Which accounting concept states that business and owner are separate entities?
a) Going Concern Concept
b) Business Entity Concept
c) Accrual Concept
d) Consistency Concept
The Going Concern Concept assumes that a business will:
a) Close down soon
b) Continue operating indefinitely
c) Change its structure frequently
d) Operate for a fixed period only
Which concept states that financial transactions are recorded at their original cost?
a) Historical Cost Concept
b) Realization Concept
c) Prudence Concept
d) Matching Concept
Which of the following is NOT an accounting convention?
a) Consistency
b) Materiality
c) Money Measurement
d) Conservatism
According to the Accrual Concept, revenues are recorded when:
a) Cash is received
b) An agreement is signed
c) They are earned, regardless of cash received
d) Expenses are paid
The Prudence Concept suggests that:
a) Profits should be overestimated
b) Future losses should be ignored
c) Liabilities should be understated
d) Anticipated losses should be recorded, but not anticipated profits
Which concept states that only financial transactions that can be measured in money should be recorded?
a) Consistency Concept
b) Money Measurement Concept
c) Dual Aspect Concept
d) Matching Concept
According to the Consistency Concept, accounting methods should:
a) Be changed frequently
b) Remain the same over time
c) Depend on management’s discretion
d) Vary according to market trends
Which concept ensures that all expenses incurred in generating revenue are matched against that revenue?
a) Accrual Concept
b) Matching Concept
c) Dual Aspect Concept
d) Prudence Concept
What does the Realization Concept state?
a) Revenue is recognized only when cash is received
b) Expenses should always be recorded before they are incurred
c) Revenue is recognized when it is earned, not necessarily when cash is received
d) Assets should be recorded at fair value
Which of the following is NOT a fundamental accounting concept?
a) Going Concern
b) Business Entity
c) Market Price
d) Money Measurement
Which accounting convention requires businesses to disclose all material facts?
a) Conservatism
b) Materiality
c) Dual Aspect
d) Realization
Which convention advises recognizing liabilities and expenses as soon as they are possible but recognizing revenues only when they are certain?
a) Materiality
b) Dual Aspect
c) Prudence
d) Matching
The Dual Aspect Concept means that:
a) Every transaction affects at least two accounts
b) Only revenues are recorded
c) Only expenses are recorded
d) Cash transactions are more important than credit transactions
According to the Full Disclosure Principle, financial statements should:
a) Contain only necessary information
b) Provide all relevant financial information to users
c) Show only positive financial trends
d) Be kept confidential from investors
What is the main purpose of the Conservatism Concept?
a) Overstate assets
b) Understate liabilities
c) Ensure financial statements are prepared cautiously
d) Maximize reported profits
Which accounting concept assumes that the value of money remains constant over time?
a) Historical Cost
b) Money Measurement
c) Stable Monetary Unit
d) Matching
Which of the following is an example of a contingent liability?
a) Accounts payable
b) Loan repayment
c) A pending lawsuit
d) Rent expense
Which accounting concept helps avoid misleading financial statements?
a) Consistency
b) Accrual
c) Prudence
d) All of the above
The Revenue Recognition Principle states that revenue should be recognized when:
a) Cash is received
b) The sale is made, regardless of cash received
c) The invoice is issued
d) The product is delivered and payment is received
Which convention states that financial information should be clear and understandable?
a) Prudence
b) Materiality
c) Full Disclosure
d) Transparency
The Matching Principle applies to:
a) Recognizing revenue and expenses in the same period
b) Recording expenses only when cash is paid
c) Ignoring depreciation expenses
d) Matching transactions with economic conditions
Which of the following violates the Accrual Concept?
a) Recording revenue when it is earned
b) Recording expenses when they are incurred
c) Recording revenue only when cash is received
d) Recognizing prepaid expenses over time
