Accounting - Study Mode

[#1051] Provision for cash discount on debtors is a percentage of
Correct Answer

(C) Net debtors less provision for doubtful debts

Explanation

Solution: Provision for cash discount on debtors is a percentage of Net debtors less provision for doubtful debts.

[#1052] The value of inventories or stock is figured out at the lower of cost and
Correct Answer

(D) Net realizable value

Explanation

Solution: The value of inventories or stock is figured out at the lower of cost and Net realizable value.

[#1053] An overstatement in the value of closing stock overstates all of the following except
Correct Answer

(D) Cost of goods sold

Explanation

Solution: An overstatement in the value of closing stock overstates all of the following except Cost of goods sold.

[#1054] All of the following are the methods of inventory costing except
Correct Answer

(D) Stock take

Explanation

Solution: Stock take is not the methods of inventory costing. Stock-taking or "inventory checking" or "wall-to-wall" is the physical verification of the quantities and condition of items held in an inventory or warehouse. This may be done to provide an audit of existing stock. It is also the source of stock discrepancy information.

[#1055] An asset must be ________ by the business to be shown as an asset in its balance sheet.
Correct Answer

(B) Owned

Explanation

Solution: In accounting, for an item to be recognized as an asset on a business's balance sheet, it must be owned by the business. Ownership implies that the business has legal control and rights over the asset, allowing it to use, sell, or otherwise benefit from the asset's economic value. Options A, C, and D are not sufficient conditions for an item to be classified as an asset: Option A: Possessed implies physical control but does not necessarily guarantee legal ownership. Possession alone does not confer the rights associated with ownership. Option C: Controlled may indicate influence or management over an asset, but it does not necessarily imply legal ownership. Control alone is not sufficient for an item to be recognized as an asset on the balance sheet. Option D: Used suggests the utilization of an asset, but again, it does not guarantee legal ownership. Using an asset does not automatically confer ownership rights. Therefore, Option B: Owned is the correct choice because ownership is a fundamental requirement for an item to be classified as an asset in accounting.