Nature and scope of financial accounting

Which of the following groups has only external users of accounting information?

• owners, present investors, stock exchange

• potential investors, government planners, stock exchange

• managers, board of directors, partners

• government planners, supervisors, customers

Which of the following is not true about accounting information?

• It reflects the mood of the business

• Only events with monetary values are recorded

• Different policies make comparison between companies easy

The owner of a business paid his private telephone bill from the business bank account. The amount was debited to the drawings account. Which concept was applied?

• realization

• expense recognition

• economic entity

• prudence

A trader has included rent which is due but not paid in his profit and loss account. Which concept was applied?

• historic cost

• matching

• money measurement

• prudence

Accounting polies used differently in a particular industry refers to which constraint?

• cost benefit

• materiality

• conservatism

• industry practice

This constraint of accounting information does not influence decision making process in an organization.

• cost benefit

• materiality

• conservatism

• industry practice

This is applied when there is uncertainty of the accounting choice to be used.

• cost benefit

• materiality

• conservatism

• industry practice

A waste paper basket costing $30 is being depreciated over 5 years. Which principle of accounting is violated?

• separate entity

• disclosure

• materiality

• realization

Accounting information is ___ if it is capable to provide feedback.

• reliable

• consistent

• relevant

• comparable

Accounting information is ___ to the extent that it is verifiable, it is a faithful representation and is reasonably free from error and bias.

• reliable

• consistent

• understandable

• relevant