Accounting Equation Effects Test 43

Result

Accounting Equation Effects Test 43

Score
-
out of -
Rank
-
out of -

TIME Taken - -

SHARING IS CARING

If our Website helped you a little, then kindly spread our voice using Social Networks. Spread our word to your readers, friends, teachers, students & all those close ones who deserve to know what you know now.

Weekly Quiz Competition

Question 1
1 / -0

According to which of the following principles all costs which are applicable to revenue of the period should be charged against that revenue?

A
Materiality

B
Full disclosure

C
Conservatism

D
Matching

Solution

The process of ascertaining the amount of profit earned or the loss incurred during a particular period involves deduction of related expenses from the revenue earned during that period.
The matching concept emphasises exactly on this aspect. It states that expenses incurred in an accounting period should be matched with revenues during that period.
It follows from this that the revenue and expenses incurred to earn these revenues must belong to the same accounting period.
Question 2
1 / -0

On 31st Dec. 2006 assets of the business are Rs.3,00,000 and its capital is Rs.1,00,000. Its liabilities on that date will be __________.

A
Rs. $$4,00,000$$

B
Rs. $$2,00,000$$

C
Rs. $$1,00,000$$

D
none of the above

Solution

As per Accounting equation,
Assets = liabilities + Capital
300,000 = Liabilities + 100,000
Liabilities = 200,000
Question 3
1 / -0

The principle to anticipate no profit and provide for all possible losses emanates from the ___________.

A
Convention of relevance

B
Consistency concept

C
Materiality concept

D
Conservation concept

Solution

The conservatism principle is the general concept of recognising expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received. Under the conservatism principle, if there is uncertainty about incurring a loss, you should tend towards recording the loss. Conversely, if there is uncertainty about receiving a gain, you should not record the gain.
Question 4
1 / -0

Accounting rules, procedures and methods should be observed alike and should not be changed from year to year. This is called accounting convention of __________.

A
Consistency

B
Full disclosure

C
Conservatism

D
Going concern

Solution

Consistency Concept: The accounting information provided by the financial statements would be useful in drawing conclusions regarding the working of an enterprise only when it allows comparisons over a period of time as well as with the working of other enterprises. This can be possible only when accounting policies and practices followed by enterprises are uniform and are consistent over the period of time.
Question 5
1 / -0

Change in accounting estimate means ______________.

A
differences arising between certain parameters estimated earlier and re-estimated during the current period.

B
differences arising between certain parameters estimated earlier and actual results achieved during the current period.

C
differences arising between certain parameters re-estimated during the current period and actual results achieved during the current period.

D
Both (a) and (b).

Solution

An accounting estimate is an approximation of the amount of a business transaction for which there are no precise means of measurement.
Change in accounting estimate can be measured by deducting the amount estimated earlier from the Amount re-estimated during the current period.
Question 6
1 / -0

Withdrawal of money by the owner is not a expense but a reduction of __________.

A
Cash only

B
Cash and capital

C
Capital only

D
All of these

Solution

Separate business entity concept of accounting defines that the owner and business are treated two separate entity in the eyes of law.

Any amount contributed towards capital is considered as liabilities in the business books. On the similar line, any amount withdrawn by the owner for personal use is called as drawings which is deducted from capital and will further reduce the cash.

Accounting entry will be as under:

Drawings A/c Dr.
To Cash A/c.
Question 7
1 / -0

Mohan purchased goods for Rs. $$15,00,000$$ and sold $$4/5^{th}$$ of the goods amounting Rs. $$18,00,000$$ and paid expenses amounting Rs. $$2,70,000$$ during the year, $$2005$$. He paid Rs. $$5000$$ for an electricity bill of Dec. $$2004$$ and advance salaries amounting Rs. $$15,000$$ was paid for the month of Jan. $$2006$$. He counted net profit as Rs. $$3,50,000$$.
The profit calculated by him is correct according to ___________.

A
Entity concept

B
Periodicity concept

C
Matching concept

D
Conservatism concept

Solution

As per Matching Concept, While calculating the net profit, expenses of the particular duration should be deducted from the respective revenue.
Here, the revenue = 18,00,000
and Purchase for the year = 15,00,000 x 4 / 5 = 12,00, 000
Expenses for the year = 270000 - 15000 (adv. salaries) - 5000 (electricity) = 250000
Therefore, Net Profit = 18,00,000 - 12,00,000 - 250000
= 3,50,000
Question 8
1 / -0

If the Going Concern concept is no longer valid, which of the following is true?

A
All prepaid assets would be completely written-off immediately

B
Total contributed capital and retained earning would remain unchanged

C
Intangible assets would continue to be carried at net amortized historical cost

D
Land held as an investment would be valued at its realizable value

Solution

Going Concern Concept assumes that the business will go on indefinitely. Due to this assumption, the whole asset is not charged to the profit and loss account. But if there is no such assumption then it implies that business may close at any time. Therefore, Land held as an investment would be valued at its realizable value
Question 9
1 / -0

Which principle has important bearing on the capital-revenue classification?

A
Principle of materiality

B
Principle of conservation

C
Principle of consistency

D
Principle of full disclosure

Solution

Any fact would be considered as material if it is reasonably believed that its knowledge would influence the decision of informed user of financial statements. when the amount involved is very small, strict adherence to accounting principles is not required. For example, stock of erasers, pencils, scales, etc. are not shown as assets, whatever amount of stationery is bought in an accounting period is treated as the expense of that period, whether consumed or not.
Question 10
1 / -0

Reserve for Bad Debts is created in accordance with ____________.

A
going concern concept

B
conservative concept

C
dual aspect concept

D
materiality

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.

User

Question Analysis

Correct -
Wrong -
Skipped -

My Perfomance

Score
-
out of -
Rank
-
out of -

Re-Attempt Weekly Quiz Competition

Accounting Equation Effects Test 43

Result

Accounting Equation Effects Test 43

Score

-

Rank

-

SHARING IS CARING

Question 1

Materiality

Full disclosure

Conservatism

Matching

Solution

Question 2

Rs. $$4,00,000$$

Rs. $$2,00,000$$

Rs. $$1,00,000$$

none of the above

Solution

Question 3

Convention of relevance

Consistency concept

Materiality concept

Conservation concept

Solution

Question 4

Consistency

Full disclosure

Conservatism

Going concern

Solution

Question 5

differences arising between certain parameters estimated earlier and re-estimated during the current period.

differences arising between certain parameters estimated earlier and actual results achieved during the current period.

differences arising between certain parameters re-estimated during the current period and actual results achieved during the current period.

Both (a) and (b).

Solution

Question 6

Cash only

Cash and capital

Capital only

All of these

Solution

Question 7

Entity concept

Periodicity concept

Matching concept

Conservatism concept

Solution

Question 8

All prepaid assets would be completely written-off immediately

Total contributed capital and retained earning would remain unchanged

Intangible assets would continue to be carried at net amortized historical cost

Land held as an investment would be valued at its realizable value

Solution

Question 9

Principle of materiality

Principle of conservation

Principle of consistency

Principle of full disclosure

Solution

Question 10

going concern concept

conservative concept

dual aspect concept

materiality

Solution

User

Question Analysis

My Perfomance

Score

-

Rank

-

Results Announcement on: coming Monday

Stay Tuned: We’ll update you on your result via email or SMS.