IC26 Mock Test Sample 4
These questions cover insurance accounting, auditing, budgeting, KYC norms, ratios, and financial reporting concepts. Capital expenditure like purchase of office space gives long-term benefits. Auditors have a cooling period before reappointment as per IRDA guidelines. IFRS in India is notified by the Ministry of Corporate Affairs. Errors in trial balance include posting and transposition errors. Production budget is calculated using sales plus closing inventory minus opening inventory. High conservation ratio indicates low lapses. Source documents validate transactions. Asset formula is Assets = Liabilities + Equity. Insurance companies must manage fair value gains properly, and budgeting mainly focuses on controlling expenses and ensuring financial discipline.
1. An insurance company bought office space for Rs 40 lacs. Why is it capital expenditure?
a) To maintain existing asset capacity
b) Part of regular income
c) Long lasting benefit for company
d) Income from non-ordinary activities
e) Cannot be classified as capital expenditure
2. Cooling period for auditor after 5-year joint audit tenure is:
a) 1 year
b) 2 years
c) 3 years
d) 4 years
e) 5 years
3. IFRS version of Accounting Standards in India is notified by:
a) AMFI
b) SEBI
c) Ministry of Corporate Affairs
d) RBI
e) ASB of ICAI
4. Correct statement about concurrent auditor:
a) Only 1
b) Both 1 and 2
c) Both 1 and 3
d) All 1, 2 and 3
e) Only 2
5. Bad debts carried as Rs 2000 instead of Rs 1000 is:
a) Omission error
b) Overcasting error
c) Transposition error
d) Principle error
e) Posting error
6. Production Budget (Sales 58000, Opening 7600, Closing 9200):
a) 58000
b) 56400
c) 59600
d) 49700
e) 48100
7. Advantage of single premium policy:
a) Only 1
b) Only 2
c) Only 3
d) Both 1 and 2
e) All 1, 2 and 3
8. Fall in conservation ratio indicates:
a) Long term plans issued
b) High expenses
c) Lapse of new business
d) High lapses
e) Quarterly policy mode
9. Principal Compliance Officer should be:
a) Junior to Head Compliance & CRO
b) Senior to Head Compliance & CRO
c) Junior to CRO only
d) Senior to Compliance & Junior CRO
e) Senior to CFO
10. Trial balance will disclose which error(s)?
a) Only 1
b) Only 2
c) Only 3
d) Both 1 and 2
e) Both 2 and 4
11. Limitation of ratio analysis:
a) Only 1
b) Only 2
c) Only 3
d) Both 1 and 2
e) Both 2 and 3
12. Unrealized gains/losses treatment in life insurance:
a) Only 1
b) Only 2
c) Only 3
d) 1 or 2
e) 1 or 3
13. Correct formula for assets is:
a) Assets = Capital - Liabilities
b) Assets = Liabilities + Equity
c) Assets = Liabilities × Capital
d) Assets = Capital + Liabilities
e) Assets = Liabilities - Capital / 100
14. Tax is levied on:
a) 1 and 2
b) 1 and 3
c) 2 and 3
d) Only 2
e) All 1, 2 and 3
15. High-risk KYC customer is:
a) Govt departments
b) Salaried employees
c) Non-residents
d) Charities
e) Low income individuals
16. Purpose of source documents is:
a) To prove transaction
b) To prepare financial statements
c) To analyze records
d) To report to external users
e) To classify expenditure
17. Cancelled cheques register credit column is to:
a) Increase bank balance
b) Decrease bank balance
c) Track cancelled cheques
d) Issue fresh cheques
e) None
18. Career agents receive stipend:
a) After 1 year
b) After 6 months
c) First 2 years
d) After 3 years
e) After training completion
19. Main focus of insurance budgeting is:
a) Profit increase
b) Sales maximization
c) Premium generation
d) Manufacturing
e) Expense control
20. NOT under Accounting Standard 10 is:
a) Forests
b) Real estate development expenditure
c) Livestock
d) Mineral rights & oil exploration
e) None
