Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material

Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material is designed strictly as per the latest syllabus and exam pattern.

Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material

Question 1.
Double Entry System.
Answer:
Double Entry System:

  • This system was invented by an Italian merchant named Fra Luco Pacioli in 1494 A.D.
  • According to this system, every transaction has got a two-fold aspect (dual aspect), i.e. one party giving the benefit and the other receiving the benefit and it has effect of opposite nature on two financial items.
  • Information of one financial nature at one place is known as an account which is divided into two sides, debit and credit.
  • In short, one account is to be debited and another account is to be credited for every transaction in order to have a complete record of the same.
  • Therefore, every transaction affects two accounts in opposite direction.
  • For example, if goods are sold to Mr. A on credit, the same will affect goods /sales account and A’s account and entries will be made in opposite direction in these two accounts.
  • This system is called Double Entry System since it keeps records for every transaction in two accounts.
  • Therefore, the basic principle, under this system, is that for every debit there must be a corresponding credit or vice versa.
  • Before going to discuss the double entry principle it becomes necessary to explain certain terms which are frequently used in accounting. They are discussed in later questions.

Question 2.
Meaning of Transactions and events
Answer:
Meaning of Transactions :

  • A business dealing, which can be measured and expressed in terms of money and must be recorded in the books of account, is called a ‘transaction’.
  • In a transaction, there must be some monetary change between the parties.
  • In other words, the meaning of a transaction is to ‘receive’ and ‘give’, viz., one party receive and the other party gives, e.g. if X gives ₹ 400 to Y, Y is receiving ₹ 400 whereas X is giving the same and there is a monetary change between the parties.
  • This give and take can be of Cash, Property, Goods, Services and benefits etc. which has monetary value.
    So, a transaction also means a change in affairs that alters the financial state of parties in any way.
  • There are always two parties in a transaction of which one must be the entity in whose books, accounting is being done.

Transaction
(Transaction is a give & take which has some financial effect on entity)
Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material 1

1. Goods a/c if prepared is treated as a real a/c but instead of preparing goods a/c, we prepare Purchase a/c, Sale a/c etc. to get full information, which are treated as nominal a/c.

2. In the above analysis you can observe:

  • There are two persons of which one is the entity.
  • Something (i.e, cash, property, goods, service or benefits) is given & in return something else is taken.
  • These both the arrows indicating give & take may take place at the same point of time (known as cash transaction) or at different point of time (known as credit transactions).
  • Irrespective of whether both give & take is done at same time or at different point of time (i.e. indicating only one arrow at a time), there are always two accounts involved in a transaction (dual aspect concept).
  • These accounts can be classified according to function into Real, Nominal & Personal a/c or according to nature into Expense, Income, Asset or liability.

Meaning of Events:

  • Event is happening of something, which has financial effect on the entity.
  • Example – A fire destroys furniture, Stock Balance at the end of the year etc.

Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material

Question 3.
Petty Cash Book.
Answer:
Petty Cash Book:

  • This is to be prepared to record the petty (small) expenses, which are incurred frequently.
  • On the payment side the amount is classified into various columns depending upon the account to which it has to be debited.
  • The columns can be for conveyance expenses, postage, repairs & maintenance, printing & stationery, salary, wages and so on.
  • It is also known as analytical cash book.
  • In petty cash book receipt will be from main cash book.

Posting:

  • The total of this column is debited to respective expense accounts in the ledger after a specific period may be monthly, weekly etc.
  • The Balance of petty cash book (i.e. receipts (-) payments) shows the balance of cash in hand which will be shown in Trial balance.

Question 4.
Imprest System.
Answer:
Imprest System:

  • An amount is fixed which is given to petty cashier who meets expenses out of it & periodically or when the amount is spent, he takes reimbursement from main Cashier exactly equal to amount spent hence his cash balance again becomes equal to fixed imprest amount.
  • This is the upper limit of cash which petty cashier can have.
  • It is a version of Petty cash book only.
  • Example – Imprest amount is fixed at ₹ 1,000. Petty cashier has spent ₹ 785 in that period, thus he has balance of ₹ 215. Now he will get reimbursement from main cashier ₹ 785, thus his balance will again become ₹ 1000.

Question 5.
Sales Book.
Answer:
Sales Book:

  • The Sales Day-Book is a register specially kept to record credit sales of goods dealt in by the firm.
  • Cash sales are entered in the Cash Book and not in the Sales Day Book.
  • Credit sales of things other than the goods dealt in by the firm are not entered in the Sales Day Book, they are journalised.
  • For accounting, Goods means only those items in which the particulars concern is doing business i.e. purchasing & selling it.
  • It is a subsidiary book/subsidiary journal & posting is made from it to the sales account and accounts of the customers.

Posting:

  • The total of sales register is credited to sales a/c periodically say monthly.
  • And individual amounts are debited to respective parties (debtors) a/c.

Sales Account is a final record and postings are made to it from Cash Book (cash sales) and Sales Day Book (credit sales). Sales Account is maintained in the ledger in the manner, the other accounts are maintained. Sales Account is a nominal account and its balance is used for ascertaining gross profit or gross loss.

Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material

Question 6.
Purchase Book.
Answer:
Purchase Book:

  • All credit purchases of goods are recorded in Purchase Book.
  • Cash purchases are entered in the Cash Book and not in the Purchases . Day Book.
  • Credit purchases of things other than the goods dealt in by the firm are not entered in the Purchases Day Book; they are journalised.
  • It is a subsidiary book/subsidiary journal & posting is made from it to the purchases account and accounts of the suppliers.

Posting:

  • The total of purchase register is debited to purchase a/c periodically say monthly &
  • Individual amounts are credited to respective parties (suppliers) a/c.

Cash Sales & Cash Purchases will be recorded in Cash Book and credit sales & credit purchase of Assets will be recorded in Journal. Comments for sales account made above equally apply to purchase account.

Question 7.
Principal Book (Ledger).
Answer:
Principal Book (Ledger):

  • All accounts are opened in a separate register known as a ledger
  • Only exception is cash & Bank a/c which are not prepared in ledger because cash & Bank book itself is Cash & Bank account also (when Cash-cum-Bank Book is prepared).
  • All other books are only books of entry they are not ledger accounts.
  • Hence when we enter a transaction in a book of entry, we decide/write which account should be debited & which account should be credited.
  • But actual debit & credit gets completed only when we write the amount from this book to respective accounts in ledger on debit or credit side as the case may be.
  • This process of writing the amount from books of entry to ledger account is known as ‘posting’.

Posting:

  • Each account will have two sides, left hand side is known as debit side & right hand side as credit side.
  • If the amount is written on debit side that means that account is debited
  • If written on credit side means that account is credited.
  • All these accounts are then totalled & balanced.
  • All the accounts which are having balances either debit or credit are listed on a statement known as Trial Balance.
  • With the help of this Trial Balance, Final accounts namely Trading & P&L A/c and Balance Sheet is prepared.

Instead of one ledger, concern can maintain multiple ledgers like Debtors ledger, Creditors ledger, General ledger etc.

Ledger Account
Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material 2

Question 8.
Mercantile System of Accounting and Cash System of Accounting
Answer:
Mercantile System of Accounting (Accrual basis of accounting) and Cash System of Accounting:

  • A transaction is recognized when either a liability is created (i.e. when goods/services/benefits or properties are received) and/or an asset is created (i.e. when goods/services/benefits or properties are given).
  • Whether payment is made or received is immaterial in accrual basis accounting.
  • Accrual basis of accounting is also known as mercantile basis of accounting.
  • On the other hand, cash basis of accounting is system of accounting by which a transaction is recognized only if cash is received or paid, no entry is being made when a payment or receipt is merely due.
  • Accrual basis accounting is the only generally accepted accounting method for business entities which are supposed to operate for long period.
  • Cash basis accounting is suitable for short duration ventures.
  • All the chapters which you will study are on accrual basis only exception may be joint venture.

Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material

Question 9.
Journal proper.
Answer:
Journal proper:
If there is no special book meant to record a transaction, it is recorded in the Journal (proper).
(i) Opening entries: When books are started for the new year, the opening balance of assets and liabilities are journalised.

(ii) Closing entries: At the end of the year nominal accounts are transferred to the profit and loss account. This is done through journal entries called closing entries.

(iii) Rectification entries: If an error has been committed, it is rectified . through a journal entry.

(iv) Transfer entries: If some amount is to be transferred from one account to another, the transfer will be made through a journal entry.

(v) Adjusting entries: At the end of the year the amount of expenses or income may have to be adjusted for amounts received in advance or for amounts not yet settled in cash. Such an adjustment is also made through journal entries. Usually, the entries relating to Outstanding expenses, Prepaid expenses, Interest on Capital and Depreciation are necessary.

(vi) Entries on dishonour of Bills: If someone who accepted a promissory note (or bill) is not able to pay it on the due date, a journal entry will be necessary to record the non-payment or dishonour.

(vii) Miscellaneous entries: The following entries will also be shown in Journal proper:

  • Credit purchase of things other than goods dealt in or materials required for production of goods e.g. credit purchase of asset will be journalised.
  • An allowance to be given to the customers.
  • Receipt of promissory notes or issue to them if separate bill books have not been maintained.
  • On an amount becoming irrecoverable, because of the customer becoming insolvent.
  • Effects of accidents such as loss of property by fire etc.

Question 10.
Trade discount and Cash discount.
Answer:
Trade discount and Cash discount:

  • Trade discount is a discount on the selling price for bulk purchase or for purchasing above a minimum quantity or is offered generally to regular customers.
  • It is also called quantity discount.
  • This is a technique of sales promotion.
  • It is generally determined at the stage of sale itself & is deducted from the sale/purchase value & hence doesn’t appear separately in the Books of accounts & Final a/cs.
  • Cash discount is the discount offered by the supplier in consideration of early or timely payment.
  • It may vary with the period of payment.
  • It is accounted as a separate item & appears in the Profit & loss a/c.
  • Cash discount is usually given at the time of payment/receipt as against trade discount is given at the stage of sale/purchase.

Question 11.
Debit Note and Credit Note.
Answer:
Debit Note and Credit Note:
Debit Note:

    • A debit note is a statement sent by one party to the other stating/informing him that his account has been debited with a specified amount and the reason for debit.
    • A debit note is sent to the supplier when the goods purchased from him are returned (purchase return) or for discount to be received from him or for any expenses incurred for him.

Entry:

In the books of sender of Debit note In the books of receiver of Debit note
Party (to whom it is sent) a/c Dr. Sales return/Discount allowed etc. a/c Dr.
To Purchase return/Discount received etc. To Party (who sent it) a/c

Credit Note:

  • A Credit note is a statement/letter sent by one party to the other stating/informing him that his account has been credited with a specified amount and the reason for credit.
  • A credit note is sent to the customer when we receive good returned by them or for discount to be allowed to him or for any expenses incurred for us by him.

Entry:

In the books of sender of Debit note In the books of receiver of Debit note
Sales return/Discount allowed etc. a/c Dr. To Party (who sent it) a/c
To Party (to whom it is sent) a/c. To Purchase return/Discount received etc.

Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material

Question 12.
Classify the following accounts into Personal, Real and Nominal.
a. Cash Account
b. Wages Account
c. Building Account
d. Calcutta Tramway Co. Account
e. East Bengal Club Account
f. Rent Account
g. Capital Account
h. Drawings Account
i. Interest Account
j. Trade Mark Account
k. Dividend Account
l. Land Account
m. Goodwill Account
n. Patent Account
o. Bad Debts Account
p. Bank Account
q. Discount Allowed Account
r. Interest Received Account
s. Discount Received Account
t. Salary Payable
u. Bills Receivable
Solution:
Personal Accounts – d, e, g, h, p, t, u
Real Accounts – a, c, j, l, m, n
Nominal Accounts – b, f, i, k, o, q, r, s

Question 13.
From the following transactions prepare the Cash Book with cash and discount columns:

Aug. 2006
1 Opening cash balance 2500.00
3 Received from D & Co. ₹ 1,350 in full settlement of ₹ 1,400
4 Received for cash sales           1250.00 1250.00
5 Paid to Rajesh & Co. ₹ 775 in full settlement of his account for 800.00
7 Purchased office furniture 670.00
13 Paid for postal stamps 25.00
15 Paid for office rent for month of July, 2006 125.00
17 Used office cash for meeting personal expenses 150.00
19 Sold goods on credit to Mr. Faithful 1700.00
20 Paid to Rajnikant ₹ 670 in full settlement of his account for ₹ 70
20 Deposited in the bank all cash in excess of ₹ 1,200

Solution:
Double Column Cash Book:
Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material 3
It is assumed that in July month provision for rent payable was made, hence now on payment rent payable account is debited.
Credit sale of 19.08.06 will be entered in sales book or in Journal, if sales book is not maintained.

Question 14.
Write up a three column cash book from the following:
Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material 4
Solution:
Triple Column Cash Book
Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material 5

Cheque received but not deposited in bank:
The usual practice in the books on ac-counting is to show such amount as cash and when the same is deposited in bank then cash a/c is credited and bank a/c debited (As done for ₹ 860 in above problem). I (author) don’t consider it appropriate and suggest the following –
a. In real life it will be a daily routine to receive cheque and deposit it next day hence to obviate unnecessary confusion and complication, it should be debited to bank a/c on receipt itself.

b. When it is a year end situation, debit such cheque to cheques in hand a/c rather than in cash a/c. So that in balance sheet we will show cash balance (which is actual cash), cheques in hand and bank balance (which does not include cheque received but not deposited).

Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material

Question 15.
Enter the following transactions in a three column cash book of M/s. Barket & Co.
April, 2006
1 Cash on hand t 237; Balance at bank ₹ 6,594.
2 Received from K. Agrawal cash ₹ 590, allowed him discount ₹ 10.
4 Paid salaries for March by cash t 200. Cash sales, ₹ 134.
5 Paid B.K. Bose by cheque ₹ 300. Cash Purchases ₹ 60.
7 Paid Question Ahmad by cheque ₹ 585; discount received 21/2%.
8 Cash Sales ₹ 112. Paid cartage and coolie ₹ 6.
10 Paid rent in cash ₹ 50
14 Cash Sales ₹ 212. Received from G.C. Dhar ₹ 194 by cheque discount 3%.
16 Deposited into Bank ₹ 600. Purchased a motor car for ₹ 5,800 and drawn a cheque for the amount
23 Received a cheque from Robert & Co. for ₹ 291; discount received 3%.
28 Cash Sales t 298.
29 Bank notifies that Robert & Co’s cheque has been dishonoured.
30 Deposited with Bank t 300. Paid wages ₹ 72. Bank charges as shown in Pass Book ₹ 5.
Solution:
Triple Column Cash Book
Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material 6
Posted to discount account in ledger

Question 16.
Enter the following transactions in a columnar Petty Cash Book kept on the Imprest System and balance the cash book. Also post the transaction to the respective ledger accounts.

Jan. 2006
1 The Petty Cash received by cheque 300.00
2 Carriage 4.00
3 Coolie charges 5.50
6 Postal stamps 17.75
8 Revenue stamps 4.50
10 Bought stationery for office use 14.90
13 Bought envelopes 9.40
17 Safety pin box 5.00
19 Printing bill 25.00
23 Travelling expenses to salesman 45.25
25 Subscription to Economic Times 10.50
26 Paid to Waikar on account 17.00
27 Railway fare for sale executive 35.60
28 Tea to office staff 31.40
30 Paid advertising bill 10.25

Solution:
Petty Cash Book (Analytical Cash Book)
Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material 7
Posting from above petty cash book to ledger accounts will be made as follows:
Carriage and Coolie Charges Account
Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material 8

Question 17.
From the transactions given below prepare the Sales Book of Amin Chand, a furniture dealer:

June, 2006
5 Sold on credit to Ideal College : 10 tables @ ₹ 25 less 10%
8 Sold Mohan Bros.: 5 stools @ ₹ 10 10 chairs @ ₹ 15
10 Sold on credit M/s. Golchand & Co.: 3 tables @ ₹ 75, 5 chairs @ ₹ 30
20 Sold to M/s. Ram Lai & Sons for cash 5 tables @ ₹ 40
27 Sold on credit to Anand Pal & Co. old type-writer for ₹ 400

Solution:
Sales Book of Amin Chand
Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material 9
→ Cash transaction of 20.6 will not be entered in sales book. Asset sale will not be recorded in sales book. Cash sale will be recorded in cash book & sale of Asset on credit will be recorded in Journal.

→ Additional columns to note other details, can be made as per requirement.

→ Posting from sales book will be done as follows: (hypothetical folio numbers have been used)
Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material 10
→ Balancing of accounts is not done because these are not yet complete.

→ Folio numbers have been hypothetically given to explain the concept of folio number.

Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material

Question 17.
From the following transactions prepare the purchase book of Admas for July, 2006 and prepare ledger accounts connected with this book.

1.706 Purchased on credit from Paul & Co.: 50 Electric Irons @ 25, 10 Toasters @ ₹30
6 Purchased for Cash from John & Bros.: 25 Table Lamps @ ₹ 15
10 Purchased from Harsh & Sons on credit: 20 Electric Stoves @ ₹ 20, 10 Heaters @ ₹ 30.
16 Purchased on credit from More & Co.: 15 Heaters @ ₹ 20.
20 Purchased on credit one typewriter from Remington and for 1,500/-

Solution:
Purchase Book of Admas
Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material 11
Posting: Total ₹ 2,550 shall be debited to purchase a/c & individual figures will be credited to respective parties a/c.

Note: Cash purchase of 6.7 will be entered in Cash Book & Purchase of Asset (Type writer) on Credit will be recorded in Journal.

True or False

Question 1.
Wages paid for erection of machinery is debited to Profit and Loss Account.
Answer:
False: Wages paid for erection is a capital expenditure, so it should be debited to the machinery account.

Question 2.
The balance in the cash book shows net income.
Answer:
False: The balance in the cash book shows cash in hand at the end of the period.

Question 3.
The debts written off as bad, if recovered subsequently are credited to Debtors Account.
Answer:
False: The debts written off as bad, if recovered subsequently, shall be credited to Bad Debts Recovered Account.

Question 4.
The sales day book is a part of the ledger.
Answer:
False: The sales day book is a book of prime entry and so it is part of journal.

Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material

Question 5.
Patent right is in the nature of nominal account.
Answer:
False: Patent right is an intangible asset, so it is a real account.

Question 6.
Goods costing ₹ 600 taken by the proprietor for personal use should be credited to Sales Account.
Answer:
False: Goods taken by the proprietor for personal use should be credited to Purchase Account at a cost price of ₹ 600.

Question 7.
If a cheque received is further endorsed, it must be entered on both sides of the cash book.
Answer:
True: The cash book is debited in cash column when the cheque is received and it is credited when it is endorsed.

Question 8.
Rent paid account is Nominal Account whereas, rent received account is a Real Account.
Answer:
False: Rent paid and rent received-both are nominal accounts because they are expenses and incomes of the business.

Question 9.
A tallied Trial balance is a conclusive proof of accuracy of books of account.
Answer:
False: Agreement of trial balance is not a conclusive proof of the accuracy, because there may be some errors like errors of principle, compensating errors etc. which do not affect the total of trial balance.

Question 10.
Opening, Closing, Rectifying and Adjusting entries are recorded in journal proper.
Answer:
True: All the Opening, Closing, Rectifying and Adjusting entries are recorded in journal proper because these are not recorded in any other subsidiary book.

Question 11.
Sale of office furniture should be credited to Sales Account.
Answer:
False: Sale of office furniture is a capital receipt, so it should be credited to Furniture Account.

Question 12.
The balance in the Petty Cash Book represents expenses.
Answer:
False: The balance in the Petty Cash Book represents petty cash balance lying with the Petty cashier. It is treated as an asset of the business.

Accounting Process (Journal, Ledger, Trial Balance, Cash Book, Subsidiary Books) – CA Foundation Accounts Study Material

Question 13.
The purchase day book is a part of the ledger.
Answer:
False: Purchase day book is a book of original entry and so it is a part of journal.

Question 14.
In a Cash Book, Discount Columns may show either debit balance or credit balance.
Answer:
False: Discount Columns of a Cash Book are totalled but never balanced. These are totalled and transferred to Discount Allowed and Discount Received Account respectively.

Question 15.
Purchase book records all purchases of goods.
Answer:
False: Purchase book records only credit purchases of goods.

Question 16.
The Sales book is kept to record all sales.
Answer:
False: The Sales book is kept to record only the credit sales of goods.

Question 17.
The debit notes issued are used to prepare sales return book.
Answer:
False: The credit notes are used to prepare sales return book.

Question 18.
Bank column of the cash book will show only a debit balance.
Answer:
False: Bank column of the cash book may show debit or credit balance.

Andhra Pradesh Grameena Vikas Bank Personal Loan @ 9.99% | Loan Amount, Eligibility Criteria, Documents Required, Repayment Options

Andhra Pradesh Grameena Vikas Bank Personal Loan: In terms of the market reputation, it can be said that Andhra Pradesh Grameena Vikas Bank is one of the most trusted rural banks all over India. It was founded exactly 15 years ago after the amalgamation of 6 banks. The banks were taken under the wing of the State Bank of India (SBI), and at present, the bank is functional all across the 21 districts of Telangana and a total of 3 districts in Andhra Pradesh. 771 branches of the Andhra Pradesh Grameena Vikas Bank exist across the two states, as mentioned earlier, and help the account holders and people associated with the bank 1526 Mitra Points are also there with almost all the banking facilities.

This bank offers personal loans for various purposes. In comparison to the other private sector banks, the interest rate is quite low. So, read on and find out everything about the personal loan offered by the Andhra Pradesh Grameena Vikas Bank.

Want to compare Andhra Pradesh Grameena Vikas Bank Personal Loan with other bank personal loans for lowest interest rates and extra offerings? Just keep an eye on our Complete Guide on Personal Loan & choose the suitable bank to apply for the loan.

Andhra Pradesh Grameena Vikas Bank

Andhra Pradesh Grameena Vikas Bank Personal Loan

On the total personal loan amount of 10 lakhs INR, one needs to pay an interest of 9.99%. The borrower needs to return the money within a period of 12 to 60 months. Only 1 to 2 percent of the Proc. fee will be charged from the lender. Andhra Pradesh Grameena Vikas Bank offers various types of personal loans. All of them are mentioned below.

  • Marriage Loan: If you cannot bear the expenses of a marriage in the family, then a personal loan is also sanctioned for that purpose.
  • Loan for Government Employees: Both state and Central government employees can apply for a personal loan.
  • Loan for Doctors: Doctors who have practiced for more than three years can apply for the loan.
  • Loan for Pensioners: Even in your retired life, you are eligible for a personal loan. The only clause is that you need to be an ex-government employee.
  • Balance Transfer Related Personal Loans: If you feel that the interest rate is very high, then you can choose this option having a lower interest rate.
  • Top Up Personal Loan: If you have already taken a personal loan but urgently require more money, you can apply for this top-up to get an extra amount of money other than the original loan amount.

How You Can Get a Personal Loan from Andhra Pradesh Grameena Vikas Bank?

You need to visit the official website of ‘Andhra Pradesh Grameena Vikas Bank Personal Loan.’ There you need to fill a form, and after the submission of that form, the bank authority will contact you. You can consult with the bank employees to get personal assistance throughout the loan procedure.

The money lender’s authentication will then be verified within two days. After that, you need to submit your KYC. You can choose to submit your KYC either online or offline. Once the document verification process finishes, you will receive a call from the bank to confirm the loan amount, and if everything goes right, your loan will get sanctioned. If the loan gets sanctioned, you will get the money in the next 48 hours. The time mentioned above frame may vary depending on the situation.

You can check the application status of your loan by visiting the official website of the Andhra Pradesh Grameena Vikas Bank. To do that, you need to submit some of your details, such as your mobile number, loan application number, and maybe your date of birth. But first, you need to click on products on the bank’s web page, and there you need to select the option of personal loans, which will redirect you to another page. There click on ‘More’ and finally tap on the ‘Review Loan Application Status; to check your loan status.

How Can You Use the Loan Amount?

As it is a personal loan, you can use it just the way you want. You can spend it on educational purposes or build a house and even for a vacation if you like. Still, there are categories in the personal loan section depending on the job profile of the borrower. Money is lent depending on the financial capability of the borrower and their need.

Andhra Pradesh Grameena Vikas Bank Personal Loan Eligibility Criteria

To take a personal loan from the Andhra Pradesh Grameena Vikas Bank, you need to be eligible. The eligibility criteria are mentioned below.

  • The minimum age of the moneylender should be 21 years, whereas the maximum age limit is 60 years.
  • The CIBIL score of the person taking the loan should be at least 600.
  • The minimum monthly income of the loan applicant should be 20000 INR.
  • The moneylender can either be self-employed or a salaried person.

Documents Required for Andhra Pradesh Grameena Vikas Bank Personal Loan

Following is a list of documents that you need to submit to the Andhra Pradesh Grameena Vikas Bank if you plan to take a personal loan from the bank. While applying for the loan, the applicant needs to submit copies of a few documents. The loan amount will be sanctioned only after the completion of the document verification process.

As proof of your identity, you can submit a copy of any of the following documents.

  • Aadhar Card
  • Driving License
  • Voter ID Card
  • Passport

To prove your permanent address, you can submit a copy of your ration card, Passport, or electricity bills if you do not have a permanent address and live in a rented place. You need to submit a copy of your rental agreement with the house owner. You should stay in one location for at least one year before applying for the loan.

You need to submit your ITR for the last two assessment years, bank statement from your updated passbook where the transaction history of the last three months will be visible, or finally, you can also submit your salary slips for the last six months proof of your monthly and yearly income.

Andhra Pradesh Grameena Vikas Bank Maximum Loan Amount

The maximum personal loan amount given by Andhra Pradesh Grameena Vikas Bank is ten lakhs INR.

Repayment Options for Andhra Pradesh Grameena Vikas Bank Personal Loan

You can pay the total lent money and as well as the interest in EMIs. You can choose to pay either physically or virtually.

When does the Personal Loan request Gets Rejected?

Under the following circumstances, your loan request might get rejected by the Andhra Pradesh Grameena Vikas Bank.

  • Bad credit history: A person’s credit score is used to indicate a person’s ability to repay a loan. A high credit score determines the ability to repay a loan without default. For a lender, an honest credit score is essential in assessing the likelihood of default. Lenders turn down many consumer loan applications due to bad credit scores. People with credit scores of less than 750 may find it difficult to get a private loan.
  • In case you are in debt: If you have borrowed a large amount of money in the past and the ratio of your loan amount to income exceeds 40%, lenders may refuse your loan application.
  • Increase in loan requests: As long as you are applying for a loan, the investor asks for your credit report, pronounced as a request. Even though the service is free, you shouldn’t worry about asking too many questions.

Final Words on Andhra Pradesh Grameena Vikas Bank Personal Loan

In most cases, the borrower’s credit score is checked by Andhra Pradesh Grameena Vikas Bank before lending money to anyone, but in some cases, your loan request may get rejected due to other reasons. You need to repay the loan amount no matter what, take a loan if necessary, and read all the loan-related documents carefully before signing on the dotted line.

Business Environment – CA Foundation BCK Notes Chapter 2

Business Environment – CA Foundation BCK Notes Chapter 2

Browsing through CA Foundation BCK Notes Chapter 2 Business Environment helps students to revise the complete subject quickly.

Business Environment – BCK CA Foundation Notes Chapter 2

Business enterprises do not function in isolation. They operate within charging environment. Various elements of this environment and changes in them exercise a significant influence on the working and performance of business firms

2.1 Meaning of Business Environment:
The term business environment means “the aggregate of all the forces, factors and institutions which are external to and beyond the control of an individual business enterprise but which exercise a significant influence on the functioning and growth of individual enterprises.” Keith Davis defines business environment as “the aggregate of all conditions, events and influences that surround and affect business.”

According to Bayord O. Wheeler, business environment refers to “the total of all things external to firms and industries which affect their organisation and operation”. In the words of Arthtur M. Weimer, “business environment encompasses the climate or set of conditions, economic, social, political, or institutional in which business operations are conducted”.

Thus, business environment means all those internal and external factors that have an impact on business.

Business Organizations – CA Foundation BCK Notes Chapter 3

2.2 Nature (Characteristics) of Business Environment:
Business environment is characterised by the following features:
1. Aggregative – Business environment is the totality of all the internal and external forces which influence the working and decision-making of an enterprise.

2. Inter-related – Different elements of business environment are closely inter-related and interdependent. A change in one element affects the other elements. Economic environment influences the non-economic environment which in turn affects the economic conditions.

For example, economic liberalisation in India since 1991 has opened up new opportunities for private sector and foreign entrepreneurs. Similarly, social pressures against pollution led to the enactment of anti-pollution laws. Therefore, managers should not consider environmental factors in isolation from one another. A holistic approach is necessary for proper understanding of business environment.

3. Dynamic – Business environment is dynamic in nature as it keeps on changing from time to time.

4. General and Specific Forces – Business environment consists of both general and specific forces. General forces such as economic, social, political, legal, natural and technological conditions influence all business enterprises. Specific forces such as investors, customers, competitors, suppliers, etc. affect individual enterprises directly.

5. Relative – Business environment is a relative concept. It differs from country to country and even region to region. Capitalist economies like those of USA and UK have a different kind of environment than communist economies. The nature of economic system in a country affects the environment of business.

6. Inter-temporal – Business environment is also an inter-temporal concept as it changes over time. For example, business environment in India today is much different from that prevailing before 1991. In the short run business environment may remain static. But in the long run, it does change.

7. Uncertain – Business environment is largely uncertain because it is very difficult to forecast the future environment. When the environment is volatile, i.e. changes very fast, uncertainty increases.

8. Contextual – Business environment provides the macro framework within which the business firm (a micro unit) operates. The environmental forces are largely those given within which an individual enterprise and its management must function.

Business environment exercises tremendous influence on the working and success of business firms. Different elements of business environment have different types and degrees of influence on business. A factor that has a favourable impact on one firm may adversely effect another firm.

Therefore, management of a business enterprise must have a deep understanding and appreciation of the environment. The changes taking place in environment must be continuously monitored to judge their impact on business. Appropriate and timely steps must be taken to face the environmental changes.

2.3 Significance of Business Environment:
The survival and success of any enterprise depends upon its inherent capabilities (physical, financial, human and other resources) and its ability to adapt to the changing environment.

It is very important for business firms to understand their environment and changes occurring in it. Business enterprises which know their environment and are ready to adapt to environmental changes would be successful. On the other hand, firms which fail to adapt to their environment are unlikely to survive in the long run.

For example, some Indian firms suffered considerably because they failed to appreciate the tightening regulations against environmental pollution. Knowledge of environmental changes is very helpful in the formulation and implementation of business plans. A business can obtain this knowledge through environmental scanning.

Environmental scanning is the process by which organisations monitor their relevant environment to identify opportunities and threats affecting their business. With the help of environmental scanning, an enterprise can consider the impact of different events, trends, issues and expectations on its business operations. Firms which systematically analyse and diagnose the environment are more effective than those which do not.

Some of the direct benefits of understanding the environment are given below:
(i) First Mover Advantage – Awareness of environment helps an enterprise to take advantage of early opportunities instead of losing them to competitors. For example, Maruti Suzuki became the leader in small car market because it was the first to recognise the need for small car on account of rising petroleum prices and a large middle class.

(ii) Early Warning Signal – Environmental awareness serves as an early warning signal. It makes a firm aware of the impending threat or crisis so that the firm can take timely action to minimise the adverse effects, if any.

For example, ‘when new firms entered in the mid segment cars (threat), Maruti Suzuki increased the production of its Esteem threefold. Increase in production enabled the company to make faster delivery. As a result the company captured a substantial share of the market and became a leader in this segment.

(iii) Customer Focus – Environmental understanding makes the management sensitive to the changing needs and expectations of consumers. For example, Hindustan Unilever and several other FMCG companies launched small sachets of shampoo and other products realising the wishes of customers. This move helped the firms to increase sales.

(iv) Strategy Formulation – Environmental monitoring provides relevant information about the business environment. Such information serves as the basis for strategy making. For example, ITC realised that there is a vast scope for growth in the travel and tourism industry in India and the Government is keen to promote this industry because of its employment potential. With the help of this knowledge, ITC planned new hotels both in India and abroad.

Study of environment enables an organisation to analyse its competitors’ strategies and thereby formulate effective counter strategies. All strategic decisions such as what business to do, whether to expand or reduce a business, and so on require a thorough understanding of the internal and external environment of the organisation.

(v) Change Agent – Business leaders act as agents of change. They create a drive for change at the gross root level. In order to decide the direction and nature of change, the leaders need to understand the aspirations of people and other environmental forces through environmental scanning. For example, contemporary environment requires prompt decision-making and power to people. Therefore, business leaders are increasingly delegating authority to empower their staff and to eliminate procedural delays.

(vi) Public Image – A business firm can improve its image by showing that it is sensitive to its en-vironment and responsive to the aspirations of public. Leading firms like Reliance Industries, ICICI Bank and others have built good image by being sensitive and responsive to environmental forces. Environmental understanding enables business to be responsive to their environment.

(vii) Continuous Learning – Environmental analysis serves as broad based and ongoing education for business executives. It keeps them in touch with the changing scenario so that they are never caught unaware. With the help of environmental learning managers can react in an appropriate manner and thereby increase the success of their organisations. Knowledge of changing environment can keep the organisation dynamic in its approach.

There are two major components of business environment-micro and macro.

Business Organizations – CA Foundation BCK Notes Chapter 3

2.4 Meaning and Elements of Micro Environment:
Micro environment or task environment refers to those individuals, groups and agencies with which the organisations comes into direct and frequent contact in the course of its functioning. In the words of Philip Kotler, “micro environment consists of the actors in company’s immediate environment that affect the performance of the company.” Micro environmental factors exercise a direct and intimate influence on the operations of the enterprise. Therefore, it is also known as Direct Action Environment or specific forces or Stakeholders.

Micro environment consists of the groups in the company’s immediate operating environment which have a stake in the company. However, the micro forces may not influence all the firms in a particular industry in the same manner.

For example, one firm’s supplier environment may be entirely different from that of another firm which has in house supplies. Even when all the competing firms in an industry have similar micro environment, their relative success depends on how effectively they face the micro forces.

Micro environment consists of the following elements:
1. Customers – The people who buy a firm’s products and services are its customers. A business exists to create and satisfy customers. A firm may have different types of customers like individuals, households, Government departments, commercial establishments, etc. For example, the customers of a paper company may include students, teachers, educational institutions, business firms and other users of stationery.
Business Environment – CA Foundation BCK Notes Chapter 2 1
In order to be successful a company must understand and meet the needs and expectations of its customers. A firm can select the target customer group or market segment on the basis of factors like profitability, elasticity of demand, dependability, degree of competition and growth prospects.

It is generally risky to depend upon a single customer group. The customer environment is becoming global due to increasing globalisation and liberalisation of the economy. With the opening up of Indian market and foreign markets, the customer is becoming more global in the matter of shopping.

2. Competitors – A company may have both direct and indirect competitors. Direct competitors are the other firms which offer the same or similar products and services. For example, Sony TV faces direct competition from other brands like LG, Samsung, Onida, Videocon, BPL, etc.

Indirect competition comes from firms vying for discretionary income. For example, a cinema house, faces indirect competition from Casino, and other firms marketing entertainment. Due to economic liberalisation and globalisation, Indian companies are now facing competition from both domestic firms and multinational corporations. In order to understand the full range of its competition, a company must look at from buyers viewpoint.

3. Suppliers – Suppliers refer to the people and groups who supply raw materials and components to the company. Reliable sources of supply enable the company to carry on uninterrupted operations and to minimise inventory carrying costs. Suppliers also influence quality levels and costs of manufacturing. It is very risky to depend on a single supplier.

A strike or any other production problem of the supplier may cause interruptions in manufacturing. Therefore, it is advisable to develop and sustain multiple sources of supply. Some companies like Maruti Suzuki undertake vendor development to ensure timely and regular supply of materials and parts. The relationship between the suppliers and the firm reflects a power equation which is based on the extent to which each of them is dependent on the other.

4. Marketing Intermediaries – Several marketing intermediaries help a company in promoting, selling and distributing its products to consumers. Middlemen like agents, wholesalers, and retailers serve as a link between the company and its customers.

Transportation firms and warehouses assist in the physical distribution of products. Advertising agencies, marketing research agencies and insurance companies are other types of marketing intermediaries. Countrywide retail distribution network has contributed significantly to the success of companies like Hindustan Unilever and Dabur India.

5. Financiers – The shareholders, financial institutions, debenture holders and banks provide finance to a company. Financial capacity, policies and attitudes of financiers are important factors for the company. For example, the company cannot raise funds through shares if the financiers are not risk taking.

6. Publics – Publics include all those groups who have an actual or potential, interest in the company or who influence the company’s ability to achieve its objectives. Media groups, environmentalists, non-government organisations (NGOs), consumer associations and local community are examples of publics.

These publics can have both positive and negative impact on a business firm. For example, media groups can be used to disseminate useful information. A company can cooperate with the local people to improve its image as well as to provide some benefit to the people.

On the negative side, local community concerned with public health can force a company to suspend operations or to take pollution control measures. Non- government organisations often organise protests against firms suspected of being guilty for child labour, cruelty against animals and damage to nature.

For example, one of the leading companies in India was attacked by the media for writing advertisements on rocks near a famous hill station. Such activities of publics can tarnish the image of business.

7. Workers and Trade Union – Workers and their union are an important component of micro environment. A firm’s relations with its workers and trade union have a significant impact on its functioning and performance. Company’s work environment and industrial relations system must be conducive to efficient functioning.

According to Philip Kotler, “companies must put their primary energy into effectively managing their relationships with their customers, distributors and suppliers. Their overall success will be affected by how other publics in the society view their activity. Companies would be wise to spend time monitoring all their public, understanding their needs and opinions and dealing with them constructively.”

Business Organizations – CA Foundation BCK Notes Chapter 3

2.5 Meaning and Elements of Macro Environment:
Macro environment refers to the general environment or remote environment within which a business firm and forces in its micro environment operate. A company does not directly or regularly interact with the macro environment. Therefore, macro environment is also known as Indirect Action Environment. Forces in the macro environment, however, create opportunities for and pose threats to the company.

The macro environment forces are less controllable than the micro forces. Therefore, success of an enterprise depends on its ability to adapt to the macro environment. For example, when there is a substantial increase in the cost of imported raw materials due to depreciation of the Rupee, production of such materials within the country may become necessary.

Macro environment consists of the following components:

  • Demographic environment
  • Political and legal environment
  • Social and cultural environment
  • Economic environment
  • Technological environment
  • Natural environment
  • Global environment.

1. Demographic Environment: Demographic environment means various dimensions of country’s population. The demographic environment is important to business because people constitute the market for a business. Moreover, business management involves management of people and the efficiency of business depends largely on the competence and motivation of its people.

Business firms often use demographic factors (e.g., age, sex, family size, occupation, family life cycle, education, social class, income distribution) as the basis of market segmentation. The demographic environment differs from country to country and from one place to another within a country.

The demographic factors which have very significant implications for business are as follows:

  • Size and growth rate of population,
  • Age and sex composition of population,
  • Life expectancy,
  • Rate of employment,
  • Density of population,
  • Rural urban distribution,
  • Family size,
  • Ethnic composition,
  • Literacy levels, and
  • Income levels.

2. Economic Environment – The economic environment comprises all those economic forces which influence the functioning of business enterprises, e.g., the nature and structure of the economy, the stage of economic development, economic resources, the level of income, economic policies, distribution of income, etc.

The main components of economic environment are as follows:

  • The nature of economic system-capitalist, socialist or mixed economy.
  • Economic structure-occupational distribution of labour force, structure of national output, capital formation, investment pattern, composition of trade, balance/imbalance between different sectors, five year plans.
  • Economic policies-industrial policy, export-import policy, monetary policy, fiscal policy, for-eign investment and technology policy.
  • Organisation and development of the capital market-banking system, securities markets, etc.
  • Economic indices-gross national product, per capita income, rate of savings and investment, price level, balance of payments position, interest rates, etc.
  • Economic infrastructure and stage of development of the economy.
  • Product markets and factor markets-degree of competition, market size, etc.

3. Political and Legal Environment – Political environment comprises the elements relating to Government affairs. It serves as the regulatory framework of business. The main constituents of a country’s political and legal environment are as follows:

  • The constitution of the country.
  • Political organisation-organisation and philosophy of political parties, ideology of the Government, nature and extent of bureaucracy, influence of primary groups, business donations to political parties, political consciousness, etc.
  • Political stability-structure of military and police force, election system, law and order situation, President’s Rule, foreign infiltrations, secessionist activities, etc.
  • Image of the country and its leaders.
  • Foreign policy-alignment or non-alignment, relations with neighbouring countries.
  • Defence and military policy.
  • Laws governing business, and legal system.
  • Flexibility and adaptability of laws-constitutional amendments and direction of public policies. (ix) The judicial system-implementation and effectiveness of laws.

4. Social and Cultural Environment – Social environment refers to the characteristics of the society in which a business firm exists. Social and cultural environment consists of the following:

  • Social institutions and groups.
  • Caste structure and family organisation.
  • Educational system and literacy rates.
  • Customs, attitudes, beliefs, values and life styles.
  • Tastes, preferences of people, and their buying behaviour.
  • Religions, etc.

Family, marriage, education, religion, attitudes to work and wealth and ethics are some examples of socio-cultural factors.
Business Environment – CA Foundation BCK Notes Chapter 2 2

5. Technological and Physical Environment – The main elements of technological and physical environment are the following:

  • Sources and types of technology.
  • Rate of technological change*.
  • Approaches to production of goods and services.
  • New processes and equipment.
  • Research and Development (R&D) systems.

6. Natural Environment – The main natural forces are as follows:

  • Climatic and geographical conditions.
  • Agricultural, commercial and other natural resources.
  • Ecological system.
  • Levels of pollution.

7. Global Environment – International agencies (World Bank, IMF, WTO, EEC, etc.), international conventions, treaties and agreements, economic and business conditions in other countries, etc. Certain developments such as a hike in the crude oil price have global impact. Developments in information and communication technologies facilitate rapid spread of culture across countries. E

conomic conditions abroad affect Indian firms. For example, exports increase when markets expand abroad. International political factors can also affect business. For example, improvements in relations between India and Pakistan has led to higher trade between the two countries. WTO regulations have far reaching impact on business in India. Import and investment liberalisation by WTO has led to greater competition in India.

The main determinants of international environment are as follows:

  • The state of the world economy and distribution of world output.
  • International economic cooperation.
  • International market structure and competition.
  • Barriers to international trade and investment.
  • National economic policies of different countries.
  • Role of multilateral economic institutions.
  • International economic laws, treaties, agreements, codes and practices.
  • Political system and conditions in different countries.
  • Cultural factors in different countries.
  • Growth and transfer of technology.
  • Growth and spread of multinationals.
TDS on Transportation Charges

TDS on Transportation Charges | Points Regarding TDS Under Section 194C

TDS on Transportation Charges: Confusion regarding the application of Section 194C has been observed amongst people. Section 194C focuses on TDS on the contract during payment to the transporter. This might result from various amendments through the years related to the specific points 194C(6) and 194C(7). The summarization of the details of Section 194C is discussed below.

Points Regarding TDS Under Section 194C

  • This revised sub-section is applicable with effect from April 1st, 2015.
  • The transporter for the sub-sections mentioned is the person handling plying, hiring, or leasing assets carriages.
  • The advantage of non-deduction of tax is available only for small transportation operators owning less than ten goods carriages.

Therefore, if the transporter having not more than ten goods carriages through the year, provides his PAN and the declaration, then, being a payer, they don’t have to deduct his TDS.

But suppose the transporter was owning more than ten goods carriages at any time during the year. Then, as payers, they must deduct TDS during payment of charges to goods transporter at the price of 1% or 2% depending on the case and status of the transport contractor.

Note: The TDS rate of 1% and 2% will decrease to 0.75% and 1.50%, respectively, through the period from the month of May 14th, 2020, to the month of March 31st, 2021.

  • The person accountable for paying or charging any amount to such transporters shall furnish a declaration along with their PAN to the income tax authority.

Under Section 194C, the specified persons must deduct income tax:

  • Central/State Government employee
  • Co-operative society/Statutory corporation
  • Housing/Town development authority
  • Registered society
  • Trust/Local authority
  • University
  • Foreign Government/Enterprise/Association
  • Individual/Association of persons gross receipts Rs. 1 crore during the preceding financial year.

Is TDS applicable on transportation charges?

What is TDS on Transportation (Freight)? According to Section 194C, any payment made to a transporter is subject to TDS deduction on freight charges. The payer must reduce the income tax amount before transferring the fee.

What is the TDS on transportation?

Section 194C of Income Tax Act is amended to include TDS deduction of 1 % for individuals and Hindu Undivided Families owning more than 10 goods carriage, and at the rate of 2% in case of other payees.

What is the TDS limit for transporter?

TDS on transporter

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Is transporter in TDS return?

As per Income tax act 194C, TDS is not required to be deducted on payments made to transporter If PAN number has been provided to the deductor. To incorporate nil rate transporter entries in E-TDS return by inserting a tag “T” in remarks in 26Q.

Is TDS applicable on vehicle insurance?

Most times people choose their insurance via agents, brokers, etc. In such cases, the insurance commission or any other remuneration/reward received by such agents, brokers etc., are subjected to Tax Deducted at Source (TDS) as dictated under Section 194D of the Income Tax Act.

PPF Interest Rate History

PPF Interest Rate History | Features and PPF Interest Rate Over Years

PPF Interest Rate History: Public Provident Fund (PPF) is a long-term retirement saving scheme to provide a secure post-retirement. The Government of India usually offers the PPF, and the PPF rates are said to be 7.1 percent from April 2020 to June 2021. The most troubling question is if the PPF Interest Rate is fixed? What are the new PPF withdrawal rules? How does one often fix PPF changes? What is the range of PPF interests over the years? This article on PPF Interest Rate History is the solution to your questions.

PPF Interest Rate History

PPF, or Public Provident Fund, was launched from 1968 to 1969. However, the historical returns of the Public Provident Fund since 1968 are elucidated below-.

Earlier the PPF interest rates were announced once a year. However, from 2016 to 2017, the Public Provident Fund rate of interest is reported quarterly. This is done based either on the previous quarter’s yield on benchmark government securities or the bonds of corresponding maturities and a few extra of about 0.25 percent.

It is to note that the Public Provident Fund or the PPF interest is calculated on the lowest balance and is usually done between the 5th day and the end of the month every month. However, the Public Provident Fund interest is credited only to the financial end period of the year.

  • The Public Provident Fund Interest rate in 1968 to 1969 and 1969 to 1970 was 4.8 percent precise.
  • The PPF Interest rate was slowly raised and peaked at 12% between April 1, 1986, to January 14, 2000.
  • The PPF interest rate fell again and reached eight percent in 2011.
  • The PPF interest rate slowly increased again and reached 8.8 percent from 2012 to 2013.
  • The PPF fell to 7.9 percent in June 2019 and remained at that pace till Mar 2020.
  • It has now further reduced to 7.1 percent from April to June 2020.

Essential Features Of Public Provident Fund

  • Tenure: The Public Provident Fund holds a minimum of 15 years of the term, which can be extended in blocks of five years as per the individual’s request.
  • Investment Limits: Public Provident Fund allows the investor to hold a minimum investment limit of Rs 500 and a maximum investment limit of Rs 1.5 lakh for each financial year. However, the investments can be made either as a lump sum or in a maximum of 12 instalments.
  • Opening Balance: The PPF account can be opened with just Rs 100, and the annual investments reach above Rs 1.5 lakh. However, this will not earn the interest and is not applicable or eligible for tax saving.
  • Deposit Frequency: Deposits credited into a Public Provident Fund account have to be noted to be made at least once every year for 15 years.
  • Deposit Method: The deposit method for a Public Provident Fund account can be made through modes such as a cheque, award of cash, through Demand Draft or even an online fund transfer.
  • Nomination: A Public Provident Fund account holder can designate a nominee for her or his account. This can be done either at the time of opening the account or subsequently.
  • Joint accounts: A rule stated is that the Public Provident Fund account can only be held only in the name of one individual. Therefore, opening an account in joint terms is ruled out.
  • Risk factor: Since the Indian Government backs the Public Provident Fund, a PPF fund offers guaranteed, risk-free returns and complete capital protection. However, the potential risk element involved in holding a Public Provident Fund account is minimal.

PPF Interest Rate Over Years

Public Provident Fund Interest rate over the years in also tabulated below for a brief comprehension-

Year Range Public Provident Fund Interest Rate
1968- 1969 4.80 percent
1969- 1970 4.80 percent
1970- 1971 5 percent
1971- 1972 5 percent
1972- 1973 5 percent
1973- 1974 5.30 percent
1.4.1974 to 31.7.1974 5.80 percent
1.8.1974 to 31.3.1975 7 percent
1975-1976 7 percent
1976-1977 7 percent
1977-1978 7.50 percent
1978-1979 7.50 percent
1979-1980 7.50 percent
1980-1981 8 percent
1981-1982 8.50 percent
1982-1983 8.50 percent
1983-1984 9 percent
1984-1985 9.50 percent
1985-1986 10 percent
01.04.1986 to 14.01.2000 12 percent
15.01.2000 to 28.02.2001 11 percent
01.03.2001 to 28.02.2002 9.50 percent
01.03.2002 to 28.02.2003 9 percent
01.03.2003 to 30.11.2011 8 percent
01.12.2011 to 31.03.2012 8.60 percent
01.04.2012 to 31.03.2013 8.80 percent
01.07.2019 to 31.03.2020 7.90 percent
01.04.2013 to 31.03.2016 8.70 percent
01.04.2016 to 30.09.2016 8.10 percent
01.10.2016 to 31.03.2017 8 percent
01.04.2017 to 30.06.2017 7.90 percent
01.07.2017 to 31.12.2017 7.80 percent
01.01.2018 to 30.09.2018 7.60 percent
01.10.2018 to 30.06.2019 8 percent
01.04.2020 onwards 7.10 percent

Why Does A Public Provident Fund Interest Rate Change?

The earlier Public Provident Fund Interest rates were announced once a year.  However, the Public Provident Fund interest rate shifted to a quarterly announcement from 2016 to 2017 based on the previous quarter’s yield on both the benchmark government securities or bonds of corresponding maturities and a few extra around 0.25 percent.

The Indian Government issues the 10-year Treasury Public Provident Fund bonds with funding itself, a debt obligation. A 10-year Treasury note helps to pay interest at a fixed rate on a half-yearly basis. It also delivers the face value to the account holder at maturity. In June 2020, the PPF benchmark was 6.45 percent, and the bond maturing in 2029 offered a 5.97 percent yield, the lowest since January 27, 2009.

Is It A Public Provident Fund That Makes One Crorepati?

With Public Provident Fund interest rates going down, it is to be noted that one needs to invest longer to become crorepati by investing in Public Provident Fund.

Using the 7.1 percent interest for the entire period, account holders can become crorepati after investing in Public Provident Funds for over 25 years, however not overnight.

In this period of 25 to 30 years, an individual can invest in Rs 45 lakh, and the Public Provident Fund interest getting credit into the Public Provident Fund would account for Rs 1,09,50,911. So, in short, there are chances that an individual can become a crorepati by investing in a Public Provident Fund.

Should One Invest in PPF?

The Government of India runs a Public Provident Fund (PPF), and hence it is almost risk-free and is a highly safe platform to invest in. However, it also falls under the Exempt Exempt Exempt category.

  • It would be best to remember that the money you invest is eligible for tax deduction under Section 80C, which is up to Rs.1,50,000 currently.
  • The Public Provident Fund interest income earned every year is tax-free. And is a must to be included in the ITR.
  • The maturity amount in terms of PPF is also completely tax-free.

Hence, the Public Provident Fund is a part of their debt portfolio for many account holders where the returns do not fluctuate like stocks or equity MFs.

What was the highest PPF interest rate ever?

12%
The highest interest rate that the Employees’ Provident Fund (EPF) and Public Provident Fund (PPF) have ever offered was 12%. PPF hit that peak between 1 April 1986 and 14 January 2000, while EPF offered that rate from FY1990 to FY2001.

How much we get after 15 years in PPF?

PPF Calculation Examples for Different Investment Tenures

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What is the PPF interest rate for 2020 21?

As per the ministry circular, PPF will continue to earn 7.10%, the NSC will fetch 6.8%, and Post Office Monthly Income Scheme Account will earn 6.6%. Here is a look at the interest rates on various small savings schemes for the second quarter of FY 2021-22.

Which bank has highest PPF interest rate?

State Bank of India (SBI)
State Bank of India (SBI), which is the largest bank in the country, offers the PPF scheme with a good interest rate. SBI has over 15,000 branches in India, therefore, getting access to the scheme is easy.

Can I have 2 PPF accounts?

As per the Public Provident Fund (PPF) Scheme rules, an individual cannot have more than one account. However, many people still inadvertently end up opening more than one PPF account; they would have opened PPF accounts with two different banks or with a post office and a bank as well.

What is CAGR of PPF?

PPF Returns vs ELSS Returns

According to Value Research, the 5-year CAGR of the ELSS category is 21.19% compared to 8.2% for the PPF.

How can I get 1 crore from PPF?

So, like mutual fund SIP, a PPF account holder can accumulate ₹1 crore by simply investing ₹9,000 per month in one’s PPF account for 30 years using extension facility in 15th, 20th and 25th year of PPF account opening.

Partnership Act 1932

Partnership Act 1932 Important Points | Partnership Definition, Notes

Partnership Act 1932: A partnership firm is formed when two or more people join forces as partners. The Indian Partnership Act, 1932 governs this partnership firm’s laws and regulations Also, the Indian Contract Act governs the partnership in locations where the Partnership Act, 1932 is absent. In this article, let’s understand the Partnership Act 1932, its definition, scope, and different types of partnerships.

Definition of Partnership Act

The Indian Partnership Act, Section 4, defines a partnership as:

Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all

What is Partnership Act, 1962?

A partnership firm is formed when two or more persons join forces to run a business with the goal of making money and sharing it. The partners pool their financial resources and work together to run the company. A partnership must be created for the purpose of carrying on a lawful business, according to Section 12 of the Indian Partnership Act. Property co-ownership is not considered a partnership.

Partnership Act Important Points

The important points of the Partnership Act are explained below:

  • To carry on the partnership firm’s business, the partners must come to an agreement.
  • The goal of forming a partnership should be to make money and share it with the other partners. Unless otherwise indicated, profit and loss distribution might be based on the capital contribution percentage of each partner or distributed equally among all partners.
  • The partnership agreement must specify that the business will be run jointly by all of them or by some of them acting on behalf of all of them. The mutual agency exists between the partners, according to Section 13 of the Partnership Act of 1932.
  • In a partnership, each partner serves as both a principal and an agent for the other partners. A partner’s activities have a binding effect on the actions of all other partners.
  • Unlimited Liability- The partners might be held jointly accountable for the firm’s debts. They have unlimited accountability for the firm’s obligations, which extends to their personal assets.

Types of Partnerships

On the basis of partnership terms and business scope, there are two types of partnerships.

  1. Partnership on the Basis of Duration
    • Partnership at Will: A partnership at will has no set time limit for its expiration.
    • Partnership for a Fixed Period: The partners agree on a period of time for the partnership to last, after which it will end.
  2. Partnership Based on the Size of the Company
    • Particular Partnership: When a partnership is formed for the purpose of completing a specific project, it expires after the project is completed.
    • General Partnership: When a partnership is created for the firm’s regular operations rather than for a specific project, it is referred to as a general partnership.

Number of Partners in a Partnership

  • According to the Indian Partnership Act, the maximum number of participants in a partnership is unlimited, although a minimum of two partners is required.
  • According to the Companies Act of 2013, the maximum number of participants in a partnership cannot exceed 100.
  • According to Section 464 of the Companies Act, 2013, a partnership with more than 100 members is considered an illegal association.

However, the maximum number of partners for banking purposes is ten, while the maximum number of partners for other reasons is ten, according to Section 11 of the Companies Act.

Types of Partners in Partnership Firm

In a partnership firm, there are essentially six types of partners.

  • Active/Managing Partner: Takes an active role in the firm’s day-to-day activities.
  • Sleeping/Dormant Partner: Does not participate in the day-to-day activities of the firm but is bound by the other partners’ actions.
  • Nominal Partner: Has no financial interest in the firm and is merely a partner in the name.
  • Partner in profit only: He/She shares only the firm’s gains and not the losses. Any third-party liabilities are not the responsibility of such a partner.
  • Minor Partner: According to the Indian Contract Act, a minor cannot be a partner in a partnership firm, but he can be entitled to the firm’s benefits with the approval of the other partners. The minor partner shares in the firm’s profits equally, but has limited accountability for the firm’s losses.
  • Partner by Estoppel: A person who is not a partner of the firm but represents himself to be one to another person through his words or conduct is referred to as a partner by estoppel. Even if he is not a partner, such a person cannot deny being one afterwards.

Partnership Deeds

A partnership’s foundation is the partnership agreement. It is the basis that establishes a legal relationship between the partners in order to carry out the partnership firm’s operations. A partnership agreement can be written or oral, but it is referred to as a partnership deed when it is written. The following are some of the details contained in a partnership deed.

  • The partnership firm’s name and address, as well as the business’s
  • All partners’ names and addresses
  • Partners’ rights, responsibilities, and obligations
  • Ratio of profit and loss sharing
  • Each partner makes a financial contribution.
  • Interest rates on capital, loans, and drawings
  • Accounts are settled in the event of the firm’s dissolution.
  • In the event of a disagreement between partners, how do you resolve it?
  • Partners’ salaries and commissions are due.
  • Rules to follow in the event of a new partner’s admission, retirement, or death of an existing partner
  • Any other provisions impacting the partners’ rights

FAQ’s on Partnership Act

Question 1.
What are the rights of partnership?

Answer:
For the business, partners share planning, decision-making, operation, and management rights and duties. This right can also be waived by partners. During the decision-making process, partners have the right to provide input and propose ideas, and these ideas can be considered by the group.

Question 2.
Why is a HUF not considered as a partnership?

Answer:
A contract/agreement for a partnership is one of the most crucial aspects of a partnership. A voluntary and contractual agreement between partners is required. A HUF is formed from statues, and all of its members are born into the organisation. As a result, these individuals cannot be considered partners under the law, therefore the HUF is not a partnership.

Question 3.
Sharing of Profit is the truest test of a partnership. True or False?

Answer:
This is a false statement. The existence of a Mutual Agency is the truest test of a partnership. There are additional situations in which profit is shared but there is no partnership. However, if there is an agency between the persons that manage a business jointly and split earnings, it will be considered a partnership.

CA Foundation BCK Chapter 1 MCQ with Answers – Business and Commercial Knowledge: An Introduction

Students should practice CA Foundation BCK Chapter 1 MCQ with Answers Business and Commercial Knowledge: An Introduction – CA Foundation BCK MCQ Questions based on the latest syllabus.

BCK CA Foundation Chapter 1 MCQ Questions – Business and Commercial Knowledge: An Introduction

1. On the basis of activities as a domain, the list does not include:
(a) Manufacturing
(b) Trading
(c) Commerce and Services
(d) Human Resource
Answer:
(d) Human Resource

2. On the basis of functions as a BCK domain, the list includes:
(a) Production
(b) Accounting, Finance and Taxa-tion
(c) Human Resource
(d) All of the above
Answer:
(d) All of the above

3. Economic laws, philosophy, Psychology, Sociology, etc. are related with the BCK domain:
(a) Mode
(b) Scale
(c) Underlying disciplines
(d) Focus
Answer:
(c) Underlying disciplines

CA Foundation BCK Chapter 1 MCQ with Answers – Business and Commercial Knowledge: An Introduction

4. As per Oxford online dictionary, a specified sphere of knowledge is called as ________.
(a) Business and Commercial Knowledge
(b) Domain
(c) Principle
(d) All of the above
Answer:
(b) Domain

5. Business and Commercial Knowledge as a domain is :
(a) Vast
(b) Eclectic
(c) Ever-evolving and expanding
(d) All of the above
Answer:
(d) All of the above

6. In case of business, the range of activities includes manufacturing, trading, services, retail & domestic trade, door to door selling, malls, weekly haats, etc. Therefore, BCK is.
(a) Vast
(b) Eclectic
(c) Ever-evolving and expanding
(d) All of the above
Answer:
(a) Vast

7. BCK has derived from various dis-ciplines like marketing, accounting & finance, operations, human behaviour, laws, economics, ethics, etc. Therefore, BCK is.
(a) Eclectic
(b) Uni-disciplinary
(c) Bi-disciplinary
(d) None of the above.
Answer:
(a) Eclectic

8. The businesses draw their strategies to beat their competitors. BCK has adapted the term “Strategy” from which of the following original discipline?
(a) Military
(b) Biology
(c) Chemistry
(d) None of the above
Answer:
(a) Military

9. The BCK Vocabulary includes “Bulls & Bears”. These have been taken from the discipline:
(a) Military
(b) Biology
(c) Chemistry
(d) None of the above
Answer:
(b) Biology

10. The information and communication technology has introduced several terms in the lexicon of BCK e.g. 24 X 7, B2B, B2C, etc. The impact of this evolution is the decline and demise of old businesses and newer ways of doing the business. On this basis, it can be said that BCK is.
(a) Vast
(b) Multi-disciplinary
(c) Eclectic
(d) Even-evolving and expanding.
Answer:
(d) Even-evolving and expanding.

11. The Chartered Accountants are responsible for putting in place a credible system of truthful and fair accounting and reporting of the society’s resources, their deployment and utilisation. Hence, the Chartered Accountants are the ________ of a nations resources.
(a) Custodians
(b) Investigators
(c) Supervisors
(d) None of the above
Answer:
(a) Custodians

12. The BCK is important for the Chartered Accountants (CA). Which of the following Statement(s) is/are correct in this regard?
(a) The CA cannot develop notions of cost, inventory, revenue, profit is, etc. in case of FMCG business.
(b) The CA’s shall be able to conduct audit diligently only when they understand the nuances of the corresponding business.
(c) The knowledge of law is not re-quired to CA
(d) All of the above
Answer:
(b) The CA’s shall be able to conduct audit diligently only when they understand the nuances of the corresponding business.

CA Foundation BCK Chapter 1 MCQ with Answers – Business and Commercial Knowledge: An Introduction

13. According to the English Journalist Joseph Rudyard Kipling, each one of us have six honest servants. These are ________.
(a) What, why, when, how, where & who.
(b) Honesty, Integrity, diligence, loyalty, truthfulness & positive.
(c) Technology, Service, education, mental level, background & Finance.
(d) None of the above.
Answer:
(a) What, why, when, how, where & who.

14. Which of the following is not a business magazine?
(a) Business word.
(b) Business Today.
(c) India Forbes.
(d) Hindu’s Year Book.
Answer:
(d) Hindu’s Year Book.

15. Which of the following is not a business Channel?
(a) CNBC TV 18
(h) ETNow
(c) NDTV Profit
(d) SAB TV
Answer:
(d) SAB TV

16. Which of the following is not an economic objective of the firm?
(a) Sales growth
(b) Improvement in market share
(c) Profits and return on investment
(d) Conservation of natural resources
Answer:
(a) Sales growth

17. Economic, Activities are driven cause of ________?
(a) Self-Interest
(b) Self-less motive
(c) Human welfare
(d) Self satisfaction
Answer:
(a) Self-Interest

18. Which of the following statements characterizes the best non-economic activities?
(a) Non-economic activities do not require any investment of re-sources
(b) These activities do not entail any operational costs
(c) These activities are undertaken by ascetics
(d) The underlying purpose of these activities is not earning of a livelihood but social, psychological or spiritual satisfaction.
Answer:
(d) The underlying purpose of these activities is not earning of a livelihood but social, psychological or spiritual satisfaction.

19. Usually non-economic activities are driven by the reasons:
(a) Emotional
(b) Sentimental
(c) Altruism
(d) Any of the above
Answer:
(d) Any of the above

20. The economic activities are dis-tinguishable merely by the present of motive.
(a) Livelihood
(b) Emotional
(c) Altruism
(d) All of the above
Answer:
(a) Livelihood

21. Which of the following is economic activity?
(a) Social, religions & cultural
(b) Personal & recreational
(c) Charity and patriotic
(d) Self-interest & rationality of what do I get in return.
Answer:
(d) Self-interest & rationality of what do I get in return.

22. Which of the following statement is false in respect of non-economic actinides?
(a) These can never have an economic dimension.
(b) These are not for livelihood motive.
(c) These are for selfless consent (i.e. altruism)
(d) These are for charity, patriotic, social, religious, etc.
Answer:
(a) These can never have an economic dimension.

23. Which of the following is not a characteristic of Economic Activities?
(a) Income generating.
(b) Productive.
(c) Saving, investment & wealth
(d) Personal satisfaction only.
Answer:
(d) Personal satisfaction only.

CA Foundation BCK Chapter 1 MCQ with Answers – Business and Commercial Knowledge: An Introduction

24. From the broader perspective, ________ may be defined as an economic activity comprising the entire spectrum of activities pertaining to production, distribution and trading (Exchange) of goods and Services.
(a) Business
(b) Employment
(c) Profession
(d) Economy
Answer:
(a) Business

25. The extraction of edible oil from rice bran, mustard, coconut, Soyboan, etc. represents:
(a) Pure agriculture
(b) Agro-based industries.
(c) Business
(d) Retail industry.
Answer:
(b) Agro-based industries.

26. Identify the economic activity:
(a) Cooking of food by the home-maker.
(b) Playing of piano as a hobby.
(c) Employment in a charitable or-ganisation.
(d) Exercising in a park.
Answer:
(c) Employment in a charitable or-ganisation.

27. Economic activities do not include ________.
(a) Profit earning
(b) Emotional sentimental
(c) Self interest
(d) Livelihood motive
Answer:
(b) Emotional sentimental

28. Identify which are of the following is economic activity?
(a) Cooking of food by Mr. X in a restaurant.
(b) Giving private tuitions.
(c) Dabbawalla picks up the food from home & delivers it to the office.
(d) All of the above.
Answer:
(d) All of the above.

29. Usually non-economic activities are driver by the reasons:
(a) Emotional
(b) Sentimental
(c) Altruism
(d) Any of the above
Answer:
(d) Any of the above

30. Identify non-economic activity:
(a) Music Composer.
(b) Ice Cream Vendor.
(c) Cycle repair shop.
(d) Elder sibling assisting the younger one in studies.
Answer:
(d) Elder sibling assisting the younger one in studies.

31. Transfer of interest is possible in:
(a) Business
(b) Profession
(c) Employment
(d) All of the above
Answer:
(a) Business

32. Professional codes are used as the ethnical guidance in case of:
(a) Business
(b) Profession
(c) Employment
(d) All of the above
Answer:
(b) Profession

33. Letter of appointment and service agreement are the mode of establishment in case of
(a) Business
(b) Profession
(c) Employment
(d) All of the above
Answer:
(c) Employment

CA Foundation BCK Chapter 1 MCQ with Answers – Business and Commercial Knowledge: An Introduction

34. Consider the following table showing columns for the nature of economic occupation and the corresponding characterization of income. And, then, choose the right solution option from the alternatives given below the table.
(a) i-c; ii-d; iii-e; iv-a; v-b
(b) i-b; ii-c; iii-d; iv-e; v-a
(c) i-b; ii-e; iii-a; iv-d; v-c
(d) i-c; ii-d; iii-e; iv-a; v-b
Answer:
(c) i-b; ii-e; iii-a; iv-d; v-c

35. The attribute of a profession does not include.
(a) Certificate of service from government
(b) Self imposed code of conduct
(c) Rendering of specialised nature of services
(d) All of the above
Answer:
(a) Certificate of service from gov-ernment

36. The periodic compensation, in case of employment, refers to:
(a) Wages
(b) Salaries
(c) Both (a) & (b)
(d) Lump Sum amount payable on retirement.
Answer:
(c) Both (a) & (b)

37. Business as a Institution is ________.
(a) Job creator
(b) Job seeker
(c) Both
(d) None of the above
Answer:
(a) Job creator

38. The entire spectrum of market oriented activities coming under industry, trade and commerce is ________.
(a) Business
(b) Profession
(c) Employment
(d) All of the above
Answer:
(a) Business

39. Which of the following is organic objective of business?
(a) Fitness of Human Resources
(b) Community Service
(c) Effective waste handling and disposal
(d) Economic Value Added
Answer:
(a) Fitness of Human Resources

40. The source of livelihood in case of business is:
(a) Professional fee
(b) Profit
(c) Wages
(d) Salaries.
Answer:
(b) Profit

41. The occupation in which people work for others and get remunerated in return is known as:
(a) Business
(b) Employment
(c) Profession
(d) None of these
Answer:
(b) Employment

42. Which of the following statements distinguishes business from entrepre-neurship?
(a) Entrepreneurs are the business owners too
(b) All business owners are entrepreneurs too
(c) Entrepreneurs seek out new op-portunities and pursue innovative business ideas
(d) (a) and (b)
Answer:
(c) Entrepreneurs seek out new op-portunities and pursue innovative business ideas

43. Which are of the following does not require any investment?
(a) Small business
(b) Business
(c) Profession
(d) Employment.
Answer:
(d) Employment.

44. The Logo of Institute of Chartered Accountants of India (ICAI) is suggestive of ________.
(a) Integrity
(b) Vigilance
(c) Profession
(d) None of these
Answer:
(b) Vigilance

45. The Micro, Small, Medium and Large Enterprises are defined with respect to the:
(a) Number of employees
(b) Number of Products
(c) Area Served
(d) Size of investment.
Answer:
(d) Size of investment.

46. Which of the following occupations requires rendering of services based upon specialised knowledge and membership of an accreditation and assessment body?
(a) Employment
(b) Profession
(c) Business
(d) Agriculture
Answer:
(b) Profession

47. In which of the following case, the qualifications are strictly prescribed?
(a) Business
(b) Profession
(c) Employment
(d) Trading
Answer:
(b) Profession

48. Which of the following statement is false as regards profession?
(a) It is rendering of services of a specialized nature.
(b) Prescribed qualifications.
(c) Works under a certificate of practice from an established certification.
(d) The Source of livelihood is profit.
Answer:
(d) The Source of livelihood is profit.

49. Trading implies buying for the pur-poses of selling. Applying this criterion, tell which of the following activities would not qualify as trading?
(a) Purchase of goods in bulk quantity from the manufacturer and sale in smaller quantities to the retailers.
(b) Buying from the wholesaler and selling it to the consumers.
(c) Buying from the retailer for selfconsumption.
(d) Purchase of raw materials from the suppliers for further processing in the factory.
Answer:
(c) Buying from the retailer for selfconsumption.

CA Foundation BCK Chapter 1 MCQ with Answers – Business and Commercial Knowledge: An Introduction

50. Which one of following is true, in economics and finance?
(a) Risk and uncertainty are synonymous.
(b) Risk can be calculated in advance but not uncertainty.
(c) Uncertainty can be calculated but not rise.
(d) Under uncertainties, Risk must be zero.
Answer:
(b) Risk can be calculated in advance but not uncertainty.

51. Sustainable development/businesses imply:
(a) Consistent economic performance
(b) Attention to social problems
(c) Harmony with nature
(d) All of the above
Answer:
(d) All of the above

52. ________ Suggests that business must be assessed not only in terms of their economic returns but also on the basis of their social and ecological returns.
(a) The objectives of business.
(b) The Plurality of Business.
(c) The vision of Business.
(d) The mission of Business.
Answer:
(b) The Plurality of Business.

53. The choice of an appropriate form of business organization depends upon:
(i) Ease of formation
(ii) Liability of aspects
(iii) Capital adequacy
(a) Only I
(b) Onlvm
(c) i&m
(d) I, n & m
Answer:
(d) I, n & m

54. On the basis of size and scale of the activity undertaken, business may be classified as:
(a) Micro, Small, medium & large.
(b) Public and Private.
(c) Big and Small.
(d) Small Scale and Large Scale.
Answer:
(a) Micro, Small, medium & large.

55. Business ownership is a bundle of ________.
(a) Benefits.
(b) Rights.
(c) Obligations.
(d) Advantages.
Answer:
(b) Rights.

56. The shared ownership is beneficial because.
(a) There is sharing of risks.
(b) There is sharing of Profits.
(c) There is sharing of Benefits.
(d) There is sharing of Expenses.
Answer:
(a) There is sharing of risks.

57. ________ form of business is/are appropriate for retail business.
(a) Sole proprietorship
(b) Partnership
(c) Company
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)

CA Foundation BCK Chapter 1 MCQ with Answers – Business and Commercial Knowledge: An Introduction

58. Which form of business organisation has a separate legal entity?
(a) Hindu Undivided Family (HUF)
(b) Co-operative society
(c) Partnership firm
(d) Sole proprietorship.
Answer:
(b) Co-operative society

59. Which of the following Statement is incorrect?
(a) The Business ownership accrues because a person has invested money in it.
(b) A business may be owned single or jointly.
(c) Business may be organized as a Proprietary concern or a Corpo-rate concern.
(d) Joint family business is not a business.
Answer:
(d) Joint family business is not a business.

60. In case of ________, there is a separation of ownership and management.
(a) Sole Proprietorship.
(b) Partnership.
(c) Co-ownership.
(d) Company.
Answer:
(d) Company.

61. The choice of an appropriate form of business organisation largely depends upon:
(I) Ease of formation
(II) Continuity and stability
(III) Liability aspects
Correct option is –
(a) I and II
(b) II and III
(c) I and III
(d) I, II and ID.
Answer:
(d) I, II and ID.

62. Which of the following is not a form of organisation?
(a) Partnership
(b) Company
(c) Partners
(d) Sole Proprietorship
Answer:
(c) Partners

63. The size of structure of business depend on many factors which (are):
(a) In the control of enterprises
(b) Arbitrary and random
(c) Range from internal to external factors which are beyond the control of enterprises
(d) Beyond the control of enterprises.
Answer:
(a) In the control of enterprises

64. Which of the following Statement is incorrect as regards Corporate form?
(a) Life of business is entwined with the life of owner.
(b) Business is a Separate legal per-son.
(c) The life of business in independent from the lives of its owners.
(d) The business has distinct name.
Answer:
(a) Life of business is entwined with the life of owner.

65. The choice of form of business organisation depends upon:
(a) Funds required.
(b) Nature of Product.
(c) Risk Involved.
(d) All of the above
Answer:
(d) All of the above

66. Which one of the following does not have perpetual succession?
(a) Company
(b) Statutory Corporation
(c) Sole Proprietorship
(d) Co-operative Society
Answer:
(c) Sole Proprietorship

67. Sole proprietary business is suitable when market is:
(a) Non Existent
(b) National
(c) Local
(d) Global
Answer:

68. Which are of the following is the easiest and earliest form of business as a human occupation?
(a) Sole Proprietorship
(b) Co-ownership
(c) Partnership
(d) Company
Answer:
(a) Sole Proprietorship

CA Foundation BCK Chapter 1 MCQ with Answers – Business and Commercial Knowledge: An Introduction

69. Which of the following form of enterprise are the largest in India?
(a) Sole Proprietorship.
(b) Partnership.
(c) Company.
(d) LLP
Answer:
(a) Sole Proprietorship.

70. In relation to business organization structure, which one of the following is easy to form and wind up?
(a) A company
(b) A sole proprietorship
(c) Statutory corporation
(d) Public enterprises.
Answer:
(b) A sole proprietorship

71. In which of the following form of business organisation, the entrepreneur is regarded as economic hero who organizes production, uses creativity and ingenuity in innovation, bears risks and uncertainty.
(a) Sole Proprietorship.
(b) Partnership.
(c) Company.
(d) LLP
Answer:
(a) Sole Proprietorship.

72. Which of the following statements describes the best Joint Hindu/Hindu Undivided Family (HUF) Business?
(a) It is a form of business particular to and recognized as such in India
(b) Every family business is in fact a HUF Business
(c) In HUF businesses, there is a family involvement in business
(d) Either (a) or (c)
Answer:
(d) Either (a) or (c)

73. Members of HUF are known as ________.
(a) Partners
(b) Shareholders
(c) Members
(d) Co-parceners
Answer:
(d) Co-parceners

74. Head of HUF is known as ________.
(a) Karta
(b) Co-parceners
(c) Manager
(d) Head
Answer:
(a) Karta

75. In HUF:
(a) Liability of Karta is limited
(b) No liability of Karta
(c) Liability of Karta is unlimited
(d) Liability of everyone is unlimited
Answer:
(c) Liability of Karta is unlimited

76. HUF ________ be formed by a group of people who do not constitute a family.
(a) Cannot
(b) Can
(c) Should not
(d) May
Answer:
(a) Cannot

77. As per Income Tax Act, HUF is a Separate Entity from the joint family that comprises it. Therefore, HUF cannot earn income from which of the following source?
(a) Salary.
(b) House Property.
(c) Business and Profession.
(d) Capital Gain.
Answer:
(a) Salary.

78. The definition of HUF includes:
(a) Buddhist
(b) Jain & Parsi.
(c) Sikh.
(d) All of the above.
Answer:
(d) All of the above.

79. ________ Successive generations of an undivided family are known as HUF.
(a) One
(b) Two
(c) Three
(d) Four.
Answer:
(c) Three

80. HUF can comprise members of a:
(a) Hindu & Sikh family
(b) Parsi family
(c) Buddhist family
(d) Muslim family
Answer:
(d) Muslim family

81. In a Hindu Undivided Family, liability of ________ is unlimited.
(a) Karta
(b) Co-parceners
(c) Both (a) and (b)
(d) Neither (a) and (b)
Answer:
(a) Karta

CA Foundation BCK Chapter 1 MCQ with Answers – Business and Commercial Knowledge: An Introduction

82. The Karta is Joint Hindu Family business has:
(a) Unlimited liability
(b) Joint liability
(c) Limited liability
(d) No liability for debts.
Answer:
(a) Unlimited liability

83. Who can be the head of Joint Hindu Family business?
(a) Karta
(b) Co-parcener
(c) Manager
(d) Director
Answer:
(a) Karta

84. Liability of other Co-parceners are:
(a) Limited upto the extent of share except Karta
(b) Unlimited upto the extent of share except Karta
(c) Unlimited
(d) Limited
Answer:
(a) Limited upto the extent of share except Karta

85. The liability of each member of the Hindu Undivided Family business is:
(a) Limited to a sum as declared by him in general public
(b) Unlimited
(c) Limited to the extent of his share in the business except karta.
(d) Limited to the extent of his share in the business including that of karta.
Answer:
(c) Limited to the extent of his share in the business except karta.

86. Which is not a merit of LLP?
(a) Designated partners have to do all compliance
(b) Separate Legal entity
(c) Both (a) & (b)
(d) None of the above.
Answer:
(a) Designated partners have to do all compliance

87. Income tax Act, HUF cannot card which type of ________.
(a) Profit
(b) Salary
(c) House Property
(d) Other Sources.
Answer:
(b) Salary

88. Which of the following is correct?
(a) Max. No. of members is 50 in case of private limited company.
(b) Freely transferable shares in case of private limited company.
(c) Max. No. of members-200 in case of private limited company.
(d) None of the above.
Answer:
(c) Max. No. of members-200 in case of private limited company.

89. In case of Hindu Undivided Family, the individual share of each coparcener:
(a) Depends upon his efficiency
(b) Keeps charging on the death or birth of coparcener
(c) Is fixed
(d) Keeps changing annually
Answer:
(c) Is fixed

90. Which of the following statement is correct with respect to HUF ________.
(a) HUF earns income from salary
(b) Four successive generations of an undivided family
(c) HUF enjoys a separate entity status under Income Tax Act, 1961
(d) All of the above
Answer:
(c) HUF enjoys a separate entity status under Income Tax Act, 1961

91. In case of HUF what are liabilities of Coparcener and Karta ________.
(a) Both have unlimited liability.
(b) Coparcener’s Lability is limited while Karta’s liability is unlimited.
(c) Karta’s liability is limited while Coparcener’s liability is unlimited.
(d) Both have limited liability.
Answer:
(b) Coparcener’s Lability is limited while Karta’s liability is unlimited.

92. Which of the following is part of HUF?
(a) Hindu and Sikh Family
(b) Parsi Family
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b)

93. A partnership may be formed to carry on:
(a) Any trade
(b) Occupation
(c) Profession
(d) Social enterprise
Answer:
(d) Social enterprise

94. Which of the following is not a necessary feature of partnership?
(a) Sharing of Profit
(b) Sharing of losses
(c) Agency between partners
(d) Business Purpose
Answer:
(b) Sharing of losses

95. The agreement between partners must be ________.
(a) Verbal only
(b) Written only
(c) May be verbal or written
(d) In electronic form only.
Answer:
(c) May be verbal or written

CA Foundation BCK Chapter 1 MCQ with Answers – Business and Commercial Knowledge: An Introduction

96. To form a partnership, the mini-mum capital contribution should be:
(a) Rs. 1 Lakh
(b) There is no minimum limit
(c) Rs. 1 Crore
(d) Rs. 5 Lakh.
Answer:
(b) There is no minimum limit

97. ________ is a feature of partnership form of business.
(a) Separate legal entity from the firm
(b) Limited scope for raising finance
(c) The liability of a partner is limited to his contribution to capital
(d) Registration of partnership is compulsory
Answer:
(b) Limited scope for raising finance

98. There can be partnership between:
(a) Natural persons
(b) Artificial persons
(c) Partnership firms
(d) Any combination of natural and artificial persons
Answer:
(c) Partnership firms

99. The registration of partnership firm is:
(a) Compulsory
(b) Mandatory
(c) Statutorily required
(d) Optional.
Answer:
(d) Optional.

100. Which of the following is the feature of partnership?
(a) Agreement
(b) Unlimited liability
(c) Mutual Agency
(d) All of the above
Answer:
(d) All of the above

101. Which of the following is not a feature of LLP?
(a) Every partner is agent of LLP
(b) Legal entity separate from its partners
(c) Registrar of firm is the administering authority
(d) No limit on maximum No. of partners
Answer:
(c) Registrar of firm is the administering authority

102. Which is not a feature of LLP?
(a) Separate legal entity.
(b) All LLP have existence for fixed period.
(c) Partnership in an LLP is required to turn into an agreement.
(d) In an LLP, partners are not liable for the act of other partners.
Answer:
(b) All LLP have existence for fixed period.

103. ________ is the hybrid form of business organisation which contains the features of both the corporate from as well as proprietary form of business organisation.
(a) Partnership
(b) Company
(c) Sole Proprietorship
(d) Limited Liability partnership.
Answer:
(d) Limited Liability partnership.

104. ________ oversees the governance of the LLP.
(a) Ministry of Corporate Affairs
(b) State Government
(c) SEBI
(d) FEMA
Answer:
(a) Ministry of Corporate Affairs

105. Which one of the following is treated as a separate legal entity Afferent from its members?
(a) Sole proprietorship
(b) Hindu undivided family
(c) Partnership
(d) Limited liability partnership.
Answer:
(d) Limited liability partnership.

106. Which of the following is incorrect as regards LLP?
(a) Incorporation is mandatory
(b) No personal liability of partners except in case of fraud.
(c) ROC is the administrating authority
(d) The minimum number of members required is seven.
Answer:
(d) The minimum number of members required is seven.

107. What is the liability of each partner under LLP?
(a) Limited
(b) Unlimited
(c) Partially Limited
(d) None of the above
Answer:
(a) Limited

108. Which amongst the following is a feature of LLP?
(a) Separate legal entity
(b) Unlimited liability
(c) No perpetual succession
(d) Not a body corporate
Answer:
(a) Separate legal entity

CA Foundation BCK Chapter 1 MCQ with Answers – Business and Commercial Knowledge: An Introduction

109. Which corporation has both characteristics i.e. of a partnership and of a separate legal entity?
(a) Limited Liability Partnership (LLP)
(b) Company
(c) Partnership
(d) Statutory Body.
Answer:
(a) Limited Liability Partnership (LLP)

110. Limited Liability Partnership is constituted under ________.
(a) The Companies Act, 2013
(b) Limited Liability Partnership Act, 2008
(c) Partnership Act, 1932
(d) None is applicable.
Answer:
(b) Limited Liability Partnership Act, 2008

111. In case of LLP.
(a) Every partner is agent of Firm only.
(b) Every partner is agent of other partners only.
(c) Every partner is agent of both firm and other partners.
(d) Every partner is not an agent at all
Answer:
(b) Every partner is agent of other partners only.

111A. What is the maximum No. of partners in case of LLP?
(a) 02
(b) 50
(c) 07
(d) No Limit.
Answer:
(a) 02

112. LLP has:
(a) Liability of Partners
(b) In case of fraud, liability of partners becomes unlimited
(c) It was incorporated under LLP Act, 2009
(d) All of the above.
Answer:
(d) All of the above.

113. When FERA is converted into a FEMA:
(a) 1934
(b) 1928
(c) 1999
(d) 1997
Answer:
(c) 1999

114. In order to make the system of diffused ownership of joint stock companies and their management work, ________ provides an elaborate system of corporate functioning.
(a) Companies Act, 2013
(b) Competition Act, 2002
(c) SEBI Act, 1992
(d) None of the above
Answer:
(a) Companies Act, 2013

115. The Companies Act, 2013 provides registration for ________.
(a) One person company
(b) Small company
(c) Defunct company
(d) All of the above
Answer:
(d) All of the above

116. The Indian Companies Act provides for the registration of:
(a) Private Limited and Public Company
(b) One Person Company and Small Company
(c) Defunct Company
(d) All of the above
Answer:
(d) All of the above

CA Foundation BCK Chapter 1 MCQ with Answers – Business and Commercial Knowledge: An Introduction

117. CSR stands for:
(a) Cash Security Ratio
(b) Cash Supply Ratio
(c) Corporate Social Responsibility
(d) Consumer Satisfaction Ratio
Answer:
(c) Corporate Social Responsibility

118. Gas Authority of India Limited is an example of:
(a) Limited liability partnership
(b) Private limited company
(c) Public enterprise
(d) None of the above.
Answer:
(c) Public enterprise

119. The affairs of a company is over-seen by:
(a) Shareholders
(b) Employees
(c) Board of Directors
(d) Dividend Holders.
Answer:
(c) Board of Directors

120. The objectives of the Company can be traced from which of the following document?
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
(d) All of the above
Answer:
(a) Memorandum of Association

121. The company solicits Capital Contribution by the issue of ________.
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
(d) All of the above
Answer:
(c) Prospectus

122. The Indian Corporate sector is numerically dominated by ________ Companies.
(a) Public
(b) Private
(c) Government
(d) Small
Answer:
(b) Private

123. ________ has been the most recently introduced from of business organisation in India vide “The Companies Act, 2013”.
(a) One Person Company
(b) Private Company
(c) Public Company
(d) Defunct Company
Answer:
(a) One Person Company

124. As per Companies Act, 2013, ________ company be created for a future project or to hold an asset or intellectual property and has no Significant accounting transactions.
(a) Small Company
(b) Dormant Company
(c) Gestation Company
(d) Deferred Company
Answer:
(b) Dormant Company

125. Which of the following document of the company focuses on its internal regulation?
(a) Memorandum of Association
(b) Article of Association
(c) Prospectus
(d) Agreement
Answer:
(b) Article of Association

126. The minimum number of members in case of Private and Public companies are & respectively.
(a) 02 and 05
(b) 05 and 07
(c) 02 and 07
(d) 02 and 10
Answer:
(c) 02 and 07

127. What is the minimum number of directors in case of public companies?
(a) 01
(b) 02
(c) 03
(d) 07
Answer:
(c) 03

Contingent Assets and Contingent Liabilities – CA Foundation Accounts Study Material

Contingent Assets and Contingent Liabilities – CA Foundation Accounts Study Material is designed strictly as per the latest syllabus and exam pattern.

Contingent Assets and Contingent Liabilities – CA Foundation Accounts Study Material

Question 1.
Contingent liability.
Answer:
Contingent liability:
(a) A contingent liability is a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise.

Possible obligation – An obligation is a possible obligation if, based on the evidence available, its existence at the balance sheet date is considered not probable or

(b) A contingent liability is a present obligation that arises from past events but is not recognised because:

  • it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
  • a reliable estimate of the amount of the obligation cannot be made.

It is said to be ‘probable’ if chances of its happening are more than not happening i.e. probability is more than half.

Contingent Assets and Contingent Liabilities – CA Foundation Accounts Study Material

Question 2.
Contingent Assets
Answer:
Contingent Assets:

  • A contingent asset is a possible asset that arises from past events the existence of which will be confirmed
  • only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise.
  • An example is a claim that an enterprise is pursuing through legal processes, where the outcome is uncertain.
  • An enterprise should not recognise a contingent asset.
  • However, when the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate.
  • A contingent asset is not disclosed in the financial statements.
  • It is usually disclosed in the report of the approving authority (Board of Directors in the case of a company, and, the corresponding approving authority in the case of any other enterprise), where an inflow of economic benefits is probable.

Question 3.
Provision and Contingent liability.
Answer:
Provision and Contingent liability:

Provision Contingent liability
Provision is a present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation. A Contingent liability is a possible obligation that may or may not crys-tallise depending on the occurrence or non-occurrence of one or more uncertain future events.
A provision meets the recognition criteria. A contingent liability fails to meet the same.
Provision is recognized when (a) an enterprise has a present obligation arising from past events; an outflow of resources embodying economic benefits is probable, and (b) a reliable estimate can be made of the amount of the obligation. Contingent liability includes present obligations that do not meet the recognition criteria because either it is not probable that settlement of those obligations will require outflow of economic benefits, or the amount cannot be reliably estimated.
If the management estimates that it is probable that the settlement of an obligation will result in outflow of economic benebts, it recognises a provision in the balance sheet. If the management estimates, that it is less likely that any economic benefit will outflow from the firm to settle the obligation, it discloses the obligation as a contingent liability.

Contingent Assets and Contingent Liabilities – CA Foundation Accounts Study Material

True or False

Question 1.
Present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation is termed as contingent liability.
Answer:
False: Present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation is termed as provision.

Question 2.
In the financial statement, contingent liability is recognized.
Answer:
False: In the financial statement, contingent liability is not recognized.

Question 3.
If an inflow of economic benefits is probable then a contingent asset is disclosed in the financial statements.
Answer:
False: If an inflow of economic benefits is probable then a contingent asset is disclosed in the report of the approving authority (Board of Directors in the case of a company, and the corresponding approving authority in the case of any other enterprise).

Question 4.
Contingent asset usually arises from unplanned or unexpected events that give rise to the possibility of an outflow of economic benefits to the business entity.
Answer:
False: Contingent asset usually arises from unplanned or unexpected events that give rise to the possibility of an inflow of economic benefits to the business entity.

Arunachal Pradesh Rural Bank Personal Loan | Reasons for Rejection, Documentation, Eligibility and Tax Advantages

Arunachal Pradesh Rural Bank Personal Loan: This Gramin Bank in India was created on November 30, 1983, and it is located in Arunachal Pradesh (formerly Arunachal Pradesh Rural Bank). Arunachal Pradesh has its headquarters in Naharlagun, with E Sector, Shiv Mandir Road, Naharlagun – 791 110. Currently, there are 56 branches spread around the state.

This financial institution offers its customers a wide range of financial services, including saving deposit products such as fixed deposit and recurring deposit as well as loans and personal loans, as well as net banking services such as RTGS, NEFT, and IMPS, as well as Atal Pension Yojana, Pradhan Mantri Jandhan Yojana, and Pradhan Mantri Suraksha Yojana. Bima Yojana and Pradhan Mantri Jeevan Jyoti are examples of government initiatives. Bima Yojana, among other things.

Want to compare Arunachal Pradesh Rural Bank Personal Loan with other bank personal loans for lowest interest rates and extra offerings? Just keep an eye on our Complete Guide on Personal Loan & choose the suitable bank to apply for the loan.

It was updated on November 14, 2021: Arunachal Pradesh Rural Bank Home Interest Rates On loans, Housing Loan at Arunachal Pradesh Rural Bank. Online application for a home loan is available. Find information about Arunachal Pradesh Rural Bank Home loan purposes, eligibility, margin, loan repayment, security, and documentation requirements for a home loan in the table below.

Arunachal Pradesh Rural Bank

Loans Offered by Arunachal Pradesh Rural Bank

Home Loans, Personal Loans, Education Loans, Business Loans, Car Loans, Two-Wheeler Loans, Gold Loans, Fixed Deposit Interest Rates, Recurring Deposit Interest Rates, Bank ATMs, and PPF Accounts are some of the financial products available.

For What Reason Should You Use an Arunachal Pradesh Rural Bank home loan?

An array of Home Loan Schemes is available from the Arunachal Pradesh Rural Bank, each of which is tailored to meet customers’ specific requirements.

  • The interest rate is competitive and reasonable.
  • Documentation is kept to a minimum.
  • It offers debtors a variety of flexible repayment options.
  • Home loans are approved and disbursed in a timely and straightforward manner.
  • Provides personalized assistance through a devoted team of highly skilled personnel.
  • The Arunachal Pradesh Rural Bank’s customer service department is available 24 hours a day, seven days a week, to provide timely support to customers.

The Arunachal Pradesh Rural Bank Home Loan is being used

  • To purchase or develop a new or existing house or apartment.
  • to make repairs, renovations, additions, or alterations to an existing structure
  • purchasing a ready-to-move-in apartment or house from a housing society, the State Government Housing Board, or a private developer
  • To purchase consumer items for a newly constructed home under the Total Home Loan Scheme.

Eligibility for a Home Loan from the Arunachal Pradesh Rural Bank

  • The candidate must be an Indian citizen or a properly-recognized NRI. He must, at the very least, be a person of Indian descent (PIO).
  • At the time of loan maturity, the applicant’s age must be between the ages of 18 and 70 at the time of application.
  • The candidate must be employed or self-employed with a consistent source of income to be considered.
  • The applicant’s income must be higher than the bare minimum requirement.

Documentation for a Rural Bank of Arunachal Pradesh Home Loan

  • Application form including a photograph that has been duly completed and signed
  • Identifying documents include Aadhar Card, Permanent Account Number (PAN), passport, driver’s license, voter identification card, and ID card issued by the government.
  • Address verification documents include Aadhar card, passport, driving license, voter identification card, electricity/telephone/post-paid mobile bill, and bank statement.
  • Passport, birth certificate, PAN card, driving license, voter identification card, employment identification card (only for PSU/Government employees), and school/college leaving certificate are acceptable forms of identification.
  • Form 16 is an abbreviation for
  • Salary slips from the previous six months for salaried employees.
  • Bank Statements for the last six months
  • Income Tax Returns (ITR) for the previous three years
  • Balance sheet and profit and loss account certified or audited by a CA within the last three years
  • A cheque for the processing fee
  • Copies of the property’s title documents, as well as the approved development plan
  • In the case of construction or renovation, a quotation from the architect is required.

Tax Advantages of Obtaining a Home Loan from Arunachal Pradesh Rural Bank

In connection with a home loan for a Resident Indian, there are two sorts of tax incentives to consider:

A tax rebate under Section 80C of the Income Tax Act is available on the entire amount of principal owed by a taxpayer in any financial year, up to a maximum of Rs. 1,50,000/- in any one financial year, subject to a limit of Rs. 1,50,000/- in any one financial year.

Following Section 24(1) of the Income Tax Act, a deduction for interest payment on a home loan can be claimed for repaying the loan. In the case of house loan interest payments made within a financial year, one is eligible for a tax deduction of up to Rs. 2 lakh each financial year for the amount of interest paid.

What Will Happen To Your Monthly EMI Payment If You Pay Off Your Arunachal Pradesh Rural Bank Home Loan In Full?

Prepayment of an Arunachal Pradesh Rural Bank House Loan is not subject to any prepayment penalties because the bank permits prepayment at no disadvantage in the event of floating rate home loans. When a borrower makes a prepayment on their house loan, the existing debt of the principal amount of the loan is reduced. In that instance, he has the following two alternatives:

  • He has the option of continuing with the current loan and shortening the loan term.
  • He has the chance of reducing the EMI while keeping the loan term the same.

Out of the two possibilities listed above, the first is more advantageous to the borrower because he will pay less interest to the bank. After all, the home loan will be paid off sooner.

How Can You Lower Your Monthly Home Loan EMI?

  • Negotiate a cheaper interest rate with your financial institution.
  • Make a formal request for a longer-term.
  • Make a down payment of the most significant amount possible.
  • Prepaying a portion of a debt
  • Switch to a different bank or financial institution that offers a lower interest rate.

Reasons for Rejection of Arunachal Pradesh Rural Bank Personal Loan

The most common reasons for rejection of a personal loan application are as follows:

A poor credit rating

A person’s credit score is seen as a measure of their ability to obtain credit. Having a good credit score influences your ability to repay a loan without defaulting on the agreement. For a lender to determine the risk of default, a credit score is required. Lenders turn down many personal loan applications because of a low credit score or no credit history. A person with a credit score of less than 750 may have difficulty getting a personal loan because of their poor credit history.

Increase in the amount of existing debt

If you have already taken out a large amount of debt and your loan-to-net-income ratio is greater than 40%, lenders may reject your application for a loan.

An increase in loan inquiries

When you apply for a loan, the lender will request a copy of your credit report from the credit bureaus, referred to as a credit inquiry. Such inquiries are regarded as “hard inquiries” by the credit bureau, and they are recorded in your credit report. Even if the service is provided free of charge, you should refrain from making an excessive number of inquiries. The number of inquiries on your credit report can harm your credit score.

Government Policies for Business Growth – CA Foundation BCK Notes Chapter 4

Browsing through CA Foundation BCK Notes Chapter 4 Government Policies for Business Growth helps students to revise the complete subject quickly.

Government Policies for Business Growth – BCK CA Foundation Notes Chapter 4

India faced foreign exchange crises in 1990. Government of India adopted the policy of Liberalization, Privatization and Globalization (LPG) to overcome the crisis. Government controls on business and industry have since then been dismantled gradually. The process further gained momentum in 2014. Since then rules and regulations have been simplified to increase the ease of doing business. Goods and Services Tax (GST) is the latest step in this process.

4.1 Meaning of Liberalization:
Liberalization of an economy means removing or relaxing Government controls and restrictions on economic activities. It is the process of liberating the economy from unnecessary controls and restrictions on trade, industry, banking system, etc. of the country. It involves abolition of those policies, rules and regulations which impede economic development.

4.2 Liberalization In India Trends And Issues:
The process of economic liberalization in India began primarily in 1991. The economic reforms are being implemented in two stages, namely –

  • First Generation Reforms
  • Second Generation Reforms.

The main trends of liberalization in India are as follows :

(i) Infrastructural Reforms:

  • Opening up of oil exploration and petroleum to foreign investment.
  • Power sector reforms.
  • Private sector participation in infrastructure development.
  • Decontrol of steel.
  • Telecom sector reforms.

(ii) Industrial Reforms:

  • Delicensing of industry.
  • Public sector undertakings allowed access to capital market.
  • Simplification of licensing procedures.

(iii) Fiscal Reforms:

  • Reduction in customs duty.
  • Five year tax holiday to enterprises in specified sectors.
  • Downsizing of some departments.
  • Reduction in personal and corporate taxes.
  • Simplified tax administration.
  • Introduction of Value Added Tax (VAT).

(iv) Capital and Money Market Reforms:

  • Clearing Corporation of India set up.
  • Introduction of Negotiated Dealing System.
  • Floating rate Government bonds re-introduced.
  • Trading in index options, and stock futures introduced.

(v) External Sector Reforms :

  • Removal of import restrictions.
  • Liberalised Exchange Rate Management System (LERMS)
  • Liberalisation of NRI remittances.
  • Encouraging foreign tie-ups.
  • Automatic approval of foreign investment and foreign technology agreements to specified extent.

(vi) Banking Sector Reforms :

  • Reduction in CRR and SLR.
  • Introduction of capital adequacy norms.
  • Setting up of Debt Recovery Tribunals.
  • Issue of guidelines for entry to new private banks.
  • Setting up of IRDA.

Government Policies for Business Growth – CA Foundation BCK Notes Chapter 4

4.3 Impact of liberalization of indian economy:
Liberalization has considerably expanded the scope of private sector in India. Private enterprises can now enter most of the industries. The competitive strength and industrial efficiency have improved. Business opportunities have increased and many Indian companies have established subsidiaries and joint ventures abroad. Liberalisation has also boosted foreign investment in India. Thus, liberalisation has led to radical changes in India’s business environment.

Positive and Negative Effects of Liberalization In India:

Positive Effects Negative Effects
1. Increase in foreign investment 1. Decline in small scale sector
2. Decline in external debt 2. Increase in unemployment
3. Rise in foreign exchange reserves 3. Decrease in GDP rate
4. Increase in tax receipts
5. Increase in production
6. Technological advancement

4.4 Meaning of Privatization:
Privatization means the transfer of ownership and/or management of an enterprise from the public sector to the private sector. It refers to the introduction of private control and ownership in public sector undertakings. According to the World Bank, “privatization is the transfer of State owned enterprises to the private sector by sale (full or partial) of going concerns or by sale of assets following their liquidation.” In the words of Barbara Lee and John Nellis “Privatization is the general process of involving the private sector in the ownership or operation of a State owned enterprise,”.

There are several forms or methods of privatization such as :

  • Denationalization of a public enterprise by its complete sale to the private sector. For example, BALCO. was sold to Sterlite Industries.
  • Divestiture, i.e., the sale of equity in full or part of a public sector undertaking to private sector.
  • Transfer of management of a public sector enterprise to private sector through a management contract.
  • Joint venture, i.e., joint ownership of an enterprise by Government and private sector.
  • Leasing, Le., transferring the use of assets of a public sector unit to private bidders for a specified period.
  • Franchising of public sector services to designated private sector units.

4.5 Trends and Issues – Privatization In India:
The process of privatization began in India mainly after the Industrial Policy of July 1991. Under this policy the number of industries reserved for the public sector was reduced from 17 to 2 – Railways and Atomic Energy. Shares of several public sector enterprises have been sold to mutual funds, workers and the public.

4.6 Impact of Privatization n Indian Economy:
The main reason for privatization in India has been the poor performance of public sector units which results in wastage of national resources and burden on common man.

Positive and Negative Effects of Privatization:

Positive Effects Negative Effects
1. Expansion of market 1. Cut-throat competition
2. Growth of independent money market 2. Rise in monopoly
3. Free flow of resources 3. Increase in inequalities
4. Advancements in technology 4. Takeover of domestic firms
5. Equilibrium in balance of payments 5. Removal of protection to domestic firms
6. Development of infrastructure 6. Affect on national sovereignty
7. Higher living standards
8. International cooperation

4.7 Meaning of Globalization:
Globalization means reduction or removal of Government restrictions on the movement of goods and services, capital, technology and talent across national borders. It is the process of increasing economic interdependence between countries and their economic integration in the form of world economy. Markets become international and global firms consider the whole world as one market.

Government Policies for Business Growth – CA Foundation BCK Notes Chapter 4

4.8 Globalization In India – Trends And Issues:
The process of globalization of Indian economy began largely in 1991 due to the unprecedented balance of payments crisis. Since then the pace of globalization has gained momentum :

  • Foreign Direct Investment upto 100 per cent is now permitted in specified sectors.
  • Foreign investors can invest in Indian companies through GDRs without any lock-in period.
  • Indian companies are allowed to get themselves listed on overseas stock exchanges.
  • Guidelines for Euro issues were liberalised.
  • The Foreign Exchange Management Act (FEMA) has replaced the Foreign Exchange Regulations Act (FERA).

4.9 Impact of Globalization of Indian Economy:
Globalization has made India a huge consumer market. There has been rapid increase in GDP and India’s exports. India has emerged as one of the fastest growing economies in the world. Our foreign exchange reserves are now huge and there has been rapid increase in foreign direct investment (FDI).

Positive and negative effects of globalization:

Positive Effects Negative Effects
1. Expansion of market 1. Cut-throat competition
2. Growth of independent money market 2. Rise in monopoly
3. Free flow of resources 3. Increase in inequalities
4. Advancements in technology 4. Takeover of domestic firms
5. Equilibrium in balance of payments 5. Removal of protection to domestic firms
6. Development of infrastructure 6. Affect on national sovereignty
7. Higher living standards
8. International cooperation

4.10 Foreign Direct Investment (FDI)

4.10.1 Meaning of FDI:
Foreign Direct Investment means investment in a foreign country where the investor claims con¬trol over the investment in terms of actual power of management and effective decision-making. Foreign direct investment typically occurs in the form of setting up a subsidiary, starting a joint venture or acquiring a stake in an existing firm in a foreign country According to the Committee on Compilation of FDI in India (Oct 2002). FDI is “the process whereby residents of one country (the home country) acquire ownership of assets for the purpose of controlling the production, distribution and other activities of a firm in another country (the host country). There are three main categories of FDI-equity capital, reinvested earnings, and lending of funds by a multinational to its affiliate.

When the investor makes only investment and does not retain control over the enterprise it is known as portfolio investment. The investor is interested only in return on his capital and does not want control over the use of the invested capital. Portfolio investment is for a short period and is influenced by short-term gains. On the other hand, foreign direct investment involves long-term commitment and cannot be easily liquidated. Therefore, long-term considerations like political stability, Government policy, industrial prospects, etc. influence it.

Direct investors have direct responsibility for the promotion and management of the enterprise. But portfolio investors have no direct responsibility for promotion and management of the enterprise. Portfolio investment takes place through foreign institutional investors (Fils) like mutual funds and through American Depository Receipts (ADRs) Global Depository Receipts (GDRs) and Foreign Currency Convertible Bonds (FCCBs). ADRs, GDRs and FCCBs are securities issued by Indian companies in the foreign markets to mobilise foreign capital.

4.10.2 Advantages of Foreign Direct Investment:
Foreign direct investment offers the following benefits:
(i) FDI increases the level of investment by supplementing domestic capital. The host country gets scarce capital resources from abroad. As a result, FDI contributes towards the development of infrastructure, industry and service sector in the host country. FDI helps to enhance business activity and raise the level of economic development.

(ii) FDI facilitates transfer of technology, machinery and equipment to the host country. Advanced foreign technology helps to reduce costs and improve quality of products and services. Local firms get the opportunity for technology upgradation.

(iii) FDI can create a managerial revolution in the host country through professional man-agement and employment of sophisticated techniques of organisation and management. Local firms get access to world class management and corporate practices.

(iv) FDI helps to boost employment and incomes in the host country through establish¬ment of new industries and development of ancillary industries. Higher production and income in turn increase the tax revenue of the Government. Material and human resources can be utilised optimally.

(v) FDI can help the host country to increase its exports and reduce imports These add to the foreign exchange resources of the country and improve its balance of payments position. In fact, the Government of India announced economic liberalisation in July, 1991 due to foreign exchange crisis.

(vi) FDI may help to increase competition and break domestic monopolies in the host country. It can overcome trade barriers like tariffs and quotas. FDI can make Indian industries globally competitive.

(vii) FDI offers benefits to the home country also. There is inflow of foreign currency in the form of dividend and interest. Exports of technology machinery and equipment help to enhance industrial activity and employment in the home country.

(viii) There is greater choice of products by consumers. Their standard of living is likely to improve due to better quality and wider choice.

Government Policies for Business Growth – CA Foundation BCK Notes Chapter 4

4.10.3 Disadvantages of Foreign Direct Investment:
Foreign direct investment has been criticised for the following reasons:
(i) FDI tends to flow in the areas of high profits rather than in the priority sectors of the host country.

(ii) Considerable funds are repatriated from the host country in the form of royalty, fees, dividend, interest, etc. on FDI. Such outflows put pressure on the host country’s balance of payments. The cost of FDI is high.

(iii) FDI takes place mainly through multinational corporations. These corporations are large in size and have a wide resource base. They pose a threat to the domestic firms in the host country.

(iv) The technology brought in by the foreign investors may not be appropriate to the market size, resource base, stage of economic development and consumption needs of the host country. Excessive reliance on foreign technology may have an adverse effect on local initiative.

(v) FDI poses a threat to the economic autonomy and political sovereignty of the host country. Some of the multinational corporations have destabilised governments in African countries. Excessive reliance on foreign technology may have an adverse effect on local initiative.

(vi) FDI can lead to adverse effects on domestic savings, and adverse terms of trade for the host country which offers special concessions to attract FDI, Some foreign investors pre-empt investment plans of domestic companies. They engage in unfair and unethical trade practices.

(vii) FDI may involve costs and risks for the home country. Employment opportunities may shrink and balance of payment position may suffer due to FDI.

Government Policies for Business Growth – CA Foundation BCK Notes Chapter 4

4.10.4 Determinants of Foreign Direct Investment:
The volume of FDI in a country depends on the following factors:
1. Natural Resources – Availability of natural resources in the host country is a major determinant of FDI. Most foreign investors seek an adequate, reliable and economical source of minerals and other materials. FDI tends to flow in countries which are rich in resources but lack capital, technical skills and infrastructure required for the exploitation of natural resources. Though their relative importance has declined, the availability of natural resources still continues to be an important determinant of FDI.

2. National Markets – The market size of a host country in absolute terms as well as in relation to the size and income of its population and market growth is another major determinant of FDI. Large markets can accommodate more firms and can help firms to achieve economies of large scale operations. Market access has been the main motive for investment by American companies in Europe and Asia.

3. Availability of Cheap Labour – The availability of low cost unskilled labour has been a major cause of FDI in countries like China and India, Low cost labour together with availability of cheap raw materials enable foreign investors to minimise costs of production and thereby increase profits.

4. Rate of Interest – Differences in the rate of interest prevailing in different countries stimulate foreign investment. Capital tends to move from a country with a low rate of interest to a country where it is higher. Foreign investment is also inspired by foreign exchange rates. Foreign capital is attracted to countries where the return on investment is higher.

5. Socio-Economic Conditions – Size of the population, infrastructural facilities and income level of a country influence direct foreign investment.

6. Political Situation: Political stability, legal framework, judicial system, relations with other countries and other political factors influence movements of capital from one country to another.

7. Government Policies – Policy towards foreign investment, foreign collaborations, foreign exchange control, remittances, and incentives (monetary, fiscal and others) offered to foreign investors exercise a significant influence on FDI in a country. For example, Export Processing Zones have been developed in India to attract FDI and to boost exports.

Audit and Auditors Under Companies Act, 2013 – Basic Provisions – CS Foundation Fundamentals of Auditing Notes

Go through this Audit and Auditors Under Companies Act, 2013 – Basic Provisions – CS Foundation Fundamentals of Accounting and Auditing Notes will help students in revising the entire subject quickly.

Audit and Auditors Under Companies Act, 2013 – Basic Provisions – CS Foundation Fundamentals of Auditing Notes

Auditor – an introduction:

  • A person who conducts an audit is known as an auditor.
  • He is charged with the responsibility of reporting whether the books show a true or fair view or not.
  • Auditor does not have any connection with the company.

Types of Auditor:
1. Internal auditor:
He acts as an employee of the company and is responsible for conducting periodical audits.

2. External Auditor:
The organizations are also required to get their accounts audited by an external agency. These are known as the external auditors.
External auditors are not the employees of the company and hence management cannot influence triem.

Appointment of Auditor:

  • Appointment, qualifications, disqualifications etc of the auditors are governed by the Companies Act 2013.
  • Auditors are appointed under Sec. 139 of The Companies Act, 2013.

Audit and Auditors Under Companies Act, 2013 - Basic Provisions - CS Foundation Fundamentals of Auditing Notes - 2

Appointment of first auditors [Sec. 139(6)]

Audit and Auditors Under Companies Act, 2013 - Basic Provisions - CS Foundation Fundamentals of Auditing Notes - 1

  • Such auditor shall hdld office till the conclusion of first AGM.
  • Such auditor can be removed by a company in general meeting.
  • Company is not required to send any information to the registrar for the appointment of the first auditor.

Appointment of Subsequent Auditor [Section 139(1)]:

  • Every subsequent appointment of auditor is done by shareholders in general meeting.
  • Every company shall, at its first AGM, appoint an individual or a firm, as an auditor, who shall hold office from the
  • conclusion of that meeting till the conclusion of every 6th AGM and thereafter till the conclusion of every 6th meeting.
  • Every company shall place the matter relating to such appointment for ratification by members at every AGM.
  • Before appointment the company should obtain a wr itten consent and a certificate from the auditor. Such certificate shall indicate whether the auditor satisfies the criteria provided in Section 141.
  • After appointment, the company shall inform the auditor of his appointment and also file a notice of such appointment with registrar within 15 days of concerned AGM.
  • If at any AGM, no auditor is appointed or reappointed, the existing auditor shall continue to be the auditor of the company.

Appointment to fill the casual vacancy [Sec 139(8)]:

  • Casual vacancy means vacancy created by the auditor ceasing to act after being validly appointed.
  • It can occur on account of following reasons: resignation, death, disqualification, etc.
  • Such auditor shall hold office till conclusion of next A.G.M
  • Any casual vacancy other than government company, shall be filled by the BoDs within 30 days.
  • If Vacancy is result of registration of an auditor it shall be also approved by the company at a general meeting convened with in months of the recommendation.

Audit and Auditors Under Companies Act, 2013 - Basic Provisions - CS Foundation Fundamentals of Auditing Notes - 3

Note this:
A casual vacancy can be created only when the appointment was effective eg- If Mr. X refused to accept appointment it will not be said to be a casual vacancy.

  • Casual vacancy shall be filled after taking into account the recommendation of audit committee.

Appointment of Auditors of Government Companies :
(1) First Auditor:

  • The Comptroller and Auditor-General ol India shall appoint the first auditor of the Government Company within 60 days from the date of incorporation.
  • In case of failure to do so the BoD(s) of the company shall appoint such auditors within the next 30 days.
  • Or in case of failure of BoD(s) members of the company shall appoint such auditor within the 60 days at an EGM, such auditor shall loss office till conclusion of First AGM.

(2) Subsequent Auditor:
In respect of financial year the Comptroller and Auditor-General of India shall appoint an auditor within a period of one hundred and eighty days (180 days) from the commencement of the financial year.

(3) Casual Auditor:

  • Any casual vacancy in the office of an auditor of a government company shall be filled by the Comptroller and Auditor-General of India within 30 days.
  • Or in failure of Comptroller and Auditor General of India by the BoD(s) within next 30 days.

Mandatory Rotation of Auditors:
The Companies Act, 2013 has introduced the system of rotation of auditors which is applicable to:

  • All listed companies.
  • All unlisted companies, having paid up share capital of ₹ 10 crore or more;
  • All private companies having paid up share capital of ₹ 20 crore or more;
  • All companies having public borrowing from financial institutions, banks or public deposits of ₹ 50 crore or more.
  • The concept of rotation of auditors shall not apply to one person companies.
  • All the companies mentioned above shall not appoint or re-appoint an individual as an auditor of the company for more than 1 term of 5 consecutive years.
  • All the companies mentioned above shall not appoint or re-appoint an audit firm as an auditor of the company for more than 2 terms of 5 consecutive years.

Remuneration of the Auditors:

  • The remuneration of the auditor of a company shall be fixed in its General Meeting.
  • The Board may fix remuneration of the first auditor appointed by it. The remuneration shall be in addition to the fee payable to an auditor, includes the expenses, if any, incurred by the auditor in connection with the audit of the company and any facility extended to him.

Qualification and Disqualification of Auditors:

Qualification [Sec 141(1) & 141(2)]:

  • Only a CA (individual) or a firm where majority of partners practicing in India are CA can be appointed as auditor.
  • Where a firm including an LLP is appointed as an auditor, only the partners who are CA shall be authorised to act and sign on behalf of the firm.

Disqualification [Sec. 141(3)]:

An auditor should not be a _________

  • a body corporate except LLP
  • an officer or employee of the company
  • any partner or employee of office or employee of a company
  • a person who himself or his relative or partner

(i) is holding any security or interest in the company, or any company which is its holding, subsidiary, associate;
Provided that Relative may hold security or interest not exceeding ₹ 1 Lac in above mentioned companies.

(ii) is indebted to the company or its subsidiary, holding or associate company or a subsidiary of such holding company, in excess of ₹ 5 Lacs.

(iii) has given a guarantee or provided any security in connection with the indebted-ness of any third person to the company or its subsidiary, holding or associate company or a subsidiary of such holding company, in excess of ₹ 1 Lac.

person or a firm who, whether directly or indirectly has the business relationship with the company or its subsidiary, holding or associate company.

  • a person whose relative is a director or is in the employ-ment of the company as a director or key managerial personnel (kmp).
  • a person who is a full time employment else where.
  • a person who is the auditor of more than 20 companies.
  • a person who has been convicted by the court of an offence involving fraud and a period of 10 years has not elapsed from the date of such conviction.
  • a person whose subsidiary or associate company or any other form of company, is engaged as on the date of appointment in consulting and specialised services as provided in Section 144.

Points to be noted:

  • A firm can be appointed as an auditor if all the partners of the firm are practicing Chartered Accountant.
  • Even if any one of the partners is disqualified under 141 (3), the whole firm will be disqualified .
  • If a person is insolvent or of an unsound mind, he ceases to be a member of CA and automatically be disqualified for appointment as an auditor.
  • If any relative of CA has substantial interest in the company, he should disclose his interest.
  • The department of company affairs has clarified that a statutory auditor cannot act as internal auditor of the company.

Rights of the Auditor:

  • Right to access the books of account
  • Right to obtain information and explanation from officers.
  • Right to receive notice of and attend general meetings
  • Right to visit branch offices and access books
  • Right to receive notice for removal
  • Right to make a representation on removal
  • Right to receive remuneration
  • Right to sign the audit report.

Duties of the Auditor [Section 143(1)]:

  • Proper examination of books of account
  • Report to the members
  • Make adequate disclosure in audit report

To inquire into the following matters:
(a) whether loans and advances made by the company are properly secured and terms and conditions are prejudicial to the interest of the co. and its members.
(b) whether transactions of the company represented merely by book entries are prejudicial to the interest of the company .
(c) Where the company is not an investment or banking company, whether the securities have been sold at a price less than the purchase price.
(d) whether loans and advances made by the company have been shown as deposits.
(e) whether personal expenses have been charged to revenue.
(f) whether cash has actually been received in case of shares allotted for cash.

Auditor not to render certain services:

  1. Accounting and book keeping services.
  2. Internal Audit
  3. Design and implementation of any financial information system
  4. Actuarial Services
  5. Investment advisory services
  6. Investment banking services
  7. Rendering of outsourced financial services
  8. Management services and
  9. Any other kind of services as may be prescribed.

Auditor’s Report [Section 143(2)]:

  • Auditor shall make a report to the members of the company on the accounts examined by him and on every financial statement which is required to be laid before the general meeting of the company.

The auditors report besides other things shall also state other details as following –

  1. Whether he has obtained all the necessary information and explanation for the purpose of his audit.
  2. Whether proper books of accounts as required by the law have been kept by the company and proper returns have been received from branches not visited by him.
  3. Whether branch audit report prepared by person other than company’s auditor has been sent to him.
  4. Whether company’s financial statement are in agreement with the books of accounts and returns.
  5. Whether financial statements comply with the accounting standard.
  6. Observation or comments of the auditors on the financial transactions or matter which have any adverse effect on the functioning of the company.
  7. Whether any director is disqualified from being appointed as a director under section 164 (2).
  8.  any qualification, reservation or adverse remark relating to the maintenance of accounts and other connected matters.
  9. Whether company has adequate internal financial control system.
  10. The auditor’s report shall include their views and comments on:
    • Whether the company has disclosed the impact of pending litigations on its financial position in its financial statement.
    • Whether the company has made provision for material foreseeable losses if any, on long term contracts including derivative contracts.
    • Whether there has been any delay in transferring amounts to the Investor Education and Protection Fund by the company.

Importance of Audit Report:

  1. Audit Report helps an auditor to express his opinion on financial statements
  2. It shows the scope of work done and the responsibility assumed by the auditor while conducting audit.
  3. The conclusions drawn by the auditor are communicated to the management through audit report
  4. It helps the shareholders of the company to know the state of affairs of the company

Elements (Essentials) of Audit Report:

  1. Title
  2. Addressee
  3. Identification
  4. Reference to Auditing Standards
  5. Opinion
  6. Date of report
  7. Auditor’s Address
  8. Auditor’s signature.
  9. Description of the responsibility of management.
  10. Place of signature

Specimen Of Audit Report:
Auditor’s Report – Title
To the shareholders of _________ . (company name) – Addressing
1. We have audited the B.S of _________ – Opening paragraph (Identification)
2. We conducted our audit in accordance with the auditing standards _________ – Scope paragraph (Ref. to auditing std.)
3. In accordance with Section 143 (2) of Companies Act, 2013, we report as under _________ – Opinion paragraph
(i) _________
(ii) _________
(iii) _________
(iv) _________
(v) _________
(vi) _________
(vii) _________
(viii) _________
(ix) _________

Sd/ …………..
(Firm Name)
(Name of Partner)

Place:
Date:

Auditor’s opinion:

  • it is the duty of the auditor to express his opinion on the books and accounts examined by him.
  • Auditor’s opinion can be of the foilowing types:

(a) Unqualified opinion
(b) Adverse opinion
(c) Qualified opinion
(d) Disclaimer of opinion

(a) Unqualified opinion:

  • It is given when auditor has no reservations or objections regarding the information under audit.
  • This shows that according to the audit the books and account show a true and fair view.
  • It is also known as the clean report.

(b) Adverse / Negative opinion:

  • an auditor gives an adverse or negative opinion when he does not agree with the books and accounts examined by him.
  • It is given when the reservation on matters are so significant that they destroy the true and fair view of books and accounts (financial statements)

(c) Qualified opinion:

  • This is given when the auditor has some reservations about the financial statements.
  • These reservations are not so significant, but still relevant
  • This opinion means that “subject” to certain matters, the auditor agrees with the financial statements that they are true and fairly viewed and by that he gives qualified opinion.
  • It is a situation when the reservations are not so significant so as to give an adverse opinion and not so insignificant so as to give an unqualified opinion.

(d) Disclaimer of opinion:

  • When an auditor is not able to collect appropriate audit evidence, then he must give a disclaimer of opinion.
  • Disclaimer of opinion shows that adequate books/accounts and other information were not being provided to the auditor so that he can form an audit opinion.
  • The auditor should give a reason for giving a disclaimer of opinion. So that the readers can assess their significant and effect.

Branch Audit:
If any company has a branch office, the accounts of that office shall be audited either by the auditor of the company or by any other person qualified for appointment as an auditor of the company or appointed as auditor under the Act.

Secretarial Audit:
Secretarial audit is an audit to check compliance ot various legislation including the Companies Act and other corporate and economic laws applicable to the company.
As per Companies Act, 2013 and the ComparHes (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the following companies are required to obtain Seci-etarial Audit Report:

  • Every hsted company
  • Every public company having a paid-up capital of 54) crore or more.
    or
  • Every public company having a turnover of 250 crore or more.

Eligibility:
Company Secretary in practice.
Secretarial Auditor needs to examine and report on the compliance of the following five specific laws:
1. The Companies Act, 2013 and the rules macfe under there,
2. The Securities Contracts (Regulation) Act, 1956 (SCRA),
The Depositories Act. 1996 and the regulations and Bye-laws framed thereunder. Foreign Exchange Manageaient Act, 1999 and the rules and regulations made under there. The Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (SEBI Act).

Modified Report:
An auditor’s report Is considered to be modified when it includes:
(a) Matters that do not affect the auditors opinion-emphasis of matter
(b) Matters that do affect the auditor’s opinion
qualified opinion
disclaim of opinion
adverse opinion

Audit and Auditors Under Companies Act, 2013-Basic Provisions MCQ Questions

1. External auditor is an employee of the company. State true or false.
(a) True
(b) False
(c) Partly true
(d) None.
Answer:
(b) False

2. Appointment of auditors is made under section _________ of the Companies Act 2013.
(a) 139(1)
(b) 139(2)
(c) 139(3)
(d) None
Answer:
(a) 139(1)

3. The first auditor of the company shall be appointed within _________ of the Registration of the company.
(a) 6 months
(b) 1 month
(c) 7 days
(d) None
Answer:
(b) 1 month

4. Which of the following is NOT an essential of an audit report?
(a) Title
(b) Date of report
(c) Summary
(d) Opinion.
Answer:
(c) Summary

5. Mr. A was appointed as the auditor of the company. Two months after his appointment, he resigned from the post on some personal grounds. Board of Directors filled the vacancy by appointing Mr. Q. Is the appointment of Mr. Q valid?
(a) Yes
(b) No
(c) Can’t say
(d) None
Answer:
(b) No

6. An auditor appointed to fill casual vacancy shall hold office till:
(a) The year end
(b) Conclusion of next AGM
(c) The desire of Board of Directors
(d) Any of these
Answer:
(b) Conclusion of next AGM

7. When the auditor has a few reservations which he wants to bring to the notice of the stakeholders, then he issues:
(a) Qualified opinion
(b) Adverse opinion
(c) Disclaimer of opinion
(d) Unqualified opinion.
Answer:
(a) Qualified opinion

8. Qualifications and disqualification of an auditor are explained under:
(a) Sec 141
(b) Sec 142
(c) Sec 143
(d) Sec 144
Answer:
(a) Sec 141

9. An auditor not having a certificate of practice can also become an auditor of the Company. This statement is:
(a) True
(b) False
(c) Partly true
(d) None
Answer:
(b) False

10. ABC & Associates is a firm of Chartered Accountants wherein B and C hold a part time certificate of practice. Can the firm ABC & Associates be appointed as an auditor of the company?
(a) Yes, since atleast one partner holds full time COP.
(b) Yes, the firm is comprised of practicing chartered accountants either full time or part time.
(c) No, since all partners should hold a full time COP
(d) None of these.
Answer:
(b) Yes, the firm is comprised of practicing chartered accountants either full time or part time.

11. Which of these is not one of the rights of the auditor?
(a) Right to receive remuneration
(b) Right to access books of account
(c) Right to remove a director
(d) Right of lien
Answer:
(c) Right to remove a director

12. Which of these is not an element of Audit Report?
(a) Title
(b)Addressee
(c) Name of auditor
(d) None of these.
Answer:
(c) Name of auditor

13. Where the auditor is unable to give his opinion due to insufficiency of evidence, then he gives:
(a) Adverse opinion
(b) Disclaimer of opinion
(c) Qualified opinion
(d) Unqualified opinion.
Answer:
(b) Disclaimer of opinion

14. When an auditor has no reservations regarding the information then he gives a
(a) Qualified opinion
(b) Unqualified opinion
(c) Disclaimer of opinion
(d) None of these
Answer:
(b) Unqualified opinion

15. If an auditor is not able to draw appropriate audit conclusions due to lack of audit evidence and available information, he shall give:
(a) Qualified opinion
(b) Unqualified opinion
(c) Disclaimer of opinion
(d) None of these
Answer:
(c) Disclaimer of opinion

16. …………….. is also known as the clean report:
(a) Qualified Report
(b) Unqualified Report
(c) Disclaimer
(d) None
Answer:
(b) Unqualified Report

17. When reservations are so significant that they destroy the true and fair view of books, the auditor gives-
(a) Qualified Report
(b) Adverse Report
(c) Disclaimer
(d) None
Answer:
(b) Adverse Report

18. A persons who conduct an audit is:
(a) Auditor
(b) First auditor
(c) Subsequent auditor
(d) All of the above
Answer:
(a) Auditor

19. Appointment of first auditor is made under which section:
(a) Section 139(1)
(b) Section 139(2)
(c) Section 139(3)
(d) Section 139(6)
Answer:
(d) Section 139(6)

20. When an auditor is not able to collect appropriate audit evidence, then he must give which opinion:
(a) Adverse opinion
(b) Qualified opinion
(c) Unqualified opinion
(d) Disclaimer
Answer:
(d) Disclaimer

21. An auditor may function as:
(a) Employee
(b) Independent Professional
(c) Both
(d) None
Answer:
(c) Both

22. The first auditor appointed shall hold office till:
(a) End of company
(b) End of 2 years
(c) End of 1st year
(d) End of first A.G.M.
Answer:
(d) End of first A.G.M.3

23. _________ is not a right/power of auditor:
(a) To receive remuneration
(b) To sign the audit report
(c) To check position as stated is correct
(d) Both (a) & (b)
Answer:
(c) To check position as stated is correct

24. Sec. _________ contains the Auditor’s opinion that financial statements comply with Accounting standards
(a) 143(1)
(b) 143(2)
(c) 143(3)
(d) 143 (2A)
Answer:
(b) 143(2)

25. When the auditor does not agree with the true and fair view of financial position, he expresses which opinion
(a) Unqualified
(b) Qualified
(c) Adverse
(d) None
Answer:
(c) Adverse

26. Vacancy caused by resignation of auditor shall only be filled by
(a) Company in A.G.M.
(b) Central Government
(c) Board of Director
(d) Chartered Accountant
Answer:
(c) Board of Director

27. Sec. 141 provides that only a _________ in practice can act as an auditor of a Limited Company.
(a) Company Secretary
(b) Director
(c) Chartered Accountant
(d) Both (a) & (c)
Answer:
(c) Chartered Accountant

28. Auditors report is laid down before company is
(a) General Meeting
(b) Annual General Meeting
(c) Emergency General Meeting
(d) Any of above
Answer:
(a) General Meeting

29. Even if any one partner is disqualified, the whole firm will
(a) Remain qualified
(b) As per situation
(c) Disqualified
(d) None
Answer:
(c) Disqualified

30. If any relative of CA has substantial interest in the company, he should _________
(a) Not disclose
(b) Disclose
(c) His wish
(d) As per company
Answer:
(b) Disclose

31. The first auditor of the company is appointed by:
(a) Board of directors
(b) Shareholders
(c) Central Government
(d) None of the above.
Answer:
(a) Board of directors

32. The first auditor should be appointed within:
(a) 2 months of incorporation
(b) 1 month from the date of incorporation
(c) 3 months from the date of commencement of business
(d) Within 7 days of incorporation.
Answer:
(b) 1 month from the date of incorporation

33. Where the auditor does not have any reservation, objection regarding the information under audit, then he gives:
(a) Unqualified opinion
(b) Qualified opinion
(c) Disclaimer of opinion
(d) Negative opinion.
Answer:
(a) Unqualified opinion

34. If a partner of an audit firm is disqualified, then:
(a) The firm will be disqualified
(b) The firm will not be disqualified
(c) Both (a) & (b)
(d) None of the above.
Answer:
(a) The firm will be disqualified

35. Which of the following is NOT a right of an auditor?
(a) Right to access books of accounts
(b) Right to receive dividend
(c) Right to visit the branch office
(d) None of the above.
Answer:
(b) Right to receive dividend

36. The duties of an auditor are contained under which section of the Companies Act, 2013?
(a) Section 143(1)
(b) Section 143(2)
(c) Section 143(3)
(d) Section 143(4).
Answer:
(a) Section 143(1)

37. The observations of the auditor which have an adverse effect on the functioning are written in:
(a) Thick type
(b) Italics
(c) Colored text
(d) Either (a) or (b)
Answer:
(d) Either (a) or (b)

38. Who appoints the subsequent auditors of a company:
(a) Shareholders
(b) Central Government
(c) Board of directors
(d) Registrar of companies
Answer:
(a) Shareholders
Section 139(1) of The Companies Act, 2013 contains provisions
regarding the appointment of the auditor. As per this section, the auditor of a company can be appointed by the shareholders.

39. Board meeting is the meeting of:
(a) Shareholders
(b) Government
(c) Creditors and debtors
(d) Directors of the company
Answer:
(d) Directors of the company
Board Meeting refers to the meeting of Board of Directors of the Company.

40. A statutory auditor reports to:
(a) Debenture holders
(b) Central Government
(c) Board of directors
(d) Share holders
Answer:
(d) Share holders
Under Section 143(2) of the companies Act, 2013, it is the duty of the auditor to make a report to the members of the company on the accounts examined by him. Audit report can be regarded as a formal communication by the auditor to the shareholders throwing light on the state of affairs of the company. Audit Report is addressed to the members of the company and is considered at the AGM.

41. When an auditor does not have any reservation/objection regarding the information under audit, which type of audit report is issued to him?
(a) Qualified report
(b) Clean report
(c) Adverse audit report
(d) Disclaimer of opinion
Answer:
(b) Clean report
Where auditor does not have any reservation, objection regarding the information under audit, then he issues an unqualified opinion. It is also known as Clean Report.

42. The first auditor of a company is appointed:
(a) Within one month of completion of capital subscription of the company
(b) Within one month of promotion of the company
(c) Within one month of the commencement of the business of the company
(d) Within one month of incorporation of the company.
Answer:
(d) Within one month of incorporation of the company.
Section 139(6) provides that the first auditor or auditors are to be
appointed by the Board of Directors within one month of the date of the registration of the company.
In case the Board of Directors fails to appoint the first auditors within one month of its incorporation the company in general meeting may appoint the first auditors.

43. The duties of a company auditor are defined under/in:
(a) Memorandum of association
(b) Articles of association
(c) Companies Act, 2013
(d) Agreement between company and the auditor
Answer:
(d) Agreement between company and the auditor
Duties of an auditor are many and varied. Such duties of an auditor are determined by an agreement between the company and the auditor.
Auditor must examine the original books of account kept by the company to discover any inaccuracies or omission therein, to examine company’s balance sheet and profit and loss account and report on the original books of account and the annual accounts to the members. However, the company’s management cannot in any manner what soever limit the scope of audit.

44. Under which meeting is an auditor usually appointed₹
(a) Board meeting
(b) Shareholders meeting or general meeting
(c) Debenture holders meeting
(d) Class meeting
Answer:
(b) Shareholders meeting or general meeting
Section 139(1) of the Companies Act, 2013 contains provisions regarding the appointment of the auditor. As per this section, the auditor of any company can be appointed by the shareholders in general meeting who shall hold office till conclusion of its 6th AGM.

45. Casual vacancy arising due to resignation of an auditor may be filled by:
(a) Board of director
(b) Shareholder’s in general meeting
(c) Audit committee
(d) Debenture holders
Answer:
(a) Board of director
If a casually vacancy arises due to resignation of auditor then new auditor will be appointed by Board of Directors but such appointment shall be approved by the shareholders in their EGM.

46. Due to lack of audit evidences, auditor issues a:
(a) Qualified opinion
(b) Unqualified opinion
(c) Adverse opinion
(d) Disclaimer of opinion
Answer:
(d) Disclaimer of opinion
Where there is a situation where auditor is not in a position to collect sufficient appropriate audit evidence which enables him to draw his conclusion then it is proper for the auditor to disclaim an opinion due to lack of sufficient appropriate audit evidence.

47. In which section of The Companies Act, 2013, the provisions relating to an Auditor’s Report are covered₹
(a) Section 143 (1)
(b) Section 143 (2)
(c) Section 143 (3)
(d) Section 143 (4).
Answer:
(b) Section 143 (2)
Under Section 143(2) of the Companies Act, 2013, it is the duty of the auditor to make a report to the members of the company on the accounts examined by him.

48. The board of directors shall appoint first auditor of a company:
(a) within one month of completion of capital subscription by the company
(b) within one month of the promotion of the company
(c) Within one month of the commencement of the business of the company
(d) Within one month of incorporation of the company.
Answer:
(d) Within one month of incorporation of the company.
Section 139(6) provides that the first auditors are to be appointed by the Board of directors within one month of the date of the registration of the company. In case the BOD fails to appoint the first auditors within one month of its incorporation the company in general meeting may appoint the first auditors.

49. The client changed method of depreciation from straight line to written down value method. This has been disclosed as a note to the financial statements. It has an immaterial effect on the current financial statements. It is expected, however, that the change will have a significant effect on future periods. Which of the following option should the auditor express₹
(a) Unqualified opinion
(b) Qualified opinion
(c) Disclaimer of opinion
(d) Adverse opinion.
Answer:
(b) In a situation where neither the unqualified, nor adverse opinion is appropriate, the auditor gives the qualified opinion. This is a situation where the auditor has some reservation about the financial statements which though significant but not that significant so as to warrant adverse opinion and auditor agrees to a large extent with the true and fair view of the financial statement that he gives a qualified opinion.

50. ‘Disclaimer of Opinion’ means:
(a) The auditor gives clean report
(b) The auditor gives qualified report
(c) The auditor gives adverse report
(d) The auditor is unable to expresses his opinion.
Answer:
(d) The auditor is unable to expresses his opinion.
Disclaimer of Opinion is a situation when auditor is not in a position to give his opinion.

51. Statutory audit report of a company is addressed to:
(a) Board of Directors
(b) Ministry of Corporate Affairs
(c) Employees of the company
(d) Members of the company.
Answer:
(d) Members of the company.
The audit report is the end product of every audit. It is the medium
through which an auditor expresses his opinion on the financial statements. It is a formal communication by the auditor to the shareholders throwing light on the state of affairs of the company. It is addressed to the members of the company and is considered at the AGM.

52. Which of the following are the rights of a Statutory Auditor?
X. To receive remuneration
Y. To attend Board of Director’s meeting
Z. To attend the general meeting
W. To visit the branch office
correct option is –
(a) XandY
(b) X, Y and Z
(c) X, ZandW
(d) X, Y, Z and W.
Answer:
(c) X, ZandW
A statutory auditor has the following rights

  1. access to books, accounts and vouchers.
  2. obtain information and explanation
  3. sign the audit report
  4. receive notice of and attend AGM and GM.
  5. visit branch office and access the books.
  6. receive remuneration.

Thus, all options except y i.e. right to attend BOD’s meeting is not a right of statutory auditor. Thus, the answer is X, Z and W.

53. The form and basic contents of statutory audit report are –
(a) Provided in the Companies Act, 2013
(b) Provided in the Chartered Accountants Act, 1949
(c) Provided in the Code of Civil Procedure, 1908
(d) Not provided anywhere.
Answer:
(a) Provided in the Companies Act, 2013
Under Section 143(1) of the Companies Act, 2013, it is the duty of the auditor to make a report to the members of the company on the accounts examined by him.
Section 143(2) states that auditor’s report must state the negative points noticed by him along with the reasons for the same.
Under the relevant section, the CG is empowered to issue order requiring the auditor to include in his report a statement on such matters as may be specified.
Thus, form and basic contents of statutory audit report are provided in the Companies Act, 2013.

54. Duties of auditor are given in –
(a) 144
(b) 146
(c) 143
(d) 139
Answer:
(c) 143
Section 143 of Companies Act talks about the duties of auditor.

53. The first auditor holds the office till –
(a) Auditor dies
(b) Auditor retires
(c) Holding of 1st AGM
(d) Conclusion of 1st AGM.
Answer:
(d) Conclusion of 1st AGM.
The first auditor is appointed by the Board who holds the office till the conclusion of 1st AGM

54. Which of the following is not mentioned in Audit Report?
(a) Whether HR practices are going right or wrong.
(b) Whether any Director is disqualified from appointment.
(c) Whether Balance Sheet gives true fair view.
(d) Whether he has obtained all the information and explanation required by him for the purpose of audit.
Answer:
(a) Whether HR practices are going right or wrong.
In the audit report, the auditor shall expressly state:
(a) Whether the accounts give the information as required by law.
(b) Whether the financial statements show a true and fair view.
(c) Whether proper books of account as required by law has been kept by the company.
(d) Whether financial statements comply with accounting standards.
(e) Whether any director has been disqualified from being acting as the director of the company. Thus option (a), whether HR practices are going on right or wrong are not mentioned in Audit Report.

55. When does casual vacancy arises in.the office of the auditor?
(a) Arises due to resignation
(b) Arises due to death
(c) Arises due to disqualification
(d) All of the above.
Answer:
(d) All of the above.
Casual vacancy means vacancy created by auditor ceasing to act
after being validly appointed. It can occur on account of following reasons – resignation, death, disqualification, etc. Hence, all of the above are reasons for casual vacancy.

56. A person who is indebted to the company for which amount cannot be appointed to set as an auditor of a company –
(a) As may be prescribed
(b) more than 1 Lac
(c) more than 3 Lac
(d) more than 5 Lac.
Answer:
(d) more than 5 Lac.
A person who is indebted to the company in exempt of 5 lac cannot be appointed to act as an auditor.

57. XYZ, a C.A. firm is an auditor of Lawan Pvt Ltd. X included Y as a partner in the firm. Then who will be the auditor?
(a) X
(b) Y
(c) Both X and Y
(d) None of the above.
Answer:
(c) Both X and Y
A firm whereof all the partners are practicing Chartered Accountants can be appointed by its firm name as auditor in which case any partner may act in the name of the firm. As in the given question XYZ, a C.A. firm is an auditor of Laxman Pvt. Ltd. X included Y as a partner in the firm. So, Both X & Y will be the auditors.

58. If an individual partner of a C.A. firm is disqualified to be an auditor, then which of the following is correct?
(a) Whole firm will be disqualified
(b) Whole firm will not be disqualified
(c) Only that C.A. will be disqualified
(d) None of the above.
Answer:
(a) Whole firm will be disqualified
If an individual partner of a C.A. firm is disqualified to be an auditor, then whole firm will be disqualified under Section 141.

59. Appointment of an auditor is done under which section of Companies Act, 2013?
(a) 139
(b) 142
(c) 137
(d) 140.
Answer:
(a) 139
Section 139 of the Companies Act 2013 contains provisions regarding the appointment of the auditor.

60. Under which Section of Companies Act, 2013, qualifications and disqualifications of an auditor are mentioned?
(a) 140
(b) 143
(c) 141
(d) 145.
Answer:
(c) 141
The qualifications and disqualifications of the auditor are mentioned under Section 141 of the Companies Act, 2013.’Section 141, of Companies Act, 2013, defines qualifications and disqualifications of the auditor are mentioned.

61. A clean audit report is:
(a) A qualified audit report
(b) A modified audit report
(c) An unqualified audit report
(d) A audit report that has an adverse opinion.
Answer:
(c) An unqualified audit report
A clean audit report is an unqualified audit report. This opinion signifies that the auditor accepts the accounting treatment given to the various transactions and the profit and loss account shows the true and fair view of the transaction entered by the organisation during the period and the balance sheet shows the true and fair view of the state of affairs of the organisation at that point of time.

62. The retiring auditor can:
(i) Make written representations
(ii) Get his representation circulated
(iii) Be given an opportunity of being heard. The options are:
(a) I, II and III
(b) I and III
(c) I and II
(d) II and III
Answer:
(a) I, II and III
The retiring auditor can:
make written representations.
get his representation circulated.
be given an opportunity of being heard.
So, the option (a) is correct answer.

63. As per Companies Act, 2013, which of the following sections deal with qualifications of the audit?
(a) Section 226(3) and 226 (4)
(b) Section 141
(c) Section 224(1) and 224 (2)
(d) Section 224 (3) and 224.
Answer:
(b) Section 141
Section 141(1) & 141(2) deals with the qualifications of an auditor i.e.
Only a CA (individual) or a firm where majority of partners practicing in India are CA can be appointed as auditor.
Where a firm including an LLP is appointed as an auditor, only the partners who are CA shall be authorized to act and sign on behalf of the firm.

64. Under which Section of Companies Act, 2013, the auditor has a duty to sign audit report:
(a) Section 227 (4A)
(b) Section 227 (3)
(c) Section 227 (2)
(d) Section 145
Answer:
(d) Section 145
Sec. 145 of the Companies Act, 2013, the auditor has a duty to sign audit report and other documents. Auditor shall be punishable with fine which shall not be less than ₹ 25,000 but which may extend to ₹ 5,00,000.

65. The auditor has a right to:
(a) To direct the officers of the company
(b) Retain the books of accounts
(c) Attend all the board meetings
(d) Access the books of Accounts and vouchers of the company.
Answer:
(d) Access the books of Accounts and vouchers of the company.
Rights of the auditors under Companies Act are as follows:
(i) Right to access to books, accounts and vouchers
(ii) Right to obtain information and explanation
(iii) Right to sign audit report
(iv) Right to receive notice and attend General Meeting
(v) Right to receive remuneration.

66. Which of the following may be appointed as the first auditor of the company₹ (i) A Chartered Accountant in practice (ii) A firm of Chartered Accountants in practice (iii) A limited liability partnership of Chartered Accountants in practice. The options are:
(a) I, II and III
(b) I and III
(c) II and III
(d) I and II.
Answer:
(a) I, II and III
Chartered Accountant in practice is appointed as first auditor of the company or a firm of Chartered Accountants in practice.

67. In which section of Companies Act, 2013, the provisions relating to an auditor’s remuneration is covered?
(a) Section 140
(b) Section 141
(c) Section 142
(d) Section 139.
Answer:
(b) Section 141
Section 141 states provision relating to remuneration of auditor for auditing accounts of the company.

68. Who will be responsible for errors in report if external auditor relies on the work of internal auditor?
(a) External auditor
(b) Internal auditor
(c) Management
(d) Shareholder.
Answer:
(a) External auditor
Statutory auditor has to review the work done by internal auditor to determine the extent of reliance they can place on them. Auditors cannot completely /ely on internal audit, they are responsible if there are any errors in report, if it is made by being fully dependent on internal audit.

69. What is the qualification of an auditor:
(a) CA
(b) CS
(c) CMA
(d) Key managerial person of the Company
Answer:
(a) CA
Section 141 contains that a person shall be eligible for appointment
as an auditor of a company only if he is a Chartered Accountant.

70. Rights of auditor:
(a) Notice of AGM
(b) Notice of Board Meeting
(c) Right to have remuneration
(d) Both (a) & (c)
Answer:
(d) Both (a) & (c)
Rights of an auditor:
(i) Right to access to books, accounts and vouchers
(ii) Right to obtain information and explanation
(iii) Right to sign the audit report
(iv) Right to receive notice and attend general meeting
(v) Right to receive remuneration
(vi) Right to visit Branch Office and right of access to books.

71. Disqualification of auditor:
(a) A body corporate other than LLP Act 2008
(b) Employee of company
(c) Relative of a director
(d) All of the above
Answer:
(d) All of the above
Disqualification of an Auditor:
(i) A body corporate except LLP registered under Limited Liability Partnership Act, 2008.
(ii) An officer of employer of the Company
(iii) Any person who is a partner, or who is in the employment, of an officer or employee of the company
(iv) Relative of a director or who is in employment of the company ] as director or KMP.
(v) A person who himself or his relative or partner
(a) is holding any security or interest in the company in excess of ₹ 1 Lac
(b) is indebted to the company or its subsidiary, holding or associate company or a subsidiary of such holding company in excess of ₹ 5 lacs.
Thus, all options are correct. Thus, the answer is option (d).

72. If an auditor is not in a position to give an opinion then it is:
(a) Unqualified opinion
(b) Adverse or negative opinion
(c) Qualified opinion
(d) Disclaimer of opinion
Answer:
(d) Disclaimer of opinion
Disclaimer of opinion is a situation when auditor is not in a position to give his opinion. Where auditor is not in a position to collect sufficient appropriate audit evidence which enables him to draw his conclusion then it is proper for the auditor to disclaim an opinion due! to lack of sufficient appropriate audit evidence.

73. The first auditor of a company shall be appointed by _________ within 30 days from the date of registration of the company.
(a) Creditor of the company
(b) Board of Director
(c) Member of the company
(d) The Central Government.
Answer:
(b) Board of Director
Sec. 139(6) of the Companies Act, 2013 provides that the first auditor are to be appointed by the Board of Directors within 30 days from the date of registration of the company. He shall hold office till the conclusion of first AGM.

74. Which of the following are the rights of a statutory auditor?
(X) To receive remuneration
(Y) To attend board of directors meeting
(Z) To attend the general meeting
(W) To visit the branch office
(a) X, Y, Z and W
(b) X and Y
(c) X, ZandW
(d) X, YandZ
Answer:
(c) X, ZandW
As per Sec. 143 (1) of the Companies Act, 2013 every statutory auditor has a right to receive remuneration, to receive notice of or attend general meeting, to visit the branch office and access to the books.

75. Which of the following may be appointed as the first auditor of company?
(I) A Chartered Accountant in practice
(II) A firm of Chartered Accountant in practice
(III) A limited liability partnership of Chartered Accountant in practice.
(a) (I) and (III)
(b) (I), (II) and (III)
(c) (I) and (II)
(d) (I) and (III)
Answer:
(b) (I), (II) and (III)
Sec. 141(1) and Sec. 141(2) of Companies Act, 2013 contains provisions as regards to qualification of auditors. A Chartered Accountant in practice, a firm whereof majority of partners are qualified for or are CA in practice including LLP is appointed as an auditor of a company.

76. A negative audit report is:
(a) A qualified audit report
(b) A modified audit report
(c) An audit report that has an adverse opinion
(d) An unqualified audit report.
Answer:
(c) An audit report that has an adverse opinion
Where as a result of the examination of books of accounts, the auditor concludes that he does not agree with the true and fair view of financial statement under audit, he express adverse opinion or negative opinion.

77. In the course of audit the auditor observed that loans and advances made by the company have been shown as deposits. The auditor will:
(a) Report it to SEBI
(b) State this in his audit report
(c) Not state this in his audit report
(d) Report it to the Central Government.
Answer:
(b) State this in his audit report
The Auditor, will have to state his observation in his audit report that the loans and advances made by the company have been wrongly shown as deposits.

78. Which of the following is not disqualified for appointment as auditor of “a” Co.?
(a) An employee of the company
(b) A person whose relative is a director of the company
(c) A limited liability partnership firm
(d) A body corporate other than LLP.
Answer:
(c) A limited liability partnership firm
Sec. 141(1) and 141(2) of the Companies Act. 2013 contains provisions stating hrm including LLP is appointed as an auditor of a company, only the partners who are Chartered Accountants shall be authorised to act and sign on behalf of a firm.

79. Which of the following is not a type of audit opinion?
(a) Reserve
(b) Disclaimer
(c) Adverse
(d) Qualified
Answer:
(a) Reserve
Types of Auditor’s opinion:
(a) Unqualified opinion: Where auditor does not have any reservation, objection regarding the information under audit then he issues an unqualified opinion. It is also known as clean report.
(b) Adverse opinion: Where auditor does not agree with the true and fair view of Financial Statement. He express adverse opinion.
(c) Qualified opinion: When auditor has some reservation which though significant but not that much so as to give an adverse opinion. In that case, Auditor gives a qualified opinion.
(d) Disclaimer of opinion: It is a situation when auditor is not in position to collect sufficient and appropriate audit evidence, then he expresses a disclaimer of opinion.

80. Which of the following may be appointed as first auditor of Company (1)A Chartered Accountant in practice (2) A firm of Chartered Accountants in practice (3) A Limited Liability Partnership of Chartered Accountants in practice
(a) 1 and 2
(b) 1,2 and 3
(c) 2 and 3
(d) 1 and 3
Answer:
(b) 1,2 and 3
As per Sec. 141 (1) of Companies Act, 2013:
(a) A person shall be eligible for appointment as auditor of company only if he is a Chartered Accountant in practice
(b) A firm where majority of partners are Chartered Accountant in practice
(c) A Limited Liability partnership of Chartered Accountant in practice

81. Which account will be credited for the excess money received on share application that is to be adjusted against allotment₹
(a) Share allotment A/c
(b) Share First Call A/c
(c) Share Capital A/c
(d) Share application A/c
Answer:
(d) Share application A/c
The Journal Entry for money received on Application is
Bank A/c Dr.
To Share Application A/c
The Amount received in excess is first credited to Share Application A/c and then it is transferred to Share Allotment A/c at the time of adjustment.

82. Which of the following is disqualified for appointment as auditor of a Company?
(a) A limited liability partnership
(b) An officer or Employee of the Company.
(c) A Chartered Accountant holding a Certificate of Practice.
(d) A firm of Chartered Accountants
Answer:
(b) An officer or Employee of the Company.
As per Sec. 141(3) of the Companies Act, 2013 following person shall not be eligible for appointment as auditor.
(a) A body corporate other than LLP of Chartered Accountant
(b) An officer or employee of company.
(c) A person who is a partner.
(d) A person who or his relative
(i) is holding security of face value more than ₹ 1 lakh.
(ii) is indebted with a debt of more than ₹ 5 lakhs.
(iii) has given guarantee in debt of ₹ 1 lakh or more.
(e) A person who has business relationship with the company.
(f) A person whose relative is director.
(g) A person who is afthe time of appointment or reappointment is auditor of more than 20 companies.
(h) A person who has been convicted and a period of 10 years has not elapsed.
(i) A person whose subsidiary or associate company is engaged in providing any service under section 144.

83. The audit report of the statutory auditor shall report on the: (i) Books of accounts examined by him (ii) Balance Sheet of the company (iii) Profit and loss account of the Company (iv) Direction report of the Company. The options are:
(a) I,II, III and IV
(b) I,II and IV
(c) I,II, and III
(d) II,III and IV
Answer:
(c) I,II, and III
(c) The auditor’s report shall also state under section 143(3) of the Companies Act, 2013:
(a) Information and explanation obtained for the purpose of audit.
(b) Proper books of account as required by law have been kept or not.
(c) Report on accounts of Branch office audited by other person.
(d) Financial statement are in agreement with books.
(e) Financial Statement comply with accounting standards.
(f) Any observation or comment of auditor on financial transaction or matter.
(g) Any director being disqualified under section164 (2).
(h) Any qualification, reservation or adverse mark on maintenance of account.
(i) Whether company has adequate internal financial control or not

84. Which of the following are the rights of a Statutory Auditor₹ (X) To receive remuneration (Y) To attend Board of Direction’s meeting (Z) To attend the general meeting (W) To visit the branch office.
The Correct opinion is:
(a) X, Z and W
(b) X, Y, Z and W
(c) X and Y
(d) X, Y and Z
Answer:
(a) X, Z and W
As per Sec. 143(1), The rights and power enjoyed by auditor are:
(a) Right to access books, accounts and vouchers
(b) Right to obtain Information and explanation
(c) Right to sign the Audit Report
(d) Right to Receive Notice of and Attend General Meeting
(e) Right to Visit Branch Office and access books of accounts.

85. Audit report is prepared by
(a) Auditor
(b) Assistants of auditor
(c) Both
(d) None of these
Answer:
(a) Auditor
The auditor’s report is a formal opinion, issued by either an internal auditor or an independent external auditor as a result of an internal or external audit or evaluation performed on an organisation. The auditor should review and assess whether the financial statements have been prepared in accordance with an acceptable financial reporting framework applicable to the entity under audit. It is also necessary to consider whether the financial statements comply with the relevant statutory requirements and then the audit report is prepared. The report is subsequently provided to the stakeholders such as shareholders, creditors, financial institutions, banks, government, or the general public at large as an assurance service so that the user can make decisions based on the results of the audit.

86. What is a negative report?
(a) Qualified report
(b) Unqualified report
(c) Adverse opinion report
(d) None of these
Answer:
(c) Adverse opinion report
If any of the matters required to be included in the audit report is answered in the negative or with a qualification, the report shall also state the reasons for the same. An adverse opinion is expressed when the effect of a disagreement is so material and pervasive to the financial statements that the auditor concludes that a qualification of the report is not adequate to disclose the misleading or incomplete nature of the financial statements.

87. Appointment of auditor is given in section _________ of Companies Act 2013.
(a) 139(6)
(b) 143
(c) 144
(d) 126
Answer:
(a) 139(6)
As per Companies Act, 2013 the auditors of the company are appointed as per the provisions provided in section 139(6) of the act. Hence, we can say that Statutory Audit is also a financial audit as the objectives are same.

88. Auditor’s report is to be laid before the company _________ meetings.
(a) AGM
(b) EGM
(c) Board meeting
(d) All of the above
Answer:
(a) AGM
Auditor’s report and every other document required by law to be annexed or attached to the financial statements, which are to be laid before a company in its general meeting, shall be sent to every member of the company, to every trustee for the debenture-holder of any debentures issued by the company. Thus auditor report is laid before the company in the annual general meetings.

89. First auditor is to be appointed by _________
(a) Shareholders
(b) Members
(c) Board of Directors
(d) CA
Answer:
(c) Board of Directors
The Board of Directors of a company shall appoint an individual or firm as the first auditor of a company, other than a Government company, within thirty days from the date of registration of the company. In the case of failure of the Board to appoint the first auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual general meeting.

90. When auditor does not have any reservation, objective regarding the information under audit, then he gives-
(a) Unqualified opinion
(b) Negative opinion
(c) Positive opinion
(d) Qualified opinion
Answer:
(a) Unqualified opinion
An unqualified opinion is expressed when the auditor concludes that the financial statements give a true and fair view in accordance with the financial reporting framework used for the preparation and presentation of the financial statements. An unqualified opinion indicates, implicitly, that any changes in the accounting principles or in the method of their application, and the effects thereof, have been properly determined and disclosed in the financial statements. Thus option A is correct.

91. The client changed method of depreciation from straight line to written down value method. This has been disclosed as a note to the financial statements. It has an immaterial effect on the current financial statements. It is expected, however, that the change will have a significant effect on future periods. Which of the following option should the auditor express?
(a) Adverse opinion.
(b) Disclaimer of opinion
(c) Qualified opinion
(d) Unqualified opinion
Answer:
(c) Qualified opinion
(c) In a situation where neither the unqualified, nor adverse opinion is appropriate, the auditor gives the qualified opinion. This is a situation where the auditor has some reservation about the financial statements which though significant but not that significant so as to ₹ warrant adverse opinion and auditor agrees to a large extent with the true & fair view of the financial statement that he gives a qualified opinion. In the given case, there is a change in accounting principle or , account of change in method of depreciation which the company has disclosed as notes in the financial statements. Moreover, it has an immaterial effect on the current year’s financial statements. Thus, the auditor will issue a qualified opinion.

92. Which of the following may be appointed as the first auditor of company₹ (I) A Chartered Accountant in practice (II) A firm of Chartered Accountants in practice (III) A Limited Liability Partnership of Chartered Accountants in practice. The options are:
(a) I, II and III
(b) II and III
(c) I and III
(d) I and II
Answer:
(a) I, II and III
Following may be appointed as auditor:
(a) A Chartered Accountant in practice
(b) A Firm of Chartered Accountant in practice
(c) An LLP of Chartered Accountant in practice

93. In the course of audit, the auditor observed that loans and advances made by the company have been shown as deposits. The auditor will:
(a) State this in his audit report
(b) Report it to Central Government
(c) Not state this in his report
(d) Report it to SEBI
Answer:
(a) State this in his audit report
Auditor shall state all the relevant matter in this report and he should also state this matter in his report.

94. Which of the following is not disqualified for appointment as auditor of a company₹
(a) A limited liability partnership firm.
(b) A person whose relative is a director in the company.
(c) An employee of the company.
(d) A Body corporate other than LLP.
Answer:
(a) A limited liability partnership firm.
As per Companies Act, 2013 an LLP of Chartered Accountant in practice shall not be disqualified for being appointed as auditor.

95. Disclaimer of Opinion means:
(a) The auditor gives clean report
(b) The auditor gives qualified report
(c) The auditor is unable to express his opinion
(d) The auditor gives adverse report.
Answer:
(c) The auditor is unable to express his opinion
Disclaimer of Opinion mean the auditor is unable to form an opinion.

96. Which of the following are the rights of a statutory auditor (X) To receive remuneration (Y) To attend Board of Directors meeting (Z) To attend the general meeting (W) To visit the branch office. The correct option is:
(a) X, Y and Z
(b) X, Z and W
(c) XandY
(d) X, Y, Z and W
Answer:
(b) X, Z and W
Rights of Statutory Auditor:
(a) To receive Remuneration
(b) To attend General Meeting either by himself or by proxy
(c) To visit branch office.

97. The board of directors shall appoint first auditor of a company:
(a) within one month of completion of capital subscription by the company .
(b) within one month of the promotion of the company
(c) within one month of the commencement of the business of the company
(d) within one month of incorporation of the company
Answer:
(d) within one month of incorporation of the company
Board of Directors shall appoint as first auditor of the company within 30 days or one month after the registration of company. The first auditor shall be ratified by company at the first annual general meeting. Board of Directors shall be appointed as first auditor in Government Companies within 60 days after registration of company.

98. The client changed method of depreciation from straight line to written down value method. This has been disclosed as a note to the financial statements. It has an immaterial effect on the current financial statements. It is expected, however, that the change will have a significant effect on future periods. Which of the following option should the auditor express?
(a) Unqualified opinion
(b) Qualified opinion
(c) Disclaimer of opinion
(d) Adverse opinion
Answer:
(b) Qualified opinion
Qualified opinion is an opinion which is given by the auditor to show the audit report clean if audit report of firm is not clean. In this question, if is not clear that what effect has been drawn after changing depreciation method from straight line to written down value method. So, Auditor give qualified opinion to show that audit report is clean.

99. If a casual vacancy in the office of Auditor arises by his resignation, it should only be filled by the company in a:
(a) Board meeting
(b) General meeting
(c) Annual general meeting
(d) Statutory meeting
Answer:
(b) General meeting
If there is a vacancy arises of auditor by his resignation then it is only filled by company in a General Meeting to appoint new auditor or old auditor by solving his problem with company.

100. Duties of auditor are given in :
(a) Section 144
(b) Section 146
(c) Section 143
(d) Section 139
Answer:
(c) Section 143
(c) The Auditor of an organisation may also have specific statutory dulies and powers under the act governing suck organisation. In case of a company Auditor, its duties and powers are defined under Companies Act, 2013 under Section 143.

101. An auditor expresses when he has no reservations
(a) Unqualified opinion
(b) Disclaimer of opinion
(c) Adverse opinion
(d) Can’t say
Answer:
(a) Unqualified opinion
If an auditor expressed that every estimates and matter disclosed in audit report is adequate and in accordance to financial reporting framework; it is unqualified opinion. Hence, option (a) is correct

102. Who is not qualified for doing Audit (financial).
(a) Practicing Chartered Accountant
(b) Practicing Company Secretary
(c) Practicing Cost Accountant
(d) (b) and (c) both.
Answer:
(d) (b) and (c) both.
Disqualification of an Auditor: Except of Practicing Chartered Account and in case of LLP as auditor an audit is done by a Chartered Accountant of a firm; every person is disqualified for Audit (financial). Thus, option (d) is correct.

103. For which companies it is compulsory to do secretarial audit?
(a) Every listed company
(b) Every public company having a paid-up capital of ₹ 50 cr. or more
(c) Private company which is a subsidiary of a public company
(d) All of the above.
Answer:
(d) All of the above.
Mandatory Secretarial Audit:
(i) Every listed company
(ii) Every Public listed company, having paid up capital of ₹ 50 crore or more
(iii) Every Private company is a subsidiary of a public company etc. Thus, option (d) is correct.

104. An Auditor is a:
(a) A practicing Company Secretary
(b) A practicing Chartered Accountant
(c) A Cost and Management Accountant
(d) None of these
Answer:
(b) A practicing Chartered Accountant
An Auditor is a Practicing Chartered Accountant. Option (b) is correct.

105. Who will be member of IBC 2016 as a Insolvency resolution professional?
(a) Practicing Company Secretary
(b) Practicing Chartered Accountant .
(c) Practicing Cost and Management Accountant
(d) All of the above.
Answer:
(d) All of the above.
The member of insolvency resolution professional are :
(i) Practicing Company Secretary
(ii) Practicing Chartered Accountant
(iii) Practicing Cost and Management Accountant

106. Statutory audit report of a company is addressed to:
(a) Board of Directors
(b) Ministry of Corporate Affairs
(c) Employees of the company
(d) Members of the company
Answer:
(d) Members of the company
(d) Statutory audit report of a company is addressed to the members of the Company.

107. The form and basic contents of statutory audit report are:
(a) Provided in the Companies Act, 2013
(b) Provided in the Chartered Accountants Act, 1949
(c) Provided in the Code of Civil Procedure, 1908
(d) Not provided any where
Answer:
(a) Provided in the Companies Act, 2013
The format and basic contentb of statutory audit report are contained in Companies Act, 2013.

108. Which of the following is necessarily to be included in an auditor’s report:
(a) Whether the company has followed best HR practices in recruitment of employees
(b) Whether fhe company is an equal opportunities employer
(c) Whether the company has taken any loan from its directors
(d) Whether any director is disqualified from being appointed under Section 164g Companies Act, 2013.
Answer:
(d) Whether any director is disqualified from being appointed under Section 164g Companies Act, 2013.
The fact whether any director is disqualified from appointment u/s 164g of Companies Act, 2013 should necessarily be mentioned in auditor report.

109. ‘Disclaimer of Opinion’ means:
(a) The auditor gives clean report
(b) The auditor gives qualified report
(c) The auditor gives adverse report
(d) The auditor is unable to expresses his opinion.
Answer:
(d) The auditor is unable to expresses his opinion.
A disclaimer of opinion is expressed when the possible effect of a limitation on scope is so material and pervasive that the auditor has not been able to obtain sufficient appropriate evidence and is therefore, unable to express an opinion on financial Statements.

110. The controller and Auditor General of India in respect of _________ shall appoint an auditor within a period of _________
(a) Calendar year, 180 days
(b) Financial year, 180 days
(c) Financial year, 182 days
(d) Calendar year, 90 days
Answer:
(b) Financial year, 180 days
In the case of Subsequent Auditor of Government Companies, the Comptroller and Auditor General of India in respect of a financial year shall appoint an auditor within a period of 180 days from the commencement of the financial year.
Hence option ‘c’ is correct.

111. The Comptroller and Auditor-General of India shall appoint the first auditor of the Government Company within _________ from the date of registration of the company.
(a) sixty days
(b) sixty weeks
(c) six months
(d) six days
Answer:
(a) sixty days
The Comptroller and Auditor-General of India shall appoint the first auditor of the Government Company within sixty days from the date of registration of the company.

112. Is it the duty of auditor whether personal expenses have been charged to revenue account.
(a) False
(b) True
(c) Can’t say
(d) Partly True and Partly False
Answer:
(b) True
According to section 143(1), powers and duties of auditors, it is the duity of the auditor to see wheather the personal expenses have been charged to revenue accounts.
Hence option ‘b’ is correct.

113. As per Companies Act, 2013 matters to be included in auditor’s report
(a) Fixed and Non Fixed Assets
(b) Fixed Assets
(c) Both (a) and (b)
(d) None of those
Answer:
(c) Both (a) and (b)
According to section 143(2) the auditor’s power Report also includes.
(i) Fixed assets
(ii) Inventory
(iii) Granting of loans to certain parties
(iv) Internal control system etc.

114. The secretarial auditor shall submit his report in _________ form
(a) MR-3
(b) MR-2
(c) MR-1
(d) None of above
Answer:
(a) MR-3
The board is required to provide explanation in the Board’s report to every qualification, observation or other adverse remark made by company secretary in his report. The Secretarial Auditors will submit his report in Form MR-3.

115. Which of the following is (are) case of casual vacancy
(i) Resignation due to family issues
(ii) Any disqualification as per sec. 141 (3)
(iii) Any quarrels with management
(iv) Any issue regarding remuneration
(a) Only I
(b) II & III
(c) II,III,IV
(d) I, II, III,
Answer:
(c) II,III,IV
Causal vacancy of the auditor means a vacancy caused due to death, disqualification as per section 141(3), resignation of an auditor only.