Plus One Accountancy Chapter Wise Previous Questions Chapter 2 Theory Base of Accounting

Kerala Plus One Accountancy Chapter Wise Previous Questions and Answers Chapter 2 Theory Base of Accounting

Question 1.
Closing stock is valued at _______ (March 2010)
a) Cost price
b) Market price
c) Cost price or market price whichever is lower.
d) replacement cost
Answer:
c) Cost price or market price whichever is lower.

Question 2.
Assets are shown at cost less depreciation due to the following principles. (March 2010)
a) Realization
b) Going concern
c) Duality
d) Dissolution
Answer:
b) Going concern

Question 3.
Revenue from the sale of products ordinarily is reported as part of the earning in the period when _________ (March 2010)
a) the sale is made
b) the cash is collected
c) the products are manufactured
Answer:
a) the sale is made

Question 4.
In double-entry book-keeping, every transaction has two aspects. (March 2010)
Answer:
True

Question 5.
The _____ concept makes a distinction between a business and its proprietor. (March 2011)
a) business entity
b) consistency
c) going concerned
d) accounting entity
Answer:
d) accounting entity

Question 6.
Assets are always equal to capital plus ________ (March 2011)
Answer:
Liabilities

Question 7.
Revenue is generally recognised being earned at, when ________ (March 2011)
a) cash is received
b) goods are delivered
c) sale is effected
Answer:
c) Sales is effected

Question 8.
According to the _______ principle, frequent changes in accounting policies adversely affect the reliability of financial information. (March 2011)
Answer:
Consistency principle

Question 9.
State whether the following is “true” or “false”. If false, correct the same. (March 2011)
It is on the basis of the going concern concept, that assets are valued at market price.
Answer:
False, It is on the basis of the going concern concept, the business has an indefinite life.

Question 10.
Excess of assets over liability is _________ (March 2012)
a) fixed assets
b) current assets
c) capital
d) drawings
Answer:
c) capital

Question 11.
Accounting Standards-2 (AS2) deals with ________ (March 2012)
a) depreciation accounting
b) revenue recognition.
c) valuation of inventory
d) accounting for fixed assets
Answer:
c) valuation of inventory

Question 12.
Debit Means _______ (March 2012)
Answer:
Receiving aspects of a transaction

Question 13.
Enumerate four different forms of the accounting equation. (March 2012)
Answer:
Accounting Equation
Assets = Equities
The properties owned by a business are called assets, the right to the properties are called equities. Equities may be creditors’ equity or owners’ equity. Equities of creditors being debts of the business are called liabilities. The equity of owners is called capital or owners equity.
Therefore, Assets = Liabilities + Capital i.e., A = L + C
Capital = Assets – Liabilities i.e., C = A – L
Liabilities = Assets – Capital i.e., L = A – C
Assets – Capital – Liabilities = Zero i.e, A – C – L = Zero

Question 14.
Identify the accounting principles or concepts involved in the following: (March 2012)
a) Mr. Sreenath, owner of the business, invested Rs. 10,000 in his business. He is treated as a creditor of the business to the extent of Rs. 10,000 and his capital account is credited with the amount.
b) All transactions recorded in the books of accounts must have a supporting document in evidence of it.
c) Closing stock is valued at cost price or market price whichever is less.
Answer:
a) Business Entity/Accounting Entity Assumption
b) Verifiability/Objectivity Principle
c) Prudence/Conservatism Principle

Question 15.
Briefly explain any four of the modifying principles of accounting. (March 2012)
Answer:
There are certain general conventions or principles which supplement the basic principles for the preparation of accounting records and financial statements. They are called modifying conventions or principles.
The important modifying principles are:
a. Cost-Benefit
b. Materiality
c. Consistency
d. Prudence or conservatism
e. Timeliness
f. Substance over legal form
g. Variation in accounting practices.

a. Cost-Benefit Principle: This principle is a generally accepted norm that the cost of doing anything must not exceed the possible benefit that may be derived. This is applicable in the case of accounting also. Money spent for undertaking accounting work should definitely provide more benefit than the cost incurred.

b. Materiality Principle: Materiality means relevance or importance or significance. As per this principle, all material facts should be disclosed in the financial statements, but insignificant and immaterial facts need not be disclosed in detail. For example, purchase of items like pen, pencil, scissors etc. are to be recorded as assets but practically these items are treated as expenses under the head stationary.

c. Consistency Principle: Consistency means steadiness or unchanging nature. Accounting policies and practices adopted must be consistent for a relatively reasonable period of time. The comparison of the financial statement of one year with that of another year will be effective and meaningful only if accounting practices and methods remain unchanged over year.

d. Conservatism or Prudence Principle: This principle calls for losses while recording accounting information but at the same time does not permit anticipation of profits. This principle implies that while preparing financial statements all possible losses are to be provided for but incomes can be recognized only when there is a certainty. It is base on the principle of prudence that stock is the value at market price or cost price whichever is less and provision is provided for doubtful debts.

Question 16.
According to ________ concept, it is assumed that business will last for a long period. (Say 2012)
a) Going concerned
b) Accounting entity
c) Dual aspect
d) Consistency
Answer:
a) Going concerned

Question 17.
A firm purchased pen and paperweight and included these items under the head stationery. Identify the relevant accounting principle. (Say 2012)
Answer:
Materiality Principles

Question 18.
Premier Ltd. supplies stationeries to ABT Ltd. on credit assuming that they can realise the amount in the future period. Name the relevant accounting concept and explain it. (Say 2012)
Answer:
Going concerned or Revenue Realisation concept.

Question 19.
Transactions relating to the qualitative aspect of business are not recorded because of the _________ (March 2013)
a) money measurement concept
b) entity concept
c) accrual concept
d) consistency principle
Answer:
a) money measurement concept

Question 20.
Find the odd one and state the reason. (March 2013)
a) Matching
b) Full disclosure
c) Dual aspect
d) Going concerned
Answer:
d) Going concerned.
All others are Accounting principles.

Question 21.
A firm decided to make provision for doubtful debts @10% on debtors for the year 2012-13. Name the relevant accounting principle applied here and explain. (March 2013)
Answer:
Conservatism or Prudence Principle: This principle calls for losses while recording accounting information but at the same time does not permit anticipation of profits. This principle implies that while preparing financial statements all possible losses are to be provided for but incomes can be recognized only when there is a certainty. It is base on the principle of prudence that stock is the value at market price or cost price whichever is less and provision is provided for doubtful debts.

Question 22.
‘Business entity assumption is not applicable to a partnership firm.’ State whether this statement is True or False. (March 2014)
Answer:
False. Business Entity Assumption applies to all forms of business like sole proprietorship, partnership, and Joint Stock companies.

Question 23.
Accounting standards in India are issued by _______ (March 2014)
Answer:
Accounting Standard Board (ASB) was set up by the Institute of Chartered Accountants of India.

Question 24.
Which one of the following principles of accounting helps to equate the assets of a firm with its liabilities? (March 2014)
a) Full Disclosure principle
b) Duality principle
c) Matching principle
d) Cost principle
Answer:
b) Duality principle

Question 25.
Which assumption of accounting, states that the capital supplied by the proprietor is a liability to the business? Describe it in one or two sentences. (March 2014)
Answer:
Accounting Entity/Business Entity Assumption This concept assumes that the entity of business is different from its owners. The business is treated as a unit or entity separate from the person who control it. The proprietor is treated as a creditor to the extent of the amount invested by him on the assumption that he has given money and the business has received it.

Question 26.
Identify the relevant principles and concepts associated with the following. (March 2015)

1. The quality of manpower is not recorded in the books of accounts.
2. Capital is a liability for the business.
3. For every debit, there is an equal and corresponding credit.
4. Contingent liabilities are shown as a footnote in the balance sheet.
5. Anticipate no profit but provide for all possible losses.

Answer:

1. Money measurement concept
2. Business Entity concept
3. Duality principle
4. Full Disclosure Principle
5. Prudence or conservatism Principle

Question 27.
Every transaction has two aspects which will be recorded in the books of accounts. (March 2015)
a) Identify and explain the accounting concept referred to above, by giving suitable examples.
b) Narrate a transaction which affects only the asset side of an accounting equation.
Answer:
a) Duality Principle
According to this concept, each and every business transaction has two aspects’ – a giving aspect and a receiving aspect. The giving aspect of a transaction is called “credit” and the receiving aspect of a transaction is called “Debit”.
For example Manu started the business with Rs. 10000 The effect of this transaction is that
It increases cash (assets) Rs. 10000
It increases capital (liability) Rs. 10000

b) Purchased goods for cash
cash deposited into bank
sales of assets

Question 28.
Match the following: (Say 2015)

Answer:
a) Matching concept – Salary outstanding
b) Money measurement Concept – Efficiency of the labour
c) Conservatism concept – Provision for bad debts
d) Vouchers and bills – Verifiable objective

Question 29.
Which one of the following is INCORRECT. (March 2016)
a) Assets = Liabilities + Capital
b) Liabilities = Assets – Captial
c) Captial = Assets – Liabilities
d) Liabilities = Assets + Captial
Answer:
d) Labilities = Assets + Capital

Question 30.
The fact that a business is separate and distinguished from its owner is best exemplified by the ______ concept. (March 2016)
a) money measurement
b) going concerned
c) business entity
d) cost
Answer:
c) Business entity

Question 31.
Identify the accounting principle related to the following transactions. (March 2016)
a) A land was purchased for Rs.5,00,000. But the market value of it was Rs.7,50,000. It was recorded in the books of the firm at Rs.5,00,000.
b) A business unit would continue to carry out its operations indefinitely fora long period of time and not liquidate in the near future.
Answer:
a) Historical cost principle/Cost principle
b) Going concern concept

Question 32.
In a meeting, the General Manager appreciate the sales department’s achievement of Rs.25 lakhs sales during the year 2015. But this activity of the General Manager is not recorded in the accounts of the business. (March 2016)
a) Identify the accounting principle on the basis of which this activity is not recorded?
b) Explain the above principle.
Answer:
a) Money measurement concept
b) According to this concept, transactions that can be measured in terms of money only are recorded in the books of accounts. Here, the activity of the general manager cannot be measured in terms of money.

Question 33.
Rajanesh is a manager with great expertise in management and leading his firm very well. But his expertise does not find a place in the accounting records of the firm. (March 2016)
a) Is it genuine according to the rules of accounting?
b) State your answer with the reason.
Answer:
a) Yes
b) According to the money measurement concept, transactions that can be measured in terms of money only are recorded in the books of accounts.

Question 34.
State the relevant principles/Concepts. (Say 2016)

Answer:

1. Accounting Entity concept or Business Entity concept
2. Money Measurement concept
3. Going concern concept
4. Consistency principle
5. Conservatism or prudence principle
6. Matching principle

Question 35.
Transactions between owner and business are recorded due to the ______ principle. (March 2017)
a) going concerned
b) accounting entity
c) matching
d) consistency
Answer:
b) accounting entity

Question 36.
A building worth Rs. 10 lakhs is purchased for Rs. 8 lakhs and recorded the same in the books of account at Rs. 8 lakhs.
a) Name the accounting principle referred to in the above. (March 2017)
b) Explain that principle.
Answer:
a) Historical cost principle
b) This principle requires that all transactions should be recorded at their acquisition cost. The cost principle assumes that all assets are to be recorded at the total amount paid to acquire them and this cost is the basis for all subsequent accounting for those assets.

Question 37.
Match the following. (March 2017)

Answer:
a → iv. Principle of conservatism
b → iii. Dual aspect concept
c → ii. money measurement concept
d → i. objectivity principles

 Plus One Accountancy Chapter Wise Previous Questions