1.

The accrual principle states that: time periods

a) Revenue is recognized only when cash is c) Allow businesses to report financial data
received irregularly
b) Expenses should be recognized in the d) Require businesses to close accounts
period they are incurred every month
c) Only transactions involving cash should 7. Which of the following is an example of a
be recorded fiscal year?
d) Expenses are recognized after payment a) January 1 to December 31
2. The going concern assumption means that: b) April 1 to March 31
a) The business is expected to continue c) July 1 to June 30
operations indefinitely d) Both B and C
b) The business is preparing for closure 8. Financial statements prepared for a specific
c) Only cash transactions should be point in time rather than a period include:
recorded a) Income Statement
d) The business must liquidate its assets b) Balance Sheet
every year c) Statement of Cash Flows
3. Which principle requires companies to d) Statement of Retained Earnings
report expenses in the same period as 9. Which financial statement shows a
related revenues? company’s profitability over a period of
a) Historical Cost Principle time?
b) Matching Principle a) Balance Sheet
c) Going Concern Assumption b) Income Statement
d) Full Disclosure Principle c) Statement of Cash Flows
4. The historical cost principle requires that: d) Notes to Financial Statements
a) Assets be recorded at their original 10. Interim financial reports are usually
purchase price prepared:
b) Assets be adjusted to fair market value a) Every five years
annually b) Every two years
c) Businesses report their estimated asset c) Quarterly or semi-annually
values d) Only when requested by shareholders
d) Financial statements include projected 11. Which branch of accounting provides
revenue information to help managers make
5. The monetary unit assumption states that: business decisions?
a) All transactions should be recorded in a a) Financial Accounting
stable currency b) Managerial Accounting
b) Transactions can be recorded in any unit c) Government Accounting
of measure d) Auditing
c) non-monetary information is required in 12. The main objective of financial accounting is
financial statements to:
d) Market values should be used in a) Help management make strategic
recording transactions decisions
6. The purpose of the accounting period b) Provide information to external users
assumption is to: c) Determine product costs
a) Limit financial reporting to annual cycles d) Detect fraud and irregularities
only 13. Which branch of accounting deals with the
b) Divide business activities into specific financial activities of public sector entities?
 a) Cost Accounting sustainability efforts?
b) Government Accounting a) Forensic Accounting
c) Financial Accounting b) Environmental Accounting
d) Auditing c) Financial Accounting
14. Auditing primarily focuses on: d) Tax Accounting
a) Cost allocation 21. Which external user is primarily interested
b) Providing Information as to fairness in in an entity's liquidity and ability to pay
presentation of FS debts?
c) Preparing tax reports a) Investors
d) Providing information for investment b) Government agencies
decisions c) Creditors
15. Which type of accounting helps d) Customers
organizations comply with tax laws and 22. A company’s employees are considered:
regulations? a) External users of financial statements
a) Management Accounting b) Internal users of financial statements
b) Financial Accounting c) Government regulators
c) Tax Accounting d) Creditors
d) Government Accounting 23. Which of the following external users would
16. Cost accounting is primarily concerned with: be most concerned with a company’s tax
a) External financial reporting obligations?
b) The calculation of production costs a) Shareholders
c) Determining tax obligations b) Tax authorities
d) Compliance with accounting standards c) Employees
17. The field of accounting that involves the d) Creditors
examination and verification of financial 24. Who among the following internal users
records is: relies on financial statements to assess
a) Auditing business profitability?
b) Managerial Accounting a) Shareholders
c) Cost Accounting b) Government agencies
d) Government Accounting c) Management
18. Which of the following is NOT a major d) Customers
purpose of management accounting? 25. Which group uses financial statements to
a) Budgeting assess dividend payouts?
b) Performance evaluation a) Managers
c) External reporting b) Investors
d) Cost analysis c) Employees
19. Which of the following statements about d) Auditors
government accounting is TRUE? 26. Which of the following is NOT a
a) It follows the same rules as financial characteristic of a sole proprietorship?
accounting for private businesses a) Limited liability
b) It primarily serves external investors b) Easy to establish
c) It focuses on the allocation and use of c) Owner controls all decisions
public funds d) Business and owner are legally the same
d) It does not involve budgeting 27. Which type of business organization is
20. Which branch of accounting is most relevant owned by two or more people and has
for tracking environmental impact and unlimited liability?
 a) Corporation c) Manufacturing business
b) Sole proprietorship d) Cooperative
c) Partnership 35. Which business type does NOT typically
d) Cooperative have an inventory of physical goods?
28. In a corporation, shareholders primarily a) Merchandising
benefit from: b) Manufacturing
a) Tax exemptions c) Service
b) Limited liability d) Retail
c) Full control over business operations
d) Exemption from legal obligations
29. A cooperative is unique because:
a) It is owned and controlled by members
b) It is a single-owner business
c) It is always nonprofit
d) It is primarily used by large multinational
companies
30. In a limited partnership, liability is limited
for:
a) General partners
b) All partners
c) Limited partners
d) Government agencies
31. A business that primarily earns revenue by
selling tangible goods is a:
a) Service business
b) Merchandising business
c) Manufacturing business
d) Cooperative
32. A company that provides intangible services
to clients is classified as a:
a) Service business
b) Merchandising business
c) Manufacturing business
d) Partnership
33. Which of the following is an example of a
merchandising business?
a) A software development firm
b) A law firm
c) A clothing retail store
d) A bakery that produces and sells its own
goods
34. A company that converts raw materials into
finished products is a:
a) Service business
b) Merchandising business