Chapter 1 - Accounting Concept (FA1)

1. Which concept requires business transactions to be recorded separately from the owner’s personal activities?

• A. Going Concern

• B. Separate Entity

• C. Consistency

• D. Objectivity

2. Which concept assumes that a business will continue operating long enough to fulfill obligations and plans?

• A. Monetary Unit

• B. Matching

• C. Going Concern

• D. Accrual

3. Under which concept are non-quantifiable items such as loyalty and honesty excluded from accounting records?

• A. Historical Cost

• B. Monetary Unit

• C. Materiality

• D. Full Disclosure

4. Which concept requires using the same accounting method from one period to the next unless clearly disclosed?

• A. Consistency

• B. Prudence

• C. Matching

• D. Substance over Form

5. Preparing financial statements for a fixed duration, such as quarterly or annually, relates to which concept?

• A. Accrual

• B. Accounting Period

• C. Double Entry

• D. Materiality

6. Under which concept must potential losses be recorded immediately, but profits only when realized?

• A. Conservatism/Prudence

• B. Matching

• C. Full Disclosure

• D. Objectivity

7. Recording assets based on their original purchase price follows which concept?

• A. Historical Cost

• B. Materiality

• C. Realization

• D. Benefit and Cost

8. Which concept states that expenses must be matched with the revenues they help generate?

• A. Matching

• B. Accrual

• C. Materiality

• D. Substance over Form

9. Recognizing income when it is earned, not when cash is received, is part of which concept?

• A. Realization

• B. Accrual

• C. Double Entry

• D. Objectivity

10. Which concept requires that financial information should reflect the economic reality, not just the legal form?

• A. Objectivity

• B. Full Disclosure

• C. Substance over Form

• D. Benefit and Cost