SAQs FROM ACCOUNTING CONCEPT

 

SBSIRCommerce Present 

Here are 25 short-answer questions (SAQs) from the *Accounting Concepts* chapter in Accountancy:

1. Q:** What is meant by "Accounting Concepts"?

   A:** Accounting concepts are basic assumptions or fundamental principles that form the basis for recording financial transactions and preparing financial statements.

2. Q:* What is the "Business Entity Concept"?

   - A: The business entity concept states that the business is separate from its owners, and financial records should reflect the activities of the business only.

3. Q: Define the "Money Measurement Concept."

   - **A:** The money measurement concept states that only those transactions that can be measured in monetary terms are recorded in the books of accounts.

4. Q: What is the "Going Concern Concept"?

   - A: The going concern concept assumes that a business will continue to operate indefinitely and not close or be liquidated in the foreseeable future.

5.*Q: Explain the "Cost Concept."

   - A: The cost concept holds that assets are recorded at their original purchase price, and this cost is the basis for subsequent accounting.

6. Q:What is the "Dual Aspect Concept"?

   - A: The dual aspect concept states that every transaction affects two accounts, ensuring that the accounting equation (Assets = Liabilities + Owner’s Equity) remains balanced.

7.*Q:Define the "Matching Concept."

   - **A: The matching concept requires that expenses be matched with the revenues they help generate in the same accounting period.

8. **Q:** What is the "Accrual Concept"?

   - A:The accrual concept states that revenues and expenses should be recorded when they are earned or incurred, not when cash is received or paid.

9. Q:What is the "Revenue Recognition Concept"?

   - **A: The revenue recognition concept states that revenue is recognized when it is earned, regardless of when the cash is received.

10. Q: Explain the "Conservatism Concept."

    - **A:** The conservatism concept requires that expenses and liabilities be recognized as soon as possible, but revenues and assets are only recognized when they are certain.

11. Q:What is the "Consistency Concept"?

    - **A:** The consistency concept states that once an accounting method is adopted, it should be used consistently from one period to the next to allow for comparability.

12.*Q: Define the "Materiality Concept."

    - **A:** The materiality concept states that only items or events that are significant enough to affect financial statements need to be reported.

13.Q What is the "Full Disclosure Concept"?

    - **A:** The full disclosure concept requires that all significant information related to financial statements be fully disclosed to users.

14. Q:What is meant by the "Periodicity Concept"?

    - **A:** The periodicity concept requires that financial statements be prepared at regular intervals, such as monthly, quarterly, or annually.

15. *Q: Explain the "Realization Concept."

    - **A:** The realization concept holds that revenue should be recognized when goods or services are provided, and there is a certainty of payment.

16.*Q:What is the "Objectivity Concept"?

    - **A:** The objectivity concept ensures that accounting information is based on verifiable evidence, free from personal bias or opinions.

17.*Q: Define the "Historical Cost Concept."

    - **A:** The historical cost concept requires that assets be recorded at their original purchase price, rather than their current market value.

18.*Q: What is the "Fair Value Concept"?

    - **A:** The fair value concept involves recording assets and liabilities at their current market value, rather than historical cost.

19. Q: What does the "Prudence Concept" emphasize?

    - **A:** The prudence concept, similar to conservatism, advises caution when making estimates, ensuring that assets and income are not overstated and liabilities are not understated.

20.Q: Explain the "Substance Over Form Concept."

    - **A:** The substance over form concept requires that the economic substance of transactions be recorded rather than their legal form.

21.Q:What is the "Revenue Concept" in accounting?

    - **A:** The revenue concept states that revenue should be recognized when it is earned and realized, not necessarily when cash is received.

22. Q:Define "Capital Expenditure."

    - **A:** Capital expenditure refers to expenses incurred for acquiring or improving fixed assets, which will provide benefits for more than one accounting period.

23.Q: What is the "Consistency Concept"?

    - **A:** The consistency concept requires that the same accounting methods be used from one period to the next to ensure comparability.

24.*Q: What is the "Accounting Equation"?

    - **A:** The accounting equation is Assets = Liabilities + Owner's Equity, which is the foundation of double-entry bookkeeping.

25. *Q: Define "Revenue Expenditure."

    - *A:* Revenue expenditure refers to expenses incurred for day-to

-day operations, which are expected to be consumed within the accounting period.