ACCOUNTANCY – INTRODUCTION AND THEORY BASE OF ACCOUNTING

1. Book-keeping is wider concept than accounting

(a) True (b) False
(c) Partially true (d) partially false
2. Complete the series from items given in brackets
I. Revenue Expenditure – ……………………………………
II. Capital Expenditure – ……………………………………
III. Revenue Receipts – …………………………………….
IV. Capital Receipts – …………………………………….
(Bank loan, Machinery, Salary, Rent received )
3. Creative Traders provides accounting information to its users whenever it is required for.
Specify the qualitative characteristics of accounting.
(Understandability, Relevance, Comparability, Reliability)
4. Suresh advanced 3-month’s salary to an employee of his firm. This advance salary is
(a) Revenue expense (b) Capital expense
(c) Current asset (d) Current liability
5. Fathima took an educational loan of Rs.10, 000 from SBI, Calicut. The relationship which
exists between SBI and Fathima is ___________________
(a) Fathima is the debtor of SBI, Calicut
(b) SBI, Calicut is the debtor of Fathima
(c) Fathima is the creditor of SBI, Calicut
(d) Fathima is the proprietor of SBI, Calicut
6. Double entry means
(a) Entry for the two aspects of books
(b) Entry at two dates
(c) Entry in two aspects of transaction
(d) All of the above
7. Amount received or receivable against sale of goods is
(a) Revenue receipt (b) capital receipt
(c) Revenue expenditure (d) capital expenditure
8. Expenditure of revenue nature that gives benefit for more than one accounting period is
categorised as
(a) Deferred Revenue Expenditure (b) Capital Expenditure
(c) Revenue Expenditure (d) None of these
9.Stock is valued at
(a) Cost or Net Realisable Value(Market Value),whichever is lower.
(b) Cost or Net Realisable Value(Market Value),whichever is higher.
(c) Cost
(d) Net Realisable Value(Market Value)
10.Sale is recognised as revenue
(a) when the contract for sale is entered into.
(b) at the point of sale or performance of service.
(c) after the expiry of credit period allowed to debtors
(d) after the money collected from customers.
11. The nature of accrued income is
(a) revenue (b) liability (c) expenses (d) asset
12. Trade Discount allowed
(a) is shown separately in the books of account.
(b) is not shown separately in the books of account.
(c) can be shown either separately or deducted from purchase cost.
(d) None of the above
13.Which of the following statements correctly describes the Cost Concept?
(a) Assets are shown in the books at the price at which it was purchased plus cost of
improvement minus depreciation till date
(b) Assets are shown in the books at the price it was purchased.
(c) Assets are shown in the books at the price it was purchased plus cost of improvement.
(d) Assets are shown in the books at the price it was purchased or market price whichever
is lower.
14.IASB upon coming into existence has adopted
(a) All IAS and SIC (b) some IAS and SIC (c) none of the IAS and SIC (d) none of these
15. IFRS and Ind-AS are
(a) rule based accounting standards (b) principle accounting standards
(c) partially rule based and partially principle based accounting standards.
(d) None of the above.
16. IFRS are based on
(a) historical cost (b) fair value (c) both historical cost and fair value (d) None of these
17.Accrual Basis of Accounting recognises
(a) Outstanding and Prepaid Expenses
(b) Accrued Incomes and Income Received in Advance
(c) Both (a) and (b) (d) None of the above
18. The comparability of information is required both to make
_____________________comparison and ________________Comparisons.
19. The accounting records are made in the books of accounts from the point of view of
___________________ and not that of ___________________.
20. ___________________and __________________Act require that the income
statements of an enterprise should be prepared annually.
21. ___________________ concept forms the core of Double Entry System of Accounting.
22.___________________ _is termed as creditor’s equity.
23. ___________________ is termed as owner’s equity.
24.______________ is the gross inflow of cash arising from sale of goods and services by an
enterprise.
25. Writing off Intangible assets like patents, goodwill, copyright etc.from the books of
accounts are some of the examples of application of principle of ______________________.
26._____________________ basis of accounting is incompatible with matching principle.
27. ____________________ is recognised not when cash is paid but an asset or service has
been used to generate revenue.
28. ______________________ concept eliminates personal bias and helps in achieving
results that are comparable.
29. Everything a firm ownes, it also owns out to somebody. This coincidence is explained by
_________________________ Concept.
30. A firm may hold stock which is heavily in demand.consequently, the market value of this
stock may be increased. Normal accounting procedure is to ignore this because of
_____________________concept.
31._______________ basis of accounting is more appropriate basis for calculation of profits.
32.Information in financial reports is based on _______________________.
33._______________are the basis of recording financial transactions in the books of A/C.
34.Amount at which an asset appears in the books of account is _________________.
ASSERTION AND REASONING QUESTIONS
(a) Both A and R is true and R is the correct explanation of A.
(b) Both A and R is true but R is not the correct explanation of A.
(c) A is true and R is false.
(d) A is false and R is true.
35. A: - The records of transaction are to be kept in physical units.
R: - For the purpose of accounting, assets are recorded in terms of money.
36. A: - The money measurement assumption is not free from limitations.
R: - As the change in value of money is not reflected in books of accounts, the
accounting data does not reflect true and fair view of the affairs of an enterprise.
37. A: - The important limitation of historical cost is that it does not show the true worth of
business and may lead to hidden profit.
R: - During the period of rising prices, the market value or the cost (at which the assets can
be replaced are higher than value at which these are shown in books of accounts) leading to
hidden profit.
38. A: - Assets = Capital + Liabilities
R: - Assets of business are always equal to claims of owner and outsiders.
39. A: - Comparison between the financial results of two enterprises would be meaningful
only if same kind of accounting methods and policies are adopted in preparation of financial
statements.
R: - Consistency concept prohibits change in accounting policies.
40. A: - Accounting is merely concerned with recording of financial event.
R: Accounting also provides insightful information that helps business in their decision
making.