Accounting Rules

The employees of a business are highly skilled but this is not recorded in the financial statements of the business. Which accounting principle is being applied?

• going concern

• money measurement

• prudence

• realisation

A business maintains a provision for doubtful debts. Which two accounting principles are being applied?

• accruals (matching) and prudence

• business entity and duality

• consistency and realisation

• money measurement and going concern

Which accounting objective states that the information in financial statements must be free from error and bias?

• comparability

• relevance

• reliability

• understandability

Profit is only recorded in the financial statements when legal title passes between buyer and seller.

Which accounting principle is being applied?

• consistency

• going concern

• prudence

• realisation

A trader included his personal telephone bill in the telephone expenses account of his business.

Which accounting principle is the trader not applying?

• business entity

• going concern

• matching (accruals)

• prudence

An item of inventory has an original cost of $18 and a replacement cost of $13. The costs of packing and delivery when the item is sold will amount to $3. It is expected to be sold for $20.

At which value should it be included in the financial statements?

• $13

• $16

• $17

• 18

Which accounting principle requires a business to prepare financial statements at regular intervals?

• accounting entity

• accounting year

• going concern

• money measurement

A business applies the money measurement principle. What would be included in the financial statements?

• morale of workers

• quality of the goods sold

• skill of workers

• value of the goods sold

What is meant by the consistency principle?

• Accounts should normally be prepared on the same basis each year

• Businesses must never change their year-end

• Net profit will always be the same each year

• Similar businesses must treat similar items in the same way

Which asset is valued at the lower of cost and net realisable value?

• Goodwill

• Inventory

• Loose tools

• Machinery