Accounting Concepts Quiz

What does the Going Concern Concept assume?

• A) A business will always make profits

• B) A business will continue indefinitely

• C) A business will close within a year

• D) A business has enough cash reserves

Which concept separates the finances of a business from its owner?

• Dual Aspect Concept

• Going Concern Concept

• Business Entity Concept

• Historical Cost Concept

According to the Accrual Concept, when are revenues recognized?

• When payment is received

• When expenses are paid

• When the service is rendered

• At the end of the fiscal year

What does the Money Measurement Concept state?

• Only monetary transactions should be recorded

• All transactions are recorded in foreign currency

• Non-monetary items should be included

• Measurement of assets is not necessary

Which accounting equation is maintained under the Dual Aspect Concept?

• A) Assets = Income + Expenses

• B) Assets = Liabilities + Equity

• C) Revenue = Expenses + Profit

• D) Liabilities = Equity + Cash

What does the Revenue Realisation Concept ensure?

• Revenue is recorded only when received in cash

• Revenue is recognized when earned

• Revenue is recorded when an invoice is sent

• Revenue is deferred until taxes are paid

Which concept records assets at their original purchase price?

• Accrual Concept

• Money Measurement Concept

• Historical Cost Concept

• Business Entity Concept

Which of the following is an example of the Accounting Period Concept?

• Preparing daily financial statements

• Preparing annual financial reports

• Preparing statements every 10 years

• Ignoring financial periods

What does the Convention of Conservatism advocate?

• Overstating profits and assets

• Recording the higher of two estimates

• 9. Recording the lowest value in uncertain situations

• Ignoring losses

Which convention ensures consistency across financial reports over time?

• A) Conservatism

• B) Materiality

• C) Consistency

• D) Full Disclosure