Banking Financial Awareness · Commerce Accountancy

Credit, Debt, and Finance

1,382 Questions

This topic covers essential concepts of credit, debt, and finance including bankruptcy, debt recovery, and financial acts. These questions are frequently asked in banking and IBPS exams. Test your knowledge of financial terminology and loan classifications.

Debt recovery actsBankruptcy filing proceduresFinancial classificationsMedium term financeCredit loss management

Credit, Debt, and Finance Questions

Multiple choice elements of accounts ratio analysis activity (or turnover) ratios accounting ratio's accounting ratios

In response to market expectations, the credit period has been increased from 45 days to 60 days. This would result in a _____________.

  1. Decrease in sales

  2. Decrease in debtors

  3. Increase in bad debts

  4. Increase in average collection period
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Credit policy of an organization consists of various elements like cash discount, collection period etc. Collection period means the period of credit allowed to the customer by the organization against the credit sales.


If the credit period is increased from 45 days to 60 days, this will result more blockage of funds and will increase in average collection period.

Multiple choice maths banking and taxation types of accounts banks introduction, recurring deposit accounts and calculation of interest on a fixed deposit account

________ is guarantee to return a payment.

  1. savings account

  2. fixed deposit

  3. current account

  4. recurring deposit
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Fixed Deposits (FD) are investment instruments offered by banks and non-banking financial companies, where one can deposit money for a higher rate of interest than savings accounts. One can deposit a lump sum of money in fixed deposits for a specific period, ranging from 7 days to 10 years. 


Fixed Deposits guarantee a return on investment. 

Multiple choice maths banking and taxation types of accounts banks introduction, recurring deposit accounts and calculation of interest on a fixed deposit account

Which among the following accounts fetch the highest rate of interest?

  1. saving deposits

  2. recurring deposits

  3. fixed deposits

  4. current deposits
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Fixed Deposits (FD) are investment instruments offered by banks and non-banking financial companies, where one can deposit money for a higher rate of interest than savings accounts. These deposits, hence, offer the highest rate of interest, ranging from $4$ to $7.25$ percent.

Multiple choice maths banking and taxation types of accounts banks introduction, recurring deposit accounts and calculation of interest on a fixed deposit account

When a certain amount is deposited for a fixed period such as six months, one year or longer. Such type of account is

  1. saving account

  2. current account

  3. recurring deposit account

  4. fixed deposit account
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When a certain amount is deposited for a fixed period such as six months, one year or longer. such type of account is fixed deposit account.

Multiple choice maths banking and taxation types of accounts banks introduction, recurring deposit accounts and calculation of interest on a fixed deposit account

The deposit is fixed and is repayable only after a specific period is over is called

  1. current account

  2. fixed deposit account

  3. recurring deposit account

  4. savings account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The deposit is fixed and is repayable only after a specific period is over is called fixed deposit account.

Multiple choice maths banking and taxation types of accounts banks introduction, recurring deposit accounts and calculation of interest on a fixed deposit account

Bank allow the prematurity of fixed deposits. Then they usually collect penal of interest on _____ for the premature withdrawal of fixed deposits.

  1. principal

  2. maturity amount

  3. rate of interest

  4. profit
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Bank allow the prematurity of fixed deposits. Then they usually collect penal of interest on rate of interest for the premature withdrawal of fixed deposits.

Multiple choice book keeping and accountancy meaning and fundamentals of double entry book-keeping double entry system meaning, definition, and advantages of double entry book-keeping meaning, definition, need, objectives and limitations of double entry system

Lenders can study the creditworthiness of the business firm with the help of books of accounts.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Lenders rely on financial statements and books of accounts to assess the financial health, liquidity, and solvency of a business before extending credit.

Multiple choice commercial applications meaning and fundamentals of double entry book-keeping double entry system meaning, definition, and advantages of double entry book-keeping meaning, definition, need, objectives and limitations of double entry system introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

Book-keeping is helpful for ___________.

  1. Owners

  2. Lenders

  3. Investors

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Book-keeping provides essential financial data that is useful to various stakeholders, including owners (for performance), lenders (for creditworthiness), and investors (for decision-making).

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

Making excessive provision for doubtful debits builds up the secret reserve in the business.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This statement is true. Secret reserves refers to a reserve the existence of which is not disclosed in the balance sheet. Secret reserves are also called as hidden reserve or internal reserve. When excess provision is created it reduces the profits of the company and create secret reserve. Such a reserve is not disclosed in the balance sheet. 

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

Secret reserve can be created by way of _________________.

  1. Undervaluation of asset

  2. Charging capital expenditure as revenue expenditure

  3. Making excessive provisions for doubtful debts

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Secret Reserves are created for contingency's, to avoid competitions, to provide additional working capital and to strengthen the financial position of the business firm.

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

The Reserve which is credited for a particular purpose and which is a charge against revenue is called___________.

  1. Capital Reserve

  2. General Reserve

  3. Secret Reserve

  4. Specific Reserve
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A specific reserve is one, which is created for some specific purpose by debiting Profit and Loss Appropriation Account. Normally, it is available for the purpose for which it has been created.

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

Secret reserve is created by way of_________.

  1. excess provision of bad debts

  2. undervaluation of closing stock

  3. excess provision of depreciation

  4. all the three
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Secret reserve is a reserve, the existence and/ or the amount of which is not disclosed in the balance sheet. It is also called as "Hidden Reserves or Internal Reserves."

Secret reserves are created by :
  • Excessive depreciation on the asset.
  • Excessive overvaluation of liability
  • Showing a contingent liability of an actual liability or as provision.
  • Charging capital expenditure to revenue or crediting revenue receipts to an asset.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Financial analysis is used only by the creditors. 

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Financial statement analysis is used by internal and external stakeholders to evaluate business performance and value. Financial accounting calls for all companies to create a balance sheet, income statement, and cash flow statement which form the basis for financial statement analysis.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Payment received from debtor _____________.

  1. Decreases the total assets

  2. Increases the total assets

  3. Results in no change in total assets

  4. Increase the total liabilities
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Every business transaction affects two accounts as accounting is based on double entry system of accounting. For every debit there will be a credit and vice versa. 


Accounting entry for payment received from debtors will be:

Cash A/c              Dr.
    To Debtors

Cash and debtors both are current assets. One is increasing and another is decreasing. There will be no change in total assets.

Multiple choice book keeping and accountancy analysis of financial statements financial statement of company rules for recording in journal dual effect of transactions, types of accounts and rules of debit and credit

Bills Receivable A/c is _________.

  1. Personal A/c

  2. Real A/c

  3. Nominal

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

There are mainly three types of account: Real, Personal and Nominal accounts. Personal accounts are classified into three subcategories: Natural, Artificial and Representative. Bills Receivable and Bills Payable are personal accounts. Both these accounts represent debtors and creditors of a particular entity. The rule of personal account is Debit the receiver, Credit the giver. Suppose when Bills Receivable is issued, its debited because that represents debtor from whom money is receivable. In a way the entity has given those debtors a benefit i.e. credit so as per the rule  Bills Receivable A/c is debited. Hence, bills receivable is a personal a/c.