Sant Gadge Baba Amravati University Amravati

Faculty of Commerce & Management

Online U.G. Study Material Provided By
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nnnnnnnnnnnnnnnnnnnnnnnnnnnnnn c dkdanm,dnam,

Dr. Dinesh Nichit Prof. Dr. Kamal C. Agrawal

Dean, Faculty of Commerce R.A. College, Washim
& Management Faculty of BOS ACC/
SGBAU, Amravati Stat. & P.G. Board Member
SGBAU, Amravati

Prof. Dr. Arun Harne Prin. Dr. Devendra Vyas

Chairman BOS Commerce Chairman BOS Business
SGBAU, Amravati Economics, SGBAU, Amravati

Prof. Dr. Sanjay Kadu Prof. Dr. Avinash Jumble

Chairman BOS Account & Chairman BOS Business
Statistics, SGBAU, Amravati Management, SGBAU, Amravati

SGBAU, AMravati
and Aditya Publication, Amravati
Due to COVID-19 problem, all universities, colleges and
educational institutes are closed. Because of this, students
aren’t able to study and will definitely lack behind in exam.
Overall education field is disturbed during COVID-19 period.
To overcome this situation and for betterment of students,
Faculty of Commerce & Management (Sant Gadge Baba
Amravati University Amravati) and Aditya Publication,
Amravati (Anurag Dwivedi’s Group) are stepping forward.
We will be providing an efficient study material for student’s
better results in the upcoming exam.

Providing Online study Material for 6th Semester

1) Compulsory English
2) Management Accounting
3) Economics of Development
4) Company Law
5) E.C: Internet and WWW – II
6) E.C: E-Commerce – II
7) E.C: Indian Insurance System-II
8) E.C: Indian Banking System-II
 Sant Gadge Baba Amravati University, Amravati
Faculty of Commerce & Management

Subject NO: 2

Management Accounting
B.Com 6th Semester

As Per University Paper Pattern Section-A 20 marks

Multiple Choice Question (MCQ)

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 Unit One Management Accounting

Multiple Choice Questions (MCQs)

 The term Management Accounting was first
used in _______.
a) 1994 b) 1950
c) 1955 d) 1960

om
Answer: b) 1950
 Management accounting is _______.

.c
a) Subjective

n
b) Objective

io
c) Subjective and objective both
d) None of these
at
Answer: a) Subjective
lic
 Management Accounting is related to _______.
ub

a) Recording to accounting data

ap

b) Recording to costing data

c) Presentation of accounting data
ity

d) With all these

d

Answer: c) Presentation of accounting data.

.a

 Purpose of management accounting is to ____.

w

a) Past orientation
w

b) Help banks make decisions

w

c) Help managers make decisions

d) Help investors make decision
Answer: c) Help manager make decisions.

Management Accounting 1-1

 Unit One Management Accounting
 An accounting approach in which expected
benefits exceed expected cost is classified as
_______.
a) Benefit approach
b) Cost approach
c) Cost-benefit approach
d) Accounting approach

om
Answer: c) Cost benefit approach.
 Decisions regarding usage of material kind

.c
and changes in plant processing are part of
______.

n
io
a) Past management
b) Future management at
c) Help management
lic
d) Cost management
Answer: d) Cost management.
ub

 The use of Management Accounting is as

_________.
ap

a) Legally obligatory
ity

b) Compulsory
c) Optional
d

d) Compulsory to some and optional to other

.a

Answer: c) Optional
w

 Management Accounting helps the

management ________.
w

a) Only in planning.
w

b) Only in direction
c) Only in control
d) In planning, direction and control
Answer: d) In planning Direction and Control
Management Accounting 1-2
 Unit One Management Accounting
 Decision making step which consists of
organization goals predicting alternatives and
communicating goals is called ________.
a) Organisation b) Alternation
c) Planning d) Valuing
Answer: c) Planning

om
 In management accounting an emphasis and
focus must be _________.
a) Past oriented

.c
b) Future oriented

n
c) Communication oriented

io
d) Bank oriented at
Answer: b) Future Oriented
lic
 Management Accounting is highly sensitive to
________.
ub

a) Government needs
ap

b) Investors needs
c) Management needs
ity

d) Towards all these needs

d

Answer: c) Management Needs

.a

 The type of accounting which reports to

external parties of the organization is known
w

as __________.
w

a) Cost Accounting
w

b) Decision Accounting
c) Financial Accounting
d) Management Accounting
Answer: c) Financial Accounting

Management Accounting 1-3

 Unit One Management Accounting
 The cash management, investment, long and
short term financing are included in ______.
a) Proprietorship b) Functional line
c) Treasury d) Controllership
Answer: c) Treasury
 An approach in which managers use

om
resources to increase customer value is
classified as _______.
a) Help Management

.c
b) Cost Management

n
c) Past Management

io
d) Future Management at
Answer: b) Cost Management
lic
 Type of accounting which measures, reports
and analysis non-financial and financial
ub

information to help in decision making is

called __________.
ap

a) Financial Accounting
b) Management Accounting
ity

c) Cost Accounting
d

d) Decision Accounting
.a

Answer: b) Management Accounting

w

 Which of the following is not the tool of

Management Accounting?
w

a) Human Resources Accounting

w

b) Standard Costing
c) Budgetary Control
d) Decision Accounting
Answer: a) Human Resources Accounting
Management Accounting 1-4
 Unit One Management Accounting
 Management Accounting is basically
concerned with _________.
a) The problem of choice making
b) Cause and effect relationship
c) Recording of transactions
d) Only (a) and (b)

om
Answer: d) Only (a) and (b)
 Management Accountancy is a framework

.c
for___________.
a) Accounting b) Costing

n
io
c) Decision-making d) Management
Answer: c) Decision-making
at
 Who is the originator of management
lic
accounting concept?
ub

a) J. Batty
b) James H. Bliss
ap

c) R. N. Anthony
d) American Accounting Association
ity

Answer: b) James H. Bliss

d

 The Philosophy, in which the management

.a

works to improve value chain of the products,

to exceed customer expectation is classified as
w

________.
w

a) Quality
w

b) Management Chain
c) Customer Chain
d) Cost Chain
Answer: a) Quality

Management Accounting 1-5

 Unit Two Break Even Analysis

Multiple Choice Questions (MCQs)

 B.E.P is that where?
a) There is minimum profit
b) There is minimum loss
c) There is maximum profit

om
d) There is neither profit nor loss
Answer: d) There is Neither Profit nor Loss

.c
 B.E.P is the point at which ________.

n
a) Total revenue is equal to total cost.

io
b) Contribution margin is equal to total fixed
at
cost.
c) There is no profit no loss.
lic
d) All of the above.
ub

Answer: d) All of the above

ap

 B.E.P in Rs: ________.

Fixed Cost Fixed Cost
a) b)
ity

P / V Ratio C Per Unit

d

Fixed Cost P : V Ratio

c) d)
.a

P.V Ratio Fixed Cost

w

Fixed Cost
Answer: a)
P : V Ratio
w
w

Management Accounting 2-1

 Unit Two Break Even Analysis
 Which of the following are limitation of break-
even analysis?
a) Static concept.
b) Capital employed is taken into account.
c) Limitation of non-linear behavior of costs.
d) Limitation of presence of perfect

om
competition.
Answer: a) Static concept

.c
 Margin of safety ________.

n
a) Sales – Fixed Cost

io
b) Sales – Variable Cost at
c) Sales – Total Cost
lic
d) Sales – B.E.P
Answer: d) Sales – B.E.P
ub

 To obtain the break – even point in units,

ap

total fixed cost are divided by ________.

a) Variable Cost Per Unit
ity

b) Fixed Cost Per Unit

d

c) P/V Ratio
.a

d) Contribution Per Unit

w

Answer: d) Contribution per unit

w

 What will be the effect on B.E.P by the

increase in fixed cost?
w

a) Decrease b) Increase
c) No change d) None of these
Answer: b) Increase

Management Accounting 2-2

 Unit Two Break Even Analysis
 In break – even chart y-axis represents.
a) Volume of sales in unit.
b) Value of sales in rupees.
c) Cost and sales in rupees.
d) Value of production in rupees.
Answer: c) Cost and sales in rupees.

om
 Contribution is also known as ________.
a) Contribution margin

.c
b) Net margin

n
io
c) Both a and b
d) None of the above
at
Answer: a) Contribution margin
lic
 Profit volume ratio is also known as ________.
ub

a) Contribution ratio.
b) Contribution/Sales ratio.
ap

c) Marginal income percentage.

ity

d) All of the above.

Answer: All of the above.
d
.a

 Profit on sales is measured as ________.

w

a) Sales × P/V Ration – Fixed Cost

w

b) Sales × P/V Ratio + Fixed Cost

c) Sales + P/V Ratio + Fixed Cost
w

d) None of the above

Answer: a) Sales  P/V Ratio – Fixed Cost

Management Accounting 2-3

 Unit Two Break Even Analysis
 Margin of safety con be increased by ________.
a) Decrease in setting price.
b) Decline in volume of production.
c) Reduction in fixed or the variable costs or
both.
d) None of the above.

om
Answer: c) Reduction in fixed or the variable
costs or both

.c
 Which of the following are characteristics of

n
B.E.P.

io
a) There is no loss and no profit to the firm.
at
b) Total revenue is equal to total cost.
c) Contribution is equal to fixed cost.
lic
d) All of the above.
ub

Answer: d) All the above.

ap

 P.V. Ratio = ________.

SV SV
a) b)  100
ity

S S
Pr ofit
d

c)  100 d) None of these

Sales
.a

SV
w

Answer: b)  100
S
w

 Determine contribution if sales is Rs.

w

1,50,000 and P/V ratio is 40%

a) Rs. 60,000 b) Rs. 70,000
c) Rs. 30,000 d) None of the above
Answer: a) Rs. 60,000
Management Accounting 2-4
 Unit Two Break Even Analysis
Explanation:
 C = Sales × PVR
= 1,50,000 × 40%
40
 C  1,50,000  = 60,000
100
 What will be the amount of profit if fixed cost

om
is Rs. 20,000 sales is Rs. 1,60,000 and P/V
ratio is 25%?

.c
a) Rs. 40,000 b) Rs. 20,000

n
c) Rs. 10,000 d) None of the above

io
Answer: b) Rs. 20,000 at
Explanation:
lic
 Profit = (Sales × PVR) – Fixed Cost)
 25 
ub

 1,60,000•
   20,000
 100 
ap

 Profit = 40,000 – 20,000 = 20,000

 Determine margin of safety if profit is Rs.
ity

15,000 and P/V ratio is 40%.

d

a) Rs. 37,500 b) Rs. 33,000

.a

c) Rs. 38,000 d) None of the above.

w

Answer: a) 37,500
w

Explanation:
w

Pr ofit 15,000 15,000  100

 MS   
PVR 40% 40
 MS = 37,500

Management Accounting 2-5

 Unit Two Break Even Analysis
 The break-even point of a company is that
level of sales income which will equal the sum
of its fixed cost.
a) True b) False
Answer: a) True
 The term marginal cost can be used as a

om
substitute of variable cost while measuring
contribution.
a) True b) False

.c
Answer: a) True

n
 Contribution and profit both are some

io
concepts. at
a) True b) False
lic
Answer: b) False
ub
ap
d ity
.a
w
w
w

Management Accounting 2-6

 Unit Three Ratio Analysis

Multiple Choice Questions (MCQs)

 Stock (Inventory) turnover ratio is ______.
a) Liquidity ratio b) Profitability ratio
c) Solvency ratio d) Activity ratio
Solution: d) Activity ratio

om
 Ideal level of current ratio is ______.
a) 4 : 1 b) 2 : 1

.c
c) 1 : 1 d) 0.5 : 1
Solution: b) 2 : 1

n
io
 Liquid or quick assets ______.
a) Current assets – Prepaid expenses
at
b) Current assets – Stock – Prepaid expenses
lic
c) Current assets + Stock – Prepaid expenses
ub

d) Current assets – Stock – Prepaid expenses

Solution: b) Current assets – Stock – Prepaid
ap

expenses
 Turnover ratio help the management in _____.
ity

a) Managing the resources

d

b) Evaluating the performance

.a

c) Planning the finance

w

d) All the above

w

Solution: b) Evaluating the performance

w

 Which is not included in quick assets ______.

a) Inventories b) Trade receivables
c) Cash at bank d) Cash in hand
Solution: a) Inventories

Management Accounting 3-1

 Unit Three Ratio Analysis
 The most rigorous test of liquidity is ______.
a) Current ratio b) Absolute liquid ratio
c) Quick ratio d) All the above
Solution: b) Absolute liquid ratio
 “Higher the ratio, the more favorable it is”.
This does not apply to ______.

om
a) Net profit ratio b) Stock turnover
c) Operating ratio d) None of these

.c
Solution: c) Operating ratio

n
 Collection of debtors ______.

io
a) Increases current ratio
b) Decreases current ratio
at
c) Has no effect on the current ratio
lic
d) All the above
ub

Solution: c) Has no effect on the current ratio

 Profit after interest and tax is used in
ap

calculating return on ______.

a) Total assets b) Capital employed
ity

c) Shareholders funds d) All the above

Solution: c) Shareholders funds
d
.a

 Operating ration is ______.

a) Profitability ratio b) Activity ratio
w

c) Solvency ratio d) None of these

w

Solution: a) Profitability ratio

w

Management Accounting 3-2

 Unit Three Ratio Analysis
 Commonly which ratio is calculated in
percentage ______.
a) Profitability ratio
b) Activity ratio
c) Financial position ratio
d) None of the above

om
Solution: a) Profitability ratio
 Commonly which ratio is calculated in times
______.

.c
a) Profitability ratio

n
b) Activity ratio

io
c) Financial position ratio at
d) None of the above
lic
Solution: b) Activity ratio
 Under which ratio one component is
ub

converted in one ______.

a) Profitability ratio
ap

b) Activity ratio
c) Financial position ratio
ity

d) None of the above

d

Solution: c) Financial position ratio

.a

 Ideal acid test ratio is ______.

w

a) 1 : 1 b) 1 : 2
w

c) 2 : 1 d) None of above
w

Solution: a) 1 : 1
 General profitability ratio are based on ______.
a) Investments b) Sales
c) (a) and (b) d) None of the above
Solution: b) Sales
Management Accounting 3-3
 Unit Three Ratio Analysis
 Gross profit ratio is also termed as ______.
a) Gross profit margin
b) Gross margin to net sales
c) Both (a) and (b)
d) All of the above
Solution: c) Both (a) and (b)

om
 Gross profit ratio should be adequate to cover
______.
a) Selling expenses b) Administrative expenses

.c
c) Dividends d) All of the above

n
Solution: d) All of the above

io
 Which ratio is considered as safe margin of
at
solvency ______.
lic
a) Liquid ratio b) Quick ratio
c) Current ratio d) None of the above
ub

Solution: c) Current ratio

 Which of the following is not included in
ap

current assets?
a) Debtors b) Stock
ity

c) Cash at bank d) Cash in hand

d

Solution: b) Stock
.a

 Return on proprietors funds is also known as

______.
w

a) Return on net worth

w

b) Return on shareholders fund

w

c) Return on shareholders investment

d) All of the above
Solution: d) All of the above

Management Accounting 3-4

 Unit Three Ratio Analysis
 Liquid ratio is also known as ______.
a) Quick ratio
b) Acid test ratio
c) Working capital ratio
d) Stock turnover ratio
A) (a) and (b) B) (a) and (c)
C) (b) and (c) D) (c) and (d)

om
Solution: A) a and b
 Gross profit ratio is calculated by ______.

.c
a) (Gross profit/Gross sales)  100
b) (Gross profit/Net sales)  100

n
c) (Net profit/Gross sales)  100
d) None of the above
io
at
Solution: b) (Gross profit/Net sales)  100
lic
 While calculating gross profit ratio ______.
a) Closing stock is deducted from cost of good sold
ub

b) Closing stock is added to cost of good sold

c) Closing stock is ignored
ap

d) None of the above

Solution: a) Closing stock is deducted from
ity

cost of good sold

 Stock is considered as a liquid assets as
d

anytime it can be converted into cash

.a

immediately
a) Yes b) No
w

Solution: b) No
w

 The ratio analysis is helpful to management is

w

taking several decisions, but as a mechanical

substitute for judgment and thinking it is
worse than useless.
a) True b) False
Solution: a) True

Management Accounting 3-5

 Unit Four Budget

Multiple Choice Questions

 A budget is tool which helps the management
in planning and control of _______.
a) All business activities
b) Production activities

om
c) Purchase activities
d) Sales activities

.c
Solution: a) All business activities

n
 Budget is prepared for a _______.

io
a) Indefinite period b) Definite period
c) Period of one year
at
d) Six months
Solution: b) Definite period
lic
 The budgets are classified on the basis of
ub

_______.
a) Time b) Function
ap

c) Flexibility d) All
ity

Solution: d) All
 In cash flow method for preparing cash
d

budget payment of dividends and prepaid

.a

payments are _______.

w

a) Deducted from of opening balance of cash

w

b) Added to opening balance of cash

w

c) Not included in cash budget

d) None of the above
Solution: a) Deducted from opening balance of
cash

Management Accounting 4-1

 Unit Four Budget
 While preparing cash budget from cash
accounting method.
a) Payments and receipts related to budget
period are considered
b) Payment and receipts before budget period
are considered

om
c) Payments and receipts after budget period
are considered
d) All of the above

.c
Solution: a) Payments and receipts related to

n
budget period are considered

io
 Cash budget is a ______ budget.
at
a) Short-term b) Long-term
lic
c) Both a and b d) None of the above
ub

Solution: a) Short-term
 Which of the following statements are true
ap

about cash budget.

a) Cash budget and cash flow statement are
ity

same
b) Fixed expenses are not shown in cash
d

budget
.a

c) Actual payments are receipts are shown in

w

cash budget
w

d) None of the above

w

Solution: d) None of the above

Management Accounting 4-2

 Unit Four Budget
 While preparing a cash budget the focus
should be on _______.
a) Sources of cash inflow during a particular
period
b) Amount of cash to be received from cash
inflow sources

om
c) Timing of cash inflow
d) All of the above

.c
Solution: d) All of the above

n
 Cash budget is more helpful in those business
concerns where there are _______.
a) No seasonal fluctuations
io
at
b) Wide seasonal fluctuations
lic
c) Rare seasonal fluctuations
ub

d) All of the above

Solution: b) Wide seasonal fluctuations
ap

 While preparing cash budget from cash

accounting method, if there is no specific
ity

direction in respect of a particular item, it is

assumed that payments or receipts will take
d

place in _______.
.a

a) Current month
w

b) Month of occurrence
w

c) Insufficient data to decide

w

d) None of the above

Solution: b) Month of occurrence

Management Accounting 4-3

 Unit Four Budget
 A columnar statement is prepared in _______
in which first column shows items of
payments and receipts, whereas the other
columns represents the amount of payments
and receipts in each time break-up of budget
period.
a) Cash accounting method

om
b) Budgeted method
c) Cash flow method

.c
d) None of the above

n
Solution: a) Cash accounting method

io
 Project forecast method is also knows as
_______.
at
a) Projected balance sheet method
lic
b) Cash flow method
ub

c) Budgeted method
d) None of the above
ap

Solution: b) Cash flow method

ity

 The payment of income tax, dividend, interest

and donation are examples of _______.
d

a) Cash payment for capital transaction

.a

b) Cash payment for non-operating expenses

w

c) Cash payment for business operations

w

d) None of the above

w

Solution: b) Cash payment for non-operating

expenses

Management Accounting 4-4

 Unit Four Budget
 A budget centre is _______.
a) Department or part of the department
b) Meeting place for budget committee
c) Office of the budget officer
d) None
Solution: a) Department or part of the

om
department
 The budget committee consists of _______.

.c
a) Managers b) Budget officers

n
c) Creditors d) Both

io
Solution: b) Budget officers at
 Cash budget deals with historical data
lic
whereas cash flow statement deals with future
data _______.
ub

a) True b) False
Solution: b) False
ap

 A budgeted balance sheet is prepared in

projected balance sheet method and an
ity

estimate is made of the values of all assets

including bank overdraft, cash balance an
d

bank.
.a

a) True b) False
w

Solution: b) False
w

 The receipts or payments having time log are

w

not included in cash budget.

a) True b) False
Solution: b) False

Management Accounting 4-5

 Unit Four Budget
 Outstanding expenses and reserve for
doubtful debts are shown in cash budget.
a) True b) False
Solution: b) False
 Cash budget helps in the formulation of
suitable dividend policy

om
a) True b) False
Solution: a) True

n .c
io
at
lic
ub
ap
d ity
.a
w
w
w

Management Accounting 4-6

 Unit Five Budgetary Control

Multiple Choice Questions

 Budgetary control system acts as a friend
philosopher and guide to the ______.
a) Management b) Share holders
c) Creditors d) Employees

om
Solution: a) Management
 Budgetary control system defines the
objectives and policies of the ______.

.c
a) Production department

n
b) Finance department
c) Marketing department
io
at
d) All
lic
Solution: d) All
ub

 Budgetary control facilitates easy introduction

of the ______.
ap

a) Marginal costing b) Ratio analysis

c) Standard costing d) Subjective matter
ity

Solution: c) Standard costing

d

 Budgetary control helps the management in

.a

______.
w

a) Obtaining bank credit

w

b) Issue of shares
w

c) Getting grants from government

d) All of these
Solution: a) Obtaining bank credit

Management Accounting 5-1

 Unit Five Budgetary Control
 Budgetary control provides a basis for ______.
a) Bonus shares b) Right shares
c) Remuneration plans d) None
Solution: c) Remuneration plans
 Budgetary control helps to introduce a
suitable incentive and remuneration based on

om
_______.
a) Changes in government policies

.c
b) Inflationary conditions

n
c) Both

io
d) None at
Solution: b) Inflationary conditions
lic
 Budgetary control ______ replace management
in decision making.
ub

a) Can b) Cannot
ap

c) Sometimes d) Inadequate data

Solution: b) Cannot
ity

 The success of budgetary control system

depends upon the willing co-operation of
d

______.
.a

a) Shareholders
w

b) Management
w

c) Creditors
w

d) All the functional areas of management

Solution: d) All the functional areas of
management

Management Accounting 5-2

 Unit Five Budgetary Control
 Recording of actual performance is _______.
a) An advantage of budgetary control
b) A step in budgetary control
c) A limitation of budgetary control
d) None
Solution: b) A step in budgetary control

om
 The main objective of budgetary control is
______.

.c
a) To define the goal of the firm

n
b) To coordinate different departments

io
c) To plan to achieve its goals
at
d) All of the above
lic
Solution: c) To plan to achieve its goals
ub

 Variable cost is also known as ______.

a) Direct cost b) Proportionate cost
ap

c) Both a and b d) None of the above

ity

Solution: c) Both a and b

 Flexible budgeting is used when the supply of
d

material and labour required for production is

.a

_______.
w

a) Uncertain b) Certain
w

c) Either a or b d) None of the above

w

Solution: a) Uncertain

Management Accounting 5-3

 Unit Five Budgetary Control
 In _______ actual performance can easily be
compared due to availability of budgets at
different levels of activity.
a) Fixed budget b) Flexible budget
c) Both a and b d) None of the above
Solution: b) Flexible budget

om
 Flexible budget is also known as ______.
a) Sliding scale budget b) Dynamic budget

.c
c) Both a and b d) None of the above

n
Solution: a) Sliding scale budget

io
 Flexible budget is that budget which presents
at
_______ at various levels of business activity.
a) Costs b) Revenues
lic
c) Profit d) All of the above
ub

Solution: d) All of the above

ap

 Flexible budget is used when ______.

a) Demand remains static even when there is
ity

change in taste and fashion of customers

b) When the business unit is new
d
.a

c) Whenever there is change of activity due to

change in government policies
w

d) All of the above

w

Solution: d) All of the above

w

Management Accounting 5-4

 Unit Five Budgetary Control
 At 50% capacity expenses are Rs. 10, 000,
which increase by 10% between 60% and 80%
level of activity and 20% thereafter. These are
_______.
a) Variable expenses
b) Semi-variable expenses

om
c) Both a and b
d) None of the above

.c
Solution: b) Semi-variable expenses

n
 Semi-variable cost will not be zero, even if
production is Nill.
a) True
io
b) False
at
Solution: a) True
lic
 While preparing a flexible budget, direct
ub

material, direct labour and direct expenses all

are placed under the head of variable cost.
ap

a) True b) False
Solution: a) True
ity

 Fixed budget is of much help in the fixation of

selling price or calculation of tender price.
d
.a

a) True b) False
Solution: b) False
w
w
w

Management Accounting 5-5

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