Test your knowledge on the different types of accounts, the basic principles of accounting including the double-entry system, and the main financial statements like the balance sheet and income statement. This quiz covers essential concepts necessary for understanding accounting fundamentals. There’s no need to feel confused about these basic accounting principles or stressed out because you feel like there’s never enough time to finish all the questions on your accounting quizzes and tests. My students efficiently solve accounting problems with confidence in the allotted time. And I can show you how to do this too with Pass Accounting Class Resources.
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When a cause-and-effect relationship isn’t clear, expenses are reported in the accounting period when the cost is used up. For example, the $120,000 cost of equipment with a 10-year life will be charged to expense at a rate of $1,000 per month. To report a company’s net income for each month, the company will prepare adjusting entries to record each month’s share of depreciation expense, property taxes, insurance, etc. It will also prepare adjusting entries for expenses that occurred but were not paid. The going concern assumption means the accountant believes that the company will not be liquidated in the foreseeable future.
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Many businesses are required to have their financial statements audited to assure the users that the amounts are objective and reliable. If a company has two acceptable ways to record and/or report a transaction, conservatism directs the accountant to choose the alternative that results in less net income or a smaller asset amount. The accountant should be objective, but when doubt exists, conservatism should be used to break the tie. It also means that financial statements can be prepared for a group of separate legal corporations that are controlled by one corporation. This group of commonly owned corporations is referred to as the economic entity. The set of financial statements that reports the combined activity of the group is referred to as consolidated financial statements.
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- Comparability is enhanced by requiring the use of generally accepted accounting principles.
- This group of commonly owned corporations is referred to as the economic entity.
Some of the factors that may be considered include the company’s financial position, Cash Flow, profitability, and business strategy. A nongovernment group of seven members assisted by a large research staff which is responsible for the setting of accounting standards, rules, and principles for financial reporting by U.S. entities. Since 1973, US GAAP has been developed and maintained by the Financial Accounting Standards Board (FASB), a non-government, not-for-profit organization.
What factors should be considered when making decisions in accounting?
Preparation is the key to success when trying to pass your accounting class. The best way to prepare for your next accounting test or quiz is to work on accounting problems you’re likely to see on your test. This free accounting principles practice test assesses your knowledge of some of the most common questions that students encounter on their accounting exams. It will help you quickly identify your strengths and focus your efforts on where you need more study and practice.
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Accountants are expected to apply accounting principles, procedures, and practices consistently from period to period. If a change is justified, the change must be disclosed on the financial statements. In this explanation we begin with brief descriptions of many of the underlying principles, assumptions, concepts, and qualities upon which the complex and detailed accounting standards are based. Examples include historical cost, revenue recognition, full disclosure, materiality, and consistency.