Accounting Basics MCQs

Practice and Learn through MCQs and Quizzes. have 5 Accounting Basics MCQs

Accounting MCQ1- A primary objective of external financial reporting is

  • A. Direct measurement of the value of a business enterprise.
  • B. "Provision of information that is useful to present and potential investors, creditors, and others in making rational financial decisions regarding the enterprise."
  • C. Establishment of rules for accruing liabilities.
  • D. Direct measurement of the enterprise�s stock price.
  • "Answer (B) is correct. According to the FASB�s Conceptual Framework, the objectives of external financial reporting are to provide information that (1) is useful to present and potential investors, creditors, and others in making rational financial decisions regarding the enterprise; (2) helps those parties in assessing the amounts, timing, and uncertainty of prospective cash receipts from dividends or interest and the proceeds from sale, redemption, or maturity of securities or loans; and (3) concerns the economic resources of an enterprise, the claims thereto, and the effects of transactions, events, and circumstances that change its resources and claims thereto."
  • Correct Answer: Option B

Accounting MCQ10- The primary purpose of the statement of financial position is to reflect

  • A. The fair value of the firm�s assets at some moment in time
  • B. The status of the firm�s assets in case of forced liquidation of the firm
  • C. The success of a company�s operations for a given amount of time
  • D. Items of value, debt, and net worth
  • Answer (D) is correct. The balance sheet presents three major financial accounting elements: assets (items of value), liabilities (debts), and equity (net worth). According to the FASB�s Conceptual Framework, assets are probable future economic benefits resulting from past transactions or events. Liabilities are probable future sacrifices of economic benefits arising from present obligations as a result of past transactions or events. Equity is the residual interest in the assets after deduction of liabilities.
  • Correct Answer: Option D

Accounting MCQ3- An objective of financial reporting is

  • A. Providing information useful to investors, creditors, donors, and other users for decision making
  • B. Assessing the adequacy of internal control
  • C. Evaluating management results compared with standards
  • D. Providing information on compliance with established procedures
  • Answer (A) is correct. The objective is to report financial information that is useful in making decisions about providing resources to the reporting entity. Primary users of financial information are current or prospective investors and creditors who cannot obtain it directly. Their decisions depend on expected returns
  • Correct Answer: Option A

Accounting MCQ6- Which of the following is true regarding the comparison of managerial and financial accounting?

  • A. Managerial accounting is generally more precise
  • C. The emphasis on managerial accounting is relevance, and the emphasis on financial accounting is timeliness
  • D. Managerial accounting need not follow generally accepted accounting principles (GAAP), while financial accounting must follow them
  • Answer (D) is correct. Managerial accounting assists management decision making, planning, and control. Financial accounting addresses accounting for an entity�s assets, liabilities, revenues, expenses, and other elements of financial statements. Financial statements are the primary method of communicating to external parties information about the entity�s results of operations, financial position, and cash flows. For general-purpose financial statements to be useful to external parties, they must be prepared in conformity with accounting principles that are generally accepted in the United States. However, managerial accounting information is primarily directed to specific internal users. Hence, it ordinarily need not follow such guidance.
  • Correct Answer: Option D

Accounting MCQ9- The accounting measurement that is not consistent with the going concern concept is

  • A. Historical cost
  • B. Realization
  • C. The transaction approach
  • D. Liquidation value
  • Answer (D) is correct. Financial accounting principles assume that a business entity is a going concern in the absence of evidence to the contrary. The concept justifies the use of depreciation and amortization schedules, and the recording of assets and liabilities using attributes other than liquidation value.
  • Correct Answer: Option D