Reconciliations & Asset Disposal

Which of the following statements is true regarding Generally Accepted Accounting Principles (GAAP)?

• GAAP is a set of guidelines for financial reporting.

• GAAP is only applicable to publicly traded companies.

• GAAP is not important for small businesses.

• GAAP is a set of rules that all businesses must follow.

Which of the following is the most important reason for following GAAP?

• To avoid penalties for non-compliance.

• To ensure that financial statements are accurate and reliable.

• To maintain consistency across industries.

• To make financial statements easier to understand for non-accountants.

Which of the following is an example of a situation where a company might need to deviate from GAAP?

• The company is hiding financial information from SARS.

• The company operates in an industry where GAAP does not apply.

• The company is facing a unique situation that is not addressed by GAAP.

• The company's management does not agree with the principles of GAAP.

A business purchased a new delivery truck for R300 000. Which GAAP principle requires that the cost of the truck be recorded at R300 000?

• Double entry principle

• Historical cost principle

• Matching principle

• Prudence principle

A business has a debtor’s list of R10 000 at the end of the year. Which GAAP principle requires that the business estimate and record a provision for bad debts based on the likelihood of customers not paying their bills?

• Double entry principle

• Historical cost principle

• Matching principle

• Prudence principle

What are some potential reasons for discrepancies between a company's financial records and a creditor's account statement?

• Errors in recording transactions, timing discrepancies, and mistakes by the creditor

• Changes in interest rates, fluctuations in exchange rates, and inflation

• Changes in the company's credit rating, alterations in the creditor's credit terms, and an economic downturn

• Changes in the company's management, employee fraud, and changes in the company's ownership

What is one way for a business to ensure the accuracy and reliability of its creditor's reconciliations?

• By verifying the details on the creditor's statements with the creditors directly.

• By using internal controls, such as separation of duties and regular audits.

• By paying its bills promptly and avoiding disputes with creditors.

• This can only be done if a business uses accounting software that automatically reconciles the creditor's statements.

Which of the following would not be included in a debtor’s reconciliation?

• Invoices that have been issued to debtors.

• Payments received from debtors.

• Outstanding debts by its creditors.

• Interest charged on overdue debts.

If the opening balance of a debtor's account was R5 000, the closing balance R7 000, and the total payments received during the month were R4 000, what was the total amount of sales made to the debtor during the month

• R6 000

• R8 000

• R10 000

• R12 000

A debtor owes R2 000 at an interest rate of 24% per annum and the invoice is 60 days past due. How much interest is owed at the end of the 60 days?

• 2 000 × 24/ 100 × 2/ 12 + 2 000 × 24 /100 × 2 /12

• 2 000 × 24 /100 × 1/ 12 + 2 000 × 24 /100 × 1 /12

• 2 000 × 24 /100 × 1 /12 + 2 040 × 24 /100 × 1/ 12

• 2 000 × 24 /100 × 2 /12