Question 1

Which accounting principle requires that only information measurable in monetary terms is recorded in the financial statements?

Accepted Answer

Money Measurement Principle

Question 2

A company purchases inventory at $$20 per unit, incurs 1 $$per unit in carriage inwards, and $$0.50 per unit in preparation costs. If the net realisable value (NRV) is 18 $$per unit, at what value per unit should the inventory be recorded according to accounting principles?

Accepted Answer

$18.00

Question 3

Which principle dictates that profit is only recognized when legal title passes from seller to buyer, not when cash is received?

Accepted Answer

Realisation Principle

Question 4

Why is inventory valued at the lower of cost or net realisable value at year-end?

Accepted Answer

To comply with the Prudence (Conservatism) Principle

Question 5

Which of the following best describes the Principle of Duality in accounting?

Accepted Answer

Every transaction has a giving and a receiving aspect

Question 6

A business decides to treat a $10 calculator as an expense rather than an asset. Which principle justifies this treatment?

Accepted Answer

Materiality Principle

Question 7

Which principle requires that the same accounting methods are used from one period to the next to ensure valid year-to-year comparisons?

Accepted Answer

Consistency Principle

Question 8

According to the International Accounting Standards (IAS), which of the following is NOT a key objective?

Accepted Answer

Maximize company profits

Question 9

Which principle assumes that a business will continue to operate for an indefinite period, and therefore non-current assets are not valued at fire-sale prices?

Accepted Answer

Going Concern Principle

Question 10

If a company changes its inventory valuation method from FIFO to LIFO without disclosure, which qualitative characteristic of financial information is most compromised?

Accepted Answer

Comparability

Question 11

Which of the following is an example of the Matching (Accruals) Principle?

Accepted Answer

Recording depreciation expense in the same period as the asset generates revenue

Question 12

A company’s financial statements include the owner’s personal car as a business asset. Which principle is being violated?

Accepted Answer

Business Entity Principle

Question 13

Which principle requires that all assets and expenses are initially recorded at their actual cost, not at their current market value?

Accepted Answer

Historic Cost Principle

Question 14

Which of the following best describes the concept of Net Realisable Value (NRV)?

Accepted Answer

The estimated receipts from sale of inventory less costs to complete and sell

Question 15

If 12 units of inventory are damaged and can only be sold for $$10 each, but their cost was 15 $$each, how should they be valued in the closing inventory?

Accepted Answer

$120

Question 16

Which principle requires accountants to provide for all possible losses but never anticipate profits?

Accepted Answer

Prudence (Conservatism) Principle

Question 17

Which of the following is NOT one of the four pillars of quality financial information?

Accepted Answer

Profitability

Question 18

A company records a large, one-time gain as recurring revenue. Which qualitative characteristic is most at risk?

Accepted Answer

Reliability

Question 19

Which accounting concept is most closely linked to the requirement that personal and business transactions are kept separate?

Accepted Answer

Business Entity Principle

Question 20

Which principle ensures that financial statements are not misleading due to creative or inconsistent accounting?

Accepted Answer

International Accounting Standards (IAS)

Fundamental Accounting Principles and Inventory Valuation: A Blueprint for Financial Reporting

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