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Friday, May 20, 2011

commerce for IAS prelims

commerce for IAS prelims
Civil Services Commerce Prelims Paper practice
Commerce model question papers
1. Match List-I (Basis of Departmentation) with List-II (Example) and select the correct answer using the Code given below the lists:
List—I List—II
(Basis of Departmentation) (Example)
A. Customer 1. Day and night shifts in a hospital
B. Functional 2. Retail and wholesale sale of a trader
C. Geographical 3. Northern and Southern Divisions of a railway
D. Temporal 4. Production and sales of a factory
(a) 2 3 1 4
(b) 1 4 3 5
(c) 2 4 3 1
(d) 1 3 4 5
Ans. (c)

2. Which one of the following is not true of GDR?
(a) It is an instrument issued abroad and is listed and traded on a foreign stock exchange
(b) A GDR may represent one or more shares of the issuing company
(c) It can be converted into equity shares at any time
(d) A GDR may represent either equity shares or
Ans. (d)

3. The quality of information is measured by its:
(a) Accuracy
(b) Cost
(c) Degree of statistical validity
(d) Timeliness
Ans. (d)

4. A wage which should enable a worker to provide for himself and his family not merely the bare essentials like food, clothing and shelter but also a measure of comfort in the form of education for his children and protection against diseases and illness is known as:
(a) Fair wage
(b) Minimum wage
(c) Living wage
(d) Incentive wage
Ans. (c)

5. Emerson Efficiency System of wage payment means:
(a) The worker is allowed a certain time within which he is required to complete his job
(b) The completion of job within the prescribed time. The worker is paid bonus of a certain percentage
(c) where the worker takes 50% more than prescribed time he is paid no bonus
(d) All of the above
Ans. (b)

6. One of the consequences of highly protective tariff walls would be that:
(a) Foreign producers find their imports attractive
(b) Domestic producers sell exportable goods at a premium in the domestic market
(c) Foreign producers find their exports attractive
(d) Domestic producers find imports to be cheaper
Ans. (b)
Directions : The following Fourteen (14) items consist of two statements, one labelled as the ‘Assertion (A) ‘and the other as ‘Reason (R)’. You are to examine these two statements carefully and select the answers to these items using the Code given below:
(a) Both A and R are individually true and R is the correct explanation of A
(b) Both A and R are individually true but R is not the correct explanation of A
(c) A is true but R is false
(d) A is false but R is true

7. Assertion (A): Management Audit should be conducted by a team of experts.
Reason (R): Management Audit is a critical examination of policy and practices of management from the highest level to downward in order to ascertain that sound management prevails in the business concern.
Ans. (a)

8. Assertion (A): If it is found that some errors and/or frauds are remaining undetected due to the fact that a statutory auditor depended upon test checking, then the said auditor will be held responsible for negligence in the performance of his duties.
Reason (R): A statutory auditor cannot, in any way, avoid or reduce the responsibility laid on him by the statutes.
Ans. (d)

9. Assertion (A): An auditor of a large business concern has to adopt test checking based on scientific statistical sampling technique instead of checking the whole of transaction- of a particular class.
Reason (R): Test checking based on scientific statistical sampling technique, reduces the volume of unnecessarily cumbersome audit work involved in detailed checking of all transactions.
Ans. (a)

10. Assertion (A): Revenue expenditure is written off in the year in which it occurs.
Reason (R): The benefit of revenue expenditure is consumed in the year in which it arises.
Ans. (a)

11. Assertion (A): Cash flow Statement and Fund Flow Statement disclose same information.
Reason (R): Both are prepared out of the same data.
Ans. (d)

12. Assertion (A): Liquid ratio reveals strength of liquidity ofa business unit.
Reason (R): Liquid ratio analyses liquid assets and liquid liabilities of a business uhit in order to assess the extent of liquidity.
Ans. (a)

13. Assertion (A): Profit and Loss Account and Balance Sheet are financial statements showing financial position of a business unit.
Reason (R): Profit and Loss Account and Balance Sheet are prepared at the end of the financial year.
Ans. (d)

14. Assertion (A): The interest on debentures can be capitalized up to the complete construction of the fixed assets.
Reason (R): The construction of fixed assets could only be completed by the use of these funds.
Ans. (c)

15. Assertion (A): The role of the Doctrine of Indoor Management is opposed to the rules of constructive notice.
Reason (R): The constructive notice seeks to protect the company against the outsider whereas the Doctrine of Indoor Management operates to protect outsider against the company.
Ans. (a)

16. Assertion (A): Rules of Constructive Notice and Articles of Association are known to everyone who deals with the company.
Reason (R): After re4stration of the company, Memorandum and Articles of Association become public documents.
Ans. (a)

17. Assertion (A): Doctrine of Indoor Management does not apply to forgery.
Reason (R): Company Law recognizes ultra vires or illegal acts.

18. Assertion (A): A Director of a company in his individual capacity can exercise powers conferred on him by the Companies Act, Memorandum and the Article of Association of the company.
Reason (R): The Directors have the power to enter into contract on behalf of the company with other parties.
Ans. (d)

19. Assertion (A): Capital expenditure is incurred for the purpose f acquiring fixed asset.
Reason (R): Capital expenditure item is shown in the asset side of the Balance Sheet.
Ans. (b)

20. Assertion (A): Staff officers and assigned an ‘authority of ideas’ and line officers and ‘authority to command’.
Reason (R): Functional authority is not restricted to managers of a particular type of department.
Ans. (b)

21. Accounting is generally understood as:
1. summarization of business transaction
2. language of the business
3. source of business information
4. means of communication
Select the correct answer using the Code given below:
(a) 1 only
(b) 1 and 2
(c) 2 and 3
(d) 1, 2, 3 and 4
Ans. (d)

22. In case of disclosure of accounting policies, the following fundamental accountings assumptions may NOT be required to be stated f they are followed in the preparation of final accounts or a company:
1. Materiality and accounting period
2. Going concern and consistency
3. Accrual basis of accounting
4. Conservatism and accounting period
Select the correct answer using the Code given below:
(a) 2 and 3
(b) 1 and 4
(c) l, 2 and 3
(d) 1, 2, 3 and 4
Ans. (a)

23. Which one of the following pairs is NOT correctly matched?
(a) Accounting equation : Assets — Liabilities — Capital
(b) Accounting year : 1st April to 31st March
(c) Accrual concept : Recognizing revenue on receipt of cash
(d) Cost concept : Recognizing transactions at historical cost
Ans. (a)

24. Match List—I (Accounting Standards (AS) issued by the Institute of Chartered Accountants of India) with List-II (Standard on) and select the correct answer using the code given below the Lists:
List –I List-II
A. AS -1 1. Valuation of Inventories
B. AS-2 2. Disclosure of Accounting Policies
C. AS-3 3. Depreciation Accounting
D. AS-6 4. Cash Flow Statement
(a) 2 3 4 1
(b) 4 1 2 3
(c) 4 3 2 1
(d) 2 1 4 3
Ans. (d)

25. Which among the following is the societal obligation of accounting?
(a) To ascertain profit correctly
(b) To maintain the records of the assets and liabilities of organization
(c) To establish effective organizational control
(d) To be helpful in correct tax assessment
Ans. (d)

26. Included in production overhead of hardware division of Rs. 3, 00,000 is Rs. 50,000, being the cost of prototype computers manufactured by the company itself. These are not to be sold but to be kept for demonstrating a live medical imaging software programme.
The cost of prototype computers of Rs. 50,000 should be treated as:
(a) fixed assets
(b) deferred revenue expenditure
(c) production overheat cost of hardware division
(d) advertising cost
Ans. (b)

27. A and B are partners sharing profits and losses in proportion of 2: 1. They admit new partner C whom they give 1/5th share in profits. The new profit-sharing ratio will be:
(a) 8:4:3
(b) 3:2:1
(c) 2:1:1
(d) 4:2:1
Ans. (a)

28. A and B are sharing profits in the ratio of 2:1. They admit C into the firm ¼ th share in profits for which he brings Rs. 12,000 as his share of capital. Therefore, the adjusted capital of B will be:
(a) Rs. 48,000
(b) Rs. 12,000
(c) Rs. l6, 000
(d) Rs. 24,000
Ans. (b)

29. Match List-I with List-II and select the correct answer using the Code given below the Lists:
List-I List—II
A. Revaluation Account 1. Retirement of a partner
B. Realization Account 2. Maximum loss method
C. Piecemeal Distribution 3. Admission of a partner
D. Gaining Ratio 4. Dissolution of partnership firm
(a) 2 1 3 4
(b) 3 4 2 1
(c) 2 4 3 1
(d) 3 1 2 4
Ans. (b)

30. While making an adjusting entry in respect of interest on capital, we credit:
(a) Capital account
(b) Profit and loss account
(c) Interest on capital account
(d) Drawing account
Ans. (a)

31. What is the correct sequence of the following items of current assets in balance sheet of a company, as per the Companies Act, 1956?
1. Cash balance on hand
2. Interest accrued on investments
3. Stores and spare parts
4. Loose tools
5. Sundry debtors
6. Stock-in-trade
7. Work-in-progress
Select the correct answer using the Code given below:
(a) 2, 5, 4, 6, 7, 3, 1
(b) 1, 2, 4, 3, 5, 7, 6
(c) 7, 6, 4, 1, 2, 5, 3
(d) 2, 3, 4, 6, 7, 5, 1
Ans. (d)

32. The loss on the sale of old furniture debited to:
(a) profit and loss account
(b) furniture account
(c) trading account
(d) depreciation account
Ans. (a)

33. Given:
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. 1000
The cost of production would be
(a) Rs. 28,000
(b) Rs. 29,000
(c) Rs. 27,000
(d) Rs. 30,000
Ans. (c)

34. Consider the following statements:
1. Closing stock is valued on the Principle of cost price of market price whichever is lower
2. The manufactured goods in a year are transferred from the manufacturing account to trading account at selling price
3. The going concern concept assumes that a business will continue its operations indefinitely
4. Revenue is not increased by taking loans although assets and liabilities are increased
Which of the above statements are correct?
(a) l, 3 and 4
(b) l and 2
(c) 2 and 3
(d) 2, 3 and 4
Ans. (a)

35. Under the head ‘Provisions’ in the balance sheet of a limited company, the following provisions made for, are to be disclosed:
1. Proposed dividend
2. PF schemes
3. Pension and other staff-benefit schemes
4. Taxation The correct chronological order of their disclosure is
(a) 4, 2, 1, 3
(b) 3, 2, 1, 4
(c) 4, 1, 2, 3
(d) 3, 1, 2, 4
Ans. (c)
36. Under the head ‘current liabilities’, the following are disclosed:
1. Unclaimed dividend
2. Sundry creditors
3. Unexpired discounts
4. Bills payable
The correct chronological order of their disclosure is:
(a) 4, 3, 2, 1
(b) l, 3, 2, 4
(c) 4, 2, 3, 1
(d) l, 2, 3, 4
Ans. (c)

37. Dividend can be paid generally out of:
(a) share premium account
(b) capital redemption reserve account
(c) current year’s profits
(d) All of these
Ans. (c)

38. If the purchases made during the year were Rs. 60,000, the balance of stock in trade at the beginning and at the end of-the year were Rs. 12,000 and Rs. 9,000 respectively and the gross profit on sales was 1/5th, when which one of the following represents the figure of gross profit for the year?
(a) Rs. 15,750
(b) Rs. 14,000
(c) Rs. 12,500
(d) Rs. 17,250
Ans. (a) Rs. 15,750

39. Financial year of a company shall not exceed:
(a) calendar year
(b) 15 months.
(c) 18 months with special permission of Registrar of Companies
(d) 15 months with special permission of Registrar of Companies
Ans. (c)

40. The following four assets normally appear in the balance sheet:
1. Advance salary
2. Copyright
3. Preliminary expenses
4. Loose tools
The correct order in which these are to appear in the balance sheet if drawn in order of permanency will be:
(a) 4, 2, 1, 3
(b) 3, 2, 4, 1
(c) 1, 2, 3, 4
(d) 2, 4, 1, 3
Ans. (d)

41. Match List-I with List-II and select the correct answer using the Code given below the Lists:
List—I List—II
A. Nominal share capital 1. Capitalization of reserve
B. Right shares 2. Fixed dividend
C. Bonus shares 3. Maximum amount of share capital of a company
D. Preference shares 4. First offered to the existing shareholders
(a) 3 4 1 2
(b) 2 1 4 3
(c) 2 4 1 3
(d) 3 1 4 2
Ans. (a)

42. A company forfeited 30 equity shares of Rs. 10 each fully called-up, for non-payment of allotment money of Rs. 3 and call-money of Rs, 4 per share. If these shares are reissued at Rs. 8 per share fully paid, the amount transferable to capital reserve will be:
(a) Rs. 300
(b) Rs. 60
(c) Rs. 90
(d) Rs. 30
Ans. (d)

43. The balances appearing in the books of a company at the end of the financial year were:
Capital Redemption Reserve Account Rs. 50,000; Share Premium Account Rs. 10,000; General Reserve Account Rs. 5,000; Revaluation Reserve Rs. 2,000; Profit and Loss Account (Debit) Rs.10,000. Maximum amount available for distribution as ‘Bonus Shares’ will be:
(a) Rs. 50,000
(b) Rs. 55,000
(c) Rs. 45,000
(d) Rs. 57,000
Ans. (b)

44. A company can forfeit shares if the:
(a) shareholder fails to pay the amount of the call during the stipulated time
(b) shareholder pays calls in advance
(c) shareholder does not pay the application money
(d) shares have been issued at par
Ans. (a)

45. With regard to the rate of return on investment (ROI), which one of the following statements is NOT valid?
(a) It is an overall indicator of the profitability of an enterprise
(b) It is a triangular relationship in the sense that R O I= Profit margin x Asset turnover
(c) It is a superior measure compared to the cash flow generated per share
(d) It was firm developed by Du Pont, USA
Ans. (b)

46. 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. (d)

47. The return on capital employed shows the combined effect of:
(a) net profit ratio and inventory turnover ratio
(b) operating ratio and net profit ratio
(c) net profit ratio and capital turnover ratio
(d) gross profit ratio and capital turnover ratio
Ans. (c)

48. 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)

49. Consider the following statements:
The current ratio would reduce by
1. collection of book debts
2. payment to 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) 2and 4
(d) 1, 3 and 4
Ans. (b)

50. Which one of the following ratios is likely to be affected the most on account of price level changes?
(a) Current Ratio
(b) Inventory Turnover Ratio
(c) Debtors’ Turnover Ratio
(d) Fixed Assets Turnover Ratio
Ans. (b)

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