RKCE

9 Hari Das Daw Road New Alipore

GAAP AND OTHER CONCEPTS

Class 11 - Accountancy

1. Closing stock is valued at lower of cost or market price. Which concept of accounting is applied here: [1]

a) Prudence b) Revenue concept

c) Cost concept d) Matching concept

2. The assumption that a business enterprise will not be sold or liquidated in the near future is known as [1]

a) Materiality b) Consistency

c) Going concern d) Industry practice

3. As per the Income Tax Act, the accounting period is: [1]

a) From 1st January to 31st December b) From 1st July to 30th June

c) From Diwali to Diwali d) From 1st April to 31st March

4. Everything a firm owns, it also owes to somebody. This co-existence is explained by [1]
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a) consistency concept b) matching principle
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c) accrual concept d) dual aspect principle

5. According to business entity principle, business is treated as a unit separate and distinct from its [1]

a) promoters b) All of these

c) owners d) shareholders
6. IASB has adopted [1]

a) SIC b) IAS

c) All IAS and SIC d) None of these

7. A consolidated financial statement is dealt under which IFRS? [1]

a) IFRS-5 b) IFRS-10

c) IFRS-15 d) IFRS-1
8. According to the Business Entity Concept: [1]
A. transactions between the business and its owners are not recorded.
B. transactions between the business and its owners are recorded considering them to be one single entity.
C. transactions between the business and its owners are recorded from the business point of view.

a) Only C is correct b) None of these

c) Only A is correct d) Only B is correct

9. On which of these items, GST is not applicable? [1]

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 a) Books b) Sanitary pads

c) Alcoholic liquor d) Medicines

10. According to the Going Concern Concept: [1]
A. assets are recorded at cost and are depreciated over their useful life.
B. assets are valued at their market value at the year-end and are recorded in the books of account.
C. assets are valued at their market value, recorded in the books, and depreciation is charged on the market
value.

a) None of these b) Only A is correct

c) Only C is correct d) Only B is correct

11. Which accounting principle requires that the life of business be broken into smaller parts: [1]

a) Going concern concept b) Accounting entity

c) Prudence d) Accounting period

12. To promote worldwide uniformity in published accounts, the International Accounting Standards Committee [1]
(IASC) has been set up in June

a) 1975 b) 1972

c) 1973 d) 1971
13. According to companies act 1956 all companies are required to maintain their accounts according to [1]
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a) Cash Basis b) Accrual basis

c) Profit basis d) Money basis

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14. According to which, accounting principle personal expenses of proprietor are recorded in drawings account. [1]

a) Prudence b) Matching

c) Business Entity Concept d) Money measurement

15. Which statements are drawn to provide information about growth or decline of business activities over a period [1]
of time or comparison of the results, i.e. intra-firm or inter-firm comparisons:

a) Cost statements b) Financial statements

c) Management statements d) All of these

16. Concept of Consistency means: [1]
A. Accounting principles and methods should remain consistent from one year to another.
B. All the firms in the same industry should use identical accounting principles and procedures.
C. All principles and procedures of accounting are utilised.

a) All of these b) Only B is correct

c) Only A is correct d) Only C is correct

17. Ind-AS-1 deals with [1]

a) disclosure of accounting policies b) None of these

c) plant, property and equipment d) statement of cash flows

18. As per the law, which of the following is the correct accounting period? [1]

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 a) 1st April to 31st December b) 1st January to 31st December

c) 1st April to 31st March d) Both 1st April to 31st March and 1st
January to 31st December
19. 12 television sets of Rs.10,000 each are purchased and this event is recorded in the books with a total amount of [1]
Rs.1,20,000 is an example of

a) Cost concept b) Money measurement concept

c) Prudence d) Dual aspect concept

20. Income is measured on the basis of: [1]

a) Consistency Concept b) Cost Concept

c) None of these d) Matching Concept

21. According to Business Entity Concept [1]

a) All of these b) Life insurance premium is treated as

drawing

c) Owner is treated as creditors d) Proprietor's private expenses are treated as

drawing
22. Recognition of cost in the same period as associated revenues is called ________. [1]

a) Dual aspect principle b) Cost principle

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c) Matching principle d) Full disclosure principle
23. Following are the objectives of accounting standards except: [1]
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a) To ascertain cash transactions b) To prevent fraud and manipulations

c) To improves reliability d) To help to audit

24. Accrual concept is based on: [1]

a) Dual Aspect Concept b) Cost Concept

c) Matching Concept d) Going concern Concept

25. IFRS are [1]

a) Partially rule based and partially based b) Rule based accounting standards
accounting standards

c) Principle based accounting standards d) None of these

26. Accounting standards are generally referred to as the essence of financial accounting [1]

a) Mitigate inconsistency and incomparability b) Help in removing inconsistencies

and to bring uniformity in preparation of the
financial statements

c) All of these d) Help in removing ambiguities and

27. According to which concept the same accounting methods should be used each year: [1]

a) Full Disclosure b) Prudence

c) Consistency d) Materiality

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28. The Prudence of Accountants states that preference should be given for error Rs.in measuring assets and [1]
recognizing revenues in the direction of understatement rather than overstatement.

a) False b) Partly True

c) True d) Can’t say

29. Due to which of the following, contingent liabilities are shown in the Balance Sheet: [1]

a) Going Concern Concept b) Convention of materiality

c) Convention of full disclosure d) Dual aspect concept

30. Under the Cash Basis of Accounting, expenses are recorded: [1]

a) none of these b) both payment and on being incurred

c) on being incurred d) on payment

31. Which of the following methods of accounting is/are recognised by Companies Act, 2013? [1]

a) Cash basis of accounting b) Both (Cash basis of accounting) and

(Accrual basis of accounting)

c) Can't be determined d) Accrual basis of accounting

32. Which of the following is/are objectives of GST? [1]

a) To restrict the movement of goods across b) All of these

the country
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c) To maximise tax rate slabs d) To eliminate classification dispute between
goods and services
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33. X Ltd. follows the Written Down Value Method of depreciating machinery year after year due to: [1]

a) consistency b) comparability

c) All of these d) convenience

34. ________ implies that accounting practices once selected and adopted should be applied consistently year after [1]
year.

a) Accrual b) Consistency

c) Cost d) Going concern

35. As per the business entity assumption, the business is different from the [1]

a) Proprietor b) Politics

c) Government d) Banker
36. Assertion (A): The cash basis of accounting is that accounting which records only cash transactions, i.e. only [1]
those incomes and expenses are recorded which have been received and paid in cash respectively. Thus, the cash
basis of accounting violates GAAP.
Reason (R): The cash basis of accounting makes a distinction between capital and revenue items.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

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37. Assertion (A): NOP Ltd. purchased machinery of ₹ 20,000 which is supposed to last for 20 years. The [1]
accountant decides to spread the cost of machinery for the next 20 years for calculation of profit and loss.
Reason (R): According to the consistency concept, accounting principles and methods should remain consistent
from one year to another.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

38. Assertion (A): Revenue is recorded at the time when sales are made and expense when incurred. [1]
Reason (R): All the transaction are recorded in the books on the assumption of payments.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

39. Assertion (A): Double entry system is based on the principle of dual aspect. [1]
Reason (R): The system of double-entry can be implemented by big as well as small organisations.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

40. Assertion (A): In conservatism principle, we do not anticipate profits but probable losses. [1]
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Reason (R): This principle suggests that we should make provisions for probable future expenses but ignore any
future probable gains, until it actually happens.
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a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

41. Assertion (A): The ICAI gives consideration to the international accounting standards. [1]
Reason (R): India is a member of international account setting body.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

42. Assertion (A): A claim of a very big sum pending in a court of law against the enterprise should be brought to [1]
the notice of the users of financial statements, otherwise the statements would be misleading.
Reason (R): According to the principle of full disclosure, all significant information relating to the economic
affairs of the enterprise should be completely disclosed.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

43. Assertion (A): Capital = Liabilities - Assets. [1]
Reason (R): According to the dual aspect principle, every business transaction is recorded as having a dual
aspect, one aspect is debit and the other aspect is credit.

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 a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

44. Assertion (A): The goods supplied from Chennai to Lucknow would fetch Integrated GST. [1]
Reason (R): Integrated GST is levied in the course of inter-state supply of goods and services.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

45. Assertion (A): Accounting standards are being converged with international financial Reporting standards. [1]
Reason (R): To make the economy more dynamic, competitive and boost confidence in international circuit.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

46. Match the following options are [1]

a. Accounting period i. events which are of financial nature are recorded

b. Money Measurement ii. the business will exist for a long period

c. Going Concern iii. need periodical reports to know the operational result
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a) a - (iii), b - (ii), c - (i) b) a - (ii), b - (i), c - (iii)

c) a - (i), b - (iii), c - (ii) d) a - (iii), b - (i), c - (ii)

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47. Match the columns. [1]

Column I Column II

(a) Cash flow statement (i) AS-10

(b) Plant, property and equipment (ii) AS-3

(c) Valuation of inventories (iii) AS-2

(d) Accounting for investments (iv) AS-13

a) (a)-(i), (b)-(ii), (c)-(iv), (d)-(iii) b) (a)-(i), (b)-(ii), (c)-(iii), (d)-(iv)

c) (a)-(ii), (b)-(i), (c)-(iv), (d)-(iii) d) (a)-(ii), (b)-(i), (c)-(iii), (d)-(iv)

48. Match the Columns. [1]

Column I Column II

(a) Quality of management is not recorded in books (i) Full disclosure principle

(b) Change in method of valuation of stock is shown in footnotes (ii) Consistency concept

(c) Making provision for likely bad debts should remain consistent with (iii) Money measurement
previous years principle

(d) Provision should be made for pending law suit against firm (iv) Principle of conservation

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 a) (a)-(iii), (b)-(ii), (c)-(iv), (d)-(i) b) (a)-(iii), (b)-(ii), (c)-(i), (d)-(iv)

c) (a)-(i), (b)-(ii), (c)-(iii), (d)-(iv) d) (a)-(iii), (b)-(i), (c)-(ii), (d)-(iv)

49. Match the following options are [1]

a. Historical Cost i. revenue is considered as the income earned on the date

b. Revenue Realization ii. assets are recorded at the price paid to acquire them

c. Full Disclosure iii. disclose fully and completely all the significant information

a) a - (i), b - (ii), c - (iii) b) a - (ii), b - (i), c (iii)

c) a - (ii), b - (iii), c - (i) d) a - (iii), b - (ii), c - (i)

50. Revenue and expenses are recorded only when they are recognized as per the ________ Accounting. [1]

a) Accrual basis b) Cash Basis

c) Profit basis d) Money basis

51. Which of the following is correct? [1]

a) Owner’s equity = claims of outsides + b) Owner’s equity - claims of outside = Assets

Assets

c) Owner’s equity × claims of outside = d) Owner’s equity + claims of outside = Assets

Assets
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52. Which statement is false regarding the conservatism principle: [1]
A. Losses should not be anticipated; however, all profits should be accounted
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B. Provision for discount to debtors, provision for doubtful bad debts etc. based on the conservatism
C. Helps the business to deal with uncertainty and unforeseen conditions

a) (A) b) None of these

c) (C) d) (B)
53. As per principle of conservatism, which of the following is incorrect? [1]

a) Closing stock is always valued at the b) Provision for doubtful debts is created in
realisable value anticipation of actual bad debts

c) None of these d) Joint life insurance policy is shown at the

surrender value
54. According to consistency concept, which of the following statements is correct? [1]
i. Accounting principles should be changed year to year to benefit the organisation.
ii. Accounting principles or methods should remain same from year to year.
iii. Business firm can change accounting methods according to the changed circumstances of business.

a) Only (ii) b) Only (iii)

c) Only (ii) and (iii) d) Only (i) and (iii)

55. Manish purchased 2,000 sq. yards land to build a factory and paid Rs. 18 lakh towards its cost including [1]
registration charges. At the end of the financial year, the value of the land came down to Rs. 13 lakh. Manish

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 recorded the land at Rs.15 lakhs and booked a loss of Rs.3 lakh. Is he correct in treating the fall in value as a
loss?

a) No, not following the prudence concept b) No, not following the accrual concept

c) None of these d) No, not following the cost concept

56. Which of the following is correct about value of investments of a firm? [1]
i. Market value of investments are not shown anywhere and only book value is shown in balance sheet
ii. Both market value and book value is shown in balance sheet and the higher of the two is accounted for
iii. Market value of investments is shown in balance sheet and book value is not shown anywhere
iv. Market value of investments is shown in footnote and book value of investment is reflected in balance sheet

a) Option (i) b) Option (ii)

c) Option (iii) d) Option (iv)

57. An enterprise prepares its account under the accrual basis. Salaries amounting to Rs. 20000 for the month of [1]
March 2013 was not paid. The owner did not want to account it in the books of accounts on the ground that the
amount was not paid. The enterprise closes its account on 31st March every year. Is he correct?

a) Yes, the expense should be accounted at the b) No, the expense should not be accounted at
time it incurred the time it incurred

c) None of these d) No, the expense should be accounted at the

time it incurred
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58. Which of the following statement is false regarding the matching concept: [1]
A. States that all expenses incurred during the year, whether paid or not and all revenues earned during the year
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B. To ascertain the true profit or loss during an accounting period

C. Reveal the true efficiency of the business and its activities in the concerned accounting period

a) (C) b) None of these

c) (B) d) (A)
59. The junior accountant in a fortune 500 company decided to omit the paisa in certain figures and showed the [1]
rounded-off figures in financial statements. The act was found to be correct by a senior accountant because of

a) principle of full disclosure b) consistency concept

c) going concern concept d) materiality principle

60. Consider the following statements with respect to the advantages of double entry system: [1]
i. It focuses where incomplete record of transactions are maintained.
ii. It is a scientific method of recording transactions.
iii. It establishes the arithmetical accuracy of recording transactions.
iv. It helps in preparing financial statements without delay.
Identify the correct statement/statements:

a) All of these b) ii, iii and iv

c) i, ii and iii d) i, iii and iv

61. Consider the following statements with respect to the assumption of accounting period principles: [1]

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 i. Mesure the progress of business accurately and on a conservative basis.
ii. It facilitates accounting process.
iii. Match periodic revenues with expenses for getting correct business results.
iv. Calculate income tax and other government dues.
Identify the correct statement/statements:

a) i, ii and iv b) ii and iv

c) iii and iv d) i and iii

62. Consider the following statements with regard to the advantages of cash basis of Accounting: [1]
i. It is simple as adjustments for outstanding expenses, prepaid are not required.
ii. It is more objective as use of personal judgements and estimates are minimized.
iii. It is suitable for NPO and other organizations that mainly deal in cash transactions.
Identify the correct statement/statements:

a) only i b) ii and iii

c) i, ii and iii d) i and ii

63. Identify the GST applicable in case X Ltd. sells goods from Naisk to a vendor in Mumbai. [1]

a) Both Central GST and State GST b) Central GST

c) Integrated GST d) State GST

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64. Consider the following statements with respect to the purpose of Accounting Standards: [1]
i. Comparing financial statements easily, thereby improving their reliability.
ii. Providing a set of standard accounting policies, valuation norms and disclosure requirements.
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iii. Reduces the scope of creative accounting i.e., interpreting the accounting policies for a favourable
presentation of financial statement to a particular group.
Identify the correct statement/statements:

a) i and iii b) ii and iii

c) i, ii and iii d) i and ii

65. Consider the following statements with regard to the advantages of Accounting Standards: [1]
i. Eliminates variations in accounting treatment, where alternatives exist.
ii. Disclose certain important information, not statutorily required.
iii. There may be a tendency to rigidly follow the Accounting Standards, thereby moving away from its flexible
nature.
Identify the correct statement/statements:

a) i and iii b) ii and iv

c) ii and iii d) i and ii

66. State True or False: [10]
(i) On inter-state sale of goods, GST charged is CGST. [1]
(ii) Personal transactions are distinguished from business transactions in accordance with the concept of a [1]
business entity.
(iii) The cost of a small calculator is accounted as an expense and not shown as an asset in the financial [1]

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 statements of a business entity due to materiality convention.
(iv) The omission of paise and showing the round figures in financial statements is based on the money [1]
measurement concept.
(v) Full form of SGST is State Goods and Service Transport. [1]
(vi) Income is measured on the basis of the cost concept. [1]
(vii) If a firm adopts different accounting principles in two accounting periods it conflicts with the concept [1]
of consistency.
(viii) The consistency concept states that if the straight-line method of depreciation is used in one year, then [1]
it should also be used in the next year.
(ix) Assets will be equal to capital if there are no liabilities. [1]
(x) The business entity concept is not applicable to sole trading concerns and partnership concerns. [1]

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