5 Written Questions

1. These are present obligations of the business as a result of past transactions, which are expected to result in an outflow of resources representing economic benefits in the future.
2. These are resources controlled by the entity as a result of past transactions, from which economic benefits are expected to flow to the entity.
3. This is the residual interest in the assets of a business after deducting all its liabilities.
4. All transactions are measured in dollars. The NZ dollar is the common unit of measurement.
5. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.

5 Multiple Choice Questions

1. This is day to day business expenditure where the benefit will be used up in the current financial period.
   1. Revenue expenditure
   2. Period reporting
   3. Expenses
   4. Capital expenditure
2. These are increases in economic benefits in the form of inflows of assets or decreases in liabilities that results in increases in equity, other than contributions by owners.
   1. Expenses
   2. Equity
   3. Income
   4. Assets
3. Expenses are decreases in economic benefits in the form of outflows or depletions of assets or increases in liabilities that result in decrease in equity, other than drawings
   1. Income
   2. Equity
   3. Expenses
   4. Assets
4. Assets are recorded at the price paid at the time of purchase.
   1. Depreciation
   2. Accrual Basis
   3. Historical Cost
   4. Income
5. The effects of transactions are recognised when they occur and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate.
   1. Historical Cost
   2. Assets
   3. Accrual Basis
   4. Expenses

4 True/False Questions

1. Capital expenditure → This is expenditure that creates an asset and will benefit the business beyond the current financial period.

   True        False

2. Accounting Entity → The effects of transactions are recognised when they occur and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate.

   True        False

3. Going Concern → It is assumed that the business will continue into the foreseeable future.

   True        False

4. Period reporting → The life of the business is divided into nominated periods.

   True        False