Accounting Principles exam questions
and answers
The consistency principle - answer states that, once you adopt an accounting principle or
method, continue to follow it consistently in future accounting periods.
The full disclosure principle - answer states that you should include in an entity's financial
statements all information that would affect a reader's understanding of those statements.
The materiality principle - answer states that you are allowed to ignore an accounting standard
if the net impact of doing so has such a small impact on the financial statements that a reader
of the financial statements would not be misled.
The reliability principle - answer is the concept of only recording those transactions in the
accounting system that you can verify are reliable with objective evidence.
The time period principle - answer is the concept that a business should report the financial
results of its activities over a standard time period, which is usually monthly, quarterly, or
annually.
The conservatism principle - answer is the general concept of recognizing expenses and
liabilities as soon as possible when there is uncertainty about the outcome, but to only
recognize revenues and assets when they are assured of being received.
The economic entity principle - answer states that the recorded activities of a business entity
will be kept separate from the recorded activities of its owner(s) and any other business
entities.
The going concern principle - answer is the assumption that an entity will remain in business for
the foreseeable future. Conversely, this means the entity will not be forced to halt operations
and liquidate its assets in the near term at what may be very low fire-sale prices.
and answers
The consistency principle - answer states that, once you adopt an accounting principle or
method, continue to follow it consistently in future accounting periods.
The full disclosure principle - answer states that you should include in an entity's financial
statements all information that would affect a reader's understanding of those statements.
The materiality principle - answer states that you are allowed to ignore an accounting standard
if the net impact of doing so has such a small impact on the financial statements that a reader
of the financial statements would not be misled.
The reliability principle - answer is the concept of only recording those transactions in the
accounting system that you can verify are reliable with objective evidence.
The time period principle - answer is the concept that a business should report the financial
results of its activities over a standard time period, which is usually monthly, quarterly, or
annually.
The conservatism principle - answer is the general concept of recognizing expenses and
liabilities as soon as possible when there is uncertainty about the outcome, but to only
recognize revenues and assets when they are assured of being received.
The economic entity principle - answer states that the recorded activities of a business entity
will be kept separate from the recorded activities of its owner(s) and any other business
entities.
The going concern principle - answer is the assumption that an entity will remain in business for
the foreseeable future. Conversely, this means the entity will not be forced to halt operations
and liquidate its assets in the near term at what may be very low fire-sale prices.
