Financial Statements Interpretation – Corporate and Management Accounting MCQBy CACSMockTest / November 25, 2022 2 Financial Statements Interpretation – Corporate and Management Accounting MCQ 1 / 46 Profits of Q Ltd. before remuneration of MD was 12,06,000 for the year ended 31st March 2020. The said profit has been calculated considering the following figures:Capital expenditure 4,95,000Depreciation as per Schedule II 42,000 Bonus to technicians 1,89,000Compensation paid to work- 42,000 menLoss on sale of fixed assets 42,000 Subsidy from Govt. 2,52,000Multiple shift allowance 63,000Provision for taxation 16,80,000Ex-gratia payments to workers 21,000 Profit on sale of building 1,26,000Determine the maximum remuneration payable to the MD of Z Ltd. from the above information. (A) ₹ 1,76,800 (B) ₹ 1,56,600 (C) ₹ 1,65,900 (D) ₹ 1,68,800 2 / 46 The gross profit of G Ltd. is ₹ 40,38,000 before considering the following items:Salaries & Bonus 1,80,000Repairs to Buildings 90,000R & D Expenses 15,000Directors Fees 6,000Managing Director’s Salary 36,000Interest on Debentures 20,000Profit on sale of plant 1,20,000Subsidy from Central Govt. 2,19,000The whole of the R & D expenses has been incurred for the purchase of equipment. On Plant depreciation provided up to date was ₹ 42,000. Maximum remuneration payable to MD without complying with provisions of the Schedule V is (A) ₹ 2,22,440 (B) ₹ 2,12,320 (C) ₹ 2,48,650 (D) ₹ 2,00,150 3 / 46 The manager of Z Ltd. is entitled to a commission @ 3% on net profit after charging such commission. Calculate the commission payable to the manager.Net profit before tax and managerial remuneration = ₹ 8,80,000Depreciation as provided in books of account = ₹ 1,10,000Depreciation as per the Companies Act, 2013 = ₹ 1,32,000 (A) ₹ 25,740 (B) ₹ 24,990 (C) ₹ 42,900 (D) ₹ 23,330 4 / 46 Net profits before charging the commission ₹ 80,000. Following had been charged off against the profits as determined as above:– Depreciation ₹ 31,900– Provision for bad debts ₹ 920.Other relevant information:– Actual bad debts ₹ 800.– Depreciation as per Schedule II ₹ 39,160.Maximum remuneration payable to MD without complying with provisions of the Schedule V is (A) ₹ 3,643 (B) ₹ 5,728 (C) ₹ 4,762 (D) ₹ 1,874 5 / 46 Revenue profit on the sale of plant 1,40,000Subsidy from Central Govt. 7,30,000Capital profit on the sale of plant 1,30,000Interest on Investment 60,000Depreciation as per Schedule II 3,00,000Maximum remuneration payable to MD without complying provisions of the Schedule V is: The gross profit of AG Ltd. is ₹ 20,78,000 before considering the following items: (A) ₹ 1,23,700 (B) ₹ 1,35,400 (C) ₹ 1,53,200 (D) ₹ 1,46,300 6 / 46 The net profit after tax of QPR Ltd. is ₹ 15,48,000. This net profit is arrived at after debiting P & L A/c following items:Income Tax: ₹ 3,20,000;Ex-gratia payment to employee: ₹ 50,000 ’Following items are credited to P & L A/c before arriving above net profit:Capital Profit: ₹ 75,000Profit on forfeiture of shares: ₹ 4,300Maximum remuneration payable toManaging Director as per provisions of the Companies Act, 2013 without complying with provisions of the Schedule Vis- (A) ₹ 91,935 (B) ₹ 95,685 (C) ₹ 90,425 (D) ₹ 94,750 7 / 46 Net profit after tax of XYZ Ltd. is ₹ 1,00,000 after debiting provisions for tax ₹ 40,000 and Managing Director’s Salary 60,000. Maximum remuneration payable to Managing Director as per provisions of the Companies Act, 2013 without complying with provisions of the Schedule V is (A) ₹ 14,000 (B) ₹ 8,000 (C) ₹ 10,000 (D) ₹ 12,000 8 / 46 Computation of net profit for Section 135 is as per Section 198 of the Companies Act, 2013 which is primarily: (A) Profit After Tax (PAT) (B) Earnings Before Interest & Tax (EBIT) (C) Profit Before Tax (PBT) (D) Net Operating Profit After Tax (NOPAT) 9 / 46 The Board of every company shall ensure that the company spends, in every financial year, at least of the company made during the____, in pursuance of its CSR Policy. (A) 2% of the average net profits; 3 immediately preceding financial years (B) 5% of the average net profits; 5 immediately preceding financial years (C) 5% of the average net profits; 3 immediately preceding financial years (D) 2% of the average net profits; 5 immediately preceding financial years 10 / 46 Provisions of Corporate Social Responsibility (CSR) are applicable to the company having a net worth of (A) ₹ 100 Crore or more (B) ₹ 250 Crore or more (C) ₹ 500 Crore or more (D) ₹ 1,000 Crore or more 11 / 46 Every company fulfilling specified criteria shall constitute Corporate Social Responsibility (CSR) Committee of the Board consisting of: (A) 5 or more directors, out of which at least 2 directors shall be an independent director (B) 10 or more directors, out of which at least 3 directors shall be an independent director (C) 5 or more directors, out of which at least 1 director shall be an independent director (D) 3 or more directors, out of which at least 1 director shall be an independent director 12 / 46 In case of companies depreciation on assets are provided on the basis of (A) Life of the asset as given in Schedule IV (B) Rate of depreciation as given in Schedule III (C) Life of the asset as given in Schedule II (D) Rate of depreciation as given in Schedule V 13 / 46 According to AS-6 “Depreciation Accounting”, issued by the ICAI change in method is permitted (A) Prospectively (B) Retrospectively (C) Negatively (D) None of the above 14 / 46 The depreciation fund method is also known as (A) Redemption fund method (B) Amortization fund method (C) Sinking fund method (D) All of the above 15 / 46 Choose the true statement. (A) Accrued incomes represent in-come unearned but realized in cash. (B) Accrued incomes represent income earned but not realized in cash. (C) Accrued income A/c is shown on the liability side. (D) No tax is payable on accrued income 16 / 46 What do you understand when one refers to as “net book value” of a non-current asset? (A) The cost of the asset. (B) The cost of the asset less amount expensed as depreciation in the current period. (C) The cost less accumulated depreciation up to the date of reporting. (D) The current worth of the asset. 17 / 46 Revenues affect net income (A) In the period during which they are earned (B) In the period when they are collected (C) In the period when they are accounted for (D) Any of the above three which occur first 18 / 46 The most compelling reason for accounting for depreciation is: (A) To match a portion of the depreciable cost of the asset against the income generated by it. (B) To build up resources for the purpose of replacing the non-current assets. (C) Because that is a requirement of company law. (D) To write down the non-current assets to what it is worth by the end of the period. 19 / 46 Which of the following expenses is NOT included in the acquisition cost of a plant and equipment? (A) Cost of site preparation (B) Delivery and handling charges (C) Installation costs (D) Financing costs incurred subsequent to the period after plant and equipment is put to use. 20 / 46 In the case of downward revaluation of an asset which is for the first time, the account to be debited is (A) Fixed Asset A/c (B) Revaluation Reserve A/c (C) Profit & Loss A/c (D) General Reserve A/c 21 / 46 Computers taken on hire by a business for a period of twelve months should be classified as (A) Current assets (B) Intangible assets (C) Deferred revenue expenditure (D) Not an asset 22 / 46 Obsolescence of a depreciable asset may be caused by(I) Technological changes.(II) Improvement in the production method.(III) Change in market demand for the product or service output.(IV) Legal or other restrictions. (A) Only (I) above (B) Both (I) & (II) above (C) All (I), (II), (III) & (IV) above (D) Only (IV) above 23 / 46 The balance sheet gives information regarding the (A) Results of operations for a particular period (B) Financial position during a particular period (C) Profit earning capacity for a particular period (D) Financial position as on a particular date 24 / 46 Which of the following is/are the important characteristic of depreciation?P. Depreciation is a permanent, continuous, and gradual increase in the value of a fixed asset.Q. Depreciation is the appropriation of profit.R. Depreciation is always computed in a systematic and rational manner.Select the correct answer from the options given below (A) Q & R only (B) P & R only (C) R only (D) P & Q only 25 / 46 Provisions of Corporate Social Responsibility (CSR) are applicable to the company having a turnover of (A) ₹ 100 Crore or more (B) ₹ 250 Crore or more (C) ₹ 500 Crore or more (D) ₹ 1,000 Crore or more 26 / 46 Which of the following statements is /are NOT correct? (A) Provision for bad debts appears as a liability on the balance sheet (B) The provision for bad debts is owed to the company (C) Bad debts could be less than the provision for bad debts (D) Bad debts could exceed the provision for bad debts 27 / 46 Amortization applies to (A) Current Assets (B) Wasting Assets (C) Intangible Assets (D) Non-Current Assets 28 / 46 _____which can be immediately be converted into cash, such as Government Securities. (A) Intangible Assets (B) Fictitious Assets (C) Wasting Assets (D) Floating Assets 29 / 46 Depreciation is a process of (A) Valuation (B) Allocation (C) Reduction (D) Appreciation 30 / 46 ______are those fixed assets that have fixed content, like coal in a coal mine; the value of the asset goes down as the contents are taken out. (A) Intangible Assets (B) Fictitious Assets (C) Wasting Assets (D) Floating Assets 31 / 46 If the Effective Capital of the company is negative and it passes special resolution then it may, without the approval of Central Government, pay remuneration to the managerial person not exceeding: (A) ₹ 60 lakhs per annum (B) ₹ 120 lakhs per annum (C) No remuneration since effective capital is negative (D) ₹ 90 lakhs per annum 32 / 46 Arrange the following assets as per permanence order.I. Cash & BankII. BuildingIII. InvestmentIV. Stock (A) II, III, I, IV (B) I, II, III, IV (C) I, IV, III, II (D) II, III, IV, I 33 / 46 The annual installment to depreciation fund for replacement of a fixed asset is (A) Charge against profit (B) An appropriation of profits (C) Charge against the reserve (D) Charge against cash 34 / 46 Which of the following statement is true? (A) The amount reported on the balance sheet for property, plant, and equipment is the estimate of the fair market value as of the balance sheet date. (B) The third line of the balance sheet at the end of the year should begin with “for the year ended”. (C) The total amount reported for owners’ equity is the approximate fair value or net worth of the corporation as of the balance sheet date. (D) None of the above 35 / 46 If the Effective Capital of the company is ₹ 250 Crores and above it may, without the approval of Central Government, pay remuneration to the managerial person not exceeding: (A) ₹ 160 lakhs plus 0.05% of the effective capital in excess of ₹ 250 Crores (B) ₹ 180 lakhs plus 0.25% of the effective capital in excess of ₹ 250 Crores (C) ₹ 240 lakhs plus 0.02% of the effective capital in excess of ₹ 2 50 Crores (D) ₹ 120 lakhs plus 0.01% of the effective capital in excess of ₹ 250 Crores 36 / 46 Arrange the following assets as per liquidity order.I. Cash & BankII. BuildingIII. InvestmentIV. Stock (A) II, III, I, IV (B) I, II, III, IV (C) I, IV, III, II (D) I, IV, II, III 37 / 46 If the Effective Capital of the company is ₹ 100 Crores and above but less than ₹ 250 Crores it may, without the approval of Central Government, pay remuneration to the managerial person not exceeding: (A) ₹ 240 lakhs per annum (B) ₹ 180 lakhs per annum (C) ₹ 120 lakhs per annum (D) ₹ 100 lakhs per annum 38 / 46 In_____, approach the assets are stated in the balance sheet in the order in which they can be easily converted into cash and the liabilities in the order in which they have to be paid off. (A) Alphabetical order (B) Permanence order (C) Liquidity order (D) None of the above 39 / 46 If the Effective Capital of the company is ₹ 5 Crores and above but less than ₹ 100 Crores it may, without the approval of Central Government, pay remuneration to the managerial person not exceeding: (A) ₹ 7 lakhs per month (B) ₹ 5 lakhs per month (C) ₹ 4 lakhs per month (D) ₹ 9 lakhs per month 40 / 46 In_____, approach assets which are to be used for long-term in the business and are not meant to be sold are presented first and assets that are most liquid such as cash in hand, are presented at the bottom. (A) Alphabetical order (B) Permanence order (C) Liquidity order (D) None of the above 41 / 46 If Net Profit is the starting point for the purpose of calculation of managerial remuneration then which of the following you will deduct: (A) Income Tax (B) Capital Profits (C) Compensation for breach of contract (D) General expenses 42 / 46 The arrangement of assets and liabilities in accordance with a particular order is known as of balance sheet. (A) Tallying (B) Marking (C) Ruling (D) Marshalling 43 / 46 As per Section 198 of the Companies Act, 2013 while calculating net profit for managerial remuneration, if gross profit is the starting point then which of the following is allowed to deduct (A) Contributions made u/s 181 (B) Actual bad debts written-off (C) Liability arising from a breach of contract (D) All of the above 44 / 46 Which of the following are current assets of a business?(i) Income received in advance(ii) Stock(iii) Debtors(iv) Pre-paid expenses(v) Accrued income (A) Both (i) and (iv) above (B) Both (ii) and (iii) above (C) (i), (ii) and (iii) above (D) (ii), (iii), (iv) and (v) above 45 / 46 If Net Profit is the starting point for the purpose of calculation of managerial remuneration then which of the following you will add: (A) Ex-gratia payment to an employee (B) Capital Profit (C) Debenture trustee Remuneration (D) Revenue profit on the sale of plant 46 / 46 As per Section 198 of the Companies Act, 2013 while calculating net profit for managerial remuneration, if gross profit is the starting point then which of the following is allowed to deduct (A) Loss of capital natures (B) Voluntarily compensation (C) Directors seating fee (D) Super-tax on the income Your score is LinkedIn Facebook Twitter VKontakte