Test: Theory Base Of Accounting - 1 - Commerce MCQ

According to business entity concept business is different from owners and it is treated as a separate unit or entity apart from owners. Personal expenses of proprietor will be recorded in drawings because it may be an expenses which relate to business entity .So the correct answer is d

The accounting principle where the quality of manpower is not recorded in the accounts book is Money Measurement Principle.

This concept underlines the fact that in economics and accounting generally, every recorded transaction or event is measured with regards to money.

By utilizing this principle, the happening or a fact or event that cannot be indicated in terms of money are not recorded in accounting books.

Going concern concept is also known as continuty assumption.
It is assumed that the enterprise is normally continuing in for the foreseeable future

Accounting period principle: Accounting to this principle life of a business is broken into smaller parts generally in a period of one year known as accounting year so that its performance is measured at regular intervals.

A historical cost is a measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the company. The historical-cost method is used for assets in the United States under generally accepted accounting principles (GAAP).

Single entry system ignores dual aspects (debit and credit) of transactions. It also ignores nominal account and real accounts. So, it is an incomplete system of recording transactions.

It is based on the Prudence or Conservatism Principle, according to which all the prospective losses are taken into consideration and not the prospective profits. The assumption of this concept ensures that the financial statement presents a realistic picture of state of affairs of the enterprise.

The business entity concept states that the transactions associated with a business must be separately recorded from those of its owners or other businesses. Doing so requires the use of separate accounting records for the organization that completely exclude the assets and liabilities of any other entity or the owner.

GAAP means Generally Accepted Accounting Principles is a combination of authoritative standards (set by police boards) and the commonly accepted ways of recording and reporting accounting information. GAAP improves the clarity of the communication of financial information.

The debts which are to be repaid within a short period (year or less) are known as Current liabilities. Current liabilities are a company's debts or obligations that are due within one year or within a normal operating cycle.