Free JAIIB Online Mock Test


Account and finance for bankers

1. Borrowing Costs like interest and other costs that are directly attributable to the acquisition, construction or production of a ‘qualifying asset’ should be capitalised, under which of the following accounting standards:
1
AS 22
2
AS 20
3
AS 16
4
AS 26

Explanation: AS 16 requires that borrowing costs directly attributable to the acquisition, construction or production of a 'qualifying asset' (one that necessarily takes a substantial period of time to get ready for its intended use or sale) are included in the cost of the asset. Other borrowing costs are recognized as an expense.

2. As per OECD guidelines on transfer pricing, _____________ method compares the price at which controlled transaction is conducted to the price at which comparable uncontrolled transaction is conducted:
1
Comparable uncontrolled price method
2
Cost plus method
3
Resale price method
4
Transactional net margin method

Explanation: Under Organization for Economic co-operation and Development (OECD), Comparable Uncontrolled Price (“CUP”) method compares the price charged for property or services transferred in a controlled transaction to the price charged for property or services transferred in a comparable uncontrolled transaction in comparable circumstances.

3. The annual cash flows divided by the current market price of bond gives:
1
Rate of interest
2
Discount rate
3
Earnings per share
4
Current yield
4. The basic rule of book keeping i.e. debit the receiver and credit the giver is applicable to:
1
Personal accounts
2
Real accounts
3
Nominal account
4
All the above

Explanation: A personal account is an account for use by an individual for that person's own needs. The golden rule of this account is Debit: The Receiver and Credit: The Giver. So, option(1) is correct.

5. Capital account of the owners is an example of:
1
Personal account
2
Real account
3
Nominal account
4
None of the above

Explanation: Capital account shows that how much of the company assets are owned by the owners instead of creditors. Capital falls under personal account. So, the option(1) is correct.

6. Which of the following accounts have only credit balance?
1
Reserve fund account
2
Capital accounts
3
Accounts receivables
4
All of these

Explanation: Reserve Funds mean amounts set aside out of profits (as ascertained by the Profit and Loss Account) or other surpluses which are not meant to cover any liability, contingency commitment or depreciation in the value of assets. Since, surplus/income have only credit balance in nominal account. So, option(1) is correct.

7. Any expenditure the benefits of which are consumed in the current year is capital expenditure:
1
True
2
False
3
Incomplete statement
4
None of the above

Explanation: An amount spent to acquire or upgrade productive assets (such as buildings, machinery and equipment, vehicles) in order to increase the capacity or efficiency of a company for more than one accounting period is called capital expenditure. So, option(2) is correct.

8. Any expenditure the benefits of which are consumed in the current year is capital expenditure:
1
True
2
False
3
Incomplete statement
4
None of the above

Explanation: An amount spent to acquire or upgrade productive assets (such as buildings, machinery and equipment, vehicles) in order to increase the capacity or efficiency of a company for more than one accounting period is called capital expenditure. So, option(2) is correct.

9. Which of the following statement is not true regarding closing stock?
1
This account has credit balance
2
It is real account and shown on liability side of balance sheet
3
In the profit and loss account it is shown on credit side
4
All the above

Explanation: Closing stock is the amount of inventory that a business still has on hand at the end of a reporting period. It is real account and shown on assets side of balance sheet. It is shown on the credit side of trading account. It has only debit balance. So, option(4) is correct.

10. Posting in the ledgers, in bank is on the basis of:
1
Cash book entries
2
Journal entries
3
Vouchers
4
All the above

Explanation: All cash receipts and payments are recorded in the receiving cashier's cash book and paying cashier's cash book respectively. After this, on the basis of pay-in slips (Vouchers) received by the receiving cashier and cheques and withdrawals slips by the paying cashier, these transactions are entered first in the accounts of customers and after that Day Books are written.

11. As per KYC guidelines, the banks cannot have correspondent arrangements with 'Shell Banks'. For this purpose, the 'Shell Bank' mean:
1
A bank having no existence but on paper only
2
A bank incorporated outside India and having a branch in India
3
A bank incorporated in a country where it has no existence and it is not required by regulating authority
4
A bank incorporated outside India and banned by UNO to have operations other than in country of incorporation

Explanation: A shell bank is a financial institution that does not have a physical presence in any country.

12. The extention of ________ is the principal activity of a commercial bank:
1
Hire or Purchase
2
Credit or Lending
3
Both A and B
4
None of the above

Explanation: The three main interrelated functions of commercial banks are holding of deposits, creating credit through lending and investment activities, and providing a mechanism of payments and transfers of funds for various productive activities. The extension of credit and lending is the principal activity of commercial bank. The extension fo credit or lending is the principal activity of a commerial bank.

13. In order to accelerate and enhance the flow of long term funds to Infrasturcture Projects for undertaking govt ambitious program of Infrastructure Development, scheduled commerical bank have been allowed to act as sponsors to
1
Infrastructure Debt Fund (IDF)
2
Infrastructure Balance Fund (IBF)
3
Infrastructure Growth Fund (IGF)
4
Infrastructure Equity Fund (IEF)

Explanation: In order to accelerate and enhance the flow of long term funds to infrastructure projects for undertaking the Government's ambition programmeof infrastructure development, scheduled commercial banks have been allowed to act as sponsors to Infrastructure Debt Funds.

14. The general ledger trial balance is prepared at branch end:
1
Daily basis
2
Weekly basis
3
Monthly basis
4
Quarterly basis

Explanation: The general ledger trial balance is prepared every day.

15. Which of following entries should not come on debit of the voucher?
1
Draft issued by other branches of the bank payable at the branch
2
Letters of authority signed by the customers, containing standing instructions
3
Withdrawal form received from the savings bank account holders
4
Challans for deposits into the accounts of Central/State Government

Explanation: Challan for deposit into the account of Central/State Government should be entered on credit side of the voucher as fund is getting credited into account.

16. The causes of depreciation_____:
1
Fall in the market value of an asset
2
Physical wear and tear
3
Fall in value of money
4
None of the above

Explanation: The causes of depreciation can be divided up between physical deterioration, depletion, obsolescence and physical wear and tear.

17. In case of straight line method of charging depreciation, amount:
1
Is constant every year
2
Increase every year
3
Decreases every year
4
None of the above

Explanation: Under the straight line method, the amount of depreciation is equal/constant every year.

18. In case of diminishing balance method, depreciation is calculated on:
1
The original cost
2
Written down value
3
The scrap value
4
None of the above

Explanation: Under reducing balance method, the depreciation is charged at a fixed rate like straight line method. But the rate percent is not calculated on cost of asset as is done under fixed installment method - it is calculated on the book value of asset. The book value of an asset is obtained by deducting depreciation from its cost. The book value of asset gradually reduces on account of charging depreciation. So, the depreciation is calculated on "Written down value".

19. Within ICAI, which organization takes care of formulation of accounting standards?
1
Council of ICAI
2
Accounting Standards Board
3
Accounting Standards Committee
4
A to C all

Explanation: Indian Accounting Standard were issued under the supervision and control of Accounting Standards Board (ASB). ASB is a committee under Institute of Chartered Accountants of India (ICAI) which consists of representatives from government department, academicians, other professional bodies viz. icai, representatives from ASSOCHAM, CII, FICCI, etc.

20. A firm should present the gross amount due to customers for contract work as a liability: True/False
1
TRUE
2
FALSE

Explanation: Accounting for construction contracts mainly includes treatment in respect of contract revenue, contract costs, trade receivables, gross amount due to / from customers, advances from customers and retention money. So, the firm should present the gross amount due to customers for contract work as a liability.