IC46 - General Insurance A_c Preparation Mock Test 08
This IC46 section covers insurance reserves, internal audit, solvency, trial balance, capital and revenue transactions, investment policies, accounting methods, inventory valuation, and share forfeiture. It discusses the creation and utilization of catastrophe reserves according to regulatory requirements and the role of internal audit in maintaining effective internal control systems. The solvency margin ratio is highlighted as an important indicator of an insurer’s financial strength and ability to meet claims. Accounting concepts include errors affecting trial balance accuracy, capital receipts, and the factors influencing financial accounting methods. The section also covers specific identification for inventory valuation, the meaning of accounting, investment policy approval, and treatment of share premium.
1. What shall be created in accordance with norms, if any, prescribed by the Authority? Investment of funds out of this shall be made in accordance with prescriptions from the Authority.
A. Loan Reserve
B. Catastrophe Reserve
C. Remaining Reserve
D. Excess of Reserve
2. Traditionally, the head of the internal audit department in insurance companies integrated the internal control systems with other systems of internal control and accounting control in respect of all operational activities which change with changes in market conditions, technology, product development and regulatory requirements.
The above statement is:
A. True
B. False
3. Which of the following ratios is an important indicator that helps to judge whether an insurer is strong enough to pay claims to policyholders as scheduled?
A. Net Earnings Ratio
B. Gross Premium Growth Ratio
C. Solvency Margin Ratio
D. All of the above
4. Which of the following errors will not affect the arithmetical accuracy of the Trial Balance?
A. Wrong balancing of an account
B. Writing an amount in the wrong account but on the correct side
C. Wrong totalling of an account
D. None of the above
5. What is converted into liability or capital contribution or which results from disposal of an asset?
A. Capital Expenditure
B. Revenue Receipt
C. Revenue Expenditure
D. Capital Receipt
6. As per Regulation 13A of IRDAI (Investment) (Fifth Amendment) Regulations 2013, every Insurer shall draw up, annually, an investment policy and place the same before the __________.
A. Shareholders
B. Board of Directors
C. Investment Committee
D. IRDAI
7. Financial accounting methods followed by business houses depend on:
A. The type of business
B. The statutes
C. Business laws applicable to them
D. All of the above
8. Which method is suitable for inventories where each unit of stock along with its associated cost can be separately identified, and in other words, where one unit of stock is not interchangeable with another unit?
A. Weighted Average Method
B. FIFO (First In First Out)
C. Standard Cost Method
D. Specific Identification Method
9. __________ is thus the process of recording, classifying, summarising, analysing and interpreting financial transactions and communicating the results thereof to the interested parties.
A. Banking
B. Insurance
C. Management
D. Accounting
10. Take the case of ABC Ltd., which issued 5,00,000 shares of face value Re. 1 each at a premium of Rs. 4. All the shareholders except one paid the application and allotment money. One shareholder holding 300 shares did not pay the call money and so his shares were forfeited by the company. The company will transfer the share premium received on this forfeiture of shares to __________.
A. Share Capital Account
B. Capital Reserve Account
C. Securities Premium Account
D. Investor Protection Account
E. Suspense Account
