Accounting Concepts Scenario

A construction company completed a project in December, but payment will only be received in January. According to the Accrual Concept, when should the revenue be recorded?

• December, when the project was completed.

• January, when payment is received.

• Spread over December and January.

• At the end of the fiscal year.

A retail store spends $5,000 on holiday advertising in November, which will drive December sales. When should the advertising expense be recorded?

• November, when the expense was paid.

• December, when the related sales occur.

• Split between November and December.

• At year-end, when the sales figures are known.

Mark owns a landscaping business and uses business funds to pay his personal electric bill. According to the Separate Legal Entity concept, how should this be recorded?

• As a business expense.

• As an owner’s drawing.

• Ignore it completely.

• As business revenue.

A company hires a team of highly skilled software engineers, whose expertise significantly contributes to the company’s success. Can this be recorded on the financial statements?

• Yes, as it adds value to the business.

• No, because it cannot be measured in monetary terms.

• Yes, if they receive salaries.

• No, as only physical assets are recorded.

A business buys equipment worth $10,000 on credit. According to the Dual Aspect Concept, how should this be recorded?

• Debit cash, credit liability.

• Debit equipment, credit liability.

• Debit expense, credit revenue.

• Debit cash, credit asset.

A company pays for insurance covering January to June in a single payment in January. How should this expense be recorded?

• Fully in January, when paid.

• Equally over the six months from January to June.

• At the end of June, when coverage ends.

• Only when claims are made.

A publishing company incurs printing costs in April for books sold in May. When should these printing costs be recorded?

• April, when incurred.

• May, when the books are sold.

• Split equally between April and May.

• At the end of the year.

A business owner has strong relationships with key clients that bring consistent revenue. According to the Money Measurement Concept, can these relationships be recorded?

• Yes, if the clients pay a regular amount.

• No, as relationships are non-monetary.

• Yes, if contracts exist.

• No, unless the clients invest in the company.

Linda owns a bakery as a corporation and invests her personal funds to renovate the shop. How should this investment be recorded?

• As business income.

• As a personal expense.

• As an owner’s equity contribution.

• Ignore it in business records.

A business receives a loan of $15,000 to purchase new machinery. According to the Dual Aspect Concept, what accounts are affected?

• Debit cash, credit asset.

• Debit cash, credit liability.

• Debit revenue, credit cash.

• Debit expense, credit equity.