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Introduction to Accounting
Introduction to Accounting
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1/16

A firm pays the owner's car instalment of $1000.
Which of the following theories is being applied if the $1000 is not shown as an expense of the business?

Accounting Entity

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Prudence 

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Historical Cost
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Matching 

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2/16

The business has seen that the premises that it owns has increased in value.

However, this is not reported in the financial statements of the current year.

Which of the following theories is being applied? 

Prudence
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Matching
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Consistency
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Historical cost
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3/16

Financial statements are prepared to assess the progress of the business every year.

Which of the following theories is being applied? 

Accounting period
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Objectivity
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Accrual basis of accounting
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Historical cost
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4/16

One of the reasons why the historical cost theory is used to record the value of assets is due to the application of the ...

Going concern theory
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Accounting entity theory
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Matching theory
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Accounting period theory

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5/16

Timmie does not have any accounting knowledge. He insists that profit for the year is the difference between the receipts of a period and the payments of that period. This violates the ...

Accrual basis of accounting theory

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Consistency theory
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Objectivity theory
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Prudence theory
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6/16

The amount of money invested by the owner is considered an amount owed to the business owner.

The theory that is applied is the... 

Accounting entity theory
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Monetary theory
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Accounting period theory
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Prudence theory
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7/16

The accountant insisted that the owner needs to produce written evidence of expenses when making claims from him. This is the application of which theory?
Objectivity theory
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Accrual basis of accounting theory

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Accounting entity theory 

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Consistency theory

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8/16

A good location and an efficient manager are very valuable to a business entity.

The owner of the business has insisted that the accountant show these as assets in the business’ financial statements. Which accounting theory has been violated?

Monetary theory
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Going concern theory 

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Objectivity theory
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Accounting entity theory
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9/16

Mary has seen that the cost of her inventory has fallen to below its cost. She has decided to not record this decrease in the cost of inventory in her books of account. The accounting theory she has violated is the...
Prudence theory
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Consistency theory
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Going concern theory
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Matching theory
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10/16

The accountant refused to accept the suggestion of the owner to change the depreciation method for its non-current assets so that the profit of the business can be increased.
Consistency theory concept
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Objectivity theory concept
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Monetary theory concept
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Going concern theory concept 

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11/16

The cost of stationery purchased is usually recorded as an expense upon purchase although it can be used for more than one accounting period. This is in line with the ...

Materiality theory concept 

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Going concern theory concept
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Accounting entity theory concept 

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Accounting period theory concept 

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12/16

A factory building had a selling price of $200000. The company paid only $180000. Which theory requires the factory to be recorded at $180000?

Historical Cost 

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Monetary concept
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Accounting Business Entity
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Prudence
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13/16

During the year Eli bought goods for resale on 15 January. He paid his supplier on 30 March. The purchase was recorded on 15 January. This is in line with the...

Accrual basis of accounting theory

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Accounting entity theory
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Prudence theory
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Accounting period theory
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14/16

Mary is a sole proprietor. She uses her personal cheque to pay for her club membership subscription. Which concept is being applied?

Accounting entity theory 
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Matching theory
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Accounting period theory
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Monetary theory
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15/16

wners of business firms are the only people who need accounting information.
True
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False
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16/16

Accounting communicates financial information about a business enterprise to both internal and external stakeholders users.
True
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False
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