Management Accounting Mcqs First Module

PRIYA
Management Accounting MCQs First Module:
1. Management accounting is deals with –
(a) Quantitative Information

(b) Qualitative Information
(c) Both (a) and (b)
(d) None of the above
2. Management accounting and financial accounting differ in that management accounting

information is prepared
a. following prescribed rules.

b. using whatever methods the company finds beneficial.
c. for shareholders.
d. to summarize the whole company with little detail.
3. The primary objective of management accounting is
a. to provide shareholders and potential investors with useful information for decision
making.
b. to provide banks and other creditors with information useful in making credit decisions.
c. to provide management with information useful for planning and control of operations.
d. to provide the relevant taxation authorities with information about taxable income.
4.Management accounting is the branch of accounting concerned with reporting to
a. internal managers.
b. shareholders.
c. the government.
d. bankers.
5.Which of the following characteristics does NOT pertain to management accounting?
a. provides information and estimates about future activity

b. generates specific-purpose financial statements and reports
c. provides financial and operating data multidisciplinary in scope
d. has externally imposed standards
6.Which of the following does NOT describe management accounting?
a. evaluation of segments or products within the firm

b. emphasis on the future
c. externally focused
d. detailed information
7.Management accounting reports are prepared
a. to meet the needs of decision makers within the firm.
b. whenever shareholders request them.
c. according to guidelines prepared by the shares and Financial Services Authority.
d. according to financial accounting standards.
8. Management accounting assists the management
(a) Only in control

(b) Only in direction
(c) Only in planning
(d) In planning, direction and control
9. Management accounting is concerned with which kind of decision?
a. product costing and pricing

b. continuous operational improvement
c. financial control
d. all of the above
10. Management accounting:
a. provides a framework to evaluate information in light of an organization's goals.

b. provides relevant information to managers.
c. provides relevant information to meet specific needs of persons inside the organization.
d. all of the above
11. Management accounting is primarily concerned with:
a. providing investors with useful information for valuing securities.

b. providing creditors information on the status of their loans.
c. providing managers with relevant information to help achieve organizational goals.
d. providing the relevant taxation authorities with information to determine the amount of
taxes owed.
12. According to CIMA, England, “the technique and process of ascertaining cost” is called
a. Costing
b. Cost Accounting
c. Cost Accountancy
d. Cost
13. Which among the following costs are not useful for managerial decision making?
a. Sunk Cost
b. Marginal Cost
c. Standard Cost
d. None of the above
14. The main function of cost accounting is _______ reporting
a. Internal
b. External
c. Government
d. Bank
15. In cost accounting, stock is valued at _______

a. Market price
b. Cost price
c. Selling price
d. Standard price
16. Cost accounting has developed due to the ___________ of financial accounting
a. Advantages
b. Limitations
c. Merits
d. Expansion
17. _______ is the application of costing and cost accounting principles, methods and
techniques to the art, science and practice of cost control and the ascertainment of
profitability.
a. Cost accounting
b. Cost accountancy
c. Cost Control
d. Cost Ascertainment
18. Cost accountancy is considered an art because it _____

a. Has systematic body of knowledge
b. requires necessary ability and skills
c. involves continuous efforts of cost accountant
d. None of the above
19. Which of the following statements are not true regarding cost accounting?
a. Information obtained is used by management for decision making
b. Stock is valued at cost
c. Deals partly with facts & partly with estimates
d. Accounts are mandatory according to Companies Act and IT Act
20. The term management accounting was first coined in
a)1950
b) 1945
c) 1955
d) 1960
21 The purpose of management accounting is to

a). Help banks make decisions
b). Past orientation
c). Help investors make decision
d). Help managers make decisions
22 The correct order of process of establishing the standards, is

a). Decision about types of standards to be used, Study of technical details, Study of existing costing
system
b). Study of existing costing system, Study of technical details, Decision about types of standards to
be used
c). Study of technical details, Study of existing costing system, Decision about types of standards to
be used
d). None of the above

a) In planning, direction and control
b) Only in planning
c) Only in direction
d) Only in control
24. Which of the following are tools of management accounting?

A) Standard costing
B) Decision accounting
C) Human Resources Accounting
D) Budgetary control
25. The concept of management accounting was coined by?

a) R.N Anthony
b) J. Batty
c) James H. Bliss
d) American Accounting Association
26 An accounting approach, in which the expected benefits exceed the expected cost is classified
as
a) cost-benefit approach
b) benefit approach
c) cost approach
d) accounting approach
27. Management accounting deals with

a) Qualitative information
b) Quantitative information
c) None of the above
d) Both a and b
28. Decisions regarding usage of material, kind and changes in plant processing are a part of
a) help management
b) future management
c) cost management
d) past management
29. In management accounting, an emphasis and focus must be

a) past oriented
b) future oriented
c) bank oriented
d) communication oriented
30. GAAP stands for:

(a) Generally Accepted Accounting Provisions
(b) Generally Accepted Accounting Policies
(c) Generally Accepted Accounting Principles
(d) None of these
31 Which accounting principle states that companies and owners should be treated as separate
entities.
(a) Monetary Unit Assumption
(b) Business Entity Concept
(c) Periodicity Assumption
(d) Going Concern Concept
32 Cost or expenses must be recorded at the same time as the revenue to which they correspond
is specified by which principle?
(a) Matching Principle
(b) Going Concern Principle
(c) Consistency Principle
(d) Prudence Principle
33 Which concept states that “for every debit, there is a credit”?

(a) Money Measurement Concept
(b) Accounting Period Concept
(c) Separate Entity Concept
(d) Dual Aspect Concept
34 For measuring income, the most acceptable method is?

(a) To apply normal rate of return on capital invested
(b) To apply the average return in industry on capital
(c) To match the cost with revenue
(d) To find out the difference in net worth as on two date
35 The correct form of Accounting equation is

(a) Assets – Receivable = Equity
(b) Assets + Receivable = Equity
(c) Assets – Liabilities = Equity
(d) Assets + Liabilities = Equity
36 As per revenue recognition principle, sales revenues should be recognized at the time when?
(a) Order is taken for merchandise
(b) Ownership of goods gets transferred from the seller to the buyer
(c) Cash is received
(d) All of the above
37 Due to which concept, accounting does not record non-financial transactions?

(a) Going concern concept
(b) Money measurement concept
(c) Accrual concept
(d) Cost concept
38 The owner of the business is treated as a creditor of the business according to which of the
following concept?
(a) Entity concept
(b) Materiality concept
(c) Consistency concept
(d) Periodicity concept
39 As per the accrual concept of accounting, any financial or business transaction should be
recorded:
(a) when profit is computed
(b) when balance sheet is prepared
(c) when cash is received or paid
(d) when transaction occurs
40. Which of the following jobs check accounting in ledgers and financial statements?
(A) Financial
(B) Audit
(C) Management
(D) Budget Analysis
41. The process of accounting is needed to

I. take a holiday
II. assist in decision making
III. invest in start up of a business
IV. track money spent
42. Which of the following describes the practical framework of bookkeeping?

(A) Classifying, recording and summarizing
(B) Reporting, analyzing and interpreting
(C)Classifying, analyzing and interpreting
(D)Recording, summarizing and reporting
43. Which of the following principles assumes that a business will continue for a long time?
(A) Historical cost
(B) Periodicity
(C)Objectivity
(D)Going concern
44. Which of the following users assesses the attractiveness of investing in a business?
(A) Tax authorities
(B) Financial analysts
(C) Bank
(D) Employees
45. Accountants use Generally Accepted Accounting Principles (GAAP) to make the financial
information communicated
I. relevant
II. reliable
III. comparable
IV profitable
46. One of the detailed rules used to record business transaction is

(A) Objectivity
(B) Accruals
(C) Double entry book keeping
(D)Going Concern
47. Which of the following highlights the correct order of the stages in the accounting cycle?
(A) Journalizing, final accounts, posting to the ledger and trial balance
(B) Journalizing, posting to the ledger, trial balance and final accounts
(C)Posting to the ledger, trial balance, final accounts and journalizing
(D)Posting to the ledger, journalizing, final accounts and trial balance
48. If debit side of bank account is greater than credit side it represents?
(a) Cash at Bank
(b) Bank Loan
(c) Bank Overdraft
(d) None of them
49. The payment to a creditor will?
(a) Increase one asset and decrease another
(b) Decrease an asset and decrease owner’s equity
(c) Decrease an asset and decrease a liability
(d) Increase an asset and increase a liability
50. Ledger is a principal book in which?
(a) Only real account are kept
(b) Only personal accounts are kept

(c) All accounts are kept
(d) Only nominal accounts are kept
51. Which item will appear on the credit side of ledger account?
(a) Cash received
(b) Purchases
(c) Discount received
(d) Rent Expenses
52. The process of transferring the debit and credit items from a journal to their
respective account in the ledger is termed as?
(a) Balancing
(b) Posting
(c) Arithmetic
(d) Entry
53. When a Liability is reduced or decreased, it is recorded on the?
(a) Right or debit side of the account
(b) Left or debit side of the account
(c) Left or credit side of the account
(d) Right or credit side of the account
54. Among these transactions, which transaction will have no impact on stockholders’ equity?
(a) Net loss
(b) Investment of cash by stockholders
(c) Dividends to stockholders
(d) Purchase of the land from the proceeds of bank loan
55. Amount invested by the proprietor in the business should be credit to:
(a) A/c payable
(b) Capital
(c) Cash
(d) Drawings
56. Transactions are first recorded in which book/account?

(a) Book of Original Entry
(b) T Accounts
(c) Accounting Equation
(d) Book of Final Entry
57. Customer goods returned will be credited to which account?

(a) Purchases A/C
(b) Return outward
(c) Customer’s A/C
(d) Return inward
58. Journal is also called a?

(a) A day book
(b) History book
(c) Ledger book
(d) An entry book
59. ________ A/c is credited and ____ A/c is debited in case wages are paid for construction of
business premises
A) Cash, Wages
B) Cash, Premises
C) Premises, Cash
D) Wages, Cash
60. Journal lists transactions in which order?

(a) Decreasing
(b) Chronological
(c) Alphabetical
(d) Increasing
61. Among these statements which one is incorrect regarding journal entry?
(a) The debited account titles are listed first
(b) Journal entries show the effects of transactions
(c) Each journal entry should begin with a date
(d) Journal entries provide account balances
62. Cash withdrawal from business by the proprietor should be credited to

(a) Cash account
(b) Purchase account
(c) Capital account
(d) Drawings account
63. Which one of the following is called the book of original entry?
(a) Receipt and Payment Account
(b) Trial Balance
(c) General Journal
(d) General Ledger
64.Accounting furnishes data on

A) Income and cost for the managers
B) Financial conditions of the institutions
C) Company’s tax liability for a particular year
D) All the above
65.Long term assets having no physical existence but, possessing a value are called
A) Intangible assets
B) Fixed assets
C) Current assets
D) Investments
66.The assets that can be easily converted into cash within a short period, i.e., 1 year or less are
known as
A) Current assets
B) Fixed assets
C) Intangible assets
D) Investments
67.Copyrights, Patents and Trademarks are,

A) Current assets
B) Fixed assets
C) Intangible assets
D) Investments
68.The debts which are to be repaid within a short period (a year or less) are referred to as,
A) Current Liabilities
B) Fixed liabilities
C) Contingent liabilities
D) All the above
69.Gross profit is
A) Cost of goods sold + Opening stock
B) Excess of sales over cost of goods sold
C) Sales fewer Purchases
D) Net profit fewer expenses of the period
70.Net profit is computed in the

A) Profit and loss account
B) Balance sheet
C) Trial balance
D) Trading account
71.In order to find out the value of the closing stock during the end of the financial year we,
A) do this by stocktaking
B) deduct the cost of goods sold from sales
C) deduct opening stock from the cost of goods sold
D) look in the stock account
72.Which of these best explains fixed assets?

A) Are bought to be used in the business
B) Are expensive items bought for the business
C) Are items which will not wear out quickly
D) Are of long life and are not purchased specifically for resale
73.The charges of placing commodities into a saleable condition should be charged to

A) Trading account
B) P & L a/c
C) Balance Sheet
D) None of the above
74.Suppliers personal a/c are seen in the

A) Sales Ledger
B) Nominal ledger
C) Purchases Ledger
D) General Ledger
75.Discounts received are

A) Deducted by us when we pay our accounts
B) Deducted when we receive cash
C) Given by us when we sell goods on credit
D) None of these
76.Sales invoices are first entered in

A) The Cash Book
B) The Purchases Journal
C) The Sales Journal
D) The Sales Account
77.Entered in the Purchases Journal are

A) Discounts received
B) Purchases invoices
C) Payments to suppliers
D) Trade discounts
78.At the balance sheet date, the balance on the Accumulated Provision for Depreciation
Account is
A) Transferred to Depreciation Account
B) Transferred to the Asset Account
C) Transferred to Profit and Loss Account
D) Simply deducted from the asset in the Balance Sheet
79.If we take goods for own use we should

A) Debit Drawings Account, Credit Purchases Account
B) Debit Drawings Account: Credit Stock Account
C) Debit Sales Account: Credit Stock Account
D) Debit Purchases Account: Credit Drawings Account
80.When a petty cash book is kept there will be

A) No entries made at all in the general ledger for items paid by petty cash
B) The same number of entries in the general ledger
C) Fewer entries made in the general ledger
D) More entries made in the general ledger
81.If a trial balance totals do not agree, the difference must be entered in
A) The Profit and Loss Account
B) A Nominal Account
C) The Capital Account
D) A Suspense Account
82.If it is required to maintain fixed capitals then the partners’ shares of profits must be
A) Credited to capital accounts
B) Debited to capital accounts
C) Debited to partners’ current accounts
D) Credited to partners’ current accounts
83.Trading Account discloses-

(a) Gross profit
(b) Net profit
(c) Net loss
(d) Gross profit or Gross loss
84.Direct Expenses are entered in:
(a) Trading Account
(b) profit & Loss Account
(c) Balance sheet
(d) None of these
85.Profit and loss Account discloses:

(a) Gross profit
(b) Gross profit or Gross loss
(c) Gross profit or Net loss
(d) None of these
86.Goodwill is a-
(a) Fixed Asset
(b) Current Asset
(c) Fictitious Asset
(d) None of these
KRUNAL Answers at the end of the questions
Q1. The term management accounting was first coined in

a)1950
b) 1945
c) 1955
d) 1960
Answer: A
Q.2 The purpose of management accounting is to
a). Help banks make decisions
b). Past orientation
c). Help investors make decision
d). Help managers make decisions
Answer: D
Q.3 The correct order of process of establishing the standards, is
a). Decision about types of standards to be used, Study of technical details, Study of existing
costing system
b). Study of existing costing system, Study of technical details, Decision about types of standards
to be used
c). Study of technical details, Study of existing costing system, Decision about types of standards
to be used
d). None of the above
Answer: C
Q4. Management accounting assists the management
a) In planning, direction and control
b) Only in planning
c) Only in direction
d) Only in control
Answer: A
Q5. Which of the following are tools of management accounting?
A) Standard costing
B) Decision accounting
C) Human Resources Accounting
D) Budgetary control
a) A, C and D
b) A, B and D
c) A, B , C, D
d) A, B and C
Answer: b) A, B and D
Q6. The concept of management accounting was coined by?
a) R.N Anthony
b) J. Batty
c) James H. Bliss
d) American Accounting Association
Answer: C
Q.7 An accounting approach, in which the expected benefits exceed the expected cost is
classified as
a) cost-benefit approach
b) benefit approach
c) cost approach
d) accounting approach
Answer: A
Q8. Management accounting deals with
a) Qualitative information
b) Quantitative information
c) None of the above
d) Both a and b
Answer: D
Q9. Decisions regarding usage of material, kind and changes in plant processing are a
part of
a) help management
b) future management
c) cost management
d) past management
Answer: C
Q.10 In management accounting, an emphasis and focus must be
a) past oriented
b) future oriented
c) bank oriented
d) communication oriented
Answer: B
- MCQ
Management Accounting
1. Statement of cash flows includes
A) Financing Activities
B) Operating Activities
C) Investing Activities
D) All of the Above
2. In cash flows, when a firm invests in fixed assets and short-term financial investments
results in
A) Increased Equity
B) Increased Liabilities
C) Decreased Cash
D) Increased Cash
3. A firm that issues stocks and bonds to raise funds results in
A) Decreases Cash
B) Increases Cash
C) Increases Equity
D) Increases Liabilities
4. The purchase value of assets over its serviceable life is categorised as
A) Appreciated Liabilities
B) Appreciated Assets
C) Depreciation
D) Appreciation
5. The basic financial statements include
A) Statement of Cash Flows
B) Statement of Retained Earnings
C) Balance Sheet and Income Statement
D) None of the Above
6. The statement of cash flow clarifies cash flows according to
A) Operating and Non-operating Flows
B) Inflow and Outflow
C) Investing and Non-operating Flows
D) Operating, Investing, and Financing Activities
7. Cash flow example from a financial activity is
A) Payment of Dividend
B) Receipt of Dividend on Investment
C) Cash Received from Customers
D) Purchase of Fixed Asset
8. Cash flow example from an investing activity is
A) Issue of Debenture
B) Repayment of Long-term Loan
C) Purchase of Raw Materials for Cash
D) Sale of Investment by Non-Financial Enterprise

9. Cash flow example from an operating activity is
A) Purchase of Own Debenture
B) Sale of Fixed Assets
C) Interest Paid on Term-deposits by a Bank
D) Issue of Equity Share Capital
10. Which item comes under financial activities in cash flow?
A) Redemption of Preference Share
B) Issue of Preference Share
C) Interest Paid
D) All of the above
11. As per AS-3, Cash Flow Statement is mandatory for
A) All enterprises
B) Companies listed on a stock exchange
C) Companies with a turnover of more than Rs 50 crores
a) Both A and B
b) Both A and C
c) Both C and B
12. Listed Enterprises need to prepare Cash Flow Statement only under indirect method.
a) True
b) False
13. In the case of financial enterprises, the cash flow resulting from interest and dividend
received and interest paid should be classified as cash flow from
a) Operating activities
b) Financing activities
c) Investing activities
d) None of the above
14. In case of other enterprises cash flow arising from interest paid should be classified as cash
flow from ________ while dividends and interest received should be stated as cash flow
from ____.
a) Operating activities, financing activities
b) Financing activities, investing activities
c) Investing activities, operating activities
15. Issue of bonus shares and conversion of debentures into equity are shown as a footnote to
the Cash Flow Statement.
a) True
b) False
16. When a fixed asset is bought as hire purchase, interest element is classified under ______
and loan element is classified under________.
a) Operating activities, financing activities
b) Financing activities, investing activities
c) Investing activities, operating activities
17. Which of the following statements are false?
A) Old Furniture written off doesn’t affect cash flow.
B) Cash flow statement is a substitute for cash account.
C) Appropriation of retained earnings is not shown in Cash flow statement.
D) Net cash flow during a period can never be negative.
a) A, B, C
b) B, C, D
c) C, D, A
18. Which of the following is not a cash inflow?
a) Decrease in debtors
b) Issue of shares
c) Decrease in creditors
d) Sale of fixed assets
19. Which of the following is not a cash outflow?
a) Increase in Prepaid expenses
b) Increase in debtors
c) Increase in stock
d) Increase in creditors
20. Which of the following is a conventional method of ascertaining cost?
a) Absorption costing
b) Full Costing
c) Both a & b
21. Under absorption costing, profit is ascertained
a) On the basis of difference between sales and total cost.
b) By computation as per desired rate of profit on sales or cost
c) Both a and b
d) None of the above.
22. While ascertaining gross profit under absorption costing, only that portion of
manufacturing overheads is deducted from sales revenue which is associated with the
goods sold.
a) True
b) False
23. Under absorption costing among fixed expenses
a) Fixed manufacturing expenses are included in unit cost
b) Fixed non-manufacturing expenses are included in unit cost
c) Both a and b
24. Absorption costing is used for
a) Price determination on basis of full cost
b) Solution of separation of costs
c) Calculation of gross and net profit
d) All of the above
25. Absorption costs helps in
a) Difference between product cost and period cost
b) Charged of fixed factory overheads on inventory
c) Both a and b
26. Which of the following statements are true?
A) Absorption costing helps in preparation of fixed budget.
B) Absorption costing is dependent on level of level of output.
C) Absorption costing is very helpful in taking managerial decisions.
D) Absorption costing helps to conform with accrual and matching concept.
a) A and B
b) B and C
c) A and D
d) B and D
27. Fixed expenses decrease per unit with the increases in production and increases per unit
with the decrease in production.
a) True
b) False
28. Marginal costs is taken as equal to
a) Prime Cost plus all variable overheads
b) Prime Cost minus all variable overheads

c) Variable overheads
29. If total cost of 100 units is Rs 5000 and those of 101 units is Rs 5030 then increase of Rs
30 in total cost is
a) Marginal cost
b) Prime cost
c) All variable overheads
30. Marginal cost is computed as
a) Prime cost + All Variable overheads
b) Direct material + Direct labor + Direct Expenses + All variable overheads
c) Total costs – All fixed overheads
d) All of the above
31. Marginal costing is also known as
a) Direct costing
b) Variable costing
c) Both a and b
A. Marginal costing is not an independent system of costing.
B. In marginal costing all elements of cost are divided into fixed and variable components.
C. In marginal costing fixed costs are treated as product cost.
D. Marginal costing is not a technique of cost analysis.
a) A and B
b) B and C
c) A and D
d) B and D
33. While computation of profit in marginal costing
a) Total marginal cost is deducted from total sales revenues
b) Total marginal cost is added to total sales revenues
c) Fixed cost is added to contribution
34. Which of the following are the assumptions of marginal costing?
A) All the elements of cost can be divided into fixed and variable components.
B) Total fixed cost remains constant at all levels of output.
C) Total variable costs varies in proportion to the volume of output.
D) Per unit selling price remain unchanged at all levels of operating activity.
a) A and B
b) B and C
c) A and D
d) A, B C and D
35. In two periods total costs amounts to Rs 50000 and Rs 40000 against production of 20000
and 15000 units respectively. Determine marginal cost per unit and fixed cost.
a) Rs 2 and Rs 10,000
b) Rs 4 and Rs 5000
c) Rs 10 and Rs 8000
36. Under High and Low Point method, the output at two different levels is compared with the
amount of __________ incurred at these two points.
a) Total fixed costs
b) Total costs
c) Total fixed costs
37. Given Maximum value of production and minimum value of production is 10,000 and
5000 units respectively. Maximum total cost is RS 25,000 and minimum total cost is Rs
15,000. Determine total fixed cost and per unit marginal cost.
a) Rs 2 per unit, Rs 5,000
b) Rs 5 per unit, Rs 2000
c) Rs 10 per unit, Rs 10,000
38. Under method of least squares, a linear equation is developed in the form of ______
wherein Y is total cost, a=fixed cost, b= marginal cost and X is output.
a) Y=a+bX
b) Y=a-bX
c) Y=a*bX
39. In Analytical method of calculating marginal costing, it is determined on the basis of past
records.
a) True
b) False
40. Theory of contribution is the excess of sales over variable costs.
a) a)True
b) b)False
41. Which of the following statements related to Contribution Analysis are ture?
a) If contribution is zero, there is loss equal to fixed costs
b) If contribution is negative, loss is less than fixed costs
c) If contribution is positive and more than fixed cost there will be profit.
d) All of the above
42. When contribution is negative but less than fixed cost,
a) There is loss equal to fixed costs
b) There is loss more than fixed costs

c) There will be loss less than fixed costs
d) All of above are false
43. When contribution is positive but equal to fixed cost,
d) There will be neither profit not loss
44. Opportunities to achieve further growth within current businesses are:
a) Intensive Opportunities
b) Integrative Opportunities
c) Diversification Opportunities
45. Absorption costing is also known as
a) Historical costing
b) Total costing
c) Both a and b
46. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling price is Rs 10 per
unit and variable cost is Rs 6 per unit. Determine profit using technique of marginal
costing.
a) Rs 2,00,000
b) Rs 8,00,000
c) Rs 6,00,000
a) In absorption costing, cost is divided into three major parts while in marginal costing cost
is divided into two main parts.

b) IN absorption costing period is important and in marginal costing product is important.
c) Both a and b
48. In context of net operating profit, which of the following statements are true?
a) If all costs are variable, the amount of profit obtained in marginal costing and absorption
costing will be same.
b) If the volume of sales and output is equal in a period, profit will be same in absorption
costing and marginal costing.
c) Both a and b
49. Under absorption costing, managerial decisions are based on
a) Profit
b) Contribution
c) Profit volume ratio
50. If sales is less than production and there is no opening stock, it suggests there is closing
stock. In such a scenario, profit under marginal costing will be less than the one shown by
absorption costing.
a) True
b) False
51. In the calculation of return on shareholders investments the referred investment deals with
A. All reserves
B. Preference and equity capital only
C. All appropriations
D. All of the above
52. Which of the following is an advantage of standard costing?
A. Measuring efficiency
B. Facilitates cost control
C. Determination of variance
D. All of the above
53. The assets of a business can be classified as
A. Only fixed assets
B. Only current assets
C. Fixed and current assets
D. None of the above
54. Which of the following is the test of the long term liquidity of a business?
A. Interest coverage ratio
B. Stock turnover ratio
C. Operating ratio
D. Current ratio
55. The term management accounting was first coined in
a) 1960
b) 1950
c) 1945
d) 1955
56. Management accounting is
A) Subjective
B) Objective
a) Only A
b) Only B
c) Both A and B
57. The use of management accounting is
a) Optional
b) Compulsory
c) Legally obligatory
d) Compulsory to some and optional to others
58. The management accounting can be stated an extension of
A) Cost Accounting
B) Financial Accounting
C) Responsibility Accounting
a) Both A and B
b) Both A and C
c) Both B and C
d) A, B, C
59. Which of the following is true about management accounting?
A) Management accounting is associated with presentation of accounting data.
B) Management accounting is extremely sensitive to investors needs.
a) Only A
b) Only B
c) Both A and B
a) Only in control
b) Only in direction
c) Only in planning
d) In planning, direction and control
61. Which of the following are tools of management accounting?
A) Decision accounting
B) Standard costing
C) Budgetary control
D) Human Resources Accounting
a) A, B and D
b) A, C and D
c) A, B and C
d) A, B , C, D
62. Management accounting is related with
a) The problem of choice making
b) Recording of transactions
c) Cause and effect relationships
A. A and B
B. B and C
C. A and C
D. All are false
63. Management accountancy is a structure for
A. Costing
B. Accounting
C. Decision making
D. Management
64. Who coined the concept of management accounting?
A. R.N Anthony
B. James H. Bliss
C. J. Batty
D. American Accounting
65. Management accounting deals with
A. Quantitative information
B. Qualitative information
C. Both a and b
66. Management accounting highlights staff relationship with top management as well as other
personnel.
A. True
B. False
67. The definition â˜Management Accounting is the presentation of accounting information
in such a way as to assist management in the creation of policy and the day-to-day
operation of an undertaking.â™
A. Ango-American Council on Productivity
B. AICPA
C. Robert N. Anthony
D. All of the above
68. The second term for Horizontal Analysis is
A. Dynamic Analysis
B. Inter-firm Analysis
C. Time-series Analysis
D. All of the above
69. Vertical analysis is also known as
A. Static analysis
B. Structural analysis
C. Cross-sectional analysis
D. All of the above
70. The assessment of financial statements by a shareholder is an example of
A. Vertical Analysis
B. Horizontal Analysis
C. Internal Analysis
D. External Analysis
71. Trend percentages and trend ratios are used in
A. Static Analysis
B. Dynamic Analysis
C. Horizontal Analysis
D. Vertical Analysis
A) Vertical Analysis is also termed as dynamic analysis.
B) Horizontal analysis is also termed as dynamic analysis.
C) Static Analysis is not extremely useful for the long-term financial planning.
A. Both A and B
B. Both A and C
C. Both B and C
D. A, B , C
A) Funds Flow statement is one of the ways to analysis & interpret financial statements.
B) Cash Flow Statement is one of the ways to analysis & interprets financial statements.
C) Common-size statement one of the ways to analysis & interprets financial statements.
A. Both A and B
B. Both A and C
C. Both B and C
D. A, B, C
74. Which of the following statements are true about Horizontal Analysis?
A) It do not examines the periodical trend
B) It is useful for long-term analysis.
C) It is useful for long â“term planning.
A. Both A and B
B. Both A and C
C. Both B and C
D. A, B, C
A) Comparative financial statement is an example of horizontal analysis.
B) Trend Analysis is an example of vertical analysis.
C) Cash flow analysis is an example of horizontal analysis.
A. Both A and B
B. Both A and C
C. Both B and C
D. A, B, C
76. John N. Myer stated that vertical and horizontal analysis forms the back-bone of financial
statement analysis technique.
A. True
B. False
77. Ratio analysis is an important approach of horizontal analysis.
A. True
B. False
78. The 3 Ps, i.e. the three objectives of analysis and interpretation of financial statements are :
Progress, Position and Prospects.
A. True
B. False
79. Comparison of financial statements highlights the trend of the _________ of the business.
A. Financial position
B. Performance
C. Profitability
D. All of the above
80. Analysis of any financial Statement comprises

A. Balance sheet
B. P&L Account
C. Trading account
D. All of the above
81. Which of the following are techniques, tools or methods of analysis and interpretation of
financial statements?
A. Ratio Analysis
B. Average Analysis
C. Trend Analysis
D. All of the above
82. Interpretation of accounts is the
A. Art and science of translating the figures
B. To know financial strengths and weaknesses of a business
C. To know the causes for the prevailing performance of business
D. All of the above
83. The only feasible purpose of financial management is
A. Wealth Maximization
B. Sales Maximization
C. Profit Maximization
D. Assets maximization
84. Financial management process deals with
A. Investments
B. Financing decisions
C. Both a and b
85. Agency cost consists of
A. Binding
B. Monitoring
C. Opportunity and structure cost
D. All of the above
86. Finance Function comprises
A. Safe custody of funds only
B. Expenditure of funds only
C. Procurement of finance only
D. Procurement & effective use of funds
87. The objective of wealth maximization takes into account
A. Amount of returns expected
B. Timing of anticipated returns
C. Risk associated with uncertainty of returns
D. All of the above
88. Financial management mainly focuses on
A. Efficient management of every business
B. Brand dimension
C. Arrangement of funds
D. All elements of acquiring and using means of financial resources for financial
activities
89. Time value of money indicates that
A. A unit of money obtained today is worth more than a unit of money obtained in
future
B. A unit of money obtained today is worth less than a unit of money obtained in
future
C. There is no difference in the value of money obtained today and tomorrow
90. Time value of money supports the comparison of cash flows recorded at different time
period by
A. Discounting all cash flows to a common point of time
B. Compounding all cash flows to a common point of time
C. Using either a or b
D. None of the above.
91. If the nominal rate of interest is 10% per annum and there is quarterly compounding, the
effective rate of interest will be:
A. 10% per annum
B. 10.10 per annum
C. 10.25%per annum
D. 10.38% per annum
92. Relationship between annual nominal rate of interest and annual effective rate of interest,
if frequency of compounding is greater than one:
A. Effective rate > Nominal rate
B. Effective rate < Nominal rate
C. Effective rate = Nominal rate
93. Mr. X takes a loan of Rs 50,000 from HDFC Bank. The rate of interest is 10% per annum.
The first installment will be paid at the end of year 5. Determine the amount of equal
annual installments if Mr. X wishes to repay the amount in five installments.
A. Rs 19500
B. Rs 19400
C. Rs 19310
94. If nominal rate of return is 10% per annum and annual effective rate of interest is 10.25%
per annum, determine the frequency of compounding:
A. 1
B. 2
C. 3
95. Present value tables for annuity cannot be straight away applied to varied stream of cash
flows.
A. True
B. False
96. Heterogeneous cash flows can be made comparable by
A. Discounting technique
B. Compounding technique
C. Either a or b
97. Risk of two securities with different expected return can be compared with:
A. Coefficient of variation
B. Standard deviation of securities
C. Variance of Securities
98. Efficient portfolios can be defined as those portfolios which for a given level of risk
provides
A. Maximum return
B. Average return
C. Minimum return
99. CAPM accounts for:
A. Unsystematic risk
B. Systematic risk
C. Both a and b
100.Which among the following presents a bird's-eyeview of the operations for the entire
period of a business?
A. Balance sheet
B. Profit and loss a/c
C. Cash flow statements
D. Position statement
101. ________ is the relationship between quick assets and current liabilities .
A. Current ratio
B. Absolute liquidity ratio
C. Acid test ratio
D. Proprietary ratio
102.When the concept of ratio is defined in respected to the items shown in the financial
statements, it is termed as
A. Accounting ratio
B. Financial ratio
C. Costing ratio
103.The definition, “The term accounting ratio is used to describe significant relationship
which exist between figures shown in a balance sheet, in a profit and loss account, in a
budgetary control system or in a any part of the accounting organization” is given by
A. Biramn and Dribin
B. Lord Keynes
C. J. Betty
104.The relationship between two financial variables can be expressed in:
A. Pure ratio
B. Percentage
C. Rate or time
D. Either of the above
105.Liquidity ratios are expressed in
A. Pure ratio form
B. Percentage
C. Rate or time
106.Which of the following statements are true about Ratio Analysis?
A) Ratio analysis is useful in financial analysis.
B) Ratio analysis is helpful in communication and coordination
C) Ratio Analysis is not helpful in identifying weak spots of the business.
D) Ratio Analysis is helpful in financial planning and forecasting.
a) A, B and D
b) A, C and D
c) A, B and C
d) A, B , C, D
107.Profit for the objective of calculating a ratio may be taken as
A. Profit before tax but after interest
B. Profit before interest and tax
C. Profit after interest and tax
D. All of the above
108.Which of the following falls under Profitability ratios?
A) General Profitability ratios
B) Overall Profitability ratios
C) Comprehensive Profitability ratios
A. A and B
B. A and C
C. B and C
109.General Profitability ratios are based on
A. Investments
B. Sales
C. a & B
110.Gross Profit ratio is also termed as
A. Gross Profit Margin
B. Gross Margin to net sales
C. Both a and b
D. All of the above
111.While calculating Gross Profit ratio,
A. Closing stock is deducted from cost of goods sold
B. Closing stock is added to cost of goods sold
C. Closing stock is ignored
112.While calculating Gross Profit, if net profit is given,
A. It can be converted into gross profit by adding interest to it
B. It can be converted into Gross profit by adding indirect expenses to it
C. Both a and b
113.Gross profit ratio is calculated by
A. (Gross Profit/Gross sales)*100
B. (Gross Profit/Net sales)*100
C. (Net Profit/Gross sales)*100

114.Given Sales is 1, 20,000 and Gross Profit is 30,000, the gross profit ratio is
A. 24%
B. 25%
C. 40%
D. 44%%
115.What will be the Gross Profit if, total sales is Rs 2,60,000 Cost of net goods sold is Rs
2,00,000 and Sales return is Rs 10,000?
A. 13%
B. 28%
C. 26%
D. 20%
116.If selling price is fixed 25% above the cost, the Gross Profit ratio is
A. 13%
B. 28%
C. 26%
D. 20%
117.Gross Profit ratio should be adequate to cover
A. Selling expenses
B. Administrative expenses
C. Dividends
D. All of the above
118.Which statement is prepared in the process of funds flow analysis?
A. Schedule of changes in working capital
B. Funds Flow Statement
C. Both a and b

119.Funds Flow Statement is prepared on the basis of data of P&L statement and two
consecutive balance sheets.
A. True
B. False
C. Value delivery
120.Which of the following rules stands true while preparation of Schedule of changes in
working capital?
A) An increase in current assets increases working capital.
B) An increase in current assets decreases working capital.
C) An increase in current liabilities decreases working capital.
D) An increase in current liabilities increases working capital
A. A and C
B. A and D
C. B and D
D. A, B, C and D
121.If reserve for bad and doubtful debts is mentioned in the question of Funds Flow Statement
Preparation, it can be shown as
A. In the schedule by deducting from total debtors under current assets
B. In the schedule separately under the heading of capital liabilities
C. Both a & b
122.Funds Flow Statement is also known as
A. Statement of Funds Flow
B. Statement of Sources and Application of Funds
C. Statement of Sources and Uses of Funds
D. All of the above

123.Given Net profit for the year Rs 2, 50,000 Transferred to general reserves Rs 40,000 and
old machinery bought for Rs 50,000 was sold for Rs 20,000. Calculate funds from
operations.
A. Rs 2, 80,000
B. Rs 2, 20,000
C. Rs 2, 90,000
D. Rs 3, 00,000
124.Which of the following are sources of funds?
A) Issue of bonus shares
B) Issue of shares against the purchase of fixed assets
C) Conversion of debentures into shares
D) Conversion of loans into shares
a) A and C
b) A and D
c) A, B, C and D
125.The share capital of A Ltd. stood at Rs 20,00,000 in 2013 and at Rs 26 lac in 2014. As per
records, the company bought asset of another company for Rs 6 lac payable in fully paid
shares. These assets included Goodwill Rs 2,00,000 Machinery Rs 1, 83, 600 and Stock Rs
2,16,400. What is the fund from issue of shares?
A. Rs 2,15,600
B. Rs 2,16,400
C. Rs 2,00,000
126.Debentures are Rs 2,50,000 and Rs 3,50,000 in the balance sheet of 2013 and 2014. 1000
of the debentures of Rs 100 each were issued at par in 2014 of which 400 debentures were
issued to a supplier for the purchase of a machine. Determine amount of issue for
debentures for the purpose of funds flow statement.
A. Rs 60,000
B. Rs 40,000
C. RS 10,000
127.In the balance sheet of Praveen for 2013 and 2014, 4% debentures are Rs 5,00,000 and Rs
4,00,000, respectively. Profit on redemption of debentures in 2013 is nil while in 2014 is
Rs 4,000. What is the amount of redemption for the purpose of funds flow statement?
A. Rs 96,000
B. Rs 1,04,000
C. Rs 9,00,000
D. Rs 9,04,000
128.The balance of property at cost has been RS 20,000 and Rs 17,000 in 2013 and 2014
respectively. The profit on sale of property of Rs 2000 is credited to Capital Reserves
Account. New property costing Rs 5000 bought in 2014. Determine sale of proceeds from
land.
A. Rs 3000
B. Rs 10,000
C. Rs 7000
D. Rs 15,000
129.of Ram at end of 2013 and 2014 disclose investments in shares of Rs 2000 and Rs 3000,
respectively. Rs 100 as pre-acquisition dividend has been credited to investments account.
Determine purchase of investments.
A. RS 5000
B. Rs 1000
C. Rs 1,100

130.The balance of fixed assets of Y Ltd. at cost at the end of 2013 and 2014 were Rs 5,70,800
and Rs 6,15,300. During the year 2014 a machinery costing Rs 60,000 was sold.
Determine the purchase of fixed assets.
A. Rs 1,04,500
B. Rs 1,40,500
C. Rs 1,64,500
131.Which of the following are applications of funds?
A. Payment of dividend on share capital
B. Payment of tax
C. Increase in working capital
D. All of above
132.Which of the following are treated as long term investments?
A. Non-current investments
B. Trade Investments
C. Sinking fund investments
D. All of the above
133.Provision of taxation is treated as
A. As a current liability
B. As an appropriation of profits
C. Either a or b
134.As per accounting standard AS3, provision for taxation should be treated as
A. As a current liability
B. As an appropriation of profits
C. Either a or b

135.Which of the following statement is true?
A. If the amount of good will increases during current year, the difference is treated as
purchase of goodwill.
B. If the amount of good will decreases during current year, It will treated as written
off.
C. Both a and b
136.The opening and closing balance of general reserves are Rs 10,000 and Rs 9,000,
respectively. It is stated in addition information that a loss of Rs 1000 has been written off
in general reserves. In such a case, decline in reserve and loss on investment will be
adjusted in P&L account.
A. True
B. False
137.As per Accounting Standard-3, Cash Flow is classified into
A. Operating activities and investing activities
B. Investing activities and financing activities
C. Operating activities and financing activities
D. Operating activities, financing activities and investing activities
138.Cash Flow Statement is also known as
A. Statement of Changes in Financial Position on Cash basis
B. Statement accounting for variation in cash
C. Both a and b
139.The objectives of Cash Flow Statement are
A) Analysis of cash position
B) Short-term cash planning
C) Evaluation of liquidity
D) Comparison of operating Performance
a) Both A and B
b) Both A and C
c) Both B and D
d) A, B, C, D
140.In cash flow statement, the item of interest is shown in
A) Operating Activities
B) Financing Activities
C) Investing Activities
A. Both A and B
B. Both A and C
C. Both B and C
D. A, B, C
141.Cash Flow Statement is based upon
A. Cash basis of accounting
B. Accrual basis of accounting
C. Credit basis of accounting
142.Which of the following statements are false?
A) Cash Flow Statement is helpful in the formation of policies.
B) Cash Flow Statement is useful for external analysis
C) Cash Flow Statement is helpful in estimating future cash flow
A. Both A and B
B. Both A and C
C. Both B and C
143.Which of the following statements are true?

A) Cash flow reveals only the inflow of cash
B) Cash flow reveals only the outflow of cash
C) Cash flow is a substitute for income statement
D) Cash flow statement is not a replacement of funds flow statement.
A. Only A
B. Only B
C. Both B and C
D. Only D
144.Cash flow statement is based upon _________ while Funds Flow Statement recognizes
_______.
A. Cash basis of accounting, accrual basis of accounting
B. Accrual basis of accounting, cash basis of accounting
C. Both are based on cash basis of accounting
145.Statement of changes in working capital is prepared separately in
A. Cash Flow Statement
C. Both a and b
146.Cash Flow Statement studies causes of change in working capital.
A. True
B. False
147._________ reconciles the opening cash balance with the closing cash balance of a given
period on the basis of net decrease or increase in cash during that period.
A. Cash Flow Statement
C. Both a and b
148.Which of the following statements are true?
A) Cash flow statement is more useful for short term cash planning.
B) Funds Flow statement is more useful in planning medium term and long term
financing.
C) Cash Flow statement discloses the position of liquidity in a better way
A. Only A
B. Only B
C. Only C
D. A, B and C
149._____ has/have accepted cash flow statement is more useful than funds flow statement,
particularly from view of analysis of liquidity of a firm.
A. Institute Of Chartered Accountants of India
B. FASB, America
C. SEBI
D. All of the above
150.Cash Flow Statement is prepared from
A. Profit and loss account
B. Balance Sheet
C. Additional Information
D. All of the above
151.Which of the following are cash flow from operating activities?
A) Cash Receipts from customers
B) Cash Paid to Supplier and Employees
C) Purchase of fixed assets
D) Sale of fixed assets
A. Both A and B
B. Both A and C
C. Both B and C
D. Both C and D
152.Match the column
A) Taxes Paid ------------------ i) Cash flow from investing activities
B) Repayment of loans -------------- ii) Cash flow from operating activities
C) Sale of fixed assets ----------------------- iii) Cash Flow from financing activities
A. A-ii), B-iii), C-i)
B. A-i), B-ii), C-iii)
C. A-iii), B-i), C-ii)
153.Cash payment to suppliers for services and goods is example of cash outflow.
A. True
B. False
154.For the calculation of cash flow from operating activities, payments and receipts shown in
Profit & Loss account are converted into payments and receipts actually in cash.
A. True
B. False
155.For the calculation of cash flow from operating activities, payments and receipts shown in
Profit & Loss account are converted into payments and receipts actually in cash by
eliminating
A. Non-cash revenue from the revenue earned
B. Non-cash expenses from expenses incurred
C. Both a & b
156.While preparing Cash Flow Statement, non-cash items and non-operating items are not
required to be adjusted under________
A. Indirect method
B. Direct method
C. Both a & b
157.Cash flow from sales is calculated by
A. Cash sales + Cash Collections
B. Sales + Opening debtors+ Opening B/R â “Closing Debtors â“ Closing B/R
C. Both a and b
158.Cash outflow on purchases is calculated by
A. Purchases + Opening Creditors + Opening B/P â “Closing Creditors-Closing B/P
B. Purchases + Opening Creditors - Closing Creditors +Closing B/P
C. Purchases - Opening Creditors - Opening B/P + Closing Creditors +Closing B/P
159.The amount of operating expenses which are actually been paid in cash are shown under:
A. Cash flow from sales
B. Cash outflow on purchases
C. Cash outflow on expenses
D. All of above are false
160.Given salary expenses Rs 40,000, Outstanding in the beginning of the year: Rs 5,000 and
outstanding at the end of the year Rs 10,000. Cash outflow on salary will be:
A. Rs 45,000
B. Rs 35000
C. Rs 55,000
D. Rs 15,000
161.In indirect method, net cash flow from operating activities is calculated on the basis of
A. Net Profit after tax
B. Net profit before tax

C. Both and b
162.Which of the following are added to net profit after tax and extraordinary items to reach to
net profit before tax and extraordinary items?
A) Provision for tax made during the year
B) Proposed dividend made during the year
C) Interim dividend
D) Transfer to General reserves and other reserves
A. Both A and B
B. Both A and C
C. Both B and C
D. A, B, C and D
163.Which of the following are cash flow from investing activities?
A) Interest received
C) Dividend received
D) Sale of fixed assets
E) Purchase of fixed assets
a) Both A and B
b) Both A and C
c) Both B and C
d) A, B, C and D
164.Which of the following are cash flow from financing activities?
A) Interest received
B) Dividend received
C) Interest paid
D) Dividend paid
A. Both A and B
B. Both A and C
C. Both C and D
D. A, B, C and D
165.Acquisition and disposal of long term assets is included in
A. Cash flow from investing activities
B. Cash flow from financing activities
C. Cash flow from operating activities
166.Which of the following statements represent example of cash flow from investing
activities?
A. Cash advances and loans made by financial enterprises
B. Cash advances and loans made to third parties
C. Both a and b
167.ABC Ltd had investment of Rs 68,000 as on 31.3.2013 and investment of Rs 56,000 as on
31.3.2014. During the year ABC Ltd sold 40% of its investments being held in the
beginning of period at a profit of Rs 16,800. Determine cash flow from investing activities.
A. Rs 59,200
B. Rs 28,800
C. Rs 72,800
168.Financing activities brings changes in
A. Size and composition of ownerâ™s equities
B. Borrowing of the enterprise
C. Both a and b
169.For year 2013 Equity Share Capital is Rs 3,00,000 Preference Share Capital is 1,00,000
10% debentures is 2,00,000 and Share premium is 30,000. For year 2014 Equity Share
Capital is Rs 4,00,000 Preference Share Capital is 60,000 10% debentures is 1,00,000 and
Share premium is 40,000. Also given, Dividend paid on shares Rs 15,000 and Interest paid
on debentures RS 20,000. Determine net cash flow from financing activities.
A. Cash inflow of Rs 65,000
B. Cash outflow of Rs 65,000
C. Cash inflow of Rs 56,000
D. Cash outflow of Rs 56,000
170.As per AS-3, Cash Flow Statement is mandatory for
A) All enterprises
B) Companies listed on a stock exchange
C) Companies with a turnover of more than Rs 50 crores
A. Both A and B
B. Both A and C
C. Both C and B
171.Listed Enterprises need to prepare Cash Flow Statement only under indirect method.
A. True
B. False
172.In the case of financial enterprises, the cash flow resulting from interest and dividend
received and interest paid should be classified as cash flow from
A. Operating activities
B. Financing activities
C. Investing activities
173.In case of other enterprises cash flow arising from interest paid should be classified as cash
flow from ________ while dividends and interest received should be stated as cash flow
from ____.
A. Operating activities, financing activities
B. Financing activities, investing activities
C. Investing activities, operating activities
174.Issue of bonus shares and conversion of debentures into equity are shown as a footnote to
the Cash Flow Statement.
A. True
B. False
175.When a fixed asset is bought as hire purchase, interest element is classified under ______
and loan element is classified under________.
A. Operating activities, financing activities
B. Financing activities, investing activities
C. Investing activities, operating activities
176.Which of the following statements are false?
A) Old Furniture written off doesn’t affect cash flow.
B) Cash flow statement is a substitute for cash account.
C) Appropriation of retained earnings is not shown in Cash flow statement.
D) Net cash flow during a period can never be negative.
A. A, B, C
B. B, C, D
C. C, D, A
177.Which of the following is not a cash inflow?
A. Decrease in debtors
B. Issue of shares
C. Decrease in creditors
D. Sale of fixed assets
178.Which of the following is not a cash outflow?
A. Increase in Prepaid expenses
B. Increase in debtors
C. Increase in stock
D. Increase in creditors
179.Which of the following is a conventional method of ascertaining cost?
A. Absorption costing
B. Full Costing
C. Both a & b
180.Under absorption costing, profit is ascertained
A. On the basis of difference between sales and total cost.
B. By computation as per desired rate of profit on sales or cost
C. Both a and b
181.All costs are classified under ______ segments under absorption costing.
A. Five
B. Six
C. Four
D. Three
182.While ascertaining gross profit under absorption costing, only that portion of
manufacturing overheads is deducted from sales revenue which is associated with the
goods sold.
A. True
B. False
183.Under absorption costing among fixed expenses

A. Fixed manufacturing expenses are included in unit cost
B. Fixed non-manufacturing expenses are included in unit cost
C. Both a and b
184.Absorption costing is used for
A. Price determination on basis of full cost
B. Solution of separation of costs
C. Calculation of gross and net profit
D. All of the above
185.Absorption costs helps in
A. Difference between product cost and period cost
B. Charged of fixed factory overheads on inventory
C. Both a and b
186.Fixed expenses decrease per unit with the increases in production and increases per unit
with the decrease in production.
A. True
B. False
187.Marginal costs is taken as equal to
A. Prime Cost plus all variable overheads
B. Prime Cost minus all variable overheads
C. Variable overheads
188.If total cost of 100 units is Rs 5000 and those of 101 units is Rs 5030 then increase of Rs
30 in total cost is
A. Marginal cost
B. Prime cost
C. All variable overheads
189.Marginal cost is computed as
A. Prime cost + All Variable overheads
B. Direct material + Direct labor + Direct Expenses + All variable overheads
C. Total costs – All fixed overheads
D. All of the above
190.Marginal costing is also known as
A. Direct costing
B. Variable costing
C. Both a and b
191.Under High and Low Point method, the output at two different levels is compared with the
amount of __________ incurred at these two points.
A. Total fixed costs
B. Total costs
C. Total fixed costs
192.In Analytical method of calculating marginal costing, it is determined on the basis of past
records.
A. True
B. False
193.When contribution is positive but equal to fixed cost,
A. There is loss equal to fixed costs
B. There is loss more than fixed costs
C. There will be loss less than fixed costs
D. There will be neither profit not loss

194.Opportunities to achieve further growth within current businesses are:
A. Intensive Opportunities
B. Integrative Opportunities
C. Diversification Opportunities
195.Absorption costing is also known as
A. Historical costing
B. Total costing
C. Both a and b
196.Under absorption costing, managerial decisions are based on
A. Profit
B. Contribution
C. Profit volume ratio
197.Managers utilizes marginal costing for
A. Make or buy decision
B. Utilization of additional capacity
C. Determination of dumping price
D. All of the above
198.The problems associated with marginal costing are
A. Difficulties in divisions of costs
B. Problem of valuation of stocks
C. Ignores time elements
D. All of the above
199.___________ is not suitable where selling price is determined on the basis of cost-plus
method.
A. Absorption costing
B. Marginal costing
C. Both a and b
200.Which of the following are added to net profit after tax and extraordinary items to reach to
net profit before tax and extraordinary items?
A. Provision for tax made during the year
B. Proposed dividend made during the year
C. Interim dividend
D. Transfer to General reserves and other reserves
a. Both A and B
b. Both A and C
c. Both B and C
d. A, B, C and D
201.Absorption costing is used for
A. Price determination on basis of full cost
B. Solution of separation of costs
C. Calculation of gross and net profit
D. All of the above

Answers
1. D) All of the Above
2. C) Decreased Cash
3. B) Increases Cash
4. C) Depreciation
5. D) None of the Above
6. D) Operating, Investing and
Financing Activities
7. D) Purchase of Fixed Asset
8. D) Sale of Investment by NonFinancial Enterprise
9. C) Interest Paid on Term-deposits by
a Bank
10. D) All of the above
11. c) Both C and B
12. a) True
13. a) Operating activities
14. b) Financing activities, investing
activities
15. a) True
16. b) Financing activities, investing
activities
17. b) B, C, D
18. c) Decrease in creditors

19. d) Increase in creditors
20. c) Both a & b
21. c) Both a and b
22. a) True
23. a) Fixed manufacturing expenses are
included in unit cost
24. a) Price determination on basis of full
cost
25. c) Both a and b
26. d) B and D
27. a) True
28. a) Prime Cost plus all variable
overheads
29. a) Marginal cost
30. a) Prime cost + All Variable
overheads
31. c) Both a and b
32. a) A and B
33. a) Total marginal cost is deducted
from total sales revenues
34. d) A, B C and D
35. a) Rs 2 and Rs 10,000
36. b) Total costs
37. a) Rs 2 per unit, Rs 5,000
38. a) Y=a+bX
39. a) True
40. a)True
41. a) If contribution is zero, there is loss
equal to fixed costs
42. c) There will be loss less than fixed
costs
43. d) There will be neither profit not
loss
44. a) Intensive Opportunities
45. c) Both a and b
46. a) Rs 2,00,000
47. c) Both a and b
48. c) Both a and b
49. a) Profit
50. a) True
53. Fixed and current assets
54. A) Interest coverage ratio
55. b) 1950
56. a) Only A
57. a) Optional
58. d) A, B, C
59. a) Only A
60. d) In planning, direction and control
61. c) A, B and C
62. c) a and c
63. c) Decision making
64. b) James H. Bliss

65. c) Both a and b
66. b) False
67. a) Ango-American Council on
Productivity
68. d) All of the above
70. d) External Analysis
71. a) Static Analysis
72. c) Both B and C
73. d) A, B, C
74. c) Both B and C
75. b) Both A and C
76. a) True
77. b) False
78. a) True
83. a) Wealth Maximization
84. b) Financing decisions
86. d) Procurement & effective use of
funds
88. d) All elements of acquiring and
using means of financial resources for

financial activities
89. a) A unit of money obtained today is
worth more than a unit of money
obtained in future
90. c) Using either a or b
91. d) 10.38% per annum
92. a) Effective rate > Nominal rate
93. c) Rs 19310
94. b) 2
95. a) True
96. c) Either a or b
97. a) Coefficient of variation
98. a) Maximum return
99. b) Systematic risk
100.b) Profit and loss a/c
101.c) Acid test ratio
102.a) Accounting ratio
103.c) J. Betty
104.Either of the above
105.A) Pure ratio form
106.a) A, B and D
107.D) All of the above
108.A) A and B
109.B) Sales
110.C) Both A and B
111.A) Closing stock is deducted from
cost of goods sold

112.a) It can be converted into gross
profit by adding interest to it
113. ) (Gross profit / net sales) * 100
114.B) 25 %
115.D) 20 %
116.B) 20%
118.A) Schedule of changes in working
capital
119.A) True
120.A) A and C
121.C) Both a and b
123.A) 2,80,000
124.d) None of the above
125.B) Rs. 2,16,400
126.A) Rs 60,000
127.A) 96,000
128.B) 10,000
129.C) 1,100
130.A) 1,04,500
131.d) All of above
132.d) All of the above
133.c) Either a or b
134.b) As an appropriation of profits
135.c) Both a and b
136.b) False
137.d) Operating activities, financing
activities and investing activities
138.c) Both a and b
139.d) A, B, C, D
140.c) Both B and C
141.a) Cash basis of accounting
142.d) None of the above
143.D) only D
144.a) Cash basis of accounting, accrual
basis of accounting
145.b) Funds Flow Statement
146.b) False
147.a) Cash Flow Statement
148.d) A, B and C
151.a) Both a and b
152.a) A-ii), B-iii), C-i)
153.b) False
154.: a) True
155.c) Both a & b
156.b) Direct method
157.c) Both a and b
158.a) Purchases + Opening Creditors +
Opening B/P â“Closing CreditorsClosing B/P
159.c) Cash outflow on expenses
160.b) Rs 35000
161. b) Net profit before tax
162.d) A, B, C and D
164.c) Both C and D
165.a) Cash flow from investing activities
166.b) Cash advances and loans made to
third parties
167.b) Rs 28,800
168.c) Both a and b
169.b) Cash outflow of Rs 65,000
170.c) Both C and B
171.a) True
172.a) Operating activities
173.b) Financing activities, investing
activities
174.a) True
175.b) Financing activities, investing
activities
176.b) B, C, D
177.c) Decrease in creditors
178.d) Increase in creditors
179.c) Both a & b
180.c) Both a and b
181.d) Three
182.a) True
183.a) Fixed manufacturing expenses are
included in unit cost

184.a) Price determination on basis of full
cost
185.c) Both a and b
186.a) True
187.a) Prime Cost plus all variable
overheads
188.a) Marginal cost
189.a) Prime cost + All Variable
overheads
190.c) Both a and b
191.b) Total costs
192.a) True
193.d) There will be neither profit not
loss
194.a) Intensive Opportunities
195.c) Both a and b
196.a) Profit
199.b) Marginal costing
201.a) Price determination on basis of full
cost
PREETY
ACCOUNTS
MODULE-4
1. Fixed expenses decrease per unit with the increases in

production and increases per unit with the decrease in
production.
a) True
b) False
2. Marginal costs is taken as equal to
a) Prime Cost plus all variable overheads

b) Prime Cost minus all variable overheads
c) Variable overheads
3. If total cost of 100 units is Rs 5000 and those of 101 units is

Rs 5030 then increase of Rs 30 in total cost is
a) Marginal cost
b) Prime cost
c) All variable overheads
4. Marginal cost is computed as
a) Prime cost + All Variable overheads

b) Direct material + Direct labor + Direct Expenses + All variable
overheads
c) Total costs – All fixed overheads
d) All of the above
5. Marginal costing is also known as
a) Direct costing
b) Variable costing
c) Both a and b
A) Marginal costing is not an independent system of costing.
B) In marginal costing all elements of cost are divided into fixed and
variable components.
C) In marginal costing fixed costs are treated as product cost.
D) Marginal costing is not a technique of cost analysis.
a) A and B
b) B and C
c) A and D
d) B and D
7. While computation of profit in marginal costing
a) Total marginal cost is deducted from total sales revenues

b) Total marginal cost is added to total sales revenues
c) Fixed cost is added to contribution
8. Which of the following are the assumptions of marginal

costing?
A) All the elements of cost can be divided into fixed and variable
components.
B) Total fixed cost remains constant at all levels of output.
C) Total variable costs varies in proportion to the volume of output.

D) Per unit selling price remain unchanged at all levels of operating
activity.
a) A and B
b) B and C
c) A and D
d) A, B C and D
9. In two periods total costs amounts to Rs 50000 and Rs

40000 against production of 20000 and 15000 units
respectively. Determine marginal cost per unit and fixed cost.
a) Rs 2 and Rs 10,000
b) Rs 4 and Rs 5000
c) Rs 10 and Rs 8000
10. Under High and Low Point method, the output at two
different levels is compared with the amount of __________
incurred at these two points.
a) Total fixed costs

b) Total costs
c) Total fixed costs
11. Given Maximum value of production and minimum value of

production is 10,000 and 5000 units respectively. Maximum
total cost is RS 25,000 and minimum total cost is Rs 15,000.
Determine total fixed cost and per unit marginal cost.
a) Rs 2 per unit, Rs 5,000

b) Rs 5 per unit, Rs 2000
c) Rs 10 per unit, Rs 10,000
12. Theory of contribution is the excess of sales over variable

costs.
a)True
b)False
13. Which of the following statements related to Contribution

Analysis are ture?
a) If contribution is zero, there is loss equal to fixed costs
b) If contribution is negative, loss is less than fixed costs
c) If contribution is positive and more than fixed cost there will be profit.
d) All of the above
14. When contribution is negative but less than fixed cost,

d) All of above are false
15. When contribution is positive but equal to fixed cost,

d) There will be neither profit not loss
16. Opportunities to achieve further growth within current businesses
are:
a) Intensive Opportunities
b) Integrative Opportunities
c) Diversification Opportunities
17. Absorption costing is also known as
a) Historical costing
b) Total costing
c) Both a and b
18. Given production is 1,00,000 units, fixed costs is Rs 2,00,000 Selling

price is Rs 10 per unit and variable cost is Rs 6 per unit. Determine
profit using technique of marginal costing.
a) Rs 2,00,000
b) Rs 8,00,000
c) Rs 6,00,000
19. Break-even analysis is also called?

(a) Business Analysis
(b) Unit sales
(c) Cost-Volume-Profit analysis

20. Break even capacity----------------------?
(a) Breakeven sales in dollar/Normal sales in dollar
(b) Normal sales in dollar/ Break even sales in dollar
(c) All of above
(d) None of above

21. Estimate sales in amount is____________________?
(a) FC+ Profit/Contribution margin per unit
(b) FC+ Profit/Contribution margin Ratio
(c) VC+ Profit/Contribution margin
(d) VC+ Profit/Contribution margin Ratio

22. To find the break-even in dollars, you have to divide the
fixed cost by ____________?
(a) Variable cost
(b) Contribution Margin per unit
(c) Contribution Margin
(d) Contribution Margin ratio

23. The break-even point can be defined as?
(a) The level of activity at which there is neither profit nor loss
(b) The level of activity where cash flow is zero
(c) The level of activity where profits equal fixed costs
(d) The level of activity where variable costs are covered by sales
revenue
24. The break-even point in units is represented by the
equation?
(a) Fixed costs / Variable costs
(b) Fixed costs / selling price per unit

(c) (Sales revenue - Fixed costs) / Contribution per unit
(d) Fixed costs / Contribution per unit

25. If actual units produced are lower than the budgeted level of
production which of the following types of cost would you expect
to be lower than the budget?
(a) Variable costs per unit
(b) Total variable costs
(c) Total fixed costs
(d) None
26. Costs that do not change when the activity base fluctuates
are known as?
(a) Variable costs
(b) Discretionary costs
(c) Fixed costs
(d) Mixed costs

27. A company's telephone bill consisting of a Rs. 200 monthly
base amount, plus long distance charges, would be classified as
a?
(a) Variable cost
(b) Committed fixed cost
(b) Discretionary fixed cost
(d) Mixed cost

28. A company has fixed costs of Rs. 50,000 and variable costs
per unit of output of Rs. 8. If its sole product sells for Rs. 18,
what is the break-even quantity of output?
(a) Rs. 2,500
(b) Rs. 5,000
(c) Rs. 1,500
(d) Rs. 7,500

29. Fixed cost per unit increases when?
(a) Production volume decreases
(b) Production volume increases
(c) Variable cost per unit decreases

30. Contribution margin is also known as____________?
(a) Marginal income
(b) Gross profit
(c) Net income

31. Contribution margin is the difference between sales
and____________?
(a) Variable cost
(b) Fixed cost
(c) Profit
(d) Revenue
32. An increase in variable costs?
(a) Increases P/V ratio
(b) Reduces the contribution margin
(c) Increase new profit

(d) None of above
33. Those cost that have both fixed and variable element are
called________________?
(a) Variable cost
(b) Total fixed cost
(c) Semi variable cost
(d) Prime cost

34. Following are the uses of CVP analysis except?
(a) Estimating future profits
(b) Deciding on selling price for a product
(c) Analyzing margin of safety in budget
(d) Analyze cash flows

35. Which of the following costs would decrease if production
levels were increase within the relevant range?
(a) Total fixed costs
(b) Variable costs per unit
(c) Total variable costs
(d) Fixed costs per unit

36. The indicator that results in total revenues being equal to
total cost is called the?
(a) Break-even point
(b) Marginal cost
(c) Profit mix
(d) Marginal volume

37. An example of a semi variable cost would be?
(a) The costs of insuring assets
(b) Electricity costs
(c) The salaries of supervisors in a department
(d) The costs of material to be used for production

38. Which of the following statements hold true for safety stock?
(a) The higher the profit margin per unit, the lower the safety stock
necessary
(b) The lower the opportunity cost of the funds invested in inventory,
the smaller the safety stock needed
(c) The greater the risk of running out of stock, the larger the safety
stock needed
(d) The greater the uncertainty associated with forecasted demand, the
lower the level of safety stock needed
39. The main objective of depreciation is

(a) To show the previous profit
(b) To calculate net profit
(c) To reduce tax
(d) To satisfy the tax department
40. Depreciation is generated due to
(a) Increase in the value of liability
(b) Decrease in capital
(c) Wear and tear
(d) Decrease in the value of assets
41. What is the purpose of making a provision for depreciation

in the accounts?
(a) To charge the cost of fixed assets against profits
(b) To show the current market value of fixed asset
(c) To make cash available to replace fixed assets
(d) To make a provision for repairs
42. According to straight line method of providing depreciation,

the depreciation
(a) Remains constant
(b) Increase each year.
(c) Decrease each year
(d) None of them.
43. Total amount of depreciation of an asset cannot exceed its

(a) Depreciation value
(b) Scrap value
(c) Market value
(d) None of these
44. According to fixed instalment method, the depreciation is

calculated on
(a) Balance amount
(b) Original cost
(c) Scrap value
(d) None of them
45. Salvage value means

(a) Definite sale price of the asset
(b) Cash to be received when life of the asset ends
(c) Cash to be paid when asset is disposed off
(d) Estimated disposal value
46. Depreciation is calculated under diminishing balance

method, based on
(a) Original value
(b) Book value
(c) Scrap value
(d) None of them
47. Depreciation amount charged on a machinery will be

debited to:
(a) Repair account
(b) Cash account
(c) Depreciation account
(d) Machinery account
48. In accounting, becoming out of date or obsolete is known

as
(a) Amortization
(b) Obsolescence
(c) Depletion
(d) Physical deterioration
49. How do we describe the process of adjusting the value of an
asset by recognizing that it is consumed in a way that does not
completely eliminate the resource?
(a) Adjustment
(b) Valuation
(c) Depreciation
(d) Waning
50. If the estimated amount of depreciation on equipment for a
period is Rs. 2,000, the adjusting entry to record depreciation
would be?
(a) Debit depreciation expense, Rs. 2,000; credit accumulated
depreciation, Rs. 2,000
(b) Debit depreciation expense, Rs. Rs. 2,000; credit cash, Rs. 2,000
(c) Debit equipment, Rs. 2,000; credit depreciation expense, Rs. 2,000
(d) Debit accumulated depreciation, Rs. 2,000; credit depreciation

expense, Rs. 2,000
51. Which one of the following most closely defines
'Amortization'?
(a) The depreciation of tangible fixed assets
(b) The depreciation of intangible fixed assets
(c) The depreciation of current assets
(d) The revaluation of land and buildings

52. Book value = cost minus _____________?
(a) Current liabilities
(b) Salvage value
(c) Accumulated depreciation
(d) Residual value

53. What is process called, where costs of the natural resources
are allocated over its useful life?
(a) Capitalization
(b) Depletion
(c) Amortization
(d) Depreciation
54. Depreciation arises due to?
(a) Physical wear and tear of the Asset
(b) Fall in the market value of an Asset
(c) Fall in the value of money
(d) None of these

55. A machine that cost Rs. 120,000 has accumulated
depreciation of Rs. 50,000. The book value of machine is?
(a) Rs. 50,000
(b) Rs. 70,000
(c) Rs. 120,000
(d) Rs. 170,000

56. What is the process of allocating the cost of intangible
assets over its estimated life?
(a) Depreciation
(b) Amortization
(c) Depletion
(d) Trial balance

57. Which of the following items is not a non-cash item?
(a) Depreciation expense
(b) Amortization expense
(c) Depletion expense
(d) Income tax expense

58. Depreciable value of an asset is equal to?
(a) Cost + scrap value
(b) Cost + market price
(c) Cost – scrap value
(d) None of the given options

59. A decrease in value of a fixed asset due to age, wear and
tear is known as?
(a) Depreciation
(b) Accumulated Depreciation
(c) Appreciation
(d) Written Down Value

60. Which of the following intangible assets is not amortized?
(a) Patents
(b) Goodwill
(c) Copyrights
(d) Franchises
(Note: Under US GAAP and IFRS, goodwill is never amortized,

because it is considered to have an indefinite useful life. Instead,
management is responsible for valuing goodwill every year and to
determine if an impairment is required)
61. All of the following are needed for the computation of
depreciation except?
(a) Expected disposal date
(b) Cost
(c) Residual value
(d) Estimated total useful life to the present and future owners
62. The sale of equipment costing Rs. 8,000, with accumulated
depreciation of Rs. 6,700 and sale price of Rs. 2,000, would
result in a?
(a) Gain of Rs. 2,000
(b) Gain of Rs. 700
(c) Loss of Rs. 700
(d) Loss of Rs. 600

63. Which of the following would not be a basis for estimating
the useful life of a piece of equipment?
(a) Years of service
(b) Weight
(c) Potential production in units
(d) Hours of service

64. Firms charge depreciation each year?
(a) To ensure there is enough money in the firm to replace the asset
(b) To spread the cost of the asset over its working life
(c) To reduce the profit and thus reduce the dividends they can pay to
share holders
(d) Because the law states they must be reduced

65. Which one of the following items is not a consideration when
recording periodic depreciation expense on plant assets?
(a) Salvage value
(b) Estimated useful life

(c) Cash needed to replace the plant asset
(d) Initial cost of the plant assets

66. Loss in value of an asset owing to the physical deterioration
or obsolescence is called?
(a) Book value
(b) Capital gain
(c) Depreciation
(d) Both a & c

67. Under the straight line method of depreciation?
(a) Amount of depreciation increases every year
(b) Amount of depreciation decreases every year
(c) Amount of depreciation remains constant for every year
(d) None of the given options

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Management Accounting Mcqs First Module

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Management Accounting MCQs First Module:

1. Management accounting is deals with –

(a) Quantitative Information

2. Management accounting and financial accounting differ in that management accounting

a. following prescribed rules.

3. The primary objective of management accounting is

4.Management accounting is the branch of accounting concerned with reporting to

5.Which of the following characteristics does NOT pertain to management accounting?

a. provides information and estimates about future activity

6.Which of the following does NOT describe management accounting?

a. evaluation of segments or products within the firm

8. Management accounting assists the management

(a) Only in control

9. Management accounting is concerned with which kind of decision?

a. product costing and pricing

10. Management accounting:

a. provides a framework to evaluate information in light of an organization's goals.

11. Management accounting is primarily concerned with:

a. providing investors with useful information for valuing securities.

15. In cost accounting, stock is valued at _______

18. Cost accountancy is considered an art because it _____

21 The purpose of management accounting is to

22 The correct order of process of establishing the standards, is

23. Management accounting assists the management

24. Which of the following are tools of management accounting?

25. The concept of management accounting was coined by?

27. Management accounting deals with

29. In management accounting, an emphasis and focus must be

30. GAAP stands for:

33 Which concept states that “for every debit, there is a credit”?

34 For measuring income, the most acceptable method is?

35 The correct form of Accounting equation is

37 Due to which concept, accounting does not record non-financial transactions?

41. The process of accounting is needed to

42. Which of the following describes the practical framework of bookkeeping?

46. One of the detailed rules used to record business transaction is

(a) Cash at Bank

(b) Bank Loan

(c) Bank Overdraft

(d) None of them

49. The payment to a creditor will?

(a) Increase one asset and decrease another

(b) Decrease an asset and decrease owner’s equity

(c) Decrease an asset and decrease a liability

(d) Increase an asset and increase a liability

50. Ledger is a principal book in which?

(a) Only real account are kept

(b) Only personal accounts are kept

(d) Only nominal accounts are kept

(a) Cash received

(c) Discount received

(d) Rent Expenses

53. When a Liability is reduced or decreased, it is recorded on the?

(a) Right or debit side of the account

(b) Left or debit side of the account

(c) Left or credit side of the account

(d) Right or credit side of the account

56. Transactions are first recorded in which book/account?

57. Customer goods returned will be credited to which account?

58. Journal is also called a?

60. Journal lists transactions in which order?

62. Cash withdrawal from business by the proprietor should be credited to