A provision for doubtful debts is created in accordance with: MCQ with Answer and Explanation

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A provision for doubtful debts is created in accordance with:

A. Conservatism concept

B. Going concern concept

C. Consistency concept

D. Materiality concept

Answer: Option A

Solution (By JKSSB Mock Tests)

Conservatism (prudence) requires anticipating possible losses, hence the provision.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

The accounting equation is based on which concept?

A. Matching Concept

B. Money Measurement Concept

C. Dual Aspect Concept

D. Business Entity Concept

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Correct Answer: Option C

Explanation:
The dual aspect concept states that every transaction has two aspects, which forms the basis of the accounting equation: Assets = Liabilities + Capital.

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Question #2

The 'Financial Management' decision relating to the mix of debt and equity is called:

A. Dividend decision

B. Financing decision

C. Investment decision

D. Liquidity decision

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Correct Answer: Option B

Explanation:
Financing decision concerns how to raise funds, i.e., capital structure.

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Question #3

The 'Impairment of Assets' testing: Goodwill is allocated to:

A. Individual assets

B. Cash-generating units (CGUs) or groups of CGUs that are expected to benefit from synergies

C. All assets equally

D. Parent company only

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Correct Answer: Option B

Explanation:
Goodwill must be tested for impairment at the CGU level.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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