Test on Accounting Concepts & Regulatory Frameworks (FA Test No 2)

Financial Accounting (FA) Test No 2:

Consists of thirteen (13) questions to test your understanding of the basic accounting concepts:

[Refer Answer to FA Answer No 1 &2]

Item No

Name the Concept




The success of the company is mainly attributed to the invaluable qualities of three employees, X,Y & Z. However, employees X,Y & Z are not recorded as an assets in the balance sheet of the company.



The company has received goods valued at $200,000 and have already billed the customers for all these goods but so far has only received suppliers invoices for $50,000. The balance of $150,000 is taken up into the books of account. What concept is this?



A large company purchases a $150 chair 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?



For the December year-end close, the utilities bills have not been received for the month of November & December. However, based on previous average month trends, take up $20,000 X 2 = $40,000 as utilities expenses as estimates for November & December.



The management has decided on a twelve month financial reporting period. They have just started on the 1st January so they will complete the twelve months reporting period by 31st December.



During the audit, auditors have discovered that certain portion of the company sales are not true sales as they have evidence that the sales are financed by the company itself.



In the Notes to the financial statements, Management disclosed that an earthquake has destroyed one of their factory in Thailand, hence stopping production and affecting the revenue of the company.



Once a particular financial period is adopted by a business, it is not changed from one period to the next period



The cost of a dust bin in an office is treated as an expense rather depreciating its cost over its useful life



Expenses are recognize in the same accounting period as the revenues which result from the incurrence of these expenses



The ringgit which is used to measure business transactions in Malaysia is assumed to maintain its purchasing power over time.



Each transaction is described by a business document that proves the transaction did occur.



The actual amount paid or received is the amount recorded in the books of accounts.

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