Capital Budgeting falls under which type of financial management decision? MCQ with Answer and Explanation

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Capital Budgeting falls under which type of financial management decision?

A. Long-term Investment Decision

B. Short-term Investment Decision

C. Dividend Decision

D. Financing Decision

Answer: Option A

Solution (By JKSSB Mock Tests)

Capital budgeting is the process of evaluating and selecting long-term investments that are consistent with the firm's goal of wealth maximization.

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Question #1

Which of the following is an error of principle?

A. Wages paid for installation of machinery debited to Wages Account

B. Sales of old furniture credited to Sales Account

C. Credit sale to Ram posted to Shyam's account

D. Purchase of goods recorded in purchase book but not posted to supplier's account

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Correct Answer: Option A

Explanation:
Wages for installation of machinery should be capitalised (machinery). Debiting Wages Account treats it as revenue expenditure, violating principles.

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Question #2

In the absence of a partnership deed, profits are shared:

A. In the ratio of capital

B. Based on age

C. Based on experience

D. Equally

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Correct Answer: Option D

Explanation:
As per Indian Partnership Act, 1932, in absence of a deed, profits and losses are shared equally among partners.

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Question #3

A 'Contra Entry' is recorded in:

A. Purchase book

B. Cash book (with bank and cash columns)

C. Sales book

D. Journal proper

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Correct Answer: Option B

Explanation:
Contra entries (like cash deposited into bank) involve both cash and bank, recorded in cash book.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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