Accounting Principles Quick Test

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1. This non-government organization currently establishes accounting standards in the United States.
2. Costs that are used up in the process of earning revenues are referred to as __________.
3. Advertising costs and research and development costs are usually __________.
4. What is the accounting term for increases in equity resulting from transactions that are not part of a company’s main operations?
5. The matching principle is best achieved when a company’s vacation expense and liability are reported in the period when the employees __________ the vacation days.
Select the accounting principle or term that best matches the descriptions listed as items 6 - 16:
Each principle or term can be used several times.

conservatism
cost
economic entity
full disclosure
going concern
industry practices
matching
materiality
monetary unit
time period
6. In the U.S., assets are reported in U.S. dollars and the dollar’s purchasing power is assumed to be constant or stable over time.
7. Allows accountants to round financial statement amounts to the nearest thousand dollars.
8. Results in dozens of pages of notes to the financial statements.
9. Allows accountants to report a proprietor’s business assets separately from the proprietor’s personal assets.
10. When doubt exists between two alternatives, the accountant should select the one with the lesser asset amount or the one resulting in less profit.
11. Allows an ongoing business to prepare quarterly financial statements.
12. Requires accrual accounting and adjusting entries.
13. Defined as the cash or cash equivalent amount at the time an asset was purchased.
14. Allows inexpensive equipment to be expensed immediately instead of being depreciated.
15. Justifies stating assets at cost and the deferral of some costs to a future accounting period.
16. Assumption that the company will continue in business long enough to carry out its objectives and commitments.
Match one of the following qualitative characteristics to items 17 - 20:
Each term may be used more than once. (These items are based on the FASB's Statement of Financial Accounting Concepts No. 2, Qualitative Characteristics of Accounting Information, which is available at FASB.org.)

comparability
consistency
reliability
17. Objective, unbiased, verifiable.
18. Is enhanced through common accounting rules.
19. A reader of the financial statements can assume that the same accounting rules are being followed year after year unless noted.
20. Using the same principles at different automobile manufacturers.

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