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By Accounting Mcqs 1 Comment

The concept of conservatism will have the effect of______________?

A. Overstatement of Assets
B. Understatement of Assets
C. Overstatement of Liabilities
D. Understatement of Liabilities

The concept of conservatism will have the effect of understatement of assets since the financial statements are usually drawn up on rather a conservative basis. Window-dressing i.e., showing a position better than what it is, is not permitted.

Related Mcqs:

  1. If the total liabilities of a business decrease by $5000 what will be the effect on total asset?

    (assuming the amount of capital remain same)

    A. Remain constant
    B. Decrease by $5000
    C. Increase by $5000
    D. Increase by $10,000

  2. If the business’s owner withdraws cash for his/her personal use what will be the effect on capital?

    A. Increase in capital
    B. Remain the same
    C. Decrease in capital
    D. No effect on capital

  3. If debit balances = credit balances, trial balance only shows or check the ____________ and it does not indicate that no errors were made during recording and posting.

    A. Arithmetic accuracy
    B. Errors of commission
    C. Omissions of economic events
    D. Understatements of balances

  4. ________ is a separate legal entity that Total capital can be divided in many shares.

    A. Partnership
    B. Sole proprietorship
    C. Company
    D. Non-profit organization

  5. The real accounts are accounts of Assets, liabilities and ___________?

    A. Expenses
    B. Revenues
    C. Capital
    D. Drawing

  6. Which of the following error is an error of principle

    A. 5,000 received from Sham credited to Ram A/c
    B. 5,000 incurred on installation of new plant debited to travelling expenses A/c
    C. 500 paid for wages debited to salary A/c
    D. 500 being purchase of raw material debited to purchase A/c ` 50

  7. Debit side of Bank Pass book corresponds to___________?

    A. Credit side of Cash Book
    B. Debit side of Cash Book
    C. Debit side of Trial Balance
    D. Credit side of Balance Sheet

  8. Payments received in advance from a customer for a contract can be__________?

    A. Shown as a deduction from contract work-in-progress on asset side
    B. Shown as a liability
    C. Credited to P&L A/c
    D. Either A or B above

  9. Which of these is not an operating income?

    A. Income from sale of trading goods
    B. Bad debts recovered
    C. Interest on FDs
    D. None

  10. Payment of rent expenses is recorded on which side of cash book?

    A. Receipts
    B. Payments
    C. Income
    D. Expense

The correct answer to the question: "The concept of conservatism will have the effect of______________?" is "Understatement of Assets".

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