Wrong Answers Flashcards
(36 cards)
What is capital maintenance important for?
The measurement of profit.
What accounting convention governs the below statement?
“Sales revenue should be recognised only when goods and services have been supplied? “
The realisation convention
What accounting convention requires that NCA are valued at cost less depreciation rather than sale able value?
Going Concern convention.
What are elements of the stewardship function?
Safeguard assets
Ensure adequate controls exist to prevent fraud
Prepare financial accounts
Can you capitalise training costs or Testing costs?
Training costs; NO
Testing Costs: YES
When is the reducing balance method of dep’n more appropriate than straight line?
When it better reflects the pattern of the consumption of economic benefits derived from the asset.
Why is it important to produce an opening TB prior to preparing the financial statements?
It shows that the ledger accounts contain debit and credit entries of an equal value.
What is a cash discount?
A cash discount is a discount for early settlement or prompt payment of an invoice.
What is a trade discount?
A discount given to encourage customers to purchase bigger quantities and bulk buy.
Does discount received affect gross or net profit?
Net profit.
Can capital reserves be distributed as dividends & give an example of capital re services?
NO - Share premium account.
Do you include storage costs in inventory valuation?
No
How to calculate periodic WACO?
Step 1: Calculate weighted cost per unit
(Sum of purchases x cost per unit / sum of purchases)
Step 2: Calculate closing inventory in units.
Step 3: Closing inventory = closing units * weighted av cost per unit
Periodic vs Continous weighted average?
Periodic: Average cost per unit is calculated based on cost of opening inventory plus all purchases made
Continuous: Average cost per unit is calculated following each purchase of goods.
Are declared dividends included in current liabilities?
Yes
How to calculate cash cycle?
Inventory days + receivable days - payable days
What does limited mean in an entity’s name?
The members liability is limited to the total amount paid or payable on the shares held by them
Do we deduct the costs incurred in selling inventories when calculating NRV?
Yes
What is the difference between SPL and income and expediture statement?
SPL is prepared for a business entity and I&E for a non-profit
Are the issue of loan notes a cash inflow from financing activities?
Yes
Out of revaluation surplus, dep’n and loss on disposals. Which is included in other comprehensive income?
Revaluation surplus only
Is sales tax included in the figures of the cash book?
Yes include sales tax.
Are all items of PPE depreciated?
Not necessarily.
How to calculate net profit with incomplete records?
Closing net assets + Drawings - Capital Introduced - Opening Net Assets = Net Profit/
