Month: May 2019

Which of the four fundamental accounting concepts (listed below) is sometimes referred to as the matching concept ….?

Select ONE answer:

1. the accruals concept.
2. the prudence concept.
3. the going concern concept.
4. the consistency concept.

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. The matching concept is often known as the accruals concept because the accruals concept means that profit is equal to revenues less expenses, that is, expenses are matched (offset) against revenues to give a profit figure.
2. Not correct
3. Not correct
4. Not correct

 

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

According to SSAP 2….?

Select ONE answer:

1. the financial statements of a firm must always be prepared on the basis that the firm is a going concern.
2. materiality is a ‘fundamental’ accounting concept.
3. when two or more accounting concepts conflict, the prudence concept overrides the other concept(s).
4. None of the above.

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. The financial statements of a firm should be prepared on the basis that the firm is a going concern, only when this is considered to be the case. If it is considered that the firm is not a going concern, its accounts should be prepared on that basis. This will mean that assets will be shown at their market value, provision will have to be made for redundancy costs, costs associated with selling assets etc. and all liabilities will be shown as current liabilities (as the firm is unlikely to be in business after more than one year to pay long- term liabilities).
2. Although the materiality concept is a well-recognised accounting concept, it is not one of the ‘fundamental’ accounting concepts referred to in SSAP2.
3. Correct
4. Not correct

 

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

Which of the following is one of the ‘fundamental accounting concepts’ referred to in SSAP 2?

Select ONE answer:

1. The materiality concept.
2. The business entity concept.
3. The going concern concept.
4. The money measurement concept.

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. Although the materiality concept is a well-recognised accounting concept, it is not one of the ‘fundamental’ accounting concepts referred to in SSAP2.
2. Although the business entity concept is a well—recognised accounting concept, it is not one of the ‘fundamental’ accounting concepts referred to in SSAP2.
3. Correct
4. Although the money measurement concept is a well-recognised accounting concept, it is not one of the ‘fundamental’ accounting concepts referred to in SSAP2.

 

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

The consistency concept means that…?

Select ONE answer:

1. when preparing the accounts of a firm, one should normally account for similar items in the same way from one accounting period to the next.
2. firms in the same industry must account for similar items in the same way.
3. firms may never change the way in which they prepare their accounts.
4. None of the above.

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
2. The consistency concept requires consistency of treatment over time, not across firms.
3. Firms may change the way in which they prepare their accounts if the new way is more ‘correct’ than the old.
4. Not correct

 

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

The effect of the prudence concept is that…?

Select ONE answer:

1. net profit is the difference between revenues and expenses rather than the difference between receipts and payments.
2. losses should be provided for as soon as they are foreseen and profit should not be recorded prematurely.
3. similar items should be treated in a consistent way from one accounting period to the next.
4. None of the above.

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. is the accruals concept.
2. Correct
3. is the consistency concept.
4. Not correct

 

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