Question

4. Which of the following are limitations of an entity’s Statement of Financial Position?

I. The Statement of Financial Position prepared at the end of the financial period may not be representative of the financial position at other times during the financial period.

II. The Statement of Financial Position may not include all items that create value for the entity.

III. The Statement of Financial Position is a historical representation of an entity’s financial position and does not consider the entity’s future growth potential.     Group of answer

choices

1. II and III
2. I and III,
3. II and III
4. I and III

5. Which of the following statements relates to the accounting period convention?

Group of answer choices

1. The value of employee loyalty and motivation is not recorded in the financial statements.
2. The amount of inventory recorded in the financial statements is based on suppliers’ billings.
3. Unless there is specific information to the contrary, the business is expected to continue operations for the foreseeable future.
4. The business is required to prepare financial statements every year.

6. The requirement for the accounts of the business to be kept separate from the personal accounts of the owners illustrates the:

Group of answer choices

A. Accounting entity concept

B. Business entity concept

C. Legal entity concept

D. Economic entity concept

7.  An entity’s financial year ends on 31 December. On 1 October it pays a 24-month magazine subscription of $600. Under the accrual system of accounting how much of the subscription will be recognized as an expense for the current year ended 31 December, and how much will be treated as an asset (prepaid subscription)?

Answer 1

4. Which of the following are limitations of an entity’s Statement of Financial Position?

Answer-Choices II and III

5. Which of the following statements relates to the accounting period convention?

Answer- The business is required to prepare financial statements every year.

6. The requirement for the accounts of the business to be kept separate from the personal accounts of the owners illustrates the:

Answer-Answer A,B,C and D all are currect.

7.Under accruel system the matching concept of accounting will be followed,hence the expeses for the current year will be recoreded as current year expenses and the prepaid expenses will be treated as current asset.In this question the entity paid 24 months subscribtion of 600$ in advance in october first ,the current year ampount need only for 3 months 600x3/24=75 for current year remaing 525 will be treated as current asset.