Tag: basic accounting principles and concepts

Quizzes (3) Questions (49)

Questions Related to basic accounting principles and concepts

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

GAAP tells _________.

  1. Accounting policies

  2. Accounting procedures

  3. Accounting statements

  4. Both a & b
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

GAAP provides the framework for both accounting policies (the specific principles chosen) and accounting procedures (the methods used to implement those principles).

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

If rights and beneficial interest in a property is transferred but documentation and legal formalities are pending then seller & purchaser should record in their accounts sale & purchase. Which principle is applied here?

  1. Prudence

  2. Substance over from

  3. Materiality

  4. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The principle of substance over form dictates that the economic reality of a transaction should take precedence over its legal form. If the beneficial interest is transferred, it should be recorded as a sale even if legal paperwork is pending.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

The notion that the life of a business is divisible into equal time periods of equal length is known as the _________.

  1. Continuing concern principle

  2. Time-period principle

  3. Business entity principle

  4. Recognition principle
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The time-period principle (or periodicity concept) assumes that the indefinite life of a business can be divided into shorter, equal time intervals for reporting purposes.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Goodwill should be tested for value impairment at which of the following levels?

  1. Each identifiable long-term asset.

  2. Each reporting unit.

  3. Each acquisition unit.

  4. Entire business as a whole
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Under accounting standards like ASC 350, goodwill is tested for impairment at the reporting unit level, which is an operating segment or one level below an operating segment.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Bank overdraft account is a _____________.

  1. Personal account

  2. Real account

  3. Nominal account

  4. Representative personal account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A bank overdraft represents a liability to a specific person or entity (the bank). Therefore, it is classified as a personal account.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Which one of the following statements correctly explain the term 'doctrine of Indoor Management? 

  1. The doctrine seeks to protect the outsiders against the company

  2. Every person dealing with the company is presumed to have read and understood the contents of company's Memorandum and Articles of association

  3. If a person enters into a contract with the company which is contrary to the provisions of Memorandum and Articles of Association, he will not get any right under such contract

  4. It protects the company against the outsiders.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Option B is correct.

Doctrine of indoor management is an exception to rule of constructive notice. According to this doctrine, persons dealing with company are entitled to presume that internal requirements prescribed in the memorandum and articles have been properly observed. 
They can assume that the members of the company are performing their acts within the scope of their apparent authority. 

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Comparative financial statements are prepared at the end of __________ .

  1. Each financial year

  2. Every six months

  3. Every quarter of a year

  4. At the will of management
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Comparative financial statements are the complete set of financial statements that an entity issues, revealing information for more than one reporting period. The financial statements that may be included in this package are: The income statement (showing results for multiple periods)


These statements can be prepared anytime at the will of management.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Latest generation of personal computers (PCs) being used in an office setup is _____________.

  1. PC XT

  2. PC Pentium

  3. PC AT

  4. PC 486
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In the context of historical computer generations, the Pentium processor represented a significant leap in performance over the 486 and earlier PC architectures.

Multiple choice commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting generally accepted accounting principles

Match List-I with List-II and select the correct answer using the codes given the lists.

List-I(Accounting concept) List-II(Principle involved)
I. Consistency (a) Losses are anticipated and accounted for in advance but profits are not accounted for until realised
II. Comparability (b) All the relevant financial information should be summarised and presented in the accounting statements
III. Conservatism (c) According procedures in an entity should be followed uniformly from period to period
IV. Disclosure (d) Accounting statement of different periods of an entity and those of different entities of a period should be based on the same accounting principles and procedures
(e) Personal Judgement of accountants should not influence accounting measurements

  1. I-(d), II-(c), III-(e), IV-(b)

  2. I-(c), II-(d), III-(a), IV-(b)

  3. I-(d), II-(c), III-(a), IV-(e)

  4. I-(c), II-(d), III-(b), IV-(e)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
  1. Consistency: The consistency principle states  that, once you adopt an accounting principle or method, continue to follow it consistently in future accounting periods. Only change an accounting principle or method if the new version in some way improves reported financial results. 
    2. Comparability: It is one of the key qualities which accounting information must possess. Accounting information is comparable when accounting standards and polices are applied consistently from one period to another and from one region to another.
    3. Conservatism: Under the conservatism principle, if there is uncertainty about incurring a loss, you should tend towards recording the loss. Conversely, if there is uncertainty about recording a gain you should not record the gain.
    4. Disclosure: Full disclosure principle requires a company to provide the necessary information so that people who are accustomed to reading financial information can make informed decisions concerning the company. All relevant financial information should be summarised and presented in the accounting statements.