Chapter Exam

Chapter 2: Theory Base of Accounting — Online MCQ Test

Q: Which principle states that a business is assumed to continue its operations indefinitely?

Answer: A. Going Concern Concept — The Going Concern Concept assumes that a business will continue to operate indefinitely unless there is evidence to the contrary.

Q: The Business Entity Concept states that:

Answer: B. Business and owner are separate entities — The Business Entity Concept maintains that the business is separate from its owner for accounting purposes, allowing for independent financial records.

Q: Which accounting principle would prevent a company from valuing its brand name at ₹10 crores in the balance sheet without external evidence?

Answer: B. Objectivity Principle — The Objectivity Principle requires verifiable evidence for asset valuations; internally developed brand names cannot be capitalized without external, verifiable evidence.

Q: A retailer purchases goods for ₹1,000 (including 5% GST) and sells for ₹1,500 (including 5% GST). The net GST payable/receivable is:

Answer: A. GST payable of ₹25 — Purchase GST (input): ₹1000/1.05 × 5% = ₹47.62; Sale GST (output): ₹1500/1.05 × 5% = ₹71.43; Net GST payable = ₹71.43 - ₹47.62 = ₹23.81 (approximately ₹25).

ACCOUNTANCY · CLASS 11 FIRST PUC · Karnataka State Board

Practice Chapter 2: Theory Base of Accounting with a free chapter-wise online MCQ test for Karnataka State Board CLASS 11 FIRST PUC ACCOUNTANCY. This chapter covers: Generally Accepted Accounting Principles (GAAP), Business Entity, Money Measurement, Going Concern, Accounting Period, Cost Concept, Dual Aspect, Revenue Recognition, Matching, Ful.... AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter 2: Theory Base of Accounting — Important Questions & Answers (FAQ)

Frequently asked questions from Karnataka State Board CLASS 11 FIRST PUC ACCOUNTANCY — Chapter 2: Theory Base of Accounting, with answers and explanations. These are sample questions; the exam has its own separate question set.

Which principle states that a business is assumed to continue its operations indefinitely?

A. Going Concern Concept ✓
B. Business Entity Concept
C. Cost Concept
D. Accounting Period Concept

Answer: A. Going Concern Concept
The Going Concern Concept assumes that a business will continue to operate indefinitely unless there is evidence to the contrary.

The Business Entity Concept states that:

A. Business and owner are one and the same
B. Business and owner are separate entities ✓
C. Only the owner's transactions are recorded
D. Only business transactions are ignored

Answer: B. Business and owner are separate entities
The Business Entity Concept maintains that the business is separate from its owner for accounting purposes, allowing for independent financial records.

The Conservatism Principle suggests that:

A. All assets should be valued at market price
B. Recognize all possible losses but defer recognition of gains ✓
C. Recognize all gains and losses equally
D. Never record any losses

Answer: B. Recognize all possible losses but defer recognition of gains
The Conservatism Principle advises recognizing all possible losses immediately but deferring the recognition of gains until they are certain.

Which accounting principle would prevent a company from valuing its brand name at ₹10 crores in the balance sheet without external evidence?

A. Consistency Principle
B. Objectivity Principle ✓
C. Conservatism Principle
D. Materiality Principle

Answer: B. Objectivity Principle
The Objectivity Principle requires verifiable evidence for asset valuations; internally developed brand names cannot be capitalized without external, verifiable evidence.

A retailer purchases goods for ₹1,000 (including 5% GST) and sells for ₹1,500 (including 5% GST). The net GST payable/receivable is:

A. GST payable of ₹25 ✓
B. GST receivable of ₹25
C. No GST payable as input and output are equal
D. Cannot be determined without knowing the base value

Answer: A. GST payable of ₹25
Purchase GST (input): ₹1000/1.05 × 5% = ₹47.62; Sale GST (output): ₹1500/1.05 × 5% = ₹71.43; Net GST payable = ₹71.43 - ₹47.62 = ₹23.81 (approximately ₹25).