Refer to MCQs for Accountancy Class 11 with Answers Chapter 2 Theory Base of Accounting designed as per the latest syllabus issued by CBSE. All Multiple choice questions have been provided with solutions and have been prepared based on the expected pattern in upcoming board exams. MCQs Chapter 2 Theory Base of Accounting have been prepared by our team of best accountancy teachers

Question During the life-time of an entity, accounting produces financial statements in accordance with which of the following accounting concept? 
(a) Matching
(b) Conservatism
(c) Accounting period
(d) Cost

Question. As per Dual Aspect Concept: 
(a) Assets = Liabilities – Capital
(b) Assets = Capital – Liabilities
(c) Assets = Liabilities + Capital
(d) Capital = Assets + Liabilities

Question. M/s Future Ltd. has invested Rs. 10,000 in the shares of Relicam Industries Ltd. Current market value of these shares is Rs. 10,500. Accountant of Future Ltd. wants to show Rs. 10,500 as value of investment in the books of accounts, which accounting convention restricts him from doing so?   
(a) Full disclosure
(b) Consistency
(c) Conservatism
(d) Materiality

Question. Omission of paise and showing the round figures in financial statements is based on …… .   
(a) Conservatism convention
(b) Consistency concept
(c) Materiality convention
(d) Money measurement concept

Question. According to the Cost Concept   
(a) Assets are recorded at lower of cost and market value.
(b) Assets are recorded by estimating the market value at the time of purchase.
(c) Assets are recorded at the value paid for acquiring it.
(d) Assets are not recorded

Question X Ltd. follows the Written Down Value Method of depreciating machinery year after year due to 
(a) comparability.
(b) convenience.
(c) consistency.
(d) All of these.

Question. The Trading and Profit and Loss Account is prepared under which attribute of accounting:
(a) Summarising
(b) Recording
(c) Classifying
(d) Analysis and Interpretation

Question. According to Convention of Conservatism closing stock is valued at:   
(a) At cost Price
(b) At Realisable value
(c) Cost price or realisable
(d) At Real value value whichever is less

Question. Convention of conservatism takes into account: 
(a) All future profits and losses
(b) All future profits and not losses
(c) All future losses and not profits
(d) Neither profits nor losses of the future

Question. The owner of the firm records his medical expenses in the firms’ income statement. Indicate the principle that is violated. 
(a) Cost Concept
(b) Prudence
(c) Full disclosure
(d) Entity concept

Question. As per Income Tax Act, accounting period is :   
(a) From 1st January to 31st December
(b) From 1st April to 31st March
(c) From 1st July to 30th June
(d) From Diwali to Diwali

Question. Which of the following statements is correct:
(a) Book Keeping is a part of Accounting.
(b) Accounting is a part of book-keeping.
(c) The term book-keeping and accounting can be used interchangeably.
(d) Book keeping is not a part of accounting.

Question. As per Dual Aspect Concept: 
(a) Assets = Liabilities – Capital
(b) Assets = Capital – Liabilities
(c) Assets = Liabilities + Capital
(d) Capital = Assets + Liabilities

Question. Concept of Consistency means:   
(a) All the firms in the same industry should use identical accounting principles and procedures  
(b) All principles and procedures of accounting are utilised
(c) Accounting principles and methods should remain consistent from one year to another
(d) All of the above

Question. IFRS are:
(a) Principles based accounting standards
(b) Rule based accounting standards
(c) Partially rule and partially principles
(d) None of the options

Question. Which of these is not a fundamental accounting assumption?   
(a) Going concern
(b) Consistency
(c) Accrual
(d) Materiality

Question. The cost of a small calculator is accounted as an expense and not shown as an asset in a financial statements of a business entity due to …… .   
(a) Materiality Convention
(b) Matching concept
(c) Periodicity concept
(d) Convention of full disclosure

Question IFRS are   
(а) rule based accounting standards.
(б) principle based accounting standards.
(c) partially rule based and partially principle based accounting standards.
(d) None of the above.

Question. M/s Future Ltd. has invested Rs. 10,000 in the shares of Relicam Industries Ltd. Current market value of these shares is Rs. 10,500. Accountant of Future Ltd. wants to show Rs. 10,500 as value of investment in the books of accounts, which accounting convention restricts him from doing so?   
(a) Full disclosure
(b) Consistency
(c) Conservatism
(d) Materiality

Question. As per Income Tax Act, accounting period is : 
(a) From 1st January to 31st December
(b) From 1st April to 31st March
(c) From 1st July to 30th June
(d) From Diwali to Diwali

Question. IASB (International Accounting Standards Board) upon coming into existence has adopted:
(a) All IAS and SIC (Standing Interpretation Board)
(b) Some IAS and SIC
(c) None of the options
(d) None of the IAS and SIC

Question. Providing depreciation on fixed asset is in accordance with which of the following principles/concepts.   
(i) Going concern (ii) Matching Concept (iii) Materiality
(a) (i) & (ii)
(b) (ii) & (iii)
(c) (i) & (iii)
(d) All the three

Question. Which one of the following statement is correct?
(a) Income = Revenue – Expenses.
(b) Income = Expenses – Revenue.
(c) Expenses = Income – Revenue.
(d) Income= Profits – Expenses.

Question IASB upon coming into existence has adopted   
(a) all IAS and SIC.
(b) some IAS and SIC.
(e) none of the IAS and SIC.
(d) None of these.

Question. Providing depreciation on fixed asset is in accordance with which of the following principles/concepts.   
(i) Going concern (ii) Matching Concept (iii) Materiality
(a) (i) & (ii)
(b) (ii) & (iii)
(c) (i) & (iii)
(d) All the three

Question Ind-AS are   
(a) rule based accounting standards.
(b) principle-based accounting standards.
(c) partially rule based and partially principle-based accounting standards.
(d) None of the above.

Question Assets (except Securities) may be valued under Ind-AS on.   
(a) historical cost.
(b) fair value.
(c) both historical cost and fair value.
(d) None of these.

Question. Concept of Consistency means: 
(a) All the firms in the same industry should use identical accounting principles and procedures
(b) All principles and procedures of accounting are utilised
(c) Accounting principles and methods should remain consistent from one year to another
(d) All of the above

Question. According to which Concept the same accounting methods should be used each year :   
(a) Prudence
(b) Full Disclosure
(c) Materiality
(d) Consistency

Question. Convention of conservatism takes into account: 
(a) All future profits and losses
(b) All future profits and not losses
(c) All future losses and not profits
(d) Neither profits nor losses of the future

Question IFRS are based on   
(a) historical cost.
(b) fair value.
(c) both historical cost and fair value.
(d) None of these.

Question. Due to which of the following, contingent liabilities are shown in the Balance Sheet:   
(a) Dual Aspect Concept
(b) Convention of Full Disclosure
(c) Convention of Materiality
(d) Going Concern Concept

Question. According to Convention of Conservatism closing stock is valued at: 
(a) At cost Price
(b) At Realisable value
(c) Cost price or realisable
(d) At Real value value whichever is less

Question Under the Cash Basis of Accounting, expenses are recorded   
(a) on payment.
(b) on being incurred.
(c) either (a) or (b).
(d) None of these.

Question  Accrual Basis of Accounting   
(a) does not give a true and fair view of profit and financial position.
(b) gives a true and fair view of profit and financial position.
(c) may or may not give a true and fair view of profit and financial position.
(d) None of the above.

Question According to the Convention of Consistency 
(a) accounting policies and practices once adopted should be consistently followed.
(b) accounting policies and practices adopted may be changed as per the management’s decision.
(c) accounting policies and practices once adopted cannot be changed under any circumstances.
(d) None of the above.

Question. Which of the following limitations of accounting states that accounts may be manipulated to conceal vital information?
(a) Accounting leads to window dressing
(b) Accounting is not fully exact
(c) Accounting ignores price level changes.
(d) Accounting ignores qualitative concepts.

Question According to the Going Concern Concept 
(a) assets are recorded at cost and are depreciated over their useful life.
(b) assets are valued at their market value at the year-end and are recorded in the books of account.
(c) assets are valued at their market value, recorded in the books and depreciation is charged on the market value.
(d) None of the above.

Question. The cost of a small calculator is accounted as an expense and not shown as an asset in a financial statements of a business entity due to …… .   
(a) Materiality Convention
(b) Matching concept
(c) Periodicity concept
(d) Convention of full disclosure

Question: Return Inward is the term used for:
(a) Sales Return
(b) Purchase Return
(c) Credit purchase
(d) Credit Sales

Question  Under the Accrual Basis of Accounting, expenses are recorded 
(a) on payment.
(b) on being incurred.
(c) either (a) or (b).
(d) None of these.

Question. Among the following assets, which one is fictitious asset?
(a) Debit balance of Profit &loss A/c
(b) Goodwill
(c) Patents
(d) Oil wells

Question (i) According to the Business Entity Concept 
(a) transactions between the business and its owners are not recorded.
(b) transactions between the business and its owners are recorded considering them to be one single entity.
(c) transactions between the business and its owners are recorded from the business point of view.
(d) None of the above.

Question According to the Cost Concept 
(a) assets are recorded at the value paid for acquiring them.
(b) assets are recorded by estimating the market value at the time of purchase.
(c) assets are recorded at lower of cost or market value.
(d) None of the above.

Question 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.
(c) transactions and events may be recorded either at the time of the settlement or when they are entered into.
(d) None of the above.

Question. According to the Cost Concept   
(a) Assets are recorded at lower of cost and market value.
(b) Assets are recorded by estimating the market value at the time of purchase.
(c) Assets are recorded at the value paid for acquiring it.
(d) Assets are not recorded

Question  Accrual Basis of Accounting recognises   
(а) Outstanding and Prepaid Expenses.
(b) Accrued Incomes and Incomes Received in Advance.
(c) Both (a) and (b).
(d) None of the above.

Question. Which one of the following is NOT the qualitative characteristic of accounting?
(a) Completeness
(b) Reliability
(c) Understandability
(d) Relevance

Question. Reliability of accounting information depends upon:
(a) Verifiability
(b) Neutrality
(c) Understandability
(d) Comparability

Question According to the Cost Concept 
(a) assets are recorded at the value paid for acquiring them.
(b) assets are recorded by estimating the market value at the time of purchase.
(c) assets are recorded at lower of cost or market value.
(d) None of the above.

Question. The basic accounting postulates are denoted by –
(a) Concepts
(b) Book – keeping
(c) Accounting standards
(d) None of these.

Question. Meaning of credibility of going concern is :
(a) Closing of business
(b) Opening of business
(c) Continuing of business
(d) None of these.

Question According to Going Concern Concept, a business is viewed as having 
(a) a limited life.
(b) a very long life.
(c) an indefinite life.
(d) None of these.

Question. Income is measured on the basis of:   
(a) Matching Concept
(b) Consistency Concept
(c) Cost Concept
(d) None of the above

Question. The sum of Liabilities and Capital is-
(a) Expense
(b) Income
(c) Drawings
(d) Assets.

Question IFRS are   
(а) rule based accounting standards.
(б) principle based accounting standards.
(c) partially rule based and partially principle based accounting standards.
(d) None of the above.

Question. Closing stock is valued at lower of cost or market price. Which concept of accounting is applied here
(a) Matching concept
(b) Revenue concept
(c) Prudence
(d) Cost concept

Question. Salary to Manager will be recorded in the books of accounts but appointment of manager is not recorded due to______
(a) Full disclosure
(b) Accounting period
(c) Business entity
(d) Money measurement

Question IFRS are based on 
(a) historical cost.
(b) fair value.
(c) both historical cost and fair value.
(d) None of these.

Question Ind-AS are 
(a) rule based accounting standards.
(b) principle-based accounting standards.
(c) partially rule based and partially principle-based accounting standards.
(d) None of the above.

Question  Under Accrual Basis of Accounting   
(a) both Cash and Credit transactions are recorded.
(b) only cash transactions are recorded.
(c) only credit transactions are recorded.
(d) None of the above.

Question. Under which accounting principle quality of manpower is not recorded in the books of accounts
(a) Going concern
(b) Accounting entity
(c) Accounting period
(d) Money measurement

Question According to which of the following accounting concepts, even the proprietor of a business is treated as creditor to the extent of his capital?   
(a) Money Measurement Concept
(b) Dual Aspect Concept
(c) Cost Concept
(d) Business Entity Concept

Question. Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the ___________ concept.
(a) Cost concept
(b) Prudence
(c) Consistency
(d) Dual aspect concept

Question According to which of the following accounting concepts, even the proprietor of a business is treated as creditor to the extent of his capital?  
(a) Money Measurement Concept
(b) Dual Aspect Concept
(c) Cost Concept
(d) Business Entity Concept

Question. Under which accounting concept fixed assets are recorded at cost without considering the market price (whether low or high).
(a) Matching concept
(b) Revenue concept
(c) Prudence concept
(d) Historical Cost Principle

Question. Purchases refers to the buying of ——–
(a) stationery for office use 
(b) assets for the factory 
(c) goods of resale 
(d) investment

Question IASB upon coming into existence has adopted   
(a) all IAS and SIC.
(b) some IAS and SIC.
(e) none of the IAS and SIC.
(d) None of these.

Question According to the Going Concern Concept 
(a) assets are recorded at cost and are depreciated over their useful life.
(b) assets are valued at their market value at the year-end and are recorded in the books of account.
(c) assets are valued at their market value, recorded in the books and depreciation is charged on the market value.
(d) None of the above.

Question The Convention of Conservatism takes into account   C
(a) all prospective profits and prospective losses.
(b) all prospective profits and leaves out prospective losses.
(c) all prospective losses but leaves out prospective profits.
(d) None of the above.

Question According to the Money Measurement Concept 
(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.
(d) None of the above.

Question. Current asset do not include —
(a)   debtors
(b) motor car
(c) bank balance
(d) prepaid expenses

Question. Out of the following assets which one is not an intangible asset?
(a) Patents
(b) investment
(c) goodwill
(d) trade mark

Question. Select the best alternative: 
(i) According to the Business Entity Concept
(a) transactions between the business and its owners are not recorded.
(b) transactions between the business and its owners are recorded considering them to be one single entity.
(c) transactions between the business and its owners are recorded from the business point of view.
(d) None of the above.

Question. Which of the following is capital expenditure?
(a) Wages 
(b) wages paid for building construction 
(c) repair expenses of building
(d) advertisement expenses

Question. Main feature of business transaction is ——
(a) An economic activity
(b) change in the financial position of the firm
(c) express in terms of money
(d) all of the above

Question. Accrual concept is based on
(a) Matching principle
(b) Dual aspect
(c) Cost
(d) Going concern

Question. Due to which principle qualitative transactions are not recorded in the books
(a) Business entity
(b) Money measurement
(c) Historical cost
(d) Dual aspect

Question 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.
(c) transactions and events may be recorded either at the time of the settlement or when they are entered into.
(d) None of the above.

Question. According to the cost concept
(a) Assets are recorded at lower of cost and market value
(b) Assets are recorded by estimating the market value at the time of purchase
(c) Assets are not recorded
(d) Assets are recorded at the value paid for acquiring it.

Question. Omission of paise and showing the round figures in financial statements is based on
(a) Conservatism
(b) Consistency
(c) Materiality
(d) Money measurement

Question. Due to which of the following, contingent liabilities are shown in the Balance Sheet:
(a) Dual aspect
(b) Full disclosure
(c) Materiality
(d) Going concern

Question. When the information about two different enterprises have been prepared and presented in a similar manner the information exhibits the characteristic of:
(a) Verifiability
(b) Relevance
(c) Reliability
(d) None of the above

Question. Accrual concept is based on : 
(a) Matching Concept
(b) Dual Aspect Concept
(c) Cost Concept
(d) Going concern Concept

Question. Income is measured on the basis of: 
(a) Matching Concept
(b) Consistency Concept
(c) Cost Concept
(d) None of the above

Question According to Going Concern Concept, a business is viewed as having   
(a) a limited life.
(b) a very long life.
(c) an indefinite life.
(d) None of these.

Question According to which of the following concepts, in determining the net income from business, all costs which are applicable to the revenue of the period should be charged against that revenue?  
(a) Matching Concept
(b) Money Measurement Concept
(c) Cost Concept
(d) Dual Aspect Concept

Question. The primary qualities that make accounting information useful for decision-making are:
(a) Relevance and freedom from bias|
(b) Reliability and comparability 
(c) Comparability and consistency
(d) None of the above

Question. According to which Concept the same accounting methods should be used each year : 
(a) Prudence
(b) Full Disclosure
(c) Materiality
(d) Consistency

Question According to the Money Measurement Concept 
(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.
(d) None of the above.

Question. Due to which Concept qualitative transactions are not recorded in the books : 
(a) Business Entity Concept
(b) Money Measurement Concept
(c) Historical cost Concept
(d) Dual Aspect Concept

Question Valuation of stock at lower of cost or net realisable value is an example of 
(a) Consistency Convention.
(b) Conservatism Convention.
(c) Realisation Concept.
(d) Matching Concept.

Question. Revenue from sale of products is realized when
(a) the sale is made
(b) the cash is collected
(c) the production is completed
(d) the order placed to supply goods.

Question. The owner of the firm records his medical expenses in the firms’ income statement. Indicate the principle that is violated.   
(a) Cost Concept
(b) Prudence
(c) Full disclosure
(d) Entity concept

Question According to the Convention of Consistency 
(a) accounting policies and practices once adopted should be consistently followed.
(b) accounting policies and practices adopted may be changed as per the management’s decision.
(c) accounting policies and practices once adopted cannot be changed under any circumstances.
(d) None of the above.

Question. According to which Concept even the proprietor of the business is treated as a creditor of the business; 
(a) Going concern Concept
(b) Cost Concept
(c) Business Entity Concept
(d) Accounting Period Concept

Question. Omission of paise and showing the round figures in financial statements is based on …… .   
(a) Conservatism convention
(b) Consistency concept
(c) Materiality convention
(d) Money measurement concept

Question Assets (except Securities) may be valued under Ind-AS on. 
(a) historical cost.
(b) fair value.
(c) both historical cost and fair value.
(d) None of these.

Question. Accrual concept is based on :   
(a) Matching Concept
(b) Dual Aspect Concept
(c) Cost Concept
(d) Going concern Concept

Question. Normally assets are recorded at cost price. This because
(a) Assets can be realized at the lime of winding up.
(b) Historical cost concept.
(c) Going concern concept
(d) All of these

Question The Convention of Conservatism takes into account 
(a) all prospective profits and prospective losses.
(b) all prospective profits and leaves out prospective losses.
(c) all prospective losses but leaves out prospective profits.
(d) None of the above.

Question. According to Convention of Conservatism: 
(a) Provision is made for bad and doubtful debts
(b) Depreciation is charged on assets
(c) Recording is made of outstanding expenses
(d) All of the above

Question. According to Convention of Conservatism: 
(a) Provision is made for bad and doubtful debts
(b) Depreciation is charged on assets”
(c) Recording is made of outstanding expenses
(d) All of the above

Question. Due to which Concept qualitative transactions are not recorded in the books : 
(a) Business Entity Concept
(b) Money Measurement Concept
(c) Historical cost Concept
(d) Dual Aspect Concept

Question. Accounting standard deals with depreciation accounting is
(a) As-5
(b) As-16
(c) As-6
(d) As-9

Question. During the lifetime of an entity, accounting produce financial statements in accordance with which basic accounting concept.
(a) Conservation
(b) Matching
(c) Accounting period
(d) None of these

Question. According to which Concept even the proprietor of the business is treated as a creditor of the business;   
(a) Going concern Concept
(b) Cost Concept
(c) Business Entity Concept
(d) Accounting Period Concept

Question X Ltd. follows the Written Down Value Method of depreciating machinery year after year due to   
(a) comparability.
(b) convenience.
(c) consistency.
(d) All of these.

Question. The Policy of ‘anticipate no profit and provide for all possible losses’ arises due to convention of
(a) Matching
(b) Conservatism
(c) Consistency
(d) None 

Question. Which of these is not a fundamental accounting assumption? 
(a) Going concern
(b) Consistency
(c) Accrual
(d) Materiality

Question According to which of the following concepts, in determining the net income from business, all costs which are applicable to the revenue of the period should be charged against that revenue?   
(a) Matching Concept
(b) Money Measurement Concept
(c) Cost Concept
(d) Dual Aspect Concept

Question Valuation of stock at lower of cost or net realisable value is an example of   
(a) Consistency Convention.
(b) Conservatism Convention.
(c) Realisation Concept.
(d) Matching Concept.

Question. Due to which of the following, contingent liabilities are shown in the Balance Sheet: 
(a) Dual Aspect Concept
(b) Convention of Full Disclosure
(c) Convention of Materiality
(d) Going Concern Concept

Question During the life-time of an entity, accounting produces financial statements in accordance with which of the following accounting concept?   
(a) Matching
(b) Conservatism
(c) Accounting period
(d) Cost