Theory Base of Accounting Test

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Theory Base of Accounting Test - 45

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Question 1
1 / -0

In case where installation fees are other than incidental to the sale of a product, they should be recognized as revenue _____________________.

A
When the order for installation of equipment is received

B
When the advance for installation work to be done is received

C
When the equipment is installed and accepted by the customer

D
All of the above

Solution

In cases where installation fees are other than incidental to the sale of a product, they should be recognised as revenue only when the equipment is installed and accepted by the customer. Revenue should be recognised when the service is completed.
Question 2
1 / -0

Market value of investment is shown as a foot note to Balance Sheet according to ________________.

A
Consistency concept

B
Disclosure concept

C
Materiality concept

D
Going concern concept

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 3
1 / -0

Window dressing is prohibited due to____________________.

A
Convention of conservatism

B
Convention of disclosure

C
Convention of materially

D
Accrual concept

Solution

In window dressing, accountant or businessman changes the information in accounting records for getting benefits from outside parties. So, as per convention of disclosure, it should be prohibited.
Question 4
1 / -0

Which one of the following is an ingredient of the entity convention of accounting?

A
The owner of a unit and the unit itself is one and the same

B
The owner and the unit are treated separately

C
No separate accounts for the unit is required

D
The unit is a private affair of the owner, hence no accounting is required

Solution

Business Entity Concept states that the business man is separate from the business. Thus, the amount invested by the owner in the business is known as the capital and is liability for the business. This is a universal to all the forms of business whether it is sole proprietorship, partnership firm or a joint stock company.
Therefore, the owner and business are treated separate.
Question 5
1 / -0

According to Money measurement concept, the following will be recorded in the books of accounts.

A
Quality control in business

B
Commission payable to salesman

C
Extra profit due to introduction of a budgetary control system

D
All of these

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, only commission payable to salesman will be recorded in the books of accounts.
Question 6
1 / -0

According to which of the following accounting concepts, even then the proprietor of a business is treated as a creditor to the extend of his capital.

A
Money Measurement Concept

B
Cost Concept

C
Dual aspect concept

D
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.
Hence, the proprietor of a business is treated as a creditor to the extend of his capital.
Question 7
1 / -0

The convention of conservatism will have the effect of _________________.

A
Over statement of assets

B
Under statement of assets

C
Under statement of provisions for bad and doubtful debts

D
None of the above

Solution

The convention of conservatism is 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 8
1 / -0

Qualitative transaction are not recorded in accounts due to _____________.

A
Dual aspect concept

B
Accrual concept

C
Money Measurement concept

D
None of the above

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.
Question 9
1 / -0

According to which of the following concepts in determining the net income from the business, all costs which are applicable to revenue of the period should be charged against that revenue.

A
Matching Concept

B
Cost Concept

C
Money Measurement Concept

D
Dual aspect Concept

Solution

The matching principle requires that revenues and any related expenses be recognized together in the same reporting period. Thus, if there is a cause-and-effect relationship between revenue and certain expenses, then record them at the same time. If there is no such relationship, then charge the cost to expense at once.
This is one of the most essential concepts in accrual accounting, since it mandates that the entire effect of a transaction be recorded within the same reporting period.
Question 10
1 / -0

Making provision for an expected loss or expenses in an approved practice in a business house. This is justified on the principle of _____________.

A
Conservatism

B
Cost

C
Industry pratice

D
Verifiable objective

Solution

The convention of conservatism is 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.

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Re-Attempt Weekly Quiz Competition

Theory Base of Accounting Test - 45

Result

Theory Base of Accounting Test - 45

Score

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Rank

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SHARING IS CARING

Question 1

When the order for installation of equipment is received

When the advance for installation work to be done is received

When the equipment is installed and accepted by the customer

All of the above

Solution

Question 2

Consistency concept

Disclosure concept

Materiality concept

Going concern concept

Solution

Question 3

Convention of conservatism

Convention of disclosure

Convention of materially

Accrual concept

Solution

Question 4

The owner of a unit and the unit itself is one and the same

The owner and the unit are treated separately

No separate accounts for the unit is required

The unit is a private affair of the owner, hence no accounting is required

Solution

Question 5

Quality control in business

Commission payable to salesman

Extra profit due to introduction of a budgetary control system

All of these

Solution

Question 6

Money Measurement Concept

Cost Concept

Dual aspect concept

Entity concept

Solution

Question 7

Over statement of assets

Under statement of assets

Under statement of provisions for bad and doubtful debts

None of the above

Solution

Question 8

Dual aspect concept

Accrual concept

Money Measurement concept

None of the above

Solution

Question 9

Matching Concept

Cost Concept

Money Measurement Concept

Dual aspect Concept

Solution

Question 10

Conservatism

Cost

Industry pratice

Verifiable objective

Solution

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