COMMERCE
PAPER – III
Note : This paper contains seventy five (75) objective type questions of two (2) marks
each. All questions are compulsory
1. If Opening Stock is INR 10,000, Net
Purchases INR 70,000, Wages INR 2,500,
Carriage inward INR 500 and Closing
Stock INR 15,000, what is the
Manufacturing Cost ?
(A) INR 65,000 (B) INR 83,000
(C) INR 68,000 (D) INR 73,000
Answer:(C)
2. What does a high payout ratio
indicate ?
(A) A High Earning Per Share
(EPS)
(B) The management is not
ploughing back enough profit.
(C) The management is ploughing
back profit.
(D) The company is earning high
profit.
Answer:(B)
3. Which one of the following
statements is true ?
(A) Capital expenditure does not
affect the profitability of a
concern but revenue
expenditure does.
(B) Capital expenditure affects the
profitability of a concern
directly but revenue
expenditure does not.
(C) Capital expenditure affects the
profitability of a concern
indirectly but revenue
expenditure affects directly.
(D) Both capital expenditure and
revenue expenditure affect the
profitability of a concern
directly.
Answer:(C)
4. Identify the true statement of the
following :
(i) Balance Sheet is always
prepared from the point of
view of the business but not
from that of the owners.
(ii) The financial relationship of
the business to its owners is
shown in the Balance Sheet.
(iii) Balance Sheet is always
related to a period of time.
Codes :
(A) (i) and (ii)
(B) (ii) and (iii)
(C) (i) and (iii)
(D) (i), (ii) and (iii)
Answer:(A)
5. X and Y are partners in a firm
sharing profits in the ratios of 2 : 1.
Z is admitted with a 1/3 profit
sharing. What will be the new profit
sharing ratio of X, Y and Z ?
(A) 3 : 3 : 3 (B) 4 : 3 : 2
(C) 4 : 2 : 3 (D) 2 : 3 : 4
Answer:(C)
6. Which one of the following will not
affect the working capital ?
(A) Realisation of cash from
debtors.
(B) Sale of plant and machinery in
cash.
(C) Issue of equity shares.
(D) Redemption of debentures.
Answer:(A)
7. Given below are two statements, one
labelled as Assertion (A) and the
other labelled as Reason (R) :
Assertion (A) : When a company
earns profit prior to its
incorporation, it is called
capital profit.
Reason (R) : Capital profit cannot
be used for distribution as
dividend to the shareholders.
In the context of the above two
statements, which one of the
following is correct ?
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)
8. Reconstruction of a company takes
place when
(i) the company is
undercapitalised
(ii) company has incurred heavy
losses which must be written
off
(iii) the company is overcapitalised
Which one of the following is
correct ?
(A) (i) and (ii) only
(B) (i) and (iii) only
(C) (ii) and (iii) only
(D) All the above
Answer:(C)
9. Match the items of List – I with the
items of List – II and select the
correct answer using the codes given
below the lists :
List – I List – II
(a) Leverage (i) Short-term
Ratio solvency
(b) Liquidity (ii) Earning
Ratio capacity
(c) Turnover (iii) Relationship
Ratio between debt and equity
(d) Profitability (iv) Efficiency of
Ratio Asset Management
Codes :
(a) (b) (c) (d)
(A) (ii) (i) (iv) (iii)
(B) (iii) (ii) (i) (iv)
(C) (iv) (iii) (i) (ii)
(D) (iii) (i) (iv) (ii)
Answer:(D)
10. Given below are two statements, one
labelled as Assertion (A) and the
other labelled as Reason (R) :
Assertion (A) : Sinking fund is a
charge against Profit and Loss
Account.
Reason (R) : Sinking fund is created
for repayment of a long term
liability.
In the context of the above two
statements, which one of the
following is correct ?
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:(C)
11. Match List – I with List – II and
select the correct answer using the
codes given below the lists :
List – I List – II
(a) Goodwill of (i) Current
a company liability
(b) Overdraft (ii) Fixed Assets
(c) Preliminary (iii) Reserves and Surplus
Expenses
(d) Premium on (iv) Fictitious Assets
Issue of
Shares
Codes :
(a) (b) (c) (d)
(A) (ii) (i) (iv) (iii)
(B) (i) (ii) (iv) (iii)
(C) (i) (ii) (iii) (iv)
(D) (ii) (i) (iii) (iv)
Answer:(A)
12. In India, which of the following is
prepared on the guidelines of AS-3
(Accounting Standard – 3) ?
(A) Balance Sheet of a Company
(B) Funds Flow Statement
(C) Cash Flow Statement
(D) Consolidated Financial
Statement
Answer:(C)
13. What is the correct sequence of the
following actions required for the
preparation of financial accounts ?
(i) Trading accounts
(ii) Making adjusting entries
(iii) Balance Sheet
(iv) Profit and Loss Account
Select the correct answer from the
codes given below :
Codes :
(A) (iv), (ii), (i), (iii)
(B) (ii), (iv), (iii), (i)
(C) (ii), (i), (iv), (iii)
(D) (iv), (ii), (iii), (i)
Answer:(C)
14. The main effect of inflation on the
financial statement is
(A) Profits are understated
(B) Overstatement of Assets
(C) Adequacy of funds for
replacement of assets
(D) Erosion of capital
Answer:(D)
15. Present value of future earnings is a
model of Human Resources
Accounting suggested by
(A) Brauch Lev & ABA Schwartz
(B) Jaggi & Lau
(C) S.K. Chakraborty
(D) Eric Flamhaltz
Answer:(A)
16. Which element of the promotion mix
do wholesalers generally apply to
obtain their promotional objective ?
(A) Advertising
(B) Personal Selling
(C) Trade Promotion
(D) Direct Marketing
Answer:(C)
17. Who has given ‘fourteen Principles
of Management’ ?
(A) Barnard
(B) Henry Fayol
(C) F.W. Taylor
(D) Flemming
Answer:(B)
18. What is M.B.O ?
(A) Management by Objective
(B) Multiple Business Organisation
(C) Management by Organisation
(D) Multiplicity of Business
Operations
Answer:(A)
19. Match items in List – II with items
in List – I :
List – I List – II
I. Mega 1. Advertising
Marketing
II. Penetration 2. Kotler
Price
III. Promotion 3. Low price
Mix
IV. Customer 4. Post Purchase Behaviour
Satisfaction
Codes :
1 2 3 4
(A) I II III IV
(B) III I II IV
(C) IV III II I
(D) III IV I II
Answer:(B)
20. Statement (A) : Sales promotion has
a strong impact on consumer
behaviour in rural India.
Reason (R) : Rural people in India
give utmost significance to
sales promotion schemes.
Codes :
(A) Statement (A) is correct but
Reason (R) is incorrect.
(B) Statement (A) is incorrect, but
Reason (R) is correct.
(C) Both Statement (A) and
Reason (R) are correct.
(D) Both Statement (A) and
Reason (R) are incorrect.
Answer:(A)
21. Market sub-divided on the basis of
behavioural characteristics is called
(A) Segmentation
(B) Aggregation
(C) Precision
(D) None of the above
Answer:(A)
22. What is mass marketing ?
(A) Offering the same products
and marketing mix to all
consumers.
(B) Offering variety of products to
the entire market.
(C) Offering differentiated
products to all customers.
(D) Following concentrated
marketing strategy.
Answer:(A)
23. Which concept of marketing is based
on the assumption that superior
products sell themselves ?
(A) Production (B) Marketing
(C) Societal (D) Product
Answer:(D)
24. In broader sense, marketing
communication includes
(A) Product (B) Price
(C) Place (D) All
Answer:(D)
25. Physical distribution provides
(A) Place utility
(B) Time utility
(C) Place and Time utility
(D) Form utility
Answer:(C)
26. What is relevant to place variable of
marketing mix ?
(A) Branding
(B) Price penetration
(C) Sales personnel motivation
(D) None
Answer:(C)
27. Find incorrect statement :
(A) Marketers arouse emotional
motives
(B) Marketers satisfy rational
motives
(C) Marketers formulate different
sales promotions for different
motives
(D) None of the above
Answer:(D)
28. Non-store marketing includes
(A) Home selling
(B) V.P.P.
(C) Vending Machines
(D) All of the above
Answer:(D)
29. What is customer delight ?
(A) Performance equal to
expectation
(B) Performance less than
expectation
(C) Performance more than
expectation
(D) Expectation more than
performance
Answer:(C)
30. Which terms are often used inter-
changeably in marketing literature ?
(A) Concept, method, philosophy
(B) Concept, approach, technique
(C) Orientation, concept,
philosophy
(D) Philosophy, system, concept
Answer:(C)
31. Which one of the following is not
the operative function of HRM ?
(A) Development
(B) Controlling
(C) Compensation
(D) Integration
Answer:(B)
32. Which one of the following is not in
sequence of personnel training
procedure ?
1. Instructor Preparation
2. Present the task
3. Try out performance
4. Training preparation
5. Follow up
(A) 1, 2, 3, 4, 5
(B) 2, 1, 4, 3, 5
(C) 1, 4, 2, 3, 5
(D) 3, 1, 2, 5, 4
Answer:(A,B&D)
33. Under which method of performance
appraisal one person is compared
with all others for the purpose of
placing them in a simple order of
work ?
(A) Grading
(B) Person to Person comparison
(C) Ranking
(D) None of the above
Answer:(C)
34. Which one of the following is not
the fundamental procedure that
should be considered for the
collective bargaining ?
(A) Prenegotiation phase
(B) Selection of Negotiators
(C) Tactic and Strategy of
Bargaining
(D) None of the above
Answer:(D)
35. Assertion (A) : Inevitably the firm
must go to the external sources
for lower entry jobs.
Reason (R) : For positions where
required qualification/
experience are not met.
Codes :
(A) Both (A) and (R) are not
correct.
(B) (A) is true, but (R) is false.
(C) (R) is true, but (A) is false.
(D) Both (A) and (R) are correct.
Answer:(D)
36. Match the following items of List – I
and List – II :
List – I List – II
1. Asbestos I. Lung Cancer
2. Benzene II. Cancer
3. Ethylene III. Leukemia
Disbromide
4. Kerosene IV. Acute Nervous
System Depression
Codes :
I II III IV
(A) 4 2 3 1
(B) 4 3 2 1
(C) 1 3 2 4
(D) 3 4 2 1
Answer:(C)
37. Assertion (A) : Business Economics
is tool centrics facilitating
decision making in business.
Reason (R) : It provides an
analytical understanding of
economic activities.
Codes :
(A) Both (A) and (R) are not
correct.
(B) Both (A) and (R) are correct.
(C) (A) is true, but (R) is false.
(D) (R) is true, but (A) is false.
Answer:(B)
38. Demand has the following elements :
(A) Quantity
(B) Price
(C) Time
(D) All the above
Answer:(D)
39. A perfectly competitive firm attains
equilibrium when
(A) AC = AR
(B) MR = MC
(C) MC = AC
(D) TC = TR
Answer:(B)
40. The purpose of job evaluation is
(A) Fixation of Responsibility
(B) Promotion
(C) Wage Determination
(D) Transfer to a better job
Answer:(C)
41.
(A) 1.96 (B) 2.32
(C) 1.645 (D) 2.5758
Answer:(C)
42. Which of the following is the non-
random method of selecting samples
from a population ?
(A) Stratified Sampling
(B) Quota Sampling
(C) Systematic Sampling
(D) Cluster Sampling
Answer:(B)
43. If the two regression coefficients are
0.8 and 0.2, then the value of
coefficient of correlation is
(A) + 0.16 (B) – 0.40
(C) – 0.16 (D) + 0.40
Answer:(D)
44. Which one of the following is a
relative measure of dispersion ?
(A) Standard deviation
(B) Variance
(C) Coefficient of variation
(D) None of the above
Answer:(C)
45. Assertion (A) : Internal factors of
business environment are
controllable factors.
Reason (R) : The company can alter
or modify such factors to suit
the environment.
Codes :
(A) Both (A) and (R) are correct.
(B) (A) is correct, but (R) is
incorrect.
(C) Both (A) and (R) are incorrect.
(D) (A) is incorrect.
(C) Coefficient of variation
(D) None of the above
Answer:(A)
46. The concept of ‘Rolling Plan’ in
India was introduced by the
(A) BJP Government
(B) Janta Government
(C) Congress Government
(D) All of the above
Answer:(B)
47. Which one of the following is an
obstacle to globalisation ?
(A) Wide base
(B) Niche markets
(C) Obsolescence
(D) Competition
Answer:(C)
48. ‘VSAT’ technology is first followed
for on-line trading by
(A) BSE (B) OTCEI
(C) NSE (D) ISE
Answer:(C)
49. Match the following :
List – I List – II
Years Act
(a) 1956 (i) Consumer Protection
Act
(b) 1986 (ii) Indian Companies
Act
(c) 1992 (iii) Securities and
Exchange Board of
India
(d) 2002 (iv) Securitisation Act
Codes :
(a) (b) (c) (d)
(A) (ii) (i) (iii) (iv)
(B) (i) (ii) (iii) (iv)
(C) (ii) (iii) (i) (iv)
(D) (i) (iv) (iii) (ii)
Answer:(A)
50. The flagship project of Government
of India launched for generating
guaranteed employment in rural
areas is known as
(A) PMRY (B) MNREGA
(C) JRY (D) NREP
Answer:(B)
51. The conflicts in project ranking in
capital budgeting as per NPV and
IRR may arise because of
(A) Size disparity
(B) Time disparity
(C) Life disparity
(D) All the above
Answer:(D)
52. The degree of financial leverage
reflects the responsiveness of
(A) Operating income to changes
in total revenue
(B) EPS to changes in EBIT
(C) EPS to changes in total
revenue
(D) None of the above
Answer:(B)
53. The overall capitalisation rate and
the cost of debt remain constant for
all degrees of financial leverage is
advocated by
(A) Traditional Approach
(B) Net Income Approach
(C) Net Operating Income
Approach
(D) M-M-Approach
Answer:(C)
54. Which of the following is not
included in the assumptions on
which Myron Gordon proposed a
model on stock valuation ?
(A) Retained earnings, the only
source of financing
(B) Finite life of the firm
(C) Taxes do not exist
(D) Constant rate of return on
firm’s investment
Answer:(B)
55. Match the following :
List – I List – II
(i) Factoring (a) Cash
services Management
(ii) Economic (b) Receivable
Order Management
Quantity
(iii) Commercial (c) Inventory
paper Management
(d)Working Capital
Financing
Codes :
(i) (ii) (iii)
(A) (a) (c) (b)
(B) (c) (b) (a)
(C) (b) (c) (d)
(D) (b) (a) (c)
Answer:(C)
56. Assertion (A) : International
business focuses on global
resources, opportunities to
buy/sell worldwide.
Reason (R) : The efforts of IMF,
World Bank and WTO to
liberalise their economies led
to globalisation.
Codes :
(A) Both (A) and (R) are true.
(B) Both (A) and (R) are false.
(C) (A) is true, but (R) is false.
(D) (A) is false, but (R) is true.
Answer:(A)
57. Match the items of List – I with
items of List – II :
List – I List – II
(i) Wider Market 1. Modes of
Entry
(ii) Turn key 2. Goal of International
Projects Business
(iii) Expanding the 3. Advantages of
production International
capacities Business
(iv) Geocentric 4. Stage of
approach Globalisation
Codes :
(i) (ii) (iii) (iv)
(A) 4 2 3 1
(B) 3 1 2 4
(C) 1 2 3 4
(D) 4 3 2 1
Answer:(B)
58. BRICS includes
(A) Bhutan, Romania, Indonesia,
Chile and South Korea
(B) Brazil, Russia, Indonesia,
Chile and Sudan
(C) Brazil, Russia, India, China
and South Africa
(D) Britain, Russia, India,
Czechoslovakia, Sri Lanka
Answer:(C)
59. Out of the following, one is not
related with WTO :
(A) TRIPS
(B) Ministerial Conference
(C) TRIMS
(D) TRAI
Answer:(D)
60. Balance of Payment includes
components
(A) Current Account, Capital
Account, Unilateral Payments
Accounts, Official Settlement
Account
(B) Revenue Account, P & L
Account, Capital Account,
Official Account
(C) Trade Account, Activity
Account, Revenue Account,
Currency Account
(D) Forex Account, Trade
Account, Funds Account
Answer:(A)
61. Assertion (A) : International
Monetary Fund was set up in
1944.
Reason (R) : To promote
international monetary
cooperation through a
permanent institution which
provides machinery for
consultation and collaboration
on international monetary
problems.
Codes :
(A) Both (A) and (R) are false.
(B) Both (A) and (R) are true.
(C) (A) is true, but (R) is false.
(D) (R) is true, but (A) is false.
Answer:(B)
62. The commercial banks do not
perform one function out of the
following :
(A) Mobilisation of savings
(B) Giving Loans and Advances
(C) Issuing Currency Notes
(D) Financing Priority Sectors
Answer:(C)
63. There are two lists of items, match
the items of List – I with items of
List – II :
List – I List – II
I. Reserve Bank 1. NPA
of India
II. EXIM Bank 2. Facilitating Small Scale
Industries
III. SIDBI 3. Credit Control
IV. Capital 4. Export/Import
Adequacy Financing
Codes :
I II III IV
(A) 1 2 3 4
(B) 4 3 2 1
(C) 2 3 4 1
(D) 3 4 2 1
Answer:(D)
64. One of the items is not related with
e-banking :
(A) Demand Draft
(B) SPNS
(C) ECS
(D) ATM
Answer:(A)
65. Assertion (A) : The Treasury
Manager uses the derivatives
in the Bond market as well as
in Forex market.
Reason (R) : It helps risk coverage.
Codes :
(A) Both (A) and (R) are false.
(B) Both (A) and (R) are true.
(C) (A) is true, but (R) is false.
(D) (R) is true, but (A) is false.
Answer:(B)
66. Factoring and forfeiting have not
taken off in the Indian economy due
to lack of expertise and experience.
One is not included in the factoring
services rendered.
(A) Purchase of book debts and
receivables.
(B) Prepayment of debts partially
or fully
(C) Giving advice
(D) Covering the credit risk of the
suppliers
Answer:(C)
67. Which one is not the form of FDI ?
(A) Purchase of existing assets in
foreign currency
(B) New Investment in property,
plant, equipment
(C) Making investment in the
mutual funds
(D) Transfer of many types of
assets
Answer:(C)
68. Match the items of List – I with
items of List – II :
List – I List – II
1. Measures I. Globalisation
towards
globalization
2. Off-shoring II. FEMA
3. FERA III. Liberalise the
inflow of FDI
4. Mr. Aruthur IV. Uruguay
Dunkel Round
Codes :
1 2 3 4
(A) III I II IV
(B) II I III IV
(C) IV II I III
(D) I II IV III
Answer:(A)
69. Which one of the following is not
the advantage of MNCs to the host
country ?
(A) Increase in social activity
(B) Increase in economic activity
(C) Utilisation of natural resources
(D) R & D efforts enhanced
Answer:(A)
70. India suffered from deficit balance
both in trade balance and net
invisibles, hence, took up a number
of steps to manage this problem.
Which one is not appropriate for this ?
(A) Export control
(B) Current Account Convertibility
(C) Liberalised Export Policy
(D) Unified Exchange Rate
Answer:(A)
71. Mr. James, a citizen of U.S., arrived
in India for the first time on 1st July,
2010 and left for Nepal on 15th
December 2010. He arrived to India
again on 1st January 2011 and stayed
till the end of the financial year
2010-11. His residential status for
the assessment year 2011-12 is
(A) Resident (ordinarily resident)
(B) Not ordinarily resident
(C) Non-resident
(D) None of the above
Answer:(B)
72. The value of free accommodation in
Delhi provided by employer in the
private sector is
(A) 10% of salary
(B) 15% of salary
(C) 20% of salary
(D) 25% of salary
Answer:(B)
73. Which of the following is not a
capital asset under capital gains head
of income ?
(A) Stock in trade
(B) Goodwill of business
(C) Agricultural Land in Delhi
(D) Jewellery
Answer:(A)
74. Match the items of List-I with
List-II
List – I List – II
I. Tax 1. Making suitable
Planning arrangement of TDS
II. Tax 2. Understatement
Avoidance of Income
III. Tax Evasion 3. Availing deduction
under Section 10A of IT Act.
IV. Tax Admini- 4. Misinterpreting the provisions
stration of the IT Act
Codes :
I II III IV
(A) 2 1 4 3
(B) 1 4 3 2
(C) 3 4 2 1
(D) 4 1 3 2
Answer:(C)
75. Under the Income Tax Act, 1961
unabsorbed depreciation can be
carried forward for set-off purpose :
(A) For 4 years
(B) For 5 years
(C) For 8 years
(D) For unspecified period
Answer:(D)
Commerce 2012 June Paper 3 Solved
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