M.Com Entrance Test
Solved Question Paper’ 2019
Dibrugarh University
1. The Consumption at
large inventory accumulation is indicated by
(A) Asset turnover ratio
(B) Working capital turnover ratio
(C) Inventory turnover ratio
(D) All of the above
Ans: (C) inventory
turnover ratio
2. Receipt and Payment Account is a summary of
(A) Debit and credit balances of ledger accounts
(B) Cash receipt and payment
(C) Incomes and expenses
(D) Balances of assets and liabilities
Ans: (B) cash
receipt and payment
3. The assets held by a business which can
be converted in the form of cash, without disturbing the normal operations of a
business are known as
(A) tangible assets
(B) intangible assets
(C) fixed assets
(D) current assets
Ans: (D) current
assets
4. Which of the
following is the type of capital budgeting decision?
(A) Diversification
(B) Replacement
(C) Expansion
(D) All of the above
Ans: (D) All of
the above
https://www.cmatutors.com/2021/01/capital-budgeting-mcq-financial.html
5. Which of the
following is the external source of cash?
(A) Long-term loans
(B) Short-term borrowings
(C) Issue of new shares
(D) All of the above
Ans: (D) All of
the above
6. The amount of
total cost increased due to increase in additional single unit is called
(A) Average cost
(B) Marginal cost
(C) Fixed cost
(D) unit cost
Ans: (B) marginal
cost
7. Current assets are
also referred to as
(A) net working capital
(B) investments
(C) inventory
(D) livestock
Ans: (A) net
working capital
8. Carriage Inward is
normally debited to
(A) Profit and Loss Account
(B) Manufacturing/Trading Account
(C) Marketing Account
(D)None of the above
Ans: (B)
Manufacturing/Trading Account
9. The standard
liquid ratio is
(A) 2:1
(B) 1:2
(C) 1:1
(D) 1:3
Ans: (C) 1:1
10. If the present
value of cash inflows is greater than the present value of cash outflows, the
project would be
(A) accepted
(B) rejected with condition
(C) rejected with approval
(D) rejected
Ans: (A) accepted
11. Finance functions
are
(A) planning for funds
(B) raising of funds
(C) allocation of resources
(D) All of the above
Ans: (D) All of
the above
12. The only feasible
purpose of Financial Management is
(A) Wealth maximization
(B) Sales maximization
(C) Profit maximization
(D) Asset maximization
Ans: (A) Wealth
maximization
13. Which one of the following accounting conventions stipulates that contingent assets appear as a footnote of the Balance Sheet?
(A) Materiality
(B) Consistency
(C) Disclosure
(D) Prudence
Ans: (C)
Disclosure
14. Which one of the
following Balance Sheet equations is correct?
(A) Assets = Owner’s equity
(B) Assets – Liabilities = Owner’s equity
(C) Assets + Liabilities = Owner’s equity
(D) Assets = Liabilities – Owner’s equity
Ans: (B) Assets –
Liabilities = Owner’s equity
15. The overall rate
of interest payable on various deposits is determined by the basis of directors
of the
(A) Head Office of each bank
(B) Central Government
(C) RBI
(D) Indian Banks Association
Ans: (C) RBI
(Reserve Bank of India)
16. Preparation of
Trial Balance helps mainly in
(A) Summarizing business transactions
(B) Verifying that GAAP has been observed
(C) Finalizing the sources and uses of funds statement
(D) Knowing the arithmetic accuracy of the transactions recorded
Ans: (D) Knowing
the arithmetic accuracy of the transactions recorded
17. A and B are partners in a firm sharing
profits and losses in the ratio 2:3. C a new partner is admitted for 1/4th
share. A and B old partners share Cs profit into their profit sharing ratio The
new profit sharing ratio The new profit sharing ratio of A B and C would be:
(A) 1:1:1
(B) 2:3:4
(c) 1:2:2
(D) 6:9:5
Ans: (D) 6:9:5
18. Which one of the
following is not a feature in the eye of law in sole proprietorship business?
(A) Undivided risk
(B) No government regulation
(C) Separate entity of the firm
(D) Unlimited liability
Ans: (C) Separate
entity of the firm
19. Dividend can be
paid generally out of
(A) Share premium account
(B) Capital redemption reserve account
(C) Current year’s profit
(D) All of the above
Ans: (C) Current
year’s profit
20. Merchant Banker
does not offer services in regard to
(A) Project appraisal
(B) Capital issue
(C) Project preparation
(D) Subscription in equity shares
Ans: (A) Project
appraisal
21. Which of the
following four assets is an intangible asset?
(A) Advance salary
(B) Copyright
(C) Preliminary expenses
(D) Loose tools
Ans: (B) Copyright
22. The current ratio is 3:2 and the amount
of current liabilities is Rs. 40,000. What is the amount of current assets?
(A) Rs. 60,000
(B) Rs. 70,000
(C) Rs. 80,000
(D) Rs. 1, 00,000
Ans: (A) Rs.
60,000
23. When audit is
carried out during the accounting period with some interval, it is called:
(A) Periodic audit
(B) Partial audit
(C) Continuous audit
(D) Interim audit
Ans: (C) Continuous
audit
24. Given the
following data extracted from the books of accounts of AB Ltd
Opening Stock – Rs. 30,000
Closing Stock – Rs. 40,000
Purchases – Rs. 1, 25,000
Carriage Inward – Rs. 2,000
Carriage Outward – Rs. 3,000
Return Outward – Rs. 5,000
Sales – Rs. 1, 50,000
The cost of goods sold will be
(A) Rs. 1, 30,000
(B) Rs. 1, 12,000
(C) Rs. 1, 20,000
(D) Rs. 1, 15,000
Ans: (B) Rs. 1,
12,000
[Hint: Cost of
goods sold = opening stock + Net purchases + Direct Expenses – Closing Stock]
25. The Life Insurance
Corporation of India (LICI) came into existence on
(A) September 1, 1956
(B) July 1, 1956
(C) March 1, 1956
(D) January 1, 1956
Ans: (A) September
1, 1956
26. The open market
operation in money market is an important tool of:
(A) Forex management
(B) Liquidity management
(C) Inventory management
(D) Marketing management
Ans: (B) Liquidity
management
27. Preliminary
expenses may be written off against
(A) Capital loss
(B) Capital profit
(C) Capital receipts
(D) None of the above
Ans: (D) None of
the above (Debited to profit and loss account)
28. Cost of
products/services is pre-determined under
(A) Standard costing
(B) Historical costing
(C) Marginal costing
(D) None of the above
Ans: (A) Standard
costing
29. Which is direct
cost?
(A) Raw material consumed
(B) Salaries to Administrative Staff
(C) Tax
(D) All of the above
Ans: (A) Raw
material consumed
30. Preparation of
Balance Sheet is an example of
(A) Analyzing
(B) Interpreting
(C) Recording
(D) Summarizing
Ans: (D)
Summarizing
31. External users of
financial accounting information are basically interested in the
(A) Profitability of an enterprise
(B) Solvency of an enterprise
(C) Both (A) and (B)
(D) Financial sustainability and (A) and (B)
Ans: (C) Both (A)
and (B)
32. Which of the following
statements is incorrect?
(A) Prudence is a concept to recognize revenue
(B) Accounting principles are general rules followed in preparation of financial statements
(C) Reliability of the financial statements is dependent on its faithful presentation.
(D) Use of raw material for production should not be created as an event
Ans: (A) Prudence
is a concept to recognize revenue
33. Which of the following assets cannot be treated as
fixed assets?
(A) Capital work in progress
(B) Patents
(C) Copyright
(D) Inventories
Ans: (D)
Inventories
34. Matching concept of accounting is a pre-requisite for
determination of
(A) social responsibility
(B) tax liability
(C) net profit
(D) manufacturing cost
Ans: (C) net
profit
35. Which of the
following accounts is treated as personal account?
(A) Prepaid Rent
(B) Capital Account
(C) Outstanding Salary Account
(D) All of the above
Ans: (D) All of
the above
36. Which of the
following expenditures cannot be treated as deferred revenue expenditure?
(A) Huge advertisement expenses paid for next 5 year
(B) Laboratory equipments acquired for research and development
(C) Brokerage paid on the issue of shares and debentures
(D) Purchase of a patent right
Ans: (D) Purchase
of a patent right
37. Goods sold to
Chandrika of Rs. 1, 00,000 is not recorded in any book. It is treated as an
(A) error of principle
(B) error of omission
(C) error of commission
(D) compensatory error
Ans: (B) error of
omission
38. Which of the
following is not a correct statement?
(A) Foreign Portfolio Investment (FPI) is usually unsustainable investment
(B) Foreign Direct Investment (FDI) is usually a short-term investment
(C) If an American company establishes a plant in Assam. It is known as FDI
(D) If an American buys shares of an Indian company. It is called FPI
Ans: (B) Foreign
Direct Investment (FDI) is usually a short-term investment
39. Which is the most
important branch of Commercial Law?
(A) Law and Practice
(B) Law and Tradition
(C) Law of Business
(D) Law of Contract
Ans: (D) Law of
Contract
40. A partnership
deed usually contains the particulars relating to
(A) names of the firm and partners
(B) nature of business
(C) capital contribution, profit-sharing ratio and other agreed upon terms and conditions
(D) All of the above
Ans: (D) All of the
above
41. If an initial
investment is Rs. 10, 00,000 and annual cash inflows are Rs. 1, 00,000 p.a. for
a period of 15 years what will be the payback period?
(A) 15 years
(B) 10 years
(C) 7.5 years
(D) 5 years
Ans: (B) 10 years
42. Which of the
following is not capitalized along with the purchase price of a fixed asset
acquired in 2019?
(A) Excise duty on the asset
(B) Delivery and handling cost
(C) GST
(D) Cost of installation
Ans: (C) GST
43. Which one of the
following is correct with respect to going-concern convention?
(A) The enterprise is not going to terminate its operations in the period ahead
(B) The enterprise may go out of business in the next accounting period
(C) The enterprise may not divest or diversify its operational spheres
(D) The enterprise may not revalue its assets during the current accounting period
Ans: (A) The
enterprise is not going to terminate its operations in the period ahead
44. Match List-I with List-II and select the correct
answer using the codes given below the Lists
|
|
List –I |
|
List – II |
|
(a) |
Goodwill |
1. |
Current liability |
|
(b) |
Overdraft |
2. |
Fixed asset |
|
(c) |
Preliminary expenses |
3. |
Reserves and surpluses |
|
(d) |
Premium on issue of shares |
4. |
Fictitious asset |
Code:
(A) a b c d
2 1 4 3
(B) a b c d
1 2 4 3
(C) a b c d
1 2 3 4
(D) a b c d
2 1 3 4
Ans: (A) a b c d
2 1 4 3
45. The fund
available with a company after paying all claims including tax and dividend is
called
(A) net profit
(B) net operating profit
(C) capital profit
(D) retained earnings
Ans: (D) retained
earnings
46. Commercial paper
is
(A) long-term corporate security meant for small investors
(B) medium-term corporate security meant for institutional investors
(C) Treasury paper meant for corporate investors
(D) short-term corporate security meant for large-scale investors
Ans: (D)
short-term corporate security meant for large-scale investors
47. Social
responsibility of business assumes considerable importance towards
(A) owners and workers
(B) consumers and community
(C) government and nation
(D) All of the above
Ans: (D) All of
the above
48. Which one of the
following types of information a creditor would be interested to gather while
reading annual reports of an enterprise?
(A) Profitability
(B) Liquidity
(C) Continuity
(D) Solvency
Ans: (B) Liquidity
49. Consider the
following statements:
1. Closing Stock is valued on the basis of cost price or net realizable value whichever is lower
2. The manufactured goods in a year are transferred from the manufacturing Account to Trading Account at cost price.
3. The going concern concept assumes that a business will continue its operation indefinitely.
4. Revenue is not increased by taking loans although assets and liabilities are increased
Which of the above
statements are correct?
(A) 1,3 and 4
(B) 1 and 2
(C) 2 and 3
(D) 1, 2 and 3
Ans: (C) 2 and 3
50. Given the
following data
Opening Stock – Rs. 5.000
Closing Stock – Rs. 7,000
Purchases – Rs. 10,000
Manufacturing expenses – Rs. 20,000
Loss of materials due to fire – Rs. 1,000
The cost of
production would be
(A) Rs. 28,000
(B) Rs. 29,000
(C) Rs. 27,000
(D) Rs. 30,000
Ans: (C) Rs.
27,000
51. While making an
adjusting entry in respect of interest on capital we credit
(A) Capital Account/Current Account of the owner
(B) Profit and Loss Account
(C) Interest on Capital Account
(D) Drawings Account
Ans: (A) Capital
Account/Current Account of the owner
52. The loss on sale
of old furniture is debited to
(A) Profit and Loss Account
(B) Furniture Account
(C) Trading Account
(D) Depreciation Account
Ans: (A) Profit
and Loss Account
53. A company can
forfeit shares if the
(A) shareholder fails to pay the amount of the call within the stipulate time
(B) shareholder pays calls in advance
(C) shareholder does not pay the application money
(D) shares have been issued at par
Ans: (A)
shareholder fails to pay the amount of the call within the stipulate time
54. Consider the following statements: The current ratio would be reduced by
1. collection of book debts
2. payment of trade creditors
3. purchase of machinery for cash
4. cash deposited into bank
Which of the above
statements are correct?
(A) 1 and 3
(B) 2 and 3
(C) 2 and 4
(D) 1, 3 and 4
Ans: (B) 2 and 3
55. The Memorandum of
Association of a company shall be signed by
(A) Director
(B) Shareholder
(C) Subscribers
(D) Promoter and Director
Ans: (C) Subscriber
56. A company
purchased the following assets and paid through 1, 00,000 fully paid equity
shares of Rs. 10 at a premium of Rs. 2:
Building – Rs. 5, 00,000
Machinery – Rs. 4, 00,000
Stock in Trade – Rs. 1, 00,000
In Funds Flow
Statement, this transaction will result in
(A) Funds inflow of Rs. 10,00,000
(B) Funds outflow of Rs. 10,00,000
(C) Funds inflow of Rs. 1,00,000
(D) Funds inflow of Rs. 9,00,000
Ans: (C) Funds inflow of Rs. 1,00,000
57. Under the actual concept. Which one of
the following will not be shown as an asset/liability in the Balance Sheet of
an entity?
(A) Interest due but not paid
(B) Interest due but not received
(C) Interest due and paid
(D) Interest paid but not due
Ans: (A) Interest due but not paid
58. A company purchased 8% bonds at a cost
of Rs. 12,00,000 face value Rs. 10,00,000 on January 1, 2018 Half yearly
interest is payable on this investment on June 30th and December 31st
every year. The company closes its accounts on 31.3.2018. The amount of accrued
interest shown in the Profit and Loss Account for the year ended is
(A) Rs. 10,000
(B) Rs. 60,000
(C) Rs. 20,000
(D) Rs. 80,000
Ans: (C) Rs. 20,000
59. A machine with a
WDV of Rs. 10,000 has been sold for Rs. 13,000. The amount of profit is a:
(A) capital receipt and profit involved should be transferred to capital reserve
(B) revenue receipt
(C) capital receipt and profit involved should be transferred to general reserve
(D) capital receipt and profit involved should be transferred to Profit and Loss Account
Ans:
(D) capital receipt and profit involved should be transferred to Profit and
Loss Account
60. Rs. 10,000 spent
on the replacement worn-out parts of an electrical machinery is treated as
(A) capital expenditure
(B) revenue expenditure
(C) deferred revenue expenditure
(D) capital loss
Ans:
(B) revenue expenditure
[Hint:
The expenditure given in the question is revenue expenditure because Rs. 10,000
spent on the replacement of worn out parts of an electronic machinery does not
increase its earning capacity rather it is a repairs and maintenance cost.]
61. Consider the
following statements
A credit purchase during the accounting year which was not recorded in the book of accounts but included in the Closing Stock is to be
1. added to the Credit Purchases account
2. added to the Creditors Account
3. subtracted from the Closing Stock
4. added to the Opening Stock
Which of the
statements given above is/are correct?
(A) 3 only
(B) 1 and 2
(C) 2 and 3
(D) 2,3, and 4
Ans: (B) 1 and 2
62. Secret reserves
are created by means of
(A) transfer to general reserve
(B) providing excessive depreciation
(C) overvaluation of inventories
(D) undervaluation of liabilities
Ans: (B) providing
excessive depreciation
63. Which of the
following is known as “Smart Money”?
(A) Amount deposited into post office savings bank account
(B) Amount deposited into savings bank account
(C) Credit card
(D) Cash in hand
Ans: (C) Credit
card
64. The Government
securities are not issued through
(A) auction
(B) contract
(C) sale
(D) private placement with the RBI
Ans: (D) private
placement with the RBI
65. Profit prior to
incorporation is transferred to
(A) general reserve
(B) capital reserve
(C) Profit and Loss Account
(D) None of the above
Ans: (B) capital
reserve
66. Dividends are
usually paid on
(A) paid-up capital
(B) authorized capital
(C) called –up capital
(D) subscribed capital
Ans: (A) paid-up
capital
67. Sinking fund for
the redemption at debenture is an instance of
(A) reserve
(B) provision
(C) reserve fund
(D) reserve and surplus
Ans: (D) reserve and surplus
[Hint: A sinking fund for the
replacement of a fixed asset is a provision. But a sinking fund for redemption
of debentures or repayment of loan is an appropriation of profits.]
68. Audit Committee
shall act in accordance with the terms of reference to be specified by the
(A) Statutory Auditors
(B) SEBI
(C) Non-Executive Directors in Audit Committee
(D) Central Government
Ans: (C)
Non-Executive Directors in Audit Committee
69. When the sale
increases from Rs. 40,000 to Rs. 60,000 and profit increases by Rs. 5,000; the
P/V ratio is
(A) 20%
(B) 30%
(C) 25%
(D) 40%
Ans: 25% [Hint: Change in
profit/change in sales *100)
70. A company which has a margin of safety
of Rs. 4,00,000 makes a profit of Rs. 80,000. Its fixed cost is Rs. 5,00,000
and its breakeven sales will be
(A) Rs. 20 lakh
(B) Rs. 30 lakh
(C) Rs. 25 lakh
(D) Rs. 40 lakh
Ans: (C) Rs. 25
lakh
[Pv ratio = profit/mos*100 =
20%; BEP = Fixed cost / pv ratio = 25 lacs]
71. Spent Rs. 20,000
as legal expenses for abuse of trademark. It is an example of
(A) capital expenditure
(B) revenue expenditure
(C) deferred revenue expenditure
(D) direct expenditure
Ans: (B) revenue expenditure
72. Which of the
following statements is correct?
(A) The corporate governance is about ethical conduct only
(B) The corporate governance is beyond the realm of law
(C) The corporate governance stems from culture and mind set of management and cannot be regulated by legislation alone
(D) All of the above
Ans: (D) All of the above
73. Which of the
following is a correct statement?
(A) GST is subsuming many indirect taxes already level in India earlier
(B) In India excise duty and service tax are level in the Central Government/ State Government
(C) VAT is level by the State Government
(D) All of the above
Ans: (D) All of the above
74. In India FDI is
prohibited in
(A) lottery business
(B) gambling and betting
(C) business of chit fund
(D) All of the above
Ans: (D) All of the above
75. Balance of
payments can be favorable if
(A) exports are increased
(B) imports are increased
(C) imports remain the same
(D) foreign portfolio investment increases
Ans: (A) exports are increased
76. Macro economics
deals with
(A) growth of an economy
(B) total consumption
(C) national income
(D) All of the above
Ans: (D) All of the above
77. Breakeven point
is that point where
(A) Total revenue = Total cost
(B) Total revenue = Fixed cost + variable cost
(C) Marginal cost = Total cost
(D) None of the above
Ans: (A) Total revenue = Total cost
78. Life insurance is
a
(A) social security measure
(B) safety measure
(C) self-esteem measure
(D) self-actualisation measure
Ans: (A) social security measure
79. Questions Missing
80.
81.
82.
83.
84.
85.
86.
87. The distinctive
characteristic of perpetual succession of a joint-stock company refers to
(A) uninterrupted business in spite of continuous losses
(B) immunity from government direction for the closure of the company
(C) immunity from resolution passed in the annual general body meeting for the closure of the company
(D) Uninterrupted existence not affected by the death or insolvency of members of the company
Ans: (D) Uninterrupted existence not affected by the
death or insolvency of members of the company
88. Which of the
following method does not consider time value of money?
(A) Net present value
(B) Internal rate of return
(C) Average rate of return
(D) Sum of the present values
Ans: (C) Average rate of return
89. Which of the following can be crossed?
(A) Bill of exchange
(B) Promissory note
(C) Cheque
(D) All of the above
Ans: (C) Cheque
90. Subscription
received in advance during the current year is
(A) an income
(B) an asset
(C) a liability
(D) None of the above
Ans: (C) a liability
91. Share Allotment Account is
(A) Expenses Account
(B) Liability Account
(C) Asset Account
(D) Income Account
Ans: (B) Liability Account
92. Premium on issue
of shares can be used for
(A) issue of fully paid bonus shares
(B) distribution of profit
(C) transferring to general reserve
(D) None of the above
Ans: (A) issue of fully paid bonus shares
93.
A company has issued 10,000 equity shares of Rs. 10 each on which full call has
been made. All the money was duly received with the exception of Final call @
Rs. 1 on 500 equity shares. These 500 equity shares will be shown as:
(A) Subscribed and fully paid up
(B) Subscribe but not fully paid up
(C) Issued share capital
(D) None of the above
Ans: (B) Subscribe but not fully paid up
94. Debenture holders
are
(A) owners of the company
(B) lenders of the company
(C) vendors of the company
(D) customers of the company
Ans: (B) lenders of the company
95. Discount or loss
on issue of Debentures to be written off after 12 months from the date of
Balance Sheet, after the period of operating cycle, is shown as
(A) other current assets
(B) other non-current assets
(C) other long term liabilities
(D) other current liabilities
Ans: (B) other non-current assets
96. Cash Flow
Statement is based upon
(A) accrual basis accounting
(B) cash basis accounting
(C) accounting equation
(D) None of the above
Ans: (B) cash basis accounting
97. Interest received
by other than financial enterprise is shown in Cash Flow statement under
(A) operating activities
(B) investing activities
(C) financing activities
(D) extraordinary activities
Ans: (A) operating activities
98. An example of an activity which is classified as
financing activity in case of all enterprises is:
(A) payment of salaries
(B) payment of dividend on shares
(C) purchase of goodwill
(D) payment of interest on borrowings
Ans: (B) payment of dividend on shares
99. Which of the
following statements is true about a Balance Sheet?
(A) It is called a statement of condition
(B) It shows the financial position for a period of time
(C) It shows the financial position at a point in time
(D) It determines the profit/loss at a point in time
Ans: (C) It shows the financial position at a point in
time
100. Assuming a
period of inflation which method of inventory valuation would be matching to
the cost of goods sold?
(A) LIFO
(B) FIFO
(C) Simple average
(D) Weighted average
Ans: (A) LIFO
***
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