S.Y.B.COM. MGT. A/C. Sem. – III Dec.

20

Title:Introduction to Management Accounting

Topics::Introduction to Management Accounting

1 Financial Accounting deals with __________

Detrmination of cost
Determination of price
Determination of profit
Determination of sales
2 Financial accounts records only
Actual figures
Bugeted figures
Standandard figures
differed figurea
3 Management accounting related to _______
Recording of accounting data
recording of costing data
presention of accounting data
presentation od costing data
4 The use of management accounting is _______
Mandatory
Optional
Compulsory
Evaluation
5 Strategic information is is used by
Senior management
Middle Management
Top Management
Shareholder
6 Strategic information required for __________
Monthly Planning
Short range planning
Day to day planning
Long range planning
7 Strategic information is is obtained from ______
Internal sources
External Sources
Internal and ecternal sources
E-Source
8 Tactical information is used by______________
 Top Management
Lower Management
 Middle Management
Directors
9 Tactical information is ______
Generated Internally
Generated Externally
Generated Both Internally and Externally
Deparments
10 Tactical information is relevant to_________
 Short Term Planning
Medium Term Planning
 Short Term and Medium Term Planning
Long Term Planning
11 Tactical information is based on___________
Quantitative Measures
 Qualitative Measures
Both Quantitative and Qualitative Measures
Performance measures
12 Operational information is used by _____________
Lower Level Management
Middle Level Management
Top Level Management
Lower level and top level management
13  Operational information is obtained from_________
E-sources
External Sources
Both Internal and External Sources
 Internal Sources
14 Operational information is___________
 Quantitative
Qualitative
Both Quantitative and Qualitative
Analytical
15  Strategic information is needed for ______
Monthly Planning
Short range planning
Day to day planning
Long range planning
16 Strategic information is required by
Middle Managers
 Top Managers
 Line Managers
All the Workers
17  Tactical information is required by________
 Top Managers
All the Workers
Line Managers
Middle Managers
18 Operational information is required by_______
 Top Managers
All the Workers
Line Managers
Middle Managers
19 The users of management accounting information are________
Managers
Bankers
Government
Debtors
20 Management accounting reports are prepared_________
 Quarterly
Half yearly
Annually
 As and when required
21 The focus of management accounting is on a) Internal Reporting_______
External Reporting
Internal Reporting
Tax Planning
Budget planning
22 Management accounting information is generally prepared for________
Creditors
 Governments
Managers
 Shareholders
23 ________ is devoted to providing information for external users. Management accounting
Financial accounting
Internal accounting
Cost accounting
24 Financial accounting is primarly concerned with providing fincnial reports to all th following EXCEP
  creditors such as banks and other financial institutions.
  creditors such as suppliers.
  shareholders of the company.
 management of the firm
25 Management accounting and financial accounting differ in that management accounting information
following prescribed rules.
using whatever methods the company finds beneficial.
    for shareholders.
to summarize the whole company with little detail.

26 The primary objective of management accounting is

To provide shareholders and potential investors with useful information for decision making.
To provide banks and other creditors with information useful in making credit decisions.
 To provide management with information useful for planning and control of operations.
 To provide the relevant taxation authorities with information about taxable income.
27 Management accounting is the branch of accounting concerned with reporting to
Internal managers.
Shareholders.
Government
Bankers
28 Which of the following does NOT describe management accounting?
Evaluation of segments or products within the firm
 Emphasis on the future
 Externally focused
Detailed information
29 Management accounting reports are prepared
To meet the needs of decision makers within the firm.
Whenever shareholders request them.
According to guidelines prepared by the shares and Financial Services Authority.
According to financial accounting standards.
30 Which of the following costing activities is associated with the financial accounting system?
 Determining the cost of a department
Determining the cost of goods sold for financial statements
  Preparing budgets
Determining the cost of a customer
31  Which of the following activities is NOT associated with the financial accounting information system
  Reporting on the cost of quality
  Reporting to the shareholders
  Preparing reports for the tax authorities
Preparing a statement of cash flows
32 Which of the following cost management tools supports the firm's concentration on the delivery of v
  Service industry growth
  Global competition
  Preparing an earnings report for external reporting
 Value-chain analysis
33 Automation of the manufacturing environment is associated with increases in
inventory.
capacity.
processing time.
Sales
34  Accounting____________
 Always has an external orientation.
 Always has an internal orientation.
 Information assists in planning and controlling.
Terms serve as a model of the organization.
35 Financial control report comes under____________
 Dynamic financial reports
Static financial reports
Extensive Activity report
Rigid financial reports
36 A balance sheet is a form of________
 Dynamic financial reports
Static financial reports
Extensive Activity report
Rigid financial reports
37 Analytical reports are based on the ______ comparison of results.
 Horizontal
 Vertical
 Symmetrical
Traditional
38    Monitoring the number of defects produced is an example of the management function of
planning.
control.
decision making.
both a and c.
39 ___________ are just income statements, wherein the results of one particular year are compared wit
Subsidiary trend reports
Analytical report
Activity reports
Master trend report
40 A firm that issues stocks and bonds to raise funds results in
Decreases Cash
Increases Cash
Increases Equity
Increases Liabilities
41. Balance Sheet is a
a) Statement of assets and liabilities b) Statement of operationg results
c) Statement of Working Capital d) None of the above
42. Income statement is a
a) Statement on working results b) Statement of Sources of Funds
c) Statement of Cash Flow d) Fund from operation

43. Authorised Capital is

a) Minimum capital the company can raise
b) Maximum capiutal that can be raised as per the M/A

c) Optimum Capital that can be raised

d) Needed capital
44. Securities Premuum can be used for
a) Issue of fully paid bonus Shares b) Issue of rights shares
c) Payment of dividend d) Issue of partly paid bonus shares
45. General reserve is created out of
a) Profit b) Income
c) Expenditure d) Dividend received
46. Point out from the following which is not a secured loan
a) Public Deposits b) Mortgage loan
c) Bank Overdraft on hypothecation of stock
d) Debentures issue on floating charge
47. Fixed assets shuld be disclosed in Balance sheet as
a) Cost b) Market Value
c) Cost or market value whichever is more d) Cost or market value whichever is less
48. Live Stock is a
a) Current asset b) Ficitious asset
c) Fixed assets d) none of the above
49. Patents and copyrights is an
a) Intangible Asset b) Movable Asset
c) Intangible fixed asset d) Fictitious Assets
50. Goodwill is an
a) Intangible Asset b) Fixed Asset
c) Itangible fixed asset having realizable value d) Ficitious asset
51. Land and Building is a
a) Fixed tangible movable asset b) Fixed intabgible movable assets
c) Intangible asset d) Fixed tangible immovable asset
52. Capital Work in progress is disclosed under
a) Fixed asset b) Current assets
c) Capital d) Intangible assets

53. Provision for depreciation is

a) Shown under provision b) Shown under secured Loans
c) deducted from cost of fiexed assets d) Ignored
54. Underwriting commission is a
a) Tangible asset b) Intabgible asset
c) Fixed asset d) Fictitious asset
55. Stock is a
a) Current asset b) quick asset
 c) fixed asset d) fictitious asset
56. Bank Overdraft is not a

a) Quick Liability b) Current Liability

c) Urgent Liability d) Liability

57. Gross Profit is

a) Excess of sales over total cost b) Excess of sales over cost of goods sold
c) Excess of sales over pruchase d) Excess of sales over cost of Materials
58. Operating Profit is
a) Gorss profit plus operating income
b) Gross profit less operating expenses plus operating income

c) Gross profit less Non - operating expenses

d) Gross profit plus operating losses
59. Bills Payable is a
a) Quick liability b) Long term liability
c) Fixed Liability d) Non - current liability
60. Provision for taxation is a charge against
a) Profit b) Income
c) Retained Earning d) None of the above

61. Staff Salary is an

a) Operating Expenditure b) Operating Income
c) Non operating Expenditure d) Capital Expenditure
62. Fixed assets are Rs. 5,00,000 Current assets are Rs. 3,00,000 Current Liabilities are Rs. 1,00,000.
There is no investments Capital employed will be
a) Rs. 8,00,000 b) Rs. 7,00,000 c) Rs. 9,00,000 d) Rs. 6,00,000
63. Current Liabilities include creditors Rs. 2,00,000 Bills payable Rs. 1,00,000. Expenses Payable
Rs. 50,000. Bank OD Rs. 2,00,000 Quick liabilities will be
a) Rs. 3,00,000 b) Rs. 3,50,000 c) Rs. 2,50,000 d) Rs. 2,00,000
64. Fixed assets include premises Rs. 10,00,000 Machinery Rs. 5,00,000, Furniture Rs. 2,00,000
Vehicles Rs. 3,00,000 Live stock Rs. 1,00,000 Goodwill Rs. 2,00,000 Patents and copyrights Rs. 1,50,000
underwriting commission Rs. 50,000 Fidnd out the fixed, tangible, Immovabel asstes.
a) Rs. 10,00,000 b) Rs. 20,00,000 c) Rs. 3,00,000 d) Rs. 1,50,000

65. Gross profit is Rs. 47,000 administrative expenses Rs. 10,500. Selling expenses Rs. 5000 divdend
on investment Rs. 2000, loss on sale of car is Rs. 500, Net operating profit will be.
a) Rs. 31,500 b) Rs. 35,000 c) Rs. 57,000 d) Rs. 33,500
66. Sales are Rs. 5,00,000 G.P. is 20% on cost of sales, The G.P. will be :
a) Rs. 1,00,000 b) Rs. 1,50,000
c) Rs. 83,333 d) Rs. 50,000

67. Sales are Rs. 5,00,000 operating cost is Rs. 2,00,000 profit on sale of machinery is Rs. 10,000
operating profit will be
a) Rs. 3,00,000 b) Rs. 3,10,000 c) Rs. 2,10,000 d) Rs. 3,50,000
68. Share Capital is Rs. 15,00,000 Reserves Rs. 10,00,000 Formation expenses Rs. 10,000.
Debentures Rs. 5,00,000. Public Deposits Rs. 3,00,000 Calls in arrears Rs. 10,000. Find out Net worth.
a) Rs. 25,00,000 b) Rs. 24,80,000 c) Rs. 15,10,000 d) Rs. 24,90,000
69. Stock Rs. 3,00,000 Debtors Rs. 2,50,000 Cash/Bank Rs. 2,50,000, Bills receivable Rs. 50,000,
prepaid expenses Rs. 10,000. Creditors Rs. 2,00,000, Bills payable Rs. 50,000 expenses payable Rs. 5,000
provision for tax Rs. 20,000, unclaimed dividend Rs. 25,000, loan taken Rs. 1,00,000. Find out current
assets.
a) Rs. 8,60,000 b) Rs. 3,00,000 c) Rs. 10,60,000 d) Rs. 60,000

70. Natural resources like mines oil wells are

a) wasting assets b) ficitious assets
c) current assets d) intangible assets
71. Th intangible assets which do not have value are
a) Tangible assets b) Intangible assets
c) Fictitious assets d) Current assets
72. The expenditure which is carried forward is
a) Deferred Revenue Expenditure b) Revenue Expenditure
c) Capital Expenditure d) Expired cost
73. Income of the current year received in next year is shown in the balance sheet as
a) Income Receivabel b) Income Receivable in Advance
c) Fixed Asset d) Current liability
74. Reserve which is available for dividend is
a) Capital Reserve b) Revenue Reserve
c) Both of them d) None of them
75. Following is not a liquid asset
a) Debetors b) Bills Receivable
c) Stock d) Cash
76. Follwing is not a quick liability
a) Creditors b) Bills Payable
c) Unclaimed dividend d) Bank ovferdraft
77. Short term investments are shown in vertical Balance sheet under
a) Investments b) Current Assets
c) Current Liabilities d) Ficitious Assets
78. Advances given are shown in the Vertical Balance Sheet under
a) Current Assets b) Current Liabilities
c) Fixed Liabilities d) Loan Funds
79. Loss on sale of machinery is shown
a) Operating Expenditure b) Non-operating Expenditure
c) Cost of Goods sold d) None of the above
80. Depreciation on machinery is shown under
a) Office Expenses b) Selling Expenses
c) Finance Expenses d) Cost of goods sold
81. Owed funds indicate
a) Short term & long term debt b) Current assets
c) Loans & advances d) Liability
82. Balance of forfeited shares
a) Increases shareholders fund b) Decreases shareholders fund
c) Increases loan fund d) Assets
83. Interest accrued on investment is shown as
a) Investment b) Current Asset
c) Loans & advances d) Trading
84. Profit on sale of Furnitujre is shwon in vertical income statement under
a) Operating income b) Non-operating income
 c) Operating expenditujre d) P&L
85. Following information is extracted from the books of Jigna Ltd.
Rs.
cash 60,000
Creditors 30,000
Bank Loan 1,50,000
Debtors 20,000
Inventory 1,00,000
Outstanding Wages 20,000
Marketable securities 25,000
Working Capital is
a) Rs. 1,55,000 b) Rs. 1,00,000 c) Rs. 3,05,000 d) Rs. 1,20,000
86. Following information is extracted from the books of Monica Ltd.
Rs.
Sales 50,00,000
Depreciation 6,50,000
Operating Expenses 36,00,000
Non-Operating Income 2,00,000
Increase in Inventory 4,00,000
Net Profit before tax is
a) Rs. 13,50,000b) Rs. 16,00,000 c) Rs. 38,00,000 d) Rs. 54,00,000
87. Kumar Ltd. furnished the following informatin :
Operating Profit Before tax 45,00,000
Provision fro Tax 16,00,000
Non-Operating Income 4,00,000
Dividend Paid 5,00,000
Transfer to General Reserve 3,00,000
Net profit transferred to balance sheet is
a) Rs. 25,00,000b) Rs. 30,00,000 c) Rs. 18,00,000 d) Rs. 49,00,000
88. Following information is provided by Sun Ltd. for the year ended 31-3-2016
Rs.
Share Capital 20,00,000
Reserves 5,00,000
Debentures 4,00,000
Creditors 3,00,000
The sharehoders fund will be
a) Rs. 25,00,000 b) Rs. 20,00,000 c) Rs. 29,00,000 d) Rs. 32,00,000
89. Total applications of fund amounted to Rs. 40,00,000. Loan fund is Rs. 25,00,000 Shareholders
fund will be
a) Rs. 20,00,000 b) Rs. 15,00,000 c) Rs. 65,00,000 d) Rs. 10,00,000
90. Soni Ltd. supplied the following informations :
Rs.
Fixed Assets 40,00,000
Current Assets 15,00,000
Investments 20,00,000
Current Liabilities 10,00,000
Debentures 5,00,000
Total of sources of fund is
a) Rs. 65,00,000b) Rs. 55,00,000 c) Rs. 70,00,000 d) Rs. 60,00,000

Chapter: Analysis & interpretation of financial statement

(Common, Comparative trend)
91) Comparative Statement Analysis is ---------
a) Dynamic Analysis
b) Horizontal Analysis
c) Vertical Analysis
d) External Analysis
92) The comparative income statement shows the increase or decrease of ---- over the
previous year
a) Only sales
b) Only profit
c) Only expenses
d) All the above
93) In common size income statement analysis the --- is a assumed to be hundred all
Other figure are expressed as per a % of -------
a) Sales, sales
 b) Sales, purchase
c) Sales, net profit
d) Sale, gross profit
94) Total current assets are Rs 30,000 Rs 54,000 Rs 66,000 in 2013, 2014
and 2015 respectively.
If 2013 is base year what is the trend % for 2015 -----
a) 120%
b) 125%
c) 60 %
d) 50%
95) % increase /Decrease / Method of preparation of ---
a) balance sheet
b) Income statement
c) Comparative statement
d) Common size Statement
96) Trend analysis is a technique of analysis -----
a) Growth in performance
b) Change in performance
c) Trend in performance
d) Decrease in performance
97) Cost of goods sold for a company is Ts 30, 00,000 Rs 24, 00,000 and Rs 18, 00,000
For 2015, 2014, and 2013.respectively.if 2013 is the base year the percentage increase
In cost of goods sold from 2013 to 2015 is -----
a) 66, 67%
b) 70%
c) 50%
d) 45%
98) Performance over two year can be understand from---
a) Income statement
b) Balance sheet
c) Comparative income statement
d) Common size Statement
99) Performance for the year can be Analysis from----
a) Balance sheet
b) Income Statement
c) Common size Statement
d) Comparative Statement
100) Trend in performance is understood from ------
 a) Fundamental Analysis
b) Horizontal Analysis
c) Vertical Analysis
d) Trend Analysis
101) Earliest Year Has to be Considered as base year, the values of which are taken as 100 in
–
a) Balance sheet
b) Income Statement
c) Trend Analysis
d) Comparative Statement
102) For Inter Firm Comparison-----
a) Comparative Statement is prepare
b) A common size Statement is prepare
c) Balance sheet is prepare
d) Income statement is prepare
103) Inter form comparison becomes misleading when two different firms follow---
a) Same policies
b) Different policies
c) Same Account System
d) Same procedure
104) Common size statement is a tool of --------
a) Vertical analysis
b) Horizontal analysis
c) Technical analysis
d) Fundamental analysis
105) Common size statement is also known as ---------
a) Percentage Statement
b) 100% Statement
c) Most Common Statement
d) Small size statement
106) in common size income statement the basis is ------
a) Total cost
b) Net Profit
c) Gross profit
d) Sales
107) In common size vertical Balance sheet the basis is------
a) Capital employed
b) Total Assets
 c) Total Liabilities
d) Proprietary fund
108) Comparative Statement is a tool of -----
a) Vertical Analysis
b) Horizontal Analysis
c) Structural Analysis
d) Technical Analysis
109) Common size statement cannot make a------
a) Horizontal Analysis
b) Vertical Analysis
c) Combined Analysis
d) Technical Analysis
110) Common size statement cannot find out relationship between----
a) Sales & capital employed
b) Sales & gross profit
c) Expenses & sale
d) Net profit & sales
111) Trend shows --------
a) Direction of the change
b) Composition of the change
c) Upward Change
d) Down ward Change
112) Amit Ltd . Report net sales Rs 900,000 Rs 990,000 and Rs 10, 80,000 in the
Year 2013, 2014 and 2015 if 2013 is the base year what is the trend % for 2015----
a) 120%
b) 75%
c) 80%
d) 90%
113) Comparative statement shows -----
a) one year performance
b) Comparative performance
c) Financial performance
d) Profitability Performance
114) Increase /Decrease is method of Preparation of -------
a) Common size statement
b) Comparative statement
c) Income Statement
d) Balance sheet
115) following are Example of vertical Analysis --------
a) Ratio Analysis
b) Cash flow statement
c) Trend percentage
d) ( a) & (b)

TOPIC : RATIO ANALYSIS AND INTERPRETATION

116. Net profit ratio indicates

a. Overall profitability

b. profitability

c. Trading efficiency

d. Liquidity

117 . Shareholder’s includes

a. Equity share capital

b. Pref. share capital

c. Reserve and surplus

d. All of the above

118. Loan fund does not include one of the following

a. Debenture

b. Loans

c. Provision for taxation

d. Public Deposit ..

119 Net profit ratio indicates

a. Overall profitability

b. profitability

c. Trading efficiency

d. Liquidity
120 ROI is a

a. Balance sheet ratio

b. Revenue statement ratio

c. Combined ratio

d. None of the above

121 Operating ratio is

a. Balance sheet ratio

b. Revenue statement ratio

c. combined ratio

d. None of the above

122 Buying polices are judge by

a. Gross profit ratio

b. Net profit ratio

c. ROI

d. P/E ratio

123 Proprietary ratio is a

a. Balance sheet ratio

b. Revenue statement ratio

c. combined ratio

d. None of the above

124. Debt equity ratio is

a. Revenue statement ratio

b. Balance sheet ratio

c. Combined ratio

d. None of the above

125. Stock working capital ratio

a. Revenue statement ratio

b. Balance sheet ratio

c. Combined ratio

d. None of the above

126. administrative expenses ratio

a. Revenue statement ratio

b. Balance sheet ratio

c. Combined ratio

d. None of the above

127. The quick ratio is 2:1 cash received from debtors will

a. Improve

b. Reduce

c. Not change

d. None of the above

128 Return on capital employed is a measure of

a. Overall profitability

b. Trading profitability

c. Operating profitability

d. None of the above

129. Operating cost includes

a. Operating expenses

b. Non operating expenses

c. Cost of goods sold only

d. Both a&b
130 Solvency ratio shows

a. Short term solvency

b. Long term solvency

c. Liquidity

d. profitability

131. Creditors turnover ratio is

a. Balance sheet ratio

b. Revenue statement ratio

c. Combined Ratio

d. None of the above

132 A very high current ratio will

a. Increase profitability

b. Decrease profitability

c. Not affected Profitability

d.None of the above

133. Current ratio shows

a. Short term financial position

b. Financial stability

c. Collection efficiency

d.Higher profitability

134. Liquid ratio which is equal to the following

a.. 2:1

b.1:1

c. 1:3

d.2:5
135. Higher proprietary ratio shows that

a.Small portion of asset is financed by the proprietors

b.Larger portion of asset is financed by the proprietors

c.Longer portion of asset is financed by the loan

d.None of the above

136. Loan fund does not include one of the following

a.Debentures

b.Loans

c.Provision for taxation

d.Public deposits

137. Shareholder’s equity does not include

a.Equity capital

b.Reserve & surplus

c.Debentures

d.Preliminary expenses

138.Return on capital employed is also known as:

a.Return on total assets

b.Return on fixed assets

c.Return on investment

d.Return on shareholder’s fund

139. N.P.before interest & tax rupees 500,000.Interest rupees 1,00,000,interest coverage will

Be

a.4 times

b.5 times

c.7 times
 d.12 times

140. Operating performance is best measured by

a..Operating profit ratio

b.Return on capital

c.Return on fixed assets

d.Return on equity

141. Current ratio is 2.5 working capital is rs.60,000 current asset will be

a.Rs.100,000

b.Rs.1,40,000

c.Rs.50,000

d.Rs.1,25,000

142. Net operating profit ratio is

a.Balance sheet ratio

b.Revenue statement ratio

c.combined ratio

d.None of the above

143. 2:1 is a standard

a.Debt equity ratio

b.Current ratio

c.Liquid ratio

d.None of the above

144. Solvency ratio shows

a.Short term solvency

b. Long term solvency

c.Liquidity
 d.Profitability

145. Quick assets are equal to

a.Current assets

b.Current assets less stock

c.Stock

d.None of the above

146. G.P. is a proportion between

a.Gross profit & sale

b. Net profit& Sales

c.Operating profit & sales

d.None of the above

147. Inventory turnover is increased by

a.Higher sales

b.Higher cost of goods sold

c. lower average inventory

d. Both b&c

148. P/E ratio is a proportion between

a.EPS & MP

b.NP & MP

c.EPS & GP

d.None of the above

149. Standard current ratio is

a.1:1

b.2:1

c.3:1
 d.5:1

150. Payment to creditors will

a.Improve current ratio

b.Decline current ratio

c.Not change current ratio

d.None of the above

151. High geared capital structure involve

a.High risk

b.Low risk

c.Moderate risk

d.No risk

152. Quick assets are equal to

a.Current assets less current liabilities

b.Current assets less stock

c.Current assets less bank balance

d.None of the above

153. Purchase of good will

a. .Increase gross profit ratio

b.Decrease gross profit ratio

c.Not change gross profit ratio

d.None of the above

154. While calculating proprietary ratio total asset are equal to

a. .Equity capital

b.Fixed assets+Investment+Current assets

c.Fixed asset only

 d.None of the above

155. Dividend payout ratio is

a.Balance sheet ratio

b.Revenue statement ratio

c.Combined ratio

d.None of the above

156. Activity ratio include

a.Capital turnover ratio

b.Stock turnover ratio

c.Debtors turnover ratio

d.All of the above

157. Lower debt equity indicates

a.Debt servicing is less burdensome

b.Capacity to raise additional debt

c.Less pressure of creditors

d.All of the above

158. G.P.ratio is 20%,purchase of goods rs.20,000 will

a.Increase G.P

b.Decrease G.P

c.No change G.P

d.None

159. Redemption of debenture for cash will

a.Increase debt equity ratio

b.Decrease debt equity

c.Not change debt equity ratio

 d.None of the above

160. Liquidity of a company judged by

a.Current ratio

b.Acid test ratio

c.Stock turnover ratio

d.None of the above

161. Return on equity capital indicates

a.Overall profitability of the company

b.Use of the equity capital

c.Earning power of equity share capital

d.All of the above

162. Debt equity is a

a.Balance sheet ratio

b. Income statement ratio

c.Composite ratio

d.None of the above

163. 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

164.Stock working capital ratio is proportion between

a.Closing stock & working capital

b.Opening stock & wrong capital

c.Sales & working capital

 d.Sales & current assets

165. Cost of goods sold is rs.5,40,000.Net sale rs.6,00,000

Sale return rs.10,000.The G.P. ratio is

a.20%

b.15%

c.12%

d.10%

Management Accounting
MCQs (Working Capital)
166. Working Capital is…….
a) Capital required to finance day to day operations
b) Capital to finance fixed assets
c) Capital working in the organisation
d) None of the above
167. Working Capital is…….
a) Excess of fixed assets over current assets
b) Excess of current assets over current liabilities
c) Excess of share capital over loans
d) None of the above
168. Gross Working Capital is equal to …….
a) gross fixed assets
b) gross current liabilities
c) gross current assets
d) None of the above
169. Net working Capital isequal to …….…….
a) CA less FA
b) CL less CA
c) CA less CL
d) None of the above
170. Negative working Capital is equal to…….
 a) CA less CL
b) CA less FA
c) CL less CA
d) None of the above

171. Cash working Capital is equal to …….

a) Cash and balance
b) cash and bank balance plus stock
c) liquid assets
d) cash cost of working capital
172. Permanent working Capital is…….
a) Minimum working capital required at all the time
b) seasonal in nature
c) permanently blocked up in stock
d) None of the above
173. Seasonal working Capital is…….
a) permanently required
b) Fluctuating in nature
c) required to meet seasonal needs of the organisation
d) None of the above
174. Manufacturing organisation requires…….
a) larger working capital
b) smaller working capital
c) moderate working capital
d) None of the above
175. Service organisation requires…….
a) larger working capital
b) smaller working capital
c) minimum working capital
d) None of the above
176. Longer the process period…….
a) lesser will be the working capital
 b) larger will be the working capital
c) minimum will be the working capital
d) moderate will be the working capital
177. The organisation which allows longer period of credit to debtors requires…….
a) More working capital
b) lesser working capital
c) no working capital
d) moderate working capital
178. Sale of goods on cash basis…….
a) reduces working capital requirement
b) increases working capital requirement
c) nullifies working capital requirement
d) None of the above
179. Longer period of credit allowed by creditors…….
a) increases working capital requirement
b) decreases working capital requirement
c) maximises working capital requirement
d) None of the above
180. Shortage of working Capital may result in..........…….
a) poor credit worthiness
b) higher trade discount
c) higher cash discount
d) None of the above
181. Operating cycle period can be reduced by……...........
a) Increasing the period of the credit allowed by creditors
b) decreasing the raw material storage period
c) decreasing the processing period
d) None of the above
182. Excessive investment in current assets results in.....…….
a) High Profitability
b) Low Profitability
 c) High liquidity
d) Low Profitability and High liquidity

183. Inadequate investment in current assets results in.....……

a) Low liquidity
b) High profitability
c) Low solvency
d) Low liquidity and High profitability
184. High investment in inventory affects adversely........…….
a) Liquidity
b) Long term solvency
c) credit worthiness
d) None of the above
185. Higher cash/bank balance…….
a) decreases profitability
b) increases profitability
c) increases operating efficiency
d) None of the above
186. Working Capital finance is raised from.......…….
a) Bank overdraft
b) Cash credit
c) Bill finance
d) All of the above
187. Cash working Capital includes.......…….
a) Fixed Assets less depreciation
b) Inventory at cost less depreciation
c) Inventory at cost plus depreciation
d) None of the above
188. Gross working capital is equal to..................…….
a) Fixed assets
b) current assets
c) Current liabilities
 d) None of the above
189. Net working Capital is…….
a) Excess of fixed assets over depreciation
b) Excess of current assets over current liabilities
c) Fixed assets less current liabilities
d) None of the above
190. .................working Capital increases ROI
a) Adequate
b) Surplus
c) Shortage of
d) None of the above
191. Shortage of working Capital results in …….
a) Poor credit rating
b) More cash discount
c) Less trade discount
d) None of the above
192. The following is not a current liability.
a) Creditors
b) Bank loan
c) Unclaimed dividend
d) Outstanding wages
193. The following will increases the net operating cycle.
a) Increase in the period of storage of material
b) Decrease in collection period
c) Increase in payment period
d) None of the above
194. The minimum amount of working capital required to operate at the lowest
level of activity is…….
a) Permanent working capital
b) Net working capital
c) Gross working capital
 d) None of the above
195. Permanent working capital is also known as............
a) Net working capital
b) Gross working capital
c) Core working capital
d) None of the above
196. Negative working Capital means…….
a) Excess of current assets over current liabilities
b) Excess of current liabilities over current assets
c) Excess of Fixed assets over current assets
d) None of the above
197. Balance sheet working Capital is calculated on the basis of…….
a) Book values of CA & CL as per Balance sheet
b) Market values of CA & CL
c) Fair values of CA & CL
d) None of the above
198. For estimation of working Capital debtors are valued at…….
a) Cost
b) Market value
c) Cost or at Market value depending upon the policy of the organisation
d) Fair value
199. Margin of safety is provided to....…….
a) cover possible variations in estimation
b) have safety in management of working capital
c) ensure safety in management of working capital
d) both a) & c)
200. Total current assets is equal to …….
a) Totalworking Capital
b) Networking Capital
c) Gross working Capital
d) None of the above
201. Working Capital is a statement of…….
a) Assets and liabilities
b) Current assets and current liabilities
c) Quick assets and quick liabilities
d) None of the above
202. Working Capital is the capital required to finance…….
a) Day to day operations
b) Purchase of fixed assets
c) Settlement of long term liabilities
d) None of the above
203. Debtors Turnover ratio indicates the …….
a) speed of collection of debt
a) speed of payment of dues
b) movement of stock
c) None of the above
204. Creditors Turnover ratio indicates the …….
b) speed of collection of debt
d) speed of payment of short-term dues
e) movement of stock
f) None of the above
205. Material in stock75 days, Finished goods in stock 54 days, Collection period
72 days & Payment period 60 days. The operating cycle is....
a) 146 days
b) 141 days
c) 165 days
d) 190 days
206. Material storage period 85 days, FG storage period 10 days, Processing period
15 days, Collection period 30 days & Payment period 24 days. The operating
cycle is....
a) 116 days
b) 124 days
 c) 90 days
d) 156 days
207. Purchases of Raw Materials Rs.96,000. Closing creditors Rs.16,000& No. of
days in year 360 days. Credit period allowed by creditors is........
a) 80 days
b) 75 days
c) 60 days
d) 73 days
208. Sales Rs.1,60,000, Closing Debtors Rs.32,000No. of days in year 360 days.
Credit period allowed to debtors is ........
a) 75 days
b) 72 days
c) 79 days
d) 84 days
209. Cost of goods sold Rs.1,40,000. Closing stock of Finished goodsRs.21,000&
No. of days in year 360 days.Finished goods holding period is........
a) 39 days
b) 46 days
c) 50 days
d) 54 days
210. Purchases of Raw MaterialsRs.96,000.Closing stock of Raw Materials
Rs.20,000& No. of days in year 360 days. Raw material stock holding period
is......................
a) 80 days
b) 75 days
c) 60 days
d) 73 days

Topic: Capital Budgeting

211) Capital Budgeting is a part of __________

a) Investment Decision b) Working Capital Decision
c) HR Decision d) Marketing Decision
212) Long term decisions are called as ___________
a) Capital Budgeting decision b) Working Capital Decision
c) Future Decision d) Marketing Decision
213) Capital Budgeting Deals with__________
a) Long term decision b) Short term Decision
c) Accounting Decisions d) HR Decisions
214) which of the following technique is not used for capital budgeting?
a) Payback period b) Net Present Value
c) Net Asset Method d) Profitability Index
215) which of the following is not a capital budgeting decision?
a) Expansion Program b) Modernization Program
c) Replacement of an Asset d) Stock turnover
216) Capital budgeting Decisions are based on __________
a) Incremental Debtors b) Incremental Cash Flows
c) Incremental Assets d) Incremental Capital
217) Depreciation is incorporated in cash flows because it_________
a) is unavoidable cost b) is a cash flow
c) Reduces tax liability d) involves an outflow
218) A proposal is not a capital budgeting proposal if it ______
a) Related to fixed asset b) Brings long term benefits
c) Brings short term benefits only d) has very large investment
219) which of the following statements is true about mutually exclusive projects?
a) They are not in direct competition with each other.
b) They are in direct competition with each other.
c) They are not evaluated based on shareholder wealth.
d) They are never evaluated
220) what is the net present value?
a) The future value of a project’s cash flows plus its initial cost
b) The present value of a project’s cash flows plus its initial cost
c) The future value of a project’s cash flows minus its initial cost
d) The present value of a project’s cash flows minus its initial Cost
221) Why are projects with negative net present values (NPVs) unacceptable to a firm?
a) Returns lower than the cost of capital result in firm failure.
b) Returns with negative NPVs cause an equal profit ratio.
c) Returns with negative NPVs are acceptable to a firm.
d) Returns lower than the cost of capital result in higher profit ratios
222) Projects with __________ are preferred
a) Lower payback period b) Normal payback period
c) Higher payback period d) Average pay back period
223) The Payback period is ____________
a) The time required to recover the original investment
b) The time required to depreciate asset
c) The time required to pay to creditors
d) The time required to pay debenture holders
224) For Capital budgeting Decision _______
a) Depreciation is to be considered b) Depreciation is to be ignored
c) Depreciation is to be calculated at 30% d) Depreciation is to calculated at 50%
225) ARR method _________
a) Takes in to account time value of money
b) Does not take in to account time value of money
c) Most modern capital expenditure decision
d) Not suitable for capital budgeting decision
226) Initial Cash outflows = ________
a) Cost of Asset + Installation expenses less salvage less working capital
b) Cost of Asset + Installation expenses + salvage + working capital
c) Cost of Asset + Installation expenses + working capital
d) Cost of Asset less Installation expenses less salvage less working capital
227) In case a project having equal annual inflows, the payback period can be calculated as ___
a) Cost of Investment ÷ total cash inflows
b) Cost of Investment ÷ No. of years of useful life of machinery
c) Cost of Investment ÷ Annul cash inflows
d) Total cash inflows less cost of investment
228) The average profit for computing the average rate of returns from new machine = ____
a) Cumulative cash inflows ÷ No. of years of useful life of machine
b) Cumulative net profit after tax ÷ cost of investment
c) Cumulative net profit after tax ÷ No. of years of useful life of machine
d) Cumulative net profit after tax ÷ Payback period
229) Net present value of Machine = _________
a) PV of Cash inflows less cost of investment
b) PV of Cash inflows ÷ Cost of Investment
c) PV of Net profit after tax less cost of investment
d) PV of Net profit after tax less average cost of investment
230) Profitability Index = _________
a) PV of Cash inflows less cost of investment
b) PV of Cash inflows ÷ Cost of Investment
c) PV of Cash inflows ÷ PV of Cash outflows
d) PV of Net profit after tax less cost of investment
231) The expenditure incurred on fixed assets are expected to give return over _______
a) One year b) Two Year c) A number of years d) Five Year
232) The method which shows number of years required by a project to recover the initial
investment is called __________
a) Payback period b) Investment Period c) Profit Period d) liquidity period
233) If the annual cash inflows are not constant, the payback period is calculated by taking ____
a) Average cash inflow b) Minimum Cash inflow c) Cumulative cash inflow d)
Only cash outflow
234) In payback period method, the project which ______ is recommended for investment.
a) Takes short Payback period
b) Takes very long payback period
c) Yields highest rate of return
d) is having longer life
235) In ____ the project which yields the highest rate of return is selected.
a) Net Present Value method b) Payback period method
c) Accounting rate of return method d) Discounted payback period
236) Under accounting rate of return method ________ is taken in to account.
a) Profit after depreciation and tax b) Profit after tax but before depreciation
c) Profit before tax but after depreciation d) Cash inflows
237) Accounting rate of Return = Average profit after tax ÷ ______ ×100
a) Average capital invested b) Average cash inflow
c) Cumulative cash inflow d) Net present value
238) Payback Period = Cash outflow ÷ ________
a) Annual cash inflow b) Average cash inflow
c) Cumulative cash inflow d) Net present value
239) As per profitability index method project is accepted when profitability Index is _____
a) Equal to or more than1 b) Only more than 1
c) Less than 1 d) only equal to 1
240) In capital budgeting decision cost and benefit of a project is measured in terms of _______
a) Accounting Profit b) Cash inflow c) Book Profit d) Cash outflow
241) Profitability index is the proportion between_________
a) Present value of Cash inflow and present value of cash outflow
b) Present value of Cash inflow and total cash outflow
c) Cash inflow and total cash outflow
d) Cash inflow and average cash outflow
242) In determination of cash outflow ________
a) Increase in working capital is added
b) Increase in working capital is deducted
c) Increase in working capital is ignored
d) Deduction or Addition of increase in working capital is depend on the decision of
management.
243) The method which uses accrual accounting is______
a) Payback b) ARR c) NPV d) IRR
244) M. Ltd; is considering acquiring a plant. The purchase price is Rs. 12,36,100. The company
believes that the net cash inflow of Rs. 3,09,025 will be generated every year. The plant will
have to be replaced in eight years. The payback period is ____
a) 4 years b) 3 years c) 6 years ` d) 2 years
245) The difference between the present value of cash inflows and the present value of cash
outflows associated with a project is known as_____
a) Average capital cost b) Discounted capital cost
c) Net capital cost d) Net present value of the project
246) Acceptance of one proposal excludes the acceptance of another proposal is a______
a) Diversification decision b) Mutually Exclusive decision
c) Expansion Decision d) Modernization decision
247) Release of working capital at the end of the life of the project is treated as ______
a) Cash inflow b) Cash outflow
c) Change in working capital d) not considered
248) Salvage value of the machine at the end of useful life of machine increases __
a) Cash inflow in the last year b) Cash outflow in the last year
c) Not considered d) Both Cash inflow and Outflow
249) An engineering project involves an initial investment of Rs. 2,00,000 and will give an
annual cash inflow Rs. 40,000 for 8 years. Find out payback period.
a) 5 years b) 6 years c) 8 years d) 4 years
250) The term average annual profit refers to _____
a) Average profit before depreciation and tax
b) Average profit after depreciation but before tax
c) Average profit after depreciation and tax till payback period
d) Average profit after depreciation and tax over the life of the project
251) Subsidy from Government is treated as _______
a) Cash inflow of the respective year b) Cash outflow of the respective year
c) Loss of the respective year d) Not considered
252) Which of the following statement is correct?
a) Capital Budgeting decision need not be taken carefully
b) Long term decision can be easily reversed
c) Capital budgeting decisions are very easy to take
d) Long term decision involve heavy risk
253) If present value of cash outflow is equal to present value of cash inflow, the net present
value will be ___________
a) Positive b) Negative c) Zero d) infinite
254) Which of the following technique does not take in to account the time value of money?
a) Internal rate of return b) Simple cash payback method
c) Net present value method d) Discounted cash payback method
255) The current worth of a some money to be received at future date is called ________
a) Real Value b) Future value c) Present Value d) Salvage value