Accounting - Test 2

Which of the following accounting concepts means that similar items should receive a similar accounting

treatment?

• A Going concern

• B Accruals

• C Matching

• D Consistency

A business can make a profit and yet have a reduction in its bank balance. Which ONE of the following

might cause this to happen?

• A The sale of non-current assets at a loss

• B The charging of depreciation in the statement of profit or loss

• C The lengthening of the period of credit given to customers

• D The lengthening of the period of credit taken from suppliers

A business sells $100 worth of goods to a customer, the customer pays $50 in cash immediately and will pay the remaining $50 in 30 days' time.

• Debit cash $50, credit payables $50, credit purchases $50

• Debit payables $50, debit cash $50, credit purchases $100

• Debit purchases $100, credit payables $50, credit cash $50

• Debit purchases $100, credit cash $100

Which of the following statements is/are TRUE or FALSE?

1 Cash purchases are recorded in the purchases day book.

2 The sales day books is used to keep a list of invoices received from suppliers.

• Both statements are TRUE

• Both statements are FALSE

• Statement 1 is TRUE and statement 2 is FALSE

• Statement 1 is FALSE and statement 2 is TRUE

A business commenced with capital in cash of $1,000. Inventory costing $800 plus sales tax is purchased on credit, and half is sold for $1,000 plus sales tax, the customer paying in cash at once. The sales tax rate is 20%.

What would the accounting equation after these transactions show?

• Assets $1,800 less Liabilities $200 equals Capital $1,600

• Assets $2,200 less Liabilities $1,000 equals Capital $1,200

• Assets $2,600 less Liabilities $800 equals Capital $1,800

• Assets $2,600 less Liabilities $1,000 equals Capital $1,600

Which of the following costs may be included when arriving at the cost of finished goods inventory for inclusion in the financial statements of a manufacturing company?

1 Carriage inwards

2 Carriage outwards

3 Depreciation of factory plant

4 Finished goods storage costs

5 Factory supervisors' wages

• 1 and 5 only

• 2, 4 and 5 only

• 1, 3 and 5 only

• 1, 2, 3 and 4 only

You are preparing the final accounts for a business. The cost of the items in closing inventory is $41,875. This includes some items which cost $1,960 and which were damaged in transit. You have estimated that it will cost $360 to repair the items, and they can then be sold for $1,200.

What is the correct inventory valuation for inclusion in the final accounts?

• $39,915

• $40,755

• $41,515

• $42,995

IAS 2 Inventories defines the items that may be included in computing the value of an inventory of finished goods manufactured by a business.

Which one of the following lists consists only of items which may be included in the statement of financial position value of such inventories, according to IAS 2?

• Supervisor's wages, carriage inwards, carriage outwards, raw materials

• Raw materials, carriage inwards, costs of storage of finished goods, plant depreciation

• Plant depreciation, carriage inwards, raw materials, Supervisor's wages

• Carriage outwards, raw materials, Supervisor's wages, plant depreciation

A company has decided to switch from using the FIFO method of inventory valuation to using the average cost method (AVCO). In the first accounting period where the change is made, opening inventory valued by the FIFO method was $53,200. Closing inventory valued by the AVCO method was $59,800. Total purchases and during the period were $136,500. Using the continuous AVCO method, opening inventory would have been valued at $56,200.

What is the cost of materials that should be included in the statement of profit or loss for the period?

• $129,900

• $132,900

• $135,900

• $140,100

Which of the statements below correctly states the purpose of the asset register?

• An internal control to ensure details of all assets are readily available in the event of loss or theft

• To ensure the organisation is aware of the age of plant and machinery

• An internal control to ensure information relating to non-current assets in the nominal ledger and the financial statements is correct

• To enable the organisation to comply with IAS 16 Property, plant and equipment