The 'Dual-purpose Test' in audit is: MCQ with Answer and Explanation

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The 'Dual-purpose Test' in audit is:

A. Only compliance

B. Only substantive

C. A test that serves both as a test of control and a substantive test

D. Two separate tests

Answer: Option C

Solution (By JKSSB Mock Tests)

A single procedure can provide evidence on both controls and substantive assertions.

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

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Question #1

A trader sells goods costing ₹20,000 for ₹25,000. The gross profit margin is:

A. None

B. 25%

C. 20%

D. 20% on sales? Actually profit 5,000 on sales 25,000 = 20%.

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Correct Answer: Option C

Explanation:
Gross profit = 5,000. Gross profit ratio on sales = (5,000/25,000)*100 = 20%.

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

Question #2

Under the 'Net Profit Method' of goodwill valuation, goodwill is:

A. Capitalised value of super profits

B. Number of years purchase of super profits

C. Capitalised value of average profits less net tangible assets

D. Number of years purchase of average profits

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Correct Answer: Option D

Explanation:
The net profit method uses a multiplier on average profits, not super profits. Capitalisation of super profits is different.

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Question #3

In financial management, the 'Degree of Operating Leverage' (DOL) at a given level of sales is calculated as:

A. EBIT / Net Profit

B. Contribution / Net Profit

C. Contribution / EBIT

D. Sales / Contribution

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Correct Answer: Option C

Explanation:
The Degree of Operating Leverage (DOL) measures the sensitivity of EBIT to changes in sales. It is calculated as Contribution divided by EBIT (Earnings Before Interest and Taxes).

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