Academic Year 2026–2027 UNISA Assignment: FAC1501 Introductory
Financial Accounting Fully Solved Assignment with Verified Answers |
Financial Statements, Double Entry System, Ledger Accounts, Trial
Balance, Accounting Principles and Business Transactions
Question 1: Which financial statement presents a company’s financial position at a
specific point in time?
A. Income Statement
B. Statement of Cash Flows
C. Statement of Changes in Equity
D. Statement of Financial Position
CORRECT ANSWER: D. Statement of Financial Position
Rationale: The Statement of Financial Position (also known as the Balance Sheet)
reports a company’s assets, liabilities, and equity at a specific date, reflecting its
financial position.
Question 2: What is the accounting equation that underpins double-entry
bookkeeping?
A. Assets + Liabilities = Equity
B. Assets = Liabilities + Equity
C. Equity = Assets – Liabilities
D. Liabilities = Assets + Equity
CORRECT ANSWER: B. Assets = Liabilities + Equity
Rationale: The fundamental accounting equation states that total assets equal the sum
of liabilities and owners’ equity, forming the basis of the balance sheet and double-
entry accounting.
Question 3: Which of the following is classified as a current asset?
A. Land
B. Machinery
C. Accounts Receivable
D. Trademarks
CORRECT ANSWER: C. Accounts Receivable
Rationale: Current assets are expected to be converted into cash or used within one
year. Accounts receivable represent amounts owed by customers and are typically
collected within this period.
Question 4: Depreciation is best described as:
A. A valuation technique to determine market value
B. The systematic allocation of the cost of a non-current asset over its useful life
C. An expense recorded only when an asset is sold
D. A method to increase the book value of an asset
,CORRECT ANSWER: B. The systematic allocation of the cost of a non-current asset
over its useful life
Rationale: Depreciation spreads the cost of a tangible non-current asset across the
periods it benefits, matching expenses with revenues in accordance with the matching
principle.
Question 5: Which account normally has a credit balance?
A. Prepaid Expenses
B. Equipment
C. Revenue
D. Drawings
CORRECT ANSWER: C. Revenue
Rationale: Revenue accounts increase equity and have normal credit balances.
Increases in revenue are credited, consistent with the rules of double-entry accounting.
Question 6: What does the term “accruals” refer to in financial accounting?
A. Cash received before services are rendered
B. Revenues earned or expenses incurred but not yet recorded in cash terms
C. Payments made in advance for future expenses
D. Reductions in asset values due to obsolescence
CORRECT ANSWER: B. Revenues earned or expenses incurred but not yet recorded
in cash terms
Rationale: Accruals recognize economic events when they occur, regardless of cash
flow timing, aligning with the accrual basis of accounting required by IFRS.
Question 7: Which of the following is NOT a component of the Statement of Profit or
Loss?
A. Cost of Sales
B. Gross Profit
C. Ordinary Share Capital
D. Operating Expenses
CORRECT ANSWER: C. Ordinary Share Capital
Rationale: Ordinary share capital is part of equity and appears on the Statement of
Financial Position, not the Statement of Profit or Loss, which focuses on revenues and
expenses.
Question 8: If a business purchases inventory on credit, which accounts are
affected?
A. Increase in Inventory (asset), Increase in Trade Payables (liability)
B. Decrease in Cash, Increase in Inventory
, C. Increase in Inventory, Decrease in Trade Receivables
D. Decrease in Equity, Increase in Inventory
CORRECT ANSWER: A. Increase in Inventory (asset), Increase in Trade Payables
(liability)
Rationale: Buying inventory on credit increases the asset (inventory) and creates a
liability (trade payables), with no immediate cash outflow.
Question 9: The concept that assumes a business will continue operating
indefinitely is called:
A. Historical Cost Concept
B. Going Concern Assumption
C. Prudence Concept
D. Materiality Concept
CORRECT ANSWER: B. Going Concern Assumption
Rationale: The going concern assumption presumes that the entity will remain in
operation for the foreseeable future, influencing asset valuation and liability
classification.
Question 10: Which of the following best describes a contra asset account?
A. An account that increases total assets
B. An account that offsets the balance of a related asset account
C. An account used only for recording expenses
D. A liability account linked to an asset
CORRECT ANSWER: B. An account that offsets the balance of a related asset
account
Rationale: Contra asset accounts, such as accumulated depreciation, reduce the gross
amount of an asset to reflect its net book value.
Question 11: What is the effect on the accounting equation when a sole proprietor
withdraws cash for personal use?
A. Assets increase; Equity increases
B. Liabilities decrease; Assets decrease
C. Assets decrease; Equity decreases
D. No effect on the accounting equation
CORRECT ANSWER: C. Assets decrease; Equity decreases
Rationale: Drawings reduce both cash (an asset) and owner’s equity, maintaining the
balance of the accounting equation.
Question 12: Which financial statement shows how cash was generated and used
during a period?
Financial Accounting Fully Solved Assignment with Verified Answers |
Financial Statements, Double Entry System, Ledger Accounts, Trial
Balance, Accounting Principles and Business Transactions
Question 1: Which financial statement presents a company’s financial position at a
specific point in time?
A. Income Statement
B. Statement of Cash Flows
C. Statement of Changes in Equity
D. Statement of Financial Position
CORRECT ANSWER: D. Statement of Financial Position
Rationale: The Statement of Financial Position (also known as the Balance Sheet)
reports a company’s assets, liabilities, and equity at a specific date, reflecting its
financial position.
Question 2: What is the accounting equation that underpins double-entry
bookkeeping?
A. Assets + Liabilities = Equity
B. Assets = Liabilities + Equity
C. Equity = Assets – Liabilities
D. Liabilities = Assets + Equity
CORRECT ANSWER: B. Assets = Liabilities + Equity
Rationale: The fundamental accounting equation states that total assets equal the sum
of liabilities and owners’ equity, forming the basis of the balance sheet and double-
entry accounting.
Question 3: Which of the following is classified as a current asset?
A. Land
B. Machinery
C. Accounts Receivable
D. Trademarks
CORRECT ANSWER: C. Accounts Receivable
Rationale: Current assets are expected to be converted into cash or used within one
year. Accounts receivable represent amounts owed by customers and are typically
collected within this period.
Question 4: Depreciation is best described as:
A. A valuation technique to determine market value
B. The systematic allocation of the cost of a non-current asset over its useful life
C. An expense recorded only when an asset is sold
D. A method to increase the book value of an asset
,CORRECT ANSWER: B. The systematic allocation of the cost of a non-current asset
over its useful life
Rationale: Depreciation spreads the cost of a tangible non-current asset across the
periods it benefits, matching expenses with revenues in accordance with the matching
principle.
Question 5: Which account normally has a credit balance?
A. Prepaid Expenses
B. Equipment
C. Revenue
D. Drawings
CORRECT ANSWER: C. Revenue
Rationale: Revenue accounts increase equity and have normal credit balances.
Increases in revenue are credited, consistent with the rules of double-entry accounting.
Question 6: What does the term “accruals” refer to in financial accounting?
A. Cash received before services are rendered
B. Revenues earned or expenses incurred but not yet recorded in cash terms
C. Payments made in advance for future expenses
D. Reductions in asset values due to obsolescence
CORRECT ANSWER: B. Revenues earned or expenses incurred but not yet recorded
in cash terms
Rationale: Accruals recognize economic events when they occur, regardless of cash
flow timing, aligning with the accrual basis of accounting required by IFRS.
Question 7: Which of the following is NOT a component of the Statement of Profit or
Loss?
A. Cost of Sales
B. Gross Profit
C. Ordinary Share Capital
D. Operating Expenses
CORRECT ANSWER: C. Ordinary Share Capital
Rationale: Ordinary share capital is part of equity and appears on the Statement of
Financial Position, not the Statement of Profit or Loss, which focuses on revenues and
expenses.
Question 8: If a business purchases inventory on credit, which accounts are
affected?
A. Increase in Inventory (asset), Increase in Trade Payables (liability)
B. Decrease in Cash, Increase in Inventory
, C. Increase in Inventory, Decrease in Trade Receivables
D. Decrease in Equity, Increase in Inventory
CORRECT ANSWER: A. Increase in Inventory (asset), Increase in Trade Payables
(liability)
Rationale: Buying inventory on credit increases the asset (inventory) and creates a
liability (trade payables), with no immediate cash outflow.
Question 9: The concept that assumes a business will continue operating
indefinitely is called:
A. Historical Cost Concept
B. Going Concern Assumption
C. Prudence Concept
D. Materiality Concept
CORRECT ANSWER: B. Going Concern Assumption
Rationale: The going concern assumption presumes that the entity will remain in
operation for the foreseeable future, influencing asset valuation and liability
classification.
Question 10: Which of the following best describes a contra asset account?
A. An account that increases total assets
B. An account that offsets the balance of a related asset account
C. An account used only for recording expenses
D. A liability account linked to an asset
CORRECT ANSWER: B. An account that offsets the balance of a related asset
account
Rationale: Contra asset accounts, such as accumulated depreciation, reduce the gross
amount of an asset to reflect its net book value.
Question 11: What is the effect on the accounting equation when a sole proprietor
withdraws cash for personal use?
A. Assets increase; Equity increases
B. Liabilities decrease; Assets decrease
C. Assets decrease; Equity decreases
D. No effect on the accounting equation
CORRECT ANSWER: C. Assets decrease; Equity decreases
Rationale: Drawings reduce both cash (an asset) and owner’s equity, maintaining the
balance of the accounting equation.
Question 12: Which financial statement shows how cash was generated and used
during a period?
