Accounting Principles Quiz

What is the Business Entity Concept?

• The business is treated as separate from its owner(s).

• Personal transactions of the owner are mixed with business transactions.

• The business is treated as a part of the owner's personal finances.

What does the Money Measurement Concept state?

• Only financial transactions that can be measured in monetary terms are recorded.

• All transactions, regardless of measurement, are recorded.

• Non-monetary aspects are included in financial records.

What is the Going Concern Concept?

• Assumes that the business will continue to operate in the foreseeable future.

• Assumes that the business will cease operations soon.

• Assumes that the business will operate indefinitely.

What does the Accrual / Matching Concept ensure?

• Revenues and expenses are recorded when they are earned or incurred.

• Revenues and expenses are recorded only when cash is received or paid.

• Revenues are recorded at the end of the financial year.

What is the Consistency Concept?

• The same accounting methods should be used consistently across periods.

• Different accounting methods can be used without justification.

• Changes in accounting methods are not required to be disclosed.

What does the Prudence (Conservatism) Concept state?

• Profits should not be overstated, while losses should be recognized as soon as they are foreseeable.

• All profits should be recognized immediately.

• Expenses should be ignored until they are paid.

What is the Cost Concept?

• Assets are recorded at their original purchase cost.

• Assets are recorded at their current market value.

• Assets are recorded at their liquidation value.

What does the Dual Aspect Concept state?

• Every transaction affects at least two accounts.

• Every transaction affects only one account.

• Every transaction is recorded in a single entry.

What is the Revenue Realization Concept?

• Revenue is recognized when goods are sold or services are rendered.

• Revenue is recognized only when cash is received.

• Revenue is recognized at the end of the financial year.

What does the Materiality Concept state?

• Only significant financial information that influences decision-making is recorded.

• All transactions must be recorded regardless of significance.

• Insignificant transactions must be reported separately.