Management Accounting- I MCQ (B.COM- III)

VIVEKANAND COLLEGE KOLHAPUR

(AN EMPOWERED AUTONOMOUS INSTITUTE)

B.Com- III Sem- V (Group- B)

ACCOUNTANCY- V (MANAGEMENT ACCOUNTING PAPER- I

MULTIPLE CHOICE QUESTIONS AND TRUE OR FALSE

Module- I Introduction to Management Accounting

A) Choose Correct Alternatives:

1. …………….. Accounting assists the management to carry out the functions.

a) Management b) Financial c) Cost d) Corporate

2. Under the ………………. Accounting actual costs are recorded after they are incurred.

a) Management b) Financial c) Cost d) ) Corporate

3. ……………. Accounting assists the management in taking decisions and deciding policies.

a) Management b) Financial c) Cost d) ) Corporate

4. …………… accountant is considered to be the eye and brain of management.

a) Chief b) Cost c) Management d) Chartered

5. Management accounting is meant for……………….

a) Management b) Financial Accountant c) Shareholders d) Debenture holders

6. Workers are interested in …………….. accounts.

a) Management b) Financial c) Cost d) ) Corporate

7. Financial accounting is the record of ………….. transactions of a business.

a) Monetary b) Non-monetary c) Both monetary and non-monetary d) None of the above

8. The principal objective of the financial accounting is to serve the needs of ………………

a) Management b) Employees c) Directors d) Outsiders

9. For every company publication of financial statements is ……………..

a) Optional b) Compulsory c) Needed d) None of the above

10. In the financial books transactions are recorded at …………. price.

a) Market b) Retail c) Cost d) All of the above

11. Balance sheet shows the financial position of the business for a particular…………….

a) Day b) Year c) Period d) All of the above

12. Sales less ………………. Show gross profit.

a) Purchases b) Cost of goods sold c) operating expenses d) Return

13. Analysis of financial statement is specially necessary for……………….

a) Employees b) Government c) Management d) Shareholders

14. ……………….. Statements are very useful in pointing out the financial operating trends.

a) Financial b) Comparative c) Common Sizes d) All of the above

15. Financial statements report to the end users ……………. Information.

a) Quantitative b) Factual Financial c) Market d) Qualitative

16. Financial statements mainly refer to ……………….

a) Profit and Loss A/c b) Balance Sheet c) Both of the above d) None of the above

17. Statement of Retained Earnings is also termed as …………….. account.

a) Profit & Loss A/c b) Balance Sheet c) P & L Appropriation A/c d) None of the above

18. Financial statements are prepared from ………………….

a) Journal b) Ledger c) Trial Balance d) All of the above

19. Closing stock is valued at cost or market price, whichever is…………………

a) More b) Less c) Equal d) All of the above

20. Financial statement are required to be ……………. for the benefit of outsiders.

a) Maintained b) Non Published c) Published d) None Maintained

B) State True or False:

1. Financial Accounting is a record of monetary transactions of a business. True

2. Management accounting is a historical accounting. False

3. Decision making is one of the important functions of management accounting. True

4. Publication of management accounting is compulsory. False

5. Creditors are interested in management accounting. False

6. Financial statements are also termed as final accounts. True

7. At present financial statements also include fund flow and cash flow statements. True

8. Balance sheet shows the financial position for the year under question. False

9. Balance Sheet is a ledger account. False

10. There is no difference between fund flow statement & cash flow statement. False

Module- II Analysis of Financial Statements

A) Choose Correct Alternatives:

1. Long term solvency is the same as…………………

a) Current Ratio b) Liquid Ratio c) Debt Equity Ratio d) All of the above

2. Operating Profit to sales gives …………….. ratio.

a) Gross Profit b) Operating Profit c) Net Profit d) All of the above

3. Long term solvency is indicated by ……………. Ratio

a) Liquidity b) Fixed Assets c) Inventory Turnover d) debtors turnover ratio

4. Turnover ratios help in management of………………..

a) Managing Resources b) Managing Debts

c) Evaluating Performance d) All of the above

5. Ratio of Net Sales to Net working capital is ……………. Ratio.

a) Working capital turnover b) Profitability c) Liquidity d) All of the above

6. Current Ratio is also called as ……………….. ratio.

a) Liquidity ratio b) Solvency ratio c) Working capital d) Profitability

7. Operating net profit means gross profit less………………. expenses.

a) Operating b) Non-Operating c) Capital d) Revenue

8. Gross Profit Ratio = ………………… ÷ Sales × 100.

a) Cost of goods sold b) Net Profit c) Fixed Assets d) Gross Profit

9. Net Profit ratio is used to measure overall ……………… of the business.

a) Performance b) Efficiency c) Assets d) Profitability

10. The relationship between two figures expressed mathematically is called……………..

a) Correlation b) Regression c) Ratio d) Inter relation

11. Ratio may be expressed in …………………

a) Times b) Proportion c) Percentage d) All of the above

12. According to nature of items which of the following is type of ratio.

a) Balance Sheet Ratio b) Profit & Loss A/c Ratio

c) Composite Ratio d) All of the above

13. Which of the following is not functional classification of ratio?

a) Liquidity Ratio b) Leverage Ratio

c) Profitability Ratio d) Balance Sheet Ratio

14. ……………. ratios indicates the relationship of certain items in balance sheet with some figures in the P& L A/c.

a) Balance Sheet Ratio b) Profit & Loss A/c Ratio

c) Composite Ratio d) All of the above

15. …………….. ratios measure the liquidity position of the enterprise.

a) Liquidity Ratio b) Leverage Ratio

c) Profitability Ratio d) Activity Ratio

16. ……………… ratios indicate the relative use of debt and equity in financing the assets of the firm.

a) Liquidity Ratio b) Leverage Ratio

c) Profitability Ratio d) Activity Ratio

17. Inventory Turnover Ratio = …………………. ÷ Average Inventory.

a) Sales b) Purchases c) Cost of Goods Sold d) All of the above

18. Fixed Assets Turnover Ratio = ……………….÷ Net Fixed Assets.

a) Sales b) Purchases c) Cost of Goods Sold d) All of the above

19. Operating Ratio = Cost of Goods Sold + Operating Expenses ÷ ………………. × 100.

a) Total Expenses b) Purchases c) Cost of Goods Sold d) Sales

20. Proprietary Ratio = Proprietors Fund ÷ ……………………

a) Total Expenses b) Total Liabilities c) Total Assets d) Sales

B) State True or False:

1. Accounting ratios facilitate summarisation and simplification of huge mass of data. True

2. Current Ratio shows long term solvency. False

3. Liquidity Ratio is also called as 1: 1 Ratio. True

4. Profitability Ratios measure overall performance and profit earning capacity of the business. True

5. Current assets ratio should be 1: 2 i.e. current liabilities should be twice of current assets. False

6. Current ratio is also called as working capital ratio. True

Module- III Working Capital

A) Choose Correct Alternatives:

1. When the term working capital is used to denote the total current assets it is termed as ………….. working capital.

a) Gross b) Net c) Permanent d) Negative

2. ……………….. working capital is required to be kept always on hand.

a) Essential b) Maximum c) Minimum d) Permanent

3. Current Assets less Current Liabilities means ………………….. working capital.

a) Gross b) Net c) Fixed d) Variable

4. In the absence of ………………. Working capital required to be kept on hand, the business may run the risk of insolvency.

a) Gross b) Net c) Variable d) Regular

5. Sufficient & constant supply of …………….. capital is essential to keep the business alive.

a) Equity b) Preference c) Debt d) Working

6. Banking companies require ……………. working capital.

a) Essential b) Maximum c) Minimum d) Permanent

7. If a firm has slow moving stock on large scale, it requires working capital on ………………. scale.

a) Small b) Medium c) Large d) Average

8. If a business has sufficient working capital it can avail of the facility of …………… discount.

a) Cash b) Credit c) More d) Less

9. In the initial stage i.e till the production is out a business requires a ………………… amount of working capital.

a) Small b) Medium c) Large d) Average

10. ……………… is the amount of funds necessary to cover the cost of operating the enterprise.

a) Equity Capital b) Preference Capital c) Working Capital d) Debt Capital

11. ……………. is also defined as excess of current assets over current liabilities.

a) Equity Capital b) Preference Capital c) Working Capital d) Debt Capital

12. Working capital is also known as ……………… capital.

a) Permanent b) Temporary c) Variable d) Circulating

13. Working capital starts with cash and ultimately results in ……………

a) Raw Material b) Finished Goods c) Bills Receivable d) Cash

14. When the term working capital is used to denote the current assets less current liabilities it is termed as ………….. working capital.

a) Gross b) Net c) Permanent d) Negative

15. Which of the following is a type of working capital?

a) Gross working capital b) Net working capital

c) Permanent working capital d) All of the above

16. Which of the following are the types of inventories.

a) Raw materials b) Work in Progress

c) Finished Goods d) All of the above

17. Cash purchases requires …………….. working capital.

a) Gross b) Net c) More d) Less

18. Credit sales requires ……………… working capital.

a) Gross b) Net c) More d) Less

19. Trading company requires comparatively ………….. working capital.

a) Gross b) Net c) Large d) Small

20. Longer the period of processing or manufacture requires……………….. working capital.

a) Gross b) Net c) Larger d) Small

21. During slack season a company requires……………. Working capital.

a) Gross b) Net c) Higher d) Lower

B) State True or False:

1. Funds required to pay the cost of fixed assets is called working capital. False

2. Funds required by the business for conducting day to day business operation is called working capital. True

3. Working Capital is also known as circulating capital. True

4. Requirement of working capital depends upon the nature of business. True

5. Industrial concerns require relatively less working capital. True

Module- IV Fund Flow Statement

A) Choose Correct Alternatives:

1. Sale of long term investment indicates…………………

a) Sources of Funds b) Application of Funds

c) Changes in Current Assets d) Changes in Current liabilities

2. Increase in fixed assets due to purchase is ……………..

a) Sources of Funds b) Application of Funds

c) Changes in Non-Current Assets d) Changes in Non-Current liabilities

3. Stock in the beginning results in ……………….

a) Application of funds b) Source of funds

c) No flow of funds d) All of the above

4. Stock at the end results in the ………………

a) Application of funds b) Source of funds

c) No flow of funds d) All of the above

5. Difference between current assets and current liabilities is known as …………….

a) Application of funds b) Source of funds

c) No flow of funds d) Working capital

6. Funds flow refers to changes in …………………

a) Application of funds b) Source of funds

c) No flow of funds d) Working capital

7. Building sold on credit is ………………. of funds.

a) Application of funds b) Source of funds

c) No flow of funds d) Working capital

8. Funds from operations constitute the chief source of ……………….

a) Capital b) Cash c) Funds d) Information

9. Cash or Credit sales increases the ………………..

a) Cash b) Credit c) Debtors d) Working Capital

10. ………………… indicates the reasons of changes in the items of two balance sheets.

a) Comparative Statement b) Fund Flow Statement

c) Cash Flow Statement d) Trend Analysis

11. Fund flow statement is also known as …………………..

a) Fund received and disbursed statement b) Statement of funds supplied and applied

c) Where got where gone statement d) All of the above

12. In narrow sense fund means ……………

a) Cash b) Bank c) Cheque d) DD

13. The entire assets side shows the ……………..

a) Sources of funds b) Application of fund