Theory base of Accounting

Why is the Theory Base of Accounting important?

1. It helps only in tax collection.
2. It provides principles and concepts for preparing accurate and reliable financial statements.
3. It eliminates the need for bookkeeping.
4. It is useful only for banks.

The accounting equation is:

1. Assets = Liabilities - Capital
2. Assets = Capital + Liabilities
3. Capital = Assets + Expenses
4. Assets = Income - Expenses

Which qualitative characteristic makes accounting information useful for decision-making?

1. Irrelevance
2. Reliability
3. Uncertainty
4. Delay

Which accounting assumption forms the basis of preparing financial statements on an annual basis?

1. Accounting Period Concept
2. Business Entity Concept
3. Cost Concept
4. Money Measurement Concept

Which accounting principle requires the same accounting methods to be followed year after year?

1. Materiality Principle
2. Consistency Principle
3. Matching Principle
4. Going Concern Principle

Which accounting principle requires anticipated losses to be recognized but not anticipated profits?

1. Conservatism Principle
2. Consistency Principle
3. Materiality Principle
4. Full Disclosure Principle

Revenue should be recognized when:

1. Cash is received only
2. Goods or services are delivered and income is earned
3. Business starts operations
4. Expenses are paid

Which concept forms the basis of the accounting equation?

1. Matching Concept
2. Dual Aspect Concept
3. Cost Concept
4. Realisation Concept

Which accounting concept divides the life of a business into fixed accounting periods?

1. Going Concern Concept
2. Accounting Period Concept
3. Dual Aspect Concept
4. Cost Concept

Which accounting concept states that only transactions measurable in monetary terms should be recorded?

1. Money Measurement Concept
2. Cost Concept
3. Dual Aspect Concept
4. Accounting Period Concept

Which concept requires revenues and related expenses to be recognized in the same accounting period?

1. Money Measurement Concept
2. Matching Concept
3. Going Concern Concept
4. Business Entity Concept

Which accounting concept states that transactions should be recorded at their original purchase price?

1. Cost Concept
2. Matching Concept
3. Realisation Concept
4. Accrual Concept

According to the Business Entity Concept, the business is:

1. The same as its owner
2. Separate and distinct from its owner
3. Controlled by the government
4. Part of the market

Which accounting concept assumes that a business will continue to operate for the foreseeable future?

1. Matching Concept
2. Going Concern Concept
3. Money Measurement Concept
4. Dual Aspect Concept