Accounting Concepts Test Quiz! Trivia

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| By Sujal.tandon27
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Sujal.tandon27
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Questions: 10 | Attempts: 947

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Accounting Concepts Test Quiz! Trivia - Quiz


Accounting concepts are out in place to ensure that accounting processes are uniform. An accountant must have a good understanding of these concepts. Did you know that once a business chooses to use a specific accounting method, it should continue using it on a go-forward basis? Do take up this quiz and see how well you understand the many concepts. All the best!


Questions and Answers
  • 1. 

    Which one of the following is a current liability?

    • A.

      Debtor

    • B.

      Creditor

    • C.

      Advertisement

    • D.

      Debentures

    Correct Answer
    B. Creditor
    Explanation
    A creditor is a person or entity to whom a company owes money or has a financial obligation. They are considered a current liability because the debt or obligation is expected to be settled within a short period, usually within one year. In contrast, debtors owe money to the company and are considered an asset. Advertisement and debentures are not current liabilities as they do not represent a financial obligation or debt owed by the company.

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  • 2. 

    Which one of the following is not an internal user of accounting information?

    • A.

      Owner

    • B.

      Government 

    • C.

      Employees

    • D.

      Management

    Correct Answer
    B. Government 
    Explanation
    The government is not considered an internal user of accounting information because it is an external entity that regulates and monitors the activities of businesses. Internal users, on the other hand, are individuals or groups within the organization who use accounting information for decision-making and planning purposes, such as owners, employees, and management.

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  • 3. 

    The other name of prudence principle is_______

    Correct Answer
    Conservatism principle
    Explanation
    The prudence principle is also known as the conservatism principle. This principle suggests that when there are uncertainties or doubts about the future outcomes, it is better to be cautious and record transactions and events in a way that understates assets, revenues, gains, and overstates liabilities, expenses, and losses. This approach ensures that financial statements are not overly optimistic and provides a more realistic view of the entity's financial position and performance. Therefore, the correct answer is the conservatism principle.

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  • 4. 

    Debentures are short term liabilities.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Debentures are not short term liabilities, but rather long term liabilities. Debentures are a type of loan taken by a company from the public, where the company promises to repay the loan amount along with interest at a specified future date. These loans typically have a maturity period of more than one year, making them long term liabilities for the company. Therefore, the correct answer is False.

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  • 5. 

    Income can be calculated as

    • A.

      Revenue+expenditure

    • B.

      Revenue-expenditure

    • C.

      Revenue-expense

    • D.

      Revenue+expense

    Correct Answer
    C. Revenue-expense
    Explanation
    The correct answer is "Revenue-expense" because income is typically calculated by subtracting expenses from revenue. This calculation allows for determining the net profit or loss of a business or individual. By subtracting expenses from revenue, it provides a clearer picture of the actual income generated after deducting all necessary costs.

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  • 6. 

    Capital is considered to be an internal_________

    • A.

      Asset

    • B.

      Revenue

    • C.

      Liability

    • D.

      Benefit

    Correct Answer
    C. Liability
    Explanation
    Capital is considered to be an internal liability because it represents the owner's investment in the business. It is the amount of money or assets that the owner contributes to the business to start or expand its operations. The owner has a claim on the capital and can withdraw it from the business if necessary. Therefore, capital is a liability to the business as it represents the amount owed to the owner.

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  • 7. 

    According to which assumption it is assumed that a business will continue for a foreseeable period.

    • A.

      Prudence

    • B.

      Consistency

    • C.

      Money measurement

    • D.

      Going concern

    Correct Answer
    D. Going concern
    Explanation
    The assumption of going concern is based on the belief that a business will continue to operate in the foreseeable future. This assumption is important because it allows the financial statements to be prepared on the basis that the business will not be liquidated or forced to cease operations. It assumes that the business will continue to generate revenue, meet its financial obligations, and operate in the normal course of business. This assumption is crucial for accurate financial reporting and decision-making by stakeholders.

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  • 8. 

    Accounting begins when bookkeeping ends.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Accounting and bookkeeping are closely related but distinct processes. Bookkeeping involves recording financial transactions, while accounting involves analyzing, interpreting, and summarizing those transactions to generate financial reports and make informed decisions. Therefore, it can be said that accounting begins when bookkeeping ends, as bookkeeping provides the data necessary for accounting processes to take place.

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  • 9. 

    Full form of ICAI is

    Correct Answer
    Institute of Chartered Accountants of India
    Explanation
    ICAI stands for Institute of Chartered Accountants of India. This organization is responsible for regulating the profession of chartered accountancy in India. It sets accounting and auditing standards, conducts examinations, and grants membership to qualified individuals. The full form accurately represents the purpose and scope of ICAI, which is to ensure the highest standards of professional competence and ethics among chartered accountants in India.

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  • 10. 

    Bank overdraft is an asset.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Bank overdraft is not an asset but a liability. It represents the amount of money that a bank allows an account holder to withdraw in excess of the available balance. Since it is a debt owed by the account holder to the bank, it is classified as a liability on the balance sheet.

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  • Current Version
  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Jun 12, 2020
    Quiz Created by
    Sujal.tandon27
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