Theory Base of Accounting Test

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Theory Base of Accounting Test - 56

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Question 1
1 / -0

What is the maximum rate prescribed under CGST?

A
14%

B
28%

C
20%

D
18%

Solution

There are mainly five tax slabs under which GST is collected across nation
They are
1. 0% 2. 5% 3. 12% 4. 18% 5. 28%
Half Amount is collected by State GST and half by CGST
Therefore, the maximum rate prescribed under CGST is 14%.
Question 2
1 / -0

Commercial accounting is based on ________________.

A
Single entry book keeping

B
Double entry book keeping

C
Both single and double entry book keeping

D
Cash basis of book keeping

Solution

Double Entry System is one of the accounting system of the accountancy which states that every transaction shall have two effect i.e. for each debit there will be an equal and opposite credit.
Double Entry System is based on Dual Aspect which states the assets of the business are always equal to the total of liabilities and capital.
Question 3
1 / -0

Which one of the following is not an accounting convention?

A
Consistency

B
Full disclosure

C
Materiality

D
Secrecy
Solution
The common Accounting Conventions are
- Consistency
- Full Disclosure
- Materiality
There is no Accounting convention named as Secrecy.
Question 4
1 / -0

The cost of three small files (of Rs. 4 each) was charged to expenses when purchased even though they had a useful life of several years. This was done according to the concept of __________.

A
Cost principle

B
Conservatism principle

C
Full disclosure

D
Materiality

Solution

Materiality concepts defines that all business transaction must be recorded in the business by verifying the value of the transaction in comparison to the operations carried out in the business.
Business entity has to distinguish between the material and immaterial transactions as per the materiality concept. The transactions which have small values comparatively will not be considered material and are recorded as revenue items.
Question 5
1 / -0

Cost of asset should always be equal to the cost of the liabilities. This concept is _________________.

A
Matching Concept

B
Dual Aspect Concept

C
Consistency

D
Money Measurement Concept

Solution

Accounting is based on the dual system, hence for every debit, there will be a credit. In such a situation cost of assets will always be equal to the cost of liabilities.
Question 6
1 / -0

Concept of Realisation implies _____________.

A
When cash is received from debtors

B
When goods are delivered to customer

C
When order is received

D
None of the Above

Solution

Realization concept assumes that revenue is recognized only when there is a sale or transfer of the goods. Sales is complete only when title of the goods is passed on to the buyer.
Question 7
1 / -0

Land was reported at its selling price which is substantially higher than its cost. The increase in value was included in the income statement, which accounting principle is violated?

A
Cost principle

B
Going concern concept

C
Entity concept

D
Conservatism

Solution

The concept of conservatism provides guidance for recording transactions so that conscious approach can be adopted in ascertaining income so that profits of the enterprise are not overstated. Recording of the increase in the value in the income statement will overstate the profits and hence, the concept is violated.
Question 8
1 / -0

The convention of conservation is applicable in ____________.

A
providing for discount on creditors

B
making provision for bad debts and doubtful debts

C
making provision for depreciation

D
making provision for contingencies

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 9
1 / -0

LIFO inventory method was used in year I, FIFO in year II and weighted average in year III. Which accounting principle is violated?

A
Cost principle

B
Consistency

C
Materiality

D
No principle of accounting is violated

Solution

Consistency is a basic assumption on which it is assumed that various policies or methods adopted by the firms while preparing the accounts are consistent from one period to another. Hence, changing of the method is a violation of the consistency concept.
Question 10
1 / -0

Window dressing is prohibited due to __________.

A
Convention of conservation

B
Convention of disclosure

C
Convention of materiality

D
Accrual 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 order to ensure that the financial statements gives full, fair and true picture of the financial position. Any type of window dressing to give a better picture of the position will violate the convention of disclosure.

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Theory Base of Accounting Test - 56

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Theory Base of Accounting Test - 56

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SHARING IS CARING

Question 1

14%

28%

20%

18%

Solution

Question 2

Single entry book keeping

Double entry book keeping

Both single and double entry book keeping

Cash basis of book keeping

Solution

Question 3

Consistency

Full disclosure

Materiality

Secrecy

Solution

Question 4

Cost principle

Conservatism principle

Full disclosure

Materiality

Solution

Question 5

Matching Concept

Dual Aspect Concept

Consistency

Money Measurement Concept

Solution

Question 6

When cash is received from debtors

When goods are delivered to customer

When order is received

None of the Above

Solution

Question 7

Cost principle

Going concern concept

Entity concept

Conservatism

Solution

Question 8

providing for discount on creditors

making provision for bad debts and doubtful debts

making provision for depreciation

making provision for contingencies

Solution

Question 9

Cost principle

Consistency

Materiality

No principle of accounting is violated

Solution

Question 10

Convention of conservation

Convention of disclosure

Convention of materiality

Accrual concept

Solution

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