Topic 1- 3 [MCQ]

Question 1

A business has a good reputation. The owner wishes to include goodwill in the financial statements. An accountant advises against it.

a) business entity
b) going concern
c) matching
d) prudence

Answer 1

Prudence

Question 2

What might stop financial statements showing a true and fair view

Answer 2

changes in depreciation methods year to year

Question 3

Which accounting treatments illustrate the use of matching concept

1. comparing the receipts and payments in the cash book to obtain the balance of inventory as net realisable value rather than cost
2. using the FIFO method of inventory valuation each year
3. charging depreciation in non-current assets

Answer 3

3. charging depreciation in non current assets

Question 4

A business’s year end is 31 March. 31 March 2016 the business received an order from a credit customer. The goods were not sent to the customer until 5 April 2016. The sale was not included in the financial statements for the year ended 31 March 2016.

What accounting concepts are being applied

1. business entity
2. realisation
3. substance over form

Answer 4

2. realisation

Question 5

When a business man introduces capital into his business, the transaction is debited in the cash book and credited in his capital account.

a) business entity
b) going concern
c) matching
d) prudence

Answer 5

Business Entity

Question 6

A company decided to not capitalize the purchase of a stapler for use in its office.

What accounting concepts was the company applying to

a.) consistency
b.) duality
c.) materiality
d.) prudence

Answer 6

c. Materiality

Question 7

An item is found to be the subject of a material error in a company’s financial statements.

What does material mean?

Answer 7

The item can affect the economic decisions of a user of the financial statements

Question 8

Which concept is identified by the accounting equation
A= OE + L

Answer 8

Duality

Question 9

A business depreciates its non-current assets. It then includes them in the statement of financial position at the net book value.

Answer 9

substance over form

Question 10

Which are examples of the accounting equation

1. C + A = L
2. C = A + L
3. C = A + L

Answer 10

1. C = A - L

Question 11

A customer paid a deposit in advance for goods to be supplied at a later date

How should this be recorded?

DEBIT                    CREDIT 1. cash                       customer  2. cash                       sales  3. customer              cash  4. customer              sales

Answer 11

1. Cash customer

Question 12

How could a credit entry of $500 in X’s A/C have risen in the books of A/C in Y.

1. X bought goods from Y
2. X returned to Y
3. Y made a payment to X
4. Y returned goods to X

Answer 12

2. X returned to Y