Gujarat Board GSEB Class 11 Commerce Accounts Important Questions Part 2 Chapter 6 Conventions, Assumption, Concepts and Principles of Accounting Important Questions and Answers.

GSEB Class 11 Accounts Important Questions Part 2 Chapter 6 Conventions, Assumption, Concepts and Principles of Accounting

Fill in the blanks choosing the most appropriate option from the given options:

1. …………………… suggests that depreciation should be provided by the same method every year.
(a) Cost concept
(b) Going concern concept
(c) Consistency concept
(d) Accrual concept
Answer:
(c) Consistency concept

2. ………………………….. suggests that assets like goodwill, patents, trademark and copyright are not written off in one year.
(a) Periodicity concept
(b) Prudence concept
(c) Going concern concept
(d) Consistency concept
Answer:
(c) Going concern concept

Question 3.
Fixed assets are depreciated based on the principle of ………………………. .
(a) Accounting period
(b) Prudence
(c) Going concern concept
(d) Accrual concept
Answer:
(c) Going concern concept

Question 4.
Based on …………………………… concept, joint life policy is ………………………. shown at its surrender value.
(a) Full disclosure
(b) Consistency
(c) Accrual
(d) Going concern
Answer:
(d) Going concern

Question 5.
Fundamental accounting equation i.e., A = C + L is based on ………………………….. concept.
(a) Going concern
(b) Dual aspect
(c) Cost
(d) Prudence
Answer:
(b) Dual aspect

Question 6.
Based on ………………………… concept, profit is credited to the capital account.
(a) Dual aspect
(b) Periodicity
(c) Accounting entity
(d) Materiality
Answer:
(c) Accounting entity

Question 7.
According to ………………………. concept, in addition to book value of investment in listed shares, the market value thereof is also shown as additional information in financial statements.
(a) Dual aspect
(b) Full disclosure
(c) Cost
(d) Going concern
Answer:
(b) Full disclosure

Question 8.
Pre-paid expenses should be carried forward on the basis of concept of ……………………………… .
(a) Conservatism
(b) Consistency
(c) Dual aspect
(d) Matching cost with revenue
Answer:
(d) Matching cost with revenue

Question 9.
Due to the concept of ……………………………………. provision for doubtful debts on debtors is made in the accounts.
(a) Prudence
(b) Periodicity
(c) Verifiability
(d) Revenue recognition
Answer:
(a) Prudence

Question 10.
Based on ……………………… concept, Balance Sheet is prepared at the end of every accounting period.
(a) Realisation
(b) Consistency
(c) Periodicity
(d) Cost
Answer:
(c) Periodicity

Question 11.
Based on …………………………. concept, no accounting entry is made in the books of accounts for advantage of having a team of sincere, honest, hard-working and efficient employees with the firm.
(a) Accrual
(b) Materiality
(c) Money measurement
(d) Consistency
Answer:
(c) Money measurement

Question 12.
The reason for valuing work in process on the basis pf the cost incurred thereon is ………………….. principle.
(a) Prudence
(b) Revenue recognition
(c) Going concern
(d) Dual aspect
Answer:
(b) Revenue recognition

Question 13.
Adjustments are made for incomes received in advance based on ……………………… principle.
(a) Matching cost with revenue
(b) Cost
(c) Prudence
(d) Full disclosure
Answer:
(a) Matching cost with revenue

Question 14.
Instead of preparing separate accounts for small tools like small hammers, nails, screws, screwdrivers, etc., they are all grouped under one Loose Tool Account based on …………………… concept.
(a) Accounting entity
(b) Materiality
(c) Dual aspect
(d) Consistency
Answer:
(b) Materiality

Question 15.
According to ……………………. concept, an amount of ₹ 25,000 received as an advance with the order of sales is not recorded in the sales book.
(a) Realisation
(b) Verifiability
(c) Full disclosure
(d) Accrual
Answer:
(a) Realisation

Answer the following question in one sentence :

Question 1.
What is assumed in going concern concept?
Answer:
According to going concern concept, it is assumed that the business concern will continue for a long period and the same will not be closed or liquidated in the near future.

Question 2.
What does the principle of consistency suggest?
Answer:
The principle of consistency suggests that while writing accounts or for preparing financial statements, the same policies, procedures and methods should be followed every year.

Question 3.
Which concept is similar to the concept of accrual of revenue?
Answer:
The concept of accrual of revenue is similar to the concept of realisation of revenue or revenue recognition.

Question 4.
How is the accounting entity concept also referred to as?
Answer:
Accounting entity concept is also referred to as Business entity concept or Entity concept or Separate entity concept.

Question 5.
What does the money measurement concept suggest?
Answer:
Money measurement concept suggests that in business, all transactions are represented in monetary unit.

Question 6.
For accounting, what is accepted as common measurement unit?
Answer:
For accounting, money is accepted as common measurement unit.

Question 7.
By which other name periodicity concept is known?
Answer:
Periodicity concept is also known as Accounting Period concept.

Question 8.
How is the accounting period known?
Answer:
Accounting period is also known as accounting year.

Question 9.
Which concept is associated with the principle of full disclosure?
Answer:
Materiality concept is associated with the principle of full disclosure.

Question 10.
According to which concept, all material information should be disclosed in the financial statements?
Answer:
According to full disclosure concept, all information should be disclosed in the financial statements.

Question 11.
How is the prudence concept also referred to as?
Answer:
Prudence concept is also referred to as conservatism concept.

Question 12.
On which basis are financial statements usually prepared?
Answer:
Financial statements are usually prepared on conservative basis.

Question 13.
According to which principle, every business transaction has a two-fold effect?
Answer:
According to duality principle, every business transaction has a two-fold effect.

Question 14.
Which principle or concept is a fundamental accounting convention?
Answer:
Dual aspect concept or Duality principle is a fundamental accounting convention.

Question 15.
What does the principle of objectivity suggest?
Answer:
The principle of objectivity suggests that there should be objective evidence, for transactions recorded in accounts, which are capable of verification.

Question 16.
What does the matching cost with revenue concept suggest?
Answer:
The matching cost with revenue concept suggests that cost incurred during a particular period should be matched against the revenue of that period to ascertain profit or loss.

Question 17.
Generally, why is the accounting period maintained of one year?
Answer:
The accounting period is maintained of one year because in the period most of the transactions relating to business are covered. A period of one year comprises all seasons and all types of seasonal transactions.

Question 18.
When is revenue said to be realised in the sale of goods?
Answer:
Sales revenue is said to be realised at the time of delivery of goods or legal transfer of ownership of goods.

Question 19.
Which attitude can be said to be the conservative attitude?
Answer:
The attitude that future probable loss must be taken into consideration in accounts but future possible profits should not be taken into consideration is known as conservative attitude.

Question 20.
Explain the C + L = A equation.
Answer:
In business, the funds invested by the owner is denoted by C (Capital) and the amount invested by the third parties is denoted by L (Liabilities) and assets is denoted by A, then it states that on the assets of the business there is claim by the owners and creditors.

State the name of the accounting principle, concept or convention in the following statements:

Question 1.
According to the books of accounts of the business, C + L = A always hold true.
Answer:
Dual aspect concept.

Question 2.
The personal expenses of the trader paid by the business are recorded in the drawings account in the books of the business.
Answer:
Accounting entity concept.

Question 3.
At the end of the year, the books of accounts are closed and new books are opened for the next year.
Answer:
Periodicity concept or Accounting period concept.

Question 4.
Without proof or evidence, any transaction cannot be recorded in the books of accounts.
Answer:
Principle of objectivity and verifiability.

Question 5.
Generally, a discount reserve on creditors is not maintained.
Answer:
Prudence concept or Principal of conservatism.

Question 6.
Professionals like advocates, doctors, C.A., etc. record their revenue on cash basis.
Answer:
Realisation concept.

Question 7.
Prepaid expenses are subtracted from the concerned expenses in the profit and loss account.
Answer:
Matching cost with revenue concept.

Question 8.
In the Balance Sheet the receivable amount are shown at realisable value only.
Answer:
Going concern concept.

Question 9.
Frequent changes in the methods of depreciation should be avoided.
Answer:
Consistency concept

Question 10.
No accounting entry is made for free samples received.
Answer:
Cost concept.

Question 11.
Information about the change in method of stock or inventory valuation and its impact should be disclosed in financial statements.
Answer:
Full disclosure concept.

Question 12.
Instead of keeping separate accounts for pencil, erasers, pen, etc., only one account styled as “Stationery Expense Account” shall be maintained.
Answer:
Materiality concept.

Question 13.
Salary payable for March 2017 will be treated as expense for the month of March 2017 even if it is paid in April 2017.
Answer:
Accrual concept

Question 14.
No accounting entry is recorded for strike by factory workers.
Answer:
Money measurement concept.

Question 15.
In accounts, the closing stock is valued at cost price or market price whichever is lower.
Answer:
Conservatism concept or Prudence concept.

Write the correct option from those given below each question :
Question 1.
At the end of the year, if the accounts are written correctly, the trial balance gets tallied.
(a) Dual aspect concept
(b) Concept of objectivity
(c) Going concern concept
(d) Cost concept
Answer:
(a) Dual aspect concept

Question 2.
Independent branch prepares its own trial balance separately.
(a) Going concern concept
(b) Periodicity concept
(c) Accounting entity concept
(d) Accrual concept
Answer:
(c) Accounting entity concept

Question 3.
Profit and Loss Account is prepared at the end of every accounting period.
(a) Full disclosure concept
(b) Materiality concept
(c) Prudence concept
(d) Periodicity concept
Answer:
(d) Periodicity concept

Question 4.
No accounting entry is recorded in books of account for resignation of a competent and efficient manager.
(a) Cost concept
(b) Money measurement concept
(c) Realisation concept
(d) Materiality concept
Answer:
(b) Money measurement concept

Question 5.
Deferred revenue expenses are sometimes shown on the asset side of Balance Sheet.
(a) Going concern concept
(b) Verifiability concept
(c) Matching cost with revenue concept
(d) Cost concept
Answer:
(a) Going concern concept

Question 6.
The method of stock valuation should be followed consistently and it should not be changed frequently.
(a) Full disclosure concept
(b) Consistency concept
(c) Dual aspect concept
(d) Concept of objectivity
Answer:
(b) Consistency concept

Question 7.
When goods are sold on credit to a customer, then revenue should be recognised in accounting.
(a) Revenue recognition concept
(b) Cost concept
(c) Accrual concept
(d) Going concern concept
Answer:
(c) Accrual concept

Question 8.
Change in method of depreciation should be disclosed in financial statements along with the impact of such change.
(a) Materiality concept
(b) Full disclosure concept
(c) Prudence concept
(d) Periodicity concept
Answer:
(b) Full disclosure concept

Question 9.
Purchase of dustbin for ₹ 150 should be considered as an expense instead of considering the same to be a fixed asset.
(a) Principal of conservatism
(b) Cost concept
(c) Money measurement concept
(d) Materiality concept
Answer:
(d) Materiality concept

Question 10.
Provision for reduction or erosion in value of investments is usually made in the books of account.
(a) Prudence concept
(b) Cost concept
(c) Accrual concept
(d) Consistency concept
Answer:
(a) Prudence concept

Question 11.
Profit means the difference arised by matching the expenses against the revenue realised.
(a) Revenue recognition concept
(b) Matching cost with revenue concept
(c) Full disclosure concept
(d) Accounting entity concept
Answer:
(b) Matching cost with revenue concept.

Question 12.
In case of gold mine, as soon as the production of the gold is obtained it is recorded in the books.
(a) Realisation concept
(b) Materiality concept
(c) Verifiability concept
(d) Accrual concept
Answer:
(a) Realisation concept

Question 13.
Bank charges or interest on overdraft are recorded on the basis of bank advice or passbook.
(a) Principle of objectivity
(b) Cost concept
(c) Principle of conservatism
(d) Periodicity concept

Answer:
(a) Principle of objectivity

Question 14.
For the entry of payment of expenses like carriage and cartage, wages, etc. the unit itself has to prepare a voucher.
(a) Principle of conservatism
(b) Principle of objectivity
(c) Realisation concept
(d) Going concern concept
Answer:
(b) Principle of objectivity

Question 15.
One note of ₹ 1,000 is found duplicate in the cashbook.
(a) Separate entity concept
(b) Verifiability concept
(c) Dual aspect concept
(d) Accounting entity concept
Answer:
(c) Dual aspect concept