Grade-9

[First Semester 2023-24]

[Class Test] Subject: Accounting Topics: Accounting Rules.
[Full Marks: 25] [Duration: 40 minutes] [Instruction: Calculators are allowed]

Section-A: Multiple Choice Questions

Draw a ring around the correct option. Each MCQ is of 1 mark.
1. A business sends its staff on an annual professional development retreat for which it spends
$40 000 a year. The expense of $40 000 is recorded in the business accounts, but the increased
value of the staff is not recorded. Which accounting principle is being applied?

A Duality
B Going concern
C Money measurement
D Realization

2. Profit is only recognized as being earned when the legal title of goods pass from the seller to the
buyer. Which accounting principle is being described?

A Duality
B Matching
C Prudence
D Realization

3. Missy, a sole trader, always uses the reducing balance method to depreciate her non-current
assets. Which accounting principle is she applying?

A Consistency
B Duality
C Going concern
D Money measurement

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4. Lamington Ltd received cash from Seri, a customer. It recorded it in Seri’s account and in the
cash book. Which accounting principle is the company applying?
A Business entity
B Duality
C Matching
D Money measurement

5. Ganesh, a sole trader, included his personal assets and liabilities in the business’ statement of
financial position. Which accounting principle is not being applied?

A Business entity
B Consistency
C Realization
D Money measurement

Section-B: Structured Questions

6. John is considering the following proposals to improve his profit for the year. Name the
accounting principle which would not be compiled with if each proposal was implemented. [5]

Proposal Accounting Principle

(a) Change the depreciation methods for non-current assets.
(b) Remove the provision for doubtful debts from the financial
statements.
(c) Value the inventory at market price.
(d) Place a value on the skill of the workforce in the financial
statements
(e) Exclude expenses owing from the income statement.

7. Dorothy is valuing her inventory.

(a) Explain how inventory should be valued. [2]

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(b) Dorothy had overvalued her inventory on 31 December 2018. Complete the table by placing
a tick in the correct column to show the effect of this on each of the items shown. [8]

Overstated Understated No effect

Gross profit for the year ended
31 December 2018
Gross profit for the year ended
31 December 2019
Cost of sales for the year ended
31 December 2018
Cost of sales for the year ended
31 December 2019
Profit for the year for the year
ended 31 December 2018
Profit for the year for the year
ended 31 December 2019
Current assets at 31 December
2018
Current assets at 31 December
2019

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8. Ravi is a retailer of garden furniture. Ravi provided the following information about inventory held
at the end of his financial year. Calculate the total value of each type of product. [5]

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End of Exam
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