Commerce MCQ Questions and Answers

1. In accounting, profit prior to incorporation is treated as:
a) Revenue Reserve
b) Secret Reserve
c) Capital Reserve
d) General Reserve

2. Receipts and Payments Account is prepared by:
a) Manufacturing concerns
b) Non-Trading Concerns
c) Trading Concerns
d) Companies registered under Companies Act 1956

3. Owners equity stands for:
a) Fixed Assets minus Fixed Liabilities
b) Fixed Assets minus Current Liabilities
c) Current Assets minus Fixed Liabilities
d) Total Assets minus Total outside Liabilities

4. The main objective of Accounting Standards is:
a) To prepare the accounting reports which is easily understood by common man.
b) To comply with the legal formalities.
c) To harmonize the diversified accounting practices.
d) To comply with the requirements of the international Accounting Standards (IAS).

5. If the current ratio is 2:1 and working capital is Rs. 60000, what is the value of the Current Assets?
a) Rs 60000
b) Rs 100000
c) Rs 120000
d) Rs 180000

6. Who is considered Father of Scientific Management?
a) Peter Drucker
b) F.W Taylor
c) Victor Vroom
d) Henry Fayol

7. The Securities and Exchange Board of India is not entrusted with the function of-
a) Investor Protection
b) Ensuring Fair practices by companies.
c) Promotion of efficient services by brokers.
d) improving the earnings of equity shareholders.

8. If Opening Stock is Rs.10000, Net Purchases Rs.70000, Wages Rs. 2500, Carriage Inward Rs 500 and Closing Stock Rs 15000. What is the Manufacturing Cost?
a) Rs 65000
b) Rs 83000
c) Rs 68000
d) Rs 73000

9. X and Y are partners in a firm sharing profits in the ratios of 2:1. Z is admitted with a 1/3 profit sharing. What will be the new profit sharing ratio of X, Y and Z?
a) 3:3:3
b) 4:3:2
c) 4:2:3
d) 2:3:4

10. Given below are two statements, one labeled as Assertion (A) and the other labeled as Reason (R)–
Assertion (A): Sinking Fund is a charge against profit and loss account.
Reason (R): Sinking fund is created for repayment of a long term liability.
In the context of the above two statements, which one of the following is correct?
a) (A) is correct, but (R) is wrong
b) Both (A) and (R) are correct
c) (A) is wrong, but (R) is correct
d) Both (A) and (R) are wrong

11. In India, which of the following is prepared on the guidelines of AS-3 (Accounting Standard 3 )?
a) Balance Sheet of a company
b) Funds Flow Statement
c) Cash Flow Statement
d) Consolidated Financial Statement

12. Who has given ‘Fourteen Principles of Management’-
a) Henry Fayol
b) Barnard
c) F.W Taylor
d) Flemming

13. Equity Share Capital have-
a) Voting right
b) Fixed Dividend
c) Fixed Rate
d) Interest

14. Section 78 is related to-
a) Security Premium Account
b) Company
c) Board of Directors
d) Voting Right

15. What is calculated by dividing shareholders funds by the total assets –
a) Gross Profit
b) Liquid Ratio
c) Proprietary Ratio
d) Debt Ratio

16. The Turnover means —
a) The number of times
b) Profit
c) Cost
d) Dividend

17. Pooling of Interest method is followed when amalgamation is in the form of —
a) A merger
b) Unit
c) Transfer
d) Cost

18. Trademark A/c is a —
a) Real A/c
b) Nominal A/c
c) Personal A/c
d) All of these

19. List C is related to-
a) Preferential creditor
b) Liabilities
c) Assets
d) Surplus A/c

20. The main objective of auditing is –
a) Detection of Errors
b) To find out whether Profit & Loss accounts and Balance Sheet show true and fair state of the affairs of the company.
c) Detection of Frauds
d) Detection and prevention of frauds and errors

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21. Propriety audit refers to-
a) Verification of Accounts
b) Examination of accounts of proprietary concerns
c) Enquiry against justification and necessity of expenses
d) Audit of Government companies

22. Government may order for Special Audit under Section ……. Of the Companies Act, 1956-
a) Section 227
b) Section 233A
c) Section 233B
d) Section 224

23. Management Audit means-
a) Audit undertaken on behalf of the management
b) Evaluating performance of various management processes and functions
c) Audit undertaken on behalf of government to punish management
d) Compulsory Audit of company management

24. Internal check refers to-
a) Checking of record by the cashier
b) Checking of accounts by the internal auditor
c) Checking of work of one person by another automatically
d) Managerial control internally over the subordinates

25. Valuation of assets on a wrong basis is a –
a) Technical error
b) Clerical error
c) Error of principle
d) Compensating error

26. Test checking refers to-
a) Testing of accounting records
b) Testing of honesty of employees
c) Intensive checking of a selected number of transactions
d) Checking of all transactions recorded

27. Which of the following is not a kind of Audit?
a) Statutory and Private Audit
b) Government and Continuous Audit
c) Final and Interim Audit
d) None of the Above

28. Audit done by the Employees of the business undertaking is called ………
a) Final Audit
b) Management Audit
c) Government Audit
d) Company Audit

29. Test checking should not be applied to-
a) Sales Book
b) Purchases Book
c) Bank Reconciliation Statement
d) Bills Book

30. Purchase Returns should be vouched with the help of-
a) Bought Notes
b) Credit Notes
c) Goods Inwards Book
d) Cash Book

31. First auditor of a company is appointed by the –
a) Shareholders
b) Central Government
c) Company Law Board
d) Board of Directors

32. Which of the following person is not qualified to be a company auditor?
a) A Body Corporate
b) An employee of the company
c) A man of unsound mind
d) All of the above

33. A Special Auditor is appointed by the –
a) Shareholders
b) Board of Directors
c) Central Government
d) Comptroller and Auditor General of India

34. Remuneration of a company auditor is fixed by the –
a) Shareholders
b) Board of Directors
c) Central Government
d) Appointing Authority

35. Civil Liability of an Auditor implies liability for –
a) Fraud
b) Misappropriation of cash
c) Incorrect Reporting
d) Misfeasance

36. Cost Audit Report is to be furnished to –
a) The Central Government with a copy to the company
b) The Central Government only
c) The company only
d) The shareholders of the company

37. An audit engagement letter should preferably be sent-
a) Before the commencement of audit
b) Immediately after the commencement of audit
c) Any time before the completion of audit
d) After the completion of audit

38. A Public company must have at least Directors as per Sec 252(1) of the Companies Act 1956
a) Two
b) Three
c) Four
d) Five

39. In case of which business form managing committee is elected by the members on the basis of one member one vote irrespective of the number of shares held
a) Sole proprietorship
b) Partnership
c) Joint stock Company
d) Cooperative society

40. __________ is a document of title which gives the holder the right of possession of goods.
a) Bill of Lading
b) Certificate of Origin
c) Bills of Exchange
d) Letter of Credit

41. Which one of the following is not a type of External Trade?
a) Import Trade
b) Export Trade
c) Entrepot Trade
d) None of these

42. In which type of Insurance a part of premium payable by the insured is borne by Government
a) Life Insurance
b) Social Insurance
c) Marine Insurance
d) General Insurance

43. A firm practicing price discrimination will be –
a) Charging different prices for different qualities of a product
b) Buying in the cheapest and selling in the dearest markets
c) Charging different prices in different markets for a product
d) Buying only from firms selling in bulk at a distance

44. The LIC was established in –
a) 1920
b) 1926
c) 1956
d) 2001

45. The monetary policy is announced by the –
a) Governor of RBI
b) President of India
c) Prime Minister

46. SEBI was established in –
a) 1988
b) 1995
c) 1982
d) 2000

47. Mutual fund are traded by –
b) RBI
c) SBI
d) PNB

48. Which one of the following does not constitute the purpose of setting up SEBI?
a) To protect the interests of the investors in securities
b) To promote the development of the securities market
c) To regulate the global securities market
d) To deal with matters connected with fraudulent and unfair trade practices relating to securities markets

49. Both ‘security’ and ‘Investment’ elements are available –
a) Only in Life Insurance
b) in both Life and Fire Insurance
c) in both Marine and Fire Insurance
d) in Life, Marine and Fire Insurance

50. Of the following organizations, the easiest to wind up is the –
a) Public Limited Company
b) Multinational Corporation
c) Private Limited Company
d) Partnership firm

51. The maximum number of partners in a firm fora general business is –
a) 7
b) 10
c) 50
d) 20

52. Participating preference shares are those which participate
a) In the voting
b) in the general meeting of the company
c) in the management of the company
d) in the profits over and above their fixed dividend

53. In which of the following, rate of interest/dividend is not fixed?
a) Equity capital
b) Debentures
c) Preference capital
d) Public deposits

54. To which of the following types of companies, debentures suit as a source of finance?
a) Companies with fluctuating earnings
b) Companies with stable earnings
c) Companies which cannot earn a rate of profit higher than the rate of interest payable on debentures
d) All of the above

55. First debentures are those
a) which are issued before share capital
b) which are repayable before other debentures
c) which are secured by a floating charges
d) which are secured by a fixed charge

56. The first stock exchange was set up in India in
a) Calcutta
b) Bombay
c) Delhi
d) Madras

57. Under writes are persons who
a) purchase the shares and debentures of a company
b) work as agents of the company for the sale of shares and debentures
c) manage the issues of shares and debentures
d) undertake to buy those shares and debentures not subscribed for by the public

58. Which of the following is not a component of the new issue market?
a) Stock exchange
b) Unit Trust of India
c) Financial Institution
d) LIC

59. Which of the speculators expects the price of securities to rise in the near future?
a) Bull
b) Bear
c) Stag
d) Lane Duck

60. An existing company raising additional capital
a) must offer the new shares to the existing share holders
b) need not offer the new shares to the existing share holders
c) issue shares to debenture-holders
d) issue shares to preference shareholders

61. Espirite De corps is a principle of-
a) Management
b) Price
c) Economics
d) Auditing

62. Which is called ‘Bottom up’ communication?
a) Written communication
b) Line
c) Upward communication
d) Message

63. Grapevine channels involves
a) Single standard chain
b) Gossip chain
c) Cluster chain
d) All of these

64. Marketing concept is based on-
a) Customer Orientation
b) Supply
c) Demand
d) Need

65. Pricing objectives includes-
a) Profit maximization
b) Market share
c) Price stabilization
d) All of these

66. Personal selling is a part of-
a) Price
b) Product
c) Promotion programme
d) Value

67. Sales promotion is based on –
a) Salesmen
b) Dealers
c) Consumers
d) All of these

68. The sources of the rules relating to internal management of a company is known from –
a) Memorandum of Association
b) Prospectus
c) Articles of Association
d) Fundamental Rules

69. Brainstorming is used by the management for
a) Work allocation on the shop floor
b) Generating alternatives for problem solving
c) The promotion of research and development
d) Training employees

70. Which is a part of Issued capital?
a) Subscribed capital
b) Unissued capital
c) Paid up capital
d) All of these

71. Which of the following is the non-random method of selecting samples from a population?
a) Stratified Sampling
b) Quota Sampling
c) Systematic Sampling
d) Cluster Sampling

72. Section 85(1) of Companies Act is related to-
a) Mutual Fund
b) Calls-in-advance
c) Preference Share Capital
d) Dividend

73. Which among the following is not a category of Non-Performing Assets?
a) Substandard Assets
b) Doubtful Debts
c) Loss Assets
d) Devaluated Assets

74. Interest on capital paid by a firm to its partners, under the Income Tax Act, 1961, is allowed –
a) 6%
b) 12%
c) 15%
d) 18%