Accountancy

Correct answer: B

I is incorrect: Weighted-average inventory cost → Average unit cost weighted by quantities purchased. It combines costs rather than simply averaging quoted prices. II is correct: Routine repair maintaining existing condition → Normally a period expense. It does not by itself create a separately recognisable long-term improvement.

Correct answer: A

It need not equal current market value.

Correct answer: D

I is incorrect: Perpetual inventory system → Inventory records updated continuously for movements. It supports ongoing quantity and cost information. II is incorrect: Weighted-average inventory cost → Average unit cost weighted by quantities purchased. It combines costs rather than simply averaging quoted prices.

Correct answer: D

I is incorrect: Useful life → Expected period or units of service to the entity. It may be shorter than the asset's physical life. II is correct: Residual value → Estimated disposal proceeds net of disposal costs at the end of useful life. It reduces the depreciable amount.

Correct answer: B

Purchases are accumulated during the period.

Correct answer: C

I is correct: Inventory write-down → Reduction when carrying cost exceeds recoverable inventory value under the rule. The loss is recognised rather than retaining an overstated asset. II is incorrect: Reducing-balance depreciation → Fixed rate applied to declining carrying amount. Charges are higher in earlier years.

Correct answer: C

I is incorrect: Interest coverage → Profit before interest and tax divided by interest expense. It measures the earnings cushion for interest payments. II is correct: Segregation of duties → Splitting authorisation, custody and recording roles. It reduces opportunities for undetected error or misuse.

Correct answer: B

Multiplication by 100 expresses it as a percentage.

Correct answer: C

I is incorrect: Physical verification → Checking recorded assets against actual existence. Differences require investigation. II is incorrect: Inventory turnover → Cost of goods sold divided by average inventory. It indicates how often average inventory is consumed or sold.

Correct answer: A

It enables review from source to ledger and back.

Correct answer: D

I is correct: Authorisation control → Approval by an appropriate responsible person. It ensures transactions are permitted before execution. II is incorrect: Bank reconciliation → Explaining differences between internal and bank records. Timing items and unrecorded entries are common causes.

Correct answer: C

It reduces opportunities for undetected error or misuse.

Correct answer: D

I is correct: Vouching → Checking entries against supporting evidence. Documents support occurrence and validity of transactions. II is correct: Current ratio → Current assets divided by current liabilities. It is a broad short-term liquidity indicator.

Correct answer: C

I is incorrect: Interest coverage → Profit before interest and tax divided by interest expense. It measures the earnings cushion for interest payments. II is correct: Inventory turnover → Cost of goods sold divided by average inventory. It indicates how often average inventory is consumed or sold.

Correct answer: A

Differences require investigation.

Correct answer: B

I is correct: Bank reconciliation → Explaining differences between internal and bank records. Timing items and unrecorded entries are common causes. II is correct: Internal audit → Independent appraisal within an organisation's governance framework. It evaluates controls, risks and operations.

Correct answer: C

Definitions of debt should be consistent when comparing ratios.

Correct answer: B

I is incorrect: External audit opinion → Conclusion on financial statements within the audit scope. It is not a guarantee that no fraud or error exists anywhere. II is correct: Physical verification → Checking recorded assets against actual existence. Differences require investigation.

Correct answer: D

I is incorrect: Bank reconciliation → Explaining differences between internal and bank records. Timing items and unrecorded entries are common causes. II is incorrect: Segregation of duties → Splitting authorisation, custody and recording roles. It reduces opportunities for undetected error or misuse.

Correct answer: C

It indicates how often average inventory is consumed or sold.

Correct answer: B

I is correct: Bank reconciliation → Explaining differences between internal and bank records. Timing items and unrecorded entries are common causes. II is correct: Vouching → Checking entries against supporting evidence. Documents support occurrence and validity of transactions.

Correct answer: C

It is a broad short-term liquidity indicator.

Correct answer: B

I is correct: Receivables turnover → Credit sales divided by average trade receivables. It describes collection-related asset turnover. II is incorrect: Gross profit ratio → Gross profit divided by sales revenue. Multiplication by 100 expresses it as a percentage.

Correct answer: C

It is not a guarantee that no fraud or error exists anywhere.

Correct answer: D

I is incorrect: Vouching → Checking entries against supporting evidence. Documents support occurrence and validity of transactions. II is correct: Quick ratio → Liquid current assets excluding inventory and usually prepayments divided by current liabilities. It applies a stricter liquidity test.