JAIIB Examination

Accounting & Financial Management For

Bankers
Most Expected Questions
AFM – Module D– JAIIB 2025
Practice question -
Who is the regulator of Interest rate derivatives, in India?
a. RBI
b. SEBI
c. FMC
d. None of the above

a. RBI
AFM – Module D– JAIIB 2025

TAXATION AND FUNDAMENTALS OF COSTING

Unit 29 Taxation: Income Tax/TDS/Deferred Tax
Unit 30 Goods & Services Tax
Unit 31 An Overview of Cost & Management Accounting
Unit 32 Costing Methods
Unit 33 Standard Costing
Unit 34 Marginal Costing
Unit 35 Budgets and Budgetary Control
AFM – Module D– JAIIB 2025
Q. 1
Which of following statements regarding Permanent Account number (PAN) are correct?
I. PAN is a 12 digit alphanumeric number.
II. It is issued by Income Tax Department and remains unaffected by change of name,
address within or across the states.
III. It is compulsory to link PAN to Aadhar number.
[A] I and II only
[B] II and III only
[C] I and III only
[D] None of the above
[B]
II and III only
AFM – Module D– JAIIB 2025
Q. 2
Which of the following statements regarding the 'new tax regime' are correct?
I. A new section 115BAC was inserted in the IT Act via Finance Act 2020.
II. It gives an option to choose between the existing tax rates and the new concessional tax
rates by foregoing prescribed exemptions or deductions.
III. Once a company opts for the concessional rate it cannot subsequently withdraw from
it.
[A] I and II only
[B] II and III only
[C] I and III only
[D] I, II and III
[D] I, II and III
AFM – Module D– JAIIB 2025
Q. 3
Under Income Tax Act, 1961, _____________ provides for incomes exempted from being included in total
income while ___________________ provides for deductions from total income for the purpose of
taxation.
[A] Section 80 C, Section 10
[B] Section 80 U, Section 10
[C] Section 10, Section 80C to Section 80 U
[D] Section 2, Section 80C to Section 80 U
[C] Section 10, Section 80C to Section 80 U
AFM – Module D– JAIIB 2025
Q. 4
The definition of 'Person' for the purpose of income tax, is mentioned under which of the following sections
of IT Act?
[A] Section 4 (41)
[B] Section 2(31)
[C] Section 8 (21)
[D] section 10 (10)
[B] Section 2(31)
AFM – Module D– JAIIB 2025
Q. 5
Section 80 TTA provides for deduction in respect of:
[A] Interest on fixed deposits
[B] Interest on savings account
[C] Deduction in case of a person with disability
[D] Deduction in respect of royalty on patents
Answer: Option B
AFM – Module D– JAIIB 2025
Q. 6
Align the listed goods and services with their corresponding GST rates:
1. Education Services a. 0%
2. Footwear below Rs.500 b. 5%
3. Ice-cream c. 18%
[A] 1: (a), 2: (b), 3: (c)
[B] 1: (b), 2: (a), 3: (c)
[C] 1: (a), 2: (c), 3: (b)
[D] 1: (b), 2: (c), 3: (a)
1: (a), 2: (b), 3: (c)
AFM – Module D– JAIIB 2025
Q. 7
Ajay, a financial advisor, is explaining the concept of direct and indirect taxes to his client,
Ravi. Which of the following statements correctly describes direct and indirect taxes?
I. Indirect taxes discourage consumption and encourage savings.
II. Direct taxes cover all the members of the society.
III. Direct taxes have no impact on savings and investments.
[A] Only II
[B] Only I
[C] Only I & II
[D] Only II & III
[B] Only I
AFM – Module D– JAIIB 2025
Q. 8
Which initiative has been introduced by the Indian government to encourage GST billing?
[A] Invoice Incentive Scheme (Mera Bill Mera Adhikaar)
[B] Tax Rebate Program for Small Businesses
[C] GST Compliance Drive
[D] Goods and Services Tax (GST) Awareness Campaign
[A] Invoice Incentive Scheme (Mera
Bill Mera Adhikaar)
AFM – Module D– JAIIB 2025
Q. 9
Out of the total 33 members in the GST Council, how many members represent the
central government?
[A] 3
[B] 4
[C] 1
[D] 2
[D] 2
AFM – Module D– JAIIB 2025
Q. 10
What is the correct method for XYZ Clothing Store to calculate its tax liability under the GST system,
considering the GST collected from customers and the Input Tax Credit (ITC) availed on inventory
purchases?
[A] XYZ Clothing Store's tax liability is determined solely by the total sales revenue without considering ITC.
[B] XYZ Clothing Store calculates its tax liability by summing up the GST collected and the ITC availed during
the payment period.
[C] Z Clothing Store determines its tax liability by subtracting the GST collected on supplies and the ITC
during the payment period.
[D] XYZ Clothing Store calculates its tax liability by deducting the total sales revenue from the ITC availed
during the payment period.

[C] Z Clothing Store determines its tax liability by subtracting the GST collected on
supplies and the ITC during the payment period.
AFM – Module D– JAIIB 2025
Q. 11
Ramesh, a trader from Uttarakhand, sells goods to Suresh in Delhi for ₹10,000. The
invoice date is 1st January 2023, payment is made on 15th January 2023, and the goods
are delivered on 10th January 2023. At what point does Ramesh need to pay GST for this
transaction?
[A] It cannot be determined from the given information.
[B] On 15th January 2023, when the payment is received.
[C] On 10th January 2023, when the goods are delivered.
[D] On 1st January 2023, when the invoice is issued.
[D] On 1st January 2023, when the invoice is issued
AFM – Module D– JAIIB 2025
Q. 12
Consider the following statements regarding Cost Accounting Standards and identify
which ones are correct?
I. Cost Accounting standards have been issued by Institute of Chartered Accountants of
India.
II. Cost Accounting standards aim at achieving uniformity and consistency.
III. So far 24 Cost Accounting Standards have been issued.
[A] I and II only
[B] II and III only
[C] I and III only
[D] I, II and III
Answer: Option B
AFM – Module D– JAIIB 2025
Q. 13
Which of the following can be considered tools for management accounting?
I. Financial Planning
II. Financial Statement Analysis
III. Statistical Techniques
[A] I and II only
[B] II and III only
[C] I, II and III
[D] I and III only
Answer: Option B
AFM – Module D– JAIIB 2025
Q. 14
______________ involves identifying, measuring, recording, allocation, and
communicating economic information related to a product or service in terms of money.
[A] Taxation
[B] Financial Management
[C] Cost Accounting
[D] Auditing
Answer: C
AFM – Module D– JAIIB 2025
Q. 15
If the total cost of the contract is Rs. 500 lakhs and the cost already incurred is Rs. 200
lakh. Then, what is the profit to date if the total estimated profits from the contract is Rs.
100 lakh?
[A] 200 lakh loss
[B] 100 lakhs loss
[C] 40 lakhs profit
[D] 100 lakhs profit
Answer: Option C
AFM – Module D– JAIIB 2025
Q. 15
Explanation:
Here, there is a need to ascertain 'profits on incomplete contracts'.
Profit to Date (%) = (Cost Already Incurred / Total Cost of the Contract) * Total Estimated
Profits
Cost Already Incurred = Rs. 200 lakh
Total Cost of the Contract = Rs. 500 lakh
Total Estimated Profits = Rs. 100 lakh
Plug these values into the formula:
Profit to Date = (200 / 500) * 100 lakh = 40 lakh
So, the profit to date is 40 lakh rupees, which means that up to the current point in the
project, a profit of 40 lakh rupees has been earned.
AFM – Module D– JAIIB 2025
Q. 16
Consider the following statements about 'cost plus' type of contracts.
I. Under this type of contract, the contract price is based on the costs actually incurred
plus a percentage of profits or fixed profit.
II. In this, a customer may use the service of an auditor to examine the costs and may not
allow some of them.
Which of the given statements are correct?
[A] I only
[B] II only
[C] Both I and II
[D] Neither I nor II
Answer: Option C
AFM – Module D– JAIIB 2025
Q. 17

Products incidental to the production of main products are known as:

[A] By-products
[B] Sub-products
[C] Co-products
[D] Auxiliary products
Answer: Option A
AFM – Module D– JAIIB 2025
Q. 18
In accounting, there are various methods for treating variances. Among these methods,
which one is used to even out variances over time and create a reserve for future
periods?
[A] Transfer to Reserve Account
[B] Allocation of Variances to Inventory Accounts
[C] Transfer to Costing Profit and Loss Account
[D] All of the above
[A] Transfer to Reserve Account
AFM – Module D– JAIIB 2025
Q. 19
ABC Manufacturing budgeted to use 5,000 units of raw material at a standard cost of Rs.
8 per unit. The actual usage was 4,800 units at an actual cost of Rs. 8.20 per unit.
Calculate the material cost variance.
[A] 780 (Unfavourable)
[B] 780 (Favourable)
[C] 640 (Unfavourable)
[D] 640 (Favourable)
Answer: Option d
AFM – Module D– JAIIB 2025
Q. 19
Given:
Budgeted quantity: 5,000 units
Standard cost per unit: Rs. 8
Actual quantity used: 4,800 units
Actual cost per unit: Rs. 8.20
Step 1: Calculate the standard cost of materials
Standard cost of materials = Budgeted quantity × Standard cost per unit
Standard cost of materials = 5,000 units × Rs. 8 = Rs. 40,000
Step 2: Calculate the actual cost of materials
Actual cost of materials = Actual quantity used × Actual cost per unit
Actual cost of materials = 4,800 units × Rs. 8.20 = Rs. 39,360
Step 3: Calculate the material cost variance
Material cost variance = Standard cost of materials - Actual cost of materials
Material cost variance = Rs. 39,360 - Rs. 40,000 = Rs. 640
The negative variance indicates a favorable situation, as the actual cost of materials is lower than the standard cost.
AFM – Module D– JAIIB 2025
Q. 21
Identify the possible reasons for material usage variance from the following options:
a) Pilferage
b) Theft
c) Inferior quality of material purchased
[A] 2 and 3 only
[B] 1, 2 and 3
[C] 3 only
[D] 1 and 2 only
Answer: Option B
AFM – Module D– JAIIB 2025
Q. 22
Which of the following are features of marginal costing?
I. Marginal costing considers not only variable costs, but also fixed costs.
II. Marginal costing is often used for break-even analysis
III. Marginal costing involves both cost recording and cost reporting.
[A] I only
[B] I and II only
[C] II and III only
[D] I and III only
Answer: Option C
AFM – Module D– JAIIB 2025
Q. 23
Company X has fixed costs of ₹50,000 and a selling price per unit of ₹20. The variable
cost per unit is ₹10. What is the break-even point in units for Company X?
[A] 1000 units
[B] 2000 units
[C] 5000 units
[D] 2500 units
Answer: Option C
AFM – Module D– JAIIB 2025
Q. 23
Explanation:
Break-even Point (in units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)
= ₹50,000 / (₹20 - ₹10) = ₹50,000 / ₹10 = 5,000 units
So, the break-even point for Company X is 5,000 units
AFM – Module D– JAIIB 2025
Q. 24
Which of the following best defines Zero Base Budgeting (ZBB)?
[A] Budgeting by making incremental changes to last year’s budget
[B] Budgeting with no reference to previous budgets
[C] Budgeting only capital expenditures
[D] Budgeting based on inflation rates
Answer: [B] Budgeting with no reference to previous budgets
AFM – Module D– JAIIB 2025
Q. 25
Which of the following is a key component of performance budgeting?
[A] Comparison of profits only
[B] Focus only on capital investments
[C] Preparation of performance reports comparing budgeted vs actual performance
[D] Ignoring organizational objectives
Answer: [C] Preparation of performance reports comparing budgeted vs actual
performance
AFM – Module D– JAIIB 2025
Q. 26
The Production Cost Budget is typically made up of which of the following
components?
[I] Material Cost Budget
[II] Labour Cost Budget
[III] Overhead Budget
[IV] Sales Budget
Options:
[A] I, II, and III
[B] II, III, and IV
[C] I and IV only
[D] I, II, III, and IV Answer: [A] I, II, and III
AFM – Module D– JAIIB 2025
Q. 27
Which of the following is not a characteristic of a fixed budget?
[A] Designed for a specific planned output level
[B] Adjusted regularly based on actual activity
[C] Not changed with level of actual activity
[D] Generally prepared for a shorter period
Answer: [B] Adjusted regularly based on actual activity
(Explanation: Fixed budgets are not adjusted based on actual activity unless major
deviations occur.)
AFM – Module D– JAIIB 2025
Q. 28
Which of the following is not true about marginal costing?
A. It provides a strong base for pricing decisions during a recession
B. It helps identify contribution of each product or segment
C. It assumes perfect segregation of fixed and variable costs
D. It always includes fixed costs in closing stock valuation
Answer: D. It always includes fixed costs in closing stock valuation
(In marginal costing, fixed costs are not included in inventory valuation.)
AFM – Module D– JAIIB 2025
Q. 29
In which method of costing is each individual product or order treated separately for
cost calculation?
A. Process Costing
B. Operation Costing
C. Job Costing
D. Batch Costing
Answer: C. Job Costing
(Each job or order is treated as a separate cost entity, as in the case of construction or
repairs.)
AFM – Module D– JAIIB 2025
Q.30
What is the primary purpose of financial accounting?
A. To estimate production costs
B. To meet management’s internal reporting needs
C. To fulfill statutory requirements and inform external stakeholders
D. To plan product pricing strategies
Answer: C. To fulfill statutory requirements and
inform external stakeholder
AFM – Module D– JAIIB 2025
Q.31
Why are alcohol for human consumption and petroleum products excluded from GST?
A. They are non-taxable items under any law
B. Their prices are regulated internationally
C. States derive major revenue from these items
D. These items are banned in most states
Answer: C. States derive major revenue from these items
Explanation: States opposed inclusion of these items in GST due to significant
revenue dependence.
AFM – Module D– JAIIB 2025
Q.32
Which of the following correctly represent the differences between direct and indirect tax?
I. Direct tax is imposed on income and profits, indirect tax is levied on goods and services.
II. The burden of tax can be shifted in case of direct tax, while the burden cannot be shifted for
indirect tax.
III. Direct taxes are considered to be progressive while indirect taxes are considered to be
regressive.
[A] I and II only
[B] II and III only
[C] I and III only
[D] I, II and III
Answer: C
AFM – Module D– JAIIB 2025
Q.33
Which of the following are primary objectives of Cost accounting.
I. Determine the cost of producing goods or providing services accurately.
II. Maximization of profit to ensure wealth maximization for shareholders.
III. Cost control by assessing where costs can be reduced or controlled without
compromising quality or efficiency.
[A] I and II only
[B] I and III only
[C] II and III only
[D] I, II and III
[B] I and III only
AFM – Module D– JAIIB 2025
Q.34
What is batch costing in the context of cost accounting?
[A] A method used to determine the cost of individual items in a production batch.
[B] A technique for tracking the cost of each component in a manufacturing process.
[C] A cost allocation method used for similar products produced in batches.
[D] An accounting approach specific to the service industry.
Answer: C
AFM – Module D– JAIIB 2025
Q.35
In which method of costing is each individual product or order treated separately for
cost calculation?
A. Process Costing
B. Operation Costing
C. Job Costing
D. Batch Costing
Answer: C. Job Costing
AFM – Module D– JAIIB 2025
Q. 36
60,000 litres of crude oil is processed to produce 30,000 litres of petrol, 20,000 litres of
diesel and 10,000 litres of aviation fuel (for the purpose of simplicity, it is assumed that
there is no process loss). The cost of process up to the split point is ₹ 30,00,000. After
split points, all the 3 products are processed further. The cost of processing petrol is ₹
3,00,000 while the cost of processing diesel and aviation fuel is ₹ 1,00,000 and ₹
1,50,000 respectively. What is the cost allocation for each of the
A) Petrol
B) Diesel
C) Aviation Fuel
AFM – Module D– JAIIB 2025
Q. 36
A) Petrol
AFM – Module D– JAIIB 2025
Q. 36
b) Diesel
AFM – Module D– JAIIB 2025
Q. 36
c) Aviation Fuel
AFM – Module D– JAIIB 2025
Q. 37
Before the split point, the total process cost of 30,00,000 is allocated based on the
volume of each product. Therefore, the allocation for petrol is (volume of petrol/ total
volume of all the products)
•cost of processing = (30,000/60,000) × 30,00,000 = ₹ 15,00,000
•Similarly, allocation for diesel is (20,000/60,000) × 30,00,000 = ₹ 10,00,000
•And allocation for aviation fuel is (10,000/60,000) × 30,00,000 = ₹ 5,00,000
•After the split point, the costs are ₹ 3,00,000, ₹ 1,00,000 and ₹ 1,50,000 respectively.
So, the total cost for petrol is ₹ 15,00,000 3,00,000 = ₹ 18,00,000 or, ₹ 60.00 per litre
•Price for diesel is ₹ 10,00,000 1,00,000 = ₹ 11,00,000 or, ₹ 55.00 per litre
•Price for aviation fuel is ₹ 5,00,000 1,50,000 = ₹ 6,50,000 or, ₹ 65.00 per litre
AFM – Module D– JAIIB 2025
Q. 38
A company produces television sets of only 1 type. Its total production was 3000 sets and
the total cost incurred by the company was 3 crores. So the cost of 1 TV set is Rs. 3000.
Which type of coting has been used here to determine this cost?
[A] Job costing
[B] Process costing
[C] Unit costing
[D] None of the above
Answer: Option c
AFM – Module D– JAIIB 2025
Q. 39
Which of the following is NOT a type of GST?
[A] State Goods and Services tax
[B] Central goods and services tax
[C] Exports goods and services tax
[D] Integrated goods and services tax
Answer c
AFM – Module D– JAIIB 2025
Q. 40
Under which section of the Indian Income Tax Act can a senior citizenclaim a deduction
on interest income earned from savings accounts?
[A] Section 80D
[B] Section 80G
[C] Section 80TTB
[D] Section 80E
Answer: c
AFM – Module D– JAIIB 2025
Q. 41
Which of the following best describes "direct cost" in cost accounting?
[A] Costs that cannot be traced to a specific product or project.
[B] Costs that are incurred for the production of goods or services and can be directly
traced to a specific product, project, or department.
[C] Costs that are unrelated to the core operations of a business.
[D] Costs that are incurred for marketing and advertising activities.
Answer: Option b
AFM – Module D– JAIIB 2025
Q. 42
Calculate the break even point in terms of sales volume if the sale price of ₹100/unit, if,
total fixed cost is ₹2,00,000 and the P/V ratio is 80%?
[A] 1500 units
[B] 2000 units
[C] 2500 units
[D] 3000 units
Answer: C
AFM – Module D– JAIIB 2025
Q. 42
Calculate the break even point in terms of sales volume if the sale price of ₹100/unit, if,
Explanation:
total fixed cost
To calculate theisbreak-even
₹2,00,000 and
pointthe
in P/V ratio
terms is 80%?
of sales volume, we can use the following
[A]
formulae:
1500 units point (units) = Fixed cost / (Contribution margin per unit)
Break-even
[B]
Contribution Margin = Sales Price per Unit x P/V Ratio
2000
Usingunits
the data given in the question:
[C]
Contribution Margin = ₹100 * 80% = ₹100 * 0.80 = ₹80 per unit
2500 units
BE point (no. of units) = ₹2,00,000 / ₹80 = 2500 units
[D]
Therefore, BE point in terms of sales volume = 2500 units
3000
Henceunits
option C is correct.
AFM – Module D– JAIIB 2025
Q. 43
TCS under GST is collected by
[A] E-Commerce operators
[B] Central and state governments
[C] Dealers
[D] Customers
Answer: A
AFM – Module D– JAIIB 2025
Q. 43
Contribution is equal to
[A] Fixed cost + profit
[B] Sales – variable cost
[C] Fixed cost – loss
[D] All the above
Answer: d
AFM – Module D– JAIIB 2025
Q. 44
Which of the following techniques help in financial control?
I. Ratio analysis
II. Costing
III. Budgetary control
IV. Cost-Volume-Profit Analysis
[A] I and II
[B] II and III
[C] I, II and III
[D] I, II, III and IV

Answer: D
AFM – Module D– JAIIB 2025
Q. 45
When does the liability to pay GST arise?
a) Receipt of payment
b) Issue of invoice
c) Completion of supply
(Select the most appropriate answer from the options given below)
a) 1 and 2
b) 2 and 3
c) 1 and 3
d) All of the above
Answer: Option D
AFM – Module D– JAIIB 2025
Q. 46
By looking at a Programme Budget, we can easily find out which of the following?
a) What is not being carried out.
b) At what cost it is being carried out.
c) What are the expected results.
(Select the most appropriate answer from the options given below)
a) 1 and 2
b) 2 and 3
c) 1 and 3
d) All of the above
Answer: B
AFM – Module D– JAIIB 2025
Q. 47
Which among the following methods are not used to calculate the cost of material in
process costing?
a) Weighted Average Costs
b) First In First Out
c) Standard Costs
d) Last In First Out
Answer: D
AFM – Module D– JAIIB 2025
Q. 48
The method of Activity Based Costing (ABC) is based on
a) Process
b) Cost Unit
c) Cost Driving Activity
d) Cost Center
Answer: c
AFM – Module D– JAIIB 2025
Q. 49
Which budget is prepared according to the capacity or efficiency of the unit to which
they are related ?
a) Production budget
b) Basic budget
c) Flexible budget
d) Overhead budget
Answer: C
AFM – Module D– JAIIB 2025
Q. 50
Which of the following statements is correct about Marginal Costing?
a) variable cost is considered as marginal cost.
b) Marginal contribution of a product or department is considered for calculating its
profitability.
c) Fixed costs are taken into account for calculating the product cost.
d) Marginal costing involves only cost recording.

Answer: A
AFM – Module D– JAIIB 2025
Practice question -
Which one of the following is not likely to use service costing?
a. Water supply company
b. Transport company
c. Consultancy firm
d. Cement company
AFM – Module D– JAIIB 2025
Practice question -
A budget is normally considered to be a long-term budget if it covers a period of more
than ____________
a. 3 months
b. 6 months
c. 9 months
d. one year