Generally Accepted Accounting Principles and Sample Test Paper

7694 Words Jan 30th, 2013 31 Pages
MULTIPLE CHOICE QUESTIONS (Answers are on page no 16 onwards) Q. What is the primary objective of most businesses? a. To maximize profits b. To pay dividends to stockholders c. To provide a benefit to society d. To manufacture a quality product ANS:

Q. When a business borrows money, it incurs a(n) a. tax. b. liability. c. receivable. d. addtional equity. ANS: Q. When a product is sold, this cost is often called a. cost of goods sold. b. revenue. c. products. d. retained earnings. ANS: Q. The financial resources a business owns are called a. assets. b. liabilities. c. earnings. d. stockholders' equity. ANS:

Q. Rights to receive money from customers are a. liabilities. b. prepaid expenses. c. accounts
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b. balance sheet. c. statement of cash flows. d. retained earnings statement. ANS:

Q. The debt created by a business when it makes a purchase on credit is referred to as an a. account payable. b. account receivable. c. asset. d. expense payable. ANS:

Compiled by Manek. 2011.

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Q. If there was 10,000 O equity at start, net income of $20,000, and O equity at end of $16,000, how much were withdrawn? a. $10,000 b. $4,000 c. $6,000 d. $14,000 ANS:

Q.During 2010, Smith Corporation had an increase in total assets of $70,000 and an increase in total liabilities of $90,000. Assuming that capital introduced by $5,000 and no money withdrawn, calculate Smith’s net income or net loss for 2010. a. Net loss of $15,000 b. Net loss of $20,000 c. Net loss of $25,000 d. Net income of $15,000 ANS: Q. The "rules" of accounting are called a. income tax regulations. b. SEC regulations. c. Internet rules. d. Generally Accepted Accounting Principles. ANS:

Q. Which principle determines the amount initially entered into the records for purchases? a. Cost principle b. Going concern concept c. Business entity concept d. Objectivity concept ANS:

Q. Expressing financial data as if a business will continue operating for an indefinite period time refers to which concept? a. Business entity concept b. Going concern concept c. Objectivity concept d. Adequate disclosure concept ANS:

Compiled by Manek. 2011.

P age |5

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