Theory Base of Accounting Test

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Theory Base of Accounting Test - 37

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Question 1
1 / -0

According to the Money Measurement Concept which of the following will be recorded in the books of accounts?

A
Quality control in business

B
Commission payable to salesman

C
Extra profits made due to introduction of a budgetary control system

D
All of the above

Solution

According to money measurement concept, the commission payable to salesman will be recorded in the books of accounts.
Quality control in business, extra profits made due to introduction of a budgetary control system are qualitative in nature and cannot be recorded, as according to money measurement concept, only those transactions which can be measured in terms of money are recorded in the books of accounts.
Question 2
1 / -0

An obligation of the entity to owner's is treated as a liability in the balance sheet according to ___________.

A
Going concern concept

B
Dual aspect concept

C
Business entity concept

D
All of the above

Solution

According to Business Entity Concept, a business is treated as a separate entity and is distinct from it's owners. When a proprietor introduces capital in his own business, the capital is considered as liability from business point of view. Similarly, when he withdraws any money for personal use it is treated as reduction in the liability of business.
Question 3
1 / -0

Market value of investments is shown as a footnote according to __________.

A
Convention of disclosure

B
Convention of consistency

C
Convention of conservatism

D
All of the above

Solution

According to convention of full disclosure, the financial statements should disclose all reliable and relevant information which is necessary for the users. Various items of facts which do not find place in accounting statements are shown in balance sheet by way of Footnote and it includes a note for contingent liability, Change in method of depreciation, Market value of investment etc.
Question 4
1 / -0

Which is/are limitation of Accounting Standards?

A
The choice between different alternative accounting treatments is difficult.

B
There may be trend towards rigidity.

C
Accounting Standards cannot override the statute.

D
All of the above.

Solution

The limitations of accounting standards are:
1. Accounting standard makes choice between different alternate accounting treatments difficult to apply.
2. It is rigidly followed and fails to extend flexibility in applying accounting standards.
3. Accounting standard cannot override the statue. The standards are required to be farmed within the ambit of prevailing status
Question 5
1 / -0

Measurements discipline deals with ____________.

A
Identification of objects and events

B
Selection of scale

C
Evaluation of dimension of measurement scale

D
All of the above

Solution

Primarily transactions and events are measured in terms of Money. Any measurement discipline deals with three basic elements of measurement, viz., identification of objects and events to be measured, selections of standard or scale to be used, evaluation of dimension of measurement standards or scale.
Question 6
1 / -0

Under which of the following concept shareholders are treated as creditors for the amount they paid on the shares they subscribed to?

A
Cost concept

B
Duality concept

C
Business entity concept

D
Going concern concept

Solution

Under the business entity concept, shareholders are treated as creditors for the amount they paid on the shares they subscribed for, even though they are the owners of the business. Business entity is an accounting concept which suggests that, business has a separate legal identity from its owner. The concept states that, the enterprise should record transaction separately for those of the business and the owner.
Question 7
1 / -0

Accounting Standards refer to specific accounting _________.

A
Principles

B
Methods of applying those principles

C
Both (A) and (B)

D
None of these

Solution

Accounting Standards refer to specific accounting principles and methods of applying those principles.
In India, Accounting Standards are issued by the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI)
Question 8
1 / -0

Disclosing essential information in accounting observes the principle of _________.

A
Matching

B
Consistency

C
Full disclosure

D
Conservatism

Solution

The principle of full disclosure requires that all material and relevant facts concerning financial performance of an enterprise must be fully and completely disclosed in the financial statements and their accompanying footnotes.
This is to enable the users to make correct assessment about the profitability and financial soundness of the enterprise and help them to take informed decisions.
Question 9
1 / -0

Mr. $$A$$ purchased goods for Rs. $$15,00,000$$ and sold 4/5th of the goods amounting to Rs. $$20,00,000$$ and met expenses amounting to Rs. $$2,50,000$$ during the year. His net profit is Rs. $$5,50,000$$. Which of the accounting concepts was followed by him?

A
Entity

B
Periodicity

C
Matching

D
Conservatism

Solution

As per Matching Concept, all the respective expenses are matched with their revenue.
Here, the cost of goods purchased is 15,00,000 but only 4/5 is sold i.e. 15,00,000x4/5 = 12,00,000.
Other expenses are 250,000.
Revenue for the period is 20,00,000
Therefore, Net Profit = 20,00,000 - 12,00,000-250,000
= 550,000
Therefore, the matching concept is being followed over here as revenues of the period are being matched with respective expenses.
.
Question 10
1 / -0

The underlying accounting principle(s) necessitating amortization of intangible asset(s) is/are __________.

A
cost concept

B
Realization concept

C
Matching concept

D
All of the above

Solution

The underlying accounting principle necessitating amortization of intangible assets is Matching concept.
In accrual accounting, matching concept states that expenses should be recorded during the period in which they are incurred, regardless of when cash transfer incurs.

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Theory Base of Accounting Test - 37

Result

Theory Base of Accounting Test - 37

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Rank

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SHARING IS CARING

Question 1

Quality control in business

Commission payable to salesman

Extra profits made due to introduction of a budgetary control system

All of the above

Solution

Question 2

Going concern concept

Dual aspect concept

Business entity concept

All of the above

Solution

Question 3

Convention of disclosure

Convention of consistency

Convention of conservatism

All of the above

Solution

Question 4

The choice between different alternative accounting treatments is difficult.

There may be trend towards rigidity.

Accounting Standards cannot override the statute.

All of the above.

Solution

Question 5

Identification of objects and events

Selection of scale

Evaluation of dimension of measurement scale

All of the above

Solution

Question 6

Cost concept

Duality concept

Business entity concept

Going concern concept

Solution

Question 7

Principles

Methods of applying those principles

Both (A) and (B)

None of these

Solution

Question 8

Matching

Consistency

Full disclosure

Conservatism

Solution

Question 9

Entity

Periodicity

Matching

Conservatism

Solution

Question 10

cost concept

Realization concept

Matching concept

All of the above

Solution

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