Introduction to Economics - Online Test

Q1. In Economics, a good is something which
Answer : Option D
Explaination / Solution:

In Economics, goods are materials that satisfy human wants and provide utility. A good may be a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it.

Q2. A resource is a
Answer : Option B
Explaination / Solution:

A resource is a source or supply from which benefit is produced. An item becomes a resource with time and developing technology.Typically resources are materials, energy, services, staff, knowledge, or other assets that are transformed to produce benefit and in the process may be consumed or made unavailable.

Q3. The central problems of an economy are due to
Answer : Option B
Explaination / Solution:

Central economic problem asserts that an economy's finite resources are insufficient to satisfy all human wants and needs. It assumes that human wants are unlimited, but the means to satisfy human wants are scarce.

Q4. Vinod Limited sold patents costing Rs.20,000 in Rs.22,000. Treatment will be ---
Answer : Option D
Explaination / Solution:

Sale of patent is not an operating activity. Profit on sale of patents will be deducted in operating activities and sale price Rs.22,000 will be added in investing activities.

Q5. Cash paid against trade payable belongs to ------------


Answer : Option C
Explaination / Solution:

These are the company's core business activities, such as manufacturing, distributing, marketing and selling a product or service. Operating activities should generally provide the majority of a company's cash flow and largely determine whether a company is profitable.

Q6. Interest received on investment will be___________
Answer : Option C
Explaination / Solution:

Interest received on investment is a revenue receipt and added in investing activities while preparing cash flow statement.

Q7. Calculate Purchase on Investment. The information is Opening balance of Investment – Rs. 2,50,000, closing balance Investment – Rs. 5,00,000, Sale – Rs.1,37,500, Profit on sale – Rs.12,500.
Answer : Option C
Explaination / Solution:

Purchses= (Closing stock+Sales)-(Opening stock + Profit). Purchase of investment during the year Rs.3,75,000 i.e. (5,00,000 + 1,37,500) – (2,50,000 + 12,500) = 3,75,000

Q8. Under which type of activity will you classify the sale of shares of another company while preparing cash flow statement?
Answer : Option C
Explaination / Solution:

Sale of shares of other company are part of investment which is now sold by the company. It is sale of investment, so it will take place in investing activity.

Q9. Loose tools and Stores and spares are the part of --------------
Answer : Option C
Explaination / Solution:

Spares and tools which is not part of any particular Fixed assets, you can value as Inventory as per AS-2 and charge off in P&L a/c based on consumption.

Q10. Increase of decrease in the Bank balance is ---------
Answer : Option A
Explaination / Solution:

Cash from operating activities usually refers to the net cash inflow reported in the first section of the statement of cash flows. Cash from operating activities focuses on the cash inflows and outflows from a company's main business activities of buying and selling merchandise, providing services, etc.