PAPER-III
COMMERCE
Note : This paper contains seventy five (75) objective type questions of two (2) marks each.
All questions are compulsory.
1. In accounting, profit prior to
incorporation is treated as
(A) Revenue Reserve
(B) Secret Reserve
(C) Capital Reserve
(D) General Reserve
Answer:(C)
2. Receipts and Payments Account is
prepared by
(A) Manufacturing concerns
(B) Non-Trading concerns
(C) Trading concerns
(D) Companies registered under
Companies Act, 1956
Answer:(B)
3. Owners equity stands for
(A) Fixed Assets minus Fixed
Liabilities.
(B) Fixed Assets minus Current
Liabilities.
(C) Current Assets minus Fixed
Liabilities.
(D) Total Assets minus Total outside
Liabilities.
Answer:(D)
4. When the Debt Turnover Ratio is 4,
what is the average collection period ?
(A) 5 months (B) 4 months
(C) 3 months (D) 2 months
Answer:(C)
5. Which of the following will result into
sources of funds ?
(i) Increase in current assets
(ii) Decrease in current assets
(iii) Increase in current liabilities
(iv) Decrease in current liabilities
Codes :
(A) (i) and (iv) (B) (ii) and (iii)
(C) (i) and (iii) (D) (ii) and (iv)
Answer:(B)
6. In marginal costing, contribution is
equal to
(A) Sales – Fixed cost
(B) Sales – Variable cost
(C) Sales – Profit
(D) Sales – Variable Cost + Fixed
cost
Answer:(B)
7. The funds available with a company
after paying all claims including tax
and dividend is called
(A) Net Profit
(B) Net Operating Profit
(C) Capital Profit
(D) Retained Earnings
Answer:(D)
8. Assertion (A) : Accounting
information refers to only events
which are concerned with
business firm.
Reason (R) : Accounting information
is presented in financial
statements.
Codes :
(A) (A) is correct, but (R) is wrong.
(B) Both (A) and (R) are correct.
(C) (A) is wrong, but (R) is correct.
(D) Both (A) and (R) are wrong.
Answer:(B)
9. When average cost is declining
(A) Marginal cost must be declining.
(B) Marginal cost must be above
average cost.
(C) Marginal cost must be below
average cost.
(D) Marginal cost must be rising.
Answer:(C)
10. ABC Ltd. has declared 40% dividend.
Which one of the following does it
mean ?
(A) The company has declared 40%
of net profit as dividend.
(B) The company has declared 40%
of profits after tax as dividend.
(C) The company will provide
dividend 40% on issued capital.
(D) The company will provide
dividend 40% on paid-up capital.
Answer:(D)
11. The main objective of Accounting
Standards is
(A) To prepare the accounting
reports which is easily
understood by common man.
(B) To comply with the legal
formalities.
(C) To harmonise the diversified
accounting practices.
(D) To comply with the
requirements of the International
Accounting Standards (IAS).
Answer:(C)
12. Given below are two statements :
I. Activity ratios show where the
company is going.
II. Balance Sheet ratios show how
the company stand.
Codes :
(A) I is correct, but II is wrong.
(B) Both I and II are correct.
(C) I is wrong, but II is correct.
(D) Both I and II are wrong.
Answer:(B)
13. Income and Expenditure Account of
non-profit organisation is a
(A) Real Account
(B) Nominal Account
(C) Personal Account
(D) Representative Personal Account
Answer:(B)
14. Which of the following statements are
correct ?
I. Inventory includes raw
materials, finished goods and
work – in – progress.
II. Inventory is a part of the
working capital.
III. Inventory includes goods likely
to be purchased.
Codes :
(A) I, II and III
(B) II and III
(C) I and III
(D) I and II
Answer:(D)
15. If the current ratio is 2 : 1 and working
capital is ` 60,000, what is the value of
the Current Assets ?
(A) Rs 60,000
(B) Rs 1,00,000
(C) Rs 1,20,000
(D) Rs 1,80,000
Answer:(C)
16. Which of the following steps of
purchase decision process is in
sequence ?
1. Problem recognition
2. Search for alternatives
3. Evaluation of alternatives
4. Purchase action
5. Post purchase action
Codes :
(A) 1, 3, 2, 4, 5
(B) 1, 2, 4, 3, 5
(C) 2, 1, 3, 5, 4
(D) 1, 2, 3, 4, 5
Answer:(D)
17. What is customer value ?
(A) Ratio between the customer’s
perceived benefits and the
resources used to obtain these
benefits.
(B) Excess of satisfaction over
expectation.
(C) Post purchase dissonance
(D) None of the above
Answer:(A)
18. Match the items of List – I with items
of List – II.
List – I List – II
a. The silent mental 1. Encoding
repetition of information.
b. The process by which 2. Rehearsal
we select a word or
visual image to represent
a perceived object.
c. Where information is 3. Working
kept temporarily before
further processing.
Memory
d. The stage of real 4. Store house
memory in which
information is processed
and held for just a brief
period.
Codes :
a b c d
(A) 2 1 4 3
(B) 1 2 3 4
(C) 3 2 1 4
(D) 4 3 2 1
Answer:(A)
19. Fill in the blanks :
Statements Alternatives
a. Loyal customers 1. Less attention
____ products.
b. Loyal customers are 2. Cheaper
____ sensitive.
c. Loyal customers pay 3. Less price advertising.
____ to competitor’s
d. Serving existing 4. Buy more
customer is ____
Codes :
a b c d
(A) 3 1 2 4
(B) 4 3 1 2
(C) 2 1 3 4
(D) 4 3 2 1
Answer:(B)
20. Assertion (A) : High customer
expectations lead to dissatisfaction as
product performance never matches
them.
Reason (R) : Product performance is
always customer specific.
Codes :
(A) Both (A) and (R) are correct.
(B) Both (A) and (R) are incorrect.
(C) (A) is correct, but (R) is
incorrect.
(D) (R) is correct, but (A) is
incorrect.
Answer:(B)
21. Under which concept of marketing do
you find greater emphasis on
techniques and technology of
production ?
(A) Product
(B) Selling
(C) Marketing
(D) None
Answer:()
22. Which is used for short-term sales
achievement ?
(A) Personal selling
(B) Advertising
(C) Sales Promotion
(D) Public Relations
Answer:(C)
23. Public distribution system relates to
(A) Marketing system
(B) Retailing system
(C) Industrial system
(D) Selling system
Answer:(B)
24. Who do buy more, complain less,
spread positive word of mouth, ensure
a large customer base and repeat
business ?
(A) Satisfied customers
(B) Delighted customers
(C) Industrial customers
(D) None of the above
Answer:(B)
25. There are impulses which persuade a
customer to buy certain products
without evaluating the positive and
negative value of the same.
(A) Emotional motives
(B) Blind motives
(C) Egoistic motives
(D) All the above
Answer:(D)
26. Which subject is relevant to the study
of consumer behaviour ?
(A) Economics
(B) Psychology
(C) Sociology
(D) All the above
Answer:(D)
27. Find an incorrect statement.
(A) Consumer attitude can be
summarized as evaluation of an
object.
(B) Attitudes are learned.
(C) Attitudes are synonymous with
behaviour.
(D) Attitudes have motivational
qualities.
Answer:(C)
28. Who is considered Father of Scientific
Management ?
(A) Peter Drucker
(B) F.W. Taylor
(C) Victor Vroom
(D) Henry Fayol
Answer:(B)
29. Who did give the concept of hierarchy
of needs ?
(A) Fredrick Herzberg
(B) Victor Vroom
(C) Douglas Mcgregor
(D) A.H. Maslow
Answer:(D)
30. Assertion (A) : Management is a
continuous process.
Reason (R) : Managers first plan, then
organise and finally perform the
function of controlling.
Codes :
(A) Both (A) and (R) are correct and
(R) is correct explanation of (A).
(B) Both(A) and (R) are correct, but
(R) is not a correct explanation
of (A).
(C) (A) is correct, but (R) is
incorrect.
(D) (A) is incorrect, but (R) is
correct.
Answer:(A)
31. Induction of employees relates to
(A) Organisational awareness
(B) Training programme
(C) Introduction
(D) Assignment of duties
Answer:(C)
32. ‘Kinked’ demand curve is related with
(A) Monopoly
(B) Discriminating monopoly
(C) Oligopoly
(D) Perfect competition
Answer:(C)
33. Who is not associated with HRM ?
(A) Michael J Jucius
(B) Dale Yodar
(C) Edvoin B. Flippo
(D) K.K. Devit
Answer:(D)
34. Merit rating is not known as
(A) Efficiency Rating
(B) Service Rating
(C) Job Rating
(D) Experience Rating
Answer:(C)
35. Match the items of List – I with the
items of List – II.
List – I List – II
a. FEMA 1. 1986
b. Indian Factories Act 2. 1999
c. Industrial Dispute Act 3. 1948
d. Consumer Protection Act 4. 1947
Codes :
a b c d
(A) 4 2 3 1
(B) 3 1 2 4
(C) 2 3 4 1
(D) 1 4 3 2
Answer:(C)
36. If price of any commodity decreases
by 20% and the demand for that
commodity increases by 40%, then
elasticity of demand would be
(A) perfectly elastic
(B) perfectly inelastic
(C) unit elastic
(D) highly elastic
Answer:(D)
37. Which of the following statements is
true ?
(A) In case of inferior goods, the
income effect is negative,
although the substitution effect
is positive.
(B) In inferior goods, the income
and substitution effects are
positive.
(C) In inferior goods, the income
and substitution effects are
negative.
(D) In case of inferior goods, the
income effect is positive
although the substitution effect
is negative.
Answer:(A)
38. In perfect competition, the demand
curve of a firm is
(A) Vertical
(B) Horizontal
(C) Positively sloped
(D) Negatively sloped
Answer:(B)
39. Which one is not non-financial
incentive ?
(A) Additional bonus on minimum
wasteful expenditure.
(B) Permanent job.
(C) Participatory decision making.
(D) Recognition of individuality.
Answer:(A)
40. HRM does not include
(A) job evaluation
(B) performance appraisal
(C) sales promotion
(D) job enrichment
Answer:(C)
41. The term (1-B) is called
(A) Level of the test
(B) Power of the test
(C) Size of the test
(D) None of the above
Answer:(B)
42.
(A) 0.6827
(B) 0.9545
(C) 0.9973
(D) 1.0000
Answer:(C)
43. Sampling distribution of mean is very
close to the standard normal
distribution when
(A) Population is normally
distributed.
(B) Population is not normally
distributed, but sample size is
large.
(C) Both (A) and (B).
(D) Neither (A) nor (B).
Answer:(C)
44. If the value of co-efficient of
determination is 0.64, what is the
value of coefficient of correlation ?
(A) 0.40
(B) 0.80
(C) 0.08
(D) 0.04
Answer:(B)
45. Which one of the following is not a
source of conflict in project ranking in
capital budgeting decision as per NPV
and IRR ?
(A) Independent Investment Project
(B) No Capital Budget Constraints
(C) No time disparity
(D) None of the above
Answer:(D)
46. Match the following :
List – I List – II
a. Trade policy 1. Economic conditions
b. Trade flows 2. Economic policies
c. Price trends 3. Global linkages
d. Internal sectoral 4. Structure and
linkages Nature of Economy
Codes :
a b c d
(A) 3 1 2 4
(B) 2 3 1 4
(C) 1 2 3 4
(D) 1 2 4 3
Answer:(B)
47. Which one of the following is not a
benefit of privatisation ?
(A) Encourage entrepreneurship.
(B) Concentration of economic
power.
(C) Better management of
enterprise.
(D) Freedom from bureaucracy.
Answer:(B)
48. ‘BOLT’ system in the Indian
Securities market is related to
(A) National Stock Exchange
(B) Bombay Stock Exchange
(C) Over the Counter Exchange of
India
(D) Multi Commodity Stock
Exchange
Answer:(B)
49. Which one of the following is not a
money market instrument ?
(A) Commercial paper
(B) Participatory certificates
(C) Warrants
(D) Treasury Bills
Answer:(C)
50. Which one is related with micro-
financing ?
(A) SHG
(B) Anganwadi workers
(C) Women Entrepreneurs
(D) None of the above
Answer:(A)
51. Which one of the following is not an
element of internal environment ?
(A) Mission/Objectives
(B) Human Resources
(C) Customers
(D) Shareholders’ values
Answer:(C)
52. The presence of fixed costs in the total
cost structure of a firm results into
(A) Financial leverage
(B) Operating leverage
(C) Super leverage
(D) None of the above
Answer:(B)
53. “The cost of capital declines when the
degree of financial leverage increases.”
Who advocated it ?
(A) Net operating income approach
(B) Net income approach
(C) Modigliani-Miller approach
(D) Traditional approach
Answer:(B)
54. A view that the dividend policy of a
firm has a bearing on share valuation
advocated by James E. Walter is based
on which one of the following
assumptions ?
(A) Retained earnings is only source
of financing.
(B) Cost of capital does not remain
constant.
(C) Return on investment fluctuates.
(D) All the above.
Answer:(A)
55. Match the following :
List – I List – II
a. Matching 1. Dividend Policy
approach
b. Structural 2. Inventory Management
ratios
c. Ordering 3. Financing Working Capital
quantity
d. Bonus shares 4. Capital Structure
Codes :
a b c d
(A) 1 2 3 4
(B) 3 4 1 2
(C) 3 4 2 1
(D) 2 1 3 4
Answer:(C)
56. Assertion (A) : Operating style of the
international business can be
spread to the entire globe.
Reason (R) : The style is limited to
the internal economy only.
Codes :
(A) Both (A) and (R) are true.
(B) (A) is true, but (R) is false.
(C) (A) is false, but (R) is true.
(D) Both (A) and (R) are false.
Answer:(B)
57. The Comparative Cost Advantage
Theory was given by
(A) David Ricardo
(B) Adam Smith
(C) Raymond Vernon
(D) Michael E. Porter
Answer:(A)
58. The companies globalise their
operations through different means :
(A) Exporting directly
(B) Licensing/Franchising
(C) Joint ventures
(D) All the above
Answer:(D)
59. The components of W.T.O. are
(A) Ministerial Conference
(B) Disputes Settlement Body
(C) Director General
(D) All the above
Answer:(D)
60. India is not associated with
(A) SAARC
(B) NAFTA
(C) BRICS
(D) None of the above
Answer:(B)
61. Which one of the following is true
statement ?
(A) A balance of trade deals with
export and import of invisible
items only.
(B) A balance of payment deals with
both visible and invisible items.
(C) The current account is not a
component of balance of
payment.
(D) All the above.
Answer:(B)
62. SDRs are popularly known as
(A) Currency Notes
(B) Paper Gold
(C) Silver Coin
(D) Gold Coin
Answer:(B)
63. Which one is not international
institution ?
(A) IMF
(B) IDA
(C) IBRD
(D) TRAI
Answer:(D)
64. Assertion (A) : Indent may be open or
closed. Open indent does not
specify the price and other details
of the goods. The closed indent
specifies the brand, price,
number, packing, shipping mode,
insurance, etc.
Reason (R) : This is required as a part
of export procedures.
Codes :
(A) Both (A) and (R) are correct.
(B) Both (A) and (R) are not correct.
(C) (A) is true, but (R) is false.
(D) (R) is true, but (A) is false.
Answer:(C)
65. Which one of the statements is not
true ?
(A) Institutional infrastructure
facilitates market intelligence.
(B) STC is the chief canalizing agent
for export and import of
agricultural products.
(C) IIPO organizes trade fairs and
exhibitions.
(D) Letter of credit does not indicate
that the bank will pay the value
of imports to the exporter.
Answer:(X)
66. Match the items of List – I with items
of List – II.
List – I List – II
a. Selective credit 1. Consumer Credit
control Regulation
b. Encourage credit 2. Cash Reserve Ratio
for desirable use
c. Quantitative 3. Variation in Margin
credit control
d. Bank Rate 4. Re-discounting Rate
Codes :
a b c d
(A) 4 2 3 1
(B) 3 1 2 4
(C) 1 3 2 4
(D) 2 1 3 4
Answer:(B)
67. Assertion (A) : Use of paper money is
replaced by plastic money. The
future will see the electronic
money clearance through
satellite networking.
Reason (R) : RBI is encouraging
e-banking.
Codes :
(A) (A) is false, but (R) is true.
(B) (A) is true, but (R) is false.
(C) Both (A) and (R) are false.
(D) Both (A) and (R) are true.
Answer:(D)
68. Which one is not Finance Company ?
(A) Hire-Purchase Finance Company
(B) IRDA
(C) Mutual Benefit Finance
Companies
(D) Loan Companies
Answer:(B)
69. The Securities and Exchange Board of
India was not entrusted with the
function of
(A) Investor Protection.
(B) Ensuring Fair practices by
companies.
(C) Promotion of efficient services
by brokers.
(D) Improving the earnings of equity
holders.
Answer:(D)
70. Which one is not Non-Marketable
securities ?
(A) Corporate Securities
(B) Bank Deposits
(C) Deposits with Companies
(D) Post Office Certificates and
Deposits
Answer:(A)
71. Minimum Alternative Tax (MAT)
under Sec.115 JB of the Income Tax
Act is applicable on
(A) Partnership firm
(B) Association of persons
(C) Certain companies
(D) All types of companies
Answer:(C)
72. For the Assessment Year 2011-12,
deduction under Sec. 80G is available
without any limit but at the rate of
50% on
(A) Prime Minister’s National Relief
Fund.
(B) National Foundation for
communal Harmany.
(C) Jawahar Lal Nehru Memorial
Fund.
(D) Chief Minister Relief Fund
Answer:(C).
73. Interest on capital paid by a firm to its
partners, under the Income Tax Act,
1961, is allowed
(A) 6%
(B) 12%
(C) 15%
(D) 18%
Answer:(B)
74. Under capital gains head of the
Income Tax Act, the income from sale
of Household Furniture is
(A) Taxable Income
(B) Capital Gain
(C) Revenue Gain
(D) Exempted Income
Answer:(D)
75. Under Section 80E of the Income Tax
Act, 1961 deduction in respect of
payment of interest on loan taken for
higher education shall be allowed
up to
(A) Rs 10,000
(B) Rs 15,000
(C) Rs 20,000
(D) Without any limit
Answer:(D)
Commerce 2012 December Paper 3 Solved
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