PART A (Multiple Choice Questions)

Answer all questions in the space provided.

1. The term accounting can best defined as ____________________________________
a. A document that reports on an organizations financial position
b. A system that measures business activities, processes financial information into reports
and communicates the findings
c. A business plan
d. A method of recording business transaction
2. The name of the financial statement that is also known as the statement of financial position is
the ___________________________
a.
b.
c.
d.

Balance sheet
Income Statement
Statement of cash flows
Financial Statement

3. Which of the following statement is incorrect?

a.
b.
c.
d.

A sole proprietor and partners have unlimited liability

Companies pay corporate tax
A private company is usually controlled by a family
Transfers of shares in a private company need not be authorized by other shareholders or
directors.

4. Which of the following group is correct?

a.
b.
c.
d.

External users Government, Accountant, Creditors, Managers

Intangible Assets Patents, Goodwill, Bank, Copyrights
Internal users Workers, Customers, Bankers, Accounts Clerk
Current liabilities overdraft bank, creditor, short term loan (< 1 year)

5. The financial statement that reports the revenues and expenses for a period of time such as a
year or a month is the___________________
a. Balance sheet
b. Income Statement
c. Statement of cash flows
d. Notes to the financial statement
6. _____________is the excess of a company's revenues over expenses for a given time period.
a. Net Loss
b. Income Statement

c. Net Income
d. Balance Sheet
7. Which of the following will cause owner's equity to decrease?
a. Net Loss
b. Revenue
c. Net Income
d. Dividend
8. Chilli Enterprise had liabilities of RM400, 000 and owners equity of RM100, 000. It
purchased goods on credit for RM50, 000 and collected RM30, 000 from its debtors by
cheque. The firms total assets would now be ______________________
a.
b.
c.
d.

RM500, 000
RM530, 000
RM550, 000
RM580, 000

9. A sundry shop sells goods on credit to Syarikat Mewah Jaya. The balance sheet effect
is________________________
a. Increase asset, increase liabilities
b. Increase assets, decrease liabilities
c. Increase assets, increase revenue
d. Decrease liabilities, increase revenues
10. Which of the following changes will not occur as a result of a business transaction in the
bookkeeping records?
a.
b.
c.
d.

Increase asset and increase liability

Increase asset and increase capital
Increase capital and increase liability
Increase capital and decrease liability

Bil

Answer

Bil

Answer

10

C
(10 marks)

PART B: Answer all questions.

PART B : Answer all questions
1. Following independent situations, the accounting concepts and conventions has been violated.
You are required to state the concept and conventions that has been violated.
Materiality Concept

Historical Concept

Matching Concept

Accrual Concept

Realization Concept

Entity Concept

Prudence Concept

Consistency Concept

Periodicity Concept

Going Concern Concept

a) Mr. Raja recorded a piece of land which was acquired for his business from his brother Mr.
Ramu at RM40 000, the estimated value of the land, although the actual purchase price was
RM30 000. This is not in line with

HISTORICAL CONCEPT

b) Depreciation expense was no recorded for the current year because the management wanted
to show higher net operating income. This is not accordance with ACCRUAL CONCEPT
c) Encik Abdullah, the owner of the sundry shop, included his familys personal use of some of
goods as expenses of the business. This is the violation of

ENTITY CONCEPT

d) Ombak Rindu Trading changes its stock valuation method every year. Management would
choose the method that will report the kind of net income that it wants to portray to its
shareholders. This is not follow CONSISTENCY CONCEPT
e) Moody Garden records revenue on receiving a customers purchase order instead of when it
delivers the goods to the customer. This is not in line with REALIZATION CONCEPT
f) Which principle or concept is associated with the assumption that the company will continue
on long enough to carry out its objectives and commitments? GOING CONCERN
CONCEPT

g) Accountants might recognize losses but not gains in certain situations. For example, the
company might write-down the cost of inventory, but will not write-up the cost of inventory.
Which principle or concept is associated with this action? PRUDENCE CONCEPT
h) Which principle or concept directs a company to show all the expenses related to its revenues
of a specified period even if the expenses were not paid in that period? MATCHING
CONCEPT
i) A large company purchases a $100 digital camera and expenses it immediately instead of
recording it as an asset and depreciating it over its useful life. This practice may be acceptable
because of which principle or concept? MATERIALITY CONCEPT
j) Which principle or concept allows a company to ignore the change in the purchasing power of
the dollar over time? MONETARY CONCEPT
(9 marks)

2. Based on the basic accounting equation; answer each of the following questions.
a) The liabilities of Kejora Enterprise are RM 12,000, and the owners equity is RM
232,000. What is the amount of Kejora Enterprises total assets?
Answer: RM 24,400
b) The total assets of company are RM 190,000, and its owner equity is RM 80,000. What is
the amount of its total liabilities?
Answer: RM 110,000
c) The total assets of company are RM 180,000, and its liabilities are equal to half of its
total assets. What is the amount of Kejora Enterprises owner equity?
Answer: RM 90,000
(3 marks)

3. Classify each of the following items as Assets, Liability, Owners Equity, Expense, or
Revenue.

a) Account receivable

Assets

b) Dividend on investment
c) Salaries expense
d) Office equipment
e) Owners investment
f) Account payable
g) Long term debt
h) Property
i) Repairs to Office Machinery
j) Salesmens Commission
k) Interest on fixed deposit
l) Postage
m) Patent
n) Fixed deposit
o) Trademark
p) Insurance
q) Fixtures and Fitting
r) Overdraft bank
s) Duty on purchase
t) Mortgage on premise
u) Goodwill
v) Inventory
w) Interest on loan
x) Discount allowed

Revenue.
Expense
Assets
Owners Equity
Liability
Liability
Assets
Expense
Revenue.
Revenue.
Expense
Assets
Assets
Assets
Expense
Assets
Liability
Expense
Liability
Assets
Assets
Expense
Expense

(12 marks)
4. Lembah Bujang Enterpise situated in front of UITM Kedah. Encik Kassim, the owner of
Lembah Bujang Enterprise interested in knowing the effect of the following transaction.
a)

Made cash investment to start business amounted RM15, 000

b)

Paid RM4, 000 cash for monthly rent on storage space

c)

Purchased equipment for RM20, 000 from Digital Equipment on credit

d)

Withdrew goods for owners personal use.

e)

Paid Digital Equipment for the equipment purchase in (c) above by cheque

f)

Incurred advertising expense for May of RM1, 200 and pay by cheque

g)

Owner made additional investment by depositing RM1, 000 into the bank account

h)

Paid loan from Bank Islam RM1, 000 being the amount borrowed from the bank
by cash

i)

Bought an office equipment paying by cheque RM1, 200

j)

Pay creditors RM880 by cash

k)

Bought furniture RM2, 000 from Italy Jaya paying 20% cash as deposit and the
balance will be settled next month.

l)

Motor van repair being paid by cash RM500

m)

Kassim purchase a Photostat machine which costs RM5, 000 from Merbok
Enterprise for office use. Kassim paid for the machine using his personal cheque.

n)

Paid transportation RM120 by cash for goods delivered to customers.

o)

Return goods bought on credit to Italy Jaya

p)

Receive commission revenue by cheque amounted to RM2, 000

You are required to list the number of the above transactions and describe the effect of each
transaction on assets, liabilities, owner equity, revenues and expenses.
a.

Example:

b
c

Increase in assets and increase in owner equity/capital

Increase in assets and increase in expenses
Increase in assets and increase in liability

d
e
f
g
h
i
j

Decrease in expenses and decrease in owner equity/capital

Decrease in liability and decrease in assets
Increase in expenses and decrease in assets
Increase in assets and increase in owner equity/capital
Decrease in liability and decrease in assets
Increase in assets and decrease in assets
Decrease in liability and decrease in assets

k
l
m

Increase in assets, decrease in assets and increase in liability

Increase in expenses and decrease in assets
Increase in assets and increase in owner equity/capital

n
o
p

Increase in expenses and decrease in assets

Decrease in liability and decrease in expenses
Increase in revenues and increase in assets
(15 marks)