Which of the following is considered the fundamental accounting equation?
a) Assets = Liabilities + Owner’s Equity
b) Revenue = Expenses + Profit
c) Assets = Liabilities – Equity
d) Income = Assets + Liabilities
Which accounting principle states that revenue should be recognized when earned, not when cash is received?
a) Matching Principle
b) Revenue Recognition Principle
c) Consistency Principle
d) Materiality Principle
The Matching Principle ensures that:
a) Revenues and expenses are recorded in the same period
b) Expenses are recorded only when cash is paid
c) Revenue is recorded only when cash is received
d) Only current assets are recorded
Which principle requires accountants to choose the same accounting methods from period to period?
a) Consistency Principle
b) Prudence Principle
c) Going Concern Principle
d) Objectivity Principle
What does the Going Concern Principle assume?
a) The business will continue to operate in the foreseeable future
b) The business will be sold within a year
c) The business is only concerned with immediate profits
d) The business operates only on a cash basis
Which accounting principle suggests that financial statements should be free from bias?
a) Objectivity Principle
b) Accrual Principle
c) Cost Principle
d) Revenue Recognition Principle
Under the Cost Principle, assets should be recorded at:
a) Market value
b) Historical cost
c) Expected selling price
d) Replacement cost
Which concept states that businesses should record expenses when they are incurred, not when they are paid?
a) Accrual Principle
b) Realization Principle
c) Revenue Recognition Principle
d) Cash Basis Accounting
What does the Materiality Principle state?
a) Every transaction must be recorded, no matter how small
b) Only significant transactions that affect decisions should be recorded
c) All business transactions are immaterial
d) Revenue should only be recorded when cash is received
Which principle ensures that similar financial information is reported consistently?
a) Conservatism Principle
b) Consistency Principle
c) Revenue Recognition Principle
d) Matching Principle
What does the Full Disclosure Principle require?
a) Businesses must disclose all financial information that could impact decision-making
b) Companies should keep some financial data confidential
c) Only positive financial information should be disclosed
d) Only historical cost information should be shared
Which principle states that financial information should be reliable and verifiable?
a) Objectivity Principle
b) Cost Principle
c) Conservatism Principle
d) Matching Principle
Which principle suggests that accountants should choose the least optimistic estimate when faced with uncertainty?
a) Conservatism Principle
b) Cost Principle
c) Matching Principle
d) Revenue Recognition Principle
Which financial statement reports a company’s financial position at a specific point in time?
a) Balance Sheet
b) Income Statement
c) Cash Flow Statement
d) Statement of Retained Earnings
What is the main objective of financial reporting?
a) To provide information useful for decision-making
b) To increase profits
c) To attract investors
d) To minimize tax liabilities
Which accounting assumption states that transactions are recorded in monetary terms?
a) Business Entity Assumption
b) Monetary Unit Assumption
c) Going Concern Assumption
d) Revenue Recognition Assumption
Which of the following is NOT a financial statement?
a) Balance Sheet
b) Cash Flow Statement
c) Trial Balance
d) Income Statement
Which principle ensures that expenses are recognized in the same period as the related revenues?
a) Matching Principle
b) Objectivity Principle
c) Going Concern Principle
d) Consistency Principle
What does the Business Entity Concept imply?
a) The business and owner are separate entities
b) Business and personal transactions should be combined
c) Owners are personally liable for all business transactions
d) Business records can include personal expenses
The Cash Flow Statement provides information about:
a) Profitability
b) Financial position
c) Cash receipts and payments
d) Total liabilities
The time period assumption in accounting ensures:
a) Financial reporting is done for a specific time frame
b) Businesses must operate indefinitely
c) Revenue is recorded only when cash is received
d) Expenses should never be recorded
Which principle requires companies to follow the same accounting methods consistently?
a) Consistency Principle
b) Matching Principle
c) Cost Principle
d) Objectivity Principle
Which assumption states that only transactions measurable in money should be recorded?
a) Monetary Unit Assumption
b) Going Concern Assumption
c) Business Entity Assumption
d) Matching Principle
Which principle ensures all transactions are recorded at actual cost?
a) Cost Principle
b) Objectivity Principle
c) Accrual Principle
d) Materiality Principle
