Tag: generally accepted accounting principles (gaap)

Questions Related to generally accepted accounting principles (gaap)

_______ is the first 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. Communicating

Show answer
Correct Option: C
Explanation:

Recording is the first phase of accounting process. It is essentially concerned with not only ensuring that all business transactions of financial character are, in fact recorded but also that they are recorded in an orderly manner.

Which of these statements is true about book keeping?

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

  1. It is a language of business

  2. It is a process concerned with recording of transactions

  3. It is end result of Accounting process

  4. It is concerned with summarizing of business transactions

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Correct Option: B
Explanation:

Book keeping is a process of recording an economic event of the business. Once the transaction is done, this has to be recorded immediately in the books of account to have a proper accounting. 

Which of these is not one of the function of accounting?

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

  1.  It help in comparison, evaluation and predicting financial results.

  2. Identifying weakness of the system and install appropriate control mechanism.

  3. It facilitate decision making process.

  4. It helps in tax evasion

Show answer
Correct Option: C
Explanation:

Financial accounting information is the accounting information concerned with the summary, analysis and reporting of financial transactions pertaining to a business. Financial statements help in comparison, evaluation and predicting financial results. Financial accounting  reports the results and position of business to government, creditors, investors, and external parties. It is useful for identifying weakness of the system and install appropriate control mechanism. 

Function(s) of Accounting is/are _______ .

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

  1. to help in decision making

  2. to help in measurement

  3. to help in forecasting

  4. all of the above

Show answer
Correct Option: D
Explanation:

Financial accounting information is the accounting information concerned with the summary, analysis and reporting of financial transactions pertaining to a business. This involves the preparation of financial statements available for public consumption. Stockholders, suppliers, banks, employees, governments agencies, business owners, and other stakeholders are examples of people interested in receiving such information for decision making purposes. 

State whether the following statement is 'True' or 'False':
In accounting, all business transactions are recorded as having dual aspect.

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

  1. True

  2. False

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Correct Option: A
Explanation:

Double Entry System of Accounting is based on dual aspect. That means, for every business transaction, there are affects in books of account. For every debit entry, there will be a credit and vice versa. 


Accounting Equation can be defined as:

Owners Equity+Liabilities=Fixed Assets+ Current Assets

If Good worth Rs.10000 purchased on credit, it will affect two accounts i.e. Goods account and liability account. 

Now Accounting equation will be as under:

Owners Equity+Rs.10000 (Liability) = Fixed Assets+ Rs.10000 (Goods).

Which of these process is/are not the function of Book Keeping?

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

  1. Summarising

  2. Interpreting

  3. Communicating

  4. All the three

Show answer
Correct Option: D
Explanation:

Book keeping and accountancy are not to be considered as identical terms. Book keeping is defined as recording and classifying the transaction. Summarizing, interpreting and communicating the financial data is part of accounting.

Which of these processes are the function of book keeping?

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

  1. Summarising

  2. Interpreting

  3. Classifying

  4. Communicating

Show answer
Correct Option: C
Explanation:

Book keeping is an activity concerned with the recording and classification of financial data relating to business operations in significant and orderly manner. It is a process concerned with financial data recording. 

No profit should be anticipated but every possible loss should be provided for.

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

  1. True

  2. False

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Correct Option: A
Explanation:

The given statement is true. The reason is that every business involves the element of risk.Business risks implies uncertainty in profits or danger of losses due to some unforeseen events.

Accounting is the process of matching _________.

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

  1. benefits and costs

  2. revenues and costs

  3. cash inflow and outflows

  4. potential and real performances

Show answer
Correct Option: B
Explanation:

Matching concept of accounting defines that all the expenses need to be recorded in the books of account for the same period against which the revenue is recorded in the books. 


If the revenue is recorded in the books of account for the period 1st April 2017 to 31st March 2018, in such case, expenses pertaining to the same period should be recorded in the books of account irrespective whether these are actually paid or not.

Which of the following describes the proper sequence of actions in the accounting cycle?

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

  1. Post, enter, analyse, prepare, close, adjust

  2. Analyse, enter, post, adjust, prepare, close

  3. Prepare, enter, post, adjust, analyse, close

  4. Enter, post, close, prepare, adjust, analyse

Show answer
Correct Option: B
Explanation:

The accounting cycle is a process designed to make financial accounting of business activities easier for business owners.

These steps are: 
(1) analyzing the transactions as they occur; 
(2) recording them in the journals;
(3) posting debits and credits from journal entries to the general ledger; 
(4) adjusting the assets with a trial balance; 
(5) preparing financial statements, and 
(6) closing the temporary accounts.