THEORY OF ACCOUNTS ACCOUNTING CONCEPTS 1. Which of the following statements is/are true? I.

Accounting is a service activity intended to fulfill a useful function in society II. Accounting involves the art of recording, classifying and summarizing transaction and events, and interpreting the results thereof. III. Accounting is an art but not a science IV. Accounting provides quantitative financial information intended to be useful in making economic decisions a. I, II, III, IV b. I, II, III c. I, II, IV d. II, III, IV

2. The branch of accounting concerned with the presentation of financial information primarily for use of third person outside of business enterprise. a. Financial Accounting b. Management Accounting c. Government Accounting d. All of the above

3. Accounting is an art because a. of the existence of a body knowledge governing accounting practice b. of accounting theory c. the necessity of applying creative skill and ability d. None of the above 4. Financial accounting is the branch of accounting that focuses on a. special purpose reports of financial position and results of operations b. financial statements c. the various need of statement users d. general purpose reports of financial position and results of operations 5. General-purpose information is a. not intended to satisfy the specialized needs of individual users. b. intended to satisfy the specialized needs of individual users c. not intended to satisfy the common needs of individual users. d. Provided by managerial accounting. 6. Which of the following is not true? a. Accounting is concerned primarily with quantitative information used by persons who must make economic decisions among alternative actions. b. Governmental accounting is also known as municipal or fund accounting

principles d. The branch of accounting concerned with the presentation of financial information to assist management in planning and controlling operations is called managerial accounting. accounting principles b. 7. accounting principles 13. This postulate is referred to as a. Historical cost b. measurement and recognition b. Matching c. Matching c. accounting conventions d. Going concern d. Accounting postulates c. accounting procedures d. d. including the numerous rules specifying how financial data should be recorded. The body of rules and principles which govern accounting practices is referred to as a. accounting conventions d. accounting principles 12. Financial accounting emphasizes special purpose information based on presumption that significant numbers of users need similar information. Historical cost b. Specific-separate-entity . Unless there is specific evidence to the contrary. the firm will continue to be in existence in the foreseeable future. The basic assumption or premises on which accounting principles rest are called a. summarized and reported are referred to as a. accounting postulates c. Accounting practice c. The specific methods used by accountants in carrying out t5he general guidelines provided by GAAP. “The accounting entity is assumed to be separate and distinct from other entities and from the owners. The general guidelines used in accounting practice that are based on substantial authoritative support are called a. Going concern d. accounting laws 10. The layers of the structure of accounting theory include the following except a.c. accounting procedures b. Specific-separate-entity 14. accounting principles 11. Accounting principles d. managers and employees which constitute the firm”. accounting postulates c. accounting procedures b. accounting postulates c. This postulate is referred to as a. accounting procedures b. methods and procedures c. Accounting theory 8. Accounting concepts b. accounting conventions d. classified. postulates and conventions 9. The normative attitudes or ideas of the accounting profession as to what ought to represent good accounting practice and which modify the application of accounting principles are known as a.

its instability is immaterial”. This postulate referred to as a. Consistency b. Money measuring unit b. liabilities and equity. Revenue recognition d. Conservatism c. Consistency c.” This postulate is referred to as a. “ This postulate is referred to as a. Specific-separate entity 20.“Goods and services used (“expenses”) during the fiscal period can be associated with the revenue earned during the same fiscal period”. Historical cost c. “Money is the best measuring unit of a firm’s assets. Matching c. “Financial statements of different firms should be based on similar accounting principles and procedures in order to aid users of financial statements in finding similarities and differences among firms for purposed of financial decision making” This convention is called a. Money measuring unit b. Money measuring unit b.” This convention is called a. as well as changes therein. Fiscal period 18. Conservatism . and equity. verifiable and convenient to obtain. The convention is called a. Revenue recognition d. periodic reporting implies the use of accrual accounting and use of estimates ( approximations) and informed judgment by accountants. hence. Conservatism c. Comparability d. Objectivity d. Fiscal period 16. approximating value at time of acquisition.15. “The point of sale when goods are delivered or services are rendered. is the time at which revenue is to be recognized. Objectivity d. Fiscal period 19. Historical cost c. and changes in them because it is objective. “The life of a business firm can be segmented into short run time periods in order to provide timely financial information to aid in financial decision making. Fiscal period 17. Revenue recognition d. Materiality 22. Going concern d. liabilities. “The same accounting procedures for a given entity should be used from one period to the next. This postulate is referred to as a. Materiality 21. financial reporting is concerned only with information that is significant enough to affect evaluations or decisions. “Exception to the application of accounting theory are permitted if the amount involve is not material.” This postulate is referred to as a. Historical cost c. Consistency b. Objectivity b. Money-measuring unit b. Historical Cost b. Historical cost c. Changes may however be made if it will result in more accurate or useful information for decision making provided it disclosed”. “Cost is normally the proper money measurement of a firm’s assets. Revenue recognition d.

Consistency c. “The accountant should recognize all possible losses but anticipate no profit. Objectivity b. Conservatism . Where alternative courses of action are available. Objectivity b. Conservatism 24.23. This convention is called a. Consistency c. Comparability d. “Accounting measurement should be based on evidence that is verifiable by competent persons”. he should choose the alternative least favorable to owners’ equity. Comparability d. a.

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