Classical

Financial and Management Accounting - Financial and Management Accounting Objective Type Questions

41:  
In the case of a particular depreciation method, the periodic depreciation is smaller than the asset's actual annual depreciation cost. The annual net incidence on profit and loss account remains constant due to incorporation of only fixed depreciation. The periodic depreciation is not recorded through the asset account. The depreciation method used in this case is
A.

Sinking fund method

B.

Diminishing balance method

C.

Annuity method

D.

Sum-of-year digits method

 
 

Option: A

Explanation :


42:  
When it is not registered, a partnership firm is
A.
Deemed to be an illegal association and is disallowed to carryon business.
B.
Allowed to carryon business subject to payment of penalty.
C.
Allowed to carryon business subject to certain disabilities
D.
Allowed to carry on business only with the special permission of the Registrar of Firms.
 
 

Option: C

Explanation :


43:  
Consider the following ratios:
1. Acid test ratio
2. Capital turnover ratio
3. Bad debts to sales ratio
4. Inventory turnover ratio
Which of these ratios are more appropriate for testing the liquidity of a concern?

 

A.

1 and 3

B.

1 and 4

C.

2 and 4

D.

2 and 3

 
 

Option: B

Explanation :


44:  
The current ratio of a company is 2 : 1. Which of the following suggestions would reduce it?
A.

Paying off a current liability

B.
Selling off a motor car for cash at a slight loss
C.
To borrow from money for a short time on an interest bearing promissory note
D.

Issuing new shares.

 
 

Option: C

Explanation :


45:  
The ratios which measure the relative contribution of financing by owners and financing provided by outsiders are called
A.

Liquidity ratios

B.

Leverage ratios

C.

Activity ratios

D.

Profitability ratios

 
 

Option: B

Explanation :




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