1.

Introduction to management accounting

1. Inventory control is ________ in management accounting.
2. Financial accounting deals with ___________ data.
3. Management accounting is ________ oriented.
4. There is no legal format for management accounting____________.
5. In management accounting publication of reports is______________.
6. Management account is __________in nature.
Answer: 1. Included, 2. Historical, 3. Future, 4. Reports, 5. Optional,
6. Analytical.
1. Financial accounting records only
a) Actual Figures
b) Budgeted figures
c) Standard Figures
d) All of the above
2. The use of management accounting is
a) Mandatory
b) Optional
c) Compulsory
d) All of the above
3. Management Accounting includes
a) Financial Accounting
b) Cost Accounting
c) Budgetary control
d) All of the above
4. Management Accounting is
a) Analytical
b) Future oriented
c) Dynamic
d) All of the above
5. Financial Accounting deals with
a) Determination of cost
b) Determination of profit
c) Determination of prices
d) None of the above
6. Management accounting relates to
a) Recording of accounting data
b) Recording of costing data
c) Presentation of accounting data
d) None of the above
Answer: 1. a, 2. b, 3.d, 4.d,5. b, 6.c
2.ANALYSIS AND INTERPRETATION OF
FINANCIAL STATEMENTS
1. Trade Mark is an ______________ assets.
2. Advance tax is shown under _________________.
3. Current Liabilities = _________________ - Current Assets.
4. Fictitious Assets are _________________ .
5. Securities Premium forms part of ______________.
6. Capital Employed = Fixed Assets + ___________ capital.
Answer : 1. Intangible , 2. Loans and Advances, 3. Working Capital, 4.
Intangible, 5. Reserve & Surplus 6. Working.
1. Patents and Copyrights is an
a) Intangible Assets
b) Movable assets
c) Intangible fixed assets
d) Fictitious Assets
2. Balance sheet is a
a) Statement of assets and liabilities
b) Statement of operating results
c) Statement of working capital
d) None of the above
3. Income Statement is a
a) Statement of working results
b) Statement of Sources of Fund
c) Statement of Cash Flow
d) Fund from Operation
4. Fixed assets are Rs.5, 00,000; Current Assets are Rs.3,
00,000; Current Liabilities are Rs. 1, 00,000. There is no
investment, Find out capital employed.
a) 8,00,000
b) 7,00,000
c) 9,00,000
d) 6,00,000
5. Sales are Rs.5, 00,000; operating cost is Rs.2, 00,000; profit
on sale of machinery is Rs.10, 000, find out operating profit.
a) 3,00,000
b) 3,10,000
c) 3,10,000
d) 3,50,000
6. Short term investments are shown under which head in the
vertical balance sheet.
a) Investment
b) Current Assets
c) Current Liabilities
d) Fictitious Assets
Answer: 1. c, 2. a, 3. d, 4. b, 5.a, 6.b
3.TOOLS OF ANALYSIS OF FINANCIAL
STATEMENTS
1. Comparative statement is a part of __________ analysis.
2. Common size statement is a _________________ analysis.
3. _________ analysis show trend in performance.
4. In __________________ statement sales is considered equal to 100.
5. In trend Analysis earliest year is considered as_______________year.
6. Analysis is must for _______________.
Answer: 1. Horizontal , 2. Vertical, 3. Trend, 4. Common Size,
5. Base 6. Interpretation.
1. Common size statement is a tool of
a) Vertical Analysis
b) Horizontal analysis
 c) Technical analysis
d) Fundamental Analysis
2. Comparative statement shows
a) One year performance
b) Comparative performance
c) Financial performance
d) Profitability performance
3. Trend analysis is a technique to analysis.
a) Growth in performance
b) Change in performance
c) Trend in performance
d) Common size statement
4. Earliest year has to be considered as base year, the values
of which is taken as 100.
a) Balance sheet
b) Income statement
c) Trend analysis
d) Comparative statement
5. Inter firm comparison become misleading when two different
firm follows
a) Same policies
b) Different Policies
c) Same account system
d) Same procedures
6. Trend Shows
a) Direction of the change
b) Composition of the change
c) Upward change
d) Downward change
Answer: 1.a, 2. b , 3. c, 4. c , 5. b, 6. a
4.RATIO ANALYSIS
1. Working capital is excess of current assets are _________________.
2. Margin of safety is ____________ to net current assets to get working capital..
3. Management of ___________ capital is the task of a finance manager.
4. Debt/Equity shows proportion between __________ and ______.
5. Standard Current ratio is ______________.
6. Net profit ratio is an indicator of _______________.
Answer: 1.Current Liabilities, 2. Added, 3.Working capital, 4. Long term
Debt, Equity 5. 1:1 6. Profitability.
1. Proprietary ratio shows
a) Long term financial position
b) Short term financial position
c) Liquidity position
d) All of the above
2. A low inventory turnover ratio indicates
a) Investment tied up in stock
b) Absolute goods on hand
c) Adverse liquidity
d) All of the above
3. Higher Gross profit ratio may be due to
a) Higher rate of profitability
b) Strict control over cost of goods sold
c) Higher trading efficiency
d) All of the above
4. Inventory turnover is increased by
a) Higher sales
b) Higher cost of goods sold
c) Lower average inventory
d) B & C
5. P/E Ratio is a proportion between
a) EPS and MP
b) NP and MP
c) EPS and GP
d) None of the above
6. Net sales Rs.1,40,000; Gross profit Rs.10,000; Net profit
Rs.6,000; Bills Receivable Rs.2,000; Debtors Rs.8,800;
stock Rs.10,000; Cash Rs.6,000, Creditors Rs.12,000; Bills
payable Rs.8,800; current ratio will be
a) 1.35
b) 1.29
c) 1.30
d) 1.48
Answer 1. a , 2. d , 3. d, 4. d , 5. a, 6. b
5.WORKING CAPITAL
1. Minimum amount of working capital is ______________ .
2. Stock of finished is valued at _________________.
3. An organization which grant longer period of credit required_________ working capital.
4. Value of creditors depends on ____________ of credit allowed by____________ .
5. _______ operating cycle required more working capital.
6. Working capital can be decided on the basis of ____________.
Answer: 1.Permanent, 2. Cost of production, 3. More, 4. Period,
creditors, 5. Longer, 6. Balance sheet.
1. Negative working capital is equal to
a) Current assets less current liabilities
b) Current assets less fixed assets
c) Current liabilities less current assets
d) None of the above
2. Seasonal working capital is
a) Permanently required
b) Fluctuating in nature
c) Required to meet seasonal needs of the organization
d) None of the above
3. Shortage of working capital may result in
a) Poor credit worthiness
b) Higher trade discount
c) Higher cash discount
d) None of the above
4. Margin of safety is provided to
 a) Cover possible variations in estimation
b) Have safety in management of working capital
c) Ensure safety in estimation of working capital
d) Both B & C
5. Working capital finance is raised from
a) Bank overdraft
b) Cash credit
c) Bill Finance
d) All of the above
6. Balance sheet working capital is calculate on the basis of
a) Book value of current Assets and current liabilities as per
balance sheet
b) Market value of current assets and current liabilities
c) Fair value of current assets and current liabilities
d) None of the above
Answer 1. c , 2. c , 3. a , 4. d , 5. d, 6. a
6.CASH FLOW STATEMENT
1. Cash flow statement is prepared as per AS __________.
2. Cash flow statement is compulsory for ___________ companies.
3. Cash receipt from sale of goods is cash flow from _______________.
4. Cash received from sale of machinery is a cash flow from _______________.
5. Depreciation is ___________________ to net profit to get cash flow from operating activities.
6. Decrease in working capital __________ cash flow from operating activities.
Answer 1. AS 3, 2. Listed, 3. Operating Activities, 4. Investing
Activities, 5. Added 6. Increase.
1. Cash flow statement provides information that
a) Supplement the P&L A/c and balance sheet
b) Is independent of financial statements
c) Provide basis for financial planning
d) Of a cash budget
2. Decrease in debtors
a) Increase cash flow from operating activities
b) Decrease cash flow from financing activities
c) Decrease cash flow from investing activities
d) None of the above
3. For cash flow statement cash equivalent includes
a) Bank deposits for 21 days
b) Money market instruments
c) Treasury Bills
d) All of the above
4. Cash receipts from future contracts is a cash flow from
a) Operating activities
b) Investing activities
c) Financing Activities
d) None of the above
5. Buy back of equity shares creates cash flow from
a) Investing activities
b) Financing activities
c) Operating Activities
 d) None of the above
6. Investment on 1.1.2015 Rs. 2,10,000
Investment on 31.12.2015 Rs.50,000
During the year the company purchased investment costing
of Rs.2,16,000 and sold some investment at a loss of 20%
on book value. The cash inflow from investing activities will
be
a) 44,800
b) 2,16,000
c) 56,000
d) 59,000
Answer 1. a, 2.a , 3.d , 4.b , 5.a, 6.a
7.AUDITING CONCEPTS
i) The main object of an audit is --------------------.
a) To ensure that the final accounts are prepared.
b) Detection and prevention of frauds and errors.
c) Verification of accounts and financial statements.
d) To ensure future viability of the concern.
ii) The main objective of window – dressing is ---------------------.
a) To reduce tax ability
b) To mislead investors
c) To understate profits
d) To avoid payment of bonus to workers
iii) Auditing commences after ------------------------.
a) Investigation is over b) Accounting work is over
c) The General Meeting is over d) None of the above
iv) --------------------- is not an error of commission.
a) Arithmetical error b) Compensating error
c) Posting error d) None of the above
v) Misappropriation of goods is generally done by --------------------.
a) Auditors b) Employees
c) Shareholders d) All of the above
vi) The responsibility of adopting sound accounting policies and
maintaining adequate internal control rests with ------------------.
a) Chief Accountant
b) Company Management
c) Company’s internal audit department
d) Statutory Auditor
vii) Audit conclusions and reporting is --------------------.
a) Advantage of audit
b) Technique of audit
c) Limitation of audit
d) Principle of audit
8.Audit planning and procedures and documentation
a) Audit Programme should be –
i) Oral
ii) Rigid
iii) Flexible
 iv) Oral and Flexible
b) Working papers are the property of the –
i) Client
ii) Auditor
iii) Client and Auditor
iv) Equity Share holder
c) Audit programme must be prepared –
i) Before commencement of an audit.
ii) During the conduct of an Audit.
iii) After completion of an audit.
iv) After submission of an audit report.
9.AUDITING TECHNIQUES
i. Internal auditor’s appointment is made by --------------------
a) Institute of internal auditors of India.
b) Members at the Annual General meeting.
c) The management
d) The statutory auditor
ii. Internal check is meant for ------------------.
a) Prevention of fraud
b) Increase in the profits
c) Detection of fraud
d) Helping audit in depth
iii. ----------------- deals with audit sampling.
a) SA 530
b) SA 400
c) SA 610
d) SA 510
10.VOUCHING
a) Which of the following document is not relevant for vouching
of sales?
i) Daily cash sales summary
ii) Credit memos
iii) Delivery Challans
iv) Sales department attendance record
b) ---------------- document is not relevant for vouching cash
purchases.
i) Purchase invoice
ii) Goods inward register
iii) Attendance record of cashier
iv) Purchase order
c) Telephone charges should be examined on the basis of ------
i) Cash memo
ii) Agreement with telephone department
iii) Telephone bill
iv) All of the above
11.AUDITING TECHNIQUE VERIFICATION
a. Debtors are valued at
i) Book value
 ii) Decided by the customer
iii) Realisable value
iv) As per articles of Association
b. Stock of goods on consignment should be valued at -----------
i) Invoice price
ii) Cost plus proportionate expenses
iii) Cost or realisable value whichever is less
iv) None of the above
c. ---------------- asset which is not subject to physical verification.
i) Cash
ii) Debtors
iii) Stock
iv) Furniture