Theoretical Framework – Accounting Concepts, Principles And Conventions 0 Theoretical Framework - Accounting Concepts, Principles And Conventions 1 / 29 Q.30 Cost Advance received from the suppliers is not taken as income or Sale Value of asset is determined on the basis of the acquisition cost Provision is made for the amount outstanding for the electricity consumed during the accounting period Fixed assets are kept in the business for generating benefits in the future and not for immediate Sale 2 / 29 Q.29 Consistency Affairs of the business are distinguished from personal affairs of the proprietor Accounting policies are not changed frequently Anticipated income should not be recognized in the financial statements Loyalty of the management team is not disclosed in the financial statements 3 / 29 Q.28 Going concern , cost and realization concept Are the fundamental accounting gives the valuation criteria Is the basic accounting concept Is the procedural accounting concept 4 / 29 Q.27 Going concern , consistency and accrual Are the fundamental accounting gives the valuation criteria Is the basic accounting concept Is the procedural accounting concept 5 / 29 Q.26 Economic life of an enterprise is split into the periodic interval to measure its performance as per Periodicity Matching Going concern Accrual 6 / 29 Q.24 R Ltd. Purchased Equipment from P Ltd. For Rs. 50,000 on 1st April 2009. The freight and cartage of Rs. 2,000 is spent to bring the Asset to the factory and Rs. 3,000 is incurred on installing the equipment to make it possible for the intended use. The market price of machinery on 31st April 2010 is Rs. 60,000 and the accountant of the company want to disclose the machinery at Rs. 60,000 in financial statements.However,the auditor emphasizes that the machinery should be valued at Rs.55,000 (50,000+2,000+3,000) according to________ Money measurement principle Historical cost concept Full disclosure principle Revenue recognition 7 / 29 Q.23 ________Principle requires that the same accounting method should be used from one accounting period to the next. Conservatism Consistency Business entity Money measurement 8 / 29 Q.22 As per_________the accountant should not anticipate income and should provide for all possible losses. Convention of disclosure Convention of Materiality Convention of consistency Convention of conservatism 9 / 29 Q.21 According to the_____accountants should report only what is material and ignore insignificant details while preparing the final accounts. Convention of disclosure Convention of Materiality Convention of consistency All of the above 10 / 29 Q.20 As per______concepts in order to determine the profit earned or loss suffered by the business in a particular defined accounting period,it is necessary that expenses of the period should be matched with the revenues of that period Accrual concept Realization concept Accounting period concept Revenue match concept 11 / 29 Q.19 If the assumption of the going concern is not valid,the financial statements should_________ Not be necessary to clearly state this fact. Clearly state this fact. Clearly state this fact if it suggested by auditor. Clearly state this fact if it suggested by internal auditor 12 / 29 Q.18 According to_________the various assets acquired by a concern or firm should be recorded on the basis of the actual amounts involved or spent. Money measurement Cost concept Going concern concept Dual aspect concept 13 / 29 Q.17 ______are defined as basic assumption on the basis of which financial statements of a business entity are prepared. Accounting concepts Accounting methods Both (a) & (b) None of the above 14 / 29 Q.16 A proprietor X has a reported a profit of Rs.1,00,000 at the end of the financial year after taking into consideration the following amount (I) the cost of an asset of Rs.10,000 has been taken as an expenses (ii) X is anticipating a profit of Rs.5,000 on the future sale of a car shown as an asset in his books (iii) salary of Rs.200 payable in the financial year has not been taken into account (iv) X purchased an asset for Rs.50,000 but its fair value on the date of purchase was Rs.60,000.X recorded the value of asset in his book at Rs.60,000.On the basis of the above facts answers the following question from the given choice ? 1. which measurement base should be followed in the statement historical cost current cost replacement cost present value 15 / 29 Q.15 a businessman purchased goods for Rs.15,00,000 and sold 80% of such goods during the accounting year ended 31st March, 2007. The market value of remaining goods was Rs.2,50,000, He valued the closing stock at Rs.3,00,000 . He violated the concept of periodicity principle cost principle money measurement principle Conservatism 16 / 29 Q.14 subjectivity is involved in prudence principle money measurement principle cost principle accounting entity principle 17 / 29 Q.13 The production manager reports to the top management that the production for the year 2007 is 200 tons but actual production is 1,99,000.90 kg.He has followed Conservatism principle materiality principle cost principle consistency principle 18 / 29 Q.12 x started a business on 1st April 2001 & reported about the financial performance & financial position of the business on 31st march 2007 being the date of liquidation of enterprise. He has violated periodicity principle consistency principle money measurement principle accounting entity principle 19 / 29 Q.11 personal transaction are distinguished from business transaction of an accounting period in accordance with accounting period principle accounting entity principle money measurement principle None of these 20 / 29 Q.10 materiality principle is an exception to the accounting period assumptions consistency principle full disclosure principle prudence principle 21 / 29 Q.9 Purchase of machinery for cash Decreases total assets Increase total assets Retains total assets unchanged Decrease total liabilities 22 / 29 Q.8 All the following items are classified as fundamental accounting assumptions except Consistency Business entity Going concern Accrual 23 / 29 Q.7 Assets should be valued at the price paid to acquire them is based on_______ Realization concept Cost concept Matching concept Periodicity concept 24 / 29 Q.6 Going concern concept is not followed by_____ Banks Partnership Companies Joint ventures 25 / 29 Q.5 A proprietor X has a reported a profit of Rs.1,00,000 at the end of the financial year after taking into consideration the following amount (I) the cost of an asset of Rs.10,000 has been taken as an expenses (ii) X is anticipating a profit of Rs.5,000 on the future sale of a car shown as an asset in his books (iii) salary of Rs.200 payable in the financial year has not been taken into account (iv) X purchased an asset for Rs.50,000 but its fair value on the date of purchase was Rs.60,000.X recorded the value of asset in his book at Rs.60,000.On the basis of the above facts answers the following question from the given choice ? 1. which concept should be followed in the statement historical cost Conservatism accrual materiality 26 / 29 Q.4 during the year ,2006 X purchased goods for Rs.5,00,000 & sold 3/5th of the goods for Rs.5,00,000 & met expenses amounting Rs.1,50,000 . He counted net profit as Rs.50,000 .which of the accounting concept was followed by him ? Entity Periodicity matching Conservatism 27 / 29 Q.3 X has a closing stock costing Rs.10,000 but its market value is Rs.12,000.He shows this stock at Rs.12,000 in the financial statements .He has violated Conservatism principle materiality principle cost principle consistency principle 28 / 29 Q.2 the principle which treats all rupees alike whether it is a rupee of 1957 or 2007 periodicity principle consistency principle money measurement principle accounting entity principle 29 / 29 Q.1 the assets & incomes are not overstated & the liabilities & losses are not understated in accordance with going concern assumptions matching principle prudence principle cost concept Your score is LinkedIn Facebook Twitter VKontakte