WorksheetsPOA 7086 Theory
Total questions: 107
Worksheet time: 2hrs 0mins
Q. What is the role of accounting.
Accounting provides accounting information for ________-______ by stakeholders.
(a)
State the role of accountants.
Identify the professional ethics principles of an accountant.
Objectivity
Unbiased
Straightforward
Integrity
Q. Define integrity.
An accountant is _______________ ___ ______ in all professional relationships.
(a)
Define objectivity.
Q. Explain why is it important to have integrity and objectivity in preparing and presenting accounting information.
Stakeholders _____ _____ in the information provided by accountants who must adhere to professional ethics, uphold integrity and be objective.
(a)
Name all the stakeholders who are interested in the affairs of the business and make use of the accounting information for decision-making.
Hint: 9 in total
(a)
Identify examples of accounting information needed by stakeholders of a business for decision-making.
Cost of inventory
Trade receivables balance
Cash discounts
Reputation of supplier
All of the above
Identify examples of non-accounting information needed by owners and managers of a business for decision-making.
Reputation of customers
New customer's repayment history
Customer's preference of inventory
Specific industry outlook
All of the above
Q. Explain why lenders are interested in the business' accounting information.
To decide whether to _____ ____.
(a)
Q. Explain why employees are interested in the business' accounting information.
To evaluate their ______ _________ and if they will receive their salaries promptly.
(a)
Q. Explain why managers are interested in the business' accounting information.
To consider ways to _______ ___________ of business.
(a)
Q. Explain why suppliers are interested in the business' accounting information.
To decide whether to sell goods on credit, depending on the ability to (a) .
Q. Explain why customers are interested in the business' accounting information.
To evaluate whether a business is able to provide _____-_____ _______.
(a)
Q. Explain why governments are interested in the business' accounting information.
To check for compliance of _____ ___ ___________ and to assess how much tax is payable.
(a)
Q. Explain why competitors are interested in the business' accounting information.
To ________ business ___________.
(a)
Q. Explain why investors are interested in the business' accounting information.
To assess ______ __ ___________ and the future profitability of the business.
(a)
Explain why owners and shareholders are interested in the business' accounting information.
Q. Explain why owners and managers of a business are interested in non-accounting information.
This is so that important business-related factors that are not shown on financial statements are also included to make (a) .
Specify what a trading business is.
a business that buys goods from suppliers and sells goods to customers for profit.
a business that earns revenue through providing services to its customers for profit.
Specify what a service business is.
a business that buys goods from suppliers and sells goods to customers for profit.
a business that earns revenue through providing services to its customers for profit.
Identify the components of the financial statements of a trading business.
Gross profit
Sales revenue
Cost of sales
Sales returns
All of the above
Identify the components of the financial statements of a service business.
Gross profit
Sales revenue
Cost of sales
Service fee revenue
All of the above
Q. Define asset.
Assets are _________ _____ or controlled by the business that are expected to provide future benefits.
(a)
Q. Define liability.
Liabilities are ___________ ____ by a business that are expected to be settled in the future.
(a)
Q. Define equity.
Equity is the (a) by the owner on the net assets of a business.
Q. Define income.
Income is the _______ ______ through activities of a business.
(a)
Q. Define expense.
Expenses are the _____ _________ in the operation of a business to earn income in the same accounting period.
(a)
Which of the following are assets?
Property
Commission income receivable
Salaries expense payable
Bank overdraft
Depreciation of motor vehicles
Which of the following are liabilities?
Rent income received in advance
Commission income receivable
Salaries expense payable
Bank overdraft
Depreciation of motor vehicles
Which of the following are expenses?
Trade receivables
Impairment loss on trade receivables
Accumulated depreciation of motor vehicles
Bank overdraft
Depreciation of motor vehicles
Which of the following is an income?
Discount allowed
Discount received
Wages and salaries
Insurance
State the accounting equation.
(a)
Q. Define non-current asset.
Resources owned by a business that are expected to provide benefits that last ______ ___ financial year.
(a)
Q. Define current asset.
Resources owned by a business that are expected to provide benefits that last ______ ___ financial year.
(a)
Q. Define non-current liability.
Obligations owed by a business that are expected to be settled ______ ___ financial year.
(a)
Q. Define current liability.
Obligations owed by a business that are expected to be settled ______ ___ financial year.
(a)
Define gross profit.
(a)
Define profit for the period.
(a)
Explain revenue recognition theory.
Explain accrual basis of accounting theory.
Explain matching theory.
Q. Explain why businesses keep inventories.
To avoid ___-__-_____ situations.
(a)
Q. Describe how businesses manage inventories?
By keeping ______ _______ to track inventory.
(a)
Identify the accounting theory applied to value inventory.
Accounting entity theory
Going concern theory
Prudence theory
Consistency theory
Explain how inventory is valued.
State the accounting theory applied, in relation to accounting of impairment loss on trade receivables.
Going concern theory
Consistency theory
Matching theory
Monetary theory
Explain prudence theory in relation to the accounting of allowance for impairment of trade receivables.
Q. Define trade discount.
Trade discount is a reduction to the ____ _____.
(a)
Q. Define cash discount.
Cash discount is a reduction to the _______ _____.
(a)
Q. Explain why a trade discount is given.
A trade discount is given to encourage (a) purchases.
Q. Explain why a cash discount is given.
A cash discount is given to encourage customers to ___ _____, within a specified time.
(a)
Explain materiality theory.
State the accounting theory applied when deciding on the method of depreciation.
Consistency theory
Matching theory
Prudence theory
Historical cost theory
Q. Explain using matching theory why depreciation is charged.
Matching theory states that the depreciation expense will be matched against the ______ ______ in the same financial period to determine the profit for the period.
(a)
Q. Explain consistency theory.
Consistency theory states that a business should use the (a) method of depreciation and rate of depreciation every financial period to enable meaningful comparison of the net book value of non-current assets over time.
Q. Explain using prudence theory, why the net book value of non-current assets should be presented.
The net book value of a non-current asset should be calculated and presented so that assets and profits will not be (a) .
Q. Define capital expenditure.
Capital expenditure is the costs to (a) the non-current assets.
Q. Define capital expenditure.
Capital expenditure is recorded as ___-_______ ______, which provide benefits for more than 1 year.
(a)
Q. Define revenue expenditure.
Revenue expenditure is the costs to operate, repair and (a) the non-current assets in working condition.
Q. Define revenue expenditure.
Revenue expenditure is recorded as an (a) , which provide benefits within 1 year.
Which of the following are classified as capital expenditure?
The business owns a storage warehouse.
Cost of the extension of the warehouse
Cost of electricity utilities to operate the warehouse
Cost of renovation of the office in the warehouse
Cost of the fire insurance purchased for the warehouse
Cost of the new air-conditioners purchased in the warehouse
Q. Define depreciation.
Depreciation is the (a) of cost of a non-current asset over its estimated useful life.
Q. Define accumulated depreciation.
Accumulated depreciation is the (a) depreciation to date, deducted from the original cost of the non-current assets in the statement of financial position to arrive at the net book value.
State the causes of depreciation.
Usage
Legal limits
Wear and tear
Obsolescence
All of the above
Q. Distinguish the straight-line method.
Straight-line method assumes that the non-current assets provide the (a) benefit throughout their estimated useful life.
Q. Distinguish the reducing-balance method.
Reducing-balance method assumes that the non-current assets provide ____ benefits in the _______ years.
Provide 2 separate words in the blank as your answer.
(a)
Specify which non-current asset would you apply the straight-line method.
Fixtures and fittings
Motor vehicles
Office equipment
Plant and equipment
Specify which non-current asset would you apply the reducing-balance method.
Office equipment
Motor vehicles
Machinery
Fixtures and fittings
Explain using accrual basis of accounting how the accounting of interest expense is applied.
Q. Distinguish what a bank loan is.
A fixed amount borrowed from the bank and cash is (a) to the bank account.
Q. Distinguish how a bank loan is repaid.
It is repaid regularly in (a) instalments over the loan period or a one-time lump sum at the end of the loan period.
Q. Distinguish what a bank overdraft is.
It is the amount (a) more than what was deposited in the bank account, up to the limit which the business and bank had agreed upon.
Q. Distinguish how a bank overdraft is repaid.
It is repaid when the business (a) cash into the bank account within the year to reduce the bank overdraft.
State the accounting theory applied when accounting for capital and drawings.
Accounting period theory
Accounting entity theory
Consistency theory
Accrual basis of accounting theory
Q. Define drawings.
Assets taken from the business by the sole owner for ________ ___.
(a)
Q. Explain the limitation of a trial balance.
A balanced trial balance is not an ________ _____ __ ________. There may be errors not revealed by a trial balance.
(a)
Which of the following explains how errors not revealed happen?
The transaction is not recorded at all.
The wrong amount is recorded.
The transaction is recorded in the wrong account of the same accounting element.
The transaction is recorded in the wrong account of a different accounting element.
The transaction is recorded on the wrong sides of the accounts involved.
Q. State the missing type of transaction processed through the accounting information system.
1 Source document, 2 _______, 3 ledger, 4 trial balance, 5 financial statements
journal entries
journal
objective
ledger accounts
Q. State the purpose of source document.
A source document provides (a) that transactions have occurred.
Q. Define a journal.
A journal is a _____ ______ of transactions organised by transaction dates.
(a)
Q. Explain what a ledger is.
A ledger contain (a) ledger accounts posted from journal entries and it is a consolidation of all transactions relating to asset, liability, equity, income or expense item.
Q. State the purpose of a receipt.
A receipt acknowledges payment (a) from customers immediately after the business has sold goods or provide services.
Q. State the purpose of an invoice.
An invoice informs credit customers of the amount owed after the business sold goods or provided services on (a) .
Q. State the purpose of a debit note.
A debit note (a) the amount owed by credit customers who were previously undercharged.
Q. State the purpose of a credit note.
A credit note (a) the amount owed by credit customers who were previously overcharged or after goods were returned.
Q. State the purpose of a payment voucher.
A payment voucher _________ _______ to credit suppliers that must be approved by authorised personnel and supported by original supplier's invoice.
(a)
Q. State the purpose of a bank statement.
A bank statement is to check and (a) against the business records of its cash at bank account.
Explain objectivity theory.
Q. State the source document used in the transaction below.
Cash sales of goods.
Receipt
Invoice
Credit note
Debit note
Q. State the source document used in the transaction below.
Interest deposited into the bank account
Invoice
Payment voucher
Bank statement
Debit note
Q. State the source document used in the transaction below.
An amount owing from a credit customer that was not charged previously.
Invoice
Payment voucher
Bank statement
Debit note
Q. State the source document used in the transaction below.
Issued a cheque to credit supplier.
Invoice
Payment voucher
Credit note
Debit note
Explain the purpose of trial balance.
Q. Explain the purpose of internal control.
It is to (a) assets of the business.
Q. Explain the purpose of internal control.
It is to ensure business transactions are recorded (a) .
Q. Explain how segregation of duties is carried out.
Separate cash handling and cash recording duties among different employees so that no single person has control over the (a) cash process.
Q. Explain how custody of cash is carried out.
Cash and cheques are (a) in a locked storage.
Q. Explain how authorisation is a form of internal control.
Proper (a) has to be obtained for all payments from authorised personnel.
Q. Explain the purpose of preparing a bank reconciliation.
It is to (a) the differences between the cash at bank account and the bank statement.
Q. Explain the purpose of preparing a bank reconciliation.
It is to check for (a) that caused the differences between the cash at bank account and the bank statement.
Q. Explain direct deposits.
The customer deposits cash or cheques with the (a) directly.
Q. Explain direct payments.
The bank has been authorised by the business via a standing order to pay and (a) funds directly to its suppliers' bank account.
Q. Explain the meaning of cheques not yet presented.
The business has issued a cheque to its supplier but the supplier has not (a) the cheque to the bank for payment yet.
Q. Explain the meaning of deposits in transit.
The business has deposited the cheque with the bank but the bank has not (a) the cheque yet.
Q. Explain the meaning of dishonoured cheques.
The bank (a) a cheque that the business has previously deposited.
Which of the following are reasons why a cheque is dishonoured?
Cheque has expired by 6 months.
Insufficient funds in the payer's bank account.
Cheques not yet presented
Deposits in transit
Information on the cheque is incomplete.
