Accountancy

Correct answer: D

I is correct: Materiality → Importance depends on whether information could influence user decisions. Both amount and nature may matter. II is incorrect: Substance over form → Reflect economic substance rather than legal label alone. A transaction's real rights and obligations matter.

Correct answer: C

Receivables and payables arise from timing differences.

Correct answer: A

I is incorrect: Business entity assumption → Business records are separate from the owner's personal records. Personal spending is not automatically a business expense. II 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.

Correct answer: B

Valuable non-monetary factors may require other reporting.

Correct answer: D

I is correct: Full disclosure → Provide material information needed to understand the accounts. Notes complement the primary statements. II is correct: Consistency → Comparable accounting methods are applied across periods unless justified changes occur. Changes should be explained appropriately.

Correct answer: A

I is incorrect: Dual aspect → Each transaction has balancing effects. This supports the accounting equation and double entry. II is correct: Substance over form → Reflect economic substance rather than legal label alone. A transaction's real rights and obligations matter.

Correct answer: B

Both amount and nature may matter.

Correct answer: A

I is correct: Dual aspect → Each transaction has balancing effects. This supports the accounting equation and double entry. II is incorrect: Prudence → Exercise caution in judgements under uncertainty. It does not justify deliberately biased understatement.

Correct answer: B

I is incorrect: Business entity assumption → Business records are separate from the owner's personal records. Personal spending is not automatically a business expense. II is incorrect: Going concern assumption → Accounts assume continued operation unless evidence indicates otherwise. Asset measurement is not automatically based on forced liquidation.

Correct answer: C

Comparable presentation does not require ignoring genuine differences.

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 incorrect: Historical cost → Initial recording based on the transaction amount. Subsequent measurement depends on the applicable accounting model.

Correct answer: D

Adjustments allocate income and expenses to those intervals.

Correct answer: A

I is incorrect: Materiality → Importance depends on whether information could influence user decisions. Both amount and nature may matter. II is incorrect: Consistency → Comparable accounting methods are applied across periods unless justified changes occur. Changes should be explained appropriately.

Correct answer: B

I is correct: Full disclosure → Provide material information needed to understand the accounts. Notes complement the primary statements. II is incorrect: Going concern assumption → Accounts assume continued operation unless evidence indicates otherwise. Asset measurement is not automatically based on forced liquidation.

Correct answer: A

Changes should be explained appropriately.

Correct answer: C

I is correct: Historical cost → Initial recording based on the transaction amount. Subsequent measurement depends on the applicable accounting model. II is incorrect: Money measurement → Accounts primarily record items measurable in monetary terms. Valuable non-monetary factors may require other reporting.

Correct answer: B

It does not justify deliberately biased understatement.

Correct answer: A

I is incorrect: Materiality → Importance depends on whether information could influence user decisions. Both amount and nature may matter. II is correct: Matching expenses with related revenue → Recognise associated costs in the relevant performance period. Inventory cost becomes expense when the related sale is recognised.

Correct answer: D

I is incorrect: Bank charges appearing only on the bank statement → Cash book needs a deduction. The bank has reduced the balance before the business records the expense. II is incorrect: Complete omission of a transaction → May leave the trial balance in agreement. Both debit and credit are missing.

Correct answer: A

The business has recorded receipt before the bank credits it.

Correct answer: D

I is incorrect: Capital purchase wrongly treated as a routine expense → Error of principle. The distinction between asset and expense is misapplied. II is incorrect: Provision for a qualifying uncertain obligation → Recognise an estimated liability when recognition conditions are met. Uncertainty does not always prevent recognition.

Correct answer: A

Arithmetic equality can survive classification errors.

Correct answer: C

I is incorrect: Adjustment for accrued income → Increase receivable and recognise income. Earning precedes cash receipt. II is correct: Adjustment for expired prepaid insurance → Increase expense and reduce prepaid asset. The previously recorded future benefit has been consumed.

Correct answer: B

I is correct: Interest credited by the bank but unrecorded in the cash book → Cash book needs an addition. The business must record the bank's credit. II is correct: Complete omission of a transaction → May leave the trial balance in agreement. Both debit and credit are missing.

Correct answer: C

The expected collection has failed.