Accounting Principles Quiz

What is the purpose of accounting principles?

• To make financial statements more complex

• To hide information from external users

• To allow for easy comparison of financial statements

• To confuse lenders and investors

Who develops and maintains US GAAP?

• The Internal Revenue Service

• The Securities and Exchange Commission

• The International Accounting Standards Board

• The Financial Accounting Standards Board

What is the purpose of the Securities and Exchange Commission (SEC)?

• To enforce tax regulations

• To develop accounting principles

• To maintain US GAAP

• To regulate stock exchanges

What is the economic entity assumption?

• Keeping business transactions separate from personal transactions

• Assuming the company will continue operating

• Dividing financial results into time periods

• Expressing assets in dollar amounts

What is the monetary unit assumption?

• Keeping business transactions separate from personal transactions

• Assuming the company will continue operating

• Dividing financial results into time periods

• Expressing assets in dollar amounts

What is the going concern assumption?

• Keeping business transactions separate from personal transactions

• Dividing financial results into time periods

• Expressing assets in dollar amounts

• Assuming the company will continue operating

What is the time period assumption?

• Keeping business transactions separate from personal transactions

• Assuming the company will continue operating

• Expressing assets in dollar amounts

• Dividing financial results into time periods

What is the cost principle?

• Reporting expenses based on cause-and-effect relationship

• Recording transactions at the cash amount

• Providing sufficient information for decision making

• Recognizing revenues when they are earned

What is the full disclosure principle?

• Recording transactions at the cash amount

• Providing sufficient information for decision making

• Recognizing revenues when they are earned

• Reporting expenses based on cause-and-effect relationship

What is the matching principle?

• Recording transactions at the cash amount

• Reporting expenses based on cause-and-effect relationship

• Providing sufficient information for decision making

• Recognizing revenues when they are earned