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Management Accounting - A23

Question Features of convention of consistency are . . .
Correct Answer The accounting policies and procedures should be followed consistently , Facilitates the comparison of financial statements , It facilitates comparison of financial statements on period-to-period basis

Question Uniform costing is not a separate method of ________.
Correct Answer cost accounting

Question Suspense account is closed automatically after rectification of all the errors.
Correct Answer True

Question Manufacturing overheads represents all costs incurred in the factory including direct material cost and direct labour cost.
Correct Answer False

Question Generally all the liabilities will have ________balance.
Correct Answer Credit

Question If overhead absorbed i.e. overheads charged to units during the period is more than the overhead incurred, it is said that the overheads are ________.
Correct Answer Over-absorbed

Question Loan @ 12% p.a. of Rs.50,000/- was taken on 1st March, 2004. Find the interest expenditure on 31st March, 2004.
Correct Answer Rs.500/-

Question The sales forecast (quantity) should be compared with the ________ to find out whether it is possible for the firm to handle this level of sales.
Correct Answer Production capacity

Question Following are the examples of service cost centre
Correct Answer Stores department , Transport department , Accounting department

Question The sum of indirect material cost, indirect labour cost and indirect expenses is termed as Overheads.
Correct Answer True

Question Pre-requisites of Uniform Costing are . . .
Correct Answer Spirit of mutual trust , Free Exchange of ideas , No rivalry

Question You are using petrol as one of the raw materials. Daily you purchase 1,000 litres of petrol at Rs.28.50 per ltire. 5% of it generally gets lost due to spillage and evaporation. On a particular hot and dry day, the issue of petrol from 1,000 litres drum was as follows : To job X 200 litres; job Y 400 litres and job Z 320 litres. After these issues the drum was empty. Calculate per litre charge for use of petrol, quantum of loss and total quantum of petrol used for jobs X,Y and Z.
Correct Answer Loss due to spillage and evaporation - 30 litres. , Rate of charge per litre of petrol - Rs.30/-

Question Error of commission refer to calculation errors, totaling errors, errors in carrying forward etc.
Correct Answer True

Question Cheque received from a client on 28th September, 2004 must be entered in the bank book only after it is credited in the pass book.
Correct Answer False

Question Copy of a firm's account in the bank's ledger is known as ________.
Correct Answer Bank statement

Question The column which refers to the page number of the ledger is known as ________.
Correct Answer Ledger folio

Question The direct material useage budget and direct material purchase budget differ because of which of the following:
Correct Answer A planned change in the level of material stock

Question Loss is equal to fixed cost minus ________
Correct Answer Contribution

Question Profit = Contribution per unit X ________.
Correct Answer Margin of safety (units)

Question The different purposes served by standard costing technique are :
Correct Answer Cost control , Cost awareness , Performance appraisal

Question Error of commission refer to a situation where a transaction is not recorded in the books of account.
Correct Answer False

Question If a predetermined overhead rate is not employed an the volume of production is increased over the level planned, the cost per unit would be expected to :
Correct Answer Decrease for fixed costs and remain unchanged for variable costs

Question The variance which measures the difference between what is paid for a given quantity of materials and what should have been paid for, is known as ________ variance.
Correct Answer Direct material cost

Question Deferred revenue expenditure written off account is a real account.
Correct Answer False

Question The cost of fixed asset is Rs. 1,00,000. Rs. 17,000 is charged as depreciation. Calculate the rate of depreciation.
Correct Answer 0.17

Question The cost-volume-profit analysis basically highlights the effect of changes in sales volume on the profit of the company, in the ________.
Correct Answer short run

Question The following figures relate to a company manufacturing a varied range of products : Year 2003 Total sales Rs.22,23,000/- and total cost Rs.19,83,600/-. Year 2004 : Total sales Rs.24,51,000/- and Total cost Rs.21,43,200/-. Assuming stability in prices, calculate the profit volume ratio
Correct Answer 0.3

Question Calculate the machine hour rate. The amount of overhead pertaining to June, 2004 to be apportioned is Rs.170,010/-. The machine cannot work without an operator. During the month June, 2004 the machine operator has been paid for 5,670 hours.
Correct Answer Rs.29.98

Question While preparing sales budget the following factors must be considered :
Correct Answer The number and types of products sold by the organisation , Whether the organisation's market share is increasing or decreasing? , Details of seasonal fluctuations in sales

Question Techniques of management accounting include:
Correct Answer Marginal costing , Budgetary control , Standard costing

Question Which of the following aspects are mainly responsible for difficulty in application of Uniform costing system.
Correct Answer Capital investment , Plant size , Location

Question The expenses relating to maintenance and creation of demand for the product should be included in the ________budget
Correct Answer Selling expenses

Question Management Accounting is…
Correct Answer Designed particularly for internal use , Helpful in estimating the future along with past period , Useful in furnishing the necessary information to the management

Question Malik started business by contributing cash Rs.50,000/- and his personal car worth Rs.25,000/-; thus his capital account should be credited with Rs.75,000/-.
Correct Answer True

Question The selection of the supplier may depend upon the following aspects:
Correct Answer Geographical location of the supplier , Price quoted by the supplier , Goodwill of the supplier

Question XYZ & Co. has taken a loan of Rs.100,000/- @ 15% p.a.on 1st October, 2003. Interest is to be paid on half yearly basis. What treatment should be given in the books of accounts of XYZ & Co. as on 31st March, 2004?
Correct Answer Interest account should be debited with Rs.7,520.55 and outstanding interest account should be credited with Rs.7,520.55

Question The labour cost which can be identified with the individual cost centre is known as the Direct Labour Cost.
Correct Answer True

Question If the firm is operating with zero margin of safety, decline of even a single unit in sales will result in ________.
Correct Answer Loss

Question When bank balance as per bank book is considered for preparing bank reconciliation statement, then following items need to be added :
Correct Answer Cheques issued but not presented , Direct deposit made by customer , Wrong credits given by bank

Question The indirect material cost, indirect labour cost and indirect expenses cost, collectively are termed as ________.
Correct Answer Overhead

Question Labour efficiency variance Rs.1,000/- (favourable); labour mix variance Rs.260/- (adverse) and labour rate variance Rs.300/- (adverse). Compute labour cost variance and labour yield variance.
Correct Answer Labour cost variance -Rs.700/- (Favourable) , Labour yield variance -Rs.1,260/- , Labour yield variance is favourable

Question If the standard contribution is less than the actual contribution, then ________ variance arises.
Correct Answer Favourable

Question Correct Answer

Purchase budget Forecast of quantity and value of materials

Budget committee Analyses the performance of different budget centres

Cash budget Assists in predicting shortage of cash

Budget Objective is performance evaluation

Question As a part of the data presented in support of a proposal to icnrease the production of clock radios, the sales manager of Wittman Electronics reproted the total additional cost required for the proposed increased production level. The increase in total cost is known as :
Correct Answer Incremental cost

Question Business Entity Concept ______________.
Correct Answer Business is separated from the owner. , The accounting process carried out for the business , Separate legal entity

Question The danger level fixed below maximum level
Correct Answer False

Question Following example comes under service cost centre
Correct Answer Store department , Internal Transport department , Accounting/Costing department

Match The Following
Question Correct Answer

Straight Piece rate system The rate of payment is fixed per piece

Diemer system Halsey system & Gantt System

Time rate System Worker is paid on the basis of time attended by him

Payment by Result Workers are paid according to the production achieved by him

Differential Time rate Different hourly rates are fixed for different levels of efficiency

Question When bank balance as per pass book is considered then following to be added.
Correct Answer cheques deposited but not cleared , Interest debited by bank , bank charges debited by bank

Question (No. of unit * Rate of depreciation per unit ) this formula is used for written down value method.
Correct Answer False

Question Cash and---------------are the two systems of accounting.
Correct Answer Mercantile

Question This cost indicates increased or decreased cost due to the increased or decreased volume of operations.
Correct Answer Differential cost

Match The Following
Question Correct Answer

Fixed cost + variable cost Total cost

Total cost – fixed cost variable cost

sales- variable cost contribution

contribution – fixed cost profit

Total cost + profit Sales

Question Under the differential time rate method of wage payment between 90% to 100% of efficiency following rate is offered.
Correct Answer Rs. 1.40 per hour

Question Margin of safety are the sales beyond
Correct Answer break even point

Question Indirect Labour Cost
Correct Answer Wages paid to storekeeper, Salary of works manager, Wages paid to gatekeeper

Question The difference between sales and factory/ works cost is termed as ________ the difference between sales and ________ termed as net profit
Correct Answer gross profit
Correct Answer cost of sales

Question For a material, if standard quantity is 400 kg and standard price is Rs.3.75/- per kg. Find out the Material Usage variance if actual quantity is 500 kg and actual price is Rs.3.60/- per kg.
Correct Answer Rs.375/-( Adverse )

Question Labour Efficiency Standards are decided by considering following factors
Correct Answer Records of past performance, Time & Motion Study, Trial Runs

Question Depreciation does not involve cash out flow
Correct Answer True

Question The difference between standard cost and actual cost is termed as Variance.
Correct Answer True

Question Wage payment system should be properly tied up with quality control procedures to ensure that the workers are paid only for good and quality production.
Correct Answer True

Question In Cash budget Operating cash inflow includes
Correct Answer Cash Sales, Collection from Debtors, Interest/Dividend received

Question If the product is labour intensive, more stress may be necessary on inventory control procedure.
Correct Answer False

Question A good wage payment system will not punish the workers for the matters beyond the control of the workers.
Correct Answer True

Question The material issued to production department may be returned back to the stores because material issued in excess requirement and
Correct Answer Material issued is defective

Question Following are called the element of Cost
Correct Answer Material , Labour , Expenses

Question Amount with drawn for personal purpose drawing A/C to be debited.
Correct Answer True

Question Under the repeated distribution method the overheads of ________ department are distributed to other departments on agreed ________
Correct Answer service
Correct Answer percentage

Question Under time rate system a worker is paid on the basis of production achieved by him.
Correct Answer False

Question Calculate Labour Rate Variance, If actual rate per hour is Rs.3.50/- , Standard rate is Rs.3/- per unit and actual hours are 13, 500.
Correct Answer Rs.6750/- ( Adverse )

Question Benefits available from revenue expenditure are received in the :
Correct Answer Same year

Match The Following
Question Correct Answer

Cost Centre Facilitate the fixation of responsibility

Cost Control Process of controlling costs of operations

Differential Cost Increase or Decrease in cost

Sunk Cost Historical Cost

Question Financial Accounting is …
Correct Answer Designed to supply information to internal/ external users , Referred as 'Historical' form of accounting , Concerned with financial factors

Question The system which provides an opportunity to the small units to take advantage of the research work taken by the large scale units of the same industry is known as ________ system.
Correct Answer Uniform costing

Question The net profit before certain adjustments was Rs.95,040/-. After giving due effects to the adjustments, the revised net profit (after considering the adjustments) is Rs.78,560/-. Select the adjustments which might brought this change.
Correct Answer Accrued commission income of-Rs.32,960/- was not entered in the books , Rent for the month of March was payable and yet to be recorded Rs.19,280/- , Repairs expenditure to the extent of Rs.30,160/- was wrongly transferred to Machinery account

Question If the customer is not likely to pay the amount receivable from him, this amount should to be treated as ________.
Correct Answer Bad debts

Question Creditors as on 31st March, 2004 amount to Rs.15,225/-. Provision for discount from creditors is to made @ 5%. Find the impact of this provision on the net profit.
Correct Answer The net profit will increase by Rs.761.25

Question Under the Rowan plan bonus is a fixed percentage.
Correct Answer False

Question Margin of safety indicates ________ of operations.
Correct Answer Profitability

Question XYZ Ltd. has sufficient idle capacity. It has received an enquiry for the supply of 300 units (packed in better box at an additional cost of Rs.20/- per box). The variable cost of manufacturing the product is Rs.150/-. The company expects a profit of Rs.6,000/- from this wholesale offer. What minimum price should it quote for this deal?
Correct Answer Rs.190/-

Question Period cost is the cost assigned to the products.
Correct Answer False

Question In calculation of total sales margin variance, the ________cost of sales is deducted from the actual sales revenue.
Correct Answer Standard

Question The sales mix variance highlights the fact that the actual mix of sales has been in the same ratio as budgeted.
Correct Answer False

Match The Following
Question Correct Answer

Personal A/C Debit the receiver, Credit the giver

Real A/C Debit what comes in, Credit what goes out

Nominal A/C Debit all the expenses, Credit all the incomes

Tangible assets Building, Machinery

In tangible assets Patents, Trade marks

Question When bank balance as per pass book is considered then following to be deducted.
Correct Answer cheques issued but not presented , direct deposit by customer , wrong credits given by bank

Question Rs. 2500 paid for the purchase of radio set for personal use of proprietor debited to general expenses account for rectifying the error, which A/C to be debited
Correct Answer Drawing A/C

Question Total of purchase register for the month of March is taken 50,000 instead of 55,000. Posting to individual A/C of supplier total to correct amount is 55,000 but purchase account is debited by Rs. 50,0
Correct Answer True

Question Office & Administration overhead includes
Correct Answer Salary , Rent & Taxes , Stationary & postage

Question There is reverse relationship between the ordering cost and carrying cost
Correct Answer True

Question Following points are taking into consideration for evaluation of receipts
Correct Answer The Price , The trade discount is to be deducted , Other amounts such as sales tax, excise duty, octroi duty

Question In EOQ, to express carrying cost as a percentage of the unit cost of purchases this is used in the formula-----------
Correct Answer i

Question Where overheads chargeable to the department are Rs. 5000/- , direct labour hours worked are 24000 then labour hour rate is Re. 0.2083 labour hour.
Correct Answer True

Question The selection of the base on which overheads should be apportioned depend on the following principles.
Correct Answer service or use basis , survey basis , ability to pay basis

Question The Budget key factor may be in the form of sales, raw material, labour etc.
Correct Answer True

Question For a material, if standard quantity is 500 kg and standard price is Rs.6/- per kg. Find out the Material Cost variance if actual quantity is 400 kg and actual price is Rs.6/- per kg.
Correct Answer Rs.600/-( favorable )

Question Find out Labour Efficiency Variance, if Standard Rate is Rs.1.50/- per hour, Standard hours are 12,000 and Actual hours are 12,600.
Correct Answer Rs.900/- ( Adverse )

Question Calculate Labour Mix Variance, If revised standard hours are 16,500/-, Standard rate is Rs.3/- and Actual hours are 13, 500.
Correct Answer Rs.9,000/- ( favourable )

Question Calendar Variance arises only if there is abnormal increase or decrease in
Correct Answer Actual number of working days

Match The Follow
Question Correct Answer

Token or Disc Method Token number & identification number allotted to worker

Time Recording Clock Method Ticket number & clock card allotted to worker

Daily Time sheets Time spent by worker on job is recorded

Weekly Time sheets Record of time for all the jobs during the week is made

Hand Written method Attendance register

Question Rs.5000 paid as ________ to ________ should be debited to salary account
Correct Answer Mahesh
Correct Answer salary

Question Uncontrollable variances are
Correct Answer Strike , Change in customers demand , Devaluation of currency

Question Indirect labour cost indicates that labour cost which cannot be identified with the individual cost centre.
Correct Answer True

Question There is no need to open a suspense account if the trial balance does not agree.
Correct Answer False

Question Old furniture sold for Rs. 5400 has been entered as Rs 4500 in the cash book, for rectifying the same Suspense A/C credited to Rs
Correct Answer 900

Question In financial statements P& L Accounts relates to a specific duration whereas ________ is for a given point of time
Correct Answer P& L Accounts
Correct Answer Balance sheet

Question Goods return by Pande worth Rs. 2000 should have appeared on the credit side of Pande’s account for rectifying the same. Following account to be credited
Correct Answer Suspense A/C

Question Bin Card is not an ________ record but only a ________ record.
Correct Answer Accounting
Correct Answer Quantitative

Question Salary given in trial balance Rs. 5000/-, still 2000/- is to be paid . The outstanding salary is debited to Profit &Loss A/C. The second effect is --
Correct Answer Transfer to balance sheet liability side

Question Debit the receiver & credit the giver is a rule of Real a/c.
Correct Answer False

Question If at 50% capacity, total factory overheads are Rs.10,000/- (out of which 60% are fixed and 40 % are variable) then what will the amount of total factory overheads at 60% capacity
Correct Answer Rs.10,800/-

Match The Following
Question Correct Answer

Advance Not related in current year

Application Increase in Assets

Outstanding Amount still payable in current year

Prepaid Amount paid for next year

Drawing Amount of personal use

Question Head of the Department should sign the purchase requisition.
Correct Answer True

Question FIFO method
Correct Answer The price of the earliest available lot is considered first , If the lot is exhausted, the price of the next available lot is considered , It is used for issue of material

Question If production overheads to be absorbed are Rs. 20000/- and machine hours worked are 5000 then the machine hour rate will be,
Correct Answer Re. 4 per machine hour.

Question From the following data, workout the EOQ annual demand. 5000 units, ordering cost Rs. 60 per unit, price per unit Rs. 100, inventory carrying cost15% on average inventory
Correct Answer 300

Question Under the Emerson’s Efficiency Bonus System at following efficiency level no bonus is payable.
Correct Answer Below 66.66%

Match The Following
Question Correct Answer

Discount received Suppliers

Outstanding expenses Liabilities

Depreciation Assets

Interest on capital Borrowed capital

Discount allowed Debtors

Question canteen facility to workers, health and safety services are examples of monetary incentives.
Correct Answer False

Question This is the process of recording attendance time of the workers.
Correct Answer Time keeping

Question If actual cost is more than the standard cost then it is called favorable variance.
Correct Answer False

Question The aggregate of indirect material cost, indirect labour cost and indirect expenses is termed as factory cost.
Correct Answer False

Question Interest on drawings of partners should be credited to which account?
Correct Answer Profit and loss account

Question The actual loss incurred by a company, due to fire, is the extent of difference between the cost of goods destroyed and the amount of claim settled by the insurance company.
Correct Answer True

Question Penalty paid for delay in payment to creditors represents uncontrollable cost.
Correct Answer False

Question Subsidiary books include:
Correct Answer Cash Book , Purchase Register , Sales Register

Question Balance sheet is a part of the ledger accounts maintained by the company.
Correct Answer False

Question Average stock = ________ + (Order size / 2)
Correct Answer Safety stock

Question Based on the journal entry given, identify what transaction has taken place. Suresh Account………….Dr. Rs.500 To Cash Account Rs.500 (Being paid to Kailash on behalf of creditor Suresh)
Correct Answer Cash paid to Kailash should not be recovered from creditor Suresh

Match The Follow
Question Correct Answer

Real A/C Debit what comes in, Credit what goes out

Trade Discount Not accounted for in the books of Accounts

Cash Discount Accounted for in the books of Accounts

Rs.1 Personal A/C Debit the receiver, Credit the giver

Question These are the preventive costs of labour turnover.
Correct Answer Cost of maintaining good relations with the workers , Cost of medical services , Cost of welfare facilities

Question If the sales forecast is less than the past sales but the top management insists upon a certain amount of additional profits, then following steps can be taken to achieve the target profit
Correct Answer Increase the selling price , Reduce cost of sales , Increase the selling efforts

Question A company had incurred fixed expenses of Rs.225,000/- with sales of Rs.750,000/- and earned a profit of Rs.150,000/- during the first month. In the second month, it suffered a loss of Rs.75,000/-. You are required to calculate the margin of safety for the first month.
Correct Answer Rs.300,000/-

Question Loss on account of goods lost due to earthquake should be debited to which account?
Correct Answer Profit and loss account

Match The Following
Question Correct Answer

Operating income Cash Sales

Non-Operating income Issue of shares

Plan of investment in fixed assets Capital Expenditure Budget

Plan for surplus/shortage of cash Cash Budget

Question Under the average cost method of valuing material issues, new issue price is determined after ________ issue.
Correct Answer Each

Question Narration must be mentioned in the ledger.
Correct Answer False

Question The sum of indirect material cost, indirect labour cost and indirect expenses is termed as factory cost.
Correct Answer False

Question The term ________ indicates expenditure incurred on or attributable to a given thing.
Correct Answer Cost

Question Items credited to Profit & Loss Account are…
Correct Answer Gross profit , Commission received , Interested received

Question Yield variance equal to zero indicates that the standard yield and actual yield are the same.
Correct Answer True

Question Balance sheet is statement of
Correct Answer All Assets and Properties

Question If the profit of Y Ltd. is Rs.10,000/- and its profit volume ratio is 10%, then its margin of safety will be Rs.________.
Correct Answer 100,000/-

Question Inventory holding cost comprises of :
Correct Answer Cost of insurance , Rent of store house , Salary of store keeper

Question Identify the steps involved in the process of decision making :
Correct Answer Determination of the problem , Ascertainment of alternative courses of action , Screening each alternative so as to select the best one

Question A low inventory turnover ratio should always be preferred.
Correct Answer False

Question The variance which measures the deviation of the rate actually paid to labour as from the standard hourly rate is known as:
Correct Answer Labour rate variance

Question Following errors affect the trial balance
Correct Answer Wrong totaling of subsidiary books , Posting on the wrong side of an account , Omission of posting an account in the ledger

Question ________ Accounting is the process of analysis and interpretation of financial data collected with help of financial accounting & cost accounting
Correct Answer Management

Question Purchase day book for the month of April was under cast by Rs.1000/- which account should be credited ? ________
Correct Answer Suspense Account

Question Linking overhead to a cost unit is known as overhead absorption.
Correct Answer True

Question A factory received a carton containing two materials X and Y. The invoice relating to the materials discloses the following details : Material X - 400 kg @ Rs.10/- per kg. =Rs.4,000/-; Material Y - 600 kg @ Rs.15/- per kg.= Rs.9,000/-; Sales @ 5% =Rs.650/-; Insurance @ 1% =Rs.130/-; Freight and handling charges = Rs.220/-.
Correct Answer Material X -Rs.11.10; Material Y -Rs.16.68

Question An employee working under a bonus scheme saves 10 hours in a job for which the standard time is 60 hours. Calculate the wages payable to him, if incentive bonus of 10% on the hourly rate is payable when standard time (namely 100% efficiency) is achieved, and a further incentive bonus of 1% on hourly rate for each 1% in excess of that 100% efficiency is payable. Assume that the normal rate of payment is Rs.50/- per hour.
Correct Answer Rs.3,250/-

Question At 60% capacity utilisation the overhead recovery rate is Rs.35/- per unit. At 70% capacity the rate gets reduced to Rs.32/- per unit. What should be the recovery rate if the production attains 90% capacity utilisation?
Correct Answer Rs.28/- per unit

Question The production budget may be prepared in terms of :
Correct Answer Units produced , Production cost , Material cost, labour cost and overheads

Question Tom company has sales of Rs.200,000/- with variable expenses of Rs.150,000/-, fixed expenses of Rs.60,000/-, and an operating loss of Rs.10,000/-. By how much would Tom have to increase its sales in order to achieve an operating income of 10% of sales?
Correct Answer Rs.200,000/-

Question Angle formed by the intersection of total cost line and sales line is called angle of ________.
Correct Answer Incidence

Question All costs are controllable.
Correct Answer False

Question In the adjustment entry passed for closing stock, the ________ account should be credited.
Correct Answer Trading

Question Select the items which may be classified as selling and distribution overheads.
Correct Answer Delivery van expenses , Rent of finished goods warehouse , Sales research expenses

Question Warehousing cost is an item of ________
Correct Answer Distribution overheads

Question From the following, select current assets:
Correct Answer Sundry debtors , Stock , Pre paid expenses

Question The objectives of cost accounting are :
Correct Answer Cost control , Ascertain ment of cost of each product , Assist in managerial decision-making

Question Which cost is defined as an estimated cost, prepared in advance of production or supply, estimated within a prescribed set of working conditions?
Correct Answer Standard cost

Question Carriage charges paid for a new machine purchased if debited to carriage account would affect the ________
Correct Answer Machinery A/c and carriage A/c

Question Purchased goods worth Rs.6,450/- on 10th March, 2004. However the goods were delivered directly to the plant situated at Nagar and hence this transaction was not recorded in the purchase book, which is maintained at the corporate office. Analyse the impact of this transaction.
Correct Answer The gross profit will increase by Rs.6,450/-

Question Fundamentally, changes in price and changes in sales volume give rise to sales variances.
Correct Answer True

Question The ________ is responsible for material losses while in storage.
Correct Answer Store-keeper

Question A cash payment of Rs.1,000/- for traveling expenses has been entered in the books but not debited to traveling A/c. The trial balance will NOT agree.
Correct Answer True

Question Accounts representing expenses will have ________balance.
Correct Answer Debit

Question It is discovered that sales effected on 31st March, 2004 worth Rs.42,000/- has not been recorded in the books of accounts. Analyse the impact on the final statement of accounts.
Correct Answer The sundry debtors will increase by Rs.42,000/-

Question Purchases returns of Rs.18,000/- were wrongly transferred to the sales returns account. Calculate its impact on net profit.
Correct Answer The net profit will not be affected

Question New companies can adopt Uniform costing system as a ready-made system.
Correct Answer True

Question A journal entry is passed for trade discount, but no entry is passed for cash discount.
Correct Answer False

Question The assets which are suppoed to be used by the organisation to do business, are known as ________assets.
Correct Answer Fixed

Question The total production cost for making 20,000 units was Rs.21,000/- and the total production cost for making 50,000 units was Rs.34,000/-. Once production exceeds 25,000 units, additional fixed costs of Rs.4,000/- are incurred. The full production cost per unit of making 30,000 units is:
Correct Answer Re.0.98

Question The disadvantages of time rate system are :
Correct Answer Ignores the efficiency of workers , Higher labour cost , Lack of motivation to increase productivity

Question Which of the following is the most efficient use of the clock card?
Correct Answer To facilitate payment for time spend on the work premises

Question One of the main objection to the contribution approach of costing is that it ignores fixed cost.
Correct Answer True

Question If the bank pays off the credit card bill, as per the standing instructions, the overdraft as per bank book will be ________ the overdraft as per pass book.
Correct Answer Lesser than

Question The cash flow format is used for preparing the cash budget by the ________ method.
Correct Answer Adjusted Profits/Losses

Question The ideal budget period for a company engaged in generation and distribution of electricity is one year.
Correct Answer False

Question In India, where public undertakings operate along with the private sector undertakings, ________ enables a comparative assessment to be made of the two sectors.
Correct Answer uniform costing

Question Unearned commission of Rs.5,000/- needs to be recorded in the books of accounts. Find its correct impact.
Correct Answer The asset side of the balance sheet will increase by Rs.5,000/-

Question It is very easy to measure the portion of increased sales which is due to expenditure incurred for advertisement of the product
Correct Answer False

Question A cheque of Rs.400/- received and deposited into bank on 26th September, was credited in the pass book but was omitted to be entered in the bank book: this error will result in :
Correct Answer Difference in the balance as per bank book and as per pass book

Question Direct labour hour rate method of absorption of overheads is suitable where most of the production is done by using machines.
Correct Answer False

Question A business's telephone bill should nromally be classified into which one of the following categories?
Correct Answer Semi-variable cost

Question The objects of cost accountancy are . .
Correct Answer To ascertain cost and profitability , Cost Control , Presentation of Information

Question Depreciation can be defined as a permanent, continuous and gradual reduction in the book value of a fixed asset.
Correct Answer True

Match The Following
Question Correct Answer

Error of Principle Trial Balance does not get affected

Error of Omission Transaction is totally omitted

Error of commission Wrong Posting

Compensating Error Wrong classification

Difference in trial balance Transferred to suspense account

Question The difference between sales and cost of sales is termed as ________.
Correct Answer Net Profit

Question ________ Accounting assists the management in establishing the plans to attain the economic objectives and take proper decisions for the attainment of its objectives.
Correct Answer Management

Question The capacity utilised to installed capacity ratio is 80% for the company. The capacity utilisation ratio in respect of a machine for a particular month is 90%. The available working hours in a month are 200 hours. The break of idle time is as follows : Waiting for job - 5hours, breakdown - 4 hours and waiting for tools - 3 hours. Calculate the idle time cost when the hourly fixed cost of running the machine is Rs.8/-.
Correct Answer Rs.96/-

Question Semi variable expenses fluctuate in direct proportion to volume.
Correct Answer False

Question GAIL having monopoly in the CNG (Compressed Natural Gas) market can implement the Uniform costing system.
Correct Answer False

Question From the following, select intangible assets:
Correct Answer Goodwill , Patents , Trade Marks

Question Select the accounts to be disclosed on the assets side of the Balance sheet.
Correct Answer Furniture , Loan to Bank of U.S.A. , Land & building

Question Judge the given statement according to the given criteria. Goods being real account, when goods are lost by fire, the goods account should be debited because the goods are not going out of the factory.
Correct Answer The statement is correct but the reason is incorrect

Question The credit side of the sales book was overcast by Rs.2,000/-. As a result of this rectification, what of the given impacts is likely to happen?
Correct Answer The liability side of the balance sheet will increase by Rs.2,000/-

Question It is said that the income statement represents wealth increase /decrease for the organisation.
Correct Answer True

Question All personal expenses of the owner should be debited to the organisation's profit and loss account.
Correct Answer False

Question A cheque of Rs.400/- received and deposited into bank on 26th September, was credited in the pass book but was omitted to be entered in the bank book: this error will result in :
Correct Answer Difference in the balance as per bank book and as per pass book

Question If the ordering cost ________s, then the economic order quantity will Increase.
Correct Answer Increase

Question ________ authorises the production department to issue requistion for materials.
Correct Answer Bill of material

Question P Ltd. produces a product having a monthly demand of 4,000 units. For every one unit of finished product one unit of a component X is required at purchase price of Rs.20/-. The ordering cost is Rs.120/- per order and the holding cost is 10% per annum. If the company places each order for 2,000 units due to financial constraints, what is the extra annual cost?
Correct Answer Rs.80/-

Question An entry in the stores ledger is required for transfer of material from one job to another in the same department.
Correct Answer False

Question The method which deals with ownership rights being given to workers is known as ________ method of remuneration.
Correct Answer Co-partnership

Question A firm of boiler-house engineers provides engineering services to large number of factories having boiler houses. The firm charges on the basis of number of hours its engineers have worked for the client. Each engineer works for eight hours on each working day. Each engineer enjoys Saturday and Sunday as holiday. In addition he is granted a total of 21 more paid holidays in a year. An engineer's annual remuneration comprises (for the year
Correct Answer Rs.182.29

Question Marginal costing is useful in the following areas :
Correct Answer Plant shut down decisions , Make or buy decisions , Profit planning

Question Cost volume profit analysis focuses attention on the ________ effect of a particular course of action.
Correct Answer short run

Question ABC Ltd. has a proposal of utilising a cheaper raw material which will increase the contribution from Rs.100/- per unit to Rs.125/- per unit. However, the use of cheaper raw material may result in decrease in sales by 10% (to 450 units only). Find the impact of using the cheaper raw material on the amount of contribution ( net increase or decrease in contribution).
Correct Answer Increase in contribution Rs.6,250/-

Question Which of the following budgets may be termed as a long term budget?
Correct Answer Capital expenditure budget , Research and Development expenditure budget , Budget of a transportation company

Question A ________ can be defined as a part of the orgainsation for which separate budget can be prepared and implemented.
Correct Answer Budget centre

Question The finance manager is responsible for which of the following budget?
Correct Answer Cash budget

Question The role of the budget committee may be taken as an advisory role to the Chief Executive.
Correct Answer True

Question While preparing the labour cost budget, factors such as overtime working or night shift working may be ignored.
Correct Answer False

Question The actual hours taken by the labour are compared with the standard hours allowed for output to find out the labour yield variance.
Correct Answer True

Question From the following data, determine the net profit if sales are 20% above the break even point. Selling price Rs.20/- per unit, variable cost Rs.15/- per unit and fixed overheads Rs.20,000/-
Correct Answer Rs.4,000/-

Match The Following
Question Correct Answer

Decrease in selling price will lead to Decrease in contribution

Increase in contribution will lead to Increase in profits

Increase in fixed cost will lead to Increase in break even point

Decrease in variable cost will lead to Increase in profit volume ratio

Question As on 30th September, 2004 the cost of closing stock was Rs.84,696/- and its market price as on the same day was Rs.66,584/-. Which value of closing stock should be considered in the final statement of accounts for the year ended on 30th September, 2004?
Correct Answer Rs.66,584/-

Question Marginal costing technique is useful in taking decisions relating to which of the following courses of action?
Correct Answer Decision to drop a product line , Decision to accept a special offer at price lower than the normal selling price , Decision regarding temporary shut-downs

Question In a Balance-Sheet right hand side is referred as assets side and left hand side is referred as liabilities.
Correct Answer True

Question Profit and loss account indicates the profit earned as on a particular date.
Correct Answer False

Question The balance of the suspense account will ________ after all the errors are
Correct Answer become zero

Question The best way to reduce labour cost is to recruit cheap labour.
Correct Answer False

Question A' started business with cash Rs. 5,000/-, building Rs. 5,000/-, furniture Rs. 2,000/-. What is the total amount of capital?
Correct Answer Rs. 12,000

Question Income Tax Act, recognise only one method of depreciation namely ________.
Correct Answer Written down value method

Question An adjustment relating to outstanding expenses will ________ the net profit.
Correct Answer Decrease

Question Generally, all real accounts will have a ________ balance
Correct Answer Debit

Question The present unit cost data for a product is as follows: selling price Rs.15/-, variable costs Rs.8/-. If selling prices are reduced by 10% and variable costs are increased by 12.5%. Which of the following is the amended contribution to sales ratio?
Correct Answer 0.333

Question The selective ________ controls are intended to control the ________ to particular sectors without affecting the total credit, and also to change the composition of credit from undesirable to de
Correct Answer credit
Correct Answer credit flows

Question Journal is popularly known as 'Book of . . .
Correct Answer Original Entry

Question Presentation of information to enable managerial decision making' is one of the objects of which of the following
Correct Answer Cost Accounting

Question The principle of ________ is followed while preparing the financial statements.
Correct Answer Going concern

Match The Following
Question Correct Answer

Indirect Material Element wise classification

Administration overheads Function wise classification

Fixed overheads Variability wise classification

Abnormal overheads Normality wise classification

Question In India the gas industry and electricity industry, and ________ industry are examples of industries using the uniform costing system.
Correct Answer fertilizer

Multiple Choice Multiple Answer
Question Ram and Laxman are partners of Kush & Bros. As on 1st April, 2003 Ram's capital is Rs.50,000/- and Laxman's capital is Rs.80,000/-. If interest on capital is to be provided @ 10% p.a., what will be the amount of capital of each of the partners as on 31st March, 2004, assuming there were no additions during this period? Also, state the treatment of this item in the Profit and loss account.
Correct Answer Ram's capital Rs.55,000/- , Laxman's capital Rs.88,000/- , Interest on capital should be debited to the Profit and loss account

Question Non-trading income is disclosed on the credit side of ________ account.
Correct Answer Profit and loss

Question Goods returned to the suppliers from whom it was ________d is recorded in the Purchase return register.
Correct Answer Purchase

Question An advertisement contract was made with an artist which stated that the remuneration will be 12% of net sales. On an average the monthly sales were Rs.36,000/-, however the average rate of sales return was 5% of that month's sale. Find the expenditure on account of advertisement.
Correct Answer Rs.49,248/-

Question Goods kept in the godown were destroyed by fire on 18th June, 2004. The cost of such goods was Rs.18,950/-. The goods were not insured. Find the amont which should be debited to the profitability statement.
Correct Answer Rs.18,950/-

Question Generally speaking income represents wealth increase and business success; higher the income, lower will be the success of a business.
Correct Answer False

Question While preparing the bank reconciliation statement as on 31st March, 2004 you find the following discrepancy : 'a cheque of Rs.3,700/- received and deposited in bank on 27th March, 2004 was entered credited in the pass book on 3rd April, 2004.' In this background, which of the following statement holds true as on 31st March, 2004?
Correct Answer Balance as per pass book < Balance as per bank book

Question Bank reconciliation statement is a systematic presentation of errors made by the accountant.
Correct Answer False

Question The stores department is a ________ department.
Correct Answer Service

Question The ________ is a perpetual inventory record.
Correct Answer Bin card

Question Selecting an appropriate method of valuation of inventory is important because :
Correct Answer It influences the figure of gross profit

Question Re-order level for materials is determined considering maximum consumption and maximum delivery period.
Correct Answer True

Question Under some circumstances, it may be advisable to sell at prices equal to or below the marginal cost ignoring fixed cost.
Correct Answer True

Question Economical use of labour, materials and facilities can achieved with the help of ________.
Correct Answer Budgetary control

Question Select the advantages of standard cost system.
Correct Answer Provides reliable basis for budgeting , Facilitates delegation of authority , Promotes economy and efficiency

Question Which variance is used to analyse the effect of change in the quantity of output from a given mix of inputs?
Correct Answer Materials yield variance

Question Judge the statement according to the criteria given : ' The accounting period for XYZ Ltd. ends on 31st December, 2003. It is noted that office rent for the month of December, 2003 is paid on 15th January, 2004. "According to concept of matching expenses with the revenues, this expenditure should be recorded in the books of accounts in January,
Correct Answer The statement and its reason are both incorrect

Question From the following select the examples of errors of commission -
Correct Answer Sales recorded in the sales register as Rs.2,020/- instead of Rs.2,200/- , Received cash from Sham, credited to Ram's account , Paid transport charges, credited to transport charges account

Question Expenditure on income-tax is an example of ________.
Correct Answer non-operating expenditure

Question Identify the items which are correctly classified.
Correct Answer Carriage inward - Factory overheads , Carriage outward - Selling and distribution overheads , Sales research expenses -Selling and distribution overheads

Question Select the items which may be classified as administration overheads.
Correct Answer Depreciation on office furniture , Director's remuneration , Telephone expenses

Question Overhead absorption is an exercise by which overhead is properly spread over production for the period.
Correct Answer True

Question Which system involves adoption of same costing principles, practices and procedures by the individual firms of an industry ?
Correct Answer Uniform costing

Question A new computer worth Rs.35,000 was purchased on 18th June, 2003. The company has 10 such computers costing Rs.20,000/- each. The depreciation is charged @ 18% p.a. Find the depreciation on computers to be charged for the year.
Correct Answer Rs.40,953.70

Question The amount of income for the current period which is not received during the current period, is called Accrued Income.
Correct Answer True

Question The balance as per bank book as on 30th June, 2004 is Rs.10,298/- while the balance as per pass book as on the same date is Rs.10,123.60. Select the transactions representing the reasons for this difference.
Correct Answer Interest credited by bank, not entered in the bank book, Rs.125.60 , Cheques dishonoured not entered in the bank book Rs.200/- , Debit side of the cash book is overcast by Rs.100/-

Question The principal functions of the cost accounting department are :
Correct Answer Classifying labour cost according to jobs, processes, etc. , Preparation of different reports based on direct, indirect labour cost, etc. , To focus on areas where labour cost may be reduced.

Question Profit volume ratio is also known as ________.
Correct Answer Contribution to sales ratio

Question Margin of safety = Contribution / Profit volume ratio
Correct Answer False

Question Depreciation, interest and property tax continue even when the operations are discontinued.
Correct Answer True

Question The reasons and objectives of budgets may be stated as :
Correct Answer To aid the planning of annual operations , To communicate the organisational plans to the different departments , To motivate the managers to strive for attainment of the organisational goals

Question The key factor determines the :
Correct Answer Level of activity , Capacity utilization , Level of sales

Question Essentials for effective implementation of budgetary control system are
Correct Answer Commitment of top management , Clearly defined objectives , Continous budget education

Question Which of the following is a correct definition of the key factor?
Correct Answer The factor which limits the activites of the undertaking

Question The integrated form of all functional budgets is known as :
Correct Answer Master budget

Question For the month of November, a firm has budgeted sales of 20,000 units of X at a price of Rs.10/- and sale of 30,000 untis of Y at a price of Rs.6/- per unit. Actual sale during the month was 35,000 units of X at Rs.9/- per unit and 25,000 units of Y at Rs.8/- per unit. Calculate sales volume variance, sales mix variance and sales quantity variance.
Correct Answer Sales volume variance -Rs.120,000/- (Favourable) , Sales mix variance -Rs.44,000/- (Favourable) , Sales Quantity variance-Rs.76,000/- (Favourable)

Question ________ variance represents the over or under utilisation of pland and machinery.
Correct Answer Capacity

Question The following data relates to the month of October : Actual variable overheads Rs.60,000/-; budgeted variable overheads Rs.80,000/-; actual output 900 units; budgeted output 1,000 units; standard time for one unit - 2 hours. Calculate variable overhead efficiency variance.
Correct Answer Rs.4,000/- (Favourable)

Question Which of the following operations would normally be carried out first when preparing a master budget?
Correct Answer Determining the budget period

Question Interest on capital is an allowable expenditure for parntership firms, as per the provisions of the ________ .
Correct Answer Income Tax Act, 1961

Question Mixers Ltd. is engaged in producing a standard mix using 60kg of chemical X and 40 kg of chemical Y. The standard loss of production is 30%. The standard price of X is Rs.5/- per kg.and of Y Rs.10/- per kg. The actual mix and yield were as follows : X - 80 kg @ Rs.4.50 per kg; Y - 70 kg @ Rs.8/- per kg. Actual yield - 115 kg.Compute material yield variance.
Correct Answer Rs.100/- (Favourable)

Question Select the examples of functional budgets:
Correct Answer Sales budget , Production budget , Research and development budget

Question Sita and Gita are partners of SGL & Co. As on 1st August, 2003 Sita's capital stood as Rs.10,000/- and Gita's capital as Rs.18,000/-. If interest on capital is to be provided @ 10% p.a., what should be the treatment of this interest in the profitability statement, assuming there were no additions to capital during this period?
Correct Answer Profit and loss account should be debited with Rs.1,866.67

Question KDL Ltd. charges depreciation @ 20% on written down value method. The net book value of its machinery on 1st January, 2003 was Rs.125,000/-. What will be the net book value of its machinery on year end, i.e.31st December, 2003, assuming there were no additions or disposals during the year?
Correct Answer Rs.100,000/-

Question Standard costing is always accompanied by a system of budgeting but budgetary control may be operated in business where standard costing is impracticable.
Correct Answer True

Question An amount of Rs.200/- is received from P and is credited to Q. The rectification entry would affect ________
Correct Answer P's A/c and Q's A/c

Question Budgetary control system provides a basis for establishment of the incentive systems.
Correct Answer True

Question A fixed budget is useful only when the actual level of activity corresponds to the budgeted level of activity.
Correct Answer True

Question A low margin of safety indicates ________ fixed overheads.
Correct Answer higher

Question Category A items, as per ABC analysis, represent ________ % of the total number of items in inventory.
Correct Answer less than 10

Question The gross profit transferred from the trading account is Rs.98,999/-. The expenses debited to the profit and loss account are salary Rs.12,000/-; advertisement expenses Rs.18,000/-; printing and stationery Rs.5,500/- and managing director's incentive Rs.28,000/-. It was noted that no entry was made for salary of one month which was due but not yet paid. Find the net profit of the company.
Correct Answer Rs.34,408.09

Question Price based on Uniform Costing may be taken to be reliable and representative of the whole industry.
Correct Answer True

Question The budget manual must contain statement regarding:
Correct Answer Objectives of the orgainsation

Question Annual subscription paid by bank to the Chamber of Commerce on 31/03/04, as per the standing instructions, and advise sent thereafter, may lead to:
Correct Answer Balance as per bank book > Balance as per pass book

Question Entry for dishonour of cheque appears only in the pass book, this entry should be ________ in the bank book.
Correct Answer Passed

Question Since the pass book and the bank book record the ________ transactions, the bank balance as per these books should be equal.
Correct Answer Same

Question A pre-determined factory overhead rate holds up product costing.
Correct Answer False

Question Rent of Rs.7,500/- for the month of April was received in March. Which account should be credited in the books of accounts for making an entry for receipt of the said amount?
Correct Answer Rent received in advance account

Question Bank reconciliation statement can be prepared on weekly basis.
Correct Answer True

Question Amit sold Goods to Atul for Rs. 50,000/- on cash & Rs. 50,000/- on credit basis. Amit allowed 10% discount for on the spot transaction. What is the amount that should be debited to the cash account?
Correct Answer Rs.45,000/-
Question Financial Accounting ______________
Correct Answer Designed to supply information for internal/ external uses. , Deals with the transaction during specific period. , It is compulsory

Question Cost Accounting ______________.
Correct Answer Concerned with specific activities. , Classified according to their nature. , It deals with both i.e. past & present.

Question Features of double entry accounting system are . . .
Correct Answer Every business transaction has two elements , When business receives something, it has to pay something , Every debit has a corresponding credit

Question Features of a cost sheet are as follows
Correct Answer Indicates the total cost of production during a given period , Indicates the unit cost of production during a given period , Helps the management in fixing the selling price to be quoted for the

Question Depreciation charged on office furniture on straight line basis is an example of ________.
Correct Answer Administration overheads

Question If Rs.15,000/- has been paid to Kargil Relief Fund as the owner's personal contribution, ________ account should be debited in the books of accounts of the business.
Correct Answer Drawings

Question Included in the trial balance is the sales promotion suspense account with a debit balance of Rs.6,300/-. It is given that this balance should be written off. Calculate its impact on profit of the company.
Correct Answer The net profit will decrease by Rs.6,300/-

Question A lathe machine was purhcased on 31st March, 2004 for Rs.65,000/-, however it was installed only on 5th April, 2004. The depreciation is charged @ 15% p.a.. Find the amount of depreciation charge for the said lathe machine for the year ended 31st March, 2004.
Correct Answer Nil

Question While passing the journal entry, it is of utmost importance to ensure that the total of amount debited is equal to the total of the amount credited.
Correct Answer True

Question The bin card and stores ledger, being independent records, comparison of these two records should be avoided.
Correct Answer False

Question The cost of idle time incurred by employees that is considered normal for the production process should be charged to :
Correct Answer Factory overheads

Question The cost of abnormal time may be recovered by inflating the hourly labour rate.
Correct Answer True

Question ABC Ltd. is planning to sell 200,000 units of product B. The fixed costs are Rs.400,000/- and the variable costs are 60% of the selling price. In order to realize a profit of Rs.100,000/-, the selling price per unit would have to be :
Correct Answer Rs.6.25

Question In which of the following situations, the flexible budget should be preferred?
Correct Answer Sales are too difficult to predict , Supply level of input cannot be predicted , Varying levels of production activity

Question The budget that represents the funds investment for expansion, diversification, etc. is known as ________.
Correct Answer Capital expenditure budget

Question Amortization of goodwill should be considered while preparing cash budget.
Correct Answer False

Question As cost centers facilitate the control function, in many cases, they are termed as . . .
Correct Answer Responsibility centers

Question Lata and Tara are partners of Latara & Co. As on 31st March, 2004 Lata's annual drawings were as Rs.25,000/- and Tara's annual drawings amounted to Rs.18,000/-. If interest on drawings is charged @ 15% p.a., what is the amount of income for Latara & Co.?
Correct Answer Rs.6,450/-

Question Labour turnover rate is best defined as :
Correct Answer The number of leavers replaced divided by the average of employees on the payroll

Question Which system provides an opportunity to companies to adopt the one best method of cost accounting system known to the industry ?
Correct Answer Uniform costing

Question An order for goods worth Rs.18,000/- was placed on 25th March, 2004. The goods were received on 1st April, 2004. Calculate the impact of this transaction on the final statements of accounts for the year ended 31st March, 2004.
Correct Answer The net profit will not be affected

Question Interim dividend paid by the company should be debited to the profit and loss appropriation account.
Correct Answer True

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