APPSC PORTAL: COMMERCE QUESTIONS FOR PSC EXAMS

Monday, January 31, 2011

COMMERCE QUESTIONS FOR PSC EXAMS

1. Unpaid calls are shown in the balance sheet of a Company:

(a) by adding it to the share capital

(b) by deducting it from the called-up share capital

(d) under the head ‘Current liabilities’

Ans. (b)

2. Part-II Schedule VI to the Companies Act, 1956, prescribes:

(a) vertical form of balance sheet

(b) requirements as to profit and loss account

(d) contents of prospectus

Ans. (b)

3. X Ltd. forfeited 30 shares of Rs. 10 each fully called-up, for non-payment of allotment money of Rs. 3 per share and call money of Rs. 4 per share. These shares are re-issued for Rs. 8 per share fully paid.

What is the amount to be transferred to Capital Reserve Account?

(a) Rs. 300

(b) Rs. 60

(d) Rs. 90

Ans. (c)

4. Right’s shares are the shares that are offered to the:

(a) directors of the company

(b) debenture holders

(d) creditors of the company

Ans. (c)

5. Pro-rata allotment of shares means allotment of shares:

(a) equally amongst the applicants

(b) at the discretion of the Directors

(d) to only a few selected applicants

Ans. (c)

6. Interest on calls in arrears is charged according to Table A of Schedule I to the Companies Act 1956 at the rate of:

(a) 5% p.a.

(b) 6% p.a

(d) 10% p.a.

Ans. (a)

7. The best definition of ‘Capital employed’ in calculating the rate of return on investment is:

(a) current assets + gross fixed assets

(b) current assets + net fixed assets

(d) working capital + net fixed assets

Ans. (d)

8.Match list-I with list-II and select the correct answer using the Code given below the lists:

List—I List—II

A. Acid test ratio 1. Liquidity ratio

B. Gearing ratio 2. Profitability ratio

C. Working capital turnover ratio 3. Leverage ratio

D. Return on capital employed 4. Long-term solvency ratio

5. Activity ratio

Codes:

A B C D

(a) 1 3 5 2

(b) 2 5 1 3

(d) 5 3 4 1

Ans. (a)

9. Collection of sundry debtors would:

(a) increase current ratio

(b) decrease current ratio

(d) increase debtors’ turnover

Ans. (c)

10. A company with a paid up capital of 5000 equity shares of Rs. 10 each has a turnover of four times with a margin of 8% on sales. The ROI of the company will be:

(a) 28%

(b) 32%

(d) 42%

Ans. (b)

11. The ratios which measure the relative contribution of financing by owners and financing provided by outsiders are called:

(a) liquidity ratios

(b) leverage ratios

(d) profitability ratios

Ans. (b)

12. The debt equity ratio of a company is 8: 1. It was decided to issue bonus shares in the ratio of 1: 2. The debt : equity ratio after the issue of bonus shares would be:

(a) 8: 1

(b) 4: 1

(d) 1:4

Ans. (a)

13. Which of the following transaction(s) will improve the Current Ratio?

1. Bills receivable dishonored

2. Cash collected from customers

3. Issue of new shares

4. Payment of preliminary expenses by way of equity shares

Select the correct answer using the Code given below:

Code:

(a) 1, 2 and 3

(b) 4 alone

(d) 2 and 4

Ans. (c)

14. Which one of the following statements is NOT correct?

A high gross profit margin ratio is the result of:

(a) higher sales prices, cost of goods sold remaining constant

(b) lower cost of goods sold, sales price remaining constant.

(d) increase in the sales return, cost of goods sold remaining the same

Ans. (d)

15. Credit sales of a company during the year are Rs. 1,20,000; Debtors Rs. 20,000 and bills receivables, Rs. 10,000. The average collection period is:

(a) 3 months

(b) 4 months

(d) 6 months

Ans. (a)

16. While calculating the net present value under

discounted cash flow method of return on investment

analysis, the c4lculations involved are:

1. Cash outflow

2. Discounted net cash flow

3. Cash inflow

4. Net present value

The correct sequence of these calculations is:

(a) 4, 1, 3, 2

(b) 1, 3, 2, 4

(d) 3, 1, 4, 2

Ans. (b)

17. Ajoy Ltd. makes a net profit of Rs. 1,00,000, after providing for depreciation on assets amounting to Rs. 20,000 and writing off preliminary expenses amounting to Rs. 10,000 and gain of Rs. 5,000 on sale of a piece of machinery. Funds from operation of Ajoy Ltd. would be:

(a) Rs. 1,00,000

(b) 1,20,000

(d) 1,35,000

Ans. (b)

18. Match List-I with List-II and select the correct answer using the Code given below the lists:

List-I List-II

A. Net loss from operations 1. Source of funds

B. Changes in working capital 2. Drain of working capital

C. Depreciation 3. Flow of Funds

D. Issue of fully paid bonus shares 4. Neither source nor application of funds

Code:

A B C D

(a) 3 2 1 4

(b) 2 3 4 1

(d) 3 2 4 1

Ans. (c)

19. Which one of the following statements is correct?

(a) A decrease iii current liabilities causes an increase in the working capital

(b) An increase in current liabilities causes a decrease in the working capital

(d) An increase in the current assets causes a decrease in the working capital

Ans. (a)

20. Match List-I (Type of audit) with List-II (Purposes) and select the correct answer using the Code given below the lists:

List-I List-II

A. Continuous audit 1. To ensure efficient conduct of the business and prevent

wastage

B. Periodical audit 2. Detailed examination of the books of accounts at regular

intervals capital

C. Interim audit 3. Audit taken up at the close of the financial period

D. Internal audit 4. Audit conducted between the ends of two financial period

Codes:

A B C D

(a) 1 3 4 2

(b) 2 3 4 1

(d) 3 1 2 4

Ans. (b)

21. Match List-I (Items) with List-II (Section of Companies Act, 1956) and select the correct answer using the Code given below the lists:

List-I List-II

A. Appointment of Auditors by Central Government 1. Sec. 22 (1)

B. Qualification of Auditors 2. Sec. 224 (5)

C. Appointment of Auditors by Board of Directors 3. Sec. 224 (8)

D. Remuneration of Auditors 4. Sec. 224 (3)

Code:

A B C D

(a) 4 1 3 2

(b) 1 4 2 3

(d) 1 4 3 2

Ans. (c)

22. Special audit of the accounts of a company is directed by:

(a) shareholders of the company

(b) Comptroller and Auditor General, of India

(d) Central Government

Ans. (d)

23. The author of the books ‘Suma de Arithmetica ‘is:

(a) H. A. Cassel

(b) Luca Paciolli

(d) Batliboi

Ans. (b)

24. Vouching may be termed as:

(a) identification of the documentary evidence supporting the transaction

(b) verification of the document supporting the transaction

(d) verification of the accuracy and authenticity of the transaction

Ans. (d)

25. Interim audit refers to n audit conducted:

(a) in two different accounting years

(b) in between two statutory annual audits within the same accounting period

(d) in between one statutory audit, one management audit and one internal audit

Ans. (b)

26. Various plans that an organization may formulate are for—purpose or mission, objective, strategies, policies, rules and procedures, programmes or projects and budget. These can be arranged in a hierarchy because higher level plans give/generate lower level plans. -

Identify the correct order according to hierarchy of plans from amongst the following:

(a) Purpose or mission, objective, strategies, policies, rules and procedures, programmes or projects and budget

(b) Budget, objectives, policies, rules and procedures, purpose or mission, strategies and programmes or – projects

(d) Strategies, objectives, policies, purpose or mission, programmes or projects, rules and procedures, and budget

Ans. (c)

27. What is the correct sequence of the following aspects in auditing?

1. Special audit

2. Internal audit

3. Internal check

4. Annual audit

Select the correct answer using the Code given below:

Code:

(a) 1, 3, 2, 4

(b) 3, 4, 1, 2

(d) 1, 2, 3, 4

Ans. (c)

28. Test checking reduces the:

(a) powers of an auditor

(b) expenses of audit

(d) liability of an auditor

Ans. (c)

29. Management audit refers to:

(a) examination of books and audit of accounts done by the management

(b) the periodic assessment of company’s activities by the statutory auditor

(c) periodic assessment of company’s managerial planning, organizing, actuating and controlling compared to norm of successful operation

(d) auditor’s assessment of the financial statement of the entity

Ans. (c)

30. Consider the following documents:

1. Audit Notebook

2. Audit Programme

3. Audit Report

4. Audit Files

The correct sequence, in which an auditor prepares these documents is

(a) 2, 1, 4, 3

(b) 1, 2, 3, 4

(d) 1, 2, 4, 3

Ans. (a)

31. The most important objective of internal audit, is:

(a) early detection of errors and frauds

(b) facilitating final audit

(d) ensuring systematic accounting

Ans. (a)

32. Section 224 of the Companies Act, 1956 deals with:

(a) special audit

(b) secretarial audit

(d) appointment and remuneration of auditors

Ans. (d)

33. An arrangement in which the accounting work of each individual is checked by other members is

known as:

(a) internal audit

(b) external audit

(d) test checking

Ans. (c)

34. The main purpose of an independent audit is to:

(a) check and correct frauds and errors

(b) help in detecting frauds and errors

(c) determine if the financial statements fairly represent the actual financial position and the working results of the organization

(d) help in formulating future plans

Ans. (c)

35. Consider the following statements:

I. Foreign institutional investors have been allowed to invest in Mutual Funds

2. The main objective of SEBI is to protect the investors

3. Private placement is the route through which Promoters’ contribution is mobilized by a public company

4. RBI lays down the guidelines governing the capital market operation

Of these statements:

(a) 1 and 2 are correct

(b) 2, 3 and 4 are correct

(d) 1, 3 and 4 are correct

Ans. (b)

36. Dow and Jones, now popularly known as ‘Dow-Jones’ in the stock market parlance, were the:

(a) first financial journalists

(b) first bull operators in the New York Stock Exchange

(d) architects of shop-floor trading

Ans.(b)

37. The primary function of Stock Exchange is to:

(a) mobilize savings from the public for long-term investment

(b) offer a secondary market for shares and other securities

(d) enable Reserve Bank of India to trade in Government securities in their efforts to control money supply in the economy

Ans. (b)

38. Consider the following statements:

A mutual fund helps the ‘investor in securing:

1. professional management

2. diversification of risk

3. steady appreciation

4. lower cost of operation

Of these statements:

(a) 1, 2, 3 and 4 are correct

(b) 1, 2 and 4 are correct

(d) 3 and 4 are correct

Ans. (a)

39. Which of the following pairs are correctly matched?

1. Cooperative movement in India : Nanavahi Committee

is breast-fed, bottle-fed and spoon-fed

2. Tax on sole proprietor and partnership : Direct Taxes, Enquiry Committee

firm’s needs rationalization

3. Capital market in India is tightly controlled : Narasimham Committee

by the Government

Select the correct answer using the Code given below:

Code:

(a) 1, 2 and 3

(b) 1 and 3

(d) 1 and 2

Ans. (a)

40. “Arbitrage” means:

(a) a business arrangement by which al share broker tries to take advantages of different in ‘Spot’ and ‘Futures’ prices of a share

(b) a business arrangement in which a share broker tries to take advantage of difference in prices between two Stock Exchange centers on a particular share

(c) an arbitration proceedings that is invoked by either the buyer or the seller when he other party is unable to meet its commitment

(d) a compromise arrangement by which the transaction is postponed to the next settlement date

Ans. (b)

41. Which one of the following sets is correct with regard to liberalization in financial sector?

(a) Globalization, devaluation and privatization

(b) Deregulation, moral suasion branch expansion

(d) Globalization, deregulation and privatization

Ans. (b)

42. Which of the following are the means of marketing new issues of securities?

1. By listing of securities

2. Through jobbers and brokers

3. By private placing of securities

4. Through privileged subscription

Select the correct answer using the Code given below:

Code:

(a) 1 and 2

(b) 1,2 and 3

(d) 1, 2, 3 and 4

Ans. (d)

43. Narasimham Committee has, apart from other things, recommended:

(a) expanding priority sector financing

(b) restricting priority sector-financing

(d) total elimination of priority sector financing

Ans. (b)

44. Prospectus issued by a company is to be vetted and approved by the SEBI. This, however, does not mean that:

(a) disclosures are adequate as per its guidelines

(b) project proposal has been presented in conformity with its guidelines

(d) project proposal is sound or satisfactory

45. Commercial papers represent a new financial instrument issued for the purpose of:

(a) project financing

(b) working capital

(d) import of capital goods

Ans. (b)

46. Match List-I (Forms of business organization) with List-II (Distinctive characteristics) and select the correct answer using the Code given below the lists:

List-I List-II

A. Joint Hindu Family Firm 1. Association of persons for their common interests

B. Public Enterprise 2. Ownership and control by Government

C. Section 25 of Company 3. Ownership by coparceners

D. Co-operative organization 4. Limited company formed for promoting

art, commerce, science etc.

Codes:

A B C D

(a) 3 2 1 4

(b) 1 3 2 4

(d) 1 3 4 2

Ans. (c)

47. Does modernization of industrial enterprises call for mechanization?

(a) Yes, because manual labour alone cannot deliver the goods

(b) Yes, because mechanization holds the key to industrial success in most developing countries

(c) No, because it is rationalization and not mechanization that holds the key to modernization and higher productivity in the industrial sector

(d) No, because it is mechanization will aggravate the unemployment situation in the country and will ultimately result in the collapse of the economy

Ans. (a)

48. In the absence of an agreement to the contrary, the partners are:

(a) entitled to 6% interest on their capitals, only when there are profits

(b) entitled to 9% interest on their capitals, only when there are profits

Ans. (d)

49. Match List-I (landmark case) with List-II (the legal point established by that case) and select the correct answer using the Code given below the lists:

List—I List—II

A. Solomon vs. Solomon 1. The scope and limits of the Objects

Clause

B. Ewing vs. Butter Cup Margarine Co. Ltd. 2. A company should not be registered

with a name which resembles the

name of an existing Co.

C. Ashbury Rail Carriage & Iron Co. vs. Ritchie 3. Company is a distinct entity,

different from its members

D. Royal British Bank vs. Turquand 4. Limitation to the Doctrine of

constructive notice

5. Doctrine of Indoor Management

Codes:

A B C D

(a) 2 3 1 4

(b) 3 2 4 5

(d) 2 3 4 5

Ans. (b)

50. Which one of the following is NOT applicable to a .Co-operative form of business organization?

(a) Major portion of profit is distributed to members by way of dividend

(b) Policy decisions are taken by the members in a General Meeting

(d) It is formed generally by the artisans and consumers of limited means

Ans. (d)

Monday, January 31, 2011

COMMERCE QUESTIONS FOR PSC EXAMS

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