SEBI Grade A 2022- Commerce & Accountancy Question Set-2

Correct Answer –A. Liquidity ratio

Explanation: The ratios that refer to the ability of the firm to meet the short term obligations out of its short term resources is known as Liquidity ratio.

Correct Answer –D. All of the above

Explanation:Bills payable, Outstanding expenses and Bank Overdraft are the current liabilities.

Correct Answer –D. (Net profit / Total assets) x 100

Explanation:Return on Investment Ratio (ROI) = (Net profit / Total assets) x 100.Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.

Correct Answer – C. Revenue expenditure

Explanation: Rs.5000 spent on maintenance of computer is Revenue expenditure. A revenue expenditure is a cost that will be an expense in the accounting period when the expenditure takes place.

Correct Answer – B. Error of principle

Explanation:“Treating a revenue expenditure as a capital expenditure” is an example of Error of principle. An error of principle is an accounting mistake in which an entry is recorded in the incorrect account, violating the fundamental principles of accounting. An error of principle is a procedural error, meaning that the value recorded was the correct value but placed incorrectly.

 Correct Answer – D. Trial Balance

Explanation:Trial Balance is not a financial statement. Trial Balance is a list of closing balances of ledger accounts on a certain date and is the first step towards the preparation of financial statements. It is usually prepared at the end of an accounting period to assist in the drafting of financial statements.

Correct Answer – A. FIFO

Explanation: FIFO-First In First Out

Correct Answer – C. Create funds for replacement of fixed assets

Explanation:The main objective of providing depreciation is to Create funds for replacement of fixed assets. The main objective of charging depreciation is to accumulate adequate fund to replace old asset with the new one after the useful life. Depreciation is charged to fixed assets which helps to show the current value of the asset.

Correct Answer –C. Customs duty paid in connection with the import of equipment

Explanation:Customs duty paid in connection with the import of equipment is not an item of revenue expenditure. Customs duty paid on import of raw materials. It is capital expenditure.

Correct Answer – B. Going concern

Explanation:One of the Fundamental accounting assumption is Going concern. Going concern is an accounting term for a company that has the resources needed to continue operating indefinitely until it provides evidence to the contrary.