CHAPTER 2: BASIC ACCOUNTING CONCEPT

CHAPTER 2: BASIC ACCOUNTING CONCEPTS

Multiple Choice

GAAP stands for

• Generally Accepted Auditing Procedures.

• Generally Accepted Accounting Principles.

• Generally Accepted Auditing Principles.

• Generally Accepted Accounting Procedures

Multiple Choice

The historical cost principle requires that when assets are acquired, they be recorded at

• appraisal value.

• cost.

• market price.

• book value.

Multiple Choice

Which principle/guideline requires the company's financial statements to have footnotes containing information that is important to users of the financial statements?

• Historical Principle

• Business Entity

• Accrual Principle

• Adequate disclosure Principle

Multiple Choice

Concept: Financial information is reported for a specific period of time on financial statements.

• Matching Expenses with Revenue

• Accounting Period Cycle

• Business Entity

Multiple Choice

Concept: a business's records should never be mixed with an owner's personal records and reports

• adequate disclosure

• economic entity

• objective evidence

• going concern

Multiple Choice

As of June 30, 2020, Little Giantz Company has assets of $100,000 and owner’s equity of $60,000. What are the liabilities for Little Giantz Company as of June 30, 2020?

• $40,000

• $60,000

• $100,000

• $160,000

Multiple Choice

The owner invests personal cash in the business. Assets will.......

• Increase

• Decrease

• No effect

Multiple Choice

The company receives cash from a bank loan. Liabilities will.........

• Increase

• Decrease

• No Effect

Multiple Choice

Collection of a $1,500 Accounts Receivable

• increases an asset $1,500; decreases an asset $1,500.

• increases an asset $1,500; decreases a liability $1,500.

• decreases a liability $1,500; increases owner's equity $1,500.

• decreases an asset $1,500; decreases a liability $1,500

Multiple Choice

If total liabilities decreased by $30,000 and owner’s equity decreased by $15,000 during a period of time, then total assets must change by what amount and direction during that same period?

• $45,000 increase

• $15,000 decrease

• $15,000 increase

• $45,000 decrease

Multiple Choice

The company receives cash from a bank loan. Liabilities will.........

• Increase

• Decrease

• No Effect