CUET Accountancy MCQs Unit VI Analysis of Financial Statements

CUET Accountancy Financial Statements Of a Company MCQs

Question: ___________ is conducted by bankers and government

a) External Analysis

b) Internal Analysis

c) External Analysis and Internal Analysis

d) None of the options

Answer: External Analysis

Question: Tangible assets are assets which can be physically seen and touched, Like

a) All of the options

b) Land & Building

c) Plant and Equipment

d) Furniture & Fixture

Answer: All of the options

Question: The following is(are) the external source(s) of cash

a) All of the options

b) Long terms loans

c) Issue of new shares

d) Short term borrowings

Answer: All of the options

Question: Balance Sheet of A Company is prepared according to the Revised Schedule III, Part-I of

a) Section 211

b) Section 213

c) Section 217

d) Section 209

Answer: Section 211

Question: Main headings of assets are

a) Current Assets and Non Current assets

b) Current Assets

c) Non Current assets

d) None of the options

Answer: Current Assets and Non Current assets

Question: Loss on sale is a

a) Non Operating Expenses

b) Miscellaneous Expenses

c) Sales Expenses

d) All of the options

Answer: Non Operating Expenses

Question: Provision for Provident Fund comes under

a) Long-term Provision

b) Trade Payable

c) Other Current Liabilities

d) None of the options

Answer: Long-term Provision

Question: Name the expenses which refer to the indirect expenses relating to the principal revenue generating activities of the enterprise:

a) Non Operating Expenses

b) Miscellaneous Expenses

c) Sales Expenses

d) All of the options

Answer: Non Operating Expenses

Question: Unclaimed Dividend is shown under which major heading in balance sheet

a) Current Liability

b) Equity and Liability

c) Current Assets

d) None of the options

Answer: Current Liability

Question: Preliminary expense incurred for formation of joint stock company represent

a) Deferred revenue expenditure

b) Revenue loss

c) Capital loss

d) None of the options

Answer: Deferred revenue expenditure

Question: Prepaid expenses are shown under

a) Other current assets

b) Inventories

c) Cash Equivalents

d) None of the options

Answer: Other current assets

Question: Share Application Money (refundable) is shown as

a) Other Long-term Liabilities.

b) Intangible Fixed Assets.

c) Short-term Provisions.

d) Capital Work-in-Progress.

Answer: Intangible Fixed Assets.

Question: Which of the following is not required to be prepared under the Companies Act

a) Statement of Profit and Loss

b) Balance Sheet

c) Report of Director’s and Auditor’s

d) Funds Flow Statement

Answer: Funds Flow Statement

Question: _______ appear in a Company’s Balance Sheet under the Sub-head Short-term Provision

a) Interest Accrued but not due on Borrowings

b) Provision for Tax

c) Unpaid Dividend

d) Calls in Advance

Answer: Provision for Tax

Question: A company prepares its Balance Sheet as per the format in

a) Schedule VI of the Indian Companies Act, 2013

b) Schedule II of the Indian Companies Act, 2013

c) Schedule IV of the Indian Companies Act, 2013

d) None of the options

Answer: Schedule VI of the Indian Companies Act, 2013

Question: Outstanding wages appear in trial balance will be recorded in the

a) Balance sheet

b) Trading account

c) Balance sheet and Trading account

d) None of the options

Answer: Balance sheet

Question: The profit & loss statement is also known as the

a) All of the options

b) Income Statement

c) Statement of Earning

d) Statement of Operation

Answer: All of the options

Question: Receipt on sales of fixed assets is

a) Capital receipt

b) Current receipt

c) Debtor receipt

d) None of the options

Answer: Capital receipt

Question: Persons who are willing to invest in any organization always wish to know about the profitability and solvency of the business concern

a) All of the options

b) Investors and Potential Investors

c) Employees and Workers

d) Owner

Answer: All of the options

Question: Expenses increasing the earning capacity of business are

a) Capital expenses

b) Financial expenses

c) Direct expenses

d) None of the options

Answer: Capital expenses

Question: What are the items shown under heading Miscellaneous Expenditure

a) All of the options

b) Preliminary expenses

c) Discount on Issue of share and debenture

d) Deferred expenses

Answer: All of the options

Question: Which of the following statements are true?

a) Financial statements are also known as annual records and Financial statements are historic

b) Financial statements are also known as annual records

c) Financial statements are historic

d) None of the options

Answer: Financial statements are also known as annual records and Financial statements are historic

Question: Which is the first thing which is being shown in the liabilities side of balance sheet

a) Share Capital

b) Current Assets

c) Current Liabilities

d) None of the options

Answer: Share Capital

Question: Net Sales - Cost of Goods Sold =

a) Gross Margin

b) Gross Loss

c) Net Loss

d) None of the options

Answer: Gross Margin

Question: Debentures redeemable after 10 years from the date of issue are shown as

(a) Long-term Borrowings.

(b) Other Long-term Liabilities,

(c) Short-term Borrowings.

(d) Other Short-term Liabilities.

 Answer: Long-term Borrowings.

Question: ‘Claims against the Company not acknowledged as debts’ is shown under the head _______

a) Current Liabilities

b) Non-Current Liabilities

c) Commitments

d) Contingent Liabilities

Answer: Contingent Liabilities

 Question: Calls in advance appear in a Company’s Balance Sheet under

a) Share Capital

b) Current Liability

c) Long-term Borrowings

d) Reserve & Surplus

Answer: Current Liability

Question: Bills Payable is shown as

a) Long-term Borrowings.

b) Short-term Borrowings.

c) Other Current Liabilities.

d) Trade Payables.

Answer: Trade Payables.

Question: An example of fixed asset is

a) Live stock

b) Value stock

c) Income stock

d) None of the options

Answer: Live stock

Question: Salaries outstanding Rs 50,000 will be record in the balance sheet under

a) Other Current Liabilities

b) Other Current Assets

c) Non-current Liabilities

d) All of the options

Answer: Other Current Liabilities

Question: Reliability of financial analysis depends upon the

a) Reliability of financial data

b) Reliability of Customer

c) Reliability of financial data and Reliability of Customer

d) None of the options

Answer: Reliability of financial data

Question: Which statement shows the sources related to the inflow and Outflow of cash

a) Cash Flow Statement

b) Fund Flow Statement

c) Ratio Analysis

d) None of the options

Answer: Cash Flow Statement

Question: Non Current Assets is

a) Patents and Trade Marks

b) Bills Receivables

c) Prepaid Expenses

d) Debtors

Answer: Patents and Trade Marks

Question: Operating expense represent are

a) Selling and administrative expense

b) Selling expense and general expense

c) Selling and administrative expense and Selling expense and general expense

d) None of the options

Answer: Selling and administrative expense

Question: Proposed Dividend shown under major heading Current Liability and Subheading

a) Short-term Provision

b) Trade Payable

c) Other Current Liabilities

d) None of the options

Answer: Short-term Provision

Question: 50,000, 9% Debentures redeemable within 12 months of the date of Balance Sheet will be shown under :

a) Short-term Borrowings

b) Short-term Provision

c) Other Current Liability

d) Trade Payables

Answer: Other Current Liability

Question: Financial Statement also called

a) Final Accounts

b) Profit & Loss A/c

c) Trading A/c

d) None of the options

Answer: Final Accounts

Question: Goodwill appears in a Company’s Balance Sheet under the Sub-head

a) Unamortized Assets

b) Non-Current Investment

c) Intangible Assets

d) Tangible Assets

Answer: Intangible Assets

Question: Discount allowed appear in the trial balance will be recorded in the

a) Profit and loss account

b) Balance sheet

c) Trading account

d) None of the options

Answer: Profit and loss account
 

CUET Accountancy Analysis of Financial Statement and Tools MCQs

Question: Financial Statement Analysis Objectives/Need is

a) All of the options

b) Measure the profitability of the business

c) Measure the financial strength of the business

d) Make comparative study within the firm and with other forms

Answer: All of the options

Question: Study of relationship between various items is known as

a) Accounting Ratios

b) Vertical Analysis

c) Horizontal Analysis

d) None of the options

Answer: Accounting Ratios

Question: Limitations of financial analysis except

a) All of the options

b) Dont reflect changes in price level

c) Affected by the personal ability and bias of the Analyst

d) Single years Analysis of financial statement have limited use

Answer: All of the options

Question: Comparison of two or more departments or divisions of the same business unit with the objective of meaningful analysis

a) Intra-firm comparison

b) Inter firm analysis

c) Intra-firm comparison and Inter firm analysis

d) None of the options

Answer: Intra-firm comparison

Question: A formula such as net income available to common stockholders divided by common equity is used to calculate

a) Return on common equity

b) Return on interest

c) Return on earning power

d) None of the options

Answer: Return on common equity

Question: While preparing Common-size Balance Sheet, each item of Balance Sheet is expressed as % of

a) Non-current Assets.

b) Current Assets,

c) Non-current Liabilities.

d) Total Assets.

Answer: Total Assets.

Question: While preparing Common-size Balance Sheet, each item of Balance Sheet is expressed as % of

a) Current Assets

b) Non-current Assets

c) Non-current Liabilities

d) Total Assets

Answer: Total Assets

Question: Main limitation of financial analysis is :

a) To know earning capacity

b) To know financial strength

c) Do not reflect changes in price level

d) Comparative study with other firms

Answer: Do not reflect changes in price level

Question: The analysis of actual movement of money inflow and outflow in an organization is called_________analysis.

a) Cash flow

b) Simplification

c) Explaining

d) None of the options

Answer: Cash flow

Question: Ratio analysis is a total for analysing the

a) Financial statements of any enterprise and Income statements of any enterprise

b) Financial statements of any enterprise

c) Income statements of any enterprise

d) None of the options

Answer: Financial statements of any enterprise and Income statements of any enterprise

Question: Importance of Comparative Statements

a) All of the options

b) Make Presentation Simpler

c) Help in Drawing Conclusion

d) Help in Detection of Problems

Answer: All of the options

Question: Which objective is not fulfilled by comparative Statement of Profit & Loss :

a) To compare the items of Statement of Profit & Loss of two years

b) To know the absolute changes in items of Statement of Profit & Loss

c) To show the change in financial position

d) To know the percentage changes in items of Statement of Profit & Loss

Answer: To show the change in financial position

Question: Creditors or Suppliers are interested to know the

a) Profitability of the firm in relation to turnover.

b) Profitability of the firm in relation to investments.

c) Short-term solvency/liquidity of the concern.

d) Effective utilisation of its (firm's) resources.

 Answer: Short-term solvency/liquidity of the concern.

Question: Which one of the following items is not a method/tool of analysis of financial statements?

a) Trend Analysis

b) Statement of Affairs

c) Cash Flow Statement

d) Comparative Statements

Answer: Statement of Affairs

Question: Which of the following are techniques, tools or methods of analysis and interpretation of financial statements?

a) All of the options

b) Ratio Analysis

c) Average Analysis

d) Trend Analysis

Answer: All of the options

Question: When financial statements of several years are analysed, it is termed as

a) Vertical analysis

b) Horizontal analysis

c) Current ratios

d) None of the options

Answer: Vertical analysis

Question: Ratio analysis is useful in

a) Financial analysis

b) Profit Analysis

c) Loss Analysis

d) None of the options

Answer: Financial analysis

Question: Total assets divided common equity is a formula uses for calculating

a) Equity multiplier

b) Graphical multiplier

c) Turnover multiplier

d) None of the options

Answer: Equity multiplier

Question: Which one of the following is tool of financial analysis?

a) Comparative Statements

b) Common-size Statements

c) Cash Flow Statement

d) All of these

Answer: All of these

Question: Comparative Statements show the changes in

a) Percentages.

b) Absolute amounts,

c) Both (a) and (b).

d) Ratios.

Answer: Both (a) and (b).

Question: Which of the following is not a form of presenting financial analysis :

a) Absolute figure Comparison

b) Ratio Method

c) Cumulative figures and averages

d) Annual Report

Answer: Annual Report

Question: Net profit is obtained by deducting ................ from Gross Profit.

a) Operating Expenses

b) Non-Operating Exp.

c) Operating and Non-Operating Exp.

d) None of the Above

Answer: Operating and Non-Operating Exp.

Question: Which is Types of financial Analysis

a) Horizontal Analysis and Vertical Analysis

b) Horizontal Analysis

c) Vertical Analysis

d) None of the options

Answer: Horizontal Analysis and Vertical Analysis

Question: When analysis is made on the basis of Published statements, reports and information it is known as

a) External analysis

b) Horizontal analysis

c) Vertical Analysis

d) None of the options

Answer: External analysis

Question: Internal analysis is done

a) By Management

b) By Shareholders

c) By debenture holder

d) None of the options

Answer: By Management

Question: Profit margin multiply assets turnover multiply equity multiplier is used to calculate

a) Return on equity

b) Return on turnover

c) Return on stock

d) None of the options

Answer: Return on equity

Question: This item is not used as a tool for Analysis of Financial Statements :

a) Cash Flow Statement

b) Fund Flow Statement

c) Ratio Analysis

d) No. of Employees Statement

Answer: No. of Employees Statement

Question: The most commonly used tools for financial analysis are

a) All of the options

b) Horizontal analysis

c) Vertical analysis

d) Ratio analysis

Answer: All of the options

Question: It is a technique of studying the operational results and financial position over a series of years.

a) Trend Analysis

b) Common Size Statements

c) Comparative Financial Statements

d) Trend Analysis

Answer: Trend Analysis

Question: In a common size Statement of Profit & Loss, the amount of net revenue from operations is assumed to be equal to

a) 1

b) 10

c) 100

d) 1,000

Answer: 100
 

CUET Accountancy Ratios MCQs

Question: Accounting ratios are an important tool of

a) Financial statement analysis

b) Trial Balance

c) Financial statement analysis and Trial Balance

d) None of the options

Answer: Financial statement analysis

Question: Proprietary or equity ratio is equal to

a) Shareholders funds/ total assets

b) Shareholders funds+ total assets

c) Shareholders funds- total assets

d) None of the options

Answer: Shareholders funds/ total assets

Question: Gross profit is equal to

a) Gross Profit/Net Sales x100

b) Gross Profit+Net Sales x100

c) Gross Profit-Net Sales x100

d) None of the options

Answer: Gross Profit/Net Sales x100

Question: The most precise test of liquidity is

a) Absolute Liquid ratio

b) Quick ratio

c) Current ratio

d) None of the options

Answer: Absolute Liquid ratio

Question: Equity Investors are interested in

a) All of the options

b) knowing Earnings per Share

c) Return on Investment

d) Return on Equity

Answer: All of the options

Question: A very high current ratio is

a) Not a good sign

b) A good sign

c) Not a good sign and A good sign

d) None of the options

Answer: Not a good sign

Question: Ratio Analysis provide analysis of the

a) Liquidity

b) Solvency

c) Profitability

d) None of the options

Answer: Liquidity

Question: For measuring the long term solvency of any business we calculate

a) Debt Equity Ratio

b) Working Capital Ratio

c) Debt Equity Ratio and Working Capital Ratio

d) None of the options

Answer: Debt Equity Ratio

Question: Operating Profit Ratio is equal to

a) Operating Profit Ratio/Net sales X 100

b) Gross Profit/Net sales/100

c) Net Profit/Net sales/100

d) None of the options

Answer: Operating Profit Ratio/Net sales X 100

Question: Ratio Analysis affected by

a) All of the options

b) Window-dressing

c) Personal bias

d) Ability of the analyst

Answer: All of the options

Question: Average payment period 2 months hence creditors turnover will be

a) 6 Times

b) 5 Times

c) 2 Times

d) None of the options

Answer: 6 Times

Question: The current ratio explains the relationship between

a) Current assets and current liabilities

b) Sundry Debtors and sundry creditors

c) Current assets and current liabilities and Sundry Debtors and sundry creditors

d) None of the options

Answer: Current assets and current liabilities

Question: Items excluded in liquid assets are

a) Inventories and prepaid expenses

b) Inventories

c) Prepaid expenses

d) None of the options

Answer: inventories and prepaid expenses

Question: A low current ratio may signify

a) Shortage of working capital

b) Working capital adequacy

c) Optimum working capital

d) None of the options

Answer: Shortage of working capital

Question: If the inventory turnover ratio is divided into 365, it becomes a measure of ______

a) Sales efficiency

b) Average Age of Inventory

c) Sales Turnover

d) Average Collection Period

Answer: Average Age of Inventory

Question: Current Assets Rs.85,000; Inventory Rs.22,000; Prepaid Expenses Rs.3,000. Then liquid assets will be :

a) Rs.63,000

b) 60,000

c) X 82,000

d) X 1,10,000

Answer: 60,000

Question: Patents and Copyrights fall under the category of:

a) Current Assets

b) Liquid Assets

c) Intangible Assets

d) None of Above

Answers: Intangible Assets

Question: Cash Balance Rs.15,000; Trade Receivables Rs.35,000; Inventory Rs.40,000; Trade Payables Rs.24,000 and Bank Overdraft is Rs.6,000. Current Ratio will be :

a) 3.75 : 1

b) 3 : 1

c) 1 : 3

d) 1 : 3.75

Answer: 3 : 1

Question: Current Ratio is :

a) Solvency Ratio

b) Liquidity Ratio

c) Activity Ratio

d) Profitability Ratio

Answer: Liquidity Ratio

Question: Current Assets are 4,00,000; Inventories 2,00,000; Working Capital 2,40,000, calculate Current Ratio.

a) 2.5:1

b) 1:1

c) 2:1

d) 1:2

Answers: 2.5:1

Question: On the basis of following data, the proprietary ratio of a Company will be : Equity Share Capital Rs.6,00,000; Debentures Rs.2,40,000; Statement of Profit & Loss Debit Balance Rs.40,000.

a) 74%

b) 65%

c) 82%

d) 70%

Answer: 70%

Question: lf Current Ratio ofa firm is 2.5 :1 and its Current Liabilities are ,00,000. Its Working Capital will be

a) 3,00,000.

b) 3,75,000.

c) 11,00,000.

d) 7,00,000.

Answer: 3,00,000.

Question: A Company’s Current Assets are Rs.6,00,000 and working capital is Rs.2,00,000. Its Current Ratio will be :

a) 3 : 1

b) 1.5 : 1

c) 2 : 1

d) 4 : 1

Answers: 1.5 : 1

Question: What will be the amount of Gross Profit, if revenue from operations are Rs.6,00,000 and Gross Profit Ratio is 20% of cost?

a) Rs. 1,50,000

b) Rs. 1,00,000

c) Rs. 1,20,000

d) Rs.5,00,000

Answer: Rs. 1,00,000

Question: A Company’s Current Ratio is 2.5 : 1 and Liquid Ratio is 1.6 : 1. If its Current Assets are Rs.7,50,000, what will be the value of Inventory?

a) Rs.4,50,000

b) Rs.4,80,000

c) Rs.2,70,000

d) Rs. 1,80,000

Answer: Rs.2,70,000

Question: The __________ of a business firm is measured by its ability to satisfy its short term obligations as they become due.

a) Activity

b) Liquidity

c) Debt

d) Profitability

Answers: Liquidity

Question: Gross profit would be the difference between

a) Net sales and cost of goods sold

b) Gross sales and cost of goods sold

c) Net sales and cost of goods sold and Gross sales and cost of goods sold

d) None of the options

Answer: Net sales and cost of goods sold

Question: Working Capital is equal to

a) Current Assets Current Liabilities

b) Current Assets + Current Liabilities

c) Current Assets/Current Liabilities

d) None of the options

Answer: Current Assets Current Liabilities

Question: Stock turnover ratio is calculated by dividing cost of goods sold by

a) Average Stock

b) Closing Stock

c) Opening Stock

d) None of the options

Answer: Average Stock

Question: Quick assets are those assets which can get converted into

a) Cash easily

b) Liability easily

c) Cash easily and Liability easily

d) None of the options

Answer: Cash easily 

Question: The debt equity ratio of a company is 1:1 state giving reasons, (any four) which of the following would improve, reduce or not change the ratio

a) Purchase, of machinery for cash

b) Sale of goods at a profit

c) Redemption of debentures at a premium

d) None of the options

Answer: Purchase, of machinery for cash

Question: Conversion of debentures into preference shares shall_________The debt ratio

a) Decrease

b) Increase

c) No effect

d) None of the options

Answer: Decrease

Question: The two basic components for the calculation of operating ratio are

a) Operating cost (cost of goods sold plus operating expenses) and net sales

b) Operating cost (cost of goods sold plus operating expenses) and Gross sales

c) Operating cost (cost of goods sold plus operating expenses) and Net Loss

d) None of the options

Answer: Operating cost (cost of goods sold plus operating expenses) and net sales

Question: The _____ of a business firm is measured by its ability to satisfy

a) Liquidity

b) Activity

c) Liquidity

d) Debt

Answer: Liquidity

Question: Cost of Revenue from operations + Operating Expenses/ Revenue from operations x100

a) Operating Ratio

b) Proprietary Ratio

c) Gross Profit Ratio

d) Working Capital Turnover Ratio

Answer: Operating Ratio

Question: Those assets which can get converted into cash easily in case of emergency

a) Quick assets

b) Intangible Assets

c) Quick assets and Intangible Assets

d) None of the options

Answer: Quick assets