Reading Comprehension for Banking Exams

Reading comprehension is the act of understanding what you are reading.

In this post, we present the top 20+ Reading comprehensions for Banking exams with questions and answers. These passages are designed to challenge and improve your reading comprehension skills.

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Reading Comprehension for Banking Exams

Reading Comprehension for Banking Exams #1

A commercial bank is a financial institution that provides services such as accepting deposits, giving business loans, mortgage lending, and basic investment products such as savings accounts and certificates of deposit. The commercial bank is also called a joint-stock bank because it is organized on the lines of joint-stock companies. A commercial bank deals with money accepts deposits and advances short-term loans to traders. Its main aim is to earn profit and create demand deposits which serve as a medium of exchange.

A commercial bank helps traders and industrialists by providing financial assistance. Its cheques and drafts are useful for large-scale trading. It accepts deposits from people who have a surplus amount and provides loans to investors who need productive activity. Thus, they encourage savings and promote production activities by investing in them. It helps in the distribution of surplus capital from regions where it is abundant and transfers it to a scarce region. It provides concessional loans to priority sectors such as agriculture, small-scale industry, retail trade, and export.

Multiple Choice Questions (MCQs):

What is another name for a commercial bank?

  • A) Investment bank
  • B) Cooperative bank
  • C) Joint-stock bank
  • D) Central bank

Answer: C) Joint-stock bank

What is the main aim of a commercial bank?

  • A) Providing free services to customers
  • B) Serving as a medium of exchange
  • C) Earning profit
  • D) Offering long-term loans

Answer: C) Earning profit

Which sectors does a commercial bank provide concessional loans to?

  • A) Real estate
  • B) Technology
  • C) Agriculture
  • D) Entertainment

Answer: C) Agriculture

What is the primary function of a commercial bank?

  • A) Providing investment advice
  • B) Distributing surplus capital
  • C) Accepting deposits and giving loans
  • D) Managing government finances

Answer: C) Accepting deposits and giving loans

What is the purpose of a commercial bank’s cheques and drafts?

  • A) Encouraging savings
  • B) Facilitating large-scale trading
  • C) Funding charitable organizations
  • D) Providing education loans

Answer: B) Facilitating large-scale trading

True or False Questions:

Commercial banks primarily aim to serve the public interest rather than earning profits.

False. Commercial banks aim to earn profits.

 

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Commercial banks transfer surplus capital from regions where it is abundant to regions where it is scarce.

True. This is one of the functions of commercial banks as mentioned in the passage.

Commercial banks provide concessional loans only to large-scale industries.

False. Commercial banks provide concessional loans to priority sectors such as agriculture, small-scale industry, retail trade, and export.

Very Short Answer Questions:

What is the primary function of a commercial bank?

Answer: Accepting deposits and giving loans.

Name one sector to which commercial banks provide concessional loans.

Answer: Agriculture.

What is another name for a commercial bank?

Answer: Joint-stock bank.

Fill in the Blanks:

A commercial bank deals with money, accepts deposits, and advances __________ loans to traders.

Answer: short-term

Commercial banks encourage savings and promote production activities by investing in __________.

Answer: them

Commercial banks provide concessional loans to priority sectors such as agriculture, small-scale industry, retail trade, and __________.

Answer: export

Reading Comprehension for Banking Exams #2

A tax is a compulsory payment imposed on persons or companies by the government to meet the expenditure incurred on providing common benefits to the people. Taxes are very significant in generating revenue for financing developmental programs. Taxes are very significant in generating revenue for financing developmental programs. The government provides tax relief to entrepreneurs to manage the production of a commodity. Such tax policies help in the expansion of certain industries and trade. Custom duties help to reduce the import of goods that are domestically available within the country.

Thus, taxes can be used to promote the economic growth of a nation. The taxation policy helps in regulating the production and consumption of goods and services in a country. Heavy taxes can be imposed on non-essential goods such as wines, cigarettes, and so on. This will reduce the production and consumption of such harmful goods. It also helps in allocating scarce resources to the desired line of production. Thus, differential commodity taxation helps in regulating the production and consumption of goods.

Multiple Choice Questions (MCQs):

What is the primary purpose of taxes imposed by the government?

  • A) To promote economic growth
  • B) To provide common benefits to the people
  • C) To burden individuals and companies
  • D) To discourage entrepreneurship

Answer: B) To provide common benefits to the people

How do tax policies contribute to the expansion of industries and trade?

  • A) By increasing tax rates on entrepreneurs
  • B) By reducing tax relief for entrepreneurs
  • C) By providing tax relief to entrepreneurs
  • D) By imposing heavy taxes on imported goods

Answer: C) By providing tax relief to entrepreneurs

What is the purpose of custom duties on imported goods?

  • A) To encourage the import of goods
  • B) To increase domestic production
  • C) To reduce the import of goods available domestically
  • D) To discourage domestic trade

Answer: C) To reduce the import of goods available domestically

How can heavy taxes on non-essential goods like wines and cigarettes affect production and consumption?

  • A) They will increase production and consumption of such goods
  • B) They will decrease production and consumption of such goods
  • C) They will have no impact on production and consumption
  • D) They will encourage the import of such goods

Answer: B) They will decrease production and consumption of such goods

What is the role of differential commodity taxation?

  • A) To encourage the production and consumption of harmful goods
  • B) To regulate the production and consumption of goods
  • C) To impose heavy taxes on essential goods
  • D) To discourage the allocation of scarce resources

Answer: B) To regulate the production and consumption of goods

True or False Questions:

Taxes imposed by the government primarily aim to burden individuals and companies.

False. Taxes are imposed to provide common benefits to the people.

Tax relief provided to entrepreneurs helps in the expansion of certain industries and trade.

True.

Customs duties are imposed to increase the import of goods available domestically.

False. Custom duties are imposed to reduce the import of such goods.

Very Short Answer Questions:

What is the primary purpose of taxes imposed by the government?

Answer: To provide common benefits to the people.

How do tax policies contribute to the expansion of industries and trade?

Answer: By providing tax relief to entrepreneurs.

What is the purpose of custom duties on imported goods?

Answer: To reduce the import of goods available domestically.

Fill in the Blanks:

Taxes are very significant in generating revenue for financing _________ programs.

Answer: developmental

Heavy taxes can be imposed on non-essential goods such as wines, cigarettes, and so on to reduce their _________ and consumption.

Answer: production

Differential commodity taxation helps in regulating the production and consumption of _________.

Answer: goods

The government provides tax relief to entrepreneurs to manage the _________ of a commodity.

Answer: production

Reading Comprehension for Banking Exams #3

Fixed Assets are the assets that are acquired for use in the business for a long period, generally more than one year. These assets are not meant for resale, rather, these are used for the production or rendering of goods and services. Fixed Assets help the business to earn income. For example, Machinery, Building, Goodwill, Plant, Furniture, etc. These assets are recorded in the Balance Sheet at cost after deducting depreciation. 

These assets include both tangible as well as intangible assets.

Tangible Assets are those assets that have physical existence. This implies that these assets can be seen or touched. For example, Plants, Furniture, Loose Tools, etc.

Intangible Assets are those assets that do not have any physical existence. It implies that these assets cannot be seen or touched. For example, Goodwill, Patents, Trademarks, etc.

Multiple Choice Questions (MCQs):

What is the primary characteristic of fixed assets?

  • A) Acquired for short-term use
  • B) Meant for resale
  • C) Used in the business for a long period
  • D) Recorded at market value

Answer: C) Used in the business for a long period

How are fixed assets recorded in the balance sheet?

  • A) At market value
  • B) At original cost
  • C) At net realizable value
  • D) At fair market value

Answer: B) At original cost

Which of the following is an example of an intangible asset?

  • A) Machinery
  • B) Building
  • C) Goodwill
  • D) Furniture

Answer: C) Goodwill

What distinguishes tangible assets from intangible assets?

  • A) Tangible assets have physical existence, while intangible assets do not.
  • B) Tangible assets have a shorter lifespan compared to intangible assets.
  • C) Intangible assets are recorded at fair market value, while tangible assets are recorded at original cost.
  • D) Intangible assets are used for resale, while tangible assets are used for production.

Answer: A) Tangible assets have physical existence, while intangible assets do not.

What purpose do fixed assets serve in a business?

  • A) To generate expenses
  • B) To incur liabilities
  • C) To earn income
  • D) To decrease profits

Answer: C) To earn income

True or False Questions:

Fixed assets are acquired for short-term use in the business.

False. Fixed assets are acquired for long-term use.

Intangible assets can be seen or touched.

False. Intangible assets cannot be seen or touched.

Fixed assets are recorded in the balance sheet at net realizable value.

False. Fixed assets are recorded at cost after deducting depreciation.

Very Short Answer Questions:

What are fixed assets?

Answer: Assets acquired for use in the business for a long period.

Give an example of a tangible asset.

Answer: Machinery.

Name one intangible asset.

Answer: Goodwill.

Fill in the Blanks:

Fixed Assets are the assets that are acquired for use in the business for a _________ period.

Answer: long

Tangible Assets are those assets that have _________ existence.

Answer: physical

Intangible Assets are those assets that do not have any _________ existence.

Answer: physical

Fixed Assets are recorded in the Balance Sheet at cost after deducting _________.

Answer: depreciation

Reading Comprehension for Banking Exams #4

Bank deposits form the basis for credit creation. Banks accept deposits from the public by opening a deposit account known as the primary deposit. Banks do not hold the money in the account itself and the entire amount is not withdrawn from the account at the same time. So, they advance loans to business people and retain only a small portion of the total deposits in the bank. The Central Bank decides the amount to be held in the form of cash. This is called the cash reserve ratio.

These banks advance loans to business people only against collateral securities. The bank will not give cash but open a derivative account in the name of the individual or institution. Here, the loans create a derivative deposit which is called a secondary deposit or derivative deposit. Thus, the second deposit is called the creation of credit.

Limitations of a Commercial Bank to Create Credit

  • Credit creation by a commercial bank is based on the primary deposit. Hence, there should be a large amount of cash, but the Central Bank has full control over the cash deposited by the individual. They decide the amount of cash to hold as a reserve and the amount for advancing loans.
  • Business people can avail of loans from the bank only when they have good securities to submit against a loan. If the approved securities are not available to them, then the bank will not be able to create credit as loans.

Multiple Choice Questions (MCQs):

What is the primary function of banks in credit creation?

  • A) Holding cash in deposit accounts
  • B) Withdrawing money from deposit accounts
  • C) Advancing loans to business people
  • D) Investing in securities

Answer: C) Advancing loans to business people

What determines the amount of cash banks must hold as reserves?

  • A) Central Bank’s control
  • B) Government regulations
  • C) Market demand
  • D) Customer preferences

Answer: A) Central Bank’s control

What is the purpose of the cash reserve ratio?

  • A) To limit credit creation
  • B) To encourage credit expansion
  • C) To regulate interest rates
  • D) To promote savings

Answer: A) To limit credit creation

How do commercial banks create secondary deposits?

  • A) By withdrawing money from primary deposits
  • B) By advancing loans against collateral securities
  • C) By holding cash reserves in derivative accounts
  • D) By investing in government bonds

Answer: B) By advancing loans against collateral securities

What limitation does a commercial bank face in credit creation?

  • A) Insufficient demand for loans
  • B) Lack of government regulations
  • C) Dependence on Central Bank’s decisions
  • D) Inability to attract depositors

Answer: C) Dependence on Central Bank’s decisions

True or False Questions:

Banks hold the entire amount deposited by individuals in their deposit accounts.

False. Banks do not hold the entire amount in deposit accounts; they advance loans with a portion of the deposits.

Commercial banks can create credit without any limitations.

False. Commercial banks face limitations such as Central Bank control over cash reserves and the availability of securities for loans.

The primary function of the cash reserve ratio is to encourage credit expansion.

False. The primary function of the cash reserve ratio is to limit credit creation.

Very Short Answer Questions:

What is the primary deposit known as?

Answer: Primary deposit.

Who decides the amount of cash banks must hold as reserves?

Answer: Central Bank.

What is the purpose of the cash reserve ratio?

Answer: To limit credit creation.

Fill in the Blanks:

Banks accept deposits from the public by opening a deposit account known as the _________.

Answer: primary deposit

The Central Bank decides the amount to be held in the form of _________.

Answer: cash

Commercial banks create secondary deposits by advancing loans against _________.

Answer: collateral securities

Credit creation by a commercial bank is based on the _________ deposit.

Answer: primary

Reading Comprehension for Banking Exams #5

Every business organization maintains a proper record of all its transactions during the year to keep proper track of its expenses and income. At the end of an accounting year, these organizations measure their business performance in terms of profits or losses. Apart from profits or losses, it is also interested in knowing the actual position of its assets and liabilities at the end of an accounting period. Thus, the records maintained by the organizations to ascertain the profits and losses and to assess the financial position of a firm on a particular date are referred to as Financial Statements. The Accounting Process ends with the preparation of Financial Statements.

In other words, financial statements reveal the profitability and financial position of a business at the end of the accounting year. It provides financial information to various accounting users that helps them in the decision-making and policy-designing process. It should be noted that the financial statements of an organization are prepared based on Trial Balance. The financial statements include mainly the following two statements

  • Income Statements or Trading and Profit and Loss Account
  • Balance Sheet

Income Statements: These statements are popularly known as Trading and Profit and Loss Accounts. These statements disclose the financial performance of an enterprise. Trading Account records all the direct incomes and expenses and reveals the gross profit earned or gross loss incurred during a particular period. On the other hand, the Profit and Loss Account records all the indirect incomes and expenses and shows the net profit or loss during the year.

Balance Sheet: This statement discloses the true financial position of an enterprise on a particular date. It reveals the actual position of the assets and liabilities of an organization.

Multiple Choice Questions (MCQs):

What do financial statements help organizations measure at the end of an accounting year?

  • A) Inventory levels
  • B) Customer satisfaction
  • C) Profits or losses
  • D) Marketing strategies

Answer: C) Profits or losses

What is the purpose of financial statements?

  • A) To track inventory movements
  • B) To assess customer preferences
  • C) To measure profitability and financial position
  • D) To design marketing campaigns

Answer: C) To measure profitability and financial position

Which statement reveals the financial performance of an enterprise?

  • A) Balance Sheet
  • B) Income Statement
  • C) Cash Flow Statement
  • D) Statement of Changes in Equity

Answer: B) Income Statement

What does the Trading Account record?

  • A) Indirect incomes and expenses
  • B) Direct incomes and expenses
  • C) Net profit or loss
  • D) Asset and liability positions

Answer: B) Direct incomes and expenses

What does the Balance Sheet disclose?

  • A) Financial performance
  • B) Profit and loss
  • C) Asset and liability positions
  • D) Cash flows

Answer: C) Asset and liability positions

True or False Questions:

Financial statements are prepared based on Cash Flow Statements.

False. Financial statements are prepared based on Trial Balance.

The Income Statement records all indirect incomes and expenses.

True.

The Balance Sheet reveals the financial performance of an enterprise.

False. The Balance Sheet discloses the true financial position of an enterprise.

Very Short Answer Questions:

What are financial statements used to measure at the end of an accounting year?

Answer: Profits or losses.

What is the purpose of financial statements?

Answer: To measure profitability and financial position.

What does the Trading Account record?

Answer: Direct incomes and expenses.

Fill in the Blanks:

The records maintained by organizations to ascertain the profits and losses and to assess the financial position of a firm on a particular date are referred to as _________.

Answer: Financial Statements

Income Statements are popularly known as _________.

Answer: Trading and Profit and Loss Accounts

The Balance Sheet reveals the actual position of the _________ and _________ of an organization.

Answer: assets, liabilities

Financial statements are prepared based on _________.

Answer: Trial Balance

Reading Comprehension for Banking Exams #6

Privatization of commercial banks is a debated topic, with proponents highlighting increased flexibility and competition, while opponents raise concerns about job losses and economic inequality.

Arguments in Favour of Privatization of Commercial Banks

  • Commercial banks have the freedom to make decisions regarding loan advancement and can choose sectors with higher returns and recoverability.
  • They are free to design various innovative deposit schemes to attract depositors.
  • A competitive environment will be created in the banking sector because these banks will face many other private foreign banks in the banking sector. Hence, each commercial bank will try to survive and evolve new methods to improve its efficiency.

Arguments against the Privatization of Commercial Bank

  • These banks would reduce employment opportunities as private bank functions would be directed by profit motives.
  • It may lead to the concentration of monopoly power in the hands of private sector banks and an increase in the unequal distribution of income and wealth in the economy.
  • If some of these banks are also merged with foreign banks and if restrictions on the movements of financial capital from one country to another country are withdrawn, then there will be no guarantee that the savings mobilized from the Indian economy will be recycled within India or abroad.

Multiple Choice Questions (MCQs):

What is one argument in favor of the privatization of commercial banks?

  • A) Increased job opportunities
  • B) Enhanced government control
  • C) Greater flexibility in decision-making
  • D) Reduced competition

Answer: C) Greater flexibility in decision-making

What potential consequence is highlighted as an argument against privatization?

  • A) Increased efficiency
  • B) Concentration of monopoly power
  • C) Enhanced economic equality
  • D) Improved innovation

Answer: B) Concentration of monopoly power

What is suggested about the competitive environment in the banking sector post-privatization?

  • A) It will diminish competition
  • B) It will lead to decreased efficiency
  • C) It will foster innovation and efficiency
  • D) It will restrict decision-making freedom

Answer: C) It will foster innovation and efficiency

What concern is raised regarding the employment scenario with privatization?

  • A) Decreased job opportunities
  • B) Increased government intervention
  • C) Enhanced job security
  • D) Greater employee benefits

Answer: A) Decreased job opportunities

What is a potential risk associated with merging private banks with foreign banks?

  • A) Enhanced savings mobilization within the economy
  • B) Increased financial capital movements between countries
  • C) Decreased concentration of wealth
  • D) Uncertain recycling of savings within the country

Answer: D) Uncertain recycling of savings within the country

True or False Questions:

Proponents of privatization argue that it may lead to increased economic equality.

False. Opponents raise concerns about increased economic inequality.

Privatization of commercial banks could potentially lead to a concentration of monopoly power.

True.

Increased competition is considered a disadvantage of privatization in the banking sector.

False. Increased competition is considered an advantage.

Very Short Answer Questions:

What freedom do commercial banks gain with privatization, according to the passage?

Answer: Freedom to make decisions regarding loan advancement.

What potential consequence of privatization is mentioned in relation to job opportunities?

Answer: Reduction in employment opportunities.

What risk is highlighted concerning savings mobilization within the country?

Answer: Uncertain recycling of savings within the country.

Fill in the Blanks:

Privatization of commercial banks may lead to a concentration of _________ power.

Answer: monopoly

Proponents argue that privatization fosters innovation and _________ in the banking sector.

Answer: efficiency

Opponents raise concerns about the potential _________ of job opportunities with privatization.

Answer: reduction

Merging private banks with foreign banks may result in uncertain recycling of savings within the _________.

Answer: country

Reading Comprehension for Banking Exams #7

Many times you must have observed that in the Trial Balance loan is recorded either on the credit side or on the debit side. If it appears on the credit side, then it implies that the loan is taken by the proprietor from outsiders such as banks, financial institutions, etc. On the other hand, if the loan appears on the debit side of the Trial Balance, then it implies that the proprietor has granted a loan to the other parties (or to the outsiders).

A loan taken by the proprietor is a liability for the business and thus interest on such a loan is considered as an expense. Whereas, a loan granted by the proprietor is an asset for the business and thus interest on such loan is considered as an income. Thus, the accounting treatment of interest loans in the books depends on whether the given loan is a loan taken or a loan granted.

Multiple Choice Questions (MCQs):

How is a loan taken by the proprietor recorded in the Trial Balance?

  • A) On the debit side
  • B) On the credit side
  • C) On both sides
  • D) Not recorded

Answer: B) On the credit side

What does it imply if a loan appears on the debit side of the Trial Balance?

  • A) The proprietor took the loan
  • B) The proprietor granted the loan
  • C) The loan is not accounted for
  • D) The loan is an asset

Answer: B) The proprietor granted the loan

How is interest on a loan taken by the proprietor treated in accounting?

  • A) Recorded as income
  • B) Recorded as an asset
  • C) Recorded as a liability
  • D) Recorded as an expense

Answer: D) Recorded as an expense

What is the accounting treatment of interest on a loan granted by the proprietor?

  • A) Recorded as income
  • B) Recorded as a liability
  • C) Recorded as an expense
  • D) Not recorded

Answer: A) Recorded as income

What does the accounting treatment of interest loans depend on?

  • A) The amount of the loan
  • B) The tenure of the loan
  • C) Whether the loan is taken or granted
  • D) The interest rate of the loan

Answer: C) Whether the loan is taken or granted

True or False Questions:

If a loan appears on the credit side of the Trial Balance, it means the proprietor granted the loan.

False. It means the proprietor took the loan.

Interest on a loan taken by the proprietor is considered an expense.

True.

Interest on a loan granted by the proprietor is recorded as a liability.

False. It is recorded as income.

Very Short Answer Questions:

How is a loan taken by the proprietor recorded in the Trial Balance?

Answer: On the credit side.

What is the accounting treatment of interest on a loan taken by the proprietor?

Answer: Recorded as an expense.

How is interest on a loan granted by the proprietor treated in accounting?

Answer: Recorded as income.

Fill in the Blanks:

A loan taken by the proprietor is recorded on the _________ side of the Trial Balance.

Answer: credit

Interest on a loan taken by the proprietor is considered as an _________.

Answer: expense

Interest on a loan granted by the proprietor is treated as _________ in accounting.

Answer: income

The accounting treatment of interest loans depends on whether the loan is taken or _________.

Answer: granted

Reading Comprehension for Banking Exams #8

Inflation is a sustained increase in the aggregate price levels. It refers to a state of rising prices and not a state of high prices.

The types of inflation observed in an economy are dependent on the rate of increase in price levels and are as follows:

  • In Creeping inflation, the price level increases at a very slow rate of 2–2.5% per annum.
  • In Walking inflation, the general price level of the economy increases at the rate of 5–6% per annum.
  • In Running inflation, the general price level increases faster and the rate of increase in price level is about 10% per annum. The rate becomes a double-digit figure.
  • In Hyperinflation, the general price level increases at the rate of 200% or more per month. Here, the price rise is ten or even a hundred-fold in a month.

Multiple Choice Questions (MCQs):

What is inflation?

  • A) A sustained decrease in aggregate price levels
  • B) A sustained increase in aggregate price levels
  • C) A temporary decrease in aggregate price levels
  • D) A temporary increase in aggregate price levels

Answer: B) A sustained increase in aggregate price levels

What characterizes Creeping inflation?

  • A) Price level increases of 5–6% per annum
  • B) Price level increases at a slow rate of 2–2.5% per annum
  • C) Price level increases of 10% per annum
  • D) Price level increases of 200% or more per month

Answer: B) Price level increases at a slow rate of 2–2.5% per annum

At what rate does Walking inflation occur?

  • A) 2–2.5% per annum
  • B) 5–6% per annum
  • C) 10% per annum
  • D) 200% or more per month

Answer: B) 5–6% per annum

What characterizes Running inflation?

  • A) Price level increases of 2–2.5% per annum
  • B) Price level increases of 5–6% per annum
  • C) Price level increases of 10% per annum
  • D) Price level increases of 200% or more per month

Answer: C) Price level increases of 10% per annum

What rate of increase in price levels characterizes Hyperinflation?

  • A) 2–2.5% per annum
  • B) 5–6% per annum
  • C) 10% per annum
  • D) 200% or more per month

Answer: D) 200% or more per month

True or False Questions:

Inflation refers to a state of high prices rather than a state of rising prices.

False. Inflation refers to a state of rising prices.

Creeping inflation is characterized by a slow rate of increase in price levels.

True.

Running inflation occurs when the rate of increase in price levels is below 5% per annum.

False. Running inflation occurs when the rate of increase in price levels is about 10% per annum.

Very Short Answer Questions:

What is inflation?

Answer: A sustained increase in aggregate price levels.

What is the characteristic rate of increase in price levels in Creeping inflation?

Answer: 2–2.5% per annum.

At what rate does Hyperinflation occur?

Answer: 200% or more per month.

Fill in the Blanks:

Creeping inflation occurs when the price level increases at a _________ rate of 2–2.5% per annum.

Answer: slow

Running inflation occurs when the rate of increase in price level is about _________ per annum.

Answer: 10%

In Hyperinflation, the general price level increases at the rate of _________ or more per month.

Answer: 200%

Reading Comprehension for Banking Exams #9

Every transaction is first recorded in the Journal. But as the business grows, the volume of transactions also increases and it becomes practically very difficult to record all the transactions in the Journal. So, for all the transactions related to Cash whether it is receipt or payment a separate book is maintained, which is called CashBook.

In Cash Book, all the transactions related to receipts of cash are recorded on the left side of the book as Cash Receipts, and all the transactions related to cash payments are recorded on the Right Side of the Book as Cash Payments. Balance of Cash or Bank on any day can be calculated by deducting the total of the Right side (or Payment side) of the book from the total of the Left Side (or Receipt side) of the book.

Features of the CashBook

  • It records only cash transactions.
  • All transactions relating to the receipt of cash or cheque are recorded on the Left Side of the Cash Book and the transactions related to payment of cash or cheque are recorded on the Right Side of the Cash Book.
  • Transactions are recorded in the Cash Book as and when they occurred i.e. in chronological order.
  • It serves both the purpose of Journal as well as Ledger.

Multiple Choice Questions (MCQs):

What is the primary purpose of the Cash Book?

  • A) Recording all types of transactions
  • B) Recording only cash transactions
  • C) Maintaining inventory records
  • D) Managing employee salaries

Answer: B) Recording only cash transactions

How are cash receipts recorded in the Cash Book?

  • A) On the debit side
  • B) On the credit side
  • C) On both sides
  • D) Not recorded

Answer: A) On the debit side

How are cash payments recorded in the Cash Book?

  • A) On the debit side
  • B) On the credit side
  • C) On both sides
  • D) Not recorded

Answer: B) On the credit side

How is the balance of cash or bank calculated in the Cash Book?

  • A) By adding the total of both sides
  • B) By subtracting the total of the right side from the total of the left side
  • C) By subtracting the total of the left side from the total of the right side
  • D) By comparing with the inventory records

Answer: C) By subtracting the total of the left side from the total of the right side

What purpose does the Cash Book serve?

  • A) Recording transactions only
  • B) Maintaining inventory records
  • C) Serving as a journal and ledger
  • D) Managing employee salaries

Answer: C) Serving as a journal and ledger

True or False Questions:

The Cash Book records all types of transactions, including credit transactions.

False. The Cash Book records only cash transactions.

Cash receipts are recorded on the credit side of the Cash Book.

False. Cash receipts are recorded on the debit side.

Transactions are recorded in the Cash Book in a random order.

False. Transactions are recorded in chronological order.

Very Short Answer Questions:

What types of transactions are recorded in the Cash Book?

Answer: Only cash transactions.

How are cash payments recorded in the Cash Book?

Answer: On the credit side.

How is the balance of cash or bank calculated in the Cash Book?

Answer: By subtracting the total of the left side from the total of the right side.

Fill in the Blanks:

The Cash Book records only _________ transactions.

Answer: cash

Cash receipts are recorded on the _________ side of the Cash Book.

Answer: debit

Transactions are recorded in the Cash Book in _________ order.

Answer: chronological

The Cash Book serves both the purpose of _________ as well as _________.

Answer: Journal, Ledger

Reading Comprehension for Banking Exams #10

The Right to Information (RTI) Act was passed on 15 June 2005 and came into force on 13 October 2005. According to the provisions of the RTI Act, the right to information means the right to access information held by or under the control of any public authority. It includes the right to

  • Inspection of work, documents, and records
  • Making notes, certified copies of documents or records
  • Making certified samples of material
  • Receiving information in the form of CDs or any other form of electronic mode or through printouts where that information is stored in a computer or any other device.

Multiple Choice Questions (MCQs):

What does the Right to Information (RTI) Act provide?

  • A) Access to information held by private entities
  • B) Access to information held only by government agencies
  • C) Access to information held by or under the control of any public authority
  • D) Access to information held by foreign governments

Answer: C) Access to information held by or under the control of any public authority

Which of the following is NOT included in the right to information according to the RTI Act?

  • A) Inspection of work, documents, and records
  • B) Making notes and certified copies of documents or records
  • C) Conducting interviews with public officials
  • D) Receiving information in electronic form or printouts

Answer: C) Conducting interviews with public officials

What is one of the rights provided under the RTI Act?

  • A) Making certified samples of material
  • B) Conducting surveillance on public authorities
  • C) Making unauthorized changes to official documents
  • D) Distributing classified information

Answer: A) Making certified samples of material

In what form can information be received under the RTI Act?

  • A) Only in physical copies
  • B) Only in CDs
  • C) Only in electronic mode
  • D) In CDs or any other form of electronic mode or through printouts

Answer: D) In CDs or any other form of electronic mode or through printouts

When did the RTI Act come into force?

  • A) 15 June 2005
  • B) 13 October 2005
  • C) 15 October 2005
  • D) 13 June 2005

Answer: B) 13 October 2005

True or False Questions:

The RTI Act provides access to information held by private entities.

False. The RTI Act provides access to information held by or under the control of any public authority.

Making unauthorized changes to official documents is one of the rights provided under the RTI Act.

False. Making unauthorized changes to official documents is not a right provided under the RTI Act.

Information under the RTI Act can only be received in physical copies.

False. Information under the RTI Act can be received in electronic form or printouts as well.

Very Short Answer Questions:

What does the RTI Act provide access to?

Answer: Information held by or under the control of any public authority.

What forms can information be received in under the RTI Act?

Answer: Electronic form, CDs, printouts.

When did the RTI Act come into force?

Answer: 13 October 2005.

Fill in the Blanks:

According to the RTI Act, the right to information means the right to access information held by or under the control of any _________ authority.

Answer: public

The RTI Act includes the right to inspection of work, documents, and _________.

Answer: records

Information can be received under the RTI Act in electronic mode or through printouts where that information is stored in a computer or any other _________.

Answer: device

The RTI Act came into force on _________ October 2005.

Answer: 13

Reading Comprehension for Banking Exams #11

Public debt is raised by the government when its taxation revenue is insufficient to meet public expenditure. If the government borrows more than the required amount, it may lead to a debt trap situation. In such circumstances, the government borrows to pay interest on old debts. This will impose a greater burden on society. External debt leads to an outflow of economic resources from the country.

When the loan is availed from foreign agencies, the interest payments will flow from the domestic nation to the foreign nation. Added to this, if there is any condition applied in the loan process that the required inputs for the project will be purchased from abroad rather than within the domestic nation, the burden of external debt will be still greater.

Multiple Choice Questions (MCQs):

Why does the government raise public debt?

  • A) To increase taxation revenue
  • B) To meet public expenditure when taxation revenue is insufficient
  • C) To reduce public expenditure
  • D) To eliminate taxation altogether

Answer: B) To meet public expenditure when taxation revenue is insufficient

What situation may arise if the government borrows more than necessary?

  • A) Debt relief
  • B) Debt crisis or debt trap
  • C) Economic prosperity
  • D) Fiscal surplus

Answer: B) Debt crisis or debt trap

What is one consequence of external debt?

  • A) Inflow of economic resources into the country
  • B) Increase in domestic investment
  • C) Outflow of economic resources from the country
  • D) Decrease in government expenditure

Answer: C) Outflow of economic resources from the country

What happens when a government borrows from foreign agencies?

  • A) Interest payments flow from foreign nations to the domestic nation
  • B) Interest payments flow from the domestic nation to foreign nations
  • C) Interest payments are eliminated
  • D) Domestic resources increase

Answer: B) Interest payments flow from the domestic nation to foreign nations

What worsens the burden of external debt?

  • A) Purchasing required inputs domestically
  • B) Condition applied to purchase inputs from foreign nations
  • C) Decreasing taxation revenue
  • D) Increasing government expenditure

Answer: B) Condition applied to purchase inputs from foreign nations

True or False Questions:

Public debt is raised by the government when taxation revenue exceeds public expenditure.

False. Public debt is raised when taxation revenue is insufficient to meet public expenditure.

External debt leads to an inflow of economic resources into the country.

False. External debt leads to an outflow of economic resources from the country.

Borrowing from foreign agencies results in interest payments flowing from the domestic nation to foreign nations.

True.

Very Short Answer Questions:

Why does the government raise public debt?

Answer: To meet public expenditure when taxation revenue is insufficient.

What is a consequence of borrowing more than necessary?

Answer: Debt crisis or debt trap.

What worsens the burden of external debt?

Answer: Condition applied to purchase inputs from foreign nations.

Fill in the Blanks:

Public debt is raised by the government when its taxation revenue is insufficient to meet _________ expenditure.

Answer: public

In a debt trap situation, the government borrows to pay interest on old _________.

Answer: debts

External debt leads to an outflow of economic resources from the _________.

Answer: country

When the government borrows from foreign agencies, interest payments flow from the domestic nation to _________ nations.

Answer: Foreign

Reading Comprehension for Banking Exams #12

The barter system is a system where goods were exchanged for goods in the olden days. The sale and purchase of goods occur at the same time, and their value also remains equal at that point. After the money came into existence, a person could purchase or sell goods with cash without selling or purchasing any goods at that point. Thus, the act of purchase and sale was separated.

Difficulties of Barter System

  • Lack of double coincidence of wants: A person with a particular good has to find a person who has the good of his wants and he should also possess the wanted good of the other person. Hence, the exchange of goods is not possible without the double coincidence of wants.
  • Lack of store of value: Wealth is stored in terms of goods as there was no money in existence, storage of goods cost, loss of value, and movement of transfer. Hence, it is not practically possible to store people’s purchasing power.
  • Lack of divisibility: All types of goods cannot be divided and subdivided. In the absence of a common medium of exchange, a problem arises when a big indivisible commodity is to be exchanged for a smaller commodity.
  • Lack of deferred payment: Money has made deferred payments easier. When money is borrowed, the principal and interest amounts have to be returned to the lender. However, these transactions are not possible in goods and services.
  • The problem of storing wealth: In the absence of money, individuals have to store wealth. The value of stored commodities may change over time. Storing a particular good for a longer period is more expensive.

Multiple Choice Questions (MCQs):

What is the barter system?

  • A) A system where goods are exchanged for money
  • B) A system where goods are exchanged for goods
  • C) A system where goods are stored for future use
  • D) A system where goods are sold without payment

Answer: B) A system where goods are exchanged for goods

What is a difficulty of the barter system related to lack of double coincidence of wants?

A) Finding a person with desired goods

B) Finding a person willing to exchange goods

C) Finding a person with desired goods who also wants the goods you possess

D) Finding a person with money to purchase goods

Answer: C) Finding a person with desired goods who also wants the goods you possess

Why is lack of store of value a difficulty in the barter system?

  • A) Wealth cannot be stored in terms of goods
  • B) Goods lose value over time
  • C) Goods are difficult to transport
  • D) Goods cannot be divided easily

Answer: A) Wealth cannot be stored in terms of goods

What problem arises due to lack of divisibility in the barter system?

  • A) Difficulty in finding exchange partners
  • B) Difficulty in transporting goods
  • C) Difficulty in exchanging large commodities for smaller ones
  • D) Difficulty in storing wealth

Answer: C) Difficulty in exchanging large commodities for smaller ones

How has money made deferred payments easier?

  • A) By allowing borrowing and lending of goods
  • B) By providing a common medium of exchange
  • C) By allowing goods to be stored for future use
  • D) By eliminating the need for exchange partners

Answer: A) By allowing borrowing and lending of goods

True or False Questions:

In the barter system, goods are exchanged for money.

False. In the barter system, goods are exchanged for goods.

Lack of divisibility is a difficulty of the barter system.

True.

Deferred payments are easier in the barter system compared to using money.

False. Deferred payments are easier with money.

Very Short Answer Questions:

What is the main difficulty of the barter system related to exchange?

Answer: Lack of double coincidence of wants.

Why is lack of store of value a problem in the barter system?

Answer: Wealth cannot be stored in terms of goods.

How has money made deferred payments easier?

Answer: By allowing borrowing and lending of goods.

Fill in the Blanks:

The barter system involves the exchange of goods for _________.

Answer: goods

Lack of double coincidence of wants makes exchange difficult as individuals need to find someone with desired goods who also wants the goods they _________.

Answer: Possess

Money has made deferred payments easier by allowing the borrowing and lending of _________.

Answer: goods

In the absence of money, individuals have to store wealth in the form of _________, which may change in value over time.

Answer: goods

Reading Comprehension for Banking Exams #13

The World Trade Organization (WTO) is an organization with 164 members and 25 observer governments and aims to liberalize international trade. At the international level, the WTO has pressured developing countries to liberalize trade and investment.

Objectives of the World Trade Organization

  • The main aim of the WTO is to implement the new world trade system.
  • To promote world trade in a way that benefits every country.
  • To ensure that developing countries secure a better balance in sharing the advantages, resulting from the expansion of international trade, corresponding to their developmental needs.
  • To remove all the restrictions to an open world trading system and introduce an international economic renaissance because world trade is an effective instrument for faster economic growth.
  • To enhance competitiveness among all trading partners to benefit consumers and help in global integration.
  • To expand and use the available resources to the maximum level.
  • To improve the standard of living for the global population and speed up the economic development of member nations.

Multiple Choice Questions (MCQs):

How many members does the World Trade Organization (WTO) have?

  • A) 100 members
  • B) 164 members
  • C) 200 members
  • D) 50 members

Answer: B) 164 members

What is one of the objectives of the WTO?

  • A) To restrict international trade
  • B) To promote world trade in a way that benefits every country
  • C) To impose trade barriers
  • D) To favor developed countries over developing countries

Answer: B) To promote world trade in a way that benefits every country

What is the aim of the WTO regarding developing countries?

  • A) To pressure them to restrict trade and investment
  • B) To ensure they do not benefit from international trade
  • C) To secure a better balance in sharing the advantages of international trade
  • D) To exclude them from the global trading system

Answer: C) To secure a better balance in sharing the advantages of international trade

What does the WTO aim to remove?

  • A) Barriers to an open world trading system
  • B) Benefits of international trade
  • C) Competitiveness among trading partners
  • D) Resources available for trade

Answer: A) Barriers to an open world trading system

How does the WTO aim to benefit consumers?

  • A) By reducing competitiveness among trading partners
  • B) By restricting trade
  • C) By promoting global integration
  • D) By imposing trade barriers

Answer: C) By promoting global integration

True or False Questions:

The WTO aims to restrict international trade.

False. The WTO aims to liberalize international trade.

One of the objectives of the WTO is to ensure that developing countries secure a better balance in sharing the advantages of international trade.

True.

The WTO aims to limit the expansion of international trade.

False. The WTO aims to remove restrictions on an open-world trading system.

Very Short Answer Questions:

How many observer governments does the WTO have?

Answer: 25 observer governments

What is the main aim of the WTO?

Answer: To implement the new world trade system.

How does the WTO aim to benefit consumers?

Answer: By enhancing competitiveness among trading partners.

Fill in the Blanks:

The World Trade Organization (WTO) aims to liberalize _________ trade.

Answer: international

One of the objectives of the WTO is to ensure that developing countries secure a better balance in sharing the advantages of _________ trade.

Answer: international

The WTO aims to remove all restrictions to an open world trading system and introduce an international _________ renaissance.

Answer: economic

The WTO aims to improve the standard of living for the global population and speed up the economic development of _________ nations.

Answer: Member

Reading Comprehension for Banking Exams #14

A multinational corporation is a large company that carries on its products and business activities in more than one country. It is also called a transnational corporation as its operations extend beyond the boundaries of the nation in which it was initiated. Example: multinational corporations working in India are Johnson and Johnson and Coca-Cola and Indian MNCs include Tata Steel and Reliance Industries.

Multinational corporations are spreading their production across countries in many ways. Large MNCs set up production units jointly with local companies in a country. Many times, Multinational corporations buy local companies and then start expanding their production activities. They provide advanced technology and managerial services to the enterprises established by them. Through these MNCs, technology has been transferred to developing countries. It has enabled them to produce quality goods and make them available in the international market.

Thus, it paves the way to boost exports. Because of the flow of the MNC’s capital in foreign currency, the availability of foreign exchange increases. This in turn enables the country to make payments for imports. Thus, MNCs are playing an important role by spreading their production across countries.

MNCs set up or control production by investing large amounts of money in a country’s economy. They set up their production units close to the markets, where labor is available at a low cost. They work jointly with some local companies where infrastructural facilities are adequate and enhance production in developed cities. Hence, the backward areas remain backward and create regional disparities.

Multiple Choice Questions (MCQs):

What is another term used to refer to multinational corporations?

  • A) International corporations
  • B) Global corporations
  • C) Transnational corporations
  • D) Domestic corporations

Answer: C) Transnational corporations

Which of the following is an example of a multinational corporation?

  • A) Ford (operating only in the United States)
  • B) Tata Motors (operating only in India)
  • C) Johnson and Johnson (operating in multiple countries)
  • D) Walmart (operating only in Canada)

Answer: C) Johnson and Johnson (operating in multiple countries)

How do multinational corporations spread their production across countries?

  • A) By restricting their operations to one country
  • B) By avoiding partnerships with local companies
  • C) By purchasing local companies and expanding production activities
  • D) By limiting technology transfer to developing countries

Answer: C) By purchasing local companies and expanding production activities

What role do multinational corporations play in boosting exports?

  • A) By decreasing the availability of foreign exchange
  • B) By limiting technology transfer
  • C) By spreading production across countries
  • D) By reducing labor costs in developed cities

Answer: C) By spreading production across countries

Why do multinational corporations set up production units close to markets?

  • A) To increase labor costs
  • B) To create regional disparities
  • C) To access low-cost labor
  • D) To hinder technology transfer

Answer: C) To access low-cost labor

True or False Questions:

Multinational corporations operate only within the boundaries of the nation in which they were initiated.

False. Multinational corporations operate beyond the boundaries of their initiating nation.

Multinational corporations contribute to regional disparities by setting up production units in developed cities only.

True.

Multinational corporations hinder technology transfer to developing countries.

False. Multinational corporations facilitate technology transfer to developing countries.

Very Short Answer Questions:

What term is used interchangeably with multinational corporations?

Answer: Transnational corporations.

How do multinational corporations boost exports?

Answer: By spreading production across countries.

Why do multinational corporations set up production units close to markets?

Answer: To access low-cost labor.

Fill in the Blanks:

Multinational corporations spread their production across countries by setting up production units jointly with _________ companies.

Answer: Local

Multinational corporations facilitate technology transfer to _________ countries.

Answer: Developing

Multinational corporations invest large amounts of money in a country’s economy to set up or control _________.

Answer: Production

Reading Comprehension for Banking Exams #15

A monopoly is a form of market where there is a single seller of goods with no close substitutes.

Features of Monopoly

  • There is a single seller and a large number of buyers of the commodity.
  • There are some restrictions on the entry of new firms into the monopoly industry. Generally, there are patent rights or exclusive control over a technique or raw material.
  • They produce a commodity that has no close substitutes. Hence, there will not be any shift in consumer preferences from one product to another.
  • Being a single seller of the product, a monopolist has full control over its price. Hence, a monopolist is a price maker.
  • A monopolist charges different prices from different buyers for the same product to maximize profits. This is called price discrimination.
  • The firm does not spend much on advertisements. It incurs only nominal selling costs in the beginning just to give information to buyers about its product.

Multiple Choice Questions (MCQs):

What is a characteristic feature of a monopoly market?

  • A) Multiple sellers and multiple buyers
  • B) Single seller and multiple buyers
  • C) Single seller and single buyer
  • D) Multiple sellers and single buyer

Answer: B) Single seller and multiple buyers

How does a monopoly maintain its market dominance?

  • A) By allowing easy entry of new firms
  • B) By producing goods with close substitutes
  • C) By having exclusive control over raw materials or technology
  • D) By engaging in perfect competition

Answer: C) By having exclusive control over raw materials or technology

What term is used to describe the situation where a monopolist charges different prices to different buyers for the same product?

  • A) Price equilibrium
  • B) Price stability
  • C) Price discrimination
  • D) Price competition

Answer: C) Price discrimination

Why does a monopolist have full control over the price of its product?

  • A) Because it has no buyers
  • B) Because it has no substitutes
  • C) Because it faces stiff competition
  • D) Because it has no control over production

Answer: B) Because it has no substitutes

What is the characteristic behavior of a monopolist regarding advertising and selling costs?

  • A) Spending heavily on advertising
  • B) Incurring high selling costs
  • C) Charging low prices to attract buyers
  • D) Incurring only nominal selling costs

Answer: D) Incurring only nominal selling costs

True or False Questions:

In a monopoly market, there is a single seller and multiple buyers.

True.

Monopolies often spend heavily on advertising to attract buyers.

False.

A monopolist charges the same price to all buyers for the same product.

False.

Very Short Answer Questions:

What term describes the situation where a monopolist charges different prices to different buyers for the same product?

Answer: Price discrimination.

What type of control does a monopolist have over the price of its product?

Answer: Full control.

How does a monopoly maintain its market dominance?

Answer: By having exclusive control over raw materials or technology.

Fill in the Blanks:

In a monopoly market, there is a single seller and a large number of _________.

Answer: buyers

Price discrimination is a strategy used by monopolists to charge different prices from different _________ for the same product.

Answer: buyers

A monopolist has full control over the price of its product because it has no close _________.

Monopolists incur only nominal selling costs and do not spend much on _________.

Answer: advertisements

Reading Comprehension for Banking Exams #16

Fiscal policy refers to the revenue and expenditure policies of the government and helps to correct the situations of excess and deficient demands. It is also called the budgetary policy of the government.

Components of Fiscal Policy

  • Government expenditure is increased to adjust deficient demand and decreased to adjust excess demand.
  • The tax burden is decreased to adjust deficient demand and increased to adjust excess demand.
  • Public borrowing is increased to adjust excess demand and decreased to adjust deficient demand.
  • Borrowing from RBI is increased to adjust deficient demand and decreased to adjust excess demand.

Multiple Choice Questions (MCQs):

What does fiscal policy refer to?

  • A) Monetary policies of the government
  • B) Revenue and expenditure policies of the government
  • C) Industrial policies of the government
  • D) Social welfare policies of the government

Answer: B) Revenue and expenditure policies of the government

How does the government adjust deficient demand through fiscal policy?

  • A) By decreasing government expenditure
  • B) By increasing government expenditure
  • C) By decreasing taxes
  • D) By increasing taxes

Answer: B) By increasing government expenditure

What does the government do to adjust excess demand according to fiscal policy?

  • A) Increases public borrowing
  • B) Decreases public borrowing
  • C) Decreases government expenditure
  • D) Increases taxes

Answer: D) Increases taxes

When does the government increase borrowing from the Reserve Bank of India (RBI) according to fiscal policy?

  • A) To adjust excess demand
  • B) To adjust deficient demand
  • C) To decrease government expenditure
  • D) To decrease taxes

Answer: B) To adjust deficient demand

What is another name for fiscal policy?

  • A) Monetary policy
  • B) Budgetary policy
  • C) Industrial policy
  • D) Social welfare policy

Answer: B) Budgetary policy

True or False Questions:

Fiscal policy helps to correct situations of excess and deficient demands.

True.

Government expenditure is increased to adjust excess demand.

False.

Public borrowing is decreased to adjust deficient demand.

True.

Very Short Answer Questions:

What is fiscal policy also called?

Answer: Budgetary policy.

How does the government adjust deficient demand through fiscal policy?

Answer: By increasing government expenditure.

When does the government increase borrowing from the Reserve Bank of India (RBI)?

Answer: To adjust deficient demand.

Fill in the Blanks:

Fiscal policy refers to the revenue and expenditure policies of the _________.

Answer: government

Government expenditure is increased to adjust _________ demand.

Answer: deficient

The tax burden is increased to adjust _________ demand.

Answer: excess

Borrowing from RBI is increased to adjust _________ demand.

Answer: deficient

Reading Comprehension for Banking Exams #17

Goodwill is the value of a firm’s reputation and its good brand name in the market. A firm earns goodwill through its hard work. Goodwill helps a firm win the trust and faith of the customers by fulfilling their demands in both qualitative and quantitative aspects. It can be said that the goodwill of a firm is a result of the past efforts made by it which helps a firm to earn higher profits in the present and the future as well.

In other words, positive goodwill helps a firm earn supernormal profits as compared to the other firms that earn only normal profits. Goodwill is considered an intangible asset of the firm. It means it cannot be seen or touched like other assets of the firm. It plays a very crucial role for any firm to survive and compete in the market.

In the words of Lord Eldon, “Goodwill is nothing more than the probability that the old customers will resort to the old place”.

Multiple Choice Questions (MCQs):

What is goodwill?

  • A) The physical assets of a firm
  • B) The reputation and brand name of a firm
  • C) The profits earned by a firm
  • D) The liabilities of a firm

Answer: B) The reputation and brand name of a firm

How does goodwill help a firm in the market?

  • A) By decreasing customer trust
  • B) By earning lower profits
  • C) By fulfilling customer demands
  • D) By decreasing brand recognition

Answer: C) By fulfilling customer demands

What role does goodwill play in a firm’s profitability?

  • A) It decreases profitability
  • B) It has no impact on profitability
  • C) It helps earn supernormal profits
  • D) It decreases customer trust

Answer: C) It helps earn supernormal profits

How is goodwill classified?

  • A) Tangible asset
  • B) Physical asset
  • C) Intangible asset
  • D) Liability

Answer: C) Intangible asset

According to Lord Eldon, what is goodwill?

  • A) The physical location of a firm
  • B) The loyalty of old customers
  • C) The probability of earning higher profits
  • D) The probability of old customers returning

Answer: D) The probability of old customers returning

True or False Questions:

Goodwill is the tangible assets of a firm.

False.

Goodwill helps a firm earn lower profits.

False.

Goodwill is considered an intangible asset of the firm.

True.

Very Short Answer Questions:

Define goodwill.

Answer: Goodwill is the value of a firm’s reputation and its good brand name in the market.

How does goodwill contribute to a firm’s profitability?

Answer: Goodwill helps a firm earn supernormal profits.

According to Lord Eldon, what is goodwill?

Answer: The probability that old customers will return to the old place.

Fill in the Blanks:

Goodwill is considered an _________ asset of the firm.

Answer: intangible

Goodwill helps a firm win the trust and faith of _________.

Answer: Customers

Positive goodwill helps a firm earn supernormal profits compared to firms earning only _________ profits.

Answer: Normal

Goodwill is the value of a firm’s reputation and its good brand name in the _________.

Answer: market

Reading Comprehension for Banking Exams #18

According to Section 4 of the Partnership Act, of 1932, a partnership is an agreement between two or more persons who have agreed to share profits or losses of a business that will be carried by all or any one of them acting for all. The persons who joined their hands to set up the partnership business individually are known as ‘Partners’ and all the partners in the partnership business are collectively known as ‘Firm’. The name under which the partners decided to carry out their business is known as ‘Firm Name’.

Rights of Partners of a Partnership Firm

  • Every partner has a right to share profits or losses of the firm equally or in the ratio as agreed among them.
  • Every partner has a right to receive interest on loans and advances provided to the firm at the rate of 6% p.a. if the rate is not agreed upon among the partners.
  • Every partner has a right to participate in the conduct or management of the business.
  • Every partner has a right to access, inspect, and copy the books of accounts and records of the firm.
  • Every partner has a right to voice his/her opinion on the matters relating to the business.
  • Every partner has a right to be indemnified for all the expenses and liabilities incurred by him/her on behalf of the business.
  • Every partner has a right to use the property of the firm exclusively for the partnership business and not for personal use.
  • A partner has a right to restrict the admission of a new partner or prevent the expulsion of an existing partner from the firm.
  • A partner has a right to retire from the firm after giving proper notice or with the consent of all other co-partners.
  • In case of emergency, a partner has a right to act on behalf of the firm to prevent it from losses and possesses a right to claim indemnity for the payments made by him/her for such an act.

Multiple Choice Questions (MCQs):

What is the collective term for all partners in a partnership business?

  • A) Shareholders
  • B) Directors
  • C) Partners
  • D) Firm

Answer: D) Firm

What right does every partner have regarding the conduct or management of the business?

  • A) Right to receive interest on loans
  • B) Right to participate in business decisions
  • C) Right to use property for personal use
  • D) Right to restrict the admission of new partners

Answer: B) Right to participate in business decisions

What right does a partner have regarding the admission of new partners?

  • A) Right to receive interest on loans
  • B) Right to participate in business decisions
  • C) Right to restrict the admission of new partners
  • D) Right to retire from the firm

Answer: C) Right to restrict admission of new partners

How can a partner retire from the firm?

  • A) By giving proper notice
  • B) By preventing expulsion of existing partners
  • C) By restricting admission of new partners
  • D) By claiming indemnity for expenses

Answer: A) By giving proper notice

In case of emergency, what right does a partner possess?

  • A) Right to claim indemnity for expenses
  • B) Right to restrict the admission of new partners
  • C) Right to use property for personal use
  • D) Right to participate in business decisions

Answer: A) Right to claim indemnity for expenses

True or False Questions:

Every partner has a right to share the profits or losses of the firm equally.

True.

A partner cannot retire from the firm without the consent of all other co-partners.

False.

Partners are not allowed to use the property of the firm for personal use.

True.

Very Short Answer Questions:

What is the collective term for all partners in a partnership business?

Answer: Firm.

What right does every partner have regarding the conduct or management of the business?

Answer: Right to participate in business decisions.

How can a partner retire from the firm?

Answer: By giving proper notice.

Fill in the Blanks:

The name under which the partners carry out their business is known as ‘_________’.

Answer: Firm Name

Every partner has a right to participate in the conduct or management of the _________.

Answer: business

A partner has a right to use the property of the firm exclusively for the partnership business and not for _________ use.

Answer: personal

A partner has a right to _________ the admission of a new partner or prevent the expulsion of an existing partner from the firm.

Answer: restrict

Reading Comprehension for Banking Exams #19

Although a computer system has various advantages, it suffers from certain limitations, which are listed below:

Has no mind: The computer system works as per the set instructions or commands given to it. Unlike Human Beings, it does not have any common sense. So, if wrong instructions are given to it by human beings, it will work accordingly without applying its mind.

Lack of Intelligence: A computer system cannot perform a task on its own. It has to be programmed with a set of instructions to perform a particular function. Also, in case of any unforeseen condition, it cannot decide what exactly is to be done unless they are instructed to handle such a situation.

Cannot take its own decisions: As decision-making involves analyzing data, comparison with already available data, and analysis of the present environment, it, therefore, requires an intellectual mind, alertness, common sense, and intelligence. Since computers work on a set of instructions given, thus it lack all the above features that are required for quality decision-making.

Multiple Choice Questions (MCQs):

What is one limitation of computer systems mentioned in the passage?

  • A) Lack of instructions
  • B) Lack of common sense
  • C) Lack of hardware
  • D) Lack of memory

Answer: B) Lack of common sense

Why does a computer system require instructions to perform a task?

  • A) Due to lack of hardware
  • B) Due to lack of memory
  • C) Due to lack of intelligence
  • D) Due to lack of software

Answer: C) Due to lack of intelligence

What is a requirement for decision-making that computers lack?

  • A) Alertness
  • B) Common sense
  • C) Hardware
  • D) Memory

Answer: B) Common sense

What is the consequence of wrong instructions given to a computer system?

  • A) It applies its mind
  • B) It performs the task correctly
  • C) It works accordingly without applying its mind
  • D) It takes its own decisions

Answer: C) It works accordingly without applying its mind

How does a computer system handle unforeseen conditions?

  • A) It applies its mind
  • B) It decides what needs to be done
  • C) It follows a set of instructions
  • D) It analyzes the present environment

Answer: C) It follows a set of instructions

True or False Questions:

Computer systems have common sense and can make decisions on their own.

False.

Decision-making involves analyzing data, comparison with already available data, and analysis of the present environment.

True.

Computer systems lack the features required for quality decision-making.

True.

Very Short Answer Questions:

What is one limitation of computer systems mentioned in the passage?

Answer: Lack of common sense.

Why does a computer system require instructions to perform a task?

Answer: Due to lack of intelligence.

What requirement for decision-making do computers lack?

Answer: Common sense.

Fill in the Blanks:

A computer system works as per the set instructions or commands given to it and has no _________.

Answer: common sense

Decision-making requires an intellectual mind, alertness, common sense, and _________.

Answer: Intelligence

Computers work on a set of instructions given, thus they lack the features required for quality _________.

Answer: decision-making

In case of any unforeseen condition, computers cannot decide what exactly is to be done unless they are _________ to handle such a situation.

Answer: instructed

Reading Comprehension for Banking Exams #20

Non Profit Organizations (NPOs) are formed with the basic motive of rendering services and with the welfare motive. A few examples of Non-Profit Organizations (NPOs) are charitable trusts, hospitals, schools, temples, social clubs, and sports clubs. These organizations are managed and governed by the person(s) who are known as trustees.

Features of Non-Profit Organizations (NPOs)

Welfare-Motive Objective: The prime motive to set up an NPO is to render services to its members and society. In this way, an NPO aims to enhance social welfare.

Separate Legal Entity: NPOs have a separate legal entity. This entity means that an NPO is different from its members or trustees. This implies that NPO remains unaffected by the death of existing members and/or the admission of new members. In different words, an NPO is treated as an artificial person.

Income Sources: The main sources of income of NPOs are subscriptions from their members, entrance, and admission fees, donations, and grants.

Books of Accounts: These organizations maintain their books of accounts in the form of Receipts and Payments Account, Income, and Expenditure Account, and Balance sheets.

Form: These organizations are established in the form of trusts, charitable institutes, or clubs that aim to promote the welfare of society.

Multiple Choice Questions (MCQs):

What is the primary motive behind forming Non-Profit Organizations (NPOs)?

  • A) Profit maximization
  • B) Rendering services and welfare motive
  • C) Competition with other organizations
  • D) Cost reduction

Answer: B) Rendering services and welfare motive

Which of the following is NOT an example of a Non-Profit Organization (NPO)?

  • A) Charitable trusts
  • B) Hospitals
  • C) Corporations
  • D) Social clubs

Answer: C) Corporations

How are NPOs managed and governed?

  • A) By shareholders
  • B) By trustees
  • C) By directors
  • D) By employees

Answer: B) By trustees

What are the main sources of income for Non-Profit Organizations (NPOs)?

  • A) Sales revenue
  • B) Donations and grants
  • C) Investment returns
  • D) Advertising revenue

Answer: B) Donations and grants

In what form are Non-Profit Organizations (NPOs) established?

  • A) Sole proprietorships
  • B) Partnerships
  • C) Trusts, charitable institutes, or clubs
  • D) Limited liability companies

Answer: C) Trusts, charitable institutes, or clubs

True or False Questions:

Non-Profit Organizations (NPOs) aim to maximize profits.

False.

NPOs have a separate legal entity, making them unaffected by changes in membership.

True.

The primary sources of income for NPOs are investments and sales revenue.

False.

Very Short Answer Questions:

What is the primary motive behind forming Non-Profit Organizations (NPOs)?

Answer: Rendering services and welfare motive.

How are NPOs managed and governed?

Answer: By trustees.

What form are Non-Profit Organizations (NPOs) established in?

Answer: Trusts, charitable institutes, or clubs.

Fill in the Blanks:

The main sources of income of NPOs are subscriptions from their members, entrance and admission fees, donations, and _________.

Answer: grants.

Non-Profit Organizations (NPOs) maintain their books of accounts in the form of Receipts and Payments Account, Income, and Expenditure Account, and _________.

Answer: Balance sheets.

NPOs have a separate legal entity, implying that they are different from their members or trustees and are treated as an _________ person.

Answer: artificial.

Reading Comprehension for Banking Exams #21

Income of the current year which is still to be received by a business is known as accrued income. These are the incomes that a business earns during the current year but are not received in the same year. In short, these incomes are earned in the current year but are received in the next accounting year. These incomes are also known as Outstanding Income or Income Receivable or Incomes earned but not received.

For example, rent is to be received at Rs 2,000 per month. During the year rent received Rs 22,000. In this case, rent for one month i.e. Rs 2,000 is still to be received. Thus, the amount of Rs 2,000 is considered as outstanding rent or rent receivable.

Multiple Choice Questions (MCQs):

What is accrued income?

  • A) Income received in the current year
  • B) Income earned in the current year but received in the next accounting year
  • C) Income received in the next accounting year
  • D) Income earned in the previous year

Answer: B) Income earned in the current year but received in the next accounting year

Accrued income is also known as:

  • A) Prepaid income
  • B) Outstanding income
  • C) Deferred income
  • D) Accrued expenses

Answer: B) Outstanding income

How is accrued income recorded in the books of accounts?

  • A) As an expense
  • B) As a liability
  • C) As an asset
  • D) As revenue

Answer: C) As an asset

Which of the following is an example of accrued income?

  • A) Rent received in advance
  • B) Interest earned but not yet received
  • C) Salary paid to employees
  • D) Sales revenue received on credit

Answer: B) Interest earned but not yet received

Accrued income represents:

  • A) Income earned in the previous year
  • B) Income received in the current year
  • C) Income earned but not yet received
  • D) Income received in the next accounting year

Answer: C) Income earned but not yet received

True or False Questions:

Accrued income refers to income received in the current year.

False

Accrued income is recorded as a liability in the books of accounts.

False

Accrued income is also known as prepaid income.

False

Very Short Answer Questions:

Define accrued income.

Answer: Accrued income is income earned in the current year but not yet received.

What is another term for accrued income?

Answer: Outstanding income.

How is accrued income recorded in the books of accounts?

Answer: As an asset.

Fill in the Blanks:

Accrued income represents income _________ but not yet _________.

Answer: earned, received.

Accrued income is recorded on the _________ side of the balance sheet.

Answer: asset.

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