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Test: Accounting Concepts, Principles And Conventions - 1 - CA Foundation MCQ


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30 Questions MCQ Test Principles and Practice of Accounting - Test: Accounting Concepts, Principles And Conventions - 1

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Test: Accounting Concepts, Principles And Conventions - 1 - Question 1

The accounts that records expenses, gains and losses are

Detailed Solution for Test: Accounting Concepts, Principles And Conventions - 1 - Question 1

A nominal account is a general ledger or temporary account formed and maintained by a business. It includes all necessary records of the business's expenses, losses, gains and revenues for a particular financial year.

Test: Accounting Concepts, Principles And Conventions - 1 - Question 2

Money owed from an Outsider is a : 

Detailed Solution for Test: Accounting Concepts, Principles And Conventions - 1 - Question 2

 

Test: Accounting Concepts, Principles And Conventions - 1 - Question 3

 No inference of profit and the provision making policy for all possible losses is due to: 

Test: Accounting Concepts, Principles And Conventions - 1 - Question 4

The Accounting Equation is based on: 

Test: Accounting Concepts, Principles And Conventions - 1 - Question 5

 During life- time of an entity accountants prepare financial statements at arbitrary points of time as per:

Test: Accounting Concepts, Principles And Conventions - 1 - Question 6

The owner of a company included his personal medical expenses in the company’s income statement. Indicate the principle that is violated. 

Test: Accounting Concepts, Principles And Conventions - 1 - Question 7

Capital as on 1-4-05: Rs. 90,000
Capital introduced: Rs. 25,000
Drawings made: Rs. 35,000
Capital as on 31-3-06: Rs. 1,25,000
What is the amount of profit added to the Capital? 

Detailed Solution for Test: Accounting Concepts, Principles And Conventions - 1 - Question 7

Net Profit= Closing Capital+ Drawings- Capital Introduced- Opening Capital 

= 1,25,000+ 35,000- 25,000- 90,000

= Rs. 45,000

Test: Accounting Concepts, Principles And Conventions - 1 - Question 8

“Holding gains in relation to stocks should not be used for payment of dividend.” Which one of the following accounting principle is involved in this?

Detailed Solution for Test: Accounting Concepts, Principles And Conventions - 1 - Question 8

The correct option is D.

The realization principle is the concept that revenue can only be recognized once the underlying goods or services associated with the revenue have been delivered or rendered, respectively. Thus, revenue can only be recognized after it has been earned. So since the amount is not realised and dividends are paid out of profits that are realised in cash, it cannot be paid by the gains in holdings.

Test: Accounting Concepts, Principles And Conventions - 1 - Question 9

________refer to the general agreement on the usage and practices in social or economic life: 

Test: Accounting Concepts, Principles And Conventions - 1 - Question 10

 Fundamental Accounting Assumptions are: 

Detailed Solution for Test: Accounting Concepts, Principles And Conventions - 1 - Question 10

Fundamental Accounting Assumptions.So unless specified otherwise, it will be assumed that such principles were implemented in the final accounts of the company. The three main assumptions we will deal with are – going concern, consistency, and accrual basis.

Test: Accounting Concepts, Principles And Conventions - 1 - Question 11

Recording of capital contributed by the owner as liability ensures adherence of principle of 

Detailed Solution for Test: Accounting Concepts, Principles And Conventions - 1 - Question 11

Recording capital contributed by the owner as a liability ensures adherence to the principle of separate entity.  The separate entity concept assumes that a business has its own identity, separate from its owners, creditors, debtors, and managers. This means that the transactions of a business and its owners are recorded separately. 

Test: Accounting Concepts, Principles And Conventions - 1 - Question 12

Ram starts business with Rs. 90,000 and then buys goods from Shyam on credit for Rs. 23,000. The accounting equation based on Assets= Capital + Liabilities will be:

Detailed Solution for Test: Accounting Concepts, Principles And Conventions - 1 - Question 12

Description: Accounting Equation as per the dual aspect concept is:
Assets= Capital + Liabilities
When Ram starts business:
A= C + L
Cash= Capital+ Liability
90,000= 90,000+ Nil
When gods are bought on Credit:
A= C+ L
Cash+ Goods= Capital+ Creditors
90,000+ 23,000= 90,000+ 23,000
1,13,000= 90,000+ 23,000

Test: Accounting Concepts, Principles And Conventions - 1 - Question 13

Which financial statement represents the accounting equations

ASSETS=LIABILITIES + OWNER’S EQUITY 

Test: Accounting Concepts, Principles And Conventions - 1 - Question 14

Which of these is not fundamental accounting assumption?

Test: Accounting Concepts, Principles And Conventions - 1 - Question 15

 Accounting does not record non-financial transactions because of : 

Detailed Solution for Test: Accounting Concepts, Principles And Conventions - 1 - Question 15

The concept of money measurement states that only those transactions and happenings in an organisation which can be expressed in terms of money such as sale of goods or payment of expenses or receipt of income, etc. are to be recorded in the book of accounts. 

All such transactions or happenings which can not be expressed in monetary terms, for example, the appointment of a manager, capabilities of its human resources or creativity of its research department or image of the organisation among people in general do not find a place in the accounting records of a firm.

Test: Accounting Concepts, Principles And Conventions - 1 - Question 16

Kanika Enterprises follows the written down value method of depreciating machinery year after year due to 

Test: Accounting Concepts, Principles And Conventions - 1 - Question 17

Cash of Rs. 2,000 is withdrawn for personal expenses. This will be debited to which account: 

Test: Accounting Concepts, Principles And Conventions - 1 - Question 18

 If nothing is written in the financial statements about the three fundamental assumptions, then it could be pressured that:

Test: Accounting Concepts, Principles And Conventions - 1 - Question 19

A trader started retail business. During the year he sold goods worth Rs. 60,000 and for Rs.1,20,000 out of which only Rs. 1,00,000 was collected during the year. He had a closing stock of Rs. 10,000. His other business expenses for the period were Rs.20,000 out of which Rs.5,000 was outstanding at year end His total profit for the year 2008-09 as per the terms of accrual concept was

Detailed Solution for Test: Accounting Concepts, Principles And Conventions - 1 - Question 19

The total profit for the year 2008-09 as per the accrual concept would be Rs. 45,000. This can be calculated by: Sales (Rs. 1,20,000) - Cost of goods sold (Rs. 60,000 (purchased goods) + Rs. 10,000 (closing stock)) - Expenses (Rs. 20,000 - Rs. 5,000 (outstanding expenses)) = Rs. 45,000. It is important to note that the Rs. 20,000 in expenses and Rs. 5,000 in outstanding expenses are considered in the calculation, as per the accrual concept expenses are recognized in the period in which they are incurred, rather than when they are paid.

Test: Accounting Concepts, Principles And Conventions - 1 - Question 20

Which of the following is not regarded as the fundamental concept that is identified by AS-1

Detailed Solution for Test: Accounting Concepts, Principles And Conventions - 1 - Question 20

The Fundamental Accounting concepts are

1. Conservatism 

2. Going Concern Concept

3. Accrual Concept

Test: Accounting Concepts, Principles And Conventions - 1 - Question 21

 What is the effect on the Net Assets if cash is received from debtors of Rs. 50,000?

Test: Accounting Concepts, Principles And Conventions - 1 - Question 22

According to which concept the owner of an enterprise pays the “interest on drawings”?

Test: Accounting Concepts, Principles And Conventions - 1 - Question 23

Which of the following does not follow Dual Aspect?

Test: Accounting Concepts, Principles And Conventions - 1 - Question 24

According to accrual concept of accounting, financial or business transaction is recorded:

Test: Accounting Concepts, Principles And Conventions - 1 - Question 25

 An asset was purchased for Rs. 6,60,000. Cash was paid Rs. 1,20,000 and for the balance a bill was drawn for 60 days. What will be the effect on fixed assets?

Test: Accounting Concepts, Principles And Conventions - 1 - Question 26

What is the objective of conservatism ?

Test: Accounting Concepts, Principles And Conventions - 1 - Question 27

 All the following items are classified as fundamental accounting assumption except

Test: Accounting Concepts, Principles And Conventions - 1 - Question 28

Unpaid expenses are: 

Test: Accounting Concepts, Principles And Conventions - 1 - Question 29

The obligations of an enterprise other than owner’s fund are known as: 

Test: Accounting Concepts, Principles And Conventions - 1 - Question 30

Cost concept basically recognizes

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