Accounting Concepts, Principles and Conventions
- X Ltd., purchased goods for Rs. 5 lakh and sold 9/10th of the value of goods for Rs. 6 lakh. Net expenses during the year were Rs. 25, 000. The company reported its net profit as Rs. 75,000. Which of the following concept is violated by the company?
(a) Realization
(b) Conservation
(c) Matching
(d) Accrual - If the Going Concern concept is no longer valid, which of the following is true?
(a) All present assets would be completely written-off immediately
(b) Total contributed Capital and Retained Earnings 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 - Mr. Rohit, owner of Rohit Furniture Ltd., owns a personal residence that cost Rs. 6,00,000, but has a market value of Rs. 9,00,000. During preparation of the financial statement for the business, the entire value of property was ignored and was not shown in the financial statements. The principle that was followed was
(a) The concept of the Business Entity
(b) The concept of the Cost Principle
(c) The concept of Going Concern Principle
(d) The concept of Duality Principle - Based on which of the following concepts, is Share Capital Account shown on the liabilities side of a Balance Sheet?
(a) Business entity concept
(b) Money measurement concept
(c) Going concern concept
(d) Matching concept - ——— Principle specifies that cost or expenses should be recorded at the same time as the revenue to which they correspond
(a) Going run concern
(b) Matching
(c) Historical Cost
(d) Prudence - The accounting equation is based on :
(a) Going concern Concept
(b) Materiality
(c) Money Measurement Concept
(d) Dual aspect concept - No anticipation of profits and provision of making for all possible losses is due to :
(a) Convention of consistency
(b) Convention of prudence
(c) Convention of materiality
(d) Convention of full disclosure - Which of the following concepts assumes that a business will last indefinitely?
(a) Business Entity Concept
(b) Going Concern Concept
(c) Periodicity
(d) Consistency - Innovative Ltd. Follows the written down value method of depreciating furniture and computer year after year due to
(a) Comparability.
(b) Consistency.
(c) Convenience.
(d) All of the above. - All the following items are classified as fundamental accounting assumptions except
(a) Going Concern.
(b) Consistency.
(c) Accrual.
(d) Business entity. - The concept of conservatism when applied to the balance sheet results in
(a) Understatement of assets.
(b) Overstatement of Capital.
(c) Overstatement of assets.
(d) No change in assets. - Economic Life of an enterprise is split into the periodical interval to measure its performance is as per
(a) Entity.
(b) Matching.
(c) Periodicity.
(d) Accrual. - The determination of expenses for an accounting period is based on the principal of
(a) Objectivity.
(b) Matching.
(c) Periodicity.
(d) Accrual. - Which accounting concept satisfy the valuation criteria
(a) Going concern, Realisation, Cost
(b) Going concern, Cost, Dual aspect
(c) Cost, Dual aspect, Conservatism
(d) Realisation, Conservatism, Going concern. - A trader has made a sale of Rs.75,500 out of which cash sales amounted to Rs.25,500. He showed trade receivables on 31-3-2014 at Rs.25,500. Which concept is followed by him?
(a) Going concern
(b) Cost
(c) Accrual
(d) Money measurement - The process of recording financial data up to trial balance is
(a) Book keeping
(b) Classifying
(c) Summarising
(d) Analyzing - Rohit carrying on real estate business sold a piece of land for Rs. 4,00,00,000 (cost Rs.3,50,00,000) then the type of receipt is nature and profit on sale is
(a) Capital & transferred to capital reserve
(b) Revenue & transferred to P & L a/c
(c)Capital & transferred to P & L a/c
(d) Revenue & transferred to general reserve - In income measurement & recognisation of assets & liabilities which of the following concepts goes together ?
(a) Periodicity, Accural, Matching
(b) Cost, Accural, matching
(c) Going concern, cost, Realization
(d) Going concern, Periodicity, Reliability - A trader purchases goods for Rs. 2500000, of these 70% of goods were sold during the year. At the end of 31st December 2009, the market value of such goods were Rs. 500000. But the trader recorded in his books for Rs. 750000. Which of the following concept is violated.
(a) Money measurement
(b) Conservatism
(c) Consistency
(d) None of these - Which of the following is wrong?
(a) All real and personal accounts are transferred to balance sheet
(b) Nominal accounts are transferred to Profit & Loss account
(c) Each account is opened separately in ledger
(d) Rent is a personal account, outstanding rent is nominal account - Is root cause for financial accounting
(a) Stewardship accounting
(b) Social accounting
(c) Management accounting
(d) Human resource accounting - If nothing is given in the financial statements about the three accounting assumptions then it is to be treated as it
(a) Is assumed that it is not followed
(b) Is assumed to be followed
(c) Is assumed to be followed to some extent
(d) None of the above - The proprietor of the business is treated as creditor for the capital introduced by him due to concept.
(a) Money measurement
(b) Cost
(c) Entity
(d) Dual aspect - Fixed assets are held by business for
(a) Converting into cash
(b) Generating revenue
(c) Resale
(d) None of the above - Which accounting concept specifies the practice of crediting closing stock to the trading account?
(a) Cost
(b) Realisation
(c) Going concern
(d) Matching - Consistency with reference to application of accounting procedures means
(a) All companies in the same Industry should use identical accounting procedures
(b) Income & assets have not been overstated
(c) Accounting methods & procedures shall be followed uniform basis year after year
(d) Any accounting method can be followed as per convenience - The basic concepts related to Balance Sheet are
(a) Cost Concept
(b) Business Entity Concept
(c) Accounting Period Concept
(d) Both (a) and (b) above - The basic concepts related to Profit & Loss Account are
(a) Realization Concept
(b) Matching Concept
(c) Cost Concept
(d) Both (a) and (b) above - Which of the following practices is not in consonance with the convention of conservatism?
(a) Creating Provision for Bad debts
(b) Creating Provision for Discount on Creditors
(c) Creating Provision for Discount on Debtors
(d) Creating Provision for tax - The comparison of financial statement of one year with that of another is possible only when —————-concept is followed
(a) Going concern
(b) Accrual
(c) Consistency
(d) Materiality - Choose the correct code for the following statements being correct or incorrect.
Statement I : Punctuality and team spirit among employees of an organisation has great contribution in enhancing profits of the business but they do not appear as asset in the balance sheet.
Statement II : Financial statements do not reflect the correct financial position of a business.
Code :
(a) Both the Statement I and II are correct.
(b) Both the Statement I and II are incorrect.
(c) Statement I is correct, but II is incorrect.
(d) Statement I is incorrect, but II is correct. - A firm has inventory turnover of 3 and cost of goods sold is Rs.2,70,000. With better inventory management, the inventory turnover is increased to 5. This would result in
(a) Decrease in inventory by Rs. 90,000
(b) Decrease in inventory by Rs. 36,000
(c) Decrease in inventory by Rs.20,000
(d) Decrease in inventory by Rs.54,000