IGCSE Accounting Paper-1: Specimen Questions with Answers 119 - 120 of 214

Question number: 119

MCQ▾

Question

A trader recognizes that his machinery depreciate in value each year.

How does he record this in his final accounts?

Choices

Choice (4)

Response

a.

**shows given table in record in the final accounts**

shows table in decrease expenses and decrease fixed assets.
Profit and Loss Account		Balance Sheet
Increase expenses	Decrease expense	Increase fixed assets	Decrease fixed asset
	✓		✓

b.

**shows a record in the final accounts**

shows table in increase expenses and increase fixed assets.
Profit and Loss Account		Balance Sheet
Increase expenses	Decrease expense	Increase fixed assets	Decrease fixed asset
✓		✓

c.

**shows The record in the final accounts**

shows table in decrease expenses
Profit and Loss Account		Balance Sheet
Increase expenses	Decrease expense	Increase fixed assets	Decrease fixed asset
	✓	✓

d.

**The record in the final accounts**

shows table in increase expenses
Profit and Loss Account		Balance Sheet
Increase expenses	Decrease expense	Increase fixedassets	Decrease fixed asset
✓			✓

Answer

d.

Explanation

The expenses incurred in relation to the fixed assets are shown in the profit and loss account in the debit side and the same amount is decreased from the fixed asset of the business. Hence the expenses will increase in profit and loss account and decrease the value of the assets.

Question number: 120

MCQ▾

Question

Stock in trades are to be recorded at cost or market price whichever is less.

Which accounting principle is being applied?

Choices

Choice (4)		Response
a.	Consistency
b.	Money measurement
c.	Prudence
d.	Duality

Answer

c.

Explanation

All prospective losses are taken into consideration in the prudence principle. But in this principle all prospective profits are left in calculation. Hence Stock in trades are to be recorded at cost or market price whichever is less.