Accounting for IGCSE & O level - Advanced Principles (Section 7)
1
Which of the following events would be most likely to trigger a review of the accounts in the name of professional conduct?
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(C)
Discrepancies are discovered in a tax filing
2
Which of the following is a factor that will cause the working capital and quick ratio to deteriorate?
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(C)
A failure to control costs in the business
3
What does a high accounts receivable turnover ratio indicate?
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(C)
The company is efficiently collecting its receivables.
4
Which of the following is a violation of professional ethics for an accountant?
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(D)
Disclosing confidential client information without consent.
5
What is a key factor to consider when evaluating the inventory turnover ratio?
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(A)
The industry in which the company operates.
6
What is the purpose of providing a schedule of aged trade receivables?
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A
B
C
7
How does a shorter trade receivables collection period generally affect a business's cash flow?
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(A)
It improves cash flow.
8
The principle of prudence supports which of the following actions?
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(C)
Recognizing potential losses as soon as there is a likelihood of them happening
9
Which principle would be most important in determining if a small expense should be ignored in the financial statements?
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(C)
Materiality
10
Which of the following stakeholders is LEAST likely to use accounting statements?
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(B)
Competitors
11
Which of the following best describes the realization principle?
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(B)
Recognizing revenue when it is earned and when goods or services are provided.
12
What is the effect on the quick ratio when a company converts its inventory into cash?
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(C)
No change
13
What is a characteristic of a business with a strong working capital position?
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(C)
Efficient management of inventory turnover.
14
Which principle does the statement: 'Profits should not be overstated by ignoring reasonable losses and incomes should not be anticipated before it is earned', relate to?
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(B)
Prudence principle
15
Which of the following best describes the application of the principle of Materiality?
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(B)
Focusing on transactions that will affect the decision-making of financial statement users.
16
What is the impact of a reduction in the trade payables period?
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(D)
It may cause the business to lose out on potential discounts.
17
How does the principle of 'prudence' affect financial reporting?
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(C)
It encourages recognizing potential losses and expenses.
18
What financial ratio provides information about a company's efficiency?
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(C)
Inventory turnover ratio
19
What does the monetary measurement principle state?
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(C)
That all transactions must be expressed in monetary terms.
20
What is the main goal of using financial ratios?
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(C)
To show trends in the performance of a company.
21
What does the quick ratio measure?
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(C)
A company's ability to pay its short-term obligations using its most liquid assets.
22
Which of the following actions can improve a company’s working capital position?
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A
C
D
23
What is the effect of paying off accounts payable with cash on the working capital?
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(C)
Stays the same
24
What is the primary purpose of calculating the inventory turnover ratio?
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(B)
To assess how efficiently a company manages its inventory.
25
Which financial statement is used to calculate the inventory turnover ratio?
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(B)
Income statement.
26
What is one area where accounting policies can differ?
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(D)
All of the above
27
If a company uses cash to purchase more inventory, what is the immediate impact on its current ratio?
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(C)
Has no impact on the current ratio
28
What does the text suggest about the relationship between selling inventory quickly and a company’s working capital position?
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(B)
Selling inventory quickly can improve a company's working capital position.
29
What does the inventory turnover ratio measure?
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(B)
How quickly a company sells its inventory.
30
What does 'average days to settle inventory' represent?
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(B)
The time it takes to sell inventory.
31
What is the core concept of professional conduct for accountants as described in the provided text?
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(B)
Maintaining confidentiality and acting with integrity.
32
In the context of managing inventory, what is meant by 'stockouts'?
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(B)
When a company runs out of a particular product.
33
Which of the following can be seen as the limitations when using accounting ratios?
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A
B
C
34
Which of the following is NOT a factor that will increase the ROCE?
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(D)
An increase in capital employed
35
What is the primary purpose of international accounting standards?
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(B)
To improve the comparability, reliability, and understandability of financial statements.
36
What is the purpose of the 'aged trade receivables schedule'?
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(B)
To categorize and analyze outstanding customer invoices by the amount of time they are overdue.
37
What is a primary goal of efficient inventory management?
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(B)
To minimize the risk of stockouts and reduce costs.
38
What does the duality principle state?
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(B)
Every transaction has two aspects and should be recorded in the double-entry accounts of the business.
39
Which accounting principle would be most relevant when deciding if a small expense should be recorded or ignored?
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(C)
Materiality principle
40
What does the matching principle require?
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(C)
Costs to be matched against related revenue in the same accounting period.
41
What is the difference between the accruals concept and the historic cost concept?
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(A)
The accruals concept recognizes revenues and expenses in the accounting period to which they relate, while the historic cost concept records assets at their original cost.
42
What is a potential disadvantage of having a high current ratio?
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(A)
Indicates poor use of working capital.
43
What is the effect of an overvalued inventory on the gross profit of the company?
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(B)
Gross profit will increase
44
Which principle addresses the significance of an item's impact on the financial statements?
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(B)
Materiality
45
Which of the following best describes the application of the matching principle?
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(B)
Matching expenses to the period in which the company provides goods or services.
46
What are some factors that would improve liquidity in a business?
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A
C
D
47
What is a significant limitation when using ratios?
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(D)
They can be easily manipulated.
48
What is the main purpose of a company's income statement?
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(C)
To show a company's revenues, expenses, and profit or loss over a period.
49
What is the significance of the 'materiality principle' in accounting?
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(C)
Transactions that are not significant to the user’s decision-making may be omitted.
50
Which principle states that every transaction has two aspects and should be recorded in a company’s books?
