UPHESC Assistant Professor Commerce 2025, 2026 PYQs

Concept: Securities premium is a capital receipt but not part of share capital.

1. Schedule III of the Companies Act, 2013: Shareholders' funds → (a) Share capital (b) Reserves and Surplus.
2. Securities Premium is shown under 'Reserves and Surplus' (Other equity in Ind AS format).
3. Its use is restricted by Sec. 52 (bonus shares, writing off preliminary expenses, buy-back etc.).

Short trick: Premium is extra over face value → not 'capital', but 'Reserves & Surplus'.

Concept: ABC (Cooper & Kaplan) assigns overheads to activities and then to products using many activity-specific cost drivers.

1. (B), (C), (D) are its features – activity focus, more accurate product cost, better pricing/product-mix decisions.
2. Relying on a single volume base such as direct labour hours is the feature of TRADITIONAL absorption costing, which ABC replaces.

Short trick: ABC = many drivers (set-ups, orders, inspections), not one labour-hour rate.

Concept: BEP (sales) = Fixed cost ÷ P/V ratio; P/V ratio = 100% − variable cost ratio.

1. P/V ratio = 100% − 70% = 30%.
2. BEP = 90,000 ÷ 0.30 = Rs. 3,00,000.
3. BEP is 60% of capacity sales → capacity sales = 3,00,000 ÷ 0.60 = Rs. 5,00,000.

Short trick: Rs. 3,00,000 (option A) is the BEP, not the capacity – read the question to the end.

Concept: Responsibility accounting divides the firm into cost, revenue, profit and investment centres and holds each manager responsible for controllable items.

1. Identifying responsibility centres, evaluating individual managers and improving control are its essence – (A), (B), (D) are correct.
2. Performance is judged by comparing actual results with BUDGETS/STANDARDS (variance reports), not by historical cost data – so (C) is incorrect.

Short trick: Responsibility accounting = Budget vs Actual for controllable costs, centre-wise.

Concept: Price discrimination (including dumping in foreign markets) is profitable only when price elasticities of demand differ between markets.

1. Higher price is charged in the market with less elastic demand (usually the home market).
2. Lower price is charged where demand is more elastic (usually the foreign market) – this is dumping.
3. Equilibrium: MR equal in both markets; $P=MC\cdot \frac{e}{e-1}$, so price depends on price elasticity.

Short trick: Discrimination needs different PRICE elasticities: inelastic → high price, elastic → low price.

Concept: Excess capacity theorem is associated with Chamberlin's monopolistic competition.

1. In long-run equilibrium the downward-sloping AR curve is tangent to LAC on its falling part.
2. So the firm produces less than the minimum-LAC (optimum) output – the gap is excess capacity.
3. Under perfect competition the firm produces at minimum LAC – no excess capacity.

Short trick: Chamberlin + tangency on the falling part of LAC = excess capacity.

Concept: A trade cycle moves through depression (slump) → recovery (revival) → boom (prosperity) → recession → again depression.

1. Start from the trough: Slump (I).
2. Activity picks up: Recovery (IV).
3. Peak activity: Boom (III).
4. Downturn begins: Recession (II).

Short trick: S-R-B-R: Slump, Recovery, Boom, Recession = I, IV, III, II.

Concept: Exceptions are situations where more is bought at a higher price.

1. Giffen paradox – inferior staple goods (Giffen goods).
2. Demonstration / Veblen effect – prestige goods bought more when dearer.
3. War, emergency or fear of shortage – people buy more even at higher prices.
4. Inflation is a general rise in the price level, not a listed exception to the law of demand.

Short trick: Textbook exceptions: Giffen, Veblen (demonstration), emergency/war, speculation, ignorance, fashion.

Concept: Window dressing means presenting the financial statements so that the position looks better than it really is.

1. The convention of (full) disclosure requires that accounts be honestly prepared and all material facts be fully disclosed, giving a true and fair view.
2. Window dressing hides or distorts facts, so it violates – and is prohibited by – the convention of disclosure.
3. Conservatism leads to understatement (secret reserves); materiality decides what is significant.

Short trick: Window dressing = cosmetic over-statement ↔ Disclosure = full, honest, true and fair.

Concept: MRS is the slope of the indifference curve.

1. For perfect substitutes the IC is a straight line (e.g. $X+Y=k$).
2. A straight line has the same slope everywhere, so MRS is constant.
3. Perfect complements give L-shaped ICs (MRS 0 or ∞); normal goods give convex ICs with diminishing MRS.

Short trick: Perfect substitutes → straight-line IC → constant MRS.

Concept: Skimming = 'skim the cream' of the market with a high introductory price, then reduce price to reach more price-sensitive segments.

1. Penetration pricing is the opposite – low initial price to capture market share.
2. Peak-load pricing charges more at times of peak demand (electricity, transport).
3. Cost-plus adds a mark-up to cost.

Short trick: Skimming = High → Low (new gadgets); Penetration = Low start.

Concept: At BEP, Total revenue = Total cost, so profit = 0.

1. Profit = Contribution − Fixed cost; at BEP profit = 0, so Contribution = Fixed cost.
2. Contribution < Fixed cost means a loss – that is a point below BEP.

Short trick: C = F → BEP; C > F → profit; C < F → loss.

Concept: Optimal capital structure is the debt–equity mix that minimises the overall cost of capital (WACC) and maximises firm value.

1. WACC depends on cost of debt, cost of equity and the tax rate (interest is tax-deductible: $K_d(1-t)$).
2. Current ratio is a short-term liquidity measure for working capital; it does not decide the long-term debt–equity mix.

Short trick: Capital structure = long-term funds; current ratio = short-term liquidity.

Concept: Working capital = Current assets − Current liabilities.

1. Inventory and receivables are current assets.
2. Payables are current liabilities – also part of net working capital.
3. Plant and equipment are fixed (non-current) assets.

Short trick: Anything that turns over within a year = working capital; plant lasts years = fixed capital.

Concept: Financial leverage arises from fixed interest charges; it links EBIT with EPS/EBT.

1. Degree of financial leverage = EBIT ÷ EBT, i.e. EBIT ÷ (EBIT − Interest).
2. Operating leverage = Contribution ÷ EBIT; Combined leverage = Contribution ÷ EBT.

Short trick: OL: C/EBIT → FL: EBIT/EBT → CL: C/EBT (each denominator becomes next numerator).

Concept: Earnings-price approach: $K_e=\frac{EPS}{MPS}\times 100$.

1. $K_e=\frac{1.5}{15}\times 100=10\mathrm{\%}$.

Short trick: Cost of equity (E/P) = inverse of P/E ratio: P/E = 10 → Ke = 10%.

Concept: Operating leverage arises from fixed operating costs; it shows how a change in sales affects EBIT.

1. DOL = % change in EBIT ÷ % change in sales = Contribution ÷ EBIT.
2. Sales and EBT together are linked by combined leverage; EBIT and EBT by financial leverage.

Short trick: Operating = Sales → EBIT; Financial = EBIT → EBT/EPS; Combined = Sales → EPS.

Concept: An ideal (optimum) capital structure is the mix of debt and equity at which the overall cost of capital is lowest and the return/value for shareholders (EPS, market value) is highest.

1. Minimum cost of capital alone is one side; maximum profitability for owners is the other side – they occur together at the optimum.
2. Maximum cost can never be ideal, so (C) is wrong.

Short trick: Optimum = Minimum WACC + Maximum value/EPS.

Concept: CLT: for a sufficiently large sample of independent observations from ANY population with a finite mean and finite variance, the sampling distribution of the mean is approximately normal.

1. What the CLT needs: independent (random) samples, a large enough n (rule of thumb n ≥ 30), and a population with a finite variance ${\sigma }^2$.
2. (B) 'Population is normally distributed' is NOT an assumption – the whole point of the CLT is that it works for non-normal populations.
3. (D) 'The population variance is known' is also NOT an assumption – the variance must exist (be finite), not be known; knowing $\sigma$ matters only for using a z-test/interval, not for the theorem.
4. Two options, (B) and (D), are therefore 'not an assumption' → no single answer; the question is treated as a bonus.

Short trick: CLT = independent + large n + finite variance. Not needed: normal population, known variance.

Concept: Mode is defined as the value around which the items are most densely concentrated (point of maximum density / frequency).

1. In a continuous series the modal class is the class of highest frequency density (frequency per unit class-width), especially with unequal class intervals.
2. Mode is then located by interpolation $Z=L_1+\frac{f_1-f_0}{2f_1-f_0-f_2}\times i$ – this density approach is used for mode, not for mean or median.

Short trick: Mode = 'most fashionable / most dense' value.