Generally Accepted Accounting Principles - GAAP

Question 1

_______________________ common set of accounting principles,
standards and procedures that must be followed when preparing financial statements.

Answer 1

GAAP

Question 2

e it is important that all who will receive accounting reports be able to interpret
them, a set of practices were developed that will provide guidelines for financial accounting. The
term used to describe these practices is

Answer 2

GAAP

Question 3

__________________ encompass the conventions, rules, and

procedures necessary to define accepted accounting practice at a particular time.

Answer 3

GAAP

Question 4

These

“principles” are not like the unchangeable laws of nature .

Answer 4

TRUE

Question 5

They are
developed by ENGINEERS and businesses to serve the needs of decision-makers, and they can be
changed or altered as better methods are developed or as circumstances change.

Answer 5

accountants

Question 6

__________ the activities of a business are recorded separately from the
activities of the owner or owners.

Answer 6

BUSINESS ENTITY CONCEPT

Question 7

To prepare financial statements for an accounting period, the accountant must make an
assumption about the ability of the business to continue.

Answer 7

GOING CONCERN OR CONTINUITY ASSUMPTION

Question 8

The operating results of any business cannot be known with certainty until the company
has completed its life span and ceased doing business. But financial reports covering shorter time
periods are needed because external decision makers require timely accounting information to
satisfy their analytical needs.

Answer 8

TIME PERIOD ASSUMPTION

Question 9

Because of this, businesses have imposed the time-period
assumption, requiring that changes in a business’s financial position be reported over a series of
shorter time periods like _____, _______, __________, _______________

Answer 9

annually, semi-annually, quarterly, monthly

Question 10

An annual accounting

period is the most common which can be a calendar year or a fiscal year.

Answer 10

true

Question 11

January 1, 2017 to December 31, 2017

Answer 11

Calendar Year

Question 12

July 1, 2017 to June 30, 2018

Answer 12

Fiscal Year

Question 13

______________ specifies that accounting should measure and report the
results of a business’s economic activities in terms of a monetary unit such as the Philippine peso.

Answer 13

Unit-of-Measure Assumption

Question 14

The going concern assumption recognizes that the use of a standard monetary unit throughout all financial
statements is an effective means for aggregating and communicating accounting information. It is
a standard practice to ignore changes in the purchasing power of a peso.

Answer 14

False, unit-of-measure assumption

Question 15

The difference between accrual basis and cash basis of accounting lies in the timing of
when is revenues and expenses are recognized and incurred when recorded in the books.

Answer 15

TRUE

Question 16

revenues are recognized and recorded when cash is
received or collected and expenses when cash is paid. No adjusting entries are needed in this
method of accounting.

Answer 16

CASH BASIS

Question 17

revenues are recognized and recorded when
earned regardless of when cash is received or collected. Expenses incurred are recorded whether
or not cash is paid. Adjusting entries are needed under this method to update the account
balances at the end of the accounting period.

Answer 17

ACCRUAL BASIS

Question 18

requires that any business ( expenses incurred must be recorded in the same period as related revenues. )

Answer 18

Matching Principle