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Which one of the following is an example of where the accrual or matching convention should be applied?

A.

A customer who is in financial difficulty and owes the company $8,000.

B.

A company's machinery which is very specialized and would only have a small resale value if the company goes into liquidation.

C.

Gas consumed last quarter and paid for this quarter.

D.

Non-current assets originally costing $40,000, which if purchased today would cost $45,000.

Accountant P debited wages with £1,000 instead of £1,500, but credited sales with £1,500 instead of £2,000.

Which of the following kind of bookkeeping mistakes is this?

A.

Error of original entry

B.

Compensation of errors

C.

Reversal of entries

D.

Error of principle

Refer to the Exhibit.

Which of the following balances normally result from the double-entry system of book-keeping?

The answer is:

A.

Option A

B.

Option B

C.

Option C

D.

Option D

Andrew is valuing the closing inventory at the lower of cost and net realizable value.

Which of the following concepts dictates his choice?

A.

Materiality concept

B.

Money measurement concept

C.

Accrual concept

D.

Prudence concept

Who is responsible for ensuring that internal control systems operate efficiently?

A.

External auditors

B.

Directors

C.

Shareholders of the company

D.

Creditors

In internal auditing, detection of fraud is an important objective. The auditors will best be able to detect frauds if they are knowledgeable in the most common methods of fraud.

Which THREE of the following are common methods of fraud?

A.

Ghost employees

B.

Taking stationary home

C.

Teeming and lading

D.

Using a company car for personal use

E.

Collusion with external parties

F.

Using company phones for private calls

If a profitable entity is not required to register for sales tax with its local tax authority, which of the following statements is TRUE?

A.

A sales tax receivable account will be prepared in the nominal ledger

B.

Sales tax will not be added to the sales price of goods invoiced to customers

C.

Sales tax will not be added to the cost of goods and expenses supplied

D.

Profit for the year will be reported net of sales tax.