1. What is the primary objective of financial accounting?

 a) Record financial transactions

 b) Facilitate managerial decision-making

 c) Provide information that is useful in making economic decisions

 d) Ensure legal compliance

 Answer: c) Provide information that is useful in making economic

decisions

 Rationale: The main goal of financial accounting is to provide financial

information that users need to make informed economic decisions.

2. Which of the following is not a characteristic of useful financial

information?

 a) Relevance

 b) Faithful representation

 c) Predictive value

 d) Costliness

 Answer: d) Costliness

 Rationale: While relevance, faithful representation, and predictive value

are all qualities that make financial information useful, costliness is not a

characteristic of the information itself but a consideration in its

production.

3. What does the accrual basis of accounting recognize?

 a) Transactions only when cash is received or paid

 b) Expenses only when they are paid

 c) Revenues when they are earned and expenses when they are incurred

 d) Transactions only when there is a legal contract

 Answer: c) Revenues when they are earned and expenses when they are

incurred

 Rationale: The accrual basis of accounting recognizes revenues and

expenses when they are earned or incurred, regardless of when the cash

transactions occur.

4. In financial accounting, what does the 'going concern' assumption

imply?

 a) The business will remain in operation for the foreseeable future

 b) The business is currently facing financial difficulties

 c) The business will be liquidated in the near term