Question 1

The capital account of a sole trader was credited with $5000.Which of these items would not give rise to such a credit?

Accepted Answer

A) The business earned a profit of $5000. 
B) The owner brought in a private car valued at $5000 for business use. 
C) The owner introduced $5000 new capital. 
D) The owner paid an outstanding private gambling debt of $5000 from the business bank account. 
A) The business earned a profit of $5000. 
B) The owner brought in a private car valued at $5000 for business use. 
C) The owner introduced $5000 new capital. 
D) The owner paid an outstanding private gambling debt of $5000 from the business bank account. D

Question 2

Right Style received a $1000 advance payment from a customer for work to be carried out in the next accounting period.Which of the following is the correct accounting entry to initially record the $1000?

Accepted Answer

A) Debit bank $1000; credit unearned income $1000 
B) Debit unearned income $1000; credit bank $1000 
C) Debit bank $1000; credit accounts payable $1000 
D) Debit income earned $1000; credit bank $1000 
A) Debit bank $1000; credit unearned income $1000 
B) Debit unearned income $1000; credit bank $1000 
C) Debit bank $1000; credit accounts payable $1000 
D) Debit income earned $1000; credit bank $1000 A

Question 3

On the first day of the year Mayo Resources purchased a forklift truck for $12 000 which is to be depreciated by 25% a year.At the end of the first year:

Accepted Answer

A) depreciation in the income statement is $3000 and the carrying value of the forklift in the balance sheet is $12 000. 
B) depreciation in the income statement is $3000 and the carrying value of the forklift in the balance sheet is $15 000. 
C) depreciation in the income statement is $3000 and the carrying value of the forklift in the balance sheet is $9000. 
D) depreciation in the income statement is $0 and the carrying value of the forklift in the balance sheet is $12 000. 
A) depreciation in the income statement is $3000 and the carrying value of the forklift in the balance sheet is $12 000. 
B) depreciation in the income statement is $3000 and the carrying value of the forklift in the balance sheet is $15 000. 
C) depreciation in the income statement is $3000 and the carrying value of the forklift in the balance sheet is $9000. 
D) depreciation in the income statement is $0 and the carrying value of the forklift in the balance sheet is $12 000. C

Question 4

Accrued salaries is a:

Accepted Answer

A) contra asset account. 
B) equity account. 
C) asset account. 
D) liability account. 
A) contra asset account. 
B) equity account. 
C) asset account. 
D) liability account.

Question 5

What type of account is unearned income?

Accepted Answer

A) Liability 
B) Income 
C) Expense 
D) Asset 
A) Liability 
B) Income 
C) Expense 
D) Asset

Question 6

At year-end it was forgotten to accrue an income item.This will result in an:

Accepted Answer

A) understatement of assets and an overstatement of profit and equity. 
B) overstatement of liabilities and an understatement of profit and equity. 
C) overstatement of assets,profit,and equity. 
D) understatement of assets,profit,and equity. 
A) understatement of assets and an overstatement of profit and equity. 
B) overstatement of liabilities and an understatement of profit and equity. 
C) overstatement of assets,profit,and equity. 
D) understatement of assets,profit,and equity.

Question 7

ABC collects rents from several properties.Prior to recording adjusting entries, assume the rent income account has a credit balance of $8000.Two adjustments are to be made at the end of the financial year (1)an accrual for accrued rent income of $600 (2)the unearned rent income account is to be decreased by $200.After processing these adjusting entries the amount of rent income to be shown in the income statement is:

Accepted Answer

A) $8800. 
B) $8400. 
C) $7600. 
D) $7200. 
A) $8800. 
B) $8400. 
C) $7600. 
D) $7200.

Question 8

The reason it is necessary to prepare adjusting entries at the end of the financial year is:

Accepted Answer

A) to correct errors made during the year. 
B) to provide as accurate a profit measurement as possible. 
C) to prepare the ledger for the next accounting period. 
D) to close the accounts. 
A) to correct errors made during the year. 
B) to provide as accurate a profit measurement as possible. 
C) to prepare the ledger for the next accounting period. 
D) to close the accounts.

Question 9

Which of these is correct in matching decisions with information in financial reports?

Accepted Answer

A) Profitability - balance sheet 
B) Solvency - income statement 
C) Return on investment - income statement and balance sheet 
D) Long-term borrowing - statement of changes in equity 
A) Profitability - balance sheet 
B) Solvency - income statement 
C) Return on investment - income statement and balance sheet 
D) Long-term borrowing - statement of changes in equity

Question 10

X Co's employees carry out work to the value of $7500.They are paid $4500 immediately with the balance to be settled in the next accounting period.Under the cash approach to profit measurement the amount of wages expense that will be recorded in the current period is:

Accepted Answer

A) nil. 
B) $4500. 
C) $3000. 
D) $7500. 
A) nil. 
B) $4500. 
C) $3000. 
D) $7500.

Question 11

On 1 July 2014 Tan Traders paid $600,representing a two-year insurance premium.The $600 was initially recorded in the insurance expense account.The correct adjusting entry on 31 December 2014,the close of the annual accounting period,is which of the following?

Accepted Answer

A) Debit prepaid insurance $450; credit insurance expense $450 
B) Debit prepaid insurance $150; credit insurance expense $150 
C) Debit prepaid insurance $300; credit insurance expense $300 
D) Debit insurance expense $150; credit prepaid insurance $150 
A) Debit prepaid insurance $450; credit insurance expense $450 
B) Debit prepaid insurance $150; credit insurance expense $150 
C) Debit prepaid insurance $300; credit insurance expense $300 
D) Debit insurance expense $150; credit prepaid insurance $150

Question 12

If an adjustment for depreciation is omitted from the financial reports,the effect is which of the following?

Accepted Answer

A) Assets are understated; profit is understated 
B) Assets are overstated; profit is overstated 
C) Assets are understated; profit is overstated 
D) Assets are overstated; profit is understated 
A) Assets are understated; profit is understated 
B) Assets are overstated; profit is overstated 
C) Assets are understated; profit is overstated 
D) Assets are overstated; profit is understated

Question 13

In preparing its 2014 adjusting entries,the ZigZag Ltd forgot to adjust the Office Supplies (asset)account for the amount of supplies used up during the year.As a result of this error:

Accepted Answer

A) 2014 profit is understated,the balance of equity is understated,and assets are understated. 
B) 2014 profit is overstated,the balance of equity is correct,and assets are overstated. 
C) 2014 profit is overstated,the balance of equity is overstated,and assets are overstated. 
D) 2014 profit is overstated,the balance of equity is overstated,and assets are correctly stated. 
A) 2014 profit is understated,the balance of equity is understated,and assets are understated. 
B) 2014 profit is overstated,the balance of equity is correct,and assets are overstated. 
C) 2014 profit is overstated,the balance of equity is overstated,and assets are overstated. 
D) 2014 profit is overstated,the balance of equity is overstated,and assets are correctly stated.

Question 14

The excess of current assets over current liabilities is known as:

Accepted Answer

A) tangible assets. 
B) net assets. 
C) intangible assets. 
D) working capital. 
A) tangible assets. 
B) net assets. 
C) intangible assets. 
D) working capital.

Question 15

The last step in the manual accounting cycle before financial statements are prepared is which of the following?

Accepted Answer

A) Post the journals to the ledger 
B) Determine adjusting entries 
C) Prepare an adjusted trial balance 
D) Prepare a closing trial balance 
A) Post the journals to the ledger 
B) Determine adjusting entries 
C) Prepare an adjusted trial balance 
D) Prepare a closing trial balance

Question 16

It is correct that each balance day adjustment:

Accepted Answer

A) affects either the income statement or the balance sheet. 
B) has at least one effect on the income statement and one effect on the balance sheet. 
C) only affects the income statement. 
D) always has an effect on the bank account. 
A) affects either the income statement or the balance sheet. 
B) has at least one effect on the income statement and one effect on the balance sheet. 
C) only affects the income statement. 
D) always has an effect on the bank account.

Question 17

The current liability is:

Accepted Answer

A) accrued delivery expenses. 
B) accounts receivable. 
C) electricity expense. 
D) long-term loan. 
A) accrued delivery expenses. 
B) accounts receivable. 
C) electricity expense. 
D) long-term loan.

Question 18

Determine the cash payments made during the year for rent from the following information.
$
Rent expense (income statement) 475
Prepaid Rent:
Beginning Balance 195
Ending Balance 220
Assume all insurance premiums are paid in cash.

Accepted Answer

A) $475 
B) $500 
C) $695 
D) $450 
A) $475 
B) $500 
C) $695 
D) $450

Question 19

If an adjustment for accrued income is omitted from the financial reports the effect is:

Accepted Answer

A) assets are understated; profit is understated. 
B) assets are overstated; profit is understated. 
C) assets are understated; profit is overstated. 
D) assets are overstated; profit is overstated. 
A) assets are understated; profit is understated. 
B) assets are overstated; profit is understated. 
C) assets are understated; profit is overstated. 
D) assets are overstated; profit is overstated.

Question 20

If a company has earned income which has not been received in cash at the end of the accounting period an adjustment should be made which will:

Accepted Answer

A) debit an asset account and credit an income account. 
B) debit an expense account and credit cash. 
C) debit an income account and credit an asset account. 
D) debit an asset account and credit an expense account. 
A) debit an asset account and credit an income account. 
B) debit an expense account and credit cash. 
C) debit an income account and credit an asset account. 
D) debit an asset account and credit an expense account.

The capital account of a sole trader was credited with $5000.Which of these items would not give rise to such a credit?

Right Style received a $1000 advance payment from a customer for work to be carried out in the next accounting period.Which of the following is the correct accounting entry to initially record the $1000?

On the first day of the year Mayo Resources purchased a forklift truck for $12 000 which is to be depreciated by 25% a year.At the end of the first year:

Accrued salaries is a:

What type of account is unearned income?

At year-end it was forgotten to accrue an income item.This will result in an:

The reason it is necessary to prepare adjusting entries at the end of the financial year is:

Which of these is correct in matching decisions with information in financial reports?

X Co's employees carry out work to the value of $7500.They are paid $4500 immediately with the balance to be settled in the next accounting period.Under the cash approach to profit measurement the amount of wages expense that will be recorded in the current period is:

On 1 July 2014 Tan Traders paid $600,representing a two-year insurance premium.The $600 was initially recorded in the insurance expense account.The correct adjusting entry on 31 December 2014,the close of the annual accounting period,is which of the following?

If an adjustment for depreciation is omitted from the financial reports,the effect is which of the following?

In preparing its 2014 adjusting entries,the ZigZag Ltd forgot to adjust the Office Supplies (asset)account for the amount of supplies used up during the year.As a result of this error:

The excess of current assets over current liabilities is known as:

The last step in the manual accounting cycle before financial statements are prepared is which of the following?

It is correct that each balance day adjustment:

The current liability is:

Determine the cash payments made during the year for rent from the following information. $ Rent expense (income statement) 475 Prepaid Rent: Beginning Balance 195 Ending Balance 220 Assume all insurance premiums are paid in cash.

If an adjustment for accrued income is omitted from the financial reports the effect is:

If a company has earned income which has not been received in cash at the end of the accounting period an adjustment should be made which will:

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Retailing

Accounting for Systems

Partnerships: Formation,operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Cash Management and Control

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation,disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

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Exam 4: Adjusting the Accounts and Preparing Financial Statements

The capital account of a sole trader was credited with $5000.Which of these items would not give rise to such a credit?

Right Style received a $1000 advance payment from a customer for work to be carried out in the next accounting period.Which of the following is the correct accounting entry to initially record the $1000?

On the first day of the year Mayo Resources purchased a forklift truck for $12 000 which is to be depreciated by 25% a year.At the end of the first year:

Accrued salaries is a:

What type of account is unearned income?

At year-end it was forgotten to accrue an income item.This will result in an:

The reason it is necessary to prepare adjusting entries at the end of the financial year is:

Which of these is correct in matching decisions with information in financial reports?

X Co's employees carry out work to the value of $7500.They are paid $4500 immediately with the balance to be settled in the next accounting period.Under the cash approach to profit measurement the amount of wages expense that will be recorded in the current period is:

On 1 July 2014 Tan Traders paid $600,representing a two-year insurance premium.The $600 was initially recorded in the insurance expense account.The correct adjusting entry on 31 December 2014,the close of the annual accounting period,is which of the following?

If an adjustment for depreciation is omitted from the financial reports,the effect is which of the following?

In preparing its 2014 adjusting entries,the ZigZag Ltd forgot to adjust the Office Supplies (asset)account for the amount of supplies used up during the year.As a result of this error:

The excess of current assets over current liabilities is known as:

The last step in the manual accounting cycle before financial statements are prepared is which of the following?

It is correct that each balance day adjustment:

The current liability is:

Determine the cash payments made during the year for rent from the following information. $ Rent expense (income statement) 475 Prepaid Rent: Beginning Balance 195 Ending Balance 220 Assume all insurance premiums are paid in cash.

If an adjustment for accrued income is omitted from the financial reports the effect is:

If a company has earned income which has not been received in cash at the end of the accounting period an adjustment should be made which will:

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Retailing

Accounting for Systems

Partnerships: Formation,operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Cash Management and Control

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation,disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

Filters