84. Which one of the following costs is generally not included in computing the cost of inventory?
(a) Administration overheads (b) All cost of purchase (c) Normal wastage of materials (d) Storage cost assuming a special storage required as part of production process.
Answer: (a) Administration overheads Explanation: According to Ind AS 2 (Inventories), the cost of inventory includes purchase costs, conversion costs, and other direct costs to bring inventory to its current location and condition. General administration overheads are excluded unless directly attributable to production. Normal wastage and necessary storage costs are included.
85. Which one of the following will be the adjustment journal entry if the rent received in advance is ₹2,000?
(a) Debit profit and loss account and Credit rent received in advance account (b) Debit rent received account and Credit profit and loss account (c) Debit rent received in advance account and Credit rent account (d) Debit rent account and Credit profit and loss account
Answer: (c) Debit rent received in advance account and Credit rent account Explanation: Rent received in advance is a liability. To recognize the portion earned as income at year-end, the adjustment entry debits the advance account (reducing the liability) and credits the rent income account (increasing revenue in P&L). This follows accrual accounting principles.
86. In case of contract of Insurance, the principle which states that it is the duty of the insured to take reasonable steps to minimize the loss or damage to the insured property is called:
(a) Principle of Subrogation (b) Principle of Utmost Good Faith (c) Principle of Co-operation (d) Principle of Mitigation
Answer: (d) Principle of Mitigation Explanation: The principle of mitigation in insurance requires the insured to actively prevent or reduce further loss after an incident occurs, ensuring the insurer’s liability is not unnecessarily increased. This is a standard insurance doctrine.
87. Which one of the following is not a Contract of Indemnity?
(a) Contract of Fire Insurance (b) Contract of Life Insurance (c) Contract of Marine Insurance (d) Contract of Motor Insurance
Answer: (b) Contract of Life Insurance Explanation: Contracts of indemnity (e.g., fire, marine, motor) compensate for actual losses up to the value lost. Life insurance is a contract of assurance, paying a fixed sum on death or maturity, not based on quantifiable loss.
88. Which one of the following statements about audit documentation is not correct?
(a) Audit documentation includes audit programmes. (b) Audit file and audit documentation are the same. (c) Audit documentation includes summaries of significant matters. (d) Audit documentation may be recorded on paper or electronic or any other media.
Answer: (b) Audit file and audit documentation are the same. Explanation: Audit documentation refers to the records (working papers) of procedures, evidence, and conclusions. An audit file is the organized collection or repository of that documentation. They are related but not identical, as per SA 230 (Audit Documentation).
89. In the context of auditing, the primary objective of vouching is:
(a) To detect errors in financial statements (b) To verify internal controls (c) To verify the authenticity of transactions (d) To assess management performance
Answer: (c) To verify the authenticity of transactions Explanation: Vouching involves examining supporting documents (vouchers) to confirm that transactions are genuine, authorized, and accurately recorded. While it may help detect errors, its primary focus is authenticity.
90. Which one of the following is not the objective of verification in auditing?
(a) Checking the historical accuracy of accounts (b) Verification of the existence of the assets (c) Verification of the valuation of the assets (d) Verification of the authority of the acquisition of the assets
Answer: (a) Checking the historical accuracy of accounts Explanation: Verification in auditing focuses on balance sheet items like assets and liabilities, confirming existence, valuation, ownership, and proper authorization/disclosure. Historical accuracy relates more to overall audit or income statement review, not specifically verification.
91. Consider the following statements regarding Social Protection in India:
- The World Social Protection Report (WSPR) 2024-26 released by the International Labour Organization estimates that India’s social coverage has doubled from 2014 to 2024.
- The Ministry of Labour and Employment estimates that nearly 65% population are now covered by at least one form of social protection, whether in cash or in kind, through Central Government schemes.
Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2
Answer: (b) 2 only Explanation: Statement 1 is incorrect—the WSPR 2024-26 reports India’s coverage doubled from 24.4% in 2021 (not 2014) to 48.8% in 2024. Statement 2 is correct, as per Ministry data, approximately 65% (92 crore people) are covered by at least one benefit.
92. The classification of Micro, Small and Medium enterprises is based on which of the following factors?
- Annual turnover
- Number of workers
- Investment in plant and machinery or equipment
Select the answer using the codes given below: (a) 1, 2 and 3 (b) 1 and 2 only (c) 2 only (d) 1 and 3 only
Answer: (d) 1 and 3 only Explanation: Under the MSME Development Act (amended 2020), classification uses composite criteria of investment in plant/machinery/equipment and annual turnover. Number of workers is not a factor for classification, though it may be relevant for other regulations.