Commerce MCQs
Topic Notes: Commerce
MCQs and preparation resources for competitive exams, covering important concepts, past papers, and detailed explanations.
Plato
- Biography: Ancient Greek philosopher (427–347 BCE), student of Socrates and teacher of Aristotle, founder of the Academy in Athens.
- Important Ideas:
- Theory of Forms
- Philosopher-King
- Ideal State
81
Evaluate the following: Assertion (A) Profits earned prior to incorporation are capital profits. Reason (R) Capital profits cannot be distributed as dividends to shareholders.
Answer:
Both (A) and (R) are correct
Profits earned before a company is legally incorporated are considered capital in nature because they are generated before the entity existed as a legal person. Such capital profits are generally not available for distribution as dividends to shareholders, as they are meant to be used for capital purposes like writing off goodwill.
82
What is the term for a dividend declared by a company between two Annual General Meetings?
Answer:
interim dividend
An interim dividend is a dividend payment made before the company's Annual General Meeting and the finalization of the annual financial statements. It is declared by the Board of Directors based on the company's interim financial performance during the fiscal year.
83
Under the Companies Act, 1956, which section specifies the proforma for the Balance Sheet?
Answer:
Section 211
Section 211 of the Companies Act, 1956, mandated the form and content of the Balance Sheet and Profit and Loss Account for companies. It required that financial statements provide a true and fair view of the state of affairs of the company, following the prescribed schedules and formats.
84
Which of the following options is not classified as a capital reserve?
Answer:
Dividend equalisation reserve
A dividend equalisation reserve is a revenue reserve, not a capital reserve. It is created out of divisible profits to ensure a stable dividend payout to shareholders over time, whereas capital reserves are created from non-operating capital gains.
85
Which term refers to the portion of a company's profit that is legally available for distribution to shareholders as dividends?
Answer:
Divisible
Divisible profit represents the net earnings of a company that remain after accounting for all necessary reserves, taxes, and statutory requirements. It is the specific portion of profit that the board of directors can legally propose to distribute to shareholders as dividends, ensuring the company maintains its capital integrity.
86
In corporate accounting, how is profit earned prior to the incorporation of a company treated?
Answer:
Capital reserve
Profit earned before the date of incorporation is considered a capital profit because it is earned before the company officially exists as a legal entity. Therefore, it is transferred to a capital reserve and cannot be distributed as dividends.
87
What percentage of the net surplus of a life insurance company is typically distributed to policyholders as a bonus?
Answer:
95%
In many jurisdictions, life insurance regulations mandate that a significant portion of the surplus generated from participating policies must be allocated to policyholders. While 95% is a common statutory requirement in some regions, this can vary based on specific local insurance laws and company policies.