CA Foundation May 2025 Suggested Answers Paper 4 Business Economics

FOR CA FOUNDATION EXAM PREPARATION

CA Foundation 2025
Suggested Answers ·
Paper 4 Business
Economics
EXAM YEAR TYPE

CA Foundation 2025 Suggested Answers
SUBJECT DATE

Paper 4 Business Economics May 2025

Notes · Sample Papers · Previous Year Papers · Mock Tests

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PAPER – 4: BUSINESS ECONOMICS
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Time: 2 Hours Marks: 100

a microeconomic theory mainly does not deal with which of the g
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1. The
a
a following issues:
(A) Stage of business cycles
(B) Demand analysis and forecasting
(C) Production and Cost Analysis
(D) Inventory management
2. Which of the following is not correct about business economics with
reference to economics?
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. decision making in a particular
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(A) Business economics helps in proper

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(B) Business economics hasla
business entity.

a g a narrow scope in comparison to economics.
(C) Economics is an applied branch of business economics.
(D) Business economics includes the analysis of micro level issues like
demand, supply etc.
3. Command Economy is another name for:
(A) Capitalist Economy

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(B) Socialist Economy

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(C) Mixed Economy
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4. Which of the following is not a merit of Capitalist Economy?

ag (A) Faster economic growth
(B) Collective ownership
(C) High degree of operative efficiency

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BUSINESS ECONOMICS

(D) Incentives for innovation and technological progress
5. An economy exists on which of the following two facts?
(A) Human wants are limited and the resources are unlimited.
(B) Human wants are limited and the resources are scarce.
(C) Human wants as well as resources are unlimited.
(D) Human wants are unlimited but the resources are relatively scarce.
6. Commodities for which the quantity demanded rises only up to a certain
level of income and decreases with an increase in income beyond this
level are called:
(A) Normal goods
(B) Inferior goods
(C) Essential goods
(D) Luxury goods
7. Highly priced goods are consumed by status seeking rich people to satisfy
their need for conspicuous consumption. This is called:
(A) Demonstrative effect
(B) Bandwagon effect
(C) Snob effect
(D) Veblen effect
8. An expectation that price will fall in future will lead to:
(A) A downward movement along the same demand curve
(B) An upward movement along the same demand curve
(C) Rightward shift of demand curve
(D) Leftward shift of demand curve
9. A consumer buys 100 units of a goods at a price of 6 per unit. Suppose
price elasticity of demand is-3. At what price will he buy 80 units?
(A) ` 5.8
(B) ` 6.2

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FOUNDATION EXAMINATION: MAY 2025

(C) ` 6.4
(D) ` 6.75
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10. If total revenue of goods increases with an increase in its price, demand

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for the goods is said to be:

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(A) Elastic
(C)s Inelastic g
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l(B) Unit elastic a
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(D) Infinitely elastic
11. Which of the following statement is not true while determining price
elasticity of demand?
(A) Goods which have close or perfect substitutes, have highly elastic
demand curves.

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(B) The greater the proportion of income spent on a commodity;
generally the lesser will be its elasticity of demand.
(C) Necessities are generally priceminelastic.
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(D) The more possible uses l a of a commodity, greater will be its price
elasticity. a
12. When two goods are complementary, the cross elasticity between them is:
(A) Infinite
(B) Positive and large
(C) Zero

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(D) Negative

m 13. When total utility is increasing at decreasing rate:
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(B) Marginal utility is decreasing but remains positive.

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(C) Marginal utility becomes negative.
(D) Marginal utility is equal to zero.

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BUSINESS ECONOMICS

14. Due to an increase in price of product X from 100 to 110 quantity
supplied increases from 150 units to 200 units. Calculate elasticity of
supply using arc-elasticity method.
(A) 2.3
(B) 3
(C) 3.33
(D) 3.5
15. The rate at which a consumer is prepared to exchange goods X and Y,
holding the level of satisfaction constant is called as __________.
(A) Indifference curve
(B) Marginal rate of substitution
(C) Diminishing marginal utility
(D) Consumer surplus
16. The form of capital which performs its function in production in a single
use and is not available for further use is termed as:
(A) Fixed capital
(B) Circulating capital
(C) Real capital
(D) Intangible capital
17. Survival, growth and expansion come under which of the following
objective of an enterprise?
(A) Organic objective
(B) Economic objective
(C) Social objective
(D) National objective
18. The minimum quantities of various inputs that are required to yield a
given quantity of output is termed as:
(A) Demand function

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FOUNDATION EXAMINATION: MAY 2025

(B) Supply function
(C) Production function
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(D) Investment function
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19. Which of the following is not true about relationship between average
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product and marginal product?
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(A) When average product rises as a result of an increase in the quantity
a g
ag (B) When average product is maximum, marginal product is equal to
of variable input marginal product is more than the average product.

average product.
(C) When average product falls, marginal product is less than the average
product.
(D) When average product is negative, marginal product becomes zero.

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20. Total product starts declining in which stage of production?

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(A) Stage 1: The stage of increasing returns

s em returns
(B) Stage 2: The stage of diminishing

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(C) Stage3: The stage of negative
astage of production
(D) It may decline in any
21. Returns to scale refers to:
(A) Changes in output as a result of proportionate change in one of the
variable factors of production.
(B) Changes in output as a result of proportionate change in all factors of
production.

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(C) Changes in output as a result of proportionate change in any two
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variable factors of production.

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(D) Changes in output as a result of variation in factor proportions.

as g l for __________.
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22. Linear Homogeneous Production function is another name

ag (A) Law of variable proportion
(B) Constant returns to scale
(C) Increasing returns to scale

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BUSINESS ECONOMICS

(D) Decreasing returns to scale
23. Budget line or budget constraint line which shows the various alternative
combinations of two factors which the firm can buy with given outlay is
called:
(A) Isoquant
(B) Indifference curve
(C) Isocost line
(D) Iso-product curve
Use the following data to answer question 24-25:

Output (Q) 0 1 2 3 4 5
Total cost (TC) ` 200 ` 310 ` 410 ` 500 ` 604 ` 710

24. The Average Fixed Cost of 2 units of output is:
(A) ` 85
(C) ` 110
(B) ` 100
(D) ` 205
25. Diminishing marginal returns start to occur between units:
(A) 1 and 2
(B) 2 and 3
(C) 3 and 4
(D) 4 and 5
26. Calculate Marginal Revenue (MR) when Average Revenue (AR) = 45 and
price elasticity of demand (e) = 3.
(A) ` 15
(C) ` 30
(B) ` 25
(D) ` 135

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27. Which of the following is not a feature of perfect competition market?
(A) Very large number of sellers
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(B) Homogeneous products
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(C) Inelastic demand
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s em are price takers
(D) Firms
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28. lAafirm should not produce at all if: a
ag (A) AR is greater than minimum AVC
(B) AR is equal to ATC
(C) If its total variable costs are not met
(D) AR is greater than ATC
29. Which type of markets allocates productive resources to producers and
helps ensure that those resources are used efficiently?
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(A) Product markets
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(B) Factor markets
s em
(C) Local Markets
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(D) Retail markets a
30. The firm will be making maximum profits by expanding output to the
level where:
(A) Marginal revenue is greater than marginal cost
(B) Marginal revenue is equal to marginal cost
(C) Marginal revenue is less than marginal cost

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(D) Marginal revenue is equal to average cost
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will happen to the equilibrium price and equilibrium quantity

em demand increases and supply decreases?
a
l quantity is
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(A) The equilibrium price rises but change in equilibrium
uncertain.
(B) Both equilibrium price and equilibrium quantity falls.
(C) Both equilibrium price and equilibrium quantity go up.

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(D) The equilibrium quantity increases but the change in equilibrium
price is uncertain.
32. Suppose that a sole proprietor is earning total revenue of 120,000/- and is
incurring explicit cost of 95,000/-. If the owner could work for another
company for 30,000/- a year, which of the following statement is false?
(A) The firm incurred an economic loss of ` 5,000/-
(B) The firm is having accounting profit of 25,000/-
(C) Total economic costs are 30,000/-
(D) The total accounting costs are ` 95,000/
Use the following data to answer question 33 and 34:

Quantity 0 10 20 30 40
Total Cost (in `) 100 220 320 410 510

33. What is the average variable cost when 20 units are produced?
(A) ` 5
(C) ` 11
(B) ` 10
(D) ` 16
34. Between 10 and 20 units, what is the marginal cost per unit?
(A) ` 10
(B) ` 20
(C) ` 100
(D) ` 220
35. Which of the following is not a feature of the monopoly market?
(A) Single buyer of the products
(B) Barriers to entry
(C) No close substitutes
(D) Market power

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36. Which of the following is not a condition for price discrimination?
(A) The seller should have price setting power.
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(B) The seller should be able to divide his market into two or more sub

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(C) The .price elasticity of the product should be different in different sub
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markets.

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ag product to the buyers of high-priced market.
(D) It should be possible for buyers of low-priced market to resell the

37. Under second degree price discrimination, different prices are charged for
(A) Each individual consumer
(C) Customer segment
(B) Location

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(D) Different quantities sold

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38. Kinked demand curve model of oligopoly is also called:
(A) Sweezy's Model
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(B) McKinsey's Model
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(C) Oskar's Model
(D) Neumann's Model
39. Assume that when price is 30 the quantity demanded is 19 units and
when price is 28 the quantity demanded is 20 units, what is the marginal
revenue resulting from an increase in output from 19 units to 20 units ?

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(A) ` 10

m (C) ` 20 (B) - ` 10
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(D) - ` 20

g a to a common
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40. The oligopoly market in which few firms come
understanding with each other in fixing price or output or both is called:
(A) Pure Oligopoly

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(B) Collusive Oligopoly
(C) Partial Oligopoly
(D) Syndicated Oligopoly
41. During the upswing phase of business cycle, the involuntary
unemployment is ___________.
(A) Highest
(B) Almost Zero
(C) Lowest
(D) Not affected
42. The level of national income and expenditure declines rapidly during
which phase of the business cycle?
(A) Upswing
(B) Downswing
(C) Recovery
(D) Trough and Depression
43. In all kinds of businesses, the different phases of business cycle generally
occurs as:
(A) Having perfectly timed cycles
(B) No fixed time cycles but are regular
(C) Boom have longer period than Depression
(D) Depression have longer period than Boom
44. An indicator which gives information about the rate of change of the
expansion or contraction of an economy is called ___________.
(A) Leading Indicator
(B) Lagging Indicator
(C) Both Leading and Lagging Indicator
(D) Co-incident Indicator

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45. There is a war going between Country A and Country B for last two years.
Now in the current year both countries have signed a peace agreement
and war has come to an end. Now both countries have started to rebuild
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the losses caused due to war out of their own funds. Which type of cause
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. Cause
of change in business cycle is this for Country A?
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eExternal Cause la s
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(A) Internal

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(B)
a (C) Both Internal and External Cause
(D) This is not a cause of change in business cycle
46. Which of the following organisation is responsible for the compilation of
National accounts statistics?
(A) Central Statistical Organisation (CSO)
(B) Directorate of Economics and Statistics (DES)

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(C) Ministry of Finance of Central Government
(D) Reserve Bank of India (RBI)
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47. Which of the following is notaassignificance and usefulness of the National
l
Income estimates?
ag
(A) Businesses use it to forecast the future demand of their products
(B) To identify the sector wise composition of national income
(C) To assist in making policies related to inflation
(D) To assist in making policies related to population growth
48. Considering the data given in the table below calculate the Inflation rate
of year 3:
o m
m .c
c. o m
Year Nominal GDP Real GDP GDP Deflator

s e 100
em a
gl 120
0 900 900

las 1 1200 1000
a
ag 2 1500 1200 125
3 1800 1250 144
4 2000 1600 125

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(A) 13.19%
(B) 15.20%
(C) 19%
(D) -19%
49. Which of the following defines the Gross National Product (GNP) of a
country under the concept of National Income?
(A) It is market value of all final economic goods & services produced
within the domestic territory of a country including Net Factor
Income from abroad.
(B) It is market value of all final economic goods & services produced
within the domestic territory of a country excluding Net Factor
Income from abroad.
(C) It is production cost of all final economic goods & services produced
within the domestic territory including depreciation.
(D) It is production cost of all final economic goods & services produced
within the domestic territory excluding depreciation.
50. The Gross Domestic Product at Factor Cost (GDPFC) is calculated by which
of the following formula (Here GDPMP is Gross Domestic Product at
market prices):
(A) GDPFC = GDPMP + Net Factor Income from Abroad
(B) GDPFC = GDPMP + Net Factor Income from Abroad - Depreciation
(C) GDPFC = GDPMP-Indirect Taxes + Subsidies
(D) GDPFC = GDPMP + Indirect Taxes – Subsidies
51. Which of the following is true about the basic price in the determination
of National Income?
(A) Basic Price = Factor Cost Subsidy Manufacturing Taxes +
Manufacturing
(B) Basic Price = Factor Cost - Depreciation
(C) Basic Price = Factor Cost + Net Factor Income from Abroad
(D) Basic Price = Factor Cost + Production Tax + Production Subsidy

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52. Which of the following is an indicator of the standard of living of a
country under the concept of National Income?

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(A) Personal Income

o m m
c
(C) Per .Capita Income
(B) Disposable Personal Income

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(D) GDP at factor cost
a
a53.g The amount of money in the hands of the individual that is available for
their consumption or savings is known as
(A) Private Income
(B) Per Capita Income
(C) Disposable Personal Income
(D) Personal Income

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54. Which of the following is included in the calculation of Personal Income
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under the concept of National Income?

a s
(A) Unemployment Compensation
(B) Retained Earnings gl
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(C) Indirect Business Taxes
(D) Contribution towards Social Security
55. Which of the following is true in relation with Private Income under the
concept of National Income?
(A) It is personal income adjusted by inflation rate.

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(B) It is personal income less personal income tax.

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c. o m
(C) It is the income (both factor & transfer income) accrued to private

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sector from all sources within the country only.

s em g l a to the private
la
(D) It is income (both factor and transfer income) accrued

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sector from all sources within and outside the a
country.
a 56. In the preparation of state income estimates, certain activities like
railways, banking, insurance etc. that cut across state boundaries, and

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BUSINESS ECONOMICS

thus their economic contribution assigned to more than one state are
known as ____________.
(A) Central Sectors of economy
(B) Supra Regional Sectors of economy
(C) Tertiary Sectors of economy
(D) Secondary Sectors of economy
57. Which of the following is not a sector to be included in the three sector
model of Keynesian theory of Income determination?
(A) Household Sector
(B) Business Sector
(C) Foreign Sector
(D) Government Sector
58. Under the Keynesian theory of National Income determination, which of
the following term is given to the demand for money?
(A) Investment multiplier
(B) Liquidity preference
(C) Aggregate demand
(D) Marginal Propensity
59. Under the Keynesian theory of determination of national income, the
assumption is that the consumption increases with an increase in
disposable income but the increase in consumption will be _________ the
increase in disposable income.
(A) Equal to
(B) Opposite to
(C) Greater than
(D) Less than
60. Which of the following is true in respect of relation of Marginal
Propensity to Consume (MPC) and Marginal Propensity to Save (MPS) as
per the Keynesian theory of determination of National Income?

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(A) MPC = MPS
(B) MPC+MPS = 1
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(C) MPC+MPS = 0
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(D) No relation exists between MPC and MPS
s e m
61. Whichmof the following is one of the key functions of fiscal policy and a
s e
aims at eliminating the macroeconomic fluctuations arising from sub g l
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a (A) The Allocation Function
optimal allocation of resources?

(B) The Redistribution Function
(C) The Stabilization Function
(D) The Utilisation Function
62. Which of the following statement is true in respect of Social cost?

o m
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(A) Social Cost = Private Cost + External Cost
(B) Social Cost = Private Cost .+ External Cost - Total Negative
s em
la + External Cost-Government Taxes
Externalities
(C) Social Cost = Private g
a Cost
(D) Social Cost = Private Cost + Total Negative Externalities -
Government Taxes
63. Which of the following is not a characteristic of Public Goods?
(A) Non-rival in consumption
(B) Indivisibility
(C) More vulnerable to externalities
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c. o 64. What does the term "lemon" means in the model of "Lemons m
(D) Excludable

m s e problem"
s e g l a
la
developed by "George Akeil of" in relation to used car market:-

g a
a
(A) Only good quality used cars
(B) Both poor and good quality used cars
(C) Average quality used cars

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(D) Scrapped used cars
65. The statutory disclaimer that "Mutual Fund investments are subject to
market risks please read the offer documents carefully before investing" is
which of the following type of government intervention?
(A) Government intervention to correct externalities.
(B) Government intervention for equitable distribution.
(C) Government intervention to correct information failure.
(D) Government intervention in case of public goods.
66. Article 112 of Indian Constitution provides that in respect of every
financial year the President shall cause to be laid before both houses of
the parliament a statement of estimated receipts and expenditure of the
government of India for that year. This statement is referred as:
(A) Budget
(B) Annual Financial Statement
(C) Statement of Income & Expenditure
(D) Interim Budget
67. Which of the following information regarding the receipts and
expenditure of the Government is not presented in the budget
documents?
(A) Budget estimates of Current financial year
(B) Budget estimates of the Ensuing financial year
(C) Revised estimates of the Ensuing financial year
(D) Actual expenditure and Income of Current financial year
68. Which of the following is the nodal department for overseeing the public
financial management system in the Central Government?
(A) NITI Aayog
(B) Department of Revenue under Finance Ministry
(C) Department of Expenditure under Finance Ministry
(D) Reserve Bank of India

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69. During the Budget proceedings, the speaker of Lok Sabha once the
prescribed time is over, puts all the outstanding demand for grants,
whether discussed or not, to the vote of the house, this process is known
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as:
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(A) Cut Motion
s e m
em la
l a s
(B) Presenting the appropriation bill
a g
ag (C) Outcome Budget

(D) Guillotine
70. Which of the following is not true regarding the fiscal policy of
Government?
(A) It is deliberate policy of Government.
(B) An economy producing full employment does not require

m
c. o
Government action in the form of fiscal policy.

em
(C) Taxation policy is part of Fiscal policy.
(D) Fiscal Policy is supply side spolicy.

g lain the expression Md = k PY?
a
71. What is the term Y represent
(A) Real National income
(B) Price level
(C) Money supply

(D) Interest rate

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72. Banks availing Marginal Standing Facility Rate can use a maximum of how

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much percentage of Statutory Liquidity Ratio Securities?
.co
c. o (A) 1%
se
m
s em g la
la
(B) 2%

g a
a
(C) 3%

(D) 4%

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73. Calculate currency with Public from following Data (` in lakhs)

Notes in Circulation 2,59,121
Coins in Circulation 23,345
Cash on hands with Banks 19,009
Coin on hands with Banks 909

(A) 3,02,384
(B) 2,62,548
(C) 2,53,876
(D) 2,15,858
74. Liquidity trap occurs when:
(A) Interest rates are high, and people prefer bonds over cash balances.
(B) Interest rates are near zero, and people prefer holding cash over
bonds.
(C) Inflation rates are high, reducing purchasing power of money
balances.
(D) Central banks increase CRR drastically.
75. What is the likely impact of an increase in the Time Deposit to Demand
Deposit (TD/DD) ratio on the banking system and monetary expansion?
(A) It leads to higher availability of free reserves and consequent
enlargement of volume of multiple deposit expansion and monetary
expansion.
(B) It reduces the availability of free reserves, thereby restricting the
process of monetary expansion.
(C) It has no impact on the banking system as time deposits and demand
deposits are interchangeable.
(D) It directly reduces the money supply as time deposits are not
considered part of the money supply.

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76. Broad money includes currency deposits with an agreed maturity of up to
________ years, deposits redeemable at notice up to ______ months and
repurchase agreements, money market fund shares/units and debt
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security up to ______ years.
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(A) 3 years, 6 months, 3 years
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(B) 2 years, 6 months, 2 years
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ag (D) 2 years, 3 months, 2 years
(C) 3 years, 3 months, 3 years,

77. Which of the following is NOT included in MI?
(A) Currency with the public
(B) Demand deposits with banks
(C) Time (term) deposits with banks

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c
(D) Other deposits with RBI

m . of the four determinants of the
Friedman's demand for money? e
78. Which of the following is NOT one

(A) Nominal Demand for g las is a function of total wealth.
a money
(B) It is positively related to price level P, if price level rises the demand
for money increases.
(C) Nominal demand for money falls if the opportunity costs of money
holding declines.
(D) Nominal Demand for money is influenced by inflation.

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79. Which of the following is NOT a quantitative tool of monetary policy?

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(A) Cash Reserve Ratio (CRR)
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(B) Statutory Liquidity Ratio (SLR)

la se
l as (C) Open Market Operations (OMO)
a g
ag (D) Liquidity Adjustment Facility (LAF)
80. Which of the following expressions is true?
(A) Reverse Repo Rate = Repo Rate - 1

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BUSINESS ECONOMICS

(B) Reverse Repo Rate = Repo Rate + 1
(C) Repo Rate = Reverse Repo Rate - 1
(D) Repo Rate = 1- Reverse Repo Rate
81. In the Theory of Comparative Costs, which of the following statements are
true?
I. It is based on money cost which is more realistic
II. It is Positive in Nature
III. It is Normative in nature
IV. Do not take into account the factor price differences
(A) I and II are correct
(B) III and IV are correct
(C) II and IV are correct
(D) I and IV are correct
82. The value of the product or service is enhanced as the number of
individuals using it increases. What effect is this?
(A) Veblen Effect
(B) Bandwagon Effect
(C) Income Effect
(D) Snob Effect
83. What is the Ad valorem tariff?
(A) The fixed amount of money per physical unit or weight of commodity
imported or exported.
(B) A fixed time period for tariff application per calendar year.
(C) The duty levied as a fixed percentage of the value of the traded
commodity.
(D) A flat rate imposed regardless of the product's value.

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FOUNDATION EXAMINATION: MAY 2025

84. A tariff that is set so high that no imports can enter is known as __________
(A) Prohibitive Tariff
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(B) Bound Tariff
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(C) Escalated Tariff
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(D) eVariable
la
85. la
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a (A) Mexico
Which of these countries is part of the USMCA Agreement?

(B) Malta
(C) Malaysia
(D) Mongolia
86. Which one of these is the main reason why GATT lost its relevance by

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1980?

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(A) Efforts at liberalising agricultural trade were successful.

s emnot expand substantially.
la
(B) International investments did
(C) GATT was a treaty.
a g
(D) There were inadequacies in institutional structure and dispute
settlement system.
87. The most controversial topic for Doha Development Agenda was
(A) The Labour Welfare
(B) World Peace
(C) Globalization
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c. o 88. Match the following:
(D) Agriculture Trade
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las Table A
a g
Table

ag (a) Has a long term interest and is (i) Foreign Portfolio
invested for long Investment
(b) Speculative in Nature (ii) Foreign Direct Investment

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BUSINESS ECONOMICS

(c) Help developing countries (iii) Free Floating exchange
benefit fully from global trading rate system
system
(d) Government and central banks (iv) World Trade Organisation
do not participate in the market
for foreign exchange

(A) (a)(ii), (b) - (i), (c) - (iv), (d) - (iii)
(B) (a)(i), (b) (ii), (c) - (iv), (d) - (iii)
(C) (a)(ii), (b) - (i), (c) - (iii), (d) - (iv)
(D) (a)(i), (b) (ii), (c) - (iii), (d) - (iv)
89. An investment in which one investor establishes a business activity in a
foreign country which is different from investor's main business activity
but in some way supplements its major activity is called ___________
(A) Horizontal direct investment
(B) Vertical investment
(C) Conglomerate type of FDI
(D) Two way direct foreign investment
90. An appreciation of currency or strong currency makes the domestic
currency more __________ therefore it can be exchanged for a _________
amount of foreign currency.
(A) Weaker, smaller
(B) Valuable, larger
(C) Weaker, larger
(D) Valuable, smaller
91. Which of the following are fiscal reforms?
i. Ensuring better tax compliance
ii. Reinvestment of funds in more profitable options
iii. Encouraging private sector participation

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FOUNDATION EXAMINATION: MAY 2025

iv. Thrust on curbing government expenditure
(A) Only i and iii
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(B) Only i, ii, iii
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(C) Only i, iii, iv
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(D) eOnly
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92. lWhich of the following best describes the pre-British Indian economy ? a
g
ag (A) Dependent on imports for goods
(B) Self-sufficient villages and cities which were centers of commerce
(C) Focus on industrial production
(D) Dominated by foreign trade
93. The trade policy reforms include ____________.

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(A) Inclusion of licensing restrictions for imports
c
(B) Removal of licensing procedure .for imports
(C) Complication of tariffs. se
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g larestrictions on imports and exports
a
(D) Inclusion of quantitative
94. Which initiative by NITI Aayog aims to promote electric vehicles?
(A) E-Amrit
(B) Shoonya Campaign
(C) Methanol Economy Program
(D) India Policy Insights (IPI)
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95. The early liberalization and reforms started in India in ______________.
.co
c. o (A) 1980s
se
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s em (B) 1970s
g la
gla a
a
(C) 1960s
(D) 1990s

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BUSINESS ECONOMICS

96. What percentage of India's population depends on agriculture for
livelihood as per latest estimates?
(A) 18%
(B) 25%
(C) 47%
(D) 60%
97. Which government scheme focuses on providing financial support to
farmers suffering crop loss or damage?
(A) PM KISAN
(B) Pradhan Mantri Fasal Bima Yojana (PMFBY)
(C) Soil Health Card Scheme
(D) Paramparagat Krishi Vikas Yojana (PKVY)
98. Which regime replaced the Foreign Investment Promotion Board (FIPB)?
(A) SEBI
(B) FIF Portal
(C) NITI Aayog
(D) DPIHT
99. What was India's rank in 2022 as per Global Innovation Index?
(A) 81st
(B) 40th
(C) 63rd
(D) 25th
100. Which policy replaced the Merchandise Exports from India Scheme (MEIS)
in 2021?
(A) NDAP
(B) GST
(C) PLI Scheme
(D) RoDTEP
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FOUNDATION EXAMINATION: MAY 2025

ANSWERS

m
MCQ Correct MCQ Correct MCQ Correct MCQ Correct

m 26. c. o
Option Option Option Option
1.
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(A) (C) 51. No correct 76. (D)
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e (C)
option
la
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2.s 27. (C) 52. (C) 77. (C)
a g
ag 3.4. (B)
(B)
28.
29.
(C)
(B)
53.
54.
(C)
(A)
78.
79.
(C)
(D)
5. (D) 30. (B) 55. (D) 80. (A)
6. (B) 31. (A) 56. (B) 81. (B)
7. (D) 32. (C) 57. (C) 82. (B)
8. (D) 33. (C) 58. (B) 83. (C)
9. (C) 34. (A) 59. (D) 84. (A)
m (B)
co
10. (C) 35. (A) 60. 85. (A)

m .
(D) se 62.
11. (B) 36. (D) 61. (C) 86. (D)

la 63.
12. (D) 37. (A) 87. (D)
13. (B) 38.
a g
(A) (D) 88. (A)
14. (B) 39. (B) 64. (B) 89. (B)
15. (B) 40. (B) 65. (C) 90. (B)
16. (B) 41. (B) 66. (B) 91. (C)
17. (A) 42. (D) 67. (D) 92. (B)
18. (C) 43. (B) 68 (C) 93. (B)
19. (D) 44. (D) 69 (D) 94. (A & B)

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c
20. (C) 45. (B) 70 (D) 95. (A)
m . (C)
c. o 21. (B) 46. (A) 71. (A) 96.

s
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e (B)
em a
gl 98. (B)
22. (B) 47. (D) 72. (A) 97.

las 23. (C) 48. (B) 73. (B)
a
ag 24. (B) 49. (A) 74. (B) 99. (B)
25. (C) 50 (C) 75. (A) 100. (D)

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EXAMINERS’ COMMENTS ON THE PERFORMANCE OF THE EXAMINEES

PAPER – 1: ACCOUNTING
Specific Comments
Question 1.(a) Some of the examinees were unable to give correct logical
reasoning in 2 to 3 sub parts of the statement of true or false.

(b) A significant number of examinees were unable to understand the
requirement of the question and were not able to write objectives of
accounting standards and fared poorly. Similarly, some examinees could not
differentiate between Liability and Contingent Liability.
(c) Many examinees were unable to add cost of goods sent on approval
basis. Few examinees could not deduct unsold stock of goods received on
consignment basis.
Question 3.(b) Several examinees were unable to credit goodwill brought in
by the new partner in cash in his Capital account which further led to incorrect
Cash & Bank balance. For outstanding liabilities, some examinees either gave
effect in Revaluation A/c or debited Capital A/c which in effect reduced marks
in Partners' Capital Account. Few examinees erred in calculating sacrificing
ratio.
Question 4.(a) Many examinees failed to understand that there was change
in profit sharing ratio before retirement with retrospective effect. Instead of
sharing revaluation profit in new ratio before retirement, they distributed it in
old profit-sharing ratio. While calculating Goodwill, most of the examinees
added current year profit without reducing bonus to a partner, which resulted
in loss of marks. Due to change in ratio before retirement with retrospective
effect, examinees erred in calculation Gaining Ratio. Examinees also fared
poorly as many were unable to give correct account heads in the Partners'
Capital Account ledger resulting in deduction of marks.
(b) Few examinees made reverse adjustments of Prepaid expenses and
outstanding commission in Revised Profit & Loss A/c. Some examinees
calculated depreciation on additions to Vehicle though the same were done
on closing date & was not required to be depreciated.

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FOUNDATION EXAMINATION: MAY 2025

Question 5.(a) Some of the examinees didn't pass correct entries relating to
utilization of application money. Many examinees failed to calculate correct

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c. o
amount of calls in arrears, amount transferred to Share forfeiture a/c and

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amount transferred to Capital Reserve. Further, examinees didn't show proper

. e m
s
workings which also resulted in loss of marks.

em l a
a s
Question 6.(b)
l knowledge.
Majority of the examinees failed to mention three basic
a g
a g
elements
conceptual
of Measurement and four Valuation Principles which showed lack of

PAPER – 2: BUSINESS LAWS
Specific Comments
Question 1.(a) Most examinees responded to the question on the principal’s
liability when an agent exceeds their authority and fails to disclose the
principal’s name in a generalized way, rather than in accordance with Sections

o m
c
227 and 228 of the Indian Partnership Act, 1932.

m . unable to answer the question on
Small Companies correctly, as theye failed to apply the situational aspects
(b)(i) The majority of examinees were

l a sof the provisions of Section 2(85) of the
ag
provided in the question in light
Companies Act, 2013.
(ii) Most examinees answered the question on Associate Company in a
generalized manner, without aligning their responses with the specific
provisions of Section 2(6) of the Companies Act, 2013, as required by the
given situation.
(c) Most examinees responded to the question on the rights of an outgoing

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partner to carry on a competing business in a generalized manner, without

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c. o
referring to the specific provisions of Section 36 of the Indian Partnership Act,
m
se
1932. Similarly, the questions on a partner’s right to be indemnified by the

s em la
firm [Section 13(e)] and the liability of a partner to indemnify the firm [Section
g
gla a
13(f)] were also answered without proper reference to the relevant provisions

a of the Act.

Question 2.(a) The majority of examinees were unable to answer the
question relating to specific goods needing to be put into a deliverable state,

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EXAMINERS COMMENTS

as per the situation provided, in accordance with Sections 21 and 26 of the
Sale of Goods Act, 1930.

Question 3.(a) Many examinees answered the question on the liability of a
newly admitted partner, including cases where the partner is a minor, in a
generalized manner, without adhering to the specific provisions of Sections 30
and 31 of the Indian Partnership Act, 1932.
(b)(i) Most examinees were unable to correctly explain the implications of
borrowing for an object not specified in the Memorandum of Association
(MoA) of the company, and the recourse available to the lending institution
for recovery of the loan amount, as per the provisions of the Companies Act,
2013.
Question 4.(b)(i) Most examinees failed to explain the significance of the
delivery of an instrument—whether payable to bearer or to order—for
completing its negotiation, as required under the provisions of Section 46 of
the Negotiable Instruments Act, 1881.
(c) Most examinees were unable to clearly explain the key functions
performed by the Ministries referred to in the question.
Question 5.(a)(ii) Most examinees failed to answer the question on the
legal rules governing auction sale and their application to the given situation,
in accordance with the provisions of Section 64 of the Sale of Goods Act,
1930.
(b) The majority of examinees failed to explain the statement —"A partner
virtually assumes the role of both a principal and an agent. The implied
authority of a partner to bind the firm applies to all acts done by him in
matters related to the business, provided they are done in the usual course
and within the scope of the partnership"—in accordance with Sections 18,
19(1) and 22 of the Indian Partnership Act, 1932.
Question 6.(a) Most examinees answered the question relating to the
dishonour of a cheque based on the situations provided in a generalized
manner, without aligning their responses with the specific provisions of
Section 138 of the Negotiable Instruments Act, 1881.

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FOUNDATION EXAMINATION: MAY 2025

(b) (Optional) Most examinees failed to correctly answer the question
relating to pledge by a mercantile agent under Section 178 and pledge by a

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person in possession under a voidable contract under Section 178A of the

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Indian Contract Act, 1872.

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(c) Most examinees failed to explain the concept of reservation of the right
e l a s
a s
of disposal and the circumstances under which such a right may be reserved,
l ag
ag
as per Section 25 of the Sale of Goods Act, 1930. They also did not correctly
address the situations where a contract cannot be avoided despite a breach of
condition, in accordance with Section 13 of the Act.

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