1. Which accounting standard deals with "The Effects of Changes in Foreign Exchange Rates"?
Explanation:
AS 11 prescribes how to account for foreign currency transactions and foreign operations. AS 10 is Property, Plant & Equipment; AS 3 is Cash Flow; AS 9 is Revenue Recognition.
2. According to AS 11, monetary items (like foreign currency loans or receivables) should be reported at the Balance Sheet date using the:
Forward Rate.
Closing Rate (Spot Rate at Balance Sheet date).
Average Rate of the year.
Rate at the date of transaction.
Explanation:
Monetary items (money held and assets/liabilities to be received/paid in fixed money amounts) must be translated at the Closing Rate. Exchange differences are recognized in P&L.
3. Which of the following is NOT an Officially Valid Document (OVD) for KYC?
Passport
PAN Card
Voter ID
NREGA Job Card
Explanation:
While PAN is mandatory for many financial transactions (Income Tax purpose), it is technically NOT in the list of 6 OVDs for "Proof of Address" in KYC norms because it does not contain an address.
4. When converting the Trial Balance of a "Non-Integral Foreign Operation" (NIFO), assets and liabilities are translated at:
Historical Rate
Closing Rate
Average Rate
Opening Rate
Explanation:
For NIFO, assets and liabilities (both monetary and non-monetary) are translated at the Closing Rate because the investment is treated as a net investment. For Integral Operations, non-monetary items use Historical Rate.
5. A Forward Exchange Contract is recorded in the books:
At the date of settlement only.
Only if there is a loss.
Never recorded.
At the inception of the contract.
Explanation:
As per AS 11, forward contracts should be recorded at inception. The premium/discount is amortized over the life of the contract.
6. In banking, "Value Date" refers to:
The date of the cheque.
The date of account opening.
The date on which the transaction is entered in the system.
The effective date from which the interest accrual begins.
Explanation:
Sometimes entry date and value date differ. For interest calculation, the Value Date is what matters.
7. Unreconciled entries in "Inter-Office Adjustments" accounts are a major risk area for banks because:
They are required by RBI.
They may hide frauds or misappropriations.
They reduce taxes.
They increase profit.
Explanation:
If branch A debits Branch B, and Branch B doesn't credit, the money might be siphoned off. Long outstanding entries suggest control failure.