Test you Accounting Concepts and Principles - 15

1. If the opening inventory of a business is undercast, it will
[A]Increase gross profit and decrease net profit
[B]Decrease gross profit as well as net profit
[C]Increase value of assets
[D]Increase gross profit as well as net profit


2. Which of the following is not a financial statement?
[A]Profit and loss account
[B]Profit and loss appropriation account
[C]Balance sheet
[D]Trial Balance


3. Based on which of the following concepts, is share capital account shown on the liabilities side of a balance sheet?
[A]Business entity concept
[B]Money measurement concept
[C]Duality concept
[D]Going concern concept


4. Which of the following is a liability of a firm?
[A]Debit balance of analytical petty cash book
[B]Credit balance of bank pass book
[C]Debit balance of bank column of cash book
[D]Credit balance of bank column of cash book


5. Which of the following statements is true?
[A]Inventory valuation affects only the income statement
[B]Undercasting or overcasting of subsidiary book is an example of error of commission
[C]Capital expenditure wrongly treated as revenue is an example of error of commission
[D]The sum total of assets is equal to the sum total of outside liabilities


6. Provision for bad debts is made as per the
[A]Conservatism concept
[B]Cost concept
[C]Consistency concept
[D]Going concern concept


7. Purchase of fixed assets on credit is originally recorded in
[A]Purchases book
[B]Ledger
[C]Cash book
[D]Journal proper


8. Double entry book keeping involves
[A]Two accounts being affected for each transaction which are equal and opposite to one another
[B]Two sets of books being kept for the business
[C]Business book-keeping being kept by more than one person
[D]Every entry in the business books being checked twice


9. Which of the following are current assets of a business?
I. Income received in advance
II. Stock
III. Debtors
IV. Pre-paid expenses
V. Accrued income
[A]Both (I) and (IV) above
[B]Both (II) and (III) above
[C](I), (II) and (III) above
[D](II), (III), (IV) and (V) above


10. The excess price received over the par value of shares should be credited to
[A]Calls-in-advance account
[B]Share capital account
[C]Reserve capital account
[D]Share premium account


11. The claims against the company not acknowledged as debts are shown as
[A]Current liabilities
[B]Loans and advances
[C]Notes to balance sheet
[D]Directors’ report


12. The amount of any transaction incorrectly recorded, either wholly or partly, is
[A]Error of omission
[B]Error of commission
[C]Error of principle
[D]Compensating error


13. The discount allowed on re-issue of forfeited shares is debited to
[A]General reserve account
[B]Capital reserve account
[C]Revaluation reserve account
[D]Forfeited shares account


14. Under cash basis of accounting, revenue is recognized when
[A]Sale is made
[B]Cash is received
[C]Goods are delivered
[D]Services are rendered


15. Which of the following factors is used as a multiplier of super profits in valuation of goodwill of a business?
[A]Average capital employed in the business
[B]Simple profits
[C]Number of years’ purchase
[D]Normal rate of return