| Question 1: | Which of the following is the underlying assumption in the Framework for the Preparation and Presentation of Financial Statements?
a) Consistency b) Materiality c) Going concern d) Comparability |
| Question 2: | What does the term “recognition” refer to in relation to the elements of financial statements?
a) The process of measuring the monetary value of an asset b) The process of disclosing financial information to stakeholders c) The process of incorporating items that meet the definition and recognition criteria into the financial statements d) The process of assessing the fair value of a liability |
| Question 3: | Which of the following best describes the term “faithful representation” as a qualitative characteristic of useful financial information?
a) The information is complete, neutral, and free from error. b) The information is relevant and reliable. c) The information is timely and understandable. d) The information is verifiable and comparable. |
| Question 4: | What is the primary characteristic of “relevance” as a qualitative characteristic of useful financial information?
a) The information is capable of making a difference in the economic decisions of users. b) The information is faithfully represented without any bias. c) The information is presented in a clear and understandable manner. d) The information is supported by sufficient evidence. |
| Question 5: | In the context of financial statements, what does the term “measurement” refer to?
a) The process of assessing the fair value of an asset or liability b) The process of disclosing financial information to stakeholders c) The process of recording and summarizing financial transactions d) The process of determining the monetary amount at which elements in the financial statements are recognized and carried at |
| Question 6: | What is the purpose of a Statement of Financial Position?
a) To record the financial position of the business at a point in time b) To provide information about the cash flows of the business c) To report the financial performance of the business over a period of time d) To disclose the changes in equity of the business |
| Question 7: | Why would a vehicle purchased in cash by the business to do deliveries be reported as an asset on the Statement of Financial Position?
a) Because the vehicle is a present economic resource controlled by the business due to past events b) Because the vehicle represents the owner’s capital contribution to the business c) Because the vehicle generates revenue for the business d) Because the vehicle is purchased for resale purposes |
| Question 8: | Why are trade payables reported as a liability on the Statement of Financial Position?
a) Because trade payables represent the business’s obligation to transfer an economic resource as a result of past events b) Because trade payables are considered an expense incurred by the business c) Because trade payables reflect the market value of the business’s assets d) Because trade payables represent the business’s ownership interest in other entities |
| Question 9: | What is meant by the term “cost model”?
a) Assets are recorded at their original cost and are reflected as such on the Statement of Financial Position b) Assets are measured based on their fair value and are adjusted accordingly on the Statement of Financial Position c) Assets are recorded at their net realizable value and are reflected as such on the Statement of Financial Position d) Assets are measured based on their replacement cost and are adjusted accordingly on the Statement of Financial Position |
| Question 10: | Why does capital appear with liabilities on the Statement of Financial Position?
a) Because capital represents the business’s obligation to repay loans and debts b) Because capital represents the total resources owned by the business, which include both liabilities and owner’s equity c) Because capital represents the business’s obligation to transfer economic resources to suppliers and creditors d) Because capital represents the business’s obligation to distribute profits to shareholders |
Part 2: Creating a Valid Tax Invoice (10 marks)
You are required to create a valid tax invoice based on the sales transaction details provided.
Instructions:
• Research and establish the requirements for a tax invoice to be considered valid in South Africa. Visit the SARS website for valuable information.
• Based on your research from reliable sources, such as the SARS website, create a valid tax invoice to record the sales transaction details provided below.
• You will be acting as the seller and must create a fictional company for this task.
• Your fictional company is registered for VAT purposes, and the recipient of the invoice is “Leonie (Pty) Ltd.”
• Format and present the tax invoice neatly on a single page.
Transaction Details:
You (your fictional company) sold 20 office chairs to the client, Leonie (Pty) Ltd, on 1 December 2023. The sales value of one chair is R805, inclusive of VAT.
Client Information
Company Name Leonie’s (Pty) Ltd
Company Registration Number 20102020/01
VAT Registration Number 12345678910
Company Address 1 Church Street, Kimberley, Postal Code
7900
Purchase Information
Date 1 December 2023
Quantity 20 office chairs
Sales Value R805 per chair (VAT inclusive)
Note: Ensure that your valid tax invoice includes all the necessary information as per the requirements you have researched. Present the invoice clearly and concisely on a single page.
Part 3: Preparation of a Valid Credit Note (5 marks)
Leonie (Pty) Ltd returned five chairs on 14 December 2023 due to damages and requested a credit note.
Prepare a valid credit note to reverse the sales invoice issued for the faulty chairs.
The credit note should adhere to the requirements for validity and be presented neatly on a single page.
Answers to Above Questions on Financial Accounting
Answer 1: The underlying assumption in the Framework for the Preparation and Presentation of Financial Statements is c) Going concern.
Get completed answers on the questions above on financial accounting from the accounting assignment help experts in South Africa.
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