Fall Semester 2025 | UNISA Assignment | FAC1502 –
Financial Accounting Principles, Concepts and
Procedures | Complete Answers, Worked Examples
& Updated Study Guide | Due November/December
2025
Question 1:
Which of the following is considered a fundamental accounting principle?
A) Consistency
B) Materiality
C) Matching
D) All of the above
Correct Option: D) All of the above
Rationale:
All listed options are fundamental accounting principles. Consistency ensures financial
statements are comparable over time; materiality pertains to the significance of
transactions; matching relates to recognizing expenses in the same period as the
revenues they helped to generate.
Question 2:
The purpose of the matching principle is to:
A) Ensure that revenues are recognized when earned.
B) Associate expenses with the revenues they generate in the same reporting period.
C) Depreciate fixed assets systematically.
D) Ensure that all financial statements are prepared in the same manner.
Correct Option: B) Associate expenses with the revenues they generate in the same
reporting period.
Rationale:
The matching principle states that expenses should be matched with the revenues they
help generate in the same accounting period, ensuring a more accurate depiction of a
company's financial performance.
Question 3:
Which financial statement provides a snapshot of a company's financial position at a
specific point in time?
A) Income Statement
B) Statement of Cash Flows
,C) Balance Sheet
D) Statement of Changes in Equity
Correct Option: C) Balance Sheet
Rationale:
The balance sheet reports a company's assets, liabilities, and shareholders' equity at a
specific point in time, giving stakeholders insight into its financial position.
Question 4:
What is the primary objective of financial reporting?
A) To provide information solely for management decisions.
B) To comply with taxation requirements.
C) To provide useful financial information to potential investors and creditors.
D) To reduce accounting costs.
Correct Option: C) To provide useful financial information to potential investors and
creditors.
Rationale:
The primary objective of financial reporting is to provide relevant financial information
that helps investors and creditors make informed decisions about resource allocation.
Question 5:
In accounting, what does the term "asset" refer to?
A) A liability that a company has to pay.
B) Any expense incurred during the period.
C) Resources owned by a company that are expected to provide future economic
benefits.
D) The revaluation of a company’s standing in its industry.
Correct Option: C) Resources owned by a company that are expected to provide
future economic benefits.
Rationale:
An asset is a resource owned by a company, which is expected to bring future economic
benefit, such as cash, inventory, and real estate.
Question 6:
Under the accrual basis of accounting, revenues are recognized when:
A) Cash is received.
B) They are earned, regardless of when cash is received.
,C) The goods are shipped.
D) The year-end is reached.
Correct Option: B) They are earned, regardless of when cash is received.
Rationale:
The accrual basis of accounting dictates that revenues are recognized when they are
earned, not necessarily when cash is received. This principle aligns revenues to the
period they are generated.
Question 7:
Which of the following is NOT a component of the income statement?
A) Revenues
B) Assets
C) Expenses
D) Net Income
Correct Option: B) Assets
Rationale:
The income statement focuses on revenues and expenses to calculate net income,
whereas the balance sheet includes assets, liabilities, and equity, making "assets" not a
component of the income statement.
Question 8:
A company purchased inventory for $5,000. If the inventory is later sold for $8,000, what
is the gross profit?
A) $3,000
B) $5,000
C) $2,000
D) $1,000
Correct Option: A) $3,000
Rationale:
Gross profit is calculated as sales revenue minus the cost of goods sold. Here, $8,000
(sales) - $5,000 (cost) = $3,000 gross profit.
Question 9:
Which accounting principle requires that all significant financial information should be
disclosed in financial statements?
, A) Historical Cost Principle
B) Full Disclosure Principle
C) Going Concern Principle
D) Revenue Recognition Principle
Correct Option: B) Full Disclosure Principle
Rationale:
The Full Disclosure Principle mandates that all material information affecting a
company’s financial position should be disclosed in its financial statements, ensuring
transparency for stakeholders.
Question 10:
What does the current ratio measure?
A) Profitability of the company.
B) Long-term solvency.
C) Short-term liquidity.
D) Market performance.
Correct Option: C) Short-term liquidity.
Rationale:
The current ratio is a liquidity ratio that measures a company’s ability to pay short-term
obligations. It is calculated by dividing current assets by current liabilities.
Question 11:
Which of the following is true about liabilities?
A) They represent obligations of the company.
B) They are assets owned by the company.
C) They do not affect equity.
D) They are only long-term in nature.
Correct Option: A) They represent obligations of the company.
Rationale:
Liabilities are defined as obligations that a company has to settle in the future through
the transfer of economic benefits, such as cash or services.
Question 12:
What is the accounting equation?
Financial Accounting Principles, Concepts and
Procedures | Complete Answers, Worked Examples
& Updated Study Guide | Due November/December
2025
Question 1:
Which of the following is considered a fundamental accounting principle?
A) Consistency
B) Materiality
C) Matching
D) All of the above
Correct Option: D) All of the above
Rationale:
All listed options are fundamental accounting principles. Consistency ensures financial
statements are comparable over time; materiality pertains to the significance of
transactions; matching relates to recognizing expenses in the same period as the
revenues they helped to generate.
Question 2:
The purpose of the matching principle is to:
A) Ensure that revenues are recognized when earned.
B) Associate expenses with the revenues they generate in the same reporting period.
C) Depreciate fixed assets systematically.
D) Ensure that all financial statements are prepared in the same manner.
Correct Option: B) Associate expenses with the revenues they generate in the same
reporting period.
Rationale:
The matching principle states that expenses should be matched with the revenues they
help generate in the same accounting period, ensuring a more accurate depiction of a
company's financial performance.
Question 3:
Which financial statement provides a snapshot of a company's financial position at a
specific point in time?
A) Income Statement
B) Statement of Cash Flows
,C) Balance Sheet
D) Statement of Changes in Equity
Correct Option: C) Balance Sheet
Rationale:
The balance sheet reports a company's assets, liabilities, and shareholders' equity at a
specific point in time, giving stakeholders insight into its financial position.
Question 4:
What is the primary objective of financial reporting?
A) To provide information solely for management decisions.
B) To comply with taxation requirements.
C) To provide useful financial information to potential investors and creditors.
D) To reduce accounting costs.
Correct Option: C) To provide useful financial information to potential investors and
creditors.
Rationale:
The primary objective of financial reporting is to provide relevant financial information
that helps investors and creditors make informed decisions about resource allocation.
Question 5:
In accounting, what does the term "asset" refer to?
A) A liability that a company has to pay.
B) Any expense incurred during the period.
C) Resources owned by a company that are expected to provide future economic
benefits.
D) The revaluation of a company’s standing in its industry.
Correct Option: C) Resources owned by a company that are expected to provide
future economic benefits.
Rationale:
An asset is a resource owned by a company, which is expected to bring future economic
benefit, such as cash, inventory, and real estate.
Question 6:
Under the accrual basis of accounting, revenues are recognized when:
A) Cash is received.
B) They are earned, regardless of when cash is received.
,C) The goods are shipped.
D) The year-end is reached.
Correct Option: B) They are earned, regardless of when cash is received.
Rationale:
The accrual basis of accounting dictates that revenues are recognized when they are
earned, not necessarily when cash is received. This principle aligns revenues to the
period they are generated.
Question 7:
Which of the following is NOT a component of the income statement?
A) Revenues
B) Assets
C) Expenses
D) Net Income
Correct Option: B) Assets
Rationale:
The income statement focuses on revenues and expenses to calculate net income,
whereas the balance sheet includes assets, liabilities, and equity, making "assets" not a
component of the income statement.
Question 8:
A company purchased inventory for $5,000. If the inventory is later sold for $8,000, what
is the gross profit?
A) $3,000
B) $5,000
C) $2,000
D) $1,000
Correct Option: A) $3,000
Rationale:
Gross profit is calculated as sales revenue minus the cost of goods sold. Here, $8,000
(sales) - $5,000 (cost) = $3,000 gross profit.
Question 9:
Which accounting principle requires that all significant financial information should be
disclosed in financial statements?
, A) Historical Cost Principle
B) Full Disclosure Principle
C) Going Concern Principle
D) Revenue Recognition Principle
Correct Option: B) Full Disclosure Principle
Rationale:
The Full Disclosure Principle mandates that all material information affecting a
company’s financial position should be disclosed in its financial statements, ensuring
transparency for stakeholders.
Question 10:
What does the current ratio measure?
A) Profitability of the company.
B) Long-term solvency.
C) Short-term liquidity.
D) Market performance.
Correct Option: C) Short-term liquidity.
Rationale:
The current ratio is a liquidity ratio that measures a company’s ability to pay short-term
obligations. It is calculated by dividing current assets by current liabilities.
Question 11:
Which of the following is true about liabilities?
A) They represent obligations of the company.
B) They are assets owned by the company.
C) They do not affect equity.
D) They are only long-term in nature.
Correct Option: A) They represent obligations of the company.
Rationale:
Liabilities are defined as obligations that a company has to settle in the future through
the transfer of economic benefits, such as cash or services.
Question 12:
What is the accounting equation?
