GAAP

In accounting, GAAP (generally accepted accounting principles) refers to a collection of accounting rules and standards that are widely followed in the financial reporting industry. The abbreviation is pronounced “gap.”

Specifications for generally accepted accounting principles (GAAP) include meanings of concepts and principles as well as sector rules. Generally accepted accounting principles (GAAP) are intended to ensure that accounting information is clear and accountable from one public organization to another, as well as from one accounting period to another.

GAAP was established in the 1970s and consists of the four major rules and standards listed below:

Methods of accrual accounting are used. Under GAAP, revenue is reported when a service or goods is sold, rather than when pay is collected; direct expenses for sales made are recorded when a sale is completed, and indirectly expenses are recorded when payments for expenses are received.

Degradation and capital expenditures are two types of expenses. Large-scale asset acquisitions incur costs that must be accounted for across the asset’s entire useful life. For instance, an item with a 10-year life is accounted during at a rate of 10% for the first ten years of its existence.

Costs from the past are being reported. Some assets, including real estate, equipment, and facilities, are valued at their original acquisition costs rather than their current market values, which is known as historical cost accounting.

Bad debts must be reported. Companies that owe considerable amounts of money to customers, known as accounts receivable, are required to report the likelihood that one or more of that cash may not be paid and will result in income being forfeited.

Listed below are some GAAP multiple choice questions and answers that will aid students in brushing up on their understanding of the idea of GAAP, as well as some further resources.

1.  GAAP is an abbreviation for:

1. 1. Accepted Accounting Principles (gaap and Practices)
   2. Standard Accounting Principles and Practices (GAAP)
   3. Generally Accepted Accounting Principles.
   4. None of the options are acceptable.

Answer: 3

2.  Which accounting principle states that companies and their owners should be treated as separate legal entities in accounting?

1. 1. Assumption of the Monetary Unit
   2. The Concept of a Business Entity
   3. The Assumption of Periodicity
   4. The Concept of a Going Concern

Answer: 2

3.  According to which principle, expenditure must be recorded at the same time as the revenue to which they correspond? Q.3 Costs or expenses must be recorded at the very same time as the profits to which they correspond is specified by which principle?

1. 1. The Principle of Equivalence
   2. The Continuity of Business Principle
   3. The Principle of Consistency
   4. The Prudence Principle’s Response

Answer: 1

4.  Which theory states that “for every debit, there is an equal and opposite credit”?

1. 1. The Concept of Money Measurement
   2. accounting period accounting period concept
   3. The Concept of a Separate Entity
   4. The Concept of Dual Aspects

Answer: 4

5.  Which of the following methods is the most acceptable for determining income?

1. 1. The application of the normal rate of return on capital invested
   2. To use the average return on capital in the industry as a guideline.
   3. To ensure that costs and revenues are in sync.
   4. To make the distinction in net worth between two different dates.

Answer: 3

6.  What is the proper form of the Accounting equation?

1. 1. Assets minus Receivables equals equity.
   2. Assets minus Receivables equals equity.
   3. Equity is equal to the sum of assets and fewer liabilities.
   4. Equity is equal to the sum of assets and liabilities.

Answer: 3

7.  When, according to the revenue recognition principle, should sales revenues be recognized?

1. 1. A purchase order is placed for merchandise.
   2. In the case of a purchase, ownership of goods is transferred from seller to buyer.
   3. The payment is made in cash.
   4. All of the foregoing

Answer: 2

8.  Accounting doesn’t at all record non-financial transactions due to the application of which concept?

1. 1. The concept of a going concern
   2. The concept of money as a unit of measurement
   3. The concept of accrual
   4. The concept of cost

Answer: 2

9.  As per to which of the following concepts is the owner of the business treated as a lender of the business?

1. 1. The concept of an entity
   2. The concept of materiality
   3. The concept of consistency
   4. The concept of periodicity

Answer: 1

10.  As a general rule, any financial or business transaction should be recorded in accordance with the accrual concept of accounting.

1. 1. the period during which profits are computed
   2. at the time of preparing the balance sheet
   3. when money is received or paid in cash
   4. when the transaction takes place

Answer: 4

11.  Because of this, a contingent liability is recorded on the balance sheet.

1. 1. The Convention on Public Disclosure
   2. The Convention on the Materiality of Things
   3. The consistency convention is a formal agreement between two parties.
   4. None of the options is available.

Answer: 1

12.  When revenue exceeds earnings, the term “earnings” is used.

1. 1. The transaction is completed.
   2. The manufacturing process has been completed.
   3. The payment is made in cash.
   4. None of the options are available.

Answer: 1

13.  Accounting doesn’t at all record non-financial transactions as a result of the accounting principle of separation of duties

1. 1. The idea of accrual
   2. The concept of an entity
   3. The concept of measurement
   4. None of the options are available.

Answer: 3

14.   Which of the following principles indicates that sometimes the owner of the capital may be viewed as a creditor of the company?

1. 1. The concept of monetary measurement
   2. The concept of cost
   3. The idea of a business entity
   4. None of the options are available.

Answer: 3

15.  Application of the…… convention to append components of financial statements

1. 1. Affirmation of faith (conversions)
   2. Publication of information
   3. Consistency is important.
   4. The importance of materiality

Answer: 2

16.   Accounting for a pen as a cost rather than an asset is owing to the fact that the Convention

1. 1. The concept of materiality
   2. Conservatism is a political philosophy that advocates for the preservation of traditional values.
   3. Consistency is important.
   4. Information disclosure

Answer: 3

17.  Implementing the written down value depreciation method on a particular asset is due to the…….. convention, as explained in the answer

1. 1. Conservatism is a political philosophy that advocates for limited government.
   2. Consistency is important.
   3. The importance of materiality
   4. Information disclosure

Answer: 2

18.  The stock is valued at the lower of its cost or market value since it is more stable.

1. 1. Consistency is important.
   2. Conservatism is a political philosophy that advocates for the preservation of traditional values.
   3. Information disclosure
   4. The importance of materiality

Answer: 2

19.  Making provisions for dubious debts is in accordance with the…… convention.

1. 1. Consistency is important.
   2. Publication of information
   3. Conservatism is a political philosophy that advocates for the preservation of existing institutions
   4. The importance of materiality

Answer: 3

20.  A contingent liability, which appears on the balance sheet, is created.

1. 1. Consistency is important.
   2. The importance of materiality
   3. Conservatism is a political philosophy that advocates for the preservation of existing institutions.
   4. Information disclosure

Answer: 4

21.  Because of this, the corporation is required to prepare financial statements on a regular basis.

1. 1. The idea of accrual
   2. The concept of “going concern”
   3. The Concept of Time
   4. The idea of a business entity

Answer: 3

22.  Which principle implies that the same accounting methods should be applied from one period to the next?

1. 1. Consistency is important.
   2. The time in which the accounting records are kept.
   3. Conservatism is a political philosophy that advocates for the preservation of existing institutions.
   4. The importance of materiality

Answer: 1

23.  Which accounting principle governs expenses that have not yet been paid but are nevertheless documented in the accounting records?

1. 1. Realization is the first step.
   2. Conservatism is a political philosophy that advocates for the preservation of traditional values.
   3. The Measurement of Money
   4. Accumulation

Answer: 4

24.  The classification of assets into current and fixed assets is as follows?

1. 1. The concept of “going concern”
   2. Aspects that are dual in nature
   3. The price
   4. The Measurement of Money

Answer: 1