Tag: ascertainment of profit and loss

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Questions Related to ascertainment of profit and loss

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Who appoints the auditors of a company?

  1. Shareholders

  2. Central Government

  3. Board of directors

  4. Registrar of companies
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to the Companies Act, the shareholders of a company have the authority to appoint auditors during the Annual General Meeting.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Which one of the following securities cannot be issued by a public limited company in India?

  1. Participating preference shares.

  2. Redeemable preference shares.

  3. Deferred shares.

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

A deferred share is a share that does not have any rights to the assets of a company undergoing bankruptcy until all common and preferred shareholders are paid. It may also be a share that is issued to company founders that restricts their receipt of dividends until dividends have been distributed to all other classes of shareholder.
In India deferred shares were issued prior to 1956.The Companies Act, 1956 prohibited public limited companies to have these shares and hence these securities cannot be issued by a public limited company in India.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Who among the following is a bear operator?

  1. A stock broker who sells shares now and buys the same shares later.

  2. An investor who expects the price of a security or that of the whole securities market to rise.

  3. An investor who sells securities anticipation of being able to repurchase them later at a lower price.

  4. A broker who indulges in rigging of share prices.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A bear operator is an investor who anticipates a market decline. They sell securities they do not own (short selling) or sell existing holdings, hoping to buy them back later at a lower price to profit from the difference.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

A limited company has to redeem redeemable preference shares of the value of Rs. $1,00,000$ for which the company has issues $3000$ equity shares of Rs. $10$ each at a premium of $10\%$. The amount to be transferred to capital redemption reserve account will be.

  1. Rs. $1,00,000$

  2. Rs. $97,000$

  3. Rs. $70,000$

  4. Rs. $67,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

If the preference shares are redeemed out of accumulated profit, it will be necessary to transfer an amount equal to the amount repaid on the redemption to Capital Redemption Reserve Account. If the company issues any fresh shares for redemption purpose, the transferred amount will be the difference between nominal value of shares redeemed and the nominal value of shares issued (i.e. amount transferred to CRR = Nominal value of shares redeemed – Nominal value of shares issued). The capital redemption reserve account can be used for issuing fully paid bonus shares.

Therfore, amount to be transferred to capital redemption reserve account will be Rs. 70000.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

The movement of securities from one stock exchange to another with the object of reaping a profit from the disparity in share prices is called __________.

  1. Averaging

  2. Arbitraging

  3. Back wardation

  4. Forward Trading
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Arbitrage is a process of taking out the profits by movement of securities from one stock exchange to another due to price disparity.

Arbitrage is the simultaneous purchase and sale of an asset to profit from an imbalance in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

A statutory auditor reports to____________.

  1. Debenture holders

  2. Central Government

  3. Board of directors

  4. Share holders
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under section $143(3)$ of the Companies Act, $2013$, the duties of the auditor which relate to his report are that the auditor shall report to the shareholders on the accounts examined by him.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

The ratios which measure the relative contribution of financing by owners and financing provided by outsiders are called ______________.

  1. Liquidity ratios

  2. Leverage ratios

  3. Activity ratios

  4. Profitability ratios
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Leverage ratios, also known as solvency ratios, compare the amount of debt (outsider financing) to equity (owner financing) to assess a company's long term financial risk.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Control of management of the company mainly vests in hands of __________ .

  1. Equity shareholders

  2. Preference shareholders

  3. Debenture-holders

  4. All of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A corporation generally has three parties sharing power and control: directors, officers, and shareholders. Directors are the managers of the corporation, and officers control the day-to-day decisions and work more closely with the employees.

Control of management of the company mainly vests in hands of equity shareholders.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Which of the following is not an internal user of management information?

  1. Creditor

  2. Department manager

  3. Controller

  4. Treasurer
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Management information is a representation of various information to the management. This information is used by the internal management for taking various decisions. 

Creditors are not the internal users. Creditors are outsiders and they are not intended to be the internal user of management information. 

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Which of the following amounts shall be credited to Investor Education and Protection Fund, if they remain unpaid/unclaimed for seven years from the date they become due?

  1. Matured debentures of a company

  2. Tax arrears

  3. Proceeds of sale property

  4. Provision for doubtful debts
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Investor Education and Protection Fund (IEPF) is for promotion of investors’ awareness and protection of the interests of investors.

Investor Education and Protection Fund (IEPF) has been set-up under Section 205C of the Companies Act, 1956 by way of the Companies (Amendment) Act, 1999.  As per the Act, the following amounts which have remained unclaimed and unpaid for a period of seven years from the date they became due for payment shall be credited to the IEPF:-
 (a) Unpaid dividend accounts of the companies;
 (b) The application moneys received and due for refund; 
(c) Matured deposits;
 (d) The interest accrued in the amounts referred to in clauses (a) to (d);
 (e) matured debentures;
 (f) Grants and donations by the Central Govt., State Govt., companies or any other institutions ;
 (g) The interest or other income received out of the investments made from the fund.