Master Accounting Principles and Standards: A Comprehensive Guide for MBA Students

Question 1

Revised: Which of the following is NOT a qualitative characteristic of useful financial data, as defined by the FASB?

Accepted Answer

Removed: Comparability

Answer

Relevance

Answer

Reliability

Answer

Timeliness

Question 2

Revised: Identify a type of adjusting entry:

Accepted Answer

Improved: Accrued Revenue

Answer

Depreciation Expense

Answer

Unearned Revenue

Answer

Cash on Hand

Question 3

Revised: Which financial statement displays a company's financial position?

Accepted Answer

Balance Sheet

Answer

Income Statement

Answer

Statement of Cash Flows

Answer

Statement of Owner's Equity

Question 4

Revised: Which of the following is NOT an auditor's responsibility?

Accepted Answer

Improved: To create and implement the accounting system

Answer

Improved: To provide an opinion on financial statements' fairness

Answer

To examine accounting records for accuracy

Answer

To detect fraud

Question 5

The matching principle aims to:

Accepted Answer

Match revenues to expenses incurred in generating those revenues.

Answer

Match assets to liabilities.

Answer

Report all revenues and expenses in the income statement.

Answer

Ensure that financial statements are balanced.

Question 6

Under the periodic inventory system, the cost of inventory acquired is determined:

Accepted Answer

At the end of the accounting period.

Answer

When the inventory is purchased.

Answer

When the inventory is sold.

Answer

At the beginning of the accounting period.

Question 7

Which of the following is not considered a fundamental assumption of accounting?

Accepted Answer

Accrual accounting

Answer

Going concern

Answer

Monetary unit

Answer

Time period

Question 8

Under the accrual basis of accounting, when are revenues and expenses recognized?

Accepted Answer

When the goods or services are delivered or consumed.

Answer

When cash is received and paid, respectively.

Answer

When invoices are issued or received.

Answer

When the cash is deposited into or withdrawn from the bank.

Question 9

What is the primary purpose of a balance sheet?

Accepted Answer

To present the financial position of a company on a particular date.

Answer

To summarize the financial transactions of a company over a period of time.

Answer

To project the financial performance of a company in the future.

Answer

To compare the financial performance of a company with that of other companies.

Question 10

What is the primary purpose of an income statement?

Accepted Answer

To summarize the financial performance of a company over a period of time.

Answer

To present the financial position of a company on a particular date.

Answer

To project the financial performance of a company in the future.

Answer

To compare the financial performance of a company with that of other companies.

Question 11

Reordered and Clarified: Which of the fundamental principles govern Generally Accepted Accounting Principles (GAAP)?

Accepted Answer

Maintained: All of the above

Answer

Reworded: Materiality

Answer

Reworded: Going concern

Answer

Reworded: Reliability

Question 12

The International Accounting Standards Board (IASB) is responsible for developing and issuing:

Accepted Answer

Maintained: IFRS

Answer

Removed: GAAP

Answer

Removed: US GAAP

Answer

Removed: None of the above

Question 13

Reworded for Clarity: Which of the following is a primary point of distinction between GAAP and IFRS?

Accepted Answer

Reordered: All of the above

Answer

Reordered: Scope and application

Answer

Reordered: Recognition and measurement

Answer

Reordered: Presentation and disclosure

Question 14

Reworded for Clarity: The matching principle requires that:

Accepted Answer

Reworded: Expenses be recognized concurrently with related revenues

Answer

Reworded: Assets be valued at historical cost

Answer

Reworded: Liabilities be recorded only when incurred

Answer

Removed: None of the above

Question 15

Reworded and Simplified: The going concern assumption presumes that:

Accepted Answer

Reworded: The entity will continue to operate in the foreseeable future

Answer

Removed: The entity's assets will exceed its liabilities at all times

Answer

Removed: The entity will be able to repay its debts as they become due

Answer

Removed: None of the above

Question 16

Reworded for Clarity: The historical cost principle states that:

Accepted Answer

Reworded: Assets should be recorded at their acquisition cost

Answer

Removed: Expenses be recognized when incurred

Answer

Removed: Revenues be recognized when earned

Answer

Removed: None of the above

Question 17

Which of the following is the primary objective of financial reporting under GAAP?

Accepted Answer

To assist users in making well-informed decisions about an entity's financial position and performance.

Answer

To provide information solely for investors to analyze.

Answer

To ensure all financial statements are prepared using the same methods.

Answer

To provide comprehensive information about the operations of an entity.

Question 18

What is a principal difference between GAAP and IFRS?

Accepted Answer

GAAP is principle-based, while IFRS is rules-based.

Answer

IFRS is more widely accepted than GAAP.

Answer

GAAP is mandatory in the United States, while IFRS is only mandatory in Europe.

Answer

GAAP focuses on providing information to investors, while IFRS focuses on providing information to creditors.

Question 19

What is the final step in the accounting cycle?

Accepted Answer

Closing entries.

Answer

Recording transactions in a journal.

Answer

Preparing a trial balance.

Answer

Adjusting entries.

Question 20

Which of the following is a cloud-based accounting software solution?

Accepted Answer

Oracle NetSuite

Answer

SAP

Answer

Microsoft Dynamics

Answer

QuickBooks Desktop

Question 21

Which key principle of GAAP emphasizes the significance of information to users of financial statements?

Accepted Answer

Materiality

Answer

Consistency

Answer

Prudence

Answer

Good Faith

Question 22

In what way do IFRS and GAAP compare to each other?

Accepted Answer

Similar, but with some differences

Answer

Identical frameworks

Answer

Completely different frameworks

Answer

Only used in specific industries

Question 23

Which organization is primarily responsible for setting accounting standards in the United States under GAAP?

Accepted Answer

Financial Accounting Standards Board (FASB)

Answer

International Accounting Standards Board (IASB)

Answer

Securities and Exchange Commission (SEC)

Answer

American Institute of Certified Public Accountants (AICPA)

Question 24

What is a primary advantage of using IFRS?

Accepted Answer

Increased comparability of financial statements across borders

Answer

Reduced accounting costs

Answer

Improved financial performance

Answer

Enhanced investor confidence

Question 25

Under the matching principle, when are expenses recognized?

Accepted Answer

In the period in which the related revenues are earned

Answer

When they are incurred

Answer

When they are paid

Answer

Equally over the asset's useful life

Question 26

Which accounting principle requires that assets be recorded at their original purchase price?

Accepted Answer

Historical cost principle

Answer

Fair value principle

Answer

Depreciation principle

Answer

Amortization principle

Question 27

The historical cost principle requires that:

Accepted Answer

Assets be recorded at their original cost

Answer

Assets be recorded at their current market value

Answer

Liabilities be recorded at their current market value

Answer

Liabilities be recorded at their original cost

Question 28

According to the matching principle, expenses should be recognized when:

Accepted Answer

Incurred and revenue is earned

Answer

Incurred and paid

Answer

Cash is paid

Answer

Revenue is collected

Question 29

The historical cost principle requires that assets be recorded at:

Accepted Answer

Original acquisition cost

Answer

Current market value

Answer

Replacement cost

Answer

Liquidation value

Question 30

The accrual basis of accounting requires that transactions be recorded when:

Accepted Answer

The revenue or expense is earned or incurred

Answer

Cash is received or paid

Answer

The transaction occurs

Answer

Financial statements are prepared

Question 31

The going concern assumption assumes that:

Accepted Answer

The business will continue to operate in the foreseeable future

Answer

The business will be liquidated in the near term

Answer

The business's current assets exceed its current liabilities

Answer

The business has a positive net income

Question 32

Which of the following is NOT a primary objective of Generally Accepted Accounting Principles (GAAP)?

Accepted Answer

Detection and prevention of fraud

Answer

Fair presentation of financial information

Answer

Uniformity in accounting practices

Answer

Promoting investor confidence

Question 33

The International Financial Reporting Framework (IFRS) is primarily based on which of the following principles?

Accepted Answer

Fair value principle

Answer

Historical cost principle

Answer

Matching principle

Answer

Materiality principle

Question 34

The matching principle requires that:

Accepted Answer

Expenses be matched to the revenue they helped generate

Answer

Expenses be recorded when they are incurred

Answer

Revenue be recorded when earned

Answer

Assets be valued at their current market price

Question 35

The historical cost principle states that:

Accepted Answer

Assets are recorded at their original acquisition cost

Answer

Assets are revalued to reflect their current market price

Answer

Depreciation is calculated based on the fair value of assets

Answer

Liabilities are recorded at their present value

Question 36

The Financial Accounting Standards Board (FASB) is the primary body responsible for setting accounting standards in:

Accepted Answer

United States

Answer

United Kingdom

Answer

European Union

Answer

International Financial Reporting Committee

Question 37

Which statement accurately describes International Financial Reporting Standards (IFRS)?

Accepted Answer

IFRS is a principles-based accounting standard.

Answer

IFRS and GAAP are identical in their principles and applications.

Answer

IFRS is a rules-based accounting standard.

Answer

IFRS is primarily used in the United States.

Question 38

A company holds a significant amount of inventory. Which accounting principle suggests that this inventory should be valued at the lower of cost or market value?

Accepted Answer

Conservatism

Answer

Matching

Answer

Going Concern

Answer

Materiality

Question 39

A company issues a 10-year bond at a discount. How is this discount typically amortized over the bond's life?

Accepted Answer

The discount is amortized as interest expense over the life of the bond.

Answer

The discount is amortized as a reduction in the principal amount.

Answer

The discount is recognized as a gain in the year of issuance.

Question 40

What best describes the 'matching' principle in accounting?

Accepted Answer

Matching expenses with the revenues they generate within the same accounting period.

Answer

Matching cash inflows with cash outflows.

Answer

Matching assets with their related liabilities.

Question 41

A company changes its inventory accounting method from FIFO to weighted-average. Which accounting principle requires this change to be disclosed in the financial statements?

Accepted Answer

Consistency

Answer

Accrual Accounting

Answer

Going Concern

Answer

Materiality

Question 42

Which of the following is NOT considered an 'accounting standard'?

Accepted Answer

A company's internal control policy

Answer

GAAP

Answer

IFRS

Answer

FASB pronouncements

Question 43

Which organization is primarily responsible for establishing and issuing GAAP in the United States?

Accepted Answer

Financial Accounting Standards Board (FASB)

Answer

Securities and Exchange Commission (SEC)

Answer

International Accounting Standards Board (IASB)

Answer

American Institute of Certified Public Accountants (AICPA)