PRINCIPLES OF ACCOUNTS
IN THE ABSENCE OF AN AGREEMENT, PARTNERS SHARE PROFITS
A. based on activeness of a partner B. based on capital contribution C. on patronage basis D. on equal basis ✓ In the absence of an agreement, partners share profits based on the principle of equal sharing. This means that profits are…
AS A BASIS FOR ASSESSING FUTURE USAGE, FIXED ASSETS ARE SHOWN AT
A. selling price B. cost price ✓ C. cost plus residual value D. net book value Fixed assets are typically shown on a company’s balance sheet at their original cost price, which is the amount paid to acquire or construct the asset.…
GOODS RETURNED TO A SUPPLIER IS
A. Debited to returns outward account B. Credited to returns outwards account ✓ C. Debited to returns inwards account D. Credited to returns inwards account When goods are returned to a supplier, it means that the products have been sent back due…
ASSETS ACQUIRED IS RECORDED BY DEBITING
A. Asset Account, Crediting Cash Account ✓ B. Cash Account, Crediting Asset Account C. Purchase of Business Account, Crediting Sale of Business Account D. Asset Account, Crediting Purchase of Business Account When assets are acquired, they are recorded by debiting an Asset…
THE DIFFERENCE BETWEEN THE MARKET VALUE OF GOODS PRODUCED AND THE COST OF PRODUCTION IS
A. net profit on goods sold B. gross profit on manufacturing ✓ C. closing stock of work-in-progress D. prime cost of manufacturing To calculate the difference between the market value of goods produced and the cost of production, you would look at…
WHERE PARTNERS MAINTAIN A FLUCTUATING CAPITAL ACCOUNT, PARTNERS’ SHARE OF PROFIT IS CREDITED TO
A. capital account ✓ B. profit and loss appropriate account C. current account D. profit and loss account In partnership where partners maintain a fluctuating capital account, partners’ share of profit is credited to capital account. Steps to Determine the Answer: Partners’ share…
A LIMITATION OF THE MONEY MEASUREMENT CONCEPT IS THAT
A. it results in inaccurate financial statements B. financial statement is not easily understood C. important non-monetary activities are not reported ✓ D. the reports are not comparable to that of other businesses The money measurement concept states that only transactions that…
IN THE PREPARATION OF FINANCIAL STATEMENTS, FULL DISCLOSURE OF MINOR EVENTS ARE IGNORED IN LINE WITH
A. accrual concept B. money measurement concept C. business entity concept D. materiality concept ✓ The materiality concept in accounting states that only information that would influence the economic decisions of users should be disclosed in financial statements. Minor events or transactions…
AN EXAMPLE OF A CREDIT ENTRY IN A PROFIT AND LOSS ACCOUNT IS
A. carriage inwards B. carriage outwards C. discounts allowed D. discounts received ✓ Discounts received are considered as income for a business and are recorded as a credit entry in the profit and loss account. When a business receives discounts from its…
IN THE OPERATION OF AN IMPREST OF PETTY CASH, THE
A. petty cashier pays all expenses B. petty cashier pays money to the accountant C. petty cashier regularly begins each period with the same amount of money ✓ D. main cashier accounts to the petty cashier for some experiences made by him …
THE EXPENDITURE ON A GOOD OR SERVICES WHICH IS CONSUMED EITHER IMMEDIATELY OR WITHIN A CURRENT ACCOUNTING PERIOD IS CALLED
A. fixed expenditure B. capital expenditure C. annual expenditure D. recurrent expenditure ✓ Recurrent expenditure refers to the regular and ongoing expenses incurred by an individual, organization, or government for the day-to-day operations or maintenance of assets. This type of expenditure is…
THE DOUBLE ENTRY PRINCIPLE STATES THAT
A. every debit entry must have a corresponding credit entry ✓ B. every credit entry must have a corresponding double entry C. every debit must must have a corresponding double entry D. every assets must have a corresponding liability The double entry…
THE ACCOUNTING CONVENTION WHICH STATES THAT PROFIT MUST NOT BE RECOGNIZED UNTIL REALIZED WHILE ALL LOSSES SHOULD BE ADEQUATELY PROVIDED FOR IS TERMED
A. materiality B. objectivity C. consistency D. conservatism ✓ The accounting convention that states profit must not be recognized until realized while all losses should be adequately provided for is termed conservatism. Conservatism is a principle in accounting that suggests caution in…
