PRACTICE QUESTIONS FOR OMBC 103 MANAGEMENT ACCOUNTING

1. The term management accounting was first coined in

1950
1945
1955
1960

2. The use of management accounting is _____________

Optional
Compulsory
Legally obligatory
Compulsory to some and optional to others

3. Management accounting assists the management

In planning, direction and control

Only in control
Only in direction
Only in planning

4. Management accountancy is a structure for

Accounting
Decision making
Costing
Management

5. Who coined the concept of management accounting?

J. Batty
James H. Bliss
American Accounting Association
R.N. Anthony
6. Format of management accounting reports is tailor made as per requirements of management.

True
False

7. Management Accounting system cannot be installed without proper Cost accounting system.

True
False

8. A/ An ________________________ is a person who does the basic job of maintaining accounts as he is the
man who is engaged in book keeping.

Finance head
Finance Manager
Data entry operator
Accountant

9. _________________ is primarily concerned with the preparation of financial statements whereas

management accounting covers areas such as interpretation of financial statements, cost accounting, etc.

Management Accounting
Financial accounting
Cost Accounting
Corporate accounting

10. Management Accounting is futuristic in its approach.

True
False

11. Accounting standards are statements prescribed by

Law
Bodies of shareholders
Professional accounting bodies
None of the above
12. The Policy of ‘anticipate no profit and provide for all possible losses’ arises due to convention of

Consistency
Disclosure
Conservatism
Matching

13. Which is the accounting concept that requires the practice of crediting closing stock to the trading account

Going concern
Cost
Matching
Conservatism

14. A business firm is separate and distinct from its owners is the assumption under which of the following
accounting concepts:

Business Entity
Going Concern Entity
Money Measuring Entity
Accounting Period concept

15. Under which of the following kinds of business concepts it is assumed that the organization will last for a
long time.

Going Concern Entity

Accounting Entity
Money Measuring Entity
Accounting Period

16. Cash, Bills receivable and prepaid expenses are the examples of current assets.

True
False

17. Business is human activity directed towards providing or acquiring wealth through buying & selling of
goods.

True
False
18. Current liabilities must be paid within one year.

True
False

19. When company can not pay its dues it is said to be____________

Insolvent
Bad debts
Creditors
Fraudulent

20. Basic function of Financial Accounting is to _____________.

Record the transactions of the business

For analysis
Provide information
Match the debit side and credit side
21. Which of the following items would not fall under the definition of an asset?

Land
Machine
Cash
Owner's Equity

22. When machinery is sold for credit :

Assets increase
Assets decrease
One asset increase and other asset decrease
None of the above

23. The return of goods by the customer should be debited to

Customer a/c
Sales return a/c
Goods a/c
Purchase return a/c
24. Furniture purchased by cheque

Expenses of Co.
One asset increase and other asset decrease
One asset increase
Income of Co.

25. Effect of this transaction:When asset is purchase against cheque :

Debit asset A/C

Debit expenses A/C
Debit purchase A/C and credit bank A/C
Debit asset A/C and credit bank A/C

26. Accounting equation may not hold for every transaction

True
False

27. Every company has to maintain journal for financial discipline

True
False

28. Return inward book records purchase returns

True
False

29. Opening balance of asset A/c is always a_______________ balance.

Debit
Credit
Overdraft
Cash Payment
30. Purchase A/c is always _______and sales A/c is always _________.

Debited, Credited
Credited, Debited
Inward, Outward
Outward, Inward

31. As per company's Act all companies must maintain their accounts on basis of

Accrual method
Accrual and Double entry
Double entry
No one of above

32. Books of Accounts of company should be kept at

Any of the offices of Co

Head office
Registered office
Registered office or any other place decided by board

33. Shareholders of Co.

Can inspect books of A/c of company

Cannot inspect books of A/c of Co.
Can inspect books of A/cs if authorized by A.G.M.
Can inspect books of A/cs if authorized by Articles of Co.

34. Financial statements of company must be authenticated by

All directors
Any 2 directors
M.D. + Other director + Manager or company secretary
Chairman of Co.

35. Maximum period for financial year of Co. can be :

18 Months
15 Months
16 Months
 12 Months

36. Company should include only Income statement and Balance sheet in its financial statements

True
False

37. Company can prepare its financial accounts after every 2 years

True
False

38. Auditor's Report is a part of Annual Report

True
False

39. Shareholders can impact books of accounts only if authorized by ______

Memorandum of Association
Management
Articles of Association
Company

40. Annual accounts must be approved by______________

Owner
Shareholders of company
Management
Finance Manager
41. Which of the following cost is also known as overhead cost or on cost:

Cost of direct labour

Cost of direct material
Indirect expenses
Direct expenses

42. Which of the following calculate the actual cost of product:

Cost estimation
Costing
 Both a and b
None of these

43. Which factor that cause change in cost of activity:

Activity cost
Driver rates
Cost pool
Cost drivers

44. Costing is specialized branch of accounting which deals with:

Technique and process of ascertaining costs

Classification, processing, allocation and directing
Classification, recording, planning and control of asset
Classification, recording, planning and control of asset

45. Over-absorption of factory overheads, due to inefficiency of management, should be disposed of by:

Carry forward to next year

Supplementary rate
Transfer to costing P&L A/c
Any of these

46. Prime Cost = (Direct Material) + (Direct Labour) + Direct Expenses)

True
False

47. Direct labour includes all remuneration and other benefits paid to workmen who are directly involved in
manufacturing of a product

True
False

48. Costs can be collected under 3 main elements viz Material, Labour, Expenses.

True
False
49. In case of building construction, ______ method of costing will be used.

Batch costing
Job costing
Process costing
Contract costing

50. Unit costing is also known as_______.

Output costing
Batch costing
Process costing
Contract costing

51. ABC analysis is used in

CPM
PERT
Inventory control
Ratio Analysis

52. ABC analysis divides an organization's on-hand inventory into three classes based upon

the number of units on hand.

annual dollar volume.
unit price.
annual demand.

53. Policies based on ABC analysis might include investing

more in inventory security for C items.

extra care in forecasting for C items.
more in supplier development for A items.
the most time and effort verifying the accuracy of records for B items.

54. Which of the following element must be taken into account while calculating total earnings of a worker
under different incentive wage schemes?
Rate per unit
Units of production
Extra time taken by employee to complete the production
 Number of workers employed

55. The following classes of costs are usually involved in inventory decisions except

Cost of ordering
Carrying cost

Cost of shortage
Machine cost

56. Pricing of issue of materials is closely connected with the actual physical movements of units of material.

True
False

57. Issue prices have an impact on book profits of the firm.

True
False

58. Pricing of issue of raw material do not have any impact on the valuation of stock.

True
False

59. A store ledger card is similar to the ________ .

Stock ledger
Bin card
Material card
Purchase requisition card

60. Purchase requisition for production items is raised by ________.

Stores
Management
Purchase department
Company

61. Absorption costing is used for:

Price determination on basis of full cost

 Solution of separation of costs
Calculation of gross and net profit
Prime cost

62. Absorption costs helps in___________________

Difference between product cost and period cost

Charged of fixed factory overheads on inventory
Both 1 and 2 Option
Labor Overheads

63. Which of the following is a conventional method of ascertaining cost?

Absorption costing
Full Costing
Both 1 & 2 Option
Variable cost

64. Under absorption costing, profit is ascertained on the basis of

Difference between sales and total cost.

By computation as per desired rate of profit on sales or cost
Both 1 and 2 option
Difference in Direct sales and direct Material.

65. Under absorption costing among fixed expenses

Fixed manufacturing expenses are included in unit cost

Fixed non-manufacturing expenses are included in unit cost
Both 1 and 2 option
Variable Manufacturing expenses.

66. Allocation means charging overheads to particular product, process, or activity.

True
False

67. Apportionment is division of overhead cost to two or more cost centers or departments using appropriate
base
 True
False

68. Factory rent is semi fixed cost

True
False

69. All costs are classified under ______ segments under absorption costing.

Five
Six
Four
Three

70. All factory costs are treated as _________ while all administration costs are treated as ___________.

Product costs, Period costs

Period costs, fixed costs

Period Costs, Product costs

Fixed costs, Period costs

71. Marginal costing technique is based on

Variable Cost.
Fixed Cost
Prime Cost
Incremental Cost

72. Contribution/sales is equal to

P/V ratio
Net profit ratio
BEP
EPS

73. Profit volume ratio establishes the relationship between

Contribution and profit

 Fixed cost and contribution
Profit and sales
Contribution and sales value

74. Marginal costs is taken as equal to

Prime Cost plus all variable overheads

Prime Cost minus all variable overheads
Variable overheads
Factory overheads

75. If total cost of 100 units is Rs 5000 and those of 101 units is Rs 5030 then increase of Rs 30 in total cost is

Marginal cost
Prime cost
All variable overheads
Break even cost

76. Marginal cost is the increase or decrease in total cost when there is increase or decrease in production by
one unit.

True
False

77. Contribution depends on fixed cost

True
False

78. Increase variable cost to increase P/V ratio

True
False

79. Fixed cost of company is 60,000. selling price per unit is 30 and variable cost per unit is 20. B.E.P. is
achieved when sale is of___________units.

6000
-6000
12000
 18000

80. ______________is more when sales are more than B.E.P.

Margin of Safety
Break Even Point
Marginal costing
Contribution

81. The standard cost card contains quantities and costs for

Direct material only

Direct labor only
direct material and direct labor only
Direct material, direct labor, and overhead.

82. Which of the following statements regarding standard cost systems is true?

Favorable variances are not necessarily good variances

Managers will investigate all variances from standard
The production supervisor is generally responsible for material price variances
Standard costs cannot be used for planning purposes since costs normally change in the future

83. In a standard cost system, Work in Process Inventory is ordinarily debited with

Actual costs of material and labor and a predetermined overhead cost for overhead
Standard costs based on the level of input activity (such as direct labor hours worked)
Standard costs based on production output
Actual costs of material, labor, and overhead

84. A standard cost system may be used in

Job order costing, but not process costing

Process costing, but not job order costing
Either job order costing or process costing
Neither job order costing nor process costing

85. A purpose of standard costing is to

Replace budgets and budgeting

 Simplify costing procedures
Eliminate the need for actual costing for external reporting purposes
Eliminate the need to account for year-end under-applied or over-applied manufacturing overhead

86. Specifications for materials are compiled on a bill of materials.

True
False

87. An operations flow document shows all processes necessary to manufacture one unit of a product

True
False

88. A standard cost card is prepared before developing manufacturing standards for direct materials, direct
labor, and factory overhead.

True
False

89. The difference between total actual cost incurred and total standard cost applied is referred to as
_______________.

Total Variance
Costing
Price Variance
Efficiency Variance

90. The difference between actual variable overhead and budgeted variable overhead based upon actual hours
is referred to as the __________.

Variable overhead spending variance

Efficiency variance
Material mix
Total Variance

91. A budget is a plan of action expressed in

Financial terms
Non‐financial terms
Both
 Subjective matter

92. Budget is prepared for a

Indefinite period
Definite period
Period of one year
Six months

93. A budget is tool which helps the management in planning and control of

All business activities

Production activities
Purchase activities
Sales activities

94. Budgetary control system acts as a friend, philosopher and guide to the

Management
Share holders
Creditors
Employees

95. R&D budget and Capital expenditure budget are examples of

Short-term budget
Current budget
Long-term budget
Mid term Budget

96. Flexible budget is a budget prepared for different cost

True
False

97. Cash budget depends upon cash forecasts

True
False
98. Production budget and labour budget are inter related

True
False

99. _______ is prepared for single level of activity and single set of business conditions.

Fixed budget
Flexible budget
Production budget
Sales budget

100. _________ is stated as a budget which is made to change as per the levels of activity attained.

Fixed budget
Flexible budget
Cash budget
Sales budget