Day: October 28, 2021

A company purchases machinery on hire purchase over four years but does not own the machinery until the final payment has been made.

At the end of year 1 the company shows the machinery in its Balance Sheet as a fixed asset and also records the liability for the amount still owed.

Which accounting principle is being applied?

Select ONE answer:

1. consistency
2. materiality
3. prudence
4. substance over form

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

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