Tag: basic accounting principles and concepts

Questions Related to basic accounting principles and concepts

Generally accepted accounting principles ___________.

commercial applications basic accounting principles and concepts meaning and purposes of accounting need and basic principles of accounting 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

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Correct Option: A
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.

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

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

  1. Transparency

  2. Consistency

  3. Comparability

  4. All of these

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Correct Option: D

Which of the following statements describes GAAP properly?

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

  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

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Correct Option: A

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

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

  1. Consistency

  2. Disclosure

  3. Conservatism

  4. All of these

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Correct Option: D

A general law adopted as a guide is called _____________ .

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

  1. Accounting System

  2. Accounting Principles

  3. Accounting Process

  4. Accounting Plan

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Correct Option: B

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. 

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

  1. True

  2. False

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Correct Option: A

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.

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

  1. True

  2. False

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Correct Option: B

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

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

  1. True

  2. False

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Correct Option: A

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?

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

  1. Materiality

  2. Prudence

  3. Substance over form

  4. All of the above

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Correct Option: B

The other name of merchantile system of accounting is _________.

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

  1. cash system of accounting

  2. receipts & expenditure accounts

  3. accrual system of accounting

  4. all of the above

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Correct Option: C