Accounting Standards (IFRS, GAAP) in Business Management : Practice MCQ Questions & Answers with Explanations

Expenses are the costs of selling goods, while costs are the costs of producing goods

Expenses are costs that are directly related to the generation of revenue, while costs are all the expenses incurred by an entity

Expenses are all the costs incurred by an entity, while costs are only the costs that are directly related to the generation of revenue

Expenses are the costs of goods sold, while costs are all other expenses

Revenue is the total equity of an entity, while income is the net income of an entity

Revenue is the gross inflow of economic benefits arising from ordinary activities of an entity, while income is revenue minus expenses

Revenue is the net inflow of economic benefits arising from ordinary activities of an entity, while income is revenue plus expenses

Revenue is the total assets of an entity, while income is the total liabilities of an entity

Neither IFRS and GAAP

IFRS

GAAP

Both IFRS and GAAP

Accounting policies should be selected to minimize tax liabilities

Accounting policies should remain consistent from period to period unless there is a valid reason for change

Accounting policies should be changed frequently to reflect changes in business conditions

Accounting policies should be selected to present the most favorable financial results

The assumption that a company will be liquidated in the near future

The assumption that a company will continue to operate in the foreseeable future

The assumption that a company will cease operations in the foreseeable future

The assumption that a company will be sold in the near future

Revenues should be recognized when cash is received

Revenues and profits should not be overstated, and expenses and losses should not be understated

Assets should always be recorded at their fair value

Liabilities should always be recorded at their historical cost

Only information that is significant to the financial statements needs to be disclosed

All information, regardless of significance, must be disclosed in the financial statements

Information that is not significant to the financial statements need not be disclosed

Information that is disclosed in the financial statements must be accurate and reliable

When cash is paid

When goods or services are received

When the obligation to pay is incurred

When the invoice is received

When cash is received

When goods are shipped

When the risks and rewards of ownership have transferred to the customer

When the goods are produced

A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow 1 of economic benefits from the entity

A future obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of economic benefits 2 from the entity

A present obligation of the entity arising from future events, the settlement of which is expected to result in an outflow 3 of economic benefits from the entity

A future obligation of the entity arising from future events, the settlement of which is expected to result in an inflow of economic benefits to the entity

A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow 4 of economic benefits from the entity

A future obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of economic benefits 5 from the entity

A present obligation of the entity arising from future events, the settlement of which is expected to result in an outflow 6 of economic benefits from the entity

A future obligation of the entity arising from future events, the settlement of which is expected to result in an inflow of economic benefits to the entity

An entity must control the economic benefits of the asset and it is probable that future economic benefits will flow to the entity

An entity must own the asset and it is probable that future economic benefits will flow to the entity

An entity must have possession of the asset and it is probable that future economic benefits will flow to the entity

An entity must have paid for the asset and it is probable that future economic benefits will flow to the entity

Historical cost is the original cost of an asset, while fair value is the current market value of an asset

Historical cost is the current market value of an asset, while fair value is the original cost of an asset

Historical cost is the estimated future value of an asset, while fair value is the current market value of an asset

Historical cost is the estimated future value of an asset, while fair value is the original cost of an asset

IFRS

GAAP

Both IFRS and GAAP

Neither IFRS nor GAAP

Assets and liabilities should be recorded at their current market value

Assets should be recorded at their historical cost

Liabilities should be recorded at their historical cost

Revenues should be recognized when cash is received

Assets should be recorded at their original cost

Assets should be recorded at their fair value

Assets should be recorded at their market value

Assets should be recorded at their estimated future value

Revenues and profits should not be overstated, and expenses and losses should not be understated

Assets should be recorded at their fair value

Liabilities should be recorded at their historical cost

Revenues should be recognized when cash is received

Only material items should be disclosed in the financial statements

All items, regardless of their size, should be disclosed in the financial statements

Material items should be disclosed in the notes to the financial statements

Material items should be valued at fair value

Accounting policies should be applied consistently from period to period

Accounting policies should be changed frequently to reflect changes in business conditions

Accounting policies should be selected to present the most favorable financial results

Accounting policies should be selected to minimize tax liabilities

The assumption that a company will continue to operate in the foreseeable future

The assumption that assets should be recorded at their historical cost

The assumption that liabilities should be recorded at their fair value

The assumption that revenues and expenses should be matched