Deck 43: Fundamentals of Accounting: Objectives, Concepts, and Principles

Question 1

What is the important objective of accounting?

A)To maintain records.
B)Depiction of financial position.
C)Make information available to various groups and users.
D)All of three.

Answer 1

Make information available to various groups and users.

Question 2

Which of the following is NOT normally considered to be an asset?

A)Retained earnings.
B)Cash.
C)Buildings.
D)Accounts receivable.

Answer 2

Retained earnings.

Question 3

Which of the following is not a sub-field of accounting?

A)Management Accounting
B)Cost Accounting
C)Financial Accounting
D)Book-keeping

Answer 3

Book-keeping

Question 4

A revenue that is collected before it has been earned is called

A)Accrued revenue
B)Unrecorded revenue
C)Deferred revenue
D)Unearned

Question 5

Which of the following statements about differences between financial and management accounting is incorrect?

A)Management accounting information is prepared primarily for external parties such as stockholders and creditors. financial accounting is directed at internal users.
B)Financial accounting is aggregated. management accounting is focused on products and departments.
C)Management accounting pertains to both past and future items. financial accounting focuses primarily on past transactions and events.
D)Financial accounting is based on generally accepted accounting practices. management accounting faces no similar constraining factors.

Question 6

External users of accounting information do not include:

A)Employees
B)Government
C)Potential Investors
D)Financial Institutions

Question 7

Which is the third stage of accounting process?

A)Recording
B)Classifying
C)Summarizing
D)none

Question 8

"Assets should be valued at the price paid to acquire them" is based on?

A)Accrual concept.
B)Cost concept.
C)Money measurement concept.
D)Realization concept.

Question 9

Financial accounting is primarily concerned with:

A)Recording of financial information relating to activities of the owners of the business enterprise
B)Providing financial information to assist the management in decision making.
C)Reporting financial information for external users of accounting reports
D)Interpretation of financial statements

Question 10

Which of the following is not the objective of accounting?

A)To maintain records of business
B)To ascertain profit or loss of the business
C)To depict capital, liabilities and assets of the business.
D)To provide information about the personal assets and personal liabilities of the owners of the business.

Question 11

Which accounting concept or convention which, in times of rising prices, tends to understate asset values and overstate profits?

A)The going concern concept
B)The prudence concept
C)The realisation concept
D)The historical cost convention

Question 12

It is generally assumed that the business will not liquidate in the near foreseeable future because of

A)Periodicity.
B)Materiality.
C)Matching.
D)Going concern.

Question 13

Which accounting concept should be considered if the owner of a business takes goods from inventory for his own personal use?

A)The prudence concept
B)The capitalisation concept
C)The money measurement concept
D)none

Question 14

Assets are usually valued under which basis?

A)Replacement cost
B)Historical cost
C)Net realizable value
D)none

Question 15

In India, a company can keep its books of accounts on?

A)Mercantile Basis
B)Accrual Basis
C)Cash Basis
D)No Basis

Question 16

The comparison of the results of one accounting period with that in the past is possible when the following convention is followed:

A)Convention of Consistency
B)Convention of Full Disclosure
C)Convention of Materiality
D)Convention of Prudence

Question 17

According to this convention, important items must be recorded instead of being left out or merged with other items.

A)Convention of Consistency
B)Convention of Full Disclosure
C)Convention of Materiality
D)Convention of Prudence

Question 18

XYZ Ltd. follows the written down value method of depreciating machinery year after year due to

A)Comparability
B)Convenience
C)Consistency
D)All of the above

Question 19

The Accounting Standards Board was established in India by

A)Ministry of Corporate Affairs
B)Institute of Chartered Accountant of India
C)International Accounting Standards Committee
D)none

Question 20

The total number of accounting standards issued by ICAI so far is

A)29
B)32
C)42
D)36

Question 21

The Convention of Conservatism takes into account

A)All prospective profits and prospective losses.
B)All prospective profits and leaves out prospective losses.
C)All prospective losses but leaves out prospective profit.
D)None of these.

Question 22

According to the money measurement concept, the following will be recorded in the books of account of the business:

A)Health of Managing Director of the company
B)Quality of company's goods
C)Value of Plant & Machinery
D)Strike by employees

Question 23

Double Entry System was introduced in-

A)America
B)Japan
C)India
D)Italy

Question 24

The International Accounting Standards Committee was set up in -

A)1976
B)1967
C)1982
D)2009

Question 25

The underlying assumption that assumes that the life of a company can be divided into artificial time periods is:

A)Periodicity
B)Going concern
C)Economic entity
D)Monetary unit

Question 26

The primary objective of the matching principle is to:

A)Provide timely information to external decision-makers
B)Provide full disclosure
C)Recognize expenses in the same period as the related revenue
D)All of the above

Question 27

The term "compound entry" means that the journal entry has

A)More than two accounts involved in the entry
B)A debit amount greater than the credit amount
C)A credit amount greater than the debit amount
D)Only one debit, but two credits

Question 28

The convention of conservatism is applicable ___________________

A)In providing for discount on creditors
B)In making provision for bad and doubtful debts
C)Providing for depreciation
D)none

Question 29

Creditors for goods purchase come within the category of________________

A)Fixed Liabilities
B)Current Liabilities
C)Capital
D)none

Question 30

Money spent on heavy advertising, whose benefit is continuing for three years to come, is a __________.

A)Capital Expenditure
B)Revenue expenditure
C)Deferred Revenue Expenditure
D)none

Question 31

A deduction allowed to the buyers from the gross catalogue price on making bulk purchases is termed as ____________

A)Trade discount
B)Quantity discount
C)Cash discount
D)None of the above

Question 32

Goodwill is a

A)Current asset
B)Tangible asset
C)Intangible asset
D)Liability

Question 33

What type of expenditure is shown as asset in balance sheet? Capital expenditure

A)Revenue expenditure
B)Deferred revenue expenditure
C)Capitalized expenditure
D)none

Question 34

A business firm is separate and distinct from its owners is the assumption under which of the following accounting concepts:

A)Business Entity
B)Going Concern Entity
C)Money Measuring Entity
D)Accounting Period concept

Question 35

General rules that are used as a guide in accounting and as a basis of accounting practices are called:

A)Generally Accepted Accounting Practices
B)Basic Accounting Conventions
C)Accounting and Financing Principles
D)Accounting Principles

Question 36

Every transaction has two aspects i.e., debit and credit, under which of the following accounting principles:

A)Cash Accrual Principle
B)Revenue Accrual Principle
C)Dual Aspect Principle
D)Double Entry Book-keeping System

Question 37

Anticipate no profits and provide for all possible losses. This is essence of which of the following accounting principles:

A)Materiality Principle
B)Timeliness Principle
C)Consistency Principle
D)Conservatism Principle

Question 38

Accounting procedures and accounting practices should remain same from year to year under which of the following accounting principles:

A)Dual Aspect Principle
B)Materiality Principle
C)Timeliness Principle
D)Consistency Principle

Question 39

An ink-stand has been purchased by a firm for a nominal amount that is to last for 4 year. It should not be classified as a fixed asset under which of the following accounting principles:

A)Dual Aspect Principle
B)Materiality Principle
C)Timeliness Principle
D)Consistency Principle

Question 40

When a machinery is purchased for cash, the cash balance is reduced and to that extent, the amount of machinery as an asset is recorded. This is done to follow which of the following accounting principles:

A)Dual Aspect Principle
B)Materiality Principle
C)Timeliness Principle
D)Consistency Principle

Question 41

Rules of revenue recognition determine that earning process should be either complete or near completion under:

A)Realization Concept
B)Materiality Concept
C)Historical Record Concept
D)Accounting Period Concept

Question 42

Value of goods withdrawn by the proprietor for his personal use should be credited to ____.

A)Capital A/c
B)Sales A/c
C)Drawings A/c
D)Purchases A/c

Question 43

M/s Stationery Mart will debit the purchase of stationery to _______

A)Purchases A/c
B)General Expenses A/c
C)Stationery A/c
D)None

Question 44

Goods distributed as free samples is debited to

A)Advertisement A/c
B)Charity A/c
C)Purchases A/c
D)Goods A/c

Question 45

Journal entry for wages paid Rs. 5,000 for installation of plant will be

A)Dr. Plant Repairs A/c and Cr. Cash A/c Rs. 5,000
B)Dr. Wages A/c and Cr. Cash A/c Rs. 5,000
C)Dr. Plant A/c and Cr. Cash A/c Rs. 5,000
D)None of the Above

Question 46

Interest of Drawings is:

A)Expenditure for the business
B)Expense for the business
C)Gain for the business
D)none

Question 47

Drawings account is the nature of

A)Personal Account
B)Real Account
C)Nominal Account
D)None of the above

Question 48

Outstanding Salaries are shown as:

A)An Expense
B)A Liability
C)An asset
D)none

Question 49

Income tax paid by a sole proprietor from his business income should be:

A)Debited to the trading Account
B)Debited to the Profit and Loss Account
C)Deducted from the Capital account in the Balance Sheet
D)none

Question 50

The Income created but not yet received is known as:

A)Unearned Income
B)Outstanding Income
C)Acrued Income
D)none

Question 51

The income earned but not yet received:

A)Accrued income
B)Outstanding Income
C)Unearned Income
D)none

Question 52

The closing stock in adjustment is shown in:

A)Trading Account
B)Profit and Loss Account
C)Balance Sheet
D)Both (a) and (c)

Question 53

The opening stock is shown in:

A)Trading Account
B)Profit and Loss Account
C)Balance Sheet
D)Both (a) and (c)

Question 54

The trial balance checks

A)Arithmetical accuracy of books
B)The honesty of the book-keeper
C)The valuation of closing stock
D)None of the three

Question 55

In case a trail balance does not agree the difference is put to

A)Trading A/c
B)Profit & Loss A/c
C)Capital A/c
D)Suspense A/c

Question 56

Rs. 5000 spent on replacement of worn out part of the machine will be charged as:

A)Capital expenditure
B)Revenue Expenditure
C)Deferred Revenue Expenditure
D)none

Question 57

What is the order in which the accounting transactions and events are recorded in the books

A)Journal, Subsidiary books, Profit & Loss A/c and Ledger
B)Ledger, Journal, Balance Sheet and Profit & Loss A/c
C)Journal, Ledger, Profit & Loss A/c and Balance Sheet
D)Profit & Loss A/c, Ledger and Balance Sheet

Question 58

Depreciation of fixed assets is an example of:

A)Revenue Expenditure
B)Capital Expenditure
C)Deferred Revenue Expenditure
D)none

Question 59

Income is the output of excess or deficiency of revenue over related:

A)Expired Cost
B)Unexpired Cost
C)Sunk Cost
D)none

Question 60

The term 'Business Income' includes:

A)Unrealised Net Income
B)Realised Net Income
C)Revenue receipt
D)Going Concern

Question 61

The concept of conservatism ensures that the reported profit is not:

A)Under stated
B)Overstated
C)Neutral
D)Negative

Question 62

In accounting revenue is generally treated to be realized when goods or services are:

A)Not stated to the customers
B)Not stated to the competitors
C)Furnished to the customers
D)Not stated at all

Question 63

Capital expenditures are the expenditures incurred for the:

A)Short term advantage of the business.
B)Long term advantage of the business.
C)No advantage
D)Advantage after closure of business

Question 64

The principle of recognizing revenue proportionately on the basis of work actually done is generally followed in case of:

A)Long term contracts
B)Short term contracts
C)Not done
D)Casual Contracts

Question 65

The process of recording financial data up to trial balance is:

A)Book keeping
B)Classifying
C)Summarizing
D)Analyzing

Question 66

Which accounting concept specifies the practice of crediting closing stock to the trading account?

A)Cost
B)Realization
C)Going concern
D)Matching

Question 67

An asset was purchased for Rs.1000000 with the down payment of Rs.200000 and bills accepted for Rs.800000/-. What would be the effect on the total asset and total liabilities in the balance sheet?

A)Assets increased by Rs.800000 and liabilities decreased by Rs.800000
B)Assets decreased by Rs.800000 and liabilities increased by Rs.800000
C)Assets increased by Rs.1000000 and liabilities increased by Rs.800000
D)Assets increased by Rs.800000 and liabilities increased by Rs.800000

Question 68

In which of the following cases, accounting estimates are needed?

A)Employs benefit schemes
B)Impairment of losses
C)Inventory obsolescence
D)All of the above

Question 69

The purpose of final accounts is to ascertain. …

A)Profit
B)The value of assets
C)The value of liabilities
D)profit or loss and financial position

Question 70

Final accounts are prepared…….

A)At the end of calendar year
B)on every Diwali
C)at the end of assessment year
D)at the end of accounting year

Question 71

Errors of carry forward from one year to another year affect:

A)Personal account
B)Real account
C)Nominal account
D)Both personal & Real accounts

Question 72

The manufacturing account is prepared

A)To ascertain the profit or loss on the goods purchased
B)To ascertain the cost of manufactured goods
C)To show the sale proceeds from the goods produced during the year
D)None of the above.

Question 73

Sales made to Mahesh fir cash should be debited to

A)Cash Account
B)Mahesh
C)Sales Account
D)Purchase Account

Question 74

The amount salary paid to Suresh should be debited to

A)The account of Suresh
B)Salaries Account
C)Cash Account
D)none

Question 75

The cash discount allowed to a debtor should be credited to

A)Discount Account
B)Customer's Account
C)Sales Account
D)Suspense Account

Question 76

In case of a debt becoming bad, the amount should be credited to

A)Debtor's Account
B)Bad Debts Account
C)Sales Account
D)Suspense Account

Question 77

When goods are purchased for cash, the entry will be recorded in the?

A)Cash book
B)Purchases book
C)Journal
D)None

Question 78

The balance of petty cash is?

A)An asset
B)A liability
C)An expense
D)An income

Question 79

All of the following are not considered cash except?

A)Postage and stamps
B)Securities
C)Investments
D)Cheque

Question 80

Entry representing the reversal or cancellation of an entry on the other side is called?

A)Closing entry
B)Contra entry
C)Bank overdraft
D)Adjusting entry