Accounting Multiple Choice Question – 9 January 2024

The accounting principle which, in times of rising prices, tends to understate asset values and overstate profits, is?

Select ONE answer:

1. Going concern
2. Accruals
3. Consistency
4. Historical cost

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- Profit will be overstated due to depreciation based on understated assets, and cost of sales based on understated inventory.

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