tests on accounting
1. The assumption that a business can continue to remain in operation into the future is the:
a. Historical cost principle.
b. Unit-of-measure assumption.
c. Continuity assumption. *
d. Separate-entity assumption.
2. Sales revenue should be recognised when goods and services have been supplied; costs are incurred when goods and services have been received. Which accounting concept governs the above?
a. The prudence concept
b. The materiality concept
c. The accruals concept *
d. The dual accept concept
3. Which accounting concept requires that foreseen losses should be anticipated and taken into account immediately?
a. The consistency concept
b. The accruals concept
c. The prudence concept *
d. The going concern concept
4. In times of rising prices, what effect does the use of the historical cost concept have on a company's asset values and profit?
a. Asset values and profit both understated
b. Asset values and profit both overstated
c. Asset values understated and profit overstated *
d. Asset values overstated and profit understated.
5. Which of the following statements about stockholders' equity is not correct?
a. Stockholders’ equity is the shareholders’ residual interest in the company resilting from the difference in assets and liabilities.
b. Stockholders’ equity accounts are increased with credits.
c. Stockholders’ equity results only from contributions of the owners. *
d. The purchase of land for cash has no stockholders’ equity.
6. Which of the following transactions would cause retained earnings to increase?
a. Collection of a customer’s account
b. Loan from a bank
c. Sale of service to a customer *
d. Wage costs owed to employees
7. Which of the following events will cause retained earnings to increase?
a. Dividends declared
b. Net income reported *
c. Net loss reported
d. Issuance of stock
8. Which of the following liability accounts is usually not satisfied by payment of cash?
a.
a. Historical cost principle.
b. Unit-of-measure assumption.
c. Continuity assumption. *
d. Separate-entity assumption.
2. Sales revenue should be recognised when goods and services have been supplied; costs are incurred when goods and services have been received. Which accounting concept governs the above?
a. The prudence concept
b. The materiality concept
c. The accruals concept *
d. The dual accept concept
3. Which accounting concept requires that foreseen losses should be anticipated and taken into account immediately?
a. The consistency concept
b. The accruals concept
c. The prudence concept *
d. The going concern concept
4. In times of rising prices, what effect does the use of the historical cost concept have on a company's asset values and profit?
a. Asset values and profit both understated
b. Asset values and profit both overstated
c. Asset values understated and profit overstated *
d. Asset values overstated and profit understated.
5. Which of the following statements about stockholders' equity is not correct?
a. Stockholders’ equity is the shareholders’ residual interest in the company resilting from the difference in assets and liabilities.
b. Stockholders’ equity accounts are increased with credits.
c. Stockholders’ equity results only from contributions of the owners. *
d. The purchase of land for cash has no stockholders’ equity.
6. Which of the following transactions would cause retained earnings to increase?
a. Collection of a customer’s account
b. Loan from a bank
c. Sale of service to a customer *
d. Wage costs owed to employees
7. Which of the following events will cause retained earnings to increase?
a. Dividends declared
b. Net income reported *
c. Net loss reported
d. Issuance of stock
8. Which of the following liability accounts is usually not satisfied by payment of cash?
a.