This quiz works best with JavaScript enabled. Home > General Knowledge > Economy > Accounting > Accounting – Quiz 5 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Accounting Quiz 5 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Which is Time Adjusted Method of Capital Budgeting? A) Payout period method. B) Pay-back period method. C) Net present value method. D) Pay-off method. Show Answer Correct Answer: C) Net present value method. 2. Total assets - Total external liabilities equal to A) Net Depreciation. B) Net assets. C) Net Cost. D) Net liabilities. Show Answer Correct Answer: B) Net assets. 3. Which accounting standard deals with intagible assets? A) AS-6. B) AS-2. C) AS-14. D) AS-26. Show Answer Correct Answer: D) AS-26. 4. Which of the following cash flows is not a cash flow from operating activity? A) Payment of dividend. B) Cash payment to and on behalf of employees. C) Cash payments to suppliers for goods and services. D) Cash receipts from royalties, fees, commissions and other revenue. Show Answer Correct Answer: A) Payment of dividend. 5. Which one is not an important objective of financial Management? A) Value Maximisation. B) Profit Maximisation. C) Maximisation of Social benefits. D) Wealth Maximisation. Show Answer Correct Answer: C) Maximisation of Social benefits. 6. According to the guidelines issued by SEBI, a company has to create Debenture Redemption Reserve equivalent to .....of the amount of debentures issue before redemption of debentures commences. A) 25 %. B) 100 %. C) 75 %. D) 50 %. Show Answer Correct Answer: D) 50 %. 7. Which of the following recognises risk in capital budgeting analysis by adjusting estimated cash flows and employs risk-free rate to discount the adjusted cash flows? A) Certainty Equivalent Approach. B) Cash. C) Pay-back Period. D) Inventory. Show Answer Correct Answer: A) Certainty Equivalent Approach. 8. Goods withdrawn by the proprietor for his personal use are A) Added to the purchases. B) Shown as a deduction from the sales. C) Treated as sales at cost price. D) Shown as a deduction from the purchases. Show Answer Correct Answer: D) Shown as a deduction from the purchases. 9. The listed companies are allowed to pay brokerage on private placement of capital at the maximum rate of A) 0.5 %. B) 1.5 %. C) 2.5 %. D) 3.5 %. Show Answer Correct Answer: B) 1.5 %. 10. Which one of the following is not used to estimate cost of equity capital? A) Capital asset pricing model. B) External yield criterion. C) Dividend plus growth rate. D) Equity capitalisation approach. Show Answer Correct Answer: B) External yield criterion. 11. A newly established company cannot be successful in obtaining finance by way of A) Issue of debenture. B) Issue of equity capital. C) Issue of preference share. D) None of the above. Show Answer Correct Answer: A) Issue of debenture. 12. The Present Value of all inflows are cumulated in A) Order of Time. B) Order of Investment. C) Order of Sales. D) Order of Cash. Show Answer Correct Answer: A) Order of Time. 13. In case the depreciable assets are revalued, the provision for depreciation is based on A) AS - 6 is silent in this regard. B) The revalued amount on the estimate of the remaining useful life of such assets. C) Original cost of the assets. D) Depreciated value of the assets. Show Answer Correct Answer: B) The revalued amount on the estimate of the remaining useful life of such assets. 14. Identify the item which is not an operating expense A) General management salaries. B) Depreciation of office equipment. C) Loss on sale of motor car. D) Advertising expenses. Show Answer Correct Answer: C) Loss on sale of motor car. 15. Multinational corporations face problems since they A) Cannot benefit from the advantage of comparative advantage. B) May raise political problems in countries where their subsidiaries operate. C) Can only invest at home, but not overseas. D) Can only invest overseas, but not at home. Show Answer Correct Answer: B) May raise political problems in countries where their subsidiaries operate. 16. Price Ratio Method is A) Asset Method. B) Growth Method. C) Earning Yield Method. D) Dividend Yield Method. Show Answer Correct Answer: C) Earning Yield Method. 17. Which is a capital expenditure? A) Project Expansion. B) Project Generation. C) Research and Development Project. D) All of the above. Show Answer Correct Answer: D) All of the above. 18. The fundamental accounting equation' Assets = Liabilities + Capital' is the formal expression of A) Money measurement concept. B) Matching concept. C) Dual aspect concept. D) Going concern concept. Show Answer Correct Answer: C) Dual aspect concept. 19. Profit maximisation is A) Primary objective of business. B) It is indicator of economic efficiency. C) Measurement of Success of business decisions. D) All of the above. Show Answer Correct Answer: D) All of the above. 20. EBIT /Total Assets Ratio is A) Solvency Ratio. B) Turnover Ratio. C) Liquidity Ratio. D) Profitability Ratio. Show Answer Correct Answer: D) Profitability Ratio. 21. Redeemable preference shares is ..... A) Current assets. B) Non-Current liability. C) Current liability. D) Non-current assets. Show Answer Correct Answer: B) Non-Current liability. 22. Capital budgeting means A) Planning for Profit. B) Planning for Capital Assets. C) Planning for Sales. D) Planning for Cash. Show Answer Correct Answer: B) Planning for Capital Assets. 23. Accounting Standard Board was set up by A) Government of India. B) Institute of Chartered Accountants of India. C) Institute of Company Secretaries of India. D) Institute of Cost and Works Accountants of India. Show Answer Correct Answer: B) Institute of Chartered Accountants of India. 24. Amount of premium on issue of shares is decided by the ..... as per the guidelines issued by SEBI A) Board of Directors. B) Registrar of Companies. C) Company Law Board. D) Shareholders. Show Answer Correct Answer: A) Board of Directors. 25. Which method of capital budgeting is known as 'Accounting Rate of Return Method'? A) Return on Investment. B) Rate of Return Method. C) Average Rate of Return Method. D) All of the above. Show Answer Correct Answer: D) All of the above. 26. A company can buy-back its own shares out of A) Free reserves. B) Proceeds of any shares. C) Securities premium account. D) All of the above. Show Answer Correct Answer: D) All of the above. 27. Payback reciprocal method of ranking investment proposals should be used only when A) The econontic life of the project is at least twice of the pay back period. B) Annual savings are even for the entire period. C) Both (a) and (b). D) None of the above. Show Answer Correct Answer: C) Both (a) and (b). 28. Identify the item that is not taken into account in computing the current ratio A) Cash. B) Bank. C) Land. D) Bills recoverable. Show Answer Correct Answer: C) Land. 29. Which of the following transactions will improve the current Ratio? A) Payment of preliminary expenses by way of equity shares. B) Bills receivable Dishonoured. C) Issue of new shares. D) Cash collected from customers. Show Answer Correct Answer: C) Issue of new shares. 30. Which of the following accounting standards is not mandatory in India? A) Non-monetary assets and fixed assets. B) Inventory and depreciation accounting. C) Monetary assets and depreciation accounting. D) Fixed assets accounting and revenue recognition. Show Answer Correct Answer: A) Non-monetary assets and fixed assets. 31. Consider the following statement: A low inventory turnover may be the result of A) Obsolescence of some of the stock. B) Slow-moving inventory. C) Both (a) and (b). D) Frequent stock-outs. Show Answer Correct Answer: C) Both (a) and (b). 32. What is the advantage of 'NPV Method'? A) This method can be allied where cash inflows are even. B) It takes into account the objective of maximum profitability. C) This method considers the entire economic life of the project. D) All of these. Show Answer Correct Answer: D) All of these. 33. Investors engage in ..... when they move funds into foreign currencies in order to take advantage of interest rates abroad that are higher than domestic interest rates. A) Short positions. B) Interest arbitrage. C) Currency arbitrage. D) Long positions. Show Answer Correct Answer: B) Interest arbitrage. 34. A nation wishing to reduce its current account deficit would be advised to A) Reduce government taxes. B) Increase private investment spending. C) Decrease domestic consumption spending. D) Engage in more government spending. Show Answer Correct Answer: C) Decrease domestic consumption spending. 35. If the stock turnover ratio is 4 times and the collection period is 30 days the operating cycle would be A) 60 days. B) 30 days. C) 90 days. D) 120 days. Show Answer Correct Answer: C) 90 days. 36. According to section..... of the Indian Partnership Act, 1932, dissolution of partnership between all the partners of a firm is called the 'dissolution of the firm'. A) 49. B) 29. C) 19. D) 39. Show Answer Correct Answer: D) 39. 37. The direct advantages of accounting do not include A) Comparison of results. B) Competitive advantage. C) Preparation of financial statements. D) Information to interested groups. Show Answer Correct Answer: B) Competitive advantage. 38. Which is the function of finance as per John J. Hampton? A) Managing funds. B) Managing assets. C) Liquidity function. D) All of the above. Show Answer Correct Answer: D) All of the above. 39. Capital budgeting process involves A) Screening of the proposals. B) Evaluation of various proposals. C) Identification of investment proposals. D) All of the above. Show Answer Correct Answer: D) All of the above. 40. If Strike price is more than the spot price of the asset, the call option is known as A) Out of Money Option. B) American Option. C) European Option. D) In the Money Option. Show Answer Correct Answer: A) Out of Money Option. 41. Under the head 'current liabilities', the following items are disclosed in the Final Accounts of a company A) Acceptance or Bills Payable. B) Sundry creditors. C) Outstanding expenses and Advance Incomes. D) All of the above. Show Answer Correct Answer: D) All of the above. 42. Modigliani and Miller's dividend policy of a firm is A) Relevant. B) Irrelevant. C) Unrealistic. D) None of these. Show Answer Correct Answer: B) Irrelevant. 43. All the fully paid up shares of a company may be converted into stock if so authorised by the .....of a company. A) Company Law Board. B) Registrar of Companies. C) Articles of Association. D) Memorandum of Association. Show Answer Correct Answer: C) Articles of Association. 44. Accounting rate of return is the ratio of average value of A) Profit after tax to book value of the investment. B) Profit after tax to present value of the investment. C) Profit before tax to present value of the investment. D) Profit after tax to salvage value of the investment. Show Answer Correct Answer: A) Profit after tax to book value of the investment. 45. Which of the following is not true for cash Budget? A) Only revenue nature cash flows are shown. B) Proposed issue of share capital in shown as an inflow. C) All inflows would arise before outflows for those periods. D) That shortage or excess of cash would appear in a particular period. Show Answer Correct Answer: A) Only revenue nature cash flows are shown. 46. The basic rule of book-keeping "Debit all expenses and losses and credit all gains and incomes" is applicable to A) Real account. B) Personal account. C) Nominal account. D) None of the above. Show Answer Correct Answer: C) Nominal account. 47. Cost of depreciation fund computed as A) Long term loan capital. B) Short term loan capital. C) Profit. D) Dividend. Show Answer Correct Answer: A) Long term loan capital. 48. An important feature of a ..... is that the holder has the right, but not the obligation, to buy or sell currency. A) Foreign exchange option. B) Futures market contract. C) Foreign exchange arbitrage. D) Swap. Show Answer Correct Answer: A) Foreign exchange option. 49. The satisfactory ratio between share-holder's funds and long terms loan is ..... A) 2:1. B) 3:1. C) 4:1. D) 1 : 1. Show Answer Correct Answer: A) 2:1. 50. Which of the following is true for mutual funds in India? A) Entry load is allowed. B) Exit load is not allowed. C) Entry load is not allowed. D) Exit load allowed is some cases. Show Answer Correct Answer: D) Exit load allowed is some cases. 51. Financial Management includes A) Finance function. B) Financial Resources. C) Measurement of Performance. D) All of the above. Show Answer Correct Answer: D) All of the above. 52. The finance manager plays an important role in A) Amalgamation. B) Reconstruction. C) Liquidation Decisions. D) All of the above. Show Answer Correct Answer: D) All of the above. 53. If no information is available, the General Rule for valuation of stock for balance sheet is A) Standard Cost. B) Historical Cost. C) Realizable Value. D) Replacement Cost. Show Answer Correct Answer: B) Historical Cost. 54. Accounting is generally understood as A) Means of communication. B) Source of business information. C) Summarisation of business transactions. D) All of the above. Show Answer Correct Answer: D) All of the above. 55. Which round of international trade negotiations resulted in the creation of the World Trade Organization? A) Doha Round of 2003-2007. B) Uruguay Round of 1986-1993. C) Kennedy Round of 1964-1967. D) Tokyo Round of 1973-1979. Show Answer Correct Answer: B) Uruguay Round of 1986-1993. 56. Which of the following statement(s) regarding IRR is true? A) If IRR is less than the firm's cost of capital, the project should be rejected. B) A project can have multiple IRRs depending on the cash flow streams. C) Both (a) and (b). D) A project can have only one IRR. Show Answer Correct Answer: C) Both (a) and (b). 57. Which of the following derivative is not traded on Indian Stock Market? A) Stock Futures. B) Forward Rate Agreements. C) Index Futures. D) Index Options. Show Answer Correct Answer: B) Forward Rate Agreements. 58. Which of the following is not followed in capital budgeting? A) Accrual Principle. B) Cash flows principle. C) Post-tax Principle. D) Interest Exclusion Principle. Show Answer Correct Answer: A) Accrual Principle. 59. The least common type of transaction in the foreign exchange is a A) Spot transaction. B) Swap transaction. C) Forward transaction. D) None of the above. Show Answer Correct Answer: C) Forward transaction. 60. Which is external source of finance? A) Letters of Credit. B) Advance from customers. C) Finance from Companies. D) All of the above. Show Answer Correct Answer: D) All of the above. ← PreviousNext →Related QuizzesEconomy QuizzesGeneral Knowledge QuizzesAccounting Quiz 1Accounting Quiz 2Accounting Quiz 3Accounting Quiz 4Accounting Quiz 6Accounting Quiz 7Accounting Quiz 8 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books