Union Public Service Commission

Public Provident Fund

EPFO APFC &

Study Material
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SP &

Question Bank
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Chief Editor
A.K. Mahajan
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UPSC, EPFO Exam Expert Group
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full care has been taken by the Editor and the Publisher,
still your suggestions and queries are welcomed. Rs. : 295/-
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 INDEX
g Accounting and General Accounting Principle ............................................................................................3-38
Company's Accounts ....................................................................................................................................... 8
Partnership ..................................................................................................................................................... 15
Capital and Revenue Profit............................................................................................................................ 19
Previous Year MCQ ...................................................................................................................................... 21
Practice MCQ ................................................................................................................................................ 24
g Insurance .......................................................................................................................................................39-48
Important insurance Plans ............................................................................................................................. 43
Previous Year MCQ ...................................................................................................................................... 44
Practice MCQ ................................................................................................................................................ 45
g AUDITING ....................................................................................................................................................49-65
Previous Year MCQ ...................................................................................................................................... 60
Practice MCQ ................................................................................................................................................ 60
g Social Security ...............................................................................................................................................66-69
Previous Year ................................................................................................................................................ 67
g Industrial Relations & Labour Laws ..........................................................................................................70-95
Development of Labour Laws In India.......................................................................................................... 73

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12- Payment of Wages Act, 1936 .................................................................................................................. 77
Previous Year MCQ ...................................................................................................................................... 86
Practice MCQ ................................................................................................................................................ 90
g
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Computer Application ................................................................................................................................96-128
Multimedia Projector................................................................................................................................... 100
Introduction to the Internet WWW and Web Browser ................................................................................ 106
Computer Note ............................................................................................................................................ 107
Previous Year MCQ .................................................................................................................................... 116
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Practice MCQ .............................................................................................................................................. 120
Union Public Service Commission
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EPFO EO/AO & APFC Syllabus

Scheme and syllabus for the Recruitment Test (RT) for the posts of Enforcement Officers/Accounts
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Officers is as under :
I. Scheme of the RT
(i) The test will be of two hours duration and the medium of the test will be both Hindi and English.
(ii) The test will be an objective type with multiple choices of answers.
(iii) All questions will carry equal marks.
(iv) There will be penalty for wrong answer. Every wrong answer will carry a deduction of one-third of
the marks assigned to that question. If no answer is marked for a question, there will be no penalty
for that question.
II. Syllabus of the RT :
The syllabus of the Test will broadly comprise the following topics :
(i) General English – To evaluate candidate's understanding of English language & workman – like use
of words.
(ii) Indian Freedom Struggle.
(iii) Current Events and Developmental issues.
(iv) Indian Polity & Economy.
(v) General Accounting Principles.
(vi) Industrial Relations & Labour Laws.
(vii) General Science & Knowledge of Computer applications.
(viii) General Mental Ability & Quantitative Aptitude.
(ix) Social Security in India.
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01.
Accounting and General
Accounting Principle
Introduction : Necessity and Importance of Accounting -
Accounting enjoys a remarkable heritage. The history of The necessity of accounting is described below-
accounting is as old as civilisation. The seeds of • Accounting supplies numerical information to the
accounting were most likely first sown in Babylonia and institution relating to its management and
Egypt around 4000 B.C. In Greece, accounting was used administration.
for apportioning the revenues received among treasuries, • Exact results of the institution are disclosed through
maintaining total receipts and payments of government accounting.
transactions. • The firm can ascertain the financial status of the
Accounting practices in India could be traced back to a business operation.
period when twenty three centuries ago, kautilya, a • Firm can compare the financial position of two/more
minister in Chandragupta's kingdom wrote a book named years.
Arthashasthra, which also described how accounting • Proper accounting makes the firm Credible to other

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records had to be maintained. party.
Luca pacioli's a Franciscan friar (marchant class), book • Books of accounts are very valuable documents.
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"Summa de Arithmetica, Geometrica, proportion at
proportionality" in venice 1494 is considered as the first
book on double entry book-keeping.
• Tax authority can assess taxes for the firm using the
accounting information.
Book-Keeping -
Definition of Accounting - Book-Keeping is a process of recording business
Accounting has been defined as, "the art of recording, transactions in the books of accounts in a systematic
classifying and summarizing in a significant manner in
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manner.
terms of money, transactions and events which are, in R.N. Carter has defined, "Book-keeping is the science
part at least, of financial character and interpreting the and art of correctly recording in the books of accounts,
results there of." American Accounting Association all those business transactions that results in transfer of
(AAA) defines "Accounting refers to the process of money's worth."
identifying measuring and communicating economic Book-Keeping Vs Accountancy -
information to permit informed judgment and decisions Book-keeping deals with identifying and recording
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by users of the information. financial transaction only whereas accounting refers to

Objectives of Accounting- the process of summarizing, interpreting and
The main objects of accounting are enumerated below :- communicating the financial data of an organisation.
Proper Recording of Transactions - The first and • Book-keeping is the first stage and it comes
foremost object of accounting is to keep record of immediately after transaction whereas Accounting
monetary transaction in a systematic manner. comes after recording and classification.
Determination of Results - Every person or institution Accountancy is the next stage after Book-Keeping.
is always interested to know the results of his/its • Book-Keeping aims at keeping the record and
monetary transactions at the end of a definite period. So, provides primary information whereas Accountancy
ascertainment of result of financial transactions is an aims at finding the profits or losses and gives
important object of accounting. financial position.
Ascertainment of financial position - Another object of • Book-Keeping basically results in Journal and
accounting is the ascertainment of debtors and creditors, Ledger whereas the results of Accountancy is profit
assets and liabilities and the overall financial position. and Loss A/c and Balance Sheet.
Supplying financial information - Accounting provides • Book-Keeping requires principles of elementary
accounting information to its users in the form of reports, knowledge of journalising and posting whereas
statements, graphs etc. Accountancy requires all the Accounting principles.
Defalcation prevented - The object of accounting is the • Book-Keeping records are used by accountant as it
prevention of defalcation of money made through fraud provides the basis for accountancy whereas
by the officials of the institution as well as control of Accounting records are used by owners,
expenditure. managements, government & other stock holders.
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• Basis of Accountancy (Accounting) - be treated as two separate entities. According to this
(1) Cash Basis - Under this system only cash concept only business transactions are recorded in the
transactions are recorded. In this, income is recorded business book of accounts. proprietor's personal
only when cash is actually received and expenses are transactions are not recorded in the books of accounts.
recorded when cash is actually paid. • Money Measurement Concept -
(2) Accrual Basis - An income is recorded when it is The Money Measurement Concept states that only those
earned (whether cash received or not) and expenses is transaction and happenings in an organisation which can
recorded when they become payable. Both cash as well be expressed in terms of money such as sale of goods or
as credit transactions are recorded. This is also called payment of expenses or receipt of income etc are to be
mercantile Basis of Accounting. recorded in the book of accounts.
Branches of Accounting - • Cost Concept -
Followings are the branches of Accounting- The cost concept requires that all assets are recorded in
Financial Accounting - Financial Accounting is the books of accounts at their purchase price, which
concerned with recording of financial transactions, includes cost of acquisition, transportation, installation
summarizing and interpreting them and communicating and making the asset ready to use. The concept of cost is
historical in nature as it is something, which has been
the results. It is original form accounting that ascertains
profits earned or loss suffered during a specific period paid on the date of acquisition and does not change year
(generally a year) and ascertain the financial position onafter year.
the date when the accounting period ends. • Going Concern Concept -
Cost Accounting - The concept of going concern assumes that a business
It is the process of accounting and controlling the cost of
firm would continue to carry out its operations
product, operating or function. The purpose of this indefinitely i.e. for a fairly long period of time and would
branch of accounting is to ascertain the cost, to control not be liquidated in the foreseeable future.

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the cost and to communicate information for decision. Realisation Concept - According to this concept,
Management Accounting - Income is recorded only when it is realized i.e. either it is
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It is an accounting for the management i.e. accounting
which provides necessary information to the top level
management for discharging its functions. Management
received or earned. Revenues are recorded only when
sale are affected or the services are rendared. Sales
revenues are considered as recognized when sales are
accounting covers various areas such as cost accounting, effected during the accounting period irrespective of the
budgetary control, inventory control, statistical methods,fact whether cash is received or not.
internal auditing etc. The purpose of this branch of Accrual Concept - According to this concept, recording
accounting is to supply all information that management of revenues (Incomes) and expenses of a particular
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may need in taking decisions and to evaluate the impact accounting period, whether they are received or paid in
of its decisions and actions. cash or not. All expenses and revenues related to the
Accounting principles - accounting period are to be considered irrespective of the
"Accounting principles are those rules of action or fact, the revenues (Incomes) are received in cash or not
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conduct, which are accepted universally by all or expenses are paid in cash or not.
accountants in recording transactions in the books of Dual Aspect Concept - It is the foundation or basic
accounts". principle of accounting. It provides the very basis for
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Accounting principles can be broadly classified into two recording business transactions into the book-of
main categories. accounts. This concept states that every transaction has a
dual or two-fold effect and should therefore be recorded
at two places.
Revenue Recognition (Realisation) Concept -
The concept of revenue recognition requires that the
revenue for a business transaction should be included in
the accounting records only when it is realised.
Matching Concept -
According to this concept, the profit of the business is
calculated by matching total revenue earned during the
year with total expenses incurred during the same period.
The difference between the two represents profit or loss.
Accounting period concept -
Accounting period concept is based on the theory that all
accounting transactions of a business should be divided
into equal time periods, which are referred to as
(A) Accounting Concepts - accounting periods.
• Entity Concept/Business Entity Concept - (B) Accounting Convention -
Entity Concept assumes that business has a distinct and Convention of Disclosure -
Separate entity from its owners. It means that for the According to this Convention, the accounts must disclose
purpose of accounting, the business and its owners are to full and fair information to all material (important)
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information. The financial position and performance Accounting equation -
should be disclosed very honestly to all the users. All the Accounting equation signifies that the assets of a
information disclosed should be relevant, reliable, business are always equal to the total of its liabilities and
comparable and understood by all the concerned capital (owner's equity). The equations reads as follows:-
authorities. A=L+C
Convention of Materiality - where,
The Convention of Materiality requires that accounting A = Assets
should focus on material fact. The accountant should L = Liabilities
attach importance to material (important) details and C = Capital
ignore insignificant (unimportant) details.
The above equation can also be presented in the
Convention of Consistency/Consistency Concept - following forms as its derivatives to enables the
Any policy adopted for accounting should be continuous determination of missing figure of capital (C) or
or consistent throughout the business and it need not be Liabilities (L).
changed generally unless and untill circumstances (i) A – L = C
demand.
(ii) A – C = L
Convention of Conservatism -
Since, the accounting equation depicts the fundamental
The Concept of Conservatism (also called 'prudence') relationship among the components of the balance sheet,
provides guidance for recording transactions in the book it is also called the Balance sheet equation.
of accounts and is based on the policy of playing safe.
The Concept states that a conscious approach should be • Introduction to Accounts -
adopted in ascertaining income so that profits of the As per the concept of Double entry system, every
enterprise are not overstated. business transactions has a two effects, i.e. Debit and
Accounting Concept Vs. Accounting Conventions - Credit. An account as we understand it, as a systematic

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record of transaction related to a person, prosperity,
• Accounting Concepts are assumptions and conditions expenses, or income. Every account has two sides. The
on which the whole accounting structure stands. left hand side known as the Debit side and the right hand
practices.
• Accounting Conventions means Customs or
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These are general guidelines for sound accounting side is known as Credit Side. To debit an account means
to record the transaction on debit side and credit an
account means to record the transaction on credit side.
traditions which are followed years together to
prepare accounts of the business concern. ________A/C Cr.
Date Particulars J.F. ` Date Particulars J.F. `
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Types of Accounts -
• Generally Accepted Accounting Principles (GAAP)- Accounts are classified as follows :-
Generally Accepted Accounting principles refers to the (I) Personal Account
rules or guidelines adopted for recording and reporting of (II) Impersonal Account
business transactions in order to bring uniformity in the (a) Real Account
preparation and presentation of financial statements. (b) Nominal Account
These principles are also referred to as concepts and
conventions.
• Accounting Standards -
These are written statements of uniform accounting rules
and guidelines in practice for preparing the uniform and
consistent financial statements. These standards cannot
over ride the provisions of applicable laws, customs,
usages, and business environment in the country.
• Systems of Accounting -
The systems of recording transactions in the book of (I) Personal A/c -
accounts are generally classified into two types, viz, Personal Accounts includes the accounts of persons or
Double entry system and single entry system. parties with whom the business deals.
Double entry system is based on the principle of 'Dual It can be classified into three categories :-
Aspect' which states that every transaction has two (a) Natural or Living personal A/c's -
effect, where as single entry system is known as These accounts are related to natural or living persons.
incomplete records. e.g. Meena's A/c, Mr. Ray's A/c, Miss Reshma's A/c etc.
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(b) Artificial or Legal Personal A/c's - Trading Account -
These are artificial persons created by provisions of law. • Income statement consists of Trading and Profit &
These accounts include accounts of corporate Loss Account. Trading Account is prepared to
(registered) bodies or institutions. e.g., partnership firms, ascertain the results of the trading activities of the
Co-operative societies, Companies, Clubs, Associations, business enterprise.
etc. • It shows weather the selling of goods purchased or
(c) Representative or Groups Personal A/C s. manufactured has earned profit or incurred loss for
These accounts represents certain person or Groups. e.g.- the business unit. Cost of goods sold is subtracted
from the net sales of the business of that accounting
Capital, Drawing, Debtors, Creditors etc. year. In case the total sales value exceeds the cost of
(II) Impersonal A/c - goods sold, the difference is called Gross Profit and
All accounts other than personal accounts are called Vice Versa.
impersonal account. • All accounts related to cost of goods sold. Such as
These are two types of impersonal accounts. opening stock, net purchases i.e. purchase less
(a) Real Account - returns. Outward, direct expenses such as wages,
These accounts relate to all kinds of properties and assets carriage inward etc. and closing stock with net sales
possessed by business. i.e. sales mines sales return are taken to the Trading
These are of two types :- Account. Credit balance shows the gross profit and
debit balance shows the gross loss.
(1) Tangible Real A/C s.
Cost of good sold = Opening stock + Net purchases +
These accounts consists of assets and properties which
All direct expenses – closing stock.
can be seen, touched, felt & measured.
Gross Profit = Net Sales – Cost of goods sold
e.g.- Cash A/C, Building A/C etc.
Format of Trading Account

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(2) Intangible Real accounts-
(Trading Account)
These accounts consists of assets and properties which
cannot be seen, touched but they are capable of (for the year ending .........)
measurement in terms of money.
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e.g.- Goodwill, Copyright, Trade Marks, Patent Right
Dr.
Cr.
Particulars Amount Particulars Amount
etc.
Rs. Rs.
(b) Nominal Account -
These are the accounts of expenses or losses and incomes Opening stock Sales :
or gains. These accounts are called fictitious as they do purchases Less : Sales
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not represent any tangible asset. Less : Purchase Returns
e.g. - Salary A/c, Sales A/c, Electricity A/c etc. Returns Closing stock
Direct Gross loss
The Three Golden Rules of Accounting -
Expenses : transferred to
Types of Accounts The Golden Rules of
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Carriage Profit and

Accounting Inward Loss Account
(1) Real Accounts Debit : What comes in Freight
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Credit : What goes out. Wages

(2) Personal Debit : The receiver. Fuel & Power
Accounts Credit : The Giver. Excise Duty
(3) Nominal Debit : All Expenses and Factory Rent
Accounts Losses. Heating &
Credit : All income and gains. Lighting
Factory Rent &
• Financial Statements :- Insurance
Financial statements are the statements that are prepared work managers
at the end of the accounting period, which is generally salary
one year. These include income statement i.e. Trading Gross profit
and profit & loss account and position statement i.e. transferred to
Balance Sheet. profit and Loss
A/C

Gross profit = Net Sales – Cost of goods sold

Gross loss = Cost of goods sold – Net sales
Profit & Loss Account -
• As the trading account is prepared to ascertain the
Gross profit or Gross loss of the trading activities of
the business.
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• But these are not the final results of business In the words of Freeman, "A Balance sheet is an item
operations of an enterprise. Apart from direct wise list of assets, liabilities and proprietorship of a
expenses, there are indirect expenses also. These may business at a certain date. "Financial position of a
be conveniently divided into office and business is the list of assets owned by the business and
administrative expenses, selling and distribution the claims of various parties against these assets. The
expenses, financial expenses, depreciation and statement prepared to show the financial position is
maintenance charge etc. termed as Balance sheet.
• So, the another account is prepared in which all There is no prescribed form of a Balance Sheet in which
indirect expenses and revenues from sources other it should be prepared by a sole proprietary business or a
than sales are written. partnership firm. However, an order is generally
• This account when balanced shows profit (or loss). maintained in which assets and liabilities are written.
This account is termed as profit and loss account. (a) Liquidity order
• The profit shown by this account is called 'net profit' (b) Permanency order
and if it shows loss it is known as 'net loss'. (Liquidity order) Balance sheet of M/s ..........
Format of Profit and Loss Account - (As on ...................)
Profit and Loss A/C of M/S ................ Liabilities Amount Assets Amount
(for the year ended .................) Rs. Rs.
Dr. Bank ××× Cash in hand ×××
Cr. overdraft ××× Cash at bank ×××
Particulars Amount Particulars Amount Outstanding
Rs. Rs.
Prepaid ×××
expenses ××× expenses ×××
Gross Loss b/d - Gross profit - Investments
Salaries - b/d - ××× ×××

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Bill (shorts term)
Rent, Rates & - Discount - ××× × ××
payables Bill
taxes - Received - Sundry × × × Receivables × × ×
Insurance
premium
Advertising
-
-
-
Commission
Received
Dividend
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-
-
Creditors
Loans
Capital
× ×
×××
× Sundry
Debtors
× ×
×××
Closing stock × × ×
×

Commission Received
- - Add Net Investments ×××
paid - Interest on Profit Furniture
Discount Investment
- Less Plant &
am
Allowed Rent drawings
- Machinery
Repairs & Received
- Land &
Renewals Building
-
Bad Debts Net Loss
transferred Goodwill
Establishment
charges to capital Classification of Assets and Liabilities -
Travelling account Assets and Liabilities are of various types. These can be
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Expenses classified as under :-

Bank Charges (a) Fixed assets -
Sales These are the assets that are purchased for permanent i.e.
Tax/Value long term use and these help the business to earn
added tax revenue.
Depreciation Example :- Building, Machinery, Motor Vehicle etc.
on fixed assets (b) Current Assets -
Net profit These are the assets which are acquired by the business
transferred to either for resale or for converting them into cash. These
Capital are normally realised within a period of one year. Eg:-
Account Cash in hand, bill receivable, debtors etc.
• Balance Sheet (position statement) - (c) Tangible Assets -
• Position statement or Balance sheet is another basis These are the assets that can be seen, touched and have
of financial statement. Balance sheet is a statement certain volume, Building machinery, goods etc. are
prepared on a particular date, generally at the end of tangible assets.
accounting year to ascertain the financial position of (d) Intangible Assets - Assets which can neither be seen
the entity. nor touched and have no volume are called intangible
• It is consists of assets on the one hand and liabilities assets. Patents, trademark, goodwill etc. are the examples
on the other. of such assets.
In the words of Francis R steal. "Balance sheet is a (e) Liquid Assets - These are the assets which are either
screen picture of the financial position of a going in cash or can be easily converted into cash. E.g. - Cash,
business at a certain moment". stock etc.
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(f) Wasting Assets - These are the assets which exhaust Separate Legal Entity–A company has a separate
or reduce in value by their use. mines, quarries, etc come legal entity which is distinct and separate from its
under this category. members. It can hold and deal with any type of property.
(g) Fictitious assets : It can enter into contracts and even open a bank account
These are not real assets. These are the items of such in its own name.
expenses and losses which have not been written off in Limited Liability–The liability of the members of
full. E.g. preliminary expenses etc. the company is limited to the extent of unpaid amount of
Liabilities - the shares held by them.
Liabilities can be classified as follows :- Kinds of companies–The companies can be
classified into the following three categories.
(a) Long term liabilities -
(i) Companies limited by shares : In this case the
These are the liabilities which are not payable during the liability of its members is limited to the extent
current accounting year. Generally, the funds raised of the nominal value of shares held by them.
through such means are used for purchase of fixed assets.
(ii) Companies Limited by Guarantee : In this
(b) Current Liabilities - case, the liability of its members is limited to
These are the liabilities which are payable during the the amount they undertake to contribute in the
current year. These include Bank Overdraft Trade event of the company being wound up. Thus,
Creditors etc. the liability of the members will arise only in
(C) Owner's Funds - the event of its winding up.
The amount owing to the proprietor or proprietors is (iii) Unlimited company : When there is no limit
called owner's funds. As per business entity concept this on the liability of its members, the company is
is a liability of the business. Apart from capital it also called an unlimited company.
includes undistributed profits and reserves. On the basis of the number of members, companies
can be divided into three categories as follow.

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Company's Accounts (i) Public company
Company–The word ‘company’ has no strictly (ii) Private company
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technical or legal meaning. It may be described to imply
an association of persons for same common object or
objects. The purposes for which people may associate
(iii) One person company (OPC)
Share capital of a company–A company being an
artificial person, cannot generate its own capital which
themselves are multifarious and include economic as has necessarily to be collected from several persons.
well as non-economic objectives. These persons are known as shareholders and the amount
Used in the aforesaid sense, the word 'company' in contributed by them is called share capital.
simple terms, may be described to mean a voluntary Categories of share capital–The share capital of
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association of persons who have come together for the company can be classified as follows.
carrying on some business and sharing the profits there Authorised capital : The share capital is the amount
from. of share capital which a company is authorised to issue
Definition of a company :- by its Memorandum of Association. The company
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Section 2(20) of the companies Act, 2023 defines– cannot raise more than the amount of capital as specified
A company to mean a company incorporated under this in the Memorandum of Association. It is also called
nominal or Registered capital.
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Act or under any previous company law.

Issued capital : It is that part of the authorised
Chief Justice Marshall–“A corporation is an
capital which is actually issued to the public for
artificial being, invisible, intangible, existing only in subscription including the shares allotted to vendors and
contemplation of the law. Being a more creation of law is the signatories to the company's memorandum.
possesses only the properties which the charter of its
Subscribed capital : It is that part of the issued
creation confers upon its either expressly or as incidental
capital which has been actually subscribed by the Public.
to its very existence.” When the share offered for public subscription are
Prof. Haney– “A company is an artificial person subscribed fully by the public the issued capital and
created by law, having separate entity with a perpetual subscribed capital would be the same. It may be noted
succession and common seal.” that ultimately, the subscribed capital and issued capital
Features of a company– A company may be are the same because if the number of share, subscribed
viewed as an association of person who contribute is less than what is offered, the company allot only the
money or money's worth to a common inventory and use number of shares for which subscription has been
it for a common purpose. It is an artificial person having received.
separate legal entity distinct from its members and has a Called up capital–It is that part of the subscribed
common seal used for its signature. Thus it has certain capital which has been called up on the shares. The
special features. company may decide to call the entire amount or part of
Body corporate– A company is formed according the face value of the shares.
to the provisions of law enforced from time to time. Paid up capital–It is that portion of the called up
Generally, in India the companies are formed and capital which has been actually received from the
registered under Companies Law except in the case of shareholders. When the shareholders have paid all the
Banking and Insurance companies for which a separate call amount, the called capital is the same to the paid up
law is provided for. capital.
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 Uncalled capital : That portion of the subscribed (i) For Amount Due on Allotment
capital which has not yet been called up. As stated Share Allotment A/c _________Dr
earlier, the company may collect this amount any time To Share capital A/c
when it needs further funds. (Allotment money due on ________ shares allotted
Reserve capital : A company may reserve a portion transferred to share capital)
of its uncalled capital to be called only in the event of (ii) For receipt of allotment money.
winding up of the company. Such uncalled amount is
Bank A/c _________Dr
called 'Reserve capital of the company. It is available
only for the creditors on winding up of the company. To share allotment A/c
(Allotment money received on ____share @ Rs. ___
per share)
(3) For call amount :
(i) For amount due on call.
Share call A/c __________Dr (individually)
To share capital A/c (individually)
(Call money due on _____share @ Rs. __ per
shares)
(ii) For receipt of call Amount.
Bank A/c _________Dr. (individually)
To share call A/c (individually)
(Call money received)
(4) For Money Refunded on Rejected
Nature and classes of shares : As per the Application:

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Companies Act, a company can issue two types of Share Application A/c ________Dr
shares. To Bank A/c
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(1) Preference shares : According to Section 43 of (Application money returned or rejected application
the Companies Act, 2013, a preference share is one for _______shares)
which fulfills the following conditions : (5) For Adjustment of Excess Application Money.
(a) That is carries a Preferential right to dividend to Share Application A/c ..............Dr.
be paid either as a fixed amount payable to To share allotment A/c.
preference shareholders or an amount calculated
(Application money on ______shares @ Rs.
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by a fixed rate of the nominal value of each share
before any dividend is paid to the equity ____per shares adjusted to the amount due on allotment).
shareholders. Calls in Arrears : When any shareholder fails to
(b) That with respect to capital it carries or will carry pay, the amount due on allotment or on any of the calls.
on the winding up of the company, the preferential Such amount is known as calls in arrears or unpaid calls.
right to the repayment of capital before anything is Calls in arrears represent the debit balance of all the calls
paid to entity shareholders. account.
Accounting treatment :
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(2) Equity shares : According to Section 43 of the

Companies Act, 2013, an equity share is a share which is Calls in Arrears A/c _________Dr.
not a preference share. In other words shares which do To shares first call A/c
not enjoy any preferential right in the payment of To share second and final call A/c.
dividend or repayment of capital, are termed as To share allotment A/c
equity/ordinary shares. (Calls in arrears brought into account)
Accounting Treatment : Journal entry is as On receipt of the call amount together with
follows: interest.
(1) On application : Bank A/c ____________dr.
Bank A/c Dr. To calls in Arrears A/c
To share Application A/c. To interest A/c
(Amount received on application for .........shares @ (Calls in arrears received with interest)
Rs. _____ per share)
Calls in Advance : Sometimes shareholders pay a
For Transfer of Application Money part or the whole of the amount of the calls not yet made.
Share Application A/c Dr. The amount so received from the shareholders is known
To share capital A/c as “calls in advance”. The amount received in advance is
(Application money on ________shares a liability of the company and should be credited to call
allotted/transferred to share capital.) ‘calls in Advance Account.” The amount received will be
(2) On allotment : The allotment of shares implies a adjusted towards the payment of calls as and when they
contract between the company and the applicants who becomes due. Table F of the Companies Act provides for
now become the allottees and assume the status of the Payment of Interest on calls in Advance at a rate not
shareholders. exceeding 12% per annum.
9
 (i) Journal entry is recorded for the amount of calls (b) Share Application A/c __________Dr.
to Advance. To Share Application A/c.
Bank A/c _________Dr. To Securities Premium Reserve A/c
To calls in Advance A/c. (Transfer of application money to share capital
(Amount received on calls in Advance) and Securities Premium Account)
Over-Subscription of shares. (ii) Premium Amount called with Allotment Money
There are instance when applications for more (a) Share Allotment A/c. _________Dr.
shares of a company are received than the number To Share Capital A/c.
offered to the public for subscription. This usually To Securities Premium Reserve A/c.
happens in respect of shares issue of well managed and (Amount due to allotment of shares @) Rs.
financially strong companies and is said to be a case of ____ per share including premium)
over subscription. In such a condition three alternatives (b) Bank A/c. ________Dr.
are available to the directors, to deal with the situation. To Share Allotment A/c.
(i) They can accept some application in full and
(Allotment money received including premium)
totally reject the others.
(iii) Premium amount called with call money.
(ii) They can make a pro-rata allotment to all.
(a) Share Application A/c. _________Dr.
(iii) They can adopt a combination of the above two
alternatives which happens to be the most To Share Capital Reserve A/c.
common course adopted in practice. To Securities Premium A/c.
Note : There may be some applicants who are not (Amount due on 1st/2nd call @ Rs. ____ per
allotted any shares. The application money received from share including premium)
these application is returned to them. Following entry is (b) Bank A/c. ___________Dr.
passed for this purpose. To Share Call A/c.

Y
Share application A/c. __________Dr. (Call money received including premium)
To Bank A/c. Issue of shares at a discount : When the shares of a
(Application money returned)
SP
Under Subscription : Under subscription is a
situation where number of shares applied for is less than
company are issued at a discount when an amount of
share less than the nominal or par value of shares. The
difference between the nominal value and issue price
the number for which applications have been invited for representing discount on the issues of shares.
subscription. Forfeiture shares : A company can forfeit it its
Issue of shares at a premium : It is quite common share, cancel its allotment and treat the amount already
for the shares of financially strong and well managed received thereon as forfeited to the company within the
m
companies to be issued at a premium. When a company framework of the provisions in its articles. These
issues a share of amount more than the nominal or par provisions are usually based on Table F which authorise
values of shares. This type of share is called shares at a the directors to forfeit the shares for non-payment of
premium. The premium amount is credited to a separate calls made.
a

account, called ‘Securities Premium Account’ and is Accounting treatment :

shown under the title ‘Equity and Liabilities’ of the (a) Forfeiture of shares issued at par :
Share capital A/c. ______________Dr.
Te

company's balance sheet under the head 'Reserve and

surplus'. It can be used for the following five purposes : To share forfeiture A/c.
(i) To issue fully paid bonus shares to the extent To share allotment A/c.
not exceeding unissued share capital of the To share calls A/c. (individually)
company. (Shares forfeited for non-payment of allotment
(ii) To write off preliminary expenses of the money and calls made)
company. Forfeiture of shares issued at a premium : If
(iii) To write off the expenses of, or commission shares were initially issued at a premium and the
paid or discount allowed on any securities of the premium amount has been fully realised, but some of the
company. shares are forfeited due to non-payment of call money,
(iv) To pay premium on the redemption of the accounting treatment for forfeiture shall be on the
preference shares or debentures of the company. same pattern as in securities premium account is not to
(v) Purchase of its own shares (ex : buy back of be debited at the time of forfeiture if the premium has
shares) been received in respect of the forfeited shares and the
Accounting treatment for the Securities amount of forfeiture shall be excluding premium amount.
Premium: (i) The journal entry to record the forfeiture of
(i) For Premium Amount called with Application shares issued at a premium on which premium has been
Money fully received :
(a) Bank A/c __________Dr. Share capital A/c. _________ Dr.
To Share Application A/c. To share forfeiture A/c.
(Money received on application for – shares @ To share allotment A/c.
Rs. ___ per Share including premium) To share calls A/c. (individually)
10
 (Shares forfeited for non-payment of allotment (g) The company should file a solvency declaration
money and calls made.) with the Registrar and SEBI which must be
(ii) The journal entry to record the forfeiture of signed by at least two directors of the company.
shares issued at a premium on which premium has not Issue of Debentures : In addition to raising of
been fully received : capital by issue of shares, a company requiring funds on
Share capital A/c. _________Dr. long term basis, may borrow money by issue of
debentures. A debenture issued by a company is usually
Securities Premium Reserve A/c. _________Dr.
in the form of a certificate, given under the seal of the
To share forfeiture A/c. company. Thus a debenture is a written
To Share Allotment A/c. acknowledgement of a debt taken by the company as
To Share Calls A/c. (individually) these are issued under the seal of the company.
(Shares forfeited for non-payment of allotment According to Section 2(30) of the Companies Act,
money and calls made) 2013 'Debenture'. Includes Debenture Inventory, Bonds
Re-issue of forfeited shares–The directors can and any other securities of a company whether
either cancel or re-issue the forfeited shares. In most constituting a change on the assets of the company or
cases, they reissue such shares which may be at par, at not.
premium or at a discount. Forfeited shares may be re- Distinction between shares and Debentures.
issued as fully paid at a par, premium, discount. Ownership : (1) A share represents ownership of
Accounting treatment of re-issued of forfeited the company whereas a debenture is only
shares : acknowledgement of debt.
(2) A share is a part of the owned capital whereas a
Bank A/c. _____________Dr. debenture is a part of borrowed capital.
Return : (1) The return on shares is known as
Share forfeiture A/c. __________Dr.
dividend while the return on debenture is called interest.
To share capital A/c. (2) The rate of return on shares may vary from year
(Re-issued of _______shares at Rs. ____ per to year depending upon the profits of the company but
share as fully paid) the rate of interest on debentures is prefixed.
Share forfeited account should be transferred to (3) Repayment : Normally, the amount of shares is
capital reserve account by journal entry. not returned during the life of the company, whereas
Share forfeiture A/c. _________Dr. generally, the debentures are issued for a specified period
To Capital Reserve A/c and repayable on the expiry of that period.
(Profit on re-issue of forfeited shares) (4) Voting rights : Shareholders enjoy voting rights
Buy-back of shares : When a company purchase its whereas debentures are generally secured and carry a
own shares. It is called Buy-back shares : Section 68 of fixed or floating charge over the assets of the company.
the Companies Act, 2013 provides that the company can Characteristics or features of debentures :
buy their own shares from either of the following (i) A debenture is issued by a company in the form
sources. of a certificate, which is a written
(a) Existing equity shareholders on a proportionate acknowledgement of debt taken by the
basis company.
(b) Open market (ii) A debenture is issued under the seal of the
company.
(c) Odd-lot shareholders
(iii) It contains a contract for the repayment of
(d) Employees of the company. principal sum at a specified date.
The company can buy back its own shares either from (iv) As per Companies Act, 2013 no company is
the free reserves, securities premium or from the allowed to issue debentures having a maturity
proceeds of any shares or other specified securities. A date of more than 10 years from the date of
company has following procedures have been lead down issue. However, a company engaged in
for buy back of shares : infrastructure projects can issue debentures for
(a) The articles of the association must authorise more than 10 years but not exceeding 30 years.
the company for the buy back of shares. Bond : It is very much similar to that of debenture.
(b) A special resolution must be passed in the Traditionally, bonds had been issued by the government
companies. Annual General Body meeting. but now a days these are also being issued by various
(c) The amount of buy back of shares in any semi-government organisations. Main distinction
financial year should not exceed 25% of the between debenture and bond is with respect to the rate of
paid up capital and free reserves. interest.
(d) The debt-equity ratio should not be more than a Types of Debentures :
ratio of 2 : 1 after the buy back. (i) Secured or Mortgage Debentures : These
(e) All the shares of buy back should be fully paid debentures are those which are secured either on
particular assets of the company called fixed charge or
up.
on all assets of the company in general, called a floating
(f) The buy back of the shares should be completed charge. Fixed charge denies the company from dealing
within 12 months from the date of passing the with mortgaged assets, whereas the floating charge does
special resolution. not prevent the company from using the assets.
11
 (ii) Unsecured or Naked Debentures : These (5) On making allotment money due :
debentures are those which are not given any security. 12% Debenture Allotment A/c. _________Dr.
The holders of such debentures are treated as unsecured To 12% Debentures A/c.
creditors at the time of liquidation of the company. (Allotment money due)
(iii) Registered debentures : Names and addresses (6) On receipt of allotment money :
of the holders of such debentures are recorded in a
register of the company called, "Register of Bank A/c. _________Dr.
Debentureholders". Such debentures are not freely To 12% Debenture Allotment A/c.
transferable. The transfer of such debentures requires the (Allotment money received)
execution of a proper transfer deed. Principal amount and (7) On making the call money due :
interest on such a debenture is paid to the person whose 12% Debenture First call A/c. _________dr.
name appears in the company's register. To 12% Debentures A/c.
(iv) Bearer Debentures : Names and addresses of (First call money due)
the holders of such debentures are not recorded in the (8) On receipt of call money :
company and these debentures are transferable by mere
Bank A/c. ________Dr.
delivery.
(v) Redeemable Debentures : Redeemable To 12% Debenture First call A/c.
debentures are those debentures which will be repaid by (First call money received)
the company either in lump sum at the end of a specified Note : Similar entries may be made for the second
period or by instalments during the lifetime of the call and final call.
company. Most of the debentures are generally of this 1. Issue of Debentures at par : When the
type. debentures are issued at same price, their face value, they
(vi) Irredeemable or perpetual debentures : are said to have been issued at par. For example, if a
Irredeemable debentures are those debentures which are debenture of ` 100 is issued at ` 100.
not repayable by the company during its life time. These 2. Issue of Debenture at premium : When the
debentures are repayable only at the time of liquidation debenture are issued at more than their face value. They
of the company. are said to have been issued at premium. For example if
(vii) Convertible Debentures : Convertible a debenture of ` 100 is issued at ` 110, ` 10 is the
debentures are those debentures which are convertible premium, which is a gain to the company. This premium
into equity shares or other securities at a stated rate of should not be treated as a revenue profit as it is not an
exchange either at the option of debenture holders or at income arising from the normal course of business
the option of the company after a specified period. When operations. It is a capital profit and should, therefore, be
only a part of the amount of debenture is convertible into used in writing off the capital losses such as discount on
shares, such debentures are called 'partly convertible issue of shares and debentures, premium on redemption
Debentures : of debentures, preliminary expenses, goodwill, patents
Issue of Debentures : Debentures may be issued etc.
either at par, or at a premium or at a discount. There are 3. Issue of Debentures, at Discount : When the
no restrictions on the issue of debentures at discount. The company issues debentures at a price which is less than
rate of discount is also to be decided by the directors.
their face or nominal value, the debentures are said to
Following entries will be passed on the issue of
have been issued at a discount. There are no restrictions
debentures (assuming that the debentures carry 12%
interest). in the companies Act regarding the maximum limit for
discount on debentures.
1. On receipt of application money :
Bank A/c. ____________ Dr. Note : Treatment of Discount/Loss on issue of
debentures. As per AS-16, borrowing costs and discount
To 12% Debenture Application A/c. on issues or premium on redemption relating to
(Application money received) borrowing could be amortized over loan period.
2. On transfer of application money to Debenture Unamortized portion of such expenses be shown on
Account. the assets side of the balance sheet under the head
12% Debenture Application A/c. __________Dr. current/Non-current assets' Depending on whether the
To 12% Debentures A/c. amount will be amortized in the Next 12 months or
(Application money transferred) thereafter.
3. On refund of money to totally rejected Issue of Debentures for consideration other than
applications : cash–A company purchases some assets from the
12% Debenture Application A/c. _________Dr. vendor and instead of paying the vendor in cash, the
To Bank A/c. company may decide to issue debentures to the vendor in
(Application money returned on rejected payment of purchases for consideration. Such an issue of
application) debentures to vendors is known as issue of debentures
4. On the transfer of surplus application money for consideration other than cash.
on partially accepted applications. Journal entries :
12% Debenture Application A/c. __________Dr. (i) On the Purchase of assets :
To 12% Debenture Allotment A/c. Assets A/c. ___________Dr.
(Transfer of excess application money to allotment A/c.) To vendor's A/c.
12
 (ii) For the issue of debentures to vendor at par. Statement of profit & Loss A/c. ________Dr.
Vendor's A/c. __________Dr. To interest A/c.
To Debentures A/c. (Interest transferred to statement of P/L A/c.)
(iii) For the issue of debentures to vendor at Redemption of Debentures :
premium. Redemption of debentures means repayment of the
Vendor's A/c. _______________Dr. amount of debentures to debenture holders. In other
To Debentures A/c. words redemption refers to discharge of liability on
To Securities Premium Reserve A/c. account of debentures by repaying the due amount of
(iv) For the issue of debentures to vendor at debentures.
discount. Sources of Finance for the Redemption
Vendor's A/c._________Dr. of Debentures
Discount on Debentures A/c. ________Dr. Amount required for the redemption of debentures.
To Debentures A/c. May be managed by a company from the following
INTEREST ON DEBENTURES sources.
Interest on debentures is usually paid half-yearly. (i) Redemption from the proceeds of fresh issue of
Interest on debentures is a charge against the profits of shares and debentures.
the company. It has to be regularly even if the company (ii) Redemption of Debentures out of capital.
suffers a loss or does not earn profit. The rate of interest (iii) Redemption of Debentures out of profits.
payable on debentures is prefixed on debentures. As per SEBI Guidelines for redemption of debentures :
income Tax Act a company is required to deduct income (i) The creation of Debenture Redemption Reserve
tax at the prescribed rate from the gross amount of (DRR) is obligatory only for non-convertible
debenture interest before any amount is paid to the debentures and non convertible portion of partly
debenture holders. The tax thus deducted is to be convertible debentures.
deposited in Government Account on behalf of the (ii) A company shall create DRR equivalent to at
debenture holders. least 25% of the amount of debentures issued
(i) Interest accrued and due : If a company pays before starting the redemption of debentures :
interest on debentures half yearly on 30th June and 31st Exemptions to the Rule of creating DRR :
December while preparing the balance sheet on 31st Following categories of companies are exempt from
March, 2004. If the interest for the period ending 31st creating DRR :
Dec., 2003 remains unpaid it will be called 'interest (1) All India Financial Institutions (AIFIs)
accrued but due'. regulated by Reserve Bank of India :
(ii) Interest accrued but not due : If a company (2) Other Financial Institutions regulated by R.B.I.
pays interest on debentures half yearly on 30th June and (3) Banking companies for both public as well as
31st December, while preparing the balance sheet on privately placed debentures.
31st March, 2004, the interest for the period from 1st
(4) Housing Finance Companies registered with the
January 2004 to 31st March, 2004 will be called 'interest
National Housing Bank :
accrued but not due'.
Note : Debenture Redemption Reserve is shown on
Note–Both the types of accrued interest will be
the Equity and Liabilities part of the Balance-sheet under
shown in the current liabilities in the balance-sheet.
the head "shareholders Fund' and sub-head 'Reserves and
Journal entries are passed for interest on surplus'. When all the debentures have been redeemed.
debentures : Debenture Redemption Reserve Account is closed by
(i) When interest is due and tax is deducted at source transferring the amount to General Reserve. The entry
(TDS) passed is –
Interest on Debentures A/c. _______dr. Debenture Redemption Reserve A/c. _______ Dr.
To Debentureholders A/c. To General Reserve A/c.
To TDS A/c. Methods of Redemption of Debentures :
(Interest due to debentureholders and the deducted at (1) Lump-sum payment at the end of fixed period.
source) (2) Redemption of Debentures in instalments.
(ii) When interest is paid to the debentureholders : (3) By the purchase of own debentures in the open
Debentureholders A/c. __________Dr. market.
To Bank A/c. (4) By conversion into shares.
(Payment of interest) (I) Lump-sum payment at the end of fixed
(iii) On payment of tax deducted at source. period– Under this method, the company redeems whole
TDS A/c. __________Dr. of its debentures in one lump-sum at the expiry of a
To Bank A/c. specified period, at maturity date of the debentures or
(Depositing the amount of TDS in Government earlier at the option of the company.
Account) The journal entries in this method are–
(iv) On transfer of debenture interest to statement of (i) At the beginning of financial year (upto 30th
profit and loss at the end of the year : April)
13
 Debenture Redemption Investment A/c. _______Dr. Accounting treatment :
To Bank A/c. Debentures A/c. _____________Dr.
(ii) At the time of redemption on encashing To Debentureholders A/c.
investment Debentureholders A/c. _________Dr.
Bank A/c. ________Dr.
To share capital A/c.
To Debenture Redemption Investment A/c.
Note–If the new shares are issued at a premium, the
(iii) On transfer of projects from surplus instatement
of P&L entry will be–
Surplus in instatement of profit & Loss A/c. Debentureholders A/c. _______Dr.
_____Dr. To Share Capital A/c.
To Debenture Redemption Reserve A/c. To Securities Premium Reserve A/c.
(iv) On redemption of debentures : Accounting for issue of Debentures considering
(a) Debentures A/c. _______Dr. the terms and conditions of Redemption.
To Debentureholders A/c. (1) When debentures are issued at par and are
(b) Debentureholders A/c. _______Dr. redeemable at par :
To Bank A/c. For Issue–
(v) When all the debentures are redeemed : (a) Bank A/c. ______Dr.
Debenture Redemption Reserve A/c._______Dr. To Debenture Application & Allotment A/c.
To General Reserve A/c. (b) Debenture Application & Allotment A/c.
(2) Redemption of debentures in Instalments by ____Dr.
drawing of lots :
To Debentures A/c.
In this method, the debentures are redeemed in
annual instalments and debentures are redeemed at par or For Redemption :
at a premium, according to the terms of issue. This (a) Debentures A/c. _______Dr.
procedure is known as “drawing by lots”. To Debentureholders A/c.
(3) Redemption of debentures by the purchase of (b) Debentureholders A/c. _______Dr.
own debentures in the open market : To Bank A/c.
A company can, if authorised by its articles of (2) When debentures are issued at a discount and
association, redeem its debentures by purchasing them in are redeemable at Par :
the open market. Open market means purchasing own
debentures from the stock market. This procedure is For issue :
usually adopted by the company only when its (a) Bank A/c. _________Dr.
debentures are quoted at a discount on the stock To Debenture Application & Allotment A/c.
exchange. (b) Debenture Application & Allotment A/c.
Note–(1) It is assumed that the company has ____Dr.
sufficient balance in Debenture Redemption Reserve Discount on issue of debentures A/c. ______Dr.
before initiating the purchase of debentures for
To Debenture A/c.
cancellation. Hence, unless otherwise stated, there is no
need to create DRR in this method. For redemption
(2) Also assume that required investment @ 15% (a) Debentures A/c. _________Dr.
has been made. Hence there is no need to make To Debentureholders A/c.
investment. (b) Debentureholders A/c. ________Dr.
(4) Redemption by conversion into shares : At the To Bank A/c.
time of issue of debentures a company gives the (3) When debentures are issued at a premium
debentureholders a privilege that they can get their and are redeemable at par :
debentures converted into shares after the expiry of a
specified period. This facility is provided to attract more For issue :
public to apply for the debentures at the time of issue. (a) Bank A/c. _______Dr.
Such debentures are called convertible debentures. To Debenture Application & Allotment A/c.
Rules Application to conversion of debentures : (b) Debenture Application & Allotment A/c.
SEBI Guidelines require that where the conversion ____Dr.
is to be made at or after 18 months from the date of To Debentures A/c.
allotment but before 36 months, any conversion in part To Securities Premium Reserve A/c.
or whole shall be optional on the part of the
debentureholders. The premium amount and the time of For redemption
conversion shall be fixed at the time of issue. (a) Debentures A/c. _______Dr.
Note–There is no requirement of creating a To Debentureholders A/c.
‘Debenture Redemption Reserve in case of redemption (b) Debentureholders A/c. ________dr.
by conversion since no cash outflow will take place. To Bank A/c.
14
 (4) When debentures are issued at par and are ■ Business – It is also a necessary factor for existence
redeemable at a premium : of partnership. Mere joint ownership of a property
For Issue does not constitute a partnership but operation of
(a) Bank A/c. ________Dr. business must be there.
■ Mutual Agency – This is most important element
To Debenture Application & Allotment A/c.
in the partnership firm as the definition of
(b) Debenture Application & Allotment A/c. partnership says "carried on by all or any of them
____Dr. acting for all."
Loss on Issue of Debentures A/c. ________dr. It means that each partner is principle as well agent
To Debenture A/c. of other partners. He can bind every partners by his
To Premium on Redemption of Debentures acts and is also bound by acts of other partners of
A/c. the firm.
For redemption : ■ Liability – Every partner is jointly and severally
liable to the third party for the acts of the firm and
Debentures A/c. ________Dr.
the liability of every partner is unlimited which
Premium on Redemption of Debentures A/c. means that their private property can be claimed to
____Dr. pay off firms debt.
To Debentures A/c. Partnership Deed
Debentureholders A/c. ________Dr. Partnership deed is a document that contains all rules and
To Bank A/c. regulations, as well as terms and conditions that affect
(5) When debentures are issued at a discount and relationship among partners. This deed can be altered be
are redeemable at a premium : prepared as per provision of 'stamp act' and preferably
registered with the Registrar of Firms.
For Issue–
Contents of Partnership deed
(a) Bank A/c. __________Dr. ■ Name and Addresses of the firm and its main
To Debenture Application & Allotment A/c. business.
(b) Debenture Application & Allotment A/c. ___Dr. ■ Name and Address of all partners.
Loss on issue of Debentures A/c. ________Dr. ■ Amount of capital to be contributed by each
To Debentures A/c. partner.
To Premium on Redemption of Debentures ■ The Accounting period of firm.
A/c. ■ The date of commencement of partnership.
■ Rules Regarding operation of bank Accounts.
For redemption–
■ Profit and Loss sharing ratio.
(a) Debentures A/c. ___________Dr. ■ Rate of interest on capital, loan, drawing etc.
Premium on Redemption of debentures A/c. ___Dr. ■ Mode of Auditor appointment, if any.
To Debentureholders A/c. ■ Salaries, commission, etc, if payable to any partner.
(b) Debentureholders A/c. ________Dr. ■ The rights, duties, liabilities of each partner.
To Bank A/c. ■ Treatment of loss arising out of insolvency of one
or more partners.
■ Settlements of accounts on dissolution of the firm.
Partnership ■ Method of settlement of disputes among the
partners.
Meaning ■ Rules of be followed in case of admission,
Partnership is a form of organization where two or more retirement, death of a partner.
people come together to establish business and share its ■ Any other matter relating to conduct of business
profits. Each person is known as partner of the firm and Rules Applicable in Absence of Partnership Deed
the name under which business is carried on is known as Following Rules are applicable in case of Absence of
"Firm Name". partnership deed among partners.
According to section 4 of Indian Partnership Act, 1932 (i). Profit Sharing Ratio – Profit and losses are
'The relation between persons who have agreed equally divided among partners irrespective of
to share the profits of a business carried on by all or capital contributed by them.
anyone of them acting for all' (ii). Interest on capital – No interest on capital shall be
allowed to partners.
The characteristics of partnership are as follow.
(iii). Interest on Drawing – No interest on drawing is
■ Two or more person – There must be a minimum
charged on partner.
number of two partners required to constitute a (iv). Salary to partner – No salary is paid to the partner
partnership firm whether he has taken part in the conduct of business
■ Agreement – Partnership is product of agreement or not.
between persons who have agreed to share profit or (v). Interest on Loan – Interest @ 6% P.A. is paid to
losses of the firm. It is worthwhile to note that this the partner loan to firm and this interest is paid
agreement can be both in written as well as oral even if there are losses.
form, but avoid disputes/clashes people tend to (vi). Participation – Each partner can participate in the
make it in written form. conduct of business.
15
 Need for Providing Interest on Capital Capitalinvested × Normal rate of return
(a) Normal profit =
Interest on capital is the money provided by firm to 100
partners on their capital contribution at the rate agreed in (b) Super Profit = Actual or average profit – Normal
the deed. However if the deed is silent then no interest on profit
capital is provided to partners. The reasons for providing (c) Goodwill = Super profit × No. of years purchased.
Interest on capital is as follow. 3. Capitalisation Method – It consist of two methods
(a) Sometimes Partner's decide to share profit equally for calculation of goodwill.
irrespective of their capital contribution in the firm (i) Capitalisation of Average profit method –
in such cases the partner with more capital gets Under this method first average profit is calculated
equal profit. So to compensate this loss interest of and then the capital needed for earning such profit
capital is provided. with the help of normal rate of return. This value is
(b) Sometimes partner share profit in a specific ratio called capitalised value of average profit. And at
and their capital contribution remains equal them last actual capital employed in the business is
also in such condition interest on capital deducted from capitalised value of average profit of
compensates the partner with share. find goodwill of business.
Calculation of interest on capital Capitalised value of average profits
Interest on capital is charged on the opening capital of 100
= Average Pr ofit ×
partner's. Following entry is passed for the distribution of Normal Rateof Re turn
interest on capital. (ii) Capitalisation of Super Profit Method –
On Allowing Interest on Capital. Under this method, firstly super profit is calculated
Interest on capital A/c Dr. then the capital needed for earning such super
To partner's capital A/c profit. The amount so calculated is the amount of
(Being interest provided to partner) goodwill.
On closure of Interest on capital. 100
Profit and Loss Appropriation A/c Dr. Goodwill = Super Pr ofit ×
Normal Rateof Re turn
To Interest on capital Ac/
(Being Interest on capital transferred to P & L Appro. Capital Account of partner
Account) Under partnership firm, A separate capital account
Goodwill for every partner is opened for recording various
According to Lord Eldon transactions such as interest on capital, interest on
"Goodwill is nothing more than the probability that the drawing, distribution of profits or reserves etc.
old customers will resort to the old place." However, they are maintain under two types
It is intangible asset of business because it has no I. Fixed Capital Account - Under this method, two
physical existence. There are two types of goodwill in accounts are opened namely current account and
business. capital account. Current account records all
1. Purchased Goodwill – It is a goodwill which transactions of business such as interest on capital '
interest on drawing, undistributed profit whereas
comes into books of accounts through purchase
capital account records only transaction related to
consideration. When a business purchases another
opening capital, closing capital, additional capital
business then excess of liabilities over assets is
etc.
referred to as goodwill.
II. Fluctuating capital account - Under this method
2. Inherent Goodwill – It is self generated goodwill only one account is prepared namely capital
of business by virtue of hard work and time. account .It records all entries of business itself and
Methods of valuation of goodwill. the capital of business goes on changing from time
(I) Average Profit Method – This methods calculates to time throughout the year.
goodwill on the basis of past year profits. The Admission of a Partner.
averages of such profits is multiplied by number of According to Indian Partnership Act, 1932, A new
year purchased to find out goodwill. partner can only be admitted into firm with the consent
Goodwill = Average Profit × Number of years of of all existing partners unless otherwise agreed upon.
purchase Need for Admission of New partner.
2. Super Profit Method – This method calculates A new partner may be admitted into business due to
goodwill on the basis of above the average profit following reasons.
earned in the same industry. For example a firm (i). For expansion of business when more funds are
named X earns a profit of ` 50,000 in a industry for needed.
capital investment of ` 1,00,000. However, the (ii). For admitting a person with high reputation in
average profit earned in the industry for the same is society to increase goodwill of business.
25%. There-fore it is earning super profit of 50,000 (iii). To admit a person with high and efficient
– 25,000 = 25,000 managerial skills to manage business.
At last, Goodwill is calculated by multiplying Following factors are taken into account at the time of
number of purchase. admission of partner.
16
1. Profit Sharing Ratio – After admission of a Retirement of partner.
partner, the new profit sharing ratio among partner A partner has right to retire from firm with his consent
is calculated after giving due notice in advance. The outgoing partner
(i) Gaining Ratio – It is excess of new ratio over is entitled to get following amount of his share.
old ratio so that a partner get more profit than 1. Share in Reserve – The outgoing partner is entitled
before he was earning. to get his share in the business of firm so that his
Gaining ratio = New ratio – old ratio share in reserve or undistributed profit is credited in
(ii) Sacrificing ratio – It is excess of old ratio over his account.
new ratio so that a partner is getting less profit than
2. Share in Goodwill – The retiring partner share of
before he was earning.
Sacrificing ratio = Old Ratio – New Ratio goodwill is credited to this capital account.
2. Accounting treatment of goodwill – The 3. Share in Revaluation of Assets and Liabilities –
incoming partner brings in his amount of share of The Assets and Liabilities of business are revalued
goodwill to compensate the sacrificing partner. at the time of retirement of partner and his share of
Following entry are passed in this regard. profit/loss is credited/debited to his account.
(a) Cash/Bank A/c Dr. 4. Share in Profit – An outgoing partner also gets his
To Premium for goodwill A/c. shares in profit upto the date of retirement. The
(Being goodwill bought by new partner) total amount due to the outgoing partner is either
(b) Premium for goodwill A/c Dr. paid to him in cash or credited to his loan account.
To Sacrificing Partner Capital A/c The following deductions are also made to him before
(Being amount of Premium credited to old partner making any payment.
capital account) (i) His share of accumulated losses (if any)
when goodwill is withdrawn by partner then (ii) His share of loss on revaluation (if any)
following entry is passed. (iii) His Drawing.
(c) Existing Partner's capital A/c Dr. (iv) His interest on drawing
To Bank A/c Death of Partner
(Being amount of goodwill withdrawn by existing
In event of a death of partner, the same accounting
partner)
treatment follows as in case of retirement of partner.
Revaluation of assets and liabilities.
At the time of admission of partner, Asset and Liabilities However the amount due to the partner is credited to his
of business are revalued for that a revaluation account is executor account.
prepared. Dissolution of partnership firm
Dr. Revaluation Account Cr. According to section 39 of the partnership act 1932 the
Particulars ` Particulars ` dissolution of partnership between all the partners of a
To Increase in By Increase in firm is called dissolution of partnership firm.
value of value of Assets. This leads to end of business of the firm and selling its
Liabilities. assets and disposing liabilities plus payment of the
To Decrease in By Decrease in claims of partners are done.
value of Assets. value of Dissolution of Partnership v/s Dissolution of
liabilities Partnership Firm – One thing to be noted is that there is
To unrecorded By Unrecorded difference between dissolution of partnership and
liabilities assets dissolution of partnership firm.
To profit on By Loss on Dissolution of partnership means change in relation
revaluation Revaluation between partners. This happens due to following reasons.
(i) Change in profit sharing ratio
Treatment of Reserve and Accumulated Profit or (ii) Admission of partner
Losses. (iii) Retirement of partner
If there is any reserve fund, or accumulated profit or loss (iv) Death of partner
then it must be transferred to old partners in their old
(v) Completion of project
profit sharing ratio.
(iv) Death of partner
General Reserve A/c Dr.
Reserve fund A/c Dr. (v) Completion of project
Profit and Loss A/c Dr. (vi) Expiry of period of partnership
To old Partner capital A/c. In such cases, the partnership with changed rule goes on
If there are any specific reserve such as work men but in case of dissolution of partnership firm, the
compensation reserve or investment fluctuation reserve it partnership business comes to an end.
also must be transferred to old partner capital account is Types of Dissolution of partnership firm.
old ratio. 1. Dissolution by Agreement - A firm in such cases
Workmen Compensation Reserve A/c Dr. is dissolved.
Investment Fluctuation Reserve A/c Dr. (i) with consent of all partners.
To old partner capital A/c (ii) In accordance with contract with partners.
17
2. Compulsory Dissolution– This Dissolution 5. Happening of certain contingencies – Under this
happens in the following cases. case, the partnership if constituted for fixed term,
(i) when all or one except all partner become may get terminated on expiry of such term.
insolvent. Realisation Account
(ii) when the business of firm becomes illegal. This account is prepared to ascertain the profit or loss on
3. Dissolution by Notice – This happens in case of realisation of asset and payment of liabilities. All the
partnership at will, In such cases any partner can asset of business except cash in hand and cash at bank
give notice to other partner seeking dissolution of are transferred to this account and all external liabilities
firm.
of business are also transferred.
4. Dissolution by court – Under some circumstances
court may order dissolution of partnership firm It also accounts for realisation of Assets and Payment of
such as. Liabilities as well as realisation expenses. The balance at
(i) when partner become incapable of performing the end denotes profit or loss on realisation which is
his duties. transferred to partner's capital account in their profit
(ii) when partner become insane. sharing ratio.
Dr. Realisation A/c. Cr.
Particulars ` Particulars `
Intangible Assets Bank Loan mortgage
Land and Building Sundry creditors
Plant and Machinery Bills Payable
Furniture and Fitting Bank overdraft
Loan to other Parties Outstanding expenses
B/R Provision for Doubtful Debts
Sundry Debtor Cash/bank
Cash (Sales of Assets)
(Payment of Liabilities) Partner capital account
Cash/Bank (Asset taken by partner)
(Payment of unrecorded liabilities) Loss
Partner capital account (Transferred to partner capital account)
Investment Loss
(Liability assumed by partner) (Transferred to partner investment
Profit (Transferred to partner capital Fluctuation Fund)
account in PSR)
Total

2. Partner's Loan Account – Suppose, if there is any Capital and Revenue Receipts
partner loan appearing in the books of the firm, it 1. Capital receipts are receipts which do not arise out
will be paid-off after paying all outside liabilities. of normal course of business. Examples of such
Following entry is passed for that. receipts are sale of fixed assets, and raising of
Partner loan A/c Dr. loan etc. Such receipts are not treated as income
To Bank A/c of the enterprise.
(Being partner's loan paid off.) Revenue receipts are receipts which arise during
3. Partner's Capital Account – After that profit or the normal course of business, sale of goods, rent
loss on realisation is transferred to capital account from tenants, dividend received etc, are some of
of partners along with undistributed reserve funds the examples of revenue receipts. They are the
and then their accounts are closed in following items of incomes of the business entity.
manner.
The differences between capital receipts and
(i) when to clear debit balance, partners are
revenue receipts are-
required to bring in cash
Cash/Bank A/c Dr. Basis Capital Revenue receipts.
To Partner's Capital receipts
(Being cash Brought by partner) Meaning The amount The amount
(ii) when a partner are paid the credit balance of received in form received mainly by
their account. of capital selling of goods and
Partner Capital A/c Dr. introduced, loan service is known as
To Cash A/c taken and sale revenue receipts.
(Being money paid to partner) proceeds of the
4. Cash Account – At last this account is prepared in fixed assets is
which total receipts and total payment are recorded known as
where both sides of this account should be equal. capital receipts.

18
 Nature These are of These are of depreciation as "a measure of the wearing out.
capital nature revenue nature and Consumption or other loss of value of depreciable assets
and hence are hence are treated as arising from use, effluxion of time or obsolescence
not treated as items of income of through technology and market change. Depreciation is
items of income the business. allocated so as the charge fair proportion of depreciable
of the business. amount in each accounting period during the expected
Shown Capital receipts Revenue receipts useful life of the asset. Depreciation Includes
are shown on are shown at the amortisation of assets whose useful life is pre-
the liabilities credit of either determined."
side of balance trading account or According to Institute of Cost and Management
sheet. profit and loss Accounting, London (ICMA) terminology "The
account. depreciation is the diminution in intrinsic value of the
asset due to use and/or lapse of time."
Source Receipt that do Receipt that arise
not arise during during normal Features of Depreciation:
the normal course of business. 1. Decrease in the book value of fixed assets.
course of 2. Non-Cash Expenses.
business. 3. Charge against Profit.
Occurrence These are of These are recurring 4. Tax benefit.
non-reducing in in nature. 5. It is a continuing process.
nature. Methods of Calculating Depreciation Amount:
Examples Sale of fixed Profit on sale of As per accounting standard-6, the selected depreciation
assets, capital assets. Sale of method should be applied consistently from period to
contribution and goods. Interest period charge in depreciation method may be allowed
loan taken etc. received on loans only under specific circumstances.
are some (advanced) royalty, 1. Straight line method: It is also called fixed
example of etc. are some Installment method because the amount of depreciation
capital receipts. examples of revenue remains constant from year to year over the useful life of
receipts. the assets. According to this method, a fixed and an
equal amount is charged as depreciation in every
Capital and Revenue Profit accounting period during the life time of an assets. The
amount annually charged as depreciation is such that it
Revenue profits are those profits that are earned in the reduces the original cost of the asset to its scrap value, at
normal and ordinary course of business i.e.. Through the end of its useful life.
regular sales of goods or by way of income from
The depreciation amount to be provided under this
investment. Capital profits, on the other hand, are those
method is computed by using the following formula-
profits which are not earned in the course of regular
trading. Such profits arise as a result of
Cost of assets − estimated net residual value
(i) Selling some fixed assets at a profit or Deprciation =
Estimated usefullifeof theassets
(ii) Shares issued at a premium.
Rate of depreciation under Straight line method
The revenue profits are credited to profit and loss
is the percentage of the total cost of the assets to be
account whereas the capital profits are transferred to
charged as depreciation during the useful lifetime of the
capital to capital reserve and shown in the balance sheet.
assets.
Capital and Revenue Losses:
Rate of depreciation is calculated as follow-
Revenue losses are those losses that arise during the
Annual depreciation amount
normal course of business. The capital losses are losses Rate of depreciation = × 100
which arise on account of the sale of some fixed assets or Acquisition cos t
on issue of shares at a discount. Capital losses are not Advantages of straight line method:
shown in the Profit and Loss account. They are generally Straight line method has certain advantages which are
set off against capital profit. However, if the amount of stated below-
capital loss heavy and capital profits are not available for • This method is suitable for those assets whose useful
writing it off, the same is spread over a number of years. life can be estimated accurately and where the use of
It will be written off in installments. the asset is consistent from year to year such as
Meaning of Depreciation:- leasehold building;
Depreciation may be described as a permanent, • It is very simple, easy to understand and apply.
continuing and gradual shrinkage in the book value of Simplicity makes it a popular method in practice;
fixed assets. It is based on the cost of assets consumed in • Asset can be depreciated upto the net scrap value or
a business and not on its market value. zero value. Therefore, this method makes it possible
Accounting standard-6 issued by The Institute of to distribute full depreciable cost over useful life of
chartered Accountants of India (ICAI) defines the asset.
19
2. Limitations of Straight Line method: 3. Annuity method:
• This method is based on the faulty assumption of Under this method, not only the cost of the assets but
same amount of the utility of an asset in different also the element of interest lost on capital outlay, i.e. the
accounting years; opportunity cost, is written off over the life of the asset.
• With the passage of time, work efficiency of the asset It assumes that the amount laid out in acquiring the asset,
decreases and repair and maintenance expense if invested elsewhere, would have earned interest which
Increases. Hence, under this method, the total amount must be considered as the part of cost of assets. The total
charged against profit on account of depreciation and cost (Capital Outlay + Interest element) is written of over
repair taken together, will not be uniform throughout the life of the asset referring to the annuity table.
the life of the asset, rather it will keep on increasing Since interest is calculated on the original cost/opening
from year to year. WDV of the asset, amount of interest decreases year
after year. However, the amount of depreciation remains
Written Down value method:
the constant.
Under this method, depreciation is charged on the book
4. Sum of year digit method:
value of the assets. Since book value keeps on reducing
by the annual charge of depreciation, it is also known as It is a variation of "Reducing Balance Method". Under
'Diminishing Balance method'. This method involves the this method, the amount of deprciation is calculated as
application of a pre-determined Proportion/Percentage of under
the book value of the assets at the beginning of every Depreciable amount X total of the digits
accounting period, so as to calculate the amount of (Including current year) of remaining life of asset
depreciation. The amount of depreciation reduces year Total of all the digits of the life on the assets
after year.
Under Witten down value method, the rate of n ( n – 1)
Total of all the digits of the life asset =
depreciation is computed by using the following 2
formula- Where n = life of asset in years
 S 5. Sinking Fund Method/Depreciation Fund Method:
R = 1 − n  × 100 Under this method, Asset amount is shown at cost.
 C 
Depreciation is credited to a separate account called
Where, "Sinking Fund Account OR Depreciation Fund
R = Rate of depreciation Account". The amount set aside as depreciation is
n = expected useful life invested normally in readily saleable Government
S = scrap value securities. Interest is earned on investments which is
credited to Sinking Fund Account. At the time of
C = Cost of an asset
replacement of the asset, the securities are sold out and
Advantage of written Down value Method: the funds are more available to replace the asset.
Written down value method has the folloiwng The amount of annual depreciation is ascertained from
advantages- sinking fund table.
• This method is based on a more realistic assumption 6. Production unit method:
that the benefits from asset go on diminishing Where the life of the asset is limited to the actual No. of
(reducing) with the passage of time. Hence, it calls units produced by each machine, Production unit method
for proper allocation of cost because higher as is used.
compared to later year when it becomes less Amount of depreciation per unit produced =
effective;
Depreciable amount
• Income Tax Act accept this method for tax purpose;
• This method is suitable for fixed assets which last for Total lifein units
long and which require increased repair and 7. Machine Hour Method:
maintenance expenses with passage of time. It can Where the life of the asset is limited to the actual running
also be used where obsolescence rate is high; hours of each machine, machine hour method is used.
• It results into almost equal burden of depreciation Amount of depreciation per hour =
Depreciable amount
and repair expenses taken together every on profit Total life in hours
and loss account. 8. Depletion Method:
Limitation of written down method: This method is used in mines, quarries etc. Containing
• It is difficult to ascertain a suitable rate of only a certain quantity of product.
depreciation; Where the life of the asset is limited to the actual No. of
• A depreciation is calculated at fixed percentage of units produced by each machine, Production Unit
written down value, depreciable cost of the asset Method is used.
cannot be fully written off. The value of the assets Amount of depreciation per unit extracted =
Depreciable amount
can never be zero. Total quantity

20
 Previous Year MC
1. Which one of the following denotes Gross 4. Which one of the following concerns prepares
Profit? Receipts and Payments Account?
(a) Cost of goods sold + Opening stock (a) Trading concerns
(b) Sales less Cost of goods sold (b) Non - trading concerns
(c) Sales less Purchases (c) Manufacturing concerns
(d) Net profit less Expenses of the period (d) Companies registered under Companies Act
EPFO-2020 EPFO-2020
Ans. (b) : Gross profit is the profit a business makes Ans. (b) : The receipts and payments accounts
after subtracting all the costs that are related to summarizes receipts and payments made by a non-
manufacturing and selling its product or services. It is
trading concerns during a particular period of time
calculated by deducting the cost of goods sold from the
(usually one year). The receipts and payments account
total sales.
is prepared from transaction recorded in cash book and
2. What is the underlying accounting concept that can also be termed as a summarized version of cash
supports no anticipation of profits but book of non - trading concerns.
provision for all possible losses?
5. Which one of the following statements is
(a) Matching (b) Materiality
correct about Income and Expenditure
(c) Consistency (d) Conservatism
Account?
EPFO-2020
(a) It is a Real Account
Ans. (d) : Conservatism is the accounting concept that
(b) It is a Personal Account
supports no anticipation of profits but provision for all
(c) It is a Nominal Account
possible losses. According to this principle gains should
be recorded only if their occurrence is certain, but all (d) It is a Representative Personal Account
potential losses, even those with a remote chance of EPFO-2020
incurrence, are to be recognized. Ans. (c) : An income and expenditure account is a
3. Which one of the following accounting concepts nominal account maintained on an accrual basis. It
is applied by an entity, when events such as records every revenue and expenditure of a non-trading
new competitor entering in the market and rift organisation in a specific financial year.
between production and marketing 6. Which one of the following statements about
departments are not disclosed in the books of Trial Balance is correct?
accounts? (a) It is a book containing different accounts of
(a) Matching an entity.
(b) Money Measurement
(b) It is a statement containing balances of
(c) Revenue Recognition debtors of an entity.
(d) Cost
(c) It is a statement containing balances of
EPFO-2020 debtors and creditors of an entity
Ans. (b) : The money measurement concept underlines
(d) It is a statement containing the various ledger
the fact that in accounting, a business should only
balances of an entity on a particular date.
record an accounting transactions if it can be expressed
EPFO-2020
in terms of money. Therefore events like new
competitors entering the market and rift between Ans. (d) : Trial Balance is a statement of all debits and
production and marketing departments are not disclosed credits in a double entry account book. It is a statement
in the books of account under the money measurement containing the various ledger balances of an entity on a
concept of accounting. particular date. Rests of the statements are incorrect.

21
7. Wages paid for installation of machinery is 11. Preliminary expenditure the examples of
debited to which one of the following accounts? (a) capital expenditure
(a) Wages Account (b) capital gain
(b) Machinery Account (c) deferred revenue expenditure
(c) Installation Account (d) revenue expenditure / expense
(d) Profit and Loss Account EPFO-2017
EPFO-2020 Ans. (c) : Revenue expenditures, which are likely to
Ans. (b) : The wages paid for installation of machinary give benefit for more than one accounting period are
is a part of the cost of the machinary. Therefore it termed as differed revenue expenditure. e.g. preliminary
should be debited to machinary account. expenses, the Purchase of building, plant and machinery
8. When are current liabilities payable? etc.
(a) Within a year Hence, Preliminary expenditure falls in the category of
(b) After one year but within five years deferred revenue expenditure.
(c) Within five years 12. Depreciation of fixed assets is an example of
(d) Subject to a contingency (a) deferred revenue expenditure
EPFO-2020 (b) capital expenditure
Ans. (a) : Current liabilites also called short - term (c) capital gain
liabilities are debts a company must pay within a (d) revenue expenditure/expense
normal operating cycle usually less than a year. EPFO-2017
9. Is the total of Debit and Credit side of Trial Ans. (d) : If the benefit of expenditure extends up to
Balance the same? one accounting period then it is termed as revenue
(a) No, there are some times good reason why expenditure e.g. expenditure incurred on day to day
they differ. conduct of business, depreciation of fixed assets etc
(b) Yes, always falls in the category of revenue expenditure.
(c) Yes, except where the Trial Balance is
13. In the context of accounting, the term IFRS
extracted at the year end.
stands for
(d) No, because it is not a Balance Sheet.
(a) International Financial Reporting Standards
EPFO-2020
(b) Indian Financial Reporting Standards
Ans. (*) : The total of debit balances of different
(c) Indian Financial Reporting System
accounts in the ledger must be equal to the total of the
(d) International Financial Reporting System
credit balances in the remaining accounts, provided
EPFO-2017
transactions have been correctly posted in the ledger.
However the commission has considered option (a) as Ans. (a) : In the context of accounting, the term IFRS
the correct answer. stands for international financial reporting standards.

10. Which one of the following is the first book in 14. From the information given below, calculate
which the transactions of a business unit are the sum insurable :
recorded? Date of fire –0.1.03.2016
(a) Balance Sheet (b) Cash Book Turnover from 01.03.2015 to 29.02.2016–
(c) Ledger (d) Journal `88,00,000 Agreed GP ratio–20% Special for
EPFO-2020 the increase of turnover by 10%
Ans. (d) : A journal is the first book in which (a) ` 19,36,000
transactions are recorded before they get transferred (b) `48,40,000
into accounts in the ledger. A journal contains daily (c) `10,32,000
details of business transactions, this means that all (d) `24,20,000
transactions for a day are recorded in the journal. EPFO-2017
22
 Turn over × Agreed GP (a) Purchase Account
Ans. (a) : Insurable sum = (b) Joint Venture Account
100
(c) Venturer's Capital Account
88, 00, 000 × 20
= (d) Profit and Loss Account
100
EPFO-2017
= 1,760000
Ans. (b) : If goods are purchased for the joint venture,
Total insurable sum = Insurable sum + special
then the amount is debited to joint venture account.
circumstance clause (increase of turnover by 10%)
19. Consider the following information :
1, 760000 ×110 Rate of gross profit–25% on cost of goods sold
= = 1936000
100 Sales – ` 20,00,000
15. Income and Expenditure Account is Which one of the following is the amount of
(a) Real Account (b) Personal Account gross profit?
(c) Nominal Account (d) Capital Account (a) `5,00,00 (b) `6,25,000
EPFO-2017 (c) `3,75,000 (d) `4,00,000
EPFO-2017
Ans. (c) : The accounts connected with losses
expenditure, income or gain are termed as "Nominal Ans. (d) : Sales = 20,00,000
accounts". It is used to keep track of financial 20, 00, 000 × 100
C.P. =
transactions over a set period of time. 125
16. Legacies are generally = 1,600,000
Profit = 20,00,000 – 1,600,000 = 4,00,000
(a) capitalized and taken to Balance Sheet
(b) treated as income 20. Branch Account under Debtors System is
(a) Real Account (b) Personal Account
(c) treated as expenditure
(c) Nominal Account (d) Liability Account
(d) capitalized and taken to Suspense Account
EPFO-2017
EPFO-2017
Ans. (c) : Branch account under debtor's system is
Ans. (a) : A legacy is money or property which termed as nominal account.
received as per the will of a deceased person. The
21. Under which Schedule of the Companies Act,
legacies are generally capitalised and taken to balance 2013, the formats of financial statements are
sheet. prescribed ?
17. The abnormal loss on consignment is credited (a) Schedule I (b) Schedule II
to (c) Schedule III (d) Schedule IV
(a) Profit and Loss Account EPFO-2017
(b) Consignee's Account Ans. (c) : The formats of financial statements, are
(c) Consignment Account prescribed in schedule-III of the companies act 2013.
(d) Income and Expenditure Account 22. In the absence of any provision in the
EPFO-2017 partnership agreement, profits and losses are
shared by the partners
Ans. (c) : The abnormal loss on consignment is credited
(a) in the ratio of the capital of partners
to consignment account. Consignment account is an
(b) equally
account for goods that is sent to a person or company
(c) in the ratio of loans given by them to the
that is not the owner but is responsible for selling them
partnership firm
or retuning them to the owner if they are not sold.
(d) in the ratio of the initial capital introduced by
If they are not sold. the partners
The value of goods that are sent on consignment are EPFO-2017
charged to the consignment account. Ans. (b) : In the absence of any provision in partnership
18. When goods are purchased for the Joint agreement, profits and losses are shared by the partners
Venture, the amount is debited to equally.

23
 Accounts Practice MCQ
1. The provision for maximum number of (a) ` 30000 (b) ` 20000
partners in a partnership firm is given in - (c) ` 25000 (d) ` 40000
(a) In partnership Act (b) In companies Act Ans. (a)
(c) In contract Act (d) None of the above 10. Dissolution of partnership necessarily takes
Ans. (b) place -
2. Over capitalization means - (a) Misbehave by a partner
(a) Excess of capital (b) When a partner is insane
(b) Payment of higher rate of divided on shares (c) Loss making business
(c) High forecast of rate of capitalization (d) On the death of a partner
(d) Raising capital in excess of the earning Ans. (d)
capacity. 11. When the current ratio is 2 : 5 and the amount
Ans. (d) of current liability is Rs. 25000, then the
3. Buyback in a company is related to - amount of current asset will be -
(a) By Description (b) By Shares (a) Rs. 62500 (b) Rs. 12500
(c) By Debentures (d) By money-orders (c) Rs. 10000 (d) None of the above
Ans. (c)
Ans. (b)
12. Which of the following is not a current
4. Bonus shares can be issued - liabilities.
(a) From the balance of profit and loss account (a) Bank Overdraft
(b) From the share premium account (b) Provision for doubtful debts
(c) From capital reserve (c) Redeemable Debenture
(d) All of these (d) Accounts payable
Ans. (d) Ans. (c)
5. The return on investment ratio is - 13. When the prices are rising, the stock should be
(a) Between net profit and capital employed appraised as -
(b) Between Investment and profit (a) First In First Out (FIFO)
(c) Between sales and capital employed (b) Last In First Out (LIFO)
(d) Between net profit and dividend (c) Simple average method
Ans. (a) (d) Weighted average method
6. The balance of capital redemption reserve Ans. (b)
account is available in - 14. The installation expense of a new machine will
(a) For redemption of redeemable preference be debited to -
shares (a) In Establishment expenses account
(b) For redemption of redeemable debentures (b) In cash account
(c) For reconstitution of share capital (c) In Profit & Loss account
(d) For issue of bonus shares (d) In machinery account
Ans. (d) Ans. (d)
7. Which of the following is prepared to 15. If the opening stock is Rs. 10000, purchases is
determine the income of a non-trading Rs. 30000, direct expenses is Rs. 4000 and
concern? closing stock is Rs. 5000, then the cost of goods
(a) Profit & Loss Account sold will be -
(b) Balance Sheet (a) Rs. 39,000 (b) Rs. 40000
(c) Receipt and Payment Account (c) Rs. 43000 (d) Rs. 44000
(d) Income and Expenditure Account. Ans. (a)
Ans. (d) 16. A partner of a firm becomes insolvent, the loss
so caused is to be borne by the other partners -
8. Total Assets Turnover -4
(a) Equal Ratio
Net profit - 10% (b) In their capital ratio
Total Asset - ` 50000 (c) In profit sharing ratio
Net profit will be - (d) None of the above
(a) Rs. 5000 (b) Rs. 10000
Ans. (c)
(c) Rs. 20000 (d) Rs. 25000
17. A machine was purchased for Rs. 10000 and its
Ans. (c) expected life was 3 years and its book value at
9. The average profit of a firm is Rs. 9000. The the end of its life was Rs. 5120. If depreciation
capital of the firm is Rs. 60000 and the rate of is calculated on the basis of diminishing
return on business is expected to be 10%. balance method, then the rate of depreciation
Goodwill by capital method will be - will be -
24
 (a) 25% (b) 15% 26. The amount of share premium may be applies
(c) 20% (d) 10% to write off, wholly or in partly -
Ans. (c) (a) Goodwill
(b) Preliminary expenses
18. On retirement of a partner, amount of goodwill
is credited to - (c) Deferred revenue expenditure
(a) The full amount of goodwill is credited only (d) All of the above
on retirement. Ans. (b)
(b) In the accounts of the remaining partners 27. A company has earned profits before obtaining
(c) In the accounts of all the partners the certificate of commencement of business. It
(d) None of the above should be transferred to -
(a) Dividend Equalization Fund
Ans. (c)
(b) General Reserve Fund
19. 'A' and 'B' are partners in the ratio 2 : 1. They (c) Suspense account
admit 'C' for 1/4th share. C brings Rs. 3000 for (d) Capital Reserve Account
his share of goodwill. The total value of the
goodwill of the firm will be - Ans. (d)
(a) Rs. 3000 (b) Rs. 9000 28. After re-issue of forfeited shares, the balance of
(c) Rs. 12000 (d) Rs. 15000 forfeited shares account is transferred to -
(a) Capital Redemption Reserve Account
Ans. (c)
(b) Capital Reserve Account
20. At the time of sale of a firm, the purchase (c) General Reserve Account
consideration received in the form of shares
(d) Profit and Loss Account
and debentures is distributed among the
partners. Ans. (b)
(a) In the ratio of the last payment due to the 29. When Co. Ltd. forfeited Rs. 800 on 100 fully
partners paid up shares of Rs. 10 each. Out of the
(b) Capital Ratio forfeited shares, 50 shares were reissued at
(c) Profit Sharing Ratio fully paid up price of Rs. 5 each. The amount
transferred to capital reserve will be -
(d) Equally
(a) ` 800 (b) ` 250
Ans. (a) (c) ` 650 (d) ` 350
21. In the absence of any agreement, a new partner Ans. (b)
is presumed to receive his share of profit from
the old partners - 30. A company purchased an asset for Rs. 360000
and in lieu there of issued debentures of Rs. 100
(a) In new Ratio
each at a discount of 10%. The number of
(b) In Old Ratio debentures issued will be -
(c) In sacrificing Ratio (a) 3960 (b) 3600
(d) In the Gaining Ratio (c) 3000 (d) 4000
Ans. (b) Ans. (d)
22. That part of the share capital which can be 31. A company may reissue its forfeited shares -
called upon only on the winding up of a (a) at premium (b) at face value
company is called - (c) at discount (d) all of the above
(a) Authorized Capital (b) Called Capital
Ans. (d)
(c) Reserve Capital (d) Closing Capital
32. Which of the following is a personal account
Ans. (c) (a) Prepaid Salaries Account
23. Profits prior to amalgamation can be utilised - (b) Drawing Account
(a) In writing off goodwill (c) Unpaid Rent Account
(b) To set off capital losses (d) All of the above
(c) Both (a) and (b) above Ans. (d)
(d) None of these
33. Current assets are valued on the following
Ans. (c) basis-
24. In the balance sheet of a company, unclaimed (a) Net replacement value
dividend is shown under the head - (b) Market value
(a) Reserves and surplus (b) Provision (c) Whichever is lower of cost or market value
(c) Current Liabilities (d) Various items (d) Depreciated value
Ans. (c) Ans. (c)
25. The percentage of minimum application 34. Which of the following should be shown on the
amount on the face value of share is - asset side of the balance sheet -
(a) 5 (b) 10 (a) Prepaid insurance (b) Share premium
(c) 15 (d) 25 (c) Unpaid wages (d) Salary unpaid
Ans. (a) Ans. (a)

25
35. Advance subscription received by a club shall 43. If the cost of goods sold is Rs. 100000, the
be shown as under - opening stock is Rs. 20000 and the closing stock
(a) On the asset side of the balance sheet. is Rs. 80000, then the stock turnover ratio will
(b) On the liability side of the balance sheet. be -
(c) Credit side of Income and Expenditure (a) 5 times (b) 4 times
Account (c) 2 times (d) 1 times
(d) Debit side of Income and Expenditure Ans. (c)
Account 44. Secret reserves can be created in an
Ans. (b) organization by the following -
36. On dissolution of partnership firm, the debit (a) Undervaluing fixed assets
balance of profit and loss account is (b) Showing revenue expenditure as capital
transferred to - expenditure
(a) Realization Account (c) Undervaluing liabilities
(b) Reserve Account (d) By all three
(c) Revaluation Account Ans. (b)
(d) Partner's Capital Account 45. Fixed Assets Rs. 1440000
Ans. (d) Net worth Rs. 1500000
Long term loan Rs. 900000
37. The capital of a company is Rs. 100000. His
profit on sales is 8%. The sales are five times Other Current assets Rs. 760000
the capital. Return on investment will be - Current liabilities Rs. 600000
(a) 3% (b) 8% The current ratio will be -
(c) 24% (d) 40% (a) 2.4 : 1 (b) 2.6 : 1
(c) 3.2 : 1 (d) 3.5 : 1
Ans. (d)
Ans. (b)
38. A, B, and C are partners sharing profits in the
ratio of 4 : 3 : 2. They admit D for 1/3rd profit 46. X Ltd. forfeited 20 shares of Rs. 10 each with a
of the firm. The sacrificing ratio of A, B and C premium of Rs. 6 per share. If out of these
will be - shares, 8 shares of Hari are reissued as fully
paid up on payment of Rs. 5.50/- per share,
(a) 3 : 2 : 1 (b) 4 : 2 : 1 then the amount in the credit side of share
(c) 4 : 3 : 2 (d) 5 : 3 : 2 forfeiture account will be -
Ans. (c) (a) Rs. 48 (b) Rs. 84
39. The assets and liabilities of a firm were Rs. (c) Rs. 72 (d) Rs. 120
40000 and Rs. 30000 respectively on 31st Ans. (d)
December, 2002. The firm was dissolved and 47. Which of the following is indicative of the long
the creditors were paid 60 paise to a rupee. term solvency of a firm -
How much amount lost in recovery - (a) Acid test ratio
(a) Rs. 10000 (b) Rs. 12000 (b) Debt equity ratio
(c) Rs. 18000 (d) Rs. 22000 (c) Earned time interest ratio
Ans. (d) (d) None of these
40. Premium received on issue of equity shares is - Ans. (b)
(a) Capital income (b) Revenue income 48. Share premium received on issue of shares can
(c) Casual income (d) None of the above be utilized for -
Ans. (a) (a) Payment of dividend
41. If the account of goodwill is opened in the (b) Issue of bonus shares
accounts at the time of admission of a partner, (c) Remuneration to the managers
then the goodwill is distributed among the old (d) Other business purposes
partners in the following manner - Ans. (b)
(a) In the new profit sharing ratio 49. The abbreviated form of receipts and payments
(b) Old profit sharing ratio account is -
(c) In sacrificing Ratio (a) Cash Book (b) Pass Book
(d) In Capital Ratio (c) Both (a) and (b) (d) None of the above
Ans. (b) Ans. (a)
42. Which statement is true regarding receipts and 50. Which of the following items are related to
payments account? fund flow -
(a) It is a nominal account (a) Issue of shares in the form of cash.
(b) All cash and credit items are shown in it (b) Payment of bonus in the form of shares
(c) It starts from the credit balance (c) Cash payment to creditors
(d) Its closing balance tells the cash balance (d) Purchase of building in lieu of land.
Ans. (d) Ans. (a)
26
51. The source of inflow of cash in cash flow 60. Which of the following is not a current liability-
statement is - (a) Bank overdraft (b) Account payable
(a) Non-trade payments (c) Debentures payable
(b) Increase in current assets (d) Provision for doubtful debts
(c) Reduction in liabilities Ans. (c)
(d) None of the above
61. Which of the following is revenue
Ans. (d) expenditures?
52. Underwriting commission is payable on the (a) Repair expenses to bring the old asset
basis of - purchased in working condition
(a) Issue price of shares (b) Preliminary expenditure
(b) Face value of shares (c) Cost of issue of shares and debentures
(c) Market value of shares (d) Legal expenses for defending the suit filed by
(d) Application money received on shares the competitors
Ans. (a) Ans. (d)
53. The following entry will be made in the total 62. Contingent liability is shown by -
creditors account - (a) Due to the ideology of full disclosure
(a) Cash sales (b) Total sales (b) Under the orthodox concept
(c) Credit sales (d) None of these (c) Due to the concept of importance
Ans. (b) (d) One to the concept of bilateral
54. Directors declare dividend - Ans. (a)
(a) In the constituent assembly
63. The closing balance shown in the trial balance
(b) In the annual general meeting is shown in :
(c) Extraordinary general meeting (a) Only in trading account
(d) In the directors meeting (b) Only in the balance sheet
Ans. (b) (c) Trading account and Balance sheet
55. The following method can be used to calculated (d) Only profit and loss account
interest on drawings made by partners - Ans. (b)
(a) Cost method (b) Supply method
(c) Multiplication method 64. 'High Ratio Low Profitability' applies to -
(d) None of the above (a) Net profit ratio
(b) Rate of return on investments
Ans. (c)
(c) Operating ratio
56. Which one of the following is not an accounting (d) Stock to sales ratio
practice -
(a) Uniformity (b) Full disclosure Ans. (c)
(c) Importance (d) Confidentiality 65. If the original cost of an asset is Rs. 57000, the
Ans. (d) residual value is Rs. 2000 and the expected life
is 10 years, what will be the amount to be
57. Which of the following is capital expenditure - acquired in the first year according to the
(a) Repair and painting of old building purchased annual compounding method?
for expansion of business (a) Rs. 10000 (b) Rs. 5900
(b) Repair and maintenance of old type writer (c) Rs. 5700 (d) Rs. 5500
(c) Re-treading of truck tires
Ans. (d)
(d) Repair of ladder
66. Credit balance of income and expenditure
Ans. (a)
account shows -
58. A transaction in double entry system of book - (a) excess of cash receipts over cash payments
keeping affects -
(b) excess of income over expenses
(a) Twice is one account
(c) excess of expenditure over income
(b) In two accounts at the same time
(d) excess of cash payments over cash receipts
(c) Two types of one account
(d) Two accounts each in two ways Ans. (b)
Ans. (b) 67. The figures included in the Income -
Expenditure Account are -
59. Conversion of capital expenditure into revenue
expenditure results in the following - (a) Related to previous year
(a) Secret Reserve (b) Revenue Reserve (b) Pertaining to the current year
(c) Capital accumulation (c) Related to future year
(d) None of these (d) All of the above
Ans. (a) Ans. (b)
27
68. The sale amount of grass in relation to a sports 77. If at the end of the year after making the
club shall be - adjustment some balance remains in the
(a) Capital receipt (b) An asset prepaid interest account which of the following
(c) Revenue receipt (d) None of the above would be it?
Ans. (c) (a) Assets (b) Liabilities
(c) Revenue (d) Expenses
69. Goodwill is one of the following
(a) Intangible assets (b) Tangible assets Ans. (a)
(c) Fictitious assets (d) Current assets 78. Balance sheet to the financial position of the
Ans. (a) business -
(a) Display for a specified period of time.
70. Which one of the following ratios indicate the (b) Display for a specified date of time.
long term solvency of the firm?
(c) Both of above
(a) Acid test ratio
(d) None of the above
(b) Debt - equity ratio
(c) Earning Time Interest Ratio Ans. (b)
(d) Return on Investment Ratio 79. How will be the following assets shown in the
order of liquidity in the balance sheet
Ans. (b)
1. Cash at Bank
71. The overall performance of a business is 2. Cash in Hand
measured by -
3. Plant and machinery
(a) By return on investment
4. Sundry debtors
(b) By stock-turnover ratio
(a) 1, 2, 3, 4 (b) 1, 2, 4, 3
(c) By Net profit to sales ratio
(c) 2, 1, 3, 4 (d) 2, 1, 4, 3
(d) By ownership ratio or by equity ratio
Ans. (d)
Ans. (a)
80. In the absence of a partnership agreement the
72. After writing off accumulated losses, the partners share profit and losses-
balance of capital deduction account is
(a) In proportion to their capital at the beginning
transferred to -
of the year.
(a) In General Reserve Account
(b) To capital at the end of the year.
(b) In Capital Reserve Account
(c) In proportion to average capital
(c) In share capital Account
(d) In equal ratio
(d) None of the above
Ans. (d)
Ans. (b)
81. A and B are partners in a firm. Whose profit is
73. Depreciation on fixed assets is - in the ratio 3 : 2. If they admit C for 1/4th of the
(a) Source of funds profit, then in what ratio will be the new profit
(b) use of funds ratio-
(c) Neither source of funds nor use of funds (a) 1 : 1 : 1 (b) 3 : 2 : 1
(d) Increase in working capital (c) 3 : 2 : 2 (d) 9 : 6 : 5
Ans. (c) Ans. (d)
74. When the working capital is Rs. 60000 and the 82. A, B and C are the partners in the ratio 1/2 :
current ratio is 3 : 1, then the current liabilities 2/5 : 1/10. If A retires, what will be the new
will be - profit sharing ratio of the remaining partners?
(a) Rs. 30000 (b) Rs. 80000 (a) 2 : 1 (b) 4 : 1
(c) Rs. 90000 (d) Rs. 120000 (c) 5 : 1 (d) 3 : 1
Ans. (a) Ans. (b)
75. Receipts and payments account of a club 83. Which of the following affects a business
should not show - transactions?
(a) Sale of old newspapers (a) At least one account
(b) Loss on sale of furniture (b) At least two accounts
(c) Payment of honorarium (c) At most two accounts
(d) Amount received from the sale of a computer (d) At most three accounts
Ans. (b) Ans. (c)
76. If opening stock Rs. 15000, purchase Rs. 40000, 84. Imprest system is used in relation to ____?
cost of goods sold Rs. 50000. what will be gross (a) Cash book (b) Purchase book
profit or gross loss. (c) Sales book (d) Petty cash book
(a) Rs. 12000 (profit) (b) Rs. 5000 (profit) Ans. (d)
(c) Rs. 5000 (loss) (d) Rs. 7000 (profit)
85. What will be the result when purchased a
Ans. (b) machine-
28
 (a) Loss of project 94. Which one system is most commonly used in
(b) Confirmation of Assets stock evaluation in accounting.
(c) Loss of Capital (a) Cost Value
(d) None of these (b) Market Value
Ans. (b) (c) Cost or Market Value which ever is higher
86. An old machine was purchased, after this Rs. 2 (d) Cost or Market Value which ever is less.
and Rs. 2000 were paid on its renovation and Ans. (d)
installment respectively. identify both the 95. Which of the following expenses is incurred,
above expenditure. the factory cost will be involved in extracting?
(a) Capital expenditure (a) Sales commission
(b) Revenue expenditure (b) Advertisement Expenses
(c) Rs. 20000 as capital expenditure (c) Depreciation of Machines
(d) Rs. 2000 as revenue expenditure (d) Depreciation on office tools.
Ans. (a) Ans. (c)
87. What will be the total sales, if the opening 96. Bill Receivable book is the port of _______ ?
stock, closing stock and purchase are, Rs. 8000, (a) Ledger (b) Journal
Rs. 7000 and Rs. 40000 respectively, and the (c) Balance Sheet (d) None of the above
rate of gross profit is 1/6 of the sales. Ans. (b)
(a) Rs. 49200 (b) Rs. 41000
97. Movable property does not include.
(c) Rs. 56200
(a) Cash (b) Stock in trade
(d) Can not be organised (c) Advance Payment (d) Furniture
Ans. (a) Ans. (d)
88. Cash account is not affected. 98. If assets of a business is Rs. 21315 and liabilities
(a) Paid money lenders is Rs. 4120. Then what will be the amount of
(b) Credit purchases owner equity.
(c) Cash sales (a) Rs. 21.375 (b) Rs. 17195
(d) Cash received from debtors (c) Rs. 25435 (d) Rs. 4120
Ans. (b) Ans. (b)
89. Application on one equity share of Rs. 100 as 99. Cash sales are recorded in?
per rules. The amount should be at least? (a) In sales Book (b) In cash book
(a) Should be Rs. 2 (b) Should be Rs. 5 (c) In journal (d) None of the above
(c) Should be Rs. 10 (d) Should be Rs. 50 Ans. (b)
Ans. (b) 100. Which of the following account increase due to
90. Amount of commission on issue of debentures credit entry?
is limited by law. (a) Sales return account
(a) 2% (b) 2.5% (b) Goodwill account
(c) 3% (d) 4% (c) Bank overdraft account
Ans. (b) (d) Purchase account
91. In which of the following the bonus share can Ans. (c)
be issued. 101. Entries in Receipts and Payments accounts
(a) Credit balance of profit and loss account are?
(b) From capital fund (a) Only of revenue nature
(c) From General Fund (b) Only of capital nature
(d) All of the above (c) Both revenue and capital nature
Ans. (b) (d) None of the above
92. What are the non-convertible debentures Ans. (c)
called? 102. Life membership fee received by a club is
(a) Owner's capital (b) Debt capital ____?
(c) Short term fund (d) None of these (a) Revenue receipt (b) Deferred receipt
Ans. (c) (c) Capital gain (d) None of the above
93. In which of the following methods the assets is Ans. (b)
accounted for at its original cost throughout its 103. The entry fee received by a cricket club is
life? ____?
(a) Straight Line Depreciation Method (a) Revenue receipt
(b) Diminishing Depreciation Method (b) Capital receipt
(c) Depreciating Fund Method (c) Liability to be shown in the balance sheet
(d) None of the above (d) None of these
Ans. (c) Ans. (a)
29
104. Cost of Asset Rs. 21000, scrap value Rs. 1000 113. A company paid Rs. 10000 to its creditors. By
and rate of depreciation is 10% per annum. this transaction his working capital is ___ ?
What will be the amount of depreciation for (a) Rs. 10000 will be decreased
first year in case of straight line method. (b) Rs. 10000 will be increased
(a) Rs. 2000 (b) Rs. 2200 (c) Rs. 20000 will be decreased
(d) will neither decrease nor increase
(c) Rs. 2300 (d) Rs. 2600
Ans. (d)
Ans. (a) 114. Deduction given on issue of debentures should
105. Interest payable on partnership capital is be shown in -
debited to - (a) Assets side of Balance Sheet.
(a) Profit and Loss Account (b) Liabilities side of Balance Sheet.
(b) Profit and Loss Appropriation Account (c) Debit side of profit & Loss Account.
(c) Profit and Loss Adjustment Account (d) Credit side of profit & loss account.
(d) Retention Account Ans. (a)
Ans. (a) 115. Which of the following items is not taken into
account for arriving at the current ratio?
106. Prepaid salary account is a _____? (a) Sundry creditors (b) Sundry Debtors
(a) Personal Account (b) Real Account (c) Bank over draft (d) Furniture
(c) Nominal Account (d) None of the above Ans. (d)
Ans. (a) 116. Net working capital is equal to ____
107. Bonus shares can be issued _____? (a) All assets
(a) Balance of project & loss account (b) Current Assets - Current liabilities
(c) All liabilities
(b) General reserve fund (d) Owner's capital
(c) Another reserve fund prepared from profit
Ans. (b)
(d) All of the above
117. Double account system is used for _____
Ans. (d) (a) Public utility organisation
108. Non-convertible debenture included? (b) Chemical organisation
(a) Owner's capital (b) Loan Capital (c) Consumer Industry
(c) Short-term loan (d) None of the above (d) Public industry
Ans. (b) Ans. (a)
118. An installation expenses of a newly purchased
109. Direct material and labour expenses are machine will be debited to which account.
included in ____? (a) Installation expenses account.
(a) Prime Cost (b) Factory Cost (b) Machinery Account
(c) Manufacture Cost (d) All of the above (c) Cash Account
Ans. (a) (d) Profit & Loss Account
110. Net income in non profit making organisations Ans. (b)
is calculated by -? 119. Current ratio is ____
(a) Income and Expenditure Account (a) Ratio between current assets and current
liabilities.
(b) Fund Flow Statement (b) Ratio between liquid assets and current
(c) Profit & Loss Account liabilities
(d) Receipt and payment Account (c) Ratio between loan and equity capital
Ans. (a) (d) Ratio between fixed assets and sales.
111. The net assets of a business on Ist January were Ans. (a)
Rs. 6000 and Rs. 7500 on 31st January. If in 120. If cost of goods sold is Rs. 50000. Opening stock
January the owner withdrawn Rs. 1500. The and closing stock are 15000, 25000 respectively.
Then what will be stock turnover ratio.
net income for January is ___ ?
(a) 2 times (b) 2.5 times
(a) Rs. 1500 (b) Rs. 2500 (c) 3.3 times (d) 1.25 times
(c) Rs. 3000 (d) Rs. 500 Ans. (b)
Ans. (c) 121. If operating expenses is more than gross profit.
112. If sales Rs. 15000, Gross profit Rs. 4000 and It's surplus is called?
loss are Rs. 500. The amount of operating will (a) Operating Income
be ____ ? (b) Operating Expenses
(a) Rs. 3500 (b) Rs. 4500 (c) Non-operating Expenses
(c) Rs. 14500 (d) Rs. 15500 (d) Non-operating income
Ans. (b) Ans. (b)

30
122. Owner's equity means. (c) Allotments of shares to all the applicants in
(a) Difference of fixed assets and fixed liabilities. proportion to the shares applied for
(b) Difference of fixed assets and current (d) Allotment of shares to selected applicants
liabilities. only
(c) Difference of current assets and fixed Ans. (c)
liabilities.
(d) Difference of total assets and total liabilities. 130. The credit sales of a company during the year
were Rs. 120000. Debtors Rs. 20000 and bills
Ans. (d) received is Rs. 10000. The average recovery
123. If current ratio is 2 : 1 and net working capital period is -
is Rs. 60600. Then amount of current liability (a) 3 month (b) 4 month
will -
(c) 5 month (d) 6 month
(a) Rs. 30000 (b) Rs. 60600
(c) Rs. 121200 (d) Rs. 90,900 Ans. (a)
Ans. (b) 131. Recovery of sundry debtors
124. Following data are given. (a) Increase the current ratio
Closing stock - Rs. 30000 (b) Decrease the current ratio
Opening Stock - Rs. 20000 (c) Not affect the current ratio
Sales - Rs. 100000 (d) Increase debtors turnover
Sales and - Rs. 20000 Ans. (c)
Administrative expenses 132. A company whose paid-up capital is Rs.10.5000
Purchase - Rs. 70000 equity share each turnover four time with 8%
operating ratio is - margin on sales. The ROI of the company will
(a) 50% (b) 65% be.
(c) 75% (d) 80% (a) 28% (b) 32%
Ans. (d) (c) 35% (d) 42%
125. In the absence of any contract to the country, Ans. (b)
the capital gain arising on the dissolution of the 133. The best definition of 'capital employed' in
partnership firm is credited to the partners. computing the rate of return on investment is -
(a) Equal ratio (b) Capital Ratio (a) Current Assets + Gross fixed Assets
(c) Profit Sharing Ratio
(b) Current Assets + Net fixed Assets
(d) Recovery from assets ratio
(c) Working capital + Gross fixed Assets
Ans. (a) (d) Working capital + Net fixed assets
126. The debt equity ratio of a company is 8 : 1 it
was decided to issue bonus shares in ratio 1 : 2. Ans. (d)
The debt equity ratio after the issue of bonus 134. Patent and copyright include -
shares would be ? (a) Current Assets (b) Liquid Assets
(a) 8 : 1 (b) 4 : 1 (c) Intangible Assets (d) Nominal Assets
(c) 1 : 8 (d) 1 : 4 Ans. (c)
Ans. (a) 135. Ajay Ltd. earned a net profit of Rs. 100000
127. Right shares are those shares which are offered after a depreciation provision of Rs. 20000 on
to - assets discounting Rs. 10000 initial expenditure
(a) Directors of the company and 5000 profits on the sales of a part of the
(b) Debenture holders plant. the fund will be from the operation of
(c) Existing share holders (a) 100000 (b) 120000
(d) Creditors of the company (c) 125000 (d) 135000
Ans. (c) Ans. (c)
128. The outstading are shown in the balance sheet 136. Consider the following ratio :
of the company. 1. Credit rating ratio
(a) Additing to the share capital
2. Capital turnover ratio
(b) Deducting from the called up share capital
3. Bad debts to sales ratio
(c) Under the head 'current assets'
(d) Under the head 'current liabilities. 4. Inventroy turnover ratio
Which of the above ratios are more suitable to
Ans. (b)
test the liquidity of a concern?
129. Pro-rata allotment of shares means - Code :
(a) Allotment of shares equally among the (a) 1 and 3 (b) 1 and 4
applicants
(c) 2 and 4 (d) 2 and 3
(b) Allotment of shares at the discretion of the
directors Ans. (b)

31
137. Consider the given data : Which of the following assumptions are taken
1. Proprietorship Ratio = 0.75 into account while preparing the statements as
2. Current Ratio = 2 : 1 per Accounting standard-1?
3. Proprietor's fund = Rs. 60000 (a) 1 and 4 (b) 2 and 3
4. Fixed assets = Rs. 50000 (c) 1, 2, 3 and 4 (d) 2, 3 and 4
working capital will be calculated - Ans. (d)
(a) Rs. 10000 (b) Rs. 15000 144. Which one of the following statements is
(c) Rs. 20000 (d) Rs. 25000 correct?
Ans. (b) (a) Preliminary expenses are operating expenses
(b) The costs of issue of shares and debentures
138. The main objective of depreciation accounting and of borrowing such as legal expenses and
is underwriting commission, are capital
(a) To charge the cost of the asset expenditure.
(b) To charge the cost of the asset to its estimated (c) Interest on loan is a capital expense
useful life apportionment over life (d) The cost of the machine purchased is a
(c) Making provision for replacement of an asset working expense.
after its useful life hes elapsed. Ans. (b)
(d) Valuation of assets on the last date of the
year. 145. Which of the following is capital expenditure
(a) Interest on payment of compensation for a
Ans. (b) contract for the supply of goods
139. To analyze the changes in financial position (b) Loans during construction
Establishment prepare - (c) Loss of stock by fire
(a) Balance sheet and profit and loss account (d) Loss due to embezzlement by manager
(b) Cash flow statement and fund flow statement Ans. (b)
(c) Statement of cash from operations and 146. A company issued 14% debentures of Rs.
balance sheet 1000000 at 10% discount. The discount shown
(d) Statement of changes in working capital and in the books of accounts will go.
statement of cash from operations (a) As capital expenditure
Ans. (b) (b) As operating expenditure
140. Important in accounting is determined by - (c) Deferred operating expenses
(a) Item size (d) capital loss
(b) Knowing whether a particular item has a Ans. (d)
material effect on the financial statements 147. Loss on sale of old furniture will be debited
(c) At the sole discretion of the accountant (a) profit and loss A/c (b) furniture A/c
(d) Physical volume of transaction (c) Trading A/c (d) Depreciation A/c
Ans. (b) Ans. (a)
141. Accounting is a process of - 148. While making adjustment entry for interest on
(a) Matching of profit and cost capital we will credit -
(b) Matching of Income and cost (a) Capital A/c (b) Profit and Loss A/c
(c) Matching of cash inflow and outflow (c) Interest on Capital A/c
(d) Matching of potential and actual performance (d) Drawing A/c
Ans. (b) Ans. (c)
142. Consider the following activities, which are 149. Dividends are usually paid from -
related to accounting information system. (a) Share premium A/c
1. Preparation of Accounting Statement. (b) Capital Redemption Reserve A/c
2. Communication of Accounting Information. (c) Profits of the current years
3. Preparation of Accounting information (d) All of these
reports. Ans. (c)
4. Accounting is the collection of data. 150. Which of the following is a personal Account?
(a) 4, 1, 3, 2 (b) 1, 4, 3, 2 (a) Bill payable (b) Live stock
(c) 4, 3, 1, 2 (d) 1, 2, 4, 3 (c) Good will (d) Accrued rent
Ans. (a) Ans. (d)
143. Consider the following basic assumptions. 151. Which account to be credited by the owner on
1. Foresight withdrawal from business for this personal use.
2. Current Establishment (a) Sales Account (b) Purchases Account
3. Accrual (c) Supplier's Account (d) Stock Account
4. Uniformity Ans. (b)
32
152. Accounting standards in India are formulated 161. Amount of interest on issue of shares at
by: premium can be used:-
(a) Company Low Board. (a) Issue of bonus shares
(b) Institute of cost and works Accountants of (b) Payment of dividend
India. (c) For the payment of operating expenses
(c) Institute of chartered Accountants of India.
(d) Redemption of debentures
(d) Indian standard Institution.
Ans. (a)
Ans. (c)
162. If the cash sales amount is ` 40,000. Credit
153. Establishment expenses on a new machine will
be debited to sales ` 80,000 and debtors ` 20,000, then the
(a) Establishment expenses Account average recovery period will be (Assume one
(b) Cash Account year of 360 days)
(c) Profit and loss Account (a) 180 days (b) 120 days
(d) Machinery Account (c) 90 days (d) 60 days
Ans. (d) Ans. (c)
154. On the retirement of one of the partners, the 163. The following is the first Accounting standard
total amount of goodwill is credited in : (AS-1) issued by the Institute of chartered.
(a) Retiring partner's account only. Accountants of India:-
(b) Remaining partner's account (a) Valuation of stock
(c) In the account of all the partners. (b) Revenue Recognition
(d) Not in the account of any of the above (c) Change in financial position
Ans. (c) (d) Disclosure of accounting policies.
155. Receipts and payment account is (a) Ans. (d)
(a) Real Account (b) Personal Account 164. Which of the following not deals will current
(c) Capital Account (d) Nominal Account Ratio ?
Ans. (a) (a) Cash received from debtors
156. Depreciation on fixed assets is (b) Cash sale of old machinery
(a) A source of fund (c) Conversion of debentures into equity shares.
(b) A use of fund (d) Cash purchase.
(c) Neither source nor use of funds. Ans. (c)
(d) Both (a) and (b)
165. Net worth of a business means:-
Ans. (c) (a) Equity capital
157. After declaration of dividend in general (b) Net worth
meeting it is necessary to pay-
(c) fixed assets - current asset
(a) Within 60 days (b) Within 42 days
(c) Within 45 days (d) Within 90 days (d) Total assets - Total external liabilities
Ans. (b) Ans. (d)
158. In a manufacturing undertaking, stock 166. Accounting standard - 8 is concerned with-
includes:- (a) Valuation of inventory
(a) Raw material (b) Work in progress (b) Accounting of fixed assets
(c) finished stock (d) All of the above (c) Research and development accounting
Ans. (d) (d) Depreciation accounting
159. Which one of the following transactions is Ans. (c)
capital in nature? 167. The liabilities of a business are ` 11,420 and the
(a) Purchase of truck liability of the proprietor is Rs. 15,200. What
(b) Replacement of old tires will be the assets of the business?
(c) Cost of repairing the truck (a) ` 11,420 (b) ` 3,970
(d) All of the above (c) ` 15,200 (d) None of these
Ans. (a) Ans. (a)
160. Given ;
168. What is the error in writing `10,000 as wages
Gross profit 60,000
given for the installation of a new machine?
Gross profit ratio 20%
Debtor's periods 2 Month (a) Error of compensation
The debtor's amount will be: (b) Clerical error
(a) 12,000 (b) 50,000 (c) Principle error
(c) 1,20,000 (d) 3,00,000 (d) None of these
Ans. (b) Ans. (c)
33
169. An invoice of `562 was entered in the sales 176. Given: Current Ratio = 2.8
book as `652. The total of the debit side of trial Acid Test Ratio (c) = 1.5
balance is ` 21,242. If there is no other error in Working capital = `1,52,000
trial balance, what will be the total of its credit Liquid assets are:
side? (a) `2,52,000 (b) `1,35,000
(a) ` 21,242 (b) ` 21,152 (c) `90,000 (d) `2,43,000
(c) ` 21,332 (d) None of these
Ans. (b)
Ans. (c)
177. If the net profit is `30,000 Non-cash expense is
170. The items included in the income and 10,000 then the operating fund will be:-
expenditure account are related to (a) `30,000 (b) `20,000
(a) Last year (b) Current year
(c) `40,000 (d) None of the above
(c) Future year (d) All these year
Ans. (c)
Ans. (b)
178. The most prevalent accounting method in
171. Single entry is defective because under this public utility institutions is.
system:-
(a) Double Entry System
(a) Trial balance cannot be prepared
(b) Double Accounting System
(b) Trading and profit and loss account cannot be
prepared (c) Single Entry System
(c) Balance sheet cannot be prepared (d) Government Accounting System
(d) All of the above cannot be prepared Ans. (b)
Ans. (d) 179. The Share capital of a company can be reduced
by.
172. Which of the following is the accounting
equation? (a) Reducing the amount of the authorized capital
of the company
(a) Capital = Assets – Liabilities
(b) Reducing the face value of the shares issued
(b) Capital = Liabilities – Capital
(c) By returning the excess paid-up capital.
(c) Assets = Liabilities – Capital
(d) By canceling the paid-up-share capital which
(d) Liabilities = Assets + Capital
has been lost in the previous years.
Ans. (a)
Ans. (b)
173. A company issued 50,000 equity shares of ` 10
each. In which 8 paid - and issued 50,000, 8% 180. In an Indian Export Oriented Company, non-
preference shares of ` 100 each. Potential resident Indians can be employed in the equity
profit is Rs. 10,00,000. The normal rate of capital of-
dividend on equity shares is 16%. The (a) upto 40% (b) upto 51%
provision for taxes is to be 60% and reserve (c) upto 60% (d) upto 100%
10% of profit. The value of equity share will Ans. (d)
be:- 181. Which of the following items is a current
(a) 40 (b) 50 liability-
(c) 45 (d) None of the above (a) Outstanding wages
Ans. (a) (b) Redeemable preference shares.
174. A company was incorporated on 1st may 1997 (c) Share premium
to purchase a business from 1st January 1997. (d) Provision for depreciation on machinery.
Compared to the average monthly sales of the Ans. (a)
year, the sales in January, March and
182. Which of the following is not an item of capital
September were one and half times, and that of
reserve -
December was double and that of February
was half. (a) Premium on issue of share
(a) 4 : 8 (b) 17 : 7 (b) Profit prior to amalgamation
(c) 49 : 99 (d) 59 : 109 (c) Dividend Equivalence reserve
(d) Profit on sale of fixed Assets
Ans. (a)
Ans. (c)
175. The x Ltd. forfeited the, 20 share of ` 10 each
on which 6 Rs. are paid-up. 8 of these shares at 183. The practice of valuing stock at cost or market
`5.50 each. When repaid reissued as full paid value, whichever is lower: is an example of:-
up. The amount to be transferred to capital (a) Cost concept
reserve account will be. (b) Uniformity concept
(a) `12 (b) `36 (c) Conservatism concept
(c) `84 (d) `120 (d) Realisation concept
Ans. (a) Ans. (c)

34
184. The closing balance shown in the trial balance 192. A and B are partners sharing profits in the
is shown in:- ratio 2:1. He admits C into partnership who
(a) Only in balance sheet receives his share of goodwill of `15,000 agreed
(b) Both in trading account and balance sheet to debit his capital to be brought in. The future
(c) Only in trading account profit - sharing ratio of A, B and C will be 2:3:3
(d) None of these respectively. In respect of goodwill, A's capital
account shall be credited.
Ans. (a) (a) 10,000 (b) 15,000
185. Generally the income is considered earned, at (c) 16,533 (d) 16,667
the time while. Ans. (d)
(a) There is conflict of sales
(b) Cash is received 1 2 1
193. X, Y and Z are partners in : : Ratio. If x
(c) Production is completed 2 5 10
(d) The goods are delivered retires, what will be the profit sharing ratio of
the remaining partners:
Ans. (b) (a) 2 : 1 (b) 4 : 1
186. Opening stock 10,000 (c) 5 : 1 (d) 3 : 1
Purchase 90,000 Ans. (b)
Closing stock 28,000
194. When a partner is guilty of fraud or negligence
Gross profit 10% sales within his own right
The amount of sale will be:- (a) It can be removed
(a) 60,000 (b) 72,000 (b) He alone will be responsible for his act.
(c) 80,000 (d) 90,000 (c) All the partners are held liable if there is an
Ans. (c) agreement in this regard
187. The first accounting standard issued by the (d) All the partners are liable even if there is no
Accounting standard Board of India (ASBI) is such agreement
related to- Ans. (d)
(a) Valuation of inventory 195. In what order will the following items appear
(b) Depreciation accounting on the liabilities side of the balance sheet of the
(c) Disclosure of accounting polices company?
(d) Revenue recognition 1. Current liabilities and provisions
Ans. (c) 2. Secured debt
188. Sales + Closing stock – Purchase – Gross profit 3. Share capital
will be equal to 4. Reserve and surplus
(a) Purchase return (b) Cost of goods sold Select the correct answer using the options
(c) Opening stock (d) Sales return. given bellow:-
(a) 3, 4, 2, 1 (b) 1, 2, 3, 4
Ans. (c)
(c) 4, 3, 1, 2 (d) 3, 4, 1, 2
189. Profit on sale of furniture is shown in a non-
profit organization on. Ans. (a)
(a) The credit side of profit and loss account 196. The Realisation concept of accounting does not
(b) Credit side of Income and expenditure apply
account (a) In long term contract works
(c) Receipt side of receipts and payments (b) In power generation and distribution
(d) Assets side of balance sheet (c) In shipping companies
(d) Railway
Ans. (b)
Ans. (a)
190. Which of the following items is not shown in
the balance sheet of a club? 197. A piece of land was given free of cost to a form
(a) Subscriptions received for the next year six months ago. Its fair value at that time was
`12 lakhs but not its present price is `14 lakhs.
(b) Subscriptions received for the current year According to the traditional accounting
(c) Un received Subscriptions for current year. method, it will be reported in the balance sheet
(d) Outstanding salary. today at the following value:-
Ans. (b) (a) 12 lakhs
191. Depreciation on fixed assets is (b) 14 lakhs
(a) A source of funds (b) A use of funds (c) 2 lakhs
(c) No flow of funds (d) None of the above (d) Will not be shown at any cost
Ans. (c) Ans. (a)

35
198. Equity capital of a company `2,00,000, 206. On which of the following types of shares the
preference share capital `1,00,000, 12% dividend may remain in arrears
debentures `1,00,000. (a) Ordinary shares
Long- term loans `2,00,000 and short-term- (b) Cumulative preference share
loan is `1,00,000. (c) Non-Cumulative preference share
The capital gearing ratio will be:- (d) Redeemable preference share
(a) 1 : 1 (b) 0.5 : 1 Ans. (b)
(c) 0.4 : 1 (d) None of the above 207. In case of a company limited by shares, the
liability of a member is limited to:-
Ans. (b) (a) The unpaid amount of shares held by him
199. In case of a company, the balance that remains (b) To the extent of the amount paid on the shares
after deducting the external liabilities from the held by him
total assets is called:- (c) To the extent of the total amount of shares
(a) Net working capital held by him
(b) Gross working capital (d) None of the above
(c) Deferred liabilities Ans. (a)
(d) Net worth 208. If goodwill is to be written off at the time of
Ans. (d) retirement of one partner, then the capital
accounts of the remaining partners will be
200. The cost of goods sold will be: debited:-
If, opening stock `10,000 (a) In the New profit-sharing ratio
Sales `30,000 (b) In capital ratio
Direct expense `24,000 and (c) In old profit-sharing ratio
Closing stock is `5,000 (d) In sacrificing ratio
(a) 39,000 (b) 40,000 Ans. (a)
(c) 41,000 (d) 44,000 209. Total asset turnover 4
Ans. (a) Net profit 10%
Net profit will be 50,000
201. A motor car which was bought in `20,000, its The Net profit will be
book value was 12,000, it was sold in `25,000, (a) 15,000 (b) 10,000
the capital profit will be:- (c) 25,000 (d) 20,000
(a) `5,000 (b) `8,000 Ans. (d)
(c) `13,000 (d) `25,000 210. The subject of Accounting standard -2 of the
Ans. (a) International Accounting Standard Committee
202. According to the decision of Garner vs Murray, is-
the loss of capital of an insolvent partner is (a) Valuation and presentation of stock
apportioned to other partners in:- (b) Depreciation Accounting
(a) Profit and loss ratio (c) Disclosure of information
(b) Capital ratio (d) None of the above
(c) Capital ratio before apportionment Ans. (a)
(d) Yield ratio 211. Bonus shares refers to those shares which are
issued to :-
Ans. (b) (a) Employees
203. Profit before amalgamation can be used for (b) Existing equity shareholders
(a) Writing off goodwill (b) To set off capital (c) Preference shareholders in lieu of dividend
(c) Both (a) and (b) (d) None of the above (d) Debenture holders instead of interest
Ans. (c) Ans. (b)
204. At the time of inflation, the value of stock is 212. Price-earnings ratio is high when:-
specified higher- (a) Earning per share is more
(a) In LIFO method (b) Book value of share is more
(b) In FIFO method (c) The market value of the share is higher
(c) Weighted average method (d) All of the above
(d) None of the above Ans. (c)
213. Which of the following items should not be
Ans. (b) recorded in receipt and payment account
205. The amount of premium on issue of shares is (a) Sale of old newspapers
shown in the balance sheet:- (b) Loss from used assets
(a) As an asset (b) As a liability (c) Payment of honorarium
(c) As an expense (d) As an income (d) Amount received from sale of equipment
Ans. (b) Ans. (b)
36
214. Which of the following does not require 223. Final account and statement means:-
physical verification (a) Balance sheet
(a) Stock (b) Plant (b) Profit and loss account
(c) Small books (d) Goodwill (c) Trading account
Ans. (b) (d) All of the above
215. Internal audit is a part of Ans. (d)
(a) Internal check (b) Internal control 224. A and B sharing profits and losses in the ratio
(c) Annual audit (d) Standard audit 1:2. They admitted 'C' as a new partner and
Ans. (b) agreed to share 1/5 of the profits. The new
216. Cash from operations is equal to- profit - sharing ratio among the new partners
(a) Net profit + Increase in current assets will be:-
(b) Net profit + decrease in current liabilities (a) 8:2:2 (b) 6:4:3
(c) Profit from operations + current assets and (c) 8:3:4 (d) 4:8:3
current liabilities Ans. (d)
(d) Funds from operations + adjustment of 225. Which of the following is the source of funds ?
increase and decease in current assets and (a) Repayment of long term loan
current liabilities
(b) Credit sales
Ans. (d) (c) Increase in stock
217. A company can reissues its forfeited shares:- (d) Issue of new shares
(a) At premium (b) At face value
Ans. (d)
(c) At discount (d) All of the above
226. The sales indicator of long term investment is:-
Ans. (d)
(a) Change in the current assets
218. The average profit of a firm is `9,000. The
(b) Use of funds
capital of firm is `60,000 and the rate of return
on business is expected to be 10%. By (c) Increase in working capital
capitalisation method the goodwill will be:- (d) Source of funds.
(a) `30,000 (b) `20,000 Ans. (d)
(c) `25,000 (d) `40,000 227. Net working capital means:-
Ans. (a) (a) Current assets
219. A machine was purchased on `1,000 which had (b) Excess of current assets over current
a life of 3 years and its book value at the end of liabilities
the year is `512. If depreciation is calculated on (c) Equity share-capital and fixed assets
the basis of diminishing balance method, then (d) Retained earnings
the rate of depreciation will be:- Ans. (b)
(a) 25% (b) 15%
(c) 20% (d) 10% 228. Only personal accounts and real accounts are
shown in:
Ans. (c) (a) Trial balance
220. Which of the following is not a current (b) Balance sheet
liability? (c) Profit and loss account
(a) Bank overdraft
(d) Trading Account
(b) Redeemable debentures
(c) Accounts payable Ans. (b)
(d) Provision for bad debts 229. Depreciation is (a):-
Ans. (b) (a) A source of funds (b) Use of funds
221. In the absence of a partnership deed, the rate (c) Neither (a) nor (b) (d) Both (a) & (b)
of interest allowed on loan given by a partner Ans. (c)
to the firm will be:- 230. If the earnings per share of company x is Rs. 15
(a) 5% (b) 6% and the price-earnings ratio of similar
(c) 10% (d) None of the above companies is `10, then the market price of
Ans. (b) shares of company x will be:-
222. Opening stock + purchases-closing stock in a (a) `300 (b) `150
firm is called :- (c) `75 (d) `25
(a) Cost of goods produced Ans. (b)
(b) Cost of goods sold 1
(c) Cost of goods in hand 231. If sales is `6,000, gross profit is of cost,
3
(d) Cost of goods produced purchase is `4,900 and closing stock ` 900, then
Ans. (b) opening stock will be:-
37
 (a) Zero (b) `500 241. The cost of machine having a life of 5 years is
(c) `2,000 (d) `4,900 10,000. Its scrap value is `1,000. According to
Ans. (b) the sum-of the digit, method the depreciation
amount in the first year will be:-
232. A debenture holder gets:- (a) `1,600 (b) `1,800
(a) Dividend (c) `2,500 (d) `3,000
(b) Right according to articles of association
Ans. (d)
(c) Ownership in the company
(d) Interest at a fixed rate 242. Under which method of computing
depreciation, interest is taken into account in
Ans. (d) the cost of the asset?
233. Income and expenditure account is a/an. (a) Annuity method
(a) Personal account (b) Real account (b) Fixed installment method
(c) Nominal account (d) Suspense account (c) Insurance policy method
Ans. (c) (d) Sinking fund method
234. Profit on reissue of forfeited shares is Ans. (a)
transferred to:- 243. Given,
(a) Profit and loss account Gross profit - 60,000
(b) Capital reserve account Gross profit ratio - 20%
(c) Share capital account Debt period - 2 Month
(d) General reserve account Amount will be:-
Ans. (b) (a) 12,000 (b) 50,000
235. Non-convertible debentures means. (c) 1,20,000 (d) 3,00,000
(a) Owner's capital (b) Debt capital Ans. (b)
(c) Short term fund (d) None of these 244. On retirement of a partner, goodwill amount is
Ans. (b) credited to :-
(a) Only in the account of retiring partners
236. Liquidity of a firm can be measured with the
(b) Only in the account of remaining partners
help of the following ratios:-
(c) In the accounts of all the partners
(a) Current ratio
(d) All of the above
(b) Acid test or quick ratio
(c) Liquidity ratio Ans. (c)
(d) All of the above 245. If the current ratio is 2.5, the liquid ratio is 1.5
and the working capital is `15,000. The value of
Ans. (d) the stock will be
237. Valuation of raw material is done in :- (a) 10,000 (b) 15,000
(a) Market price (c) 37,500 (d) 52,500
(b) Receivable value Ans. (a)
(c) Cost 246. Stock turnover is :-
(d) Cost or market price whichever is lower. (a) Earning Ratio (b) Activity Ratio
Ans. (d) (c) Leverage Ratio (d) Liquidly Ratio
238. After the declaration of dividend in general Ans. (b)
meeting its payment is required :- 247. Total capital employed is equal to:-
(a) Within 60 days (b) Within 42 days (a) Fixed assets
(c) Within 45 days (d) Within 90 days (b) fixed assets + Net working capital
Ans. (b) (c) Total asset
239. In a manufacturing undertaking stock (d) Net worth.
includes:- Ans. (b)
(a) Row material (b) Work-in-progress 248. If the gross profit is 25% of the sales and the
(c) Finished-stock (d) All of the above cost of goods sold is `1,00,000, then the amount
Ans. (d) of gross profit will be:-
240. Which one of the following transactions is (a) `25,000 (b) `20,000
capital in nature? (c) `30,000 (d) `33,000
(a) Purchase of truck Ans. (d)
(b) Replacement of old tires 249. Patent right account is:-
(c) Lost of repairing the truck (a) Personal account (b) Real account
(d) All of the above (c) Nominal account (d) All of the above
Ans. (a) Ans. (b)
38
02.
Insurance
Introduction → Insurance is thus a device by which the (ii) Insurable Interest :- The insured must have an
loss likely to be caused by an uncertain event is spread insurable interest in the subject matter of insurance. One
over a number of person who are exposed to it and who fundamental fact of this principle is that it is not the
prepare to insure themselves against such an event. house, ship, machinery, potential liability of life that is
It is a contract or agreement under which one party insured, but is the pecuniary interest of the insured in
Agrees in return for a consideration to pay an agreed them which is insured. Insurable interest means some
amount of money to another party to make a loss, pecuniary interest in subject matter of the insurance
damage or injury to something of value in which the contract.
insured has a pecuniary interest as a result of some (iii) Indemnity:- All insurance contracts of fire or
uncertain event marine insurance are contracts of indemnity. According
Insurance Definition → Insurance is generally defined to it, the insurer undertakes to put the insured in the
as a contract which is also called a policy. An insurance event of loss, in the same position that he occupied
policy is a contract in which an individual or an immediately before the happening of the event insured
organization gets financial protection and compensation against.
for any damages by the insurer of the insurance (iv) Proximate Cause :- According to this principle, an
company. In simple words, one can answer what is an insurance policy is designed to provide compensation
insurance policy as a form of protection from any only for such losses as are caused by the perils which are
unexpected loss or damage. stated in the policy. When the loss is the result of two or
Fundamental Principle of Insurance → The basic more cause. The proximate cause means the direct, the
principle of insurance is that an individual or a business most dominant and most effective cause of which the
concern chooses to spend a definitely known sum in loss is the natural consequence. In case of loss arising out
place of a possible huge amount involved in an indefinite of any mishap. The most proximate cause of the mishap
future loss. Insurance therefore is a form of risk should be taken into consideration.
management primarily used to safe guard against the risk (v) Subrogation:- It refers to the right of the insurer to
of potential financial loss. Ideally, insurance is defined as stand in the place of the insured, after settlement of a
the equitable transfer of the risk of a potential loss, from claim as for as the right of insured in respect of recovery
one entity to another in exchange for a reasonable fee. from an alternative source is involved.
Functions of Insurance - The various functions of (vi) Contribution :- As per this principle, it is the right
insurance are as follows:- of an insurer who has paid claim under an insurance to
(i) Providing certainty- Insurance provides certainity of call upon other liable insurers to contribute for the loss of
payment for the risk of loss. There are uncertainties of payment. It implies, that in case of double insurance, the
happenings of time and amount of loss. Insurance insurers are to share the losses in proportion to the
removes these uncertainties and the assured receives amount assured by each of them in case there is a loss,
payment of loss. when there is more than one policy on the same property,
(ii) Protection :- The second main function of insurance the insured will have no right to recover more than the
is to provide protection from probable chances of loss. full amount of his actual loss.
(iii) Risk sharing :- On the happening of a risk event, (vii) Mitigation :- This principle states that it is the duty
the loss is shared by all the persons exposed to it. The of the insured to take reasonable steps to minimise the
share is obtained from energy insured member by way of loss or damage to the insured property. Suppose goods
premiums. kept in a store house catch fire then the owner of the
(iv) Assist in Capital formation:- The accumulated goods should try to recover the goods and save them
funds of the insurer received by way of premium from fire to minimize the loss or damage. The insured
payments made generating schemes. must behave with great prudence and not be careless just
Principles of insurance: - The principles of insurance because there is an insurance cover.
are the rules of action or conduct adopted by the Types of Insurance - Various types of insurance exist
stakeholders involved in the insurance business. by virtue of practice of insurance companies and the
(i) Utmost good faith:- A contract of insurance is a influence of legal enactments controlling the insurance
contract of uberrimae fidei i.e., a contract found on business. Broadly speaking, insurance may be classified
utmost good faith. Both the insurer and the insured as follows.
should display good faith towards each other in regard to Life Insurance - Life insurance may be defined as a
disclose all material facts. Contract It is a contract contract in which the insurer, in consideration of a
binding on the proposer about the subject matter of the certain premium, either in a lump sum or by other
proposed insurance. periodical payments, agrees to pay to the assured, or to
39
the person for whose benefit the policy is taken, the (5) Unvalued Policy:- An unvalued policy is one where
assured sum of money, on the happening of a specified the valve of the subject matter is not determined at the
event contingent on the human life or at the expiry of a time of taking the policy but is left to be decided at the
certain period. time of loss.
This insurance provides protection to the family at (6) Floating policies:- A floating policy is a long term
premature death of an individual or gives adequate cargo insurance contract.
amount at an old age when earning capacities are • Classification of subject - matter of marine
reduced. The insurance is not only a protection but is a Insurance :-
sort of investment because as certain sum is returnable to Marine Insurance :- Marine insurance is slightly
the insured at the time of death or at the expiry of a different from other types. There are three things
certain period. involved i.e. ship or hull, cargo or goods, and fright.
The main elements of a life insurance contract are: (a) Ship or hull insurance:- Since the ship is exposed
to many dangers at sea, the insurance policy is for
(i) The life insurance contract must have all the indemnifying the insured for losses caused by damage
essentials of a valid contract. to the ship.
(ii) The contact of life insurance is a contract of utmost (b) Cargo insurance: - The cargo while being
good faith. transported by ship is subject to many risk. These may
(iii) In life insurance, the insured must have insurable be at port i.e. risk of theft, lost goods or on voyage etc.
interest in the life assured. Thus an insurance policy can be issued to cover against
(iv) Life insurance contract is not a contract of such risk to cargo.
indemnity. (c) Freight insurance :- Freight is the amount to be
Marine insurance : - A marine insurance contract is an paid for the transportation of the goods. Generally, the
agreement whereby the insurer undertakes to indemnify Ship-owner and the freight receiver is one and the same
the insured in the manner and to the extent thereby person. Freight is paid either in advance or at the
agreed against loss by marine perils or perils of the sea. destination. It is paid in advance there is no problem,
but if it is to be paid at destination the problem arises
Marine insurance is slightly different from other types. since as per Marine laws fright is to be paid only if the
There are three things involved i.e. ship or hull, cargo or cargo is reached safely at the port of destination. If ship
goods and freight. or vessel fails to reach its destination, freight is also
The main elements of a marine insurance contract lost. Therefore, freight insurance is necessary.
are: Fire Insurance:- Section 2 of Insurance Act, 1938 has
(i) Unlike life insurance the contract of marine defined Fire Insurance business as under: 'Fire
insurance is a contract of indemnity. insurance business means the business effecting,
(ii) Similar to life and fire insurance, the contract of otherwise than incidentally to some other class of
marine is a contract of utmost good faith. insurance business contracts of insurance against loss
(iii) Insurable interest must exist at the time of loss. by or incidental to fire or other occurrence customarily
included among the risks insured against in fire
(iv) The principle of cause a proxima will apply to it. insurance policies. Thus, fire insurance is a device to
Marine Insurance policies:- cover loss caused by fire.
Marine insurance is believed to be the oldest form of The method of fire insurance has been devised as the
insurance. It is concerned with the overseas trade means of protection against loss. The fire policy holder
conducted. though sea route. Marine risks generally who is also the owner of the property , has to pay a
relate to the ship or cargo. nominal premium to the insurer for risk coverage.
The important policies are discussed below which are General Information relating to Fire Insurance:-
issued in order to meet different demands of the 1. Period of Insurance :- A fire insurance policy is
insured. These are: issued generally for term of one year, but sometimes the
(1) Time policy :- This policy insures the subject matter policy for a term of less than one year can also be issued
for a definite period of time, which may generally not known as a short -term policy.
exceed 12 months. 2. Commencement of Risk:- As soon as the contract is
(2) Voyage policy:- Under this policy, the subject completed the risk is commenced irrespective whether
the policy is issued or not/or whether the premium is
matter is insured from one place to another. It may
paid or not. If the policy has been issued, payment of
cover only a particular voyage. premium will not be the basis of the commencement or
(3) Mixed policy or Time and voyage policy:- The risk.
policy Covers the subject matter for both a voyage and 3. Issue of cover note:- A cover note is an unstamped
a definite period of time and therefore is a combination documents issued in advance of the policy and usually
of the above two policies. contains the same terms and conditions on which policy
(4) Valued policy: A valued policy is one where the is to be issued
insured and the insurer agree to determine the value of 4. Policy - A policy is a stamped document and contains
the subject matter in advance at the time of taking the the terms and conditions of the contract. The policy also
policy and this shall be the basis of their settlement in contains the name and address of the assured, the
the event of loss to avoid any controversy and litigation. subject matter, the premium and the sum assured, etc.
40
5. Renewal :- A fire insurance contract comes to an end (3) Insurable Interest :- In the case of fire insurance,
after the expiry of one year and may be renewed after the insured must have insurable interest in the goods or
making payment of the premium within the days of properties insured against fire, both at the time when
grace. the policy is taken and also at the time when the loss
occurs and the claim is field for compensation.
Need for fire insurance :- A contract of fire insurance
(4) Payment of premium :- Premium is required to be
is a contract whereby the insurer agrees, in paid at the time of taking policy
consideration of a sum of money called premium, to (5) Insurance Period :- Fire Insurance policies are
compensate another person known as insured for any insured usually for one year duration but in some case
loss or damage to the insured property. for shorter periods also.
The need for the fire insurance arises out of the (6) Contract of Indemnity - The contract of fire
following facts : insurance is a contract of indemnity and the insured
1. There is existence of material property susceptible to cannot anything more than the value of goods or
damage or destruction by fire or other peril. property lost or damaged by fire or the amount of
policy whichever is less.
2. That such material property has intrinsic value
(7) Subrogation :- The scarp or whatever is left of the
measurable in terms of money. goods or properties after damage or destroyed by fire
3. The occurrence of fire will result in not only loss or automatically pass on to the hands of the insurer after
damage to material property, but also other the payment of claim under life insurance. The loss
consequential loss such as loss of production, etc. must be the outcome of fire or ignition only.
Features of fire Insurance Contract:- The following (8) Good faith:- Fire insurance is a contract of utmost
are the characteristics of a fire Insurance contract:- good faith in which the insurer and the insured must
(1) Outcome of offer and Acceptance:- The contract disclose all material facts relating to the subject matter
of insurance.
of insurance is the outcome of the offer made by the
(9) Several Policies for one Property :- In case of
insured and acceptance by the insurer or insurance
several policies for the same property each insurer is
company. As Such, contract of fire insurance is the entitled to contribute for other insurers.
result of an offer made by insured and its acceptance by (10) Intimation of fire:- On occurrence of fire the
insure. insurer should be intimated immediately so that he
(2) Lawful consideration :- Fire Insurance policy is could salvage the reminder of the property and can
issued for a lawful Consideration i.e. premium. also determine the amount of loss
• Difference between Life, Fire and Marine Insurance
Basis of difference Life Insurance Fire Insurance Marine Insurance
1. Subject Matter The subject matter of The subject matter is The subject matter is a
insurance is human life. any physical property or ship, cargo or freight
assets.
2. Element Life Insurance has the Fire insurance has only Marine insurance has
elements of protection and the element of only the element of
investment or both protection and not the protection.
element of investment
3. Insurable interest Insurable interest must be Insurable interest on the Insurable interest must
present at the time of subject matter must be be present at the time
effecting the policy but need present both at the time when claim falls due or
not be necessary at the time of effecting policy as at time of loss only.
when the claim falls due. well as when the claim
falls due.
4. Duration Life insurance policy usually Fire insurance policy Marine insurance policy
exceeds a year and is taken for usually does not exceed is for one or period of
longer periods ranging from 5 a year. voyage or mixed.
to 30 years or whole life.
5. Indemnity Life insurance is not based on Fire insurance is a Marine insurance is a
the principle of indemnity. contract of indemnity contract of indemnity.
The sum assured in paid The insured can claim the insured can claim
either on the happening of only the actual amount the market value of the
certain event or on maturity of loss from the insurer. ship and cost of goods
of the policy. The loss due to the fire destroyed at sea and the
is indemnified subject to loss will be
the maximum limit of indemnified.
the policy amount

41
6. Loss measurement Loss is not measurable Loss is measurable Loss is measurable.
7. Surrender value or Life insurance policy has a Fire insurance does not Marine insurance does
paid up value surrender value or paid up have any surrender not have any surrender
value. value or paid up value. value or paid up value
8. Policy amount One can insure for any In fire insurance the In marine insurance the
amount in life insurance the amount of the policy amount of the policy
subject matter. cannot be more than the can be the market value
value of Assets/property of the ship or cargo
9. Contingency of risk There is an element of The event i.e. The event i.e. loss at sea
certainity. The event i.e. destruction by fire may may not occur and there
death of maturity or policy is not happen. There is an may be no claim. There
bound to happen, Therefore a element of uncertainty is an element of
claim will be present. and there may be no uncertainty.
claim
Insurance Contract :- Insurance is a contract where by
one, party the insurance agrees to pay a specified
amount on the happening of an event and the other party
i.e. the insured agrees to pay in consideration there of, a
sum which is called premium.
Therefore there are two parties to an insurance contract:
(1) The insurer: Who undertakes the responsibility to
indemnify
(2) The insured : Whose risk is undertaken. Important Term :-
According to E.W. Petterson " Insurance is a contract Whole Life Policy :- In this kind of policy, the amount
by which one party for a consideration called premium payable to the insured will not be paid before the death
assumes particular risk of other party and promises to of the assured . The sum then becomes payable only to
pay to him or his nominee a certain or ascertainable sum the beneficiaries or heir of the deceassed.
of money on a specified contingency." Endowment Life Assurance Policy :- The insurer
Characteristics of an Insurance Contract :- The (Insurance company) undertakes to pay a specified sum
Indian contract Act, 1872 as well as the Insurance Act when the insured attains a particular age or on his death
1938 governs the insurance contract. The provision of whichever is earlier.
Indian contract Act, 1872 refer to the general Joint Life Policy:- This policy is taken up by two or
characteristic of an insurance contract whereas more persons. The premium is paid jointly or by either
Insurance Act, 1938 refers to the special characteristics. of them in installment or lump sum. The assured sum or
policy money is payable upon the death of an one
General Characteristics :- According to Section 2 (h) person to the other survivor or survivors.
and section 10 of the Indian Contract Act a valid
Annuity Policy:- Under this policy, the assured sum or
contract must have the following essentials:- policy money is payable after the assured attains a
1. Agreement , i.e. offer and acceptance certain age in monthly, quarterly, half yearly or annual
2. Free consent to the contract installments
3. Lawful object Children's Endowment Policy:- This policy is taken
4. Competence of the parties by a person for his/her children to meet the expenses of
5. Legal Consideration. their education or marriage.
Insurance ACT 1938:- The Heading :- The heading section of an insurance
policy gives information about the insurer, the insurers
This Insurance Act was passed in the year 1938 and was
name, address of registered office as well as his policy
implemented from 1st July 1939. This act of 1938 was issuing office .
wide and comprehensive. There was strict control over The preamble :- The preamble section of the policy
the insurance business. This Act was amended a number introduce the parties to the contract : insured and
of time, the most important amendment were made in insurer.
1950 and 1968. Schedule :- The preamble is followed by schedule of
The act applies to the General Insurance Corporation of the policy. The schedule contains specific details
India and the four subsidiary companies subject to relating to the insurance contract, of which the policy
exceptions, restrictions and limitations, as specified by document is the evidence.
the central Government under power conferred by Cover Note:- It is not always possible to issue an actual
section 35 of the General Insurance Business policy documents as soon as the terms of the contract
(Nationalisation) Act, which is reproduced below. have been agreed.
42
Certificate of Insurance:- In case of motor insurance is
compulsory, a certificate of insurance is issued in Important insurance Plans
addition to the policy document certificate of insurance ■ (i) LIC Jeevan Ankur Plan :-
is an evidence of insurance to be produced when the This insurance scheme was started on January
registration authorities and policy ask for it. The 23,2012 for new born babies.
certificate is issued to prove that the policy is in force. Features :-
The Insuring clause :- Insurance agreement is a Life of the parents is insured for the purpose of
condition of contract and forms the essence of an benefiting the children up to the age of 17 years.
insurance contract . The insuring clause states what the ■ In case of death of mother or father during the term of
insurer has agreed to do subject to the terms conditions, insurance, the premium is not to be paid and the
privileges endorsements and exclusions mentioned policy continues.
therein. This clause sets out the essence of the contract. ■ (ii) LIC's Jeevan Kishore Plan :-
The Inserted/Policy holder:- When an insurance This is an Endowment Assurance Plan available for
agreement is entered into, it is essential to nominate a children of less than 12 years of age. The policy may
person or organization that will receive the policy be purchased by any of the parent/grandparent.
benefits should the policy mature or the insured peril Commencement of risk cover :-
occur. . The risk commences either after 2 years from the date
Exclusions: - Insurance policies are broad insuring of commencement of policy or from the policy
agreements. The cover provided by any such agreement anniversary immediately following the completion of
is defined and limited by the exclusions therein 7 years of age of child, whichever is later.
Excluded Perlis: - In general all insurance contact ■ (iii) Komal Jeevan Bima Plan :-
exclude , from coverage, certain perils that can cause This insurance plan is a children's money back plan
losses. Exclusions find place in a standard policy that provides financial protection in case of death of
because some perils are not insurable (Such as a the child. It has been started for children from birth to
suicide) at all or not insurable for the given price. 10 years of age.
Uninsurable Perils:- Losses from unpredicted source Feature :-
of risk, non-accidental causes and losses from deliberate ■ The installments are payable yearly, half yearly,
acts of the insured's fall into the category of uninsurable quarterly, monthly or till the child attains the age of
perils. 18 years or in case of premature death of the child.
Excluded Losses :- As per the doctrine of proximate ■ Risk cover Two years after the commencement of
cause a perils is said to be the cause of a loss if there is insurance or till the child completes seven years of
a chain of unbroken events leading from peril to the age.
ultimate loss. ■ Rs. 75 per thousand on the insured income every year
Assignment :- The assignment condition enables the under insurance. Provision of guaranteed benefit.
insured, with the consent and knowledge of the insurer, ■ This is a with profit insurance plan and is included in
to transfer his personal rights under the contract to the profits of the life insurance business of the
another person. Assignment is a written agreement corporation.
where a right is transferred from one party to the other. ■ (iv) Jeevan Anuraag Bima Plan :-
Signature Clause :- This clause requires the policy to This is an insurance scheme with benefits which has
be signed. The authorized official of the insurer signs an been started for children.
insurance policy. ■ (v) Jeevan Chhaya Bima Plan :-
Pro Rata Clause/Contribution :- Pro rata Clause, It provides financial protection in case of death
states that is multiple polices are in force covering the during the entire term of the insurance plan. After
same property, each policy will pay an amount in a death, the entire sum assured is paid.
proportion that the policy amount bears the total of ■ Premium payable annually, half yearly, quarterly or
amounts on all the polices. till the death of the Life Assured.
■ Simple reversionary bonuses declared per thousand of
Certificates :- Where insurance is compulsory, the law
income. Assured at the end of each year are added to
requires that a certificates is issued to prove that policy
the guaranteed benefits of the plan.
is in force. The information to be shown on a certificate
■ (vi) Jeevan Vishwas Plan :-
is laid down by the respective statute.
This is an Endowment Assurance plan designed for
Peril:- A peril is a cause of risk : Fire earthquake, flood, the benefits of handicapped dependants.
etc, are example of perils. ■ Premium
Hazard :- is a condition that increases the frequency or Premium are payable quarterly, half-yearly or yearly
severity of loss. throughout the term of the policy or till the earlier
Risk is often thought of in terms of chance (probability death, alternatively, the premium may be paid in one
of loss). lump sum (single premium)
43
■ (vii) LIC's Jeevan Amrit :- Special Features:-
Some people, particularly the younger ones, want to (1) Encashment of survival Benefit as and when needed.
have high cover at a low cost. Further, many of them (2) Flexibility to pay premiums in advance.
do not want commitment to pay premiums for a (3) Option to receive maturity proceeds in the form of an
longer duration. LIC's Jeevan Amrit is most suitable
for such persons. Under this plan premium payment annuity.
is limited to 3 or 4 or 5 years and the premium ■ (xiii) LIC's Jeeven Sathi Plan :-
payable during the first year is higher than the This is an Endowment Assurance Plan issued on the
premiums payable in subsequent years. lives of husband and wife. The plan provides
■ (viii) Jeevan Mitra Plan :- financial protection against death of both the lives. It
This is an Endowment Assurance Plan that provides pays the maturity amount on serviced of one or both
greater financial protesting against death throughout the lives to the end of the policy term.
the term of plan. It pays the maturity amount on Premiums :-
survival to the end of the policy term. Premiums are payable yearly, half-yearly, quarterly
Premiums :-
Premiums are payable yearly, half-yearly, quarterly, monthly or through salary deductions as opted by you
monthly or through salary deductions, as opted by though the term of the policy or till the first death of
you, throughout the term of the policy or earlier the lives covered, whichever is earlier.
death. ■ (xiv) LIC's Jeevan Madhur Plan :-
■ (ix) LIC's Jeevan Anand :- It is a simple savings related life insurance plan
This plan is a combination of Endowment Assurance where you may pay premiums regularly at weekly,
and whole Life plans. It provides financial protection fortnightly, monthly, quarterly, half-yearly or yearly
against death through the lifetime of the life assured intervals over the term of the policy.
with the provision of payment of a lump sum at the ■ (xv) LIC's Jeevan Saral Plan :-
end of the selected term in case of his survival.
■ (x) LIC's Jeevan Shree Plan :- This is an Endowment Assurance Plan where the
This is an Endowment Assurance plan offering the proposer has simply to choose the amount and mode
choice of many convenient premium paying terms. It of premium payment. The plan provides financial
provides financial protection against death throughout protection against death thought the term of the plan.
the term of plan with the payment of maturity amount The death benefit is directly related to the premium
on survival to the end of the policy term. paid. The maturity sum Assured depends on the age
■ (xi) LIC's Jeevan Surabhi Plan :- at entry of the life to be assured and is payable on
Jeevan Surbhi Plan is similar to other money back survival to the end of the policy term. It also offers
plans. However main differences in regular money
the flexibility of term and a lot of liquidity.
back plans and Jeevan Surbhi are as under
■ Maturity term higher rate of survival benefit payment ■ (xvi) LIC's Health Plus Plan :-
■ Early and higher rate of survival benefit payment This plan is unique and a unique health plan with the
■ Risk cover increases every five years. benefits of health insurance and share market which
■ (xii) LIC's Jeeven Bharti Plan :- is based on rising stock index along with health
LIC's Jeevan Bharati is a plan exclusively for women. protection.
It is a with profit plan having special features ■ For persons from 18 to 55 years (including wife and
considering the needs of women. The plan also children in the family, if the husband is above 55,
provides for accident Benefit critical Illness Benefit then the wife can also take this policy for the family.
and congenital Disability Benefit as Optional Riders.

Previous Year MCQ

1. Consider the following statements regarding Ans. (c) : Pradhan Mantri Jeevan Jyoti Bima Yojna
the Pradhan Mantri Jeevan Jyoti Bima Yojana : (PMJJBY) is a life insurance scheme launched is 2015.
1. It is applicable to all adults above the age Under this scheme only those adults, above age of 18
group of 18 years. years and upto age of 50 years, are eligible who have
2. The premium is deducted from the account bank accounts.
holder's bank account through 'auto debit Hence 1st statement is incorrect The life cover of Rs. 2
facility'. taken is predecided and not fixed by the policy holder.
Therefore, 3rd statement is also incorrect. Rests of the
3. The life insurance worth is decided by the Statements are correct.
account holder and he had to pay the
2. Consider the following statements regarding
annual premium accordingly.
the Pradhan Mantri Suraksha Bima Yojana:
4. The life insurance amount is given to the 1. It is applicable for all bank account holders
family after the death of the subscriber up to the age of 60 years.
Which of the above statements are correct? 2. It is a life insurance cover.
(a) 1 and 3 only (b) 1 and 4 only 3. It is an accident insurance cover.
(c) 2 and 4 only (d) 2 and 3 only 4. The insurance covers death and permanent
EPFO-2015 disability due to accident.
44
 Which of the above statements are correct? Select the correct answer using the codes given
(a) 1 and 2 only (b) 3 and 4 only below:
(c) 2 and 3 only (d) 1 and 4 only (a) 1, 2 and 3 only (b) 1, 2 and 4 only
EPFO-2015 (c) 3 and 4 only (d) 1, 2, 3 and 4
Ans. (b) : Pradhan Mantri Suraksha Bima Yojna is a EPFO-2015
government backed accident insurance scheme
launched on 8th May 2015. The scheme is available to Ans. (d) :
people in age group 18 to 70. Therefore 1st statement is Private Insurance Social Insurance
incorrect. It is not a life insurance cover hence 2nd Programmes Programmes
Statement is also incorrect. Rests of the statement are Adequacy Equity
correct.
Voluntary Mandatory participation
3. Which of the following are the typical difference Contractual Statutory Rights
between the private insurance programmes
and the social insurance programmes? Self premium Payment Some schemes EPF
1. Adequacy versus Equity bonus paid by the
2. Voluntary versus Mandatory participation government
3. Contractual versus Statutory Rights ∴ All of the above are correct.
4. Funding

Practice MCQ
1. "Insurance is a co-operative system" this 7. The assurance implied in marine insurance is
statement was given by not-
(a) Prof. R.S. Sharma (b) Den Werg (a) Seaworthiness of the ship
(c) Hapkins (d) Mege (b) Legality of the undertaking
Ans. (a) (c) Not to deviate from the route
2. Importance of 'Implied Assurances' exists in (d) Assurances made with the insurer
(a) Life insurance Ans. (c)
(b) Fire insurance 8. Insurable interest in marine insurance must
(c) Accidental Insurance exist:-
(d) Marine Insurance (a) At the time of getting insurance
Ans. (d) (b) When submitting a claim for damages
3. "Insurance is a security against Economic (c) When insuring and claiming indemnity
loss". This statement is given by. (d) Never
(a) Sir Willam Beveridge (b) Magie Ans. (b)
(c) Prof. Marshall (d) Haopkins 9. The principle of insurable interest applies-
Ans. (a) (a) Fire insurance (b) Life insurance
4. Insurer refers to a person who (c) Marine insurance (d) All of the above
(a) Files case in court for recovery of Insurance Ans. (d)
claim. 10. Insurable interest to exist in case of fire
(b) Insures his life or property insurance should-
(c) Helps any person in taking Insurance policy (a) At the time of taking the policy
(d) Protects another person from the risk of (b) At the time of filling the claim
subject matter of Insurance (c) At the time of fire
Ans. (d) (d) At the time of taking the policy and also at
5. The words Assurance and Insurance are the time of making a claim
usually differentiated in Ans. (d)
(a) England (b) America 11. When an insurance company gives insurance
(c) France (d) India business to another company for heavy
Ans. (a) insurance, it is called-
6. New India Assurance company is situated at (a) Double insurance
which place? (b) Reinsurance
(a) Kalkata (b) New Delhi (c) Separate insurance
(c) Mumbai (d) Chennai (d) Joint insurance policy
Ans. (c) Ans. (b)

45
12. Where Oriental Insurance company is 22. When more than one fire Insurance policy is
situated? taken, for a subject matter then it is called.
(a) Kolkata (b) New Delhi (a) Block Insurance (b) Re-Insurance
(c) Mumbai (d) Chennai (c) Double Insurance (d) Average Insurance
Ans. (b) Ans. (c)
13. United India Insurance company Limited is 23. Insurable interest is an important component
located at which place of
(a) Kolkata (b) New Delhi (a) Only life Insurance
(c) Mumbai (d) Chennai (b) Only Marine Insurance
Ans. (d) (c) Only fire Insurance
(d) All of the above
14. India International Insurance private limited is
situated at which place? Ans. (d)
(a) Sinopore (b) London 24. In fire Insurance, insurable interest should be
(c) Washigton (d) Tokyo present at the time of
Ans. (a) (a) Taking Insurance (b) Loss
(c) Both (A) and (b) (d) None of the above
15. Where National Insurance company limited is
situated? Ans. (c)
(a) Kolkata (b) New Delhi 25. Principle of Subrogation does not apply to
(c) Mumbai (d) Chennai (a) Life Insurance (b) Fire Insurance
Ans. (a) (c) Deposit Insurance (d) Theft Insurance
16. The number of Subsidiary companies of Ans. (b)
general Insurance corporation of India are 26. In which policies insurable interest is
(a) 2 (b) 3 necessary-
(c) 4 (d) 5 (a) Life insurance policy
(b) Fire insurance policy
Ans. (c)
(c) Marine insurance policy
17. The life Insurance was nationalised on
(d) In all policies of all types of insurance
(a) 19 Feb, 1956 (b) 20 Sept, 1972
Ans. (d)
(c) 20sept, 1956 (d) 19feb, 1972
27. Risk not insurable
Ans. (a)
(a) Pure risk (b) Hypothetical risk
18. The nationalization of general Insurance took (c) Certified risk (d) Empirical risk
place on
Ans. (b)
(a) 19 Feb, 1972 (b) 20 Sept, 1972
(c) 19 Feb, 1956 (d) 20 Sept., 1956 28. The importance of implied assurances is-
(a) Life insurance (b) In fire insurance
Ans. (b)
(c) Accident insurance (d) Marine insurance
19. Principle of Indemnity does apply to which of
Ans. (d)
the following
(a) Life Insurance (b) Fire Insurance 29. The action in which the assured, in the event of
(c) Marine Insurance (d) Insurance of Theft his death during the term of the insurance,
confers on another person the right to receive
Ans. (a) the sum assured, is called-
20. Insurance is a contract where one party (a) Assignment (b) Enrollment
undertakes to indemnify the other party (c) Surrender (d) Renovation
against a possible loss in return for some Ans. (b)
consideration. This does not apply to
30. "Insurance is the taking of risks collectively" .
(a) Fire Insurance
Who said this?
(b) Manine Insurance
(a) Sir William Bebridge
(c) Life Insurance
(b) Boom and Kurtz
(d) Accidental Insurance
(c) Maggie
Ans. (c) (d) Willett
21. General Insurance corporation was set up in Ans. (a)
the year
31. "Insurance is a plan under which a large
(a) 1948 (b) 1956
number of people together to take the risks of a
(c) 1972 (d) 1974 few individuals on their shoulders". Who said
Ans. (c) this?
46
 (a) Regal and Miller (b) John Magee 39. In life insurance, Insurance interest should lie
(c) Prof. R.S. Sharma (d) Willett at the time of
Ans. (b) (a) Taking policy
32. An important requirement for a valid contract (b) Maturity of Policy
of insurance is- (c) Both, At the time of taking policy as well as
(a) Payment of premium in cash maturity of Policy
(b) Insurable interest (d) Full duration of policy
(c) Registration of the contract in the court Ans. (a)
(d) Creditworthiness of the insured
40. A person got his property worth Rs. 20,000 fire
Ans. (b) insured for Rs. 16,000 only. the loss caused to
33. Disclosure of all material things in a contract of him by fire is Rs. 10,000. The policy also has an
insurance is called. average clause. what will be the amount of his
(a) Insurable interest claim?
(b) Principle of indemnity (a) ` 20,000 (b) `16,000
(c) Principle of Utmost good faith
(c) `10,000 (d) `8,000
(d) Co-operative principle
Ans. (c) Ans. (d)
34. Ram leaves some goods with Shyam for their 41. Under marine insurance, if the value of subject
safety, When Insurable interest lie on those matter of insurance is not mentioned, then it is
goods. called as,
(a) Only Ram (a) Open policy (b) Current policy
(b) Only Shyam (c) Valuated policy (d) Mixed policy
(c) Both Ram and Shyam Ans. (a)
(d) Neither of the two 42. Under which of the following principles both
Ans. (b) the related parties should disclose relevant
35. Statement (a) : Life Insurance is an Insurance facts to each other?
of Indemnity . (a) Principle of Indemnity
Reason (R): Human Life is so valuable that it is (b) Utmost good faith
impossible to calculate its value.
(c) Principle of Subrogation
(a) Both (A) and (R) are correct and R is correct
explanation of A. (d) Insurance Interest
(b) Both (A) and (R) are correct and R is not Ans. (b)
correct explanation of A. 43. Under fire insurance policy, Provision of
(c) A is correct but R is not correct Average clause is given because.
(d) A is incorrect but R is correct . (a) Amount of insurance does not decrease
Ans. (d) (b) Amount of insurance does not increase more
36. In marine Insurance, which of the following (c) Amount of insurance does not increase or
principles not lies? decrease
(a) Validity of the enterprise (d) All of the above
(b) utmost good faith Ans. (c)
(c) Insurable interest
(d) Indemnity 44. Under marine Policy, when insurance of good
is agreed between Mumbai to London, than
Ans. (a)
this type of policy will be called as.
37. Which of the following risk is not insurable? (a) Time related policy
(a) Loss of Property (b) Loss of Gambling
(b) Value related policy
(c) Social Risk (d) Export Risk
(c) Mixed policy
Ans. (b)
(d) Travel related policy
38. Which of the following Insurance can be taken
by a person ? Ans. (d)
(a) Property of any person 45. Under which of the following policy, insurable
(b) Only his property interest is necessary at the time of happening of
(c) Only that property in which his interest lies. loss?
(d) Only that property in which his financial (a) Life insurance (b) Fire insurance
interest lies. (c) Marine insurance (d) Theft insurance
Ans. (d) Ans. (c)

47
46. Principle of subrogation does not apply in 54. Read the following statements.
which of the following ? 1. Under main insurance, Insurable interest
(a) Life insurance (b) Fire insurance should exist at the time of loss.
(c) Deposit insurance (d) Theft insurance 2. Under fire insurance, Insurable interest should
exist at the time of contract as well as at the
Ans. (a) time of loss.
47. Security and Investment element exists in Which of the following statements incorrect.
(a) Life insurance (a) Only 1 (b) Only 2
(b) Fire insurance (c) Both 1 and 2 (d) Neither 1 nor 2
(c) Life insurance and Marine insurance Ans. (c)
(d) Fire insurance and Marine insurance 55. The insurance under which the risk of
Ans. (a) professional negligence is insured is called.
48. Fire insurance includes. (a) Professional Insurance
(a) Only Risk Factor (b) Investment factor (b) Business Insurance
(c) Liability Insurance
(c) (a) and (b) both. (d) Neither (a) nor (b)
(d) Risk Insurance
Ans. (c)
Ans. (d)
49. Reinsurance means.
56. Which of the following as an example of
(a) Only double insurance company incorporated by special act of
(b) Single insurance parliament?
(c) Owner taking insurance from more than one (a) Life Insurance Corporation of India
company. (b) Oil India Limited
(d) One insurance company taking insurance (c) State Trading Corporation of India
from another insurance company. (d) Bharat heavy Electrical Limited.
Ans. (d) Ans. (a)
50. Showing correct date of birth in life insurance 57. Under Life Insurance 'Paid-up' value is paid
policy is correct according to which of the up at the time of
following principle? (a) Maturity of Policy
(a) Principle of indemnity (b) On lapse of policy
(b) Principle of insurable interest (c) On surrender of Policy
(c) Principle of subrogation (d) On maturity or expiry whichever is earlier.
(d) Principle of utmost good faith. Ans. (d)
Ans. (d) 58. Under Fire insurance, Average clause tells that
an insured person can get.
51. Insurance contract is a (a) Only that much of actual loss as is insured out
(a) Contract of indemnity of the gross value.
(b) Contract of gamble (b) The full amount of the entire loss occurred.
(c) Contingent contract (c) The full amount of partial loss
(d) Implied contract (d) A fixed amount of the actual loss.
Ans. (a) Ans. (a)
52. Export Risk insurance is a type of 59. In case of death of a partner, joint life policy is
(a) Guarantee Insurance credited to the
(b) Social Insurance (a) All partner capital account (Including
Deceased partner) in their profit sharing ratio.
(c) Asset Insurance
(b) Remaining partner capital account in their
(d) Liability Insurance profit sharing ration.
Ans. (a) (c) Remaining Partner capital account in their
53. A promise made by an insurer to identify the capital ratio.
insured against loss or destruction of his (d) All partner capital account (Including
property comes under which of the following? Deceased Partner) in their capital ratio.
(a) Principle of utmost good faith Ans. (a)
(b) principle of insurable interest 60. Importance of 'Implied Assurances' exists in
(c) Principle of indemnity (a) Life insurance (b) Fire insurance
(d) Principle of contingency. (c) Accidental Insurance (d) Marine Insurance
Ans. (c) Ans. (d)
48
03.
AUDITING
Auditing: Features of Auditing:
• The term audit is derived from the Latin word 1. Audit is a systematic and scientific examination of
‘audire’, which means to hear. In early days a the books of accounts of a business.
person used to listen to the accounts read over by 2. Audit is undertaken by an independent person or
an accountant in order to check them. He was body of persons who are duly qualified for the job.
known as auditor. 3. Audit is a verification of the results shown by the
• Audit is performed to ascertain the validity and profit and loss account and the state of affairs as
reliability of information. Examination of books shown by the balance-sheet.
of accounts with supporting vouchers and 4. Audit is a critical review of the system of
documents in order to detect and prevent error and accounting and internal control.
fraud is the main function of auditing. The goal of 5. Audit is done with the help of vouchers,
an audit is to express an opinion on the financial documents, information and explanations received
or non-financial areas. from the authorities.
• It is not mandatory from the legal point of view to 6. The auditor has to satisfy himself with the
get the accounts of a sole proprietorship business authenticity of the financial statements and report
or a partnership firm checked. But the audit of the that they exhibit a true and fair view of the state of
accounts of the company is mandatory from the affairs of the concern.
statutory point of view. Objectives of Auditing:
Definitions: • The objectives of auditing may be classified into
two parts:
• Spicer and Peglar–‘‘Audit such an examination
of the books of accounts and vouchers of a 1. The primary objective,
business, as will enable the auditor to satisfy 2. The secondary or incidental objective.
himself that the balance-sheet is properly drawn 1. Primary objectives–As per the section 143 of the
up, so as to give a true and fair view of state of companies act 2013, the primary duty (objective)
affairs of the business and whether the profit and of the auditor is to report to the owners that the
loss account gives a true and fair view of the accounts, financial statements given a true and fair
profit or loss for the financial period according to view of the state of the company’s affairs as at the
the best of his information and explanations given end of its financial year and profit or loss and cash
to him and as shown by the books, and if not, in flow for the year and such other matters as may be
what respect he is not satisfied.’’ prescribed.
2. Secondary objectives–It is also called the
• Lawrence R. Dicksee–‘‘An audit is an
incidental objective as it is incidental to the
examination of accounting records undertaken satisfaction of the main objective. The incidental
with a view to establishing whether they correctly objectives of auditing are:
and completely reflect the transactions to which
(i) Detection and prevention of frauds, and
they purport to relate.’’
(ii) Detection and prevention of error.
• Taylor and Perry–‘‘Audit is defined as an
• Detection of material frauds and errors as an
investigation of some statements of figures
incidental objectives of independent financial
involving examination of certain evidence, so as
auditing flows from the main objectives of
to enable an auditor to make a report on the determining whether or not the financial
statement’’. statements give a true and fair view. As the
• The Institute of Chartered Accountants of statement on auditing practices issued by the
India (ICAI) defines Auditing as–‘‘Auditing is Institute of chartered accounts of India states, an
defined as a systematic and independent auditor should bear in mind the possibility of the
examination of data, statements, records, existence of fraud or errors in the accounts under
operations and performance of an enterprise for a audit since they may cause the financial position
stated purpose. In any auditing situation, the to be mis-stated.
auditor perceives and recognizes the propositions • Fraud refers to intentional misrepresentation of
before him for examination, collect evidences, financial information with the intention to
evaluates the same and on this basis formulates deceive. Frauds can take place in the form of
his judgment which is communicated through his manipulation of accounts, misappropriation of
audit report.’’ cash and misappropriation of goods. It is a great
49
 importance for the auditor to detect any frauds, Benefits of Audit:
and prevent their recurrence. Errors refer to • Satisfaction of owner,
unintentional mistake in the financial information • Detection and prevention of errors and frauds,
arising on account of ignorance of accounting
principles i.e. principle errors, or error arising out • Verification of books,
of negligence of accounting staff i.e. clerical • Independent opinion,
errors. • Moral check,
Basic Principles Governing an Audit: • Protection of the rights and interests of
shareholders,
• Integrity objectivity and independence,
• Confidentiality, • Reliance by outsiders,
• Skill and competence, • Ensures compliance with legal requirements,
• Work performed by others, • Reinforce and strengthen internal control,
• Documentation, • Loan facility,
• Planning, Limitations of Audit:
• Audit Evidence, • Higher cost burden,
• Based on test checks,
• Accounting system and internal control,
• Insufficient time,
• Audit conclusions and reporting. • In conclusiveness of evidences,
Principal Aspects to be concerned in Auditing: • Based on estimates,
• Review of system and procedures, • Based on the information provided by the
• Review of internal control system, management,
• Review of system and procedures,
• Routine checking/Arithmetical accuracy,
• Review of internal control system,
• Accounting principles,
• Routine checking/Arithmetical accuracy,
• Books and statements,
• Accounting principles,
• Verification of assets, • Books and statements,
• Verification of liabilities • Verification of assets,
• True and fair view, • True and fair view,
• Statutory compliance, • Statutory compliance,
• Reporting, • Reporting,
Difference between Audting and Investigation
Particulars Investigation Auditing
1. Meaning Investigation implies systematic, critical An audit is independent examination of financial
and special examination of the records of a information of any entity, when such an
business for a specific purpose. examination is conducted with a view to
expressing an opinion thereon.
2. Mandatory Nature Voluntary Mandatory for companies, for others, it is
voluntary.
3. Conducted By Any person, who may not be a chartered A Chartered Accountant within the meaning of
accountant. the Chartered Accountants Act, 1949.
4. Appointing Agency Owners or management or even third Owners/Shareholders of the enterprise.
parties may appoint the investigator.
5. Protection of Interests Work is carried out from the view-point of Work is carried out on behalf of the owners, even
the appointing agency. if the power of appointment is delegated to say,
Board of Directors.
6. Scope and coverage Specific-seeks to answer only those General when compared to investigation seeks to
questions laid-down in the engagement form an opinion on the financial statements.
letter.
7. Period covered Not necessarily restricted to a financial Generally a period of one financial year.
year. It can extend for a period consisting
of a number of years.
8. Evidence Seeks conclusive and corroborative Much of audit evidence is persuasive rather than
evidence conclusive.
9. Form of reporting There is no statutory form of investigation The matters to be covered in the audit report are
report. sometimes prescribed by law.

50
(A) According to organizational structure of the 3. Government Audit: The audit of accounts of
Business: government departments and institutions is known
1. Statutory Audit: By statutory audit we mean as government audit. Every government has an
the compulsory audit under a statute or law. The accounts and audit department headed by
organizations established under specific statute Comptroller and Auditor General of India who is
are bound to get their accounts audited. Thus, appointed by president of India (Article 148 of the
audit of an organization which is mandatory constitution). His rights and duties are determined
by the parliament or by any act of parliament
under any statute is known as statutory audit. It
(Article 149) with regard to audit of accounts of a
is legally compulsory for the following
department or institution of central or a state
organization to get their accounts audited: government.
(i) Companies registered under Companies Act, 4. Internal Audit: The periodic examination of
1956 but now 2013. books of accounts by the employees who are
(ii) Banking companies under banking the appointed to act as auditor is known as internal
banking companies act, 1949. audit. Some concerns appoint permanent auditors
(iii) Insurance companies governed by Insurance like other employees in order to strengthen its
Companies act, 1938. internal control system with a view to early
(iv) Local bodies and local authorities. detection of errors, frauds or manipulations of
(v) Public trust registered under public trusts accounts. People with ordinary qualification like
Act. that of accountant can do this work. It is not
necessary for them to have professional
(vi) Public and charitable trusts registered under qualification like statutory auditor. Internal
various acts. auditors do not submit their report but are mainly
(vii) Co-operative societies under various co- appointed to give suggestions to the management
operative societies acts. for the improvement of the accounts.
2. Private Audit: The audit is respect of various (B) According to Practical Utility:
organisation for which audit is not compulsory (a) Complete Audit: If all the books of accounts of
under any statute is known as private audit. The a period are examined in detail and no book or
audit for such organisation depends upon the account is left unexamined, such an audit is
willingness of owners of the business. Private known as complete audit. Such an audit is
audit is also known as voluntary audit. compulsory in case of a company.
51
(b) Partial Audit: In case a specific part of books of (b) Advantages relating to employees:
accounts or only books of accounts for a specific 1. The chances to commit frauds are minimized as
period are examined, this is known as partial employees do not get time for the same and even
audit. Such an audit is conducted only for if some fraud is committed it can be detected
achievement of a particular objective. easily.
(c) Continuous Audit: The examination of books of 2. As the auditor pays surprise visits, it has a
accounts by the auditor throughout the year or at considerable moral check on them and they
perform their work carefully and effectively.
irregular or regular intervals is known as
3. Work is performed regularly and in time, which
continuous audit or detailed audit or running
leaves no chances to postpone work for last few
audit. months of a financial year.
Continuous Audit is discussed in detail as Disadvantages of Continuous Audit:
follows: • Continuous audit is not free from certain
Continuous Audit disadvantages, which are as follows:
• According to R.G. Williams, ‘‘A continuous audit (a) Disadvantages with regard to Audit:
is one where the auditor and his staff is constantly 1. There is possibility of alteration of figures after
engaged in checking the accounts during the the examination as the books are not closed.
whole period, or where the auditor or his staff 2. There is also a possibility of some work remaining
attends at regular intervals during that period.’’ left out because the auditor has full year to
Need and Utility of continuous audit: examine the book, he may become careless,
• Though continuous audit is not legally particularly in the beginning of the year.
compulsory, it is important in the following 3. Since the audit work continues throughout the
circumstances: year. It becomes mechanical with the auditor’s
1. In a business where there are a large number of staff becoming careless. This way the quality of
transactions, productions, purchase or sales. work is affected.
2. In a business where the statement of sale, (b) Disadvantages with Regard to Employees:
purchase and expenses are prepared fortnightly Due to frequent visits of auditor, the routine
work of employees is affected. Moreover, the
or on monthly basis or after a short-period and
auditors staff gets acquainted and even friendly
where the profit and loss account and balance-
with employee’s staff, which might result in
sheet is prepared quarterly. their collaboration in any defalcation or
3. In case where the internal check system does not discrepancy.
exist or if it is not satisfactory. Periodical Audit
4. In case of concerns where the profit and loss • Periodical audit is done at the end of the financial
account and balance-sheet are to be prepared year at the time of preparing final accounts. The
immediately after the close of financial year, e.g. auditor visits the client only once in a year and
Electricity company, Gas company. Railway Computer the examination of all books and
company or a mining company. accounts. It covers entire examination of books
Advantages of continuous audit: and complete verification of accounts. Periodical
(a) Advantages related to auditing and errors: audit is also known as annual audit or final audit
1. It is possible to conduct detailed examination or complete audit.
because audit work keeps or going throughout The periodical audit is adopted by these concerns:
the whole year and no account or transaction is 1. Where there is small number of transactions.
left unrecorded. 2. Where effective internal system is in use.
3. Where there is no need of easily preparation of
2. Audit work can be completed early and as a result
final accounts.
balance-sheet and profit and loss account are also
4. Where the detailed and in depth examination is
prepared early which is not possible in other
not essential.
audits.
5. Where there is no need of preparing interim
3. As the auditor keeps visiting the concern accounts.
throughout the year he comes to known about the Advantages:
weakness and secret information about the (i) It does not cause any inconvenience and
concern. This helps him to conduct his audit work disturbance to the work of the concern as the
smoothly. auditor comes only once in a year.
4. Errors are detected at an easily stage and hence (ii) It is less expensive and suitable for a small
can be rectified immediately. Thus, the time business.
wasted on the agreement of trial balance at the end (iii) The work of auditor can be completed quickly and
of the year is saved. within a reasonable time.
52
(iv) It is not possible to establish undue collision Interim Audit:
between the auditors staff and client’s staff. • An interim audit is one which is conducted for a
(v) The work does not become mechanical and link in part of the financial year, for some interim
the work can be properly maintained. purpose, e.g. declaration of interim dividend by a
(vi) As the work finished at one go, there is no fear of company, interim audit involves a complete audit
alternation of figures. of accounts prepared and closed for a part of the
(vii) As compared to continuous audit, audit work does year to the date of a set of interim accounts e.g.,
not become monotonous in final audit. quarterly or half-yearly accounts. Thus, the
(viii) Periodical audit is also advantageous to the purpose of interim audit may be:
auditor since he gets all the books of accounts, (a) When there is a change in the structure of a
vouchers and necessary information at a time. firm.
(ix) Since the audit work is done continuously after it (b) To ascertain interim profits or losses of a
has started, there is no question of audit staff business.
loosing thread of work. (c) To declare interim dividend.
Disadvantages: (d) To project financial status of the business to
(i) It is not possible to carry out examination of the creditors for the purpose of taking loans.
various transactions in detail as in case of (e) To make expansion or extension decision for
continuous audit. the business.
(ii) It is difficult to rectify the errors as the same are Advantages:
detected very late, i.e. once in a year. (i) Interim audit helps to complete annual audit in a
(iii) It even becomes difficult to detect the frauds shorter period of time.
committed carefully. Even if these are detected, it (ii) Early and quick detection of errors and frauds is
becomes difficult to identify the person who has possible.
committed such a fraud. (iii) It helps in exercising moral check on staff of the
(iv) Employees of the concern know that their work client.
will be judged only once at the end of the year, (iv) Such audit is helpful where the publication of
their performance gets deteriorated as they interim figures is necessary.
become careless and negligent. (v) It provides an aid to the auditor to make useful
(v) Periodic audit does not suit big business houses. suggestions on the basis of errors and frauds
Distinction between continuous audit and periodical detected.
audit: Disadvantages:
S. Continuous Audit Periodical Audit (i) There is a danger of altering the figures in respect
No. of accounts already audited.
1. The audit continues at The audit commences (ii) It involves an additional work both for auditor’s
regular or irregular after the finalization staff and client’s staff.
intervals throughout of the books of (iii) It is more time consuming for auditor’s staff.
the year. accounts at the end of (iv) Interim audit also interference in normal day-to-
the financial years day working of the business as its staff is required
and continues till it to provide the information and give explanations.
is completed. Difference between Interim Audit and Continuous Audit
2. The checking of Intensive and detailed S.N. Basis of Interim Audit Continuous
accounts is detailed checking is not Difference Audit
and intensive . possible. Only test 1. Period The audit is The audit goes
checking is possible. conducted for a on at regular
3. The audit is very The audit is suitable part of the or irregular
suitable for layer-scale for small business accounting year intervals
business undertakings undertakings. with some throughout the
with a multitude of interim year.
transactions large . purpose.
4. It is a detailed and Even after the 2. Checking Detailed and Checking is
intensive detailed and
intensive checking and completion of the
as such, there is very audit, the possibility checking is not intensive.
little possibility of remains that frauds done.
frauds or errors being and error have not 3. Final Final accounts Final accounts
undetected. been detected. Accounts up to a certain are not
date in the prepared to be
5. The cost is high The cost is low accounting year audited during
because the auditor has because it is once-in- are prepared to the accounting
to do a lot of work. a-year job. be audited. year.

53
 4. Verification Verification of Verification of • Following are the features/ characteristics of
assets and assets and internal audit:
liabilities is liabilities is 1. Internal audit is done by a concern’s
done along done at the employees specially appointed for this
with the interim end of the purpose.
audit. accounting 2. It is conducted according to internal system of
year. a concern.
5. Audit Report The auditor’s The auditor 3. Internal audit has an independent status the
report is given gives his final organisation.
immediately report at the 4. It is totally free from managerial or executive
after the interim end of the functions. It helps in formulating managerial
audit. accounting decisions without actually taking part in such
year. decisions.
6. Expensive Interim audit is Continuous 5. Internal audit maintains a regular check and
less expensive audit is more constant review of accounting and financial
expensive. aspects.
6. Internal auditor is an employee of the
Cost Audit organisation but he does not work under any
• Cost audit is complete checking and verification sort of managerial pressure.
of cost accounts in order to see whether the Objectives of Internal Audit:
concern has adhered to cost accounting principles. 1. For review the functions of other employees.
Companies Act, 2013 provides for audit of cost 2. Prevention and detection of errors and frauds.
accounts under Section 128. According to this 3. Effectiveness of internal check system.
section the government may direct certain 4. Control over assets and liabilities.
companies to maintain cost records and get their 5. Improvement and suggestion.
accounts (cost) audited. It is directed to those 6. Verification of profitability.
companies which are engaged in processing, 7. Constructive appraisal.
production or manufacturing process. 8. Examination of procedure.
Management Audit 9. Aid to statutory audit.
• The audit conducted to check and examine the Importance of Internal Audit:
efficiency and effectiveness of management is 1. It is an independent evaluation of business
called management audit. It examines all the activities and accounting records and systems.
aspects of management of a business. It involves 2. Internal audit is in a way considered as a
examination of various activities of management, management control.
plans, objectives, utilization of resources, 3. Internal audit increases efficiency of
coordination, control etc. and to see whether the accounting system.
plan and objectives and achieved and also the give 4. Internal audit acts as an aid to final audit.
valuable suggestion in this regard. 5. Internal auditor examines day-to-day
Balance-sheet Audit transactions, which help in reducing
• Balance sheet audit does not simply mean an audit possibilities of errors and frauds.
of the balance-sheet only. It is more than this. In Principles of Internal Audit/Requisites of Internal
fact, balance sheet audit is a system of audit where Audit:
balance sheet is first taken up for examination and 1. Adequate and competent staff.
the audit works backward to the profit and loss 2. Freedom to internal auditor.
account, notes to accounts and the books and 3. Free from executive functions.
records. 4. Independent department.
Tax Audit 5. Right to investigate.
• Tax audit means an audit conducted for the Functions of Internal Auditor
purpose of calculation of tax and the assessment ↓
of income and expenditure for this purpose. (i) Investigation
Income Tax Act, 1961 has given many provisions ↓
with regard to tax audit. Thus, there is a special (ii) Appraisal
need a tax audit under the income tax act. Since ↓
financial audit does not fulfill the requirements of (iii) Advisory Function
tax authorities it becomes necessary to conduct tax ↓
audit. (iv) Discharging Responsibility
Internal Audit ↓
• The examination of accounts by the regular (v) Co-ordination
employees of the business, appointed specially for ↓
the purpose is known as internal audit. (vi) Reporting
54
Advantages of Internal Audit: 4. Object The main The main
1. Internal audit helps the management in objective of objective of
formulating of plans and programmes and their internal audit is statutory audit
effective control for increasing the profitability detection of is to give a
of the organisation. frauds and errors report to
2. It also helps the management in preparation of and making the correctness,
accounts relating to tax and tax returns. internal control accuracy and
3. Internal audit also helps to avoid depreciation more effective. regularity of
the accounts.
of capital as it ensures best utilisation by
constant checking. 5. Qualification The internal The statutory
4. It helps to reduce the chances of errors and auditor need not auditor should
frauds. have any special posses the
qualification qualification
5. It gives constructive advise to the management
specified in
according to needs of the organisation.
section 226 of
6. It helps in finding out employee and labour companies act.
problems and reasons for the same.
6. Remuneration Determined by Determined by
7. It helps in increasing consumer satisfaction as
the management the
it tries to establish sound relations with them.
shareholders.
8. Internal audit helps the management in
determining standards of work for the Difference between continuous audit and internal
employees. auditor:
Disadvantages of Internal Audit: S.N. Basis of Continuous Internal
Difference Audit Audit
1. If the internal audit staff is not capable or
effective, the whole exercise of internal audit 1. Objective The objective of The main
is futile. the audit is to objective of the
2. It involves a high cost, so it does not suit small keep the audit is to fulfill
business undertakings. management of a the needs of
large management.
3. Internal auditor being employees of the
organisation The audit is not
concern, may resort to malpractices i.e.,
abreast of latest related to the
showing wrong position with a motive to
state of affairs employees of the
mislead others.
and build organisation.
4. There are no statutory qualification for an confidence in the
internal auditor, so his appointment depends employees.
upon personal relations.
2. Time The audit is The audit
5. The elements of pressure of the management
conducted at continues
cannot be ignored as the internal auditor is not regular and throughout
independent and works under the control of irregular intervals lifetime of the
management. during the organisation.
S.N. Basis of Internal Audit Statutory accounting year.
Difference Audit 3. Status of The auditor is a The auditor is an
1. Nature Internal audit is Statutory audit the auditor free and employee of the
a part of the is an professional organisation.
internal system independent individual.
present in the examination.
4. Qualificatio The auditor must The auditor need
organisation.
n of the be a certified not necessarily
2. Compulsion Getting the Every auditor chartered be a
internal audit company has accountant. professionally
done depend to get a qualified person.
upon the wishes statutory audit
of the company, done, i.e. it is 5. Responsibil The auditor is The auditor is
i.e. it is not compulsory. ity of the answerable to answerable to
compulsory. auditor the shareholders the management.
of the enterprise
3. Appointment The internal The statutory
auditor is auditor is 6. Report The auditor There is no need
appointed by the appointment by gives his final for an internal
management the company or report at the end auditor to give a
the of the accounting report.
government. year.

55
 Audit Programme 3. Queries, etc., for which information and
• ‘‘An audit programme is a detailed plan of the explanation is sought.
auditing work to be performed, specifying the 4. List of missing vouchers and invoices etc., the
procedure to be followed in verification of each duplicates of which are to be obtained.
item in the financial statements and giving the 5. Frauds and errors found during the course of
estimated time required.’’ – W.W. Biggs audit.
Objects of an Audit Programme: 6. Details which are to be included in auditor’s
• Important objects of an audit programme are as report.
follows: 7. Information needed in future.
(i) Division of work among auditor’s staff. 8. Record of important correspondence.
(ii) To complete the work within specified time. 9. Totals of important ledger accounts.
(iii) Smooth conduct of audit work. 10. Progress of audit work.
(iv) To know the progress of work from time to 11. Main provisions affecting accounts from
time. memorandum and articles of association.
(v) To ensure that no part of the work is left 12. A brief description of internal check system.
undone. Audit Working Papers:
(vi) To fix the responsibility among auditor’s • Audit working papers are the written private
staff. materials, which an auditor prepares for each
(vii) To determine the process of audit. audit. They describe the accounting information
(viii) To fix the limits of audit. which he received from his client, the methods of
(ix) To prepare accurate audit report. examination used, his conclusion and the financial
Advantages of an Audit Programme: statements. Audit working papers generally
1. Division of work, include the following:
2. Knowledge of progress of work, (i) Audit programme,
3. Change in Employees, (ii) Audit note book,
4. Increase in efficiency, (iii) Appointment contract or letter of
5. Conduct of audit of different organisations appointment,
simultaneously, (iv) Schedule of debtors and creditors,
6. Fixed responsibility, (v) Opening and closing trial balance,
7. Evidence in court, (vi) A copy of previous audit report,
8. Uniformity in audit work, (vii) Rules of organisation, memorandum and
9. Effective control, articles of association,
10. Complete checking. (viii) Adjustment journal entries,
Disadvantage/Demerits of an Audit Programme: (ix) List of investment,
1. Mechanical work, (x) Summary of minute book.
2. Lack of initiative, Audit Files
3. Cannot take into account every minute detail, • Preparing files and keeping them safe is an
4. Lack of moral influence, important task of audit office because entire work,
5. Uniformity not applicable, present as well as future, depends upon these files.
6. Lack of elasticity, The audit files can be of two types, namely : (1)
Permanent audit file, and (2) Current audit file.
7. Does not disclose inefficiencies,
8. Does not suit small business. Evidence
Audit Note Book • The auditor has to obtain sufficient and
appropriate evidence to substantiate his opinion on
• It is difficult for the auditor and his staff to
the financial statements. The audit evidence
remember each and everything all the time.
provides grounds for believing that a particular
During the course of audit a book known as audit
thing is true or not by providing support for a fact
note book is maintained in which the audit staff
or a point in question. The evidences collected by
notes down important points and enquiries etc.,
the auditor must support the contents of the
which has to be referred to officers of the client or
auditor’s report.
to be discussed with his seniors.
Types of Evidence:
Following are the main contents of an audit note
book: 1. Physical evidence,
1. Technical details about the business, i.e., both 2. Oral evidence,
financial and non-financial. 3. Documentary evidence,
2. List of books maintained by the client. 4. Circumstantial evidence.
56
Methods of collecting evidence or audit techniques: Objects of Internal Check:
1. Physical examination, 1. Increase in efficiency.
2. Vouching, 2. Early preparation of final accounts.
3. Reconciliation, 3. Pre-determined duties and liabilities.
4. Confirmation, 4. Completeness and correctness of accounts.
5. Analysis, 5. Eases the work of auditor.
6. Inquiry, 6. Prevention of frauds.
7. Testing, 7. Moral pressure.
Internal Control 8. Promptness in work.
• Internal control includes all those activities 9. Simplicity in auditing.
adopted by the management for the systematic
10. Record of every transactions
running of the business enterprise, for the safety
and security of the assets of the business and to Essentials of an efficient internal check system:
prepare its accounts correctly and in trustworthy 1. Fair distribution of work.
manner. 2. Use of self-balancing system of accounting.
According to Spicer and Peglar, ‘‘Internal control is 3. Use of accounting machines.
best regarded as indicating the whole system of control, 4. Accounting records of wages and salaries.
financial and otherwise, established by the management 5. Timely change in the work of employees.
in the conduct of a business, including internal check, 6. Adequate control on purchase and sales.
internal audit and other form of control.’’
7. Correspondence with debtors and creditors.
• Internal control can be divided in three important
8. Timely review of the system.
categories which are as follows:
1. Organisational control Advantages of internal check:
2. Accounting control (I) Advantages to the organisation:
3. Administrative control. 1. Decrease in errors and frauds.
Objects of Internal Control: 2. Proper performance of work.
(i) Correct recording of transactions, 3. Increase in efficiency.
(ii) Prevention of errors and frauds 4. Quick preparation of final accounts.
(iii) Fixing of responsibility 5. Moral influence on employees.
(iv) Safety of assets (II) Advantages to the Auditor:
(v) Control over deviations 1. No need of extensive checking.
(vi) Following management policies 2. Easy approach to test checking.
(vii) Improvement in efficiency. Disadvantages of Internal check:
Need for Evaluation of Internal control: 1. Negligence or carelessness as part of top officials.
1. To ensure proper management of large scale 2. Expensive.
organisation. 3. Lack of adequate vigilence.
2. Audit of selective accounts. 4. Hurry in work.
3. Increasing use of computers in accounting. 5. Possibility of disputes among employees.
4. Eases the auditor’s work.
Vouching
5. Extension of limit of audit work.
• Vouching implies having documentary evidence
Internal Check
in support of all entries made in books of original
• Internal check implies such a system of checks,
entry. It is a technique in which an auditor verifies
whereby the entire work relating to business
authenticity and authority of transactions recorded
transactions and related accounts is distributed
in the books and on the basis of which submits a
among the various employees of the concern in
such a way that the work of one employee is report, indicating that accounts are correct, free
checked automatically by another employee. from errors or frauds and are complete.
Factors of Internal Check: Definitions:
1. Responsibility towards specific functions. 1. ‘‘Vouching’’ means testing of truth of items
2. Independent check. appearing in the books of original entry.’’
3. Division of work. – J.R. Batliboi
4. Distribution of work according to qualifications. 2. ‘‘Vouching refers to the examination of entries
5. No possibility of frauds. made in account books with documents on the
6. Complete responsibility. basis of which these have been written.’’
7. Minimizes errors. – Lawrence R. Dicksee
57
Objective of Vouching: • Verification establishes the correspondence of
1. Knowledge of correctness of accounts. actual facts or details with those represented in
2. Relation of accounts with business. accounts.
3. Authorisation of accounts. Definition:
4. Completeness of accounts. • The verification of assets should include not only
5. Knowledge of accounts not related to business. the verification of existence but also of the values
6. Verification of accounts. at which they appear in the books, as far as
possible for the auditor to satisfy himself on this.
Voucher:
– Spicer and Peglar
• Voucher is a documentary evidence on the basis
Objects of verification:
of which transactions are entered in books of
1. Knowledge of fraud and irregularities,
accounts.
2. Existence of assets,
Characteristics of Voucher:
3. Determining arithmetical accuracy.
(a) Voucher is a documentary evidence in support of
4. Correctness of balance-sheet.
an entry in the books of accounts.
5. Correct valuation.
(b) Voucher is a written evidence.
6. Truthness of liabilities.
(b) Voucher present the full description of a
General Principles of Verification and Auditor: The
transaction.
auditor should follow the following general principles or
(d) An evidence of correctness and fairness of rules while verifying assets and liabilities.
accounting entries.
1. He should personally verify the existence of assets
(e) Voucher presents the full description of a present in the business and if he thinks necessary, he
particular transaction. should obtain a certificate in this regard from
(f) Voucher may be a simple receipt. concerned officers.
(g) Voucher helps in substantiating the accuracy of 2. It the property is mortgaged, the certificate to this
book entries. effect has to be obtained from those who have
Kinds of Vouchers: mortgaged the same.
Vouchers may be two types: 3. If same other officials, other than responsible
(i) Primary Voucher: A written evidence or officer, have given certificate regarding assets he
document in original related to a transaction is should rely on these certificates in case if he himself
called primary voucher e.g., a cash memo or has verified the assets.
invoice for a purchase. 4. If the assets or securities of business are kept with
(ii) Subsidiary or collateral: When the original or some third party, and which is not according to
primary voucher is not available, the copies of rules, the auditor after inspecting them personally,
primary voucher are presented to verify the should give the certificate of their Truthness.
transaction or any related document in order to 5. If the assets are purchased, the auditor must see the
satisfy the auditors. Such a copy of original related documents to verify the price of such assets.
document or any supporting document is known 6. Repairs and renewals expenses should be treated as
as subsidiary or collateral voucher e.g., an invoice revenue expenses.
presented in place of original bill in support of 7. He has to see that whether the depreciation provided
payment made for credit purchases. is proper or not.
The following are some examples of vouchers: 8. If some assets has been appreciated, such
1. Cash Receipts, appreciation should be added to the value of asset in
the balance-sheet.
2. Cash payments,
9. If the assets are purchased from a vendor the
3. Purchases receipts,
agreement to this effect must be examined.
4. Sales receipts, 10. He has also to see that the fictitious assets which are
5. B/R, B/P etc. shown in the balance sheet are corrected, recorded or
Contents of Vouchers not.
• A vouchers usually has following contents: Valuation
(i) Name, (ii) Related to business, (iii) date, (iv) Serial • The valuation of assets is assessing the value of a
number, (v) signature, (vi) Revenue stamp (if needed), (vii) particular asset to the business on the date of
Printed form, (viii) Amount, (ix) Changed particulars. balance-sheet. It means testing the exact value of
Verification: an asset on the basis of utility. It is actually the
• Verification is a process to verify the ownership, ascertainment of money value at which an asset
valuation, possession and existence of a particular has been shown in the financial statements. The
asset or liability. task is usually done by experts.
58
Objectives of valuation: (c) LLP’s as Auditors: Limited liability partnership
1. To know the exact position of the assets as on the firm can be appointed as auditors of company but
date of balance-sheet. only chartered accountant partners are authorised
2. To know the financial position of the business. to act and sign on behalf of firm.
3. To know the reasons of difference between the Disqualifications of an Auditor [Section 141(3)]
purchase price and the value as on the date of • Following persons shall be qualified for
balance-sheet. appointment as an auditor of a company:
4. To know about distribution of capital of business.
(a) A body corporate other than LLP.
5. To have the knowledge of the goodwill of
(b) An officer or employee of the company.
business.
6. To satisfy the auditor in order to enable him to (c) A person who is a partner of an officer or
submit details in this regard in the audit report. employee of the company.
7. To satisfy the auditor that the assets shown in the (d) A person who is an employee of any officer or
balance-sheet show the true and fair view of the employee of the company.
financial position. (e) A person who is indebted to the company for any
8. To make the verification work possible because amount exceeding Rs. 5,00,000 or who has given
verification of assets is possible only with the help any guarantee of any third person to the company,
of valuation of assets. if the amount of debt or guarantee exceeds Rs.
Advantages of valuation of assets: 100,000.
1. To know the exact financial position of the (f) A person holding any security of the company.
business/company. The expression ‘security’ means any instrument,
2. To know correct profit and loss of the business. which carries voting rights.
3. To know about secret reserves, if any. (g) A person who by virtue of any of the aforesaid
4. To know the real position of assets as on the date provisions is disqualified for appointment as an
of balance-sheet or statement of accounts. auditor in the company’s subsidiary or holding
5. To ensure the security of investments in the company, or a subsidiary of that companyֹ’s
business. holding company.
Appointment of Company Auditor (h) A partnership, firm, wherein any partner is
1. Essential qualification: disqualified by virtue of any of the aforesaid
Chartered Accountant or Certified Auditor. provisions.
2. Persons Disqualified to be appointed as Rights of Auditors (Section 143):
Auditors [Section 141(3)]:
1. Right to access to books of account.
• A body corporate (other than LLP), officer or
2. Right to obtain information and explanation.
employee of a company, partner of an officer or
employee of the company. A person indebted to 3. Right to attend general meeting (Section 146)
the company for an amount exceeding Rs. 4. Right to be heard at general meeting.
5,00,000 or guarantor or surety for debt of third 5. Right to visit and access of books of account at
party for an amount exceeding Rs. 1,00,000. the branch office.
• If he is disqualified from acting as auditor of the 6. Right of lien conditions.
company’s subsidiary or holding company or of 7. Right to receive notice of removal.
any other subsidiary of the same holding 8. Right to receive remuneration.
company.
9. Right to make a representation on removal.
3. Appointed By:
Duties of Company Auditor:
(a) Directors,
(b) Shareholder, 1. Reporting
(c) Central Government, 2. Report in prospectus
Qualification of an Auditor Section 141 (1) and (2) 3. Certification of statutory report
(a) In case of individuals: A person who is a 4. Assisting investigators
chartered accountant within the meaning of 5. Report on voluntary winding up
chartered accountant act, 1949 and holds a 6. Compliance with audit standard
certificate of practice. 7. Duty to report fraud
(b) A firm of chartered accounts: A partnership 8. Duty to sign audit reports etc. (Sec. 145)
firm where all the partners practicing in India are
9. Duty to attend General Meeting (Sec. 146)
chartered accountant holding certificate of
practice, may also be appointed as an auditor of a 10. Duty not to render certain services. (Sec. 144)
company. In such a case, the appointment of an Liabilities of an auditor under companies Act, 2013:
auditor may be made in the name of the firm and • The liability of an auditor can be divided into two
any partner may act in its name. categories:
59
(I) Civil Liabilities : (ii) Interim Report: When the auditor is asked to
A. Liabilities for negligence give his report in between the year, such a report
B. Liabilities for misfeasance is called the Interim Report.
C. Liabilities for third parties (iii) Final Report: When the auditor gives his report
D. Liabilities under company act, 2013 after completion of his work at the close of the
(II) Criminal Liabilities: year, such a report is known as final report.
A. Liabilities under company act, 2013 (II) Other Classifications:
A. Liabilities under Indian Penal Code. (A) Clean or unqualified Report: Section 143 of the
companies act lays down certain questions which
the auditor must answer in his report for the
benefits of the shareholders of the company.
When the answers to these question are positive
and not negative the report submitted by the
auditor is called unqualified report.
(B) Qualified Report: If the auditor is not satisfied
after auditing the accounts and balance
sheet/profit and loss account or if the answer to
(I) Classification according to work: questions stated in Section 143 are negative then
(i) Partial Report: When an auditor is appointed for he has to motion this in the his report regarding
a part of a work or a particular aspect and not for the incorrectness of accounts or otherwise.
the complete verifications of accounts and he Writing such facts is the duty or qualification of
submits his reports for that part or aspect of the the auditor. The report containing such
work, such a report is known as partial report. qualifications is known as qualified report.

Previous Year MCQ

1. Consider the following statement in respect of the constitution the reports of the comptroller and
the Comptrollers and Auditor General (CAG) : Auditor general of India. relating to the accounts of a
1. Reports on the accounts of the States are state shall be submitted to the Governor of the state,
submitted to the President who shall cause who shall cause them to be laid before the legislature of
these to be placed before the parliament. the state. Therefore 1st statement is incorrect. Rests are
2. CAG is appointed by the President of India correct statements.
and can be removed only on grounds and 2. The Comptroller and Auditor General of India
procedure similar to those of a Supreme is appointed by the
Court Judge. (a) Prime Minister (b) President
3. The form is which account is the Centre and (c) Finance Minister (d) Home Minister
State are to his kept is prescribed by CAG. EPFO-2002
Which of these statement are correct ? Ans. (b) : Article 148 of the constitution provides that
(a) 1, 2 and 3 (b) 1 and 2 only the comptroller and Auditor General is appointed by
(c) 2 and 3 only (d) 1 and 3 only President of India and can be removed from office only
EPFO-2012 in the manner and on the grounds that a judge of
Ans. (c) : Article 149 of the constitution of India Supreme Court is removed.
provides for the duties and power of the computers and
Auditor General of India. According to Act 151(2) of

Practice MCQ
1. Ongoing audit is most appropriate where - (b) Statutory requirement
(a) The transactions are few but complex (c) To inquire into the conduct of the directors
(b) Do not be in a hurry to prepare the accounts (d) To independently evaluate business
on any given date competition
(c) The internal audit function is being carried Ans. (a)
out satisfactorily.
(d) The ongoing system of internal checks is not 3. Internal auditor is appointed -
satisfactory (a) Share holders of the company
Ans. (d) (b) Statutory auditor
(c) Institute of Internal Auditors of India
2. Management audit is -
(a) Independent evaluation of the entire (d) Board of Directors of the company
management process Ans. (d)

60
4. To call for information and clarification to the 12. When the auditor is confident of the internal
auditor have the right - but too much control system, the acceptable
(a) From the former auditors of the company risk of over confidence shall be -
(b) From the directors of the company (a) Less (b) High
(c) General (d) Nothing
(c) From the officers of the company
(d) Internal auditors of the company Ans. (b)
Ans. (c) 13. Under the law, an inspector who inspects the
accounts of a company has to submit his report
5. The auditors of the company have to report - to -
(a) board of director (a) Board of Directors of the company
(b) Managing Director (b) Secretary of the company
(c) Institutional investors (c) To the central Government
(d) To the shareholders in the annual general (d) The shareholder of the company
meeting Ans. (c)
Ans. (d) 14. Special audit of the accounts of the company is
6. Special audit may be ordered - directed to -
(a) Preference shareholders (a) Shareholders of the company
(b) Central Government (b) Comptroller and Auditor General of India
(c) SEBI (c) Company Law Board
(d) Debenture holders (d) Central Government
Ans. (b) Ans. (d)
7. Assertion (A) : The auditor should visit a 15. Interim audit refers to -
particular institution at intervals and examine (a) The audit conducted in two different
the books of accounts. accounting years
Reason (R) : In order to remove the (b) Two statutory annual audits in the same
deficiencies of the ongoing audit, the auditor accounting period
has to take some precautions. (c) An audit carried out between a statutory audit
(a) Both (A) and (R) are correct and (R) is the and an internal audit in the same accounting
right explanation of (A) period
(d) A statutory audit, a management audit and a
(b) Both (A) and (R) are correct but (R) is not the audit conducted in the midst of internal audit
right explanation of (A)
(c) (A) is correct, But (R) is incorrect Ans. (b)
(d) (A) is incorrect, But (R) is correct 16. Such an arrangement under which the
accounting work of each person is checked by
Ans. (a) other members is called.
8. Management audit is ordered. (a) Internal Audit (b) External Audit
(a) Employee of the company (c) Internal check (d) Sample check
(b) Government Ans. (c)
(c) Board of Directors 17. The most important objective of Internal
(d) SEBI audit?
Ans. (c) (a) Early detection of in accuracies and fraud
9. When an auditor discovers significant (b) To be helpful in final audit
deficiencies in its internal check and control (c) Early completion of annual accounts
system at the time of its audit finds, he should (d) Ensuring regular accounting
report the information to - Ans. (a)
(a) ICAI (b) SEBI 18. Considered the following document -
(c) MACCAR (d) ICWAI (A) Audit Note Book (B) Audit program
Ans. (c) (C) Audit reports (D) Audit files
10. The remuneration of the auditor of a The correct sequence of preparation of these
partnership firm is fixed by - document by the auditor is.
(a) Partnership Act (b) Companies Act (a) 2, 1, 4, 3 (b) 1, 2, 3, 4
(c) Government (d) None of the above (c) 2, 1, 3, 4 (d) 1, 2, 4, 3
Ans. (d) Ans. (a)
11. A file containing the rules governing the 19. Sample test reduces -
organization under audit is called - (a) The power of the auditor
(a) Current file (b) Permanent file (b) The expenses of the auditor
(c) Routine file (d) Priority file (c) The work of the auditor
(d) The responsibility of the auditor
Ans. (b)
Ans. (c)

61
20. Which of the following industrial establishment C. Financial Audit 3. Authorization of
is the first to conduct social audit of its Expenditure
performance? D. Valuation in 4. Critical review by
(a) Associated cement companies Balance sheet management
(b) Reliance Industries Limited 5. Entity Concept
(c) Bharat Heavy Electricals Limited Codes :
(d) Tata Iron and steel company A B C D
Ans. (a) (a) 2 1 5 3
21. If an auditor becomes disqualified as referred (b) 4 1 2 5
to in section 226 (3) and (4) of the companies (c) 2 1 3 5
Act, 1956, after his appointment? (d) 4 2 3 1
(a) The appointing authority will ask him to Ans. (c)
vacate his post 26. Right of an Auditor in the companies Act 2013
(b) The company Law Board will ask him to and which one of the following under the
resign powers not included?
(c) Shall be deemed to have vacated his office (a) Right to see the books of accounts
(d) The Institute of Chartered Accountants of (b) Right to call general meeting
India shall terminate his service from that (c) Right to receive notice of general meeting and
post. attend it
Ans. (c) (d) Right to make statement in general meeting
22. Appointment of cost auditor in a company will Ans. (b)
go - 27. Analytical review carried out by the auditor
(a) the board of directors mainly includes -
(b) The board of directors with the prior approval (a) Checking of vouchers and other documents
of the central government (b) Physical verification of assets
(c) The members of the company with the prior (c) Checking of journals with ledger
approval of the central Government (d) Study of ratio and trends
(d) Comptroller and Auditor General Ans. (d)
Ans. (b) 28. The main objective of audit is -
23. For the appointment of an auditor other than a (a) Detection of accounting offenses and
retiring auditor - punishment of the offender
(a) A special resolution is required (b) Preparing and authenticating accounts
(b) Ordinary resolution and approval of the (c) Preparing accounts and their accuracy and
comptroller and auditor general are required justification to certify
(c) Requires unanimous resolution and the (d) To give proof of the financial position of the
approval of the central government business
(d) Requires special notice Ans. (d)
Ans. (c) 29. The selection of items to be included in an audit
on a subject matter basis, regardless of sample
24. Consider the following document -
size or method of selection is
1. Auditors Report (a) Priority model
2. Audited final Accounts (b) Systematic sampling
3. Audit Note Book (c) Random sampling
4. List of lost vouchers (d) Justice model
5. Audit program Ans. (c)
Which of the above documents are working
30. Internal audit report is submitted to -
papers?
(a) Government (b) Shareholders
(a) 1, 2 and 4 (b) 1, 3 and 4
(c) Creditors (d) Board of Directors
(c) 1, 3, 4 and 5 (d) 2, 3, and 5
Ans. (d)
Ans. (c)
31. Controlled scope of audit in a partnership firm
25. Match List-I with List-II and select the correct is done -
answer using the code given below the lists (a) Partnership Act
select. (b) Partnership deed
List-I List-II (c) Agreement between partnership firm and
A. Interest on capital in 1. Performance and auditor
construction work justification (d) No. of partners of the firm
B. Management Audit 2. Capital Expenditure Ans. (c)
62
32. If an auditor in the performance of his duty 39. Under section 619 of the companies Act, 1956,
does something improper which results in the remuneration of the auditor appointed by
financial loss to the company, he shall be held the comptroller and Auditor General is
guilty of determined -
(a) For civil negligence (a) Company in general meeting
(b) For mischief (b) Comptroller and Auditor General
(c) For criminal negligence
(c) Comptroller and Auditor General in
(d) For financial irregularity
consultation with the central government
Ans. (a) (d) Company Law Board
33. The first standard auditing practice (SAP-1) is
related to - Ans. (d)
(a) Objectives and scope of audits of the financial 40. Examination of financial Accounts for joint
statements staff company in India is -
(b) The basic principles governing and audit (a) Necessary
(c) Documentation (b) Voluntary
(d) Detection of fraud and mistakes (c) Statutory
Ans. (c) (d) Voluntary for companies engaged in certain
34. The program of management audit is decided activity
by- Ans. (c)
(a) The shareholders 41. Consider the following statement : "Internal
(b) By the Board of directors Audit"
(c) By the Comptroller and Auditor general
(1) Ongoing is not a part of statutory audit
(CRAG)
(d) Separately by the Comptroller and Auditor (2) Not a part of internal checking system
General in consultation with the central (3) Not a part of the internal control system
government Which of these statements are correct?
Ans. (a) (a) 1, 2 and 3 (b) 1 and 2
35. Test check of entries in audit work related to (c) 2 and 3 (d) 1 and 3
is- Ans. (b)
(a) Internal Investigation 42. Consider the following functions -
(b) Internal Control (1) Physical verification of assets and checking of
(c) By examining some sample items from a valuation
large number of items of the same type
(d) Checking the cash flow of the business (2) Routine checkup and Administration
(3) Scrutiny of internal checking system
Ans. (c)
The correct sequence of performance of these
36. Sample test cuts - functions by the auditor during audit is
(a) In the work of auditor
(a) 2, 1, 3 (b) 3, 1, 2
(b) The responsibility of auditor
(c) Both the function and responsibility of the (c) 3, 2, 1 (d) 1, 2, 3
audit Ans. (c)
(d) In audit fee 43. The following four functions related to audit
Ans. (a) are performed by the auditor -
37. The terms of reference for which the audit (1) Verification of assets and checking of their
committee is to act; They will be mentioned valuation
(a) By statutory auditors (2) Examination of Annual Accounts and Balance
(b) By the SEBI sheet
(c) By the board of directors (3) Preparation of program of Audit
(d) By the central government (4) Test checking of financial transaction
Ans. (c) The correctness of the performance of these
38. ABC Co. Ltd X is to be appointed as auditor in functions by the auditor the sequence is
place of Y who is about to retire at the ensuing (a) 2, 1, 3, 4 (b) 2, 3, 4, 1
Annual General Meeting. This is expected (c) 3, 1, 4, 2 (d) 3, 4, 1, 2
(a) A special resolution and approval of the
company law board Ans. (d)
(b) A special Notice 44. Which of the following may be included in the
(c) An ordinary resolution and approval of the 'Audit Working Document'?
company Law Board. (1) Audit Note Book
(d) A special resolution and approval of the (2) Audit Program
central Government. (3) Schedules of sundry debtors and creditors
Ans. (c) (4) Audit Guide
63
 Select the correct answer using the codes given What is the correct sequence of these actions by
below : the auditor to find the error?
Code : (a) 4, 2, 1, 3 (b) 1, 3, 4, 2
(a) 1 and 4 (b) 1 and 2 (c) 4, 3, 1, 2 (d) 1, 2, 4, 3
(c) 2, 3 and 4 (d) 1, 2 and 3
Ans. (c)
Ans. (d)
52. Which of the following is not an advantage of
45. An Audit in which the auditor examines the interim Audit?
financial statements of an enterprise to give an
opinion that they give a true and fair view of its (a) Audit employees have to prepare comments
position is not called - when they finish the last audit
(a) Management Audit (b) Cost Audit (b) Final audit can be completed quickly
(c) Financial Audit (d) Periodic Audit (c) Where publication of data is necessary, it is
Ans. (c) considered good.
(d) There is moral control over the employees.
46. Which of the following are statutory audits -
1. Financial Audit of Insurance companies Ans. (a)
2. Financial Audit of partnership firms 53. Which one of the following statements is
3. Financial Audit of sole proprietorship firm correct?
4. Financial Audit of manufacturing companies While conducting the audit, the auditor must
Select the correct answer using the codes given ensure that the valuation of the stock is.
below : (a) At cost price
(a) 1 and 4 (b) 1 and 2 (b) At market price
(c) 1 and 3 (d) 3 and 4 (c) Cost or market value, whichever is less
Ans. (a) (d) Cost or market value, whichever is higher
47. Means used by the auditor to monitor and Ans. (c)
control the Progress of the audit work goes, to
54. Which one of the following statement is
(a) Work Diary
correct?
(b) Audit program
(c) Audit working papers The liability lies in the civil liability of the
auditor -
(d) Audit Notes
(a) Misappropriation of cash
Ans. (b)
(b) Misappropriation of goods
48. Which of the following can be called the
(c) Fraudulent
backbone of auditing?
(a) Routine inspection (b) Accreditation (d) Equipment
(c) Internal inspection (d) Internal Control Ans. (d)
Ans. (b) 55. The fine in which the rules regarding the
49. The auditor usually performs the following operation of the organization under audit are
tasks in a specific order : given is called -
1. Verification of assets and liabilities (a) Current file (b) Permanent file
2. Crediting of transaction (c) Routine file (d) Primary file
3. Testing of valuation of assets and liabilities Ans. (c)
Select the correct sequence using the codes 56. The audit note book is -
given below (a) Personality note book at of auditor
(a) 2, 3, 1 (b) 1, 2, 3
(b) Record of actions taken by the auditor
(c) 2, 1, 3 (d) 3, 1, 2
(c) A record of the important matters and
Ans. (a) inquiries which an auditor has sent for the
50. The casual vacancy in the office of statutory consideration of his clients.
auditor arising out of the resignation of an (d) Defects noticed during the audit of books of
auditor shall be filled by the company -
account and record of errors.
(a) In the meeting of the board of director
(b) In the annual general meeting Ans. (d)
(c) By a circular motion 57. Which one of the following is not the main
(d) In the constituent Assembly objective of audit working papers -
Ans. (b) (a) Basis of planning an audit
51. Consider the following functions : (b) Record of test results and evidence collected
1. Comparison of lists of debtors and creditors (c) Material to be filed with SEBI and basis for
2. Checking of cash balance preparation of tax return
3. To ensure that no entry is left unwritten (d) Data to ensure all types of audit reports.
4. Checking of Remaining test papers Ans. (c)
64
58. Working papers should not contain the details (a) Evaluating the efficiency of management at
of- all levels of the organization from top to
(a) Audit planning bottom
(b) The nature, timing and extent of the audit (b) Evaluating the performance of the Accounts
procedures performed Department from top to bottom across the
(c) Conclusions based on the evidence obtained organization
(d) Audit programs (c) To ascertain the efficiency of Management
information system (MIS)
Ans. (c) (d) Management's responsibility to ascertain
59. What is meant by third party confirmation in compliance with accounting standards
audit? Ans. (a)
(a) Confirmation of balances of sundry
65. The first auditor of the company is appointed
(b) Debtors and creditors by the board of director of -
(c) Confirmation of contingent liabilities (a) Within the gestation period
(d) Confirmation of security deposit (b) After the commencement of production
Ans. (a) (c) Within one month from the date of
60. What is meant by test and test check in the registration of the company
context of audit? (d) Within six months from date of registration of
(a) Selection and testing of a representation the company
sample from a large number of similar items Ans. (c)
(b) Selection and checking of a large number of 66. Management audit is carried out -
identical items exhaustively (a) Statutory auditors
(c) Selecting a representative sample in spite of (b) Government auditors
discrepancies and check (c) Cost Auditors
(d) Selecting and checking a small amount of (d) None of the above
representatives from a small allegiance Ans. (d)
Ans. (a) 67. Audit report is given along with the annual
61. Which one of the following is not a specific accounts -
duty of internal audit? (a) Statutory Auditors
(a) Organization structure check (b) Internal Auditors
(b) Evaluation of plans and goals (c) Government Auditors
(c) Testing the adequacy of the internal control (d) Secretarial Auditors
system Ans. (a)
(d) Do your own research 68. Auditing is compulsory for -
Ans. (d) (a) Joint stock company
62. To whom is the auditor's report submitted (b) Charitable trust
following a special audit of a company? (c) Co-operative society
(a) Shareholders of company (d) All of the above
(b) Board of directors of the company Ans. (d)
(c) Central Government 69. The accounts of a company shall be audited by
(d) State Governments concerned the auditors of the company or by person
Ans. (c) qualified to be appointed as an auditor, if the
63. Which of the following documents is not company -
required for permanent file in the audit of an (a) To conclude
unincorporated enterprise? (b) Amalgamation
(a) Representative of the constitution of the (c) Finalization of branch office accounts
enterprise (d) Declaration of interim dividend
(b) Copy of appointment letter of auditor Ans. (c)
(c) Copy of the registration certificate of the 70. Analytical review carried out by the auditor
enterprise mainly includes -
(d) Copy of the financial statements of the (a) Checking of vouchers and other documents
enterprise (b) Physical verification of assets
Ans. (c) (c) Checking of journals with ledger
64. Which of the following is correct regarding (d) Study of ratios and trends
Management Audit this is a methodology- Ans. (d)
65
04.
Social Security
Social security is made up of two words, the first word 'social' and the second word 'security'. According to the
scholars, the security which is given by the society in case of insecurity of a person is called social security.
According to Lord Bebridge - 6 types of situations arise in the life of the labour in which their income stops.
These situations are as follows-
1. Sickness - Income Interruption
2. Maternity - Income Interruption
3. Disablement - Income Interruption
4. Death - Income Interruption
5. Unemployment - Income Interruption
6. Old age - Income Interruption
The employer does not pay them wages on the principle of 'no work no pay'. Thus, at that time a situation of
economic crisis arises in front of the labour and that labour starts feeling insecure. In this situation, the security
which is provided to him by the society, the same security is called social security.
■ If we look at the above mentioned things the following three things come to the force -
1. Program of security:- Security is mainly provided to the labour through security programs.
2. Against certain risk :- Social security is given under certain circumstances. For example, sickness motherhood,
accident, death, Unemployment and old age.
3. Getting through the society:- Social security is provided by the society in this security is provided directly by
forming an organization or by the government.
■ Objectives of social security :– The following are the main objectives of social security-
1. To maintain income.
2. To meet the essential needs.
3. To develop a sense of security
4. To help lead a normal life
5. Social security is temporary in nature
6. To prevent the problems arising in the society.
History of Social Security Development in India :-
It is said that social security is a modern concept. Whose development started after industrialization. But in the
context of India, Scholars have said that the system of social security was found even before industrialization in
India.
In our early times, social security was provided by the following institutions -
1. Temple, Mosque, Monastery, Church, Gurudwara etc.
2. Joint family system
3. Caste system
4. Our agricultural system
Craft Industry
■ Nature of Social Security :- The nature of social security can be divided into the following two parts-
(1) Legal Social Security
(2) Illegal Social Security
When laws are passed in the constitution to provide social security to a country and social security is provided under
those laws, then this type of social security is called legal social security. For example Under the Employee's
State Insurance Act 1948 in India - social security is provided to industrial workers.
When no law is passed for social security in a country and social security is provided without any law, then it is
called illegal social security.

1. Social Insurance 2. Social Assistant

Under this, by making a law or plan, regular In this, the fund is created by the government from the
contribution is taken from the owner or from the government treasury and not by contribution in this the
labour or from both, and with this contribution the government itself protests the workers.
fund is created, from this fund the workers, are
given benefits in case of illness and other
circumstances-
⇓
Public insurance - ex:- ESI Act 1948
Worker compensation Act 1923

66
Social Security in India :- Social security is divided by the Indian government into seven branches like health
insurance and Medical Benefit; old age/retirement benefits; Unemployment insurance; life and disability
insurance; maternity and childcare benefits; rural job guarantee; and food security.
Code on Social Security:- The code on Social Security, 2020 is a code to amend and consolidate the law relating to
social security with the goal to extend social security to all employees and workers either in the organised or
unorganised or any other sectors.
■ Social Security refers to protection measures provided to workers to ensure health care and income security in
case of certain contingencies such as old age, maternity, or accidents.
■ The act amalgamates nine central labour enactment relating to social security.
■ It consolidated the Employees compensation Act, 1923. The Employee State, Insurance Act 1948. The
Employees provident funds and Miscellaneous provisions Act, 1952. The Employment Exchanges (compulsory
Notification of vacancies). Act, 1959, the maternity Benefit Act, 1971. The workers welfare fund Act, 1981. The
Building and other construction workers Welfare Act, 1996 Unorganised Workers Social Security Act 2008.
Key Provisions of the Social Security Code, 2020:- The definition of employees has been winded to include inter-
state migrant workers, construction workers, film industry workers and Platform workers. It has provisions for
the registration of all three categories of workers-Unorganised workers, gig workers and platform workers.
■ Gig workers refer to worker outside the "traditional employer-employee relationship:
■ Platform workers are those who are outside the "traditional employer- employee relationship" and access
organisations or individuals through an online platform and provide services for payment.
■ An Unorganised workers is defined as one who works in the unorganised sector, and includes workers not
covered by the industrial Disputes Act, 1947, or other provisions of the Bill (Such as provident fund or gratuity).
It also includes self-employed workers.
■ A social security fund will be created to paying these benefits to workers and it will be funded by central and
state government and also through CSR funding.
■ The government could notify schemes for unorganised sector workers (Such as home -based and self-employed
workers), gig workers, and platform workers.
■ The code also provides for the setting up of a 'National Social Security Board'. The functions of the Board
include recommending schemes to the central government and also monitoring the schemes for the different
types of workers, advising the government on matter relating to the administration of the code amongst others.
Limitations of social security:-
(1) It is said that the poorer the country, the more the need for social security in that country. But that country will
have less resources to provide social security.
(2) Discussing the limitations of social security, it has also been said that social security creates a feeling to evasion
of work among the labour. Workers never like to work if social security benefits are too high.
(3) The system of social security in any country can work successfully only when the scheme of co-operation of
employers, workers, government and labour unions with each other does not work very successfully in small
countries. That is why the American Social security system, the British Social Security system is considered very
important.

Previous Year MCQ

1. What is the minimum and maximum age at Ans. (d) : Gratuity is an amount offered to the
which a subscriber can join the Atal Pension employees for proffering their services to the
Yojana? organization or company. The employer provides this
(a) 21 years and 58 years respectively amount, and the employees do not need to contribute to
(b) 18 years and 40 years respectively the funds.
(c) 18 years and 50 years respectively According to the Payment of Gratuity Act, 1972, the
(d) 21 years and 60 years respectively maximum gratuity limit that the employees can receive
EPFO-2020 is upto Rs. 20 laksh for both private sector and
Ans. (b) : The Atal Pension Yojna (APY) was launched government employees.
on 09.05.2015 to create a universal social security 3. "Everyone as a member of the society has the
system for all Indians, especially the poor, the under - right to social security, and is entitled to
privileged and the workers in the unorganised sector. It realization through national efforts and
is administered by Pension Fund Regulatory and international cooperation and in accordance
Development Authority (PFRDA). The APY is open to with the organization and resources of each
all bank account holder in the age group of 18 to 40 state of economic, social and cultural rights
years and the contribution differ, based on pension indispensable for his personality." This
amount chosen. statement which is emphasizing the importance
2. What is the maximum amount of gratuity of social security has been expressed in which
of the following ?
payable to the employees under the Payment of
Gratuity Act, 1972? (a) Universal Declaration of Human Rights
(a) Rs. 5,00,000 (b) Rs. 10,00,000 (b) Philadelphia Declaration of the ILO
(c) Rs.15,00,000 (d) Rs. 20,00,000 (c) Report of the First National Commission on
EPFO-2020 Labour
67
 (d) Directive Principles of State Policy of the Ans. (d) : Pradhan Mantri Suraksha Bima Yojana is a
Indian Constitution government backed accident insurance scheme in India.
EPFO-2017 The scheme is available to people between 18 to 70
Ans. (a) : The above statement which is emphasizing years of age with bank accounts, it has an annual
the importance of social security has been expressed in premium of `20 and in case of death or full disability
Universal Delaration of Human Rights. the payment to the nominee will be 2,00,000 and in case
of partial permanent disability Rs. 1,00,000
4. For the first in India, medical benefit as a non-
cash benefit was provided under 8. Which one of the following is statutory
machinery functioning at the central level?
(a) the Emplyess' State Insurance Act, 1948
(a) Central Implementation and Evaluation
(b) the Factories Act, 1948 Committee
(c) the Maternity Benefit Act, 1961 (b) Central Board for Workers' Education
(d) the Mines Act, 1952 (c) Standing Labour Committee
EPFO-2017 (d) Employee's State Insurance Corporation
Ans. (a) : Under the Employees state insurance Act EPFO-2017
1948 the medical benefit provided as non cash benefit Ans. (d) : Employees' state insurance corporation,
for the first time in India. works under ministry of labour and Employment, GOI.
5. Which one of the following is the correct set of It was established by the parliament by the
contingencies identified by William Beveridge promulgation of Employee's state insurance act 1948
in his comprehensive social security scheme? (ESI Act 1948).
(a) Want, disease, ignorance, squalor and idleness Hence- In above given options, it is statutory machinery
(b) Want, sickness, disability, squalor and idleness functioning at the central level.
(c) Want, disease, old age, squalor and 9. Employees State insurance Act, 1948 covers
unemployment factors like
(d) Disease, invalidity, old age, unemployment 1. Factories and establishments with 10 or
and ignorance more employees.
EPFO-2017 2. Provision of comprehensive medical care to
Ans. (a) : William Beveridge had defined social employees and their families.
security as means of securing an income to take the 3. Provision of cash benefits during sickness
place of earning when they are interrupted by and maternity.
unemployment, sickness or accident. He identified the 4. Monthly payments in case of death or
contingencies in his comprehensive social security disablement.
scheme these are Want, Disease, Ignorance, Squalor and Which of the above statements are correct?
Idleness. (a) 1, 2 and 3 only (b) 1, 2 and 4 only
(c) 3 and 4 only (d) 1, 2, 3 and 4
6. Which one of the following statements is not
correct for Atal Pension Yojana? EPFO-2015
(a) There is guaranteed minimum monthly Ans. (d) : All the given factors are covered by
pension for the subscribers ranging between Employees State Insurance Act. 1948.
`1,000 and `5,000 per month. Hence, correct answer to the question will be option (d)
(b) The benefit of minimum pension would be 10. Social Security may provide cash benefits to
guaranteed by the Government of India. persons faced with
(c) Government of India co-contributes 50% of 1. Sickness and disability
the subscriber's contribution or `1,000 per 2. Unemployment
annum, whichever is lower. 3. Crop failure
(d) It is applicable to all citizens of India aged 4. Loss of the marital partner
above 40 years. Select the correct answer using the codes given
EPFO-2017 below:
Ans. (d) : Atal Pension yojana is a government backed (a) 1, 2 and 3 only (b) 1, 2 and 4 only
pension scheme primarily targeted to unorganised (c) 3 and 4 only (d) 1, 2, 3 and 4
sector, was launched by Prime Minister in 2015. The EPFO-2015
minimum eligible age for a person to join scheme is 18 Ans. (d) : Social security may provide cash benefits to
years and maximum is 40 years. An enrolled person persons with sickness. Disability, unemployment, in
would start receiving pension on attaining the age of 60 event of crop failure or loss of the marital Partner.
years. Therefore, all the given conditions are eligible for cash
7. Which one of the following is the amount of benefit under social security.
annual premium of the Pradhan Mantri 11. Consider the following statements in respect of
Suraksha Bima Yojana (PMSBY) for accident Atal Pension Yojana:
and disability cover up to `2,00,000? 1. Beneficiary must be in the age group of 18
(a) `100 (b) `50 to 40 years.
(c) `20 (d) `12 2. Beneficiary will receive the pension only
EPFO-2017 after he attains the age of 60 years.
68
 3. After the death of a beneficiary, his spouse But this leaves insufficient funds for the risks that may
continues to receive the pension. occur early in life and inflation reduces the real value of
4. No nominee of the beneficiary is permitted. savings. Hence, (1) and (2) are its disadvantages.
Which of the above statements are correct? 15. What is the maximum limit of gratuity payable
(a) 3 and 4 only (b) 1, 3 and 4 only under the payment of Gratuity Act, 1972.
(c) 1, 2 and 3 only (d) 1, 2, 3 and 4 (a) 3 Lakhs rupees (b) 7.5 Lakhs rupees
EPFO-2015 (c) 10 Lakhs rupees (d) 10.5 Lakhs rupees
Ans. (c) : Atal Pension Yojana, a pension scheme for EPFO-2012
citizens of India is focused on the unorganised sector Ans. (c) : The Payment of Gratuity Act, 1972, provides
workers. Under the Atal Pension Yojana, guaranteed for payment of gratuity at the rate of 15 days wages for
minimum persion of Rs 1000, or 2000/– or 3000 or each completed year of service subject to a maximum of
4000/- or Rs 5000/-Per month will be given at the age Rs. 10 Lakh. In the case of seasonal establishment gratuity
of 60 years depending on the contributions by the is payable at the rate of seven days wages for each season.
subscribers, any citizen of India can join Atal Pension 16. Which of the following legislations is
Scheme following are the eligibility criteria. comprehensive social security legislation ?
– The age should be between 18 – 40 years (a) The Maternity Benefits Act
– He/she should have a savings bank account/post office (b) The Employees State Insurance Act
savings bank account. (c) The Employees Compensation Act
12. The Maternity Benefit Act, 1961 (M.B. Act) (d) The Employees Provident Funds and
provides for how many weeks, wages during Miscellaneous Provisions Act
the maternity period? EPFO-2012
(a) 11 weeks (b) 12 weeks Ans. (b) : The Employees State Insurance (ESI) scheme
(c) 13 weeks (d) 14 weeks under the ESI, Act 1948 provides social security
EPFO-2015 coverage to workers employed in various factories and
establishment and covers contingencies such as
Ans. (b) : The Maternity Benefit Act, 1961 provides for sickness, maternity leaves and physical disablement or
12 weeks wages during the maternity period death due to employment injury resulting is loss of
13. Which of the following are the instruments of wages or earning.
providing social security in India? 17. Which of the following is NOT covered by the
1. Income Tax Employees Provident Fund and Miscellaneous
2. Employees' Provident Fund Provisions Act, 1952.
3. General Sales Tax (a) Pension
4. LIC (b) Provident Fund
5. National Pension Scheme (c) Deposit Linked Insurance
6. Postal Provident Fund (d) Injury Compensations
Select the correct answer using the codes given EPFO-2012
below: Ans. (d) : Injury Compensation is not covered by the
(a) 1, 2, 3 and 4 (b) 2, 3, 4 and 5 Employees Provident Fund and Miscellaneous
(c) 2, 4, 5 and 6 (d) 3, 4, 5 and 6 Provisions Act, 1952 Pension, Provident Fund and
EPFO-2015 Deposit linked insurance all three are covered in it.
Ans. (c) : Instruments of providing social security in 18. Consider the following statements:
India are– 1. The members of the Employees Provident
– Employees Provident Fund Fund and exempted provident Funds are
eligible for the Employees' Deposit-Linked
– LIC Insurance Scheme.
– National Pension Scheme 2. Employees Pension Scheme 1995 was
– Postal Provident Fund introduced for the industrial workers.
14. What are the disadvantages of Provident Fund 3. Coverage under the Employees Provident
Scheme? Fund and Miscellaneous Provisions Act is
1. Money is inadequate for risks occurring restricted to establishments employing 20
early in working life. or more persons.
2. Inflation erodes the real value of savings. Which of the statements given above is/are
3. It generates forced saving that can be used correct?
(a) 1 and 2 (b) 1, 2 and 3
to finance national development plans.
(c) 1 and 3 (d) 3 only
Select the correct answer using the codes given
below : EPFO-2004
(a) 1 and 2 only (b) 1 and 3 only Ans. (b) : The members of Employees Provident fund
(c) 2 and 3 only (d) 1, 2 and 3 and exempted provident funds are eligible for the
Employees deposit linked Insurance Schema.
EPFO-2015 Employees Pension Scheme 1995 was introduced for
Ans. (a) : Provident Fund is an essential savings that the industries workers. The coverage under EPF is for
can be used to finance national development Plans. establishments employing 20 More Persons.

69
05.
Industrial Relations & Labour Laws
Industrial jurisprudence : During the 20th century a capitalist. Most of the benefits claimed by a workmen are
new branch of jurisprudence known as industrial not part of his bargain with the employer when the latter
jurisprudence has developed in our country. Industrial employed him or are not due to them on account of any
jurisprudence is a development of mainly post - contract but of status. The industrial society all over the
independence period although its birth may be traced world has been moving during the present century from
back to the industrial revolution. contract to status (2) and this status is a politico socio-
Before independence it existed in a rudimentary economic juristic status.
form in our country. The growth of industrial What were the factors that lead to this departure
jurisprudence can significantly be noticed not only from from the old theories of law of contract, and the law of
increase in labour and industrial legislations but also Master and Servant?
from a large number of industrial law matters decided by Industrialization in India, as in order countries,
the supreme court and High Courts. It affects directly a brought with it some new socio-economic problem.
considerable population of our country consisting of Those who control the industry have a natural tendency
industrialists, workman and their families. Those who are of multiplying their wealth and if this tendency is not
affected indirectly constitute a still larger bulk of the checked the rich grow on richer and the poor becomes
country population. poorer day by day. The gap between the rich and the
This branch of law modified the traditional law poor ultimately grows on to this extent that it develops
relating to master and servant and had cut down the old into distinct classes in any industrial society, a few of
theory if laises faire based upon the freedom of contract whom are Haves and others are Have-nots. This
in the larger interest of the society because that theory economic disparity leads to a struggle between Haves
was found wanting for the development of harmonious and Have-nots, the latter exploited.
and amicable relations between the employers and Although this situation for some time and it had
employees. Individual contacts have been in many continued to be so in our country too but gradually the
respects substituted by a standard form of statutory workmen realized that they could put a better fight if
contract through legislation and judicial interpretation. they get united. This realization was closely followed by
The traditional right of an employee to hire and fire his a period of industrial unrest leading to strikes and
workmen at his well has been subjected to many lockouts. In conditions of disturbed the world has
restraints. witnessed the horrors of the two world wars resulting in
Industrial Tribunals can be their award makes a spiral rise in the cost of living with the rise in the cost of
contract which is binding on both the parties creating living there has been consistent demand from labour for
new right and imposing new obligations arising out of increase in wages.
the award. There is no question of the employer agreeing Democratic ideas have also grown
to the new contract, it is binding even through it is simultaneously with the growth of industrialization in
unacceptable to him. The creation of new obligations is our country. These democratic ideas have pleaded for
not by the parties themselves. Either or both of them may and have also helped in mass awakening and
be opposed to it, neverthless it binds them. Thus the idea consciousness for greater power amongst the working
of some authority making a contract for the workmen class.
and employer is a strange and novel idea and is foreign Out of the struggle between workers,
to the basic principle of the law of contract. demanding for better share in the production and profit
Similarly there is change in the concept of of the industry and the employers hesitation to part with
master and servant. One who invests capital is no more a it beyond an certain limit. Have grown the recognition of
master and one who puts in labour is no more a servant. certain principles which are considered to be
They are employer and employees, the farmer may hire fundamental in almost all developed countries of the
the latter but he can more fire them at his will. The world.
interest of the employees is in many respects protected The basic principles are:
by legislation. Both are now parties in as enterprise,
without one yielding to the higher status of another but • The right of workmen to combine form associations or
as cosharer in the partnership. Even the right of labour unions.
participation in the management has been given • The right of workmen to bargain collectively for the
legislative recognition to the utter despair of the betterment of their conditions of service.
70
• The realization that economic struggle is inevitable Lobour Policy in India
because it is but natural that labour world agitate for After independence it was largely felt that the labour
better conditions. policy must emphasize upon self-reliance on the part of
• A shift from the doctrine of laissez faire to a welfare the workers. Since independence till 1954 the period
when V.V. Giri was the labour minister, all official
state.
pronoun coments emphasized that labour should become
• Tripartite consultation i.e. solution of the industrial or self-reliant an equally forceful view had been to prefer
labour disputes through the participation of workers, reliance upon the government. This cross-current of
employers and the government. approach to the labour policy gave place to a new
• The state can no more be a neutral onlooker but must approach known as Tripartism.
interfere as the protector of the social good. Thus, Tripartism become the central theme in the so-
• Minimum standards must be guaranteed through state called Nandda-period that began in 1957. During this
legislation. period the government paid reliance on three party
The concept of industrial jurisprudence in our approach, namely the trade union representing the
country developed only after independence. Until workers, the employers and the government. In this kind
independence the change in attitude of the government of approach the reprentatives do not decide anything but
and the benevolent labour legistation only aimed at their role is mainly advisory.
amelioration of the condition of labour and it could The meet together discuss the points is dipute
hardly be said to be said to be a deal in social justice to and strive to reach a consensus and if they agree they
the working class. make recommendation out of the three, the role of the
The birth of industrial jurisprudence in our government is more important. Annual labour
country may be ascribed to the constitution of India conferences and the permanent standing labour
which made more articulate and clear the industrial committees served as the cheif instrument of Tripartism.
relations philosophy of the Republic of India. This These conferences advocated, amongst many
philosophy has afforded the broad and clear guidelines things, workers participation in management, workers
for the development of our industrial jurisprudence and
education, works committees and minimum wage
has thus taken India one step forward in her guest
legislation. At the sixteenth conference held in 1958 a
Industrial harmony. The parliament and the supreme
momentous advancement was made by adopting a code
court have helped in shaping industrial jurisprudence, the
of discipline in industry. The code pledged the parties to
former through legislation and the latter as interpreter of
the lobour laws avoid strike and lock-out without notice, and to eschew
unilateral actions, and to rely on settlement of disputes
Right of workers :
by discussion by voluntary arbitration or by adopting to
The laws cover the right to work of one's choice,
such measures as the law may provide. It also pledge
• Right against discrimination. them to avoid coercion and victimization, to avoid partial
• Prohibition of child labour. strikes and look out, and to follow grievance procedure.
• Fair and human condition of work. Industrial Revolution of India
• Social security • Industrialization in India as in any other country
implies the growth of a factory system with employers
• Protection of wages and wage earners in varying circumstances and with
• Redress of grievances varying characteristics yet having some common
• Right to organize and form trade unions. features and it is the common features that are of
interest.
• Collective bargaining and participation in
management. • As a consequence of the introduction of factory system
India has numerous labour laws such as those production become concentrated in a few selected
prohibiting discrimination and child labour, those that places, resulting in the increase of labour population at
aim to guarantee fair and human conditions of work, all such places.
those that provide social security, minimum wage, right • The village workers migrated to the industrial town
to organize, form trade unions and enforce collective
because of the difficulty of finding adequate livilihood
bargaining. India also has numerous rigid regulations
in their native place. This resulted in disappearance of
such as maximum number of employees per company in
certain sectors of economy and limitations on employers the popular village handicraft system because they
on retrenchment and layoffs, requirement of paperwork, could not compete with machine made goods.
bureaucratic process and government approval for • The development of industry in India brought with it a
change in labour in companies even if these are because great evil in as much as it changed the status of a
of economic conditions. craftsman into wage-earner.
71
Evil of Industrialization : • Low level of Health Nutrition and Healthy
The factory system had some inherent evils Recreation.
which may be dividend into two heads namely, economic
The Indian workers as compared with his counterpart
and social.
in most European countries is unhealthy and confined
• Economic Evil with illness. This shows a definite effect over the
- The artisan who in the handicraft system had the production potential. Hence he is very great need of
psychological satisfaction of producing the goods inexpensive nutritive food and good facility in case of
himself become in the factory system only a tender of hospitalization. Healthy recreation is also at a priority
the maching. in our country the efficiency of labour force is
- The wages paid to factory workers were quite diminished by energy being employed in all kind of
inadequate to meet their barest needs in the new undesirable channels.
environment which was different from their rural life.
- The employment of factory workers was not secure in • Extreme poverty and lack of training :
the begining. The percentage of people under the poverty line in our
• Social Evils country is comparatively high than other countries. So,
- The wages paid to the workers were very low. The the standard of living is very low. An Indian workers is
workers found it extremely difficult to live with the unable to provide with a healthy living for his family
wages so earned by them, consequently employment. and in the case of female workers she is not providing
The factory owners exploited this situation and with assistance in case of female workers she is not
employed them in large numbers at extremely low provided with assistance in case of need. Hence, the
wage without any regard to their physical conditions. labour welfare has much to do in the country.
- Accidents were considered as normal risk incidents to • Industrial Backwardness of India :
employment in a factory and the worker who was
In India, industrial progress is being aimed through the
unfortunate victim of an accident lost his employment
and had no right to compersation. medium of the five year plans, but industrial progress
- Work in factories was very hazardous and strenous is dependent on the efficiency of the labour force. The
with long hours duty, no rest, and no facility for welfare work motivates the workers and maintains
recreation. efficiency and productivity. So we can say that the
- Over crowded cities with insanitary slums, and acute importance of these activities is great for India in
housing shortage because of large scale migration of comparison to western countries.
village population to industrial towns had its natural Industrial Relations :
effect on health, morality and social life of workers. The term 'Industrial Relations' refers to the
These evils of industrialization and the lack of complex of human relationships which emerges in work
adjustment and harmonious relationship between the situations. These situations bring people together for
employer and the labour created problem in the industry, services which are bought and sold at a price.
which we call labour problem. J. Henry Richardson, "Industrial relations are the art of
Major problems of Indian Labour : living together for purposes of production."
• Illiteracy The parties involved in industrial relations i.e.
As compared with other countries, the percentage of the workers and the employers, have a common purpose
educated workers is very low, most of them being production. The willingly bind themselves to work
illiterate. Consequently, they are not in a position to together. The most prominent feature of industrial
receive advanced industrial training, understand the relations is, that it is an art which the two parties learn by
problems in industries their own interests and those of acquiring the skill of adjustment.
nation as a whole. This can prove a source of harm not
According to Dale Yoder, "Industrial relations deal with
only to the workers but also to the country.
the problem which arise in the context of human
• Problem of Absenteeism and migration relationship when the workers submit themselves to
Compared to the workers of other countries the Indian being controlled by the employers".
labour are more restless and does tendentious towards Industrial relations arise in any setting where
frequent migration because life in the town does not
somebody hires the work/services of someone else by
provide for his needs and the atmosphere in general
does not suit him. Also due to inadequate level of offering a reward.
wages the labours cannot comfortably settle down in The subject of industrial relations includes
one place. This may in turn also give rise to individual relations and joint consultation between
absenteeism. This workers migratory tendency can be employers and employees at the place of work, collective
curbed by providing him with adequate facilities and relations between employers and their organisation and
conditions and this also shows a positive effect over the trade unions, and the part played by the state in
the absenteeism in the factory. regulating the relation.
72
Principles of labour Legislation : movement took a new form and public demand for
The principles of labour legislations can be indigenous goods increased. In the 'Swadeshi Movement'
categorized in :- the people of India were clearly urged to boycott foreign
1. Principle of protection goods and use indigenous goods. This led to an
The principle of protection suggests enactment economic crisis and this crisis gave the country a strong
of labour legislation to protect those workers who are to impetus to industrialize. Economically suited to the
protect their interests on their own and also workers, in conditions of the country. An attempt was made to
particular industries againts the hazards of industrial establish a new principle of economic planning. The
process. plantation industry of Assam was first brought under
2. Principles of Social Justice Legislative control in India. In this industry, the method
of hiring labourers and getting them to work was very
The principles of social justice implies
establishment of equality in social relationships. It aims difficult. Workers were recruited by professional
recruiters and workers were not allowed to leave the tea
at removing discrimination suffered by particular groups
of labour. gardens. In independent India, attention was paid to the
improved of these short comings and special duties of the
3. Principles of Regulation
state were specified in the constitution to promote and
The principles of regulation generally seeks to protect the interests of the workers. In our constitution,
regulate the relationship between the employers and their the system of social justice has been provided to all
association, on the one hand and workers and their sections of the society for the purpose of providing social
organization, on the other. justice and social security to the workers, many laws
4. Principles of welfare were made and necessary amendments were made in the
Special labour welfare or labour welfare fund Acts. Many laws were made regarding labour in India.
laws have been enacted with a view to providing certain Each of these methods has been aimed at the
welfare amenities to the workers, and often to their development of industry and strengthening of the
family members. national economy. After the attainment of independence,
5. Principle of social security both law and public property have strongly supported the
The principles of social security may be improvement of the condition of the workers.
considered to be a part of the principle of welfare but in Industrialists should realize today that as elite
view of its special connotation, it is desirable to keep it citizens of the country they should give a new ideal for
under a separate category under this, payment of the future of the country. Also it is the duty of the
compensation to the employees and their dependents in workers and their organizations. that they improve and
the case of v injury and accident arising out of and in provide their active contribution towards the production
course of employment and resulting in disablement or which will result in more profit and more promotion of
death. the industry so that owners, workers and society at large
6. Principle of Economic Development can get its proportionate benefits.
Labour laws have also been enacted keeping in In today's industrial enterprises workers play an
view the need for economic and industrial development important role and without their co-operation, good
of particular countries. It covers improvement of work, discipline, reputation and character, effective
physical working condition, establishment of industrial results or profits would not be achieved in the industry.
peace, social security benefits etc. No matter now efficient the machines have been
7. Principles of International obligation incorporated in any industry, if human element does not
This principles postulates enactment of labour cooperate properly, then definitely the operation, of the
laws with a view to giving effect to the provisions of industry will stop. Therefore the profits of industry must
resolutions, adopted by international organizations like be shared by the employers the workers and the society
ILO, UN other similar bodies. in which the share of the workers must be special
because they are the real producers of wealth.
Development of Labour The Factories Act, 1948
Laws In India There has been rise of large scale factory/Industry in
The emergence of labour law in the country coincided India in the later half of nineteenth century. Major moorp
with industrialization. In the eighteenth century; India Inspector-in-chief of the Bombay cotton Department in
was not only an agricultural country, but had also his report in 1872-73 first of all raised the question for
became a producer country but the British Government the provision of legislation to regulate the working
in India always discouraged the Indian manufactures. condition in factories the first factories act was enacted
The reason for this way to give more and more in 1881. After that the factories Act 1934 was passed
encouragement to the British manufacturers and to replacing all the previous legislation in regard to
enable the Indians only to go on producing raw factories. This act was drafted in the light of the
materials. In the twentieth century, the national recommendations of the Royal commission on labour.
73
The factories act 1934 had revealed a number of defects Provisions under the Act:
and weakness therefore the factories act 1948 The Act consists of 120 sections and 3 schedules.
consolidating and amending the law relating to labour in Section Chapter Content
factories, was passed by the constituent assemble on Section 1- Section 7 Chapter I Preliminary
August 28, 1948. The Act received the assent of Section7A-Section Chapter II The Inspecting staff
Governor General of India on 23 September 1948 and 10
came into force on April 1949. Section11-Section 20 Chapter III Health
Objective of Factories Act, 1948 Section21-Section 41 Chapter IV Safety
The main objectives of the India Factories Act 1994 are Section41A-Section Chapter Provision relating
to regulate the working conditions in factories to regulate 41H IVA to Hazardous
health safety welfare and annual leave and enact special processes
provision in respect of young person's women and Section42-Section 50 Chapter V Welfare
children who work in the factories. Section51-Section 66 Chapter VI Working hrs of
• Working Hour- According to the provision working adults
hours of an adults is 48 hours in a week and weekly Section67-Section 77 Chapter VII Employment of
holiday. young persons
• Health- The Act lays down that every factory shall be Section78-Section 85 Chapter VIII Annual leave with
kept clean and all necessary precautions shall be taken in wages
this regard. Section86-Section Chapter IX Special provisions
• Safety- In order to provide safely to the workers the act 91A
provides safety code for the factories which should be Section92-Section Chapter X Penalties and
followed. 106A procedure
• Welfare- For the welfare of the workers the act Section107-Section Chapter XI Supplemental
provides that in every factory adequate and suitable 120
facilities for wasting should be provided and maintained Schedule 1 : It contains list of industries involving
for the use of workers. hazardous processes.
• Penalties- The following penalties can be imposed if Schedule 2 : It is about permissible level of certain
rules made under the act is violated. chemical substances in work environment.
- Imprisonment for a term which may extend to one year Schedule 3 : It consists of list of notifiable diseases.
- Find which may extend to one lakh rupees or Child Employment under the Act :
- Both fine and imprisonment A child under the age of 14 should not be tired, and a
If a worker misuses an appliance related to welfare safety child beyond the age of 14 but under the age of 15 may
and health of workers or in relation to discharge of his only work 4.5 hours each day or at night. A certifying
duties he can be imposed a penalty of Rs. 500. surgeon needs to certify his fitness.
Applicability of factories Act, 1948 He is not allowed to work from 10 p.m. to 6 a.m. "
The Act is applicable to any factory whereon ten or more "Adolescent' refers to a person who is above 15 but
workers are working or were working on any day of the under 18 years old. If he receives a certificate of fitness
preceding twelve months and in any part of which a for a full day's work from a certifying surgeon, he can be
manufacturing process is being carried on with the aid of hired as an adult. Teens are not allowed to work between
power or is ordinarily so carried on or whereon twenty or the hours of 7 p.m. and 6 a.m. The employment of
more workers are working, or were working on any day teenage girls is subjects to fighter limitations. It is
of the preceding twelve months, and in any part of which important to keep track on child employees.
a manufacturing process is being carried on without the Conclusion:
aid of power or is ordinarily so carried on : but this does The present factories Act in operation for the last 37
not includes a mine, or a mobile unit belonging to the years has provided ample benefits to the factory workers.
armed forces of the Union, a railway running shed or a It has considerably improved their working and
hotel, restaurant or eating place. employment conditions. The Government is actively
Importance of factories Act, 1948. considering the introduction of some vital amendments
The factories Act, 1948 is a beneficial legislation. The to the Act to keep it in tune with time and make it more
aim and object of the Act is essentially to safeguard the effective while dealing with the duties of the occupier
interests of workers, stop their exploitation and take care and factory manager under factories Act 1948, altogether
of their safety hygiene and welfare at their places of we can conclude that the occupier and factory manager
work. It casts various obligations, duties and has a vital role to play in assuring the health, safety and
responsibilities on the occupier of a factory and also on welfare of the workers as they are the backbone of the
the factory manager. industrial sector It is, however necessary that the workers
74
and their representatives make themselves aware of the Concept of subsistence Allowance section 10A
various provisions of the Act and safeguard their The act also provided for the payment of subsistence
interests on their own and force the defaulting employer allowance.
to be conscious of his legal obligations. As a result of enquiry and investigation or misconduct
Industrial Employment (Standing Order) Act 1946 : changes against any workman and it results in his
The industrial employment standing orders act is the suspension by the employer then.
piece of labour legislation which lays the model standing • For the first 90 days the workman shall be entitled for
orders applicable to every industrial establishment under 50% wages.
the act.
• For the remaining period if suspension remains for
Object of the Act :
more than 90 days then 75% of wages shall be paid as
To require employers in industrial establishment
subsistence allowance.
formally to draft and define conditions of employment
under them. Standing orders mean set of conditions Schedule and Contents
defining the. The act contains only 1 schedule which lays down the
Conditions of recruitment matters to be provided in the standing orders of industrial
Disciplinary action establishments depending upon the nature of industrial
Discharge establishment the employer shall draft standing orders.
Holidays and leave The matters to be stated are:-
The purpose of standing order Act 1946 is to minimize - Classes of workman
friction between the management and workers in the - Hours of work
industrial establishments. The act contains is section and - Shift working
a schedule. - Attendance
History : - Condition regarding holidays
The Indian labour conference tripartite on Indian labour - Entry conditions and requirements
conference revealed a consensus of opinion in favour of - Closure and reopening of industrial establishment
legislation. The bill accordingly seeks to provide for the
- Termination of employment
training of standing orders in all industrial establishments
employing 100 or more workers. Section 2(g) of the act - Suspension
defines 'standing order "as the rules relating to matter set - Means of redressal for unfair treatment
out in the schedule. - Such other matters as may be prescribed
Industrial Establishment: Thus, the act and its ambit in providing subsistence
(Section 2(e) defines industrial establishment as : allowance and applicability of the industrial employment
• Any factory under the factories Act 1948. (Standing Orders) act 1946 are discussed. The employer
• Industrial establishment as under section 2 (ii) of the shall at his discretion draft the standing orders and get it
payment of wages act, 1936. certified by the authority provided it is in conformity
• Railway under Indian railways Act 1890. with the model standing orders.
Procedural Aspect: The trade unions Act, 1926
1. Submission and certification of standing orders : The Act was formulated in 1926 called - 'Indian
Section 3 defines about submission of draft standing Trade Union Act' and enforced from 1st June 1927. The
orders. The section lays the procedure that employer India Trade union Act 1926 was passed to provide for
shall draft standing orders relating to the industrial the registration of trade unions with a view to render
establishment and submit it to the certifying officer who lawful association of workers. The act also defined law
is generally termed as regional labour commissioner or relating to registered trade unions and provided certain
labour officer where such a model standing order has privileges and protection to the registered trade unions.
been prescribed the standing order draft shall be in
Scope of the act
conformity with that model standing orders. The
standing orders on being certified by the certifying It applies to registered trade unions and extend
authority shall bind on both the employer and workman. to the whole of India including the state of Jammu and
Kashmir. The Act applies to all kind of unions of
2. Appeals
workers and association of employers. The Act aims at
Section 7 the person workman or any employer trade
union or any parties who are aggrieved by the order of regularizing the labour management relation.
certifying officer shall appeal to the appellate authority Appointment of registrars
within 30 days of such order sent by certifying authority. The Act empowers the appropriate government
The appellate authority on receipt of order shall modify to appoint a person to be the Registrar of Trade union for
the order add some conditions in it and within seven days each state.
of receipt shall send copies to the certifying officer who It may be appoint as many additional and
shall certify if. deputy registrars of Trade unions as it thinks fit.
75
Mode of registration (section 4 to 9) Change of name of registered trade union
(i) Any seven or more members of a Trade Union may • If a registered trade union wants to change its name
be subscribing their names to the rules of the Trade the notice of change of name must be in writing and
union apply for regisration of the Trade union under signed by the 7 members and the secretary of the
this Act. union. The name can be changed with consent of
(ii) Application for Registration atleast 2/3rd of the total number of the members of the
• Every application for registration of a Trade union.
Union shall be made to the Registrar and shall be • On getting the notice, the Registrar shall register the
accompanied by a copy of the rules of the Trade change in name, if he is satisfied that the proposed
Union and a statement of the following name is not identical with the name of the other
particulars, namely:- existing union and all the requirements in respect of
- The name, occupations and address of the change of name have been complied with.
members making application. Dissolution of a registered trade union
- The name of the Trade Union and the address of
• When a registered trade union is dissolved, notice of
its head office : and
the dissolution signed by seven members and by the
- The titles, names, ages, addresses and occupations secretary of the trade union, shall within fourteen
of the office- bearers of the Trade Union. days of the dissolution be sent to the Registrar, and
(iii) Provisions to be contained in the Rules of a Trade shall be registered by him if he is satisfied that the
Union : A trade union shall not be entitled to dissolution has been effected in accordance with the
registration under this Act, unless the executive rules of the Trade Union and the dissolution shall
there of is constituted in accordance with the have effect from the date of such registration.
provisions of this Act, and the rules there of provide Industrial Dispute Act, 1947
for the following matters, namely-
The Industrial disputes Act, 1947 regulation the Indian
- The name of the Trade Union. labour law so far as that concerns trade unions as well as
- The whole of the objects for which the Trade individual workmen employed in any industry in the
Union has been established. Indian mainland. It was one of the last legislative act
- The whole of the purposes for which the general before the passing of the Indian Independence Act of
funds of the Trade Union shall be applicable, all 1947.
of which purposes shall be purposes to which such Object of the Act
funds are lawfully applicable under this Act. Provisions for investigation and settlement of industrial
- The maintenance of a list of the members of the disputes and for certain other purposes.
Trade union and adequate facilities for the Important Clarifications
inspection there of by the office bearers and
members of Trade union. • Industry - has attained wider meaning than defined
- The conditions under which any member shall be except for domestic employment, covers from
entitled to any benefit assured by the rules and Barbour shops to big steel companies. (Sec. 2(I))
under which any fine or forfeiture may be • Works Committee - Joint committee with equal
imposed on the members. number of employers and employees representatives
- The manner in which the rules shall be amended, for discussion of certain common problems (Sec. 3)
varied or rescinded. • Conciliation - is an attempt by a third party in helping
(iv) Power to call for further particulars. to settle the disputes. (Sec 4)
(v) Registration (section 8)
• Adjudication - Labour court, Industrial Tribunal or
(vi) Certificate of registration National Tribunal to hear and decide the dispute.
The Registrar, on registering a Trade Union under
(Sec. 7, 7A & 7B)
section 8, shall issue a certificate of registration in the
prescribed form which shall be conclusive evidence that - Power of labour court to give appropriate relief -
the Trade union has been duly registered under this Act • Labour court/Industrial Tribunal can modify the
Registered Office punishment of dismissal or discharge of workmen
• All communications and notices to a registered. Trade and give appropriate relief including reinstatement.
union may be addressed to its registered office. (Sec. 11A)
Notice of Change
• Notice of any change in the address of the head office
shall be given within fourteen days of such change to • 21 days by an employer to workman about changing
the Registrar in writing and the changed address shall the condition of service as provided in IVth schedule
be recorded in the register referred to in section 8. (Sec. 9A)
76
- Right of a workman during pendency of Prior permission by the Government for
proceedings in High Court. retrenchment (Sec. 25N)
• Employer to pay last drawn wages to reinstated • When there are more than 100 (in UP 300 or more)
workman when proceedings challenging the award of workmen during proceeding 12 months.
his reinstatement are pending in the higher courts. • Three months notice or wages there to
(Sec. 17B)
• Form QA
- Persons Bound by Settlement
• Compensation @ 15 days wages
• When in the course of conciliation proceeding etc. all
persons working or joining subsequently. 12- Payment of Wages Act, 1936
• Otherwise than in course of settlement upon the Introduction
parties to the settlement. (Sec. 18) In 1926, Government of India wrote to local
Period of operation of settlement and awards government to ascertain the position with regard to
the delays which occurred in the payment of wages
• A settlement for a period as agreed by the parties, or to the persons employed in industry. Material So
• Period of six months on signing of settlement. collected was placed before the Royal Commission,
Government of India re-examined the subject and
• An award for one year after its enforcement. (Sec 19)
in February, 1933 the payment of wages Bill, 1933,
Prohibition of Strikes & Lock outs (sec 22 & 23) was introduced in the Legislative Assembly and
• Without giving to the employer notice of strike: as circulated for the purpose of eliciting opinions. A
hereinafter provided, within six weeks before motion for the reference of the Bill to a select
striking. committee was tabled but the motion could not be
passed and the Bill lapsed. In 1935 the Payment of
• Within fourteen days of giving such notice.
wages Bill, based upon the same principles as the
• Before the expiry of the date of strike specified in any earlier Bill of 1933 but throughly revised was
such notice as aforesaid. introduced in the Legislative Assembly on 15th
• During the pendency of any conciliation proceedings February, 1935. The Bill was referred to the select
before a conciliation officer and seven days after the Committee. The Select committee presented its
conclusion of such proceedings. report on 2nd September, 1935. Incorporating the
recommendations of the select committee, the
• During the pendency of conciliation proceedings payment of wages Bill, 1935 was again introduced
before a Board and seven days after the conclusion of in the Legislative Assembly.
such proceedings. ♦ The Act guarantees payment of wages on time
• During the pendency of proceedings before a labour and without any deductions except those
court, Tribunal or National. authorized under the Act.
• Tribunal and two months, after the conclusion of ♦ The Act provides for the responsibility for
proceedings. payment of wages. Fixation of wage period,
time and mode of payment of wages,
Lay off & payment of compensation - condition for
permissible deduction as also casts upon the
laying off (Sec 25C)
employer a duty to seek the approval of the
• Failure, refusal or inability of an employer to provide Government for the acts and permission for
works due to which fines may be imposed by him and also
• Shortage of coal, power or raw material. sealing of the fines, and also for a machinery to
hear and decide complaints regarding the
• Accumulation of stock. deduction from wages or in delay in payment of
• Breakdown of machinery. wages, penality for malicious and vexatious
• Natural Calamity claim.
♦ The Act does not apply to persons whose wage
Lay off Compensation (Sec 25C)
is Rs. 24,000/- or more per month.
• Payment of wages except for intervening weekly ♦ The Act also provides to the effect that a worker
holiday compensation 50% of total or basic wages cannot contract out of any right conferred upon
and DA for a period of lay off upto maximum 45 days him under the Act.
in a year. Commencement and application :-
Prior permission for Lay off (i) This Act may be called the payment of wages
• When there are more than 100 workmen during Act 1936.
proceeding 12 months (sec 25 m) (ii) It extends to the whole of India.
77
 (iii) It shall come into force on such date as the (ii) The value of any house - accommodation or the
central Government may be notification in the supply of light water medical attendance or
official Gazette appoint. other amenity or of any service excluded from
(iv) It applies in the first instance to the payment of the computation of wages by a general or
wages to the payment of wages to persons special order of Appropriate Government.
employed in any factory to persons employed (iii) Any contribution paid by the employer to any
(otherwise than in a factory) upon any railway pension or provident fund and the interest which
may have accrued thereon;
by a railway administration or either directly or
(iv) Any travelling allowance or the value of any
through a sub - contractor by a person fulfilling
travelling consession;
a contract with a railway administration and to
(v) Any sum paid to the employed person to defray
persons employed in an industrial or other
special expenses entailed on him by the nature
establishment specified in Sub - clauses (a) to of his employment; or
(g) of clause (ii) of section 2. (vi) Any gratuity payable on the termination of
(v) The state Government may after giving three employment in cases other then those specified
months' notice of intention of so doing by in sub - clause (d) [Section 2 (vi)]
notification in the official Gazette extend the Deduction which may be made from wages:-
provisions of this Act or any of them to the (i) Not with standing the provisions of sub -
payment of wages to any class of persons section(2) of section (47) of the Indian Railways
employed in any establishment of class of Act, 1890, the wages of an employed person
establishments specified by the central shall be paid to him without deductions of any
Government or a state Government under sub kind except those authorised by or under this
clause (h) of clause (ii) of section (2). Act.
"Wages" [Sec 2 (iv)] :- Means all remuneration Explanation :- Every Payment made by the
(whether by way of salary allowances or otherwise) employed person to the employer or his agent
expressed in terms of money or capable of being so shall, for the purposes of this Act, be deemed to
expressed which would if the terms of employment be a deduction from wages.
express or implied were fulfilled by payable to a (ii) Deductions from the wages of an employed
person employed in respect of his employment or person shall be made only in accordance with
the provisions of this Act, and may be of the
of work done in such employment and includes -
following kinds only, namely :-
(a) Any remuneration payable under any award or
(a) Fines :
settlement between the parties or order of a
(b) Deductions for obsence from duty.
court;
(c) Deductions for damage to or loss of goods
(b) Any remuneration to which the person expressly entrusted to the employed person for
employed is entitled in respect of overtime work custody, or for loss of money for which he is
or holidays or any leave period; required to Account, where such damage or loss
(c) Any additional remuneration payable under the is directly attributable to his neglect or default;
terms of employment [whether called a bonus or (d) Deductions for house - accommodation supplied
by any other name] by the employer
(d) Any sum which by reason of the termination of (e) Deduction for such amenities and services
employment of the person employed is payble supplied by employer as the [Government] may,
under any law contract or instrument which by general or special order, authorize
provide for the payment of such sum whether (f) Deductions for recovery of advances or for
with or without deductions but does not provide adjustment of over - payments of wages.
for the time within which the payment is to be (g) Deductions of Incomes - Tax payable by the
made; employed person.
(e) Any sum to which the person employed is (h) Deductions required to be made by order of a
court or other authority competent to make such
entitled under any scheme framed under any
order.
law for the time being in force.
(i) Deduction for subscriptions to and for re -
But does not include - payment of advance from any provident fund to
(i) Any bonus (whether under a scheme of profit which the provident funds Act, 1925 applies or
sharing or otherwise) which does not form part any recognized provident fund as defined in
of the remuneration payable under the terms of section [clause (37)] of section 2 of the Income
employment or which is not payable under any Tax ordinance, 1979 or any provident fund
award or settlement between the parties or order approved in this behalf by the (Government),
of a court. during the continuance of such approval
78
 (j) Deductions for payment to co - operative (2) The amount of such deduction shall in no case
societies approved by the (Government) or to a bear to the wages payable to the employed
scheme of insurance maintained by the person in respect of the wage - period for which
(Pakistan post office). the deduction is made a larger proportion than
(k) Deductions, made with the written authorisation the period for which he was absent bears to the
of the employed person, in furtherance of any total period, within such wage period, during
war saving scheme, approved by the which by the terms of his employment he was
[Government] for the purchase of securities of required to work.
the [Government of Pakistan]
Deductions for damage or loss :-
Fines :-
(i) A deduction under clause (c) of sub - section (2)
(i) No fine shall be imposed on any employed
of section 7 shall not exceed the amount of the
person save in respect of such acts and
omissions on his part as the employer, with the damage or loss caused to the employer by the
previous approval of the [Government] on of neglect or default of the employed person and
the prescribed authority, may have specified by shall not be made until the employed person has
notice under sub - section (2) been given an opportunity of showing cause
(ii) A Notice specifying such acts and omissions against the deduction, or otherwise than in
shall be exhibited in the prescribed manner on accordance with such procedure as may by
the premises in which the employment is carried prescribed for the making of such deduction.
on or in the case of persons employed upon a (ii) All such deductions and all realizations there of
railway (otherwise than in a factory) at the shall be recorded in a register to be kept by the
prescribed place or places. person responsible for the payment of wages
(iii) No fine shall be imposed on any employed under sections (3) in such form as may be
person until he has been given an opportunity of prescribed.
showing cause against the fine, or otherwise Deductions for services rendered : -
than in accordance with such procedure as may A deduction under clause(c) of sub - section (2) of
be prescribed for the imposition of fines.
section 7 shall not be made from the wages of an
(iv) The total amount of fine which may be imposed
employed person unless the house -
in any one wage - period on any employed
accommodation, amenity or service has been
person shall not exceed an amount equal to
accepted by him, as a term of employment or
[three percent] of the wages payable to him in
respect of that wage - period. otherwise, and such deduction shall not exceed an
(v) No fine shall be imposed on any employed amount equivalent to the value of the house -
person who is under the age of '15'years. accommodation amenity or service supplied and, in
(vi) No fine imposed on any employed person shall the case of a deduction under the said clause (e),
be recovered from him by installments or after shall be subject to such conditions as the
the expiry of 60 days from the day on which it [Government] may impose.
was imposed. Deduction for recovery of Advances :-
(vii) Every fine shall be deemed to have been Deductions under clause (f) of sub - section (2) of
imposed on the day of the act or omission in section 7 shall be subject to the following
respect of which it was imposed. conditions, namely :-
(viii) All fines and all realization there of shall be (a) Recovery of an advance of money given before
recorded in a register to be kept by the person employment began shall be made from the first
responsible for the payment of wages under payment of wages in respect of a complete wage -
section (3) in such from as may be prescribed; period, but no recovery shall be made of such
and all such realizations shall be applied only to advances given for travelling expenses.
such purpose beneficial to the persons employed
(b) Recovery of advances of wages not already earned
in the factory or establishment as are approved
shall be subject to any rules made by the
by the prescribed authority.
[Government] regulating the extent to which such
Deductions for absence from Duty :-
advances may be given and the installments by
(i) Deductions may be made under clause (b) of
which they may be recovered.
sub - section (2) of section 7 only on account of
the absence of an employed person from the Deduction for payment to co-operative societies and
place or places, where by the terms of his insurance schemes :-
employment, he is required to works, such Deductions under clause(J) [and clause (k)] of
absence being for the whole or any part of the subsection (2) of section 7 shall be subject to such
period during which he is so required to work. conditions as the [Government] may impose.
79
Authorities Under the Act : According to its preamble the minimum wages Act,
(1) Appointment :- 1948 is an Act to provide for fixing minimum rates
Appropriate government may, by notification in the of wages in certain employments. The
official Gazette, appoint : employments are those which are included in the
(a) Presiding officer of any Labour court schedule and are referred to 85.
'Scheduled Employments'. The Act extends to
(b) Presiding officer of any Industrial Tribunal
whole of India.
(c) Any commissioner for work men's compensation
Objectives of the Act :-
(d) Any other officer with experience as a judge of a
♦ To Provide minimum wages to the workers
civil court or as a Judicial magistrate to be the
working in organized sector.
'Authority' to hear and decide the claims arising out
♦ To stop exploitation of the workers.
of deductions from the wages, or delay in payment
of the wages of employed persons. ♦ To empower the government to take steps for fixing
minimum wages and to revising it in a timely
(2) Application :-
manner.
Where payment of wages have been delayed or any
♦ To apply this law on most of the sections in
deduction has been made from wages, the
organized sector (Scheduled employment).
application can be made to the authority by :
Historical Back drop :-
(a) The person himself
♦ The initiative by Shri K.G.R. Chaudhary in 1920 :
(b) Any legal practitioner Set up board for determination of wages.
(c) Any official of a registered trade union, duly ♦ The International Labour conference adopted
authorized in writing. Convention '26' and 30 in 1928 relating to wage
(d) Any Inspector under this Act. fixing machinery in trades or parts of trades.
(e) Any other person acting with the permission of the ♦ A minimum wages Bill was introduced in the
'Authority'. central Legislative Assembley
(3) Process :- ♦ The committee on fair wage was setup in 1948 to
♦ Authority shall hear the applicant and the employer provide guidelines for wage structure.
or other person responsible for the payment of Bread features of the Act :-
wages. ♦ [Sec 3] :
♦ The Authority may direct the refund to the The Act lays down the principles for Fixation
employed person of the amount deducted, or the of
payment of the delayed wages, together with the • A minimum time rate of wages
payment of such compensation. • A minimum piece rate
♦ The compensation shall not exceed '10' times the • A guaranteed time rate
amount deducted in the former case and not • An overtime rate for different occupation, localties
exceding 3000 rupees but not less then 1500 rupees. or classes of work and for adults, adolescents,
♦ No compensation shall be made in the case of children and apprentices.
delayed wages. it the Authority is satisfied that : ♦[Sec 4]:
(i) The delay was due to bona fide error/dispute as to The minimum wages may consist of
the amount payable to the employed person. • A basic rate of wages and a cost of living of
(ii) The person responsible was unable to make allowances.
payment due to exceptional circumstances, even • A basic rate of wages with or without the cost of
though exercised due diligence. living allowance and the cash value of the
(iii) The delay was due to the failure of the employed concessions in respect of essential commodities
person to apply for or accept payment. supplied at concessional rates.
Minimum Wages Act, 1948 :- Wages [Sec. 2 (n)]
The minimum wages Act was passed in 1948 and it ♦ Minimum wages : all remuneration capable of
came into force on 15th March, 1948. The National being paid in money terms for work done if terms
commission on Labour has described the passing of of contract were fulfilled.
the Act as landmark in the history of labout ♦ Consist of Basic + Dearness Allowance + House
legislation in the courntry. Rent Allowance.
The philosophy of the minimum wages Act and its ♦ Every 5 years, basic rates of every industry are
significance in the context of conditions in India, decide by minimum wages committee
has been explained by the supreme court in ♦ Dearness Allowance changes every six months and
Unichoyi V. State of Keral. is decided by Government
80
Segreation - (c) Independent persons not exceeding one - third of its
Minimum rates of wages may be fixed by any one total number of members : one of such independent
or more of the following wage periods, namely: person shall be appointed the chairman by the
• By the hour appropriate Government
• By the day Correction of Error [sec. 10]
• By the month • By appropriate Government at any time
• By the such other larger wage period as may be • By Notification in the official Gazette
prescribed; and where such rates are fixed by the • Correct clerical or arithmetical mistakes or Errors
day or by the month, the manner of calculating arising from and accidental slip or omission.
wages for a month or for a day, as the case may be, • Every such notification shall be placed before the
may be indicated. Advisory Board for information.
Fixing minimum Rates of wages [Sec. 5] Wages in Kind [Sec. 11]
• Publish its proposals in the official Gazette asking • Minimum wages shall be paid in cash.
comments from the affected parties • The appropriate government may authorize where
• Constitute committees/Sub committees for the there has been a custom of payment of minimum
purpose wages either wholly or partly in kind
• The committees/sub - Committees and advisory • The appropriate government may authorize supply
boards of essential commodities at concessional rates.
• The committees/sub - committees and advisory Payment of Minimum Rate of wages [sec. 12]
boards constitud by the Government consist of • The minimum wages has to be paid without any
equal number of members of : deductions other than statutory deductions
- Employers. • Payment of wages less the minimum wages on the
- Employees, and ground of less performance or outputs is illegal.
- Independent person Normal working hours [sec. 13]
Fixation of Minimum wages : For and adult worker working in factories :
Recommendations of Advisory Board for different
• Number of working hours should not exceed '48
Class [unskilled, skilled, clerk, supervisor]
hours in a week with a weekly holiday.
⇓
• The daily hours should not exceed more than '9'
Publish recommendations in National publications hours with 1 hours rest interval.
[For public comments/representations from Trade
• Provision of compensatory holiday/Overtime wages
Unions etc]
if working on holiday.
⇓
Over time wages [sec. 14]
Hearing of the Representatives etc
• If the person has worked for more than 48 hours in
⇓
a week then, the excess hours worked will be
Notifications of Minimum wages treated as over time,
Advisory Board [Sec. 7]
• overtime wages rate will be twice of the normal
• Appointed by appropriate government wages rate.
• To Co - ordinate the work of committees and sub Wages of a worker who works less than normal
committees appointed under section 5 working Day [sec -15].
Central Advisory Board [Sec. 8] Where the rate of wages has been fixed under the
• To advise the central and state Government in Act by the day for an employee and if he works on
fixation and revision of minimum rates of wages. any day on which he employed for a period less
• To co - ordinate the work of the Advisory Boards than the requisite number of hours constituting a
Composition of Committees, etc, [sec. 9] normal working day. He shall be entitled to receive
• Each of the committee, sub-committee and the wages for that day as if he had worked for a full
Advisory Board shall consist of : working day.
(a) Persons to be nominated by the appropriate (i) If his failure to work is caused by his unwilligness
Government to work and not by omission of the employer to
(b) representing the employers and employees in the provide him with work and
scheduled employments who shall be equal in (ii) Such other cases and circumstances as may be
number and prescribed.
81
Minimum Time - Rate wages for price work [sec.17] only limited classes/groups of employees. In 1952,
Where an employee is engaged in work on piece the employees provident funds Act was enacted to
work for which minimum time rate and not a provide institution of provident fund for workers in
minimum piece rate has been fixed, wages shall be six specified industries with provision for gradual
paid in terms of section 17 of the Act at minimum extansion of the Act to other industries/ classes of
time rate. establishments. The Act is now applicable to
Maintenance of Registers and Records (Sec. 18) employees drawing pay not exceeding Rs. 15,000/-
A part from the payment of the minimum wages, per month. The Act extends to whole of India
the employer is required under section 18 to except Jammu and Kashmir The term pay includes
maintain registers and records giving such basic wages with dearness allowances, retaining
particulars of employees under his employment, the allowance (if any), and cash value, of food
work performed by them the receipts given by them concession.
and such other particulars as may be prescribed. The following three Schemes have been framed under
Every employee is required also to exhibit notices, the Act by the central Government :
in the prescribed from containing particulars in the (a) The Employee's Provident fund Schemes, 1952,
place of work. He is also required to maintain wage (b) The Employee's pension Scheme, 1995, and
books or wage - slipes as may be prescribed by the (c) The Employees Deposit - Linked Insurance Scheme
appropriate Government and the entries made : 1976.
therein will have to be authenticated by the Application of the Act :
employer or his agent in the manner prescribed by According to section 1(3), the Act, subject to the
the appropriate Government. provisions of section 16, applies.
Claims : [sec - 20] (a) To every establishment which is a factory engaged
• A Labour Commissioner or any other appointed in any industry specified in Schedule I and in which
authority is authorized to hear claims regarding non twenty or more person are employed and
- payment of minimum wages. (b) To any other establishment employing twenty or
• Any aggrieved person may apply to the authority more persons or class of such establishment which
for settings his claims within 6 months. the central Government may, by notification in the
Offences And penalties [sec. 22] :- official Gazette, Specify in this behalf :
Section 22 of the Act provides that any employer Non - applicability of the Act to certain
who (a) pays to any employee less than the establishments :
minimum rates of wages fixed for that employee's Section 16(1) of the Act provides that the Act shall
class of work or less than the amount due to him not apply to certain establishments as stated
under the provisions of this Act or contravenes any thereunder. Such establishments include
rule or order made under section (13) shall be (a) Establishments registered under the co - operative
punishable with imprisonment for a term which societies Act 1912, or under any other law for the
may extend to six months or with fine which may time being in force in any state relating to co-
extend to five hundred rupees or with both. operative societies, employing less than 50 persons
While imposing any fine for an offence under this and working without the aid of power : or
sections the court shall take into consideration the (b) To any other establishment belonging to or under
amount of any compensation already awarded the control of the central Government or a state
against the accused in any proceedings taken under Government and whose employees are entitled to
section 20. It is further stipulated under section 22 the benefit of contributory provident fund or old
(A) of the Act that any employer who contravenes age pension in accordance with any scheme or rule
any provision of this Act or of any rules or order framed by the central Government or the state
made there under shall if no other penalty is Government governing such benefits or
provided for such contravention by this Act be (c) To any other establishment set up under any
punishable with fine which may extend to five central, provincial or state Act and whose
hundred ruppees. employees are entitled to the benefits of
The Employee's provident Fund & Miscellaneous contributory provident fund or old age pension in
Provision Act, 1952 :- accordance with any scheme or rule framed under
Provident fund schemes for the benefit of the that Act governing such benefits.
employees had been introduced by some According to section 16(2), if the central
organization even when there was no legislation Government is of opinion that having regard to the
requiring them to do so. Such Schemes were, financial position of any class of establishments or
however, very few in number and they covered other circustances of the case, it is necessary or
82
 expedient so to do. it may, by notification in the (6) Employees :
official Gazette, and subject to such conditions as "Employee" means any person who is employed for
may be specified in the notification, exempt that wages in any kind of work, manual or otherwise, in
class of establishments from the operation of this or in connection with the work of an establishment
Act for such period as may be specified in the and who gets his wages directly or indirectly from
notifications. the employer and indudes any person:
Important Definitions : (i) Employed by or through a contractor in or in
(1) Appropriate Government Means connection with the work of the establishment
(i) In relation to those establishment belonging to or (ii) Engaged as an apprentice, not being an apprentice
under the control of the central government or in engaged under Apprentices Act, 1961 or under the
relation to an establishment connected with a standing order of the establishment [sec.2(f)]
railway company, a major port, a mine or an oil
(7) Exempted Employees :
field or a controlled industry, or in relation to an
establishment having departments or branches in It means an employee to whom a scheme or the
more than one state, the central Government : and insurance scheme as the case may be would, but for
(ii) In relation to any other establishment, the state the exemption granted under section 17, have
Governement [sec. 2(a)] applied [sec. 2(ff)]
(2) Basic wages : (8) Exempted Establishment :
"Basic wages" means all emoluments which are It means an establishment in respect of which an
earned by an employee while on duty or on leave or exemption has been granted under section 17 from
on holiday with wages in either case in accordance the operation of all or any of the provisions of any
with the terms of the contract of employment and scheme or the Insurance scheme as the case may be
which are paid or payable in cash to him, but does whether such exemption has been granted to the
not include : establishment as such or to any person or class of
(i) The cash value of any food concession persons employed therein [sec.2(fff)]
(ii) Any dearness allowance (house - rent Allowance) (9) Factory :
overtime allowance, bonus, commission or any It means any premise induding the precinets
other similar allowance payable to the employes in thereof, in any part of which a manufactring
respect of his emploment or of work done in such process is being carried on or ordinrily se carried
employment : on, whether with the aid of power [sec - 2(g)]
(iii) Any presents made by the employer [sec. 2(b)] (10) Fund :
(3) Contribution : It means provident fund established under the
"Contribution" means a contribution payable in scheme [sec 2(h)]
respect of a member under a scheme or the
contribution payable in respect of an employee to (11) Industry :
whome the Insurance scheme applies [sec. 2(c)] It means any industry specified in schedule I, and
(4) Controlled Industry : indudes any other industry added to the schedule by
"Controlled Industry" means any industry the notification under section 4 [sec 2(i)]
control of which by the union has been declared by (12) Insurance fund
the Central Act to be expedient in the public It means the Deposit - Linked insurance fund
interest [sec. 2(d)] established under sub - section(2) of section 6 -c
(5) Employer : [sec -2(i-a)
(i) In relation to an establishment which is a factory. (13) Insurance scheme :
the doner or occupier of the factory, including the It means the Employes Deposits - Linked Insurance
agent of such owner or ocupier, the legal scheme framed under sub - section(i) of section 6-c
representative of a deceased owner or occupier and [sec - 2 (i - b)]
where a person has been named as a manager of the
(14) Manufacture of Manufacturing process :
factory under clause (f) of sub-section(i) of section
7 of the factories Act, 1948, the person so named; It means any process for making, altering,
and repairing, ornamenting, finishing, packing, oiling,
(ii) In relation to any other establishment, the person washing, cleaning, breaking UP, demolishing or
who or the authority which, has the ultimate control otherwise treating or adapting any article or
over the affairs of the establishment, and where the substance with a view to its use, sale, transport,
said affairs are entrusted to a manager, managing delivery or disposal. [sec. - 2(i - c)]
director, or managing agent, such manager, (15) Member :
managing director or managing agent. [sec. 2(e)] It means a member of the fund [sec. 2(J)]
83
(16) Occupier of a factory : (ii) In relation to an establishment under any local
It means the person, who has ultimate control over authority the person appointed by such authority for
the affairs of the factory, and where the said affair the supervision and control of employees or where
are entrusted to a managing agent, such agent shall no person is so appointed the chief executive
be deemed to be the occupier of the factory [sec 2 officer of the local authority.
(k)] (iii) In any other case the person who or the authority
(17) Pension Fund : which has the ultimate control over the affairs of
'Pension fund' means the employees pension fund the establishment and where that said affairs and
established under sub - section(2) of section 6 - A entrasted to any other person whether called a
[sec - 2 (KA)] manager managing director managing agent or by
(18) Pension Scheme : any other name such person [sec - 3(d)]
"Pension Scheme" means the Employees pension
"Establishment" means -
scheme framed under sub - section(1) of section 6A
[sec 2(KB)] (i) A Factory
(19) Scheme : (ii) A mine
It means the Employees Provident fund Scheme (iii) A plantation
framed under Section 5. [section 2(i)] (iv) An establishment wherein persons are employed for
(20) Superannuation : the exhibition of equestrian acrobatic and other
It means in relation to an employee, who is the performance
member of the pension scheme, mens the (iv- (a)) A shop or establishment or
attainment by the said employee, of age of fifty - (v) An establishment to which the provisions of this
eight years. [sec 2(ii)] Act have been declared under sub - section(i) of
Maternity Benefit Act, 1961 :- section 2 to be applicable [sec 3(e)]
Introduction : "Maternity benefit" means the payment referred
Artical 39(e) & (f) of the constitution of India to in Sub - section (i) of section (5) [sec - 3 (h)]
Provides that the state shall, in particular, direct its "Wages" means all remuneration paid or payable
policy towards securing that the health and strength
in cash to a woman if the term of the contract of
of workers, men and women, and the tender age of
children are not abused and that citizens are not employment express or implied were fulfilled and
forced by economic necessity to enter avocations includes -
unsuited to their age or strength; and that children (i) Such cash allowance [including dearness allowance
are given opportunities and facilities to develop in a and house rent allowances] as a woman is for the
healthy manner and in conditions of freedom and time being entitled to
dignity and that childhood and youth are protected (ii) Incentive bonus and
against exploitation and against moral and material (iii) The money value of the concessional supply of
abandonment. food grains and other articles but does not include -
Maternity Benefits are aimed to protect the dignity (a) Any bonus other than incentive bonus.
of motherhood by providing for the full and healty
(b) Over - time earnings and any deduction or payment
maintenance of woman and her child when she is
not working. The Maternity Benefit Act, 1961 is made on account of fines.
applicable to mines, factories, circus industry, (c) Any contribution paid or payable by the employer
plantations, shops and establishments employing to any pension fund or provident fund or for the
ten or more persons. It can be extended to other benefit of the woman under any law for the time
establishments by the state Government. being in force; and
Definitions : (d) Any gratuity payable on the termination of service
"Appropirate Governmen" means in relation to an [sec - 3 (n)]
establishment being a mine or an establishment Eligibility:
where in person are employed for the exhibition of As per the Act, to be eligible for maternity benefit,
equestrain acrobatic and other perforances the a woman must have been working as an employee
central Government and in relation to any other in an establishment for a period of at least 80 days
establishment the state Government [sec - 3(a)] within the past 12 month. payment during the leave
"Child" Includes a still - born child [sec -3(b)] period is based on the average daily wage for the
"Employer"
period of actual absence.
(i) In relation to an establishment which is under the
control of the government a person or authority Duties of Employee for maternity Benefit :
appointed by the Government for the supervision • Under section - 5(2) of the Maternity Benefit Act,
and control of employees or where no person or 1961 : She must work not less than 80 days in the
authority is so appointed the head of the 12 Month immediately proceding the date of her
department. expected delivery.
84
• Ten(10) weeks before the date of her expected •
An additional leave with pay up to one month.
delivery, she may ask the employer to give her light[proof of illness]
work for a month. • Tubectomy operation : Leave with wages for a
At that time she should produce a certificate that period of 2 weeks.
she is pregnant. Non Cash Benefits :
• No discharge or dismissal when on maternity leave
• She should give written notice to the employer
• Light work for 10 weeks before delivery
about seven(07) weeks before the date of delivery
• No charge to be made on her in any of the
that she will be absent before and after her delivery.
conditions to her Job while on Maternity leave
She should also name the person to whom payment
• Two Nursing Breaks until the child will become the
will be made in case she cannot take it hereself. (15) fifteen months old.
Key Highlights of the Amendment : • No deduction from the Normal and usual daily
1. Increase in Maternity Benefit wages of a woman entitled to maternity Benefit
• Paid Maternity leave increased to 26 weeks under the provisions of this Act.
• Leave prior to expected delivery date - 8 weeks Note : In case the woman dies during this period, the
maternity benefit shall be payable only for the days
2. No increased benefit for third child : up to and including the day of her death.
• The increased Maternity Benefit is only available
• Every establishment having 50 or more employees
for the first two children. shall have the facility of creche.
• A woman having two or more surviving children • Employer shall allow & visit a day to the creche by
shall only be entitled to twelve (12) weeks of the women, which shall also include the interval for
maternity Benefit of which not more than (6) six rest allowed to her.
shall be taken prior to the date of the expectedLegal Obligation under this Act :
delivery. • No employer shall knowingly employ a woman in
3. Aoption/surrogacy : A woman who adopts a child establishment during 6 weeks following date of her
delivery or miscarriage.
below the age of (3) three months, or a
•
commissioning mother will be entitled to maternity No woman shall work in any establishment during
the during the 6 weeks immediately the day
Benefit for a period of (12) twelve weeks from the following her delivery
date the child is handed over to the adopting mother
• It shall be unlawful for her employer to dishcharge
or the commissioning mother. or dissmiss delivery
4. Creche Facility : Establishment having 50 plus • In case of gross misconduct, the employee in
employees mandatory to creche facility. writing can communicate about depriving such
The woman is also to be allowed 4 (four) visit a daybenefits.
•
to the creche, which will include the interval for Writing 60 days from the day of deprivation of
rest allowed to her. maternity benefit, any women can appeal to the
5. Work from home : authority prescribed by law.
An employer may allow her to work from home Right, Duty & penalty of Employer :
•
post the period of maternity Benefit. The conditionsFor feature of Maternity Benefit :
for working from home may be mutually agreed • Abstract of Act and rules : An abstract of the
between the employer and the woman. provisions of this Act and rules made there under in
the language or languages of the locality shall be
6. Prior Intimation : Every establishment will be exhibited in a conspicuous place by the employer in
required to provide woman at the time of her initialevery part of the establishment in which women are
appointment, information about every benefit employed.
available under the Act. • Records Management : Every employer shall
prepare and maintain such registers, records and
muster - rolls and in such manner as may be
prescribed under the maternity Act
• Penalty for contravention of Act;
• Imprisonment which shall not be less than(03) three
months but which may extend to (01) one year and.
• Fine which shall not be less than Rs: 2000/- which
may extend to Rs : 5000/-
Cash Benefits : Conclusion :
• Leave of 26 weeks 18 weeks before expected date After analyzing various provision of the Act, it can
of delivery of 18 weeks after expected date of be concluded that Maternity Benefit Act, 1961 is a
boon for the working women in the sense that they
delivery) don't have Job insecurity during their maternity
• A medical bonus of Rs. 3500 (Minimum amount) period.
• In case of miscarriage : Leave of 8 weeks, This act regulate the employment of women &
immediately after the date of miscarriage provide Maternity & and other benefits to them.

85
 Previous Year MCQ
1. What is the maximum number of hours in a • Workmen :- A workman is a person employed in any
week that an adult worker is allowed to work industry to do skilled, unskilled or manual work.
for? • Strike :- A period of time when people refuse to go to
(a) 35 hours (b) 40 hours work (cessation of work by employees), usually
(c) 45 hours (d) 48 hours because they want to make their voices heared by the
EPFO-2020 management.
Ans. (d) : According to the section 51 of the factories • Lockout :-A lockout is a temporary closing down of
Act 1948, no worker is required to work for more than workplace by the management.
48 hours in any week. It also provide that every worker 4. Who is an 'Adolescent' as per the Factories
is entitled to an interval break of at least half an hour Act, 1948?
and not more than 5 hours of work should pass before (a) Who has completed 15 years of age but is less
such interval. than 18 years
2. What is the maximum period in which the (b) Who is less than 18 years
appropriate government shall review and (c) Who has completed 14 years of age but is less
revise the minimum rates of wages under the
than 18 years
Minimum Wages Act, 1948?
(d) Who has completed 16 years of age but is less
(a) 2 years (b) 3 years
than 18 years
(c) 4 years (d) 5 years
EPFO-2020
EPFO-2020
Ans. (a) : According to the Factories Act, 1948, an
Ans. (d) : The minimum Wages Act 1948 generally
'Adolescent' is a person who has completed his/her
specifies minimum wage rates on a per day basis, and
fifteen years of age but has not completed his/her
extends to the entire country and is revised within a
eighteen years. According to this Act, an adolescent is
period of not less than five years, however there is a
only allowed to work in a factory between 6 a.m. and 7
provision to increase dearness allowance every two
p.m.
years.
5. What is a controlled industry?
3. Match List I with List II and select the correct
answer using the code given below the lists : (a) Any industry the control of which by the
Union has been declared by any Central Act
List I List II to be expedient in the public interest
(Term) (Explanation) (b) Any industry the control of which by the
A. Closure 1. Permanent closing State has been declared by any State Act to be
down of a place of expedient in the public interest
employment (c) Any industry the control of which by the
B. Workmen 2. Any person employed Municipal bodies has been declared by any
in any industry to do Municipal Rules to be expedient in the public
skilled, unskilled or interest
manual work (d) Any Industry the control of which by the
C. Strike 3. Temporary closing State has been declared by any Central Act to
down of workplace by be expedient in the public interest
the management EPFO-2020
D. Lockout 4. Cessation of work by Ans. (a) : According to the section 2 of the Industrial
employees Disputes Act, 1947, controlled industry means any
Code : industry, the control of which by the Union has been
A B C D A B C D declared by any Central Act to be expedient in the
(a) 1 2 4 3 (b) 3 4 2 1 public interest.
(c) 1 4 2 3 (d) 3 2 4 1 6. What is the minimum number of members
EPFO-2020 required for registration of a Trade Union?
Ans. (a) : The correct match is as follows - (a) 2 members (b) 3 members
• Closure :- It is an act of permanantly closing down of (c) 7 members (d) 10 members
a place of employment. EPFO-2020
86
Ans. (c) : As per the Trade Unions (Amendment) Act, Ans. (d) : The general conference of the International
2001, the minimum number of members required for labour organisation meeting in it's twenty sixth session
registration of a Trade Union is seven. According to the in Philadelphia, which is known as Philadelphia
Act, no Trade Union of workmen shall be registered declaration, the aim and purpose of this declaration as
unless it has on the date of making application not less follows-
than seven persons as its members, who are workmen 1) Labour is not a commodity
engaged or employed in the establishment or industry 2) Freedom of expression and of association are
with which it is connected. essential to sustained progress
7. Which of the following disputes is/are 3) Poverty any where constitutes a danger to prosperity
considered as trade disputes(s) under the everywhere.
provision of the Trade Union Act, 1926,? 4) The war against want requires to be carried on with
Any dispute of any person connected with unrelenting vigour with each nation, and by
1. Employment continuous a concerted international effort in which
2. Non - Employment the representatives of workers and employers
3. Conditions of Labour enjoying equal status with those of governments,
Select the correct answer using the code given join with them in free discussion and democratic
below : decision with a view to promotion of the common
(a) 1 only (b) 2 and 3 only welfare hence option (d) is not correct as per ILO,
Philadelphia declaration.
(c) 1, 2 and 3 (d) 1 and 3 only
EPFO-2020 10. Which one of the following is an exception from
the five functional types of unionism identified
Ans. (c) : According to the provisions of the Trade
Robert Hoxie ?
Union Act, 1926, trade dispute means any dispute
(a) Business Unionism
between employers and workmen or between workmen
and workmen, or between employers and employers (b) Predatory Unionism
which is connected with the employment or non- (c) Revolutionary Unionism
employment or the terms of employment or the (d) Evolutionary Unionism
conditions of labour, of any person. EPFO-2017
8. Works Committee, Safety Committee and Ans. (d) : Robert F. Hoxie was the prof. of Economics
Canteen Management Committee are the at the university of Chicago. He gave the "theory of
examples of trade unionism" Hoxie classified unions in following
(a) workers' participation in management categories–
(b) workers' education schemes 1. Business Unionism
(c) workers' cooperatives 2. Friendly or uplift unionism
(d) workers' suggestion schemes 3. Revolutionary Unionism
EPFO-2017 4. Predatory Unionism and
Ans. (a) : Works committee, safety committee and 5. Dependent Unionism.
canteen management committee are the examples of Hence Evolutionary Unionism is not the part of his
worker's participation in management. Worker's classification.
participation in management is a process by which 11. Which one of the following is the process in
subordinate employees either individually or collectedly which representatives of workmen and
become involved in one or more aspects of employer involved in an industrial dispute are
organizational decision making within the enterprises. brought together before a third person or
9. Which one of the following is not part of the group of persons who facilitates / facilitate
aims and purposes of the ILO as per through mediation to reach a mutually
Philadelphia Declaration ? satisfactory agreement ?
(a) Labour is not a commodity. (a) Arbitration
(b) Freedom of expression and of association are (b) Adjudication
essential to sustained progress. (c) Conciliation
(c) Poverty anywhere constitutes danger to (d) Collective negotiation
prosperity everywhere. EPFO-2017
(d) The was against want requires to be carried Ans. (c) : In the Process of conciliation, the
on with unrelenting vigour within each nation representatives, of workmen and employer involved on an
and is solely the responsibility of the industrial dispute, they are brought together before a third
government. person or a group of persons who facilitates through
EPFO-2017 mediation to reach a mutually satisfactory agreement.

87
12. Questions relating to the application or Article-39A, provides free legal aid to the poor and
interpretation of a standing order certified weaker sections of societies and Article-42 seeks to
under the Industrial Employment (Standing ensure humane work condition and provide for
Orders) Act, 1946 may be referred to maternity reliefs.
(a) Industrial Tribunal 16. Which one of the following is not a trade union
(b) Labour Commissioner security measure ?
(c) Labour Court (a) Closed shop system
(d) Industrial Employment Court (b) Agency shop system
EPFO-2017 (c) Open shop system
Ans. (c) : The Question related to the application or (d) Union shop system
interpretational of a standing order certified under the EPFO-2017
industrial Employment (Standing orders) Act 1946, Ans. (c) : A Union security agreement is a contractual
refers to labour court. agreement, usually part of a union collective bargaining
agreement, in which an employer and trade or labour
13. A union whose membership may cover workers
union agree on the extent to which the union may
employed in many industries, employment and
compel employees to join the union and whether the
crafts is known as
employer will collect dues, fees, and assessment on
(a) industrial union behalf of the union.
(b) general union Various types of security agreements exists among them
(c) craft union more common are as follows-
(d) region-cum-industry level union • Closed shop
EPFO-2017 • Union shop
Ans. (b) : A general union is a trade union which • Agency Shop
represents workers from all industries and companies Hence- open shop system in not a trade union security
rather than just one organisation or a particular sector as measure.
in a craft union or industrial Union. 17. Which one of the following explains the 'citizen
14. Which one of the following perspectives of concept' of labour?
industrial relations is based on the assumption (a) Labour is largely regarded by the employers
that both the parties strive (and have as operating organizations in industry.
opportunity) to exercise economic (wages and (b) Labour is affected by the law of demand and
benefits) as well as political (control) power? supply.
(a) Pluralistic perspective (c) Labour has a right to be consulted in regard to
(b) Unitary perspective the terms and conditions under which they are
(c) Radical Perspective supposed to work.
(d) Trusteeship Perspective (d) Labour is a cog in the machine.
EPFO-2017 EPFO-2017
Ans. (a) : The pluralistic perspective views the Ans. (c) : The citizen concept of labour:- As a citizen
employing organization as a coalition of individuals and in a democracy has certain inaliable right and voice
groups with diverse objectives, values and interests. In determining and exercising these rights same as
this method, it is assume that, both parties strive (and industrial labour has a right to be consulted in regard to
have opportunity) to exercise economic (wages and the terms and conditions under which they are supposed
benefits) as well as political (control) power. to work.
15. The provision of workers, participation in 18. Who among the following can be appointed as
management of industries is provided under the Chairman of the Central Advisory Board
constituted by the Central Government under
(a) Article 39A of the Constitution of India
the Minimum Wages Act, 1948?
(b) Article 43A of the Constitution of India
(a) One of the independent members of the Board
(c) Article 42 of the Constitution of India (b) One of the employers' represem-tatives of the
(d) Article 43B of the Constitution of India Board
EPFO-2017 (c) One of the employees' represent-tatives of the
Ans. (b) : Article-43A of Indian constitution provides Board
worker's participation in management of industries (d) A functionary of the Central Government
while Article-43B deals with promotion of co-operative nominated by the Government
societies. EPFO-2017
88
Ans. (a) : As per minimum wages Act-1948. Any 23. In which part of the India constitution
independent members of the board can be appointed as Worker's participations in Management has
the chairman of the central advisory Board constituted been incorporated?
by the central government. (a) The Preamble
19. The assumption that "man is selfish and self- (b) The Fundamental Rights
centered, and always tries to achieve his own (c) The Directive Principles of State Policy
ends even at the cost of others" explains which (d) None of the above
theory of labour welfare? EPFO-2012
(a) Placating theory Ans. (c) : Worker's participations in Management has
(b) Police theory been incorporated in Article 43(A) of the constitution
(c) Religious theory under the directive principles of State Policy.
(d) Philanthropic theory 24. Which of the following statements about
EPFO-2017 Workmen's Compensation Act, 1923 is true?
(a) It is not social security legislation.
Ans. (b) : The policing theory of labour welfare based
(b) Its name has been changed to the Employee's
on the assumption the human being is so much selfish
Compensation Act in 2009.
and always tries to achieve his own ends even at the
(c) In provides maximum Compensation in the
cost of others.
event of death.
20. Dr. Aykroyd's formula is associated with (d) It does not provide compensation for
determination of occupational diseases.
(a) fair wage (b) minimum wage EPFO-2012
(c) living wage (d) real wage Ans. (b) : Workmen's Compensation Act, 1923 was
EPFO-2017 renamed as Employee's compensation Act is 2009.
Ans. (b) : Dr. Aykroyd's formula is associated with 25. Match List-I with List-II and select the correct
determination of minimum wage. Dr. Aykroyd's was a answer using the code given below the lists :
nutritionist and first director of the department of List-I List-II
nutrition, food and Agricultural organization or FAO, as (Board Committee) (Chairperson)
per Aykroyd's formula, which were based on the food
A. First National 1. G. K
and clothing requirements the minimum monthly
Commission an Chadha
payment for a government employee in India is
Labour, 1969
recommended to be fixed at 18000 per month.
B. Wage Board for 2. Ravindra
21. The famous 'Giri' approach in Industrial Working Journalists, Verma
Relations in India espouses the cause of 2009
(a) Adjudication
C. Second National 3. P.B.
(b) Compulsory Collective Bargaining Commission on Gajendrag
(c) Conciliation Labour, 2002 adkar
(d) Arbitration D. Index Review 4. G.R.
EPFO-2015 Committee, 2009 Majithia
Ans. (d) : 'Giri' approach arbitration in industrial Code :
relation supports the cause of arbitration, According to A B C D A B C D
Mr. V.V. Giri (former president), the disputes of labour (a) 3 4 2 1 (b) 1 4 2 3
and industrial management should be settled through (c) 3 2 4 1 (d) 1 2 4 3
mutual negotiations. EPFO-2012
22. In which of the following Acts, housing facility is
a statutory provision? Ans. (a)
(a) The Plantations LabourAct, 1951 Board Committee Chairperson
(b) The Factories Act, 1948 A. First National Corn-mission P.B.
(c) The Mines Act, 1952 an Labour, 1969 Gajendragadkar
(d) None of the above B. Wage Board for Working G.R. Majithia
EPFO-2012 Jourbalists, 2009
Ans. (a) : The Plantation Labours Act, 1951 imposes C. Second National Commission Ravindra
the duty of providing and maintaining the nursing on Labour, 2002 Verma
facility for every worker and their family, on the D. Index Review Commoittee, G. K Chadha
employer. 2009

89
26. Statement (I): Industrial relations is currently (c) Statement (I) is true but statement (II) is false.
more influenced by the external market forces (d) Statement (I) is false but Statement (II) is
than the power play between employers and true.
employees. EPFO-2012
Statement (II): The forces of globalizations Ans. (d) : Industrial relations is currently more
have made competitions so imperative that influenced by the power play between employers and
unions and their tactics like stopping employees than the market forces so, statement I is
productivity no more hold good. incorrect.
(a) Both Statement (I) and Statement (II) are The forces of globalizations have made competitions so
individually true and Statement (II) is the imperative that unions and their tactics like stopping
correct explanation of Statement (I). productivity no more hold good is correct so statement I
(b) Both Statement (I) and Statement (II) are is false but statement II is true.
individually true but Statement (II) is NOT
the correct explanations of Statement (I).

Practice MCQ
1. When did industrial jurisprudence develop in 6. The use of the code of discipline was accepted
India? in the industry in
(a) 18th century (b) 20th century (a) Twelfth Labor Conference, 1952
th
(c) 19 century (d) 17th century (b) Sixteenth Labor Conference, 1950
(c) Twentieth Labor Conference, 1960
Ans. (b) (d) Twenty fourth Labor Conference, 1972
2. After the conflict between the employer and the Ans. (b)
employee, same principles were developed. 7. Payment of Bonus Act was passed in the
(i) The right of workers to form an association Parliament on-
(ii) Tripartite negotiation (a) 1955 (b) 1965
(iii) Right of workers to collectively bargain for (c) 1952 (d) 1956
more favorable conditions of service Ans. (b)
(iv) Charge from laissez faire to welfare state. 8. Arrangements were made in the code of
(a) (i) and (ii) (b) (ii), (iii) and (iv) Discipline of the industry.
(c) (i), (ii), (iii) and (iv) (d) (i) and (iv) (a) Recruitment process of workers
Ans. (c) (b) Retrenchment process of workers
(c) Do not strike or lockout without notice
3. "Tripartite Labor Policy" was brought to (d) None of the above
makes the workers self-confident in the year.
Ans. (c)
(a) 1952 (b) 1957
9. The main components of the labor policy are–
(c) 1962 (d) 1972 (i) Workers have the right to express their protest
Ans. (b) peacefully if justice is not given.
4. The tripartite labor policy was brought by the (ii) Promoting mutual settlement, collective
Government of India at that time who was the bargaining and voluntarily arbitration.
labor minister. (iii) Ensuring fair wage standards and social
security
(a) Shri V.V. Giri
(iv) Intervention by the state to provide proper
(b) Neelam Sanjeeva Reddy treatment the weak side.
(c) Zakir Hussain Choose the correct option–
(d) Jagjivan Ram (a) (i) and (iv) (b) (i) and (ii)
Ans. (a) (c) (i), (ii) and (iii) (d) (i), (iii) and (iv)
5. The tripartite labor policy emphasized Ans. (d)
(a) To make the workers a partner in the 10. What is meant by the development of
management industrialization in India?
(b) For the education of workers (a) By labor method
(b) Factory method
(c) Workers Committee and the minimum wages
(c) By the capital method
(d) All of the above (d) All of the above
Ans. (d) Ans. (b)
90
11. Labour legislation in any country should be 18. Workmen's Compensation Act, 1923 was
based on enacted in–
(a) Social justice (b) Social equality (a) In July 1923 (b) July 1924
(c) Both (d) None (c) In June 1923 (d) June 1924
Ans. (c) Ans. (b)
12. Workmen's Compensation Act was passed on– 19. Workmen's Compensation Act, 1923 is not
applicable in which state of India?
(a) In 1920 (b) In 1923
(a) Goa
(c) In 1934 (d) In 1948
(b) Tripura
Ans. (b) (c) Meghalaya
13. Prior to the passing of the Workmen's (d) Jammu and Kashmir
Compensation Act, 1923 Compensation was not Ans. (d)
paid to a workman in the course of his
20. Workmen's Compensation Act, 1923 applies
employment– to–
(a) Accident (a) All employees
(b) Retrenchment (b) Employees of industries
(c) Safety of workers (c) Agricultural workers
(d) Provision for payment of overtime work (d) Domestic workers
Ans. (a) Ans. (b)
14. Examples of laws based on the principle of 21. Assertion (A) : The object of the Workmen's
social justice. Compensation Act, 1923 is to provide
(a) Minimum Wages Act compensation towards personal injury to the
(b) Factories Act employee.
(c) Payment of Wags Act Reason (R) : Compensation is given if the
employee survives a result of the accident and
(d) All of the above
compensation is given to dependents if he dies.
Ans. (d) Select the correct option.
15. The importance of the measures of social (a) (A) and (R) both are correct and (R) is the
security is explanation of (A).
(a) Important steps towards the fulfillment of the (b) (A) and (R) both are correct and (R) is not
objectives of the public welfare state. correct explanation of (A).
(b) Enable the workers to be more efficient than (c) (A) is correct but (R) is not correct.
their work and skills (d) (A) is not correct but (R) is correct.
(c) (a) and (b) Ans. (a)
(d) None of the above 22. Assertion (A) : Workmen's Compensation Act
Ans. (c) is applicable to all the employees.
16. Which organisation has done the important Reason (R) : The Act provides protection to an
employees from damages arising out of
work of creating the standards of social
accidents which have occurred by reason of his
insurance.
employment and in the course of his
(a) By the International Labor Organization employment.
(ILO) Select the correct option.
(b) By the United Nations Organization (a) Both (A) and (R) are correct and (R) is the
(c) UNESCO correct explanation of (A).
(d) India Labor Organization (b) Both (A) and (R) are correct but (R) is not the
Ans. (a) explanation of (A).
17. Universally accepted basic principles and (c) (A) is correct but (R) is wrong.
general norms of social security have been (d) (A) is wrong but (R) is correct.
approved– Ans. (d)
(a) Minimum Standards Act, 1962 23. Who among the relatives of the workmen have
(b) Insurance Act, 1972 the right to submit the claim in the first class?
(c) Social Security Convention, 1952 (a) Window, minor godson or adopted son or
daughter and widowed mother.
(d) Social Security Convention, 1955
(b) Widow son, daughter-in-law minor child of
Ans. (c) pre-deceased son.
91
 (c) Minor brother or unmarried sister or widowed Choose the correct option:
sister. (a) Both assertion and reason are correct reason
(d) Parents not including widowed mothers. explain the assertion.
Ans. (a) (b) Both assertion and reason are correct but
24. After the death of the employee, third class reason is not true of assertion.
dependent has been included– (c) (A) is correct but (R) is incorrect.
(i) Parents not including widowed mother. (d) (A) is Incorrect but (R) is correct.
(ii) A minor brother or on unmarried sister or a Ans. (a)
widowed sister, if a minor. 29. Assertion (A) : If a worker is injured as a result
(iii) Widow's son's daughter-in-law and minor of an accident by a physical defect which does
child of pre-deceased son's. not impair the physical capacity of the worker
(iv) Minor adopted son and unmarried adopted to work but the injury. It has a reasonable
daughter. impact on getting employment in the market
Select the correct option– than before.
(a) (i) and (iv) Reason (R) : At that time the worker will be
(b) (i), (ii) and (iii) considered as fully disabled.
(c) (ii), (iii) and (iv) Choose the correct option :
(d) (i), (ii), (iii) and (iv) (a) (A) and (R) both the correct (R) is also the
Ans. (d) correct explanation of (A).
25. Assertion (A) : The second category includes a (b) Both (A) and (R) are correct (R) is not the
son or daughter who has attained the age of 18 correct explanation of (A)
years but who has become disabled. (c) (A) is wrong but (R) is not correct.
Reason (R) : He should also be completely (d) (A) is correct but (R) is wrong.
dependent on the earnings of that worker at the
Ans. (d)
time of his death.
Select the correct option. 30. In which year the Employees Provident Fund,
(a) Both (A) and (R) are correct, (R) is the Family Pension Fund and Deposit linked
explanation of (A). Insurance Fund Act, 1952 was amended to
(b) Both (A) and (R) are correct but (R) is the replace the Family Pension Fund with the
explanation of (A). Pension Fund.
(c) (A) is correct but (R) is wrong. (a) 1966 (b) 1972
(d) (A) is wrong but (R) is correct. (c) 1992 (d) 1996
Ans. (a) Ans. (d)
26. Which court has considered blood relations as 31. The Employees' Provident Fund, Family
brothers and siblings as equal? Pension Fund and Deposit Linked Insurance
(a) Madras High Court Fund Act, 1952 is not applicable in which state
(b) Madhya Pradesh High Court of India?
(c) Bombay High Court (a) Nagaland
(d) Bihar High Court (b) Jammu and Kashmir
Ans. (b) (c) Goa
27. By the Workmen's Compensation (d) Tripura
(Amendment) Act, 2000, which section has Ans. (b)
been omitted from the definition of workman. 32. Assertion A : The purpose of the Employees'
(a) Casual nature (b) Contact nature Provident Fund Act is to provide facilities
(c) Fixed nature (d) Historical nature related to Provident Fund, Pension Fund and
Ans. (a) Deposit Linked Insurance Fund to the
28. Assertion (A) : Employment of casual nature employees in factories and other
means employment by chance or employment establishments.
for indefinite period or employment in Reason (R) : It is the prime duty of the
uncertain circumstances. employer to introduce a provident fund scheme
Reason (R) : It is a planning which depends on for the workers employed in his factory or
the opportunity. There is no contract of establishment.
appointment in this regard. Choose the correct option.
92
 (a) Both (A) and (R) are correct (R) is also the Choose the correct option :
correct explanation of (A). (a) (i) and (ii) (b) only (i)
(b) Both (A) and (R) are correct but (R) is not the (c) only (ii) (d) neither (i) nor (ii)
correct explanation of (A). Ans. (a)
(c) (A) is correct but (R) is wrong. 38. When was the Industrial Planning (Standing
(d) (A) is wrong but (R) is correct. Orders) Act passed?
Ans. (a) (a) In 1942 (b) In 1944
33. The Employees' Provident Fund (Amendment) (c) In 1946 (d) In 1948
Act, 1956 applies to factories employing at least Ans. (c)
how many persons? 39. Through the industrial Employment (Standing
(a) 50 (b) 30 Orders) Act, It has now been made mandatory
(c) 10 (d) 20 for all employers covered by this Act to–
Ans. (d) (a) Ensure the terms and conditions of
34. Since when this act was made applicable to employment under you
workers employed in tea, coffee, rubber, (b) The workers should be informed about the
cardamom and pepper plantations as well? terms and conditions of service under which
(a) 30th April, 1956 (b) 30th April, 1957 employment has been provided to them.
(c) 28th May, 1956 (d) 28th May, 1957 (c) A and B both
(d) None of the above
Ans. (b)
Ans. (c)
35. What conditions are necessary to be fulfilled
regarding the implementation of this Act in a 40. In which type of industrial establishments
factory of Scheduled Industries? Industrial Employment (Standing Order) Act
(a) Less than 20 persons are employed in any is applicable.
such establishment. (a) Situated anywhere in the Union of India
(b) Any manufacturing process is being earned except the State of Jammu and Kashmir
on in any part of the premises including (b) In which 100 or more workers are employed
factory premises whether operated by a (c) In which 100 or more workers are employed
persons with or without power. on any day of the preceding 12 months
(c) Both (a) and (b) (d) All of the above
(d) None of the above Ans. (d)
Ans. (c) 41. Industrial Employment (Standing Orders) Act
36. In relation to an establishment, means the is not enforced in the following establishments.
Central Government. (a) Any industry in relation to which the
provisions of Chapter VII of the Bombay
(a) From an establishment owned or controlled
Industrial Relations Act, 1946, apply.
by the Central Government.
(b) Any industrial establishment in respect of
(b) At least 20 persons are employed in that
which the Madhya Pradesh Industrial
establishment.
Planning (Standing Orders) Act, 1961 applies.
(c) Such establishment relations which have
(c) Both (a) and (b)
different departments or branches in more
(d) None of the above
than one state.
(d) All of the above Ans. (c)
Ans. (d) 42. The employers of every industrial
establishment to which the Industrial
37. In relation to the implementation of the Employment Act is applicable, it is expected
Employees Provident Fund and Miscellaneous that–
Provisions Act, 1952. Which conditions are (a) Create that Standing Order
necessary to be fulfilled in an establishment.
(b) Submit to Divisional Officer for certification
(i) The establishment must be engaged in any of
(c) The Divisional Officer is usually the Labor
the industries specified in schedule.
Commission
(ii) At least 20 persons are employed in that (d) All of the above
establishment. In establishments where more
than 3 persons are employed, 3 years have Ans. (d)
elapsed from the date of establishment and in 43. Salient features of the Act are–
which between 10 and 50 persons are (i) Under the Act the definition of workman is
employed. 5 years have elapsed from the date deemed to include a supervisory technical
of establishment. person in certain circumstances
93
 (ii) The Certifying Officer can make some 48. The section under which lockout without prior
changes in the Standing Orders document notice has been considered illegal?
(iii) The employers of the same industrial (a) Section 22 (b) Section 24
establishment may also submit the document (c) (a) and (b) both (d) None of these
of joint standing orders Ans. (b)
Choose the correct statement–
49. It is mandatory to inform the employer strike
(a) Only (i) (b) (i) and (ii) or factory closure to the mentioned officer
(c) (ii) and (iii) (d) (i), (ii), (iii) (a) On the same day the strike is announced
Ans. (d) (b) On the day the strike started
44. The essential element of the Industrial (c) When there is possibility of strike
Planning Act, 1946 is not (d) after the strike
(a) This rule does not apply to such industrial Ans. (a)
establishment where one hundred or more
than one hundred workers are employed. 50. According to Section 24(B), will a factory
closure declared as a result of illegal strike or a
(b) The Certifying Officers shall have all the
strike declared as a result of illegal factory
powers under Section 11 of the Act which a
closure be considered?
Civil Court would have in such cases.
(a) Legal
(c) The appropriate Government may exempt any
industrial establishment from the operation of (b) Illegal
any provision of the Act. (c) Illegal but justified
(d) None of the above (d) Illegal and unjustified
Ans. (a) Ans. (a)
45. Who will be considered as Certifying Officer 51. When did the Industrial Disputes Act came
under this Act? into existence?
(a) Labor Commissioner (a) 1942 (b) 1944
(b) Regional Labor Commissioner (c) 1947 (d) 1948
(c) Both (a) and (b) Ans. (c)
(d) None of these 52. When did the development of business unions
Ans. (c) begin in India?
46. No person, employed in a public utility service (a) 1789 (b) 1889
shall go on strike as a breach of contract under (c) 1890 (d) 1892
the following circumstance. Which of the Ans. (c)
following is false? 53. For the first time in the country, an association
(a) Strike without giving 6 weeks' notice to the of workers was formed in Bombay by the name
employee of Bombay Mill Hands Association. When was
(b) Within 14 days of giving such notice this association formed?
(c) After 14 days of giving such notice (a) 1886 (b) 1888
(d) Shall not go on strike during the pendency of (c) 1786 (d) 1890
the proceedings before any conciliation Ans. (d)
officer and for a period of 7 days after their
conclusion. 54. For which type of problem was the Royal
Commission constituted in India?
Ans. (c)
(a) Labor problem
47. What are the circumstances in which an (b) Educational problem
employer operating a public utility shall not
(c) Economical problem
impose lock-up in respect of any of his
(d) Political problem
workmen?
(a) Without giving notice of factory closure six Ans. (a)
weeks before factory closure. 55. When was the Trade Union Act passed?
(b) Within the 14 days lot of giving of the notice. (a) 1922 (b) 1924
(c) Before the expiry of the date of factory (c) 1926 (d) 1927
closure mentioned in the notice. Ans. (c)
(d) All of the above 56. Which one of the following is meant by
Ans. (d) business disputes?
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 (a) Between employers and workers 63. When was the Employees State Insurance Act
(b) Between the workers constituted?
(c) Between the Employers (a) 1942 (b) 1946
(c) 1948 (d) 1952
(d) All of the above
Ans. (c)
Ans. (d)
64. When was the minimum wages Act enacted?
57. A business dispute should relate to the (a) 1944 (b) 1946
following (c) 1948 (d) 1952
(i) By planning Ans. (c)
(ii) Out of planning 65. What is the main purpose of the minimum
(iii) Terms of planning ways act ?
(iv) From the conditions of the labor (a) To service the welfare of the workers
Select the correct answer from the above. (b) Fixing the minimum wages rate of the
(a) Only (i) workers
(b) (i) and (ii) both (c) To stop workers exploitation
(c) (ii) and (iii) (d) All of the above
(d) (i), (ii), (iii) and (iv) all Ans. (d)
Ans. (d) 66. In which year, a draft convention on the
question of minimum wages was accepted at
58. The principle of collective bargaining is the International Labor Conference of
recognized by the International Labor Union. Geneva?
Collective contracts were accepted by a (a) 1915 (b) 1920
resolution in the international Labor (c) 1925 (d) 1928
conference. When was that conference held? Ans. (d)
(a) In 1948 (b) In 1950 67. In the Minimum Wages Act, there is a
(c) In 1951 (d) In 1952 provision for fixing the lower rates of wages.
Ans. (c) Which of these is not true?
(a) Maximum period rate
59. Which is the section of the Act which (b) Minimum price rate
authorizes the Central Government to frame (c) Guaranteed period rate
the Employees Provident Fund scheme for the (d) Overtime rate
establishment of a Provident Fund under this
Ans. (a)
Act?
(a) Section 2 (b) Section 3 68. The Minimum Wages Act, 1948 is an extention
of?
(c) Section 4 (d) Section 5 (a) In whole India
Ans. (d) (b) All of the states except only J & K, Assam
60. Under Section 5(1) of the Act, different powers (c) All over India except Union Territories
have been given to the Central Government, (d) All over India except Lakshadweep
such as Ans. (a)
(a) Preparing a plan and 69. Assertion (A) : The term minimum wages has
(b) Specifying the factories to which the scheme not been defined in the Act.
will apply Reason (R) : It is possible to fix Common
(c) Only (a) Wages for all industries throughout the
country.
(d) (a) and (b) both
(a) Both (A) and (R) are correct and (R) is the
Ans. (d) correct explanation of (A).
61. On which date the Cinema Workers and (b) Both (A) and (R) are correct but (R) is not
Cinema Theatre Workers (Regulation of correct explanation of (A).
Employment) Act, 1981 came into force? (c) (A) is incorrect and (R) is correct.
(a) 01-10-1982 (b) 01-10-1984 (d) (R) is incorrect and (A) is correct.
(c) 01-10-1986 (d) 01-10-1988 Ans. (a)
Ans. (b) 70. What cannot be included in the minimum rates
of wages act?
62. Since, when was the provident fund scheme (a) Maximum rate of wages
extended to those working in Cinema theaters (b) Cash value of discount given in respect of
by issuing a notification on 30 April, 1986? essential commodities
(a) 1980 (b) 1982 (c) Value of living allowance
(c) 1984 (d) 1988 (d) Rate of full integrated value
Ans. (c) Ans. (a)

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06.
Computer Application
Introduction On the basis of size and work computers are divided
The word computer is originated from word 'compute' into four types.
which means 'to calculate'. Hence the dictionary (i) Super computer ⇒ Those computers who
meaning of computer is "one who calculates". calculation power and other features are most
In older days, computer was only used for calculation superior than other computers.
purpose however in modern era, it is used for various Their speed is measured in FLOPS (Floating point
purposes such as making documents, Email, Audios per second). The computer whose working speed is
and videos, playing games, making database etc. more than 500 FLOPS are called super computer.
Objective They are used in various fields such as scientific
⇒ What is computer research, weather forecasting, meteorology, nuclear
⇒ History of computer energy research etc.
⇒ Features of computer (ii) Mainframe computer ⇒ These computers are
⇒ Limitation of computer large in size and the number of microprocessors are
⇒ Basic components of computer system also large in it. They use 32 or 64 micro processors.
⇒ Basic Application of computer system Their storage capacity and speed is also very
⇒ Effective uses of computer accurate. They are often used in big companies,
⇒ Hardware and software bank, Defence and research fields.
⇒ Representation of Data (iii) Mini computers ⇒ They are smaller than mini
computer but larger than micro computer. Their
⇒ Concept of Data processing
storage capacity is vast and their speed is quick. It
⇒ Concept of IECT
is used in reservation place, big offices and
What is computer companies etc.
A computer is an electronic device that receives data
(iv) Micro computer ⇒ It was started in 1970 when
control through input and displays it as an output by
microprocessor was used in C.P.U. . It was firstly
working on it according to the instruction given.
developed by IBM company. It uses 8, 16, 32 and
⇒ Raw facts are known as data.
64 bit microprocessor. It is used in house, office,
⇒ Meaning data is known as information. schools, Trade etc.
⇒ The command which tells computer what to do is Micro computers are of four types.
known as instruction.
(a) Personal computer
⇒ The equipment related with computer which can be (b) Laptop
felt by touching physically is known as Hardware.
(c) Palmtop
⇒ The group of instructions which tells a user what to
(d) Workstation
do is known as program.
Hand held or mobile computing devices ⇒ These are
⇒ The group of programs which performs a specific
small and portable hand held or mobile computing
function is known as software.
devices. It helps in communicating and interacting
Primarily, computers are mainly two types.
people with fixed information system, some of its
(i) Analog computer-
examples are.
(ii) Digital computer
(a) Laptop and Notebooks.
(i) Analog computer- In this category, those computer
come which convert physical units, (Pressure, (b) PDAs (Personal Digital Assistants)
temperature, length etc) into numbers. These (c) Tablet PC
computers measure any amount on the basis of (a) Laptop and Notebooks – Laptop is a small and
comparison. portable computer. It is so small that it can fit on a lap of
(ii)Digital computer- Under this category, those a person. So, that it gets its name lap-top.
computer comes which calculates numbers using Notebook is smaller than laptop and are easily portable.
binary codes 0 and 1 to process, store and transmit They can run on batteries or electric current. It is used by
information. various persons such as editors or other field workers.
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(b) Personal Digital Assistants ⇒ PDA is a hand held marked on them, these dialers were used by rotating
computer. It is also known as palmtop. They are smaller them.
than laptop so that they can be kept even in pockets. It is ⇒ Analytical Engine
touch screen in feature and uses memory card for storage Analytical Engine was invented by Charles Babbage in
system. It is effectively used for portable audio players, 1833 AD. It is a mechanical machine which is
web browser etc. considered to be the inital prototype of modern
(c) Tablet PC ⇒ Tablet PC is a slate thin-lipped mobile computers. That is why Charles Babbage was consider to
computing device. It has in built touch screen for its be the father of computer. There were five main parts of
facility in operation as well as in built keyboard also so it this machine- input unit, data store, mill, control, output
does not need physical keyboard. unit.
ENIAC– First Electronic computer
Super computer in India
During world war II in 1946, ENIAC (Electronic
The development of supercomputers in India took place
Numerical Integrated and calculator) was built by J.P.
in late 1980s; when the US had 'Cray' in 1987. However
Eckert and John Mauchly (USA). It was the first fully
America refused to give super computer. The reason electronic computer. It had 18,000 vacuum tubes and
behind this is to maintain American supremacy, because twenty accumulators. At that time, it was used by private
at that time the technological revolution had started India firms, the Engineers, Research Association and IBM.
and China, In such situation, America did not want that EDSAC- Stored Program concept ⇒ It was invented
any of the world may stand against him. by Marries wilkes (UK) in 1949. A.D. It was developed
However Indian scientist made C-DAC Param 8000 at the University of Cambridge. According to the stored
computes in 1991. After that they were given to program concept, the operating instructions and data that
Germany, UK and Russia. are used in processing should be stored in computer and
As of March 2023, PARAM Siddhi-AI and Pratyush should be modified at the time of execution of the
super computer are India's fastest super computer. program as required. These mercury delay lines were
History of computers used for memory and vaccum tubes were used for logic.
Abacus (500 BC) ⇒ Computing is attributed to the EDVAC–Electronic Discrete variable automatic
invention of ABACUS almost 3000 years ago. It was a computer– John von Neumann introduced the concept
mechanical device capable of doing simple arithmatic of stored program computer which was capable of stored
program computer which was capable of storing data as
calculation only. It was invented by Li Kai Chen (China)
well as program in memory. The EDVAC and then the
in the 16th century. It was used for addition, subtraction ENIAC computers were developed based on this
and square root. The abacus was a rectangular wooden concept.
structure with a wire frame inside it. UNIVAC- Universal Automatic computer– It was
Pascaline or Pascal calculator– This calculating invented in 1951 by J.J. Prosper Eckert and Roop John
machine was built by Blaise Pascal (France) in 1645 AD. mauchly. It was used for commercial purpose. This
This machine worked on the principle of odometer and computer used for commercial purposes so that it used to
clock and in this machine there were dialers like many process both statistical and textual data. It contained all
cycles and old telephones, numbers from 0 to 9 were the qualities of the first generation computer.
Generations of Computers- At a Glance
Generation Hardware Software Memory Input/Outpu Language Example of advantage/disadvant
s Vacuum Machine Magnetic t Devices Low level Generation ages
First Tube Language Tapes Paper tape Language, s Consume a lot of
Generation binary (0,1) and and punched machine ENIAC, electricity, expensive
(1940- magnetic cards language EDVAC, large size higher
1956) drums (0,1) UNIVAC, energy consumption
IBM 650 greater chance of error
IBM 701
Second Transistor Batch Magnetic Magnetic Assembly PDP-8, Smaller in size, low
Generation Operating core, tape and and high IBM1400 power consumption
(1956- system magnetic Punch cards level series IBM and generated less heat
1963) disk language 7090 &
(FO 7094
RTRAN, UNIVAC
ALGOL, 1107
COBAL) CDC 3600

97
 Third Integrated Time Large Magnetic High level IBM 360 Relatively Fast, small
Generation circuit sharing/Mult magnetic tape, language IBM 370 and cheap easy to use.
(1964- (ICs), SSI, i core, monitor, (PASCAL PDP-11
1975) MSI programmin magnetic keyboard, , BASIC) NCR 395
g operating tape/disk printer etc.
system
Fourth Micro- Graphical Semi- Pointing High level IBM, PC, Highly reliable and
Generation processor user conducto devices, language, STAR very less maintenance
(1975- and very Interface r keyboard C, C++, 1000, storages capacity very
1989) large scale (GUI), memory monitor etc. Database APPLE II large and faster.
integration UNIX, Real etc. APPLE
(VLSI) Time, Macintosh
Distributed Alter 8800
operating etc.
system
Fifth Based on Internet and Optical Touch screen Understan Desktops, Portable and small in
Generation Artificial multimedia disk pen, speech d natural laptops, size fastest
(1990- intelligenc software virtual input, Light language Tablets,
Present) e uses the parallel/mult memory scanner (Human smart-
ultra large i processing (Huge printer etc. language) phone
scale operating storage
integration system capacity)
(ULSI)
technology
and
parallel
processing
method

Basic Application of computers ⇒ Engineering – In electronics engineering, computers

Let us look at various Applications of computer in are used to design and test integrated circuits used in
different fields. radio, televisions and computers.
⇒ Scientific Research ⇒ Banks– The application of computer in banks has
brought a revolution. Today computers are being used
Today computers are used in scientific research and
for most of the time consuming tasks of banks like online
analysis, experiments, inventions etc. so that it is banking, withdrawing money through ATM, check
becoming backbone of scientific research. payment, computer money counting, Passbook entry etc.
⇒ Business Application Different branches of bank are connected through
Computers provide updated information about the computer network, so inter branch transaction like
business position of the management in text and graphics clearing of cheeps can also be done immediately.
form like chart, graphs etc. quickly and at very low cost. ⇒ Education– Computer has changed the picture of
modern education, Today through internet we can get
So, that many business industries such as steel, chemical,
information about any subjects in few moments schools
oil making companies etc, are dependent on computers. and colleges have also been connected to internet and in
E-commerce is a utility of internet, with help of which many places the emphasis is on smart class. It is being
business in done through electronic medium. given which is possible only because of computer. The
⇒ Communication– Use of internet has made several development of education and multimedia has made it
changes in the field of communication, various useful for the students.
Applications/platforms such as whatsapp, facebook, According to researchers, when a new concept is bought
in front of students through audio-video medium from a
Gmail have made sending and receiving message or calls
computer, they can learn that subject better and faster.
possible in a lapse of time.
⇒ Accounting– Computer in this field is used for
⇒ Medicine– In the field of medicine, computers are various purposes such as various special new programs
widely used in the detection of diseases inside the body, for accounting such as Tally ERP9 are available this
their analysis and necessary diagnosis. Computer is used program is used to maintain the account of a company,
in CT Scan, Ultrasound, X-Ray, Eye test etc. make profit and loss account and balance sheet etc.
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Structure of computer It usually has two buttons. Left button, Right button and
All type of computers follow the same basic logical scroll wheel in the middle.
structure. Computers are made of three basic units. (i) Left click ⇒ This is used to select any object on the
1) CPU (Central Processing Unit) screen.
2) Input Unit (ii) Double click ⇒ This is used to open any file,
3) Output Unit Document or programme on desktop.
(iii) Right click ⇒ This command gives access to all file
properties on monitor.
(iv) Drag and Drop ⇒ This is used to drag object from
one place to another on screen.
b) Keyboard ⇒ Keyboard is the most important device
of any computer. You can enter text or numerical data in
the computer from the keyboard itself. In a keyboard, all
the letters are arranged in same order as in a typewriter
but it has more buttons than a typewriter.
Trackball ⇒ A trackball is a pointing device similar to
mouse, but it consists of a ball that is controlled by
1) CPU (Central Processing Unit)⇒ Processes the data
rotating the fingers to control the movement of pointer. It
or instructions entered by the input unit acts according to
neither needs a flat surface nor does it need to be moved
the user assigns the result to the output unit or stores the
around like a mouse.
given data or instruction in memory CPU also known as
microprocessor. Scanner ⇒ The scanner is used to convert the image
CPU has three main parts. written or printed on the paper into digital form and store
it in the memory/disc of the computer and for editing.
(a) ALU (Arithmetic Logic Unit)
There are three types of scanner available.
(b) Control Unit
1) Flat Bed Scanner
(c) Memory Unit
2) Hand held Scanner
(a) ALU (Arithmetic Logic Unit)– The execution of the
3) Drum Scanner
command given to the computer mathematical and
logical operations are done by this unit. Joystick ⇒ Joystick is an input device. It is a pointing
device. It moves in all directions. It is used in flight
Mathematical operations means additions, subtraction,
stimulators, computer gaming systems. It consist of a
multiplication, division and comparing, selecting,
stick which rotates on a base and reports its angle and
matching data etc.
direction to the CPU.
(b) Control Unit ⇒ The control unit is called the
Light Pen– Light Pen is on electro-optical pointing input
nervous system of computer. The control unit controls
device. It uses a photosensitive detector to select objects
the operation of all the parts of computer. It is
on the display screen.
responsible for controlling and managing all the units of
Web camera– This is a digital camera, which is
computer and controlling the transfer of data or
connected with the computer, web camera are used for
instruction between ALU and the memory.
online videas conferencing and chatting.
(c) Memory Unit– Memory unit is a component of the
Digitizer– Digitizer is an input device that converts
computer system. It is used to store data, instruction and
analog information into digital form. Digitizer is also
information. It is actually a work area of computer where
known as graphics tablet. It is specially used for
the CPU stores data and instructions. This is known as
designing images, animations and graphics. It consist of
main internal memory.
pen and pad.
2) Input Device
Microphone– A microphone is an input device that
The device through which data is inputted, that is the translates sound vibrations in the air into electronic
devices from which words, data or instructions are put in signals and scribes them to a recording medium or over a
memory, are called input device. loudspeaker.
Following are some of the major input device Magnetic Ink character Recognition (MICR)–
a) Mouse– It is an input device, it is used in the Examines MICR information in the form of matrix. It is
computer to give instruction to the computer with the used in banks to identify code number and the check
help of graphics. It was invented by Douglas Engelbart. number printed on the check with a magnetic ink.
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Bar code Reader (BCR)– A bar code reader is an input Figure - Projector
device used to read bar codes (data in form of light and Speech Synthesizer:- Speech synthesizer is an
dark lines) printed on a paper product. output device that converts text data in to spoken
Optical character Reader (OCR)– OCR is an input sentences. Basic sound units and added to it to
device. It use converts the image of hand written and give the output of speech. A sequence of words in
typed or printed text into digital form. a text is combined with sound units, amplified and
Optical mark Reader (OMR)– OMR is an input device output through a speaker connected to the
which is used for recognize (select one among the same computer.
options) symbol made by pen or pencil. Using this device, text Information is read out to
3) Output Device visually impaired people and with the help of this
An output device is a device through which the result of device, the typed information of a mute person is
the work done by the CPU (Processor) is obtained in the converted into spoken words
form of output such as monitor, printer etc. Computer Memory:- Computer memory, device
a) Monitor –Monitor is an output device which display that is used to store data or Programs (Sequences
the result of the input as output on the screen. Monitor of Instructions) on a temporary or permanent basis
quality is determined by Dot pitch, resolution, and for used in an electronic digital computer,
refresh rate. Computer memory is divided into main (or
The display size of a monitor is measured diagonally. Primary) memory and auxiliary (or secondary)
monitors are available in sizes of 9", 12", 14", 15.5", memory. Main memory holds instructions and
16.5", 17.5" and 21" etc. data when a program is executing, while auxiliary
(i) CRT (cathode Ray Tube ) memory holds data and programs not currently in
(ii) Flat Panel screen monitor LCD (Liquid crystal use and provides long-term storage.
Display), LED (Light Emitting Diode) & TFT (Thin There are two types of computer memory-
Film Transistor) 1. Primary Memory
Printer– Printer is an output device, it uses the results 2. Secondary Memory
received from the computer as a output by printing on a 1. Primary Memory:- Primary memory is also
paper. The speed of a printer is measured in characters called internal memory because it is a part of
per second, lines per minute and pages per minute. The Computer CPU Only. In the Primary memory, the
quality of a printer is measured in Dots per inch (DPI – Input data and output data of the programs and
Dots per inch) programs running at that time are stored for some
Printer are divided into two parts. time and after their need is over, they can be
(1) Impact printer removed and other data or programs can be kept.
(a) Dot matrix printers 2. Secondary Memory:- The Secondary storage
(b) Daisy wheel printers devices which are built in to the computer or
connected to the Computer are known as a
(c) Line printers
secondary Memory of the Computer. It is also
(d) Drum printers
known as external memory or auxiliary storage.
(2) Non-impact printer
The secondary memory is accessed indirectly via
(a) Inkjet printer input/output operations. It is non-volatile, So
(b) Thermal printer Permanently stores the data even when the
(c) Laser printer Computer is turned off or until this data is
Plotter – This is an output device, which is used in large overwritten or deleted. The CPU can't directly
drawing or picture such as construction plant auto CAD. access to the secondary memory.
To make drawing, the pen, pencil, marker etc. Is the use Primary memory can be divided into the following
of writing tool. It provides output such as graphs and two types–
sketches (i) RAM (Random Access Memory)
Multimedia Projector (ii) ROM (Read Only Memory)
RAM (Random Access Memory):- This is the
It is a hardware device that is used to display most useful memory in the Computer. It is volatile
Information or data received from a computer in pictures memory i.e. If the power supply is turned off, the
on a large surface or screen. Generally it is used in data stored in it is also lasts.
Presentation and meetings, in which there is a large • Data can be real from anywhere in RAM, it does
number of audience. not have to be read sequentially.
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 • RAM available in 64 MB, 128 MB, 256 MB, 512 Secondary Memory:- Secondary Memory is also called
MB, 1 GB. Capacity. Auxiliary and Backing storage memory, Since main
Static and Dynamic RAM:- memory RAM is temporary and of limited capacity,
• Static RAM is also Called SRAM. Data is stored therefore secondary memory is used as large amount of
non-volatile data memory. The data which is not
in it as long as the power supply on (ON). Storage
currently required by the central processing unit (CPU) is
cell circuits in SRAM Consist of multiple
stored in secondary memory.
transistors.
• The cost of secondary memory is very less
• Data in SRAM does not need to be refreshed and
compared to the main memory RAM and the ability
it works faster than DRAM.
to store data capacity is very high.
• Dynamic RAM is also Called DRAM. The storage
• Such information is stored in it, which has to kept
cell circuits of the DRAM chip consist of a safe for a long time and which is not required
transistor and a Capacitor. continuously.
• DRAM is frequently refreshed and is Cheaper • It stores system software. assemblers, compilers,
than SRAM. useful packages, large data files etc.
• DRAM chip Provides a memory whose • This memory is in the form of some magnetic
information is lost when the power is turned off. devices; Like-magnetic Disc (Hard Disk, Floppy
• SDRAM, RDRAM, DDR SDRAM etc are Disk, Magnetic Tape etc.), Optical Disk (CD-ROM,
examples of DRAM and SRAM, synchronous DVD etc) This memory is used for backup.
SRAM etc. are examples of SRAM. • Magnetic drums and disk are commonly used direct
ROM (Read Only Memory):- Read Only access storage devices.
Memory is which the stored data can only be read, Magnetic Tape:- It is the most successful backing
it cannot be destroyed or changed. storage medium.
It is a permanent (Non-Volatile) memory. ROM is • Magnetic tape is a half inch or 12.7 mm wide and
used to store data permanently in the computer. 2400 -3600 feet long plastic tape, which is wound on
• ROM is a silicon chip located on top of the a spool.
motherboard that stores instructions at the time of • Compared to punch cards and paper tapes, huge data
manufacture. can be stored in it. Data on a tape can be written,
• When the computer is switched on, the instruction erased and changed any number of times.
Program stored in the ROM gets executed • It requires a magnetic tape drive. All magnetic tape
automatically and even after turning off of the drives have two reels, one reel off tape that is used
power button, the instruction/program stored in its for reading or writing is called the file reel and the
is not destroyed. other called the take up file reel.
PROM:- PROM is called programmable Read Only Concepts of Hardware and Software
Memory, Once the program/Instruction is burnt by (i) Hardware:- A computer's hardware consists of its
the user, it cannot be changed. physical parts, including its internal pieces and
connected external devices. Hardware Components
• There are some other types of PROM like-erasable
perform a computer's tasks like Calculating data, Storing
PROM (EPROM), Electronically Erasable PROM
information, processing input, and providing output. Any
(EEPROM).
part of computer that you can physically touch is
• The burning Process in EPROM can be repeated hardware.
with the help of ultraviolet rays. Every machinery part of the computer is hardware,
• EEPROM is also permanent memory like whether it is a monitor, key-board, Memory chip, hard
EPROM, but the burning Process can be repeated disk, circuit and board cooling fan installed in the
with the help of electricity. computer, plug in the electrical board.
Volatility of Memory:- Computer Memory Volatility (ii) Software:- Software is a series of instruction written
refers to the ability of the computer memory to retain in a programming language, that is programs, which
information even after the power is switched off. A controls the functions of a computer system.
Computer's main memory, which is made up of SRAM Role of software in computer:- Software establishes
or DRAM chips loses its information when the power is coordination between various hardware of the computer,
turned off. RAM Volatile is temporary memory. Volatile So that a particular task can be accomplished. Its primary
memory is the memory whose information is lost when purpose is to convert data into information. It also helps
the power is turned off. in inputting the data and outputing the result.
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Types of software:- Software is divided into the Job Management:- Job management is the process of
following categories– organizing the execution of the task required for a system
(i) System categories to function. Jobs are usually collected in sequence called
(ii) Application software FIFO (First in first out) most OS's like Unix, windows
(iii) Packages software etc. Including database Management system (DBMS),
(iv) Utilities backup.
Task Management:- Task management is a system
monitoring program that provides information about the
processes and Programs running on the computer as well
as the general status of the computer.
In multiprogramming computers, the operating
system decides which process will get the processor and
which will not and for how long. This Process is called
task management.
System software:- System software is such software
Data Management:- The main function of the Operating
which is written to run computer, control it and take care
system is to keep track of the data on the disk. By which
of its various parts and make good use of all its
its name was Dos (Disk operating System)
capabilities. Our Communication with the computer is
The Operating system's access methods or
possible only through the system software.
device driver routines contain the knowledge of where
System software includes those programs,
the application program needs to retrieve (access) data.
which control the computer system and make it work by
When a program is ready to accept data. The OS locates
making proper coordination between its various parts.
the data and delivers its to the program. In Contrast,
Operating system:- Operating system is the main type when the program ready to accept data, the operating
of system software, without which it is impossible to run system signals the 05 with a coded massage. The OS
a computer. This is the first program that is loaded into locates the data and delivers it to the program. In
the computer's memory when the computer is switched contrast, when the program is ready for output, the OS
on. transfers the data from the program to the next available
• It controls the signal coming from the CPU with a space in disk.
view to flow to different parts of the computer Boot Strap Programs: Bootstrap is a program that
• MS-DOS, MS-Windows, Unix, Linux, O/52, Apple initializes the Operating system during startup.
Macintosh, sun etc. are Some of the major operating Bootstrapping is the Process of loading a set of
systems. instructing when a computer is powered on or booted.
During the startup Process diagnostic tests are performed
such as the Power on the self test (POST). Which sets the
configuration for devices and performs routine test for
connections to peripherals. The bootstrap Program is
then loaded to stand the OS. The ROM chip in a PC
(Personal Computer) has a small boot strap routing that
is automatically executed.
Such PC's (Personal Computers) in which single
• This Operating system is a set of instruction that tasking operating system is used, it is necessary to reset
controls various activities of the computer such as them after their crash.
memory, Processor, file system and other I/O A Computer system can be booted in two ways;
devices, in addition to this it also decides who can The first is cold booting which time and the second is
use the various devices of the computer. Operating warm booting in which the computer is already on and it
system perform the following functions- is reset. Ctrl + Alt + Del keys combination is used for
(i) Job Management warm booting.
(ii) Task Management Assemblers:- An assembler is a type of computer
(iii) Data Management Program that interprets software program written in
(iv) Security assembly language into machine language, code and
(v) Boot Strap instruction that can be executed by computer.
102
 An assembler enables software and application Packages: A packages is a computer application in
developers to access, operate and manage a computer's which individual files or resources are packaged together
hardware architecture and components. An assembly is as a software collection that provide some functionality
sometimes referred to as the compiler of assembly as part of a large system. Software suite, which provide
language. It also provides the services of an interpreter. an organized collection of several packages or a package
Compilers:- Compiler, computer software that translates consisting of more than one separate piece. Application
(compilers) source code written in a high-level language packages are available for types of application like
(e.g. C++) into a set of machine-language instruction that business applications, engineering designs, home
can be understood by a digital computer's CPU. application etc. Some examples of this are-
Compilers are every large programs, with error-checking (i) MS-Word which is a word processing package, if
and other abilities. Some compilers translate. high-level does text processing and manipulation.
language into an intermediate assembly language, which (ii) MS-Excel which is a spreadsheet package for
is then translated (assembled) into machine code by on financial calculation and data analysis.
assembly Program or assembler. Other compilers
(iii) CAD (Computer Aided Design) designing or is for
generate machine language directly.
drafting.
Interpreters: An interpreter is a computer program that
(iv) Works with Oracle records such as management of
is used to directly execute program instruction written
files, management of databases, storage and access of
using one of the many high-level programming language.
information etc.
The interpreter transforms the high-level program into an
intermediate language that it then executes , or it could Some integrated software packages have also
parse the high-level source code and then program the been developed for word processing, spreadsheet,
commands directly, which is done line by line or graphics, database, management etc.
statement by statement. Programming languages: A programming language is a
A compiler is 5 to 25 times faster than an Computer language that is used by programmers
interpreter, interpreter takes less memory space. (developers) to communicate with computers. It is a set
Application software:- Application software are those of instruction written in any specific language (C, C++,
program which are written to do our actual work; Like- Java, Python) to perform a specific task.
Calculating the salary of the office employees, keeping A programming language is mainly used to develop
account of all the transactions and accounts, printing desktop applications, websites and mobile application
different types of reports, letters and documents should computer languages or programming language are
be prepared. Application software is developed using divided into three major categories-
high level computer languages. Software program are (i) Machine language
written using the English language, So the user can (ii) Assembly language
easily use computer; Such as industrial automation, (iii) High level language
medical software, educational software, word processor 1. Machine Language: Machine language is type of
etc. low-level programming language. It is also called as
Difference between system and application 'machine code' or 'object code'. Machine language is
Software and Packages- easier to read because it is normally displayed in binary
• System software is installed when the operating or hexadecimal form (base 16) form. It does not require
system is installed on the computer, while a translator to convert the programs because computers
application software is installed as per the needs of directly understand the machine language programs.
the user. The advantage of machine language is that it
• System software includes programs such as helps the programmer to execute the programs faster
compilers, debuggers, drivers, which application than the high-level programming language.
software includes media players, word processors 2. Assembly Language:- Assembly language is also a
and spreadsheet programs. types of low-level programming language that is
• Generally, user do not interact with system software designed for specific processors. It represents the set of
as if works in the background while users interact instruction in a symbolic and human- understandable
with application software during various activities. form. It uses an assembler to convert the assembly
• A computer does not need more than one type of language to machine language.
system software, whereas multiple application The advantage of assembly language is that it requires
software programs can be installed on the computer less memory and less execution time to execute a
at the same time. program.
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Disadvantages of Assembly language Program:- The main advantage of natural language is that
(i) Assembler software is different for different it helps users to ask question in any subject and directly
computer hardware. respond within seconds.
(ii) Assembly language depends on the type of computer Machine Independence:- High-level machine
hardware. Therefore, the program written in this independent. A program written in a high level language
language depends on the machine. can be run on many different types of computers little or
(iii) Program execution in assembly language takes no modification.
longer than machine language. Portability:- High level language are independent of
(iv) Programming in assembly language is difficult and computer architecture. The same program can run on two
debugging takes a lot of time. different computers having the same language compiler
because the compiler is machine dependent and not
(v) To write a program in an assembly language, a
language dependent.
programmer must have complete knowledge about
Representation of data Information:
that computer which he is using.
(i) Definition of Information & Data:- Data can be
3. High-Level Language:- High-level programming
defined as representation of facts, concepts, or
language (HLL) is designed for developing user-
instruction in a formalized manner, which should be
Friendly software programs and websites. This
suitable for communication, interpretation, or processing
programming language requires a compiler or interpreter
by human or electronic machine.
to translate the program into machine language (execute
Data is represented with the help of characters
the program).
such as alphabets (A - Z, a - z), digits (0 - 9) or special
The main advantage of a high-level language is that is
characters (+, –, /, ×, <, >, = etc.)
easy to read, write, and maintain.
Information is organized or classified data,
High-level programming language includes pythod, Java, which has some meaningful values for the receiver.
Java Scrip, PHP, C++, Cobol, Perl, Pascal, LISP, Information is the processed data on which decision and
FORTRAN, and Swift Programming language. action are based.
A high-level language is further divided into three parts- For the decision to be meaningful, the processed
(i) Procedural Oriented Programming language:- data must qualify for the following characteristics-
Procedural Oriented Programming language is derived • Timely– Information should be available when
from structured programming and based upon the required.
procedure call concept. It divided a program into small • Accuracy- Information should be accurate
procedures called routines or functions.
• Completeness : Information should be complete.
Procedural oriented programming language is Basic Data Types:- The basic data types are also known
used by a software oriented programmer to create a as fundamental or primary data types. Basic data types
program that can be accomplished by using a are sued in the C language for storing the available
programming editor like IDE, Adobe, Dream weaver, or values in decimal as well as integer forms, and these
micro soft Visual Studio. provide support for both unsigned and signed literals.
Example: C, FORTRAN, Basic, Pascal, etc. Type Range Bytes Represents
(ii) Object-Oriented Programming language:- Object- From to
Oriented programming language is based upon the Char/short –128 127 1 Characters
objects. In this programming language, programs are Unsigned 0 255 1 Characters
divided into small parts called objects. It is used to Char
implement real-ward entities like inheritance, int –32,768 32,767 2 Whole
polymorphism, abstraction, etc. in the program to make Numbers
the program reusable, efficient and easy to use. Unsigned 0 5535 2 Whole
The main advantage of object-oriented int numbers
programming is that OOP is faster and easier to execute, Long –2,147, 2,147, 4 Whole
maintain, modify, as well as debug. 438, 648 438,647 numbers
Example - C++, Java, Python, CH. etc. Unsigned 0 4,294,967, 4 Whole
(iii) Natural language:- Natural language is a part of long 295 numbers
human languages such as English, Russian, German and Float 3.4×10–38 3.4×1038 4 Whole
Japanese. It is used by machines to understand, numbers
manipulate and interpret human is language. It is used by Double 1.7×10–308 1.7×10–308 8 Whole
developers to perform tasks such as translation, numbers
automatic summarization, Named entity Recognition Long 3.4×10–4932 3.4× 10 Whole
(NER), relationship extraction, and topic segmentation. double 10–4932 numbers

104
Storage of Data:- Data storage is the process of using Pen drive is an example of EEPROM (Electrically
computer devices to save digital information. Storing Erasable Programmable Read Only Memory)
data helps achieve numerous digital tasks efficiently. Memory Cards:- Memory Card Can be defined as a
Computers leverage different types of memory portable electronic storage device that falls under the
depending on how the system uses the data. For example, category of the flash type of storage devices. This
devices rely on RAM for instant data storage and
devices has become a widespread storage method used to
retrieval, while ROM helps store long-term data.
match with the modern-day technological evolution. It
The Process of data storage becomes complex quickly.
can contain data of any format and type and type, like
For instance, organizations that work with vast volumes
of the require faster and high-capacity storage devices. videos, pictures, audio, executable files, etc. It is known
Hard disk:- A hard disk is also known as a hard drive or to be faster and handy in nature, while being cheaper,
fixed disk. It is said to be rigid magnetic disk that store which makes them the most preferred devices compared
data. It is located within a drive unit. Hard disk is non- to other portable flash memory units. Memory cards are
volatile storage device that contains platters and most commonly used in other transferable devices like
magnetic disks rotating at high speeds. Non-Volatile mobile phones, Tablets, gaming console, cameras,
means the data retains when the computer shuts down. laptops and media players.
It is installed internally in our computer Smart Media Card:- Smart media is an outdated flash
systems. Hard disk is located within a drive unit on the memory card. It was mainly used to store date in cameras
computer 's motherboard and comprises one or more and is no longer produced by the original owner,
platters packed in an air-sealed casing. Toshiba.
Its main components include a real/write
The Card had a storage capacity of 2 MB to 128
actuator arm, head actuator, read/ write head, spindle and
MB.
platter. A circuit board (also called as the interface board
or disk controller) is present on the back of hard drive. It Secure Digital Card (SD Card):- A Secure Digital (SD)
lets the hard drive to communicate with the computer. card is a tiny flash memory card designed for high-
Compact Disk:-CDs or compact disks are optic readable Capacity memory and various portable devices, such as
media. CD's are the replacement of the phonograph disc. car navigation system, cellular Phones, e-books, PDAs,
The main material of the CD is plastic. A Compact disc Smart Phones, digital Cameras, music players, digital
is a portable storage medium that can record, store and video camcorders and personal computers.
play back audio, video and other data in digital form. Micro SD Memory Card:- The Micro SD card is the
A standard compact disc measures 4.7 inches , smallest consumer - focused flash memory card in use
or 120 millimeters (mm), across, is 1.2 mm thick, weight today. It's a variation of the standard SD card and uses a
between 15 grams and 20 grams, and has a Capacity of similar set of electrical Connection. That makes it
80 minutes of audio, or 650 megabytes (MB) to MB of possible to use micro SD cards in standard SD card slots
data.
with the use of an adapter. Micro SD was introduced as
Digital Video Disc or Digital Versatile Disc (DVD):-
smaller alternative for portable electronics. The micro
DVD stands for digital versatile Disc. It is Commonly
SD format is about 1/4th the size of an SD card, which
known as digital Video Disc, It is a digital optical disc
storage format used to store high capacity data like high ranges from 15 mm to 0.7 mm,
quality videos and movies. If is also used to store Portable Hard Drive:- Al though external hard drives
operating system. It is invented and developed by 4 are available in varying storage capacities, they all
companies named Philips, Sony, to Toshiba and connect to a computer just as the name suggests
Panasonic in 1995. DVD's Provide higher storage externally.
capacity than CD's (Compact disc) and can be played in To put it simply, on external hard drive, also
multiple types of players like DVD playerse known as a portable hard drive, is device that is
Pen Drive: A Pen drive, or a USB flash drive, is a connected to the outside of a computer through a USB
portable data - Storage device. Pen and have become the connection that is often used to back up computer or
most popular data – storage devices among consumers.
serve as a portable storage solution.
Micro, lightweight and handy, a pen drive can be easily
carried form place to place by students, Professionals, Portable hard drives help users to back up or
academicians and Independent tech consultants. store important information, which is kept separate from
Currently available pen drives with storage capacities the main internal hard driver. Documents such as music
ranging from 8 GB and 32 GB can be used to shore files, DVD movies, images and back up of the main
graphics. heavy documents, photos, music files and internal hard drive is contents can all be safely and
video clips. discreetly stored on a portable hard drive.
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Concept of data processing: Data in its raw form is not (Output). Each step is taken in a specific order, but the
useful to any organization. Data Processing is the method entire process is repeated in a cyclic manner. The first
of collecting raw data and translating it into usable data processing cycle's output can be stored and feed as
information. It is usually performed in a step-by-step the input for the next cycle, as the illustration below
Process by a team of data scientists and data engineers in shown us.
Organization. The raw data is collected, filtered, sorted,
processed, analyzed, stored and then presented in a
readable format.
Data processing is essential for organizations to
create better business strategies and increase their
competition edge. By converting the date into readable
formats like graphs, charts and documents, employees
throughout the organization can understand and use the
data
Data Processing Cycle:- The data processing cycle
consists of a series of steps where raw data (Input) is
feed into a system of produce actionable insights

Introduction to the Internet WWW and Web Browser

Internet is a global communication system that links • Hardware sharing:- It helps to share hardware
together thousands of individual networks. It allows
like printer, scanner etc.
exchange of information between two or more computers
on a network. The Internet helps in transfer of massage • Software Sharing:- It helps in easy sharing of

through mail, chat, Video and audio conference, etc. It software across a network.
has become mandatory for day to day activities: bills • Reliability:- It helps in easy sharing of software
payment, online shopping and surfing, tutoring, working,
across a network.
communicating with peers, etc.
Components of Computer Network:
The first internet services in India was started by VSNL
Server:- It is the main computer of the network which
(Videsh Sancher Nigam Limited) on 15 August 1995.
hold all the data like shared files, programs and network
Basic of Computer Network:- A computer network is a
operating system.
group of many computer that are connected to each other
Clients:- Computer Other than servers connected to the
in such a way that they can exchange their data and
information with each other. A network consists of network, also called nodes. The user works on these
computers as well as peripheral devices that are carriers computers. The more powerful node is called a
and data communication devices and help to exchange workstation.
data and information. Transmission Media:- It is an essential component for
Benefits of computer Network:- Computer network has connecting physical devices (Hardware) in a computer
the following advantages– network.
Network Interface Card:- This is a circuit connecting
network cables to the computer, with the help which the
arrival of data is fast. The card is installed in the
motherboard of all the computer connected to the
network.
Protocol:- Such a set of rules that establish harmony
• Data and File Sharing:- It helps the user to share among various devices in the entire communication
data and files. process is called as a protocol .

106
 Computer Note
Voice Over Internet Protocol (VOIP)- checking before forwarding data, which makes it very
Voice Over Internet Protocol (VOIP) is a technology that efficient as it does not forward packets that have errors
allows you to make voice calls using a broadband and forward good packets selectively to the correct port
Internet connection line. Some VOIP services may only only.
allow you to call other people using the same service, but Routers: A router is a device like a switch that router
other may allow you to call anyone who has a telephone data packets based on their IP addresses the router is
number including local, long distance, mobile and mainly a network layer device. Routers normally connect
international numbers. Also while some VOIP services LANs and WANs and here a dynamically updating
only work over your computer or special VOIP phone, routing table based on which they make decisions on
other services allow you to use a traditional phone routing the data packets. The router divides the broadcast
connected to a VOIP adapter. domains of hosts connected through it.
Advantages of VOIP- Gateway: A gateway as the name suggests is a passage
(i) Roaming related charges are not applicable in this to connect two networks that may work upon different
system. networking models. They work as messenger agents that
(ii) Both internet and calls can be done on the same take data from one system, interpret it and transfer it to
network simultaneously. another system. Gateways are also called protocol
(iii) Calling rate becomes cheaper. converters and can operate at any network layer.
(iv) Direct cost saving Gateways are generally more complex than switches or
(v) A VOIP service also enables businesses to cut other routers. A gateway is also called a protocol converter.
ongoing expenses such as taxes, repair and maintenance Brouter: It is also known as the bridging router is a
fees. device that combines features of both bridge and router.
Network Devices: Network devices also known as It can work either at the data link layer or a network
network hardware, are physical devices that allow layer working as a router, it is capable of routing packets
hardware on a computer network to communicate and across networks and working as the bridge, it is capable
interact with one another. For example Repeater, Hub, of filtering local area network traffic.
Bridge Switch, Routers, Gateways, Brouter and NIC, etc. NIC: NIC or Network Interface Card is a network
Repeater: A repeater operates at the physical layer, its adapter that is used to connect the computer to the
job is to regenerate the signal over the same network network. It is installed in the computer to establish a
before the signal becomes too weak or corrupted to LAN. It has a unique id that is written on the chip, and it
extend the length to which the signal can be transmit has a connector to connect the cable to it. The cable acts
over the same network. An important point to be noted as an interface between the computer and the router or
about repeaters is that they do not amplify the signal. modem. NIC Card is a layer 2 device means that it works
When signal becomes weak, they copy it bit and on both the physical and data link layers of the network
regenerate it at its star topology connectors connecting if model.
original strength. It is a 2 port device.
Modem: A modem is a hardware which connects to a
Hub: A hub is a basically multi-port repeater. A hub
computer, broadband network or wireless router. Modem
connects multiple wires coming from different branches,
converts information between analogue and digital
for examples, the connector in star topology which
formats in real time making seamless two way network
connects different stations. Hubs cannot filter data so
communication. The full form of modern stands for
data packets are sent to all connected devices.
modulator-demodulator.
Bridge: A bridge operates at the data link layer. A bridge
Types of Computer Network
is a repeater, with add on the functionality of filtering
content by reading the MAC addresses of the source and A Computer Network is a connection between two or
destination. It is also used for interconnecting two LANs more network devices like computers, routers and
working on the same protocol. It has a single input and switches to share network resources. There are mainly
single output port, thus making it a 2 port device. four types of computer network.
Switch: A switch is a multiport bridge with a buffer and (i) LAN
a design that can boost its efficiency (a large number of (ii) MAN
ports imply less traffic) and performance. A switch is a (iii) PAN
data link layer device. The switch can perform error (iv) WAN
107
 Difference Between LAN, MAN and WAN 4G Network: 4G is the short name fourth generation
Parameter LAN MAN WAN wireless the stage of broadband mobile communication
Full form Local Metropolitan Wide that supersedes 3G and is the predecessor of 5G
Area Area Area LTE (Long-Term Evaluation)- LTE was first
Network Network introduced in 2008, it defined a new cellular access
Network The LAN MAN can be The network with high spectral efficiency, high peak data
ownership is private, both private or WAN rates, shoot round trip times as well as flexibility in
Hospitals, public many can also frequency and bandwidth. It signifies an evolving level
homes, organisation be both of performance as the capabilities of cellular hardware,
schools, and telecom private or software and network technology. Such as speed,
offices etc. operators may public latency, battery usage and cost efficiency are optimized
own them. and improved over time. LTE technology today is that
Maintenance Very easy Comparatively Very they can deploy a wide range of devices in an LTE
and designing to design difficult to difficult network with confidence that their deployment will
and design and to design
remain viable for many years to come.
maintain maintain and
maintain
5G Network: 5G is the 5th generation mobile network. It
is a new global wireless standard after 1G, 2G, 3G and
Speed LAN MAN offers a WAN
4G networks, 5G enables a new kind of network that is
offers a moderate offers a
very high internet speed low
designed to connect virtually everyone and everything
internet internet together including machines objects and devices. 5G
speed speed technology uses cell sites that transmit data through ratio
Uses Schools, It basically It covers waves. Cell sites connect to networks with wireless
homes, covers a city, an entire technology or wired connection. 5G technology works
colleges, a small down country a by modifying how data is encoded, significantly
hospitals, or any given sub increasing the number of usable airwaves for carriers.
offices etc. area with a continent Cloud Computing: Cloud computing enables customers
bigger radius or an to use infrastructure and application via the internet,
than the LAN equivalen without installing and maintaining them on premises.
t area. Cloud computing is on-demand access via the internet, to
Communication LAN MAN allows A huge computing resources-applications, servers (physical
Allotment typically multiple group of servers and virtual servers) data storage, development
allows a computers to computer tools, networking capabilities, and more-hosted at a
single pair interact s can remote data center managed by a cloud services provider
of devices simultaneousl easily
(CSP). The CSP makes these resources available for a
to y with each interact
monthly subscription fee or bills them according to
establish a other with each
communic other usage.
ation. But using the Various level of cloud computing
it may also WAN Clients
support
Services
more
computer Application
2G Network: 2G is the second generation of cellular Platform
network based on the Global system for mobile Storage
communication (GSM). Designed to accommodate the Infrastructure
growing number of mobile phones, 2G introduced Network Topology: Network topology describes the
cellular services like SMS, multimedia messaging, and physical and logical relationship of nodes in a network,
digitally encrypted voice conversions. the schematic arrangement of the links and nodes, or
3G Network: 3G is the third generation of wireless some hybrid combination thereof. The purpose of
mobile telecommunications technology. It can handle network topology is to give you an overview of the
more calls and higher incoming and outgoing data network, by visualizing the physical connection of
communication. 3G also allows users to access mobile derives and the data flow within the network. It draws a
internet with the introduction of smartphones that could distinction between logical and physical connection.
access 3G gave users the possibility of having a mobile There are six types of network topology which are Bus,
computer. Star, Ring, Tree, Mesh and Hybrid topology.
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(1) Bus topology: The bus topology is designed in such different topologies are combined together is formed as
away that all the stations are connected through a single hybrid topology is termed as hybrid topology and if
cable known as a backbone cable. Each nodes is either similar topologies are connected with each other will not
connected to the backbone cable by drop cable or result in Hybrid topology.
directly connected to the backbone cable. The bus Transmission Media: Transmission media is a
topology is mainly used in 802.3 (Ethernet) and 802.4 communication channel that transmits information from
standard network, the backbone cable is considered as a the source/transmitter to the receiver. It is a physical path
"Single lane" through which the message is broadcast to for data transfer through electromagnetic signals.
all the stations. Information is carried over in the form of bits through
(2) Star topology: Star topology is an arrangement of LAN. There are two main types of transmission media in
the network in which every nodes is connected to the computer networks. These are-
central hub, switch or a control computer. The central (i) guided media
computer is known as a server and the peripheral devices (ii) unguided media
attached to the server are known as clients. Coaxial cable
(1) Guided Transmission Media: Guided media are
or RJ-45 cables are used to connect the computers. Hub
also known as wired or bounded media. These media
or switches are mainly used as connection devices in a
consist of wires through which the data is transferred.
physical star topology. Star topology is the most popular
Guided media is a physical link between transmitter and
topology in network implementation.
recipient devices. Signals are directed in a narrow
(3) Mesh topology: Mesh topology is an arrangement of
pathway using physical links. These media types are
the network in which computers are inter connected with
each other through various redundant connections. There used for shorter distances since physical limitation limits
are multiple paths from one computer to another the signal that flows through these transmission media.
computer. It does not contain the switch, hub or any There are three types of guided media.
central computer which acts as a central point of (i) Twisted Pair Cable: In this type of transmission
computer. The Internet is an example of the mesh media, two insulated conductors of a single circuit are
topology. Mesh topology is mainly used for WAN twisted together to improve electromagnetic
implementations where communication failure are a compatibility. These are most widely used transmission
critical concern. Mesh topology is mainly used for medium cables. These are packed together inprotective
wireless networks. Mesh topology can be formed by sheaths.
using the formula. (ii) Optical Fibre Cable: Also known as fiber optic
Number of cables = (n* (n-1))/2 cable, these are thin strands of glass that guide light
(4) Ring Topology: Ring topology is like a bus topology along their length. These contain multiple optical fibers
but with connected ends. The node that receives the and are very often used for long-distance
massage from the previous computer will retransmit to communications. Compared to other materials, these
the next node. The data flows in one direction like as cables can carry huge amount of data and run for miles
unidirectional. The data flows in a single loop without using signal repeaters.
continuously known as an endless the data in a ring (iii) Co-axial Cable: These guided transmission media
topology flow in a clockwise direction. The most contain an insulation layer that transmits information in
common access method of the ring topology is taken baseband mode and broadband mode. Coaxial cable are
passing. made of PVC/Teflon and two parallel conductors that are
(5) Tree Topology: Tree topology combines the separately insulated. Such cables carry high frequency
characteristics of bus topology and star topology. A tree electrical signal without any big loss. The dimension of
topology is a type of structure in which all the computers cable and connectors are controlled to give them constant
are connected with each other in hierarchical fashion. conductor spacing for efficient functioning as a
The top most node in tree topology is known as a root
transmission line.
node, and all other nodes are the descendants of the root
(2) Unguided Transmission Media: Also known as
node. There is only one path exists between two nodes
unbounded or wireless media, they help in transmitting
for the data transmission. Thus it forms a parent child
hierarchy. electromagnetic signals without using a physical
medium. There is no physical connectivity between
(6) Hybrid Topology: The combination of various
different topologies is known as hybrid topology. A transmitter and receiver. These types of transmission
hybrid topology is a connection between different links media are less secure than guided media. There are three
and nodes to transfer the data, when two or more main types of wireless transmission media.

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(I) Radio waves: Radio waves are transmitted in every (1) ISP (Internet Service Provider): An ISP (Internet
direction throughout free space. Since these are Service Provider) is a company that provides individuals
omnidirectional, sent waves can be received by any and organisations access to the internet and other related
antenna. These waves are useful when the data is to multi services. An ISP has the equipment and the
cased from one sender to multiple receivers. Radio telecommunication line access required to have a point
waves can cover large area and even penetrate obstacles of presence on the internet for the geographic area
such as building and walls the frequency of these waves served. An ISPs are connected to one or more high-speed
ranges between 3 KHz to 1 GHz. internet lines. Larger ISPs have their own high speed
(II) Infrared Technology: These waves are useful for leased lines, so they are less dependent on
only very short distance communication unlike radio telecommunications services and can better service to
waves they do not have the ability to penetrate barriers. their customers.
Their ranges varies between 300 GHz - 400 GHz. Since (2) Networking Layer: Every computer in a network
they have larger bandwidth, the data rate is very high for has an IP address by which it can be uniquely identified
infrared waves. These have less interference and are and addressed. An IP address is layer-3 (Network layer)
more secure. logical address. This address may change every time a
computer restarts. A computer can have one IP at one
(III) Microwaves: Fore these waves, it is important for
instance of time and another IP at some different time.
the transmitter and receiver antenna to be aligned. This is
(3) Address Resolution Protocol (ARP): While
why it is known as line of sight transmission. Due to this,
communicating a host needs layer-2 (MAC) address of
they are suitable for shorter distances. They comprise of
the destination machine which belongs to the same
electromagnetic waves with frequencies ranging between
broadcast domain or network. A MAC address is
1-400 GHz. Microwaves provide bandwidth between the
physically burnt into the network interface card (NIC) of
range of 1 to 10 mbps. Distance covered by the signal is
a machine and it never changes.
proportional to the height of the antenna.
IOT (Internet on Tings): The Internet of Things (IOT)
Internet: Internet is a global network that connects
describes the network of physical objects "Things"- that
billions of computers across the word with each other
are embedded with sensors, software and other
and to the world wide web. It uses standard internet
technologies for the purpose of connecting and
protocol suite (TCP/IP) to connect billions of computer exchanging data with other devices and systems over the
users worldwide. It is set up by using cables such as internet. These devices range from ordinary household
optical fibers and other wireless and networking objects to sophisticated industrial tools with more than 7
technologies. At present internet is the fastest mean of billion connected IOT devices today, experts are
sending or exchanging information and data between expecting this number to grow to 10 billion by 2020 and
computers across the word. It is believed that the internet 22 billion by 2025. Oracle has a network of device
was developed by "Defense Advanced projects Agency" partner.
(DARPA) department of the united states. And it was Services of Internet: Internet services allow us to access
first connected in 1969. huge amount of information such as text, graphics, sound
Internet is called as network as it creates a network by and software over the internet.
connecting computers and servers across the world using (1) World Wide Web: World wide web (WWW) also
routers, switches and telephone lines and other known as the web or w3 refers to all the public websites
communication devices and channels. So it can be or pages that users can access on their local computers
considered a global network of physical cables such as and other devices through the internet. These pages and
copper telephone wires, fibre optic cables, TV cables etc. documents are interconnected by means of hyper links
Furthermore, even wireless connections like 3G, 4G or that users click on for information.
Wi-Fi make used of these cables to access the internet. (2) Website: A website is a collection of web pages and
Basic of Internet Architecture: Internet architecture is related content that is identified by a common domain
a meta network, which refers to a congregation of name and published on at least one web server. Websites
thousands of distinct networks interacting with a are typically dedicated to a particular topic or purpose
common protocol. The architecture of the internet is ever such as news, education, commerce, entertainment or
changing due to continuous changes in the technologies social networking.
as well as the nature of the service provided. The (3) How it works: Internet is a network of networks. It
heterogeneity and vastness of the internet make it works by using a technique called packet switching and
difficult to describe every aspect of its architecture. The by relying on standardized networking protocol that all
overall architecture can be described in three levels. computer can interpret.
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 Chat: Chat refers to the process of communicating,
interacting and/or exchanging messages over the internet.
It involves two or more individuals that communicate
through a chat-enabled service or software.
Chat is also known as chatting, online chat or internet
chat.
Blog: Blogs are regularly updated websites that provide
insight into a certain topic. The word blog is a combined
version of the words "web" and "blog".
Blogs were simply an online diary where people could
keep a log about their daily lives on the web.
(4) URL (Uniform Resource Locater): A URL
Internet Services: Internet services allows us to access
(Uniform Resource Locater) is a unique identifier used to huge amount of information such as text, graphics, sound
locate a resource on the internet. It is also referred to as a
and software over the internet. Following diagram shows
web address. URLs consist of multiple parts- including a the four different categories of internet services.
protocol and domain name that tell a web browser how
and where to retrieve a resource. The URL contains the
name of the protocol needed to access a resource as well
as a resource name. The first part of a URL identifies
what protocol to use as the primary access medium. The
second part identifies the IP address or domain name and Video Conferencing: Video conferencing is a type of
possibly subdomain-where the resource is located. virtual, online meeting where two or more people talk
Example of URL through a video and audio call in real-time. Video
conferencing has been around for years, but it
skyrocketed in popularity as school and work shifted into
(5) Web Browser: A software application used to access the home during the 2020 pandemic.
information on the world wide web is called a web Types of Video conferencing
browser when user requests some information, the web (i) Point-to-point
browser fetches the data from a web server and then (ii) Multi-point
displays the webpage on the user's screen. (i) Point-to-Point A one on one conversation involving
(6) Domain Name: A domain name is an easy to two participants in different locations. A video call with
remember name that's associated with a physical IP a client or a customer service rep, for example, is point-
address on the internet. It's the unique name that appears to-point video conferencing.
after the @ sign in email addresses, and after www.in (ii) Multi-Point Also called "group video conferencing"
web addresses. "or" group calls." this is a conversation that involves
three or more people in at least two locations. It could be
Example- google.com, yahoo.com etc. a business meeting with some participants at the office
(7) Domain name system (DNS)- The domain name and others remote, or a webinar where a person streams
system is responsible for translating domain names into a to viewers in several locations.
specific IP address so that the initiating client can load Digital Locker or Digi Locker: Digi Locker is a data
the requested internet resources. The domain name storage solution developed by the ministry of electronics
system works much like a phone book where users can and IT (meity) that lets you store digital copies of PAN,
search for a requested person and retrieve their phone ABHAID, mark sheet, driving license, etc. Digi locker is
number. a cloud document storage wallet developed by the
Communication on Internet ministry of Electronics and IT (Meity) under its digital
E-mail (Electronic mail) is a communication method that India initiative. It can also be used for digitally verifying
your credentials.
uses electronic devices to deliver messages across
Preparing Computer for Internet Access
computer networks. "Email" refers to both the delivery
(i) ISP (Internet Service Providers): An ISP (Internet
system and individual messages that are sent and
Service Provider) is a company that provides individuals
received. Email has existed in some form since the
and organizations access to the internet and other related
1970s, when programmer Ray Tomlison created a way to services. An ISP has the equipment and the
transmit messages between computer system on the telecommunication line access required to have a point
Advanced Research Projects Agency Network of presence on the internet for the geographic area
(ARPANET). served.
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Digital Subscriber Line (DSL): A digital subscriber Wi-Fi is the radio signal sent from a wireless router to a
line or DSL, formerly called a digital subscriber loop, is nearby device, which translates the signal into data you
a type of internet connection that uses the voice can see and use. The term was created by a marketing
frequency of telephone lines to send and receive internet firm because the wireless industry was looking for a
data and traffic. This type of connection enables high- user-friendly name to refer to some not so user-friendly
speed downloads when the user is situated close to the technology known as IEEE 802.11 and the name stuck.
DSL provider. WiMax in Computer Network: WiMax stands for
Dial-up Connection: A dial up connection uses a world wide inter operability for microwave access. This
standard phone line and analog modem to access the technology is based on IEEE 802.16. It is based on MAN
internet at data transfer rates (DTR) of up to 56 kbps. (Metropolitan Area Network) technology. Its range is up
A dial-up connection is the least expensive way to access to 50 km. It may provide speed upto 70 mbps and it can
the internet, but it also slowest connection. operate in non-line of sight. This technology is fast,
Integrated Service Digital Network: These are a set of convenient and cost effective.
communication standards for simultaneous digital Li-Fi: LiFi is a visible light communications system
transmission of voice, video, data and other network transmitting wireless internet communications at very
services over the traditional circuits of the public high speeds. The technology makes a LED light bulb
switched telephone network. Before integrated services
emit pulses of light that are undetectable to the human
digital network (ISDN), the telephone system was seen
eye and within those emitted pulses, data can travel to
as a way to transmit voice, with some special services
and from receivers. Then, the receivers collect
available for data.
information and interpret the transmitted data.
Direct Internet Access (DIA): DIA standards for
National Broadband Policy: The Indian Broadband
dedicated Internet Access. It is fully dedicated bandwith
Policy 2004 offered host of fiscal incentives and tax
that is not shared and the speed does not very. It is an
rebates to attract investor, both domestic and foreign
internet connection that is totally dedicated to a specific
investor. The main objectives of the Indian Broadband
location or business.
Policy 2004 was to identify the potential o the use of
Dedicated internet access solutions are typically
Internet in the development of Indian Industry. It aimed
guaranteed with a service level agreement. Those service
at enhancing the quality of life by implementation of
legal agreement establish service level minimums for
items like latency and network availability which is tele-education, tele medicine, e-governance,
usually measured between 99.9% and 99.99%. Internet entertainment and also to generate employment through
connectivity service legal agreement are increasingly high speed access to information and web-based
important with the explosion of real time applications communication.
like cloud voice or VOIP, Video conferencing and Web-Browsing Software: A software application used
remote working. to access information on the world wide web is called a
Wireless Connection: Computer networks that are not web browser. When a user requests some information,
connected by cables are called wireless networks. They the web browser fetches the data from a web server and
generally use radio waves for communication between then displays the webpage on the user's screen. It is also
the network nodes. They allow devices to be connected important to know in detail about what a web browser is
to the network while roaming around within the network for candidates preparing for Government exams. Today's
coverage. web browsers are easily accessible and can be used on
Types of Wireless Networks: devices like computer, laptops, mobile phones etc.
(1) Wireless LAN- Connects two or more network Types of Browsers: The functions of all web browsers
devices using wireless distribution techniques. are the same, thus more than the different types there are
(2) Wireless MANs- Connects two or more wireless different web browsers which have been used over the
LANs spreading over a metropolitan area. years.
(3) Wireless WANs- Connects large areas comprising (1) Word wide web: The first web browser over
LAN, MAN and Personal networks. launched in 1990. It was later named "Nexus" to avoid
Wi-Fi: Wi-Fi is a wireless technology used to connect any confusion with the world wide web. It had the very
computer, tablets, smartphones and other devices to the basic features and less interactive in forms of graphical
internet. interface. It did not have the feature of bookmark.
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(2) Mosaic: It was launched in 1993. It had a better (5) Java Script Interpreter: It allows conversion of
graphical interface images, text and graphics could all be java script code in a document and the executes it then
integrated. It was developed at the National Center for the engine shows the translation on the screen to the
Super Computing Applications. The team which was users.
responsible for creating mosaic was lead by more Name of bars in Computer
Andreessen. It was named "The world's first popular Title bar: The title bar at the top of a window displays
browser". an application-defined icon and line of text. The text
(3) Netscape Navigator: It was released in 1994. It was specifies the name of the application and indicates the
the dominant browser interms of usage share, more purpose of the window. The title bar also makes it
versions of this browser were launched by Netscape. It possible for the user to move the window using a mouse
had an advanced licensing scheme and allowed free or other pointing device
usage for non-commercial purposes. Menu bar- The menu bar is the part of a browser or
(4) Internet Explorer: It was launched in 1995 by application window, typically at the top left side, that
Microsoft. It has attained almost 95% of usage share and houses drop-down menus that allow the user to interact
had become the most popular browser of all close to 10 with the content or application in various ways. Menu
versions of internet explorer were released by Microsoft bar items very between applications, most menu bars
and were updated gradually. It was included in the include the standard file, Edit and view menus.
Microsoft windows operating system. In 2015. It was
Address bar: The address is bar is the familiar text field
replaced with "Microsoft Edge" as it became the default
at the top of web browser graphical user interface (GUI)
browser on windows 10.
that displays the name or the URL (Uniform resource
(5) Firefox: It was introduced in 2002 and was locator) of the current web page, users request websites
developed by Mozilla Foundation. Firefox overlook the and pages by typing either the name or the URL into the
usage share from Internet Explorer and became the
address bar.
dominant browser during 2003-04. This browser was
Command bar: The command bar provides access to
also made available for mobile phones, tablets etc.
change setting for the internet pages you, view, including
(6) Google Chrome: It was launched in 2008 by Google.
text size, text style and e-mail capabilities. The bar
It is a cross-platform web browser and multiple features
provides access to safety setting, features and tools such
from old browsers were amalgamated to form better and
as the pop-up blocker and any-ones that are installed.
newer features. In cognitive mode is provided where
Status bar: A status bar is a horizontal window at the
private searching is available where no cookies or history
is saved. bottom of a parent window in which an application can
display various kinds of status information. The status
Apart from theses, opera mini web browser was
bar can be divided into parts to display more than one
introduced in 2005 which was specially designed for
type of information.
mobile users. Before the mobile version, the computer
version "opera" was also released in 1995. It supported a Scroll bar: A vertical or horizontal bar commonly on the
decent user interface and was developed by opera for right or bottom of a window that lets you move the
software. window viewing area up, down, left or right. Most
Components of web browser people today are familiar with scroll bars because of the
need to scroll up and down on almost every internet web
(1) User Interface: It is an environment allowing users
page.
to use certain features like search bar, refresh button,
menu book marks etc. Configuring Web Browser
(2) Browser Engine: The bridge connects the interface Configuring a web browser is organising or changing the
and the engine. It monitors the rendition engine while settings of the browser in a format presentable to the
manipulating the inputs coming from multiple user user.
interfaces. (i) Configuring Google Chrome.
(3) Networking: The protocol provides on URL and Step-1 Open Google Chrome via icon in the taskbar or
manages all sorts of safety, privacy and communication. "start menu".
In addition, the store network traffic get saved in Step-2 Click three vertical dots icon ( ) present at upper
retrieved documents. right corner of the window and go to "Setting" option
(4) Data Storage: The cookies store information as the from the menu displayed
data store is an uniform layer that the browsers use. Step-3 From the window opened change setting of
Storage processes like indexed DB, web SQL, local people, appearance, search engine default browser,
storage etc. works well on browsers. startup and advanced tabs.
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 Adjust the temporary Internet files and history (3) Baidu- Baidu is the most used search engine in china
To adjust the maximum size of temporary files storage was founded in January, 2000 by Chinese Entrepreneur,
by internet explorer when the folder size exceeds the Eric Xu. This web search is made to deliver results for
maximum General tab setting buttons. websites some other services including maps, news,
Click on the key button in the setting box opened by this, cloud, storage and much more.
you can set the maximum value with the help of such (4) Duck Duck Go- Duck Duck Go is a popular search
keysas up and down. The link history folder stores all the engine known for protecting the privacy of the users.
recently visited web pages. You can also store and delete Unlike Ask.com they are quite open about who they use
browsing history as per your requirement. to generate search results: They have partnered with
Change the Default Font- The readable content yahoo. bing and yummly. It was founded back in 2008
available on web pages can be changed to a different font by Gabriel weinberg in California and its revenue come
to improve its display. To open the font dialog box from yahoo-bing search alliance network and affiliates.
General tab- Font button. In this font box, select a font
Web Crawler- Web spider/An Ant//Automatic
for web pages. Select and click on the 'ok' button. Save
Indexes- A web crawler or spider is a type of bot that is
all setting. To do this, click on 'OK' in the internet
typically operated by search engines like Google and
options dialog box. The next time you open the web
browser, it will open with the new setting. Through the Bing. Their purpose is to index the content of websites
history. all across the Internet so that those websites can appear
Deleting Browsing History: On opening a website, in search engine results. The goal of such a bot is to learn
internet explorer is used by the user and it stores what every webpage on the web is about, so that the
information about temporary internet files, cookies, information can be retrieved when it is needed. They are
opened websites, history and address of websites. Stores called "web crawlers" because crawling is the technical
information typed in the bar and web passwords etc. To term for automatically accessing a websites and
delete browsing history, command bar→safety button→ obtaining data via a software program. These bots are
delete browsing history. almost always operated by search engines. By applying a
Click on the check box next on the check box next to the search algorithm to the data collected by web crawlers,
information to be deleted and 'Preserve' Favorites' for the search engines can provider relevant links in response to
websites you do not want to delete website select the user search queries, generating the list of web pages that
'data' check box. And now click on the delete button. show up after a user types a search into Google or Bing
Search Engine (or another search engine)
A search engine is a coordinated set of programs that Accessing Web Browser- There are several ways to
searches for and identifies items in a database that match access a web page like using URLs, hyperlinks, using
specified criteria. Search engines are used to access navigating tools, search engine etc.
information on the world wide web. Using URLs- URL refers to "Uniform Resource
Popular Search Engine Locater". Each and every website can be recognized
(1) Yahoo- Yahoo or yahoo.com, is a web services using a unique address called "Uniform Resource
provider that offers both a search engine and a directory Locator" or simply a URL. Once you provide URL of a
of world wide web pages organized in a hierarchy of specific page in address bar, web browser will find the
topic categories. While the yahoo web portal started off corresponding page and displays result to the user.
as a web directory. It soon added other services such as Using Hyperlinks- "Hyperlink" is a part of web page
email, news and finance. that is linked to URL. Hyperlink can be text, image,
(2) Google- Google search is a fully automated search button, arrow, etc. By clicking on a hyperlink you can
engine that uses software known as web crawlers that move to different URL specified in the from the current
explore the web regularly to find pages to add to our URL. Hyperlinked text is an underlined blue color text
index. Infact, the vast majority of pages listed in our
which is represented using hand symbol.
results are not manually submitted for inclusion but are
Back Button- Helps to move back to the previous page
found and added automatically when our web crawlers
from current page.
explore the web. This document explains the stages of
how search works in the context of your website. Having Forward Button- Helps to move to the next page from
this base knowledge can help you fix crawling issues, get current page.
your pages indexed and learn how to optimize how your Refresh Button- Helps to refresh current page.
site appears in Google Search. Close Button- Helps to close a web page.
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Using Bookmark- Web browsers allows you to by these shortcut files are made readily accessible by
bookmark pages that you visit most frequently. This mapping the folder to the browser's main menu, under
helps you to go to web page directly by selecting from a favorites. If the shortcuts are organised in subfolders,
list of bookmarks instead of typing the URL multiple then they show in cascading submenus of the favorites
times. This is displayed as an icon with star symbol in menu. The favorites menu also can call up dialog boxes
the top right corner of the page. for adding a link to the favorites and for organising
Using Favorites Folders whatever links are already there. Again the emphasis is
The favorites section of outlook, located at the top of the on easy access to the user's favourite links. Indeed, there
navigation panel, contains shortcuts to folders such as is too much accessibility for some tastes: both these
your inbox, sent items and search folders you can add, dialog boxes can be opened for you by script on a web
remove, and arrange folders in this section in order to page.
access your mail folders more easily • Internet Explorer → Favorites Button
Adding items to favorites: Instead of memorizing • After clicked on organize favorite open a dialog box
favorite items, use test architect favorites to easily save • Select New Folder → Type Folder Name
items you had like to revisit. The simplest way to add • Close
items to favorites is to click the icon in the toolbar. Some Downloading Web Pages: Web Page is used on the
alternative ways to add items to favorites are: world wide web which is a source of information and is
Option # 2: Add a favorite item from the toolbar. accessed through a web browser. Downloading a web
1: Click the down arrow next to the icon in the toolbar to page means saving that page in your computer so follow
see your options. these steps-
(2) Click Add active tab to favorites- • Open Internet Explorer
Tip: To bookmark all open items at once click add all
• File menu → Select web page
open tabs to favorites.
• After selecting the web page, the save page dialog box
option # 3: Add all open all tabs at once from the
is displayed-
favorite list view.
Save web page dialog box
(1) Open the favorite list view.
(2) Click the add all open tabs to favorites button. • Delete the default name in the file name text box and
type a new name.
Organize Favorites- Internet bookmarks and favorites
are a great way to quickly navigate back to the websites • Select the location in which you want to save your file
you like the most. However, sometimes bookmarks need from the save in list box.
to be arranged renamed, to deleted. The following • Click save button.
sections contain information on managing your By default web pages are save in documents folder to
bookmarks and favorites in all the major internet save them.
browsers. To proceed, select your browser from the list • Select a single file for web archive information.
below and follow the instructions. • If only HTML code of the page is to be saved, them
1. Open the Microsoft Edge browser. select web page, HTML only option.
2. In the upper-right corner of the screen, click the icon.
• Select the text only option to save web page
3. In the favorites window that appears, click the kebab
information as feet.
menu icon.
• Click on the save button.
4. Select open favorites page from the drop down menu.
Printing Web Pages: When we browse through web
5. On the next screen, the menu on the lefts you see
pages related to our requested information and displayed.
items in your favorites bar and other various folders.
If you want to have a hard copy of those was pages then
6. Once you select a folder, its contents are displayed in
print them.
the middle of the screen, similar to the image below.
There are many print option in Internet explorer 8.0
To delete favorites- To delete favorites, check the boxes
which are as follows-
next to them and click the "Delete" button you can
remove favorites individually by clicking the "x" icon on (i) Printing all the documents related to the current
the right side of each entry. pages.
To open organize favourites dialog box- (ii) Printing the list of links present in the current pages.
Internet Explorer has long arranged that each user has a (iii) Printing the selected portion of the current pages
special folder, named favorites, in which to keep To print a web page using the print dialog box, follow
shortcuts to favourite web pages. The links represented these steps-
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1. File menu → print or, Right click on web page → research on open source software, as well as on software
print or systems they own or have been authorized to
2. A print dialog box will be displayed. investigate. Including produced & services that operate
Print dialog box bug bounty programs. These types of programs reward
3. Select printer, pages & number of copies. individuals with money for disclosing security flaws.
4. Click on print button. e-waste: e-waste is short for electronic waste and the
Computer Hacking: Hacking refers to activities that term is used to describe old, end-of-life or discarded
seek to compromise digital devices, such as computer, electronic appliances. It includes their components,
smartphones, tablets and even entire network. And while consumables, parts and spares.
hacking might not always before malicious purposes, Laws to manage e-waste have been in place in INdia
nowadays most references to hacking, and hackers, since 2011, mandating that only authorised dismantlers
characterize it/them as unlawful activity by cyber and recyclers collect e-waste. E-waste (Management)
criminals- motivated by financial gain, protest, Rules, 2016 was enacted in 2017.
information gathering (spying), and even just for the India's first e-waste clinic for segregating, processing and
'Fun' of the challenge. disposal of waste from household and commercial units
Black Hat Hacker: Black hat hackers are criminals who has been set-up in Bhopal, Madhya Pradesh.
break into computer network with malicious intent. They Artificial Intelligence: At its simplest form, artificial
may also release malware that destroys files, holds intelligence is a field, which combines computer science
computers hostage, or steals passwords, credit card and robust datasets, to enable problem-solving. It also
numbers and other personal information. encompasses sub-fields of machine learning and deep
White Hat Hacker: White hat hackers only seek learning, which are frequently mentioned in conjunction
vulnerabilities or exploits when they are legally with artificial intelligence.
permitted to do so, white hat hackers may do their

Previous Year MCQ

1. Which one of the following is not a language Ans. (b) : A device driver of output devices interprets
translator? computer output into user understandable form. The
(a) Assembler (b) Linker main purpose of device drivers is to provide abstraction
(c) Interpreter (d) Compiler
by acting as an interpreter between a hardware device
EPFO-2020
and the applications or operating systems that uses it.
Ans. (b) : Generally there are three types of language
translators namely - Compiler, Assembler and 3. Which one of the following registers is used to
Interpreter. Linker is not a language translators. keep track of the next instruction to be
Compiler translates a programming languages' source executed?
code into machine code, bytecode or another (a) Memory address register
programming language Assembler translates the (b) Memory buffer register
program written in Assembly language into machine
(c) Program counter
code. An interpreter translates the entire source code
line by line. (d) Memory data register
Note :- A linker is a utility program that takes the object EPFO-2020
files, produced by the assembler and compiler and other
Ans. (c) : The register which is used to keep track of the
code to join them into a single executable file.
next instruction to be executed is called the program
2. Which one of the following statements is counter. It contains the address (location) of the
correct?
instruction being executed at the current time. As each
A device driver of output devices
instruction gets fetched, the program counter increases
(a) interprets input provided by users into
computer usable form. its stored value by 1.
(b) interprets computer outputs into user 4. Which one of the following is not an audio file
understandable form. format?
(c) translates user inputs into output device (a) MIDI (b) WAV
(d) facilitates user to communicate with output
device. (c) SWF (d) MPEG
EPFO-2020 EPFO-2020
116
Ans. (c) : SWF (Small Web Format) is an Adobe flash 9. Which one of the following represents 1 GB of
file format which contains videos and vector based information?
animations. Whereas rests of the given options are (a) 1024 KB (b) 1024 MB
audio file format. (c) 1024 TB (d) 1024 PB
5. Which one of the following denotes sequential EPFO-2020
electronic circuit that is used to store 1- bit of Ans. (b) : 1 GB or 1 Gigabyte is a specific unit of data
information? that is equal to 1024 MB or Megabytes of data. The
(a) Register (b) Transistor term GB or MB is typically used to describe the amount
(c) Flip - flop (d) Capacitor of stored data or the capacity of a storage device.
EPFO-2020 10. CD-ROM is a
Ans. (c) : The Flip-flop denotes a sequential electronic (a) secondary memory
circuit that is used to store a single bit (1- bit) of data. A (b) magnetic memory
flip - flop has two stable states and can be used to store (c) memory register
state information. (d) semiconductor memory
6. Which one of the following basic operations for EPFO-2017
converting raw input data into useful Ans. (a) : CD-ROM (Compact disc read only memory)
information is not performed by all computers? It is digital storage medium that can hold large amounts
(a) Inputting (b) Storing of data, including text, image and audio, It is an
(c) Switching (d) Outputting example of secondary memory.
EPFO-2020 11. WAP stands for
Ans. (c) : For converting raw input data into useful (a) Wireless Addition Protocol
information, all computer system perform the following (b) Wireless Automation protocol
five basic operations - (c) Wireless Adaption protocol
Inputting → storing → Processing → Outputting (d) Wireless Application Protocol
→ Controlling EPFO-2017
Switching is not a such operation. Ans. (d) : WAP stands for wireless application
7. Which one of the following memories is protocol, it is technical standard for accessing
extremely fast and acts as a high - speed buffer information over a mobile wireless network.
between the CPU and the main memory? 12. Bluetooth technology allows
(a) RAM (b) ROM (a) sending of files within the range of 10 km
(c) Flash Memory (d) Cache Memory (b) sending an e-mail
EPFO-2020 (c) wireless connection between various
devices/equipments over short distances
Ans. (d) : The cache memory is extremely fast and acts
as a high - speed buffer between the CPU and the main (d) downloading of movies from Internet
memory. It is noteworthy that cache memory is EPFO-2017
supplementary memory system that temporarily stores Ans. (c) : Bluetooth is a short range wireless technology
frequently used instructions and data for quicker standard that are used for exchanging data between
processing by the CPU of a computer. various devices and equipments over short distances.
8. Which one of the following is not a web 13. Which one among the following is not a basic
browser? function of a computer?
(a) Internet Explorer (b) Firefox (a) Accept and Process data
(c) Fedora (d) Google Chrome (b) Store data
EPFO-2020 (c) Scan text
Ans. (c) : Fedora is a free and open source OS (d) Accept input
plateform for hardware, clouds and containers. It is EPFO-2017
based on the Linux OS kernel architecture. It is not a Ans. (c) : In the given options, scan text is not the basic
web browser, whereas Internet explorer, Mozilla function of a computer. The basis function of computer
Firefox and Google chrome are famous web browser. usually includes input, processing, output and storage.

117
14. Which one of the following is hardware? 19. The 'Cloud Computing' technology refers to
(a) power point (b) Control unit (a) A set of algorithms that solves problems
(c) Printer driver (d) Operating system using fuzzy logic
EPFO-2017 (b) Many computers that are interconnected
through wireless networks and satellites
Ans. (b) : Hardware refers to the physical part of a
(c) A distributed computer architecture that
computer, example- of hardware devices are - Control
provides software, infrastructure and
unit, Monitor, Keyboard, Printer, Mouse, etc.
platforms just as required by
15. The method of communication in which applications/users
transmission can take place in both directions, (d) A futuristic technology that will use clouds to
but happens only in one direction at a time, is perform computing
called EPFO-2015
(a) Duplex (b) Half Duplex Ans. (c) : The 'cloud computing' technology refers to a
(c) Full Duplex (d) Simplex distributed computer architecture that provides
EPFO-2015 software, infrastructures and platforms just as required
Ans. (b) : The method of communication is which by applications/users.
transmission can take place in both directions, but 20. Consider the following statements for Nano-
happens only in one direction at a time, is called Half technology:
Duplex. 1. It is the technology of creating materials
16. A collection of programs that controls how the and devices atom-by-atom.
computer system runs and processes 2. Physical properties change at the
nanometer scale.
information is called
3. Chemical properties change at the
(a) Compiler (b) Operating System
nanometer scale.
(c) Linker (d) Assembler
Which of the above statements are correct?
EPFO-2015 (a) 1 and 2 only (b) 1 and 3 only
Ans. (b) : A collection of programs that controls how (c) 2 and 3 only (d) 1, 2 and 3
the computer system runs and processes information is EPFO-2015
called operating system.
Ans. (d) : Nano technology is the technology of
17. SMPS is the acronym for creating materials and devices atom by atom and the
(a) Store Mode Power Supply physical and chemical properties change at the
(b) Single Mode Power Supply nanometer scale.
(c) Switch Mode Power Supply 21. Which one of the following software
(d) Start Mode Power Supply applications would be the most appropriate for
EPFO-2015 performing numerical and statistical
calculations?
Ans. (c) : SMPS - Switch Mode Power Supply. Like
(a) Database
other types of power supply, a SMPS power supply
(b) Spreadsheet
transfers power from a source-usually an AC outlet-to a
(c) Graphics package
DC device.
(d) Document processor
18. USB is the acronym for EPFO-2015
(a) Uniform Service Broadcasting Ans. (b) : Spreadsheet software application will be
(b) Unique Solution Bus most appropriate for performing numerical and
(c) Universal Serial Bus statistical calculations. It is a platform designed to
(d) Universal Service Broadcasting analyze, organize and stare information in a table with
rows and columns.
EPFO-2015
22. Consider the following statements on Global
Ans. (b) : USB- Universal Serial Bus.
Positioning System (GPS):
USB drives are commonly used for storage, data 1. GPS allows accurate time-stamping on
backup, and transferring files between device. USB ATM transactions.
drives. USB drives come in multiple storage capacities 2. GPS relies on a set of satellites for
and different parts, each having a unique shape. transferring signals worldwide.
118
 Which of the above statements is/are correct? 26. SPAM in a system (e-mail) is
(a) 1 only (b) 2 only (a) A message distributed indiscriminately
(c) Both 1 and 2 (d) Neither 1 nor 2 (b) A search engine
EPFO-2015 (c) An activity of the user
Ans. (c) : Major financial institutions use GPS to obtain (d) A command initiated by the sender
precise tine for setting internal clocks used to create EPFO-2015
financial transaction timestamps. Hence, statement (1)
is correct. In the United States Navistar GPS, 24 main Ans. (a) : Spam is any form of unrequested
satellites in 6 orbits circle Earth every 12 hours. Hence, communication sent in bulk (Unsolicited Bulk Email a
statement (2) is corkiest. UBE). Its most frequent form is a commercial email
23. Consider the following statements: sent to many addresses. It can be used to spread
Cellular technology evolves in stages called computer viruses Trojan horses or other malicious
Generation (G), where software.
1. A Generation represents the number of 27. The Word FTP stand for:
subscribers; higher Generation has more (a) File Transit Provision
subscribers. (b) File Translate Protocol
2. 2G technology has two standards CDMA (c) File Transfer Provision
and GSM.
(d) File Transfer Protocol
3. 2G technology has CDMA standard and
3G has GSM standard. EPFO-2012
Which of the above statements is/are correct? Ans. (d) : FTP stand for File Transfer Protocol.
(a) 1 and 3 only (b) 1 only 28. RAM stands for :
(c) 3 only (d) 2 only (a) Random Access Memory
EPFO-2015 (b) Read Access Memory
Ans. (d) : There are two standards in 2 G - technology, (c) Random Attribute Memory
CDMA (Division Multiple Accem) and GSM (Global (d) Random Applicable Memory
System for Mobile Communication). 2 G is the second EPFO-2012
generation wireless telephone technology. The Ans. (a) : RAM stands for Random Access Memory.
following are the generation of mobile technology - 1G, Sometimes it's called PC memory or just memory. In
2G, 2.5G, 3G, 4G and 5G. essence, RAM is your computer or laptop's short term
24. LAN, WAN and MAN are computer networks memory. Its where the data is shorted that your
covering different areas. Their first alphabets computer processor need to run your applications and
L, W and M respectively stand for open your files.
(a) Local, World and Middle 29. Which of the following also known as brain of
(b) Long, Wireless and Metropolitan computer?
(c) Local, Wide and Metropolitan (a) Monitor
(d) Least, Wireless and Maximum (b) Arithmetic Logic Unit (ALU)
EPFO-2015 (c) Control Unit
Ans. (c) : (d) Central Processing Unit (CPU)
LAN – Local Area Network EPFO-2012
WAN – Wide Area Network Ans. (d) : The Central Processing Unit (CPU) is the
MAN – Metropolitan Area Network brain of a computer, containing all the circuitry needed
25. The devices that work with computer systems to process input store data and output results.
as soon as they are connected are described as 30. A technique in which data is written to two
(a) Hot Swapping (b) Bay Swap duplicate disks simultaneously, is called:
(c) Plug-N-Play (d) USB Swapping (a) Mirroring (b) Multiplexing
EPFO-2015 (c) Duplicating (d) Copying
Ans. (c) : The devices that work with computer systems EPFO-2012
as soon as they are connected are described as Plug-N- Ans. (a) : Data mirroring refers to the real time
play. It in a technology that allows the operating system operation of copying data, as an exact copy form one
to detect and configure internal and external peripherals location to a local or remote storage medium. in
as well as most adapters. computing mirror is an exact copy of a dataset. Most
119
commonly, data mirroring is used when multiple exact simulate and modify designs easily, opening doors to
copies of data are required in multiple locations innovative and differentiated products that get to market
similarly, a live mirror is an exact copy of a dataset fast.
when it is immediately changed as the original is 33. Consider the following statements :
changed. This term is also sometime known as disk 1. Intel's Pentium IV is an operating system
duplexing. used in PCs
31. The term 'e-Waste' refers to : 2. During booting period of a PC, the
(a) The files that are deleted and enter the operating system is first loaded
'Waste-bin' folder in a computer. 3. Analogue computers are useful only in
(b) The temporary files, folders, links etc that are scientific field while digital computers have
rarely used in a computer. application in scientific as well as in
(c) The electronic products such as mobiles, PCs business, administrative functions
etc, that are disposed off after their useful life 4. Micro-computer is another name for
(d) A portal that offers services for collecting micro-processor
household waste Which of these statements are correct?
EPFO-2012 (a) 1, 2, 3 and 4 (b) 2 and 3
(c) 1 and 4 (d) 1, 2 and 4
Ans. (c) : The term 'e-Waste' refers to the electronic
products such as mobiles, PCs etc, that are disposed off EPFO-2002
after their useful life. Ans. (b) : • Intel's Pentium IV is a single core CPUs for
32. CAD stands for : desktop & laptops. It is not the operating system.
(a) Computer Aided Design • During booting period of a PC, the operating system is
(b) Computer Application in Design first loaded.
(c) Coded Algorithm is Design • Analogue computers are useful only in scientific field
(d) Coded Addressable Design while digital computers have application in scientific as
well as business and administrative function.
EPFO-2012
• Microprocessor is Central Processing Unit of
Ans. (a) : CAD- Computer Aided Design
Microcomputer not a microcomputer in itself.
Design is a way to digitally created 2D drawings and
3D models of real world products before they're ever
manufactured. With 3D, CAD one can share review

Practice MCQ
1. Which website would you use to do a Job 5. IDS is stand of
search? (a) Intrusion detection Service
(a) Linkedin (b) Intrusion detection system
(b) Facebook (c) Intrusion detection software
(c) Flipkart (d) None
(d) Amazon Ans. (b) :
Ans. (a) : 6. UMANG app is stand for?
2. TB-GB-KB is? (a) United machine app government
(a) Descending order (b) Unified mobile application for new age
(b) Ascending order governance
(c) Unified Mobile application for new app
(c) Both
(d) Union mobile application for new-app
(d) None
government
Ans. (a) :
Ans. (b) :
3. What is the meaning of T in IoT?
7. In how many language is the UMANG app
(a) Thing (b) Target
available?
(c) Twice (d) Twit (a) 13 (b) 14
Ans. (a) : (c) 17 (d) 18
4. How long videos can be recorded and uploaded Ans. (b) :
on Instagram? 8. The following can be posted on the blog.
(a) 3.6 sce (b) 5 min (a) Texts (b) Photo
(c) 2 min (d) 1 min (c) Video (d) All of these
Ans. (d) : Ans. (d) :
120
9. Information retrieval is fastest from. 19. What is the meaning of "Sleep" in Windows
(a) Pen drive (b) CD 10?
(c) Hard disk (d) All of the above (a) Restart the computer in safe mode
Ans. (c) : (b) Restart the computer in sleep mode
10._______ is the screen background and main area (c) Shutdown the computer terminating all the
of window where you can open and manage running applications
programs (d) Shutdown the computer without closing the
(a) Windows settings running applications
(b) Desktop Ans. (d) :
(c) Application window
20. An electronic page in a presentation is called.
(d) All Apps
(a) Slide (b) W-slide
Ans. (b) : (c) E-page (d) Page
11. Cloud Service have a _______ relationship with
Ans. (a) :
their customers
(a) Many-to-Many (b) One-to-Many 21. Which one is not an element of IoT?
(c) One-to-One (d) None of these (a) Security (b) Process
Ans. (b) : (c) People (d) Things
12. Mail-merge is a component of– Ans. (a) :
(a) MS-Word (b) Word Press 22. The characteristics of the computer system
(c) MS-Excel (d) MS-Access capable of thinking, reasoning and learning is
Ans : (a) known as.
13. Where is facebook headquarters located? (a) Machine intelligence
(a) New York (b) Zineva (b) Human intelligence
(c) California (d) New Delhi (c) Artificial intelligence
Ans. (c) : (d) Virtual intelligence
14. UPI stands for? Ans. (c) :
(a) Unique Payment Interface 23. An error in a computer is also known as–
(b) Union Profile Interchange (a) debug (b) bug
(c) Unified Payments Interface (c) cursor (d) none of these
(d) Unicode Part International Ans : (b)
Ans. (c) : 24. Windows ______ is the newest version of the
15. When was the Swachh Bharat Mobile app Windows operating system.
launched? (a) 6 (b) 7
(a) 4 October, 2019 (b) 3 June, 2017 (c) 8.1 (d) 10
(c) 12 September, 2016 (d) 23 May, 2014
Ans. (d) :
Ans. (b) :
25. To which family of Windows does Windows 10
16. What is the use of Incredible India App?
belong?
(a) To Promote a new industry in India
(a) Windows NT
(b) Promote agriculture
(b) Windows XP
(c) To promote tourism
(c) Windows 7X
(d) None of the above
(d) Windows NET
Ans. (c) :
Ans. (a) :
17. Who among the fallowing is the founder of
26. What is the name of the first recognized IoT
twitter?
(a) Mark Zuckerberg (b) Jack Dorsey device?
(c) Bill Gates (d) Sunder Pichai (a) Smart Watch (b) ATM
(c) Radio (d) Video game
Ans. (b) :
18. What is the function of control unit in the Ans. (b) :
CPU? 27. ______ is being used by Internet of Things.
(a) To transfer data to primary storage (a) Radio identification technology
(b) To store program instructions (b) Satellite
(c) To perform logic functions (c) Cable
(d) To decode program instruction (d) Broadband
Ans. (d) : Ans. (a) :

121
28. _____ technology makes users feel as if they 37. The most common type of storage devices
truly are in a virtual environment. are.......
(a) Artificial Intelligence (a) Persistent (b) Optical
(b) Reality Augmented (c) Magnetic (d) Flash
(c) Augmented Reality Ans : (c)
(d) Virtual Reality
38. An output device that lets you see what the
Ans. (d) :
computer is doing........
29. The basic architecture of the IoT network (a) A disk drive (b) Monitor-screen
includes.
(c) Shift key (d) Printer
(a) Sensors
(b) Network connectivity Ans : (b)
(c) Data Storage applications 39. All of them are examples of real security and
(d) All of the above privacy risks EXCEPT.
Ans. (d) : (a) Hackers (b) Spam
30. IMPs is stands for______? (c) Viruses (d) Identify theft
(a) Indian Mail Password System Ans : (b
(b) International Manufactured Position System 40. A process known as ......... is used by large
(c) Immediate Payment Service retailers to study trends.
(d) Intermediate Particular Service (a) Data mining (b) Data selection
Ans. (c) : (c) POS (d) Data conversion
31. Advanced technical, such as artificial Ans : (a)
intelligence, quantum computing, etc were
41. The ability to recover and read deleted or
mainly for _____ generation computers.
damaged files from a criminal's computer is an
(a) 5th (b) 3rd
(c) 2 nd
(d) 4th example of a law enforcement speciality called.
(a) Robotics (b) Simulation
Ans :(a)
(c) Computer forensics (d) Animation
32. Mail-merge is a component of–
(a) MS-Word (b) Word Press Ans : (c)
(c) MS-Excel (d) MS-Access 42. A client program used to access the internet
Ans : (a) services and ......... resources available through
33. Why has RAM been named like this? the World Wide Web.
(a) Because it is read and write memory. (a) ISP (b) Web Browsers
(b) Because it is volatile memory. (c) Web Servers (d) None of these
(c) Because any of the locations in chip directly Ans : (b)
be selected for storing and retrieving data and 43. Fiber optics has the advantage of........
instructions. (a) Being cheaper to install
(d) Because it is non-volatile memory. (b) Being easier to install than twisted wire
Ans : (c) (c) Having no interference
34. What is the full form of URL? (d) Using direct line-of-sight
(a) Uniform Reverse Location. Ans : (d)
(b) Universal Resolution Location.
(c) Uniform Resource Locator. 44. A Client program used to access the Internet
(d) United Resource Locator. services and resources available through the
World Wide Web.
Ans : (c)
(a) IPS
35. Which is the part of the computer system that
(b) Web Browsers
one can physically touch?
(a) Data (b) Operating systems (c) Web Servers
(c) Hardware (d) Software (d) None of the above
Ans : (c) Ans. (b) :
36. Reusable optical storage will typically have the 45. "When a computer prints a report, this output
acronym....... is called _____."
(a) CD. (b) DVD. (a) Hard Copy (b) Soft Copy
(c) ROM. (d) RW. (c) COM (d) None of the above
Ans : (d) Ans. (a) :
122
46. "To change the size of the chart without 55. "In computer terminology, information
changing its proportion, then you have to press means"
______ as you drag a corner handle" (a) raw
(a) [Shift] (b) [Alt] (b) data
(c) [Ctrl] (d) [F11] (c) data in more useful or intellingible form
Ans. (c) : (d) alphanumeric data program
47. The default page orientation in Excel is Ans. (b) :
(a) Landscape (b) Horizontal 56. Which of the following is a part of the Central
(c) Portrait (d) None of the above Processing Unit?
Ans. (c) : (a) Mouse
48. In which menu change case command appears (b) Printer
(a) Insert (b) Slide show (c) Tape
(c) Format (d) Edit (d) Arithmetic Logic Unit
Ans. (c) : Ans. (d) :
49. The area on a slide that holds text that will 57. What is meant by computer literacy?
appear in the presentation outline is a _____. (a) Ability to write computer programs
(a) Text box (b) Place holder (b) Knowing what a computer can and cannot do
(c) Bullet point (d) Title box (c) Knowing computer related vocabulary
Ans. (a) : (d) Ability to assemble computers
50. The purpose of Auto Format command in Ans. (c) :
Excel is to 58. A floppy disk contains
(a) create a professional and consistent look for (a) Circular tracks only
your data (b) Sector only
(b) "choose between standard table formats that (c) Both circular tracks and sectors
include borders, shading, font colours and (d) None of the above
other formatting options" Ans. (c) :
(c) easily apply a consistent format throughout a 59. The first page that you normally view at a Web
workbook site is its:
(d) All of the above (a) Home page (b) Master page
Ans. (d) : (c) First page (d) Banner page
51. DFS Stand for Ans. (a) :
(a) Digital full Service 60. Which of the following is/are GUI based
(b) Digital File Service operating system(s)?
(c) Digital Final Service (a) MS DOS (b) MS Windows
(d) Digital Finacial Service (c) Unix (d) All of these
Ans. (d) : Ans : (b)
52. "What would you use for immediate, real-time 61. CPU reads the information from secondary
communication with a friends ?" memory-
(a) Instant Messaging (b) E-mail (a) Directly
(c) Usenet (d) Blog (b) "First, information is transferred to main
Ans. (a) : memory and from there, the CPU reads"
53. The Internet uses (c) Through registers
(a) Circuit switching (b) Packet switching (d) None of these
(c) Hybrid switching (d) None of the above Ans. (b) :
Ans. (b) : 62. A plotter is-
54. Software instruction intended to satisfy a user's (a) An input device to produce good quality
specific processing needs are called ____. graphics
(a) System software (b) An output device to produce drawings and
(b) Micro computer graphics
(c) Documentation (c) A fast output device using camera lenses
(d) Application (d) None of these
Ans. (d) : Ans. (b) :

123
63. The arithmetic logic unit performs the 71. Ctrl + Y means-
following actions: (a) Undo the last action
(a) checks data for accuracy (b) Repeat the last Action
(b) "Does calculations using addition, (c) Delete the first page
subtraction, multiplication, and division" (d) Delete the last page
(c) "Does logical comparisons, such as equal to, Ans. (b) :
greater than, less than"
72. Processed data is known as
(d) both calculations and logical comparisons
(a) Data (b) Information
Ans. (d) : (c) Knowledge (d) Analysis
64. Supercomputers are primarily useful for Ans : (b)
(a) Input-output intensive processing
73. If you want to improve the performance of
(b) Mathematical intensive scientific applications
your PC, you need to upgrade
(c) Data retrieval operations
(a) CPU (b) Monitor
(d) None of these
(c) Keyboard (d) None of these
Ans. (b) :
Ans : (a)
65. E-mail
(a) Cannot address many users 74. The main purpose of software is to convert data into
(b) Does not provide protection given to first (a) Website (b) Information
class mail (c) Program (d) Object
(c) Always uses bridge to send messages in Ans : (b)
different networks 75. Which of the following control memory input
(d) None of these and output devices?
Ans. (c) : (a) C.P.U (b) A.L.U
66. Which of the following is a graphical package? (c) C.U (d) Memory
(a) Corel Draw (b) MS Excel Ans : (a)
(c) MS Word (d) None of these 76. Program Counter (PC) register stores the :
Ans. (a) : (a) Address of the first memory block
67. The gigantic work of simulating the airflow (b) Address of the last memory block
around an entire aircraft can only be done by (c) Address of the next instruction to be executed
using fast (d) Size of the primary memory
(a) Micro computers (b) Mini computers Ans : (c)
(c) Super computers (d) None of these
77. Which of the following is not a pheripheral
Ans. (c) : device?
68. Which of the following filename extensions (a) Printer (b) Moniter
suggests that the file is a backup copy of (c) Motherboard (d) Keyboard
another file?
Ans : (c)
(a) .txt (b) .com (c) .bas (d) .bak
78. ALU is the part of–
Ans : (d)
(a) CPU (b) CU
69. "A Mouse, trackball and joystick are examples
(c) Memory (d) None of these
of _______."
(a) pointing devices Ans : (a)
(b) pen input devices 79. The word 'computer' was derived from which
(c) data collection devices of the following languages?
(d) multimedia devices (a) French (b) Latin
Ans. (a) : (c) German (d) Spanish
70. The contents of the Clipboard remain the same Ans : (b)
until 80. Who is known as father of computer?
(a) you cut other text (a) Charles Babbage
(b) you shut down your computer (b) Tim Berners Lee
(c) you copy other text (c) Douglas Carl Engelbart
(d) All of the above (d) Sabeer Bhatia
Ans. (b) : Ans : (a)

124
81. ..............gave stored program concept in which 89. Microphone is a (an)………
program and data to be processed are stored in (a) Input device
the same memory. (b) Output device
(a) John Von Neumann (b) Alan Turing (c) Storage device
(c) Charles Babbage (d) Bill Gates (d) Both input and output device
Ans : (a)
Ans : (a)
82. The complete form of 'IC' in electronics is
90. The resolution of a printer is measured in
(a) Internal circuit
(a) Megabits
(b) Independent circuit
(b) Hz
(c) Integrated circuit
(c) Dots per inch (DPI)
(d) Inbuilt circuit
(d) Inches (diagonal)
Ans : (c)
Ans : (c)
83. ........... is a series of supercomputers designed
91. Internet, initially started as–
and assembled by the Centre for Development of
Advanced Computing (C-DAC) in Pune, India. (a) TCP/IP experiment
(a) PARAM (b) TITAN (b) Network for the defence force of America
(c) SHAKTI (d) VIGYAN (c) Group of research scientists of bell Lab
Ans : (a) (d) Contribution was done by all the above
84. Example of super computer is- institutions
(a) CRAY-2 Ans : (b)
(b) CRAY XMP-24 92. The first network that planted the seeds of
(c) Tianhe-2 internet was
(d) All of above (a) ARPANET (b) NSFNET
Ans : (d) (c) VNET (d) INET
85. A keyboard is used– Ans : (a)
(a) to enter text and numbers and send 93. Which country has the largest internet users?
commands to the computer (a) USA (b) China
(b) to create new keys to use with your computer (c) India (d) Russia
(c) to open the computer Ans : (b)
(d) for all of these 94. Netscape Navigator is a–
Ans : (a) (a) Network layer protocol
86. Which of the following categories of mouse (b) Presentation layer protocol
uses a laser for detecting the movement of the (c) Web browser
mouse? (d) Web search engine
(a) Mechanical mouse Ans : (c)
(b) Optomechanical mouse
95. Who invented E-Mail?
(c) Both Mechanical and Optomechanical mouse
(a) Tim Berners-Lee
(d) Optical mouse
(b) James Gosling
Ans : (d) (c) Vinton Cerf
87. Which of the following is used by banking (d) VA Shiva Ayyadurai
industry for faster processing of large volume
Ans : (d)
of cheques?
96. Which file extension is used for binary files?
(a) Bar-Code Reader
(b) OCR (a) .BAK' (b) .BAT'
(c) MICR (c) .BKF' (d) .BIN'
(d) OMR Ans : (d)
Ans : (c) 97. What does audio file extension ".amr" stands
88. What is full form of OMR? for?
(a) Optical Mark Reader (a) Adaptive Media-Rate
(b) Optical Marked Reading (b) Audio Multi-Rate
(c) Optical Moon Right (c) Adaptive Multi-Rate
(d) Optical Me Right (d) Audio Media-Rate
Ans : (a) Ans : (c)
125
98. Redo is done by– 106. The ascending order of a data hierarchy is:
(a) Ctrl + Z (b) Ctrl + Y (a) Bit-byte-record-field-file-database
(c) Y (d) Z (b) Byte-bit-field-record-file-database
Ans : (b) (c) Bit-byte-field-record-file-database
99. Most news reader's present newsgroup articles (d) Byte-bit-record-file-field-database
Ans. (d) :
in:
(a) threads (b) mail 107 . The most common input device used today is
(c) column (d) None of the above the_____
Ans : (b) (a) Printer
(b) Central Processing unit
100. Fiber optics has the advantage of ____.
(c) Keyboard
(a) being cheaper to install (d) System unit
(b) being easier to install than twisted wire
Ans : (c)
(c) having no interference
(d) using direct line-of-sight 108 . Which kind of storage device can be carried
Ans : (d) around?
(a) Hard disk (b) System cabinet
101. Which of the following is a presentation
(c) Diskette (d) Main memory
graphics software Ans : (d)
(a) MS-Windows (b) MS-Power Point
109. IMPS stand for
(c) MS- Excel (d) MS-Word
(a) Immediate Payment Service
Ans : (b) (b) Immediate Pay Service
102. UPI Stands for (c) Immediate Payment Service
(a) Unifiede payment Interface (d) None of the above
(b) Unfined Pay Interface Ans : (a)
(c) Immediate payment Interface 110. The difference between memory and storage is
(d) None of the above
that memory is _____ and storage is _____.
Ans : (a) (a) "Temporary, permanent"
103. Internet is governed by- (b) "Permanent, temporary"
(a) W3C (World Wide Web Consortium) (c) "Slow, fast"
(b) IETF (Internet Engineering Task Force (d) None of the above
(c) Inter NIC (Internet Network Information Ans : (a)
Center) 111. The language that the computer can
(d) None of these understand and execute is called:
Ans : (a) (a) Machine language
104. The E-Mail component of Internet Explorer is (b) Application software
called (c) System program
(a) Messenger Mailbox (d) None of above
(b) Message Box Ans : (a)
(c) Outlook Express 112. ..............is a global system of interconnected
(d) None of the above governmental, academic, corporate, public, and
Ans : (c) private computer networks
105. USENET is (a) Intranet (b) Internet
(c) Extranet (d) Darknet
(a) A set of tools reserved exclusively for
Ans : (b)
Internet administrators
(b) Short for United States Electronic Network 113. Which of the following admirable capability is
(c) A bulletin board system that allows for provided in most of the workstations?
posting and responding to messages on the (a) Numeric processing
Internet (b) Graphics
(d) A precursor to the Internet that is now (c) Text manipulation
obsolete (d) None of these
Ans : (c) Ans : (a)

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114. "A device that provides emergency power to 122. Files can be safely transferred using Internet
your computer, conditions the voltage, and through:-
protects against power surges is called a (a) FTP (b) SMTP
(a) PSU = Power Supply Unit (c) TCP/IP (d) HTTP
(b) USP = Universal Surge protector Ans. (a) :
(c) UPPS = Universal Power Protection and 123. An Interpreter translates program into
Supply machine code:-
(d) UPS = Uninterruptible Power supply (a) Not responsible for translating
Ans : (d) (b) Entire program at once
115. Which among the following is the fastest? (c) One line at a time
(a) ROM (b) Flash drive (d) One module at a time
(c) Cache memory (d) RAM Ans. (c) :
Ans. (c) : 124. Example of volatile memory is:-
116. In the computer terminology MIPS stands for (a) Flash Drive (b) Magnetic Tape
Marginal Input Storage. (c) RAM (d) Hard disk
(a) Marginal Input Storage Ans. (c) :
(b) Million Instruction Per Second 125. Full form of SVG is:-
(c) Mega Instruction Per Second (a) Serial Viewable Grapics
(d) Micro Input Processor System (b) Standard Video Grapics
Ans : (b) (c) Simple Visual Grapics
117. The 1950s belonged to ________ generation of (d) Scalable Vector Grapics
computer. Ans. (d) :
(a) First (b) Second 126. A malware that secretly collects information
(c) Fourth (d) Third
about users without their consent is called:-
Ans. (a) : (a) Spyware (b) Virus
118. Which of the following is responsible for (c) Bootware (d) Adware
reassembling received packets at recipient Ans. (a) :
computer?
127. Which of these is a valid audio file format?
(a) IP
(a) .vob (b) .flv
(b) TCP
(c) .png (d) .aiff
(c) TCP and IP both
(d) Neither TCP and nor IP Ans. (d) :
Ans. (b) : 128. The process of publishing original content on
the Internet is called
119. Which of the following is NOT a characteristic
(a) Community publishing
of RAM?
(b) Digital publishing
(a) Faster
(c) Web publishing
(b) Expensive
(c) High power consumption (d) Desktop publishing
(d) Smaller Ans. (c) :
Ans. (d) : 129. Eavesdropping is an example of ________ type
120. Which of the following protocols can only be of cyber attack
used for sending emails? (a) Phishing (b) Denial of Service
(a) IMAP (b) POP3 (c) Man in the middle (d) Malware
(c) SMTP (d) HTTP Ans. (c) :
Ans. (c) : 130. A SD disk usually can hold data up to______.
121. Anti-virus softwere must be regularly updated (a) 17 GB (b) 8.2 GB
else:- (c) 4.7 GB (d) 1.7 GB
(a) New viruses wouldn’t be recognized Ans. (a) :
(b) None of these 131. The number of bits in an audio sample is called
(c) Software will become corrupt (a) Bit depth (b) Bit density
(d) Both of these (c) Audio resolution (d) Audio depth
Ans. (a) : Ans. (a) :
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132. In Infrastructure WLAN, two devices 142. For textual chatting on internet, most common
communicate:- chat protocol is ______.
(a) Directly (a) HLR (b) IRC
(b) Through wires (c) H.323 (d) SIP
(c) Through routers
Ans. (b) :
(d) Through an access point
143. Which of the given options is the minimum
Ans. (d) :
amount of memory?
133. Operating System based on Linux are:-
(a) Debian (b) Fedora (a) Gigabyte (b) Terabyte
(c) Ubuntu (d) All of these (c) Megabyte (d) Petabyte
Ans. (d) : Ans. (c) :
134. Full Form of FDDI is: 144. The full form of GPRS is ______.
(a) Fiber Distributed Data Interface (a) Global Packet Radio Service
(b) Fiber Direct Data Inspection (b) Global Protocol for Radio Service
(c) Frequency Demodulation Data Interface (c) General Packet Radio Service
(d) Foreign Development Department of India (d) General Protocols for Radio Service
Ans. (a) : Ans. (c) :
135. Internet Explorer was launched in: 145. Cache memory is used to transfer the data
(a) 1998 (b) 1997 between
(c) 1994 (d) 1995
(a) processor and input device
Ans. (d) : (b) main memory and secondary memory
136. What is the use of F11 in Internet Explorer? (c) processor and outpur device
(a) To refresh
(d) main memory and processor
(b) To take screen shot
(c) To change search engine Ans : (d)
(d) Toggle full screen 146. The function of DNS is to convert
Ans. (d) : (a) domain name into IP address
137. Which of the following technologies is the (b) IP address into domain name
oldest? (c) domain name into email adress
(a) NSFnet (b) ARPANET (d) email address into domain name
(c) Interspace (d) Internet Ans : (a)
Ans. (b) : 147. On which type of ROM, data can be written
138. IRCTC is a/an ______. only once?
(a) Plastic money (a) PROM (b) EPROM
(b) Email services provided (c) EEPROM (d) FROM
(c) Railway services provider
(d) e-wallet Ans : (a)
Ans. (c) : 148. Which of the following is used to provide remote
139. _________ converts High level language into access to servers and networking devices?
machine language and execute it in one go. (a) HTTP (b) FTP
(a) Assembler (b) Interpreter (c) SMTP (d) Telnet
(c) None of these (d) Compiler Ans : (d)
Ans. (d) : 149. Which of the following is an application-layer
140. Linux is a popular webserver set of programs- internet standard protocol used by local e-mail
LAMP where 'A' stands for _______. clients to retrieve e-mail from a remote server
(a) Apache (b) Android over a TCP/IP connection?
(c) Adobe (d) Apple (a) SMTP (b) POP
Ans. (a) : (c) HTTP (d) FTP
141. With reference to Internet protocols, SNMP Ans : (b)
refers to ________.
(a) Simple Network Management Protocol 150. The address of a resource on the net is known
(b) Simple Network Mailing Protocol as
(c) Secured Network Mailing Protocol (a) ISP (b) HTTP
(d) Secured Network Management Protocol (c) URL (d) www
Ans. (a) : Ans : (c)
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