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chapter 1 principle of accounting
Nguyên lý kế toán (NLKT1)
Học viện Tài chính
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CHAPTER 1
Q1.
Choose the best answer for these following questions:
- What statement(s) do external and internal users of accounting information rely on?
a. Income Statement
b. Statement of Retained Earnings
c. Balance Sheet
d. Statement of Cash Flows
e. All answers are correct.
Which of the following is an example of external users of accounting information? a. Directors b. Managers c. Owners d. Employees e. Analysts
Sara is the Chief Financial Officer for InfoTech Inc. Murray is the Chief Lending Officer at the Bank where InfoTech has a large bank loan. Which statement is true for both Sara and Murray, in connection with the accounting information for InfoTech? a. Both are external users. b. Sara is an internal user and Murray is an external user. c. Both are internal users. d. Murray is an internal user and Sara is an external user.
- What is the first step in the accounting cycle? a) Recording the transaction b) Preparation of financial statement
c) Identification of information
d) Analysis and Interpretation of Information
- What is the final step of the accounting cycle?
a) Recording the transaction b) Preparation of financial statements c) Communication of information d) Analysis and interpretation of information
- Book keeping is mainly concerned will:
a. Recording financial data reality to business b. Designing for systems recording classifying & summarizing records data c. Interpreting data for internal & external users d. All of above
- The pioneer of accounting is:
a. Arthor field house b. Gitman c. William pickles d. Lucas pacioli
- Which of following will not be recorded in the book of Account?
a) Sales of goods
b) Payment of salary
c) Quality of staff
d) Purchases of goods
- Modern system of book keeping is
a) Single entry systems
b) Double entry system
c) British system
d) None of these
Accrued expenses $3,435 $2,
Required:
Determine net income of Dunbar Clinic on an accrual basis for year 2019.
Q4: True or false
- Users of financial statements are assumed to have no knowledge of business and financial accounting matters by financial statement preparers.
- Relevance and faithful representation are the two fundamental qualities that make accounting information useful for decision making.
- The idea of consistency does not mean that companies cannot switch from one accounting method to another.
- Timeliness and neutrality are two ingredients of relevance.
- Verifiability and predictive value are two ingredients of faithful representation.
- The historical cost principle would be of limited usefulness if not for the going concern assumption.
- The economic entity concept means that economic activity can be identified with a particular legal entity.
- Materiality is one of the basic assumptions of accounting
- Timeliness is one of the basic assumptions of accounting.
- Revenues are recognized in the accounting period in which the performance obligation is satisfied.
- Companies consider only quantitative factors in determining whether an item is material.
- Companies must consider both quantitative and qualitative factors in determining whether an item is material.
Q
Situation 1: On 1/1/N, enterprise A purchased company B’s shares of $ 100 , other purchase cost: $2. On 31/12/N, the share’s market value was $110.
Required: How did A record the above investment on Financial Statements at the year ended 31/12/N if:
A. Historical cost principle is applied
B. Market value principle is applied
C. “Lower of cost and market principle” is applied
Situation 2: On 15/3/N+1, enterprise A, in Situation 1, sold all company B’s shares to the Chairman of Board of Directors of company B for $120, paid by cash on hand, selling expense: $2.
Required: Should company B record the above transaction? State the reason for your answer.
Q
Situation 1: On 20/12/N, company X sold goods to company Y for 150 million VND. 50% of the amount was paid immediately by cash in bank. Company Y agreed to pay the remaining amount on 10/1/N+1.
Required: Determine revenue of X for the year N and N + 1, if:
A. Cash accounting principle is applied
B. Accrual accounting principle is applied
Situation 2: Continue with the event in Situation 1. Assume that in year N, company X applied the accrual basis in revenue recognition.
Required: Applying the requirement for the comparability of accounting information:
A. Determine applicable accounting principles to the year N+1 to ensure the comparability;
B. Solve the above situation for the year N+1 in case that company X applied a different accounting principle in recognition of revenue compared to the year N.
Q
4/ Paid advertising expense for 12 months in N: 120
5/ Sold 2/3 total goods purchased in transaction 2: Total price of 200. Received cash at bank: 100. The outstanding amount would be received in next month.
Required : Calculate revenue, expenses and net income if the company applied:
a. Cash basis b. Accrual basis
b/ These following transactions were extracted from A Company’s accounting records in Dec. of year N (CU: VND million)
- Purchased goods of 250, paid by cash 210, the remaining amount would be by next period.
- Total payable to employees incurred in Dec/N: 41. Salary payments in cash: 35
- Prepaid for 3-month insurance services cost starting from Dec/N by cash: 30
- Electricity payments in cash: 36, including 24 for the payables from the previous period and 12 for current period’s power usage.
- Renting fee payments for Selling Department by cash in bank: 12
- All goods purchased from transaction (1) were issued (sold) for cash sales: 320 and credit sales: 40 Required: Determine A Company’s business performance (revenue, expenses and profit/loss) in Dec/N in some following cases: (a). Cash basis accounting is applied (b). Accrual basis accounting is applied
Q
Company C signed contract with Company D: Total value of goods provided by C: 1000 tons, price: 1 millinon/ton. On 20 December 12 N, Co. C sent to customer 500 tons, cost of good sold: 800 thousand dong/ton. On 31 December N, Co. D received 400 tons goods and commit to make payment within 5 days.
Required : Calculate revenue and expense recorded by Co. C’s accountant in accordance with matching concept
Q
Determine amount of revenue recorded if company applied cash basis and accrual basis accounting principle (Accounting period: N, currency unit: million VND)
No
Main transaction: Selling goods
Amount
Cash flow received in the period (N)
Revenue recognized in the period (N) Delivery period
Receipt period
Accrual basis
Cash basis
1 N-
N-1 100
2 N 150
3 N+1 300
4
N
N-1 450
5 N 500
6 N+1 650
7
N+
N-1 700
8 N 850
9 N+1 900
Total 4600
Q
Determine amount of expenses recorded if company applied cash basis and accrual basis accounting principle (Accounting period: N, currency unit: million VND)
No
Main transaction: Purchase goods Amount
Cash flow out of
Expense recognized in the period
The John Marketing Company provides advertising services to an investment company in year A but receives advertising fee in year B. The John Marketing Company recognizes this revenue in year A. This action of John Marketing Company is justified by which concept/principle?
Which accounting concept or principle states that the transactions of a business must be recorded separately from those of its owners or other businesses?
When the accountant has to choose between two acceptable alternatives, the accountant should select the alternative that will report less profit, less asset amount, or a greater liability amount. This is based upon which principle/concept?
A corporation pays its annual property tax bill of approximately $12,000 in one payment each December 28. During the year, the corporation's monthly income statements report Property Tax Expense of $1,000. This is an example of which accounting principle/guideline?
A company sold merchandise of $8,000 to a customer in December. The company's sales terms require the customer to pay the company in 30 days. The company's income statement reported the sale in December. This is proper under which accounting principle/concept?
A large company purchases a $250 digital camera and expenses it immediately instead of recording it as an asset and depreciating it over its useful life. This practice may be acceptable because of which principle/guideline?
The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline?
Which principle/concept requires a company's balance sheet to report its land at the amount the company paid to acquire the land, even if the land could be sold today at a significantly higher amount?
Which principle/concept is associated with the assumption that the company will continue on long enough to carry out its objectives and commitments?
Accountants might recognize losses but not gains in certain situations. For example, the company might write-down the cost of inventory, but will not write-up the cost of inventory. Which principle/concept is associated with this action?
Which principle/concept directs a company to show all the expenses related to its revenues of a specified period even if the expenses were not paid in that period?
Accounting acts as a bridge between _____ transactions and users of the accounting information a. long-term b. petty c. daily
_____ are internal users. a. investors b. customers c. employees
_____ are external users. a. employees b. legal bodies c. partners
The branch of accounting dealing with internal users is called financial accounting? True or False
chapter 1 principle of accounting
Course: Nguyên lý kế toán (NLKT1)
University: Học viện Tài chính
