What does GAAP stand for?
a) Government Auditing and Accounting Procedures
b) Generally Accepted Accounting Principles
c) Global Accounting and Auditing Policies
d) General Analysis of Accounting Practices
Which organization is responsible for establishing GAAP in the United States?
a) Financial Accounting Standards Board (FASB)
b) Securities and Exchange Commission (SEC)
c) International Accounting Standards Board (IASB)
d) Federal Reserve
Which GAAP principle states that revenue should be recognized when earned?
a) Revenue Recognition Principle
b) Cost Principle
c) Matching Principle
d) Conservatism Principle
Under GAAP, expenses should be matched with revenues in the period they are incurred. This is known as the:
a) Matching Principle
b) Cost Principle
c) Consistency Principle
d) Revenue Principle
Which financial statement is required under GAAP?
a) Statement of Ethics
b) Balance Sheet
c) Customer Satisfaction Report
d) Company Policies Statement
Which principle states that accountants should choose the least optimistic approach when faced with uncertainty?
a) Materiality Principle
b) Conservatism Principle
c) Revenue Recognition Principle
d) Cost Principle
According to GAAP, what should assets be recorded at?
a) Market Value
b) Historical Cost
c) Future Value
d) Estimated Cost
Which GAAP principle ensures that similar transactions are recorded the same way across reporting periods?
a) Materiality Principle
b) Consistency Principle
c) Objectivity Principle
d) Revenue Recognition Principle
The principle that requires all relevant financial information to be reported is called:
a) Full Disclosure Principle
b) Matching Principle
c) Revenue Principle
d) Cost Principle
GAAP requires that financial reports be prepared based on:
a) Cash Basis Accounting
b) Accrual Basis Accounting
c) Hybrid Accounting
d) Tax Basis Accounting
Which concept states that a business should continue operating indefinitely?
a) Going Concern Principle
b) Historical Cost Principle
c) Revenue Recognition Principle
d) Consistency Principle
GAAP requires that financial reports must be:
a) Based on personal opinion
b) Free from bias and errors
c) Kept confidential from investors
d) Exempt from regulatory oversight
Which of the following is NOT a fundamental principle of GAAP?
a) Objectivity Principle
b) Matching Principle
c) Maximization of Profits Principle
d) Consistency Principle
Which principle requires accountants to use the same methods over time?
a) Consistency Principle
b) Matching Principle
c) Materiality Principle
d) Cost Principle
The principle that prevents companies from overstating assets or revenue is:
a) Objectivity Principle
b) Conservatism Principle
c) Full Disclosure Principle
d) Matching Principle
Which of the following is NOT required under GAAP?
a) Publicly traded companies must follow GAAP
b) Private companies must follow GAAP
c) GAAP allows financial statements to be audited
d) Companies can use any accounting method they prefer
What does the materiality principle state?
a) Small transactions do not need to be reported if they do not affect decisions
b) Every transaction must be recorded regardless of its impact
c) Only cash transactions are material
d) Minor errors can be ignored in financial reports
What is the purpose of GAAP?
a) To allow companies to manipulate financial data
b) To ensure consistency, transparency, and accuracy in financial reporting
c) To increase government control over businesses
d) To focus only on tax reporting
Which financial statement reports a company’s revenues and expenses?
a) Balance Sheet
b) Cash Flow Statement
c) Income Statement
d) Statement of Retained Earnings
Which GAAP principle ensures financial statements contain only factual and verifiable data?
a) Cost Principle
b) Objectivity Principle
c) Revenue Recognition Principle
d) Materiality Principle
Who must comply with GAAP?
a) Only large corporations
b) Only small businesses
c) All publicly traded companies in the U.S.
d) Only government agencies
What is an example of a GAAP-compliant financial disclosure?
a) Keeping financial reports confidential
b) Publishing audited annual reports
c) Reporting estimated figures instead of actual data
d) Excluding liabilities from balance sheets
Which entity enforces GAAP compliance?
a) World Bank
b) Federal Reserve
c) Securities and Exchange Commission (SEC)
d) International Monetary Fund (IMF)
