Name: _______________
GAAP Quiz
Choose the one that best describes the principle.
1. Conservatism Principle:
a. Each expense item related to revenue earned must be recorded in the same
accounting period as the revenue it helped to earn.
b. Accountants can judge if an item requires it's own account or if it can be
combined with other less material accounts.
c. Financial information must be fair and reasonable - neither overstated nor
understated.
d. The financial information of a business is recorded and reported separately
from the owner's personal affairs.
e. Must be consistent throughout the time periods of a business.
f. Each transaction has a corresponding business document that proves the
transaction did occur.
2. Full Disclosure Principle:
a. Changes in financial information are reported for a specific period of time in the
form of financial statements.
b. Financial statements should contain all information necessary for a reader to
understand the financial condition.
c. The actual amount paid or received is the amount recorded.
d. Revenue from business transactions are recorded at the time goods and
services are sold.
e. Financial statements are prepared with the expectation that a business will
remain in operation indefinitely.
3. Business Entity:
a. Each expense item related to revenue earned must be recorded in the same
accounting period as the revenue it helped to earn.
b. Financial statements should contain all information necessary for a reader to
understand the financial condition.
c. The financial information of a business is recorded and reported separately
from the owner's personal affairs.
d. Financial statements are prepared with the expectation that a business will
remain in operation indefinitely.
e. Each transaction has a corresponding business document that proves the
transaction did occur.
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4. Materiality Principle:
a. Accountants can judge if an item requires it's own account or if it can be
combined with other less material accounts.
b. Financial statements should contain all information necessary for a reader to
understand the financial condition.
c. Financial information must be fair and reasonable - neither overstated nor
understated.
d. The actual amount paid or received is the amount recorded.
e. Must be consistent throughout the time periods of a business.
5. Objective Evidence:
a. Changes in financial information are reported for a specific period of time in the
form of financial statements.
b. Accountants can judge if an item requires it's own account or if it can be
combined with other less material accounts.
c. Financial information must be fair and reasonable - neither overstated nor
understated.
d. The actual amount paid or received is the amount recorded.
e. Financial statements are prepared with the expectation that a business will
remain in operation indefinitely.
f. Each transaction has a corresponding business document that proves the
transaction did occur.
6. Time Period Concept:
a. Each expense item related to revenue earned must be recorded in the same
accounting period as the revenue it helped to earn.
b. Changes in financial information are reported for a specific period of time in the
form of financial statements.
c. Accountants can judge if an item requires it's own account or if it can be
combined with other less material accounts.
d. Financial statements should contain all information necessary for a reader to
understand the financial condition.
e. Financial information must be fair and reasonable - neither overstated nor
understated.
7. Continuing Concern:
a. The actual amount paid or received is the amount recorded.
b. The financial information of a business is recorded and reported separately
from the owner's personal affairs.
c. Revenue from business transactions are recorded at the time goods and
services are sold.
d. Must be consistent throughout the time periods of a business.
e. Financial statements are prepared with the expectation that a business will
remain in operation indefinitely.
f. Each transaction has a corresponding business document that proves the
transaction did occur.
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8. Revenue Recognition Concept :
a. The actual amount paid or received is the amount recorded.
b. The financial information of a business is recorded and reported separately
from the owner's personal affairs.
c. Revenue from business transactions are recorded at the time goods and
services are sold.
d. Must be consistent throughout the time periods of a business.
e. Financial statements are prepared with the expectation that a business will
remain in operation indefinitely.
f. Each transaction has a corresponding business document that proves the
transaction did occur.
9. Cost Principle :
a. Changes in financial information are reported for a specific period of time in the
form of financial statements.
b. Financial statements should contain all information necessary for a reader to
understand the financial condition.
c. The actual amount paid or received is the amount recorded.
d. Revenue from business transactions are recorded at the time goods and
services are sold.
e. Financial statements are prepared with the expectation that a business will
remain in operation indefinitely.
10. Matching Principle:
a. Each expense item related to revenue earned must be recorded in the same
accounting period as the revenue it helped to earn.
b. Accountants can judge if an item requires it's own account or if it can be
combined with other less material accounts.
c. Financial information must be fair and reasonable - neither overstated nor
understated.
d. The financial information of a business is recorded and reported separately
from the owner's personal affairs.
e. Must be consistent throughout the time periods of a business.
f. Each transaction has a corresponding business document that proves the
transaction did occur.
11. Consistency Principle :
a. Accountants can judge if an item requires it's own account or if it can be
combined with other less material accounts.
b. Financial statements should contain all information necessary for a reader to
understand the financial condition.
c. Financial information must be fair and reasonable - neither overstated nor
understated.
d. The actual amount paid or received is the amount recorded.
e. Must be consistent throughout the time periods of a business.
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