ABAB 113

Business Accounting
Semester 1 2015/2016
TUTORIAL 1: INTRODUCTION
Question 1
Please complete the following sentences with the most appropriate accounting concepts.
a.

Including private costs incurred in running a car-selling business would violate the
________________ concept.

b.

The employees of ABC Bhd are remarkably prominent and experience. However, the
account executive is unable to show this attribute in the accounting records due to the
________________ concept.

c.

According to the ________________ concept, the revenue is recognised when it is

earned but not when it is received. For example, we record sales in the books when the
transactions take place but not when we receive the actual payment.

d.

________________ concept is the presumption that a business will continue to trade

for the foreseeable future.

e.

________________ concept implies that the company need to record transactions

based on the same method, format and policies over different time period.

f.

A giant company owns a small amount of stationery on hand at the end of the financial
year. However, the company does not make an effort to value it. This is consistent with
________________ concept.

Question 2
Please circle the most appropriate answer.
1. The accounting process involves all of the following except:
A. Identifying economic transactions that are relevant to the business
B. Communicating financial information to users by preparing financial reports
C. Recording non-quantifiable economic events
D. Analysing and interpreting financial reports
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2. Which type of business organisation has the following characteristics?

i. Conducts business separate from its owners
ii. The owners have limited liability
iii. The organisation is a taxable entity
A. Sole proprietorship
B. Partnership
C. Company
D. None of the above
3. Which of the following statements is incorrect?
A. Under a sole trader, the owner is not responsible for the liabilities of the
business when the business goes bankrupt.
B. The minimum number of members of a partnership is two.
C. The partners of a partnership are responsible for the liabilities if the partnership
is bankrupt.
D. The liability of the shareholders of a limited company is limited to their
investment in the company.
4. Taka and Tako are brothers. They run a sport equipment shop in Muadzam Shah. They
hire an accounts clerk, Kako, to prepare their financial accounts.
Based on the above scenario, name the persons responsible for the management and
control of the sport equipment shop.
A. Taka, Tako and Kako
B. Taka and Kako
C. Tako and Kako
D. Taka and Tako
5. Ed Sdn Bhd purchased a piece of land on 1 January 2007 and paid RM 1,000,000 to
the seller. This land was reported in the balance sheet at a cost of RM1,000,000.
During the year ended 2009, the market value of the land increases to RM1,500,000.
The land is still reported at RM1,000,000 because of the application of the
________________ concept.
A. matching
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B. materiality
C. historical cost
D. time interval
6. ________________ concept tells us that there is always a need for both debit and
credit entries of an equal amount to record each transaction. This is to keep the basic
accounting equation in balance.
A. Monetary
B. Dual aspect
C. Materiality
D. Time interval
Question 3
State the accounting concept that is most applicable in the following independent cases and
statements.
No.

Information

1.

The business unit is treated as a separate body, separate from the

owners.
This concept assumes that all business transactions must be in terms of
money that is in the currency of a country.
The concept that a business enterprise will not be closed down in the
near future is known as ..
If accounting year begins from 1st of January, and ends on 31st of
December, it is known as .
This concept requires asset to be shown at the price it has been
acquired.
This concept assumes that every transaction has a dual effect, i.e. it
affects two accounts in their respective opposite sides. Therefore, the
transaction should be recorded at two places.
Revenue is recognized when earned/sales take place, not when the cash
is received. Expenses recorded when incurred, not when the payment is
made.
..... concept states how the expenses should be compared
with revenues for ascertaining exact profit or loss for a particular
period.
If something would not be of interest to a user of the financial
statements, it is not.
It implies that the company need to record transactions based on the
same method, format and policies.

2.
3.
4.
5.
6.
7.
8.
9.
10.

Accounting
Concept

Question 4
Briefly explain the importance of accounting information to its users
Question 5
Saw is a sole proprietor, two of Saws friends, Sang and Sing are interested to join him as
business partners. Advice Saw by explaining TWO (2) advantages of changing his business
from a sole proprietorship to partnership.
Additional questions from textbook
1.5, 1.6, 1.7, 5.1, 5.4, 5.5, 5.8