JAIIB Accounting and Finance for Bankers Mock Tests Set 7

The internal rate of return is the

Options are :

• Rate of interest that equates the present value of cash outflows and the present value of cash inflows.
• Minimum acceptable rate of return for a proposed investment.
• Required rate of return.

Answer :Rate of interest that equates the present value of cash outflows and the present value of cash inflows.

Options are :

• Personal a/c
• Real a/c
• Nominal a/c
• None

Wasim,is analyzing two mutually exclusive investment projects. Wasim has calculated the net present value (NPV) and internal rate of return (IRR) for each project: Project 1: NPV = ?230? IRR = 15% Project 2: NPV = ?4,000? IRR = 6% Wasim should make which of the following recommendations concerning the two projects?

Options are :

• Accept Project 2 only.
• Accept Project 1 only.
• Accept both projects.

Options are :

• STR
• CTR
• CCR
• CBWT

If rate of the interest is not given, but amount of installments are equal and periods of installments are also equal, the amount of interest included in the installments is calculated by-

Options are :

• Inverse Ratio Method
• Products Method
• Annuity Method
• All of the above
• None of the above

Which of the following depreciation methods is NOT an accelerated method?

Options are :

• Double-declining balance
• Straight-line
• Sum-of-the-years' digits
• None of these

In the sharing ration of respective parties, which is not correctly matched:

Options are :

• Proprietorship firm- entire profit belongs to promoter
• Partnership firm- in all cases, the profit of partners is equal
• Company- members share profit in the form of dividend
• None of the above

Answer :Partnership firm- in all cases, the profit of partners is equal

Which one of the following statements is 'false'

Options are :

• A bank must at least 20% of net profits of the year prior to declaration of dividend to statutory reserve , unless the central government condones this binding.
• slip system in a bank is not a different accounting system but a method of rapid posting it. the books of account.
• Schedule 6 deals with ' Other liabilities and Provision' of a bank .
• State Bank of India is a nationalized bank.
• Non -banking assets are the tangible assets which a bank recovers as a claim against non-payment of its advances.

Answer :Schedule 6 deals with ' Other liabilities and Provision' of a bank .

An organization is using capital budgeting techniques to compare two independent projects. It could accept one, both, or neither of the projects. Which of the following statements is true about the use of net present value (NPV) and internal rate of return (IRR) methods for evaluating these two projects?

Options are :

• NPV and IRR criteria will always lead to the same accept or reject decision for two independent projects.
• If the first project’s IRR is higher than the organization’s cost or capital, the first project will be accepted but the second project will not.
• If the NPV criterion leads to accepting or rejecting the first project, one cannot predict whether the IRR criterion will lead to accepting or rejecting the first project.
• If the NPV criterion leads to accepting the first project, the IRR criterion will never lead to accepting the first project

Answer :NPV and IRR criteria will always lead to the same accept or reject decision for two independent projects.

The ___________ of section 29 of the Banking Regulation Act, 1949 prescribes formats of Balance sheet and profit and loss account of banking companies.

Options are :

• Third schedule
• Second schedule
• Sixth schedule
• Fourth schedule

________ is the last item to appear under ‘Capital and liabilities of the Balance Sheet of a bank.

Options are :

• Reserves and surplus
• Deposits
• Borrowings
• Other liabilities and provision.

Shyam prepared a trial balance for his factory on 31st March, 2010. The debit total of the trial balance was short by ? 500. He transferred the deficiency to a suspense account. In April, 2010 after a close examination, he found that the purchases day book for September, 2009 was undercast by ?500. The necessary Journal entry to rectify the error will be _________ assuming Final Accounts are not prepared.

Options are :

• Purchases A/c Dr. ? 500 To Cash A/c ? 500
• Suspense A/c Dr. ? 500 To Purchases A/c ? 500
• Purchases A/c Dr. ? 500 To Suspense A/c ? 500
• None of the above.

Answer :Purchases A/c Dr. ? 500 To Suspense A/c ? 500

_______ is shown by way of a footnote and details are given in schedule 12 of balance sheet of bank

Options are :

• Contingent Liabilities
• Other Assets
• Investments
• Other liabilities and provisions.

If a bond is purchased at its current market price and if the coupon interest is received, the rate of return on it is measured by ......

Options are :

• Yield to maturity of bond
• Current yield of bond
• Current present value of bond
• Future yield of bond.

Options are :

• Schedule 10
• Schedule 8
• Schedule 9
• Schedule 12

Section 20 of the Banking Regulation Act, 1949 deals with ________.

Options are :

• Cash Reserves
• Restrictions on loans and advances
• Statutory Reserves
• Final account

A banking company can pay dividend on its shares ________.

Options are :

• after writing off all its capitalised expenses including preliminary expenses
• after charging depreciation on its investments
• after charging bad debts where adequate provisions has been made to the satisfaction of the auditor
• before charging depreciation on its investments and writing off all its capitalised expenses

Answer :after writing off all its capitalised expenses including preliminary expenses

if there is loss to the goods, which of the following statements is correct in case of hire purchase and installment sale:

Options are :

• loss to be borne by the seller in hire purchase and by the buyer in case of installment sale
• loss to be borne by the buyer in hire purchase and by the seller in case of installment sale
• loss to be borne by the seller in hire purchase and by the seller in case of installment sale
• loss to be borne by the buyer in hire purchase and by the buyer in case of installment sale

Answer :loss to be borne by the seller in hire purchase and by the buyer in case of installment sale

The items under ‘Liabilities’ in the balance sheet of a Bank are shown in the following order.

Options are :

• Capital, Reserves and Surplus, Borrowings, Deposits
• Deposits, Capital, Reserves and Surplus, Borrowings
• Capital, Reserves and Surplus, Deposits, Borrowings
• Borrowings, Deposits, Capital, Reserves and Surplus

Answer :Capital, Reserves and Surplus, Deposits, Borrowings

Options are :

• ?3,780.
• ?3,760.
• ?3,500.

What  is  not  a  Nominal  Account?  (i)  An  account  of  each  person  or  firm  with  whom  the  trader deals,  (ii)  An  account  of  each  head  of expense  or  source  of  income,  (iii)  An  account  of  each property or possession dealt in by the trader in his business

Options are :

• Only (i) and (ii)
• Only (i) and (iii)
• Only (ii) and (iii)
• (i), (ii) and (iii)

In its first year of business, Digmore Corporation's balance sheet shows gross fixed assets at \$90 million and accumulated depreciation of \$10 million. If the estimated salvage value of these assets is \$10 million, and the original estimated useful life is 8 years, what method of depreciation did Digmore most likely use?

Options are :

• Straight Line.
• Units of production.
• Double-declining-balance.

If nothing is written about the accounting assumption to be followed it is presumed that

Options are :

• They have been followed
• They have not been followed
• They are followed to some extent
• none of these

Answer :They have not been followed

The items under ‘Reserves and Surplus’ in Schedule 2 of the balance sheet of a Bank are shown in the following order

Options are :

• Statutory reserves, Capital reserves, Shares premium
• Capital reserves, Statutory reserves, Shares premium
• Statutory reserves, Shares premium, Capital reserves
• Shares, premium, Statutory reserves, Capital reserves

The intrinsic value of bond is not the ...... (i) Face value, (ii) Present value of cash flows in future, (iii) Market value

Options are :

• Only (i) and (ii)
• Only (i) and (iii)
• Only (ii) and (iii)
• (i), (ii) and (iii)

Options are :

• ?3,100.
• ?3,475.
• ?1,575.

Contingency funds will appear ________.

Options are :

• in the balance sheet of a bank under ‘Other Liabilities and Provisions’
• in the balance sheet of a bank under ‘Reserves and Surplus’
• on the face of the main profit and loss account of a bank
• in the notes forming part of balance sheet of a Bank under contingent liabilities

Answer :in the balance sheet of a bank under ‘Other Liabilities and Provisions’

Mix of debit and equity is known as

Options are :

• Organizational structure of the firm
• Financial structure of the firm
• Capital structure of the firm
• Bond equity structure of the firm

Answer :Capital structure of the firm

As per accrual concept, which of the followings is not true

Options are :

• revenue – expenditure = profit
• revenue – profit = expenditure
• sales + gross profit = revenue
• revenue = profit + expenditure

Answer :sales + gross profit = revenue

What is the objective of conservatism?

Options are :

• Take all incomes and losses
• Anticipate losses but not profits
• Take all losses
• None of the above

Answer :Anticipate losses but not profits

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