Page 21 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes recorded at the 150 amount. The accounting principle that is most demonstrated by this
example is:
(a) The cost principle (b) The going-concern principle

(c) The business entity principle (d) The monetary unit principle
(e) The conservatism principle
13. The basic accounting equation is Assets = Liabilities + Equity. The Equity term of the
equation can be further broken down into several other terms. Assume that the entity is a
sole proprietorship. Which of the following statements is correct?
(a) Additional investments by the business owner will increase equity; and revenues
will decrease equity.
(b) Additional investments by the business owner will decrease equity; and revenues
will increase equity.
(c) Increases in expenses will decrease equity; and owner withdrawals will decrease
equity.

(d) Revenues will increase equity; and owner withdrawals will increase equity.
(e) Revenues will decrease equity; and owner withdrawals will increase equity.
14. If at the end of the accounting period the company’s liabilities total 19,000 and its equity
totals 40,000, then what must be the total of assets?
(a) 14,000 (b) 40,000
(c) 21,000 (d) 59,000
(e) None of the above

15. If during the current accounting period the company’s assets increased by 24,000 and
equity increased by 5,000, then how did liabilities change?
(a) Increased by 29,000 (b) Increased by 24,000

(c) Decreased by 5,000 (d) Decreased by 19,000
(e) Increased by 19,000

1.10 Review Questions

1. Accounting is the process of recording, classifying and summarizing of accounting
transactions. Explain.
2. The entire accounting system is governed by the practice of accountancy. What are the key
principles used in accounting?
3. What are the key assumptions of going concern concept?
4. Every debit transaction is appropriately equated with the transaction of credit. Define.
5. Classify the various kinds of values in accounting process.
6. Distinguish between material and immaterial transactions of business.

7. Singania Chartered Accountants Firm established in the year 1956, having very good
number of corporate clients. It continuously maintains the quality in audit administration
with the clients since its early inception. The firm is eagerly looking for promising students

16 LOVELY PROFESSIONAL UNIVERSITY