Accounting Principles Quiz

Which of the following best reflects the cost principle in accounting?

• A) Assets should be recorded at their current market value.

• B) Assets are recorded at the original purchase price.

• C) Assets should be recorded at the value the owner believes they are worth.

• D) Assets are updated annually to reflect current replacement costs.

What does the matching principle require?

• A) Revenues must be recorded only when cash is received.

• B) All expenses must be deferred until the end of the accounting period.

• C) Expenses must be recorded in the same period as the revenues they help generate.

• D) Expenses are only recognized when paid in cash.

According to the revenue recognition principle, revenue should be recorded when:

• A) Cash is received from the customer.

• B) The sale is approved by the manager and the costomer.

• C) It is earned, regardless of when payment is received.

• D) An invoice is issued.

What does the materiality principle state?

• A) Only transactions that affect cash flow need to be recorded.

• B) All financial information must be disclosed, regardless of size.

• C) Insignificant items may be disregarded if they don’t affect decision-making.

• D) Only large corporations must follow this principle.

The going concern principle assumes:

• A) The business will be sold or merged in the foreseeable future.

• B) The business will continue to operate for the foreseeable future.

• C) All debts will be paid immediately.

• D) Financial statements are prepared only for tax purposes.

The accrual principle requires:

• A) Revenue and expenses to be recognized when when cash is exchanged.

• B) Revenue and expenses to be recognized when they occur, not when cash is received or paid.

• C) Only large transactions to be recorded.

• D) Financial statements to be updated monthly.

Which of the following is classified as an asset?

• A) Accounts Payable

• B) Capital

• C) Accounts Receivable

• D) Revenue

Which of the following best represents a liability?

• A) Inventory

• B) Bank Loan

• C) Cash

• D) Owner's Capital

Which account reflects the owner’s residual interest in the business?

• A) Notes Payable

• B) Prepaid Expenses

• C) Owner’s Equity

• D) Unearned Revenue

Which of the following is NOT an asset account?

• A) Equipment

• B) Account receivable

• C) Accrued Expenses

• D) Land