Deck 4: Accounting Principles, Concepts and Policies

Question 1

Sales revenue should be recognised when goods and services have been supplied; costs are incurred when goods and services have been received.
The accounting concept which governs the above is the:

A) accruals concept.
B) matching concept.
C) realisation concept
D) dual aspect concept.

Answer 1

accruals concept.

Question 2

Which of the following is not an objective against which an entity should judge the appropriateness of its accounting policies?

A) Relevance
B) Comparability
C) Profitability
D) Reliability

Answer 2

Profitability

Question 3

Inventory not sold in one period, should be carried forward to the next period and released to the income statement in the next period if the goods are sold.

A) accruals concept.
B) matching concept.
C) realisation concept
D) dual aspect concept.

Answer 3

matching concept.

Question 4

Changing the valuation of inventory from LIFO to FIFO is an example of:

A) A change in estimation techniques
B) An accounting concept
C) A change of accounting policy
D) None of the above

Question 5

The historical cost convention

A) fails to take account of changing price levels over time.
B) records only past transactions.
C) values all assets at their cost to the business, without any adjustment for depreciation.
D) has been replaced in accounting records by a system of current cost accounting.

Question 6

A trader bought goods for resale on credit costing £1,000 in July and paid for them in August. These were sold on credit for £1,500 in September and the money received in October.
Applying the accruals concept and matching principle:

A) The costs were incurred in July, the revenue was earned in September and the profit of £500 arose in September
B) The costs were incurred in August, the revenue was earned in October and the profit of £500 arose in October
C) There was a loss of £1,000 in July and a profit of £1,500 in September
D) There was a loss of £1,000 in August and a profit of £1,500 in October

Question 7

Which of the following is not an accounting concept?

A) FIFO
B) Consistency
C) Prudence
D) Accruals

Question 8

Which of the following is not an accounting concept?

A) Going concern
B) Materiality
C) Periodicity
D) Amortisation

Question 9

The accounting concept which tends to understate values when inflation is high is:

A) The historical cost concept
B) The money measurement concept
C) The prudence concept
D) The realisation concept

Question 10

At the end of the accounting period a company makes a charge in its financial statements for oil delivered, not invoiced but used. Then this adjustment is in accordance with the following concept:

A) Realisation
B) Consistency
C) Accruals
D) Materiality

Question 11

At the end of the accounting period the value of the entity's building rises by £10,000, however, the £10,000 is not included in the income for the period. This 'non' adjustment is in accordance with the following concept:

A) Realisation
B) Consistency
C) Accruals
D) Materiality

Question 12

At the end of the accounting period the value of the inventory not sold is removed from that years cost of sales and carried into the next year as a current asset. This adjustment is in accordance with the following concept:

A) Realisation
B) Matching
C) Accruals
D) Prudence

Question 13

Which of the following is not an estimation technique?

A) Straight line method
B) Providing a provision for bad debts
C) Actuarial method
D) Fair value

Question 14

Which of the following is not a measurement basis as stipulated in the framework document?

A) Historical cost
B) Materiality cost
C) Current cost
D) Present value

Question 15

Which of the following is not an element as defined in the Framework?

A) Income
B) Assets
C) Liabilities
D) Profit

Question 16

Substance over form was first introduced in the UK by the following accounting standard:

A) SSAP 2
B) IAS 1
C) FRS 5
D) FRS 8