Unit 1: Introduction to Accounting - Practice Quiz

1 Accounting is often referred to as the:

2 The basic accounting equation is:

3 If total assets are $80,000 and liabilities are $30,000, the capital is:

4 Under the traditional rules, for a personal account the rule is:

5 The rule "Debit what comes in, credit what goes out" applies to which type of account?

6 The rule "Debit all expenses and losses, credit all incomes and gains" applies to:

7 Which of the following is a primary objective of accounting?

8 Which of the following is a limitation of accounting?

9 Which of the following is an advantage of accounting?

10 The concept that treats the business as separate from its owner is the:

11 The assumption that a business will continue to operate for the foreseeable future is called:

12 The convention of conservatism means:

13 The money measurement concept states that accounting records only transactions that are:

14 Amounts owed by a business to outsiders are known as:

15 Cash or goods withdrawn by the owner for personal use is called:

16 IFRS stands for:

17 The main relevance of IFRS is to:

18 Which of the following is a qualitative characteristic of financial information under IFRS?

19 Which of the following is an element of financial statements?

20 A key difference between IFRS and GAAP is that IFRS is:

21 A business starts with capital of and takes a bank loan of . It then buys machinery worth in cash. What is the total of assets after these transactions?

22 If a firm's total assets are and outside liabilities are , what is the owner's capital?

23 A business pays cash to a creditor. Under the modern rules of accounting, how are the accounts affected?

24 Under the traditional (golden) rules, salary paid to an employee is recorded by applying which rule?

25 A company records a machine at its purchase price of and does not adjust it upward even though its market value rises to . Which concept is being followed?

26 A trader anticipates a possible loss from a lawsuit and creates a provision, but does not record an expected gain from another case. This treatment reflects which convention?

27 Revenue from a credit sale is recognised when goods are delivered, even though cash is received later. Which concept supports this treatment?

28 The owner's personal car expenses are kept separate from the business's books. Which concept justifies this separation?

29 Which of the following best describes the primary objective of accounting?

30 Which statement correctly identifies a limitation of accounting?

31 A firm values inventory at cost in one year and at net realisable value the next year. Which limitation of accounting does this highlight?

32 A business owes to a supplier for goods purchased on credit. In accounting terms, the supplier is classified as a:

33 The amount of cash or goods withdrawn by the owner from the business for personal use is termed:

34 Goods purchased for resale that remain unsold at the end of the accounting period are referred to as:

35 IFRS standards are issued by which body?

36 What is the main relevance of adopting IFRS across countries?

37 Under the IFRS Conceptual Framework, the two fundamental qualitative characteristics of useful financial information are:

38 Which of the following is an enhancing qualitative characteristic rather than a fundamental one under IFRS?

39 According to the IFRS framework, a present obligation of an entity arising from past events that is expected to result in an outflow of resources is defined as a(n):

40 Which statement correctly distinguishes IFRS from US GAAP regarding inventory valuation?

41 A business starts with capital of . It buys goods worth on credit, sells half of these goods for cash, and pays to the creditor. What is the total of the accounting equation (Assets = Liabilities + Capital) after these transactions?

42 Under the modern (American) approach, a business receives interest on investments. Which pair of debit/credit correctly records this transaction?

43 A company records a purchased patent at cost but refuses to record a self-generated brand of equal economic value. Which combination of concepts best explains this treatment?

44 A firm using LIFO for inventory under US GAAP plans to transition to IFRS. What is the primary implication of this shift regarding inventory valuation?

45 Financial information that is capable of making a difference in users' decisions and is free from material error and bias satisfies which two fundamental qualitative characteristics under the IFRS conceptual framework?

46 Under the IFRS framework, an obligation that arises from a past event and is expected to result in an outflow of economic resources, but whose amount must be estimated, is classified as which element?

47 The owner withdraws goods costing (sale value ) for personal use. How does this affect the accounting equation?

48 A company recognises anticipated losses on a pending lawsuit but does not recognise a probable gain from another suit. This asymmetric treatment is a direct application of which convention, and which qualitative feature does it potentially threaten?

49 A stakeholder wants to assess whether a firm can generate sufficient cash to meet its short-term obligations. Which specific objective of accounting most directly serves this need?

50 During a period of high inflation, financial statements prepared under the historical cost basis may overstate profit. Which limitation of accounting does this illustrate?

51 Rent paid in advance is recorded. Under the traditional approach, 'Prepaid Rent' is treated as which type of account, and what is the applicable rule?

52 A multinational group lists on stock exchanges in several countries. The primary relevance of adopting IFRS for such a group is that it:

53 A business sells goods on credit for ; the customer returns goods worth and later becomes insolvent, paying only in the rupee on the balance. The amount treated as 'Bad Debts' is:

54 Under the revised IFRS Conceptual Framework, income and expenses are defined primarily in terms of changes in which element?

55 A firm's assets are and liabilities are . It issues a bonus (capitalisation) transferring from reserves to share capital. What is the effect on total equity and total assets?

56 A company treats a stapler as an expense rather than capitalising it as an asset over its useful life. Which concept justifies this, and how does it interact with the Matching concept?

57 Which statement best characterises a structural difference between IFRS and US GAAP?

58 A firm delays publishing its annual results by eight months, providing highly detailed and error-free figures. Which enhancing qualitative characteristic is most compromised despite the accuracy?

59 Goods costing are destroyed by fire; the insurance company admits a claim of . Which journal entry pair correctly records the loss and the claim?

60 A manager values employee skill and customer loyalty as key business strengths but finds them absent from the balance sheet. This omission arises from which limitation, linked to which concept?