ACCOUNTING FOR BEGINNERS (true or false)

Question 1

The basic purpose of accounting is to provide information that is useful in making economic decisions.

Answer 1

CORRECT/TRUE

Question 2

Financial statements are the structured representation of an entity’s financial position and results of its operations.

Answer 2

CORRECT/TRUE

Question 3

Information on financial position is primarily provided by the statement of financial performance.

Answer 3

INCORRECT/FALSE

Question 4

The elements directly related to the measurement of position are income and expenses.

Answer 4

INCORRECT/FALSE

Question 5

Financial position refers to the condition of an entity’s assets, liabilities, and equity and their relationships.

Answer 5

CORRECT/TRUE

Question 6

When determining the existence of an asset, legal ownership is always a necessary factor to consider.

Answer 6

INCORRECT/FALSE

Question 7

An obligation is either a legal obligation or a constructive obligation.

Answer 7

CORRECT/TRUE

Question 8

A business practice or policy that creates a valid expectation on others that the business will discharge a liability gives rise to a legal obligation.

Answer 8

CORRECT/TRUE

Question 9

Statements of financial position are more commonly presented using the unclassified presentation.

Answer 9

INCORRECT/FALSE

Question 10

The term ‘economic benefits’ may refer to the asset’s potential to provide an entity, directly or indirectly, with cash.

Answer 10

CORRECT/TRUE

Question 11

A classified statement of financial position is one that shows information on current and non-current assets and liabilities.

Answer 11

CORRECT/TRUE

Question 12

The normal operating cycle of an entity is the time between the acquisition of assets for processing and their realization in cash.

Answer 12

CORRECT/TRUE

Question 13

An unclassified balance sheet does not show distinction between current and non-current assets and liabilities.

Answer 13

CORRECT/TRUE

Question 14

Liabilities are classified as current when they are expected to be settled within 12 months from the end of the reporting period.

Answer 14

CORRECT/TRUE

Question 15

Land is normally reported under the ‘property, plant and equipment’ line item.

Answer 15

CORRECT/TRUE

Question 16

Assets are classified as non-current when they are expected to be realized within 12 months from the end of the reporting period.

Answer 16

INCORRECT/FALSE

Question 17

The line item, “property, plant and equipment” normally connotes a current asset.

Answer 17

INCORRECT/FALSE

Question 18

Trade receivables and trade payables are presented as current only if they are collectible or payable within 12 months.

Answer 18

CORRECT/TRUE

Question 19

Accounts receivable is normally presented in the statement as current asset .

Answer 19

CORRECT/TRUE

Question 20

Trade receivables are those that arise from the sale of goods or services in the ordinary course of business. Otherwise receivables are non-trade.

Answer 20

CORRECT/TRUE