Which expenditure normally creates benefits beyond the current period?
Correct answer: B
It is generally recognised as an asset when recognition conditions are met.
Accountancy
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Which cost remains unchanged in total within the relevant activity range?
Correct answer: D
Its cost per unit changes as activity changes.
Which statement lists ledger balances to compare debit and credit totals?
Correct answer: B
Equal totals do not guarantee absence of all accounting errors.
Which record groups transactions by individual account?
Correct answer: C
A ledger collects entries affecting each account.
Which accounting equation links assets with claims against them?
Correct answer: B
Assets are financed through creditor and owner claims.
Which cost allocation spreads a depreciable asset's amount over its useful life?
Correct answer: A
It allocates cost systematically rather than measuring market value.
Which cost changes in total in proportion to activity under a linear assumption?
Correct answer: D
Its cost per unit stays constant under that assumption.
Which record first captures transactions chronologically with debit and credit entries?
Correct answer: A
Journal entries are subsequently posted to ledger accounts.
Evaluate the two proposed answers. Which are supported? I. Going concern assumption — the implication: Importance depends on whether information could influence user decisions. II. Materiality — the implication: Importance depends on whether information could influence user decisions.
Correct answer: B
I is incorrect: Going concern assumption → Accounts assume continued operation unless evidence indicates otherwise. Asset measurement is not automatically based on forced liquidation. II is correct: Materiality → Importance depends on whether information could influence user decisions. Both amount and nature may matter.
For Matching expenses with related revenue, identify the implication.
Correct answer: A
Inventory cost becomes expense when the related sale is recognised.
Evaluate the two proposed answers. Which are supported? I. Money measurement — the implication: Accounts primarily record items measurable in monetary terms. II. Consistency — the implication: Comparable accounting methods are applied across periods unless justified changes occur.
Correct answer: C
I is correct: Money measurement → Accounts primarily record items measurable in monetary terms. Valuable non-monetary factors may require other reporting. II is correct: Consistency → Comparable accounting methods are applied across periods unless justified changes occur. Changes should be explained appropriately.
For Substance over form, identify the implication.
Correct answer: D
A transaction's real rights and obligations matter.
Evaluate the two proposed answers. Which are supported? I. Faithful representation — the implication: Information is complete, neutral and free from material error in the relevant sense. II. Accrual basis — the implication: Recognise effects when earned or incurred rather than only when cash moves.
Correct answer: B
I is correct: Faithful representation → Information is complete, neutral and free from material error in the relevant sense. It aims to depict the underlying economic phenomenon. II is correct: Accrual basis → Recognise effects when earned or incurred rather than only when cash moves. Receivables and payables arise from timing differences.
For Business entity assumption, identify the implication.
Correct answer: D
Personal spending is not automatically a business expense.
Evaluate the two proposed answers. Which are supported? I. Accounting period — the implication: Reporting divides continuing activity into defined intervals. II. Historical cost — the implication: Initial recording based on the transaction amount.
Correct answer: C
I is correct: Accounting period → Reporting divides continuing activity into defined intervals. Adjustments allocate income and expenses to those intervals. II is correct: Historical cost → Initial recording based on the transaction amount. Subsequent measurement depends on the applicable accounting model.
Evaluate the two proposed answers. Which are supported? I. Materiality — the implication: Exercise caution in judgements under uncertainty. II. Full disclosure — the implication: Provide material information needed to understand the accounts.
Correct answer: B
I is incorrect: Materiality → Importance depends on whether information could influence user decisions. Both amount and nature may matter. II is correct: Full disclosure → Provide material information needed to understand the accounts. Notes complement the primary statements.
For Dual aspect, identify the implication.
Correct answer: C
This supports the accounting equation and double entry.
Evaluate the two proposed answers. Which are supported? I. Matching expenses with related revenue — the implication: Accounts primarily record items measurable in monetary terms. II. Substance over form — the implication: Reflect economic substance rather than legal label alone.
Correct answer: B
I is incorrect: Matching expenses with related revenue → Recognise associated costs in the relevant performance period. Inventory cost becomes expense when the related sale is recognised. II is correct: Substance over form → Reflect economic substance rather than legal label alone. A transaction's real rights and obligations matter.
For Going concern assumption, identify the implication.
Correct answer: C
Asset measurement is not automatically based on forced liquidation.
Evaluate the two proposed answers. Which are supported? I. Full disclosure — the implication: Information is complete, neutral and free from material error in the relevant sense. II. Accounting period — the implication: Business records are separate from the owner's personal records.
Correct answer: A
I is incorrect: Full disclosure → Provide material information needed to understand the accounts. Notes complement the primary statements. II is incorrect: Accounting period → Reporting divides continuing activity into defined intervals. Adjustments allocate income and expenses to those intervals.
For Historical cost, identify the implication.
Correct answer: C
Subsequent measurement depends on the applicable accounting model.
Evaluate the two proposed answers. Which are supported? I. Going concern assumption — the implication: Accounts assume continued operation unless evidence indicates otherwise. II. Accrual basis — the implication: Recognise effects when earned or incurred rather than only when cash moves.
Correct answer: B
I is correct: Going concern assumption → Accounts assume continued operation unless evidence indicates otherwise. Asset measurement is not automatically based on forced liquidation. II is correct: Accrual basis → Recognise effects when earned or incurred rather than only when cash moves. Receivables and payables arise from timing differences.
For Faithful representation, identify the implication.
Correct answer: A
It aims to depict the underlying economic phenomenon.
Evaluate the two proposed answers. Which are supported? I. Money measurement — the implication: Accounts primarily record items measurable in monetary terms. II. Prudence — the implication: Recognise associated costs in the relevant performance period.
Correct answer: C
I is correct: Money measurement → Accounts primarily record items measurable in monetary terms. Valuable non-monetary factors may require other reporting. II is incorrect: Prudence → Exercise caution in judgements under uncertainty. It does not justify deliberately biased understatement.
For Full disclosure, identify the implication.
Correct answer: A
Notes complement the primary statements.