The Multiple Choice Questions Blog

Direct confirmation of trade receivables provides evidence in respect of which ONE of the following assertions?

Select ONE answer:

1. Completeness
2. Occurrence
3. Existence
4. Accuracy, valuation and allocation

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – Accuracy, valuation and allocation is not supported as we have no evidence that these receivables intend to pay. Completeness is not supported as it is the list of receivables provided by the client that is subject to direct confirmation (i.e., the test is for existence and ownership (= rights and obligations) from that list). Occurrence is a financial statement assertion that affects classes of transactions and not account balances.
4. Not correct

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Management should compare the cost and net realisable value for each item of inventory.

Which ONE of the following circumstances could result in net realisable value being HIGHER than cost?

Select ONE answer:

1. An increase in the cost of raw materials, which cannot be passed on to the customer
2. Trade discounts from suppliers
3. Errors in production
4. An increase in production overheads

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct – Trade discounts from suppliers would REDUCE cost
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Management should compare the cost and net realisable value for each item of inventory.

Which ONE of the following circumstances could result in net realisable value being HIGHER than cost?

Select ONE answer:

1. An increase in selling price
2. An increase in the cost of raw materials which cannot be passed on to the customer
3. Errors in production
4. An increase in production overheads

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – An increase in selling price increases net realisable value.
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

For the following statement concerning perpetual inventory counts, select whether it is true, false, it depends on the size of the business, or it should be referred to a more senior auditor for comment.

• Material differences between book inventory and actual inventory must be investigated and corrected.

Select ONE answer:

1. Consult a senior colleague
2. Depends on the size of the business
3. False
4. True

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

For the following statement concerning perpetual inventory counts, select whether it is true, false, it depends on the size of the business, or it should be referred to a more senior auditor for comment.

• All inventory lines must be counted at least once per month.

Select ONE answer:

1. Consult a senior colleague
2. Depends on the size of the business
3. False
4. True

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – All inventory lines must be counted at least once per year, not once per month.
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.