Chapter 1

Accounting Concepts & Conventions

Accounting Concepts are the assumptions on the basis of which financial statements of a
business are prepared. The word concept means idea or notion. Concepts are the basic
assumptions and conditions on which accounting principles are formed.
1.

Entity concept : As per this concept the business is considered to have a separate identity
apart from its owner. Only the business transactions are recorded in the books of Accounts.
Personal transactions of the owner are recorded in his own personal books of Accounts. As
per this concept the business is liable to pay to the owner the capital brought by him.

2.

Money Measurement Concept : As per this concept only those transactions that can be
measured in terms of money are to be recorded in the books of accounts.

3.

Going concern concept : Accounting statements are prepared on the basis that the
business will continue its activities in the near future. The valuation of the assets is done
on this basis, as we assume that Assets are to be used in future & are not for resale. It is
also assumed that business has indefinitely long life.

4.

Periodicity Concept : This concept defines accounting period. A small period of time is
chosen for measuring performance and looking at the financial position. Generally one
year is taken as the standard period for measuring and appraising the financial position,
which is called as Accounting year.

5.

Matching Concept : As per this concept from the revenue of an accounting period such
expenses are deducted which are incurred to earn that income. This helps to determine the
correct profit or loss of that period.

6.

Accrual concept : As per this concept the transactions are recorded in the books of Accounts
when they occur & not when the money is paid or received. It means recording the expenses &
incomes when they are incurred or earned irrespective whether it has been paid or received.
Financial statements are prepared on the accrual basis as it informs the users not only of
the past events but also the future obligations to pay and the sources to receive the money.

7.

Cost Concept : The value of an asset is to be recorded on the basis of its purchase cost. If a
tangible asset is acquired free of cost, then the transaction is recorded at value of 1 to
make te record available as per disclosure principle.

8.

Realisation Concept : Any change in value of an asset is to be recorded only when the business
realises it. This concept follows the cost concept .i.e. if there is an anticipation of a decrease
in the value of an asset it will be recorded but if there is an anticipation of an increase in
the value of an asset it will be recorded only when the money is received for the same.

9.

Conservatism Concept (Prudence) : This concept implies that the accountant should not
anticipate income but provide for all possible losses. This concept puts a guard against all
possible losses. Valuation of stock at cost or market price whichever is less , Providing
R.D.D. and R.F.D.D. are examples of conservatism.

10.

Consistency Concept : In order to compare the financial statements of different years it is

necessary to maintain consistency in the accounting policies followed by the business.
Valuation of stock at cost or market price whichever is less is an exception to this rule.
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IDEAL / CPT / ACCOUNTS / ACCOUNTING CONCEPTS & CONVENTIONS

Accounting policies should be changed when there is compliance of law or in accordance
with the accounting standards. A proper accounting policy should be consistently followed
w.r.t. stock valuation, Depreciation and investment valuation.
11.

Convention Of Disclosure:Interpretation: The convention of disclosure means that information of material nature
must be fully or properly disclosed in the financial statement. Unless there is a clear
disclosure of various informations the financial statement will be useless. Sometimes the
information may not be material but its effect in future years may be material, then the
same is to be properly disclosed.
Example:
1. Contingent liabilities.
2. Events subsequent to balance sheet date.
3. Accounting method and policies adopted by a concern, change in them if any.
4. Difference in the cost value and market value of investment, stock, etc.

12.

Materiality Concept:. This principle permits other concepts to be ignored if the effect of that
concept is not material. This principle is an exception to the rule of full disclosure.
According to this concept only those items having a significant effect on the business
should be disclosed in the financial statements. Judgement of materiality depends upon
the common sense and discretion of the accountant. Materiality depends upon not only the
amount of the item but also on the size of the business , nature / level of information ,
level of person making the decision etc.

13.

Dual aspect concept : This concept implies double entry book keeping i.e. for every debit
there is a credit. Every transaction affects two aspects.
Increase in one asset / liability
Increase in one asset / liability
Decrease in one asset / liability
Decrease in asset / liability
*
*
*
*

Decrease in another asset / liability

Increase in liability / asset
Increase in another asset / liability
Decrease in liability / asset

Accrual, periodicity and matching are the three procedural conventions for income
measurement and recording of assets
Primary Quality of financial statements are reliability and relevance.
Going concern, Cost and Realisation concepts help in valuation
Entity and Money measurement concepts are viewed as basic concepts.

14.

Objective Evidence: This concept / convention means all transaction should be supported
by documentary evidence. It can be verified. These evidences behind the business
transactions should be objective and represent factual informations without bias towards
either side. E.g. bill, voucher, pass book, Agreement etc.
Fundamental Accounting Assumptions :

(a)

Going Concern : Assumption that an enterprise will continue operations for the foreseeable
future. It has indefinitely long life.

(b)

Consistency : The accounting policies are followed consistently.

(c)

Accrual : Transactions and other events are recognized when they occur they are recorded
in the accounting records and reported in the financial statements of the periods to which
they relate.
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IDEAL / CPT / ACCOUNTS / ACCOUNTING CONCEPTS & CONVENTIONS

MULTIPLE CHOICE QUESTIONS

1.

XYZ Ltd. purchased goods for

25,00,000 and sold 80% of such goods during the
st
accounting year ended 31 March, 2005. The market value of the remaining goods was
4,00,000. The company valued the closing stock at cost. They violated the concept of
(a) Conservatism
(b) Money measurement
(c) Periodicity
(d) Cost

2.

Profit and Loss Account is prepared for a period of one year by following
(a) Periodicity period concept
(b) Business entity concept
(c) Accrual concept
(d) None of the above

3.

Basic concepts related to balance sheet are

(a) Conservatism concept
(b) Business entity concept
(c) Going concern concept
(d) Both (b) or (c)

4.

What is the important object of accounting?

(a) To maintain records
(c) Make information available to various groups & users

5.

Income is measured on the basis of

(a) Matching concept
(c) Cost concept

(b) Depiction of financial position

(d) All of the above

(b) Consistency concept

(d) None of the above

6.

The enterprise is liable to the owner for capital investment made by the owner as per
(a) Entity concept
(b) Money measurement concept
(c) Accrual concept
(d) Going concern concept

7.

Inventories are valued at lower of cost or net realisable value by applying the principle of
(a) Conservatism
(b) Consistency
(c) Materiality
(d) Disclosure

8.

In which area different accounting policies are adopted

(a) Valuation of inventories
(b) Valuation of investment
(c) Depreciation
(d) All of the above

9.

Advance received from Debtors is not taken as Sales is based on

(a) Conservatism concept
(b) Accrual concept
(c) Money measurement concept
(d) None of the above

10.

Mohan purchased a Motor Car costing 60,000 on 1st January, 2006 transportation and
repairing charge were incurred amounting
5,000 and 200 respectively. Dismentaling
charge of old motor car in place of which new motor car was purchased amounted to
20,000. Market value of motor car was estimated at 70,000 on 31st December, 2006
while finalising the annual accounts. Mohan values the motor car at 70,000 in his book.
Which of the following concepts was violated by the Mohan?
(a) Matching concept
(b) Realisation concept
(c) Cost concept
(d) Periodicity concept
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IDEAL / CPT / ACCOUNTS / ACCOUNTING CONCEPTS & CONVENTIONS

11.

Fundamental accounting assumptions are

(a) Consistency concept
(b) Going concern concept
(c) Accrual concept
(d) All of the above

12.

Arjun purchased goods for 10,00,000 and sold 70% of such goods during the year ended
31st December, 2006. The market value of the remaining goods was 2,00,000.
He valued the closing stock at cost. He violated the concept of
(a) Periodicity
(b) Money measurement
(c) Conservatism
(d) Cost

13.

All the following items are classified as fundamental accounting assumptions except
(a) Consistency
(b) Business entity (c) Going concern
(d) Accrual

14.

Two primary qualitative characteristics of financial statements are

(a) Understandability and materiality
(b) Relevance and reliability
(c) Relevance and understandability
(d) Materiality and reliability

15.

Kanika Enterprises 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

16.

Assets are held in the business for the purpose of

(a) Resale
(b) Conversion into cash
(c) Earning revenue
(d) None of the above

17.

Revenue from sale of products, is generally, realised in the period in which

(a) Cash is collected
(b) Sale is made
(c) Products are manufactured
(d) None of the above

18.

The concept of conservatism when applied to the balance sheet results in

(a) Understatement of assets
(b) Overstatement of assets
(c) Overstatement of capital
(d) Understatement of capital

19.

The determination of expenses for an accounting period is based on the principle of

(a) Objectivity
(b) Materiality
(c) Matching
(d) Periodicity

20.

Economic life of an enterprise is split into the periodic interval as per

(a) Periodicity
(b) Matching
(c) Going concern
(d) Accrual

21.

If an individual asset is increased, there will be a corresponding

(a) Increase of another asset or increase of capital
(b) Decrease of another asset or increase of liability
(c) Decrease of specific liability or decrease of capital
(d) None of these

IDEAL / CPT / ACCOUNTS / ACCOUNTING CONCEPTS & CONVENTIONS

22.

Financial position of the business is ascertained on the basis of

(a) Records prepared under book keeping process
(b) Trial balance
(c) Accounting reports
(d) None of the above

23.

Users of accounting information include

(a) Creditors
(b) Lenders
(c) Customers

(d) All of the above

24.

It is on the basis of the entity concept that money brought by the proprietor into the
business is credited to _______________ account.
(a) proprietors personal
(b) proprietors capital
(c) Cash A/c
(d) Bank A/c

25.

As per the going concern concept until and unless the business has entered into a state of
liquidation, it is viewed as having _______________ life.
(a) Definite
(b) indefinite
(c) Standstill
(d) None

26.

A businessman needs to know the state of affairs of his business at frequent intervals
which is normally a twelve-month period This period is called _______________ year.
(a) Accounting
(b) Calendar
(c) Financial year
(d) Leap Year

27.

_______________ basis of revenue recognition considers the revenue as realized when sale
is completed
(a) Cash
(b) Sales
(c) Mercantile
(d) None of these

28.

In determining net income from business operation, the losses not related to ordinary
business operation are _______________ from the revenue for determining net income.
(a) Deducted
(b) not deducted
(c) Added
(d) None of these

29.

According to the convention of conservatism, the stock in trade is valued at market price,
or cost price, whichever is _______________.
(a) Less
(b) more
(c) Same
(d) None

30.

The principle of accountancy, which recognises the double aspect of a business transaction
is knows as __________ concept.
(a) Dual
(b) Accrual
(c) Matching
(d) Entity

31.

The system of recording transactions based on dual concept is called

(a) Double account system
(b) Double entry system
(c) Single entry system
(d) cash system

32.

According to money measurement concept 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) Staff morale

IDEAL / CPT / ACCOUNTS / ACCOUNTING CONCEPTS & CONVENTIONS

33.

Cost concept envisages the recording of the following in the books of accounts
(a) An asset at its cost
(b) Knowledge and will acquired by business executive
(c) Changes effected because of some political events
(d) Qualification C.F.O. (Chief Financial officer)

34.

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) Entity Concept

35.

The Proprietor is treated as a creditor to the extent of his capital according to

(a) Cost concept
(b) Business entity concept
(c) Going concern concept
(d) Dual concept

36.

The accounting equation is based on

(a) Going concern concept
(b) Dual aspect concept
(c) Money measurement concept
(d) Entity concept

37.

Market value of investments is shown as a footnote according to

(a) Convention of disclosure
(b) Convention of consistency
(c) Convention of conservatism
(d) Entity Concept

38.

Making the provision for doubtful debts in anticipation of actual bad debts is on the basis of
(a) Convention of disclosure
(b) Convention of consistency
(c) Convention of conservatism
(d) Dual Concept

39.

According to going concern concept, a Business is viewed as having

(a) A limited life
(b) An indefinite life
(c) A very long life

(d) No life

40.

Contingent liability is shown due to

(a) Convention of full disclosure
(b) Convention of conservatism
(c) Convention of materiality
(d) Dual aspect concept

41.

Depreciation was not recorded because to do so would result in a net loss for the period
Indicate the accounting principle that is violated
(a) Cost principle (b) Consistency
(c) Full disclosure
(d) Conservatism

42.

LIFO inventory method was used in year 1, FIFO in year 2 and weighed average in year 3.
Which accounting principle is violated?
(a) Cost Principle
(b) Consistency
(c) Materiality
(d) No principle of accounting is violated

43.

The owner of a company included his personal medical expenses in the companys income
statements. Indicate the accounting principle that is violated.
(a) Cost principle (b) Going concern concept (c) Entity concept
(d) Conservatism
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IDEAL / CPT / ACCOUNTS / ACCOUNTING CONCEPTS & CONVENTIONS

44.
Land was reported as its selling price which is substantially higher than its cost. The increase in
value was included in the income statement. Which accounting principle is violated?
(a) Cost principle (b) Going concern concept (c) Entity concept
(d) Conservatism
45.

No mention was made of a major law suit filed against the company even though the
companys attorney believes that there is high probability of losing the case. Indicate the
accounting principle that is violated.
(a) Cost principle (b) Conservatism
(c) Full disclosure
(d) Materiality

46.

The cost of three small files (of 4 each) was charged to expenses when purchased even
though they had a useful life of several years. This was done according to the
(a) Cost principle (b) Conservatism principle
(c) Full disclosure (d) Materiality

47.

An Accounting Convention which provides that when doubt, choose the solution least likely
to overstate assets and income is
(a) Consistency
(b) Materiality
(c) Conservatism (d) Continuity

48.

Money measurement concept of Accounting Theory is based on the assumption that the
value of money will
(a) Remain constant (b) Fluctuate (c) Decrease
(d) Go up

49.

The fundamental accounting equation Assets = Liabilities is the formal expression of

(a) Dual aspect concept
(b) Matching concept
(c) Going concern concept
(d) Money measurement concept

50.

Any change in the accounting policy relating to inventories which has a material effect in
the current or late, periods should be disclosed. This is in accordance with the accounting
principle of :
(a) Going concern (b) Conservatism (c) Consistency (d) Disclosure

51.

Assets in the balance sheet are shown at cost less depreciation rather than their
replacement cost because of the accounting convention.
(a) Going concern
(b) Matching
(c) Realisation (d) Money Measurement

52.

The assets are classified as current assets and fixed assets in accordance with _________
(a) Accounting period assumption
(b) Matching principle
(c) Consistency principle
(d) Going concern principle

53.

Materiality principle is an exception to the _________

(a) Consistency principle
(b) Accounting period assumption
(c) Prudence principle
(d) Full disclosure principle

54.

When stock is valued at cost in one accounting period and at lower at cost and net
realisable value in another accounting period ____________
(a) Prudence principle conflicts with consistency principle
(b) Matching principle conflicts with consistency principle
(c) Consistency principle conflicts with Accounting Period Assumption
(d) None of the above
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55.
Accrual means ______________
(a) recognition of revenue as it is earned and of costs as they are paid
(b) recognition of revenue as it is received and of costs as they are incurred
(c) recognition of revenue and costs on payment basis
(d) recognition of revenue as it is earned and of costs as they are incurred
56.

Prudence principle is as exception to the ___________

(a) Matching principle
(b) Going concern assumption
(c) Conservatism
(d) Consistency

57.

The assets and incomes are not overstated and the liabilities and losses are not
understated in accordance with ___________.
(a) Cost concept
(b) Going concern assumption
(c) Matching principle
(d) Prudence principle

58.

Prudence is a concept to recognise ______________

(a) all losses and not profits
(b) unrealised profits and not losses
(c) realised losses and not profits
(d) None of the above

59.

Accounting of a small calculator as an expense & not as an asset is in accordance with ___
(a) Full disclosure principle
(b) Materiality concept
(c) Accounting period assumption
(d) None of the above

60.

Mr. X started business on 1st April, 2001 and reported about the financial performance and
financial position of the business on 31st March, 2007 being the date of liquidation of
enterprise. He has violated __________
(a) Money measurement principle
(b) Periodicity principle
(c) Consistency principle
(d) Accounting entity principle

61.

The principle which treats all rupees alike whether it is a rupee of 1957 or 2007 ________
(a) Money measurement principle
(b) Periodicity principle
(c) Consistency principle
(d) Accounting entity principle

62.

Mr. X valued the inventory on FIFO basis and LIFO basis during 2006 and 2007
respectively. He has violated ___________
(a) Conservation principle
(b) Materiality principle
(c) Cost principle
(d) Consistency principle

63.

Mr. X has a Sundry Debtors of

1,00,000. Creating a provision for discount @ 2% on
Sundry Debtors is in accordance with _________
(a) Conservatism principle
(b) Materiality principle
(c) Cost principle
(d) Consistency principle

64.

Mr. X has a Sundry Creditors of 1,00,000 creating a reserve for discount @ 2% on Sundry
Creditors is violation of ___________
(a) Conservatism principle
(b) Materiality principle
(c) Cost principle
(d) Consistency principle
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65.

The production manager reports to the top management that production for the year 2007
is 200 tons but actual production is 1,99,000.90 kilogram. He has followed _____
(a) Conservatism principle
(b) Materiality principle
(c) Cost principle
(d) Consistency

66.

Mr. X purchased a building for

1,00,000 but at the end of accounting period,
the market value of building is 1,50,000. He disclosed the building at 1,50,000 in the
financial statements. He has violated _________
(a) Conservatism principle
(b) Materiality principle
(c) Cost principle
(d) Consistency

67.

The concept which calls for adjustment to be made in respect of prepaid and outstanding
expenses and accrued and unaccrued revenues is ____________
(a) Prudence principle
(b) Accrual principle
(c) Cost principle
(d) Consistency

68.

GAAPs are :
(a) Generally Accepted Accounting Policies
(b) Generally Accepted Accounting Principles
(c) Generally Accepted Accounting Provisions
(d) None of these

69.

A purchased a car for 5,00,000, making a down payment of 1,00,000 and signing a
4,00,000 bill payable due in 60 days. As a result of this transaction
(c) Total assets increased by 5,00,000.
(d) Total liabilities increased by 4,00,000.
(c) Total assets increased by 4,00,000.
(d) Total assets increased by 4,00,000 with corresponding increase in liabilities

70.

Mohan purchased goods for 15,00,000 and sold 4/5th of the goods amounting
18,00,000 and met expenses amounting 2,50,000 during the year, 2005. He counted
net profit as 3,50,000. Which of the accounting concept was followed by him?
(a) Entity
(b) Periodicity
(c) Matching
(d) Conservatism

71.

Decrease in the amount of creditors results in

(a) Increase in cash.
(b) Decrease in cash.
(c) Decrease in assets.
(d) No change in assets

72.

Purchase of machinery for cash

(a) Decreases total assets.
(c) Retains total assets unchanged.

(b) Increases total assets.

(d) Decreases total liabilities.

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73.

Consider the following data pertaining to Alpha Ltd.:

Particulars
Cost of machinery purchased on 1st April, 2009
10,00,000
Installation charges
1,00,000
st
Market value as on 31 March, 2010
12,00,000
While finalizing the annual accounts, if the company values the machinery at 12,00,000.
Which of the following concepts is violated by the Alpha Ltd.?
(a) Cost
(b) Matching
(c) Accrual(d) Periodicity

74.

A proprietor, Mr. A has reported a profit of 1,25,000 at the end of the financial year after
taking into consideration the following amount:
(i) The cost of an asset of 25,000 has been taken as an expense.
(ii) Mr. A is anticipating a profit of 10,000 on the future sale of a car shown as an asset
in his books.
(iii) Salary of 7,000 payable in the financial year has not been taken into account.
(iv) Mr. A purchased an asset for 75,000 but its fair value on the date of purchase was
85,000. Mr. A recorded the value of asset in his books by 85,000.
On the basis of the above facts answer the following questions from the given choices:

(a).

What is the correct amount of profit to be reported in the books?

(a) 1,25,000
(b) 1,35,000
(c) 1,50,000

(d)

Which measurement base should be followed in the statement (iv)?

(a) Historical cost, (b) Current cost
(c) Replacement cost

(d) Present value

Which concept should be followed in the statement (ii)?

(a) Conservatism,
(b) Materiality,
(c) Historical cost,

(d) Accrual,

Which concept should be followed in the statement (iii)?

(a) Materiality,
(b) Historical cost,
(c) Current cost,

(d) Accrual,

(b).
(c).
(d).
75.

Revenue from sale of products, is generally, realized in the period in which

(a) Cash is collected
(b) Sale is made.
(c) Products are manufactured.
(d) None of the above

76.

Accounting Standards in India are issued by

(a) Central Govt.
(c) Institute of Chartered Accountants of India.

77.

(b) State Govt.

(d) Reserve Bank of India.

Accounting Standards
(a) Harmonise accounting policies.
(b) Eliminate the non-comparability of financial statements.
(c) Improve the reliability of financial statements.
(d) All of the above
10

1,33,000

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78.

How many Accounting Standards have been issued by ICAI?

(a) 25
(b) 20
(c) 32

(d) 2

79.

all of the following are limitations of Accounting Standards except

(a) The choice between different alternative accounting treatments is difficult.
(b) There may be trend towards rigidity.
(c) Accounting Standards cannot override the statute.
(d) All of the above.

80.

A change in accounting policy is justified

(a) To comply with accounting standard.
(b) To ensure more appropriate presentation of the financial statement of the enterprise.
(c) To comply with law.
(d) All of the above.

81.

The areas wherein different accounting policies can be adopted are

(a) Providing depreciation.
(b) Valuation of inventories.
(c) Valuation of investments.
(d) All of the above.

82.

Selection of an inappropriate accounting policy decision may

(a) Overstate the performance and financial position of a business entity.
(b) Understate/overstate the performance and financial position of a business entity.
(c) Overstate the performance a business entity.
(d) Understate financial position a business entity.

83.

Accounting policies refer to specific accounting

(a) Principles.
(b) Methods of applying those principles.
(c) Both (a) and (b)
(d) None of the above

84.

Measurement discipline deals with

(a) Identification of objects and events.
(c) Evaluation of dimension of measurement scale

85.

(b) Selection of scale

(d) All of the above

All of the following are valuation principles except

(a) Historical cost. (b) Present value.
(c) Future value.

(d) Realisable value

86.

Mohan purchased a machinery amounting 10,00,000 on 1st April, 2000. On 31st March,
2010, similar machinery could be purchased for 20,00,000 but the realizable value of
the machinery (purchased on 1.4.2000) was estimated at 15,00,000. The present
discounted value of the future net cash inflows that the machinery was expected to
generate in the normal course of business, was calculated as 12,00,000.

(a).

The current cost of the machinery is

(a) 10,00,000
(b) 20,00,000

(c) 15,00,000
11

(d)

12,00,000

IDEAL / CPT / ACCOUNTS / ACCOUNTING CONCEPTS & CONVENTIONS

(b).
The present value of machinery is
(a) 10,00,000
(b) 20,00,000
(c) 15,00,000
(d) 12,00,000
(c).
(d).

The historical cost of machinery is

(a) 10,00,000
(b) 20,00,000

(c) 15,00,000

(d)

12,00,000

The realizable value of machinery is

(a) 10,00,000
(b) 20,00,000

(c) 15,00,000

(d)

12,00,000

87.

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

(a) Management accounting
(b) Cost accounting
(c) Financial accounting
(d) Book-keeping

88.

The determination of expenses for an accounting period is based on the principle of

(a) Objectivity
(b) Materiality
(c) Matching
(d) Entity

89.

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).

90.

All of the following are functions of Accounting except

(a) Decision making
(b) Measurement
(c) Forecasting

(d) Ledger posting

91.

RPG Ltd. purchased equipment from PQR Ltd. for 50,000 on 1st April, 2005. The fright
and cartage of 2,000 is spent to bring the asset to the factory and 3,000 is incurred on
installing the equipment to make it possible for the intended use. The market price of
machinery on 31st April, 2006 is 60,000 and the accountant of the company wants to
disclose the machinery at 60,000 in financial statements. However, the auditor
emphasizes that the machinery should be valued at 55,000 (50,000 + 2,000 + 3,000)
according to:
(a) Money measurement principle
(b) Historical cost concept
(c) Full disclosure principle
(d) Revenue recognition

92.

On March 31, 2006 Amit purchased a typewriter from Arvind for 8,000. This is
(a) An event.
(b) A transaction.
(c) A transaction as well as an event.
(d) Neither a transaction nor an event.

93.

Substance of any transaction should be considered while recording them and not only the
legal form is the statement which holds true for:
(a) Substance over form.
(b) Disclosure of accounting policies.
(c) Both (a) and (b).
(d) None of the three.
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IDEAL / CPT / ACCOUNTS / ACCOUNTING CONCEPTS & CONVENTIONS

94.
Human assets have no place in accounting records is based on _____________
(a) Money measurement concept
(b) Accrual concept
(c) Consistency
(d) Conservatism
95.

According to money measurement concept, currency transactions and events are recorded
in the books of accounts
(a) In the ruling currency of the country in which transaction takes place
(b) In the ruling currency of the country in which books of accounts are prepared
(c) In the currency set by ministry of finance
(d) In the currency set by Govt.

96.

Basic concepts related to Balance Sheet are

(a) Conservatism concept
(b) Business entity concept
(c) Going concern concept
(d) Both (b) or (c)

97.

Narang purchased goods for 3,00,000 and sold 4/5 of goods amounting 5,00,000 and
paid expenses amounting 1,10,000 for the year 2006. Besides that he paid 7,000 for
an electricity bill of March 2005 and advance salaries amounting 10,000 was paid for
the month of April 2007. He calculated net profit 1,50,000. The profit calculated by him
is correct according to
(a) Conservatism concept
(b) Matching concept
(c) Periodicity concept
(d) Entity concept

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