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Accounting Principles Quiz

Total questions: 69

Worksheet time: 37mins

Name
Class
Date
1.

Rules and guidelines that company must follow when reporting financial data is called:

a)

Accounting principles

b)

Accounting procedures.

c)

Accounting assumptions.

d)

None of the above.

2.

Which of the following principle provides the definite and factual basis for assets valuation?

a)

Stable Currency principle.

b)

Objectivity Principle

c)

Matching Principle.

d)

Cost Principle

3.

Which of the following principle states that the assets are purchased for the use and not for resale purpose?

a)

Stable Currency principle.

b)

Objectivity Principle

c)

Going-concern principle.

d)

Cost Principle

4.

Which of the following principles assumes that a business will continue for a long time?

a)

Historical cost.

b)

Periodicity

c)

Objectivity.

d)

Going concern

5.

The accounting principle that states companies and owners should be account for separately:

a)

Business entity concept.

b)

Going concern concept

c)

Monetary unit assumption.

d)

Periodicity assumption

6.

According to the personal expenses paid by Mr. A from his own pocket would not be recorded in business books of account:

a)

Realization principle.

b)

Separate entity principle

c)

Matching principle.

d)

Materiality principle

7.

Which of the following principle deals with the valuation and recording of the assets at cost?

a)

Entity principle.

b)

Matching principle

c)

Cost principle.

d)

Stable currency principle

8.

Which of the following principle is used for recording an expense?

a)

Matching principle

b)

Cost principle

c)

Realization principle.

d)

Objectivity principle

9.

Companies not disclosing an imminent bankruptcy would violate the:

a)

Business entity concept.

b)

Going concern concept

c)

Monetary unit assumption.

d)

Periodicity assumption

10.

The assumption that states that businesses can divide up their activities into artificial time periods:

a)

Business entity concept.

b)

Going concern concept

c)

Monetary unit assumption.

d)

Periodicity assumption

11.

Assets are recorded at their original purchase price according to the:

a)

Materiality principle.

b)

Historical cost principle

c)

Cost benefit principle.

d)

Consistency principle

12.

Management concealing important financial information violates the:

a)

Materiality principle.

b)

Historical cost principle

c)

Full disclosure principle.

d)

Consistency principle

13.

When estimating unearned revenues, which principle applies?

a)

Conservatism principle

b)

Historical cost principle

c)

Full disclosure principle.

d)

Consistency principle

14.

Switching accounting principles every year would violate the:

a)

Conservatism principle.

b)

Historical cost principle

c)

Full disclosure principle.

d)

Consistency principle

15.

Recording expenses and revenues in the same period in which they occur called:

a)

Objectivity principle.

b)

Matching principle

c)

Historical cost principle.

d)

Industry practices constraint

16.

Which accounting concept requires that amounts of goods taken from inventory by the prospector of a business are treated as drawings?

a)

Accruals.

b)

Prudence

c)

Separate entity

d)

Substance over form

17.

The accounting concept which dictates that non-current assets should be valued at cost less accumulated depreciation, rather than at their enforced saleable value, is:

a)

Understandability.

b)

Relevance

c)

Comparability

d)

Going concern

18.

Inventories should be valued at the lower of con and net realizable value. Which one of the following accounting concepts governs this?

a)

Comparability

b)

Prudence

c)

Going concern

d)

None of the above

19.

Which of the following statements about accounting procedures is not correct?

a)

The journal shows in one place all the information about specific transactions arranged in chronological order.

b)

A ledger account shows in one place all the information about changes in a specific asset or liability or owner's equity.

c)

Posting is the process of transferring information from ledger accounts to the journal.

d)

The product of the accounting cycle is the formal financial statements such as balance sheet and income statement.

20.

Accounting is called the "language of business" because:

a)

It communicates the financial information to the Management only

b)

In order to run a business one must have knowledge about accounting

c)

Different business accounts are involved in financial statements

d)

It helps to organize and communicate financial information to end users

21.

Which of the following explains the debit and credit rules relating to recording revenues and expenses?

a)

Realization and matching principle

b)

The effect of revenues and expenses in the owner's equity

c)

Expenses appear on the left side of the income statement

d)

Liabilities are recorded as debit on the balance sheet

22.

For purpose of measuring business income, the life of a business is divided into which of the following?

a)

Divided into specific points in time

b)

Divided into irregular cycles

c)

Divided into discrete accounting periods

d)

Considered to be a continuous cycle

23.

Which of the following statements is associated with the accrual basis of accounting?

a)

The timing of cash receipts and disbursements is emphasized.

b)

A minimum amount of record keeping is required.

c)

This method is used less frequently by businesses than the cash method of accounting.

d)

Revenues are recognized in the period they are earned, regardless of the time period the cash is received.

24.

An accounting system is used by a business to:

a)

Analyze transactions

b)

Handle routine bookkeeping tasks

c)

Structure information

d)

All of the above

25.

A business event which can be measured in terms of money and must be recorded in books of accounts is called:

a)

Condition

b)

Transaction

c)

Information.

d)

Record

26.

Liabilities are which of the following?

a)

Resources.

b)

Obligations

c)

Future benefits

d)

Expenses

27.

Gross inflow of economic benefits is called:

a)

Assets

b)

Liabilities

c)

Income

d)

Expenses

28.

What are the decreases in gross economic benefits of the business?

a)

Expenses

b)

Obligations

c)

Creditors

d)

Income or gain

29.

Double entry book-keeping was fathered by:

a)

F.W.Taylor

b)

Henry Fayol

c)

Luca Pacioli

d)

Murphy Smith

30.

One of the detailed rules used to record business transaction is:

a)

Objectivity

b)

Accruals

c)

Double entry book keeping

d)

Going concer

31.

How much duration does an accounting period usually have?

a)

Three months

b)

Two years

c)

One year.

d)

Five years

32.

Which of the following is not normally required for revenue to be recognized according to the revenue principle for accrual basis accounting?

a)

The price is fixed or determinable

b)

Services have been performed

c)

Cash that has already been collected

d)

Evidence of an arrangement for customer payment exists

33.

Which of the following balances does the contra-asset account show typically?

a)

Credit

b)

Debit

c)

Negative

d)

Positive

34.

Which of the following statements is (are) not consistent with generally accepted accounting principles relating to asset valuation:

a)

Many assets are originally recorded in accounting record at their cost to the business entity.

b)

Subtracting total liabilities from total assets indicates what the owner equity in the business is worth under current market condition.

c)

Accountant assumed that assets such as office supplies, land and buildings will be used in business operations rather than sold at current market prices.

d)

Accountants prefer to base the valuation of assets upon objective, verifiable evidence rather than upon appraisals or personal opinion.

35.

The concept of materiality (indicate wrong answer):

4 lines
36.

The concept of materiality (indicate wrong answer):

a)

Requires that financial statements be accurate to the nearest dollar, but need not show cents.

b)

Is based upon what users of financial statements are thought to consider important.

c)

Permits accountants to ignore generally accepted accounting principles in certain situations.

d)

Permits accountants to use the easiest and most convenient means of accounting for events that are immaterial.

37.

Which of the following best describes the application of generally accepted accounting principles to the valuation of accounts receivable?

a)

Realization principle-Accounts receivables are shown at their net realizable value in the balance sheet.

b)

Matching principle-The loss due to an uncollectible account is recognized in the period in which the sale is made, not in the period in which the account receivable is determined to be worthless.

c)

Cost principle-Accounts receivables are shown at the initial cost of the merchandise to customers, less the cost the seller must pay to cover uncollectible accounts.

d)

Principle of conservatism-Accountants favors using the lowest reasonable estimate for the amounts of uncollectible accounts.

38.

What is not a value of accounting relevance?

a)

Predictive value

b)

Feedback value

c)

Timeliness

d)

Reliability

39.

What is not a value of accounting reliability?

a)

Verifiability

b)

Representational faithfulness

c)

Timeliness

d)

Neutrality

40.

Which of the following true with respect to provision?

a)

It is a liability of uncertain timing or amount

b)

It is a liability of certain timing or amount

c)

It is an asset of uncertain timing or amount

d)

It is an income of uncertain timing or amount

41.

Which of the following is true with respect to the measurement of revenue?

a)

Revenue shall be measured at the fair value of the consideration received or receivable

b)

Revenue shall be measured at the future value of the consideration received or receivable

c)

Revenue shall be measured at the discounted value of the consideration received or receivable

d)

Revenue shall not be measured at the fair value of the consideration received or receivable

42.

If stock valuation method is changed every year by the firm, which concept the firm has violated?

a)

The materiality concept

b)

The consistency concept

c)

The prudence concept

d)

The going concern concept

43.

Which of the following is related to the qualitative characteristics that make financial information useful?

a)

Reliability only

b)

Relevancy only

c)

Both reliability and relevancy.

d)

Comparability

44.

Which of the following statement is true regarding going concern concept?

a)

The business is profitable

b)

The assets of the business are valued at market value

c)

The business will continue until the directors decide to close it

d)

The business will continue for indefinite period

45.

Under which of the following assumptions, the financial statements are to be prepared?

a)

Future assumptions

b)

Past assumptions

c)

Accrual basis and going concern basis

d)

Accrual basis assumption only

46.

Revenue is most commonly recognized at the time when:

a)

Cash is collected

b)

The order is received from customers

c)

The sale is made

d)

None of the above

47.

For each transaction, double-entry accounting requires which of the following:

a)

Debits to asset accounts must create credits to liability or equity accounts

b)

A debit to a liability account must create a credit to an asset accounts

c)

Total debits must equal total credits

d)

None of these

48.

Accumulated loss of a company is shown in the balance sheet as:

a)

Liability

b)

Asset

c)

As footnote in balance sheet.

d)

None of the above

49.

Deciding whether to record a sale when order for services is received or when the services are performed is an example of a:

a)

Classification issue

b)

Recognition issue

c)

Valuation issue

d)

None of the above

50.

Which of the following is an important reason for studying accounting?

a)

Accounting information is useful in making economic decisions

b)

Accounting plays an important role in society

c)

The study of accounting can lead to a challenging career

d)

None of the above

51.

The prime function of accounting is to:

a)

Record economic data

b)

Provide the informational basis for action

c)

Classifying and recording business transactions

d)

Attain non-economic goals

52.

The basic function of financial accounting is to:

a)

Record all business transactions

b)

Interpret financial data

c)

Assist the management in performing functions effectively

d)

None of the above

53.

Book keeping is mainly concern with:

a)

Recording of financial data relating to business operations

b)

Designing the systems in recording, classifying, summarizing the recorded data

c)

Interpreting the data for internal and external end users

d)

None of the above

54.

Accounting principles are generally based on:

a)

Practicability

b)

Subjectivity

c)

Convenience in recording

d)

All of the above

55.

Revenue from sale of products ordinarily is reported as part of the earning in the period:

a)

The sale is made

b)

The cash is collected

c)

The products are manufactured

d)

The planning takes place

56.

Which type of accounting change should always be accounted for in current and future periods?

a)

Change in accounting principle

b)

Change in reporting entity

c)

Change in accounting estimate

d)

Correction of an error

57.

The going concern concept is the underlying basis for:

a)

Depreciating fixed asset over their useful lives

b)

Disclosing the market value of securities

c)

Consolidating the accounts of subsidiary companies with those of parent company

d)

Disclosing the sales and other operating information in the income statement

58.

Revenue is said to be realized:

a)

When the sales are made

b)

When the goods are manufactured

c)

When cash is received

d)

All of the above

59.

In case of gold, revenue is recognized in the accounting period in which the gold:

a)

Is mined

b)

Is sold

c)

Is delivered

d)

None of the above

60.

In case of long term contracts, revenue is generally recognized:

a)

Only on full completion of the contract

b)

Only when the full cash is received

c)

Even when a part of the contract has been completed

d)

All of the above

61.

In case of traditional approach, the expense to be matched with revenue is based on:

a)

Original cost.

b)

Replacement cost

c)

Cash cost.

d)

None of the above

62.

Which of the following pairs of accounting concepts are most likely to be in conflict with one another?

a)

Comparability and understandability

b)

Accruals basis and going concern

c)

Comparability and reliability

d)

Relevance and reliability

63.

Which of the following statements is most accurate about the historical cost concepts?

a)

Records transactions from past years

b)

Fails to take account of changing price levels over time

c)

Values assets at their cost to the business, irrespective of any depreciation or other loss in value

d)

Is no longer used in modern accounting systems

64.

In times of falling prices, the historical cost convention:

a)

Understates asset values and profits

b)

Understates asset values and overstates

c)

Overstates asset values and profits

d)

Overstates asset values and understates profits

65.

Which of the following characteristics of financial information contribute to reliability according to the IAS framework for the preparation and presentation of financial statements?

a)

Completeness.

b)

Prudence

c)

Neutrality

d)

Faithful

e)

All of above

66.

International Accounting standards are acronym of?

a)

IAS.

b)

ISA

c)

Both a & b.

d)

None of above

67.

Accounting standards which applies in Pakistan are?

a)

IAS

b)

ISA

c)

GAAP

d)

None of above

68.

GAAP stand for:

a)

Generally Adopted Accounting Principles

b)

Generally Accepted Auditing Principles

c)

Generally Accepted Accounting Principles

d)

Generally Adapted American Principles

69.

GAAP are applicable in?

a)

USA

b)

Pakistan

c)

Both a & b

d)

None of above

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