CA Intermediate Practice Set 1

The 'Framework for the Preparation and Presentation of Financial Statements' issued by the ICAI primarily provides the conceptual basis for

1. A.Formulation of Accounting Standards and resolving accounting issues not specifically covered✓
2. B.Computation of income tax liability
3. C.Preparation of GST returns
4. D.Registration of companies

Correct answer: A

As per AS 3 (Cash Flow Statements), cash flows are classified into operating activities, investing activities and

1. A.Extraordinary activities
2. B.Financing activities✓
3. C.Capital activities
4. D.Trading activities

Correct answer: B

As per AS 9 (Revenue Recognition), revenue from the sale of goods is recognised when

1. A.The customer places the order
2. B.The significant risks and rewards of ownership have been transferred to the buyer✓
3. C.Cash is actually received
4. D.The goods are manufactured

Correct answer: B

As per AS 29, a provision should be recognised when an enterprise has a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle it, and

1. A.A reliable estimate can be made of the amount of the obligation✓
2. B.The shareholders have approved it in the AGM
3. C.It relates to a contingent asset
4. D.The statute fixes the exact amount

Correct answer: A

Under Section 68 of the Companies Act, 2013, a company can fund the buy-back of its own shares out of

1. A.Free reserves, the securities premium account, or the proceeds of an issue of any shares/specified securities other than the same kind being bought back✓
2. B.Free reserves only
3. C.The securities premium account only
4. D.Fresh borrowings from banks

Correct answer: A

In a Consolidated Balance Sheet, where the cost of the parent's investment in a subsidiary exceeds the parent's share in the subsidiary's net assets on the date of acquisition, the excess is recognised as

1. A.Goodwill✓
2. B.Capital Reserve
3. C.General Reserve
4. D.Minority Interest

Correct answer: A

An individual qualifies as 'Resident and Ordinarily Resident' in India only after satisfying at least one basic condition of residence in India AND

1. A.Both of the specified additional conditions relating to residence in earlier years✓
2. B.Being an Indian citizen
3. C.Holding a valid PAN
4. D.Having filed a return of income in the previous year

Correct answer: A

Under the head 'Income from House Property', the standard deduction allowed towards repairs and maintenance, irrespective of actual expenditure, is

1. A.30% of the Net Annual Value✓
2. B.30% of the Gross Annual Value
3. C.20% of the Net Annual Value
4. D.Actual expenses incurred, subject to proof

Correct answer: A

For computing 'Profits and Gains of Business or Profession', depreciation on business assets is generally allowed as per the

1. A.Written Down Value (WDV) method prescribed under the Income-tax Rules✓
2. B.Straight Line Method only
3. C.Units of Production Method
4. D.No depreciation is allowed under the Income-tax Act

Correct answer: A

For equity shares listed on a recognised stock exchange in India, the asset is treated as a long-term capital asset if held for more than

1. A.12 months✓
2. B.24 months
3. C.36 months
4. D.6 months

Correct answer: A

Long-term capital loss can be set off only against

1. A.Any head of income
2. B.Long-term capital gains✓
3. C.Short-term capital gains only
4. D.Income from business or profession

Correct answer: B

GST in India is structured as a

1. A.Single, unified GST levied only by the Central Government
2. B.Dual GST system, with CGST and SGST/UTGST levied concurrently✓
3. C.Triple GST system levied by the Centre, States and local bodies
4. D.Tax applicable only to services, not goods

Correct answer: B

Under Section 17(5) of the CGST Act, Input Tax Credit is generally blocked in respect of

1. A.Raw materials used in the course of business
2. B.Motor vehicles used for personal purposes✓
3. C.Capital goods used exclusively for business
4. D.Input services used for taxable outward supplies

Correct answer: B

Under Activity-Based Costing (ABC), overhead costs are assigned to products primarily on the basis of

1. A.Cost drivers/activities that cause the costs to be incurred✓
2. B.Direct labour hours alone
3. C.Machine hours alone
4. D.A single plant-wide blanket overhead rate

Correct answer: A

Under the Companies Act, 2013, the minimum number of directors required on the Board of a public company is

1. A.2
2. B.3✓
3. C.1
4. D.7

Correct answer: B

As per Section 135 of the Companies Act, 2013, an eligible company must spend, in every financial year, at least ___ of its average net profits of the three immediately preceding financial years on CSR activities.

1. A.1%
2. B.2%✓
3. C.5%
4. D.10%

Correct answer: B

The first auditor of a company (other than a Government company) must be appointed by the Board of Directors within

1. A.30 days from the date of registration of the company✓
2. B.6 months from the date of registration
3. C.1 year from the date of registration
4. D.90 days from the date of registration

Correct answer: A

In a Limited Liability Partnership (LLP), the liability of a partner is limited to

1. A.The partner's agreed contribution to the LLP✓
2. B.Unlimited personal liability, as in a traditional partnership
3. C.Double the amount of the partner's contribution
4. D.The total assets of the LLP, with additional personal liability

Correct answer: A

The General Clauses Act, 1897 primarily serves to

1. A.Lay down general rules for the interpretation and construction of Central Acts and Regulations✓
2. B.Prescribe corporate tax rates
3. C.Govern the incorporation of companies
4. D.Provide the framework for filing GST returns

Correct answer: A

The primary objective of modern financial management is generally regarded as

1. A.Profit maximisation alone
2. B.Wealth maximisation of shareholders✓
3. C.Sales maximisation
4. D.Cost minimisation alone

Correct answer: B

The cost of retained earnings is generally treated as approximately equal to the

1. A.Cost of equity capital✓
2. B.Cost of debt capital
3. C.Bank lending rate
4. D.Zero, since retained earnings involve no external cost

Correct answer: A

The Net Present Value (NPV) of a project is calculated by discounting expected future cash flows at the

1. A.Prevailing bank rate
2. B.Cost of capital (discount rate)✓
3. C.Rate of inflation
4. D.Applicable tax rate

Correct answer: B

The 'operating cycle' of a manufacturing firm refers to the time period between

1. A.The purchase of raw materials and the receipt of cash from the sale of finished goods✓
2. B.Incorporation of the company and its first sale
3. C.Two consecutive dividend declarations
4. D.Two consecutive audit reports

Correct answer: A

According to Walter's Model of dividend policy, dividend policy affects the value of a firm's shares when the firm's internal rate of return (r) is

1. A.Not equal to its cost of capital (Ke)✓
2. B.Always equal to Ke
3. C.Always zero
4. D.Irrelevant regardless of the relationship between r and Ke

Correct answer: A

Strategic management is primarily concerned with decisions relating to the

1. A.Long-term direction, scope and competitive positioning of an organisation✓
2. B.Routine day-to-day clerical operations
3. C.Preparation of the daily cash book
4. D.Attendance record of employees

Correct answer: A

A SWOT analysis evaluates an organisation's Strengths, Weaknesses, Opportunities and

1. A.Targets
2. B.Threats✓
3. C.Trends
4. D.Tactics

Correct answer: B

A strategy in which a firm concentrates on serving a narrow market segment more effectively than broad-based competitors is known as

1. A.Cost leadership strategy
2. B.Focus (niche) strategy✓
3. C.Differentiation strategy
4. D.Diversification strategy

Correct answer: B

Which of the following tools translates an organisation's strategy into performance measures across financial, customer, internal process, and learning-and-growth perspectives?

1. A.Balanced Scorecard✓
2. B.Trial Balance
3. C.Break-even Chart
4. D.Gantt Chart

Correct answer: A

Functional strategies within an organisation are typically formulated at the

1. A.Corporate level, applicable to all businesses
2. B.Departmental/operational level (e.g., marketing, HR, finance)✓
3. C.Board level exclusively, without departmental input
4. D.Shareholder level

Correct answer: B

Michael Porter's Five Forces framework for industry analysis does NOT include which of the following as a distinct, separate force?

1. A.Threat of new entrants
2. B.Bargaining power of suppliers
3. C.Government regulation, as a standalone sixth force✓
4. D.Threat of substitute products

Correct answer: C