Accounting Concepts – Page 2

FR – Nov 2019 – L2 – Q4a – Ethical Issues in Financial Reporting

Explain the concepts of substance over form and going concern in financial reporting.

Question

The IASB’s framework for preparation and presentation of financial statements requires financial statements to be prepared on the basis that they comply with certain accounting concepts and underlying assumptions.

Required:

Explain the meaning of each of the following concepts and the underlying assumption:

Substance over form
Going concern
(6 Marks)

Answer

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Tags: Accounting Concepts, Going Concern, Substance Over Form
Level: Level 2

Topic: Ethical Issues in Financial Reporting
Series: NOV 2019

FA – Nov 2011 – L1 – SA – Q15 – Accounting Concepts

This question asks which of the given options does not belong to the group of accounting concepts.

Question

Which of the following does not belong to the group?
A. Going concern concept
B. Realisation concept
C. Matching concept
D. Entity concept
E. Profitability concept

Answer

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Tags: Accounting Concepts, Fundamental Principles
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2011

FA – Nov 2011 – L1 – SA – Q7 – Accounting Concepts

This question tests understanding of the duality concept in accounting.

Question

The accounting concept that says every debit entry must have a corresponding credit entry is
A. Going concern
B. Duality concept
C. Historical cost concept
D. Money measurement concept
E. Consistency concept

Answer

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Tags: Accounting Concepts, Duality Concept
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2011

FA – Nov 2020 – L1 – SB – Q2 -Accounting Concepts (e.g., Going Concern, Accruals, Materiality)

Explain accounting concepts, provide examples, and list users of financial statements.

Question

a. Explain the term ‘accounting concepts’. (2 Marks)

b. With particular reference to the accounting treatments, explain the following accounting concepts:
i. Entity (2 Marks)
ii. Going concern (2 Marks)
iii. Accrual (2 Marks)
iv. Materiality and aggregation (2 Marks)
v. Consistency (2 Marks)

c. In accordance with IAS 1 – Presentation of Financial Statements, highlight six qualitative characteristics of general-purpose financial statements. (4 Marks)

d. Financial statements provide information to users, and each user’s information requirement is not always the same.

Required:
Using the table below and the example provided, list four users of financial statements and their information needs.

S/N	Users	Information Needs
1	Employees	Wage negotiation and determination of job security
2
3
4

(Total: 20 Marks)

Answer

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Tags: Accounting Concepts, Financial Statements, IAS 1, Materiality, Users of financial statements
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2020

FA – Nov 2020 – L1 – SA – Q11 – Accounting Concepts

Identifies the accounting convention that suggests using a valuation method that understates rather than overstates results.

Question

Which of the following accounting conventions suggests that accountants should use a method of valuation that understates rather than overstates results?
A. Conservatism
B. Historical
C. Monetary
D. Cost
E. Substance over form

Answer

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Tags: Accounting Concepts, Conservatism
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2020

FA – Nov 2012 – L1 – SB – Q34 – Accounting Concepts

Recognize the accounting concept for sales revenue recognition.

Question

The accounting concept which states that sales revenue should be recognized when goods and services have been received is known as?

Answer

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Tags: Accounting Concepts, Revenue, Sales
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2012

FA – May 2013 – L1 – SA – Q5 – Depreciation Methods and Accounting for Disposals

This question tests the understanding of depreciation charged on non-current assets.

Question

Depreciation charged on non-current assets is known to be:

A. The amount spent to buy the non-current asset
B. The salvage value of a non-current asset
C. The part of the cost of non-current asset consumed during its period of use
D. The amount of money spent in replacing non-current assets
E. The part of the cost of non-current asset reserved to be consumed in future periods

Answer

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Tags: Accounting Concepts, Depreciation, Non-current Assets
Level: Level 1

Topic: Depreciation Methods and Accounting for Disposals
Series: MAY 2013

FA – May 2014 – L1 – SA – Q2 – Accounting Concepts

Identifies the concept that implies independence of judgment.

Question

Which concept connotes independence of judgment on the part of the Accountant preparing financial statements?

Answer

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Tags: Accounting Concepts, Independence, Objectivity
Level: Level 1

Topic: Accounting Concepts
Series: MAY 2014

FA – Nov 2013 – L1 – SB – Q1b – Accounting Concepts

Listing and benefits of accounting concepts.

Question

List any SIX accounting concepts and state their benefits.

Answer

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Tags: Accounting Concepts, Accounting principles, Benefits of Accounting Concepts, Financial Reporting
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2013

FA – Nov 2013 – L1 – SB – Q1a – Accounting Concepts

Definition of accounting concepts.

Question

Define accounting concepts.

Answer

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Tags: Accounting Concepts, Accounting principles, Financial Reporting
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2013

FA – Nov 2013 – L1 – SA – Q5 – Scope and Purpose of Accounting

Identifying the best definition of the concept of accounting.

Question

Which of the following best defines “the concept of accounting”?

A. An activity performed by accountants
B. A system comprising several interrelated and interdependent parts
C. A technique of management
D. A discipline of study
E. A process of handling information of economic nature, which is useful and adaptive to varying situations

Answer

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Tags: Accounting Concepts, Accounting Definition, Financial Information
Level: Level 1

Topic: Scope and Purpose of Accounting
Series: NOV 2013

FA – Nov 2015 – L1 – SB – Q6a – Bases of Accounting: Accrual vs. Cash

Differentiate accounting bases and discuss a setback of the cash basis.

Question

i. Differences between Accounting Bases

Cash Basis: Recognizes revenue and expenses only when cash is received or paid. It does not match income with expenses incurred in the same period.
Accrual Basis: Recognizes revenue when earned and expenses when incurred, regardless of when cash transactions occur. It provides a more accurate picture of a company’s financial position.
Break-up Basis: Assumes that a business will not continue as a going concern, and assets are valued at their realizable amounts rather than their carrying amounts.

ii. Setback of Cash Basis

It does not provide a true picture of financial performance, as income and expenses may not be recorded in the period to which they relate.

Answer

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Tags: Accounting Concepts, Accrual Basis, Break-up Basis, Cash Basis
Level: Level 1

Topic: Bases of Accounting: Accrual vs. Cash
Series: NOV 2015

FA – May 2018 – L1 – SA – Q18 – Accounting Concepts

Identifies the accounting concept violated when expenses are not charged in the correct period.

Question

What accounting concept is violated when N50,000 cost of electricity consumed during the first year of operation of a business was not charged as expense for the year?
A. Accrual
B. Materiality
C. Historical cost
D. Business entity
E. Prudence

Answer

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Tags: Accounting Concepts, Financial Statements, Violations
Level: Level 1

Topic: Accounting Concepts
Series: MAY 2018

FA – May 2018 – L1 – SA – Q8 – Bases of Accounting: Accrual vs. Cash

Identifies the requirement for revenue recognition under the cash basis of accounting.

Question

The cash basis of accounting requires the recognition of revenue only when they are:
A. Due
B. Earned
C. Paid
D. Received
E. Budgeted

Answer

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Tags: Accounting Concepts, Cash Basis, Revenue Recognition
Level: Level 1

Topic: Bases of Accounting: Accrual vs. Cash
Series: MAY 2018

FA – May 2018 – L1 – SA – Q4 – Accounting Concepts

Adjustment of electricity consumed but not paid for at year-end based on accounting concept.

Question

At the end of the year, Chukwu makes a charge against the profit for electricity consumed but not yet paid, this adjustment is in accordance with the:
A. Consistency concept
B. Objectivity concept
C. Materiality concept
D. Accruals concept
E. Prudence concept

Answer

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Tags: Accounting Concepts, Accruals

Topic: Accounting Concepts
Series: MAY 2018

FA – Nov 2021 – L1 – SB – Q4 – Accounting Concepts

This question involves explaining different bases of accounting and the operation of a petty cash book.

Question

a. Accounting concepts are the broad principles and general assumptions underlying the preparation of financial statements.

Required:
i. Explain cash, accrual, and break-up bases of accounting. (6 Marks)
ii. State FOUR limitations associated with the cash basis of accounting. (8 Marks)

b. Mallam Isa is considering setting up a petty cash book from which to pay small expenses, however, he is not sure of how a petty cash book operates.
Required:
Explain to Mallam Isa the operation of a petty cash book. (6 Marks)

Answer

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Tags: Accounting Concepts, Accruals, Cash Basis, Petty Cash
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2021

FA – Nov 2021 – L1 – SA – Q8 – Accounting Concepts

This question identifies which of the provided options is not an accounting concept.

Question

Accounting concepts are generally accepted principles used in the preparation and presentation of financial statements. Which of the following is NOT an accounting concept?
A. Going concern
B. Impairment
C. Matching
D. Periodicity
E. Prudence

Answer

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Tags: Accounting Concepts, Financial Statements, Multiple Choice
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2021

FA – Nov 2022 – L1 – SB – Q4b – Accounting Concepts

State four limitations of the cash basis of accounting.

Question

State FOUR limitations associated with cash basis of accounting.
(8 Marks)

Answer

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Tags: Accounting Concepts, Cash Basis, Financial Reporting, Limitations
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2022

FA – Nov 2022 – L1 – SA – Q18 – Accruals and Prepayments

Identify the accounting concept that applies to prepaid and accrued expenses.

Question

In the process of drawing up financial statements, adjustments are made for prepaid and accrued expenses in order to comply with which fundamental accounting concept?
A. Matching
B. Prudency
C. Aggregation
D. Entity
E. Consistency

Answer

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Tags: Accounting Concepts, Accruals, Prepayments
Level: Level 1

Topic: Accruals and prepayments
Series: NOV 2022

FA – Nov 2022 – L1 – SA – Q8 – Accounting Concepts

Identify the option that is not an accounting concept.

Question

Answer

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Tags: Accounting Concepts, Financial Statements, Principles of Accounting
Level: Level 1

Series: NOV 2022

Question Tag: Accounting Concepts

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FR – Nov 2019 – L2 – Q4a – Ethical Issues in Financial Reporting

Explain the concepts of substance over form and going concern in financial reporting.

You're reporting an error for "FR – Nov 2019 – L2 – Q4a – Ethical Issues in Financial Reporting"

FA – Nov 2011 – L1 – SA – Q15 – Accounting Concepts

This question asks which of the given options does not belong to the group of accounting concepts.

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FA – Nov 2011 – L1 – SA – Q7 – Accounting Concepts

This question tests understanding of the duality concept in accounting.

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FA – Nov 2020 – L1 – SB – Q2 -Accounting Concepts (e.g., Going Concern, Accruals, Materiality)

Explain accounting concepts, provide examples, and list users of financial statements.

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FA – Nov 2020 – L1 – SA – Q11 – Accounting Concepts

Identifies the accounting convention that suggests using a valuation method that understates rather than overstates results.

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FA – Nov 2012 – L1 – SB – Q34 – Accounting Concepts

Recognize the accounting concept for sales revenue recognition.

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FA – May 2013 – L1 – SA – Q5 – Depreciation Methods and Accounting for Disposals

This question tests the understanding of depreciation charged on non-current assets.

You're reporting an error for "FA – May 2013 – L1 – SA – Q5 – Depreciation Methods and Accounting for Disposals"

FA – May 2014 – L1 – SA – Q2 – Accounting Concepts

Identifies the concept that implies independence of judgment.

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FA – Nov 2013 – L1 – SB – Q1b – Accounting Concepts

Listing and benefits of accounting concepts.

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FA – Nov 2013 – L1 – SB – Q1a – Accounting Concepts

Definition of accounting concepts.

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FA – Nov 2013 – L1 – SA – Q5 – Scope and Purpose of Accounting

Identifying the best definition of the concept of accounting.

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FA – Nov 2015 – L1 – SB – Q6a – Bases of Accounting: Accrual vs. Cash

Differentiate accounting bases and discuss a setback of the cash basis.

i. Differences between Accounting Bases

ii. Setback of Cash Basis

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FA – May 2018 – L1 – SA – Q18 – Accounting Concepts

Identifies the accounting concept violated when expenses are not charged in the correct period.

You're reporting an error for "FA – May 2018 – L1 – SA – Q18 – Accounting Concepts"

FA – May 2018 – L1 – SA – Q8 – Bases of Accounting: Accrual vs. Cash

Identifies the requirement for revenue recognition under the cash basis of accounting.

You're reporting an error for "FA – May 2018 – L1 – SA – Q8 – Bases of Accounting: Accrual vs. Cash"

FA – May 2018 – L1 – SA – Q4 – Accounting Concepts

Adjustment of electricity consumed but not paid for at year-end based on accounting concept.

You're reporting an error for "FA – May 2018 – L1 – SA – Q4 – Accounting Concepts"

FA – Nov 2021 – L1 – SB – Q4 – Accounting Concepts

This question involves explaining different bases of accounting and the operation of a petty cash book.

You're reporting an error for "FA – Nov 2021 – L1 – SB – Q4 – Accounting Concepts"

FA – Nov 2021 – L1 – SA – Q8 – Accounting Concepts

This question identifies which of the provided options is not an accounting concept.

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FA – Nov 2022 – L1 – SB – Q4b – Accounting Concepts

State four limitations of the cash basis of accounting.

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FA – Nov 2022 – L1 – SA – Q18 – Accruals and Prepayments

Identify the accounting concept that applies to prepaid and accrued expenses.

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FA – Nov 2022 – L1 – SA – Q8 – Accounting Concepts

Identify the option that is not an accounting concept.

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