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Quiz - Gaap

The document contains a quiz with 24 multiple choice questions testing understanding of generally accepted accounting principles (GAAP). GAAP is a framework for financial accounting and reporting that is recognized as authoritative by accountants in the United States. The questions cover key GAAP concepts like the organizations responsible for establishing GAAP, principles such as consistency and materiality, and financial statements prepared according to GAAP.

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96 views

Quiz - Gaap

The document contains a quiz with 24 multiple choice questions testing understanding of generally accepted accounting principles (GAAP). GAAP is a framework for financial accounting and reporting that is recognized as authoritative by accountants in the United States. The questions cover key GAAP concepts like the organizations responsible for establishing GAAP, principles such as consistency and materiality, and financial statements prepared according to GAAP.

Uploaded by

iraleigh17
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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QUIZ

Read each question carefully. Select the best answer choice from the options provided. Choose only one
answer for each question.

1. Which organization is primarily responsible for establishing and updating GAAP in the United States?
a) International Accounting Standards Board (IASB)
b) Securities and Exchange Commission (SEC)
c) Financial Accounting Standards Board (FASB)
d) American Institute of Certified Public Accountants (AICPA)

2. What is the primary objective of GAAP?


a) To ensure profitability of businesses
b) To facilitate tax planning for corporations
c) To provide a framework for accurate financial reporting
d) To regulate corporate governance practices

3. Which of the following is a key principle of GAAP related to the timing of recognizing expenses and
revenues?
a) Relevance
b) Prudence
c) Consistency
d) Matching Principle

4. Which principle of GAAP suggests that when uncertainty exists, accountants should recognize losses
and liabilities sooner rather than later?
a) Relevance
b) Substance Over Form
c) Materiality
d) Prudence

5. Which financial statement is not prepared according to GAAP?


a) Income Statement
b) Balance Sheet
c) Statement of Cash Flows
d) Pro Forma Statement

6. Which of the following is true regarding the consistency principle of GAAP?


a) It requires using different accounting methods for similar transactions.
b) It requires using the same accounting methods for similar transactions across different periods.
c) It allows companies to change accounting methods frequently to adapt to market conditions.
d) It applies only to large corporations, not to small businesses.
7. What is the term for an item that could influence the economic decisions of users and therefore must
be disclosed in financial statements?
a) Prudence
b) Materiality
c) Consistency
d) Relevance

8. Which of the following is a fundamental qualitative characteristic of financial information according to


GAAP?
a) Relevance
b) Consistency
c) Prudence
d) Comparability

9. Which of the following organizations issued the original pronouncements that eventually became part
of GAAP?
a) International Financial Reporting Standards Foundation (IFRSF)
b) American Institute of Certified Public Accountants (AICPA)
c) Securities and Exchange Commission (SEC)
d) Financial Accounting Standards Board (FASB)

10. Under GAAP, which principle requires companies to record transactions based on their economic
substance rather than their legal form?
a) Consistency
b) Substance Over Form
c) Materiality
d) Relevance

11. Which of the following is not a primary objective of financial reporting according to GAAP?
a) Providing information useful for assessing cash flow prospects
b) Providing information useful for assessing liquidity and solvency
c) Providing information useful for assessing managerial performance
d) Providing information useful for assessing economic resources and claims

12. Which organization oversees the accounting profession in the United States and plays a significant
role in shaping GAAP?
a) American Institute of Certified Public Accountants (AICPA)
b) Securities and Exchange Commission (SEC)
c) Financial Accounting Standards Board (FASB)
d) International Accounting Standards Board (IASB)

13. Which principle of GAAP emphasizes the need for information to be understandable to users with
reasonable knowledge of business and economic activities?
a) Comparability
b) Relevance
c) Faithful Representation
d) Understandability

14. Which financial statement reports a company's financial position at a specific point in time?
a) Income Statement
b) Statement of Cash Flows
c) Balance Sheet
d) Statement of Retained Earnings

15. Which of the following is a key characteristic of GAAP?


a) It is a static set of rules that never changes.
b) It allows companies to choose any accounting method they prefer.
c) It provides flexibility for companies to manipulate financial statements.
d) It provides a common framework for financial reporting.

16. Which of the following is not a basic accounting assumption under GAAP?
a) Going Concern
b) Historical Cost
c) Accrual Basis
d) Conservatism

17. Which of the following statements is true regarding the GAAP hierarchy?
a) Authoritative literature issued by the SEC takes precedence over FASB standards.
b) In the GAAP hierarchy, IFRS is considered the highest level of authority.
c) Consensus positions of the Emerging Issues Task Force (EITF) rank below authoritative standards
issued by the FASB.
d) Company policies and procedures supersede all other sources of GAAP guidance.

18. Under GAAP, revenue should generally be recognized when:


a) Cash is received from customers.
b) Services are performed or goods are delivered, and there is persuasive evidence of an arrangement,
the price is fixed or determinable, and collectibility is reasonably assured.
c) Services are performed or goods are delivered, regardless of collectibility.
d) The company needs additional cash flow.

19. Which of the following is an example of a situation where the consistency principle of GAAP might
be violated?
a) Using different methods for inventory valuation from one year to the next.
b) Reporting revenue using different currency units.
c) Changing the fiscal year-end date for reporting purposes.
d) Adopting a new accounting standard issued by the FASB.

20. The primary goal of the GAAP framework is to:


a) Ensure companies pay their taxes accurately.
b) Provide a set of rules that companies must follow.
c) Enhance the comparability, consistency, and transparency of financial reporting.
d) Increase the complexity of financial statements.

21. Which of the following is a key characteristic of the materiality principle under GAAP?
a) It allows companies to disregard insignificant items in financial reporting.
b) It requires companies to disclose all information, regardless of its importance.
c) It encourages companies to overstate their financial position.
d) It suggests that companies should only report information that is easy to understand.

22. Which of the following is a true statement about GAAP?


a) It only applies to publicly traded companies.
b) It is a set of guidelines that companies may choose to follow or ignore.
c) It provides a framework for financial reporting but allows for flexibility in implementation.
d) It is enforced by the Internal Revenue Service (IRS) to ensure accurate tax reporting.

23. Which of the following is a key principle of GAAP related to the recording of expenses?
a) Consistency
b) Substance Over Form
c) Materiality
d) Matching Principle

24. Which organization is responsible for overseeing the enforcement of GAAP for publicly traded
companies in the United States?
a) American Institute of Certified Public Accountants (AICPA)
b) Securities and Exchange Commission (SEC)
c) Financial Accounting Standards Board (FASB)
d) Internal Revenue Service (IRS)

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