According to which concept all expenses are matched with the revenue of that period:

Here are the answers to the questions:

5. Accounting equation is based on:

   • The accounting equation, Assets = Liabilities + Owner's Equity, is built on the fundamental principle that every financial transaction has two effects.
   • The correct option is c).

   c) Dual aspect concept

6. The firm purchases a machine worth ₹30,00,000 on credit from Reliab Industries this will increase an asset (Machinery) on the one hand and a liability (Creditor) on the other. which concept (principle) takes place this case?

   • This scenario perfectly illustrates the double-entry system, where every transaction affects at least two accounts, maintaining the balance of the accounting equation.
   • The correct option is a).

   a) Dual aspect concept

7. According to which concept all expenses are matched with the revenue of that period:

   • The matching concept dictates that expenses incurred to generate revenue should be recognized in the same accounting period as the revenue itself.
   • The correct option is c).

   c) Matching concept

8. Provision for bad & doubtful debts is created in anticipation of actual bad debts on the basis of:

   • Creating provisions for potential losses, like bad debts, before they actually occur is an application of the conservatism principle, which advocates for caution in financial reporting.
   • The correct option is b).

   b) Conservatism concept

9. Insignificant events are not recorded in the books of accounts due to:

   • The materiality concept allows businesses to omit or simplify the reporting of information that is not significant enough to influence the decisions of users of financial statements.
   • The correct option is d).

   d) Materiality concept

10. By the misuse of which convention 'Secret Reserve' is created.

    • Secret reserves are created by deliberately understating assets or overstating liabilities/expenses, which is an excessive and inappropriate application of the conservatism principle, leading to an understatement of profits or assets.
    • The correct option is a).

    a) Conservatism