IGCSE Accounting Paper-1: Specimen Questions with Answers 19 - 21 of 214

Question number: 19

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Question

Identify the accounting objectives of the following statement:

“The information in financial statements must be free from error and bias”

Choices

Choice (4) Response

a.

Comparability

b.

Understandability

c.

Relevance

d.

Reliability

Answer

d.

Explanation

Properly verified transactions are recorded under the accounting principle of reliability. This verification may be carried out with supportive evidence like bank statements, purchases receipts, promissory notes and appraisal reports.

Question number: 20

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Question

A business provided the following information.

Percentage of profit on sales for three years

In this table Percentage of profit on sales for three years

year 1

year 2

year 3

gross profit as a percentage of sales

27%

27%

27%

net profit as a percentage of sales

7%

10%

12%

What does this show?

Choices

Choice (4) Response

a.

control over expenses is getting better

b.

sales have increased

c.

sales have reduced

d.

control over expenses is getting worse

Answer

a.

Explanation

Gross profits on sales were continuously constant over a period of three years and the net profits of the three years were in progress from 7 % to 12%. This shows that the business were able to control over expenses is getting better.

Question number: 21

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Question

Choose the accounting equation:

Choices

Choice (4) Response

a.

b.

c.

d.

Question does not provide sufficient data or is vague

Answer

c.

Explanation

Accounting equation shows a true reflection of the financial position of the company.

This is one of the easiest ways to calculate assets or liabilities or capital of the company.

Thus accounting equation is .