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?
Answer
(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?
Answer
(C)
A failure to control costs in the business
3
What does a high accounts receivable turnover ratio indicate?
Answer
(C)
The company is efficiently collecting its receivables.
4
Which of the following is a violation of professional ethics for an accountant?
Answer
(D)
Disclosing confidential client information without consent.
5
What is a key factor to consider when evaluating the inventory turnover ratio?
Answer
(A)
The industry in which the company operates.
6
What is the purpose of providing a schedule of aged trade receivables?
Answer
A
B
C
7
How does a shorter trade receivables collection period generally affect a business's cash flow?
Answer
(A)
It improves cash flow.
8
The principle of prudence supports which of the following actions?
Answer
(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?
Answer
(C)
Materiality
10
Which of the following stakeholders is LEAST likely to use accounting statements?
Answer
(B)
Competitors
11
Which of the following best describes the realization principle?
Answer
(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?
Answer
(C)
No change
13
What is a characteristic of a business with a strong working capital position?
Answer
(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?
Answer
(B)
Prudence principle
15
Which of the following best describes the application of the principle of Materiality?
Answer
(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?
Answer
(D)
It may cause the business to lose out on potential discounts.
17
How does the principle of 'prudence' affect financial reporting?
Answer
(C)
It encourages recognizing potential losses and expenses.
18
What financial ratio provides information about a company's efficiency?
Answer
(C)
Inventory turnover ratio
19
What does the monetary measurement principle state?
Answer
(C)
That all transactions must be expressed in monetary terms.
20
What is the main goal of using financial ratios?
Answer
(C)
To show trends in the performance of a company.
21
What does the quick ratio measure?
Answer
(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?
Answer
A
C
D
23
What is the effect of paying off accounts payable with cash on the working capital?
Answer
(C)
Stays the same
24
What is the primary purpose of calculating the inventory turnover ratio?
Answer
(B)
To assess how efficiently a company manages its inventory.
25
Which financial statement is used to calculate the inventory turnover ratio?
Answer
(B)
Income statement.
26
What is one area where accounting policies can differ?
Answer
(D)
All of the above
27
If a company uses cash to purchase more inventory, what is the immediate impact on its current ratio?
Answer
(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?
Answer
(B)
Selling inventory quickly can improve a company's working capital position.
29
What does the inventory turnover ratio measure?
Answer
(B)
How quickly a company sells its inventory.
30
What does 'average days to settle inventory' represent?
Answer
(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?
Answer
(B)
Maintaining confidentiality and acting with integrity.
32
In the context of managing inventory, what is meant by 'stockouts'?
Answer
(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?
Answer
A
B
C
34
Which of the following is NOT a factor that will increase the ROCE?
Answer
(D)
An increase in capital employed
35
What is the primary purpose of international accounting standards?
Answer
(B)
To improve the comparability, reliability, and understandability of financial statements.
36
What is the purpose of the 'aged trade receivables schedule'?
Answer
(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?
Answer
(B)
To minimize the risk of stockouts and reduce costs.
38
What does the duality principle state?
Answer
(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?
Answer
(C)
Materiality principle
40
What does the matching principle require?
Answer
(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?
Answer
(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?
Answer
(A)
Indicates poor use of working capital.
43
What is the effect of an overvalued inventory on the gross profit of the company?
Answer
(B)
Gross profit will increase
44
Which principle addresses the significance of an item's impact on the financial statements?
Answer
(B)
Materiality
45
Which of the following best describes the application of the matching principle?
Answer
(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?
Answer
A
C
D
47
What is a significant limitation when using ratios?
Answer
(D)
They can be easily manipulated.
48
What is the main purpose of a company's income statement?
Answer
(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?
Answer
(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?
