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Executive Post Graduate Diploma in Management

Subject: Management Accounting & Analysis


Sample Question paper (Reference only)

Level 1: Objective Type (2 marks each)


1. A company's total liabilities and shareholders equity amount to Rs.9,50,000/-, long-term assets to
Rs.6,00,000/-, accounts receivable to Rs.50,000/- and inventory to Rs.1,00,000/-. The only other
current asset shown on the balance sheet is cash. The value of the cash would be:-

 (a) Rs.1,00,000/-
 (b) Rs.2,50,000/-
 (c) Rs.1,50,000/-
 (d) Rs.2,00,000/-
 (e) None of the above

2. XYZ Pizza Limited has current assets worth Rs.6,00,000/-, current liabilities worth Rs.1,00,000/-,
zero long-term liabilities and shareholders equity totaling Rs.6,00,000/-. The total assets of the
company would be:-

 (a) Rs.5,00,000/-
 (b) Rs.8,00,000/-
 (c) Rs.7,00,000/-
 (d) Rs.7,50,000/-
 (e) None of the above

3. When the total amount of a given expense does not change as the amount of activity changes, the
expense is classified as a:-

 (a) Variable Expenses


 (b) Direct Expense
 (c) Fixed Expenses
 (d) Semi-Variable Expenses
 (e) None of the above

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4. If a person buys the assets of a company, the price that he would pay for the assets is their net book
values as shown in the balance sheet.

 (a) True
 (b) False

5. Which of the following are likely to have the reported amounts on the balance being close to their
current value?

 (a) Current assets


 (b) Long term assets
 (c) Shareholders equity
 (d) All of the above
 (e) None of the above

6. The purpose of depreciation is to have the balance sheet report the current value of an asset.

 (a) True
 (b) False

7. Preference shares have preference over equity shares with regards to:-

 (a) a) Payment of dividend


 (b) b) Repayment of capital
 (c) c) Payment of interest
 (d) d) Both (a) and (b)
 (e) e) Both (a), (b) and (c)

8. There are several dates that are relevant when a company pays a dividend. Which date is irrelevant
when a company pays a dividend?

 (a) Declaration date


 (b) Date of record
 (c) Payment date
 (d) Date of the financial statement
 (e) None of the above

9. Which of the following statements is TRUE?

 (a) Companies can only issue preference shares


 (b) Companies can only issue ordinary shares
 (c) The holders of shares in a company are liable for all debts of the company
 (d) The holders of the shares in a company have a limited liability
 (e) None of the above

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10. The share premium account is a capital reserve and the profit and loss account is a revenue
reserve.

 (a) True
 (b) False

11. A Balance sheet is best described as:-

 (a) A summary of what happened last year


 (b) A summary of the position of an organisation
 (c) A listing of money received and paid during the past year
 (d) A summary of all assets, expenses, liabilities and revenues
 (e) None of the above

12. Assets are:-

 (a) An expense that will recur in more than one year


 (b) Something that will last for more than one year
 (c) Something giving control of future benefits
 (d) The obligation to transfer benefits as a result of past transaction
 (e) None of the above

13. Double entry accounting reflects:-

 (a) The matching concept


 (b) The prudence concept
 (c) The accruals concept
 (d) All of the above
 (e) None of the above

14. If a sole trader purchases Furniture for Rs.50,000/- for business use, paying by cheque, when
completing his double entry accounts he will:-

 (a) Debit furniture account and credit cash account


 (b) Credit furniture account and debit bank account
 (c) Debit furniture account and credit bank account
 (d) Debit furniture account and credit capital account
 (e) None of the above

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15. Assets of Rs.90,000/-, current assets of Rs.22,000/-, current liabilities of Rs.15,000/- and a long-term
loan of Rs.18,000/-, owners equity will be:-

 (a) Rs.79,000/-
 (b) Rs.80,000/-
 (c) Rs.77,000/-
 (d) Rs.78,000/-
 (e) None of the above

16. If sales are Rs.1,80,000/-, cost of sales is Rs.1,55,000/-, selling expenses are Rs.20,000/- and
administration expenses are Rs.6,000/-, the net results will be:-

 (a) A loss of Rs.1,000/-


 (b) A profit of Rs.1,000/-
 (c) A loss of Rs.2,000/-
 (d) A profit of Rs.2,000/-
 (e) None of the above

17. Accounting is a:-

 (a) Language of business


 (b) Used by investors, government and non-profit organisation
 (c) Both of the above
 (d) None of the above

18. The amount a sole proprietorship gives to its owner for the owner's personal consumption is
recorded as a credit to cash and a debit to the owner's:-

 (a) Cash account


 (b) Capital account
 (c) Drawings account
 (d) Owners account
 (e) None of the above

19. The depreciation method that causes equal amounts of annual depreciation expense for a given
asset is the:-

 (a) Diminishing Method


 (b) Sum of Eight Digits Method
 (c) Accelerated Depreciation
 (d) Straight line Method
 (e) None of the above

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20. Management accounting information is irrelevant to the:-

 (a) Chief Executive Officer


 (b) Creditors
 (c) Chief Financial Officer
 (d) Competitors
 (e) None of the above

21. If a company sells some of the equipment that had been used in its operations and the company
receives more than the book value of the equipment, the company will report a Gain on its income
statement.

 (a) True
 (b) False

22. Assets are usually reported on the balance sheet at which amount?

 (a) Cost
 (b) Current Market Value
 (c) Expected Selling Price
 (d) All of the above
 (e) None of the above

23. Creditor accounts of Rs.1,500/- in the double entry system represents:-

 (a) An expense of the business


 (b) An asset of the business
 (c) A liability of the business
 (d) An item of income for the business
 (e) None of the above

24. If a share is sold by a company for Rs.4.37/- and its nominal value is Re.1/-, the difference of
Rs.3.37/- is known as a share premium.

 (a) True
 (b) False

25. The word to describe the systematic allocation of the cost of a plant asset from the balance sheet to
an expense on the income statement is appreciation.

 (a) True
 (b) False

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26. Unearned Revenues or Customer Deposits are generally listed as a Current Liability on a classified
balance sheet.

 (a) True
 (b) False

27. Which financial statement has a heading that does NOT specify a period of time?

 (a) a) Balance sheet


 (b) b) Profit and loss account
 (c) c) Trading account
 (d) d) Both (b) and (c)
 (e) e) None of the above

28. If a companys inventory of direct materials is carried at standard cost, it is not likely that the direct
materials price variance is recognized at the time of purchase.

 (a) True
 (b) False

29. Another name for the balance sheet is:-

 (a) Income and expenditure account


 (b) Statement of financial position
 (c) Trading and profit and loss account
 (d) Statement of operations
 (e) None of the above

30. Deferred credits will appear on the balance sheet with the:-

 (a) a) Assets
 (b) b) Liabilities
 (c) c) Owners equity
 (d) d) Both (a) and (b)
 (e) e) None of the above

31. Which of the following is a category or element of the balance sheet?

 (a) Gains
 (b) Expenses
 (c) Losses
 (d) Liabilities
 (e) None of the above

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32. Which of the following would not be a current asset?

 (a) Debtors
 (b) Land
 (c) Accounts Receivable
 (d) Prepaid insurance
 (e) None of the above

33. Seasonality is not considered a limitation of ratio analysis.

 (a) True
 (b) False

34. The short-term solvency ratios examine how quickly a firm's assets can be converted into cash. The
quick ratio is computed by what formula?

 (a) Current assets / Current liabilities


 (b) (Current assets - Accounts receivable) / (Current liabilities - cash)
 (c) (Current assets - Inventories) / Current liabilities
 (d) (Current assets - Stock) / Current liabilities
 (e) None of the above

35. Current asset MINUS current liabilities is the:-

 (a) Quick ratio


 (b) Net worth
 (c) Current ratio
 (d) Cash ratio
 (e) None of the above

36. A corporation's excellent reputation will be listed among the corporation's assets on its balance
sheet.

 (a) True
 (b) False

37. Which of the following costs are generally allowed to be included in the computation of the cost of a
plant and machinery?

 (a) Cost of installation


 (b) Transportation cost
 (c) Taxes and import duties paid
 (d) All of the Above
 (e) None of the above

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38. If a trail balance extracted from the double entry system of a sole trader shows that total debits
equals total credits then it reveals that:-

 (a) The books are correct


 (b) An equal debit for every credit will have posted and the accounts correctly added
 (c) No errors have been made in posting the transaction of the business
 (d) The business is profitable
 (e) None of the above

39. The debt ratio indicates how much debt is used to finance a firm's assets and provides an indication
of how a firm is financed. What is the formula for calculating the debt ratio?

 (a) Total assets / Total liabilities


 (b) Total debt / Shareholders equity
 (c) Long-term debt / Total assets
 (d) Total debt / Total assets
 (e) None of the above

Level 2: Descriptive Type (10 marks each)

1. What is the difference between accounts payable and accounts receivable? What is the main
purpose of a journal and ledger process in maintaining the accounting records?

2. There is always an independent authority verifying a company's account namely the external auditor
for every company. In such a scenario why should there be a regulator for monitoring of public
offerings from capital markets? Discuss.

3. Differentiate: accounts and finance.

4. A cash flow statement can be more useful than a fund flow statement. Discuss.

5. A highly profitable firm can have a bad cash flow statement. Discuss.

6. Discuss the utility of ratios from various stakeholders' perspectives. Also identify the three key
financial ratios from each stakeholder's perspective.

7. What are the significant assumptions we make while comparing financial ratios of various companies
in the same industries? Discuss the implications of the above assumptions for a user of financial
ratios.

8. What is a difference between the straight-line method of depreciation and the written down value
method? Which method is more appropriate for reporting earnings?

9. What is the method of valuation of shares acquiring by way of a rights issue and a bonus issue?

10. Take up any four accounting standards and mention the accounting principles behind them.

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