ADNI Accounting IGCSE 2020 P1 - SET B

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

Khalid started a business on 1 April 2018 with a capital of $90 000. He provided the following information on 31 March 2019.

non-current assets $75 000

current assets $32 000

current liabilities $24 000

drawings during the year $19 000

What was the profit or loss for the year ended 31 March 2019?

• $12 000 loss

• $12 000 profit

• $26 000 loss

• $26 000 profit

How is cost of production calculated?

• direct materials + direct labour + direct expenses

• direct materials + direct labour + direct expenses + factory overheads

• direct materials + direct labour + direct expenses + factory overheads + decrease in work in progress

• direct materials + direct labour + direct expenses + factory overheads – decrease in work in progress

Lisa returned goods previously purchased from Tara.

How did Tara record this?

• account debited : Lisa

  account credited : purchases returns

• account debited : Lisa

  account credited : sales returns

• account debited : purchases returns

  account credited : Lisa

• account debited : sales returns

  account credited : Lisa

When preparing his financial statements for the year ended 30 April 2019 Tebogo recorded his opening inventory of $6400 as $4600 in error.

What was the effect of this error?

• effect on gross profit for the year : overstated

  effect on profit for the year : overstated

  effect on capital at 30 April 2019 : overstated

• effect on gross profit for the year : understated

  effect on profit for the year : understated

  effect on capital at 30 April 2019 : understated

• effect on gross profit for the year : overstated

  effect on profit for the year : understated

  effect on capital at 30 April 2019 : understated

• effect on gross profit for the year : understated

  effect on profit for the year : overstated

  effect on capital at 30 April 2019 : overstated

Insurance paid by a business included $400 relating to the owner’s private house.

This amount was not included in the income statement.

Which accounting principle was applied?

• accruals (matching)

• business entity

• duality

• prudence

The following account appeared in Jacob’s ledger.

Which statement is correct?

• Cindy paid Jacob $441 by cheque on 29 August.

• Cindy purchased goods, $390, on credit from Jacob on 14 August.

• Jacob allowed Cindy $9 cash discount on 29 August.

• Jacob owed Cindy $450 on 1 August.

What is not a requirement of the accounting objective of reliability?

• information must be available in time for decisions to be made

• information must be free from bias

• information must be free from errors

• information must be prepared with suitable caution applied

  to any judgement

On 2 September Tumelo purchased goods on credit, list price $4200, less trade discount of 20% and a cash discount of 2% if the invoice was paid within 30 days.

On 5 September Tumelo returned one-third of the goods to the supplier.

Which amount did Tumelo enter in his purchases returns journal?

• $1092

• $1120

• $1372

• $1400

Which statements about debentures are correct?

1 Debentures carry a fixed rate of interest.

2 Debentures do not carry voting rights.

3 Debenture holders are members of the company.

4 Debenture interest depends on the profit of the company.

• 1 and 2

• 1 and 4

• 2 and 3

• 3 and 4