Question

Questions

This questions are multiple choice:

1. The lower of cost or market rules apply when:
   1. The market value of the inventory is higher than the cost in the books
   2. The market value of the inventory is lower than the cost in the books
   3. The market value of the inventory is higher than the cost to the consumer
   4. The market value of the inventory is lower than the cost to the consumer
2. Special Journals are used to:
   1. Increase efficiency
   2. Reduce costs
   3. Reduce the number of similar journal entries prepared
   4. All of the above
   5. None of the above
3. Segregation of duties is one example of:
   1. Generally Accepted Accounting Principles
   2. FASB
   3. Internal Controls
   4. Accounting Cycle
4. Which of the following is NOT a generally accepted accounting principle:
   1. Balance Principle
   2. Matching Principle
   3. Revenue recognition principle
   4. Consistency principle
5. When preparing bank reconciliation, you notice that a $500 check for rent cleared the bank correctly but was only listed on the books as $50. Which of the following is needed?
   1. Add to the bank balance
   2. Subtract from the bank balance
   3. Add to the book balance
   4. Subtract from the book balance

Answer 1

1.The lower of cost or market rules apply when:

1. The market value of the inventory is higher than the cost in the books
2. The market value of the inventory is lower than the cost in the books
3. The market value of the inventory is higher than the cost to the consumer
4. The market value of the inventory is lower than the cost to the consumer

Answer: The market value of the inventory is lower than the cost in the books.

Explanation:The Lower of cost or market(LCM) method is an inventory costing method which works on the assumption that when the cost of an item reduces the market value also reduces.

2.Special Journals are used to:

1. Increase efficiency
2. Reduce costs
3. Reduce the number of similar journal entries prepared
4. All of the above
5. None of the above

Answer: All of the above.

Explanation:Special Journals are used to record the most frequently occurring transactions. It reduces the need to record both debit and credit entry in a General Journal. Examples are Sales Journals. Since Special Journals require only single entry, the number of similar transactions are reduced. This in turn leads to increased efficiency and cost reduction.

3. Segregation of duties is one example of:

1. Generally Accepted Accounting Principles
2. FASB
3. Internal Controls
4. Accounting Cycle

Answer:Internal Controls.

Explanation:Segregation of duties refers to a larger process being broken down into smaller steps and assigned to different individuals . This is designed to ensure that no one individual holds excessive control over the entire process which can help in preventing fraud or theft.

4. Which of the following is NOT a generally accepted accounting principle:

1. Balance Principle
2. Matching Principle
3. Revenue recognition principle
4. Consistency principle

Answer: Balance Principle

Explanation:Matching principle:This principle states that expenses should be matched with revenues.

Revenue recognition principle: As soon as a product or service has been sold, revenue should be recognized instead of waiting for the actual transaction to complete.

Consistency principle: Accountants are expected to be consistent in applying the accounting practices.

5. When preparing bank reconciliation, you notice that a $500 check for rent cleared the bank correctly but was only listed on the books as $50. Which of the following is needed?

1. Add to the bank balance
2. Subtract from the bank balance
3. Add to the book balance
4. Subtract from the book balance

Answer: Subtract from book balance.

Explanation:Since the book is accounting for only $50, but the expenditure for rent is $500, so differential $450 must be reduced from book balance.