Assertion Reason MCQs of Chapter 2 – Basic Accounting Terms with answers
Assertion Reason MCQs of Chapter 2 – Basic Accounting Terms with answers for CBSE, ISC and State Boards
Assertion (A): Fixed assets sold is not part of Sales since they are not goods.
Reason (R): Fixed assets are purchased to give benefit of enduring nature.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (b)
Assertion (A): Any expenditure that gives benefit for one accounting period is known as capital expenditure.
Reason (R): A Revenue Expenditure, the benefit of which will accrue in more than one financial year has to be written off in more than one accounting period is called Deferred Revenue Expenditure.
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): Transaction is a financial event entered into by the entity recorded in the books of account having monetary effect on the financial statements by bringing change in the financial position of an enterprise.
Reason (R): A transaction may be cash transaction or credit transaction.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (a)
Assertion (A): Goods remaining unsold at the end of the accounting year are termed ‘Stock’.
Reason (R): Stock includes fixed assets remaining unused at the end of the accounting year.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (d)
Assertion (A): Any expenditure which is incurred in acquiring and installation of an asset is capital expenditure.
Reason (R): Such expenditure yields benefit for a long period and hence added to assets.
(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): Current Liabilities refer to those liabilities which are to be paid in near future (normally within one month)
Reason (R): Current Liabilities include Bank Overdraft, Creditors, Outstanding Expenses etc.
(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): Gross Profit is Revenue less Cost of Goods Sold.
Reason (R): Net Profit is Revenue plus Other Income less Cost of Goods Sold less Expenses.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (a)
Assertion (A): A transaction is a credit transaction when it is settled at a later date and not on the date of transaction.
Reason (R): Cash transaction is a transaction in which amount of cash is received at a later date.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (d)
Assertion (A): Net Profit is Revenue plus Other Income less Cost of Goods Sold less Expenses.
Reason (R): In case, Cost of Goods Sold plus Expneses is more than Revenue plus Other Incomes, it is loss.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (b)
Assertion (A): Tangible assets are those assets which can be seen and touched. Machinery, Motor-Vehicles, Computer, Patents and Computer Software are tangible assets.
Reason (R): Intangible assets are those assets which can not be seen or felt. They are also valuable assets and help the firm in earning profits as much as the tangible assets.
(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): Revenue includes both amounts earned from sale of goods and rendering of services.
Reason (R): Income is excess of revenue and other income over total expenses.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (a)
Assertion (A): Capital is the amount invested by the proprietor.
Reason (R): Capital being that of the proprietor, is an internal liability.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (a)
Assertion (A): Capital expenditure is incurred for the purpose of increasing the earning capacity of the business.
Reason (R): Revenue expenditure is incurred for mantenance of earning capacity.
(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): Assets owned by the firm may be tangible fixed Assets or intangible fixed assets.
Reason (R): Current Assets may or may not be tangible asset.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (a)
Assertion (A): Capital is a liability of the firm towards the proprietor.
Reason (R): Capital is a liability because the proprietor is separate and distinct from the business.
(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): Tangible fixed assets are the assets whose benefit is exhausted within the accounting period.
Reason (R): Current assets are the assets which give benefit of enduring nature.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (c)
Assertion (A): Expense is the cost of use of things or services for the purpsoe of generating revenue.
Reason (R): Cost of goods sold and depreciation are expenses.
(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): Wasting Assets have limited life and its value decreases by extraction.
Reason (R): Fictitious Assets are expenditures or losses incurred by the entity but are written off as expense in more than one year/accounting period.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (a)
Assertion (A): Profit is the excess of revenue over expenses during an accounting period. It results due to business transactions which are regular in nature.
Reason (R): Gain arises from transactions which are incidental to business such as sale of land & building.
(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): Long-Term or Non-Current Liabilities are those liabilities which are payable after a period of 12 months from the end of the financial year.
Reason (R): Current Liabilities are those liabilities which are payable after the period of 12 months from the end of the financial year.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (d)
Assertion (A): Current assets refer to those assets which are held for continued use in the business.
Reason (R): Debtors, Stock and Prepaid Expenses are Current assets
(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): Contingent Liabilities are those liabilities which become liability on happening of an event.
Reason (R): Contingent liability if it becomes a liability is payable by the entity.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (b)
Assertion (A): Fictitious assets are those assets which cannot be realised in cash or no further benefit can be derived from these assets.
Reason (R): Goodwill, patents and trade-marks are fictitious assets.
(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 – (c)
Assertion (A): Debtor is the person or party to whom amount is payable due to purchase of goods or services taken.
Reason (R): Creditor is the person or party from whom amount is receivable due to sale of goods or rendering of services.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (c)
Assertion (A): Purchases means purchase of goosd and includes both cash and credit purchase.
Reason (R): Fixed asset purchased on credit is not included in purchases, it being not held for resale.
(a) Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of the Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A)
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is correct but Reason (R) is not correct
Ans – (b)
