AcAdemic YeAr 2025 | FAc1502 FinAnciAl
Accounting PrinciPles, concePts And
Procedures (FAc1501) – comPlete Assignment
AnsWers | VeriFied unisA Accounting guide |
uPdAted semester 2 2025 PortFolio |
comPrehensiVe FinAnciAl Accounting studY
resource For south AFricAn students
1. What is the primary purpose of financial accounting?
• A) To provide information for internal management decisions
• B) To provide financial information to external users
• C) To comply with tax regulations
• D) To facilitate budgeting processes
Correct Option: B
Rationale: Financial accounting focuses on creating reports for external
stakeholders to aid in decision-making.
2. Which accounting principle requires that expenses be matched with revenues?
• A) Cost Principle
• B) Matching Principle
• C) Revenue Recognition Principle
• D) Full Disclosure Principle
Correct Option: B
Rationale: The Matching Principle ensures expenses are recorded in the same
period as the related revenues.
3. In which financial statement would you find the net income of a company?
• A) Balance Sheet
• B) Income Statement
• C) Cash Flow Statement
• D) Statement of Changes in Equity
Correct Option: B
Rationale: The Income Statement summarizes revenues and expenses,
indicating net income for the period.
,4. What does the term "liquidity" refer to in financial accounting?
• A) The ability to generate profits
• B) The capacity to pay long-term debts
• C) The availability of cash to meet short-term obligations
• D) The overall profitability of the business
Correct Option: C
Rationale: Liquidity measures how quickly assets can be converted into cash for
short-term liabilities.
5. Which of the following accounting methods records revenues when they are
earned, regardless of when cash is received?
• A) Cash Basis Accounting
• B) Accrual Basis Accounting
• C) Modified Cash Basis Accounting
• D) Revenue Recognition Method
Correct Option: B
Rationale: Under Accrual Basis Accounting, revenues and expenses are
recognized when they are earned or incurred.
6. What is the accounting equation?
• A) Assets = Liabilities + Equity
• B) Assets = Liabilities + Owner's Equity
• C) Revenues = Expenses + Net Income
• D) Assets + Liabilities = Owner's Equity
Correct Option: B
Rationale: The accounting equation reflects the relationship between a
company's assets, liabilities, and equity.
7. Which of the following is not considered a current asset?
• A) Cash
• B) Accounts Receivable
• C) Land
, • D) Inventory
Correct Option: C
Rationale: Land is a long-term asset, while current assets are expected to be
converted into cash or used within one year.
8. Which financial statement provides a snapshot of a company's financial position
at a specific point in time?
• A) Income Statement
• B) Cash Flow Statement
• C) Balance Sheet
• D) Statement of Changes in Equity
Correct Option: C
Rationale: The Balance Sheet displays assets, liabilities, and equity at a specific
date, reflecting the company’s financial position.
9. What is depreciation?
• A) An increase in asset value
• B) The allocation of the cost of an asset over its useful life
• C) A method of calculating profit
• D) The process of selling an asset
Correct Option: B
Rationale: Depreciation spreads the cost of a tangible asset over its estimated
useful life.
10. Which of the following statements about the revenue recognition principle is
true?
• A) Revenue is recognized when cash is received.
• B) Revenue is recognized when it is earned, regardless of cash flow.
• C) Revenue can only be recognized after all expenses are paid.
• D) Revenue is recognized at the end of the fiscal year only.
Correct Option: B
Rationale: The revenue recognition principle states that revenue is recognized
when earned, not necessarily when cash is received.
, 11. What is the purpose of a trial balance?
• A) To prepare financial statements
• B) To ensure that debits equal credits in the ledger
• C) To calculate net income
• D) To determine cash flow
Correct Option: B
Rationale: A trial balance is used to verify that total debits equal total credits in
the accounting records.
12. Which accounting concept dictates that business transactions should be
recorded separately from the owner's personal transactions?
• A) Monetary Unit Assumption
• B) Economic Entity Assumption
• C) Time Period Assumption
• D) Going Concern Assumption
Correct Option: B
Rationale: The Economic Entity Assumption ensures that a business's financial
activities are separate from personal financial activities of its owners.
13. What is the purpose of the cash flow statement?
• A) To report the profitability of a company
• B) To show how cash is generated and used during a period
• C) To summarize the financial position at a point in time
• D) To track inventory levels
Correct Option: B
Rationale: The cash flow statement outlines cash inflows and outflows,
providing a view of cash management.
14. Which of the following is an example of a long-term liability?
• A) Accounts Payable
• B) Bonds Payable
• C) Notes Payable (due in 6 months)
Accounting PrinciPles, concePts And
Procedures (FAc1501) – comPlete Assignment
AnsWers | VeriFied unisA Accounting guide |
uPdAted semester 2 2025 PortFolio |
comPrehensiVe FinAnciAl Accounting studY
resource For south AFricAn students
1. What is the primary purpose of financial accounting?
• A) To provide information for internal management decisions
• B) To provide financial information to external users
• C) To comply with tax regulations
• D) To facilitate budgeting processes
Correct Option: B
Rationale: Financial accounting focuses on creating reports for external
stakeholders to aid in decision-making.
2. Which accounting principle requires that expenses be matched with revenues?
• A) Cost Principle
• B) Matching Principle
• C) Revenue Recognition Principle
• D) Full Disclosure Principle
Correct Option: B
Rationale: The Matching Principle ensures expenses are recorded in the same
period as the related revenues.
3. In which financial statement would you find the net income of a company?
• A) Balance Sheet
• B) Income Statement
• C) Cash Flow Statement
• D) Statement of Changes in Equity
Correct Option: B
Rationale: The Income Statement summarizes revenues and expenses,
indicating net income for the period.
,4. What does the term "liquidity" refer to in financial accounting?
• A) The ability to generate profits
• B) The capacity to pay long-term debts
• C) The availability of cash to meet short-term obligations
• D) The overall profitability of the business
Correct Option: C
Rationale: Liquidity measures how quickly assets can be converted into cash for
short-term liabilities.
5. Which of the following accounting methods records revenues when they are
earned, regardless of when cash is received?
• A) Cash Basis Accounting
• B) Accrual Basis Accounting
• C) Modified Cash Basis Accounting
• D) Revenue Recognition Method
Correct Option: B
Rationale: Under Accrual Basis Accounting, revenues and expenses are
recognized when they are earned or incurred.
6. What is the accounting equation?
• A) Assets = Liabilities + Equity
• B) Assets = Liabilities + Owner's Equity
• C) Revenues = Expenses + Net Income
• D) Assets + Liabilities = Owner's Equity
Correct Option: B
Rationale: The accounting equation reflects the relationship between a
company's assets, liabilities, and equity.
7. Which of the following is not considered a current asset?
• A) Cash
• B) Accounts Receivable
• C) Land
, • D) Inventory
Correct Option: C
Rationale: Land is a long-term asset, while current assets are expected to be
converted into cash or used within one year.
8. Which financial statement provides a snapshot of a company's financial position
at a specific point in time?
• A) Income Statement
• B) Cash Flow Statement
• C) Balance Sheet
• D) Statement of Changes in Equity
Correct Option: C
Rationale: The Balance Sheet displays assets, liabilities, and equity at a specific
date, reflecting the company’s financial position.
9. What is depreciation?
• A) An increase in asset value
• B) The allocation of the cost of an asset over its useful life
• C) A method of calculating profit
• D) The process of selling an asset
Correct Option: B
Rationale: Depreciation spreads the cost of a tangible asset over its estimated
useful life.
10. Which of the following statements about the revenue recognition principle is
true?
• A) Revenue is recognized when cash is received.
• B) Revenue is recognized when it is earned, regardless of cash flow.
• C) Revenue can only be recognized after all expenses are paid.
• D) Revenue is recognized at the end of the fiscal year only.
Correct Option: B
Rationale: The revenue recognition principle states that revenue is recognized
when earned, not necessarily when cash is received.
, 11. What is the purpose of a trial balance?
• A) To prepare financial statements
• B) To ensure that debits equal credits in the ledger
• C) To calculate net income
• D) To determine cash flow
Correct Option: B
Rationale: A trial balance is used to verify that total debits equal total credits in
the accounting records.
12. Which accounting concept dictates that business transactions should be
recorded separately from the owner's personal transactions?
• A) Monetary Unit Assumption
• B) Economic Entity Assumption
• C) Time Period Assumption
• D) Going Concern Assumption
Correct Option: B
Rationale: The Economic Entity Assumption ensures that a business's financial
activities are separate from personal financial activities of its owners.
13. What is the purpose of the cash flow statement?
• A) To report the profitability of a company
• B) To show how cash is generated and used during a period
• C) To summarize the financial position at a point in time
• D) To track inventory levels
Correct Option: B
Rationale: The cash flow statement outlines cash inflows and outflows,
providing a view of cash management.
14. Which of the following is an example of a long-term liability?
• A) Accounts Payable
• B) Bonds Payable
• C) Notes Payable (due in 6 months)
