Accounting Rules and Policies S20-23

Rashid’s financial year ends on 31 December. He paid rent on 1 February, 1 May, 1 August and

1 November.

An adjustment was made in the income statement for rent prepaid.

Which accounting principle was applied?

• duality

• matching

• money measurement

• prudence

Which statement describes the going concern principle?

• Accounting methods must be used consistently from one accounting period to the next.

• It is assumed that the business will continue to operate for the foreseeable future.

• Revenue is earned when legal title to goods passes from the seller to the buyer.

• The business is treated as being completely separate from the owner of the business.

At the end of the financial year, a company did not account for the unused stationary valued

at $50.

Which accounting principle did the company apply?

• matching

• materiality

• money measurement

• prudence

A trader wrote off the balance on a credit customer’s account as irrecoverable.

Which accounting principle was applied?

• business entity

• consistency

• money measurement

• prudence

Why should a trader match his costs for a financial year with the revenues for the same period?

• to account for all liabilities

• to account for money that has been paid in advance

• to make sure outstanding income is included

• to show the correct profit figure

Which international accounting objectives are described by the following statements?

1 Information in financial statements must be free from material error and bias.

2 Users must be able to identify differences and similarities between information in

different financial statements.

• A

• B

• C

• D

Which accounting policy requires that the information in financial statements is free from

significant errors and bias?

• comparability

• consistency

• reliability

• understandability

‘Revenue should only be regarded as earned when the legal title of goods and services passes

from the seller to the buyer.’

To which accounting principle does this statement refer?

• going concern

• matching

• money measurement

• realisation

Manvinder started a business and paid a cheque for $1000 into a business bank account. He

recorded this in the books of the business by debiting the bank account and crediting the capital

account.

Which accounting principles did he apply?

• business entity and duality

• business entity and going concern

• going concern and matching

• matching and duality

A trader always records assets and expenses in his ledger at the price he paid for them.

Which accounting principle is he applying?

• business entity

• historic cost

• prudence

• realisation