Theory Base of Accounting (Class 11 Accountancy)
Practise chapter-wise MCQs for Class 11 Accountancy — Theory Base of Accounting. Every question comes with the correct answer and an explanation.
TL;DR: Practise chapter-wise MCQs for Class 11 Accountancy — Theory Base of Accounting. Every question comes with the correct answer and an explanation.
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Practise chapter-wise MCQs for Class 11 Accountancy — Theory Base of Accounting. Every question comes with the correct answer and an explanation.
Theory Base of Accounting MCQs with Answers & Explanations
Q1. Which accounting assumption states that a business will continue to operate for the foreseeable future and will not be liquidated?
- Going Concern Assumption ✓ (correct)
- Accounting Period Concept
- Consistency Concept
- Accrual Concept
Explanation: The Going Concern Assumption presumes that a business will continue to operate indefinitely, allowing for the valuation of assets based on their ongoing use rather than their immediate liquidation value.
Q2. The 'Full Disclosure Principle' primarily aims to ensure that:
- Assets are not overstated and liabilities are not understated.
- All material information that could influence the decision-making of users is provided. ✓ (correct)
- Financial statements are prepared in a consistent manner year after year.
- Transactions are recorded at their historical cost.
Explanation: The Full Disclosure Principle mandates that all relevant and material information that might affect the users' understanding and decisions should be disclosed in the financial statements or accompanying notes.
Q3. Which concept suggests that only those transactions that can be expressed in terms of money should be recorded in the books of accounts?
- Accrual Concept
- Business Entity Concept
- Money Measurement Concept ✓ (correct)
- Historical Cost Concept
Explanation: The Money Measurement Concept states that accounting records only those events that can be measured in monetary terms. Non-monetary factors, even if important, are not typically recorded.
Q4. According to the 'Conservatism' or 'Prudence' concept, accountants should:
- Anticipate all gains but not losses.
- Recognize gains and losses only when realized.
- Recognize potential gains and all losses.
- Recognize all losses but not gains until realized. ✓ (correct)
Explanation: The Conservatism Concept dictates that when there is uncertainty, accountants should err on the side of caution. This means anticipating no profit but providing for all possible losses.
Q5. If a company records revenue when it is earned and expenses when they are incurred, irrespective of when cash is exchanged, it is following which concept?
- Accrual Basis of Accounting ✓ (correct)
- Matching Principle
- Cash Basis of Accounting
- Going Concern Assumption
Explanation: The Accrual Basis of Accounting recognizes revenues when earned and expenses when incurred, regardless of the timing of cash receipts or payments. This provides a more accurate picture of a company's financial performance.
Q6. The principle of 'matching' in accounting is best illustrated by which of the following?
- Depreciating assets over their useful life on a straight-line basis.
- Recording expenses in the period in which the revenues they helped to generate are recognized. ✓ (correct)
- Recognizing revenue when it is earned, regardless of when cash is received.
- Valuing inventory at the lower of cost or net realizable value.
Explanation: The Matching Principle requires that expenses be recognized in the same accounting period as the revenues they helped to generate. This ensures an accurate measure of profit or loss for the period.
Q7. The 'Dual Aspect Concept' is the foundation for which accounting equation?
- Sales - Cost of Goods Sold = Gross Profit
- Revenue - Expenses = Profit
- Assets = Liabilities + Capital ✓ (correct)
- Current Assets - Current Liabilities = Working Capital
Explanation: The Dual Aspect Concept states that every transaction has at least two effects. This is reflected in the fundamental accounting equation: Assets = Liabilities + Capital (or Equity).
Q8. The 'Objectivity Concept' in accounting emphasizes that financial information should be:
- Prepared based on management's opinion.
- Disclosed to the fullest extent possible.
- Reflect future economic benefits.
- Free from bias and verifiable by independent parties. ✓ (correct)
Explanation: The Objectivity Concept requires that financial data should be verifiable and free from the personal bias of the accountant or management. Evidence should support the recorded transactions.
Q9. Which accounting concept states that a business is assumed to have a life of its own, separate and distinct from its owners?
- Business Entity Concept ✓ (correct)
- Dual Aspect Concept
- Money Measurement Concept
- Going Concern Concept
Explanation: The Business Entity Concept (also known as the Accounting Entity Concept) posits that the business is a separate entity from its owners, meaning the owner's personal transactions are kept distinct from the business's transactions.
Q10. What accounting concept is violated if a company consistently changes its inventory valuation method (e.g., from FIFO to Weighted Average) without a valid reason?
- Going Concern Concept
- Consistency Concept ✓ (correct)
- Objectivity Concept
- Materiality Concept
Explanation: The Consistency Concept requires that accounting policies and methods should be applied uniformly from one period to another to ensure comparability of financial statements. Frequent changes make comparisons difficult and misleading.
More Class 11 Accountancy MCQs
- Accounting for Partnership: Basic Concepts
- Goodwill: Nature and Valuation
- Reconstitution of a Partnership Firm - Change in Profit Sharing Ratio
- Reconstitution of a Partnership Firm - Admission of a Partner
- Reconstitution of a Partnership Firm - Retirement and Death of a Partner
- Dissolution of Partnership Firm
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