IGCSE Accounting Paper-1: Specimen Questions with Answers 261 - 262 of 338

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Question 261

Question

MCQ▾

On applying money measurement concept, which of the following should not be recorded in the books of accounts?

Choices

Choice (4)

a.

Purchase of materials from suppliers

b.

Appointment of a new employee

c.

Payment of rent to landlord

d.

Sale of goods to customers

Answer

b.

Explanation

  • Money Measurement Concept says that only those events which can be measured in terms of money should be recorded in the books of accounts.
  • Events like sale or purchase of goods, payment of wages to labourers, payment of rent to landlord, purchase of any asset, deposit or withdrawal cash from business bank account etc. are measurable in terms of money so these should be accounted for.
  • On the contrary, appointment of a new employee, skills of managers, creativity of workers etc. should not be recorded in the accounts.

Question 262

Edit

Write in Brief

One Liner▾

The owner introduces his personal car into his business. How this transaction would affect the accounting equation? (Marks 1)

(I) Assets- Increase

Liabilities- No effect

Capital- Increase

(II) Assets- Decrease

Liabilities- Increase

Capital- No effect

(III) Assets- No effect

Liabilities- Increase

Capital- Increase

(IV) Assets- Decrease

Liabilities- No effect

Capital- Decrease

Explanation

(I) Assets- Increase

Liabilities- No effect

Capital- Increase

  • Car is a Fixed Assets. When a car is introduced in the business, the total assets increase. And since it is the owner՚s own car, it will form part of capital and not liabilities.
  • Therefore, both Capital and Assets increase when the owner introduces his personal car into his business.

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