Focused Revision Tam 1 15 QUESTION 1 GAAP AND ACCOUNTING EQUATION (25 marks; 15 minutes) 1.1 GAAP PRINCIPLES Choose a description from COLUMN B that matches the concept in COLUMN A Write down only the letter (A-E) next to the question number (1.1.1-1.1.5) in the ANSWER BOOK COLUMN A 1.1.1 Historical cost COLUMN B A 1.1.2 Matching B. Amounts reflected on financial statements are expected to be realistic (conservative) Items of significance should be shown separately in financial statements. Income and expenses must be recorded in the correct financial year 1.1.3 Going concern C 1.1.4 Materiality D Financial statements are prepared with the assumption that the company will continue operating in the future. 1.1.5 Prudence E Fixed assets are recorded at their original cost price, although their market value may be different 1.2 ACCOUNTING EQUATION Analyse the following transactions in the books of Benito Traders as indicated by the example below. Benito Traders operates at a fixed mark-up of 25% on cost price. Eg. Pay the telephone account per EFT, R120. No. Account Account Assets Owners credited equity debited Telephone Liability 0 Bank -R120 -R120 1.2.1 Pay wages from the petty cash, R150. 1.2.2 Bought goods on credit, R3 500. 1.2.3 Cash sales for the week R24 750. Profit mark-up is 25% on cost price. Returned goods back to the supplier, issued a debit note for R130. 124 (1 x 5) (5) (1 x 20) (20) 25 1
Focused Revision Tam 1 15 QUESTION 1 GAAP AND ACCOUNTING EQUATION (25 marks; 15 minutes) 1.1 GAAP PRINCIPLES Choose a description from COLUMN B that matches the concept in COLUMN A Write down only the letter (A-E) next to the question number (1.1.1-1.1.5) in the ANSWER BOOK COLUMN A 1.1.1 Historical cost COLUMN B A 1.1.2 Matching B. Amounts reflected on financial statements are expected to be realistic (conservative) Items of significance should be shown separately in financial statements. Income and expenses must be recorded in the correct financial year 1.1.3 Going concern C 1.1.4 Materiality D Financial statements are prepared with the assumption that the company will continue operating in the future. 1.1.5 Prudence E Fixed assets are recorded at their original cost price, although their market value may be different 1.2 ACCOUNTING EQUATION Analyse the following transactions in the books of Benito Traders as indicated by the example below. Benito Traders operates at a fixed mark-up of 25% on cost price. Eg. Pay the telephone account per EFT, R120. No. Account Account Assets Owners credited equity debited Telephone Liability 0 Bank -R120 -R120 1.2.1 Pay wages from the petty cash, R150. 1.2.2 Bought goods on credit, R3 500. 1.2.3 Cash sales for the week R24 750. Profit mark-up is 25% on cost price. Returned goods back to the supplier, issued a debit note for R130. 124 (1 x 5) (5) (1 x 20) (20) 25 1
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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