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1. Which of the following is an exception of “Full Disclosure” Principle?
(a) Materiality
(b) Conservatism
(c) Going Concern
(d) All of the above
According to materially principle, only the material items should be disclosed. So, this principle is an exception of full disclosure principle. Option (b) (c) & (d) is not related to Disclosure.
Hence (a) is the correct option.
2. The proprietor of a business is treated as a creditor for capital under ——— concepts.
(a) Money measurement concept
(b) Cost concept
(c) Business entity concept
(d) Dual aspect concept.
Under Business entity concept, Business is treated as a separate entity from its owner and the proprietor is treated as a creditor of the business. Option (a), (b) & (d) are not correct in this case.
Hence (c) is the correct option.
3. Under Business Entity Concept, proprietor of a business is treated as a —– for capital
a. Capital contributed by Proprietor is treated as Asset for the Business
b. Proprietor’s Capital is not part of the business
c. Proprietor of a business is treated as creditor for capital in the business
d. None of the above
Under Business entity concept, proprietor is treated as a creditor of the business. Option (a), (b) & (d) are not correct in this case.
Hence (c) is the correct option.
4. Accounting rules, practices and conventions should remain same from one year to another as per the —————-
(a) Convention of consistency
(b) Convention of full disclosure
(c) Convention of conservatism
(d) All of the above.
Under convention of consistency, Accounting rules, practices and conventions should remain same and not change from one year to another year. Option (b), (c), & (d) are not correct in this case.
Hence (a) is the correct option.
5. Market value of investments is shown as a footnote to Balance Sheet as per the ______
(a) Consistency concept
(b) Disclosure concept
(c) Going concern concept.
(d)None of the above.
Under Disclosure concept, any material information that cannot be included in the proper balance sheet should shown by way of footnote. Market value of investment is not included in the financial and so shown as note. Option (a), (c), & (d) are not correct in this case.
Hence (b) is the correct option.
6. Provision for bad debts is made under the principle of
(a) Disclosure concept
(b) Conservatism concept
(c) Realization concept.
(d) None of the above.
As per the concept of conservatism, Provision for Bad Debts are made for possible losses. Option (a), (c), & (d) are not correct in this case.
Hence (b) is the correct option.
7. In which of the following situations the principle of conservatism is applied
(a) Accounting policies are not changed frequently.
(b) Anticipated income should not be recognized in the financial statement.
(c) Value of asset is determined on the basis of the acquisition cost.
(d) All of the above.
Conservatism concept states anticipated income should not be taken into account and all possible losses should be provided. Option (a), (c), & (d) are not correct in this case.
Hence (b) is the correct option.
8. Matching Concept is based on :
(a) Accrual Concept only
(b) Money Measurement Concept only
(c) Accounting Period Concept only
(d) Both Accrual and Accounting Period Concept
Both Accrual Accounting & Matching Period Concept work together for measurement and recognition of Income and assets and liabilities respectively. Option (a), (b) & (c) are not correct in this case.
Hence (d) is the correct option.
9. Contingent liability to be shown in the Balance-Sheet is placed as a footnote, according to the convention of.
(a) Disclosure
(b) Conservatism
(c) Consistency
(d) Periodicity.
Under convention of full disclosure, if some material information cannot be included in the balance sheet, it is shown by way of footnote. Contingent liability is such an example. Option (b), (c) & (d), are not correct in this case.
Hence (a) is the correct option.
10. Accounting principles represent.
(a) A basis of conduct or practice of accounting.
(b) A rule of action adopted by accountants universally.
(c) Classification of principles under ‘Accounting concepts’.
(d) All of the above.
Accounting principle is a general law or rule adopted or professed as a guide for action. It is a basis of conduct or practice. Accounting principles are adopted by Accounts universally. Accounts are classified as per Accounting Principles. Hence, statements under (a), (b) & (c) are all correct.
Hence (d) is correct option.
11. According to the going concern concept, a business will exist for
(a) A short span of life
(b) A very long life
(c) An indefinite economic life
(d) None of the above.
As per Going Concern Concept, it is assumed that the enterprise will continue an indefinite long economical life. Option (a), (b) & (d), are not correct in this case.
Hence (c) is correct option.
12. As per the concept of conservatism, the stock-in-trade to be valued at
(a) Cost price
(b) Market price
(c) Cost price or market price, whichever is higher
(d) Cost price or market price, whichever is lower.
As per conservatism concept, stock-in-trade is current assets and so should be valued at cost or market price, whichever is lower. Option (a), (b) & (c), are not correct in this case.
Hence (d) is the correct option
13. Separate Business entity concept means
(a) The private affairs of the owner are also recorded in the books of account.
(b) Business is treated as an entity different from its owner, Partners.
(c) The owner and the business are treated same.
(d) None ofthe above.
Under separate business entity concept, the business enterprise is a separate and distinct entity apart from its owners. Option (a), (c) & (d), are not correct in this case.
Hence (b) is the correct option.
14. Final accounts are prepared for a period of one year by following
(a) Consistency concept
(b) Conservatism concept
(c) Time period concept
(d) None of the above.
According to Time period concept, accounts should be prepared for every financial year on the time period concept (which states that the life of business should be divided into several defined time periods. Option (a), (b) & (d), are not correct in this case.
Hence (c) is the correct option.
15. Qualitative transactions are not recorded in accounts due to the ————- concept
(a) Dual.
(b) Money measurement.
(c) Realization.
(d) None of the above.
Qualitative transactions cannot be expressed in terms of money. Such transactions are not recorded in accounts due to money measurement concept. Option (a), (c) & (d), are not correct in this case.
Hence (b) is the correct option.
16. —————— Concept distinguish that the business is separate from owner.
(a) Dual Aspect
(b) Going concern.
(c) Entity
(d) Materiality
Entity concept states that business enterprise has a separate identity apart from its owner. Option (a), (b) & (d), are not correct in this case.
Hence (c) is the correct option.
17. The exercise of prudence means
(a) Assets or income are not overstated.
(b) Liabilities or expenses are not understated.
(c) Hidden reserves will not be created.
(d) All of the above.
Exercise of Prudence means caution needed in judgments in making the estimates required under conditions of uncertainty. So, recognition of unrealized profits, creation of excess provisions, hidden reserve, is not permitted. Statements under Option (a), (b) & (c), are all correct in this case.
Hence (d) is the correct option.
18. The convention of matching means, matching of
(a) profit with investment.
(b) revenues with cost.
(c) expenses one period with expenses of another period.
(d) Matching of revenues of one period with the revenues of another period.
Accounting record would be made in such a manner that cost of the period may be compared or matched with revenue of the period. Option (a), (c) & (d), are not correct in this case.
Hence (b) is the correct option
19. The entity concept of Accounting is applicable to
(a) Sole Proprietary Business only
(b) Partnership Business only
(c) Joint Stock Company only
(d) All types of Company as above.
Entity Concept is applicable to all types of Business organisation, irrespective of the nature or form of Business. It is not specific to any specific type of Business. So, options (a),(b),(c) are not correct. So, option (d) is correct
20. Find out the accounting equation?
(a) Capital = Assets + Liabilities
(b) Capital = Assets – Liabilities
(c) Assets = Liabilities – Capital
(d) All of the above.
Capital = Assets – Liabilities is the correct equation. Option (a), (c) & (d), are not correct in this case.
Hence (b) is correct.
21. Under —— concept, Shareholders are treated as creditors for the amount they subscribed to
(a) Cost concept.
(b) Money measurement concept.
(c) Business entity concept.
(d) Periodicity concept.
Under Business entity concept, Business is treated as a separate entity from its owner and the proprietor is treated as a creditor of the business. So, Shareholders are treated as creditors for the amount they subscribed to. Option (a), (b) & (d), are not correct in this case.
Hence option (c) is correct
22. A car is purchased for Rs.20, 00,000. Down payment of Rs.2, 00,000 is made and a Rs.18, 00,000 bill payable has been signed due in 90 days. This transaction results
(a) Increase of total assets by Rs.20, 00,000.
(b) Increase of total liabilities by Rs.18, 00,000.
(c) Total assets increased by Rs.18, 00,000 and increase in liabilities by Rs.18,00,000.
(d) None of the above.
Fixed Asset (Asset) will be increased by Rs.20, 00,000 and cash (Asset) will be decreased by Rs.2, 00,000. So increase in Total Assets will be Rs.18, 00,000. Bill Payable (Liabilities) will increased by Rs.18, 00,000. Option (a), (b) & (d), are not correct in this case.
Hence option (c) is correct
23. The outside liabilities of a business are Rs.10, 000. The proprietor’s capital is
Rs.40, 000. Total assets of the firm are:
(a) Rs.50, 000.
(b) Rs.30, 000.
(c) Rs.10, 000.
(d) Rs.40, 000.
Asset = (Liability + Capital) = 10,000 + 40,000 = Rs. 50,000. Option (b), (c) & (d), are not correct in this case.
So, option (a) is the right answer
24. Assets of the business are Rs.30, 000 and its capital is Rs.10, 000. Its liabilities on that date will be:
(a) Rs.30, 000.
(b) Rs.20, 000.
(c) Rs.10, 000.
(d) Rs.40, 000.
Liability = Asset – Capital. = (30,000 – 10,000) = Rs.20, 000. Option (a), (c) & (d), are not correct in this case.
So, option (b) is the right answer
25. Purchase of office furniture on credit results in –———-
(a) Increase in capital.
(b) Increase in assets.
(c) Decrease in liability.
(d) Increase in Asset & Liabilities.
Purchase of office furniture in Credit will result increase in Assets and increase in Liability (Creditors). Option (a), (c) & (d), are not correct in this case.
Hence (d) is the right option
26. If a car dealer buys a car for his personal use from out of business funds, the amount paid for the car will be treated as “drawings” of the dealer due to –
(a) Disclosure concept
(b) Going concern concept
(c) Business entity concept
(d) Periodicity concept.
According to Entity concept, business enterprise is a separate identity apart from its owner. That’s why Drawing Account is maintained for personal use of proprietor. Option (a), (b) & (d), are not correct in this case.
Hence (c) is the correct option.
