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Management Accounting Questions SOLVED

Question 1 : The following statements relate to the nature and function of accounting:

  1. (i)  Financial information is required only by undertakings aiming to maximize profits.
  2. (ii)  An accounting entity is an independently existing economic unit, the financial transactions of which must be dealt with separately from those of any other unit.
  3. (iii)  Management accounting deals with the reporting of the financial achievements of an entity as a whole.
  4. (iv)  The financial position of an undertaking is best reflected by the bank statement.
  5. (v)  With the arrival of the computer no amendment of the theory of accountancy was necessary.
  6. (vi)  All liabilities redeemable within one year must be treated as current liabilities.

Question 2 : Which one of the following groups correctly reflects all the statements that are true?

  1. (i) (iii) (v)
  2. (ii) (iv) (vi)
  3. (i) (v) (vi)
  4. (ii) (v) (vi)
  5. None of the above

Question 2

How many of the following statements are correct?

  1. (i)  Communication of financial information is known as reporting.
  2. (ii)  The more financial statements represent the subjective opinion of management, the more useful the information to the user.
  3. (iii)  The application of the concept of consistency is essential if users are to rely on financial statements.
  4. (iv)  Prudence is a quantitative restriction on accounting information.
  1. One
  2. Two
  3. Three
  4. Four
  5. None of the above


Question 3
Which one of the following statements is incorrect?

  1. The policy of materiality requires that only transactions and occurrences which have an essential bearing upon the nature and scope of the entity’s activity should be brought into account.
  2. According to the cost principle, assets should be initially brought into account in the accounting process at the cost which the entity incurred in acquiring those assets.
  3. The realisation principle determines that costs and losses are brought into account as soon as they are realised.
  4. The policy of consistency requires that a specific basis, method, procedure or approach once chosen should be maintained.
  5. None of the above

Question 4

Boo-Bip Co Ltd uses control accounts in their accounting system. Which one of the following errors/omissions will affect the debtor’s control account?

  1. The purchases returns journal was undercast by R60.
  2. An invoice for goods sold for cash to B Bean for R300 was not at all entered in the books.
  3. Goods to the value of R45, returned by E Emery, were never entered in the books, although the necessary debit note was made out.
  4. An invoice for R300 was not posted from the sales journal to the account of P Perry.
  5. None of the above

Question 5

Xanta Limited sold a machine, originally costing R500, to Alpha Limited for R750 on credit.

Which one of the following alternatives correctly reflects the influence of the above transaction on the accounting equation of Xanta Limited?

Assets = Liabilities + Owners’ equity
1. 2. 3. 4. 5. -R750 -R750 +R750 +R750 +R750 -R500
None of the above
+ R750 + R500+ R250 + R250

Question 6

The following transactions were incurred by a firm of consulting engineers operating on a favourable bank balance:

  1. (i)  Cheque received in payment of services rendered on credit – R3 000
  2. (ii)  Cheque issued for payment of office rent – R2 500
  3. (iii)  Cheque issued to a creditor in payment of an outstanding account – R1 200
  4. (iv)  Cheque for R4 000 issued for payment of assets purchased for cash.

Which one of the following alternatives represents the effect of the above transactions on the owners’ equity of the firm?

  1. +R 500
  2. -R2 500
  3. -R4 700
  4. +R3 000
  5. None of the above

Question 7

In the process of assisting the bookkeeper of Rapid Services to rectify the trial balance at 28 February 2011, the following errors, which resulted in the difference of the totals of the trial balance, were traced. Control accounts are in use.

a) The total of the February 2011 cash payments journal amounting to R29 800 has not been transferred to the bank account in the general ledger. The business operated on a bank overdraft.

(b)  A payment of R300 to a creditor was entered in the cash payments journal and posted to the creditor’s personal account, but it has not been analysed in the creditor’s column of the cash payments journal.

(c)  Rent amounting to R600, paid for February 19.5, was correctly entered in the cash payments journal, but posted to the credit side of the rent account in the general ledger.

Which one of the following amounts represents the difference in the totals of the trial balance, before the above mistakes were rectified?

  1. R28 000
  2. R29 500
  3. R28 300
  4. R29 800
  5. None of the above

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