THEORY OF ACCOUNTS 13.

13. “The accounting entity is assumed to be separate and distinct from other entities and from the owners,
1. Which of the following statements is/are true? managers and employees which constitute the firm”. This postulate is referred to as
I. Accounting is a service activity intended to fulfill a useful function in society a. Matching c. Historical cost
II. Accounting involves the art of recording, classifying and summarizing b. Going concern d. Specific-separate-entity
transaction and events, and interpreting the results thereof. 14. Unless there is specific evidence to the contrary, the firm will continue to be in existence in the foreseeable
III. Accounting is an art but not a science future. This postulate is referred to as
IV. Accounting provides quantitative financial information intended to be useful in making a. Matching c. Historical cost
economic decisions b. Going concern d. Specific-separate-entity
a. I, II, III, IV c. I, II, IV 15. “Money is the best measuring unit of a firm’s assets, liabilities and equity, as well as changes therein; its
b. I, II, III d. II, III, IV instability is immaterial”. This postulate is referred to as
2. The branch of accounting concerned with the presentation of financial information primarily for use of a. Historical cost c. Money-measuring unit
third person outside of business enterprise. b. Revenue recognition d. Fiscal period
a. Financial Accounting c. Government Accounting 16. “Cost is normally the proper money measurement of a firm’s assets, liabilities, and equity, and changes in
b. Management Accounting d. All of the above them because it is objective, verifiable and convenient to obtain, approximating value at time of acquisition. “
3. Accounting is an art because This postulate is referred to as
a. of the existence of a body knowledge governing accounting practice a. Historical cost c. Money measuring unit
b. of accounting theory b. Revenue recognition d. Fiscal period
c. the necessity of applying creative skill and ability 17. “The life of a business firm can be segmented into short run time periods in order to provide timely
d. None of the above financial information to aid in financial decision making; hence, periodic reporting implies the use of accrual
4. Financial accounting is the branch of accounting that focuses on accounting and use of estimates ( approximations) and informed judgment by accountants.” This postulate is
a. special purpose reports of financial position and results of operations referred to as
b. financial statements a. Historical cost c. Money measuring unit
c. the various need of statement users b. Revenue recognition d. Fiscal period
d. general purpose reports of financial position and results of operations 18. “The point of sale when goods are delivered or services are rendered, is the time at which revenue is to be
5. General-purpose information is recognized.” This postulate is referred to as
a. not intended to satisfy the specialized needs of individual users. a. Historical cost c. Money measuring unit
b. intended to satisfy the specialized needs of individual users b. Revenue recognition d. Fiscal period
c. not intended to satisfy the common needs of individual users. 19.“Goods and services used (“expenses”) during the fiscal period can be associated with the revenue earned
d. Provided by managerial accounting. during the same fiscal period”. This postulate referred to as
6. Which of the following is not true? a. Matching c. Historical Cost
a. Accounting is concerned primarily with quantitative information used by persons who must b. Going concern d. Specific-separate entity
make economic decisions among alternative actions. 20. “Exception to the application of accounting theory are permitted if the amount involve is not material;
b. Governmental accounting is also known as municipal or fund accounting financial reporting is concerned only with information that is significant enough to affect evaluations or
c. The branch of accounting concerned with the presentation of financial information to assist decisions.” This convention is called
management in planning and controlling operations is called managerial accounting. a. Conservatism c. Consistency
d. Financial accounting emphasizes special purpose information based on presumption that b. Objectivity d. Materiality
significant numbers of users need similar information. 21. “The same accounting procedures for a given entity should be used from one period to the next. Changes
7. The body of rules and principles which govern accounting practices is referred to as may however be made if it will result in more accurate or useful information for decision making provided it
a. Accounting practice c. Accounting concepts disclosed”. The convention is called
b. Accounting principles d. Accounting theory a. Conservatism c. Consistency
8. The layers of the structure of accounting theory include the following except b. Objectivity d. Materiality
a. methods and procedures c. measurement and recognition 22. “Financial statements of different firms should be based on similar accounting principles and procedures
b. principles d. postulates and conventions in order to aid users of financial statements in finding similarities and differences among firms for purposed
9. The basic assumption or premises on which accounting principles rest are called of financial decision making” This convention is called
a. accounting postulates c. accounting principles a. Consistency c. Objectivity
b. accounting procedures d. accounting laws b. Comparability d. Conservatism
10. The normative attitudes or ideas of the accounting profession as to what ought to represent good 23. “Accounting measurement should be based on evidence that is verifiable by competent persons”. This
accounting practice and which modify the application of accounting principles are known as convention is called
a. accounting postulates c. accounting procedures a. Consistency c. Objectivity
b. accounting conventions d. accounting principles b. Comparability d. Conservatism
11. The general guidelines used in accounting practice that are based on substantial authoritative support are 24. “The accountant should recognize all possible losses but anticipate no profit. Where alternative courses of
called a. Accounting postulates c. accounting procedures action are available, he should choose the alternative least favorable to owners’ equity.
b. accounting conventions d. accounting principles a. Consistency c. Objectivity
12. The specific methods used by accountants in carrying out t5he general guidelines provided by GAAP, b. Comparability d. Conservatism
including the numerous rules specifying how financial data should be recorded, classified, summarized and
reported are referred to as
a. accounting postulates c. accounting procedures
b. accounting conventions d. accounting principles