Question 1

Which of the following is considered the primary source of accounting standards in India?

Accepted Answer

The Institute of Chartered Accountants of India (ICAI) is the primary body that formulates and issues accounting standards in India to ensure uniformity and consistency in financial reporting.

Question 2

According to which accounting concept, the business is considered to be separate and distinct from its owner?

Accepted Answer

The Business Entity Concept states that business is treated as a separate entity from its owners, which is why capital contributed by the owner is treated as a liability for the business.

Question 3

Which of the following represents the accounting equation?

Accepted Answer

The basic accounting equation is Assets = Liabilities + Capital, which reflects that the total claims of outsiders (liabilities) and owners (capital) on the assets of the business are always equal to the total assets.

Question 4

Under which concept are expenses matched with revenues of the same period?

Accepted Answer

The Matching Concept requires that expenses incurred during an accounting period should be matched with the revenues of that same period to determine the correct net profit or loss.

Question 5

Fixed assets are recorded in the books of accounts at their purchase price, ignoring current market value, based on which concept?

Accepted Answer

The Cost Concept (Historical Cost Concept) requires fixed assets to be recorded in the books of accounts at the price at which they were acquired, regardless of market fluctuations.

Theory Base of Accounting