Self Studies
Self Studies
Self Studies
Self Studies

Theory Base of Accounting Test - 27

Result Self Studies

Theory Base of Accounting Test - 27
  • Score

    -

    out of -
  • Rank

    -

    out of -
TIME Taken - -
Self Studies

SHARING IS CARING

If our Website helped you a little, then kindly spread our voice using Social Networks. Spread our word to your readers, friends, teachers, students & all those close ones who deserve to know what you know now.

Self Studies Self Studies
Weekly Quiz Competition
  • Question 1
    1 / -0
    The _______concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.
    Solution
    The accounting information provided by the financial statements would be useful in drawing conclusions regarding the working of an enterprise only when it allows comparisons over a period of time as well as with the working of other enterprises. 
    Thus, both inter-firm and inter-period comparisons are required to be made. This can be possible only when accounting policies and practices followed by enterprises are uniform and are consistent over the period of time.
    Hence, the consistency concept states that, if Straight Line Method of depreciation is used in one year, then it should also be used in the next year.
  • Question 2
    1 / -0
    A firm may hold stock which is heavily in demand. 
    Consistently, the market value of this stock may be increased. 
    Normal accounting procedure is to ignore this because of___________concept.
    Solution
    A firm may hold stock which is heavily in demand. Consistently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of conservatism principle. 
    The convention of conservatism mean that the convention of caution, or the policy of playing safe. This principle requires that in the situation of uncertainty and doubt, the business transactions should be recorded in such a manner that the profits and assets are not overstated and losses and liabilities are not understated.
  • Question 3
    1 / -0
    Revenue is generally recognised at the point of sale denotes the concept of _______.
    Solution

    The revenue recognition principle is a cornerstone of accrual accounting together with the matching principle. They both determine the accounting period in which revenues and expenses are recognized. 

    According to the principle, revenues are recognized when they are realized or realizable, and are earned (usually when goods are transferred or services rendered), no matter when cash is received.

    In conclusion, the revenue shall be recognized at the point where sale is made, and not when the cash is received.

  • Question 4
    1 / -0
    The management of a firm is remarkably incompetent, but the firms accountants cannot take this into account while preparing book of accounts because of ____________concept.
    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, do not find a place in the accounting records of a firm.
    Hence, in the above case, the incompetence of management of the firm, not being measurable in monetary terms, will not be recorded in the books of accounts.
  • Question 5
    1 / -0
    If a firm believes that some of its debtors may default, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the______concept.
    Solution

    The convention of conservatism mean that the convention of caution, or the policy of playing safe. This principle requires that in the situation of uncertainty and doubt, the business transactions should be recorded in such a manner that the profits and assets are not overstated and losses and liabilities are not understated. The following are some examples:

    1. Closing stock is valued at cost price or Net realisable value, whichever is lower.

    2. Joint life insurance policy  is shown only at surrender value as against the amount paid.

    3. Provision for doubtful debt is created in anticipation of bad debts etc.

    4. Provision for pending law suit against the firm, which may either be decided in its favour.

  • Question 6
    1 / -0
    The_______concept requires that accounting transaction should be free from the bias of accountants and others.
    Solution
    The objectivity concept requires that accounting transaction should be free from the bias of accountants and others. 
    This principle states that accounts should be prepared independently of biases and subjective methods. 
    This can be possible when each of the transaction is supported by verifiable documents or vouchers.
  • Question 7
    1 / -0
    The fact that a business is separate from its owner is best exemplified by the ________ concept.
    Solution
    The concept of business entity assumes that business has a distinct and separate entity from its owners. It means that for the purposes of accounting, the business and its owners are to be treated as two separate entities. Keeping this in view, when a person brings in some money as capital into his business, in accounting records, it is treated as liability of the business to the owner. 
    Here, one separate entity (owner) is assumed to be giving money to another distinct entity (business unit). 
    Similarly, when the owner withdraws any money from the business for his personal expenses(drawings), it is treated as reduction of the owner’s capital and consequently a reduction in the liabilities of the business.
  • Question 8
    1 / -0
    If a firm receives an order for goods, it would not be included in the sales figure owing to_____________concepts.
    Solution
    If a firm receives an order for goods, it would not be included in the sales figure owing to Revenue recognition concepts.  
    According, to this concept revenue can only be recognized when the underlying goods or services associated with the revenue has been delivered or rendered, respectively. Hence, in the given case sale will be recorded in the books, when goods are delivered.
  • Question 9
    1 / -0
    What is entity concept?
    Solution
    The concept of business entity assumes that business has a distinct and separate entity from its owners. It means that for the purposes of accounting, the business and its owners are to be treated as two separate entities. 
    Keeping this in view, when a person brings in some money as capital into his business, in accounting records, it is treated as liability of the business to the owner. 
    Here, one separate entity (owner) is assumed to be giving money to another distinct entity (business unit). 
    Similarly, when the owner withdraws any money from the business for his personal expenses(drawings), it is treated as reduction of the owner’s capital and consequently a reduction in the liabilities of the business.
  • Question 10
    1 / -0
    Concept under which comparison of one accounting period with the other period is possible is known as ___________ .
    Solution
    The accounting information provided by the financial statements would be useful in drawing conclusions regarding the working of an enterprise only when it allows comparisons over a period of time as well as with the working of other enterprises. 
    Thus, both inter-firm and inter-period comparisons are required to be made. This can be possible only when accounting policies and practices followed by enterprises are uniform and are consistent over the period of time.
Self Studies
User
Question Analysis

  • Correct -

  • Wrong -

  • Skipped -

My Perfomance
  • Score

    -

    out of -
  • Rank

    -

    out of -
Re-Attempt Weekly Quiz Competition
Self Studies Get latest Exam Updates
& Study Material Alerts!
No, Thanks
Self Studies
Click on Allow to receive notifications
Allow Notification
Self Studies
Self Studies Self Studies
To enable notifications follow this 2 steps:
  • First Click on Secure Icon Self Studies
  • Second click on the toggle icon
Allow Notification
Get latest Exam Updates & FREE Study Material Alerts!
Self Studies ×
Open Now