Question 1

Which of the following is regarded as a tangible asset?

Accepted Answer

A) Franchise. 
B) Goodwill. 
C) Long-term investment. 
D) Copyright. 
A) Franchise. 
B) Goodwill. 
C) Long-term investment. 
D) Copyright.

Question 2

The accounting assumption that a business will continue to operate into the foreseeable future is the:

Accepted Answer

A) entity assumption. 
B) going concern assumption. 
C) accounting period assumption. 
D) historical cost assumption. 
A) entity assumption. 
B) going concern assumption. 
C) accounting period assumption. 
D) historical cost assumption.

Question 3

The accounting convention that requires the activities of the business to be kept separate from the activities of the owner is the:

Accepted Answer

A) dual aspect convention. 
B) business entity convention. 
C) conservatism convention. 
D) accounting period convention. 
A) dual aspect convention. 
B) business entity convention. 
C) conservatism convention. 
D) accounting period convention.

Question 4

The recognition criteria for liabilities includes:

Accepted Answer

A) future obligation. 
B) probability of occurrence. 
C) reliability of measurement. 
D) Both B and C. 
A) future obligation. 
B) probability of occurrence. 
C) reliability of measurement. 
D) Both B and C.

Question 5

Which of these does not belong with the others?

Accepted Answer

A) Bank overdraft. 
B) Prepaid wages. 
C) Accounts payable. 
D) Mortgage loan. 
A) Bank overdraft. 
B) Prepaid wages. 
C) Accounts payable. 
D) Mortgage loan.

Question 6

What is the effect on the statement of financial position of a business buying supplies for cash?

Accepted Answer

A) increase asset supplies; increase asset bank. 
B) decrease asset supplies; decrease asset bank. 
C) decrease asset supplies; increase asset bank. 
D) increase asset supplies; decrease asset bank. 
A) increase asset supplies; increase asset bank. 
B) decrease asset supplies; decrease asset bank. 
C) decrease asset supplies; increase asset bank. 
D) increase asset supplies; decrease asset bank.

Question 7

Which of the following is not a reason that the relationship between current and non-current assets important?

Accepted Answer

A) Firms having too much funds tied up in non-current assets can lead to business failure. 
B) In case of financial difficulty, non-current assets are often difficult to sell. 
C) It shows the ability of the business to pay long-term obligations. 
D) Converting non-current assets to cash often results in a loss to the business. 
A) Firms having too much funds tied up in non-current assets can lead to business failure. 
B) In case of financial difficulty, non-current assets are often difficult to sell. 
C) It shows the ability of the business to pay long-term obligations. 
D) Converting non-current assets to cash often results in a loss to the business.

Question 8

If the prudence (conservatism)convention conflicts with another convention, which will normally prevail?

Accepted Answer

A) Prudence (conservatism). 
B) The other convention. 
C) 50% of the time prudence and 50% of the time the other convention. 
D) Conventions never conflict so the issue does not arise. 
A) Prudence (conservatism). 
B) The other convention. 
C) 50% of the time prudence and 50% of the time the other convention. 
D) Conventions never conflict so the issue does not arise.

Question 9

What is the effect on the statement of financial position when the business has cash sales of $15,000 of goods that were originally purchased for $10,000?

Accepted Answer

A) Increase asset bank $12,000; increase equity $12,000. 
B) Increase asset bank $15,000; decrease asset inventory $10,000; increase equity $5,000. 
C) Increase asset bank $4,000; increase equity $4,000. 
D) None of the above. 
A) Increase asset bank $12,000; increase equity $12,000. 
B) Increase asset bank $15,000; decrease asset inventory $10,000; increase equity $5,000. 
C) Increase asset bank $4,000; increase equity $4,000. 
D) None of the above.

Question 10

Which statement about current value is true?

Accepted Answer

A) Current value can only be defined one way. 
B) An accounting system could be produced based on current value rather than historical cost. 
C) The second-hand sale value of an asset is not an example of current value. 
D) Current values are based on transactions. 
A) Current value can only be defined one way. 
B) An accounting system could be produced based on current value rather than historical cost. 
C) The second-hand sale value of an asset is not an example of current value. 
D) Current values are based on transactions.

Question 11

If current assets are $15,200, current liabilities are $3,100, non-current liabilities are $45,000 and equity is $70,000, non-current assets are:

Accepted Answer

A) $108,100 
B) $48,100 
C) $92,900 
D) $102,900 
A) $108,100 
B) $48,100 
C) $92,900 
D) $102,900

Question 12

Under the accounting standards, which alternative measure of value is not permitted to be used for valuing assets?

Accepted Answer

A) Historical cost. 
B) Net realisable value. 
C) Fair value. 
D) None of the above. i.e., all are permitted methods in some circumstances. 
A) Historical cost. 
B) Net realisable value. 
C) Fair value. 
D) None of the above. i.e., all are permitted methods in some circumstances.

Question 13

Which of the following would appear in the equity section of the statement of financial position?

Accepted Answer

A) Loan from ABC Bank. 
B) Loan to family member. 
C) Bank overdraft. 
D) Drawings by the owner. 
A) Loan from ABC Bank. 
B) Loan to family member. 
C) Bank overdraft. 
D) Drawings by the owner.

Question 14

What do non-current liabilities represent?

Accepted Answer

A) amounts due to the owner of the business which are not payable within 12 months. 
B) amounts due to outsiders which are not payable within 12 months. 
C) amounts due and payable to outsiders within 12 months. 
D) Both A and B. 
A) amounts due to the owner of the business which are not payable within 12 months. 
B) amounts due to outsiders which are not payable within 12 months. 
C) amounts due and payable to outsiders within 12 months. 
D) Both A and B.

Question 15

The accounting convention which results in the anticipation of losses but not of profits is:

Accepted Answer

A) matching. 
B) prudence (conservatism). 
C) going concern. 
D) none of the above. 
A) matching. 
B) prudence (conservatism). 
C) going concern. 
D) none of the above.

Question 16

Application of the (prudence)conservatism assumption can produce:

Accepted Answer

A) higher profits. 
B) higher values for assets. 
C) higher amounts for liabilities. 
D) lower amounts for expenses. 
A) higher profits. 
B) higher values for assets. 
C) higher amounts for liabilities. 
D) lower amounts for expenses.

Question 17

Without the business entity convention, which item in the statement of financial position would not exist?

Accepted Answer

A) Assets. 
B) Equity. 
C) Liabilities. 
D) Cash at bank. 
A) Assets. 
B) Equity. 
C) Liabilities. 
D) Cash at bank.

Question 18

Intangible assets have no physical substance but still provide expected future benefits. Which of the following is not an intangible asset?

Accepted Answer

A) Newspaper masthead. 
B) Goodwill. 
C) Patent. 
D) None of the above, i.e., all are intangible assets. 
A) Newspaper masthead. 
B) Goodwill. 
C) Patent. 
D) None of the above, i.e., all are intangible assets.

Question 19

The effect on the statement of financial position when the owner withdraws money from the business is:

Accepted Answer

A) decrease asset bank; decrease equity. 
B) decrease drawings; decrease equity. 
C) increase drawings; increase equity. 
D) decrease asset bank; increase equity. 
A) decrease asset bank; decrease equity. 
B) decrease drawings; decrease equity. 
C) increase drawings; increase equity. 
D) decrease asset bank; increase equity.

Question 20

An example of where the prudence assumption leads to a reduction in the valuation of an asset is:

Accepted Answer

A) development expenditure capitalised as an asset rather than written off as an expense. 
B) taking an upward revaluation of an asset to a reserve rather than including it in the profit calculation. 
C) valuing inventory at the lower of cost and net realisable value. 
D) All are examples. 
A) development expenditure capitalised as an asset rather than written off as an expense. 
B) taking an upward revaluation of an asset to a reserve rather than including it in the profit calculation. 
C) valuing inventory at the lower of cost and net realisable value. 
D) All are examples.

Which of the following is regarded as a tangible asset?

The accounting assumption that a business will continue to operate into the foreseeable future is the:

The accounting convention that requires the activities of the business to be kept separate from the activities of the owner is the:

The recognition criteria for liabilities includes:

Which of these does not belong with the others?

What is the effect on the statement of financial position of a business buying supplies for cash?

Which of the following is not a reason that the relationship between current and non-current assets important?

If the prudence (conservatism)convention conflicts with another convention, which will normally prevail?

What is the effect on the statement of financial position when the business has cash sales of $15,000 of goods that were originally purchased for $10,000?

Which statement about current value is true?

If current assets are $15,200, current liabilities are $3,100, non-current liabilities are $45,000 and equity is $70,000, non-current assets are:

Under the accounting standards, which alternative measure of value is not permitted to be used for valuing assets?

Which of the following would appear in the equity section of the statement of financial position?

What do non-current liabilities represent?

The accounting convention which results in the anticipation of losses but not of profits is:

Application of the (prudence)conservatism assumption can produce:

Without the business entity convention, which item in the statement of financial position would not exist?

Intangible assets have no physical substance but still provide expected future benefits. Which of the following is not an intangible asset?

The effect on the statement of financial position when the owner withdraws money from the business is:

An example of where the prudence assumption leads to a reduction in the valuation of an asset is:

Introduction to Accounting

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Cost-Volume-Profit Analysis and Relevant Costing

Full Costing

Budgeting

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters

Exam 2: Measuring and Reporting Financial Position

Which of the following is regarded as a tangible asset?

The accounting assumption that a business will continue to operate into the foreseeable future is the:

The accounting convention that requires the activities of the business to be kept separate from the activities of the owner is the:

The recognition criteria for liabilities includes:

Which of these does not belong with the others?

What is the effect on the statement of financial position of a business buying supplies for cash?

Which of the following is not a reason that the relationship between current and non-current assets important?

If the prudence (conservatism)convention conflicts with another convention, which will normally prevail?

What is the effect on the statement of financial position when the business has cash sales of $15,000 of goods that were originally purchased for $10,000?

Which statement about current value is true?

If current assets are $15,200, current liabilities are $3,100, non-current liabilities are $45,000 and equity is $70,000, non-current assets are:

Under the accounting standards, which alternative measure of value is not permitted to be used for valuing assets?

Which of the following would appear in the equity section of the statement of financial position?

What do non-current liabilities represent?

The accounting convention which results in the anticipation of losses but not of profits is:

Application of the (prudence)conservatism assumption can produce:

Without the business entity convention, which item in the statement of financial position would not exist?

Intangible assets have no physical substance but still provide expected future benefits. Which of the following is not an intangible asset?

The effect on the statement of financial position when the owner withdraws money from the business is:

An example of where the prudence assumption leads to a reduction in the valuation of an asset is:

Introduction to Accounting

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Cost-Volume-Profit Analysis and Relevant Costing

Full Costing

Budgeting

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters