Q.1 Which accounting principle requires that expenses be recorded in the same period as the revenues they help to generate?
Revenue Recognition Principle
Matching Principle
Conservatism Principle
Cost Principle
Explanation - The Matching Principle ensures expenses are matched with the revenues of the same period, giving an accurate measure of profit.
Correct answer is: Matching Principle
Q.2 Which concept assumes that the business will continue operating indefinitely?
Accrual Concept
Going Concern Concept
Consistency Principle
Conservatism Principle
Explanation - Going Concern assumes a business will operate for the foreseeable future and not liquidate.
Correct answer is: Going Concern Concept
Q.3 According to which concept should assets be recorded at their purchase price rather than market value?
Accrual Concept
Cost Concept
Matching Principle
Realisation Concept
Explanation - The Cost Concept states assets must be recorded at their historical cost, not fluctuating market values.
Correct answer is: Cost Concept
Q.4 Revenue is recognized when it is earned, not when cash is received. This is based on which principle?
Cash Basis
Revenue Recognition Principle
Matching Principle
Consistency Principle
Explanation - The Revenue Recognition Principle states revenue is recorded when earned, regardless of cash receipt.
Correct answer is: Revenue Recognition Principle
Q.5 Which concept requires that accounting policies remain consistent from one period to another?
Consistency Principle
Conservatism Principle
Accrual Concept
Realisation Concept
Explanation - Consistency ensures comparability of financial statements over time by applying the same policies.
Correct answer is: Consistency Principle
Q.6 The principle of prudence or conservatism suggests what?
Record future profits today
Anticipate losses but not profits
Ignore all losses
Record all revenues immediately
Explanation - The Conservatism Principle records potential losses but avoids recognizing unrealized profits.
Correct answer is: Anticipate losses but not profits
Q.7 Which accounting concept requires that personal and business transactions are kept separate?
Money Measurement Concept
Business Entity Concept
Going Concern Concept
Cost Concept
Explanation - The Business Entity Concept treats business as separate from the owner for accurate reporting.
Correct answer is: Business Entity Concept
Q.8 Which principle ensures that only measurable financial transactions are recorded?
Money Measurement Concept
Cost Concept
Matching Principle
Dual Aspect Concept
Explanation - The Money Measurement Concept records only transactions measurable in monetary terms.
Correct answer is: Money Measurement Concept
Q.9 According to which concept should financial statements be prepared annually?
Accrual Concept
Accounting Period Concept
Consistency Principle
Going Concern Concept
Explanation - The Accounting Period Concept divides the life of a business into periods (e.g., yearly) for reporting.
Correct answer is: Accounting Period Concept
Q.10 Which accounting principle is reflected in the rule: 'Do not overstate assets or income'?
Prudence Principle
Cost Concept
Revenue Recognition Principle
Dual Aspect Concept
Explanation - Prudence (conservatism) requires understatement rather than overstatement of financial position.
Correct answer is: Prudence Principle
Q.11 Which concept underlies the double-entry system of accounting?
Dual Aspect Concept
Matching Principle
Accrual Concept
Cost Concept
Explanation - The Dual Aspect Concept states every transaction has two effects: debit and credit.
Correct answer is: Dual Aspect Concept
Q.12 When expenses are recognized when incurred, regardless of payment, this is based on which concept?
Cash Concept
Accrual Concept
Cost Concept
Consistency Principle
Explanation - The Accrual Concept records income and expenses when incurred, not when cash is exchanged.
Correct answer is: Accrual Concept
Q.13 Which concept requires recording of transactions at the time they occur, not when cash changes hands?
Accrual Concept
Cash Basis
Cost Concept
Consistency Principle
Explanation - Accrual requires recognizing revenues and expenses when they are earned or incurred, not upon cash payment.
Correct answer is: Accrual Concept
Q.14 According to which principle is stock valued at 'Cost or Market Price whichever is lower'?
Consistency Principle
Going Concern Principle
Prudence Principle
Matching Principle
Explanation - Prudence requires valuing stock conservatively at cost or market price, whichever is lower.
Correct answer is: Prudence Principle
Q.15 The assumption that money value remains constant over time refers to which concept?
Cost Concept
Money Measurement Concept
Going Concern Concept
Accounting Period Concept
Explanation - Money Measurement assumes stability in the currency's value, ignoring inflation.
Correct answer is: Money Measurement Concept
Q.16 Which concept forms the basis for depreciation accounting?
Cost Concept
Going Concern Concept
Prudence Concept
Dual Aspect Concept
Explanation - Depreciation is charged assuming the business will continue to use assets over their useful lives.
Correct answer is: Going Concern Concept
Q.17 Which principle states that once a method is chosen, it should be followed consistently?
Conservatism Principle
Consistency Principle
Accrual Concept
Matching Principle
Explanation - The Consistency Principle ensures comparability by requiring consistent application of methods.
Correct answer is: Consistency Principle
Q.18 Which principle justifies recording prepaid expenses as assets?
Accrual Concept
Matching Principle
Prudence Principle
Cost Concept
Explanation - Accrual treats prepaid expenses as assets until they are used and become expenses.
Correct answer is: Accrual Concept
Q.19 The idea that every transaction affects at least two accounts is based on which concept?
Dual Aspect Concept
Prudence Principle
Matching Concept
Consistency Concept
Explanation - The Dual Aspect Concept is the foundation of double-entry bookkeeping.
Correct answer is: Dual Aspect Concept
Q.20 Under which concept are financial statements prepared assuming the business is not closing down?
Going Concern Concept
Prudence Concept
Consistency Concept
Matching Concept
Explanation - Going Concern assumes continuity of the business for the foreseeable future.
Correct answer is: Going Concern Concept
Q.21 Which principle ensures that all significant accounting information is disclosed in financial statements?
Full Disclosure Principle
Prudence Principle
Cost Concept
Matching Concept
Explanation - The Full Disclosure Principle requires reporting all relevant facts for informed decision-making.
Correct answer is: Full Disclosure Principle
Q.22 Which accounting concept is violated if an owner includes personal expenses in business books?
Money Measurement Concept
Business Entity Concept
Cost Concept
Consistency Concept
Explanation - Business Entity requires separation of personal and business transactions.
Correct answer is: Business Entity Concept
Q.23 Why are financial statements prepared periodically?
Due to Accrual Concept
Due to Accounting Period Concept
Due to Consistency Principle
Due to Dual Aspect Concept
Explanation - Accounting Period divides life of business into equal periods for performance reporting.
Correct answer is: Due to Accounting Period Concept
Q.24 Which principle requires recognizing bad debts as soon as they are anticipated?
Prudence Principle
Consistency Principle
Cost Concept
Accrual Concept
Explanation - Prudence ensures anticipated losses like bad debts are recognized immediately.
Correct answer is: Prudence Principle
Q.25 The assumption that a business is a separate economic unit is based on which concept?
Business Entity Concept
Dual Aspect Concept
Cost Concept
Money Measurement Concept
Explanation - The Business Entity Concept treats the business as distinct from owners.
Correct answer is: Business Entity Concept