Fall Semester 2025 UNISA Assignment: FAC1601 / LJU4801 Financial
Accounting and Reporting – Complete Solved Assignment with Step-by-
Step Answers and Exam-Focused Study Guide (Updated 2025 Edition)
Question 1: Basic Accounting Principles
Which of the following is not considered a fundamental accounting principle?
A. Going Concern
B. Accrual Basis
C. Matching Concept
D. Cash Basis
CORRECT ANSWER: D. Cash Basis
Rationale: The cash basis of accounting is generally not considered a fundamental
principle as the accrual basis is widely accepted for preparing financial statements. The
other options represent foundational concepts in accounting.
Question 2: Financial Statements
Which financial statement provides information about a company's financial position at
a specific point in time?
A. Income Statement
B. Balance Sheet
C. Cash Flow Statement
D. Statement of Changes in Equity
CORRECT ANSWER: B. Balance Sheet
Rationale: The balance sheet presents a company's assets, liabilities, and equity at a
specific date, making it a snapshot of financial position, unlike the income statement
that reflects performance over a period.
Question 3: Revenue Recognition
Under the accrual basis of accounting, revenue is recognized when it is:
A. Received in cash
B. Earned and realizable
C. Invoiced to the customer
D. When a contract is signed
CORRECT ANSWER: B. Earned and realizable
Rationale: Revenue is recognized when it is earned (i.e., goods or services have been
provided) and realizable (i.e., it is reasonable to expect payment), according to generally
accepted accounting principles.
,Question 4: Depreciation Methods
Which of the following methods of depreciation results in higher depreciation expense
in the earlier years of an asset's life?
A. Straight-Line Method
B. Units of Production Method
C. Declining Balance Method
D. Sum-of-the-Years'-Digits Method
CORRECT ANSWER: C. Declining Balance Method
Rationale: The declining balance method accelerates the recognition of depreciation
expense, resulting in higher expenses in the early years of an asset’s life compared to
methods like straight-line or units of production.
Question 5: Current Liabilities
Which of the following is classified as a current liability?
A. Mortgage Payable
B. Notes Payable Due in 2 Years
C. Accounts Payable
D. Bonds Payable
CORRECT ANSWER: C. Accounts Payable
Rationale: Accounts payable are amounts owed to suppliers that must be paid within a
year, categorizing them as current liabilities. The other options represent long-term
obligations.
Question 6: Accounting Cycle
Which of the following is the correct order of the steps in the accounting cycle?
A. Journal entries, ledger accounts, financial statements, trial balance
B. Trial balance, journal entries, ledger accounts, financial statements
C. Journal entries, trial balance, ledger accounts, financial statements
D. Journal entries, ledger accounts, trial balance, financial statements
CORRECT ANSWER: D. Journal entries, ledger accounts, trial balance, financial
statements
Rationale: The accounting cycle begins with recording journal entries, then posting to
ledger accounts, preparing a trial balance, and finally producing the financial
statements.
, Question 7: Expense Recognition
Which principle states that expenses should be matched with revenues in the period in
which efforts are made to generate those revenues?
A. Revenue Recognition Principle
B. Expense Recognition Principle
C. Matching Principle
D. Cost Principle
CORRECT ANSWER: C. Matching Principle
Rationale: The matching principle dictates that expenses should be recognized in the
same period as the revenues they helped generate, ensuring that financial statements
accurately reflect profitability.
Question 8: Inventory Valuation
Which of the following inventory valuation methods results in the lowest cost of goods
sold during a period of rising prices?
A. FIFO (First-In, First-Out)
B. LIFO (Last-In, First-Out)
C. Weighted Average Cost
D. Specific Identification
CORRECT ANSWER: A. FIFO (First-In, First-Out)
Rationale: Under FIFO, the oldest costs are used for cost of goods sold during times of
rising prices, resulting in lower cost of goods sold and higher profits compared to LIFO.
Question 9: Cash Flow from Operating Activities
Which of the following cash flows is included in cash flow from operating activities?
A. Cash received from selling equipment
B. Dividends received from investments
C. Cash sales receipts
D. Proceeds from issuing stock
CORRECT ANSWER: C. Cash sales receipts
Rationale: Cash flow from operating activities includes cash generated from the core
business operations, such as cash sales receipts, whereas the other options pertain to
investing or financing activities.
Question 10: Financial Ratios
Accounting and Reporting – Complete Solved Assignment with Step-by-
Step Answers and Exam-Focused Study Guide (Updated 2025 Edition)
Question 1: Basic Accounting Principles
Which of the following is not considered a fundamental accounting principle?
A. Going Concern
B. Accrual Basis
C. Matching Concept
D. Cash Basis
CORRECT ANSWER: D. Cash Basis
Rationale: The cash basis of accounting is generally not considered a fundamental
principle as the accrual basis is widely accepted for preparing financial statements. The
other options represent foundational concepts in accounting.
Question 2: Financial Statements
Which financial statement provides information about a company's financial position at
a specific point in time?
A. Income Statement
B. Balance Sheet
C. Cash Flow Statement
D. Statement of Changes in Equity
CORRECT ANSWER: B. Balance Sheet
Rationale: The balance sheet presents a company's assets, liabilities, and equity at a
specific date, making it a snapshot of financial position, unlike the income statement
that reflects performance over a period.
Question 3: Revenue Recognition
Under the accrual basis of accounting, revenue is recognized when it is:
A. Received in cash
B. Earned and realizable
C. Invoiced to the customer
D. When a contract is signed
CORRECT ANSWER: B. Earned and realizable
Rationale: Revenue is recognized when it is earned (i.e., goods or services have been
provided) and realizable (i.e., it is reasonable to expect payment), according to generally
accepted accounting principles.
,Question 4: Depreciation Methods
Which of the following methods of depreciation results in higher depreciation expense
in the earlier years of an asset's life?
A. Straight-Line Method
B. Units of Production Method
C. Declining Balance Method
D. Sum-of-the-Years'-Digits Method
CORRECT ANSWER: C. Declining Balance Method
Rationale: The declining balance method accelerates the recognition of depreciation
expense, resulting in higher expenses in the early years of an asset’s life compared to
methods like straight-line or units of production.
Question 5: Current Liabilities
Which of the following is classified as a current liability?
A. Mortgage Payable
B. Notes Payable Due in 2 Years
C. Accounts Payable
D. Bonds Payable
CORRECT ANSWER: C. Accounts Payable
Rationale: Accounts payable are amounts owed to suppliers that must be paid within a
year, categorizing them as current liabilities. The other options represent long-term
obligations.
Question 6: Accounting Cycle
Which of the following is the correct order of the steps in the accounting cycle?
A. Journal entries, ledger accounts, financial statements, trial balance
B. Trial balance, journal entries, ledger accounts, financial statements
C. Journal entries, trial balance, ledger accounts, financial statements
D. Journal entries, ledger accounts, trial balance, financial statements
CORRECT ANSWER: D. Journal entries, ledger accounts, trial balance, financial
statements
Rationale: The accounting cycle begins with recording journal entries, then posting to
ledger accounts, preparing a trial balance, and finally producing the financial
statements.
, Question 7: Expense Recognition
Which principle states that expenses should be matched with revenues in the period in
which efforts are made to generate those revenues?
A. Revenue Recognition Principle
B. Expense Recognition Principle
C. Matching Principle
D. Cost Principle
CORRECT ANSWER: C. Matching Principle
Rationale: The matching principle dictates that expenses should be recognized in the
same period as the revenues they helped generate, ensuring that financial statements
accurately reflect profitability.
Question 8: Inventory Valuation
Which of the following inventory valuation methods results in the lowest cost of goods
sold during a period of rising prices?
A. FIFO (First-In, First-Out)
B. LIFO (Last-In, First-Out)
C. Weighted Average Cost
D. Specific Identification
CORRECT ANSWER: A. FIFO (First-In, First-Out)
Rationale: Under FIFO, the oldest costs are used for cost of goods sold during times of
rising prices, resulting in lower cost of goods sold and higher profits compared to LIFO.
Question 9: Cash Flow from Operating Activities
Which of the following cash flows is included in cash flow from operating activities?
A. Cash received from selling equipment
B. Dividends received from investments
C. Cash sales receipts
D. Proceeds from issuing stock
CORRECT ANSWER: C. Cash sales receipts
Rationale: Cash flow from operating activities includes cash generated from the core
business operations, such as cash sales receipts, whereas the other options pertain to
investing or financing activities.
Question 10: Financial Ratios
