Accounting Concepts & Conventions Quiz
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Accounting Concepts & Conventions Quiz

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Questions and Answers

What type of accounts include each person or firm with whom the business interacts?

  • Real Accounts
  • Nominal Accounts
  • Personal Accounts (correct)
  • Capital Accounts

    • Which of the following accounts would you use to track expenses or income sources?

  • Personal Accounts
  • Nominal Accounts (correct)
  • Real Accounts
  • Investment Accounts

    • What do the terms 'debit' and 'credit' specifically refer to in the double entry system?

  • Sections of an account's record (correct)
  • Sides of a balance sheet
  • Types of business transactions
  • Accounts of liabilities

    • Who were the first known businessmen to implement the double entry system?

    <p>Venetian merchants</p> Signup and view all the answers

    What is the left-hand side of an account known as?

    <p>Debit side</p> Signup and view all the answers

    In the double entry system, what is indicated by 'Dr' and 'Cr'?

    <p>Debit and Credit sides</p> Signup and view all the answers

    What do Real Accounts primarily represent in business accounting?

    <p>Assets and properties</p> Signup and view all the answers

    Why were the left and right sides chosen in the double entry system?

    <p>Random selection by early merchants</p> Signup and view all the answers

    What is the primary focus of the course described in the document?

    <p>Financial Accounting</p> Signup and view all the answers

    Which educational policy framework is mentioned as influencing the course structure?

    <p>UGCF - 2022</p> Signup and view all the answers

    Who is the Academic Coordinator for the course?

    <p>Deekshant Awasthi</p> Signup and view all the answers

    Where should feedback or suggestions regarding the study material be sent?

    <p><a href="mailto:[email protected]">[email protected]</a></p> Signup and view all the answers

    What is one aspect covered in Unit I of the course?

    <p>Accounting Concepts and Conventions</p> Signup and view all the answers

    Which of the following is NOT a responsibility of the Editorial Board mentioned in the document?

    <p>Conducting examinations</p> Signup and view all the answers

    What is the course credit value for this Financial Accounting course?

    <p>4</p> Signup and view all the answers

    Which university is associated with the course on Financial Accounting?

    <p>University of Delhi</p> Signup and view all the answers

    What is recorded in the debit column of an account?

    <p>The benefits received by the account</p> Signup and view all the answers

    Which rule applies to personal accounts in the double entry system?

    <p>Debit the receiver and credit the giver of benefits</p> Signup and view all the answers

    What is the primary function of a creditor in financial accounting?

    <p>To provide benefits to debtors</p> Signup and view all the answers

    What does the credit column of an account signify?

    <p>The amounts gained by the account or benefits given</p> Signup and view all the answers

    How are real accounts treated under the double entry system?

    <p>Debited with incoming amounts and credited with outgoing amounts</p> Signup and view all the answers

    In nominal accounts, which entries are made as debits?

    <p>All expenses and losses</p> Signup and view all the answers

    Which of the following statements about the positioning of account entries is true?

    <p>Each entry signifies a benefit given or received</p> Signup and view all the answers

    According to the rules of accounting, what must be identified first in a transaction?

    <p>The class of accounts affected by the transaction</p> Signup and view all the answers

    What is the primary objective of accountants as stated in the content?

    <p>Determining profit or loss</p> Signup and view all the answers

    What must be matched to ascertain profit for a particular accounting period?

    <p>Revenues and expenses</p> Signup and view all the answers

    According to the accrual concept, when are revenues recognized?

    <p>In the year they are earned</p> Signup and view all the answers

    What is one reason why the cash basis of determining income is deemed appealing?

    <p>It is simple and realistic</p> Signup and view all the answers

    What happens to additional investments made by owners and creditors, according to the content?

    <p>They are treated as non-income transactions</p> Signup and view all the answers

    What is a significant deficiency of the cash basis for determining income?

    <p>It does not account for earned revenues not yet received</p> Signup and view all the answers

    What basis do accountants generally adopt for determining income?

    <p>Accrual basis</p> Signup and view all the answers

    What does recognizing revenues depend on in the accrual concept?

    <p>Accrued earnings during the accounting year</p> Signup and view all the answers

    What is the primary reason that current assets like cash are shown at their actual worth rather than their original cost?

    <p>To reflect market conditions</p> Signup and view all the answers

    What happens to a fixed asset's value on the balance sheet as it undergoes depreciation?

    <p>It systematically decreases over its useful life</p> Signup and view all the answers

    Goodwill appears in accounting records only under which condition?

    <p>When a company purchases an intangible right and pays for it</p> Signup and view all the answers

    What is a potential consequence of the cost concept in accounting?

    <p>Some events affecting business value may not impact accounting records</p> Signup and view all the answers

    Which of the following is NOT reflected in the accounting records as an asset?

    <p>Research knowledge of an R&amp;D team</p> Signup and view all the answers

    What accounting principle leads to certain assets being recorded at cost or market value, whichever is lower?

    <p>Lower of cost or market principle</p> Signup and view all the answers

    When a company's economic or useful life of an asset ends, what is the expected outcome in the financial statements?

    <p>The asset is written off from the balance sheet</p> Signup and view all the answers

    If a company acquires an item without payment, how will this item appear in the accounting records?

    <p>It will not be recorded as an asset</p> Signup and view all the answers

    Study Notes

    Accounting Concepts & Conventions

    • The text explores the fundamental concepts behind accounting practices, introducing the key concepts of personal, real and nominal accounts within the double entry bookkeeping system.
    • Personal accounts represent individuals or firms associated with the business, real accounts depict assets and property, while nominal accounts reflect expenses and sources of income.
    • The text highlights the importance of the left (debit) and right (credit) sides of an account, explaining their roles in recording benefits bestowed or gained.
    • The double entry system necessitates that every transaction affects two accounts, ensuring a balanced accounting equation.
    • The text emphasizes the cost concept in accounting, where assets are entered at their original purchase price, regardless of potential future value fluctuations.
    • Depreciation is introduced as a method to systematically reduce the cost of fixed assets over their useful lifespan.
    • The text underlines the importance of revenue recognition in accounting, emphasizing the accrual concept where revenue is recorded when earned, irrespective of cash receipt.
    • The contrast between the accrual and cash basis of determining income is discussed, showcasing the accrual method as the preferred practice by accountants.

    The Accrual Concept & Revenue Recognition

    • The accrual concept assumes revenue is earned in the accounting period during which the revenue generating activities are completed.
    • It emphasizes that the revenue recognition occurs when the transaction has been fulfilled and the right to payment has been established, irrespective of the actual cash receipt.
    • This practice, in contrast to the simpler cash basis, provides a more holistic view of the business's financial performance.

    Key Takeaways

    • The text serves as a foundational introduction to accounting concepts, emphasizing the double-entry system, cost concept, and accrual revenue recognition.
    • The provided information highlights the core principles behind maintaining accurate financial records and offers insight into the complexities of accounting practices.
    • The text encourages further exploration of more advanced accounting concepts and analyses, laying a solid foundation for understanding the intricacies of financial reporting.

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    Description

    This quiz covers the fundamental concepts of accounting, focusing on personal, real, and nominal accounts within the double entry bookkeeping system. It highlights the importance of debits and credits, the cost concept, and the method of depreciation. Test your understanding of these essential accounting principles and their applications in real-world scenarios.

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