ACCOUNTS QUESTION 3

Q. Statutory Auditors are appointed by

A. GIPSA B. IRDA C. CAG D. Companies Board

Q In case of incoming co-insurance service tax is collected and paid by

A Consumer b Insured c leader d None

Q In the context of Financial statement NET PREMIUM means

A. Direct Premium earned.

B. Direct Premium earned plus reinsurance premium received minus reinsurance
premium ceded.
C. As above “B” and adjustment towards provision for un-expired risks.
D None

Q Identify the revenue expenditure

A. Furniture and fixture purchase b. Computers purchase
C. Repairs to cabin d. Motor car purchase

Q The weightage for apportionment of management expenses for FIRE revenue account is
A 25% b 50% c 75% d 100%

Q The weightage for apportionment of management expenses for Marine revenue account is
A 25% b 50% c 75% d 100%

Q. Provision for outstanding expenses is made for

A expenses paid during the financial year
B. expenses incurred during the financial year and paid in the subsequent financial year [s]
C Expenses incurred and paid during the financial year
D none

Q BRS stands for

A Bank reconciliation statement
B Bank revenue system
C Balance revenue statement
D Balance reserve surplus

Q. The General Insurers requires to invest in govt. securities to a minimum of

A 20% b 15% c 30% d 10%
Q As per IRDA Regulation, minimum percentage of Rural and social sector premium to the
GDP should be
A 10% b 6% c . 5% d 3.5%

Q Required minimum solvency ratio for general insurer’s operating in india is

A1 B 1.5 C2 D 2.5

Q Minimum paid up capital for General Insurers operating in India should be:
A 10 cores b 200 cores c 100 cores d 250 crores

Q Solvency ratio means:

A ratio of asset and liability
B ratio of premium and claims
C Ratio of management exp. and claims
D ratio of available solvency margin to required solvency margin

Q The entire shareholding of the four PSU General Insurance companies is held by:
A. Public B. Central Government
C. 50% public and 50% Govt. D. None of the above.

Q In determining the reserves for un-expired risk, in fire business as per regulations is:
A 100% b. 40% c. 60% d 50%

Q Reserve for un-expired risks for Marine hull business is:

A 100% 40% c 60% d 50%

Q As per rule no. 58 & 59 of insurance rules 1939, which of the following statement is correct.

a. The premium can be collected in four equal quarterly installments in respect of Marine Hull
and Aviation Hull business.

B Premium cannot be collected in four equal quarterly installments in respect of Marine hull
and aviation hull business.

C Premium can be collected in four equal quarterly installments in respect of marine hull but
not for aviation hull business.

D Premium can be collected in four equal quarterly installments in respect of Aviation but not
for Marine Hull business.

Q I. 15% obligatory session in incorporated in the insurance act

 II. Un-expired risk reserve an outstanding claims reserve are the sources of the
policyholder funds.
A Both statements I & II are true
B Both statements I & II are false
C Only statement I is true
D Only statement II is true

Q Every General insurer shall invest its total assets in Central government securities upto a
minimum of
A 30% b 10% c 5% d 20%

Q No investment by the reinsurer shall be made in an asset /instrument which

A its actual value
B Market practice
C both (a) & (b)
D is capable of being rated as per market practice but not has been rated as such.

Q Every insurer is required to submit to regulatory authority the statement of mutual fund
investments:
A quarterly B Monthly C Annually D Half yearly

Q Every insurer is required to submit to Regulatory Authority a confirmation of investment

Portfolio details:
A All secured loans b All secured debentures
C All secured Bonds d All the above

Q One of the following is not an approved investment for General Insurance Business
A Treasury bills issued by RBI
B Preferential shares recognized by RBI
C Bills rediscounting
D Long Term loans with private Ltd. Companies

Q Every General Insurer shall prepare a statement of the value of assets in form
a. BB b. HG c. KG d. AA

Q Short terms Investment is an investment which is

A held for less than 12 months
B Held for a period equal 12 months
C Held for more than 12 months
D Non of the above

Q Debit securities are valued at

 A Market value b Historical cost
c Historical cost less amortization D None

Q Audit faced by an insurance company is

A. CAG B. Statutory audit
C Internal Audit D. All of the above.

Q Without prejudice to sec27 or sec 27B of the insurance Act every insurer carrying on general
Insurance business shall invest in infrastructure and social sector
A 2% of total investible funds
B 5% of total investible funds
C Not less than 10% of total investible funds
D 7.5% of total investible funds

Q The assets / instruments under consideration for investment without referring to investment
committee should be of a grade
A Not less than B+ b Not less than BBB-
C Not less than AA d Not less than A

Q Investment in other than approved category shall at no time exceed

A 25% of total investible funds
B 50% of total investible funds
C 15% of total investible funds
D 10% of total investible funds

Q Investment committee shall constitute

A Minimum of 2 non executive directors and the principal officer
B Chief of Finance and investment divisions
C The Appointed actuary
D all the above

Q Which of the following is not an approved investment

A investment in secured bonds
B investment in central government security
C collateralized borrowing and lending obligations [CBLO]
D investment in Mutual funds.

Q Unrealized gains a losses arising out of changes in values of listed equity shares and
derivatives instruments shall be taken to

A Profit on sale of investments

B Fair value change account
 C General reserve
D All of the above

D Exposure’s / prudential norms limits the investment made by the insurance company on the
following exposure norms.
A Limit for investee company
B Limit for the industry sector to which investor company belongs
C Limit for the entire group to which investor company belongs
D None of the above.

Q An insurer shall prepare the following financial statements at the end of the financial year

a. Revenue account b. Profit & Loss account

c. Balance sheet d. All of the above.

Q Which of the following is a contingent liability

A Partly paid up investments
B Guarantees given by or on behalf of the company
C statutory demands / liability in dispute not provided for
D All the above

Q For the insurance Revenue account gross direct premium is Rs.500 cr premium on RI
accepted is Rs. 200 cr premium on RI ceded Rs. 100 cr. Adjustment for change in RUR is Rs.100
cr. The Net premium works out to
A Rs. 400 b Rs.600 c Rs. 500 D Rs. 700 cr.

Q investment is insurance sector is guided by

A Insurance act b IRDA regulations
C Board lid down norms D All the above.

Q Every General Insurer owes the duty to report extraordinary events affecting the investment
portfolio which has material adverse impact to:
A Controller of Insurance
B Ministry of Finance
C Insurance Regulatory & Development Authority
D Board of Directors of the Company

Q To protect the policy holders interest and review the pattern of investment the authority is
A Chairman cum Managing Director
B Ministry of Finance
C Policyholders
D Company Board
Q Accretion of funds means:
A Investment income
B Gains on sale of the existing investments
C Operating surplus
D All the above.

Q The insurance regulatory and development authority [investment regulations was brought in
the year]
A 1999 b 2000 c 2001 d 2002
‘
Q every General insurer shall prepare a statement of the value of assets in form:
A First Mortgages on immovable property situated in other countries.
B Immovable property situated in other countries
C In (a) and (b) above d None of the above.

Q Management expenses as per insurance Act should be around the following percentage of
premium
A 15 b 20 c 22 d 25

Q as per insurance act separate revenue account is not required for the following:
A Fire B Marine C Miscellaneous D Motor.

Q As per insurance act, minimum percentage of investible funds to be invested government

securities or other approved securities or other approved securities by a general insurance
company is
A 30 b 35 c 45 d 55

Q Reserve for un-expired Risk at 100% is provided for the following

A Fire B Engineering c Marine Hull d Motor

Q Which of the following items does not appear on the asset side of the balance sheet
A Cash at bank and in hand b Sunday debtors
C General Reserves D Plant and Machinery

Q As per insurance Act, minimum amount to be invested in social and infrastructure sector by a
general insurance company is
A 5% b 10% c 15% d 20%

Q Which of the following items does not appear on the liabilities side of the balance sheet
A Reserve for un-expired risk b Sunday Debtors
C Sundry creditors d Provision for outstanding claims
Q Claims does not include
A Only claims specific statement cost b Expenses of management
c Adjustment for estimated salvage value d surveyors fee, legal and other expense relating to
claims

Q Formula for calculating solvency ratio is

A Total R S M / Total a s m
B Total A S M / Total R S M
C Total A S M Total R S M – Not incurred claims
D Total R S M / Total A S M – Not Incurred claims

Q Un-expired risk reserve provided under Misc. revenue account is

A 50% of gross premium
B 50% of net premium
C 50% of gross premium + R I accepted
D 50% of R I accepted – RI ceded

Q share holders funds consists of

A share capital b General reserve
c Balance of profit in profit and loss account D All

Q Set off clause in re-insurance agreement allows you to set off balances
A Under any treaty or treaties between re insured and re insurer
B Between two brokers
C Between the RE insure and the broker
D Between two direct insurers.

Q Proportional treaties are generally written on

A Clean cut method b Underwriting year wise method
C Both of the above. D None of the above

Q Service tax has been introduced in reinsurance business from

a. 1st May 2006 b 1st April 2006 c 1st May 2007 d 1st June 2008

Q The loss ratio for the purpose of calculating sliding scale commission under re insurance is
A gross premium / incurred claims
B Net premium / incurred claims
C incurred claims / earned premium
D Incurred claims / net premium

Q Investment in government securities are considered to be

 A Available to sale and hence valued at market price
B Held to maturity and valued at cost
C Hold for trading and valued at market price or cost whichever is lower
D None of the above.

Q Depreciation in respect of fixed assets which has been held for less than 6 months are
provided at
A 100% of the applicable rates
B 50% of the applicable rates
C Pro rata
D Nil

Q IBNR is a part of outstanding loss provisioning. This figures is a

A worked out as a % of gross incurred claims
B worked out as a % of net incurred claims
C Estimated by actuary based on loss information and past trend available
D None of the above.

Q Investment policy is drawn up annually and placed by the company for approval before.

A Ministry of finance b IRDA C Its board of Directors D SEBI

Q The final accounts of the Public sector insurance company is adopted by the board of the
company after it is

A Approved by the CAG auditors

B Approved by the Audit committee
C Approved by the internal Auditors
D All of the above

Q. Premium deficiency is provided for on the basis of

A Unnamed premium and claims outstanding
B Premium on un expired risk and outstanding claims
C as percentage of outstanding claims
D None of the above

Q as directed by the IRDA, the cash flow statement of the insurance companies are to be
prepared by
A Indirect method b Direct method
c. As a combination of both D None of the above

Q Which of the following statement is True

 A shareholders fund represent the share capital only
B share holders fund comprised of share capital and general reserves0
C share holders fund comprises of provision for outstanding claims
D None of the above.

Q Policy holders fund mainly constitute

A Provision for outstanding claims and reserve for un-expired risk
B Provision for outstanding claims and share capital
C Provision for outstanding claims and investment income
D None of the above.

Q Solvency Margin is calculated on the basis of

A Available solvency margin and required solvency margin
B As a percentage of net worth
C as a percentage of investments
D none of the above.

Q Availability solvency margin is calculated after

A Reworking of the assets and liabilities
B as a percentage of assets
C as a percentage of share capital
D None of the above.

Q Which of the following statements is TRUE

A The General insurance co. shall show their investments within India and abroad separately
B The General Insurance co. need not show their investments within India and abroad
separately.
C The General Insurance Cos. Shall show their investments within India and abroad combined.
D None of the above.

Q which of the following statement is true.

A Segmental reporting is compulsory as per IRDA regulations.

B Segmental reporting is optional as per IRDA regulations
C Gen. Insurance company follow this as a healthy practice
D None of the above.

Q. Which of the following statement is false in respect of a PSU/ Gen Insur. Co,.
1. The accounts of the company has to be placed before the CAG for their comments
2. The Accounts are not scrutinized by the Comptroller and Auditor General
3 The accounts of the company after approval by the Board and placed before the parliament for
discussion.
4 The accounts are to be approved by the statutory auditors.

Q Which of the following statement is TRUE

1. A Claim relating to Motor Third Party cannot be paid by servicing office.
2 a Claim relating to Motor Third Party can be paid by servicing office and adjusted through
inter office accounts
3 A claim relating to Marine cargo can be paid by servicing
4 None of the above.

Q Which of the following statement is false.

1 Advocate fee can be debited to the respective claim account
2 Survey fee should be treated only as professional fee and not as a claim
3 survey fee for a motor claim shall be treated as part of claim paid
4 None of the above

Q As per the existing tax provisions which of the following statement is tRUE
1. An Insurance company need not collect service tax on insurance premium
2 Service tax collected may by paid to the authorities after adjusting the service tax paid by the
co on input service availed
3 service tax need not be paid by the insurance co on the input service it utilities
4 All the statements are true

Q state which of the following statement is true.

1 General Insurance Companies are exempted from payment of fringe benefit tax
2 General insurance co. are not exempted from payment of fringe benefit tax
3 General insurance co are exempted from payment of income tax
4 None of the above.

Q General Insurance companies shall keep their investible funds in government securities,
Housing and infrastructure sectors fire fighting and social sectors at
1. 25% 2. 30% 3. 40% 4. 45%

Q Which of the following statement is TRUE and more appropriate

1 the expenses of management are distributed in the Revenue account according to the
premium.
2 The expenses of management are distributed in the revenue account in proportion of premium
with weightage of 75% for Marine
3 The expense of Management are distributed in the revenue account in proportion of premium
with weightage of 50% for Marine
4 The expenses of management are distributed in the revenue accounts in proportion of the
claims paid.
Q Spot the only TRUE statement from the following
1 Investment income is divided between that earned from policy holder fund and that from
share holder fund
2 Investment income is shown as a total in profit and loss account
3 Investment income is shown as a total in profit and less appropriation account
4 None of the above

Q Investments in equity shares as value at

1 Market price on the last working day of the financial year
2 cost of purchase
3 Lower of the above two
4 Higher of 1 and 2

Q What does not appear in the bank reconciliation statement ?

A Balance as per passbook b Cheques dishonoured
C Bank charges d cash in hand

Q. Which one of following forms part of policy holders fund:

A. share capital B. Reserve and surplus

C. Provision for outstanding claims D. investment reserve

Q. Stale cheque means:

A. Cheque issued but not presented for payment more than months.
B. Cheque issued but not presented for payment more than 6 months.
C. Cheque issued but not presented for payment more than 9 months.
D. Cheque issued but not presented for payment more than 12 months.