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Theory Base of Accounting Test - 14

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Theory Base of Accounting Test - 14
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Weekly Quiz Competition
  • Question 1
    1 / -0
    The letter 'R' denotes which word in the term IFRS?
    Solution
    IFRS stands for International Financial Reporting Framework 
  • Question 2
    1 / -0
    Which of the following is not regarded as the fundamental concept that is identified by AS-1?
    Solution
    The Fundamental Accounting concepts are
    1. Conservatism 
    2. Going Concern Concept
    3. Accrual Concept
  • Question 3
    1 / -0
    The policy to anticipate no profit and provide for all possible losses arises due to convention of ___________.
    Solution

    The concept of conservatism (also called ‘prudence’) provides guidance for recording transactions in the book of accounts and is based on the policy of playing safe. 

    The concept states that a conscious approach should be adopted in ascertaining income so that profits of the enterprise are not overstated. 

    The concept of conservatism requires that profits should not to be recorded until realised but all losses, even those which may have a remote possibility, are to be provided in the books of accounts.

  • Question 4
    1 / -0
    Revenue is considered as being earned, when _________.
    Solution
    Revenue are recognized when they are realized or realizable and are earned, no matter when cash is received. Usually, when goods are transferred or services rendered, revenue is considered as earned. 
    Hence, when sales is affected i.e increase in sales denotes revenue is generated.
  • Question 5
    1 / -0
    According to money measurement concept, which one of the following will be recorded in the books of accounts ___________________.
    Solution
    The concept of money measurement states that only those transactions and happenings in an organisation which can be expressed in terms of money such as sale of goods or payment of expenses or receipt of income, etc. are to be recorded in the book of accounts. 
    All such transactions or happenings which can not be expressed in monetary terms, for example, the appointment of a manager, capabilities of its human resources or creativity of its research department or image of the organisation among people in general do not find a place in the accounting records of a firm. 
    In the above case, only the cost of machinery is measurable in terms of money. Hence, only option (D) is acceptable for recording in the books of accounts.
  • Question 6
    1 / -0
    Revenue is generally recognized being earned at the point of time when __________.
    Solution
    Accounting is based on certain basic principles which are commonly known as GAAP. One of them is revenue recognition concept. It defines that revenue is recognized only when there is legal transfer of goods or asset. In fact, it is recognized only when sale is affected. 
  • Question 7
    1 / -0
    Assets in the balance sheet are shown at cost less depreciation rather than their replacement cost because of which accounting convention?
    Solution
    The concept of going concern assumes that a business firm would continue to carry out its operations indefinitely, i.e., for a fairly long period of time and would not be liquidated in the foreseeable future. This is an important assumption of accounting as it provides the very basis for showing the value of assets in the balance sheet.
    Conversely, this means the entity will not be forced to halt operations and liquidate its assets in the near term at what may be very low fire-sale prices.
    This the reason why, assets in the balance sheet are shown at cost less depreciation rather than their replacement cost.
  • Question 8
    1 / -0
    Accounting does not record non-financial transactions because of ________________.
    Solution
    The concept of money measurement states that only those transactions and happenings in an organisation which can be expressed in terms of money such as sale of goods or payment of expenses or receipt of income, etc. are to be recorded in the book of accounts. 
    All such transactions or happenings which can not be expressed in monetary terms, for example, the appointment of a manager, capabilities of its human resources or creativity of its research department or image of the organisation among people in general do not find a place in the accounting records of a firm. 
    Another important aspect of the concept of money measurement is that the records of the transactions are to be kept not in the physical units but in the monetary unit.
  • Question 9
    1 / -0
    Which is the accounting concept that required the practice of crediting closing stock to the trading account?
    Solution
    The concept of matching emphasis that expenses incurred in an accounting period should be be matched with revenues during that period. It follows from this that the revenue and expenses incurred to earn these revenue must belong to the same accounting period. 
  • Question 10
    1 / -0
    Stock is valued at ___________.
    Solution

    As per AS-2, Valuation of inventories prescribed the accounting treatment for inventories and sets the guidance to determine the value at which the inventories are carried in the financial statement. 

    Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs. 

    The cost of inventories should comprise all costs of purchase, Costs of conversion and other costs incurred in bringing  the inventories to their present location and condition. 

    As per AS-2, "Inventories should be valued at the lower of cost and net realisable value."

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