Accounting Principles Knowledge Test: Quiz

20 Questions | Total Attempts: 1042

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Accounting Principles Knowledge Test: Quiz

Do you know anything about accounting principles and knowledge? Could you pass this quiz? Financial accounting is the branch of corporate accounting that identifies, records, and examines financial data for people outside of the company. Any data given by financial accounting includes quarterly and annual income statements, balance sheets, and cash flow statements of general earnings. If it all adds up you will pass this quiz.


Questions and Answers
  • 1. 
    The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline?
    • A. 

      Cost

    • B. 

      Economic Entity

    • C. 

      Monetary Unit

  • 2. 
    Which principle/guideline requires a company's balance sheet to report its land at the amount the company paid to acquire the land, even if the land could be sold today at a significantly higher amount?
    • A. 

      Cost

    • B. 

      Economic Entity

    • C. 

      Monetary Unit

  • 3. 
    Which principle/guideline allows a company to ignore the change in the purchasing power of the dollar over time?
    • A. 

      Cost

    • B. 

      Economic Entity

    • C. 

      Monetary Unit

  • 4. 
    Which principle/guideline requires the company's financial statements to have footnotes containing information that is important to users of the financial statements?
    • A. 

      Conservatism

    • B. 

      Economic Entity

    • C. 

      Full Disclosure

  • 5. 
    Which principle/guideline justifies a company violating an accounting principle because the amounts are immaterial?
    • A. 

      Conservatism

    • B. 

      Full Disclosure

    • C. 

      Materiality

  • 6. 
    Which principle/guideline is associated with the assumption that the company will continue on long enough to carry out its objectives and commitments?
    • A. 

      Economic Entity

    • B. 

      Going Concern

    • C. 

      Time Period

  • 7. 
    A very large corporation's financial statements have the dollar amounts rounded to the nearest $1,000. Which accounting principle/guideline justifies not reporting the amounts to the penny?
    • A. 

      Full Disclosure

    • B. 

      Materiality

    • C. 

      Monetary Unit

  • 8. 
    Accountants might recognize losses but not gains in certain situations. For example, the company might write-down the cost of inventory, but will not write-up the cost of inventory. Which principle/guideline is associated with this action?
    • A. 

      Conservatism

    • B. 

      Materiality

    • C. 

      Monetary Unit

  • 9. 
    Which principle/guideline directs a company to show all the expenses related to its revenues of a specified period even if the expenses were not paid in that period?
    • A. 

      Cost

    • B. 

      Matching

    • C. 

      Monetary Unit

  • 10. 
    When the accountant has to choose between two acceptable alternatives, the accountant should select the alternative that will report less profit, less asset amount, or a greater liability amount. This is based upon which principle/guideline?
    • A. 

      Conservatism

    • B. 

      Cost

    • C. 

      Materiality

  • 11. 
    Public utilities' balance sheets list the plant assets before the current assets. This is acceptable under which accounting principle/guideline?
    • A. 

      Conservatism

    • B. 

      Cost

    • C. 

      Industry Practices

  • 12. 
    A large company purchases a $250 digital camera and expenses it immediately instead of recording it as an asset and depreciating it over its useful life. This practice may be acceptable because of which principle/guideline?
    • A. 

      Cost

    • B. 

      Matching

    • C. 

      Materiality

  • 13. 
    A corporation pays its annual property tax bill of approximately $12,000 in one payment each December 28. During the year, the corporation's monthly income statements report Property Tax Expense of $1,000. This is an example of which accounting principle/guideline?
    • A. 

      Conservatism

    • B. 

      Matching

    • C. 

      Monetary Unit

  • 14. 
    A company sold merchandise of $8,000 to a customer on December 29, 2010. The company's sales terms require the customer to pay the company by January 28, 2011. The company's income statement reported the sale in December 2010. This is proper under which accounting principle/guideline?
    • A. 

      Full Disclosure

    • B. 

      Monetary Unit

    • C. 

      Revenue Recognition

  • 15. 
    Accrual accounting is based on this principle/guideline.
    • A. 

      Cost

    • B. 

      Full Disclosure

    • C. 

      Matching

  • 16. 
    The creative chief executive of a corporation who is personally responsible for numerous inventions and innovations is not reported as an asset on the corporation's balance sheet. The accounting principle/guideline that prevents the corporation for reporting this person as an asset is
    • A. 

      Conservatism

    • B. 

      Cost

    • C. 

      Going Concern

  • 17. 
    An asset with a cost of $120,000 is depreciated over its useful life of 10 years rather than expensing the entire amount when it is purchased. This complies with which principle/guideline?
    • A. 

      Cost

    • B. 

      Full Disclosure

    • C. 

      Matching

  • 18. 
    Near the end of the year 2010, a company required a customer to pay $200,000 as a deposit for work that is to begin in early 2011. At the end of 2010 the company reported the $200,000 as a liability on its balance sheet. Which accounting principle/guideline prevented the company from reporting the $200,000 on its 2010 income statement?
    • A. 

      Going Concern

    • B. 

      Materiality

    • C. 

      Revenue Recognition

  • 19. 
    A retailer wishes to report its merchandise inventory on its balance sheet at its retail value. This would violate which accounting principle/guideline?
    • A. 

      Cost

    • B. 

      Full Disclosure

    • C. 

      Monetary Unit

  • 20. 
    A company borrowed $100,000 on December 1, 2010, and will make its only payment for interest when the note is paid off on June 1, 2011. The total interest for the six months will be $3,600. On the December 2010 income statement, the accountant reported an Interest Expense of $600. This action was the result of which accounting principle/guideline?
    • A. 

      Cost

    • B. 

      Matching

    • C. 

      Revenue Recognition

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