Accounting for IGCSE & O level - Advanced Principles (Section 1)
1
Which of following mentions the importance of the independence of an accountant?
Răspuns
(C)
Accountants should not show favour or be influenced by the opinion of others.
2
The statement about the factors that will increase the rate of inventory turnover are correct, except:
Răspuns
(C)
holding excess inventory
3
Which of the following is a fundamental accounting assumption?
Răspuns
(D)
The going concern assumption.
4
What is the main objective of the business entity principle?
Răspuns
(A)
To keep the financial records of a business separate from the owner's personal financial affairs.
5
Which of the following will improve a company's liquidity?
Răspuns
A
B
C
6
What is the purpose of the duality principle?
Răspuns
(B)
To guarantee that every transaction is recorded in at least two accounts.
7
Which of the following is not an impact of good credit contact?
Răspuns
(C)
Increasing inventory.
8
What is the main focus of the consistency principle?
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(C)
To use the same accounting methods from one period to the next.
9
What is the effect of an overstatement of closing inventory on the cost of goods sold and profit for the period?
Răspuns
(C)
Cost of goods sold understated, profit overstated.
10
What does a low quick ratio indicate?
Răspuns
(B)
Inability to pay short term debts.
11
Which of the following is true about working capital?
Răspuns
(D)
Efficient management of inventory boosts a business’s working capital position.
12
Which of the following is an application of the accounting period principle?
Răspuns
(C)
Dividing the lifetime of a business into successive accounting periods.
13
Why is it important to use accounting concepts and conventions?
Răspuns
(A)
To make financial statements and information to be meaningful and comparable.
14
Which of the following actions will INCREASE the gross profit margin?
Răspuns
A
C
15
What is the main focus of the prudence principle?
Răspuns
(C)
To exercise caution in accounting and avoid overstating assets or income.
16
Which of the following will not be in the financial statements?
Răspuns
(D)
Information on non-financial performance
17
What is the primary purpose of the going concern principle in accounting?
Răspuns
(C)
To assume that a business will continue to operate for the foreseeable future.
18
What can the financial information from the accounts of a business tell you?
Răspuns
(A)
Financial strength, position, and performance.
19
Which of the following best describes the relationship between inventory levels and inventory turnover?
Răspuns
(B)
Higher inventory levels result in lower inventory turnover.
20
Which of the following is an application of the historic cost principle?
Răspuns
(A)
Recording assets and expenses at their actual price paid.
21
Inventory turnover ratio measures the rate at which inventory is sold and replaced over a given period. Which factor is least relevant to increasing a company's inventory turnover ratio?
Răspuns
(D)
Offer extended credit terms to customers.
22
What does the historical cost principle state?
Răspuns
(B)
Assets and expenses should be recorded at their original cost.
23
The rule of inventory turnover is a useful indicator of how successfully a business is at selling its products and replacing its inventory. It measures how frequently inventory is sold off and replaced during an accounting year. It is calculated as follows:
Răspuns
(A)
cost of sales / average inventory
24
Which action would most likely decrease a company's current ratio?
Răspuns
(B)
Purchasing inventory on credit.
25
The gross profit margin is calculated as:
Răspuns
(A)
Gross profit / revenue * 100%
26
How can inventory turnover be increased?
Răspuns
B
C
27
Which of the following is an example of a liquidity ratio?
Răspuns
(B)
Current ratio
28
What is the relationship between accounting standards and different methods for similar items?
Răspuns
(A)
Accounting standards allow for different methods for similar items.
29
What is the formula for working capital?
Răspuns
(A)
Current Assets - Current Liabilities
30
What actions can Chemtura take to improve its liquidity?
Răspuns
B
C
D
31
What information is used to compute a business's current ratio?
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(B)
Current assets and current liabilities.
32
Which of the following represents a core tenet of the matching principle?
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(A)
Costs must be matched against related income.
33
Which stakeholders are interested in the financial health of a business?
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A
B
34
Is an increase in the trade receivables collection period good or bad for business?
Răspuns
(B)
Bad: The collection period has now become too long, due to poor credit control, resulting in fewer increases in trade debts.
35
Is a reduction in the trade payables payment period good or bad for business?
Răspuns
(B)
Bad: The business was previously taking longer to pay suppliers. The business may achieve cash discount for paying promptly. This will increase its profits.
36
What is the purpose of having consistent accounting methods from one period to another?
Răspuns
(A)
To make financial statements easier to understand and compare
37
Which of the following will reduce working capital?
Răspuns
(C)
Purchasing inventory.
38
Which of the following is NOT a financial ratio?
Răspuns
(D)
Capital employed
39
Which of the following is an example of the realization principle?
Răspuns
(B)
Recognizing income as goods and services are supplied
40
Which of the following is not a method a business can improve its liquidity?
Răspuns
(B)
Increasing short-term debt.
41
Is an increase in the trade payables payment period good or bad for business?
Răspuns
(A)
Good: The business can previously taking longer to pay supplies. The business may achieve cash discount for paying promptly. This will increase its profits.
42
What is the main goal of a business?
Răspuns
(B)
Making a Profit
43
If the closing inventory is overstated, the cost of goods sold is ______ and the gross profit is ______.
Răspuns
(B)
understated, overstated
44
Which of the following is a limitation of accounting statements and ratio analysis?
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(D)
All of the above
45
Factors that will cause the working capital and quick ratios to improve are:
Răspuns
A
B
C
46
What does the phrase 'liquid assets' mean in accounting?
Răspuns
(B)
Assets converted to cash quickly.
47
Which of the following actions improves a company’s liquidity position?
Răspuns
A
B
C
48
Why is it important to use international standards for accounting?
Răspuns
(A)
To make it easier to understand financial statements
49
Which of the following are accounting concepts?
Răspuns
A
B
C
D
50
What are the key characteristics of an accountant?
