Accounting Concepts True/False Quiz
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Questions and Answers

What does the term 'going concern' refer to in a partnership context?

  • The partnership's ability to pay off short-term debts.
  • The partnership's ability to cover all its liabilities with its assets.
  • The analysis of the financial position of the partnership.
  • The sustainability of the partnership's operations into the foreseeable future. (correct)

    • Which of the following best describes solvency in a partnership?

  • The analysis of revenue versus expenses over time.
  • The partnership's capability to pay off short-term debts.
  • The partnership's ability to meet its long-term obligations. (correct)
  • The amount of trading stock held at any given time.

    • Which statement accurately describes liquidity in a financial context?

  • Liquidity indicates the total revenue generated by the partnership in a fiscal year.
  • Liquidity refers to the long-term financial stability of the partnership.
  • Liquidity is assessed by analyzing the value of assets versus liabilities.
  • Liquidity involves the partnership's ability to pay off all short-term debts. (correct)

    • What is implied by the balance sheet reflecting trading stock at R60,000 when a sale is planned for next month?

    <p>The trading stock is overvalued and may not be sold for its recorded value.</p> Signup and view all the answers

    Why is consistency in inventory systems important for financial reporting?

    <p>It allows for easier comparison of financial results across different periods.</p> Signup and view all the answers

    What is the total amount of fixed assets listed in the trial balance?

    <p>$256,000</p> Signup and view all the answers

    What is the total amount in the Debtors' control account after accounting for the provision for bad debts?

    <p>$34,514</p> Signup and view all the answers

    What is the total expenses listed in the nominal accounts section?

    <p>$563,000</p> Signup and view all the answers

    Which of the following accounts shows a credit balance in the trial balance?

    <p>Provision for bad debts</p> Signup and view all the answers

    What is the total amount of liabilities present in the trial balance?

    <p>$198,170</p> Signup and view all the answers

    What is the total sales revenue reported in the nominal accounts section?

    <p>$1,797,600</p> Signup and view all the answers

    Which of the following is considered an operating expense in the nominal accounts section?

    <p>Insurance</p> Signup and view all the answers

    What is the net profit before tax derived from the trial balance provided?

    <p>$770,400</p> Signup and view all the answers

    What is the carrying value of an asset?

    <p>The remaining value after depreciation</p> Signup and view all the answers

    What does GAAP stand for?

    <p>General Accepted Accounting Principles</p> Signup and view all the answers

    Which of the following statements about the materiality principle is true?

    <p>It requires all incomes and expenses to be shown for the same period.</p> Signup and view all the answers

    What is considered an expense in relation to assets?

    <p>Accumulated depreciation over time</p> Signup and view all the answers

    Which statement accurately describes depreciation?

    <p>It is a type of expense that reduces the value of an asset.</p> Signup and view all the answers

    What is the purpose of using GAAP in financial reporting?

    <p>To ensure consistency and comparability between different companies’ financial statements</p> Signup and view all the answers

    Which of the following statements is FALSE regarding depreciation?

    <p>Depreciation serves to increase the carrying value of an asset.</p> Signup and view all the answers

    Which of the following occurs when an asset is fully depreciated?

    <p>The carrying value equals zero.</p> Signup and view all the answers

    What is the total capital balance of the partnerships at IronMan Toy Store?

    <p>R1 100 000</p> Signup and view all the answers

    How much interest are the partners entitled to on their capital balance at the end of the financial year?

    <p>R31 500</p> Signup and view all the answers

    What was Iron's total withdrawals for the financial year?

    <p>R25 000</p> Signup and view all the answers

    How much bonus did Man receive at the end of the financial year?

    <p>R51 000</p> Signup and view all the answers

    What is the effective capital balance for Man after considering his current account?

    <p>R751 500</p> Signup and view all the answers

    What was the total value of stock taken by Iron for donation?

    <p>R35 000</p> Signup and view all the answers

    What was the ratio for sharing profits or losses between Iron and Man?

    <p>3 : 2</p> Signup and view all the answers

    How much total capital did Iron increase on 1 March 2022 without an entry made?

    <p>R175 000</p> Signup and view all the answers

    What is the percentage operating expenses on turnover for 2023?

    <p>17.2%</p> Signup and view all the answers

    What is the acid-test ratio for 2023?

    <p>1.30</p> Signup and view all the answers

    Which financial indicator shows that the business has improved its net profit from 2022 to 2023?

    <p>Percentage returns on average partners’ equity</p> Signup and view all the answers

    What was the profit mark-up policy change from 2022 to 2023?

    <p>Increased from 20% to 30%</p> Signup and view all the answers

    What does the debt-equity ratio indicate about the business in 2023?

    <p>High reliance on debt financing</p> Signup and view all the answers

    Based on the information provided, how did the operating expenses change from 2022 to 2023?

    <p>Decreased by $8,640</p> Signup and view all the answers

    Which financial indicator can be used to assess control over expenses?

    <p>Percentage of operating expenses on turnover</p> Signup and view all the answers

    What effect did the change in profit mark-up policy have on the business income for 2023?

    <p>Increased overall profit</p> Signup and view all the answers

    Study Notes

    Concepts - True/False

    • Carrying value is not the remaining value of an asset after it has been fully depreciated. Carrying value is the current value of an asset on the Balance Sheet, after depreciation has been deducted.
    • GAAP ensures consistent financial reporting, making it easier to compare financial information and data across different companies. Therefore, GAAP makes it possible to compare the financial results of different companies.
    • The materiality principle is about deciding which information should be included in financial statements. This does not include the rule that all income and expenses must be shown in the same financial period.
    • Accumulated depreciation is a contra asset account that reduces the value of a fixed asset, rather than being an expense.
    • Depreciation is not a negative asset. It reflects the decline in the value of a tangible asset over time.

    Hoppity Poppity Traders Equity & Liabilities

    • The Equity and Liabilities section of the Statement of Financial Position for Hoppity Poppity Traders on 28 February 2023, will include:
      • Capital: Iron
      • Capital: Man
      • Current account: Iron
      • Current Account: Man
      • Drawings: Iron
      • Drawings: Man
      • Interest on Capital: Iron
      • Interest on Capital: Man
      • Bonus: Man
      • Bonus: Iron
      • Profit sharing: Iron
      • Profit sharing: Man

    Nota Clothing Boutique

    • Nota Clothing Boutique had sales of R3 213 000 in 2023.
    • Percentage operating expenses on turnover for 2023 is calculated as: (Operating expenses /  Turnover) * 100.
    • Acid-test ratio for 2023 is calculated as: (Quick assets / Current liabilities). Quick assets include cash, cash equivalents, and accounts receivable, but exclude inventory.
    • Debt-equity ratio for 2023 is calculated as: (Total debt / Total equity).
    • Percentage returns on average partners’ equity for 2023 is calculated as: (Net Income / Average Partners’ Equity) * 100.
    • Liquidity ratio is a measure of a company's ability to meet its short-term financial obligations. This is important because businesses without enough cash flow, could struggle to make payments to suppliers, employees, or lenders.
    • The profit markup is the difference between the cost price and the selling price. This difference is a way of measuring the business's ability to make a profit.
    • Expense control is important to maintain profitability, especially in competitive business environments.
    • Nota Clothing Boutique's percentage operating expenses on turnover is relatively low, suggesting they are efficient with their resources.

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    GP Accounting Grade 11 November 2023 Paper 1 PDF

    Description

    Test your understanding of key accounting concepts through this true/false quiz. Questions cover important principles like carrying value, GAAP, materiality, and depreciation. Perfect for students studying financial accounting and reporting.

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