ARFB113 Topic 2

Once a particular accounting method is adopted by a business, it must be used in the subsequent years. This accounting concept refers to the __________________________.

• business entity concept

• historical cost concept

• consistency concept

• conservatism concept

Mama Rose, the owner of a sundry shop, includes her family's personal expenses as expenses of the business. The accounting concept that has been violated is the _________________________.

• materiality concept

• entity concept

• prudence concept

• matching concept

Provision for doubtful debts is based on the ________________________________.

• prudence concept

• consistency concept

• materiality concept

• matching concept

Which of the following statements explains the going concern concept?

• The going concern concept states that a business will cease operations in the near future.
• The going concern concept requires businesses to liquidate their assets immediately.
• The going concern concept suggests that a business will only operate for a fixed period of time.
• The going concern concept assumes that a business will continue to operate indefinitely.

Accounting requires each transaction to have at least a debit and a credit entry. This is related to the ____________________.

• single-entry accounting
• cash basis accounting
• accrual accounting
• double-entry bookkeeping

Murni Trading own three acres of land, which cost RM5,000,000 per acre. The current market value of the land is RM8,000,000 per acre. Based on the historical cost concept, what is the amount to be reported in the Statement of Financial Position for the three acres of land?

• RM3,000,000

• RM5,000,000

• RM8,000,000

• RM13,000,000

Which of the following statements best describes the materiality concept?

• Financial information is only material if it is legally required.
• Financial information is material if its omission or misstatement could influence users' economic decisions.
• Materiality is determined solely by the size of the financial statement.
• All financial information is considered material regardless of its impact.

Accrual accounting records revenues when ______________________ and expenses when ____________________.

• earned; incurred

• earned; cash is paid out

• cash is received; cash is paid out

• cash is received; incurred