Tag: need and basic principles of accounting

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

Generally accepted accounting principles ___________.

  1. define accounting practice at a point in time

  2. are similar in nature to the principles of chemistry or physics

  3. are rarely changed

  4. are not affected by changes in the way business operates
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting. The acronym is pronounced "gap." GAAP specifications include definitions of concepts and principles, as well as industry-specific rules.

These "principles" are not like the unchangeable laws of nature in chemistry or physics.
They encompass conventions ,rules,and procedures,necessary to define accepted accounting practice at a particular time.

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

It is essential to standardize the accounting principles and policies in order to ensure _____________.

  1. Transparency

  2. Consistency

  3. Comparability

  4. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Standardizing accounting principles ensures that financial statements are transparent, consistent over time, and comparable between different entities. All these attributes are essential for reliable financial reporting.

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 of the following statements describes GAAP properly?

  1. Generally accepted accounting principles (GAAP) compries a set of rules, concepts and guidelines used in preparing financial accounting reports

  2. Generally accepted accounting principles (GAAP) incorporate the consensus at any time as to which economic resources and obligations should be recorded as assets and liabilities

  3. What information should be disclosed and how it should be disclosed, and which financial statements should be prepared

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

GAAP refers to the collection of rules, procedures, and guidelines that accountants must follow when preparing financial statements to ensure uniformity and reliability.

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

According to which of the following conventions, secret reserves are not permitted?

  1. Consistency

  2. Disclosure

  3. Conservatism

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

According to the full disclosure convention, financial statements must report all relevant and material information clearly. Secret reserves violate this principle because they obscure the true financial position of an enterprise.

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

A general law adopted as a guide is called _____________ .

  1. Accounting System

  2. Accounting Principles

  3. Accounting Process

  4. Accounting Plan
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Accounting principles are the fundamental truths or general laws that serve as the foundation for accounting systems and processes.

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

State with reasons whether the following statement is true or false.
Transaction and events are guides by generally accepted accounting principles and the transactions and events are guided by those principles. 

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounting principles provide the framework and guidelines for recording, classifying, and summarizing financial transactions and events to ensure consistency and accuracy.

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

State with reasons whether the following statement is true or false:
Loss of stock is said to be abnormal loss, which is due to inherent characteristics of the commodity.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Abnormal loss is typically caused by unforeseen events like fire, theft, or accidents, whereas loss due to inherent characteristics (like evaporation or drying) is considered a normal loss.

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

State with reasons whether the following statement is true or false:
Accounting principle is general rule followed in preparation of Financial Statements.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounting principles are indeed the general rules or guidelines that dictate how financial statements should be prepared to ensure they are understandable and reliable.

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

Accounting policy for inventories of X ltd. states that inventories are valued at the lower of cost or net realizable value. Which accounting principle in followed in adopting the above policy?

  1. Materiality

  2. Prudence

  3. Substance over form

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

The principle of prudence (or conservatism) dictates that you should anticipate no profit but provide for all possible losses, which is why inventory is valued at the lower of cost or net realizable value.

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 other name of merchantile system of accounting is _________.

  1. cash system of accounting

  2. receipts & expenditure accounts

  3. accrual system of accounting

  4. all of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The mercantile system of accounting is the same as the accrual system, where transactions are recorded when they occur, regardless of when cash is received or paid.