Tag: business studies

Questions Related to business studies

Maintaining petty cash book is ______.

introduction of business laws business law and contract act business studies

  1. Mandatory

  2. Necessary

  3. Dependant on nature of business

  4. All of the above

Show answer
Correct Option: C
Explanation:

Petty cash book - This is used to record petty expenses like postage. cartage. printing and stationery etc in the day to day business activities.
In big organisation, it is not possible to maintain petty expenses for main cashier. In small organisation the number of petty Expenses is less so such a book can be maintained by cashier. Maintaining such a book is not compulsory.
So, maintaining petty cash book is dependent on nature of business.

Which of the following is the most important source of the Mercantile Law?

introduction of business laws business law and contract act business studies

  1. Similar law

  2. Law merchant

  3. Common law

  4. Principle of equity

Show answer
Correct Option: B
Explanation:

Lex mercatoria, often referred to as "the Law Merchant" in English, is the body of commercial law used by merchants throughout Europe during the medieval period. It evolved similar to English common law as a system of custom and best practice, which was enforced through a system of merchant courts along the main trade routes. It functioned as the international law of commerce. It is the most important source of Mercantile Law.

_______means those customs and usages which are binding on traders in their dealings with each other.

introduction of business laws business law and contract act business studies

  1. Similar law

  2. Common law

  3. Principle of equity

  4. Law merchant

Show answer
Correct Option: D
Explanation:
Law Merchant in English, is the body of commercial law used by merchants throughout Europe during the medieval period. It evolved similar to English common law as a system of custom and best practice, which was enforced through a system of merchant courts along the main trade routes. It functioned as the international law of commerce. It is the most important source of Mercantile Law.

Which of the following transactions would have no impact on owner's capital?

introduction of business laws business law and contract act business studies

  1. Purchase of land from the proceeds of a bank loan

  2. Withdrawal of profits

  3. Net loss

  4. Cash brought in by owner as additional capital

Show answer
Correct Option: A
Explanation:

Purchase of land from the proceeds of a bank loan would have no impact on owner's capital. The entries to be passed on purchase of land are
Cash A/c                                  Dr.
         To Bank Loan A/c On purchase of Land the following entry will be passed-
Land A/c                                 Dr.
         To Cash A/c
Thus no impact on owner's capital

Expenses paid in cash and recorded as assets before they are used are called _____.

introduction of business laws business law and contract act business studies

  1. accrued Expenses

  2. interim Expenses

  3. prepaid Expenses

  4. unearned Expenses

Show answer
Correct Option: C
Explanation:

Prepaid expenses are future expenses that have been paid in advance. It can also be said to be costs that have been paid but have not yet been used up or have not yet expired. The amount of prepaid expenses that have not yet expired are reported on a company's balance sheet as an asset.

A purchased an old computer costing Rs. 10,000 and incurred Rs. 1,000 on its repairs and Rs. 500 on its packing. He sold the computer at 20% margin on selling price. The sales value will be:

introduction of business laws business law and contract act business studies

  1. Rs. 12,500

  2. Rs. 11,000

  3. Rs. 14,375

  4. Rs. 13,800

Show answer
Correct Option: C

The main purpose of the corporation sole is to ______.

introduction of business laws business law and contract act business studies

  1. Make the property easily inheritable

  2. Make the property easily transferable

  3. Maintain continuity of an office

  4. Protect the property of the State

Show answer
Correct Option: C
Explanation:

The sole purpose of the corporation is to maintain the continuity of an office. Till it is in continuation its all others purposes like maximizing profit, increase in shareholders wealth can be achieved.

When an agreement is discovered to be void, any person who has received any advantage under such agreement ____________.

introduction of business laws business law and contract act business studies

  1. is bound to restore it

  2. is not bound to return it

  3. may retain it

  4. both A and B

Show answer
Correct Option: A
Explanation:

Under section 65 of the Indian Contract Act, 1872, when an agreement is discovered to  be void or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make  good the compensation received if any, to the person from whom he received it.

The cheapest source of finance is _____.

long-term and short-term finance sources of business finance business studies

  1. Debenture

  2. Equity share capital

  3. Preference share

  4. Retained earning

Show answer
Correct Option: D
Explanation:

Retained Earnings

The portion of net profit distributed to shareholders is called dividend and the remaining portion of the profit is called retained earning. In other word, the amount of undistributed profit which is available for investment is called retained earning. Retained earning is considered as internal source of long-term financing and it is a part of shareholders equity.Generally, retained earning is considered as cost free source of financing. It is because neither dividend nor interest is payable on retained profit. 

Current assets of a business firm should be financed through __________.

long-term and short-term finance sources of business finance business studies

  1. Current Liability Only

  2. Long Term Liability Only

  3. Partly from both types, i.e., long and short term Liabilities

  4. None of the Above

Show answer
Correct Option: C
Explanation:
Current assets refer to those assets held in a business which can be converted in the form of cash within a period of one year. Current assets are more liquid but less profitable.
Current assets of a business firm should be financed through: both types(i.e. long and short term liabilities)