IGCSE Accounting Paper-1: Specimen Questions with Answers 292 - 293 of 338

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Question 292

Question

MCQ▾

ABC Ltd. bought a building at a cost of $ 2,00, 000 in 2010, the fair market value of which stands at $ 4,50, 000 on 31 December 2019. ABC Ltd. shows the building at $ 4,50, 000 in his balance sheet on 31 December 2019. Which accounting principle is violated here?

Choices

Choice (4)

a.

Going Concern Principle

b.

Conservatism Principle

c.

Cost Principle

d.

Realization Principle

Answer

c.

Explanation

  • Cost Principle says that the fixed assets of a business should always be recorded at their original cost regardless of their current market price. The original cost is the amount actually paid for its acquisition.
  • The building in this case should be shown at the price paid by ABC Ltd. to acquire it i.e.. at $ 2,00, 000.

Question 293

Question

MCQ▾

X writes a cheque to his supplier of goods and his supplier sends this into his bank for collection. Which of the following is correct implication of this in X՚s books of accounts?

Choices

Choice (4)

a.

Banks- Decrease, Creditors- Decrease,

b.

Banks- Unchanged, Creditors- Decrease,

c.

Banks- Decrease, Creditors- Increase,

d.

Banks- Decrease, Creditors- Unchanged,

Answer

a.

Explanation

  • When X writes a cheque in favour of his supplier of goods, his bank balance will get reduced by the amount of cheque.
  • As the same time, the supplier is a creditor for X, so when X pays him, the amount standing to the credit of creditors ‘’ account will also get reduced as the supplier is no longer a creditor for X.

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