Question

1.According to GAAP, to be useful, accounting information must be all of the following EXCEPT:

1. Relevant
2. Reliable
3. Subjective
4. Comparable

2.

An increase in the cost of goods sold would cause a company’s profit margin to

              a.    increase.

              b.    decrease.

              c.     remain unchanged.

              d.    Must be offset by an increase in the selling price.

3.

Which of the following is not an element of internal control?

1. Assigning responsibilities to individuals who have the authority to administer them
2. Separation of duties whenever possible
3. Assigning to one individual the responsibility for accounting for and custody of assets
4. Relying on internal and external audits

Answer 1

1

Correct answer is ''c'' Subjective

As per Gaap accoutning information should be relevant that is informarion should be important,also the information should be reliable that is the information should be true and to be relied on.The accounting information should also be comparable that is can be compared to last year and with peers.

Accounting information should not be subjective as per gaap.

2.

Correct asnwer is b 'decrease''

An increase in cost of goods sold will cause decrease in profit margin of company.As cost of goods sold is an expense and an increase in expense causes decrease in profit.

3.

Correct answer is 'c' Assigning to one individual the reponsibility for accounting and custody of assets

Effective element of internal control is to not give one individual responsibility for accounting and custody of assets.

Internal control elements include depending on internal and external audit,giving authority to person responsible and seperation of duties whenerv possible

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