T20 – 5R Strategic Consultancy Sdn Bhd

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Test 20

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Which transaction violates the entity principle?

The company repays a bank loan

The owner withdraw cash for personal use but record it as a business expenses

The company business received payment from a debtor

The company pays supplier invoices

Which of the following best demonstrates full disclosure?

Omitting details of pending litigation

Hiding related party transaction

Excluding subsequent events

Reporting contingent liabilities in the notes to account

Accounting Principles refers to

Rules and conventions that have been adopted as a general guide to companies in the treatment of financial transactions

Procedures adopted by a firm in preparing and presenting financial statements

Nine Principles to be used in preparing and presenting financial statements

Concepts and ideas that are universal to the financial accounting process in business organisation

Which of the following is not accounting doctrines?

Prudence

Disclosure

Conservatism

Consistency

Monetary Principle is

Recording of the past happening

A business unit that distinct from the business

A firm that want to perpetual its existence

A recording and reporting of account information about a firm's event must be expressed in monetary term

Which of the normal basis in valuing the going concern of a business?

Assets of the business

Earning power

Net worth of the business

Sales growth

Which of the following statements refer to Accounting Principle?

Procedures adopted by a firm in preparing and presenting the financial statements

Concepts and ideas that are universal to the financial accounting process in business organisation

Guideline to company with the Malaysian Accounting and Financial Reporting Standard (MFRS)

Rules and conventions that have been adopted as general guide to companies in the treatment of financial transactions

Different companies have different income recognition method. This relates to which of the following accounting principles

Realisation principle

Going concern principle

Accrual principle

Historical principle

If company is in financial distress and liquidation seems imminent. which principle may no longer hold?

Accrual or matching principle

Disclosure principle

Going concern principle

Accounting period principle

If assets increase by RM10,000 and liabilities decrease by RM4,000. What happen to owner's equity?

Increase by RM14,000

Remain unchanged

Increase by RM6,000

Decrease by RM6,000

The dual aspect states that

Debit and credit sentry to be applied in accounting transactions

Every transaction affects at least two account: Debit and Credit

Asset = Liabilities + Equity

Double entry must be used to recording business transaction

Under the monetary principle, which of the followings would not recorded?

I. Purchase a vehicle
II. Quantity of staff
III. Receipt of interest income
IV. Establish trade record

I and III

II and IV

II, III and IV

I, II and IV

Under Doctrine of Conservatism, which statement is correct?

Record assets at future expected values

Anticipate all profit but ignore losses

Ignore depreciation until assets are sold

Recognise revenue only when realised but provide for probable losses

If land purchased at RM1,000,000 is now worth RM1,500,000 the books will still show RM1,000,000. This due to

Conservative principle

Dual aspect principle

Materiality principle

Historical cost principle

Which are the following statements reflecting the Doctrine of Conservatism?

This doctrine requires all accounting statements to be scrupulously honest

The accounting policies should be continuously and consistently observed

This doctrine is ensuring accuracy and reliability of the accounting process

This is the policy of caution or playing safe

In accounting, the doctrine of "Disclosure" refers to

Full disclosure regardless of materiality or significance of information should be made

Full disclosure of all significant informations

Full disclosure of items in financial statement

Declaration by reporting Directors that what is reported is true

What are the main areas of materiality that the accounting doctrine of materiality is concerned with

I. Materiality of information's
II. Materiality of time
III. Materiality of amount
IV. Materiality of importance

II and IV

III and IV

I and III

I and II

Doctrine of Consistency in accounting required that

Accounting policies in preparing and presenting financial statements remain the same

The same accountant prepares the account every year

The same accounting methods are applied from one period to another

The company must earn constant profit annually

Under the realisation principle, revenue is recognised when

Production is completed

Cash is collected from customer

Orders are received

Goods or services have been delivered and the right to receive payment is established

The following statements relating to financial accounting are true except

Users of this reports are free to specify the types of information required

Financial reports are prepared for use by parties external to organisation

Financial report must comply with General Accepted Accounting Principles

The format of the financial reports are standardised

The following are considerations governing selection and application of accounting policies in a firm

I. Prudence (Discretion)
II. Objectively
III. Substance over form
IV. Materiality

I and II

All the above

I and IV

I, III and IV

The accounting principles of Entity Principle is

Business unit is distinct from its owner. For accounting purpose, a firm exists in its own right.

The entity of business can be in the form of sole proprietorship or partnership only

The entity of business can be in the form of a club, association or society only

The entity of business can be in the form of private limited or public limited company only

The matching principle requires that

Revenue are recorded only when cash is received

Revenues and related expenses are recognised in the same accounting period

All revenue and expenses are differed until end of accounting period

Expenses are recorded only when paid

In order for shareholders and creditors to assess the financial performance and position of a business effectively and consistently, the preparation of business account must be based on certain accepted rules. The rules are referred as:

I. Management Accounting
II. Financial Accounting
III. Accounting Doctrines
IV. Accounting Principles

III and IV

I and II

All the above

II and IV

The concept of materiality in accounting means

Materiality of information or account must be recorded

Material items refer only to tangible assets

Only items that influence user's decision are reported

Every minor items must be recorded in details

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