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.

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f. Each transaction has a corresponding business document that proves the transaction did occur.

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.

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e. Must be consistent throughout the time periods of a business.

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