Accounting and Auditing MCQ Quiz in मल्याळम - Objective Question with Answer for Accounting and Auditing - സൗജന്യ PDF ഡൗൺലോഡ് ചെയ്യുക

Cash Flow From Operating Activities = Profit After Tax + Depreciation + Decrease In Debtors

Therefore, Cash Flow From Operating Activities = 80,000 + 15,000 + 25,000 = Rs. 1,20,000

Depreciation is added back to profit after tax as it is a non-cash expense.

A decrease in debtors is added to profit after tax as it indicates cash inflow of money.

The correct answer is Management audit

Key Points Management audit:

• An independent and systematic analysis and evaluation of a company's overall operations and performances constitutes a management audit.
• It is a useful tool for evaluating the effectiveness, roles, successes, and accomplishments of the business.
• The main goal of a management audit is to spot mistakes in management processes and recommend potential improvements.
• It directs management to oversee activities in the most efficient and effective manner possible. 

Important Points Objectives Of Management Audit:

• Verify Efficiency- It aims to boost productivity at all levels of management and policy implementation.
• Evaluates the Potential of Policies and Planning: It examines and assesses the management-structured policies and plans to see whether they are being properly carried out.
• Increase Profit - By offering ways to effectively maximise the company's resources, it helps to raise the profit margin.

Financial management refers to the managing of a firm's financial resources, in relation to its acquisition and application of funds. Financial management is the branch of management that deals with acquiring, financing, and managing business assets.

Objectives of Financial Management:

1) Maximization of profits:

• Maximization of profits is considered the ultimate objective for any business organization. 
• Company's decisions are taken keeping in mind the number of profits they will get from the application of these decisions.

2) Maximization of shareholders’ wealth: 

• It can be ascertained through cost-benefit analysis according to the time for which money is invested and risk is involved and is also called value maximization.
• This objective is concerned with raising the market value of the organization.
• Wealth can be calculated by subtracting the Present value of Cost from the Present Value of Benefits.

A company's business objective defines the decision-making in Financial Management.

Profit Maximisation is the primary objective of the firm, and wealth maximization is the overall main objective.

Also, profit maximization is a short-term goal, and wealth maximization is a long-term goal of the firms.

Therefore, The basic objective of Financial Management is the Maximization of shareholders’ wealth. 

A cost audit represents the verification of cost accounts and checking on the adherence to the cost accounting plan. Cost audit ascertains the accuracy of cost accounting records to ensure that they are in conformity with cost accounting principles, plans, procedures, and objectives.

1. The cost auditor is to be appointed by the Board of Directors on the recommendation of the Audit Committee, where the company is required to have an Audit Committee.
2. The cost auditor proposed to be appointed is required to give a letter of consent to the Board of Directors.
3. The company shall inform the cost auditor concerned of his or its appointment as such and file a notice of such appointment with the Central Government within a period of thirty days of the Board meeting in which such appointment is made or within a period of one hundred and eighty days of the commencement of the financial year, whichever is earlier, through electronic mode, in form CRA-2 along with the fee as specified in Companies (Registration Offices and Fees) Rules, 2014.

According to section 148(3) of Companies Act 2013, cost audit shall be conducted by Cost Accountant in Practice who shall be appointed by the Board on such remuneration as determined by the members in such a manner as may be prescribed.

Thus, the Cost auditor is appointed by the Board of Directors.

Purchase Consideration:

In the case of amalgamation, purchase consideration is the agreed amount that the transferee company (Purchasing company) pays to the transferor company (Vendor company) in exchange of the ownership of the transferor company. It may be in form of cash, shares, or any other assets as agreed between both companies.

Methods of Purchase Consideration:

There are four various methods that can be used in this calculation:

1. Net asset method:

The purchase consideration is equal to the total net assets of the transferor company.

The total agreed amount of asset – Total agreed amount of liabilities

2. Net payment method:

Payment made to the shareholders of the transferor company in form of cash, shares, or debentures.

3. Lump-sum method:

Fixed amount paid by the transferee company to the transferor company. This method does not require any calculation as the amount is decided by the mutual consent of both companies.

4. Intrinsic value/ Share exchange method:

It is calculated by dividing the net asset value of the transferor company by the price of one share of the transferee company.

The resulting figure then divided by the number of existing shares of the transferor company to find out the ratio.

Therefore, Gross Receipts Method is NOT a method for calculating or ascertaining the amount of purchase consideration.

Option1 is correct.

Monthly Demand = 1,350 units (Given)

Annual demand = 1350 x 12=16200 (monthly units x 12)

Ordering Cost = 2400 (given)

Price paid = Rs. 20 per unit.

Carrying Cost = 30% x 20 = 0.03 x 20 = 6  (As carrying cost of inventory being 30 percent of the price paid)

where:

• AR– Consumption of the article concerned (in units) during a year;
• OC = Cost of placing one order including the cost of receiving the goods or ordering cost; and
• C = Interest payment per unit per year including another variable cost of storing it (carrying cost per unit per annum)

= \(\sqrt{{2\times16200\times2400}\over{6}}\)

EOQ= 3600 Units

The correct answer is Money measurement concept.

Key PointsMoney Measurement Concept:

The money measurement concept is an accounting concept based on the idea that a business should only record those transactions and events that can be measured in monetary terms, i.e., at a transaction price that is equal to cash outflow or inflow in terms of money, measurable in the currency unit used in that particular country, in order to provide quantitative information rather than qualitative information.

Important Points

• Example of Money Measurement Concept: The skills and competence of human employees employed by the company contribute to its growth and performance, although they cannot be assigned to an objective monetary value and are therefore not recognised as assets in the balance sheet of the company.
• However, transactions involving employees that are measurable in monetary terms, such as salary expenses and pension liabilities to the company, must be measured and acknowledged as a valid source to be added to financial statements.

Hence, it can be concluded that if a company does not include the value of skills gained by its employees from training programmes in its annual financial statements, it is applying money measurement concept of accounting.

Additional Information

Going Concern Concept:  

• According to the going concern principle of accounting, a company's operations will not be liquidated or forced to end for any reason, and they will instead continue in the future.
• A business is considered a continuing concern if there is no reason to think that it will have to or will have to halt operations in the near future.

Revenue recognition concept: 

• A generally accepted accounting standard (GAAP) called revenue recognition specifies how and when revenue should be recognised.
• According to the accrual accounting revenue recognition concept, revenues must be recognised when they are earned and realised rather than when cash is received.

Business entity concept: 

• According to the concept of business entities, businesses and their owners are considered to be different legal entities for the purposes of accounting procedures.
• Accountants should only keep track of the business's affairs, not the owners' private affairs. 

The correct answer is credit note.

Important PointsCredit Note:

• The seller provides the buyer with a credit note.
• It is issued when the buyer returns faulty items or when the goods are overcharged.
• The amount credited to the buyer's account is disclosed to them.
• The seller keeps a duplicate and sends the original copy to the buyer.

Hence, it can be concluded that the correct answer is credit note. 

 Additional InformationDebit Note:

• It is given to the buyer by the seller.
• In the event that the vendor undercharged for his goods or services, it serves as a supplemental invoice.
• The buyer is made aware of the additional sum that must be paid to the seller.
• The seller keeps a duplicate and sends the original copy to the buyer.

Vouching refers to reviewing documentary evidence to see if it properly supports entries made in the accounting records. While vouching, and the auditor is looking for any errors in the amount recorded in the accounting records, as well as ensuring that the transactions are recorded in the correct accounts.

A sales voucher is a form of a receipt or documentation commonly given to a buyer of supplies or goods. It typically serves as proof of purchase when a provider must order or deliver the goods at a later point.

Vouching of sales includes:

Sales Book:

• Sales book records only credit sales of goods to the customer.
• When the goods are sold, invoices are sent out and that only becomes the source document or voucher for recording transactions in the sales book.

Dispatch of goods:

• Dispatching of goods refers to an act of sending goods to a particular place which is undertaken by a logistic unit.
• The term "lead time" can be used to refer to the time elapsed between order and dispatch of goods.
• The document of dispatch clarifies that the goods have been transported or dispatched under the conditions specified.

An auditor verifies and vouches for both the Sales Book and Dispatch of goods documents to check that they support the entries made in them and the inventory is maintained accordingly or not.

Therefore, options B and A are only related to the vouching of sales.

Debit notes:

• A debit note is a document used by a vendor to inform the buyer of current debt obligations.
• It can provide information regarding an upcoming invoice or can serve as a reminder for funds currently due.
• It is used in case of Purchase Returns, escalation/de-escalation in price, any other expenses incurred by the vendor on behalf of the party. 

Credit notes:

• A credit note is a document used when there has been an error in an already issued invoice, such as when a customer wishes to change their original order or an incorrect amount. 
• In other words, it is issued in any scenario that would require the invoice to be changed or re-issued.
• It is used in case of Sales Return, issued by a seller to buyer informing that his account is credited.

The correct answer is A, C, and D only.

Key PointsGAAP (Generally Accepted Accounting Principles) - 

The framework for more intricate and thorough accounting regulations, standards, and other sector-specific accounting procedures is provided by generally accepted accounting principles (GAAP), which are fundamental accounting concepts and recommendations.

 Important PointsIGAAP, are Indian Generally Accepted Accounting Principles. In India, accounting standards published by the Institute of Chartered Accountants of India (ICAI) and the laws outlined in the relevant applicable statutes are used to generate financial accounts.

Indian Companies Act, 2013- 

• An Act of the Indian Parliament on Indian company law, the Companies Act 2013, governs the incorporation of a company, its duties, its directors, and its dissolution.
• For example, Schedule III of Companies Act, 2013 should be compulsorily followed by all companies and gives the format of financial statements.
• Thus, Indian Companies Act, 2013 includes in IGAAP.

Accounting standards-

• A unified collection of guidelines that serve as the foundation for financial accounting rules and practices is known as an accounting standard.
• Accounting Standards are mandatory to followed by all firms & companies.
• There are total 32 Accounting standards in India which should be followed by every single firms and companies.
• Accounting standard are also included in IGAAP.
• Recently to meet international accounting standards ICAI also includes Ind ASs (Indian Accounting Standards).
• Thus, Accounting Standards are included in IGAAP.

ICAI's pronouncements- 

• It is an official or authoritative statement or announcement.
• These pronouncements include Engagement and Quality Control Standards, Guidance Notes on accounting and Statements on Accounting.
• The ‘Handbook of Accounting Pronouncements’ is issued by ICAI with a view to provide the text of all these pronouncements to the members at one place.
• These statements gives guidance to the companies to follow Accounting Standards.
• Thus, these are also includes for IGAAP.