Theory Base of Accounting Test

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Theory Base of Accounting Test - 54

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Weekly Quiz Competition

Question 1
1 / -0

Book value & Market value of machinery on 31.3.2019 was Rs.1,00,000 & Rs.1,10,000 respectively. As on 31.3.2019, if the company values the machinery at Rs. 1,10,000, which of the following principle is not being followed _________________.

A
Historical Cost

B
Present Value

C
Realisable value

D
Current Cost

Solution

The historical cost concept states that an asset should be recorded at its purchase price.
Here, the Purchase price of the Machinery is Rs, 100,000 and the Machinery should be recorded at 100,000.
But it is valued at market value therefore, the Historical Cost Concept is being violated.
Question 2
1 / -0

State the case where the going concern concept is applied?

A
When an enterprise was set up for a particular purpose, which has been achieved, or to be achieved shortly

B
When a receiver or liquidator has been appointed in case of as a company which is to be liquidated.

C
Fixed assets are acquired for use in the business for earning revenues and are not meant for resale

D
When an enterprise is declared sick

Solution

Fixed assets are acquired for use in the business for earning revenues and are not meant for resale this is as per Going Concern Concept.
The life span of a fixed asset is more than 1 years and its includes plant, machinery, furniture etc.
Question 3
1 / -0

Accounting Standards in India are issued by _________________.

A
The Board of Studies - ICAI

B
The Accounting Standards Board-ICAI

C
The Expert Advisory Committee - ICAI

D
The International Accounting Standards Committee (IASC)

Solution

The Institute of Chartered Accountants of India (ICAI) constituted the Accounting Standards Board (ASB) on 21st April, 1977 ) to harmonise the diverse accounting policies and practices in use in India.
ASB of the ICAI has been issuing accounting standards.

Since then, it has issued 32 Accounting Standards so far.
Question 4
1 / -0

Which accounting principle is followed in adopting policy of making provision for doubtful debts @ 5% on debtors ?

A
Prudence

B
Substance over from

C
Materiality

D
All of these

Solution

The prudence principle is followed in adopting policy of making provision for doubtful debts @5% on debtors. Prudence principle or conservatism principle means all the expenses or possible losses should be recorded in advance, but incomes should not be recorded in advance.
Question 5
1 / -0

GST is a destination based tax on consumption of ______________.

A
goods

B
resources

C
services

D
both (A) & (C)

Solution

GST is a consumption based tax which is levied on the basis of “Destination principle.”
The concept relates to taxing the supply of goods or services at the point of consumption. It is a comprehensive tax regime covering both goods and services, and is collected on value-added at each stage of the supply chain.
Question 6
1 / -0

Materiality in accounting is decided __________________.

A
By the size of an item

B
By the knowledge as to whether an individual item is having a significant influence on financial statement

C
Solely by the discretion of the accountant

D
By the physical volume of the transaction

Solution

Materiality in accounting is decided by the knowledge as to whether an individual item is having a significant influence on financial statement
Question 7
1 / -0

Tick mark the correct answer.
The accounting measurement that is not consistent with the going concern concept is?

A
Realisation

B
Historical cost

C
Liquidation value

D
Continuity

Solution

Option C is correct.
Liquidation value is the concept of winding up of a business- no continuation of the activities henceforth- the going concern concept becomes irrelevant.
Question 8
1 / -0

Under GST, credit availed of all the taxes paid is termed as __________.

A
Round off

B
Net off

C
Set off

D
Cut off

Solution

GST is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as set off.
Question 9
1 / -0

GST will replace a major part of __________ taxes.

A
direct

B
indirect

C
foreign

D
all of the above

Solution

GST will replace a major part of indirect taxes. This law has replaced many indirect taxes like VAT, Service tax etc. in country. GST is one indirect tax for the entire country.
Question 10
1 / -0

A cooperative store having a turnover of Rs 10 lakh and profit of Rs 50,000 purchased locks costing Rs 12,000 for use in the shop. The accountant charged it in the P & L A/c or current year but auditor raised an objection saying that it should be capitalised. On which one of the following conventions could the accountant be defended?

A
Disclosure

B
Materiality

C
Conservatism

D
Consistency

Solution

Materiality is a convention of that relates to the importance and significance of any amount or transaction. Whether a transaction is material or not is determined by the concept of materiality. In the given question the auditor has to determine the materiality of the amount and check if correct treatment is done for the same.

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Theory Base of Accounting Test - 54

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Theory Base of Accounting Test - 54

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SHARING IS CARING

Question 1

Historical Cost

Present Value

Realisable value

Current Cost

Solution

Question 2

When an enterprise was set up for a particular purpose, which has been achieved, or to be achieved shortly

When a receiver or liquidator has been appointed in case of as a company which is to be liquidated.

Fixed assets are acquired for use in the business for earning revenues and are not meant for resale

When an enterprise is declared sick

Solution

Question 3

The Board of Studies - ICAI

The Accounting Standards Board-ICAI

The Expert Advisory Committee - ICAI

The International Accounting Standards Committee (IASC)

Solution

Question 4

Prudence

Substance over from

Materiality

All of these

Solution

Question 5

goods

resources

services

both (A) & (C)

Solution

Question 6

By the size of an item

By the knowledge as to whether an individual item is having a significant influence on financial statement

Solely by the discretion of the accountant

By the physical volume of the transaction

Solution

Question 7

Realisation

Historical cost

Liquidation value

Continuity

Solution

Question 8

Round off

Net off

Set off

Cut off

Solution

Question 9

direct

indirect

foreign

all of the above

Solution

Question 10

Disclosure

Materiality

Conservatism

Consistency

Solution

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