TERM-1 QUESTION BANK (2023-2024)

CLASS – XI (ACCOUNTANCY)

Chapter 3 – Accounting Principles

1. Accrual concept is based on: [1]

a) Dual Aspect Concept b) Cost Concept

c) Matching Concept d) Going concern Concept

2. Due to which Concept qualitative transactions are not recorded in the books: [1]

a) Historical cost Concept b) Money Measurement Concept

c) Business Entity Concept d) Dual Aspect Concept

3. It is necessary to assume the Going Concern Concept as it [1]

a) Both bifurcate revenue expenditure b) Helps to bifurcate revenue expenditure

and capital expenditure

c) Helps to bifurcate capital expenditure d) None of these

4. X Ltd. follows the Written Down Value Method of depreciating machinery year after year due to: [1]

a) consistency b) comparability [1]

c) All of these d) convenience

5. Vinod sold goods on credit in February and received payment on 31st March. In such a case
Revenue is considered to be recognized in the month of

a) Revenue not recognized at all b) February

c) 31st March d) 1st march

6. M/s Future Ltd. has invested Rs 10,000 in the shares of Relicam Industries Ltd. The current market [1]
value of these shares is Rs 10,500. Accountant of Future Ltd. wants to show Rs 10,500 as the value of an
investment in the books of accounts, which accounting convention restricts him from doing so?

a) Consistency b) Materiality

c) Full disclosure d) Conservatism

7. Due to which principle, contingent liabilities are shown in the balance sheet by way a foot Note? [1]

a) Principle of materiality b) Going concern concept

c) Principle of full disclosure d) Dual aspect principle

8. According to the Accrual Concept:

A. transactions and events are recorded in the books at the time of their settlement in cash.
B. transactions and events are recorded in the books at the time when they are entered into. [1]
C. transactions and events may be recorded either at the time of the settlement or when they are
entered into.
 a) None of these b) Only B is correct

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

9. 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

10. According to the Money Measurement Concept: [1]
A. all transactions and events are recorded.
B. all transactions and events which can be estimated in money terms are recorded in the books of
account.
C. all transactions and events which can be measured in money terms are recorded in the books of
account.

a) Only C is correct b) Only B is correct

c) Only A is correct d) None of these

11. The owner of the firm records his medical expenses in the firms’ income statement. Indicate the principle [1]
that is violated:

a) Cost Concept b) Prudence

c) Full disclosure d) Business Entity concept

12. Under which accounting concept asset is recorded at cost, even if the market price is more or less? [1]
13. Life of a business be broken into smaller parts, according to which principle? [1]
14. A Company has been charging depreciation @ 10% p.a. on the original cost method. It now wants to [1]
change the method from the original cost to the diminishing balance method, the rate of depreciation
being 15% p.a. Can it do so?
15. Explain the nature of Accounting Standards. [1]
16. Name the principle which states that the financial statements should disclose all significant information? [1]
17. Which Accounting Principle states that revenue should be recognized when they are earned? [1]
18. What is accounting cycle? [1]
19. A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be
increased. Normal accounting procedure is to ignore this because of which concept? [1]

20. An accountant always charged depreciation on fixed assets @ 15% p. a year after year. Which [1]
assumption is followed by the accountant?

21. Materiality principle is an exception to which principle? [1]

22. Assertion (A): In conservatism principle, we do not anticipate profits but probable losses. [1]

Reason (R): This principle suggests that we should make provisions for probable future expenses but
ignore any future probable gains, until it actually happens.
[1]
a) Both A and R are true and R is the b) Both A and R are true but R is not
correct explanation of A. the correct explanation of A.
c) A is true but R is false. d) A is false but R is true.

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

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

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

24. Assertion (A): A claim of a very big sum pending in a court of law against the enterprise should be [1]
brought to 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 b) Both A and R are true but R is not
correct explanation of A. the correct explanation of A.

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

25. Assertion (A): NOP Ltd. purchased machinery of ₹ 20,000 which is supposed to last for 20 years. [1]
The 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 b) Both A and R are true but R is not
correct explanation of A. the correct explanation of A.

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

26. Assertion (A): Revenue is recorded at the time when sales are made and expense when [1]
incurred.
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 b) Both A and R are true but R is not
correct explanation of A. the correct explanation of A.

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

27. 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.

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

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

28. Assertion (A): The cash basis of accounting is that accounting which records only cash transactions, i.e. [1]
only 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 b) Both A and R are true but R is not
correct explanation of A. the correct explanation of A.

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

29. Assertion (A): Accounting standards are being converged with international financial Reporting [1]
standards.
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 b) Both A and R are true but R is not
correct explanation of A. the correct explanation of A.

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

30. The proforma and contents of the balance sheet and profit and loss account are prescribed by the
Companies Act so that companies show all the relevant information while preparing the financial [1]
statements. This is done to
 ensure that is followed.

a) accrual concept b) dual aspect principle

c) principle of materiality d) principle of full disclosure

31. During periods of inflation, the figure of net profit disclosed by profit and loss account will be distorted [1]
because of .

a) historical cost principle b) principle of prudence

c) matching principle d) dual apsect principle

32. According to principle, an event, even though it may be very important for the business, will [1]
not be recorded in the books of business unless its effect can be measured terms of money with a fair
degree of accuracy.

a) materiality b) full disclosure

c) dual aspect d) money measurement

33. Depreciation method is not changed by a firm since last 5 years is an example of . [1]

a) Revenue recognition b) Consistency Assumption

c) Industry practice d) Materiality

34. Do not anticipate any profit but provide for all possible losses according to the . [1]

a) Business entity b) Prudence concept

c) Full disclosure d) Accounting period

35. The assumption of accounting states that if the straight-line method of depreciation is followed [1]
in one accounting year, then it should be continued in the next year also.

a) Dual aspect concept b) Consistency

c) Prudence d) Cost concept

36. If a firm receives an order for goods, it would not be included in the sales figure owing to the . [1]

a) Revenue recognition b) Cost concept

c) Prudence d) Dual aspect concept

37. The fact that a business is separate and distinguishable from its owner is best exemplified by the [1]
concept.

a) Prudence b) Dual aspect concept

c) Cost concept d) Business entity concept

38. The cost of a small calculator is accounted as an expense and not shown as an asset in a financial [1]
statement of a business entity due to .

a) Matching Concept b) Periodicity Concept

c) Materiality Convention d) Convention of full disclosure

39. State True or False: [10]
(i) The business entity concept is not applicable to sole trading concerns and partnership concerns. [1]
(ii) Everything a firm owns, it also owes out to somebody. This coincidence is explained by the dual [1]
 aspect concept.
(iii) It is necessary to deposit GST in the Government Account. [1]
(iv) On inter-state sale of goods, GST charged is CGST. [1]
(v) Revenues are matched with expenses in accordance with going concern assumption. [1]

40. Fill in the blanks: [10]

(i) of goods purchased means excluding GST payable and expenses payable, if any. [1]
(ii) The management of a firm is remarkably incompetent, but the firms' accountants can not take [1]
this into account while preparing the book of accounts because of concept.
(iii) A firm may hold stock which is heavily in demand. Consequently, the market value of this stock [1]
may be increased. Normal accounting procedure is to ignore this because of the .
(iv) The fact that a business is separate and distinguishable from its owner is best exemplified by [1]
the
concept.