ARFB113 - Topic 2

What is the primary goal of every business?

• Customer satisfaction

• Profit making

• Creative innovation

• Risk management

Which of the following is NOT a branch of accounting?

• Management Accounting

• Financial Accounting

• Taxation

• Marketing Accounting

What does the Statement of Financial Position represent?

• The financial position at a specific point in time

• The income earned over a period

• The cash inflows and outflows

• The changes in equity over time

Which accounting concept ensures that expenses are matched with revenues?

• Matching concept

• Going concern

• Prudence concept

• Materiality concept

What is the definition of an asset?

• A decrease in liabilities

• The residual interest in the assets of the entity

• A right that has the potential to produce economic benefits

• A present obligation to transfer an economic resource

In cash accounting, when are revenues reported?

• When cash is received

• When expenses are paid

• When earned

• At the end of the accounting period

Which of the following is an example of a current liability?

• Trade payables

• Bank loans due in five years

• Mortgages

• Long-term loans

What does the term 'equity' refer to in financial statements?

• The total liabilities of the business

• The total assets of the business

• The income generated by the business

• The residual interest in the assets after liabilities

Which accounting principle requires that all important matters are disclosed?

• Consistency concept

• Materiality concept

• Substance over form concept

• Duality concept

The ________ concept states that financial statements should be prepared in a way that avoids overestimating profits and underestimating losses.