CPT General Economics Practice Questions with Answers

general economics for cpt exam

25 Objective Type CPT General Economics Practice Questions

1. Loss on issue of debentures is treated as ____________.
(a) Intangible asset
(b) Current asset
(c) Current liability
(d) Miscellaneous expenditure

Ans. (d)

2. Abhishek & Bhawna are partners sharing profits and losses in the ratio 5:3. On admission, Chandan brings Rs. 70,000 cash and Rs. 48,000 against goodwill. New profit sharing ratio between Abhishek, Bhawna and Chandan are 7:5:4. The sacrificing ratio among Abhishek : Bhawna will be
(a) 3:1
(b) 4:7
(c) 5:4
(d) 2:1

Ans. (a)

3. Revenue from sale of products, is generally, realized in the period in which
(a) Cash is collected
(b) Sale is made
(c) Products are manufactured
(d) None of the above.

Ans. (b)

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4. Wipro Ltd. issued 20,000, 8% debentures of Rs.10 each at par, which are redeemable after 5 years at a premium of 20%. The amount of loss on redemption of debentures to be written off every year will be
(a) Rs.40,000
(b) Rs.10,000
(c) Rs.20,000
(d) Rs.8,000

Ans. (d)

5. Goods sent out on consignment Rs. 2, 00,000. Consignor’s expenses Rs. 5,000. Consignee’s expenses Rs.2000. Cash sales Rs.1,00,000 credit sales Rs.1,10,000. Consignment stock Rs.40,000 Ordinary commission payable to consignee Rs.3,000. Del-credere commission Rs.2000. The amount irrecoverable from customer Rs.2,000. What will be the profit on consignment?
(a) Rs.38,000
(b) Rs.40,000
(c) Rs.36,000
(d) Rs.43,000

Ans. (a)

6. Dividends are usually paid as a percentage of ______
(a) Authorized share capital
(b) Net profit
(c) Paid-up capital
(d) Called-up capital

Ans. (c)

7. Future Ltd. purchased Machinery from Gupta & Company for a book value of Rs.4,00,000. The consideration was paid by issue of 10% debentures of Rs.100 each at a discount of 20%. The debenture account was credited with
(a) Rs.4,00,000
(b) Rs.5,00,000
(c) Rs.3,20,000
(d) Rs.4,80,000

Ans. (b)

8. Noting charges are paid at the time of _______of a bill.
(a) Retirement
(b) Renewal
(c) Dishonour
(d) None of these

Ans. (c)

9. Raman and Gopal are partners sharing profits and losses in the ratio of 2:1. Gopal gave a loan of Rs.12,000 to the firm. They did not have any specific agreement about interest on loan mentioned in the partnership deed. Gopal claims interest on loan @ 10% p.a. The interest on loan as per rules of Partnership Act, 1932 will be:
(a) Rs.840
(b) Rs.820
(c) Rs.720
(d) Rs.960

Ans. (c)

10. At the time of admission of a new partner, if the value of goodwill is overstated in the books, it is written back by ________
(a) Old partners in old profit/loss sharing ratio
(b)  All the partners including the new partner in new profit/loss sharing ratio.
(c) Old partners in sacrificing ratio
(d) New partner in gaining ratio.

Ans. (a)

11. Sunflower Oil Ltd. issued 5,000, 15% Debentures of Rs.100 each at a premium of Rs.10 each. These debentures were to be redeemed at a premium of Rs.4 each after 5 years. The amount to be credited to the debenture premium account will be
(a) Rs.25,000
(b) Rs.50,000
(c) Rs.40,000
(d) Rs.60,000

Ans. (b)

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12. The accounting convention under which items in the accounts are adjusted by reference to the Retail Price Index is known as
(a) Current cost accounting
(b) Historical cost accounting
(c) Alternative accounting rules
(d) Current purchasing power accounting

Ans. (d)

13. Depreciation is best described as
(a) A means of spreading the payment for non-current assets over a period of years
(b) A decline in the market value of the assets
(c) A means of spreading the net cost of non-current assets over their estimated useful life
(d) A means of estimating the amount of money needed to replace the assets

Ans. (c)

14. FIFO, LIFO and average cost are inventory valuation methods. Which of the following statements is correct?
(a) When prices are rising FIFO will produce the higher profit figure of all these methods.
(b) When prices are rising LIFO will produce the higher profit figure of all these methods.
(c) LIFO is a permissible valuation method under IAS 2.
(d) Average cost is recomputed following every dispatch or issue of inventory.

Ans. (a)

15. It is easy to detect ______than to ______.
(a) Frauds, Errors
(b) Mistakes, Frauds
(c) Errors, Frauds
(d) Errors, Mistakes

Ans. (c)

16. When money is withdrawn from the bank, the bank ________ the account of the customer.
(a) Credits
(b) Debits
(c) Either (a) or (b)
(d) None of the three

Ans. (b)

17. Raman sells goods for Rs.1,00,000 to Harish on 1st January, 2006 and on the same day draws a bill on Harish at three months for the amount. Harish accepts it and returns it to Raman, who discounts it on 4th January, 2006 with his bank at 12% per annum.
The discounting charges are:
(a) Rs.12,000
(b) Rs.4,000
(c) Rs.3,000
(d) Nil

Ans. (c)

18. Rs.5,000 was spent by Mrs. Saroj for addition to machinery in order to increase the production capacity. The amount is:
(a) Revenue in nature
(b) Deferred revenue in nature
(c) Capital in nature
(d) Liability in nature

Ans. (c)

19. An error of principle would occur if
(a) Plant and machinery purchased was credited to a non-current assets account
(b) Plant and machinery purchased was debited to the purchases account
(c) Plant and machinery purchased was debited to the equipment account
(d) Plant and machinery purchased was debited to the correct account but with the wrong amount

Ans. (b)

20. A business can make a profit and yet have a reduction in its bank balance. Which ONE of the following might cause this to happen?
(a) The sales of non-current assets at a loss
(b) The charging of depreciation in the income statement
(c)  The lengthening of the period of credit given to customers
(d) The lengthening of the period of credit taken from suppliers

Ans. (c)

21. Which ONE of the following does NOT form part of the equity capital of a limited company?
(a) Preference share capital
(b) Share premium
(c) Revaluation reserve
(d) Ordinary share capital

Ans. (a)

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22. The prime cost of goods manufactured is the total of
(a) All factory costs before adjusting for work-in progress
(b) All factory costs of goods completed
(c) All materials and labour
(d) Direct factory costs

Ans. (d)

23. Which of the following items is not an asset?
(a) Salary paid to manager
(b) Accounts payable
(c) Sales
(d) Debtors

Ans. (d)

24. Which is the single most important attribute of an auditor (external or internal)?
(a)  Professional skills and training
(b)  Good communication skills
(c) Independence
(d) Accuracy

Ans. (c)

25. Which of the following internal control procedures will not help to detect fictitious employees on the payroll of a large company?
(a) Identification of employees by an independent official at the distribution of wages
(b) Paying employees by bank transfer
(c) Ensuring that all employees have contracts of employment prepared by the personnel department
(d) Ensuring that changes to the company payroll system (eg starters and leavers) are authorized

Ans. (b)

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2 Comments

  • A sent some goods costing Rs. 3,500 at a profit of 25% on sale to B on sale or return basis. B returned goods costing Rs. 800. At the end of the accounting period i.e. on 31st December, 2005, the remaining goods were neither returned nor were approved by him. The stock on approval will be shown in the balance sheet at Rs. (a) 2,000 (b) 2,700 (c) 2,700 less 25% of 2,700 (d) 3,500