Question 0 (40 marks)

Choose the best answer for each of the following questions [20* 2 mark each]:

1. The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

1. Cash basis accounting.
2. Operating cycle accounting.
3. Accrual basis accounting.
4. Revenue recognition accounting.

2. During a period of steadily rising costs, the inventory valuation method that yields the highest reported net income is:

1. Specific identification method.
2. Average cost method.
3. Weighted-average method.
4. FIFO method.

3. Which of the following principles states that a business's financial statements must report enough information for outsiders to make knowledgeable decisions about the company?

1. Conservatism
2. Materiality concept
3. Disclosure principle
4. Consistency principle

4. Merchandise inventory:

1. Is a long-term asset.
2. Is a current asset.
3. Includes supplies the company will use in future periods.
4. Is classified with investments on the balance sheet.

5. The credit terms 2/10, n/30 are interpreted as:

1. 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.
2. 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days.
3. 30% discount if paid within 2 days.
4. 30% discount if paid within 10 days.

6. ----------- A measure of how quickly an asset may be converted into cash.

1. Materiality Concept
2. Cash Basis Accounting
3. Accrual Basis Accounting
4. Liquidity