Accounting Concepts and Principles Quiz

What is the accounting equation?

• Assets = Liabilities - Equity

• Assets = Liabilities + Equity

• Assets + Liabilities = Equity

• Assets - Liabilities = Equity

What is the double-entry system in accounting?

• A way to track inventory

• A method of calculating taxes

• A method of recording financial transactions

• A process for managing employee payroll

What is the matching principle in accounting?

• Expenses should be recognized in the same period as the revenues they help to generate.

• Expenses should be recognized randomly without any relation to the revenues generated.

• Expenses should be recognized only if they exceed the revenues generated.

• Expenses should be recognized in a different period than the revenues they help to generate.

What is the concept of business entity in accounting?

• A business entity is a separate and distinct organization or economic unit in accounting.

• A business entity is a type of tax form in accounting.

• A business entity is a financial statement in accounting.

• A business entity is a group of individuals working together in accounting.

What are the components of the accounting equation?

• revenue, expenses, and income

• cash, accounts receivable, and inventory

• assets, liabilities, and equity

• debits, credits, and journal entries

Explain the application of the matching principle in accounting.

• The matching principle is not applicable in accounting.

• The matching principle ensures that expenses are recognized in a different period than the revenues they help generate.

• The matching principle only applies to certain types of expenses and revenues.

• The matching principle ensures that expenses are recognized in the same period as the revenues they help generate.

Concept: Financial statements are prepared with the expectation that business will remain in operation indefinately

• going concern

• materiality

• accounting period cycle

• matching revenue with expenses

The same accounting procedure must be followed in the same way in each accounting period.

• Consistency

• Materiality

• Objectivity

• Conservatism

GAAP stands for:

• Generally Accepted Auditing Procedures

• Generally Accepted Accounting Principles

• Generally Accepted Accounting Procedures

• Generally Auditing Accounting Principles

The revenue from business activities and the expenses associated with earning that revenue are recorded in the same accounting period.

• Matching Principle

• Periodicity

• Historical Cost

• Full Disclosure