Chapter 7 - The perpetual inventory system - ACC 3/4

What is the two-fold effect on a balance sheet when goods are sold for cash?

• Increase Bank, Decrease GST liability, Increase Capital

• Increase Bank, Increase GST Liability, Increase Capital

• Increase Bank, Decrease GST Liability, Decrease Capital

• Increase Accounts Receivable, Increase GST liability, Increase Capital

Which source document could be used to verify an entry in the IN column of an inventory card?

• A sales invoice

• A cash receipt

• A credit note to a customer

• A credit note from a supplier

How should inventory be valued in a balance sheet?

• At estimated selling price in order to satisfy relevance

• At the lowest expected selling price in order to satisfy accrual accounting

• Using period costing in order to calculate an accurate profit

• At cost price in order to satisfy faithful representation

A non-current asset is:

• Expected to be used up within 12 months

• Expected to be sold at a profit

• Usually reported in an income statement

• Usually purchased to produce economic benefits

Why is ethical compliance important in accounting?

• It ensures financial reports are filed on time.

• It boosts a business's profit margins.

• It considers the potential impact of decisions on financial and non-financial factors.

• It helps reduce financial costs to a business.

What are assets in accounting?

• Present obligations to transfer economic resources

• Present economic resources controlled by an entity

• Residual interest in an entity's assets after liabilities are deducted

• Decreases in assets or increases in liabilities that reduce owner’s equity

How are current liabilities defined?

• Obligations due to be settled within 12 months from the end of the current reporting period

• Economic resources expected to be used for several years

• Increases in owner’s equity

• Decreases in owner’s equity

Which of the following is an example of revenue?

• Wages paid to employees

• Purchase of inventory

• Sale of goods for cash

• Interest on a loan taken out by the business

What is the role of verifiability in accounting reports?

• To ensure information is presented as soon as possible

• To ensure information can be compared across entities and periods

• To ensure information accurately represents real-world events

• To ensure information is understandable to users

How are expenses defined in accounting?

• Increases in assets that result in an increase in owner’s equity

• Decreases in assets or increases in liabilities that result in a decrease in owner’s equity

• Present obligations to transfer economic resources

• Economic resources controlled by an entity