1ST YEAR CLINCHER ROUND

Which of the following will understate net income for the period?

• Beginning inventory is overstated.
• Purchases are understated.
• Ending inventory is overstated.
• All of the above.

Which of the following statements is false?

• The conceptual framework prescribes the concepts for general purpose financial reporting.
• When exercising prudence in case of uncertainty, the one which has the least effect on assets is chosen
• When making materiality judgments, a quantitative assessment alone is not always sufficient to conclude that an item of information is not material.
• All changes in an entity's economic resources and claims to those resources result from an entity's financial performance.

Two Scenarios happened in the ledger as noted by the accountant: Left side posting of 100,000 and 20,000 to an expense account Right side posting of 232,533 and 341,400 to a revenue account. From these scenario we can conclude that:

• Both Expense and Revenue account Increase in their normal balances
• Expense should be posted a net amount of 80,000
• Expense is decreasing while the revenue increases
• Scenario 1 Increases expenses and Scenario 2 Decreases revenue

Statement 1: Compliance with the PFRS is presume to result in fairly presented financial statements Statement 2: Systematic and rational allocation is where costs that are directly related to the earning of revenue are recognized as expenses in the same period the related revenue is recognized.

• Only statement 1 is true
• Only statement 2 is true
• Both statements are true
• Both statements are false

Increasing asset and decreasing liabilities, in terms of debit and credit, would be

• Debiting asset and debiting liabilities
• Debiting asset and crediting liabilities
• Crediting asset and crediting liability
• Crediting asset and debiting liability

Which of the following statements regarding accounting is incorrect?

• Accounting is regarded as a service activity
• Accounting deals quantitative information primarily financial in nature
• Accounting is a service activity which provides financial information about economic entities and is not intended for use of not for profit entity
• Accounting helps economic decisions

Unearned Revenue will have a debit journal entry in one of the following scenarios:

• Receiving cash from rendering services
• Receiving invoice receipts from customer
• Performance of an service to customer who has advance payment
• None of the above

Which of the following account types increase by debits in double-entry accounting?

• Assets, Expenses, Losses
• Assets, Revenue, Gains
• Expenses, Liabilities, Losses
• Gains, Expenses, Liabilities

The preparation of adjusting entries is

• Straightforward because the accounts that need adjustment will be out of balance.
• Often an involved process requiring the skills of a professional.
• Only required for accounts that do not have a normal balance
• Optional when financial statements are prepared

Which of these statements about accrual accounting is true?

• Revenue is recorded only when payments are received, while expenses are recognized when they're incurred.
• All revenue from prepayments should be recognized when the payment is received, while expenses accrue over the life of the obligation.
• If the business has provided the goods or services and can reasonably expect to receive cash, it can recognize the revenue in that period.
• The matching principle dictates that expenses should be recognized when they are incurred, regardless of when revenue is recognized.