CBSE Questions for Class 9 Elements Of Book Keeping And Accountancy Accounting Equation Effects Quiz 3 - MCQExams.com

1. Small firms basically deal with transactions of low amount. There is no need for them balance sheet. They are satisfied by recording day to day transactions. Hence they follow journal system.
   
2. On the other hand, bigger firms deal with large transactions. Hence, they follow subsidiary system of accounting.
3. The  fundamental concept of accounting which is money measurement states that all accounting transactions must be measured in terms of money only. Hence, the basis for accounting is money measurement.
4.  Balance sheet represents the financial position of the company because it contains information about the assets, liabilities and capital of the company.

Dual aspect is the foundation or basic principle of accounting. It provides the very basis for recording business transactions into the book of accounts. 

This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places. In other words, at least two accounts will be involved in recording a transaction.

The double-entry system also requires that for all transactions, the amounts entered as debits must be equal to the amounts entered as credits.

The duality principle is commonly expressed in terms of fundamental Accounting Equation, which is as follows : 

Assets = Liabilities + Capital

Dual aspect is the foundation or basic principle of accounting. It provides the very basis for recording business transactions into the book of accounts. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places. In other words, at least two accounts will be involved in recording a transaction.

The double-entry system also requires that for all transactions, the amounts entered as debits must be equal to the amounts entered as credits.

Hence, the two aspects are giving and receiving of benefits.

The concept of conservatism (also called ‘prudence’) provides guidance for recording transactions in the book of accounts and is based on the policy of playing safe. 

The concept of conservatism requires that profits should not to be recorded until realised but all losses, even those which may have a remote possibility, are to be provided in the books of accounts.

The concept states that a conscious approach should be adopted in ascertaining income so that profits of the enterprise are not overstated.  

The concept of conservatism (also called ‘prudence’) provides guidance for recording transactions in the book of accounts and is based on the policy of playing safe. 

The concept states that a conscious approach should be adopted in ascertaining income so that profits of the enterprise are not overstated.  

The concept of conservatism requires that profits should not to be recorded until realised but all losses, even those which may have a remote possibility, are to be provided in the books of accounts.

As per AS-2, Valuation of inventories (stock-in-trade) prescribed the accounting treatment for inventories and sets the guidance to determine the value at which the inventories are carried in the financial statement. 

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs. 

The cost of inventories should comprise all costs of purchase, Costs of conversion and other costs incurred in bringing  the inventories to their present location and condition. 

As per AS-2, "Inventories should be valued at the lower of cost and net realisable value."