Commerce - MCQ Important Questions and Answers Part - 2

1. What is Director Identification Number (DIN) ?
(A) An identification number which the individual company allots to the intending director 
(B) A number which the Central Government allots to any individual intending to be appointed as director or to any existing director of a company
(C) A number which the SEBI allots to any individual intending to be appointed as director or to any existing director of a company 
(D) A number which the Central Government allots to retired directors so as to build data base 
Answer : B

2. When does a body corporate become capable forthwith of exercising all the functions of a company ?
(A) On finalizing Memorandum of Association
(B) On obtaining certificate of commencement of business
(C) On obtaining certificate of incorporation
(D) On having convened its first Annual General Meeting 
Answer : C

3. For how many years the books of accounts of a company have to be preserved in good order ?
(A) For a period of not less than eight years immediately preceding the current year
(B) For a period of not less than five years immediately preceding the current year
(C) For a period of not less than six years immediately preceding the current years
(D) For a period of not less than four years immediately preceding the current year 
Answer : A

4. Which one of the following is not one of the elements of the 7S McKinsey Model for analyzing and improving organizational effectiveness ?
(A) Strategy 
(B) Structure 
(C) Shared Values 
(D) Standard 
Answer : D

5. A limited company makes a net profit of Rs. 2,00,000 after writing off preliminary expenses amounting to Rs. 20,000 and providing for depreciation on assets amounting to Rs. 40,000 and gain of Rs. 10,000 on sale of a piece of machinery. What are the funds from operation ?
(A) Rs. 2,00,000 
(B) Rs. 2,40,000 
(C) Rs. 2,50,000 
(D) Rs. 2,60,000 
Answer : C

6. Which of the following represents corporate sustainable reporting ?
(A) Publishing annual financial statement only
(B) Publishing annual financial statements and social accounts
(C) Publishing social and environmental accounts annually
(D) Publishing annual financial statements incorporating economic, social and environmental performances 
Answer : D

7. Sometimes an auditor is called upon to review the operations of an enterprise for evaluating their cost-effectiveness. What is this kind of audit generally known as ?
(A) Cost Audit 
(B) Operations Audit 
(C) Tax Audit 
(D) Independent Financial Audit 
Answer : A

8. Which one of the following is not included in the internal check as regards purchases ?
(A) Assessment of requirements 
(B) Placing orders
(C) Despatch of goods 
(D) Recording and making payments 
Answer : C

9. What is the method in which an amount equal to the amount written off as depreciation is invested in outside securities in order to facilitate replacement of an asset at the expiry of its life period, called ?
(A) Annuity Method 
(B) Sinking Fund Method
(C) Replacement Method 
(D) Depletion Method 
Answer : B

10. What is Capital Redemption Reserve Account available for ?
(A) Redemption of redeemable preference shares
(B) Redemption of redeemable debentures
(C) Reorganization of share capital
(D) Issue of fully paid bonus shares 
Answer: D

11. Government grants related to income as per the Accounting Standard (AS)-12 should be—
(A) Presented as a credit in the statement of Profit and Loss
(B) Presented as a deferred income on the asset side of the balance sheet
(C) Presented as a capital grant on the liability side of balance sheet
(D) Presented both in the Profit and Loss statement and in the balance sheet 
Answer: D

12. What is the renewal fees paid for a patent right ?
(A) Capital expenditure 
(B) Revenue expenditure
(C) Deferred revenue expenditure
 (D) Development expenditure 
Answer : B

13. According to the Accounting Standard (AS)-2, the inventory is to be valued at which one of the following ?
(A) Actual cost or sales value, whichever is lower 
(B) Historical cost
(C) Net realizable value 
(D) Historical cost or net realizable value, whichever is lower
Answer : D

14. Which of the following is affected by treatment of an accrued item in accounting ?
(A) Profit and Loss A/c only 
(B) Profit and Loss Appropriation A/c
(C) Balance Sheet only 
(D) Profit and Loss A/c and Balance Sheet 
Answer: D

15. Which one of the following statements about preparation of financial statements of a limited liability company is correct ?
(A) Financial statements should
be prepared according to the cash basis of accounting only
(B) Financial statements should be prepared according to the accrual basis of accounting only
(C) Financial statements should be prepared according to either the cash basis or accrual basis of accounting
(D) Financial statements should be prepared according to both the accrual and cash basis of accounting 
Answer : B

16. Expenses need to be recorded in the period in which the associated revenues are recognised. This is to be ensured as per which one of the following accounting principles ?
(A) Revenue recognition 
(B) Cost benefit
(C) Matching 
(D) Periodicity 
Answer : A

17. How is profit prior to incorporation treated as ?
(A) Revenue reserve 
(B) Secret reserve
(C) Capital reserve 
(D) General reserve 
Answer : C

18. Which one of the following has replaced the Budla system in India ?
(A) Rolling settlement 
(B) Trading in equity derivatives
(C) Depository system 
(D) Online trading 
Answer : A

19. What is the theory of social responsibility that focuses on how companies respond to issues, rather than trying to determine their ultimate social responsibility, called ?
(A) Corporate social performance 
(B) Corporate social responsiveness
(C) Stewardship principle 
(D) Enlightened self-interest
Answer: A

20. What is a systematic evaluation of a company's activities in a given area of social interest such as environmental protection, workplace safety or community
involvement, called ?
(A) Social responsibility 
(B) Social accounting
(C) Social audit 
(D) Social forecasting 
Answer : C

21. What is cross rate ?
(A) A rate of exchange derived from central bank
(B) A rate of exchange between two currencies, other than those that form a market's principal rates
(C) A rate of exchange derived from the quotations for buying currencies
(D) A rate of exchange quoted by a dealer in foreign exchange for selling currencies
Answer : B

22. In foreign trade, what is the price quoted by a supplier which includes all charges incurred up to door delivery of goods to the buyer, called ?
(A) Loco price 
(B) C.I.F. price  
(C) Franco price 
(D) Landed price 
Answer : C

23. Under which principle, all the rights of an insured are transferred to insurance company after making payment of claim ?
(A) Subrogation 
(B) Utmost good faith 
(C) Contribution 
(D) Average clause 
Answer : A

24. In a marine insurance, when must the insurable interest exist ? 
(A) At the time of making contract
(B) At the time of loss of subject matter
(C) Both at the time of making contract and at the time of loss of subject matter
(D) At the time of termination of the policy 
Answer : B

25. Under which one of the following is the term ‘Dominant Undertaking’ defined ?
(A) MRTP Act 
(B) FEMA 
(C) Companies Act 
(D) SEBI
Answer : C

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