Question

QUESTION5 MULTIPLE CHOICE QUESTIONS This question consists of five (5) multiple-choice questions. Only one option for each question is correct. Indicate the chosen option in your exam script next to the question number in brackets, for example, Question 6 (c). 1 The one underlying assumption for financial statements is: (b) verifiability (c) timeliness (d) going concem (e) understandability 2. Inventory with a cost price of R1 000 was sold for cash R2 100. Which one of the following options illustrates the effect of the transaction on the accounting equation when recording the transaction in the accounting records of an entity that uses a perpetual inventory system. (a) Increase bank, decrease inventory, increase sales and increase cost of sales. b) Increase bank, increase inventory, increase sales and increase cost of sales. (c) Increase bank, decrease inventory, decrease sales and increase cost of sales. (d) Increase bank, decrease inventory, increase sales and decrease cost of sales. (e) Increase bank, decrease inventory and increase sales. 3. Income is not cash but the right to receive cash later and where such occurrence would benefit the owner. Income should be recognised if it is probable that economic benefits in the form of that result in increases in equity, other than those relating to contributions from equity participants. (a) (b) (c) (d) (e) Increases in assets or decreases in liabilities. Decreases in assets or increases in liabilities. Decreases in assets and increases in liabilities. Decreases in assets and increases in liabilities. Increases in assets and increases in liabilities. 4. If a credit loss, previously written off as irrecoverable, is fully recovered what will the general journal entry be? (lgnore any VAT implications) (a) (b) (c) (d) (e) Debit credit losses; Credit trade receivables control. Debit bank; Credit trade receivables control. Debit bank; Credit credit losses recovered. Debit trade receivables control: Credit credit losses. Debit bank; Credit credit losses. 5. What is the difference between credit losses and an allowance for credit losses? (a) Credit losses are actual debts gone bad and allowanoe for credit losses are expected debts to go bad. Both are related to debts gone bad. Allowance for credit losses are debts gone bad and credit losses are expected losses to go bad Both are related to expected debts to go bad. Both are related to debts that are recovered. (b) (c) (d) (e)

Answer 1

1 (d) (Accrual Basis & Going Concern)

2 (e)

3(a)

4(c)

5(a)

All these Questions are MCQs, therefore it seems no Explanation is required.