Theory Base of Accounting Test

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Theory Base of Accounting Test - 58

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Weekly Quiz Competition

Question 1
1 / -0

A business has the following items in it:
Land - $$Rs 1000000$$
Machinery - $$Rs 20000$$
Cash - $$Rs 10000$$
Debt - $$Rs 0$$
Owner's equity will be _____________.

A
$$Rs. 1020000$$

B
$$Rs. 1010000$$

C
$$Rs. 1030000$$

D
None of the above

Solution

Accounting equation can be termed as:

Total Assets = Owner's Equity(Capital) + Liabilities
Owner's Equity = Total Assets
Owner's Equity = Land+Machinery+Cash
Owner's Equity = 1000000+20000+10000
Owner's Equity = 1030000.
Question 2
1 / -0

The basic concepts related to P & L A/c are ________________.

A
Realization Concept

B
Matching Concept

C
Cost Concept

D
Both A and B above

Solution

Realization concept assumes that the revenue is recognized only when there is sale or transfer of goods or assets. Sale is complete when the title of goods is passed on to the buyer.

Matching concept is based on accounting period concept. It assumes that all transactions relating to income & expenses must be recorded in the books of accounts based on the accounting period followed by the business. Hence all adjustment entries like outstanding expenses, prepaid expenses are to be passed in books of account to get the correct profitability.
Question 3
1 / -0

The concept of separate entity is applicable to which of following types of business?

A
Sole proprietorship

B
Corporation

C
Partnership

D
All of them

Solution

The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.
Question 4
1 / -0

Goods and Service Tax (GST) is a consolidation of many ________ already levels in India.

A
Direct taxes

B
Indirect taxes

C
Special additional duties

D
Countervailing duties (CVD)

Solution

GST is an indirect tax which has replaced many indirect taxes in India.
On 29th March 2017 Parliament has passed Goods & Services Tax Act in India. It has came in to effect from 1st July 2018. Goods and Services Tax is levied on supply of goods and services. It has replaced many indirect taxes like VAT, CST, Service Tax, Entertainment Tax, Entry Tax, Custom duty are abolished.
Question 5
1 / -0

A business has following items:
Vehicles Rs 600,000,
Debtors Rs 1,20,000,
Cash Rs 30,000,
Owner's Equity Rs 10,00,000
Loan Rs 5,00,000,
Creditors Rs 50,000
Value of the land is ____________.

A
$$Rs.1,000,000$$

B
$$Rs.1,550,000$$

C
$$Rs.8,00,000$$

D
None of these

Solution

Total assets = Total liabilities
Total liabilities = Owner's equity + Loan + Creditor
Total liabilities = $$ Rs.10,00,000$$ + $$ Rs.5,00,000$$ + $$ Rs.50,000$$
Total liabilities = $$ Rs.15,50,000$$
Hence, Total liabilities = $$ Rs.15,50,000$$
Total assets = Land + Vehicle + Debtors + Cash
$$ Rs.15,50,000$$ = Land + $$ Rs.6,00,000$$ + $$ Rs.1,20,000$$ + $$ Rs.30,000$$
Therefore, Land = $$ Rs.8,00,000$$
Question 6
1 / -0

The immediate recognition of loss is supported by principle of __________.

A
Matching

B
Conservatism

C
Consistency

D
Objective

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 7
1 / -0

A business has the following items in it:
Owner's equity - $$Rs. 600000$$
Liabilities - $$Rs. 1400000$$
What is the value of Assets will be __________.

A
$$Rs.600000$$

B
$$Rs.1400000$$

C
$$Rs.2000000$$

D
None of these

Solution

Accounting equation can be termed as:

Owner's Equity+Liabilities= Total Assets
600000+1400000= Total Assets
Total Assets =Rs.2000000.
Question 8
1 / -0

A business has the following items in it:
Land Rs 1,500,000
Machinery Rs 80,000
Cash Rs 20,000
Owners equity Rs 900,000
Loan Rs 500,000
Creditors?

A
$$Rs.2,00,000$$

B
$$Rs.7,00,000$$

C
$$Rs.8,00,000$$

D
$$Rs.1,100,000$$

Solution

Total assets = Total liability
Total assets = Land + Machinery + Cash
Total assets = $$ Rs.15,00,000$$ + $$ Rs.80,000$$ + $$ Rs.20,000$$ = $$ Rs.16,00,000$$
Hence, Total Liability = $$ Rs.16,00,000$$
Total liability = Owner's equity + Loan + Creditor
$$ Rs.16,00,000$$ = $$ Rs.9,00,000$$ + $$ Rs.5,00,000$$ + Creditor
Therefore, Creditor = $$ Rs.2,00,000$$.
Question 9
1 / -0

Financial information is said to be __________ if its misstatement influences the decision making of the users on the basis of that information.

A
Relevant

B
Reliable

C
Material

D
Immaterial

Solution

Financial statements items are material if they could influence the economic decisions of users. The materiality concept is the universally accepted accounting principle that all material matters are to be disclosed. Financial information is said to be material if its misstatement influences the decision making of the users on the basis of that information.
Question 10
1 / -0

An old car having a book value of Rs. 50,000 on 1st April 2013 and having a market value of Rs.10,000 as on 31st March 2014 is reported in the financial statement at Rs. 45,000 after charging depreciation of Rs. 5000. The company is following ______ method of valuation.

A
Historical cost

B
Present value

C
Realizable cost

D
Current cost

Solution

Cost concept of accounting defines that all transactions must be recorded in the books of account at cost i.e. cost incurred at the time of incurring the transaction. This cost will be the base for future and shall not be affected by the market value.

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Theory Base of Accounting Test - 58

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Theory Base of Accounting Test - 58

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Question 1

$$Rs. 1020000$$

$$Rs. 1010000$$

$$Rs. 1030000$$

None of the above

Solution

Question 2

Realization Concept

Matching Concept

Cost Concept

Both A and B above

Solution

Question 3

Sole proprietorship

Corporation

Partnership

All of them

Solution

Question 4

Direct taxes

Indirect taxes

Special additional duties

Countervailing duties (CVD)

Solution

Question 5

$$Rs.1,000,000$$

$$Rs.1,550,000$$

$$Rs.8,00,000$$

None of these

Solution

Question 6

Matching

Conservatism

Consistency

Objective

Solution

Question 7

$$Rs.600000$$

$$Rs.1400000$$

$$Rs.2000000$$

None of these

Solution

Question 8

$$Rs.2,00,000$$

$$Rs.7,00,000$$

$$Rs.8,00,000$$

$$Rs.1,100,000$$

Solution

Question 9

Relevant

Reliable

Material

Immaterial

Solution

Question 10

Historical cost

Present value

Realizable cost

Current cost

Solution

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