Prelim Exam: Cooperative Management! Quiz

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Prelim Exam: Cooperative Management! Quiz - Quiz



Questions and Answers
  • 1. 

    An autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.

    • A.

      Government

    • B.

      Cooperative

    • C.

      Union

    Correct Answer
    B. Cooperative
    Explanation
    A cooperative is an autonomous association of individuals who come together voluntarily to fulfill their common economic, social, and cultural needs and aspirations. They do this by jointly owning and democratically controlling an enterprise. Unlike a government or union, a cooperative is not controlled by a centralized authority but rather by its members, who have an equal say in decision-making. This model allows for the equitable distribution of benefits and empowers individuals to work together for their shared interests.

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  • 2. 

    Check the three basic interests of business.

    • A.

      Ownership

    • B.

      Manager

    • C.

      Control

    • D.

      Supervise

    • E.

      Beneficiary

    Correct Answer(s)
    A. Ownership
    C. Control
    E. Beneficiary
    Explanation
    The three basic interests of business are ownership, control, and beneficiary. Ownership refers to the possession and legal rights over a business entity or its assets. Control involves the ability to make decisions and influence the operations of the business. Beneficiary refers to the individuals or groups who receive the benefits or profits generated by the business. These three interests are crucial for the success and sustainability of any business organization.

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  • 3. 

    Cooperatives are owned, managed, and patronized by _______.

    • A.

      Members

    • B.

      Manager

    • C.

      Proprietor

    Correct Answer
    A. Members
    Explanation
    Cooperatives are a type of organization that are owned, managed, and patronized by their members. This means that the individuals who are part of the cooperative have a stake in its ownership, play a role in its management, and also benefit from its services or products. Unlike traditional businesses where the ownership and decision-making power lies with a single proprietor or a group of managers, cooperatives operate on a democratic model where the members collectively make decisions and share in the profits. Therefore, the correct answer is members.

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  • 4. 

    Cooperatives serve best when they answer the needs of the_______.

    • A.

      Members

    • B.

      Manager

    • C.

      Proprietor

    Correct Answer
    A. Members
    Explanation
    Cooperatives serve best when they answer the needs of their members. Cooperatives are organizations that are owned and operated by their members, who are typically the customers, employees, or residents of the cooperative. The purpose of a cooperative is to provide goods, services, or benefits to its members in a way that meets their specific needs and interests. By focusing on the needs of the members, cooperatives can ensure that they are providing value and fulfilling their mission effectively.

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  • 5. 

    Check the COOP PRINCIPLES & PRACTICES.

    • A.

      Open and Voluntary Membership

    • B.

      Democratic Member Control

    • C.

      For Lending and Credit

    Correct Answer(s)
    A. Open and Voluntary Membership
    B. Democratic Member Control
    Explanation
    The correct answer is Open and Voluntary Membership, Democratic Member Control. These principles are part of the cooperative principles and practices. Open and voluntary membership means that anyone who meets the eligibility criteria can join the cooperative. Democratic member control means that members have equal voting rights and can participate in the decision-making process of the cooperative. These principles ensure that the cooperative operates in a fair and inclusive manner, with members having a say in the cooperative's affairs.

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  • 6. 

    In Cooperatives, membership is forced.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The statement is false because membership in cooperatives is not forced. Cooperatives are voluntary organizations where individuals join willingly based on their shared needs and interests. Members have the freedom to decide whether or not to join and can also withdraw their membership if they choose to do so.

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  • 7. 

    In cooperatives, the members are the owners of the business.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    In cooperatives, the members have ownership of the business. This means that they have a say in decision-making processes and are entitled to share in the profits or benefits of the cooperative. Unlike traditional businesses where ownership is typically held by a single individual or a group of shareholders, cooperatives distribute ownership among its members, giving them a sense of collective responsibility and control over the business. This model promotes democratic participation and ensures that the interests of the members are prioritized.

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  • 8. 

    Check the cooperative values.

    • A.

      Self-help

    • B.

      Self-responsibility

    • C.

      Democracy

    • D.

      Autocratic

    • E.

      Business-minded

    Correct Answer(s)
    A. Self-help
    B. Self-responsibility
    C. Democracy
    Explanation
    The correct answer is Self-help, Self-responsibility, Democracy. These values are often associated with cooperatives. Self-help means that members of a cooperative work together to achieve common goals and support each other. Self-responsibility refers to the idea that members are responsible for their own actions and contributions to the cooperative. Democracy means that decisions are made collectively and every member has a voice in the decision-making process. These values reflect the principles of cooperation and collaboration within a cooperative organization.

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  • 9. 

    One of the purposes of Cooperative is to encourage _________.

    • A.

      Thrift and savings

    • B.

      Borrow when there's no money

    • C.

      Lending all the way

    Correct Answer
    A. Thrift and savings
    Explanation
    The purpose of a cooperative is to encourage thrift and savings among its members. This means that the cooperative aims to promote the habit of saving money and being frugal in its members. By encouraging thrift and savings, the cooperative can help its members build financial stability and achieve their financial goals. This can be done through various means such as offering savings accounts, providing financial education, and promoting responsible spending habits. Ultimately, the goal is to empower members to manage their finances effectively and improve their overall financial well-being.

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  • 10. 

    A type of coop that caters to lending services.

    • A.

      Credit Coop

    • B.

      Consumers Coop

    • C.

      Producers Coop

    • D.

      Multi-purpose coop

    Correct Answer
    A. Credit Coop
    Explanation
    A Credit Coop is a type of cooperative that specifically focuses on providing lending services. This means that its main purpose is to offer financial assistance to its members by granting loans and credit facilities. Unlike other types of coops that may cater to different needs or industries, a Credit Coop is dedicated to providing financial support and helping its members with their borrowing requirements.

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  • 11. 

    A type of coop that is formed by farmers to save money selling crops and other products of farmers.

    • A.

      Credit Coop

    • B.

      Consumers Coop

    • C.

      Producers Coop

    • D.

      Multi-purpose coop

    Correct Answer
    C. Producers Coop
    Explanation
    A producers coop is a type of cooperative that is formed by farmers to save money selling crops and other products of farmers. This type of coop allows farmers to pool their resources and collectively market and sell their products, thereby saving on costs and increasing their bargaining power. By working together, farmers can negotiate better prices for their products and access larger markets, ultimately benefiting all members of the coop.

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  • 12. 

    What is the primary capital of cooperatives?

    • A.

      Member's share capital

    • B.

      Savings

    • C.

      Donations

    Correct Answer
    A. Member's share capital
    Explanation
    The primary capital of cooperatives is the member's share capital. This refers to the money that cooperative members contribute to the cooperative in order to become a member and have a stake in the organization. It represents the ownership interest of the members in the cooperative and is used to finance the cooperative's operations and investments. Unlike savings or donations, which may also be sources of capital for cooperatives, the member's share capital is specifically tied to the cooperative's ownership structure and is a fundamental aspect of its capital structure.

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  • 13. 

    What are the two types of membership?

    • A.

      Regular

    • B.

      Permanent

    • C.

      Associate

    • D.

      Part time

    Correct Answer(s)
    A. Regular
    C. Associate
    Explanation
    The correct answer is Regular and Associate. These are the two types of membership mentioned in the given options. Regular membership refers to the standard or full membership, while Associate membership is a type of membership that is typically associated with a reduced level of benefits or privileges compared to regular membership.

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  • 14. 

    Death can be a reason to terminate a member in the coop.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Death can be a reason to terminate a member in a coop because when a member dies, they are no longer able to actively participate in the cooperative. This may affect the overall functioning and decision-making processes of the coop. Terminating the membership of a deceased member allows the coop to maintain accurate records and ensure that the membership is comprised of active participants. Additionally, it enables the coop to make necessary adjustments and distribute any benefits or assets in accordance with the coop's policies and procedures.

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  • 15. 

    A member can continue to be a member even he does not patronize the Coop services.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The statement is false because in order to be a member of a Coop, one typically needs to actively patronize the Coop services. If a member does not use or support the services provided by the Coop, they may no longer be considered a member.

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  • 16. 

    A member can be terminated if he is mentally ill.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    If a member is mentally ill, it can be a valid reason for termination. Mental illness may affect a person's ability to perform their duties or pose a risk to themselves or others. In such cases, terminating the member's association can be necessary to ensure the well-being and safety of everyone involved.

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  • 17. 

    What are the duties of a Coop member?

    • A.

      Attend general assembly

    • B.

      Patronize products and services

    • C.

      Always apply for a credit

    • D.

      Withdraw the capital share

    Correct Answer(s)
    A. Attend general assembly
    B. Patronize products and services
    Explanation
    The duties of a Coop member include attending the general assembly and patronizing products and services. Attending the general assembly is important as it allows members to participate in decision-making processes and stay informed about the cooperative's activities. Patronizing products and services helps support the cooperative and ensures its sustainability. The other options, always applying for credit and withdrawing the capital share, are not mentioned as duties of a Coop member.

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  • 18. 

    What is the highest governing body of the Cooperative?

    • A.

      General Assembly

    • B.

      BOD

    • C.

      Officers

    Correct Answer
    A. General Assembly
    Explanation
    The General Assembly is the highest governing body of the Cooperative. It is responsible for making key decisions and setting policies for the organization. The General Assembly is made up of all the members of the Cooperative, who come together to discuss and vote on important matters. As the highest authority, the General Assembly ensures that the Cooperative operates in accordance with its principles and serves the best interests of its members. The BOD (Board of Directors) and Officers may have specific roles and responsibilities within the Cooperative, but the General Assembly holds the ultimate power and authority.

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  • 19. 

    Who will preside the General Assembly?

    • A.

      Officers

    • B.

      Chairman

    • C.

      Committees

    Correct Answer
    B. Chairman
    Explanation
    The correct answer is "Chairman" because the General Assembly is typically presided over by a chairperson or chairman. This individual is responsible for leading the meetings, maintaining order, and ensuring that all members have a chance to speak and participate in the discussions. The chairman plays a crucial role in facilitating the decision-making process and ensuring that the assembly operates smoothly.

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  • 20. 

    How many times the General Assembly must meet in a year?

    • A.

      Only once a year

    • B.

      Twice a year

    • C.

      One, but BOD might call a special meeting

    Correct Answer
    C. One, but BOD might call a special meeting
    Explanation
    The General Assembly must meet only once a year, as stated in the answer. However, it is possible for the Board of Directors (BOD) to call a special meeting if necessary. This means that while the General Assembly has a scheduled annual meeting, additional meetings may be called by the BOD if there are urgent matters that need to be addressed.

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  • 21. 

    The Board of Directors has the power to create new policies that can be implemented directly without the General Assembly's approval.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The Board of Directors does not have the power to create new policies without the approval of the General Assembly. The General Assembly is typically responsible for making important decisions and approving policies within an organization. The Board of Directors may propose new policies, but they still require the approval of the General Assembly before they can be implemented. Therefore, the statement is false.

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  • 22. 

    BOD's number should be odd.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The explanation for the answer being true is that BOD's number is a measurement used to determine the amount of oxygen required by microorganisms to decompose organic matter in water. It is based on the assumption that the decomposition process is aerobic, meaning it requires oxygen. Since odd numbers are used in the calculation of BOD's number, it is necessary for the number to be odd.

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  • 23. 

    What committee is responsible for the approval of the loans?

    • A.

      Audit committee

    • B.

      Credit committee

    • C.

      Supevisory committee

    Correct Answer
    B. Credit committee
    Explanation
    The credit committee is responsible for the approval of loans. This committee evaluates the creditworthiness of borrowers, assesses the risk associated with lending, and makes decisions regarding loan approvals. They review loan applications, analyze financial information, and consider factors such as credit history, income stability, and collateral. The credit committee plays a crucial role in ensuring that loans are granted to individuals or businesses that meet the necessary criteria and are likely to repay the borrowed funds.

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  • 24. 

    What committee is responsible for the checking and analysis of the financial reports?

    • A.

      Credit committee

    • B.

      Audit committee

    • C.

      Supervisory committee

    Correct Answer
    B. Audit committee
    Explanation
    The audit committee is responsible for the checking and analysis of the financial reports. This committee is typically composed of independent directors who have expertise in finance and accounting. They review the financial statements, ensure compliance with regulations and internal controls, and provide oversight of the auditing process. Their role is to safeguard the integrity of the financial reporting process and ensure transparency and accuracy in the company's financial statements.

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  • 25. 

    Check the choices that hold true about the education committee.

    • A.

      Responsible for auditing

    • B.

      Calls the meeting

    • C.

      Recruits new members

    • D.

      Gives training and lecture about the coop

    Correct Answer(s)
    C. Recruits new members
    D. Gives training and lecture about the coop
    Explanation
    The education committee is responsible for two main tasks: recruiting new members and providing training and lectures about the cooperative. This means that they actively seek out and bring in new individuals to join the committee, and they also organize and deliver educational sessions to educate members about the cooperative and its workings.

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  • 26. 

    The elected vice-chairman will automatically be designated as chairman of what committee?

    • A.

      Audit

    • B.

      Education

    • C.

      Credit

    Correct Answer
    B. Education
    Explanation
    The elected vice-chairman will automatically be designated as chairman of the Education committee. This is a common practice in many organizations where the vice-chairman is next in line to assume the role of chairman in the event of a vacancy or absence. The Education committee is responsible for overseeing educational programs, policies, and initiatives within the organization.

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  • 27. 

    The secretary is responsible for recording and keeping the minutes of the meeting.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The statement is true because the secretary is indeed responsible for recording and keeping the minutes of the meeting. The minutes serve as an official record of what was discussed and decided during the meeting. The secretary's role is to accurately document the key points, actions, and decisions made, ensuring that they are properly recorded and can be referred to in the future. This helps to maintain transparency, accountability, and organizational memory within the meeting and the wider organization.

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  • 28. 

    Who is responsible for the promulgation of the election of officers?

    • A.

      Credit committee

    • B.

      Election committee

    • C.

      BOD

    Correct Answer
    B. Election committee
    Explanation
    The election committee is responsible for the promulgation of the election of officers. They are in charge of overseeing the entire election process, including the nomination, campaigning, and voting procedures. Their role is to ensure a fair and transparent election, where all eligible candidates have an equal opportunity to be elected. The election committee is typically composed of individuals who are impartial and have no vested interest in the outcome of the election. They play a crucial role in upholding the democratic principles of the organization.

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  • 29. 

    A capital share is of what type of account?

    • A.

      Asset

    • B.

      Income

    • C.

      Liaility

    • D.

      Equity

    Correct Answer
    D. Equity
    Explanation
    A capital share is a type of account that falls under the category of equity. Equity represents the ownership interest of the shareholders in a company. It represents the residual interest in the assets of the company after deducting liabilities. Capital shares are issued to shareholders as a representation of their ownership in the company and provide them with certain rights and privileges, such as voting rights and entitlement to dividends. Therefore, the correct answer is Equity.

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  • 30. 

    Accounts receivable is under the _______ account.

    • A.

      Assets

    • B.

      Income

    • C.

      Liabilities

    Correct Answer
    A. Assets
    Explanation
    Accounts receivable is categorized as an asset account. Assets are resources owned by a company that have economic value and are expected to generate future benefits. Accounts receivable represents the amount of money owed to a company by its customers for goods or services that have been sold on credit. As such, it is considered an asset because it represents a future inflow of cash that the company is entitled to receive.

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  • 31. 

    Which of the following is an Asset account?

    • A.

      Cash in Hand

    • B.

      Checking Account

    • C.

      Supplies

    • D.

      Building

    • E.

      Equipment

    Correct Answer(s)
    A. Cash in Hand
    B. Checking Account
    D. Building
    E. Equipment
    Explanation
    The correct answer is Cash in Hand, Checking Account, Building, and Equipment. These are all examples of Asset accounts because they represent resources that the company owns and can provide future economic benefits. Cash in Hand and Checking Account are both liquid assets that can be readily used for transactions. Building and Equipment are non-liquid assets that have long-term value and are used in the company's operations. Supplies, on the other hand, is not an Asset account as it represents consumable items that are used up in the normal course of business.

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  • 32. 

    What is a government agency that regulates Cooperatives?

    • A.

      Cooperative Development Authority

    • B.

      Phil. Federation of Credit Cooperatives

    • C.

      Cooperative Authority of the Phils

    Correct Answer
    A. Cooperative Development Authority
    Explanation
    The Cooperative Development Authority is the correct answer because it is the government agency responsible for regulating cooperatives in the Philippines. They oversee the registration, monitoring, and supervision of cooperatives to ensure compliance with laws and regulations. The Cooperative Development Authority plays a crucial role in promoting the growth and development of cooperatives as a means of empowering communities and fostering economic stability.

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  • 33. 

    A cooperative is formed because of ______.

    • A.

      Mutual benefit

    • B.

      Credit

    • C.

      Business

    Correct Answer
    A. Mutual benefit
    Explanation
    A cooperative is formed because of mutual benefit. This means that individuals or businesses come together to form a cooperative in order to achieve common goals and benefits that they wouldn't be able to achieve individually. By pooling their resources and working together, members of a cooperative can share costs, risks, and profits, leading to mutual benefit for all involved.

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  • 34. 

    Check in the following choices the advantages of Cooperatives.

    • A.

      Owned by one person

    • B.

      Controlled by members

    • C.

      It follows the laws of corporation

    • D.

      Members are benefeciaries

    Correct Answer(s)
    B. Controlled by members
    D. Members are benefeciaries
    Explanation
    The advantages of cooperatives include being controlled by members, meaning that decisions are made collectively and everyone has a say in the organization's operations. Additionally, members are beneficiaries, meaning that they receive the benefits and profits generated by the cooperative. This allows for a more equitable distribution of resources and rewards among the members.

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  • 35. 

    Which of the following is an advantage of the Cooperative form of business?

    • A.

      Extensive record keeping

    • B.

      Harmony of members

    • C.

      Managed by one group

    Correct Answer
    A. Extensive record keeping
    Explanation
    The advantage of the Cooperative form of business is extensive record keeping. This means that the cooperative keeps detailed and comprehensive records of its operations, transactions, and financial activities. Extensive record keeping is beneficial as it allows the cooperative to have a clear understanding of its performance, track its income and expenses, and make informed decisions based on accurate and up-to-date information. It also helps in maintaining transparency and accountability within the cooperative, as members can easily access and review the records.

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  • 36. 

    Check the nature and character of cooperatives.

    • A.

      Service-oriented

    • B.

      Self-sufficient

    • C.

      Providing goods and services at reasonable cost.

    • D.

      Cooperatives are not for profit and not for charity but for service.

    • E.

      Cooperatives are for lending

    Correct Answer(s)
    A. Service-oriented
    C. Providing goods and services at reasonable cost.
    D. Cooperatives are not for profit and not for charity but for service.
    Explanation
    Cooperatives are service-oriented organizations that aim to provide goods and services at a reasonable cost. They operate with the intention of serving their members and the community rather than making a profit or engaging in charitable activities. The main focus of cooperatives is to meet the needs and interests of their members by offering affordable products and services.

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  • 37. 

    A type of coop that caters to different services such as lending, savings, marketing, etc.

    • A.

      Credit Coop

    • B.

      Consumers Coop

    • C.

      Producers Coop

    • D.

      Multi-purpose coop

    Correct Answer
    D. Multi-purpose coop
    Explanation
    A multi-purpose coop is the correct answer because it caters to different services such as lending, savings, marketing, etc. This type of coop is designed to meet the diverse needs of its members by offering a range of services that are not limited to a specific industry or sector. It provides a platform for individuals or businesses to collaborate and support each other in various areas, making it a versatile and comprehensive cooperative model.

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  • 38. 

    A type of Coop that focuses on retail business such as grocery, general merchandise, etc.

    • A.

      Multi-purpose coop

    • B.

      Producers Coop

    • C.

      Consumers Coop

    • D.

      Credit Coop

    Correct Answer
    C. Consumers Coop
    Explanation
    A Consumers Coop is a type of Coop that focuses on retail business such as grocery, general merchandise, etc. This type of Coop is formed by consumers who come together to pool their resources and collectively own and operate a retail business. The main objective of a Consumers Coop is to provide affordable and quality goods and services to its members. By purchasing in bulk and eliminating middlemen, Consumers Coops are able to offer products at lower prices compared to traditional retail stores. Members of a Consumers Coop also have a say in the decision-making process and may receive dividends based on their purchases.

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  • 39. 

    What is the excess amount of revenues that will be shared by the members?

    • A.

      Profit

    • B.

      Dividends

    • C.

      Share

    Correct Answer
    B. Dividends
    Explanation
    The excess amount of revenues that will be shared by the members is called dividends. Dividends are the portion of profits that a company distributes to its shareholders as a return on their investment. It is a way for the company to distribute its earnings and reward its shareholders.

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  • 40. 

    What are the rights of a Coop Member?

    • A.

      The right to inspect accounts

    • B.

      The right to vote

    • C.

      The right to run for a position

    • D.

      The right not to avail of the services

    Correct Answer(s)
    A. The right to inspect accounts
    B. The right to vote
    C. The right to run for a position
    Explanation
    Coop members have the right to inspect accounts, which means they can review financial records and ensure transparency. They also have the right to vote, allowing them to participate in decision-making processes within the cooperative. Additionally, members have the right to run for a position, enabling them to be part of the leadership or governing body. However, there is no mention of the right not to avail of services in the given options.

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  • 41. 

    Salaries and wages of employees are under the _________ account.

    • A.

      Expenses

    • B.

      Income

    • C.

      Liabilities

    • D.

      None of the above

    Correct Answer
    A. Expenses
    Explanation
    The correct answer is Expenses because salaries and wages paid to employees are considered as an expense for a company. Expenses are the costs incurred by a business in order to generate revenue and operate effectively. Salaries and wages are a significant portion of a company's expenses as they are a direct cost associated with the labor required to produce goods or provide services. Therefore, they are recorded under the expenses account in the financial statements.

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  • 42. 

    The Coop wants to purchase a Photocopy Machine. What is the effect of this purchase in the accounting equation?

    • A.

      Debit Assets, Credit Cash

    • B.

      Debit Cash, Credit Assets

    • C.

      Debit Expenses, Credit Cash

    • D.

      None of the above

    Correct Answer
    A. Debit Assets, Credit Cash
    Explanation
    When the Coop purchases a Photocopy Machine, it is considered an acquisition of an asset. Assets are recorded on the debit side of the accounting equation, so the purchase would be debited to Assets. On the other hand, the Coop would need to pay for the machine, which involves a cash outflow. Cash is recorded on the credit side of the accounting equation, so the purchase would be credited to Cash. Therefore, the effect of this purchase in the accounting equation is Debit Assets, Credit Cash.

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  • 43. 

    Which will you account for if a fixed asset depreciates?

    • A.

      Expenses

    • B.

      Income

    • C.

      Accounts Payable

    • D.

      None of the above

    Correct Answer
    A. Expenses
    Explanation
    When a fixed asset depreciates, it means that its value is gradually decreasing over time due to factors such as wear and tear or obsolescence. This decrease in value is considered as an expense for the company. Depreciation is recorded in the financial statements as an expense, which reduces the company's net income. Therefore, the correct answer is Expenses.

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  • 44. 

    Service fees, interest rates, and penalties are accounted for on what type of account?

    • A.

      Expenses

    • B.

      Income

    • C.

      Liabilities

    • D.

      Equity

    Correct Answer
    B. Income
    Explanation
    Service fees, interest rates, and penalties are accounted for as income because they represent revenue earned by the account holder or financial institution. These fees and rates are charged for the services provided by the institution, such as account maintenance or loan interest. Penalties are also considered income as they are charges imposed for violations or late payments. Therefore, these items contribute to the overall income of the account and are recorded as such in the financial statements.

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  • 45. 

    What will be the effect on the accounting equation when an electricity bill is due at the end of the month?

    • A.

      Debit Electricity, Credit Accounts Payable

    • B.

      Debit Electricity, Credit Cash

    • C.

      Debit Cash, Credit Accounts Payable

    • D.

      None of the above

    Correct Answer
    A. Debit Electricity, Credit Accounts Payable
    Explanation
    When an electricity bill is due at the end of the month, it means that the company owes money to the electricity provider. This creates a liability for the company, which is recorded as an increase in the accounts payable account. At the same time, the electricity expense is recognized and recorded as an increase in the electricity account, which is an expense account. Therefore, the effect on the accounting equation is a debit to the electricity account and a credit to the accounts payable account.

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