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ACCG41

Accounting Concepts. Accruals/Prepayments Practice Questions

Q1. What is meant by the money measurement concept?


Q2. Explain the concept of prudence in relation to the recognition of profits and losses.
Q3. Explain the term materiality as it is used in accounting.
Q4. The historical cost convention looks backwards but the going concern convention
looks forwards. Required:
(a) Explain clearly what is meant by: - the historical cost concept;
- the going concern concept.
(b) Does traditional financial accounting, using the historical cost convention, make the going concern
convention unnecessary? Explain your answer fully.
(c) Which do you think a shareholder is likely to find more useful a report on the past or an estimate
of the future? Why?
Calculate the balance on the account and state whether it is accrued or prepaid. Also find
out what amounts are to be recognised in Profit & loss account / Income statement and/or
Balance sheet.
Q5. (A) On 31 December 2014, three months rent amounting to a total of $3,000 owed.
(B) The rent chargeable per year was $12,000.
(C) Following rent payments were made in the year 2015:
6 Jan $3,000;
4 Apr $3,000;
7 Jul $3,000;
18 Oct $3,000.
(D) The final three months rent for 2015 is still owed.
Q6. The following details are available about the packing materials account used by a
packaging business.
(A) On 31 December 2013, packing materials in hand amounted to $1,850.
(B) During the year to 31 December 2014, we paid $27,480 for packing materials.
(C) There were no stocks of packing materials on 31 December 2014.
(D) On 31 December 2014, we still owed $2,750 for packing materials already received and used.
Q7. Our Accounting period end is 31 December. We rent part of our building to another firm
for $800 per annum.
Amounts
Rent due date
Rent Received date
Amounts
Rent due date
Rent Received date
$200
31 March 2015
4 April 2015
$200
31 Sept. 2015
1
Oct 2015
$200
30 June 2015
4 July 2015
$200
31 Dec. 2015
7 Jan
2015
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1
ACCG41

Accounting Concepts. Accruals/Prepayments Practice Questions

Q1. What is meant by the money measurement concept?


Q2. Explain the concept of prudence in relation to the recognition of profits and losses.
Q3. Explain the term materiality as it is used in accounting.
Q4. The historical cost convention looks backwards but the going concern convention
looks forwards. Required:
(b) Explain clearly what is meant by: - the historical cost concept;
- the going concern concept.
(b) Does traditional financial accounting, using the historical cost convention, make the going concern
convention unnecessary? Explain your answer fully.
(c) Which do you think a shareholder is likely to find more useful a report on the past or an estimate
of the future? Why?
Calculate the balance on the account and state whether it is accrued or prepaid. Also find
out what amounts are to be recognised in Profit & loss account / Income statement and/or
Balance sheet.
Q5. (A) On 31 December 2014, three months rent amounting to a total of $3,000 owed.
(B) The rent chargeable per year was $12,000.
(C) Following rent payments were made in the year 2015:
6 Jan $3,000;
4 Apr $3,000;
7 Jul $3,000;
18 Oct $3,000.
(D) The final three months rent for 2015 is still owed.

2
ACCG41

Accounting Concepts. Accruals/Prepayments Practice Questions

Q6. The following details are available about the packing materials account used by a
packaging business.
(A) On 31 December 2013, packing materials in hand amounted to $1,850.
(B) During the year to 31 December 2014, we paid $27,480 for packing materials.
(C) There were no stocks of packing materials on 31 December 2014.
(D) On 31 December 2014, we still owed $2,750 for packing materials already received and used.
Q7. Our Accounting period end is 31 December. We rent part of our building to another firm
for $800 per annum.
Amounts
Rent due date
Rent Received date
Amounts
Rent due date
Rent Received date
$200
31 March 2015
4 April 2015
$200
31 Sept. 2015
1
Oct 2015
$200
30 June 2015
4 July 2015
$200
31 Dec. 2015
7 Jan
2015
Q8. The financial year of T Guiness ended on 31 December 20X6. Show the ledger accounts
for the following items including the balance transferred to the necessary part of the
financial statements, also the balances carried down to 20X7:
(a) Motor expenses: Paid in 20X6 $819; Owing at 31 December 20X6 $94.
(b) Insurance: Paid in 20X6 $840; Prepaid as at 31 December 20X6 $68.
(c) Stationery: Paid during 20X6 $370; Owing as at 31 December 20X5 $110; Owing as at 31 December
20X6 $245.
(d) Business rates: Paid during 20X6 $1,654; Prepaid as at 31 December 20X5 $140; Prepaid as at 31
December 20X6 $120.
(e) Guiness sub-lets part of the premises. He receives $1,400 during the year ended 31 December
20X6. Harte, the tenant, owed Guiness $175 on 31 December 20X5 and $185 on 31 December
20X6.
Q9. On 1 January 20X8 the following balances, among others, stood in the books of R Atkins, a sole
trader:
(a) Business rates, $210 (Dr); (b) Packing materials, $740 (Dr).
During the year ended 31 December 20X8 the information related to these two accounts is as follows:
(i) Business rates of $1,920 were paid to cover the period 1 April 20X8 to 31 March 20X9;
(ii) $3,150 was paid for packing materials bought;
(iii) $242 was owing on 31 December 20X8 in respect of packing materials bought on credit;
(iv) Old materials amounting to $63 were sold as scrap for cash;
(v) Closing stock of packing materials was valued at $690.
You are required to write up the two accounts showing the appropriate amounts
transferred to the Profit and Loss Account at 31 December 20X8, the end of the financial
year of the trader.
Q10. Explain which accounting rule is not being followed in following cases:
(i) A customer sends /pays you money through mobile phone and wishes to buy a desk. You write it as
Sale of desk. The customer will come to your shop this weekend to pick up the desk.
(ii) Your shop floor was wet and a customer slipped and got hurt. The court sends you a notice to pay
for his hospital expenses of $500.But normally other businesses also pay a fine/penalty of $2000 in
this case. You wrote $500 only in your expenses as you have only paid $500 until now.
(iii) The shops front glass was hit and broken. You have sent a notice to the baseball ground of $300
and entered it as income.
(iv) The car bought for owners son was entered as Fixed Asset Motor Vehicle in the books. The money
was paid by manager.

2
ACCG41

Accounting Concepts. Accruals/Prepayments Practice Questions

Q8. The financial year of T Guiness ended on 31 December 20X6. Show the ledger accounts
for the following items including the balance transferred to the necessary part of the
financial statements, also the balances carried down to 20X7:
(a) Motor expenses: Paid in 20X6 $819; Owing at 31 December 20X6 $94.

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ACCG41

Accounting Concepts. Accruals/Prepayments Practice Questions

(b) Insurance: Paid in 20X6 $840; Prepaid as at 31 December 20X6 $68.


(c) Stationery: Paid during 20X6 $370; Owing as at 31 December 20X5 $110; Owing as at 31 December
20X6 $245.
(d) Business rates: Paid during 20X6 $1,654; Prepaid as at 31 December 20X5 $140; Prepaid as at 31
December 20X6 $120.
(e) Guiness sub-lets part of the premises. He receives $1,400 during the year ended 31 December
20X6. Harte, the tenant, owed Guiness $175 on 31 December 20X5 and $185 on 31 December
20X6.
Q9. On 1 January 20X8 the following balances, among others, stood in the books of R Atkins, a sole
trader:
(a) Business rates, $210 (Dr); (b) Packing materials, $740 (Dr).
During the year ended 31 December 20X8 the information related to these two accounts is as follows:
(i) Business rates of $1,920 were paid to cover the period 1 April 20X8 to 31 March 20X9;
(ii) $3,150 was paid for packing materials bought;
(iii) $242 was owing on 31 December 20X8 in respect of packing materials bought on credit;
(iv) Old materials amounting to $63 were sold as scrap for cash;
(v) Closing stock of packing materials was valued at $690.
You are required to write up the two accounts showing the appropriate amounts
transferred to the Profit and Loss Account at 31 December 20X8, the end of the financial
year of the trader.
Q10. Explain which accounting rule is not being followed in following cases:
(i) A customer sends /pays you money through mobile phone and wishes to buy a desk. You write it
as Sale of desk. The customer will come to your shop this weekend to pick up the desk.
(ii) Your shop floor was wet and a customer slipped and got hurt. The court sends you a notice to pay
for his hospital expenses of $500.But normally other businesses also pay a fine/penalty of $2000 in
this case. You wrote $500 only in your expenses as you have only paid $500 until now.
(iii) The shops front glass was hit and broken. You have sent a notice to the baseball ground of $300
and entered it as income.
(iv) The car bought for owners son was entered as Fixed Asset Motor Vehicle in the books. The money
was paid by manager.