Materiality Concept

Q. An ink-stand has been purchased by a firm for a nominal amount that is to last for 4 years. It should not be classified as a fixed asset under which of the following accounting principles:

1. Materiality Principle
2. Timeliness Principle
3. Consistency Principle
4. Conservatism Principle

Q. Under which conventions of accounting, the contingent liabilities are shown as a footnote or explanatory notes in the balance sheet of a firm:

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

Q.

Explain verifiable objective concept or objectivity principle.

Q.

What are the 2 types of drawings?

Q.

Information about an item is ___ , if its omission or misstatement might influence the decisions of the users of financial statements taken on the basis of that information.

1. Concrete

2. Complete

3. Immaterial

4. Material

Q.

Which concept is the reason behind accounting the cost of a small calculator as an expense and not as an asset in financial statements of a business entity?

1. None of the above

2. Conservatism

3. Going concern

4. Materiality

Q.

Which of the following is taken into account while determining the materiality of an amount?

1. Nature of the amount in question

2. All of the above

3. Size of the amount as well as organisation

4. Cumulative effect of all immaterial amounts

Q.

What are the principles of GAAP in accounting?

Q. Capital account is a personal account.

1. True
2. False

Q. There are 2 companies - Company A & Company B. Company A has a Net Worth of Rs 1000 Crores while company B has a Net Worth of Rs 1 Crore. A customer owes Rs 1, 00, 000 to both the companies. For which of the companies shall this amount be material?

1. Both A & B
2. Company B
3. None of the above
4. Company A

Q. The auditor has serious concern about the going concern of the company. It is dependent on company's obtaining a working capital loan from a bank which has been applied for. The management of the company has made full disclosure of there facts in the notes to the balance sheet. The auditor is satisfied with the level of disclosure. He should issue ____________ .

1. Unqualified opinion
2. Unqualified opinion with reference to notes to the accounts
3. Qualified opinion
4. Disclaimer of opinion

Q.

Rectify the following errors-

1) Wages paid to Pradeep was wrongly debited to his personal account Rs 8, 000.
2) Advertisement expense Rs 9, 100 paid to Prashithi Add. Ltd. was debited to Prashithi Add Ltd.
3) Rent paid to landlord Dilip was debited to his personal account Rs 4, 500.
4) Received interest from Bank of Maharashtra was credited to Bank of Maharashtra account Rs 500.
5) Repairing charges Rs 1, 500 paid to Motor Mechanic sharad was debited to his personal account.
6) Cash purchases Rs 8, 300 from Shiddhi Trader’s was debited to Shiddhi trader account.

Q. Users of accounting information include ____________.

1. Creditors
2. Tax authorities
3. Investors
4. All of these

Q. Where as a result of the examination of the books of account, the auditor concludes that he does not agree with the true and fair view of financial statements under audit, he express ________________.

1. Adverse opinion
2. Clean report
3. Unqualified opinion
4. (B) & (C)

Q.

$\begin{array}{ccc}2010& & \left(Rs\right)\\ \text{Jan 1}& \text{Commenced business with cash}& 1,75,000\\ \text{Jan 1}& \text{Building}& 1,00,000\\ \text{Jan 2}& \text{Goods Purchased for cash}& 75,000\\ \text{Jan 3}& \text{Sold goods to Ramesh}& 30,000\\ \text{Jan 4}& \text{Paid Wages}& 500\\ \text{Jan 6}& \text{Sold goods for cash}& 10,000\\ \text{Jan 10}& \text{Paid for trade expenses}& 700\\ \text{Jan 12}& \text{Cash received from Ramesh}& 29,500\\ & \text{Discount allowed}& 500\\ \text{Jan 14}& \text{Goods purchased for Sudhir}& 27,000\\ \text{Jan 18}& \text{Cartage paid}& 1,000\\ \text{Jan 20}& \text{Drew cash for personal use}& 5,000\\ \text{Jan 22}& \text{Goods use for household}& 2,000\\ \text{Jan 25}& \text{Cash paid to Sudhir}& 26,700\\ & \text{Discount allowed}& 300\end{array}$

Q. The client changed method of depreciation from straight line to written down value method. This has been disclosed as a note to the financial statements. It has an immaterial effect on the current financial statements. It is expected, however, that the change will have a significant effect on future periods. Which of the following option should the auditor express?

1. Unqualified opinion
2. Disclaimer of opinion
3. Qualified opinion
4. Adverse opinion

Q. concept involves assigning significance to transactions in accounting.

1. Materiality
2. Matching
3. Consistency
4. Conservatism

Q. Which of the following is not a function of financial accounting?

1. Keeping systematic recording
2. Meeting legal requirements
3. Window dressing
4. Communicating business results

Q.

What is the difference between Computer And Calculator ? (computers in accounting)

Q. The auditor is most likely examine related party transactions very carefully while vouching _________.

1. credit sales
2. sales returns
3. credit purchases
4. cash purchases

Q. Which of the following is not a function of accounting?

1. Keeping systematic record
2. Protecting properties of business
3. Maximising the results
4. Meeting legal requirements

Q.

For the following transactions in ABC Ltd, prepare Accounting Equation.

a. Started Business with Cash Rs 36, 000

b. Purchased goods for cash Rs 18, 000 and credit Rs 12, 000

c. Paid Rent in advance Rs 300

d. Paid Salary Rs.300 and Salary outstanding is Rs 60.

e. Bought motorcycle for personal use Rs.3, 000

Q. Accounting Standard-6 relating to depreciation is recommended for use companies___________________.

1. Listed on a recognised stock exchange
2. Engaged in manufacturing business
3. Engaged in manufacturing or trading business
4. All types of business undertakings

Q. All expenses account show ________ balance.

1. Zero
2. Negative
3. Debit
4. Credit

Q. Describe the informational needs of external users.

Q. One of the examples of the substance over form is ___________.

1. Valuation of inventory
2. Treatment of commission paid to consignee
3. Treatment of capital expenditures
4. Recording of asset purchased under hire-purchase system

Q. Outstanding rent is a_________.

1. Personal account
2. Real account
3. Nominal account
4. None of these