A banking company cannot grant loan to

any
of its directors.
2. Banking companies are governed by the
Banking Realisation Act, 1949.
3. The maximum number of Partners in a
banking business is 10.
4. Rebate on Bills Discounted for a banking
company is not an income.
5. No banking company shares pay any
dividend unless its capital expenses and
fictitious assets are written off.
6. Statutory reserve required = 25 %
7. Cash reserve with RBI = 3 % of its time
and
demand liabilities.
 8. Limit on investments in shares of other
companies: 30 % of paid up capital and
reserves.
9. Rebate on bills discounted is shown
under
the head other liabilities of the balance
sheet
as unexpired discounts.

10. Paid up capital of a banking company must

be at least one-half of the subscribed capital of a

banking company.

11. The accounting year of a banking company

ends on 31st march of every year.

12. Provision for bad and doubtful debts cannot

be shown as deduction from interest earned in

the profit and loss account of banking companies.

13. Bills for collection at the end of the year are

not shown in any schedule. They appear at the

foot of the balance sheet.

14. Contingent liabilities are shown under

schedule 12.

15. Revenue accounts of insurance companies

are prepared under the provisions of IRDA

Regulation ' 2002.

16. Valuation balance sheet is prepared in case

of life assurance business only to ascertain

surplus or deficit.

17. Annuity is an expense and it is shown under

the head benefits paid (Schedule 4).

18. Revenue account of Life Insurance

companies: Form A-RA

19. Profit and loss account of Life Insurance

companies: Form A-PL

20. Balance sheet of Life Insurance companies:

Form A-BS.

21. Reinsurance premium whether ceded or

accepted has been shown on gross basis before

deducting commission.

22. Liabilities under existing policies are

determined by actuarial valuation.

23. Life insurance is more appropriate to be

called life assurance.

24. Bonus in reduction of premium is both at

expense and income in revenue account.

25. General insurance includes all types of

insurance except life insurance.

26. IRDA was set up in the year 1996.

27. Revenue accounts of insurance companies

are prepared under the provisions of IRDA

Regulation ' 2002.

28. Provisions for unexpired risk in respect of

marine business = 100 %

29. Provisions for unexpired risk in respect of

fire business = 50 %

30. Partly paid investments, guarantee,

reinsurance obligations not provided in accounts

are contingent liabilities.

31. Income from rent includes only the realised

rent. It does not include any notional rent.

32. Commission on reinsurance ceded is an

income and commission on reinsurance accepted

is an expense.

33. FORM B-RA: Revenue account of general

insurance companies.

34. FORM B-PL: Profit and loss account of

general insurance companies.

35. FORM B-BS: Balance sheet of general

insurance companies.

36. Investments hold for more than one year to

earn continuous income or to control business is

called trade investments.

37. Investment held with a view to buy or sale is

known as temporary investments or current

investments or marketable securities.

38. Current investments are valued at cost or

fair value whichever is lower and fixed

investments are valued at cost.

39. Investment account is real account.

40. Sale of right is a capital receipt in case of

right issue.

41. Brokerage is included in the cost of

investment in case of purchase and investments

are deducted with the cost of investment in case

of sale.

42. FIFO and average cost method is used to

calculate cost of closing balance of investment.

43. Cost of Bonus shares is nil.

44. Accounting for investments: AS-13.

45. In case of cum-interest, interest is included

in quoted price and in case of ex-interest,

interest is excluded from quoted price.

46. Real price of investment is Ex

interest/ dividend price.

Subscribed capital of a banking company

should not exceed half of the authorized capital

and the paid-up capital should not exceed half of

the subscribed capital. [True]

2. A banking company should transfer 20 % of

its profits to a statutory reserve, only till such

reserve together with share premium account

balance equals the paid-up capital. [False]

3. A banking company cannot pay dividend on

its shares until it writes off all capitalized

expenses such an preliminary expenses,

brokerage and commission on issue of shares,

etc. [True]

4. A banking company cannot grant any loans

or advances on the security of its own shares.

[True]

5. The total of bank's advances comprises

loans, cash credits, overdrafts and money at call

and short notice. [False]

6. In a bank's balance sheet gold is shown

under Other assets ' whereas silver is shown

under ‘ Investments? [False]

7. Banks do not make a provision for bad debts,

as they secure or insure all their advances.

[False]

8.' Rebate on bills discounted ' a liability and

is, therefore, shown under the heading' Other

liabilities ' by banks. [False]

9. Life insurance is more appropriate to be

called life assurance. (True]

10. All insurance contracts are contracts of

indemnity. [False]

11. There is no difference between a wagering

contract and contract of insurance. [True]

12. Bonus payable on maturity of the policy is

called reversionary bonus. [False]

13. A life insurance business is said to have

earned profit only if its life assurance fund

exceeds its net liability on all outstanding

policies. [False]

14. A balance sheet of a life insurance company

is called a ' Valuation balance sheet'. [False]

15. Life insurance contract is a contract of

indemnity. [False)

B. Fill in the blanks:

1. When interest on doubtful debts is realised

the amount is debited to Interest suspense

account and credited to Interest account.

2. The bases for recording bank transactions

are the Slips prepared by customers and

sometimes bank staff.

3. Liability on account of bills rediscounted will

appear under Contingent Liabilities of the bank's

balance sheet.

4. Banks are required to transfer 25 % of their

profits to a statutory reserve.

1) The excess of net liability over the ' Life

Assurance Fund represents the Deficiency for

the inter-valuation period.

2) The concept of surrender value of a policy is

peculiar to Life insurance.

3) When an insurance company finds the risk

heavy, part of the risk is insured with another

company. Such a procedure is known as

Reinsurance.

4) The purpose preparing the valuation

balance sheet is to ascertain the Profit or loss

made by life insurance business.

5) Valuation balance sheet is prepared once in

every Two years in the case of life insurance

business.

6) In the case of marine insurance the provision

against unexpired risk should be 100 % of the net

premiums.

C. Indicate the correct answer:

1. Banks prepare the accounts for

a) Calendar year.

b) Financial year.

c) Cooperative year.

The term ‘Financial Statement’ covers

a) Profit & Loss Statement

b) Balance sheet and Profit & Loss Statement appropriation account
c) Profit & Loss Statement and Balance sheet
d) All of above are false

View Answer / Hide Answer

ANSWER: c) Profit & Loss Statement and Balance sheet

2. The form of balance sheet is

a) Vertical
b) Horizontal
c) Horizontal and vertical
d) Horizontal or vertical

View Answer / Hide Answer

ANSWER: d) Horizontal or vertical

3. The term current asset doesn’t cover

a) Car
b) Debtors
c) Stock
d) Prepaid expenses

View Answer / Hide Answer

ANSWER: a) Car

4. P&L statement is also known as

a) Statement of operations
b) Statement of income
c) Statement of earnings
d) All of the above
View Answer / Hide Answer

ANSWER: b) Statement of income

5. Which of the following is true about financial statements?

A) Financial statement gives a summary of accounts.

B) Financial statements can be stated as recorded facts.

a) Only A
b) Only B
c) Both A and B
d) None of the above

View Answer / Hide Answer

ANSWER: c) Both A and B

6. The statement of financial position and the balance sheet are synonyms.

a) True
b) False

View Answer / Hide Answer

ANSWER: a) True

7. Schedules attached with the balance sheet forms a part of the financial statements.

a) True
b) False

View Answer / Hide Answer

ANSWER: a) True

8. Which of the following statements are true?

A) Financial statements are only interim report.

B) Financial statements are also known as annual records.
C) Financial statements are historic.

a) Both A and B
b) Both A and C
c) Both B and C
d) A, B, C

View Answer / Hide Answer

ANSWER: c) Both B and C

9. Certain assumptions are essential to prepare financial statements.

a) True
b) False

View Answer / Hide Answer

ANSWER: a) True

Accounting generally has the responsibility for

expressing the budget in financial terms
What is budgetary control?
the use of budgets in controlling operations
What is a standard cost?
the amount management thinks should be incurred to produce a good or service
A standard cost is
a predetermined cost
The diff. between a budget and a standard is that
a budget expresses a total amount, while standard expresses a unit amount
Standard costs may be used by
universities, governmental agencies, and charitable org
A standard differs from a budget because a standard
is a unit amount
Internal reports that review the actual impact of decisions are prepared by
manager accountants
The process of evaluating financial data that change under alternative courses of action is
called
incremental analysis
Incremental analysis is synonymous with
differential analysis
Which of the following is not a true statement
Incremental analysis is the same as CVP analysis
Non-financial info. that management might evaluate in making a decision would not include
contribution margin
Standard differ from budgets in that
budgets are a total amount and standards are a unit amount
Each of the following formulas is correct, EXCEPT
materials price per variance= (actual quantity x actual price) - (standard quantity x standard
price)
A variable cost is a cost that
varies in total in proportion to changes in the level of activity
A cost which remains constant per unit at various levels of activity is a
variable cost
An increase in the level of activity will have the following effects on unit costs for variable and
fixed costs:
unit variable cost remains constant; unit fixed cost decreases
A fixed cost is a cost in which
remains constant in total with changes in the level of activity
Fixed costs normally will not include
direct labor
A mixed cost contains
a variable element and a fixed element
Why are budgets useful in the planning process?
they help communicate goals and provide a basis for evaluation
A budget
is an aid to management
Which one of the following is not a benefit of budgeting?
it provides assurance that the company will achieve its objectives
Budgeting is usually most closely associated with which management function?
planning
An unrealistic budget is more likely to result when it
has been developed in a top down fashion
A major element in budgetary control is
the comparison of actual results with planned objectives
Budget reports should be prepared
as frequently as needed
The purpose of the departmental overhead cost report is to
control overhead costs
The purpose of the sales budget report is to
determine whether sales goals are being met
When budgeted and actual results are not the same amount, there is a budget
difference