Accounting Principles Quiz

The Historical Cost concept requires assets to be recorded at their:

• Market value

• Original purchase price

• Replacement cost

• Present value

Under the Historical Cost concept, which of the following is true?

• Assets are recorded at their depreciated value

• Assets are recorded at their market value

• Assets are recorded at their original cost

• Assets are recorded at their future value

The Objectivity principle requires that:

• Financial statements be prepared with opinions

• Transactions be recorded based on verifiable evidence

• Financial data be subjective

• Transactions be recorded based on estimates

Which document would be considered objective evidence for recording a transaction?

• Verbal agreement

• Personal opinion

• Invoice

• Management's expectation

The Matching principle states that:

• Expenses should be recorded when they are paid

• Revenues and expenses should be matched in the same accounting period

• Revenues should be recognized when orders are received

• Expenses should be recorded when incurred

Under the Matching principle, if revenue is earned in January, when should related expenses be recorded?

• In January

• In the previous period

• When paid

• At the end of the fiscal year

Accrual accounting requires:

• Revenues and expenses to be recorded when cash is exchanged

• Revenues to be recorded when earned and expenses when incurred

• Only cash transactions to be recorded

• Transactions to be recorded based on cash flow

Which of the following is an example of an accrual?

• Recording rent expense when paid

• Recording sales revenue when cash is received

• Recording salary expense in the month it is earned

• Recording utility expense when the bill is paid

The Duality principle in accounting states that:

• Each transaction affects only one account

• Each transaction affects two accounts in opposite directions

• Transactions should be recorded twice

• Each transaction affects the profit and loss account

The Business Entity concept requires:

• Personal transactions to be mixed with business transactions

• Business transactions to be recorded separately from personal transactions

• Personal transactions to be recorded in the business books

• Only cash transactions to be recorded