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Theory Base of Accounting

Test Your Understanding – I

Choose the correct answer

1. During the life-time of an entity accounting produce financial statements
with which basic accounting concept:
a. Conservation
b. Matching
c. Accounting period
d. None of the above
2. When the information about two different enterprises have been
prepared and presented in a similar manner the information exhibits the
characteristic of:
a. Verifiability
b. Relevance
c. Reliability
d. None of the above
3. A concept that a business enterprise will not be sold or liquidated in the
near future is known as:
a. Going concern
b. Economic entity
c. Monetary unit
d. None of the above
4. The primary qualities that make accounting information useful for
decision-making are:
a. Relevance and freedom from bias
b. Reliability and comparability
c. Comparability and consistency
d. None of the above

Test Your Understanding – II

Fill in the correct word:

1. Recognition of expenses in the same period as associated revenues is
called _________________ concept.
2. The accounting concept that refers to the tendency of accountants to
sold uncertainty and doubt in favour of understating assets and revenues
and overstating liabilities and expenses is known as _______________
3. Revenue is generally recognized at the point of sale denotes the

concept of ______________ The _________________ concept
requires that the same accounting method should be used from one
accounting period to the next. The ________________ requires that
accounting transaction should be free from the bias of accountants and
others.
4. Short Answer Questions