Consider the following statements in the context of the nature of financial accounting. How many statements are correct? i) It records only economic events. ii) It records information as per some specified rules. iii) It records business transactions only on cash basis.
Only 2 statement
The correct answer is option 3. The statement "Only 2 statement" is correct because only the second statement is true. Financial accounting follows standardized rules, such as GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards). The first statement about recording only economic events is correct, but the third statement about recording only cash-based transactions is incorrect as accrual accounting is also a key part of financial accounting, which records transactions when they occur, not just when cash changes hands.
Similar Questions
The generally acceptable accounting principles (GAAP) fulfill the conditions of
(i) Relevance
(ii) Objectivity
(iii) Feasibility
A firm purchases a piece of land after making full payment to the seller. However, the legal formalities are yet to be completed. According to which principle does the firm record the transaction in its books of accounts though the legal formalities are NOT completed?
Which of the following is regarded as an accounting convention and NOT as an accounting concept?
According to the ______ concept of accounting, the life of the business is divided into appropriate segments for studying the results shown by the business after each segment.
On account of ______ convention, the inventory is valued 'at cost or market price whichever is less'.
The ______ concept of accounting presumes that an enterprise will continue in operation long enough to charge against income, the cost of fixed assets over their useful lives, to amortize over appropriate periods other costs which have been deferred under the actual or matching concept, to pay liabilities when they become due and to meet the contractual commitments.
The convention of conservatism has become a target of serious criticism on the ground that it goes against the convention of _____.
Which accounting conventions are related to the following actions?
i) Closing stock is valued at lower of the cost or realizable value.
ii) Some stationary items purchased in a year and used for a number of years are treated as an expense and not as an asset.
Which of the following is (are) the attribute(s) of accounting information?
(i) It should help in making inter-firm comparisons but not necessarily inter-period comparisons.
(ii) It should show an accurate and fair view of the profitability of the firm.
(iii) The financial statements should be accompanied by all the source documents while reporting to the stakeholders.
Which of the following are accounting limitations?
(i) Accounting system records only historical events.
(ii) Accounting ignores the effect of inflation on the value of fixed assets.
(iii) Accounting information does not include the costs of pollution and employee accidental injuries.
Important Questions from Basic accounting principles
The traditional accounting practice of resolving uncertainty by choosing the solution that leads to the lower amount of income being recognized in the current accounting period is based on which of the following accounting principles?
The policy ‘anticipate no profit and provide for all possible losses’ arises due to
“Advance received from a supplier is not taken as income or sales.” This comment is based on
Revenue from sale of goods ordinarily is reported as a part of the earning in the period
The generally acceptable accounting principles (GAAP) fulfill the conditions of
(i) Relevance
(ii) Objectivity
(iii) Feasibility
