Please write clearly in block capitals.
Centre number Candidate number
Surname
Forename(s)
Candidate signatu re
I declare this is my own work.
A+level
Accounting 320 Final Exam – Multiple
Choice Questions with Verified Answers
Time allowed: 3 hours
Materials
For this paper you must have: For Examiner’s Use
• a calculator. Section Mark
A
Instructions
• Use black ink or black ball-point pen. B
• Fill in the boxes at the top of this page. C
• Answer all questions.
TOTAL
• You must answer the questions in the spaces provided. Do not write
outside the box around each page or on blank pages.
• If you need extra space for your answer(s), use the lined pages at the end
of this book. Write the question number against your answer(s).
• Do all rough work in this answer book. Cross through any
work you do not want to be marked.
Information
• The marks for each question are shown in brackets.
• The maximum mark for this paper is 120.
IB/G/Jun21/E8
,Economic Entity Assumption - ✔✔all business transactions can be associated with one or more economic unit for
financial reporting. company activity is different from owner activity
Going Concern Assumption - ✔✔all businesses will continue to operate indefinitely. the company will have a long life
Monetary Unit Assumption - ✔✔all financial information is reported in US dollars and not adjusted for inflation.
monetary unit is relevant, simple, universally available, understandable, and useful
Periodicity Assumption - ✔✔businesses can be divided into artificial time periods for financial reporting purposes; the
SEC required annual and quarterly reports.
Most common: monthly(most difficult to get an accurate income balance), quarterly, yearly.
Measurement principle - ✔✔A "mixed attribute" system that permits the use of various measurement bases
Historical cost (measurement principle) - ✔✔purchase price; considered the most reliable measurement value. based on
acquisition price. verifiable.
Fair Value (Measurement Principle) - ✔✔exchange price between two or more willing and unrelated parties; might be
more subjective but is often more relevant. market based measure based on current measurement date
Revenue Recognition Principle - ✔✔companies should recognize revenue on the income statement in the accounting
period in which its performance obligations have been satisfied. the timing of the transaction does not always equal $
flow. a purchase can be recognized, but it can also be paid for on credit (accounts receivable)
Expense Recognition Principle - ✔✔expenses should follow revenue. companies should recognize expenses in teh same
period as the revenue they helped generate. Practical rules for expense matching include direct association, rational and
systematic allocation, and expense immediately
Direct Association (Expense Recognition) - ✔✔direct link between expense and revenue; expense in period of sale. tied
to rev. recognition.
EX: COGS, commissions, and warrenties
Rational and systematic allocation (expense recogntion) - ✔✔some indirect link between expense and revenue; expense
when incurred. can be difficult to associate w/revenue.
EX: Utilities, rent, insurance, taxes
, Expense immediately (expense recognition principle) - ✔✔no determinable link between expense and revenue; expense
immediately
Start up costs and advertising costs: includes organizational costs, legal costs, market research, etc.
Full Disclosure Principle - ✔✔the overall info included in financial reports reflects a series of judgmental trade offs. ties
to the primary objective of financial reporting, which is to provide useful information to those making decisions about
providing resources to an entity.
Cost Constraint - ✔✔Cost-benefit relationship: is the cost of disclosure less than the benefit obtained by the users?
Adjusting Entries - ✔✔there are two types: deferrals and accruals. many adjusting entries require the use of estimates in
order to comply with the accrual accounting model.
Deferrals - ✔✔Cash flow precedes expense or revenue recognition on the Income Statement
(unearned revenue, prepaid expenses)
Prepaid expenses - ✔✔items paid for in advance of receiving benefit
Unearned Revenue - ✔✔cash is received in advance of performing services or delivering product.
accruals - ✔✔Cash is paid or received after a related expense or revenue is recognized on the income statement
(Accrued expenses and revenues)
accrued expenses - ✔✔costs incurred in a period that are both unpaid and unrecorded; create accrued liabilities
accrued revenues - ✔✔revenues earned prior to cash receipt; create accrued receivables
Multi-step vs single-step income statement - ✔✔a multistep income statement distinguishes operating from non-
operating activities and includes several steps to calculate net income and also calculates gross profit for the user. a
single step statement simply subtracts all expenses from all revenues
Centre number Candidate number
Surname
Forename(s)
Candidate signatu re
I declare this is my own work.
A+level
Accounting 320 Final Exam – Multiple
Choice Questions with Verified Answers
Time allowed: 3 hours
Materials
For this paper you must have: For Examiner’s Use
• a calculator. Section Mark
A
Instructions
• Use black ink or black ball-point pen. B
• Fill in the boxes at the top of this page. C
• Answer all questions.
TOTAL
• You must answer the questions in the spaces provided. Do not write
outside the box around each page or on blank pages.
• If you need extra space for your answer(s), use the lined pages at the end
of this book. Write the question number against your answer(s).
• Do all rough work in this answer book. Cross through any
work you do not want to be marked.
Information
• The marks for each question are shown in brackets.
• The maximum mark for this paper is 120.
IB/G/Jun21/E8
,Economic Entity Assumption - ✔✔all business transactions can be associated with one or more economic unit for
financial reporting. company activity is different from owner activity
Going Concern Assumption - ✔✔all businesses will continue to operate indefinitely. the company will have a long life
Monetary Unit Assumption - ✔✔all financial information is reported in US dollars and not adjusted for inflation.
monetary unit is relevant, simple, universally available, understandable, and useful
Periodicity Assumption - ✔✔businesses can be divided into artificial time periods for financial reporting purposes; the
SEC required annual and quarterly reports.
Most common: monthly(most difficult to get an accurate income balance), quarterly, yearly.
Measurement principle - ✔✔A "mixed attribute" system that permits the use of various measurement bases
Historical cost (measurement principle) - ✔✔purchase price; considered the most reliable measurement value. based on
acquisition price. verifiable.
Fair Value (Measurement Principle) - ✔✔exchange price between two or more willing and unrelated parties; might be
more subjective but is often more relevant. market based measure based on current measurement date
Revenue Recognition Principle - ✔✔companies should recognize revenue on the income statement in the accounting
period in which its performance obligations have been satisfied. the timing of the transaction does not always equal $
flow. a purchase can be recognized, but it can also be paid for on credit (accounts receivable)
Expense Recognition Principle - ✔✔expenses should follow revenue. companies should recognize expenses in teh same
period as the revenue they helped generate. Practical rules for expense matching include direct association, rational and
systematic allocation, and expense immediately
Direct Association (Expense Recognition) - ✔✔direct link between expense and revenue; expense in period of sale. tied
to rev. recognition.
EX: COGS, commissions, and warrenties
Rational and systematic allocation (expense recogntion) - ✔✔some indirect link between expense and revenue; expense
when incurred. can be difficult to associate w/revenue.
EX: Utilities, rent, insurance, taxes
, Expense immediately (expense recognition principle) - ✔✔no determinable link between expense and revenue; expense
immediately
Start up costs and advertising costs: includes organizational costs, legal costs, market research, etc.
Full Disclosure Principle - ✔✔the overall info included in financial reports reflects a series of judgmental trade offs. ties
to the primary objective of financial reporting, which is to provide useful information to those making decisions about
providing resources to an entity.
Cost Constraint - ✔✔Cost-benefit relationship: is the cost of disclosure less than the benefit obtained by the users?
Adjusting Entries - ✔✔there are two types: deferrals and accruals. many adjusting entries require the use of estimates in
order to comply with the accrual accounting model.
Deferrals - ✔✔Cash flow precedes expense or revenue recognition on the Income Statement
(unearned revenue, prepaid expenses)
Prepaid expenses - ✔✔items paid for in advance of receiving benefit
Unearned Revenue - ✔✔cash is received in advance of performing services or delivering product.
accruals - ✔✔Cash is paid or received after a related expense or revenue is recognized on the income statement
(Accrued expenses and revenues)
accrued expenses - ✔✔costs incurred in a period that are both unpaid and unrecorded; create accrued liabilities
accrued revenues - ✔✔revenues earned prior to cash receipt; create accrued receivables
Multi-step vs single-step income statement - ✔✔a multistep income statement distinguishes operating from non-
operating activities and includes several steps to calculate net income and also calculates gross profit for the user. a
single step statement simply subtracts all expenses from all revenues
