This quiz works best with JavaScript enabled. Home > General Knowledge > Economy > Accounting > Accounting – Quiz 6 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Accounting Quiz 6 (60 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Which is the importance of the concept of cost of capital? A) Helpful in Capital budgeting process. B) Helpful in Capital structure decisions. C) Helpful in comparative analysis of various sources of finance. D) All of the above. Show Answer Correct Answer: D) All of the above. 2. Which of the following is not a relevant cost in capital budgeting? A) Sunk cost. B) Allocated overheads. C) Both (a) and (b). D) Opportunity cost. Show Answer Correct Answer: C) Both (a) and (b). 3. Which of the following statements about goodwill is not correct? A) It does not become obsolete. B) It becomes obsolete. C) It is not visible but it subject to fluctuations. D) It is an intangible asset. Show Answer Correct Answer: B) It becomes obsolete. 4. The basic objective of financial Management is A) Profit planning of the organisation. B) Ensuring financial disciplined in the organisation. C) Maxirnization of profits. D) Maximization of shareholders wealth. Show Answer Correct Answer: D) Maximization of shareholders wealth. 5. Which is the limitation of Traditional approach of Financial Management? A) One-sided approach. B) Ignores allocation of resources. C) More emphasis on long term problems. D) All of the above. Show Answer Correct Answer: D) All of the above. 6. Role of finance manager includes? A) Financial analysis. B) Investing and Financing Decisions. C) Both (a) and (b). D) None of the above. Show Answer Correct Answer: C) Both (a) and (b). 7. What does the return on total assets take into account? A) Shareholder's fund. B) Income after taxation. C) Total outside liability. D) Income before tax and interest on fixed liability. Show Answer Correct Answer: D) Income before tax and interest on fixed liability. 8. Which is not the form of dividend? A) Zero Dividend. B) Stock. C) Property. D) Regular. Show Answer Correct Answer: A) Zero Dividend. 9. Which of the following are examples of flexible working practices? A) Part-time work. B) Parental leave. C) Both (a) and (b). D) Flexible hours arrangement. Show Answer Correct Answer: C) Both (a) and (b). 10. The exchange rate system that best characterizes the present international monetary arrangement used by industrialized countries is A) Pegged or fixed exchange rates. B) Managed floating exchange rates. C) Freely fluctuating exchange rates. D) Adjustable pegged exchange rates. Show Answer Correct Answer: B) Managed floating exchange rates. 11. Capital gearing ratio indicates the relationship between A) Assets and capital. B) Loans and capital. C) Debentures and share capital. D) Equity shareholders fund and long term borrowed funds. Show Answer Correct Answer: D) Equity shareholders fund and long term borrowed funds. 12. Which of the following is an intangible asset? A) Goodwill. B) Furniture. C) Land & Building. D) Plant & Machinery. Show Answer Correct Answer: A) Goodwill. 13. Change in the constitution of the firm may be due to A) The death of a partner. B) The retirement of a partner. C) The admission of a new partner. D) All of the above. Show Answer Correct Answer: D) All of the above. 14. Which of the following Accounting standards is recommendatory and not mandatory? A) AS -3 - Cash Flow Statement. B) AS - 4 - Contingencies and Events occurring after the Balance Sheet date. C) AS - 2 (Revised) - Valuation of inventories. D) AS - 1 - Disclosure of accounting policies. Show Answer Correct Answer: A) AS -3 - Cash Flow Statement. 15. Which method of inventory valuation is very useful when prices are falling? A) Base stock method. B) First-in-first-out. C) Average cost. D) Last-in-first-out. Show Answer Correct Answer: C) Average cost. 16. Spot exchange rate is the rate of exchange between two currencies A) For future delivery. B) For immediate delivery. C) For delivery at a particular spot in future. D) None of the above. Show Answer Correct Answer: B) For immediate delivery. 17. Antidumping duties applied to imported goods A) Are abolished by the World Trade Organization. B) Result in decreases in consumer surplus for domestic households. C) Are imposed by industrial countries but not developing countries. D) Result in lower-priced goods for domestic consumers. Show Answer Correct Answer: B) Result in decreases in consumer surplus for domestic households. 18. Depreciation is incorporated in cash flows because it A) Involves an outflow. B) Is unavoidable cost. C) Is a cash flow. D) Reduces tax liability. Show Answer Correct Answer: D) Reduces tax liability. 19. A, B and C were partners sharing profits in the ratio of 3 : 5 : 7. C retires and his share were taken up by A and B in the ratio of 3: 2. What is new ratio? A) 1 : 11. B) 2 : 12. C) 2 : 13. D) 3 : 14. Show Answer Correct Answer: C) 2 : 13. 20. ..... is said to exist when the formation of a regional trading group leads to the reduction of trade with nonmember countries in favor of member countries. A) Trade creation. B) Trade diversion. C) Trade distortion. D) Trade exclusion. Show Answer Correct Answer: B) Trade diversion. 21. Dividends are the ..... of a company distributed amongst members in proportion to their shares. A) Reserve. B) Divisible Profits. C) Undivisible Profits. D) Assets with Cash and Bank. Show Answer Correct Answer: B) Divisible Profits. 22. Which of the following is not included in the assumption on which Myron Gorden proposed a model on Stock valuation A) Taxes do not exist. B) Retained earning the only source of financing. C) Constant rate of return on firms investment. D) Finite Life of the firm. Show Answer Correct Answer: D) Finite Life of the firm. 23. Inventory is valued at cost or market price whichever is lower. This principle of valuation is based on the accounting convention of A) Materiality. B) Conservatism. C) Full disclosure. D) Consistency. Show Answer Correct Answer: B) Conservatism. 24. In a diversified portfolio, a new security adds A) Liquidity Risk. B) Systematic Risk. C) Unsystematic Risk. D) None of the above. Show Answer Correct Answer: B) Systematic Risk. 25. Which method of inventory valuation helps in reducing the burden of income tax in times of rising prices? A) First-in-first-out. B) Base stock method. C) Last-in-first-out. D) Average cost. Show Answer Correct Answer: C) Last-in-first-out. 26. The ratios which measure the relative contribution of financing by owners and financing provided by outsiders are called A) Leverage ratios. B) Activity ratios. C) Profitability ratios. D) Liquidity ratios. Show Answer Correct Answer: A) Leverage ratios. 27. In Accounting equation approach for recording business transactions all accounts are divided into three categories, namely A) Expenditure, Revenue and Loss. B) Assets, Liabilities and Capital. C) Personal, Real and Nominal. D) None of the above. Show Answer Correct Answer: B) Assets, Liabilities and Capital. 28. Which one of the following is an example of sources of funds? A) Increase in long-term liabilities. B) Decrease in long-term liabilities. C) Decrease in share capital. D) Increase in fixed assets. Show Answer Correct Answer: A) Increase in long-term liabilities. 29. Which country is not a member of the European Union A) Spain. B) Iceland. C) France. D) Germany. Show Answer Correct Answer: B) Iceland. 30. Cost of goods sold equals A) Sales - Gross Profit. B) Opening stock + Purchases + Direct expenses + Manufacturing expenses - Closing stock. C) Both (a) and (b). D) Sales - Net Profit. Show Answer Correct Answer: C) Both (a) and (b). 31. Debt Equity Ratio is computed by A) Total Liabilities /Shareholders Equity. B) Assets / Current Assets. C) Reserve / Capital. D) (Reserve + Capital + Loss) / 2. Show Answer Correct Answer: A) Total Liabilities /Shareholders Equity. 32. Which one is more appropriate for cost of retained earning? A) Opportunity cost to the firm. B) Weighted Average cost of capital. C) Expected rate of return by the investor. D) None of the above. Show Answer Correct Answer: A) Opportunity cost to the firm. 33. Break-even of a Put option occurs when spot price is equal to A) Premium. B) Strike price + Premium. C) Strike Price - Premium. D) None of the above. Show Answer Correct Answer: C) Strike Price - Premium. 34. Profitability Index, when applied to divisible projects, impliedly assumes that A) NPV is addictive in nature. B) NPV is linearly proportionate to part of the project taken up. C) Both (a) and (b). D) Project cannot be taken in parts. Show Answer Correct Answer: C) Both (a) and (b). 35. Capital Redemption Reserve can be utilised by the company only for A) Issue of fully paid bonus shares. B) Distribution of dividend. C) Redemption of shares. D) All of the above. Show Answer Correct Answer: A) Issue of fully paid bonus shares. 36. Bonus shares can be issued by a company A) Out of the Reserves created by revaluation of fixed assets. B) Out of free reserves built out of genuine profit. C) Out of share premium not collected in cash. D) Without any provision for it in the Articles of Association of the company. Show Answer Correct Answer: B) Out of free reserves built out of genuine profit. 37. A company with a paid up capital of 5000 equity shares of Rs. 10 each has a turnover of four times with a margin of 8 % on sales. The ROI of the company will be A) 32 %. B) 33 %. C) 34 %. D) 31 %. Show Answer Correct Answer: A) 32 %. 38. Indicate the item that appears below the line in the Profit and Loss Account A) Provision for Taxation. B) Miscellaneous expenditure written off. C) Contribution to Provident Fund. D) Proposed Dividend. Show Answer Correct Answer: D) Proposed Dividend. 39. Finance functions are A) Raising of funds. B) Planning for funds. C) Allocation of Resources. D) All of the above. Show Answer Correct Answer: D) All of the above. 40. A sound dividend policy contains the ..... features. A) Stability. B) Distribution of dividend in cash. C) Gradually Rising dividend Rates. D) All of the above. Show Answer Correct Answer: D) All of the above. 41. The information provided by the financial accounting system is A) Significant. B) Sufficient for smooth, orderly and efficient conduct of business. C) Both (a) and (b). D) Not sufficient for smooth, orderly and efficient conduct of business. Show Answer Correct Answer: C) Both (a) and (b). 42. Which one of the following is not a sources of conflict in project ranking in capital budgeting decision as per NPV and IRR. A) No time disparity. B) No capital Budget constraints. C) Independent Investment project. D) None of the above. Show Answer Correct Answer: D) None of the above. 43. Current assets include A) Stock in trade. B) Sundry Debtors. C) Stores & Spare parts. D) All of the above. Show Answer Correct Answer: D) All of the above. 44. Which of the following assets are dealt with by AS - 10 (Accounting Standard on Fixed Assets)? A) Goodwill and patents. B) Trademarks and designs. C) Land, building, plant and machinery, vehicles, furniture and fittings. D) All of the above. Show Answer Correct Answer: D) All of the above. 45. A lease which is generally not cancellable and covers full economic life of the asset is known as A) Finance Lease. B) Operating Lease. C) Economic Lease. D) Sale and leaseback. Show Answer Correct Answer: A) Finance Lease. 46. Stock beta measures A) Debt Equity Ratio. B) Dividend. C) EPS. D) Stock Volatility. Show Answer Correct Answer: D) Stock Volatility. 47. In India, NIFTY and SENSEX are calculated on the basis of A) Authorized Share Capital. B) Free-float Capitalization. C) Market Capitalization. D) Paid up Capital. Show Answer Correct Answer: B) Free-float Capitalization. 48. What are the important objectives of accounting? A) Calculation of profit or loss. B) Depiction of financial position. C) To make information available to variousgroups and users. D) All of the above. Show Answer Correct Answer: D) All of the above. 49. Which is the functions of Financial Control? A) Audit. B) Planning for Control. C) Accounting Functions. D) All of the above. Show Answer Correct Answer: D) All of the above. 50. Forward exchange rate is the rate of exchange between two currencies A) Would prevail at a future date. B) Prevailing today for future delivery. C) Prevailing today for immediate delivery. D) None of the above. Show Answer Correct Answer: B) Prevailing today for future delivery. 51. Du Pont Analysis deals with A) Capital Budgeting. B) Analysis of Current Assets. C) Analysis of Profit. D) Analysis of Fixed Assets. Show Answer Correct Answer: C) Analysis of Profit. 52. Accounting ratios can be expressed in the following forms A) Times. B) Fraction. C) Percentage. D) All of the above. Show Answer Correct Answer: D) All of the above. 53. The cash flow associated with extraordinary items should be classified as arising from A) Investing activities. B) Financing activities. C) Operating activities. D) All of the above. Show Answer Correct Answer: D) All of the above. 54. In some cases assessment year and previous year can be same financial year. A) Is decided by the Assessing Officer. B) True. C) False. D) Cannot be said with certainty. Show Answer Correct Answer: B) True. 55. The issue of equity capital in exchange of plant and machinery will cause the return on equity capital to A) Fluctuate. B) Increase. C) Remain unchanged. D) Decrease. Show Answer Correct Answer: D) Decrease. 56. Proprietary ratio indicates the relationship between proprietor's funds and ..... . A) Share capital. B) Debentures. C) Total assets. D) Reserve. Show Answer Correct Answer: C) Total assets. 57. The proposal is accepted if the profitability index is more than A) Zero. B) Five. C) Three. D) One. Show Answer Correct Answer: A) Zero. 58. The net income of the company should ideally be ----- times of the fixed internal charges. A) 6 or 7. B) 3 or 4. C) 4 or 5. D) 5 or 6. Show Answer Correct Answer: A) 6 or 7. 59. Currency speculation is ..... if speculators bet against market forces that cause exchange fluctuations, thus moderating such fluctuations. A) Destabilizing. B) Stabilizing. C) Inflationary. D) Deflationary. Show Answer Correct Answer: B) Stabilizing. 60. The firm is said to be more geared, if equity capital is more than the debentures and ..... A) Reserve. B) Preference share capital. C) Total assets. D) Loan. Show Answer Correct Answer: B) Preference share capital. ← PreviousNext →Related QuizzesEconomy QuizzesGeneral Knowledge QuizzesAccounting Quiz 1Accounting Quiz 2Accounting Quiz 3Accounting Quiz 4Accounting Quiz 5Accounting Quiz 7Accounting Quiz 8 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books