72. If the Current Assets and Working Capital of a concern are ₹80,000 and ₹50,000 respectively then Current Liabilities will be:
(A) ₹1,00,000
(B) ₹70,000
(C) ₹1,30,000
(D) ₹30,000
73. The ratio which is a good indicator to maintain the correct selling price and efficiency of trading activities is:
(A) Net Profit Ratio 2(B) Gross Profit Ratio 3
(C) Current Ratio
(D) Liquid Ratio
Explanation: The Gross Profit Ratio measures the margin earned on sales before considering operating expenses. It is the best indicator of the efficiency of the core trading function (purchasing and pricing of goods).
74. Opening stock + Purchases + Direct expenses – Closing stock = ?
(A) Net purchases
(B) Stock consumed
(C) Cost of goods sold
(D) Gross profit
Explanation: This is the standard formula for calculating the Cost of Goods Sold (COGS), which is the total cost associated with the goods that were sold during the period.
75. Despite the development of Management Accounting as an effective discipline to improve the managerial performance, it has some limitations. Which of the following is a limitation of management accounting?
(A) Psychological Resistance
(B) Physiological Resistance
(C) Both of the above
(D) None of the above
Explanation: Psychological Resistance (resistance from staff or management due to fear of change or lack of understanding) is a significant limitation in the successful implementation of management accounting techniques.
77. To verify the cash flow from operating activities as calculated under direct and indirect method, which statement is prepared?
(A) Fixed asset account
(B) Cash account
(C) Reconciliation statement
(D) Statement about extraordinary items
Explanation: A Reconciliation statement is prepared to ensure and verify that the cash flow from operating activities calculated using the direct method is equal to the amount calculated using the indirect method.
76. Which are the two methods adopted on piecemeal distribution, to apportion cash realised among the partners?
(A) Surplus Method and Maximum Possible Loss Method
(B) Realization Method and Surplus Method
(C) Inventory Assessment Method and Maximum Possible Loss Method
(D) Realization Method and Inventory Assessment Method
Explanation: In the Piecemeal Distribution of cash to partners during dissolution, the two primary methods used to ensure partners are paid equitably, while mitigating risk, are the Maximum Possible Loss Method and the Highest Relative Capital/Surplus Capital Method.
78. When shares are forfeited, the share capital account is debited by
(A) Paid up amount
(B) Called up amount
(C) Calls in arrear
(D) Nominal value of such share
Explanation: Upon forfeiture, the Share Capital Account (which has a credit balance) is debited to cancel the share capital amount that the company has called up on the forfeited shares.
79. Under which of the following methods of depreciation on fixed assets, the annual amount of depreciation decreases?
(A) Written-down value method
(B) Straight line method
(C) Annuity method
(D) Insurance policy method
Explanation: In the Written-Down Value Method (or Diminishing Balance Method), the depreciation rate is applied to the decreasing book value of the asset each year, causing the annual depreciation amount to decrease over time.
80. Which of the following is an effect of the payment of outstanding expenses in cash?
(A) Only current liabilities are decreased
(B) Only current assets are decreased
(C) Current liabilities as well as current assets are reduced
(D) None of these
Explanation:
- Outstanding Expenses (a Current Liability) is paid off, so Current Liabilities are reduced.
- The payment is made in Cash (a Current Asset), so Current Assets are reduced.
81. Cash flow statement is not useful for which one of the following stakeholders?
(A) Customers of the business enterprise
(B) Suppliers of the business enterprises
(C) Debenture holders of the business enterprises
(D) Banker to the business enterprises
Explanation: The Cash Flow Statement is crucial for creditors (Bankers, Suppliers) and investors (Debenture holders) to assess the firm’s liquidity and ability to generate cash to pay its debts. Customers are typically more concerned with product quality and availability, making the statement least relevant to them.
82. HL holds 51% shares and 10% debentures of VL. Then which of the following is the relationship between HL. and VL?
(A) VL is associate company of HL
(B) VL is subsidiary of HL
(C) HL is subsidiary of VL
(D) None of these
Explanation: A company (HL) holding more than 50% of the shares (which grant voting rights) in another company (VL) is the Holding Company, and the latter is the Subsidiary Company (VL). Debentures are debt instruments and do not affect control.
83. At the time of dissolution:
(A) all the assets are transferred to realization account
(B) Only current assets are transferred to realization account
(C) Non-cash assets are transferred to realization account
(D) All the above must be done
Explanation: At dissolution, Non-cash assets (Fixed Assets, Debtors, Stock, etc.) are transferred to the Realization Account. Cash and Bank balances are held in their own accounts and are not transferred.
84. A document that does not contain the details about the final issue price of the shares being issued is called:
(A) Letter of intent
(B) Prospectus
(C) Red-herring prospectus
(D) Offer document
Explanation: A Red-herring Prospectus is a preliminary document filed by a company with incomplete details, most notably omitting the price per share and the exact number of shares being offered.
85. Under purchase method of amalgamation, if Net Asset Value exceeds the amount of purchase consideration, then it results into:
(A) Goodwill
(B) Capital reserve
(C) Adjustment in general reserve
(D) None of these
Explanation: When the Net Asset Value (Fair Value of Assets Acquired – Liabilities Assumed) is greater than the Purchase Consideration (Price Paid), the acquiring company has made a ‘bargain purchase’ or gained an excess. This excess amount is credited to Capital Reserve.
86. Memorandum Joint Venture Account is prepared when:
(A) the separate set of books is maintained for Joint Venture
(B) each Co-venturer keeps records of all transactions
(C) each Co-venturer keeps records of their own transactions only
(D) All of the above cases
Explanation: The Memorandum Joint Venture Account is prepared when the co-venturers do not maintain a separate set of books for the venture, but instead, each co-venturer records only their own transactions in their personal books. The Memorandum Joint Venture Account is then compiled using information from all co-venturers to find the overall profit or loss.