Accounting Equation Effects Test 19

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Accounting Equation Effects Test 19

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Weekly Quiz Competition

Question 1
1 / -0

Inventory valuation method is guided by which of the following accounting concept ______________.

A
Business entity

B
Conservatism

C
Materiality

D
Double entry

Solution

The concept of conservatism (also called ‘prudence’) provides guidance for recording transactions in the book of accounts and is based on the policy of playing safe.
The concept of conservatism requires that profits should not to be recorded until realised but all losses, even those which may have a remote possibility, are to be provided in the books of accounts.
On the basis of this concept, inventories should be valued at the lower of, cost and net realisable value.
Question 2
1 / -0

Notes to financial statement about law suits, contractual commitment etc. are required to be shown in the financial statement by way of footnote or in notes to accounts under which of the following principles?

A
Disclosure Concept

B
Window Dressing

C
CA Institutes Requirement

D
Consistency Principles
Question 3
1 / -0

Postponement of anticipated gains is an application of

A
Conservatism concept

B
Dual concept

C
Going concern

D
Disclosure
Question 4
1 / -0

According to money measurement concept which of the following will be recorded in the books of account?

A
Health of the chairman of the company

B
Quality control in the business

C
Value of the building

D
All 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.
Hence, amongst the above, only value of building shall be recorded in the books of accounts.
Question 5
1 / -0

When applied to the balance sheet, the convention of conservatism results in __________.

A
Understatement of assets

B
Understatement of liabilities and provisions

C
Overstatement of capital

D
All of these

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.
Principle of conservatism should be used very cautiously as it may disclose the lower profits in comparison to the actual profits. Balance sheet will disclose understatement of assets and overstatement of liabilities in comparison to actual values.
Question 6
1 / -0

The equality of Total Assets and Total Liability is known as........

A
Accounting equation

B
Accounting concept

C
Accounting jugglery

D
Accounting practice

Solution

When all the assets are equal to the total of all liabilities and capital then the accounting equation is satisfied.
As per the Accounting equation
Total Assets = Total Liabilities + Capital
Capital is also liability for the business
Therefore, The equality of Total Assets and Total Liability is known as Accounting Equation.
Question 7
1 / -0

The concept of Disclosure is applicable to ..

A
All material and immaterial transactions

B
Only material transactions

C
Transactions reducing profit only

D
None

Solution

Concept of Disclosure states that only those matter should be disclosed in the financial which may change the decision making of the users of the financial statement. Therefore, Only material transactions is to be disclosed as per this concept.
Question 8
1 / -0

The practice of appending note regarding contingent liabilities in the accounting statements is in pursuant to __________.

A
convention of consistency

B
money measurement concept

C
convention of disclosure

D
none of the above

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 9
1 / -0

The basis of revenue recognition often used in hire-purchase transaction is____________.

A
Cash basis

B
Sales basis

C
Production basis

D
None of these

Solution

The basis of revenue recognition often used in hire purchase transaction is cash basis. In case of hire purchase system the amount is received in instalment hence, revenue is recognised on cash basis,
Question 10
1 / -0

Cost concept envisages the recording of which of the following in the books of accounts?

A
An asset at its cost

B
Knowledge and will acquired by the business executive

C
Changes effected because of some political events

D
All of the above

Solution

Cost concept envisages the recording of an asset at its cost. Cost concept also known as historical cost concept states that the asset should be recorded at the cost at which it was acquired i.e., Historical cost. Knowledge acquired can not be recorded in books of accounts because it can not be expressed in monetary terms.

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Re-Attempt Weekly Quiz Competition

Accounting Equation Effects Test 19

Result

Accounting Equation Effects Test 19

Score

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Rank

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SHARING IS CARING

Question 1

Business entity

Conservatism

Materiality

Double entry

Solution

Question 2

Disclosure Concept

Window Dressing

CA Institutes Requirement

Consistency Principles

Question 3

Conservatism concept

Dual concept

Going concern

Disclosure

Question 4

Health of the chairman of the company

Quality control in the business

Value of the building

All of the above

Solution

Question 5

Understatement of assets

Understatement of liabilities and provisions

Overstatement of capital

All of these

Solution

Question 6

Accounting equation

Accounting concept

Accounting jugglery

Accounting practice

Solution

Question 7

All material and immaterial transactions

Only material transactions

Transactions reducing profit only

None

Solution

Question 8

convention of consistency

money measurement concept

convention of disclosure

none of the above

Solution

Question 9

Cash basis

Sales basis

Production basis

None of these

Solution

Question 10

An asset at its cost

Knowledge and will acquired by the business executive

Changes effected because of some political events

All of the above

Solution

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