Generally Accepted Accounting Principles or GAAP is a defined set of rules and procedures that needs to be followed in order to create financial statements, which are consistent with the industry standards. It is the accounting standard that is followed in the US.
Following are some of the GAAP multiple choice questions and answers that will help the students in brushing up their understanding of the concept of GAAP.
Q.1 GAAP stands for:
(a) Generally Accepted Accounting Provisions
(b) Generally Accepted Accounting Policies
(c) Generally Accepted Accounting Principles
(d) None of these
Q.2 Which accounting principle states that companies and owners should be treated as separate entities.
(a) Monetary Unit Assumption
(b) Business Entity Concept
(c) Periodicity Assumption
(d) Going Concern Concept
Q.3 Cost or expenses must be recorded at the same time as the revenue to which they correspond is specified by which principle?
(a) Matching Principle
(b) Going Concern Principle
(c) Consistency Principle
(d) Prudence Principle
Q.4 Which concept states that “for every debit, there is a credit”?
(a) Money Measurement Concept
(b) Accounting Period Concept
(c) Separate Entity Concept
(d) Dual Aspect Concept
Q.5 For measuring income, the most acceptable method is?
(a) To apply normal rate of return on capital invested
(b) To apply the average return in industry on capital
(c) To match the cost with revenue
(d) To find out the difference in net worth as on two dates
Q.6 The correct form of Accounting equation is
(a) Assets – Receivable = Equity
(b) Assets + Receivable = Equity
(c) Assets – Liabilities = Equity
(d) Assets + Liabilities = Equity
Q.7 As per revenue recognition principle, sales revenues should be recognized at the time when?
(a) Order is taken for merchandise
(b) Ownership of goods gets transferred from the seller to the buyer
(c) Cash is received
(d) All of the above
Q.8 Due to which concept, accounting does not record non-financial transactions?
(a) Going concern concept
(b) Money measurement concept
(c) Accrual concept
(d) Cost concept
Q.9 The owner of the business is treated as a creditor of the business according to which of the following concept?
(a) Entity concept
(b) Materiality concept
(c) Consistency concept
(d) Periodicity concept
Q.10 As per the accrual concept of accounting, any financial or business transaction should be recorded:
(a) when profit is computed
(b) when balance sheet is prepared
(c) when cash is received or paid
(d) when transaction occurs
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