Business Mathematics & Accountancy- Sample Problems to Solve Practice 1

1. Only the significant events which affect the business are to be reported in financial
statements. This is as per the principle of:
a) Money measurement concept
b) Accrual concept
c) Materiality concept
d) Business entity concept
2. Which one of the following statement is Correct
a) Credit whatever comes in and debit whatever goes out
b) Debit the receiver and credit the giver
c) Ledger is the book of original entry
d) Journal is the permanent entry of transactions
3. Following are number of defective items produced in a machine and data compiled through
sample checks. What is the mode value of the defective items?
4, 5, 5, 7, 3, 4, 9, 2, 6, 8, 3, 3, 4, 6, 4
a) 4
b) 5
c) 3
d) 6
4. In a trading account statement, the debit side total is Rs 14, 15,750. The total gross sales for
the year is Rs 13, 45,800 and the sales return is Rs 2,750. The closing stock will be
a) 67200
b) 69950
c) 72700
d) 77200
5. The opening balance of creditors account was Rs 25,000. The total purchases made for the
full year was Rs 1, 30,000 of which cash purchases were to the extent of Rs 20,000. Defective
materials returned (purchase-return) was Rs 35,000. The payments made to the creditors
during the year amounted to Rs 55,000. The closing balance in creditors account will show
a) Rs 65,000
b) Rs 1,00,000
c) Rs 75,000
d) Rs 45,000
6. Match the items appearing in Column 1 below to the related items in Column 2.

Real account A Interest received 1

Nominal account B Bank balance 2
Intangible account C Furniture 3
Personal account D Goodwill 4
a) A-3; B-1; C-4; D-2
b) A-2; B-4; C-1; D-3
c) A-4; B-1; C-2; D-3
d) A-2; B-3; C-4; D-1
7. Which one of the following assets is NOT normally depreciated in the books of accounts of
the company
a) Building
b) Land
 c) Machinery
d) Furniture
8. Mr Ram purchased for his company a drilling machine at a cost of Rs 3, 55,000 on 1 st January
2014. The installation and other related expenses spent was Rs 5,000. A SLM-depreciation of
10% is accounted for this machine in the books of accounts. He sold the said machine on 1 st
April 2017 at a cost of Rs 2, 50, 000. How much is the profit/ loss Mr Ram would have
earned/ incurred in this transaction?
a) Rs 2,000 (Loss)
b) Rs 29,000 (Loss)
c) Rs 7,000 (Profit)
d) Rs 22,000 (Profit)
9. The opening and closing balances of debtors’ account for the year 2016-17 were Rs 80,000
and Rs 1, 20,000 respectively. The total sales for the year was Rs 8, 00,000 of which cash
sales account for Rs 2, 00,000. The debtors’ turnover ratio for the year 2016-17 is
a) 6 times
b) 8 times
c) 10 times
d) 6 times
e) 5 times
10. Which of the following is NOT the method of charging Depreciation?
a) Straight line method
b) Diminishing balance method
c) Accrual method
d) Sum of digits method
11. Which one of the following will appear on the credit side of the balance sheet
a) Outstanding expenses
b) Prepaid expenses
c) Bills receivables
d) Prepaid Insurance Premium
12. The debt-equity ratio of a firm is 4:1. The owners’ fund in the firm amounts to Rs 2 lacs. The
firm has repaid a long-term loan amount of Rs 2 lacs by disposal of a fixed assets. The
changed debt-equity ratio of the firm is
a) 5.0: 1
b) 3.0: 1
c) No Change
d) 2.5: 1
13. In which of the following the account is closed for the year and no balance is carried over to
next financial year?
a) Debtors’ account
b) Salary expenses
c) Capital account
d) Furniture account
14. The quick-ratio of a company is 2.0. The current liabilities amount to Rs 40 lacs. The
inventories and pre-paid expenses are Rs 15 lacs and Rs 5 lacs. The current assets of the
company is
a) Rs 100 lacs
b) Rs 60 lacs
c) Rs 40 lacs
 d) Rs 120 lacs
15. Which of the following statement is TRUE?
a) Short term assets are those held for more than one year
b) A term loan availed from bank will not affect debt-equity ratio
c) The amount of purchase-returned are credited to supplier’s account
d) Net working capital is current assets minus current liabilities
16. Which of the following statement is NOT TRUE?
a) A debit entry decreases the balances in capital account
b) A credit entry increases the balances in sales account
c) A debit entry decreases the balances in machinery account
d) A debit entry increases the balances in debtors’ account
17. Which one of the following is a typical cash outflow on account of operating activities?
a) Cash payments to staff
b) Cash advances to third parties
c) Redemption of debentures
d) Dividends payment for shares
18. Which one of the following is NOT a Nominal account?
a) Salary Expenses account
b) Cash account
c) Discount received account
d) Carriage-inward account
19. The firm has accepted for full settlement of a payment due of Rs 60,000 from a debtor-Mr
Ramesh, against an immediate cash settlement of Rs 50,000. In the company’s books of
accounts, which one of the following sets of journal entries will be passed?
a) Cash account debit Rs 60,000; Discount allowed account credit Rs 10,000; Ramesh
account credit Rs 50,000
b) Cash account debit Rs 50,000; Discount allowed account debit Rs 10,000; Ramesh
account credit Rs 60,000
c) Cash account debit Rs 50,000; Discount allowed account credit Rs 10,000; Ramesh
account debit Rs 60,000
d) Cash account debit Rs 60,000; Discount allowed account credit Rs 10,000; Ramesh
account credit Rs 50,000
20. The salary paid to staff members for the full year was Rs 12, 50,000. For four staff members
there were arrears of salary amounting to Rs 50,000. Which of the following entries are to
be passed in the books before posting the expenses to P & L account?
a) Salary expenses account credit Rs 50,000 and Outstanding expenses account debit
Rs 50,000
b) Salary expenses account debit Rs 50,000 and miscellaneous expenses account credit
Rs 50,000
c) Salary expenses account credit Rs 50,000 and miscellaneous expenses account debit
Rs 50,000
d) Salary expenses account debit Rs 50,000 and Outstanding expenses account credit
Rs 50,000
21. Net profit ratio of 0.25 times implies that:
a) The profit after tax is 25% of sales
b) The profit after tax is 4 times of sales
c) The profit before tax is 4 times of sales
d) The profit before tax is 25% of sales
22. Calculate the current ratio and quick ratio for the Following data
Cash balance ₹ 5,000
Bank balance ₹ 10,000
Inventories ₹ 10,000
Bills receivable ₹ 15,000
Debtors ₹ 10,000
Creditors ₹ 10,000
Bills payable ₹ 15,000
a) 2.25; 1.5
b) 2.0; 1.8
c) 2.5; 1.5
d) 2.0; 1.6
23. How do you treat the loss on sale of long-term asset Funds Flow calculation as per Indirect
Method?
a) This loss has to be deducted from net income
b) This loss is neither to be added nor to be deducted from net income
c) This loss has to be accrued for set off against future gain
d) This loss has to be added back to net income
24. Which one of the following transactions will NOT affect the net working capital?
a) Purchasing of raw materials by availing of a long term loan
b) Purchasing of a land property by issuing bank cheque
c) Availing of a short term loan from bank for investing in fixed assets
d) Purchasing of raw material by payment of cash
25. Which one of the following statement IS FALSE?
a) Decrease in long term assets results in source of funds
b) Increase in Long term liabilities results in use of funds
c) Decrease in short term liabilities results in use of funds
d) Increase in short term assets results in use of funds
26. Which one of the following item will NOT find a place in the ASSETS side of a General Ledger
of a BANK?
a) Debit balance in current account
b) Cash in hand
c) Credit balance in overdraft accounts
d) Balances in other banks
27. If an amount of Rs 3,00,000 is invested at a compound interest rate of 10% p a for 4 years,
the maturity value is
a) Rs 4,20,000
b) Rs 3,99,300
c) Rs 4,55,000
d) Rs 4,39,230
28. At what simple interest does Rs 30,000 amount to Rs 36,000 in 3 years?
a) 6.00%
b) 6.75%
c) 5.75%
d) 6.67%
29. Find the effective rate of return for 12% and 15% when compounding is done quarterly
a) 12.55%; 15.86%
 b) 12.25%; 15.56%
c) 12.75%; 15.97%
d) 11.98%; 15.25%
30. Raman invests Rs 40,000 at the end of each year for 4 years in a bank. Deposit earns interest
@ 8% p a. Calculate the future value of annuity.
a) Rs 1,70,560
b) Rs 1,80,240
c) Rs 1,65,730
d) Rs 1,79,495
31. Find out the doubling period for two rates of interest viz., 6% and 12% using the ‘rule of 69’
a) 12 years; 6 years
b) 11.85 years: 6.1 years
c) 13 years; 6.5 years
d) 11.75 years; 6.1 years
32. Mr Raju wants to receive Rs 3,20,000 annually for 6 years at a discount rate of 12% p a.
Compute how much he should invest now if he wants to receives it at the end the period.
a) Rs 14,73,528
b) Rs 14,73,515
c) Rs 14,73,000
d) Rs 14,74,000
33. Calculate Arithmetic Mean from the following data:
Expenses of the Branch No. of Months
(In Lakhs of INR)
15 3
23 5
17 2
25 1
21 1

a) 18
b) 25
c) 20
d) 30
34. If Coefficient of Variation is 20% and SD is 8, Mean value is:
a) 10
b) 50
c) 60
d) 40
35. If the NPV of a project is INR 550 when discounted at 10%, and INR 430 when discounted at
12%, what is the IRR?
a) 11.12
b) 11.22
c) 10.28
d) 12.00
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Answer Key

1 C 11 A 21 A 31 B
2 B 12 B 22 D 32 A
3 A 13 B 23 D 33 C
4 C 14 A 24 D 34 D
5 D 15 D 25 B 35 A
6 A 16 C 26 C ------ --
7 B 17 A 27 D ------ --
8 B 18 B 28 D ------ --
9 D 19 B 29 A ------ --
10 C 20 D 30 B ------ --