- 20 Marks
IA – JULY 2020 – L1 – Q2 – Accounting Concepts Violations and Working Capital
Identify violated accounting concepts in scenarios and explain; define working capital and explain four factors determining its requirements.
Question
Answer at least ONE question from this section
a. A number of accounting reporting situations are described below.
- In preparing its financial statements, GROUP NDOMIE omitted information about an ongoing lawsuit which its lawyers advised that the company could very well lose when it gets to court.
- RECEIVERSHIP COMPANY believes its people are its most significant asset. It estimates and records their value on its Balance Sheet.
- SME LIMITED is carrying stock at its current market value of GHS100,000. The stock had an original cost of GHS75,000.
- BREW CORPORATION is in its fifth year of operations and has yet to issue financial statements.
- Nana Appah, President of A1-GOLD COMPANY LIMITED bought a computer for his personal use. He paid for the computer with company funds and recorded it in the Computers’ account.
You are required: For each of the above situations, indicate the concept or convention that has been violated, and explain why the situation described violates this assumption or principle.
b.
- Define the term “working capital”.
- State and explain any four (4) factors which determine the Working Capital requirements of a business enterprise.
Total Marks – 20
Find Related Questions by Tags, levels, etc.
- Tags: Concept Violations, Entity, Factors, Prudence, Working Capital Definition
- Level: Level 1
- Topic: Importance of working capital/liquidity
- Series: JULY 2020
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