IC46 - General Insurance A_c Preparation Mock Test 15
This set covers important topics in reinsurance, investment accounting, company law, auditing, and financial accounting. It includes different types of commissions involved in reinsurance transactions and accounting treatment of bonus shares and investments held as current assets. The questions examine Accounting Standard 9 concerning revenue recognition and the recording of cash discounts. Corporate governance topics include disclosures related to the Nomination and Remuneration Committee. Internal auditing focuses on evaluating internal controls and performance. Investment concepts include debentures and valuation of closing investments. Cash book concepts such as contra entries are also covered. Finally, the set includes IRDAI investment requirements for insurers investing in Central Government Securities.
1. Which of the following are the commissions involved in a reinsurance transaction?
(i) Ceding commission
(ii) Brokerage commission
(iii) Settlement commission
(iv) Profit commission
A. (i), (ii) and (iv)
B. (i), (ii) and (iii)
C. (i) and (ii)
D. Only (i)
2. On 1.4.2010, Ms. Kavita Puri purchased 1,000 equity shares of Rs. 100 each in Tibco Ltd. @ Rs. 120 each from a Broker, who charged 2% brokerage. She incurred 50 Paise per Rs. 100 as cost of share transfer stamps.
On 31.1.2011, Bonus was declared in the ratio of 1 : 2. Before and after the record date of bonus shares, the shares were quoted at Rs. 175 per share and Rs. 90 per share respectively.
On 31.3.2011, Ms. Kavita Puri sold bonus shares to a Broker, who charged 2% brokerage. Ms. Kavita Puri held the shares as Current Assets, and the closing value of investments shall be calculated at Cost or Market Value, whichever is lower.
What will be the amount transferred to the Profit and Loss A/c?
A. Rs. 3,100
B. Rs. 11,100
C. Rs. 4,000
D. Rs. 900
3. Which Standard deals with the bases for recognition of revenue in the statement of profit and loss of an enterprise and the recognition of revenue arising in the course of the ordinary activities of the enterprise from sale of goods?
A. Accounting Standard 6
B. Accounting Standard 9
C. Accounting Standard 12
D. Accounting Standard 15
4. The amount of cash discount allowed on a transaction will initially be recorded in the:
A. Sales Day Book
B. Sales Invoice only
C. Cash Book (Receipts side)
D. Cash Book (Payment side)
5. Which of the following items should be included under Nomination and Remuneration Committee?
A. Number of pending complaints
B. Location and time, where last three AGMs held
C. Brief description of terms of reference
D. Attendance during the year
6. What refers to the internal auditor's primary duty to examine and evaluate the adequacy and effectiveness of the system of internal control and to assess the quality of performance in carrying out assigned responsibilities?
A. Corporate Governance
B. Risk Management
C. Internal Control Process
D. Auditing Management
7. Mr. Shah purchased 500 equity shares of Rs. 100 each in Parekh Ltd. for Rs. 62,500, inclusive of brokerage and stamp duty.
At the end of six years, the company decided to capitalise its profits and to issue to the shareholders of equity shares, one equity bonus share for every share held by them.
Prior to capitalisation, the shares of Parekh Ltd. were quoted at Rs. 180 per share. After the capitalisation, the shares were quoted at Rs. 92.50 per share. Mr. Shah sold the bonus shares and received Rs. 90 per share.
What will be the market price of the closing investment (on average cost basis)?
A. Rs. 46,250
B. Rs. 50,000
C. Rs. 31,250
D. Rs. 45,000
8. __________ is a bond issued by a company under its seal acknowledging its debt and obligation for repayment along with the conditions and provisions for repayment of the principal amount and interest.
A. Stock Exchange
B. Letter of Credit
C. Loan
D. Debenture
9. A contra entry in the cashbook would include:
A. Totalling up the bank and cash columns at the end of each month
B. Transferring the discounts to the accounts in the general ledger
C. Transferring cash into the petty cash box
D. Withdrawing cash from the bank account
10. As per the IRDAI (Investment) (Fifth Amendment) Regulations 2013, every insurer carrying on general insurance business shall invest in Central Government Securities __________.
A. Not less than 10%
B. Not less than 20%
C. Not less than 30%
D. Not less than 20%
