Question 1

Question 1
1.

A company receives a payment from a customer for credit sales

made in the previous period. What is the effect on the
accounting equation?
Answer

An asset decreased and a liability decreased

An asset decreased and owners equity decreased
An asset increased and a liability increased
One asset increased and another asset decreased
Owners equity increased and an asset increased
1 points
Question 2
Question 2
1.

At 30 June 2009 Sam Ltd had a balance in Accounts Receivable

of $40,000 and an Allowance for Doubtful Debts of $2,000. It
was decided to write off as irrecoverable the debt of Jason Ltd
totalling $3,500.
What was the journal entry to write-off the debt of Jason Ltd as
irrecoverable?
Answer

Dr Accounts Receivable $1,500 Cr Allowance for Doubtful

Debts $1,500
Dr Accounts Receivable $3,500 Cr Bad Debts Expense
$3,500
Dr Allowance for Doubtful Debts $3,500 Cr Accounts
Receivable $3,500
Dr Bad Debts Expense $3,500 Cr Accounts Receivable
$3,500
Dr Bad Debts Expense $3,500 Cr Allowance for Doubtful
debts $3,500
1 points
Question 3
Question 3

1.

The left hand column of a T-account is most importantly used to:

Answer

Show credits
Show dates
Show debits
Show sub-totals
Show totals
1 points
Question 4
Question 4
1.

What is the journal entry to record depreciation expense for the

year on motor vehicles?
Answer

Dr Accumulated Depreciation Cr Depreciation Expense

Dr Accumulated Depreciation Cr Motor Vehicles

Dr Depreciation Expense Cr Accumulated Depreciation
Dr Depreciation Expense Cr Motor Vehicles
Dr Motor Vehicles Cr Accumulated Depreciation

1 points
Question 5
Question 5
1.

Use the information given below to answer the following

question.

$
Cash sales

10,000

Credit sales

30,000

Cash received from accounts

22,000

receivable
Wages paid

8,000

Wages owing at year-end

5,000

What is the net profit for 2009?

Answer

$22,000
$27,000
$32,000
$49,000
$54,000
1 points
Question 6
Question 6
1.

Which of the following errors will be able to be detected by a trial

balance?
Answer

A journal entry was dated incorrectly

A journal recording the purchase of inventory on credit was
posted twice to the general ledger
A cash sale is recorded as a credit sale
An addition error in a ledger account
Failure to record a journal entry
1 points
Question 7
Question 7
1.

If a company pays a 12-month insurance premium for $1,200 on

1 May 2009, then at 30 June 2009 the accounts, after recording
the appropriate adjusting entries, will show:
Answer

a prepayment of $200 in the Balance Sheet and an

insurance expense of $1,000 in the Income Statement
a prepayment of $1,000 in the Balance Sheet and an
insurance expense of $200 in the Income Statement

a prepayment of $1,200 in the Balance Sheet

a prepayment of $1,200 in the Balance Sheet and an
insurance expense of $200 in the Income Statement
an insurance expense of $1,200 in the Income Statement
1 points
Question 8
Question 8
1.

Which of the following entries records the acquisition of

equipment on account?
Answer

Dr Accounts Payable Cr Cash

Dr Accounts Payable Cr Equipment
Dr Cash Cr Accounts Payable
Dr Equipment Cr Accounts Payable
Dr Equipment Cr Cash
1 points

Question 9
Question 9
1.

An account has a debit balance if:

Answer

Its normal balance is a debit (without regard to the amounts

or number of entries on the debit side)
The amount of the debits exceeds the amount of the credits
The first entry of the accounting period was posted on the
debit side
The last entry of the accounting period was posted on the
debit side
There are more entries on the debit side than on the credit
side
1 points
Question 10
Question 10

1.

At 30 June 2009 Simon Ltd had a balance in Accounts

Receivable of $40,000 and an Allowance for Doubtful Debts of
$2,000. It was decided to write off as irrecoverable the debt of
Fred Ltd totalling $3,500. It was further decided that the
Allowance for Doubtful Debts should stand at 10% of Accounts
Receivable. What was the journal entry for Simon Ltd to bring
the Allowance for Doubtful Debts to the required level after
writing off the debt of Fred Ltd?
Answer

Dr Accounts Receivable $2,000 Cr Allowance for Doubtful

Debts $2,000
Dr Allowance for Doubtful Debts $3,500 Cr Accounts
Receivable $3,500
Dr Bad Debts Expense $4,000 Cr Allowance for Doubtful
Debts $4,000
Dr Bad Debts Expense $5,150 Cr Allowance for Doubtful
Debts $5,150
Dr Bad Debts Expense $5,500 Cr Allowance for Doubtful
Debts $5,500

1 points
Question 11
Question 11
1.

During 2009, the first year of operation, a company makes credit

sales of $500,000, of which $375,000 is collected at year-end. It
pays $200,000 in expenses and owes $25,000 for electricity
used during 2009.

What would the profit be if cash accounting was used?

Answer

$125,000
$150,000
$175,000
$275,000
$300,000
1 points
Question 12

Question 12
1.

Closing entries:
Answer

Are required prior to preparation of financial statements

Are the last step in the accounting cycle
Bring the balances in the Balance Sheet to zero
Close off all ledger accounts
Ensure that there is adequate cash for payment of bills
1 points
Question 13
Question 13
1.

Consider the following transactions.

(i)

Repayment of a loan in June 2008

(ii)

Depreciation of equipment in June 2008

(iii)

Payment of accounts payable in June 2008

(iv)

Payment of an insurance bill in June 2008, which covers 1

July 2008 to 30 June 2009

Which of the above transactions increase June 2008 expenses?

Answer

(ii) only
(i) and (ii) only
(i), (ii) and (iii) only
(i), (ii) and (iv) only
(ii), (iii) and (iv) only
1 points
Question 14
Question 14
1.

Kramer Limited ships goods to Sykes Company on consignment.

When the goods are delivered to Sykes, Kramer should record:

Answer

Cost of Goods Sold Expense: No; Sales Revenue: Yes

Cost of Goods Sold Expense: No; Sales Revenue: No
Cost of Goods Sold Expense: Yes; Sales Revenue: No
Consignment Expense: No; Sales Revenue: Yes
Consignment Expense: Yes; Sales Revenue: No
1 points
Question 15
Question 15
1.

At the end of the financial year, the usual adjusting entry for
accrued salaries owed to employees was omitted. Which of the
following statements is true?
Answer

Net profit for the year was overstated

Retained profits was understated

Revenue for the year was understated

Salary Expense for the year was overstated
The total of the liabilities at the end of the year was
overstated
1 points
Question 16
Question 16
1.

The entry to record payment of salaries would be:

Answer

Debit Accounts Payable, Credit Accounts Receivable

Debit Cash, Credit Accounts Receivable
Debit Cash, Credit Salaries Expense
Debit Salaries Expense, Credit Accounts Payable
Debit Salaries Expense, Credit Cash
1 points
Question 17

Question 17
1.

A chart of accounts:
Answer

Is a chronological record of all transactions

Is a listing of the titles and numeric references of all
accounts in the ledger
Is a financial statement
Is a means of ensuring that the debits equal the credits
Is used to determine for which accounts period-end
adjustments are required
1 points
Question 18
Question 18
1.

During 2009, the first year of operation, a company makes credit

sales of $500,000, of which $375,000 is collected at year-end. It

pays $200,000 in expenses and owes $25,000 for electricity
used during 2009. Accrual profit is:
Answer

$125,000
$150,000
$175,000
$275,000
$300,000
1 points
Question 19
Question 19
1.

Supplies purchased on account were incorrectly recorded as

Office Equipment. A complete correcting entry would be:
Answer

Dr Accounts Payable Cr Office Equipment

Dr Accounts Payable Cr Supplies

Dr Office Equipment Cr Supplies
Dr Supplies Cr Accounts Payable
Dr Supplies Cr Office Equipment
1 points
Question 20
Question 20
1.

The correct classification for the following ledger accounts is:

1. Prepaid insurance
2. Accrued wages
3. Depreciation
4. Cost of goods sold
Answer

Asset Liability Expense Asset

Asset Liability Expense Expense
Asset Liability Liability Revenue

Expense Expense Expense Expense

Expense Liability Expense Expense