Financial Accounting Meaning and Scope

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Chapter 01: Financial Accounting - Meaning and Scope
Course Name: IC-46: General Insurance Accounts Preparation and Regulation of

Investment
1) How many recording systems of transactions exist in Financial Accounting?
(a) One
(b) Two
(c) Three
(d) Four
Correct Options: (b)
2) In financial accounting, where are transactions first recorded?
(a) Cash Book
(b) Ledges
(c) Trial Balance
(d) Journal
Correct Options: (d)
3) Financial accounting is special in nature and type for which of the following?
(a) Only insurance companies
(b) Only banks
(c) Only non-financial institutions
(d) Banks and insurance companies

4) What is solvency?
(a) The capacity to pay liability and borrowings
(b) The inability to pay liability and borrowings
(c) The act of paying liability and borrowings
(d) The act of recording liability and borrowings
Correct Options: (a)
5) RSM (Required Solvency Margin) is determined with reference to…
(a) Net Worth being excess of assets over liabilities in both Policyholders’ funds
(b) Net Worth being excess of assets over liabilities in both Shareholders’ fund
(c) Nature and volume of business operations and the incurred claims on such business operations
(d) Nature and volume of both the Policyholders’ and Shareholders’ funds
Correct Options: (c)
6) Which of the following is NOT a function of financial accounting?
(a) Measuring performance
(b) Reporting
(c) Making decisions
(d) Providing information
7) Which of the following statements is true?
(a) Alternative treatment of the same transaction is not permitted
(b) Estimates while recording transactions are bound to be influenced by personal judgements
(c) Sophisticated software has made it possible for timely information to be readily available
(d) Management decisions cannot be taken without the application of Management Accounting
8) What are books of account?
(a) Books that provide the guidelines for accounting entries
(b) Books that teach how to make accounting entries
(c) Books in which plans of transactions are accounted
(d) Books in which accounting entries are recorded
9) What is the primary book of account?
(a) Journal
(b) Ledger
(c) Balance Sheet
(d) Cash Book
10) What is the final book of account?
(a) Journal
(b) Ledger
(c) Balance Sheet
(d) Cash Book

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Chapter 02: Accounting Concepts, Principles and Convention
Course Name : IC-46: General Insurance Accounts Preparation and Regulation of

Investment
1) Which of the following imply resources controlled by the enterprise, as a result of contribution
from the promoters, shareholders and past performances, from which future economic benefits
may arise?
(a) Equity
(b) Shares
(c) Liabilities
(d) Assets
Correct Options : (d)
2) Which of the following terms refer to the basic assumptions and rules, required for recording
business transactions, maintaining accounts and preparing financial statements?
(a) Financial concept
(b) Accounting concept
(c) Financial position
(d) Cash concept
Correct Options : (b)

3) The ____ concept states that an entity will continue to carry on its business activities for an
indefinite period of time.
(a) Financial concept
(b) Business concept
(c) Growth concept
(d) Going concern concept
4) As per the money measurement concept, all transactions are to be recorded in the books of
account on the assumption that the financial results of such transactions are to be ascertained for
a specified period.
(a) True
(b) False
5) Which of the following concepts is expressed as Assets = Liabilities + Capital?
(a) Dual aspect concept
(b) Dual keeping concept
(c) Business concept
(d) Double book concept
Correct Options : (a)

6) ______ concept states that the revenue from any business transaction should be included in
the accounting records only when it is realized.
(a) Accrual concept
(b) Matching concept
(c) Money measurement concept
(d) Realization concept
7) Which of the following concepts states that the revenue and the expenses incurred to earn the
revenues must belong to the same accounting period?
(a) Business entity concept
(b) Matching concept
(c) Comparing concept
(d) Going concern concept
8) The set of rules or standards on which financial accounting are based is called the Indian
Accounting Standards (IAS).
(a) True
(b) False

9) Which of the following is not a basic accounting principle?
(a) Periodicity principle
(b) Continuity principle
(c) Going concern principle
(d) Standard accounting principle
10) The Financial statements of a company must be prepared in accordance with the provisions
of the __________
(a) Business Act 1946
(b) Companies Act 1966
(c) Insurance Act 1956
(d) Companies Act 1956

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Chapter 03: Accounting Standards–Objectives and Interpretation (Part 2) -
Course Name: IC-46: General Insurance Accounts Preparation and Regulation of

Investment
1) Which of the following does AS 2 deal with?
(a) Disclosure of accounting policies
(b) Valuation of inventories
(c) Cash flow statement
(d) Contingencies events occurring after balance sheet date
2) Which of the following is true for reporting of cash flow statements?
(a) An enterprise should report cash flows from operating activities using either Direct method or
Indirect method.
(b) Under direct method, net profit or loss is adjusted for the effects of transactions of a non-cash
nature, any deferral or accruals of the past or future operating cash receipts or payments and items
of income or expense associated with investment or financing cash flows.
(c) Under indirect method, major classes of gross cash receipts and gross cash payments are
disclosed.
(d) Cash flows arising from transactions in a foreign currency should be recorded in foreign
currency.
3) Which of the following statement is incorrect for AS 2?
(a) This standard deals with the determination of the value at which the inventories are carried in
the financial statements.
(b) The inventories of an enterprise should always be valued at net realizable value.
(c) The financial statements should disclose the accounting policies adopted in measuring the
inventories, including the cost formula used.
(d) Inventory is valued on the basis of conservative principle to prevent unnecessary overstatement
of inventories which results in an overstatement of profit.
4) Accounting Standard 6 deals with ‘Depreciation accounting’.
(a) True
(b) False
5) Which of the following aspects is dealt with, in the AS 9?
(a) Revenue arising from construction contracts
(b) Revenue arising from hire purchase or lease agreements
(c) Revenue arising from Govt. grant and other similar subsidies
(d) Revenue arising from royalties and dividends
6) Which of the following is not true as per AS 12?
(a) Govt. grants related to depreciable fixed assets should be credited to capital reserve
(b) Govt. grants that become refundable should be accounted for as an extra ordinary item
(c) Govt. grants related to revenue may be presented as a credit to the profit and loss statement,
either separately or under ‘other income’
(d) Govt. grants should not be recognized, until there is reasonable assurance that, the enterprise
will comply with the conditions attached to them and the grants will be received
7) Which of the following implies the number of days for which specific shares are outstanding as
a proportion of the total number of days in the period?
(a) Period-weighting factor
(b) Share-weighting factor
(c) Time-weighting factor
(d) Share-earning factor

8) Deferred tax is the amount of income tax determined to be payable/recoverable, in respect of

the taxable income (tax loss) for a period.
(a) True
(b) False
9) _____ is the amount by which the carrying amount of an asset exceeds its recoverable amount.
(a) Tax loss
(b) Accounting loss
(c) Impairment gain
(d) Impairment loss
10) Which of the following loan commitments are not within the scope of the AS 30?
(a) Loan commitments that the entity designates as financial liabilities at fair value, through profit
or loss
(b) Loan commitments that can be settled net in cash or by delivering or issuing another financial
instrument
(c) Commitments to provide a loan at below-market interest rate
(d) Loan commitments in the form of contingent assets at market value


your Exams
Chapter 04: Accounting Policies -
Course Name: IC-46: General Insurance Accounts Preparation and Regulation

of Investment
1) Accounting policies followed by life insurance business entities are same for those followed by
non-life insurance business organizations.
(a) True
(b) False
2) The important factors for selection of accounting policies are prudence, substance and
____________
(a) Materiality
(b) Facts
(c) Truth
(d) Laws
3) Which of the following is not the method adopted by the enterprise for determining the cost
price?
(a) Average price
(b) Mark-up price
(c) FILO
(d) FIFO
4) For any change of accounting policy, there must be a full, fair and adequate disclosure of such
change and the impact thereof in the ‘Notes on accounts’ as per __________.
(a) AS 1
(b) AS 2
(c) AS 3
(d) AS 4
5) Which of the following is incorrect regarding the disclosures of accounting policies?
(a) As per AS 1, all significant accounting policies adopted in the preparation of financial statements
should be disclosed.
(b) The disclosures of the significant accounting policies, as such, form a part of the financial
statements and the significant accounting policies should normally be disclosed in one place
(c) AS 1 further provides that any change in the accounting policies, which has a material effect in
the current period or which is reasonably expected to have a material effect in later periods should
be disclosed.
(d) If the fundamental accounting assumption, viz. Going Concern, Consistency and Accrual are
followed in financial statements, specific disclosure is required.
6) Tax liability in foreign countries is accounted for on actual payment basis.
(a) True
(b) False
7) Which of the following transactions is treated as secured lending transactions and accordingly
disclosed in the financial statements?
(a) Fixed transaction
(b) Equity instruments transaction
(c) CBLO
(d) Reverse Repo
8) Which of the following is stated at cost less depreciation?
(a) Movable assets
(b) Intangible assets
(c) Fixed assets

(d) Impaired assets
9) ______consist of share capital, general reserves, capital reserves and investment reserves.
(a) Policyholder’s funds
(b) Shareholder’s funds
(c) Businessman’s funds
(d) Insurer’s funds
10) Which standard classifies foreign branches/agencies as ‘non-integral foreign operations’?
(a) AS 1
(b) AS 11
(c) AS 5
(d) AS 19


your Exams
Chapter 05: Accounting Process
Course Name: IC-46: General Insurance Accounts Preparation and Regulation

of Investment
1) Which of the following statements is incorrect regarding accounting process?
(a) Journal entries from ‘Journal’ are posted to the individual ledger accounts maintained in the
‘Ledger’.
(b) Balancing is done for each and every ledger account periodically, specifically at the end of the
accounting year.
(c) Trial balance is prepared taking balances from the ‘Journal’ and from the cash book of cash and
bank balances.
(d) Some of the individual ledger balances from the trial balance are used for the preparation of
income statement such as profit & loss a/c.
2) Which of the accounts relate to assets of the firm, but not the debt?
(a) Impersonal account
(b) Real account
(c) Personal account
(d) Nominal account

3) ___________are those transactions, where the benefit is exhausted within one accounting
period.
(a) Capital transactions
(b) Capital expenditure transactions
(c) Capital receipt transactions
(d) Revenue transactions
4) General ledger for premium account, claims paid account, commission account, bank account,
etc. are types of which books of accounts?
(a) Subsidiary books in business firms
(b) Principal books in business firms
(c) Principal books in insurance firms
(d) Subsidiary books in insurance firms
5) Which of the following is incorrect regarding the golden rules of accounting?
(a) Increases in assets are debits; decreases in assets are credits.
(b) Increases in liabilities are credits, decreases in liabilities are debits.
(c) Decreases in expenses are credits; decreases in expenses are debits.
(d) Increases in revenue/incomes are credits; decreases in incomes are debits.

6) Records of individual ledger accounts are kept in a book called ‘Journal’.
(a) True
(b) False
7) Which type of account is classified as natural, artificial and representative accounts?
(a) Personal
(b) Real
(c) Nominal
(d) Impersonal
8) Individual and small shops or sole-proprietary business entity use_________ system of

bookkeeping.
(a) Double entry system
(b) Single entry system
(c) Single and double entry system
(d) Dual entry system

9) An account is simply a record of financial inflows and outflows, in relation to the respective
asset, liability, income or expense.
(a) True
(b) False
10) For which account do we follow the process of recording transactions as,’debit the receiver of
the benefit of transaction; credit the giver of the benefit of transaction’?
(a) Real account
(b) Nominal account
(c) Personal account
(d) Representative account

your Exams

Financial Accounting Meaning and Scope

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Chapter 01: Financial Accounting - Meaning and Scope

Course Name: IC-46: General Insurance Accounts Preparation and Regulation of

1) How many recording systems of transactions exist in Financial Accounting?

Correct Options: (b)

2) In financial accounting, where are transactions first recorded?

(a) Cash Book

(c) Trial Balance

Correct Options: (d)

(a) Only insurance companies

(b) Only banks

(c) Only non-financial institutions

(d) Banks and insurance companies

Correct Options: (d)

(a) The capacity to pay liability and borrowings

(b) The inability to pay liability and borrowings

(c) The act of paying liability and borrowings

(d) The act of recording liability and borrowings

Correct Options: (a)

5) RSM (Required Solvency Margin) is determined with reference to…

Correct Options: (c)

6) Which of the following is NOT a function of financial accounting?

(a) Measuring performance

(c) Making decisions

(d) Providing information

Correct Options: (b)

7) Which of the following statements is true?

(a) Alternative treatment of the same transaction is not permitted

Correct Options: (a)

8) What are books of account?

(a) Books that provide the guidelines for accounting entries

(b) Books that teach how to make accounting entries

(c) Books in which plans of transactions are accounted

(d) Books in which accounting entries are recorded

Correct Options: (d)

9) What is the primary book of account?

(c) Balance Sheet

(d) Cash Book

Correct Options: (a)

10) What is the final book of account?

(c) Balance Sheet

(d) Cash Book

Correct Options: (b)

Join us on Telegram Official Group for Para 13.2: Click here

Mail us at : ambitiousbaba1@gmail.com Follow

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“Thanks & Be Ambitious”

“Thanks & Be Ambitious” All the best for

Chapter 02: Accounting Concepts, Principles and Convention

Course Name : IC-46: General Insurance Accounts Preparation and Regulation of

Correct Options : (d)

(a) Financial concept

(b) Accounting concept

(c) Financial position

(d) Cash concept

Correct Options : (b)

(a) Financial concept

(b) Business concept

(c) Growth concept

(d) Going concern concept