Chapter 1 KTQT

1 : Which of the following statements best defines a statement of financial position?

• A. It is a summary of income and expenditure for an accounting period

• B. It is a summary of cash receipts and payments made during an accounting period

• C. It is a summary of assets, liabilities and equity at a specified date

• D. It is a summary of assets and expenses at a specified date

2. 2. Which of the following statements are true?

3. (1) Accounting can be described as the recording and summarising of transactions.

4. (2) Financial accounting describes the production of a statement of financial position and statement of profit or loss for internal use.

• A. (1) only

• B. (2) only

• C. Both (1) and (2)

• D. None

3. 3. What is the main purpose of financial accounting?

• A. To record all transactions in the books of account

• B. To provide management with detailed analyses of costs

• C. To enable preparation of financial statements that provides information about an entity’s financial performance and position

• D. To calculate profit or loss for an accounting period

4. 4. Which of the following statements about users of accounting information is INCORRECT?

• A. Management is an internal user

• B. Taxing authorities are external users.

• C. Present creditors are external users

• D. Regulatory authorities are internal users

5. 5. Which of the following statements is FALSE?

• A. A statement of cash flows summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time.

• B. A statement of financial position reports the assets, liabilities, and owner’s equity at a specific date.

• C. An income statement presents the revenues, expenses,changes in owner’s equity, and resulting net income or net loss for a specific period of time.

• D. An statement of changes in equity summarizes the changes in owner’s equity for a specific period of time.

6. 6. Which accounting concept should be considered if the owner of a business takes goods from inventory for his own personal use?

• A. The fair presentation concept

• B. The accruals concept

• C. The going concern concept

• D. The business entity concept

7. 7. Sales revenue should be recognised when goods and services have been supplied; costs are incurred when goods and services have been received.

8. Which accounting concept governs the above?

• A. The business entity concept

• B. The materiality concept

• C. The accruals concept

• D. The duality concept

8. 8. Which accounting concept states that omitting or misstating this information could influence users of the financial statements?

• A. The consistency concept

• B. The accruals concept

• C. The materiality concept

• D. The going concern concept

9. 9. Which ONE of the following statements describes faithful representation, a qualitative characteristic of faithful representation?

• A. Revenue earned must be matched against the expenditure incurred in earning it

• B. Revenue earned must be matched against the expenditure incurred in earning it.

• C. he presentation and classification of items in the financial statements should stay the same from one period to the next.

• D. Financial information should be complete, neutral and free from error

10. 10. Which one of the following statements best defines a liability?

• A. A liability is an obligation arising from a past transaction or event.

• B. A liability is a legally binding amount owed to a third party.

• C. A liability is an obligation arising from a past transaction or event which is expected to be settled by an outflow of economic benefits.

• D. A liability is anything which results in an outflow of economic benefits from an entity.