MCQs For NCERT Class 11 Chapter 2 Theory Base of Accounting

Please refer to the MCQ Questions for Class 11 Accountancy Chapter 2 Theory Base of Accounting with Answers. The following Theory Base of Accounting Class 11 Accountancy MCQ Questions has been designed based on the latest syllabus and examination pattern for Class 11. Our experts have designed MCQ Questions for Class 11 Accountancy with Answers for all chapters in your NCERT Class 11 Accountancy book.

Theory Base of Accounting Class 11 MCQ Questions with Answers

See below Theory Base of Accounting Class 11 Accountancy MCQ Questions, solve the questions and compare your answers with the solutions provided below. 

Question. Which principle/concept of accounting is highlighted in the line, “Therefore, the fees of the accountant was not paid in the year when pandemic set in as the firm was going through cash-crunch. However, the accountant entered the amount of his fees as expense even though cash was not paid”?
(a) Dual aspect principle
(b) Accrual concept
(c) Consistency concept
(d) Cost principle

Question: A business enterprise will not be sold or liquidated in near future- Which accounting concept reflects this statement?
• Business Entity Concept
• On Going Concern
• Consistency
• None of the above 

Question:  If one aspect of a transaction is not recorded, which accounting concept is NOT followed?
• Revenue Recognition concept
• Cost concept
• Dual Aspect concept
• Prudence concept       

Question:  Recognition of expenses in the same period as associated revenues is called ________ concept.
• Revenue Realisation
• Matching
• Objectivity
• Consistency   

Question:  ‘ Closing stock is valued at Cost Price or Market Price whichever is lower- Identify the concept applied here.
• Consistency Principle
• Prudence Concept
• Money Measurement Principle
• Cost concept 

Question:  If advanced is received against sale of goods, the advanced received is recorded as ” Advance Against Sale’
and not Sales. Which accounting concept requires so?
• Revenue Recognition concept   
• Dual Aspect concept
• Money measurement concept
• Prudence concept

Question. “The owner of the firm asked the accountant to enter this fact but accountant denied and gave the correct reasons.” Which principle was used by accountant to explain the owner?
(a) Dual aspect principle
(b) Money measurement principle
(c) Full disclosure principle
(d) Accounting period principle 

Question. During periods of inflation, the figure of net profit disclosed by profit and loss account will be distorted because of ……… .
(a) matching principle
(b) historical cost principle
(c) principle of prudence
(d) dual apsect principle

Question. Which AS is required to be followed to prepare cash flow statements?
(a) AS-1
(b) AS-2
(c) AS-3
(d) AS-4

Question. “A single rate of GST was charged on the supply of the goods …”. Who levy GST on this common base?
(a) Centre government
(b) State government
(c) Union territory government
(d) Both (a) and (b)

Question. Which of the following transactions/ events/entries can be attributed to matching principle?
(i) Outstanding expenses, though not paid in cash are shown in profit and loss account.
(ii) When insurance premium is paid partly for next year also, the part relating to next year will be shown as expense only next year and not this year.
(iii) Depreciation is charged as per straight line method each and every year.
(a) Only (i)
(b) Only (ii)
(c) (i) and (ii)
(d) All of these 

Question. Which principle is highlighted in the line, “While accounting, company usually booked a normal loss to account for spoiled fruits that they might get”?
(a) Business entity principle
(b) Prudence principle
(c) Materiality principle
(d) Full disclosure principle

Question. The principle highlighted in the line, “Moreover, they charged depreciation on the machinery to ensure that expenses are distributed over the years” is matching principle.
(a) True
(b) False
(c) Partially false
(d) Can’t say

Question. The company follows the calendar year as accounting year. Which principle is highlighted in the fact that firm divided the whole life of firm into small financial years?
(a) Dual aspect principle
(b) Materiality principle
(c) Prudence principle
(d) Accounting period principle

Question. Which principle is highlighted in the fact that the company continued even after death of the founders?
(a) Business entity principle
(b) Money measurement principle
(c) Duality principle
(d) Historical cost principle

Question. The main function of Accounting standards Board is
i) To identify areas in which uniformity in standards is requested
ii) Develop draft standards after wide discussion with representative, the public sector undertakings etc.
a) Option (i) is the correct Statement
b) Option (ii) is the correct Statement
c) Both Option (i) and (ii) are the correct Statement
d) None of the Option is the correct Statement

Question. The statement that provide the applicability of laws, customs, usages and the business environment of any country is known as:
a) Financial statement
b) Accounting Information
c) Accounting standards
d) Accounting Convention

Question. Under which accounting concept the personal transactions of the owner are not recorded in the books of the business, unless it involves inflow or outflow of business funds.
a) Business Entity
b) Dual Aspect
c) Materiality
d) Money Measurement. 

Question. Identify the assumption of accounting that provides the very basis for showing the value of assets in the Balance Sheet.
a) Going Concern Concept
b) Objectivity
c) Full Disclosure
d) Materiality

Question. Which concept/Principle does the Income Tax act refer under The Companies Act 1956 that requires that the income statement should be prepared annually?
a) Cost Concept
b) Dual Concept
c) Accounting Period Concept
d) Matching Concept. 

Question. Identify the Accounting Principle which includes the cost of acquisition that does not change year after year.
a) Cost Concept
b) Revenue Recognition
c) Accounting Period
d) Consistency 

Question. The concept that states that every transaction has at least two accounts involved in recording a transaction is:
a) Matching
b) Dual Aspect
c) Full Disclosure
d) Conservatism 

Question. The revenue is assumed to be realised when a legal right to receive it arises under the:
a) Realisation Concept
b) Matching Concept
c) Cost concept
d) Dual Aspect 

Question. The concept that states the revenue and the expenses incurred to earn the revenue must belong to the same accounting period for ascertaining profit/loss for that year.
a) Revenue Recognition
b) Matching
c) Full Disclosure
d) Cost 

Question. The term that refers the necessary assumptions and ideas which are fundamental to accounting practice is:
a) Accounting Convention
b) Accounting Concept
c) Accounting Period
d) Accounting Procedure.

Question. The term that connotes customs or traditions as a guide to the preparation of accounting statements is:
(a) Accounting Concept
b) Accounting Procedures
c) Accounting Convention
d) Accounting Standards 

Question. The concept that anticipates the Loss and not the Profit Refers to :
a) Consistency
b) Full Disclosure
c) Conservatism
d) Matching 

Question. State the principle which enables the comparison of the financial result inter- firm as well as intra firm.
a) Consistency
b) Prudence
c) Full disclosure
d) Matching

Question. According to which accounting concept, the capital introduced while commencement of the business is considered as the liability of the firm?
a) Money Measurement
b) Matching
c) Business Entity
d) Full Disclosure 

Question. Identify the two pair of accounting concept under which the life of business is assumed to continue to carry, so the firm invested Rs. 50,000 to purchase a machinery and assumed to earn Rs. 10,000 as a revenue from it.
a) Going Concern and Cost Concept
b) Matching and Dual aspect
c) Cost Concept and Consistency concept
d) Revenue Recognition and Matching Concept.

Question. The credit sales are treated as revenue on the day sales are made and not when money is received from the buyer refers to the :
a) Realisation concept
b) Matching concept
c) Cost Concept
d) Dual aspect

Question. The Indian Company’s Act 1956 and SEBI, has provided a format for the preparation of Profit/Loss and Balance sheet of the Company which can enable the users to make correct assessment about the profitability and financial soundness of the enterprise under the Accounting concept popularly known as
a) Materiality
b) Conservatism
c) Full Disclosure
d) Consistency

Question. The concept that states that the reasonable material facts that disclose through the financial statement and the informing notes is:
a) Materiality
b) Full Disclosure
c) Consistency
d) Prudence

Question. Identify the concept that requires the documentary evidence for the accounting transaction which is supported by verifiable documents or vouchers.
a) Materiality
b) Objectivity
c) Full Disclosure
d) Consistency

Question. Accrual accounting is based on the basis of accounting principle that states the concept of:
a) Cost
b) Full Disclosure
c) Matching
d) Materiality 

Question. Which principle does implies when the closing stock is valued at the cost or market value whichever less is, discount on debtors, creating provisions for doubtful debts or writing of the intangible assets etc. In the books of account.
a) Cost
b) conservatism
c) Materiality
d) consistency 

Question. The accounting data does not reflect the True and fair view of the firm as the heterogeneous value of two different assets that has been purchased in two different year, can’t be clubbed together is the limitation of the concept of:
a) Money Measurement
b) cost
c) Accounting period
d) Matching 

Question. The value of a building that has been purchased by the firm for 3 crores, keeps on changing with its market value violates the principle of
a) Historical cost
b) Matching
c) Money Measurement
d) Materiality

Question. The revenue will be recognized when
a) Received an order for the goods worth Rs.50,000 on 1st April’18
b) Goods worth Rs. 50,000 is supplied to the customer on 10th Apr’18
c) Received amount of Rs. 25,000 as from the customer on 15th Apr’18
d) Balance amount is received on 25th Apr’18 

Question. Identify the Accounting principle which express the fundamental Accounting Equations
a) Dual Aspect
b) Matching
c) Cost
d) Consistency

Question. Which principle does implies when the firm shows all the expenses related to its revenues of a specified accounting period even if the expenses were not paid in that financial year.
a) Cost
b) matching
c) conservatism
d) Dual aspect

Question. i) Double entry system can minimise the possibilities of frauds and mis-appropriations.
ii) Every debit must have its corresponding credit
iii) single entry system is the complete system of maintaining records of the financial transaction
iv) The arithmetic accuracies can be checked by preparing the trial balance in the single entry system
a) Option (i) and option (ii) are the correct statement.
b) Option (ii) and option (iii) are the correct statement
c) Option (i) and option (iii) are the correct statement
d) Option (iv) and option (ii) are the correct statement

Question. As per this concept under accounting concepts/assumptions, business is assumed to continue for a long period of time in future and there is no intention of closing it. Which concept is highlighted here?
(a) Consistency concept
(b) Going concern concept
(c) Accrual concept
(d) None of the above

Question. According to consistency concept, which of the following statements is correct?
(i) Accounting principles should be changed year to year to benefit the organisation.
(ii) Accounting principles or methods should remain same from year to year.
(iii) Business firm can change accounting methods according to the changed circumstances of business.
(a) Only (ii)
(b) Only (iii)
(c) Only (i) and (iii)
(d) Only (ii) and (iii)

Question. According to Dual Aspect State the accounts that affects when the goods are sold to Mr. Mohan.
a) Cash A/c and Stock A/c
b) Debtors A/c and Cash A/c
c) Stock and Debtors
d) Creditors and Stock

 Question. According to the Matching concept, a company show all the expenses related to its revenues of a specified period even if:
a) Expenses were not paid in that period
b) Revenues were not paid in that period
c) Fixed assets were not sold in that period
d) Liabilities were not paid in that period.

Question. As per the Duality principle calculate the total outsider’s equity if the raw materials cost Rs. 5000, machine cost Rs. 50,000, Furniture used in the firm cost Rs. 20,000, cash at bank is Rs. 30,000 and the owner’s equity is Rs. 70,000.
a) Rs.35,000
b) Rs. 1,75,000
c) Rs. 70,000
d) Rs. 1,40,000

 Question. Which of the following methods need not remain consistent from year to year?
(a) Method of depreciation : Straight line or Written down value
(b) Method of stock valuation : LIFO, FIFO or HIFO
(c) Both (a) and (b)
(d) None of the above

Question. Even after the existence of consistency concept, if the accountant feels that change in a particular method will lead to the better disclosure of profits and the financial position of the business, the changed method may be adopted.
(a) True
(b) False
(c) Partially true
(d) Partially false

Question. According to business entity principle, business is treated as a unit separate and distinct from its ……… . 
(a) owners
(b) promoters
(c) shareholders
(d) All of these

Question. ABC Ltd. Received an advance on sale in the month of Dec’18 for the sales made in the month of May’19. The sale should recognized on
a) May’19
b) Dec’18
c) Both in May’19 and Dec’18
d) Jan’19 

Question. Calculate the Liabilities, If Assets=Rs.1,00,000, capital= Rs. 40,000.
a) Rs.60,000
b) Rs.1,60,000
c) Rs.1,00,000
d) Rs.40,000 

Question. i) According to cash basis the receipt or payment becomes due are ignored.
ii) As per the accrual basis the revenue and costs are recognized when it occurred
iii. Office Rent for the month of Dec’18 paid in Jan’19 is recorded in Jan’19.
a) Option (i) and (ii) is the correct statement
b) Option (i),(ii) and (iii) is the correct statement
c) Option (i) and (iii) is the correct statement
d) Option (ii) and (ii) is the correct statement

Question. Principle of separate entity is applicable to only sole proprietorship business.
(a) True
(b) False
(c) Partially false
(d) Can’t say

Question. Goods used from stock of the business for business purposes are treated as the ……… of business but similar goods used by proprietor for his personal use are treated as ……… .
(a) inventory, expenditure
(b) drawings, expenditure
(c) drawings, inventory
(d) expenditure, drawings

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is false, but Reason (R) is true
(d) Assertion (A) is true, but Reason (R) is false

Question. Assertion (A) Cash basis of accounting is that accounting which records only cash transactions, i.e. only those incomes and expenses are recorded which have been received and paid in cash respectively. Thus, cash basis of accounting violates GAAP.
Reason (R) Cash basis of accounting makes a distinction between capital and revenue items. 

Question. Assertion (A) A claim of a very big sum pending in a court of law against the enterprise should be brought to the notice of the users of financial statements, otherwise the statements would be misleading.
Reason (R) According to principle of full disclosure, all significant information relating to the economic affairs of the enterprise should be completely disclosed. 

Question. Assertion (A) Capital = Liabilities − Assets.
Reason (R) According to the dual aspect principle, every business transaction is recored as having a dual aspect, one aspect is debit and the other aspect is credit. 

Question. Assertion (A) The goods supplied from Chennai to Lucknow would fetch  Integrated GST.
Reason (R) Integrated GST is levied in the course of inter-state supply of goods and services. 

Question. Assertion (A) NOP Ltd. purchased a machinery of ₹ 20,000 which is supposed to last for 20 years. The accountant decides to spread the cost of machinery for next 20 years for calculation of profit and loss.
Reason (R) According to consistency concept, accounting principles and methods should remain consistent from one year to another. 

Fill In The Blanks

Question. AS stands for __________________.

Question. Accounting process starts from _____________.

Question. Ajit is running a small shop and keeping record of cash inflow and outflow only. He is maintaining his books on _____ basis of accounting.

Question. Fixed assets are recorded at cost without considering the market price whether low or high under ________ concept.

Question. According to _________ concept, all expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.

Question. Salary to manager will be recorded in the books of accounts but appointment of manager is not recorded due to _____________ concept.

Question. True value of profit and loss is identified in __________ basis of accounting.

Question. Only cash transactions are recorded in _______ basis of accounting.

Question. Purchase goods of Rs 50,000 and purchase machinery of Rs 5,00,000 are classified under different expenditure category due to going concern concept. Carriage of Rs 1,000 is added to capital expenditure, in this Rs ____ amount is to be debited in purchase A/c.

Question. Assets = Liabilities + ____________; is a fundamental accounting equation under dual aspect concept.

Question. A code of conduct imposed on an accountant by custom, law and a professional body is termed as ____________.

Question. The ____________ assumption of accounting states that if straight line method of depreciation is followed in one accounting year, then it should be continued in the next year also.

Question. Shyam made cash sales of Rs 3,20,000 and credit sales of Rs 1,80,000. His expenses for the year were Rs 50,000, out of which Rs10,000 is yet to be paid. Ram’s income on the base of accrual basis of accounting will be Rs____________.

Question. M/s Amarnath recorded the transactions on day basis and could not prepare Trial Balance directly as he missed _______________ step of accounting process.

Question. Rent paid Rs 85,000 out of which Rs 15,000 is related to next year. In the Cash Basis of accounting Rs __________ amount will be debited in Rent A/c.

Question. Accounting period may be either a calendar year from January 01 to December 31 or the _________ year from April 01 to March 31 of the government.

Question. Everything a firm owns, it also owns out of somebody. This co – incidence is explained by the ____________ concept.

True /False

Question. Accounting standards enhances comparability of financial statements for both intra and inter firm analysis.

Question. According to Materiality concept, an ink pot has been purchased by the firm for Rs 5000 treated as revenue expenditure.

Question. Only personal accounts and Cash book are maintained under Double Entry System. 

Question. Accounting standards is rigidly followed and fails to extend flexibility.

Question. ICAI stands for Institute of Company Accounts.

Question. Accounting Standards signifies Uniformity, Transparency and Consistency in Accounting. 

Question. Prudence Concept considers all prospective losses and prospective profits of business.

Question. The concept of going concept assumes that a business firm would continue to carry out its operations indefinitely for a fairly long period of time.

Question. According to Business entity Principle even the proprietor of the business is treated as Creditor of the business.

Question. Accrual Concept is based on matching principle.

Question. Due to Money Measurement Concept, Asset is recorded at cost Price.

Question. Purchase of goods amounted to Rs 50,000 on cash increased one asset and reduces the other Asset due to the adherence of Single entry system.

Question. The fact that a business is separate and distinguishable from its owners is best exemplified by the Business entity Concept.

Question. Under Cash Basis of Accounting, Outstanding and prepaid expenses are adjusted.

Question. Accounting standard is an authoritative statement issued by ICAI.

Question. Accounting Principles, concepts and conventions commonly known as GAAPs.

Question. Which principle is Followed here

1. Accounting should be free from personal bias.	a) Dual Aspect concept
2. Firm borrows amount from bank leads to increase in assets and liabilities both.	b) Verifiable evidence objective
	c) Materiality Concept
	d) Cost Concept

Question. Which principle is violated in the below give match the column:

1. Contingent liabilities are not recorded as a foot note.	a) Conservatism concept
2. Closing stock is valued at a cost or market price whichever is higher	b) Matching principle
	c) Verifiability Objective
	d) Full disclosure principle

Question.

1. Balance sheet items should be presented under the prescribed head	a) Indian accounting standard
2. Companies which are listed on the stock exchange in India	b) Indian company Act 2013
	c) IFRS

Question.

1. Salary due to Mohan	a) Revenue
2. Interest received in advance	b) Liabilities
	c) Assets

Question.

1. Revenue realized at the time of sale.	a) Business Entity Concept
2. Business will not be liquidated in the near future.	b) Revenue recognition principle
	c) Going concern Concept

Question.

1. Interest on bank loan	a) Assets
2. Cash balance	b) liability
	c) Expense
	d) revenue

Question.

1. Conservatism	a) All prospective profits and all prospective losses
2. Ind-AS are based on	b) All prospective losses but not the prospective profits
	c) Principles
	d) Rules

Question.

1. Ind-As apply to	a) Companies having net worth of Rs.250 crores or more
2. GAAP	b) Companies having net worth of Rs.150 crores or more
	c) Rules
	d) Priciples