IC46 - General Insurance A_c Preparation Mock Test 03
This IC46 section covers important topics in general insurance accounting and corporate accounting. It includes presentation of income and expenses in financial statements, capitalization and write-off of assets, annual basis of accounting, and its relevance to profitability and anticipated losses. The questions also cover the sources from which bonus shares can be issued and accounting treatment of government grants under AS 12. Other important areas include classification of personal and non-personal accounts, legal definitions of public companies, accounting treatment of investment properties, and circumstances requiring changes in accounting policies. The final question focuses on correct depreciation treatment for assets purchased at different times during the financial year.
1. In the financial statements of a General Insurance Company, items of expenses and income in excess of ______ the total premiums (less reinsurance) or Rs. 5,00,000 whichever is higher will be shown as a separate line item.
A. 0.0025
B. 0.005
C. 0.01
D. 0.015
E. 0.02
2. Up to what amount of assets purchased during the financial year can be written off completely during the year as per the corporate accounting policy?
A. Rs. 5,000
B. Rs. 10,000
C. Rs. 15,000
D. Rs. 25,000
E. Rs. 50,000
3. With respect to 'Annual Basis of Accounting', which of the following statement is/are CORRECT?
A. The Annual Basis of Accounting is more suitable to aviation insurance.
B. Annual Basis of Accounting is a better indicator of current profitability as compared to fund basis of accounting.
C. Annual Basis of Accounting requires providing for any anticipated losses by creating provisions.
D. Both 1 and 2
E. Both 2 and 3
4. A company can issue bonus shares out ________.
- Capital Redemption Reserve Account
- Securities Premium Account
- Free Reserves
A. Only 1
B. Only 2
C. Only 3
D. Both 1 and 3
E. All 1, 2 and 3
5. The Government grants which are related to depreciable assets may be ________. (As per AS 12)
- Credited to the Capital Reserve directly
- Treated as deferred income
- Recognized in Profit or Loss immediately
A. Only 1
B. Only 2
C. Only 3
D. Both 1 and 2
E. Both 2 and 3
6. From the below given options, which is not a personal account for a business entity?
A. Dinesh's A/c
B. Local Municipal Corporation A/c
C. Land A/c
D. Ravindra's A/c
E. Magictica Co. Ltd.
7. A public company means a company which —
- Is not a private company
- Has a minimum paid-up capital of Rs. 5 lakh rupees or such higher paid-up capital as may be prescribed
- Is a private company which is subsidiary of a company which is not a private company
A. Only 1
B. Both 1 and 2
C. Both 2 and 3
D. Both 1 and 3
E. All 1, 2 and 3
8. How will 'Investment Properties' be accounted for?
A. As Long-term Investment
B. As Short-term Investment
C. As Quick Investment
D. As Current Investment
E. Either Current Investment or Long-term Investment depending upon situation
9. When does a company generally make changes in its accounting policies?
- To adhere to the provisions of law
- Due to changed methods which will reflect a truer and fairer view of the financial statements
- To adhere to the Accounting Standards (AS)
A. Only 1
B. Only 2
C. Only 3
D. Both 1 and 3
E. All 1, 2 and 3
10. Choose the correct accounting treatment.
A. GR purchased a printer for Rs. 6,000 on 31 Dec 2016 and the accountant has charged depreciation as per the rates applicable.
B. GR purchased machinery on 15th May 2016 and the accountant has charged the depreciation for the entire year at the rates applicable.
C. GR purchased a Car for Rs. 7,50,000 on 15 Feb 2016 and the accountant has charged depreciation for one and a half months at the rates applicable.
D. Both 1 and 2 are correct
E. Both 1 and 3 are correct
