Revision Final Exam FHBM1214 FA

The owner paid her son's school tuition fees using the company cheque. The accounting clerk recorded it as company's expenses.

• Complied; Business Entity

• Against; Business Entity

• Complied; Accrual Concept

• Against; Accrual Concept

Answer explanation

The owner and the business should be treated as separate entities. The accounting clerk should record it in the drawings account as withdrawal by owner for personal use.

The accounting clerk used the straight line method to depreciate the computers. However, he changed to another method in the following year.

• Against; Consistency

• Complied; Consistency

• Against; Matching Concept

• Complied; Matching Concept

Answer explanation

The same method has to be applied when preparing the financial reports for comparison purpose.

Company XYZ reported its yearly financial accounts from 1 January 2022 to 31 December 2022.

• Complied; Consistency

• Against; Consistency

• Complied; Accounting Period

• Against; Accounting Period

Answer explanation

The life of a business is divided into units of equal length for the purpose of preparing financial reports.

Company RST faces lawsuits from the creditors. The company did not disclose the information in the notes to the financial statements.

• Complied; Materiality

• Against; Materiality

• Complied; Full Disclosure

• Against; Full Disclosure

Rental received in advance has been reported as unearned rental revenue.

• Complied; Accrual Concept

• Against; Accrual Concept

• Complied; Objectivity Concept

• Against; Objectivity Concept

Answer explanation

Revenue is reported when it is earned regardless of cash receipts.

Company ABC recorded the purchase of a machine at its purchase price.

• Complied; Prudence Concept

• Against; Prudence Concept

• Complied; Historical Cost

• Against; Historical Cost

Answer explanation

All transactions of a business entity are recorded at the original cost to the enterprise.

Issued by a trader when he sells on credit.

Sent by seller when goods are overcharged

Sent by seller when goods are undercharged

Prepared to record payment of money to third parties.