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Incorrect!1. The accounting principle that states companies and owners should be account for separately. 2. Companies not disclosing an immanent bankruptcy would violate the: 3. The assumption that states that businesses can divide up their activities into artificial time periods. 4. Assets are recorded at their original purchase price according to the: 5. Management concealing important financial information violates the: 6. When estimating unearned revenues, what principle applies? 7. What is not a value of accounting relevance? 8. What is not a value of accounting reliability? 9. Switching accounting principles every year would violate the: 10. Recording expenses and revenues in the same period in which they occur. Generally Accepted Accounting Principles or GAAP is a defined set of rules and procedures that needs to be followed in order to create financial statements, which are consistent with the industry standards. It is the accounting standard that is followed in the US. Following are some of the GAAP multiple choice questions and answers that will help the students in brushing up their understanding of the concept of GAAP. Q.1 GAAP stands for: (a) Generally Accepted Accounting Provisions (b) Generally Accepted Accounting Policies (c) Generally Accepted Accounting Principles (d) None of these Answer: c Q.2 Which accounting principle states that companies and owners should be treated as separate entities. (a) Monetary Unit Assumption (b) Business Entity Concept (c) Periodicity Assumption (d) Going Concern Concept Answer: b Q.3 Cost or expenses must be recorded at the same time as the revenue to which they correspond is specified by which principle? (a) Matching Principle (b) Going Concern Principle (c) Consistency Principle (d) Prudence Principle Answer: a Q.4 Which concept states that “for every debit, there is a credit”? (a) Money Measurement Concept (b) Accounting Period Concept (c) Separate Entity Concept (d) Dual Aspect Concept Answer: d Q.5 For measuring income, the most acceptable method is? (a) To apply normal rate of return on capital invested (b) To apply the average return in industry on capital (c) To match the cost with revenue (d) To find out the difference in net worth as on two dates Answer: c Q.6 The correct form of Accounting equation is (a) Assets – Receivable = Equity (b) Assets + Receivable = Equity (c) Assets – Liabilities = Equity (d) Assets + Liabilities = Equity Answer: c Q.7 As per revenue recognition principle, sales revenues should be recognized at the time when? (a) Order is taken for merchandise (b) Ownership of goods gets transferred from the seller to the buyer (c) Cash is received (d) All of the above Answer: b Q.8 Due to which concept, accounting does not record non-financial transactions? (a) Going concern concept (b) Money measurement concept (c) Accrual concept (d) Cost concept Answer: b Q.9 The owner of the business is treated as a creditor of the business according to which of the following concept? (a) Entity concept (b) Materiality concept (c) Consistency concept (d) Periodicity concept Answer: a Q.10 As per the accrual concept of accounting, any financial or business transaction should be recorded: (a) when profit is computed (b) when balance sheet is prepared (c) when cash is received or paid (d) when transaction occurs Answer: d Also see: Difference Between GAAP and IFRS For reading more such MCQs on various topics pertaining to Commerce, visit here This preview shows page 1 - 3 out of 5 pages. QuestionsOption AOption BOption COption DCorrect AnswerAccording to accrual concept of accounting, financialor business transaction is recorded:when cash is receivedor paidwhen transaction occurswhen profit iscomputedwhen balance sheet ispreparedBThe John Marketing Company provides advertisingservices to an investment company in year A butreceives advertising fee in year B. The JohnMarketing Company recognizes this revenue in yearBA company is a going concern if:its balance sheet showsa strong financialpositionits income statementfor the current yearshows huge profitthere is no evidencethat it will or will haveto cease operationswithin foreseeablefuture.Which accounting concept or principle states that thetransactions of a business must be recorded separatelyfrom those of its owners or other businesses?The business or economic entity concept is applicableto:sole proprietorshipform of businesspartnership form ofbusinessCorporate form ofbusinessall of the aboveDWhich of the following states that a transaction is notrecorded in the books of accounts unless it ismeasurable in terms of money?Which one of the following states that the life of abusiness can be divided into equal time periods?The revenue is not recognized until it is earned andrealized or at least realizable. To which accountingprinciple/concept this statement belongs?The auditor noticed that the financial statements ofMeta Company were missing some footnotesimportant for users for decision making. This actionof the management is a violation of:materiality conceptgoing concern concepteconomic entity concept full disclosure conceptDIn certain situations, companies might recognizelosses but not gains. This action belongs to:Accounting Concepts and Accounting Conventions The Modern Enterprises reported all assets in thebalance sheet at current market value. This action is a Upload your study docs or become a Course Hero member to access this document Upload your study docs or become a Course Hero member to access this document End of preview. Want to read all 5 pages? Upload your study docs or become a Course Hero member to access this document Tags Generally Accepted Accounting Principles, John Marketing Company What states that the life of a business can be divided into equal time periods?The time period assumption states that the economic life of a business can be divided into a. equal time periods.
Which of the following states that the life of a business can be divided into equal time period Mcq?Economic entity concept. Which one of the following states that the life of a business can be divided into equal time periods? a. Revenue recognition principle.
Which accounting concept or principle states that the transactions of a business must be recorded separately from those of its owners or other businesses?Business entity concept is one of the accounting concepts that states that business and the owner are two separate entities and therefore, should be considered separate from each other.
Which of the following states that transaction is not recorded in the books of accounts unless it is measurable in terms of money?The monetary unit principle states that business transactions should only be recorded if they can be expressed in terms of a currency. In other words, anything that is non-quantifiable should not be recorded a business' financial accounts.
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Which of the following states that the life of a business can be divided into equal time periods Mcq?
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