Financial Accounting MCQ on GAAP

MCQ on GAAP(Generally Accepted Accounting Principles)

Here you will get the MCQ on GAAP(Generally Accepted Accounting Principles) for 12th commerce students and also B.com commerce students of all university.

Also Read Financial Accounting MCQ

1. According to the going concern concept, a business entity should assumed to have

(a) a very short life

(b) an indefinite life

(c) a long life

(d) None of the above

Answer (c) a long life

2.  In the balance sheet, Contingent liability is shown because of

(a) Convention of disclosure

(b) Convention of materiality

(c) Convention of consistency

(d) None of the above

Answer (a) Convention of disclosure

3. Revenue is considered as earning, when

(a) Sale is effected

(b) Production is done

(c) Cash is received

(d) None of the above

Answer (a) Sale is effected

4. Accounting does not record non-financial transactions because of which accounting principle

(a) Accrual concept

(b) Entity concept

(c) Measurement concept

(d) None of the above

Answer (c) Measurement concept

5. Which concepts states that even the owner of the capital may be treated as a creditor of the business?

(a) Money measurement concept

(b) Cost concept

(c) Business Entity concept

(d) None of the above

Answer (c) Business Entity concept

6. Appending notes to the financial statements as per …… convention

(a) Convertism

(b) Disclosure

(c) Consistency

(d) Materiality

Answer (b) Disclosure

7.  Accounting of a pen as an expense and not as an asset is due to

Convention

(a) Materiality

(b) Conservatism

(c) Consistency

(d) Disclosure

Answer (a) Materiality

8. Following the written down value method of depreciation on particular is because of ……… convention

(a) Conservatism

(b) Consistency

(c) Materiality

(d) Disclosure

Answer (b) Consistency

9. Valuation of stock is done at lower of cost or market value because

(a) Consistency

(b) Conservatism

(c) Disclosure

(d) Materiality

Answer  (b) Conservatism

10. Making provision for doubtful debts is as per …… convention

(a) Consistency

(b) Disclosure

(c) Conservatism

(d) Materiality

Answer (c) Conservatism

11. Contingent liability shown in the balance sheet, arises

(a) Consistency

(b) Materiality

(c) Conservatism

(d) Disclosure

Answer (d) Disclosure

12. Accounting principles are generally based on

(a) Subjectivity

(b) Practicability

(c) Objectivity

(d) Convenience in Recording

Answer  (b) Practicability

13. According to money measurement concept the following will be recorded in the books

accounts of the business:

(a) Value of Plant and Machinery

(b) Quality of Company Goods

(c) Utility of Managers

(d) Health of Director

Answer (a) Value of Plant and Machinery

14. The convention of Prudence when applied to the balance sheet results

(a) Overstatement of Assets

(b) Understatement of Liability

(c) Understatement of Assets

(d) Overstatement of Liabilities

Answer (c) Understatement of Assets 

15. Accounting concepts include those assumptions upon which the science of ………… is based.

(a) Book-keeping

(b) Accounting

(c) Double Entry System

(d) Recording

Answer (b) Accounting

16. A firm follows the straight line method of depreciating fixed assets year after year due to:

(a) Objectivity

(b) Convenience

(c) Consistency

(d) Prudence

Answer (c) Consistency

17. A change in accounting policy is justified:

(a) To comply with accounting standard

(b) To ensure better presentation of the financial statements of the firm

(c) To comply with law

(d) All of the above

Answer (d) All of the above

18.  Which of the following is fundamental accounting assumption?

(a) Accounting period

(b) Materiality

(c) Going Concern

(d) Full disclosure

Answer (c) Going Concern

19. Revenue Should be recognised at the point of sale. Which principle is applied here ?

(a) Consistency

(b) Cost Realization

(c) Marketing

(d) Realization

Answer (d) Realization

20. Which assumption says a business entity will not be sold or liquidated in the near future

(a) Conservatism

(b) Going Concern

(c) Periodic

(d) Separate Entity

Answer (b) Going Concern

21. Corporate must prepare financial statements by time to time due to

(a) Accrual concept

(b) Going Concern concept

(c) Period Concept

(d) Business Entity concept

Answer (c) Period concept

22. Which principle states that same accounting methods should be used from one

accounting period to the next.

(a) Consistency

(b) Accounting period

(c) Conservatism

(d) Materiality

Answer (a) Consistency

23. Expenses not yet paid still recorded in accounting according which concept ?

(a) Realisation

(b) Conservatism

(c) Money Measurement

(d) Accrual

Answer(d) Accrual

24. Classification of assets as current assets and fixed assets is as per…

(a) Going Concern concept

(b) Dual aspect

(c) Cost

(d) Money Measurement

Answer (a) Going Concern concept

25. The convention that sates that the accounting practice should be followed consistently over

(a) Consistency

(b) Full disclosure

(c) Conservatism

(d) Materiality

Answer (a) Consistency

26. Which Accounting Principles says personal expenses should be debited to Drawings Account.

(a) Money measurement concept

(b) Going Concern Concept

(c) Business entity concept

(d) Accounting Period Concept

Answer (c) Business entity concept

27. which principle says quality should not recorded in the book of accounts?

(a) Business entity concept

(b) Money measurement concept

(c) Going Concern Concept

(d) Dual aspect concept

Answer (b) Money measurement concept

28. Which concept assumes that a business entity will not be liquidated in the near future?

(a) Money measurement concept

(b) Business entity concept

(c) Dual aspect concept

(d) Going Concern Concept

Answer (d) Going Concern Concept

29. Which accounting concept requires that the life of a business be divided into smaller parts?

(a) Business entity concept

(b) Dual aspect concept

(c) Accounting Period Concept

(d) Matching Concept

Answer (c) Accounting Period Concept

30. Under which concept assets is recorded at cost, even if the market price is more or less?

(a) Accounting Period Concept

(b) Matching Concept

(c) Matching Concept

(d) Cost Concept

Answer (d) Cost Concept

31. Under which concept advance received against sale of goods is recorded as ‘Advance

against Sale’ and not Sales ?

(a) Dual aspect concept

(b) Cost Concept

(c) Revenue Recognition Concept

(d) Matching Concept

Answer (c) Revenue Recognition Concept

32. Which Accounting Principle is Applied for “Closing stock is valued at lower of cost or market price”

(a) Matching Concept

(b) Prudence Concept

(c) Matching Concept

(d) Money measurement concept

Answer (b) Prudence Concept

33. General Reserve is created on the basis of convention of

(a) Materiality

(b) Uniformity

(c) Prudence

(d) Account Period

Answer (c) Prudence

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