Assertion Reason MCQs of Financial Statements of Sole Proprietorship Class 11 with Answers

Assertion Reason MCQs of Financial Statements of Sole Proprietorship Class 11 with Answers for CBSE, ISC and State Boards

Assertion (A): Balance Sheet is a statement and not an account.

Reason (R): It is prepared on a particular date and not for a particular period.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (b)

Assertion (A): An expenditure the benefit of which is for the current accounting period is a Revenue Expenditure.

Reason (R): Revenue Expenditure is that expenditure the benefit of which does not extend beyond the current accounting period.

Options:-

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
(c) Assertion (A) is correct but Reason (R) is not correct
(d) Assertion (A) is not correct but the Reason (R) is correct

Ans – (b)

Assertion (A): Bills Receivable, Debtors and Stock are liquid assets.

Reason (R): Liquid assets are those which are either in the form of cash or can be quickly converted into cash.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (d)

Assertion (A): Expenditure which results in acquisition of fixed asset is a Capital Expenditure.

Reason (R): It gives benefit of enduring nature and help in revenue generation over more than ne accounting period or periods.

Options:-

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
(c) Assertion (A) is correct but Reason (R) is not correct
(d) Assertion (A) is not correct but the Reason (R) is correct

Ans – (b)

Assertion (A): Profit and Loss Account is a periodic statement because it is prepared for a particular period.

Reason (R): Balance Sheet is a point statement because it is prepared on a particular date.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (b)

Assertion (A): Amount paid for acquiring goods is deferred Revenue Expenditure.

Reason (R): Amoun paid for acquiring goodwill is Capital Expenditure since it involves acquisition of an intangible asset which is classified as fixed asset.

Options:-

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
(c) Assertion (A) is correct but Reason (R) is not correct
(d) Assertion (A) is not correct but the Reason (R) is correct

Ans – (d)

Assertion (A): While preparing financial statements, Closing Stock is valued at Cost Price or realisable value whichever is less.

Reason (R): This is done as per the convention of prudence according to which all anticipated losses are recorded but all unrealized gains are ignored.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (a)

Assertion (A): Capital Expenditures are normally recorded under Real Account.

Reason (R): Capital Expenditures normaly create capital assets like machine,land and building, etc., which belong to Real Account.

Options:-

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
(c) Assertion (A) is correct but Reason (R) is not correct
(d) Assertion (A) is not correct but the Reason (R) is correct

Ans – (b)

Assertion (A): Liability in respect of a suit pending in a court of law is not treated as a liability while preparing a balance sheet.

Reason (R): Liability in respect of a suit pending in a court of law is contingent liabilities. Such liabilities are shown as a footnote just below the Balance Sheet.

Options:

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true

Ans – (a)

Assertion (A): Installation expenditure of a machine is Capital Expenditure.

Reason (R): It is paid for installation of the asset before the asset is put to use and therefore, it is capitalised.

Options:-

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
(c) Assertion (A) is correct but Reason (R) is not correct
(d) Assertion (A) is not correct but the Reason (R) is correct

Ans – (b)

Assertion (A): Revenue Receipts are shown in the Balance sheet.

Reason (R): Revenue Receipts are transferred to Profit & Loss Account.

Options:-

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
(c) Assertion (A) is correct but Reason (R) is not correct
(d) Assertion (A) is not correct but the Reason (R) is correct

Ans – (d)

Assertion (A): Depreciation expense is a Revenue Expense.

Reason (R): Depreciation is expired or used up cost of fixed asset allocated over its estimated useful life and hence it is an expense and it is treated as Revenue Expenditure.

Options:-

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
(c) Assertion (A) is correct but Reason (R) is not correct
(d) Assertion (A) is not correct but the Reason (R) is correct

Ans – (b)

Assertion (A): Distinction between Capital and Revenue Expenditure is necessary for preparing Cash Book.

Reason (R): Distinction between Capital and Revenue Expenditure is required for preparation of Profit & Loss Account.

Options:-

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
(c) Assertion (A) is correct but Reason (R) is not correct
(d) Assertion (A) is not correct but the Reason (R) is correct

Ans – (d)