What are the Accounting Conventions?

There are four widely recognized Accounting Conventions: conservatism, consistency, full disclosure, and materiality.

What is an Accounting Principle?

Accounting Principles are the rules that an organization follows when reporting financial information. Some basic Accounting Principles have been developed through common usage. They form the basis upon which the complete suite of accounting standards has been built.

What are the three major principles of accounting?

It includes debit the receiver and credit the giver. Debit what comes in and credit what goes outlastly, debit expenses and losses, credit income, and gains.

What is the Consistency Principle?

The Consistency Principle requires that once a company adopts an accounting method, it continue to use that method in all future periods.

What is Full Disclosure Principle?

Full Disclosure Principle states that a buyer has the right to know the exact condition of a product or service before agreeing to buy it.

Accounting Principles and Concepts MCQ Quiz With Answers

1. The accounting cycle does not include:

Recording
Decision-making
Classification
Interpreting

2. One of the following is not a characteristic of accounting principles:

Results-oriented
Factual
Practical
Summarizing

3. Which of the following is not a feature of the separate entity concept?

Business and owner are treated as separate entities
Personal affairs of the owner should not be considered
Business should not be dissolved in the near future
This concept is followed in all types of businesses

4. Going concern can be defined best as:

The concept provides the basis for the formation of the accounting equation.
This concept refuses allocation of cost on different accounting periods.
This concept discusses the issue of the realization of profit.
This concept assumes that the business will operate for a long period of time and will not be dissolved in the near future.

5. Matching concept does not include one of the following:

The revenues of a particular period must match with the expenses of that period.
This concept also required allocation of cost on different accounting periods.
Revenues should only be recorded if there is reasonable certainty about its realization.
The comparison of incomes and expenses of a period gives the net profit or loss for that particular period.

6. The accounting conventions do not include:

Depreciation convention
Conservatism convention
Consistency convention
Full disclosure convention

7. The realization concept does not include one of the following features:

The concept requires proper care when calculating revenue.
The concept stresses that revenues should only be recorded if there is reasonable certainty about their realization.
The concept describes the problems that may arise in the calculation of incomes and expenses.
The concept explains that the comparison of incomes and expenses for a particular period can give the period's net result.

8. According to consistency convention, accounting principles should be:

Consistent
Variable
Flexible
Factual

9. One of the following is not an example of the materiality concept:

Purchase of pencil recorded as an expense instead of including in stock
Purchase of car for private use
Purchase of plant for business
Purchase of building to extend the business

10. The disclosure convention requires:

Full disclosure of all material facts that can affect the financial statement.
That profit should be realized.
Matching of incomes and expenses for a particular period.
The business to avoid being dissolved in the near future.

11. To assess audit risk more effectively, an auditor investigates all the different groups within an organization apart from:

Board of governance and top-level management
Legal counsel
Middle-level management
Stakeholders

12. Which of the following is of the least concern to an auditor regarding a client's internal control system?

Efficiency and effectiveness of operations
Controls related to the reliability of financial reporting
Controls over classes of transactions
Auditors are equally concerned about each of the issues

13. When testing control procedures, the design can easily be tested using:

ICQs and walkthrough tests
ICQs and judgment samples
ICQs and random samples
ICQs and ICEC

14. Which of the following is true?

The audit profession is unregulated
The audit profession is regulated by its own professional body
Outside bodies sometimes become involved in the regulation of the audit profession
The audit profession is regulated only by the government

15. Small audit firms provide the following services apart from:

Liquidation and receivership work, fraud auditing
Financial management and system consultancy
Financial system planning and preparation
Tax management and statutory form filling

16. Which of the following is not included in the category of cash?

Bank deposits
Checks
Postdated checks
Money orders

17. Which of the following letters should be included in the letter of representation?

Existence of immaterial mistake in the statement
Existence of any fraud or any error in the statement
Company's growth trend in the future in figures
Market value of the company's stock

18. When should cash sales be recorded by companies to achieve control objectives?

When a purchase order is received from a customer
At the point cash sales are made
After some period
Weekly

19. Auditors conduct auditing in accordance with:

International Financial Reporting Standards
Local Pronouncements/Legislations
Financial Accounting Standards Board
All of the above

20. Which of the following is a series of constant cash flows that occur at the end of each period for some fixed number of periods?

Ordinary annuity
Annuity due
Perpetuity
None of the above

21. During the accounting period, sales revenue is $25,000 and accounts receivable increases by $8,000. How much cash is received from customers for the period?