratio is calculated by the formula i.e. Commission / Net Premium
Explanation X 100.

Therefore 27000 / 624000 X 100 = 4.32% is the net commission ratio.

Question 26 Megha is interested in choosing a method of depreciation in which the amount of

depreciation charged decreases every year. Which is the right method for this ?
(a) Straight line method
(b) Revaluation method
(c) Reducing balance method
(d) Both 2 and 3
(e) All 1, 2 and 3

Correct Answer Reducing balance method

Answer The amount of depreciation goes on decreasing every year under the reducing
Explanation balance method. It is also known as diminishing balance method. It is more
equitable than straight line method but is most suitable for assets like electronic
equipment’s which are considered as items of exhausting nature & are generally
costly.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 27 Reserve for unexpired risks has to be created in respect of fire and miscellaneous
business at ___ % ( As per Insurance Act 1938 )
(a) 10%
(b) 25%
(c) 37.50%
(d) 50%
(e) 67.50%

Correct Answer 50%

Question 28 If a fixed asset is acquired in exchange for another asset than the cost of the asset
acquired is recorded at which value ?
1. The fair value of asset given up 2. The carrying value of asset given up
3. The fair value of asset acquired
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 1 and 2
(e) Both 2 and 3

Correct Answer Only 1

Answer When a fixed asset is acquired in exchange or in part exchange for another asset
Explanation the cost of the asset acquired should be recorded at Fair value of asset given up
or the acquisition cost whichever is more.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 29 A difference in the balance as per pass book and as per cash book CANNOT be
caused by _______ .
1. Cheques which have been issued but are not presented for payment
2. Cheques which have been deposited and cleared
3. Errors in Cash Book
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 1 and 2
(e) Both 2 and 3

Correct Answer Only 2

Answer When a cheque is deposited in the bank & it is cleared, this would not be the
Explanation causes for difference in balance as per pass book and as per cash book. Under this
circumstance, the balance between pass book and cash book would always
match.

Question 30 Which entry has to be passed for this transaction - Returned goods to the supplier
and received a cheque for refund.
(a) Dr Bank account Cr Purchase return a/c
(b) Dr Sales account Cr bank account
(c) Dr Purchase return a/c Cr bank account
(d) Dr Purchase account Cr Bank a/c
(e) Dr bank account Cr purchase account

Correct Answer Dr Bank account Cr Purchase return a/c

Answer According to accounting rule is Debit what comes in, Credit what goes out.
Explanation Money has come, so we Debit Bank a/c. Goods have gone out, so we Credit
Purchase return a/c.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 31 Which is the best suitable method of charging depreciation for a coal mining
company ?
(a) Straight line method
(b) Reducing balance method
(c) Revaluation method
(d) Depletion method
(e) Sinking fund method

Correct Answer Depletion method

Answer Depletion method is also known as ‘Unit Changing Method’ or ‘Output Method.
Explanation This method is applied in the case of assets of wasting nature like mines as well
as to intangible assets like patents. Rate of depreciation per unit is determined by
dividing total cost by expected number of output in contrast to number of years.

Question 32 The process of recording of financial transactions which includes the origination
of the transactions, its recognition, processing and summarization in the financial
statements is called as _______ .
(a) Journal
(b) Ledger
(c) P/L Account and Balance sheet
(d) Accounting
(e) Double entry system

Correct Answer Accounting

Answer Accounting is a systematic process of identifying, recording, measuring,
Explanation classifying, verifying, summarizing, interpreting and communicating financial
information. It reveals profit or loss for a given period, and the value and nature
of a firm's assets, liabilities and owners' equity.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 33 The auditor gives ______ in Long Form Reports (LFAR).

(a) a certificate that the dues payable to the statutory authorities have been duly
paid
(b) details of cases of cheques dishonored where the relevant risks covered have not
been cancelled from inception
(c) status of large outstanding claims with cause wise and year wise analysis
(d) Both 1 and 2
(e) Both 2 and 3

Correct Answer Both 2 and 3

Answer Under LFAR, the auditor provides information on Cases of cheques dishonored
Explanation where the relevant risks covered have not been cancelled from inception and
Status of large outstanding claims – with cause wise and year wise analysis.

Question 34 The contents and disclosures of annual report of a company are governed by
______ of the Companies Act 2013 .
(a) Section 481
(b) Section 136
(c) Section 209
(d) Section 355
(e) Section 82

Correct Answer Section 136

 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 35 ______ is NOT a feature of a company?

(a) Ownership and management
(b) It has a perpetual succession
(c) Limits liability of owners
(d) Common seal
(e) Transferability of shares

Correct Answer Limits liability of owners

Answer A company must have the following salient features; It must have Ownership and
Explanation management, Transferability of shares, It must have a perpetual succession & it
must have a Common seal.

Limits liability of owners is not a feature for a company.

Question 36 What is the term used term to describe the amount received on disposal of the
asset at the end of its useful life?
(a) Balance value
(b) End amount
(c) Maintenance charges
(d) Freight amount
(e) Scrap value

Correct Answer Scrap value

 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 37 What is the minimum number of non-executive directors required in the

Investment Committee which every insurer shall constitute as per regulation
13(A) of IRDAI (Investment) (Fifth Amendment) Regulation 2013?
(a) 2
(b) 6
(c) 3
(d) 4
(e) 5

Correct Answer 2
Answer The regulation 13 (A) of IRDAI (Investment) (Fifth Amendment) Regulations 2013,
Explanation provides for constitution of Investment Committee where there should be
minimum two non-executive directors in the investment committee.

Question 38 As per which accounting concept the companies and owners should be accounted
separately ?
(a) Going concern concept
(b) Business entity concept
(c) Accounting period concept
(d) Double entry concept
(e) Matching concept

Correct Answer Business entity concept

Answer As per the Business entity concept, business & personal transactions are
Explanation separately entered in the books of accounts.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 39 'Preparation of Financial Statements' is dealt in which part of Schedule B of the

IRDA (Preparation of Financial statements and Auditors report of Insurance
Companies) Regulations, 2000 ?
(a) Part I
(b) Part II
(c) Part III
(d) Part IV
(e) Part V

Correct Answer Part V

Question 40 A bond which is issued by a company under its seal acknowledging its debt and
obligation for repayment along with the conditions and provisions of repayment
of the principal amount and interest is known as ______ .
(a) Equity
(b) Debt
(c) Debenture
(d) Loan
(e) Bond

Correct Answer Debenture

 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 41 An amalgamation will be in the nature of purchase if ______ .

1. The purchase consideration is paid mainly in the form of equity shares
2. Complete assets and liabilities of transferor company are taken over by the
transferee company
3. The business of transferor company is intended to be carried on by the
transferee company
(a) Only 1 and 2
(b) Only 2 and 3
(c) Only 3
(d) Only 1
(e) All 1, 2 and 3

Correct Answer All 1, 2 and 3

Answer As per the provisions of AS 14: ‘Accounting for Amalgamation’, amalgamation is
Explanation in nature of purchase if; Complete assets and liabilities of transferor company are
taken over by the transferee company, The business of transferor company is
intended to be carried on by the transferee company and the purchase
consideration is paid mainly in the form of equity shares

Question 42 Some steps of the accounting process are mentioned below. Arrange them in
proper sequence.
1.Recording 2. Reporting 3. Classifying 4. Analyzing

(a) 3, 2 , 4, 1
(b) 1, 2, 4, 3
(c) 2, 4, 3, 1
(d) 3, 1, 4, 2
(e) 4, 2, 1, 3

Correct Answer 3, 1, 4, 2
Answer Financial performance & financial position of the enterprise is done through
Explanation financial statements in a logical manner & in proper sequence. As per the given
options, the sequence would be: Classifying, Recording, Analyzing and Reporting.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 43 If a credit rating company has given a rating of 'BB' to a long term investment
instrument of a company, this means that there is a _______ .
1. High risk of default relating to timely servicing of financial obligations
2. Very High risk of default relating to timely servicing of financial obligations
3. Moderate risk of default relating to timely servicing of financial obligations
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 1 and 2
(e) All 1, 2 and 3

Correct Answer Only 3

Answer For a company where credit rating issued by rating companies for long term
Explanation investments is ‘BB’, this imply that the credit worthiness of the instrument is
‘Moderate risk of default relating to timely servicing of financial obligations’.

Question 44 The following details were given by Mahesh in the financial statements for the
year ended 31 Dec 2016. Machine purchased on 1st January 2012 for Rs 560000.
Installation expenses Rs 40000. Expected life of this machine 10 years.
Depreciation was charged on straight line method. The scrap value of the
machine after 10 years is Rs 50000. Calculate the depreciation to be charged for
the year 2016.
(a) Rs. 48500
(b) Rs. 50000
(c) Rs. 55000
(d) Rs. 29000
(e) Rs. 63550

Correct Answer Rs. 55000

Answer The historical value of machinery under the example would be :
Explanation
Cost + Erection charges – Salvage value = 560000 + 40000 - 50000 = 550000

Since the expected life is 10 yrs. the depreciation per yr. would be 550000/10 =
55000

Hence the depreciation charge for 2016 would be Rs. 55000.

 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 45 The deferred tax arising due to difference between taxable income and
accounting income on the balance sheet date shall be treated in the books as
______ .

1.Asset 2. Liability 3. Income

(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 1 and 3
(e) None of the above

Correct Answer Only 1

Question 46 In the below mentioned statements, which is /are CORRECT ?

(a) The reserve for unexpired risk is created at 100% of the net premium for marine
insurance and 50% of the net premium for all other types of insurance
(b) Separate Revenue Accounts are prepared for fire insurance, marine insurance and
miscellaneous insurance in general insurance business
(c) Separate P&L A/c are prepared for fire, marine and miscellaneous insurance in
general insurance business
(d) Both 1 and 2 are correct
(e) Both 1 and 3 are correct

Correct Answer Both 1 and 2 are correct

Answer As per Section 64 V(i) (ii) (b) of The Insurance Act 1938, reserve for unexpired risk
Explanation has to be created at 100% of the net premium in case of marine insurance and
50% of the net premium in case of all other types of insurance. In addition in
general insurance business, separate Revenue Accounts are prepared for fire
insurance, marine insurance and miscellaneous insurance.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 47 _______ is the reinsurance accounting system in which the premium / losses are
entered in the accounts according to the treaty criteria for the relevant
accounting year without any breakup of income and expenditure by year of
occurrence or underwriting year.
(a) Accrual accounting system
(b) Annual accounting system
(c) Accounting year system
(d) Per risk accounting system
(e) Underwriting year system

Correct Answer Accounting year system

Answer Under this system, premium is booked as per the due date or the premium paid,
Explanation and claims as per the date of payment. All transactions are accounted for in the
same treaty period without reference to the underwriting year. Under this
system, premium is booked as per the due date or premium paid, and claims as
per the date of payment.

Question 48 How can one ascertain that the accounts of a company are true and fair ?
1. They are prepared as per the accounting policies of the company
2. They are prepared as per the facts
3. They are prepared as per the accounting standards
(a) Only 1
(b) Only 2
(c) Only 3
(d) Both 2 and 3
(e) All 1, 2 and 3

Correct Answer All 1, 2 and 3

Answer The accounts of a company can be said to be are true and fair if they are;
Explanation Prepared as per facts, Prepared as per accounting standards and Prepared as per
company accounting policy. The accounting policy of an enterprise may differ
from those of another but the accounts must be prepared as per facts & as per
accounting standards prescribed for the particular enterprise.
 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

Question 49 What matters found in Long Form Audit Reports (LFAR)?

1. The status of large outstanding claims
2. Various cases of cheques dishonored where the relevant risks covered have not
been cancelled from inception
3. The certification that all the dues payable to the statutory authorities have
been duly paid
(a) All 1, 2 and 3
(b) Only 1 and 2
(c) Only 1 and 3
(d) Only 1
(e) Only 2 and 3

Correct Answer Only 1 and 2

Answer Under LFAR, the auditor provides information on Cases of cheques dishonored
Explanation where the relevant risks covered have not been cancelled from inception and
Status of large outstanding claims.

Question 50 _______ will influence the inflow and outflow of cash in the statement of cash
flows.
(a) Dividends received
(b) Proceeds of the issue of shares
(c) Proposed dividends
(d) Both 1 and 2
(e) All 1, 2 and 3

Correct Answer Dividends received

Answer Increase in assets and decrease in the liabilities refers to increase in economic
Explanation benefits during an accounting period. It is known as inflows. The example of an
inflow is by way of dividend received. None of the other increases or decreases
the inflow or outflow of cash.

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 IC 46 – GENERAL INSURANCE ACCOUNTS
LAST DAY REVISION TEST NO. 1

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INSURANCE EXAMS

IC 01 – Principles of Insurance
IC 02 – Practice of Life Insurance
IC 11 – Practice of General Insurance
IC 14 – Regulation of Insurance Business
IC 26 – Life Insurance Finance
IC 27 – Health Insurance
IC 45 – General Insurance Underwriting
IC 46 – General Insurance Accounts

NISM

NISM Series I: Currency Derivatives Certification Exam

NISM Series V A: Mutual Fund Distributors Certification Exam
NISM Series VI: Depository Operations Certification Exam
NISM Series VII: Securities Operations and Risk Management
NISM Series VII: Equity Derivatives Certification Exam
NISM Series III A: Securities Intermediaries Compliance Certification Exam
NISM Series X A : Investment Adviser (Level 1) Certification Exam
NISM Series X B: Investment Adviser (Level 2) Certification Exam
NISM Series X V: Research Analyst Certification Exam
NISM II A – Registrar to an Issue & Share Transfer Agent
NISM IV – Interest Rate Derivatives Certification Exam

NCFM

NCFM Financial Markets: A Beginners Module

NCFM Capital Market (Dealers) Module
NSE FIMMDA : Debt Market (Basic) Module
NCFM Derivative Market (Dealers) Module