Which of the following is a fundamental accounting assumption as per AS-1? MCQ with Answer and Explanation

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Which of the following is a fundamental accounting assumption as per AS-1?

A. Materiality

B. Accrual

C. Conservatism

D. Matching

Answer: Option B

Solution (By JKSSB Mock Tests)

AS-1 lists Going Concern, Consistency, and Accrual as the three fundamental accounting assumptions.

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Question #1

The concept of 'Going Concern' assumes that:

A. The business will be liquidated soon

B. Profits are not important

C. The business will continue operations indefinitely

D. The business is not viable

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Correct Answer: Option C

Explanation:
Going concern concept assumes that the enterprise will continue in operation for the foreseeable future, and has no intention to liquidate.

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Question #2

In cost accounting, the 'Re-order Level' is calculated as:

A. Normal consumption rate x Normal re-order period

B. Average consumption rate x Average re-order period

C. Minimum consumption rate x Minimum re-order period

D. Maximum consumption rate x Maximum re-order period

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Correct Answer: Option D

Explanation:
The Re-order Level is the level at which a new order is placed. To ensure stock doesn't run out during the maximum lead time, it is calculated as Maximum consumption rate multiplied by Maximum re-order period.

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Question #3

A costing system that focuses on continuous small improvements in manufacturing processes to reduce costs is known as:

A. Standard Costing

B. Life Cycle Costing

C. Target Costing

D. Kaizen Costing

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Correct Answer: Option D

Explanation:
Kaizen costing is a Japanese concept involving continuous, incremental improvements to reduce costs during the manufacturing phase.

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