VS THEORY BASE OF ACCOUNTING

ONE WORD TO ONE SENTENCE QUESTIONS

Q.1. What are accounting standards ?

Ans. Accounting stands are the guidelines issued by the accounting body for preparing financial statements.

Q.2. What do you mean by the double entry system ?

Ans. Double entry system is the system under which each transaction has double aspect debit as well as credit.

Q.3. Write any two advantages of the double entry system ?

Ans. (i) It enables us to keep a complete record of every business transaction.

(ii) It gives the result of business activities.

Q.4. Write any two features of accounting principles ?

Ans. (i) These principles are based on facts.

(ii) These are man made.

Q.5. What is the Business Entity Principle ?

Ans. Business entity means that the business is to be tested as a separate entity by itself independent of the owner's entity.

Q.6. What is the money measurement principle ?

Ans. The transactions of goods and services are measured in monetary units to record and report accounting information

Q.7. What is the Accounting period Principle ?  .

Ans. Some definite period is decided upon as an accountancy period which is usually a year of twelve months.

Q.8. What is the Full Disclosure Principle ?

Ans.  This principle specifies that there should be complete and full disclosure of all significant information relating to the economic activity and financial affairs of the  business enterprise.

Q.9. What is the Materiality Principle ?

Ans. All material information should be disclosed that is necessary to make financial statement clear

Q.10. What is prudence or conservation principle ?

Ans. It refers to the policy of playing safe by providing for all possible losses but not for the anticipated gains .

Q.11. What is the matching concept ?

Ans. Matching concept is based upon the accounting period postulate which implies recognition of revenue and expenses on a comparable basis to determine the profit or loss for a particular Accounting period.

Q.12. What is the Dual Aspect Principle ?

Ans. This implies that each and every business transaction has two aspects. It may be either :

(a)  Receiving the benefit and giving the benefit

(b)  Source of benefit and use of benefit and so on.

Q.13. What are the three basis of accounting systems ?

Ans. (a) Accrual Base (b) Cash Base © Hybrid Base.

Q.14. Give one distinction between cash basis and accrual based accounting system.

Ans. in a cash based accounting system true  picture of profit and loss is not given but in accrual base it is true profit and loss.

Q.15. What do you mean by cost concept ?

Ans. In this concept assets are recorded at purchase price not at market price.

Q.16. What do you meant by Hybrid System of accounting

Ans. It is a mixture of cash and accrual basis of the accounting system.

Q.17. What is meant by the concept of concern ?

Ans. It means that business will continue to exist in the long run.

Q.18. State any one cause of developing accounting Stands ?

Ans. To avoid manipulations in accounting data. 

FILL IN  THE  BLANKS :

1. Accounting to ____________concept a business is assumed to have a long life.

2. Going concern is not applicable to ___________business.

3. ]convention of __________provides that Anticipate no profits but provide for al  loss

4. In accounting in all transaction every debit has its____________

5. Statement of equality between debits and credits called_____________

Ans.  1.  Going concern  2. Joint Venture  3. Conservatism  4. Credit  5. Accounting  Equation 

TRUE OR FALSE STATEMENT 

1. Accounting for dual concept capital + liabilities = Assets .

2. In sole proprietorship dual concept is not applicable.

3. For cash transactions, the debit amount is equal to credit amount.

4. Accounting to go  concern a business assumed to have limited life.

5. Hybrid system means combination of cash and Accrual basis system.

6. Business entity concept is not applicable to sole trading concerns and partnership concerns.

7. Only those facts and events are recorded in accounting which are capable of being expressed in terms of money.

8. All items or facts whether material or immaterial are recorded on accounting

9. Assets will be equal to capital if there are no liabilities ..

10. Materiality principle is an exception to the Full Disclosure conventions.

Ans. 1. True  2. False  3. True  4. False  5. True  6. False  7. True  8. False  9. True  10. True 

MULTIPLE CHOICE QUESTIONS :

1. Which of the following is not a basis of the accounting system  ?

1. Cash Basis

2. Accrual Basis

3. Hybrid Basis

4. Payment Basis

2. ‘The proprietor of the business is treated as a creditor of the business’. This followed under which concept ?

1. Matching Concept

2. Cost Concept

3. Entity Concept

4. Dual aspect concept

3. According to the Accounting Cycle which accounts are made after the Journal .

1. Balance Sheet

2. Ledger

3. Profit & Loss Account  

4. Trial Balance

4. Which of the following will he record in the books according to money measurement concepts ?

1. Quality control data

2. Profit on revaluation of assets

3. Commission Payable

4. All of these

5. As per Income Tax act accounting Period is

1. From 1st January to 31st December

2. From 1st April to 31st March

3. From Diwali to Diwali

4. From 1st July to 30th June

6. As fer Dual Aspect Concept

1. Assets = Liabilities - Capital

2. Assets = Capital - Liabilities

3. Assets = Liabilities  + Capital

4. Capital = Assets + Liabilities

7. Accrual concept is based on

1. Matching Concept

2. Dual Aspect Concept

3. Cost Concept

4. Going concern Concept

8. According to which concept the same accounting methods should be used each year

1. Prudence

2. Full Disclosure

3. Materiality

4. Consistency

9. Income is measured on the basis of

1. Matching concept

2. Consistency concept

3. Cost concept

4. None of the above

Ans. 1. D    2. C 3. B 4. C 5. B 6. C 7. A 8. D 9. A .