Chapter 1 : Fundamental Of Accounting PC-14 MCQ

In this post, we have covered all important Questions and answer relevant to the fundamentals of accounting which will be helpful in the Upcoming Exam.

Information in financial reports is based on
a. Event b. Economic transaction
c. non-economic transactions d. All of the above
Answer
Answer: B
Internal users of a business entity are except
a. Chief Executive Office of the entity b. Plant Managers
c. Line Supervisor d. Owner of the entity
Answer
Answer: D
External users of a business entity are
i. Investor, creditor and lender ii. Chief Financial Officer Office of the entity
iii. Customer iv. Registrar of Companies
v. Owner of the entity
a. i, ii, iii and iv b. i, iii, iv and v
c. ii, iii, iv and v d. All of the above
Answer
Answer: B
Financial report of the entity are determined whether or not the business entity is eligible for a loan by
a. Owner b. Customer
c. Creditor d. Regularity Authority
Answer
Answer: C
Users are groups outside the business entity, who uses the information to make decisions about the business entity is
a. Internal Users b. External Users
c. Both d. Neither
Answer
Answer: B
Information is said to be relevant if it is
a. clearly prepared b. understandable
c. free from bias d. All of the above
Answer
Answer: C
The process of accounting starts with and ends with respectively
a. Identifying the transactions and communicating information
b. Recording the transactions and communicating information
c. Identifying the transactions and summarising the information
d. Recording the transactions and preparing the financial statement
Answer
Answer: A
Accounting measures the business transactions in terms of
a. physical units b. financial units
c. monetary units d. All of the above
Answer
Answer: C
Identified and measured economic events should be recorded in
a. chronological order b. ascending order of economic transaction
c. descending order of economic transaction d. Capital transaction first and revenue later.
Answer
Answer: A
Qualitative characteristics of financial information are
i. Reliability ii. Understandability
iii. Relevance iv. Comparability
v. Long-lasting
a. i, ii, iii and iv b. ii, iii, iv and v
c. i, iii, iv and v d. All of the above
Answer
Answer: A
Verifiability, Faithfulness, Neutrality are components of qualitative characteristics of
a. Understandability b. Reliability
c. Comparability d. Relevance
Answer
Answer: B
Which of the following is not a business transaction?
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Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)
a. Bought furniture of ₹10,000 for business b. Paid for salaries of employees ₹ 5,000
c. Paid sons fees from her personal bank account ₹ 20,000
d. Paid sons fees from the business ₹ 2,000
Answer
Answer: C
Deepti wants to buy a building for her business today. Which of the following is the relevant data for his decision?
a. Similar business acquired the required building in 2000 for ₹ 10,00,000
b. Building cost details of 2003
c. Building cost details of 1998
d. Similar building cost in August, 2005 ₹ 25,00,000
Answer
Answer: A
Which is the last step of accounting as a process of information?
a. Recording of data in the books of accounts
b. Preparation of summaries in the form of financial statements
c. Communication of information
d. Analysis and interpretation of information
Answer
Answer: C
Which qualitative characteristics of accounting information is reflected when accounting information is clearly presented?
a. Understandability b. Relevance
c. Comparability d. Reliability
Answer
Answer: A
Use of common unit of measurement and common format of reporting promotes
a. Comparability b. Understandability
c. Relevance d. Reliability
Answer
Answer: A
Mr. Amit started a business named M/s Amit Enterprises for buying and selling of stationery with ₹ 5,00,000 as an initial investment. The entry that will be recorded in the business will be
a. Capital Account Dr. ₹ 500000
To Cash/Bank Account ₹ 500000
b. Cash/Bank Account Dr. ₹ 500000
To Capital Account ₹ 500000
c. Capital Account Dr. ₹ 500000
To Stationery Account ₹ 500000
b. Stationery Account Dr. ₹ 500000
To Capital Account ₹ 500000
Answer
Answer: B
Furniture worth ₹ 100000 was purchased by a business entity, the journal entry would be
a. Purchase Account Dr. ₹ 100000
To Cash/Bank Accounts ₹ 100000
b. Capital Accounts Dr. ₹ 100000
To Cash/Bank Accounts ₹ 100000
c. Assets Accounts Dr. ₹ 100000
To Cash/Bank Accounts ₹ 100000
d. Cash/Bank Accounts Dr. ₹ 100000
To Furniture Accounts ₹ 100000
Answer
Answer: C
M/s Amit Enterprises, a business of stationery, bought stationery worth ₹ 200000 by paying ₹ 150000 by a cheque and ₹ 50000 in cash. The journal entry would be
a. Stationery Accounts Dr. ₹ 200000
To Bank Account ₹ 150000
To Cash Account ₹ 50000
b. Bank Account Dr. ₹ 150000
Cash Account Dr. ₹ 50000
To Stationery Accounts ₹ 200000
c. Bank Account Dr. ₹ 150000
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Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)
Cash Account Dr. ₹ 50000
To Purchase Accounts ₹ 200000
d. Purchase Accounts Dr. ₹ 200000
To Bank Account ₹ 150000
To Cash Account ₹ 50000
Answer
Answer: D
M/s Amit Enterprises, a business of stationery, bought stationery worth ₹ 200000 by paying ₹ 150000 by a cheque and ₹ 50000 in credit. The journal entry would be
a. Stationery Accounts Dr. ₹ 200000
To Bank Account ₹ 150000
To Creditor Account ₹ 50000
b. Stationery Accounts Dr. ₹ 200000
To Bank Account ₹ 150000
To Debtor Account ₹ 50000
c. Purchase Accounts Dr. ₹ 200000
To Bank Account ₹ 150000
To Creditor Account ₹ 50000
d. Purchase Accounts Dr. ₹ 200000
To Bank Account ₹ 150000
To Debtor Account ₹ 50000
Answer
Answer: C
M/s Amit Enterprises, a business of stationery, bought stationery worth ₹ 50000 on credit in March 2019 and paid it out at the end of April 2019. The journal entry when paid would be
a. Stationery Accounts Dr. ₹ 50000
To Bank Account ₹ 50000
b. Creditor Account Dr. ₹ 50000
To Bank Account ₹ 50000
c. Debtor Account Dr. ₹ 50000
To Bank Account ₹ 50000
d. Purchase Accounts Dr. ₹ 50000
To Creditor Account ₹ 50000
Answer
Answer: B
Identify transactions related to book-Keeping
i. Credit Sales/Purchases ii. Cash Purchases/Sales
iii. Calculation of business profits iv. Find out total debtors
v. Find out financial position of the business enterprise
a. i and ii b. i, ii and iii
d. i, ii and iv d. iii, iv and v
Answer
Answer: A
Identify transactions related to accounting
a. Credit Sales/Purchases
b. Cash Purchases/Sales
c. Calculation of business profits
d. Find out total debtors
e. Find out financial position of the business enterprise
a. i and ii b. i, ii and iii
d. i, ii and iv d. iii, iv and v
Answer
Answer: D
Which of the following transaction will be accounted under assets accounts
i. Furniture purchased by Makhan Singh, a dealer in furniture.
ii. Automatic Machine purchased by a workshop for manufacturing products.
iii. Machine manufactured by a firm for sale to a proper mill.
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Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)
iv. Furniture purchased by Shankar, a stationery shop-owner
a. i and ii b. i and iii
c. ii and iv d. ii, iii and iv
Answer
Answer: B
The stakeholder that concerned with ensuring that the money invested in the company/organisation is generating an adequate return and that the company/organisation is able to pay its debts and remain solvent
a. Owner b. Shareholder
c. Director/Management d. Bank/Lender
Answer
Answer: C
The accounting information should ensure to provide or serve
i. making economic decision
ii. Information on activities affecting the society.
iii. for judging management’s ability to utilise resources effectively in meeting goals
iv. factual and interpretative information by disclosing underlying assumptions on matters subject to interpretation, evaluation, prediction, or estimation
v. factual and interpretative information by disclosing underlying assumptions on matters subject to interpretation, evaluation, prediction, or estimation
a. i, ii, iii and iv b. ii, iii, iv and v
c. i, ii, iv and v d. All of the above
Answer
Answer: D
Vouchers and other supporting documents are necessary for
a. book-keeping b. accounting
c. both A & B d. Neither A nor B
Answer
Answer: A
The branch of accounting that draws the relevant information mainly from financial accounting and cost accounting which helps the management in budgeting, assessing profitability, taking pricing decisions, capital expenditure decisions and so on is
a. Cost-Accounting b. Financial Accounting
c. Management Accounting d. All of the above
Answer
Answer: C
The branch of accounting that assists in keeping a systematic record of financial transactions the preparation and presentation of financial reports in order to arrive at a measure of organisational success and financial soundness is
a. Cost-Accounting b. Financial Accounting
c. Management Accounting d. All of the above
Answer
Answer: B
The components of Relevance, a characteristic of accounting information are
i. information must be available in time ii. must help in prediction and feedback
iii. must influence the decisions of users iv. the users must be able to depend on the information
a. i, ii and iii b. ii, iii and iv
c. i, iii and iv d. All of the above
Answer
Answer: A
Which of the following statements is not an objective of accounting?
a. To keep systematic records
b. To ascertain the operational profit or loss
c. To provide information of the personal assets liabilities of the owner of an enterprise
d. To ascertain the financial position of the business
Answer
Answer: C
Which of the following events represent business transaction:
a. Goods is purchased for cash b. Goods are ordered for delivery next month
c. The owner of the firm dies d. An employee is dismissed from this job
Answer
Answer: A
Which of the following transactions will be entered in the books of Mr. Kapoor, a cloth merchant?
a. He receives a shirt as a gift on his birthday b. He buys a shirt for his son
c. He sells cloth to one of his customers d. He donates few shirts on his birthday.
Answer
Answer: C
The limitations of Accounting are:
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Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)
i. Influenced by Personal Judgements ii. Incomplete Information
iii. Consideration of monetary transactions only iv. helpful in decision making
a. i, ii and iii b. ii, iii and iv
c. i, iii and iv d. i, ii and iv
Answer
Answer: A
Advantages of Accounting Information are:
i. Accounting Information is historical in nature
ii. It provides to users the information regarding the earning capacity of Enterprise
iii. it provides information useful for making economic decisions
iv. If reflects the current financial position of a business
a. i, ii and iii b. ii, iii and iv
c. i, iii and iv d. All of the above
Answer
Answer: D
A message is said to be effectively communicated when it is interpreted by the receiver of the message in the same sense in which the sender has sent is the key point of accounting characteristic
a. Reliability b. Relevance
c. Understandability d. Comparative
Answer
Answer: C
To be comparable, an accounting information should
i. belong to a common period ii. use common unit of measurement
iii. use format of reporting iv. be free from error and bias
a. ii, iii and iv b. i, ii and iii
c. i, iii and iv d. All of the above.
Answer
Answer: B
Functions of accounting include
i. Maintaining systematic records ii. Communicating the financial results
iii. Meeting Legal Requirements iv. Fixing responsibility
v. Decision making vi. Maximising the profit for the owner.
a. i, ii, iii, iv and v b. i, ii, iii, iv and vi
c. ii, iii, iv, v and vi d. All of the above.
Answer
Answer: A
Manipulation of the Profit for a given period by omitting certain expenses such as advertisement, research and development, depreciation etc. is called
a. Figure Dressing b. Cover Dressing
c. Window Dressing d. Roof Dressing
Answer
Answer: C
GAAP stands for
a. Generally Accepted Accounting Principles b. Generally Accepted Accounting Procedures
c. Generally Applicable Accounting Principles d. Generally Applicable Accounting Procedures
Answer
Answer: A
Types of Accounting Principles are:
a. Basic Concepts b. Basic principles
c. Modifying principles d. All of the above
Answer
Answer: D
Accounting Principles means:
i. Which are implemented at the time of recording of accounting transactions
ii. Which are implemented at the time of presentation of Financial Statements.
iii. Which are written and certain
iv. Which are generally acceptable
a. i, ii and iii b. ii, iii and iv
c. i, ii and iv d. All of the above
Answer
Answer: C
A business firm is separate and distinct from its owners is the assumption under which of the following accounting concepts
a. Business Entity b. Going Concern Entity
c. Money Measuring Entity d. Accounting Period concept
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Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)
Answer
Answer: A
Assumption of accounting entity or business entity concept is applicable for which of the following business organizations.
a. Societies b. Joint Stock Companies/ Partnership Firms c. Corporations d. All the above
Answer
Answer: D
Under which of the following kinds of business concepts it is assumed that the organization will last for a long time.
a. Accounting Entity b. Going Concern Entity c. Money Measuring Entity d. Accounting Period
Answer
Answer: B
Distinction between an expenditure whose benefit will be for a long period and whose benefit for a short period of say up to one year, is made under which of the following.
a. Accounting Entity b. Going concern Entity c. Money Measuring Entity d. Accounting Period
Answer
Answer: B
A firm is expected not to curtail its present scale and continue to operate at least at the existing level under, which of the following:
a. Accounting Entity b. Going Concern Entity c. Money Measuring Entity d. Accounting Period
Answer
Answer: B
It is assumed that only those transactions that could be expressed in monetary terms, under which of the following concepts:
a. Dual Aspect Principle b. Going Concern Entity c. Money Measurement Entity d. Cost Principle
Answer
Answer: C
Entire life of a business entity is divided into shorter time intervals, say of one year, under which of the following
a. Dual Aspect Principle b. Going Concern Entity c. Money Measuring Principle d. Accounting Period Principle
Answer
Answer: D
General rules that are used as a guide in accounting and as a basis of accounting practices are called
a. Generally Accepted Accounting Practices b. Basic Accounting Conventions c. Accounting and Financing Principles d. All the above
Answer
Answer: A
Every transactions has two aspects i.e., debit and credit, under which of the following accounting principles:
a. Cash Accrual Principle b. Revenue Accrual Principle c. Dual Aspect Principle d. Double Entry Book-keeping System
Answer
Answer: C
Anticipate no profits and provide for all possible losses. This is essence of which of the following accounting principles:
a. Dual Aspect Principle b. Materiality Principle c. Conservatism Principle d. Consistency Principle
Answer
Answer: C
Accounting procedures and accounting practices should remain same from year to year under which of the following accounting principles:
a. Dual Aspect Principle b. Materiality Principle c. Timeliness Principle d. Consistency Principle
Answer
Answer: D
An ink-stand has been purchased by a firm for a nominal amount that is to last for 4 year. It should not be classified as a fixed asset under which of the following accounting principles:
a. Dual Aspect Principle b. Materiality Principle c. Timeliness Principle d. Conservatism Principle
Answer
Answer: B
When a machinery is purchased for cash, the cash balance is reduced and to that extent, the amount of machinery as an asset is recorded. This is done to follow which of the following accounting principles:
a. Dual Aspect Principle b. Materiality Principle c. Conservatism Principle d. Consistency Principle
Answer
Answer: A
Rules of revenue recognition determine that earning process should be either complete or near completion under:
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Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)
a. Realization Concept b. Materiality Concept c. Historical Record Concept d. Accounting Period Concept
Answer
Answer: A
The business transactions are recorded date wise to create proper record for all transactions. This is part of which of the following
a. Realization Concept b. Materiality Concept c. Historical Record Concept d. Accounting Period Concept
Answer
Answer: C
Profit is a liability for a firm and the loss is an asset under which of the following concepts a. Business Entity Concept b. Materiality Concept c. Historical Record Concept d. Accounting Period Concept
Answer
Answer: A
The accounting equation ‘asset = capital + liability is part of which of the following concepts
a. Realization Concept b. Materiality Concept c. Historical Record Concept d. Dual Aspect Concept
Answer
Answer: D
Under which conventions of accounting, the contingent liabilities are shown as a footnote or explanatory notes in the balance sheet of a firm:
a. Convention of Full Disclosure b. Convention of Materiality c. Convention of Conservatism d. Convention of Consistency
Answer
Answer: A
A business firm creates provisions against doubtful debt under which of the following conventions
a. Convention of Full Disclosure b. Convection of Materiality c. Convention of Conservatism d. Convention of Consistency
Answer
Answer: C
Valuation of stocks is done by a business firm at cost price or market price, whichever is lower basis, under
a. Convention of Full Disclosure b. Convection of Materiality c. Convention of Conservatism d. Convention of Consistency
Answer
Answer: C
The concept that recognizes the distinction between the receipt of cash and the right to receive the cash is called
a. Accrual Concept b. Cash Concept c. Materiality Concept d. Full Disclosure Concept
Answer
Answer: A
Depreciation to Fixed assets is provided keeping in mind
a. Business Entity b. Going Concern
c. Convention of Conservatism d. Convection of Consistency
Answer
Answer: B
The assumption that states that businesses can divide up their activities into artificial time periods
a. Business Entity Concept b. Materiality Concept c. Historical Record Concept d. Accounting Period Concept.
Answer
Answer: D
Companies not disclosing an immanent bankruptcy would violate the
a. Convention of Full Disclosure b. Convection of Materiality c. Convention of Conservatism d. Convention of Consistency
Answer
Answer: A
Assets are recorded at their original purchase price according to the
a. Convention of Materiality b. Conventional of Historical Cost
c. Convention of Cost benefit d. Consistency Principle
Answer
Answer: B
Management concealing important financial information violates the
a. Convention of Materiality b. Convection of Business Entity
c. Convention of Conservatism d. Convention of Full Disclosure
Answer
Answer: D
When estimating unearned revenues, what principle does apply to?
a. Conservatism concept b. Going concern concept
c. Consistency concept d. Money Measurement concept
Answer
Answer: B
Which is not a value of accounting relevance?
a. Predictive Value b. Feedback Value
c. Timeliness d. Reliability
Answer
Answer: D
Switching accounting principles every year would violate the
a. Principle of Conservatism b. Principle of Going concern
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Prepared by Deepak Kumar Rahi, AAO (LAD/Patna)
c. Consistency principle d. Principle of Money Measurement
Answer
Answer: C
Recording expenses and revenues in the same period in which they occur
a. Accounting Period Principle b. Principle of Money Measurement
c. Matching Principle d. Consistency Principle
Answer
Answer: C
During the life-time of an entity accounting produce financial statements in accordance with which basic accounting concept
a. Conservation Concept b. Matching Concept
c. Accounting period Concept d. None of the above
Answer
Answer: C
When information about two different enterprises have been prepared presented in a similar manner the information exhibits the characteristic of:
a. Verifiability b. Relevance
c. Reliability d. None of the above
Answer
Answer: D
A concept that a business enterprise will not be sold or liquidated in the near future is known as :
a. Going concern b. Economic entity
c. Monetary unit d. None of the above
Answer
Answer: A
The primary qualities that make accounting information useful for decision-making are
a. Relevance and freedom from bias b. Reliability and comparability
c. Comparability and consistency d. None of the above
Answer
Answer: B
The accounting concept that advocates recognition of expenses in the same period as associated revenues is
a. Revenue Recognition concept b. Conservatism Concept
c. Matching Concept d. Money Measurement Concept
Answer
Answer: C
The accounting concept that refers to the tendency of accountants to resolve uncertainty and doubt in favour of understating assets and revenues and overstating liabilities and expenses is known as
a. Dual Aspect b. Consistency Concept
c. Conservatism Concept d. Objectivity Concept
Answer
Answer: C
Revenue is generally recognized at the point of sale denotes the concept of
a. Revenue Recognition Concept b. Accrual Concept
c. Going Concern Concept d. Matching Concept
Answer
Answer: A
The concept/principle requires that accounting transaction should be free from the bias of accountants and others is
a. Consistency Concept b. Objectivity principle
c. Conservatism Concept d. Matching Concept
Answer
Answer: B
If a firm believes that some of its debtors may ‘default’, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the
a. Business Entity concept b. Accrual Concept
c. Going Concern Concept d. Conservatism Concept
Answer
Answer: D
Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the
a. Business Entity concept b. Dual Aspect concept
c. Conservatism Concept d. Accrual Concept
Answer
Answer: B
The concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year
a. Consistency b. Going Concern
c. Objectivity d. Revenue Recognition
Answer
Answer: A
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 the concept/principle
a. Cost concept b. Revenue Recognition
c. Conservatism d. Money Measurement
Answer
Answer: C
If a firm receives an order for goods, it would not be included in the sales figure owing to the
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a. Money Measurement Concept b. Revenue Recognition concept
c. Conservatism Concept d. Accrual Concept
Answer
Answer: B
The management of a firm is remarkably incompetent, but the firms’ accountants cannot take this into account while preparing book of accounts because of the concept of
a. Money Measurement Concept b. Revenue Recognition concept
c. Conservatism Concept d. Accrual Concept
Answer
Answer: A
The main objective of accounting concepts is to maintain
i. uniformity ii. consistency
c. Longevity iv Sensitivity
a. i, and ii b. i, ii and iii
c. ii, iii and iv d. All of the above
Answer
Answer: A
All fixed assets are recorded in the books of accounts at their historical price under
a. Conservatism Concept b. Revenue Recognition Concept
c. Principle of Objectivity d. Cost Concept
Answer
Answer: D
The main objective to adopt historical cost in recording the fixed assets is that
a. net worth of the business entity is not disclosed
b. the cost of the assets will be easily verifiable from the supporting documents
c. business may utilise the deprecation account for enlarging the business volume
d. All of the above.
Answer
Answer: B
Revenue is said to have been realised when
a. cash is received
b. right to receive cash on the sale of goods/services has been created
c. Both A & B
d. Either A or B
Answer
Answer: D
The financial statements shall be made more meaningful, only significant and important items should be supplied to the users under the concept of
a. Objectivity b. Money Measurement
c. Materiality d. Matching
Answer
Answer: C

Chapter 1 : Fundamental of Accounting PC-14 MCQ

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