Month: February 2020

A bank reconciliation statement is a statement which . . .

Select ONE answer:

1. is sent by banks to their customers.
2. is sent by banks to any of their customers who exceed their agreed credit limit with the bank.
3. explains the difference between the bank balance shown in a firm’s accounting records and that shown on its bank statement.
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. Not correct – A statement sent by banks to their customers is a ‘bank statement’ – i.e. a statement showing details of all transactions recorded by the bank on the customers’ accounts and the balances on those accounts.
2. Not correct – Banks do send letters to customers who exceed their agreed credit limit with the bank but these letters are not known as bank reconciliation statements.
3. Correct
4. Not correct

 

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The accounting concept which prevents firms from frequently changing the stock valuation method they use, thereby preventing them from manipulating the figures in their profit and loss accounts and balance sheets, is……

Select ONE answer:

1. The materiality concept.
2. The consistency concept.
3. The prudence concept.
4. The going concern 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 2

1. Not correct
2. Correct – The consistency concept means that similar items should be accounted for in a similar way from one accounting period to the next. Therefore, stock should be valued consistently over time. This would not be the case if the method used to value it or approximate its cost, changed from year to year.
3. Not correct
4. Not correct

 

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The valuation of stock at the lower of its cost and its net realisable value is an application of. . . 

Select ONE answer:

1. the consistency concept.
2. the going concern concept.
3. the prudence concept.
4. the accruals 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. Not correct
2. Not correct
3. Correct – The prudence concept means that profit should not be anticipated and all foreseeable losses. should be provided for as soon as they are foreseen. If stock was valued at an amount greater than its cost (NRV usually is greater than cost) it would include an element of profit, which, as the stock is not yet sold, would be an anticipation of profit. If stock was valued at its cost, when its net realisable value was lower, this would not be anticipating a foreseeable loss.
4. Not correct

 

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If an item of stock which originally cost £1,420 can be sold for £1,600, after incurring further completion costs of £110 and advertising costs of £130, then it should be included in the balance sheet stock valuation at:

Select ONE answer:

1. £1,360
2. £1,420
3. £1,490
4. £1,600

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 – The net realisable value of an item of stock is its actual or estimated selling price less all further costs to completion and all costs to be incurred in marketing, selling and distributing the item. In this case, this is £1,600 – £110 – £130 = £1,360. According to IAS / GAAP, when the NRV of an item is less than its cost, the item should be valued at its NRV, i.e. £1,360.
2. Not correct
3. Not correct
4. Not correct

 

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

The net realisable value of an item of stock is its actual or estimated selling price . . .

Select ONE answer:

1. plus all further costs to completion and all costs to be incurred in marketing, selling and distributing the item.
2. less all further costs to completion.
3. less all further costs to completion and all costs to be incurred in marketing, selling and distributing the item.
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. Not correct
2. Not correct
3. Correct
4. Not correct

 

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