21-22 QUIZ-1 With Solutions

Name:______________________________________ Id.
No:____________________
Birla Institute of Technology and Science, Pilani

First Semester: 2022-2023
Evaluative Tutorial 1
Course Name & No.: Fundamentals of Finance and Accounting ECON F 212
Maximum Marks: (30 Marks) 10% Weight-age Date: 27 Sep 22
Duration: 35 Minutes Type: Closed Book
Instructions for the students

1. Write your name and BITS Id No in the space provided on the top of this page
2. This paper consists of 10 multiple choice questions (choose the most appropriate answer; 2 marks each) and
10 true or false questions (1 mark each). All questions are compulsory.
3. There is no negative marking.
4. Write your answers in the table provided below. Answers written elsewhere or in incorrect order will not be
evaluated. Overwritten/ambiguous answers will not be evaluated.
1 2 3 4 5 6 7 8 9 10
11 12 13 14 15 16 17 18 19 20
1. What happens to the net profits in the income statement?

a) Transferred and added to paid-up capital in balance sheet
b) Transferred and added to owner’s equity in balance sheet
c) Transferred and added to liabilities in the balance sheet
d) Transferred and subtracted from liabilities in balance sheet
Ans: B
2. Zero net worth is defined as:

a) Assets are less than liabilities
b) Assets are equal to liabilities
c) Assets are greater than liabilities
d) Total liabilities equal to total shareholder’s equity
Ans: B
3. The net income increased by 10% compared to the last year, and this year the firm's
EPS is Rs 2. If the net income in the last year was Rs 10,000, and the retained
earnings in this year increased by Rs 2000, the retention ratio for the current year is:
a) 0.18
b) 0.82
c) 0.20
d) 0.80
Ans: A
4. Find out value of the account receivables assuming the following are the only
accounts in the balance sheet:
Cash Rs. 65,000 accounts payable Rs. 32,000 office equipment Rs. 21,000 owner
equity Rs. 85,000
a) Rs. 31,000
b) Rs. 41,000
c) Rs. 25,000
d) Rs 110,000
Ans: A
5. The ABC Ltd. balance sheet on September 30, 2020 follows (all figures are in Rs.):
Total Assets 1,00,000
Total liabilities 20,000
Paid-in-Capital 65,000
Retained Earnings 15,000
During the month of October, the ABC Ltd. recognized revenues of 55,000, cost of goods sold of
40,000, depreciation expense of 3,000, and salary expense of 5,000. The retained earnings
balance at October 31, 2020, will be:
a) 20,000.
b) 5,000.
c) 7,000
d) 22,000.
Ans: D
6. Shares of XYZ Widget Company are currently priced in the market at Rs 46 per
share. The company’s dividend payout ratio is 60%, the total dividend paid by the
company is Rs.30,000, and the no. of outstanding shares = 10,000.
What is the price-earnings ratio?
a) 20.44
b) 0.6
c) 9.2
d) 2
Ans: C
7. A company purchased a car for Rs X and paid Y% of Rs X as cash down payment and
remainder to be paid in three equal instalments. Due to this, at the time of purchase:
a) Total assets increase by Rs X

b) Total liabilities increase by Y% of X
c) Total assets and liabilities will both increase by (1-Y%) of X
d) Total assets and liabilities will both decrease by (1-Y%) of X
Ans: C
8. Assets amount to Rs 35,000 at the beginning of the period and Rs 40,000 at the end of the
period. Liabilities amount to Rs 10,000 at the beginning of the period and Rs 20,000 at the
end of the period. What is the amount of the change and the direction of the change in owners'
equity for the period?
a) Increase of Rs 15,000
b) Decrease of Rs 10,000
c) Increase of Rs 5,000
d) Decrease of Rs 5,000
Ans: D
9. Which of the following event will impact the owner's equity?

a) discussion between managers on possible dividend payment to shareholders
b) cash payment for purchase of machine
c) purchase of inventory on partial cash and partial credit
d) None of the above
Ans: D
10. In which form of the business organizations, is the risk, skills, and expertise shared among
the owners for running the business:
a) Sole proprietorship
b) Partnership
c) Franchise
d) Corporation
Ans: B
11. The purchase of inventory by paying cash does not change the total assets of the
company. True
12. Financial reports of the company such as the Balance Sheet can be used by external
users also. Shareholders of a company are an example of these users. True
13. The balance sheet provides information on company’s profitability as on given date.
False
14. Undertaking a short-term loan from a bank has no effect on company’s owner’s
equity at the time the loan is disbursed by the bank. True
15. Recognition principle helps determine when a sale should be included in the income
statement. True
16. The recording of expenses in the same time period as the related revenues is called
matching principle. True
17. Since, dividends on common stocks reduce retained earnings, they are considered as
expense. False
18. Dividend-yield ratio is also called the earnings multiple. False
19. When a company records sales it must also simultaneously record the cost of sales
that are associated with the sales. True
20. Expenses reduce the net assets of a company. True
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Name:______________________________________ Id.

Birla Institute of Technology and Science, Pilani

Instructions for the students

1. What happens to the net profits in the income statement?

2. Zero net worth is defined as:

a) Total assets increase by Rs X

9. Which of the following event will impact the owner's equity?

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