FINANCIAL ACCOUNTING FOR MBAS
COMPREHENSIVE TEST PAPER QUESTIONS
AND SOLUTIONS GRADED APLUS
●● Economic Entity
Answer: Company keeps its activity separate from its owners and other
businesses. One firm, one set of books.
●● Going Concern
Answer: The accounting assumption that a business is expected to
operate indefinitely. Assumes the company will continue so asset values
are at a historical cost.
●● Monetary Unit
Answer: Financial transactions are denominated in a stable unit of
measure. Everything is in US dollars
●● Accounting Periods
Answer: The results of operations for an entity must be reported on a
periodic basis, usually a year
●● Revenue/Expense Matching
, Answer: All expenses incurred to generate revenues should be
recognized during the same period as those revenues
●● Conservatism
Answer: Accounting theory advocates that it is better for potential
measurement errors to understate rather than overstate profits
●● Understandability
Answer: Information presented in a clear and concise fashion so that
users can interpret it and comprehend its meaning.
●● Relevance
Answer: The quality of information that indicates the information makes
a difference in a decision.
●● Comparability
Answer: Ability to compare the accounting information of different
companies because they use the same accounting principles.
Quantitative assessment
●● Consistency
Answer: Use of the same accounting principles and methods from year
to year within a company. Allows information to be compared over time.
COMPREHENSIVE TEST PAPER QUESTIONS
AND SOLUTIONS GRADED APLUS
●● Economic Entity
Answer: Company keeps its activity separate from its owners and other
businesses. One firm, one set of books.
●● Going Concern
Answer: The accounting assumption that a business is expected to
operate indefinitely. Assumes the company will continue so asset values
are at a historical cost.
●● Monetary Unit
Answer: Financial transactions are denominated in a stable unit of
measure. Everything is in US dollars
●● Accounting Periods
Answer: The results of operations for an entity must be reported on a
periodic basis, usually a year
●● Revenue/Expense Matching
, Answer: All expenses incurred to generate revenues should be
recognized during the same period as those revenues
●● Conservatism
Answer: Accounting theory advocates that it is better for potential
measurement errors to understate rather than overstate profits
●● Understandability
Answer: Information presented in a clear and concise fashion so that
users can interpret it and comprehend its meaning.
●● Relevance
Answer: The quality of information that indicates the information makes
a difference in a decision.
●● Comparability
Answer: Ability to compare the accounting information of different
companies because they use the same accounting principles.
Quantitative assessment
●● Consistency
Answer: Use of the same accounting principles and methods from year
to year within a company. Allows information to be compared over time.
