Accounting Principles and Concepts Quiz

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What does the Going Concern Concept in Accounting assume?

The business will continue to exist for a long period of time. (correct)

The business will cease operations soon.

The business will change its name frequently.

The business will only exist for a specific financial year.

In the Substance over Form concept in Accounting, what is preferred?

Formal view

Theoretical view

Legal view

Practical view (correct)

What is an example of substance over form in Accounting?

Ignoring financial regulations.

Selling a product without a license.

A machine bought on hire purchase being shown as a fixed asset. (correct)

Not recording any transactions.

When should final accounts be drawn up according to the Going Concern Concept?

When a business is expected to continue operating. Signup and view all the answers

How does the Going Concern Concept impact decision-making in Accounting?

It affects how assets and liabilities are valued. Signup and view all the answers

Which accounting principle states that financial information should be free from significant errors, bias, and independently verified?

Reliability Signup and view all the answers

Who uses the financial statements to decide whether to provide a company with a loan?

Banker Signup and view all the answers

What is the main reason for drafting financial statements in a common format?

To provide a common understanding among accounting users Signup and view all the answers

Which of the following is NOT an accounting principle for preparing consistent financial statements?

Consistency Signup and view all the answers

Who would refer to the income statement and balance sheet to know the profit of a business?

Owner Signup and view all the answers

What characteristic must financial information have to be considered relevant according to accounting principles?

Affecting business decisions Signup and view all the answers

According to the concept of Realisation Concept, when are profits considered realized?

When cash or a debtor replaces the goods or services Signup and view all the answers

Which accounting concept dictates that only transactions expressible in monetary terms are to be recorded?

Money Measurement Concept Signup and view all the answers

In accounting, the Dual Aspect Concept dictates that every transaction affects how many items?

Two Signup and view all the answers

Under the Business Entity Concept, whose transactions should be recorded?

Owner's private transactions Signup and view all the answers

According to the Historic Cost Concept, at what value are transactions recorded?

At their cost to the business Signup and view all the answers

'Profits are realized when a customer takes ownership of the good or service regardless of whether money is received straight away' - which concept does this statement align with?

Realisation Concept Signup and view all the answers

What concept ensures that transactions of a similar nature should always be recorded in a consistent way?

Consistency Concept Signup and view all the answers

Which concept states that you should not waste time recording trivial transactions involving very small amounts of money?

Materiality Concept Signup and view all the answers

What concept dictates that only the income earned and expenses incurred in the current financial year should be included in the Trading and Profit and Loss Account?

Accruals (Matching) Concept Signup and view all the answers

Which concept ensures that profits are not overstated and assets are not shown to be too high?

Prudence Concept Signup and view all the answers

What is the main purpose of the Consistency Concept?

To allow meaningful year-to-year comparison Signup and view all the answers

Which concept suggests that what is trivial for a large business could be material for a small business?