Q. What accounting standard governs the recognition of revenue?
A.
IAS 1
B.
IFRS 15
C.
IAS 2
D.
IFRS 9
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Solution
IFRS 15 provides the framework for recognizing revenue from contracts with customers.
Correct Answer:
B
— IFRS 15
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Q. What is the effect of a depreciation expense on the financial statements?
A.
Increases net income
B.
Decreases net income
C.
Increases cash flow
D.
No effect on net income
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Solution
Depreciation expense reduces net income as it is an expense that is deducted from revenues.
Correct Answer:
B
— Decreases net income
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Q. What is the formula for calculating straight-line depreciation?
A.
Cost - Salvage Value / Useful Life
B.
Cost + Salvage Value / Useful Life
C.
Cost / Useful Life
D.
Cost - Useful Life
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Solution
The straight-line depreciation formula is (Cost - Salvage Value) / Useful Life.
Correct Answer:
A
— Cost - Salvage Value / Useful Life
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Q. What is the primary purpose of the final accounts?
A.
To record daily transactions
B.
To provide a summary of financial performance
C.
To prepare tax returns
D.
To manage cash flow
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Solution
Final accounts summarize the financial performance and position of a business over a specific period.
Correct Answer:
B
— To provide a summary of financial performance
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Q. Which accounting principle dictates that expenses should be matched with revenues?
A.
Revenue Recognition Principle
B.
Matching Principle
C.
Cost Principle
D.
Conservatism Principle
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Solution
The Matching Principle states that expenses should be recognized in the same period as the revenues they help to generate.
Correct Answer:
B
— Matching Principle
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Q. Which accounting standard requires companies to present their financial statements in a consistent manner?
A.
GAAP
B.
IFRS
C.
Both GAAP and IFRS
D.
Neither GAAP nor IFRS
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Solution
Both GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) require consistency in financial reporting.
Correct Answer:
C
— Both GAAP and IFRS
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Q. Which inventory valuation method is most commonly used for tax purposes?
A.
FIFO
B.
LIFO
C.
Weighted Average
D.
Specific Identification
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Solution
LIFO is often used for tax purposes as it can result in lower taxable income during periods of rising prices.
Correct Answer:
B
— LIFO
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