Question 1

Which accounting convention has the effect that the employees will not appear as an asset on the entity's balance sheet?

Accepted Answer

A)  entity convention 
B)  stable monetary unit convention 
C)  money measurement convention 
D)  accounting period convention 
A)  entity convention 
B)  stable monetary unit convention 
C)  money measurement convention 
D)  accounting period convention

Question 2

Identify the current liability.

Accepted Answer

A)  wages owing 
B)  loan from B Buy (due in 4 months) 
C)  bill payable (due in 2 years) 
D)  A and B 
A)  wages owing 
B)  loan from B Buy (due in 4 months) 
C)  bill payable (due in 2 years) 
D)  A and B

Question 3

A limitation of the balance sheet in portraying the financial position of an entity is:

Accepted Answer

A)  items which cannot be measured in money are not included. 
B)  there is no adjustment to values for inflation. 
C)  the historical cost approach means that assets are not shown at their estimated market values. 
D)  all of the above are limitations. 
A)  items which cannot be measured in money are not included. 
B)  there is no adjustment to values for inflation. 
C)  the historical cost approach means that assets are not shown at their estimated market values. 
D)  all of the above are limitations.

Question 4

Which of these assets that could be listed on a balance sheet is likely not to translate into future economic benefits?

Accepted Answer

A)  large inventories of spare parts 
B)  inventory that has been on the shelves for over a year 
C)  debtors that have been outstanding for several months 
D)  all of the above 
A)  large inventories of spare parts 
B)  inventory that has been on the shelves for over a year 
C)  debtors that have been outstanding for several months 
D)  all of the above

Question 5

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

Accepted Answer

A)  patent 
B)  goodwill 
C)  newspaper masthead 
D)  none of the above 
A)  patent 
B)  goodwill 
C)  newspaper masthead 
D)  none of the above

Question 6

Identify the non-current asset.

Accepted Answer

A)  long-term investment 
B)  machinery 
C)  5-year loan to Ti Finance 
D)  all of the above 
A)  long-term investment 
B)  machinery 
C)  5-year loan to Ti Finance 
D)  all of the above

Question 7

The only tangible asset that is not depreciated is:

Accepted Answer

A)  leasehold improvements. 
B)  land. 
C)  buildings. 
D)  B and C 
A)  leasehold improvements. 
B)  land. 
C)  buildings. 
D)  B and C

Question 8

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

Accepted Answer

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

Question 9

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

Accepted Answer

A)  fair value 
B)  historical cost 
C)  net realisable value 
D)  None of the above, i.e. all are permitted methods in some circumstances 
A)  fair value 
B)  historical cost 
C)  net realisable value 
D)  None of the above, i.e. all are permitted methods in some circumstances

Question 10

Which of these is a liability, not because it is a legal claim but because of past industry or business behaviour?

Accepted Answer

A)  money borrowed from an associate company 
B)  trade creditors 
C)  deposit on services received in advance 
D)  provision for employee bonuses 
A)  money borrowed from an associate company 
B)  trade creditors 
C)  deposit on services received in advance 
D)  provision for employee bonuses

Question 11

Identify the asset.

Accepted Answer

A)  loan from ABC Ltd. 
B)  accrued expenses 
C)  bank overdraft 
D)  plant and equipment 
A)  loan from ABC Ltd. 
B)  accrued expenses 
C)  bank overdraft 
D)  plant and equipment

Question 12

A reserve name that would not appear on a balance sheet is:

Accepted Answer

A)  general reserve. 
B)  foreign currency translation reserve. 
C)  asset replacement reserve. 
D)  bank reserve. 
A)  general reserve. 
B)  foreign currency translation reserve. 
C)  asset replacement reserve. 
D)  bank reserve.

Question 13

Without the business entity convention, which item in the balance sheet would not exist?

Accepted Answer

A)  equity 
B)  liabilities 
C)  cash at bank 
D)  assets 
A)  equity 
B)  liabilities 
C)  cash at bank 
D)  assets

Question 14

What is the effect on the balance sheet when the business has cash sales of $12,000 of goods that were originally purchased for $8,000?

Accepted Answer

A)  increase the asset Bank by $12,000; increase equity by $12,000 
B)  increase the asset Bank by $4,000; increase equity by $4,000 
C)  increase the asset Bank by $12,000, decrease the asset Inventory by $8,000; increase equity by $4,000 
D)  none of the above 
A)  increase the asset Bank by $12,000; increase equity by $12,000 
B)  increase the asset Bank by $4,000; increase equity by $4,000 
C)  increase the asset Bank by $12,000, decrease the asset Inventory by $8,000; increase equity by $4,000 
D)  none of the above

Question 15

If assets are $34,800 and equity is $12,700, liabilities are:

Accepted Answer

A)  $22,900 
B)  $22,100 
C)  $47,500 
D)  $47,000 
A)  $22,900 
B)  $22,100 
C)  $47,500 
D)  $47,000

Question 16

The effect on the balance sheet when the business pays a creditor is:

Accepted Answer

A)  decrease asset bank; decrease equity. 
B)  decrease asset creditor; decrease liability bank. 
C)  decrease asset bank; decrease liability creditor. 
D)  none of the above. 
A)  decrease asset bank; decrease equity. 
B)  decrease asset creditor; decrease liability bank. 
C)  decrease asset bank; decrease liability creditor. 
D)  none of the above.

Question 17

A reason why profits may be retained in a business rather than withdrawn by the owners is:

Accepted Answer

A)  to fund future growth of the business. 
B)  because the business is able to generate greater returns on the funds than could be obtained if the owner invests them elsewhere. 
C)  to gain tax advantages. 
D)  all of the above. 
A)  to fund future growth of the business. 
B)  because the business is able to generate greater returns on the funds than could be obtained if the owner invests them elsewhere. 
C)  to gain tax advantages. 
D)  all of the above.

Question 18

The accounting convention that the objectivity principle provides support for is:

Accepted Answer

A)  prudence (conservatism). 
B)  historic cost. 
C)  accounting period. 
D)  relevance. 
A)  prudence (conservatism). 
B)  historic cost. 
C)  accounting period. 
D)  relevance.

Question 19

Identify the liability.

Accepted Answer

A)  creditor 
B)  drawings 
C)  cash at bank 
D)  prepaid insurance 
A)  creditor 
B)  drawings 
C)  cash at bank 
D)  prepaid insurance

Question 20

If reported profits are reduced by $5,000 in year one because of the operation of prudence:

Accepted Answer

A)  profits in later years must be $5,000 higher. 
B)  profits in later years will be $5,000 lower. 
C)  profits in later years will be unaffected. 
D)  none of the above. 
A)  profits in later years must be $5,000 higher. 
B)  profits in later years will be $5,000 lower. 
C)  profits in later years will be unaffected. 
D)  none of the above.

Which accounting convention has the effect that the employees will not appear as an asset on the entity's balance sheet?

Identify the current liability.

A limitation of the balance sheet in portraying the financial position of an entity is:

Which of these assets that could be listed on a balance sheet is likely not to translate into future economic benefits?

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

Identify the non-current asset.

The only tangible asset that is not depreciated is:

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

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

Which of these is a liability, not because it is a legal claim but because of past industry or business behaviour?

Identify the asset.

A reserve name that would not appear on a balance sheet is:

Without the business entity convention, which item in the balance sheet would not exist?

What is the effect on the balance sheet when the business has cash sales of $12,000 of goods that were originally purchased for $8,000?

If assets are $34,800 and equity is $12,700, liabilities are:

The effect on the balance sheet when the business pays a creditor is:

A reason why profits may be retained in a business rather than withdrawn by the owners is:

The accounting convention that the objectivity principle provides support for is:

Identify the liability.

If reported profits are reduced by $5,000 in year one because of the operation of prudence:

Introduction to Accounting

Different Accounting Entities

Measuring and Reporting Financial Performance

Measuring and Reporting Cash Flows

Analysis and Interpretation of Financial Statements

Costvolumeprofit Analysis and Marginal Analysis

Full Costing

Budgeting

Projected Financial Statements

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Trends and Issues in Accounting

Filters

Exam 3: Measuring and Reporting Financial Position

Which accounting convention has the effect that the employees will not appear as an asset on the entity's balance sheet?

Identify the current liability.

A limitation of the balance sheet in portraying the financial position of an entity is:

Which of these assets that could be listed on a balance sheet is likely not to translate into future economic benefits?

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

Identify the non-current asset.

The only tangible asset that is not depreciated is:

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

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

Which of these is a liability, not because it is a legal claim but because of past industry or business behaviour?

Identify the asset.

A reserve name that would not appear on a balance sheet is:

Without the business entity convention, which item in the balance sheet would not exist?

What is the effect on the balance sheet when the business has cash sales of $12,000 of goods that were originally purchased for $8,000?

If assets are $34,800 and equity is $12,700, liabilities are:

The effect on the balance sheet when the business pays a creditor is:

A reason why profits may be retained in a business rather than withdrawn by the owners is:

The accounting convention that the objectivity principle provides support for is:

Identify the liability.

If reported profits are reduced by $5,000 in year one because of the operation of prudence:

Introduction to Accounting

Different Accounting Entities

Measuring and Reporting Financial Performance

Measuring and Reporting Cash Flows

Analysis and Interpretation of Financial Statements

Costvolumeprofit Analysis and Marginal Analysis

Full Costing

Budgeting

Projected Financial Statements

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Trends and Issues in Accounting

Filters