➡️QUESTION⬅️
The creation of a provision for doubtful debts is an example of which accounting concept?
A business entity
B consistency
C prudence
D realisation
Answer: C
Prudence concept requires assets to be valued on fair basis and if not possible then assets are understated but cannot be overstated.
➡️QUESTION⬅️
Which concept is identified by the accounting equation assets = capital + liabilities?
A business entity
B duality
C going concern
D realisation
ANSWER B
➡️QUESTION⬅️
An item is included in the financial statements because it affects their interpretation.
Which accounting concept is being applied?
A consistency
B materiality
C money measurement
D substance over form
ANSWER B
➡️QUESTION⬅️
When a businessman introduces capital into his business, the transaction is debited in the cash book and credited to his capital account.
Of which accounting concept is this an example?
A business entity
B going concern
C matching
D prudence
ANSWER A
➡️QUESTION⬅️
Which are examples of the accounting equation?
1 capital + assets = liabilities
2 capital = assets + liabilities
3 capital = assets - liabilities
A 1and3
B 1only
C 2and3
D 3only
ANSWER D
➡️QUESTION⬅️
The owner of a business has been told that work completed for a customer should be recorded in the books of account although the invoice has not yet been sent to the customer.
Which accounting concepts are being applied?
1 matching
2 materiality
3 realisation
A 1and2
B 1and3
C 2only
D 2and3
ANSWER B
➡️QUESTION⬅️
A company does not include in the financial statements the value of skills gained by its employees from training programmes.
Which accounting concept is being applied?
A consistency
B materiality
C money measurement
D substance over form
ANSWER C
➡️QUESTION⬅️
Which concept requires that profits should be based on recognising revenues and their related expenses for an accounting period?
A consistency
B matching
C materiality
D prudence
ANSWER B
➡️QUESTION⬅️
Which information would an investor gain by looking at the financial statements of a business?
1 identifying future trading prospects
2 identifying the amount of future dividends
3. identifying that the entity is a going concern
A1and2
B 1only
C 2and3
D 3only
ANSWER D
➡️QUESTION⬅️
Which accounting treatments illustrate the use of the matching concept?
1 comparing the receipts and payments in the cash book to obtain the balance of inventory at net realisable value rather than cost
2 using the FIFO method of inventory valuation each year
3. charging depreciation on non-current assets
A 1,2and3
B 1and3only
C 2only
D 3only
ANSWER D
➡️QUESTION⬅️
During the financial year a business paid $295000 to its trade payables, after taking a cash discount of $15000.
At the start of the year the trade payables balance was $25000. At the end of the year $32000 was owed to trade payables.
What was the amount of credit purchases made during the year?
A $288000
B $302000
C $303000
D $317000
ANSWER D
➡️QUESTION⬅️
What would not be a purpose of ledger accounts?
A to assist in the preparation of the financial statements
B to assist in the preparation of the trial balance
C to record the double entry from the subsidiary books
D to verify the accuracy of the book-keeping system
ANSWER D