IC26 Mock Test Sample 11
This set of questions mainly covers core concepts from accounting, finance, taxation, insurance, and financial reporting frameworks. It includes key topics such as liquidity, tax deductions under Sections 80C/80CCC/80CCD, IFRS classification of insurance investments, and types of accounting errors. It also covers RBI’s role in banking regulation, joint life insurance concepts, death claim procedures, investment norms in life insurance, and sundry debtors classification. Other areas include human resource valuation models, money market instruments, accounting equation basics, whole life insurance features, perquisites, IASB Phase II objectives, ULIP underwriting, expense classification, bank reconciliation, and Value Added Statement limitations.
1. What does liquidity refer to in financial terms?
a) Ability to generate long-term assets
b) Ability to convert assets to cash in a short time
c) Ability to acquire fixed assets
d) Ability to pay off long-term debt
e) Ability to invest in stocks and bonds
2. What is the maximum amount of deduction available under Section 80C, 80CCC, and 80CCD?
a) Rs. 50,000
b) Rs. 1,00,000
c) Rs. 1,50,000
d) Rs. 2,00,000
e) Rs. 2,50,000
3. How are investment assets of insurance companies categorized under IFRS 4?
a) As held to maturity (HTM) or available for sale (AFS)
b) As held to maturity (HTM) or held for trading
c) As available for sale (AFS) or loans and receivables
d) As loans and receivables or held for trading
e) None of the above
4. What type of error involves two errors that compensate each other, resulting in total debits equaling total credits in the trial balance?
a) Error of commission
b) Error of omission
c) Transposition error
d) Compensating error
e) Error of prime entry
5. What is the primary role of the Reserve Bank of India (RBI) in the banking system?
a) To provide loans to individuals and businesses
b) To promote long-term investments in equities
c) To regulate the housing finance industry
d) To ensure smooth functioning of the banking sector
e) To facilitate government projects
6. Under the Joint life endowment insurance plan, how many payments on two deaths are contemplated?
a) One
b) Two
c) Three
d) Four
e) Five
7. How are accounting entries for death claims typically initiated by insurance companies?
a) Sending claim discharge forms
b) Treating the policy amount as a claim upon receiving notice of the insured's death
c) Initiating a transaction with a bank account
d) Calculating the outstanding death claim amount
e) Netting the claim amount with deductions
8. In life insurance business, what is the minimum percentage of the fund that must be invested in government securities?
a) Not less than 10%
b) Not less than 25%
c) Not less than 40%
d) Not less than 60%
e) Not less than 75%
9. What should be included in the schedule of sundry debtors?
a) All items grouped as sundry debtors and advance
b) Only those debtors shown separately in the balance sheet
c) Only advance for purchase of cycles
d) All advance against traveling expenses
e) All debtors specifically listed by the accounts department
10. What does the Jaggi and Lau Model emphasize in valuing human resources?
a) Individual contributions and skills
b) Expected service tenure of each employee
c) Percentage of people likely to leave the organization in future
d) Present value of existing employees in each rank
e) Subjective evaluation of replacement cost
11. Which type of users include managers, employees, and people related to the organization?
a) Internal Users
b) External Users
c) Shareholders
d) Lenders/Other Suppliers
e) Customers
12. What are some of the instruments in the money market with a maturity of not more than one year?
a) Equity shares
b) Government bonds
c) Certificate of deposit
d) Mutual funds
e) Real estate investments
13. In the accounting equation Assets = Liabilities + Capital, what does "Liabilities" represent?
a) Everything the entity owns or controls
b) Everything the entity owes to third parties
c) Initial capital contributed by the owners
d) Profits generated by the business
e) Total of all ledger accounts
14. What is a disadvantage of Whole life insurance plans?
a) Premiums cease at retirement age
b) Sum assured is payable on death or at the end of a fixed term
c) Premiums continue in old age
d) Provision for old age is included
e) Premiums are limited to a predetermined maximum number
15. Under what circumstances is the value of free meals provided by the employer not considered as a perquisite?
a) When alcoholic drinks are served along with meals
b) When non-alcoholic drinks and food are served during working hours
c) When the employee pays for the meals
d) When the meals are provided at the employee's residence
e) None of the above
16. What does Phase II of the insurance contract project of IASB aim to achieve?
a) Implement a single, consistent recognition and measurement standard for insurance contracts
b) Retain existing international insurance contract accounting practices
c) Specify accounting for financial assets and liabilities
d) Require disclosure of amounts in an insurer’s financial statements
e) None of the above
17. When does the underwriter assess the risk in a ULIP policy application?
a) After receiving the first premium
b) After receiving the application form
c) After allocating premium to unit funds
d) After receiving the subsequent premium
e) After the policy is issued
18. What are the two main categories of expenses related to unit-linked plans in insurance?
a) Premium and commission expenses
b) Direct and indirect expenses
c) Medical and advertising expenses
d) Policy and fund management expenses
e) None of the above
19. What is the purpose of obtaining a certificate of balance from the bank in final accounts?
a) To reconcile bank balance with books of accounts
b) To verify cash on hand
c) To assess saleable literature value
d) To determine obsolete asset value
e) To confirm policy loan amounts
20. According to opponents of Value Added Statement, which stakeholder should get more weightage but is not possible?
a) Government
b) Employees
c) Shareholders
d) Customers
e) Suppliers
