Peter Atrill Test - Progress Test 1 Financial Accounting – Chapte...

Accounting and Finance An Introduction, 10e Eddie McLaney, Peter Atrill (Test Bank All Chapter, Answers at the end of each Chapter) 1 / 4

170 © Pearson Education Limited 2020

Progress Test 1

Financial Accounting – Chapters 1 to 7

This paper is divided into three sections

Answer all questions in each section

Time allowed – 2 1 /2 hours Total possible marks – 80

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Section A Multiple choice questions Each question in this section is worth 2 marks (Total 20 marks) For each question select the best one of the four options available

• What are the two fundamental qualities, or characteristics, that accounting information

should possess?

• Comparability and Understandability
• Faithful representation and Relevance
• Reliability and Fairness
• Consistency and Prudence
• Consider the following two statements concerning the differences between financial and

management accounting:

• Management accounting reports are often prepared for a specific purpose, whereas financial

accounting reports usually serve a general purpose.

• Management accounting reports place less emphasis on objective, verifiable evidence than

financial accounting reports. 2 / 4

McLaney and Atrill, Accounting and Finance: An Introduction, 10e, Instructor’s Manual 171 © Pearson Education Limited 2020

Which one of the following combinations (true/false) relating to the above statements is correct?

Statement

1 2

• True True
• True False
• False True
• False False
• Enhancement of which one of the following factors is the assumed objective of a business?
• Sales revenue
• Profit
• Owners’ wealth
• Return on capital employed

• Which one of the following equations correctly expresses the relationship between assets

(A), liabilities (L), revenues (R), expenses (X) and owner’s equity (E)?

A. A = L

+ R + X + E

B. A = E

+ (R − X) + L

C. A = E

− (R − X) + L

D. A = (L

− E) + (R − X)

• At the beginning of the financial year, a trader had an equity balance of £45,600 and by the end

of the year this had risen to £53,500. During the year, he/she withdrew £18,400 in cash for his/her personal expenses and introduced his/her car into the business, which was valued at

£7,300.

What was the profit or loss for the financial year?

• £3,200 (loss)
• £7,900 (profit)
• £19,000 (profit)
• £26,300 (profit)
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McLaney and Atrill, Accounting and Finance: An Introduction, 10e, Instructor’s Manual 172 © Pearson Education Limited 2020

6. Consider the following statements concerning depreciation:

• The reducing-balance method of depreciation results in higher charges to the income

statement than the straight-line method of depreciation over the life of the asset.

• The purpose of depreciation is to derive the current market value (at each statement of

financial position date) of the asset that is being depreciated.

Which one of the following combinations concerning the above statements (true or false) is correct?

Statement

1 2

• True True
• True False
• False True
• False False

• An electrician buys a pair of pliers that has an expected life of four years. The pliers, which cost

£8, are charged as an expense in the income statement for the period in which they were purchased.

Which accounting convention does this treatment reflect?

• Going concern
• Historic cost
• Duality
• Materiality

• Which body is responsible for setting accounting standards for large listed UK

businesses?

• The London Stock Exchange
• The Government
• The International Accounting Standards Board
• The Accounting Standards Committee

• A business’s statement of financial position shows the following relationships:

Current ratio 3.0 times Acid test ratio 2.5 times

Current assets to non-current assets 1:2

The total assets of the business are £27million.

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