FA - Basics

Which of the following are TRUE of partnerships?

1. The partners’ individual exposure to debt is limited.

2. Financial statements for the partnership by law must be produced and made public.

3. A partnership is not a separate legal entity from the partners themselves.

• 1 and 2 only

• 2 only

• 3 only

• 1 and 3 only

Which of the following statements is/are true?

1. Directors of companies have a duty of care to show reasonable competence in their management of the affairs of a company.

2. Directors of companies must act honestly in what they consider to be the best interest of the company.

3. A Director’s main aim should be to create wealth for the shareholders of the company.

• 1 and 2 only

• 2 only

• 1, 2 and 3

• 1 and 3 only

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

• Going concern

• Accruals

• Matching

• Consistency

Which of the following statements about accounting concepts and policies is/are correct?

1. Companies should never change the presentation or classification of items in their financial statements, even if there is a significant change in the nature of operations.

2. Companies should create provisions in times of company growth to be utilised in more difficult times, to smooth profits.

• 1 only

• 2 only

• 1 and 2

• Both are incorrect

Which one of the following statements best defines an expense?

• An expense is any outflow of economic benefits in an accounting period.

• An expense is an outflow of economic benefits resulting from the purchase of resources in an accounting period

• An expense is an outflow of economic benefits resulting from a claim by a third party.

• An expense is an outflow of economic benefits in an accounting period as a result of the using up of resources or a fall in the value of an asset.

Which one of the following statements is true in relation to a partnership?

• A partnership is a separate legal entity

• A partnership is jointly owned and managed by the partners

• A partnership can raise capital by issuing shares to members of the public

• A partnership is able to own property and other assets in its own name

Which one of the following statements best defines an asset?

• An asset is a resource owned by the entity with a financial value.

• An asset is a resource controlled by an entity from which future economic benefits are expected to be generated.

• An asset is a resource controlled by an entity as a result of past events.

• An asset is a resource controlled by an entity as a result of past events from which future economic benefits are expected to be generated.

Which one of the following statements is true in relation to a sole trader?

• A sole trader cannot have any employees

• A sole trader is able to introduce or withdraw capital from the business at any time

• A sole trader has limited liability for the debts of the business

• A sole trader can operate a business from only one location

Which one of the following statements best defines the equity or capital of a business?

• Equity or capital of a business is represented by the net assets of the business

• Equity or capital of a business is equivalent to the value of the business

• Equity or capital of a business is equivalent to the value of the business assets

• Equity or capital of a business is represented by the total assets of the business

Which of the following statements is true?

• The directors of a company are liable for any losses of the company

• A sole trader business is owned by shareholders and operated by the proprietor

• Partners are liable for losses in a partnership in proportion to their profit share ratio

• A company is run by directors on behalf of its members