Initial and Element 1 Assessment Quiz

What is cash basis accounting?

• Records transactions when cash is received or paid

• Records transactions when they are earned or incurred

• Recognises receivables and payables

• Excludes cash transactions

How does accrual basis accounting record transactions?

• When cash is received or paid

• When receivables are recognised

• When revenues and expenses are earned or incurred

• When transactions are excluded

What does Accounts Payable refer to?

• Money a company is owed

• Money a company owes to creditors

• Money a company has in cash

• Money a company has in receivables

Define Depreciation.

• Increase in the value of an asset

• Systematic reduction of the recorded cost of a fixed asset

• Immediate expense of an asset

• Value of an asset over its use

What is Inventory?

• Cash available for purchase

• Goods available for sale and raw materials

• Receivables from customers

• Payables to suppliers

How should the purchase of office supplies on credit for £200 be recorded in double-entry bookkeeping?

• Debit Office Supplies £200, Credit Cash £200

• Debit Accounts Payable £200, Credit Office Supplies £200

• Debit Office Supplies £200, Credit Accounts Payable £200

• Debit Cash £200, Credit Office Supplies £200

Why is understanding accounting principles important for a business?

• For creative financial reporting

• For informed decision making and regulatory compliance

• For avoiding taxes

• For increasing expenses

What is the basic accounting equation?

• Assets = Liabilities - Equity

• Assets = Equity - Liabilities

What does an Inventory account track?

• The value of a company's receivables

• The value of a company's liabilities

• The value of a company's goods and materials available for sale or use

• The value of a company's fixed assets

What is the role of the audit committee in internal audit reports?

• To ignore financial reporting

• To ensure the integrity of financial reporting

• To manage day-to-day operations

• To increase liabilities