Theory Base of Accounting Test

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Theory Base of Accounting Test - 50

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Question 1
1 / -0

The adjusting process is based on two accounting principles; The two accounting principles are _______________.

A
Realization and recognition

B
Revenue recognition and matching

C
Cost and business entity

D
Continuing-concern and realization

Solution

The revenue recognition (realization) principle states that the income should be recognised when it is earned;
the matching principle states that expenses shall be reported in the same time period when the respective revenue is recognised.
Question 2
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Mr Nachiket, the owner of Furniture Shop, owns a personal residence that cost Rs. 6,00,000 but has a market value of Rs. 9,00,000. During preparation of the financial statement for the business, the entire value of the property was ignored and was not shown in the financial statements. The principle that was followed was __________________.

A
The concept of the business entity

B
The concept of the cost principle

C
The concept of going concern principle

D
The concept of duality principe

Solution

The concept of the business entity states that the businessman is considered separate from the business. Therefore, the owner personal property shall not form part of business and vice versa.
Therefore, due to Business Entity Concept, the personal residence of the owners is not in the preparation of financial Statement.
Question 3
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The standard given by ICAI for calculation of depreciation is ________.

A
Accounting standard 5 depreciation accounting

B
Accounting standard 6 depreciation accounting

C
Accounting standard 7 depreciation accounting

D
Accounting standard 4 depreciation accounting

Solution

The Institute of Chartered Accountant of India (ICAI) has issued Accounting standard 6 is for depreciation accounting.
It defines how the depreciation will be charged on various kinds of assets.
Depreciation is decrease in the value of the assets due to wear and tear, effluxion of time or obsolescence through technology or market changes etc.
Question 4
1 / -0

Purpose of an accounting system include all the following except _______________________.

A
Interpret and record the effects of business transaction

B
Classify the effects of transactions to facilitate the preparation of reports

C
Summarize and communicate information to decision makers

D
Dictate the specific types of business enterprise transactions that the enterprises may engage in.

Solution

The purpose of an accounting system includes all the following except Dictate the specific types of business enterprise transactions that the enterprises may engage in. Accounting systems never restrict the business to engage in any kind of transaction.
Accounting System is built to facilitate the business in the smooth recording of the transaction.
Question 5
1 / -0

The correct concept of double entry book keeping states that ___________.

A
for every goods received on credit, the seller becomes your creditor

B
for every debit entry, there must be a corresponding credit entry

C
for every seller, there must be a buyer

D
one party receives and another party gives value

Solution

The correct concept of double entry book keeping states that for every debit entry, there must be a corresponding credit entry
Question 6
1 / -0

Amit is recording sales transactions in the accounting system so that they can be summarized in a logical manner for the purpose of providing the financial statements for decision-making. Amit is doing________.

A
Management Consulting

B
Review

C
Accounting

D
Auditing

Solution

Accounting is the process of identifying, recording, classifying, summarizing, interpreting, analysing and communicating the financial transaction in the books of accounts.
Therefore, Accounting involves recording business transactions.
Here, Amit is recording some sales transactions. Therefore, Amit is doing accounting.
Question 7
1 / -0

Ashok a cloth merchant buys cloth for Rs. $$50,000$$ paying cash Rs. $$20,000$$. What is the amount of expense as per accrual concept?

A
$$50,000$$

B
$$20,000$$

C
$$30,000$$

D
Nil

Solution

Business transactions are recorded when they occur and not when the related payments are received or made.
Hence purchases to be booked for Rs.50000.
Accounting entry will be as under:

Purchases A/c Dr. Rs.50000
To Cash Rs.20000
To Creditors Rs.30000
Question 8
1 / -0

Which accounting concept is applicable to record a transaction entered between owner and business?

A
Productivity

B
Going concern

C
Prudence

D
Business entity

Solution

Business Entity Concept:
In accounting business organization and owners are two different identity. Thus business has its own existence separate from owners, creditors etc. This concept is called business entity concept. It means that personal transactions of owners are treated separately from those of the business. Therefore any personal expenses incurred by owners of a business will not appear in the income statement of the entity.
Question 9
1 / -0

Which accounting system best reflect the time picture of organization?

A
Accrual system of accounting

B
Cash system of accounting

C
Receipts & expenditure accounts

D
All of the above

Solution

Under the accrual basis, revenues and costs are recognised in the period in which they occur rather when they are paid.
Accrual basis of accounting is suitable for large corporations
This accounting system best reflect the time picture of organization.
Question 10
1 / -0

In accrual system of accounting ______________________.

A
Revenues are taken care of irrespective whether cash is received or not

B
Cost incurred during the period is taken care of

C
Both a & b

D
Cost of last financial period is only taken care of

Solution

In the accrual system of accounting, Revenues are recorded irrespective of whether cash is received or not and in the same way, the cost incurred during the period is taken care of and recorded in the same period.
Therefore, Both a and b are correct.

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Theory Base of Accounting Test - 50

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Theory Base of Accounting Test - 50

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SHARING IS CARING

Question 1

Realization and recognition

Revenue recognition and matching

Cost and business entity

Continuing-concern and realization

Solution

Question 2

The concept of the business entity

The concept of the cost principle

The concept of going concern principle

The concept of duality principe

Solution

Question 3

Accounting standard 5 depreciation accounting

Accounting standard 6 depreciation accounting

Accounting standard 7 depreciation accounting

Accounting standard 4 depreciation accounting

Solution

Question 4

Interpret and record the effects of business transaction

Classify the effects of transactions to facilitate the preparation of reports

Summarize and communicate information to decision makers

Dictate the specific types of business enterprise transactions that the enterprises may engage in.

Solution

Question 5

for every goods received on credit, the seller becomes your creditor

for every debit entry, there must be a corresponding credit entry

for every seller, there must be a buyer

one party receives and another party gives value

Solution

Question 6

Management Consulting

Review

Accounting

Auditing

Solution

Question 7

$$50,000$$

$$20,000$$

$$30,000$$

Nil

Solution

Question 8

Productivity

Going concern

Prudence

Business entity

Solution

Question 9

Accrual system of accounting

Cash system of accounting

Receipts & expenditure accounts

All of the above

Solution

Question 10

Revenues are taken care of irrespective whether cash is received or not

Cost incurred during the period is taken care of

Both a & b

Cost of last financial period is only taken care of

Solution

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