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BBA II SEMESTER (FMA-II) UNIT - I

 

MCQ On Bank Reconciliation Statement

1. The Cash Book debit balance is equivalent to?

    1.  Credit Balance as per passbook 
    2.  Overdraft as per Cash Book
    3.  Overdraft as per Pass Book
    4. None of the above

Ans: A. Credit Balance as per passbook 

(Note: When your cash book balance is debited, the passbook balance is a credit balance. As a result, both books’ balances will be favourable. Otherwise, it is unfavorable while it’s opposite to each other.)

2. How is the Bank Reconciliation Statement prepared? 

    1.  By matching entries in the passbook with entries in the bank and cash column of the cash book 
    2.  By matching the entries in the passbook with entries in the bank column of the cash book 
    3.  By matching the entries in the passbook with entries in the cash column of the cash book 
    4. None of the above 

Ans: C. By matching the entries in the passbook with entries in the bank column of the cash book 

(Note: So, the Back reconciliation statement is made by matching the entries in the passbook with entries in the bank column of the cash book.)

3. When the Cash amount as per the Cash Book is the beginning point, explicit deposits by the bank holder are known as?

    1. Subtracted 
    2.  Added
    3.  Not need to be adjusted
    4.  Neither of the two 

Ans: B.) Added

(Note: As you know, the passbook balance will increase due to the direct amount by the customer in the bank. The balance of the cash book will decrease with the same amount.)

4. The Bank Reconciliation Statement is the Part of?

    1.  Double-entry system
    2.  Not a Part of the Double-entry system
    3.  Bank Statement 
    4.  None of all of these 

Ans: B.) Not a Part of the double-entry system

(Note: You know very well that you are reconciling the balances through the Bank Reconciliation Statement. The Bank Reconciliation Statement is simple, and it is not a part of the Double-entry system.) 

  1. Who is preparing the Bank Reconciliation Statement?
    1. Debtor
    2.  Creditor 
    3.  Account Holder 
    4.  Bank 

Ans: C.) Account Holder 

(Note: The balances are simply reconciled by the accountant and account holder to match the cash book and passbook.) 

  1. Which amount of the following does not need to be adjusted into the cash book balance?
    1. Cheques mistakenly credited by the bank
    2.  Cheques deposited but not cleared
    3.  cheques issued but not showing
    4. All of these 

Ans: A.) Cheques mistakenly credited by the bank

(Note: Because the bank credited our account mistakenly for this amount, you do not need it. So you do not add it to the cash book balance for the adjustment.)

  1. If the Account holder deposits the cash in the bank, then it is known as?
    1. Expense
    2.  Liability
    3. Credit
    4.  Debit

Ans: C.) Credit 

(Note: The more courage you deposit in the bank, the bank’s liability will increase, and your bank balance will increase. So the cash book balance will be credited, and it’s known as a credit balance.)

  1. A Bank Reconciliation Statement is made up using the ……… from following which?
    1. The bank column of the Cashbook and the Bank Statement
    2.  The Cash column of the Cashbook and Bank statement
    3. Bank column of the cash book and cash column of the Cashbook
    4. None of all of the above 

Ans: A.) The bank column of the Cashbook and the Bank Statement

(Note: The Bank Reconciliation Statement is prepared with the help of the Bank Statement and the bank column of the Cashbook.) 

  1. The customer account is ………….when he withdraws the amount from the bank?
    1. Debited
    2.  No effect 
    3.  Credited 
    4. None of these 

Ans: A.) Debited

(Note: As you know, when cash is withdrawn from your bank account, money will reduce from your bank. So, it is known as a debited amount from the bank account.

10. What is the “deposit in transit” treatment in a bank reconciliation? 

    1. Recorded in books
    2. Recorded in banks
    3.  Subtracted from the cash book balance
    4. Subtracted from the Passbook balance

Ans: A) Added to the passbook balance

(Note: It is recorded in the cash book but not in the Passbook. So, your cash book balance has been increased, but it’s not recorded in Passbook. So, to reconcile the balance of both books, kindly record the balance in the Passbook.)

11. “NSF” mark in the cheque sent back by the bank indicate?

    1.  No sufficient funds or money
    2.  The check has been rejected
    3.  The Cheque has been forged
    4. A bank could not verify the identity

Ans: A.) No sufficient funds or money

(Note: The full form of the NSF is not providing sufficient funds into your bank account. So, the NSF indicates no sufficient funds or money in your bank account.

12. Unpresented cheques are also known as?

    1.  Uncollected cheques
    2. Uncredited cheques
    3. Outstanding cheques 
    4.  None of all of the above

Ans: C.) Outstanding cheques 

(Note: The unpresented cheque means a cheque issue but not presented for payment into the bank. So, its amount is not debited from a bank account but is deducted from the cash book.) 

13.If any cash balance is instantly deposited into the bank, then it is shown what?

    1. Cashbook will show a double balance 
    2. Cashbook will display less amount of the cash, and the Passbook will demonstrate the more balance
    3.  Passbook will show a double balance 
    4.  Cashbook will show increased balance, and the bank will show fewer

Ans.D) Cashbook will show less balance, and the bank will show more 

(Note: If the cash is deposited directly in your bank, the bank balance will increase. But if you do not enter it in your cash book, the amount will reduce.)

14. If the Cash amount as per the passbook is the beginning point, then the rate of the bank interest will be permitted?

    1. Deducted
    2. Added 
    3.  No effect
    4.  None of all of these 

Ans: A.) Subtracted 

15. What is the most prominent purpose of preparing the Bank Reconciliation Statement?

    1. To confirm the cash collections have been deposited into the bank suitably and the payments have been processed
    2.  To know about the balance of the PassBook 
    3.  To know about the balance of the Cashbook
    4.  None of all of these 

Ans: A.) The cash collections have been deposited into the bank suitably, and the payments have been processed.

16. What are the various steps to completing a bank reconciliation?

    1. Obtain bank records and Collect your company records
    2.  Find a place to start, check the income and expenses in your books, and Go over your bank withdrawals and deposits
    3.  Adjust the cash balance, Compare the end balances, and Adjust the bank statements
    4. All of the above points

Ans: D.) All of the above points

(Note: So, to end bank reconciliation, you have to need to collect your company records, locate a place to begin, get bank records, go over your bank withdrawals and deposits, Adjust the bank statements, Accommodate the cash balance, Check the expenses and income in your books, and Analogize the end balances.)

17. The Balance of the replenished petty cash fund contains a credit to

    1. Petty Cash
    2.  Cash
    3. Freight-In
    4.  Postage Expense

Ans: B.) Cash Account

18. The Balance of the reconciliation of the cash ledger book reconcile with the cash in the register is an example of

    1. Other rules
    2. Separate internal confirmation
    3. Establishment of duty
    4.  Segregation of responsibilities

Ans: B.) Separate internal confirmation

19. Which of these below-given points is not an internal management method for cash?

    1. Cash is deposited daily
    2. There should be limited access to cash
    3.  Keep the amount of cash on hand to a minimum
    4.  Payments are made with cash

Ans: D.) Payments are made with cash

20. Which of the below-given items on a bank statement reconciliation would need an adjusting entry on the company’s books?

    1. An error by the bank
    2. Outstanding checks
    3.  A bank service charge
    4.  A deposit in transit

Ans: C.) A bank service charge

ANOTHER MCQ QUESTIONS

1.Bank reconciliation statement is prepared to
(a) Ascertain the cash book balance
(b) Ascertain the bank balance
(c) Ascertain the overdraft balance
(d) Ensure balance as shown in cash book is in sync with that shown in the pass book.
Bank reconciliation statement is prepared to reconcile the difference between the bank balance as per Cash Book. So, option (d) is correct.

2. Bank reconciliation statement is prepared by
(a) The bank
(b) The bank customer
(c) The auditor
(d) All of the above
Bank Reconciliation statement is prepared by the customer of the bank (i.e the organisation who has a bank account). So, option (b) is correct.

3. Debit balance in Bank pass book means
(a) Bank overdraft.
(b) Bank Balance.
(c) Balance as per Cash Book.
(d) All of the above
Debit balance in bank pass book means bank overdraft balance. In cash book, it will be shown as credit balance. So, option (a) is correct.

4. Credit balance in Bank pass book means
(a) Bank overdraft.
(b) Bank Balance.
(c) Balance as per Cash book.
(d) Total of Bank A/c.
Credit balance in bank pass book means customer balance lying in bank account. In cash book, it will be shown as debit balance. So, option (b) is correct.

5. Bank reconciliation is prepared by
(a) Sole Proprietor concern.
(b) Partnership firm.
(c) Corporate bodies.
(d) All of the above.
Bank reconciliation statement is prepared to reconcile the difference between the bank balance as per Cash Book. by all types of Bank Customers whoever maintains a Bank a/c. So, option (d) is correct.

6. Bank Reconciliation statement is
(a) Combined cash bank book.
(b) Statement showing negative balance of bank account
(c) A statement showing the analysis for difference between the balances of cash book and pass book.
(d) A summary of all bank transactions
Bank reconciliation statement is not a part of books of accounts. It is a statement showing the analysis of difference between the balances of cash book and pass book. So, option (c) is correct.

7. Debit Balance in bank account column in the Cash Bank Book, means
(a) Overdraft as per Pass Book.
(b) Overdraft as per Cash Book.
(c) Credit Balance as per Pass Book.
(d) Neither of these.
Debit balance in cash book means balance lying in bank account. In bank pass book, it will be shown as credit balance. So, option (c) is correct.

8. Credit Balance in the bank column in Cash / Bank Book means
(a) Overdraft as per Pass Book.
(b) Favorable Balance as per Cash Book.
(c) Favorable Balance as per Pass Book.
(d) Neither of these.
Credit balance in bank column in cash book means overdraft in bank account. In bank pass book, it will be shown as debit balance. So, option (a) is correct.

9. Overdraft as per cash book means
(a) Credit balance in the cash column cash book.
(b) Credit balance in the bank column of the cash book.
(c) Debit balance in the pass book.
(d). Both b & c
Credit balance in bank column in cash book means overdraft in bank account. In bank pass book, it will be shown as debit balance. So, option (d) is correct.

10. Bank Reconciliation is a —————— and not an ————-
(a) Ledger, Journal.
(b) Account, Statement.
(c) Statement, Account.
(d) Ledger, Account.
Bank reconciliation statement is a statement, not an account. It contains explanation of the differences in balance as per cash book and bank statement. So, option (c) is correct.

11. Mr. A issued several cheques totaling Rs.20, 000 in March 2022 out of which cheques worth Rs.5, 000 only were presented for payment by 31st March, 2022. Balance as per pass book was Rs.25, 000. What would be balance as per cash book?
(a) Rs.5,000
(b) Rs.10,000
(c) Rs.15,000
(d) Rs.20,000
Out of cheque for Rs 20000 issued, only 5000 were presented. So, cheques worth Rs 15,000 were not presented to bank. So, the balance as per cash book would be Rs 25000 Rs 15,000 = 10,000. So, option (b) is correct.

12. Favourable balance of cash book implies that
A)  Credit balance of cash book 
B)  Debit balance of cash book 
C)  Bank overdraft
D)  Adjusted balance of cash book
Favourable balance of cash book implies Debit balance of cash book. Hence option B is correct

13. A cash deposit made by business appears on the bank statement in ——— column. 
A)  Debit 
B)  Credit 
C)  Expenses
D)  Liability

A cash deposit made by business appears on the bank statement in Debit column. Hence option B is correct

14. Bank reconciliation statement is the comparison of a bank statement (sent by bank) with the _ (prepared by business)
A)  Cash receipt journal 
B)  Cash payment journal 
C)  Cash book
D)  Financial statements

Bank reconciliation statement is the comparison of a bank statement (sent by bank) with the Cash Book (prepared by business). Hence option B is correct

15. A check returned by bank marked “NSF” means
A)  Bank can’t verify your identity 
B)  There are not sufficient funds in your account 
C)  Check has been forged
D)  Check can’t be cashed being illegal

A check returned by bank marked “NSF” means there are not sufficient funds account to clear the cheque. Hence option B is correct

16. Favourable balance in bank statement is shown as
A)  Credit balance 
B)  Debit balance 
C)  Bank overdraft
D)  Adjusted balance
Favourable balance in bank statement is shown as Credit balance. So option (A) is correct

17. Overdraft balance in bank statement is shown as
A)  Credit balance 
B)  Debit balance 
C)  Bank overdraft
D)  Adjusted balance
Overdraft balance in bank statement is shown as Debit balance. So option (B) is correct

18. Balance as per cash book=Rs.1000, Unpresented checks issued=Rs.2000, Uncredited checks=Rs.500, Deposit in transit=Rs.500. Compute the balance as per bank statement. 
A)  Rs.2000 
B)  Zero 
C)  Rs.3000
D)  Rs.2500
Balance in Bank Statement = Balance in Cash Book (1000) + Unrepresented checks (2000) [Uncredited Cheques (500) + Deposit in Transit (500)] = 1000+2000-1000=2000. Hence option A is correct.

MCQ QUESTIONS RELATED INTRODUCTION TO CORPORATE ACCOUNTING

_________ refers to accounting relating to corporate bodies or joint stock companies.

A. Financial accounting

B. Corporate Accounting

C. Cost accounting

D. Management accounting

View Answer

B. Corporate Accounting

________ is primarily concerned with the preparation and presentation of accounts in accordance with the provisions of the Indian Company Law.

A. Cost accounting

B. Management accounting

C. Corporate accounting

D. Both A & B

View Answer

B. Corporate Accounting

From the point of view of their incorporation or registration, companies can be classified into _______

A. Chartered Companies

B. Statutory Companies

C. Registered Companies

D. All of the above

View Answer

D. All of the above

East India Company is an example of ________

A. Chartered Companies

B. Statutory Companies

C. Registered Companies

D. OPC

View Answer

A. Chartered Companies

RBI, LIC, and UTI are the examples of _________

A. Statutory Companies

B. Registered Companies

C. Chartered Companies

D. Limited Liability Partnership Company

View Answer

A. Statutory Companies

Companies formed and registered under the Companies Act 1956 or registered under the previous companies Act is known as _______

A. Chartered Companies

B. Statutory Companies

C. Registered Companies

D. None of the above

View Answer

C. Registered Companies

Companies incorporated under a special charter by Royal Charter which lays down objectives, rights, duties etc. of the companies are known as ______

A. Statutory Companies

B. Chartered companies

C. Registered companies

D. Special company

View Answer

B. Chartered companies

_______ are those companies which are not private companies.

A. Limited companies

B. Proprietorship companies

C. Public companies

D. Registered companies

View Answer

C. Public companies

________ involves setting costs in advance considering the normal production output.

A. Retail Costing

B. Standard costing

C. Absorption costing

D. Marginal costing

View Answer

B. Standard costing

___________ method is an easy approach to determine cost by deducting profit from the sales price.

A. Retail Costing

B. Standard costing

C. Absorption costing

D. All of the above

View Answer

A. Retail Costing

Corporate accounting helps organization in _______

A. taking management decisions

B. formation of planning and control system

C. expert advice in financial reporting with formulation and implementation of organizational strategies

D. All of the above

View Answer

D. All of the above

Total capital of the company is divided into units of small denominations; each one is called a _______.

A. Stock

B. Index

C. Share

D. Dividend

View Answer

C. Share

_________ means issuing shares at price above its par value i.e face value.

A. Issue of share at par

B. Issue of share at discount

C. Issue of share at premium

D. All of the above

View Answer

C. Issue of share at premium

_____ means accepting a price which is less then the face value of share.

A. Issue of share at premium

B. Issue of share at discount

C. Issue of share at par

D. All of the above

View Answer

B. Issue of share at discount

If a share of 10 is issued at 10, then it is said to be issued at _______.

A. premium

B. discount

C. par

D. All of the above

View Answer

C. par

ESOP stands for _______

A. Employees Share Option Plan

B. Employees Stock Option Process

C. Employees Stock Option Plan

D. Employees Share Owner Plan

View Answer

C. Employees Stock Option Plan

________ is grant of shares at a discount or without monetary considerations.

A. ESOP

B. Sweat Equity

C. Dividend

D. ESPS

View Answer

B. Sweat Equity

Under ______ scheme a company offers its shares to its employees as a part of a public issue or otherwise.

A. ESPS

B. ESPP

C. ESOP

D. Both A & B

View Answer

D. Both A & B

___________ is the type of underwriting.

A. Complete underwriting

B. Partial underwriting

C. Joint Underwriting

D. All of the above

View Answer

D. All of the above

Preference shares are also referred to as ____________ because they combine both equity-like and debt-like characteristics. 5.1

A. preferred securities

B. hybrid instruments

C. Dividends

D. Both A & B

View Answer

D. Both A & B

Financial Statements MCQs

Question 1

Which report gives a review on the profitability of a business?

(a) Statement of changes in equity

(b) Cash flow statement

(c) Balance sheet

(d) Income statement

Answer: d

Question 2

When assets are subtracted from liabilities it will be equal to?

(a) Capital

(b) Net income

(c) Working capital

(d) Goodwill

Answer: a

Question 3

P&L statement is also known as?

(a) Statement of earnings

(b) Statement of balance sheet

(c) Statement of operations

(d) Statement of income

Answer: d

Question 4

Which of the following options is not recorded in the Balance sheet?

(a) Cash

(b) Rent expenses

(c) Building

(d) Goodwill

Answer: b

Question 5

Current assets are also known as:

(a) Cash

(b) Assets

(c) Invested capital

(d) Working capital

Answer: d

Question 6

The main operation expenses of a business are termed as:

(a) Operating expenses

(b) Non-administration expense

(c) Selling expenses

(d) Administration expense

Answer: a

Question 7

Cash receipt received from the sales fixed assets are recorded under the head of:

(a) Other activities

(b) Investing activities

(c) Financing activities

(d) Operating activities

Answer: b

Question 8

A current asset that can be transferred into cash within three months is known as:

(a) Cash equivalent

(b) Intangible asset

(c) Operating asset

(d) Cash asset

Answer: a

Question 9

A method used in a comparative analysis of financial statement is:

(a) Returning analysis

(b) Common size analysis

(c) Preference analysis

(d) Graphical analysis

Answer: B

Question 10

Which statement shows the flow of cash and cash equivalents during the financial period?

(a) Statement of changes in equity

(b) Cash flow statement

(c) Balance sheet

(d) Income statement

Answer: b

ANOTHER MCQ'S

Question 1 – What do we understand from financial statements? 

    1. A group of reports regarding the organization’s various financial aspects.
    2. A group of reports regarding the employee’s data.
    3. A collection of reports pertaining to the organization’s vision and mission. 
    4. None of the above

Answer 1 – A) 

Question 2 – Which of the following is a disadvantage of the financial statements. 

    1. The ability to tell if a business would be able to pay the debts
    2. Determining the sources and use of cash in the organization 
    3. Chance of manipulation in the report for obtaining debt that the organization cannot payback
    4. A yearly report that the investors can refer to

Answer 2 – C) 

A financial report may be manipulated such that the investors might begin believing the false better results of the organization. 

Question 3 – What does a balance sheet indicate out of the following options

    1. The demographic details of the employees 
    2. The overall organization’s liabilities, assets as well as stockholders’ equity
    3. The report regarding the weekly work progress of the organization
    4. None of the above

Answer 3 B)  

Question 4 – Which of the following is not a part of the financial reports of the organization

    1. Balance sheet
    2. Income statements 
    3. Report with the vision and mission of the organization 
    4. Report regarding the flow of cash

Answer 4 – C)

Question 5 – Which of the following can be a part of financial reports?

    1. The report regarding the financial result of the organization 
    2. The report with details about the financial position of the organization
    3. The report regarding the flow of cash of the organization 
    4. All of the above

Answer 5 – D)

Question 6 – In a balance sheet report, the total value of assets should be able to match the worth of the following

    1. The total sum of equity and liabilities 
    2. Total number of employees in the organization 
    3. The total earnings of the organization in the past week 
    4. The total number of new employees hires in the organization during the past year

Answer 6 – A)

Question 7 – Which of the following is the most suitable statement for explaining the statement of cash flows

    1. Report regarding the assets, equity and liabilities
    2. Report explaining the purpose of business 
    3. Report regarding the changes in the flow of cash for a particular time
    4. Report regarding the working and functioning of the organization 

Answer 7 – C) 

Statement of cash flows helps in understanding the flow of cash for a specific period. 

Question 8 – Which of the following can be a part of liabilities in the balance sheet

    1. Debts
    2. Dividends payable 
    3. Wages that are payable
    4. All of the above

Answer 8 D) 

Question 9 – What are the limitations of the financial statements

    1. There can be subjective interpretations of the financial statements as per the investors 
    2. There may be manipulation done in the financial statements such that the real profit-loss of the organization is not shown to the investors 
    3. The financial statements give a detailed description of the cash flow of the organization 
    4. Both A and B

Answer 9 – D)

Question 10 – Which of the following can be called very important in terms of the financial statements 

    1. The report regarding ethics of the organization 
    2. The list of holidays in the organization 
    3. Cash flow statement, balance sheet and the income statement 
    4. List of investors for the organization 

Answer 10 C) 

Question 11 – In terms of the topic – of financial statements, what can be the most suitable full form of CFS?

    1. Chronic fatigue syndrome
    2. Cubic feet per second
    3. Cash flow statement 
    4. Container Freight Solution 

Answer 11 C)

Question 12 – What can be some of the commonly depicted items in the financial statement of an organization 

    1. Cost of goods
    2. Debts
    3. Taxes
    4. All of the above

Answer 12 – D)

Question 13 – What can be the most appropriate role of the income statement from the following options 

    1. The income statement helps in learning about the business’s performance on a yearly basis in terms of the overall profit and other significant aspects of the business 
    2. It helps in learning about the shareholder’s equity, assets and liabilities. 
    3. It helps in understanding the decrease and increase in terms of the cash
    4. It helps in showing the overall changes in cash

Answer 13 – A) 

Question 14 – Out of the following options, which is the most suitable with regards to the balance sheet

    1. Liabilities = Assets + Shareholders Equity
    2. Shareholders Equity = Assets + Liabilities
    3. Assets = Shareholders Equity + Liabilities 
    4. Assets = Shareholders Equity – Liabilities

Answer 14 – C)

Question 15 – Out of all following four options, which is the most suitable with reference to a key feature of cash flow

    1. Cash flow helps in showing the increase as well as a decrease in the cash
    2. Cash flow has three significant sections such as liabilities, assets and shareholders’ equity
    3. Cash flow helps in showing the expenses as well as revenue of the business
    4. Cash flow can be used for showing the businesses’ financial position

Answer 15 – A)

A key feature of cash flow can be its ability to show a decrease as well as an increase in the cash flow. The three sections regarding liabilities, assets and shareholders’ equity can be found in a balance sheet, the balance sheet can also be helpful for showing the financial position of the business and the income statement can help in learning about the expenses and revenue of a specific business. 

Question 16 – Out of the following four options what can be the most suitable key feature with regards to the balance sheet

    1. The balance sheet can help in showing the expenses as well as revenues of the business
    2. The balance sheet helps in showing the business’s financial position and it has three crucial sections such as liabilities, assets and shareholder’s equity
    3.  The balance sheet helps in showing the decrease as well as an increase in cash
    4. The balance sheet helps in assessing the profitability

Answer 16 – B)

Question 17 – Which of the following four options cannot be called as a part of financial statements

    1. Income Statement
    2. Company’s Vision
    3. Balance Sheet
    4. Cash flow of the organization

Answer 17 – B)

Question 18 – Which of the following options is the most suitable for explaining the purpose of an income statement

    1. Profitability and financial position
    2. Financial Position and movement of cash
    3. Movement of cash and profitability
    4. Profitability 

Answer 18 – D)

Question 19 – What can be the measure of cash flow in keeping a record of the financial statement

    1. Revenues, liabilities, expenses and shareholder’s equity
    2. Decrease as well as an increase in cash along with revenue
    3. Expenses, assets, shareholders’ equity as well as decrease and increase in the cash
    4. Decrease and increase in cash

Answer 19 – D)

Question 20 – What can be the measure of the balance sheet in terms of keeping a record for the financial statements

    1. Assets, shareholder’s equity and liabilities
    2. Expenses, Assets, Shareholder’s equity, liabilities and movement of cash
    3. Decrease as well as an increase in cash along with assets, shareholder’s equity and liabilities
    4. Profitability and expenses

Answer 20 – A)

Question 21 – Which of the following description can be the most suitable for an explanation of liabilities in the balance sheet

    1. Liabilities refer to things owned by the organization
    2. Liabilities refer to the total sum of capital that the organization is indebted to others
    3. Liabilities refer to the overall capital or the total net worth
    4. Liabilities refer to the masses that may be either used or sold by the organization 

Answer 21 – B) 

Question 22 – Which of the following activities can be called a crucial part of the cash flow statements

    1. Operating activities
    2. Financing activities
    3. Investing activities
    4. All of the above

Answer 22 – D)

Question 23 – Which of the following option can be most suitable for understanding the operating margins

    1. Operating Margin = Net revenue/Income from operations
    2. Operating Margin = Income from operations/net revenue
    3. Operating margin = Net revenue
    4. Operating margin = Income from operations

Answer 23 – B) 

List of Basic Accounting MCQs

1. The revenues and expenses of a company are displayed in which statement?

  1. Balance Sheet
  2. Cash Flow Statement
  3. Income Statement
  4. None of the above

Answer: C) Income Statement

Explanation:

The income statement displays all the revenues and expenses of a company.

2. The main Purpose of Financial Accounting is?

  1. To Provide financial information to shareholders
  2. To maintain balance sheet
  3. To minimize taxes.
  4. To keep track of liabilities

Answer: A) To Provide financial information to shareholders

Explanation:

The purpose of financial accounting is to provide financial information to shareholders.

3. The expanded accounting equation is used by which statement?

  1. Cash Flow Statement
  2. Balance Sheet
  3. Income Statement
  4. None of the above

Answer: B) Balance Sheet

Explanation:

The expanded accounting equation is used by the balance sheet.

4. What type of balance do asset accounts have?

  1. Contra
  2. Credit
  3. Debit
  4. All of the above

Answer: C) Debit

Explanation:

Assets Account have a debit balance.

5.The kind of debts which are needed to be repaid in a short term is known as?

  1. Fixed Liabilities
  2. Current Liabilities
  3. Depreciating Assets
  4. Intangible Assets

Answer: B) Current Liabilities

Explanation:

Current Liabilities are the debts that needed to be repaid in a short period.

6. The account which increases equity is known as?

  1. Debit Account
  2. Credit Account
  3. Revenue
  4. Treasury Stock

Answer: C) Revenue

Explanation:

Revenue, Owner Investments and retained earnings increase the equity of a company.

7. What are the long-term assets which do not have any physical existence?

  1. Intangible Assets
  2. Tangible Assets
  3. Current Liabilities
  4. Current Assets

Answer: A) Intangible Assets

Explanation:

Intangible Assets have no physical existence. For Example, Goodwill, Brand Recognition, Patents etc. are known as Intangible Assets.

8. What is the supporting evidence in a business transaction called?

  1. Journal
  2. Ledger
  3. Voucher
  4. Contra Voucher

Answer: C) Voucher

Explanation:

Vouchers are proof that a business transaction has taken place.

9. The Expenses, Profit & Loss of an organisation are recorded in which account?

  1. Current Account
  2. Personal Account
  3. Nominal Account
  4. None of the above

Answer: C) Nominal Account

Explanation:

The nominal account records all the transactions of a business for one fiscal year.

10. Which person owes an amount to a business organisation for buying goods and services on a credit basis?

  1. Creditors
  2. Debtors
  3. Owner
  4. None of the above

Answer: B) Debtors

Explanation:

Debtors are the persons who owe an amount to a business organisation for buying goods and services on a credit basis.

11. When are balance sheets prepared?

  1. Quarterly
  2. Yearly
  3. Monthly
  4. None of the above

Answer: B) Yearly

Explanation:

Balance Sheets are prepared yearly as it displays the liabilities and assets of a company.

12. What is Activity Ratio?

  1. Financial Ratios that measure a firm's ability to convert different accounts into a balance sheet.
  2. Ratios that measure a company's ability to pay debt obligations and its margin of safety.
  3. Financial measurements that assess the ability of a company to meet its financial obligations
  4. The ratio that evaluates the company's ability to generate income as compared to its expenses.

Answer: A) Financial Ratios that measure a firm's ability to convert different accounts into a balance sheet

Explanation:

Activity Ratios are a category of financial ratios that measure a firm's ability to convert different accounts within its balance sheets into cash or sales.

13. What is Current Liability?

  1. Assets of a company that are expected to be sold or used as a result of standard business operations over the next year.
  2. A potential liability that may occur in the future.
  3. Company's short-term financial obligations that are due within one year or within a normal operating cycle.
  4. Obligations listed on the balance sheet not due for more than a year.

Answer: C) Company's short-term financial obligations that are due within one year or within a normal operating cycle

Explanation:

Current liabilities are a company's short-term financial obligations that are due within one year or within a normal operating cycle.

14. What is an operating cycle?

  1. A metric that expresses the time (measured in days) it takes for a company to convert its investments in inventory and other resources into cash flows from sales.
  2. The time it takes a company to buy goods, sell them and receive cash from the sale of said goods.
  3. The process of hiring personnel to conduct the daily operations of the business.
  4. collective process of identifying, analysing, and recording the accounting events of a company.

Answer: B) The time it takes a company to buy goods, sell them and receive cash from the sale of said goods

Explanation:

An operating cycle refers to the time it takes a company to buy goods, sell them and receive cash from the sale of said goods. In other words, it's how long it takes a company to turn its inventories into cash. The length of an operating cycle is dependent upon the industry.

15. What are Outstanding Expenses?

  1. Expenses which are not paid off in the current balance sheet.
  2. The necessary purchases that keep a business going from day-to-day.
  3. Type of expense that is due but has not been paid.
  4. None of the above.

Answer: C) Type of expense that is due but has not been paid

Explanation:

An Outstanding Expense is a type of expense that is due but has not been paid. This expense becomes outstanding to the company when, this has taken the benefit, but the related payment has not been made simultaneously. For Example: Rent due but not yet paid.

16. What is Bank Overdraft?

  1. A document used by a company's accounts payable department containing the supporting documents for an invoice.
  2. A negotiable instrument where payment is guaranteed by the issuing bank.
  3. A negotiable instrument similar to a bill of exchange.
  4. A line of credit that covers your transactions if your bank account balance drops below zero.

Answer: D) A line of credit that covers your transactions if your bank account balance drops below zero

Explanation:

An overdraft facility linked to your everyday transaction account is an unsecured line of credit designed to cover short-term cash flow shortfalls.

17. Which Ratio protects the Creditors?

  1. Lower Debt Equity Ratio
  2. Liquidity Assets
  3. Higher Inventory Ratio
  4. Return on Investment Ratio

Answer: A) Lower Debt Equity Ratio

Explanation:

Lower the Debt Equity ratio higher is the protection to creditors. Creditors usually like a low debt to equity ratio because a low ratio (less than 1) is the indication of greater protection to their money.

18. Return on Investment =?

  1. Net Sales x 100
  2. Fixed Assets x 100
  3. Total Assets x 100
  4. None of the above

Answer: C) Total Assets x 100

Explanation:

Return on Investment Ratio (ROI) = (Net profit / Total assets) x 100.

Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.

19. What does improper utilization of resources and over investment in assets indicate?

  1. Low Return on Investment
  2. Low Sales
  3. High Sales
  4. Depreciation of Assets

Answer: A) Low Return on Investment

Explanation:

Improper Utilization of resources and over investment in assets indicate a Low Return on Investment.

20. Which budget is prepared for Advertising, Salary, and Market Analysis?

  1. Operating Budget
  2. Sales Expenditure Budget
  3. Static Budget
  4. Labor Budget

Answer: B) Sales Expenditure Budget

Explanation:

The selling expense budget is usually based on the sales budget and the prior expense budgets in prior years.

21. What does a master budget include?

  1. Material Budget
  2. Production Budget
  3. Sales Budget
  4. All of the above

Answer: D) All of the above

Explanation:

A Master Budget consists of Sales budget, Production budget and Material budget.

22. Transaction is referred as which event in accounting?

  1. Political Event
  2. Economic Event
  3. Dividend
  4. Cash Transaction

Answer: B) Economic Event

Explanation:

In accounting, an economic event is referred to as Transaction.

23. Recording financial transaction is part of?

  1. Accounting
  2. Book Keeping
  3. Data Entry
  4. Journal

Answer: B) Book Keeping

Explanation:

Bookkeeping refers mainly to the record-keeping aspects of financial accounting, and involves preparing source documents for all transactions, operations, and other events of a business.

24. Examining of financial information refers to?

  1. Analysis
  2. Auditing
  3. Recording
  4. Balance Sheet

Answer: B) Auditing

Explanation:

Auditing is defined as the on-site verification activity, such as inspection or examination, of a process or quality system, to ensure compliance to requirements.

25. Who is an external user of financial statements?

  1. Shareholders
  2. CEO
  3. Manager
  4. Creditor

Answer: D) Creditor

Explanation:

Creditor of the business is the external user of financial statements.

26. Identifying an economic transaction is which phase of accounting cycle?

  1. First
  2. Second
  3. Third
  4. Last

Answer: A) First

Explanation:

Identifying an economic transaction is the first phase of an accounting cycle.

27. What is a Company?

  1. Legal entity organized and operated for a collective, public or social benefit, in contrast with an entity that operates as a business aiming to generate a profit for its owners.
  2. Business organization which is owned and carried on jointly by the members of the Hindu Undivided Family.
  3. Unincorporated business with only one owner who pays personal income tax on profits earned.
  4. A legal entity formed by a group of individuals to engage in and operate a business.

Answer: D) A legal entity formed by a group of individuals to engage in and operate a business

Explanation:

A company is a legal entity formed by a group of individuals to engage in and operate a business, commercial or industrial enterprise. A company may be organized in various ways for tax and financial liability purposes depending on the corporate law of its jurisdiction.

28. What are Liabilities?

  1. Resources of a Company
  2. Expenses of a Company
  3. Obligations of a Company
  4. None of the above

Answer: C) Obligations of a Company

Explanation:

Liabilities are defined as a company's legal financial debts or obligations that arise during the course of business operations.

29. What is an Income?

  1. A resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.
  2. Obligation between one party and another not yet completed or paid for.
  3. Earning from investments and other sources unrelated to employment.
  4. The revenue a business earns from selling its goods and services.

Answer: D) The revenue a business earns from selling its goods and services

Explanation:

Income is the revenue a business earns by selling its goods or by providing services.

30. An Asset possessed by the business should be shown in which part of balance sheet?

  1. Liabilities
  2. Assets
  3. Revenues
  4. Fixed Assets

Answer: B) Assets

Explanation:

An Asset possessed by the business should be shown in Asset part of balance sheet.

31. What is the common characteristic of all the assets owned by a company?

  1. Intangible
  2. Long Life
  3. Future Economic Benefits
  4. None of the above

Answer: C) Future Economic Benefits

Explanation:

Future economic benefits are the most important characteristic that all assets of a business have.

32. Capital + Liabilities = ?

  1. Revenue
  2. Assets
  3. Unearned Income
  4. Voucher

Answer: B) Assets

Explanation:

This is the fundamental accounting equation, also called the balance sheet equation, represents the relationship between the assets, liabilities, and owner's equity of a person or business.

33. Owner's claim on total assets is?

  1. Liability
  2. Assets
  3. Equity
  4. Cash

Answer: C) Equity

Explanation:

Owner's claim on total assets is called equity.

34. What are Drawings?

  1. Accounting method used to allocate the cost of a tangible or physical asset over its useful life or life expectancy.
  2. The amount of cash that a business disburses.
  3. An increase in the value of an asset over time.
  4. Money that is taken from the business account for personal use.

Answer: D) Money that is taken from the business account for personal use

Explanation:

Drawing in accounts is the record kept by a business owner or accountant that shows how much money has been withdrawn by business owners.

35. What occurs when expenses are greater than income?

  1. Net Loss
  2. Net Profit
  3. Debts
  4. Decrease in Assets

Answer: A) Net Loss

Explanation:

Net loss occurs when Expenses are greater than income. A net loss, sometimes referred to as a net operating loss (NOL), occurs when expenses exceed the income or total revenue produced for a given period of time.

36. What is a nominal account?

  1. An interest-bearing deposit account held at a bank or other financial institution.
  2. The account that represents a country's imports and exports of goods and services.
  3. The account in which accounting transactions are stored for one fiscal year.
  4. None of the above

Answer: C) The account in which accounting transactions are stored for one fiscal year

Explanation:

Nominal accounts are used to collect accounting transaction information for revenue, expense, gain, and loss transactions, all of which appear in the income statement.

37. What is a Real Account?

  1. An interest-bearing deposit account held at a bank or other financial institution.
  2. The account that represents a country's imports and exports of goods and services.
  3. The account in which accounting transactions are stored for one fiscal year.
  4. An account that retains and rolls forward its ending balance at the end of the year.

Answer: D) An account that retains and rolls forward its ending balance at the end of the year

Explanation:

A real account is an account that retains and rolls forward its ending balance at the end of the year. These amounts then become the beginning balances in the next period.

38. When does the capital of a company increases?

  1. Drawings Decrease
  2. Liabilities Decrease
  3. Revenue Increases
  4. Interest on capital increases

Answer: C) Revenue Increases

Explanation:

The capital of a company increases when its revenue increases.

39. Revenue - Expenses =?

  1. Net Income
  2. Net Loss
  3. Depreciation
  4. None of the above

Answer: A) Net Income

Explanation:

Revenue minus Expenses is the net income of the company.

40. What causes the decrease in Assets?

  1. Cash Purchases
  2. Liabilities
  3. Payment of Expenses
  4. Retained Earnings

Answer: C) Payment of Expenses

Explanation:

When an expense is recorded at the same time it is paid for with cash, the cash (asset) account declines, while the amount of the expense reduces the retained earnings account.

41. Assets - Liabilities = ?

  1. Income
  2. Gains
  3. Earnings
  4. Capital

Answer: D) Capital

Explanation:

Assets - Liabilities = Capital is correct.

42. What increases the Assets & Equity?

  1. Fresh Capital
  2. Debts paid off
  3. Revenues
  4. None of the above

Answer: A) Fresh Capital

Explanation:

The Assets & Equity of a company increases when fresh capital is introduced.

43. What is the book of original entries?

  1. Voucher Book
  2. General Journal
  3. Day Book
  4. Account Statement

Answer: B) General Journal

Explanation:

General Journal is the first place where a transaction is entered into the books.

44. How many accounts are affected by a business transaction?

  1. One
  2. Two
  3. Three
  4. Several

Answer: B) Two

Explanation:

Two accounts are affected whenever a transaction takes place in a business organization.

45. Day book is also known as?

  1. Journal
  2. Voucher
  3. Ledger
  4. Book Keeping

Answer: A) Journal

Explanation:

Day Book is the other name of Journal.

46. What is a compound entry?

  1. An entry involving more than two accounts.
  2. Accounting entry in which just one account is debited and one is credited.
  3. An accounting entry in which there is more than one debit, more than one credit, or more than one of both debits and credits.
  4. Entry that is used to record a business transaction in the accounting records of a business.

Answer: C) An accounting entry in which there is more than one debit, more than one credit, or more than one of both debits and credits.

Explanation:

A compound journal entry is an accounting entry in which there is more than one debit, more than one credit, or more than one of both debits and credits

47. Purchases are Debited when?

  1. Goods are purchased on cash
  2. Goods are sold at a discount
  3. Goods are purchased on credit
  4. Goods are lost

Answer: C) Goods are purchased on credit

Explanation:

Purchases are debited when an organisation purchases goods on credit.

48. When are Drawing Debited?

  1. Cash withdrawn for personal use
  2. Cash withdrawn for payment of goods
  3. Cash withdrawn for salary
  4. Octroi

Answer: A) Cash withdrawn for personal use

Explanation:

Drawings Account is debited when cash is withdrawn for personal use.

49. In what order data is entered into Journal?

  1. Chronological Order
  2. Numeric Order
  3. Alphabetically
  4. Bullets

Answer: A) Chronological Order

Explanation:

Journal entries are typically entered in chronological order.

50. Cash Account is credited when?

  1. Debts paid off
  2. Building bought in cash
  3. Asset sold for cash
  4. None of the above

Answer: B) Building bought in cash

Explanation:

Cash Account is credited when a building is purchases by the organization for cash.

MCQ on FIFO and LIFO methods :-

Latest First in First Out MCQ Objective Questions

First in First Out Question 1:

In which one of the following page replacement policies, Belady's anomaly may occur?

  1. FIFO
  2. Optimal
  3. LRU
  4. MRU

Answer: 

Option 1 : FIFO

First in First Out Question 1 Detailed Solution

Belady's anomaly may occur in FIFO

Key Points

  • A page fault occurs when a page is not found in the memory and needs to be loaded from the disk. If a page fault occurs and all memory frames have been already allocated, then the replacement of a page in memory is required at the request of a new page. This is referred to as demand-paging.
  • The choice of which page to replace is specified by a page replacement algorithm. The commonly used page replacement algorithms are FIFO, LRU, optimal page replacement algorithms, etc.
  • Generally, on increasing the number of frames to a process’s virtual memory, its execution becomes faster as less number of page faults occur. Sometimes the reverse happens, that is, more numbers of page faults occur when more frames are allocated to a process. This most unexpected result is termed as Belady’s Anomaly.
  • FIFO and random replacement algorithms suffer from Belady’s Anomaly. 

First in First Out Question 2:

Belady's anomaly may occur in ________.

  1. deadlock detection
  2. page replacement
  3. process scheduling
  4. process synchronisation

Answer (Detailed Solution Below)

Option 2 : page replacement

First in First Out Question 2 Detailed Solution

  • A page fault occurs when a page is not found in the memory and needs to be loaded from the disk. If a page fault occurs and all memory frames have been already allocated, then the replacement of a page in memory is required at the request of a new page. This is referred to as demand-paging.
  • The choice of which page to replace is specified by a page replacement algorithm. The commonly used page replacement algorithms are FIFO, LRU, optimal page replacement algorithms, etc.
  • Generally, on increasing the number of frames to a process’ virtual memory, its execution becomes faster as less number of page faults occur. Sometimes the reverse happens, that is, more numbers of page faults occur when more frames are allocated to a process. This most unexpected result is termed as Belady’s Anomaly.
  • FIFO and random replacement algorithms suffer from Belady’s Anomaly.
  • Hence Belady's anomaly may occur in page replacement. Therefore option 2 is correct

First in First Out Question 3:

Suppose for a process P, reference to pages in order are 1, 2, 4, 5, 2, 1, 2, 4. Assume that main memory can accommodate 3 pages and the main memory has already pages 1 and 2 in the order 1 - first, 2 - second. At this moment, assume FIFO Page Replacement Algorithm is used then the number of page faults that occur to complete the execution of process P is

  1. 6
  2. 4
  3. 3
  4. 5

Answer (Detailed Solution Below)

Option 4 : 5

First in First Out Question 3 Detailed Solution

Page Replacement Algorithm: FIFO

Reference to pages: 1, 2, 4, 5, 2, 1, 2, 4.

Page 1 and 2 are present in order: 1 and 2 in page frame:

1

2

4

5

2

1

2

4

1

1

1

5

5

5

5

4

2

2

2

2

2

1

1

1

 

 

4

4

4

4

2

2

H

H

M

M

H

M

M

M

 

Miss = page fault = 5

Important Points

M → miss

H → hit

First in First Out Question 4:

Which of the page replacement policy chooses oldest page for replacement?

  1. First - in - first - out
  2. Least recently used
  3. Optimal page replacement
  4. Least frequently used
  5. Most frequently used

Answer (Detailed Solution Below)

Option 1 : First - in - first - out

First in First Out Question 4 Detailed Solution

The simplest page-replacement algorithm is a first-in, first-out (FIFO) algorithm. A FIFO replacement algorithm associates with each page the time when that page was brought into memory. When a page must be replaced, the oldest page is chosen.
In this algorithm, the operating system keeps track of all pages in the memory in a queue, the oldest page is in the front of the queue. When a page needs to be replaced page in the front of the queue is selected for removal.

First in First Out Question 5:

Belady’s Anomaly is a behaviour of which page replacement Algorithm?

  1. FIFO
  2. Optimal
  3. LIFO
  4. LRU

Answer (Detailed Solution Below)

Option 1 : FIFO

First in First Out Question 5 Detailed Solution

  • A page fault occurs when a page is not found in the memory and needs to be loaded from the disk
  • If a page fault occurs and all memory frames have been already allocated, then the replacement of a page in memory is required at the request of a new page; This is referred to as demand-paging
  • The choice of which page to replace is specified by a page replacement algorithm
  • The commonly used page replacement algorithms are FIFO, LRU, optimal page replacement algorithms, etc
  • Generally, on increasing the number of frames to a process’ virtual memory, its execution becomes faster as less number of page faults occur; Sometimes the reverse happens, that is, more numbers of page faults occur when more frames are allocated to a process; This most unexpected result is termed as Belady’s Anomaly
  • FIFO and random replacement algorithms suffer from Belady’s Anomaly

In which one of the following page replacement policies, Belady's anomaly may occur?

  1. FIFO
  2. Optimal
  3. LRU
  4. MRU

Answer (Detailed Solution Below)

Option 1 : FIFO

First in First Out Question 6 

Detailed Solution

Belady's anomaly may occur in FIFO

Key Points

  • A page fault occurs when a page is not found in the memory and needs to be loaded from the disk. If a page fault occurs and all memory frames have been already allocated, then the replacement of a page in memory is required at the request of a new page. This is referred to as demand-paging.
  • The choice of which page to replace is specified by a page replacement algorithm. The commonly used page replacement algorithms are FIFO, LRU, optimal page replacement algorithms, etc.
  • Generally, on increasing the number of frames to a process’s virtual memory, its execution becomes faster as less number of page faults occur. Sometimes the reverse happens, that is, more numbers of page faults occur when more frames are allocated to a process. This most unexpected result is termed as Belady’s Anomaly.
  • FIFO and random replacement algorithms suffer from Belady’s Anomaly. 

Belady's anomaly may occur in ________.

  1. deadlock detection
  2. page replacement
  3. process scheduling
  4. process synchronisation

Answer (Detailed Solution Below)

Option 2 : page replacement

First in First Out Question 7 

Detailed Solution

  • A page fault occurs when a page is not found in the memory and needs to be loaded from the disk. If a page fault occurs and all memory frames have been already allocated, then the replacement of a page in memory is required at the request of a new page. This is referred to as demand-paging.
  • The choice of which page to replace is specified by a page replacement algorithm. The commonly used page replacement algorithms are FIFO, LRU, optimal page replacement algorithms, etc.
  • Generally, on increasing the number of frames to a process’ virtual memory, its execution becomes faster as less number of page faults occur. Sometimes the reverse happens, that is, more numbers of page faults occur when more frames are allocated to a process. This most unexpected result is termed as Belady’s Anomaly.
  • FIFO and random replacement algorithms suffer from Belady’s Anomaly.
  • Hence Belady's anomaly may occur in page replacement. Therefore option 2 is correct. 

Suppose for a process P, reference to pages in order are 1, 2, 4, 5, 2, 1, 2, 4. Assume that main memory can accommodate 3 pages and the main memory has already pages 1 and 2 in the order 1 - first, 2 - second. At this moment, assume FIFO Page Replacement Algorithm is used then the number of page faults that occur to complete the execution of process P is

  1. 6
  2. 4
  3. 3
  4. 5

Answer (Detailed Solution Below)

Option 4 : 5

First in First Out Question 8 

Detailed Solution

Page Replacement Algorithm: FIFO

Reference to pages: 1, 2, 4, 5, 2, 1, 2, 4.

Page 1 and 2 are present in order: 1 and 2 in page frame:

1

2

4

5

2

1

2

4

1

1

1

5

5

5

5

4

2

2

2

2

2

1

1

1

 

 

4

4

4

4

2

2

H

H

M

M

H

M

M

M

 

Miss = page fault = 5

Important Points

M → miss

H → hit


  • 1. Multiple-choice

    The difference between Cost of Goods Available for Sale and Ending inventory is:

    answer choices

    Beginning inventory.

    Cost of Goods Sold

    Inventory purchase.

    Inventory adjustment.

  • Ans- Cost of goods sold

2. Multiple-choice

The inventory cost flow assumption where the cost of the most recent purchases are likely to remain in inventory is:

answer choices

FIFO.

LIFO.

Weighted-average cost.

Specific Identification.

Ans- FIFO

3. Multiple-choice

The inventory cost flow assumption where the cost of the most recent purchase is matched first against sales revenues is

answer choices

FIFO.

LIFO.

Weighted-average cost.

Specific Identification.

Ans- LIFO

4. Multiple-choice

Which of the following should not be included in the

physical inventory of a company?

answer choices

Goods held on consignment from another company.

Goods shipped on consignment to another company.

Goods in transit from another company shipped FOB

shipping point.

None of the above.

Ans- goods held on consignment from another company. 

5. Multiple-choice

Cost of goods available for sale consist of two elements:

beginning inventory and:

answer choices

ending inventory.

cost of goods purchased.

cost of goods sold.

All of the above.

Ans- cost of goods purchased

6. Multiple-choice

At the beginning of the year, Bennett Supply has inventory of $3,500. During the year, the company purchases an additional $12,000 of inventory. An inventory count at the end of the year reveals remaining inventory of $4,000. What amount will Bennett report for cost of goods sold?

answer choices

$11,000.

$11,500.

$12,000.

$12,500.

Ans - $11500

7. Multiple-choice

The account Cost of Goods sold is considered an expense.

answer choices

True

False

Ans- True


  • 8. Multiple-choice

    Which of the following methods best matches the actual physical flow for most companies?

    answer choices

    FIFO.

    LIFO.

    Weighted-average cost.

    Specific identification.

Ans- FIFO


  • 9. Multiple-choice

    We had two items costing $20 each. We buy two more at $25 each. We use FIFO and sell one. How much is cost of goods sold?

    answer choices

    $20

    $22.50

    $25

    $20 or $25, depending on which item the customer picks up

Ans- $20

10. Multiple-choice

We had two items costing $20 each. We buy two more at $25 each. We use LIFO and sell one. How much is cost of goods sold?

answer choices

$20

$22.50

$25

$20 or $25, depending on which item the customer picks up

Ans- $25

11. Multiple-choice

We had two items costing $20 each. We buy two more at $25 each. We use weighted average and sell one. How much is cost of goods sold?

answer choices

$20

$22.50

$25

$20 or $25, depending on which item the customer picks up

Ans- $22.50

12. Multiple-choice

Using weighted average method: we had two items that cost $40 each. We buy 4 more that cost $70 each. What is the new weighted average cost per unit?

answer choices

$40

$55

$60

$70

Ans-

Q.

In LIFO method of inventory valuation?

A.Issue of stocks to production is at latest price
B.Closing stock is at latest price
C.Both (a) & (b)
D.Neither (a) nor (b)
Answer» A. Issue of stocks to production is at latest price

……….. is the term associated with inventory is called
A. Re-order costs
B. Purchase price of the inventory
C. Inventory holding costs, Shortage costs
D. All of the above

Which of the following accounts normally has a subsidiary ledger?

a) capital stock
b) accounts payable
c) retained earnings
d) supplies

Re-order costs are the costs of making orders to purchase a quantity of a material item from a supplier. Re-order costs include costs of which one of the followings;
A. The costs associated with placing an order, such as the costs of telephone calls
B. Costs associated with checking the inventory after delivery from the supplier
C. The cost of delivery of the purchased items, if these are paid for by the buyer

D. Batch set up costs if the inventory is produced internally
E. All of the above
Which of the following cot includes by Inventory holding costs?
A. Insurance costs
B. Cost of capital tied up
C. Cost of warehousing, obsolescence, deterioration and theft
D. All of the above
Shortage costs of inventory include:
A. Lost profit on sale
B. Future loss of profit due to loss of customer goodwill
C. Costs due to production stoppage due to shortage of raw materials
D. All of the above

........is the term associated with inventory is called

A. Re-order costs
B. Purchase price of the inventory
C. Inventory holding costs, Shortage costs
D. All of the above

Which of the following accounts normally has a subsidiary ledger?

a) capital stock
b) accounts payable
c) retained earnings
d) supplies

Re-order costs are the costs of making orders to purchase a quantity of a material item from a supplier. Re-order costs include costs of which one of the followings;
A. The costs associated with placing an order, such as the costs of telephone calls
B. Costs associated with checking the inventory after delivery from the supplier
C. The cost of delivery of the purchased items, if these are paid for by the buyer

D. Batch set up costs if the inventory is produced internally
E. All of the above
Which of the following cot includes by Inventory holding costs?
A. Insurance costs
B. Cost of capital tied up
C. Cost of warehousing, obsolescence, deterioration and theft
D. All of the above
Shortage costs of inventory include:
A. Lost profit on sale
B. Future loss of profit due to loss of customer goodwill
C. Costs due to production stoppage due to shortage of raw materials
D. All of the above

Which of the following is not an inventory?

a. Raw material
b. Finished products
c. Both a and b
d. Machines
(Ans:d)

All of the followings classes of costs are usually involved in making the inventory decisions except ……..the cost.
a. Cost of ordering
b. Carrying cost
c. Machining cost
d. None of these
Ans:c

The cost of insurance and tax is included in which of the following costs?
a. Inventory carrying cost
b. Cost of ordering
c. Set up cost
d. None of these
Ans:a

‘Buffer stock’ is the level of stock
a. Half of the actual stock
b. Minimum stock level below which actual stock should not fall
c. At which the ordering process should start
d. None of them
Ans:b

Which of the following always recorded in the general journal?
a) closing enteries
b) purchases of supplies on account
c) rendering services on account
d) rendering services for cash

The minimum stock level is calculated as
a. Reorder level + (Nornal consumption x Normal delivery time)
b. (Reorder level + Nornal consumption) x Normal delivery time
c. (Reorder level + Nornal consumption) / Normal delivery time
d. Reorder level – (Nornal consumption x Normal delivery time)
e. None of these
f. c and d
Ans:d

Select the assumptions of Economic order quantity (EOQ)?
A. There are no bulk purchase discounts for making orders in large sizes. All units purchased for each item of material cost the same unit price.
B. The order lead time (the time between placing an order and receiving delivery from the supplier) is constant and known.
C. Annual demand and consumption for the inventory item is constant throughout the year.
D. All of the above
Which of the following is the cost for the purpose of Economic order quantity (EOQ)?
A. The annual holding cost per item per annum
B. The annual ordering costs
C. Both A&B
D. None

The order quantity that minimize the total annual cost of ordering the item with the cost of holding it ina store is called the economic order quantity.
True
False

ABC analysis divides an organization’s on-hand inventory into three classes based upon

(A).unit price

(B). annual dollar values       

(C). annual demand

(D). the number of units on hand

In EOQ model the equation (Q/2) × CH is used to calculate which one of the followings;
A. The number of orders each year
B. Total ordering costs each year
C. The total holding costs each year
D. All above

What does FIFO mean in inventory management system?
(a) First In First Out
(b) Fabrications Inward Fabrications Outward
(c) Final Input Final Output
(d) Finished stock In Finished stock out
(e) None of these

In the economic order quantity model the equation D/Q calculate which one of the followings;
A. The total holding costs each year
B.  Total ordering costs each year
C. The number of orders each year
D. All above
In the economic order quantity model the equation (D/Q) × CO calculate which one of the followings;
A. Total ordering costs each year
B. The number of orders each year
C. The total holding costs each year
D. All above

3. The latest cost of inventories is changed to production but the old prices are changed to inventories on hand?
(a) FIFO
(b) LIFO
(c) Average
(d) Perpetual

If we want to minimize the total cost of holding and ordering inventory using EOQ model, then it is necessary to balance the relevant costs. These are:
A. The variable costs of holding the inventory
B. The fixed costs placing the order
C. Both A&B
D. None

The two-bin system of stores control is one whereby each stores item is kept in two storage bins.
Correct
Incorrect
In the ABC method materials are classified A, B or C according to their expense. group A is considered as expensive, group B is considered as the medium-cost and group C is considered as the inexpensive materials.
Incorrect
Correct

The EOQ can be calculated by using

Inventory

 MCQs of valuation account

…….. is the term associated with inventory is called

A. Re-order costs
B. Purchase price of the inventory
C. Inventory holding costs, Shortage costs
D. All of the above

Which of the following accounts normally has a subsidiary ledger?

a) capital stock
b) accounts payable
c) retained earnings
d) supplies

Re-order costs are the costs of making orders to purchase a quantity of a material item from a supplier. Re-order costs include costs of which one of the followings;
A. The costs associated with placing an order, such as the costs of telephone calls
B. Costs associated with checking the inventory after delivery from the supplier
C. The cost of delivery of the purchased items, if these are paid for by the buyer

D. Batch set up costs if the inventory is produced internally
E. All of the above
Which of the following cot includes by Inventory holding costs?
A. Insurance costs
B. Cost of capital tied up
C. Cost of warehousing, obsolescence, deterioration and theft
D. All of the above
Shortage costs of inventory include:
A. Lost profit on sale
B. Future loss of profit due to loss of customer goodwill
C. Costs due to production stoppage due to shortage of raw materials
D. All of the above

Which of the following is not an inventory?

a. Raw material
b. Finished products
c. Both a and b
d. Machines
(Ans:d)

All of the followings classes of costs are usually involved in making the inventory decisions except ……..the cost.
a. Cost of ordering
b. Carrying cost
c. Machining cost
d. None of these
Ans:c

The cost of insurance and tax is included in which of the following costs?
a. Inventory carrying cost
b. Cost of ordering
c. Set up cost
d. None of these
Ans:a

‘Buffer stock’ is the level of stock
a. Half of the actual stock
b. Minimum stock level below which actual stock should not fall
c. At which the ordering process should start
d. None of them
Ans:b

Which of the following always recorded in the general journal?
a) closing enteries
b) purchases of supplies on account
c) rendering services on account
d) rendering services for cash

The minimum stock level is calculated as
a. Reorder level + (Nornal consumption x Normal delivery time)
b. (Reorder level + Nornal consumption) x Normal delivery time
c. (Reorder level + Nornal consumption) / Normal delivery time
d. Reorder level – (Nornal consumption x Normal delivery time)
e. None of these
f. c and d
Ans:d

Select the assumptions of Economic order quantity (EOQ)?
A. There are no bulk purchase discounts for making orders in large sizes. All units purchased for each item of material cost the same unit price.
B. The order lead time (the time between placing an order and receiving delivery from the supplier) is constant and known.
C. Annual demand and consumption for the inventory item is constant throughout the year.
D. All of the above
Which of the following is the cost for the purpose of Economic order quantity (EOQ)?
A. The annual holding cost per item per annum
B. The annual ordering costs
C. Both A&B
D. None

The order quantity that minimize the total annual cost of ordering the item with the cost of holding it ina store is called the economic order quantity.
True
False

ABC analysis divides an organization’s on-hand inventory into three classes based upon

(A).unit price

(B). annual dollar values       

(C). annual demand

(D). the number of units on hand

In EOQ model the equation (Q/2) × CH is used to calculate which one of the followings;
A. The number of orders each year
B. Total ordering costs each year
C. The total holding costs each year
D. All above

What does FIFO mean in inventory management system?
(a) First In First Out
(b) Fabrications Inward Fabrications Outward
(c) Final Input Final Output
(d) Finished stock In Finished stock out
(e) None of these

In the economic order quantity model the equation D/Q calculate which one of the followings;
A. The total holding costs each year
B.  Total ordering costs each year
C. The number of orders each year
D. All above
In the economic order quantity model the equation (D/Q) × CO calculate which one of the followings;
A. Total ordering costs each year
B. The number of orders each year
C. The total holding costs each year
D. All above

3. The latest cost of inventories is changed to production but the old prices are changed to inventories on hand?
(a) FIFO
(b) LIFO
(c) Average
(d) Perpetual

If we want to minimize the total cost of holding and ordering inventory using EOQ model, then it is necessary to balance the relevant costs. These are:
A. The variable costs of holding the inventory
B. The fixed costs placing the order
C. Both A&B
D. None

The two-bin system of stores control is one whereby each stores item is kept in two storage bins.
Correct
Incorrect
In the ABC method materials are classified A, B or C according to their expense. group A is considered as expensive, group B is considered as the medium-cost and group C is considered as the inexpensive materials.
Incorrect
Correct

The EOQ can be calculated by using the which one of the following

. Graph

F Table

G. Formula
H. All of the above

According to Economic order theory average inventory held is equal to one half of the reorder quantity.
A. Correct
B. Incorrect
Supply lead time is the time between placing a new order with a supplier and receiving the delivery of the purchased items. The length of this supply lead time might be uncertain and might be several days, weeks or even months.
A. The above is statement is correct
B. The above statement is incorrect

The time period between placing an order and its receipt in stock is known as
a. Carrying time
b. Lead time
c. Shortage time
d. Over time

Re-ordering level is calculated by the formula
a. Minimum consumption rate x Minimum re-order period
b. Maximum consumption rate x Minimum re-order period
c. Maximum consumption rate x Maximum re-order period
d. Minimum consumption rate x Maximum re-order period

Average stock level can be calculated by the formula
A. Maximum stock level + ½ of Re-order level
B. Minimum stock level + 1/3 of Re-order level
C. Maximum stock level + 1/3 of Re-order level
D. None of these

An increase in inventories indicates that?
(a) Not all purchases were cash
(b) Less merchandise was purchased then sold to the customer
(c) More merchandise was purchased then the amount sold to customer
(d) Cash payments were more than purchases on account

inventory shrinkage is recorded when….?
Inventory shrinkage is recorded when you want to reconcile your sitting inventory with your inventory records. If you find less on your shelves than your accounting reflects you’ve sold, you’ve got shrinkage.
Ending inventory is made up of the oldest purchases when a company uses?
A. FIFO
B. LIFO
C. Average costing method
D. None of these

When the perpetual inventory system is used, the inventory sold is debited to?
a) supplies expense
b) merchandise inventory
c) cost of merchandise sold
d) none of these

when the perpetual inventory system is used, the inventory sold is debited to?


……….. is the term associated with inventory is called
A. Re-order costs
B. Purchase price of the inventory
C. Inventory holding costs, Shortage costs
D. All of the above

Which of the following accounts normally has a subsidiary ledger?

a) capital stock
b) accounts payable
c) retained earnings
d) supplies

Re-order costs are the costs of making orders to purchase a quantity of a material item from a supplier. Re-order costs include costs of which one of the followings;
A. The costs associated with placing an order, such as the costs of telephone calls
B. Costs associated with checking the inventory after delivery from the supplier
C. The cost of delivery of the purchased items, if these are paid for by the buyer

D. Batch set up costs if the inventory is produced internally
E. All of the above
Which of the following cot includes by Inventory holding costs?
A. Insurance costs
B. Cost of capital tied up
C. Cost of warehousing, obsolescence, deterioration and theft
D. All of the above
Shortage costs of inventory include:
A. Lost profit on sale
B. Future loss of profit due to loss of customer goodwill
C. Costs due to production stoppage due to shortage of raw materials
D. All of the above

Which of the following is not an inventory?

a. Raw material
b. Finished products
c. Both a and b
d. Machines
(Ans:d)

All of the followings classes of costs are usually involved in making the inventory decisions except ……..the cost.
a. Cost of ordering
b. Carrying cost
c. Machining cost
d. None of these
Ans:c

The cost of insurance and tax is included in which of the following costs?
a. Inventory carrying cost
b. Cost of ordering
c. Set up cost
d. None of these
Ans:a

‘Buffer stock’ is the level of stock
a. Half of the actual stock
b. Minimum stock level below which actual stock should not fall
c. At which the ordering process should start
d. None of them
Ans:b

Which of the following always recorded in the general journal?
a) closing enteries
b) purchases of supplies on account
c) rendering services on account
d) rendering services for cash

The minimum stock level is calculated as
a. Reorder level + (Nornal consumption x Normal delivery time)
b. (Reorder level + Nornal consumption) x Normal delivery time
c. (Reorder level + Nornal consumption) / Normal delivery time
d. Reorder level – (Nornal consumption x Normal delivery time)
e. None of these
f. c and d
Ans:d

Select the assumptions of Economic order quantity (EOQ)?
A. There are no bulk purchase discounts for making orders in large sizes. All units purchased for each item of material cost the same unit price.
B. The order lead time (the time between placing an order and receiving delivery from the supplier) is constant and known.
C. Annual demand and consumption for the inventory item is constant throughout the year.
D. All of the above
Which of the following is the cost for the purpose of Economic order quantity (EOQ)?
A. The annual holding cost per item per annum
B. The annual ordering costs
C. Both A&B
D. None

The order quantity that minimize the total annual cost of ordering the item with the cost of holding it ina store is called the economic order quantity.
True
False

ABC analysis divides an organization’s on-hand inventory into three classes based upon

(A).unit price

(B). annual dollar values       

(C). annual demand

(D). the number of units on hand

In EOQ model the equation (Q/2) × CH is used to calculate which one of the followings;
A. The number of orders each year
B. Total ordering costs each year
C. The total holding costs each year
D. All above

What does FIFO mean in inventory management system?
(a) First In First Out
(b) Fabrications Inward Fabrications Outward
(c) Final Input Final Output
(d) Finished stock In Finished stock out
(e) None of these

In the economic order quantity model the equation D/Q calculate which one of the followings;
A. The total holding costs each year
B.  Total ordering costs each year
C. The number of orders each year
D. All above
In the economic order quantity model the equation (D/Q) × CO calculate which one of the followings;
A. Total ordering costs each year
B. The number of orders each year
C. The total holding costs each year
D. All above

3. The latest cost of inventories is changed to production but the old prices are changed to inventories on hand?
(a) FIFO
(b) LIFO
(c) Average
(d) Perpetual

If we want to minimize the total cost of holding and ordering inventory using EOQ model, then it is necessary to balance the relevant costs. These are:
A. The variable costs of holding the inventory
B. The fixed costs placing the order
C. Both A&B
D. None

The two-bin system of stores control is one whereby each stores item is kept in two storage bins.
Correct
Incorrect
In the ABC method materials are classified A, B or C according to their expense. group A is considered as expensive, group B is considered as the medium-cost and group C is considered as the inexpensive materials.
Incorrect
Correct

The EOQ can be calculated by using the which one of the followings;

E. Graph
F. Table
G. Formula
H. All of the above

According to Economic order theory average inventory held is equal to one half of the reorder quantity.
A. Correct
B. Incorrect
Supply lead time is the time between placing a new order with a supplier and receiving the delivery of the purchased items. The length of this supply lead time might be uncertain and might be several days, weeks or even months.
A. The above is statement is correct
B. The above statement is incorrect

The time period between placing an order and its receipt in stock is known as
a. Carrying time
b. Lead time
c. Shortage time
d. Over time

Re-ordering level is calculated by the formula
a. Minimum consumption rate x Minimum re-order period
b. Maximum consumption rate x Minimum re-order period
c. Maximum consumption rate x Maximum re-order period
d. Minimum consumption rate x Maximum re-order period

Average stock level can be calculated by the formula
A. Maximum stock level + ½ of Re-order level
B. Minimum stock level + 1/3 of Re-order level
C. Maximum stock level + 1/3 of Re-order level
D. None of these

An increase in inventories indicates that?
(a) Not all purchases were cash
(b) Less merchandise was purchased then sold to the customer
(c) More merchandise was purchased then the amount sold to customer
(d) Cash payments were more than purchases on account

inventory shrinkage is recorded when….?
Inventory shrinkage is recorded when you want to reconcile your sitting inventory with your inventory records. If you find less on your shelves than your accounting reflects you’ve sold, you’ve got shrinkage.
Ending inventory is made up of the oldest purchases when a company uses?
A. FIFO
B. LIFO
C. Average costing method
D. None of these

When the perpetual inventory system is used, the inventory sold is debited to?
a) supplies expense
b) merchandise inventory
c) cost of merchandise sold
d) none of these

when the perpetual inventory system is used, the inventory sold is debited to?

a) supplies expense
b) merchandise inventory
c) cost of merchandise sold
d) none of these
when is a physical inventory usually taken?
a. When goods are not being sold or received
b. When the company has its greatest amount of inventory
c. When the company has its greatest amount of inventory and at the end of the company’s fiscal year
d. At the end of the company’s fiscal year

What is the objective of inventory management?
“The objectives of inventory management is to provide the desired level of customer service, to allow cost-efficient operations, and to minimize the inventory investment.”

Multiple Choice QuizInventory Methods

Questions and Answers
  • 1. 

    The inventory costing method that is based on the assumption that cost should be charged against revenue in the order in which they were incurred.

    • A. 

      Fifo

    • B. 

      Lifo

    • C. 

      Average cost

    Correct Answer(s)
    A. Fifo
    •  
  • 2. 

    The inventory costing method that charges the most recent costs incurred against revenue

    • A. 

      Lifo

    • B. 

      Fifo

    • C. 

      Average cost

    Correct Answer(s)
    A. Lifo
    •  
  • 3. 

    The following units of a particular item were purchased and sold during the period: Beginning inventory 40 units at P20 First purchase 50 units at P21 Second purchase 50 units at P22 First sale 110 units Third purchase 50 units at 23 Second sale 45 units What is the cost of the 35 units on hand at the end of the period as determined under the perpetual inventory system by the lifo costing method

    • A. 

      P715

    • B. 

      700

    • C. 

      705

    • D. 

      805

    Correct Answer(s)
    A. P715
    •  
  • 4. 

    The following units of a particular item were purchased and sold during the period: Beginning inventory 40 units at P20 First purchase 50 units at P21 Second purchase 50 units at P22 First sale 110 units Third purchase 50 units at 23 Second sale 45 units What is the cost of the 35 units on hand at the end of the period as determined under the periodic inventory system by the fifo costing method

    • A. 

      20

    • B. 

      21

    • C. 

      22

    • D. 

      23

    Correct Answer(s)
    D. 23
    •  
  • 5. 

    If the merchandise inventory is being valued at cost and the price level is steadily rising,the method of costing that will yield the highest net income is:

    • A. 

      Lifo

    • B. 

      Fifo

    • C. 

      Average cost

    Correct Answer(s)
    B. Fifo

Question 1.
Raw materials are directly identifiable as part of the final product and are classified as
(A) Period costs
(B) Fixed costs
(C) Direct materials
(D) Any of the above
Answer:
(C) Direct materials

Question 2.
Inventory consists of
(A) Intangible property
(B) Tangible property
(C) (A) or (B)
(D) (A) & (B)
Answer:
(B) Tangible property 

Management – Financial Management MCQ

Question 1.
Raw materials are directly identifiable as part of the final product and are classified as
(A) Period costs
(B) Fixed costs
(C) Direct materials
(D) Any of the above
Answer:
(C) Direct materials

Question 2.
Inventory consists of
(A) Intangible property
(B) Tangible property
(C) (A) or (B)
(D) (A) & (B)
Answer:
(B) Tangible puestion 3.

Which of the following statement is correct in relation to “need for proper inventory control”?
(A) Inadequate inventory may lead to keep men and machines waiting.
(B) Materials do not constitute a significant part of the total production cost hence proper planning and controlling of inventories is not a big deal.
(C) Funds are not tied up in surplus stores and stocks.
(D) All of the above
Answer:
(A) Inadequate inventory may lead to keep men and machines waiting.

Question 4.
Inventory is valued at ………….
(A) Replacement price
(B) Replacement price or purchase value, whichever is less.
(C) At cost or net realizable value which-ever is less.
(D) Replacement price or net realizable value, whichever is less.
Answer:
(C) At cost or net realizable value which-ever is less.

Question 5.
………… indicates the level of each particular item of stock at any point of time.
(A) Bill of Material
(B) Material Requisition Note
(C) A bin card
(D) All of the above
Answer:
(C) A bin card

Question 6.

Which of the following details are recorded in bin card?
(A) Date of order and suppliers name along with address
(B) Record of quantities only
(C) Record of both quantities & values
(D) All of the above
Answer:
(B) Record of quantities only

Question 7.

Inventory held for sale in the ordinary course of business is known as ………….
(A) Finished Goods
(B) Raw Material
(C) Work-in-progress
(D) Miscellaneous inventory
Answer:
(A) Finished Goods

Question 8.
…………… is a list of materials, with specifications, material codes and quantity of each material required for a particular job, process or production unit.
(A) Material Transfer Note
(B) Bill of Materials
(C) Purchase Requisition
(D) Bin Card
Answer:
(B) Bill of Materials

Question 9.
Which of the following method is based on the assumption that, latest consignment of materials or goods manufactured are exhausted first and the closing stock is valued at the cost of earliest lot in hand?
(A) FIFO Method
(B) Highest-in-first-out method
(C) Average cost method
(D) LIFO Method
Answer:
(A) FIFO Method

Question 10.
…………….. are those cost, which can be identified and traceable to particular product or costing unit or cost centre.
(A) Indirect material costs
(B) Period costs
(C) Direct material costs
(D) Fixed costs
Answer:
(C) Direct material costs

Question 11.
Wood used in production of tables and chairs, steel bars used in steel factory etc are the examples of …………
(A) Indirect material
(B) Direct material
(C) Fixed material
(D) All of the above
Answer:
(B) Direct material

Question 12.
Under of inventory valuation, the historical cost of inventory is estimated by calculating at selling price and then deducting an amount equal to the estimated gross margin of profit on such stocks.
(A) Simple Average Price Method
(B) Weighted Average Price Method
(C) Adjusted Selling Price Method
(D) Market Price Method
Answer:
(C) Adjusted Selling Price Method

Question 13.
When materials are unloaded, the warehouse staff checks the material unloaded with the delivery note. Then the warehouse staff prepares a…………, a copy of which is given to the supplier’ carrier as a proof of delivery.
(A) Delivery note
(B) Material receipt note
(C) Bill of Material
(D) Purchase Requisition
Answer:
(B) Material receipt note

Question 14.
……….. .. are those items, which are moving at a slow rate and this may arise due to general depression in demand due to keen g competition.
(A) Dormant stocks
(B) Written-off stocks
(C) Slow moving stocks
(D) Any of the above
Answer:
(C) Slow moving stocks

Question 15.

CIMA defines ………… as, an internal instruction to a buying office to procure goods or services.
(A) Bin card
(B) Store accounting
(C) Bill of Material
(D) Purchase requisition
Answer:
(D) Purchase requisition

Question 16.

In which of the following posting is done before the transaction takes place?
(A) Bill of Material
(B) Bin card
(C) Purchase requisition
(D) General ledger
Answer:
(B) Bin card

Question 17.
……………….. are those items which are not moving temporarily but their movement is expected shortly.
(A) Slow moving stock
(B) Dormant stocks
(C) Non marketable stock
(D) Less efficient stock
Answer:
(B) Dormant stocks

Question 18.
When materials are delivered, a supplier’s carrier will usually provide a document called to confirm the details of delivery.
(A) Material Transfer Note
(B) Materials Inspection Note
(C) Delivery Note
(D) Purchase Requisition
Answer:
(C) Delivery Note

Question 19.
………… represents the unusable loss,which can be sold. It is a residue, which is measurable and has a minor value.
(A) Waste
(B) Scrap
(C) Spoilage
(D) Defective
Answer:
(B) Scrap

Question 20.
If small quantities of direct material used in the end product like gums and threads are used in binding books then it may be categorized as
(A) Miscellaneous cost
(B) Preliminary cost
(C) Indirect material cost
(D) Fixed cost of production
Answer:
(C) Indirect material cost

Question 21.

Bill of material acts as an authorization to the in procuring the materials and the concerned department in material requisition from the stores.
(A) Manufacturing department
(B) Store department
(C) Research department
(D) Sales department
Answer:
(B) Store department

Question 23.
………. records the quantity details,rates and values of stock movements.
(A) Stores ledger
(B) Sales ledger
(C) Material Transfer Note
(D) Delivery Note
Answer:
(A) Stores ledger

Question 24.
…………… are that portion of the process loss, which can be converted into a finished product by incurring more material and labour expenses.
(A) Waste
(B) Scrap
(C) Spoilage
(D) Defectives
Answer:
(B) Scrap

Question 25.
CIMA defines as, ……….. “the recording as they occur of receipts, issues and the resulting balances of individual items of stock in either quantity or quality and value”.
(A) Pre-paid Inventory System
(B) Continuous Stock Taking
(C) Perpetual Inventory System
(D) Budgetary Control System
Answer:
(C) Perpetual Inventory System

Question 26.

Which of the following accounting treatment is correct in relation to “Spoilage”?
(A) Loss due to spoilage can be debited to the job /product /process in which it occurred.
(B) It may be charged to factory over-heads so that the loss is borne by all products.
(C) If spoilage occurs on a specific job/ special order, it is charged to that job itself.
(D) All of the above
Answer:
(D) All of the above

Question 27.

Which of the following technique can be used for inventory control?
(A) Standard Costing
(B) ABC Analysis
(C) Integrated Accounting System
(D) Any of the above
Answer:
(B) ABC Analysis

Question 28.
…………….. is an optimum quantity of material to be ordered every time an order is placed. EOQ may be defined as that quantity of purchase which minimizes material order cost and material carrying cost.
(A) Quantity in such lot which has maximum discount
(B) Special Order Quantity (SOQ)
(C) Standard Order Quantity (SOQ)
(D) Economic Order Quantity (EOQ)
Answer:
(D) Economic Order Quantity (EOQ)

Question 29.

The model and formula of EOQ was developed by in 1913.
(A) F.W. Taylor
(B) F. Wilson Harris
(C) F. Walter Harris
(D) F.W. Marshall
Answer:
(B) F. Wilson Harris

Question 30.
………. are those materials or components which are so damaged in the manufacturing process that they cannot be repaired or reconditioned.
(A) Spoilage
(B) Waste
(C) Scrap
(D) Defective
Answer:
(A) Spoilage

Question 31.
Under which of the following plan the analyst lays down a minimum and maximum quantity for each stock item keeping in view its usage, requirements and margin of safety required to minimize risk of stock outs?
(A) ABC plan
(B) Two-bin system
(C) Order cycling systems
(D) Min-Max plan
Answer:
(D) Min-Max plan

Question 32.
Under …………. a pre-determined price is fixed for valuing each material.
(A) Base Stock Method
(B) Specific Identification Method
(C) Market Price Method
(D) Standard Cost Method
Answer:
(D) Standard Cost Method

Question 33.

………….. may be defined as that quantity of purchase which minimizes material order cost and material carrying cost.
(A) Basic Ordering Quantity
(B) Constant Ordering Quantity
(C) Economic Order Quantity
(D) Any of the above
Answer:
(C) Economic Order Quantity

Question 34.

Which of the following statement is true in relation to ABC Analysis of inventory control?
(A) Category A: It contains a relatively large number of inexpensive items.
Category B: It contains inventory items, which are neither very expensive nor very cheap.
Category C: It contains inventory items, which are in massive quantities.
(B) Category A: It contains inventory items, which are neither very expensive nor very cheap. Moreover, they are used in moderate quantities.
Category B: It contains a relatively large number of items. But they are either very inexpensive items or used in very small quantities so that they do not constitute small percentage of the total value of inventories.
Category C: It contains inventory items, which are expensive or used in massive quantities. Thus, they low in quantity but high in value.
(C) Category A: It contains inventory items, which are low in quantity but high in value.
Category B: It contains inventory items, which are neither very expensive nor very cheap. They are used in moderate quantities.
Category C: It contains inventory items, which are in massive quantities, but they are very inexpensive
(D) Any of the above
Answer:
(C)
Question 35.
Which of the following is property of “Normal Waste”?
(A) It is included in output quantity.
(B) It do not involves further costs of disposing
(C) It is avoidable and controllable
(D) None of the above
Answer:
(D) None of the above
Question 36.
…………….. are goods/units which can be converted into a finished product by incurring more material & labour expenses.
(A) Scrap
(B) Waste
(C) Spoilage
(D) Defectives
Answer:
(D) Defectives

Question 37.
Under ………… a continuous record of receipt and issue of materials is maintained by the stores department and the information about the stock of material is always available.
(A) Perpetual Inventory System
(B) Continuous Stock Taking
(C) Periodic Inventory System
(D) Just in time
Answer:
(A) Perpetual Inventory System

Question 38.

Reorder Level = Safety Stock + …………..
(A) Maximum re-order period
(B) Maximum usage
(C) Minimum consumption
(D) Normal lead time consumption
Answer:
(D) Normal lead time consumption

Question 39.
Which of the following treatment is correct for “Waste”?
(A) Abnormal waste is unavoidable and uncontrollable and treated as part of the product cost.
(B) Normal waste is transferred to the Costing P & L A/c
(C) Both (a) & (b)
(D) Neither (a) nor (b)

Question 40.
Which of the following is required in order to calculate EOQ?
(A) Cost of equity (Ke)
(B) Stock-out Cost
(C) Opportunity Cost
(D) All of the above
Answer:
(B) Stock-out Cost

Question 41.

Which of the following formula is used to calculate Re-order Level?
(A) (Maximum usage × Maximum re-order period)
(B) Safety Stock + Normal lead time consumption
(C) (Average usage × Average re-order period)
(D) (A) or (B)
Answer:
(D) (A) or (B)
Question 42.
Which of the following is/are example of “Waste” in relation to material cost?
(A) Smoke
(B) Sawdust in timber industry
(C) Portion of the process loss, which can be converted into a finished product
(D) All of the above
Answer:
(A) Smoke

Question 43.
Which of the following formula is used to calculate Maximum Level?
(A) (Re-order level + Re-order qty) – (Maximum consumption × Maximum reorder period)
(B) (Re-order level + Re-order qty) – (Minimum consumption × Minimum reorder period)
(C) (Re-order level 4- EOQ) – (Minimum consumption × Minimum re-order period)
(D) (B) or (C)
Answer:
(D) (B) or (C)

Question 44.
Re-order Level is also known as ……………
(A) Re-order Quantity
(B) Economic order quantity
(C) Reorder point
(D) (A) or (C)
Answer:
(D) (A) or (C)

Question 45.
Danger Level = ?
(A) (Maximum consumption × Lead time for emergency purchase
(B) (Average consumption × Lead time for emergency purchase)
(C) (Minimum × Lead time for emergency purchase
(D) Ordering Level – (Average Usage × Re-order Period)
Answer:
(B) (Average consumption × Lead time for emergency purchase)

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