Tag: meaning, need and objectives of accounting

Questions Related to meaning, need and objectives of accounting

Generally, under the single entry system __________.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. only personal accounts are maintained

  2. only personal, cash and bank accounts are maintained

  3. all accounts are maintained

  4. no account is maintained

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Correct Option: B
Explanation:

Under single entry system , no purchase, sales accounts are maintained. Only cash, bank and personal ledgers are maintained.

The prime function of accounting is to ____________.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. record economic data.

  2. provide the informational basis for action.

  3. classify and record business transactions.

  4. attain non-economic goals.

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Correct Option: C
Explanation:

As the definition says "accounting is the art of recording, classifying and summarizing all the monetary transactions in a significant manner". The prime function of accounting is recording and classifying  the business transactions.

The appropriate objective of an enterprise is _________.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. To maintain sales at minimum level

  2. Maximisation of business wealth

  3. To maintain the profits at one level

  4. None of the above

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Correct Option: B
Explanation:

Wealth maximisation is the concept of increasing the value of the business in order to increase the value of the shares held by shareholders, therefore it is an objective of enterprise.

The first step in the accounting process is_______.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. Summarizing

  2. Interpreting the results

  3. Recording

  4. Classification

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Correct Option: C
Explanation:

Maintaining proper and fine accounts has become very essential today, as a result, of increasing competition in the business-world. Every business organization is, therefore, supposed to maintain fine accounts  comprising of all the financial transactions, financial as well as non-financial information. We all know that any accounting involves a fine recording, summarizing, proper classification as well as the interpretation and communication of financial information. Every transaction has to be recorded first so that the other processes can be carried out effectively. Therefore the first step in the accounting process is recording.

Summarizing take place in the form of ________.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. Trial balance

  2. Trading account and Balance sheet

  3. Profit and loss account

  4. All of the above

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Correct Option: D
Explanation:

The first step in the process of accounting cycle is recording of transactions in journal and ledger. After this process, summarizing takes place. Summarising involves posting from ledger to prepare a trial balance and then the items of trial balance are posted in profit and loss account from which we get the net profit of the firm. After that balance sheet of the company is prepared from which we get the details about the assets and liabilities of the business of the firm. So basically summarizing involves trial balnace,profit and loss account and balancesheet.

Which of the following pairs are correctly matched?
I. Business entity - Accounting standard
II. Stock valuation - Consistency
III. Capital - Drawings
IV. Going concern - Assumption
Select the correct answer using the codes given.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. I, II and III

  2. I, II and IV

  3. II, III and IV

  4. I, III and IV

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Correct Option: D
Explanation:

I) A business is required to maintain separate financial records from its owners and investors. An accounting entity allows for taxing authorities to assess proper levies in accordance with tax rules. Different accounting entities have different financial reporting requirements

II) A stock's value the consistency of a company's ability to pay and raise its dividend shows that it has predictability in its earnings. It also shows that it's financially stable enough to pay that dividend (from current or retained earnings).
III) The going concern principle is the assumption that an entity will remain in business for the foreseeable future. Conversely, this means the entity will not be forced to halt operations and liquidate its assets in the near term at what may be very low fire-sale prices.

The prime function of accounting is to _________________.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. To record economic data

  2. Provide the information basis of action

  3. Classifying and recording business transaction

  4. Attainment of economic goal

Show answer
Correct Option: C
Explanation:

Accounting is an art of recording, classifying, summarizing and interpreting the data in a significant manner of money's worth business transactions.


The prime function of accounting is to classify and record all such business transaction. It plays an important role in providing appropriate information to the business for decision making. 

The second important stage in the accounting process is______.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. Journal

  2. Ledger

  3. Account

  4. Subsidiary books

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Correct Option: B
Explanation:

The book of original entry or prime entry is journal in which all day to day transactions are recorded. All the transactions from journal are posted to ledger which consists of different accounts on the basis of transactions recorded in journal. Hence, it is regarded as the second important stage in the accounting process.

Standard hour is a _____________.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. Unit of work

  2. Unit of time

  3. Both (A) and (B)

  4. None of the above

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Correct Option: A
Explanation:

The standard hours per unit is derived from the labor routing, which is a compilation of the normal amount of time expected to be required to manufacture a unit. Therefore, the standard hours allowed is 750 hours, which is calculated as 500 units multiplied by 1.5 hours per unit.

Interpretation is usually done through ________.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. Ratio and flow statements

  2. Ratio statements

  3. Flow statements

  4. None of the above

Show answer
Correct Option: A
Explanation:

Accounting cycle consists of various steps such as recording,summarising,analysing and interpretation. After carrying out all the steps of recording and summmarising interpretation of financial statements takes place. It is carried out so that managers can make important decisions regarding company welfare. Ratio and flow statements makes it effective to carry out interpretation easily. Hence, interpretation is usually done through ratio and flow statements.