Tag: generally accepted accounting principles (gaap)

Questions Related to generally accepted accounting principles (gaap)

Customs and traditions which guide the accounts to prepare accounting statements are called ______________. 

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. conventions

  2. principles

  3. concepts

  4. procedure

Show answer
Correct Option: A
Explanation:

Conventions are the guidelines that arise from the practical application of accounting principles. It is not legally binding practice rather, it is a generally accepted convention based on customs and designed to help accountants  overcome practical problems that arise out of the preparation of financial statements. 

State true of false :
In Book - keeping & accountancy non- monetary transactions are also recorded. 

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

Book-keeping &  accountancy both only record the transaction which are related with money and money 's worth.  It record transactions which are the agreements between a buyer and a seller to exchange goods and services for money. 

Book- keeping and accounting are one and the same thing. 

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

Book - keeping and accounting are not the same thing although they both involve the process of recording the financial transactions  of a business. Book -  keeping  are two different  terms. 

            Book -  keeping is the process of recording in chronological order, the daily  transactions of a  business entity. On the other hand accounting is an information system includes the process of recording, classifying, summarizing, reporting and interpreting the financial condition and performance of a business. Book keeping forms the part of accounting. 

A person who is unable to pay his debts, is called_______. 

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. insolvent

  2. solvent

  3. well to do

  4. poor

Show answer
Correct Option: A
Explanation:

A person or firm whose liabilities exceed the value of owned assets is termed as insolvent. It is the inabilities of the company or person to pay liabilities as they become due. 

The work of book-keeping is of __________ nature. 

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. competitive

  2. primary/basic

  3. secondary

  4. none of these

Show answer
Correct Option: B
Explanation:

Book-keeping is primary/basic in nature as it is a part of accounting itself. Literally, it means the activity of keeping financial books i. e recording financial transactions and events. 

State True or False.
Writing of account does not include specific skill and knowledge. 

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

Writing of accounts require specific knowledge and  skills to perform various tasks such as knowledge of accounting, knowledge of auditing, knowledge of finance, knowledge of tax and regulations etc so it requires high level of quality to perform the task. 

State true of false :
Accounting is useful only to the owner. 

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

Accounting is useful for various interested parties. These include business managers, owners, creditors, governmental  units and even employees. In one way or another, these users of accounting information tend to be concerned about their own interests in the entity not only for the owners. 

________ is concerned with the systematic analysis of the recorded data with a view to group transactions or entries of one nature at one place.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. Summarizing

  2. Analysis

  3. Classifying

  4. Interpreting

Show answer
Correct Option: C
Explanation:

Classification is concerned with the systematic analysis of the recorded data with a view to group transactions or entries of one nature at one place. The work of classification is done in the book called "ledger". This book contains on different pages individual account heads under which all financial transactions of similar nature are collected.

_______ defined Accounting as the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least of a financial character, and interpreting the results thereafter.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. The American Institute of Certified Public Accounts

  2. Financial Accounting Standard Board

  3. Institute of Certified Accountants of Wales

  4. Institute of Chartered Accountants of India

Show answer
Correct Option: A
Explanation:

In 1941, The american institute of Certified Public Accounts (AICPA) had defined accounting as the art of recording, classifying and summerising in a significant manner and in terms of ,money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof. With greater economic development resulting in changing role of accounting its scope become broader.

________ is the last phase of Accounting process.

commercial applications generally accepted accounting principles (gaap) acccounting cycle meaning, need and objectives of accounting accounting process

  1. Classification

  2. Summarizing

  3. Recording

  4. Communication

Show answer
Correct Option: D
Explanation:

Communication is concerned with the transmission of summarized, analysed and interpreted information to the end user to enable them to make rational decision. The accounting information after being meaningfully analysed and interpreted has to be communicated in a proper form and manner to the proper person. Hence, communicating is the last phase of Accounting process.