1.  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

Answer & Explanation
Answer : Option B

2.  Business loss can be set off against salary income

a

  False

b

 True

c

 Cannot be said with certainty

d

 Is decided by the Assessing Officer

Answer & Explanation
Answer : Option A

3.  Which ratio explains that how much portion of earning is distributed in the form of dividend?

a

  Pay-out Ratio

b

 Equity-Debt Ratio

c

 Earning Yield Ratio

d

 Dividend-Debt Ratio

Answer & Explanation
Answer : Option A

4.  Accounting rules, practices and conventions should not change from one year to another as per the

a

  Convention of materiality

b

 Convention of consistency

c

 Convention of conservatism

d

 Convention of full disclosure

Answer & Explanation
Answer : Option B

5.  Capital budgeting is known as

a

  Profit

b

 Cost of Sales

c

 Cost of Product

d

 Capital Expenditure

Answer & Explanation
Answer : Option D

6.  Capital budgeting means

a

  Planning for Cash

b

 Planning for Sales

c

 Planning for Profit

d

 Planning for Capital Assets

Answer & Explanation
Answer : Option D

7.  Which of the following accounting equation is correct?

a

  Capital- Liabilities = Assets

b

 Capital = Assets + Liabilities

c

 Capital + Assets = Liabilities

d

 Capital + Liabilities= Assets

Answer & Explanation
Answer : Option D

8.  Consider the following statements with respect to the sinking-fund method of depreciation

a

  Depreciation is smaller than the assets annual depreciable cost.

b

 Annual net incidence on profit and loss account remains constant due to changing fixed depreciation.

c

 Both (a) and (b)

d

 Amount of interest constantly declines due to assets reducing balance.

Answer & Explanation
Answer : Option C

9.  A sudden shift from import tariffs to free trade may induce short-term unemployment in

a

  Import-competing industries

b

 Industries that are only exporters

c

 Industries that neither import nor export

d

 Industries that sell domestically as well as export

Answer & Explanation
Answer : Option A

10.  Which of the following statement is correct?

a

  Owner's Equity = Assets + Liabilities

b

 Patents is an example of current asset

c

 Book-keeping and accounting are different terms

d

 Fixed assets must always be shown at market value

Answer & Explanation
Answer : Option D

11.  The need of capital budgeting in a firm arises on account of the

a

  Selection of the best project

b

 Analysis of capital expenditure

c

 Control over capital expenditure

d

 All of the above

Answer & Explanation
Answer : Option D

12.  To test the liquidity of a concern which of the following ratios are useful?

a

  Acid test ratio

b

 Capital turnover ratio

c

 Bad Debt to sales ratio

d

 lnventory turnover ratio

Answer & Explanation
Answer : Option A

13.  The implementation of the European Union has

a

  made it harder for Indians to compete against the Germans in the British market

b

 made it harder for Indians to compete against the Japanese in the British market

c

 made it easier for Indians to compete against the Germans in the British market

d

 made it easier for Indians to compete against the Japanese in the British market

Answer & Explanation
Answer : Option A

14.  A difference between forward and futures contracts is that

a

  futures contracts have negotiable delivery dates

b

 futures contracts involve no brokerage fees or other transactions costs

c

 forward contracts occur in a specific location - for example, the Chicago Mercantile Exchange

d

 forward contracts can be tailored in amount and delivery date to the needs of importers or exporters

Answer & Explanation
Answer : Option D

15.  The significance of capital budgeting arises mainly due to the

a

  Large Investment

b

 Irreversible in nature

c

 Complicacies of Investment decisions

d

 All of the above

Answer & Explanation
Answer : Option D
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