1. What is the main objective of financial accounting?
[A] profit and loss account only
[B] balance sheet only
[C] both P & L account and balance sheet
[D] trial balance only
Answer: Option [C]
2. According to which concept the owners are considered to be different from the business
[A] business entity concept
[B] going concern concept
[C] money measurement concept
[D] accounting period concept
Answer: Option [A]
3. According to which concept all the transactions are measurable in the terms of money are recorded in accounts?
[A] business entity concept
[B] going concern concept
[C] money measurement concept
[D] accounting period concept
Answer: Option [C]
4. While putting the value or price of an entity in financial records the lowest price is recorded not the current price or current market value. This is known as
[A] Business Entity Concept
[B] Conservatism
[C] Expenditure Concept
[D] Money Measurment Concept
Answer: Option [B]
5. Which of the following is related to Scientific system of maintaining account?
[A] single entry
[B] double entry
[C] contra entry
[D] book entry
Answer: Option [B]
6. Which of the following defines outstanding salary account?
[A] natural personal account
[B] artificial personal account
[C] representative personal account
[D] real account
Answer: Option [C]
7. Debit the receiver, credit the giver is rule for
[A] personal account
[B] tangible real account
[C] nominal account
[D] representative personal account
Answer: Option [A]
8. Interest earned is a
[A] personal account
[B] real account
[C] nominal account
[D] Intangible real account
Answer: Option [C]
9. Investment is a
[A] personal account
[B] real account
[C] nominal account
[D] representative personal account
Answer: Option [B]
10. Trading account is a
[A] personal account
[B] real account
[C] nominal account
[D] none of the above
Answer: Option [C]
11. Profit and loss account starts with
[A] net profit
[B] net loss
[C] gross profit
[D] none of the above
Answer: Option [C]
12. All revenue incomes are credited to
[A] manufacturing account
[B] trading account
[C] profit and loss account
[D] none of the above
Answer: Option [C]
13. In profit and loss account, if debit is more than the credit, the difference is
[A] net profit
[B] net loss
[C] gross profit
[D] none of the above
Answer: Option [A]
14. Assets which are acquired and held permanently and used in the business with the objective of making profits is known as
[A] fixed assets
[B] current assets
[C] intangible assets
[D] none of the above
15. Which of the following assets have definite physical share or identity and existence?
[A] fictitious assets
[B] current assets
[C] tangible assets
[D] intangible assets
Answer: Option [C]
16. Outstanding expenses is a
[A] liability
[B] income
[C] asset
[D] none of the above
Answer: Option [A]
17. Interest on capital is a business can be defined as
[A] expense
[B] income
[C] liability
[D] asset
Answer: Option [A]
18. The ratios which reflect managerial efficiency in handling the assets is
[A] turnover ratios
[B] profitability ratios
[C] short term solvency ratio
[D] none of the above
Answer: Option [A]
19. Interest on capital is added with
[A] capital
[B] profit
[C] loss
[D] donation
Answer: Option [A]
20. The ratios which reveal the final result of the managerial policies and performance is
[A] turnover ratios
[B] profitability ratios
[C] long term solvency ratio
[D] none of the above
Answer: Option [B]
21. Which of the following matches with fixed assets ratio?
[A] short-term solvency ratio
[B] long-term solvency ratio
[C] profitability ratio
[D] turnover ratio
Answer: Option [B]
22. The ratio which determines the profitability from the shareholders point of view is
[A] return on investment
[B] gross profit ratio
[C] return on shareholders funds
[D] operating profit ratio
Answer: Option [C]
23. The ratio which shows the proportion of profits retained in the business out of the current year profits is
[A] retained earnings ratio
[B] pay out ratio
[C] earnings per share
[D] None
Answer: Option [A]
24. How the dividend is related to the market value of shares?
[A] interest coverage ratio
[B] fixed dividend coverage ratio
[C] debt service coverage ratio
[D] dividend yield ratio
Answer: Option [D]
25. Which ratio is calculated to ascertain the efficiency of inventory management in terms of capital investment?
[A] stock velocity ratio
[B] debtors velocity ratio
[C] creditors velocity ratio
[D] working capital turnover ratio
Answer: Option [A]
26. Which ratio measures the number of times the receivables are rotated in a year in terms of sales?
[A] stock turnover ratio
[B] debtors turnover ratio
[C] creditors velocity ratio
[D] working capital turnover ratio
Answer: Option [B]
27. Current assets - current liabilities =
[A] fixed capital
[B] working capital
[C] opening capital
[D] closing capital
Answer: Option [B]
28. The ratio establishes the relationship between fixed assets and long-terms funds is
[A] current ratio
[B] fixed assets ratio
[C] fixed assets turnover ratio
[D] debt equity ratio
Answer: Option [B]
29. A high capital gearing ratio indicates
[A] under capitalization
[B] over capitalization
[C] borrowed capital
[D] long term funds
Answer: Option [A]
30. Low turnover of stock ratio indicates
[A] solvency position
[B] monopoly situation
[C] overinvestment in inventory
[D] liquidity position
Answer: Option [C]
31. All those assets which are converted into cash in the normal course of business within one year are known as
[A] fixed assets
[B] current assets
[C] fictitious assets
[D] wasting assets
Answer: Option [B]
32. Any transaction between a current account and another current account does not affect
[A] profit
[B] funds
[C] working capital
[D] capital
Answer: Option [B]
33. Decrease in current asset
[A] increases working capital
[B] decreases working capital
[C] decrease fixed capital
[D] increase fixed capital
Answer: Option [B]
34. Decrease in current liability
[A] increases working capital
[B] decreases working capital
[C] decreases fixed capital
[D] ncreases fixed capital
Answer: Option [A]
35. Profit on sale of fixed assets is
[A] non trading income
[B] operating income
[C] non trading gains
[D] long term gain
Answer: Option [C]
36. In funds flow statement, funds from operations is
[A] application of fund
[B] source of cash
[C] application of cash
[D] source of fund
Answer: Option [D]
37. In funds flow statement, outflow of funds on account of operations is
[A] application of fund
[B] source of cash
[C] application of cash
[D] source of fund
Answer: Option [A]
38. In funds flow statement, repayment of long-term loans is
[A] application of fund
[B] source of cash
[C] application of cash
[D] source of fund
Answer: Option [A]
39. In adjusted P & L account, depreciation on fixed assets will be
[A] debited
[B] credited
[C] ignored
[D] deducted
Answer: Option [A]
40. Cash flow analysis is based on the
[A] capital
[B] fixed assets
[C] cash concept of funds
[D] working capital
Answer: Option [C]
41. In cash flow statement, increase in current asset
[A] increases cash
[B] decreases cash
[C] increases working capital
[D] decreases working capital
Answer: Option [B]
42. In cash flow statement, opening balances of bank balance is posted in which side of the statement
[A] sources of cash
[B] application of cash
[C] sources of funds
[D] application of funds
Answer: Option [A]
43. In cash flow statement, closing balances of bank balance is posted in which side of the statement
[A] sources of cash
[B] application of cash
[C] sources of funds
[D] application of funds
Answer: Option [B]
44. Production cost under marginal costing includes
[A] prime cost only
[B] prime cost and fixed overhead
[C] prime cost and variable overhead
[D] prime cost, variable overhead and fixed overhead
Answer: Option [C]
45. Contribution margin is equal to
[A] fixed cost - loss
[B] profit + variable cost
[C] sales - fixed cost - profit
[D] sales - profit
Answer: Option [A]
46. P/V Ratio is an indicator of
[A] the rate at which goods are sold
[B] the volume of sales
[C] the volume of profit
[D] the rate of profit
Answer: Option [D]
47. An increase in variable costs
[A] increases p/v ratio
[B] increases the profit
[C] reduces contribution
[D] increases margin of safety
Answer: Option [C]
48. CVP analysis is most important for the determination of
[A] sales revenue necessary to equal fixed costs
[B] relationship between revenues and costs at various levels of operations
[C] variable revenues necessary to equal fixed costs
[D] volume of operations necessary to Break-even
Answer: Option [A]
49. In funds flow statement, outflow of funds on account of operations is
[A] application of fund
[B] source of cash
[C] application of cash
[D] source of fund
Answer: Option [A]
50. In funds flow statement, repayment of long-term loans is
[A] application of fund
[B] source of cash
[C] application of cash
[D] source of fund
Answer: Option [A]
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