Name the accounting concept described in the statement.
1. ‘Profit should not be overstated by ignoring foreseeable losses and revenue should not be
recorded before it is earned.’ --PRUDENCE
2. “Stock is valued at the --------------------of------------------------ and ------------------------------------.”
MCQ” S
1.A trader wants his accounts to record his customers' satisfaction with his business. Which
accounting principle prevents this?
A business entity B duality
C money measurement D realisation C
[Link]’ skills are not recorded in the books of account. Which accounting principle is
involved?
A consistency B money measurement
C prudence D realisation B
3.A business decides to use the same depreciation method every year. Which accounting
principle is the business following?
A consistency B duality
C matching D prudence A
4 A cheque paid to a creditor is entered in both the cash book and the creditor’s account.
Which accounting principle is being observed?
A duality B going concern
C matching D realisation A
5 What is meant by the consistency principle?
A Accounts should normally be prepared on the same basis each year.
B Businesses must never change their year-end.
C Net profit will always be the same each year.
D Similar businesses must treat similar items in the same way. A
6.A trader purchased inventory for $4000. At the statement of financial statement date, the
inventory had a realisable value of $3000. The inventory was shown in statement of
financial statement at $3000. Which accounting principle did the trader apply?
A business entity B money measurement
C prudence D realisation C
7 Which is an example of the application of the principle of prudence?
A applying the same method of depreciation from year to year
B making an adjustment for prepaid expenses at the year-end
C recognising a sale on credit
D taking account of any foreseeable losses D
[Link] describes the going concern principle?
A Accountants apply the same treatment to similar transactions.
B Accountants assume that the business will continue to exist indefinitely.
C Accountants keep the transactions of the proprietor and the business separate.
D Accountants record the two-fold aspect of every transaction. B
9.A trader reduced the telephone expenses in the final accounts by the amount of his
personal telephone bill, which had been included in the telephone expenses account. Which
accounting principle is the trader using?
A business entity B going concern
C matching D prudence A
10.A payment of rent of $100 is debited to the rent account and credited to the bank
account. Which accounting principle is being applied?
A consistency B duality
C prudence D realisation
B
[Link] would not be recorded in the accounting records of a business when applying the
money measurement principle?
A cost of computers purchased.
B fees paid for staff computer training course
C new computer skills acquired by staff
D repair bill for computers C
[Link] is meant by the business entity principle?
A All businesses must account for items in the same manner.
B All businesses must maintain accounting records.
C The business is expected to be able to continue operating.
D The financial affairs of a business and its owner are kept separate. D
13.A business applies the money measurement principle. Which would be recorded in its
accounting records?
A the benefits of staff training B the cost of property owned
C the effect of new laws D the value of the manager’s skills B
14. What is an application of the consistency principle?
A comparing income received with expenses paid for a financial year.
B providing for all foreseeable losses in the annual accounts.
C recording income received when goods are delivered to the customer.
D using the same method of stock valuation each year D
15. Bi-Appah thinks her business will be worth more when she takes on new, highly skilled
staff. Which accounting principle prevents her from recording this in her balance sheet?
A accounting entity B accounting period
C going concern D money measurement D
