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,1. Which principle does the matching concept in accounting best
illustrate?
a) Revenue Recognition Principle
b) Cost Principle
c) Consistency Principle
d) Expense Recognition Principle
ANS: d) Expense Recognition Principle
Rationale: The matching principle requires that expenses be
recognized in the period in which they help generate revenue,
aligning with expense recognition.
2. Which of the following is an example of a contra account?
a) Accounts Receivable
b) Sales Revenue
c) Allowance for Doubtful Accounts
d) Prepaid Insurance
, ANS: c) Allowance for Doubtful Accounts
Rationale: A contra account reduces the balance of a related
account, such as Allowance for Doubtful Accounts reducing
Accounts Receivable.
3. Which of the following is not considered a primary qualitative
characteristic of financial information according to the IFRS
Conceptual Framework?
a) Relevance
b) Faithful Representation
c) Comparability
d) Materiality
ANS: d) Materiality
Rationale: Materiality is a component of relevance but not a
primary qualitative characteristic.
, b) Expenses are recognized only when cash is paid
c) Revenues and expenses are recognized when they occur
regardless of cash transactions
d) None of the above
ANS: c) Revenues and expenses are recognized when they
occur regardless of cash transactions
Rationale: Accrual accounting recognizes financial
transactions in the period they occur rather than when cash
changes hands.
5. Which inventory valuation method results in the highest net
income during a period of rising prices?
a) FIFO
b) LIFO
c) Average Cost
d) Specific Identification
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