CHAPTER 1 - AN INTRODUCTION TO BUSINESS AND ACCOUNTING

An effective accounting system should provide information

• on sales, cost of goods sold and profitability of the business.
• for customers’ feedback and requirements.
• on internal and external reporting for managers and third parties.
• on new products and methods.

The term “accounting period” is used to refer to the

• time span during which taxes are paid to the tax authorities.
• budget period, usually one year, relied on by the accountant.
• time span, usually one year, covered by the financial statements.
• period within which debtors are expected to settle accounts.

Which of the following is a capital receipt?

• Interest received on fixed deposit account
• Commission received
• Premium on shares
• Dividend received on shares

Which of the following should be classified as capital expenditure?

• The annual depreciation of property
• Computer repairs and maintenance cost
• Solicitors’ fees in connection with the purchase of property
• The wages of the machine operators

An expense is classified as revenue expenditure if it

• Contributes to the operating income of the business
• Adds to or reduces the capital of the business
• Necessitates the injection of an additional capital
• Adds to or improves the value of non-current assets

The accounting concept that says every debit entry must have a corresponding credit entry is

• Going concern
• Duality concept
• Historical cost concept
• Consistency concept

Which of the following best defines “the concept of accounting”?

• An activity performed by accountants
• A system comprising several interrelated and interdependent parts
• A technique of managements
• A process of handling information of economic nature, which is useful and adaptive to varying situations

Which of the following is NOT a financial statement?

• Statement of changes in equity
• Statement of profit or loss
• Statement of financial position
• Statement of corporate governance

Which of the following is NOT an external user of accounting information?

• Customer
• Manager
• Competitor
• Government

Which of the following best explains the term capital expenditure?

• Expenditure relating to the issue of share capital
• Expenditure on expensive assets
• Expenditure relating to the acquisition or improvement of non-current assets
• Expenditure on non-current assets including repairs and maintenance