Banking Preparation Model Questions
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Banking Preparation Model Questions - sample questions with answers
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1. How is prepaid insurance premium presented in the Balance Sheet, and how does it appear in the insurance expense account?
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Answer: Shown as an asset, and appears as a credit in the expense account
Prepaid insurance is recorded as an asset on the Balance Sheet and credited to the insurance expense account to reduce the period's expense.
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2. Which of the following is NOT classified as a fundamental accounting assumption according to standard accounting principles?
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Answer: Business Entity Concept
The three fundamental accounting assumptions recognized under accounting standards are Going Concern, Consistency, and Accrual. The Business Entity Concept is an accounting concept, not one of the fundamental assumptions.
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3. What is the portion of a company's divisible profits distributed to its shareholders in proportion to their shareholding called?
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Answer: Dividend
Dividend is the portion of divisible profits distributed to shareholders in proportion to their shareholdings.
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4. In Cost Accounting, which stock metric is calculated using the formula 'Average Usage × Minimum Delivery Time for Emergency Purchase'?
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Answer: Danger Stock Level
Danger Stock Level is calculated by multiplying average consumption/usage rate by the minimum delivery time for emergency purchases.
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5. Under which heading is the payment of subordinated liabilities included when preparing a Cash Flow Statement?
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Answer: Cash flow from financing activities
Since subordinated liabilities are related to long-term financing, their payment is classified under Cash Flow From Financing Activities.
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6. When did the Fiscal Procedures and Financial Accountability Act, 2076 come into force in Nepal?
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Answer: October 11, 2019 (24 Ashwin 2076)
The Fiscal Procedures and Financial Accountability Act, 2076 came into force on 24 Ashwin 2076 B.S.
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7. Which accounting concept distinguishes between the actual receipt of cash and the right to receive cash?
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Answer: Accrual Concept
The accrual concept recognizes transactions when the right to receive or obligation to pay arises, rather than when cash is actually received or paid.
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8. According to the accounting equation, revenues lead to an increase in which of the following?
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Answer: Equity
Revenues increase net income, which ultimately increases the owner's equity in the business.
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9. Which of the following is NOT a component of the audit risk model?
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Answer: Compliance risk
Audit risk consists of three components: inherent risk, control risk, and detection risk; compliance risk is not a component of the audit risk model.
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10. Which of the following indicates a deterioration in working capital management?
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Answer: An increase in the debtors collection period
An increase in the debtors collection period means customers take longer to pay, which ties up funds and indicates deteriorating working capital management.
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11. What is the document used in a store to record only the quantitative status of stock called?
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Answer: Bin Card
A Bin Card is a record that shows only the quantitative movement and balance of stock in a store, whereas a store ledger also records monetary values.
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12. Under which category in financial statements are guarantees issued by banks recorded?
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Answer: Contingent liabilities
Guarantees issued by banks depend on the occurrence or non-occurrence of uncertain future events, hence they are classified as contingent liabilities.
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13. According to the Fiscal Procedures and Financial Accountability Act, 2076, at what interval must an internal audit be conducted?
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Answer: Every 3 months
According to the Fiscal Procedures and Financial Accountability Act, 2076, internal auditing must be conducted every 3 months (quarterly).
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14. According to the Realization Concept in accounting, when is revenue recognized?
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Answer: Upon delivery of goods
According to the Realization Concept, revenue is recognized when the ownership or delivery of goods to the customer takes place.
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15. What are the Profit and Loss Account and Balance Sheet collectively known as?
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Answer: Final Accounts
The financial statements prepared at the end of an accounting period, including the Profit and Loss Account and Balance Sheet, are collectively called Final Accounts.
This chapter has 51 questions. Practise them all with timing, answers and explanations.