Unit: 2 Theory Base of Accounting
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### MCQs on Accounting Concepts
**1. Accounting aims at providing information about a firm's financial performance to various users. Which of the following is NOT one of the users?**
- (A) Managers
- (B) Investors
- (C) Competitors
- (D) Tax authorities
**Answer:** (C) Competitors
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**2. The concept which states that the business and its owner are separate entities is called:**
- (A) Going Concern Concept
- (B) Money Measurement Concept
- (C) Business Entity Concept
- (D) Matching Concept
**Answer:** (C) Business Entity Concept
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**3. According to the Money Measurement Concept, which of the following would NOT be recorded in the accounting books?**
- (A) Sale of goods
- (B) Payment of salaries
- (C) Appointment of a manager
- (D) Purchase of machinery
**Answer:** (C) Appointment of a manager
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**4. Which concept requires that only those transactions that can be expressed in monetary terms should be recorded in the accounts?**
- (A) Matching Concept
- (B) Dual Aspect Concept
- (C) Cost Concept
- (D) Money Measurement Concept
**Answer:** (D) Money Measurement Concept
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**5. The Going Concern Concept assumes that a business will operate:**
- (A) For a limited period
- (B) Indefinitely
- (C) Until the owner decides to close
- (D) For one year
**Answer:** (B) Indefinitely
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**6. The period at the end of which financial statements are prepared to show financial performance is called:**
- (A) Financial Year
- (B) Accounting Period
- (C) Calendar Year
- (D) Fiscal Year
**Answer:** (B) Accounting Period
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**7. According to the Cost Concept, all assets should be recorded at:**
- (A) Their current market value
- (B) Their original purchase price
- (C) Their resale value
- (D) Their replacement cost
**Answer:** (B) Their original purchase price
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**8. The principle stating that every transaction has a dual effect and must be recorded in at least two accounts is known as:**
- (A) Consistency Concept
- (B) Going Concern Concept
- (C) Dual Aspect Concept
- (D) Full Disclosure Concept
**Answer:** (C) Dual Aspect Concept
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**9. Revenue is recognised in the accounts when it is:**
- (A) Received
- (B) Earned
- (C) Realised
- (D) Deposited in the bank
**Answer:** (C) Realised
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**10. Which concept requires that expenses should be matched with the revenue they generate in the same accounting period?**
- (A) Money Measurement Concept
- (B) Dual Aspect Concept
- (C) Matching Concept
- (D) Revenue Recognition Concept
**Answer:** (C) Matching Concept
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**11. Which principle requires that all material information is fully disclosed in financial statements to help users make informed decisions?**
- (A) Consistency Concept
- (B) Full Disclosure Concept
- (C) Objectivity Concept
- (D) Revenue Recognition Concept
**Answer:** (B) Full Disclosure Concept
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**12. The Indian regulatory body that issues accounting standards to bring consistency to accounting practices is:**
- (A) ICAI
- (B) RBI
- (C) SEBI
- (D) Ministry of Finance
**Answer:** (A) ICAI
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**13. Which of the following principles is also known as the Prudence Concept?**
- (A) Business Entity
- (B) Going Concern
- (C) Conservatism
- (D) Consistency
**Answer:** (C) Conservatism
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**14. Assets = Liabilities + Capital is based on which accounting concept?**
- (A) Dual Aspect Concept
- (B) Money Measurement Concept
- (C) Cost Concept
- (D) Going Concern Concept
**Answer:** (A) Dual Aspect Concept
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**15. The idea that all financial statements should be prepared in the same way each year for comparison purposes refers to which concept?**
- (A) Consistency Concept
- (B) Dual Aspect Concept
- (C) Matching Concept
- (D) Full Disclosure Concept
**Answer:** (A) Consistency Concept
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16. **The Consistency Concept in accounting ensures that:**
- A) Financial statements reflect only one period’s data
- B) Financial statements are comparable across periods and enterprises
- C) Only income is recognized in financial statements
- D) All financial statements follow different policies each year
- **Answer:** B) Financial statements are comparable across periods and enterprises
17. **According to the Conservatism Concept, a business should:**
- A) Record all gains immediately but defer losses
- B) Record losses even if they are uncertain
- C) Record profits even if they are uncertain
- D) Ignore both gains and losses until they are realized
- **Answer:** B) Record losses even if they are uncertain
18. **The Materiality Concept implies that:**
- A) All transactions, regardless of size, should be recorded with equal detail
- B) Only material facts that affect users’ decisions should be disclosed
- C) Only immaterial facts should be ignored in financial reporting
- D) The financial statements should avoid full disclosure to limit complexity
- **Answer:** B) Only material facts that affect users’ decisions should be disclosed
19. **Objectivity in accounting means that transactions should be recorded:**
- A) Based on the accountant’s judgment only
- B) Using historical cost as it is verifiable
- C) Using future cost to avoid market fluctuations
- D) Only if the company sees a benefit from recording it
- **Answer:** B) Using historical cost as it is verifiable
20. **Which system of accounting is based on the “Dual Aspect” principle?**
- A) Cash basis system
- B) Single entry system
- C) Double entry system
- D) Accrual system
- **Answer:** C) Double entry system
21. **In the cash basis of accounting, revenue is recorded when:**
- A) It is earned
- B) Cash is received
- C) Goods are delivered
- D) Payment becomes due
- **Answer:** B) Cash is received
22. **Which of the following is not a benefit of accounting standards?**
- A) Ensures uniformity in accounting practices
- B) Makes financial statements difficult to compare
- C) Promotes full disclosure
- D) Reduces variations in accounting treatment
- **Answer:** B) Makes financial statements difficult to compare
23. **Which tax under GST is levied by both the Central and State governments?**
- A) CGST
- B) SGST
- C) IGST
- D) Both A and B
- **Answer:** C) IGST
24. **If CGST is 9% and SGST is 9%, the total GST rate for an intra-state transaction is:**
- A) 9%
- B) 18%
- C) 27%
- D) None of the above
- **Answer:** B) 18%
25. **Under which concept is it required to provide for anticipated losses but not gains?**
- A) Matching Concept
- B) Conservatism Concept
- C) Materiality Concept
- D) Objectivity Concept
- **Answer:** B) Conservatism Concept
26. **The concept that states every transaction has two aspects is called:**
- A) Dual Aspect Concept
- B) Objectivity Concept
- C) Materiality Concept
- D) Conservatism Concept
- **Answer:** A) Dual Aspect Concept
27. **The purpose of GST is to:**
- A) Apply a tax on income only
- B) Promote multiple levies on the same transaction
- C) Reduce tax complexity by merging central and state taxes
- D) Avoid taxing value addition
- **Answer:** C) Reduce tax complexity by merging central and state taxes
28. **According to the Materiality Concept, expenses like stationery are treated as:**
- A) Fixed Assets
- B) Current Assets
- C) Revenue Expenditure
- D) Deferred Expenditure
- **Answer:** C) Revenue Expenditure
29. **The Accounting Standards are issued by which body in India?**
- A) Reserve Bank of India (RBI)
- B) Indian Standards Institution (ISI)
- C) Institute of Chartered Accountants of India (ICAI)
- D) Securities and Exchange Board of India (SEBI)
- **Answer:** C) Institute of Chartered Accountants of India (ICAI)
30. **Which characteristic is unique to GST?**
- A) Separate law and procedure for each state
- B) Origin-based tax on goods and services
- C) Destination-based tax on consumption
- D) Multiple rates exceeding five categories
- **Answer:** C) Destination-based tax on consumption
