Q: In the cupcake business scenario, what is the formula for calculating total revenue for the month?

Total revenue $= 22 \times 100$

Question 1

Which of the following best describes the accrual basis of accounting?

Accepted Answer

Transactions are recorded in the period in which they occur, regardless of when cash is received or paid.

Question 2

A business purchases a machine for R100,000. Which of the following criteria must be met for this machine to be recognized as an asset in the financial statements?

Accepted Answer

It must be controlled by the business, arise from a past event, and provide future economic benefit.

Question 3

Which qualitative characteristic of financial statements ensures that users with a reasonable understanding of business can comprehend the information presented?

Accepted Answer

Understandability

Question 4

Jon’s business had the following cash movements in the first month: Initial cash R3,000, cash received from customers R840, cash paid for brushes and polish R385, rent R100, airtime voucher R100, cash taken for personal use R600, furniture R480, cell phone R300. What is the balance in Jon’s savings account at the end of the month?

Accepted Answer

R1,875

Question 5

Which of the following is NOT a primary user of financial statements?

Accepted Answer

Employees

Question 6

A company receives R2,000 from a client for services to be rendered next month. How should this transaction be classified?

Accepted Answer

Liability

Question 7

Which underlying assumption states that a business will continue to operate in the foreseeable future?

Accepted Answer

Going concern

Question 8

In the cupcake business scenario, what is the formula for calculating depreciation expense for the I-pad purchased for R8,000 with a useful life of 5 years?

Accepted Answer

Depreciation expense per month $= \frac{8,000}{60}$

Question 9

Which of the following best explains why a business can be profitable but still fail?

Accepted Answer

It does not have enough cash to meet immediate obligations.

Question 10

Which statement is true regarding the entity convention in accounting?

Accepted Answer

Business and owner are treated as separate entities for accounting purposes.

Question 11

Which of the following is a constraint on the relevance and reliability of financial information?

Accepted Answer

Timeliness

Question 12

A business has assets of R500,000 and liabilities of R600,000. What is the owner’s equity?

Accepted Answer

-R100,000

Question 13

Which of the following is NOT a component of financial statements as per IAS 1?

Accepted Answer

Statement of tax payments

Question 14

In the Fiona Doll business, the cash receipts from customers were R54,000, but revenue per the Statement of Comprehensive Income was R57,000. Which of the following best explains this difference?

Accepted Answer

Some sales were made on credit and not yet received in cash.

Question 15

Which of the following is a reason why the expense figure per the Statement of Comprehensive Income can be higher than the cash paid out for inventory and commission?

Accepted Answer

Expenses include amounts incurred but not yet paid (accruals).

Question 16

A business receives R90,000 from a landlord for next year’s rent. How should this be classified?

Accepted Answer

Asset

Question 17

Which of the following best describes the role of International Financial Reporting Standards (IFRS)?

Accepted Answer

They provide authoritative guidelines for recording and measuring financial information.

Question 18

In the cupcake business scenario, what is the formula for calculating total revenue for the month?

Accepted Answer

Total revenue $= 22 	imes 100$

Question 19

Which of the following is a key difference between the cash basis and accrual basis of accounting?

Accepted Answer

Cash basis records transactions when cash changes hands; accrual basis records transactions when they occur, regardless of cash movement.

Question 20

A business has the following: Furniture (R480 – R8), Cell phone (R300 – R7), Airtime voucher (R100 – R50), Savings account R1,875. What is the total value of assets at month end?

Accepted Answer

R2,690

Introduction to Financial Accounting: Concepts, Users, and Financial Statements

Study Guide - Practice Questions

Study Guide - Flashcards