Conservatism Concept

Q.

Rectify the following errors

(i) Salary paid Rs. 5, 000 was debited to employee's personal account.

(ii) Rent paid Rs. 4, 000 was posted to landlord's personal account.

(iii) Goods withdrawn by proprietor for personal use Rs 1, 000 were debited to sundry expenses account.

(iv) Cash received from Kohli Rs. 2, 000 was posted to Kapur's account.

(v) Cash paid to Babu Rs. 1, 500 was posted to Sabu's account.

(vi) Goods sold to Rohan on credit amounting to Rs. 700 were omitted from the accounts although cash received subsequently from him stands posted to his credit.

(vii) On 31st March, goods of the value of Rs. 6, 000 were returned by Rohan and were taken into stock on the same date but entry was not passed in the books.

Q.

Rectify the following errors.

(i) Sales book overcast by Rs. 700.

(ii) Purchase book overcast by Rs. 500.

(iii) Sales return book overcast by Rs. 300.

(iv) Purchase return book overcast by Rs. 200.

(v) Sales book undercast by Rs. 300.

(vi) Purchase book undercast by Rs. 400.

(vii) Return inwards book undercast by Rs. 200.

(viii) Return outwards book undercast by Rs. 100.

Q.

Rectify the following errors.

(a) Sales book undercast by Rs. 300.

(b) Purchase book undercast by Rs. 400.

(c) Return inwards book undercast by Rs. 200.

(d) Return outwards book undercast by Rs. 100.

Q.

Rectify the following errors.

(a) Furniture purchased for Rs. 10, 000 wrongly debited to purchase account.

(b) Machinery purchased on credit from Raman for Rs. 20, 000 was recorded through purchase book.

(c) Repairs on machinery Rs. 1, 400 debited to machinery account.

(d) Repairs on overhauling of second hand machinery purchased Rs. 2, 000 was debited to repair account.

(e) Sales of old machinery at book value of Rs. 3, 000 was credited to sales account.

Q.

Closing Stock Is Always Valued At Market Price. (True/False)

1. True
2. False

Q.

Pass entries to rectify the following errors :

(i) Purchased good from Ravi Rs. 500 passed through sales book.

(ii) Only Rs. 20 were recorded in Bill Receivable Book instead of Rs. 200.

(iii) A repair to Plant amounting to Rs. 1, 000 has been changed to plant & Machine Alc.

(iv) A purchase of gods of Rs. 2, 000 has been wrongly debited to Furniture Ale.

Q.

Rectify the following errors:

(i) Repairs made on Building for Rs 1, 00, 000 were debited to Building a/c.
(ii) Rent paid Rs 12, 000 to Landlord was debited to Landlord a/c.
(iii) Wages paid for installation of Machinery of Rs 7, 000 was debited to Wages a/c.
(iv) Salary paid to Accountant (Mr. Ram) on Rs 15, 000 was debited to Ram a/c.
(v) Rs 32, 000 paid for purchase of Computer was charged to Office Expenses a/c.
(vi) Amount of Rs 7, 500 withdrawn by proprietor for personal use was debited to Miscellaneous Expenses a/c.

Q.

Anticipate no profits and provide for all possible losses. This is essence of which of the following accounting principles:

1. Materiality Principle

2. Timeliness Principle

3. Consistency Principle

4. Conservatism Principle

Q.

Rectify the following errors.

(i) Credit purchase from Rohan Rs. 9, 000 were recorded in sales book.

(ii) Goods returned to Rakesh Rs. 4, 000 were recorded in the sales return book.

(iii) Good returned from Mahesh Rs. 1, 000 were recorded in purchases return book.

(iv) Goods returned from Mahesh Rs. 2, 000 were recorded in purchases book.

Q. Valuation of stocks is done by a business firm at cost price or market price, whichever is lower basis, under

1. Convention Of Full Disclosure
2. Convention Of Materiality
3. Convention Of Consistency
4. Convention Of Conservatism

Q.

Rectify the following errors.

(a) Sales book overcast by Rs. 700.

(b) Purchase book overcast by Rs. 500.

(c) Sales return book overcast by Rs. 300.

(d) Purchase return book overcast by Rs. 200.

Q.

A firm has reported a profit of Rs.1, 47, 000 for the year ended 31-3-2017 after taking into consideration an anticipated profit of Rs.12, 000 on the sale of an old furniture & not taking into consideration salary of Rs.7, 000 outstanding for the year. What shall be the correct profit as per Conservatism Principle?

1. Rs 1, 40, 000

2. Rs 1, 54, 000

3. Rs 1, 28, 000

4. Rs 1, 35, 000

Q.

A firm holds a stock which is heavily in demand. Consequently, the market value of this stock may be increasing. Normal accounting procedure would ignore this. Which concept covers this?

Note: Stock is always measured at lower of cost at which goods were purchased and the current price of those goods. (We'll study this later)

1. Conservatism

2. Consistency

3. Matching

4. Money measurement

Q.

The Realisation Concept Is

(A) Important for determining the incomes pertaining to an accounting period

(B) Avoid the possibility of inflating incomes and profits

(C) Also known as revenue recognition concept

(D) All of the above.

.

Q.

A business firm creates provisions against doubtful debt under which of the following conventions

1. Convention of Full Disclosure

2. Convection of Materiality

3. Convention of Conservatism

4. Convention of Consistency

Q.

The lower-of-cost -or market rule is an example of:

Q.

What is conservatism in simple terms?

Q. Closing stock is valued at cost price or market price whichever is less.

1. True
2. False

Q.

Ram borrowed Rs. 10, 000 from a firm. However, he fails to pay back and defaults. The firm should ensure that this loss is recorded in the books.

Which concept is illustrated in this example?

1. Matching

2. Full Disclosure

3. Money Measurement

4. Conservatism

Q. Select the most appropriate alternative from those given below:
Closing stock is always valued at cost or market price, whichever is ________ .

1. more
2. less
3. equal
4. none of these

Q. The reason for creation of provision for disount on debtors is to fulfil concept.

1. objectivity
2. prudence
3. materiality
4. going concern

Q. A contingent liabilities can also be called doubtful liabilities.

1. True
2. False

Q. Answer in One Sentence :

What is Conservatism?

Q. Discuss the concept-based on the premise 'do not anticipate profits but provide for all losses.

Q. The provisions for bad debts and provision for cash discounts which appear as a deduction from sundry debtors in the balance sheet is due to the application of _________.

1. consistency principle
2. conservatism principle
3. materiality principle
4. revenue recognition principle

Q. The principle that an accountant should not anticipate profits, but must provide for all loses is known as the ____________.

1. realization concept
2. consistency concept
3. conservatism concept
4. materiality concept

Q.

Is revenue recognized when invoicing?

Q. Valuation is _______________.

1. Sophisticated guess work
2. An exact science
3. Not related to the future
4. Certain

Q. Select the most appropriate alternatives from those given below and rewrite the statements :

The immediate recognition of loss is supported by principle of ______.
a) Matoning
b) Conservatism
c) Consistency
d) Objective

Q. According to___principle of accounting, profits are never anticipated, but all prospective losses should be recorded in the books of accounts.

1. Money measurement
2. Accounting period
3. Prudence
4. business entity