Financial Accounting (FA )Test No 1:
Consist of 13 questions to test your understanding of the basic accounting concepts.
[Refer Answer to FA Answer No 1]
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Item No |
Name the Concept |
QUESTIONS |
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(1) |
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The same accounting concepts are applied in the same way in each accounting period. |
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(2) |
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Always relate revenue earned in a period with expenses incurred to generate this revenue |
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(3) |
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A business’s financial performance is recorded and reported separately from the owner’s personal financial statement |
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(4) |
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Business is expected to remain in operations indefinitely |
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(5) |
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Similar items should receive similar accounting treatment |
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(6) |
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Use a common unit of measurement for reporting financial activity |
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(7) |
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Profits should not be overstated and loss must not be understated |
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(8) |
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Due to the high inflation rate, the replacement cost of the existing raw material has gone up by 30%. The company ignores this inflationary factor and records it at the value it has earlier bought. |
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(9) |
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A company has bought this property for $1million in year 2003 but now the property has appreciated to $5 million. The company is recording the property at $1 million. |
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(10) |
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Which principle/guideline requires the company’s financial statements to have footnotes containing information that is important to users of the financial statements? |
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(11) |
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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? |
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(12) |
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A fixed asset with a cost of $50,000 is depreciated over its useful life of 7 years rather than expensing the entire amount when it is purchased.
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(13) |
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A company borrowed $60,000 on December 1, 2005 and will make its only payment for interest when the note is paid off on June 1, 2006. The total interest for the six months will be $6,000. On the December 2005 income statement the accountant reported Interest Expense of $1,000.
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