CMA Intermediate Practice Set 1

A contract of guarantee, as a special contract, typically involves how many parties?

1. A.Two
2. B.Three — the creditor, the principal debtor and the surety✓
3. C.Four
4. D.One

Correct answer: B

As per Section 103 of the Companies Act, 2013, the quorum for a general meeting of a public company having more than 1,000 but up to 5,000 members is

1. A.5 members
2. B.15 members✓
3. C.30 members
4. D.2 members

Correct answer: B

The Employees' Provident Fund scheme in India is governed primarily under the

1. A.Employees' Provident Funds and Miscellaneous Provisions Act, 1952✓
2. B.Factories Act, 1948
3. C.Minimum Wages Act, 1948
4. D.Payment of Bonus Act, 1965

Correct answer: A

Under the Competition Act, 2002, an agreement between enterprises that causes an 'appreciable adverse effect on competition' (AAEC) in India is

1. A.Void✓
2. B.Voidable at the discretion of the parties
3. C.Valid but subject to additional tax
4. D.Automatically approved by the Competition Commission

Correct answer: A

In India, Accounting Standards for companies are notified based on recommendations of the

1. A.Institute of Chartered Accountants of India (ICAI) / National Financial Reporting Authority (NFRA)✓
2. B.Reserve Bank of India
3. C.Securities and Exchange Board of India
4. D.Ministry of Labour and Employment

Correct answer: A

'Calls-in-Arrears' is shown in the Balance Sheet of a company as a deduction from

1. A.Called-up capital✓
2. B.Reserves and Surplus
3. C.Fixed assets
4. D.Current liabilities

Correct answer: A

As per Schedule III to the Companies Act, 2013, the Balance Sheet of a company must be prepared in

1. A.Horizontal (T) form only
2. B.Vertical form✓
3. C.Either horizontal or vertical form, at management's discretion
4. D.Any format the auditor prefers

Correct answer: B

Under AS 3, the purchase of fixed assets (property, plant and equipment) is classified as a cash flow arising from

1. A.Operating activities
2. B.Investing activities✓
3. C.Financing activities
4. D.Extraordinary items

Correct answer: B

For income-tax purposes in India, the 'previous year' refers to the financial year

1. A.Immediately preceding the relevant assessment year✓
2. B.Immediately following the relevant assessment year
3. C.Always equal to the calendar year
4. D.Chosen freely by the assessee

Correct answer: A

Rental income from letting out a residential house property is chargeable to tax under the head

1. A.Income from Salary
2. B.Income from House Property✓
3. C.Income from Other Sources
4. D.Capital Gains

Correct answer: B

GST is levied in India on the

1. A.Supply of goods or services or both✓
2. B.Manufacture of goods only
3. C.Sale of immovable property only
4. D.Import of capital goods only

Correct answer: A

Form GSTR-3B, filed by regular taxpayers, is a

1. A.Monthly (or quarterly) summary return for reporting outward and inward supplies and paying tax✓
2. B.One-time registration application
3. C.Annual audit report
4. D.Return filed only at the time of business closure

Correct answer: A

The primary objective of cost accounting is the

1. A.Ascertainment of cost and exercise of cost control✓
2. B.Conduct of statutory external audit
3. C.Filing of income tax returns
4. D.Issue of shares to the public

Correct answer: A

The costing method suitable for production carried out against specific customer orders, where each job has distinguishable characteristics, is

1. A.Process Costing
2. B.Job Costing✓
3. C.Operating Costing
4. D.Unit/Output Costing

Correct answer: B

In process costing, the loss that is inherent and unavoidable under normal operating conditions is called

1. A.Abnormal loss
2. B.Normal loss✓
3. C.Abnormal gain
4. D.Scrap value

Correct answer: B

Under marginal costing, the 'contribution' per unit is calculated as

1. A.Selling price per unit minus variable cost per unit✓
2. B.Selling price per unit minus total cost per unit
3. C.Fixed cost minus variable cost
4. D.Selling price per unit minus fixed cost per unit

Correct answer: A

A favourable material price variance arises when

1. A.The actual price paid for materials is less than the standard price✓
2. B.The actual price paid exceeds the standard price
3. C.The actual quantity used exceeds the standard quantity
4. D.Actual output falls short of standard output

Correct answer: A

A budget designed to adjust automatically in accordance with the level of activity actually attained is known as a

1. A.Fixed budget
2. B.Flexible budget✓
3. C.Zero-based budget
4. D.Master budget

Correct answer: B

Operations planning is primarily concerned with the

1. A.Efficient utilisation of resources to produce goods or services✓
2. B.Recruitment of sales staff exclusively
3. C.Design of advertising campaigns
4. D.Formulation of dividend policy

Correct answer: A

The Economic Order Quantity (EOQ) model determines the order quantity that minimises the total of

1. A.Ordering cost and carrying (holding) cost✓
2. B.Selling price and profit margin
3. C.Wages and salaries
4. D.Excise duty and customs duty

Correct answer: A

Total Quality Management (TQM) emphasises

1. A.Continuous improvement in quality, involving all employees across the organisation✓
2. B.Quality checks conducted solely by inspectors at the final stage
3. C.One-time quality audits with no follow-up
4. D.Cost-cutting at the expense of product quality

Correct answer: A

Strategy formulation, as a stage of strategic management, primarily involves setting the organisation's

1. A.Mission, objectives, and strategic choices✓
2. B.Daily work schedules only
3. C.Annual budget alone
4. D.Payroll structure

Correct answer: A

Business Process Re-engineering (BPR) primarily involves

1. A.Radical redesign of business processes to achieve dramatic improvements in performance✓
2. B.Minor, incremental changes to existing processes
3. C.Complete outsourcing of all business functions
4. D.Deliberately reducing product quality to cut costs

Correct answer: A

A key element in evaluating whether a chosen strategy is working effectively is

1. A.Comparing actual performance against pre-set standards and objectives✓
2. B.Ignoring deviations between actual and planned performance
3. C.Avoiding periodic performance reviews
4. D.Reducing communication between departments

Correct answer: A

The concept of 'time value of money' implies that a rupee received today is worth

1. A.More than a rupee to be received in the future✓
2. B.Less than a rupee to be received in the future
3. C.Exactly equal to a rupee received in the future
4. D.Unrelated to a rupee received in the future

Correct answer: A

The Weighted Average Cost of Capital (WACC) is computed by weighting the cost of each source of capital by its

1. A.Proportion in the firm's overall capital structure✓
2. B.Face value alone
3. C.Market capitalisation of equity alone
4. D.Applicable corporate tax rate alone

Correct answer: A

The 'Payback Period' method of evaluating capital budgeting proposals measures

1. A.The time required to recover the initial investment from a project's cash inflows✓
2. B.The internal rate of return of the project
3. C.The profitability index of the project
4. D.The firm's cost of capital

Correct answer: A

Net working capital of a firm is calculated as

1. A.Current Assets minus Current Liabilities✓
2. B.Fixed Assets minus Current Liabilities
3. C.Total Assets minus Total Liabilities
4. D.Current Assets plus Current Liabilities

Correct answer: A

According to the Modigliani-Miller (MM) hypothesis, under the assumptions of a perfect capital market, the value of a firm is

1. A.Independent of its dividend policy✓
2. B.Solely determined by its dividend payout ratio
3. C.Maximised only when the payout ratio is 100%
4. D.Maximised only when the payout ratio is zero

Correct answer: A

Business data analytics that uses historical data and statistical techniques to forecast future outcomes or trends is called

1. A.Descriptive analytics
2. B.Predictive analytics✓
3. C.Prescriptive analytics
4. D.None of the above

Correct answer: B