IC46 - General Insurance A_c Preparation Mock Test 01
This set of IC46 questions covers important concepts in General Insurance Accounting and financial management. Key areas include accounting treatment of dividends from pre-acquisition profits, presentation of underwriting results, applicability of Ind AS 104 to insurance contracts, accounting for foreign tax liabilities, and maintenance of proper books of accounts. It also covers internal audit requirements for insurance companies and regulatory requirements governing investments. Fundamental accounting concepts such as cash discounts and Bank Reconciliation Statements are included. Finally, the questions examine how reinsurance can protect shareholders’ funds from unpredictable losses. These topics are important for understanding insurance accounting, reporting, compliance, and risk management.
1. If dividends on equity are declared from pre-acquisition profits, such dividends shall be ______.
A. Debited to Profit and Loss A/c
B. Debited to Investment A/c
C. Credited to Profit and Loss A/c
D. Credited to Investment A/c
E. None of the above
2. In which account will the details of the underwriting results for the reporting period be presented?
A. P/L Account
B. Cash Flow Statement
C. Revenue Account
D. Income Statement
E. Investment Account
3. For what does the 'Ind AS 104' apply to?
A. Accounting for financial assets held by an insurance company
B. Accounting for assets issued by an insurance company
C. Accounting for an insurance contract issued by an entity
D. Both 1 and 3
E. All 1, 2 and 3
4. How are the tax liabilities in foreign countries accounted for?
- On Accrual basis
- On Actual Payment basis
- On Calculation basis
A. Only 1
B. Only 2
C. Only 3
D. Both 1 and 2
E. All 1, 2 and 3
5. Proper books of accounts are not maintained can be seen in which of the below cases?
A. Accounts are maintained for all offices including branch office on cash basis
B. Books of accounts are maintained on accrual basis for head office and for branch offices on cash basis
C. Accounts are maintained for head office but not for branch offices
D. Both 1 and 3
E. All 1, 2 and 3
6. When will an insurance company have to undertake internal audit?
A. When it has assets under management (AUM) of more than Rs. 1,000 crore
B. When it has assets under management (AUM) of more than Rs. 10,000 crore
C. When it has assets under management (AUM) of not more than Rs. 1,000 crore
D. When it has a net worth of not more than Rs. 1,000 crore
E. Irrespective of AUM, it is compulsory for all insurance companies to undertake internal audits
7. As per the directives issued to General Insurance companies, all investments in assets made by such companies have to comply with certain requirements. Which of the following statements is true for such companies?
A. The rating for such assets should be carried out by a credit rating agency which is registered under SEBI
B. Investments can be made in equity shares which are listed on a registered stock exchange and which are actively traded
C. Investments cannot be made in non-rated instruments
D. Both 1 and 2
E. All 1, 2 and 3
8. What is cash discount?
A. It is the discount one receives when payment is made by demand draft
B. It is the discount one receives when purchases are made in bulk
C. It is the discount one receives when payment is made before the due date
D. It is the discount one receives when payment is made in cash
E. It is the discount one receives while making sales on credit
9. With what does the Bank Reconciliation Statement reconcile?
A. It reconciles the petty cash book with bank accounts
B. It reconciles the day books with bank statements
C. It reconciles the ledger with a journal
D. All 1, 2 and 3
E. None of the above
10. How can XYZ Insurance Ltd. protect the shareholders’ funds from unpredictable losses?
A. By opting for Reinsurance
B. By opting for Co-insurance
C. By opting for Underwriting contract
D. By opting for Limited period insurance
E. By opting for Shared insurance
