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Question:* The ability of a firm to pay its current maturing obligations Question:* That part of the equity that

at the owner invests in the


on time is known as ...? business is known as ...?
Answer: Solvency Answer: Capital

Question:* What happen to an asset when it is depreciated? Question:* True or False: Recording a business transaction always
Answer: it decreases in value
requires at least a debit to one account and a credit to a different
account.
Question:* The books of original entry are known as the ......? Answer: True
Answer: Journals

Question:* Net profit is always greater than Gross Profit.


Question:* True or False? An accrual occurs before a payment or Answer: False

receipt. A deferral occurs after a payment or receipt.


Answer: True
Question:* If Assets totaled $55,000 and Liabilities totaled $25,000,
Equity would be ....?
Question:* Which of the following transactions is primarily identified Answer: $30,000

in the bank reconciliation process?


Answer: bank charges
Question:* Loan funds owed to a bank would belong to which account
group?
Question:* For every financial transaction entered in the bookkeeping Answer: Liabilities

system, the total of the debits must equal the total of the credits?
Answer: True
Question:* Under what section is the Accounts Receivable account
reported in the Balance Sheet?
Question:* When an owner contributes additional money to a business, Answer: Current assets

the equity ....?


Answer: Increases
Question:* "Amounts owed by the business and expected to be paid
out within one year" is the description of which account group?
Answer: Current liabilities
Question:* Which of the following is a capital expenditure?
Answer: Purchase of equipment
Question:* A _______ entry is entered on the left side of an account.
Answer: debit
Question:* Which of the following general ledger accounts would NOT
generally have a subsidiary ledger?
Question:* Assets that will be converted to cash within one year will Answer: Goodwill
be reported under what category in the Balance Sheet?
Answer: Current Assets
Question:* Which principle/guideline requires the company's financial
statements to have footnotes containing information that is important
Question:* Which of the following does NOT form part of the bank
to users of the financial statements?
reconciliation process? Answer: Full disclosure
Answer: Aged debtors

Question:* The golden rule of accounting says that, for every debit
Question:* Income that has been earned within a financial period but
entry, there must be...
has not yet been received in cash, is known as ...? Answer: a corresponding credit entry
Answer: accrued revenue

Question:* Interest paid by a business on a bank loan is ...?


Question:* Which term in accounting means that every transaction Answer: an expense
affects two or more accounts?
Answer: double entry
Question:* Which of the following items would be accounted for as an
expense?
Question:* An adjustment being made for an error relating to Answer: Payment of the current period's rent
transactions posted to the wrong expense account would be recorded
in which journal? Question:* What three sections make up the Balance Sheet?
Answer: general Answer: assets, liabilities and equity
Question:* There are two accounting methods for recording financial Question:* On December 15, XYZ Co. hired Jane Houston as a
transactions, the cash method and the: contractor to begin working on January 3 at a monthly salary of
Answer: accrual method
$5,000. ABC's balance sheet of December 31 will show a liability of...
Answer: No liability

Question:* Invoices from vendors (suppliers) which are due in 30 days


should be credited to Accounts _______. Question:* Which account group does 'Accounts Receivable' belong to?
Answer: Payable Answer: Assets

Question:* What is a listing of account numbers with account titles but Question:* An accounts payable ledger records which transactions?
Answer: Purchases made on credit
without amounts called?
Answer: Chart of Accounts

Question:* Inventories encompass all of the following, except:


Answer: Land and other property not held for sale
Question:* Under which classification would 'Merchandise Inventory'
be recorded?
Answer: Current asset Question:* Which of the following is NOT a correct description of the
'Debit and Credit' concept in bookkeeping?
Answer: 'Debit' is always good for the business and 'Credit' is always
Question:* Which amounts appear on left side of T-account? bad for the business.
Answer: debit

Question:* The calculation for gross profit is, Sales less ...?
Question:* An invoice being paid that relates to insurance cover for Answer: Cost of goods sold
the next accounting period should be reported in the financial
statements for this accounting period as .....?
Question:* Which of the following would NOT be considered a The
Answer: a prepaid expense
Bottom Line result in financial reporting?
Answer: Sales
Question:* What is the typical balance of a liability account reported Question:* Which of the following is more an accountant's role than a
in the Balance Sheet? bookkeeper's role?
Answer: credit balance Answer: reporting to governments and meeting statutory
requirements

Question:* Which of the following would be reported in the financial


Question:* Which account group does 'Drawings' belong to?
statements as a current asset? Answer: Owners equity
Answer: Accounts receivable

Question:* In which journal do bookkeepers generally add memos or


Question:* Which of the following account groups does NOT appear on
notes for individual transactions?
the Balance sheet of the business? Answer: General
Answer: Expenses

Question:* 'Prepaid expenses' are classified and reported in the


Question:* If a company has $50,000 in Total Assets (including $10,000
financial statements under which account group?
in Current Assets + $40,000 in Fixed Assets) and $20,000 in Equity, Answer: Assets
what is their Total Liability?
Answer: $30,000
Question:* Which of the following is NOT a method of inventory
valuation?
Question:* Which of the following transactions would have NO impact Answer: ISO
on stockholders' equity?
Answer: Purchase of land from the proceeds of a bank loan
Question:* Which type of balances do Expense and Asset accounts
typically have?
Question:* On which part of a Balance Sheet do Prepaid Expenses Answer: debit
appear?
Answer: Assets
Question:* Taking the information from the journals and recording it in
the ledgers, is known in bookkeeping as ....?
Answer: posting
Question:* Which of the following documents would you NOT rely on Question:* When a business uses cash to purchase inventory, which of
to originate accounting entries? the following bookkeeping entries is the correct one?
Answer: Delivery dockets Answer: Debit - Inventory account, Credit - Cash account

Question:* An accounting principle that record asset such as land at Question:* If a supplier's invoice is recorded on the last day of the
original cost and ignoring increases in value is the: year for future services, one side of the entry should be accounts
Answer: Historical Cost Rule
payable, and the other entry should be to which account?
Answer: Prepaid Expense

Question:* Cost of Good Sold is calculated by adding purchases to the


beginning inventory and then subtracting ...? Question:* The accounting practice where general treatment of items
Answer: Ending Inventory
does not differ from period to period, is known as ...?
Answer: Consistency

Question:* Which specific expense group is deducted from revenue to


calculate gross profit? Question:* A company disposes of equipment that it no longer uses in
Answer: Cost of sales
its business. The amount received by the company is more than the
amount the asset is carried at in the accounting records. The company
Question:* When a check received for a sale is returned by the bank,
will report a...
the two accounts to be adjusted are cash and ...? Answer: Gain
Answer: Accounts receivable

Question:* What accounting concept is being applied when personal


Question:* Net Sales minus the Cost of Goods Sold equals ...?
transaction must be separated from business transaction?
Answer: Gross profit
Answer: Business entity concept

Question:* The current period's profit will be reported in which


Question:* Working capital is calculated by the formula ...?
section of the Balance Sheet? Answer: Current asset - Current liabilities
Answer: Equity
Question:* In the double-entry bookkeeping system, financial Question:* Which of the following is NOT a liability of the business?
Answer: Accounts Receivable
transactions are first recorded in the:
Answer: journals

Question:* When an owner invests more money into the business,


Question:* What is the next step in the bookkeeping process after you which of the following bookkeeping entries is correct ?
Answer: Debit Cash account, Credit Owners equity
have recorded the financial transaction details in the appropriate
journal?
Answer: Post the details to the general ledger Question:* The deposit book issued by the bank is used to evidence
the banking of .....?
Answer: Monies received
Question:* Which of the following transactions increases the balance
of the Creditors control account in the general ledger?
Answer: Purchases on credit Question:* The accounting equation is ....?
Answer: Assets = Liabilities + Owners equity

Question:* Which is not a current asset?


Answer: Furniture Question:* To credit an expense account means to decrease it.
Answer: True

Question:* Transactions that include revenue that has been earned but
Question:* When an asset is sold for cash, into which journal is the
not yet collected OR expenses that have been incurred but not yet
transaction recorded?
evidenced or paid, are known as...
Answer: Cash receipts journal
Answer: Accruals

Question:* Which of the following is NOT generally used as an


Question:* "A statement of assets and liabilities that is reconciled with
alternative name for 'Owners Equity'?
the equity of the owner at the close of an accounting period" is a
Answer: Investments and loans
definition of which financial report?
Answer: Balance sheet
Question:* In what type of journal would adjustments be generally Question:* Which of the following statement about the perpetual
recorded? inventory system is TRUE?
Answer: General Journal Answer: it provides a continuous record of stock turnover

Question:* Which statement correctly completes the sentence? If Cost Question:* When applying the accrual basis of accounting, how would
of Goods Sold increases, ........ you report expenses that covered a future period?
Answer: gross profit decreases Answer: As an asset - prepaid expenses

Question:* Under which account group is 'Accumulated depreciation' Question:* The accounting convention that requires the assets of a
reported in the financial statements? business to be reported in the financial statement at the actual price
Answer: Assets
that was paid to acquire them, is known as .....?
Answer: Historical cost

Question:* Which of the following statements describes the accounting


equation? Question:* A Debit balance is usually not normal for which account?
Answer: Assets = Liabilities + Equity/Capital Answer: All of these

Question:* The owner of a small business writes himself a check for Question:* When an invoice for a service covers more than one
5,000 for personal use. How is this check recorded in the journal? accounting period, the journal entry will show an Expense and a:
Answer: credit Cash at bank account, debit Drawings Answer: Prepaid Expense

Question:* Recording revenues as they are earned and expenses as Question:* As at the balance date, prepaid expenses will be
they are incurred, regardless of when the money is exchanged, is represented in the financial statements as ....?
Answer: a debit balance current asset
known as ....?
Answer: Accrual accounting

Question:* If a financial transaction increased an asset you would


credit the asset account in the bookkeeping system?
Answer: False
Question:* The process of writing off the value of intangible assets to
acknowledge their loss of value is known as:
Question:* The original book of entry for financial transactions in the Answer: Amortization
bookkeeping system is the .....?
Answer: Journal
Question:* In a company's accounts, the shareholder's fund is equal
to ...?
Question:* Which one of the following is a Contra-Asset account? Answer: Total assets - Total liabilities
Answer: Accumulated Depreciation

Question:* Which of the following is NOT a contra account?


Question:* Which principle/guideline requires a company's balance Answer: Bank charges
sheet to report its land at the amount the company paid to acquire the
land, even if the land could be sold today at a significantly higher Question:* What does the term "2% 10, Net 30" mean?
Answer: The total bill is due in 30 days, but a discount of 2% may be
amount?
taken if the bill is paid in 10 days of the bill date.
Answer: Cost Principle

Question:* The broad accounting principle that requires expenses to


Question:* A business with available cash to use will have a ......?
Answer: Debit balance in its Cash At Bank account be reported in the same period as the revenues that were earned as a
result of the expenses is known as ...?
Answer: Matching principle
Question:* Cash sales are recorded in which subsidiary journal?
Answer: Cash receipts journal

Question:* The account set up as an advance or float for petty cash is


Question:* Which of the following is NOT found on an income treated as ... ?
Answer: an asset account
statement?
Answer: Cash at bank

Question:* End-of-period adjustments do NOT include which


transactions?
Answer: Cash sales
Question:* Which principle/guideline minimizes the detail of reporting Question:* A credit balance in the bank statement would be normally
based on the insignificant size of the amount? reconciled with:
Answer: Materiality Answer: a debit balance in the Cash at Bank account

Question:* A chart of accounts is an index of the accounts contained in Question:* Which account is NOT part of the profit and loss account?
Answer: Accumulated depreciation
the ... ?
Answer: General Ledger

Question:* TUV Co. performed services for Client Asim and billed them
Question:* If Assets totaled $40,000 and Owners Equity is 40% of the in December. TUV follows the accrual basis of accounting. In January
total Assets, what is the value of the Liabilities? TUV received the $5,000 from Asim and debited the Cash account:
Answer: $24,000
What account should it credit?
Answer: Account receivable

Question:* Treasury stock is classified under which account group?


Answer: equity
Question:* XYZ Co. has current assets of $50,000 and total assets of
$150,000. XYZ has current liabilities of $30,000 and total liabilities of
Question:* Which of the following balance-day entries do not need
$80,000. What is the amount of XYZ's owner's equity?
reversing entries at the start of the new period? Answer: $70,000
Answer: bad and doubtful debts

Question:* In regards to time, which of the following headings would


Question:* Which of the following accounts is NOT a current liability?
you NOT find on an income statement?
Answer: Term Loans secured by a mortgage
Answer: As at the 30 June

Question:* A cash receipts journal is a special journal used to record


Question:* Which of the following statements in relation to materiality
all cash disbursement.
is true? I. Materiality of item depends on their individual or collective
Answer: False
influence on the economic decisions of users. II.Materiality of an item
depends on its absolute size and nature
Answer: Both I and II Answer: Newest received

Question:* Which of the following is a current liability? Question:* Is it acceptable in accounting that some of the expenses
Answer: Accrued expenses
reported on the income statement are estimates?
Answer: Yes

Question:* When recording financial transactions using the "T" account


method, the 'Debit' value is recorded on the right and the 'Credit' Question:* Accounting for inventory by applying the lower of cost or
value is recorded on the left. net realizable value is an example of the application of:
Answer: False Answer: Conservatism

Question:* A bank service charge on the bank statement will require a Question:* Only legal entities can be accounting entities under
_____________ to the general ledger account 'Cash at Bank' of the accounting conventions. True or False?
Answer: False
business.
Answer: credit entry

Question:* Which of the following is NOT generally used as an


Question:* The accounting principle that is the primary support for alternative name for a 'Balance sheet'?
Answer: Equity Statement
the accrual method of bookkeeping is the .....?
Answer: Matching principle

Question:* The trial balance lists which type of accounts?


Answer: Only the General ledger accounts
Question:* A petty cash expenditure would be recorded and debited to
which account?
Answer: an expense account Question:* In a reconciliation process, if the discrepancy amount when
divided by 9 results in a whole integer, then it is ...?
Answer: a transposition error
Question:* If you are valuing inventory by the FIFO method, the
inventory on hand, according to the books of the business, will be
the ...?
Answer: Adjustment note
Question:* In the Accounts Receivable ledger, a Debit entry is most
likely for:
Answer: Recording an uncollected sale Question:* A check that was received from a debtor was dishonored.
How does this transaction affect the debtors control account in the

Question:* In times of rising costs for inventory, the Cost of Goods Sold general ledger?
Answer: it is debited
will be highest under which inventory valuation method?
Answer: LIFO
Question:* Which of the following is NOT a feature of a perpetual

Question:* What does a debit balance on a bank statement indicate? inventory system?
Answer: the bank account is overdrawn Answer: gross profit calculations cannot be done without a physical
stocktake

Question:* Which of the following accounting principles supports the


Question:* The chronological record of a transactions process
need to ensure that recorded information is based on fact and not just
through the accounting system, from the source document to the
on personal opinion?
Answer: Objectivity financial statements, is known as ....?
Answer: An audit trail

Question:* If the asset side of the accounting equation represents the


Question:* Under what account group heading would 'Provision for
'things of value in the business', what does the other side represent?
Answer: the source of finance to the business Doubtful Debts' be reported in the financial statements?
Answer: Current assets

Question:* When trading stock is received from a supplier, the source


Question:* Under what account group heading would 'Provision for
document for bookkeeping purposes will be the ...?
Answer: Supplier's invoice Doubtful Debts' be reported in the financial statements?
Answer: Current assets

Question:* Which source document would be used when inventories


Question:* The purchase of motor vehicles on credit should be
are returned to a supplier?
entered into which journal?
Answer: General
Question:* Unexpired costs are represented in the accounts of an
accounting entity as...
Question:* Which of the following is NOT generally listed as one of the Answer: assets
key expense group classifications of an income statement?
Answer: Accrued expenses
Question:* Under the IFRS, the value of land is recorded at ________
on the balance sheet.
Question:* Interest Expense on a term loan for a large retailer is a ....? Answer: Fair Value
Answer: a Non operating expense

Question:* On December 1 a company borrowed $100,000 at 12% per


Question:* Which of the following inventory costing methods is
year. The interest will be paid quarterly, with the first payment due on
appropriate for a business with a relatively small number of unique
March 1. What interest expense amount should the company report on
inventory items with a high unit cost?
Answer: Specific identification its income statement for the month of December?
Answer: $1,000

Question:* Which account would NOT form part of the Trading


Question:* If a 4 year old asset (equipment) was sold on credit for the
Account?
Answer: Sales commissions book value of $5,000, the total value of assets in the firm's accounting
equation is ....?
Answer: Unchanged
Question:* 'Nominal accounts' in bookkeeping are also known as
'Temporary accounts'.
Answer: True Question:* Which of the following transactions are recorded in the
purchases journal?
Answer: Trading stock bought on credit
Question:* The directive to recognize revenue only when it is
reasonably certain of happening and to recognize expenses as soon as
Question:* When using the moving average method of inventory
they are incurred is known by which principle?
Answer: Prudence/Conservatism valuation, a new unit cost must be computed after each:
Answer: Purchase
Question:* Assuming a "T account" setup in the general ledger, on Question:* The 'Discount allowed' account records the ....?
Answer: Discount given to debtors
which side of the subsidiary account must an entry in the control
account be posted?
Answer: on the opposite side Question:* Which account is NOT part of the trading account?
Answer: Freight outward

Question:* Which of the following is NOT considered a function of


Question:* When using the FIFO inventory costing method, the most
accounting?
Answer: a means for calculating the current market value of a recent costs are assigned to the cost of goods sold. True or False?
business Answer: False

Question:* Investments securities held for the purpose of retiring Question:* Which of the following is NOT generally used as an
bonds payable shall be classified as: alternative name for an 'Income Statement'?
Answer: Current assets Answer: Net Profit Statement

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