ACCOUNTS AND INVESTMENT

Q.1. The statutory requirement of solvency ratio for Non-life Ins. Companies is-
a. 1.75
b. 1.25
c. 1.50
d. 1.40

Q.2. Solvency Ratio means

a. ratio of the amount of required solvency margin to the amount of available solvency margin
b. ratio between the amount of Available Solvency margin to the amount of required solvency margin
c. Excess of assests over liabilities multiplied by hundred
d. Excess of liabilities over assets multiplied by hundered

Q.3. Which one of following forms part of Policy holders’ fund –

a. Share Capital
b. Reserve and Surplus
c. Provision for outstanding claims
d. Investment Reserve

Q.4. Which statement is correct in relation to Investment guidelines of IRDA for General Insurance
Companies-
a. Investment in Central Government securities can not be less than 20% of total assets.
b. Investment in Central Government securities can not be less than 20% of total Premium for the year.
c. Investment in Central Government securities can not be less than 20% of total Investments
d. Investment in Central Government securities can not be less than 20% of total Share Capital

Q.5. As per IRDA Regulations on Investment which of the following area for investment has not been
prescribed –
a. Central Government Securities
b. Statement Government Securities
c. Investment in Infrastructure and Social Sector
d. Investment in Pension Funds

Q.6. Which one of the following is correct way of calculating ‘Incurred Claims’
a. Out standing claims at the beginning of the year plus Claims paid during the year minus claims
outstanding at the end of the year
b. Out standing claims at the end of the year plus Claims paid during the year minus claims outstanding
at the beginning of the year
c. Out standing claims at the end of the year plus outstanding claims at the beginning of the year minus
claims paid during the year
d. None of the above

Q.7. An insurance premium paid in the year 2006-07 for covering Company’s assets for the period
commencing from 1st April 2007 will be reflected in which of the following schedules attached to the
Balance Sheet-
a. Outstanding Expenses
b. IBNR Statement
c. Prepaid Expenses
d. Premium received in advance Schedule

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 ACCOUNTS AND INVESTMENT

Q.8. Company purchased a Water Cooler for Rs. 4,550/-. What will be rate of depreciation for this Water
Cooler –
a. 16%
b. 25.89%
c. 15%
d. 100%

Q.9 Which of the following is not prepared at BO/DO level

a. Trial Balance
b. Bank Reconciliation statement
c. Fund flow statement
d. Revenue accounts

Q.10 Section 40(C) of the Insurance Act deals with

a. Expenses of management
b. Solvency margin
c. Incurred claims
d. General Reserve

Q.11 Following is not deducted from current assets to arrive at Quick assets
a. Income accrued on investment
b. Deposits with ceding companies
c. Short term deposits with banks
d. Prepayments

Q.12 Which of the following is not the utilization of funds but is a source of fund as per fund flow statement
a. Addition to Gross Block
b. Addition to Reserves and Surplus
c. Addition to Investment
d. Increase/Decrease in working capital

Q.13 Operating expenses relating to insurance business are

a. Shown in the Balance Sheet
b. Shown in the Profit & Loss account
c. Apportioned to the Revenue Accounts
d. None of the above

Q.14 Reserve for unexpired risk is made at

a. 50% of net premium for marine and 100% of net premium for other classes of business
b. As per share of each department in total business
c. 100% of net premium for marine and 50% of net premium for other classes of business
d. None of the above

Q.15 Investment income is apportioned between shareholders fund and policyholder fund
a. Equally
b. In proportion to the closing balance of these funds at the end of the year
c. Not apportioned at all
d. In proportion to the opening balance of these funds at the beginning of the year

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 ACCOUNTS AND INVESTMENT

Q.16.Which of the following statement is correct:

a) Trial Balance is an account.
b) Trial Balance is sum total of Credit Balances.
c) Trail Balance is drawn on Debit Balances only.
d) Trail Balance is a statement showing all Debit Balances and Credit Balances.

Q.17. Calculate the incurred claim from the following figures of fire claims for the financial 2006 - 07 of an
insurer:

Claims Paid Direct Rs 50,00,000

Claims Outstanding at the end Rs 6000000
Claims o/s t the beginning Rs 4000000
Claims on Reinsurance ceded Rs 1000000
a) Rs 5000000
b) Rs7500000
c) Rs 6000000
d) None of the above

Q.18.Net premium of Insurance Company is arrived at

a) After adjusting the Reinsurance Premium with the GDPI
b) After adjusting the commission Paid with the GDPI
c) After adjusting Claims Paid with the GDPI
d) None of the above.

Q.19.What is the Paid up Capital required for carrying on General Insurance business as per IRDA Guidelines:
a) Rs 125 corores
b) Rs 200 crores
c) Rs 100 crores
d) Rs 75 crores

Q.20.The Management expenses are debited to

a) Profit & Loss A/c
b) b) Profit & Loss Appropriation A/c
c) All the three Revenue A/cs proportionately
d) d) None of the above

Q.21.Cash flow Statement is prepared by

a) Direct Method
b) Indirect Method
c) Specified method as prescribed by IRDA
d) None of the above

Q.22.One of the following statements does not appear in the Annual Report of Insurance Company:
a) Profit & Loss Account.
b) Revenue Account of Fire, Marine & Misc.
c) Bank Reconciliation Statement.
d) Balance Sheet.

Q.23..The Companay, on which of the following systems is appointing internal Auditors:

a) Outsourcing of manpower.
b) Nominated employees of the same company.

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 ACCOUNTS AND INVESTMENT

c) Professional CA s.
d) From GIC.

Q.24.Find out the statement, which does not appear in the Financial Statement of Company’s Annual Report:
a) Confirmation of validity of Registration certificate granted by IRDA.
b) Confirmation of having maintained Solvency Margin.
c) Age wise analysis of the claims of the previous years.
d) Region wise premium statement.

Q.25.. Which of the Ratio is correct:

i. Operating Ratio: underwriting profit + Investment Income divided by net premium.
ii. Re-insurance ratio: Risk reinsured divided by Gross Premium.
a) (a) Only
b) (b) Only
c) (a) & (b)
d) None of the above.

Q.26.Claims incurred but not reported including inadequate reserves means:

i) IBNR
ii) IBNER

a) (i) Only
b) (ii) Only
c) (i) & (ii)
d) None of the above.

Q.27.What is the Maximum permissible amount Insurance Co. can invest outside Govt. related securities:
a) 55%
b) 50%
c) 60%
d) 45%

Q.28.Petty cash is maintained in

a. Computer System
b. Imprest System
c. Rotation System
d. Banking System

Q.29.A cheque issued but not presented for more than six months is reflected in
a. Collection account
b. Dishonoured cheque account
c. Stale cheque account
d. NOC account

Q.30.Incurred claim means

a) O/S of current year + claim paid – claim O/S of previous year
b) O/S of current year + claim paid + claim O/S of previous year
c) O/S of current year – claim paid – claim O/S of previous year
d) O/S of current year – claim paid + claim O/S of previous year

Q.31.Claim occurring during the accounting year but lodged after 31 st March is the claim

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 ACCOUNTS AND INVESTMENT

a) Insured but not reported

b) Insured but not renewed
c) Incurred but not renewed
d) Incurred but not reported

Q.32.The Statutory Auditors generally do not physically verify

a. Furniture
b. Cash
c. Cheque
d. Stamp

Q.33.In premium collection account with the bank, the balance available (leaving the minimum amount) is
transferred on
a. Monthly basis
b. Fortnightly basis
c. Daily basis
d. Weekly basis

Q.34.Statutory Auditors for the Public Sector insurance companies are appointed by
a. RBI
b. C & AG
c. IRDA
d. Central Government

Q.35.Section 40C of the Insurance Act 1938 imposes a limit on

a. Premium Retention
b. Ceiling on Premium Cession
c. Limit on agency commission
d. Expenses of Management

Q.36.Which one of the following statement is correct **

a) Depreciation is not strictly charged in accordance with Income Tax Act
b) Depreciation is also considered on current assets
c) 100% of the rate of depreciation is charged even for the assets purchased within three months
from the date of closing of accounts
d) Reserve for unexpired risk is also provided in the accounts of the operating offices.

Q.37.The Branch Manager is given the financial authority by

a. D.O.
b. R.O.
c. H.O.
d. Ex officio

Q.38.Separate account for collection and payment is requirement under law for**
a. Each operating office
b. Each class of business
c. Each Divisional Office
d. Each Regional Office

Q.39.Insurers can invest funds under their control in

a. Approved securities

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 ACCOUNTS AND INVESTMENT

b. Debentures issued by a Municipal Corporation of any State Government

c. Preference share of a company which is regularly paying dividend to its ordinary
share holders
d. In all the above

Q.40.Solvency Margin of a company is an indication of

a. Recognition
b. Financial Soundness
c. Accreditation
d. Revenue Surplus

Q.41.Bad debt means

a. Unrecovered loans
b. Irrecoverable loans
c. Loan to employees
d. None of the above

Q.42.Earning per share means

a. Profit after tax divided by numbers of shares
b. Profit before tax divided by number of shares
c. Surplus of profit after payment of dividend
d. General reserve divided by number of shares.

Q.43.Which of the following is not an element in a revenue account**

a. Net premium
b. Incurred claim
c. Commission on direct business
d. None of the above

Q.44.Current Ratio is an indication of

a. Financial Position
b. Liquidity position
c. Profitability
d. Solvency

Q.45.Investment income is a
a. Capital receipts
b. Revenue receipts
c. Miscellaneous receipts
d. Profit on sale of assets

Q.46.Trial Balance of a D.O. after transferring revenue Balance to HO contains

a) Assets
b) Liability
c) Provisions at the year and
d) All the above

Q.47.Which of the following is not a measure of operating efficiency

a. Incurred claim ratio
b. Management expenses ratio
c. Target realization ratio

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 ACCOUNTS AND INVESTMENT

d. None of the above

Q.48.Reconciliation of collection bank account has to be made

a) Immediately on the completion of each month
b) Suffice, if we reconcile on quarterly basis
c) As ibs a/c submitted as half yearly basis sufficient to reconcile at every six months.
d) Reconciliation one in every year is well sufficient

Q.49.Recovery made towards Income Tax can be remitted to Income Tax Deptt.
a. On Annual basis
b. On half yearly basis
c. On quarterly basis
d. Monthly basis

Q.50.Premium Cheque receipted but lost in transit while banking. Action to be taken
a. Cancel the policy immediately
b. Continue with the policy as it is.
c. Cancel the policy immediately, Convince the party for a fresh cheque and issue a
fresh policy
d. None of the above

Q.51.In case of dishonor of cheque

a) To cancel the policy immediately and to inform the insured immediately by registered post.
b) Represent the cheque again on the genuine request of the insured
c) No action is necessary
d) To cancel the policy immediately with immediate intimation to the insured and to obtain cash
premium to issue fresh policy.

Q.52.For making any payment to our own employee through voucher

a. Cashier himself can make payment without approval
b. Approval of the voucher by any of the authorized officer is sufficient
c. To be approved only by the head of the department
d. Approved by all the officer in the A/c dept. is essential
Q.53.A cheque dated 27-1-2006 has been received on 20-9-2006.whether receipt of cheque
a. Is in order
b. Not in order
c. In order but could have been avoided
d. With a declaration from the drawer to accept .

Q.54.What is full form of IBNR?

a. Incurred but not reported
b. Incurred but not registered
c. Incurred but not realised
d. None of the above

Q.55.Which of the following gives the correct formula for arriving at the operating surplus of a DO?
a) GDPI less Incurred claims less Commission less Reserve Strain less Management Expenses
b) GDPI less Incurred claims less Commission + (add) Reserve Strain less) Management Expenses
c) GDPI (-) less Incurred claims less Commission + (add) Reserve Gain – (less) Management Expenses
d) a &/or c

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 ACCOUNTS AND INVESTMENT

Q.56.In case a large Schedule Fire policy is underwritten by CD the following accounting entry has to be made
to underwrite the policy
a) Debit CD A/c and Credit Premium A/C
b) Credit CD A/c and debit Premium A/C
c) Debit CD A/c and Credit Bank A/C
d) None of the above

Q.57.To ensure that cash is deposited in the bank account the BO/DO accountant should
a) Verify and check the bank deposit slip every day
b) Verify the monthly bank reconciliation statement
c) Make necessary posting in the cash collection register
d) All the above

Q.58.Depreciation is charged on
a) Assets / capital expenditure
b) Expenses which are revenue in nature
c) Wages and salary
d) None of the above

Q.59.Incurred claims mean

a) Claims o/s at the end of the year + claim paid during the year – claims o/s at the beginning of
the year
b) Claims o/s at the end of the year - claim paid during the year + claims o/s at the beginning of
the year
c) Claims o/s at the end of the year + claim paid during the year + claims o/s at the beginning of
the year
d) None of the above

Q.60.In Revenue account, claims is shown

a) Claims o/s at the end of the year + claim paid during the year – claims o/s at the beginning of
the year
b) Claims o/s at the end of the year - claim paid during the year + claims o/s at the beginning of
the year
c) Claims o/s at the end of the year + claim paid during the year + claims o/s at the beginning of
the year
d) Claims o/s at the end of the year + claim paid during the year – claims o/s at the beginning of
the year plus adjustment of claims on reinsurance ceded and accepted

Q.61.Commission expenses is shown in revenue account

a) gross commission paid
b) net commission with adjustment of commission on reinsurance
c) commission incurred
d) none of above

Q.62.solvency margin is determined by comparing

a) ASM : RSM
b) RSM : ASM
c) RSM multiplied by ASM
d) ASM multiplied by RSM

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Q.63.In case of an outstation premium cheque section 64 VB of the insurance act is complied from the time
a) The cheque is deposited in the bank
b) The cheque is received by the underwriting office
c) The cheque is posted by the insured through registered post
d) The cheque is cleared and credit is obtained in the bank account

Q.64.The limitations of expenses of management in general insurance business dealt by

a. Sect. 40 of the Insurance Act 1938
b. Sect. 40 A of the Insurance Act 1938
c. Sect. 40 B of the Insurance Act 1938
d. Sect.40 C of the Insurance Act 1938

Q.65.Section 64 VB of Insurance Act 1938 deals with

a) No risk to be assumed unless premium is received in advance
b) Restrictions on the opening of new place of business
c) Sufficiency of assets
d) Prohibition of Rebates

Q.66. The statutory Auditors certify the insurance company balance sheet profit and loss accout in accordance
with the applicable provision of the
a) Insurance Act 1938
b) IRDA Act 1999
c) Companies Act 1958
d) All the above three Act

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ANSWER

Q. no. Answer Q. No. Answer Q. No. Answer

1 C 26 C 51 D
2 B 27 A 52 B
3 C 28 B 53 B
4 C 29 C 54 A
5 D 30 A 55 A
6 B 31 D 56 A
7 C 32 A 57 D
8 D 33 D 58 A
9 D 34 B 59 A
10 A 35 D 60 D
11 C 36 A 61 B
12 B 37 D 62 A
13 C 38 A 63 C
14 C 39 D 64 D
15 D 40 B 65 A
16 D 41 B 66 D
17 C 42 A
18 A 43 D
19 C 44 B
20 C 45 B
21 A 46 D
22 C 47 D
23 B 48 A
24 D 49 D
25 C 50 C

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