CIE Accounting Paper-1: Specimen Questions 88 - 91 of 214

Question number: 88

Short Answer Question▾

Write in Short

Which accounting convention states that understatement of assets and income and overstatement of provisions and liabilities?

Explanation

Convention of conservation

The policy behind the conservation is playing safe. According to this convention least favorable situation to the firm will materialize and necessary action should be taken on that basis of accounting treatments.

Question number: 89

Short Answer Question▾

Write in Short

Give two examples of internal users.

I ……………………………………

II…………………………………………….

Explanation

Owners and Management

The internal users are those individual or may be a group of persons who are within the organization like owners, management, employees and trade unions. The users are determined according to their need of information.

Passage

James’s business had inventory (stock) on 1 July 2014 of $12000 and on 30 June 2014 of $13000. His cost of goods sold for the year ended 30 June 2014 was $25000.

Question number: 90 (1 of 2 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

Calculate his rate of inventory (stock) turnover in times. Show all your workings.

Explanation

2 times

Rateofstockturnover=Costofgoodssold/Averagestock

=2500012000+130002

=25000250002

2500012500

=2times

Question number: 91 (2 of 2 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

Calculate his rate of inventory (stock) turnover in days. Show all your workings.

Explanation

2 times

The stock turnover rate may be calculated in days also:

Rateofstockturnover=AveragestockCostofgoodssold×365

=12000+13000225000×365

=25000225000×365

1250025000×365

=182.5days

=182or183days

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