Multiple Choice Questions (MCQs) )

Select the best alternative:

() According totlhe Business Entity Concept.
(a) transactions between the business and its
0Wners are not. recorded.
(6) traNsactions between the busines8 and itA 0Wners are
recorded considering them
to be one single entity.
(c) transactions between the business and its
owners are recorded from the business
point of view.
(d) None of the above.
(i)) According to the Money
Measurement Concept
(a) all transactions and events are
recorded.
(6) all transactions and events which can be
in the books of account. estimated in money terms are recorded
(c) all transactions and events
which can be measured in money terms are
in the books of account. recorded
() None of the above.
(üi) Which of the following statements
correctly describes the Cost Concept?
(a) Assets are shown in the bookS at
the price at which it was
improvement minus depreciation til date. purchased plus cost of
(6) Assets are shown in the books at the
price it was purchased.
(c) Assets are shown in the books at the
price it was purchasedplus cost of
(d) Assets are shown in the books at the price it improvement.
is lower.
was purchasedor market price whichever
(iv) A concept that a business enterprise will not be
sold or liquidated in the near future is
known as
(a) Going Concern.
(6) Economic Entity.
(c) Monetary Unit. (d) None of these.
(v) According to the Accrual Concept (NCERT)
(a) transactions and events are recorded in the books at the time of their
in cash. settlement
(6) transactions
and events are recorded in the books at
entered into. the time when they are
(c) transactions and events may be
recorded either at the time of the settlement or
when they are entered into.
() None of the above.
(v) )According tothe Convention of
Consistency
(a) accounting policies and practices once adopted should be consistently followed.
(6) accounting policies and practices adopted may be
decision. changed as per the management's
(C) accounting policies and practices once
adopted cannot be changed under any
circumstances.
(d) None of the above.
 Keeping- ineome
Measurement
Concept vea
proprietor Concept should of Convention.
in machinery standards.
net, example statements standards
Book having Concept the
determining
period
Dual
Aspect
Concept
Entry (d)
Matching
Concept.
life. the p Entity SIC.
accounting
Double as these. the
an (6)
Conservatism
depreciating accounting
long even Aspect
viewed is financial(6)
Conservatism (b) convenience.
these. losses
protts.
andthese. these.
Businessof value
veryof concepts,
None revenueMoney IAS (6)
fair
value.
is
Dual of of
based of
business
a capital? in concepts, realisable produces () Cost of prospective
All account prospective some
None None based
(h) (d) aceounting (b) (d) concept? Method losses.
the (6) (d) (d) (6) (d)
adopted principle () principle
to accounting into
his net prospective
out standards. standards.
(oneept,
a applicable
following accounting Value takes out
of or leaves has partially
standards. value. standards. partially
following
extentConrept cost leaves
entity, Down Conservatism existence
Cncern of andand aceounting fair
the the are
which
costs
lower (a)
Consistency
Convention. following Written but SIC. and accounting
and
the Measurement
to of (c)
Realisation
Concept.
an profits
profits
losses accounting and accounting
(a)
Matching
Concept into and based based
Cong hfe ofwhich(reditor which revenue? against
that at of
life-time
(c)
Accounting
period above.
SIC.IAS
above. cost above.
ife ndefinite (oncept
Cost
(c) Cost
(c) stock
Concept the the (a)comparability.
of prospective
prospective coming
prospective based historical based
(c)
consistency.
Convention the andthe rule on (a)
historical
cost. rule
to hmited to as to all Matchingfollows
of (a) based the based based the
Aceording Aoring Money Arording of which principle
partially principle
partially
(reated business, Valuation the due
to
year of upon IAS of of (cuii)
Ind-AS
are of
An During None none(xU)
IFRS
are rule None are both rule None
a Ltd. all all all TASBall
(a) (r) with
Is (o) X
The (a) (b) (c) (d) (a) (c) (a) (b)(c) (d)
IFRS
(c) (a) (b) (c) (d)
(un) (m) (x) () (ri) (xi) (xii) (xiv) (xui)
324
TheoryBase of Accounting. AccountingStandards ond Ind As 3.25

(rvi) Assets (except Securities) may be valued under Ind-AS on

(a) historical cost. (b) fair value.
() both historicalcost and fair value. (d) None of these.
[Ans.:() (c): (ii) (c); (iin) (a): (iv) (): (o) (b): (vi) (a); (vii) (c); (uiii) (d); (ix) (a);
() (0): (xi) (c); (xii) (c); (xiii) (c): (xiv) (a); (xv) (6); (xvi) (b); (xvii) (6); (xviii) (a).]
Objective Type Questions
1. State whether the following statements are True or False:
() Accoring to the Convention of Consistency accounting policies and practices once
adopted cannot be changed under any circumstances.
(i) Convention of Conservatism takes into account all prospective losses
but leaves out
prospective profits.
(iii) The proprietor is treated as a creditor to the extent of his capital according to Going
Concern Concept.
(w) Transactions and events that cannot be measured in money terms
are not recorded
in the books of accounts due toMoney Measurement
Concept.
(v) Accounting principles and policies once adopted should be followed
year after year
unless there is a change in law or accounting standards. It is based on
Consistency
Concept.
(vi) According to the Cost Concept, assets are recorded at their
estimated replacement
cost on completion of working life.
(vii) Following Accrual Principle, advance received from customers for supply of
goods not
recorded in the books of account as goods were not yet transferred to them.
(viii) Following Accounting Period Principle, results of the business are
determined so that
accounting information could be providd at regular intervals to users of accounting
information.
(ix) All expenses of a periodare deducted from revenues of the same period for
calculation
of income due to Matching Principle.
() Verifiable Objective principle ensures that accounting is free
from personal bias.
[Ans.: (i) False; (ii) True; (iüi) False; (iv) True; (v) True;
(vi) False; (vii) False; (viii) True; (ix) True; (x) True.]
2. Fill-in-the blanks wyith.
 Basis Accrual Basis of Accounting Cash Basis of Accounting
1. Nature of Transactions Both cash and credit transactions are recorded. Cash transactions are recorded.
2. Prepaid/Outstanding Prepaid and outstanding expenses are accounted in Prepaid and outstanding expenses are
Expenses the Profit & Loss Account. not adjusted. Sirnilarly, accrued income
Accrued Income/income Accrued income and incomerecelved in advance are and income received in advance are not
Received in Advance accounted and shown in the Balance Sheet. adjusted.
3. Profit or Loss Correct profit or loss is ascertained because it records Correct profit or loss is not ascertained
both cash and credit transactions. because it records only cash transactions.
4. Technical Knowledge The Accrual Basis of Accounting requires technical It does not require much of technical
knowledge as many adjustments like prepaid, knowledge as is required for AccrualBasis
outstanding, capital and revenue are required to of Accounting.
be made.

5. Legal Position Accrual Basis of Accounting is recognised by the Cash Basis of Accounting is not recognised
Companies Act, 2013. bytheCompanies Act, 2013.
6. Acceptability Accrual Basis of Accounting is more acceptable in Cash Basis of Accounting is not acceptable
business as it reveals corect income and expense in business as it does not reveal the
besides assets and Jiabilities. required information.
7. Reliability Accrual Basis of Accounting is more reliable as it Cash Basis of Accounting is less reliable as
records both cash and credit transactions and thus,it records only cash transactions and as a
reveals correct profit or loss besides assets and result does not reveal correct profit or loss
liabilities, and also assets and liabilities.
8. Suitability Accrual Basis of Accounting is suitable for businesses Cash Basis of Accounting is suitable for Not
as it requires information that is complex, It can be for-Profit Organisations and Professionals
made available by AcCrual Basis of Accounting. such as chartered accountants, lawyers,
etc, since they require comparatively less
information.
2.
(). position. False.l
Basis acCoUrs incurred.
Accountant compute
consultane
BasiAccou (v)
Ki. (c); incurred.
Cash financial (0
Arvind Accrual Sales the False,
to
position. (iv) recorded.
hisfollowed 10) being expenses.
(4iuee for
giving the transferred
incurred. (6);
by Dr. incurred. being
advised on
order to position.
financial (i) and (iv)
for
present.ly accounts angwer. these. these. on
after credited
Accountant?
appropriate on recorded areTrue;
an (6): profit
prepaid
been received Jater
meditely being recorded
of
being position.
fnancial recorded transactions
recorded of (ii)
itshe your None None and of (iüi)
basthe maintaing and on on Advance. (a);
of IMOrehas for Account
50,000
are profit False:areview and True;
racico
QUESTIONS
Ouestions)the n
insteadl
hardware,
reasons are(6) (d) (6) (d) and
expenses
financial recorded. ()
[Ans.:
are
fairoutstanding
expenses
or expenses credit
of I8 Tee expenses of
AccoMnUngi.e.,
ndvice firm
profit view in and (ü)
D Baus hi8
Received Received
loctor Give
received, and are True False;
recevesThe Accounting, of fair Expenses. recorded. true only
Accounting,
AcCTnl computer recognises recorded.
homeopah
(HOTS) he
Wih
Account?
50,000. Advance
Accounting, viewprofit
and
transactions areAccounting,
a recognises
()
of pracoioneT Incomes Accounting Accounting
Basis
amount (MCQs) fairof statementsgives [Ans.:
sale. true
Skills OD
acODts
agr in Received and
view
Accounting Prepaid
Accounting are are
Cnsh dealer
of the affecting
Questions
Choice
Multipleof
of
Basis a transactions of Accounting
Thinking voU
Kishore,
n
the
advance to Basis truefairgive and transactions
Credit of Basis Accounting
medcalShouldcredited alternative:
Doagree. (6). and above. andIncomes
of
above. Objective
above.Type
Questions)Basis
following of
a
Bros., Advance Accrual (6). a not (6). Basis
his
Acou)De
maintain on or
Cashpayment. (a)
on or of givetruemay of Outstanding
payment. and Accrual Basis
Arvind an
Acounting. the and Cash of
Order ot a Kalra be purchaser (a) (a) Basis Basis the Accrual the
bcguse
Ldo
with
theshould the
not
the either a or of
either Accrued
(a) of
Cashcashcredit the of Accrual
Basis
correct of thethe Basis
Higher
Dr.
toof N, e
alone
to Under Under
does
Accrual gives
mayNoneAccrual BothNone both None whether
Under onlyonly
(a)
on
Or Under
UnderAccrual
1. It of the
Select (c) (c) () Under
4.6 Q. Ans
Ans.
(6) (c) (d) (a) (6) (c)
(d) (a) (b) Cash
() (ü) (c)(d)
(iüi) (iv) State
(u) (i) (ii)(ii)(ip)
()